Core Insights - The stock price of the company has experienced a significant decline, falling nearly 80% since the last analysis, with a drop of 20-30% on the first day after the results were announced [1]. Group 1: Investment Philosophy - The investment approach focuses on operational aspects and long-term earnings potential rather than market-driven dynamics [1]. - The strategy emphasizes holding companies for the long term, with most recommendations being holds rather than buys [1]. - The analysis aims to provide valuable information for future investors and introduce skepticism in a generally bullish market [1].

Financial Data and Key Metrics Changes - Revenue for the second quarter was $59.5 million, a decrease of 19% year-over-year and down 13% sequentially from the first quarter [8][9] - Operating cash flow generated in the second quarter was $3.9 million, with a year-to-date debt reduction of $6.6 million [7][14] - SG&A expenses were $9.3 million, a decrease of $2.1 million sequentially from the first quarter [12] Business Line Data and Key Metrics Changes - Gross profit dollars were $11 million, showing a slight increase from the first quarter despite a decrease in revenue [9][10] - The decline in revenue was primarily attributed to the industrial end market and the sale of the mall-related business [8][9] - New clients added over the past eighteen months contributed to modest sequential growth in revenue [9] Market Data and Key Metrics Changes - The industrial end market continues to show weakness, impacting client volumes and revenue [11][25] - The food and grocery sectors are performing well, providing some offset to the industrial sector's challenges [34] Company Strategy and Development Direction - The company is focused on improving operations, changing its culture, and laying the groundwork for sustainable profitable growth [6][8] - There is an emphasis on expanding share of wallet with existing clients and adding new clients, with a robust pipeline of new business [20][21] - The company is committed to maintaining a solid balance sheet, prioritizing debt repayment while also investing in technology and automation [27][55] Management's Comments on Operating Environment and Future Outlook - Management expressed caution regarding the outlook due to uncertainty in client volumes, particularly in the industrial end market [11][25] - Despite near-term headwinds, management remains confident in resuming sequential growth in the fourth quarter [11][26] - The company is optimistic about the long-term potential of its asset-light model and the ability to generate cash flow [26][109] Other Important Information - The company has made significant changes to its organization and operational approach to address inefficiencies [6][8] - Improvements in cash cycle times and vendor communications have been noted, contributing to better cash flow management [14][18] Q&A Session Summary Question: Revenue decline and industrial space outlook - Management indicated that the industrial sector will continue to follow general economic trends, with uncertainty impacting volumes [33][34] Question: Margin pressure and renewals - Margin pressure is not isolated to the industrial sector but is more pronounced there; renewals are part of a normal cycle [37][38] Question: Confidence in cash flow and DSOs - Management expressed confidence in cash flow generation and the ability to lower DSOs, with ongoing improvements expected [67][72] Question: New business wins and onboarding costs - Onboarding of new customers is complete, and the focus is now on service optimization [58] Question: Client attrition and retention rates - Most attrition has been related to the divested mall business, with high retention rates noted for existing clients [60][62] Question: Revenue growth opportunities - Management highlighted significant opportunities for growth through share of wallet initiatives and new client acquisitions [96][97]

Core Insights - Quest Resource Holding Corporation reported a GAAP net loss of $(2.0) million for Q2 2025, compared to a loss of $(1.5) million in Q2 2024, and a significant improvement from a loss of $(10.4) million in Q1 2025 [4] - Revenue for Q2 2025 was $59.5 million, an 18.6% decrease year-over-year and a 13.0% decrease sequentially from Q1 2025 [4] - The company generated $3.9 million in operating cash flow during Q2 2025 and reduced debt by $6.6 million year-to-date [1][4] Financial Performance - Gross profit for Q2 2025 was $11.0 million, down 18.4% from Q2 2024, but showed a 1.0% increase sequentially from Q1 2025 [4] - Adjusted EBITDA for Q2 2025 was $2.7 million, compared to $5.1 million in Q2 2024 and $1.6 million in Q1 2025 [4] - Year-to-date Adjusted EBITDA was $4.2 million, a 58.7% decrease compared to $10.3 million during the same period of 2024 [4] Operational Initiatives - The company is on track with its Operational Excellence Initiatives, focusing on cash generation, profitability, and process improvement [1][7] - Management has made strategic changes, including reductions and additions to the management team, to address operational issues and client attrition [4][6] - Despite challenges in the industrial sector, the company secured new clients and expanded existing client relationships, particularly in the restaurant and retail markets [8] Market Context - The company faced a host of operational challenges last year, including a slowdown in the industrial sector and difficulties in client retention [4] - Macro uncertainties are causing prospective clients to delay decision-making, impacting growth, but the company continues to add new client opportunities [8]

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited condensed consolidated financial statements and related notes for Quest Resource Holding Corporation for the periods ended June 30, 2025 and 2024 [Condensed Consolidated Balance Sheets](index=3&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) **Condensed Consolidated Balance Sheets (In Thousands):** | ASSETS (June 30, 2025) | Amount ($) | | :--------------------- | :--------- | | Cash and cash equivalents | 449 | | Accounts receivable, net | 53,660 | | Prepaid expenses and other current assets | 2,618 | | Assets held for sale | — | | **Total current assets** | **56,727** | | Goodwill | 81,065 | | Intangible assets, net | 9,316 | | Property and equipment, net, and other assets | 5,954 | | **Total assets** | **153,062** | | LIABILITIES AND STOCKHOLDERS' EQUITY (June 30, 2025) | Amount ($) | | :----------------------------------- | :--------- | | Accounts payable and accrued liabilities | 38,130 | | Deferred revenue | 146 | | Current portion of notes payable | 1,540 | | Liabilities held for sale | — | | **Total current liabilities** | **39,816** | | Notes payable, net | 69,680 | | Other long-term liabilities | 628 | | **Total liabilities** | **110,124** | | Total stockholders' equity | 42,938 | | **Total liabilities and stockholders' equity** | **153,062** | - Total assets decreased from **$175.6 million** at December 31, 2024, to **$153.1 million** at June 30, 2025, primarily due to the sale of assets held for sale and a decrease in accounts receivable[9](index=9&type=chunk) - Total liabilities decreased from **$121.5 million** at December 31, 2024, to **$110.1 million** at June 30, 2025, driven by reductions in accounts payable, deferred revenue, and notes payable[9](index=9&type=chunk) [Condensed Consolidated Statements of Operations](index=4&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) **Condensed Consolidated Statements of Operations (In Thousands, Except Per Share Amounts):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $59,540 | $73,145 | $127,970 | $145,796 | | Cost of revenue | 48,503 | 59,613 | 106,002 | 118,228 | | Gross profit | 11,037 | 13,532 | 21,968 | 27,568 | | Operating income (loss) | 382 | 1,782 | (7,779) | 3,658 | | Net loss | $(1,971) | $(1,514) | $(12,377) | $(2,169) | | Net loss per share (Basic and Diluted) | $(0.09) | $(0.07) | $(0.59) | $(0.11) | - Revenue decreased by **18.6%** for the three months ended June 30, 2025, and by **12.2%** for the six months ended June 30, 2025, compared to the prior year periods[11](index=11&type=chunk) - The company reported an increased net loss for both the three-month and six-month periods ended June 30, 2025, with the six-month net loss significantly widening to **$(12.4) million** from **$(2.2) million**[11](index=11&type=chunk) [Condensed Consolidated Statements of Changes in Stockholders' Equity](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) **Changes in Stockholders' Equity (In Thousands):** | Item | Balance, Dec 31, 2024 | Stock-based Compensation | Net Loss | Other Adjustments | Balance, Jun 30, 2025 | | :-------------------------------- | :-------------------- | :----------------------- | :------- | :------------------ | :-------------------- | | Common Stock (Shares) | 20,606 | — | — | 106 | 20,712 | | Common Stock (Par Value) | $21 | — | — | — | $21 | | Additional Paid-in Capital | $179,246 | $1,112 | — | $47 | $180,405 | | Accumulated Deficit | $(125,111) | — | $(12,377) | — | $(137,488) | | **Total Stockholders' Equity** | **$54,156** | **$1,112** | **$(12,377)** | **$47** | **$42,938** | - Total stockholders' equity decreased from **$54.2 million** at December 31, 2024, to **$42.9 million** at June 30, 2025, primarily due to the net loss incurred during the period[13](index=13&type=chunk) - Stock-based compensation contributed **$1.1 million** to additional paid-in capital for the six months ended June 30, 2025[13](index=13&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) **Condensed Consolidated Statements of Cash Flows (In Thousands):** | Cash Flow Activity | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :----------------------------------- | :------------------------------- | :------------------------------- | | Net cash provided by (used in) operating activities | $2,845 | $(844) | | Net cash provided by (used in) investing activities | $4,234 | $(4,847) | | Net cash (used in) provided by financing activities | $(7,026) | $6,325 | | Net increase in cash and cash equivalents | $53 | $634 | | Cash and cash equivalents at end of period | $449 | $958 | - Operating activities generated **$2.8 million** in cash for the six months ended June 30, 2025, a significant improvement from **$(0.8) million** cash used in the prior year[15](index=15&type=chunk) - Investing activities provided **$4.2 million** in cash, primarily from the sale of assets, contrasting with **$4.8 million** cash used in the prior year for equipment purchases[15](index=15&type=chunk) - Financing activities used **$7.0 million** in cash, mainly due to debt repayments, compared to **$6.3 million** cash provided in the prior year from net borrowings[15](index=15&type=chunk) [Notes to Condensed Consolidated Financial Statements](index=7&type=section&id=Notes%20to%20Condensed%20Consolidated%20Financial%20Statements) [1. The Company and Description of Business](index=7&type=section&id=1.%20The%20Company%20and%20Description%20of%20Business) - Quest Resource Holding Corporation provides national waste and recycling services to large, multi-location businesses, focusing on maximizing resource utilization and supporting sustainability goals[17](index=17&type=chunk)[18](index=18&type=chunk) [2. Summary of Significant Accounting Policies](index=7&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - The unaudited condensed consolidated financial statements are prepared under SEC rules, with the company operating as a single reportable segment managed at the consolidated level[19](index=19&type=chunk)[21](index=21&type=chunk) - Recent accounting pronouncements, ASU 2023-09 (Income Taxes) and ASU 2024-03 (Income Statement), are being evaluated, with ASU 2023-09 not expected to significantly impact financial statements[23](index=23&type=chunk)[24](index=24&type=chunk) [3. Sale of Assets](index=8&type=section&id=3.%20Sale%20of%20Assets) - On March 31, 2025, Quest sold its mall-related business assets for approximately **$5.0 million** in cash, with potential additional milestone payments up to **$6.5 million**[26](index=26&type=chunk) - The company recognized a **$4.4 million** loss on asset sale in Q1 2025 and an additional **$61 thousand** loss in Q2 2025, with proceeds used for debt repayment[27](index=27&type=chunk) [4. Accounts Receivable, Net of Allowance for Doubtful Accounts](index=8&type=section&id=4.%20Accounts%20Receivable,%20Net%20of%20Allowance%20for%20Doubtful%20Accounts) - The allowance for doubtful accounts decreased from **$831 thousand** at December 31, 2024, to **$751 thousand** at June 30, 2025[29](index=29&type=chunk) **Allowance for Doubtful Accounts Activity (In Thousands):** | Metric | Three Months Ended June 30, 2025 | Six Months Ended June 30, 2025 | | :-------------------------------- | :------------------------------- | :----------------------------- | | Beginning balance | $873 | $831 | | Bad debt expense | $112 | $428 | | Uncollectible accounts written off, net of recoveries | $(234) | $(508) | | Ending balance | $751 | $751 | [5. Property and Equipment, Net, and Other Assets](index=8&type=section&id=5.%20Property%20and%20Equipment,%20Net,%20and%20Other%20Assets) **Property and Equipment, Net, and Other Assets (In Thousands):** | Asset Category | June 30, 2025 | December 31, 2024 | | :----------------------------------- | :------------ | :---------------- | | Property and equipment, net | $4,210 | $4,507 | | Right-of-use operating lease assets | $1,071 | $1,305 | | Security deposits and other assets | $673 | $683 | | **Total** | **$5,954** | **$6,495** | - Depreciation expense for the six months ended June 30, 2025, was **$477 thousand**, with **$404 thousand** included in 'Cost of revenue'[30](index=30&type=chunk) [6. Goodwill and Other Intangible Assets](index=10&type=section&id=6.%20Goodwill%20and%20Other%20Intangible%20Assets) **Goodwill and Other Intangible Assets (In Thousands):** | Asset Category | June 30, 2025 (Net) | December 31, 2024 (Net) | | :-------------------------- | :------------------ | :---------------------- | | Customer relationships | $4,589 | $8,617 | | Software | $3,792 | $3,247 | | Trademarks | $935 | $1,079 | | Non-compete agreements | $— | $3 | | **Total finite lived intangible assets** | **$9,316** | **$12,946** | | Goodwill | $81,065 | $81,065 | - Amortization expense for finite-lived intangible assets decreased to **$2.8 million** for the six months ended June 30, 2025, from **$4.6 million** in the prior year[32](index=32&type=chunk) - A **$1.7 million** impairment charge was recognized in Q1 2025 for customer relationship intangible assets, though a qualitative assessment found no goodwill impairment as of June 30, 2025[34](index=34&type=chunk)[35](index=35&type=chunk) [7. Current Liabilities](index=11&type=section&id=7.%20Current%20Liabilities) **Accounts Payable and Accrued Liabilities (In Thousands):** | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Accounts payable and accrued liabilities | $33,450 | $37,088 | | Accrued taxes | $611 | $626 | | Employee compensation | $2,230 | $1,323 | | Operating lease liabilities - current portion | $428 | $434 | | Miscellaneous | $1,411 | $428 | | **Total** | **$38,130** | **$39,899** | - Total accounts payable and accrued liabilities decreased from **$39.9 million** at December 31, 2024, to **$38.1 million** at June 30, 2025[36](index=36&type=chunk) [8. Notes Payable](index=11&type=section&id=8.%20Notes%20Payable) **Notes Payable (In Thousands):** | Debt Obligation | Interest Rate (June 30, 2025) | June 30, 2025 | December 31, 2024 | | :-------------------------- | :---------------------------- | :------------ | :---------------- | | Monroe Term Loan | 11.94% | $51,363 | $54,000 | | PNC ABL Facility | 6.57% | $20,356 | $23,109 | | PNC Equipment Term Loan 1 | 7.33% | $1,431 | $2,729 | | PNC Equipment Term Loan 2 | 7.32% | $358 | $— | | Green Remedies Promissory Note | 3.00% | $296 | $564 | | **Total notes payable** | | **$73,804** | **$80,402** | | Less: Current portion, debt issuance costs, OID | | $(4,124) | $(4,137) | | **Notes payable, net** | | **$69,680** | **$76,265** | - Total notes payable, net, decreased from **$76.3 million** at December 31, 2024, to **$69.7 million** at June 30, 2025[37](index=37&type=chunk) - The company repaid **$1.5 million** on the ABL Facility, **$1.0 million** on Equipment Term Loan 1, and **$2.5 million** on the Monroe Term Loan using asset sale proceeds[42](index=42&type=chunk)[47](index=47&type=chunk) - The company secured waivers and revised leverage requirements through amendments to its PNC and Monroe credit agreements after non-compliance with debt covenants in Q1 2025[45](index=45&type=chunk) [9. Leases](index=15&type=section&id=9.%20Leases) - Operating lease expense for office space was approximately **$177 thousand** for the three months and **$354 thousand** for the six months ended June 30, 2025[50](index=50&type=chunk) **Lease Related Assets and Liabilities (In Thousands):** | Category | June 30, 2025 | December 31, 2024 | | :-------------------------------- | :------------ | :---------------- | | Right-of-use operating lease assets | $1,071 | $1,305 | | Total operating lease liabilities | $1,056 | $1,267 | [10. Revenue](index=15&type=section&id=10.%20Revenue) - Revenue is primarily generated from fees for waste and recycling services, commodity sales, and equipment rentals[54](index=54&type=chunk) **Revenue Disaggregated by Source (In Thousands):** | Revenue Type | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Services | $56,314 | $70,123 | $121,507 | $139,925 | | Product sales and other | $3,226 | $3,022 | $6,463 | $5,871 | | **Total revenue** | **$59,540** | **$73,145** | **$127,970** | **$145,796** | - One customer accounted for **22.0%** of revenue for the three months and **23.2%** for the six months ended June 30, 2025[57](index=57&type=chunk) [11. Income Taxes](index=17&type=section&id=11.%20Income%20Taxes) **Income Tax Expense (Benefit) (In Thousands):** | Period | Income Tax Expense (Benefit) | | :----------------------------- | :--------------------------- | | Three Months Ended June 30, 2025 | $(22) | | Three Months Ended June 30, 2024 | $684 | | Six Months Ended June 30, 2025 | $(44) | | Six Months Ended June 30, 2024 | $743 | - The company recorded an income tax benefit of **$(44) thousand** for the six months ended June 30, 2025, compared to an expense of **$743 thousand** in the prior year, due to state tax obligations and a valuation allowance[60](index=60&type=chunk)[61](index=61&type=chunk) - A valuation allowance of **$24.8 million** was recorded against deferred tax assets, with federal net operating loss carryforwards of approximately **$18.3 million** as of June 30, 2025[61](index=61&type=chunk) [12. Fair Value of Financial Instruments](index=17&type=section&id=12.%20Fair%20Value%20of%20Financial%20Instruments) - Fair values of financial instruments approximate carrying values due to short maturities or similar borrowing rates, with variable rate indebtedness exposing the company to interest rate risk[62](index=62&type=chunk) [13. Stockholders' Equity](index=17&type=section&id=13.%20Stockholders'%20Equity) - As of June 30, 2025, **20,712,204** shares of common stock were outstanding, with **45,261** shares issued to employees via the 2024 ESPP[63](index=63&type=chunk)[64](index=64&type=chunk) **Warrants Issued and Outstanding as of June 30, 2025:** | Description | Issuance Date | Expiration Date | Exercise Price | Shares of Common Stock | | :------------------ | :------------ | :-------------- | :------------- | :--------------------- | | Exercisable Warrants | 10/19/2020 | 3/19/2028 | $1.50 | 500,000 | | Exercisable Warrants | 10/19/2021 | 3/19/2028 | $1.50 | 350,000 | | **Total** | | | | **850,000** | - Stock-based compensation expense for the six months ended June 30, 2025, included **$220 thousand** for stock options, **$178 thousand** for DSUs, and **$594 thousand** for RSUs[66](index=66&type=chunk)[67](index=67&type=chunk)[68](index=68&type=chunk) - **313,650** Performance Stock Units (PSUs) were granted under the 2024 Plan, with **$128 thousand** in compensation expense recorded for the six months ended June 30, 2025[69](index=69&type=chunk)[70](index=70&type=chunk) [14. Net Loss per Share](index=19&type=section&id=14.%20Net%20Loss%20per%20Share) **Net Loss per Share (In Thousands, Except Per Share Amounts):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :------------------------------------------ | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss applicable to common stockholders | $(1,971) | $(1,514) | $(12,377) | $(2,169) | | Weighted average common shares outstanding, basic | 20,933 | 20,507 | 20,896 | 20,446 | | Net loss per share (Basic and Diluted) | $(0.09) | $(0.07) | $(0.59) | $(0.11) | - Net loss per basic and diluted share increased to **$(0.59)** for the six months ended June 30, 2025, from **$(0.11)** in the prior year, reflecting the higher net loss[73](index=73&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=21&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial condition and operating results for the three and six months ended June 30, 2025, covering revenue, net losses, and liquidity [Business Overview](index=21&type=section&id=Business%20Overview) - Quest provides national waste and recycling services to large, multi-location businesses, supporting customer sustainability and ESG goals[75](index=75&type=chunk) - Primary revenue sources include fees for waste and recycling services, sales of recyclable materials, and product sales[76](index=76&type=chunk) [Operating Results](index=22&type=section&id=Operating%20Results) **Summary of Operating Results (In Thousands):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Revenue | $59,540 | $73,145 | $127,970 | $145,796 | | Gross profit | $11,037 | $13,532 | $21,968 | $27,568 | | Operating income (loss) | $382 | $1,782 | $(7,779) | $3,658 | | Net loss | $(1,971) | $(1,514) | $(12,377) | $(2,169) | [Global Economic Trends](index=22&type=section&id=Global%20Economic%20Trends) - Macroeconomic uncertainty, including unemployment, inflation, tariffs, and geopolitical concerns, could adversely affect the company by increasing costs and hindering financing[79](index=79&type=chunk) [Revenue Analysis](index=22&type=section&id=Revenue%20Analysis) - Revenue for the quarter decreased by **$13.6 million (18.6%)** to **$59.5 million**, and for the six months, it decreased by **$17.8 million (12.2%)** to **$128.0 million**[80](index=80&type=chunk) - The revenue decline was primarily due to the mall-related business divestiture (approx. **$5 million** for the quarter, **$9 million** for six months) and industrial market softness (approx. **$11 million** for the quarter, **$17 million** for six months)[81](index=81&type=chunk)[82](index=82&type=chunk) - New client revenue of **$3 million** for the quarter and **$8 million** for six months partially offset declines, while customer attrition reduced revenue by **$5 million** and **$9 million**, respectively[81](index=81&type=chunk)[82](index=82&type=chunk) [Cost of Revenue and Gross Profit Analysis](index=22&type=section&id=Cost%20of%20Revenue%20and%20Gross%20Profit%20Analysis) - Cost of revenue decreased by **$11.1 million** to **$48.5 million** for the quarter and by **$12.2 million** to **$106.0 million** for the six months, mirroring revenue changes[83](index=83&type=chunk) - Gross profit margin remained flat at **18.5%** for the quarter but declined by **1.7%** to **17.2%** for the six months, primarily due to higher new customer implementation costs[84](index=84&type=chunk)[85](index=85&type=chunk)[86](index=86&type=chunk) [Operating Expenses Analysis](index=24&type=section&id=Operating%20Expenses%20Analysis) - Operating expenses decreased to **$10.7 million** for the quarter from **$11.8 million** in the prior year, but increased to **$29.7 million** for the six months from **$23.9 million**[88](index=88&type=chunk) - SG&A expenses increased for the six months due to **$0.7 million** in Q1 2025 severance and retirement expenses, partially offset by Q2 2025 headcount reductions[89](index=89&type=chunk) - Depreciation and amortization expense decreased due to lower intangible asset balances, while a **$4.5 million** loss on asset sale and a **$1.7 million** impairment charge were recognized in the six months ended June 30, 2025[90](index=90&type=chunk)[92](index=92&type=chunk)[93](index=93&type=chunk) [Interest Expense Analysis](index=24&type=section&id=Interest%20Expense%20Analysis) - Interest expense decreased to **$2.4 million** for the quarter and **$4.6 million** for the six months ended June 30, 2025, primarily due to lower interest rates despite increased borrowings[94](index=94&type=chunk) [Income Taxes Analysis](index=24&type=section&id=Income%20Taxes%20Analysis) - The company recorded an income tax benefit of **$(22) thousand** for the quarter and **$(44) thousand** for the six months ended June 30, 2025, primarily due to state tax obligations and a full valuation allowance[95](index=95&type=chunk)[96](index=96&type=chunk) [Net Loss and Loss per Share](index=26&type=section&id=Net%20Loss%20and%20Loss%20per%20Share) - Net loss for the quarter ended June 30, 2025, was **$(2.0) million**, and for the six months, it was **$(12.4) million**, significantly higher than prior year periods[97](index=97&type=chunk) - Net loss per basic and diluted share was **$(0.09)** for the quarter and **$(0.59)** for the six months ended June 30, 2025[99](index=99&type=chunk) [Adjusted EBITDA](index=26&type=section&id=Adjusted%20EBITDA) - Adjusted EBITDA decreased by **47.8%** to **$2.7 million** for the three months and by **58.7%** to **$4.2 million** for the six months ended June 30, 2025[101](index=101&type=chunk) **Reconciliation of Net Loss to Adjusted EBITDA (In Thousands):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Net loss | $(1,971) | $(1,514) | $(12,377) | $(2,169) | | Depreciation and amortization | 1,500 | 2,605 | 3,246 | 5,101 | | Interest expense | 2,375 | 2,612 | 4,642 | 5,084 | | Stock-based compensation expense | 533 | 363 | 1,195 | 720 | | Loss on sale of assets | 61 | — | 4,491 | — | | Impairment loss | — | — | 1,707 | — | | Acquisition, integration and related costs | — | 19 | — | 61 | | Other adjustments | 208 | 370 | 1,379 | 719 | | Income tax expense (benefit) | (22) | 684 | (44) | 743 | | **Adjusted EBITDA** | **$2,684** | **$5,139** | **$4,239** | **$10,259** | [Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share](index=27&type=section&id=Adjusted%20Net%20Income%20(Loss)%20and%20Adjusted%20Net%20Income%20(Loss)%20per%20Diluted%20Share) - Adjusted net income (loss) was **$(0.8) million** for the three months and **$(3.7) million** for the six months ended June 30, 2025, compared to positive adjusted net income in prior year periods[104](index=104&type=chunk) **Adjusted Net Income (Loss) (In Thousands, Except Per Share Amounts):** | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Six Months Ended June 30, 2025 | Six Months Ended June 30, 2024 | | :---------------------------------- | :------------------------------- | :------------------------------- | :----------------------------- | :----------------------------- | | Reported net loss | $(1,971) | $(1,514) | $(12,377) | $(2,169) | | Amortization of intangibles | 1,104 | 2,221 | 2,468 | 4,441 | | Acquisition, integration and related costs | — | 19 | — | 61 | | Loss on sale of assets | 61 | — | 4,491 | — | | Impairment loss | — | — | 1,707 | — | | **Adjusted net income (loss)** | **$(806)** | **$726** | **$(3,711)** | **$2,333** | | Adjusted net income (loss) per diluted share | $(0.04) | $0.03 | $(0.18) | $0.10 | [Liquidity and Capital Resources](index=27&type=section&id=Liquidity%20and%20Capital%20Resources) - Working capital decreased to **$16.9 million** at June 30, 2025, from **$30.7 million** at December 31, 2024, with cash and cash equivalents at **$0.4 million**[105](index=105&type=chunk) - The company expects existing cash, **$45.0 million** ABL Facility availability, and cash from operations to fund operations for the next 12 months and foreseeable future[107](index=107&type=chunk) [Cash Flows Analysis](index=28&type=section&id=Cash%20Flows%20Analysis) - Net cash provided by operating activities was **$2.8 million** for the six months ended June 30, 2025, a positive shift from **$(0.8) million** used in the prior year[110](index=110&type=chunk) - Cash provided by investing activities was **$4.2 million**, primarily from **$5.0 million** in proceeds from the sale of mall-related business assets[111](index=111&type=chunk) - Net cash used in financing activities was **$(7.0) million**, mainly due to **$3.5 million** in notes payable repayments from asset sale proceeds and **$2.8 million** net repayments on the ABL Facility[112](index=112&type=chunk) [Inflation Impact](index=28&type=section&id=Inflation%20Impact) - Inflation did not materially impact the company during the six months ended June 30, 2025 and 2024, with flexible pricing expected to offset cost increases[113](index=113&type=chunk) [Critical Accounting Estimates and Policies](index=29&type=section&id=Critical%20Accounting%20Estimates%20and%20Policies) - A qualitative assessment indicated a goodwill impairment triggering event due to share price decrease, but quantitative assessments found no impairment as of June 30, 2025[117](index=117&type=chunk)[118](index=118&type=chunk) [Recent Accounting Pronouncements](index=29&type=section&id=Recent%20Accounting%20Pronouncements) - Refer to Note 2 for details on recent accounting pronouncements[120](index=120&type=chunk) [Off-Balance Sheet Arrangements](index=29&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company has no off-balance sheet debt, similar obligations, undisclosed related-party transactions, or third-party debt guarantees[121](index=121&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=29&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section confirms no applicable quantitative and qualitative disclosures about market risk for the company - The company has no applicable quantitative and qualitative disclosures about market risk[122](index=122&type=chunk) [Item 4. Controls and Procedures](index=29&type=section&id=Item%204.%20Controls%20and%20Procedures) Management evaluated disclosure controls and procedures as effective, with no material changes in internal control over financial reporting - Disclosure controls and procedures were effective at a reasonable assurance level as of June 30, 2025, with no material changes in internal control over financial reporting[123](index=123&type=chunk)[124](index=124&type=chunk) - Control systems provide reasonable, not absolute, assurance and have inherent limitations, including potential for error, fraud, collusion, or management override[125](index=125&type=chunk) PART II. OTHER INFORMATION [Item 1. Legal Proceedings](index=32&type=section&id=Item%201.%20Legal%20Proceedings) The company is not aware of any legal proceedings that could materially adversely affect its business - The company is not aware of any legal proceedings that could have a material adverse effect[128](index=128&type=chunk) [Item 1A. Risk Factors](index=32&type=section&id=Item%201A.%20Risk%20Factors) This section reports no new material risk factors applicable for the current reporting period - No new material risk factors are applicable for this reporting period[129](index=129&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=32&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities or use of proceeds were reported during the period - No unregistered sales of equity securities or use of proceeds occurred[130](index=130&type=chunk) [Item 3. Defaults Upon Senior Securities](index=32&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[131](index=131&type=chunk) [Item 4. Mine Safety Disclosures](index=32&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This section is not applicable to the company's operations - Mine safety disclosures are not applicable to the company[132](index=132&type=chunk) [Item 5. Other Information](index=32&type=section&id=Item%205.%20Other%20Information) Director S. Ray Hatch resigned from the Board of Directors effective August 8, 2025, with no disagreements cited - S. Ray Hatch resigned from the Board of Directors on August 8, 2025, with no disagreements with the company[133](index=133&type=chunk) [Item 6. Exhibits](index=33&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including various agreements, certifications, and financial statements - Exhibits include various agreements, CEO/CFO Certifications, and financial statements in Inline XBRL format[134](index=134&type=chunk) [Signatures](index=34&type=section&id=Signatures) The report was duly signed by the President and CEO, and Senior Vice President and CFO, on August 11, 2025 - The report was signed by Perry W. Moss, President and CEO, and Brett W. Johnston, SVP and CFO, on August 11, 2025[139](index=139&type=chunk)

[Executive Summary & Highlights](index=1&type=section&id=Executive%20Summary%20%26%20Highlights) Quest Resource Holding Corporation reported Q2 2025 revenue of $59.5 million with sequential gross profit growth, alongside year-to-date revenue decline and significant debt reduction [Second Quarter 2025 Financial Highlights](index=1&type=section&id=Second%20Quarter%202025%20Highlights) Quest Resource Holding Corporation reported a revenue of $59.5 million in Q2 2025, an 18.6% decrease year-over-year and a 13.0% sequential decrease, with gross profit up 1.0% sequentially and gross margin improving by 250 basis points sequentially to 18.5% Second Quarter 2025 Financial Metrics | Metric | Q2 2025 (Millions) | Q2 2024 (Millions) | Q1 2025 (Millions) | YoY Change | QoQ Change | | :----- | :----------------- | :----------------- | :----------------- | :--------- | :--------- | | Revenue | $59.5 | $73.1 | $68.4 (implied) | -18.6% | -13.0% | | Gross Profit | $11.0 | $13.5 | $10.9 (implied) | -18.4% | +1.0% | | Gross Margin | 18.5% | 18.5% | 16.0% (implied) | 0 bps | +250 bps | | GAAP Net Loss | $(2.0) | $(1.5) | $(10.4) | -33.3% | +80.8% | | GAAP Net Loss per Share | $(0.09) | $(0.07) | $(0.50) | -28.6% | +82.0% | | Adjusted EBITDA | $2.7 | $5.1 | $1.6 | -47.1% | +68.8% | | Adjusted Net Loss per Share | $(0.04) | $0.03 | $(0.14) | N/A | +71.4% | [Year-to-Date 2025 Financial Highlights](index=1&type=section&id=Year-to-Date%202025%20Highlights) For the first six months of 2025, Quest reported revenue of $128.0 million, a 12.2% decrease year-over-year, with gross profit declining by 20.3% and Adjusted EBITDA decreasing by 58.7% Year-to-Date 2025 Financial Metrics | Metric | YTD 2025 (Millions) | YTD 2024 (Millions) | YoY Change | | :----- | :------------------ | :------------------ | :--------- | | Revenue | $128.0 | $145.8 | -12.2% | | Gross Profit | $22.0 | $27.6 | -20.3% | | Gross Margin | 17.2% | 18.9% | -170 bps | | GAAP Net Loss | $(12.4) | $(2.2) | -463.6% | | GAAP Net Loss per Share | $(0.59) | $(0.11) | -436.4% | | Adjusted EBITDA | $4.2 | $10.3 | -58.7% | | Adjusted Net Loss per Share | $(0.18) | $0.10 | N/A | [Recent Operational & Strategic Highlights](index=1&type=section&id=Recent%20Highlights) Quest generated $3.9 million in operating cash flow during Q2 2025, reduced debt by $6.6 million year-to-date, and secured new client wins in the restaurant and retail sectors - Generated **$3.9 million** of operating cash flow during the second quarter of 2025[6](index=6&type=chunk) - Reduced debt by **$6.6 million** year-to-date[6](index=6&type=chunk) - Secured significant competitive wins, including a new client in the restaurant end market and a geographic expansion with an existing client in the retail end market[6](index=6&type=chunk) [Management Commentary](index=2&type=section&id=Management%20Commentary) Management addresses past operational challenges and market slowdowns, highlighting decisive actions, cultural shifts, and operational excellence initiatives leading to sequential improvements and new client acquisitions [Chairman's Remarks](index=2&type=section&id=Chairman%27s%20Remarks) Chairman Dan M. Friedberg acknowledged past operational issues, industrial sector slowdown, and client attrition, highlighting decisive actions that led to sequential growth in gross profit, decreased SG&A, and strong operating cash flow - Experienced a host of issues last year, including operational issues, an industrial sector slowdown, client attrition, and challenges related to adding new clients and systems integration[7](index=7&type=chunk) - Took decisive actions to address issues, including reductions and additions to the management team, cost reductions, selling an underperforming business line (RWS), and resetting financial covenants with lenders[7](index=7&type=chunk)[8](index=8&type=chunk) - Efforts resulted in sequential growth in **gross profit dollars**, a decrease in **SG&A costs**, and strong **operating cash flow generation**, indicating an improving business trajectory despite continued softness in the industrial end market[8](index=8&type=chunk) [CEO's Remarks](index=2&type=section&id=CEO%27s%20Remarks) CEO Perry W. Moss emphasized a cultural shift towards performance and accountability, driven by data and KPIs, with operational excellence initiatives improving cash generation and efficiency, alongside active pursuit of growth initiatives - Fundamentally changing Quest's culture to one of performance and accountability, driven by data and KPI philosophy[9](index=9&type=chunk) - Operational Excellence Initiatives are improving **cash generation**, efficiency, reducing operational variability, strengthening vendor relationships, and increasing employee satisfaction[9](index=9&type=chunk) - Actively pursuing growth initiatives, winning new clients (e.g., restaurant industry), and expanding geographic footprint with existing clients (e.g., retail), despite macro uncertainties causing prospective clients to delay decision making[10](index=10&type=chunk) [Financial Statements](index=4&type=section&id=Financial%20Statements) This section presents the company's financial performance and position, including statements of operations, reconciliation of non-GAAP measures, and balance sheet details for Q2 and YTD 2025 [Statements of Operations](index=4&type=section&id=STATEMENTS%20OF%20OPERATIONS) The Statements of Operations show a decline in revenue and gross profit for both the three and six months ended June 30, 2025, compared to the prior year, resulting in increased net losses due to higher operating expenses Statements of Operations Summary | Metric (in thousands) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------- | :------ | :------ | :------- | :------- | | Revenue | $59,540 | $73,145 | $127,970 | $145,796 | | Cost of revenue | $48,503 | $59,613 | $106,002 | $118,228 | | Gross profit | $11,037 | $13,532 | $21,968 | $27,568 | | Total operating expenses | $10,655 | $11,750 | $29,747 | $23,910 | | Operating income (loss) | $382 | $1,782 | $(7,779) | $3,658 | | Net loss | $(1,971) | $(1,514) | $(12,377) | $(2,169) | | Basic and diluted EPS | $(0.09) | $(0.07) | $(0.59) | $(0.11) | [Reconciliation of Net Loss to Adjusted EBITDA](index=5&type=section&id=RECONCILIATION%20OF%20NET%20LOSS%20TO%20ADJUSTED%20EBITDA) This reconciliation details adjustments from GAAP net loss to Adjusted EBITDA, including depreciation, interest, stock-based compensation, and non-cash items, showing a decrease in Adjusted EBITDA for both Q2 and YTD 2025 Adjusted EBITDA Reconciliation | Metric (in thousands) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------- | :------ | :------ | :------- | :------- | | Net loss | $(1,971) | $(1,514) | $(12,377) | $(2,169) | | Depreciation and amortization | $1,500 | $2,605 | $3,246 | $5,101 | | Interest expense | $2,375 | $2,612 | $4,642 | $5,084 | | Stock-based compensation expense | $533 | $363 | $1,195 | $720 | | Loss on sale of assets | $61 | — | $4,491 | — | | Impairment loss | — | — | $1,707 | — | | Adjusted EBITDA | $2,684 | $5,139 | $4,239 | $10,259 | [Adjusted Net Income (Loss) Per Share](index=5&type=section&id=ADJUSTED%20NET%20INCOME%20(LOSS)%20PER%20SHARE) This section reconciles reported net loss to adjusted net income (loss) and per-share amounts, primarily by eliminating non-cash amortization, acquisition/integration costs, loss on asset sales, and impairment losses Adjusted Net Income (Loss) Per Share Reconciliation | Metric (in thousands, except per share) | Q2 2025 | Q2 2024 | YTD 2025 | YTD 2024 | | :-------------------------------------- | :------ | :------ | :------- | :------- | | Reported net loss | $(1,971) | $(1,514) | $(12,377) | $(2,169) | | Amortization of intangibles | $1,104 | $2,221 | $2,468 | $4,441 | | Loss on sale of assets | $61 | — | $4,491 | — | | Impairment loss | — | — | $1,707 | — | | Adjusted net income (loss) | $(806) | $726 | $(3,711) | $2,333 | | Reported net loss per share | $(0.09) | $(0.07) | $(0.59) | $(0.11) | | Adjusted net income (loss) per share | $(0.04) | $0.03 | $(0.18) | $0.10 | [Balance Sheets](index=6&type=section&id=BALANCE%20SHEETS) As of June 30, 2025, total assets decreased to $153.1 million, primarily due to reduced accounts receivable and reclassified assets held for sale, while total liabilities and stockholders' equity also decreased Balance Sheet Summary | Metric (in thousands) | June 30, 2025 | December 31, 2024 | Change | | :-------------------- | :------------ | :---------------- | :----- | | Total assets | $153,062 | $175,645 | $(22,583) | | Cash and cash equivalents | $449 | $396 | $53 | | Accounts receivable, net | $53,660 | $62,252 | $(8,592) | | Assets held for sale | — | $9,890 | $(9,890) | | Total current assets | $56,727 | $75,139 | $(18,412) | | Total liabilities | $110,124 | $121,489 | $(11,365) | | Notes payable, net | $69,680 | $76,265 | $(6,585) | | Total stockholders' equity | $42,938 | $54,156 | $(11,218) | [Additional Information](index=2&type=section&id=Additional%20Information) This section provides background on Quest's business, explains non-GAAP financial measures, includes a safe harbor statement for forward-looking information, and details investor contact and conference call information [About Quest Resource Holding Corporation](index=2&type=section&id=About%20Quest%20Resource%20Holding%20Corporation) Quest is a national provider of environmental waste and recycling services, offering single-source, client-specific solutions to help large businesses achieve their environmental and sustainability goals - Quest is a national provider of waste and recycling services[13](index=13&type=chunk) - Empowers larger businesses to excel in achieving their environmental and sustainability goals and responsibilities[13](index=13&type=chunk) - Delivers focused expertise across multiple industry sectors to build single-source, client-specific solutions that generate quantifiable business and sustainability results[13](index=13&type=chunk) [Non-GAAP Financial Measures Explanation](index=2&type=section&id=Reconciliation%20of%20U.S.%20GAAP%20to%20Non-GAAP%20Financial%20Measures) Quest uses non-GAAP financial measures like Adjusted EBITDA and Adjusted Net Income (Loss) to clarify underlying performance trends by excluding non-operating or non-cash items, though these measures have limitations - Quest uses non-GAAP financial measures, **"Adjusted EBITDA"** and **"Adjusted Net Income (Loss),"** to provide an improved understanding of underlying performance trends[14](index=14&type=chunk) - These measures exclude items such as depreciation and amortization, interest expense, stock-based compensation expense, income tax expense, and certain other adjustments[14](index=14&type=chunk) - Non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for the Company's GAAP measures[14](index=14&type=chunk)[15](index=15&type=chunk) [Safe Harbor Statement](index=3&type=section&id=Safe%20Harbor%20Statement) This safe harbor statement cautions that forward-looking statements in the press release may differ materially from actual results due to various factors, advising readers to consult SEC filings for risks - The press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934[16](index=16&type=chunk) - Actual events or results could differ materially from forward-looking statements due to factors including competition, economic environment, supply chain interruptions, commodity price fluctuations, and other risks detailed in SEC filings[16](index=16&type=chunk) - Readers are cautioned not to place undue reliance on such statements and to consult SEC filings for additional risks and uncertainties[16](index=16&type=chunk) [Investor Relations Contact & Conference Call](index=2&type=section&id=Second%20Quarter%202025%20Earnings%20Conference%20Call%20and%20Webcast) Quest will host a conference call on August 11, 2025, at 5:00 PM ET to discuss Q2 2025 financial results, with details provided for participation and webcast access, along with investor relations contact information - Quest will host a conference call on Monday, August 11, 2025, at 5:00 PM ET, to review the financial results for the second quarter ended June 30, 2025[11](index=11&type=chunk) - To participate, dial 1-800-717-1738 or 1-646-307-1865, or access online through a listen-only webcast on the investor relations section of Quest's website at http://investors.qrhc.com/[11](index=11&type=chunk) - Investor Relations Contact: Joe Noyons of Three Part Advisors, LLC, at **817.778.8424**[17](index=17&type=chunk)

Company Overview - Quest Resource Holding Corporation is a national provider of waste & recycling solutions[4,8] - The company's solutions help customers meet business efficiency, sustainability and ESG goals[10] - The company serves the $200B+ North American waste and recycling industry[10] - The company has expertise with 100+ waste streams and a nationwide footprint[10] Financial Performance - The company's TTM Revenue is $271 million[10] - The company experienced ~20% CAGR in Gross Profit dollars from 2016 to 2024[14] - The company's gross margins have more than doubled to >17% since 2016[60] - The Adjusted EBITDA for TTM 2Q25 is $8449 thousand with a margin of 3.1%[17] Business Strategy - The company focuses on large clients with complex waste streams[11] - The company has invested in building a national asset-light model[25] - The company is pursuing a focused M&A strategy to acquire companies with strong clients & focus on service[55]

Core Viewpoint - Quest Resource Holding Corporation is set to release its second quarter financial results on August 11, 2025, after market close [1]. Group 1: Financial Results Announcement - The financial results for the second quarter ended June 30, 2025, will be announced on August 11, 2025 [1]. - A conference call will be held on the same day at 5:00 PM ET to discuss the financial results and business outlook [2]. - Investors can participate in the call via phone or through a webcast on Quest's investor relations website [2]. Group 2: Webcast and Playback Information - The webcast will include forward-looking information and will be archived for at least 90 days [3]. - A telephonic playback of the conference call will be available approximately 3 hours after the call ends, continuing until August 25, 2025 [3]. Group 3: Company Overview - Quest Resource Holding Corporation is a national provider of waste and recycling services, helping businesses achieve their environmental and sustainability goals [4]. - The company offers expertise across multiple sectors to create client-specific solutions that yield measurable business and sustainability outcomes [4]. - Quest tracks and reports the environmental results of its services, providing actionable data to enhance business operations [4].

Company Performance - Quest Resource reported a quarterly loss of $0.14 per share, which was worse than the Zacks Consensus Estimate of a loss of $0.05, and compared to a loss of $0.03 per share a year ago, indicating a significant earnings surprise of -180% [1] - The company posted revenues of $68.43 million for the quarter ended March 2025, missing the Zacks Consensus Estimate by 5.63%, and down from $72.65 million in the same quarter last year [2] - Over the last four quarters, Quest Resource has not surpassed consensus EPS or revenue estimates [2] Stock Performance - Quest Resource shares have declined approximately 61.7% since the beginning of the year, contrasting with the S&P 500's decline of -3.8% [3] - The current Zacks Rank for Quest Resource is 5 (Strong Sell), indicating expectations for the stock to underperform the market in the near future [6] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.06 on revenues of $75.84 million, and for the current fiscal year, it is $0.21 on revenues of $304.77 million [7] - The trend for estimate revisions ahead of the earnings release has been unfavorable, which could impact future stock performance [6] Industry Context - The Waste Removal Services industry, to which Quest Resource belongs, is currently ranked in the bottom 30% of over 250 Zacks industries, suggesting a challenging environment for the company [8]

Financial Data and Key Metrics Changes - Revenue for the first quarter was $68.4 million, a decrease of 6% year-over-year and down 2% sequentially from the fourth quarter [11] - Gross profit dollars were $10.9 million, a 22% decrease from last year but a 2% increase sequentially from the fourth quarter [13] - SG&A expenses were $11.4 million, an increase of $1.6 million year-over-year and $1.3 million sequentially [16] Business Line Data and Key Metrics Changes - The decrease in revenue was attributed to lower volumes due to client attrition and lower volumes at select larger clients, with client attrition contributing approximately $7 million to the decline [12] - New clients secured during 2024 finished the first quarter at approximately 80% of their anticipated run rate, expected to provide incremental growth in revenue and gross profit [13] Market Data and Key Metrics Changes - The industrial sector showed some weakness, impacting volumes, but other end markets did not exhibit significant changes [53] - The company is seeing increased demand for its services, particularly from prospects that have never used its model before, indicating a robust pipeline [44] Company Strategy and Development Direction - The company is focused on generating cash, improving profitability, lowering debt, and increasing operating efficiency [9] - A cultural shift towards operational excellence is being implemented, emphasizing performance and accountability across the organization [20] - The company aims to improve EBITDA, cash generation, and pay down debt through various initiatives [20] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the company's ability to execute operational improvements and expects steady improvement throughout the year [26] - The company anticipates both top and bottom line growth for 2025, with more meaningful growth expected as the year progresses [27] Other Important Information - The company completed the sale of a non-core part of the RWS business, generating $5 million in cash used to reduce debt [8] - Cash at the end of the first quarter was $1.4 million, with approximately $21 million of available borrowing capacity [17] Q&A Session Summary Question: Any notable KPIs to highlight as you focus on execution moving forward? - Management has started to baseline all processes and identified weaknesses, implementing changes to address these gaps [31] Question: Are you seeing any increase in weakness in your market? - No significant change in market weakness has been observed, but there is hope for strength returning [38] Question: How do you plan to bring down DSO? - Strategies include improving billing efficiency and having ongoing conversations with larger clients to accelerate collections [46][48] Question: What is the timetable to evaluate the initiatives being put in place? - A year from now, the company expects to look very different, with results beginning in Q2 and largely in Q3 and Q4 [70] Question: What caused customer attrition? - Attrition has been mostly related to customers being acquired with different programs in place, with some isolated attrition noted [56] Question: How do bonuses work for employees? - Bonuses are built over an annualized forecast and will be adjusted based on the company's performance throughout the year [60]

Financial Data and Key Metrics Changes - Revenue for the first quarter was $68.4 million, a decrease of 6% year-over-year and down 2% sequentially from the fourth quarter [11] - Gross profit dollars were $10.9 million, a 22% decrease from last year but a 2% increase sequentially from the fourth quarter [13] - SG&A expenses were $11.4 million, an increase of $1.6 million year-over-year and $1.3 million sequentially [15] Business Line Data and Key Metrics Changes - The decrease in revenue was attributed to client attrition and lower volumes at select larger clients, with client attrition contributing approximately $7 million to the decline [12] - New clients secured during 2024 finished the first quarter at approximately 80% of their anticipated run rate, expected to provide incremental growth in revenue and gross profit [13] Market Data and Key Metrics Changes - The company experienced lower volumes in the industrial sector, which may continue to affect volumes for several quarters [12] - Demand for services from existing clients remains strong, with opportunities to expand services in the long term despite current volume decreases [12][26] Company Strategy and Development Direction - The company is focused on generating cash, improving profitability, lowering debt, and increasing operating efficiency [8] - A cultural shift towards operational excellence is being implemented, emphasizing performance and accountability across the organization [20][21] - The company aims to enhance shareholder value through a series of changes in cost structure, management team, and operating philosophy [10] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the potential for growth despite current economic uncertainties, expecting both top and bottom line growth for 2025 [27] - The company is monitoring its markets closely, particularly the industrial sector, and believes there are long-term opportunities with existing clients [26][27] Other Important Information - The company completed the sale of a non-core part of the RWS business, generating $5 million in cash used to reduce debt [7] - Cash at the end of the first quarter was $1.4 million, with approximately $21 million of available borrowing capacity [16] Q&A Session Summary Question: Any notable KPIs to highlight as you focus on execution moving forward? - Management has started to baseline all processes and identified weaknesses, implementing changes to improve operational efficiency [31] Question: Are you seeing any increase in weakness in your end markets? - No significant change in market weakness has been observed, but demand and volumes are slightly down [39] Question: How do you plan to bring down DSO? - Strategies include improving billing efficiency and increasing visibility into missing invoices [47][49] Question: Any notable changes in end customer behavior or volumes? - No significant changes outside the industrial segment; there has been an uptick in demand for services [54] Question: What caused customer attrition? - Attrition has been primarily related to customers being acquired with different programs in place [57] Question: What is the expected timeline for evaluating the impact of new initiatives? - A year from now, the company expects to look significantly different, with results beginning in Q2 and more substantial impacts in Q3 and Q4 [71] Question: How much of the revenue decline is due to existing customers versus new ones? - The majority of the revenue decline is attributed to new clients added throughout 2024 [95]