HireQuest, Inc. (HQI)

CIK: 0001140102. SIC: 7363 Services-Help Supply Services. Latest 10-K as of: 2026-03-31.

SIC breadcrumb: Services > Business Services > SIC 7363 Services-Help Supply Services

SEC company page: https://www.sec.gov/edgar/browse/?CIK=1140102. Latest filing source: 0001437749-26-010435.

Selected Fundamentals

Financials

Annual standardized facts from SEC companyfacts as of latest extracted filing date 2026-03-31. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001140102.json. Derived margins, ratios, and free cash flow are computed from the extracted annual SEC facts.

Flow metrics use full-year FY periods from 10-K/10-K/A filings; balance-sheet metrics use FY-end instants. Free cash flow = operating cash flow - capital expenditures. Missing metrics are omitted rather than fabricated.

Ratios

ROE and ROA use period-end equity/assets. Liabilities / equity uses total liabilities divided by stockholders' equity. Current ratio uses current assets divided by current liabilities when both are reported.

Financial Charts

Quarterly

Quarterly standardized facts from SEC companyfacts as of latest extracted filing date 2026-05-12. Source: https://data.sec.gov/api/xbrl/companyfacts/CIK0001140102.json.

Flow metrics use discrete quarter-length periods from 10-Q/10-Q/A filings. Q4 revenue and net income are derived only when annual FY and nine-month YTD facts exist for the same fiscal year; derived Q4 values are labeled. EPS Q4 is not derived.

Quarterly Charts

Macro Cross-References

• CPIAUCSL - Consumer Price Index for All Urban Consumers: All Items in U.S. City Average
• UNRATE - Unemployment Rate
• FEDFUNDS - Federal Funds Effective Rate
• CES0500000003 - Average Hourly Earnings of All Employees, Total Private
• DFEDTARU - Federal Funds Target Range - Upper Limit
• DFEDTARL - Federal Funds Target Range - Lower Limit
• DGS3MO - Market Yield on U.S. Treasury Securities at 3-Month Constant Maturity
• DGS2 - Market Yield on U.S. Treasury Securities at 2-Year Constant Maturity
• DGS10 - Market Yield on U.S. Treasury Securities at 10-Year Constant Maturity
• DGS30 - Market Yield on U.S. Treasury Securities at 30-Year Constant Maturity
• T10Y2Y - 10-Year Treasury Constant Maturity Minus 2-Year Treasury Constant Maturity
• CPILFESL - Consumer Price Index for All Urban Consumers: All Items Less Food and Energy
• CPIUFDSL - Consumer Price Index for All Urban Consumers: Food
• CPIENGSL - Consumer Price Index for All Urban Consumers: Energy
• CUSR0000SAH1 - Consumer Price Index for All Urban Consumers: Shelter
• PCEPI - Personal Consumption Expenditures: Chain-type Price Index
• PCEPILFE - Personal Consumption Expenditures Excluding Food and Energy: Chain-type Price Index
• PPIACO - Producer Price Index by Commodity: All Commodities
• T10YIE - 10-Year Breakeven Inflation Rate
• U6RATE - Total Unemployed, Plus All Marginally Attached Workers Plus Total Employed Part Time for Economic Reasons
• PAYEMS - All Employees, Total Nonfarm
• CIVPART - Labor Force Participation Rate
• EMRATIO - Employment-Population Ratio
• UNEMPLOY - Unemployed
• CE16OV - Employment Level
• ICSA - Initial Claims
• JTSJOL - Job Openings: Total Nonfarm
• JTSQUR - Quits: Total Nonfarm
• GDPC1 - Real Gross Domestic Product
• A191RL1Q225SBEA - Real Gross Domestic Product: Percent Change from Preceding Period
• INDPRO - Industrial Production: Total Index
• TCU - Capacity Utilization: Total Index
• HOUST - New Privately-Owned Housing Units Started: Total Units
• PERMIT - New Privately-Owned Housing Units Authorized in Permit-Issuing Places: Total Units
• RSAFS - Advance Retail Sales: Retail Trade
• PCE - Personal Consumption Expenditures
• DSPIC96 - Real Disposable Personal Income
• PSAVERT - Personal Saving Rate
• M2SL - M2
• BOPGSTB - U.S. International Trade in Goods and Services: Balance
• MSPUS - Median Sales Price of Houses Sold for the United States
• HSN1F - New One Family Houses Sold: United States
• RHORUSQ156N - Homeownership Rate in the United States
• TTLCONS - Total Construction Spending: Total Construction in the United States
• RRVRUSQ156N - Rental Vacancy Rate in the United States
• TOTALSL - Total Consumer Credit Owned and Securitized
• REVOLSL - Revolving Consumer Credit Owned and Securitized
• DRCCLACBS - Delinquency Rate on Credit Card Loans, All Commercial Banks
• GDP - Gross Domestic Product
• GPDI - Gross Private Domestic Investment
• GCE - Government Consumption Expenditures and Gross Investment
• PCEC - Personal Consumption Expenditures
• NETEXP - Net Exports of Goods and Services
• GFDEBTN - Federal Debt: Total Public Debt
• GFDEGDQ188S - Federal Debt: Total Public Debt as Percent of Gross Domestic Product
• FYFSD - Federal Surplus or Deficit
• FGRECPT - Federal Government Current Receipts
• FGEXPND - Federal Government: Current Expenditures
• MANEMP - All Employees, Manufacturing
• USCONS - All Employees, Construction
• USTRADE - All Employees, Retail Trade
• USFIRE - All Employees, Financial Activities
• USGOVT - All Employees, Government
• AWHAETP - Average Weekly Hours of All Employees, Total Private
• DGORDER - Manufacturers' New Orders: Durable Goods
• NEWORDER - Manufacturers' New Orders: Nondefense Capital Goods Excluding Aircraft
• BUSINV - Total Business Inventories
• EXPGS - Exports of Goods and Services
• IMPGS - Imports of Goods and Services
• IR - Import Price Index (End Use): All Commodities
• PPIFIS - Producer Price Index by Commodity: Final Demand

Latest quarter (10-Q)

Latest 10-Q source: 0001437749-26-016462.

Extracted structurally from real Item 2 body heading to real Item 3/4 boundary. Published MD&A gate trimmed front/tail over-capture. Confidence: high. Filing date: 2026-05-12. Report date: 2026-03-31.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited consolidated financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2025. The financial position, results of operations, cash flows and other information included herein are not necessarily indicative of the financial position, results of operations and cash flows that may be expected in future periods. See "Special Note Regarding Forward-Looking Statements" and "Part II - Item 1A. Risk Factors" below for a discussion of uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements. Additionally, we use a non-GAAP financial measure and a key performance indicator to evaluate our results of operations. For important information regarding the use of such non-GAAP measure, including a reconciliation to the most comparable GAAP measure, see the section titled "Use of Non-GAAP Financial Measure: Adjusted EBITDA" below. For important information regarding the use of such key performance indicator, see the section titled “Key Performance Indicator: System-Wide Sales” below.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q and other documents incorporated herein by reference include, and our officers and other representatives may sometimes make or provide, certain estimates and other forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act, and Section 21E of the Exchange Act, including, among others, statements with respect to future revenue; franchise sales and system-wide sales; net income and Adjusted EBITDA (a non-GAAP Financial Measure); operating results; dividends and shareholder returns; anticipated benefits and synergies of any proposed transaction and future opportunities, including statements regarding value, profitability or growth prospects; cost synergies of any mergers or acquisitions including those we have completed in 2023 and 2024; intended office openings or closings; expectations of the effect on our financial condition of claims and litigation; strategies for customer retention and growth; strategies for risk management; and all other statements that are not purely historical and that may constitute statements of future expectations. Forward-looking statements can be identified by words such as: “anticipate,” “intend,” “plan,” “goal,” “seek,” “believe,” “project,” “estimate,” “expect,” “strategy,” “future,” “likely,” “may,” “should,” “will,” and similar references to future periods.

While we believe these statements are accurate, forward-looking statements are not historical facts and are inherently uncertain. They are based only on our current beliefs, expectations, and assumptions regarding the future of our business, future plans and strategies, projections, anticipated events and trends, the economy, and other future conditions. We cannot assure you that these expectations will materialize, and our actual results may be significantly different. Therefore, you should not place undue reliance on these forward-looking statements. Important factors that may cause actual results to differ materially from those contemplated in any forward-looking statements made by us include the following: the level of demand for and financial performance of the temporary staffing and permanent placement industry; the financial performance of our franchisees; our franchisees’ and our customers’ ability to navigate successfully the challenges posed by instability in the financial and capital markets and the overall economic environment including increases in the price of oil and gas and any potential recession; changes in customer demand; the extent to which we are successful in gaining new long-term relationships with customers or retaining existing ones, and the level of service failures that could lead customers to use competitors’ services; workers’ compensation expenses that fluctuate from period to period based on the mix of classifications, the level of payroll, recent claims resolution, and cumulative experience; significant investigative or legal proceedings including, without limitation, those brought about by the existing regulatory environment or changes in the regulations governing the temporary staffing and permanent placement industry and those arising from the action or inaction of our franchisees and temporary employees; strategic actions, including acquisitions and dispositions and our success in integrating acquired businesses including, without limitation, successful integration following the acquisitions of Ready Temporary Staffing, TEC Staffing Services, MRINetwork, Snelling Staffing, LINK Staffing, Recruit Media, Inc., Dental Power Staffing, Temporary Alternatives, Inc., and subsequent or smaller acquisitions; the possibility that any strategic target will not agree to consummate a transaction or that any such transaction is consummated on different terms than currently anticipated; the possibility that conditions to the completion of a proposed transaction, including the receipt of any required shareholder approvals and any required regulatory approvals, will not be met; the possibility that we may be unable to achieve expected synergies and operating efficiencies within an expected time frame or at all and to successfully integrate any acquired operations with ours; the possibility that such integration may be more difficult, time-consuming, or costly than expected, or that operating costs, customer loss and business disruption (including, without limitation, difficulties in maintaining relationships with employees, customers, or suppliers) may be greater than expected following a proposed transaction or the public announcement of a proposed transaction; disruptions to our technology network including computer systems and software whether resulting from a cyber-attack or otherwise; natural events such as pandemics, severe weather, fires, floods, and earthquakes, or man-made or other disruptions of our operating systems or the economy including by war or political turmoil; and the factors discussed in the “Risk Factors” section below and in our most recent Annual Report on Form 10-K; and the other factors discussed in this Quarterly Report and our Annual Report.

Any forward-looking statement made by us in this Quarterly Report on Form 10-Q is based only on information currently available to us and speaks only as of the date on which it is made. The Company disclaims any obligation to update or revise any forward-looking statement, whether written or oral, that may be made from time to time, based on the occurrence of future events, the receipt of new information, or otherwise, except as required by law.

17

Table of Contents

Overview

HireQuest, Inc., together with its subsidiaries, (“HQI,” the “Company,” “we,” us,” or “our”) is a nationwide franchisor of offices providing direct-dispatch, executive search, commercial staffing, and permanent placement solutions primarily in the light industrial, blue-collar, executive, managerial, and administrative segments of the staffing industry. Our franchisees provide various types of temporary personnel, permanent placements, and recruitment services through multiple business models under the trade names “HireQuest Direct,” “Snelling,” “HireQuest,” “DriverQuest,” “HireQuest Health,” “TradeCorp," "Northbound Executive Search," "SearchPath," "Management Recruiters International," "MRI," and "Sales Consultants." Some of the MRI franchises also operate under other brands specific to a locality. 

●

HireQuest Direct focuses on daily-work/daily-pay jobs primarily for construction and light industrial customers.

●

Snelling and HireQuest focus on longer-term staffing positions in the light industrial and administrative arenas.

●

DriverQuest specializes in both commercial and non-CDL drivers serving a variety of industries and applications.

●

HireQuest Health specializes in skilled personnel in the healthcare and dental industries.

●

TradeCorp focuses on short-term skilled construction jobs.

●

Northbound Executive Search, MRI, SearchPath, and Sales Consultants focus on executive, managerial, and professional recruitment services, although they also offer short-term consultant services.

Our brands exhibit similar long-term financial performance and have similar economic characteristics. Therefore, we provide our services under a single operating division or segment. However, we strive to provide additional information and disclosures related to business models where appropriate.

As of March 31, 2026, we had 257 franchisee-owned offices and 1 company-owned office in 39 states, the District of Columbia, and 1 country outside of the United States. We provide employment for an estimated 75 thousand temporary employees annually working for thousands of clients in many industries including construction, healthcare, recycling, warehousing, logistics, auctioneering, manufacturing, hospitality, landscaping, retail, and dental.

Management is pursuing a strategy that includes organic and acquisition growth components. Our organic growth strategy includes expanding existing client business, seeking out national and global account opportunities for our franchisees, access to capital for our franchisees to expand into new markets, and offering new franchises to qualified applicants. Part of this growth strategy includes an expansive training program for our franchisees to start, operate and grow their business. Our acquisition growth strategy includes identifying strategic, accretive, "tuck-in" acquisitions financed primarily through a combination of cash and debt (including seller financing), the issuance of equity in appropriate circumstances, and the use of earn-outs where efficient to protect the negotiated value and future cash flows.

18

Table of Contents

Results of Operations

Financial Summary

The following table displays our Consolidated Statements of Income for three months ended March 31, 2026 and March 31, 2025. Percentages reflect the line item as a percentage of total revenue.

Three months ended

(in thousands except percentages)

March 31, 2026

March 31, 2025

Franchise royalties

$

6,061

92.9

%

$

6,960

93.1

%

Service revenue

462

7.1

%

512

6.9

%

Total revenue

6,523

100.0

%

7,472

100.0

%

Selling, general and administrative expenses

4,269

65.4

%

5,255

70.3

%

Depreciation and amortization

778

11.9

%

734

9.8

%

Income from operations

1,476

22.6

%

1,483

19.8

%

Other miscellaneous income

16

0.2

%

131

1.8

%

Interest income

101

1.5

%

134

1.8

%

Gain on divestiture

248

3.8

%

-

0.0

%

Interest and other financing expense

(8

)

(0.1

)%

(144

)

(1.9

)%

Net income before income taxes

1,833

28.1

%

1,604

21.5

%

Provision for income taxes

264

4.0

%

169

2.3

%

Net income from continuing operations

1,569

24.1

%

1,435

19.2

%

Loss from discontinued operations, net of tax

(9

)

(0.1

)%

(72

)

(1.0

)%

Net income

$

1,560

23.9

%

$

1,363

18.2

%

Non-GAAP data

Adjusted EBITDA

$

2,664

40.8

%

$

2,799

37.5

%

Use of Non-GAAP Financial Measure: Adjusted EBITDA

Adjusted EBITDA is a non-GAAP measure that represents our net income before interest expense, provision for income taxes, depreciation and amortization, costs related to the work opportunity tax credit (“WOTC”), non-cash compensation and acquisition-related charges, net, and other charges

[Excerpt truncated for page length; source filing is linked above.]

Latest 10-K MD&A

Extracted structurally from real Item 7 body heading to real Item 7A/8 boundary. Confidence: high. Filing date: 2026-03-31. Report date: 2025-12-31.

Item 7. Management’s Discussion and Analysis of Financial Conditions and Results of Operations

The following analysis is intended to help the reader understand our results of operations and financial condition, and should be read in conjunction with our consolidated financial statements and the accompanying notes located in Item 8 of this Form 10-K. This Annual Report on Form 10-K, including matters discussed in this Item 7. “Management's Discussion and Analysis of Financial Condition and Results of Operations” contains forward-looking statements relating to our plans, estimates and beliefs that involve important risks and uncertainties. See “Special Note Regarding Forward-Looking Statements” and Item 1A. “Risk Factors” for a discussion of uncertainties and assumptions that may cause actual results to differ materially from those expressed or implied in the forward-looking statements.

This section of this Annual Report on Form 10-K generally discusses 2025 and 2024 items and year-to-year comparisons between 2025 and 2024. Discussions of 2024 items and year-to-year comparisons between 2024 and 2023 that are not included in this Annual Report on Form 10-K can be found in "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2024 which we filed with the SEC on March 27, 2025.

Additionally, we use a non-GAAP financial measure and a key performance indicator to evaluate our results of operations. For important information regarding the use of the non-GAAP measure, including a reconciliation to the most comparable GAAP measure, see the section titled "Use of non-GAAP Financial Measure: Adjusted EBITDA" below. For important information regarding the use of the key performance indicator, see the section titled “Key Performance Indicator: System-Wide Sales” below.

18

Table of Contents

Overview

We are a nationwide franchisor of offices providing direct-dispatch, executive search, commercial staffing, and permanent placement solutions primarily in the light industrial, blue-collar, executive, managerial, and administrative segments of the staffing industry. Our franchisees provide various types of temporary personnel, permanent placements, and recruitment services through multiple business models under the trade names “HireQuest Direct,” “Snelling,” “HireQuest,” "TradeCorp," “DriverQuest,” “HireQuest Health,” "Northbound Executive Search," "Management Recruiters International," "MRI," and "Sales Consultants." Some of the MRI franchises also operate under other brands specific to them.

●

HireQuest Direct focuses on daily-work/daily-pay jobs primarily for construction and light industrial customers.

●

Snelling and HireQuest focus on longer-term staffing positions in the light industrial and administrative arenas.

●

DriverQuest specializes in both commercial and non-CDL drivers serving a variety of industries and applications.

●

HireQuest Health specializes in skilled personnel in the healthcare and dental industries. 

●

TradeCorp focuses on short-term skilled construction jobs.

●

Northbound and SearchPath focus on executive, managerial, and professional recruitment services, although they also offer short-term consultant services.

As of December 31, 2025 we had 413 franchisee-owned offices and 1 company-owned office in 43 states, the District of Columbia, and 14 countries outside of the United States. 197 of those offices operated by 177 franchisees were MRI offices which were divested to MRINetwork Operations, LLC on January 1, 2026. In addition, there were 18 MRI locations that provided contract staffing services only. We provide employment for an estimated 75 thousand temporary employees annually working for thousands of clients in many industries including construction, healthcare, recycling, warehousing, logistics, auctioneering, manufacturing, hospitality, landscaping, and retail.

We finished 2025 with a strong balance sheet. Our assets exceeded liabilities by over $68.3 million. Our liquidity position stayed strong in 2025 with Current Assets at December 31, 2025 of $48.3 million compared to $49.2 million at December 31, 2024.

On a year-over-year basis, we saw a 11.3% decrease in our system-wide sales from $563.6 million in 2024 to $500.2 million in 2025 as the overall staffing and recruiting industry remained soft during the year due to overall economic factors including inflation and lack of investment in economic expansion given global uncertainty. MRI, in particular, along with other professional recruiting and staffing brands, was impacted by the continued uncertainty in the overall economy which may have led to less hiring. System-wide sales for MRI and the other professional recruiting and staffing brands decreased 26.6%, or $36.1 million in 2025 when compared to 2024.  

We recorded an 11.4% decrease in total revenue from $34.6 million in 2024 to $30.6 million in 2025. Income from operations increased to $6.3 million in 2025 from $4.4 million in 2024 due to the $6.0 million goodwill and intangible asset charge associated with the MRI acquisition in 2024, partially offset by a decline in system-wide sales and associated revenues.

Results of Operations

The following table displays our consolidated statements of operations for the years ended December 31, 2025 and December 31, 2024 (in thousands, except percentages):

Year ended

December 31, 2025

December 31, 2024

Franchise royalties

$

28,995

94.6

%

$

32,673

94.4

%

Service revenue

1,645

5.4

%

1,925

5.6

%

Total revenue

30,640

100.0

%

34,598

100.0

%

Selling, general and administrative expenses

20,676

67.5

%

21,406

61.9

%

Goodwill and intangible asset impairment charge

674

2.2

%

6,035

17.4

%

Depreciation and amortization

3,008

9.8

%

2,789

8.1

%

Income from operations

6,282

20.5

%

4,368

12.6

%

Other miscellaneous income

223

0.7

%

145

0.4

%

Interest income

511

1.7

%

556

1.6

%

Interest and other financing expense

(307

)

(1.0

)%

(923

)

(2.7

)%

Net income before income taxes

6,709

21.9

%

4,146

12.0

%

Provision for income taxes

100

0.3

%

221

0.6

%

Net income from continuing operations

6,609

21.6

%

3,925

11.3

%

Net loss from discontinued operations, net of tax

(279

)

(0.9

)%

(253

)

(0.7

)%

Net income

$

6,330

20.7

%

$

3,672

10.6

%

Non-GAAP data

Adjusted EBITDA

$

14,087

46.0

%

$

16,190

46.8

%

1.

See the definition and reconciliation of Adjusted EBITDA within the immediately following section titled “Use of Non-GAAP Financial Measures: Adjusted EBITDA.” 

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Table of Contents

Use of Non-GAAP Financial Measures: Adjusted EBITDA

Earnings before interest, taxes, depreciation and amortization, and non-cash compensation, or adjusted EBITDA, is a non-GAAP measure that represents our net income before interest expense, income tax expense, depreciation and amortization, non-cash compensation, costs related to the work opportunity tax credit (“WOTC”) and other charges and gains we consider non-recurring. We utilize adjusted EBITDA as a financial measure as management believes investors find it a useful tool to perform meaningful comparisons and evaluations of past, present, and future operating results. We believe it is a complement to net income and other financial performance measures. Adjusted EBITDA is not intended to represent or replace net income as defined by U.S. GAAP and should not be considered as an alternative to net income or any other measure of performance prescribed by U.S. GAAP. We use adjusted EBITDA to measure our financial performance because we believe interest, taxes, depreciation and amortization, non-cash compensation, WOTC-related costs and other non-recurring charges and gains bear minimal relationship to our operating performance. By excluding interest expense, adjusted EBITDA measures our financial performance irrespective of our capital structure or how we finance our operations. By excluding taxes on income, we believe adjusted EBITDA provides a basis for measuring the financial performance of our operations excluding factors that are beyond our control. By excluding depreciation and amortization expense, adjusted EBITDA measures the financial performance of our operations without regard to their historical cost. By excluding non-cash compensation, adjusted EBITDA provides a basis for measuring the financial performance of our operations excluding the value of our restricted stock and stock option awards. By excluding WOTC related costs, adjusted EBITDA provides a basis for measuring the financial performance of our operations excluding the (non-operating) costs associated with qualifying for this tax credit. This tax credit is included on our income statement as part of income tax expense because it can be claimed only on the income tax return and can be realized only through the existence of taxable income. In addition, by excluding certain non-recurring charges and gains, adjusted EBITDA provides a basis for measuring financial performance without non-recurring charges and gains. For all of these reasons, we believe that adjusted EBITDA provides us, and investors, with information that is relevant and useful in evaluating our business.

However, because adjusted EBITDA excludes depreciation and amortization, it does not measure the capital we require to maintain or preserve our fixed and intangible assets. In addition, because adjusted EBITDA does not reflect interest expense, it does not take into account the total amount of interest we pay on outstanding debt, nor does it show trends in interest costs due to changes in our financing or changes in interest rates. Adjusted EBITDA, as defined by us, may not be comparable to adjusted EBITDA as reported by other companies that do not define adjusted EBITDA exactly as we define the term. Because we use adjusted EBITDA to evaluate our financial performance, we reconcile it to net income, which is the most comparable financial measure calculated and presented in accordance with U.S. GAAP.

Year ended

December 31, 2025

December 31, 2024

Net income

$

6,330

20.7

%

$

3,672

10.6

%

Interest and other financing expense

307

1.0

%

983

2.8

%

Provision for income taxes

100

0.3

%

221

0.6

%

Depreciation and amortization

3,008

9.8

%

2,789

8.1

%

EBITDA

9,745

31.8

%

7,665

22.2

%

WOTC related costs

692

2.3

%

483

1.4

%

Non-cash compensation

936

3.1

%

1,759

5.1

%

Goodwill and intangible asset impairment

892

2.9

%

6,035

17.4

%

Acquisition related charges

1,240

4.0

%

(27

)

(0.1

)%

Impairment of notes receivable

582

1.9

%

275

0.8

%

Adjusted EBITDA

$

14,087

46.0

%

$

16,190

46.8

%

Revenue

Our total revenue consists of franchise royalties, and service revenue we receive from our franchises. Revenue would also include staffing revenue with respect to owned locations. Once a company-owned office is sold, disposed of, or otherwise classified as held-for-sale, it would not be reflected in revenue and instead reported as “Income from discontinued operations, net of tax.” For a description of our revenue recognition practices, please refer to “Note 1 – Overview and Summary of Significant Accounting Policies – Revenue Recognition,” which disclosure is incorporated herein by reference.

Total revenue for the year ended December 31, 2025 was approximately $30.6 million compared to $34.6 million for the year ended December 31, 2024, a decrease of 11.4%. This decrease is roughly consistent with the decrease in underlying system-wide sales which decreased 11.3% from $563.6 million in 2024 to $500.2 million in 2025. The office that we own is classified as held-for-sale and is not included in revenue.

Franchise Royalties

We charge our franchisees a royalty fee on the basis of one of several models. Under the HireQuest Direct model, the royalty fee charged ranges from 6% to 8% of gross billings, depending on volume. Royalty fees are charged at 8% for the first $1 million of billing with the royalty fee dropping 0.5% for every $1 million of billing thereafter until the royalty fee is 6% (once gross billings reach $4 million annually). The smaller royalty fee is charged only on the incremental dollars resulting in an effective royalty fee at a blended rate of between 6% and 8%. We will grant our franchisees credits for low margin business. For the Snelling, DriverQuest, HQ Medical, and TradeCorp model, our royalty fee is 4.5% of the temporary payroll we fund plus 18% of the gross margin for the territory. Most franchise agreements provide for a royalty of 5% to 7% of direct placement sales. For the Snelling and SearchPath franchise agreements assumed where the franchise owner did not execute new HireQuest or HireQuest Direct business line franchise agreements, the royalty fee ranges from 5% to 8% of all sales. MRI franchise agreements assumed have royalty rates varying from 1% to 9% of placement sales, depending on sales volume and other factors. The MRI franchises with a lower royalty scale generally pay a flat annual fee plus a percentage-based royalty. For temporary labor, MRI franchises pay a royalty that ranges from 20% to 25% of payroll, depending on sales volume. Some customers that utilize qualified independent contractors cause the franchise to pay a royalty that ranges from 4% to 10% of contractor payments, depending on sales volume.

Franchise royalties for the year ended December 31, 2025 were approximately $29.0 million compared to $32.7 million for the year ended December 31, 2024, a decrease of 11.3%, driven predominantly by a decline in total system-wide sales of $63.4 million from $563.6 million in 2024 to $500.2 million in 2025 . The blended effective royalty rate for 2025 and 2024 was the same at 5.8%.

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Service Revenue

Service revenue consists of revenue generated from franchisees that are outside of our core services such as license fees, franchise fees related to our advertising fund, and miscellaneous income. This includes interest we charge our franchisees on overdue customer accounts receivable and other miscellaneous fees for optional services we provide. As accounts receivable age over 42 days, our franchisees pay us interest on these accounts equal to 0.5% of the amount of the uncollected receivable each 14-day period. Accounts that age over between 42 and 84 days are charged back to the franchisee and no longer incur interest. Some of our franchisees elect to charge back accounts before they age 84 days in order to reduce or avoid the interest charge. Service revenue also includes amounts charged for various optional services and cost-sharing arrangements such as bulk vender programs or IT licenses. Generally, we do not profit from these arrangements as they represent pass-through items, although there may be timing differences.

Service revenue for the year ended December 31, 2025 was approximately $1.6 million which decreased when compared to $1.9 million for the year ended December 31, 2024. Interest on overdue accounts increased approximately $116 thousand from $788 thousand for the year ended December 31, 2024 to $904 thousand for the year ended at December 31, 2025. This increase is related to an increase in accounts that were paid between 42 and 84 days outstanding. We pride ourselves on maintaining quality, creditworthy customers who pay timely, and the Company does not strive to increase interest on aged accounts receivable. Net insurance fees decreased by approximately $236 thousand  to $94 thousand in 2025 from $330 thousand in 2024. The decrease in net insurance fees was primarily related to increased insurance costs to HireQuest as well as a decline in payroll in both our HireQuest Direct and Snelling offerings. Fees collected related to our advertising fund decreased by approximately $128 thousand from $389 thousand in 2024 to $261 thousand in 2025 and is related to the decline in MRI system-wide sales. 

Operating Expenses

Operating expenses for the year ended December 31, 2025 were approximately $24.4 million compared to $30.2 million for the year ended December 31, 2024, a decrease of $5.8 million. This decrease was primarily driven by a $6.0 million goodwill and intangible asset charge in 2024 compared to only $674 thousand in 2025. The goodwill and intangible asset charge in both 2024 and 2025 were associated with MRI.  Salaries, bonuses and stock based compensation also decreased approximately $828 thousand and net workers' compensation expense decreased $1.9 million. These decreases were partially offset by $1.2 million in transaction related expenses in 2025.  

Workers' Compensation

Workers' compensation expense was approximately $89 thousand for the year ended December 31, 2025, versus an expense of approximately $2.0 million for the year ended December 31, 2024, a decrease of $1.9 million. This decrease is primarily due to a decreased number of medical claims relative to the prior year along with an appropriate adjustment to amounts collected versus paid on such claims. Our workers' compensation reserves provide benefits following a workplace injury. Benefits are usually statutory in nature and are generally provided in partial or complete replacement of the injured worker’s recourse to the liability system. Payments may include medical treatment, rehabilitation, lost wages, and survivor benefits. Workers compensation rating is typically based on job classification, and our workers typically fall into hundreds of different classifications. Annually, we use third-party actuaries to ensure that the overall ratings are sound, that individual insurer rates are adequate, and that individual risks receive a fair rate that reflects both the characteristics of the job classification and the Company's risk experience. Generally workers' compensation expense or benefit will fluctuate based on the mix of classifications, the level of payroll, recent claims resolution and cumulative experience. We cannot accurately predict the effects of workers' compensation in future periods, and historical trends may not be indicative of future results.

Other Operating Expenses

Other Operating Expenses for the year ended December 31, 2025 were approximately $21.3 million compared to $25.5 million for the year ended December 31, 2024, a decrease of $4.2 million. The decrease in Other Operating expense primarily relates to a $6.0 million goodwill and intangible asset charge in 2024 compared to only $674 thousand in 2025, as well as a decrease of approximately $828 thousand in salaries, bonuses and stock based compensation. These decreases were partially offset by $1.2 million in transaction related expenses in 2025.

Depreciation and Amortization

Depreciation and amortization for the year ended December 31, 2025 was approximately $3.0 million compared to $2.8 million for the year ended December 31, 2024. This increase is primarily the result of an IT project being placed in service causing amortization to begin.

Other Miscellaneous Income

Other miscellaneous income includes all non-operating income and expense other than interest and taxes. For the year ended December 31, 2025, other miscellaneous income was approximately $223 thousand, compared to $145 thousand for the year ended December 31, 2024.    

Interest income

Interest income for the year ended December 31, 2025 was approximately $511 thousand compared to $556 thousand for the year ended December 31, 2024. Interest income represents interest related to the financing of franchised locations.

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Interest and other financing expense

Interest and other financing expense relates primarily to our revolving credit facility. Interest and other financing expense decreased approximately $616 thousand to $307 thousand in the year ended December 31, 2025 when compared to the $923 thousand for the year ended December 31, 2024. This decrease was due primarily to lower average borrowings during the year as we reduced borrowings on the line of credit with Bank of America to $0 as of December 31, 2025. Interest and other financing expense will fluctuate as we utilize the line of credit for acquisitions or other short-term liquidity needs. 

Provision for income tax

Income tax expense was approximately $100 thousand in 2025 and $221 thousand in 2024. The effective tax rates for 2025 and 2024 were 1.5% and 5.3%, respectively. The effective tax rate is primarily driven by hiring tax credits, which reduced our effective tax rate by 28% and 21% for the years ended December 31, 2025 and December 31, 2024, respectively, and is included as part of income tax expense because it can be claimed only on the income tax return and can be realized only through the existence of taxable income. Other factors impacting our effective rate include windfall tax deductions related to stock based compensation, and deduction limits on overall compensation.

Loss from discontinued operations, net of tax

Company-owned offices that have been disposed of by sale, disposed of other than by sale, or are classified as held-for-sale are reported separately as discontinued operations. In addition, a newly acquired business that on acquisition meets the held-for-sale criteria will be reported as discontinued operations. Accordingly, the assets and liabilities, operating results, and cash flows for these businesses are presented separate from our continuing operations, for all periods presented in our consolidated financial statements and footnotes, unless indicated otherwise. The assets and liabilities of a discontinued operation held-for-sale are measured at the lower of the carrying value or fair value less cost to sell.

As of December 31, 2025 and 2024 there was 1 company-owned location reported as discontinued operations:

●

Certain assets acquired in the Dubin Agreement related to the operations of the Philadelphia franchise.

The loss from discontinued operations amounts as reported on our consolidated statements of income was comprised of the following amounts:

Year ended

December 31,

December 31,

(in thousands)

2025

2024

Revenue

$

634

$

759

Cost of staffing services

300

251

Gross profit

334

508

Selling, general and administrative expense

(484

)

(772

)

Loss on sale of intangible assets

-

(11

)

Interest expense

-

(60

)

Impairment of intangible asset

(219

)

-

Net loss before income taxes

(369

)

(335

)

Benefit for income taxes

(90

)

(82

)

Net loss

$

(279

)

$

(253

)

Liquidity and Capital Resources

Overview

Our major source of liquidity and capital is cash generated from our ongoing operations consisting of royalty revenue, service revenue and staffing revenue from franchisee-owned locations. We also receive principal and interest payments on notes receivable that we issued in connection with the conversion of company-owned offices to franchised offices.

At December 31, 2025 our current assets exceeded our current liabilities by approximately $33.0 million. Our current assets included approximately $3.9 million of cash and $39.3 million of accounts receivable, which our franchisees have billed to customers and which we own in accordance with our franchise agreements. As of December 31, 2025, the outstanding balance under our line of credit with Bank of America was $0, with approximately another $9.7 million utilized for the issuance of Letters of Credit, leaving approximately $40.3 million available for additional borrowing under the line as of such date, assuming compliance with necessary conditions. Other current liabilities include approximately $7.0 million due to our franchisees, $1.8 million of accrued wages, benefits and payroll taxes, and $2.9 million related to our workers’ compensation claims liability.

Our working capital requirements are driven largely by temporary employee payroll, which is typically paid daily or weekly, and weekly cash settlements with our franchises. Since collections from accounts receivable lag employee pay our working capital requirements increase as system-wide sales increase, and vice-versa. When the economy contracts, our cash balance tends to increase in the short-term as payroll funding requirements decrease and accounts receivable are converted to cash upon collection and not replaced with additional billings. As the economy recovers, this dynamic generally reverses. 

We believe that our current cash balance, together with the future cash generated from operations, principal and interest payments on notes receivable, and our borrowing capacity under our line of credit, will be sufficient to satisfy our working capital needs, capital asset purchases, future dividends, and other liquidity requirements associated with our continuing operations for the next 12 months. We also believe that future cash generated from operations, principal and interest payments on notes receivable, and our borrowing capacity under our line of credit, will be sufficient to satisfy our working capital needs, capital asset purchases, future dividends, and other liquidity requirements associated with our continuing operations beyond the next 12 months. Our access to, and the availability of, financing on acceptable terms in the future will be affected by many factors including overall liquidity in the capital or credit markets, the state of the economy and our credit strength as viewed by potential lenders. We cannot provide assurances that we will have future access to the capital or credit markets on acceptable terms.

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Cash Flows

Operating Activities

During 2025 net cash generated by operating activities was approximately $12.1 million. Net cash generated by operating activities for the year included net income from continuing operations of approximately $6.6 million and a change of working capital of approximately $160 thousand as a source of cash. Non-cash expenses in 2025 included approximately $674 thousand in an intangible asset and goodwill impairment charge, $936 thousand in stock based compensation, and $3.0 million in depreciation and amortization.

Investing Activities

During 2025, net cash generated from investing activities was approximately $296 thousand and included proceeds from payments on notes receivable of approximately $1.2 million. These proceeds were primarily offset by cash issued for notes receivable of $537 thousand and purchase of deferred compensation plan investments of $248 thousand.

Financing Activities

During 2025, net cash used in financing activities was approximately $10.7 million which was primarily due to a net payback on our revolving credit of $6.8 million, and by the payment of dividends of approximately $3.4 million.

Capital Resources

Revolving Credit Agreement with Bank of America

On February 28, 2023 the Company and all of its subsidiaries as borrowers entered into a Revolving Credit Agreement ("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. 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. 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. Interest will accrue on the outstanding balance of the Senior Credit Facility at a variable rate equal to (a) the BSBY Daily Floating Rate 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. 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 Borrowers 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 Borrowers as collateral including, without limitation, their accounts and notes receivable, intellectual property and the real estate owned by HQ Real Property Corporation.

At December 31, 2025, availability under the Senior Credit Facility was approximately $40.3 million based on eligible collateral, less letter of credit reserves, bank product reserves and current advances assuming continued covenant compliance. 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. Our average borrowing rate for the year ended December 31, 2025 was 3.7% and is repriced daily. For additional information related to the letter of credit securing our workers’ compensation obligations see Note 5 - Workers’ Compensation Insurance and Reserves.

Key Performance Indicator: System-Wide Sales

We refer to total sales generated by our franchisees as “franchise sales.” For any period prior to their conversion to franchises, we refer to sales at company-owned and operated offices as “company-owned sales.” In turn, we refer to the sum of franchise sales and company-owned sales as “system-wide sales.” In other words, system-wide sales include sales at all offices, whether owned and operated by us or by our franchisees. System-wide sales is a key performance indicator, although we do not record system-wide sales as revenue. Management believes that information on system-wide sales is important to understanding our financial performance because those sales are the basis on which we calculate and record much of our franchise royalty revenue, are directly related to all other royalty revenue and service revenue and are indicative of the financial health of our franchisee base. Management uses system-wide sales to benchmark current operating levels to historic operating levels. System-wide sales should not be considered as an alternative to revenue.

During 2025, all of our offices were franchised with the only exception being the Philadelphia office acquired in February 2022. The following table reflects our system-wide sales broken into its components for the periods indicated (in thousands):

Year ended

December 31,

December 31,

2025

2024

System-wide sales from HireQuest Direct

$

217,753

$

235,278

System-wide sales from Snelling and HireQuest

147,257

155,443

System-wide sales from DriverQuest and TradeCorp

14,180

13,687

System-wide sales from HireQuest Health

4,078

6,033

System-wide sales from Northbound, MRI, and SearchPath

116,286

152,423

System-wide sales from discontinued operations

633

759

System-wide sales

$

500,187

$

563,623

System-wide sales were $500.2 million in 2025, a decrease of 11.3%, from $563.6 million in 2024. The decrease in system-wide sales is primarily related to a decrease in demand in the staffing and recruiting industry during the year which particularly affected MRI where system-wide sales decreased 23.7% or $36.1 million in 2025 when compared to 2024. The remaining decrease of $27.3 million was due to the overall downturn of the economy including in the construction and manufacturing industries.

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Number of Offices

We track the number of offices we open and close every year as the number of offices is usually directly tied to the amount of royalty and service revenue we earn. In 2025, we decreased our office count by 12 offices on a net basis by opening or acquiring 7 and closing 19.

The following table accounts for the number of offices opened and closed in 2025 and 2024.

Franchised offices, December 31, 2023

427

Opened in 2024

30

Closed in 2024

(32

)

Franchised offices, December 31, 2024

425

Opened in 2025

7

Closed in 2025

(19

)

Franchised offices, December 31, 2025

413

197 of these offices operated by 177 franchisees were MRI offices which were divested to MRINetwork Operations, LLC on January 1, 2026.

Seasonality

Our revenue fluctuates quarterly and is generally higher in the second and third quarters of our year. Some of the industries in which we operate are subject to seasonal fluctuation. Many of the jobs filled by employees are outdoor jobs that are generally performed during the warmer months of the year. As a result, in an average year, activity increases in the spring and continues at higher levels through summer, then begins to taper off during fall and through winter.

Critical Accounting Estimates

Management’s Discussion and Analysis of Financial Condition and Results of Operations are based upon our financial statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires management to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, and expenses and the related disclosure of contingent assets and liabilities. Note 1 - Overview and Summary of Significant Accounting Policies to the Consolidated Financial Statements describes the significant accounting policies used to prepare the Consolidated Financial Statements and recently issued accounting guidance.

A critical accounting estimate is an estimate that: (i) is made in accordance with generally accepted accounting principles, (ii) involves a significant level of estimation uncertainty and (iii) has had or is reasonably likely to have a material impact on the Company’s financial condition or results of operations.

On an ongoing basis we evaluate our estimates, including, but not limited to, those related to our workers’ compensation claim liabilities, our Risk Management Incentive Program, our deferred taxes, our notes receivable allowance for losses, and estimated fair value of assets and liabilities acquired. Management bases its estimates and judgments on historical experience and on various other factors that it believes to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

Management believes that the following accounting estimates are the most critical to aid in fully understanding and evaluating our reported financial results, and they require management’s most difficult, subjective, or complex judgments, resulting from the need to make estimates about the effect of matters that are inherently uncertain. 

Workers’ Compensation Claims Liability 

We maintain reserves for workers’ compensation claims based on their estimated future cost. These reserves include claims that have been reported but not settled, as well as claims that have been incurred but not reported. Our estimated workers’ compensation claims liability was $5.2 million at December 31, 2025, versus $6.3 million at December 31, 2024. The decrease is due to our having now fully reserved claims from prior years as well as reduced payroll in 2025 and 2024. We estimate the future cost of these claims using several analytical techniques that incorporate actual loss activity, historical claims development patterns, and current period payroll and risk classification data. In addition, we engage an independent actuary to prepare an estimate of the future costs of claims. Management evaluates the independent actuarial estimate together with the results of our internal estimation methodologies when assessing the adequacy of the recorded workers’ compensation claims liability. We make adjustments as necessary. This liability involves significant judgment. If the actual costs of the claims exceed the amount estimated, we may incur additional charges.

Workers’
compensation Risk Management Incentive Program (“
RMIP”
)

Our RMIP is designed to incentivize our franchises to keep our temporary employees safe and control exposure to large workers’ compensation claims. We accomplish this by paying our franchisees an amount equivalent to a percentage of the amount they pay for workers’ compensation insurance if they keep their workers’ compensation loss ratios below specified thresholds.

Notes Receivable 
and Allowance for Credit Losses

Notes receivable from franchisees consist primarily of amounts due to us related to the financing of franchised locations. We report notes receivable from franchisees at the principal balance outstanding less an allowance for losses. We charge interest at a fixed rate and interest income is calculated by applying the effective rate to the outstanding principal balance. Notes receivable are generally secured by the assets of each location and the ownership interests in the franchise. We monitor the financial condition of our debtors and record provisions for estimated losses when we believe it is probable that our debtors will be unable to make their required payments. We evaluate the potential impairment of notes receivable based on various analyses, including estimated discounted future cash flows, at least annually and whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. When a note receivable is deemed impaired, we discontinue accruing interest and only recognize interest income when payment is received. Our allowance for credit losses on notes receivable was approximately
 $1.2 million and $773 thousand at December 31, 2025 and December 31, 2024, respectively.

Some of our notes receivable have contingent consideration based on a percentage of specified system-wide sales that exceed certain thresholds. Notes with contingent consideration are recorded at fair value when originated. Probability of payment is reflected in the fair value, as is the time value of money. Subsequent changes in the recorded amount of contingent consideration are recognized during period in which the change was recognized.

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Goodwill and Other Intangible Assets

Goodwill represents the excess of the purchase price over the estimated fair value of the net assets of acquired businesses. Goodwill is not amortized, but instead is subject to annual impairment testing that is conducted each calendar year in the third quarter. The goodwill asset impairment test involves comparing the fair value of a reporting unit to its carrying amount. An impairment charge is recognized when the carrying amount exceeds the reporting unit’s fair value. Interim tests during the year may be required if an event occurs or circumstances change (a "triggering event") that in management's judgement would more likely than not reduce the fair value of a reporting unit below its’ carrying amount.

To estimate fair value, we may use both a discounted cash flow and a market valuation approach. The discounted cash flow approach uses cash flow projections and a discount rate to calculate the fair value of each reporting unit while the market approach relies on market multiples of similar companies. The key assumptions used for the discounted cash flow approach include projected revenues and profit margins, changes in working capital, and the current discount and tax rates. For the market approach, we select a group of peer companies that we believe are best representative of each reporting unit. 

Annual assessments are conducted in the context of information that is reasonably available to us as of the date of the assessment including our best estimates of future sales volumes and prices; labor cost and availability; operational efficiency, and the then current discount rates and tax rates. We will perform our next annual goodwill impairment tests as of August 31, 2026; or earlier, if adverse changes in circumstances result in our assessment that a triggering event has occurred at any of our reporting units and an interim test is required.

Other intangible assets are recorded at cost or, when acquired as a part of a business combination, at estimated fair value. These assets include customer relationships, technology-related assets, trademarks, and other intellectual property. Intangible assets that have definite lives are amortized using a method that reflects the pattern in which the economic benefits of the assets are consumed or the straight-line method over estimated useful lives of 5 to 15 years. Intangible assets with indefinite lives are subject to at least annual impairment testing, which are conducted each calendar year in the fourth quarter. The impairment testing compares the fair value of the intangible asset with its’ carrying amount using the relief from royalty method or the comparable sales method, depending on the asset. The relief from royalty method uses cash flow projections and a discount rate to calculate the fair value of intellectual property while the comparable sales approach relies on recent sales of similar assets by unrelated companies. The key assumptions used for the relief from royalty method include projected revenues and profit margins, an assumed royalty rate, and the current discount and tax rates. For the comparable sales approach, we rely on public reports of recent sales that we believe are best representative of each asset being evaluated. 

During the third quarter of 2025, we completed our annual review of indefinite-lived intangible assets for potential impairment. As a result of this review, we concluded the carrying value of the MRI trade name exceeded its estimated fair value resulting in an impairment charge of $230 thousand. The related impairment was primarily due to a decrease in revenue attributable to the related business. In the fourth quarter of 2025, we entered into a contribution agreement which resulted in the transfer of certain assets and liabilities associated with MRI. Management deemed this a triggering event that led us to review the carrying value of intangible assets related to MRI. As a result of this review we concluded that the carrying amount of franchise agreements acquired in the MRI acquisition exceeded their estimated fair value resulting in an impairment charge of approximately $294 thousand. Also as a result of this review we concluded the carrying amount of the MRI trade name exceeded its estimated fair value resulting in an impairment charge of $150 thousand. These related impairments were attributable to decreased cash flows resulting from the contribution agreement. 

The combined impairment charge of approximately $674 thousand and $6.0 million is reflected in the line item, "Goodwill and intangible asset impairment charge," in our Consolidated Statements of Income for the twelve months ended December 31, 2025 and December 31, 2024, respectively.

The balance for the franchise agreements related to MRI was approximately $3.7 million and $4.9 million at December 31, 2025 and December 31, 2024, respectively. The balance for the trade name related to MRI was approximately $560 thousand and $940 thousand at December 31, 2025 and December 31, 2024, respectively. The balance for goodwill was approximately $1.6 million at December 31, 2025 and December 31, 2024.

Business Combinations

We account for business acquisitions under the acquisition method of accounting by recognizing identifiable tangible and intangible assets acquired, liabilities assumed, and non-controlling interests in the acquired business at their fair values. We record the portion of the purchase price that exceeds the fair value of the identifiable tangible and intangible assets acquired and liabilities assumed, if any, as goodwill. Any gain on a bargain purchase is recognized immediately. We recognize identifiable assets acquired and liabilities assumed in a business combination regardless of whether they have been previously recognized by the acquiree prior to the acquisition. We expense acquisition related costs as we incur them. Our acquisitions may include contingent consideration. Any contingent consideration is measured at fair value at the date of acquisition. Contingent consideration is remeasured at fair value each reporting period with subsequent changes in the fair value of the contingent consideration recognized during the period.

Asset Acquisitions

When we purchase a group of assets in a transaction that is not accounted for as a business combination, usually because the group of assets does not meet the definition of a business, we account for the transaction using a cost accumulation model, with the cost of the acquisition allocated to the acquired assets based on their relative fair values. Goodwill is not recognized. In an asset acquisition, direct transaction costs are treated as consideration transferred to acquire the group of assets and are capitalized as a component of the cost of the assets acquired. Our acquisitions may include contingent consideration. Any contingent consideration is measured at fair value at the date of acquisition. Contingent consideration is remeasured at fair value each reporting period with subsequent changes in the fair value of the contingent consideration recognized during the period.