Quest Resource Holding Corporation Q3 FY2025 earnings call

• Initiatives to streamline processes, standardize operations, and focus on share of wallet opportunities with existing clients. - Redefined sales process with greater collaboration between relationship managers and sales teams to expand services for individual clients. - Launched new client wins including a major retailer, large full-service restaurant chain, and a food products company. - Focus on diversifying customer and revenue profile into retail, hospitality, grocery stores, etc., which tend to perform better in Q4. - Vendor management improvements leading to lowest service disruption rates ever. - Vision for a data subscription model for access to portal data.

Revenue for the third quarter was $63.3 million, a 13% decrease from the prior year but a 6.4% sequential increase from the second quarter. Gross profit dollars totaled $11.5 million, a 2% decrease from the prior year but a 3.9% sequential increase. Gross margin was 18.1%, 200 basis points better than the prior year but a 40 basis point sequential decline. The decline y-o-y in revenue was due to divested mall-related business and lower industrial end market revenue, while sequential growth was driven by new clients added over the past 18 months.

• Expect sequential comparisons for gross profit dollars in Q4 to be flat to slightly down but in line with expectations. - SG&A expected to decrease further in Q4 compared to Q3. - Continued focus on generating cash, paying down debt, and driving margin improvements through operational excellence initiatives. - Confidence in organic growth from share of wallet opportunities with existing clients as macroeconomic conditions normalize.

• Macroeconomic uncertainty impacting industrial volumes. - Seasonality effects in Q4 affecting industrial clients. - Uncertainty in client volumes in certain end markets. - Need to continue executing operational initiatives to sustain improvements.

Q: Gerry Sweeney asked about the stability of end markets, particularly industrials, and if the wallet share strategy has changed.

A: Perry Moss stated markets are stabilized, with industrials having seasonality in Q4 but share of wallet efforts continuing to add incremental services. The wallet share strategy was refined with a disciplined approach, defined share of wallet, and collaboration between relationship managers and sales teams.

Q: Aaron Spychalla inquired about details of the new food win, size, timing, and vendor management platform.

A: Perry Moss said it was a competitive win, starting with higher margins and a 20% share of the customer's portfolio. Brett Johnston mentioned the vendor management platform is part of process improvement initiatives, with improved relationships and low service disruptions.

Q: Owen Rickert asked about the vendor management platform update and SG&A guidance.

A: Brett Johnston said the vendor management platform is progressing as planned, and SG&A is expected to be down sequentially from Q3 due to continued cost reductions.

Q: Greg Kitt asked about company execution ranking, SG&A, data subscription opportunity, AR, debt repayment, and renewals.

A: Perry Moss rated current execution 6-7 out of 10. Brett Johnston discussed SG&A being down sequentially. Perry Moss mentioned data subscription is a vision with untapped value. On AR, progress is being made to reduce DSO. Brett Johnston talked about debt repayment balance and Perry Moss emphasized strong position on renewals with low attrition.

Q: Andrew Heffer asked about debt reduction goals and renewals in 2026.

A: Brett Johnston said there's a balance with debt repayment restricted until Q1 but aiming to pay down more expensive debt. Perry Moss stated they're in a good position with low attrition and proactive renewal planning.