Note 1 - Overview and Summary of Significant Accounting Policies

Nature of Business

HireQuest, Inc., together with its subsidiaries, (“HQI,” the “Company,” “we,” “us,” or “our”) is a nationwide franchisor of offices providing direct-dispatch, executive search, and commercial staffing solutions primarily in the light industrial and blue-collar segments of the staffing industry and traditional commercial staffing. Our franchisees provide various types of temporary personnel through two primary business models operating under the trade names “HireQuest Direct”, “HireQuest”, “Snelling”, “DriverQuest”, “HireQuest Health”, "TradeCorp", "SearchPath", “Northbound Executive Search”, "Management Recruiters International", "Sales Consultants" and "MRI". HireQuest Direct specializes primarily in unskilled and semi-skilled industrial and construction personnel. HireQuest, Snelling and TradeCorp specialize primarily in skilled and semi-skilled industrial personnel, clerical and administrative personnel, and permanent placement services. DriverQuest specializes in both commercial and non-CDL drivers serving a variety of industries and applications. HireQuest Health specializes in skilled personnel in the medical and dental industries. Northbound Executive Search, MRI, SearchPath, and Sales Consultants specialize in executive placement and consultant services.

On December 1, 2025, HQ MRI Corporation (“HQ MRI”), a wholly-owned subsidiary of the Company, entered into a Contribution Agreement with MRINetwork Operations (“MRINO”), which became effective and closed on January 1, 2026. Under this agreement, HQ MRI contributed certain assets and liabilities associated with its permanent placement franchise base, including those necessary for day-to-day operations, in exchange for approximately 40% of the ownership interest in MRINO. The contract-staffing assets of the MRINetwork were excluded from the transaction and retained by HQ MRI. Please refer to Note 2 - Investment in MRINetwork Operations for additional information.

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 are the employer of record to approximately 75 thousand employees annually, who in turn provide services to thousands of clients in various industries including construction, healthcare, recycling, warehousing, logistics, auctioneering, manufacturing, hospitality, landscaping, retail, and dental practices. We provide employment, marketing, working capital funding, software, and administrative services to our franchisees.

Basis of Presentation

We have prepared the accompanying consolidated financial statements in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), and with the instructions to Article 8 of Regulation S-X. In the opinion of management, the accompanying consolidated financial statements reflect all adjustments of a normal recurring nature that are necessary for a fair presentation of the results for the periods presented.

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report filed on Form 10-K for the year ended December 31, 2025. Results for the interim periods presented are not necessarily indicative of the results expected for the full year or for any other period.

Share Repurchase Plan

From time to time, we repurchase shares of our common stock pursuant to a share repurchase program approved by our Board of Directors. Repurchased shares are initially recorded as treasury stock and are periodically retired and cancelled. The excess of the repurchase price over the par value of the shares is allocated to retained earnings in accordance with applicable accounting guidance. Direct costs associated with share repurchases are included as part of the cost of the shares acquired. Repurchased shares that are retired reduce the number of shares issued and outstanding.

Consolidation

The consolidated financial statements include the accounts of HQI and all of its wholly-owned subsidiaries. Intercompany balances and transactions have been eliminated.

U.S. GAAP requires the primary beneficiary of a variable interest entity (“VIE”) to consolidate that entity. To be the primary beneficiary of a VIE, an entity must have both the power to direct the activities that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits from the VIE that are significant to the beneficiary. We provide acquisition financing to some of our franchisees that could result in our having to absorb losses. This results in some franchisees being considered VIEs. We have reviewed our relationship with each of these franchisees and determined that we are not the primary beneficiary of any of these entities. Accordingly, we have not consolidated these entities.

In addition, in connection with the formation of MRINO on January 1, 2026, we evaluated our investment under U.S GAAP, including consideration of MRINO’s capitalization and our involvement in providing initial funding. We determined that, although MRINO is a VIE, we do not have the power to direct the activities that most significantly impact MRINO’s economic performance. Accordingly, we are not the primary beneficiary, and the investment is accounted for under the equity method of accounting.

Use of Estimates

The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue and expenses. Actual results could differ from those estimates.

Significant estimates and assumptions underlie our workers’ compensation claim liabilities, our workers’ compensation Risk Management Incentive Program, our deferred taxes, our allowance for credit losses, potential impairment of goodwill and other intangibles, stock-based compensation, and estimated fair value of assets and liabilities acquired.

Franchise Royalties

Below are summaries of our franchise royalties disaggregated by business model:

Service revenue, which forms the other component of our total revenue, consists of interest we charge our franchisees on overdue customer accounts receivable, trademark license fees, and other fees for optional services we provide. We recognize interest income based on the effective interest rate applied to the outstanding principal balance of overdue accounts. License fees are charged to some locations that utilize our intellectual property that are not franchisees. License fees are 9.0% of the gross margin for the location and are recognized when earned. We recognize revenue from optional services as we provide them.

Advertising fund revenue includes contributions to our National Advertising Fund by franchisees. Revenue related to these contributions is based on a percentage of sales of certain franchised locations and is recognized as earned.

Marketing and Advertising

We expense advertising and marketing costs as we incur them. These costs were approximately $368 thousand and $378 thousand during the three months ended March 31, 2026 and  March 31, 2025, respectively. These costs are included in general and administrative expenses.

Some of our MRI franchisees are required to pay an advertising fee equal to 0.5% - 1.0% of total net sales, which supports national advertising designed to build brand awareness and drive traffic for both potential customers and potential candidates. The national advertising effort is administered by us, with franchisees providing input. Some examples include subscriptions to various job boards, the creation of digital content for social media, supporting investments in marketing-related software, and purchasing video and print media.

Recently Adopted Accounting Pronouncements

There were no new accounting pronouncements adopted during the quarter that had a significant impact on our financial statements and related disclosures.

Recently Issued Accounting Pronouncements Not Yet Adopted

In November 2024, the Financial Accounting Standards Board ("FASB") issued ASU 2024-03, "Income Statement - Reporting Comprehensive Income - Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses" which expands the required disclosures related to an entity’s expenses and address requests from investors for more granular information about the make-up of expenses in commonly presented expense captions such as selling, general, and administrative. This ASU is effective for fiscal years beginning after  December 15, 2026, and interim periods beginning after  December 15, 2027. We are currently evaluating the impact these changes may have on our consolidated financial statements and related disclosures.

In  September 2025, the FASB issued ASU 2025-06, “Intangibles-Goodwill and Other-Internal-Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software.” ASU 2025-06 eliminates references to project stages and instead requires an entity to start capitalizing software costs once both of the following criteria have been met: (1) management has authorized and committed to funding the software project, and (2) it is probable that the project will be completed and the software will be used for its intended function. ASU 2025-06 is effective for fiscal years beginning after  December 15, 2027 and interim reporting periods within those annual reporting periods. The guidance can be applied on a prospective basis, a modified basis for in-process projects or a retrospective basis, and early adoption is permitted. We are currently evaluating the impact of this ASU.

In December 2025, the FASB issued ASU 2025-11, “Interim Reporting (Topic 270): Narrow-Scope Improvements.” ASU 2025-11 clarifies the applicability of interim reporting guidance under ASC 270 and reorganizes certain interim disclosure requirements to improve consistency and navigability within the Codification. The ASU also introduces a disclosure principle requiring entities to disclose events and changes that occur after the end of the most recent annual reporting period that have a material impact on the entity. ASU 2025-11 is effective for interim reporting periods within annual reporting periods beginning after December 15, 2027, and early adoption is permitted. We are currently evaluating the impact this ASU may have on our consolidated financial statements and related disclosures.