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Date
Tuesday, May 12, 2026 at 4:30 p.m. ET
Call participants
- Chief Executive Officer — Richard Hermanns
- Chief Financial Officer — C. Hartley
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Takeaways
- Total Revenue -- $6.5 million, reflecting a 12.7% decrease, excluding $574,000 in the prior-year period from divested MRI Network assets.
- Franchise Royalties -- $6.1 million, with last year's $7 million including $500,000 from the divested business.
- Service Revenue -- $462,000, down from $512,000 year over year, with $75,000 of prior-year service revenue attributable to MRI Network assets.
- System-Wide Sales -- $102.6 million compared to the prior year's $118.4 million; the prior year included $16 million from divested assets.
- SG&A Expense -- $4.3 million, versus $5.3 million in the previous year, which had $700,000 related to the divestiture.
- Workers' Compensation Expense -- $39,000 compared to $28,000 for the prior year.
- Core SG&A Expense -- $4.2 million, which excludes workers' compensation and nonrecurring operating expenses.
- Net Income -- $1.6 million or $0.11 per diluted share, compared to $1.4 million or $0.10 per diluted share a year ago.
- Adjusted Net Income -- $1.8 million or $0.13 per diluted share, unchanged from last year.
- Adjusted EBITDA -- $2.7 million compared to $2.8 million in the prior year.
- Total Assets -- $91.1 million as of March 31, 2026; $88.2 million as of December 31, 2025.
- Cash Balance -- $1 million, with $44.7 million in net accounts receivable as of quarter end, versus prior year-end's $3.9 million in cash and $39.3 million in receivables.
- Working Capital -- $32.5 million at quarter end, compared to $33 million at year end.
- Debt -- $0 drawn on credit facility; $40.3 million available subject to covenants.
- Dividend -- $0.06 per common share paid on March 16, 2026, with continued intention to pay quarterly, Board permitting.
- Commercial Sales Trend -- Commercial segment showed sales nearly flat year over year, after adjusting for the divestiture, contrasting industry-wide declines.
- Industry Comparison -- Company's system-wide sales grew nearly 57% from 2019 to 2025 post-divestiture, while the overall U.S. temporary staffing market declined by 3% in the same timeframe.
- TrueBlue Acquisition Offer -- A $105 million all-cash offer was made for the on-demand portion of TrueBlue (NYSE: TBI)’s PeopleReady segment; previous offers in 2025 did not progress.
- Operations Model -- The franchise structure is credited with supporting stable SG&A as a percentage of system-wide sales and sustained profitability, according to management.
- Business Mix -- Management highlighted commercial segment momentum and steady performance in on-demand, describing on-demand as "flat" but broadly stable.
Summary
HireQuest (HQI +4.30%) saw a double-digit revenue decline this quarter driven by the absence of MRI Network asset contributions, offset in part by resilience within its core franchise operations. The company maintained adjusted profitability nearly unchanged year over year and improved net income per share, as operating expenses decreased following the divestiture. Management highlighted that commercial sales outperformed broader industry trends, with improvement across multiple geographic markets and business lines. Asset strength was evident with no outstanding debt and substantial undrawn credit facility capacity, supporting ongoing regular dividend payments. A renewed $105 million all-cash bid for a key competitor’s on-demand staffing segment underlines a continued M&A-driven growth strategy, with management citing acquisition as highly complementary to existing divisions.
- Management reported greater consistency and favorability in weekly year-over-year comparisons, describing several recent weeks as delivering "pretty consistent consistently decent results" relative to prior periods.
- Commercial segment wins were attributed to factors such as reduction in undocumented immigration and targeted investments in the National Accounts program, with the CEO noting, "the commercial side has really been strong and not geographically limited either."
- Momentum in staffing demand was noted as apparent in both April and into May, with recent industry data seen as consistent with internal results.
- The TrueBlue PeopleReady on-demand acquisition target was characterized by management as "very complementary" and historically "underperforming" for the seller, supporting the case for transaction-driven value creation.
Industry glossary
- System-Wide Sales: Aggregate sales made through all franchisee and company-operated offices, including discontinued operations, used to provide a comprehensive performance benchmark for the franchise network.
- Franchise Royalties: Ongoing revenues earned by the franchisor, generally calculated as a percentage of sales generated by franchisee-operated offices.
- SG&A: Selling, General, and Administrative expenses, reflecting core operating costs not directly tied to service delivery within the staffing industry.
Full Conference Call Transcript
Richard Hermanns: Good afternoon, and thank you for joining our call today. Our First Quarter 2026 was another solid quarter of operational execution and profitability for our business that demonstrates the resilience of our franchise staffing model in diverse markets. While many in our industry have struggled to keep up with the shifting customer demands and a soft market for staffing services that has been impacted by a slow and sometimes even frozen hiring market, we continue to deliver consistent results and sustained profitability for multiple reasons. First, our franchise staffing model aligns incentives by making our franchisees owners alongside us. In other words, when our business is performing well, everyone benefits.
Our model also provides enhanced expense control with less need for regional or middle management and our exposure to diverse customer verticals and recurring revenue streams at the local level helps us to mitigate macroeconomic risk. Put simply, our performance in the first quarter continues to reflect the resiliency and strength of our model. It is important to stress that as a management team, we take a long-term view of the business and value creation. We have driven positive results dating back to before COVID. The company has not lost money in a single year since our formation and has delivered double-digit compounded annual growth in system-wide sales, revenue and adjusted EPS from 2019 to 2025.
This growth has also outpaced the broader market. Our total sales grew almost 57% from 2019 to 2025 after adjusting for the divestiture of MRI Network compared to a decline of approximately 3% in sales during the same period for the broader U.S. temporary staffing industry. Specifically, our commercial sales, as so adjusted, increased almost 80% during this period, while the broader industry declined by about 23%. All the while, we have maintained a strong balance sheet with no debt. Looking forward, we are not wavering from our strategy that combines disciplined M&A with organic franchise growth, which has resulted in the business more than doubling in size over the past 5 years.
Furthermore, we have been able to keep our SG&A relatively stable as a percentage of system-wide sales despite persistent economic headwinds over the past couple of years. I talked about tentative green shoots in demand over the past couple of quarters, but those tended to be isolated and fleeting. In Q1, despite a rough start, towards the second half of the quarter, we started to see some consistent favorable weekly year-over-year comparisons across the business. And so far, in Q2, those comparisons have become even more favorable. This is encouraging for a number of reasons.
First, I think we can attribute some of the improvement to the surge in undocumented workers that came from 2021 to 2023 have finally been resolved. Secondly, we are starting to see the impact of our investments in our National Accounts program and the efforts of our franchisees starting to pay off. Looking ahead, we believe we're in a favorable position to benefit from what looks to be an improved staffing market in 2026. With that, I'll now turn over the call to David to provide a closer look at our first quarter financial results.
C. Hartley: Thank you, Rick, and good afternoon, everyone. I appreciate everyone joining today. I'll now provide a summary of our first quarter results. Total revenue for the first quarter of 2026 was $6.5 million compared with revenue of $7.5 million in the prior year, a decrease of 12.7%. As a reminder to everyone, we completed our divestiture of certain MRI Network assets, which comprised of the permanent placement franchise operations on January 1 of this year. So the first quarter of 2026 does not include any revenue or SG&A from that portion of the business. As a point of comparison, the first quarter of 2025 included approximately $574,000 in total revenue related to divested MRI Network assets.
Our total revenue is made up of 2 components: franchise royalties, which is our primary source of revenue; and service revenue, which is generated from certain services and interest charge to our franchisees as well as other miscellaneous revenue. Franchise royalties in the first quarter were $6.1 million compared to $7 million for the same quarter last year. The first quarter of 2025 included approximately $500,000 in franchise royalties related to the divestiture. Underlying franchise royalties are system-wide sales, which are not a part of our revenue but are a helpful contextual performance indicator. System-wide sales reflect sales at all offices, including those classified as discontinued.
System-wide sales in the first quarter were $102.6 million compared to $118.4 million in the first quarter of 2025. The first quarter of 2025 included approximately $16 million in system-wide sales related to the divestiture. Service revenue in the first quarter was $462,000 compared to $512,000 last year. The first quarter of 2025 included roughly $75,000 in service revenue related to the divestiture. Selling, general and administrative expense in the first quarter was $4.3 million compared to $5.3 million in the first quarter of 2025. Included in SG&A is workers' compensation expense, which totaled $39,000 for the first quarter compared to $28,000 in the first quarter of 2025.
Additionally, the first quarter of 2025 included approximately $700,000 in SG&A related to the divestiture. For Q1 2026, core SG&A, which excludes the impact of workers' comp and any nonrecurring operating expenses, was $4.2 million. We provide a table in the press release issued earlier this afternoon with a detailed reconciliation of core SG&A to SG&A, along with tables for the non-GAAP profitability metrics, net income to adjusted net income and net income to adjusted EBITDA, which I'll discuss shortly. Net income after tax was $1.6 million in the first quarter or $0.11 per diluted share compared to net income of $1.4 million or $0.10 per diluted share last year.
Adjusted net income for the first quarter was $1.8 million or $0.13 per share compared to adjusted net income of $1.8 million or $0.13 per diluted share in the same period last year. And adjusted EBITDA for the first quarter of 2026 was $2.7 million compared to $2.8 million last year. Given the size of noncash operating expenses running through our P&L, we believe adjusted EBITDA and adjusted net income are both relevant metrics for us. Moving to the balance sheet. Our total assets as of March 31, 2026, were $91.1 million compared to $88.2 million at December 31, 2025.
Current assets included $1 million in cash and $44.7 million of net accounts receivable, while current assets at 2025 year-end included $3.9 million of cash and $39.3 million of net accounts receivable. Working capital was $32.5 million at the end of the first quarter compared with $33 million at the end of 2025. At the end of the first quarter, we had $0 drawn on our credit facility, and that provides us with $40.3 million in availability, assuming continued covenant compliance. We have paid a regular quarterly dividend since the third quarter of 2020. Most recently, we paid a $0.06 per common share dividend on March 16, 2026, to shareholders of record as of March 2.
We expect to continue to pay a dividend each quarter, subject to the Board's discretion. With that, I will turn the call back over to Rick for some closing comments.
Richard Hermanns: Thank you, David. I'd also like to highlight that we issued a press release this afternoon, which described the new offer to the Board of Directors of TrueBlue. Our new offer is $105 million cash for the on-demand portion of TrueBlue's PeopleReady segment. As previously disclosed, HireQuest made multiple offers to TrueBlue in 2025. Last year, we were prepared to initiate a tender offer directly to the TrueBlue shareholders and incurred substantial costs in its preparation. However, we postponed that process in hopes of engaging with the TrueBlue Board of Directors directly on a friendly basis. Now roughly a year after we first made our interest known and made it public, nothing has materialized.
We are once again exploring our options. We believe that the on-demand portion of TrueBlue's PeopleReady segment is very complementary to our HireQuest Direct division and as such, made an attractive all-cash offer earlier today to TrueBlue's Board of Directors. This part of TrueBlue's business has been an underperformer for them for years, and our proposal gives the opportunity for them the opportunity to divest these offices and raise a substantial amount of cash. We hope TrueBlue's Board will view this opportunity as a clear path to create incremental value for their shareholders.
As always, I'd like to thank our employees and franchisees for their hard work and commitment, and we look forward to speaking with you again when we report our second quarter results in August. With that, we can now open the line to questions. Thank you.
Operator: [Operator Instructions] Our first question comes from Kevin Steinke with Barrington Research.
Kevin Steinke: Great. Thank you. I wanted to start out by asking about just the trends you saw throughout the first quarter. You mentioned a rough start. Is that at all related to maybe some weather headwinds or headwinds from the holidays? I know I've heard other companies talk about that. And then you talked about the second half becoming more consistent and that continue into the second quarter with even some improvement. So maybe just a little more color on the trends as the quarter progressed and as you've moved here into the second quarter.
Richard Hermanns: Yes, absolutely. Thanks, Kevin. So yes, what you said is absolutely and what other people have observed. The beginning -- basically until mid-February, the results were -- our results were impacted significantly by sort of the placement of New Year's Day. So the holiday was just set at a really pretty much -- it became a -- basically a 20 -- 20 business day month, January was. February is always traditionally bad because it's a short month. And so January was just as bad because of the placement of New Year's Day. On top of it, the weather was unusually bad over an unusually large swath of the country.
But what we noticed was starting around mid-February, our results became perceptibly better, particularly compared to the year-over-year comparison. And as towards the end of the quarter, it continued to get better. And if you look at the numbers that David had stated, for example, really if you exclude the system-wide sales impact of the MRI Network divestiture, we were nearly flat year-over-year as far as system-wide sales. The good news or the better news is that in the first 5 weeks of the second quarter, our results -- our comparisons have become even more favorable.
And so in absence of some black swan out there, we're feeling really good about -- we're feeling really good about our demand right now.
Kevin Steinke: Okay. Yes, that's helpful. And so you mentioned the year-over-year comparisons becoming more favorable as we enter the second quarter. And I had noticed as well that excluding MRI, the system-wide sales were flat year-over-year in the first quarter. So should we kind of think about you've moved into a more -- actually growth year-over-year on a weekly basis over the last few weeks?
Richard Hermanns: Yes. I mean I would say, look, from your lips to God's ears. I mean, yes, I do think -- I do feel much more optimistic now than I have in the last -- certainly the last 2 years. We have some really solid momentum right now. Now again, and it's been more sustained. We've -- you and I have had these conversations in this forum over the last 5, 6 quarters, and it's always, yes, we've had a few good weeks. Gee, it seems like it's getting a little bit better and then frequently, it would fall off.
And for the last -- I mean, we've really -- for the last even 8, 9 weeks, we've really had pretty consistent consistently decent results compared to the year-over-year period.
Kevin Steinke: All right. And yes, you mentioned maybe a couple of factors helping you out there, reduced undocumented immigration and also your National Accounts program. So maybe just kind of touch on how you believe those things have benefited the results recently here?
Richard Hermanns: So 2 things in particular. One, obviously, between '21 and early '24, depending on who you -- whatever source you believe in, that probably at least 10 million people came into the country illegally or legally that's about 3x the size of the staffing industry. And so while obviously, not everybody who comes in is competing for our jobs, a lot are. I mean you think of a lot of those workers work in food service, things like that, that have traditionally in hospitality, jobs that frequently are filled in particularly our segments of the staffing industry. And so it really wasn't -- really has had an impact. Well, now net immigration is much lower.
And even as the economy has grown, it's absorbed some of the sort of some of the excess labor that came from the amount of immigration we had. What really kind of drove that point home for me even a couple of weeks lag, weeks back, I was reading even like what the population -- the population growth in the United States in 2025 was one of the lowest in recorded history. And again, so we're starting to see more normal patterns.
It's like it was always a hard thing for me to understand, and I mused about it on these calls even at different points, how in the world can we have declining staffing demand with 3.7% or 3.9% unemployment rate. It never computed in the 35 years I've been in this industry, that was just never the experience. And now we're actually starting to see where the staffing industry is tracking much more with true increases or decreases in unemployment. And so for us, that's a good thing because we are still in a relatively low unemployment environment.
And so I think we're just starting to see -- we're starting to see the return of certain segments of business that really had not been there in a while. And the other part is we briefly touched on it back towards the end of last year, but we made some pretty good-sized investments in our national accounts department. And we're definitely getting some pretty significant wins in -- from that investment. And so we're also seeing organic growth that's just related to our efforts, not necessarily due to the macroeconomic trends.
Kevin Steinke: All right. Great. Maybe just to touch on the TrueBlue offer or the offer for the on-demand segment, the PeopleReady. Can you maybe just give investors a sense of the size of that business you're targeting in terms of system-wide sales or you mentioned it was underperforming. And maybe if you were to acquire that, how you feel like you could improve its performance and its profitability?
Richard Hermanns: So unfortunately, I'm not at liberty to speak of anything beyond what's been released. So your questions are valid. So I'll just probably have to make for a different point.
Kevin Steinke: Okay. Completely understand. And just maybe lastly, you mentioned the positive year-over-year comparisons. Are you seeing that in there any particular markets or segments of your business, commercial versus on-demand? Or is it kind of pretty broad-based in terms of the stabilizing and improving trends you've seen?
Richard Hermanns: Commercial is where it's at right now, I have to say. Our on-demand is doing okay. And by the way I say, okay, let's say, it's flat. It's doing reasonably well just given the overall macro environment. But the commercial side has really been strong and not geographically limited either. One of the things, and this is part of what draws it back even to the immigration issue. There are a lot of different -- maybe it's related to reshoring, maybe it's just more an application of robotics, et cetera, to our industrial economy, but there are a lot of retrofits and things going on. And a lot of those are shorter to medium-term projects as an example.
And that's what I'm saying, we're starting to get a lot of wins on things like that. And which again is more of a return to traditionally what staffing is really a very good product for. And so again, we're very encouraged with it. And again, broad-based.
Operator: [Operator Instructions] The next question comes from Keegan Cox with D.A. Davidson.
Keegan Tierney Cox: I just wanted to ask how results came in versus your expectations for the quarter. I mean, excluding MRI, like you said, system-wide sales flat. It looks like service revenues improved, but franchise royalties down. I guess, kind of -- is that just all weather related? You kind of talked about it, but walk me through it again, I guess.
Richard Hermanns: Well, I guess it depends on -- as far as my expectations, it would have been depending on what time in the quarter you asked me. If you have asked me in early February, I'd have been crying over my beer thinking we're going to have a terrible quarter. And so -- and simply -- and of course, I can't control the weather and I can't control what the New Year's falls on. And so I would say the second half was -- particularly given the results of the first quarter were -- ended up balancing it out.
And so I would say we were, frankly, probably right about where we would have expected overall uniformly just based on what -- sort of on what transpired. I do think that, again, I feel good about the second quarter and again, the rest of the year. But we are obviously tied to macroeconomic circumstances that are way beyond our control.
Keegan Tierney Cox: Got it. And then you kind of talked about it already, seeing a return of some segments of business that haven't been there for a while. You mentioned the retrofits. I'm guessing you're seeing a lot more on the industrial side, too, and construction wise.
Richard Hermanns: Construction is improving, but construction is not -- construction isn't what it was, let's say, 1.5 years ago. It's not -- it's recovering, but slower unless you get into the big data centers or the really big projects, which, again, we're cracking more into. But really, the real action for us is just -- it really is in the industrial and manufacturing side. It's definitely improved.
Keegan Tierney Cox: Got it. And then just my final one is there -- we follow a few indicators. I mean, if I look at TrueBlue and PeopleReady, it looked like that business accelerated this quarter. Other industry publications show that temp staffing demand is improving. I guess looking at your results, why wouldn't your trends be holding up relative to these indicators?
Richard Hermanns: Well, they are. That's the thing. So in fact, I think it was today, maybe it was yesterday, staffing industry analysts pulls out the bullhorn job report, and it showed a really fairly -- it's like a 7% gain, don't quote me on that part, but like a 7% gain last week in temporary staffing jobs. So it's -- that's very consistent with what we're seeing. And temporary staffing jobs actually rose in March, April and appear to be accelerating into May, which is for 2 months in a row for actual growth has been -- is a big deal for the staffing industry compared to the last 3 years.
As we pointed out, even in our prepared remarks, I mean, the staffing industry is down 3% overall since 2019. And so like I said, it seems like that trend is finally starting to break.
Operator: Thank you. We have reached the end of the question-and-answer session. And I will now turn the call over to management for closing remarks.
Richard Hermanns: Again, I want to thank everybody for being with us today. This is an exciting time for the company as we hopefully are at the cusp of a period of higher demand for our services. And of course, we have -- we remain hopeful that our bid for the on-demand portion of TrueBlue's PeopleReady segment will be taken seriously and will lead to greater opportunities for everybody. So again, thank you for joining us, and we will look forward to speaking with you again in August. Thank you.
Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
