HireQuest (HQI) risk factors, FY2024 10-K

Risks Related to Our Business and Industry

1. 01Acquisitions may have an adverse effect on our business
2. 02Our strategy may be impeded, and we may not achieve our long-term growth goals if acquisition candidates are not available under acceptable terms
3. 03Acquisitions we announce could be viewed negatively by investors, which may adversely affect the price of our common stock
4. 04We impaired our goodwill and other intangible assets in 2024, and if our goodwill or other intangible assets is impaired further in the future, we will record an additional non-cash charge to our results of operations and the amount of the charge may be material
5. 05New business initiatives will cause us to incur additional expenditures and may have an adverse effect on our core business
6. 06Our results of operations could be adversely affected by economic and political conditions nationally and globally and the effects of these conditions on our and our franchisees’ customers’ businesses and levels of business activity
7. 07We have been and may continue to be unable to attract sufficient qualified candidates to meet all of the needs of our clients
8. 08We are vulnerable to seasonal fluctuations with lower demand in the winter months
9. 09We are critically dependent on workers’ compensation insurance coverage at commercially reasonable rates, and the effect of unexpected changes in claim trends, deteriorating financial results or other factors on our workers’ compensation coverage may negatively impact our financial condition
10. 10Our current and former insurance carriers may not be able to pay claims we make under such policies because of liquidity problems that they may face from time to time
11. 11We are dependent on a small number of individuals who constitute our current management
12. 12Our operating and financial results are largely linked to our large workers’ compensation reserve which can be volatile
13. 13We may incur employment related claims or other types of claims and costs that could materially harm our business
14. 14If we fail successfully to implement our growth strategy, which includes new office development by existing and new franchisees, our ability to increase our revenue and operating profits could be adversely affected
15. 15Changes in our industry could place strains on our management, employees, information systems, and internal controls, which may adversely impact our business
16. 16Shifts in attitudes towards contingent workforces could negatively impact our results of operations and financial condition

Risks Related to our Credit Facility and Liquidity

1. 17Our level of debt and restrictions in our credit agreement could negatively affect our operations and limit our liquidity and our ability to react to changes in the economy
2. 18Create, incur, or assume liens, debt, and other encumbrances
3. 19Without sufficient liquidity, we may not be able to pursue accretive business opportunities
4. 20We may be unable to obtain financing of our working capital, acquisition, capital, dividend, and other needs on favorable terms

Risks Related to Our Franchisees and Business Model

1. 21Converting company-owned offices to franchises has multiple risks
2. 22Our operating and financial results and growth strategies are closely tied to the success of our franchisees
3. 23Our success depends upon the continued protection of our trademarks, trade names, and other intellectual property rights and we may be forced to incur substantial costs to maintain, defend, protect, and enforce our intellectual property rights
4. 24Our franchisees could take action that could harm our business
5. 25If we fail to identify, recruit, and contract with a sufficient number of qualified franchisees, our ability to open new offices and increase our revenue could be materially adversely affected
6. 26Opening new offices in existing markets and aggressive development could cannibalize existing sales and may negatively affect sales at existing offices and relationships with existing franchisees
7. 27A large number of our franchises are controlled by a small number of individuals
8. 28Our results of operations may be significantly affected by the ability of certain franchisees to repay their loans to us
9. 29In terms of collateral, the value of the franchised business or California operations and any individual guarantee we have or have not obtained
10. 30Our growth strategy is reliant on finding purchasers for assets of the businesses we acquire
11. 31We may have improperly balanced the costs and benefits related to our Franchise Expansion Incentive Program

Risks Related to Technology and Cybersecurity

1. 32The improper disclosure of or access to our confidential and proprietary information, or a failure to adequately protect this information, could materially harm our business
2. 33Our information technology systems may need to be updated or replaced
3. 34Advances in technology may disrupt the labor and recruiting markets
4. 35Our facilities, operations, and information technology systems may be vulnerable to damage and interruption

Risks Related to Ownership of Our Stock

1. 36If we fail to establish and maintain adequate internal control over financial reporting, we may not be able to report our financial results in a timely and reliable manner, which could harm our business and impact the value of our securities
2. 37If we are a “personal holding company,” we may be required to pay personal holding company taxes, which would have an adverse effect on our cash flows, results of operations, and financial condition
3. 38Our directors, officers, and current principal stockholders own a large percentage of our common stock and could limit other stockholders’ influence over corporate decisions
4. 39Our stock typically trades in low volumes daily which could lead to illiquidity, volatility, or depressed stock price
5. 40Analysts covering our stock could negatively impact both the stock price and trading volume of our stock
6. 41Our stock price has been and will likely continue to be extremely volatile, and, as a result, stockholders may not be able to resell shares at or above their purchase price, and we may be more vulnerable to securities class action litigation
7. 42If we cease paying cash dividends on our common stock, you may not receive any return on investment unless you sell your common stock for a price greater than that which you paid for it
8. 43We are a “smaller reporting company” as defined in SEC regulations, and the reduced disclosure requirements applicable to smaller reporting companies may make our common stock less attractive to investors
9. 44Our industry is subject to extensive government regulation and the imposition of additional regulations, which could materially harm our future earnings
10. 45We may engage in litigation with our franchisees
11. 46We operate in a highly competitive industry and may be unable to retain clients or market share
12. 47Our facilities, operations, and information technology systems are vulnerable to damage and interruption