Q2 2024 HireQuest Inc Earnings Call
Speaker Change: Good afternoon everyone and welcome to the Hirequest Incorporated second quarter 2024 earnings call. At this time all participants are in a listen-only mode and we will open for questions following the presentation.
Speaker Change: If anyone should require operator assistance during the conference, please press star zero on your phone keypad. Please note this conference is being recorded.
Speaker Change: I will now turn the conference over to your host, John Nesbett, IMS Investor Relations. John , the floor is yours.
Operator: Thank you. I'd like to welcome everyone to the call hosting the call today or Hirequest CEO Rick Hermanns and Chief Financial Officer Steve Crane. Let's take a moment to read the safe harbor statement. This conference call contains forward-looking statements as defined within section 27A of the Securities Act of 1933 as amended and in section 21E of the Securities Exchange Act of 1934 as amended.
John Nesbett: Thank you. I'd like to welcome everyone to the call. Hosting the call today are Hirequest CEO , Rick Hermanns, and Chief Financial Officer, Steve Crane.
Operator: These forward-looking statements in terms such as anticipate, expect, intend, may, will, should, or other comparable terms involve written uncertainties because they relate to events and depend on circumstances that will occur in the future. includes 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, 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.
Speaker Change: Let's take a moment to read the Safe Harbor Statement.
Speaker Change: This conference call contains forward-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 forward-looking statements in terms such as anticipate, expect, intend, may, will, should, or other comparable terms
Speaker Change: Involve risk and uncertainties because they relate to events and depend on circumstances that will occur in the future
Speaker Change: These statements...
Speaker Change: include statements regarding the intent, belief,
Speaker Change: or current expectations of Hirequest and members of its management, as well as the assumptions on which such statements are based.
Speaker Change: Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance, involve risks and uncertainties, including those described in HireQuest periodic reports filed with the SEC. And it actually results in many different materially from those contemplated by such forward-looking statements.
Operator: Except as required by federal securities law, Hirequest undertakes no obligation to update or revise forward-looking statements to reflect changed conditions. I would now like to turn the call over to the Chief Executive Officer of Hirequest, Rick Hermanns. Please go ahead, Rick.
Speaker Change: Except as required by federal securities law, a request undertakes no obligation to update or revise forward-looking statements to reflect changed conditions.
Speaker Change: I would now like to turn the call over to the Chief Executive Officer of Hirequest, Rick Hermanns. Please go ahead, Rick.
Rick Hermanns: Good afternoon. Our second quarter of 2024 was characterized by sustained profitability, as we continue to mitigate costs, leverage our unique franchising model, and execute on our business strategy. We are focused on driving enhanced results as the market for staffing solutions slowly recovers from what has been a particularly difficult environment for the industry overall. Despite these headwinds, Hirequest has performed well compared to its peers.
Rick Hermanns: Good afternoon. Our second quarter of 2024 was characterized by sustained profitability as we continue to mitigate costs, leverage our unique franchising model, and execute on our business strategy.
Rick Hermanns: We are focused on driving enhanced results as the market for staffing solutions slowly recovers.
Rick Hermanns: from what has been a particularly difficult environment for the industry overall. Despite these headwinds, Hirequest has performed well compared to its peers.
Rick Hermanns: We believe that we are beginning to see a leveling out of this downward trend on daily pay and commercial staff outside of our business. As year-over-year declines at Lesson compared to recent quarters, Hirequest Direct, in particular, generated franchise royalties that exceeded Q2-23 levels, and system-wide sales were only just a little bit below last year, or not where we'd like to be, but we're noticing some encouraging trends that suggest that the market is finally beginning to find a baseline.
Rick Hermanns: We believe that we are beginning to see a leveling out of this downward trend on the daily pay and commercial staffing side of our business.
Rick Hermanns: As year-over-year declines have lessened compared to recent quarters, HireQuest Direct in particular generated franchise royalties that exceeded Q2'23 levels.
Rick Hermanns: and Systemwide Sales.
Rick Hermanns: We're only just a little bit below last year. We're not where we'd like to be, but we're noticing some encouraging trends that suggest that the market is finally beginning to find a baseline.
Rick Hermanns: We continued to prioritize expense reduction in the quarter as well, reducing our SG&A by 6% to $5.3 million, compared to $5.6 million in the second quarter of 2023, or SGNA, which excludes workers' top, the MRI network ad fund, and non-recurring charges, to climb 7.6% to $4.6 million. Workers' compensation costs, in particular, decreased by $143,000 in the quarter, as the changes we made earlier this year again flow through.
Rick Hermanns: We continued to prioritize expense reduction in the quarter as well, reducing our SG&A by 6% to $5.3 million compared to $5.6 million in the second quarter of 2023.
Rick Hermanns: Core SG&A, which excludes Workers' Comp, the MRI Network Ad Fund, and non-recurring charges declined 7.6% to $4.6 million.
Rick Hermanns: Workers' compensation expense in particular decreased by $143,000 in the quarter as the changes we made earlier this year began to flow through.
Rick Hermanns: RSGNA's performance in the latter half of 2023 was impacted by negative developments in our 2223 workers' comp policy year, and at this point, we do not see anything that would suggest that our workers' comp will reach those levels this year. As always, M&A is a key part of our growth strategy. Our track record of acquisitions includes numerous businesses that have allowed us to penetrate both new geographic regions and staffing verticals, significantly expanding our addressable market.
Rick Hermanns: Our SG&A in the latter half of 2023 was impacted by negative development of our 22-23 workers' comp policy year, and at this point we do not see anything that would suggest that our workers' comp will reach those levels this year.
Rick Hermanns: As always, M&A is a key part of our growth strategy.
Rick Hermanns: Our track record of acquisitions includes numerous businesses that have allowed us to penetrate both new geographic regions and staffing verticals, significantly expanding our addressable market.
Rick Hermanns: Moreover, we've seen increased opportunities for M&A related to the current market environment and continue to evaluate these, as they are made available to us. In December of 2022, we acquired MRI Network with the intention of expanding our big business into the higher-margin executive search sector.
Rick Hermanns: Moreover, we've seen increased opportunities for M&A related to the current market environment and continue to evaluate these.
Rick Hermanns: as they are made available to us.
Rick Hermanns: In December of 2022, we acquired MRI Network with the intention of expanding our business into the higher margin executive search segment. Overall, this has been a positive acquisition for us, despite the industry headwinds it's faced.
Rick Hermanns: Overall, this has been a positive acquisition for us despite the industry headwinds of state. When we acquired the business, it had been declining, and we stated that we expected the trend to continue in the near-to-medium term. Unfortunately, we couldn't predict that the extended downturn in the executive search market is experienced, which is exacerbated, exacerbated, exacerbated the problem.
Rick Hermanns: When we acquired the business, it had been declining, and we stated that we expected the trend to continue in the near to medium term. Unfortunately, we couldn't have predicted the extended downturn the executive search market has experienced, which has exacerbated the problem.
Rick Hermanns: We are encouraged by the sequential growth and system sales in Q1224 following five straight quarters of decline. And we've realized some of the revenue and operational synergies we expected, but again, the state of the market has been an impediment, and the business is down significantly from where it was at the end of 2022. It's difficult to try to time the economy as well, as we all know, but we have a very strong understanding of the staffing market and believe that a strategic combination of organic growth and M&A allows us to most efficiently grow our business.
Rick Hermanns: We are encouraged by the sequential growth in system sales over Q1 2024 following five straight quarters of decline.
Rick Hermanns: And we've realized some of the revenue and operational synergies we expected. But again, the state of the market has been an impediment and the business is down significantly from where it was at the end of 2022.
Speaker Change: It's difficult to try to time the economy as well we all know, but we have a very strong understanding of the staffing market and believe that a strategic combination of organic growth and M&A allows us to most efficiently grow our business.
Rick Hermanns: We continue to diligently evaluate opportunities that have the potential to enhance our staffing offerings and create meaningful value for our shareholders regardless of the economic environment. We take a long-term approach to our business, which allows us to deliver improved results in changing market environments. In the time since our Command Center merger back in the summer of 2019, so literally, we're five years after the merger, we've driven strong growth that consistently outpaces the broader staffing industry.
Speaker Change: We continue to diligently evaluate opportunities that have the potential to enhance our staffing offerings and create meaningful value for our shareholders, regardless of the economic environment.
Speaker Change: We take a long-term approach to our business, which allows us to deliver improved results in changing market environments.
Speaker Change: In the time since our command center merger back in the summer of 2019, so literally we're five years after the merger, we've driven strong growth that has consistently outpaced the broader staffing industry.
Rick Hermanns: Our five-year adjusted EBITDA C-A-G-R, for example, has considerably exceeded the industry average, and our five-year system sales C-A-G-R of 17% from 2018 to 2023 is more than double, almost all the other commercial or professional staffing companies in our peer group. This progress is a validation of several key aspects of our business. One that our model is not only working, but it is outperforming the broader staffing sector and Hirequest in our franchise with the flexibility to meet the needs of a wide spectrum of customers that can differ based on size, locations, and staffing vertical, therefore maximizing our addressable market and the value of our offerings.
Speaker Change: Our five-year adjusted EBITDA CAGR, for example, has considerably exceeded the industry average.
Speaker Change: And our five-year system sales, CAGR, of 17% from 2018 to 2023 is more than double almost all the other commercial or professional staffing companies in our peer group.
Speaker Change: This progress is a validation of several key aspects of our business. One, that our model is not only working, but outperforming the broader staffing sector.
Speaker Change: A franchising model provides HireQuest and our franchisees with the flexibility to meet the needs of a wide spectrum of customers that can differ based on size, location, staffing vertical, therefore maximizing our addressable market and the value of our offerings.
Rick Hermanns: Two, we have very strong economics despite a down market and are well positioned to take full advantage of opportunities once the industry recovers. While we are not immune to market conditions, our consistent performance across differing economic landscapes demonstrates the strength of our business and ability to capitalize on a strong market. The staffing industry is cyclical, and we have a strong track record of staying the course regardless of the economic landscape. We have a proven growth strategy and believe that we are very well positioned to weather short-term headwinds, such as the soft employment market or down economy and forge ahead on the path of long-term value creation. I will now pass the call over to our chief financial officer, Steve Crane, who will provide a closer look at Steve? Thank you.
Speaker Change: Two, we have very strong economics despite a down market and are well positioned to take full advantage of opportunities once the industry recovers.
Speaker Change: While we are not immune to market conditions, our consistent performance across differing economic landscapes demonstrates the strength of our business and ability to capitalize in a strong market.
Speaker Change: The staffing industry is cyclical, and we have a strong track record of staying the course regardless of the economic landscape.
Speaker Change: We have a proven growth strategy and believe that we are very well positioned to weather short-term headwinds, such as the soft employment market or down economy, and forge ahead on the path to long-term value creation.
Speaker Change: I'll now pass the call over to our Chief Financial Officer, Steve Crane, who will provide a closer look at our second quarter results. Steve?
Steve Crane: Thank you, Rick, and good afternoon, everyone. Thank you for joining us today.
Steve Crane: Total revenue for the second quarter of 2024 was $8.7 million, compared to $9 million in the same quarter last year, which is a decrease of 3.4%. Our total revenue is made up of two components; franchise royalties, which is very much our primary source of revenue; and service revenue, which is generated from certain services and interest charged to our franchisees, as well as other miscellaneous revenue. Franchise royalties for the second quarter were $8.2 million, compared to $8.7 million for the same quarter last year. Underlined 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.
Steve Crane: Total revenue for the second quarter of 2024 was $8.7 million, compared to $9 million in the same quarter last year, which is a decrease of 3.4%.
Steve Crane: System-wide sales for the second quarter were $146.1 million compared to $157 million for the same period in 2023. Service revenue was $479,000 for the second quarter compared to $245,000 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 Networks advertising fund revenue. 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.
Speaker Change: Our total revenue is made up of two components. Franchise royalties, which is very much our primary source of revenue, and service revenue, which is generated from certain services and interest charged to our franchisees, as well as other miscellaneous revenue.
Steve Crane: Franchise royalties for the second quarter were $8.2 million compared to $8.7 million for the same quarter last year.
Steve Crane: Underlined the royalties are system-wide sales, which are not part of our revenue, but are helpful contextual performance indicator. System-wide sales reflect sales at all offices, including those classified as discontinued.
Steve Crane: System-wide sales for the second quarter were $146.1 million compared to $157 million for the same period in 2023.
Steve Crane: Service revenue was $479,000 for the second quarter compared to $245,000 for the same quarter a year ago.
Steve Crane: Service Revenue is composed of interest charged to our franchisees on overdue accounts receivable, service fees, other miscellaneous.
Steve Crane: Revenue, and MRI Networks Advertising Fund Revenue. 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.
Steve Crane: SG&A expenses for the second quarter were $5.3 million compared to $5.6 million in the prior year period, a decrease of 6%. In the second quarter, workers' compensation expense was approximately $547,000, a decrease of approximately $143,000 from $690,000 in the second quarter of 2023. Generally, workers' compensation expense or benefit will fluctuate based on several different factors.
Steve Crane: SG&A expenses for the second quarter were $5.3 million compared to $5.6 million in the prior year period, a decrease of 6%.
Steve Crane: In the second quarter, workers' compensation expense was approximately $547,000, a decrease of approximately $143,000 from $690,000 in the second quarter of 2023.
Steve Crane: Generally, workers' compensation expense or benefit will fluctuate based on several different factors.
Steve Crane: Also included in SG&A were salaries and benefits, which continue to be the largest component of our operating expenses. In the second quarter of 2024, we recognized $2.7 million in compensation-related expenses. A decrease of 15% compared to $3.1 million in the second quarter of 2023 related to headcount reductions mostly around the MRI integration. Net income, which includes income from operations, adjusted from miscellaneous items, interest, income taxes, and discontinued operations, was $2 million in the second quarter of 2024, in line with $2 million in the prior year period. Net income from continuing operations for the quarter was $2.1 million, or 15 cents per diluted share, The adjusted EBITDA margin for the quarter was 47% compared to 43% in the prior year period. A detailed reconciliation of adjusted EBITDA to net income is provided in our 10-Q, which was filed this afternoon.
Steve Crane: Also included in our SG&A were salaries and benefits, which continues to be the largest component of our operating expenses. In the second quarter of 2024, we recognized $2.7 million in compensation-related expenses.
Steve Crane: A decrease of 15% compared to $3.1 million in the second quarter of 2023, related to head count reductions, mostly around the MRI integration.
Steve Crane: Net income, which includes income from operations, adjusted for miscellaneous items, interest, income taxes, and discontinued operations, was $2 million in the second quarter of 2024, in line with $2 million in the prior year period.
Steve Crane: Net income from continuing operations for the quarter was $2.1 million or $0.15 per diluted share, which was flat with net income from continuing operations of $2.1 million.
Steve Crane: or 15 cents per diluted share in the second quarter last year. Adjusted EBITDA on the second quarter of 2024 was $4 million compared to $3.9 million in the prior year period.
Steve Crane: The adjusted EBITDA margin for the quarter was 47%, compared to 43% in the prior year period. A detailed reconciliation of adjusted EBITDA to net income is provided in our 10-Q, which was filed this afternoon.
Steve Crane: Moving on now to the balance sheet, our current assets at June 30, 2024, were $57.7 million, compared to $51.5 million at December 31, 2023. Current assets, as of June 30, 2024, included $614,000 in cash and $49.9 million of net accounts receivable, while current assets at December 31, 2023 included $1.3 million of cash and $44.4 million of net accounts receivable. Current assets exceeded current liabilities by $20.6 million at June 30, 2024 versus year-end 2023, when working capital was $15.7 million.
Steve Crane: Moving on now to the balance sheet. Our current assets at June 30, 2024 were $57.7 million, compared to $51.5 million at December 31, 2023.
Steve Crane: Current assets, as of June 30, 2024, included $614,000 in cash.
Steve Crane: and $49.9 million of net accounts receivable, while current assets at December 31, 2023 included $1.3 million of cash and $44.4 million of net accounts receivable.
Steve Crane: Current assets exceeded current liabilities by $20.6 million at June 30, 2024 versus here in 2023 when working capital was $15.7 million.
Steve Crane: Current liabilities were 64.2% of current assets at June 30, 2024 versus 69.4% of current assets at December 31, 2023. At June 30, 2024, we had 15.7 million dollars drawn on our credit facility with another 24.6 million dollars in availability, assuming continued covenant compliance. We believe our credit facility provides us with flexibility in room for short-term working capital needs as well as the capacity to capitalize on potential acquisitions.
Steve Crane: Current liabilities were 64.2% of current assets at June 30, 2024 versus 69.4% of current assets at December 31, 2023.
Steve Crane: At June 30, 2024, we had $15.7 million drawn on our credit facility and another $24.6 million in availability, assuming continued covenant compliance.
Steve Crane: We believe our credit facility provides us with flexibility and room for short-term working capital needs, as well as the capacity to capitalize on potential acquisitions.
Steve Crane: We have paid regular quarterly dividends since the third quarter of 2020. Continuing that pattern, we paid a six-cent per common share dividend on June 17, 2024, to share holders of record as of June 3rd. We expect to continue to pay a dividend each quarter, subject to the board's discretion. With that, I will turn the call back over to Rick for some closing comments.
Steve Crane: We have paid a regular quarterly dividend since the third quarter of 2020.
Steve Crane: Continuing that pattern, we paid a $0.06 per common share dividend on June 17, 2024 to shareholders of record as of June 3. We expect to continue to pay a dividend each quarter subject to the Board's discretion. With that, I will turn the call back over to Rick for some closing comments.
Rick Hermanns: I'd like to thank our employees and franchisees for their hard work and dedication in this past quarter, and we look forward to generating value for our stakeholders as we progress into the latter half of 2024. With that, we can now open the line to questions. Thank you.
Rick Hermanns: Thank you, Steve.
Rick Hermanns: I'd like to thank our employees and franchisees for their hard work and dedication in this past quarter, and we look forward to generating value for our stakeholders as we progress into the latter half of 2024. With that, we can now open the line to questions. Thank you.
Speaker Change: Thank you very much. We will now be conducting our question and answer session. If you would like to ask a question, please press star 1 on your phone keypad now.
Speaker Change: A confirmation tone will indicate that your line is in the queue. You may press star 2 if you would like to remove your question from the queue. For any participants using speaker equipment, it might be necessary to pick up your handset before you press the keys.
Rick Hermanns: Please wait a moment whilst we poll for questions.
Speaker Change: Thank you very much. Your first question is coming from Kevin Steinke of Barrington Research. Kevin, your line is live.
Kevin Steinke: Thank you for an afternoon. Hey Kevin, how are you? I'm good; how are you? I can't complain. Good, well, I wanted to, um, talk about your comments about the improving staffing market. You mentioned a slow recovery, but yeah, I'm assuming that you saw some recovery in the second quarter and just trying to get a feel for what you've seen in the market thus far, you know, through the first five, six weeks of the third quarter.
Kevin Steinke: Thank you. Good afternoon.
Rick Hermanns: Hey Kevin, how are you? I'm good, how are you? I can't complain.
Speaker Change: Good. Well, I wanted to...
Speaker Change: Talk about your comments about...
Speaker Change: and Improving Staffing Market. You mentioned a slow recovery, but
Speaker Change: Yeah, I'm assuming...
Speaker Change: that you saw some recovery in the second quarter and just trying to get a feel for what you've seen in the market thus far, you know, through the first.
Rick Hermanns: I would definitely, you know, throughout the second quarter. You know, there was a... and improvement. You know, there was definitely an improvement, particularly in the year-over-year comparison. That trend towards that sort of improvement has continued into the third quarter. So we're, we've actually had a couple of weeks where we've actually exceeded the prior year, which is something we hadn't seen in more than a year.
Speaker Change: 5, 6 weeks in the third quarter.
Speaker Change: I would definitely, you know, throughout the second quarter, you know, there was a
Speaker Change: You know, there was definitely an improvement, particularly in year-over-year comparisons.
Speaker Change: that trend towards, you know, sort of an improvement.
Speaker Change: has...
Speaker Change: continued into the third quarter.
Speaker Change: where, you know, we've actually had a couple of weeks where
Speaker Change: You know, we've actually exceeded the prior year, which is, we hadn't, we hadn't seen that in, you know, more than a year. So, you know, that's why we're cautiously optimistic. Now, you know, obviously, sort of the market.
Rick Hermanns: So, you know, that's why we're cautiously optimistic. Now, you know, obviously, sort of the market. You know, stumble here the last couple of weeks, if there's, you know, if that ends up translating into the real economy, well, then we're, you know, we're, you know, we're, we're, we're, we're, we're, we're, we're, we're, we're, we're, we're, we're, we're, But, but again, we've definitely, you know, we've definitely seen an improving trend.
Speaker Change: you know, stumble here the last couple of weeks. If there's, you know, if that ends up translating into the real economy, well, then we're, you know, we're, you know, we're, we're, we're knocked off track again. But, but again, we've definitely, you know, we've definitely seen an improving trend.
Kevin Steinke: Okay, great. And you mentioned Hirequest Direct actually being up year over year in the second quarter. Are there any particular occupational categories that you, you know, maybe have drilled down into that are driving an improvement, and because it kind of across the board, I'm wondering what you're seeing in that piece of the business.
Speaker Change: Okay, great, and you mentioned Hirequest Direct.
Speaker Change: actually being up year over year in the second quarter. Are there any particular occupational categories?
Speaker Change: that you, you know, maybe have drilled down into that, that are driving an improvement because it kind of across the board is wondering what you're seeing in that piece of the business.
Rick Hermanns: So, you know, and that's a good question. So we have to say it's more geographic than it is. Uh... You know, then it is, let's say job category, but it is construction. Our strongest, our strongest offices are those that are construction-related. We've had recovery in a couple of markets where we had a few down quarters that are definitely... Regaining their stride and... We were battling a couple of comparisons where we had some good-sized clients that had fallen off and that, you know, they've started to be replaced by new business.
Speaker Change: So, you know, and that's a good question. So we've...
Speaker Change: It's more geographic than it is.
Speaker Change: than it is, let's say, job category, but it is construction. Our strongest offices are those that are construction related. We've had a recovery in a couple of markets where we had had a few down quarters that are definitely
Steve Crane: Thank you Rick, and good afternoon everyone. Thank you for joining us today.
Speaker Change: regaining, you know, regaining their stride and
Speaker Change: You know, we were battling a couple of comparisons where we had
Speaker Change: some good-sized snowing clients that had fallen off.
Speaker Change: and that they've started to be replaced by new business, so it's not necessarily the old.
Speaker Change: Clients having come back, but there are new ones stepping, you know, sort of stepping up and filling in. So, you know, again, we're cautiously optimistic about Q3.
Speaker Change: And going back to your original question, it's construction that's the best for us.
Kevin Steinke: Okay, yeah, that's helpful. So, the part of the business that you call out, still facing some meaningful headwinds in the MRI executive search. If you've seen any stabilization in that part of the business or green shoots, just wondering if you know what you're feeling about that business or seeing as we move into the second half year.
Speaker Change: Okay, yeah, that's helpful.
Speaker Change: So, the part of the business that you called out.
Speaker Change: Still facing some meaningful headwinds, MRI, executive search. Have you seen any stabilization in that part of the business or green shoots?
Speaker Change: Just wondering if, you know, what you're feeling about that business you're seeing as we move into the second half year.
Rick Hermanns: So, I would say there are two different... factors that are involved. One, as you know, stated in our prepared remarks, and really going back to what we had put out in December of 22 when we acquired MRI. MRI was losing offices and franchisees for a number of years.
Speaker Change: So I would say there are...
Speaker Change: Two different
Speaker Change: Factors that are involved one as meal.
Speaker Change: stated in our prepared remarks and really going back to what we had put out in December of 22 when we acquired MRI. MRI was losing offices in franchisees for a number of years. And so part of the downward trend.
Rick Hermanns: And so part of the downward trend, you know, is related simply to the organization, the number of units itself.
Speaker Change: you know, is related simply to the, you know, to the organization, the number of units itself.
Rick Hermanns: The remaining offices were then obviously subjected to what is, you know, clearly a bad environment for executives. As far as green shoots go, it definitely was better in Q2 than it was in Q3, you know, let's say if you exclude the effect of offices that had left the system. That said, it's still... Significantly more challenging than the staffing, you know, literally staffing has come back to being, at least for our offices, to a point where we're effectively flat. Whereas, um, the executive search still has a somewhat, you know, a less downward trend, but a downward trend nonetheless.
Speaker Change: The remaining offices were then obviously subjected to what is, you know, clearly a bad environment for executive search.
Speaker Change: As far as green shoots...
Speaker Change: It definitely was better in Q2 than it was in Q3. You know, let's say if you exclude the effect of offices that had left the system.
Speaker Change: That said, it's still...
Speaker Change: significantly more challenging than the staffing. You know, literally staffing has come back to being, at least for our offices, you know, they've come back to a point where we're effectively flat, whereas the
Speaker Change: You know, the executive searches still has a somewhat, you know, a less downward trend, but a downward trend nonetheless.
Kevin Steinke: Okay, and no, with an MRI, they have a... I think they have a... You know, a meaningful portion in terms of... I.T. placement and technology. Yeah, if we were to make some comments that there might be some signs of stabilization and recovery in that market, I don't know if that's something you might have seen.
Speaker Change: Okay, I know within MRI they have a, I think they have a, you know, a meaningful portion in terms of, you know, IT placement and technology.
Speaker Change: I've heard some comments that there might be some signs of stabilization or recovery in that market. I don't know if that's something you might have seen.
Rick Hermanns: You know, that's a great question. And so yeah, there's a little bit, but not as, let's say, as good as in other segments. It's really been a mixed bag, but it's really been a mixed bag as well. I think that there's, you know, it; you can't just point to, let's say the financial sector and say, those MRI offices are doing well, and the others aren't.
Speaker Change: You know, that's a great question, and so yeah, there's been a little bit, but not.
Rick Hermanns: Because again, a lot of those go to, many of our MRI offices are very focused on sort of specific, not even just specific industries, but even, let's say, Hadagories within that industry, and so... They don't, they don't move in a predictable, you know, in a very predictable fashion, and so, you know, I can't just sit there and say, healthcare is done well, and tech is done poorly, or vice-versa; it truly is all over the board. I would check and give you a better answer, but that's the truth.
Speaker Change: You can't just point to, let's say, the financial sector and say, those MRI offices are doing well and the others aren't. Again, a lot of those go to many of our MRI offices are very focused on...
Speaker Change: sort of specific, not even just specific industries, but even, let's say,
Speaker Change: Categories within that industry. And so...
Speaker Change: They don't, they don't move in predictable, you know, in very predictable fashion.
Speaker Change: And so, you know, I can't just sit there and say healthcare is done well and tech is done poorly or vice versa. It truly is all over the board. I wish I could give you a better answer, but that's the truth.
Kevin Steinke: Okay, yeah, fair enough. You know, looking at the S.G.A.
Speaker Change: Okay, yeah, fair enough.
Speaker Change: You know, looking at the...
Kevin Steinke: Expenses. 4.6 million in the second quarter. That's down from 4.9 million in the first quarter, I believe. I think you might have talked last quarter about some actions you had taken. I'm just trying to get a sense of if you've taken some costs out in terms of the core SG&A and if, You know, 4.6 is more of a... Ron Reed for the second half.
Speaker Change: Core SG&A Expenses
Speaker Change: $4.6 million in the second quarter.
Speaker Change: That's down from 4.9 million in the first quarter, I believe.
Speaker Change: I think you might have talked last quarter about some actions you'd take in, and just trying to get a sense of if you've taken some cost out in terms of the Core S DNA, and it's, you know, 4.6 is more of a...
Rick Hermanns: Yeah, I mean, we've definitely taken some steps. There were, even when we were, let me know, doing the last earnings call, there were already several cuts that had already been made that clearly hadn't worked through, you know, worked their way through the income statement. And so the 4-6, as far as for the core SG&A, there's, you know, really nothing to drive that up at this point that would be predictable. I mean, sometimes bills for large expenses come in at weird times. But if anything, there's probably even a bit more downward pressure on it versus upward pressure. We're really being careful with our costs.
Speaker Change: Run rate for the second half.
Speaker Change: Yeah, I mean, we definitely taken some steps there, even when we were doing the last earnings call.
Speaker Change: There were already several cuts that had already been made that clearly hadn't worked their way through the income statement. And so the 4-6, as far as for the core SG&A, there's really nothing...
Speaker Change: You know, there's nothing to drive that up at that at this point that would be predictable, I mean sometimes.
Operator: Thank you very much. We will now be conducting our question and answer session. If you would like to ask a question, please press star one on your phone keypad now. A confirmation tone will indicate that your line is in the key. You may press star two if you would like to remove your question from the key. For any participants using speaker equipment, it might be necessary to pick up your handset before you press the key. Please wait a moment whilst we pull for the question. Thank you very much. Your first question is coming from Kevin Steinke of Baronton Research. Kevin, what line of life do you live?
Speaker Change: Bills for large expenses come in at weird times, but if anything, there's probably even a bit more downward pressure on it versus upward pressure. We're really being careful with our costs.
Kevin Steinke: Okay, that's helpful. Lastly, I just wanted to ask about the M&A environment. I think you mentioned you're seeing increased opportunities. Given some of the recent pressures on the staffing industry, maybe you could just speak to the pipeline and..., valuation expectations by sellers, etc.
Speaker Change: Okay.
Speaker Change: Lastly, I just wanted to ask about
Speaker Change: The M&A environment, I think you mentioned you're seeing increased opportunities given some of the recent pressures on the staffing industry. Maybe you could just speak to the pipeline.
Speaker Change: valuation expectations by sellers etc.
Rick Hermanns: So the deals are out there, there are opportunities, like they always exist, but there are more, at least in our experience. They're still not necessarily at valuations that we think are appropriate for this environment, and so we're still working on sort of matching what we're willing to offer with what's being expected. But...
Speaker Change: So, the deals are out there, there are...
Speaker Change: Opportunities.
Speaker Change: like they always exist but that there are there are more at least in our experience there are more.
Speaker Change: They're still not necessarily at valuations that we think are appropriate for this environment, and so we're still working on sort of matching what we're willing to offer with what's being expected.
Rick Hermanns: The deals are out there. And, you know, we've, you know, we've gotten, you know, close, and we've ended up whiffing on a few of them. But we're, you know, we're still actively engaged. And obviously, though, prices are still certainly better now than what they were a year and a half ago. So, you know, I think we're getting closer to that point where, you know, we'll be able to execute on some of them and, um, you know, but again, we're always looking at that.
Speaker Change: The deals are out there.
Speaker Change: and, you know, we've, you know, we've gotten...
Speaker Change: You know, close and we've ended up whiffing on a few of them, but we're still actively engaged and obviously though.
Speaker Change: Prices are still certainly better now than what they were a year and a half ago, so I think we're getting closer to that point where we'll be able to.
Speaker Change: you know, to execute on some of them. And, you know, but again, we're always looking at that, you know, now I say that it might be, it might be a year, it might be two years before we, we hit something. And there's no promise in that whatsoever. But, but again, the deals are out there.
Rick Hermanns: You know, now I say that it might be, it might be a year, it might be two years before we hit something. I mean, there's no promise in that whatsoever, but, again, the deals are out there.
Kevin Steinke: Right, okay, yeah, understood, that makes sense. So yeah, well, that's all I had.
Speaker Change: Right, okay. Yeah, I understood. That makes sense. So yeah, well, that's all I had. I will turn it back over. Thanks for taking questions
Rick Hermanns: I will turn it back over. Thanks for taking the questions.
Kevin Steinke: Thanks, Kevin.
Operator: Thank you very much. Our next question, I'm not sure if the client has dropped the line, but just in case, if there are any more questions in the key, you can press star one on your phone, keep that mail to join the key. Okay, I'm not seeing any further questions come into the queue, so I will now hand over to the management team for any closing remarks.
Speaker Change: Thank you very much.
Speaker Change: Our next question we had, I'm not sure if the client has dropped the line, but just in case, if there are any more questions in the queue, you can press star one on your phone keypad now to join the queue.
Kevin Steinke: Thank you very much for watching, and I'll see you in the next video, and I'll see you in the next video.
Speaker Change: Okay, I'm not seeing any further questions come into the queue, so I will now hand back over to the management team for any closing remarks.
Rick Hermanns: Well again, I want to thank everybody for joining us on this call. We look forward to the second half of the year, which I probably wouldn't have been able to say at this point last year, and so, you know, we are cautiously optimistic. Again, we thank you for your continued interest in the company and confidence in the company, and we just look forward to speaking with you again in a quarter. Thank you very much.
Speaker Change: Well, again, I want to thank everybody for joining us on this call.
Speaker Change: We look forward to the...
Speaker Change: The second half of the year, which I probably really wouldn't have been able to say at this point last year. And so, you know, we are cautiously optimistic.
Speaker Change: Again, we thank you for your continued interest in the company and confidence in the company and we just look forward again to speaking with you again in a quarter. Thank you very much.
Operator: Thank you very much. This now concludes today's conference call. You may disconnect your phone line at this time and have a wonderful day. Thank you for your participation.
Speaker Change: Thank you very much. This now concludes today's conference call. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
Speaker Change: David Burnett, John Nesbett, John Nesbett, John Nesbett, John Nesbett, John Nesbett, John Nesbett, John Nesbett,
Rick Hermanns: So it's not necessarily the old clients having come back, but there are new ones stepping, you know, sort of stepping up and filling in. So, you know, again, we're cautiously optimistic about Q3, and I've been going back to your original question: I would definitely say, it's construction that's the best for us.