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Edited Transcript of QRHC.OQ earnings conference call or presentation 16-Nov-20 10:00pm GMT

·28 min read

Q3 2020 Quest Resource Holding Corp Earnings Call SCOTTSDALE Nov 17, 2020 (Thomson StreetEvents) -- Edited Transcript of Quest Resource Holding Corp earnings conference call or presentation Monday, November 16, 2020 at 10:00:00pm GMT TEXT version of Transcript ================================================================================ Corporate Participants ================================================================================ * Laurie L. Latham Quest Resource Holding Corporation - CFO, Senior VP & Secretary * S. Ray Hatch Quest Resource Holding Corporation - President, CEO & Director ================================================================================ Conference Call Participants ================================================================================ * Amit Dayal H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Technology Analyst * George Melas-Kyriazi MKH Management Company, LLC - President * Gerard J. Sweeney ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst * David M. Mossberg Three Part Advisors, LLC - Founder and CEO ================================================================================ Presentation -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- Good day, and welcome to the Quest Resource Holding Corporation's Third Quarter 2020 Earnings Call. Today's conference is being recorded. At this time, I would like to turn the conference over to David Mossberg, Investor Relations. Please go ahead, sir. -------------------------------------------------------------------------------- David M. Mossberg, Three Part Advisors, LLC - Founder and CEO [2] -------------------------------------------------------------------------------- Thank you, Carina, and thank you, everyone, for joining us on the call today. 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 requests. Use of words like anticipate, project, estimate, expect, intend, and other similar expressions are intended to identify those forward-looking statements. Such forward-looking statements are based on Quest's current expectations, estimates and projections, beliefs and assumptions and involve significant risks and uncertainties. Actual events or Quest's results could differ materially from those discussed in forward-looking statements as a result of various factors, which are discussed in greater detail with -- in Quest's filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such statements and to consult our SEC filings for additional risks and uncertainties. Quest 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. In addition, in this call, we may include industry and market data and other statistical information as both 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 resources -- and other sources. Although Quest believes those sources are reliable and the data and other information are accurate, we caution that Quest has not independently verified the reliability of sources or the accuracy of the information. 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 is useful for investors' understanding and the assessment of the company's ongoing core operations and prospects for 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 reconciliations of non-GAAP to GAAP financial measures are included in today's earnings. And with that said, I'll now turn the call over to Ray Hatch, President and Chief Executive Officer. -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [3] -------------------------------------------------------------------------------- Thank you, Dave, and thanks, everyone, for your interest in Quest. We hope that you and your families are healthy and safe, and we appreciate that you've given time -- taken the time to join us to discuss our third quarter results. To start off, I'm happy to report that our business is on an extremely solid footing. That said, we recognize the uncertainty in the current environment and we remain ready to act in the event of any short-term softness in our business. During the third quarter, gross profit dollars improved sequentially from the second quarter. Year-over-year, gross profit dollars decreased by less than 5% as weakness in some of our markets almost entirely offset by strength in the others. We benefited from a flexible cost structure and did a good job controlling cost, which led to a 15% year-over-year growth in EBITDA. We also had our first acquisition as part of our broader M&A strategy, which provides a beachhead in a new end market that has significant growth potential. I am also encouraged that we've begun to see some movement in our sales pipeline. It's been 7.5 months since the beginning of the pandemic. Customers appear to be more settled and have resumed evaluation of how Quest can help them drive operational and financial efficiencies. Importantly, we've not missed a step when it comes to providing excellent service to our customers. Almost all of our staff is still working from home and continues to do a great job providing uninterrupted service. It has not been easy, and I want to thank our folks for all their efforts to manage through this uncertainty. I'm going to turn the call over to Laurie Latham, our Chief Financial Officer, to review the financials, and then I'll be back to review trends we see in our major end markets and discuss some of our strategic initiatives. Laurie? -------------------------------------------------------------------------------- Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [4] -------------------------------------------------------------------------------- Thank you, Ray, and good afternoon to everyone on the call. Third quarter revenue was $23.7 million, relatively flat compared with $23.9 million in the third quarter last year. The decrease was primarily due to lower levels of services due to COVID-19-related shutdowns or reduced operations of some of our customers. This impact was mostly offset by increased services from both our continuing and new customer base. Gross profit was $4.6 million, a decrease of 4.5% when compared with the third quarter last year and an increase of 4.2% sequentially from the second quarter of 2020. Gross margin for the third quarter was 19.2%, which was 70 basis point decline compared with last year, but still well above our targeted levels. The year-over-year decrease was primarily related to the mix of services that we performed. SG&A expenses were $4.3 million during the third quarter compared to $4.2 million during the same period last year. Included in SG&A for the third quarter was $355,000 of professional fees related to M&A activity. Excluding these fees, SG&A expenses would have decreased about 7% year-over-year. Most of that decline was related to reduced labor and travel expenses. In the near term, while certain SG&A expenses such as travel will continue to remain low, we expect SG&A costs will increase from Q3 levels due to business recovery. I will also note that we expect corporate development expenses in the fourth quarter will remain at elevated levels related to the closing of the Green Remedies transaction. During the third quarter, depreciation and amortization decreased year-over-year by approximately $180,000. This was primarily related to a fully amortization of one of our intangible assets at the end of the second quarter. I also want to point out a couple of items on our P&L. Regarding other income, we recorded $168,000 expense for extinguishment of debt, which was related to switching our working capital line of credit to a new bank. We elected to secure the new agreement now because our existing credit facility was set to mature early 2021 and we were able to capture better terms. Also, in the other income line, we recorded $150,000 related to the use of proceeds received under the Paycheck Protection Program during the third quarter. Net loss attributable to common stockholders per basic and diluted share was $0.02 for the third quarter of 2020 compared with breakeven for the third quarter of 2019. Included within the net loss per share for the third quarter is a noncash deemed dividend adjustment of $205,000 for $0.01 loss per share. This adjustment was related to a triggered repricing of warrants when we completed the equity offering in August, which was done primarily to provide additional capital to execute our M&A strategy. As Ray mentioned, adjusted EBITDA increased 15% for the third quarter to $989,000 compared to $860,000 during the same period last year. I would note that adjusted EBITDA excludes the $355,000 of professional fees related to M&A activities as well as the gain from a PPP loan that I described earlier. Moving on to the review of the balance sheet and cash flow, we ended the quarter with $6.4 million in cash, which is up from the $3.4 million at the beginning of the year. The increase in cash is primarily related to the equity offering we completed during the third quarter, raising approximately $3 million of net proceeds. Operating cash flow year-to-date was $845,000. We maintained strong working capital discipline and continue to carefully monitor the status of our accounts receivable. DSOs remain within the normal range and through our efforts, we've been able to keep receivables in order. Subsequent to the end of the quarter, we completed the acquisition of Green Remedies' operations and assets for a total consideration of $16.2 million, with approximately 2/3 of the consideration to be paid in cash at closing and the remaining 1/3 was delivered through a combination of common stock and subordinated seller notes. An additional 4% to 14% of consideration may be paid through an earn-out tied to future performance over the next 3 years. During the trailing 12-month period ending in June, Green Remedies is estimated to have produced net income of $2.5 million and adjusted EBITDA of $2.8 million. The transaction is expected to be accretive on a free cash flow per share basis. We expect to have pro forma financial statements available within the 75 days required, and we'll be able to speak to this in more detail on our next call. Overall, we feel confident that the cash on our balance sheet, availability on our working capital line and the combined earnings power for Green Remedies and Quest will have ample liquidity to fund operations and service debt. At this time, I'll call back -- I'll turn the call back to Ray. -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [5] -------------------------------------------------------------------------------- Thank you, Laurie. Today, I'd like to cover several key points in my prepared remarks. First, I'll give some details on what we're seeing in our major end markets; second, I'll discuss how new business opportunities have begun to move to our pipeline again; and finally, I will cover M&A activities and describe the opportunity we have for growth in the multifamily housing market with the acquisition of Green Remedies. So first, I'll review what we're seeing in our end markets. We're in frequent contact with our customers in monitoring end markets across geographies in order to be prepared to adjust in the event of changes to customers' business. Keep in mind that what I'm about to describe is what we're seeing in terms of market activity levels, which does correlate, but not always on a one-to-one basis with our financial performance. We're fortunate that we're mostly service businesses -- we mostly service businesses that are considered essential and have remained operational through the period. We also have a diversified end market mix, so strength in some markets offsets the weakness in others. The grocery market has stayed stable throughout this entire period and, in some cases, experienced modest growth year-over-year. We continue to work with our grocery customers to divert more waste from landfills and grow the programs that we have in place. In the automotive market, demand for automotive repair and maintenance services has improved since April. That is still down year-over-year. The number of passenger miles driven can be used as a proxy to the overall economic activity in this segment. According to U.S. Department of Transportation, passenger miles driven were down about 14% on average during the third quarter. Passenger miles were down 19% at the beginning of the quarter and have remained down approximately 10% to 12% for the last couple of months. For reference, this is a significant recovery relative to the 50% decrease during the lows of the pandemic in April. Activity levels in the industrial market have also recovered sequentially from the second quarter, but are still down year-over-year. The pandemic had less of an effect on end customer demand but did shift order deliveries due to temporary closures related to virus and supply chain issues. Our customers are now working through backlogs and activity levels have picked back up. Of all of our end markets, as you might expect, restaurant has seen the largest impact from the pandemic. While this is one of our fastest growth areas prior to the COVID-19, I want to emphasize our restaurant business is still the smallest end market in our overall mix. While full-service restaurant customers have been significantly impacted, quick service customers have done well in terms of volumes. Overall, this end market has recovered sequentially from the second quarter, but is still significantly lower year-over-year. I want to talk about new customers and the velocity of our sales pipeline. During the early stages of the pandemic, there was little or no movement in our pipeline as many prospects slowed or even stopped the evaluation of new projects. Their attention was diverted to focus on protecting the health and safety of their employees and adapting their operations to market changes caused by the pandemic. With more time under their belts, prospects have made these changes and are now seeing greater movement in our pipeline. In fact, given that many companies are facing reduced revenue and profitability related to pandemic, we think there will be even greater willingness to evaluate programs like ours that can drive operational and financial efficiencies. Last quarter, we spoke of a 7-figure win with a specialty retailer that we began servicing in July. We recently had a smaller win in the restaurant business with a new regional quick service restaurant group. We're also making progress with a new national automotive service customer, and we've recently kicked off a pilot project with this prospect that has previously been delayed due to pandemic. Next, I want to cover recent M&A activity. Last month, we announced the acquisition of Green Remedies. This is one of the candidates we discussed on our last call, that admitted to the LOI stage. We're very excited about the acquisition. It's a great fit with our M&A criteria and will add significant EBITDA contribution and will be nicely accretive to earnings. I am particularly excited that Green Remedies will give us a beachhead with a large base of customers in the end market for multifamily housing. Its founder is joining the Quest team and will lead our efforts to expand the market nationally. Green Remedies generated approximately $2.8 million in EBITDA during the trailing 12 months ended June this year, competing successfully against much larger players by providing outstanding service. This is directly in line with our strategies. Utilizing our national footprint and service capabilities, we believe we can take their success recently and leverage that on a national level, significantly expanding the size of our business. We expect the integration of Green Remedies will be fairly seamless as we have significant overlap in our vendor network. Green Remedies customer service and finance will transition to our platform, much in the same way we bring on a new account. I also want to comment on the other acquisition in the past quarter. It's important that we take a disciplined approach to M&A. And after we completed due diligence on the other candidate, we discovered it did not fit our strict criteria. Overall, we continue to expect M&A to be an important part of our growth, and we're actually building out our pipeline and pursuing other opportunities. Our industry is highly fragmented with 18,000 local original players, which provides plenty of opportunity for growth through consolidation. In summary, I want to point out that we've been able to show an improvement in adjusted EBITDA and generate positive cash flow during one of the most challenging economic periods in our lifetimes. While there is still a lot of uncertainty regarding COVID and nobody is in a position to make forecast, we're encouraged that our end markets are showing stability. We're winning new business, and opportunities to have resumed movement in our pipeline. While we're waiting for more certainty in a broader recovery, we'll continue to work diligently to close new business and actively pursue M&A. I look forward to keeping you updated on the progress. And we now like the operator to provide instructions on how listeners can queue up for questions. Operator? ================================================================================ Questions and Answers -------------------------------------------------------------------------------- Operator [1] -------------------------------------------------------------------------------- (Operator Instructions) We'll take our first question from Gerry Sweeney with ROTH Capital. -------------------------------------------------------------------------------- Gerard J. Sweeney, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [2] -------------------------------------------------------------------------------- I wanted to just start maybe a little bit on the COVID side and recognize that you may or may not want to answer this question in its entirety, but we got to put it out there anyhow. How much visibility or communication do you have with your clients on what their view of the next several months is in regards to COVID? And then the second part of the question is, as you look at staffing internally at Quest, are you prepared to handle any of the moves and up and down that -- as your customers' vision dictates? -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [3] -------------------------------------------------------------------------------- Okay. Gerry, I appreciate that. I'll answer your second question first. I think what I'll do is I'll just refer directly the way Quest was able to handle the significant challenge of March and April, early in the pandemic. We assessed -- we evaluated, we assessed, we executed and the company managed quite well to it. And all I would say is that we would expect to do to manage any future situation in the same effective way. But on the second part, on the visibility to our customers and the COVID situation, it's quite challenging. We -- first of all, we do have constant communication with those customers. Our client services team is in contact regularly and management group is doing business reviews and have a steady higher -- bigger, bigger conversations with them. And there's a lot of optimism, but the fact is, we got to see what happens. I mean they don't know what's going on either. They don't know what the future holds. But as what happened last time, I was very, very pleased with the outset of the pandemic and the communication that our team had with the customers and our ability to react to whatever their situations became. They communicated with us quite well, and we executed well and involved a lot of service changes up and down. And it's just communication is huge. So the visibility is -- or excuse me, the communication is great. The visibility is still foggy just based on, as you can imagine, it's difficult for them to know in many cases. -------------------------------------------------------------------------------- Gerard J. Sweeney, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [4] -------------------------------------------------------------------------------- Got it. I appreciate it. I know it's not necessarily an easy question to answer. Switching gears to the automotive clients that you're working with a pilot project. Is there any way you can give us a little bit of either two things: one, the potential size of the contract or how large that customer is? And then the progression -- potential progression from a pilot program to something that's more permanent? What would that entail? -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [5] -------------------------------------------------------------------------------- Well, the client -- I could tell you, the size of the opportunity is significant. It's -- should we say that's to the average deal size is -- our average deal size is half a million or 7 figures. And this one definitely is above the 7-figure number, I would think from an opportunity perspective. The acceleration to the pilot, I'm not sure exactly what the time frame is, but we anticipate it being successful. It will be in Q1 and Q2 as we see impact on that, hopefully. But it is a significant opportunity. And then -- and we're happy because it challenges a lot of our business, different types of our business. -------------------------------------------------------------------------------- Gerard J. Sweeney, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [6] -------------------------------------------------------------------------------- Got it. And the pilot would go in -- would be performed on Q1 and Q2? -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [7] -------------------------------------------------------------------------------- Yes, I think it starts in Q1. I'm not really sure, you asked the question about the timing between the pilot and rollout. I'm not really sure that, that's still probably up to the customer on that one. -------------------------------------------------------------------------------- Gerard J. Sweeney, ROTH Capital Partners, LLC, Research Division - MD & Senior Research Analyst [8] -------------------------------------------------------------------------------- Well, that's what I meant was, maybe a different way of asking it would be, what kind of metrics would they be looking for in terms of maybe the customer taking it from pilot to the next steps. What -- there may be a better way of asking the question. My apologies. -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [9] -------------------------------------------------------------------------------- Yes, sure. There's -- this is a customer that's working for solutions to problems they have today, and they're looking for it on a consolidated basis. They're looking for cost savings and they're looking for environmental efficiency relative to that. So I think there's a number of scorecards on it, Gerry. And we have a high confidence level in our ability to perform on that. -------------------------------------------------------------------------------- Operator [10] -------------------------------------------------------------------------------- And we'll go ahead and take our next question from Amit Dayal with H.C. Wainwright. -------------------------------------------------------------------------------- Amit Dayal, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Technology Analyst [11] -------------------------------------------------------------------------------- 1 With respect to sort of the Green Remedies -- with respect to the Green Remedies acquisition, the $2.5 million you are looking at in terms of net income contribution from this acquisition, does this factor in some growth coming from your side? Or does it just represent what that business is as it stands today? -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [12] -------------------------------------------------------------------------------- (inaudible) that earnings one. -------------------------------------------------------------------------------- Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [13] -------------------------------------------------------------------------------- That was the last trailing 12 months as it stands today. [Through June]... -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [14] -------------------------------------------------------------------------------- [Through June]. And no, it doesn't include the future of (inaudible) -------------------------------------------------------------------------------- Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [15] -------------------------------------------------------------------------------- (inaudible) -------------------------------------------------------------------------------- Amit Dayal, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Technology Analyst [16] -------------------------------------------------------------------------------- Okay. And then in terms of initiatives you may be putting in place to drive growth in this business, can you give us some color on what some of those initiatives could be driving growth on the multifamily with the Green Remedies acquisition? -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [17] -------------------------------------------------------------------------------- Yes. That's a great question. Look, first, the description of Green Remedies is they're a regional player and 100% exclusive to the multifamily segment and have done a great job doing that. The company itself ran up again -- has run-up against size constraints, meaning our ability to handle the oncoming growth they have from an infrastructure standpoint. So there's a number of things that makes sense for us to grow the business. One, just from a technology platform, we already have and have built in. We're able to pull that in and exponentially create capacity for growth in that respect, just strictly from an onboarding customer perspective. Secondly, geographically, we, as you know, are not a regional play. We're a national player. We have a network in every market in the country. So the limitations that they had via network are -- we don't have that limitation. So we can sell -- we can take bacon and sell nationally. The program there is so successful with regionally and be supported by our national network. And then the last thing I would mention is Green Remedies offered a singular service profile, a high service profile, but around 1 waste stream. And we offer a numerous, as you know, different alternatives for waste that's created by their customer. And the customers that want the ability to possibly add different types of recycling programs, we can upsell into that. We're very encouraged by that as well. So that's really 3 pieces, some that we feel are going to be pretty much close to media as far as our ability to impact the growth. -------------------------------------------------------------------------------- Amit Dayal, H.C. Wainwright & Co, LLC, Research Division - MD of Equity Research & Senior Technology Analyst [18] -------------------------------------------------------------------------------- Understood. And then you talked a little bit about sort of potential hurdles or challenges coming from the markdowns that we are starting to see being put in place. I'm assuming we are much better prepared this time. If there is no PPP, et cetera, I mean, how are we positioned to manage what's in capital needs, et cetera? Just trying to get a sense of what steps you may be taking to just put measures in place that allow you to maybe ride through the next few months or uncertainty around all of this? -------------------------------------------------------------------------------- Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [19] -------------------------------------------------------------------------------- So Amit, as you're aware, we're in good cash position. We're in a -- have a very good position on our ABL, and we have flex as not only in our SG&A line. But as you know, 100% of our cost of sales is flexible, too. So we have many levers we can look at. We have maintained low travel expense. We maintained all those type of controls on expenses already and continue to do that from a COVID. So we have the ability to feel very comfortable that we can weather through some bumps, if we still continue to have those from COVID. -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [20] -------------------------------------------------------------------------------- Yes. Even without the PPP, and we're thankful for that, but it enabled us (inaudible) either. But our business is almost entirely variable, as Laurie mentioned. And we vary as necessary, both on the cost of goods and our need to serve. So I think we're probably -- I believe, we'll probably position as well, if not better than anybody to labor through that. And I also want to mention again, I think a real important aspect of Quest versus maybe some other companies, is the diversity of the end markets that we serve. No matter what happens on these types of things. There's no way it's going to -- I mean we go everywhere from heavy manufacturing to grocer food manufacturing automotive, I mean, we're all over the place. And so since we have that diversity of end market segments, it has the tendency to dilute some of the hammer type impacts that come from noncontrollables like that. So when you add our variable cost structure and the diversity of the client base that we serve, I think we're really well positioned regardless of what happens. -------------------------------------------------------------------------------- Operator [21] -------------------------------------------------------------------------------- We'll go ahead and take our next question from George Melas with MKH Management. -------------------------------------------------------------------------------- George Melas-Kyriazi, MKH Management Company, LLC - President [22] -------------------------------------------------------------------------------- Ray, could you talk a little bit, could you -- I think you mentioned if you will -- in the prepared remarks, you talked about a retailer, QSR. Could you maybe characterize those wins? And also help us understand the pipeline and maybe how has the composition of the pipeline evolved? Or at what stage for the prospects on the pipeline? And how has that evolved in the last [3 to 6 months]? -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [23] -------------------------------------------------------------------------------- Yes, George, the first part of your question, I don't think I picked it up. But you ask me -- were you asking about QSR restaurants and characterization? Is that what you asked? -------------------------------------------------------------------------------- George Melas-Kyriazi, MKH Management Company, LLC - President [24] -------------------------------------------------------------------------------- You mentioned that you had a few wins. And maybe could you characterize those wins as you connect a little bit about them? -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [25] -------------------------------------------------------------------------------- Yes. We've got a win in the quick service restaurant franchisee group, which we're really excited about potentially as they grow, which we believe they all will. QSR did well to the segment. We mentioned the... -------------------------------------------------------------------------------- Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [26] -------------------------------------------------------------------------------- Specialty retailer. -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [27] -------------------------------------------------------------------------------- Well, the specialty retailer that we brought on, which has got a lot of locations we're onboarding currently. And then also, we mentioned the pilot with the automotive service company. It's got a lot of locations throughout the U.S. It's got a ton of potential for us as well. Those are 3 of them, George, that we're talking about current wins. -------------------------------------------------------------------------------- Laurie L. Latham, Quest Resource Holding Corporation - CFO, Senior VP & Secretary [28] -------------------------------------------------------------------------------- (inaudible) -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [29] -------------------------------------------------------------------------------- Yes. Go ahead, George. I didn't finish answering all your questions. On the pipeline and the -- you had added about [digital things] that haven't been won yet, but we're confident they will. First, I want to reiterate there seems to be a much more of a receptiveness now. Maybe people are getting used to this thing. I don't really know, at least take virtual meetings and have conversations around -- I'm going to speculate here. I believe that it makes sense to me with some of the recent positive news and the light at the end of the tunnel, regards of the situation people are facing today, they realize the business is going to come out, and they want to be in strong shape tomorrow when the vaccines are all in place, and we returned to that wonderful normalcy environment we all dream of. So that means audiences are easier to get, and maybe some incentive around considering some of our offerings. So first of all, I would say it's nice to see conversations starting back up that have been quite stale for a number of months. I think that's the first indicator on the pipeline. Beyond that, it's really, really all over the place again. Restaurant is part of it. We have a lot of automotive opportunities. There's a lot of people wanting to be engaged more in understanding the tracking and the ability to move programs like food waste in the stores, so they didn't have them before, food waste type of diversion programs. So I guess it's pretty broad on the pipeline opportunities as well. I think the best thing to say about it is it's moving. And the reason it's moving is because people are more open to having conversations and are being active about finding ways to consider new programs like ours. -------------------------------------------------------------------------------- George Melas-Kyriazi, MKH Management Company, LLC - President [30] -------------------------------------------------------------------------------- Okay. Great. And then maybe just one quick thing and I know there's much there. But is there anything that you have done that Quest has done to approach sales somewhat differently in terms of your internal processes? -------------------------------------------------------------------------------- S. Ray Hatch, Quest Resource Holding Corporation - President, CEO & Director [31] -------------------------------------------------------------------------------- Yes. Actually, we've done quite a bit. We've moved some of the comp systems around. We've changed our marketing programs. We actually have a -- we've made an addition there that's really got a very cohesive joint marketing and sales activity, which involves a lot of lead generation, outreach programs. So -- and we're learning how to be more effective, more virtually, George. I mean, I think a lot of companies probably are, and we're utilizing a lot of the tools that maybe we've had access to that didn't really use a lot before social media type of lead generation activities. So I guess I want to say, we stepped a little more into the modern age, and I think it's generating more activity and opportunities for us. -------------------------------------------------------------------------------- Operator [32] -------------------------------------------------------------------------------- That concludes today's question-and-answer session and today's conference call. We do appreciate your participation. You may now disconnect your phone lines. Thank you.