Quest Resource Holding Corporation has announced a solid performance for the second quarter of 2026, marking a significant return to growth in both top-line revenue and Adjusted EBITDA. This positive trajectory is attributed to a combination of factors including the stabilization of its industrial business unit, successful penetration into new markets beyond traditional industrial sectors, and a steadfast commitment to operational excellence. The company's proactive measures in streamlining operations and optimizing cost structures have clearly yielded favorable results, reinforcing its financial health and strategic direction amidst a dynamic economic environment.
On August 6, 2026, Quest Resource's leadership, including CEO Perry Moss and CFO Brett Johnston, along with Nick Nelson from Alpha IR Group, convened to discuss the company's financial achievements and future outlook. The reported revenue climbed to $64.1 million, an 8% increase year-over-year and a 4% sequential rise from the first quarter. This growth was primarily fueled by a $3.3 million boost from improved volumes with industrial clients and an additional $1.2 million from new client acquisitions and expanded services with existing customers. Notably, the company’s Adjusted EBITDA reached $2.8 million, up from $2.7 million in the previous year, demonstrating enhanced profitability.
Despite a modest 5.5% decline in gross profit to $10.4 million year-over-year, which was mainly due to margin pressures with specific industrial clients, the sequential gross profit saw an 8% increase. Gross margin stood at 16.3%, slightly down from 18.5% in the prior year but an improvement from 15.7% sequentially. The company also achieved an 11% reduction in Selling, General, and Administrative (SG&A) expenses, totaling $8.2 million, even as revenue grew. This efficiency highlights the effectiveness of their operational initiatives. A non-cash goodwill impairment charge of $11 million was incurred due to a dip in market capitalization, but management confirmed it would not impact liquidity or debt covenants.
Quest Resource's focus on financial discipline is evident in its cash flow and debt management. The company generated $4.5 million in operating cash flow, driven by stronger revenues, stringent cost control, and optimized billing and collection processes. This robust cash generation enabled a voluntary early payment of $2 million on term debt to Monroe Capital, contributing to a year-to-date debt reduction of $4.6 million. The net notes payable decreased to $59.4 million from $64 million at the end of 2025. Improvements were also seen in Days Sales Outstanding (DSO), which fell to 70 days, and working capital days, which reduced to 5 days, signaling enhanced efficiency in managing receivables and working capital.
The company's strategic diversification efforts have been crucial to its recent success. Management emphasized a renewed sales approach targeting non-industrial markets, leading to significant growth in sectors such as food service, retail, and hospitality. New customer acquisitions and "share of wallet" expansions with existing clients, including a major national automotive parts retailer, have contributed meaningfully to revenue and margin. CEO Perry Moss highlighted that these new opportunities, often outside the industrial sector, are fostering a more balanced portfolio and providing incremental revenue streams during traditionally slower periods for industrial customers.
Looking forward, Quest Resource remains cautiously optimistic, acknowledging the complexities of the macroeconomic environment and ongoing geopolitical risks. However, the company is confident in its operational framework, which includes documented and standardized internal processes that have significantly boosted productivity and efficiency. These improvements are expected to continue driving stronger financial results by optimizing cost structures, enhancing cash generation, and further reducing debt. The management team's commitment to continuous improvement and strategic growth positions Quest Resource for sustained success, despite external challenges.
In conclusion, Quest Resource's second-quarter 2026 earnings call underscores a period of strong financial recovery and strategic realignment. The company has successfully navigated challenging market conditions by stabilizing its core industrial operations, diversifying its client base, and implementing rigorous operational efficiencies. These efforts have translated into notable revenue growth, improved profitability metrics, and a healthier balance sheet through diligent debt reduction and optimized cash flow management. The management team expressed confidence in maintaining this positive momentum, driven by a solid sales pipeline and ongoing initiatives to enhance productivity and expand market presence.
