Quest Resource Q3 loss narrows to $500K on $63.8M sales
One customer accounted for 21.4% of nine-month revenue in 2026, compared with 23.5% in 2025.
Sentiment and the balance of points
Rhea-AI Sentiment reads the wording of the document, how positive or negative its language is on a 1 to 5 scale. The balance of points shown with the takes weighs what the document actually discloses, so the two can disagree, for example when a trial that missed its main goal is described in upbeat language.
Quest Resource Holding Corp (QRHC) reported third-quarter 2026 revenue of $63.8 million, compared with $63.3 million a year earlier, and a net loss of $0.5 million versus $1.3 million. Adjusted EBITDA, a non-GAAP measure, was $3.4 million, up from $2.9 million.
For the nine months ended September 30, revenue was $189.6 million versus $191.3 million, and net loss was $15.0 million versus $13.7 million. Adjusted EBITDA increased to $8.0 million from $7.2 million. Operating cash flow was $4.4 million, compared with $8.5 million.
QRHC recognized an $11.0 million goodwill impairment in the second quarter; its third-quarter annual impairment review indicated no additional impairment. At September 30, cash was $0.9 million. The Texas Capital Bank revolving facility had $18.0 million outstanding and $17.4 million available against a $35.4 million borrowing base. QRHC reported compliance with its loan covenants at September 30.
How this balance works
Rhea-AI gives every point it takes from this document a weight. Minor counts 1, Moderate 3 and Major 9, so one Major point outweighs several Minor ones. The bar adds up the weights on each side, and when neither side holds more than 65% of the total the balance reads Mixed.
It reads the document as published, with the same rules for every company, and it does not look at what the market expected or at how the stock traded, so a point can be objectively good on a day the stock falls.
Rhea-AI Sentiment measures something else, the tone of the wording.
Positive
- Moderate pointAdjusted EBITDA rose 16.8% in Q3 and 11.7% over nine months.
- Moderate pointThird-quarter net loss narrowed to $0.5 million from $1.3 million.
Negative
- Major pointGoodwill impairment was $11.0 million in the second quarter. 50% of market cap
- Moderate pointNine-month operating cash flow fell to $4.4 million from $8.5 million.
- Moderate pointNine-month net loss widened to $15.0 million from $13.7 million.
Filing Explained
Eight hundred fifty thousand warrants could add shares if exercised; the exit-fee estimate is a minimum, not a ceiling.
Quest reports a
The
The estimate is recorded as an other long-term liability and included in debt issuance costs amortized to interest expense. Quest also reports 850,000 outstanding exercisable warrants at
Key Figures
Key Terms
Adjusted EBITDA financial
goodwill impairment financial
borrowing base financial
fixed charge coverage ratio financial
days sales outstanding financial
valuation allowance financial
FAQ
AI-generated questions and answers. How Rhea-AI works. Not financial advice.
How did QRHC perform in the third quarter of 2026?
What caused QRHC's nine-month revenue decline?
AI-generated analysis. How Rhea-AI works. Not financial advice.
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM
For the quarterly period ended
Commission file number:
(Exact Name of Registrant as Specified in its Charter)
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(State or other Jurisdiction of Incorporation or Organization) |
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(I.R.S. Employer Identification No.) |
(Address of Principal Executive Offices and Zip Code)
(
(Registrant’s Telephone Number, Including Area Code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class |
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Trading Symbol |
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Name of each exchange on which registered |
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Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer |
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Accelerated filer |
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☐ |
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☒ |
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Smaller reporting company |
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Emerging growth company |
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If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No
As of November 2, 2026, there were
TABLE OF CONTENTS
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Page |
PART I. FINANCIAL INFORMATION |
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Item 1. Financial Statements (Unaudited) |
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2 |
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations |
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17 |
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Item 3. Quantitative and Qualitative Disclosures About Market Risk |
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23 |
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Item 4. Controls and Procedures |
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24 |
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PART II. OTHER INFORMATION |
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Item 1. Legal Proceedings |
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25 |
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Item 1A. Risk Factors |
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25 |
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Item 2. Unregistered Sales of Equity Securities and Use of Proceeds |
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25 |
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Item 3. Defaults Upon Senior Securities |
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25 |
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Item 4. Mine Safety Disclosures |
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25 |
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Item 5. Other Information |
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25 |
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Item 6. Exhibits |
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26 |
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Signatures |
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27 |
1
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (Unaudited)
QUEST RESOURCE HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In Thousands, Except Par Value Amounts)
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September 30, |
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December 31, |
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2026 |
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2025 |
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(Unaudited) |
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ASSETS |
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Current assets: |
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Cash and cash equivalents |
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$ |
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$ |
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Accounts receivable, less allowance for doubtful accounts of $ |
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Prepaid expenses and other current assets |
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Total current assets |
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Goodwill |
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Intangible assets, net |
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Property and equipment, net, and other assets |
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Total assets |
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$ |
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$ |
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LIABILITIES AND STOCKHOLDERS’ EQUITY |
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Current liabilities: |
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Accounts payable and accrued liabilities |
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$ |
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$ |
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Other current liabilities |
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Current portion of notes payable |
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Total current liabilities |
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Notes payable, net |
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Other long-term liabilities, net |
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Total liabilities |
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Commitments and contingencies |
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Stockholders’ equity: |
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Preferred stock, $ |
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— |
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— |
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Common stock, $ |
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Additional paid-in capital |
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Accumulated deficit |
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( |
) |
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( |
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Total stockholders’ equity |
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Total liabilities and stockholders’ equity |
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$ |
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$ |
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The accompanying notes are an integral part of these condensed consolidated financial statements.
2
QUEST RESOURCE HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In Thousands, Except Per Share Amounts)
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Three Months Ended September 30, |
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Nine Months Ended September 30, |
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2026 |
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2025 |
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2026 |
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2025 |
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(Unaudited) |
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(Unaudited) |
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Revenue |
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$ |
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$ |
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$ |
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$ |
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Cost of revenue |
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Gross profit |
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Operating expenses: |
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Selling, general, and administrative |
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Depreciation and amortization |
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Loss (gain) on sale of assets, net |
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( |
) |
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Impairment loss |
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— |
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Total operating expenses |
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Operating income (loss) |
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( |
) |
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( |
) |
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Interest expense |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Loss on extinguishment of debt |
|
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— |
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— |
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( |
) |
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— |
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Loss before taxes |
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( |
) |
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( |
) |
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( |
) |
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( |
) |
Income tax expense (benefit) |
|
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( |
) |
|||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
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$ |
( |
) |
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$ |
( |
) |
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Net loss per share applicable to common stockholders |
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Basic and diluted |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
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$ |
( |
) |
Weighted average number of common shares outstanding |
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||||
Basic and diluted |
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||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
3
QUEST RESOURCE HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
(UNAUDITED)
(In Thousands)
|
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|
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Additional |
|
|
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Total |
|
|||||
|
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Common Stock |
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Paid-in |
|
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Accumulated |
|
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Stockholders’ |
|
||||||||
|
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Shares |
|
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Par Value |
|
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Capital |
|
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Deficit |
|
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Equity |
|
|||||
Balance, December 31, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Stock-based compensation |
|
|
— |
|
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|
— |
|
|
|
|
|
|
— |
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|
||
Release of restricted stock units |
|
|
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|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Tax withholdings related to net stock settlements |
|
|
( |
) |
|
|
— |
|
|
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( |
) |
|
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— |
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|
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( |
) |
Warrant modification |
|
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— |
|
|
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— |
|
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|
|
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— |
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|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance, March 31, 2026 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Release of deferred and restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Tax withholdings related to net stock settlements |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Shares issued for Employee Stock Purchase Plan |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance, June 30, 2026 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Release of deferred and restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Tax withholdings related to net stock settlements |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance, September 30, 2026 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
|
|
|
|
|
|
|
|
Additional |
|
|
|
|
|
Total |
|
|||||
|
|
Common Stock |
|
|
Paid-in |
|
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Accumulated |
|
|
Stockholders’ |
|
||||||||
|
|
Shares |
|
|
Par Value |
|
|
Capital |
|
|
Deficit |
|
|
Equity |
|
|||||
Balance, December 31, 2024 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance, March 31, 2025 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Release of deferred and restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Tax withholdings related to net stock settlements |
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
|
|
— |
|
|
|
( |
) |
Shares issued for Employee Stock Purchase Plan |
|
|
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
|||
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance, June 30, 2025 |
|
|
|
|
|
|
|
|
|
|
|
( |
) |
|
|
|
||||
Stock-based compensation |
|
|
— |
|
|
|
— |
|
|
|
|
|
|
— |
|
|
|
|
||
Release of deferred and restricted stock units |
|
|
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
Net loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
( |
) |
|
|
( |
) |
Balance, September 30, 2025 |
|
|
|
|
$ |
|
|
$ |
|
|
$ |
( |
) |
|
$ |
|
||||
The accompanying notes are an integral part of these condensed consolidated financial statements.
4
QUEST RESOURCE HOLDING CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(In Thousands)
|
|
For the Nine Months Ended September 30, |
|
|||||
|
|
2026 |
|
|
2025 |
|
||
Cash flows from operating activities: |
|
|
|
|
|
|
||
Net loss |
|
$ |
( |
) |
|
$ |
( |
) |
Adjustments to reconcile net loss to net cash provided by operating activities: |
|
|
|
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|
||
Depreciation |
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|
||
Amortization of intangibles |
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Amortization of debt issuance costs and discounts |
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|
||
Provision for doubtful accounts |
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|
||
Stock-based compensation |
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Loss on sale of assets, net |
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|
||
Impairment loss |
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||
Loss on extinguishment of debt |
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|
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|
— |
|
|
Changes in operating assets and liabilities: |
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|
||
Accounts receivable |
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|
( |
) |
|
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|
Prepaid expenses and other current assets |
|
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( |
) |
|
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|
Security deposits and other assets |
|
|
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||
Accounts payable and accrued liabilities |
|
|
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|
|
( |
) |
|
Deferred revenue and other liabilities |
|
|
( |
) |
|
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( |
) |
Net cash provided by operating activities |
|
|
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||
Cash flows from investing activities: |
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|
||
Purchase of property and equipment |
|
|
( |
) |
|
|
( |
) |
Purchase of intangible assets |
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( |
) |
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|
( |
) |
Proceeds from sale of assets |
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||
Net cash (used in) provided by investing activities |
|
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( |
) |
|
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|
|
Cash flows from financing activities: |
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|
||
Proceeds from credit facilities |
|
|
|
|
|
|
||
Repayments of credit facilities |
|
|
( |
) |
|
|
( |
) |
Proceeds from long-term debt |
|
|
— |
|
|
|
|
|
Repayments of long-term debt |
|
|
( |
) |
|
|
( |
) |
Proceeds from shares issued for Employee Stock Purchase Plan |
|
|
|
|
|
|
||
Tax payments for net share settlements |
|
|
( |
) |
|
|
( |
) |
Debt issuance costs |
|
|
( |
) |
|
|
( |
) |
Net cash used in financing activities |
|
|
( |
) |
|
|
( |
) |
Net (decrease) increase in cash and cash equivalents |
|
|
( |
) |
|
|
|
|
Cash and cash equivalents at beginning of period |
|
|
|
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|
||
Cash and cash equivalents at end of period |
|
$ |
|
|
$ |
|
||
|
|
|
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|
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|
||
Supplemental cash flow information: |
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|
|
|
|
|
||
Cash paid for interest |
|
$ |
|
|
$ |
|
||
Cash paid (refunded) for income taxes, net |
|
$ |
|
|
$ |
( |
) |
|
Supplemental non-cash investing and financing activities: |
|
|
|
|
|
|
||
Receivable for sale of fixed assets |
|
$ |
— |
|
|
$ |
|
|
Debt issuance cost added to other long-term liabilities |
|
$ |
|
|
$ |
— |
|
|
Liabilities assumed in exchange for right-of-use lease assets |
|
$ |
|
|
$ |
— |
|
|
The accompanying notes are an integral part of these condensed consolidated financial statements.
5
QUEST RESOURCE HOLDING CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. The Company and Description of Business
The accompanying condensed consolidated financial statements include the accounts of Quest Resource Holding Corporation (“QRHC”) and its subsidiaries, Quest Resource Management Group, LLC (“Quest”), Quest Equipment, LLC, Youchange, Inc., Quest Vertigent Corporation, Quest Vertigent One, LLC, Quest Sustainability Services, Inc. and Global Alerts, LLC (collectively, “we”, “us”, or “our company”).
We are a national provider of waste and recycling management services to customers from across multiple industry sectors that are typically larger, multi-location businesses. We create customer-specific programs and perform the related services for the collection, processing, recycling, disposal, and tracking of waste streams and recyclables to maximize resource utilization. Our programs and services also enable our customers to address their business sustainability and environmental, social and governance goals and responsibilities, while also receiving optimized operational efficiencies and lower costs. In addition, we offer products such as antifreeze and windshield washer fluid, dumpster and compacting equipment, and other minor ancillary services.
2. Summary of Significant Accounting Policies
Principles of Presentation and Consolidation
The condensed consolidated financial statements included herein have been prepared by us without audit pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with our audited financial statements for the year ended December 31, 2025. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been condensed or omitted as permitted by the SEC, although we believe the disclosures that are made are adequate to make the information presented herein not misleading.
The accompanying condensed consolidated financial statements reflect, in our opinion, all normal recurring adjustments necessary to present fairly our financial position at September 30, 2026 and the results of our operations and cash flows for the periods presented. We derived the December 31, 2025 condensed consolidated balance sheet data from audited financial statements.
Our chief operating decision maker (“CODM”), the President and Chief Executive Officer, manages our company’s business activities as a single operating and reportable segment at the consolidated level. Accordingly, our CODM uses consolidated net income (loss) to measure segment profit or loss, allocate resources and assess performance. Further, the CODM reviews and utilizes functional expenses (cost of revenue, selling, general and administrative) at the consolidated level to manage our operations. Other segment items included in consolidated net income (loss) are interest expense and income tax expense (benefit), which are reflected in the condensed consolidated statements of operations. For expenses incurred during the three and nine months ended September 30, 2026 and 2025, refer to our condensed consolidated statements of operations.
All intercompany accounts and transactions have been eliminated in consolidation. Interim results are subject to seasonal variations, and the results of operations for the nine months ended September 30, 2026 are not necessarily indicative of the results to be expected for the full year.
Recent Accounting Pronouncements
In November 2024, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2024-03, Income Statement-Reporting Comprehensive Income/Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement Expenses, requiring public entities to disclose additional information about specific expense categories in the notes to the financial statements on an interim and annual basis. ASU No. 2024-03 is effective for fiscal years beginning after December 15, 2026, and for interim periods beginning after December 15, 2027, with early adoption permitted. We are currently evaluating the impact of adopting ASU No. 2024-03.
In July 2025, the FASB issued ASU 2025-05, Financial Instruments - Credit Losses (Topic 306): Measurement of Credit Losses for Accounts Receivable and Contract Assets, which provides a practical expedient that allows public entities to assume that current conditions as of the balance sheet date will remain unchanged for the remaining life of the asset when developing a reasonable and supportable forecast as part of estimating expected credit losses on these assets. We adopted ASU 2025-05 effective January 1, 2026 on a prospective basis. The adoption did not have a material impact on our condensed consolidated financial statements.
In September 2025, the FASB issued ASU No. 2025-06, Intangibles—Goodwill and Other—Internal—Use Software (Subtopic 350-40): Targeted Improvements to the Accounting for Internal-Use Software, which modernizes guidance on accounting for costs related to internal-use software. This ASU removes references to software development project stages and applies a more principles-based approach for capitalization. The ASU also clarifies related disclosure requirements. The ASU is effective for annual periods beginning
6
after December 15, 2027, and interim periods within those fiscal years. Adoption of this ASU can be applied prospectively, retrospectively or using a modified transition approach. Early adoption is permitted. We are currently evaluating the provisions of this ASU, but we do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements.
In December 2025, the FASB issued ASU No. 2025-11, Interim Reporting (Subtopic 270-10): Narrow-Scope Improvements, which clarifies the interim disclosure requirements in Topic 270 to improve consistency of interim financial reporting. This ASU provides a comprehensive list of required interim disclosures and introduces a disclosure principle requiring entities to disclose events or changes occurring after the end of the most recent annual reporting period that have a material impact on interim results. The ASU is effective for annual periods beginning after December 15, 2027, and interim periods within those fiscal years. This guidance is only related to disclosures, and early adoption is permitted. We are currently evaluating the impact of adopting this ASU, but we do not expect the adoption of this guidance to have a material impact on our condensed consolidated financial statements.
There have been no other recent accounting pronouncements or changes in accounting pronouncements that have been issued but not yet adopted that are of significance, or potential significance, to us.
3. Sale of Assets
On March 31, 2025, Quest entered into an asset purchase agreement (the “APA”) with Lincoln Waste Solutions, LLC, a Connecticut limited liability company (“Purchaser”), and completed the sale to Purchaser of substantially all of the assets used in Quest’s divested business operations as set forth in the APA. The selling price of the assets was approximately $
The APA provides for the selling price to also include additional amounts, not to exceed $
4. Accounts Receivable, Net of Allowance for Doubtful Accounts
Our receivables, which are recorded when services are performed or when services are billed in advance, are claims against third parties that will generally be settled in cash. The carrying value of our receivables, net of the allowance for doubtful accounts, represents the estimated net realizable value. We estimate our allowance for doubtful accounts based on consideration of a number of factors, including the length of time trade accounts are past due, our previous loss history, the creditworthiness of individual customers, economic conditions affecting specific customer industries, and economic conditions in general. We write off past-due receivable balances after all reasonable collection efforts have been exhausted. We credit payments subsequently received on such receivables to the allowance for doubtful accounts in the period we receive the payment. We record delinquent finance charges on outstanding accounts receivable only if they are collected.
The changes in our allowance for doubtful accounts of trade receivables for the three and nine months ended September 30, 2026 and 2025, were as follows (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(Unaudited) |
|
|
(Unaudited) |
|
||||||||||
Beginning balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Bad debt expense |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Uncollectible accounts written off, net |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
|
|
( |
) |
Ending balance |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
7
5. Property and Equipment, Net, and Other Assets
At September 30, 2026 and December 31, 2025, property and equipment, net, and other assets consisted of the following (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
|
|
(Unaudited) |
|
|
|
|
||
Property and equipment, net of accumulated depreciation of $ |
|
$ |
|
|
$ |
|
||
Right-of-use operating lease assets |
|
|
|
|
|
|
||
Security deposits and other assets |
|
|
|
|
|
|
||
Property and equipment, net, and other assets |
|
$ |
|
|
$ |
|
||
We compute depreciation using the straight-line method over the estimated useful lives of the property and equipment. Depreciation expense for the three months ended September 30, 2026 was $
Right-of-use operating lease assets are recognized in accordance with Accounting Standards Codification (“ASC”) Topic 842. See Note 9, Leases for additional information.
6. Goodwill and Other Intangible Assets
The components of goodwill and other intangible assets were as follows (in thousands):
September 30, 2026 (Unaudited) |
|
Estimated |
|
Gross Carrying |
|
|
Accumulated |
|
|
Net |
|
|||
Finite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|||
Customer relationships |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Software |
|
|
|
|
|
|
|
|
|
|
||||
Trademarks |
|
|
|
|
|
|
|
|
|
|
||||
Non-compete agreements |
|
|
|
|
|
|
|
|
|
|
||||
Total finite-lived intangible assets |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
December 31, 2025 |
|
Estimated |
|
Gross Carrying |
|
|
Accumulated |
|
|
Net |
|
|||
Finite-lived intangible assets: |
|
|
|
|
|
|
|
|
|
|
|
|||
Customer relationships |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Software |
|
|
|
|
|
|
|
|
|
|
||||
Trademarks |
|
|
|
|
|
|
|
|
|
|
||||
Non-compete agreements |
|
|
|
|
|
|
|
|
|
|
||||
Total finite-lived intangible assets |
|
|
|
$ |
|
|
$ |
|
|
$ |
|
|||
Changes in goodwill: |
|
|
|
Carrying Amount |
|
|
Goodwill balance at December 31, 2025 |
|
|
|
$ |
|
|
Impairment |
|
|
|
|
( |
) |
Goodwill balance at September 30, 2026 |
|
|
|
$ |
|
|
We compute amortization using the straight-line method over the useful lives of the finite-lived intangible assets. Amortization expense related to finite-lived intangible assets was $
We have
We review our finite-lived intangible assets periodically for indicators of impairment. During the first quarter of 2025, following certain customer activity, we evaluated the customer relationship intangible asset balance for recoverability and noted the unamortized balance of the intangible was not recoverable. Accordingly, we performed an impairment test for the intangible asset using a
8
discounted cash flow analysis and internal forecasts (Level 3 inputs) to determine the fair value of the asset. The carrying value of the intangible asset exceeded its fair value, which resulted in an impairment charge of $
During the three months ended June 30, 2026, our stock price traded below its book value per share for a sustained period. As a sustained decline in market capitalization is a potential indicator of goodwill impairment, we performed an interim quantitative goodwill assessment. Management engaged a third party to perform the assessment as of May 31, 2026, which estimated the fair value of our company using the discounted cash flow method and guideline public company method (Level 3 inputs). We considered the relationship between estimated fair value and market capitalization when evaluating the goodwill impairment analysis. The results of these assessments indicated that our company's fair value was less than our carrying value, and therefore, we recognized a goodwill impairment of $
7. Current Liabilities
The components of accounts payable and accrued liabilities were as follows (in thousands):
|
|
September 30, |
|
|
December 31, |
|
||
|
|
2026 |
|
|
2025 |
|
||
|
|
(Unaudited) |
|
|
|
|
||
Accounts payable |
|
$ |
|
|
$ |
|
||
Accrued taxes |
|
|
|
|
|
|
||
Employee compensation |
|
|
|
|
|
|
||
Operating lease liability - current portion |
|
|
|
|
|
|
||
Accrued interest |
|
|
|
|
|
|
||
Miscellaneous |
|
|
|
|
|
|
||
Accounts payable and accrued liabilities |
|
$ |
|
|
$ |
|
||
See Note 9, Leases for additional disclosure related to the operating lease liabilities.
8. Notes Payable and Other Long-Term Liabilities
Our debt obligations were as follows (in thousands):
|
|
Interest |
|
|
September 30, |
|
|
December 31, |
|
|||
|
|
Rate (1) |
|
|
2026 |
|
|
2025 |
|
|||
|
|
|
|
|
(Unaudited) |
|
|
|
|
|||
Monroe Term Loan (2) |
|
|
% |
|
$ |
|
|
$ |
|
|||
TCB ABL Facility (3) |
|
|
% |
|
|
|
|
|
|
|||
PNC ABL Facility |
|
|
|
|
|
|
|
|
|
|||
PNC Equipment Term Loan 1 |
|
|
|
|
|
|
|
|
|
|||
PNC Equipment Term Loan 2 |
|
|
|
|
|
|
|
|
|
|||
Total notes payable |
|
|
|
|
|
|
|
|
|
|||
Less: Current portion of notes payable |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Less: Unamortized debt issuance costs and discounts |
|
|
|
|
|
( |
) |
|
|
( |
) |
|
Notes payable, net |
|
|
|
|
$ |
|
|
$ |
|
|||
|
|
|
|
|
|
|
|
|
|
|||
(1) Interest rates as of September 30, 2026 |
|
|||||||||||
(2) Bears interest based on Secured Overnight Financing Rate ("SOFR") plus Applicable Margin ranging from |
|
|||||||||||
(3) Bears interest based on SOFR plus Applicable Margin ranging from |
|
|||||||||||
9
We capitalize financing costs we incur related to implementing our debt arrangements. We record these debt issuance costs associated with our revolving credit facility and our term loan as a reduction of long-term debt, net and amortize them over the contractual life of the related debt arrangements.
|
|
|
|
September 30, |
|
|
|
|
|
|
2026 |
|
|
|
|
|
|
|
|
|
Debt issuance costs and discounts, net of accumulated amortization |
|
|
|
|
|
|
Balance at December 31, 2025 |
|
|
|
$ |
|
|
Financing costs deferred and discounts |
|
|
|
|
|
|
Less: Amortization expense |
|
|
|
|
( |
) |
Less: Write-off of costs in debt extinguishment |
|
|
|
|
( |
) |
Balance at September 30, 2026 (Unaudited) |
|
|
|
$ |
|
|
Revolving Credit Facility
On March 12, 2026, QRHC and certain of its domestic subsidiaries entered into a Loan and Security Agreement with Texas Capital Bank (the “TCB Loan Agreement”). Capitalized terms not otherwise defined herein have the meanings set forth in the TCB Loan Agreement. Among other things, the TCB Loan Agreement provides for an asset-based revolving credit facility (the “TCB ABL Facility”) in the maximum principal amount of $
Certain of QRHC’s domestic subsidiaries are the borrowers under the TCB Loan Agreement. QRHC and certain of its domestic subsidiaries are guarantors under the TCB Loan Agreement. As security for the obligations of the borrowers under the TCB Loan Agreement, (i) the borrowers under the TCB Loan Agreement have granted a first priority lien on substantially all of their tangible and intangible personal property, including a pledge of the capital stock and membership interests, as applicable, of certain of QRHC’s direct and indirect subsidiaries, and (ii) the guarantors under the TCB Loan Agreement have granted a first priority lien on the capital stock and membership interests, as applicable, of certain of QRHC’s direct and indirect domestic subsidiaries.
The TCB Loan Agreement contains certain financial covenants, including a minimum fixed charge coverage ratio. In addition, the TCB Loan Agreement contains negative covenants limiting, among other things, additional indebtedness, transactions with affiliates, additional liens, sales of assets, dividends, investments and advances, prepayments of debt, mergers and acquisitions, and other matters customarily restricted in such agreements. The TCB Loan Agreement also contains customary events of default, including payment defaults, breaches of representations and warranties, covenant defaults, events of bankruptcy and insolvency, change of control, and failure of any guaranty or security document supporting the TCB Loan Agreement to be in full force and effect. Upon the occurrence of an event of default, the outstanding obligations under the TCB Loan Agreement may be accelerated and become immediately due and payable.
The TCB ABL Facility bears interest, at the lesser of the Maximum Rate, as defined in the TCB Loan Agreement, or the Applicable Rate of Term SOFR for the interest period in effect, plus a margin ranging from
In connection with the TCB ABL Facility, we incurred a fee of $
The TCB Loan Agreement replaced our Loan, Security and Guaranty Agreement, dated as of August 5, 2020, as subsequently amended, with PNC Bank, National Association, successor to BBVA USA, which was paid in full and terminated effective March 12, 2026. We recorded $
As of September 30, 2026, the TCB ABL Facility borrowing base was $
Monroe Term Loan
On October 19, 2020, QRHC and certain of its subsidiaries entered into a Credit Agreement (the “Credit Agreement”), which was most recently amended on March 12, 2026, with Monroe Capital Management Advisors, LLC (“Monroe Capital”), as administrative agent for the lenders thereto. Among other things, the Credit Agreement provides for the following:
10
At the same time as the borrowing of the initial $
In March 2026, we amended our Credit Agreement to, among other things, modify its financial covenants. As a result of this modification, we entered into a fee arrangement with Monroe Capital for the payment of an exit fee upon the occurrence of certain triggering events, which include a change in control, a debt refinancing, or the maturity of the Credit Agreement. The minimum fee that would be due to Monroe Capital per the arrangement is $
Debt Covenants
Interest Expense
The amount of interest expense related to borrowings for the three months ended September 30, 2026 and 2025 was $
Other Long-Term Liabilities
|
|
|
|
September 30, |
|
|
December 31, |
|
||
|
|
|
|
2026 |
|
|
2025 |
|
||
|
|
|
|
(Unaudited) |
|
|
|
|
||
Operating lease liability - long-term portion |
|
|
|
$ |
|
|
$ |
|
||
Monroe Term Loan exit fee |
|
|
|
|
|
|
|
|
||
Other |
|
|
|
|
|
|
|
|
||
Other long-term liabilities |
|
|
|
$ |
|
|
$ |
|
||
9. Leases
Our leases are primarily related to office space and certain equipment. The leases are classified as operating leases, for which we recorded a right-of-use asset.
Lease Costs
Fixed cost operating lease expense for the three months ended September 30, 2026 was $
11
including $
Cash paid for operating leases approximated operating lease expense and non-cash right of use asset amortization for the nine months ended September 30, 2026 and 2025.
In January 2026, we entered into a sublease agreement for our office space located in The Colony, Texas. The sublease agreement is effective through December 31, 2027, at which time our lease for the space will terminate. The sublease agreement is accounted for as an operating lease, and we recognized sublease income as an offset to operating lease expense on a straight-line basis over the term of the sublease agreement. Rental income for the subleased property approximated the rental expense for the office space for the three and nine months ended September 30, 2026.
Balance Sheet Classification
The table below presents the lease related assets and liabilities recorded on the balance sheet (in thousands):
|
September 30, |
|
|
December 31, |
|
||
|
2026 |
|
|
2025 |
|
||
|
(Unaudited) |
|
|
|
|
||
Operating leases: |
|
|
|
|
|
||
Right-of-use operating lease assets: |
|
|
|
|
|
||
Property and equipment, net and other assets |
$ |
|
|
$ |
|
||
|
|
|
|
|
|
||
Lease liabilities: |
|
|
|
|
|
||
Accounts payable and accrued liabilities |
$ |
|
|
$ |
|
||
Other long-term liabilities |
|
|
|
|
|
||
Total operating lease liabilities |
$ |
|
|
$ |
|
||
10. Revenue
Operating Revenues
We provide businesses with services to reuse, recycle, and dispose of a wide variety of waste streams and recyclables generated by their operations. Our service revenue is primarily generated from fees charged for the collection, transfer, disposal and recycling services and from sales of commodities by our recycling operations. We also rent dumpster and compacting equipment to customers and include those fees in service revenue. In addition, we have product sales and other revenue primarily from sales of products such as antifreeze and windshield washer fluid, and other minor ancillary services.
Revenue Recognition
We recognize revenue as services are performed or products are delivered. We recognize revenue net of any contracted pricing discounts or rebate arrangements. Revenue from our equipment leases, which are classified as operating leases, is based on a fixed amount and recognized over the term of the lease.
We generally recognize revenue for the gross amount of consideration received as we are generally the primary obligor (or principal) in our contracts with customers as we hold complete responsibility to the customer for contract fulfillment. In situations in which we are not primarily obligated nor do we have credit risk, we record the revenue net of certain cost amounts. During the three months ended September 30, 2026 and 2025, we had certain management fee contracts accounted for under the net basis revenue method with net revenue totaling $
12
Disaggregation of Revenue
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(Unaudited) |
|
|
(Unaudited) |
|
||||||||||
|
|
(In Thousands) |
|
|
(In Thousands) |
|
||||||||||
Revenue Type: |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Services |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Product sales and other |
|
|
|
|
|
|
|
|
|
|
|
|
||||
Total revenue |
|
$ |
|
|
$ |
|
|
$ |
|
|
$ |
|
||||
Deferred Revenue
We bill certain customers
11. Income Taxes
Our statutory income tax rate is anticipated to be approximately
We compute income taxes using the asset and liability method in accordance with FASB ASC Topic 740, Income Taxes. Under the asset and liability method, we determine deferred income tax assets and liabilities based on the differences between the financial reporting and tax bases of assets and liabilities and measure them using currently enacted tax rates and laws. We provide a valuation allowance to reduce the amount of deferred tax assets that, based on available evidence, is more likely than not to be realized. Realization of our deferred tax assets was not reasonably assured as of September 30, 2026 and December 31, 2025, and we recorded a valuation allowance of $
12. Fair Value of Financial Instruments
Our financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable, accrued liabilities, deferred revenue, notes payable, and other long-term liabilities. We do not believe that we are exposed to significant currency or credit risks arising from these financial instruments. Our variable rate indebtedness subjects us to interest rate risk as all of the borrowings under the senior secured credit facilities bear interest at variable rates. The fair values of our financial instruments approximate their carrying values, based on their short maturities or, for notes payable, based on borrowing rates currently available to us for loans with similar terms and maturities. The fair value measurements are generally determined using unobservable inputs and are classified within Level 3 of the fair value hierarchy.
13. Stockholders’ Equity
Preferred Stock – Our authorized preferred stock consists of
Common Stock – Our authorized common stock consists of
Employee Stock Purchase Plan – We issue common shares to employees in accordance with our 2024 Employee Stock Purchase Plan (as amended from time to time, the “2024 ESPP”). On May 14, 2026, we issued
13
Warrants –
Warrants Issued and Outstanding as of September 30, 2026 |
|
|||||||||||
|
|
Date of |
|
Exercise |
|
|
Shares of |
|
||||
Description |
|
Issuance |
|
Expiration |
|
|
|
|
Common Stock |
|
||
Exercisable Warrants |
|
|
|
$ |
|
|
|
|
||||
Exercisable Warrants |
|
|
|
$ |
|
|
|
|
||||
Total warrants issued and outstanding (Unaudited) |
|
|
|
|
|
|
||||||
Incentive Compensation Plan – On July 8, 2024, our stockholders approved the adoption of our 2024 Incentive Compensation Plan (as amended from time to time, the “2024 Plan”), which replaced the 2012 Incentive Compensation Plan (the “2012 Plan”), adopted in October 2012, for all future grants. Awards previously granted under the 2012 Plan are unaffected by the adoption of the 2024 Plan and remain outstanding under the terms pursuant to which they were granted. The 2024 Plan allows for the grant of stock options (both nonqualified stock options and incentive stock options), stock appreciation rights, restricted stock, restricted stock units (“RSUs”), deferred stock units (“DSUs”), bonus stock, dividend equivalents, other stock-based awards, and performance awards that may be settled in cash, stock, or other property in our sole discretion. The maximum number of shares of common stock available for grant under the 2024 Plan is
Stock Options – We recorded stock option expense of $
|
|
Stock Options |
|
|||||||
|
|
|
|
|
|
|
Weighted- |
|
||
|
|
|
|
|
Exercise |
|
Average |
|
||
|
|
Number |
|
|
Price Per |
|
Exercise Price |
|
||
|
|
of Shares |
|
|
Share |
|
Per Share |
|
||
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
$ |
|
||
Cancelled/Forfeited |
|
|
( |
) |
|
$ |
|
$ |
|
|
Outstanding at September 30, 2026 (Unaudited) |
|
|
|
|
$ |
|
$ |
|
||
Deferred Stock Units
The following table summarizes DSU activity for the nine months ended September 30, 2026:
|
|
Deferred Stock Units |
|
|||||
|
|
|
|
|
Weighted- |
|
||
|
|
|
|
|
Average |
|
||
|
|
Number |
|
|
Grant Date |
|
||
|
|
of Units |
|
|
Fair Value |
|
||
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Released |
|
|
( |
) |
|
$ |
|
|
Outstanding at September 30, 2026 (Unaudited) |
|
|
|
|
$ |
|
||
Non-employee directors can elect to receive all or a portion of their annual retainers in the form of DSUs, and certain executive compensation expense may also be granted in the form of DSUs. The DSUs are recognized at their fair value on the date of grant and are fully vested upon issuance. Each DSU represents the right to receive
14
Restricted Stock Units
The following table summarizes RSU activity for the nine months ended September 30, 2026:
|
|
Restricted Stock Units |
|
|||||
|
|
|
|
|
Weighted- |
|
||
|
|
|
|
|
Average |
|
||
|
|
Number |
|
|
Grant Date |
|
||
|
|
of Units |
|
|
Fair Value |
|
||
Outstanding and unvested at December 31, 2025 |
|
|
|
|
$ |
|
||
Granted |
|
|
|
|
$ |
|
||
Vested and released |
|
|
( |
) |
|
$ |
|
|
Forfeited |
|
|
( |
) |
|
$ |
|
|
Outstanding at September 30, 2026 (Unaudited) |
|
|
|
|
$ |
|
||
Non-employee directors can elect to receive all or a portion of their annual retainers in the form of RSUs, and certain executive compensation expense may also be granted in the form of RSUs. RSUs are recognized at their fair value on the date of grant and typically vest over a one- to three-year period. Each RSU represents the right to receive
Performance Stock Units
Performance stock units (“PSUs”) are recognized at their fair value on the date of grant, and compensation expense is based on the probable issuance of the units at the end of the applicable performance period. We evaluate the probability of the common stock issuance for these awards and adjust the expense as appropriate.
The following table summarizes PSU activity for the nine months ended September 30, 2026:
|
|
Performance Stock Units |
|
|||||
|
|
|
|
|
Weighted- |
|
||
|
|
|
|
|
Average |
|
||
|
|
Number |
|
|
Grant Date |
|
||
|
|
of Units |
|
|
Fair Value |
|
||
Outstanding at December 31, 2025 |
|
|
|
|
$ |
|
||
Less: Forfeited |
|
|
( |
) |
|
$ |
|
|
Outstanding at September 30, 2026 (Unaudited) |
|
|
|
|
$ |
|
||
We determined it was not probable that we would meet the performance criteria at the end of the performance periods for the outstanding PSUs; therefore,
14. Net Loss per Share
We compute basic net loss per share using the weighted average number of shares of common stock outstanding plus the number of common stock equivalents for DSUs issued during the period. We compute diluted net loss per share using the weighted average number of shares of common stock outstanding during the period, adjusted for the dilutive effect of common stock equivalents. In periods where losses are reported, the weighted average number of shares of common stock outstanding excludes common stock equivalents because their inclusion would be anti-dilutive. Dilutive potential common shares consist of the incremental common shares issuable upon the exercise of outstanding stock options, warrants, shares under our 2024 ESPP and vesting of RSUs. The dilutive effect of outstanding stock options, warrants, shares under our 2024 ESPP and RSUs is reflected in diluted earnings per share by application of the treasury stock method.
15
The computation of basic and diluted net loss per share attributable to common stockholders is as follows (in thousands, except per share amounts):
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
(Unaudited) |
|
|
(Unaudited) |
|
||||||||||
Numerator: |
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss applicable to common stockholders |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Denominator: |
|
|
|
|
|
|
|
|
|
|
|
||||
Weighted average common shares outstanding, basic |
|
|
|
|
|
|
|
|
|
|
|
||||
Effect of dilutive common shares |
|
— |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Weighted average common shares outstanding, diluted |
|
|
|
|
|
|
|
|
|
|
|
||||
Net loss per share: |
|
|
|
|
|
|
|
|
|
|
|
||||
Basic |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
Diluted |
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
|
$ |
( |
) |
The following common stock equivalents were excluded from the computation of diluted net loss per share for the periods presented because including them would have been antidilutive (in thousands):
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
(Unaudited) |
|
|
(Unaudited) |
|
||||||||||
Options |
|
|
|
|
|
|
|
|
|
|
|
||||
RSUs |
|
|
|
|
|
|
|
|
|
|
|
||||
ESPP |
|
|
|
|
|
|
|
|
|
|
|
||||
Warrants |
|
|
|
|
|
|
|
|
|
|
|
||||
Total anti-dilutive securities excluded from net loss per share |
|
|
|
|
|
|
|
|
|
|
|
||||
16
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in or incorporated by reference into this Form 10-Q, including statements regarding our future operating results, future financial position, business strategy, objectives, goals, plans, prospects, and markets, and plans and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “targets,” “contemplates,” “projects,” “predicts,” “may,” “might,” “plan,” “will,” “would,” “should,” “could,” “can,” “potential,” “continue,” “objective,” or the negative of those terms, or similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. Specific forward-looking statements in this Form 10-Q include statements regarding the impact, if any, of the adoption of an Accounting Standards Update on our condensed consolidated financial statements; any changes to inflation rates; exposure to significant interest, currency, or credit risks arising from our financial instruments; compliance with our loan covenants; and sufficiency of our cash and cash equivalents, borrowing capacity, and cash generated from operations to fund our operations for the next 12 months. All forward-looking statements included herein are based on information available to us as of the date hereof and speak only as of such date. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. The forward-looking statements contained in or incorporated by reference into this Form 10-Q reflect our views as of the date of this Form 10-Q about future events and are subject to risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ significantly from those expressed or implied in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, performance, or achievements. A number of factors, including the state of the U.S. economy, general global economic conditions, including tariffs and the potential effect of inflationary pressures and increased interest rates on our cost of doing business, could cause actual results to differ materially from those indicated by the forward-looking statements and other risks detailed from time to time in our reports to the Securities and Exchange Commission, including our Annual Report on Form 10-K for the year ended December 31, 2025 (the “2025 Annual Report”).
Executive Summary
Business Overview
We are a national provider of waste and recycling management services to customers from across multiple industry sectors that are typically larger, multi-location businesses. We create customer-specific programs and perform the related services for the collection, processing, recycling, disposal, and tracking of waste streams and recyclables to maximize resource utilization. Our programs and services enable our customers to address their business sustainability and environmental, social and governance goals and responsibilities, while also receiving optimized operational efficiencies and lower costs.
Our revenue is primarily generated from fees charged for the collection, transfer, disposal and recycling services and from sales of commodities by our recycling operations. In addition, we offer products such as antifreeze and windshield washer fluid, dumpster and compacting equipment, and other minor ancillary services.
This “Management’s Discussion and Analysis of Financial Condition and Results of Operations” is based on and relates primarily to the operations of Quest Resource Holding Corporation and Quest Resource Management Group, LLC (collectively, “we,” “us,” “our,” or “our company”).
Recent Developments
Goodwill Impairment. During the three months ended June 30, 2026, our company’s stock price traded below its book value per share for a sustained period. As a sustained decline in market capitalization is a potential indicator of goodwill impairment, we performed an interim quantitative goodwill assessment which resulted in a goodwill impairment of $11.0 million as of June 30, 2026. The goodwill impairment charges are reflected in “Impairment loss” in our condensed consolidated statements of operations. See Note 6 to our condensed consolidated financial statements for further discussion of the quantitative goodwill assessment.
Global Economic Trends
There has been heightened uncertainty in the macroeconomic environment, especially as it relates to fluctuations in unemployment, inflation, tariffs, consumer and business spending, and government actions or inactions, including government shutdowns. There are also significant geopolitical concerns, including ongoing global conflicts and recent military actions involving Iran and the broader Middle East, which have caused volatility in capital markets and may continue to have further global economic consequences, including disruptions of the global supply chains and energy markets. Any such volatility and disruptions may have adverse consequences on us or the third parties on whom we rely. If the equity and credit markets deteriorate, including as a result of political unrest, war, military actions, or regional conflict, it may make any necessary debt or equity financing more difficult to obtain in a timely manner or on favorable terms, more costly or more dilutive. Inflation can adversely affect us by increasing our operating costs.
17
Any additional significant increases in inflation and related increases in interest rates could have a material adverse effect on our business, results of operations and financial condition.
Results of Operations
The following discussion focuses on our results of operations and our liquidity and capital resources. You should read this discussion in conjunction with the condensed consolidated financial statements and notes thereto for the nine months ended September 30, 2026 included in Part I, Item 1 of this Quarterly Report on Form 10-Q.
The following table summarizes our operating results for the three and nine months ended September 30, 2026 and 2025 (in thousands):
|
|
Three Months Ended |
|
|
|
|
|
|
|
|
Nine Months Ended |
|
|
|
|
|
|
|
||||||||||||||
|
|
September 30, |
|
|
Change |
|
|
September 30, |
|
|
Change |
|
||||||||||||||||||||
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
|
2026 |
|
|
2025 |
|
|
$ |
|
|
% |
|
||||||||
|
|
(Unaudited) |
|
|
|
|
|
|
|
|
(Unaudited) |
|
|
|
|
|
|
|
||||||||||||||
Revenue |
|
$ |
63,779 |
|
|
$ |
63,341 |
|
|
$ |
438 |
|
|
|
0.7 |
% |
|
$ |
189,583 |
|
|
$ |
191,311 |
|
|
$ |
(1,728 |
) |
|
|
(0.9 |
)% |
Cost of revenue |
|
|
52,396 |
|
|
|
51,874 |
|
|
|
522 |
|
|
|
1.0 |
% |
|
|
158,105 |
|
|
|
157,876 |
|
|
|
229 |
|
|
|
0.1 |
% |
Gross profit |
|
|
11,383 |
|
|
|
11,467 |
|
|
|
(84 |
) |
|
|
(0.7 |
)% |
|
|
31,478 |
|
|
|
33,435 |
|
|
|
(1,957 |
) |
|
|
(5.9 |
)% |
Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
||||||||
Selling, general, and administrative |
|
|
8,501 |
|
|
|
9,240 |
|
|
|
(739 |
) |
|
|
(8.0 |
)% |
|
|
25,136 |
|
|
|
29,947 |
|
|
|
(4,811 |
) |
|
|
(16.1 |
)% |
Depreciation and amortization |
|
|
986 |
|
|
|
1,304 |
|
|
|
(318 |
) |
|
|
(24.4 |
)% |
|
|
3,090 |
|
|
|
4,146 |
|
|
|
(1,056 |
) |
|
|
(25.5 |
)% |
Loss (gain) on sale of assets, net |
|
|
200 |
|
|
|
(152 |
) |
|
|
352 |
|
|
* |
|
|
|
277 |
|
|
|
4,339 |
|
|
|
(4,062 |
) |
|
|
(93.6 |
)% |
|
Impairment loss |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
* |
|
|
|
11,000 |
|
|
|
1,707 |
|
|
|
9,293 |
|
|
* |
|
||
Total operating expenses |
|
|
9,687 |
|
|
|
10,392 |
|
|
|
(705 |
) |
|
|
(6.8 |
)% |
|
|
39,503 |
|
|
|
40,139 |
|
|
|
(636 |
) |
|
|
(1.6 |
)% |
Operating income (loss) |
|
|
1,696 |
|
|
|
1,075 |
|
|
|
621 |
|
|
|
57.8 |
% |
|
|
(8,025 |
) |
|
|
(6,704 |
) |
|
|
(1,321 |
) |
|
|
(19.7 |
)% |
Interest expense |
|
|
(2,153 |
) |
|
|
(2,389 |
) |
|
|
236 |
|
|
|
9.9 |
% |
|
|
(6,411 |
) |
|
|
(7,031 |
) |
|
|
620 |
|
|
|
8.8 |
% |
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
— |
|
|
* |
|
|
|
(488 |
) |
|
|
— |
|
|
|
(488 |
) |
|
* |
|
||
Loss before taxes |
|
|
(457 |
) |
|
|
(1,314 |
) |
|
|
857 |
|
|
|
65.2 |
% |
|
|
(14,924 |
) |
|
|
(13,735 |
) |
|
|
(1,189 |
) |
|
|
(8.7 |
)% |
Income tax expense (benefit) |
|
|
38 |
|
|
|
35 |
|
|
|
3 |
|
|
|
8.6 |
% |
|
|
106 |
|
|
|
(9 |
) |
|
|
115 |
|
|
* |
|
|
Net loss |
|
$ |
(495 |
) |
|
$ |
(1,349 |
) |
|
$ |
854 |
|
|
|
63.3 |
% |
|
$ |
(15,030 |
) |
|
$ |
(13,726 |
) |
|
$ |
(1,304 |
) |
|
|
(9.5 |
)% |
* Indicates calculation is not meaningful or results are greater than 100% for comparison
Three Months Ended September 30, 2026, Compared to Three Months Ended September 30, 2025
Revenue. For the three months ended September 30, 2026, revenue was $63.8 million, an increase of $0.5 million, or 0.7%, compared to $63.3 million for the three months ended September 30, 2025.
The increase in revenue for the three months ended September 30, 2026 was primarily driven by net new business of approximately $1.7 million resulting from new client wins and wallet share expansion with existing customers, partially offset by a decline of $1.2 million in revenue from certain clients in the industrial end-market.
Cost of revenue. Cost of revenue increased $0.5 million, or 1.0%, to $52.4 million for the three months ended September 30, 2026 from $51.9 million for the three months ended September 30, 2025. This increase in cost of revenue for the three months ended September 30, 2026 was primarily attributable to the higher revenue volumes described above.
Gross profit. Gross profit for the three months ended September 30, 2026 was $11.4 million, compared to $11.5 million for the three months ended September 30, 2025. Our gross profit margin was 17.8% for the three months ended September 30, 2026, compared with 18.1% for the three months ended September 30, 2025. The declines in both gross profit and gross margin for the three months ended September 30, 2026, compared to the prior year period, were isolated to margin pressure with certain industrial customers. These gross profit and margin declines were partially offset by improved gross profit and gross margin across the remainder of our business, where operating initiatives and wallet share expansion continued to take hold.
Operating expenses. For the three months ended September 30, 2026 and 2025, operating expenses were $9.7 million and $10.4 million, respectively. For the three months ended September 30, 2026, operating expenses decreased $0.7 million, primarily due to decreases in selling, general and administrative expenses (“SG&A expenses”) and depreciation and amortization of approximately $0.7 million and $0.3 million, respectively, partially offset by a $0.3 million increase in loss on sale of assets.
SG&A expenses were $8.5 million for the three months ended September 30, 2026, compared to $9.2 million for the same period in 2025. The decrease of $0.7 million in SG&A expenses for the three months ended September 30, 2026, compared to the prior year
18
period, is primarily due to reductions of approximately $0.2 million in bad debt expense and $0.2 million in facility rent. All other SG&A expenses for the three months ended September 30, 2026 were down approximately $0.3 million resulting from the accumulation of cost savings initiatives across multiple departments, compared to the prior year period.
Operating expenses for the three months ended September 30, 2026 and 2025 included depreciation and amortization of $1.0 million and $1.3 million, respectively.
Interest expense. Interest expense was $2.2 million and $2.4 million for the three months ended September 30, 2026 and 2025, respectively. The decrease in expense is primarily due to lower borrowings on our TCB ABL Facility (as defined below) for the three months ended September 30, 2026 compared to borrowings in the prior year period on our asset-based revolving credit facility with PNC Bank, National Association, successor to BBVA USA (the “PNC ABL Facility”), which was paid in full and terminated effective March 12, 2026..
Income taxes. We recorded a provision for income taxes of $38 thousand and $35 thousand for the three months ended September 30, 2026 and 2025, respectively.
Net loss. Net loss for the three months ended September 30, 2026 was $(0.5) million, compared to $(1.3) million for the three months ended September 30, 2025. The discussions above explain the majority of the changes which contributed to the change in net results year-over-year.
Loss per share. Net loss per basic and diluted share attributable to common stockholders was $(0.02) and $(0.06) for the three months ended September 30, 2026 and 2025, respectively. The basic and diluted weighted average number of shares of common stock outstanding was approximately 21.5 million for the three months ended September 30, 2026 and 21.0 million for the three months ended September 30, 2025.
Nine Months Ended September 30, 2026, Compared to Nine Months Ended September 30, 2025
Revenue. For the nine months ended September 30, 2026, revenue was $189.6 million, a decrease of $1.7 million, or 0.9%, compared to $191.3 million for the nine months ended September 30, 2025. For the nine months ended September 30, 2026, the decrease in revenue was primarily attributable to the divestiture of an underperforming business operation, which was sold on March 31, 2025 and reduced revenue by approximately $3.0 million (see Note 3 to our condensed consolidated financial statements for further discussion of the sale). Additionally, continued softness experienced in 2026 from certain clients in the industrial end-market led to a $1.9 million decrease in revenues for the nine months ended September 30, 2026, compared to the prior year period. These declines were partially offset by net new business of approximately $3.2 million resulting from new client wins and wallet share expansion with existing customers during the nine months ended September 30, 2026, compared to the prior year period.
Cost of revenue. Cost of revenue increased $0.2 million to $158.1 million for the nine months ended September 30, 2026, compared to $157.9 million for the nine months ended September 30, 2025.
Gross profit. Gross profit for the nine months ended September 30, 2026 was $31.5 million, compared to $33.4 million for the nine months ended September 30, 2025. The gross profit margin was 16.6% for the nine months ended September 30, 2026, compared to 17.5% for the nine months ended September 30, 2025. The declines in both gross profit and gross margin for the nine months ended September 30, 2026, compared to the prior year period, were isolated to margin pressure with certain industrial customers. These gross profit and margin declines were partially offset by improved gross profit and gross margin across the remainder of our business, where operating initiatives and wallet share expansion continued to take hold.
Operating expenses. Operating expenses were $39.5 million and $40.1 million for the nine months ended September 30, 2026 and 2025, respectively. For the nine months ended September 30, 2026, operating expenses decreased $0.6 million, primarily due to decreases in SG&A expenses, lower loss on sale of assets and depreciation and amortization of $4.8 million, $4.1 million and $1.1 million, respectively, partially offset by an increase in impairment loss of $9.3 million. See “Critical Accounting Estimates and Policies—Goodwill Impairment” below and Note 6 to our condensed consolidated financial statements for further discussion on the goodwill impairment of $11.0 million recognized in the second quarter of 2026.
SG&A expenses were $25.1 million and $29.9 million for the nine months ended September 30, 2026 and 2025, respectively. For the nine months ended September 30, 2026, total SG&A expenses decreased by approximately $4.8 million, compared to the prior year period. This decline in SG&A expenses during the nine months ended September 30, 2026, was primarily due to a decrease of $2.2 million in labor related costs resulting from prior year headcount reductions related to operational efficiency initiatives, which includes a reduction in severance costs of $0.6 million. The decrease in SG&A expenses for the nine months ended September 30, 2026, compared to the prior year period also included a decrease of approximately $1.2 million in professional fees and marketing related costs, resulting from our cost savings initiatives, a reduction in bad debt expense of $0.5 million and a decline in facility rent of $0.4 million. All other SG&A expenses for the nine months ended September 30, 2026 were down approximately $0.5 million resulting from the accumulation of cost savings initiatives across multiple departments, compared to the prior year period.
19
Operating expenses for the nine months ended September 30, 2026 and 2025 included depreciation and amortization of $3.1 million and $4.1 million, respectively. The decrease in depreciation and amortization expense for the nine months ended September 30, 2026, compared to the prior year period, is primarily due to a lower customer relationship intangible balance. During the first quarter of 2025, as a result of certain client attrition, we determined a customer relationship intangible was impaired and recorded an impairment charge of $1.7 million, which reduced the intangible value. See Note 6 to our condensed consolidated financial statements for further discussion.
On March 31, 2025, we completed the sale of substantially all of the assets used in an underperforming business operation. The selling price of the assets was approximately $5.0 million and we recognized a $4.5 million loss on sale of assets for the nine months ended September 30, 2025. See Note 3 to our condensed consolidated financial statements for further discussion.
Interest expense. Interest expense was $6.4 million and $7.0 million for the nine months ended September 30, 2026 and 2025, respectively. The decrease in expense is primarily due to lower borrowings on our TCB ABL Facility (as defined below) for the nine months ended September 30, 2026, compared to borrowings on our PNC ABL Facility in the prior year period.
Loss on debt extinguishment. During the three months ended March 31, 2026, we entered into a Loan and Security Agreement with Texas Capital Bank (the “TCB Loan Agreement”). In connection with the execution and delivery of the TCB Loan Agreement, which provides for an asset-based revolving credit facility (the “TCB ABL Facility”), our Loan, Security and Guaranty Agreement with PNC Bank, National Association, successor to BBVA USA (the “PNC Loan Agreement”) was terminated, and all outstanding amounts were paid in full. The termination of the PNC Loan Agreement resulted in a loss on debt extinguishment of $488 thousand, attributable to the write-off of unamortized debt issuance costs.
Additionally, in March 2026, we amended our Credit Agreement, dated as of October 19, 2020 (the “Credit Agreement”), with Monroe Capital Management Advisors, LLC (“Monroe”) to, among other things, modify its financial covenants, which resulted in overall favorable terms for us. As a result of this modification, we entered into a fee arrangement with Monroe for the payment of an exit fee upon the occurrence of certain triggering events, which include a change in control, a debt refinancing, or the maturity of the Credit Agreement. The calculation of the exit fee is dependent upon the financial performance of our business at the time of the triggering event, and the fee has a minimum value of $2.0 million. While the exit fee does not include a limit on the maximum fee to be paid, we do not believe that any amount paid by us will be materially different from the $2.0 million. Therefore, as of September 30, 2026, the estimated exit fee of $2.0 million is recorded as an other long-term liability, and the fee has been included in our debt issuance costs, which is amortized to interest expense over the remaining term of the Credit Agreement. The value of the estimated liability for the exit fee and related interest expense will be adjusted if there is a material change in our estimate prior to a triggering event.
As previously disclosed, on October 19, 2020, we granted a warrant to purchase 500,000 shares exercisable immediately and subsequently issued a warrant to purchase 350,000 shares on October 19, 2021 to affiliates of Monroe (the “Holders”) in connection with the financing (the “Warrants”). On March 12, 2026, we and the Holders entered into an Amendment to Warrant to Purchase Common Stock to each of the Warrants to extend the expiration date of the Warrants from March 19, 2028 to June 28, 2030.
We calculated the change in estimated fair value of the warrants resulting from the modification using the Black-Scholes option pricing model, and recorded a debt discount of $198 thousand, which is being amortized to interest expense over the remaining term of the Credit Agreement.
We also incurred approximately $933 thousand in additional debt issuance costs resulting from the March 2026 financing transactions. As a result of these transactions, as of September 30, 2026, our unamortized debt issuance costs and debt discount is $4.1 million. See Note 8 to our condensed consolidated financial statements for further discussion.
Income taxes. We recorded a provision for income taxes of $106 thousand and an income tax benefit of $(9) thousand for the nine months ended September 30, 2026 and 2025, respectively. The provision/(benefit) for income tax is primarily attributable to state tax obligations based on current estimated state tax income/(loss) multiplied by the state tax apportionment percentage for states with no net operating loss carryforwards.
We continued to record a full valuation allowance against all our deferred tax assets (“DTAs”) as of both September 30, 2026 and December 31, 2025. We intend on maintaining a full valuation allowance on our DTAs until there is sufficient evidence to support the reversal of all or some portion of these allowances. Over the near term, we do not anticipate reversing a significant portion of this allowance. Release of the valuation allowance would result in the recognition of certain DTAs and a decrease to income tax expense for the period the release is recorded. However, the exact timing and amount of the valuation allowance release are subject to change based on the level of profitability that we are able to actually achieve.
Net loss. Net loss for the nine months ended September 30, 2026 was $(15.0) million, compared to net loss of $(13.7) million for the nine months ended September 30, 2025. The discussions above explain the majority of the changes which contributed to the change in net results year-over-year.
20
Our operating results, including revenue, operating expenses, and operating margins, vary from period to period depending on commodity prices of recyclable materials, the volumes and mix of services provided, as well as customer mix during the reporting period, and the timing of acquisitions, divestitures, and impairments.
Loss per share. Net loss per basic and diluted share attributable to common stockholders was $(0.70) and $(0.66) for the nine months ended September 30, 2026 and 2025, respectively. The basic and diluted weighted average number of shares of common stock outstanding was approximately 21.4 million for the nine months ended September 30, 2026 and 20.9 million for the nine months ended September 30, 2025.
Adjusted EBITDA
For the three months ended September 30, 2026, Adjusted EBITDA (as defined below), a financial measure not prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), increased 16.8% to $3.4 million from $2.9 million for the three months ended September 30, 2025. For the nine months ended September 30, 2026, Adjusted EBITDA increased 11.7% to $8.0 million from $7.2 million for the same period in 2025.
We use the non-GAAP measurement of earnings before interest, taxes, depreciation, amortization, stock-related compensation charges, and certain other adjustments, or “Adjusted EBITDA”, to evaluate our performance. Adjusted EBITDA is a non-GAAP measure that is frequently used by analysts, investors and other interested parties to evaluate the market value of companies considered to be in similar businesses. We suggest that Adjusted EBITDA be viewed in conjunction with our reported financial results or other financial information prepared in accordance with GAAP.
The following table reflects the reconciliation of net loss to Adjusted EBITDA for the three and nine months ended September 30, 2026 and 2025 (in thousands):
|
|
Three Months Ended September 30, |
|
|
Nine Months Ended September 30, |
|
||||||||||
|
|
2026 |
|
|
2025 |
|
|
2026 |
|
|
2025 |
|
||||
|
|
(Unaudited) |
|
|
(Unaudited) |
|
||||||||||
Net loss |
|
$ |
(495 |
) |
|
$ |
(1,349 |
) |
|
$ |
(15,030 |
) |
|
$ |
(13,726 |
) |
Depreciation and amortization |
|
|
1,139 |
|
|
|
1,498 |
|
|
|
3,565 |
|
|
|
4,744 |
|
Interest expense |
|
|
2,153 |
|
|
|
2,389 |
|
|
|
6,411 |
|
|
|
7,031 |
|
Stock-based compensation expense |
|
|
397 |
|
|
|
470 |
|
|
|
1,142 |
|
|
|
1,665 |
|
Loss (gain) on sale of assets, net |
|
|
200 |
|
|
|
(152 |
) |
|
|
277 |
|
|
|
4,339 |
|
Impairment loss |
|
|
— |
|
|
|
— |
|
|
|
11,000 |
|
|
|
1,707 |
|
Loss on extinguishment of debt |
|
|
— |
|
|
|
— |
|
|
|
488 |
|
|
|
— |
|
Other adjustments (1) |
|
|
— |
|
|
|
47 |
|
|
|
57 |
|
|
|
1,426 |
|
Income tax expense (benefit) |
|
|
38 |
|
|
|
35 |
|
|
|
106 |
|
|
|
(9 |
) |
Adjusted EBITDA |
|
$ |
3,432 |
|
|
$ |
2,938 |
|
|
$ |
8,016 |
|
|
$ |
7,177 |
|
(1) For the nine months ended September 30, 2026, other adjustments resulted primarily from severance costs. For the three months ended September 30, 2025, other adjustments primarily related to certain loan amendment costs and other professional fees. For the nine months ended September 30, 2025, other adjustments primarily related to severance and retirement costs, certain loan amendment costs, and other professional fees.
Liquidity and Capital Resources
As of September 30, 2026, we had working capital of $9.4 million, including $0.9 million of cash and cash equivalents, compared with working capital of $11.7 million, including $1.0 million of cash and cash equivalents as of December 31, 2025.
We derive our primary sources of funds for conducting our business activities from operating revenues; borrowings under our credit facilities; and the placement of our equity securities to investors. We require working capital primarily to carry accounts receivable, service debt, purchase capital assets, fund operating expenses, address unanticipated competitive threats or technical problems, withstand adverse economic conditions, fund potential acquisition transactions, and pursue goals and strategies.
We believe our existing cash and cash equivalents of $0.9 million, our borrowing availability under our $40.0 million TCB ABL Facility (as defined above and discussed in Note 8 to our condensed consolidated financial statements), and cash expected to be generated from operations will be sufficient to fund our operations for the next 12 months and thereafter for the foreseeable future. Our known current and long-term uses of cash include, among other possible demands, capital expenditures, lease payments and repayments to service debt and other long-term obligations. We have no agreements, commitments, or understandings with respect to any such placements of our securities and any such placements could be dilutive to our stockholders.
21
Cash Flows
The following table presents a summary of our cash flows for the nine months ended September 30, 2026 and 2025 (in thousands):
|
Nine months ended September 30, |
|
|
|
|
||||||
|
2026 |
|
|
2025 |
|
|
Change |
|
|||
Net cash provided by operating activities |
$ |
4,400 |
|
|
$ |
8,506 |
|
|
$ |
(4,106 |
) |
Net cash (used in) provided by investing activities |
|
(970 |
) |
|
|
3,947 |
|
|
|
(4,917 |
) |
Net cash used in financing activities |
|
(3,501 |
) |
|
|
(11,703 |
) |
|
|
8,202 |
|
Net (decrease) increase in cash and cash equivalents |
$ |
(71 |
) |
|
$ |
750 |
|
|
$ |
(821 |
) |
Cash Flows from Operating Activities
For the nine months ended September 30, 2026, our net loss of $(15.0) million included a non-cash goodwill impairment loss of $11.0 million and loss on debt extinguishment of $0.5 million. Other non-cash items included in our net loss for the nine months ended September 30, 2026 totaled approximately $6.0 million and related primarily to depreciation, amortization of intangible assets and debt issuance costs and discounts, a provision for doubtful accounts, and stock-based compensation. Net cash provided by the net change in operating assets and liabilities of $1.9 million for the nine months ended September 30, 2026, was primarily associated with relative changes in accounts receivable, accounts payable, and accrued liabilities.
For the nine months ended September 30, 2025, our net loss of $(13.7) million included a non-cash net loss on sale of $4.3 million and a non-cash intangible asset impairment loss of $1.7 million. Other non-cash items included in our net loss for the nine months ended September 30, 2025 totaled approximately $7.8 million and related primarily to depreciation, amortization of intangible assets and debt issuance costs and discounts, a provision for doubtful accounts, and stock-based compensation. Net cash provided by the net change in operating assets and liabilities of $8.3 million for the nine months ended September 30, 2025, was primarily associated with relative changes in accounts receivable, accounts payable, and accrued liabilities.
The decrease of $4.1 million in our net cash provided by operating activities during the nine months ended September 30, 2026, compared to the prior year period, primarily results from a decrease in client activity partially offset by decreased spending for operating expenses as a result of our cost savings initiatives. See Results of Operations above for further discussion of our cost savings initiatives and client activity. The decrease was also partially offset by improved working capital management, especially related to our continued focus on strong collection efforts and improved billing cycle times, which contributed to an improvement in days sales outstanding. Days sales outstanding (defined as “Accounts receivable, less allowance for doubtful accounts” at quarter end divided by “Revenue” for the most recent quarter multiplied by 91.25 days) decreased to 71.5 days at September 30, 2026 from 75.9 days at December 31, 2025.
Cash Flows from Investing Activities
Cash used in investing activities for the nine months ended September 30, 2026 was $(1.0) million and primarily relates to software development costs. Cash provided by investing activities for the nine months ended September 30, 2025 was $3.9 million and primarily related to the sale of our divested business operations, which generated cash proceeds of approximately $5.0 million. These proceeds were used to repay a portion of our outstanding debt in 2025.
Cash Flows from Financing Activities
Net cash used in financing activities for the nine months ended September 30, 2026 was $(3.5) million, primarily due to the repayment of $4.4 million on our notes payable and payments for debt issuance costs of $0.9 million resulting from the March 2026 debt refinancing transactions, partially offset by net borrowings of $1.9 million from our credit facilities.
Net cash used in financing activities for the nine months ended September 30, 2025 was $(11.7) million, primarily due to the net repayment of $7.0 million on our credit facility and repayment of $4.7 million on our notes payable using proceeds from the sale of certain divested business operations as further discussed in Notes 3 and 8 to our condensed consolidated financial statements.
Inflation
Although the overall economy has experienced some inflationary pressures, we do not believe that inflation had a material impact on us during the nine months ended September 30, 2026 and 2025. We believe our flexible pricing structures and cost recovery fees may help mitigate volatility in costs, such as fuel, labor, and certain capital items, by allowing us to recover certain inflation-related cost increases from our customer base. Ongoing geopolitical conflicts, including recent military actions involving Iran and the broader Middle East, may contribute to further volatility in energy markets and fuel costs, which could increase inflationary pressure on our business or create timing delays in our ability to recover such costs from customers. However, consistent with industry practice, we believe many of our contracts allow us to pass through certain costs to our customers or adjust pricing. While we believe that we should be able to offset many cost increases that result from inflation in the ordinary course of business, we may be required to absorb at least part of these cost increases due to competitive pressures or delays in timing of rate increases. Although we have not been
22
materially affected by inflation to date, we can provide no assurance that we will not be affected in the future by higher rates of inflation, increases in interest rates, or continued volatility in energy and fuel costs.
Critical Accounting Estimates and Policies
Our discussion and analysis of our financial condition and results of operations is based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These areas include carrying amounts of accounts receivable, goodwill and other intangible assets, the liability for estimated exit fees, stock-based compensation expense, and deferred taxes. We base our estimates on historical experience, our observance of trends in particular areas, and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual amounts could differ significantly from amounts previously estimated. For a discussion of our critical accounting policies, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2025 Annual Report. There have been no significant changes in our critical accounting policies during the nine months ended September 30, 2026, except as follows:
Goodwill Impairment
During the three months ended June 30, 2026, our company’s stock price traded below its book value per share for a sustained period. As a sustained decline in market capitalization is a potential indicator of goodwill impairment, we performed an interim quantitative goodwill assessment.
Management engaged a third party to perform the assessment as of May 31, 2026, which estimated the fair value of our company using the discounted cash flow method and guideline public company method. We considered the relationship between estimated fair value and market capitalization when evaluating the goodwill impairment analysis. The results of these assessments indicated that our company's fair value was less than our carrying value, and therefore, we recognized a goodwill impairment of $11.0 million as of June 30, 2026. The goodwill impairment charges are reflected in the “Impairment loss” in our condensed consolidated statements of operations. The remaining goodwill value as of June 30, 2026 was $70.1 million.
We performed our annual impairment analysis for goodwill in the third quarter of 2026 with no additional impairment indicated. We will continue to monitor for any additional indicators of impairment in future periods. Goodwill is tested for impairment at least annually and between annual tests whenever there is an indication of impairment.
Monroe Term Loan Exit Fee Liability
Upon the amendment of our Credit Agreement with Monroe, we entered into a fee arrangement with Monroe for the payment of an exit fee upon the occurrence of certain triggering events, which include a change in control, a debt refinancing, or the maturity of the Credit Agreement. The calculation of the exit fee is dependent upon the financial performance of our business at the time of the triggering event. The fee has a minimum value of $2.0 million, and there is not a limit to the maximum fee that could be paid. As of September 30, 2026, we believe the estimated fee to be paid approximates the minimum value of $2.0 million. As a result, we recorded the estimated exit fee as an other long-term liability, and the fee has been included in debt issuance costs which is amortized to interest expense over the remaining term of the Credit Agreement. The variable portion of the estimated fee, or the estimated amount exceeding the minimum value, will be reassessed each reporting period by taking into consideration the probability of the triggering event occurring and our estimated value at that time. Any changes to the estimated value of the variable portion of the fee will increase other long-term liabilities and increase our interest expense.
Recent Accounting Pronouncements
See Note 2 to our condensed consolidated financial statements.
Off-Balance Sheet Arrangements
We have no off-balance sheet debt or similar obligations. We have no transactions or obligations with related parties that are not disclosed, consolidated into, or reflected in our reported results of operations or financial position. We do not guarantee any third-party debt.
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Not applicable.
23
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and Procedures
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at a reasonable assurance level as of September 30, 2026.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting identified in management’s evaluation pursuant to Rules 13a-15(d) or 15d-15(d) of the Exchange Act during the period covered by this Quarterly Report on Form 10-Q that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
Limitations on Effectiveness of Controls and Procedures
Our management, including our Chief Executive Officer and Chief Financial Officer, does not expect that our disclosure controls and procedures or our internal control over financial reporting will prevent all error and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues, misstatements, errors, and instances of fraud, if any, within our company have been or will be prevented or detected. These inherent limitations include the realities that judgments in decision making can be faulty and that breakdowns can occur because of simple error or mistake. Controls also can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the controls. We base the design of any system of controls in part on certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions. Projections of any evaluation of controls effectiveness to future periods are subject to risks. Over time, internal controls may become inadequate as a result of changes in conditions, or through the deterioration of the degree of compliance with policies or procedures.
24
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
We may be subject to legal proceedings in the ordinary course of business. As of the date of this Quarterly Report on Form 10-Q, we are not aware of any legal proceedings to which we are a party that we believe could have a material adverse effect on our financial position, operating results, or cash flows.
Item 1A. Risk Factors
Not applicable.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5.
None.
25
Item 6. Exhibits
Exhibit No. |
|
Exhibit |
|
31.1 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Executive Officer |
|
31.2 |
|
Rule 13a-14(a)/15d-14(a) Certification of Chief Financial Officer |
|
32.1 |
|
Section 1350 Certification of Chief Executive Officer |
|
32.2 |
|
Section 1350 Certification of Chief Financial Officer |
|
101 |
|
The following financial statements from the Company’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2026, formatted in Inline XBRL: (i) Condensed Consolidated Balance Sheets, (ii) Condensed Consolidated Statements of Operations, (iii) Condensed Consolidated Statements of Changes in Stockholders’ Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Condensed Consolidated Financial Statements (unaudited), tagged as blocks of text and including detailed tags |
|
104 |
|
Cover Page Interactive Data File (embedded within the Inline XBRL document and included in Exhibit 101) |
|
|
|
|
|
26
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.
|
|
QUEST RESOURCE HOLDING CORPORATION |
||
|
|
|
||
Date: November 5, 2026 |
|
By: |
|
/s/ Perry W. Moss |
|
|
Perry W. Moss |
||
|
|
President and Chief Executive Officer |
||
|
|
|
||
Date: November 5, 2026 |
|
By: |
|
/s/ Brett W. Johnston |
|
|
Brett W. Johnston |
||
|
|
Senior Vice President and Chief Financial Officer |
||
27