GEE Group Reports $33.1 Million Net Loss and Revenue Decline in Fiscal Second Quarter

GEE Group Inc. reported a consolidated net loss of $33.1 million for the fiscal second quarter ended March 31, 2025, a significant increase from a loss of $1.0 million in the same period last year. The company's revenues decreased by 4% to $24.5 million, down from $25.6 million in the prior year, primarily due to a 7% decline in professional contract staffing services, which accounted for approximately 88% of total revenues. Direct hire placement services, however, saw a 22% increase, contributing $3.0 million to the total revenue, reflecting the company's efforts to capitalize on job cuts in the governmental sector.

The financial performance was notably impacted by a $22 million goodwill impairment charge, which was recorded following an interim assessment indicating that the fair value of the Professional Services reporting unit had decreased. This impairment charge accounted for a substantial portion of the net loss from continuing operations. Additionally, the company established a full valuation allowance against its deferred tax assets, further contributing to the overall loss. Selling, general, and administrative expenses decreased slightly to $9.3 million, but as a percentage of revenues, they increased to approximately 38.0% from 37.3% in the previous year, reflecting the fixed nature of some costs amid declining revenues.

In terms of strategic developments, GEE Group completed the acquisition of Hornet Staffing, Inc. on January 3, 2025, for a total consideration of $1.5 million, which included cash and promissory notes. This acquisition is expected to enhance the company's competitive position in the staffing market, particularly in serving large clients through managed service providers (MSPs) and vendor management systems (VMSs). The integration of Hornet is anticipated to provide additional capabilities in offshore recruiting, which could lead to cost savings and improved operational efficiency.

As of March 31, 2025, GEE Group reported total assets of $61.8 million, a decrease from $95.9 million at the end of the previous fiscal year. The company's cash reserves stood at $18.5 million, down from $20.7 million, primarily due to cash outflows related to the Hornet acquisition and lower business volumes. The company has classified its Industrial Segment as a discontinued operation and is in the process of negotiating a sale, which is expected to close in the second quarter of 2025.

Looking ahead, GEE Group's management acknowledges the ongoing economic challenges, including inflation and labor market uncertainties, which have adversely affected business operations. The company is focusing on integrating artificial intelligence into its staffing solutions and enhancing its service offerings to adapt to changing market conditions. While the outlook remains cautious, the acquisition of Hornet is expected to provide new growth opportunities and improve the company's ability to secure contracts with larger clients in the future.