Q4 2021 Hirequest Inc Earnings Call
Okay.
Good afternoon, ladies and gentlemen, and welcome to the higher Quest, Inc. Fourth quarter and year end 2021 earnings call. At this time, all participants have been placed on 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 <unk> the floor is yours.
Thank you operator, I would like to welcome everybody to the call hosting the call today are higher question, Rick Harman and CFO David S. Burnett.
Like to take a moment to read the Safe Harbor statement. This conference call contains forward looking statements as defined in section 27, a of the Securities Act of 1933 as amended and section 21 E 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 question 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.
Boucher involve risks and uncertainties, including those described in higher quests periodic reports filed with the SEC and actual results may differ materially from those contemplated by such forward looking statements, except as required by federal Securities Law higher quests undertakes no obligation to update or revise forward looking statements to reflect changed conditions I would now like to turn up the call ever.
Do you see a higher class requirements 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.
Our continued belief in the higher cost model.
Again, 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 with net income increasing 62% to $2 2 million or 16 cents 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 <unk> 87 cents per diluted share adjusted EBITDA for the full year was up 54% to $14 million 700.
Thousands.
Our fourth quarter results.
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 the.
This strong growth was both organic and acquisition driven.
Organic franchise royalty growth 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.
Yes.
Up from five in a net decrease 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.
<unk> and back office support amongst other things. Moreover, we support organic growth by helping our existing franchisees with part of the cost to open in new markets. We are unaware of any other franchise or that does such a thing and.
In addition to new offices, our organic growth was positively impacted by improved sales at the existing offices as they benefited from the pandemic subsided.
We also completed four acquisitions during the year, expanding our market verticals in 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.
Linked and smelling 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 COO.
<unk> 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 preprandially pre transaction revenues.
For higher class 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 franchise or 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 nextgen SaaS 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 Tangier.
<unk> staffing verticals D. M. Dickerson adds three new snelling offices in West, Texas, and New Mexico.
Dickerson 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 staff staffing services, respectively, and North bound executive search ads in office in New York City and provides executive placement in 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 cost 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.
So a lot of great things. So there are a lot of great things going on in the business. Our model is truly unique in the sector.
In 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 higher quest. Most recently with IV asset group and before that with BK EF 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.
Thank you Rick and good afternoon, everybody. Thank you for joining us today.
We had another solid quarter total revenue for the fourth quarter of 2021 was $6 8 million compared to $3 4 million for the same quarter last year, an increase of 98, 8%.
Our total revenue is comprised of three components franchise royalties, which is our primary source of revenue and typically accounts for over 90% of our total revenue.
Service revenue, which is generated from interest charge to our franchisees on overdue accounts receivable and fees for various operation.
<unk> services.
And third as staffing revenue from owned locations.
Franchise royalties in service revenue are derived from our franchise base from time to time, we may have one location revenue as a result of acquired businesses that are not converted two franchises are held for sale.
In 2021, the only home location is the dental staffing location that we acquired late in the year.
Franchise royalties for the quarter were $6 1 million compared to $3 2 million last year, an increase of 87, 9%.
While the addition of the acquired Snelling and link locations contributed to this growth we experienced organic growth of 47, 1% during the fourth quarter.
System wide sales for the quarter were $106 8 million compared to $54 8 million for the same period in 2020, an increase of 95%.
System wide sales include sales offices, whether owned and operated by us or our franchisees.
During the quarter our system wide revenue suppressed pre.
Pre pandemic levels, even when the effects of the Sterling and like acquisitions are removed.
Selling general and administrative expenses for the quarter were $4 4 million compared to $2 2 million last year.
The increase in SG&A was primarily driven by increased incentive compensation expense, we have historically recognized discretionary bonuses in Q1 of the following year.
However, as Rick noted, we changed our methodology, resulting in an acceleration of the expense in Q4.
Core operating expenses remained relatively flat, reflecting the leverage in our business model with an incremental revenue.
The bottom line is we have not added considerable corporate overhead to support our rapid growth.
Net income for the quarter was $2 2 million or <unk> 16 per diluted share compared to net income of $1 4 million or <unk> 10 per diluted share in the fourth quarter last year.
Adjusted EBITDA in the fourth quarter of 2021 was $3 5 million compared to $1 9 million in the fourth quarter of last year.
We believe adjusted EBITDA is a relevant metric for us due to the size of noncash operating expenses running through our P&L.
A detailed reconciliation of adjusted EBITDA to net income is provided in our 10-K.
Moving on now to the balance sheet and cash flow. Our current assets at December 31, 2021, or $42 million compared to 39 million at December 31 2020.
Current assets at December 31 included $1 3 million of cash and $38 2 million of accounts receivable. While current assets at December 31, 2020 included $13 7 million of cash and $21 3 million of accounts receivable.
The lower cash position was primarily due to acquisitions made during the year.
We often provide financing to our franchisees for expansion our initial capital needs.
Our notes receivable balance net of reserves as of December 31, 2021.
It was $4 2 million compared to $8 1 million at December 31, 2020.
During the year, we sold $5 3 million of notes receivable.
Without recourse.
We currently have approximately $17 million in availability under our credit facility, even after the three acquisitions completed in the first quarter of 2022.
We believe that this facility, which we finalized in the second quarter provides us with the flexibility and room for both organic growth and the capacity to capitalize on potential future acquisitions.
Beginning in the third quarter of 2020, our board approved and the company paid its first quarterly dividend of <unk> <unk> per common share.
Since then we have paid a regular quarterly dividend and in June of 2021, Our board approved an increase from five to six per common share.
We paid a <unk> <unk> per common share dividend on March 15th today to shareholders of record.
As of March one.
And we expect to continue to pay a dividend for each subsequent quarter in 2022 subject to the board's discretion.
With that I will turn the call back over to Rick for closing comments.
Thanks, David.
Hi request had a remarkable and transformational year I am proud of our team and our many accomplishments as we execute our strategy and reinforced our conviction in higher quests ability to provide a truly differentiated staffing solution to our customers and to create value for our employees franchisees and shareholders alike.
Our journey is just beginning I appreciate your support and welcome you to come along as there's never been a better time to be a part of higher quest. Thank you for joining us. This afternoon. We appreciate your interest in our company now I'll open the line to questions. Thank you.
Thank you ladies and gentlemen, the floor is open for questions. If you have any questions or comments. Please indicate so by pressing star one on your Touchtone phone pressing star two will remove you from the queue should your question be answered and lastly, what posing your question. Please pickup your handset listening on speaker phone to provide optimum sound quality. Please hold while we poll for questions once.
Again, Thats Star one if you have a question or comment.
The first question is coming from Mike Baker from D. A Davidson your line is live.
Great Hi, Thanks, guys.
Appreciate the.
Commentary and a great quarter I just wanted to ask now that we're back above pre pandemic levels.
How do you think about how should we think about 2022 maybe maybe a preview on how you see this year.
Playing out in terms of.
Some of your franchisees opening new offices or growth in existing offices.
What kind of growth you might get from the new acquisitions.
Then also talk about you know if we should expect any kind of increases in on your expense line.
Hey, Mike. Thanks for the question I would say a couple of a couple of points one as far as COO.
Growth for this year as far as revenues I would expect a fairly significant increase in revenues, if only because you're comparing 2021 revenues to which we're still at pandemic influenced amounts, particularly in the first three quarters to a full year with <unk>.
Zoom Mobley.
Without significant pandemic influences, so I do need to hedge myself on that is obviously if another variant comes out that slows things down that would change that but.
As you can tell our revenues were far we were typically running 15, 20% below pre pandemic levels for the first half of the year, we caught up in the third quarter and then surpass it in the fourth and so it would be.
It would be my expectation, there's no reason for us to drop below.
Pandemic pre pandemic levels, and so that bodes well for our overall for our overall revenues for 2022.
As far as openings obviously the.
Economy is.
There's a lot of opportunities out there.
With again, the subsiding of the pandemic and so.
Our franchisees were rightfully.
Cautious to open new offices in.
2020 of course.
But even in 2021, there was still sort of a recovery from that and so I would hope that we will see even more openings this year.
As the pandemic goes further behind us.
And you know already a number a few offices have been opened where are planned to be opened so that's a great thing.
Got it got it Okay and then a.
So more of a short term question, but just wanted to ask you about you know you have a great pulse on the economy, just you know seeing the labor market and in a number of different verticals.
What a lot of stuff going on here in the calendar first quarter between cycling stimulus and the situation in eastern Europe and in rising gas prices et cetera, but what's your general view on on the economy right. Now are on you know obviously the labor market is very tight how does that impact you guys. Just you sort of pulse.
On the economy would be would be helpful. Thanks.
Sure. So one of the things that is kind of funny and even in preparing for this call went in and I just looked at for example, the penetration in Western Europe of temporary staffing as a percentage of total employment in Western Europe .
And it typically is around 10%, whereas in the United States, It's somewhere in the two to two 5% range and so I think what we're experiencing here is.
With the way the economy is I think that companies.
Are becoming more and more.
Tuned to keeping their labor costs down number one because of the shortage, but also just as as wages have risen and really this was before the pandemic wages were rising in real terms strongly in 2019 already and.
And as they rise obviously companies need to look to.
You know in order to keep their margins in line they need to look for ways to keep their cost in line and so I believe and I believe it's borne out by our numbers is that.
You know that there's going to be.
Later in greater demand for temporary staffing and even just the absolute lack of.
Workers is going to increase that demand for temporary staffing as well, which to me goes back to.
Beyond what's going on in Ukraine beyond what is going on with the sort of post pandemic.
Sort of supply chain issues.
The reality is there's a large demographic shift in this country as well and.
As the Labor force.
Literally begins to shrink is going to create a keener and keene or competition for workers and more and more of a requirement to be smart with your workforce and I believe that as a temporary staffing company.
And our franchisees are in a great position to capitalize on those demographic shifts.
Makes perfect sense.
I'll turn it over to somebody else.
Okay. The next question is coming from Kevin Steinke from Barrington, Kevin Your line is live.
Hey, good afternoon.
Hey, Kevin again.
I just wanted to start out by just getting at that small housekeeping numbers item out of the way here just.
Are you able to.
Quantify the.
The impact of that shift in the incentive compensation that you talked about into the fourth quarter from the first quarter.
Yes, so that <unk>.
Moving the bone of moving the sort of incentive compensation from Q1 2022, as we had for the last probably 18 years into Q4 cost us on pretax dollars about $2 million $6000 or a net effect of $1 million $740000. So it was a significant.
It was a significant impact.
Yeah, Okay. No. That's that's very helpful. Yeah, I mean in.
No excluding that it really shows kind of the operating leverage you're you're able to drive their but okay. So good.
I wanted to ask too about three.
The three acquisitions that you did in January in those.
You know came together in pretty rapid succession too. So maybe just any more color on how those came together you know how long you were working on those and any more general comments on the M&A pipeline overall.
Sure.
I think we started probably working.
We took them from each one was a little bit different than the Dickason. One went on for a bit longer of a period of time simply because they had other people looking at it. So it was a that was a slower process not necessarily because of us or because of them, but but simply because of sort of the desires of the seller, but as a general rule.
Once.
Both sides are determined to want to buy and want to sell it really only takes us typically from LOI to close it usually doesn't take us more than two to three months.
So really these only started cooking probably like in November December .
And we.
We were able to close them in pretty rapid succession again, though that goes back to our franchise model because when when the people on the ground generally are the exact same on.
Day, one post close.
It really simplifies what we need to do and.
So we're really in a great position to do that as far as the pipeline.
We're always.
Beating the bushes and so the pipeline frankly could be as big as we wanted it to be.
Except it except when I say that it really won't be because we're pretty choosy on.
On the parameters of which will which will actually go towards an acquisition in other words, we're not going to just we're not growing just and I've said this a bunch of times, we're not growing just for the sake of saying that.
$400, an hour at 500 million hours $600 million in system wide sales, that's not we have no.
We have no desire to just have that top line it needs to always be an acquisition that's going to be accretive for our shareholders. It's all it's all we're ever going to do so that obviously requires more filtering of deals, but there's plenty of them again, there are plenty of them that are out there in part because of the pandemic.
It kind of slowed it down obviously nobody wanted to sell in 2020, unless they absolutely have to because their you know their business.
Declines so significantly and so nobody wanted to but now that where we are.
And you see it throughout the staffing industry I know you follow some other staffing companies I mean, most companies have now.
Sort of started to exceed.
Pre pandemic sales levels, and so I would expect us to be able to see even more deals now because people who had been putting off retirement are now ready to sell.
Alright, Yeah, that's helpful commentary and I wanted to ask too about driver Quest, which you launched the summer of 2021 and just adoption of that offering among your franchisee base and.
Any.
Just commentary on how that's progressing and helping to drive growth.
The it's a good it's a fair question.
It's not been a large driver of growth at all the the reality is.
We for 20 years would get requests for drivers and we wouldnt take it because of <unk>.
The insurance risk.
Risks are significant in trucking and so we put together obviously.
Special program in order for us to do it.
And.
It has not you know while a fairly substantial amount of our franchisees have.
Set themselves up so that theyre able to offer drivers.
I wouldn't say that a lot of them in fact very few have really.
Devoted a lot of time to developing it and to be honest with you part of that.
Is logical and rational simply because with the shortage of.
I'll call them, just the vanilla workers.
All of our offices are you know most of our offices are still.
Have more jobs than they have people to fill them and so to go into trucking, which isn't even tighter market.
It has sort of a bit of.
Masochism attached to doing that so I do believe that in the long run it will be a good market for us.
And it is helpful. It isn't it isn't nothing but it isn't really what's driving our growth at all we are getting significant growth.
In fact in.
We were running.
I think it was in the commentary, but like 47% ahead of the fourth quarter of.
2020.
That's a really that's a that's a really big number and that's excluding.
That's that's just comparable sales so I guess, what I'm trying to say is that there's a lot of already business to be had without reaching into.
You know without reaching into trucking.
But I do believe it will be adopted as time goes on in the.
He is sort of the market for workers reaches more of an equilibrium.
No yeah that makes sense I mean, it's obviously still very early on with that offering and it sounds like adoption has been pretty good by the franchisees and it is clearly up.
Strong long term play for you so that makes total sense.
You know just as we're hopefully.
Getting micron and Covid hopefully in the rearview mirror here, you know knock on wood I mean.
Did you detect any noticeable impact.
In the fourth quarter early 2022 our numbers from the surge in Covid cases, I mean, clearly you're still exceeded pre pandemic levels, but I was wondering if you know do you think that in pigs impacted demand at all.
You know, it's a good question and I'm not I'm not really sure of the answer what I will tell you is that.
Our.
Demand in let's say from Thanksgiving until mid January sort of during the peak of omicron.
Was tremendous we had really really strong demand throughout that period now you could take that one of two ways. One is it's just a recovery from.
Just from the pandemic you can just look at it is this just normal or you could take the if you could take the position that companies were short of workers because of Ami Kron and they were back filling their warehouses and factories with.
With temporary with temporary people, but I tend to think it's probably the former simply because our orders if we didn't get.
Like special orders from companies that we had never heard of before it was just us being able to fill more and more of the existing demand. So it could be either answer but I do I think it was the former not the you know that.
It's just it's just a recovery from pre pandemic levels, but there, but the numbers were really strong.
Right Okay.
Just lastly, you know could you touch on labor shortages have you seen any easing there I know you said, you're starting to see a bit of easing you know towards the end of the third quarter, but I mean, maybe I'm a crowded.
Things tighten up a little bit or just you know how how cigna.
Significantly our labor shortages impacting your ability to fill demand I guess.
Aye.
Yes, and as I said in our last earnings call back in I guess it had been in the middle of November .
The ending of the $300 supplemental unemployment benefits really really helped us and our business really our fill rates really started taking off in the second half of September .
That said we're still.
We're still short of workers, if if we had.
Some places are.
The shortage is worse than others.
But it's still really tight it might be marginally better than what it was let's say in October or November , but I would say generally we're still.
Where we're still really short of workers, especially.
Especially ones that have.
A defined skill.
It's gotten a little bit better for.
I would say, let's say a general way.
Our house worker or a general construction worker, but when you start talking an electrician or a forklift driver.
It it's it's still every bit as tight.
As it was back in let's say October .
Still better than July but.
Not I don't see it I don't see it being any better than it was let's say in October or November .
Okay. That's good color and then nonetheless, youre still able to put up really strong growth in the quarter. Despite that so yeah. Congratulations on the results. Thanks, That's all I had for now thank you.
<unk>.
Once again, if there are any remaining questions or comments. Please indicate so by pressing star one on your Touchtone phone. The next question is coming from Aaron that'll sit from mindset capital. Your line is live.
Hi, Rick Erin.
Hey, I wanted to look forward to this year and one.
Model you acquired.
You know.
Companies last year, you've acquired companies this year when it kind of.
Wanted to run by just kind of a model assuming theres no news.
Chris you see pandemic or we continue the trend, we're seeing I'm kind of coming up with system wide revenue.
Around $440 million and when I use the model that you shared before that you generally get about 4% net.
I'm coming up with you know.
EPS targets that are.
It comes up with about $1 30 in earnings.
Is there a I know you're anyway I was just curious am I thinking about things the right way in terms of system wide revenue was there anything that would change.
The historic model or how you viewed viewed higher quest.
So let me break apart the.
The two things really that you suggested.
As far as the system wide sales.
<unk> in 2019, if command and higher Quest had been merged for the full year our system wide sales were.
Let's just say $290 million.
The.
Annual sales purchased in the link.
And.
Smelling transactions, where like another $110 million.
So that's $400 million and we just bought.
$35 million worth of sales. So that's 400 exactly with zero growth. So I think that if you're using that number I would sit there and say well yeah that that you know that's that's just math.
Yeah as far as income is concerned.
Realizing our target is three and a half to four and a half and frankly with the amount of amortization that we have.
Three and a half, but that's a lot more.
Is is a lot more realistic.
There's a lot more realistic.
S yard has to amortization I just wanted to confirm that that's because of your acquisitions.
We're an asset light business. So this is one request I wanted to make in the future. Maybe you could also report a cash EPS number that's fully taxed without the amortization because it's really not reflective of your underlying cash flow right.
Well, that's I mean that part is true and so we'll have to sort of look at your request there part of it obviously, we're trying to model that with our with our adjusted EBITDA as well to get some something close to that.
But I would also caution one other thing is is needless to say there will be costs related to converting these offices that we just bought into franchises the cost of doing the deals and converting them to franchises. So I just throw that out there as well I don't I don't want you to think that Hey, Rick Hermanns as forecasts.
Oh for sure because they'll just be one time costs right, yes, absolutely that's right.
But on a normalized basis.
If I just took basically taking 2019 as you said of what higher class a command center that adding in the styling and blank and then your new acquisitions and then using your historic framework, whether its three and a half which would be like $1 14.
Two 4%, which would be $1 30 that and that assumes you know kind of know what other acquisitions.
That.
That's still a good framework.
You hire question.
Yes, I would agree with you.
And then.
I'm I'm I'm curious if.
You know you're you've been looking at new verticals, obviously, <unk> been expanding you've made acquisitions and some of the bigger ones.
Like security Guards and others.
How does the outlook look for kind of <unk>.
Tapping into yet another vertical this year.
I would simply say Theres no.
You know with the three deals already closed.
Well I think my ops team and my finance team, we're getting bored I think it's you know.
[laughter].
So I think it's time, they're probably sitting there right now.
But lee screaming, but I do believe that we will you know there's nothing stopping us. So it's really just comes down to availability of an attractive acquisition target not theres nothing limiting us at this point.
Gotcha and from the last two quarters.
I've gotten a sense.
Always appreciated your straight talk the last two quarters have gotten a sense that Europe .
Coming from your comments that you're becoming a lot more optimistic.
About where higher quest is.
Then the quarters before.
Am I reading too much into that as a long term shareholder or.
I'm just curious if you could.
I'll comment on that.
I'm not I'm not 100% sure I am generally an optimistic person so I'm not generally certain I could you know I'm, saying that I could that I could validate what you're saying there.
I can say is clearly.
Where where there is probably more confidence is that.
And this was something we tried to even bear out in our sort of in our presentation is that.
What's crucial about the fourth quarter that we just experienced.
And by exceeding pre pandemic levels, particularly including command center.
Means that we are we've demonstrated now over let's say a 10 quarter period that we were able to retain the business that we acquired.
And the same is true with snelling and with link.
What that really means from a to me.
Is that.
We've done a really good job retaining what we acquire and the real demon in service company acquisitions.
Is retaining that business right because its service related so when you lose people you lose business.
And with a lot of these acquisitions people go out and then the top salesperson quits, but good managers quit because they don't like the new culture well in our case.
<unk> the old <unk>.
Company management team is the same people who are sticking around.
And.
So if I have more confidence it would be simply because I do believe our.
Model has been validated now over really 10 quarters.
And so in that respect I do I.
I guess, maybe that's come out it's not intentional. It's just I mean, I always believed it was going to happen but of course, it's kind of funny. When you look at the history of what happened with the company.
If we when we did the acquisition or the merger had a bunch of costs. The first two quarters.
And literally.
Finally, it's like Yeah, we got this stuff behind US and then the pandemic hit like literally in the first quarter when we were like.
Ready to hit good things and so it's kind of been a it's kind of been a long journey that way.
And I do feel that we're.
You know we're on.
There's a lot of things could happen oil could go to 150 Bucks a barrel inflation could go to 12% lots of different things that can happen that can match things up but overall again I do feel like our business model has been validated and which means there's no real limit to what we do.
That's great and last question. Thank you for that is on inflation is in a weird way, you're somewhat insulated or might even benefit from inflation that flows through labor cost because youre. Your franchisees are getting a percentage of whatever the prevailing way.
The trade desk, and then you're getting a percentage of the franchise. So in a weird way as labor costs increase.
Higher quest tax along is that the right way to think about it.
That's that's very accurate I would say.
There are a few cases, where maybe we're locked into a sort of a fixed price for the year fixed price you know it might be $18 an hour 17, whatever it is that obviously can create a problem in a rapidly.
And then Ah.
And in an inflationary environment.
However.
We have had far more pricing control than what we've ever had I've been in this business for 31 years, and we never had pricing power right now we have pricing power because.
Not so much because we're just clamoring for it but just simply the worker has the pricing power with it's just simply if somebody comes to US and says we want a janitor for 14 Bucks an hour.
Good luck, you're not going to find them.
And.
So from that perspective, we are very much protected.
And that's a good thing.
Great. Thanks, again, congrats on a great quarter. Thank.
Thank you.
This completes today's Q&A portion of the call I'd like to turn the call back to management for closing remarks.
Well again, thank you everybody for joining us on the call I Hope that you go away with a better understanding of how well.
The fourth quarter really did go for us in that 2021 is really hopefully just a harbinger for the future. Thank you again for your tuning in.
And we look forward to a great 2022, thanks a lot.
Thank you ladies and gentlemen, this does conclude today's conference you may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.