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    QRHC
    Earnings call· Jun 2026(Q2 FY26)

    Quest Resource Holding Q2 FY26 earnings call QRHC

    Aug 6, 2026 Source

    Executive summary

    Quest Resource Holding Corporation Q2 FY26 — Return to Top-Line and Adjusted EBITDA Growth

    Quest Resource Holding Corporation delivered a solid Q2 FY26, marked by a return to top-line and adjusted EBITDA growth, driven by diversified customer wins and stabilizing industrial volumes. The company's operational excellence initiatives are yielding tangible results in cost control and cash generation, positioning it for improved financial performance despite a complex macro environment. Management remains cautiously optimistic about the improving operating landscape and is focused on continued debt reduction and margin expansion.

    Highlights

    5

    • Revenue grew by 8% year-over-year to $64.1 million, and 4% sequentially, driven by industrial volume improvements and new business wins.

    • Adjusted EBITDA returned to growth compared to both the prior year and prior quarter.

    • SG&A expenses decreased by 11% year-over-year to $8.2 million, and 2% sequentially, despite revenue growth.

    • Operating cash flow was strong at $4.5 million for the quarter, facilitating debt reduction.

    • Working capital days improved significantly to 5 days, from 12 days in Q1 and 19 days a year ago.

    Concerns

    4

    • Gross profit declined by 6% year-over-year to $10.4 million, primarily due to margin pressure with select industrial clients.

    • Gross margin decreased to 16.3% from 18.5% in the prior year, though it improved sequentially from 15.7%.

    • A non-cash goodwill impairment charge of $11 million was incurred due to a decline in market capitalization.

    • Sales cycles are elongating as potential customers actively monitor the current macroeconomic backdrop.

    Guidance & targets

    3
    CategoryTargetConfidence
    Revenue growth
    sequential growth
    medium materiality
    High
    Gross margin
    flat to slightly up
    medium materiality
    Medium
    DSOs
    mid-60s
    low materiality
    High

    Operational metrics

    15
    Adjusted EBITDA growth
    growthYoY and QoQ
    Q2 FY26

    Returned to growth compared to both the prior year and prior quarter.

    SG&A expense
    $8.2Mdown 11% YoY, down 2% QoQ
    Q2 FY26

    Despite revenue growth of 8% YoY and 4% QoQ, SG&A decreased, reflecting productivity improvements.

    SG&A expense reduction
    20%vs last year
    YTD FY26

    The first six months of the year showed a significant reduction in SG&A.

    Goodwill impairment charge
    $11M
    Q2 FY26

    Triggered by the decline in market capitalization.

    Cash balance
    $1M
    Q2 FY26 end

    Cash on hand at the end of the quarter.

    ABL credit facility availability
    $19.4M
    Q2 FY26 end

    Available liquidity on the Asset-Based Lending credit facility.

    Net notes payable
    $59.4Mreduced by $4.6M YTD, $17M over last 6 quarters
    Q2 FY26 end

    Total debt balance, showing significant reduction over recent periods.

    Term debt reduction
    $2Mvoluntary early payment
    Q2 FY26

    Utilized strong cash flow to make an early payment on term debt held by Monroe Capital.

    Term debt reduction
    $4M
    YTD FY26

    Total term debt reduction year-to-date.

    Days Sales Outstanding (DSOs)
    ~70improvement from mid-70s Q1
    Q2 FY26 end

    Reflects optimization of billing and collections processes.

    Accounts receivable
    $2.5Mdeclined sequentially
    Q2 FY26

    Declined despite sequential increase in revenues, indicating improved cash cycle.

    Working capital days
    5improvement from 12 days Q1 and 19 days YoY
    Q2 FY26 end

    Significant improvement in working capital efficiency.

    Revenue
    $64.1Mup 8% YoY, up 4% QoQ
    Q2 FY26

    Growth driven by industrial volume improvements and new client wins/wallet share expansion.

    Gross profit
    $10.4Mdown 6% YoY, up 8% QoQ
    Q2 FY26

    Year-over-year decline primarily due to margin pressure with select industrial clients, offset by higher gross profit and improving margins in other business areas.

    Gross margin
    16.3%down from 18.5% YoY, up from 15.7% QoQ
    Q2 FY26

    Year-over-year decline due to industrial client margin pressure, sequential improvement as new customer margins mature.

    Industry KPIs

    6
    MetricValueDetails
    Volume$3.3MUSD
    Core price—
    EBITDA margin—
    Churn retention$1.2MUSD
    Price to cost spread—
    Recycling commodity impactlimited impact

    Deals & partnerships

    8
    Large national automotive parts retailerSignificant wallet share expansion, 7-figure+ opportunity in commodities sector

    One of four new share wallet wins landed in Q2, representing a significant opportunity in the commodities sector with higher margins from the start.

    Customer in the food products marketNew customer win, diversifying portfolio outside industrial sector

    One of several new customer wins onboarded over the past four quarters, helping to diversify the portfolio.

    Large restaurant chainNew customer win, diversifying portfolio outside industrial sector

    One of several new customer wins onboarded over the past four quarters, helping to diversify the portfolio.

    Large retailerNew customer win, diversifying portfolio outside industrial sector

    One of several new customer wins onboarded over the past four quarters, helping to diversify the portfolio.

    One of the largest franchisees in the quick service restaurant industryNew customer win, diversifying portfolio outside industrial sector

    One of several new customer wins onboarded over the past four quarters, helping to diversify the portfolio.

    Existing retail customerWallet share expansion

    Expansion with an existing retail customer, part of wallet share gains.

    Customer in the automotive services and marketAddition of several hundred new locations

    Expansion with an existing customer, adding several hundred new locations.

    Two other major customersExpansions

    Expansions with two other major existing customers.

    Risks & headwinds

    4
    Macroeconomic complexity and uncertaintyongoing

    elongating the sales cycle

    Mitigation: Staying disciplined, optimizing cost structure, and focusing on operational excellence; monitoring the environment closely.

    Subdued industrial volumesongoing

    volumes still remain subdued relative to a few years ago at a few select accounts

    Mitigation: Diversifying into non-industrial markets, focusing on wallet share opportunities, and optimizing cost structure.

    Margin pressure with select industrial clientsQ2 FY26

    gross profit dollars and gross margin decline primarily isolated to margin pressure with select industrial clients

    Mitigation: Offsetting impact by growing in non-industrial markets, optimizing service levels, winning incremental wallet share, and executing 'Land and Expand' strategy.

    Geopolitical events leading to rising diesel pricesongoing

    diesel prices have risen amid geopolitical events around the world

    Mitigation: Limited impact on financials due to model resilience, ability to push back on cost increases, or pass through unavoidable costs to customers.

    What to watch in Q3 FY26

    4

    Revenue sequential growth

    Q3 FY26
    Current4% sequential increase in Q2
    Targetanother quarter of sequential growth

    Why it matters

    Continued sequential revenue growth is critical to demonstrate sustained business momentum and recovery from prior headwinds.

    As we look ahead to Q3, we expect another quarter of sequential growth in revenue.

    Q&A highlights

    3

    Can you provide details on the automotive customer win and comment on the confidence/growth in the wallet share pipeline, especially for industrial expansions?

    Management stated the automotive win is a seven-figure+ opportunity in the commodities sector, offering higher margins from the start. They continue to pursue attractive industrial opportunities and have closed nine significant wallet share opportunities since late 2025, leveraging existing customer trust for easier sales and accretive gross profit.

    “The opportunity that I referenced in the call is Is similar to a target for a new business account so seven figure plus I And it's in the commodities sector. So those opportunities come to us at kind of our normal margin and not the land and expand option. So they come in a little higher from the very beginning. So they help to drive incremental GP.”

    asked by Aaron Spychalla · answered by Perry Moss

    2 min read5 chapters

    Detailed Narrative

    01

    Strategic Diversification and Customer Wins

    Quest has successfully diversified its customer portfolio by focusing on non-industrial markets such as food service, retail, and hospitality. Over the past four quarters, the company onboarded several new customers, including a food products market client, a large restaurant chain, a major retailer, and a quick-service restaurant franchisee. Additionally, Quest secured multiple wallet share expansions with existing customers, notably a significant seven-figure opportunity with a large national automotive parts retailer in Q2, which is expected to drive incremental gross profit.

    02

    Industrial Portfolio Stabilization

    The industrial portion of Quest's portfolio showed positive trends in Q2, with sequential volume improvements and meaningful year-over-year growth from some of its largest customers. This marks an encouraging reversal from previous industrial headwinds. While volumes remain subdued compared to a few years ago, management is cautiously optimistic💬 about the stabilization and views it as a new norm, continuing to monitor the broader macro environment.

    03

    Operational Excellence and Cost Control

    Comprehensive efforts to streamline operations and improve productivity are yielding significant results. SG&A expenses decreased by 11% year-over-year and 2% sequentially, despite revenue growth. Year-to-date, SG&A is down 20% compared to the prior year. The company's model also demonstrated resilience to rising diesel prices, with limited financial impact due to scale and ability to pass through unavoidable costs.

    04

    Cash Flow and Debt Reduction

    Quest generated $4.5 million in operating cash flow during Q2, driven by higher revenues, cost discipline, and optimized billing/collections. This strong cash flow enabled a voluntary $2 million early payment on term debt, contributing to a total reduction of $4.6 million year-to-date and $17 million over the last six quarters. The company aims to further reduce DSOs to the mid-60s from approximately 70 and improved working capital days to 5 from 19 a year ago.

    05

    Sales Pipeline and Macroeconomic Headwinds

    The sales pipeline remains healthy with promising opportunities, some in new markets that would further diversify the customer base. However, the macroeconomic backdrop is causing an elongation of sales cycles as potential clients monitor the broader environment. Management is confident in its positioning but acknowledges that closing these opportunities depends on improved confidence in the economy.

    AI-generated summary of the company’s earnings call. Not investment advice.