HireQuest, Inc.

words such as may, could, would, will, should, believe, expect, anticipate, and similar expressions constitute forward-looking statements. These statements involve risks and uncertainties regarding our operations and our future results that could cause higher question results to differ materially from management's current expectations. We encourage you to review the Safe Harbor Statement and risk factors contained in the company's earnings release and its files to the SEC, including without limitation the most recent annual report on Form 10-K and other periodic reports, which identifies specific risk factors that may also cause actual results or events to differ materially from those described in the forward-looking statements. Copies of the company's most recent reports on Form 10-K and 10-Q may be obtained on the company's website at higherquest.com or the SEC's website at sec.gov. The company does not undertake to publicly update or revise any forward-looking statements after the call or date of this call. I'd also like to remind everyone that this call will be available for replay through March 25th. A link to the website replay of the call was also provided in the earnings release and is available on the company's website at HireQuest.com. I'd like now to turn the call over to HireQuest CEO, Rick Hermans. Rick?

Thank you for joining us. This has certainly been an eventful period for HireQuest. Over the last 120 days, we have taken advantage of our balance sheet and our profitable business model to make two highly strategic and accretive acquisitions during what continues to be a challenging period for our industry. The result of these two acquisitions is that we have additional revenue streams and a stronger national presence. We have augmented our on-demand staffing model, provided through HireQuest Direct franchises nationwide, by adding traditional commercial staffing, which will be sold by franchisees of the well-respected 70-year-old Snelling staffing name. These two models are complementary, and they deliver several benefits for us, including, one, first, They increase our national scale, making it easier to sell to national accounts and making our various trade names more recognizable. Second, adding commercial or weekly pay staffing models to our existing on-demand staffing operations significantly diversifies our approach. Third, we were able to meaningfully grow our system-wide sales at attractive valuations, taking advantage of the inherent leverage in our business model. As it relates to Snelling, we acquired a 70-year-old brand name that is well regarded throughout the industry. Finally, they enable us to efficiently leverage our corporate resources and our workers' compensation efforts, creating incremental profitability. Combined, our system-wide sales should exceed $340 million, even without a return to pre-COVID system-wide sales levels. In addition, we have licensed our trademarks for 10 offices in California, which should produce at least another $20 million in system-wide sales. HireQuest was built on a risk-mitigated business model, positioning us to deliver consistent profits even in challenging environments. Indeed, this was as challenging an environment for the on-demand staffing sector as we are likely to see in our lifetimes. with the cancellation of sporting events, concerts, auto auctions, and many other events which provide significant volume for our franchisees. Nevertheless, we remain profitable, and while it has been a difficult time for many of our franchisees, most of them have performed admirably and are well positioned to come out on the other side stronger for the challenge. Similarly, we took steps to de-risk these two transactions. We expect to further reduce any risk involved in these acquisitions in the future. First, we acquired Snelling Staffing, purchasing 47 locations, which generated approximately $87 million of system-wide sales in 2020. We determined that it was in our best strategic interest to sell certain Snelling locations to third parties and have done so. As mentioned before, four of these offices were transitioned to a third party in California who will license the Snelling trademark and pay us a royalty. Second, we have closed the acquisition of Link Staffing, acquiring 35 locations in nine states, adding incremental $57 million in system-wide sales. In line with our California strategy, we transferred the franchise agreements of six of these offices to be operated pursuant to the trademark license agreement. We expect these locations to convert to the Snelling name as it is well known in the industry. Financially, our royalty revenue reflects the challenges related to the pandemic. The temporary employment market began to find its footing following the bottoming out that we experienced over the spring and summer months. That we were able to navigate through the shutdowns and construction delays and the other effects of the pandemic speak to our franchisees resilience and professionalism. The staffing industry is subject to economic and business cycle risk, even under the best of conditions. Our franchise business model was designed with this in mind to reduce quarter to quarter volatility and insulate us from extreme swings in economic activity. Over the course of 2020, we demonstrated the value of our approach and remained profitable on double digit declines in system-wide sales and revenues. Our franchisees rose to the serious challenge of adjusting staffing levels and expenses to align with the current economic conditions and a steep decline in system-wide sales. Looking ahead, we are encouraged by the increasing availability of vaccines and what appears to be a moderation in the number of COVID-19 cases over the last several weeks. As a reminder, though, as the economy as a whole shows signs of recovery, there are certain sectors like leisure and hospitality where we have exposure that will most likely be later to recover, which highlights the significance of our recent acquisitions. Going forward, we will continue to evaluate additional strategic transactions, screening for fit within our existing business structure and solid economics that contribute to our financial results in a positive and meaningful way. Deploying a disciplined approach to M&A, we are focused on opportunities that provide an entree into new and attractive geographies, strengthen the presence of our existing franchisees, provide access to targeted national accounts, or place us in industries with similar employment dynamics. Any deals we accept will need to demonstrate an ability to be absorbed into our franchise model quickly and provide a positive financial contribution in a short amount of time. We are not interested in chasing scale or growth that does not fit within our existing profile. For the year, we delivered more than $5 million of net income, or 39 cents per diluted share, despite the nearly 13% in system-wide sales and significant reserves placed on a notes receivable. Importantly, we generated positive cash flow of more than $9 million, adding to our cash reserves and providing us with the resources and flexibility to selectively pursue the two strategic transactions I just discussed. Subsequent to these transactions, our balance sheet remains solid, and we expect again to be debt-free following the integration of the 80 new locations in a relatively short time. Disciplined and responsible capital allocation remains a critical cornerstone to our strategic framework and the overall health of the company. Simultaneously, we are allocating a portion of our cash flow to our shareholders in the form of regular quarterly cash dividends. Beginning in the third quarter of 2020, we declared a cash dividend of five cents per common share, which was followed by additional dividends at the same rate in December and March. We intend to continue to pay this dividend on a quarterly basis based on our business results and financial position at the discretion of the board. Our commitment to regular cash dividends underscores our confidence in our business model and our franchisees and the quality of the services they provide. Let me turn the call over now to Corey to discuss the financial results further. Corey?

Thank you, Rick, and good afternoon, everyone. Thank you for joining us. Total revenue in 2020 was $13.8 million, compared to $15.9 million in 2019, a decrease of 13%, and was primarily due to the economic shutdown caused by COVID-19. Total revenue consists of two components, franchise royalties, which make up roughly 90% of total revenue, and service revenue. Franchise royalties in 2020 were $12.8 million, compared to $14.7 million in 2019, a decrease of 12.8%. Service revenue, which is generated from interest charged to our franchisees on overdue accounts receivable and fees for various optional services, was $1 million compared to $1.2 million in 2019, a decrease of 15.5%, which was largely due to a decrease in miscellaneous fees charged for optional services. Selling general and administrative expenses in 2020 were down 33.7%, to $8.7 million compared to $13.1 million in 2019. This $4.4 million decrease was primarily due to $5.1 million in merger-related expenses that were incurred in 2019 but not present in 2020. This decrease was partially offset by an increase in stock-based compensation and a reserve placed on our notes receivable that were issued to finance the sale of the offices acquired in the 2019 merger. This reserve was directly related to the negative impact COVID-19 has had on the economy, the financial condition of our borrowers, and the value of the underlying collateral. Net income in 2020 was $5.4 million, or 39 cents per diluted share, compared to a net loss from continuing operations of $505,000 or negative five cents per diluted share in 2019. Taking a look at the fourth quarter. Total revenue in the fourth quarter of 2020 was $3.4 million, compared to $5.9 million in the fourth quarter of 2019, a decrease of 42%, again related to the economic shutdown caused by COVID-19. Franchise royalties in the fourth quarter of 2020 were $3.2 million, compared to $5.4 million in the fourth quarter of 2019, a decrease of 40.2%. Service revenue was $176,000 compared to $476,000 in the fourth quarter of 2019, a decrease of 63%. This decrease is largely due to a decrease in miscellaneous fees charged for optional services. Selling general and administrative expenses in the fourth quarter of 2020 were down 31.5% to $2.2 million, compared to $3.1 million in the fourth quarter of 2019. This $973,000 decrease was primarily due to a decrease in payroll costs and lower stock-based compensation. Net income was $1.4 million, or 10 cents per diluted share in the fourth quarter of 2020, compared to $3.5 million or 26 cents per diluted share in the fourth quarter of 2019. The fourth quarter of 2019 included a loss from continuing operations of $315,000 or a negative two cents per diluted share. Beginning in the third quarter, our board approved and the company paid its first quarterly dividend of five cents per common share to shareholders of record as of September 1, 2020. Subsequently, the Board approved a 5-cent cash dividend for payment in December and again in March of 2021. In 2020, we returned approximately $1.4 million in cash to our shareholders in the form of dividends. We expect to continue this practice and pay a cash dividend each quarter at the Board's discretion. Moving on to the balance sheet. We have grown our current assets to $39 million at December 31st, 2020 from $37 million at December 31st, 2019. Current assets at December 31st, 2020 included $13.7 million of cash and $21.3 million of accounts receivable, while current assets at December 31st, 2019 included $4.2 million of cash and $28.2 million of accounts receivable. Property and equipment increased by $1.3 million since the end of 2019 to $3.2 million at the end of 2020 as we continue the construction on a new building adjacent to our corporate headquarters, which will give us additional room for growth. We also began an IT project updating our front office software in 2020 that resulted in an intangible asset of $343,000 at December 31st, 2020. Our notes receivable balance, net of reserve, at December 31st, 2020, was $5.9 million. During 2020, we collected approximately $2.1 million in cash from these notes. And with that, I will turn the call back over to the operator for Q&A.