NEW YORK, NY / ACCESSWIRE / November 16, 2017 / SeeThruEquity, a leading independent equity research and corporate access firm focused on smallcap and microcap public companies, today announced it has issued an update on GEE Group Inc. (NYSE American: JOB).
The report is available here: November 2017 Update Note.
GEE pre-announced positive unaudited preliminary fiscal 4Q17 results on October 10, 2017, realizing much of the scale and operating efficiency envisioned when the company acquired SNI Companies in April 2017. Highlights were as follows:
- FY4Q17 revenues will be in a range of $45.5mn - $46.5mn, representing 110%+ YoY growth.
- FY4Q17 gross margins expanded by 920 basis points, to reach 36.8% - 37.0%.
- FY4Q17 adjusted EBITDA is likely to surpass $2mn
GEE pre-announces strong preliminary FY4Q17 results
GEE pre-announced nice growth and improved profitability for 4Q17 on October 10, 2017. Using the midpoint of the range, GEE expects revenues to grow by 111% YoY to reach $46mn. For the company's fiscal year 2017, revenues are expected to be $134.1mn - $135.1mn, well ahead of FY2016 revenues of $83.1mn. Importantly, with two consecutive quarters at the $46mn level, GEE appears well on its way to reaching its pro forma goal of $200mn in annual revenues following the integration of SNI Companies.
GEE adjusted profit measures improve in quarter
We were impressed that GEE was able to maintain the high gross margins that were established on FY3Q17 in FY4Q17, underscoring the earnings leverage potential from the integration of SNI. GEE sees gross margins expanding by 920 basis points YoY, coming in at 36.8% - 37.0%. The company also noted that SG&A was expected to decline by $0.75mn sequentially, as GEE realizes cost synergies in the combined company. With gross profit dollars approximately $17mn and SG&A of $14.8mn expected in 4Q17, adjusted EBITDA is likely to be in a range of $2mn - $2.4mn. This represents a nice sequential improvement from $1.8m and considerable expansion from $1.2mn in FY4Q16. We believe management is positioning the company for further cost synergies, with GEE quickly approaching an annualized adjusted EBITDA run rate north of $10mn as the company heads into FY18. We note that, prior to the merger, SNI was able to command operating margins of 8%, suggesting there still remain myriad additional opportunities for cost efficiencies. The company is expected to announce full FY2017 results in late December 2017.
Still see compelling value; updating target to $8.00
We continue to see GEE as a compelling acquisition growth story. The target of $8.00 represents a fair value of 1.0x 2018E EV/Revenue of $192.0. At the recent price of $2.75, GEE Group shares trade with a market capitalization of just $43.5mn adjusted for SNI convertible preferred shares, despite robust growth and demonstrative success creating shareholder value - GEE shares have risen by approximately 85% since we initiated coverage in September 2014.
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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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