HireQuest(HQI) - 2024 Q2 - Quarterly Results

HireQuest Q2 2024 Earnings Release Performance Summary Q2 revenue declined but profitability remained stable, while year-to-date results showed decreases in revenue and net income - System-wide sales decreased to $146.1 million in Q2 2024 from $157.0 million in Q2 2023 For the first six months, sales fell to $280.2 million from $310.5 million in the prior year period[4] Second Quarter 2024 Highlights Q2 2024 revenue decreased, but SG&A expense reduction maintained stable income from operations and net income Q2 2024 Financial Summary (vs. Q2 2023) | Metric | Q2 2024 ($M) | Q2 2023 ($M) | Change | | :--- | :--- | :--- | :--- | | Franchise Royalties | $8.2 | $8.7 | -6.2% | | Total Revenue | $8.7 | $9.0 | -3.4% | | SG&A Expenses | $5.3 | $5.6 | -6.0% | | Income from Operations | $2.7 | $2.7 | 0.0% | | Net Income (cont. ops) | $2.1 | $2.1 | 0.0% | | Diluted EPS (cont. ops) | $0.15 | $0.15 | 0.0% | | Adjusted EBITDA | $4.0 | $3.9 | +2.6% | Year-To-Date 2024 Highlights Year-to-date 2024 saw a significant decline in total revenue, leading to reduced operating and net income YTD 2024 Financial Summary (vs. YTD 2023) | Metric | YTD 2024 ($M) | YTD 2023 ($M) | Change | | :--- | :--- | :--- | :--- | | Franchise Royalties | $16.0 | $18.1 | -11.4% | | Total Revenue | $17.1 | $18.8 | -9.3% | | SG&A Expenses | $10.9 | $11.5 | -4.9% | | Income from Operations | $4.8 | $6.0 | -19.8% | | Net Income (cont. ops) | $3.8 | $4.4 | -13.6% | | Diluted EPS (cont. ops) | $0.27 | $0.32 | -15.6% | | Adjusted EBITDA | $7.4 | $8.5 | -13.0% | Management Commentary Management highlighted sustained profitability through cost control, focusing on revenue growth and M&A, with optimism for H2 2024 - The company has successfully managed costs, including lowering workers' compensation expenses, and is now focusing on driving revenue growth[4] - M&A remains a key part of the growth strategy, with the company actively evaluating opportunities to enhance its staffing offerings[5] - Management believes the company is well-positioned for the second half of 2024 due to an improving staffing market, reduced expenses, and a strong business model[5] Detailed Financial Results This section details Q2 revenue decline, primarily from MRINetwork, offset by cost controls, and broader year-to-date decreases Second Quarter 2024 Financial Results Q2 2024 total revenue decreased due to lower MRINetwork royalties, but reduced SG&A maintained stable net income - The decrease in franchise royalties was primarily due to a decline from MRINetwork, which offset increases from TradeCorp and HireQuest Direct[6] - Net income from continuing operations was $2.1 million, or $0.15 per diluted share, which was consistent with the same period in the prior year[7] Year-To-Date 2024 Financial Results Year-to-date 2024 total revenue decreased due to lower system-wide sales, resulting in a decline in net income - Total revenue for the first half of 2024 decreased to $17.1 million from $18.8 million in the prior year, driven by lower system-wide sales[8] - Interest and other financing expenses decreased significantly to $495,000 from $854,000, as the prior year period included fees related to switching credit facilities[9] Balance Sheet and Capital Structure As of June 30, 2024, total assets increased, working capital improved, and the company maintained its dividend policy Key Balance Sheet Items (as of June 30, 2024) | Metric | June 30, 2024 ($M) | Dec 31, 2023 ($M) | | :--- | :--- | :--- | | Cash | $0.6 | $1.3 | | Total Assets | $107.6 | $103.8 | | Total Liabilities | $42.2 | $41.1 | | Working Capital | $20.6 | $15.7 | - The company paid a quarterly cash dividend of $0.06 per share on June 17, 2024, and intends to continue this quarterly payment, subject to board discretion[11] - Availability under the line of credit was approximately $24.6 million as of June 30, 2024[10] Financial Statements This section presents unaudited consolidated financial statements, including balance sheets, income statements, and key reconciliations Consolidated Balance Sheets As of June 30, 2024, total assets increased to $107.6 million, driven by accounts receivable, with higher stockholders' equity Consolidated Balance Sheet Summary (in thousands) | Account | June 30, 2024 ($K) | Dec 31, 2023 ($K) | | :--- | :--- | :--- | | Total current assets | $57,650 | $51,453 | | Total assets | $107,616 | $103,826 | | Total current liabilities | $37,011 | $35,711 | | Total liabilities | $42,202 | $41,094 | | Total stockholders' equity | $65,414 | $62,732 | Consolidated Statement of Income Q2 2024 reported total revenue of $8.7 million and net income of $2.0 million, with year-to-date total revenue at $17.1 million Consolidated Income Statement Summary (in thousands) | Metric | Q2 2024 ($K) | Q2 2023 ($K) | YTD 2024 ($K) | YTD 2023 ($K) | | :--- | :--- | :--- | :--- | :--- | | Total Revenue | $8,680 | $8,990 | $17,099 | $18,848 | | Income from Operations | $2,695 | $2,665 | $4,797 | $5,981 | | Net Income from Cont. Ops | $2,075 | $2,053 | $3,768 | $4,371 | | Net Income | $2,039 | $2,008 | $3,658 | $4,638 | Reconciliation of Net Income to Adjusted EBITDA (Non-GAAP) Q2 2024 Adjusted EBITDA increased slightly to $4.0 million, while year-to-date Adjusted EBITDA decreased Adjusted EBITDA Reconciliation (in thousands) | Metric | Q2 2024 ($K) | Q2 2023 ($K) | YTD 2024 ($K) | YTD 2023 ($K) | | :--- | :--- | :--- | :--- | :--- | | Net Income | $2,039 | $2,008 | $3,658 | $4,638 | | EBITDA | $3,546 | $3,487 | $6,445 | $7,901 | | Adjusted EBITDA | $4,040 | $3,871 | $7,398 | $8,452 | Supplemental Metrics – SG&A Breakdown Core SG&A expenses decreased in both Q2 and year-to-date periods, demonstrating effective cost control SG&A Breakdown (in thousands) | Metric | Q2 2024 ($K) | Q2 2023 ($K) | YTD 2024 ($K) | YTD 2023 ($K) | | :--- | :--- | :--- | :--- | :--- | | Core SG&A | $4,586 | $4,935 | $9,532 | $10,595 | | Net workers' comp. expense | $547 | $690 | $1,119 | $875 | | Total SG&A | $5,288 | $5,625 | $10,907 | $11,470 | Conference Call Information A conference call was held on August 8, 2024, to discuss Q2 2024 financial results, with replay details available - A conference call to discuss Q2 2024 financial results was held on August 8, 2024[12] About HireQuest HireQuest is a national franchisor of diverse staffing solutions, operating over 400 offices and employing 73,000 individuals annually - HireQuest operates a franchise model with over 400 offices in the United States[12] - The company provides employment for about 73,000 people annually across industries like construction, light industrial, manufacturing, and hospitality[12] Forward-Looking Statements This section contains a safe harbor statement, cautioning that forward-looking statements are subject to inherent uncertainties and various risks - The report contains forward-looking statements regarding future economic conditions, revenue, and operating results, which are not guarantees of future performance[13] - Key risks that could affect actual results include demand in the staffing industry, franchisee performance, macroeconomic trends like inflation or recession, and the success of M&A integration[14]