# QXO, Inc.: Form 10-Q for the period ended Sep 30, 2024

- Company: [QXO, Inc.](/companies/qxo.md) (CIK 1236275)
- Form: 10-Q
- Filed: 2024-11-13
- Accepted by EDGAR: Nov 13, 2024, 08:03 ET
- Period: 2024-09-30
- Accession: 0001628280-24-047429
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/1236275/000162828024047429/qxo-20240930.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/1236275/000162828024047429/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2024-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Revenue | 3 months, 2024-07-01 to 2024-09-30 | $13.2m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Revenue | 9 months, 2024-01-01 to 2024-09-30 | $42.1m | us-gaap:RevenueFromContractWithCustomerExcludingAssessedTax |
| Cost of revenue | 3 months, 2024-07-01 to 2024-09-30 | $7.7m | us-gaap:CostOfRevenue |
| Cost of revenue | 9 months, 2024-01-01 to 2024-09-30 | $25.2m | us-gaap:CostOfRevenue |
| Selling, general and administrative | 3 months, 2024-07-01 to 2024-09-30 | $39.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Selling, general and administrative | 9 months, 2024-01-01 to 2024-09-30 | $54.0m | us-gaap:SellingGeneralAndAdministrativeExpense |
| Operating income | 3 months, 2024-07-01 to 2024-09-30 | −$33.8m | us-gaap:OperatingIncomeLoss |
| Operating income | 9 months, 2024-01-01 to 2024-09-30 | −$37.9m | us-gaap:OperatingIncomeLoss |
| Interest expense | 3 months, 2024-07-01 to 2024-09-30 | $9.0k | us-gaap:InterestExpenseNonoperating |
| Interest expense | 9 months, 2024-01-01 to 2024-09-30 | $54.0k | us-gaap:InterestExpenseNonoperating |
| Income tax | 3 months, 2024-07-01 to 2024-09-30 | $6.0m | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2024-01-01 to 2024-09-30 | $5.9m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2024-07-01 to 2024-09-30 | $17.1m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2024-01-01 to 2024-09-30 | $16.7m | us-gaap:NetIncomeLoss |
| Diluted EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.01 | us-gaap:EarningsPerShareDiluted |
| Diluted EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.10 | us-gaap:EarningsPerShareDiluted |
| Basic EPS | 3 months, 2024-07-01 to 2024-09-30 | −$0.01 | us-gaap:EarningsPerShareBasic |
| Basic EPS | 9 months, 2024-01-01 to 2024-09-30 | −$0.10 | us-gaap:EarningsPerShareBasic |
| Diluted shares (weighted) | 3 months, 2024-07-01 to 2024-09-30 | 358,813,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Diluted shares (weighted) | 9 months, 2024-01-01 to 2024-09-30 | 120,919,000 shares | us-gaap:WeightedAverageNumberOfDilutedSharesOutstanding |
| Operating cash flow | 9 months, 2024-01-01 to 2024-09-30 | $30.9m | us-gaap:NetCashProvidedByUsedInOperatingActivities |
| Capital expenditure | 9 months, 2024-01-01 to 2024-09-30 | $64.0k | us-gaap:PaymentsToAcquirePropertyPlantAndEquipment |
| Dividends paid | 9 months, 2024-01-01 to 2024-09-30 | $17.4m | us-gaap:PaymentsOfDividendsCommonStock |
| Cash and equivalents | at 2024-09-30 | $5.04bn | us-gaap:CashAndCashEquivalentsAtCarryingValue |
| Current assets | at 2024-09-30 | $5.06bn | us-gaap:AssetsCurrent |
| Total assets | at 2024-09-30 | $5.06bn | us-gaap:Assets |
| Current liabilities | at 2024-09-30 | $19.5m | us-gaap:LiabilitiesCurrent |
| Total liabilities | at 2024-09-30 | $19.9m | us-gaap:Liabilities |
| Long-term debt | at 2024-09-30 | $0 | us-gaap:LongTermDebtNoncurrent |
| Current portion of debt | at 2024-09-30 | $0 | us-gaap:LongTermDebtCurrent |
| Shareholders' equity | at 2024-09-30 | $5.04bn | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 18,251 characters.

Our unaudited condensed consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). These accounting principles require us to make certain estimates, judgments and assumptions. We believe that the estimates, judgments and assumptions upon which we rely are reasonable based upon information available to us at the time that these estimates, judgments and assumptions are made. These estimates, judgments and assumptions can affect the reported amounts of assets and liabilities as of the date of the unaudited condensed consolidated financial statements as well as the reported amounts of revenues and expenses during the periods presented. Our unaudited condensed consolidated financial statements would be affected to the extent that there are material differences between these estimates and actual results. In many cases, the accounting treatment of a particular transaction is specifically dictated by GAAP and does not require management’s judgment in its application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result. The following discussion should be read in conjunction with our unaudited condensed consolidated financial statements and notes appearing elsewhere in this report.

### Overview

QXO, Inc. (“QXO”, “we”, or the “Company”) was formerly known as SilverSun Technologies, Inc. (“SilverSun”). On June 6, 2024, we changed the Company’s name from SilverSun to QXO and changed its ticker symbol on the Nasdaq Capital Market from SSNT to QXO, upon completing a $1.0 billion cash investment in SilverSun by Jacobs Private Equity II, LLC (“JPE”) and certain minority co-investors. Refer to Note 3 - *Equity* of the “Notes to the Condensed Consolidated Financial Statements” for further details about the investment and related changes to our capital structure.

QXO is a technology solutions and professional services company that helps businesses manage and monetize their enterprise assets. We do this through our legacy operations, which provide critical software applications, consulting and other professional services, including specialized programming, training and technical support. Our customers are primarily small and mid-sized companies in the manufacturing, distribution and service industries.

Our strategy is to create a tech-forward leader in the $800 billion building products distribution industry with the goal of generating outsized stockholder value through accretive acquisitions and organic growth, including greenfield openings. We are executing our strategy toward a target of tens of billions of dollars of annual revenue in the next decade.

We grow our legacy business with a multi-pronged plan that fosters recurring revenue, customer retention and the steady expansion of our installed customer base, accomplished via sales and acquisitions. As we gain new customers, we help them digitally transform their business with further technologies and third-party software we represent, including application hosting, cybersecurity, warehouse management, human capital management, payment automation, sales tax compliance and many other value-added capabilities. Many of our offerings are billed on a subscription basis, increasing our monthly recurring revenue from new business in tandem with cross-selling. Our model is designed to increase average revenue per customer over the course of the relationship, facilitating our growth without a commensurate increase in costs of sales, and enhancing our profitability profile.

Our legacy business has five core components:

- *Enterprise Resource Planning Software*

Substantially all our initial sales of ERP financial accounting solutions consist of pre-packaged software and associated services to customers in the United States. We resell Sage, Accumatica, and other ERP software products, and provide related services, including installation, implementation, support, training, and a technical help desk.

- *Value-Added Services for ERP*

Our consulting and professional services organization shepherds our customer relationships from installation to go-live and forward as needed. A significant portion of our service revenue comes from continuing to work with existing customers as their needs change, with flexible revenue options that include prepaid services, time and materials as utilized and annual support.

- *IT Managed Network Services and Business Consulting*

We provide comprehensive managed Software-as-a-Service (SaaS) solutions, such as infrastructure-as-a-service, cybersecurity, cloud hosting, business continuity, disaster recovery, data back-up, network maintenance and server applications upgrade services.

- *Cybersecurity*

Our cybersecurity-as-a-service offering is managed by our security operations center and includes incident response, cybersecurity assessments and hacking simulations. This SaaS offering is particularly valuable to customers in compliance-driven and regulated industries, including financial services, pension administration, insurance and the land and title sector.

- *Application Hosting*

Our SaaS hosting solutions enable applications to reside securely in a remote cloud infrastructure and be accessed by our customers through the internet, eliminating many of the costs of maintaining business technologies on site.

Our Company has executed this plan successfully to expand into new geographies and create additional revenue and profit streams. This has strengthened our legacy operating platform and expanded our footprint to nearly every U.S. state, with concentrations in Arizona, California, Connecticut, Illinois, New Jersey, New York, North Carolina, Oregon and Washington as of September 30, 2024.

### Results of Operations for the Three and Nine Months Ended September 30, 2024 and 2023

The following tables set forth our results of operations for the periods presented and express the relationship of certain line items as a percentage of net sales for those periods. The period-to-period comparison of financial results is not necessarily indicative of future results:

*(in thousands, except percentages)*

| Condensed Consolidated Statements of Operations Revenue: | Three Months Ended September 30, 2024 | September 30, 2023 | % Change | % of net revenue September 30, 2024 | September 30, 2023 | Nine Months Ended September 30, 2024 | September 30, 2023 | % Change | % of net revenue September 30, 2024 | September 30, 2023 |
| --- | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: | ---: |
| Software product, net | $3,028 | $2,850 | 6.2% | 23.0% | 21.2% | $10,284 | $9,471 | 8.6% | 24.4% | 23.8% |
| Service and other, net | 10,127 | 10,573 | (4.2%) | 77.0% | 78.8% | 31,846 | 30,337 | 5.0% | 75.6% | 76.2% |
| Total revenue, net | 13,155 | 13,423 | (2.0%) | 100.0% | 100.0% | 42,130 | 39,808 | 5.8% | 100.0% | 100.0% |
| Cost of revenue: |  |  |  |  |  |  |  |  |  |  |
| Product | 1,822 | 1,754 | 3.9% | 13.9% | 13.1% | 6,390 | 5,714 | 11.8% | 15.2% | 14.4% |
| Service and other | 5,891 | 6,319 | (6.8%) | 44.8% | 47.1% | 18,846 | 18,201 | 3.5% | 44.7% | 45.7% |
| Total cost of revenue | 7,713 | 8,073 | (4.5%) | 58.6% | 60.1% | 25,236 | 23,915 | 5.5% | 59.9% | 60.1% |
| Operating expenses: |  |  |  |  |  |  |  |  |  |  |
| Selling, general and administrative expenses | 39,023 | 7,712 | 406.0% | 296.6% | 57.5% | 54,047 | 17,018 | 217.6% | 128.3% | 42.8% |
| Depreciation and amortization expenses | 245 | 196 | 25.0% | 1.9% | 1.5% | 746 | 608 | 22.7% | 1.8% | 1.5% |
| Total operating expenses | 39,268 | 7,908 | 396.6% | 298.5% | 58.9% | 54,793 | 17,626 | 210.9% | 130.1% | 44.3% |
| Loss from operations | (33,826) | (2,558) | NM | (257.1%) | (19.1%) | (37,899) | (1,733) | NM | (90.0%) | (4.4%) |
| Interest income (expense), net | 56,989 | (8) | NM | 433.2% | (0.1)% | 60,438 | (42) | NM | 143.5% | (0.1%) |
| Income (loss) before taxes | 23,163 | (2,566) | NM | 176.1% | (19.1%) | 22,539 | (1,775) | NM | 53.5% | (4.5%) |
| Provision (benefit) for income taxes | 6,031 | (456) | NM | 45.8% | (3.4%) | 5,859 | (286) | NM | 13.9% | (0.7%) |
| Net income (loss) | $17,132 | $(2,110) | NM | 130.2% | (15.7%) | $16,680 | $(1,489) | NM | 39.6% | (3.7%) |
| NM = Not Meaningful |  |  |  |  |  |  |  |  |  |  |

#### Revenue, net

Our consolidated net revenue for the third quarter of 2024 remained relatively consistent, slightly decreasing $268,000 or 2.0%, compared with the same period in the prior year. Our consolidated net revenue for the nine months of 2024 increased $2.3 million or 5.8% compared with the same period in the prior year. Net revenue for the nine months increased across our lines of business as we grew our customer base through strategic acquisitions and continued renewals of our subscription-based services. Specifically, software product revenue increased as we expanded our Sage Intacct and Acumatica product lines, and service revenue increased as we expanded our hosting application services and consulting practices.

#### Cost of revenue

Cost of revenue for the three months ended September 30, 2024 decreased $360,000 or 4.5%, compared with the same period in the prior year. As a percentage of revenue, margin expanded to 41.4%, compared with 39.9% for the same period in the prior year. Margin expansion in the period is attributed to improved operational productivity in serving customer demand. For the nine months of 2024, cost of revenue increased $1.3 million or 5.5% associated with the increase in revenue, compared with the same period in the prior year. Margin increased to 40.1%, compared with 39.9% for the same period in the prior year, as we expanded our product offerings in newly acquired lines of business to grow our customer base.

#### Operating expenses

Selling, general and administrative expenses for the third quarter of 2024 increased $31.3 million or 406.0%, compared with the same period in the prior year. Selling, general and administrative expenses for the nine months of 2024 increased $37.0 million or 217.6%, compared with the same period in the prior year. The year-over-year increases in operating expenses are primarily due to: i) salary and expense and share-based compensation associated with the Company’s new senior management team put in place to execute our expansive growth plan, ii) the severance payment contemplated in the Investment Agreement for Mark Meller and, iii) certain transaction costs associated with the private placements.

Depreciation and amortization expense for the third quarter of 2024 increased $49,000 or 25.0%, compared with the same period in the prior year. Depreciation and amortization expense for the first nine months of 2024 increased $138,000 or 22.7%, compared with the same period in the prior year. The year-over-year increases are attributed to higher amortization expense associated with the acquisition of JCS in 2023.

#### Interest income (expense), net

Interest income increased $57.0 million and $60.5 million for the three- and nine-month periods ended September 30, 2024, compared with the same periods in the prior year. The increase is attributed to the interest earned on our cash position due to the cash infusion from the Equity Investment and the private placements that closed in July 2024.

### Non-GAAP Financial Measures

#### Adjusted EBITDA

To provide investors with additional information regarding our financial results, we have disclosed here and elsewhere in this Quarterly Report Adjusted EBITDA, a non-GAAP financial measure that we calculate as net income (loss) excluding depreciation and amortization; share-based compensation; income tax (benefit) provision; interest (income) expense; transaction costs; severance costs and other items that we do not consider representative of our underlying operations. We have provided a reconciliation below of Adjusted EBITDA to net income (loss), the most directly comparable GAAP financial measure. Management uses Adjusted EBITDA in making financial, operating and planning decisions and evaluating QXO’s ongoing performance.

We believe that Adjusted EBITDA facilitates analysis of our ongoing business operations because it excludes items that may not be reflective of, or are unrelated to, QXO’s core operating performance, and may assist investors with comparisons to prior periods and assessing trends in our underlying business. Other companies may calculate this non-GAAP financial measure differently, and therefore our measure may not be comparable to similarly titled measures of other companies. This non-GAAP financial measure should only be used as a supplemental measure of our operating performance.

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, net income (loss), and our other GAAP results.

The following table presents a reconciliation of net income (loss) to Adjusted EBITDA.

*(in thousands)*

| Reconciliation of net income (loss) to Adjusted EBITDA | Three Months Ended September 30, 2024 | September 30, 2023 | Nine Months Ended September 30, 2024 | September 30, 2023 |
| --- | ---: | ---: | ---: | ---: |
| Net income (loss) | $17,132 | $(2,110) | $16,680 | $(1,489) |
| Add (deduct): |  |  |  |  |
| Depreciation and amortization | 277 | 237 | 851 | 739 |
| Share-based compensation | 13,985 | — | 13,985 | 41 |
| Interest (income) expense | (56,989) | 8 | (60,438) | 42 |
| Provision (benefit) for income taxes | 6,031 | (456) | 5,859 | (286) |
| Transaction costs | 8,095 | 2,986 | 8,118 | 2,986 |
| Severance costs | — | — | 2,768 | — |
| Adjusted EBITDA | $(11,469) | $665 | $(12,177) | $2,033 |

The year-over-year declines in three- and nine-month 2024 Adjusted EBITDA were due to higher employee-related costs in the third quarter, reflecting the introduction of a new senior management team to execute the Company’s expansive growth plan.

### Liquidity and Capital Resources

On June 6, 2024, we closed the Equity Investment under the Investment Agreement that we entered into on April 14, 2024 among the Company, JPE and certain minority investors. Pursuant to the Investment Agreement, we issued and sold an aggregate of 1,000,000 shares of Convertible Perpetual Preferred Stock, par value $0.001 per share (the "Convertible Preferred Stock"), which are initially convertible into an aggregate of 219,010,074 shares of common stock at an initial conversion price of $4.566 per share, and we issued and sold warrants exercisable for an aggregate of 219,010,074 shares of common stock (the "Warrants"). Upon closing, the Equity Investment generated gross proceeds of $1.0 billion, before deducting agent fees and offering expenses. For more information on the Investment Agreement, refer to Note 3 - *Equity.*

On June 13, 2024, we entered into purchase agreements with certain institutional and accredited investors to issue and sell in a private placement an aggregate of 340,932,212 shares of our common stock at a price of $9.14 per share, and Pre-Funded Warrants to purchase 42,000,000 shares of our common stock at a price of $9.13999 per Pre-Funded Warrant. Each Pre-Funded Warrant has an exercise price of $0.00001 per share, is exercisable immediately and until the Pre-Funded Warrant is exercised in full. The closing of the issuance and sale of these securities was consummated on July 19, 2024, and generated gross proceeds of approximately $3.5 billion before deducting agent fees and offering expenses.

On July 22, 2024, we entered into additional purchase agreements with certain institutional and accredited investors to issue and sell in a private placement an aggregate of 67,833,699 shares of our common stock at a price of $9.14 per share. The closing of the issuance and sale of these securities was consummated on July 25, 2024, and generated gross proceeds of approximately $620 million, before deducting agent fees and offering expenses.

Under the terms of the Investment Agreement, we declared a $17.4 million aggregate cash dividend to its stockholders of record as of the day before the closing of the Equity Investment. The dividend was paid from proceeds received from the Equity Investment. Under the terms of the Convertible Preferred Stock, dividends are paid quarterly when, as and if declared by our Board of Directors (the “Board”), at the rate per annum of 9% per share. During the quarter ended September 30, 2024, we paid $9.8 million of quarterly dividends to holders of Convertible Preferred Stock. Subsequent to the close of the quarter ended September 30, 2024, we paid $22.5 million of quarterly dividends to holders of Convertible Preferred Stock.

The Company’s cash balance was $5.04 billion as of September 30, 2024 and consisted primarily of cash on deposit with banks and investments in money market funds. We continually evaluate our liquidity requirements in light of our operating needs, growth initiatives and capital resources. We believe that our existing liquidity and sources of capital are sufficient to support our operations over the next 12 months.

#### Cash provided by operating activities

Cash provided by operating activities increased by $30.1 million, compared with the same period in the prior year. The year-over-year increase is attributed to interest income earned in the period offset by higher personnel costs associated with the execution of the Company's strategy as contemplated in the Investment Agreement.

#### Cash used in investing activities

Cash used in investing activities decreased by $11,000, compared with the same period in the prior year. Investment in capital expenditures is mainly associated with IT equipment to support the business.

#### Cash provided by (used in) financing activities

Cash provided by financing activities was $5.0 billion, compared with $1.9 million of cash used in financing activities in the same period in the prior year. The year-over-year increase is attributed to the Equity Investment of June 6, 2024 and the private placements in July 2024. The Company paid the common stock dividend, the preferred stock dividend, and paid its long-term debt obligations with proceeds from these investments.

## Controls and procedures

As filed, 2,235 characters.

### Management’s Evaluation of Disclosure Controls and Procedures

We maintain disclosure controls and procedures that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms and that such information is accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required financial disclosure.

As of the end of the period covered by this Quarterly Report, our management, under the supervision and with the participation of our principal executive officer and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures pursuant to Exchange Act Rule 13a-15(e) and 15d-15(e). Based upon this evaluation, our principal executive officer and principal financial officer concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2024.

### Change in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during the nine months ended September 30, 2024, that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

### Limitations on the Effectiveness of Controls

Our disclosure controls and procedures and internal control over financial reporting are designed to provide reasonable assurance of achieving their objectives as specified above. Management does not expect, however, that our disclosure controls and procedures will prevent or detect all error and fraud. Any control system, no matter how well designed and operated, is based on certain assumptions and can provide only reasonable, not absolute, assurance that its objectives will be met. Further, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud, if any, within the Company have been detected.

## Risk factors

As filed, 239 characters.

There are no material changes to the risk factors previously disclosed in Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2023 and Quarterly Report on Form 10-Q for the quarter ended June 30, 2024.

Filed Nov 13, 2024.
Source: SEC EDGAR, the filing index for accession 0001628280-24-047429. Last ingested by Listed: Oct 30, 2026, 12:37 ET. No prices; not investment advice.