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: [email protected]
Email: [email protected]
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HireQuest, Inc.
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Consolidated Balance Sheets
|
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|
|
|
|
|
|
|
March 31, 2021
|
|
December 31, 2020
|
|
ASSETS
|
(unaudited)
|
|
|
|
Current assets
|
|
|
|
|
Cash
|
$1,976,054
|
|
$13,667,434
|
|
Accounts
receivable, net of allowance for doubtful accounts
|
29,716,512
|
|
21,344,499
|
|
Notes
receivable
|
808,531
|
|
2,178,299
|
|
Prepaid
expenses, deposits, and other assets
|
919,274
|
|
344,091
|
|
Prepaid
workers' compensation
|
1,002,633
|
|
1,434,583
|
|
Due
from affiliates
|
109,571
|
|
-
|
|
Total
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
assets
|
$62,279,934
|
|
$49,095,042
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LIABILITIES AND STOCKHOLDERS' EQUITY
|
|
|
|
|
Current liabilities
|
|
|
|
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Accounts
payable
|
$959,161
|
|
$457,490
|
|
Other
current liabilities
|
510,968
|
|
1,322,764
|
|
Accrued
benefits and payroll taxes
|
3,213,433
|
|
743,431
|
|
Due
to affiliates
|
79,579
|
|
67,398
|
|
Due
to franchisees
|
4,231,154
|
|
3,228,777
|
|
Risk
management incentive program liability
|
1,249,592
|
|
858,482
|
|
Workers'
compensation claims liability
|
7,615,787
|
|
2,777,734
|
|
Total
current liabilities
|
17,859,674
|
|
9,456,076
|
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Workers' compensation claims liability, net of current
portion
|
2,001,018
|
|
1,806,334
|
|
Deferred tax liability
|
976,113
|
|
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Franchisee deposits
|
1,748,979
|
|
1,468,359
|
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Total
liabilities
|
22,585,784
|
|
12,730,769
|
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Commitments and contingencies
|
|
|
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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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Common
stock - $0.001 par value, 30,000,000 shares authorized; 13,638,041
and 13,628,675 shares issued, respectively
|
13,638
|
|
13,629
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Additional
paid-in capital
|
29,079,460
|
|
28,811,389
|
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Treasury
stock, at cost - 33,092 shares
|
(146,465)
|
|
(146,465)
|
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Retained
earnings
|
10,747,517
|
|
7,685,720
|
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Total
stockholders' equity
|
39,694,150
|
|
36,364,273
|
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Total
liabilities and stockholders' equity
|
$62,279,934
|
|
$49,095,042
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HireQuest, Inc.
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Consolidated Statements of Income
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(unaudited)
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Three months ended
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March 31, 2021
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|
March 31, 2020
|
|
Franchise royalties
|
$3,259,036
|
|
$3,705,242
|
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Service revenue
|
143,947
|
|
414,739
|
|
Total
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
(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
income
|
$3,742,044
|
|
$875,178
|
|
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|
|
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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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