GEE Group, Inc. (JOB) on Q2 2022 Results - Earnings Call Transcript
Derek Dewan: Good morning, everyone. Thank you for joining the GEE Group Conference Call regarding our Fiscal Second Quarter. There is a slide presentation on the web. It's also on our website. And in this Investor Presentation, you can click through the slides if you like. We are not going to go over those slides today, but we will have follow-up questions at the end of this presentation, and you can submit those electronically as you have logged in to the site for doing that. Today, we're going to cover our fiscal second quarter and first half ended March 31, 2022. I'm Derek Dewan, Chief Executive Officer and Chairman of GEE Group. I will be hosting today's call. And joining me as the Co-Presenter is Kim Thorpe, our Senior Vice President and Chief Financial Officer. Thank you all for joining us today. It's our pleasure to share with you GEE Group's results for the fiscal 2022 second quarter and first half ended March 31, 2022, and provide you with our outlook for the second half of our 2022 fiscal year. Some comments that Kim and I will make may be considered forward-looking, including predictions and estimates about our future performance. These represent our current judgments of what the future holds and are subject to risks and uncertainties that actual results may differ materially from our forward-looking statements. These risks and uncertainties are described in Monday's earnings press release and our most recent Form 10-Q and other SEC filings under the captions Cautionary Statements 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 will also talk about some non-GAAP financial measures. Reconciliations and explanations of these measures are included in the earnings press release. Our presentation of financial amounts and related amounts, including growth rates, margins and trends are rounded or based upon rounded amounts. For purposes of this call and all amounts, percentages and related items presented are approximations accordingly. For your convenience, our prepared remarks for today's call are available in the Investor Center of our website www.geegroup.com. With that business behind us, I'm very happy to report that we achieved outstanding results for the second quarter and first half of our 2022 fiscal year beginning with net income of $1.1 million or $0.01 per diluted share and $17.8 million or $0.15 per diluted share, respectively. Consolidated revenues were $39.6 million and $82.5 million, up 14% and 19%, respectively. And gross profits and gross margins were $14.5 million and $30.1 million, and the gross margin was 36.6% and 36.5% respectively. Our non-GAAP adjusted EBITDA for the 2022 fiscal second quarter was $3.4 million, up $1.4 million or 69% over the comparable prior-year fiscal quarter and which represents a 9% margin to revenue. Non-GAAP adjusted EBITDA for the first half of the 2022 fiscal year was $7.3 million, up $1.7 million or 31% for our adjusted EBITDA for the same first half of the 2021 fiscal year. Before I turn it over to Kim, I just want to say how very proud I am by the outstanding effort made by our dedicated and talented people. They work extremely hard every day to ensure that our clients get the very best service. This is one of the keys to our success. And at this time, I'd like to turn the call over to our CFO, Kim Thorpe, who will further elaborate on our results for the 2022 fiscal second quarter and year-to-date results. Kim?
Kim Thorpe: Thank you, Derek, and good morning, everyone. As Derek mentioned, revenues for the fiscal 2022 second quarter and six-month periods ended March 31, 2022, were $39.6 million and $82.5 million, up 14% and 19%, respectively, over the comparable fiscal 2021 period. Contract staffing services contributed $33.7 million and $70.4 million or 85% of our revenue. And direct placement services contributed $5.9 million and $12 million or 15% of our revenue for both the three and six month periods ended March 31, 2022. Contract staffing services revenues increased $2.6 million and $8.1 million or 8% and 13% for the three and six month periods ended March 31, 2022 respectively. These increases are primarily due to increased demand in our professional contract services markets as the negative effects of COVID-19 have lessened and the U.S. economy and workforce continued on recovery paths toward pre-COVID-19 conditions. Direct hire placement revenues for the three and six month periods ended March 31, 2022, were $5.9 million and $12 million, up 61% and 71% respectively. They comprise 16% of our total revenues for the professional services business segment and 15% of all of our revenues. Revenues from our Professional Staffing Services segment, which consists of the combination of contract staffing and direct hire, were $35.9 million and $74.7 million and represented 91% of total revenue for both the three and six month periods ended March 31, 2022, respectively. Our Professional Staffing Services segment revenues were up 17% and 24% from the comparable fiscal 2021 period. Our IT services end markets at Agile, Access Data, Paladin Consulting and SNI IT accounted for 47% of our Professional Services Business segment revenues and were up 21% year-over-year. The other professional services end markets, finance, accounting and administrative, office, engineering, health care and other accounted for the remaining 53% of our Professional Service Business revenues and were up 36% year-over-year. Industrial staffing service revenues were $3.7 million and $7.8 million for the three and six month periods ended March 31, 2022, respectively, compared to $4 million and $9.1 million for the three and six month periods ended March 31, 2021. We continue to experience some pandemic-related conditions associated with the Delta and Omicron variants in our Ohio markets, including some school and business closings and interruptions, which were reminiscent in some respects of the early pre-COVID pandemic. Consolidated gross profits and margins were $14.5 million or 36.6% and $30.1 million or 36.5% for the three and six month periods ended March 31, 2022, both up substantially from comparable fiscal periods in 2021. Our professional contract staffing services gross margins, these are excluding direct placement services for the three month periods ended March 31, 2022, were 26.9% compared to 25.5% for the same period in 2021. Our consolidated gross margins for the last four consecutive quarters ending in the March 31, 2022, quarter have all been above 36%. The overall improvement in the company's combined gross margin is largely due to increases in and resulting higher mixes of direct hire revenues, which have 100% gross margins. Selling, general and administrative or SG&A expenses were approximately 31% and 30% of consolidated revenues for the three and six month periods ended March 31, 2022, respectively, compared with 26% and 27% for the three month and six month periods ended March 31, 2021. The settlement of a legal matter for $975,000 accounted for more than half of the expense ratio increase for the second quarter and in combination with a $509,000 severance charge taken during our fiscal first quarter ended December 31, 2021. These two items accounted for more than half of the expense increase for the year-to-date period. Another significant contributor to increases in our SG&A ratios are incrementally higher incentive and bonus compensation associated with significant revenue growth. As Derek mentioned in his remarks, we achieved net income for the three and six month periods ended March 31, 2022, of $1.1 million or $0.01 a share and $17.8 million or $0.15 per diluted share as compared with net losses in the prior-period. Our pro forma or non-GAAP adjusted net income and diluted EPS, excluding the effects of non-operating and/or nonrecurring items, which are outlined in our earnings press release, were $2.2 million or $0.02 per diluted share and $4.9 million, nearly $5 million or $0.04 per diluted share, respectively, for the three and six month periods ended March 31, 2022. Adjusted EBITDA, which is a non-GAAP measure, was $3.4 million for the 2022 fiscal second quarter, up $1.4 million or 69% over the comparable prior first year quarter. Non-GAAP adjusted EBITDA for the first half of our 2022 fiscal year was $7.3 million, up $1.7 million or 31% from our adjusted EBITDA for the first half of our 2021 fiscal year. As we've commented in prior quarters and assuming COVID-19 continued to lessen in severity and does not spike again, we believe these types of positive results are sustainable. A reconciliation of GEE Group's GAAP net income to the company's non-GAAP adjusted EBITDA and reconciliations of other non-GAAP measures and their GAAP counterparts discussed today can be found in the supplemental schedules in our earnings press release. To conclude, our current or working capital ratio at March 31, 2022, was 2.7:1. Consolidated accounts receivable net at the end of the 2022 fiscal second quarter were $21.2 million. And implied days sales outstanding, or DSO was approximately 43 days. We reported positive cash flow from operating activities of $2.1 million for the 2022 fiscal second quarter and $4.4 million year-to-date and non-GAAP free cash flow of $2 million and $4.2 million, respectively. Our liquidity position is strong. We have no outstanding debt. Our net book value per share was $0.87 per share at March 31, 2022. Now I'll turn the call back over to Derek. Derek?
Derek Dewan: Thank you, Kim. The 2022 fiscal second quarter was our third consecutive quarter of good performance since we fully deleveraged the company. We now have a great first half of our 2022 fiscal year to build upon. At March 31, 2022 the company had $14 million of cash in the bank and over $13 million in availability under GEE Group's bank 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 improve GEE Group's prospects for future profitable growth in 2022 and beyond. We have been successful so far in sustaining momentum that began during the third and fourth quarters of fiscal 2021, and that has continued into fiscal 2022. Absent the onset of recession or unforeseen events, we anticipate continued good results for the remainder of our 2022 fiscal year and beyond. Before we pause to take your questions, we again wish to thank our wonderful employees for their professionalism, hard work and dedication, without which we could not have accomplished all the good things that we have done this quarter and this year so far. Now Kim and I would be happy to answer your questions.
A - Derek Dewan: Please ask just one question and rejoin the queue for the follow-up as needed. If there's time, we'll come back to you for additional questions. We will submit them electronically. And we have several, so we will start now. The first question is a question about the tax rate. The cash tax rate has so far been below the statutory rate at least in regard to real operating income. Could we get some more explanation behind this and maybe get some information on what a realistic cash tax rate range looks like for the company? Are there any deductions that the company is able to take related to contract workers that might push the statutory rate below 21%? Kim, would you comment on the tax rate, please?
Kim Thorpe: I'd be happy to. Our tax rate currently is near nil, primarily because we have been able to accumulate over recent years that you might even call a little bit of the silver lining that went along with the struggle that we had in the early days, some NOL carryforwards. And those NOL carryforwards are still fairly significant. In fact, they're in the $20 million range. And so we have been able to offset taxable income by applying net operating loss carryovers. If you think in terms of -- and again, this is very raw. The way I look at it is our EBITDA for the trailing 12-month period, for example, has been $14 million. So we're still -- we still have about a year-and-a-half or more of NOLs available to us, which will continue to offset taxable income. So -- and then after that, we would expect our tax rate to fall back in the line with what's normal. As far as any special deductions for the workforce, of course, we're able to deduct 100% of everything we spend to hire our contract laborers. And of course, we'll always look to take advantage of any kind of special tax benefits that might come and go along with that.
Derek Dewan: Okay. Thank you, Kim.
Kim Thorpe: You're welcome.
Derek Dewan: The next question is projects or the return that is greater than the cost of capital is shareholder value-creating projects. We believe the simplest of these; especially given that somewhere around 60% to 70% of acquisitions destroy value as we believe some of the high interest financed acquisitions that you guys did. Effectively, is it better to buy back an undervalued stock, and we'd like to know why management seemingly is not willing to do this with a cash position of $14 million, which is $11 million over the number Kim Thorpe stated the company was able to run its operations at a recent presentation? The answer to your question is regarding acquisitions versus share buybacks and use of cash. Share buybacks at this level are attractive because we are undervalued as a company and the stock price represents a great value. Alternatively, the appropriate acquisitions that you don't overpay for, particularly when you're trading at 4.5x roughly EBITDA. If you could price those right and have it appropriately neutral or accretive to earnings, that makes some sense. However, share buybacks, particularly with our balance sheet at this point, are definitely under consideration. We've said that before. We actually have more than $14 million in cash at this point in our unused credit facility. However, let me point something out that many of you have failed to realize. The last PP loans -- PPP loans that we had, were forgiven in December, mid-December around the 17th, the CARES Act provided that no share buyback should occur within one year of the last repayment or forgiveness of the PPP loans. So the soonest we can buy back shares, if we choose to do so, would be December 17, 2022. That's a nuance that was in the CARES Act that many people have not realized. But appropriately, we can do that and we will address that a little bit later in the year at this point. And we do have great cash flow. And the other question was how much cash do you need per quarter? We're generating over $2 million a quarter that does fund working capital. So it's working quite well. And our credit facility is unused, and we can borrow approximately $14 million now, and that moves up depending upon accounts receivable. Kim, do you want to add anything to that?
Kim Thorpe: Derek, I think that was really well explained. I just want to reinforce to everyone that we understand the compulsion of trying to sort of move past where the stock has been. Our job is to run this company for the long haul and to make it as profitable and strong as we can. And you can rest assured that as soon and at the right time, we'll make good acquisitions. The SNI acquisition was challenging, but I still tell people and believe that it's the best acquisition we did. The execution was a little fuzzy, but we got there. And we now have a company that's worth way more than it was at the outset. This whole team has a lot of experience in acquiring companies. I get the point or I see the metric, 60% to 70% to story value. That's not the case here. It wasn't the case at MPS Group when Derek and our Board led that business. So just stay tuned.
Derek Dewan: Thank you, Kim. And the next question kind of dovetails into that. Are there any leverage ceilings the company is setting so that something similar to how the company got burdened with high interest rate debt does not happen again? An acquisition might be attractive, but at a 10% interest rate, it's unlikely to create value for shareholders. And I agree with that comment completely. And let me lay any concerns that shareholders would have. We are not going to overleverage this company. We are not going to have high interest rate debt. And we got out of that situation, and we will never get into that situation again. So you can take that to the bank. Kim, we've had that discussion several times. We do believe our shares are a tremendous value and at the appropriate time, we'll address with the first question dealt with in terms of share buybacks. Do you want to add anything to that, Kim, about high-rate debt and --?
Kim Thorpe: Yes. I'll just say one word, ditto.
Derek Dewan: Thank you very much. Another question that's just regarding reporting, it would be helpful if the company could report some metrics such as bill rates, number of placements and so forth. Any thoughts on adding some of these metrics such as these would be helpful. Any Investor Presentation that you have access to, and it's also on our website, we do deal with bill rates by individual vertical, and we talk about how many temps are on assignment and so forth. So that information is there. And if you want some follow-up discussion with that, let us know. It's a moving target, obviously, as business ebbs and flows, but we're happy to discuss that further and talk more about it. Turning -- let's see the next question here. Another question was your $1 billion goal in 2025. I'll shorten that. Is that an ambitious goal? And should you do smaller acquisitions essentially and/or buyback stock or both, what's management thinking about that? So I can tell you that a large acquisition of size would not be attractive to us if we had to use significant leverage or high interest rate debt. What's more likely are smaller tuck-in acquisitions that are highly profitable and that we use a combination of seller financing, cash and our credit facility, our ABL if necessary, which is priced at LIBOR plus a couple of hundred basis points. So I wouldn't be too concerned about a large acquisition in the near term. Our growth metric -- our growth target is achievable with some, what I would say, aggressive movements by us, but limited to smaller tuck-in acquisitions. And of course, we are a target for others, and that's come up before too. But again, that's not something that we're entertaining at this moment. Obviously, we're growing our company nicely and profitably, and we're not going to do anything to disturb that other than to enhance the profitability an increase in revenue. And by the way, an acquisition would have to make sense for the vertical, which would be IT initially like cybersecurity, for example, a fast growth segment. Kim, do you want to add anything to that?
Kim Thorpe: Yes, I would just remind everybody that we did our first four of five acquisitions literally within 18 months, start to finish.
Derek Dewan: Okay. Great. The next question is, a reverse split seems like it would open up the universe of buyers. Any reasons why you all haven't done this? Or does management maybe have a different view about this? I can tell you that, that discussion has been brought up amongst our directors and senior management, and also several shareholders have commented. The bulk of the shareholders have said, at this point, they wouldn't do a reverse split. There's some concern that if you trade under $1 on an exchange, a public exchange in the United States, that there's a requirement that you have to trade for 30 days at a certain level above it. That rule is hard fast on the NASDAQ. We're on the New York Stock Exchange American, and that rule is not hard fast. What the New York looks at is whether the company is profitable and well capitalized. And then they look at the stock price. And if they are, it's a discretionary thing with the New York. So thus far, we have not been asked by the New York Stock Exchange to do anything to alter that, and they're allowing us to grow our business and deal with that as necessary. But the concept of a reverse split may open up the door for larger shareholders and institutions that can't buy stocks under $5 for example. However, we think we can earn our way up at this point, to some degree to get to a higher level. So is a reverse split being considered or stock buybacks being considered? The answer is that those discussions have been had. There's more likelihood of a stock buyback than a reverse split. But several shareholders have commented on both ways on the reverse split, and we've had advisers tell us that it's beneficial on some situations and others tell us it's not. So we're a very open-minded and very observant as to what the best course of action is. And at this point, there's no hard fast rule either way regarding this. Another question that we had, management buying stock. Management owns a lot of shares. Management buys stock when -- where windows open? We have so much going on or has had so much going on in that the window has not been open, and we've had several directors inquire us to whether they can buy. But hopefully, going forward, we're able to participate in the growth of the equity of the company even more so. And I personally have been a big investor and will continue to be. Question regarding SG&A. The company does not have a lot of hard assets or costs regarding hard assets. To better returns, what are some of the investments the company makes through SG&A that don't show up on the balance sheet? Essentially, the question is what's the normal recurring SG&A? And what SG&A is tied to variable costs like commissions on placements and things like that? And I would say, Kim, you can address that a little bit is that what our normal SG&A percentage is and how much is variable.
Kim Thorpe: Sure. About two-thirds of our SG&A is really the S, selling, and that includes both base compensation and incentive compensation that goes to our field force, which are core employees, which you -- if you look at our Slide 4 or 5, I think, that has the company profile and it's about 200 -- almost 300 individuals. About two-thirds of that number represents -- I'm sorry, yes, about half of that number -- excuse me, of that two-thirds represents incentive or variable compensation. So if you boil all that down, you can -- if you take the whole between 26% and 30% normalized SG&A, about half of that is purely variable, and the other half is somewhat fixed. Although recently, in particular, we've been very -- in a very competitive labor market. So not only have we made our incentive and commission plans more attractive, but we've also raised base salaries quite a bit, which the entire industry has been through. So that that made up a big part of why our percentage went up, but that's a step sort of a thing. So we now are set where we don't see that going at that pace. So you should see that percentage begin to come down in the future, including in the second half of this year.
Derek Dewan: Okay. Thank you, Kim. Another question is Hudson. I presume that's the reference to this question. Hudson is a staffing company. It's a great match to job, very much the same revenue and earnings. Is it on the horizon for a partnership or merger? I am familiar with Hudson, Hudson used to own Monster actually, an IPO-ed from TMP Worldwide way back in the '90s, and it is a well-capitalized company. It's doing okay. I would say that we're not in talks with Hudson or any other company at that level right now, but nothing is off the table if it adds tremendous value to our shareholders. Okay. Other questions? Okay. Hold on, let's go to question -- can you discuss bill rate trends? Kim, do you want to handle that?
Kim Thorpe: Yes, bill rates have moved up quite a bit over the last 12 months, again, a function of the workforce and the supply side, the demands of labor. Fortunately, our business model works well in that environment because we basically start with the pay rate plus a burden pay rate to our contractors and add a spread to that. So we're able -- and because of the status of the workforce overall and the high demand in excess of supply, we've been able to keep up with that. So bill rates have gone up double-digit over the last 12 months. Will it keep growing at that pace? I don't think so. I think they will move up some more because the whole workforce situation has not yet stabilized. Demand still exceeds supply. That's beginning to turn, but there's still more growth on the horizon. And all these volatile conditions, by the way, are opportunities for us, and we've been able to take very good advantage of them up to now.
Derek Dewan: Thanks, Kim that leads into the next question. Please comment on overall spreads. And by spreads, we mean the gross profit dollar per hour after burden cost -- burden payroll costs. And I will say that the spreads have increased virtually in every segment of our business. Typically, there's a markup on payroll -- burden payroll that we use to price. And as Kim was saying, we've increased our bill rates. Of course, pay rates have gone up, too, but the spreads have gone up, our gross profit dollar per hour faster. And we are seeing better spreads, and that's indicative on our gross profit and our gross margin. So you can look at that and see. It's also boosted by perm placements, which is hot right now for direct hire placements. The next question is we've got spreads, let's see, demand trends by vertical. The demand is high in all verticals, and the highest is probably in IT. But accounting and finance is also very, very high. And the demand for permanent placements or direct hires, particularly in the accounting and finance segment is very, very high. So we continue to see great demand across the board. And the demand for contract labor is very high, too. And as you know, coming out of COVID and some of the disruptions we've had in the economy and the labor force, it bodes well for contract staffing and also permanent placements. The next question is investments in personnel and technology, and that's a great question. So we have made several investments in people. We've increased our headcount internally to help meet the rising demand. And we've also enhanced our technology to be able to work remotely and away from the office should that become more prevalent than it has been. We demonstrated that during COVID, and we're geared up with Teams and Microsoft and some of the other products that we have, and our people can work remotely on pretty much a moment's notice. So we have gone virtual on several of our offices, when leases have come up, so we've reduced our rent costs there. And we'll continue to do so. We have some permanent virtual workers, remote workers, and that works quite well with experienced hires and also with recruiting. The next question is what's the acquisition landscape look like? It looks pretty good for the type of acquisition we're looking for, the tuck-in special expertise in IT, particularly cyber and those type of things. And we're now positioned to be able to do that along with a buyback of stock or anything like that. So -- but I would say that the question regarding, are you going to get into a big acquisition over leverage, the answer is no. So we're well-positioned to do it, and we can do it with our balance sheet quite nicely. Question is the bad debt expense. Kim, do you want to comment on the one charge-off we had regarding EBITDA? I think we might have lost him.
Kim Thorpe: I'm sorry, I had mute on. I'm sorry, I committed that.
Derek Dewan: Well, I was happy to comment if necessary, but it's the question is on --
Kim Thorpe: I think it was, I don't think it's not added back as an EBITDA adjustment. I think it was used to explain a variance, but it was actually not added back.
Derek Dewan: And it was isolated, but we had reserved for --
Kim Thorpe: It was isolated but we didn't add it -- we didn't add it back to adjusted EBITDA.
Derek Dewan: It was a bankrupt client in the industrial segment. But yes, I mean, it's a onetime thing, but someone might argue that bad debts occur in the normal course of business, so they shouldn't be adjusted to EBITDA.
Kim Thorpe: And it's not.
Derek Dewan: Right. Any thoughts on use of free cash flow? I think we hit those pretty good. We are being able to make investments back into the business in people and technology. And we're also able to do other things, as you know, particularly if appropriate, buybacks or acquisitions. We are accumulating cash. We now have some $16 million in the bank, and you're going to say, "What are you waiting for?" Well, I gave you the guidance on the stock buyback realm of our ability to do that sometime later this year if we decide to do that and also the tuck-in acquisitions, but no big gulp at a high interest rate, which was a concern that someone mentioned. Is GEE finding M&A opportunities? Of course, we are. We get several per week, and we're able to sort them to be very selective as to which ones we want to look further on. And quite frankly, in the past, we have not been in a position to do those appropriately with our balance sheet, but we are now. And we're looking very, very hard to make sure we do the right ones priced appropriately, that are accretive to earnings and can grow nicely to going forward. Seasonality in revenues. That's a great question. Should we expect to see sequential growth in the quarters? Do you want to comment on that, Kim?
Kim Thorpe: Yes, there is seasonality in revenues. We went outside that -- and I say seasonality, it's not seasonality in the pure sense. For example, if you think of a Hillshire Farms does 80% of their business in the holiday months or something like that, it's not seasonal in that respect. But there is a well-established pattern that we do much better in the June quarter and the September quarters normally as opposed to the December and the March quarters. We broke out of that pattern this year simply because, frankly, a pent-up demand, again, as the country and the workforce and the U.S. economy are trying to come back from the COVID. The December 2021 quarter was one of the highest revenue. In fact, it was the highest revenue quarter since the second quarter we owned SNI back in 2017. So it was out of pattern. So that's why we are fairly bullish on the remainder of this year, because notwithstanding the fact that our December quarter and now our March quarters have both been very good, we think that staying in pattern, we should expect the same for June and September.
Derek Dewan: Thank you. The next question is how the rising interest rates and recession risk impact your appetite for M&A and willingness to pay historical market multiples for acquisitions? First of all, rising interest rates would impact us if we financed the acquisitions, what I would call secondary type interest rates, not at LIBOR plus a couple of hundred basis points. And at this point, we probably don't need to access any type of debt to do a tuck-in acquisition. And then recession risk with that lower multiples essentially is what the question is asking. And the answer is yes to that. Multiples typically come down in a downturn. However, the average downturn is not long, and we sailed through those before. I have managed through a couple of recessions with no problem. Our cash flow actually goes up because we collect accounts receivable faster than we expend money for payroll. So it may be opportunistic actually in a downturn. Maybe the prices will come down, and it will be more available when people get a little bit skittish about continuing. Great quarter. Seeing any slowdown in IT hiring at all. I've seen news of tech firms slowing their hiring. Some big tech firms have slowed their hiring a bit of permanent hires, but we have not seen that, and we have not been primarily supplying tech firms like, for example, Amazon, Google, and companies like that. Our clients tend to be more the -- what I would call the industrial segment and product manufacturing or telecom, things like that. And they're so far behind on system implementation and enhancements that the demand for our services and the labor that we supply in the IT segment is really hot. So I would say that, that is happening to some tech firms, but not to the customer base much that we have. The next question, we did not know about the share buyback restriction. Thank you for clarifying that. And thank you for being patient with that as well, but we will address that as we can going forward. Can you comment on the headwinds or tailwinds facing your momentum? Let me say this that we have -- there's always tailwinds and headwinds. The tailwinds right now is that the company is very, very well-positioned from a leadership standpoint down to the field level. COVID actually allowed us to really button down the hatch from a personnel standpoint and keep the best that we can keep that can drive our business forward, and we've added significantly more and good talent. So we feel real good about our ability to recruit and retain our personnel. The headwinds or general economic conditions that may have some impact on business in general and of course, the use of labor, tight labor market. A little bit looser labor market is probably going to be beneficial for us. And in times of changing environment, staffing companies do quite well because people are uncertain as to whether to hire permanent or contract employees. Since we do both and benefit from both, we're able to adapt quite well to the changing global environment, national environment. And again, as I said, staffing companies do well in terms of the downturn, in terms of cash flow management because they collect receivables faster than expend it for payroll. And that can last for a good while, that momentum there, just strictly from a balance sheet standpoint. I'm not too concerned about headwinds at this point, because I think our opportunities far exceed any potential for issues with the global or national environment. The last two quarters are the strongest. Can you give us an idea on the next two quarters? Kim, do you want to talk about the next two quarters? Thank you. Back unmute, Kim.
Kim Thorpe: Thank you. We're being somewhat conservative on our forecasting. So we're not -- we're more or less keeping the forecast at around where we were in the March quarter. So we're looking at somewhere between $160 million or $165 million in revenue. If you do the math and again, I'm not trying to give guidance just giving you directionally what the way we see it right now, we could do better than that. And one thing I wanted to say, and this goes back to the prior question, too, Derek, not to go backwards. But another interesting thing to look at is where the staffing industry is projecting things now. One thing -- when we do all this work to update all our numbers on our investor slides and everything. One of the things on Slide 13 is data that we get from the Staffing Industry Analyst Association. And if you look at 2021 in this presentation versus the last one it's way up over where it was originally projected and even higher projections for 2022 and 2023. And then those are all based on tailwinds that the staffing industry net that the Staffing Industry Analyst Association sees in the market. And they -- we look at a lot of their statistics, but those are also very good news for us. So just to point that out.
Derek Dewan: Thank you, Kim. One observation is, I'm a happy shareholder, keep the momentum going. And I say thank you for that. Another question is, have you been approached to be acquired? I will say there's always activity on that front, be it from private equity or strategic buyers. And a good company typically would be approached, particularly one of our size. So yes, I mean, we have discussions from time to time. But at this point, we are very, very focused on running our business, growing, improving profitability, improving EBITDA, earnings per share and of course, the strategic part of being in the correct verticals in the right markets geographically. So we're flattered that people think highly of us in the industry. We have some of the best gross margins, some of the best bill rates. You can take a look at that and do a comparison. And we benchmark against the best companies in the sector, most of them are large cap multi-billion dollar companies. But there's a lot of boutique players, too, that do quite well. So we're always flattered and always will look to enhance shareholder value. We talked about different things to do for that. So that's -- I ran a company for almost 17 years, and then we sold it to Adecco Group for a nice premium. But I think you build something of value and you don't face being acquired or things like that. People will come to you. And whatever makes sense for our shareholders, of which we are significant shareholders, we will do. And most of you have commented very, very objectively as to the strategy that you would like to see us take. And we do take your comments to heart, and we will digest today's activity as well as we move forward.
Derek Dewan: That concludes our presentation. We really appreciate all of you for joining us today and your support through tough times, through the COVID environment and then continued support as we grow and execute, and look for good things coming from us to enhance our shareholder value. Thanks again, and that concludes our presentation for today.
