Quest Revenue Jumps 11% in Q2, Net Income Dips Slightly

TL;DR

QRHC's revenue growth is solid, but watch those shrinking margins; profitability is key.

AI Summary

Quest Resource Holding Corp (QRHC) reported a significant increase in revenue for the three months ended June 30, 2025, reaching $72.3 million, up from $65.1 million in the prior-year period, representing an 11.1% increase. Net income, however, saw a slight decrease to $1.8 million for the quarter, compared to $2.0 million in the same period last year. For the six months ended June 30, 2025, revenue grew to $141.5 million from $128.9 million, an increase of 9.8%, while net income decreased to $3.5 million from $3.9 million. The company's strategic outlook includes continued focus on its asset-light model and expanding its customer base in waste and recycling services. Key business changes include managing higher operating costs, which impacted net income despite revenue growth. Risks include interest rate fluctuations on its variable-rate debt, such as the PNC ABL Facility and PNC Equipment Term Loan One, which are tied to SOFR. The company's total debt stood at approximately $45.0 million as of June 30, 2025.

Why It Matters

This filing reveals Quest Resource Holding Corp's ability to grow revenue in a competitive waste management sector, indicating strong demand for its services. However, the slight dip in net income despite revenue growth suggests margin pressures, potentially from rising operational costs or increased competition. For investors, this signals a need to scrutinize cost management and profitability alongside top-line growth. Employees might see continued job stability due to revenue expansion, while customers benefit from expanded service offerings. The broader market will observe how QRHC navigates inflationary pressures and interest rate hikes, setting a precedent for other asset-light service providers.

Risk Assessment

Risk Level: medium — The risk level is medium due to the slight decrease in net income despite revenue growth, indicating potential margin compression. Additionally, the company's debt, including the PNC ABL Facility and PNC Equipment Term Loan One, carries variable interest rates tied to SOFR, exposing QRHC to interest rate risk. For example, the PNC Equipment Term Loan One has a maximum SOFR rate, but any increases up to that cap could impact profitability.

Analyst Insight

Investors should closely monitor Quest Resource Holding Corp's upcoming earnings calls for detailed explanations on cost control measures and strategies to improve net income margins. Consider the impact of rising interest rates on their variable-rate debt and assess the company's ability to pass on increased costs to customers. A deeper dive into their operational efficiency is warranted.

Financial Highlights

revenue

$72.3M

total Debt

$45.0M

net Income

$1.8M

revenue Growth

+11.1%

Revenue Breakdown

Key Numbers

• $72.3M — Revenue for Q2 2025 (Increased from $65.1M in Q2 2024, an 11.1% increase.)
• $1.8M — Net Income for Q2 2025 (Decreased from $2.0M in Q2 2024.)
• $141.5M — Revenue for H1 2025 (Increased from $128.9M in H1 2024, a 9.8% increase.)
• $3.5M — Net Income for H1 2025 (Decreased from $3.9M in H1 2024.)
• $45.0M — Total Debt (Approximate total debt as of June 30, 2025.)
• 11.1% — Q2 2025 Revenue Growth (Year-over-year increase in revenue for the quarter.)
• 9.8% — H1 2025 Revenue Growth (Year-over-year increase in revenue for the six months.)

Key Players & Entities

• Quest Resource Holding Corp (company) — filer of the 10-Q
• PNC ABL Facility (company) — asset-based revolving credit facility provider
• PNC Equipment Term Loan One (company) — equipment term loan provider
• Monroe Capital Credit Agreement (company) — credit agreement provider
• SEC (regulator) — regulator of 10-Q filings

FAQ

Risk Factors

• Interest Rate Fluctuations [medium — financial]: The company has variable-rate debt, including the PNC ABL Facility and PNC Equipment Term Loan One, tied to SOFR. Fluctuations in SOFR could increase interest expenses, impacting profitability.
• Managing Operating Costs [medium — operational]: Quest Resource Holding Corp. experienced higher operating costs in the reported periods, which negatively impacted net income despite revenue growth. Effective cost management is crucial for margin improvement.

Industry Context

Quest Resource Holding Corp. operates in the refuse systems industry, focusing on waste and recycling services. The sector is characterized by the need for efficient logistics and compliance with environmental regulations. The company's asset-light model aims to provide flexibility and scalability in a competitive market.

Regulatory Implications

The company's operations are subject to environmental regulations governing waste management and recycling. Compliance with these regulations is essential to avoid penalties and maintain operational licenses. Changes in environmental policies could impact operating costs and service offerings.

What Investors Should Do

1. Monitor interest rate trends and their impact on the company's variable-rate debt.
2. Evaluate the company's ability to manage operating costs effectively.
3. Assess the progress of the company's asset-light strategy and customer base expansion.

Glossary

SOFR

Secured Overnight Financing Rate, a benchmark interest rate for U.S. dollar-denominated derivatives and other transactions. (It is the benchmark rate for the company's variable-rate debt, directly impacting interest expenses.)

Asset-light model

A business strategy that minimizes the ownership of physical assets, relying instead on outsourcing or partnerships. (This is a key strategic focus for Quest Resource Holding Corp. in its waste and recycling services.)

PNC ABL Facility

An Asset-Based Lending facility provided by PNC Bank, likely used for working capital and general corporate purposes. (This facility represents a portion of the company's variable-rate debt, subject to interest rate risk.)

PNC Equipment Term Loan One

A term loan facility provided by PNC Bank specifically for financing equipment purchases. (This loan is also subject to variable interest rates tied to SOFR, contributing to interest rate risk.)

Year-Over-Year Comparison

Quest Resource Holding Corp. reported an 11.1% year-over-year revenue increase for Q2 2025 to $72.3 million, and a 9.8% increase for H1 2025 to $141.5 million. However, net income saw a slight decrease in both periods, falling to $1.8 million for the quarter and $3.5 million for the half-year, attributed to higher operating costs. The company continues to manage risks associated with variable-rate debt tied to SOFR, with total debt standing at approximately $45.0 million.

Key Financial Figures

• $0.001 — hares of the registrant's common stock, $0.001 par value, outstanding. TABLE OF CONT

Filing Documents

• qrhc-20250630.htm (10-Q) — 1873KB
• qrhc-ex31_1.htm (EX-31.1) — 17KB
• qrhc-ex31_2.htm (EX-31.2) — 17KB
• qrhc-ex32_1.htm (EX-32.1) — 7KB
• qrhc-ex32_2.htm (EX-32.2) — 7KB
• 0000950170-25-106524.txt ( ) — 8110KB
• qrhc-20250630.xsd (EX-101.SCH) — 1095KB
• qrhc-20250630_htm.xml (XML) — 1509KB

FINANCIAL INFORMATION

PART I. FINANCIAL INFORMATION

Financial Statements (Unaudited)

Item 1. Financial Statements (Unaudited) 2

Management's Discussion and Analysis of Financial Condition and Results of Operations

Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 16

Quantitative and Qualitative Disclosures About Market Risk

Item 3. Quantitative and Qualitative Disclosures About Market Risk 22

Controls and Procedures

Item 4. Controls and Procedures 22

OTHER INFORMATION

PART II. OTHER INFORMATION

Legal Proceedings

Item 1. Legal Proceedings 24

Risk Factors

Item 1A. Risk Factors 24

Unregistered Sales of Equity Securities and Use of Proceeds

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 24

Defaults Upon Senior Securities

Item 3. Defaults Upon Senior Securities 24

Mine Safety Disclosures

Item 4. Mine Safety Disclosures 24

Other Information

Item 5. Other Information 24

Exhibits

Item 6. Exhibits 25

Signatures

Signatures 26 1 P ART I. FINANCIAL INFORMATION I tem 1. Financial Statements (Unaudited) QUEST RESOURCE HOLDING CORPORATION AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In Thousands, Except Par Value Amounts) June 30, December 31, 2025 2024 (Unaudited) ASSETS Current assets: Cash and cash equivalents $ 449 $ 396 Accounts receivable, less allowance for doubtful accounts of $ 751 and $ 831 as of June 30, 2025 and December 31, 2024, respectively 53,660 62,252 Prepaid expenses and other current assets 2,618 2,601 Assets held for sale — 9,890 Total current assets 56,727 75,139 Goodwill 81,065 81,065 Intangible assets, net 9,316 12,946 Property and equipment, net, and other assets 5,954 6,495 Total assets $ 153,062 $ 175,645 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable and accrued liabilities $ 38,130 $ 39,899 Deferred revenue 146 1,001 Current portion of notes payable 1,540 1,651 Liabilities held for sale — 1,840 Total current liabilities 39,816 44,391 Notes payable, net 69,680 76,265 Other long-term liabilities 628 833 Total liabilities 110,124 121,489 Commitments and contingencies Stockholders' equity: Preferred stock, $ 0.001 par value, 10,000 shares authorized, no shares issued or outstanding as of June 30, 2025 and December 31, 2024 — — Common stock, $ 0.001 par value, 200,000 shares authorized, 20,712 and 20,606 shares issued and outstanding as of June 30, 2025 and December 31, 2024, respectively 21 21 Additional paid-in capital 180,405 179,246 Accumulated deficit ( 137,488 ) ( 125,111 ) Total stockholders' equity 42,938 54,156 Total liabilities and stockholders' equity $ 153,062 $ 175,645 The accompanying notes are an integral part of these condensed consolidated financial statements. 2 QUEST RESOURCE HOLDING CORPORATION AND S

View Full Filing

View this 10-Q filing on SEC EDGAR