hqi20250331_10q.htm

Table of Contents

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, DC 20549

FORM 10-Q

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

For the quarterly period ended March 31, 2025

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

Commission File Number 001-38513

HIREQUEST, INC.

(Exact name of registrant as specified in its Charter)

Delaware		91-2079472
(State of incorporation or organization)		(I.R.S. employer identification no.)

111 Springhall Drive, Goose Creek, SC 29445
(Address of principal executive offices) (Zip Code)

Registrant’s telephone number, including area code: (843) 723-7400

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

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

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

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

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

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

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

Number of shares of issuer's common stock outstanding at May 7, 2025: 14.0 million

Table of Contents

HireQuest, Inc.

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Operations	4
	Consolidated Statements of Changes in Stockholders' Equity	5
	Consolidated Statements of Cash Flows	6
	Notes to Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	26
Item 4.	Controls and Procedures	26

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	27
Item 1A.	Risk Factors	27
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	27
Item 5.	Other Information	27
Item 6.	Exhibits	27
	Signatures	28

Table of Contents

PART I. FINANCIAL INFORMATION

Item 1. Financial Statements

HireQuest, Inc.

Consolidated Balance Sheets

(unaudited)

(in thousands, except share and par value data)	*March 31, 2025*			*December 31, 2024*
ASSETS
Current assets
Cash	$	2,087		$	2,219
Accounts receivable, net of allowance of $278 and $275		42,218			42,348
Notes receivable		1,501			1,166
Prepaid expenses, deposits, and other assets		3,627			2,413
Prepaid workers' compensation		1,207			1,094
Total current assets		50,640			49,240
Property and equipment, net		4,134			4,149
Workers’ compensation claim payment deposit		1,127			1,127
Franchise agreements, net		19,311			19,737
Other intangible assets, net		8,171			8,442
Goodwill		1,633			1,633
Deferred tax asset		1,793			2,073
Other assets		50			57
Notes receivable, net of current portion and allowance of $876 thousand and $773 thousand, respectively		5,987			6,664
Intangible asset held for sale - discontinued operations		891			891
Total assets	$	93,737		$	94,013
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable	$	329		$	174
Line of credit		5,456			6,829
Term loan payable		-			88
Other current liabilities		1,790			2,018
Accrued payroll, benefits, and payroll taxes		2,900			2,557
Due to franchisees		7,774			7,579
Risk management incentive program liability		1,652			1,252
Workers' compensation claims liability		3,367			3,599
Total current liabilities		23,268			24,096
Workers' compensation claims liability, net of current portion		2,503			2,707
Franchisee deposits		2,402			2,406
Total liabilities		28,173			29,209
Commitments and contingencies (Note 11)
Stockholders' equity
Preferred stock - $0.001 par value, 1,000,000 shares authorized; none issued		-			-
Common stock - $0.001 par value, 30,000,000 shares authorized; 14,076,900 and 14,072,804 shares issued, respectively		14			14
Additional paid-in capital		36,525			36,286
Treasury stock, at cost - 43,849 shares		(146	)		(146	)
Retained earnings		29,171			28,650
Total stockholders' equity		65,564			64,804
Total liabilities and stockholders' equity	$	93,737		$	94,013

See accompanying notes to consolidated financial statements.

Table of Contents

HireQuest, Inc.

Consolidated Statements of Operations

(unaudited)

	*Three months ended*
(in thousands, except per share data)	*March 31, 2025*			*March 31, 2024*
Franchise royalties	$	6,960		$	7,831
Service revenue		512			588
Total revenue		7,472			8,419
Selling, general and administrative expenses		5,255			5,619
Depreciation and amortization		734			698
Income from operations		1,483			2,102
Other miscellaneous income		131			37
Interest income		134			136
Interest and other financing expense		(144	)		(243	)
Net income before income taxes		1,604			2,032
Provision for income taxes		169			340
Net income from continuing operations		1,435			1,692
Loss from discontinued operations, net of tax		(72	)		(73	)
Net income	$	1,363		$	1,619

Basic earnings per share
Continuing operations	$	0.10		$	0.12
Discontinued operations		-			-
Total	$	0.10		$	0.12

Diluted earnings per share
Continuing operations	$	0.10		$	0.12
Discontinued operations		-			-
Total	$	0.10		$	0.12

Weighted average shares outstanding
Basic		13,925			13,800
Diluted		13,980			13,886

See accompanying notes to consolidated financial statements.

Table of Contents

HireQuest, Inc.

Consolidated Statements of Changes in Stockholders’ Equity

(unaudited)

	*Common stock*
Three months ended (in thousands except per share data)	*Shares*		*Par value*		*Treasury Stock amount*			*Additional paid-in capital*		*Retained earnings*			*Total stockholders' equity*
Balance at December 31, 2024		14,073	$	14	$	(146	)	$	36,286	$	28,650		$	64,804
Stock based compensation		-		-		-			239		-			239
Common stock dividends ($0.06 per share)		-		-		-			-		(842	)		(842	)
Restricted common stock granted		4		-		-			-		-			-
Net income		-		-		-			-		1,363			1,363
Balance at March 31, 2025		14,077	$	14	$	(146	)	$	36,525	$	29,171		$	65,564

Balance at December 31, 2023		13,997	$	14	$	(146	)	$	34,527	$	28,337		$	62,732
Stock based compensation		-		-		-			362		-			362
Common stock dividends ($0.06 per share)		-		-		-			-		(838	)		(838	)
Restricted common stock granted		5		-		-			-		-			-
Net income		-		-		-			-		1,619			1,619
Balance at March 31, 2024		14,002	$	14	$	(146	)	$	34,889	$	29,118		$	63,875

See accompanying notes to consolidated financial statements.

Table of Contents

HireQuest, Inc.

Consolidated Statements of Cash Flows

(unaudited)

	*Three months ended*
(in thousands)	*March 31, 2025*			*March 31, 2024*
Cash flows from operating activities
Net income	$	1,363		$	1,619
Loss from discontinued operations		72			73
Net income from continuing operations		1,435			1,692
Adjustments to reconcile net income to net cash provided by (used in) operations:
Depreciation and amortization		734			698
Non-cash interest		4			7
Provision for credit losses		107			67
Stock based compensation		239			362
Deferred taxes		280			41
(Gain) loss on disposition of intangible assets		(103	)		11
Changes in operating assets and liabilities:
Accounts receivable		127			(3,386	)
Prepaid expenses, deposits, and other assets		(1,211	)		603
Prepaid workers' compensation		(114	)		(548	)
Accounts payable		154			(47	)
Risk management incentive program liability		400			139
Other current liabilities		(229	)		(1,131	)
Accrued payroll, benefits and payroll taxes		343			306
Due to franchisees		196			242
Workers' compensation claim payment deposit		-			342
Workers' compensation claims liability		(436	)		(292	)
Net cash provided by operating activities - continuing operations		1,926			(894	)
Net cash used in operating activities - discontinued operations		(72	)		(73	)
Net cash provided by (used in) operating activities		1,854			(967	)
Cash flows from investing activities
Purchase of property and equipment		(22	)		-
Proceeds from payments on notes receivable		362			396
Cash issued for notes receivable		(20	)		(13	)
Investment in intangible asset		-			(99	)
Net change in franchisee deposits		(4	)		(71	)
Net cash provided by investing activities		316			213
Cash flows from financing activities
Payments on term loan payable		(88	)		(169	)
Net (payments to) proceeds from revolving line of credit		(1,372	)		1,988
Payment of dividends		(842	)		(838	)
Net cash (used in) provided by financing activities		(2,302	)		981
Net (decrease) increase in cash		(132	)		227
Cash, beginning of period		2,219			1,342
Cash, end of period	$	2,087		$	1,569
Supplemental disclosure of non-cash investing and financing activities
Notes receivable issued for the sale of intangible assets	$	950		$	-
Supplemental disclosure of cash flow information
Interest paid	$	137		$	236
Income taxes paid, net of refunds	$	5		$	78

See accompanying notes to consolidated financial statements.

Table of Contents

HireQuest, Inc.

Notes to Consolidated Financial Statements

(unaudited)

Note 1 - Overview and Summary of Significant Accounting Policies

Nature of Business

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

On December 30, 2024 we completed our acquisition of Ready Temporary Staffing, LLC (“RTS”) for $1.4 million. RTS has been a premier provider of staffing services to the employers and workers in Colorado for over 50 years. For additional information related to this transactions, see Note 2 - Acquisitions.

As of March 31, 2025, we had 424 franchisee-owned offices and 1 company-owned office in 43 states, the District of Columbia, and 13 countries outside of the United States. We are the employer of record to approximately 65 thousand employees annually, who in turn provide services to thousands of clients in various industries including construction, healthcare, recycling, warehousing, logistics, auctioneering, manufacturing, hospitality, landscaping, retail, and dental practices. We provide employment, marketing, working capital funding, software, and administrative services to our franchisees.

Basis of Presentation

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

These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes included in our Annual Report filed on Form 10-K for the year ended December 31, 2024. Results for the interim periods presented are not necessarily indicative of the results expected for the full year or for any other period.

Consolidation

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

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

Use of Estimates

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

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

Table of Contents

Franchise Royalties

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

	*Three months ended*
(in thousands)		*March 31, 2025*		*March 31, 2024*
HireQuest Direct	$	3,587	$	3,823
Snelling and HireQuest		1,953		2,110
DriverQuest and TradeCorp		195		155
HireQuest Health		67		94
Northbound, MRI, and SearchPath		1,158		1,649
Total	$	6,960	$	7,831

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

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

Deferred Compensation Plan

We offer a non-qualified defined contribution plan to eligible employees. Participating employees may elect to defer and contribute a portion of their eligible compensation. This plan allows participants to direct their account based on available investment options. As a benefit, we match 100% of each employee’s first 3% of contributions, then 50% of each employee’s contribution beyond 3%, up to a maximum match of 4% of the employee’s eligible earnings.

The deferred compensation liability is included in accrued wages and benefits on our Consolidated Balance Sheets. The total deferred compensation liability is funded through company-owned life insurance policies which are recorded in cash on our Consolidated Balance Sheets. The carrying value of company-owned life insurance policies is based on the cash surrender value of the policies, which approximates fair value. Changes in the cash surrender value, premiums incurred, and proceeds received relating to the company-owned life insurance policies are included in Selling, general and administrative expenses on our Consolidated Statements Income.

Marketing and Advertising

We expense advertising and marketing costs as we incur them. These costs were approximately $378 thousand and $329 thousand during the three months ended March 31, 2025 and March 31, 2024, respectively. These costs are included in general and administrative expenses.

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

Recently Adopted Accounting Pronouncements

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

Recently Issued Accounting Pronouncements Not Yet Adopted

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

In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic 740) - Improvements to Income Tax Disclosures, which requires enhancements and further transparency to certain income tax disclosures, primarily to the tax rate reconciliation and income taxes paid. This ASU is effective for fiscal years beginning after December 15, 2024, on a prospective basis with retrospective application permitted. The adoption of this new standard did not have a material impact on our financial statements and related disclosures.

Table of Contents

Note 2 - Acquisitions

Business Combinations

Ready Temporary Staffing

On December 30, 2024, we completed our acquisition of certain assets of RTS with the terms of an Asset Purchase Agreement dated December 13, 2024, including two locations in Colorado, for $1.4 million. The acquisition of RTS expanded our presence in Colorado and grew our franchise base.

The fair values of the assets acquired and liabilities assumed were determined based on information available to us. The following table summarizes the values of the identifiable assets acquired and liabilities assumed as of the acquisition date.

(in thousands)
Cash consideration	$	1,400
Total consideration	$	1,400

Customer lists	$	490
Accounts receivable		374
Property and equipment		35
Goodwill		558
Other current liabilities		(47	)
Accounts payable		(10	)
Purchase price	$	1,400

Goodwill represents the expected synergies with our existing business, the acquired assembled workforce, potential new customers, and future cash flows after the acquisition of RTS. Goodwill is deductible for income tax purposes.

The following table presents unaudited pro forma information (in thousands, except per share data) assuming (a) the acquisition of RTS had occurred on January 1, 2023, (b) all of RTS’ operations had been converted to franchises on such date, and (c) none of the other acquisitions discussed in this Note 2 had occurred. The unaudited pro forma information is not necessarily indicative of the results of operations that would have been achieved if the acquisition had in fact taken place on that date.

	*Three months ended*
Unaudited (in thousands except per share data)		*March 31, 2025 (actual)*		*March 31, 2024*
Total revenue	$	7,472	$	8,664
Net income		1,363		1,712
Basic earnings per share	$	0.10	$	0.13
Basic weighted average shares outstanding		13,925		13,800
Diluted earnings per share	$	0.10	$	0.12
Diluted weighted average shares outstanding		13,980		13,886

These calculations reflect increased amortization expense, increased SG&A expense, the elimination of losses associated with the transaction, and the consequential tax effects that would have resulted had the acquisition closed on January 1, 2023.

In connection with the acquisition, we sold certain assets related to the operations of the acquired locations to a related party. In connection with the purchase, the buyer executed a franchise agreements with us related to the RTS locations. The aggregate sale price for the operating assets was approximately $617 thousand. In conjunction with the sale of assets acquired in this transaction, we recognized a gain of approximately $139 thousand. For more information see Note 3 - Related Party Transactions regarding the Worlds Franchisees.

Asset Acquisitions

EPIC Labor

On September 30, 2024 we completed our acquisition of the customer relationships of EPIC Labor ("EPIC") in accordance with the terms of the Asset Purchase Agreement dated September 30, 2024. EPIC was a premier provider of healthcare and life science staffing services to the employers in Arkansas for over 25 years.

The following table summarizes the estimated fair values of the identifiable assets acquired as of the acquisition date:

(in thousands)
Cash consideration	$	300
Total consideration	$	300

Customer relationships	$	300

We determined the EPIC transaction was an asset acquisition for accounting purposes as substantially all of the fair value of the gross assets acquired was concentrated in the customer relationships. Accordingly, no pro forma financial information is presented.

Immediately after the acquisition, we sold all of the assets acquired. In connection with their purchase, the buyers executed franchise agreements with us and became franchisees. The aggregate sale price for the assets was approximately $200 thousand. In conjunction with the sale of assets acquired in this transaction, we recognized a loss of approximately $100 thousand.

Table of Contents

Note 3 - Related Party Transactions

Prior to entering into a new related party transaction that is disclosable pursuant to Item 404 of Regulation S-K, the Audit Committee reviews and monitors all relevant information available. In addition, the Audit Committee reviews a summary of related parties and related party transactions on a quarterly basis. The Audit Committee, in its sole discretion, may approve the related party transaction only if it determines, in good faith and under all circumstances, that the transaction is in the best interests of the Company and its shareholders. The Audit Committee, in its sole discretion, may also impose conditions as it deems appropriate on the Company or the related party in connection with the approval of the related party transaction.

Several significant shareholders and directors of HQI own portions of Jackson Insurance Agency, Bass Underwriters, Inc., Insurance Technologies, Inc., and a number of our franchisees (in whole or in part).

Jackson Insurance Agency ("Jackson Insurance") and Bass Underwriters, Inc. ("Bass")

Edward Jackson, a member of our Board and significant stockholder, and a member of Mr. Jackson’s immediate family own Jackson Insurance. Mr. Jackson, Richard Hermanns, our CEO, Chairman of our Board, and largest stockholder, and irrevocable trusts set up by each of them, collectively own a majority of Bass, a large managing general agent.

Jackson Insurance and Bass brokered property, casualty, general liability, and cybersecurity insurance for a series of predecessor entities prior to the 2019 merger with Command Center. Since July 15, 2019, they have continued to broker these same policies for HQI. Jackson Insurance also brokers certain insurance policies on behalf of some of our franchisees, including the Worlds Franchisees (defined below).

During the three months ended March 31, 2025 and March 31, 2024, Jackson Insurance and Bass invoiced HQI approximately $1.5 million and $1.3 million, respectively, for premiums, taxes, and fees related to these insurance policies. Jackson Insurance and Bass retain a commission of approximately 9% - 15% of premiums.

Insurance Technologies, Inc. ("Insurance Technologies")

Mr. Jackson, Mr. Hermanns, and irrevocable trusts set up by each of them, collectively own a majority of Insurance Technologies, an IT development and security firm. On October 24, 2019, HQI entered into an agreement with Insurance Technologies to add certain cybersecurity protections to our existing information technology systems and to assist in developing future information technology systems within our HQ WebConnect software. In addition, Insurance Technologies assisted with the IT diligence and integration process with respect to acquisitions completed in 2021.

During the three months ended March 31, 2025 and March 31, 2024, Insurance Technologies invoiced HQI approximately $91 thousand and $124 thousand, respectively, for services provided pursuant to this agreement.

The Worlds Franchisees

Mr. Jackson and immediate family members of Mr. Hermanns have significant ownership interests in certain of our franchisees (the “Worlds Franchisees”). There were 35 Worlds Franchisees at March 31, 2025 that operated 69 of our 423 franchisee-owned offices.

Other transactions regarding the Worlds Franchisees are summarized below:

	*Three months ended*
(in thousands)		*March 31, 2025*		*March 31, 2024*
Franchisee royalties	$	2,217	$	2,437

Balances regarding the Worlds Franchisees are summarized below:

(in thousands)		*March 31, 2025*		*December 31, 2024*
Due to franchisees	$	1,772	$	2,871
Risk management incentive program liability		693		492

Note 4 - Line of Credit and Term Loans

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

On February 28, 2023 the Company and all of its subsidiaries as borrowers entered into a Revolving Credit Agreement (the "Credit Agreement") with Bank of America, N.A. for a $50,000,000 revolving facility (the “Senior Credit Facility”), which includes a $20,000,000 sublimit for the issuance of standby letters of credit. Approximately $5.4 million and $6.8 million was drawn on the Senior Credit Facility as of March 31, 2025 and December 31, 2024, respectively. The Company also has a one-time right, upon at least ten Business Days’ prior written notice to the bank to increase the maximum amount of the Senior Credit Facility to $60 million. As of March 31, 2025 this has not been exercised. The Senior Credit Facility provides for certain financial covenants including maintaining an Asset Coverage Ratio of at least 1.0:1.0 at all times; maintaining a Total Funded Debt to Adjusted EBITDA Ratio not exceeding 3.0:1.0; and maintaining, on a consolidated basis, a Fixed Charge Coverage Ratio of at least 1.25:1.0. As of March 31, 2025 we were in compliance with all financial covenants.

Interest will accrue on the outstanding balance of the line of credit at a variable rate equal to (a) the Term SOFR Daily Floating Rate (as defined in the Credit Agreement) plus a margin between 1.00% and 1.75% per annum. In each case, the applicable margin is determined by the Company's Total Funded Debt to Adjusted EBITDA, as defined in the Credit Agreement. At March 31, 2025 the effective interest rate was approximately 5.7%. The Senior Credit Facility will mature on February 28, 2028.

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

Table of Contents

At March 31, 2025, approximately $9.2 million of availability under the Senior Credit Facility was utilized by outstanding letters of credit that secure our obligations to our workers’ compensation insurance carrier, and $500 thousand was utilized by a letter of credit that secures our pay-card funding account. For additional information related to the letter of credit securing our workers’ compensation obligations see Note 5 - Workers’ Compensation Insurance and Reserves.

Term Loan

In connection with the Northbound acquisition, we entered into an amortizing term loan from the seller for $1.5 million that matured on March 1, 2025 that bore interest at 4.0%. This note has been satisfied in full.

Note 5 - Fair Value of Financial Instruments

The carrying amounts of cash, accounts receivable, accounts payable, the line of credit and all other current assets and liabilities approximate fair values due to their short-term nature. The fair value of notes receivable approximates the amortized cost basis as adjusted by an allowance for credit losses as we believe the stated interest rates reflects the prevailing market rates given our unique collateral position and the scarce capital resources willing to finance a franchise. The fair value of the term loan payable approximates its carrying value because current rates for similar borrowings do not have a material impact.

	*March 31, 2025*
(in thousands)		*Total*		*Level 1*		*Level 2*		*Level 3*
Cash	$	2,087	$	2,087	$	-	$	-
Notes receivable		7,488		-		7,488		-
Accounts receivable		42,218		-		42,218		-
Total assets at fair value	$	51,793	$	2,087	$	49,706	$	-

Line of credit		5,456		-		5,456		-
Total liabilities at fair value	$	5,456	$	-	$	5,456	$	-

	*December 31, 2024*
(in thousands)		*Total*		*Level 1*		*Level 2*		*Level 3*
Cash	$	2,219	$	2,219	$	-	$	-
Notes receivable		7,830		-		7,830		-
Accounts receivable		42,348		-		42,348		-
Total assets at fair value	$	52,397	$	2,219	$	50,178	$	-

Term loan payable	$	88	$	-	$	88	$	-
Line of credit		6,829		-		6,829		-
Total liabilities at fair value	$	6,917	$	-	$	6,917	$	-

Note 6 - Workers’ Compensation Insurance and Reserves

Since July 15, 2019 we have obtained our workers’ compensation insurance through Chubb Limited and ACE American Insurance Company (collectively, “ACE”) in all states in which we operate other than monopolistic jurisdictions. The ACE policies are large deductible policies where we have primary responsibility for all claims made. ACE provides insurance for covered losses and expenses in excess of $500 thousand per incident. Under these large deductible programs we are largely self-insured. Per our contractual agreements with ACE we must provide a collateral deposit of $ 9.2 million, which we accomplish by providing a letter of credit under our agreement with Bank of America. For workers’ compensation claims originating in the monopolistic jurisdictions of North Dakota, Ohio, Washington, and Wyoming, we pay workers’ compensation insurance premiums and obtain full coverage under mandatory state administered programs. Our liability associated with claims in these jurisdictions is limited to premium payments based upon the amount of payroll paid, or hours worked, within each jurisdiction. Accordingly, our consolidated financial statements reflect only the mandated workers’ compensation insurance premium liability for workers’ compensation claims in these jurisdictions.

Prior to July 15, 2019, one of our predecessor entities ("Legacy HQ") also obtained its workers’ compensation insurance through ACE in all states in which it operated other than monopolistic jurisdictions. The ACE policy was a large deductible policy pursuant to which Legacy HQ had primary responsibility for all claims with ACE providing insurance for covered losses and expenses in excess of $500 thousand per incident. In addition to the ACE policy, Legacy HQ purchased a deductible reimbursement insurance policy from Hirequest Insurance Company (“HQ Ins.”), an independent captive insurer, to cover losses up to the $500 thousand deductible with ACE. This resulted in Legacy HQ effectively being fully insured until the merger with Command Center. Effective July 15, 2019, Legacy HQ terminated its deductible reimbursement policy with HQ Ins.

Command Center, the predecessor entity that acquired Legacy HQ in 2019, also obtained its workers’ compensation insurance through ACE. Pursuant to Command Center’s most recent policy, which expired on March 1, 2020, ACE provided insurance for covered losses and expenses in excess of $500 thousand per incident. Command Center’s ACE policy included a one-time obligation for the Company to pay any single claim filed under the Command Center policy within a policy year that exceeds $500 thousand (if any), but only up to $750 thousand for that claim. All other claims within the policy year were subject to the $500 thousand deductible. Effective July 15, 2019, in connection with the merger with Command Center, we assumed all of the workers’ compensation claims of Command Center.

Table of Contents

Note 7 - Stockholders’ Equity

Dividend

Historically, we have paid a quarterly dividend. We intend to continue to pay a quarterly dividend based on our business results and financial position. The following common share dividends were paid during 2025 and 2024:

Declaration date (total paid in thousands)	*Dividend per share*		*Total paid*
March 1, 2024	$	0.06	$	838
June 1, 2024		0.06		838
September 1, 2024		0.06		841
December 1, 2024		0.06		842
March 1, 2025		0.06		842

Note 8 - Stock Based Compensation

Employee Stock Incentive Plan

In December 2019, our Board approved the 2019 HireQuest, Inc. Equity Incentive Plan (the “2019 Plan”). Subject to adjustment in accordance with the terms of the 2019 Plan, no more than 1.5 million shares of common stock are available in the aggregate for the grant of awards under the 2019 Plan. No more than 1 million shares may be issued in the aggregate pursuant to the exercise of incentive stock options. In addition, no more than 250 thousand shares may be issued in the aggregate to any employee or consultant, and no more than 50 thousand shares may be issued in the aggregate to any non-employee director, in any twelve-month period. Shares of common stock available for distribution under the Plan may consist, in whole or in part, of authorized and unissued shares, treasury shares or shares reacquired by the Company in any manner. The 2019 Plan was approved by our shareholders in June 2020 and became effective as of that date.

In September 2019, our Board approved a share purchase match program to encourage ownership and further align the interests of key employees and directors with those of our shareholders. Under this program, we will match 20% of any shares of our common stock purchased on the open market by or granted in lieu of cash compensation to key employees and directors up to $25 thousand in aggregate value per individual within any calendar year. These shares vest on the second anniversary of the date on which the matched shares were purchased if the individual is still employed by the Company or still serves as a director and certain other vesting criteria are met. During the first three months of 2025, we issued 681 shares valued at approximately $9 thousand under this program. During the first three months of 2024, we issued 863 thousand shares valued at approximately $12 thousand under this program.

In the first three months of 2025, we issued 4,096 shares of restricted common stock pursuant to the 2019 Plan valued at approximately $55 thousand to members of our Board of Directors for their services in lieu of cash compensation. Of these, 3,415 shares vested equally over the three months post grant. The remaining 681 shares were issued pursuant to our share purchase match program.

In the first three months of 2024, we issued 5,174 shares of restricted common stock pursuant to the 2019 Plan valued at approximately $69 thousand to members of our Board of Directors for their services in lieu of cash compensation. Of these, 4,311 shares vested equally over the three months post grant. The remaining 863 shares were issued pursuant to our share purchase match program.

Table of Contents

The following table summarizes our restricted stock outstanding at December 31, 2024, and changes during the three months ended March 31, 2025.

(number of shares in thousands)	*Shares*			*Weighted average grant date price*
Non-vested, December 31, 2024	106		$	18.28
Granted	4			13.40
Vested	(13	)		16.21
Non-vested, March 31, 2025	97			18.37

Stock options that were outstanding at Command Center were deemed to be issued on the date of the merger with Legacy HQ. Outstanding awards continue to remain in effect according to the terms of the Command Center 2008 Plan, the Command Center 2016 Plan, and the corresponding award documents. There were approximately 13 thousand stock options vested at March 31, 2025 and December 31, 2024.

The following table summarizes our stock options outstanding at December 31, 2024, and changes during the three months ended March 31, 2025.

(number of shares in thousands)	*Number of shares underlying options*		*Weighted average exercise price per share*		*Weighted average grant date fair value*
Outstanding, December 31, 2024	13	$	5.47	$	2.98
Granted	-		-		-
Outstanding, March 31, 2025	13		5.47		2.98

There were no non-vested stock options outstanding at March 31, 2025 or at December 31, 2024.

The following table summarizes information about our outstanding stock options, and reflects the intrinsic value recalculated based on the closing price of our common stock of $14.16 at March 31, 2025.

(number of shares and intrinsic value in thousands)			*Number of shares underlying options*				*Weighted average exercise price per share*				*Weighted average remaining contractual life (years)*				*Aggregate intrinsic value*
Outstanding and exercisable			13			$	5.47				3.0			$	83

At March 31, 2025, there was unrecognized stock-based compensation expense totaling approximately $562 thousand relating to non-vested restricted stock grants that will be recognized over the next 3.4 years.

Note 9 - Earnings per Share

We calculate basic earnings per share by dividing net income or loss available to common stockholders by the weighted average number of common shares outstanding. We do not include the impact of any potentially dilutive common stock equivalents in our basic earnings per share calculations. Diluted earnings per share reflect the potential dilution of securities that could share in our earnings through the conversion of common shares issuable via outstanding stock options and unvested restricted shares, except where their inclusion would be anti-dilutive. Outstanding common stock equivalents at March 31, 2025 and March 31, 2024 totaled approximately 109 thousand and 165 thousand, respectively.

We use the treasury stock method to calculate the diluted common shares outstanding which were as follows:

	*Three months ended*
(in thousands)		*March 31, 2025*	*March 31, 2024*
Weighted average number of common shares used in basic net income per common share		13,925	13,800
Dilutive effects of unvested restricted stock and stock options		55	86
Weighted average number of common shares used in diluted net income per common share		13,980	13,886

Table of Contents

Note 10 - Goodwill and Intangible Assets

Annual impairment test

During the third quarter of 2024, we completed our annual review of goodwill for potential impairment using a quantitative assessment for all of our reporting units. The fair value of each reporting unit was estimated using a weighting of a discounted cash flow model and prices of comparable businesses. As a result of this review, we concluded that the carrying value of our MRI reporting unit exceeded its estimated fair value resulting in an impairment charge of approximately $4.8 million. The goodwill impairment was primarily attributable to industry and market conditions effecting the overall financial performance of the reporting unit. These industry and market conditions were deemed a triggering event that led us to also review the fair value of certain indefinite-lived intangible assets related to the MRI reporting unit. As a result of this review we concluded the carrying value of the trade name related to MRI exceeded its estimated fair value resulting in an impairment charge of approximately $1.2 million. The related impairment was primarily attributable to industry and market conditions effecting the overall financial performance of the reporting unit. The balance for the trade name related to MRI was approximately $940 thousand at March 31, 2025 and at December 31, 2024.

The table below reflects our goodwill and changes in the carrying value:

(in thousands)
Goodwill balance at December 31, 2024	$	1,633
Impairment charge during 2025		-
Goodwill balance at March 31, 2025	$	1,633

Goodwill before impairment	$	6,428

SEC Form 10-Q filed by HireQuest Inc.