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): August 9,
2021
HIREQUEST, INC.
(Exact name of registrant as specified in its Charter)
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Delaware
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000-53088
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91-2079472
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(State or Other Jurisdiction of Incorporation or
Organization)
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(Commission File Number)
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(I.R.S. Employer Identification No.)
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111 Springhall Drive, Goose Creek, SC
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29445
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(Address of Principal Executive Offices)
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(Zip Code)
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(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:
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Title
of Each Class
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Trading
Symbol(s)
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Name of
Each Exchange on Which Registered
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Common
Stock, $0.001 par value
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HQI
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The
NASDAQ Stock Market LLC
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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 August 9, 2021, HireQuest, Inc. (the "Company") issued a press
release reporting its financial results for its quarter ended June
30, 2021, a copy of which is attached hereto as Exhibit
99.1.
Item 7.01 Regulation FD Disclosure.
Also
on August 9, 2021, the Company announced that its Board of
Directors had declared a quarterly cash dividend of $0.06 per share
of common stock expected to be paid September 15, 2021 with a
record date of September 1, 2021. This announcement is contained in
the press release attached 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 this Item 2.02 and Item 7.01
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 deemed to have been 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. The furnishing of this information hereby shall
not be deemed an admission as to the materiality of such
information.
The information in this report and in Exhibit 99.1 hereto may
contain "forward-looking statements" within the meaning of Section
27A of the Securities Act and Section 21E of the Exchange Act. All
statements, other than statements of historical or current fact,
are statements that could be deemed forward-looking statements,
including, without limitation, statements relating to our
declaration of quarterly dividends. Forward-looking statements are
based on the current beliefs, assumptions, and expectations of
management and current market conditions. There can be no assurance
that future dividends will be declared, and the payment of this
quarterly dividend is expressly conditioned on the Board not
revoking the dividend before the payment date. The declaration of
future dividends is subject to approval of the Board of Directors
each quarter after its review of the Company's financial
performance and cash needs. Declaration of future dividends is also
subject to various risks and uncertainties, including: the
Company's cash flow and cash needs; compliance with applicable law;
restrictions on the payment of dividends under existing or future
financing arrangements; changes in tax laws relating to corporate
dividends; the deterioration in the Company's financial condition
or results; and those risks, uncertainties, and other factors
identified from time to time in the Company's filings with the
Securities and Exchange Commission.
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Item 9.01 Financial
Statements and Exhibits.
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Exhibit
Index
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Exhibit
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Description
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Press Release
Dated August 9, 2021
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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.
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HIREQUEST, INC.
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(Registrant)
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Date:
August 9, 2021
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/s/
John McAnnar
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John McAnnar
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Executive
Vice President, Chief Legal Officer, and Secretary
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HireQuest Reports Financial Results for the Second Quarter
2021
Q2 2021 EPS of $0.20 per Diluted Share, Net Income of $2.7 million,
and Adjusted EBITDA of $4.4 million
GOOSE CREEK, South Carolina – August 9, 2021 –
HireQuest, Inc. (Nasdaq: HQI), a national franchisor of on-demand,
temporary, and commercial staffing services, today reported
financial results for the second quarter ended June 30,
2021.
Second Quarter 2021 Summary
●
Franchise royalties
of $5.5 million compared to $2.6 million in the prior year period,
an increase of 106.5%. The branches acquired from LINK and Snelling
in the first quarter of 2021 comprised approximately $1.7 million
of the revenue.
●
Services revenue,
including interest paid on aging accounts receivable, of $256,000
compared to $262,000 in the prior year period, a decrease of
2.3%.
●
Total revenue of
$5.7 million compared to $2.9 million in the prior year period, an
increase of 96.7%.
●
Net Income,
inclusive of miscellaneous income and acquisition-related expenses
was $2.7 million, or $0.20 per diluted share, compared to net
income of $1.2 million, or $0.09 per share last year.
●
Adjusted EBITDA of
$4.4 million compared to $1.8 million in the prior year
period.
●
HireQuest launched
DriverQuest, a franchise offering focused on providing staffing
services to the transportation and logistics industries.
DriverQuest is a natural extension to the company’s existing
on-demand and commercial staffing offerings providing another
avenue of growth for existing and new franchisees. To date over 35
existing franchisees have adopted the offering.
●
HireQuest closed a
$63.2 million credit facility comprised of a $60.0 million
Revolving Credit Facility and a $3.2 million Term Loan with its
existing lender, Truist (formerly BB&T). The new facility
replaced the Company’s prior $30 million revolving credit
facility.
Subsequent to Quarter End
●
Board of Directors
declared a quarterly cash dividend of $0.06 per share of common
stock to be paid on September 15, 2021 to shareholders of record as
of September 1, 2021.
System-wide
sales (a key performance indicator) for the second quarter of 2021
were $88.7 million compared to $44.1 million for the same period in
2020. The increase was due to recovering organic sales from our
HireQuest Direct and HireQuest franchisees as well as new sales
from the acquired Snelling and Link franchisees. Organic
system-wide sales, excluding the acquired Snelling and Link
locations, increased 29.5% in the period over the comparable period
in 2020.
“Our
results this past quarter begin to demonstrate the magnitude of the
operating leverage our franchisor structure can generate,”
commented Rick Hermanns, HireQuest’s President and Chief
Executive Officer. “This is the result of a combination of
rebounding performance by our HireQuest Direct and HireQuest
franchisees and the addition of our new Snelling and Link
franchisees. Our franchisees have done a tremendous job adapting
and executing in an incredibly difficult economic environment over
the past 12 to 18 months, but they still have a little room to
reach their Q2 2019, pre-pandemic, levels. As the economy around
the country continues to strengthen with state and local
governments easing and ending pandemic-related restrictions and
subsidies, our franchisees should benefit.”
“Despite
the challenges of the last year our existing franchisees have
opened 9 new offices so far in 2021 in addition to the locations
acquired as part of the Snelling and Link transactions,”
added Mr. Hermanns. “We continue to see opportunities to
expand our service offerings as demonstrated by our recently
announced launch of DriverQuest, a transportation industry focused
staffing offering. Over 35 franchisees have adopted the DriverQuest
offering, and we are all excited about the opportunities it opens
up for them to service a new, in-demand, industry vertical,
significantly expanding our addressable market, especially as
businesses seek to accelerate efforts with minimal up-front costs.
Strategic expansion beyond our historical core in on-demand and
traditional staffing is a key component of HireQuest’s
long-term growth strategy. DriverQuest fits nicely into
that.”
Second Quarter 2021 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, license fees and other fees for optional services we
provide our franchisees.
Franchise
royalties in the second quarter of 2021 were $5.5 million compared
to $2.6 million in the year-ago quarter. Organically, excluding the
contribution from recently acquired Snelling and LINK branches,
franchise royalties increased 40.4%. Service revenue was $256,000
compared to $262,000 in the prior-year quarter, a decrease of 2.3%.
Total revenue in the second quarter of 2021 was $5.7 million
compared to $2.9 million in the year-ago quarter, an increase of
96.7%.
Selling,
general and administrative (“SG&A”) expenses in the
second quarter of 2021 were $2.0 million compared to $1.9 million
for the second quarter last year. The second quarter of 2021
includes a total of $168,000 in non-recurring fees and expenses
related to recent acquisitions.
Net Income in the second quarter
of 2021 was $2.7 million, or $0.20 per diluted share, compared to
net income of $1.2 million, or $0.09 per diluted share, in the
second quarter last year.
Adjusted
EBITDA in the second quarter of 2021 was $4.4 million compared to
$1.2 million in the second quarter last year.
Balance Sheet and Capital Structure
Cash
was $2.2 million as of June 30, 2021, compared to $13.7 million as
of December 31, 2020. The decrease reflects the purchase price for
Link and Snelling and the subsequent increase in working
capital.
Total
assets were $69.7 million as of June 30, 2021. Total liabilities
were $27.8 million.
On June
15, 2021, the company paid a quarterly cash dividend of $0.06 per
share of common stock to shareholders of record as of June 1, 2021.
The company intends to pay a $0.06 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.
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Date:
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Monday,
August 9, 2021
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Time:
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4:30
p.m. Eastern time
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Toll-free
dial-in number:
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1-844-602-0380
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International
dial-in number:
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1-862-298-0970
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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/2359/42421
and via the investor relations section of HireQuest’s website
at www.hirequest.com.
A
replay of the conference call will be available through August 23,
2021.
Toll
Free: 877-481-4010
International:
919-882-2331
Replay
Passcode: 42421
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 economic conditions, future
revenue or sales and the growth thereof; operating results;
anticipated benefits of the acquisition of Snelling and/or LINK, or
the status of integration of those entities. 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 COVID-19;
the relative success or failure of acquisitions and new franchised
offerings; 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.
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Company
Contact:
HireQuest,
Inc.
Cory
Smith, CFO
(800)
835-6755
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Investor
Relations Contact:
Hayden
IR
Brett
Maas
(646)
536-7331
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-- Tables Follow –
HireQuest, Inc.
Consolidated Balance Sheets
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Current assets
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Cash
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$2,204,648
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$13,667,434
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Accounts
receivable, net of allowance for doubtful accounts
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35,055,831
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21,344,499
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Notes
receivable
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1,519,939
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2,178,299
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Prepaid
expenses, deposits, and other assets
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952,620
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344,091
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Prepaid
workers' compensation
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1,417,098
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1,434,583
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Total
current assets
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41,150,136
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38,968,906
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Property
and equipment, net
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3,837,037
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3,193,379
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Workers
compensation claim payment deposit
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935,215
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623,452
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Deferred
tax asset
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-
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79,379
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Franchise
agreements, net
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19,511,471
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-
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Other
intangible assets, net
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667,948
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342,697
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Other
assets
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381,807
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Notes
receivable, net of current portion and reserve
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3,235,465
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5,887,229
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Total
assets
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$69,719,079
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$49,095,042
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LIABILITIES AND STOCKHOLDERS' EQUITY
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Current liabilities
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Accounts
payable
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$1,393,011
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$457,490
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Term
note payable
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97,809
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-
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Other
current liabilities
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748,303
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1,322,764
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Accrued
benefits and payroll taxes
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3,720,775
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743,431
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Due
to affiliates
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89,584
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67,398
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Due
to franchisees
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5,396,470
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3,228,777
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Risk
management incentive program liability
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1,551,437
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858,482
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Workers'
compensation claims liability
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6,663,971
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2,777,734
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Total
current liabilities
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19,661,360
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9,456,076
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Workers'
compensation claims liability, net of current portion
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2,220,373
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1,806,334
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Deferred
tax liability
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954,600
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-
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Term
note payable, net of current portion
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3,055,691
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-
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Franchisee
deposits
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1,928,918
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1,468,359
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Total
liabilities
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27,820,942
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12,730,769
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Commitments
and contingencies (Note 8)
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Stockholders' equity
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Preferred
stock - $0.001 par value, 1,000,000 shares authorized; none
issued
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-
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-
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Common
stock - $0.001 par value, 30,000,000 shares authorized; 13,673,166
and 13,628,675 shares issued, respectively
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13,673
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13,629
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Additional
paid-in capital
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29,380,206
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28,811,389
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Treasury
stock, at cost - 33,092 shares
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(146,465)
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(146,465)
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Retained
earnings
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12,650,723
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7,685,720
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Total
stockholders' equity
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41,898,137
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36,364,273
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Total
liabilities and stockholders' equity
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$69,719,079
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$49,095,042
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HireQuest, Inc.
Consolidated Statements of Income
(unaudited)
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Franchise
royalties
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$5,450,506
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$2,639,287
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Service
revenue
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255,822
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261,703
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Total
revenue
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5,706,328
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2,900,990
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Selling,
general and administrative expenses
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2,040,621
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1,931,076
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Depreciation
and amortization
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365,995
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32,402
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Income
from operations
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3,299,712
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937,512
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Other
miscellaneous income
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126,300
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288,837
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Interest
and other financing expense
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(20,317)
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(17,850)
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Net
income before income taxes
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3,405,695
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1,208,499
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Provision
for income taxes
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685,884
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51,497
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Net
income
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$2,719,811
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$1,157,002
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Earnings per share
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Basic
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$0.20
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$0.09
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Diluted
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$0.20
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$0.09
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Weighted average shares outstanding
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Basic
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13,611,207
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13,547,950
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Diluted
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13,863,924
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13,549,727
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HireQuest, Inc.
Reconciliation of Net Income to Adjusted
EBITDA
(unaudited)
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Net
income
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$2,719,811
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$1,157,001
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Interest
expense
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20,317
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17,850
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Provision
for income taxes
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685,884
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51,497
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Depreciation
and amortization
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365,995
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32,402
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Non-cash
compensation
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300,781
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242,362
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WOTC
related costs
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146,345
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103,096
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Non-recurring
acquisition related charges, net
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167,844
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-
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Non-recurring
charge to notes receivable
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-
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151,333
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Adjusted
EBITDA
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$4,406,977
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$1,755,541
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