HQI - Earnings call transcript Q2 2024

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Operator

Good afternoon, everyone, and welcome to the HireQuest, Inc.

Second 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.

John Nesbett

you. Thank welcome call. to to everyone like the I'd Hosting and Chief today are Rick Hermanns; HireQuest's CEO, Financial the call Officer, Steve Crane.

moment a take to safe the Let's harbor read statement.

of relate regarding as call to as of will expectations and amended they based. anticipate, and belief involve terms will, depend future. the amended. of that Act may, risks because and its within and forward-looking current These circumstances conference events occur Exchange XXE Act as should statements expect, are well These Securities comparable assumptions XXXX on This Section uncertainties XXXX intend, members contains or as Section terms XXA HireQuest of statements the or on the management such statements of the the in which include as forward-looking Securities of statements and defined other intent, as such statements

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

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

Richard Hermanns

Good afternoon.

as and mitigate we Our second execute strategy. to profitability business franchising was quarter our continue sustained XXXX leverage by on our of costs, characterized unique model

overall. has environment for from on as market solution staffing slowly for been enhanced particularly what results a focused are difficult driving the industry We recovers the

staffing out to compared we a beginning are to year-over-year compared peers. believe commercial trend daily side these We leveling HireQuest recent downward its of our Despite quarters. as to declines lessened this the business and has have on well pay see headwinds, performed of that

little system-wide baseline. trends some that just sales like HireQuest be, the a QX noticing year. that We're not and where suggest levels, beginning finally we'd royalties 'XX a is were encouraging bit Direct, in that below particular, only to exceeded we're market find to generated last but franchise

continued the in XXXX. X% second quarter X.X% million. our compared in workers' $X.X by to reducing nonrecurring the which SG&A to and expense million ad excludes declined Core MRINetwork million $X.X quarter charges, to We as $X.X comp, SG&A, prioritize reduction well, to fund of the

made Workers' compensation particular, expense, by earlier year as $XXX,XXX in to through. begin the we the in decreased quarter flow changes this

of policy of suggest Our SG&A those latter year. reach development 'XX/'XX workers' impacted anything year. point, do will that negative we the in And comp comp our half workers' at by our this see that this would XXXX levels was not

our always, of M&A is strategy. As part growth a key

regions our as track for both to M&A to geographic continue and expanding numerous have market. these market Our businesses us they new environment allowed to staffing acquisitions Moreover, significantly available related penetrate the seen are to we've addressable verticals, record that of evaluate includes made us. and increased opportunities current

Search expanding despite we had with to business, near for in been segment. acquired been the the headwinds medium In business the December acquisition the it we the When this of Executive higher-margin it has intention declining, us Overall, we we continue into trend to of industry stated MRINetwork, faced. positive a that and acquired XXXX, our the expected term.

has the problem. downturn Executive extended exacerbated experienced, market the predicted have couldn't which the Search has we Unfortunately,

been revenue down some at business an the end sequential was of by and sales the we've the and XXXX, growth market the and of realized are we impediment, from over X We XXXX. of encouraged of expected. But QX the where synergies the is operational quarters straight again, significantly system following state decline, in has it

a have economy, us to as the but allows our organic and we It's of M&A staffing believe and time that most the to try grow of strategic understanding difficult growth a we know, combination very efficiently to strong well market business. all

and continue regardless enhance We economic offerings We create of value for meaningful deliver to us have the approach to market results to take in the our shareholders, improved our which diligently evaluate that potential staffing environment. to our a environments. opportunities long-term allows changing business,

industry. the that of the after strong merger literally, has back broader since time summer driven consistently In X so our outpaced the Command growth we've years in Center merger, XXXX, the we're staffing

all adjusted or peer X-year almost of considerably sales the system average, companies more CAGR exceeded other XXXX than group. EBITDA our Our is has X-year staffing industry XXXX commercial professional and to and example, CAGR, our the XX% double for from in

addressable progress is of not several flexibility model HireQuest model market One, sector. the have of business. industry and we outperforming a a our offerings. Two, our of of recovers. on well economics of A therefore, value once aspects vertical, to validation key customers only differ franchisees needs advantage a staffing our franchising that that and provides the very staffing is the full This to the can the but and our spectrum take broader size, with meet working of based opportunities despite down maximizing market our are location, wide strong positioned

and differing business landscapes of strong a While strength not to to we our our on immune across demonstrates consistent market conditions, are ability capitalize economic market. performance the

course, have we track The of of a regardless record landscape. and staying the cyclical, economic staffing is the industry strong

or and to the growth headwinds as We have positioned a to believe forge weather path proven we and market well ahead employment on value very such the economy that and short-term soft are down strategy creation. long-term

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

Steven Crane

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

generated up from revenue. miscellaneous our as to is is as which certain which royalties, primary franchise charge total source franchisees very well service and components: of revenue and revenue; interest services Our other X revenue, is of made our much

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

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

quarter X%. SG&A the expenses XXXX. which was compared period, second expense million in from will based $XXX,XXX, benefit expense operating workers' compensation to compensation for decrease the quarter, factors. the second second fluctuate and of quarter component $XXX,XXX were of year decrease expenses. a of continues $XXX,XXX $X.X of the SG&A on different prior largest a to workers' our approximately the million Also or Generally, included in approximately In be benefits, our salaries in several were $X.X

count taxes the integration. mostly of of million second XX% In XXXX, $X decrease Net head quarter reductions, MRI second million period. second operations, in with in in operations, to the income, from income of income around related a expenses, in to which quarter the in and prior million $X.X items, discontinued quarter $X compared $X.X adjusted the compensation-related line million was includes of XXXX XXXX, for miscellaneous recognized we year the interest,

net diluted flat adjusted margin or was per with compared in for to net Adjusted in prior Net to the our $X.X period. continuing XX-Q, income diluted in which year share, share from quarter detailed was in is from in EBITDA which was $X.XX $X.X second income this quarter reconciliation million of was continuing provided per The operations last year of compared $X.XX the period. the for EBITDA XX% XX% second operations quarter the of $X prior the EBITDA filed million XXXX adjusted or A afternoon. the quarter income $X.X million year. was to million

Moving to on the sheet. balance now

and at compared million while assets XX, $X.X and to of net $XX.X net $XX.X million XXXX, cash of XXXX. receivable. assets million XXXX, current of assets December at cash XX, were accounts June receivable included Current accounts at $XX.X in current XXXX, million $XX.X as XX, XX, December included $XXX,XXX Our June of million

Current when June XX, at current XXXX assets year-end were liabilities exceeded capital current working versus versus XXXX, assets liabilities million $XX.X XX.X% at at assets by June XX, was December Current of XXXX. current million. $XX.X XX, XX.X% of XXXX,

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

We a of regular shareholders share pattern, June Continuing as paid $X.XX per of dividend X. have to of XXXX. paid XXXX, that the a since on dividend quarter quarterly record common we June XX, third

We to to a expect discretion. subject quarter, to dividend the continue Board's each pay

will With turn to I Rick closing the back comments. for call some that, over

Richard Hermanns

we dedication half look now our and into value for to as to we past open Steve. of progress thank latter this you. I'd for employees like can franchisees line Thank the questions. stakeholders work hard you, and With we in Thank their that, XXXX. our and generating forward quarter, the to

Operator

first of from Kevin Your Instructions] is question Steinke [Operator Research. coming Barrington

Kevin Steinke

about talk improving I market. your to an wanted Well, about comments staffing

in but a the yes, the the get that quarter. thus assuming of recovery, slow a through far, for recovery second X, mentioned . market, I'm just you've I'm third X weeks feel the to some quarter. you what saw seen in trying You first

Richard Hermanns

was continued I towards an an particularly comparisons. improvement in Yes, of second the quarter. third into was there improvement. definitely -- There That the has would definitely sort an throughout trend quarter, year-over-year improvement,

actually a couple seen year, we've more that prior where in we of year. hadn't So exceeded weeks had we're actually than we've -- the which is a

up here we're into why optimistic if of improving -- if seen of we're couple the again, that's an definitely there's sort obviously, real market economy, that knocked then But last off trend. well, we've ends stumble So cautiously the translating the again. weeks, track now,

Kevin Steinke

Are that, categories,that mentioned piece the that you particular that seeing what the Direct year-over-year Just actually business. down up it Great. improvement? are in driving that of the of quarter. maybe wondering kind is being you're HireQuest And And there board? in any into Okay. drilled across have you second occupational

Richard Hermanns

So good -- question. and that's a

construction. is category. it it we've is, So it's than -- job geographic say, let's But more

a a Our construction-related. had regaining by few business. fallen those comparisons that replaced they've were be where strongest battling We've definitely had off down couple had good-sized we are markets, that of had to clients we stride. in a started some their of where that And that selling are offices and new couple a quarters recovery are we

So come filling sort new in. up ones stepping necessarily back, are it's not there and but the stepping clients having -- old of

to back original would -- going So But question, for That's again, your us. about cautiously best we're and construction. optimistic QX. -- the definitely, it's I

Kevin Steinke

That's Okay. helpful.

part business Search. the we So if seeing the MRI, of is the feeling half still Have meaningful business -- that Just in seen of into second called as that stabilization out you Executive facing part that wondering year. about your or any the shoots? green you're move what's business headwinds, some you

Richard Hermanns

So stated say a different in franchisees would back had was are remarks, our years. prepared for in factors to out as X are and One, MRI there of of offices I we acquired put going number involved. 'XX that when MRI, what really December we losing and

downward trend units itself. organization, number to of simply of part related the the the so And is

Executive subjected were Search. a what for environment offices to remaining then, The is obviously, clearly bad

was QX, the effect of more better As still for has whereas offices, nonetheless. had Literally, if staffing definitely trend, than but far in back our staffing. to That least exclude Search the effectively left we're flat, the a you than system. downward a that as significantly somewhat challenging a come shoots, back green Executive it's say, offices QX less it in let's trend, said, it point has a come still being, -- have where at to downward the was

Kevin Steinke

recovery think some technology. in within have now that heard that's comments if be might And -- you MRI, market. there terms stabilization of of I know I and have they some something don't that placement signs have a in I they Okay. or might seen. have IT meaningful portion

Richard Hermanns

a That's question. Yes. great

other bit, as And but so in been segments. been as a mixed a well. let's yes, -- as, mixed as but really there's really a been It's say, it's not as little bag good the

industry. let's a you point there's just those the lot sector offices focused not are that doing to, within say, again, and aren't. to are financial very specific, say on even and that those others even, think categories go offices our sort well of specific but many of MRI say, the just This MRI let's industries, I of can't

move don't they in so predictable fashion. And

And or so is I that's can I better versa. health It well can't board. poorly all over you truth. give just a and sit has vice there has care the truly done tech but and say the answer, done

Kevin Steinke

Yes. enough. Okay. Fair

expenses, million down SG&A first I core the the the in believe. at $X.X quarter, million $X.X Looking That's second in quarter. from

might I think and have rate just had sense trying last half? out of you more SG&A a some quarter you of X.X% if I'm of second taken run talked terms taken to about is you core for some get actions cost the the a in

Richard Hermanns

Yes. their I earnings -- several mean, call, some through even already that definitely doing been were income the worked when -- taken cuts worked had through There were that clearly steps. last statement. already made there the hadn't we've were way we

be drive would for that predictable. upward expenses anything, being even come times. a far really mean, X.X%, more probably pressure. at downward bit the as there's costs. it in sometimes versus there's large nothing point for But at if so bills as I this careful nothing the really on that SG&A, up our pressure We're with to core And weird there's

Kevin Steinke

That's Okay. helpful.

about Lastly, wanted I the to just environment. M&A ask

you just on pressures pipeline to you sellers, staffing recent and the increased Maybe expectations mentioned speak cetera. could some by you're the valuation think opportunities et I of the given seeing industry.

Richard Hermanns

deals valuations experience, always but the are for there that still environment. there. So are they are our there are we in They're not opportunities at appropriate more, more. at out necessarily are this least like There think exist,

deals being there. willing And -- few are with actively It's of But up matching close, and working we're we've what's and engaged. so with we're gotten out we're in of offer the on we've ended expected. but still on sort what a to still them,

were better ago. now And certainly obviously, what X.X than though, they prices still are years

we but execute to -- be to on we'll And think So some looking getting always we're that we're at of closer them. able point, again, where that.

in be it again, a that are but no out year, know might deals the Now it be that years I say there's we I promise something. might before X hit there. whatsoever,

Operator

[Operator any queue. questions further Instructions] Okay. not I'm the seeing into come

back the hand now closing management will remarks. I over for So to any team

Richard Hermanns

want again, us been half the look to for have I joining of I this on really at which the call. to to Well, We point able second year, forward thank this probably last everybody year. say wouldn't

confidence quarter. speaking continued look forward the Thank much. interest we are in company, for optimistic. you we a Again, in so the And company cautiously and you again and we you thank just your very to with in again

Operator

Thank you much. very conference today's This now call. concludes

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

HireQuest (HQI) 8 Aug 242024 Q2 Earnings call transcript