HireQuest, Inc. (NASDAQ:HQI) Q4 2024 Results Conference Call March 27, 2025 4:30 PM ET Company Participants John Nesbett - IMS, Investor Relations Rick Hermanns - Chief Executive Officer Steve Crane - Chief Financial Officer Conference Call Participants Kevin Steinke - Barrington Research Keegan Cox - D.A. Davidson Operator Greetings. Welcome to the HireQuest Inc. Fourth Quarter and Year-End 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will foll ...

HireQuest (HQI) Q4 2024 Earnings Call March 27, 2025 09:33 PM ET Company Participants John Nesbitt - Investor RelationsRick Hermanns - President and Chief Executive OfficerSteve Crane - CFOKevin Steinke - Managing DirectorKeegan Cox - Research Associate Operator Greetings. Welcome to the Hire Quest Inc. Fourth Quarter and Year End twenty twenty four Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. Please note this con ...

Financial Performance - The company's revenue for 2024 was $34.6 million, with system-wide sales reaching $563.6 million, primarily from franchisee-owned offices[27]. - Total revenue declined by 8.7% from $37.9 million in 2023 to $34.6 million in 2024, with income from operations dropping from $10.6 million to $4.4 million[173]. - Franchise royalties for the year ended December 31, 2024 were approximately $32.7 million, down 8.8% from $35.8 million in 2023, primarily due to a decline in total system-wide sales from $605.1 million in 2023 to $563.6 million in 2024[183]. - Service revenue for the year ended December 31, 2024 was approximately $1.9 million, a decrease from $2.1 million in 2023, with interest on overdue accounts decreasing from $850 thousand to $788 thousand[185]. - Net income for the year ended December 31, 2024 was $3.7 million, a decrease of 40.1% from $6.1 million in 2023[178]. - Adjusted EBITDA for the year ended December 31, 2024 was $16.1 million, representing 46.6% of total revenue, compared to $16.5 million or 43.5% in 2023[179]. - Operating expenses for the year ended December 31, 2024 were approximately $30.2 million, an increase of $3.0 million compared to $27.2 million in 2023, driven by a $6.0 million goodwill and intangible asset charge[186]. - The blended effective royalty rate for 2024 was 5.8%, slightly down from 5.9% in 2023, reflecting changes in franchisee performance[183]. - Income tax expense for 2024 was approximately $0.2 million, down from $1.3 million in 2023, with effective tax rates of 5.3% and 17.3% respectively[193]. - System-wide sales decreased by 6.9% to $563.6 million in 2024 from $605.1 million in 2023, primarily due to a decrease in demand in the staffing and recruiting industry[207]. Acquisitions and Expansion - The company completed several acquisitions in 2022, including Temporary Alternatives for $7.0 million, Dubin for $2.5 million, Northbound for $11.4 million, and MRINetwork for $13.3 million[18][19][20][21]. - In 2023, the company acquired TEC Staffing Services for approximately $9.8 million, expanding its presence in Arkansas[22]. - The company also completed the acquisition of Ready Temporary Services for $1.4 million in December 2024[23]. - The company plans to continue evaluating strategic acquisition opportunities to expand its franchisee base and diversify its national footprint[39]. - The company’s growth strategy includes new office development by franchisees, which may face challenges outside of its control[100]. Staffing Operations - Approximately 65,000 temporary employees were employed, and 173 independent contractors were contracted during 2024[27]. - The company operates approximately 425 franchisee-owned offices and one company-owned office across 44 states and 13 countries[27]. - The company focuses on local ownership and direct dispatch staffing solutions, which enhance customer satisfaction and operational efficiency[29]. - The company has established itself as a top permanent placement firm in the U.S. following the MRI acquisition, enhancing its service offerings[24]. - The staffing and recruiting industry in the U.S. generated record annual revenue of approximately $220 billion in 2023, with 85% from temporary and contract employee staffing services[30]. - Seasonal fluctuations affect demand for temporary staffing, with activity peaking in spring and summer[73]. - The company maintains a strong presence in the Southern United States, which mitigates seasonal fluctuations[73]. - The company is vulnerable to seasonal fluctuations, particularly lower demand in winter months, which can significantly impact royalty and service revenue[91]. - The company has experienced shortages of qualified candidates, impacting its ability to meet client needs[90]. Franchisee Relations - The company operates under 169 executed franchise agreements for temporary staffing, charging a royalty fee of 4.5% to 8% of gross temporary labor sales depending on sales volume[50]. - The company has a Franchise Expansion Incentive Program to assist franchisees with startup costs and encourage expansion into new markets[39]. - The Risk Management Incentive Program rewards franchisees for maintaining low workers' compensation loss ratios, promoting workplace safety[39]. - Approximately 15% of franchisees owned multiple offices, with the largest franchisee operating 12 offices[46]. - The company’s financial results are closely tied to the success of its franchisees, and their inability to operate profitably could adversely affect overall performance[112]. - The company has placed a reserve of approximately $773,000 on notes receivable from franchisees due to financial impacts from COVID-19[112]. - As of December 31, 2024, there were 35 "Worlds Franchisees" operating 69 of approximately 417 franchised offices, with significant ownership concentrated among a few individuals[119]. - Approximately one-third of franchisees own multiple offices, indicating potential risks if large ownership groups face financial difficulties[120]. - The company plans to continue opening new franchised offices in existing markets, but this may lead to sales cannibalization affecting existing offices[118]. Financial Position and Risks - The company ended 2024 with assets exceeding liabilities by over $64.8 million, maintaining a strong liquidity position with current assets of $49.2 million[171]. - The company had current assets exceeding current liabilities by approximately $25.1 million as of December 31, 2024, with $2.2 million in cash and $42.3 million in accounts receivable[197]. - The company expects that its current cash balance and future cash generated from operations will be sufficient to meet working capital needs for the next 12 months[199]. - The company recorded a loss on debt extinguishment of approximately $310,000 in 2023 as part of refinancing activities[203]. - The average borrowing rate for the year ended December 31, 2024, was 6.5%, with approximately $33.6 million available under the Senior Credit Facility[205]. - The company has a significant workers' compensation reserve that can be volatile, affecting reported earnings and stock price[95]. - The company faces risks related to franchisees, including financial distress that could lead to reduced royalty payments and operational challenges[112]. - The company relies heavily on workers' compensation insurance, and any unexpected changes in claim trends could negatively affect its financial condition[92]. - A loss of workers' compensation insurance coverage would hinder the company's ability to operate in most markets, potentially increasing costs[93]. - Economic and political conditions, including tariffs and international conflicts, may adversely affect the company's operations and financial results[86][87]. Cybersecurity and Technology - The company has developed proprietary software for operations, including payroll and invoicing, which enhances customer interaction[75]. - The company has developed proprietary software to manage operations, which is crucial for tracking financial performance and customer trends[114]. - The company has invested in off-site backup systems to protect its electronic information systems[75]. - The company has experienced cyber-attacks and unauthorized access attempts, which could materially harm its business if not adequately protected[125]. - The company has not experienced material cybersecurity incidents in the past, but maintains policies and procedures to manage cybersecurity risks[151]. Market Trends - The staffing industry is highly fragmented with no single company dominating, and competition increases as the economy grows[69]. - The company aims to increase brand awareness to drive repeat customers and expand service usage across multiple markets[39]. - The company has a strong concentration of offices in established and emerging regions, enhancing brand recognition and market trend awareness[42].

HireQuest Reports Financial Results for Fourth Quarter and Full Year 2024 GOOSE CREEK, South Carolina – March 27, 2025 – HireQuest, Inc. (Nasdaq: HQI), a national franchisor of direct dispatch, executive search, and commercial staffing services, today reported financial results for the fourth quarter and year ended December 31, 2024. Fourth Quarter 2024 Summary Full Year 2024 Summary System-wide sales for the fourth quarter of 2024 decreased 6.0% to $134.8 million compared to $143.5 million for the same per ...

Company Overview - HireQuest (NASDAQ: HQI) has experienced a rangebound stock performance over the past year, facing multiple quarters of revenue declines since 2023 [1] - The company operates in a tight US labor market, which has impacted its financial performance [1] Financial Performance - The company has reported consecutive quarters of revenue declines, indicating potential challenges in maintaining growth [1] Market Context - The current labor market conditions in the US are characterized as tight, which may affect the company's operational capabilities and revenue generation [1]

Group 1 - HireQuest (NASDAQ:HQI) is a fast-growing national staffing franchisor with a proven, profitable asset-light model [2] - The company has impressive historical operating margins and strong free cash flow [2] - The CEO's net worth is invested in over 22% of HQI's outstanding shares [2]

HireQuest, Inc. (HQI) came out with quarterly earnings of $0.20 per share, beating the Zacks Consensus Estimate of $0.16 per share. This compares to earnings of $0.12 per share a year ago. These figures are adjusted for non-recurring items.This quarterly report represents an earnings surprise of 25%. A quarter ago, it was expected that this company would post earnings of $0.12 per share when it actually produced earnings of $0.15, delivering a surprise of 25%.Over the last four quarters, the company has sur ...

Financial Performance - For the three months ended September 30, 2024, total revenue was $9.416 million, a slight increase from $9.271 million for the same period in 2023[101]. - Adjusted EBITDA for the three months ended September 30, 2024, was $4.926 million, representing 52.3% of total revenue, up from $3.742 million or 40.4% in Q3 2023[102]. - The company reported a net loss of $2.207 million for Q3 2024, compared to a net income of $1.483 million in Q3 2023[102]. - Total revenue for the three months ended September 30, 2024 was approximately $9.4 million, an increase of approximately 1.6% from $9.3 million for the same period in 2023[111]. - Adjusted EBITDA for the three months ended September 30, 2024 was $4.9 million, compared to $3.7 million for the same period in 2023, reflecting a significant increase[109]. - Total revenue for the nine months ended September 30, 2024 was approximately $26.5 million, a decrease of 5.7% from $28.1 million for the same period in 2023[132]. - The company reported a net income from continuing operations of approximately $1.6 million for the nine months ended September 30, 2024, down from $6.0 million in the same period of 2023[157]. Revenue Sources - Franchise royalties accounted for 95.5% of total revenue in Q3 2024, compared to 96.1% in Q3 2023[102]. - Franchise royalties for the three months ended September 30, 2024 were approximately $9.0 million, an increase of approximately 0.9% from $8.9 million for the same period in 2023[112]. - Service revenue for the three months ended September 30, 2024 was approximately $428 thousand, an increase of $62 thousand from $366 thousand for the same period in 2023[115]. - Franchise royalties decreased by 7.4% to approximately $25.0 million for the nine months ended September 30, 2024, down from $27.0 million in 2023[133]. - Service revenue increased by $385 thousand to approximately $1.5 million for the nine months ended September 30, 2024, compared to $1.1 million in 2023[136]. Expenses and Costs - Selling, general, and administrative expenses were $5.379 million for Q3 2024, representing 57.1% of total revenue, down from 68.5% in Q3 2023[102]. - Operating expenses for the three months ended September 30, 2024 were approximately $12.1 million, an increase of $5.0 million from $7.1 million for the same period in 2023, primarily due to a goodwill and intangible asset non-cash charge[117]. - Workers' compensation expense decreased to approximately $499 thousand for the three months ended September 30, 2024, down from approximately $1.5 million for the same period in 2023[118]. - Operating expenses increased by 22.6% to approximately $24.4 million for the nine months ended September 30, 2024, up from $19.9 million in 2023[137]. - Workers' compensation expense decreased by $724 thousand to approximately $1.6 million for the nine months ended September 30, 2024, compared to $2.3 million in 2023[138]. - Compensation and benefits expenses decreased by 11.1% to approximately $8.5 million for the nine months ended September 30, 2024, down from $9.6 million in 2023[139]. - Other SG&A expenses increased by 4.3% to $6.1 million for the nine months ended September 30, 2024, compared to $5.9 million in 2023[140]. Financing and Credit - The company has entered into a Revolving Credit Agreement with Bank of America for a $50 million facility, with the option to increase to $60 million, maturing on February 28, 2028[160]. - Availability under the Senior Credit Facility was approximately $26.9 million as of September 30, 2024[163]. - Cash used by financing activities was approximately $3.7 million for the nine months ended September 30, 2024, compared to $4.0 million for the same period in 2023, indicating a decrease of 7.5%[159]. Internal Controls and Governance - The company reported a material weakness in internal control over financial reporting due to insufficient accounting resources to handle technical accounting issues and acquisition integration[182]. - The company has engaged third-party professionals to assist with subsequent acquisitions as part of its remediation efforts[182]. - A new Chief Financial Officer with 17 years of public company experience was hired in November 2023, along with a Senior Accountant with 9 years of experience[182]. - The company is actively recruiting additional accounting staff to enhance its internal control environment[183]. - There were no significant changes in internal control over financial reporting during the quarter ended September 30, 2024, that materially affected the controls[184]. Market Expansion and Acquisitions - The company entered into an agreement to acquire certain assets of TEC, The Employment Company, for approximately $9.8 million, which generated over $34 million in system-wide sales in the prior 12 months[100]. - The company plans to acquire certain assets of TEC Staffing Services, Inc. for approximately $9.8 million, indicating ongoing market expansion efforts[163]. - The company has licensed its trade names to 6 offices in California, expanding its operational footprint[98]. - The company had 417 offices as of September 30, 2024, a decrease from 427 offices at the end of 2023, reflecting a net closure of 10 offices[170]. - System-wide sales for the nine months ended September 30, 2024, were $428.8 million, a decrease of 7.1% compared to $461.7 million for the same period in 2023[169]. - System-wide sales from DriverQuest and TradeCorp increased significantly by 217.3% for the nine months ended September 30, 2024, compared to the same period in 2023[169]. Tax and Interest - Interest income for the three months ended September 30, 2024 was approximately $138 thousand, compared to $83 thousand for the same period in 2023, due to an increase in Notes Receivables[124]. - Interest expense decreased from $302 thousand for the three months ended September 30, 2023 to $268 thousand for the same period in 2024, reflecting a decrease in the outstanding line of credit balance[125]. - The estimated annual effective tax rate for the three months ended September 30, 2024 was 25.1%, compared to 24.5% for the same period in 2023[126][127]. - Interest income increased to approximately $424 thousand for the nine months ended September 30, 2024, compared to $197 thousand in 2023[144]. - Income tax expense decreased to approximately $172 thousand for the nine months ended September 30, 2024, down from $1.5 million in 2023[146][147]. Cash Flow - For the nine months ended September 30, 2024, cash provided by continuing operating activities was approximately $3.5 million, compared to $1.8 million for the same period in 2023, reflecting an increase of 94.4%[157]. - Current assets exceeded current liabilities by approximately $23.3 million as of September 30, 2024[153].

Financial Performance - Franchise royalties increased by 0.9% to $9.0 million compared to $8.9 million in the prior year period[2] - Total revenue increased by 1.6% to $9.4 million compared to $9.3 million in the prior year period[2] - SG&A expenses decreased by 15.3% to $5.4 million compared to $6.4 million in the prior year period[2] - Net loss was $(2.2 million), or $(0.16) per diluted share, compared to net income of $1.5 million, or $0.11 per diluted share in the prior year period[11] - Adjusted net income for the quarter was $2.8 million, or $0.20 per diluted share, compared to adjusted net income of $2.2 million, or $0.16 per diluted share in the third quarter of 2023[11] - Adjusted EBITDA was $4.9 million compared to $3.7 million in the prior year period[12] - Total revenue for the three months ended September 30, 2024, was $9,416 thousand, a 1.6% increase from $9,271 thousand in the same period of 2023[31] - Net loss for the three months ended September 30, 2024, was $(2,207) thousand, compared to net income of $1,483 thousand for the same period in 2023[31] - Adjusted EBITDA for the nine months ended September 30, 2024, was $12,324 thousand, compared to $12,194 thousand for the same period in 2023[32] - Adjusted net income for the three months ended September 30, 2024, was $2,787 thousand, compared to $2,153 thousand for the same period in 2023[33] - Basic loss per share from continuing operations for the three months ended September 30, 2024, was $(0.16), compared to $0.12 for the same period in 2023[31] Sales and Royalties - System-wide sales for the third quarter of 2024 decreased by 1.7% to $148.6 million compared to $151.2 million for the same period in 2023[4] - Year-to-date franchise royalties decreased by 7.4% to $25.0 million compared to $27.0 million for the nine months ended September 30, 2023[3] - Franchise royalties for the three months ended September 30, 2024, were $8,988 thousand, compared to $8,905 thousand in the same period of 2023[31] Assets and Liabilities - Cash was $1.6 million as of September 30, 2024, compared to $1.3 million as of December 31, 2023[17] - Total current assets increased to $58,043 thousand as of September 30, 2024, from $51,453 thousand as of December 31, 2023[30] - Total liabilities decreased to $39,745 thousand as of September 30, 2024, from $41,094 thousand as of December 31, 2023[30] - Cash balance increased to $1,621 thousand as of September 30, 2024, from $1,342 thousand as of December 31, 2023[30] Impairment and Economic Outlook - Goodwill and intangible asset impairment charge for the three months ended September 30, 2024, was $6,035 thousand[31] - The company is optimistic about entering a more favorable economic environment for staffing solutions as demand strengthens[7]

Here are three stocks with buy rank and strong income characteristics for investors to consider today, October 17th: Logility Supply Chain Solutions, Inc. (LGTY) : This software applications company has witnessed the Zacks Consensus Estimate for its current year earnings increasing 8.6% over the last 60 days. This Zacks Rank #1 company has a dividend yield of 4.2%, compared with the industry average of 0.0%. HireQuest, Inc. (HQI) : This company that provides temporary staffing solutions has witnessed the Za ...