HireQuest Q2 2025 Earnings Report

HireQuest EPS Results

• Actual EPS: $0.15
• Consensus EPS: $0.11
• Beat/Miss: Beat by +$0.04
• One Year Ago EPS: N/A

HireQuest Revenue Results

• Actual Revenue: $7.64 million
• Expected Revenue: $7.66 million
• Beat/Miss: Missed by -$22.00 thousand
• YoY Revenue Growth: N/A

HireQuest Announcement Details

• Quarter: Q2 2025
• Date: 8/7/2025
• Time: After Market Closes
• Conference Call Date: Thursday, August 7, 2025
• Conference Call Time: 4:30PM ET

HireQuest (NASDAQ:HQI) provides temporary staffing services in the United States. It offers staffing services, including direct-dispatch, executive search, consultant, unskilled and semi-skilled industrial and construction personnel, clerical and administrative personnel, and permanent placement services, as well as commercial and non-CDL drivers, and skilled personnel in the medical and dental industries. The company provides its services under the HireQuest Direct, HireQuest, SNelling, DriverQuest, HireQuest Health, Northbound Executive Search, and MRI trade names. It serves construction, recycling, warehousing, logistics, auctioneering, manufacturing, hospitality, landscaping, and retail industries, as well as dental practices. HireQuest, Inc. was founded in 2002 and is headquartered in Goose Creek, South Carolina.

HireQuest Q2 2025 Earnings Call Transcript

Key Takeaways

• Negative Sentiment: HireQuest highlighted a persistently challenging hiring environment, noting the manufacturing industry contracted for a fifth consecutive month and factory employment hit its lowest level since July 2020.
• Positive Sentiment: The company’s proven franchise model continues to deliver superior margins and consistent profitability even amid industry headwinds.
• Negative Sentiment: Second-quarter revenue fell by 12% year-over-year to $7.6 M, net income dropped to $1.1 M (EPS $0.08) from $2 M (EPS $0.15), and adjusted EBITDA margin declined to 43% from 47%.
• Positive Sentiment: As of June 30, HireQuest carried only $4.3 M of debt, had $35.9 M in available credit, and maintained working capital of $28.6 M, underpinning its financial flexibility.
• Positive Sentiment: With over $77 M in acquisitions completed since its merger with Command Center and ongoing interest in targets like TrueBlue, HireQuest has significant “dry powder” to pursue value-creating deals.

Presentation

[Operator]

Good afternoon, everyone, and thank you for participating in today's conference call to discuss HireQuest's financial results for the second quarter ended 06/30/2025. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. I would now like to turn the call over to John Nesbitt of IMS Investor Relations. Please go ahead.

[John Nesbett, Founder & President at IMS Investor Relations]

Thank you, and good afternoon. I'd like to welcome everyone to the call. Hosting the call today are HireQuest Chief Executive Officer, Rick Herman and Chief Financial Officer, David Hartley. I'd like to take a moment to read the Safe Harbor statement. 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.

[John Nesbett, Founder & President at IMS Investor Relations]

These forward looking statements and terms such as anticipate, expect, intend, may, will, should and other comparable terms involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. These statements include statements regarding the intent, belief and current expectations of iRequest and members of its management as well as the assumptions in 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 HireQuest's 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, HireQuest undertakes no obligation to update or revise forward looking statements to reflect changed conditions. I would now like to turn the call over to CEO of HireQuest, Rick Kermans. Please go ahead, Rick.

[Rick Hermanns, President, CEO & Director at HireQuest]

Good afternoon and thank you for joining our call today. Our second quarter performance unfolded much as we had expected, as we continue to face a challenging hiring environment that has persisted now for over two years. As we've mentioned on previous calls, employers of all types are taking a wait and see approach and delaying certain hiring decisions in what has been an uncertain macroeconomic climate for the 2025. Moreover, the recent Bureau of Labor Statistics job report reflects continued overall softness. The manufacturing industry continued to contract for the fifth straight month, shedding an additional 11,000 jobs in July, driving down factory employment levels to their lowest point since July 2020.

[Rick Hermanns, President, CEO & Director at HireQuest]

That said, our proven franchise model provides us with a solid operational foundation that enables us to deliver superior operating results for our industry with strong margins and consistent profitability even when the industry landscape is difficult. The market for permanent placement and executive search solutions continues to be slow, particularly in the manufacturing and IT sectors. This combined with several franchisees not renewing their franchise agreements over the last couple of quarters impacted the results of MRI Network. We remain focused on controlling what we can to position MRI to benefit when demand levels for permanent placement and executive search return. Temporary staffing and day labor offerings have performed better relative to MRI, but even so the Upper Midwest has been weak.

[Rick Hermanns, President, CEO & Director at HireQuest]

As we mentioned on our first quarter call, we are encouraged by newly heightened approach to the enforcement of immigration regulations. Relaxed immigration policies throughout the previous administration had a negative impact on our temporary and day labor offerings as employers chose to use undocumented workers to reduce labor costs. As an E Verify employer, HireQuest welcomes the enhanced enforcement efforts around hiring documented workers, efforts which we believe create a level playing field in a very competitive space. Acquisitions have historically played an important role in our growth strategy as we look to further expand our market reach and geographic footprint. We've had a great deal of experience and success executing an effective M and A strategy while maintaining a strong balance sheet and managing dilution.

[Rick Hermanns, President, CEO & Director at HireQuest]

It's been six years since our merger with Command Center and over that time, we've completed over $77,000,000 of acquisitions. By the end of the second quarter, with only $4,300,000 of debt on the balance sheet, we believe that we are well positioned with the financial flexibility and resources to pursue value creating opportunities as we identify them. While the 2025 has brought its share of challenges, we have built a strong and flexible business model that it has consistently delivered strong margin performance and profitability. HireQuest is well positioned in the markets we serve with a portfolio of recognized staffing and executive search brands that have allowed us to establish a solid foundation for growth when demand returns in earnest. With that, I will turn the call over now to David to provide a closer look at our second quarter financial results.

[David Hartley, CFO at HireQuest]

Thank you, Rick, and good afternoon, everyone. Appreciate you all joining us today. Total revenue for the 2025 was $7,600,000 compared with revenue of $8,700,000 in the same quarter last year, a decrease of 12%. Our total revenue is made up of two components franchise royalties, which is our primary source of revenue and service revenue, which is generated from certain services and interest charge to our franchisees, as well as other miscellaneous revenue. Franchise royalties for the second quarter were $7,300,000 compared to $8,200,000 for the same quarter last year.

[David Hartley, CFO at HireQuest]

Underlying franchise royalties are system wide sales, which are not part of our revenue, but are helpful contextual performance indicator. System wide sales reflect sales at all offices, including those classified as discontinued. System wide sales for the second quarter were 125,900,000.0 compared to $146,100,000 in the 2024. Sequentially, system wide sales increased by 6% in the 2025 compared to system wide sales of $118,400,000 in the first quarter of this year. Service revenue was 354,000 for the second quarter compared to 479,000 in the second quarter last year.

[David Hartley, CFO at HireQuest]

Selling, general and administrative expenses for the second quarter were $5,900,000 compared to $5,300,000 in the 2024. Driving the increase was approximately $929,000 in transaction expenses, which were partially offset by a decrease of roughly 400,000 in workers' compensation expense. Workers' compensation expense was a drag on our earnings in 2023 and 2024. And we're pleased that our efforts to control costs in this area have achieved cost savings of approximately $1,000,000 through the 2025 compared to the same period in 2024. Shifting to profitability metrics, net income after tax was $1,100,000 in the 2025 or $08 per diluted share compared to net income of 2,000,000 or earnings per diluted share of $0.15 in the 2024.

[David Hartley, CFO at HireQuest]

Adjusted net income for the quarter, which excludes amortization of acquired intangibles and other non recurring one time expenses was $2,100,000 or $0.15 per diluted share compared to adjusted net income of $2,500,000 or $0.18 per diluted share in the 2024. We have provided a table on the press release issued earlier this afternoon with a detailed reconciliation of adjusted net income to net income. Adjusted EBITDA was $3,300,000 compared to $4,000,000 in the prior year period. Adjusted EBITDA margin for the quarter was 43% compared to 47% in the 2024. We believe adjusted EBITDA is a relevant metric for us due to the size of non cash operating expenses running through our P and L.

[David Hartley, CFO at HireQuest]

A detailed reconciliation of adjusted EBITDA to net income is provided in our 10 Q, which was filed this afternoon. Moving on now to the balance sheet. Our total assets as of 06/30/2025 were $94,300,000 compared to $94,000,000 at 12/31/2024. Current assets as of 06/30/2025 included $2,700,000 in cash and $42,800,000 of net accounts receivable, while current assets at 12/31/2024 included $2,200,000 of cash and $42,300,000 of net accounts receivable. Current assets exceeded current liabilities by $28,600,000 at 06/30/2025 versus 12/31/2024 when working capital was 25,100,000.0.

[David Hartley, CFO at HireQuest]

Current liabilities were 45% of current assets at 06/30/2025 versus 49% of current assets at 12/31/2024. As of 06/30/2025, we had $4,300,000 drawn on our credit facility and another $35,900,000 in availability assuming continued covenant compliance. Just to put that in perspective a bit, we had roughly $16,000,000 in total debt at the end of the second quarter last year. We believe our credit facility provides us with flexibility and room for short term working capital needs as well as the capacity to capitalize on potential acquisitions. We've paid a regular quarterly dividend since the 2020.

[David Hartley, CFO at HireQuest]

As stated on our first quarter call, we most recently paid a $06 per common share dividend on 06/16/2025 to shareholders of record as of June 2. We expect to continue to pay a dividend each quarter subject to the board's discretion. With that, I will turn the call back over to Rick for some closing comments.

[Rick Hermanns, President, CEO & Director at HireQuest]

Thank you, David. As always, I'd like to thank our employees and franchisees for their hard work and commitment. And we look forward to speaking with you again when we report our third quarter results. With that, we can now open the line to questions.

[Operator]

Thank you. The floor is now open for questions. If you would like to join the queue to ask a question at this time, please press star one on your telephone keypad. We do ask if listening on speakerphone today that you pick up your handset while asking your question to provide optimal sound quality. Once again, that'll be star one on your keypad at this time to join queue to ask a question.

[Operator]

Please hold a moment while we poll for questions. And your first question today is coming from Mike Baker from DA Davidson. Mike, your line is live. Please go ahead.

[Michael Baker, MD & Senior Research Analyst at D.A. Davidson]

Okay. Thanks. I guess I wanted to ask you, you said a couple of times you have dry powder for acquisitions. I guess the obvious question would be since the last call you did announce a potential pretty large acquisition. So just wondering if you can update us at all on what's going on with TrueBlue and if that's something that you'd rather not talk about in the context of this call.

[Michael Baker, MD & Senior Research Analyst at D.A. Davidson]

Just in general, where else you're looking or how you see the acquisition pipeline? You have the dry powder, but you get something done, I guess, is the question.

[Rick Hermanns, President, CEO & Director at HireQuest]

So I'll answer that, and thanks for the question, Mike. Two things. One is consistent with our prior public disclosures, we remain interested in pursuing a transaction with TrueBlue. Beyond that statement, there's nothing new to report. As far as the second part of your question, other companies, we continue, you know, we continue to look at other opportunities.

[Rick Hermanns, President, CEO & Director at HireQuest]

And so I would say simply that, you know, there's a good group of leads out there as well. So we're not a one trick pony, you know, just waiting on one deal. So again, I feel good about where we're at with that. And as you noted, we have a lot of dry powder right now.

[Michael Baker, MD & Senior Research Analyst at D.A. Davidson]

Yep, no doubt. Okay, fair enough. Couple others, I just wanted to ask you, where do you feel like you are in terms of market share on the system wide sales down about 13%? We can compare that to some other public guys or some industry data. And I'm just wondering your view on how your market share is faring versus some competitors.

[Rick Hermanns, President, CEO & Director at HireQuest]

So part of what bollocks up the numbers a little bit is, and as we stated in the prepared remarks, is we had a couple of fairly significant MRI franchisees not renew their franchise. So when you look at market share, obviously do you include them or do you not include them? So compared to last year, we probably lost a bit of ground because we lost those franchises. That said, our individual franchisees are performing in line, I would say with the market. I think that it's very much though segment dependent.

[Rick Hermanns, President, CEO & Director at HireQuest]

And so like if you look at whatever places we're weak in, is there are macroeconomic, you know, there are macroeconomic effects that are definitely playing a big role in that. I'll just use as an example, like in the say the DC market, which is heavily construction for us, is struggling a bit, particularly relevant to, you know, relative to last year. That makes sense in the context of what's, let's say that with the change over in the administration. So I don't know if that answers your question, but but I would just say a lot of it is definitely circumstances related to the local economy. And again, that's why we brought out the part about manufacturing in the prepared remarks as well.

[Rick Hermanns, President, CEO & Director at HireQuest]

The North Mid, you know, the Northern Midwest and the Northern Great Plains is really probably our weakest area. Well, again, it's consistent with the data that BLS is putting out.

[Michael Baker, MD & Senior Research Analyst at D.A. Davidson]

Yeah, okay, that makes sense. And just one follow-up and then I'll turn it over. But within MRI, the franchisees not renewing, is that, I guess what's going on there, is that common? Does that speak to, I guess is there any color behind why that might have happened? How much that impacted the numbers? A little bit more color on what happened there.

[Rick Hermanns, President, CEO & Director at HireQuest]

So, I mean, MRI generally, even at the time we bought it had been a company that really hadn't grown except for in 2021 and 2022 just due to the rebound from the pandemic, had been shrinking for a long time. And so we, obviously, thought and still think that we will eventually turn that around. However, it was part of a long term trend. It was part of a trend that started literally twenty years ago, twenty five years ago. That trend already started.

[Rick Hermanns, President, CEO & Director at HireQuest]

And so, you know, that's the part of it is the nature of even in the name MRI network, it's more of a network of somewhat related recruiting firms than it is a traditional franchise relationship. In other words, like most of our MRI franchisees have their own trade name, as an example. And so, are a lot looser rules of affiliation. In other words, let's say in our staffing operations, everybody uses the same software. We provide the financing for all of our franchisees.

[Rick Hermanns, President, CEO & Director at HireQuest]

So there's a lot more glue and there's a lot more, you know, there's a lot more it's far more difficult to operate independent of us, let's say as a Snelling or a Hire Quest Direct than it is, let's say with MRI, again are already practically independent. And so it makes it more of a challenge to retain franchises.

[Michael Baker, MD & Senior Research Analyst at D.A. Davidson]

Okay, makes sense. Thanks, I'll turn it over to someone else.

[Operator]

Thank you. Your next question is coming from Kevin Steinke from Barrington Research. Kevin, your line is live. Please go ahead.

[Kevin Steinke, Managing Director at Barrington Research Associates]

Great. Thank you. Just wanted to ask a little bit more about overall environment as you see it currently. Obviously, a lot of noise at the very outset of the second quarter around tariffs that's maybe calmed down a bit. And so have you seen any, I guess, stabilization or signs of a little bit better demand?

[Kevin Steinke, Managing Director at Barrington Research Associates]

I know you said system wide sales were up 6% sequentially, but I guess perhaps that's probably just kind of the you know, typical seasonal bump. So I guess, you know, any more color on recent trends or or trends that you saw throughout the quarter?

[Rick Hermanns, President, CEO & Director at HireQuest]

Yeah. Kevin, I think that probably, you know, May was probably the the worst in early June and it's and we've sort of come back a bit closer to let's say prior year comparisons. I wouldn't I wouldn't say that we've, you know, we haven't started, you know, we aren't exceeding last year even as we're, let's say, through July. You know, so there's not, I'm not gonna say that there's been a great recovery with respect to sales. There hasn't been.

[Rick Hermanns, President, CEO & Director at HireQuest]

But I do agree with you that there are some good signs out there. I gotta be honest with you. If you'd have asked me five, six months ago, you know, I would have expected the, ICE enforcement to create a bit more demand for us. And while there have been circumstances where we've regained certain clients, you know, it's not been as much as what I would have thought. Now that being said, I saw data out there that said for example, there were only 100,000 deportations in the first half of the year.

[Rick Hermanns, President, CEO & Director at HireQuest]

Well, compared to the size of The United States economy, a 100,000 deportations really is nothing. And it's really just in line with what it always has been. So, you know, there might be a bit more noise, you know, what is it, more smoke than there is heat. I don't know. That said as well, we just had a nice win about a week ago.

[Rick Hermanns, President, CEO & Director at HireQuest]

We're gonna be starting back up with a food processing plant that historically food processing plants tend to engage with a large number of, you know, non e verified workers. And so getting back a client like that, hopefully, is a harbinger for things to come.

[Kevin Steinke, Managing Director at Barrington Research Associates]

Okay. Yeah. That makes sense. Yeah. Thanks for that color. Just one of the follow-up

[Rick Hermanns, President, CEO & Director at HireQuest]

By the way, do I'm sorry, Kevin. Don't mean to interrupt you. One thing I would say too But financial professionals is is still a really strong category for us. That's primarily in the on the MRI side.

[Rick Hermanns, President, CEO & Director at HireQuest]

But that's a that's actually a really still a a category that's growing for us really nicely.

[Kevin Steinke, Managing Director at Barrington Research Associates]

Yeah, okay, that's good to hear. Yeah, I I also wanted to ask about just the SG and A expense line, excluding those transaction related costs. And then I think there's a little bit of professional fees and severance costs in the first quarter. You strip those things out, it looks like SG and A was down a little bit sequentially, just kind of on a comparable basis. So just trying to get a better sense for the kind of the SG and A run rate going forward and if you've recently taken any more cost actions in light of the environment.

[Rick Hermanns, President, CEO & Director at HireQuest]

So, you know, obviously the transaction costs were a large number with respect to, you know, with respect to the comparisons. I would also say that and by the way, kudos to David Hartley for completing his first quarter as CFO. And I would just add that, for example, Steve Crane, our retired CFO, his salary was being carried two thirds of the way through the second quarter. So there will be a bit of an impact in the third quarter from that. Otherwise though, there's nothing I would say necessarily good or bad facing us in the third quarter.

[Rick Hermanns, President, CEO & Director at HireQuest]

Other than the reduction with respect to our former CFO, obviously that won't be included in the third quarter.

[Kevin Steinke, Managing Director at Barrington Research Associates]

Right. Yeah. Okay. Got it. And, you know, workers' comp continues to come down.

[Kevin Steinke, Managing Director at Barrington Research Associates]

Is there still a thought that, maybe at some point perhaps next year that's pretty close to neutral, you kind of get to more of a pretty completely neutral stance or standpoint perhaps

[Rick Hermanns, President, CEO & Director at HireQuest]

next year? Yes, mean that clearly that's what our target is. It's eliminate to that expense. There's still some lingering development from our, you know, some of our older years. I do think that sort of on a current basis we're, you know, in the current policy we're running pretty close to where we need to be running, you know, in order for us to be flat as it relates to workers' comp.

[Rick Hermanns, President, CEO & Director at HireQuest]

So I do think that there's still room for improvement on it. Obviously, not nearly as much room for improvement as there was last year. And of course, we did make a lot of progress. And, you know, again, I would say that there are still some improvements that are, you know, that should go into, you know, not only the second half but into the, you know, into 2026.

[Kevin Steinke, Managing Director at Barrington Research Associates]

Okay. Great. Yeah, that's helpful. All right, well, thank you for taking the questions as always. Turn it back over.

[Rick Hermanns, President, CEO & Director at HireQuest]

Of course, thank you.

[Operator]

Thank you. This does conclude today's Q and A session. And at this time, I would like to turn the floor back to management for closing remarks.

[Rick Hermanns, President, CEO & Director at HireQuest]

I wanna thank everybody for joining us today. I appreciate your, support of the company. And again, I wanna thank our franchisees and employees for doing doing a good job in a challenging environment. Thank you, and until next quarter. Talk to you then.

[Operator]

Thank you. This does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful day. Thank you once again for your participation.

Participants

Executives

• Rick Hermanns, President, CEO & Director
• David Hartley, CFO

Analysts

• John Nesbett, Founder & President at IMS Investor Relations
• Michael Baker, MD & Senior Research Analyst at D.A. Davidson
• Kevin Steinke, Managing Director at Barrington Research Associates