8-K
HireQuest, Inc. (HQI)
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported): March 25, 2021
HIREQUEST, INC.
(Exact name of registrant as specified in its Charter)
| Delaware | 000-53088 | 91-2079472 |
|---|---|---|
| (State<br>or Other Jurisdiction of<br><br><br>Incorporation<br>or Organization) | (Commission<br><br><br>File<br>Number) | (I.R.S.<br>Employer<br><br><br>Identification<br>No.) |
| 111<br>Springhall Drive, Goose Creek, SC | 29445 | |
| --- | --- | |
| (Address<br>of Principal Executive Offices) | (Zip<br>Code) |
(843) 723-7400
(Registrant’s telephone number, including area code)
(Former name, former address and former fiscal year, if changed since last report)
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instruction A.2. below):
☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)
☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)
☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))
☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))
Securities registered pursuant to Section 12(b) of the Act:
| Title of Each<br>Class | Trading<br>Symbol(s) | Name of Each<br>Exchange on Which Registered |
|---|---|---|
| Common Stock,<br>$0.001 par value | HQI | The NASDAQ Stock<br>Market LLC |
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Item 2.02 Results of Operations and Financial Condition.
On March 25, 2021, HireQuest, Inc. (the "Company") issued a press release (the "Press Release") reporting its financial results for the year ended December 31, 2020, a copy of which is attahced hereto as Exhibit 99.1
The information included in this Current Report on Form 8-K (including Exhibit 99.1 hereto) is furnished pursuant to Item 2.02 and shall not be deemed to be "filed" for the purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), or otherwise subject to the liabilities of that Section or Sections 11 and 12(a)(2) of the Securities Act of 1933, as amended (the "Securities Act"). In addition, the information included in this Current Report on Form 8-K (including Exhibit 99.1 hereto) shall not be incorporated by reference into any filing of the Company, whether made before or after the date hereof, regardless of any general incorporation language in such filing, unless expressly incorporated by specific reference into such filing.
Item 7.01 Regulation FD Disclosure.
Also on March 25, 2021, the Company posted an investor presentation to its website (www.hirequest.com) under "Invest in HireQuest - Investor Relations
- Investor Presentation." The information on the Company's website is not incorporated by reference into this Current Report on Form 8-K and should not be considered part of this document. The website address is included in this Current Report on Form 8-K as an inactive textual reference only.
A copy of the investor presentation is attached as Exhibit 99.2 to this Current Report on Form 8-K. The Company expects to use the investor presentation, in whole or in part, and possibly with modifications, in connection with presentations to investors, brokers, analysts and others.
The Investor Presentation includes financial information not prepared in accordance with generally accepted accounting principles (“Non-GAAP Financial Measures”). A reconciliation of the Non-GAAP Financial Measures to financial information prepared in accordance with generally accepted accounting principles (“GAAP”), as required by Regulation G, appears at the end of the presentation. The Company is providing disclosure of the reconciliation of reported Non-GAAP Financial Measures used in the investor presentation, among other places, to its comparable financial measures on a GAAP basis. The Company believes that the Non-GAAP Financial Measures provide investors additional ways to view the Company’s operations, when considered with both the GAAP results and the reconciliation to non-GAAP financial information, which the Company believes provide a more complete understanding of the business than could be obtained absent this disclosure.
The information in this Item 7.01 and in Exhibit 99.2 is summary information that is intended to be viewed in the context of the Company’s Securities and Exchange Commission (“SEC”) filings and other public announcements that the Company may make, by press release or otherwise, from time to time. The Company undertakes no duty or obligation to publicly update or revise the information contained in the investor presentation, except as required by law. Any such updating may be made through the filing of other reports or documents with the SEC, through press releases, or through other public disclosure.
The information in this Item 7.01 of this Current Report on Form 8-K, including Exhibit 99.1 attached hereto, is being furnished and shall not be deemed “filed” for the purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities of that Section, nor shall it be deemed subject to the requirements of amended Item 10 of Regulation S-K, nor shall it be deemed incorporated by reference into any filing of the Company under the Securities Act or the Exchange Act, whether made before or after the date hereof, regardless of any general incorporation language in such filing. The furnishing of this information hereby shall not be deemed an admission as to the materiality of such information.
Item 9.01 Financial Statements and Exhibits.
Exhibit Index
Exhibit Description
99.1 Press Release dated March 25, 2021 (furnished only).
99.2 HireQuest, Inc. Investor Presentation March 2021 (furnished only).
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.
| HIREQUEST,<br>INC. | ||
|---|---|---|
| (Registrant) | ||
| Date: March 25,<br>2021 | /s/ John McAnnar | |
| John<br>McAnnar | ||
| Chief Legal<br>Officer |
exh991earnings
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
-- Tables Follow --
1 Refer to “Supplemental Operating Metrics” section at the end of this press release for a definition and additional details regarding System-wide sales
2 Based on a closing stock price of $10.12 on December 15, 2020
HireQuest, Inc.
Consolidated Balance Sheets
| December 31,<br><br><br>2020 | December 31, 2019 | |
|---|---|---|
| ASSETS | ||
| Current assets | ||
| Cash | $<br>13,667,434 | $<br>4,187,450 |
| Accounts<br>receivable, net of allowance for doubtful accounts | 21,344,499 | 28,201,279 |
| Notes<br>receivable | 2,178,299 | 3,419,458 |
| Prepaid<br>expenses, deposits, and other assets | 344,091 | 188,560 |
| Prepaid<br>workers' compensation | 1,434,583 | 822,938 |
| Other<br>assets | - | 201,440 |
| Total<br>current assets | 38,968,906 | 37,021,125 |
| Property<br>and equipment, net | 3,193,379 | 1,900,686 |
| Deferred<br>tax asset | 79,379 | - |
| Intangible<br>assets, net | 342,697 | - |
| Notes<br>receivable, net of current portion and reserve | 5,887,229 | 7,990,251 |
| Total<br>assets | $<br>49,095,042 | $<br>46,912,062 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities | ||
| Accounts<br>payable | $<br>457,490 | $<br>253,845 |
| Other<br>current liabilities | 1,322,764 | 1,893,846 |
| Accrued<br>benefits and payroll taxes | 743,431 | 1,113,904 |
| Due to<br>affiliates | 67,398 | - |
| Due to<br>franchisees | 3,228,777 | 3,610,596 |
| Risk<br>management incentive program liability | 858,482 | 1,811,917 |
| Workers'<br>compensation claims liability | 2,777,734 | 2,327,869 |
| Total<br>current liabilities | 9,456,076 | 11,011,977 |
| Workers'<br>compensation claims liability, net of current portion | 1,806,334 | 1,516,633 |
| Franchisee<br>deposits | 1,468,359 | 1,412,924 |
| Deferred<br>tax liability | - | 1,688,446 |
| Total<br>liabilities | 12,730,769 | 15,629,980 |
| Commitments<br>and contingencies | ||
| Stockholders' equity | ||
| Preferred stock -<br>$0.001 par value, 1,000,000 shares authorized; none<br>issued | - | - |
| Common<br>stock - $0.001 par value, 30,000,000 shares authorized; 13,628,675<br>and 13,518,036 shares issued, respectively | 13,629 | 13,518 |
| Additional paid-in<br>capital | 28,811,389 | 27,584,610 |
| Treasury stock, at<br>cost - 33,092 and -0- shares, respectively | (146,465) | - |
| Retained<br>earnings | 7,685,720 | 3,683,954 |
| Total<br>stockholders' equity | 36,364,273 | 31,282,082 |
| Total<br>liabilities and stockholders' equity | $<br>49,095,042 | $<br>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<br>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<br>(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<br>income before income taxes | 1,442,546 | 2,378,492 | 6,100,452 | 2,975,523 |
| Provision<br>(benefit) for income taxes | 86,446 | (1,399,406) | 741,038 | 3,480,996 |
| Income<br>(loss) from continuing operations | 1,356,100 | 3,777,898 | 5,359,414 | (505,473) |
| Income<br>from discontinued operations, net of tax | - | (315,067) | - | 215,494 |
| Net<br>income (loss) | $<br>1,356,100 | $<br>3,462,831 | $<br>5,359,414 | $<br>(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<br>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.
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