HireQuest, Inc. Q1 FY2026 earnings call

Business Model Resilience

• The franchise model aligns incentives between corporate leadership and franchisee owners, and enables stronger expense control by reducing need for redundant regional and middle management.
• Diverse exposure to local customer verticals and recurring local revenue streams mitigates broad macroeconomic risk.
• The company has delivered consistent profitability: it has not reported an annual loss since formation, and achieved double-digit compound annual growth in system-wide sales and adjusted EPS between 2019 and 2025. Adjusted for the MRI divestiture, total company sales grew 57% from 2019 to 2025, compared to a 3% industry sales decline; commercial segment sales grew nearly 80% over the same period, compared to a 23% industry decline.
• The company maintains a strong, debt-free balance sheet with $0 drawn on its credit facility as of quarter-end, giving it $40.3 million in available capital.

Operational Trends

• 2026 Q1 began with weak performance, but saw consistent improving year-over-year weekly comparisons in the second half of the quarter, with further improvement in the first five weeks of Q2 2026.
• Management attributes the improvement to two key factors: 1) the labor market impact of the 2021-2023 surge in immigration has been absorbed by the growing economy, returning to more normal staffing demand patterns that align with low unemployment; 2) prior investments in the company's national accounts program are beginning to deliver tangible new business wins.
• Improvement is broad-based geographically, with the strongest growth in the commercial segment, particularly in industrial and manufacturing short-to-medium term retrofit and project work; on-demand is performing steadily and construction is slowly recovering.

Strategic Update

• Management continues to execute its long-term strategy combining disciplined M&A with organic franchise growth, which has more than doubled the company's size over the past five years, while keeping SG&A relatively stable as a percentage of system-wide sales despite economic headwinds.
• HireQuest has submitted a new $105 million all-cash offer to the True Blue Board of Directors to acquire the on-demand People Ready segment. This segment is complementary to HireQuest's existing HireQuest Direct division, has been an underperformer for True Blue for years, and the offer would allow True Blue to raise substantial cash to create incremental value for its own shareholders. Management first disclosed interest in the segment in 2025 and postponed a planned tender offer to pursue a friendly negotiated transaction, and is now reactivating its efforts after a year of no progress.

Capital Return

• HireQuest has paid a regular quarterly dividend since Q3 2020, most recently a $0.06 per share dividend paid in March 2026. Management expects to continue regular quarterly dividends, subject to Board approval.

HireQuest completed the divestiture of its MRI Network permanent placement franchise operations on January 1, 2026, so 2026 Q1 results exclude this segment, while 2025 Q1 results include it. For 2026 Q1: Total company revenue was $6.5 million, a 12.7% decrease from $7.5 million in 2025 Q1. 1. Franchise Royalties (primary revenue segment): 2026 Q1 revenue was $6.1 million, compared to $7.0 million in 2025 Q1 (of which $500,000 came from the divested MRI segment). System-wide sales (a contextual performance metric, not company revenue) for 2026 Q1 was $102.6 million, down from $118.4 million in 2025 Q1 (of which $16 million came from the divested MRI segment); after excluding the divested segment, 2026 Q1 system-wide sales was nearly flat year-over-year. 2. Service Revenue (miscellaneous revenue from franchisee services and interest): 2026 Q1 revenue was $462,000, compared to $512,000 in 2025 Q1 (of which $74,000 came from the divested MRI segment). Profitability: 2026 Q1 net income after tax was $1.6 million ($0.11 per diluted share), up from $1.4 million ($0.10 per diluted share) in 2025 Q1. Adjusted net income was $1.8 million ($0.13 per diluted share) in both quarters. Adjusted EBITDA was $2.7 million in 2026 Q1, compared to $2.8 million in 2025 Q1. Selling, General & Administrative (SG&A) expense was $4.3 million in 2026 Q1, down from $5.3 million in 2025 Q1 (of which $700,000 related to the divested segment). Core SG&A (excluding workers' comp and non-recurring expenses) was $4.2 million in 2026 Q1. Workers' compensation expense was $39,000 in 2026 Q1, up from $28,000 in 2025 Q1.

No formal quantified full-year guidance was issued, but management provided the following qualitative forward-looking outlooks:

• Management is increasingly optimistic about demand trends after 8-9 weeks of consistent positive year-over-year comparisons, a shift from prior quarters where temporary improvements quickly faded. Barring an unforeseen negative economic shock, management expects current positive momentum to continue.
• Management believes HireQuest is well-positioned to benefit from an improving broad staffing market in 2026, as the multi-year period of industry decline appears to be ending, with temporary staffing demand starting to grow again after three years of contraction.
• The company's long-term growth strategy of combining organic franchise expansion and disciplined M&A remains unchanged.

• HireQuest's performance is heavily dependent on broad macroeconomic conditions, which are outside of management's control and can impact overall staffing demand.
• Forward-looking statements about future performance, transaction prospects for the True Blue People Ready acquisition, and demand trends are not guarantees of actual results, and actual outcomes may differ materially due to unidentified risks.
• There is no guarantee that the offer for True Blue's People Ready segment will result in a completed transaction, as the True Blue Board has not yet accepted the offer.
• The staffing industry remains in a soft general market, with hiring still slowed or frozen in some segments.

Q: Can you provide more detail on Q1 trends, the factors behind the weak start, and whether recent improvements have pushed the business into year-over-year growth? / A: The weak Q1 start was driven by adverse seasonal factors: poor holiday timing that shortened January and unusually bad weather across much of the U.S. Performance improved consistently starting mid-February, and has remained positive for 8-9 straight weeks, with even stronger comparisons in the first five weeks of Q2. Management is more optimistic than it has been in two years, as the current momentum is far more sustained than the fleeting improvements seen in prior quarters, and is now seeing consistent year-over-year growth.

Q: How have lower immigration and national accounts investments benefited recent performance, and where are improvements concentrated? / A: The 2021-2023 immigration surge created excess labor supply that suppressed staffing demand for traditional HireQuest end markets like hospitality and food service. Now that net immigration has fallen and economic growth has absorbed excess labor, staffing demand is returning to normal patterns aligned with the current low unemployment rate. Investments in the national accounts program have also delivered significant new business wins. Improvements are broad-based geographically, with the strongest growth in the commercial segment, particularly industrial and manufacturing project work; on-demand is steady and construction is slowly recovering.

Q: How did Q1 results compare to management's internal expectations, and are HireQuest's trends consistent with broader industry indicators showing improving temp demand? / A: Early in the quarter, results were far worse than expected due to uncontrolable weather and holiday timing factors, but the strong second half performance balanced out the quarter, leaving overall results right around management's full-quarter expectations. HireQuest's trends are fully consistent with broader industry indicators: recent industry data shows rising temporary staffing demand and accelerating growth after three years of contraction, matching the improvement HireQuest is seeing internally.

Q: Can you disclose the size of the True Blue People Ready segment you are offering to buy, and how you would improve its performance? / A: Management declined to provide additional details beyond what was already disclosed in the public offer, and stated that any further questions on the topic would need to be addressed at a later date.