Prior to the close of the year, we surveyed over 400 offices across our HireQuest direct, [ snelling ] and MRI brands to get a better sense of the overall job market and hiring trends as we headed into 2026. The data we collected points to a studying market with fewer extremes and early signals of reallocation across industries. In other words, while we don’t expect 2026 to be defined by hiring boom or bust, we do expect more balance in the labor market that appears to be stabilizing around new priorities including flexibility, fit and the kind of skilled work and labor that can’t be automated by AI.
Some key statistics from the survey include 68% of offices surveyed set time to fill for open rolls steadied in 2025, while 35% saw increases. This is generally considered to be a clear indicator of market stability. 61% of recruiters expect the time to fill to remain stable in 2026, while 15% expect improvement as candidate supply normalizes. On average, employers are moving faster to secure top candidates in full-time roles, demonstrated by the late 2025 hiring urgency uptick. Looking ahead, we expect several trends including AI and automation, reshoring and tariff relief and economic and political shifts to be key forces that will shape 2026, that 2026 hiring landscape.
HireQuest is keeping a close eye on the many markets in which we operate, and we believe that we’re well positioned with our franchise staffing model to benefit from a stabilizing market and to meet the shifting demands of employers in 2026. Lastly, I’d like to acknowledge that on March 3, snelling our nationwide temporary and direct hire recruiting service celebrated 75 years of continuous operation, placing it among the longest running staffing firms in the United States. On behalf of all of HireQuest, we congratulate them on 3/4 of a centric of success and look forward to many more years as a leader in their respective markets.
With that, I’ll now turn the call over to David to provide a closer look at our fourth quarter and full year financial results.
C. Hartley: Thank you, Rick, and good afternoon, everyone. I appreciate you all joining us today. I’ll now provide a summary of the fourth quarter and full year results. Total revenue in the fourth quarter of 2025 was $7 million compared with revenue of $8.1 million in the prior year, a decrease of 13%. For the full year, total revenue was $30.6 million compared to $34.6 million in 2024. Our 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 charge to our franchisees as well as other miscellaneous revenue.
Franchise royalties for the quarter were $6.6 million compared to $7.6 million for the same quarter last year. And for the full year 2025, franchise royalties were $29 million compared to $32.7 million in 2024. Underlying franchise royalties are system-wide sales, which are not a part of our revenue, but are helpful contextual performance indicator. This wide sales reflects sales at all offices, including those classified as discontinued. In the fourth quarter of 2025, system-wide sales were $122.3 million compared to $134.8 million in Q4 2024, a decrease of 9.3%. And for the full year, system-wide sales were $500.2 million compared with $563.6 million in 2024, a decrease of 11.3%.
Service revenue in the fourth quarter was $392,000 compared to $428,000 last year. And for the full year 2025, service revenue was $1.6 million compared to $1.9 million in 2024. Selling, general and administrative expenses in the fourth quarter were $4.5 million compared to $5.1 million in the fourth quarter last year. SG&A for the full year was $20.7 million compared to $21.4 million for the full year 2024.
Included in SG&A expense is net workers’ compensation expense, which totaled $89,000 for the full year compared with about $2 million in the full year of 2024, a decrease of $1.9 million that demonstrates the progress we’ve made to reduce the impact of this expense on our business and lower it back to historical levels. Core SG&A, which includes the impact — which excludes the impact of workers’ comp, MRI ad fund expenses and any nonrecurring operating expenses was $4.1 million for the quarter and $8.5 million for the full year.
We 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. Net income after tax was $1.6 million in the fourth quarter or $0.11 per diluted share compared to net income of $2.2 million or $0.16 per diluted share last year. For the full year, net income was $6.3 million or $0.45 per diluted share compared to $3.7 million or $0.26 per diluted share in 2024. Adjusted net income was relatively flat year-over-year for both the fourth quarter and full year 2025.
And in the fourth quarter of 2025, adjusted net income was $2.7 million or $0.19 per diluted share compared to adjusted net income of $2.6 million or $0.19 per diluted share in Q4 2024. And for the full year, adjusted net income was $10 million or $0.71 per diluted share in 2025 compared with $9.9 million or $0.71 per diluted share in 2024. Adjusted EBITDA in the fourth quarter was $3.4 million compared to $3.8 million last year. And for the full year, adjusted EBITDA was $14.1 million compared to $16.2 million in 2024. Given the size of noncash operating expenses running through our P&L, we believe adjusted EBITDA and adjusted net income are both relevant metrics for us.
So now moving on to the balance sheet. Our total assets as of December 31, 2025, were $88.2 million compared to $94 million at December 31, 2024. Current assets included $3.9 million in cash and $39.3 million of net accounts receivable while current assets at 2024 year-end included $2.2 million of cash and $42.3 million of net accounts receivable. We ended 2025 with about $33 million in working capital compared to $25.1 million at the end of the year in 2024. The biggest driver for the increase in working capital is that we ended 2025 with $0 drawn on our credit facility, down from $6.8 million drawn at the end of 2024.
So at December 31, 2025, we had $40.3 million in availability, assuming continued covenant compliance. We have paid a regularly — regular quarterly dividend since the third quarter of 2020. Most recently, we paid a $0.06 per common share dividend on March 16, 2025 to shareholders of record as of March 2. We expect to continue to pay a dividend each quarter, subject to the Board’s discretion. And with that, I will turn the call back over to Rick for some closing comments.
Richard Hermanns: Thank you, David. As always, we’d like to thank our employees and franchisees for their hard work and commitment, and we look forward to speaking with you again when we report the first quarter results in May. With that, we can now open the line to questions. Thanks. .
Operator: At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from Kevin Steinke with Barrington Research.
Kevin Steinke: Rick and David. I was just wondering about the environment you described in terms of stabilization and some clients moving more quickly. If you see that benefiting any of your divisions or brands more than the other, thinking of HireQuest direct versus snelling?
Richard Hermanns: Kevin, I appreciate the question. I would say that it hasn’t necessarily been more pronounced in any particular division, but it’s very apparent, and it’s carried through into the first quarter. So the market has definitely, throughout the quarter, it is definitely seems to have found its bottom. And again, I don’t want to contradict what we just said, which means it’s certainly not going to — doesn’t seem like it’s setting up to be a boom year. But after three years of a steady decline, we’re pretty hopeful that, that’s over with.
Kevin Steinke: Okay. And circling back to the MRI transaction. Can you maybe just give us a sense of quantification of how we should think about that affecting the numbers as you move forward in terms of just the revenue and expense impact from the ownership change in that business as it flows through your income statement.
Richard Hermanns: Yes. I’m going to leave that question to David, other than as far as getting into some of the specific numbers, I will say, generally speaking, the — about 35% to 40% of, let’s say, from 2025 of what we had in MRI has been retained via the contract staffing. So there will be a decline from that portion that makes any sense. Now realistically, the perm placement division was breakeven at best. So from an actual income standpoint, the effect will literally be nothing should be nothing. But David, if you have any more on that?
C. Hartley: Yes. So in 2025, the executive search portion of MRI contributed about $65 million of system-wide sales and just a touch under $2 million for royalties. And like Rick said, from an expense side of things, it was, it was breakeven to this past year, slightly down a little bit in terms of profitability. So — so those are kind of — that’s kind of what we should see as things start to normalize in 2026.
Operator: Kevin, do you have an additional question? .
Kevin Steinke: Yes. Just quickly, you didn’t mention acquisitions or the acquisition pipeline, just wondering if you had any update there.
Richard Hermanns: Well, thanks for that question. We had in the middle of the fourth quarter, we had one that we were hopeful, and I would have — if you’d have asked me in November, I would have said there’s an 85% chance we were going to close on that thing. And then they got cold feet and they got cold feet. So look, we’re all — again, we’re always looking for it. However, clearly, we’ve had a bit of a dry spell in finding any decent ones. And at the end of the day, we’re just simply not going to chase a deal just for the sake of having it. It just doesn’t really — doesn’t really help us.
And so I would say what we’re finding more than what we want is ones with like client concentrations. And so we try to avoid. We try avoiding those because those are the ones that tend to fall apart when you buy them. And so we’ve had probably a bit less activity than really what I would expect because of the fact that we’ve had three years of a down market, I would have thought there would be more that are there. But — the only thing I can say is after doing this for 35 years, it’s just when I say that, that all of a sudden, some nice deal will fall in our lap.
So we’re just — we’re always out there working, working, working the phones and trying to get deals. And so that said, right now, we don’t have anything right now.
Operator: [Operator Instructions] Okay. We currently have no questions in the queue. I’d like to turn the floor back to management for closing remarks.
Richard Hermanns: Well, I want to thank everybody for joining us today. I think that again, the results presented just further our contention that the HireQuest model is a very stable profit-centered proven method to be resilient in difficult circumstances. The fact that we went from nearly $7 million of debt to debt free, for example, in a year that was really by any macro sense of things was down, again, just indicates sort of the strength of our model. And so again, we just — thank you for joining us today and look forward to presenting our first quarter results here in, I guess, in about six weeks. Anyway, thank you, and have a good day.
Operator: This concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.
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HireQuest (HQI) Q4 2025 Earnings Transcript was originally published by The Motley Fool
