Staffing franchisor HireQuest Inc. (NASDAQ; HQI) reported fourth-quarter revenue grew 21.3% year over year to $9.8 million. The figure includes $515,000 of advertising fund revenue for MRINetwork, which it acquired in 2022.

Systemwide sales for the quarter increased to $143.5 million from $127.9 million for the prior-year quarter; for full-year 2023, they rose to $605.1 million compared to $472.2 million in 2022, primarily related to the acquisition of MRINetwork, offset by a general decline in systemwide sales from existing operations.

The Goose Creek, South Carolina-based company announced in December 2023 that it closed on its acquisition of TEC Staffing Services — a Fort Smith, Arkansas-based light industrial, clerical, technical and professional staffing provider. It has sold all of TEC’s offices throughout Northwest and Central Arkansas to franchisees and converted the offices to HireQuest’s Snelling franchise model.

Net income at HireQuest was $16,000 compared to $2.7 million in the prior year period, primarily related to increased SG&A and other miscellaneous expenses related to the resale of TEC offices to franchisees in the quarter.

SG&A expenses increased 40.2% to $6.6 million, primarily due to a $1.2 million net increase in workers’ compensation expense, the inclusion of MRINetwork’s advertising fund expenses and increased expenses to support growth in system-wide sales as a result of organic growth and acquisitions. Excluding workers’ compensation, impairment of notes receivable, and MRINetwork’s advertising fund, SG&A for the quarter would have increased 2.1% to $4.5 million compared to $4.4 million, according to the company.

President and CEO Rick Hermanns cited workers’ comp costs and an ongoing challenging economic environment for the staffing industry.

“Our bottom line was again impacted by increased workers’ compensation expense in the quarter which increased our SG&A on both a quarterly and full-year basis,” Hermanns said. “As a provider of temporary labor and commercial staffing services, workers’ compensation insurance is an essential component of our business. While this expense increased in 2023, we have taken steps to reduce its potential impact going forward and expect to see those efforts manifest in 2024.”

TEC royalties will be “highly accretive” to 2024 results and restore some of the operating leverage lost in a challenging staffing economy, according to Hermanns. Moreover, the integration of MRINetwork is largely complete and the business is demonstrating healthy profitability despite lower revenues as a result of industry headwinds.

“Overall, we’re pleased with the performance of our acquisition strategy, and we continue to monitor the market for accretive M&A opportunities,” Hermanns said. “We are a more diversified company than five years ago, and we will continue on this path to build resilience into the business.”

Click to enlarge.

Share price

Shares in HireQuest were up 2.28% to $12.80 as of 11:25 a.m. Eastern time today; they were 6.63% above their 52-week low.