HireQuest, Inc. Q3 FY2025 earnings call

• The company delivered another quarter of profitability with net income of $2.3 million or $0.16 per share. - The staffing model has shown flexibility and strength, remaining profitable in soft markets. - Temp staffing and day labor outperform permanent placement and executive search. - Snelling performed well in the third quarter with some franchisees scoring big wins in light industrial and administrative fields. - Permanent placement and executive search have lagged for over a year, impacted by macro uncertainties and MRINetwork franchisee non-renewals. - MRI franchises operate differently from traditional models, making retention challenging in down markets. - M&A is a key part of growth strategy with several accretive opportunities being explored.

Total revenue for the third quarter was $8.5 million, a decrease of 9.8% compared to the prior year. Franchise royalties, the primary revenue source, were $8.1 million (95.29% of total revenue) compared to $9 million in the same quarter last year. Service revenue was $387,000 (4.58% of total revenue) compared to $428,000 last year. System-wide sales in the third quarter were $133.6 million, down from $148.6 million in the prior year, a decrease of 9.8%. Sequentially, system-wide sales increased about 6.1% from Q2 2025.

• The company expects to continue paying quarterly dividends subject to the Board's discretion. - Anticipates more M&A opportunities over the next 3 to 6 months as market activity increases towards year-end.

• Macro-economic uncertainties including tariffs and immigration policies impact the business. - MRINetwork franchisee non-renewals negatively affected year-over-year comparisons. - MRI franchises have different operational structures, making retention less certain in down markets.

Q: Wanted to ask about the day labor business and if there was improvement from Q2 to Q3.

A: Day labor business has been stabilizing, approaching the bottom, with some markets showing reasonable on-demand labor, though still down from desired levels.

Q: Asked about big wins for Snelling franchisees being competitive takeaways or market improvement.

A: Large wins are from exceptional franchisees earning more business, with Snelling performing well and some competitive wins seen.

Q: Inquired about meaningful nonrenewals of MRI franchisee agreements in Q3.

A: There were a couple of good-sized departures earlier, but current MRI franchisees saw shrinking declines in perm placement business.

Q: Asked about M&A pipeline in current market environment.

A: M&A pipeline is surprisingly stable with plenty of opportunities, expecting more activity in next 3-6 months as people optimize exit multiples.

Q: Asked about tighter immigration enforcement and continued new business.

A: There are some business wins linked to immigration enforcement, but skepticism exists as demand didn't increase as much as expected from self-deportation reports, with cumulative effects and reshoring facilities expected to impact demand over time.