HireQuest, Inc.

Good afternoon, everyone, and thank you for participating in today's conference call to discuss HireQuest's financial results for the fourth quarter and year ended December 31st, 2023. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the call over to John Nesbitt of IMS Investor Relations. Please go ahead.

Thank you. I'd like to welcome everybody to the call. Hosting the call today are HireQuest's Chief Executive Officer, Rick Hermans, and Chief Financial Officer, Steve Krann. I'd like to take a moment to read the Safe Harbor Statement. This conference call contains forward-looking statements as defined within Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These forward-looking statements in terms such as anticipate, expect, intend, may, will, should, or other comparable terms involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. These statements include statements regarding intent, belief, or current expectations of higher requests and members of its management, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those described in HireQuest's periodic reports filed with the Securities and Exchange Commission, and that actual results may differ materially from those contemplated by such forward-looking statements. Except as required by federal securities law, HireQuest undertakes no obligation to update or revise forward-looking statements to reflect change conditions. I would now like to turn the call over to CEO of HireQuest, Rick Kermans. Please go ahead, Rick.

Thank you everyone for joining today's call. I'll begin by providing an overview of our financial and strategic highlights from the fourth quarter and full year of 2023, and then I'll turn the call over to Steve, who will share more details around our fourth quarter and full year financial results. Both our fourth quarter and full year 2023 results were characterized by the continued execution of our growth strategy and demonstrated strength of our business model as we achieve revenue growth and profitability despite a challenging economic environment that continues to impact the staffing and recruiting industry. Our fourth quarter revenue increased 21.3% to $9.8 million and franchise royalties increased 15.9% to $8.9 million. System-wide sales in the fourth quarter increased to $143.5 million compared to $127.9 million in 2022. For the full year, total revenue increased 22.4% to $37.9 million, and franchise royalties grew 23.9% to $35.8 million. Full year system-wide sales were $605.1 million, compared to $472.2 million in 2022. While our top line grew in the fourth quarter and for the full year 2023, primarily as a result of the MRI network acquisition, the state of the staffing and recruitment industry hampered organic growth. We were encouraged by the resiliency of our HireQuest Direct franchisees who were down for the year by only 2.7% and our Snelling franchisees who finished the year down 9%. These results compare very favorably to both our public and private competitors and really demonstrates the strength, not only of our franchise model, but also speaks to the customer and geographic diversification cultivated by our franchisees. Our recently launched skilled trades offering, Trade Corps, really started to gain some traction this last year, though starting from a very small base, and we're excited to continue to see its momentum into 2024. MRI Network wasn't immune to the headwinds of the professional staffing and executive recruiting markets either. But as we've said in the past, MRI historically has had less standardized royalty model, so decreases in system-wide sales don't necessarily translate to decreases in royalty revenues. Our reported SG&A expenses continue to impact our bottom line. However, our core SG&A expense were effectively flat in Q4 2023 at $4.5 million. compared to $4.4 million in Q4 2022. We provide details in today's press release on core SG&A, which excludes workers' compensation expense, the MRI ad fund expenses, which are really just a pass-through with corresponding services revenue, and one-time charges. In fact, this core SG&A expense decreased in both absolute dollars and as a percentage of total revenue for each of the past three quarters. we believe the current level provides us with plenty of capacity to take advantage of increased system-wide sales, either driven organically or through additional acquisitions, without a linear increase in fixed costs. Over the past couple of quarters, I've spent a fair amount of time talking about our net workers' compensation expense. Total net workers' compensation expense for 2023 was $3.7 million, compared to a net benefit of $1.9 million in 2022. As I've mentioned on previous calls, there are two primary factors that impact this number. First is the difference between our net premium amounts collected and our expected losses for the policy year. And the second is any changes to the expected losses, up or down, for prior policy years. Unfortunately for us, last year, our comp rates were below our expected loss rates, accounting for approximately two-thirds of the expense. and we had a particularly bad loss experience in a prior policy year, which accounted for the remaining third of the expense. While we can't predict future loss experiences, the 22-23 policy year was historically bad for us, but we haven't seen anything in the 23-24 policy year to date that would lead us to expect a repeat this year. Additionally, we've taken steps with our carrier to address the shortfall component of the expense, and expect to see some relief on that side of the equation starting in Q2 2024. We believe these actions will help normalize our margins as we progress through the year and the changes take effect. We continue to believe that we are a leader in the staffing industry with regards to our ability to manage workers' compensation expense, and it continues to be a core competency and competitive advantage. M&A continues to be a key component of our growth strategy, and we continued executing on it in 2023 while keeping our leverage low and maintaining a strong balance sheet. Most recently, we announced the acquisition of Tech Staffing Services in the fourth quarter of 2023. This acquisition is an excellent example of the accretive opportunities that we looked for in the market as it expanded our selling operations in Northwest and Central Arkansas. while restoring some of the operating leverage that we've lost due to the challenging economic environment. MRI network has proven to be a solid acquisition for us as well. While revenues have been down as a result of industry headwinds, MRI has demonstrated healthy profitability this past year. Additionally, as it relates to M&A, I'd like to point out that we've been able to maintain a healthy balance sheet and low leverage throughout all these transactions. Since the beginning of 2021, we've increased system-wide sales by just shy of $400 million. We've invested over $75 million in acquisitions and finished 2023 with net debt of $13.4 million. I'll also highlight that fully diluted shares over that time have increased from about $13.7 million to only $13.8 million at the end of 2023. That is, we financed our growth almost exclusively with cash flow from operations. We believe that as demand for staffing solutions recovers, HireQuest will be well positioned with premier staffing and executive search capabilities that we can leverage to enhance our offerings and operations, improve our bottom line, and drive increased value for our shareholders. I'll now pass the call over to our Chief Financial Officer, Steve Crane, who will provide a closer look to our fourth quarter and full year results. Steve?