HireQuest Q2 2026 earnings: Lower SG&A lifts profitability

HireQuest (Nasdaq: HQI) reported Q2 2026 revenue of $8.1 million, up 6.0% year over year, while diluted EPS increased to $0.19 from $0.08. For the quarter ended June 30, 2026, net income more than doubled as lower SG&A expenses amplified the benefit of modest reported revenue growth. Results were also affected by the January 2026 divestiture of the MRINetwork permanent-placement franchise assets.

Core Earnings Data

The most significant change was in operating expenses. SG&A declined by $1.9 million, or 31.9%, while revenue increased by approximately $0.5 million, lifting operating margin to about 41.3% from 13.7% a year earlier.

Adjusted results also improved, although less sharply than GAAP operating income because the prior-year quarter included acquisition-related charges that are excluded from adjusted measures. Adjusted EBITDA rose 41.7% to $4.6 million.

Adjusted net income and adjusted EBITDA are non-GAAP measures. The adjustments included acquired-intangible amortization, noncash compensation, WOTC-related costs and a write-down of notes receivable, among other items.

Business Performance

Franchise royalties, HireQuest’s largest revenue source, increased 4.1% to $7.6 million. Service revenue rose to $513,000 from $354,000, an increase of approximately 44.9%.

Reported comparisons understate the growth of the continuing franchise base because Q2 2025 included approximately $620,000 of franchise royalties and $70,000 of service revenue associated with the MRINetwork assets divested on January 1, 2026. Excluding the divested assets from the comparison, HireQuest said franchise royalties increased 13.8% and total revenue grew 16.6%.

System-wide sales declined to $117.8 million from $125.9 million on a reported basis, primarily because the prior-year period included $17.7 million associated with the divested MRINetwork assets. On the company’s pro forma basis, system-wide sales increased 6.9%, indicating that the remaining franchise network expanded despite the lower reported total.

Profitability, Liquidity and the Balance Sheet

Lower expenses were the main driver of the earnings increase. Core SG&A fell to $3.8 million from $4.7 million, while workers’ compensation expense declined to $39,000 from $127,000. The prior-year quarter also included $929,000 of acquisition-related charges and $70,000 of MRINetwork advertising-fund expenses, compared with none in Q2 2026. These changes more than offset a $164,000 write-down of notes receivable in the current quarter.

Cash declined between year-end and June 30, but working capital increased. Accounts receivable rose by approximately $9.6 million, while total liabilities increased by approximately $4.6 million.

HireQuest paid a quarterly cash dividend of $0.06 per share on June 15, 2026. The company intends to maintain that quarterly amount, but future declarations remain subject to operating results, financial position and board approval.

Management’s View

President and CEO Rick Hermanns described the employment market as stabilizing and demand for temporary staffing services as recovering. Management believes franchisees are positioned to benefit as employers seek flexible, skilled labor, but it did not provide a quantitative financial outlook in the supplied release.

Recent Insider Transactions

The detailed transaction data supplied lists a $13,747 direct purchase by CEO Richard Hermanns on June 3, 2026. The other recent entries consisted of a stock gift and equity awards rather than open-market sales.

The supplied six-month aggregate reports no insider purchases or sales, which conflicts with the detailed June 3 purchase entry. The source does not explain this discrepancy, so the aggregate and transaction-level data should not be treated as directly reconcilable.

Risks Investors Should Monitor

• Staffing demand: Management reported signs of stabilization and recovery, but HireQuest remains exposed to changes in demand for temporary staffing and permanent-placement services.
• Expense comparisons: Q2 profit growth benefited from the absence of $929,000 in prior-year acquisition charges, as well as lower core SG&A and workers’ compensation expense. A reversal in these cost trends would pressure margins.
• Divestiture-related comparability: Reported system-wide sales declined while pro forma sales increased. Investors need to distinguish between reported and divestiture-adjusted figures when evaluating underlying growth.
• Liquidity and working capital: Cash fell to $1.6 million as accounts receivable and liabilities increased. The company had approximately $41.0 million of credit-line availability, but that amount is conditional on continued covenant compliance and eligible collateral.
• Workers’ compensation volatility: The company cautioned that this expense can fluctuate with payroll levels, job classifications and claims experience. The unusually low expense in Q2 may therefore vary in future periods.

Summary

HireQuest’s Q2 2026 results combined moderate reported revenue growth with a substantial reduction in SG&A, producing much higher operating income, net income and adjusted EBITDA. The MRINetwork divestiture reduced reported system-wide sales but also obscured faster growth in the remaining business on a pro forma basis. Future results will depend on whether staffing demand continues to recover, lower core expenses persist and the company manages its rising receivables and reduced cash balance effectively.