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ACCESSWIRE 16-Mar-2023 4:05 PM
Q4 2022 Royalty Revenue Grows 26.4% YoY to $7.7 million
Q4 2022 Net Income from Continuing Operations Increases 21.0% YoY to $2.6 million
GOOSE CREEK, SC / ACCESSWIRE / March 16, 2023 / HireQuest, Inc. (NASDAQ:HQI), a national franchisor of direct dispatch, executive search, and commercial staffing services, today reported financial results for the fourth quarter and year ended December 31, 2022.
Fourth Quarter 2022 Summary
Full Year 2022 Summary
System-wide sales for the fourth quarter of 2022 were $127.9 million compared to $106.8 million for the same period in 2021. System-wide sales for full year 2022 were $472.2 million compared to $354.5 million in full year 2021, primarily related to acquisitions completed in 2022 and organic growth related to the rebound from the economic downturn experienced in 2021 due to COVID-19.
Rick Hermanns, HireQuest's President and Chief Executive Officer, commented, "Our operational performance in the fourth quarter of 2022 was characterized by continued top line growth, specifically in revenue generated through our franchise royalties, as well as notable increases in our total revenue and net income. During the quarter, we announced and closed our acquisition of certain assets of MRI Network, the third-largest recruiting network in the world, adding over 200 franchise offices throughout the United States and internationally to our staffing network. This acquisition of MRI Network provides us with immediate scale in the executive recruiting segment and is highly complementary to both of our existing HireQuest Direct and Snelling offerings. Our mission is to assist businesses in meeting their essential staffing needs by providing a quality pool of skilled workers on demand as workflow dictates. We believe that with our significantly expanded staffing network and dynamic offerings for a variety of staffing needs, we are well positioned to continue delivering improved operational results as we move through 2023."
Fourth Quarter 2022 Financial Results
Franchise royalties in the fourth quarter of 2022 were $7.7 million compared to $6.1 million in the prior-year quarter. Service revenue was $378 thousand compared to $471 thousand in the prior-year quarter. Total revenue in the fourth quarter of 2022 was $8.0 million compared to $6.5 million in the year-ago quarter, an increase of 23.1%. These increases are consistent with the increase in system-wide sales.
Selling, general and administrative ("SG&A") expenses in the fourth quarter of 2022 were $4.7 million compared to $4.4 million for the fourth quarter of 2021. The increase in SG&A expense is primarily due to worker's compensation, which increased by approximately $400 thousand over the same quarter last year. Generally, workers' compensation expense (benefit) will fluctuate based on the mix of classifications, the level of payroll, recent claims resolution and cumulative experience. Other increases in SG&A include $230 thousand in technology investments, and normal increases across the board due to growth and inflation. These were largely offset by a $755 thousand net decrease in salaries and benefits. The fourth quarter of 2021 included a full year of bonus accrual, whereas in 2022 we spread the accrual over the entire year.
Income tax expense was approximately $49 thousand, a net effective tax rate of 1.8%, for the three months ended December 31, 2022. Income tax expense for the prior year period was $227 thousand, a net effective tax rate of 9.4%. The effective tax rate is primarily driven down by the federal Work Opportunity Tax Credit and windfall tax deductions related to stock-based compensation.
Net income from continuing operations in the fourth quarter of 2022 increased 21.0% to $2.6 million, or $0.19 per diluted share, compared to net income from continuing operations of $2.2 million, or $0.16 per diluted share, in the fourth quarter last year.
Adjusted EBITDA for the fourth quarter of 2022 was $4.4 million compared to $3.4 million in the fourth quarter last year.
Full Year 2022 Financial Results
Franchise royalties for the full year ended December 31, 2022 were $28.9 million compared to $21.3 million for the same period in 2021. Service revenue was $2.1 million compared to $1.2 million in the prior-year period. Total revenue was $31.0 million compared to $22.5 million in the same year-ago period, an increase of 37.4%.
SG&A expenses in full year 2022 were $12.9 million compared to $13.3 million for the same period of 2021. The decrease in SG&A was primarily driven by worker's compensation. Workers' compensation provided a net benefit of $2.0 million in the year ended December 31, 2022, versus a net benefit of approximately $737 thousand in the year ended December 31, 2021. Approximately $1.2 million of the benefit recorded during 2022 relates to the Snelling reserve assumed at the time of acquisition and continues to run off as claims are resolved. Excluding workers' compensation, the increase in SG&A expenses primarily relates to salaries and benefits, which increased approximately $800 thousand as a result of additional headcount to keep pace with growth in system-wide sales as a result of acquisitions and organic growth. Compensation-related expenses remain by far the largest component of SG&A.
For the year ended December 31, 2022, other miscellaneous expense was approximately $2.0 million, compared to other miscellaneous income of $4.6 million for the same period in 2021. The increase in miscellaneous expense compared to the prior year is primarily related to a bargain purchase gain of approximately $5.6 million, recorded net of deferred taxes, in the twelve months ended December 31, 2021. In 2022 we recognized approximately $2.2 million in losses from the conversion of the Temporary Alternatives, Dubin, and Northbound acquisitions to franchises and a $195 thousand non-royalty based incentive given to two franchises during an expansion and acquisitions of competitors.
Net income from continuing operations in full year 2022 was $12.0 million, or $0.87 per diluted share, compared to net income from continuing operations of $11.8 million, or $0.87 per diluted share, in same year-ago period.
Adjusted EBITDA for the full year ended December 31, 2022 was $22.0 million compared to $12.3 million in the same prior-year period.
Balance Sheet and Capital Structure
Cash was $3.0 million as of December 31, 2022, compared to $1.3 million as of December 31, 2021.
Total assets were $103.3 million as of December 31, 2022. Total liabilities were $45.0 million.
Working capital as of December 31, 2022, was $15.2 million compared to $20.5 million as of December 31, 2021.
At December 31, 2022, availability under the line of credit was approximately $12.2 million based on eligible collateral, less letter of credit reserves, bank product reserves, and current advances.
On March 15, 2023, the company paid a quarterly cash dividend of $0.06 per share of common stock to shareholders of record as of March 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.
HireQuest will hold a conference call to discuss its financial results.
Date: Thursday, March 16, 2023
Time: 4:30 p.m. Eastern time
Toll-free dial-in number: 888-506-0062
International dial-in number: 973-528-0011
Entry Code: 954338
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/2359/47796and via the investor relations section of HireQuest's website at www.hirequest.com.
A replay of the conference call will be available through March 30, 2023.
Toll Free: 877-481-4010
Replay Passcode: 47796
HireQuest, Inc. is a nationwide franchisor of direct dispatch, executive search, and commercial staffing solutions for HireQuest Direct, HireQuest, Snelling, 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.
David Hartley, Vice President of Corporate Development
Investor Relations Contact:
IMS Investor Relations
John Nesbett/Jennifer Belodeau
-- Tables Follow --
Consolidated Balance Sheets
|December 31,||December 31,|
(in thousands except par value data)
Accounts receivable, net of allowance for doubtful accounts
Prepaid expenses, deposits, and other assets
Prepaid workers' compensation
Current assets held for sale - discontinued operations
Total current assets
Property and equipment, net
Workers' compensation claim payment deposit
Franchise agreements, net
Other intangible assets, net
Notes receivable, net of current portion and reserve
Intangible assets held for sale - discontinued operations
LIABILITIES AND STOCKHOLDERS' EQUITY
Line of credit
Term loans payable
Other current liabilities
Accrued wages, benefits and payroll taxes
Due to franchisees
Risk management incentive program liability
Workers' compensation claims liability
Total current liabilities
Term loans payable, net of current portion
Workers' compensation claims liability, net of current portion
Deferred tax liability
Commitments and contingencies (Note 11)
Preferred stock - $0.001 par value, 1,000 shares authorized; none issued
Common stock - $0.001 par value, 30,000 shares authorized; 13,918 and 13,745 shares issued, respectively
Additional paid-in capital
Treasury stock, at cost - 40 shares
Total stockholders' equity
Total liabilities and stockholders' equity
Consolidated Statements of Income
|Three months ended (unaudited)||Twelve months ended|
(in thousands, except per share data)
|December 31, 2022||December 31, 2021||December 31, 2022||December 31, 2021|
Selling, general and administrative expenses
Depreciation and amortization
Income from operations
Other miscellaneous income
Interest and other financing expense
Net income before income taxes
Provision (benefit) for income taxes
Net income (loss) from continuing operations
Income from discontinued operations, net of tax
Basic earnings per share
Diluted earnings per share
Weighted average shares outstanding
Reconciliation of Net Income to Adjusted EBITDA
|Three months ended||Twelve months ended|
|December 31, 2022||December 31, 2021||December 31, 2022||December 31, 2021|
Provision for income taxes
Depreciation and amortization
WOTC related costs
Acquisition related charges, net
Impairment of notes receivable
SOURCE: HireQuest Inc.