Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HireQuest Inc (HQI, Financial) achieved a slight growth in total revenue in Q3 2024 compared to Q3 2023, with an 8.5% sequential revenue growth from Q2 2024.
- System-wide sales for temporary staffing brands grew by 3.6% year over year, marking the first growth since Q1 2023.
- SG&A expenses were reduced by over 15% in Q3 2024 compared to Q3 2023, demonstrating effective expense management.
- Workers' compensation expenses decreased nearly 67% in Q3 2024 compared to Q3 2023, positively impacting profitability.
- Adjusted net income in Q3 2024 increased by 29% compared to Q3 2023, excluding a one-time non-cash impairment charge.
Negative Points
- The staffing industry faced a difficult environment due to cautious hiring decisions influenced by the Presidential election and an unpredictable economic landscape.
- The influx of undocumented workers impacted the lower-tier labor force, affecting the types of jobs HireQuest Inc (HQI) staffs.
- A one-time non-cash impairment charge of over $6 million related to MRI network assets significantly impacted profitability in Q3 2024.
- System-wide sales decreased due to a decline in professional recruiting and staffing brands, partially offset by an increase in temporary staffing sales.
- The permanent placement and executive recruiting market faced industry-wide challenges, leading to a downturn in MRI network performance.
Q & A Highlights
Q: Why do you think things are getting better in the environment, and how does the resolution of the election contribute to this improvement?
A: Richard Hermanns, CEO, explained that the reduction of interest rates reduces the chance of a meltdown in the commercial real estate market, which is a big driver of their business. Additionally, changes in handling illegal immigration have been favorable, particularly for their direct line competing with undocumented workers. Franchisees are returning to pre-pandemic habits, and normal incentives are starting to take effect.
Q: Are there specific lines of business or geographic areas that are improving?
A: Richard Hermanns noted that commercial construction has been strong, particularly in Texas, Tennessee, Florida, and Georgia. The Southeast has been very strong, and there is also improvement in the mid-Atlantic region. Additionally, their skilled trades division is picking up.
Q: Are you seeing signs of stabilization or improvement in the permanent staffing side, and what is your outlook for that part of the business?
A: Richard Hermanns acknowledged that the permanent placement business has been tough but expressed optimism that it can't stay at abnormally low levels. He believes the market is returning to normal, and the strength of 2022 led to an abnormally depressed 2023 and 2024.
Q: Can you hold core SG&A expenses relatively flat as demand picks up, and how much capacity do you have for system-wide sales?
A: Richard Hermanns stated they have the capacity to handle a 5-10% sales increase without a significant increase in SG&A costs. However, he anticipates potential wage increases, which could raise payroll expenses, though headcount is expected to remain flat.
Q: Has the softer demand environment created more acquisition opportunities, and what does the pipeline look like?
A: Richard Hermanns mentioned that they made two small acquisitions in the last quarter and have several deals in the pipeline. These acquisitions are typically in commercial staffing, fortifying their position in existing markets or entering new cities, and they anticipate continued opportunities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
