HQI - Earnings call transcript Q3 2021

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Operator

Good afternoon, ladies and gentlemen, and welcome to the HireQuest Third Quarter 2021 Earnings Call. At this time, all participants have been placed on a listen-only mode and the floor will be opened for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Brett Maas. Sir, the floor is yours.

Brett Maas

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

Rick Hermanns

numbers from Thank pandemic. first you the the sales direct for legacy our for beginning with for weekly joining the us. with HireQuest XXXX This pulling past milestone quarter marked time us a of franchisees since even

pulling the of sales Over July to from in trailing by the improved XXXX end results to XX% weekly XX% course the comps, early September. quarter, of even

represent momentum Snelling into and of the end system-wide of of combination our were year. excited both of from from record by million headwinds Given the the results Link for and the and continued the and contributions a driven revenue million, HireQuest, growth acquisitions. $XX.X going by sales organic $X.X QX and their total pandemic, uncertainty we’re

EBITDA at of recently is especially adjusted acquisitions given given first record had that end $X.X quarter. This the the notable also We large we -- of two million. completed

and Our Staffing end the franchisor and the charge of increased Link, and Adjusting in the ability income operating the for of into tools for compensation we and of two results second, this highlights transaction from to will of target announced the benefits the quarter, of to workforce; integrate we quarters, acquire our and before agreement leverage of Power, nonrecurring entered our Dental and both, comfortably the acquisitions: announced X.X% sales. X.X% and the we the model. development stated franchisees see that to at better expect their potential to Snelling Power scale, noncash division the achieved definitive serve extraordinary Subsequent Media we note end of the we year. to quarter, to close efforts provide a acquisition for the Recruit Dental system-wide new net first, within two accelerates our our beginning October clients

and can franchise a past, service on, a through enter applied organically avenue of such as and to the acquisitions. Smaller best a internal industries, across said Power range in we combination. verticals believe Dental give transactions we’ve we or the acquisitions evaluate both broad model add-on build staffing us verticals, our As to development, and continue that these be to platform

wanted Cory has to that Before to Board I of the quarterly dividend. mention financial our discuss declared results to further, I the turn over the call Directors regular

on shareholders dividend of We will December December record on a to $X.XX pay XXth per Xst. share

Cory? call over to will With is to turn that expectation Our quarterly we pay a that, I’ll $X.XX forward. continue dividend going Cory. the

Cory Smith

an for you XXX%. Total million compared million last of the was XXXX Thank for increase good third Rick, for year, revenue and to quarter afternoon, you, $X.X joining us. Thank same of $X.X the quarter everyone.

and Our to is XX% million increase of up Franchise for typically which total components: last year, our source accounts revenue; revenue franchise $X.X royalties, revenue. million XXX%. total an our of $X.X for quarter of about compared were of revenue service made two primary royalties the

we Link While the and the XX% locations addition contributed Snelling to of growth this organic experienced growth, quarter. third of during

in and various of metric placed related million diluted compared year. a last system-wide to provided noncash of in EBITDA Adjusted in Snelling million the to which $XXX,XXX of also compensation sale and operating relevant services, this We of share Service the is for to seen is last due last compared EBITDA achieved last us quarter interest $X an million net to to XX-Q. $X.X $XXX,XXX our was to general per million income a to This detailed noncash income to in was We and of P&L. forward as but to reserve compared optional charge in of Link costs generated locations the $X.X income through increase XXXX or believe $X $X.X accounts year. was $XXX,XXX, Net the our year. milestone running Selling, matching quarter in XXXX for nonrecurring levels net million receivable diluted on $X.XX administrative adjusted pandemic per the going revenue, our not were EBITDA due on notes with since quarter $X.X A overdue we XXXX is partially size fees reconciliation the quarter expenses quarter levels, additional sales for additional to the the California. share from also in third third adjusted have receivable XXXX. of well compared year. or of state began acquisitions, $X.XX as $XXX,XXX related charge for was a franchisees million expenses to increase an the expenses the support early included

balance sheet. the to on Moving

of at cash XXXX, and and assets $XX.X million receivable, XX, million at Current XX, of current million accounts XXth million $XX receivable. at current million were $XX.X XX, of of $XX.X Our September assets $XX.X XXXX. assets accounts to September $X.X included December million compared XXXX, while at included cash December

December $X.X Our of at XX, compared XXXX. $X.X reserves at balance, notes receivable XXth, net was September million million to

from on its acquisitions. a second Beginning and we quarter, quarterly an Since term of in common comprised new capacity to paid dividend. provides $XX the have on facility future share. with quarterly approved million increase million for both, We new $X.X potential the June Board common And well flexibility then, our a we revolving dividend dividend During us to credit approved $X.XX per credit believe million growth facility our of facility in the loan. paid per as and that and a $XX.X a Company room closed this organic third XXXX, share. in quarter XXXX, our Board as capitalize of the $X.XX first $X.XX regular quarterly

mentioned, quarter over will this continue will expect questions subject $X.XX the turn increased we As of each to dividend the for pay operator to December December to on dividend the discretion. shareholders to XXth record as to that, pay Rick in this And we call Xst. back Board’s of and XXXX, I with And answer.

Operator

Edelheit. have [Operator do Instructions] Aaron We question [Ph] a from

Unidentified Analyst

your margin? about the happy really and much EBITDA you change, Congratulations wanted how on we step with it. at this surprised I think when quarter there to is That look operating happily and very than leverage higher was adjusted or I great some the I ask should on results. was expected

should an think Going I about this? this anomaly, how forward, or was

Rick Hermanns

the about that periods, would question. pandemic. it’s Well, really hitting I right be. affected pretty thank I and you, all. the say prior at not we were where anomaly by It’s obviously, appreciate should no, just an much exactly The

expense back go you so far. to lot of of when So, -- the we XXXX, though were beginning we -- in can pandemic, still you cutting even the did only a our cut

back the on operating of of And the Link the boosted releasing bit the really, well. pandemic’s and course, acquisitions a so, economy, of significantly operating of has having the leverage our grip of leverage and as Snelling sort the with come

at look anomaly as well as wouldn’t I and no, all. at So, it

Unidentified Analyst

Okay.

Now, you there have there labor weren’t shortages you could you anyone any these were better is shortages you and Can we’ve you customers? results? are you -- me I Do much in give of to to metrics either have for provide similar the there labor. labor be things. been assume doing to happy have open to though I’m me any if how done, Could experiencing of bottlenecks of business, you your HireQuest idea if obviously, newspaper, even could you bottlenecks? give what on any or with are thoughts if there really talk

Rick Hermanns

Yes.

it’s double-edged So, sword. a

with $XXX that, let the that me a week the of So, do towards as of our really is end of we supplemental orders went the benefits do of end filling well, earlier unemployment stated A from I quarter. helped had numbers state first And the ending the XX% I think to like running like the it’s lot quarter. of -- was XX% of Worker. the the basically the Return that to to XXXX by return of Jedi, this behind Return even

ending And into for of people workforce. number $XXX of the a back pay fair so, the working not really supplemental that brought

now Now, have had as in that, we’ve bottlenecks orders far and than like unfilled Company’s as we more ever stuff the certainly history.

because we to to careful want overstating more XX% also every to orders. order. of the I so and However if be But probably that higher could -- sure, be in we leads fill XX% could shortage workers

And that any so, it sense. itself, if probably balances makes

Unidentified Analyst

about last No, Yes. trucking. of on a new asked verticals. question about call, I sense. kind you. the Last it Got question remember makes I

that for business. trucking staffing about could these year, I you how You could big dental in be? just think into long you foray opportunity $X think mentioned When quarter I’m -- could I think opportunities term with or you be but or or business, next dental I’m just wondering do look last enormous. this system like term. looking be not the a thought you of the billion announced the your some quarter verticals sales about of had and vertical, big long how the next first specifically, healthcare dental how

Rick Hermanns

Right.

a trucking, acknowledged a much now, right where So, with it XX-figure there’s opportunity. that easy when truckers to shortage see literally pretty XXX,XXX it’s to you widely becomes of have X obviously,

really grow about we’re be be us dental to start dental, necessarily develop in own for so can there. limited to necessarily with a not we that helpful not -- what’s have is the is going part into huge segment. is into And way and a dental And not systems -- going from dental is our other of yet our that. strategy to On doesn’t it hand, it’s to

broadly, So, more Dental really obviously an as areas. viewed I would say, is should a professional -- more more the probably into small into and opportunity, a the more entrée is but opportunity. skilled huge is be medical, not more

Unidentified Analyst

kind should foray? that isn’t it’s dipping we announcement your like the of -- last see medical field? And the maybe in to this we’re toe So, into going

Rick Hermanns

different significantly saying not a is there’s on It’s there’s anything line. than that’s lot person -- now. working And a of assembly truly Yes. that and credentialing, an we -- medical

make job we a that so, do want And sure to we good with it.

I’m that that, experience said, XX it a why get I of part company much industry bought or company are we systems. That’s will reason than that’s is within a for experience contracted help that us that buy we more to the buying of -- Now, sorry, develop it. being XX-year-old with said, to years like our

Operator

[Operator Instructions] the any currently in time. field not participants have do Q&A We at this

Rick Hermanns

I’d we good to then And have joined thank quarter us Well, seeing everybody a again, what look forward we like right. And you to joining who and the for thank thank fourth to you, us. day. All brings.

HireQuest (HQI) 11 Nov 212021 Q3 Earnings call transcript