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Quest Resource Holding Corporation Reports Third Quarter 2024 Financial Results
New client onboarding progressing as expected, with third-quarter revenue run rate from new client wins secured during 2024 achieving approximately 60% of expected fully ramped run rate
New automated vendor management system is demonstrating increased efficiencies and improved service levels but has temporarily resulted in higher-than-expected costs in support of the transition
Pace of new client wins continues with significant new client wins in food distribution and automotive service end markets
THE COLONY, Texas, Nov. 07, 2024 (GLOBE NEWSWIRE) -- Quest Resource Holding Corporation (Nasdaq: QRHC) (“Quest” or the “Company”), a national leader in environmental waste and recycling services, today announced financial results for the third quarter ended September 30, 2024.
“We were very active during the third quarter: securing significant new client wins, onboarding a record number of new clients, and expanding engagements with existing ones. New client onboarding, combined with strong demand from existing clients, added approximately $16 million in revenue during the third quarter. However, growth was partially offset by weaker-than-expected conditions at certain clients in our industrial end markets and isolated client attrition. In addition, during the third quarter, we implemented our vendor management system, which temporarily caused a significantly higher than expected increase in cost of revenue and incremental SG&A in support of the transition,” said S. Ray Hatch, President and Chief Executive Officer of Quest.
“As a result of the hard work of our team, we have received high marks from new clients, several of which have already been reference clients, helping us to continue to grow our pipeline of new business. In addition, we have made significant progress and are in the final stages of selecting lenders to refinance our debt. Based on initial proposals, the refinancing is on track to be completed by the end of the year, and we expect both a significant reduction in interest expense and improved terms. Based on the continued ramp of new business and increasing efficiencies, we expect to show year-over-year increases in revenue and profitability during the fourth quarter. During 2025 and beyond, we expect to continue to drive significant growth from new clients and improve profitability from efficiency gains and earnings leverage.”
Third Quarter 2024 Highlights
Revenue was $72.8 million, a 3.3% increase compared with the third quarter of 2023.
Gross profit was $11.7 million, a 5.9% decrease compared with the third quarter of 2023.
Gross margin was 16.1% of revenue compared with 17.7% for the third quarter of 2023.
GAAP net loss was $(3.4) million, compared with GAAP net loss of $(2.1) million during the third quarter of 2023.
GAAP net loss per basic and diluted share attributable to common stockholders was $(0.16), compared with $(0.10) for the third quarter of 2023.
Adjusted EBITDA was $2.5 million, compared with $3.7 million during the third quarter of 2023.
Adjusted net loss per diluted share was $(0.06), compared with adjusted net income of $0.02 per diluted share during the third quarter of 2023.
Year-to-Date 2024 Highlights (September 30, 2024)
Revenue was $218.6 million, a 0.2% decrease compared with the same period of 2023.
Gross profit was $39.3 million, a 1.8% increase compared with the same period of 2023.
Gross margin was 18.0% of revenue compared with 17.6% during the same period of 2023.
GAAP net loss was $(5.6) million, compared with GAAP net loss of $(5.0) million during the same period of 2023.
GAAP net loss per basic and diluted share attributable to common stockholders was $(0.27), compared with $(0.25) during the same period of 2023.
Year-to-date Adjusted EBITDA was $12.8 million compared to $12.7 million during the same period of 2023.
Adjusted net income per diluted share was $0.05, compared with $0.12 per diluted share during the same period of 2023.
Recent Highlights
Secured a new client in the food distribution business that is expected to produce seven figures of annual revenue.
Secured a new automotive service client win that is expected to produce seven figures of annual revenue.
Completed the integration of automated accounts payable processing system with solid waste vendors, processing approximately 70% of invoices with zero human interaction and 100% of invoices audited at the service line-item level according to contractual terms.
Progress in refinancing of existing debt, on track for completion by the end of 2024 with significantly better terms.
Third Quarter 2024 Earnings Conference Call and Webcast
Quest will host a conference call on Thursday, November 7, 2024, at 5:00 PM ET, to review the financial results for the third quarter ended September 30, 2024. To participate, dial 1-800-717-1738 or 1-646-307-1865. The conference call, which may include forward-looking statements, is also being webcast and is available via the investor relations section of Quest’s website at https://investors.qrhc.com/investors. A replay of the webcast will be archived on Quest’s investor relations website for 90 days.
About Quest Resource Holding Corporation
Quest is a national provider of waste and recycling services that enable larger businesses to excel in achieving their environmental and sustainability goals and responsibilities. Quest delivers focused expertise across multiple industry sectors to build single-source, client-specific solutions that generate quantifiable business and sustainability results. Addressing a wide variety of waste streams and recyclables, Quest provides information and data that tracks and reports the environmental results of Quest’s services, gives actionable data to improve business operations, and enables Quest’s clients to excel in their business and sustainability responsibilities. For more information, visit www.qrhc.com.
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
In this press release, non-GAAP financial measures, “Adjusted EBITDA” and “Adjusted Net Income (Loss)” are presented. From time to time, Quest considers and uses these supplemental measures of operating performance in order to provide an improved understanding of underlying performance trends. Quest believes it is useful to review, as applicable, both (1) GAAP measures that include (i) depreciation and amortization, (ii) interest expense, (iii) stock-based compensation expense, (iv) income tax expense, and (v) certain other adjustments, and (2) non-GAAP measures that exclude such items. Quest presents these non-GAAP measures because it considers it an important supplemental measure of Quest’s performance. Quest’s definition of these adjusted financial measures may differ from similarly named measures used by others. Quest believes these measures facilitate operating performance comparisons from period to period by eliminating potential differences caused by the existence and timing of certain expense items that would not otherwise be apparent on a GAAP basis. These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for the Company’s GAAP measures. (See attached tables “Reconciliation of Net Loss to Adjusted EBITDA” and “Adjusted Net Income Per Share”).
Safe Harbor Statement
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which provides a “safe harbor” for such statements in certain circumstances. The forward-looking statements include, but are not limited to, our expectation that we will show year-over-year increases in revenue and profitability during the fourth quarter, our expectation that we will continue to drive significant growth from new clients and improving profitability from efficiency gains and earnings leverage during 2025 and beyond, our expectation that our new client wins will produce seven figures of annual revenue and our belief that we will be able to refinance our existing debt by the end of 2024 on better terms. Actual events or results could differ materially from those discussed in the forward-looking statements as a result of various factors, including, but not limited to, competition in the environmental services industry, the impact of the current economic environment, the spread of major epidemics (including Coronavirus) and other related uncertainties such as government-imposed travel restrictions, interruptions to supply chains, commodity price fluctuations, extended shut down of businesses, and other factors discussed in greater detail in our filings with the Securities and Exchange Commission (“SEC”), including in our Annual Report on Form 10-K for the year ended December 31, 2023. You are cautioned not to place undue reliance on such statements and to consult our SEC filings for additional risks and uncertainties that may apply to our business and the ownership of our securities. Our forward-looking statements are presented as of the date made, and we disclaim any duty to update such statements unless required by law to do so.
Investor Relations Contact:
Three Part Advisors, LLC Joe Noyons 817.778.8424
Financial Tables Follow
Quest Resource Holding Corporation and Subsidiaries STATEMENTS OF OPERATIONS (Unaudited) (In thousands, except per share amounts)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Revenue
$
72,766
$
70,425
$
218,562
$
219,036
Cost of revenue
61,066
57,995
179,294
180,471
Gross profit
11,700
12,430
39,268
38,565
Selling, general, and administrative
10,273
9,620
29,457
28,250
Depreciation and amortization
2,368
2,342
7,094
7,219
Total operating expenses
12,641
11,962
36,551
35,469
Operating income (loss)
(941
)
468
2,717
3,096
Interest expense
(2,723
)
(2,408
)
(7,807
)
(7,407
)
Loss before taxes
(3,664
)
(1,940
)
(5,090
)
(4,311
)
Income tax expense (benefit)
(278
)
111
465
650
Net loss
$
(3,386
)
$
(2,051
)
$
(5,555
)
$
(4,961
)
Net loss applicable to common stockholders
$
(3,386
)
$
(2,051
)
$
(5,555
)
$
(4,961
)
Net loss per common share:
Basic
$
(0.16
)
$
(0.10
)
$
(0.27
)
$
(0.25
)
Diluted
$
(0.16
)
$
(0.10
)
$
(0.27
)
$
(0.25
)
Weighted average number of common shares outstanding:
Basic
20,666
20,060
20,542
19,985
Diluted
20,666
20,060
20,542
19,985
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA (Unaudited) (In thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Net loss
$
(3,386
)
$
(2,051
)
$
(5,555
)
$
(4,961
)
Depreciation and amortization
2,613
2,438
7,714
7,486
Interest expense
2,723
2,408
7,807
7,407
Stock-based compensation expense
571
289
1,291
950
Acquisition, integration, and related costs
30
374
91
1,026
Other adjustments
261
141
980
172
Income tax expense (benefit)
(278
)
111
465
650
Adjusted EBITDA
$
2,534
$
3,710
$
12,793
$
12,730
ADJUSTED NET INCOME (LOSS) PER SHARE (Unaudited) (In thousands)
Three Months Ended
Nine Months Ended
September 30,
September 30,
2024
2023
2024
2023
Reported net loss (1)
$
(3,386
)
$
(2,051
)
$
(5,555
)
$
(4,961
)
Amortization of intangibles (2)
2,209
2,224
6,650
6,668
Acquisition, integration, and related costs (3)
30
374
91
1,026
Other adjustments (4)
—
2
—
(75
)
Adjusted net income (loss)
$
(1,147
)
$
549
$
1,186
$
2,658
Diluted earnings (loss) per share:
Reported net loss
$
(0.16
)
$
(0.10
)
$
(0.27
)
$
(0.25
)
Adjusted net income (loss)
$
(0.06
)
$
0.02
$
0.05
$
0.12
Weighted average number of common shares outstanding: Diluted (5)
20,666
22,425
22,873
22,218
(1) Applicable to common stockholders (2) Reflects the elimination of non-cash amortization of acquisition-related intangible assets (3) Reflects the add back of acquisition/integration related transaction costs (4) Reflects adjustments to earn-out fair value (5) Reflects adjustment for dilution when adjusted net income is positive
BALANCE SHEETS (In thousands, except per share amounts)
September 30,
December 31,
2024
2023
(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents
$
1,133
$
324
Accounts receivable, less allowance for doubtful accounts of $1,990 and $1,582 as of September 30, 2024 and December 31, 2023, respectively
60,125
58,147
Prepaid expenses and other current assets
3,310
2,142
Total current assets
64,568
60,613
Goodwill
85,828
85,828
Intangible assets, net
20,006
26,052
Property and equipment, net, and other assets
7,753
4,626
Total assets
$
178,155
$
177,119
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities
$
39,947
$
41,296
Other current liabilities
1,434
2,470
Current portion of notes payable
1,159
1,159
Total current liabilities
42,540
44,925
Notes payable, net
71,901
64,638
Other long-term liabilities
946
1,275
Total liabilities
115,387
110,838
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000 shares authorized, no shares issued and outstanding as of September 30, 2024 and December 31, 2023
—
—
Common stock, $0.001 par value, 200,000 shares authorized, 20,464 and 20,161 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively
