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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): November 3, 2022
 
 
hqi20221103_8kimg001.jpg
 
HIREQUEST, INC.
(Exact name of registrant as specified in its Charter)
 
         
 
         
Delaware
 
000-53088
 
91-2079472
(State or Other Jurisdiction of
Incorporation or Organization)
 
(Commission
File Number)
 
(I.R.S. Employer
Identification No.)
 
     
111 Springhall Drive, Goose Creek, SC
 
29445
(Address of Principal Executive Offices)
 
(Zip 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 Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $0.001 par value
HQI
The NASDAQ Stock 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 November 3, 2022, HireQuest, Inc. (the "Company") issued a press release (the "Press Release") reporting its financial results for the quarter ended September 30, 2022, a copy of which is 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 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 9.01 Financial Statements and Exhibits.
 
Exhibit Index
 
Exhibit        Description
99.1              Press Release dated November 3, 2022 (furnished only)
104               Cover Page Interactive Data File (embedded within the Inline XBRL document)
 
 


 
 
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, INC.
   
(Registrant)
     
         
     
Date: November 3, 2022
     
/s/ John McAnnar
       
John McAnnar
       
Chief Legal Officer, Vice President, and Corporate Secretary
 
 
 
 
 
EX-99.1 2 ex_442189.htm EXHIBIT 99.1 ex_442189.htm

Exhibit 99.1

 

logo02.jpg

 

HireQuest Reports Financial Results for Third Quarter 2022

 

Q3 2022 Royalty Revenue Grows 13.7% YoY to $7.4 million

 

Q3 2022 Net Income from Continuing Operations Increases 29.9% YoY to $4.1 million

 

GOOSE CREEK, South Carolina – November 3, 2022 – HireQuest, Inc. (Nasdaq: HQI), a national franchisor of direct dispatch, executive search, and commercial staffing services, today reported financial results for the third quarter ended September 30, 2022.

 

Third Quarter 2022 Summary

 

 

Franchise royalties increased 13.7% to $7.4 million compared to $6.5 million in the prior year period. Excluding acquisitions made in 2022, franchise royalties increased 7.3%.

 

Staffing revenue from owned locations was $1.5 million.

 

Gross profit increased 19.7% to $8.2 million compared to $6.9 million in the prior year period.

 

Net income from continuing operations increased 29.9% to $4.1 million, or $0.30 per diluted share, compared to net income from continuing operations of $3.2 million, or $0.23 per diluted share in the prior year period.

 

Adjusted EBITDA of $6.6 million compared to $5.3 million in the prior year period.

 

Announced the addition of Happy Faces Personnel Group to Atlanta-based Snelling Franchise

 

Year-To-Date 2022 Summary

 

 

Franchise royalties increased 39.2% to $21.2 million compared to $15.2 million for the nine-months ended September 30, 2021. Excluding acquisitions made in 2022, franchise royalties increased 32.1%.

 

Staffing revenue from owned locations was $3.9 million.

 

Gross profit increased 49.9% to $24.0 million compared to $16.0 million in the prior year period.

 

Net income from continuing operations was $9.5 million, or $0.69 per diluted share, compared to net income from continuing operations of $9.7 million, or $0.71 per diluted share in the prior year period.

 

Adjusted EBITDA of $17.9 million compared to $9.6 million in the prior year period.

 

System-wide sales for the third quarter of 2022 were $123.2 million compared to $101.9 million for the same period in 2021. System-wide sales for the year-to-date period were $344.3 million compared to $247.7 million in the first nine months of 2021.

 

Rick Hermanns, HireQuest’s President and Chief Executive Officer, commented, “We’re pleased to have delivered strong third quarter performance, reflecting solid topline and operational growth as we effectively execute our franchised staffing model. During the quarter we welcomed Happy Faces Personnel to our Atlanta-based Snelling franchise, strengthening our presence in this growing market. Across the U.S. we assist businesses in meeting their essential staffing needs by providing a quality pool of skilled workers on demand as workflow dictates, allowing our customers to avoid the cost and commitment of permanent hiring decisions. While the current economic environment is tenuous in many ways, the demand for temporary and commercial staffing services from our franchisees remains strong as rising wages and labor shortages persist, and with our national footprint and growing brand recognition, we believe that we are well positioned to benefit from this economic environment.”

 

Third Quarter 2022 Financial Results

 

The company’s gross profit is calculated by aggregating its revenue derived from franchise royalties, gross profit from owned locations, and service revenue. Franchise royalties are the royalties earned from franchisees primarily on the basis of their sales to their customers. Gross profit from owned locations is sales at owned locations less the cost of staffing revenue. 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 third quarter of 2022 were $7.4 million compared to $6.5 million in the year-ago quarter. Service revenue was $429 thousand compared to $341 thousand in the prior-year quarter. Staffing revenue from owned locations was $1.5 million. Total revenue in the third quarter of 2022 was $9.4 million compared to $6.9 million in the year-ago quarter, an increase of 36.0%.

 

Gross profit in the third quarter of 2022 was $8.2 million compared to $6.9 million in the year-ago quarter, an increase of 19.7%.

 

Selling, general and administrative (“SG&A”) expenses in the third quarter of 2022 were $2.4 million or 1.9% of system-wide sales compared to $3.0 million, or 3.0% of system-wide sales for the third quarter last year. The decrease in SG&A expense is primarily due to a decrease in net workers compensation benefits which was partially offset by increased compensation expense as a result of increased headcount to support higher system-wide sales. Reserves based on recent claims resolution and experience were reduced during the quarter. Most of the workers compensation benefit relates to the Snelling reserve assumed at the time of acquisition that are in run off.

 

Income tax expense was approximately $946 thousand, a net effective tax rate of 18.6%, for the three months ended September 30, 2022. Income tax expense for the prior year period was $325 thousand, a net effective tax rate of 9.2%. The lower effective tax rate in 2021 was a result of a non-taxable bargain purchase gain recognized in 2021.

 

Net income from continuing operations in the third quarter of 2022 increased 29.9% to $4.1 million, or $0.30 per diluted share, compared to net income from continuing operations of $3.2 million, or $0.23 per diluted share, in the third quarter last year.

 

Adjusted EBITDA for the third quarter of 2022 was $6.6 million compared to $5.3 million in the third quarter last year.

 

Year-To-Date 2022 Financial Results

 

Franchise royalties for the nine months ended September 30, 2022, were $21.2 million compared to $15.2 million for the same period in 2021. Service revenue was $1.7 million compared to $741 thousand in the prior-year period. Staffing revenue from owned locations for the 2022 year-to-date period was $3.9 million. Total revenue was $26.8 million compared to $16.0 million in the same year-ago period, an increase of 67.6%.

 

Gross profit in the first nine months of 2022 was $24.0 million compared to $16.0 million in the prior-year period, an increase of 49.9%.

 

SG&A expenses in the first nine months of 2022 were $8.8 million or 2.5% of system-wide sales compared to $8.9 million, or 3.6% of system-wide sales for the same period of 2021. The decrease in SG&A was primarily driven by a decrease in net workers compensation expense which was partially offset by increased compensation expense as a result of increased headcount to support higher system-wide sales. During the year we have reduced our reserves based on recent claims resolution and experience. Most of the workers compensation benefit relates to the Snelling reserve assumed at the time of acquisition and will run off as claims are resolved.

 

For the first nine months of 2022, other miscellaneous expense was approximately $2.0 million, compared to other miscellaneous income of $3.9 million for the first nine months of 2021. The first nine months of 2022 includes recognition of approximately $2.2 million in losses resulting from the conversion of the Temporary Alternatives, Dubin, and Northbound acquisitions to franchises, and a $150 thousand non-royalty-based incentive given to a franchisee during an expansion and acquisition of one of their competitors. Other miscellaneous income in the nine months ended September 30, 2021 includes a bargain purchase gain of approximately $4.9 million from the Snelling acquisition.

 

Net income from continuing operations in the year-to-date period for 2022 was $9.5 million, or $0.69 per diluted share, compared to net income from continuing operations of $9.7 million, or $0.71 per diluted share, in same year-ago period.

 

Adjusted EBITDA for the first nine months of 2022 was $17.9 million compared to $9.6 million in the same prior-year period.

 

Balance Sheet and Capital Structure

 

Cash was $1.5 million as of September 30, 2022, compared to $1.3 million as of December 31, 2021.

 

Total assets were $89.8 million as of September 30, 2022. Total liabilities were $33.9 million.

 

Working capital as of September 30, 2022, was $25.3 million compared to $20.5 million as of December 31, 2021.

 

At September 30, 2022 the Company had approximately $26.1 million in availability on its revolving credit facility.

 

On September 15, 2022, the company paid a quarterly cash dividend of $0.06 per share of common stock to shareholders of record as of September 1, 2022. The Company intends to pay a $0.06 cash dividend on a quarterly basis, but the declaration of any dividend and the exact amount each quarter will be based on its business results and financial position, and is subject to board of director discretion.

 

Conference Call

 

HireQuest will hold a conference call to discuss its financial results.

 

Date:                                         Thursday, November 3, 2022

Time:                                         5:00 p.m. Eastern time

Toll-free dial-in number:          888-506-0062

International dial-in number:    973-528-0011

Entry Code:                               770748

 

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/2359/46966 and via the investor relations section of HireQuest’s website at www.hirequest.com.

 

A replay of the conference call will be available through November 17, 2022.

 

Toll Free: 877-481-4010

International: 919-882-2331

Replay Passcode: 46966

 

About HireQuest

 

HireQuest, Inc. is a nationwide franchisor of direct dispatch, executive search, and commercial staffing solutions for HireQuest Direct, HireQuest, Snelling, Link, and Northbound Executive Search franchised offices across the United States. Through its national network of over 225 franchisee-owned offices in more than 38 states and the District of Columbia, HireQuest provides employment for approximately 75,000 individuals annually that work for thousands of customers in numerous industries including construction, light industrial, manufacturing, hospitality, clerical, medical, travel, financial services, 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 acquisitions, or the status of integration of those entities; the declaration, or not, of future dividends; and other similar statements. 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; economic uncertainty caused by macroeconomic trends including potential inflation or a recessionary environment; uncertainty in the supply chain or economy caused by Russia’s invasion of Ukraine; 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 any of our various acquisitions; 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 and the quarterly reports on Form 10-Q filed thereafter.

 

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.                                                                  IMS Investor Relations 

David Hartley, Director of Corporate Development         John Nesbett/Jennifer Belodeau

(800) 835-6755                                                                  (203) 972-9200  

Email: cdhartley@hirequest.com                                      Email: hirequest@imsinvestorrelations.com

 

-- Tables Follow –



 

 

HireQuest, Inc.

Consolidated Balance Sheets

     

(in thousands, except par value data)

September 30, 2022

 

December 31, 2021

ASSETS

(unaudited)

   

Current assets

     

Cash

$1,535

 

$1,256

Accounts receivable, net of allowance for doubtful accounts

45,686

 

38,239

Notes receivable

1,272

 

1,481

Prepaid expenses, deposits, and other assets

1,313

 

659

Prepaid workers' compensation

873

 

369

Current assets held for sale - discontinued operations

204

 

-

Total current assets

50,883

 

42,004

Property and equipment, net

4,397

 

4,454

Workers’ compensation claim payment deposit

1,231

 

948

Franchise agreements, net

17,714

 

18,848

Other intangible assets, net

11,568

 

8,078

Goodwill

1,075

 

-

Other assets

447

 

334

Notes receivable, net of current portion and reserve

2,452

 

2,686

Total assets

$89,767

 

$77,352

       

LIABILITIES AND STOCKHOLDERS' EQUITY

     

Current liabilities

     

Accounts payable

$206

 

$1,126

Line of credit

2,206

 

171

Term loans payable

699

 

210

Other current liabilities

2,662

 

2,658

Accrued payroll, benefits, and payroll taxes

3,411

 

3,687

Due to franchisees

11,380

 

7,496

Risk management incentive program liability

1,199

 

1,632

Workers' compensation claims liability

3,852

 

4,491

Total current liabilities

25,615

 

21,471

Term loan payable, net of current portion

3,429

 

2,856

Deferred tax liability

-

 

473

Workers' compensation claims liability, net of current portion

2,591

 

3,759

Franchisee deposits

2,242

 

2,058

Total liabilities

33,877

 

30,617

Commitments and contingencies (Note 8)

     

Stockholders' equity

     

Preferred stock - $0.001 par value, 1,000 shares authorized; none issued

-

 

-

Common stock - $0.001 par value, 30,000 shares authorized; 13,905 and 13,745 shares issued, respectively

14

 

14

Additional paid-in capital

32,365

 

30,472

Treasury stock, at cost - 40 shares

(146)

 

(146)

Retained earnings

23,657

 

16,395

Total stockholders' equity

55,890

 

46,735

Total liabilities and stockholders' equity

$89,767

 

$77,352

 



 

 

 

HireQuest, Inc.

Consolidated Statements of Income

(unaudited)

     
 

Three months ended

 

Nine months ended

(in thousands, except per share data)

September 30, 2022

 

September 30, 2021

 

September 30, 2022

 

September 30, 2021

Franchise royalties

$7,433

 

$6,540

 

$21,226

 

$15,250

Staffing revenue, owned locations

1,499

 

-

 

3,891

 

-

Service revenue

429

 

341

 

1,677

 

741

Total revenue

9,361

 

6,881

 

26,794

 

15,991

Cost of staffing revenue, owned locations

1,123

 

-

 

2,832

 

-

Gross profit

8,238

 

6,881

 

23,962

 

15,991

Selling, general and administrative expenses

2,395

 

3,044

 

8,763

 

8,927

Depreciation and amortization

601

 

366

 

1,777

 

1,065

Income from operations

5,242

 

3,471

 

13,422

 

5,999

Other miscellaneous income (expense)

(99)

 

36

 

(2,020)

 

3,847

Interest income

51

 

54

 

198

 

285

Interest and other financing expense

(100)

 

(42)

 

(256)

 

(67)

Net income before income taxes

5,094

 

3,519

 

11,344

 

10,064

Provision for income taxes

946

 

325

 

1,880

 

408

Net income from continuing operations

4,148

 

3,194

 

9,464

 

9,656

Income from discontinued operations, net of tax

98

 

-

 

277

 

-

Net income

$4,246

 

$3,194

 

$9,741

 

$9,656

               

Basic earnings per share

             

Continuing operations

$0.30

 

$0.24

 

$0.70

 

$0.72

Discontinued operations

0.01

 

-

 

0.02

 

-

Total

$0.31

 

$0.24

 

$0.72

 

$0.72

               

Diluted earnings per share

             

Continuing operations

$0.30

 

$0.23

 

$0.69

 

$0.71

Discontinued operations

0.01

 

-

 

0.02

 

-

Total

$0.31

 

$0.23

 

$0.71

 

$0.71

               

Weighted average shares outstanding

             

Basic

13,610

 

13,482

 

13,598

 

13,461

Diluted

13,677

 

13,622

 

13,688

 

13,588

 



 

 

 

HireQuest Inc.
Reconciliation of Net Income to Adjusted EBITDA
(unaudited)

   
 

Three months ended

 

Nine months ended

(in thousands)

September 30, 2022

 

September 30, 2021

 

September 30, 2022

 

September 30, 2021

Net income

$4,246

 

$3,194

 

$9,741

 

$9,656

Interest and other financing expense

100

 

42

 

256

 

67

Provision for income taxes

946

 

325

 

1,880

 

408

Depreciation and amortization

601

 

366

 

1,777

 

1,065

WOTC related costs

156

 

175

 

451

 

414

EBITDA

6,049

 

4,102

 

14,105

 

11,610

Non-cash compensation

584

 

851

 

1,194

 

1,420

Acquisition related charges, net

(4)

 

34

 

2,317

 

(3,739)

Impairment of notes receivable

-

 

307

 

233

 

307

Adjusted EBITDA

$6,629

 

$5,294

 

$17,849

 

$9,598