Quest Resource outlines ongoing operational improvements and targets continued debt reduction as cash generation rises 46%

Earnings Call Insights: Quest Resource Holding Corporation (QRHC) Q3 2025

MANAGEMENT VIEW

* Daniel M. Friedberg, Chairman, emphasized "decisive actions across the business that included reducing costs, improving operations and generating cash flow." He stated that these initiatives have put Quest on a "much more solid footing" and are already delivering "important improvements," validating management's confidence in the business trajectory. Friedberg expressed confidence in "pursuing business efficiencies, reducing variability, generating growth and driving business margins" moving into 2026.
* CEO Perry Moss described a "solid third quarter with strong sequential improvement in our financial performance despite what remains a tough operating environment." Moss highlighted the company's push to "standardize and streamline our internal processes," improve visibility into customer needs, enhance sales productivity, elevate vendor management, and maximize operational efficiencies. Moss noted the impact of realigning the sales process to focus on "share of wallet opportunities," aiming to broaden the number of waste streams handled per client and expand coverage with multi-location customers. Moss reported the launch of new contracts, including "a major retailer and a large full-service restaurant chain," with another recent win in the food products end market. Moss detailed efforts to diversify into nonindustrial markets such as retail, hospitality, and grocery stores, aiming to broaden Quest's customer and revenue base.
* Moss underlined vendor engagement and payment process optimizations, saying "we are now paying the vast majority of our vendors on term" and have "shortened our invoicing time." He also mentioned the vision for a "subscription-like model" for clients to access their data, citing the company's "tremendous amount of data, which we believe carries incredible value."
* Brett Johnston, Senior VP, Secretary & CFO, stated, "We are encouraged by the sequential improvements in the business as the internal initiatives we've enacted are delivering tangible results." Johnston reported third quarter revenue of $63.3 million, a 13% year-over-year decrease but a 6.4% sequential increase, attributing the decline to the divested mall-related business and lower industrial sector revenue. Johnston noted, "Year-to-date, these new clients have added over $24 million in incremental revenue year-over-year." Gross profit dollars reached $11.5 million, down 2% year-over-year but up 3.9% sequentially, with gross margin at 18.1%. SG&A was $9.2 million, a $1 million year-over-year reduction and a slight sequential decrease, expected to decline further in Q4. Johnston highlighted $5.7 million in cash from operations and a $4.6 million debt paydown in Q3, bringing year-to-date debt reduction to $11.2 million.

OUTLOOK

* Johnston expects "sequential comparisons for gross profit dollars to be flat to slightly down" in Q4, with seasonal low volumes and continued uncertainty in industrial end markets. He stated, "We believe these positive trends position us to drive growth going into next year." Moss reiterated, "Our key priorities remain to grow the business with new and existing customers, drive margin improvements as we execute our operational excellence initiatives, continue the development of our operating platform, improve cash generation and pay down debt."

FINANCIAL RESULTS

* Revenue for Q3 was reported as $63.3 million, a sequential increase from Q2. Johnston described a $24 million year-to-date revenue addition from new clients. Gross profit dollars were $11.5 million, and gross margin was 18.1%. SG&A fell to $9.2 million, with further reductions expected. Cash from operations improved to $5.7 million, and net notes payable decreased to $65.4 million from $76.3 million at the start of the year.

Q&A

* Gerard Sweeney, ROTH Capital, asked about stabilization in industrial end markets and other verticals. Moss replied, "the industrial markets and really all of our markets are stabilized," noting Q4 seasonality and a focus on "share of wallet with these clients."
* Sweeney queried changes in the wallet share strategy. Moss said, "we have a very disciplined approach where we have a very well-defined share of wallet that -- which is something we didn't have before."
* Sweeney questioned operational improvement opportunities and financial impact. Moss emphasized continuous improvement, mapping all major processes, and implementing KPIs, aiming for future financial performance enhancements.
* Aaron Spychalla, Craig-Hallum, asked about the new food win's size and competitive context. Moss stated, "it was absolutely a competitive win," representing about 20% of the customer's portfolio and starting at "slightly higher margins."
* Spychalla inquired about OpEx trends and KPI progress. Moss noted "all 25 of those KPIs have been trending positive since the beginning of April."
* Owen Rickert, Northland Capital, asked about Q3 gross profit outperformance and vendor management. Johnston attributed the outperformance to "earlier traction on the initiatives" and operational efficiencies. Moss reported improved vendor relationships and minimized service disruptions.
* Gregg Kitt, Pinnacle Family Office, explored commercial and operational execution and remaining opportunities. Moss rated current operations as a "6 to 7" out of 10, citing ongoing improvement potential. Kitt asked about SG&A trends; Johnston clarified it would be "down sequentially from Q3."
* Kitt pressed on the data subscription opportunity; Moss indicated it's a vision but not yet sized. Kitt asked about AR and DSOs; Moss and Johnston confirmed ongoing improvements and further opportunities to reduce DSOs in coming quarters.
* Kitt asked about prioritizing debt reduction versus funding strategic initiatives. Johnston confirmed continued aggressive debt paydown, with restrictions on certain repayments until after Q1.
* Kitt asked about customer renewals and attrition; Moss said attrition is at "historically low levels" with proactive renewal strategies.

SENTIMENT ANALYSIS

* Analysts expressed cautious optimism but pressed on margin pressures, strategic execution, and cash flow improvements, with an overall neutral tone.
* Management maintained a confident stance in both prepared remarks and Q&A, frequently referencing operational progress and future improvement. Moss and Johnston emphasized ongoing initiatives and positive trends but acknowledged the challenging macro environment.
* Compared to the previous quarter, management's confidence appeared firmer, with concrete sequential gains, while analysts focused more on execution, improvement sustainability, and future financial impacts.

QUARTER-OVER-QUARTER COMPARISON

* Guidance language shifted to a more confident tone about operational initiatives and cash generation, while maintaining caution on industrial volumes and margin pressure.
* Strategic focus expanded on share of wallet gains, process optimization, and diversification into nonindustrial markets versus the prior quarter's foundational process improvements and workforce reductions.
* Analysts’ questions in both quarters centered on operational progress, margin sustainability, customer wins, and cash flow, but Q3 included more detail on KPI tracking and execution impact.
* Key metrics improved sequentially: revenue rose from $59.5 million in Q2 to $63.3 million in Q3, gross profit dollars increased from $11 million to $11.5 million, and cash from operations advanced from $3.9 million to $5.7 million. Debt was reduced further from $69.7 million to $65.4 million.
* Management’s confidence in operational excellence and cash flow was more pronounced in Q3, supported by multiple quarters of positive KPI trends.

RISKS AND CONCERNS

* Moss cited subdued industrial customer volumes and slower-than-expected pace of adding new clients due to economic uncertainty and extended sales cycles. Management is focused on diversifying into nonindustrial end markets to mitigate these risks.
* Margin pressure remains a concern as Quest executes its "land and expand" strategy with large clients, though management expects offsetting gains from process improvements and expanded service offerings.
* Vendor management and payment term optimization remain important, with service disruptions at historical lows.
* Debt reduction is prioritized, but certain repayments are restricted until after Q1 2026.

FINAL TAKEAWAY

Management highlighted significant operational improvements and cash generation momentum, driven by a disciplined focus on process optimization, cost reductions, and sales execution. The company plans to continue prioritizing debt paydown, expanding share of wallet with existing clients, and diversifying its customer base, while navigating ongoing margin pressures and industrial market headwinds. The leadership maintains confidence that these initiatives position Quest Resource Holding Corporation for continued improvement in financial performance and business resilience as it finishes 2025 and enters 2026.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/qrhc/earnings/transcripts]

MORE ON QUEST RESOURCE

* Quest Resource Holding Corporation (QRHC) Q3 2025 Earnings Call Transcript [https://seekingalpha.com/article/4841653-quest-resource-holding-corporation-qrhc-q3-2025-earnings-call-transcript]
* Seeking Alpha’s Quant Rating on Quest Resource [https://seekingalpha.com/symbol/QRHC/ratings/quant-ratings]
* Historical earnings data for Quest Resource [https://seekingalpha.com/symbol/QRHC/earnings]
* Financial information for Quest Resource [https://seekingalpha.com/symbol/QRHC/income-statement]