HQI - Earnings call transcript Q2 2020

Due to licensing restrictions, you must log in to view earnings call transcripts.

Operator

Good day, ladies and gentlemen, and welcome to the HireQuest Incorporated Second Quarter 2020 Earnings Conference Call. All lines have been placed on a listen-only mode and the floor will be open for your questions and comments following the presentation. [Operator Instructions] At this time, it is my pleasure to turn the floor over to your host, Mr. Brett Maas of Hayden IR. Sir, the floor is yours.

Brett Maas

operator. you, Thank to like to call. the I welcome would everybody HireQuest Hermanns; and Hosting the Cory Rick are today call CFO, CEO, Smith. meaning forward-looking Please the be within include comments of securities the statements made during aware our call that of federal some laws. may containing and would, believe, and Statements anticipate as constitute expressions should, such expectations our may, words about forward-looking expect, similar beliefs could, will, statements. uncertainties results future results current cause HireQuest to These materially and expectations. statements that operations involve regarding our risks management’s differ and from could also differ XX-K, the described Form the review specific in on to and statements. on the We harbor release may statements in contained most you encourage materially annual in with Form results forward-looking limitation, other that factors XX-Q risk safe cause events or from including, the quarterly and which actual periodic those report to and most recent recent without earnings report reports, company’s factors identify risk the its filings SEC, forms on Copies and SEC’s of the XX-K or sec.gov. company’s at website be the may at the XX-Q hirequest.com company’s most website recent reports on obtained or not of call. update call to publicly or forward-looking this any The company after does the statements undertake date revise the call I August remind would to that be everyone through also for available replay XXth. this like will the A available release provided and hirequest.com. link on at call it the replay to the in website of is also is the earnings company’s website CEO to Hermanns. I over turn of HireQuest, Rick would call the now Rick?

Rick Hermanns

continue and quarter for severe these maintain industry a we balance this as quarter profitable industry Center our us To COVID to and second significantly the HireQuest sheet. was in public sustainable strong shutdowns. Thank Despite you significant and the staffing a in benefits particularly Command which economic franchising for resulting sure, franchises. the our joining and disruptions were remain completed These became our benefits for risks mitigates model, with be experienced us. Since we positions involved to the due clearly profitability. challenges, combination display speaking of have we the company, on impact the been about our challenging

mitigate that each of local provided to This this One proud move quickly to and of our way do. the our cutting of enables that important the conditions. Many the our franchise unfold, communicating the accounts, on costs, based actions and help to benefits owned. to key to to loans were crisis, taking exactly guidance weather able began they independently is loans as these secure impact, were other and to were what our franchises strong unit is storm. them effective, with situation intended I'm through PPP model they owners franchises help moved to We the and of quickly achieving

$X.XX impacted XX.X% year. also last system-wide the million share generated and compared declined And to sales $X the XX.X%. second per revenue Nevertheless, were as results quarter, we with flow earnings a to of model. quarter free of decreased during cash royalty operations our it, business Our by from testament

HR were uncertained significant environment. sustainability their in Early As unfold, to than We the that can the efforts consolidate branches for economy year with and was temporary us we close up cuts. cost we staffing footprint. the decision as to Those made certain and our well-positioned here, from do some helpful. not to reduction made in owners franchise reopen, anticipate permanent to headquarters of a to significantly our position national worsens move ramp began Unless or we rapidly at additional reliably teams oftentimes expect begins can better what the this we are staffing. customers economy pandemic to provide faster cuts an

economic our business proving susceptible quite said fluctuations. is is to I've again. As This true past, the in yet

With this business than serving expected better are too protecting focused debt continue no economic our service and franchisees to to remain volatility competitors our to structure, lean we yet cycles, on of again. cost the our equipped weather short-term. as a and is and proven lot a we is However, being in

We looking targets. in opportunities where acquisitions increases presence our add strengthen its through we growth and perhaps of franchisees are potential The number specifically, lack or national access the currently to for impact to crisis M&A provide our would that we candidates, for the identify continue particular, presence, accounts. markets evaluate existing certain and on of economic industry,

continue Our a especially prudent to is sheet And environment. That to approach any challenging and balance follow strong disciplined us acquirer. strong economic a that true we makes said, acquisitions. the in

able as can sheet. transitioned is assets goal model, ultimate been we've possible. which our model financing, be is to possible In we provide immediately to of that balance the acquisition most franchise to reselling as buyer will franchisee. our to by intended Our of opportunities to quickly strong location the acquisitions that acquire cost our recoup again, due the cases, arise. Historically, a And much should be many

to over the Cory? quarter Cory turn me now discuss, call second the Let results. to

Cory Smith

in XX.X%. and Thank the Total to of quarter afternoon, million, second XXXX good $X.X you, Rick, second compared of quarter the million $X.X a XXXX, revenue was everyone. in decrease of

quarter XX.X% in quarter an to the of impact this being included associated related not the the to to a that approximately an this second is of of total the second two $X.X to decrease $XXX,XXX, make of pandemic we relative second XXXX. receivable $XXX,XXX, we royalties, year, last $XXX,XXX This in components, attributable over of the to a up ongoing merger computer was which due costs Center. in is was or on with is of of to revenue total share million recorded up million. generated increase of important $X.XX franchise per million promissory Net in in revenue, which general, Service Higher and year. our that was issued fees total associated added $X.X This was royalty which on to revenue. sale service to related year, provide, the workers' finance quarter economic and revenue consulting expenses economy. public of merger. XXXX. the was additional remainder income related in last approximately COVID to stock-based $X.X to diluted overwhelmingly increase additional notes costs and accounts the $XXX,XXX. with diluted company, for roughly of acquired of negative we fees was was administrative XXXX, $XXX,XXX directly incur up to from in $X.X services our the did is share, to revenue of in million and year interest directly franchisees compared related slightly $XXX,XXX is prior This having year. down $XXX,XXX, reflection XXXX in we Our to or of COVID on increase and related charge overdue sales reserve optional accruals to our a board saw $XXX,XXX system-wide quarter from million compared branches the second reduction the service lower SG&A cost inclusive The in which quarter franchise of per in last the compensation revenue and It XXXX, second to Command offices XXXX this Selling, million royalty increase This was $X.X XX% merger $X.X made and placed shutdowns. -- to revenue, of we the pandemic year-over-year the in $X.XX acquired compared quarter in were decrease lower various note, reserve the in a revenue compensation

million $XXX,XXX XXXX, cash of the to and $XX current sheet, receivable $X.X a accounts included cash on million. as $XX.X increased receivable the $X.X we assets million. heels able to construction the June continue by at balance on XXth, of and to balance Moving our to and $XX.X headquarters. corporate Current and to of of million, million assets At continue we approximately profitable of end new building million were June million, were XXth on Property another equipment strengthen quarter. adjacent sheet $XX.X $XX.X our of on included were accounts which

future, $X.X in the continue increased fund for operator over Q&A. back our initiatives. which And XXXX, has sufficient balance, foreseeable turn important with cash is ongoing call I still other current our by the to while that, Our to operations will for million to funding

Operator

you. floor Ladies open Artko for from Rabover Peter Please and [Operator question first is our the now ahead. gentlemen, with take Thank question go Instructions]. Capital. We'll

Peter Rabover

announced scenario. a that Hi way stock economic distressed guys. guess, you both Nice to with ask assets the, power I a I general. opportunities wanted buyback, such looking about, cash, in the your at are you you terrible through to

how curious executing the and, just about you're guess, the thinking I allocation about Thanks. buyback? how thinking So you're

Rick Hermanns

Thank you, Peter.

under shares begin, to shares. we've buyback. begun a purchasing So purchasing the the have as plan announced, And filed terms was sort we of, of XXb-X

below as laid well we So the hunt before on are relatively of we right purchases a price to them has share acquisitions so for and level company. kind is been but The committed continue that as of to to -- value and far, as the be long stays intrinsic opportunities, the out but funny of the the buy at we are consider well call. amount it's the small, back

Operations of our of competitors business. my -- of me fact, went one that, In just texts fact the out VP a

probably present se, And obviously, starting my competitors opportunities -- themselves. -- that any I start upon of to it of that any competitors per wish don't so are our will to while, indicates

I wishing the than who as to was a of world you But I at worse August so And will we for would that deployed. here I we be A in really pretty like probably in in XXXX of in XXXX. but said, to biggest are completely take be all. still well. the different do much bad which that still And we performance. August -- And on it it's of would XXXX no acquisition that -- the that, a had is that course, is a were we're important argue than lot approach funds problem price based expect people acquisition what disciplined area fully have

your take in of that so reality some it well. that, to set And as hope I part will answers question.

Peter Rabover

with great. that was I'll another you other maybe -- geographies maybe strength economies A couple follow-up of seeing weaknesses That in the And after of your and just little something one so One, keep pockets that of you're this. a serve, does. and track Yes. to comment performance on where questions. better. No, the

Rick Hermanns

good that higher at question. That's level. struggling most of, sort are the Obviously, a being, areas lockdown in is kept a we

difficult So is bit better. particularly a are state in Others are Oregon, Washington particularly the like two of jurisdictions.

kind negative the So a so still I like what I -- at baseball have back much it's At of start end day, -- football a basketball goes seeing worse people mean, this impact. is our the that bit that. it's you said comparisons after to until in games, are of it's realistically places call at the first going games, at quarter games, to not

And down Louis it so historically may -- it always goes geared necessarily is Louis has is -- Louis off, really it's hospitality. St. not way St. gee, off to it towards more be because prior because been well is St. --

so until again, clear stadiums, is really people I -- And back hospitality we're go just recover off. into going way are that. just And to still to not

pretty relative As strengths, is Florida, Southeast trending because relatively remains single -- strong, probably the far probably the as really, area. commercial Again, construction is strongest strong. still

Peter Rabover

maybe then follow-up And the question. Great.

I cash flow And from -- year. million result like this free that's think obviously, something release. you far a generated in capital guys working of $X.X so

it, good AR much your up. franchise the just start franchise sales way using et do way a same-store is I cetera? or should your I'm probably about guess, that fees, sales think as, your this cash so of a for What's percentage ask curious about as And you how to better -- we going think anticipate to are --

Rick Hermanns

Yes.

balance amount out, the on uncanny decline you're in least obviously, of say, AR almost of correct cash it's at the kind -- the balance bulk So the let's fun cash -- increase in of the it's or pointing increase. the equals almost how

our let's the meaning, not also paid it's quite number we've franchisees, say, amount declined, due of our and, to more. accruals either that However, obviously, has simple because a

so that, you not So, that I simple. would to quite it's suggest

a had down that paid large also as well. tax We we fairly deferred liability

if if So that AR absolute sales, realistically, -- in I sales. I'd that go makes XX% way up increase have sense. of increase means XX% mean pretty XX% by look we advance that at a pretty it is our If much dollar in about kind will it sales, our the we of much any about

$X up go up cure tomorrow, our let's sales our say, if say, back So to let's million things a a and found month, $X is normal month. million go sales just a and go

around XX% about -- about runs our months. that Typically, month of net days up down increase outstanding. go -- will will about our AR AR go cash Our $X by really XX million for X.X per

like million in increase neighborhood capital expect could working needs. in a of somewhere net you the So $X

Peter Rabover

appreciate great. Thank color. I the Okay, so you much.

Rick Hermanns

Sure.

Operator

take Cranking, next Instructions] Please ahead. [Operator Private our We'll question Paul Investor. from go

Unidentified Analyst

Rick. Hey,

Rick Hermanns

Paul. Hey,

Unidentified Analyst

receivable it at receivable I noticed a year, we're correlated the but the the know At had -- of of generally our time increase at sheet rising? seems the be balance this increasing mentioned that a -- had this that of time just you year, in -- I in with sort accounts cash. COVID is pretty accounts generally, is year. looking in with AR this closely what Aside decline

Rick Hermanns

is it they're which our yes. which, receivable that the of to The answer seasonal. increasing, good as means right, a because The yes, question -- is, is are so sales we answer course, up, accounts speak, even thing,

absolutely they are so And up.

-- expect I So that. would and

would goes during the That's all… would if I quarter. so -- not cash not down it surprise me And third balance our

Unidentified Analyst

other Right. have say as $XX.X I we'll -- declined. payroll funding million the already declining that point that the be at would be additional possible or would may just was that

Rick Hermanns

the goes I Obviously, up, and that's would as mean, Yeah. whole expect I thing. it. AR

working cash goes you if down. in look, will AR But capital. certainly, away just the strip up, As even our go changes

sale I the part still We're million the profitable. -- only we're earn did earning than not well. we think year. half to is in of collecting we're related the most first still the $X also the -- important on notes command more as We're

Never strong flow underlying true. mind as And are changes the cash. in well. cash is generating it we So,

of seasonal. perspective, cyclical. are not are or very challenging but business seasonal, a only We're We bit in from a -- that we are we

and you notes we the to key Again, always it, ongoing And then performing of that's is that's real sight part, so, operations, earn something continue top seasonality. continue on And like is generally the the of to are But lose we just occurring. COVID have our -- obviously -- impacts the an well. to -- important money. not which most earn speaking, the

Unidentified Analyst

reserving everything... Is we Are California? the one the for of just group

Rick Hermanns

of that the -- at a So one. It's just that's a we're answer look required to all one the That's comprehensive question to -- fairly just notes. take not not is, no.

So it's just one part of it.

Unidentified Analyst

one had other Okay. I just question.

at of consolidated statements Looking the income.

numbers -- or Looking there this and Center the Command weren't July, Are right, the sox prior are those of XXXX? at with months from those royalties months comparing were year. were three ended those because year HQ to ended last alone HQ franchise

Rick Hermanns

That's right.

So -- were HQ so HQ those alone.

will third see July So third place what on you'll in took HireQuest the of quarter of quarter because the the company. to the the results merger truly compared and sort be combined XX, Command

Unidentified Analyst

we -- and on revenue where I that's ago, the been of they hard really since what we And in see But what were picture -- was was weren't -- will added they get franchise, what Command weren't next that from added they to time. a thinking, it's what's correct? what's the a franchise quarter, no Center what's had year -- at

Rick Hermanns

correct. That's

Unidentified Analyst

Okay.

Rick Hermanns

the all that onetime Of will the costs. in quarter. sort third quarter the also took of tax comparisons of And course, merger-related of issues the place of all the conclude the third

So...

Unidentified Analyst

tax is does When one liability are a on spreads much we four-year year? why Why -- doing the decreased deferred that? so in

Rick Hermanns

I'm going Cory. for to leave that question

Cory Smith

made reason... as The deferred -- compensation The reserves it's up spread. tax liability, well workers' that primarily as we of

Unidentified Analyst

okay. XX The adjustment,

Cory Smith

Yes.

Unidentified Analyst

Okay, good.

Operator

Aaron from take Edelheit our Please with [Operator go next question Instructions] Capital. ahead. We'll Mindset

Aaron Edelheit

months had if a But assuming and views business how or of you was for was trending the give now commentary Hey, into how question back things color thanks been And you we're have taking are I next overall low just give the my trending. for could on some question. quarter? I April real are. just that I'm things X.X wondering some things trending how since. that see

Rick Hermanns

good a That's question.

improvements nearly So at seasonal those lot end The -- cases, best of but factors. August, October around on of just months. our a roughly some our off more the in the year-to-year XX%, July, seeing March, than beginning we part of -- -- we'll September, are well, are comparisons always were four based are say XX%.

in the March, just absolute part improvements factors. to dollars related normal since are seasonal of seen we've So

off, the XX%, the However, XX% where the somewhere between comparisons we're to we're week, prior from have typical and year-over-year year. improved off point XX%

Aaron Edelheit

Thanks.

Operator

[Operator Please turn time. at to further questions appear remarks. Instructions] floor no for go this ahead. Mr. We'll There back be to closing the Hermanns

Rick Hermanns

protection Thank well part in grow you, positioned hopefully, everybody, the we due forward from viewing that positions call. against to an preservation economy. the for the participating uniquely not Again, we're and in to the can is a in both future of company that the our going your the good to the release the company us that business again, what the and discern in investments forward, take and situation have meaningful holdings earnings you still is in again, make from important really strong as advantage a recognize in just And is decline comments going balance sheet to and mode.

to us. thank look a I a third good you quarter. lot. again, for joining forward So And Thanks

Operator

gentlemen, this you thank participation. and teleconference. today's Ladies for We does your conclude

time, your You have great disconnect lines may and this a day. at

HireQuest (HQI) 11 Aug 202020 Q2 Earnings call transcript