GEE Group Inc (JOB) 2021 Q4 法說會逐字稿

Hello, and welcome to the GEE Group fiscal fourth quarter and fiscal year ended September 30, 2021, earnings and 2022 update webcast conference call.

With me today is Kim Thorpe, our Chief Financial Officer and Senior Vice President; and I'm Derek Dewan, the Chairman and Chief Executive Officer of GEE Group.

Thank you all for joining us today. It is our pleasure to share with you GEE Group's results for the fiscal fourth quarter and year ended September 30, 2021.

Some comments Kim and I will make today may be considered forward looking, including predictions and estimates about our future performance. These statements represent our current judgment of what the future holds and are subject to risks and uncertainties that actual results may differ materially from those forward-looking statements. These risks and uncertainties are described in the earnings press release that we filed and our most recent Form 10-K filing and other filing with the SEC under the captions, Cautionary Statement Regarding Forward Looking Statements and Forward-looking Statements Safe Harbor. We assume no obligation to update the statements made on today's call.

During this presentation, we also will mention and reference some non-GAAP financial measures. We have provided reconciliations and further explanations of these measures, and they're included in supplemental schedules to our earnings press release that we filed. Our presentation of revenues, cost of services, gross profits and gross margins and the related growth rates and trends are rounded, or based upon rounded amounts. For purposes of this call, and all amounts, percentages and related items should be considered approximations, accordingly. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website, www.geegroup.com.

We have achieved near record levels of [revenues] of $41.5 million, and non-GAAP adjusted EBITDA of $3.6 million, in our 2021 fiscal fourth quarter due to increased demand for our permanent placement and contract staffing services. We were particularly pleased with the strength of our permanent placement revenue, which nearly doubled over the 2020 fiscal fourth quarter, and exceeded the 2021 sequential third quarter.

Permanent placement revenue for the full fiscal year 2021 beat both 2020 and 2019. Our contract revenue for the fiscal 2021 fourth quarter also grew by double digits over fiscal 2020's fourth quarter and was higher than the 2021 sequential third quarter.

Contract revenue for the full fiscal year 2021 beat 2020, and nearly equaled 2019, coming in just about 3% lower. In fact, we set our 2019 higher pre-pandemic results as the benchmark for our 2021 fiscal year performance, and although revenue came in just under fiscal 2019, we bested virtually all other 2019 financial results, including GAAP and non-GAAP profit measures, even with COVID-19 and its variants still very much in the picture.

For 2021 fiscal fourth quarter, we reported net income of $3 million or $0.03 per diluted share, a significant improvement compared with the fiscal 2020 fourth quarter's significant loss per diluted share. Pro forma diluted EPS, excluding the effects of former debt and related interest and gains and losses on debt extinguishments, was $0.02 in Q4 2021 compared with negative $0.01 for Q4 2020, a $0.03 per share improvement.

Our net income and diluted EPS were approximately breakeven for the 2021 full fiscal year. Our estimated pro forma diluted EPS for the full fiscal year 2021, again after removing the effects of former debt and related items, beat the 2020 full fiscal year.

Our non-GAAP adjusted EBITDA and non-GAAP EBITDA for the 2021 fiscal fourth quarter were $3.6 million and $3.4 million, respectively. The difference between the two represented nearly entirely by our non-cash stock compensation expense for the quarter. Non-GAAP adjusted EBITDA and non-GAAP EBITDA for the 2021 full year were $12.3 million and $10.9 million, respectively.

As I said last quarter, and it is worth repeating, our dedicated and hard-working employees have stepped up to the significant challenges that have faced us. I am very proud of our recruiters, business development and field leadership, and our corporate support team, all of whom are the key to our success. Our people continue to amaze us every day with their positive can-do attitudes, innovativeness, and good old fashioned work ethic.

As you know, we recently announced obtaining forgiveness from the SBA for the remaining CARES Act PPP loans and related interest, $16.7 million in the aggregate, which our businesses qualified for and initially obtained in April and early-May 2020. At that time, we had over $100 million in high-cost debt. Our consolidated net book value was less than $2 million, and we were entering into one of the most uncertain, precarious periods in our country and the world has faced during our lifetimes. We likely would have not survived these circumstances without the CARES Act assistance we were able to obtain, and we are certainly grateful to our leaders in Washington for their foresight in helping our businesses and our other small businesses out there across the nation through this unprecedented pandemic.

At this time, I'll turn the call over and the presentation to our Senior Vice President and Chief Financial Officer, Kim Thorpe, who will further elaborate on our results for the 2021 fiscal fourth quarter and full year. Kim?

Thank you, Derek, and good morning, everyone. As Derek said, consolidated revenues were $41.5 million in the fiscal 2021 fourth quarter. This was up 34% from the fiscal 2020 fourth quarter, up 9% sequentially from the fiscal 2021 third quarter, and up 7% from fiscal 2019's fiscal fourth quarter.

Our professional staffing services segment revenues were $37 million, up 40% from the fiscal 2020 fourth quarter, up 8% sequentially from the 2021 fiscal third quarter, and up 12% from fiscal 2019's fiscal fourth quarter.

Professional direct hire or permanent placement services revenues were up 96% year over year and 18% sequentially as compared to the 2021 fiscal third quarter. These comprised 18% of total revenues for the professional services business segment and 16% of consolidated contract and direct hire revenues. Professional services revenues in the fiscal 2021 fourth quarter also grew nicely, up 40% year over year and 8% sequentially over the 2021 fiscal third quarter.

Our IT services end markets at Agile, Access Data, Paladin Consulting and SNI accounted for 48% of our professional services business segment revenues and were up 25% year over year and 14% sequentially. The other professional services end markets -- finance, accounting, administrative and office, engineering, healthcare, and other -- accounted for the remaining 52% of the professional services business revenues and were up 57% year over year and 3% sequentially over the immediate prior quarter.

Our light industrial services business segment revenues for the quarter were down year-over-year 3% and up sequentially 16% from the 2021 fiscal third quarter. The year-over-year decrease is due to the lagging recovery in this end market as temporary laborers in our light industrial segment have not come back into the workforce as quickly as others since the COVID-19 pandemic.

We pointed out earlier that as government stimulus monies, including enhanced unemployment benefits and advanced payment child care credits and the like begin to scale down or terminate, we expect the supply of labor to increase, and we anticipate an increase in filled orders and related revenues in fiscal 2022. We believe the large sequential increase in the Q4 2021 versus Q3 2021 is a positive recent trend, indicating that temporary laborers are beginning to return to work in greater numbers.

All our professional services segment direct hire and contract revenues combined comprised 89% and 88% of our consolidated revenues for the fiscal fourth quarter and full fiscal year 2021, respectively.

Looking at our consolidated revenue from the viewpoint of all contract services, both professional and light industrial combined, compared with direct hire, all of which is professional, combined contract revenues were 84% and 88% of our consolidated revenues for the fiscal fourth quarter and full fiscal year 2021, respectively. Direct hire revenues were 16% and 12%, respectively.

As Derek mentioned, our direct hire revenue performance was outstanding in Q4 2021 and the full year. The higher mix of direct hire, which has a 100% gross margin, was instrumental in achieving our outstanding fiscal 2021 fourth quarter and full year results.

Fiscal fourth quarter consolidated gross profit dollars were up 45% year over year and up 10% sequentially as compared to the 2021 fiscal third quarter. Our professional staffing segment 2021 fiscal fourth quarter gross profit dollars were up 57% year over year and 11% sequentially, as compared to the immediately preceding quarter.

The consolidated gross margin percentage for Q4 2021 was up 2.7 percentage points year over year and up 0.4 percentage points sequentially, as compared to the 2021 fiscal third quarter. As I just mentioned, our permanent placements carry 100% gross margin, so the higher mix helped improve our gross margin accordingly.

Selling, general and administrative, or SG&A, expenses were approximately 29% of consolidated revenues, compared with approximately 33% of revenues in the fiscal fourth quarter of 2020. In addition to substantially higher revenue relative to fixed costs overall, this 4 percentage point improvement is the result of higher productivity, compensation expense savings, lower occupancy costs, lower job board advertising costs, and lower travel and entertainment expenses.

For the 2021 fiscal fourth quarter, as Derek mentioned earlier, we reported net income of $3 million or $0.03 per diluted share, a significant improvement compared to negative $0.58 loss per diluted share in the comparable fiscal 2020 fourth quarter. Pro forma diluted EPS, that is, excluding the effects of former debt and related interest and gains and losses on debt extinguishments, was $0.02 in Q4 2021 compared with negative $0.01 in Q4 2020, a $0.03 per share improvement. Our net income and diluted EPS were approximately breakeven for the 2021 full fiscal year. Our estimated diluted EPS and loss per share for full fiscal years 2021 and 2020, respectively, again after removing the effects of former debt and related items and a noncash goodwill impairment charge, were $0.06 per diluted share for fiscal 2021, compared with pro forma diluted loss per share of negative $0.13 for the 2020 full fiscal year.

Adjusted EBITDA, which is a non-GAAP financial measure, was $3.6 million for the 2021 fiscal fourth quarter, up $1.9 million or 112% year over year, and up $0.5 million or 16% sequentially as compared to the immediately preceding quarter. Non-GAAP EBITDA was $3.4 million for the 2021 fiscal fourth quarter. The main difference, as Derek mentioned, being non-cash stock comp expense. The overall improvement is a continuation of recovery and growth trend since the onset of the COVID-19 pandemic and cost savings from integration and restructuring activities both before and after the effects of COVID-19, which we addressed last quarter at our call. These measures have resulted in higher productivity, lower comp cost, lower occupancy, job board advertising, and lower travel and entertainment expenses reflected in our SG&A.

Importantly, in addition to these improvements in earnings and quality of earnings, we also are generating solid cash from operations once again. With the many improvements we've now made, we expect these positive trends in the Company's results to be sustainable. Reconciliations of GEE Group's GAAP net income to the Company's non-GAAP adjusted EBITDA and non-GAAP EBITDA for the quarter can be found in the supplemental schedule to our earnings release.

To conclude my remarks, our current or working capital ratio at September 30, 2021, was 1.1 to 1, which included approximately $6.7 million in current liabilities related to the CARES Act Payroll Protection Plan loans that we had remain. As Derek mentioned in his opening remarks, forgiveness has now been received from the SBA for all our remaining loans since the end of the 2021 fiscal fourth quarter and year end. Thus, after giving full effect to the PPP loan forgiveness, our pro forma current ratio at September 30, 2021, was 2.3.

Consolidated accounts receivable, net, at the end of the fiscal fourth quarter were $23.1 million, and implied days sales outstanding, or DSO, was a stable and attractive 46 days. Last, but not least, our liquidity and cash flow have dramatically improved.

With that, now I'll turn it back over to Derek.

Thank you, Kim. The 2021 fiscal fourth quarter and fiscal year have been a turning point for GEE Group. In addition to our good results, hallmarks include the successful completion of our follow-on public offering in which we raised approximately $52.5 million in cash, the closing of our new favorably priced $20 million bank senior asset-backed asset-based credit facility, and the pay-off and retirement of $60 million in former high-cost senior debt and fees.

As Kim mentioned, our liquidity and cash flow have dramatically improved. At September 30, 2021, the Company had $10 million of cash in the bank and over $15 million in available credit under its new bank credit ABL facility. Now that all of our former CARES Act PPP loans have been forgiven by the SBA, our debt leverage is nil. This all greatly enhances both the current enterprise value and financial fundamentals of our Company and significantly improved GEE Group's prospects for future profitable growth in 2022 and beyond.

A year ago, the world faced an uncertain future with extraordinary challenges for businesses created by the pandemic. Along the way, we have continued to work tirelessly and creatively, from GEE Group's offices and virtually, to help our clients safely and successfully navigate through this unprecedented period.

We also strengthened our commitment to our professionals, equipping them with state-of-the-art technology to work remotely and providing them the tools necessary to help clients with their critical talent needs despite changes in the workplace environment. As a result, we closed the fourth quarter with an employee base that is more engaged and productive than ever, with near record high revenues, creating positive strong momentum heading into the fiscal year 2022.

Supported by the strengths of our specialty brands and high-end verticals, deep subject matter expertise, our investments in recruiting and account management personnel and our refined, streamlined professional business model, we are excited about the continued ability to find meaningful and exciting employment for the people we place and provide clients access to the specialized talent they need to grow their businesses and successfully compete in a dynamic world.

GEE Group continued its strong momentum from the fourth quarter of fiscal 2021 into fiscal 2022, and we expect to report strong results for the first quarter ending December 31, 2021, and beyond.

Finally, we'd like to again thank our wonderful employees for their professionalism, hard work and dedication, without which, we could not have accomplished all the good things we have this quarter and this past year.

Now Kim and I will be happy to answer your questions. (Operator Instructions) So the first question that we have is, are you guys considering a new division for hiring NFT tech guys? Kim, would you handle that one please?

Yes. I'm assuming by NFT, you mean non-fungible token technology specialist. Nonfungible tokens, for everyone's benefit on the call, are involved in blockchain technology. But the answer to your question is yes. We are looking at all the tech spaces with the highest priority among the professional verticals, including looking at emerging specialties like NFT. So the answer to that question would be yes.

Thank you. The next question is, why insiders don't buy shares at the low price if you say the Company is undervalued? Great question.

So the officers and directors of the Company do have significant holdings in GEE Group. What happens is that we are locked out from the market periodically and almost exclusively with a few windows and opportunities for us to buy shares, and we're limited by material nonpublic information in terms of us buying when we know -- here is a great example. We submitted the PPP loan forgiveness' applications, and that was approximately $17 million that we had not heard from when the SBA left. So once that is pending, that would have been considered insider information, and we couldn't trade, buy or sell shares in our Company as insiders. That is one example.

The other is strictly timing of reported earnings and any other activity like defeasance of debt. When those negotiations were going on, that would preclude us. We did buy on the equity offering and you will see us periodically buy when the windows open up. I personally have significant holdings in the Company at a fairly high basis, and I'm quite confident and excited about our opportunity to materially create additional shareholder value. So we will buy periodically when the window opens.

The next question is, why aren't we seeing insiders buying hand over fist because you're very undervalued? And again, that is the same question that I had, and I covered that. My question is surrounding the next one, tech acquisitions. Will we diversify to do online placements like Slack and Upwork? Okay. That is a great question.

So what you have going on in our industry today is some individuals have created these medium of exchanges, similar to a Zillow or Realtor.com where there is postings of individuals available for work, and people will periodically enter into that universe of candidates and try to hire directly, not using, quote, an agency.

And what we believe is happening is very similar to the real estate industry. For example, in residential real estate, individual realtors are succeeding immensely despite all these exchanges of information in placements online of housing. And what we do is periodically, we will tap all resources for information with our expertise in recruiting and our technology, which is far superior to most of these what I call mediums of exchanging job information. We use LinkedIn Recruiter, for example, very, very well, which is by far more sophisticated and has more detail on candidates.

So again, are these medium of exchanges where you have job placements and potential candidates on an exchange, are they going to displace staffing companies? The answer is no. But will they augment us in terms of how we go into those and find talent? Speed to market is critical. So you have to narrow your search and hit the market quickly. We are able to do that. And would we buy one of these or create one? If we find that they become even more valuable -- today, they're not that great, and a lot of the companies that are sole-source, mediums of exchange do not make money as a sole-source. However, if they become more useful as we move on, we will absolutely move into that. So that is an excellent question.

And somebody said -- second question, have we received unsolicited offers to buy the Company post our great results?

That is a question that -- we get offers all the time, and that's very flattering. But we are down to business here, and we are building what I believe is a five-star company and a sustainable company for the longer term.

But as shareholders know, we always want to maximize shareholder value. And I had the prior company I was with, the NPS group, formerly AccuStaff, for 17 years and grew it into a $4 billion-plus company that was global, and Adecco Group made an offer in 2009, and we closed the deal in 2010 at a huge premium. When that comes about, if it is the best interest of the shareholders longer term, we will do what makes sense. However, we are in the build mode of our Company here, and longevity is something that we are building and sustainability. So we are quite excited and we're quite flattered when we get these opportunities as well.

Another question, supply-side talent grew roughly 10% sequentially. Great work by our teams in terms of bill rates, spreads. Are they maintaining, expanding? Any color there?

Kim, will you take that question please? Okay, I am not sure if Kim is still on, but I will take it.

Hey, I'm sorry, I had my mute button on.

You just wanted to see if I knew the answer, I think that's more --.

The answer is yes, we are seeing rates and spreads expand to some extent. As you all probably know, if you track federal data on employment and unemployment, employment still has not caught up to pre-pandemic levels. We find ourselves and our clients find themselves with more orders than still with candidates. And even though the candidates are beginning to catch up, there has been some -- it has been necessary to pay our candidates more, which in turn translates into higher bill rates and spreads for us.

Okay, great. Part two, are we seeing largely current clients or are new clients also a part of our recent revenue strength? I can say that across the board, we are seeing existing clients use us more and also we are adding new clients every day. So even though the job order flow is significant and we have huge demand, we never stop in our search for new customers and new avenues to add growth to our business. So we realized that for continued success, you have to keep expanding your customer base, and we're doing that.

And we also are penetrating existing covered customers with all of our services. For example, if we have a customer that is IT and using our IT group, when they have accounting and finance needs, our cross-selling activity will bring in our accounting and finance team, and that client will use and has been successful in using all of our services, and that is just the example of how we approach expanding our business.

Okay, another question. Revenue looks strongest since 2017. We are undervalued. Why not implement a share buyback and focus on organic growth versus acquisitions since we are valued at nearly half of comparable peers? Very astute question. And will we look at buybacks, will we focus on organic growth? The answer is yes, we do, and we are focused on organic growth.

Are acquisitions important? Acquisitions, and I have done several, with our Company, we have done five to build it to where we are at. And previously, in my prior company, I have done over 150 over a period of years. They are important for building your network out and your verticals and your expertise and to add talent because we are all -- our success is critical and critically based on internal talent, broadening the market and client base. So acquisitions do provide that in terms of building your organization and of course the by-product is increased revenue and earnings.

However, we are focused on organic growth as well and improving our shareholder value. So I call up the triple option, similar to a football play: are buybacks in your playbook, are acquisitions in your playbook, and is organic growth a key area of focus in your playbook? The answer is yes. So as we move forward, we have all of these options in the triple option playbook, and we'll execute as appropriate.

The next question is will you consider a stock split to create more investable trading level? And the stock split they're referring to is a reverse -- reverse stock splits sometimes are necessary to allow for larger financial institutions and mutual funds to buy your stock. So will we consider doing that at some point? The answer is we look at all facets of improvement of shareholder value, and that is also in the playbook.

Will you consider a modest buyback given the 5x EBITDA valuation that you have and your net cash position? No acquisition could match that. Again, I think I answered that. It is in our playbook and so it will all be considered as we move forward. Now that terrific numbers are out and outlook is very strong, might we see more direct shares involvement with insiders? Again, I gave the answer about insider participation. Inside participation in our equity will continue, and we're very bullish on our stock.

How are you preparing for a potential recession? I personally have managed a staffing company of multiple offices much larger than we have through both 2000/2001 recession and the 2008/2009 recession. The typical recession lasts about eight months in our industry. The 2008/2009 was prolonged because of the financial crisis, about 18 months. Beautifully, staffing companies tend to increase cash flow during a recession because they collect accounts receivable faster than they spend money for payroll on the contract side. So living through a recession is really not to me an issue. Our cash flow will improve temporarily. And the other thing is we have organized our balance sheet from a position of strength. So going into a recession with a high debt situation and a high interest cost would be not favorable, but we're not in that situation. We are in quite the opposite so I feel quite comfortable that we will sail through a recession.

Why are you not buying shares as insiders? The price is depressed. Again, I answered that one earlier.

Hello from Germany. Why don't you clearly publish the EPS as well as the planned EPS for 2022? We clearly published the EPS in our press release both for the quarter and for the fiscal year ended 2021, and I think there's an outlook in some of the analyst reports at 2022 moving forward.

Are customers receiving a high-quality customer service? I can tell you firsthand from customer involvement that I have and also from the caliber of the people we have on our team that we place customer service at the top of the list, and I believe that our customers have the best service, and that's why we are able to compete with much larger companies in our space.

The next one says, can you talk about 2022 expectations? You're back to 2019 revenue levels. The demand for employees is incredibly strong. IT workers remain in demand, but finding people seems to be a bottleneck. Can you talk about the market dynamics and your expectations? I can tell you that this is a robust employment market and the challenge of finding individuals to satisfy our demand is up there. However, we have invested in technology and people. We've added recruiting resources to meet that demand. We have added remote recruiting resources, internal recruiting resources. And we are up to the challenge, and we are meeting expectations, and in many cases exceeding those. And that is due to the quality and the caliber of our people that we have in our Company, and we will continue to make investments in our people to meet these expectations. We are expanding as I sit here today. I personally approve new hires, all new hires to the Company, and I cannot keep my pen and move it fast enough because we are getting the talent we need to expand and grow. So I am quite confident that we will meet the rising demand.

That seems to be the last question thus far. If you have any other questions, please submit them electronically, and we will pause for a second. Kim, would you like to add anything to what I have expanded on?

Yes, just to say that we are still -- I would remind everyone that we were still somewhat under pandemic conditions, albeit obviously not nearly as bad as it was a year ago, but things are beginning to come back. There was a question a minute ago, what are your expectations for 2022 and when are people coming back into the workforce. My personal view on that is always, and this may sound glib, but when people feel pain, when the stimulus and the generous unemployment benefits and other sources of money begin to dry up, I think they will be coming back into the workforce in greater numbers. We are already seeing the professional workforce actually not only come back but begin to grow again. So that would be the only addition I would make.

Thank you. We have another question. What are your expectations in 2022 regarding mergers and acquisitions? I can tell you that we have several opportunities for M&A. We constantly get candidates, and we also are astute in using our existing talent in the field to identify what I call quality competitors that may want to join us or some other people that may want to join us. So yes, we are always looking, and my expectation is in 2022, we are likely to execute on a transaction.

Next question, obviously the labor shortage has created some tailwinds for the business, specifically in permanent placement. What is the normalized revenue, EBITDA margins, and cash flow to the business? Well, Kim, I'm going to let you talk a little bit about the normalized revenue, EBITDA margins, and cash flow.

Sure. The fourth quarter of 2021, the third and the fourth quarters in a typical year are usually pretty good quarters in our business. They have a large number of billing days. The December quarter and the March quarter tend to back off a little. It's really hard to read right now. As Derek mentioned, we're having a great December quarter so far.

And frankly, somebody made the comment a minute ago that it looked like we were back to 2019 revenues. If you project off the third quarter and the fourth quarter of 2021, we are actually running ahead of 2019 revenues, again projecting off those two quarters. And if you annualize the average of those two numbers, that would put us at just over industry-level growth for fiscal 2022. Now we are not putting that out there as guidance because we specifically disclaim from financial guidance, but if you do that math, that is the result. So I'm just putting it out there for you, all that like to run spreadsheets and so forth.

Our normalized EBITDA margin has been high single digits. Again, as our revenues grow, we have a significant enough fixed cost base that we believe that that margin could go up and perhaps get into low single digits. And the cash flow of the business -- not to quote history, but this time two years ago, we had $12 million in annual interest. We have less than $100,000 now, which is comprised of the fees that we pay just to keep the line of credit in place. That's $12 million of cash flow we did not have two years ago.

So if you look at our operating income, that is a good gauge to tell you approximately what our cash flow is. In general, our business is very efficient in terms of conversion of what we record on a GAAP basis to cash basis. We have a 46-day average DSO. We pay our payables on about the same plane, so that is a good benchmark for cash flow. And importantly, again, if you take that benchmark and do the math on it, you're going to see that the cash flow is now positive. So Derek?

Okay that leads into the next question. Can you shed any light on upcoming or imminent acquisitions or mergers? The answer is that we are now positioned, balance sheet-wise, to absorb acquisitions. The likelihood of an imminent or an acquisition, imminent could mean tomorrow, so I'm not going to tell you exactly when. But likely in this fiscal year, you will see activity there.

The next question is, I thought you were going to update us on how Q1 2022 is going. Did I miss that? Q1 2022 would end December 31, 2021. And since we are now in early January, we do have strong indicators that we monitor daily and weekly that indicate that the first quarter of 2022 is a good one. So in case you missed it, it is a good one, and that will be reported sometime in February, mid-February.

The next question, in the presentation, it is mentioned that top-line growth goal is $1 billion in US professional revenue. Could you please elaborate on how you expect to achieve that goal and when you're going to achieve that? I can tell you that based on prior history, in my experience, I took the Company public in 1994 at $89 million. It was $1.6 billion in 1996 and $4 billion in 1998. And the reason that we were able to grow was because we positioned the Company from a position of strength financially, and we augmented our internal growth with acquisitions. So it would be a combination of internal growth and strategic acquisitions.

And I would say the billion dollars would be in our five-year plan. I was able to do it quicker before, but I don't want to set the goal too aggressively, and I think five years is a reasonable timeframe for us to be able to approach the target.

Benchmark objectives, is fiscal year 2021 Q4 GAAP EPS annualized for fiscal 2022 a good benchmark for the objective? So Kim, that question --.

Yes, I mean -- let me just say this, the quality of earnings is much higher. If you go back to the presentation, we talked about the pro forma Q4 EPS was $0.02 and the pro forma annual EPS was $0.06. So again, it's ballpark, I mean those are pretty good benchmarks right now to use. We're still in a pandemic. Anything can happen, so take that with a grain of salt. But yeah, the numbers are a lot cleaner now so I think -- you can also begin to predict off of our TTM EBITDA and adjusted EBITDA numbers more because again, not to keep bringing it back up, but with the payoff of all that debt we had, that was a pretty complicated mess that we had on our hands and then the pandemic. But now that we're beginning to come out of that and with the momentum we are, I think those are good numbers.

Okay. Thank you. Next question, how many analysts are following GEE? Today, we have one analyst, and we are approaching various others, and you should see analysts picking up coverage this fiscal year. As I sit here today, we've had contact with several others who have indicated their interest in picking up our stock. We are also preparing to launch what I call investor awareness roadshows with other institutional and retail investors. That's just forthcoming as well. We are in current discussions with investment banks regarding that to expand our investor base and the visibility of our stock. So great question, and we are on that, and you should see activity there as well.

Next question, are there specific metrics you look for when you search for buying other companies? Can we expect them to be immediately accretive to earnings? The answer to the second part is yes, they are going to be immediately accretive to earnings. That is one criteria that we use. The other thing is we look to see how they have grown over the years and whether they could sustain organic growth, whether their margins meet our expectations of higher margin and also the quality and caliber of their people.

Will GEE Group work with overseas companies like ALDI, Samsung and others to get exclusive contracts? This potentially could lead to fixed income going forward. The question there is leaning toward annuitized revenue streams, and the answer is yes, we will pursue those, and we do have some annuitized revenue streams in terms of continuing contracts on several clients. But the more you can create an annuity stream, it smooths out positives and dips in revenue and so forth. So as we grow and expand our service mix, that is the focus, and I think that is a great question.

For you to grow to $1 billion in revenue annually, wouldn't you need to make huge acquisitions to accomplish that goal? The answer to that is I think that our approach would be similar to what I have done before. We would rather take small bites on the apple and integrate very successfully and quickly, and that would be more of the approach than the big bite of the apple of going after some large target, unless it made total sense and was seamless. But I would say that larger acquisition would be later in the game after we have built out to a couple hundred million in size ourselves. So another great question, and that is the approach we are taking.

Are there any prospects in terms of staffing firms you're interested in acquiring in the near future? The answer to that is resoundedly yes.

Is there an acquisition -- if you do one, do you plan to go with debt, cash, stock or both? Kim why don't you address that, of the type of consideration we use when we go after an acquisition?

Sure, that's a great question. Our go to currencies for acquisitions are cash, prudently our own stock. Again, right now, it's kind of undervalued so that explains a little bit as to why we're still a little bit in a holding pattern and not jumping on acquisitions right away.

And then a third element for us, the question says debt. Particularly with smaller acquisitions and entrepreneur-owned businesses, we like seller debt and look at it in a manner similar to the type of M&A strategy you might have in a roll up because that invest the new owner in the Company and aligns everybody's interest.

And then last but not least, would we go to the private debt market or commercial debt market for senior debt, we would if an acquisition was so good, and it wasn't too big a piece. I would tell you the reason that we went all the way, and we get this question a lot, and raised so much capital that we could pay off all our debt, and as Derek mentioned, our leverage right now is nil, it is so that we can use senior debt in a prudent way and size it to the acquisition and not add to an already leveraged up position, if that makes sense. So we are very much strategizing and planning on acquisitions to happen in the not-too-distant future.

Let me add that one other component of the acquisition structure may be an earnout. And in terms of the earnout, we will pay for performance -- future performance as it is realized. Some people want to get paid for outlook; we pay for performance as realized. So we put something like that in place typically on some of the acquisitions that we'll make.

Another great question. Can you break out your goal of your revenue longer term? How much will come from direct hire versus professional staffing and light industrial? How to think about margins longer term? Really good question. So as we have expanded, we have increased, particularly if you look at this quarter and this last fiscal year, our gross margin and what we call our gross profit dollar per hour. We continue to focus on that, and you will see us moving more toward professional services in the higher-end verticals that we're realizing the higher margins and what I call gross profit dollar per hour in.

The other part of the question was how much of your business will be direct hire or permanent placement as you move forward with your goal versus contract staffing? And the answer to that is we have a nice blend ranging from 13% to 18% permanent direct hire versus contract staffing, and we think the mix is quite good. As you know, permanent placement is pretty hot right now so that percentage has moved upwards some. But longer term, it will probably level off in the 15% to 16% range we will grow our business. But you should see higher margins as we move forward and more of a focus toward the higher-end verticals.

Do you have the management and IT systems in place to scale GEE Group? Again, a wonderful question there. And Kim, why don't you talk about what we have built and how we can add to our revenue without increasing fixed costs and actually expand our operating margin?

Yeah, thanks, Derek. That's a great question. The answer to that is yes. Let me qualify that slightly to say, we are 90% there. And the reason I equivocated 90% is that we are putting the finishing touches on a couple things right now. Our standard is to have one GL, one applicant tracking system, a common billing system, and a common payroll systems, which we are in the final throes -- the latter, which we are in the final throes of aligning. And by having this, this will allow us, when we acquire a company, we can immediately segment the Company in terms of clients, contractors and people, and we can on board those groups, those factions from the Company. We can onboard them directly onto our systems. And through a series of codings that we have in place, maintain the legal entity sanctity of that company. But have them come onto a common system, that is not only faster and cleaner, but it also is efficient.

In the background, we already have common treasury management, everybody is managed through a common treasury management system. We have common back office systems, we have a common HR platform, we have common IT support platforms. So we are very -- when I say 90%, I'm really being conservative. We are prepared particularly to do the size and scale of acquisitions that we're probably going to come out of the box with in the near future.

Okay, great. One question is how are you going to get to $1 billion in revenue? Can you elaborate? We have answered that one.

And here's another one, thank you very much for directly interacting with shareholders through these calls. We shareholders appreciate the efforts of the whole team and also appreciate the insights. I can tell you, it is very rewarding to have these calls and to get these questions and get as much transparency on our Company out there to you all. And this is the good part of business because we are all in it together to succeed, and I want our shareholders to be part of the process of not only understanding where we are going but having key insight (technical difficulty) and transparency into the numbers and so forth. So I applaud that question, and I thank you for your good comments, but I also want to applaud all of you on the call today for really great questions and being so attentive and a part of our organization and understanding where we're going. We're excited about the growth prospects, and we look forward to much more success.

Have you given the Q1 update? I mentioned that 2022, the first quarter ending December 31 looks good. Business continues to be very, very good.

Thank you much for having the call. I think it's helpful. Do you have a sense when you will be reporting the December quarter results mid-February? What analyst reports are you referencing? We have the ThinkEquity report out there today, and there'll be more reports forthcoming as we expand our analyst base.

How many analysts follow GEE? We answered that. Is your January 2022 (inaudible)? Is it correct that your pro forma book value per share as of September is $0.86 per share? Is it correct, Kim, pro forma book value per share?

Yeah.

Okay. With little interest expense and de minimis CapEx, wouldn't EBITDA be close to cash flow?

Good question. Yes.

Okay. Will we be paying taxes the next few years? I hope not. (multiple speakers)

-- quite a bit of -- I don't have the exact figure with me, but we still have pretty significant NOL carryovers.

SNI acquisition cost, common shareholders doing internal dilution, what's needed to pay off the expensive debt? We have done all that. Thank you.

What do you enjoy most about operating GEE? I think it's the interaction with all of you and our employees and the ability to develop something that I can look at historically that has been a success story.

Are you guys aware of how (inaudible) who do you take big positions your Company? You just have to look at the filings to get that.

Is $0.08 to $0.20 EPS for the first quarter realistic? I would say, Kim, $0.08 --.

Yes. Keep in mind there'll be a near $16.7 million gain for the forgiveness of the PPP loans, and that alone, I think, is about -- I haven't done the math (multiple speakers).

Okay we got one minute left. I would like to wrap it up and say thank you all for being so attentive and being on our call and being shareholders and interested investors potentially -- if you're not a shareholder, we would love to have you -- of our Company, and we are working very, very hard and our people are working very, very hard to even be more successful.

So it's been a great quarter and a great fiscal year. We look forward to delivering great results in fiscal 2022. Once again, that concludes our call, and thank you for joining.