Release Date: August 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HireQuest Inc (HQI, Financial) maintained profitability in a challenging market by leveraging its franchising model and cost mitigation strategies.
- The company observed a leveling out of the downward trend in daily pay and commercial staffing, with franchise royalties exceeding Q2 2023 levels.
- HireQuest Inc (HQI) successfully reduced SG&A expenses by 6% compared to the previous year, demonstrating effective cost management.
- The company has a strong track record of growth, with a five-year adjusted EBITDA CAGR exceeding the industry average.
- HireQuest Inc (HQI) continues to explore M&A opportunities, expanding its market reach and addressing new staffing verticals.
Negative Points
- Total revenue for Q2 2024 decreased by 3.4% compared to the same quarter last year, indicating challenges in revenue growth.
- Franchise royalties, a primary revenue source, declined from $8.7 million in Q2 2023 to $8.2 million in Q2 2024.
- System-wide sales decreased from $157 million in Q2 2023 to $146.1 million in Q2 2024, reflecting a decline in overall sales performance.
- The MRI Network acquisition faced significant headwinds, with the executive search market experiencing an extended downturn.
- Valuation expectations in the M&A market remain high, posing challenges for HireQuest Inc (HQI) in executing potential acquisitions.
Q & A Highlights
Q: Can you elaborate on the improvement in the staffing market and what trends you've observed in the third quarter so far?
A: Richard Hermanns, CEO: We observed an improvement in the staffing market during the second quarter, particularly in year-over-year comparisons. This positive trend has continued into the third quarter, with some weeks exceeding the prior year's performance. However, recent market fluctuations could impact this progress, but overall, we are cautiously optimistic.
Q: What specific occupational categories are driving the improvement in HireQuest Direct's performance?
A: Richard Hermanns, CEO: The improvement is more geographic than job-specific, but construction-related offices are performing the strongest. We've seen recovery in markets that previously had down quarters, and new business is replacing some lost clients. Construction is currently our best-performing segment.
Q: How is the MRI executive search segment performing, and are there any signs of stabilization?
A: Richard Hermanns, CEO: The MRI segment has faced challenges due to a bad environment for executive search. While Q2 showed some improvement compared to Q3, the segment still trends downward. Staffing has stabilized, but executive search remains challenging, with some improvement in IT placement, though results vary across sectors.
Q: Can you provide insights into the core SG&A expenses and whether the current level is sustainable?
A: Richard Hermanns, CEO: We've taken steps to reduce costs, and the $4.6 million in core SG&A expenses is likely sustainable. There is no foreseeable upward pressure on these expenses, and we are being cautious with our costs, potentially even reducing them further.
Q: What is the current state of the M&A environment, and how are valuation expectations affecting potential deals?
A: Richard Hermanns, CEO: There are more M&A opportunities available, but valuations are not yet aligned with our expectations for the current environment. We are actively engaged in discussions, and while prices are better than a year and a half ago, it may take time to execute deals. We remain vigilant in seeking opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
