Quest Resource Holding Corp. (QRHC) - 10-K Summary
Business Context and Reporting Period
Company: Quest Resource Holding Corp.
Reporting Period: Fiscal Year Ended December 31, 2025
Business Model: National provider of waste and recycling management services utilizing an "asset-light" strategy. The company manages collection, processing, recycling, and disposal for multi-location businesses (Fortune 1000) across retail, automotive, industrial, and construction sectors. Services include managing over 150 waste streams and providing data reporting for ESG goals.
Key Financial Metrics (Year Ended Dec 31, 2025)
| Metric | 2025 | 2024 |
|---|---|---|
| Revenue | $250.2 million | $288.5 million |
| Gross Profit | $42.5 million | $50.0 million |
| Gross Margin | 17.0% | 17.3% |
| Operating Loss | $(6.2) million | $(4.5) million |
| Net Loss | $(15.4) million | $(15.1) million |
| Adjusted EBITDA | $9.3 million | $14.5 million |
| Cash & Equivalents | $1.0 million | $0.4 million |
| Working Capital | $11.7 million | $30.7 million |
| Total Debt (Notes Payable) | $67.2 million | $80.4 million |
| Accumulated Deficit | $(140.5) million | $(125.1) million |
Material Changes vs. Prior Period
- Revenue Decline: Revenue decreased 13.3% ($38.3 million) primarily due to a $31.4 million reduction from industrial clients facing lower production volumes and a $14.3 million impact from the divestiture of an underperforming business unit in Q1 2025.
- Divestiture Impact: The company sold substantially all assets of an underperforming operation in March 2025 for approximately $5.0 million in cash plus contingent payments. This resulted in a $4.4 million loss on sale of assets in 2025 (following a $5.5 million impairment in 2024).
- Cost Reductions: Operating expenses decreased to $48.7 million from $54.5 million, driven by labor cost savings ($1.6 million), reduced professional fees ($1.2 million), and lower bad debt expense ($0.9 million).
- Intangible Impairment: A $1.7 million impairment charge was recorded in 2025 related to customer relationship intangible assets due to client attrition.
- Debt Reduction: Total notes payable decreased by approximately $13.2 million, utilizing proceeds from asset sales to repay portions of the ABL facility and term loans.
Guidance, Outlook, and Risks
- Liquidity Outlook: Management believes existing cash ($1.0 million), borrowing availability under the $45.0 million ABL facility, and operating cash flows are sufficient to fund operations for the next 12 months.
- Recent Financing (Subsequent Event): On March 12, 2026, the company entered into a new $40.0 million asset-based revolving credit facility with Texas Capital Bank, replacing the PNC facility. The Monroe Capital term loan ($51.1 million) remains outstanding.
- Covenant Compliance: The company previously experienced covenant breaches in Q1 2025 related to the divested business but secured waivers and amendments in May 2025. Further amendments to financial covenants were executed in March 2026.
- Key Risks:
- Customer Concentration: One customer accounted for 23% of 2025 revenue (down from 27% in 2024).
- Subcontractor Reliance: The asset-light model relies entirely on third-party vendors for collection and processing; disruptions could halt operations.
- Commodity Volatility: Revenue is sensitive to fluctuating prices of recyclable commodities (e.g., oil, metal, cardboard).
- Historical Losses: The company has an accumulated deficit of $140.5 million and continues to incur net losses.
Investor Verification Checklist
- Covenant Status: Verify current compliance with the new Texas Capital Bank facility and Monroe Capital term loan covenants following the March 2026 amendments.
- Customer Retention: Assess the stability of the top customer (23% of revenue) and the impact of recent industrial sector headwinds on renewal rates.
- Divestiture Proceeds: Monitor the realization of contingent "Milestone Payments" (up to $6.5 million) from the March 2025 asset sale.
- Adjusted EBITDA Trend: Review the 35.7% decline in Adjusted EBITDA to $9.3 million and evaluate the sustainability of cost-cutting measures.
- Working Capital: Confirm the trend of working capital reduction from $30.7 million (2024) to $11.7 million (2025) and its impact on operational flexibility.