Quest Resource (QRHC) Q4 2024 earnings summary

Executive summary

• Achieved record new client wins, including eight new customers in 2024 each expected to generate at least seven figures in annual revenue, and secured multiple expansion agreements with major clients, driving pipeline growth and positive referrals.

• Faced operational challenges: onboarding costs, vendor management system transition, client attrition, and industrial market weakness impacted margins and profits.

• Leadership transition: Ray Hatch retired as CEO, Perry Moss promoted, and Nick Ober hired as SVP of Operations, bringing a performance-driven culture.

• Initiated cost reduction actions, including a 15% workforce reduction, exit from non-core mall business, and $3 million in annualized SG&A savings.

• Completed debt refinancing, lowering annual interest expense by $1 million and reducing blended interest rate by 150 basis points.

Financial highlights

• Q4 2024 revenue was $70 million, up 0.9% year-over-year, but down 4% sequentially; gross profit was $10.7 million, down 6.7% year-over-year and 8.3% sequentially.

• Q4 gross margin declined to 15.3% from 16.6% in Q4 2023; GAAP net loss per diluted share was $(0.46) vs. $(0.11) last year.

• Q4 adjusted EBITDA was $1.7 million vs. $3.5 million prior year; adjusted net loss per share was $(0.09) vs. adjusted net income of $0.03.

• FY 2024 revenue was $288.5 million, up 0.1% year-over-year; gross profit was $50 million, down 0.1% year-over-year.

• Recognized a $5.5 million non-cash impairment loss related to the sale of mall business contracts.

Outlook and guidance

• Management expects operational normalization in coming quarters, driven by efficiency initiatives, cost reductions, and a robust pipeline of new business.

• Project both top and bottom-line growth for 2025, with sequential improvements in gross profit starting Q2.

• Net incremental revenue from 2024 client wins expected to be $15 million, not including future wins or expansions.

• SG&A expected to decrease by $3 million annually, reaching $9.5 million per quarter in the second half of 2025 after cost savings.