HireQuest(US:HQI)2024-11-07 22:50Financial 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].