Quest Resource (NASDAQ:QRHC) reported second-quarter 2026 revenue growth and improved cash generation, supported by new customer wins, expanded business with existing clients and stabilizing demand among industrial customers.
Chief Executive Officer Perry Moss said the company returned to year-over-year and sequential revenue and adjusted EBITDA growth during the quarter. He attributed the performance to contributions from recent customer additions, wallet-share gains, stabilizing industrial volumes and productivity initiatives.
Revenue rises as industrial volumes stabilize
Revenue totaled $64.1 million in the second quarter, up 8% from a year earlier and 4% sequentially, according to Chief Financial Officer Brett Johnston. Volume improvements from certain industrial clients added approximately $3.3 million of revenue compared with the prior-year period, while new business, net of customer attrition, contributed about $1.2 million.
Moss said industrial customers showed positive sequential volume trends and meaningful year-over-year growth at some of Quest Resource’s largest accounts. However, he noted that volumes at a select number of accounts remain below levels from several years ago and may represent a new normal.
The company has also focused on expanding outside of industrial markets, citing growth in food service, retail and hospitality. Over the past four quarters, Quest Resource has added customers in food products, restaurant chains, retail and quick-service restaurant franchising, Moss said.
In the second quarter, the company secured four new wallet-share wins, including an expansion with a large national automotive parts retailer. Moss told analysts that the automotive-related opportunity referenced on the call is a seven-figure-plus opportunity in the commodities sector, with margins that begin above those typically associated with the company’s land-and-expand strategy.
Quest Resource has closed nine meaningful wallet-share opportunities since the second half of 2025, Moss said. Those opportunities have ranged from six-figure to seven-figure deals and have supported gross-profit growth.
The sales pipeline remains healthy, management said, with several potential large national-brand customers under consideration. Still, the company said customers’ caution regarding the macroeconomic environment has lengthened sales cycles. Johnston said Quest Resource expects another quarter of sequential revenue growth in the third quarter.
Margins improve sequentially while industrial pressure remains
Second-quarter gross profit was $10.4 million, down roughly 6% from the prior-year period but up 8% sequentially. Gross margin was 16.3%, compared with 18.5% a year earlier and 15.7% in the first quarter.
Johnston said the year-over-year decline in gross profit and margin was primarily tied to margin pressure involving select industrial clients, despite improved volumes from those accounts. Higher gross-profit dollars and improving margins in the rest of the business partly offset that pressure, he said, as margins from newer customers and wallet-share expansions mature.
The company expects gross margins to be flat to slightly higher in the third quarter as volumes increase at a few larger industrial customers.
Management also said higher diesel prices amid geopolitical events have had only a limited financial effect. Moss said the company’s model has shown resilience to short-term commodity fluctuations and allows Quest Resource to seek cost pass-throughs where necessary.
Cost controls and cash flow support debt reduction
Selling, general and administrative expense was $8.92 million, down 11% from a year earlier and down 2% sequentially, despite revenue growth in both comparisons. Moss said the first-half reduction in SG&A was 20% compared with the prior year.
The company has focused on standardizing internal processes, documenting procedures and training employees to improve productivity and reduce rework, Moss said. He added that the company has been measuring performance against baselines and tracking improvement plans weekly.
Quest Resource generated $4.5 million of operating cash flow in the quarter, supported by higher revenue, cost controls and improvements in billing, collections and vendor-payment processes. Days sales outstanding improved to roughly 70 from the mid-70s at the end of the first quarter, while accounts receivable declined approximately $2.5 million sequentially despite higher revenue.
Working-capital days fell to five at quarter-end, compared with 12 days in the first quarter and 19 days one year earlier. Johnston said the company sees a path to reducing DSO to the mid-60s.
- Cash at quarter-end was $1 million.
- Availability under the company’s asset-based lending credit facility was approximately $19.4 million.
- Net notes payable totaled approximately $59.4 million, down $4.6 million year to date and about $17 million over the past six quarters.
- The company made a voluntary $2 million early payment on its Monroe Capital term debt during the quarter.
Quest Resource recorded an $11 million non-cash goodwill impairment charge during the quarter, triggered by a decline in its market capitalization. Johnston said the charge did not affect liquidity, cash flow or compliance with debt covenants.
Management maintains cautious outlook
Moss said Quest Resource’s priorities remain new and existing customer growth, margin improvement, operating-platform development, stronger cash generation and debt reduction. The company plans to continue making early debt payments when appropriate.
While management described the operating environment as gradually improving, Moss said the outlook remains tempered by geopolitical risks and broader economic uncertainty. “We’re staying disciplined rather than getting ahead of ourselves,” he said.
About Quest Resource (NASDAQ:QRHC)
Quest Resource Holding Corporation, together with its subsidiaries, provides solutions for the reuse, recycling, and disposal of various waste streams and recyclables in the United States. The company provides disposal and recycling services for motor oil and automotive lubricants, oil filters, scrap tires, oily water, goods destruction, food waste, meat renderings, cooking oil and grease trap waste, plastics, cardboard, metal, glass, mixed paper, construction debris, as well as a large variety of regulated and non-regulated solid, liquid, and gas wastes.
