Waste and recycling services provider Quest Resource (NASDAQ: QRHC) reported revenue ahead of Wall Streets expectations in Q3 CY2025, but sales fell by 13% year on year to $63.34 million. Its non-GAAP loss of $0.02 per share was $0.01 below analysts’ consensus estimates.

Is now the time to buy QRHC? Find out in our full research report (it’s free for active Edge members).

StockStory’s Take

Quest Resource’s third quarter was defined by meaningful sequential improvements, with management crediting internal operational changes and cost reductions for the company’s progress despite a difficult operating backdrop. CEO Perry Moss described the period as one of “strong sequential improvement in our financial performance,” underpinned by a revamped sales approach and disciplined cost management. The year-over-year revenue decline was primarily attributed to the divestiture of lower-margin mall-related business and continued softness in industrial customer volumes.

Looking ahead, management’s guidance focuses on driving organic growth through deepening relationships with existing customers and expanding share of wallet, particularly in sectors resilient to industrial seasonality. Moss emphasized that, while macroeconomic uncertainty is likely to persist, Quest’s operational excellence initiatives and process optimization are expected to support both margin stability and cash generation. The company aims to leverage ongoing technology investments and enhanced vendor partnerships to further streamline operations and manage potential margin pressure as it executes its land-and-expand strategy.

Key Insights from Management’s Remarks

Management attributed the quarter’s stabilization to process optimization, a refined sales approach, and better vendor relationships, while highlighting ongoing challenges in industrial end markets.

• Sales process overhaul: A disciplined, collaborative sales process now targets both new client acquisition and increased share of wallet from existing accounts. Moss cited new initiatives combining relationship managers and sales teams to broaden the scope of services delivered, particularly for large, multi-site customers.

• Diversification beyond industrials: The company is actively expanding in markets such as retail, hospitality, and grocery, with management noting that these sectors typically experience increased activity in the fourth quarter, which could help counteract industrial seasonality and balance earnings volatility.

• Operational excellence initiatives: Standardization and streamlining of core business processes—such as order-to-cash and procure-to-pay—have led to measurable improvements in billing timelines, collections, and working capital management. Moss highlighted 25 tracked KPIs, all trending positively since implementation in April.

• Vendor relationship improvements: Enhanced vendor management practices are yielding lower service disruption rates and better pricing for Quest’s asset-light model. Vendors are proactively seeking new business opportunities with Quest, contributing to improved customer service and reduced cost leakage.

• Technology and data leverage: The development of Quest’s customer portal and data platform is beginning to add value for clients, with long-term plans to monetize this data through a subscription model. Management sees this as a future revenue stream as the data asset matures.

Drivers of Future Performance

Quest’s outlook relies on expanding services within its existing customer base, optimizing costs, and broadening exposure to more resilient end markets.

• Share of wallet expansion: Management believes that deepening service penetration among current clients, particularly by adding value-added services and handling more waste streams, will be a key driver of organic growth. Moss stated that these initiatives are expected to contribute to gross profit growth as relationships mature and clients expand their engagement with Quest.

• Operational efficiency focus: The company continues to invest in automation and process improvements, targeting further reductions in SG&A and improvements in cash flow. Moss and CFO Brett Johnston both highlighted progress on KPIs and anticipate incremental gains in financial performance as additional automation is implemented.

• Managing market and margin risks: While Quest expects ongoing headwinds in industrial volumes, management is diversifying into markets less exposed to these cycles. The company is also aware of potential initial margin pressure from new client wins but plans to offset this through operational improvements and better service optimization.

Catalysts in Upcoming Quarters

In the upcoming quarters, the StockStory team will be monitoring (1) the pace and breadth of share of wallet gains with existing and new clients, (2) the impact of ongoing operational improvements and automation on margins and cash flow, and (3) diversification efforts into less cyclical markets such as retail and hospitality. Continued progress in vendor relationships and data monetization will also be important markers of strategic execution.

Quest Resource currently trades at $1.39, down from $1.41 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free for active Edge members).

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