HireQuest, Inc.

Good afternoon, everyone, and welcome to HireQuest Incorporated's third quarter 2024 earnings call. At this time, all participants have been placed on a listen-only mode, and we will open for questions following the presentation. If anyone should require operator assistance during the conference, please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, John Nesbitt, IMS Investor Relations. John, the floor is yours.

Thank you, operator. I'd like to welcome everyone to the call. Hosting the call today are HireQuest Chief Executive Officer Rick Hermans and Chief Financial Officer Steve Crane. I would 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 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 that depend on circumstances that will occur in the future. These statements include statements regarding the intent, belief, and current expectations of HireQuest and members of the 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 high-request periodic reports filed with the SEC and that actual results may differ materially from those contemplated by such forward-looking statements. Except as required by federal securities law, high-request undertakes no obligation to update or revise forward-looking statements to reflect changed conditions. I would now like to turn the call over to Chief Executive Officer of Harquest, Rick Hermans. Please go ahead, Rick.

Good afternoon, and thank you for joining our call today. We achieved slight growth in total revenue in the third quarter of 2024 compared to the third quarter of 2023, as well as sequential revenue growth of 8.5% when compared to the second quarter of 2024 as the market for temporary staffing solutions began to stabilize. As we've mentioned before, the staffing industry has faced a particularly difficult environment in recent quarters as employers remain cautious in their hiring decisions, influenced by the presidential election and an unpredictable economic landscape. Additionally, the spike in illegal immigration, which occurred from 2022 through earlier 2024, led to the influx of undocumented workers to the lower tier labor force. While it's hard to quantify the impact on our business or the staffing industry in general, many of the jobs that we staff daily are the types of jobs undocumented workers fill. Despite these headwinds, I'm proud to say that HireQuest has performed relatively well when compared to our peers, demonstrating the strength and versatility of our franchise model. In this quarter, system-wide sales for our temporary staffing brands grew by 3.6% year over year, for the first time since the first quarter of 2023. Looking ahead, we believe that we're beginning to see a leveling out of the compressed demand we've been experiencing on the temporary and commercial staffing side of our business and our position for improved results as we move through the balance of 2024 and into 2025. Expense management continues to be a priority. We reduced SG&A expenses by over 15% in the quarter when compared to the third quarter of 2023 as we continue to mitigate workers' compensation expense that impacted our profitability in the second half of 2023. Specifically, workers' compensation expense in the third quarter decreased nearly 67% when compared to the third quarter of 2023. We believe that we can maintain and even improve on these results, and as I mentioned on last quarter's call, we see no indication that workers' compensation will reach 2023 levels moving forward. We view permanent placement and executive recruiting as a significant long-term opportunity that ideally complements our existing staffing offerings, and MRI network is the cornerstone of our growth strategy in this market. That said, the overall market for permanent placement and executive recruiting has faced industry-wide challenges for several quarters, and while we anticipated some contraction of MRI at the time of the acquisition, we did not project the projected industry-wide downturn that we've experienced. To better reflect the current fair value of MRI network to our business, we made the decision to write down certain non-cash assets related to MRI, resulting in a one-time non-cash impairment charge of just over $6 million. This charge significantly impacted our profitability in the quarter and in the year-to-date period, for which Steve will provide more detail in his prepared marks. At a high level though, absent this one-time non-cash charge, adjusted net income in the quarter increased 29% compared to the third quarter of 2023, demonstrating not only our ability to deliver strong growth and value on a year-over-year basis, but also our ability to do so in the face of headwinds that have continued to impact the entire staffing industry. As we close out the year, We believe that we are well positioned to drive enhanced financial performance as we enter a period where we expect to capitalize on a stabilizing staffing market and employ prudent expense management across our business. I would like to conclude my prepared remarks by reiterating some important data points that we presented on last quarter's call. Since our command center merger in the summer of 2019, our operational results have consistently outpaced the broader staffing industry regardless of macroeconomic factors, highlighted by a four-year adjusted EBITDA CAGR of 12.6% from 2019 to 2023 that is more than double almost all other commercial or professional staffing companies in our peer group. This quarter, we achieved our highest adjusted EBITDA since the third quarter of 2022, And with the visibility that we have today, we believe that we're in a strong position to continue this trend. Overall, we're pleased with our third quarter results, and we're optimistic that the market for both temporary and permanent staffing solutions is entering a more favorable economic environment. We're ready and eager to capitalize on the opportunities that become available to us as demand for staffing services strengthens. I'll now pass the call over to our Chief Financial Officer, Steve Crane, who will provide a closer look at our third quarter results.