HireQuest Inc. Reports Q1 2024 Earnings: A Detailed Financial Review

GuruFocus Research

May 10, 2024 at 3:43 p.m.·3 min read

Revenue: Reported at $8.4 million for Q1 2024, a decrease of 14.6% year-over-year, falling short of estimates of $8.7 million.
Net Income: Declined to $1.6 million in Q1 2024 from $2.6 million in the previous year, above the estimated $1.39 million.
Earnings Per Share (EPS): Achieved $0.12 per diluted share, surpassing the estimated $0.10.
Franchise Royalties: Decreased to $7.8 million in Q1 2024 from $9.3 million in Q1 2023.
SG&A Expenses: Slightly reduced to $5.6 million in Q1 2024 from $5.8 million in the same quarter last year.
Adjusted EBITDA: Lowered to $3.4 million in Q1 2024 from $4.6 million in Q1 2023.
System-wide Sales: Dropped to $134.0 million, down from $153.5 million year-over-year.

Warning! GuruFocus has detected 3 Warning Sign with HQI.

On May 9, 2024, HireQuest Inc. (NASDAQ:HQI), a prominent player in the staffing solutions sector, disclosed its financial outcomes for the first quarter ended March 31, 2024, through its 8-K filing. The company, known for its franchise model offering a range of staffing services across the United States, faced significant economic headwinds yet managed to align its earnings per share (EPS) with analyst projections, reporting an EPS of $0.12.

Company Overview

HireQuest Inc. operates as a national franchisor of direct dispatch, executive search, and commercial staffing services. It supports a wide array of industries including construction, manufacturing, and clerical work through its over 400 franchisee-owned offices. The primary revenue for HireQuest comes from franchise royalties, making its performance closely tied to the operational success of its franchises.

Financial Performance Insights

The first quarter of 2024 saw HireQuest grappling with a decrease in system-wide sales, which dropped from $153.5 million in Q1 2023 to $134.0 million. Total revenue also saw a downturn, falling 14.6% to $8.4 million from $9.9 million in the previous year. This decline was primarily due to a reduction in franchise royalties, which decreased to $7.8 million from $9.3 million year-over-year.

Despite these challenges, the company's net income from continuing operations was $1.7 million, or $0.12 per diluted share, a decrease from $2.3 million, or $0.17 per diluted share, in the first quarter of the previous year. This performance aligns with the estimated earnings per share of $0.10, showcasing the company's resilience in a tough economic climate.

Operational and Strategic Developments

HireQuest's President and CEO, Rick Hermanns, highlighted the company's strategic focus on controlling SG&A expenses and moderating the impact of workers compensation, which has been a significant cost in recent quarters. The company's SG&A expenses slightly decreased to $5.6 million from $5.8 million in Q1 2023, reflecting effective cost management strategies.

The balance sheet remains robust with total assets increasing to $105.9 million as of March 31, 2024, from $103.8 million at the end of 2023. The company also reported a healthy cash position of $1.6 million, up from $1.3 million at the end of the previous quarter.

Looking Ahead

Looking forward, Hermanns expressed confidence in the company's business model and its ability to navigate the fluctuating economic landscape. The anticipation of increased demand for temporary staffing in the upcoming quarters, coupled with strategic investments in IT and operational efficiencies, positions HireQuest to potentially improve its performance in the latter half of the year.

In conclusion, while HireQuest Inc. faces ongoing challenges within the staffing industry, its strategic initiatives and control over operational costs have allowed it to maintain a steady financial footing. The alignment of its EPS with analyst estimates, amidst economic pressures, underscores the company's resilience and adaptability in a competitive market.

For detailed financial figures and future projections, interested parties are encouraged to view the full earnings report and listen to the earnings call, details of which can be found on HireQuest's official website.

Explore the complete 8-K earnings release (here) from HireQuest Inc for further details.

This article first appeared on GuruFocus.

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