HireQuest Reports Financial Results for Second Quarter 2023

About this update from Hirequest, Inc.

GOOSE CREEK, SC / ACCESSWIRE / August 10, 2023 / HireQuest, Inc. (Nasdaq:HQI), a national franchisor of direct dispatch, executive search, and commercial staffing services, today reported financial results for the second quarter ended June 30, 2023 . Second Quarter 2023 Summary Franchise royalties increased 20.5% to $8.7 million compared to $7.2 million in the prior year period. Total revenue increased 12.4% to $9.0 million compared to $8.0 million in the prior year period. Income from operations decreased 37.4% to $2.7 million compared to $4.3 million in the prior year period. Selling, general and administrative ("SG&A") expenses increased 74.5% to $5.6 million compared to $3.2 million in the prior year period, primarily related to expenses from the MRI acquisition and workers' compensation. Net income from continuing operations decreased 57.2% to $2.1 million , or $0.15 per diluted share, compared to net income from continuing operations of $4.8 million , or $0.35 per diluted share in the prior year period. Adjusted EBITDA of $3.9 million compared to $5.8 million in the prior year period. Year-To-Date 2023 Summary Franchise royalties increased 30.7% to $18.0 million compared to $13.8 million for the six months ended June 30, 2022 . Total revenue increased 25.3% to $18.8 million compared to $15.0 million in the prior year period. Income from operations decreased 26.6% to $6.0 million compared to $8.1 million in the prior year period. SG&A increased 95.1% to $11.5 million compared to $5.9 million in the prior year period. Net income from continuing operations was $4.4 million , or $0.32 per diluted share, compared to net income of $5.3 million , or $0.39 per diluted share in the prior year period, primarily related to increased expenses including SG&A, and interest and other financing expenses. Adjusted EBITDA of $8.5 million compared to $10.8 million in the prior year period. System-wide sales for the second quarter of 2023 increased to $157.0 million compared to $120.0 million for the same period in 2022, primarily related to the acquisition of MRI Network. Rick Hermanns , HireQuest's President and Chief Executive Officer, commented, "We are encouraged by our performance this quarter in light of the current economic environment; these results reinforce our confidence in the HireQuest business model which includes over 400 franchisee-owned offices. Late last year, we purchased MRI Network, adding an additional franchise offering for executive search services with over 200 franchise offices in the U.S. and internationally. This was a large acquisition and we incurred certain expenses related to the purchase that we expect will come down over the balance of the year as we drive synergies. We are increasingly well positioned with a diverse mix of staffing options and a strong presence across key geographic regions, and we look forward to continuing to build our position as a leading provider of temporary workforce hiring and professional recruiting solutions." Second Quarter 2023 Financial Results Franchise royalties in the second quarter of 2023 were $8.7 million compared to $7.2 million in the prior-year period. Service revenue was $286,000 compared to $779,000 in the prior-year period. Total revenue in the second quarter of 2023 was $9.0 million compared to $8.0 million in the year-ago quarter, an increase of 12.4%. SG&A expenses in the second quarter of 2023 were $5.6 million compared to $3.2 million in the second quarter of 2022. The increase in SG&A expenses was primarily related to increased workers' compensation expense and increased costs related to the MRI acquisition. Workers' compensation was approximately $690,000 for the second quarter of 2023, compared to a net benefit of $188,000 in the second quarter of 2022. Depreciation and amortization in the second quarter of 2023 was approximately $700,000 compared to $521,000 in the second quarter of 2022. The increase of $179,000 was primarily due to additional amortization stemming from acquisitions. Other miscellaneous income for the second quarter of 2023 was approximately $99,000 , compared to other miscellaneous income of $1.4 million for the second quarter of 2022. In the second quarter of 2022, HireQuest recognized approximately $1.4 million in gains resulting from the conversion of acquisitions to franchises. Interest and other financing expense in the second quarter of 2023 was approximately $314,000 compared to $109,000 for the second quarter of 2022. Interest and other financing expense will fluctuate as the Company utilizes the line of credit for acquisitions or other short-term liquidity needs. Due to the MRI acquisition in the fourth quarter of 2022, coupled with the working capital needs associated with growth and the inefficiencies of changing treasury service providers, HireQuest carried a larger balance on its line of credit for the quarter ended June 30, 2023 . Income tax expense was approximately $465,000 , a net effective tax rate of 18.5%, for the three months ended June 30, 2023 . Income tax expense for the prior year period was $861,000 , a net effective tax rate of 15.2%. The net effective tax rate is primarily driven by the federal Work Opportunity Tax Credit and windfall tax deductions related to stock-based compensation and overall limits on executive compensation. Net income from continuing operations in the second quarter of 2023 decreased 57.2% to $2.1 million , or $0.15 per diluted share, compared to net income from continuing operations of $4.8 million , or $0.35 per diluted share, in the second quarter last year. Adjusted EBITDA for the second quarter of 2023 was $3.9 million compared to $5.8 million in the second quarter last year. Year-To-Date 2023 Financial Results Franchise royalties for the six-months ended June 30, 2023 , were $18.0 million compared to $13.8 million for the same period in 2022. Organic royalties, excluding the contribution from acquisitions, decreased 6.2%. Service revenue was $821,000 compared to $1.2 million in the prior-year period. Total revenue was $18.8 million compared to $15.0 million in the same year-ago period, an increase of 25.3%. SG&A expenses in the first half of 2023 were $11.5 million or 3.7% of system-wide sales compared to $5.9 million , or 2.7% of system-wide sales for the same period of 2022. The first half of 2023 included approximately $2.7 million of expenses related to MRI. Workers' compensation was approximately $875,000 in the first half of 2023 compared to a net benefit of $801,000 , which included approximately $365,000 of benefit related to the Snelling acquisition, for the same period of 2022. For the first half of 2023, other miscellaneous income was approximately $142,000 , compared to expense of $1.9 million in the first half of 2022. In the first half of 2022, the Company recognized approximately $2.2 million in losses resulting from the conversion of the Temporary Alternatives, Dubin, and Northbound acquisitions to franchises. Net income from continuing operations in the year-to-date period for 2023 was $4.4 million , or $0.32 per diluted share, compared to net income from continuing operations of $5.3 million , or $0.39 per diluted share, in the same year-ago period. Adjusted EBITDA for the first half of 2023 was $8.5 million compared to $10.8 million in the same prior-year period. Balance Sheet and Capital Structure Cash was $2.1 million as of June 30, 2023 , compared to $3.0 million as of December 31, 2022 . Total assets were $107.8 million as of June 30, 2023 . Total liabilities were $45.8 million . Working capital as of June 30, 2023 , was $17.3 million compared to $15.1 million as of December 31, 2022 . At June 30, 2023 , assuming continued covenant compliance, availability under the line of credit was approximately $23.2 million based on eligible collateral, less letter of credit reserves, bank product reserves, and current advances. On June 15, 2023 , the Company paid a quarterly cash dividend of $0.06 per share of common stock to shareholders of record as of June 1, 2023 . 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, August 10, 2023 Time: 4:30 p.m. Eastern time Toll-free dial-in number: 877-545-0523International dial-in number: 973-528-0016Entry Code: 973182 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/2359/48721 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 24, 2023 . Toll Free: 877-481-4010International: 919-882-2331Replay Passcode: 48721 About HireQuest HireQuest, Inc. is a nationwide franchisor of direct dispatch, executive search, and commercial staffing solutions for HireQuest Direct, HireQuest , Snelling, HireQuest Health , DriverQuest, TradeCorp , MRI, SearchPath Global, and Northbound Executive Search franchised offices across the United States . Through its national network of over 400 franchisee-owned offices across the United States , HireQuest provides employment for approximately 81,000 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: HireQuest, Inc. David Hartley , Vice President of Corporate Development(800) 835-6755Email: [email protected] Investor Relations Contact: IMS Investor Relations John Nesbett / Jennifer Belodeau (203) 972-9200Email: [email protected] - Tables Follow - HireQuest, Inc. Consolidated Balance Sheets (in thousands, except par value data) June 30 , 2023 December 31 , 2022 ASSETS (unaudited) Current Assets Cash $ 2,071 $ 3,049 Accounts receivable, net of allowance for doubtful accounts 51,089 45,728 Notes receivable 1,110 817 Prepaid expenses, deposits, and other assets 2,602 1,833 Prepaid workers' compensation 997 503 Total current assets 57,869 51,930 Property and equipment, net 4,365 4,353 Workers' compensation claim payment deposit 1,470 1,231 Franchise agreements, net 22,292 23,144 Other intangible assets, net 10,353 10,690 Goodwill 5,870 5,870 Other assets 142 325 Notes receivable, net of current portion and reserve 4,042 2,675 Intangible asset held for sale - discontinued operations 1,405 3,065 Total assets $ 107,808 $ 103,283 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities Accounts payable $ 163 $ 448 Line of credit 16,504 12,543 Term loans payable 505 704 Other current liabilities 3,061 3,408 Accrued payroll, benefits, and payroll taxes 4,619 5,602 Due to franchisees 11,334 9,846 Risk management incentive program liability 1,384 877 Workers' compensation claims liability 3,028 3,352 Total current liabilities 40,598 36,780 Term loan payable, net of current portion 348 3,291 Deferred tax liability 261 60 Workers' compensation claims liability, net of current portion 2,124 2,573 Franchisee deposits 2,431 2,325 Total liabilities 45,762 45,029 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; 13,939 and 13,918 shares issued, respectively 14 14 Additional paid-in capital 33,666 32,844 Treasury stock, at cost - 40 shares (146 ) (146 ) Retained earnings 28,512 25,542 Total stockholders' equity 62,046 58,254 Total liabilities and stockholders' equity $ 107,808 $ 103,283 HireQuest, Inc. Consolidated Statement of Income (unaudited) Three months ended Six months ended (in thousands, except per share data) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Franchise royalties $ 8,704 $ 7,221 $ 18,027 $ 13,797 Service revenue 286 779 821 1,248 Total revenue 8,990 8,000 18,848 15,045 Selling, general and administrative expenses 5,625 3,223 11,470 5,878 Depreciation and amortization 700 521 1,397 1,020 Income from operations 2,665 4,256 5,981 8,147 Other miscellaneous income (expense) 99 1,458 142 (1,922 ) Interest income 68 54 114 148 Interest and other financing expense (314 ) (109 ) (854 ) (157 ) Net income before income taxes 2,518 5,659 5,383 6,216 Provision for income taxes 465 861 1,012 926 Net income from continuing operations 2,053 4,798 4,371 5,290 Income (loss) from discontinued operations, net of tax (45 ) 93 267 204 Net income $ 2,008 $ 4,891 $ 4,638 $ 5,494 Basic earnings per share Continuing operations $ 0.15 $ 0.35 $ 0.32 $ 0.39 Discontinued operations - 0.01 0.02 0.01 Total $ 0.15 $ 0.36 $ 0.34 $ 0.40 Diluted earnings per share Continuing operations $ 0.15 $ 0.35 $ 0.32 $ 0.39 Discontinued operations - 0.01 0.02 0.01 Total $ 0.15 $ 0.36 $ 0.34 $ 0.40 Weighted average shares outstanding Basic 13,720 13,607 13,699 13,591 Diluted 13,817 13,691 13,779 13,686 HireQuest, Inc. Reconciliation of Net Income to Adjusted EBITDA (unaudited) Three months ended Six months ended (in thousands) June 30, 2023 June 30, 2022 June 30, 2023 June 30, 2022 Net income $ 2,008 $ 4,891 $ 4,638 $ 5,494 Interest expense 314 109 854 157 Provision for income taxes 465 861 1,012 926 Depreciation and amortization 700 521 1,397 1,020 WOTC related costs 125 163 270 294 EBITDA 3,612 6,545 8,171 7,891 Non-cash compensation 259 364 621 610 Acquisition related charges, net - (1,294 ) (340 ) 2,299 Impairment of notes receivable - 233 - - Adjusted EBITDA $ 3,871 $ 5,848 $ 8,452 $ 10,800 SOURCE: HireQuest, Inc. View source version on accesswire.com : https://www.accesswire.com/773660/HireQuest-Reports-Financial-Results-for-Second-Quarter-2023

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