Quest Resource Holding Corp (QRHC) - Q1 2026 10-Q Summary
Business Context and Reporting Period
Quest Resource Holding Corp is a national provider of waste and recycling management services, offering collection, processing, disposal, and tracking services to multi-location businesses. The company also provides ancillary products such as antifreeze and equipment rentals. This report covers the quarterly period ended March 31, 2026.
Key Financial Metrics
| Metric | Q1 2026 | Q1 2025 |
|---|---|---|
| Revenue | $61.7 million | $68.4 million |
| Gross Profit | $9.7 million | $10.9 million |
| Gross Margin | 15.7% | 16.0% |
| Operating Income (Loss) | $0.2 million | $(8.2) million |
| Net Loss | $(2.3) million | $(10.4) million |
| Adjusted EBITDA | $1.8 million | $1.6 million |
| Cash and Equivalents | $1.1 million | $1.4 million |
| Total Debt (Notes Payable) | $68.6 million | $67.2 million |
| Working Capital | $11.9 million | $11.7 million |
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased 9.8% year-over-year, driven by a $4.0 million reduction in volume from industrial clients and a $3.0 million impact from the divestiture of an underperforming business unit in Q1 2025. Excluding these factors, organic growth was approximately $2.0 million.
- Improved Profitability: Net loss narrowed significantly from $10.4 million to $2.3 million. This improvement is largely due to the absence of a $4.4 million loss on asset sales and a $1.7 million impairment charge recorded in Q1 2025.
- Operating Expense Reduction: SG&A expenses dropped $3.0 million to $8.4 million, attributed to labor cost savings ($1.8 million) and reduced professional fees ($0.6 million).
- Debt Restructuring: The company replaced its PNC ABL facility with a new $40.0 million asset-based revolving credit facility with Texas Capital Bank (TCB). This resulted in a $0.5 million loss on debt extinguishment.
Outlook, Risks, and Unusual Items
- Liquidity: Management believes existing cash ($1.1 million) and borrowing availability ($38.6 million under the TCB facility) are sufficient to fund operations for the next 12 months.
- Debt Covenants: The company is in compliance with financial covenants, including the minimum fixed charge coverage ratio, as of March 31, 2026.
- Exit Fee Liability: An amendment to the Monroe Term Loan created a contingent exit fee liability with a minimum value of $2.0 million, recorded as a long-term liability and amortized to interest expense.
- Goodwill Risk: While goodwill ($81.1 million) was not impaired in the most recent annual test, management noted that a sustained decline in share price could trigger future impairment risks.
- Macroeconomic Risks: The company faces headwinds from inflation, geopolitical conflicts affecting energy markets, and potential supply chain disruptions.
Investor Verification Checklist
- Customer Concentration: Verify the stability of the single customer representing 20.3% of Q1 2026 revenue.
- Debt Capacity: Confirm the utilization rate of the new $40.0 million TCB ABL facility and the impact of the $2.0 million Monroe exit fee on future cash flows.
- Valuation Allowance: Review the $26.2 million valuation allowance against deferred tax assets and the likelihood of reversal given the current net loss position.
- Industrial Exposure: Assess the duration of the "headwinds" from industrial clients that reduced revenue by $4.0 million.
- Goodwill Sensitivity: Monitor share price trends to evaluate the risk of future goodwill impairment charges.