HireQuest, Inc. (HQI) Cash Flow Statement

In 2026Q2, net income of $2.7M converted to just $1.6M of operating cash flow, an OCF/NI of 0.59, meaning the quarter's profitability overstated actual cash generation even as it represented the highest net income in the window. By contrast, 2025Q4's $1.6M of net income supported $6.6M of operating cash flow, an OCF/NI of 4.12, illustrating that the earnings and cash streams are only loosely related. The 2024Q3 quarter is instructive: a $2.2M net loss coincided with $4.2M of positive operating cash flow, implying that charges depressing reported earnings were substantially non-cash in nature, a pattern consistent with the $549K of SBC add-backs recorded that quarter.

The negative $1.1M FCF print in 2024Q1, on a -12.7% margin, was driven almost entirely by a $3.8M working capital outflow rather than operating weakness, underscoring that the franchise model's headline profitability does not guarantee near-term cash delivery. The 19.7% FCF margin in 2026Q2 is directionally healthy but well below the 105.0% posted in 2024Q4, suggesting the recent trajectory reflects normalization from outsized cash releases rather than a durable improvement in cash economics. Given that capex consumes essentially none of operating cash flow, the FCF path is almost a mirror of the operating cash line itself, leaving the company's cash profile unusually exposed to the timing of receivable settlements and accrual reversals.

The negative $2.8M working capital build in 2025Q3 followed by a $3.3M release in 2025Q4 displays a pronounced seasonal pattern in the staffing cycle, where billings accelerate late in the year and cash is collected in the following quarter. For a royalty-based franchise model, this magnitude of working capital swing relative to quarterly revenue of roughly $8M is unusually large and implies that the collection period, rather than profitability, dictates the timing of available cash. Analysts should note that the $6.7M working capital inflow in 2026Q2 contributed materially to that quarter's $1.6M of operating cash flow despite $2.7M of net income; if collections normalize in subsequent periods, cash generation could compress sharply.

The wide positive gap between cumulative cash flow and cumulative earnings suggests the reported profit figure understates the cash economics of the royalty franchise model, since franchise-owned assets and corporate overhead are largely non-cash in the aggregate. However, the divergence is not evenly distributed: 2024Q4 and 2025Q4 alone contributed $15.3M of operating cash flow against just $3.8M of net income, meaning more than half of the cumulative outperformance is concentrated in two seasonally strong quarters. This concentration implies that the ten-year cash-to-earnings profile is materially shaped by year-end collection timing, and a multi-year view would be needed to assess whether the divergence reflects durable cash conversion or simply recurring seasonal settlement patterns.