Quest Resource Holding Corp

Previous wording

We believe our services are comprehensive, innovative, and cost effective. Our services are designed to enable our business customers to capture the commodity value of their waste streams and recyclables, better manage their disposal and total operating costs, enhance their management of environmental risks, enhance their legal and regulatory compliance, and achieve their business and environmental goals while maximizing the efficiency of their assets. Our services currently focus on the waste streams and recyclables from big box retailers, including grocers and other specialty retailers; transportation, logistics, and fleet operators; manufacturing and industrial facilities; automotive after-market operations such as automotive maintenance, quick lube, dealerships, and collision repair; multi-family and commercial properties; restaurant chains and food operations; malls and shopping centers; and construction and demolition projects. We currently concentrate on programs for recycling cardboard, pallets, metal, glass, motor oil and automotive lubricants, oil filters, scrap tires, oily water, goods destruction, food waste, meat renderings, cooking oil and grease trap waste, plastics, , mixed paper, construction debris, as well as a large variety of regulated and non-regulated solid, liquid, and gas wastes. In addition, we offer products such as antifreeze and windshield washer fluid, dumpster and compacting equipment, and other minor ancillary services.

Current wording

We believe our services are comprehensive, innovative, and cost effective. Our services are designed to enable our business customers to capture the commodity value of their waste streams and recyclables, better manage their disposal and total operating costs, enhance their management of environmental risks, enhance their legal and regulatory compliance, and achieve their business and environmental goals while maximizing the efficiency of their assets. Our services currently focus on the waste streams and recyclables from big box retailers, including grocers and other specialty retailers; transportation, logistics, and fleet operators; manufacturing and industrial facilities; automotive after-market operations such as automotive maintenance, quick lube, dealerships, and collision repair; multi-family and commercial properties; restaurant chains and food operations; and construction and demolition projects. We currently concentrate on programs for recycling cardboard, pallets, metal, glass, motor oil and automotive lubricants, oil filters, scrap tires, oily water, goods destruction, food waste, meat renderings, cooking oil and grease trap waste, plastics, mixed paper, construction debris, as well as a large variety of regulated and non-regulated solid, liquid, and gas wastes. In addition, we offer products such as antifreeze and windshield washer fluid, dumpster and compacting equipment, and other minor ancillary services.

Previous wording

The following table summarizes our operating results for the years ended December 31, 2023 and 2022:

Current wording

The following table summarizes our operating results for the years ended December 31, 2024 and 2023 (in thousands):

Previous wording

There has been heightened uncertainty in the macroeconomic environment, and concerns that the U.S. economy may fall into a recession, since the Federal Reserve began aggressively raising interest rates in March 2022 to address persistently high inflation. There are also significant geopolitical concerns, including the current conflict between Ukraine and Russia and the Israel-Hamas war, which have created extreme volatility in the global capital markets and are expected to have further global economic consequences, including disruptions of the global supply chain and energy markets. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets continue to deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Inflation can adversely affect us by increasing our costs, including salary costs. Any significant increases in inflation and related increases in interest rates could have a material adverse effect on our business, results of operations and financial condition.

Current wording

There has been heightened uncertainty in the macroeconomic environment, characterized by increasing unemployment, significant inflation, and decreased consumer and business spending. There are also significant geopolitical concerns, including the ongoing conflict between Ukraine and Russia, which have created extreme volatility in the global capital markets and are expected to have further global economic consequences, including disruptions of the global supply chain and energy markets. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets deteriorate, including as a result of political unrest or war, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Inflation can adversely affect us by increasing our costs, including salary costs. Any significant increases in inflation and related increases in interest rates could have a material adverse effect on our business, results of operations and financial condition.

Previous wording

For the year ended December 31, 2023, revenue was $288.4 million, an increase of $4.4 million, or 1.5%, compared with revenue of $284.0 million for the year ended December 31, 2022.

Current wording

For the year ended December 31, 2024, revenue was $288.5 million, an increase of $0.1 million, or 0.1%, compared with revenue of $288.4 million for the year ended December 31, 2023.

Previous wording

Selling, general, and administrative expenses were $37.7 million and $37.8 million for the years ended December 31, 2023 and 2022, respectively. Operating expenses also included depreciation and amortization of $9.6 million and $9.6 million for the years ended December 31, 2023 and 2022, respectively.

Current wording

Selling, general, and administrative expenses were $39.5 million and $37.7 million for the years ended December 31, 2024 and 2023, respectively. The increase primarily relates to increases in overall labor related expenses of $0.8 million, which includes the benefit of an approximately $0.8 million reduction in year over year bonus expense in 2024, mostly related to unearned executive bonus expense. Professional fees also increased by $0.4 million compared to the prior year. Additionally, bad debt expense increased $0.2 million compared to the prior year, which included approximately $0.5 million in additional bad debt reserve for certain customers related to the assets held for sale. Operating expenses included depreciation and amortization of $9.4 million and $9.6 million for the years ended December 31, 2024 and 2023, respectively.

Previous wording

For the year ended December 31, 2023, interest expense increased to $9.7 million from $7.3 million for the year ended December 31, 2022, primarily due to increases in base interest rates which is partially offset by reduced borrowings from $7 million in voluntary paydowns on the term loan in 2023. We are amortizing debt issuance costs of $3.3 million and OID of $1.8 million to interest expense over the life of the related debt arrangements as discussed in Note 7 to our consolidated financial statements.

Current wording

For the year ended December 31, 2024, interest expense increased to $10.3 million from $9.7 million for the year ended December 31, 2023, primarily due to increased borrowings under our revolving credit facility and our equipment term loan in 2024. We are amortizing debt issuance costs of $4.8 million and loan discount costs of $1.8 million to interest expense over the life of the related debt arrangements as discussed in Note 7 to our consolidated financial statements.

Previous wording

We recorded a provision for income taxes of $386,932 and $172,604 for the years ended December 31, 2023 and 2022, respectively. The provision for income taxes for both periods is primarily attributable to state tax obligations based on current estimated state tax apportionments for states with no net operating loss carryforwards.

Current wording

We recorded a provision for income taxes of $0.3 million and $0.4 million for the years ended December 31, 2024 and 2023, respectively. The provision for income taxes for both periods is primarily attributable to state tax obligations based on current estimated state tax apportionments for states with no net operating loss carryforwards and other timing differences.

Previous wording

We recorded a full valuation allowance against all of our deferred tax assets (“DTAs”) as of both December 31, 2023 and 2022. We intend on maintaining a full valuation allowance on our DTAs until there is sufficient evidence to support the reversal of all or some portion of these allowances. However, given our current earnings and anticipated future earnings, webelieve that there is a reasonable possibility that within the next 12 to 24 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain DTAs and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on the level of profitability that we are able to actually achieve.

Current wording

We recorded a full valuation allowance against all of our deferred tax assets (“DTAs”) as of both December 31, 2024 and 2023. We intend on maintaining a full valuation allowance on our DTAs until there is sufficient evidence to support the reversal of all or some portion of these allowances. However, given our current earnings and anticipated future earnings, webelieve that there is a reasonable possibility that within the next 48 to 60 months, sufficient positive evidence may become available to allow us to reach a conclusion that a significant portion of the valuation allowance will no longer be needed. Release of the valuation allowance would result in the recognition of certain DTAs and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on the level of profitability that we are able to actually achieve.

Previous wording

Net loss for the year ended December 31, 2023 was $(7.3) million compared to net loss of $(6.0) million for the year ended December 31, 2022. The discussions above explain the primary changes related to the change in net results.

Current wording

Net loss for the year ended December 31, 2024 was $(15.1) million compared to net loss of $(7.3) million for the year ended December 31, 2023. The discussions above explain the primary changes related to the change in net results.

Previous wording

Net loss per basic and diluted share attributable to common stockholders was $(0.36) and ($0.31) for the years ended December 31, 2023 and 2022, respectively. The basic and diluted weighted average number of shares of Common Stock outstanding was approximately 20.1 million for the year ended December 31, 2023, compared to basic and diluted weighted average number of shares of Common Stock outstanding of approximately 19.5 million for the year ended December 31, 2022.

Current wording

Net loss per basic and diluted share attributable to common stockholders was $(0.73) and ($0.36) for the years ended December 31, 2024 and 2023, respectively. The basic and diluted weighted average number of shares of Common Stock outstanding was approximately 20.6 million for the year ended December 31, 2024, compared to basic and diluted weighted average number of shares of Common Stock outstanding of approximately 20.1 million for the year ended December 31, 2023.

Previous wording

For the year ended December 31, 2023, Adjusted EBITDA, a non-GAAP financial measure, decreased (1.4)% to $16.2 million from $16.4 million for the year ended December 31, 2022.

Current wording

For the year ended December 31, 2024, Adjusted EBITDA, a non-GAAP financial measure, decreased (10.7)% to $14.5 million from $16.2 million for the year ended December 31, 2023.

Previous wording

We use the non-GAAP measurement of earnings before interest, taxes, depreciation, amortization, stock-related compensation charges, acquisition-related costs, and other adjustments, or “Adjusted EBITDA,” to evaluate our performance. Adjusted EBITDA is a non-GAAP measure that is also frequently used by analysts, investors and other interested parties to evaluate the market value of companies considered to be in similar industries. We suggest that Adjusted EBITDA be viewed in conjunction with our reported financial results or other financial information prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). For the year ended December 31, 2023, other adjustments included an earn-out adjustment, severance and project costs as well as certain administrative fees related to borrowings. For the year ended December 31, 2022, other adjustments included earn-out adjustments, certain recruiting, severance and project costs, and certain administrative fees related to borrowings.

Current wording

We use the non-GAAP measurement of earnings before interest, taxes, depreciation, amortization, stock-related compensation charges, acquisition-related costs, and other adjustments, or “Adjusted EBITDA,” to evaluate our performance. Adjusted EBITDA is a non-GAAP measure that is also frequently used by analysts, investors and other interested parties to evaluate the market value of companies considered to be in similar industries. We suggest that Adjusted EBITDA be viewed in conjunction with our reported financial results or other financial information prepared in accordance with accounting principles generally accepted in the United States (“GAAP”).

Previous wording

The following table reflects the reconciliation of net loss to Adjusted EBITDA for the years ended December 31, 2023 and 2022:

Current wording

The following table reflects the reconciliation of net loss to Adjusted EBITDA for the years ended December 31, 2024 and 2023 (in thousands):

Previous wording

Adjusted Net Income and Adjusted Net Income per Diluted Share

Current wording

Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share

Previous wording

Adjusted net income, a non-GAAP financial measure, for the year ended December 31, 2023, was $3.4 million compared with $5.8 million for the year ended December 31, 2022. We present adjusted net income and adjusted net income per diluted share, both non-GAAP financial measures, supplementally because they are widely used by investors as a valuation measure in the solid waste industry. Management uses adjusted net income and adjusted net income per diluted share as one of the principal measures to evaluate and monitor the ongoing financial performance of our operations. We provide adjusted net income to exclude the effects of items management believes impact the comparability of operating results between periods. Adjusted net income has limitations due to the fact that it excludes items that have an impact on our financial condition and results of operations. Adjusted net income and adjusted net income per diluted share are not a substitute for, and should be used in conjunction with, GAAP financial measures. Other companies may calculate these non-GAAP financial measures differently. Our adjusted net income and adjusted net income per diluted share for the years ended December 31, 2023 and 2022, are calculated as follows:

Current wording

Adjusted net income (loss), a non-GAAP financial measure, for the year ended December 31, 2024, was $(0.7) million compared with $3.4 million for the year ended December 31, 2023. We present adjusted net income (loss) and adjusted net income (loss) per diluted share, both non-GAAP financial measures, supplementally because they are widely used by investors as a valuation measure in the solid waste industry. Management uses adjusted net income (loss) and adjusted net income (loss) per diluted share as one of the principal measures to evaluate and monitor the ongoing financial performance of our operations. We provide adjusted net income (loss) to exclude the effects of items management believes impact the comparability of operating results between periods. Adjusted net income (loss) has limitations due to the fact that it excludes items that have an impact on our financial condition and results of operations. Adjusted net income (loss) and adjusted net income (loss) per diluted share are not a substitute for, and should be used in conjunction with, GAAP financial measures. Other companies may calculate these non-GAAP financial measures differently. Our adjusted net income (loss) and adjusted net income (loss) per diluted share for the years ended December 31, 2024 and 2023, are calculated as follows (in thousands except per share amounts):

Previous wording

As of December 31, 2023, we had working capital of $15.7 million, including $0.3 million of cash and cash equivalents, compared with working capital of $19.7 million, including cash and cash equivalents of $9.6 million, as of December 31, 2022. As part of our working capital management and in light of increasing interest rates, we made $7.0 million in prepayments toward our variable rate debt in 2023 utilizing excess cash.

Current wording

As of December 31, 2024, we had working capital of $30.7 million, including $0.4 million of cash and cash equivalents, compared with working capital of $15.7 million, including cash and cash equivalents of $0.3 million, as of December 31, 2023.

Previous wording

As discussed in Note 7 to our consolidated financial statements, we entered into the PNC Loan Agreement which provides for an asset-based revolving credit facility of up to $25.0 million. Our known current- and long-term uses of cash include, among other possible demands, capital expenditures, lease payments and repayments to service debt and other long-term obligations. We have no agreements, commitments, or understandings with respect to any such placements of our securities and any such placements could be dilutive to our stockholders.

Current wording

We believe our existing cash and cash equivalents of $0.4 million, our borrowing availability under our $45.0 million ABL Facility (as defined and discussed in Note 7 to our consolidated financial statements), and cash expected to be generated from operations will be sufficient to fund our operations for the next 12 months and thereafter for the foreseeable future. Our known current- and long-term uses of cash include, among other possible demands, capital expenditures, lease payments and repayments to service debt and other long-term obligations. We have no agreements, commitments, or understandings with respect to any such placements of our securities and any such placements could be dilutive to our stockholders.

Previous wording

On October 19, 2020, we and certain of our subsidiaries entered into the Credit Agreement (as described in Note 7 to our consolidated financial statements). Among other things, the Credit Agreement, as amended, provides for a senior secured term loan facility in the principal amount of $53.5 million as of December 31, 2023. The maturity date of the term loan facility is October 19, 2025 (the “Maturity Date”). The senior secured term loan will amortize in aggregate annual amounts equal to 1.00% of the original principal amount of the senior secured term loan facility with the balance payable on the Maturity Date. Proceeds of the senior secured term loan are permitted to be used for Permitted Acquisitions (as defined in the Credit Agreement). The Monroe Credit Agreement also contains an accordion term loan facility in the maximum principal amount of $5.3 million. Loans under the accordion loan facility may be requested at any time until the Maturity Date. Each accordion term loan shall be on the same terms as those applicable to the senior secured term loan. Proceeds of accordion term loans are permitted to be used for Permitted Acquisitions.

Current wording

Our Credit Agreement (as described in Note 7 to our consolidated financial statements) provides for, among other things, a senior secured term loan facility in the principal amount of $54.0 million as of December 31, 2024. The maturity date of the term loan facility is June 28, 2030 (the “Maturity Date”). The senior secured term loan will amortize in aggregate annual amounts equal to 1.00% of the original principal amount of the senior secured term loan facility with the balance payable on the Maturity Date. The Credit Agreement also contains a delayed draw term loan facility in the maximum principal amount of $25.0 million. Loans under the delayed draw term loan facility may be requested at any time until December 30, 2026. Proceeds of the delayed draw term loan are permitted to be used for Permitted Acquisitions (as defined in the Credit Agreement).

Previous wording

The Credit Agreement contains certain financial covenants, including a minimum fixed charge coverage ratio and a senior net leverage ratio. In addition, the Credit Agreement contains negative covenants limiting, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other matter customarily restricted in such agreements. The Credit Agreement also contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, change of control, and failure of any guaranty or security document supporting the Credit Agreement to be in full force and effect. Upon the occurrence of an event of default, the outstanding obligations under the Credit Agreement may be accelerated and become immediately due and payable. The foregoing is a summary only and does not purport to be a complete description of all the terms, provisions, covenants and agreements contained in the Credit Agreement and is subject to and qualified in its entirety by reference to the full text of the Credit Agreement.

Current wording

The Credit Agreement contains certain financial covenants, including a minimum fixed charge coverage ratio and a senior net leverage ratio. In addition, the Credit Agreement contains negative covenants limiting, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other matters customarily restricted in such agreements. The Credit Agreement also contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, change of control, and failure of any guaranty or security document supporting the Credit Agreement to be in full force and effect. Upon the occurrence of an event of default, the outstanding obligations under the Credit Agreement may be accelerated and become immediately due and payable. The foregoing is a summary only and does not purport to be a complete description of all the terms, provisions, covenants and agreements contained in the Credit Agreement and is subject to and qualified in its entirety by reference to the full text of the Credit Agreement.

Previous wording

Net cash used in operating activities was $(1.4) million for the year ended December 31, 2023, compared with net cash used in operating activities of $(2.3) million for the year ended December 31, 2022.

Current wording

Net cash used in operating activities was $(6.1) million for the year ended December 31, 2024, compared with net cash used in operating activities of $(1.4) million for the year ended December 31, 2023.

Previous wording

non-cash items of $14.3 million, which related primarily to depreciation, amortization of intangible assets and debt issuance costs, provision for doubtful accounts, and stock-based compensation; and

Current wording

other non-cash items of $14.8 million, which related primarily to depreciation, amortization of intangible assets and debt issuance costs, provision for doubtful accounts, and stock-based compensation; and

Previous wording

cash used in the net change in operating assets and liabilities of $(10.6) million, primarily associated with relative changes in accounts receivable, accounts payable, and accrued liabilities.

Current wording

cash used in the net change in operating assets and liabilities of $(11.4) million, primarily associated with relative changes in accounts receivable, accounts payable, and accrued liabilities.

Previous wording

Our business, including revenue, operating expenses, and operating margins, may vary depending on the blend of services we provide to our customers, the terms of customer contracts, commodity contracts, and our business volume levels. Fluctuations in net accounts receivable are generally attributable to a variety of factors including, but not limited to, the timing of cash receipts from customers, and the inception, increase, modification, or termination of customer relationships. Our operating activities may require additional cash in the future from our debt facilities and/or equity financings depending on the level of our operations.

Current wording

Our business, including revenue, operating expenses, and operating margins, may vary depending on the blend of services we provide to our customers, the terms of customer contracts, recyclable materials contracts, and our business volume levels. Fluctuations in net accounts receivable are generally attributable to a variety of factors including, but not limited to, the timing of cash receipts from customers, and the inception, increase, modification, or termination of customer relationships. Our operating activities may require additional cash in the future from our debt facilities and/or equity financings depending on the level of our operations.

Previous wording

Cash used in investing activities for the year ended December 31, 2023, was $(1.9) million. Cash used for the year ended December 31, 2022, was $(4.3) million primarily related to the $3.1 million net purchase of the assets of a Northeast-based independent environmental services company on February 10, 2022, which was partially offset by a $500,000 purchase price adjustment of a prior year acquisition. Other investing activities are primarily from purchases of property and equipment and intangible assets such as software development.

Current wording

Cash used in investing activities for the year ended December 31, 2024, was $(6.0) million and primarily related to the purchase of compactors and related equipment. Cash used in investing activities for the year ended December 31, 2023, was $(1.9) million. Other investing activities are primarily from intangible assets such as software development costs and purchases of other property and equipment.

Previous wording

Net cash used in financing activities was $(6.0) million for the year ended December 31, 2023, primarily from $8.1 million repayment of notes payable, which was partially offset by net borrowings of $1.0 million on our ABL Facility and $1.1 million proceeds from stock option exercises and shares issued under our 2014 Employee Stock Purchase Plan (“2014 ESPP”). Net cash provided by financing activities was $7.8 million for the year ended December 31, 2022, primarily from borrowings of $3.5 million from the Credit Agreement with Monroe Capital used to finance the February 2022 acquisition of an independent environmental services company, net borrowings of $5.0 million on our ABL Facility, and $933,000 proceeds from stock option exercises and shares issued under our 2014 ESPP, partially offset by $1.4 million repayments of notes payable. See Note 7 to our consolidated financial statements for a discussion of the ABL Facility and other notes payable.

Current wording

Net cash provided by financing activities was $12.1 million for the year ended December 31, 2024, primarily from net borrowings of $9.9 million on our ABL Facility, $2.9 million borrowings from our PNC equipment term loan, and $1.4 million proceeds from stock option exercises and shares issued under our 2014 Employee Stock Purchase Plan (“2014 ESPP”), partially offset by $1.3 million repayments of long term debt. Net cash used in financing activities was $(6.0) million for the year ended December 31, 2023, primarily from $8.1 million repayment of notes payable, which was partially offset by net borrowings of $1.0 million on our ABL Facility and $1.1 million proceeds from stock option exercises and shares issued under our 2014 ESPP. See Note 7 to our consolidated financial statements for a discussion of the ABL Facility and other notes payable.

Previous wording

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These areas include carrying amounts of accounts receivable, goodwill and other intangible assets, deferred taxes and the fair value of assets and liabilities acquired in business acquisitions and stock-based compensation expense. We base our estimates on historical experience, our observance of trends in particular areas, and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual amounts could differ significantly from amounts previously estimated.

Current wording

Our discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles (“GAAP”). The preparation of our consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These areas include carrying amounts of accounts receivable, goodwill and other intangible assets, deferred taxes and the fair value of assets and liabilities acquired in business acquisitions, assets held for sale, and stock-based compensation expense. We base our estimates on historical experience, our observance of trends in particular areas, and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual amounts could differ significantly from amounts previously estimated.

Previous wording

In accordance with Accounting Standards Codification (“ASC”) Topic 350, Intangibles – Goodwill and Other, we perform goodwill impairment testing at least annually during the third quarter, unless indicators of impairment exist in interim periods. Our test of goodwill impairment included assessing qualitative factors and the use of judgment in evaluating economic conditions, industry and market conditions, cost factors, and entity-specific events such as market capitalization as compared to book value. The impairment test for goodwill compares the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying amount of a reporting unit’s goodwill exceeds the fair value of its goodwill, we recognize an impairment loss equal to the excess, not to exceed the total amount of recorded goodwill.

Current wording

In accordance with Accounting Standards Codification (“ASC”) Topic 350, Intangibles – Goodwill and Other, we perform goodwill impairment testing at least annually during the third quarter, unless indicators of impairment exist in interim periods. Our test of goodwill impairment included assessing qualitative factors and the use of judgment in evaluating economic conditions, industry and market conditions, cost factors, and entity-specific events such as market capitalization as compared to book value. The impairment test for goodwill compares the estimated fair value of a reporting unit with goodwill to its carrying value. If the carrying amount of a reporting unit’s goodwill exceeds the fair value of its goodwill, we recognize an impairment loss equal to the excess, not to exceed the total amount of recorded goodwill. We performed our most recent goodwill impairment analysis in the third quarter of 2024 with no impairment recorded. In addition, we reevaluated goodwill in the fourth quarter of 2024, when management identified a disposal group designated as held for sale and assigned $5.2 million of goodwill to the disposal group. The remaining goodwill of $81.1 million was assessed for impairment with no impairment recorded. See Note 3 to our consolidated financial statements for further discussion.

Previous wording

In addition to the required goodwill impairment analysis, we also review the recoverability of our net intangible assets with finite lives when an indicator of impairment exists. Based on our analysis of estimated undiscounted future cash flows expected to result from the use of these net intangibles with finite lives, we determine if we will recover their carrying values as of the test date. If not recoverable, we record an impairment charge. We performed our most recent goodwill impairment analysis in the third quarter of 2023 with no impairment recorded.

Current wording

In addition to the required goodwill impairment analysis, we also review the recoverability of our net intangible assets with finite lives when an indicator of impairment exists. Based on our analysis of estimated undiscounted future cash flows expected to result from the use of these net intangibles with finite lives, we determine if we will recover their carrying values as of the test date. If not recoverable, we record an impairment charge.

Previous wording

We have historically determined the expected term under the simplified method using an average of the contractual term and vesting period of the award. Beginning in 2023 we determine the expected life based on a weighted average of historical grants taking into account the vesting period of awards, time until exercise and expiration dates;

Current wording

We determine the expected life based on a weighted average of historical grants taking into account the vesting period of awards, time until exercise and expiration dates;