HireQuest (NASDAQ:HQI) reported higher third-quarter revenue as demand improved across its commercial staffing brands, but net income fell after the company recorded a non-cash write-down tied primarily to a repossessed franchise location.
Revenue rose 4% to $8.8 million from $8.5 million a year earlier. Excluding revenue associated with the MRINetwork assets divestiture from the prior-year period, revenue increased 11.1%, Chief Financial Officer David Hartley said on the earnings call.
Chief Executive Officer Rick Hermanns said growth was broad-based across HireQuest Direct and Snelling offices and that year-over-year comparisons strengthened during the quarter. He said momentum continued into the fourth quarter, with weekly system-wide sales up in the high teens year over year through early November. The company did not provide a revenue forecast.
Commercial Staffing Drives Growth
Franchise royalties, HireQuest’s largest revenue source, increased 1.5% to $8.2 million. On a pro forma basis for the MRINetwork divestiture, royalties rose 7.9%, Hartley said.
System-wide sales fell to $131.2 million from $133.6 million, largely because the prior-year figure included $15.8 million related to the divested MRINetwork assets. Sales at HireQuest Direct increased by $7.5 million, while Snelling sales rose by $6.6 million. Excluding the divestiture’s effect, system-wide sales grew 11.4%.
Hartley said system-wide sales capture activity across all offices, including those classified as discontinued, and are not part of HireQuest’s reported revenue.
Hermanns said no single market drove the improvement, although the company benefited from factory and warehouse automation projects and stronger food service business. He also cited broader temporary staffing demand, restrictive immigration policies and closer work between the company’s national accounts team and franchisees as contributing factors.
A new employee app has helped HireQuest recruit for projects farther from its branches, Hermanns said. He cited an upstate New York project that the company historically would not have attempted because its nearest branch was in New York City.
Write-Down Weighs on Profit
Net income declined to $1.7 million, or $0.12 per diluted share, from $2.3 million, or $0.16 per diluted share, a year earlier. The latest quarter included approximately $1.3 million in non-cash notes receivable write-downs, primarily associated with a franchise location HireQuest repossessed.
Adjusted net income fell to $3 million, or $0.22 per diluted share, from $3.3 million, or $0.23 per diluted share. Adjusted EBITDA was $4.5 million in both periods. Hartley also noted that the effective tax rate for continuing operations rose to 17% from 5.2%, as the prior-year quarter benefited from a higher level of Work Opportunity Tax Credits.
Selling, general and administrative expenses rose to $6.1 million from $5.1 million. In addition to the write-down, the latest quarter included $434,000 in net workers’ compensation expense, compared with a $99,000 net benefit a year earlier.
Hermanns said a couple of larger claims earlier in the year contributed to workers’ compensation costs, while medical inflation remained a concern. He said the company did not expect a return to the conditions it experienced in 2023 and 2024.
Regarding the repossessed location, Hermanns said its performance had deteriorated but HireQuest still liked the market and intended to invest resources to rebuild the operation before reselling it. He said the company had identified a potential buyer, but did not have a completed deal.
Liquidity and Acquisition Outlook
HireQuest ended September with $38 million in working capital, up from $33 million at the end of 2025. It had $500,000 drawn on its credit facility and $40.5 million available, assuming continued covenant compliance, Hartley said.
The company paid a $0.06-per-share dividend during the third quarter and expects to continue quarterly payments subject to board discretion. It also repurchased approximately 226,000 shares for $2.4 million during the first nine months of 2026.
On acquisitions, Hermanns said HireQuest typically works on three to five opportunities at a time. He said an improved staffing environment appeared to be bringing more potential sellers to market at reasonable valuations, while cautioning that the company did not have a deal secured.
About HireQuest (NASDAQ:HQI)
HireQuest, Inc. is a staffing company that provides temporary staffing and direct-hire services through a network of franchised offices. Its services connect employers with workers for roles in areas such as construction, light industrial, skilled trades, hospitality, and office support. The company operates under several brands, including HireQuest, HireQuest Direct, Snelling, TradeCorp, and MRINetwork. Its franchise model gives local operators access to the company’s staffing services and brand platforms.
