Good afternoon, and welcome to the HireQuest, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, John Nesbett of IMS, Investor Relations. John, the floor is yours.

Thank you, Tom. I'd like to welcome everyone to the call. Hosting the call today are HireQuest's Chief Executive Officer, Rick Hermanns; and Chief Financial Officer, David Hartley. I'd 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 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. These 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. Prospective investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those described by HireQuest's periodic reports filed with the SEC, and the 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 Chief Executive Officer of HireQuest, Rick Hermanns. Please go ahead, Rick.

Good afternoon, and thank you for joining our call today. As you can see from our third quarter results, the staffing market is much the same as it's been for the past 10 quarters now in terms of staffing demand and broader market sentiment. With that said, I'm pleased to report that we delivered another quarter of profitability, highlighted by net income of $2.3 million or $0.16 per share, and we continue to keep our expenses in check despite market uncertainties. Our results in this quarter underscore the flexibility and strength of our franchise model, which has consistently enabled us to remain profitable in soft markets when many others in our industry have struggled. Over the history of HireQuest, our model has proven to perform well and importantly, be profitable in all cycles. Since its exceptional -- inception over 20 years ago, HireQuest has been profitable each year through all of the economic downturns and consistently provided valuable operational and financial support to our franchisees. Over the long term, we are confident that this is a winning formula for shareholders. The overall staffing market has provided some mixed signals throughout 2025, which has been impacted by a variety of macroeconomic factors, including tariffs, immigration policies and impending interest rate cuts. Our temp staffing and day labor offerings are outperforming permanent placement and executive search, which can be less predictable by nature. While demand for temp and day labor staffing can fluctuate based on locations and seasonality, our franchisees have a keen understanding of the market. And with our support and resources, they are able to provide the very best in temporary and day labor staffing services. This dependability and service quality is what keeps our customers coming back to HireQuest in the many geographies that we operate in throughout the…

Thank you, Rick, and good afternoon, everyone. I appreciate you all joining us today. I'll now provide a summary of our third quarter results. Total revenue was $8.5 million compared with revenue of $9.4 million in the prior year or a decrease of 9.8%. Our total revenue is made up of 2 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 were $8.1 million compared to $9 million for the same quarter last year. And our service revenue for the quarter was $387,000 compared to $428,000 last year. Underlying these 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 the third quarter were $133.6 million compared with $148.6 million last year. Sequentially, system-wide sales increased about 6.1% this year over Q2, which was favorable compared to last year when the increase was only 1.7%. The third quarter is typically our best sales period for HireQuest Direct and to a lesser extent, Snelling. And this year, both offerings saw double-digit sequential growth compared to only mid-single digits last year. Selling, general and administrative expenses in the third quarter were $5.1 million compared to $5.4 million in the third quarter of 2024. I'd also like to point out that we recognized a workers' compensation benefit in the third quarter of just under $100,000 compared to Q3 of last year when we had a net expense of $500,000. We are pleased with the results from the changes we've implemented to our work comp program. But just so you guys don't get the wrong…

Thank you, David. As always, I'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 our year-end results in March. With that, we can now open the line to questions. Thanks.

[Operator Instructions] And the first question today is coming from Kevin Steinke from Barrington.

I wanted to start off by asking about the day labor business. It sounds like a little more optimism around that business this quarter? I think on the second quarter call, you talked about some of the softness in the manufacturing environment impacting that business. So I'm just wondering if there was a kind of a meaningful improvement in trend in that business that you saw in the third quarter compared to the second quarter.

So Kevin, thanks for the question. Good to talk to you. I don't know if I would go as far as -- it has been stabilizing, I think, is the best way of putting it. And it's been generally -- it's been generally a reasonable market for the on-demand labor in many markets. We have a couple that are still a bit more troublesome that are -- typically are related to 1 or 2 clients that have either stopped using temporary staffing or there's just not the same volume that's there. So anyway, that's a muddled way of saying we're approaching the bottom, we think. But I mean, we were still down a bit overall, obviously, from where we want it to be. But again, there is room for optimism. And I would say the other part is in the fourth quarter, we've had -- obviously, we're what -- we're 5 weeks in. And of the 5 weeks in, half of those weeks, we beat our prior year-over-year comparisons for the Snelling and HireQuest Direct division. And the other couple of weeks, we've been down. But -- so there's room for optimism that we're -- that we've hit that bottom.

Okay. Good. And then you called out there some big wins for the Snelling franchisees in the quarter. I mean, should we think about those as competitive takeaways or I don't know, again, a sign of, I guess, as you said, at least some stabilization or small improvement in the market?

So I think it's -- obviously, the large wins are more just the result of exceptional franchisees earning more business. That said, even throughout, it's -- in most markets, it's been better. And so Snelling in particular, performed pretty well. Now again, obviously, large accounts are great when you get them and they're terrible when you lose them. But this past quarter, we've been fortunate in that -- picking up a couple more than what we lost. And so -- again, but it's more, as you said, though, it's more competitive wins than it is overall improvement. But again, that said, it's pretty stable right now. It seems -- it feels pretty stable right now. And so I say feels -- I'd point back to the -- where we are so far in the fourth quarter with a couple of weeks exceeding the prior year period, similar period.

Okay. Got it. And in the discussion about MRI, you had talked about some nonrenewal of franchisee agreements. So were there any meaningful nonrenewals specific to the third quarter? Or were you kind of talking about quarters previous to the third quarter?

Yes. And I think we can't recall which quarter we addressed it, but there were a couple of -- especially in the first quarter, there were a couple of good-sized departures. And so we're obviously seeing those in the comparisons now. And what I would say, what is a positive sign is during the quarter, same sort of active ongoing MRI franchisees by the end of the quarter, we're starting to run flat, almost flat anyway with the prior year-end period -- I mean, the prior year similar period. So again, while the active offices were still declining, like I said, that leveled out by the end of the quarter, whereas most of the decline came from those closed or basically people who had left the network. Now look, I'm not going to sugarcoat it. People losing the network -- leaving the network is not good for us. But, like I said, from a sentiment of where the market stands, it again indicates that the market seems to have bottomed out or certainly stabilized.

Okay. Understood. Maybe just a couple more. I mean you mentioned looking -- you're looking at several accretive M&A opportunities. Just kind of wondering what the pipeline looks like in this market environment? Has it picked up a bit given maybe some of the stress on some of your smaller competitors?

It's been surprisingly stable. And we're obviously always in the market to buy competitors. And there are always competitors that are available. I would have thought there would have been a bit more opportunities than maybe what there are, but there's plenty. So I don't read that the wrong way. So there's certainly plenty. I think part of it, we tend to -- it's towards this time of the year when we start seeing more activity anyway. People try to get through the year so that they have full year results to things that they can package it when they go to sell it, whereas a lot of people are -- they're not going to optimize their exit multiple if they're working off of interim numbers. So I would expect a bit more opportunities over the next, let's say, 3 to 6 months, but there's plenty as they -- there are plenty of them as they are right now. I'd like to think that they would be better. But again, they are better than what they were certainly 3 years ago, which just reflects the state of the market.

Okay. Understood. And then lastly, I just wanted to ask about tighter immigration enforcement and you had talked on the last quarter's call about that driving some new business for you given less competition from undocumented workers or companies that use undocumented workers. Is that trend continued? Or is that kind of helping your pipeline still?

So here's the thing. There are absolutely a couple of decent-sized business wins that we can point directly towards immigration enforcement without question. I have to be honest with you, a lot of the reports that I've seen state that more than 2 million people have self-deported. I really would have expected a much larger uptick in our demand if that were the case. So I'll admit -- I don't know how they calculated the 2 million people self-deported. If they did, like I said, it just seems like our demand would be stronger. So I'm a bit skeptical. I'll admit I'm skeptical about that. That said, a lot of this is cumulative as well. We're in a situation where the number of people coming in has been at a very low point now for 11 months, 10 months. And so part of that takes a while for it to roll through. I think that what's going to be important in combination with immigration enforcement is once some of these, let's say, reshored facilities actually start employing nonconstruction people, meaning basically start staffing up the factories themselves, that will also hopefully push up demand. And so when you read okay, Japan has agreed to invest $500 billion in American plants. Well, it doesn't mean that you snap your fingers and those plants are built and all of a sudden, there's 150,000, 200,000 new jobs. So those are going to take a while to fit in. But again, if immigration remains at such a low point and that continues on, it's a very favorable -- it should be a very favorable trend for us or it should create a big tailwind for us.

[Operator Instructions] And there are no further questions in queue. I would now like to hand the floor back to management for closing remarks.

I want to thank everybody for joining us today for our earnings call. Again, I want to thank our employees, our franchisees and our investors. It's been a challenging really 11 quarters now. But what has hopefully been demonstrated through all of this is we remain profitable despite the challenging environment. And when you look at our peer group, there are -- it is covered with red ink, whereas we've remained profitable, which is one of the main attractions of our model. And so -- and I think that this quarter is a great demonstration of that, that despite weaker demand than what we would prefer, we remain solidly profitable and with good adjusted EBITDA despite the relatively challenging circumstances. And so again, thank you for joining us, and we look forward to talking to you again in March. Thank you.

Thank you. This does conclude today's conference call. You may disconnect at this time. Thank you once again for your participation, and have a wonderful day.