HQI - Earnings call transcript Q1 2024

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Operator

Welcome to the HireQuest, Inc.

First Quarter 2024 Earnings Call. [Operator Instructions]

I will now turn the conference over to your host, John Nesbett of IMS Investor Relations.

You may begin.

John Nesbett

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, harbor I'd read a take statement. safe like moment to the to Securities as This call the of as the XXE contains and statements Securities of Act conference amended. defined Exchange XXXX of Act forward-looking Section within XXA Section of amended the XXXX as

relate the or and such These anticipate, expect, they should future. in belief uncertainties will, and the These as on in statements risks its based. involve terms include statements of occur as current events HireQuest well statements on other regarding of statements such the assumptions depend terms which intent, expectations forward-looking may, as comparable will management or members are and circumstances to because intend, that

Prospective that reports any cautioned future in and forward-looking involve not those materially are by with and or revise actual filed securities changed that the HireQuest's no update performance to may statements described required such guarantees obligation law, uncertainties, and statements HireQuest those to federal including of risks periodic as Except differ investors conditions. are such forward-looking reflect by results statements. undertakes forward-looking from contemplated SEC

of Hermanns. the turn over would like now I to Please Rick. to HireQuest, the call ahead, CEO Rick go

Richard Hermanns

over call. more call financial results. Thank first the quarter quarter the from begin details you, and of by I'll around for and joining turn strategic highlights I'll who our first of everyone, Steve, today's providing financial will our an overview then to XXXX, share

continue royalties delivered performance total a affect million of the staffing operations of were share. income of $X.XX that in line $X.X to U.S. million, economic given $X.X Our Overall, from our revenue net with with results we headwinds current solid first franchise continuing expectations market. the a quarter million or and $X.X

industry United one, individual focus. the varies by in currently impact for and overall States solutions geography franchisees the the While our on environment is staffing a difficult

to During the the franchisees factors. geographic primary spared first higher in offerings best class direct the quarter, our of part X due

firm specifically that with network, seen consistent MRI struggled in peers from placements most segment. the we've While what our

general increase the second quarters, tends temporary a stronger business into to for as and to as seasonal demand we for demand result our expect traditionally are increase factors. staffing We see normal which of as third move

is employers Our adding with becoming diverse staffing headcount to group their demand of operations. positioned on solutions more capitalize comfortable increased to well

on we've As effectively now, controlling for control. done our is we several can quarters focus what

this the first XXXX. the decreased SG&A sequential XXXX. implemented in the started of to $X.X we of quarter significant $X.X results In of the which policy XXXX, quarter million March, orders expense represented from compensation quarter million of million the core first year-over-year a in Our in quarter $XXX,XXX, the decrease the from year We $X.X changes and were new fourth at by encouraged from our beginning year. was

on call, factors there quarter's primary impact explained I our workers' As last levels. that compensation are X

or our line losses over impacted the year. down our the quarters. expected policy year negatively our for and bad policy several was net premium any and our And up changes collected policy between business and amounts XXXX difference for expected losses ours bottom First, the The prior for years. second, to last historically the

same the with we point, of said, the year, indication we policy no That 'XX-'XX trend. at this that have the today, see visibility repeating

the our we last large mitigate which year, current carrier to for plan Additionally, X expenses year. our began control that policy worked contributed the with to to experienced we factors March in adjust calendar proactively the our

levels. believe mitigating well numbers as are through our to of focused as positioned return business that are We these our progress on continue workers' to on workers' we intently reducing we impact normalized expense. And the compensation compensation XXXX, we

key a remains as well. our M&A part of business

to a accretive while is balance leverage strengthen simultaneously M&A and us identify our keeping sheet. our maintaining staffing of that debt around offerings low expand strong acquisitions allow diverse strategy to group and Our

Over presence and the market. years, past that addressable have our geographic several offerings, we acquisitions significantly staffing expanded made numerous

with and organic driven the that acquisitions Overall, focused to enhanced growth, combined deliver pleased on significant quarter able focus benefit addressable were business. Our has other this market intently our and results our for product expanded given in strategic scanning that the we circumstances. remain the revenue opportunities on our growth we're we market, will with offerings

States solutions shareholders. believe across ideally staffing and offices the to that United increased and for are model the we demand and XXX leverage we continue value proven As recover, our franchise-owned positioned to world drive over to growing our of for

on look at pass will closer to Steve? results. Chief Officer, a Financial I'll the who the our provide call Crane, Now quarter first Steve

Steven Crane

Thank million you, was afternoon, joining good everyone. Rick, the Thank quarter of us million XXXX the to today. $X.X for for revenue for of compared decrease first last year, Total and a XX.X%. you $X.X quarter same

of miscellaneous advertising source made is royalties, primary pass-through revenue and revenue, up our fund. which services and other revenue service revenue MRI revenue certain our is of from and is from charge for generated franchisees, which components: franchise total X interest Our Networks

million the all for System-wide were first offsets, as System-wide discontinued. are quarter Franchise $X.X revenue including million but XXXX. performance Underlying $XXX.X not period to helpful the contextual same compared part to sales royalties at first year. last were million sales those million royalties system-wide in the reflect same quarter indicator. are compared $XXX $X.X sales, are quarter sales of for for the the classified which for our

our receivable, MRI The and Service quarter composed charge on $XXX,XXX factors, $XXX,XXX Service to revenue sales, dynamics. year fees, revenue overdue service the networks revenue first a contributed was system-wide similar same fund to revenue the interest accounts fluctuate quarter-to-quarter XXXX. of revenue is in ad accounts revenue. of compared quarter in insurance growth including The changes renewals number other fund receivable, fourth based in can the from Service on quarter and a advertising miscellaneous $XXX,XXX for franchisees for of ago.

in workers' the MRI network $X.X first expenses to $XXX,XXX proactive in $XXX,XXX reflects the million the compensation expense quarter million advertising the sequentially decreased results. SG&A was approximately in quarter, is to XXXX. trend our year of of XXXX quarters. approach that period. more expenses had fund This XXXX, results our expense first our in and of were are first included for to the encouraging fourth approximately In $X.X quarter compensation $XXX,XXX from prior an first million compared that in compared on of quarter recent the an has $X.X impact workers' quarter

were $X and expense. lower quarter million, income Net of miscellaneous income, quarter interest, items, accrued in in headcount of Also quarter first compared the $X.X related adjusted to was includes included bonus which from reductions operations to and first discontinued and operations our million salaries SG&A XX.X% decrease of income the the benefits $X.XX of quarter $X.XX taxes was year. $X.X a for XXXX million compared per $X.X share diluted XXXX to compared million quarter last period. operations of in or million of in continuing diluted prior million year to income the first Net income continuing $X.X from first share per the in net for operations or from $X.X

EBITDA filed for noncash of the size $X.X was is our first adjusted million running is detailed in believe the through compared quarter expenses operating to million in reconciliation EBITDA the this in XXXX net to relevant was provided of year. EBITDA us A last XX-Q, We income our metric quarter a of first which of afternoon. $X.X to adjusted P&L. due Adjusted

on balance Moving the sheet. now to

net $X.X Our and Current of was million were XXXX. at liabilities and XX, at assets December assets assets cash current million XX.X% million XX, XXXX, $XX.X assets versus XXXX. million million. current XX.X% accounts $XX.X when at cash $XX.X Current at December exceeded at of compared accounts XXXX, XXXX, were million March of of million $X.X of March included $XX XXXX, to as December by assets current while XX, of capital XXXX, $XX.X $XX.X March XX, year-end March of XX, assets current included liabilities versus receivable. working XXXX net at XX, Current XX, current and million receivable

$XX.X We us room another potential assuming in At facility and well with our and short-term $XX.X on our covenant as facility credit provides capitalized million credit we needs had XX, as for capacity capital on March flexibility believe compliance. the million drawn working availability, acquisitions. continued XXXX,

since regular dividend of we record on paid dividend as share $X.XX have shareholders XXXX, the March of continuing XX, paid per XXXX March that of a quarter pattern, a and third We quarterly X.

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

Richard Hermanns

encouraged our can industry half employees Thank you, quarter like now business seeing in Thank we remain optimistic about and of with you. pleased in environment With current market. the ahead given the that, work XXXX. hard first are we this the by and franchisees and we're trend in to the for I'd thank dedication We're their and line for second the to Steve. staffing questions. and quarter, the open our what's economic results our

Operator

[Operator Instructions] with The from comes Kevin Barrington Research. question first Steinke

Kevin Steinke

So to difficult out I staffing the about just solutions. by environment wanted for talking start

of it stable? characterize point? it's it does you of worse? Or this feel kind like any referenced that. seeing, would of a just You you're But in what continuation it Is terms gotten how at

Richard Hermanns

said, stable. thanks, very getting concentrated situation So worse. certain throughout an it's but been that isn't It getting it's would in isn't it much probably been say better that That much in it's I areas. Kevin. odd really

probably IT have improvements second Southeast -- have minimal. tougher, Anything been has branches whatever to certainly there we although would the tended at But deterioration. the been been, been the quarter, there fairly better. But improvement more say there. in again, have least Our do into move to as there hasn't I has improvements been related

Kevin Steinke

you're don't And some But in some in business some about you your any in green maybe improved if referenced kind if picking I it's of I've of terms commentary in or sector. shoots know that technology status hiring up continued headwinds quo. potentially that heard of

Richard Hermanns

I very opportunities, there the say that are but employers are more choosy. would definitely so definitely

choosy. there being So are ago, X job are again, there months X the even maybe months any some if many, ago, openings employers weren't now but -- extremely job openings, where

a a that at I'd rather So I requisition call would green shoot harder-to-fill none than have it all.

the like that has in way -- particular, improved. definitely there's so And in said, that side, IT I

of gosh, great. think But appreciable And logistics tough the again, starting over nothing year. bit. say, I other little so sort not. that's that the been again, It's I a I'd improve last that it's to, that that say side, would has

Kevin Steinke

Understood.

you you'll tell. increase seasonal a that like difficult quarters sense your too of if get about quarter. to second muted? more or you feel Or demand to for month seasonal factors. early third second for A kind little staffing into due ramp? talk to temporary of expect don't normal any the Does did it know still have in that be or I kind typical You and could that the over

Richard Hermanns

get see, it we we definitely that the Well, Will tell. is it say we The that is, would. I we extent mean, or I seasonal would normally seems that again, we to answer like to to we'll get impact. expect a definitely positive will early a certainly impact. it -- too should

quarter really but second it quarter numbers, But really in the But from third an look though numbers last good is quarter, if even was was again, that all. but not which second really for down third been. you at our grew from it quarter less line should like increase, literally year, quarter than the somewhat have our what showed probably us at the the historical second with even in

the normally So extent better say I it and believe by we're that improve as what now, tracking that last QX that I sequentially as we not QX. doing we're deteriorating. to in would year well, I I with will, do would right much mean we're again, well be? it Will saying, of would what say be don't is

higher QX year were so and last than our And QX QX.

don't I that if question. answers your So know

to but would impact. just So I revenues with the I be the expect say not perhaps that same higher,

this earnings Again, economy. to from because how I've call. It's predict the to first we bottom line is, difficult the saying are tied been we'll very do and my

overcome we is wrong those in all But third of focus for stronger the when these say insofar industry peers of fair the And least focus expect hard types the sudden, are snapback. way reasonable word, profitability well, just down. a quarter, better gets but headwinds. staffing, of circumstances, retaining on or we're at our me then types I us are so would a the more that of would a it's times, a for if these or I to economy, of system time value level obviously at the a number money to as HireQuest of losing highlight at least

test. the economy, that to a to great sort that historical And from meaningful trends. we of this to test perspective, so we said, model. of Obviously, for I at think of And least a is back need the time the to That sort hit withstanding where we're improve. growth get validity our to staffing

Kevin Steinke

the expense. Right. No, trend the representative makes think improvement that also in will to nice sense. of first Do remaining in I it wanted that that kind you of we sequentially of is ask about the the all number quarters for saw workers XXXX. compensation quarter how

that's and policy I down hope actually bit just say great will renewed again, I more. -- go would the on X. So a March a question. Obviously, it

And so policy. really net expense $XXX,XXX only month of that new X of reflected the

other The that part year. is policy 'XX-'XX

hope have really -- in have the we in the I rearview think, it I it mirror.

Richard Hermanns

one. actually quarter That answer are workers' hopeful to the jumpy. the worst notoriously your said, question, we is that be so And comp first would

would were not right we to development be bucks bit X than a better. in that adverse beyond But QX. much I'm definitely improvement a quarterly. And in we more now. for in hundred talking say that. that not to think so position hope going better, QX, of X we're couple massively we even and I a little do I maybe some could much certainly thousand like start we're But getting expecting better

Kevin Steinke

still And seeing the pipeline focused market scanning you given position stronger just now you being on this Are in M&A right the What's staffing relatively financially environment? opportunities for difficult the market the mentioned lastly, your and more opportunities. space? in

Richard Hermanns

Yes.

have towards more sorts say of would but think, as we we're who in deals, seeing living The We're those more -- I but more probably definitely, XXXX are are and priced seeing though, seeing reality geared So mindsets. is, I more deals. bad that some are we're well. people realistically

for that of lousy are already couple that will the that cumulative I out things industry, market available. to potential relatively a better and create if us. we're So think seeing think for effects on I we And this continue with opportunities there on staffing smaller be

me are But struggling, up. not creates we're That's the teed that who us. seeing Now there's got realistic case. more saying anything on especially doesn't prices just also, what mean just the side, we've smaller people which for it's more

who still that New as concerned anyway, damn numbers far is that in But answer The big. the as are prices for The rents candidate was high, of City. like York too are too kind the short I'm still. high running prices damn are high. The too Mayor are

Operator

remarks. turn queue. have the in It Instructions] management to [Operator we questions appears no further floor back I'd like closing for to

Richard Hermanns

Well, you, and thank in appreciate everybody, interest in for listening. We again, continued dialing your the company.

see another you you times hopefully, Thank and We I quarter. system have speaking during as our are And and forward for that will we of again, the this we agree as our to we system being you validity go through -- shown times. in that thank improvement to with And of patch to deeper look is an being resiliency but attention as able looking get for and hopefully me of your these have. you. again, forward encouraged XXXX sort the staffing, to been as I'm better in environment well into also,

Operator

This your conference, may time. lines you concludes disconnect for today's this at your you participation. Thank and

HireQuest (HQI) 9 May 242024 Q1 Earnings call transcript