Executive Summary

Q4 2024 delivered mixed results: revenue of $70.0M (+0.9% YoY, -4.0% QoQ), gross margin compressed to 15.3%, GAAP diluted EPS was $(0.46) due to a $5.5M non-cash impairment tied to exiting the tenant-direct mall business .
Versus Wall Street, QRHC missed Q4 revenue ($73.6M est.) and EPS (−$0.077 est.), reflecting onboarding delays, industrial end-market softness, and temporary costs from the vendor management rollout; FY24 also fell short vs consensus on revenue, EBITDA, and normalized EPS.*
Management announced structural changes: CEO transition to Perry Moss, a 15% workforce reduction, and an SG&A run-rate cut of ~$3.0M annually; debt refinanced in Q4 lowering annual interest by ~$1M and extending maturities (PNC to 2029; Monroe to 2030) .
2025 setup: gross profit expected to increase ~$1M sequentially in Q1; SG&A guided to ~$11.5M in Q1 and ~$9.5M per quarter in 2H 2025; net incremental 2025 revenue of ~$15M from 2024 wins; focus on operational excellence, DSO normalization to mid-60s, and debt paydown .

What Went Well and What Went Wrong

What Went Well
- Eight new client wins in 2024 (each ≥ seven figures) and five significant expansions with existing clients; onboarding quality praised by customers and used as references to drive pipeline growth .
- Debt refinancing completed: reduced blended interest rate by ~150 bps, ~$1M lower annual interest expense, larger revolver ($45M), extended maturities, improved terms .
- Management actions: CEO appointment (Perry Moss), hiring SVP Operations (Nick Ober), launch of an Operational Excellence Initiative to drive process and technology-enabled efficiencies .
What Went Wrong
- Margin pressure from mix shift to newer accounts, delayed onboarding, and temporary vendor management system costs; Q4 gross margin fell to 15.3% from 16.6% YoY .
- Industrial end-market weakness and client attrition (including the mall sector) pressured volumes; management expects industrial softness to persist for “next couple of quarters” .
- Non-cash impairment ($5.5M) and historical AP adjustments (~$1.0M non-cash in Q4 tied to 2021–2022 errors) weighed on results; adjusted EBITDA was $1.7M (vs. $3.5M YoY) .

Financial Results

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue ($USD Millions)	$73.145	$72.766	$69.970
Gross Profit ($USD Millions)	$13.532	$11.700	$10.727
Gross Margin %	18.5%	16.1%	15.3%
GAAP Diluted EPS ($)	$(0.07)	$(0.16)	$(0.46)
Adjusted EBITDA ($USD Millions)	$5.139	$2.534	$1.676
Adjusted Diluted EPS ($)	$0.03	$(0.06)	$(0.09)

Q4 YoY Comparison	Q4 2023	Q4 2024
Revenue ($USD Millions)	$69.342	$69.970
Gross Profit ($USD Millions)	$11.500	$10.727
Gross Margin %	16.6%	15.3%
GAAP Diluted EPS ($)	$(0.11)	$(0.46)
Adjusted EBITDA ($USD Millions)	$3.480	$1.676
Adjusted Diluted EPS ($)	$0.03	$(0.09)

KPIs and Balance Sheet Highlights

KPI	Q4 2024
New client wins in 2024 (#)	8
Expansion service agreements (#, 2024)	5
Vendors added to platform (#, 2024)	>1,200
Available borrowing capacity (revolver) ($M)	$21.9
Revolver size ($M)	$45
Notes payable net ($M)	$76.265 (LT) + $1.651 (current)
Cash and cash equivalents ($M)	$0.396
Headcount reduction (%)	15%
Annual SG&A reduction ($M)	~$3.0

Note: CFO also cited notes payable of $80.4M at Q4 end tied to working capital swings, which differs from balance sheet presentation totals (LT + current) .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
SG&A ($M)	Q4 2024	“~$10.0” (from Q3 call)	Actual $10.086	N/A (actual vs prior guide)
Gross Profit ($M)	Q1 2025	N/A	Sequential increase of ~$1.0 vs Q4 (excl. $1.0M AP adj)	New qualitative
SG&A ($M)	Q1 2025	N/A	~“$11.5”	New
SG&A ($M/quarter)	2H 2025	N/A	~“$9.5” per quarter (reflecting cost actions)	New
Net incremental revenue ($M)	FY 2025	“> $20” (Q3 call)	“$15” from 2024 wins amid market changes	Lowered
DSO target (days)	Near term	Mid-60s (ongoing target)	Mid-60s reiterated	Maintained
Interest expense ($M)	Annual	N/A	~“$1.0” reduction from refi	New
Capex – equipment ($M)	FY 2025	N/A	~“$0.5” run-rate; IT investment to continue	New
EBITDA comparison basis ($M)	FY 2025	N/A	Compare to ~$16 (ex-Q4 one-time charges)	Clarified basis

Earnings Call Themes & Trends

Topic	Q2 2024 (Previous-2)	Q3 2024 (Previous-1)	Q4 2024 (Current)	Trend
Vendor Management System	~75% vendors on AP automation; targeting 80–90% zero-touch by YE; margin tailwind expected	Temporary higher costs and billing credits; error rates improving; onboarding at record scale	Substantially complete; zero-touch benefits realized; residual costs to dwindle by Q2	Improving execution; cost headwind fading
Industrial End-Market	One large industrial client slowing production (12-month impact)	~$13M revenue decline due to industrial softness and attrition	Expect weakness for “next couple of quarters,” optimism in 2H recovery	Near-term pressure; 2H relief possible
Pipeline & Onboarding	Strong pipeline; multiple expansions; seven new client wins	Nine seven-figure wins; onboarding ~60% of run-rate	Robust pipeline; disciplined KPIs; further wins anticipated	Building momentum
Cost Actions & SG&A	SG&A ~$9.4M; leverage expected	SG&A guided to ~$10.0M in Q4	Workforce −15%; SG&A −$3M annualized; SG&A ~$11.5M (Q1), ~$9.5M/quarter (2H)	Structural savings accelerating
Capital Structure	Extended maturities; increased borrowing capacity	Refinancing progress; expected better terms	Refined: −150 bps margin; ~$1M interest savings; revolver to $45M; maturities to 2029/2030	De-risked balance sheet
Leadership & Ops	CRO role added (Perry Moss)	—	CEO transition to Moss; SVP Ops hire; Operational Excellence Initiative	Execution focus upshift
DSOs / Cash Cycle	Target mid-60s; fluctuations from ramps	Working capital a drag; covenants okay	DSO target reiterated; AP automation to accelerate billing	Improvement targeted

Management Commentary

“We are committed to achieving operational excellence… Now is the time for execution, plain and simple.” — Dan Friedberg .
“We will be relentless in implementing a results-oriented approach and building a performance culture.” — Perry Moss .
“The new financing decreased our blended interest rate margin by ~150 bps, reducing interest expense by approximately $1 million annually… and extended maturities.” — Brett Johnston .
“Excluding the noncash cost of revenue adjustment of ~$1M and a $500K bad debt adjustment… adjusted EBITDA would have been approximately $3.2M.” — Brett Johnston .
“We entered into an understanding to sell the non-core tenant-direct mall portion of RWS… we expect the transaction to close in the next few months.” — Dan Friedberg .

Q&A Highlights

Vendor Management rollout: substantially complete; residual extra costs expected to dwindle into Q1/Q2; zero-touch achieved on significant invoice share .
Industrial end-market: softness expected “for the next couple of quarters”; potential stabilization/pickup in 2H 2025 .
Attrition: ~1/3 from mall sector exit; remainder primarily M&A-related client changes; business remains “sticky” .
DSOs and cash conversion: mid-60s target reiterated; AP automation to accelerate billing; no collectability issues; focus on debt paydown .
2025 positioning: SG&A run-rate cuts (~$3M annual), gross profit expected to increase ~$1M sequentially in Q1, net incremental ~$15M 2025 revenue from 2024 wins .

Estimates Context

Quarterly comparisons (Consensus vs Actual):
- Q4 2024: Revenue $73.63M est. vs $69.97M actual; EPS −$0.077 est. vs −$0.09 actual; 3 estimates for both metrics.*
- Q3 2024: Revenue $77.10M est. vs $72.77M; EPS −$0.013 est. vs −$0.06; 3 estimates.*
- Q2 2024: Revenue $76.70M est. vs $73.15M; EPS −$0.01 est. vs $0.03 (EPS beat, revenue miss); 2 estimates.*

Metric	Q2 2024	Q3 2024	Q4 2024
Revenue Consensus Mean ($M)	76.70*	77.10*	73.63*
Revenue Actual ($M)	73.15	72.77	69.97
Primary EPS Consensus Mean ($)	−0.01*	−0.013*	−0.0767*
Primary EPS Actual ($)	0.03	−0.06	−0.09
# of Estimates (Rev/EPS)	2/2*	3/3*	3/3*

Full-year context:
- FY 2024: Revenue $292.23M est. vs $288.53M actual; EBITDA $16.3M est. vs $14.47M actual; normalized EPS $0.09 est. vs −$0.03 actual.*
- FY 2025 (pre-turnaround consensus): Revenue $252.52M, EBITDA ~$9.70M, normalized EPS −$0.26; suggests Street embeds exit of mall business and near-term margin rebuild timeline.*

Disclaimers: *Values retrieved from S&P Global.

Key Takeaways for Investors

Revenue momentum is intact but below consensus as onboarding delays and industrial end-market softness weighed on Q4; mix shift to newer accounts and temporary systems costs compressed margins .
Structural reset underway (CEO transition, Ops leadership, Operational Excellence, 15% workforce reduction, SG&A run-rate −$3M) to drive execution and margin recovery through 2025 .
Balance sheet de-risked: refinancing reduced interest by ~$1M/year and extended maturities; revolver lifted to $45M; focus on DSO normalization and debt paydown supports equity re-rating as cash conversion improves .
Near-term setup: Q1 gross profit guided +$1M sequentially (ex-Q4 AP adjustment); SG&A ~$11.5M in Q1 and ~$9.5M/quarter in 2H; monitor delivery against $15M net incremental 2025 revenue from 2024 wins .
Watch for completion and proceeds of the mall business sale (non-core, a drag on operations); expected to reduce complexity and improve DSO/margins .
Execution KPIs to track: zero-touch invoice rate and vendor system stability; DSO trajectory back to mid-60s; margin progression in matured accounts; AR collections from larger clients .
Trading implications: Potential near-term volatility around delivery of Q1/Q2 operational milestones; medium-term thesis hinges on margin normalization, SG&A leverage realization, and improved cash conversion driving debt reduction and equity rerating .

Additional Primary Source References (Q4 period press releases)

Q4 2024 earnings press release and detailed financial tables .
CEO appointment and operational excellence initiative .
Debt refinancing announcement (Dec 30, 2024) .
New client partnership: Stonebriar Auto Services (Dec 17, 2024) .

Quest Resource Holding Corp (QRHC)·Q4 2024 Earnings Summary