HireQuest (HQI) Q2 2024 earnings summary

Executive summary

• Achieved sustained profitability in Q2 2024, with revenue of $8.7 million, leveraging a franchising model and cost mitigation amid a challenging staffing market.

• Net income for Q2 2024 was $2.0 million, flat year-over-year, and adjusted EBITDA rose to $4.0 million, with margin improving to 46.5%.

• Management pursues both organic and acquisition-driven growth, including the $9.8 million acquisition of TEC, immediately franchised post-acquisition.

• Five-year adjusted EBITDA CAGR and system sales growth have outpaced industry peers, validating the business model.

• HireQuest operates 413 franchisee-owned offices and 1 company-owned office as of June 30, 2024, across multiple brands.

Financial highlights

• Q2 2024 total revenue was $8.7 million, down 3.4% from Q2 2023; six-month revenue was $17.1 million, down 9.3% year-over-year.

• Franchise royalties were $8.2 million, down 6.2% year-over-year; service revenue increased to $479,000 from $245,000.

• System-wide sales reached $146.1 million, down from $157 million in Q2 2023; six-month system-wide sales were $280.2 million, down from $310.5 million.

• Net income margin for Q2 2024 was 23.5%; adjusted EBITDA margin was 46%.

• SG&A expenses decreased 6% to $5.3 million; core SG&A declined 7.6% to $4.6 million.

Outlook and guidance

• Management is cautiously optimistic for the second half of 2024, expecting improved staffing market conditions and continued cost discipline.

• Construction-related offices are leading the recovery, with new clients replacing lost business.

• Executive search (MRI) remains challenged, though the rate of decline has slowed.

• M&A remains a key growth strategy, with ongoing evaluation of acquisition opportunities.

• Liquidity is considered sufficient for the next 12 months, with $0.6 million in cash and $24.6 million available under the credit facility as of June 30, 2024.