QRHC - NASDAQ

Good afternoon, ladies and gentlemen, and welcome to the Quest Resource Holding Corporation's Third Quarter 2025 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press 0 for an operator. This call is being recorded on Monday, November 10, 2025. I would now like to turn the call over to Nick Nelson with Alpha IR Group. Please go ahead.

Thank you, operator, and thank you, everyone, for joining us on the call. Before we begin, I'd like to remind everyone this conference call may contain predictions, estimates, and other forward-looking statements regarding future events or future performance of the company. Use of words like anticipate, project, estimate, expect, intend, believe, and other similar expressions are intended to identify those forward-looking statements. Such forward-looking statements are based on the company's current expectations, estimates, projections, beliefs, and assumptions, and involve significant risks and uncertainties. Actual events or the company's results could differ materially from those discussed in the forward-looking statements as a result of various factors which are discussed in greater detail in the company's filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such statements and may consult SEC filings for additional risks and uncertainties. The company's forward-looking statements are presented as of the date made and the company undertakes no obligation to update such statements unless required by law to do so. In addition, this call may include industry and market data, other statistical information, as well as the company's observations and views about industry conditions and developments. The data and information are based on the company's estimates, independent publications, government publications, and reports made by market research firms and other sources. Although Quest believes these sources are reliable and the data and other information are accurate, we caution that Quest has not independently verified the reliability of the sources or the accuracy of the information. Certain non-GAAP financial measures will be disclosed during this call. These non-GAAP measures are used by management to make strategic decisions, forecast future results, and evaluate the company's current performance. Management believes the presentation of these non-GAAP financial measures is useful to investors' understanding and assessment of the company's ongoing core operations and prospects for the future. Unless it is otherwise stated, it should be assumed that any financials discussed in this call will be on a non-GAAP basis. Full reconciliation of non-GAAP to GAAP financial measures are included in today's earnings release. With that, I'd like to turn the call over to Dan Friedberg, Chairman of the Board.

Good afternoon, everyone. And thank you for joining us for our third quarter call. Quest delivered a solid third quarter that showed important progress on several fronts. During the first half of the year, we took decisive actions across the business that included reducing costs, improving operations, and generating cash flow. We're on a much more solid footing as a result of these initiatives, and our third quarter results were consistent with our stated expectation for an improved trajectory of the performance of the business. The impact of these actions is already delivering important improvements in the business and validates our confidence in the path ahead. We will continue pursuing business efficiencies, reducing variability, generating growth, and driving business margins. We are confident in our ability to continue to drive improvements in the business and maintain this trajectory as we finish 2025 and move into 2026. With that, I'll turn the call over to Perry to discuss these efforts in more detail.

Thank you, Dan. We delivered a solid third quarter with strong sequential improvement in our financial performance despite what remains a tough operating environment. Since taking on the CEO role earlier this year, we've been on a mission to standardize and streamline our internal processes, relentlessly track our progress, as well as foster a culture of continuous improvement. This has been a comprehensive effort that spans every aspect of the business, from customer engagement, sales, payments and collections, and more. While these cultural changes can be complicated, I have been thrilled with the response from Quest employees as well as with what we believe are the early benefits of these efforts. Our operational excellence initiatives are driving better visibility into our customers' needs, enhancing the productivity of our sales team, elevating our vendor management practices, maximizing efficiencies for our operating teams, and ultimately, improving financial results and cash generation. Overall, the macro environment continues to present challenges. Volumes from our industrial customers remain subdued and the pace of adding new clients has been slower than last year and slower than what we had anticipated. Our pipeline remains very healthy, and potential clients have not fallen out, but economic uncertainty is leading to some decision delays that are extending the sales cycle. In response, we're focusing on what we can control. We recently redefined our sales process to direct our sales team with a greater focus on share of wallet opportunities. To do this, we focused on greater levels of collaboration between our relationship managers and our sales teams. This realignment combines the capabilities and talent of each team and gives our sales team better visibility into the ongoing and dynamic needs of customers. As a result, we're broadening the number of waste streams that we're handling for individual clients, adding new value-added services to existing client accounts, and expanding our coverage with large multi-location customers to handle a larger portion of their waste. There are many more opportunities that include geographic and service line expansion within our installed base. We expect these share of wallet initiatives to contribute greater levels of organic growth for us going forward as these are clients that already understand and appreciate the Quest value proposition and have seen the tangible benefits of the services we provide. They will all be strong contributors to gross profit dollar growth as we add and optimize services. From a process standpoint, we've also resegmented and better defined the different stages for our sales process. This has provided us with greater visibility into the sales cycle for individual accounts and offers a more detailed look at our total pipeline. We've replicated the same stage of approach for share of wallet opportunities demonstrating our focus here. And now actively maintain both a new business pipeline as well as a share of wallet pipeline. These sales-focused initiatives and process improvements are contributing to improved results as we continue to bring new clients and expanded services with others. We recently launched our two wins that we announced during our last earnings call. One is a major retailer and the other is a large full-service restaurant chain. And just last week, we signed another new contract with a company in the food products end market. Additionally, we continue to execute on our refocused share of wallet efforts by adding all the cardboard and organic food waste from one of our largest new customers from 2024 and adding a significant new number of stores from another existing customer. These efforts will also be important contributors to our commitment to broadening our customer base by adding to the total number of customers we serve and also through expanding our business in nonindustrial end markets. We are committed to diversifying our customer and revenue profile by expanding in markets like retail, hospitality, grocery stores, and more. These are all markets we are present in today and where we see compelling opportunities for our sales team to further penetrate. These are all markets and businesses that tend to perform better during the fourth quarter where industrial production typically moderates. And will provide a good counterbalance to our earnings profile and seasonality. Another critical area of focus of ours is our source to contract process where we engage our vendors and nurture those relationships. These relationships are essential given our asset-light model. Strong relationships with these vendors are central to our ability to win new clients, deploy the right solutions, and deliver a best-in-class customer experience. We've added new vendor relationships, reestablished older ones, and expanded others, which has elevated our level of visibility and value proposition with these vendors. We're finding that many vendors are once again proactively reaching out to Quest, asking for new business and looking to grow their relationships with us. Strong vendor relationships have a direct flow through to service levels for our customers, and today, we currently are experiencing the lowest service disruption rates and associated costs we've ever had. On the process side, we've taken steps to optimize our payment and collection process with the goal of improving our order to cash cycle and overall working capital management. We've been able to homogenize this process and are now paying the vast majority of our vendors on term. We have also shortened our invoicing time and will continue to optimize our cash collections process. We also continue to leverage our technology and data platform, which is enhancing the customer experience through its zero-touch nature. Customers can utilize the portal to access their data to see the benefits of the Quest program. They now see the various waste materials generated, their associated costs, and end destinations. We've amassed a tremendous amount of data which we believe carries incredible value. Ultimately, we envision a subscription-like model for access to this data, adding another margin-accretive revenue stream. Looking ahead, I am confident that the continued implementation and progress of our operational excellence initiatives will continue to drive improvements in the business in the fourth quarter and beyond. Our sales pipeline is moving slower than we would like, but the Quest value proposition continues to resonate with current and potential clients alike. Our relationships with our large industrial clients remain as strong as ever. We are growing our share of wallet with existing clients, and discussions with potential new clients leave us confident that we will win more than our fair share of new business when these companies ultimately elect to move forward. We do expect to continue to experience some margin pressure as we execute our land and expand strategy and volumes at our largest industrial customers are expected to remain challenged. However, we anticipate we will be able to help offset these pressures through optimizing service levels, growing our share of wallet with existing clients, and continuing to drive operational improvements across the business. To wrap up, our key priorities remain to grow the business with new and existing customers, drive margin improvements as we execute our operational excellence initiatives, continue the development of our operating platform, improve cash generation, and pay down debt. We remain confident in our ability to the Quest value proposition and implement these organic initiatives as macroeconomic conditions and industrial volumes normalize. With that, I'd like to turn the call over to Brett to review our third quarter financial results in greater detail.

Thanks, Perry, and good afternoon, everyone. We are encouraged by the sequential improvements in the business as the internal initiatives we've enacted are delivering tangible results. Revenue for the third quarter was $63.3 million, which was a 13% decrease from one year ago, but a sequential increase of 6.4% compared to the second quarter. The decline compared to the prior year was driven by the divested mall-related business and by lower revenue from clients in our industrial end market, where market conditions remain challenged. Our relationships with these clients remain strong, but macroeconomic conditions are leading to lower overall volumes. We do ultimately expect conditions to normalize and return to growth and fully expect to continue to support these clients when they do. In the meantime, we have greatly elevated our focus on share of wallet opportunities with these new clients. Sequentially, our revenue growth was driven by new clients that we have added over the past eighteen months. Year to date, these new clients have added over $24 million in incremental revenue year over year. The onboarding and progression of these new clients is advancing as planned and is beginning to contribute meaningfully to our financial results. To speak further to that progress, gross margins with these new clients have made consecutive gains for multiple quarters in a row. As a reminder, while margins with these newer clients are initially lower and can create a drag on overall gross profit margins, we have a demonstrated land and expand strategy to both grow our share of wallet and add incremental value-add services over time, which enhances the profitability of these relationships. In the third quarter, gross profit dollars totaled $11.5 million, a decline of 2% compared to the prior year but a sequential increase of 3.9%. This sequential growth was better than our expectation of flat to slightly down, as our gross profit initiatives gained traction. Our gross margin was 18.1%, which was 200 basis points better than the prior year, and a sequential decline of 40 basis points. The year-over-year growth in gross profit margin was largely driven by the sale of our lower margin mall business earlier this year. While the sequential decline was mainly a function of the aforementioned margin dynamics of newer clients combined with margin pressure from renewals previously discussed last quarter. These were largely offset by optimization improvements and other efficiency measures. As we look to the fourth quarter, we would expect sequential comparisons for gross profit dollars to be flat to slightly down but mostly in line with our previous expectations. As a reminder, we tend to see seasonably low volumes across several of our clients in the fourth quarter. Additionally, there remains significant uncertainty related to client volumes in the end market. However, the return to sequential growth in the third quarter leaves us confident that our commercial and customer initiatives are helping to offset these pressures. Our confidence is based on our visibility into efforts continuing to take hold as we optimize the business. And with new clients and expansions with existing clients coming online in the fourth quarter. We will also continue to benefit from the reduction of temporary cost increases we discussed during the prior calls. Overall, we believe these positive trends position us to drive growth going into next year. Moving on to SG&A, which was $9.2 million during the third quarter. This was $1 million lower compared to the prior year, which equates to a 10% reduction year over year. And on a sequential basis, it was a slight decrease from the second quarter. SG&A was consistent with our outlook of mostly flat sequentially. The declines are primarily related to the reduction in work in the first half of the year, increased efficiencies, and the aggressive takeout costs across the organization. We expect SG&A in the fourth quarter to be down again compared to the third quarter as we continue to reduce costs. Moving on to a review of the cash flow and balance sheet. At the end of the third quarter, we had $1.1 million in cash, a sequential increase from $450,000 at the end of the second quarter. And approximately $20 million of available borrowing capacity on our $45 million operating borrowing line. For the third quarter, we generated approximately $5.7 million in cash from operations, a sequential improvement of roughly 46%. These results are driven by improved processes resulting from our initiatives aimed at billing faster, collecting from our clients sooner, and improving vendor management practices and payment terms. Our heightened focus on these activities is reducing our cash cycle. Further benefiting from these initiatives, our DSOs also decreased nicely from the second quarter to the third quarter. Building off a modest decrease from the first to the second quarter. The approximate nine-day decrease drove DSOs into the lower 70s. Additionally, as the overall business continues to improve, we believe our model supports consistent operating cash generation. We would expect these systems and process improvements to contribute continued cash generation and further DSO reduction in the coming quarters. As a result of the improved cash generation, we paid down $4.6 million of debt during the third quarter, bringing our year-to-date debt reduction to $11.2 million. As of the end of the third quarter, we had $65.4 million in net notes payable versus $76.3 million at the beginning of the year. We expect to continue to aggressively reduce debt as these cash initiatives continue to take hold. With that, I'll turn the call back over to Perry for some closing comments before we open up for Q&A.

Great. Thank you, Brett. Our third quarter was an important validation of the operational excellence initiatives we've been enacting across the business. There remains plenty of work to be done, and the operating landscape remains tough. But we are highly confident in the value of our asset-light model and our ability to deliver improved financial results. Our initiatives are working, and we're well-positioned to continue to drive improvements in the business. Going forward, our focus will remain on generating cash and paying down debt while continuing to advance our customer and other commercial initiatives. With that, I'd like to request the operator to provide instructions on how listeners can queue up for questions. Operator?

Thank you so much, ladies and gentlemen. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to remove your hand from the queue, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys. Just a moment for your first question. Your first question comes from Gerry Sweeney with ROTH Capital. Please go ahead.

Good afternoon, Dan, Brett, Perry. Thanks for taking my call.

Hey, Gerry.

You'd spoken about end markets specifically maybe industrial remaining weak or challenging. Has that stabilized, or do you see some more headwinds in there outside of seasonality in the fourth quarter? And I'm just curious about your other end markets, how they are holding up altogether.

Yeah. Gerry, I'll take that. This is Perry. You know, the macroeconomic environment is still a bit uncertain. But you know, we believe the industrial markets and really all of our markets are stabilized. Of course, from the industrial sector, we'll see some seasonality effect Q4. Which is why you know, in my comments, we're trying to diversify our portfolio a bit to add customers that actually ramp up in Q4. But I think more importantly, you know, we're really focused on what we can control. Which is our share of wallet with these clients. And, you know, we've been very successful with adding incremental services with these customers, and we expect to continue to do so. You know, we talked last quarter about our strategy to renew a contract with a large client where we gave up some margin on the front end to gain an opportunity to equally share in the savings. We believe that's gonna work very well. It will take more than a quarter for us to see the gains from those shared savings. But we believe that that will benefit. So think everything is stabilized now. The sectors that I talked about earlier, retail, grocery, you know, logistics, we work in a lot of verticals. We think that they will ramp slightly in Q4. Industrials will remain a bit challenged just because of the seasonality.

Got it. And then wallet share, that was something you just brought up now, but also in the prepared comments. You know, taking wallet share, expanding wallet share, however you wanna phrase it, it's always been, I think, part of what Quest did. Have you changed that strategy at all to accelerate it or any other details on that front?

Yeah. Yeah. So the answer is yes. So when I arrived a couple of years ago, you know, I brought a whole new discipline to the sales process, the new customer sales process. So we've taken that approach and used that now for share of wallet. So we have a very disciplined approach where we have a very well-defined share of wallet, which is something we didn't have before. But in addition, we're now collaborating with our between our relationship managers and our sales teams. Which is another new development. So we have people that own relationships with the customers. They may not have the same skill sets that our sales team do. So they kinda go in together and provide additional services. And we see that that's paying off, you know, with one of our largest new customers from 2024 we've added some significant share of wallet by gaining access to all of the cardboard generation and also all of the food waste, the plastic, just a number of different streams. Another customer in the retail sector, we've added a significant new number of store locations. So I would say it's an enhanced and refined approach from the way that we did this in the past.

Gotcha. Would that include, I guess, some KPIs around it or incentives?

Absolutely. Yeah. We yes. So we have mapped every opportunity that we have with every customer. And we now know which ones we're pursuing. We know which stage in the sales cycle that opportunity is. And, you know, with any sales opportunity, it's always about advancing the sale from one stage to the next until, you know, closing. So, there are, there's discipline in KPIs around that whole approach.

Got it. And then one more quick question. I'll jump back in line. Obviously, operational improvement big theme this quarter. Making some progress. How much what as we look at the fourth quarter and 2026, what opportunities are out there and what should we be thinking about in terms of how it flows through either to the balance sheet or the income statement?

Yeah. You know, we're on a path of continuous improvement and optimization. So one of the things that we intend to do so up to now, we have defined all of our major processes. So that's, you know, source to contract, procure to pay, order to contract, and sales to contract. And we've got those all mapped and optimized. We've got KPIs. The next step is actually putting KPIs on all of our team members. To make sure that we can get them fully optimized, ensuring that they're hitting excellence every day. So we think that's a future impact that will help us improve our financial performance. And again, with our land and expand, as we close on additional significant customers, yeah, there may be some margin pressure initially, but, you know, it's gonna be a good thing because, you know, we're significantly growing our revenue base.

Got it. I will jump back in queue. Thanks for that detail.

Your next question comes from Aaron Spychalla with Craig Hallum. Please go ahead.

Yeah. Hi, Perry and Brett. Thanks for taking the questions. First, for me on the new food win, congrats on that. Can you maybe give any details on size and timing and, you know, maybe percentage of footprint for the customers who think about land and expand? And then just any is it competitive win? Any kind of more detail there is appreciated.

Yeah. Yeah. So it was absolutely a competitive win. And, you know, we generally don't talk about the size of our new wins, but I think I've mentioned on prior calls that all of our opportunities are 7 or 8 figures. So this one falls into one of those categories. We're starting out even though this one is a land to expand. We're starting out at slightly higher margins than we typically do. Of their total portfolio, this represents probably 20%. So there's a really nice share of wallet opportunity. There are a couple of operating plans that saw our value proposition and they jumped on it right away. So while we continue to pursue expansion with their corporate folks, these two plants have saw the value of our proposition and jumped right away. So I think there'll be more to come with that win, but it was competitive. And there to be a little more, I guess, granular, this is they're in the food processing business.

Thanks. Good. I appreciate the color for that as you continue to build in that space. And then maybe just second on OpEx. Can you just kind of talk about that a little bit with all the operational initiatives you have going there in addition to the team and just working to optimize things there along with the technology investments? Just curious how you think about OpEx trending as we move forward into 2026.

Yeah. I mean, you know, this has been our plan all along. So we've got two full quarters now operational excellence. As I've said before, it's, you know, it's focused on standardizing and streamlining our processes and delivering, you know, continuous improvement. That's really kind of our foundational approach on everything right now continuous improvement. So, you know, the last thing we're looking for is making major improvements and then falling back the following quarter. But the results of those efforts have been, you know, improved financial results and cash generation. So, you know, we've got of those major processes, that I talk about a lot, the order to cash, procure to pay, etcetera, within those processes, we have 25 different KPIs where we're tracking very specific projects. And all 25 of those KPIs have been trending positive since April, which is when we began to implement. So I expect to see continued improvement. It's hard work. And I think, you know, as we continue to build out our operating platform and bring in some more automation, in addition to those operational improvements, we'll see some efficiencies come from, you know, our platform and our automation.

Gotcha. Thanks for that. And then just maybe building on that real quick on the 25 different KPIs. You know, I know it's been since April and good results here, you know, progress for the first couple quarters. Just so, I mean, what inning do you think you're kind of in and implementing that, you know, across like, kind of across all the business?

Yeah. You know, last time, I think you asked me that same question. I think I said we're in the bottom of the fourth. It's been a long inning. And we're probably still in the bottom of the fourth or the top of the fifth. There just seems to be more and more things that we see that need to be done or that we want to do. These initiatives have really begun to gain traction in the business. So you can imagine, you know, our team has been focused on doing all of their daily work and then we bring in all of these operating initiatives and improvements. And these are projects and things that they're doing kind of at the moment on top of their day to day. And it takes a while to gain traction and see the results. And this is probably the first quarter that, you know, all of our employees are beginning to see the results of their work. And they're getting really excited about it. So one of the things that I'm very hopeful for is that this is we're gonna be carrying momentum into Q4 and then into next year. We've been, you know, we've been all working really hard. So it's nice to finally begin to see some, you know, tangible benefits. But, you know, it's well, it seems like it seems like we've been doing this for a couple of years. It's only been six months. Of or two full quarters of operational improvement. So, you know, with the continuous improvement mindset, I'm hopeful it will, you know, we'll continue this pattern as we move forward.

Thanks. Best of luck as we move forward through the game. Thanks, Perry, Brett, and Dan.

Yep. Welcome.

Your next question comes from Owen Rickert with Northland Capital Market. Please go ahead.

Hey, guys. Thanks for taking my question here. Last quarter, you suggested we might see the sequential decline in gross profit dollars, but 3Q obviously came in a lot stronger. Can you walk us through more specifically what drove that outperformance and where results came in better than expected? And then just on top of that, was the slight sequential margin decline primarily just from ongoing maturation of newer clients.

Yeah. This is Brett. I'll take that question. So I'll kinda start on the second piece of that, which is margin. Which was expected and largely was part of why we had directionally said maybe we'd be or that we would be flat to down in Q3 relative to Q2 and that's because of some of the margin pressure on some select renewals that we took in Q2 and had to flush through the P&L in Q3, and we've still got a little bit of that for Q4. So that's why we expect it down. But what we got was a lot earlier track on the initiatives. You know, we continue to get improvement on operational efficiencies that Perry's discussed. So it was great to see those come in a little bit ahead of plan and materialize in the P&L. Additionally, we got stabilized a little bit more on the industrials as well than what we would have expected.

Got it. Thanks. And then secondly for me, can you guys just provide a quick update on the vendor management platform? How's that going?

Yeah. It's going, you know, it's going fine. It's going as planned. And, you know, just as a reminder, our vendor management platform is just one aspect of our process improvement initiatives. Overall end-to-end workflow. So, you know, there will be ongoing opportunity just to further automate beyond just the vendor management system, but our procure to pay process and source to contract process are two processes that are heavily involved with our vendors. Our relationships have never been better. So in addition to, you know, automation that we have with our vendors and their invoices with our system, our relationships have improved. We have vendors asking for more business. We have our vendor team, you know, sourcing better rates than they have in the past. And, as a result, you know, the service disruptions that we've talked about in the past and the associated cost that come with those disruptions, they're at the lowest point really in the history of our company. They're very, very low now. So the system itself continues to progress well. But it's also the process combined with the system that's really reaping the benefits.

Great. Thank you.

Yeah. You're welcome.

Your next question comes from Greg Kitt with Pinnacle Family. Please go ahead.

Hi, Perry, Dan, and Brett. Congratulations on the good quarter that showed improvement.

Thanks, Greg.

Thanks, Greg.

The first question, kind of an open-ended question. For you, Perry. It says, we talked to I heard you on your baseball inning analogy. Maybe if I could approach it differently, how would you rank where you think the company was from a commercial execution and then operational execution standpoint when you came in? You clearly, were some opportunities to improve. And then where do you think it is? If you were to rate it out of 10, are you operational? Operationally, it seemed like there were more issues than on the commercial side because you were winning business. But we'd love to hear how you think the company is doing right now and how much more opportunity there is to improve.

Yeah. Greg, you always ask good questions. Appreciate that. You know, I don't really wanna comment too much on the past. I'd rather focus on, you know, the improvements. I mean, we got back to the blocking and tackling and the fundamentals of this business. My, you know, suspicion is we probably lost a little focus on those things we're going, you know, fairly well. And so we got back to blocking and tackling, clearly defining processes, putting KPIs in place. That is something that we didn't have before. So, you know, whenever you're running an operation, you should always know if you're operating within control parameters or not. Because it's so important to be able to be nimble and to flex and intervene when needed. And I don't think we had that visibility before. So, you know, I'm not gonna give us a rating of where we were before, but I think we are operating better than we ever have. On a scale of one to 10, I'd probably give us, you know, a score of six to seven. So there's still opportunity for us to do better. You know, this is a tough business. It never stops coming at you. You know, we've got vendors on one side. We've got customers on the other. And we've got, you know, incredible amounts of data flowing through this business. So, you know, I think once we start putting the individual KPIs on all of our team members, I expect that we'll see some efficiencies and performance improvements there. So I think six to seven is fair. For now.

Thank you. And then I missed part of Brett's comment. What did you say about SG&A? Did you say it would be down sequentially from Q3 or down year over year?

Yes, Greg. I was saying down sequentially from Q3. You know, we saw some pretty significant reductions in the first quarter from a year-over-year perspective. As we right-size the business. A lot of the focus has been on early on right-sizing and then, of course, we had the SG&A related to the divested mall business as well. Where we saw reductions. Saw a little bit of improvement in Q3, but I'd say mostly flat. But we do continue to see improvements, some additional cost reductions in Q4 as well.

Okay. Thank you. That's helpful. On the data subscription opportunity that you talked about, for customers to access the portal, do you think that's something that can be a million dollars or more over time? Or is this maybe not necessarily that big?

Greg, I really don't know. I mean, that's why I said it's, you know, we envision. It's kind of a vision of ours. What we do know is we have a lot of data. And, you know, with the onset of AI, I mean, who knows what our data is really worth, but we think there's value there. And one methodology could be to, you know, charge a subscription for access to that data, but we're, you know, we're not there yet. And I couldn't begin to size that opportunity. It was just a little peek into what we're thinking about as we move forward. But we're not there yet.

Okay. Thank you. And then on AR, you know, thank you for all your hard work to get DSOs down into it's the math I was looking at was like, seventy-five days. So really good improvement. How much of that was from maybe two-part question. In the I think on the last call, you talked about getting the percentage of customers that are billed current. To, like, 75%. That was sort of the first part. And then the second part, how do I think about that today? And then the second part of the question was, was this like, one-time why? Because maybe there are opportunities to bill customers more frequently. Or do you see this kind of from here being smaller continuous improvements, maybe a day or two every quarter getting back into the mid-sixties.

Yeah. Let me start. Brett, you jump in too. I think our calculators may be a couple of days better than yours, Greg. But, you know, I think that this is absolutely something that we believe will improve. So regarding the billing 75%, I don't really remember precisely what that comment was, but we are now billing the majority of our clients on time. However, there's always a billing tale. So we need to get the invoices in from our vendors in order to process it and then bill our customer. So we are working diligently to improve the timeline it takes to get some of those bills. So we can bill even faster. So we now know that we are billing current for all the invoices that come in on time. Which is an improvement from what we were doing before. Our focus now is to reduce the tail. So for those bills that aren't coming in in time for us to bill, we're focused on getting those in so we can bill on time. So we continue to make great progress there. Our exception processing continues to stabilize. We're paying our haulers to term, which is really important because, you know, I would tell you in the past, we were probably paying a little ahead. Just to ensure that we weren't receiving service disruptions. And, you know, that's another significant point of improvement is our service disruptions are at the lowest point in history. And each one of those disruptions comes with associated costs. You know, there are late fees and other fees that you can't bill the customer. And we don't really see much of those anymore. So that also flows right through to the business. And Brett, I don't know if you have anything to add to that.

Yeah. I'll just, I mean, one, agree on the team's been working really hard. So we're really proud of the performance. It's something we've been seeing the improvement on our side for a while. It needed to come through. And show through the financials, I'm really excited that we finally that and, you know, have everybody's hard work pay off. To your question about, you know, the opportunity ahead, you know, this was obviously a pretty big jump. I wouldn't expect to make these types of leaps down, but we do expect to continue to make progress in Q4 and into the year. There's still some opportunities. This wasn't one of those quarters where all the things went right that we needed to go right to materialize. There was some meat left on the bone, still some opportunity there. So, you know, to Perry's point, we continue to try to build faster. We still got some opportunities on the collection side to get our clients tightened up a little bit more there. And then on the payment side, we're getting more efficient. So really pleased with the progress. This is a model that is built to generate cash and we've been more consistent with that. In the last two quarters and continue to have high expectations going forward.

Thank you. If I can maybe sneak in two more. One was it looks like your Monroe debt is a little more than five points more expensive than the PNC line. Would you if you could I don't know if you can. Would you prepay some amount of that 5 or $10 million to use more of your PNC line because you could save, you know, if you prepaid $10 million, you could save half a million dollars a year in interest. Or do you like having the flexibility to draw on the revolver if you need it?

Well, it's a balance. We've created a lot more room. With the recent cash generation. So that's certainly positive. Regardless of what we wanna do though, we are restricted right now through Q1 is the earliest we could pay down. We have to hit some metrics. That the banks have established to be able to make that switch that you talked about. But certainly, I'd like to pay down more expensive debt as much as possible.

Okay. And then my last thing was, I think last year, when something that was unusual for this business is Quest never really lost any material customers, and some of that was RWS related and then some of it was acquisition related. But as I start to think about next year, how do you feel about the renewals that you know that are coming? And how are you positioning to make sure that you're in front of those customers, you know, ahead of time today?

Yeah. I think we're in a really good position, Greg. This is Perry. You know, we're back to, you know, attrition at historically low levels. We're really, you know, we started by vastly improving the relationships we had with our vendors because I would argue that it needed improving. We're gonna put a whole new refocus on relationship building and process improvement with our customers. Our customers are very happy with our program, with our execution. So, you know, we're developing a new plan to begin the renewal process for contracts earlier than we have in the past. You know, our intention is to get contracts renewed well before the contract expires. Which maintains leverage for us. So, yeah, I think we've leveled off and our attrition will be, you know, back to historical low levels.

Thank you very much for your hard work.

You're welcome.

Your next question comes from Andrew Heffer with Pinnacle Capital. Please go ahead.

Yeah. I was wondering if you could talk a little bit more about, you know, the debt reduction. You guys are generating some significant sequential cash flow and what your goals for 2026 are and like, you just said the quarter one.

Hey. This is Brett. Yeah. Just same follow-up, kinda following up on what we discussed with Greg. You know, we continue to look to pay down debt. Preference would be to pay down the more expensive. We can't do that until after Q1 at the earliest because of some of the restrictions. Currently in place. But we're excited about the cash generation. That's one of our stated short-term goals. Medium-term goals is to continue to pay down debt aggressively. We want to be able to fund, continue to fund certain strategic initiatives to help grow the business and create operating leverage with the business, and we'll continue to do that. In conjunction with paying down debt aggressively.

Do you have any goals set for 2026? To where you want your operational leverage?

No. We haven't talked about that externally.

Alright. Thank you.

Yeah.

Thank you so much. There are no further questions at this time. I'm pleased to turn the call back over to Perry Moss.

Great. Thank you, operator. We've made significant improvements in the past two quarters during a very challenging macroeconomic environment. But we still have work to do. As I said in my comments today, we're focusing on individual KPIs and performance goals to ensure our team members are operating at optimal levels. We plan to drive incremental efficiency in our business. Our mission is continuous improvement in everything we do. So with that, thank you all for joining this afternoon. We appreciate your continued support and interest in Quest. And we look forward to updating you all next quarter. Thank you.