HireQuest, Inc. (HQI) reported its financial results for the third quarter and nine months ended September 30, 2024, revealing a mixed performance compared to the previous fiscal period. Total revenue for the three months reached $9.4 million, a slight increase of 1.6% from $9.3 million in Q3 2023. However, revenue for the nine months decreased by 5.7% to $26.5 million from $28.1 million in the same period last year. The decline in nine-month revenue was primarily attributed to a $23.6 million drop in system-wide sales at MRI, reflecting challenges in the staffing and recruiting sectors.

Franchise royalties for Q3 2024 were $9.0 million, up 0.9% from $8.9 million in Q3 2023, while royalties for the nine months fell 7.4% to $25.0 million from $27.0 million. The net effective royalty rate increased slightly to 6.1% in Q3 2024 from 5.9% in Q3 2023. The company reported a net loss of $2.2 million for Q3 2024, contrasting with a net income of $1.5 million in Q3 2023. For the nine months, net income dropped to $1.5 million from $6.1 million in the prior year.

Operating expenses surged to approximately $12.1 million in Q3 2024, up from $7.1 million in Q3 2023, largely due to a non-cash goodwill and intangible asset impairment charge of $6.0 million. This impairment was linked to adverse market conditions affecting the MRI reporting unit. Despite this, adjusted EBITDA improved to $4.9 million in Q3 2024, representing 52.3% of total revenue, compared to $3.7 million (40.4% of revenue) in Q3 2023.

The company completed the acquisition of certain assets from TEC Staffing Services for approximately $9.8 million in December 2023, which is expected to enhance its market position. As of September 30, 2024, HireQuest operated 416 franchisee-owned offices and employed around 80,000 temporary workers annually.

Current assets increased to $58.0 million as of September 30, 2024, from $51.5 million at the end of 2023, with cash rising to $1.6 million. The company maintained compliance with its financial covenants under a $50 million revolving credit facility established in February 2023. However, it reported a material weakness in internal control over financial reporting, prompting management to engage third-party professionals for remediation efforts.

Overall, while HireQuest experienced revenue growth in Q3, the nine-month results reflect significant challenges, particularly in the staffing sector, leading to a notable decline in profitability.