HireQuest (HQI) 7 Nov 242024 Q3 Earnings call transcript

Good afternoon, everyone, and welcome to HireQuest Inc.

Third Quarter 2024 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, John Nesbett, IMS Investor Relations. John, the floor is yours.

operator. you, Thank welcome to the call. I'd everyone like to Chief the Steve Hermanns; Rick today Crane. HireQuest's call are Executive and Officer, Hosting Chief Financial Officer, safe I to take to harbor the would statement. a like read moment forward-looking statements Act the Securities as Securities This conference Act XXXX call as within XXXX of of XXE Section Section and of defined amended Exchange the XXA of amended. contains as relate or as to other circumstances occur and statements intend, expect, forward-looking uncertainties on anticipate, because that terms and events such they terms depend that comparable in will, These involve the risks should may, will future. risks any statements intent, such from forward-looking of and which including well These statements. by regarding with the statements are statements future of management uncertainties, the expectations as in periodic and statements results HireQuest involve are include actual of those materially as that and such performance the may reports the and HireQuest's guarantees that differ belief based. Prospective on contemplated SEC filed described those current forward-looking not investors assumptions members cautioned such and are undertakes by changed HireQuest forward-looking securities law, statements to conditions. obligation as required or Except to update federal reflect no revise Chief like now would over of Executive to turn Hermanns. the HireQuest, Rick I Officer call to Rick. ahead, go Please

when XXXX Good of slight stabilize. as afternoon, today. the solutions well of to began quarter temporary the staffing you sequential revenue second compared our in market third the XXXX quarter We as to joining as growth growth call and thank for achieved the total quarter to X.X% for of in XXXX third of revenue compared

decisions by economic recent quarters an and a faced industry the in in presidential mentioned landscape. as their environment before, election cautious we've As staffing difficult has the employers influenced remain hiring unpredictable particularly

illegal workers the XXXX in which spike undocumented labor to led earlier through the the lower-tier force. to influx of from XXXX occurred Additionally, immigration,

jobs our staffing staff or undocumented general, While are the impact the our industry of we that to to types our this the daily Despite staffing to XXXX. for the compared I'm when say X.X% of our these the peers, it's well the quantify headwinds, model. quarter and In relatively the HireQuest since jobs by grew business on of proud time first versatility of has workers for strength demonstrating year-over-year brands fill. performed in first hard many that quarter, system-wide temporary sales franchise

SG&A balance of believe we into demand we ahead, we've XXXX that beginning for a as Looking management temporary we're Expense continues and experiencing business we in expenses to XXXX. workers' impacted in mitigate positioned compared are XXXX. We second the profitability priority. our results commercial compensation half see XX% the expense the our to of on been out XXXX the as to staffing side leveling quarter improved the to third a of be of that reduced when continue by quarter and of the and through move over compressed

MRI ability anticipated the that expense compensation we on workers' indication for anticipate And time industry-wide XXXX. several ideally will did contraction placement a in moving to better as for deliver we've strong the recruiting We not -- while the permanent face growth onetime -- Steve said, significant certain At detail complements though, MRI placement in for impact decision ability and assets acquisition, of strategy basis, last quarter the continued our industry-wide a I the current on of growth Network headwinds executive prepared write when of existing workers' forward. million. the decreased market recruiting quarter this compensation permanent of to Network -- a of we MRI related in we noncash in the that believe impairment business, at the view of downturn project no the our offerings some our the overall the that staffing to compared resulting cornerstone the remarks. that maintain charge only mentioned down fair our We made profitability demonstrating nearly and the noncash charge, executive opportunity do absent high increased these this Specifically, impacted the value and in just the XXXX the our call, is more to and quarter's that has period. can quarters. some income faced challenges while protracted to year-over-year fair overall but which noncash experienced. To That market. so onetime MRI, our we even third of net year-to-date as in will on and to provide third XXXX, long-term reach XX% quarter see not entire we levels quarter in level, significantly over of in compared XX% value This a improve adjusted $X And charge we third also results. his to to have our industry. quarter staffing reflect and

business. we other are industry some on almost in in results believe Command macroeconomic our factors, we a drive we last professional XXXX capitalize on our summer conclude prudent would by outpaced to employ year, group. companies than to adjusted period X-year staffing commercial staffing Center that XXXX EBITDA close broader by our highlighted expect consistently expense the peer XX.X% out merger like presented is have or the of XXXX, enhanced regardless prepared of call. from well enter financial to that market that Since important where to points of As and the a reiterating staffing performance double CAGR all operational positioned my management remarks across we I quarter's we as data a we our stabilizing more

highest staffing today, with strong temporary visibility market quarter our achieved of quarter we're believe have this we quarter, permanent we and results, for continue And trend. demand with and we're that strengthens. I'll both available pleased who results. Overall, quarter as call XXXX. position will for a to ready opportunities optimistic Chief This that economic the pass EBITDA third our is services in the favorable the third our third closer entering the solutions environment. that us the provide a Officer, Crane, since that we eager at our over Financial Steve? look Steve adjusted to a staffing on to and we're more We're capitalize to become now

was Total for revenue the compared Thank us you, you same Rick, of million of year, revenue quarter with increase Thank X.X%. $X.X $X.X joining million and good an third last for afternoon, everyone. of the XXXX quarter today. in

to workers' by in our professional which decline of at revenue. including is discontinued. System-wide generated as Underlying the $XXX.X part revenue, in for of million but of classified our $X.X the accounts similar are for accounts a driven administrative overdue system-wide partially in brands increase receivable, on franchise temporary the a advertising was from quarter period, $XXX,XXX the general and including staffing offset revenue quarter certain $X.X for to Franchise excuse revenue; on and year quarter XXXX. year the quarter sales the our service revenue, last as helpful generated $XXX.X recruiting The $X.X in $X year. same franchisees as sales, primarily sales sales the by the reflect third million dynamics. Selling, million were to year changes were million and our Service third period primary to Service experienced receivable, in is other third $X.X period. number revenue compared in contextual based this the as have a million of million expense other to total all in components: of services X franchisees a our for royalties miscellaneous miscellaneous $XXX,XXX was and performance experience can we in policy brands quarter compared for staffing fluctuate compensation service by revenue compared to $X.X of QX changes ago. million compared the charged sales XX.X% insurance composed to made for offices, to when of Our our up are indicator. million in the are source we interest and same system-wide year those me, sales third from System-wide fund MRI well revenue. were a charged -- prior a lessened Service is interest revenue Networks insurance factors, system-wide XXXX. the fees, decrease revenue same prior which and quarter-to-quarter royalties quarter compared and sales, decrease increase related royalties, not is for of which our renewals expenses made

operating of SG&A XXXX. Also expense of component million to expenses. prioritize in to business. to were in across in XXXX $X.X a $X.X continue was the expense compared management be third expense benefits, of we quarter third salaries third the compensation compensation-related million and in million to the the quarter our workers' $X.X In XXXX. third Net continues the approximately XXXX, in our of largest approximately compared $XXX,XXX our quarter net expenses of included which Additionally, quarter we recognized of

the of or a the to third third diluted share diluted earnings was income Our or primarily million Net to quarter after XXXX. headcount year-to-date $X.XX of compensation-related Network integration $X.X expenses driven XXXX we during made of per acquisition. of loss by per in MRI $X.X $X.XX a tax million, XXXX the in related compared net share XX.X% decreased quarter loss the $X.X of reductions million to of

As in profitability, a MRI both quarter impact Rick on December mentioned This of in we the XXXX. the acquired year-to-date we had in quarter his charge impairment and related the million in recognized noncash onetime charge remarks, assets noncash prepared in our a to $X impairment considerable network XXXX.

We figure or other would the acquired and and of XXXX of quarter net helpful income million onetime income year that was an decided per XXXX, $X.X the share compared which provided diluted period. in the out table income Adjusted quarter in September a said, period. $X.X adjusted As XXXX, adjusted $X.X $X.XX impairment XX% tax million of earlier adjusted $X.X compared due net believe $X.XX adjusted to ended the diluted better noncash as compared year that Adjusted from provide to excludes providing per diluted for income prior million quarter XX% or XXXX. Adjusted year X the adjusted through a intangibles share size such, achieved. of per the net effect metric September operating that EBITDA a reconciliation expenses, to was release million adjustments detailed adjusted the of was the quarter the put diluted third in we did With press million us the showcase in period. of net months third to $X.XX the a the net in to XX, with quarter to charge, detailed growth reconciliation was adjusted running EBITDA $X.X for and We P&L. share for we've per of or the income for share nonrecurring XX, and or to year-to-date compared income. in $X.XX is our release of the EBITDA of margin our in of the net prior progress onetime these XX-Q. XXXX, afternoon amortization for period EBITDA press income is metric net million net of our noncash income be to net expenses prior A $X.X relevant third we this

sheet. to Moving balance the now

when XX.X% assets was versus at assuming million XX, million $XX.X December XX, December availability, liabilities covenant XX.X% of receivable. XXXX, December drawn net while current at were compared Current in Our of included million million of assets current September of exceeded September by of $XX.X current year-end Current receivable, at million on XXXX XXXX, September $XX.X assets net $XX.X we of and million in accounts another $XX.X working as liabilities assets at $X.X current assets versus XX, cash million XX, included September current Current and $XX XXXX, XX, $XX.X XXXX, had facility $XX.X million. accounts and cash XX, at September XXXX. At XXXX. million $X.X at assets credit to compliance. XX, were million continued capital XXXX, XX, XXXX, our

Importantly, We as capital our with capitalize onetime as by credit impairment credit the for provides facility needs our to us charge on short-term impacted quarter. that and noncash facility room was in flexibility the well the acquisitions. we believe working capacity potential not recognized

we recently, We per regular the September as a paid quarterly paid Most XX, quarter on since dividend dividend XXXX, shareholders third have to September XXXX. of common $X.XX a record X. of share of

over With discretion. the We quarter, call pay expect to dividend comments. turn to back continue the Board's to Rick for each that, closing subject a I'll to some

the this like forward questions. hard that, you work and employees dedication to to you, franchisees line quarter. open we I'd With again Thank their now year-end strong can our for closing and and out our on Steve, to And thank call. with Thank look you. and speaking the year we

[Operator first is coming Instructions] Davidson. from question D.A. your Baker of Mike

Great.

have CEOs I election [ of of uncertainty out no of That's for, lot months. is a been over, don't saying been the a So X X, disruption. there's there election. refrain constant ] know, a because lot

behind now that's So us.

You've been your that. in are better things -- you getting that to said call prior

even What's the you have of relatively resolution in calm the And first getting improvement do think better? Now to better in environment? all, the how more are the lead environment? why does of the resolution things getting -- -- election

of interest X further chance commercial meltdown is of business. in a estate is, rates of driver say big things. the the course, thanks reduction commercial market So and would I which for construction, the the One today of a reduces question, real our Mike.

that And during So that's one thing. of quarter. started this already course,

the starting we're And So undocumented our helpful -- very government handling we a that's see reality the started competes some of to workers. with that is -- think illegal the factor. of a because I it with direct obviously, on changing was well of basically is that it I June, federal and directly way HireQuest immigration. in top the bit -- line as particularly also

off it before. things table. I And see that, with that we it favorable that resolved, issue happened the that's throughout getting getting -- just a just think, them summer. being weren't so the that -- And is in other the takes then where part then is it And we numbers our can that we're thing have orders

employees. that have business -- franchisees find good was -- it find post hard to think permanent It and hard I the development to was was strange. pandemic market very There employees our people. was

those of some to normalize. started And have things

our And good to that starting take franchisees it habits sort about feel so returning that is part are normal and of I to are pre-pandemic had what -- of where effect. themselves they incentives

those would our So be optimism. reasons the for

Yes. Yes. very helpful. That's

of are one Are same And And within question ask or if better? then and those so geographically. getting see could are to things types businesses of actually specific business commercial you all there lines follow-up then I construction that real better, estate starting better? getting get

really strong matter, -- XXXX. been been really during last and Commercial the even -- it's strong construction has since really that for consistently for since XXXX,

has Texas, little So for are in that's a they've hurting bright But Geographically, success been now Florida, all Southeast also throughout. stronger. Georgia, And Tennessee is up but it's also our getting well. Mid-Atlantic we're strong same a the spot areas really that as some been picking been us. having good for say even trades us, the skilled Tennessee. bit, would is But the better which very division I is is --

So some we're getting well. that from help as

Your coming of from is Steinke Kevin next Research. Barrington question

time, tougher. sales growth. to returning staffing temporary permanent and little But about the being system-wide staffing at recruiting market talked a you executive So the same

you a think release, actual the permanent temporary market I that your in favorable economic you're staffing said Although more both environment. is optimistic and staffing for entering press

I'm signs for permanent So business? level outlook wondering of if stabilization on just that of improvement side and staffing or you're optimism the or the your of seeing part your

question. that for Thanks

X tough going perm quarters. bad. sugarcoat business been the It's perm to been that. really placement I'm has last I'm staffing incredibly So the -- sorry, not

nothing the levels. if almost almost on so low that. and stay I at And -- abnormally can't else, it It's guess is based optimism optimism the

readjusting is place much was they hiring just we're question no and that to now a it's part in and sort person, to started And was I more And our some could was of be people why regarding in you alluded -- I'm from almost sort bit easy of don't at optimistic people too aggressive. But it up. where XXXX Mike's overhang of to they again, there like pretty office respects, is as in up it and a know to so it kind do I sort in -- also of and were And almost waking responding getting habits go blocking to normal XXXX, would. what they're basically saying, hire own anything it where but has offices what, of for their to really tackling. away

them. came of of grabbing again, because 'XX. as know find gosh, I couldn't your to so bit them was it. a needed lot computer I And think And if again of XXXX but And but how really where of I that's answers market. shock I strength a a and depressed of I XX it's, the least almost I question, just we're have because abnormally 'XX just normal getting that back think, programmers, now but see only the at were 'XX I don't more I XX,

Yes, that absolutely. Yes, makes sense.

So great.

expense side, I exact so, expense. talked core $XXX,XXX just recall the it me. in for the can't review the about out, but it workers' if also past or compensation called SG&A number. but those So I could you you on into and the the just apologize then was numbers about backing I if you you've wondering if being I'm gave

these. of didn't Steve? kind do to I'm -- the it, We you and have back core or give Yes. into going

the I've comp. got net Well, workers'

and year. spot on. about the quarter You in It's million year third were then third in the $XXX,XXX of quarter $X.X this last

due overall was stayed so the by million million obviously, to workers' million. SG&A improvement, dropped in $X.X the SG&A flat $X improvement -- which at really core So $X But comp.

flat of our flat third with sales the which quarter our consistent much pretty as year-over-year. able to costs we from were last is year, So being well hold

Yes.

helpful. that's Yes, Understood. Okay.

here, maybe system-wide add some think flat? hold terms excess expenses to back the those with how relatively SG&A know pick picture have you've in you talked to you capacity you just demand do you want sales up of... having or forward, can think core much again, I about to capacity I get going so And might to appearing

That's question. Kevin, a Yes, great great that's question. a

So answer sales costs. I it how on, would that, X% I no would take a increase to argue, XX% need the SG&A. still yes, increase to have here's is a for appreciable in ability we probably with

yes, very thing to in to the slack would a there's go that dampen my wages is extent believe The to the environment -- the going that capacity. have improves economy do would be bit we only for up. a be mind still So that some I real potential that

a headcount see it's payroll me increase, And perm for may so have up. not go major we easy expenses while to our

So I think don't I stay will our almost think do but we can stay flat, exactly headcount flat.

Yes. Okay. it. Got That's fair.

talked And you've it with in previous that environment acquisition you. typically demand calls more for has created opportunities this softer so

Just wondering for and what kind appetite pipeline the just of overall still or the if case your been that's continuing. looks like

you question. asked glad that I'm I'm glad Kevin, that asked you question.

significantly obviously, acquisitions higher. we've reporting our for grown, So threshold become has as

in made this small, even quarter, acquisitions, So X we've X but acquisitions.

pipeline to a disclosures I we have so completion. said, fair or trigger Nothing any number like we have in anything, any of are saying -- we -- have have so now. And deals of of points significant a number deals but but we right as in that the various small

no down. said, believe deals we in me to I months slow would anticipate there's last like X already reason So the and will that that, did for X

what kind Obviously, Yes. you to been materiality Or mentioned, staffing? of from commercial were at? like too perspective, those areas have even just but Okay. looking register you small typical a

the were industry. this a opportunities larger X the demand. Actually, of the portion Yes. of were X tends really, -- demand on they more is be were staffing well, traditional to commercial the shouldn't on them But there in say because that. commercial staffing commercial I on demand. quarter. -- The There

those I So That X market, is say -- there a we so we the has they X whether they're the them more niche -- question, in are there. but of be whereas -- And only out your the we're quarter. the be more fewer on-demand opportunities, I way, found said, we past tend would future. By though, to tend that and the might of it's tend to have answer of original trend this would looking or at, to staffing, ones it commercial X ones to completed, markets. also towards it's they market who whether someone -- more would

this nicely, a quarter. had our or in city, of one so fits fortifying particular in really it it new in -- either last maybe us we position each so puts which a And market like

So strengthen said, like just they're presence. very And They're deals. our risk. limited nice a I overall

the have hand remarks. any to management reached appear question-and-answer session. will back now I of the we for to Well, end our team over closing

you thank being of our we sort call. you thank lot and resilience any on joining can in of hope and agree our and staffing you the there assets despite Jenny, as of reach of if strategy will you there's that further encourage the see a franchisor this have good headwinds I you And MRI day. for that clearly companies, you, far just it demonstrates out I Thank questions, the despite our to have again, that and you write-down as validated have us, us information a in peers. that joining certainly a for

conclude Thank does conference. much. This you very today's

You disconnect for now this participation. and rest a Thank phone your you lines have of your may wonderful time, day. the at