HireQuest reports financial results for the second quarter of 2020

Company Generates $4.0 Million in Cash from Operations in Q2; $9.5 Million Year-To-Date

GOOSE CREEK, SC – HireQuest, Inc. (Nasdaq: HQI), a national provider of back-office and operational support for franchised operators of on-demand and temporary staffing service providers, reported financial results for the second quarter ended June 30, 2020.

Second Quarter 2020 Financial Summary

• Franchise royalties of $2.6 million compared to $3.0 million in the prior year period, a decrease of 11.5%. Approximately $570,000 was related to branches acquired in the merger and subsequently converted to our franchise model.
• Service revenue, including interest paid on aging accounts receivable, of $262,000 compared to $257,000 in the prior year period, an increase of 1.7%.
• Total revenue of $2.9 million compared to $3.2 million in the prior year period, a decrease of 10.4%.
• Net Income, inclusive of a $151,000 incremental reserve on notes receivable taken in light of the COVID-19 situation, as well as increased public company expenses of $293,000 and increased computer related service and consulting costs of $116,000, was $1.2 million, or $0.09 per diluted share, compared to $2.3 million, or $0.23 per diluted share, in the year-ago period.

System-wide sales¹ (a non-GAAP operating performance metric) for the second quarter 2020 of $44.1 million compared to $52.0 million for the quarter ended June 30, 2019.

“Our franchise-based business model is designed to mitigate risk while maximizing profitability and sustainability even in challenging times, and the benefits of this model were clearly on display in the second quarter,” commented Rick Hermanns, HireQuest’s President and Chief Executive Officer. “We continue to generate free cash flow with another profitable quarter. I commend our franchise operators for their quick and decisive actions to reduce costs, preserve customer relationships and navigate these unprecedented challenges. To be sure, our franchisees are not immune to the significant impact from the COVID-19 pandemic. As a result of the economic shutdowns, system-wide sales have decreased by 15.2%, which in turn have diminished royalty revenues for HireQuest. As the economy continues to improve, organizations will likely turn to temporary staffing to address short-term challenges before hiring full-time employees, and our franchisees will be ready to meet that demand.”

Mr. Hermanns continued, “At the beginning of this situation, we initiated a wide-range of cost cutting initiatives, and unless the economy materially worsens, we do not see the need for further cuts. Our strong balance sheet and consistent profitability creates additional M&A opportunities, and we are evaluating potential tuck-in acquisitions, that will add to our national footprint, at attractive valuations.”

About HireQuest

HireQuest, Inc. is a nationwide franchisor that provides on demand labor solutions primarily in the light industrial and blue-collar segments of the staffing industry for HireQuest Direct and HireQuest franchised offices across the United States. Through our national network of approximately 136 franchisee-owned offices in 30 states and the District of Columbia, HireQuest provides employment for approximately 80,000 individuals annually that work for thousands of customers in numerous industries including construction, light industrial, manufacturing, hospitality, and event services. For more information, visit www.hirequest.com.