Quest Resource 2025 Q1 Earnings Misses Targets as Net Income Dips 1488.7%

Quest Resource (QRHC) reported its fiscal 2025 Q1 earnings on May 12th, 2025. Quest Resource missed expectations with its first-quarter earnings, reporting a net loss of $10.41 million compared to a $655,000 loss in the same period last year. The company provided guidance that aligns with its ongoing strategic initiatives. Quest Resource expects revenue growth and enhanced EBITDA for 2025, with SG&A costs projected to decrease to approximately $9.5 million per quarter in the latter half of the year.

Revenue

Quest Resource experienced a revenue decline of 5.8% in Q1 2025, totaling $68.43 million, down from $72.65 million in Q1 2024. The services segment contributed $65.19 million, while product sales and other operations added $3.24 million to the overall revenue.

Earnings/Net Income

Quest Resource reported a sharp increase in losses, with a net loss of $-10.41 million in Q1 2025, representing a 1488.7% increase from the previous year's $-655,000 loss. The EPS loss widened to $0.50 per share from $0.03 per share in Q1 2024, reflecting significant financial challenges.

Post-Earnings Price Action Review

Investors adopting a strategy of buying Quest Resource Holding Corp (QRHC) following revenue misses and holding for 30 days face considerable risk. Despite strategic moves to enhance profitability, including divesting a non-core business and cutting costs, the company has encountered substantial difficulties. Revenue decreased by 6% year-over-year in the quarter, mainly due to client loss and reduced volumes at major clients, missing estimates by 5.63% with $69.97 million in revenue, remaining flat year-on-year. The reported quarterly loss of $0.14 per share was significantly below the consensus estimate of a $0.05 loss, marking an earnings surprise of -180%. Quest Resource's stock has depreciated approximately 61.7% year-to-date, underperforming the S&P 500, and analysts have largely reaffirmed estimates in the last month, indicating skepticism about a near-term recovery. The company's financial health shows elevated Days Sales Outstanding (DSO) affecting cash flow, but improvements are projected by the second quarter's end. While QRHC's strategic initiatives are promising, the short-term outlook is challenging, necessitating careful consideration of risk tolerance and investment horizon.

CEO Commentary

Perry Moss - Chief Executive Officer: "Since our last call, we have been hard at work and are making progress on our short-term initiatives and continuing to develop our long-term initiatives. Our key priorities are to improve EBITDA, improve cash generation, and pay down debt. We are establishing metrics and processes to benchmark and target improvement levels across the organization. We have initiated several projects that are expected to deliver improved results. Overall, for 2025, we expect to show both top and bottom line growth and anticipate our growth to continue."

Guidance

The company expects to achieve revenue growth and improved EBITDA throughout 2025. SG&A costs are projected to decrease to approximately $9.5 million per quarter starting in the second half of the year. The CEO mentioned that they expect steady improvement as they implement ongoing initiatives and drive process enhancements, with more meaningful growth anticipated as they exit the year.

Additional News

Quest Resource has recently undergone noteworthy changes in its executive leadership and strategic operations. The company has appointed a new CEO, Perry Moss, alongside a new Senior VP of Operations, bringing extensive industry experience to focus on operational performance. In a strategic move to streamline operations, Quest Resource completed the sale of a non-core portion of its RWS business, generating $5 million in cash proceeds, which were used to reduce debt. Additionally, the company has amended agreements with its lenders to enhance financial flexibility, aligning with its commitment to improve cash generation and profitability.