HireQuest (HQI) Q2 EPS Beats by 25%

Key Points

• Non-GAAP earnings per share of $0.15 exceeded estimates by 25.0%, despite GAAP revenue falling slightly short of expectations.

• Revenue and system-wide sales each declined by double digits year over year, reflecting persistent industry-wide demand softness.

• Selling, general, and administrative expenses rose 10.8% due to acquisition-related transaction costs, but the company's quarterly dividend remained unchanged at $0.06 per share.

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HireQuest (NASDAQ:HQI), a national staffing franchisor and workforce solutions provider, reported second quarter results on August 7, 2025, for the period ending June 30. The most notable news from the release was that adjusted earnings per share (EPS) reached $0.15, beating the analysts’ consensus estimate of $0.12 by 25.0% (non-GAAP). However, GAAP revenue came in at $7.6 million, slightly below the estimate of $7.66 million. Both revenue (GAAP) and system-wide sales declined by double digits year-over-year, signaling that broader industry demand remains muted. Persistent top-line declines highlight ongoing challenges in the staffing market.

Source: Analyst estimates for the quarter provided by FactSet.

Company Overview and Recent Focus Areas

HireQuest delivers staffing and workforce management solutions across the United States, operating mainly through a franchise model. Its primary business involves connecting employers with temporary, contract, and direct-hire employees across sectors such as construction, light industrial, healthcare, and professional services.

Recently, HireQuest has concentrated on three main strategies: pursuing targeted acquisitions to broaden its portfolio, optimizing its asset-light franchise structure to maintain high margins and cost controls, and strengthening capital allocation practices. Success in these areas depends on effectively integrating acquired companies, supporting franchisees to expand, and adapting to changing industry trends favoring flexible staffing solutions.

Quarter Highlights and Key Developments

The quarter was defined by a mix of profit discipline and ongoing revenue pressures. Non-GAAP adjusted EPS reached $0.15, topping the analyst target of $0.12. This beat was achieved despite GAAP revenue of $7.6 million coming in just below the $7.66 million estimate, and declining 12.0% compared to the same period last year. Franchise royalties were $7.3 million compared to $8.2 million in the prior-year period, and service revenue, which dropped 26% to $354,000. Such declines point to broad-based industry demand weakness and a second straight quarter of lower aggregate activity.

System-wide sales, a measure encompassing the entire franchise network's billings, declined 13.9% to $125.9 million, reinforcing softness across HireQuest’s entire footprint. Adjusted EBITDA, an indicator of core operational profitability excluding taxes, interest, depreciation, and certain one-time items, dropped by 18.9% to $3.3 million compared to the prior year quarter. GAAP net income was $1.1 million, down from $2.0 million in Q2 2024, while adjusted net income reached $2.1 million versus $2.5 million last year, illustrating the persistent profit pressure despite ongoing expense controls.

Selling, general, and administrative (SG&A) expenses increased by 10.8% to $5.9 million. This rise was mainly due to $929,000 in transaction costs, reflecting the company’s ongoing acquisition activities. Notably, net workers’ compensation expense improved to $127,000 from $547,000 last year, helping to offset some of the higher overhead tied to M&A initiatives. Interest and other financing expense (GAAP) dropped significantly to $71,000 from $253,000 in Q2 2024, benefiting from lower line-of-credit usage or more favorable rates.

Management described the staffing industry as experiencing “protracted softness” triggered in part by sustained manufacturing-job losses. Though management continued to highlight the franchise model’s ability to maintain profitability even under subdued demand. Acquisition activity remained a focus, with $929,000 in transaction expenses signaling that HireQuest continues to seek growth opportunities through M&A even as many revenue benefits are still in development. The company’s core products—including on-demand staffing, executive placement, and temporary-to-permanent hiring—are delivered through divisions such as HireQuest Direct (temporary staffing), HireQuest Health (healthcare placements), MRINetwork (executive search), Snelling, and TradeCorp, each serving various segments of the employment market.

The quarterly dividend was unchanged at $0.06 per share, indicating a continued commitment to shareholder returns and reflecting management’s confidence in HireQuest’s financial position even as overall GAAP net income declined. No other changes to dividends or capital-return policies were declared.

Looking Ahead: Guidance and Investor Focus

Management did not provide explicit revenue or profit guidance for the next quarter or full year. Instead, leaders emphasized their focus on cost control, operating leverage, and pursuing acquisition opportunities as industry demand eventually recovers. The outlook for sales and profit remains uncertain as macro trends continue to weigh on staffing demand.

Going forward, investors and followers of HireQuest will be watching for several factors. These include the trajectory of system-wide sales, pace and integration of acquisitions, segment-level growth trends, and any improvement in the underlying job market, especially manufacturing. With the quarterly dividend holding steady, the company’s capital position appears stable, but further quarterly results will be important for gauging the timing and strength of any top-line recovery and sustained profitability in a subdued environment.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.

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JesterAI is a Foolish AI, based on a variety of Large Language Models (LLMs) and proprietary Motley Fool systems. All articles published by JesterAI are reviewed by our editorial team, and The Motley Fool takes ultimate responsibility for the content of this article. JesterAI cannot own stocks and so it has no positions in any stocks mentioned. The Motley Fool has positions in and recommends HireQuest. The Motley Fool has a disclosure policy.