Quest Resource’s first quarter was met with a negative market reaction, following results that fell short of Wall Street expectations. Management attributed the year-over-year revenue decline and non-GAAP loss to a combination of client attrition—partly tied to a recently divested business segment—and lower volumes at select industrial clients. CEO Perry Moss acknowledged operational gaps and inefficiencies, stating, “We have indeed identified flaws and gaps in the process...we certainly have begun the path to improvement and beginning to see results.” The company also experienced a temporary increase in expenses related to onboarding new clients and implementing a vendor management platform, which weighed on profitability.

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

While we enjoy listening to the management's commentary, our favorite part of earnings calls are the analyst questions. Those are unscripted and can often highlight topics that management teams would rather avoid or topics where the answer is complicated. Here is what has caught our attention.

Our Top 5 Analyst Questions Quest Resource’s Q1 Earnings Call

• Aaron Spychalla (Craig-Hallum) asked about operational gaps identified since the leadership transition. CEO Perry Moss explained that process flaws were found and addressed, with early initiatives already yielding improvements.
• Gerry Sweeney (ROTH Capital) inquired about end-market weakness and sales pipeline trends. Moss responded that industrial sector softness persisted but had not worsened, and that the late-stage sales pipeline remains robust despite some cautious decision-making by prospects.
• Sweeney (ROTH Capital) also questioned elevated days sales outstanding (DSO). CFO Brett Johnston described ongoing efforts to improve billing efficiency and accelerate collections, emphasizing that collectability was not a concern.
• Owen Rickert (Northland Capital Markets) sought clarity on changing customer behavior outside the industrial sector. Johnston replied that demand in other markets had actually increased, with no notable adverse trends.
• Nelson Obus (Wynnefield Capital) asked about the causes of customer attrition. Johnston explained that attrition was mostly due to clients being acquired by other firms with different service programs, and that the divested business accounted for a significant portion.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will be watching (1) the pace and effectiveness of operational improvements and SG&A reductions, (2) the margin ramp and revenue contribution from newly onboarded clients, and (3) stabilization or improvement in industrial sector volumes. Progress on reducing accounts receivable days and further strengthening the sales pipeline will also be important markers of execution.

Quest Resource currently trades at $2.22, down from $2.53 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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