HireQuest(US:HQI)2019-04-10 16:56Financial Data and Key Metrics Changes - Revenue in Q4 2018 was $24.4 million, a slight decrease of 0.3% from $24.5 million in Q4 2017, attributed to turnover in sales positions due to increased competition in the job market [18] - Gross margin improved to 27.1% in Q4 2018 from 24.5% in Q4 2017, driven by a benefit related to changes in worker's compensation accrual [19] - Net income for Q4 2018 was $1.1 million or $0.23 per diluted share, compared to a net loss of $89,000 or negative $0.02 per diluted share in the prior year [20] - Adjusted EBITDA in Q4 2018 was $1.6 million, up from $687,000 in 2017 [21] - For the full year 2018, revenue was $97.4 million, a decrease of 0.7% from $98.1 million in 2017, with net income of $1 million or $0.20 per diluted share compared to $1.7 million or $0.33 per diluted share in 2017 [22][23] Business Line Data and Key Metrics Changes - Selling, general, and administrative expenses in Q4 2018 were $5.2 million, down from $5.4 million in the same quarter last year, primarily due to lower bad debt and legal fees [20] - The company recorded an expense related to changes in worker's compensation accruals of $555,000 in 2018 compared to $303,000 in 2017 [22] Company Strategy and Development Direction - The company announced a merger with Hire Quest Holdings, which is expected to enhance profitability and create sustainable shareholder value [10][11] - The merger will result in a combined entity with 160 branches across 31 states, expanding geographic footprint and differentiating from competitors [13] - The transition to a franchise model is anticipated to lead to a decline in top-line revenue but an increase in gross and operating margins [15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the merger's potential to drive significant improvements in profitability and shareholder value [11][16] - The company ended 2018 with a strong quarter and a solid balance sheet, entering 2019 with significant momentum [16] Other Important Information - The company plans to file a proxy statement with full details of the merger transaction, which is expected to close in Q2 2019 [25] - A self-tender offer at $6 per share for up to 1.5 million shares is planned, contingent on the merger closing [26] Q&A Session Summary Question: Congratulations on the merger transaction - An analyst congratulated the management on the merger with Hire Quest, acknowledging the lengthy process [29] Question: Inquiry about worker's compensation in the new business model - Management confirmed that worker's compensation insurance will still be provided for temporary workers, with franchises managing safety programs [32] Question: Cost synergies related to the projected EBITDA - Management declined to provide guidance on cost synergies at this time, indicating more information will be available in the proxy statement [34]