Quest Resource Holding's Q1 2025: Navigating Contradictions in Client Attrition, Sales Pipeline, and Operational Efficiency
Earnings DecryptTuesday, May 20, 2025 8:01 am ET
2min read
Industrial weakness and client attrition, sales pipeline and expectations, vendor management system impact on operations, customer attrition and sales strategy are the key contradictions discussed in Quest Resource Holding's latest 2025Q1 earnings call
Revenue and Cost Reduction:
- Quest Resource Holding Corp reported revenue of $68.4 million for Q1 2025, a 6% decrease from the previous year and 2% sequentially down from Q4.
- The decline was primarily due to client attrition and lower volumes at certain large clients, as well as elevated expenses.
- The company implemented cost reduction actions, reducing SG&A costs by $3 million annually, and expects further efficiency gains and profitability improvement.
Gross Profit and Margin Optimization:
- Gross profit for Q1 2025 was $10.9 million, a 22% decrease from the previous year, with a 2% sequential increase from Q4.
- The decrease was attributed to lower contribution due to customer attrition, lower volumes at larger clients, and a shift in revenue mix, with new clients having a lower initial margin profile.
- Quest is working to optimize margins with new customers and improve operational efficiencies to enhance gross profit over time.
Debt and Cash Flow Management:
- Quest ended Q1 with $1.4 million in cash and approximately $21 million in available borrowing capacity.
- The company used $1.1 million in cash for operations, related to an increase in working capital, with elevated accounts receivables impacting DSOs.
- The sale of the non-core RWS business provided $5 million cash, which was used to reduce debt, and improved covenant ratios through amended agreements with lenders.
Operational Excellence and Sales Growth:
- Quest introduced an Operations Excellence Initiative to drive process improvements and increase efficiency across the organization, aiming to optimize cash flow and profitability.
- The sales pipeline is robust, with an increased demand for Quest's services, particularly from companies seeking cost savings and efficiencies in an uncertain economic environment.
- The company is focused on expanding its share of wallet with existing clients and optimizing the onboarding process for new clients to improve margin profiles.
Revenue and Cost Reduction:
- Quest Resource Holding Corp reported revenue of $68.4 million for Q1 2025, a 6% decrease from the previous year and 2% sequentially down from Q4.
- The decline was primarily due to client attrition and lower volumes at certain large clients, as well as elevated expenses.
- The company implemented cost reduction actions, reducing SG&A costs by $3 million annually, and expects further efficiency gains and profitability improvement.
Gross Profit and Margin Optimization:
- Gross profit for Q1 2025 was $10.9 million, a 22% decrease from the previous year, with a 2% sequential increase from Q4.
- The decrease was attributed to lower contribution due to customer attrition, lower volumes at larger clients, and a shift in revenue mix, with new clients having a lower initial margin profile.
- Quest is working to optimize margins with new customers and improve operational efficiencies to enhance gross profit over time.
Debt and Cash Flow Management:
- Quest ended Q1 with $1.4 million in cash and approximately $21 million in available borrowing capacity.
- The company used $1.1 million in cash for operations, related to an increase in working capital, with elevated accounts receivables impacting DSOs.
- The sale of the non-core RWS business provided $5 million cash, which was used to reduce debt, and improved covenant ratios through amended agreements with lenders.
Operational Excellence and Sales Growth:
- Quest introduced an Operations Excellence Initiative to drive process improvements and increase efficiency across the organization, aiming to optimize cash flow and profitability.
- The sales pipeline is robust, with an increased demand for Quest's services, particularly from companies seeking cost savings and efficiencies in an uncertain economic environment.
- The company is focused on expanding its share of wallet with existing clients and optimizing the onboarding process for new clients to improve margin profiles.
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