HireQuest (HQI) Q1 2025 earnings summary

Executive summary

• Q1 2025 revenue declined 11.2% year-over-year to $7.5 million, with net income of $1.4 million ($0.10 per diluted share), and system-wide sales down 11.7% to $118.4 million, reflecting ongoing macroeconomic headwinds in the staffing industry.

• Adjusted EBITDA was $2.8 million, down from $3.4 million in the prior year, with adjusted EBITDA margin at 37% versus 40% in Q1 2024.

• Franchise royalties were $7.0 million, down 11.2% year-over-year, and service revenue was $512,000, down from $588,000.

• Enhanced immigration enforcement is driving increased demand for compliant staffing services, opening new business opportunities.

• CFO Steve Crane retired, succeeded by David Hartley, effective May 31st.

Financial highlights

• Net income after tax was $1.4 million ($0.10 per diluted share), compared to $1.6 million ($0.12 per share) in Q1 2024; adjusted net income was $1.8 million ($0.13 per share), versus $2.0 million ($0.15 per share) last year.

• SG&A expenses were $5.3 million, down 6.5% year-over-year, with a significant drop in workers' compensation expense to $28,000 from $572,000.

• Cash at quarter-end was $2.1 million, with $5.5 million drawn on the line of credit and $34.8 million in remaining availability.

• Operating expenses decreased to $6.0 million from $6.3 million, mainly due to a $0.5 million reduction in workers' compensation expense.

• Cash provided by operating activities was $1.9 million, compared to cash used of $0.9 million in the prior year.

Outlook and guidance

• Management remains focused on M&A as a key growth driver, with a strong acquisition pipeline and capital resources to execute strategic acquisitions.

• No significant change in business trends observed in early Q2; demand remains muted, with no tangible impact from recent tariff headlines.

• Management expects current cash, operating cash flow, and credit capacity to be sufficient for liquidity needs over the next 12 months.

• Expect continued benefit from stricter immigration enforcement, leading to new business wins.

• The company intends to continue paying quarterly dividends, subject to business results and financial position.