Q1 2026 HireQuest Inc Earnings Call

May 12, 2026

Operator: Greetings. Welcome to the HireQuest Q1 2026 Earnings Conference Call. I will now turn the conference over to your host, Walter Frank of IMS Investor Relations. You may begin.

Speaker #2: 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, Walter Frank of IMS Investor Relations.

Speaker #2: You may begin. Thank you, operator. I would like to welcome everybody to the call. Hosting the call today are HireQuest CEO Rick Hermans and CFO David Hartley.

Walter Frank: Thank you, operator. I would like to welcome everybody to the call. Hosting the call today are HireQuest CEO, Rick Hermanns, and CFO, David Hartley. I would 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 1933 as amended, and Section 21 E 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 involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future. Those 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.

Speaker #2: I would like to 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.

Speaker #2: As amended, and Section 21E 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, involve risks and uncertainties because they relate to events and depend on circumstances that will occur in the future.

Speaker #2: Those 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.

Speaker #2: 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.

Walter Frank: 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 changed conditions. I would now like to turn the call over to the CEO of HireQuest, Rick Hermanns.

Speaker #2: Except as required by federal securities law, HireQuest undertakes no obligation to update or revise forward-looking statements to reflect change conditions. I would now like to turn the call over to the CEO of HireQuest, Rick Hermans.

Speaker #3: Good afternoon, and thank you for joining our call today. Our first quarter 2026 was another solid quarter of operational execution and profitability for our business that demonstrates the resilience of our franchise, staffing model in diverse markets.

Rick Hermanns: Good afternoon. Thank you for joining our call today. Our Q1 2026 was another solid quarter of operational execution and profitability for our business that demonstrates the resilience of our franchise staffing model in diverse markets. While many in our industry have struggled to keep up with the shifting customer demands and a soft market for staffing services that has been impacted by a slowed and sometimes even frozen hiring market, we continue to deliver consistent results and sustain profitability for multiple reasons. First, our franchise staffing model aligns incentives by making our franchisees owners alongside us. In other words, when our business is performing well, everyone benefits. Our model also provides enhanced expense control with less need for regional and or middle management. Our exposure to diverse customer verticals and recurring revenue streams at the local level helps us to mitigate macroeconomic risk.

Speaker #3: While many in our industry have struggled to keep up with the shifting customer demands and a soft market for staffing services, that has been impacted by a slowed and sometimes even frozen hiring market, we continue to deliver consistent results and sustain profitability for multiple reasons.

Speaker #3: First, our franchise staffing model aligns incentives by making our franchisees owners alongside us. In other words, when our business is performing well, everyone benefits.

Speaker #3: Our model also provides enhanced expense control with less need for regional or middle management, and our exposure to diverse customer verticals and recurring revenue streams at the local level helps us to mitigate macroeconomic risk.

Speaker #3: Put simply, our performance in the first quarter continues to reflect the resiliency and strength of our model. It is important to stress that as a management team, we take a long-term view of the business and value creation.

Rick Hermanns: Put simply, our performance in Q1 continues to reflect the resiliency and strength of our model. It is important to stress that as a management team, we take a long-term view of the business and value creation. We have driven positive results dating back to before COVID. The company has not lost money in a single year since our formation and has delivered double-digit compounded annual growth in system-wide sales or revenue and adjusted EPS from 2019 to 2025. This growth has also outpaced the broader market. Our total sales grew almost 57% from 2019 to 2025 after adjusting for the divestiture of MRI Network, compared to a decline of approximately 3% in sales during the same period for the broader US temporary staffing industry.

Speaker #3: We have driven positive results dating back to before COVID. The company has not lost money in a single year since our formation, and has delivered double-digit compounded annual growth in system-wide sales or revenue and adjusted EPS from 2019 to 2025.

Speaker #3: This growth has also outpaced the broader market. Our total sales grew almost 57% from 2019 to 2025, after adjusting for the divestiture of MRI Network, compared to a decline of approximately 3% in sales during the same period for the broader U.S. temporary staffing industry.

Speaker #3: Specifically, our commercial sales as so adjusted increased almost 80% during this period, while the broader industry declined by about 23%. All the while, we have maintained a strong balance sheet with no debt.

Rick Hermanns: Specifically, our commercial sales, as so adjusted, increased almost 80% during this period, while the broader industry declined by about 23%. All the while, we have maintained a strong balance sheet with no debt. Looking forward, we are not wavering from our strategy that combines disciplined M&A with organic franchise growth, which has resulted in the business more than doubling in size over the past 5 years. We have been able to keep our SG&A relatively stable as a percentage of system-wide sales, despite persistent economic headwinds over the past couple of years. I've talked about tentative green shoots in demand over the past couple of quarters, those tended to be isolated and fleeting. In Q1, despite a rough start, towards the second half of the quarter, we started to see some consistent favorable weekly year-over-year comparisons across the business.

Speaker #3: Looking forward, we are not wavering from our strategy that combines disciplined M&A with organic franchise growth, which has resulted in the business more than doubling in size over the past five years.

Speaker #3: Furthermore, we have been able to keep our SG&A relatively stable as a percentage of system-wide sales despite persistent economic headwinds over the past couple of years.

Speaker #3: I've talked about tentative green shoots in demand over the past couple of quarters, but those tended to be isolated and fleeting. In Q1, despite a rough start, towards the second half of the quarter, we started to see some consistent favorable weekly year-over-year comparisons across the business.

Speaker #3: And so far, in Q2, those comparisons have become even more favorable. This is encouraging for a number of reasons. First, I think we can attribute some of the improvement to the surge in undocumented workers that came from 2021 to 2023 has finally been resolved.

Rick Hermanns: So far in Q2, those comparisons have become even more favorable. This is encouraging for a number of reasons. First, I think we can attribute some of the improvement to the surge in undocumented workers that came from 2021 to 2023 have finally been resolved. We are starting to see the impact of our investments in our national accounts program and the efforts of our franchisees starting to pay off. Looking ahead, we believe we're in a favorable position to benefit from what looks to be an improved staffing market in 2026. With that, I'll now turn over the call to David to provide a closer look at our Q1 financial results.

Speaker #3: Secondly, we are starting to see the impact of our investments in our national accounts program, and the efforts of our franchisees are starting to pay off.

Speaker #3: Looking ahead, we believe we're in a favorable position to benefit from what looks to be an improved staffing market in 2026. With that, I'll now turn over the call to David to provide a closer look at our first quarter financial results.

Speaker #4: Thank you, Rick, and good afternoon, everyone. Appreciate everyone joining today. I'll now provide a summary of our first quarter results. Total revenue for the first quarter of 2026 was $6.5 million, compared with revenue of $7.5 million in the prior year.

David Hartley: Thank you, Rick, good afternoon, everyone. Appreciate everyone joining today. I'll now provide a summary of our Q1 results. Total revenue for Q1 of 2026 was $6.5 million, compared with revenue of $7.5 million in the prior year, a decrease of 12.7%. As a reminder to everyone, we completed our divestiture of certain MRI Network assets, which comprised of the permanent placement franchise operations on 1 January of this year. The Q1 of 2026 does not include any revenue or SG&A from that portion of the business. As a point of comparison, the Q1 of 2025 included approximately $574,000 in total revenue related to divested MRI Network assets.

Speaker #4: A decrease of 12.7%. As a reminder to everyone, we completed our divestiture of certain MRI network assets, which comprised of the permanent placement franchise operations, on January 1st of this year.

Speaker #4: So the first quarter of 2026 does not include any revenue or SG&A from that portion of the business. As a point of comparison, the first quarter of 2025 included approximately $574,000 in total revenue related to divested MRI network assets.

Speaker #4: 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 as well as other miscellaneous revenue.

David Hartley: 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, as well as other miscellaneous revenue. Franchise royalties in Q1 were $6.1 million, compared to $7 million for the same quarter last year. Q1 of 2025 included approximately $500,000 in franchise royalties related to the divestiture. Underlying franchise royalties are system-wide sales, which are not a part of our revenue, but are a helpful contextual performance indicator. System-wide sales reflect sales at all offices, including those classified as discontinued. System-wide sales in Q1 were $102.6 million, compared to $118.4 million in Q1 of 2025.

Speaker #4: Franchise royalties in the first quarter were $6.1 million, compared to $7 million for the same quarter last year. The first quarter of 2025 included approximately $500,000 in franchise royalties related to the divestiture.

Speaker #4: Underlying franchise royalties are system-wide sales, which are not a part of our revenue but are a helpful contextual performance indicator. System-wide sales reflect sales at all offices, including those classified as discontinued.

Speaker #4: System-wide sales in the first quarter were $102.6 million, compared to $118.4 million in the first quarter of 2025. The first quarter of 2025 included approximately $16 million in system-wide sales related to the divestiture.

David Hartley: The Q1 of 2025 included approximately $16 million in system-wide sales related to the divestiture. Service revenue in Q1 was $462,000, compared to $512,000 last year. The Q1 of 2025 included roughly $75,000 in service revenue related to the divestiture. Selling general and administrative expense in Q1 was $4.3 million compared to $5.3 million in Q1 of 2025. Included in SG&A is workers' compensation expense, which totaled $39,000 for Q1, compared to $28,000 in Q1 of 2025. Additionally, the Q1 of 2025 included approximately $700,000 in SG&A related to the divestiture.

Speaker #4: Service revenue in the first quarter was $462,000, compared to $512,000 last year. The first quarter of 2025 included roughly $75,000 in service revenue related to the divestiture.

Speaker #4: Selling, general, and administrative expense in the first quarter was $4.3 million, compared to $5.3 million in the first quarter of 2025. Included in SG&A is workers' compensation expense, which totaled $39,000 for the first quarter, compared to $28,000 in the first quarter of 2025.

Speaker #4: Additionally, the first quarter of 2025 included approximately $700,000 in SG&A related to the divestiture. For Q1, 2026, core SG&A, which excludes the impact of workers' comp and any non-recurring operating expenses, was $4.2 million.

David Hartley: For Q1 2026 core SG&A, which excludes the impact of workers' comp and any non-recurring operating expenses, was $4.2 million. We provide a table in the press release issued earlier this afternoon with a detailed reconciliation of core SG&A to SG&A, along with tables for the non-GAAP profitability metrics, net income to adjusted net income and net income to adjusted EBITDA, which I'll discuss shortly. Net income after tax was $1.6 million in Q1 or $0.11 per diluted share, compared to net income of $1.4 million or $0.10 per diluted share last year. Adjusted net income for Q1 was $1.8 million or $0.13 per share, compared to adjusted net income of $1.8 million or $0.13 per diluted share in the same period last year.

Speaker #4: We've provided a table in the press release issued earlier this afternoon with a detailed reconciliation of core SG&A to SG&A. Along with tables for the non-GAAP profitability metrics, net income to adjusted net income, and net income to adjusted EBITDA, which I'll discuss shortly.

Speaker #4: Net income after tax was $1.6 million in the first quarter, or $0.11 per diluted share, compared to net income of $1.4 million, or $0.10 per diluted share last year.

Speaker #4: Adjusted net income for the first quarter was $1.8 million, or $0.13 per share, compared to adjusted net income of $1.8 million, or $0.13 per diluted share in the same period last year.

David Hartley: Adjusted EBITDA for Q1 2026 was $2.7 million, compared to $2.8 million last year. Given the size of non-cash operating expenses running through our P&L, we believe adjusted EBITDA and adjusted net income are both relevant metrics for us. Moving to the balance sheet. Our total assets as of 31 March 2026 were $91.1 million, compared to $88.2 million at 31 December 2025. Current assets included $1 million in cash and $44.7 million of net accounts receivable, while current assets at 2025 year-end included $3.9 million of cash and $39.3 million of net accounts receivable. Working capital was $32.5 million at the end of Q1, compared with $33 million at the end of 2025.

Speaker #4: And adjusted EBITDA for the first quarter 2026 was $2.7 million, compared to $2.8 million last year. Given the size of non-cash operating expenses running through our P&L, we believe adjusted EBITDA and adjusted net income are both relevant metrics for us.

Speaker #4: Moving to the balance sheet, our total assets as of March 31, 2026, were $91.1 million, compared to $88.2 million at December 31, 2025. Current assets included $1 million in cash and $44.7 million of net accounts receivable, while current assets at 2025 year-end included $3.9 million of cash and $39.3 million of net accounts receivable.

Speaker #4: Working capital was $32.5 million. At the end of the first quarter, compared with $33 million at the end of 2025. At the end of the first quarter, we had $0 drawn on our credit facility.

David Hartley: At the end of Q1, we had $0 drawn on our credit facility, and that provides us with $40.3 million in availability, assuming continued covenant compliance. We have paid a regular quarterly dividend since Q3 2020. Most recently, we paid a $0.06 per common share dividend on 16 March 2026, to shareholders of record as of 2 March. 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.

Speaker #4: And that provides us with $40.3 million in availability, assuming continued covenant compliance. We've paid a regular quarterly dividend since the third quarter of 2020.

Speaker #4: Most recently, we paid a 6 cent per common share dividend on March 16, 2026, to shareholders of record as of March 2nd. We expect to continue to pay a dividend each quarter, subject to the board's discretion.

Speaker #4: With that, I will turn the call back over to Rick for some closing comments.

Speaker #5: Thank you, David. I'd also like to highlight that we issued a press release this afternoon, which described the new offer to the board of directors of True Blue.

Rick Hermanns: Thank you, David. I'd also like to highlight that we issued a press release this afternoon, which described a new offer to the board of directors of TrueBlue. Our new offer is $105 million cash for the on-demand portion of TrueBlue's PeopleReady segment. As previously disclosed, HireQuest made multiple offers to TrueBlue in 2025. Last year, we were prepared to initiate a tender offer directly to the TrueBlue shareholders and incurred substantial costs in its preparation. We postponed that process in hopes of engaging with the TrueBlue board of directors directly on a friendly basis. Roughly a year after we first made our interest known and made it public, nothing has materialized. We are once again exploring our options.

Speaker #5: Our new offer is $105 million cash for the on-demand portion of True Blue's people-ready segment. As previously disclosed, higher quest made multiple offers to True Blue in 2025.

Speaker #5: Last year, we were prepared to initiate a tender offer directly to the True Blue shareholders and incurred substantial costs in its preparation. However, we postponed that process in hopes of engaging with the True Blue board of directors directly on a friendly basis.

Speaker #5: Now, roughly a year after we first made our interest known and made it public, nothing has materialized. We are once again exploring our options.

Speaker #5: We believe that the on-demand portion of True Blue's people-ready segment is very complementary to our higher quest direct division. And as such, made an attractive all-cash offer earlier today to True Blue's board of directors.

Rick Hermanns: We believe that the on-demand portion of TrueBlue's PeopleReady segment is very complementary to our HireQuest Direct division, and as such, made an attractive all-cash offer earlier today to TrueBlue's board of directors. This part of TrueBlue's business has been an underperformer for them for years. Our proposal gives them the opportunity to divest these offices and raise a substantial amount of cash. We hope TrueBlue's board will view this opportunity as a clear path to create incremental value for their shareholders. As always, I'd like to thank our employees and franchisees for their hard work and commitment. We look forward to speaking with you again when we report our Q2 results in August. With that, we can now open the line to questions. Thank you.

Speaker #5: This part of True Blue's business has been an underperformer for them for years. And our proposal gives the opportunity for them the opportunity to divest these offices and raise a substantial amount of cash.

Speaker #5: We hope True Blue's board will view this opportunity as a clear path to creating incremental value for their shareholders. As always, I'd like to thank our employees and franchisees for their hard work and commitment.

Speaker #5: And we look forward to speaking with you again when we report our second quarter results in August. With that, we can now open the line to questions.

Speaker #5: Thank you.

Speaker #6: 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.

Operator: Thank you. Our first question comes from Kevin Steinke with Barrington Research. Please proceed.

Speaker #6: A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue.

Speaker #6: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we pull for questions.

Speaker #6: Once again, please press star one if you have a question or a comment. Our first question comes from Kevin Steinke with Barrington Research. Please proceed.

Speaker #7: Great. Thank you. I wanted to start out by asking about just the trends you saw throughout the first quarter you mentioned a rough start.

Kevin Steinke: Great. Thank you. Wanted to start out by asking about just the trends you saw throughout Q1. You mentioned a rough start. Is that at all related to maybe some weather headwinds or headwinds from the holidays? I know I've heard other companies talk about that. You know, you talked about H2 becoming more consistent. That continue into Q2 with even some improvement. Maybe just a little more color on the trends as the quarter progressed and as you've moved here into Q2.

Speaker #7: Is that at all related to maybe some weather headwinds or headwinds from the holidays? I know I've heard other companies talk about that. And then you talked about the second half becoming more consistent.

Speaker #7: And that continuing into the second quarter with even some improvement. So maybe just a little more color on the trends as the quarter progressed and as you've moved here into the second quarter.

Speaker #5: Yeah, absolutely. Thanks, Kevin. So yes, what you said is absolutely and what other people have observed. The beginning basically until mid-February, the results were our results were impacted significantly by sort of the placement of New Year's Day.

Rick Hermanns: Absolutely. Thanks, Kevin. Yes, what you said is absolutely and what other people have observed. The beginning, basically until mid-February, our results were impacted significantly by the placement of New Year's Day. The holiday was just set at a really pretty much it became a 20-day, 20-business day month, January was. February is always traditionally bad because it's a short month, January was just as bad because of the placement of New Year's Day. On top of it, the weather was unusually bad over an unusually large swath of the country. What we noticed was starting around mid-February, our results became perceptibly better, particularly compared to the year-over-year comparison.

Speaker #5: So the holiday was just set at a really pretty much it became a four basically of 20-day 20 business day month, January was. February is always traditionally bad because it's a short month.

Speaker #5: And so January was just as bad because of the placement of New Year's Day. On top of it, the weather was unusually bad over an unusually large swath of the country.

Speaker #5: But what we noticed was starting around mid-February, our results became perceptibly better. Particularly compared to the year-over-year comparison. And as towards the end of the quarter, it continued to get it continued to get better.

Rick Hermanns: As, you know, towards the end of the quarter, it continued to get better. If you look at the numbers that David had stated, for example, really, if you exclude the system-wide sales impact of the MRI Network divestiture, we were nearly flat year over year as far as system-wide sales. The good news, or the better news is that in the 5 weeks of Q2, our results have, you know, our comparisons have become even more favorable. You know, in absence of some, you know, some black swan out there, we're feeling really good about our demand right now.

Speaker #5: And if you look at the numbers that David had stated, for example, really if you exclude the system-wide sales impact of the MRI network divestiture, we were nearly flat year-over-year as far as system-wide sales.

Speaker #5: The good news or the better news is that in the first five weeks of the second quarter, our results of our comparisons have become even more favorable.

Speaker #5: And so in the absence of some black swan out there, we're feeling really good about we're feeling really good about our demand right now.

Speaker #7: Okay. Yeah, that's helpful. And so you mentioned the year-over-year comparisons. Becoming more favorable as we enter the second quarter and I had noticed as well that excluding MRI, the system-wide sales were flat year-over-year in the first quarter.

Kevin Steinke: Okay. Yeah, that's helpful. And so you mentioned the year-over-year comparisons becoming more favorable as we enter Q2, and I had noticed as well that excluding MRI, the system-wide sales were flat year over year in Q1. Should we kinda think about you've moved into a more, you know, actually growth year over year on a weekly basis over the last few weeks?

Speaker #7: So should we kind of think about you've moved into a more actually growth year-over-year on a weekly basis over the last few weeks?

Speaker #5: Yeah. I mean, I would say, look, from your lips to God's ears, I mean, yes, I do think I do feel much more optimistic now than I have in the last certainly the last two years.

Rick Hermanns: Yeah, I mean, I would say, look, from your lips to God's ears, I mean, yes, I do think I do feel much more optimistic now than I have in the last, certainly the last 2 years. 'Cause, you know, we have some really solid momentum right now. Now, again, and it's been more sustained. We've, you know, you and I have had these conversations, you know, in this forum over the last, you know, 5, 6 quarters, and it's always, yeah, we've had a few good, you know, we've had a few good weeks. Gee, it seems like it's getting a little bit better, and then frequently it would fall off. For the last, I mean, we've really, for the last even 8, 9 weeks, we've really had pretty consistently, you know, consistently decent results compared to the year-over-year period.

Speaker #5: We have some really we have some really solid momentum right now. Now, again, and it's been more sustained. You and I have had these conversations in this forum over the last five, six quarters, and it's always, "Yeah, we've had a few good we've had a few good weeks.

Speaker #5: Gee, it seems like it's getting a little bit better." And then frequently it would fall off. And for the last I mean, we've really for the last even eight, nine weeks, we've really had pretty consistently consistently decent results.

Speaker #5: Compared to the year-over-year period.

Speaker #7: All right. And yeah, you mentioned maybe a couple of factors helping you out there. Reduced undocumented immigration and also your national accounts program. So maybe just kind of touch on how you believe those things have benefited the results recently here.

Kevin Steinke: All right. Yeah, you mentioned maybe a couple of factors helping you out there, reduced undocumented immigration and also your national accounts program. Maybe just kinda touch on how you believe those things have benefited the results recently here.

Speaker #5: So two things in particular. One, obviously, between '21 and early '24, depending on who you whatever source you believe in, that probably at least 10 million people came into the country.

Rick Hermanns: Two, you know, two things in particular. One, obviously between 2021 and early 2024, you know, depending on who you know, whatever source you believe in, you know, that probably at least 10 million people came into the country illegally or legally. That's about three times the size of the staffing industry. While obviously not everybody who comes in is competing for our jobs, a lot are. I mean, you think of, you know, a lot of those workers work in food service, things like that are traditionally in hospitality, you know, jobs that frequently are filled in particularly our segments of the staffing industry. We, you know, it really was an, you know, really has had an impact.

Speaker #5: Illegally, illegally. That's about three times the size of the staffing industry. And so while obviously not everybody who comes in is competing for our jobs, a lot are.

Speaker #5: I mean, you think of a lot of those workers work in food service, things like that, that have traditionally been hospitality. Jobs that frequently are filled in particularly our segments of the staffing industry.

Speaker #5: And so it really was an really has had an impact. Well, now net immigration is much lower. And even as the economy has grown, it's absorbed some of the sort of some of the excess labor that came from the amount of immigration we had.

Rick Hermanns: Well, now, you know, net immigration is much lower, and even as the economy has grown, it's absorbed some of the, you know, sort of some of the excess labor that came from the amount of immigration we had. What really kind of drove that point home for me even a couple weeks back, I was reading even, like, what the population growth in the United States in 2025 was one of the lowest in recorded history. You know, again, we're starting to see more normal patterns. It's, like it was always a hard thing for me to understand, and I mused about it on these calls even at different points. How in the world can we have declining staffing demand with, you know, a 3.7 or a 3.9% unemployment rate?

Speaker #5: What really kind of drove that point home for me, even a couple of weeks back, I was reading even what the population the population growth in the United States in 2025 was one of the lowest in recorded history.

Speaker #5: And again, so we're starting to see more normal patterns. It's like it was always a hard thing for me to understand. And I mused about it on these calls even at different points.

Speaker #5: How in the world can we have declining staffing demand with a 3.7% or a 3.9% unemployment rate? It never—it never computed in the 35 years I've been in this industry.

Rick Hermanns: It never, you know, it never computed. In the 35 years I've been in this industry, that was just never the experience. now we're actually starting to see where the staffing industry is tracking much more with you know, true increases or decreases in unemployment. for us, that's a good, you know, that's a good thing because we are still in a relatively low unemployment environment. I think we're just starting to see, you know, we're starting to see the return of certain segments of business that really had not been there in a while. the other part is, we briefly touched on it back at towards the end of last year, but we made some pretty good-sized investments in our national accounts department.

Speaker #5: That was just never the experience. And now we're actually starting to see where the staffing industry is tracking much more with true increases or decreases in unemployment.

Speaker #5: And so for us, that's a good for that's a good thing because we are still in a relatively low unemployment environment. And so I think we're just starting to see we're starting to we're starting to see the return of certain segments of business that really had not been there in a while.

Speaker #5: And the other part is we briefly touched on it back towards the end of last year. But we made some pretty good-sized investments in our national accounts department.

Speaker #5: And we're definitely getting some pretty significant wins in from that investment. And so we're also seeing organic growth that's just related to our efforts, not necessarily due to the macroeconomic trends.

Rick Hermanns: We're definitely getting some pretty significant wins in, you know, from that investment. We're also seeing, you know, organic growth that's just related to our efforts, not necessarily due to the macroeconomic trends.

Speaker #7: All right. Great. Maybe just to touch on the true blue offer or the offer for the on-demand segment, the people ready can you maybe just give investors a sense of the size of that business you're targeting in terms of, I don't know, system-wide sales or you mentioned it was unperforming.

Kevin Steinke: All right, great. Maybe just touch on the TrueBlue offer or the offer for the on-demand segment, the PeopleReady. Can you maybe just give investors a sense of, you know, the size of that business you're targeting in terms of system-wide sales? You mentioned it was underperforming, you know, and maybe if you were to acquire that, how you feel like you could improve its performance and its profitability?

Speaker #7: Underperforming, and maybe if you were to acquire that, how you feel like you could improve its performance and its profitability.

Speaker #5: So unfortunately, I'm not at liberty to speak of anything beyond what's been released. So your questions are valid. So I'll just probably have to be for a different point.

Rick Hermanns: Unfortunately, I'm not at liberty to speak of anything beyond what's been released. Your questions are valid, they'll just probably have to be for a different point.

Speaker #7: No. Yeah. Okay. Completely understand. And just maybe lastly, you mentioned the positive year-over-year comparisons. Are you seeing that in any particular markets or segments of your business, commercial versus on-demand?

Kevin Steinke: No. Yeah. Okay. Completely understand. Just maybe lastly, you know, you mentioned the positive, year-over-year comparisons. Are you seeing that in there any particular markets or segments of your business, commercial versus on-demand? Or is it kind of pretty broad-based in terms of, the stabilizing and improving trends you've seen?

Speaker #7: Or is it kind of pretty broad-based in terms of the stabilizing and improving trends you've seen?

Speaker #5: Commercial is where it's at right now. I have to say. Our on-demand is doing okay. And by the way, I say okay. Let's say it's flat.

Rick Hermanns: Commercial is where it's at right now, I have to say. Our on-demand is doing okay. By when I say okay, it's let's say it's flat. It's doing reasonably well given, you know, just given the overall macro environment. The commercial side has really been strong. Not geographically limited either. One of the things, and this is, like, this is part of what draws it back even to the immigration issue. There are a lot of different, you know, maybe it's related to reshoring, maybe it's just more an application of robotics, et cetera, to our industrial economy. There are a lot of retrofits and things going on, and a lot of those are shorter to medium-term projects, as an example. That's what I'm saying.

Speaker #5: It's doing reasonably well, given the overall macro environment. But the commercial side has really been strong—and not geographically limited, either.

Speaker #5: One of the things and this is part of what draws it back even to the immigration issue. There are a lot of different maybe it's related to reshoring.

Speaker #5: Maybe it's just more an application of robotics, etc., to our industrial economy. But there are a lot of retrofits and things going on. And a lot of those are shorter to medium-term projects as an example.

Speaker #5: And that's what I'm saying. We're starting to get a lot of that. And which, again, is more of a return to traditionally what staffing is really a very good product for.

Rick Hermanns: We're starting to get a lot of wins on things like that, you know, which again, is more of a return to traditionally what staffing, you know, is really, you know, a very good product for. Again, we're very encouraged with it. Again, broad-based.

Speaker #5: And so again, we're very encouraged with it. And again, broad-based.

Speaker #7: Okay. Sounds good. Appreciate the comments. I'll turn it back over.

Kevin Steinke: Okay. Sounds good. Appreciate the comments. I'll turn it back over.

Speaker #5: Thanks.

Rick Hermanns: Thanks.

Speaker #2: Once again, if you have a question or a comment, please press star one. The next question comes from Keegan Cox with DA Davidson. Please proceed.

Operator: Once again, if you have a question or a comment, please press star one. The next question comes from Keegan Cox with D.A. Davidson. Please proceed.

Keegan Cox: Thanks for the question. I just wanted to ask how results came in versus your expectations for the quarter. I mean, excluding MRI, like you said, system-wide sales flat. Looks like service revenues improved, but franchise royalties down. I guess kinda, is that just all weather-related? You kinda talked about it, but walk me through it again, I guess.

Speaker #8: Thanks for the question. I just wanted to ask how results came in versus your expectations for the quarter. I mean, excluding MRI, like you said, system-wide sales flat, looks like service revenues improved.

Speaker #8: But franchise royalties down. I guess kind of is that just all weather-related? You kind of talked about it, but walk me through it again, I guess.

Speaker #7: Well, I guess it depends on as far as my expectations, it would have been depending on what time in the quarter you asked me.

Rick Hermanns: Well, I guess it depends on, as far as my expectations, it would have been depending on what time in the quarter you asked me. If you'd have asked me in early February, I'd have been crying over my beer thinking, you know, we're, you know, we're gonna have a terrible quarter. Simply and of course, because I can't control the weather and I can't control what day New Year's falls on. I would say the H2 was, particularly given the results of the Q1 were, you know, ended up balancing it out. I would say we were frankly, probably right about where we would have expected overall, uniformly, just based on what, you know, sort of on what transpired.

Speaker #7: If you'd have asked me in early February, I'd have been crying over my beer thinking, "We're going to have a terrible quarter." And so and simply and of course, because I can't control the weather and I can't control what day New Year's falls on.

Speaker #7: And so I would say the second half was particularly given the results of the first quarter were ended up balancing it out. And so I would say we were frankly probably right about where we would have expected overall uniformly just based on what sort of on what transpired.

Speaker #7: I do think that, again, I feel good about the second quarter. And again, the rest of the year. But we are obviously tied to macroeconomic circumstances that are way beyond our control.

Rick Hermanns: I do think that, again, I feel good about Q2 and, you know, again, the rest of the year. We are obviously tied to macroeconomic circumstances that are way beyond our control.

Speaker #8: Got it. And then you kind of talked about it already, seeing a return of some segments of business that haven't been there for a while.

Keegan Cox: Got it. You, you kind of talked about it already, seeing a return of some segments of business that haven't been there for a while. You mentioned the retrofits. I'm guessing, you know, you're seeing a lot more on the industrial side too, and construction-wise?

Speaker #8: You mentioned the retrofits. I'm guessing you're seeing a lot more on the industrial side too, and construction-wise.

Rick Hermanns: You know, construction is improving, but construction isn't what it was, let's say, a year and a half ago. It's recovering, but slower. Unless you get into the big data centers or the really big projects, which again, we're cracking more into. Really, the real action for us is just, it really is in the industrial and manufacturing side. It's definitely improved.

Speaker #5: Construction is improving, but construction is not construction isn't what it was, let's say, a year and a half ago. It's not it's recovering, but slower, unless you get into the big data centers or the really big projects.

Speaker #5: Which, again, we're cracking more into. But really, the real action for us is just it really is in the industrial and manufacturing side. It's definitely improved.

Speaker #8: Got it. And then just my final one is there we follow a few indicators. I mean, if I look at true blue and people ready, it looked like that business accelerated this quarter.

Keegan Cox: Got it. Just my final one, we follow a few, you know, indicators. I mean, if I look at TrueBlue and PeopleReady, it looked like that business accelerated this quarter. Other industry publications show that temp staffing demand is improving. I guess, you know, looking at your results, why wouldn't your trends be holding up relative to these indicators?

Speaker #8: Other industry publications show that temp staffing demand is improving. I guess, looking at your results, why wouldn't your trends be holding up relative to these indicators?

Speaker #5: Well, they are. That's the thing. So in fact, I think it was today. Maybe it was yesterday. Staffing industry analysts pulls out the bullhorn job report.

Rick Hermanns: Well, they are. That's the thing. In fact, I think it was today, maybe it was yesterday, Staffing Industry Analysts pulls out the BLS, the BLS, you know, job report, and it showed a really like a 7% gain. Don't quote me on that part, but like a 7% gain last week in temporary staffing jobs. It's you know, that's very consistent with what we're seeing.

Speaker #5: And it showed a really fairly it was like a 7% gain. Don't quote me on that part, but like a 7% gain last week.

Speaker #5: In temporary staffing jobs. So it's fair that's very consistent with what we're seeing. And temporary staffing jobs actually rose in March, April, and it appeared to be accelerating in May.

Keegan Cox: Got it. That's helpful.

Rick Hermanns: Temporary staffing jobs actually rose in March, April, and appear to be accelerating into May, which, you know, is, you know, for 2 months in a row for actual growth has been, you know, it is a big deal for the staffing industry compared to the last 3 years. As we pointed out even in our prepared remarks, I mean, the staffing industry is down 3% overall since 2019. Like I said, it seems like that trend is finally, you know, starting to break.

Speaker #5: Which is for two months in a row for actual growth has been is a big deal for the staffing industry compared to the last three years.

Speaker #5: As we pointed out, even in our prepared remarks, I mean, the staffing industry is down 3% overall since 2019. And so like I said, it seems like that trend is finally starting to break.

Speaker #8: Got it.

Keegan Cox: Got it.

Speaker #2: Thank you. We have reached the end of the question and answer session. And I will now turn the call over to management for a closing remarks.

Operator: Thank you. We have reached the end of the question and answer session, and I will now turn the call over to management for closing remarks.

Speaker #5: Again, I want to thank everybody for being with us today. This is an exciting time for the company, as we hopefully are at the cusp of a period of higher demand for our services.

Rick Hermanns: Again, I wanna thank everybody for being with us today. This is an exciting time for the company as we hopefully are at the cusp of a period of higher demand for our services. Of course, we have the or we remain hopeful that our bid for the on-demand portion of TrueBlue's PeopleReady segment will be taken seriously and will lead to greater opportunities for everybody. Again, thank you for joining us, and we will look forward to speaking with you again in August. Thank you.

Speaker #5: And of course, we have the we remain hopeful that our bid for the on-demand portion of true blue's people-ready segment will be taken seriously and will lead to greater opportunities for everybody.

Speaker #5: And so, again, thank you for joining us, and we will look forward to speaking with you again in August. Thank you.

Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.