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Quest Resource Holding Corporation Reports Second Quarter 2019 Financial Results

THE COLONY, Texas, Aug. 14, 2019 (GLOBE NEWSWIRE) -- Quest Resource Holding Corporation (QRHC) ("Quest"), a national leader in environmental reuse, recycling, and waste disposal services, today announced financial results for the second quarter ended June 30, 2019.

Second Quarter 2019 Highlights

  • Revenue was $25.4 million, an 8.9% decrease compared with the second quarter of 2018.
  • Gross profit was $4.7 million, a 7.3% increase compared with the second quarter of 2018.
  • Gross margin increased 280 basis points to 18.7% compared with 15.9% of revenue for the second quarter of 2018.
  • Net income per share was $0.00, an improvement compared with a net loss per share of $(0.04) during the second quarter of 2018. 
  • Adjusted EBITDA was $825,000, a 5.8% increase compared with the second quarter of 2018.

Year-to-Date 2019 Highlights (June 30, 2019)

  • Revenue was $52.1 million, a 1.0% decrease compared with the same period of 2018.
  • Gross profit was $9.3 million, a 16.5% increase compared with the same period of 2018.
  • Gross margin increased 260 basis points to 17.8% compared with 15.2% of revenue for the same period of 2018.
  • Net loss per share improved to $(0.01), including $248,000, or $0.02 per share, of expenses related to our April 2019 equity offering by selling stockholders, compared to $(0.12) during the same period of 2018. 
  • Year-to-date Adjusted EBITDA was $1.6 million, an 81.3% increase compared to the same period of 2018.

Key Recent Highlights

  • Continued success building relationships with key customers – Quest’s results continue to demonstrate its focus on adding differentiated and value-added services its portfolio to better support and meet customers’ needs, thereby driving higher gross profit and gross margin percentage, which enables broader service offerings to Quest’s customers.
  • The pipeline of new business opportunities continues to grow – Quest recently secured two competitive contract wins in the food service vertical.  In both cases, Quest was selected over incumbent providers by providing value-added solutions, which include diverting significant waste streams from landfills, as well as providing proprietary data reporting and analytics for sustainability reporting and operational improvements.  With a combined count of more than 1,000 locations, Quest expects revenue from these national restaurant chains to begin to ramp during the second half of the year. 

“Our focus on providing differentiated and value-added services to existing customers is reflected in our solid growth and record performance in gross profit and EBITDA, as well as our success in winning new customers.  Recent wins in the food service vertical are evidence of how our pipeline of new strategic accounts continues to grow, which will generate revenue and gross profit during the second half of the year.  Revenue comparisons to the second quarter of 2018 were challenging reflecting two main factors:  a slowdown in production in a low margin waste stream at one of our largest industrial customers; and the cycling out of a low-margin service line with another customer.  The combination of these factors had negligible impact on gross profit dollars, again reflecting the progress we have made in transitioning our business to higher value-added services,” said S. Ray Hatch, President and Chief Executive Officer.

Mr. Hatch added, “Our strategy of growing existing relationships, adding attractive strategic customers, and providing a portfolio of differentiated offerings combined with high service levels and the utilization of technology to enhance our customers’ compliance reporting capability is showing solid success. We expect to meet our profitability goals for 2019, which include the growth of gross profit and adjusted EBITDA in excess of 10%.”

Second Quarter 2019 Earnings Conference Call and Webcast

Quest will conduct a conference call Wednesday, August 14, 2019, at 4:00 p.m. Central Time, to review the financial results for the second quarter ended June 30, 2019. Investors interested in participating on the live call can dial 1-800-239-9838 within the U.S. or 1-323-794-2551 from abroad.  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 www.QRHC.com. A replay of the webcast will be archived on Quest’s investor relations website for 90 days.

Reconciliation of U.S. GAAP to Non-GAAP Financial Measures

In this press release, a non-GAAP financial measure, "Adjusted EBITDA," is presented. From time-to-time, Quest considers and uses this supplemental measure 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 this non-GAAP measure because it considers it an important supplemental measure of Quest's performance. Quest's definition of this adjusted financial measure may differ from similarly named measures used by others. Quest believes this measure facilitates 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. This non-GAAP measure has limitations as an analytical tool and should not be considered in isolation or as a substitute for the Company's GAAP measures. (See attached table "Reconciliation of Net Income (Loss) to Adjusted EBITDA.")

About Quest Resource Holding Corporation

Quest is a national provider of reuse, recycling, and disposal services that enable our customers to achieve and satisfy their environmental and sustainability goals and responsibilities.  Quest provides businesses across multiple industry sectors with single source, customer specific solutions to address a wide variety of waste streams and recyclables generated by their operations.  Quest also provides information and data that tracks and reports the environmental results of Quest’s services, provides actionable data to improve business operations, and enables Quest’s customers to achieve and satisfy their environmental and sustainability goals and responsibilities. For more information, visit www.QRHC.com.

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.  All statements other than statements of historical fact included in this press release, including statements regarding the company's future financial condition, results of operations, business operations and business prospects, are forward-looking statements.  Words such as “anticipate,” "estimate," "expect," "project," "intend," "plan," "predict," "believe" and similar words, expressions and variations of these words and expressions are intended to identify forward-looking statements.  These statements are based on our current expectations, estimates, projections, beliefs, and assumptions.  Such statements involve significant risks and uncertainties.  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, and other factors discussed in greater detail in our filings with the Securities and Exchange Commission (SEC), including our 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 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
  Six Months Ended
    June 30,
  June 30,
    2019
    2018     2019
    2018
Revenue   $ 25,445     $ 27,929     $ 52,094     $ 52,625  
Cost of revenue     20,695       23,501       42,802       44,649  
Gross profit     4,750       4,428       9,292       7,976  
Selling, general, and administrative     4,227       3,879       8,441       7,631  
Depreciation and amortization     327       982       653       1,966  
Total operating expenses     4,554       4,861       9,094       9,597  
Operating income (loss)     196       (433 )     198       (1,621 )
Interest expense     114       106       225       230  
Income (loss) before taxes     82       (539 )     (27 )     (1,851 )
Income tax expense     55             110        
Net income (loss)   $ 27     $ (539 )   $ (137 )   $ (1,851 )
Net income (loss) applicable to common stockholders   $ 27     $ (539 )   $ (137 )   $ (1,851 )
Net income (loss) per common share:                                
Basic   $ (0.00 )   $ (0.04 )   $ (0.01 )   $ (0.12 )
Diluted   $ (0.00 )   $ (0.04 )   $ (0.01 )   $ (0.12 )
                                 
Weighted average number of common shares outstanding:                                
Basic     15,340       15,308       15,334       15,305  
Diluted     15,362       15,308       15,334       15,305  
                                 


RECONCILIATION OF NET INCOME (LOSS) TO ADJUSTED EBITDA
(Unaudited)
(In thousands)

  Three Months Ended   Six Months Ended
  June 30,
  June 30,
  2019
  2018
  2019
  2018
                               
Net income (loss) $ 27     $ (539 )   $ (137 )   $ (1,851 )
Depreciation and amortization   343       1,027       702       2,057  
Interest expense   114       106       225       230  
Stock-based compensation expense   269       183       473       407  
Other adjustments   17       3       248       51  
Income tax expense   55             110        
Adjusted EBITDA $ 825     $ 780     $ 1,621     $ 894  
                               


BALANCE SHEETS
(In thousands, except per share amounts)

    June 30,     December 31,  
    2019     2018  
      (unaudited)          
ASSETS                
Current assets:                
Cash and cash equivalents   $ 2,088     $ 2,122  
Accounts receivable, less allowance for doubtful accounts of $977 and $929 as of June 30, 2019 and December 31, 2018, respectively     15,893       16,712  
Prepaid expenses and other current assets     1,373       966  
Total current assets     19,354       19,800  
                 
Goodwill     58,208       58,208  
Intangible assets, net     2,125       2,611  
Property and equipment, net, and other assets     2,807       968  
Total assets   $ 82,494     $ 81,587  
                 
LIABILITIES AND STOCKHOLDERS’ EQUITY                
Current liabilities:                
Accounts payable and accrued liabilities   $ 15,248     $ 15,778  
Deferred revenue and other current liabilities     23       72  
Total current liabilities     15,271       15,850  
                 
Revolving credit facility, net     4,861       5,194  
Other long-term liabilities     1,453        
Total liabilities     21,585       21,044  
                 
Commitments and contingencies                
                 
Stockholders’ equity:                
Preferred stock, $0.001 par value, 10,000 shares authorized, no shares issued or outstanding as of June 30, 2019 and December 31, 2018            
Common stock, $0.001 par value, 200,000 shares authorized, 15,350 and 15,329 shares issued and outstanding as of June 30, 2019 and December 31, 2018     15       15  
Additional paid-in capital     160,205       159,702  
Accumulated deficit     (99,311 )     (99,174 )
Total stockholders’ equity     60,909       60,543  
Total liabilities and stockholders’ equity   $ 82,494     $ 81,587