Attached files
| file | filename |
|---|---|
| EX-99.2 - ADDITIONAL EXHIBITS - HireQuest, Inc. | exh992pres.htm |
| 8-K - PRIMARY DOCUMENT - HireQuest, Inc. | hqi8-k2020earnings.htm |
HireQuest Reports Financial Results for the Fourth Quarter and
Full-Year 2020
Full-Year EPS of $0.39 per Diluted Share and Cash Flow of More than
$9 Million;
Scaling Profitable Business Model – Adding 67 New Franchised
Locations and 10 Licensed Locations Through Accretive
Acquisitions
GOOSE CREEK, South Carolina – March 25, 2021 –
HireQuest, Inc. (Nasdaq: HQI), a national franchisor of on-demand,
temporary, and commercial staffing services, today reported
financial results for the fourth quarter and year ended December
31, 2020.
Full-Year 2020 Financial Summary
●
Franchise royalties
of $12.8 million compared to $14.7 million in the prior year, a
decrease of 12.8%.
●
Services revenue,
including interest paid on aging accounts receivable, of $1.0
million compared to $1.2 million in the prior year, a decrease of
15.5%.
●
Total revenue of
$13.8 million compared to $15.9 million in the prior year, a
decrease of 13.0%.
●
Net Income was $5.4
million, or $0.39 per diluted share, compared to a net loss of
$290,000, or $(0.03) per share last year.
Subsequent to Year End
●
Board of Directors
declared a quarterly cash dividend of $0.05 per share of common
stock to be paid on March 15, 2021 to shareholders of record as of
March 1, 2021. 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 each quarter.
●
Completed the
acquisition of certain assets of Snelling Staffing for
approximately $17.3 million, before working capital
adjustments.
●
Acquired the
franchised operations of LINK Staffing for approximately $11.1
million exclusive of working capital.
Fourth Quarter 2020 Financial Summary
●
Franchise royalties
of $3.2 million compared to $5.4 million in the prior year period,
a decrease of 40.2%.
●
Services revenue,
including interest paid on aging accounts receivable, of $176,000
compared to $476,000 in the prior year period, a decrease of
63.0%.
●
Total revenue of
$3.4 million compared to $5.9 million in the prior year period, a
decrease of 42.0%.
●
Net Income was $1.4
million, or $0.10 per diluted share, compared to net income of $3.5
million, or $0.26 per share last year.
●
Paid quarterly cash
dividend of $0.05 per share.
System-wide
sales1 for 2020 were $210.9 million compared to
$241.6 million for 2019. For the fourth quarter of 2020,
system-wide sales1 were $54.8 million.
The decrease is related to the economic slowdown due to
COVID-19.
“HireQuest
continues to generate profits and free cash flow, bolstering our
strong balance sheet and enabling both dividends and accretive
acquisitions, despite the ongoing challenges related to the
pandemic,” commented Rick Hermanns, HireQuest’s
President and Chief Executive Officer. “The decrease in
attendance at sporting events, and the elimination of concerts,
auto auctions, and other major events continues to have a
pronounced impact on our franchises. To date, our franchisees have
moved quickly and judiciously to minimize the impact and navigate
these unprecedented challenges. At the corporate level, we have
experienced a significant decrease in system-wide sales and royalty
revenues, but the impact on our bottom line has been less
pronounced due to the asset light-nature of our business model.
Overall, we have weathered the storm extremely
well.”
“As
a result, we have been able to leverage the advantages of our
business model and our balance sheet to grow our business through
strategic acquisitions,” added Mr. Hermanns. “We
recently closed the acquisition of Snelling Staffing, adding 38
franchised locations, 4 licensed locations, and integrating the
70-year-old tradename of Snelling. We also closed the acquisition
of LINK Staffing, adding another 29 franchised and 6 licensed
locations. In the aggregate, these two acquisitions add substantial
scale. These franchised and licensed locations accounted for $133
million in system-wide sales in 2020 and meaningfully expand our
national presence. Additionally, both Snelling and LINK specialize
in traditional commercial staffing, giving us a second lucrative
franchising revenue stream. Going forward, we will be able to sell
franchises for both on-demand and commercial staffing models, while
maintaining significant scale to create operational efficiency and
facilitating the acquisition of national accounts to support our
franchisees.”
“To
further mitigate risk and take advantage of our scale, we divested
the licensed locations, all in California, to a third party who has
agreed to pay a perpetual royalty fee for the use of the Snelling
and LINK trademarks,” added Mr. Hermanns. “Between this
transaction, the sale of certain branches, the sale of $5.3 million
of notes receivable, and the cash flow generated by these
acquisitions, we have paid off our line of credit and are in a net
cash-positive position again. Most importantly the company is well
positioned to benefit from a post-pandemic return to economic
normalcy. When that happens, and we don’t know when, we
should experience tremendous earnings leverage with our expanded
platform.”
Fourth 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 fourth quarter of 2020 were $3.2 million compared
to $5.4 million in the year-ago quarter, a decrease of 40.2%.
Service revenue was $176,000 compared to $476,000 in the prior-year
quarter, a decrease of 63.0%. Total revenue in the fourth quarter
of 2020 was $3.4 million compared to $5.9 million in the year-ago
quarter, a decrease of 42.0%.
Selling,
general and administrative (“SG&A”) expenses in the
fourth quarter of 2020 were $2.2 million compared to $3.1 million
for the fourth quarter last year. The fourth quarter of 2019
included approximately $0.5 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 fourth quarter of 2020 was $1.4 million, or $0.10 per
diluted share, compared to net income of $3.5 million, or $0.26 per
diluted share, in the fourth quarter last year (excluding a loss of
$315,000, or $(0.02) per diluted share, in discontinued operations.
The fourth quarter of 2020 did not include any discontinued
operations.
Full Year 2020 Financial Results
Franchise
royalties for the full year 2020 were $12.8 million compared to
$14.7 million in the prior year, a decrease of 12.8%. Service
revenue was $1.0 million compared to $1.2 million in the prior
year, a decrease of 15.5%.
Total
revenue for the full year 2020 was $13.8 million compared to $15.9
million in the prior year, a decrease of 13.0%. This decrease is
primarily due to the economic shutdown caused by
COVID-19.
Selling,
general and administrative (“SG&A”) expenses for
the full year 2020 were $8.7 million compared to $12.7 million for
the prior year, a decrease of 31.5%. The decrease in SG&A was
primarily due to the absence of merger-related expenses in 2020.
2019 included approximately $5.1 million of non-recurring,
merger-related expenses. The decrease was partially offset by an
increase in stock-based compensation and a reserve placed on notes
receivable that the company issued to finance the sale of offices
acquired in its merger in 2019. This reserve is directly related to
the negative impact COVID-19 has had on the economy, the financial
condition of the company’s borrowers and the value of the
underlying collateral.
Net
Income for the full year 2020 was $5.4 million, or $0.39 per
diluted share, compared to a net loss of $290,000, or $(0.03) per
diluted share, in the prior year. In 2019, the net loss from
continuing operations, which excluded discontinued operations, was
$505,000, or $(0.05) per diluted share. 2020 did not include any
discontinued operations.
Balance Sheet and Capital Structure
Cash
was $13.7 million as of December 31, 2020, compared to $4.2 million
as of December 31, 2019.
Total
assets were $49.1 million as of December 31, 2020, and total
liabilities were $12.7 million.
On
December 15, 2020, the company paid a quarterly cash dividend of
$0.05 per share of common stock to shareholders of record as of
December 1, 2020. The company intends to pay a $0.05 cash dividend
on a quarterly basis, based on its business results and financial
position.
Conference Call
HireQuest
will hold a conference call to discuss its financial
results.
Date:
Thursday, March 25,
2021
Time:
4:30 p.m. Eastern
time (2:30 p.m. Mountain time)
Toll-free dial-in
number:
1-877-545-0320
International
dial-in
number:
1-973-528-0016
Entry
Code:
904518
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/2359/40349
and via the investor relations section of HireQuest’s website
at www.hirequest.com.
A
replay of the conference call will be available through April 8,
2021.
Toll-free replay
number:
1-877-481-4010
International
replay
number:
1-919-882-2331
Replay
Passcode:
40349
About HireQuest
HireQuest,
Inc. is a nationwide franchisor that provides on-demand labor and
commercial staffing solutions in the light industrial, blue-collar,
and commercial segments of the staffing industry for HireQuest
Direct, HireQuest, Snelling, and LINK franchised offices across the
United States. Through its national network of over 200
franchisee-owned offices in more than 35 states and the District of
Columbia, HireQuest provides employment for approximately 60,000
individuals annually that work for thousands of customers in
numerous industries including construction, light industrial,
manufacturing, hospitality, clerical, medical, travel, and event
services. For more information, visit www.hirequest.com.
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 acquisition of Snelling and/or LINK.,
or the conversion of Snelling’s corporate offices 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
acquisitions of Snelling and LINK; 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
(800)
835-6755
(646)
536-7331
Email: Cssmith@hirequest.com
Email: brett@haydenir.com
2 Based on a closing stock price of $10.12 on December 15,
2020
HireQuest, Inc.
Consolidated Balance Sheets
|
|
December 31,
2020
|
|
December 31, 2019
|
|
ASSETS
|
|
|
|
|
Current assets
|
|
|
|
|
Cash
|
$
13,667,434
|
|
$
4,187,450
|
|
Accounts
receivable, net of allowance for doubtful accounts
|
21,344,499
|
|
28,201,279
|
|
Notes
receivable
|
2,178,299
|
|
3,419,458
|
|
Prepaid
expenses, deposits, and other assets
|
344,091
|
|
188,560
|
|
Prepaid
workers' compensation
|
1,434,583
|
|
822,938
|
|
Other
assets
|
-
|
|
201,440
|
|
Total
current assets
|
38,968,906
|
|
37,021,125
|
|
Property
and equipment, net
|
3,193,379
|
|
1,900,686
|
|
Deferred
tax asset
|
79,379
|
|
-
|
|
Intangible
assets, net
|
342,697
|
|
-
|
|
Notes
receivable, net of current portion and reserve
|
5,887,229
|
|
7,990,251
|
|
Total
assets
|
$
49,095,042
|
|
$
46,912,062
|
|
LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current liabilities
|
|
|
|
|
Accounts
payable
|
$
457,490
|
|
$
253,845
|
|
Other
current liabilities
|
1,322,764
|
|
1,893,846
|
|
Accrued
benefits and payroll taxes
|
743,431
|
|
1,113,904
|
|
Due to
affiliates
|
67,398
|
|
-
|
|
Due to
franchisees
|
3,228,777
|
|
3,610,596
|
|
Risk
management incentive program liability
|
858,482
|
|
1,811,917
|
|
Workers'
compensation claims liability
|
2,777,734
|
|
2,327,869
|
|
Total
current liabilities
|
9,456,076
|
|
11,011,977
|
|
Workers'
compensation claims liability, net of current portion
|
1,806,334
|
|
1,516,633
|
|
Franchisee
deposits
|
1,468,359
|
|
1,412,924
|
|
Deferred
tax liability
|
-
|
|
1,688,446
|
|
Total
liabilities
|
12,730,769
|
|
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; 13,628,675
and 13,518,036 shares issued, respectively
|
13,629
|
|
13,518
|
|
Additional paid-in
capital
|
28,811,389
|
|
27,584,610
|
|
Treasury stock, at
cost - 33,092 and -0- shares, respectively
|
(146,465)
|
|
-
|
|
Retained
earnings
|
7,685,720
|
|
3,683,954
|
|
Total
stockholders' equity
|
36,364,273
|
|
31,282,082
|
|
Total
liabilities and stockholders' equity
|
$
49,095,042
|
|
$
46,912,062
|
HireQuest, Inc.
Consolidated Statements of Income
|
|
Three months ended
|
|
Year ended
|
||||
|
|
December 31, 2020
|
|
December 31, 2019
|
|
December 31, 2020
|
|
December 31, 2019
|
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
Franchise royalties
|
$ 3,229,658
|
|
$ 5,396,922
|
|
$ 12,792,793
|
|
$ 14,673,636
|
|
Service revenue
|
175,817
|
|
475,748
|
|
1,016,332
|
|
1,202,824
|
|
Total
revenue
|
3,405,475
|
|
5,872,670
|
|
13,809,125
|
|
15,876,460
|
|
Selling, general and administrative expenses
|
2,158,276
|
|
3,131,312
|
|
8,700,446
|
|
12,692,297
|
|
Depreciation and amortization
|
32,528
|
|
324,502
|
|
129,182
|
|
400,132
|
|
Income
(loss) from operations
|
1,214,671
|
|
2,416,856
|
|
4,979,497
|
|
2,784,031
|
|
Other miscellaneous income
|
238,365
|
|
(616)
|
|
1,170,619
|
|
751,077
|
|
Interest and other financing expense
|
(10,490)
|
|
(37,748)
|
|
(49,664)
|
|
(559,585)
|
|
Net
income before income taxes
|
1,442,546
|
|
2,378,492
|
|
6,100,452
|
|
2,975,523
|
|
Provision
(benefit) for income taxes
|
86,446
|
|
(1,399,406)
|
|
741,038
|
|
3,480,996
|
|
Income
(loss) from continuing operations
|
1,356,100
|
|
3,777,898
|
|
5,359,414
|
|
(505,473)
|
|
Income
from discontinued operations, net of tax
|
-
|
|
(315,067)
|
|
-
|
|
215,494
|
|
Net
income (loss)
|
$
1,356,100
|
|
$
3,462,831
|
|
$
5,359,414
|
|
$
(289,979)
|
|
|
|
|
|
|
|
|
|
|
Basic earnings per share
|
|
|
|
|
|
|
|
|
Continuing operations
|
$ 0.10
|
|
$ 0.28
|
|
$ 0.40
|
|
$ (0.05)
|
|
Discontinued operations
|
-
|
|
(0.02)
|
|
-
|
|
0.02
|
|
Total
|
$ 0.10
|
|
$ 0.26
|
|
$ 0.40
|
|
$ (0.03)
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per share
|
|
|
|
|
|
|
|
|
Continuing operations
|
$ 0.10
|
|
$ 0.28
|
|
$ 0.39
|
|
$ (0.04)
|
|
Discontinued operations
|
-
|
|
(0.02)
|
|
-
|
|
0.02
|
|
Total
|
$ 0.10
|
|
$ 0.26
|
|
$ 0.39
|
|
$ (0.03)
|
|
|
|
|
|
|
|
|
|
|
Weighted
average shares outstanding
|
|
|
|
|
|
|
|
|
Basic
|
13,589,006
|
|
13,488,436
|
|
13,542,403
|
|
11,588,776
|
|
Diluted
|
13,731,644
|
|
13,490,636
|
|
13,654,128
|
|
11,588,776
|
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.