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): May 17, 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 May 17, 2021, HireQuest, Inc. (the “Company”) issued a press release reporting its financial results for its quarter ended March 31, 2021, a copy of which is attached hereto as Exhibit 99.1.
Item 7.01 Regulation FD Disclosure.
Also on May 17, 2021, the Company posted an investor presentation (the "Investor Presentation") to its website (www.hirequest.com) under "Invest - Presentations and Events." 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 hereto as Exhibit 99.2. 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 Securiteis 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 thorugh other disclosure.
The information included in this Current Report on Form 8-K (including Exhibits 99.1 and 99.2 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"), nor shall it be deemed subject to the requirements of amended Item 10 of Regulation S-K. In addition, the information included in this Current Report on Form 8-K (including Exhibits 99.1 and 99.2 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 Exhibits 99.1 and 99.2 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 future results, the integration of the Snelling and Link acquisitions, or our declaration of quarterly dividends. Forward-looking statements are based on the current beliefs, assumptions, and expectations of management and current market conditions. Actual results are subject to various risks and uncertainties, many of which are outside of the Company's control.
| Item 9.01 Financial<br>Statements and Exhibits. |
|---|
Exhibit Index
| Exhibit | Description |
|---|---|
| 99.1 | Press Release dated<br>May 17, 2021 (furnished only) |
| 99.2 | Investor<br>Presentation dated May 2021 (furnished<br>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: May 17,<br>2021 | /s/ John McAnnar | |
| John<br>McAnnar | ||
| Chief Legal<br>Officer,<br><br><br>Vice President, and<br>Corporate Secretary |
hqiq12021earnings
HireQuest Reports Financial Results for the First Quarter 2021
Company Completes Integration of Both Snelling and Link Acquisitions; Q1 2021 EPS of $0.27 per Diluted Share and Net Income of $3.7 million
GOOSE CREEK, South Carolina – May 17, 2021 – HireQuest, Inc. (Nasdaq: HQI), a national franchisor of on-demand, temporary, and commercial staffing services, today reported financial results for the first quarter ended March 31, 2021.
First Quarter 2021 Financial Summary
●
Franchise royalties of $3.3 million compared to $3.7 million in the prior year period, a decrease of 12.0%.
●
Services revenue, including interest paid on aging accounts receivable, of $144,000 compared to $415,000 in the prior year period, a decrease of 65.3%.
●
Total revenue of $3.4 million compared to $4.1 million in the prior year period, a decrease of 17.4%.
●
The first quarter results included $3.9 million of other miscellaneous income recognized as part of the transactions surrounding the Snelling and Link acquisitions, and $1.4 million in acquisition-related expenses.
●
Net Income, inclusive of the miscellaneous income and the acquisition-related expenses, was $3.7 million, or $0.27 per diluted share, compared to net income of $875,000, or $0.06 per share last year.
Subsequent to Quarter End
●
Board of Directors declared a quarterly cash dividend of $0.06 per share of common stock to be paid on June 15, 2021 to shareholders of record as of June 1, 2021.
System-wide sales (a key performance indicator) for the first quarter of 2021 were $54.3 million compared to $56.5 million for the same period in 2020. The decrease is related to the economic shutdown due to COVID-19, partially offset by new sales from the acquired Snelling and Link branches.
“During the first quarter, we effectively leveraged our strong balance sheet and leadership position to complete two significant acquisitions, creating an additional revenue stream for our company and bolstering our competitive position as the pandemic begins to abate,” commented Rick Hermanns, HireQuest’s President and Chief Executive Officer. “The results for the first quarter reflect approximately one month of contribution from the acquisition of Snelling, and approximately one week from the branches acquired in the Link transaction. We de-risked the transaction, assigning seven California-based franchise agreements to a third party, and going forward, we will receive a trademark license royalty equal to 9% of the gross margin of these branches in perpetuity. We expect to add three additional California branches to this arrangement once the buyer secures regulatory approval to franchise them. In addition, we sold four branches and an onsite location, previously owned by Snelling, to a separate third party for approximately $1 million. The result is we have eliminated our exposure to California and recouped $1 million of the consideration related to the two acquisitions, while establishing an incremental revenue stream related to the perpetual trademark license agreement.”
“Operationally, we continue to generate profits and free cash flow, enabling us to pay increased dividends, despite the lower revenue related to the pandemic,” added Mr. Hermanns. “As the vaccines roll out, major events are beginning to resume, and we believe the second half of the year will be better than the first half, but our results clearly demonstrate that we can maintain profitability even amidst once-in-a-lifetime challenges. As we start to return to normal, we do so with a strong balance sheet and approximately 64 new branches from these two acquisitions. We are well-positioned for continued success.”
First 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 and other fees for optional services we provide our franchisees.
Franchise royalties in the first quarter of 2021 were $3.3 million compared to $3.7 million in the year-ago quarter, a decrease of 12.0%. Service revenue was $144,000 compared to $415,000 in the prior-year quarter, a decrease of 65.3%. Total revenue in the first quarter of 2021 was $3.4 million compared to $4.1 million in the year-ago quarter, a decrease of 17.4%.
Selling, general and administrative (“SG&A”) expenses in the first quarter of 2021 were $3.8 million compared to $3.3 million for the first quarter last year. The first quarter of 2021 included approximately $1.4 million of non-recurring, acquisition-related expenses.
Net Income in the first quarter of 2021 was $3.7 million, or $0.27 per diluted share, compared to net income of $875,000, or $0.06 per diluted share, in the first quarter last year. The current period included $3.9 million in other miscellaneous income related to the Snelling and Link transactions and one-time acquisition-related expenses of $1.4 million.
Balance Sheet and Capital Structure
Cash was $2.0 million as of March 31, 2021, compared to $13.7 million as of December 31, 2020. The decrease resulted from the purchases of Link and Snelling.
Total assets were $62.3 million as of March 31, 2021. Total liabilities were $22.6 million.
On March 15, 2021, the company paid a quarterly cash dividend of $0.05 per share of common stock to shareholders of record as of March 1, 2021. Going forward, 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.
Date:
Monday, May 17, 2021
Time:
4:30 p.m. Eastern time (2:30 p.m. Mountain time)
Toll-free dial-in number:
1-888-506-0062
International dial-in number:
1-973-528-0011
Entry Code:
662999
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/2359/41301 and via the investor relations section of HireQuest’s website at www.hirequest.com.
A replay of the conference call will be available through May 31, 2021.
Toll-free replay number:
1-877-481-4010
International replay number:
1-919-882-2331
Replay Passcode:
41301
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 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 --
| HireQuest, Inc. | ||
|---|---|---|
| Consolidated Balance Sheets | ||
| March 31, 2021 | December 31, 2020 | |
| ASSETS | (unaudited) | |
| Current assets | ||
| Cash | $1,976,054 | $13,667,434 |
| Accounts<br>receivable, net of allowance for doubtful accounts | 29,716,512 | 21,344,499 |
| Notes<br>receivable | 808,531 | 2,178,299 |
| Prepaid<br>expenses, deposits, and other assets | 919,274 | 344,091 |
| Prepaid<br>workers' compensation | 1,002,633 | 1,434,583 |
| Due<br>from affiliates | 109,571 | - |
| Total<br>current assets | 34,532,575 | 38,968,906 |
| Property and equipment, net | 3,431,951 | 3,193,379 |
| Workers compensation claim payment deposit | 705,224 | 623,452 |
| Deferred tax asset | - | 79,379 |
| Franchise agreements, net | 19,843,412 | - |
| Other intangible assets, net | 516,401 | 342,697 |
| Notes receivable, net of current portion and reserve | 3,250,371 | 5,887,229 |
| Total<br>assets | $62,279,934 | $49,095,042 |
| LIABILITIES AND STOCKHOLDERS' EQUITY | ||
| Current liabilities | ||
| Accounts<br>payable | $959,161 | $457,490 |
| Other<br>current liabilities | 510,968 | 1,322,764 |
| Accrued<br>benefits and payroll taxes | 3,213,433 | 743,431 |
| Due<br>to affiliates | 79,579 | 67,398 |
| Due<br>to franchisees | 4,231,154 | 3,228,777 |
| Risk<br>management incentive program liability | 1,249,592 | 858,482 |
| Workers'<br>compensation claims liability | 7,615,787 | 2,777,734 |
| Total<br>current liabilities | 17,859,674 | 9,456,076 |
| Workers' compensation claims liability, net of current<br>portion | 2,001,018 | 1,806,334 |
| Deferred tax liability | 976,113 | |
| Franchisee deposits | 1,748,979 | 1,468,359 |
| Total<br>liabilities | 22,585,784 | 12,730,769 |
| Commitments and contingencies | ||
| Stockholders' equity | ||
| Preferred<br>stock - $0.001 par value, 1,000,000 shares authorized; none<br>issued | - | - |
| Common<br>stock - $0.001 par value, 30,000,000 shares authorized; 13,638,041<br>and 13,628,675 shares issued, respectively | 13,638 | 13,629 |
| Additional<br>paid-in capital | 29,079,460 | 28,811,389 |
| Treasury<br>stock, at cost - 33,092 shares | (146,465) | (146,465) |
| Retained<br>earnings | 10,747,517 | 7,685,720 |
| Total<br>stockholders' equity | 39,694,150 | 36,364,273 |
| Total<br>liabilities and stockholders' equity | $62,279,934 | $49,095,042 |
| HireQuest, Inc. | ||
| --- | --- | --- |
| Consolidated Statements of Income | ||
| (unaudited) | ||
| Three months ended | ||
| March 31, 2021 | March 31, 2020 | |
| Franchise royalties | $3,259,036 | $3,705,242 |
| Service revenue | 143,947 | 414,739 |
| Total<br>revenue | 3,402,983 | 4,119,981 |
| Selling, general and administrative expenses | 3,841,772 | 3,253,372 |
| Depreciation and amortization | 332,841 | 31,814 |
| Income<br>(loss) from operations | (771,630) | 834,795 |
| Other miscellaneous income | 3,915,980 | 250,709 |
| Interest and other financing expense | (4,600) | (11,289) |
| Net income before income taxes | 3,139,750 | 1,074,215 |
| Provision (benefit) for income taxes | (602,294) | 199,037 |
| Net<br>income | $3,742,044 | $875,178 |
| Earnings per share | ||
| Basic | $0.28 | $0.06 |
| Diluted | $0.27 | $0.06 |
| Weighted average shares outstanding | ||
| Basic | 13,602,764 | 13,533,247 |
| Diluted | 13,799,203 | 13,535,000 |
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