8-K: Quest Reports Q2 2025 Results Amid Turnaround Efforts

Quest Resource Holding Corporation reports mixed second quarter 2025 financial results, showing sequential improvements despite year-over-year declines in revenue and profitability.

Summary

• Revenue for Q2 2025 was $59.5 million, an 18.6% decrease compared to Q2 2024 and a 13.0% sequential decrease from Q1 2025.
• Gross profit reached $11.0 million in Q2 2025, an 18.4% decrease year-over-year but a 1.0% sequential increase from Q1 2025.
• Gross margin was 18.5% in Q2 2025, consistent with Q2 2024 and a 250 basis point sequential improvement from Q1 2025.
• GAAP net loss was $(2.0) million in Q2 2025, compared to $(1.5) million in Q2 2024 and $(10.4) million in Q1 2025.
• Adjusted EBITDA was $2.7 million in Q2 2025, down from $5.1 million in Q2 2024 but up from $1.6 million in Q1 2025.
• Generated $3.9 million in operating cash flow during Q2 2025.
• Reduced debt by $6.6 million year-to-date 2025.
• Year-to-date 2025 revenue was $128.0 million, a 12.2% decrease compared to the same period in 2024.
• Year-to-date 2025 GAAP net loss was $(12.4) million, compared to $(2.2) million in the same period of 2024.
• Recognized a non-cash loss on sale of assets of $4.5 million and an impairment charge on intangible assets of $1.7 million year-to-date 2025.

Sentiment

Score: 4

Explanation: The sentiment is mixed to slightly negative. While the company shows sequential improvements in key profitability metrics and strong operating cash flow generation, the year-over-year declines in revenue, gross profit, and adjusted EBITDA are substantial, and net losses have widened. Management is actively addressing past issues and implementing turnaround strategies, but the overall financial performance remains challenged.

Positives

• Generated $3.9 million in operating cash flow during the second quarter of 2025, indicating improved cash cycle times.
• Reduced debt by $6.6 million year-to-date 2025.
• Achieved sequential improvements in gross profit (1.0% increase) and adjusted EBITDA (from $1.6 million to $2.7 million) from Q1 2025 to Q2 2025.
• Gross margin improved sequentially by 250 basis points from Q1 2025 to 18.5% in Q2 2025.
• Secured significant competitive wins, including a new client in the restaurant end market and a geographic expansion with an existing retail client.
• Operational Excellence Initiatives are on track, focusing on cash generation, profitability, and process improvement.

Negatives

• Revenue decreased by 18.6% year-over-year to $59.5 million in Q2 2025 and 13.0% sequentially from Q1 2025.
• Gross profit decreased by 18.4% year-over-year to $11.0 million in Q2 2025.
• GAAP net loss widened to $(2.0) million in Q2 2025 from $(1.5) million in Q2 2024.
• Adjusted EBITDA decreased by 47.1% year-over-year to $2.7 million in Q2 2025.
• Year-to-date 2025 revenue decreased by 12.2% to $128.0 million compared to the same period in 2024.
• Year-to-date 2025 GAAP net loss significantly widened to $(12.4) million from $(2.2) million in the same period of 2024.
• Year-to-date 2025 Adjusted EBITDA decreased by 58.7% to $4.2 million compared to the same period in 2024.
• Recognized a non-cash loss on sale of assets of $4.5 million and a non-cash impairment charge on intangible assets of $1.7 million year-to-date 2025.
• Experienced continued softness with clients in the industrial end market.

Risks

• Competition in the environmental services industry.
• Impact of the current economic environment.
• Interruptions to supply chains.
• Commodity price fluctuations.
• Extended shutdown of businesses.
• Macro uncertainties causing prospective clients to delay decision making, slowing the pace of growth.

Future Outlook

The company expects to continue delivering improvements in the trajectory of the business, driven by ongoing Operational Excellence Initiatives focused on cash generation, profitability, and process improvement. Management is actively pursuing growth initiatives, including winning new clients and expanding share of wallet with existing clients, despite macro uncertainties causing prospective clients to delay decision making.

Management Comments

• "Our efforts to fundamentally improve our operations and produce more consistent financial results are on track. Sequential growth in gross profit dollars, a decrease in SG&A costs and strong operating cash flow generation were all a direct result of the performance-focused actions we took earlier this year. Despite continued softness in the industrial end market, we are on track to continue to deliver improvements in the trajectory of the business." Dan M. Friedberg, Chairman of the Board of Directors.
• "I believe a culture of performance and accountability is critical to the success of an organization. We are fundamentally changing Quests culture and we are already seeing positive results. Our team is embracing this data and KPI driven philosophy. Our Operational Excellence Initiatives are beginning to improve cash generation, improve efficiency, and reduce operational variability." Perry W. Moss, Chief Executive Officer.
• "While we have been implementing operational improvements, we have also been actively pursuing growth initiatives. Macro uncertainties are causing prospective clients to delay decision making, which is slowing the pace of growth. Nevertheless, we are still winning new clients and adding new client opportunities to our pipeline. In addition, we are focused on expanding our share of wallet with existing clients." Perry W. Moss, Chief Executive Officer.

Industry Context

Quest operates as a national leader in environmental waste and recycling services, serving larger businesses in various industry sectors. The company notes a slowdown in the industrial sector and broader macro uncertainties that are causing prospective clients to delay decision-making, impacting the pace of growth across the industry.

Comparison to Industry Standards

• The filing does not provide specific comparable companies, projects, or industry benchmarks to assess the results against global standards. It states Quest is a 'national leader' but offers no quantitative comparison points.

Stakeholder Impact

• Shareholders: Impacted by widening net losses and significant year-over-year declines in revenue and profitability, though sequential improvements and debt reduction offer some positive signs for future performance.
• Employees: Management is focused on fundamentally changing the company's culture to one of performance and accountability, aiming to increase employee satisfaction.
• Customers: The company secured new competitive wins and is focused on expanding geographic footprint with existing clients, indicating continued value proposition and service.
• Creditors: Debt reduction of $6.6 million year-to-date improves the company's financial position relative to its lenders.

Next Steps

• Host a conference call on August 11, 2025, at 5:00 PM ET to review the financial results.
• Continue the roll out of Operational Excellence Initiatives with a focus on cash generation, profitability, and process improvement.
• Actively pursue growth initiatives, including winning new clients and expanding share of wallet with existing clients.

Key Dates

Recommendation

While the company reported significant year-over-year declines in revenue and profitability, and continued net losses, there are clear signs of a turnaround effort. Sequential improvements in gross profit, gross margin, and adjusted EBITDA, coupled with strong operating cash flow generation and debt reduction, suggest that management's operational excellence initiatives are beginning to yield results. An investor would likely 'hold' to observe if these sequential improvements translate into sustained year-over-year growth and profitability in future quarters, indicating a successful turnaround.

Keywords

Environmental services, Waste management, Recycling, Sustainability, Corporate responsibility, Financial results, Adjusted EBITDA, Cash flow, Debt reduction