Q1 2024 HireQuest Inc Earnings Call
Operator: Greetings. Welcome to the Hirequest, Inc. First Quarter 2024 Earnings Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, John Nesbett of IMS Investor Relations.
Greetings and welcome to the higher Quest, Inc. First quarter 2024 earnings call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone.
John Nesbett: Pat. Please note. This conference is being recorded I will now turn the conference over to your host John Nesbitt of IMS Investor Relations you may begin.
Operator: Okay.
John Nesbett: Thank you, Operator. I'd like to welcome everyone to the call. Hosting the call today are Hirequest Chief Executive Officer Rick Hermanns and Chief Financial Officer Steve Crane. I'd like to take a moment to read the Safe Harbor Statement. This conference call contains four looking statements as defined within Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Exchange Act of 1934 as amended. These four looking statements and terms such as anticipate, expect, intend, may, will, should, or other comparable terms involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future.
John Nesbett: Thank you operator, I'd like to welcome everyone to the call hosting the call today are higher Quest, Chief Executive Officer, Rick Hermanns, and Chief Financial Officer, Steve Crane, I'd like to take a moment to read the Safe Harbor statement. This conference call contains forward looking statements as defined within section 27, a of the Securities Act of 19.
John Nesbett: 33, as amended and section 21 E of the Securities Exchange Act of 1934 as amended these forward looking statements and terms such as anticipate expect intend may will should or other comparable terms involves risks and uncertainties because they relate to events independents.
John Nesbett: Circumstances that will occur in the future.
John Nesbett: These statements include statements regarding the intent, belief, or current expectations of Hirequest and members of its management, as well as the assumptions on which such statements are based. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those described in Hirequest's periodic reports filed with the SEC, and that actual results may differ materially from those contemplated by such forward-looking statements. Except as required by federal securities law, Hirequest undertakes no obligation to update or revise forward-looking statements to reflect changing conditions. I would now like to turn the call over to the CEO of Hirequest, Rick Hermanns. Please go ahead, Rick.
John Nesbett: These statements include statements regarding the intent belief or current expectations of higher quest and members of its management as well as the assumptions on which such statements are based prospective investors are cautioned that any such forward looking statements are not guarantees of future performance and involve risks and uncertainties, including those described higher quest periodic.
Richard F. Hermanns: Reports filed with the SEC and that actual results may differ materially from those contemplated by such forward looking statements, except as required by federal Securities Law. Our quest undertakes no obligation to update or revise forward looking statements to reflect changed change conditions I would now like to turn the call over.
John Nesbett: Over to the CEO of higher question Rick Hermanns. Please go ahead rich.
Richard F. Hermanns: Thank you, everyone, for joining today's call. I'll begin by providing an overview of our financial and strategic highlights from the first quarter of 2024, and then I'll turn the call over to Steve, who will share more details on our first quarter financial results. Our first quarter results were in line with our expectations, with franchise royalties of $7.8 million, total revenue of $8.4 million, and net income from continuing operations of $1.7 million, or 12 cents a share.
Richard F. Hermanns: Thank you everyone for joining today's call I'll begin by providing an overview of our financial and strategic highlights for the first quarter of 2024, and then I'll turn the call over to Steve who will share more details around our first quarter financial results. Our first quarter results were in line with our expectations with franchise.
Steve: Royalties of seven $8 billion total revenue of $8 $4 million and net income from continuing operations of $1 $7 million.12, a share overall, we delivered a solid performance given the current economic headwinds that continue to affect the U S staffing market.
Richard F. Hermanns: Overall, we delivered a solid performance given the current economic headwinds that continue to affect the U.S. staffing market. However, the overall environment for staffing solutions in the United States is currently a difficult one. The impact on our individual franchisees varies by geography and industry people. During the first quarter, our Hirequest direct franchisees fared the best of the three primary offerings, due in part to geographic factors, while MRI networks, specifically perm placements, struggled the most, consistent with what we've seen from our peers in that segment.
Richard F. Hermanns: Okay.
Richard F. Hermanns: While the overall environment for staffing solutions in the United States is currently a difficult one.
Richard F. Hermanns: The impact on our individual franchisees varies by geography and industry focus during the first quarter, our higher cost direct franchisees fared the best of the three primary offerings due in part to geographic factors, while MRI network, specifically Perm placement struggled the most consistent with what we've seen from our peers.
Richard F. Hermanns: In that segment.
Richard F. Hermanns: We expect to see general demand increase as we move into the second and third quarters, which are traditionally stronger for our business as demand for temporary staffing tends to increase as a result of normal seasonal factors. Our diverse group of staffing solutions is well-positioned to capitalize on increased demand with employers becoming more comfortable adding headcount to their operations. As we've done effectively for several quarters now, our focus is on controlling what we can control. Our core SG&A decreased year over year in the quarter to $4.9 million from $5.7 million in the first quarter of 2023.
Richard F. Hermanns: We expect to see general demand increase as we move into the second and third quarters, which are traditionally stronger for our business as demand for temporary staffing tends to increase as a result of normal seasonal factors. Our diverse group of staffing solutions is well positioned to capitalize on increased demand with employers becomes.
Richard F. Hermanns: More comfortable adding head count to their operations as we've done effectively for several quarters now our focus is on controlling what we can control.
Richard F. Hermanns: Core SG&A decreased year over year in the quarter to $4 $9 million from $5 $7 million in the first quarter of 2023.
Richard F. Hermanns: In the first quarter of 2024, workers' compensation expense was $572,000, which represented a significant sequential decrease from $1.3 million in the fourth quarter of 2023. We started our new policy year at the beginning of March, and we're encouraged by the results of the changes we implemented this year. In last quarter's call, there were two primary factors that impact our workers' compensation levels. First, the difference between our net premium amounts collected and ours and our expected losses for the policy year.
Richard F. Hermanns: The first quarter of 2020 for Workers' compensation expense was $572000, which represented a significant sequential decrease from $1.3 million in the fourth quarter of 2023, we.
Richard F. Hermanns: We stated we started our new policy year at the beginning of March and we're encouraged by the results from the changes we implemented and that we implemented this year as I explained.
Richard F. Hermanns: On last quarter's call. There are two primary factors that impact our workers' compensation levels first the difference between our net premium amounts collected in ours and our expected losses for the policy year and second any changes to the expected losses up or down for prior policy years 2023.
Richard F. Hermanns: And second, any changes to the expected losses, up or down, for prior policy years. The 2023 policy year was historically bad for our business and negatively impacted our bottom line over the last several quarters. That said, at this point, with the visibility that we have today, we see no indication of the 23-24 policy year repeating the same trend.
Richard F. Hermanns: <unk> policy year was historically bad for our business and negatively impacted our bottom bottom line over the last several quarters.
Richard F. Hermanns: That said at this point with the visibility that we have today, we see no indication of the 'twenty three 'twenty four policy year repeating the same trend.
Richard F. Hermanns: Additionally, we proactively worked with our carrier to adjust our plan for the current policy year, which began March 1st, to mitigate the factors in our control that contributed to the large expenses we experienced last calendar year. We are intently focused on reducing our workers' compensation expense, and as we progress through 2024, we believe that we are well-positioned to continue mitigating the impact of workers' compensation on our business as these numbers return to normalized levels.
Richard F. Hermanns: Additionally, we proactively worked with our carrier to adjust our plan for the current policy year, which began march 1st to mitigate the factors in our control that contributed to the large expenses. We experienced last calendar year. We are intently focused on reducing our workers' compensation expense and as we progress through 2024, we believe that.
Richard F. Hermanns: We are well positioned to continue mitigating the impact of workers' compensation on our business as these numbers returned to normalized levels.
Richard F. Hermanns: M&A remains a key part of our business as well. Our strategy for M&A is to identify accretive acquisitions that allow us to expand and strengthen our diverse group of staffing offerings while simultaneously keeping our debt leverage low and maintaining a strong balance sheet. Over the past several years, we have made numerous acquisitions that have significantly expanded our staffing offerings, geographic presence, and addressable market. Our focus on organic growth combined with strategic acquisitions has driven significant revenue growth, enhanced our product offerings, and expanded our addressable market.
Richard F. Hermanns: M&A remains a key part of our business as well our strategy around M&A is to identify accretive acquisitions that allow us to expand and strengthen our diverse group of staffing offerings, while simultaneously keeping our debt leverage low and maintaining a strong balance sheet over the past several years, we made numerous.
Richard F. Hermanns: <unk> that have significantly expanded our staffing our offerings geographic presence and addressable market our focus on organic growth combined with strategic acquisitions has driven significant revenue growth enhanced our product offerings and expanded our addressable market and we remain intently focused on.
Richard F. Hermanns: And we remain intently focused on scanning the market for other opportunities that will benefit our business. Overall, we're pleased with the results that we were able to deliver in this quarter, given the circumstances. As demand for staffing solutions continues to recover, we believe that we are ideally positioned to leverage our proven and growing model of over 400 franchise-owned offices across the United States and the world and to drive increased value for our shareholders. Now, I'll pass on the call to our Chief Financial Officer, Steve Crane, who will provide a closer look at the first quarter results. Steve?
Steven G. Crane: Scanning the market.
Steven G. Crane: For for other opportunities that will benefit our business overall, we're pleased with the results that we were able to deliver this in this quarter.
Steven G. Crane: Given the circumstances as demand for staffing solutions continue to recover we believe that we are ideally positioned to leverage our proven and growing model. Both are 400 franchise owned offices across the United States and the world and to drive increased value for our shareholders.
Richard F. Hermanns: Now I'll pass on the call to our Chief Financial Officer, Steve Crane, who will provide a closer look at the first quarter results Steve.
Steven G. Crane: Thank you, Rick. Good afternoon, everyone. Thank you for joining us today.
Steven G. Crane: Thank you Rick and good afternoon, everyone. Thank you for joining us today.
Steven G. Crane: Total revenue for the first quarter of 2024 was $8.4 million, compared to $9.9 million for the same quarter last year, a decrease of 14.6%. Our total revenue is made up of two components, franchise royalties, which is our primary source of revenue, and service revenue, which is generated from certain services and interest charged to our franchisees, other miscellaneous revenue, and pass-through revenue from MRI Network's advertising fund. Franchise royalties for the first quarter were $7.8 million, compared to $9.3 million for the same quarter last year. Underlying the royalties are system-wide sales, which are not part of our revenue but are a helpful contextual performance indicator. System-wide sales reflect sales at all offices, including those classified as discontinued.
Steven G. Crane: Total revenue for the first quarter of 2024 was eight $4 million compared to $9 9 million for the same quarter last year.
Steven G. Crane: Decrease of 14, 6%.
Steven G. Crane: System-wide sales for the first quarter were $134 million compared to $153.5 million for the same period in 2023. Service revenue was $588,000 for the fourth quarter compared to $534,000 for the same quarter a year ago. Service revenue is composed of interest charged to our franchisees on overdue accounts receivable, service fees, other miscellaneous revenue, and MRI Network's advertising fund revenue. The ad fund revenue contributed $101,000 in the first quarter of 2024. Service revenue can fluctuate from quarter to quarter based on a number of factors, including growth and system-wide sales, changes in accounts receivable, insurance renewals, and similar dynamics.
Steven G. Crane: Our total revenues made up of two components franchise royalties, which is our primary source of revenue and service revenue, which is generated from certain services and interest charged for our franchisees other miscellaneous revenue and pass through revenue from MRI networks advertising fund.
Steven G. Crane: Franchise royalties for the first quarter were $7 $8 million compared to $9 $3 million for the same quarter last year.
Steven G. Crane: Underlying the royalties our system wide sales, which are not part of our revenue but are helpful. Contextual performance indicator systemwide sales reflect sales at all officers, including those classified as discontinued system wide sales for the first quarter were $134 million.
Steven G. Crane: <unk> $253 $5 million for the same period in 2023.
Steven G. Crane: Service revenue was $588000 for the fourth quarter compared to $534000.
Steven G. Crane: The same quarter a year ago.
Steven G. Crane: Service revenues composed of interest charged for our franchisees on overdue accounts receivable service fees other miscellaneous revenue and MRI networks advertising fund revenue.
Steven G. Crane: The AD fund revenue contributed $101000 in the first quarter of 2020 for.
Steven G. Crane: Service revenue can fluctuate from quarter to quarter based on a number of factors, including growth in system wide sales changes in accounts receivable insurance renewals and similar dynamics.
Steven G. Crane: SG&A expenses for the first quarter were $5.6 million, compared to $5.8 million in the prior year period. MRI Network advertising fund expenses of $101,000 are included in our first quarter 2024 results. In the first quarter, workers' compensation expense was approximately $572,000 compared to approximately $185,000 in the first quarter of 2023 and decreased sequentially from an expense of $1.3 million in the fourth quarter of 2023. This is an encouraging trend that reflects our more proactive approach to the impact that workers' compensation has had on our results in recent quarters.
Steven G. Crane: SG&A expenses for the first quarter were $5 $6 million compared to $5 $8 million in the prior year period.
Steven G. Crane: MRI network advertising fund expenses of $101000 are included in our first quarter 2024 results in the first quarter Workers' compensation expense was approximately $572000 compared to approximately $185000 in the first quarter of 'twenty.
Steven G. Crane: <unk> 23 and decreased sequentially from an expense of $1 3 million in the fourth quarter of 2023. This is an encouraging trend that reflects our more proactive approach to the impact that workers' compensation has had on our results in recent quarters.
Steven G. Crane: Also included in our first quarter SG&A were salaries and benefits of $3 million, a decrease of 15.7% compared to $3.6 million in the first quarter of 2023 related to headcount reductions and lower bonus accrued expenses. Net income, which includes income from operations adjusted for miscellaneous items, interest, income taxes, and discontinued operations, was $1.6 million in the first quarter of 2024, compared to $2.6 million in the prior year period. Net income from continuing operations for the quarter was $1.7 million, or $0.12 per diluted share, compared to net income from continuing operations of $2.3 million, or $0.17 per diluted share, in the first quarter of last year.
Steven G. Crane: Also include included in our first quarter SG&A were salaries and benefits of $3 million.
Steven G. Crane: A decrease of 15, 7% compared to $3 $6 million in the first quarter of 2023 related to head count reductions and lower bonus accrued expense.
Steven G. Crane: Net income which includes income from operations adjusted for miscellaneous items interest income taxes and discontinued operations was $1 6 million in the first quarter of 2024 compared to $2 $6 million in the prior year period.
Steven G. Crane: Net income from continuing operations for the quarter was $1 $7 million or <unk> 12 per diluted share compared to net income from continuing operations of $2 3 million or <unk> 17 per diluted share in the first quarter last year.
Steven G. Crane: Adjusted EBITDA for the first quarter of 2024 was $3.4 million, compared to $4.6 million in the first quarter of last year. We believe adjusted EBITDA is a relevant metric for us due to the size of non-cash operating expenses running through our P&L. A detailed reconciliation of adjusted EBITDA to net income is provided in our 10-Q, which is filed this afternoon.
Steven G. Crane: Adjusted EBITDA in the first quarter of 2024 was $3 4 million compared to $4 $6 million in the first quarter of last year. We believe adjusted EBITA is a relevant metric for us due to the size of noncash operating expenses running through our P&L.
Steven G. Crane: Reconciliation of adjusted EBITDA to net income is provided in our 10-Q, which filed this afternoon.
Steven G. Crane: Moving on now to the balance sheet, our current assets at March 31st, 2024 were $55.1 million compared to $51.5 million at December 31st, 2023. Current assets as of March 31, 2024 included $1.6 million of cash and $47.7 million of net accounts receivable, while current assets as of December 31, 2023 included $1.3 million of cash and $44.4 million of net accounts receivable. Current assets exceeded current liabilities by $18 million at March 31, 2024, compared with year-end 2023, when working capital was $15.7 million.
Steven G. Crane: Moving on now to the balance sheet.
Steven G. Crane: Current assets at March 31, 2024 were $55 1 million compared.
Steven G. Crane: Compared to 51 $5 million at December 31, 2023.
Steven G. Crane: Current assets as of March 31, 2024 included $1 $6 million of cash at 47 $7 million of net accounts receivable. While current assets at December 31, 2023 included $1 $3 million of cash and $44 4 million.
Steven G. Crane: Net accounts receivable.
Steven G. Crane: Current assets exceeded current liabilities by $18 million at March 31, 2024 versus year end 2023, and working capital was $15 7 million.
Steven G. Crane: Current liabilities were 67, 3% current assets at March 31, 2024 versus 69, 4% of current assets at December 31 2023.
Steven G. Crane: Current liabilities were 67.3% of current assets at March 31, 2024, versus 69.4% of current assets at December 31, 2023. At March 31, 2024, we had $16.1 million drawn on our credit facility and another $24.2 million in availability, assuming continued covenant compliance. We believe our credit facility provides us with flexibility and room for short-term working capital needs, as well as the capacity to finance potential acquisitions. We've paid a regular quarterly dividend since the third quarter of 2020, and continuing that pattern, we paid a six cents per share dividend on March 15th, 2024 to shareholders of record as of March 1st. We expect to continue to pay a dividend each quarter, subject to the board's discretion. With that, I'll turn the call back over to Rick for some closing comments.
Steven G. Crane: At March 31st 2024, we had $16 $1 million drawn on our credit.
Steven G. Crane: Facility and another $24 $2 million and availability assuming continued covenant compliance we believe our credit facility provides us with flexibility and room for short term working capital needs as well as the capacity capitalized on potential acquisitions.
Steven G. Crane: We have paid a regular quarterly dividends since the third quarter of 2020, and continuing that pattern. We paid a <unk> <unk> per share dividend on March 15th 2024 to shareholders of record as of March 1st we expect to continue to pay a dividend each quarter subject to the board's discretion with that.
Steven G. Crane: I'll turn the call back over to Rick for some closing comments.
Richard F. Hermanns: Thank you, Steve. We're pleased with our first quarter results, given the current economic environment, and are encouraged by the trend we're seeing in the market. I'd like to thank our employees and franchisees for their hard work and dedication in this quarter, and we remain optimistic about what's ahead for our business and the staffing industry in the second half of 2024. With that, we can now open the line to questions. Thank you. Thank you.
Rick: Thank you Steve we're pleased we're pleased with our first quarter results given the current economic environment and are encouraged by the trend we're seeing in the market.
Richard F. Hermanns: Like to thank our employees and franchisees for their hard work and dedication in this quarter and we remain optimistic about what's ahead for our business in the staffing industry in the second half of 2024 with that we can now open the line to questions. Thank you.
Operator: Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you'd like to remove your line from the question queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star key. One moment, please, while we poll for questions. Once again, please press star 1 if you have a question or a comment. The first question comes from Kevin Steinke. With Barrington Research, please proceed.
Speaker Change: Thank you at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the question queue. You May press star two if you'd like to remove your line from the question queue.
Kevin Mark Steinke: Participants using speaker equipment may be necessary to pick up your handset before pressing the star keys. One moment. Please while we poll for questions. Once again. Please press star one if you have a question or comment.
Kevin Mark Steinke: The first question comes from Kevin.
Operator: Bank.
Kevin Mark Steinke: With Barrington Research. Please proceed.
Kevin Mark Steinke: Thanks. So just wanted to start out by talking about the difficult environment for staffing solutions you referenced, kind of a continuation of that, but just, you know, in terms of what you're seeing, does it feel like it's gotten any worse? Is it stable? Or how would you characterize it at this point?
Operator: Thanks.
Kevin Mark Steinke: So just wanted to start out by talking about.
Kevin Mark Steinke: You know the difficult environment for staffing solutions you referenced.
Kevin Mark Steinke: And I think a continuation of that but.
Kevin Mark Steinke: You know in terms of what Youre seeing does it.
Kevin Mark Steinke: Feel like it's gotten any worse is it stable or how would you characterize it at this point.
Richard F. Hermanns: So thanks, Kevin. I would say that it's probably stable and it isn't getting worse. That said, it really isn't getting much better. But it's been an odd situation throughout in that it's been very much concentrated in certain areas. Branches in the southeast have tended to do better, but anything related to IT has been tougher, although there has been probably more improvement. There has been more improvement there. But I would say, at least as we move into the second quarter, again, there certainly hasn't been deterioration, but, you know, improvements. Whatever improvements there have been have been fairly minimal.
Speaker Change: So thanks, Kevin.
Richard F. Hermanns: I would say that it's probably stable.
Richard F. Hermanns: It isn't getting it isn't getting worse.
Richard F. Hermanns: That said it really isn't getting much better.
Richard F. Hermanns: But it's been an odd situation throughout in that it's been very much.
Richard F. Hermanns: Concentrated in certain areas our.
Richard F. Hermanns: Branches in the southeast have tended to do better.
Richard F. Hermanns: Or anything related to high tea has been tougher although.
Richard F. Hermanns: There has been probably more improvement had been more improvement there, but I would say at least as we move into the second quarter again, there, there's certainly hasnt been deterioration.
Richard F. Hermanns: But you know the.
Richard F. Hermanns: The improvements whatever improvements there have been have been fairly minimal.
Kevin Mark Steinke: Okay, and you referenced continued headwinds in technology. I've heard some commentary about potentially some green shoots in terms of maybe some improved hiring in that sector, but I don't know if you're picking any of that up in your business or not. It's kind of a status quo. Yeah, I...
Richard F. Hermanns: Okay.
Speaker Change: And you referenced.
Kevin Mark Steinke: Continued headwinds in technology.
Kevin Mark Steinke: I've heard some commentary.
Kevin Mark Steinke: About potentially some some green shoots in terms of maybe some improved hiring.
Kevin Mark Steinke: In that sector, but I don't know if youre picking any of that up in your business or.
Kevin Mark Steinke: It's kind of status quo.
Richard F. Hermanns: Yeah, I would definitely say that there are more opportunities, but the employers are definitely very choosy. So we were maybe six months ago, nine months ago.
Speaker Change: Yeah, I would I would say I would definitely say so that there are more.
Richard F. Hermanns: Opportunities, but the.
Richard F. Hermanns: You know the employers.
Richard F. Hermanns: Definitely very choosy, so were maybe six months ago nine months ago.
Richard F. Hermanns: There weren't even many, if any, job openings. Now there are some job openings. But again, the employers are being extremely choosy. So I would call it a green shoot that that's, you know, I'd rather have a harder to fill requisition than none at all.
Richard F. Hermanns: There werent, even many if any job openings now there are some job openings.
Richard F. Hermanns: But again the employers are being extremely choosy, so I would call. It a green shoot that that's you know I'd, rather have I'd, rather have a harder to fill.
Richard F. Hermanns: And so there's definitely, like I said, the IT side in particular has improved. I think that. You know, the other side is logistics, which has been tough over the last year. And I would say that that's starting to, again, sort of improve, improve a little bit. But again, nothing so appreciable that I'd say, gosh, that it's great.
Richard F. Hermanns: The acquisition then none at all and so there's there's definitely like I say it that way in the I T sat in particular, that's improved I think that.
Richard F. Hermanns:
Richard F. Hermanns: The other side is logistics has been.
Richard F. Hermanns: Tough over the last year, and I would say that that's starting to again sort of improve.
Richard F. Hermanns: Improve a little bit by this you know.
Richard F. Hermanns: But again nothing nothing so appreciable that I'd say gosh, it's cool, but it's great it's not.
Kevin Mark Steinke: Right, right, understood. You did talk about that you expect demand for temporary staffing to increase in the second and third quarters due to normal seasonal factors, you know, a little over a month into the second quarter. It doesn't feel like you'll get your kind of typical seasonal wrap, or, you know, could that be more muted? I just, I don't know if you have any sense for that. We're still kind of too early or difficult to tell.
Speaker Change: Right right understood.
Kevin Mark Steinke: You did talk about.
Kevin Mark Steinke: Do you expect demand for temporary staffing to increase.
Kevin Mark Steinke: Second and third quarters due to normal seasonal factors.
Kevin Mark Steinke: A little over a month into the second quarter does it feel like you'll get your kind of typical seasonal ramp or.
Kevin Mark Steinke: Could there be more muted I just I don't know if you have any sense for that.
Kevin Mark Steinke: Still kind of too early or difficult to tell.
Speaker Change: Well I would say that.
Richard F. Hermanns: You know, we certainly expect to get... A Seasonal Impact. Will we get it to the extent that we should or that we normally would? The answer is, it is too early to tell.
Kevin Mark Steinke: We we certainly expect to get.
Richard F. Hermanns: A seasonal impact.
Richard F. Hermanns: Will we get it to the extent that we you know that we should or that we normally would the answer is it's it is too early to tell I mean, we will definitely.
Richard F. Hermanns: I mean, we will definitely, you know, it definitely seems like we'll see, again, a positive impact. But if you really even look at our numbers from last year, our second quarter grew somewhat in line with historical numbers, but it was really the third quarter that, even though the third quarter was literally down from the second quarter, which is really, which is really not good for us at all, but the second quarter showed an increase, but again, probably less than what it should have been.
Richard F. Hermanns: No. It definitely seems like we'll see again a positive impact.
Richard F. Hermanns: But if you really even look at our numbers from last year, our second quarter grew.
Richard F. Hermanns: Somewhat in line with historical numbers, but it was really in the third quarter, that's like even though the you know the third quarter was literally down from the second quarter, which is really.
Richard F. Hermanns: Which really is not good for us at all but the second quarter showed an increase but again probably less than what it should have been so what I would say is is that right.
Richard F. Hermanns: So what I would say is that, for, you know, I do believe that we will, uh, again, improve sequentially in Q2 and Q3. Will it be to, you know, to the extent of what it normally would be, you know? I would say we're tracking. Right now, we're tracking well with last year. By saying well, I don't mean that we're doing better as much as we're not deteriorating. And so our Q2 and Q3 were higher last year than Q1. So I don't know if that answers your question.
Richard F. Hermanns: I do believe that we will again improved sequentially in Q2 and Q3.
Richard F. Hermanns: You know.
Richard F. Hermanns: Will it be too to the extent of what it normally would be I would say we're tracking.
Richard F. Hermanns: Right now, we're tracking well with last year if.
Richard F. Hermanns: By saying, well I don't mean that where we're doing better as much as we're not deteriorating.
Richard F. Hermanns: And and.
Richard F. Hermanns: And so our Q2 and Q3 were higher last year than Q1. So I don't know if that answers. Your question. So I would just I would just say that.
Kevin Mark Steinke: So I would just say that I expect revenues to be higher, but, you know, perhaps not the same, you know, the same impact. And again, the bottom line is, and I've been saying this from my very first earnings call, it's difficult to predict how we'll do because we are tied to the economy. And so if all of a sudden, you know, the economy, at least for staffing, gets better in the third quarter, well, then, you know, we expect a stronger snapback.
Kevin Mark Steinke: I expect revenues to be higher but.
Kevin Mark Steinke:
Kevin Mark Steinke: Perhaps not the same with.
Kevin Mark Steinke: The same impact.
Kevin Mark Steinke: Again, the bottom line is and I've been saying this from my very first earnings call.
Kevin Mark Steinke: It's.
Kevin Mark Steinke: But, you know, it's hard for us to overcome those, you know, those headwinds. I would, you know, I would focus more on, or focus is the wrong word, but I would just say that. These types of circumstances, these types of industry times, highlight the value of the Hirequest system in so far as we're retaining at least a reasonable level of profitability at a time when you know a fair number of our peers are losing money or are obviously, you know, way down.
Kevin Mark Steinke: Difficult to predict how we will do because we are tied to the economy and so if all of a sudden the economy.
Kevin Mark Steinke: For staffing get better in the third quarter will then yeah, we expect a stronger snap back, but it's hard for us to overcome those.
Kevin Mark Steinke: Headwinds I would you know.
Kevin Mark Steinke: I would focus more on you know or.
Kevin Mark Steinke: Focus is the wrong word, but I would just say that.
Kevin Mark Steinke: These types of circumstances these types of industry.
Kevin Mark Steinke: Industry times to me highlight.
Kevin Mark Steinke: The value of the higher quest.
Kevin Mark Steinke: System in so far as we are retaining.
Kevin Mark Steinke: At least a reasonable level of profitability at a time when a fair number of our peers are losing money.
Kevin Mark Steinke: Or are obviously, we are way down and so.
Kevin Mark Steinke: And so, you know, this is a great time to sort of test the validity of our model. And I think that from that perspective, we're, you know, withstanding the sort of test. But, that said, to get back to meaningful growth, to where we hit historical trends, obviously, we need the economy, at least for staffing, to improve.
Kevin Mark Steinke: This is a great time to sort of test the validity of our model and I think that from that perspective. We are you know, we're withstanding that sort of the test.
Kevin Mark Steinke: That said to get back to a meaningful.
Kevin Mark Steinke: <unk> to where we hit historical trends, obviously, we need the economy at least for staffing to improve.
Kevin Mark Steinke: Right. No, that all makes sense.
Speaker Change: Right no that's all.
Speaker Change: All makes sense.
Kevin Mark Steinke: Just, I also wanted to ask you about the nice sequential improvements in workers' compensation expense. Do you think that the, uh, number that we saw in the first quarter is kind of representative of how it'll trend for the remaining quarters of 2024?
Speaker Change: Is it just what else wanted to ask you about.
Kevin Mark Steinke: The nice improvement sequentially in Workers' compensation expense do you think that.
Kevin Mark Steinke: The.
Kevin Mark Steinke: Number that we saw in the first quarter is kind of representative of how it'll trend.
Kevin Mark Steinke: For the remaining quarters of 2024.
Kevin Mark Steinke: So.
Richard F. Hermanns: And that's a great question. That's a great question.
Speaker Change: And that's a great question, that's a great question.
Richard F. Hermanns: Then. You know, I would just say I hope it'll actually go down a bit more.
Richard F. Hermanns: <unk>.
Speaker Change: I would just say I hope it'll actually go down a bit more the.
Richard F. Hermanns: You know, obviously, again, the policy renewed on March 1st, and so that $572,000 of net expense really only reflected one month of the new policy. The other part is that 2020, 22, 23 policy year. I think, I hope we have it in the rear-view mirror, and so to answer your question, I'm, you know, we are hopeful that actually the first quarter would be the worst one.
Richard F. Hermanns: Obviously again the policy.
Richard F. Hermanns: Renewed on March 1st and so those that $572000 net expense.
Richard F. Hermanns: Really only reflected one month of the new policy.
Richard F. Hermanns: The other part is that 'twenty 2022 'twenty three policy year.
Richard F. Hermanns: I.
Speaker Change: Thank you I hope we have it in the.
Richard F. Hermanns: Really have it in the rearview mirror and so to answer your question and we are hopeful that actually the first quarter would be the worst one.
Richard F. Hermanns: That said, you know, workers' comp is notoriously jumpy, and so, you know, we could start getting some adverse developments that we're not expecting right now. But I definitely would like to think that we, you know, we're, We're going to be in a much better position even in Q2, Q3, and Q4 than we were in Q1. Q1. When I say much better, I'm talking maybe a couple hundred thousand bucks better, not massively beyond that. But we do certainly hope for a little bit more improvement.
Richard F. Hermanns: That said you know workers' comp is notoriously jumpy and so we could start getting some adverse development that we're not expecting right now but.
Richard F. Hermanns: I I definitely would like to think that we were.
Richard F. Hermanns: You know where.
Richard F. Hermanns: We're going to get a much better position even in Q2, three and four than we were in.
Richard F. Hermanns: Q1, when I say much better I'm talking maybe a couple hundred thousand bucks better not not massively.
Richard F. Hermanns: Absolutely beyond that but we do we do certainly hope for a little bit more improvement.
Richard F. Hermanns: Quarterly sure Yep.
Kevin Mark Steinke: Sure, okay, yeah, understood. Thanks.
Speaker Change: Sure Okay, yeah understood. Thanks.
Kevin Mark Steinke: Lastly, you.
Kevin Mark Steinke: You mentioned still being focused on.
Kevin Mark Steinke: And just lastly, you mentioned still being focused on... Scanning the Market for M&A Opportunities. Yeah, what's the pipeline in this environment? More opportunities given, you know, the difficult staffing market right now and, you know, you're in a relatively stronger position financially in the space.
Kevin Mark Steinke: Adding the market for M&A opportunities.
Kevin Mark Steinke: Yeah, what's the pipeline in this environment are you seeing.
Kevin Mark Steinke: More opportunities given.
Kevin Mark Steinke: The difficult staffing.
Kevin Mark Steinke: Market right now and you know you're you're a relatively stronger position financially.
Kevin Mark Steinke: In this space.
Richard F. Hermanns: Yeah, so I would say we're seeing more bad deals. We're definitely, I think, seeing more deals. [inaudible] probably more geared towards people who are living in 2022 and have those sorts of mindsets. The reality is, though, we are, but we're seeing some that are more realistically priced as well. So I think that as we continue on with this, relatively. You know, a lousy market for the staffing industry. The cumulative effect will be to create better opportunities for us, and I think we're already seeing that on a couple of potential, you know, smaller things that are, you know, that are out there and available. Now, me saying that doesn't mean we've got anything teed up.
Speaker Change: Yeah, So I would say, we're seeing more bad deals.
Richard F. Hermanns: We're definitely I think seeing.
Richard F. Hermanns: More deals.
Richard F. Hermanns: But.
Richard F. Hermanns: Probably more geared towards people who are.
Richard F. Hermanns: Living in 2020 two.
Richard F. Hermanns: And have those sorts of mindsets.
Richard F. Hermanns: The reality is though we are but we're seeing some that are more realistically priced as well so.
Richard F. Hermanns: I think that as we if if we continue on with this.
Richard F. Hermanns: Relatively.
Richard F. Hermanns: I mean, a lousy market for the staffing industry.
Richard F. Hermanns: The cumulative effects will be to create better opportunities for us and I and I think we're already seeing that on a couple of potential.
Richard F. Hermanns: Smaller things that are that are that are out there and available now me, saying that doesn't mean, we've got anything teed up that's not the case, but but it's just what we're seeing also especially on the smaller side. There's there's there's just more people were struggling which creates more.
Kevin Mark Steinke: That's not the case. But it's just what we're seeing also, especially on the smaller side; there are just more people who are struggling, which creates more realistic prices for us. But, Anyway, the short answer. The short answer is that the numbers are big, and the prices are still too high. Kind of like that candidate who was running for mayor in New York City, you know, the rents are too damn high, and sort of like the prices; the prices are still too damn high as far as I'm concerned.
Kevin Mark Steinke: More realistic prices for us but.
Kevin Mark Steinke:
Kevin Mark Steinke: Anyway, the short answer.
Kevin Mark Steinke: The short answer is is that the numbers are big.
Kevin Mark Steinke: You know that the prices are still too high kind of like that a candidate who is running for mayor of New York City, you know the rents are too damn high.
Kevin Mark Steinke: Sort of like the prices the prices are too damn high as far as I'm concerned still.
Kevin Mark Steinke: Okay, great. Well, thanks. Thanks for all the insight. Appreciate you taking the questions. I'll turn it over to you. Once again, if you have...
Speaker Change: Okay, great well thanks, Thanks for all the insight.
Speaker Change: I appreciate you taking the questions I'll turn it over.
Kevin Mark Steinke: Okay.
Operator: Once again, if you have a question or a comment, please indicate so by pressing star one on your touchtone phone. Okay, it appears we have no further questions in queue. I'd like to turn the floor back to management for closing remarks.
Speaker Change: Once again, if you have a question or a comment please indicate so by pressing star one on your Touchtone phone.
Operator: Okay. It appears we have no further questions in queue I'd like to turn the floor back to management for closing remarks.
Richard F. Hermanns: Well, again, thank you, everybody, for dialing in and listening. We appreciate your continued interest in the company. We are looking forward to better times as we get deeper into 2024 and hopefully see an improvement in the environment for staffing. But I also, again, am encouraged that we have been able to sort of go through this patch as well as we have, and hopefully you will agree with me that the validity of our system and resiliency of our system are being shown during these times. And again, thank you for your attention, and I look forward to speaking to you in another quarter. Thank you.
Speaker Change: Well again, thank you everybody for dialing in and listening. We appreciate your continued interest in the company.
Speaker Change: We are.
Richard F. Hermanns: Looking forward to better times, as we get deeper into 'twenty 'twenty four.
Richard F. Hermanns: Hopefully see an improvement in the environment for staffing, but I also.
Richard F. Hermanns: Again, and encouraged that we have been able to sort of go through this go through this patch as well as we have and hopefully you will agree with me that the validity of our.
Richard F. Hermanns: Our system is being and resiliency of our system is being shown during these times and again. Thank you for thank you for your attention and.
Richard F. Hermanns: Look forward to speaking to you in another quarter. Thank you.
Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Speaker Change: This concludes today's conference and you may disconnect. Your lines at this time. Thank you for your participation.