NEW YORK, NY / ACCESSWIRE / January 14, 2019 / SeeThruEquity, a leading independent equity research and corporate access firm focused on smallcap and microcap public companies, today announced it has issued an update note on GEE Group Inc.
(NYSE American: JOB).
GEE Group (GEE) is a multi-brand national staffing and recruiting firm with a presence in 34 US markets specializing in professional and commercial staffing services in the IT, Engineering, Finance and Accounting, and Healthcare industries. GEE has grown significantly by acquisitive and organic means under the stewardship of Chairman and Chief Executive Officer Derek Dewan, and has recently been focused on optimizing its cost structure to drive adjusted EBITDA margin expansion. Mr. Dewan was previously CEO of MPS Group, Inc. (NYSE:MPS) and predecessor AccuStaff Incorporated, a multi-billion dollar global Fortune 1000 staffing provider, and is seeking to replicate this success at GEE.
Highlights from the note include:
GEE filed its 10-K and released final results for fiscal 4Q18 and FY 2018 on December 27, 2018. The company's results showed growth for the full fiscal year, balanced by the implementation of a margin improvement program as the business scales. Highlights were as follows:
- F2018 revenues grew by 22.5% YoY to reach $165.3mn, versus $135.0mn in FY2017.
- FY4Q18 revenues were $39.9mn, a decline of 13.9% from $46.4mn in 4Q17 as management focused on operational efficiency and higher profit projects.
- Gross margins expanded to 37.1% in FY4Q18 versus 36.3% in FY4Q17. For the full year FY2018, gross margins expanded by 240bps to reach 35.7% versus 33.3% in FY2017.
- GEE reported strong growth in adjusted EBITDA during FY2018, which rose by 106.7% to reach $13.2mn, versus $6.4mn. For 4Q18, adjusted EBITDA was $3.1mn, versus $2.4mn in FY4Q17.
- Adjusted EBITDA margins rose to 8.0% for the full fiscal year, reflecting cost optimization initiatives underway at GEE.
- GEE reported EPS of ($0.09) FY4Q18 and ($0.74) in FY2018. The largest factors accounting for the variance between GAAP Net income and adjusted EBITDA included interest expense, acquisitions costs, and depreciation and amortization.
Management sees further leverage improvements heading into FY2019
In its FY2018 results announcement, GEE management noted that the company expects to achieve additional economies of scale in FY2019. Specifically, CEO Derek Dewan stated that the company expects to lower SG&A as a percentage of revenue in the existing businesses, and will seek to be acquisitive in the future to augment growth.
GEE offers compelling value; $5 target
We view GEE as a higher risk, higher potential return acquisition growth story in the services sector, with significant opportunities for EBITDA expansion ahead from additional deals and the realization of economies of scale in its existing businesses. At the recent price of $0.94, GEE shares trade at an enterprise value of $108.4mn, or just 0.7x FY2018 revenues of $165.3mn. The $5.00 represents a valuation of 8.2x 2019E adjusted EBITDA of $19.4mn, and 0.9x 2019E revenue of $185.4mn.
Please review important disclosures in the report and on our website at www.seethruequity.com.
About GEE Group Inc.
GEE Group Inc. is a provider of specialized staffing solutions and is the successor to employment offices doing business since 1893. The Company operates in two industry segments, providing professional staffing services and solutions in the information technology, engineering, finance and accounting specialties and commercial staffing services through the names of Access Data Consulting, Agile Resources, Ashley Ellis, General Employment, Omni-One, Paladin Consulting and Triad. Also, in the healthcare sector, GEE Group, through its Scribe Solutions brand, staffs medical scribes who assist physicians in emergency departments of hospitals and in medical practices by providing required documentation for patient care in connection with electronic medical records (EMR). Additionally, the Company provides contract and direct hire professional staffing services through the following SNI brands: Accounting Now®, SNI Technology®, Legal Now®, SNI Financial®, Staffing Now®, SNI Energy®, and SNI Certes.
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