HireQuest(US:HQI)2020-08-12 01:52Financial Data and Key Metrics Changes - Total revenue in Q2 2020 was $2.9 million, a decrease of 10.5% from $3.2 million in Q2 2019 [17] - Net income for Q2 2020 was $1.2 million or $0.09 per diluted share, down from $2.3 million or $0.23 per diluted share in Q2 2019 [22] - System-wide sales decreased by 15.2% compared to the same quarter last year, leading to an 11.5% decline in royalty revenue to $2.6 million from $3.0 million [10][18] Business Line Data and Key Metrics Changes - Franchise royalties, which constitute approximately 90% of total revenue, were down 11.5% to $2.6 million [18] - Service revenue increased slightly to $262,000 in Q2 2020 from $257,000 in Q2 2019 [19] - Selling, general, and administrative expenses rose to $1.9 million in Q2 2020 from $871,000 in Q2 2019, primarily due to costs associated with being a public company [20] Market Data and Key Metrics Changes - The company experienced significant challenges in states with higher lockdown measures, such as Washington and Oregon, while the Southeast, particularly Florida, showed stronger performance due to ongoing commercial construction [32][34] - Year-over-year comparisons improved, with current performance off by 26% to 29% from the prior year, compared to over 40% at the end of March [62] Company Strategy and Development Direction - The company is focused on identifying M&A candidates to expand market presence and strengthen existing franchisee operations, especially in light of increased acquisition opportunities due to the economic crisis [14] - A disciplined approach to acquisitions is emphasized, with a goal to transition acquired assets to the franchise model quickly [16] Management's Comments on Operating Environment and Future Outlook - Management noted that the business is susceptible to economic fluctuations but is better equipped than competitors to weather these cycles due to a strong balance sheet and no debt [13] - As the economy reopens, the company expects to be well-positioned to provide temporary staffing rapidly, often faster than clients can ramp up permanent staffing [11] Other Important Information - The company generated $4 million of free cash flow from operations during the quarter, demonstrating resilience despite challenges [10] - Current assets as of June 30 were $38.6 million, including cash of $13.7 million, a significant increase from $4.2 million at the end of 2019 [23] Q&A Session Summary Question: Opportunities with cash and stock buyback - Management confirmed the initiation of a stock buyback program and is actively looking for acquisition opportunities, especially as competitors face challenges [28][30] Question: Pockets of strength and weaknesses in economies served - Management identified Washington and Oregon as struggling areas, while the Southeast, particularly Florida, is performing well due to strong commercial construction [32][34] Question: Cash usage and accounts receivable trends - Management indicated that accounts receivable typically increases seasonally, and cash may decline as AR rises, but profitability remains strong [46] Question: Business trends and performance recovery - Management noted improvements in business trends since March, with year-over-year comparisons showing a decline of 26% to 29% [62]