HireQuest, Inc. (HQI) Income Statement

The sustained decline from $9.4M in 2024Q3 to $6.5M in 2026Q1 reflects softening labor demand across the staffing sector, a trend corroborated by peer KELYA's -1.9% and KFRC's -5.4% one-year revenue growth rates. The 2026Q2 bounce to $8.1M on a favorable YoY comp base is encouraging but insufficient to confirm a durable uptrend—investors should monitor whether subsequent quarters sustain sequential momentum above $8M.

The appearance of $762K in COGS during 2026Q2, pulling gross margin to 90.6%, warrants scrutiny as it may reflect either a reclassification or a new direct cost embedded in operations—if the latter, investors should track whether this cost line recurs, as it would modestly erode the structural margin advantage underpinning HQI's valuation.

The ~29% reduction in absolute SG&A over ten quarters, combined with the reacceleration in revenue, has created a compounding effect on operating leverage; notably, the 2026Q2 operating income of $3.3M exceeds the 2024Q2 figure of $2.7M despite lower revenue, underscoring that cost discipline, not volume, is the primary margin driver. This operating leverage is a double-edged sword, however, as fixed-cost intensity means any renewed revenue contraction would compress margins asymmetrically.

The sharp reversal from a -$0.16 EPS in 2024Q3 to +$0.16 in 2024Q4 suggests a discrete, non-recurring expense was absorbed in that quarter, though the exact nature cannot be confirmed from the income statement alone. More materially, the true inflection appears to be the 2026Q1-to-2026Q2 transition, where EPS jumped from $0.11 to $0.20 (+163.9% YoY), coinciding with both the revenue return to growth and sustained SG&A compression—this dual-driver dynamic is the most structurally durable margin event in the observed history.