Quest Resource Holding Reports Second Quarter 2020 Financial Results

Rhea-AI Summary

Quest Resource Holding Corporation (NASDAQ: QRHC) reported second-quarter financial results for 2020, revealing revenue of $22.0 million, down 13.7% year-over-year. Despite a decrease in gross profit to $4.4 million (down 7.9%), gross margin improved to 19.9%. Year-to-date revenue was $47.3 million, a 9.2% decline, while net income per share rose to $0.06, compared to a loss of $(0.01) in 2019. Adjusted EBITDA showed growth to $1.1 million for the quarter and $1.7 million year-to-date. The company enhanced its balance sheet and raised equity to support acquisitions amid current challenges.

Positive

• Adjusted EBITDA improved to $1.1 million in Q2 2020, up from $825,000 in Q2 2019.
• Net income per share increased to $0.06 from a loss of $(0.01) in the same period of 2019.
• Gross margin rose to 19.9%, up from 18.7% year-over-year.

Negative

• Revenue decreased by 13.7% year-over-year in Q2 2020.
• Gross profit fell to $4.4 million, a 7.9% decline compared to Q2 2019.
• Year-to-date revenue is down 9.2% compared to 2019.

THE COLONY, Texas, Aug. 13, 2020 (GLOBE NEWSWIRE) -- Quest Resource Holding Corporation (NASDAQ: QRHC) ("Quest"), a national leader in environmental waste and recycling services, today announced financial results for the second quarter ended June 30, 2020.

Second Quarter 2020 Highlights

• Revenue was $22.0 million, a 13.7% decrease compared with the second quarter of 2019.
• Gross profit was $4.4 million, a 7.9% decrease compared with the second quarter of 2019.
• Gross margin increased 120 basis points to 19.9% of revenue, compared with 18.7% for the second quarter of 2019.
• Other income of $1.3 million, or $0.08 per share, in the second quarter of 2020 represented the use of PPP Loan proceeds to fund eligible expenses under the CARES Act.
• Net income per share was $0.08, compared with $0.00 during the second quarter of 2019. 
• Adjusted EBITDA was $1.1 million, compared with $825,000 during the second quarter of 2019.

Year-to-Date 2020 Highlights (June 30, 2020)

• Revenue was $47.3 million, a 9.2% decrease compared with the same period of 2019.
• Gross profit was $8.9 million, a 4.0% decrease compared with the same period of 2019.
• Gross margin increased 110 basis points to 18.9% compared with 17.8% of revenue for the same period of 2019.
• Other income of $1.3 million, or $0.08 per share, represented the use of PPP Loan proceeds to fund eligible expenses under the CARES Act.
• Net income per share improved to $0.06, compared to a net loss per share of $(0.01) during the same period of 2019. 
• Adjusted EBITDA was $1.7 million, a 3.3% increase compared to the same period of 2019.

“Our team adapted quickly to the difficult COVID-19 market environment working closely with customers to ensure high levels of service, all the while focusing on the health and safety of our employees.  Our customer end markets that were the most affected in April recovered faster than anticipated through each month of the quarter.  However, overall volume trends are negative year over year.  Due to the flexible cost structure of our asset light model, as well as actions we took to reduce expenses, we showed a solid improvement in Adjusted EBITDA and generated positive cash flow,” said S. Ray Hatch, President and Chief Executive Officer.  “Since the end of the quarter, we bolstered the balance sheet, updating our line of credit with more favorable terms, and raising equity capital to support our acquisition strategy.”

Mr. Hatch continued, “While the pace and extent of the recovery remains uncertain, our flexible business model, strong balance sheet, and the essential nature of our services, position us to continue to weather this challenging environment.”

Second Quarter 2020 Earnings Conference Call and Webcast

Quest will conduct a conference call today, August 13, 2020, at 5:00 PM ET, to review the financial results for the second quarter ended June 30, 2020. Investors interested in participating on the live call can dial 1-800-263-0877 within the U.S. or 1-646-828-8143 from abroad, referencing conference ID: 8602356.  The conference call, which may include forward-looking statements, is also being webcast and is available via the investor relations section of Quest’s website at https://investors.qrhc.com/investors/events-and-presentations.  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 waste and recycling services to customers from across multiple industry sectors that are typically larger, multi-location businesses.  In addition, Quest’s programs and services enable customers to address their environmental and sustainability goals and responsibilities. Quest provides information that tracks and reports the environmental results of Quest’s services, provides actionable data to improve business operations, and enables customers to address their environmental and sustainability goals and responsibilities. For more information, visit www.questrmg.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.  The forward-looking statements include, but are not limited to, our belief that our flexible business model, balance sheet and the essential nature of our services position us to continue to weather the challenging COVID-19 environment, and our belief that the financial measures contained in this press release facilitate operating performance comparisons from period to period.  These statements are based on our current expectations, estimates, projections, beliefs, and assumptions.  Such statements involve significant risks and uncertainties. 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,
	2020					2019								2020											2019
Revenue	$	21,969				$			25,445					$			47,301								$			52,094
Cost of revenue		17,594							20,695								38,383											42,802
Gross profit		4,375							4,750								8,918											9,292
Selling, general, and administrative		3,978							4,227								8,387											8,441
Depreciation and amortization		334							327								668											653
Total operating expenses		4,312							4,554								9,055											9,094
Operating income (loss)		63							196								(137				)							198
Other income		1,258							-								1,258											-
Interest expense		(88	)						(114			)					(172				)							(225			)
Income (loss) before taxes		1,233							82								949											(27			)
Income tax expense (benefit)		24							55								(28				)							110
Net income (loss)	$	1,209				$			27					$			977								$			(137			)
Net income (loss) per common share:
Basic	$	0.08				$			0.00					$			0.06								$			(0.01			)
Diluted	$	0.08				$			0.00					$			0.06								$			(0.01			)
Weighted average number of common shares outstanding:
Basic		15,465							15,340								15,431											15,334
Diluted		15,468							15,362								15,441											15,334

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

	Three Months Ended												Six Months Ended
	June 30,												June 30,
	2020						2019						2020										2019
Net income (loss)	$	1,209					$		27				$				977				$			(137	)
Depreciation and amortization		348							343								696							702
Interest expense		88							114								172							225
Stock-based compensation expense		400							269								777							473
Other adjustments		(929	)						17								(920	)						248
Income tax expense (benefit)		24							55								(28	)						110
Adjusted EBITDA	$	1,140					$		825				$				1,674				$			1,621

BALANCE SHEETS
(In thousands, except per share amounts)

	June 30,				December 31,
	2020				2019
	(unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	3,964			$	3,411
Accounts receivable, less allowance for doubtful accounts of $840   and $767 as of June 30, 2020 and December 31, 2019, respectively		13,942				13,900
Prepaid expenses and other current assets		1,423				1,110
Total current assets		19,329				18,421
Goodwill		58,208				58,208
Intangible assets, net		1,016				1,591
Property and equipment, net, and other assets		2,294				2,436
Total assets	$	80,847			$	80,656
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	12,634			$	13,317
Deferred revenue and other current liabilities		171				19
Total current liabilities		12,805				13,336
Revolving credit facility, net		3,792				4,535
Other long-term liabilities		821				1,141
Total liabilities		17,418				19,012
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000 shares authorized, no   shares issued or outstanding as of June 30, 2020 and December 31, 2019		—				—
Common stock, $0.001 par value, 200,000 shares authorized,   15,403 and 15,373 shares issued and outstanding as   of June 30, 2020 and December 31, 2019, respectively		15				15
Additional paid-in capital		161,666				160,858
Accumulated deficit		(98,252	)			(99,229	)
Total stockholders’ equity		63,429				61,644
Total liabilities and stockholders’ equity	$	80,847			$	80,656

FAQ

What were Quest Resource Holding Corporation's Q2 2020 earnings results?

In Q2 2020, Quest reported revenue of $22.0 million, a 13.7% decrease from Q2 2019, with net income per share at $0.08.

How did Quest's gross profit change in Q2 2020?

Quest's gross profit for Q2 2020 was $4.4 million, a 7.9% decrease compared to Q2 2019.

What is the future outlook for Quest Resource Holding Corporation following their Q2 2020 report?

While recovery pace is uncertain, Quest's flexible business model and improved balance sheet position it well to navigate challenges.