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| 8-K - PRIMARY DOCUMENT - HireQuest, Inc. | hqi8-kq32020earnings.htm |
HireQuest Reports Financial Results for the Third Quarter of
2020
$800,000 Sequential Improvement in Net Income Validates Confidence
that Worst of
COVID-19 Impact is Over
GOOSE CREEK, South Carolina – November 12, 2020 –
HireQuest, Inc. (Nasdaq: HQI), a national provider of back-office
and operational support for franchised operators of on-demand and
temporary staffing service providers, today reported financial
results for the third quarter ended September 30,
2020.
Third Quarter 2020 Financial Summary
●
Franchise royalties
of $3.2 million compared to $3.1 million in the prior year period,
an increase of 2.5%.
●
Service revenue,
including interest paid on aging accounts receivable, of $164,000
compared to $154,000 in the prior year period, an increase of
6.7%.
●
Total revenue of
$3.4 million compared to $3.3 million in the prior year period, an
increase of 2.7%.
●
Net Income was $2.0
million, or $0.15 per diluted share, compared to a net loss of $7.8
million, or $(0.60) per share last year. The prior-year quarter
included $4.8 million of merger-related expenses and $683,000 of
income from discontinued operations.
●
Paid first
quarterly cash dividend of $0.05 per share
●
On November 11,
2020, the Board of Directors declared a quarterly cash dividend of
$0.05 per share of common stock expected to be paid on December 15,
2020 to shareholders of record as of December 1, 2020 representing
an annual dividend yield of 2.4%2. The company intends
to pay quarterly cash dividends on its common stock each year in
March, June, September and December, subject to final approval by
the Board of Directors each quarter after its review of the
Company’s financial performance.
System-wide
sales1 (a non-GAAP operating performance
metric) for the third quarter 2020 of $55.6 million compared to
$74.2 million for the quarter ended September 29,
2019.
“Our
franchise business model, combined with a solid balance sheet and
steady cash flow, are making it possible for us to continue to
deliver profitable results while navigating the ongoing challenges
resulting from the global healthcare crisis,” commented Rick
Hermanns, HireQuest’s President and Chief Executive Officer.
“For the first time, we declared a quarterly cash dividend of
$0.05 per share. Our Board has again approved a dividend this
quarter, and, barring anything currently unforeseen, we expect to
continue to pay a similar dividend in the future. Importantly, the
payment of quarterly dividends does not rule out the possibility of
future acquisitions should we find the right fit for our business.
Increasingly, there are distressed businesses that make for
attractive opportunities, but we continue to be highly selective as
we consider potential targets.”
Mr.
Hermanns continued, “During the third quarter, which is
generally our strongest quarter, we saw our business stabilize. We
are confident that the worst is behind us despite continued
uncertainty as to the timing of a recovery in specific sectors of
the economy, such as construction, hospitality and large-scale
entertainment. Our franchisees have done an outstanding job
adjusting their cost structure to align with demand while
continuing to meet the needs of their customers. We are facing
unprecedented challenges and thus far, not a single franchise has
failed. We remain committed to delivering value to our shareholders
and believe that a regular cash dividend underscores our confidence
in the long-term prospects and resiliency of our
business.”
Third Quarter 2020 Financial Results
The
company’s total revenue is calculated by aggregating its
revenue derived from franchise royalties and service revenue.
Franchise royalties are the royalties earned from franchisees
primarily on the basis of their sales to their customers. Service
revenue consists of interest charged to franchisees on overdue
accounts and other fees for optional services we provide our
franchisees.
Franchise
royalties in the third quarter of 2020 were $3.2 million compared
to $3.1 million in the year-ago quarter, an increase of 2.5%.
Service revenue was $164,000 compared to $154,000 in the prior-year
quarter, an increase of 6.7%.
Total
revenue in the third quarter of 2020 was $3.4 million compared to
$3.3 million in the year-ago quarter, an increase of 2.7%, or
$90,000. This increase is primarily due to the increase in
franchised locations in 2020 as company-owned locations were
converted to franchisees in the fourth quarter of 2019, and the
results of company-owned locations are presented as discontinued
operations in our financial statements.
Selling,
general and administrative (“SG&A”) expenses in the
third quarter of 2020 were $1.4 million compared to $7.4 million
for the third quarter last year. The third quarter of 2019 included
approximately $4.7 million of non-recurring, merger-related
expenses. The decrease in SG&A was also driven by a decrease in
expenses related to workers’ compensation costs and bad
debt.
Net
Income in the third quarter of 2020 was $2.0 million, or $0.15 per
diluted share, compared to a net loss of $7.8 million, or $(0.60)
per diluted share, in the third quarter last year. The net loss
from continuing operations, which excluded discontinued operations,
was $8.5 million, or $(0.65) per diluted share, in the year-ago
quarter. The third quarter of 2020 did not include any discontinued
operations.
Balance Sheet and Capital Structure
Cash
was $10.3 million as of September 30, 2020, compared to $4.2
million at December 31, 2019.
Total
assets were $49.1 million as of September 30, 2020. Total
liabilities were $13.7 million.
On
September 15, 2020, the company paid a quarterly cash dividend of
$0.05 per share of common stock to shareholders of record as of
September 1, 2020.
On
November 11, 2020, the company’s Board of Directors declared
a quarterly cash dividend of $0.05 per share of common stock
expected to be paid on December 15, 2020 to shareholders of record
as of December 1, 2020.
Conference Call
HireQuest
will hold a conference call to discuss its financial
results.
Date:
Thursday, November 12, 2020
Time:
4:30 p.m. Eastern time (2:30 p.m. Mountain time)
Toll-free dial-in number: 1-844-602-0380
Toll-free dial-in number: 1-844-602-0380
International
dial-in number:
1-862-298-0970
Please
call the conference telephone number 5-10 minutes prior to the
start time. An operator will register your name and
organization.
The
conference call will be broadcast live and available for replay at
https://www.webcaster4.com/Webcast/Page/2359/38301
and via the investor relations section of HireQuest’s website
at www.hirequest.com.
A
replay of the conference call will be available through November
26, 2020.
Toll-free
replay
number:
1-877-481-4010
International
replay number: 1-919-882-2331
Replay passcode: 38301
Replay passcode: 38301
About HireQuest
HireQuest,
Inc. is a nationwide franchisor that provides on demand labor
solutions primarily in the light industrial and blue-collar
segments of the staffing industry for HireQuest Direct and
HireQuest franchised offices across the United States. Through our
national network of approximately 138 franchisee-owned offices in
30 states and the District of Columbia, HireQuest provides
employment for approximately 80,000 individuals annually that work
for thousands of customers in numerous industries including
construction, light industrial, manufacturing, hospitality, and
event services. For more information, visit www.hirequest.com.
2 Based on a closing stock price of $8.35 on November 11,
2020
Important Cautions Regarding Forward-Looking
Statements
This news release includes, and the company’s officers and
other representatives may sometimes make or provide certain
estimates and other forward-looking statements within the meaning
of the safe harbor provisions of the U.S. Private Securities
Litigation Reform Act of 1995, Section 27A of the Securities Act,
and Section 21E of the Exchange Act, including, among others,
statements with respect to future revenue, franchise sales,
system-wide sales, and the growth thereof; operating results;
anticipated benefits of the merger with Command Center, Inc., or
the conversion to the franchise model; intended office openings;
expectations of the effect on our financial condition of claims and
litigation; strategies for customer retention and growth;
strategies for risk management; and all other statements that are
not purely historical and that may constitute statements of future
expectations. Forward-looking statements can be identified by words
such as: “anticipate,” “intend,”
“plan,” “goal,” “seek,”
“believe,” “project,”
“estimate,” “expect,”
“strategy,” “future,” “likely,”
“may,” “should,” “will,” and
similar references to future periods.
While the company believes these statements are accurate,
forward-looking statements are not historical facts and are
inherently uncertain. They are based only on the company’s
current beliefs, expectations, and assumptions regarding the future
of its business, future plans and strategies, projections,
anticipated events and trends, the economy, and other future
conditions. The company cannot assure you that these expectations
will occur, and its actual results may be significantly different.
Therefore, you should not place undue reliance on these
forward-looking statements. Important factors that may cause actual
results to differ materially from those contemplated in any
forward-looking statements made by the company include the
following: the level of demand and financial performance of the
temporary staffing industry; the financial performance of the
company’s franchisees; changes in customer demand; the
effects of any global pandemic including the impact of the novel
coronavirus disease ("COVID-19"); the extent to which the company
is successful in gaining new long-term relationships with customers
or retaining existing ones, and the level of service failures that
could lead customers to use competitors’ services;
significant investigative or legal proceedings including, without
limitation, those brought about by the existing regulatory
environment or changes in the regulations governing the temporary
staffing industry and those arising from the action or inaction of
the company’s franchisees and temporary employees; strategic
actions, including acquisitions and dispositions and the
company’s success in integrating acquired businesses
including, without limitation, successful integration following the
merger with Command Center, Inc.; disruptions to the
company’s technology network including computer systems and
software; natural events such as severe weather, fires, floods, and
earthquakes, or man-made or other disruptions of the
company’s operating systems; and the factors discussed in the
“Risk Factors” section and elsewhere in the
company’s most recent Annual Report on Form
10-K.
Any forward-looking statement made by the company or its management
in this news release is based only on information currently
available to the company and speaks only as of the date on which it
is made. The company and its management disclaim any obligation to
update or revise any forward-looking statement, whether written or
oral, that may be made from time to time, based on the occurrence
of future events, the receipt of new information, or otherwise,
except as required by law.
Company
Contact:
Investor Relations Contact:
HireQuest,
Inc.
Hayden IR
Cory Smith, CFO Brett Maas
Cory Smith, CFO Brett Maas
(800)
835-6755
(646) 536-7331
Email: CSsmith@hirequest.com Email: brett@haydenir.com
Email: CSsmith@hirequest.com Email: brett@haydenir.com
-- Tables Follow --
HireQuest, Inc.
Consolidated Balance Sheets
|
|
September 30, 2020
|
|
December 31, 2019
|
|
ASSETS
|
(unaudited)
|
|
|
|
Current assets
|
|
|
|
|
Cash
|
$
10,297,147
|
|
$
4,187,450
|
|
Accounts
receivable, net of allowance for doubtful accounts
|
24,024,564
|
|
28,201,279
|
|
Notes
receivable
|
2,144,118
|
|
3,419,458
|
|
Prepaid
expenses, deposits, and other assets
|
1,179,333
|
|
188,560
|
|
Prepaid
workers' compensation
|
1,978,509
|
|
822,938
|
|
Other
assets
|
-
|
|
201,440
|
|
Total
current assets
|
39,623,671
|
|
37,021,125
|
|
Property
and equipment, net
|
2,958,998
|
|
1,900,686
|
|
Intangible
assets, net
|
186,705
|
|
-
|
|
Notes
receivable, net of current portion and reserve
|
6,377,779
|
|
7,990,251
|
|
Total
assets
|
$
49,147,153
|
|
$
46,912,062
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current liabilities
|
|
|
|
|
Accounts
payable
|
$
5,499
|
|
$
253,845
|
|
Other
current liabilities
|
1,664,854
|
|
1,893,846
|
|
Accrued
benefits and payroll taxes
|
2,088,119
|
|
1,113,904
|
|
Due to
franchisees
|
2,311,372
|
|
3,610,596
|
|
Risk
management incentive program liability
|
1,018,994
|
|
1,811,917
|
|
Workers'
compensation claims liability
|
3,165,056
|
|
2,327,869
|
|
Total
current liabilities
|
10,253,894
|
|
11,011,977
|
|
Workers'
compensation claims liability, net of current portion
|
1,743,128
|
|
1,516,633
|
|
Franchisee
deposits
|
1,459,335
|
|
1,412,924
|
|
Deferred
tax liability
|
273,185
|
|
1,688,446
|
|
Total
liabilities
|
13,729,542
|
|
15,629,980
|
|
Commitments
and contingencies
|
-
|
|
-
|
|
Stockholders' equity
|
|
|
|
|
Preferred stock -
$0.001 par value, 1,000,000 shares authorized; none
issued
|
-
|
|
-
|
|
Common
stock - $0.001 par value, 30,000,000 shares authorized; 13,615,605
and 13,518,036 shares issued, respectively
|
13,616
|
|
13,518
|
|
Additional paid-in
capital
|
28,541,062
|
|
27,584,610
|
|
Treasury stock, at
cost – 33,092 and -0- shares, respectively
|
(146,465)
|
|
-
|
|
Retained
earnings
|
7,009,398
|
|
3,683,954
|
|
Total
stockholders' equity
|
35,417,611
|
|
31,282,082
|
|
Total
liabilities and stockholders' equity
|
$
49,147,153
|
|
$
46,912,062
|
HireQuest, Inc.
Consolidated Statements of Income
(unaudited)
|
|
Three months ended
|
|
Nine months ended
|
||||
|
|
September 30, 2020
|
|
September 29, 2019
|
|
September 30, 2020
|
|
September 29, 2019
|
|
Franchise royalties
|
$ 3,218,606
|
|
$ 3,139,158
|
|
$ 9,563,135
|
|
$ 9,276,714
|
|
Service revenue
|
164,074
|
|
153,717
|
|
840,515
|
|
727,077
|
|
Total
revenue
|
3,382,680
|
|
3,292,875
|
|
10,403,650
|
|
10,003,791
|
|
Selling,
general and administrative expenses
|
1,357,725
|
|
7,393,380
|
|
6,542,171
|
|
9,817,245
|
|
Depreciation and amortization
|
32,438
|
|
40,200
|
|
96,654
|
|
75,630
|
|
Income
(loss) from operations
|
1,992,517
|
|
(4,140,705)
|
|
3,764,825
|
|
110,916
|
|
Other miscellaneous income
|
392,709
|
|
504,833
|
|
932,254
|
|
751,693
|
|
Interest and other financing expense
|
(10,035)
|
|
(106,461)
|
|
(39,174)
|
|
(521,838)
|
|
Net
income (loss) before income taxes
|
2,375,191
|
|
(3,742,333)
|
|
4,657,905
|
|
340,771
|
|
Provision
for income taxes
|
404,058
|
|
4,716,731
|
|
654,592
|
|
4,816,337
|
|
Income
(loss) from continuing operations
|
1,971,133
|
|
(8,459,064)
|
|
4,003,313
|
|
(4,475,566)
|
|
Income
from discontinued operations, net of tax
|
-
|
|
682,674
|
|
-
|
|
722,756
|
|
Net
income (loss)
|
$
1,971,133
|
|
$
(7,776,390)
|
|
$
4,003,313
|
|
$
(3,752,810)
|
|
|
|
|
|
|
|
|
|
|
Basic earnings (loss) per share
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$ 0.15
|
|
$ (0.65)
|
|
$ 0.30
|
|
$ (0.41)
|
|
Discontinued
operations
|
-
|
|
0.05
|
|
-
|
|
0.07
|
|
Total
|
$ 0.15
|
|
$ (0.60)
|
|
$ 0.30
|
|
$ (0.34)
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings (loss) per share
|
|
|
|
|
|
|
|
|
Continuing
operations
|
$ 0.15
|
|
$ (0.65)
|
|
$ 0.30
|
|
$ (0.41)
|
|
Discontinued
operations
|
-
|
|
0.05
|
|
-
|
|
0.07
|
|
Total
|
$ 0.15
|
|
$ (0.60)
|
|
$ 0.30
|
|
$ (0.34)
|
|
|
|
|
|
|
|
|
|
|
Weighted average shares
outstanding
|
|
|
|
|
|||
|
Basic
|
13,573,086
|
|
12,927,634
|
|
13,551,507
|
|
10,939,318
|
|
Diluted
|
13,574,863
|
|
12,927,634
|
|
13,553,619
|
|
10,939,318
|
HireQuest, Inc.
Supplemental Operating Metrics
1 Management sometimes refers to total sales generated by
its franchisees as “franchise sales.” Management also
sometimes refers to sales at offices that were owned and operated
by the company, not by one of its franchisees, as "company-owned
sales," all of which were sold as of September 29, 2019. Sales at
company-owned offices are reflected net of costs, expenses, and
taxes associated with those sales on the company’s financial
statements as “Income from discontinued operations, net of
tax.” The sum of franchise sales and company-owned sales is
referred to as “system-wide sales,” a non-GAAP
operating performance metric. In other words, system-wide sales
include sales at all offices, whether owned and operated by the
company or by its franchisees. While the company does not record
franchise sales as revenue, management believes that information on
system-wide sales is important to understanding the company’s
financial performance because those sales are the basis on which
the company calculates and records franchise royalty revenue, are
directly related to interest charged on overdue accounts, which the
company records under service revenue, and are indicative of the
financial health of the franchisee base.