Quest Resource Holding Corp Goodwill & Intangibles Disclosure

5. Goodwill and Other Intangible Assets

We compute amortization using the straight-line method over the estimated useful lives of the finite lived intangible assets. The amortization expense related to finite lived intangible assets was approximately $5.1 million and $9.2 million for the years ended December 31, 2025 and 2024, respectively. We reclassified $5.2 million of customer relationships related to a disposal group to assets held for sale at December 31, 2024. See Note 3, Sale of Assets for further discussion.

We have no indefinite-lived intangible assets other than goodwill. Approximately $66.1 million of the goodwill is not deductible for tax purposes, while $15.0 million of goodwill added in the prior years is deductible over its tax-basis life.

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 fully recoverable. Accordingly, we performed an impairment test for the intangible asset using a 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 $1.7 million.

In the second quarter of 2025, we performed a qualitative assessment of factors to determine whether it was necessary to perform the goodwill impairment test. That assessment indicated a triggering event had occurred requiring that we perform additional quantitative assessments. The triggering event was primarily due to the decrease in the Company’s share price during the six months ended June 30, 2025, resulting in a decline in the Company’s market capitalization. Management engaged a third party to perform a series of quantitative assessments utilizing multiple valuation methods. The results of those assessments indicated that the Company’s fair value was in excess of the Company’s book value and, therefore, its goodwill was not impaired as of June 30, 2025.

We performed our annual goodwill impairment analysis in the third quarter of 2024 with no impairment recorded. During the fourth quarter of 2024, we reevaluated goodwill when management identified a disposal group designated as held for sale and assigned $5.2 million of goodwill to the disposal group (see Note 3, Sale of Assets). The remaining goodwill of $81.1 million was assessed at December 31, 2024 for impairment, and later at the time of closing for the sale of assets during the first quarter of 2025, and no impairment was recorded for either period.

In 2024, we recorded an addition to goodwill from the RWS acquisition. The adjustment resulted in a net increase of $0.5 million to both goodwill and accounts payable in 2024.