[Management View]
HireQuest reported a net income of $2.3 million for Q3 2025, maintaining profitability despite a 9.8% year-over-year revenue decline. The company emphasized its franchise model's resilience, with franchise royalties remaining the primary revenue driver. Strategic focus remains on M&A opportunities, with several accretive deals under consideration.

[Outlook]
The company anticipates stabilization in the day labor business and continues to explore M&A opportunities, expecting increased activity in the next three to six months. Management remains optimistic about future demand, particularly in light industrial and administrative staffing.

[Financial Performance]
Total revenue decreased to $8.5 million from $9.4 million YoY. Franchise royalties were $8.1 million, down from $9 million. System-wide sales increased 6.1% sequentially. Net income improved to $2.3 million from a loss of $2.2 million last year. Adjusted EBITDA was $4.7 million, slightly below last year's $4.9 million, with a margin increase to 55%.

[Q&A Highlights]
Question 1: Kevin Steinke asked about the day labor business's improvement in Q3 compared to Q2.
Answer: Rick Hermanns noted stabilization in the day labor market, with some optimism as certain weeks in Q4 exceeded prior year comparisons. However, some markets remain challenging due to client-specific volume reductions.

Question 2: Kevin Steinke inquired about the Snelling franchisees' big wins and whether they were competitive takeaways.
Answer: Hermanns attributed the wins to exceptional franchisees and competitive gains, noting stability in most markets and some large account acquisitions.

Question 3: Steinke asked about non-renewals of MRI franchisee agreements in Q3.
Answer: Hermanns clarified that significant non-renewals occurred in Q1, with active office declines leveling out by the end of Q3, indicating market stabilization.

Question 4: Steinke questioned the M&A pipeline's status in the current market environment.
Answer: Hermanns described the pipeline as stable, with expectations for increased opportunities in the next three to six months, driven by smaller firms planning exits.

Question 5: Steinke asked about the impact of tighter immigration enforcement on business.
Answer: Hermanns acknowledged some business wins due to immigration enforcement but expressed skepticism about the reported magnitude of self-deportations, expecting cumulative effects to benefit future demand.

[Sentiment Analysis]
Analysts showed cautious optimism, focusing on stabilization and strategic growth opportunities. Management maintained a positive tone, emphasizing resilience and future growth potential through M&A.

[Quarterly Comparison]
| Metric | Q3 2025 | Q3 2024 |
|-------------------------|---------------|---------------|
| Total Revenue | $8.5 million | $9.4 million |
| Franchise Royalties | $8.1 million | $9 million |
| System-wide Sales | $133.6 million| $148.6 million|
| Net Income | $2.3 million | -$2.2 million |
| Adjusted EBITDA | $4.7 million | $4.9 million |
| Adjusted EBITDA Margin | 55% | 52% |

[Risks and Concerns]
The primary risk involves continued revenue decline due to non-renewals in the MRI network and market softness. Immigration enforcement impacts are uncertain, and macroeconomic factors like tariffs and interest rates add to the unpredictability.

[Final Takeaway]
HireQuest demonstrated resilience with continued profitability despite revenue challenges, driven by strategic cost management and a robust franchise model. The company's focus on M&A and market stabilization efforts positions it for potential growth, although external economic factors and franchisee retention remain key concerns. The management's strategic initiatives and cautious optimism suggest a focus on long-term shareholder value.