HireQuest(US:HQI)2020-11-14 03:59Financial Data and Key Metrics Changes - For Q3 2020, the company reported revenue of $3.4 million, a slight increase of 2.7% compared to $3.3 million in Q3 2019, despite challenging economic conditions [6][10] - Net income from continuing operations was $2.0 million or $0.15 per diluted share, a significant improvement from a net loss of $8.5 million or negative $0.65 per diluted share in Q3 2019 [13] - The company generated nearly $6.7 million in operating cash flow from continuing operations through the first nine months of 2020 [6][13] Business Line Data and Key Metrics Changes - Franchise royalties in Q3 2020 were $3.2 million, up 2.5% from $3.1 million in Q3 2019, attributed to the conversion of company-owned locations to franchises [11] - Service revenue increased by 6.7% to $164,000 compared to $154,000 in the same quarter last year, primarily due to higher fees for optional services [12] Market Data and Key Metrics Changes - System-wide sales for franchisees were down 25% year-over-year, but the decline slowed during Q3 2020, indicating some stabilization in the temporary employment market [5][6] - The company noted that the sectors served by franchisees are stabilizing, but a robust recovery in leisure, hospitality, and construction is not expected in the near term [6] Company Strategy and Development Direction - The company continues to consider acquisition targets, particularly in the current economic environment, which presents opportunities for distressed businesses [7][8] - The company aims to maintain a strong balance sheet and is focused on ensuring any acquisitions can be quickly integrated into the franchise model [8] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism regarding the potential recovery of business as vaccines become available, particularly in sectors like leisure and hospitality [19][31] - The company remains confident that the worst of the pandemic's impact is behind them, with all franchises remaining operational [4][5] Other Important Information - The Board declared and paid a quarterly cash dividend of $0.05 per share, representing a yield of nearly 2.4% [9][14] - Current assets increased to $39.6 million as of September 30, 2020, from $37.0 million at the end of 2019, indicating a healthy balance sheet [15] Q&A Session Summary Question: Potential recovery with vaccine availability - Management indicated that if vaccines are effective, they expect a return to similar revenue levels as in 2019, particularly from sectors currently operating at low levels [19] Question: High operating margins in the quarter - Management attributed the high operating margins to improved performance in workers' compensation and the effects of cost-cutting measures implemented earlier in the year [20] Question: Future SG&A expectations - Management provided a target net margin of 3.75% to 4.25% of system-wide sales, emphasizing the importance of viewing margins in relation to system-wide sales for better stability [27]