Quest Resource (QRHC) - 2025 Q2 - Quarterly Results

Executive Summary & Highlights 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 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 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 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] - Reduced debt by $6.6 million year-to-date[6] - 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] Management Commentary 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 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] - 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][8] - 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] CEO's Remarks 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] - Operational Excellence Initiatives are improving cash generation, efficiency, reducing operational variability, strengthening vendor relationships, and increasing employee satisfaction[9] - 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] Financial Statements 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 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 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 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 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 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 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] - Empowers larger businesses to excel in achieving their environmental and sustainability goals and responsibilities[13] - Delivers focused expertise across multiple industry sectors to build single-source, client-specific solutions that generate quantifiable business and sustainability results[13] Non-GAAP Financial Measures Explanation 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] - These measures exclude items such as depreciation and amortization, interest expense, stock-based compensation expense, income tax expense, and certain other adjustments[14] - 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][15] Safe Harbor Statement 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] - 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] - Readers are cautioned not to place undue reliance on such statements and to consult SEC filings for additional risks and uncertainties[16] Investor Relations Contact & Conference Call 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] - 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]