HireQuest, Inc.

Good afternoon, ladies and gentlemen, and welcome to the HireQuest, Inc. fourth quarter and year-end 2021 earnings call. At this time, all participants have been placed on a listen-only mode, and we will open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Jen Belladeau. The floor is yours.

Thanks, Operator. I would like to welcome everybody to the call. Hosting the call today are HireQuest CEO Rick Herman and CFO David S. Burnett. I would like to take a moment to read the State Harbor Statements. This conference call contains forward-looking statements as defined within Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements in terms such as anticipate, expect, intend, may, will, should, or other comparable terms involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Those statements include statements regarding the intent, belief, or current expectations of higher requests and members of its management, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those described in higher requests, periodic reports filed with the SEC, and that actual results may differ materially from those contemplated by such forward-looking statements. Except as required by federal securities law, HigherQuest undertakes no obligation to update or revise forward-looking statements to reflect changed conditions. I would now like to turn the call over to the CEO of HigherQuest, Rick Herman. Go ahead, Rick.

First, I'd like to thank everyone for joining us for today's call, especially our shareholders. We appreciate your continued support and your continued belief in the HigherQuest model. To begin, I will provide financial and strategic highlights for the full year, and then David will share details on our fourth quarter results. In Q4, we continued the momentum that we saw in Q3 and exceeded Q4 2019 pre-pandemic comparable revenues while simultaneously generating strong margins and profitability across the board. Franchise royalties grew 88% and total revenue 99% in Q4, with net income increasing 62% to $2.2 million, or $0.16 per diluted share. For the full year, franchise royalties grew 67% and total revenue grew 64%, with net income increasing 121%, reaching $11.8 million, or $0.87 per diluted share. Adjusted EBITDA for the full year was up 54% to $14,700,000. Our fourth quarter results included annual comp, I'm sorry, our Q4 results included annual incentive compensation, which we have historically recognized in Q1. This change in accounting methodology results in two years worth of incentive compensation running through our P&L in 2021. This strong growth was both organic and acquisition driven. organic franchise royalties growth in Q4 and the full year was 47% and 30% respectively. During the year, we opened 14 new offices, a net increase of 13 new offices, up from five new offices in 2020 with a net decrease of eight offices in 2020. Our franchisees are incentivized to open new offices given the attractive economics that our model provides them and the fact we support them with working capital financing, technology, and back office support, amongst other things. Moreover, we support organic growth by helping our existing franchisees with part of the costs to open in new markets. We are unaware of any other franchisor that does such a thing. In addition to new offices, our organic growth was positively impacted by improved sales at the existing offices as they benefited from the pandemic subsiding. We also completed four acquisitions during the year, expanding our market verticals and enhancing our proprietary technology platform. A defining characteristic of 2021 was the strategic transformation of our end markets from almost entirely on-demand light industrial to a healthy mix of light industrial and commercial staffing opportunities. The Link and Snelling acquisitions early in the year provided immediate scale to our commercial vertical. Our success in quickly integrating both acquisitions is due in large part to our differentiated franchise model, as well as a testament to our operations team and systems. The franchise model is also an important factor in the continued performance of these two businesses. By maintaining local ownership through new and existing franchisees, customer relationships remain intact post-acquisition, enabling our franchisees to better retain pre-transaction revenues. For HireQuest, the success of an acquisition isn't predicated on achieving certain levels of cost synergies through consolidating operations and reducing the expenses of the target, as is often the case with a company-owned model. As a franchisor, we can service new franchisees with minimal increases to our expense structure providing predictable and repeatable operating leverage as we continue to layer on new organic and acquired business. In Q4, we acquired Dental Power Staffing, which gives us access to the dental market. This acquisition is unique in that it will remain a company-owned store in the near term, but we are utilizing the experience operating this business unit to build out a franchise offering for the dental market. Finally, in Q4, we closed Recruit Media, a next-gen SAS recruitment platform that streamlines workforce communications. This acquisition allows our franchisees to better serve their customers, and the technology we acquired basically leapfrogged a lot of steps that we had planned in our internal technology roadmap. This momentum has kept up as we have entered into 2022. We have made three strategic acquisitions so far this year, which combined generated over $35 million in sales in 2021. Similar to the acquisitions during 2021, we continue to enhance our geographic footprint and grow in tangential staffing verticals. DM Dickinson adds three new Snelling offices in West Texas and New Mexico. DM Dickinson historically provided a reasonably significant amount of medical staffing from which we intend to build. The Dubin Group and Dubin Workforce Solutions bring us to Philadelphia and provide executive placement, professional staffing services, and commercial staffing services, respectively. And Northbound Executive Search adds an office in New York City and provides executive placement and short-term consultant services for blue-chip clients in the financial services industry. With the exception of the Dubin Group, each of these acquisitions have already been converted to franchisees. The transaction costs related to these acquisitions and the costs related to their subsequent conversion to franchises will be reflected in Q1. So as you can see, we've been quite busy on the acquisition front. As I mentioned earlier, a key and differentiated aspect of our asset-light franchise model is that we are able to integrate acquired businesses quickly and with comparatively less operational effort. Because of this, we are able to remain active and opportunistic on the M&A side of things. So there are a lot of great things going on in the business. Our model is truly unique in the sector, and the fourth quarter highlighted the progress we are making scaling this business and driving increased profitability for our shareholders. With that, I'll pass you along to our new CFO, David S. Burnett, for a deeper dive into the results. David joined us in December and brings over 30 years of diverse financial experience to HireQuest. most recently with Ivy Asset Group, and before that with BKF Capital Group. David has quickly become an important member of our senior management as we grow the business, and it is great to have him aboard. David?