HireQuest, Inc. (HQI)·Q3 2025 Earnings Summary

Executive Summary

• Q3 2025 delivered profitability despite muted demand: total revenue $8.497M (-9.8% y/y), diluted EPS $0.16, adjusted EPS $0.24, and adjusted EBITDA $4.651M with margin up to 55% from 52% y/y, aided by workers’ comp cost improvement .
• Temp/day labor and Snelling outperformed permanent placement; MRI Network was pressured by prior franchisee non-renewals, though trends appear to be stabilizing; early Q4 weeks show mixed but improving YoY momentum in Snelling and HireQuest Direct .
• Balance sheet capacity remains ample for M&A with ~$42.5M revolver availability, $2.203M outstanding on the line, and net debt around $1.1M; quarterly dividend of $0.06 was paid on September 15 and is expected to continue, subject to Board discretion .
• No formal quantitative guidance; management flagged macro headwinds (tariffs, immigration policy) and expects enforcement plus future reshoring to create tailwinds over time; M&A pipeline remains active with potential accretive opportunities .

What Went Well and What Went Wrong

What Went Well

• Maintained profitability with improved non-GAAP metrics: adjusted EPS $0.24 and adjusted EBITDA $4.651M, with margin rising to 55% from 52% y/y; CFO highlighted workers’ comp program improvements as a key driver .
• Sequential system-wide sales increased ~6.1% vs Q2, with double-digit sequential growth in HireQuest Direct and Snelling (vs mid-single digits last year), indicating stabilization in core temp/day labor .
• Snelling recorded “big wins” and competitive takeaways; management noted some weeks in early Q4 were above prior-year levels for Snelling and HireQuest Direct, supporting a cautiously improving demand narrative .

What Went Wrong

• Top-line pressure persisted: total revenue declined 9.8% y/y to $8.497M; franchise royalties fell to $8.110M; system-wide sales down 10.1% y/y to $133.6M .
• Executive search/permanent placement underperformed; MRI Network was negatively impacted by franchisee non-renewals earlier in the year, depressing comparisons, though declines moderated by quarter-end .
• Non-cash impairment charges and ongoing macro uncertainties weighed on results; Q3 included a $230k impairment, and demand remained below desired levels across several geographies .

Financial Results

SG&A and Workers’ Comp Detail

Balance Sheet and Liquidity KPIs

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• “We delivered another quarter of profitability highlighted by net income of $2.3 million, or $0.16 per share… Our results this quarter underscore the flexibility and strength of our franchise model… profitable in soft markets when many others … have struggled.” — CEO Rick Hermanns .
• “Adjusted EBITDA was $4.7 million… adjusted EBITDA margin this quarter rose to 55% from 52% last year… a large component… attributed to our controlling of net work comp expense.” — CFO David Hartley .
• “There are several [M&A] opportunities… immediately accretive… well equipped with a proven strategy… successfully implement numerous acquisitions.” — CEO Rick Hermanns .
• “We had a $2.2 million draw… about $42.5 million in availability… net debt… around $1.1 million… good amount of flexibility… capacity to capitalize on potential acquisitions… paid a $0.06 per common share dividend.” — CFO David Hartley .
• “When you look at our peer group, it is covered with red ink, whereas we’ve remained profitable… this quarter is a great demonstration of that.” — CEO Rick Hermanns .

Q&A Highlights

• Day labor stabilization: Management sees the market “approaching the bottom,” with optimism supported by some early Q4 weeks beating prior-year in Snelling and HireQuest Direct .
• Snelling competitive wins: Gains characterized as competitive takeaways rather than broad market improvement; large accounts contributed positively this quarter .
• MRI non-renewals: Departures earlier in the year continued to affect y/y comparisons, but active offices were “running flat” by quarter-end; management acknowledges retention challenges inherent in MRI’s network model .
• M&A pipeline: Pipeline is stable with “plenty” of opportunities; management expects more activity in coming 3–6 months as sellers seek full-year packaging; balance sheet supports action .
• Immigration enforcement: Some wins directly tied to enforcement; management is skeptical of large self-deportation figures but expects cumulative tailwinds, especially as reshored facilities staff up over time .

Estimates Context

S&P Global Wall Street consensus estimates for Q3 2025 and near-term quarters were unavailable at time of analysis; therefore, estimate comparisons and beat/miss determinations could not be made (values retrieved from S&P Global).*

Key Takeaways for Investors

• Profitability resilient in a weak demand environment; adjusted EBITDA and margin improved y/y as workers’ comp costs declined, supporting near-term cash generation .
• Sequential momentum visible in system-wide sales and core temp/day labor offerings; Snelling recorded competitive wins, suggesting stabilization and selective share gains .
• MRI Network remains a headwind due to earlier non-renewals, but trends flattened by quarter-end, limiting incremental downside into Q4 .
• Liquidity and balance sheet provide M&A firepower: ~$42.5M revolver availability and low net debt position the company to capitalize on distressed or founder-led opportunities .
• Dividend continuity at $0.06/share underscores confidence in cash generation and franchise model stability; income investors benefit while awaiting demand recovery .
• Macro variables (tariffs, immigration enforcement, reshoring) create potential medium-term tailwinds; timing is uncertain, but management expects cumulative benefits as facilities hire documented workers .
• With estimates unavailable, trading catalysts hinge on narrative elements: sequential stabilization, workers’ comp improvements, and any near-term M&A announcements; monitoring early Q4 weekly sales trends is prudent .