GEE Group Inc.: Form 10-Q for the period ended Jun 30, 2024

Overview

GEE Group Inc. and its wholly owned material operating subsidiaries, Access Data Consulting Corporation, Agile Resources, Inc., BMCH, Inc., Paladin Consulting, Inc., Scribe Solutions, Inc., SNI Companies, Inc., Triad Logistics, Inc., and Triad Personnel Services, Inc. are providers of permanent and temporary professional and industrial staffing and placement services in and near several major U.S cities. We specialize in the placement of information technology, accounting, finance, office, and engineering professionals for direct hire and contract staffing for our clients, data entry assistants (medical scribes) who specialize in electronic medical records (EMR) services for emergency departments, specialty physician practices and clinics, and provide temporary staffing services for our industrial clients. The acquisitions of Scribe Solutions, Inc., a Florida corporation (“Scribe”) in April 2015, Agile Resources, Inc., a Georgia corporation (“Agile”) in July 2015, Access Data Consulting Corporation, a Colorado corporation (“Access”) in October 2015, Paladin Consulting Inc. (“Paladin”) in January 2016, and SNI Companies, Inc., a Delaware corporation (“SNI”) in April 2017, expanded our geographical footprint within the professional placement and contract staffing verticals or end markets of information technology, accounting, finance, office, engineering professionals, and medical scribes.

The Company markets its services using the trade names General Employment Enterprises, Omni One, Ashley Ellis, Agile Resources, Scribe Solutions Inc., Access Data Consulting Corporation, Paladin Consulting Inc., SNI Companies (including Staffing Now, Accounting Now, and Certes), Triad Personnel Services and Triad Staffing. As of June 30, 2024, we operated from locations in eleven (11) states, including twenty-five (25) branch offices in downtown or suburban areas of major U.S. cities and three (3) additional U.S. locations utilizing local staff members working remotely. We have offices or serve markets remotely, as follows; (i) one office in each of Connecticut, Georgia, Illinois, Minnesota, and New Jersey, and one remote local market presence in Virginia; (ii) two offices in Massachusetts; (iii) three offices in Colorado; (iv) two offices and one additional local market presence in Texas; (v) six offices and one additional local market presence in Florida; and (vi) seven offices in Ohio.

Management has implemented a strategy which includes organic and acquisition growth components. Management’s organic growth strategy includes seeking out and winning new client business, as well as expansion of existing client business and on-going cost reduction and productivity improvement efforts in operations. Management’s acquisition growth strategy includes identifying strategic, accretive acquisitions, financed primarily through a combination of cash and debt, including seller financing, the issuance of equity in appropriate circumstances, and the use of earn-outs where efficient to improve the overall profitability and cash flows of the Company.

The Company’s contract and placement services are principally provided under two operating divisions or segments: Professional Staffing Services and Industrial Staffing Services. We believe our current segments and array of businesses and brands within our segments complement one another and position us for future growth.

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Results of Operations

Summary and Outlook

We have incurred a net loss for the fiscal 2024 third quarter and year to date and expect to report a net loss for the full fiscal year ending September 30, 2024. These results are primarily the result of negative economic and labor market conditions that began in 2023 and have continued into 2024. These conditions have negatively impacted the number of job orders received and the numbers of qualified candidates available to fill orders for placements across all of our lines of business. Likewise, the U.S. Staffing Industry, as a whole, has experienced material declines in overall volume and financial performance and the industry outlook is mixed as to when these conditions may be expected to definitively subside. Although these conditions have persisted, we have experienced an increase in revenues and orders in the quarter ended June 30, 2024, as compared to the prior sequential quarter ended March 31, 2024.

On April 18, 2024, we announced that the Mergers and Acquisitions (“M&A”) committee of our Board of Directors had completed its review of strategic alternatives with the assistance of an outside investment banking firm. Management is now in the process of executing on the Company’s plans and budgets as comprehended in the M&A Committee’s strategic recommendations, which are contemplated to include making prudent investments in both organic and M&A growth. To effectively navigate this downturn and return to profitability as soon as possible, we have implemented a comprehensive three-part strategic initiative aimed at fortifying our market position and driving sustainable growth. This includes (1) proactive measures to streamline operations and enhance growth opportunities and cost-efficiency, including significant cost reductions, (2) building upon past acquisitions by taking advantage of current conditions and further integrating and consolidating operations and systems for further efficiencies and cost saving opportunities, and (3) capitalizing on acquisition opportunities arising from the economic downturn by identifying and with the objective of acquiring businesses at reduced multiples and favorable valuations. We estimate that the strategic actions we’ve taken to date by themselves will have the effect of reducing our future annualized selling, general and administrative (“SG&A”) expenses by approximately $1.6 million. We estimate that future planned actions will have the effect of reducing our future annual SG&A an additional $1.4 million. It should be noted that due to other potential changes in our SG&A costs in the normal course of business, including the effects of inflation, changes in the volume of business, and others, these cost reductions alone will not necessarily translate into a corresponding equal reduction in our total future SG&A expenses. Regarding the second initiative above, Management expects to spend between $500 thousand and $1.0 million on systems and software over the next 12 to 18 months. Regarding the third initiative above, Management is moving forward with the Company’s M&A target list and socializing with several entities at this stage.

In addition to these initiatives, the Company also has acted timely and conservatively in the face of the current downturn and has reduced its intangible assets and goodwill through the corresponding recognition of non-cash pre-tax impairment charges of $20.5 million in its quarter ended June 30, 2024. Although these non-cash charges added significantly to our net loss and reduced the Company’s net book value, accordingly, they did not reduce the Company’s net cash position, tangible assets, or net tangible book value. The impairment charges associated with intangible assets other than goodwill essentially serve to accelerate future amortization thereby reducing non-cash amortization expense in future periods. The impairment charges in total also have the effect of reducing the level of intangible assets and goodwill and their associated risks in the Company’s consolidated balance sheet going forward.

The Company paused share repurchases on December 31, 2023, having purchased 6.1 million shares of JOB common stock, or just over 5% of our outstanding shares at the beginning of the program. For now, our Board and Management have determined that it is prudent to discontinue share repurchases at least until we are able to gain more clarity on when the market conditions for the staffing industry will improve. If and when we determine that a portion of our excess cash may be prudently utilized for share repurchases in the future, we will consider them once again, accordingly. Share repurchases will continue to be considered among alternative uses of our excess capital. However, in the context of our overall long-term growth strategy and goals it is not by itself a long-term growth strategy to achieve long-term growth goals of enterprise value, and therefore, shareholder value. Evaluation of alternative uses of GEE Group's capital is an on-going priority and process and decisions always will be made with the objectives being optimizing growth in shareholder value and maximizing shareholder returns.

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(Amounts in thousands except per share data, unless otherwise stated)

Three Months Ended June 30, 2024 Compared to the Three Months Ended June 30, 2023

Net Revenues

Consolidated net revenues are comprised of the following:

Contract staffing services contributed $26,169 or approximately 89% of consolidated revenue and direct hire placement services contributed $3,287, or approximately 11%, of consolidated revenue for the three months ended June 30, 2024. This compares to contract staffing services revenue of $32,980, or approximately 86%, of consolidated revenue and direct hire placement revenue of $5,191, or approximately 14%, of consolidated revenue for the three months ended June 30, 2023. Contract staffing services increased $574, or 2%, and direct hire services revenues increased $832, or 34%, as compared with the comparable amounts reported for the prior sequential quarter ended March 31, 2024.

Economic weakness and uncertainties, including persistent inflation and the possibility of recession, continued to negatively impact the Company’s results through the three months ended June 30, 2024. These conditions have negatively impacted the number of job orders received and the numbers of qualified candidates available to fill orders for placements across all of our lines of business. Professional contract staffing services revenues decreased $6,035, or 20%, as compared to the three months ended June 30, 2023. Industrial staffing services for the quarter decreased by $776, or 24%, mainly due to decreases in orders from clients and competition for orders and temporary labor to fill orders, accordingly. Professional contract services revenues increased $628, or 3%, and Industrial contract services revenue decreased $54, or 2%, as compared with the comparable amounts reported for the prior sequential quarter ended March 31, 2024.

Direct hire placement revenue for the three months ended June 30, 2024 decreased by $1,904, or approximately 37%, over the three months ended June 30, 2023. Direct hire services revenues increased $832, or 34%, as compared with the comparable amounts reported for the prior sequential quarter ended March 31, 2024. Direct hire opportunities tend to be highly cyclical and demand dependent, tending to rise during economic recovery and decline during downturns. Demand for the Company’s direct hire services was higher in fiscal 2023, following record highs in fiscal 2022, driven by post-COVID employment recovery trends at that time, and is down for the three months ended June 30, 2024, as a result of lingering negative economic conditions.

The U.S. Staffing Industry, as a whole, also has experienced material declines in overall volume and financial performance and the industry outlook is mixed as to when these conditions may be expected to definitively subside.

Cost of Contract Services

Cost of contract services includes wages and related payroll taxes and employee benefits of the Company's contract services employees, and certain other contract employee-related costs, while working on contract assignments. Cost of contract services for the three months ended June 30, 2024 decreased by approximately 19% to $19,861 compared to $24,518 for the three months ended June 30, 2023. The $4,657 overall decrease in cost of contract services is consistent with the decrease in revenues as discussed above.

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(Amounts in thousands except per share data, unless otherwise stated)

Gross profit percentage by service:

(a) Includes gross profit from direct hire placements, for which all associated costs are recorded as selling, general and administrative expenses. Unlike temporary contract staffing services, where the Company maintains primary responsibility for and controls the staff members that it provides to perform services for its clients, direct hire placement revenues are only recognized for the net amount of fees earned by the Company acting under an agency type of relationship. Accordingly, none of the Company’s costs associated with direct hire placement services are reportable as costs of services deducted from revenues to derive gross profit.

The Company’s combined gross profit margin, including direct hire placement services (recorded at 100% gross margin) for the three-month periods ended June 30, 2024 and 2023 were approximately 32.6% and 35.8%, respectively.

In the professional contract services segment, the gross margin (excluding direct hire placement services) was approximately 25.0% for three-month period ended June 30, 2024 compared to approximately 26.5% for the three-month period ended June 30, 2023. The decrease in professional contract staffing services gross margin is due, in part, to increases in contractor pay and other employment costs associated with the recent rise in inflation and competition for orders and candidates, accordingly, resulting in some spread compression.

The Company’s industrial contract services gross margin for the three-month period ended June 30, 2024 was approximately 15.2% versus approximately 17.7% for the three-month period ended June 30, 2023. The decrease is driven mainly by competition in the labor markets served by Company’s Industrial segment requiring the Company to offer more competitive rates and contractor pay to win business.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include the following categories:

• Compensation and benefits in the operating divisions, which include salaries, wages and commissions earned by the Company’s employment consultants, recruiters and branch managers on permanent and temporary placements;
• Administrative compensation, which includes salaries, wages, share-based compensation, payroll taxes, and employee benefits associated with general management and the operation of corporate functions, including principally, finance, human resources, information technology and administrative functions;
• Occupancy costs, which includes office rent, and other office operating expenses;
• Recruitment advertising, which includes the cost of identifying and tracking job applicants; and
• Other selling, general and administrative expenses, which includes travel, bad debt expense, fees for outside professional services and other corporate-level expenses such as business insurance and taxes.

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(Amounts in thousands except per share data, unless otherwise stated)

The Company’s SG&A for the three-month period ended June 30, 2024 decreased by $1,550, or 13%, as compared to the three-month period ended June 30, 2023. SG&A for the three-month period ended June 30, 2024, as a percentage of revenues, were approximately 34.6% compared to approximately 30.8% for the three-month period ended June 30, 2023. The increase in SG&A expenses as a percentage of revenues during the three-month period ended June 30, 2024, was primarily attributable to the declines in revenues in relation to the level of fixed SG&A expenses, including fixed personnel-related expenses, occupancy costs, job boards and applicant tracking systems, and to the presence of certain non-cash and/or non-operational and other expenses described below.

SG&A includes certain expenses incurred related to acquisition, integration, restructuring and other non-recurring activities, such as certain corporate legal and general expenses associated with capital markets activities, that either are not directly associated with core business operations or have been eliminated on a go forward basis. These costs were $46 and $21 for the three-month periods ended June 30, 2024 and 2023, respectively, and include mainly expenses associated with legal proceedings, former closed and consolidated locations, and advisory fees.

Amortization and Depreciation Expense

Amortization expense was $720 for both three-month periods ended June 30, 2024 and 2023. Depreciation expense was $74 and $96 for the three months ended June 30, 2024, and 2023, respectively.

Intangible Assets Impairment

The Company performed an evaluation of its intangible assets as of June 30, 2024, and determined that certain asset groups associated with the Company’s intangible assets including certain customer lists and tradenames are currently producing negative or sufficiently low gross cash flows that their estimated future discounted cash flows indicate impairments of the remaining unamortized balances. As a result, the Company recorded a non-cash impairment charge of $5,209 on intangible assets during the three-months ended June 30, 2024.

Goodwill Impairment

The Company completed an interim goodwill impairment assessment as of June 30, 2024 and determined that its goodwill was impaired. The estimated fair values of the Professional and Industrial Services reporting units decreased as compared to those resulting from the September 30, 2023 annual assessment, indicating that the pre-assessment carrying values of each reporting unit as of June 30, 2024 exceeded their estimated fair values. As a result, a non-cash goodwill impairment charge of $15,285 was taken during the three-months ended June 30, 2024 so that the carrying values of the Professional and Industrial Services reporting units reflect their estimated fair values, as determined by the interim evaluations made of the Company’s goodwill.

Income (Loss) from Operations

Income (loss) from operations was $(21,896) and $1,084 for the three-month periods ended June 30, 2024 and 2023, respectively. This decrease is mainly attributable to the non-cash impairment charges, the decrease in revenues, especially in direct hire placements, and other related items as explained in the preceding paragraphs.

Interest Expense

Interest expense was $115 and $119 for the three-month periods ended June 30, 2024 and 2023, respectively, and is mainly attributable to unused availability and administrative fees on the Company’s Facility.

Interest Income

Interest income earned was $179 and $159 for the three-month periods ended June 30, 2024 and 2023, respectively. Interest income is earned on cash balances held in the Company’s two brokerage accounts.

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(Amounts in thousands except per share data, unless otherwise stated)

Provision for Income Taxes

The Company recognized income tax (benefit) expense of $(2,546) and $(6,752) for the three-month periods ended June 30, 2024 and 2023, respectively. Our effective tax rate for the three-month period ended June 30, 2024 is higher than the statutory tax rate primarily due to the effect of federal tax credits and state and local taxes. Our effective tax rate for the three-month period ended June 30, 2023 is lower than the statutory tax rate primarily due to the effect of a reduction in the valuation allowance on the net deferred tax asset position as the Company maintained a full valuation allowance prior to the three months ended June 30, 2023.

Net Income (Loss)

The Company’s net income (loss) was $(19,286) and $7,876 for the three-month periods ended June 30, 2024 and 2023, respectively. The decrease of $27,162 is primarily the result of the non-cash impairment charges during the three month period ended June 30, 2024, a substantial increase in net income during the three months ended June 30, 2023 as the result of the reduction of the deferred tax assets valuation allowance previously recognized, and decreases in revenues and related net results for the three months ended June 30, 2024, compared with the three months ended June 30, 2023, and other related items as explained in the preceding paragraphs.

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(Amounts in thousands except per share data, unless otherwise stated)

Nine Months Ended June 30, 2024 Compared to the Nine Months Ended June 30, 2023

Net Revenues

Consolidated net revenues are comprised of the following:

Contract staffing services contributed $79,340 or approximately 90% of consolidated revenue and direct hire placement services contributed $8,797, or approximately 10%, of consolidated revenue for the nine months ended June 30, 2024. This compares to contract staffing services revenue of $102,357, or approximately 87%, of consolidated revenue and direct hire placement revenue of $15,821, or approximately 13%, of consolidated revenue for the nine months ended June 30, 2023.

Economic weakness and uncertainties, including persistent inflation and the possibility of recession, negatively impacted the Company’s results through the nine months ended June 30, 2024. These conditions have negatively impacted the number of job orders received and the numbers of qualified candidates available to fill orders for placements across all of our lines of business. Professional contract staffing services revenues decreased $20,353, or 22%, as compared to the nine months ended June 30, 2023. Industrial staffing services decreased by $2,664, or 27%, mainly due to decreases in orders from clients and competition for orders and temporary labor to fill orders, accordingly.

Direct hire placement revenue for the nine months ended June 30, 2024 decreased by $7,024, or approximately 44%, over the nine months ended June 30, 2023. Direct hire opportunities tend to be highly cyclical and demand dependent, tending to rise during economic recovery and decline during downturns. Demand for the Company’s direct hire services was higher in fiscal 2023, following record highs in fiscal 2022, driven by post-COVID employment recovery trends at that time, and is down for the nine months ended June 30, 2024 as a result of lingering negative economic conditions.

The U.S. Staffing Industry as a whole has experienced material declines in overall volume and financial performance and the industry outlook is mixed as to when these conditions may be expected to definitively subside.

Cost of Contract Services

Cost of contract services includes wages and related payroll taxes and employee benefits of the Company's contract services employees, and certain other contract employee-related costs, while working on contract assignments. Cost of contract services for the nine months ended June 30, 2024 decreased by approximately 22% to $60,039 compared to $76,918 for the nine months ended June 30, 2023. The $16,879 overall decrease in cost of contract services is consistent with the decrease in revenues as discussed above.

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(Amounts in thousands except per share data, unless otherwise stated)

Gross profit percentage by service:

(a) Includes gross profit from direct hire placements, for which all associated costs are recorded as selling, general and administrative expenses. Unlike temporary contract staffing services, where the Company maintains primary responsibility for and controls the staff members that it provides to perform services for its clients, direct hire placement revenues are only recognized for the net amount of fees earned by the Company acting under an agency type of relationship. Accordingly, none of the Company’s costs associated with direct hire placement services are reportable as costs of services deducted from revenues to derive gross profit.

The Company’s combined gross profit margin, including direct hire placement services (recorded at 100% gross margin) for the nine-month periods ended June 30, 2024 and 2023 were approximately 31.9% and 34.9%, respectively.

In the professional contract services segment, the gross margin (excluding direct hire placement services) was approximately 25.2% for nine-month period ended June 30, 2024 compared to approximately 25.8% for the nine-month period ended June 30, 2023. The decrease in professional contract staffing services gross margin is due, in part, to increases in contractor pay and other employment costs associated with the recent rise in inflation and competition for orders and candidates, accordingly, resulting in some spread compression.

The Company’s industrial contract services gross margin for the nine-month period ended June 30, 2024 was approximately 15.5% versus approximately 16.5% for the nine-month period ended June 30, 2023. The decrease is driven by competition in the labor market served by the Company’s Industrial segment, as discussed above, requiring the Company offer more competitive rates and contractor pay to win business.

Selling, General and Administrative Expenses

Selling, general and administrative expenses include the following categories:

• Compensation and benefits in the operating divisions, which include salaries, wages and commissions earned by the Company’s employment consultants, recruiters and branch managers on permanent and temporary placements;
• Administrative compensation, which includes salaries, wages, share-based compensation, payroll taxes, and employee benefits associated with general management and the operation of corporate functions, including principally, finance, human resources, information technology and administrative functions;
• Occupancy costs, which includes office rent, and other office operating expenses;
• Recruitment advertising, which includes the cost of identifying and tracking job applicants; and
• Other selling, general and administrative expenses, which includes travel, bad debt expense, fees for outside professional services and other corporate-level expenses such as business insurance and taxes.

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(Amounts in thousands except per share data, unless otherwise stated)

The Company’s SG&A for the nine-month period ended June 30, 2024 decreased by $5,451, or 15%, as compared to the nine-month period ended June 30, 2023. SG&A for the nine-month period ended June 30, 2024, as a percentage of revenues, were approximately 35.0% compared to approximately 30.7% for the nine-month period ended June 30, 2023. The increase in SG&A expenses as a percentage of revenues during the nine-month period ended June 30, 2024, was primarily attributable to the declines in revenues in relation to the level of fixed SG&A expenses, including fixed personnel-related expenses, occupancy costs, job boards and applicant tracking systems, and to the presence of certain non-cash and/or non-operational and other expenses described below.

SG&A includes certain expenses incurred related to acquisition, integration, restructuring and other non-recurring activities, such as certain corporate legal and general expenses associated with capital markets activities, that either are not directly associated with core business operations or have been eliminated on a go forward basis. These costs were $1,046 and $130 for the nine-month periods ended June 30, 2024 and 2023, respectively, and include mainly expenses associated with legal proceedings, former closed and consolidated locations, advisory fees, and personnel costs associated with eliminated positions.

Amortization and Depreciation Expense

Amortization expense was $2,159 for both nine-month periods ended June 30, 2024 and 2023. Depreciation expense was $235 and $295 for the nine months ended June 30, 2024, and 2023, respectively.

Intangible Assets Impairment

The Company performed an evaluation of its intangible assets as of June 30, 2024, and determined that certain asset groups associated with the Company’s intangible assets including certain customer lists and tradenames are currently producing negative or sufficiently low gross cash flows that their estimated future discounted cash flows indicate impairments of the remaining unamortized balances. As a result, the Company recorded a non-cash impairment charge of $5,209 on intangible assets during the nine-months ended June 30, 2024.

Goodwill Impairment

The Company completed an interim goodwill impairment assessment as of June 30, 2024 and determined that its goodwill was impaired. The estimated fair values of the Professional and Industrial Services reporting units decreased as compared to those resulting from the September 30, 2023 annual assessment, indicating that the pre-assessment carrying values of each reporting unit as of June 30, 2024 exceeded their estimated fair values. As a result, a non-cash goodwill impairment charge of $15,285 was taken during the nine-months ended June 30, 2024 so that the carrying values of the Professional and Industrial Services reporting units reflect their estimated fair values, as determined by the interim evaluations made of the Company’s goodwill.

Income (Loss) from Operations

Income (loss) from operations was $(25,605) and $2,540 for the nine-month periods ended June 30, 2024 and 2023, respectively. This decrease is mainly attributable to the non-cash impairment charges, the decrease in revenues, especially in direct hire placements, and other related items as explained in the preceding paragraphs.

Interest Expense

Interest expense was $253 and $265 for the nine-month periods ended June 30, 2024 and 2023, respectively, and is mainly attributable to unused availability and administrative fees on the Company’s Facility.

Interest Income

Interest income earned was $548 and $292 for the nine-month periods ended June 30, 2024 and 2023, respectively. Interest income is earned on cash balances held in the Company’s two brokerage accounts.

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(Amounts in thousands except per share data, unless otherwise stated)

Provision for Income Taxes

The Company recognized income tax (benefit) expense of $(3,461) and $(6,621) for the nine-month periods ended June 30, 2024 and 2023, respectively. Our effective tax rate for the nine-month period ended June 30, 2024 is higher than the statutory tax rate primarily due to the effect of federal tax credits and state and local taxes. Our effective tax rate for the nine-month period ended June 30, 2023 is lower than the statutory tax rate primarily due to the effect of a reduction in the valuation allowance on the net deferred tax asset position as the Company maintained a full valuation allowance prior to the nine months ended June 30, 2023.

Net Income (Loss)

The Company’s net income (loss) was $(21,849) and $9,188 for the nine-month periods ended June 30, 2024 and 2023, respectively. The decrease of $31,037 is primarily the result of the non-cash impairment charges during the nine months ended June 30, 2024, a substantial increase in net income during the nine months ended June 30, 2023 as the result of the reduction of the deferred tax assets valuation allowance previously recognized, and decreases in revenues and related net results for the nine months ended June 30, 2024, compared with the nine months ended June 30, 2023, and other related items as explained in the preceding paragraphs.

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(Amounts in thousands except per share data, unless otherwise stated)

Liquidity and Capital Resources

The primary sources of liquidity for the Company are revenues earned and collected from its clients for the placement of contract employees and independent contractors on a temporary basis and permanent employment candidates and borrowings available under its asset-based senior secured revolving credit facility. Uses of liquidity include primarily the costs and expenses necessary to fund operations, including payment of compensation to the Company’s contract and permanent employees, and employment-related expenses, operating costs and expenses, taxes and capital expenditures.

The following table sets forth certain consolidated statements of cash flows data:

As of June 30, 2024, the Company had $19,595 of cash, which was a decrease of $2,876 from $22,471 as of September 30, 2023. As of June 30, 2024, the Company had working capital of $26,864 compared to $30,290 of working capital as of September 30, 2023. The decrease in working capital is mainly attributable to the use of cash to purchase treasury stock and the effects of lower business volume on other components of working capital during the nine-months ended June 30, 2024. Cash flows provided by operating activities during the nine-months ended June 30, 2023 included the second and final installment payment of deferred payroll taxes under the CARES Act from fiscal 2020 of $1,847.

The primary uses of cash for investing activities were for the acquisition of property and equipment, principally information technology equipment, during the nine-month periods ended June 30, 2024 and 2023. Investing activities represent capital expenditures and did not include any major capital expenditures or capital improvements during either of the nine-month periods ended June 30, 2024 and 2023.

The cash flows used in financing activities were for purchases of treasury stock during the nine-months ended June 30, 2024, and payments made on finance leases during the nine-month periods ended June 30, 2024 and 2023.

The Company had $8,725 in availability for borrowings under its Facility as of June 30, 2024. There were no outstanding borrowings on the Facility as of June 30, 2024, or September 30, 2023, except for certain accrued carrying fees and costs, which are included in other current liabilities in the accompanying unaudited condensed consolidated balance sheets.

On April 27, 2023, the Company’s Board of Directors approved a share repurchase program authorizing the Company to purchase up to an aggregate of $20 million of the Company’s currently outstanding shares of common stock. The share repurchase program continued through December 31, 2023. The repurchase program did not obligate the Company to repurchase any number of shares of common stock. The share repurchase program was conducted in accordance with Rules 10b-5 and 10b-18 of the Securities Exchange Act of 1934, as amended. Subject to applicable rules and regulations, shares of common stock were purchased from time to time in the open market transactions and in amounts the Company deemed appropriate, based on factors such as market conditions, legal requirements, and other business considerations. During the nine-months ended June 30, 2024, the Company repurchased 2,717 shares of its common stock at a total cost of $1,575. Upon conclusion of the share repurchase program, as of December 31, 2023, the Company repurchased 6,128 shares in aggregate (accounting for approximately 5.4% of our issued and outstanding common shares immediately prior to the program).

All the Company’s office facilities are leased. Minimum lease payments under all the Company’s lease agreements for the twelve-month period commencing after the close of business on June 30, 2024, are approximately $1,347.

There are no minimum debt service principal payments due during the twelve-month period commencing after the close of business on June 30, 2024.

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(Amounts in thousands except per share data, unless otherwise stated)

Management believes that the Company can generate adequate liquidity to meet its obligations for the foreseeable future and at least for the next twelve months.

Off-Balance Sheet Arrangements

As of June 30, 2024, there were no transactions, agreements or other contractual arrangements to which an unconsolidated entity was a party, under which the Company (a) had any direct or contingent obligation under a guarantee contract, derivative instrument or variable interest in the unconsolidated entity, or (b) had a retained or contingent interest in assets transferred to the unconsolidated entity.

Disclosure Controls and Procedures

As of June 30, 2024, the Company’s management evaluated, with the participation of its principal executive officer and its principal financial officer, the effectiveness of the Company’s disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934, as amended ("the Exchange Act"). Based on that evaluation, the Company's principal executive officer and its principal financial officer concluded that the Company's disclosure controls and procedures were effective as of June 30, 2024.

Changes in Internal Control over Financial Reporting

There were no changes in the Company's internal control over financial reporting or in any other factors that could significantly affect these controls, during the Company's nine-month period ended June 30, 2024, that have materially affected, or are reasonably likely to materially affect, the Company's internal control over financial reporting.

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In evaluating us and our common stock, we urge you to carefully consider the risks and other information in this Quarterly Report on Form 10-Q, as well as the risk factors disclosed in Item 1A. of Part I of our Annual Report on Form 10-K for the fiscal year ended September 30, 2023 (“2023 Form 10-K”) filed with the SEC on December 18, 2023. Any of the risks discussed in this Quarterly Report on Form 10-Q or any of the risks disclosed in Item 1A. of Part I of our 2023 Form 10-K, as well as additional risks and uncertainties not currently known to us or that we currently deem immaterial, could materially and adversely affect our results of operations or financial condition.