Table of Contents

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

 

FORM 10-Q

 

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended March 31, 2026

 

or

 

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number 001-38513

 

HIREQUEST, INC.

(Exact name of registrant as specified in its Charter)

 

Delaware		91-2079472
(State of incorporation or organization)		(I.R.S. employer identification no.)
111 Springhall Drive, Goose Creek, SC 29445
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (843) 723-7400

 

Securities registered pursuant to Section 12(b) of the Act:

 

Common Stock, $0.001 par value		HQI		The NASDAQ Stock Market LLC
Title of each class		Trading Symbol(s)		Name of each exchange on which registered

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports) and (2) has been subject to such filing requirements for the past 90 days. Yes ☒     No ☐

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒     No ☐

 

Indicate by check mark whether the Registrant is a large accelerated filer ☐, an accelerated filer ☐, a non-accelerated filer ☒, a smaller reporting company ☒, or an emerging growth company ☐ (as defined in Rule 12b-2 of the Exchange Act).

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

 

Number of shares of issuer's common stock outstanding at May 11, 2026: 13.9 million

 

 

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Table of Contents

 

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HireQuest, Inc.

Condensed Consolidated Balance Sheets

(unaudited)

See accompanying notes to consolidated financial statements. 

HireQuest, Inc.

Condensed Consolidated Statements of Income

(unaudited)

See accompanying notes to consolidated financial statements. 

HireQuest, Inc.

Condensed Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

See accompanying notes to consolidated financial statements.

HireQuest, Inc.

Condensed Consolidated Statements of Cash Flows

(unaudited)

See accompanying notes to consolidated financial statements. 

HireQuest, Inc.

Notes to Condensed Consolidated Financial Statements

(unaudited)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The financial position, results of operations, cash flows and other information included herein are not necessarily indicative of the financial position, results of operations and cash flows that may be expected in future periods. See "Special Note Regarding Forward-Looking Statements" and "Part II - Item 1A. Risk Factors" below for a discussion of uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Additionally, we use a non-GAAP financial measure and a key performance indicator to evaluate our results of operations. For important information regarding the use of such non-GAAP measure, including a reconciliation to the most comparable GAAP measure, see the section titled "Use of Non-GAAP Financial Measure: Adjusted EBITDA" below. For important information regarding the use of such key performance indicator, see the section titled “Key Performance Indicator: System-Wide Sales” below.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and other documents incorporated herein by reference include, and our officers and other representatives may sometimes make or provide, certain estimates and other forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act, including, among others, statements with respect to future revenue; franchise sales and system-wide sales; net income and Adjusted EBITDA (a non-GAAP Financial Measure); operating results; dividends and shareholder returns; anticipated benefits and synergies of any proposed transaction and future opportunities, including statements regarding value, profitability or growth prospects; cost synergies of any mergers or acquisitions including those we have completed in 2023 and 2024; intended office openings or closings; expectations of the effect on our financial condition of claims and litigation; strategies for customer retention and growth; strategies for risk management; and all other statements that are not purely historical and that may constitute statements of future expectations. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will,” and similar references to future periods.

While we believe these statements are accurate, forward-looking statements are not historical facts and are inherently uncertain. They are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. We cannot assure you that these expectations will materialize, and our actual results may be significantly different. Therefore, you should not place undue reliance on these forward-looking statements. Important factors that may cause actual results to differ materially from those contemplated in any forward-looking statements made by us include the following: the level of demand for and financial performance of the temporary staffing and permanent placement industry; the financial performance of our franchisees; our franchisees’ and our customers’ ability to navigate successfully the challenges posed by instability in the financial and capital markets and the overall economic environment including increases in the price of oil and gas and any potential recession; changes in customer demand; the extent to which we are successful in gaining new long-term relationships with customers or retaining existing ones, and the level of service failures that could lead customers to use competitors’ services; workers’ compensation expenses that fluctuate from period to period based on the mix of classifications, the level of payroll, recent claims resolution, and cumulative experience; significant investigative or legal proceedings including, without limitation, those brought about by the existing regulatory environment or changes in the regulations governing the temporary staffing and permanent placement industry and those arising from the action or inaction of our franchisees and temporary employees; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses including, without limitation, successful integration following the acquisitions of Ready Temporary Staffing, TEC Staffing Services, MRINetwork, Snelling Staffing, LINK Staffing, Recruit Media, Inc., Dental Power Staffing, Temporary Alternatives, Inc., and subsequent or smaller acquisitions; the possibility that any strategic target will not agree to consummate a transaction or that any such transaction is consummated on different terms than currently anticipated; the possibility that conditions to the completion of a proposed transaction, including the receipt of any required shareholder approvals and any required regulatory approvals, will not be met; the possibility that we may be unable to achieve expected synergies and operating efficiencies within an expected time frame or at all and to successfully integrate any acquired operations with ours; the possibility that such integration may be more difficult, time-consuming, or costly than expected, or that operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, or suppliers) may be greater than expected following a proposed transaction or the public announcement of a proposed transaction; disruptions to our technology network including computer systems and software whether resulting from a cyber-attack or otherwise; natural events such as pandemics, severe weather, fires, floods, and earthquakes, or man-made or other disruptions of our operating systems or the economy including by war or political turmoil; and the factors discussed in the “Risk Factors” section below and in our most recent Annual Report on Form 10-K; and the other factors discussed in this Quarterly Report and our Annual Report.

Any forward-looking statement made by us in this Quarterly Report on Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. The Company disclaims any obligation to update or revise any forward-looking statement, whether written or oral, that may be made from time to time, based on the occurrence of future events, the receipt of new information, or otherwise, except as required by law.

Overview

HireQuest, Inc., together with its subsidiaries, (“HQI,” the “Company,” “we,” us,” or “our”) is a nationwide franchisor of offices providing direct-dispatch, executive search, commercial staffing, and permanent placement solutions primarily in the light industrial, blue-collar, executive, managerial, and administrative segments of the staffing industry. Our franchisees provide various types of temporary personnel, permanent placements, and recruitment services through multiple business models under the trade names “HireQuest Direct,” “Snelling,” “HireQuest,” “DriverQuest,” “HireQuest Health,” “TradeCorp," "Northbound Executive Search," "SearchPath," "Management Recruiters International," "MRI," and "Sales Consultants." Some of the MRI franchises also operate under other brands specific to a locality. 

Our brands exhibit similar long-term financial performance and have similar economic characteristics. Therefore, we provide our services under a single operating division or segment. However, we strive to provide additional information and disclosures related to business models where appropriate.

As of March 31, 2026, we had 257 franchisee-owned offices and 1 company-owned office in 39 states, the District of Columbia, and 1 country outside of the United States. We provide employment for an estimated 75 thousand temporary employees annually working for thousands of clients in many industries including construction, healthcare, recycling, warehousing, logistics, auctioneering, manufacturing, hospitality, landscaping, retail, and dental.

Management is pursuing a strategy that includes organic and acquisition growth components. Our organic growth strategy includes expanding existing client business, seeking out national and global account opportunities for our franchisees, access to capital for our franchisees to expand into new markets, and offering new franchises to qualified applicants. Part of this growth strategy includes an expansive training program for our franchisees to start, operate and grow their business. Our acquisition growth strategy includes identifying strategic, accretive, "tuck-in" acquisitions financed primarily through a combination of cash and debt (including seller financing), the issuance of equity in appropriate circumstances, and the use of earn-outs where efficient to protect the negotiated value and future cash flows.

Results of Operations

Financial Summary

The following table displays our Consolidated Statements of Income for three months ended March 31, 2026 and March 31, 2025. Percentages reflect the line item as a percentage of total revenue.

Use of Non-GAAP Financial Measure: Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure that represents our net income before interest expense, provision for income taxes, depreciation and amortization, costs related to the work opportunity tax credit (“WOTC”), non-cash compensation and acquisition-related charges, net, and other charges and gains we consider non-recurring. We utilize Adjusted EBITDA as a financial measure as management believes investors find it a useful tool to perform meaningful comparisons and evaluations of past, present, and future operating results. We believe it is a complement to net income and other financial performance measures. Adjusted EBITDA is not intended to represent or replace net income as defined by U.S. GAAP and should not be considered as an alternative to net income or any other measure of performance prescribed by U.S. GAAP. We use Adjusted EBITDA to measure our financial performance because we believe interest, taxes, depreciation and amortization, WOTC-related costs, non-cash compensation, acquisition-related charges, net and other non-recurring charges and gains bear little or no relationship to our operating performance.

In addition, our Revolving Credit Agreement with Bank of America, N.A. (our “Credit Agreement”) requires us to comply with a fixed charge coverage ratio and a leverage ratio, both of which include Adjusted EBITDA substantially as defined above. For all of these reasons, we believe that Adjusted EBITDA provides us, and investors, with information that is relevant and useful in evaluating our business.

However, because Adjusted EBITDA excludes depreciation and amortization, it does not measure the capital we require to maintain or preserve our fixed and intangible assets. In addition, because Adjusted EBITDA does not reflect interest expense, it does not take into account the total amount of interest we pay on outstanding debt, nor does it show trends in interest costs due to changes in our financing or changes in interest rates. Adjusted EBITDA, as defined by us, may not be comparable to Adjusted EBITDA as reported by other companies that do not define Adjusted EBITDA exactly as we define the term. Because we use Adjusted EBITDA to evaluate our financial performance, we reconcile it to net income, which is the most comparable financial measure calculated and presented in accordance with U.S. GAAP below (in thousands).

Three Months Ended March 31, 2026 Compared to the Three Months Ended March 31, 2025

Revenue

Our total revenue consists of franchise royalties and service revenue we receive from our franchises. Revenue would also include staffing revenue with respect to owned locations, when applicable. Once a company-owned office is sold, disposed of, or otherwise classified as held-for-sale, it would not be reflected in revenue and instead reported as “Income from discontinued operations, net of tax.” Revenue does not include any owned locations for the three months ended March 31, 2026 or the three months ended March 31, 2025. For a description of our revenue recognition practices, please refer to "Note 1 - Overview and Summary of Significant Accounting Policies - Revenue Recognition" in our Annual Report on Form 10-K for the year ended December 31, 2025, which disclosure is incorporated herein by reference.

Total revenue for the three months ended March 31, 2026 was approximately $6.5 million compared to $7.5 million for the three months ended March 31, 2025, a decrease of approximately 12.7%. The decrease in revenue was largely due to the loss of approximately $500 thousand of total revenue in the quarter ended March 31, 2025 related to the MRINetwork assets divestiture and a decline in royalties from the retained Northbound, MRI, and SearchPath franchisees of approximately $360 thousand in the current period. For the three months ended March 31, 2026, there was a $15.8 million or 13.4% decrease in underlying system-wide sales from $118.4 million for the three months ended March 31, 2025 to $102.6 million for the three months ended March 31, 2026. The decrease in system-wide sales was primarily driven by $16.0 million in system-wide sales related to MRINetwork assets divested on January 1, 2026 and a decline in HireQuest Direct of $2.3 million, partially offset by a $1.9 million increase in Snelling/HireQuest.

Franchise Royalties

Franchise royalties for the three months ended March 31, 2026 were approximately $6.1 million, a decrease of approximately 12.9% from $7.0 million for the three months ended March 31, 2025. The decrease in royalties was largely due to the loss of $506  thousand in royalties related to the MRINetwork assets divestiture, and a decrease in HireQuest Direct royalties that approximates the decrease in system-wide-sales. A summary of franchise royalties by brand for the three months ended March 31, 2026 and March 31, 2025 follows: 

Service Revenue

Service revenue consists of interest we charge our franchisees on overdue customer accounts receivable and other miscellaneous fees for optional services we provide. Direct costs to provide certain services are reflected as a reduction in service revenue. As accounts receivable age over 42 days, our franchisees pay us interest on these accounts equal to 0.5% of the amount of the uncollected receivable each 14-day period. All accounts that age beyond 84 days are charged back to the franchisee and no longer incur interest, although some of our franchisees elect to charge back accounts that age over 42 days in order to avoid the interest charge. Fees related to the MRINetwork national advertising fund are also included in service revenue. We do not profit from this fee as it represents pass-though items. As of January 1, 2026, all franchisees that had franchise agreements with the MRINetwork national advertising fund fee were divested to a new entity so going forward service revenue will no longer include such fees as a component. MRINetwork national advertising fund fees were $0 for the three months ended March 31, 2026, compared to $74 thousand for the three months ended March 31, 2025. Service revenue also includes amounts charged for various optional services and cost-sharing arrangements such as bulk vendor programs or IT license blocks. Generally, we do not profit from these arrangements as they represent pass-through items, although there may be timing differences. In addition, there are occasionally classification differences where the cost is embedded in selling, general and administrative expenses. 

Service revenue for the three months ended March 31, 2026 was approximately $462 thousand, a decrease of $50 thousand from the three months ended March 31, 2025, when service revenue was approximately $512 thousand. Interest income on overdue customer accounts receivable, which is included in service revenue was $203 thousand for the three months ended March 31, 2026 and $240 thousand for the three months ended March 31, 2025. Fluctuations in interest generally follow the mix of aged accounts in our accounts receivable, although relatively few age over 42 days and result in service revenue for us. Many of our franchisees have elected to charge back accounts early in order to avoid or reduce the interest charge. Therefore, there will not be a proportionally large increase in service revenue even when there is a large increase in accounts receivable. We pride ourselves on maintaining quality, creditworthy customers who pay timely. We view the imposition of higher interest rates on aged accounts receivable to serve as an incentive for our franchisees to select credit-worthy customers. Service revenue is expected to fluctuate from quarter-to-quarter.

Operating Expenses

Total Operating expenses for the three months ended March 31, 2026 were approximately $4.3 million compared to $5.3 million for the three months ended March 31, 2025. The decrease of $1.0 million was primarily driven by a decrease of $699 thousand in expenses related to the MRINetwork assets divestiture.

Workers' Compensation

Net workers' compensation expense was approximately $39 thousand for the three months ended March 31, 2026, compared to $28 thousand recorded in the three months ended March 31, 2025. Our workers' compensation reserves provide benefits following a workplace injury. Benefits are usually statutory in nature and are generally provided in partial or complete replacement of the injured worker’s recourse to the liability system. Payments may include medical treatment, rehabilitation, lost wages, and survivor benefits. Workers compensation rating is typically based on job classification, and our workers fall in hundreds of classifications. Annually, we use third-party actuaries to ensure that the overall ratings are sound, that individual insurer rates are adequate, and that individual risks receive a fair rate that reflects both the characteristics of the job classification and the Company's risk experience. The company pays premiums, actual claims, and establishes reserves for future claims. In turn we charge our franchises a percentage of payroll as determined by our workers' compensation carrier, plus or minus certain incentives and charges we provide for good or bad workers' compensation claims history. The overall charge is an estimate of the fully developed future costs and may not always coincide with the actual costs we incur resulting in expense or benefit in a given period. Over the long-term, our workers' compensation expense should equal the amounts we collect from franchisees and essentially be a pass-through cost. In the short-term, we cannot accurately predict the effects of workers' compensation in specific future periods, and historical trends are not indicative of future results.

Compensation and Benefits

Compensation-related expenses include wages, payroll taxes, benefits, and stock-based compensation. Compensation and benefits for the three months ended March 31, 2026 were approximately $2.3 million, a decrease of $535 thousand when compared to $2.9 million for the three months ended March 31, 2025. The decrease in compensation and benefits was primarily driven by the elimination of expenses related to the MRINetwork assets divestiture for the three months ended March 31, 2026, which accounted for $365 thousand in three months ended March 31, 2025.

Depreciation and amortization

Depreciation and amortization for the three months ended March 31, 2026 was approximately $778 thousand compared to $734 thousand for the three months ended March 31, 2025. This increase is primarily the result of increased amortization related to shortening the estimated useful life of the MRI franchise agreements. 

Other Income and Expense

Other income and expense consists of interest income on notes receivable, rent received from sub-tenants, and other non-operating income and expense.

Other miscellaneous income (expense)

For the three months ended March 31, 2026, other miscellaneous income was approximately $16 thousand, compared to other miscellaneous income of $131 thousand for the three months ended March 31, 2025. During the period ended March 31, 2025, we recognized a gain on the disposal of a franchise business we took control of and then sold to another franchisee in the same period.

Interest income

Interest income for the three months ended March 31, 2026 was approximately $101 thousand compared to $134 thousand for the three months ended March 31, 2025. Interest income represents interest related to the financing of franchised locations.

Gain on divestiture

For the three months ended March 31, 2026, we recognized a $251 thousand gain related to the divestiture of assets related to MRINetwork.

Interest and other financing expense

Interest and other financing expense relates primarily to the Credit Agreement. Interest and other financing expense decreased from $144 thousand for the three months ended March 31, 2025 to $8 thousand for the three months ended March 31, 2026. Interest and other financing expense will fluctuate as we utilize the line of credit for acquisitions or other short-term liquidity needs. The decrease in interest expense is consistent with the decrease in the outstanding line of credit balance. 

Provision for income tax

Income tax expense was approximately $264 thousand for the three months ended March 31, 2026. Our net ETR for the three months ended March 31, 2026 was 14.4%. We estimate an annual projected effective tax rate ("ETR") for the year to determine income tax expense or benefit in the interim periods. The estimated annual ETR does not include tax effects from significant unusual or infrequently occurring items. Such items are accounted for discretely during the period in which they occur. The ETR is primarily driven by federal hiring credits, which is included as part of income tax expense because it can be claimed only on the income tax return and can be realized only through the existence of taxable income. Other significant items affecting our tax rate result from state income taxes, certain non-deductible expenses, and tax effects of stock-based compensation.

Income tax expense for the three months ended March 31, 2025 was approximately $169 thousand. Our net ETR for the three months ended March 31, 2025 was 10.5%. The increase in the net ETR was driven by the level of hiring credits applied during the three months ended March 31, 2025.

Discontinued Operations

Following our acquisition of Dubin, we divided their operations into separate businesses and sold certain customer related assets of one of the acquired locations to a new franchisee. The remaining assets related to the operations of the other acquired location (in Philadelphia) have not been sold and as of March 31, 2026 remain classified as held-for-sale. In the meantime, we operate this Philadelphia location as company-owned, although all operations are presented as part of discontinued operations. 

The assets and liabilities of our discontinued operations are presented separately in the asset and liability sections, respectively, of the balance sheet for all periods presented. Similarly, cash flows and the results of operations are also removed from continuing operations in the respective financial statements. In general, assets held-for-sale are not amortized or depreciated, and are measured at the lower of carrying amount or fair value less costs to sell.

Liquidity and Capital Resources

Overview

Our major source of liquidity and capital is cash generated from our ongoing operations consisting of royalty revenue, service revenue and staffing revenue from franchisee-owned locations. We also receive principal and interest payments on notes receivable that we issued in connection with the conversion of company-owned or acquired offices to franchised offices. 

At March 31, 2026, our current assets exceeded our current liabilities by approximately $32.5 million. Our current assets included approximately $1.0 million of cash and $44.7 million of net accounts receivable, which our franchisees have billed to customers and which we own in accordance with our franchise agreements. Our largest current liabilities as of March 31, 2026 included approximately $10.5 million due to our franchisees on pending settlement statements and $2.9 million related to our workers’ compensation claims liability.

Our working capital requirements are driven largely by temporary employee payroll, which is typically daily or weekly, and weekly cash settlements with our franchises. Since collections from accounts receivable lag employee pay our working capital requirements increase as system-wide sales increase, and vice-versa. When the economy contracts, our cash balance tends to increase in the short-term as payroll funding requirements decrease and aged accounts receivable are converted to cash upon collection. As the economy recovers, our cash balance generally decreases and accounts receivable increase.

We believe that our current cash balance, together with the future cash generated from operations, principal and interest payments on notes receivable, and our borrowing capacity under our line of credit, will be sufficient to satisfy our working capital needs, capital asset purchases, future dividends (if any), and other liquidity requirements associated with our continuing operations for the next 12 months. We also believe that these sources of liquidity and capital will be sufficient to satisfy our liquidity requirements associated with our continuing operations beyond the next 12 months.

Our access to, and the availability of, financing on acceptable terms in the future will be affected by many factors including overall liquidity in the capital or credit markets, the state of the economy and our credit strength as viewed by potential lenders. We cannot provide assurances that we will have future access to the capital or credit markets on acceptable terms. We expect our borrowing costs to continue to increase as the Federal Reserve raises its benchmark interest rates in an effort to control inflation.

Operating Activities

During the three months ended March 31, 2026, cash provided by continuing operations was approximately $259 thousand and included net income from continuing operations of approximately $1.6 million, adjusted by non-cash items (primarily depreciation, gain of divestiture of business, and stock-based compensation) of approximately $587 thousand. These provisions were offset by changes in operating assets and liabilities requiring cash (primarily accounts receivable) of approximately $1.9 million. During the three months ended March 31, 2025, cash provided by continuing operating activities was approximately $1.9 million and included net income from continuing operations of approximately $1.4 million, adjusted by non-cash items of approximately $1.3 million (depreciation, deferred taxes. and stock-based compensation). These provisions were partially offset by changes in operating assets and liabilities requiring cash (primarily prepaid expenses) of approximately $770 thousand. 

Investing Activities

During the three months ended March 31, 2026, cash used by investing activities was approximately $435 thousand, primarily from cash issued for notes receivable of approximately $398 thousand, and capital contribution to unconsolidated affiliate of approximately $192 thousand. These provisions were offset by cash received from payments on notes receivable of approximately $148 thousand. During the three months ended March 31, 2025, cash provided by investing activities was approximately $316 thousand, primarily from payments on notes receivable of approximately $362 thousand.

Financing Activities

During the three months ended March 31, 2026, cash used by financing activities was approximately $2.7 million and included purchase of treasury stock of approximately $1.9 million and the payment of approximately $838 thousand in dividends. During the three months ended March 31, 2025, cash used by financing activities was approximately $2.3 million and included the payment of dividends totaling approximately $842 thousand and net payments on our revolving line of credit of approximately $1.4 million.

Revolving Credit Agreement with Bank of America, N.A.

On February 28, 2023 the Company and all of its subsidiaries as borrowers (collectively, the "Borrowers") entered into a Revolving Credit Agreement with Bank of America, N.A. (the "Bank") for a $50,000,000 revolving facility (the “Senior Credit Facility”), which includes a $20,000,000 sublimit for the issuance of standby letters of credit. The Company also has a one-time right, upon at least ten business days’ prior written notice to the Bank to increase the maximum amount of the Senior Credit Facility to $60 million. The Senior Credit Facility provides for certain financial covenants including maintaining an Asset Coverage Ratio of at least 1.0:1.0 at all times; maintaining a Total Funded Debt to Adjusted EBITDA Ratio not exceeding 3.0:1.0; and maintaining, on a consolidated basis, a Fixed Charge Coverage Ratio of at least 1.25:1.0. Interest will accrue on the outstanding balance of the Senior Credit Facility at a variable rate equal to (a) the Term SOFR Daily Floating Rate plus a margin between 1.00% and 1.75% per annum. In each case, the applicable margin is determined by the Company's Total Funded Debt to Adjusted EBITDA, as defined in the Credit Agreement. The Senior Credit Facility will mature on February 28, 2028. 

The Credit Agreement and other loan documents contain customary representations and warranties, affirmative, and negative covenants, including without limitation, those covenants governing indebtedness, liens, fundamental changes, restricting certain payments including dividends unless certain conditions are met, transactions with affiliates, investments, engaging in business other than the current business of the Borrowers and business reasonably related thereto, and sale/leaseback transactions. The Credit Agreement and other loan documents also contain customary events of default including, without limitation, payment default, material breaches of representations and warranties, breach of covenants, cross-default on material indebtedness, certain bankruptcies, certain ERISA violations, material judgments, change in control, termination or invalidity of any guaranty or security documents, and defaults under other loan documents. The obligations under the Credit Agreement and other loan documents are secured by substantially all of the assets of the Borrowers as collateral including, without limitation, their accounts and notes receivable, intellectual property and the real estate owned by HQ Real Property Corporation.

The Company intends to utilize the proceeds of any loans made under the Senior Credit Facility for transaction fees and expenses incurred in connection with strategic acquisitions and dispositions, working capital, required letters of credit, and general corporate purposes in accordance with the terms of the Senior Credit Facility.

At March 31, 2026, availability under the Senior Credit Facility was approximately $40.3 million based on eligible collateral, less letter of credit reserves, bank product reserves, and current advances, assuming continued covenant compliance. Our all-in-rate of borrowing was 4.7% and is repriced daily.

Economy and Inflation

Recent shifts in U.S. government policies towards isolationism, trade protectionism, immigration policy, and other potential future shifts in policy, may lead to uncertainty in the economy which may impact whether businesses in many industries choose to expand operations or preserve resources which, in turn, may affect the market for temporary or permanent placement services. The imposition of, striking down by the United States Supreme Court, and continuing negotiations with respect to tariffs and their effect on the overall economy of the United States could impact our share price as well as our results of operations. In addition, the recent joint U.S.-Israeli strikes on Iran beginning in February 2026, as well as other conflicts in the Middle East, have led to higher oil prices and created supply imbalances in the global market for oil and natural gas.

Key Performance Indicator: System-Wide Sales

We refer to total sales generated by our franchisees as “franchise sales.” For any period prior to their conversion to franchises, we refer to sales at company-owned and operated offices as “company-owned sales.” In turn, we refer to the sum of franchise sales and company-owned sales as “system-wide sales.” In other words, system-wide sales include sales at all offices, whether owned and operated by us or by our franchisees. In addition, system-wide sales include sales at company-owned offices that are classified as discontinued operations. System-wide sales is a key performance indicator, although we do not record system-wide sales as revenue. Management believes that information on system-wide sales is important to understanding our financial performance because those sales are the basis on which we calculate and record much of our franchise royalty revenue, are directly related to all other royalty revenue and service revenue and are indicative of the financial health of our franchisee base. Management uses system-wide sales to benchmark current operating levels to historic operating levels. System-wide sales should not be considered as an alternative to revenue.

For the three months ended March 31, 2026, nearly all of our offices were franchised with the only exceptions being a portion of the Dubin operations acquired in the first quarter of 2022. The following table reflects our system-wide sales broken into its components for each period indicated. The Dubin operations are presented in the consolidated financial statements as discontinued operations because they are considered held-for-sale, but their system-wide sales are reflected along with all other offices in the table below. Percentages indicate the change in system-wide sales relative to the comparable prior period.

For the three months ended March 31, 2025, system-wide sales from Northbound, MRI, and SearchPath includes $16.0 million related to MRINetwork assets divested on January 1, 2026.

Number of Offices

We examine the number of offices we open and close every period. The number of offices is directly tied to the amount of royalty and service revenue we earn. We count a location as an office if it has a physical location and is generating revenue.

The following table accounts for the number of offices opened and closed or consolidated during the three months ended March 31, 2026:

Critical Accounting Estimates

See Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Estimates" in our Annual Report on Form 10-K for the year ended December 31, 2025.

Item 3. Quantitative and Qualitative Disclosures about Market Risk

We are a “smaller reporting company” as defined by Rule 12b-2 of the Exchange Act, and, as such, are not required to provide the information required by this Item.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Under the supervision and with the participation of our management, including the Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, management concluded that these disclosure controls and procedures were effective as of the end of such period. 

Changes in Internal Control Over Financial Reporting

There was no change to the Company's internal control over financial reporting that occurred during the Company's quarter ended March 31, 2026 that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting.

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

From time to time we are involved in various legal and administrative proceedings. Based on information currently available to us, we do not expect material uninsured losses to arise from any of these matters. We believe the outcomes of these proceedings, even if determined adversely, will not have a material adverse effect on our business, financial condition, results of operations, or liquidity and capital resources.

Item 1A. Risk Factors

There have been no material changes from the risk factors we previously disclosed in our Annual Report on Form 10-K for the year ended December 31, 2025 filed with the Securities and Exchange Commission on March 31, 2026.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Issuer Purchases of Equity Securities

In December 2025, our Board of Directors authorized a one-year repurchase plan pursuant to which the Company can repurchase up to $20 million of its outstanding common stock. The program permits repurchases from time to time in the open market, through privately negotiated transactions, or otherwise, in compliance with applicable securities laws and other legal requirements. The timing, manner, price, and amount of any repurchases are determined by management based on market conditions, share price, and other factors. The program does not obligate the Company to acquire any specific number of shares and may be suspended or discontinued at any time.

The table below sets forth information with respect to purchases made by or on behalf of the Company or any "affiliated person" (as defined in Rule 10b-18(a)(3) under the Exchange Act) of our common stock during the three months ended March 31, 2026. 

Item 6. Exhibits

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned, hereunto duly authorized.

ATTACHMENTS / EXHIBITS

EXHIBIT 31.1

EXHIBIT 31.2

EXHIBIT 32.1

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