QRHC - Earnings call transcript Q3 2020 | Quest Resource Holding Corporation

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Operator

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'd like to turn the conference over to David Mossberg, Investor Relations. Please go ahead sir.

Dave Mossberg

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

regarding significant beliefs remind begin on forward-looking from uncertainties. Quest's estimates statements risks are this Commission. current in statements anticipate, forward-looking filings detail future project, involve I'd and estimates, result assumptions based words which we results those those intend, materially various similar of everyone in requests. and events a of Exchange Use performance the are and like forward-looking projections, estimate, predictions, events Before differ and identify like contain with Quest's Quest's in expressions or statements the forward-looking Actual to that are as greater and statements. the to or discussed Such may conference factors other believe, and expect, expectations, future other could discussed call Securities intended

place to uncertainties. filings on made cautioned reliance such statements any not are and forward-looking we statements and law Quest’s additional to for of are by update do presented to disclaim statements the You unless such to as so. SEC date undue risks our duty consult required and

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

and of results of the These forecast sources discussed we are Although the be of measures to independently that by evaluate the not the Quest performance. non-GAAP prospects the measures and and assessment company's will accuracy Quest verified today's measures current will the this With discussed future is it now the reconciliations in Executive to data for the Full be President other is make presentation otherwise operations ongoing investors' used believes Hatch, non-GAAP Officer. future. non-GAAP should information believes understanding Management strategic of financial financials in this these I'll stated, company's that sources management measures caution the are during included accurate, call. turn core decisions for and useful any and and GAAP these said, it Unless financial are financial Certain call Ray of non-GAAP reliable reliability information. that earnings. Chief non-GAAP or be call basis. to over are has assumed

Ray Hatch

we act are you, for We in safe and thanks and us Dave. you've that recognize results. we quarter to extremely taken to start softness the that the to to any off, time healthy environment everyone the interest solid short-term our and happy in your current appreciate remain Quest. your I'm and hope footing. is our And ready To that uncertainty families Thank of report you third discuss event on our in That business. the in business join said

growth markets profit costs almost which good less We improved the flexible XX% from quarter, as a weakness job decreased by end a of others. some than the structure in year-over-year dollars During gross in X% sequentially entirely did and benefited dollars second profit the quarter, gross controlling year-over-year led by our cost from EBITDA. offset strengthening to third a

potential. efficiencies. pandemic, operational beginning our and Quest to of more It's months settled we that can new strategy, half significant as provided resumed growth which I’m customers We M&A the encouraged also since drive help pipeline. the began end-market been a also and to some see in of seven how broader sales evaluation financial through has acquisition beachhead had our that first our be and a a of movement part in them

staff all to our easy. working uninterrupted to the call the their our service to not step job our to to Laurie? Officer financials. through Latham, Financial not been in we of we've to Laurie see excellent from It discuss great a I'll I major service. review thank and end-markets it uncertainty. back home strategic efforts comes our when turn providing the Chief this over Importantly, I'm all And manage customers. be for of to still going And some to providing want has then is trends do and missed initiatives. Almost continues our a with our folks

Laurie Latham

the good and on Ray to Thank you, call. afternoon everyone

the of impacts These base. COVID-XX in last our primarily from Gross SG&A some SG&A $X.X was services $XXX,XXX professional levels during to relatively the revenue for related third flat the M&A above or targeted The a mix compared of Gross million quarter third profit XX compared performed. with expenses for which to due decrease of new during $XX.X $XX.X quarter quarter quarter the continuing third million in third was same due shutdowns year, well million of to services an our the period year. that offset related related million $X.X The quarter level. with primarily decline was customer Third year, our mostly X.X% million, $X.X customers. second when margin and are last was services above increase to decrease of third last was Included XX.X% fees lower quarter compared year. by point still of operations decrease sequentially were quarter, we compared the activity. last XXXX. but increased in year-over-year X.X% was basis with and was reduced the to

related that the X% SG&A expenses travel while expenses. certain year-over-year. to remain fees, In low. decreased of decline these will such and continue as travel Excluding SG&A near-term, expenses have labor would was to reduced about Most

will remain in also the to QX increase closing Remedies we from the due Green of to We expenses expect costs related expect I’ll quarter recovery. elevated SG&A that business corporate levels will at transaction. fourth the development levels note

intangible $XXX,XXX. amortization This primarily our was assets quarter. I the to second out of by quarter, P&L. a want also at couple a the fully year-over-year end of our approximately the one third depreciation decreased to items point During of and related amortization on of

share. and XXXX related compared extinguishment able for capital line for we attributable the early diluted Included new for breakeven debt, the in third $X.XX and existing quarter the expense to to Protection for basic the was of better additional our $XXX,XXX which of new $XXX,XXX per of mature because net adjustment related working was recorded to Net of we non-cash during related use when a was quarter. proceeds bank. the XXXX. the capital credit third quarter agreement for stockholders of triggered a the of is Program facility secure we This our execute common $XXX,XXX share capture done deemed adjustment income, set warrants line, now other to primarily completed the to equity to XXXX to to for per within was of loss repricing credit recorded dividend which to loss third a were income is M&A our August, share switching third Paycheck loss elected we provide We offering terms. $X.XX other received under Also quarter in to with strategy. the Regarding the

period quarter the adjusted gain that Ray the note well earlier. loan adjusted would XX% to M&A to excludes $XXX,XXX a as activities, that last the I fees $XXX,XXX related mentioned, as for year, to third As from same EBITDA $XXX,XXX the I EBITDA PPP professional described increased during compared

cash The and Moving million quarter, raising able year. consideration million with our balance the in beginning up consideration the future we've third year-to-date end be on and the accounts to capital status $X.X to proceeds. is increase through continue for of related $X and years. three the be operations assets common sheet next we receivable. Operating of remain to the equity cash We an from is keep approximately range, a of of of ended $X.X review flow, over in a been cash, carefully and million Green monitor to net receivables performance strong a working to quarter DSOs primarily order. total of cash Remedies during of to we of at $XX.X to the and An approximately Subsequent the the closing, through the offering tied we the earnout was two-thirds which subordinated cash of with remaining quarter, selling. through in the $XXX,XXX. completed delivered flow the within the efforts, normal may million third maintained discipline stock the acquisition additional paid and consideration XX% completed the to paid at was combination X% our in

basis. be Green XX EBITDA the of income accretive period a transaction and During is ending flow is per cash $X.X share expected million. The $X.X to Remedies month free in to adjusted million net trailing June, of on produce estimated

be on debt. expect call service forma to time, to and availability feel statements days on earnings And the We required. able confident to At speak capital turn our line this ample we our operations cash pro within Green and Overall, on will and working this back sheet, more have detail Remedies power Quest combined for to the balance liquidity in available our fund to I'll the that have Ray. next financial XX call. we'll

Ray Hatch

I'd remarks. like to key Thank Laurie. Today several you, prepared in cover my points

our some what in give of details I'll end-markets. seeing First, we're major

the the will how are opportunity move finally, and have our activities pipeline I'll growth going cover with in again. that to of acquisition multifamily housing new the Green markets I Second, business opportunities describe And for we discuss M&A Remedies.

prepared to of of on our period. remained first, we're Keep our to which we're service geographies, frequent one be to monitoring with operational event describe the to through in Unfortunately, not end-markets considered I'm seeing contact changes what to that a and one have levels, in seeing mostly our the is performance. what businesses what with terms end-markets, essential view does that So activity in correlate are customers mind adjust but the across market business. basis our financial in always and in in we're order customers about

has a have some markets, throughout offset grocery year-over-year. end-market period entire modest weakness so stable in strength also The others. diversified and We stayed this growth experienced market in mix, in cases some

to used customers XX% Transportation, the on proxy work grocery segment. can as has to during beginning were last waste activity months. of That that economic down and maintenance our repair the divert of be In in third XX% XX% the demand about to have programs down in faster automotive According the quarter, down The of U.S. miles quarter, driven were couple and for and to landfills the miles is passenger a approximately passenger the overall April. since We down place. services remained more of driven for improved at have with the average automotive XX% Department the year-over-year. grow still continue number the we miles from to market,

the and during market decrease For of in recovered effect this XX% in second lows reference, The a to significant sequentially the recovery relative temporary had levels have down did closures industrial less year-over-year. are on Activity virus the investment quarter, chain is but order also supply pandemic due shift deliveries to to and the pandemic the April. issues. still related from

the has through all had a and smallest restaurant done still end-market about velocity now I mix. been of you terms business backlogs Quick customers recovered might But well prior restaurant to this want areas activity quarter, our end-markets is our the our in sequentially new of significantly overall impact have are sales Well talk working the fastest lower impacted. the Overall, have Service I full-service volumes. our and restaurant emphasize customers want to customers seeing is from first levels our to pipeline. as still largest up. this significantly of year-over-year. COVID-XX. market back the well our second in customers Our one is of growth Of pick from pandemic, expect

During by was are in attention the projects. made protecting safety seeing changes our that operations now pipeline. their of slowed the under there have early these no their focus diverted evaluation in their With market prospects stages and movement as of greater or was many or and pandemic. stopped little on time to even to employees adapting the changes pipeline belts, caused the our health the pandemic, prospects movement Their more

Service been in has Restaurant smaller programs many we facing been win previously of servicing and prospect that business given a evaluate are customer. efficiencies. and that pandemic. also to we've companies revenue to ours and a Last making new the a pandemic, be seven national recently especially Quick new with restaurant on operational the like July. figure fact, greater And automotive delayed we due had think We're We financial related quarter, service we've for that the pilot regional recently drive with project group. retailer kicked-off there In this progress profitability to spoke reduced can will the even willingness

add Utilizing larger us I XX-months players the It's for base Last lead million Green multifamily the this our generated approximately expand we about nicely Remedies. of our June footprint that Remedies we is that on housing. very acquisition. recently significantly the large successfully the announced of business. last Remedies in directly stage. expanding customers service. LOI EBITDA in to the will great This it one This month a level a size we criteria, the strategies. Quest made take beachhead, Next acquisition call our team the cover recent national M&A the $X.X to ended contribution by we leverage efforts excited joining M&A it I'm accretive providing discussed market We're activity. of competing Green that candidates believe to significant a want earnings. in their and the Its is can have be founder national year fit our success EBITDA will during much in give line will capabilities, and of with with service Green trailing to end-market will against particularly a but and outstanding our our nationally. excited is

comment And take criteria. integration also fairly Remedies an in fit significant our of have to Overall, other same Remedies new a the much after will to be we the not expect be mentioned opportunities. that on will M&A. disciplined way part our that other seamless, want continue platform, in quarter. pursuing due a M&A completed we on We expect our account. I our and the important as out building we we acquisition we on candidate, overlap vendor It's the growth. Green customer approach actually bring finance we it last important to network. candidate and we service And transition of to diligence to our other did strict pipeline we're discovered Green

flow provides to Our local for EBITDA and point challenging which plenty periods of In of highly in improvement XX,XXX out been that with adjusted our lifetimes. positive industry fragmented we've show is players, the in I regional one an want economic opportunity through consolidation. to or most summary, generate cash during growth able

pursue We're continue and position business, Operator? resume are end-markets actively to on regarding forecasts, While COVID, the and diligently listeners there in movement queue in pipeline, is business winning we And provide to like now that of lot to we're waiting new broad recovery, nobody's work to to forward we’ll up close and while our new still encouraged uncertainty a make to can our I how a for opportunity showing look stability. we’re updated more progress. operator M&A. you instructions keeping the and questions. for on certainty

Operator

Capital. take with Thank go you. Roth our Please Sweeney from [Operator We'll Instructions] Gerry ahead. question first

Gerry Sweeney

Good Laurie for Ray. taking afternoon, call. my and Thanks

Ray Hatch

you? are how Gerry, Hi,

Laurie Latham

Hi.

Gerry Sweeney

COVID to and as what entirety. prepared the with may may your your fasting months moves view or their answer up you you to have or we've the much COVID? out its Quest, second of put and dictates? how little not clients want of the internally and I question regards and there next on But question down recognize side bit visibility the in the on wanted do to to to in are at communication you got vision part is, a And you look maybe as it handle start that at several customers

Ray Hatch

Gerry, first. appreciate I'll second that. question, your Okay, I answer

effective I say all future in in COVID we March And to and is evaluated, challenge part expect to is assessed, it. managed this company way. We able we would do Quest the do directly to just that would our of the way same visibility On the think quite early I'll pandemic. executed challenging. situation and April, on I is we to to the second the manage the handle assess, in quite and we the customers situation to well what I'll the significant refer was

group, of there's react what don't is, the optimism. reviews, what's with in lot down. a they executed business we constant higher, that know holds. I communication shares. have just But get and whatever it's with is conversations know communication with And a changes for And our with them. to service do well. us future happened management is contact the our those quite what and ability time, First last And up very customers, team the the the was regularly team we fact we our situations lot do pleased and and to on outset well what don't see of bigger with all, had they became, and of very, and going involves either. of services And happens. picture steady that their The They communication to pandemic customers communicated

visibility great, is is based many just is on as can imagine, know visibility in the So cases. them for you or to difficult seasonally, it's communication so far

Gerry Sweeney

easy little it's I necessarily to any you is automotive with Got project, way working pilot question answer. a to a I you're Switching the appreciate it, know of then that that an contract give there can it. not gears us or client progression tell? one the What more from is? bit would size permanent? two program how the that's to large pilot potential progression, either something And of potential customer things, that the

Ray Hatch

being say from opportunity made one or figure hopefully. deal as Well But it would perspective, think a anticipate we're it'll size this is. client, our average a the acceleration figures. the the see seven you because above size impacts the it challenges is size the is And successful, not QX I number, pilot, lot And business, deal to I'm opportunity. can it we significant. of of happy is we tell in our that opportunity the I significant have of types different is we an average definitely Should that QX the our seven sure business. what exactly on timeframe But be the

Gerry Sweeney

will And it. in pile Got and and go be during the QX QX. performed

Ray Hatch

in It is start QX.

Gerry Sweeney

maybe rollout pilot the to the apologies. Well, that's customer would one? really pilot the metrics for that question way of of terms maybe what of up from about this customer way asking steps different not the be better next what but in really meant looking that to it, kind and it asking to was, and question, yes the be sure to on would I maybe Got probably still the it explain not timing taking they that's I'm a a

Ray Hatch

Yes, sure. solutions This consolidated problems today for have and is basis. They're on cost that. for a relative looking looking for to for looking customer savings. And they're that's efficiency to a environmental they're they looking

I scorecards to our on perform high and there's and confidence have level number on we So that. of a think ability Gerry, it,

Gerry Sweeney

Thanks. it. on want the dominate Got the I'll jump and don't question. line I back to

Ray Hatch

Gerry. you, thank Okay,

Operator

I ahead from and Wainwright. will Amit H.C. our take go question Dayal next with

Amit Dayal

taking factor from this Thanks what are of questions. business stands net the respect it contribution Remedies the it is Green Hi, to today? one that acquisition, growth respect your at guys, acquisition, how million does of terms you? for its With in side? income represent in does the Green with Or looking you’re sort just from Remedies my $X.X coming as -- to

Ray Hatch

[Indiscernible]

Laurie Latham

XX the last was months today trailing through June. as it stands That

Amit Dayal

And include the it doesn’t future.

Ray Hatch

Okay, Amit.

Laurie Latham

part booked No, of.

Amit Dayal

of this could give you growth be? some on putting those you in what initiatives in of in drive be place then business. to initiatives us terms And Can may some Okay. color

Ray Hatch

the growth Driving Remedies acquisition? Green multifamily with on

Amit Dayal

Yes.

Ray Hatch

XXX%, up Green Okay, doing company have growth they've And they ability standpoint. a player, great our run size and they’re an job question, regional infrastructure to a meaning that, the done the constraints, great from against segment. to description handle oncoming a is the sure. of That's first itself multifamily the exclusive Remedies

makes for that growth So perspective. from capacity platform us business to there's create have have just that one, grow we things that able number customer already in strictly in that from the for and in, onboarding of an sense respect, and we're just to fold exponentially technology a built

via the not are so network that we have that country, know player, the are you don't, a limitations market in national don't player, network have every as we regional we geographically, limitation. in we’re Secondly, had they a

different can network. Remedies program our then way So that their but Waste they're be can we alternative the we supported very types would know, for we upsell by service Green that recently, successful programs, recycling customer. by nationally, we're a can into that, sell, encouraged the service the And can and profile, as around national a well. you And one offered that's as wanted the to And numerous mention ability they is, stream. by profile, I a offer customers take sell singular last add with different we of thing high created so possibly

to that. pieces So Amit pretty are far to we impact to that be that's feel our going immediate close three really as much as ability

Amit Dayal

little Understood, place. working And positioned potential then we're PPP no cetera. there in put of et better been coming I'm challenges talked much starting cetera, we lockdowns thank you. to you are prepared, manage hurdles that to capital, if from or about bit et is I sort a mean, how see assuming we’re

Just trying taking in get you may all to maybe this? right what allow few sense of around months that just be next measures you of or to the through place uncertainty put steps a to

Laurie Latham

position but as in you flexible position, aware, our ABL, in our XXX% have sales flex, too. a as our very and in line So, Amit we're of we you're good SG&A and know, good is not cost of we only we're as are

types had already expense, of those on to controls many from maintain travel do maintained COVID. we So we've fibers, all continue we that can and low expenses

have the continue comfortable weather that will have can to from through COVID. bumps, those we So it very some feel still ability we to

Ray Hatch

But easier. cost and of even mentioned our highly Yes, business that. both the and Laurie serve. PPP. we're variable it enabled goods to for made as the think it’s without us, And almost necessary our need is it But it thankful on

Quest of that, of think the manufacturing, if mean And mention markets probably we're work the real as well, manufacturing, other probably what our maybe we types on happens food place. versus all is I way I of think it's No going also to get I to serve. we're So aspect want that mean, end grocery, we're that. tradition over than to no diversity these automotive, better I I there's we waver companies again, to some believe important to, not to matter to things anybody from the heavy

we end-market so segments that of type diversity these hesitancies, have And of come and like some since hammer that. impacts non-controllables from

when positioned variable So structure, think the client we of serve, regardless add well base what happens. we're our and diversity of really you cost I the that

Laurie Latham

I’m sorry, Amit. Please go ahead.

Ray Hatch

Operator. Amit, okay.

Operator

He’s MKH not responding. We'll go ahead from ahead. with and take George our next Melas go Please question Management.

George Melas

for my call. Could Thank a you. I you wins you remarks. bit? little mentioned talk the Thanks few think taking in prepared a

pipeline? You pipeline? stage, at last maybe QSR. also And what has wins Could that of are talked the maybe the the composition six in characterize evolved? about sort us the those evolved Or and of how has dealer months? understand prospects help pipeline how you in And the

Ray Hatch

asking you or part question, your me, picked were characterization? don't Yes, I you it restaurants QSR up think the I asked first about of and

George Melas

and few could us a you You bit that? a characterize about mentioned had that you tell wins, maybe little and that

Ray Hatch

well really Yes, Service which the will, franchisee mentioned the we've which a about potentially they grow, Quick all to the… QSR group, We win we they got Restaurant we're segment. believe in as excited did

Laurie Latham

Specialty retailer.

Ray Hatch

of are And Those for well. throughout locations got locations lot talking as boarding now. automotive three U.S. that the we're It's of on, that ton the retailer we which currently. of we specialty us with about the right a also of a pilot mentioned lot we're the While them, George, potential service a is company. It's then got brought

George Melas

maybe… And great. Okay,

Ray Hatch

answering George. Go ahead, was I I didn't questions, all your of finished kind though.

more Well, the haven't of they regardless of positive at of. maybe around. receptiveness out. pipeline we to thing, reiterate, people I situation seems meetings, this know I people be realize believe want virtual to at getting wonderful to place, and of are they to normalcy and me now, when and makes sense have much least I'm in come of end is a the things vaccines conversations to that take really tomorrow, On in there that to strong recent a going been you it yet? a the all I asked that with all to some and a environment face speculate news won the want we used here, business had about tunnel, day, be first are don't in dream shape light the to return to And going the

are incentive of considering get means and easier to that our So some maybe audiences some offerings. around

So all, first say conversation up back of would been to see, months. a I had nice that for of it's scaled starting quite number the

the that's the think pipeline. first indicator I on

on the we programs, the and opportunities food of that, lot the like in be guess pretty and it's beyond really, so before it's pipeline tracking move programs the place lot all diversion a of they over ability well. as again, really store, broad to automotive people the waste so part wanting didn't them Now restaurants of a to it, have have more type I food of waste There's opportunities. understanding engaged

to I about being are reason to moving new moving. it's And programs the it's more best think thing say about consider ways ours. having like or finding is open to people conversations the active it because is

George Melas

But anything maybe have done getting then one there that Quest thing have somewhat And Great. to done [indiscernible]. is terms quick differently you internal approach that of processes? and your sales in

Ray Hatch

activity changed of done sales we've bit, addition involves some got moved a a around, lot of marketing we've very an there really which the our programs. generation cost outreach cohesive we've, programs, joint Yes, we've marketing a lead actually that's we and actually systems made we've quite have,

So virtually, more and we're be to how George. more effective, learning

media maybe generation I access to before lot type think a really lot we've tools of but didn't companies probably social are, activities. the and lot we're had utilizing of use a of that lead a

say, modern I more we a age. stepped into little So us. activity opportunities think and want for And more I guess it's generating to I the

George Melas

much. very you Thank great. Okay,

Ray Hatch

George. you, Thank

Laurie Latham

Thank you.

Operator

We concludes today's today's appreciate question-and-answer And do conference that session your call. participation. and

You may lines. phone your now disconnect

Quest Resource Holding (QRHC) 16 Nov 202020 Q3 Earnings call transcript