Quest Resource Holding Corp (QRHC) - 10-Q Summary
Business Context and Reporting Period
Company: Quest Resource Holding Corp (QRHC)
Reporting Period: Quarter and nine months ended September 30, 2025
Business Overview: A national provider of waste and recycling services to multi-location businesses, offering collection, processing, disposal, and tracking services. The company operates as a single reportable segment.
Key Financial Metrics
| Metric (in thousands) | Q3 2025 | Q3 2024 | 9M 2025 | 9M 2024 |
|---|---|---|---|---|
| Revenue | $63,341 | $72,766 | $191,311 | $218,562 |
| Gross Profit | $11,467 | $11,700 | $33,435 | $39,268 |
| Gross Margin | 18.1% | 16.1% | 17.5% | 18.0% |
| Operating Income (Loss) | $1,075 | $(941) | $(6,704) | $2,717 |
| Net Loss | $(1,349) | $(3,386) | $(13,726) | $(5,555) |
| Adjusted EBITDA | $2,938 | $2,534 | $7,177 | $12,793 |
| Cash & Equivalents | $1,146 | $1,133 | $1,146 | $1,133 |
| Total Debt (Notes Payable) | $69,157 | $80,402 | $69,157 | $80,402 |
| Working Capital | $13,214 | $30,748 | $13,214 | $30,748 |
Note: Debt figures represent total notes payable before current portion and unamortized costs. Working capital calculated as Current Assets ($54,012) minus Current Liabilities ($40,798).
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased 13.0% in Q3 and 12.5% for the nine months ended Sept 30, 2025. This was primarily driven by the divestiture of the mall-related business (completed March 31, 2025) and softness in the industrial end market.
- Divestiture Impact: The sale of mall-related assets resulted in a $4.4 million loss on sale of assets recognized in the first quarter of 2025. Proceeds were used to repay debt.
- Impairment: A $1.7 million impairment charge was recorded in Q1 2025 related to customer relationship intangible assets.
- Operating Expenses: SG&A expenses decreased in Q3 due to reduced headcount and lower professional fees, though the nine-month period saw a slight increase due to one-time CEO transition costs.
- Debt Reduction: Total notes payable decreased from $80.4 million to $69.2 million, aided by proceeds from asset sales.
Guidance, Outlook, and Risks
- Liquidity: Management believes existing cash ($1.1 million), borrowing availability under the $45.0 million ABL Facility ($36.1 million available), and operating cash flows are sufficient to fund operations for the next 12 months.
- Outlook: Underlying revenue performance remained stable excluding divestiture and industrial headwinds. New client growth contributed $5.5 million in Q3 revenue. Attrition levels have normalized.
- Risks:
- Macroeconomic uncertainty, including inflation, tariffs, and interest rate fluctuations.
- Concentration risk: One customer accounted for 24.1% of Q3 2025 revenue.
- Valuation allowance: The company maintains a full valuation allowance against deferred tax assets ($25.3 million) due to uncertainty in realizing future tax benefits.
- Unusual Items: The $4.4 million loss on asset sale and $1.7 million impairment loss are non-recurring items impacting the nine-month net loss.
Investor Verification Checklist
- Customer Concentration: Verify the stability of the top customer representing ~24% of quarterly revenue.
- Debt Covenants: Confirm continued compliance with minimum fixed charge coverage and senior net leverage ratios under the PNC and Monroe agreements.
- Asset Sale Contingencies: Monitor the realization of potential milestone payments (up to $6.5 million) from the mall business divestiture.
- Working Capital Trends: Assess the sustainability of the $8.5 million operating cash flow improvement driven by accounts receivable optimization.
- Intangible Assets: Review the remaining carrying value of customer relationship intangibles following the Q1 impairment.