Sign in

You're signed outSign in or to get full access.

QR

Quest Resource Holding Corp (QRHC)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 revenue of $59.5M (-18.6% y/y; -13.0% q/q) with gross margin at 18.5% (flat y/y, +250 bps q/q); GAAP EPS was -$0.09 and Adjusted EPS -$0.04; Adjusted EBITDA was $2.7M .
  • Versus S&P Global consensus, revenue was a significant miss ($72.6M est. vs $59.5M actual), EBITDA missed ($3.13M est. vs $1.94M actual), while EPS was a beat (-$0.08 est. vs -$0.04 actual)*.
  • Operating cash flow of $3.9M in Q2 and year-to-date debt reduction of $6.6M reflect early benefits from Operational Excellence initiatives and tighter cash-cycle management .
  • Outlook: management expects Q3 gross profit dollars “flat to slightly down,” with sequential growth resuming in Q4; SG&A to remain mostly flat; continued focus on cash generation, lowering DSOs, and aggressive debt paydown .

What Went Well and What Went Wrong

What Went Well

  • Operational execution and cash cycle: “Our Operational Excellence Initiatives are beginning to improve cash generation, improve efficiency, and reduce operational variability,” with $3.9M operating cash flow in Q2 and $6.6M YTD debt reduction .
  • Cost control: SG&A fell to $9.3M in Q2 (-$2.1M q/q) driven by workforce reductions and efficiencies; management expects SG&A to be mostly flat in Q3–Q4 .
  • Commercial wins: competitive additions include a new multinational restaurant client and a large retailer geographic footprint expansion, validating Quest’s value proposition and share-of-wallet strategy .

What Went Wrong

  • Top-line pressure: revenue fell 18.6% y/y to $59.5M, driven by continued softness with industrial end-market clients and the sold mall-related business; CFO cited ~one-third of the sequential decline due to the divestiture, with the remainder from industrial volumes .
  • Margin pressure at renewals: clients’ heightened cost focus is compressing margins on renewed business; management expects this pressure to weigh on Q3 before savings sharing and optimization offset it .
  • GAAP losses: net loss widened y/y to -$2.0M and GAAP EPS to -$0.09, with non-GAAP adjustments (amortization, prior asset sale loss, impairment) bridging to Adjusted EPS of -$0.04 .

Financial Results

MetricQ4 2024Q1 2025Q2 2025
Revenue ($USD Millions)$70.0 $68.43 $59.54
Gross Profit ($USD Millions)$10.73 $10.93 $11.04
Gross Margin (%)15.3% 16.0% 18.5%
GAAP Net Income (Loss) ($USD Millions)-$9.51 -$10.41 -$1.97
GAAP EPS ($USD)-$0.46 -$0.50 -$0.09
Adjusted EBITDA ($USD Millions)$1.68 $1.56 $2.68
Adjusted EPS ($USD)-$0.09 -$0.14 -$0.04
Cash from Operations ($USD Millions)-$4.8 -$1.1 $3.9

Notes:

  • Q2 2025 non-GAAP adjustments primarily reflect amortization of intangibles; year-to-date also includes non-cash loss on sale of assets ($4.5M) and impairment ($1.7M) recorded in Q1 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
SG&A ($USD Millions per quarter)Q3–Q4 2025~$9.5 per quarter beginning H2 2025 Mostly flat vs Q2’s $9.3M Slightly lower/maintained
Gross Profit DollarsQ3 2025Not specifiedFlat to slightly down vs Q2 New explicit caution
Gross Profit DollarsQ4 2025Not specifiedResume sequential growth New constructive outlook
Operating Cash FlowH2 2025Improve DSOs by end of Q2 Expect significant operating cash flows remainder of year Increased emphasis on H2 cash
Debt ReductionH2 2025Priority on debt repayment Continue to aggressively reduce debt in H2 Maintained, reiterated
DSOs (days)FY 2025–2026Improvement by end of Q2; target mid-60s “May not get to the 60s by this year,” expects into next year Timeline extended

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024)Previous Mentions (Q1 2025)Current Period (Q2 2025)Trend
Operational Excellence & Process DisciplineBroad initiative to drive efficiencies; zero-touch AP progress Formal Operations Excellence Initiative launched; KPIs across workflow Tangible improvements in billing, payables, exception rates; “bottom of the fourth inning” progress Improving
Industrial End-Market WeaknessNoted weakness expected to persist a few quarters Continued softness; volumes down at large clients Ongoing pressure; uncertainty incl. tariffs; other sectors (food/grocery) healthy Worsening/Prolonged
Margin Pressure at RenewalsCost focus increasing; temporary costs cloud margins Mix shift to newer clients with lower initial margins Renewals pressuring margins; expect recovery via savings share/optimization over time Near-term pressure; medium-term improvement
Cash Cycle/DSOsElevated AR; refinancing improved flexibility AR and DSOs elevated; target mid-60s; billing faster Slight DSO improvement; confidence in H2 cash generation; mid-60s likely next year Improving but slower timeline
Debt PaydownRefinancing lowers interest ~$1M/yr; focus on debt ~$74.1M notes payable; priority to repay debt ~$69.7M notes payable; $6.6M YTD reduction; continue aggressive paydown Improving
Commercial Wins & PipelineRecord 8 new customers; expansions at large clients Robust pipeline; onboarding impacts margins temporarily New restaurant client; major retailer expansion; pipeline “goal line” deals delayed by macro Positive, slower pace
Technology/AP PlatformVendor management system near substantial completion AP automation enabling faster billing/collections AP platform improving “zero/one-touch”; large improvements in processing KPIs Improving

Management Commentary

  • “Our efforts to fundamentally improve our operations and produce more consistent financial results are on track...Sequential growth in gross profit dollars, a decrease in SG&A costs and strong operating cash flow generation were all a direct result of the performance-focused actions we took earlier this year.” – Dan M. Friedberg, Chairman .
  • “Our Operational Excellence Initiatives are beginning to improve cash generation, improve efficiency, and reduce operational variability...we are strengthening vendor relationships and increasing employee satisfaction while maintaining high standards for client service.” – Perry W. Moss, CEO .
  • “Of the $9M sequential decrease in revenue, approximately one third was related to the mall-related business that was sold...bulk of the remaining decrease was related to decreased revenue from clients in the industrial end market.” – Brett Johnston, CFO .

Q&A Highlights

  • Industrial end-market trajectory: management expects continued softness; tariffs and macro uncertainty cited; other sectors (food/grocery) performing well .
  • Margin renewals: broad-based cost sensitivity, especially industrial; Quest seeks give-backs (larger savings share, better terms, more business lines) to offset lower upfront margins over time .
  • DSOs and cash: slight sequential DSO improvement; multiple initiatives to bill faster and tighten collections; mid-60s DSO target more likely achieved next year, with strong H2 operating cash expected .
  • Pipeline/wins: two notable wins (multinational restaurant; large retailer doubling locations); pace of new client decisions slower amid uncertainty, but Quest often sole new provider considered .
  • Capital allocation: priority remains debt paydown; ongoing investment in automation/tech to support processes and efficiency .

Estimates Context

MetricQ2 2025 Consensus EstimateQ2 2025 ActualResult
Revenue ($USD)$72.556M*$59.540M Bold miss
EBITDA ($USD)$3.128M*$1.944M*Miss
Primary EPS ($USD)-$0.08*-$0.04*Bold beat
  • Revenue - # of Estimates: 3*; Primary EPS - # of Estimates: 3*.
  • Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

  • Near-term setup: revenue headwinds persist (industrial softness, renewal margin pressure), but sequential gross profit dollars are guided flat to down in Q3 and up in Q4, with SG&A held flat—a sign of stabilizing operations .
  • Cash and de-leveraging story: $3.9M Q2 operating cash and $6.6M YTD debt reduction show early traction; watch DSOs and Q3 cash conversion as catalysts for sentiment improvement .
  • Execution focus: measurable AP/billing improvements and exception reduction support margin normalization and better cash cycle—key to re-rating if sustained .
  • Commercial momentum: competitive wins and share-of-wallet expansions provide medium-term growth vectors despite slower decision cycles; monitor Q3/Q4 onboarding and optimization impact on margins .
  • Risk monitor: industrial end-market conditions and renewal pricing pressures can weigh on Q3; listen for Q3 commentary on margins and volumes to gauge inflection timing .
  • Model implications: lower SG&A run-rate and optimization of newer clients support Adjusted EBITDA recovery; consider estimate revisions (EPS up, revenue/EBITDA down) post-Q2 print*.
  • Trading lens: stock likely keyed to evidence of Q3 stabilization (GP dollars and DSOs) and debt paydown velocity; a beat on cash generation could outweigh near-term revenue misses .

Appendix: Additional Data Points

  • Q2 highlights: Adjusted EBITDA $2.684M; Adjusted EPS -$0.04; gross margin 18.5%; weighted shares ~20.933M .
  • Year-to-date (June 30, 2025): revenue $128.0M (-12.2% ytd y/y); gross profit $22.0M (-20.3% ytd y/y); GAAP net loss -$12.4M; impact from RWS asset sale loss ($4.5M) and impairment ($1.7M) .