Release Date: May 12, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Quest Resource Holding Corp (QRHC, Financial) completed the sale of a non-core part of its business, generating $5 million in cash and reducing debt.
- The company has implemented cost reduction actions, reducing SG&A costs by $3 million on an annualized basis.
- New leadership appointments, including a new CEO and Senior Vice President of Operations, aim to strengthen the management team.
- QRHC is focused on generating cash, improving profitability, lowering debt, and increasing operating efficiency.
- The company has a robust sales pipeline and is actively working on expanding its client base and increasing its share of wallet with existing customers.
Negative Points
- Revenue for the first quarter decreased by 6% year-over-year, primarily due to client attrition and lower volumes at larger clients.
- Gross profit dollars decreased by 22% from the previous year, affected by customer attrition, lower volumes, and a shift in revenue mix.
- SG&A costs increased by $1.6 million compared to the previous year, partly due to separation costs and bonus accruals.
- The company experienced a $4.4 million loss related to the sale of a non-core business and a $1.7 million adjustment to intangible assets.
- Days Sales Outstanding (DSO) remain elevated, impacting cash flow, although improvements are expected by the end of the second quarter.
Q & A Highlights
Q: Perry, you mentioned operational excellence initiatives. Have you identified any gaps or leaks in your processes since the last call?
A: Yes, we have started to baseline all our processes, not just operations but across the entire value chain. We've identified some weaknesses and have designed processes to fix those gaps. We've also implemented quick initiatives to drive immediate impacts starting in Q2. Our challenge has been converting business into profit, which we're addressing by increasing efficiencies in our operations. – Perry Moss, CEO
Q: Are you seeing any increase in market weakness, particularly with mature companies?
A: No significant change in market weakness has been observed. Demand and volumes are slightly down, but we remain hopeful for improvement. – Perry Moss, CEO
Q: How is the sales pipeline looking given recent market uncertainties?
A: We've seen a bit of a slowdown in some opportunities, but nothing significant. Interestingly, we're attracting prospects who have never used our model before, likely due to the economic uncertainty. Our pipeline is robust, especially in the final stages of the sales cycle, and we anticipate continued growth. – Perry Moss, CEO
Q: What strategies are in place to reduce Days Sales Outstanding (DSO)?
A: We are working with larger clients to address inefficiencies in processing. Our new AP system provides better visibility into missing invoices, allowing us to bill faster and improve cash flow. We expect to see improvements in DSOs by the end of Q2. – Brett Johnston, CFO
Q: Can you provide clarity on customer attrition and its impact?
A: Attrition has been mostly due to customers being acquired with different programs in place. Half of the attrition was related to the divested business. We take attrition seriously and have implemented a new customer retention plan, including developing higher-level relationships and specific customer plans. – Brett Johnston, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
