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Edited Transcript of QRHC earnings conference call or presentation 14-Aug-19 9:00pm GMT

Q2 2019 Quest Resource Holding Corp Earnings Call

SCOTTSDALE Aug 20, 2019 (Thomson StreetEvents) -- Edited Transcript of Quest Resource Holding Corp earnings conference call or presentation Wednesday, August 14, 2019 at 9:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Laurie L. Latham

Quest Resource Holding Corporation - CFO, Senior VP & Secretary

* S. Ray Hatch

Quest Resource Holding Corporation - President, CEO & Director

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Conference Call Participants

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* George Melas-Kyriazi

MKH Management Company, LLC - President

* Gerard J. Sweeney

Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst

* Sameer S. Joshi

H.C. Wainwright & Co, LLC, Research Division - Associate

* David M. Mossberg

Three Part Advisors, LLC - Founder and CEO

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Presentation

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Operator [1]

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Good day, and welcome to the Quest Resource Holding Corporation Second Quarter 2019 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Investor Relations representative, David -- Dave Mossberg. Please go ahead, sir.

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David M. Mossberg, Three Part Advisors, LLC - Founder and CEO [2]

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Thank you, Eduardo. And thank you, everyone, for joining us on the call.

Before we begin, I'd like to remind everyone that this conference call may contain predictions, estimates and other forward-looking statements regarding future events or future performance of Quest. Use of words like anticipate, project, estimate, expect, intend, believe and other similar expressions are intended to identify those forward-looking statements.

Forward-looking statements also include statements regarding Quest's future opportunities for growth; Quest's expectations for revenue, margins, and profitability in future periods; Quest's industry position and industry trends; Quest's prospects, outlook and business strategies going forward; and Quest's belief regarding progress and timing. Such forward-looking statements are based on Quest's current expectations, estimates, projections, beliefs, and assumptions and involve significant risks and uncertainties.

Actual events or Quest results could differ materially from those discussed in the forward-looking statements as a result of various factors, including changing market trends, reducing demand and the competitive nature of Quest's industries discussed in greater detail on Quest's securities and filings with the Securities and Exchange Commission, including its report on Form 10-K for the year ended December 31, 2018.

You are cautioned not to place undue reliance on such statements and to consult our SEC filings for additional risks and uncertainties. You can find those documents on Quest's website at qrhc.com (sic) [investors.qhrc.com]. Quest's forward-looking statements are presented as of the date made, and we disclaim any duty to update such statements unless required to do so by law.

In addition, in this call, we may include industry and market data and other statistical information as well as Quest's observations and views about industry conditions and developments. The data and information are based on Quest's estimates, independent publications, government publications and reports by market research firms and other sources.

Although Quest believes these sources are reliable and their data and other information are accurate, we caution that Quest does not independently verify the reliability of these sources or the accuracy of the information. In addition, Quest's observations and view about its industry conditions and developments are its own and may not be supported or agreed with by other industry participants or observers.

Certain non-GAAP financial measures will be discussed 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 to be useful for 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 on this call will be on a non-GAAP basis. Full reconciliations of non-GAAP to GAAP financial measures are included in today's earnings release.

And with all that said, I'll now turn the call over to Ray Hatch, President and Chief Executive Officer.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [3]

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Thank you, Dave, and welcome to everyone on our call to discuss our second quarter financial results.

Joining me today is Laurie Latham, our Senior Vice President, Chief Financial Officer.

We are pleased with the trajectory of the business and the strength of our customer relationships. We had good growth in gross profit dollars and adjusted EBITDA in the second quarter. In fact, both gross profit and adjusted EBITDA were records for the company.

Given the nature of our business requires that we handle multiple waste streams for our customers, the revenue mix changes in the quarter sometimes make comparisons on the top line difficult. This was certainly the case in the second quarter. I'll ask Laurie to give some more color on that in a moment, but more importantly, we are and we'll continue to focus on managing the business to grow gross profit, and this is and will continue to be the key metric we use to gauge our success.

Based on gross profit results, we had a record second quarter and year-to-date financial performance. Our strategy of focusing on industries, companies and waste streams while we provide the greatest value-add is showing progress. Our pipeline of profitable opportunities continues to grow. And among other new business, we recently had 2 wins in the food-service vertical. The one we are highlighting today is Buffalo Wild Wings, which we believe we're positioned to provide significant value going forward.

Before I go into more detail, I'll turn the call over to Laurie to review the financials. Laurie?

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [4]

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Thank you, Ray, and good afternoon to everyone on the call. Second quarter revenue was $25.4 million, a decrease of 8.9% compared with the second quarter last year. Year-to-date revenue was $52.1 million, which was relatively even versus the prior year.

There were 2 primary factors that affected our year-over-year second quarter revenue comparison. These factors had negligible net impact on gross profit contribution and comparison. The first related to the impact of a slowdown in production at one of our largest industrial customers, which affected a lower-margin waste stream. This accounted for about half of our Q2 decrease compared with Q2 in 2018. The amount of revenue we derived from this customer from this waste stream is likely to continue to be subject to the same unpredictable Q2 macro factors and may fluctuate from quarter-to-quarter but should continue to have a negligible impact to our gross profit dollars.

With less of this high-volume, low-margin waste stream in the mix during Q2, our Q2 gross margin increased to a record 18.7%. The other primary factor impacting Q2 revenue comparison was related to our cycling out of a low-margin service with another customer during the fourth quarter 2018. This revenue reduction did not materially impact the gross profit comparison.

Moving down the income statement. As Ray indicated, second quarter gross profit was a record, increasing 7.3% year-over-year to $4.7 million. Year-to-date gross profit was $9.3 million, a 16.5% growth year-over-year. The improvement in gross profit was due to the combination of increased services from both our continuing and new customer base along with lower cost of certain subcontracted services.

As I said earlier, gross margin for the second quarter was 18.7% of revenue, a quarterly record and a 280 basis point improvement compared with Q2 last year. The improvements in gross margin over the last several quarters was primarily due to the service mix shift in our business and lower cost of certain subcontracted services.

Our gross margin percentage has been above our targeted range for the last several quarters, and we believe that it should remain elevated in the second half of the year due to year-over-year service mix changes. Also as we have said previously, gross margin can vary from quarter-to-quarter depending on our revenue mix and other factors. Going forward, we expect to grow gross profit dollars and generate gross margins within our targeted range of low- to mid-teens.

Second quarter operating expenses decreased 6.3% year-over-year to $4.6 million. Year-to-date operating expenses decreased 5.2% year-over-year to $9.1 million. The decrease in operating expenses primarily relates to lower amortization expense as certain intangible assets were fully amortized as of July 2018. The lower amortization expense was partially offset by an increase in SG&A.

SG&A expenses increased 9% during the second quarter and 10.6% year-to-date. Approximately $248,000 or about 30% of the year-to-date increase was for professional fees and expenses related to the selling stockholder transactions that closed in April 2019 with the remaining increase related to labor and other SG&A expenses. In particular, the increase in labor and related expenses reflected reduced headcount levels in Q2 2018 due to open positions, which we filled during 2019.

Net income per basic and diluted share was breakeven for the second quarter of 2019 compared with a net loss per basic and diluted share of $0.04 for the second quarter of 2018. Year-to-date net loss per share improved from a loss of $0.12 last year to $0.01 loss per share this year, which included $248,000 or $0.02 per share of expenses related to the April 2019 selling stockholder transactions.

Our adjusted EBITDA was a record for the second quarter, increasing 5.8% to $825,000 versus last year. Year-to-date adjusted EBITDA increased 81.3% to $1.6 million. The improvement in adjusted EBITDA reflects the operating leverage in our business, which should allow growth in adjusted EBITDA and profitability at a faster pace than the top line as we move forward.

We compute adjusted EBITDA, which is non-GAAP financial measure, to provide additional insight into our financial performance. I refer you to the table in today's press release for a reconciliation to GAAP.

Turning to our balance sheet, our cash balance was $2.1 million at the end of the quarter, an increase of approximately $1 million compared with the second quarter of 2018 and relatively unchanged compared to the first quarter of this year. We had $4.9 million drawn on our $20 million credit facility, down $300,000 from the end of the first quarter.

So at this time, I'll turn the call back to Ray, who will discuss our initiatives and outlook.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [5]

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Thanks, Laurie. Before I review our progress on our strategies, I want to take a moment to point out a couple of recent changes the Board made to our governance policies.

Our commitment to align management and the Board with shareholder interest is reflected in our latest proxy statement. We approached stock ownership guidelines that align long-term interest of our executive officers and the members of the board with our stockholders and introduced a derivative trading policy and approved an updated clawback policy for incentive comp.

This year, we had changes in 2 of our Board seats, including our Chairman, reduced the size of the Board from 9 to 8 and fundamentally changed to broaden our investor base. Both the Board and management are committed to Quest and share a common vision for the significant opportunities to grow and enhance shareholder value.

Moving on to the progress of our -- on our strategic initiatives. Progress was evident in the second quarter record performance of gross profit and adjusted EBITDA. In addition, I'm encouraged by several recent wins and the increasing traction we are gaining in our sales efforts. Late in the second quarter, we added Buffalo Wild Wings as a customer. Under the multiyear agreement, we'll manage the waste and recycling for over 500 Buffalo Wild Wings corporate restaurants located throughout the U.S. and Canada. You may have seen the release regarding this customer today.

A few weeks ago, we secured a similar contract with another restaurant group with hundreds of locations nationally. Both are wins against incumbent traditional waste service providers. These wins illustrate how our value proposition is truly differentiated. Our asset-light model provides greater flexibility in terms of finding the best solutions to meet both the financial and sustainability goals of our customers.

The factors cited by our customers in these wins included, one, Quest saves the customer money. We optimize the customer's waste streams and offer significant savings over the incumbent, who made money by disposing waste in their landfills. Secondly, Quest offers a full breadth of services and capabilities. We're a multifaceted provider allowing for multiple recycling options from food waste to construction materials.

Third, Quest offers a comprehensive and interactive data reporting. Buffalo Wild Wings, as an example, can now more easily report sustainability improvement to its customers, investors, employees and other stakeholders and also gain valuable visibility into its waste streams by location, which can be used to take action to improve operations.

And finally, we differentiate by delivering superior levels of customer service. This is something I probably don't talk about enough, but our customer-first culture is really a critical factor in how we win and retain customers.

Let me read a recent quote from one of those customers. "I did not truly know how good the customer service level would be. My Quest account management team is stellar and extremely responsive. I have a hard time keeping up with them when they need something from me. It's a great problem to have."

This is the type of comment I here frequently and I'm very proud of our team and want to thank them all for doing such a great job. These new customers enhance our presence as a value-added service provider in the food-service vertical. This is a large and relatively untapped market for us, and we're clearly gaining traction there. It's a good demonstration of our strategy of developing our presence in industries with complex waste streams where we can bring a differentiated service offering.

In the process of focusing on new market verticals, we are significantly diversifying our exposure to specific markets. Three years ago, much of our revenue was driven by -- from big-box retailers and grocery store chains. Over the last 3 years, automotive service, industrial end markets have grown to become a larger part of our mix. And recent growth in our food manufacturing and the food-service verticals have further diversified our end-market mix. Our national multiline service profile makes us a good fit for these markets. And we believe we're well positioned to garner more business with existing and new customers.

Business growth is expected from both existing and new customers. We have a large opportunity to grow within our existing customer base. The longer we work with our customers, the more opportunity there is for us to add additional lines, to find additional value for their waste streams, and to find more ways to divert waste from landfills. Over time, the strategic nature of our collaboration with our customers grows, which directly helps us to build and grow long-term customer relationships.

I want to give you a few recent examples of how we're growing with our existing customers. For one customer, we found a new use for one of their waste streams. By developing an alternative use and a logistics model to support its disposal, our customer decreased their costs by 30% from this waste stream. In another, we supported another industrial customer by expanding one of our services to their Canadian locations. A final example is we performed several special projects, adding new service lines for national customers in the automotive service, retail and grocery market verticals.

Moving on, I want to talk about our continued investment in technology. We are continuously enhancing our customer-facing data portal. Our technology gives customers important insight into their operations, helps them with regulatory compliance on a variety of materials and provides them a common dataset to be used in external and internal sustainability reporting.

Here is an example of how our technology is providing value-add to our customers. We used our proprietary analytic tool to correlate sales by stores with the waste going out the back door for a long-term retail customer.

Using our database benchmark tool, we created a more efficient pickup frequency to their specific waste streams and volumes. There's approximately an 8% cost savings for our customer by implementing this more efficient model. However -- and this is an important bit to understand, many providers must focus on utilizing the rolling stock and landfills and have little incentive to help customers lower cost in this way. In our asset-light model, we are directly aligned with our customers to help them save cost in different ways from landfills. We feel this is one of the primary factors differentiating our model. Let me reemphasize our strategy of growing existing relationships, adding attractive strategic customers, providing a portfolio of differentiated offerings, delivering high service levels and utilizing technology to enhance our customers' compliance reporting capability is showing solid success.

Before I open the call to questions, I want to reiterate our outlook for continued growth in gross profit and adjusted EBITDA in 2019. Our top line revenue will continue to be subject to similar factors that affected Q2, but we expect to meet our profitability goals for 2019, which included growth of gross profit and adjusted EBITDA in excess of 10%.

We're excited about our prospects, outlook and business opportunities going forward. We believe our stronger foundation allows for a sustainable business that will consistently grow our revenue, profitability, and more importantly, long-term shareholder value. I look forward to keeping you updated on our progress.

We now like the operator provide instructions on how listeners can queue up for questions. Operator?

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Questions and Answers

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Operator [1]

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(Operator Instructions) We'll now take our first question from Gerry Sweeney at Roth Capital.

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Gerard J. Sweeney, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [2]

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So I wanted to maybe touch a little bit on the Buffalo Wild Wings and the other restaurant win. Just curious as to maybe how long this process took or maybe even how challenging it was for you to sort of present your model versus the incumbent or the more traditional waste management company. Obviously, we are looking at revenue. I think you got a great product and just trying to figure out timing in terms of how long the process takes, how challenging it is sort of being the new kid on the block and demonstrating your value. Maybe if you can dig into that a little bit, I think that would be helpful.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [3]

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Yes, happy to, Gerry. As we've talked about before, it's not a -- it's a relatively complicated sale because we're bringing a multifaceted solution to a client that's, in many cases, typically, has only got one element of solution. So the time frame on this is approximately 6 months. It's a long -- relatively long sales cycle, but getting the opportunity to be able to show the -- just the holistic approach to their waste program and dollar impact and also the other impacts we talk about. Take a while, but once you are able to establish that, we're really excited about all the value we're going to be able to show them going forward versus what they had before.

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Gerard J. Sweeney, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [4]

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And I guess the follow-up would be to was that how does your pipeline look now? And have you lost any contract where you just haven't been able to either convince them of value or maybe you weren't as competitive as you thought?

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [5]

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I mean, I guess, there's always situations with prospects where price is the primary function. They're not willing to look at a holistic approach to their waste streams. Those are challenging for us, and similarly we run into those. In our pipeline, on the front side, we'll have a number of those, but they don't usually make it towards the end.

But our pipeline, actually, I think the evidence of having these wins cross over into the contract stage is evidence that it's moving to the right, if you will. We've really started putting more and more in there. I guess the fact is, I feel good about our pipeline. It's lumpy how it moves through sometimes. It's nice to be able to report some wins, and we look forward to having more as we go forward. So that tells you I think that there is a number in the nearer stage of the pipeline. So we are excited about it.

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Gerard J. Sweeney, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [6]

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Okay. I appreciate that. And one final question, I apologize on this one. You talked about lower-margin, I guess, higher-volume waste stream coming -- not coming out but maybe slowing down in the quarter from one of your existing customers. Any more detail you can give around that? Generally speaking, hearing that sort of higher-volume lower-margin business would almost be a precursor to maybe some other slowing down other business in general, but I'm not sure if that exactly is going to happen just not knowing who it is, how it operates, et cetera.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [7]

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Yes, it's industrial client. So the commodity is that it was his -- but without going into detail, is high revenue, low margin. And so that's why you see -- still see the growth and I think Laurie said negligible impact on the gross profit line. So that tells you the story.

But as far as our overall business, yes, actually, I would say there are some macros that are affecting them right now that aren't great. And I can tell you, there's a couple -- there are some trade that you are aware of them, actually. There's some trade activity going on out there that has had a negative effect depending on your sector, and these guys are in that sector. And there's also -- along with the tariffs, but there's also some flooding in some of the agricultural zones that have impacted them near term.

But we do expect and continue to expect growth from this customer. It just had -- it had some quarter-over-quarter impact that was negative. And so, I'm trying to -- your question was, can I give you more color on it? And I think that's it. But as far as the overall business, our gross profit dollars are growing with it still. Even with that downturn you saw, the gross profit dollars with that client group, which kind of goes back to why we stress gross profit dollars as our measure. So I think we are in good shape there, but yes, there's -- we have some clients that time some of these factors. External factors have a negative impact, and it sure happened to these guys.

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Gerard J. Sweeney, Roth Capital Partners, LLC, Research Division - MD & Senior Research Analyst [8]

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Got it. Okay. No, I appreciate it. And I think it was a nice, solid quarter. Congrats on the 2 wins. That was great to see as well.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [9]

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Thank you, Gerry.

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Operator [10]

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We'll now take our next question from Sameer Joshi from H.C. Wainwright.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [11]

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Just a follow-up on Gerry's questions. The Buffalo Wild Wings contract, the 500 restaurant locations and the other one with hundreds of locations, is there going to be a phased deployment of services there? Or is it all going to be like starting immediately?

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [12]

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Did you -- are you...

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [13]

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Is it going to be a fast deployment.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [14]

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Yes, I'm sorry.

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [15]

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Is that right, Sameer?

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [16]

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Yes.

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [17]

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Is what he's asking about.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [18]

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Okay.

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [19]

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So well, Buffalo Wild Wings, yes, we're in the field with them already. So we are there and operating.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [20]

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Fully deployed.

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [21]

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And the other one is -- well, these adds or more recent. And as we've mentioned before, those usually take 60 to 90 days, but we are working out the details on that, but it is relatively soon, and we expect it this year.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [22]

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Yes, and to emphasize that point, I know I talk about our business model a lot, but this is a key point of emphasis and opportunity since we don't have to state-by-state or location-by-location with something like this. Our operations team can do an implementation and a national rollout in a matter of all at one time in just a couple months.

So since we don't have to deploy equipment, we're able to do that. So we anticipate when we start the service with the second one -- we've already done it on the first one, we'll do all the units at the same time.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [23]

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Understood. And what is the size of these contracts? In other words, will these 2 contracts replace the 2 low-margin customers that you are facing problems with?

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [24]

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Well, the size of the contract -- yes, we probably don't want to be specific, but we can say -- what was the phrase we came up with on that?

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [25]

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So this is one of our more significant contracts that's in the -- we're expecting it in the millions first of all.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [26]

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In multimillions.

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [27]

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Yes.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [28]

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Okay. We'll leave it. I know that's a little broad, but that's probably as tight as we can get, Sameer, on that. And what was the second part of your question?

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [29]

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Yes -- no, no. It was -- multimillion is a good enough answer for me then. In terms of -- over the last 2 years, we have seen seasonally the third quarter is sort of the weakest. Is that going to be true this year as well? And what are the reasons for that?

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [30]

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Hang on, Sameer. We are pulling out some paperwork here.

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [31]

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I don't know if it's always the third quarter, but we do have impact because of holidays, really depends on the mix, and it also depends on the number of actual service days that occur in a quarter. So some quarters, depending on how the calendar falls on the Monday through Friday schedules. Because of the large volume of business we do, that could have impact. So I don't know if we could say we're expecting a similar quarter as we have last year, but we do have some fluctuations depending on the mix and the volume and the number of service days, all those play into what our expectations are.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [32]

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Understood. Just a couple of bookkeeping questions. The SG&A has been high for the last 2 quarters, around $4.2 million. I know there were some extraordinary or onetime charges, but should we expect SG&A to be in the same $4 million to $4.2 million going forward per quarter?

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [33]

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Yes, we have actually talked about this in the past, and it will range between like $4 million to $4.2 million, and we had that in Q3 last year, Q4 sometimes had some year-end adjustments that are in our favor, so sometimes, it is a little below that. But I would say, yes, it's been pretty even. You can see that it's comparable to Q1, our level, and that's sort of the insight I can give on, on that particular item.

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Sameer S. Joshi, H.C. Wainwright & Co, LLC, Research Division - Associate [34]

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Okay. And then the last one. On PP&D, I see a increase, and I'm guessing it is for the operating lease liability. Can you confirm that?

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [35]

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Yes, it is. We have about, on the books at June 30, we have $1.9 million in the right-of-use, and there's $2 million in lease liability down in the liability section between the -- yes. That's correct.

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Operator [36]

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It appears there are no further questions at this time. I'd like to turn the conference back -- oh, my apologies. There seems to be another question from George Melas from MKH Management. Would you like to take the question?

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David M. Mossberg, Three Part Advisors, LLC - Founder and CEO [37]

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Yes.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [38]

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Sure.

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George Melas-Kyriazi, MKH Management Company, LLC - President [39]

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Ray and Laurie, just an additional question on Buffalo Wild Wings. You replaced an incumbent, but did you also consolidate a number of providers? Or did you primarily replace a single incumbent?

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [40]

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What?

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [41]

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It was more than one.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [42]

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More than one provider?

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [43]

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Yes, that we replaced.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [44]

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Okay. But the key thing is there we're going to end up -- part of the waste streams were not being recycled. We're going to create an environment where they have -- their waste stream is going to be diversified out and, previously, I believe the vast majority of which was just going to landfill. So yes, they have one provider, and they are going to have numerous more services than they had in the past because that's -- we have a broader range of opportunities for that.

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George Melas-Kyriazi, MKH Management Company, LLC - President [45]

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Okay. I'm not sure I made my question clear, but did you consolidate several service providers there? Or was it just you replaced one? And you're going to do -- you're going to handle their waste differently?

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [46]

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Okay. We replaced one -- and we'll just -- okay. And then we -- so basically, we didn't have to add numerous providers. They did have several other providers, so there was some consolidation as well. A lot of times we consolidate a lot more than that. In this case, they had a large traditional waste hauler. They had national coverage for the majority of what they had.

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George Melas-Kyriazi, MKH Management Company, LLC - President [47]

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Okay. Great. And great, that's helpful. And then, did you have any 10% customers in the quarter?

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [48]

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The same 3 that we -- at the end of the year, we talked about having 3 customers that were in excess of 10%, and they remain the same.

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George Melas-Kyriazi, MKH Management Company, LLC - President [49]

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Okay. And can you say, Laurie, how much those 3 customers were as a percentage of sales?

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Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [50]

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No. We just know that each one of those 3 is in excess of 10%, and then the -- I think the total amount that we had is close to somewhere around 35%, 40%, I think, was in our 10-K.

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Operator [51]

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At this time, there are no further questions. I'd like to turn the conference back to Ray Hatch for any additional closing comments. Please, go ahead.

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S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [52]

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Thank you, operator. I do want to close. First, I want to thank all of our investors and supporters, and thanks, everybody, on the call for your interest in Quest. We continue to evolve and -- toward our focus on profitability and growing gross profit and bringing extra solutions, additional better solutions hopefully to the clients.

And I want to thank our associates at Quest. Our employees, they work so hard to create that opportunity for us to be able to retain, grow and win new client. So thanks for everybody. We're excited about where we are. We're excited about the future. We continue to find ways to generate more profitability and value for our clients in the marketplace. So all that hopefully adds up to something that's going to be great as we move forward.

So that's all I have, operator. Thanks, everybody.

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Operator [53]

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That concludes today's call. Thank you for your participation. You may now disconnect.