Q2 2021 EPS of $0.20 per Diluted Share, Net
Income of $2.7 million, and Adjusted EBITDA of $4.4 million
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.
Date:
Monday, August 9, 2021
Time:
4:30 p.m. Eastern time
Toll-free dial-in number:
1-844-602-0380
International dial-in number:
1-862-298-0970
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.
HireQuest, Inc. Consolidated Balance Sheets
June 30, 2021 December 31, 2020 (unaudited)
ASSETS Current assets Cash
$
2,204,648
$
13,667,434
Accounts receivable, net of allowance for doubtful accounts
35,055,831
21,344,499
Notes receivable
1,519,939
2,178,299
Prepaid expenses, deposits, and other assets
952,620
344,091
Prepaid workers' compensation
1,417,098
1,434,583
Total current assets
41,150,136
38,968,906
Property and equipment, net
3,837,037
3,193,379
Workers compensation claim payment deposit
935,215
623,452
Deferred tax asset
-
79,379
Franchise agreements, net
19,511,471
-
Other intangible assets, net
667,948
342,697
Other assets
381,807
Notes receivable, net of current portion and reserve
3,235,465
5,887,229
Total assets
$
69,719,079
$
49,095,042
LIABILITIES AND STOCKHOLDERS' EQUITY Current
liabilities Accounts payable
$
1,393,011
$
457,490
Term note payable
97,809
-
Other current liabilities
748,303
1,322,764
Accrued benefits and payroll taxes
3,720,775
743,431
Due to affiliates
89,584
67,398
Due to franchisees
5,396,470
3,228,777
Risk management incentive program liability
1,551,437
858,482
Workers' compensation claims liability
6,663,971
2,777,734
Total current liabilities
19,661,360
9,456,076
Workers' compensation claims liability, net of current portion
2,220,373
1,806,334
Deferred tax liability
954,600
-
Term note payable, net of current portion
3,055,691
-
Franchisee deposits
1,928,918
1,468,359
Total liabilities
27,820,942
12,730,769
Commitments and contingencies (Note 8)
Stockholders' equity
Preferred stock - $0.001 par value, 1,000,000 shares authorized;
none issued
-
-
Common stock - $0.001 par value, 30,000,000 shares authorized;
13,673,166 and 13,628,675 shares issued, respectively
13,673
13,629
Additional paid-in capital
29,380,206
28,811,389
Treasury stock, at cost - 33,092 shares
(146,465
)
(146,465
)
Retained earnings
12,650,723
7,685,720
Total stockholders' equity
41,898,137
36,364,273
Total liabilities and stockholders' equity
$
69,719,079
$
49,095,042
HireQuest, Inc. Consolidated Statements of Income
(unaudited) Three months ended June 30,
2021 June 30, 2020 Franchise royalties
$
5,450,506
$
2,639,287
Service revenue
255,822
261,703
Total revenue
5,706,328
2,900,990
Selling, general and administrative expenses
2,040,621
1,931,076
Depreciation and amortization
365,995
32,402
Income from operations
3,299,712
937,512
Other miscellaneous income
126,300
288,837
Interest and other financing expense
(20,317
)
(17,850
)
Net income before income taxes
3,405,695
1,208,499
Provision for income taxes
685,884
51,497
Net income
$
2,719,811
$
1,157,002
Earnings per share Basic
$
0.20
$
0.09
Diluted
$
0.20
$
0.09
Weighted average shares outstanding Basic
13,611,207
13,547,950
Diluted
13,863,924
13,549,727
HireQuest, Inc. Reconciliation of Net Income to Adjusted
EBITDA (unaudited) Three months ended
June 30, 2021 June 30, 2020 Net income
$
2,719,811
$
1,157,001
Interest expense
20,317
17,850
Provision for income taxes
685,884
51,497
Depreciation and amortization
365,995
32,402
Non-cash compensation
300,781
242,362
WOTC related costs
146,345
103,096
Non-recurring acquisition related charges, net
167,844
-
Non-recurring charge to notes receivable
-
151,333
Adjusted EBITDA
$
4,406,977
$
1,755,541
View source
version on businesswire.com: https://www.businesswire.com/news/home/20210809005733/en/
Company Contact: HireQuest, Inc. Cory Smith, CFO (800)
835-6755 Email: cssmith@hirequest.com
Investor Relations Contact: Hayden IR Brett Maas (646)
536-7331 Email: brett@haydenir.com
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