Quest Resource Holding Corp’s 2026 Q2 Earnings Call: Wallet Share Pipeline and Operational Timelines Don’t Match

Date of Call: Aug 6, 2026

Financials Results

• Revenue: $64.1 million, an 8% increase from one year ago and a sequential increase of 4% compared to the first quarter
• Gross Margin: 16.3%, which was down from 18.5% in the prior year, but up from 15.7% sequentially

Guidance:

• Expect another quarter of sequential growth in revenue in Q3.
• Gross margins anticipated to be flat to slightly up in Q3 as industrial volumes ramp at a few select larger customers.

Business Commentary:

Revenue Growth and Diversification:

• Quest Resource Holding Corporation reported revenue of $64.1 million for Q2 2026, marking an 8% increase year-over-year and a 4% sequential increase.
• Growth was driven by volume improvements from certain industrial clients and new business from non-industrial markets, including food service, retail, and hospitality.

Industrial Portfolio Stabilization:

• The company's industrial portfolio contributed to year-over-year growth, with stabilization in volumes from its largest customers.
• This stabilization has been supported by positive trends in the industrial sector, helping to mitigate the impact of a challenging macroeconomic environment.

Operational Excellence and Cost Management:

• SG&A expenses were reduced by 11% year-over-year despite an 8% increase in revenue, reflecting improved operational efficiency.
• The reduction was achieved through cost discipline, process optimization, and productivity improvements across the organization.

Gross Profit and Margin Trends:

• Gross profit dollars totaled $10.4 million, reflecting a 6% year-over-year decline but an 8% sequential increase.
• The decline in gross profit was primarily due to margin pressure with select industrial clients, offset by improvements in margins from new customer wins and operational efficiencies.

Debt Reduction and Cash Flow Improvement:

• The company delivered $4.5 million in operating cash flow for the quarter and made a voluntary $2 million early payment to reduce term debt.
• These results were driven by higher revenues, cost discipline, and optimized billing and collections processes, improving the company's financial flexibility.

Sentiment Analysis:

Overall Tone: Positive

• Quest delivered a solid quarter of results with sequential improvements and momentum carried forward. We returned to top-line revenue and adjusted EBITDA growth. The comprehensive efforts to streamline operations, diversify the business, and improve productivity are clearly showing results. We are cautiously optimistic that the operating landscape is slowly improving.

Q&A:

• Question from Aaron Spychalla (Craig-Hallum): Good to see the traction on the wallet share wins. Any details on the automotive customer size, locations, or waste streams? Can you just speak to kind of confidence or growth in that kind of wallet share pipeline? I know you’ve kind of targeted some industrial expansions. Are those still possibilities?
  Response: The share of wallet opportunity is a 7-figure plus target in the commodities sector. There are several attractive industrial opportunities in the pipeline, and diversification remains a priority.

• Question from Aaron Spychalla (Craig-Hallum): With that kind of combination of growth in new and existing and the operational initiatives you had, I know in the past you’ve talked about a 50% conversion from gross profit dollars to EBITDA. Is that still fair or is the target maybe a little bit higher just given some of those operational improvements you’ve made?
  Response: The conversion is fair to assume is slightly higher, especially with share of wallet opportunities where onboarding costs are significantly lower.

• Question from Aaron Spychalla (Craig-Hallum): Any update on just operational initiatives over the last year plus that you’ve made and any other areas of notable focus moving forward?
  Response: Focus has been on redefining and optimizing internal processes, leading to a 20% reduction in SG&A over the first six months of the year compared to last year and significantly increased productivity.

Contradiction Point 1

Wallet Share Pipeline Size and Growth Potential

Contradiction on the scale and growth prospects of the wallet share opportunity pipeline.

Aaron Spychalla (Craig-Hallum) - Aaron Spychalla (Craig-Hallum)

2026Q2: The specific wallet share opportunity mentioned is a 7-figure plus target... Nine meaningful wallet share opportunities (each in the 6-7 figure range) have been closed from H2 2025 through 2026, and efforts will continue. - Perry Moss(CEO)

Can you provide details on automotive customer size, locations, waste streams, confidence in wallet share pipeline growth, and the status of industrial expansion possibilities? - Aaron Spychalla (Craig-Hallum)

2026Q1: There are dozens of wins, though only the largest are typically mentioned. Currently, there are five to six major opportunities with largest customers... - Perry Moss(CEO)

Contradiction Point 2

Gross Profit to EBITDA Conversion Rate

Contradiction on the benchmark conversion rate from gross profit to EBITDA.

Can you discuss Craig-Hallum's Q4 earnings performance? - Aaron Spychalla (Craig-Hallum)

2026Q2: The conversion rate from gross profit to EBITDA is now slightly higher than the previously stated 50% benchmark. - Perry Moss(CEO)

Given the operational improvements, is the 50% conversion rate from gross profit to EBITDA still valid or has it increased? - Aaron Spychalla (Craig-Hallum)

2026Q1: Recent new client wins (including the QSR account) and share of wallet expansions are now fully contributing to profitability after initial onboarding costs. - Perry Moss(CEO) [Implied use of the 50% benchmark]

Contradiction Point 3

Vendor Relationship Health and Payment Terms

Contradictory statements on vendor payment terms and relationship stability.

Aaron Spychalla (Craig-Hallum) - Aaron Spychalla (Craig-Hallum)

2026Q2: The focus has been on redefining, optimizing, and standardizing all internal processes... These efforts have led to a 20% reduction in SG&A year-to-date for the first six months of 2026 compared to the prior year, demonstrating tangible cost discipline and productivity gains. - Perry Moss(CEO)

Can you provide updates on operational initiatives implemented over the past year and notable areas of focus moving forward? - Aaron Spychalla (Craig-Hallum)

20260313-2025 Q4: Vendor relationships are improving, with vendors now accepting payment on terms rather than demanding upfront payments. A recent cost-lowering project with vendors delivered positive results. Service disruption rates are at historic lows, minimizing associated costs. - Perry Moss(CEO)

Contradiction Point 4

Industrial Customer Expansion Pipeline

Contradiction on the readiness and specifics of industrial expansion opportunities.

What are Aaron Spychalla's comments on Craig-Hallum? - Aaron Spychalla (Craig-Hallum)

2026Q2: The company does not typically disclose details on individual customers. The specific wallet share opportunity mentioned is a 7-figure plus target in the commodities sector... Nine meaningful wallet share opportunities (each in the 6-7 figure range) have been closed from H2 2025 through 2026, and efforts will continue. - Perry Moss(CEO)

Can you provide details on the automotive customer size, locations, and waste streams, as well as confidence in wallet share pipeline growth and the status of industrial expansion plans? - Aaron Spychalla (Craig-Hallum)

20260313-2025 Q4: While specific customers are not named, the company is focused on expanding share of wallet with existing industrial clients. If any industrial customer adds plants or if the macroeconomic environment improves, Quest is well-positioned to benefit... The company is actively engaged in cross-selling more services and expanding its scope with large, multi-location customers. - Perry Moss(CEO)

Contradiction Point 5

Operational Improvement Timeline and Progress

Contradiction on the stage and momentum of operational improvement initiatives.

Aaron Spychalla (Craig-Hallum) - Aaron Spychalla (Craig-Hallum)

2026Q2: The focus has been on redefining, optimizing, and standardizing all internal processes... These efforts have led to a 20% reduction in SG&A year-to-date for the first six months of 2026 compared to the prior year, demonstrating tangible cost discipline and productivity gains. - Perry Moss(CEO)

What updates have been made to operational initiatives over the past year, and what are the notable areas of focus moving forward? - Aaron Spychalla (Craig-Hallum)

20251111-2025 Q3: Approximately in the bottom of the fourth or top of the fifth inning. It has taken time to gain traction as initiatives are implemented alongside day-to-day work. The first quarter of operational improvement is showing tangible benefits, and momentum is hoped to carry into Q4 and next year. - Perry Moss(CEO)