HireQuest Inc Aktie

Good afternoon. Will the meeting please come to order? My name is Rick Hermanns, and I am the CEO and Chairman of the Board of HireQuest, Inc. Welcome to the 2026 Annual Meeting of the Stockholders. This meeting is being webcast live, and the webcast will be posted on our website after the meeting.

An agenda that outlines the order of business is available on the website under Meeting Information. The matters on which the stockholders at the meeting are voting on are: one, the election of 6 directors; the ratification of the appointment of Forvis Mazars, LLP as the company's independent registered public accounting firm; and three, the nonbinding advisory vote on approval of the compensation of the company's named executive officers.

After we complete the voting process, there will be time for questions and answers. You can submit your questions via the online annual meeting website during the meeting. If we do not get all of the questions, we will provide answers to all questions that are relevant to stockholders after the meeting on our website. I would like to begin the meeting by introducing the current members of the company's Board of Directors. They are They are Rimmy Malhotra, Larry Hagenbuch, Ed Jackson, Kathleen Shanahan and Jack Olmstead. We also have a number of company officers and management here with us.

Joining me today are Cory Smith, Chief Accounting Officer; and John McAnnar, Chief Legal Officer. John will serve as the Secretary of the meeting and record the proceedings. He has obtained the affidavit of Continental Stock Transfer & Trust Company as to the proper mailing of the notice of this meeting to stockholders. This affidavit is available if any stockholder wishes to examine it and will be filed with the minutes of this meeting. The Board of Directors has appointed Vito Cerone, a representative of our transfer agent, as inspector of the elections for this meeting.

Vito has signed an oath to act as inspector, and this oath will be filed with the minutes of this meeting. The inspector of the stockholder list of the company -- the inspector has the stockholder list of the company as of the record date, April 28, 2026, which shows the stockholders and their respective numbers of shares entitled to vote at this meeting. The list is available to any stockholder who wishes to examine it.

John has advised us that a quorum is present at the meeting, and so I declare the meeting duly and lawfully convened. The meeting is now open and ready for business. The first item of business is the election of 6 directors of the company. The proxy statement sent to you earlier and available on the meeting website under Meeting Documents lists the company's nominees for director. The following individuals are the nominees: Richard F. Hermanns, Rimmy Malhotra, Ed Jackson, Larry Hagenbuch, Kathleen Shanahan and Jack Olmstead.

No notices of intent to nominate candidates for director were received from any stockholder. Therefore, I declare that the nominations for directors be closed. A motion to elect the 6 nominees is now in order.

I move that each of the nominees be elected as directors to serve until the next Annual Meeting of Stockholders.

Does anyone second the motion?

I second the motion.

The polls are now open to vote on the motion. Any stockholder who has not voted by proxy or who wishes to change their vote should do so now. The polls will remain open until we reach the question-and-answer portion of the agenda. The next item of business is to ratify the appointment of Forvis Mazars as the company's independent registered public accounting firm for the year ending December 31, 2026. A motion to ratify the auditor appointment as described in the proxy statement is now in order.

I move that the appointment of Forvis Mazars, LLP as the company's independent registered public accounting firm be ratified.

Does anyone second the motion?

I second the motion.

I call the question and declare the polls open to vote on the motion. Any stockholders who have not already voted or wish to change their vote should do so at this time. The next item of business is to approve, on an advisory basis, the 2025 compensation plan of the company's named executive officers. A motion to vote on the compensation as described in the proxy statement is now in order.

I move that the compensation of the company's named executive officers as disclosed in the proxy statement be approved.

Does anyone second the motion?

I second the motion.

I call the question and declare the polls open to vote on the motion. Any stockholders desiring to vote should do so at this time. We will leave the polls open for another minute to allow the final votes to be registered.

[Voting]

The polls are now closed on the motions. Thank you for all those who voted. While the inspector of election is reviewing the votes, I would like to open the meeting to any questions that stockholders may have. You may submit your questions online via the annual meeting website. John is able to see the questions and will read them aloud.

We currently don't have any questions.

All right. I understand that the votes have been counted and the preliminary report of the Inspector of Election has been delivered to the company. John, will you please announce the results of the stockholders' vote?

Absolutely. The preliminary report of the Inspector of Elections indicates that Richard Hermanns, Rimmy Malhotra, Kathleen Shanahan, Larry Hagenbuch, Edward Jackson and Jack Olmstead have been elected as directors by the stockholders. Each candidate received a sufficient number of the votes cast at the meeting. Ratification of the appointment of Forvis Mazars, LLP as the company's independent registered public accounting firm for the year ending December 31, 2026, has been approved by the stockholders. And the compensation of the company's named executive officers as disclosed in the proxy statement has also been approved by the stockholders.

I request that the final report of the Inspector of Election be filed with the minutes of this meeting. You have now heard the results of the voting, and this completes the business to be conducted at this meeting. Since there are no other matters to come before the meeting, a motion to adjourn the meeting is now in order.

I move that this meeting be adjourned.

Does anyone second the motion?

I second the motion.

Without objection, I declare this meeting adjourned. I would like to thank you for your interest and attendance.

Greetings. Welcome to the HireQuest First Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded.

I will now turn the conference over to your host, Walter Frank of IMS Investor Relations. You may begin.

Thank you, operator. I would like to welcome everybody to the call. Hosting the call today are HireQuest's CEO, Rick Hermanns; and CFO, David Hartley. I would like to take a moment to read the safe harbor statement.

This conference call contains forward-looking statements as defined within Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements and terms such as anticipate, expect, intend, may, will, should or other comparable terms involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Those statements include statements regarding the intent, belief or current expectations of HireQuest and members of its management as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those described in HireQuest's periodic reports filed with the SEC and that actual results may differ materially from those contemplated by such forward-looking statements. Except as required by federal securities law, HireQuest undertakes no obligation to update or revise forward-looking statements to reflect changed conditions.

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

Good afternoon, and thank you for joining our call today. Our First Quarter 2026 was another solid quarter of operational execution and profitability for our business that demonstrates the resilience of our franchise staffing model in diverse markets. While many in our industry have struggled to keep up with the shifting customer demands and a soft market for staffing services that has been impacted by a slow and sometimes even frozen hiring market, we continue to deliver consistent results and sustained profitability for multiple reasons.

First, our franchise staffing model aligns incentives by making our franchisees owners alongside us. In other words, when our business is performing well, everyone benefits. Our model also provides enhanced expense control with less need for regional or middle management and our exposure to diverse customer verticals and recurring revenue streams at the local level helps us to mitigate macroeconomic risk. Put simply, our performance in the first quarter continues to reflect the resiliency and strength of our model.

It is important to stress that as a management team, we take a long-term view of the business and value creation. We have driven positive results dating back to before COVID. The company has not lost money in a single year since our formation and has delivered double-digit compounded annual growth in system-wide sales, revenue and adjusted EPS from 2019 to 2025. This growth has also outpaced the broader market. Our total sales grew almost 57% from 2019 to 2025 after adjusting for the divestiture of MRI Network compared to a decline of approximately 3% in sales during the same period for the broader U.S. temporary staffing industry. Specifically, our commercial sales, as so adjusted, increased almost 80% during this period, while the broader industry declined by about 23%. All the while, we have maintained a strong balance sheet with no debt.

Looking forward, we are not wavering from our strategy that combines disciplined M&A with organic franchise growth, which has resulted in the business more than doubling in size over the past 5 years. Furthermore, we have been able to keep our SG&A relatively stable as a percentage of system-wide sales despite persistent economic headwinds over the past couple of years.

I talked about tentative green shoots in demand over the past couple of quarters, but those tended to be isolated and fleeting. In Q1, despite a rough start, towards the second half of the quarter, we started to see some consistent favorable weekly year-over-year comparisons across the business. And so far, in Q2, those comparisons have become even more favorable. This is encouraging for a number of reasons. First, I think we can attribute some of the improvement to the surge in undocumented workers that came from 2021 to 2023 have finally been resolved. Secondly, we are starting to see the impact of our investments in our National Accounts program and the efforts of our franchisees starting to pay off. Looking ahead, we believe we're in a favorable position to benefit from what looks to be an improved staffing market in 2026.

With that, I'll now turn over the call to David to provide a closer look at our first quarter financial results.

Thank you, Rick, and good afternoon, everyone. I appreciate everyone joining today. I'll now provide a summary of our first quarter results. Total revenue for the first quarter of 2026 was $6.5 million compared with revenue of $7.5 million in the prior year, a decrease of 12.7%. As a reminder to everyone, we completed our divestiture of certain MRI Network assets, which comprised of the permanent placement franchise operations on January 1 of this year. So the first quarter of 2026 does not include any revenue or SG&A from that portion of the business. As a point of comparison, the first quarter of 2025 included approximately $574,000 in total revenue related to divested MRI Network assets.

Our total revenue is made up of 2 components: franchise royalties, which is our primary source of revenue; and service revenue, which is generated from certain services and interest charge to our franchisees as well as other miscellaneous revenue. Franchise royalties in the first quarter were $6.1 million compared to $7 million for the same quarter last year. The first quarter of 2025 included approximately $500,000 in franchise royalties related to the divestiture. Underlying franchise royalties are system-wide sales, which are not a part of our revenue but are a helpful contextual performance indicator. System-wide sales reflect sales at all offices, including those classified as discontinued. System-wide sales in the first quarter were $102.6 million compared to $118.4 million in the first quarter of 2025. The first quarter of 2025 included approximately $16 million in system-wide sales related to the divestiture.

Service revenue in the first quarter was $462,000 compared to $512,000 last year. The first quarter of 2025 included roughly $75,000 in service revenue related to the divestiture. Selling, general and administrative expense in the first quarter was $4.3 million compared to $5.3 million in the first quarter of 2025. Included in SG&A is workers' compensation expense, which totaled $39,000 for the first quarter compared to $28,000 in the first quarter of 2025. Additionally, the first quarter of 2025 included approximately $700,000 in SG&A related to the divestiture.

For Q1 2026, core SG&A, which excludes the impact of workers' comp and any nonrecurring operating expenses, was $4.2 million. We provide a table in the press release issued earlier this afternoon with a detailed reconciliation of core SG&A to SG&A, along with tables for the non-GAAP profitability metrics, net income to adjusted net income and net income to adjusted EBITDA, which I'll discuss shortly.

Net income after tax was $1.6 million in the first quarter or $0.11 per diluted share compared to net income of $1.4 million or $0.10 per diluted share last year. Adjusted net income for the first quarter was $1.8 million or $0.13 per share compared to adjusted net income of $1.8 million or $0.13 per diluted share in the same period last year. And adjusted EBITDA for the first quarter of 2026 was $2.7 million compared to $2.8 million last year. Given the size of noncash operating expenses running through our P&L, we believe adjusted EBITDA and adjusted net income are both relevant metrics for us.

Moving to the balance sheet. Our total assets as of March 31, 2026, were $91.1 million compared to $88.2 million at December 31, 2025. Current assets included $1 million in cash and $44.7 million of net accounts receivable, while current assets at 2025 year-end included $3.9 million of cash and $39.3 million of net accounts receivable. Working capital was $32.5 million at the end of the first quarter compared with $33 million at the end of 2025. At the end of the first quarter, we had $0 drawn on our credit facility, and that provides us with $40.3 million in availability, assuming continued covenant compliance. We have paid a regular quarterly dividend since the third quarter of 2020. Most recently, we paid a $0.06 per common share dividend on March 16, 2026, to shareholders of record as of March 2. We expect to continue to pay a dividend each quarter, subject to the Board's discretion.

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

Thank you, David. I'd also like to highlight that we issued a press release this afternoon, which described the new offer to the Board of Directors of TrueBlue. Our new offer is $105 million cash for the on-demand portion of TrueBlue's PeopleReady segment. As previously disclosed, HireQuest made multiple offers to TrueBlue in 2025. Last year, we were prepared to initiate a tender offer directly to the TrueBlue shareholders and incurred substantial costs in its preparation. However, we postponed that process in hopes of engaging with the TrueBlue Board of Directors directly on a friendly basis.

Now roughly a year after we first made our interest known and made it public, nothing has materialized. We are once again exploring our options. We believe that the on-demand portion of TrueBlue's PeopleReady segment is very complementary to our HireQuest Direct division and as such, made an attractive all-cash offer earlier today to TrueBlue's Board of Directors. This part of TrueBlue's business has been an underperformer for them for years, and our proposal gives the opportunity for them the opportunity to divest these offices and raise a substantial amount of cash. We hope TrueBlue's Board will view this opportunity as a clear path to create incremental value for their shareholders.

As always, I'd like to thank our employees and franchisees for their hard work and commitment, and we look forward to speaking with you again when we report our second quarter results in August.

With that, we can now open the line to questions. Thank you.

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

Great. Thank you. I wanted to start out by asking about just the trends you saw throughout the first quarter. You mentioned a rough start. Is that at all related to maybe some weather headwinds or headwinds from the holidays? I know I've heard other companies talk about that. And then you talked about the second half becoming more consistent and that continue into the second quarter with even some improvement. So maybe just a little more color on the trends as the quarter progressed and as you've moved here into the second quarter.

Yes, absolutely. Thanks, Kevin. So yes, what you said is absolutely and what other people have observed. The beginning -- basically until mid-February, the results were -- our results were impacted significantly by sort of the placement of New Year's Day. So the holiday was just set at a really pretty much -- it became a -- basically a 20 -- 20 business day month, January was. February is always traditionally bad because it's a short month. And so January was just as bad because of the placement of New Year's Day.

On top of it, the weather was unusually bad over an unusually large swath of the country. But what we noticed was starting around mid-February, our results became perceptibly better, particularly compared to the year-over-year comparison. And as towards the end of the quarter, it continued to get better. And if you look at the numbers that David had stated, for example, really if you exclude the system-wide sales impact of the MRI Network divestiture, we were nearly flat year-over-year as far as system-wide sales.

The good news or the better news is that in the first 5 weeks of the second quarter, our results -- our comparisons have become even more favorable. And so in absence of some black swan out there, we're feeling really good about -- we're feeling really good about our demand right now.

Okay. Yes, that's helpful. And so you mentioned the year-over-year comparisons becoming more favorable as we enter the second quarter. And I had noticed as well that excluding MRI, the system-wide sales were flat year-over-year in the first quarter. So should we kind of think about you've moved into a more -- actually growth year-over-year on a weekly basis over the last few weeks?

Yes. I mean I would say, look, from your lips to God's ears. I mean, yes, I do think -- I do feel much more optimistic now than I have in the last -- certainly the last 2 years. We have some really solid momentum right now. Now again, and it's been more sustained. We've -- you and I have had these conversations in this forum over the last 5, 6 quarters, and it's always, yes, we've had a few good weeks. Gee, it seems like it's getting a little bit better and then frequently, it would fall off. And for the last -- I mean, we've really -- for the last even 8, 9 weeks, we've really had pretty consistent consistently decent results compared to the year-over-year period.

All right. And yes, you mentioned maybe a couple of factors helping you out there, reduced undocumented immigration and also your National Accounts program. So maybe just kind of touch on how you believe those things have benefited the results recently here?

So 2 things in particular. One, obviously, between '21 and early '24, depending on who you -- whatever source you believe in, that probably at least 10 million people came into the country illegally or legally that's about 3x the size of the staffing industry. And so while obviously, not everybody who comes in is competing for our jobs, a lot are. I mean you think of a lot of those workers work in food service, things like that, that have traditionally in hospitality, jobs that frequently are filled in particularly our segments of the staffing industry. And so it really wasn't -- really has had an impact. Well, now net immigration is much lower. And even as the economy has grown, it's absorbed some of the sort of some of the excess labor that came from the amount of immigration we had.

What really kind of drove that point home for me even a couple of weeks lag, weeks back, I was reading even like what the population -- the population growth in the United States in 2025 was one of the lowest in recorded history. And again, so we're starting to see more normal patterns. It's like it was always a hard thing for me to understand, and I mused about it on these calls even at different points, how in the world can we have declining staffing demand with 3.7% or 3.9% unemployment rate. It never computed in the 35 years I've been in this industry, that was just never the experience. And now we're actually starting to see where the staffing industry is tracking much more with true increases or decreases in unemployment. And so for us, that's a good thing because we are still in a relatively low unemployment environment.

And so I think we're just starting to see -- we're starting to see the return of certain segments of business that really had not been there in a while. And the other part is we briefly touched on it back towards the end of last year, but we made some pretty good-sized investments in our national accounts department. And we're definitely getting some pretty significant wins in -- from that investment. And so we're also seeing organic growth that's just related to our efforts, not necessarily due to the macroeconomic trends.

All right. Great. Maybe just to touch on the TrueBlue offer or the offer for the on-demand segment, the PeopleReady. Can you maybe just give investors a sense of the size of that business you're targeting in terms of system-wide sales or you mentioned it was underperforming. And maybe if you were to acquire that, how you feel like you could improve its performance and its profitability?

So unfortunately, I'm not at liberty to speak of anything beyond what's been released. So your questions are valid. So I'll just probably have to make for a different point.

Okay. Completely understand. And just maybe lastly, you mentioned the positive year-over-year comparisons. Are you seeing that in there any particular markets or segments of your business, commercial versus on-demand? Or is it kind of pretty broad-based in terms of the stabilizing and improving trends you've seen?

Commercial is where it's at right now, I have to say. Our on-demand is doing okay. And by the way I say, okay, let's say, it's flat. It's doing reasonably well just given the overall macro environment. But the commercial side has really been strong and not geographically limited either.

One of the things, and this is part of what draws it back even to the immigration issue. There are a lot of different -- maybe it's related to reshoring, maybe it's just more an application of robotics, et cetera, to our industrial economy, but there are a lot of retrofits and things going on. And a lot of those are shorter to medium-term projects as an example. And that's what I'm saying, we're starting to get a lot of wins on things like that. And which again is more of a return to traditionally what staffing is really a very good product for. And so again, we're very encouraged with it. And again, broad-based.

[Operator Instructions] The next question comes from Keegan Cox with D.A. Davidson.

I just wanted to ask how results came in versus your expectations for the quarter. I mean, excluding MRI, like you said, system-wide sales flat. It looks like service revenues improved, but franchise royalties down. I guess, kind of -- is that just all weather related? You kind of talked about it, but walk me through it again, I guess.

Well, I guess it depends on -- as far as my expectations, it would have been depending on what time in the quarter you asked me. If you have asked me in early February, I'd have been crying over my beer thinking we're going to have a terrible quarter. And so -- and simply -- and of course, I can't control the weather and I can't control what the New Year's falls on.

And so I would say the second half was -- particularly given the results of the first quarter were -- ended up balancing it out. And so I would say we were, frankly, probably right about where we would have expected overall uniformly just based on what -- sort of on what transpired. I do think that, again, I feel good about the second quarter and again, the rest of the year. But we are obviously tied to macroeconomic circumstances that are way beyond our control.

Got it. And then you kind of talked about it already, seeing a return of some segments of business that haven't been there for a while. You mentioned the retrofits. I'm guessing you're seeing a lot more on the industrial side, too, and construction wise.

Construction is improving, but construction is not -- construction isn't what it was, let's say, 1.5 years ago. It's not -- it's recovering, but slower unless you get into the big data centers or the really big projects, which, again, we're cracking more into. But really, the real action for us is just -- it really is in the industrial and manufacturing side. It's definitely improved.

Got it. And then just my final one is there -- we follow a few indicators. I mean, if I look at TrueBlue and PeopleReady, it looked like that business accelerated this quarter. Other industry publications show that temp staffing demand is improving. I guess looking at your results, why wouldn't your trends be holding up relative to these indicators?

Well, they are. That's the thing. So in fact, I think it was today, maybe it was yesterday, staffing industry analysts pulls out the bullhorn job report, and it showed a really fairly -- it's like a 7% gain, don't quote me on that part, but like a 7% gain last week in temporary staffing jobs. So it's -- that's very consistent with what we're seeing.

And temporary staffing jobs actually rose in March, April and appear to be accelerating into May, which is for 2 months in a row for actual growth has been -- is a big deal for the staffing industry compared to the last 3 years. As we pointed out, even in our prepared remarks, I mean, the staffing industry is down 3% overall since 2019. And so like I said, it seems like that trend is finally starting to break.

Thank you. We have reached the end of the question-and-answer session. And I will now turn the call over to management for closing remarks.

Again, I want to thank everybody for being with us today. This is an exciting time for the company as we hopefully are at the cusp of a period of higher demand for our services. And of course, we have -- we remain hopeful that our bid for the on-demand portion of TrueBlue's PeopleReady segment will be taken seriously and will lead to greater opportunities for everybody.

So again, thank you for joining us, and we will look forward to speaking with you again in August. Thank you.

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

Greetings. Welcome to the HireQuest Inc. Fourth Quarter and Year-End 2025 Earnings Conference Call. [Operator Instructions] A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note, this conference is being recorded. I will now turn the conference over to your host, Walter Frank of IMS Investor Relations. You may begin.

Thank you, operator. I would like to welcome everybody to the call. Hosting the call today are HireQuest's CEO, Rick Hermanns; and CFO, David Hartley. I would like to take a moment to read the safe harbor statement. This conference call contains forward-looking statements as defined within Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. .

These forward-looking statements and terms such as anticipate, expect, intend, may, will, should or other comparable terms involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future.

Those statements include statements regarding the intent, belief or current expectations of HireQuest and members of its management as well as the assumptions on which such statements are based.

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

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

Good afternoon, and thank you for joining our call today. As we've spoken to on previous calls, the macro environment has driven a challenging time for the staffing industry. .

That said, we remain solidly profitable and executed well in 2025. As many of you already know, we acquired MRI network, our global executive search and permanent placement brand back in 2022 as a way for us to tap into the increasing demand for executive search and permanent placement staffing offerings.

Since we acquired the business, hiring for both executive search and permanent placement have slowed and that dynamic impacted our ability to scale and grow MRI. MRI network had 2 components of its business, a permanent placement executive recruiting piece and a contract staffing piece.

After careful consideration during the fourth quarter, we announced our strategic decision to change the ownership structure of MRI network by divesting the permanent placement piece of the business into a new entity in transitioning majority ownership to a newly formed leadership group made up of current and former franchise owners.

We believe this is a positive strategic shift for MRI network and the future growth of the brand. By restructuring ownership and aligning MRI's leadership with experienced franchise owner operators, we're making sure the network is being guided by the people who live its mission every day.

This reset is focused on growing and strengthening client partnerships to unite a global network of executive staffing and permanent placement offices into a cohesive, high-performing organization. Importantly, HireQuest remains fully committed to MRI network, and we'll continue to retain partial ownership and support the brand with the essential infrastructure purchasing power and shared services across our staffing and recruiting network.

So what that means for HireQuest and you as shareholders of IR Quest is that as of January 1 of this year, the permanent placement portion of MRI is operating under this new entity in which HireQuest has a minority ownership stake in. And HireQuest continues to operate and have full ownership of the contract staffing piece of the MRI business, which is the part that more closely aligns with our other franchise offerings.

In another development, we announced in December that HireQuest Board of Directors had approved a share repurchase program that authorizes the company to repurchase up to $20 million of its outstanding shares of common stock. We believe that a share repurchase program is currently an efficient use of our capital, reflects our commitment to prudent capital management and deployment and reinforces the confidence that the Board and management team have in HireQuest long-term strategy while also returning capital to our shareholders.

Prior to the close of the year, we surveyed over 400 offices across our Higher Quest direct selling and MRI brands to get a better sense of the overall job market and hiring trends as we headed into 2026. The data we collected points to a studying market with fewer extremes and early signals of reallocation across industries.

In other words, while we don't expect 2026 to be defined by hiring boom or bust, we do expect more balance in the labor market that appears to be stabilizing around new priorities including flexibility, fit and the kind of skilled work and labor that can't be automated by AI.

Some key statistics from the survey include 68% of offices surveyed set time to fill for open rolls steadied in 2025, while 35% saw increases. This is generally considered to be a clear indicator of market stability. Recruiters expect the time to fill to remain stable in 2026, while 15% expect improvement as candidate supply normalizes.

On average, employers are moving faster to secure top candidates in full-time roles, demonstrated by the late 2025 hiring urgency uptick. Looking ahead, we expect several trends including AI and automation, reshoring and tariff relief and economic and political shifts to be key forces that will spend shape 2026, but 2026 hiring landscape. HireQuest is keeping a close eye on the many markets in which we operate, and we believe that we're well positioned with our franchise staffing model to benefit from a stabilizing market. and to meet the shifting demands of employers in 2026.

Lastly, I'd like to acknowledge that on March 3, selling our nationwide temporary and direct hire recruiting service celebrated 75 years of continuous operation, placing it among the longest running staffing firms in the United States. On behalf of all of HireQuest, we congratulate them on 3/4 of a centric of success and look forward to many more years as a leader in their respective markets.

With that, I'll now turn the call over to David to provide a closer look at our fourth quarter and full year financial results.

Thank you, Rick, and good afternoon, everyone. I appreciate you all joining us today. I'll now provide a summary of the fourth quarter and full year results. Total revenue in the fourth quarter of 2025 was $7 million compared with revenue of $8.1 million in the prior year, a decrease of 13%. For the full year, total revenue was $30.6 million compared to $34.6 million in 2024.

Our revenue is made up of two components: franchise royalties, which is our primary source of revenue and service revenue, which is generated from certain services and interest charge to our franchisees as well as other miscellaneous revenue. Franchise royalties for the quarter were $6.6 million compared to $7.6 million for the same quarter last year.

And for the full year 2025, franchise royalties were $29 million compared to $32.7 million in 2024. Underlying franchise royalties are system-wide sales, which are not a part of our revenue, but are helpful contextual performance indicator.

This wide sales reflects sales at all offices, including those classified as discontinued. In the fourth quarter of 2025, system-wide sales were $122.3 million compared to $134.8 million in Q4 2024, a decrease of 9.3%. And for the full year, system-wide sales were $500.2 million compared with $563.6 million in 2024, a decrease of 11.3%.

Service revenue in the fourth quarter was $392,000 compared to $428,000 last year. And for the full year 2025, service revenue was $1.6 million compared to $1.9 million in 2024. Selling, general and administrative expenses in the fourth quarter were $4.5 million compared to $5.1 million in the fourth quarter last year.

SG&A for the full year was $20.7 million compared to $21.4 million for the full year 2024. Included in SG&A expense is net workers' compensation expense, which totaled $89,000 for the full year compared with about $2 million in the full year of 2024, a decrease of $1.9 million that demonstrates the progress we've made to reduce the impact of this expense on our business and lower it back to historical levels. SG&A, which includes the impact, which excludes the impact of workers' comp, MRI ad fund expenses and any nonrecurring operating expenses was $4.1 million for the quarter and $8.5 million for the full year.

We provided a table in the press release issued earlier this afternoon with a detailed reconciliation of core SG&A to SG&A, along with tables for the non-GAAP profitability metrics, net income to adjusted net income and net income to adjusted EBITDA, which I'll discuss shortly.

Net income after tax was $1.6 million in the fourth quarter or $0.11 per diluted share compared to net income of $2.2 million or $0.16 per diluted share last year. For the full year, net income was $6.3 million or $0.45 per diluted share compared to $3.7 million or $0.26 per diluted share in 2024.

Adjusted net income was relatively flat year-over-year for both the fourth quarter and full year 2025. And in the fourth quarter of 2025, adjusted net income was $2.7 million or $0.19 per diluted share compared to adjusted net income of $2.6 million or $0.19 per diluted share in Q4 2024.

And for the full year, adjusted net income was $10 million or $0.71 per diluted share in 2025 compared with $9.9 million or $0.71 per diluted share in 2024. Adjusted EBITDA in the fourth quarter was $3.4 million compared to $3.8 million last year. And for the full year, adjusted EBITDA was $14.1 million compared to $16.2 million in 2024.

Given the size of noncash operating expenses running through our P&L, we believe adjusted EBITDA and adjusted net income are both relevant metrics for us. So now moving on to the balance sheet. Our total assets as of December 31, 2025, were $88.2 million compared to $94 million at December 31, 2024.

And Current assets included $3.9 million in cash and $39.3 million of net accounts receivable while current assets at 2024 year-end included $2.2 million of cash and $42.3 million of net accounts receivable. We ended 2025 with about $33 million in working capital compared to $25.1 million at the end of the year in 2024.

The biggest driver for the increase in working capital is that we ended 2025 with $0 drawn on our credit facility, down from $6.8 million drawn at the end of 2024. So at December 31, 2025, we had $40.3 million in availability, assuming continued covenant compliance.

We have paid a regularly -- regular quarterly dividend since the third quarter of 2020. Most recently, we paid a $0.06 per common share dividend on March 16, 2025 to shareholders of record as of March 2. We expect to continue to pay a dividend each quarter, subject to the board's discretion. And with that, I will turn the call back over to Rick for some closing comments.

Thank you, David. As always, we'd like to thank our employees and franchisees for their hard work and commitment, and we look forward to speaking with you again when we report the first quarter results in May. With that, we can now open the line to questions. Thanks. .

At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Kevin Steinke with Barrington Research. .

Rick and David. I was just wondering about the environment you described in terms of stabilization and some clients moving more quickly. If you see that benefiting any of your divisions or brands more than the other, thinking of HireQuest direct versus selling? .

Kevin, I appreciate the question. I would say that it hasn't necessarily been more pronounced in any particular division, but it's very apparent, and it's carried through into the first quarter. So the market has definitely throughout the quarter, it is definitely seems to have found its bottom. And again, I don't want to contradict what we just said, which means it's certainly not going to -- doesn't seem like it's setting up to be a boom year. But after 3 years of a steady decline, we're pretty hopeful that, that's over with. .

Okay. And circling back to the MRI transaction. Can you maybe just give us a sense of quantification of how we should think about that affecting the numbers as you move forward in terms of just the revenue and expense impact from the ownership change in that business as it flows through your income statement. .

Yes. I'm going to leave that question to David, other than as far as getting into some of the specific numbers, I will say, generally speaking, the -- about 35% to 40% of, let's say, from 2025 of what we had in has been retained via the contract staffing.

So there will be a decline from that portion that makes any sense. Now realistically, the perm placement division was breakeven at best. So from an actual income standpoint, the effect will literally be nothing should be nothing. But David, if you have any more on that? .

Yes. So in 2025, the executive search portion of MRI contributed about $65 million of system-wide sales and just a touch under $2 million for royalties. And like Rick said, from an expense side of things, it was it was breakeven to this past year, slightly down a little bit in terms of profitability. So -- so those are kind of -- that's kind of what we should see as things start to normalize in 2026. .

Kevin, do you have an additional question? .

Yes. Just quickly, you didn't mention acquisitions or the acquisition pipeline, just wondering if you had any update there. .

Well, thanks for that question. We had in the middle of the fourth quarter, we had 1 that we were hopeful, and I would have -- if you'd have asked me in November, I would have said there's an 85% chance we were going to close on that thing. And then they got cold feet and they got cold feet. So look, we're all -- again, we're always looking for it.

However, clearly, we've had a bit of a dry spell in finding any decent ones. And at the end of the day, we're just simply not going to chase a deal just for the sake of having it. It just doesn't really doesn't really help us. And so I would say what we're finding more than what we want is ones with like client concentrations.

And so we try to avoid. We try avoiding those because those are the ones that tend to fall apart when you buy them. And so we've had probably a bit less activity than really what I would expect because of the fact that we've had three years of a down market, I would have thought there would be more that are there.

But -- the only thing I can say is after doing this for 35 years, it's just when I say that, that all of a sudden, some nice deal will fall in our lab. So we're just -- we're always out there working working, working the phones and trying to get deals. And so that said, right now, we don't have anything right now.

[Operator Instructions] Okay. We currently have no questions in the queue. I'd like to turn the floor back to management for closing remarks.

Well, I want to thank everybody for joining us today. I think that again, the results presented just further our contention that the HireQuest model is a very stable profit-centered proven method to be resilient in difficult circumstances.

The fact that we went from nearly $7 million of debt to debt free, for example, in a year that was really by any macro sense of things was down, again, just indicates sort of the strength of our model. And so again, we just -- thank you for joining us today and look forward to presenting our first quarter results here in, I guess, in about 6 weeks. Anyway, thank you, and have a good day.

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

Good afternoon, and welcome to the HireQuest, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to turn the floor over to your host, John Nesbett of IMS, Investor Relations. John, the floor is yours.

Thank you, Tom. I'd like to welcome everyone to the call. Hosting the call today are HireQuest's Chief Executive Officer, Rick Hermanns; and Chief Financial Officer, David Hartley. I'd like to take a moment to read the safe harbor statement. This conference call contains forward-looking statements as defined within Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended.

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

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

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

Good afternoon, and thank you for joining our call today. As you can see from our third quarter results, the staffing market is much the same as it's been for the past 10 quarters now in terms of staffing demand and broader market sentiment. With that said, I'm pleased to report that we delivered another quarter of profitability, highlighted by net income of $2.3 million or $0.16 per share, and we continue to keep our expenses in check despite market uncertainties.

Our results in this quarter underscore the flexibility and strength of our franchise model, which has consistently enabled us to remain profitable in soft markets when many others in our industry have struggled. Over the history of HireQuest, our model has proven to perform well and importantly, be profitable in all cycles. Since its exceptional -- inception over 20 years ago, HireQuest has been profitable each year through all of the economic downturns and consistently provided valuable operational and financial support to our franchisees.

Over the long term, we are confident that this is a winning formula for shareholders. The overall staffing market has provided some mixed signals throughout 2025, which has been impacted by a variety of macroeconomic factors, including tariffs, immigration policies and impending interest rate cuts. Our temp staffing and day labor offerings are outperforming permanent placement and executive search, which can be less predictable by nature. While demand for temp and day labor staffing can fluctuate based on locations and seasonality, our franchisees have a keen understanding of the market.

And with our support and resources, they are able to provide the very best in temporary and day labor staffing services. This dependability and service quality is what keeps our customers coming back to HireQuest in the many geographies that we operate in throughout the United States. Snelling, our nationwide temporary and direct hiring recruiting service, performed well in the third quarter relative to our other offerings with some of these franchisees scoring big wins indicating at least a slight increase in demand for longer-term staffing in the light industrial and administrative fields.

Permanent placement and executive search continues to lag, which has been the case for well over a year now, as many of you know. In addition to macro uncertainties that have been amplified by tariffs and other uncertainties, the MRINetwork mostly saw that one of the biggest problems was the several MRINetwork franchisees elected to not renew their franchise agreements over the last few quarters, which has negatively impacted year-over-year comparisons. While this is unfortunate, our current MRINetwork franchisees saw shrinking declines in their perm placement business over the quarter, which is positive.

I do want to emphasize that MRI franchises operate differently from the traditional franchise model that you see in our HireQuest Direct or Snelling offices. Our MRI offices are more of a network of somewhat related recruiting firms. In fact, many of them have their own names instead of a tight network of offices that share the same name, brand and operating standards like HireQuest Direct, for example. In other words, these are essentially independent recruiting offices operating under the MRI umbrella, making franchisee retention less of a sure thing than our traditional model, especially in a down market.

As always, M&A remains a key part of our growth strategy. There are several opportunities that we are looking at that could be immediately accretive to the HireQuest model, and we're keeping our ears close to the ground for any new deals. This is an especially interesting time for deals given the status of the market where smaller firms or long-term owners eyeing retirement may be planning their exit strategies. We're constantly scanning for new opportunities, and we're well equipped with a proven strategy that's helped us to close and successfully implement numerous acquisitions over the lifespan of the company.

With that said, I'll now turn over the call to David to provide a closer look at our third quarter financial results. David?

Thank you, Rick, and good afternoon, everyone. I appreciate you all joining us today. I'll now provide a summary of our third quarter results. Total revenue was $8.5 million compared with revenue of $9.4 million in the prior year or a decrease of 9.8%. Our total revenue is made up of 2 components: Franchise royalties, which is our primary source of revenue; and service revenue, which is generated from certain services and interest charged to our franchisees as well as other miscellaneous revenue.

Franchise royalties were $8.1 million compared to $9 million for the same quarter last year. And our service revenue for the quarter was $387,000 compared to $428,000 last year. Underlying these franchise royalties are system-wide sales, which are not a part of our revenue but are a helpful contextual performance indicator. System-wide sales reflect sales at all offices, including those classified as discontinued. System-wide sales in the third quarter were $133.6 million compared with $148.6 million last year. Sequentially, system-wide sales increased about 6.1% this year over Q2, which was favorable compared to last year when the increase was only 1.7%.

The third quarter is typically our best sales period for HireQuest Direct and to a lesser extent, Snelling. And this year, both offerings saw double-digit sequential growth compared to only mid-single digits last year. Selling, general and administrative expenses in the third quarter were $5.1 million compared to $5.4 million in the third quarter of 2024. I'd also like to point out that we recognized a workers' compensation benefit in the third quarter of just under $100,000 compared to Q3 of last year when we had a net expense of $500,000.

We are pleased with the results from the changes we've implemented to our work comp program. But just so you guys don't get the wrong idea about the other expenses, I think it would be helpful to break down SG&A just a bit more. Core SG&A, which excludes the impact of net workers' comp insurance, MRI ad fund-related expenses and any other nonrecurring operating expenses were $4.6 million for the quarter, which is flat with last year. We provide a table in the press release issued earlier this afternoon with a detailed reconciliation of core SG&A to SG&A as well as tables for the non-GAAP profitability metrics, net income to adjusted net income and net income to adjusted EBITDA that I'm going to talk about shortly.

Our net income after tax this quarter was $2.3 million or $0.16 per diluted share compared to a net loss of $2.2 million or a loss of $0.16 per diluted share last year. Adjusted net income for this quarter was $3.4 million or $0.24 per diluted share compared to last year when it was $2.8 million or $0.20 per diluted share. Adjusted EBITDA was $4.7 million compared to $4.9 million last year, and our adjusted EBITDA margin this quarter rose to 55% from 52% last year. For both adjusted net income and adjusted EBITDA, a large component of the favorable year-over-year results this quarter can be attributed to our controlling of network comp expense.

And while there have been times over the past few years where it would have been nice to be able to include it as an adjustment, we're pleased that the changes we've implemented in recent years are moving us in the right direction. Moving on to the balance sheet. Our total assets as of September 30, 2025, were $94.9 million compared to $94 million at December 31, 2024. Current assets included $1.1 million in cash and $46.9 million of net accounts receivable, while current assets at 2024 year-end included $2.2 million of cash and $42.3 million of net accounts receivable.

Working capital was $31.5 million as of September 30 compared with $25.1 million at 2024 year-end. Current liabilities were 42% of current assets as of December -- as of September 30 versus 49% at 12/31/2024. We had a $2.2 million draw on our credit facility as of September 30, 2025, and that gives us about $42.5 million in availability, assuming continued covenant compliance. So that puts our net debt at the end of this quarter at around $1.1 million, which is down about $1 million from the end of Q2 and down about $11 million compared to 9/30/2024.

So as we stand today, we have a good amount of flexibility and room for short-term working capital needs as well as the capacity to capitalize on potential acquisitions. We paid a regular quarterly dividend since the third quarter of 2020. Most recently, we paid a $0.06 per common share dividend on September 15, 2025, to shareholders of record as of September 1. We expect to continue to pay a dividend each quarter, subject to the Board's discretion.

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

Thank you, David. As always, I'd like to thank our employees and franchisees for their hard work and commitment, and we look forward to speaking with you again when we report our year-end results in March. With that, we can now open the line to questions. Thanks.

[Operator Instructions] And the first question today is coming from Kevin Steinke from Barrington.

I wanted to start off by asking about the day labor business. It sounds like a little more optimism around that business this quarter? I think on the second quarter call, you talked about some of the softness in the manufacturing environment impacting that business. So I'm just wondering if there was a kind of a meaningful improvement in trend in that business that you saw in the third quarter compared to the second quarter.

So Kevin, thanks for the question. Good to talk to you. I don't know if I would go as far as -- it has been stabilizing, I think, is the best way of putting it. And it's been generally -- it's been generally a reasonable market for the on-demand labor in many markets. We have a couple that are still a bit more troublesome that are -- typically are related to 1 or 2 clients that have either stopped using temporary staffing or there's just not the same volume that's there. So anyway, that's a muddled way of saying we're approaching the bottom, we think.

But I mean, we were still down a bit overall, obviously, from where we want it to be. But again, there is room for optimism. And I would say the other part is in the fourth quarter, we've had -- obviously, we're what -- we're 5 weeks in. And of the 5 weeks in, half of those weeks, we beat our prior year-over-year comparisons for the Snelling and HireQuest Direct division. And the other couple of weeks, we've been down. But -- so there's room for optimism that we're -- that we've hit that bottom.

Okay. Good. And then you called out there some big wins for the Snelling franchisees in the quarter. I mean, should we think about those as competitive takeaways or I don't know, again, a sign of, I guess, as you said, at least some stabilization or small improvement in the market?

So I think it's -- obviously, the large wins are more just the result of exceptional franchisees earning more business. That said, even throughout, it's -- in most markets, it's been better. And so Snelling in particular, performed pretty well. Now again, obviously, large accounts are great when you get them and they're terrible when you lose them. But this past quarter, we've been fortunate in that -- picking up a couple more than what we lost.

And so -- again, but it's more, as you said, though, it's more competitive wins than it is overall improvement. But again, that said, it's pretty stable right now. It seems -- it feels pretty stable right now. And so I say feels -- I'd point back to the -- where we are so far in the fourth quarter with a couple of weeks exceeding the prior year period, similar period.

Okay. Got it. And in the discussion about MRI, you had talked about some nonrenewal of franchisee agreements. So were there any meaningful nonrenewals specific to the third quarter? Or were you kind of talking about quarters previous to the third quarter?

Yes. And I think we can't recall which quarter we addressed it, but there were a couple of -- especially in the first quarter, there were a couple of good-sized departures. And so we're obviously seeing those in the comparisons now. And what I would say, what is a positive sign is during the quarter, same sort of active ongoing MRI franchisees by the end of the quarter, we're starting to run flat, almost flat anyway with the prior year-end period -- I mean, the prior year similar period.

So again, while the active offices were still declining, like I said, that leveled out by the end of the quarter, whereas most of the decline came from those closed or basically people who had left the network. Now look, I'm not going to sugarcoat it. People losing the network -- leaving the network is not good for us. But, like I said, from a sentiment of where the market stands, it again indicates that the market seems to have bottomed out or certainly stabilized.

Okay. Understood. Maybe just a couple more. I mean you mentioned looking -- you're looking at several accretive M&A opportunities. Just kind of wondering what the pipeline looks like in this market environment? Has it picked up a bit given maybe some of the stress on some of your smaller competitors?

It's been surprisingly stable. And we're obviously always in the market to buy competitors. And there are always competitors that are available. I would have thought there would have been a bit more opportunities than maybe what there are, but there's plenty. So I don't read that the wrong way. So there's certainly plenty. I think part of it, we tend to -- it's towards this time of the year when we start seeing more activity anyway.

People try to get through the year so that they have full year results to things that they can package it when they go to sell it, whereas a lot of people are -- they're not going to optimize their exit multiple if they're working off of interim numbers. So I would expect a bit more opportunities over the next, let's say, 3 to 6 months, but there's plenty as they -- there are plenty of them as they are right now. I'd like to think that they would be better. But again, they are better than what they were certainly 3 years ago, which just reflects the state of the market.

Okay. Understood. And then lastly, I just wanted to ask about tighter immigration enforcement and you had talked on the last quarter's call about that driving some new business for you given less competition from undocumented workers or companies that use undocumented workers. Is that trend continued? Or is that kind of helping your pipeline still?

So here's the thing. There are absolutely a couple of decent-sized business wins that we can point directly towards immigration enforcement without question. I have to be honest with you, a lot of the reports that I've seen state that more than 2 million people have self-deported. I really would have expected a much larger uptick in our demand if that were the case. So I'll admit -- I don't know how they calculated the 2 million people self-deported. If they did, like I said, it just seems like our demand would be stronger. So I'm a bit skeptical. I'll admit I'm skeptical about that.

That said, a lot of this is cumulative as well. We're in a situation where the number of people coming in has been at a very low point now for 11 months, 10 months. And so part of that takes a while for it to roll through. I think that what's going to be important in combination with immigration enforcement is once some of these, let's say, reshored facilities actually start employing nonconstruction people, meaning basically start staffing up the factories themselves, that will also hopefully push up demand.

And so when you read okay, Japan has agreed to invest $500 billion in American plants. Well, it doesn't mean that you snap your fingers and those plants are built and all of a sudden, there's 150,000, 200,000 new jobs. So those are going to take a while to fit in. But again, if immigration remains at such a low point and that continues on, it's a very favorable -- it should be a very favorable trend for us or it should create a big tailwind for us.

[Operator Instructions] And there are no further questions in queue. I would now like to hand the floor back to management for closing remarks.

I want to thank everybody for joining us today for our earnings call. Again, I want to thank our employees, our franchisees and our investors. It's been a challenging really 11 quarters now. But what has hopefully been demonstrated through all of this is we remain profitable despite the challenging environment. And when you look at our peer group, there are -- it is covered with red ink, whereas we've remained profitable, which is one of the main attractions of our model.

And so -- and I think that this quarter is a great demonstration of that, that despite weaker demand than what we would prefer, we remain solidly profitable and with good adjusted EBITDA despite the relatively challenging circumstances. And so again, thank you for joining us, and we look forward to talking to you again in March. Thank you.

Thank you. This does conclude today's conference call. You may disconnect at this time. Thank you once again for your participation, and have a wonderful day.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss HireQuest's financial results for the second quarter ended June 30, 2025. [Operator Instructions] As a reminder, this conference is being recorded.

I would now like to turn the call over to John Nesbett of IMS Investor Relations. Please go ahead.

Thank you, and good afternoon. I'd like to welcome everyone to the call. Hosting the call today are HireQuest's Chief Executive Officer, Rick Hermanns; and Chief Financial Officer, David Hartley.

I'd like to take a moment to read the safe harbor statement. This conference call contains forward-looking statements as defined within Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These forward-looking statements and terms such as anticipate, expect, intend, may, will, should and other comparable terms involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. These statements include statements regarding the intent, belief and current expectations of HireQuest and members of its management as well as the assumptions on which such statements are based.

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

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

Good afternoon, and thank you for joining our call today. Our second quarter performance unfolded much as we had expected as we continue to face a challenging hiring environment that has persisted now for over 2 years. As we've mentioned on previous calls, employers of all types are taking a wait-and-see approach and delaying certain hiring decisions in what has been an uncertain macroeconomic climate for the first half of 2025. Moreover, the recent Bureau of Labor Statistics job report reflects continued overall softness. The manufacturing industry continued to contract for the fifth straight month, shedding an additional 11,000 jobs in July, driving down factory employment levels to their lowest point since July of 2020.

That said, our proven franchise model provides us with solid -- a solid operational foundation that enables us to deliver superior operating results for our industry with strong margins and consistent profitability even when the industry landscape is difficult. The market for permanent placement and executive search solutions continues to be slow, particularly in the manufacturing and IT sectors. This, combined with several franchisees not renewing their franchise agreements over the last couple of quarters, impacted the results of MRINetwork. We remain focused on controlling what we can to position MRI to benefit when demand levels for permanent placement and executive search return.

Temporary staffing and day labor offerings have performed better relative to MRI, but even so, the upper Midwest has been weak. As we mentioned on our first quarter call, we are encouraged by newly heightened approach to the enforcement of immigration regulations. Relaxed immigration policies throughout the previous administration had a negative impact on our temporary and day labor offerings as employers chose to use undocumented workers to reduce labor costs. As an E-Verify employer, HireQuest welcomes the enhanced enforcement efforts around hiring documented workers, efforts which we believe create a level playing field in a very competitive space.

Acquisitions have historically played an important role in our growth strategy as we look to further expand our market reach and geographic footprint. We've had a great deal of experience and success executing an effective M&A strategy while maintaining a strong balance sheet and managing dilution. It's been 6 years since our merger with Command Center, and over that time, we've completed over $77 million of acquisitions. By the end of the second quarter, with only $4.3 million of debt on the balance sheet, we believe that we are well positioned with the financial flexibility and resources to pursue value-creating opportunities as we identify them.

While the first half of 2025 has brought its share of challenges, we have built a strong and flexible business model that has consistently delivered strong margin performance and profitability. HireQuest is well positioned in the markets we serve with a portfolio of recognized staffing and executive search brands that have allowed us to establish a solid foundation for growth when demand returns in earnest.

With that, I will turn the call over now to David to provide a closer look at our second quarter financial results.

Thank you, Rick, and good afternoon, everyone. I appreciate you all joining us today. Total revenue for the second quarter of 2025 was $7.6 million compared with revenue of $8.7 million in the same quarter last year, a decrease of 12%. Our total revenue is made up of 2 components: franchise royalties, which is our primary source of revenue; and service revenue, which is generated from certain services and interest charge to our franchisees as well as other miscellaneous revenue.

Franchise royalties for the second quarter were $7.3 million compared to $8.2 million for the same quarter last year. Underlying franchise royalties are system-wide sales, which are not part of our revenue but are a helpful contextual performance indicator. System-wide sales reflect sales at all offices, including those classified as discontinued. System-wide sales for the second quarter were $125.9 million compared to $146.1 million in the second quarter of 2024. Sequentially, system-wide sales increased by 6% in the second quarter of 2025 compared to system-wide sales of $118.4 million in the first quarter of this year. Service revenue was $354,000 for the second quarter compared to $479,000 in the second quarter last year.

Selling, general and administrative expenses for the second quarter were $5.9 million compared to $5.3 million in the second quarter of 2024. Driving the increase was approximately $929,000 in transaction expenses, which were partially offset by a decrease of roughly $400,000 in workers' compensation expense. Workers' compensation expense was a drag on our earnings in 2023 and 2024, and we're pleased that our efforts to control costs in this area have achieved cost savings of approximately $1 million through the first 6 months of 2025 compared to the same period in 2024.

Shifting to profitability metrics. Net income after tax was $1.1 million in the second quarter of 2025 or $0.08 per diluted share compared to net income of $2 million or earnings per diluted share of $0.15 in the second quarter of 2024. Adjusted net income for the quarter, which excludes amortization of acquired intangibles and other nonrecurring onetime expenses, was $2.1 million or $0.15 per diluted share compared to adjusted net income of $2.5 million or $0.18 per diluted share in the second quarter of 2024. We have provided a table in the press release issued earlier this afternoon with a detailed reconciliation of adjusted net income to net income.

Adjusted EBITDA was $3.3 million compared to $4 million in the prior year period. Adjusted EBITDA margin for the quarter was 43% compared to 47% in the second quarter of 2024. We believe adjusted EBITDA is a relevant metric for us due to the size of noncash operating expenses running through our P&L. A detailed reconciliation of adjusted EBITDA to net income is provided in our 10-Q, which was filed this afternoon.

Moving on now to the balance sheet. Our total assets as of June 30, 2025, were $94.3 million compared to $94 million at December 31, 2024. Current assets as of June 30, 2025, included $2.7 million in cash and $42.8 million of net accounts receivable, while current assets at December 31, 2024, included $2.2 million of cash and $42.3 million of net accounts receivable. Current assets exceeded current liabilities by $28.6 million at June 30, 2025, versus December 31, 2024, when working capital was $25.1 million. Current liabilities were 45% of current assets at June 30, 2025, versus 49% of current assets at December 31, 2024.

As of June 30, 2025, we had $4.3 million drawn on our credit facility and another $35.9 million in availability, assuming continued covenant compliance. Just to put that in perspective a bit, we had roughly $16 million in total debt at the end of the second quarter last year. We believe our credit facility provides us with flexibility and room for short-term working capital needs as well as the capacity to capitalize on potential acquisitions.

We have paid a regular quarterly dividend since the third quarter of 2020. As stated on our first quarter call, we most recently paid a $0.06 per common share dividend on June 16, 2025, to shareholders of record as of June 2. We expect to continue to pay a dividend each quarter, subject to the Board's discretion.

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

Thank you, David. As always, I'd like to thank our employees and franchisees for their hard work and commitment, and we look forward to speaking with you again when we report our third quarter results. With that, we can now open the line to questions.

And your first question today is coming from Mike Baker from D.A. Davidson.

I guess I wanted to ask you, you said a couple of times you have dry powder for acquisitions. I guess the obvious question would be -- since the last call, you did announce a potential pretty large acquisition. So just wondering if you can update us at all on what's going on with TrueBlue. And if that's something that you'd rather not talk about in the context of this call, just in general, where else you're looking or how you see the acquisition pipeline. You have the dry powder, but can you get something done, I guess, is the question.

So I'll answer that, and thanks for the question, Mike. Two things. One is consistent with our prior public disclosures, we remain interested in pursuing a transaction with TrueBlue. Beyond that statement, there's nothing new to report. As far as the second part of your question, other companies, we continue to look at other opportunities. And so I would say simply that there's a good group of leads out there as well. So we're not a one-trick pony just waiting on one deal. So again, I feel good about where we're at with that. And as you noted, we have a lot of dry powder right now.

Yes. No doubt. Okay. Fair enough. A couple of others. I just wanted to ask you, what do you -- where do you feel like you are in terms of market share on the system-wide sales down about 13%? We can compare that to some other public guys or some industry data. And I'm just wondering your view on how your market share is faring versus some competitors.

So part of what bollixes up the numbers a little bit is, and as we stated in the prepared remarks, is we had a couple of fairly significant MRI franchisees not renew their franchise. So when you look at market share, obviously, do you include them or do you not include them? So compared to last year, we probably lost a bit of ground because we lost those franchises. That said, our individual franchisees are performing in line, I would say, with the market. I think that it's very much, though, segment dependent. And so like if you look at whatever places we're weak in is there are macroeconomic effects that are definitely playing a big role in that.

I'll just use as an example, like in the, say, the D.C. market, which is heavily construction for us, is struggling a bit, particularly relevant -- relative to last year. That makes sense in the context of what's, let's say, with the change over in the administration. And so I don't know if that answers your question, but I would just say a lot of it is definitely circumstances related to the local economy. And again, that's why we brought out the part about manufacturing in the prepared remarks as well. The Northern Midwest and the Northern Great Plains is really probably our weakest area. Well, again, it's consistent with the data that BLS is putting out.

Yes. Okay. That makes sense. And just one follow-up, and then I'll turn it over. But within MRI, the franchisees not renewing, is that -- I guess, what's going on there? Is that common? Does that speak to -- I guess, is there any color behind why that might have happened, how much that impacted the numbers? Just yes, a little bit more color on what happened there.

So I mean, MRI generally, even at the time we bought it, had been a company that really hadn't grown except for in 2021 and 2022 just due to the rebound from the pandemic, had been shrinking for a long time. And so we -- obviously, we thought and still think that we will eventually turn that around. However, it was part of a long-term -- it was part of a trend that started literally 20 years ago, 25 years ago. That trend already started.

And so that's -- part of it is the nature of -- even the name MRINetwork, it's more of a network of somewhat related recruiting firms than it is a traditional franchise relationship. In other words, like most of our MRI franchisees have their own trade name as an example. And so there are -- and there are a lot looser rules of affiliation. In other words, let's say, in our staffing operations, everybody uses the same software. We provide the financing for all of our franchisees. So there's a lot more glue and there's a lot more -- it's far more difficult to operate independent of us, let's say, as a Snelling or a HireQuest Direct than it is, let's say, with MRI, which, again, are already practically independent. And so it makes it more of a challenge to retain franchises.

Your next question is coming from Kevin Steinke from Barrington Research.

Just wanted to ask a little bit more about the overall environment as you see it currently. Obviously, a lot of noise at the very outset of the second quarter around tariffs that's maybe calmed down a bit. And so have you seen any, I guess, stabilization or signs of a little bit better demand? I know you said system-wide sales were up 6% sequentially, but I guess perhaps that's probably just kind of the typical seasonal bump. So I guess any more color on recent trends or trends that you saw throughout the quarter?

Yes. Kevin, I think that probably -- May was probably the worst and early June. And it's -- and we've sort of come back a bit closer to, let's say, prior year comparisons. I wouldn't say that we've -- we haven't started -- we aren't exceeding last year even as we're, let's say, through July. So there's not -- I'm not going to say that there's been a great recovery with respect to sales. There hasn't been. But I do agree with you that there are some good signs out there. I got to be honest with you, if you'd have asked me 5, 6 months ago, I would have expected the ICE enforcement to create a bit more demand for us. And while there have been circumstances where we've regained certain clients, it's not been as much as what I would have thought.

Now that being said, I saw data out there that said, for example, there were only the 100,000 deportations in the first half of the year. Well, compared to the size of the United States economy, 100,000 deportations really is nothing, and it's really just in line with what it always has been. So there might be a bit more -- what is it, more smoke than there is heat. I don't know. That said, as well, we just had a nice win about a week ago. We're going to be starting back up with a food processing plant that historically, food processing plants tend to engage with a large number of non-E-Verified workers. And so getting back a client like that hopefully is a harbinger for things to come.

Okay. Yes. That makes sense. Just wanted to follow up on...

By the way, I do -- I'm sorry, Kevin, I don't mean to interrupt you. One thing I would say too -- but financial professionals is still a really strong category for us. That's primarily in the -- on the MRI side. But that's actually really still a category that's growing for us really nicely.

Yes. Okay. That's good to hear. Yes. I just -- I also wanted to ask about the -- just the SG&A expense line, excluding those transaction-related costs. And then I think there was a little bit of professional fees and severance costs in the first quarter. If you strip those things out, it looks like SG&A was down a little bit sequentially just kind of on a comparable basis. So just trying to get a better sense for kind of the SG&A run rate going forward and if you've recently taken any more cost actions in light of the environment.

So obviously, the transaction costs were a large number with respect to the comparisons. I would also say that -- and by the way, kudos to David Hartley for completing his first quarter as CFO. And I would just add that, for example, Steve Crane, our retired CFO, his salary was being carried 2/3 of the way through the second quarter. So there will be a bit of an impact in the third quarter from that. Otherwise, though, there's nothing, I would say, necessarily good or bad facing us in the third quarter other than the reduction with respect to our former CFO. Obviously, that won't be included in the third quarter.

Right. Yes. Okay. Got it. And workers' comp continues to come down. Is there still a thought that maybe at some point, perhaps next year, that's -- it's pretty close to neutral, but you kind of get to more of a pretty completely neutral stance or standpoint perhaps next year?

Yes. I mean that -- clearly, that's what our target is, is to completely eliminate that expense. There's still some lingering development from our -- some of our older years. I do think that sort of on a current basis, we're -- in the current policy, we're running pretty close to where we need to be running in order for us to be flat as it relates to workers' comp. So I do think that there's still room for improvement on it. Obviously, not nearly as much room for improvement as there was last year. And of course, we did make a lot of progress. And again, I would say that there are still some improvements that are -- that should go into not only the second half but into the -- into 2026.

This does conclude today's Q&A session. And at this time, I would like to turn the floor back to management for closing remarks.

I want to thank everybody for joining us today. I appreciate your support of the company. And again, I want to thank our franchisees and employees for doing a good job in a challenging environment. Thank you and until next quarter. Talk to you then.

Thank you. This does conclude today's conference call. You may disconnect your lines at this time, and have a wonderful day. Thank you once again for your participation.

Good afternoon. Will the meeting please come to order? My name is Rick Hermanns, and I am the CEO and Chairman of the Board of HireQuest Inc. Welcome to the 2025 Annual Meeting of the Stockholders. This meeting is being webcast live, and the webcast will be posted on our website after the meeting.

An agenda that outlines the order of business is available on the website under Meeting Information. The matters on which the stockholders at the meeting are voting are: one, the election of 6 directors; two, the ratification of the appointment of Forvis Mazars, LLP as the company's independent registered public accounting firm; three, the nonbinding advisory vote on approval of the compensation of the company's named executive officers; and four, the nonbinding advisory vote to determine the frequency of future advisory votes on named executive officer compensation.

After we complete the voting process, there will be time for questions and answers. You can submit your questions via the online annual meeting website during the meeting. If we do not get to all of the questions, we will provide answers to all the questions that are relevant to stockholders after the meeting on our website.

I would like to begin the meeting by introducing the current members of the company's Board of Directors. They are Rimmy Malhotra, Larry Hagenbuch, Ed Jackson, Kathleen Shanahan and Jack Olmstead. We also have a number of company officers and management here with us.

Joining me today are David Hartley, Chief Financial Officer; Cory Smith, Chief Accounting Officer. David will serve as the Secretary of the meeting and record the proceedings. He has obtained an affidavit of Continental Stock Transfer & Trust Company as to the proper mailing of notice of this meeting to stockholders. This affidavit is available if any stockholder wishes to examine it and will be filed with the minutes of this meeting.

The Board of Directors has approved Henry Farrell, a representative of our transfer agent as Inspector of Elections for the meeting. Henry has signed an oath to act as inspector, and this oath will be filed with the minutes of this meeting. The inspector has the stockholder list of the company as of the record date, April 28, 2025, which shows the stockholders and their respective number of shares entitled to vote at this meeting. This list is available to any stockholder who wishes to examine it.

David has advised us that a quorum is present at the meeting. So I will declare the meeting duly and lawfully convened. The meeting is now open and ready for business.

The first item of business is the election of 6 directors of the company. The proxy statement sent to you earlier and made available to the -- on the meeting website under Meeting Documents lists the company's nominees for Director. The following individuals are the nominees: Richard F. Hermanns, Rimmy Malhotra, Ed Jackson, Larry Hagenbuch, Kathleen Shanahan and Jack Olmstead.

No notices of intent to nominate candidates for director were received from any stockholder. Therefore, I declare the nominations for directors closed. A motion to elect the 6 nominees is now in order.

I move that each of the nominees be elected as directors to serve until the next Annual Meeting of Stockholders.

Does anyone second the motion?

I second the motion.

The polls are now open to vote on the motion. Any stockholder who has not yet voted by proxy or who wishes to change their vote should do so now. The polls will remain open until we reach the question-and-answer portion of the agenda.

The next item of business is to ratify the appointment of Forvis Mazars as the company's independent registered public accounting firm for the year ended December 31, 2025.

A motion to ratify the auditor appointment as described in the proxy statement is now in order.

I move that the appointment of Forvis Mazars, LLP as the company's independent registered public accounting firm be ratified.

Does anyone second the motion?

I second the motion.

I call the question and declare the polls open to vote on the motion. Any stockholders who have not yet -- who have not already voted or who wish to change their vote should do so at this time.

The next item of business is to approve on an advisory basis the 2024 compensation of the company's named executive officers.

A motion to vote on the compensation as described in the proxy statement is now in order.

I move that the compensation of the company's named executive officers as disclosed in the proxy statement be approved.

Does anyone second the motion?

I second the motion.

I call the question and declare the polls open to vote on the motion. Any stockholders desiring to vote should do so at this time.

The next item of business is a nonbinding vote to determine the frequency of future votes on named executive compensation.

A motion to vote on the options as described in the proxy statement is now in order.

I move that the 1-year option for the nonbinding advisory vote to determine the frequency of future advisory votes on named executive officer compensation be approved as described in the proxy statement.

Does anyone second the motion?

I second the motion.

I call the question and declare the polls open to vote on the motion. Any stockholders desiring to vote should do so at this time. We will leave the polls open for another minute to allow the final votes to be registered.

[Voting]

The polls are now closed on the motions. Thank you to all those who voted. While the inspector of election is reviewing the votes, I would like to open the meeting to any questions that stockholders may have. You may submit your questions online via the annual meeting website.

David is able to see the questions and will read them aloud.

There are no questions at this time.

I understand that the votes have been counted and the preliminary report of the inspector of election has been delivered to the company. David, will you please announce the results of the stockholders' vote?

The preliminary report of the inspector of election indicates that Richard Hermanns, Rimmy Malhotra, Kathleen Shanahan; Larry Hagenbuch, Edward Jackson and Jack Olmstead have been elected as directors by the stockholders. Each candidate received a sufficient number of the votes cast at the meeting.

Ratification of the appointment of Forvis Mazars, LLP as the company's independent registered public accounting firm for the year ending December 31, 2025, has been approved by the stockholders.

The compensation of the company's named executive officers as disclosed in the proxy statement has been approved by the stockholders.

And the 1-year option for the frequency of future advisory votes on named executive officer compensation has been approved by the stockholders.

I request the final report of the inspector of elections be filed with the minutes of the meeting. You have now heard the results of the voting, and this completes the business to be conducted at this meeting. Since there are no other matters to come before the meeting, a motion to adjourn the meeting is now in order.

I move that this meeting be adjourned.

Does anyone second the motion?

I second the motion.

Without objection, I declare this meeting adjourned. I would like to thank you for your interest and attendance.