Quest Resource (QRHC) Q3 2024 earnings summary

Executive summary

• Third quarter revenue increased 3.3% year-over-year to $72.8 million, driven by new client growth and technology enhancements, but results were below expectations due to temporary cost increases and economic headwinds in the industrial end market.

• Net loss for Q3 2024 was $(3.4) million, compared to $(2.1) million in Q3 2023; adjusted EBITDA for Q3 2024 was $2.5 million, down 31.7% year-over-year.

• Strong fundamentals, a robust sales pipeline, and successful onboarding of new clients position the company for future growth.

• Technology investments, especially the new automated vendor management system, are driving efficiency and differentiating the company in the market.

Financial highlights

• Revenue reached $72.8 million, up 3.3% year-over-year and flat sequentially; $16 million came from new and expanded client relationships.

• Gross profit for Q3 2024 was $11.7 million (16.1% margin), down from $12.4 million (17.7% margin) in Q3 2023, impacted by revenue mix, higher service costs, and $1 million in one-time billing credits.

• SG&A expenses were $10.3 million, up $650,000 year-over-year and $890,000 sequentially; operating expenses for Q3 2024 were $12.6 million, up from $12.0 million in Q3 2023.

• Interest expense increased to $2.7 million in Q3 2024 from $2.4 million in Q3 2023, reflecting higher borrowings.

• Net loss per share was $(0.16) for Q3 2024 and $(0.27) for the nine months ended September 30, 2024.

Outlook and guidance

• Expect more than $20 million in net incremental revenue in 2025 from new client wins, excluding growth from existing clients and commodity price changes.

• Anticipate continued improvements in profitability as efficiency initiatives and operating leverage take effect.

• SG&A expected to be about $10 million in Q4, growing slower than gross profit dollars.

• Temporary cost increases and billing credits are not expected to recur in Q4.

• Management expects existing cash, borrowing capacity, and operating cash flows to be sufficient to fund operations for at least the next 12 months.