8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of report (Date of earliest event reported): November 14, 2023

QUEST RESOURCE HOLDING CORPORATION

(Exact Name of Registrant as Specified in Its Charter)

Nevada	001-36451	51-0665952
(State or other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

3481 Plano Parkway, The Colony, Texas	75056
(Address of Principal Executive Offices)	(Zip Code)

Registrant’s telephone number, including area code: (972) 464-0004

(Former name or former address if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the follow provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	QRHC	The NASDAQ Stock Market LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).

Emerging growth company ☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Item 2.02 Results of Operations and Financial Condition.

We are furnishing this Current Report on Form 8-K in connection with the disclosure of information, in the form of the textual information from a press release released on November 14, 2023.

The information in this Current Report on Form 8-K (including the exhibit) is furnished pursuant to Item 2.02 and shall not be deemed to be “filed” for the purpose of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section.

We do not have, and expressly disclaim, any obligation to release publicly any updates or any changes in our expectations or any change in events, conditions, or circumstances on which any forward-looking statement is based.

The text included with this Current Report on Form 8-K is available on our website located at http://investors.qrhc.com/, although we reserve the right to discontinue that availability at any time.

Item 9.01. Financial Statements and Exhibits.

(d) Exhibits.

Exhibit No.	Description
99.1	Press Release from Quest Resource Holding Corporation, dated November 14, 2023, entitled “Quest Resource Holding Corporation Reports Third Quarter 2023 Financial Results”
104	Cover Page Interactive Data File (embedded within the Inline XBRL document)

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

	QUEST RESOURCE HOLDING CORPORATION
Dated: November 14, 2023	By:	/s/ S. Ray Hatch
		Name:	S. Ray Hatch
		Title:	President and Chief Executive Officer

EX-99.1

 

Exhibit 99.1

Quest Resource Holding Corporation Reports Third Quarter 2023 Financial Results

THE COLONY, TX – November 14, 2023 – Quest Resource Holding Corporation (NASDAQ: QRHC) ("Quest"), a national leader in environmental waste and recycling services, today announced financial results for the third quarter ended September 30, 2023.

Third Quarter 2023 Highlights

•Revenue was $70.4 million, a 4.0% decrease compared with the third quarter of 2022.

•Gross profit was $12.4 million, a 2.0% increase compared with the third quarter of 2022.

•Gross margin was 17.7% of revenue compared with 16.6% during the third quarter of 2022.

•GAAP net loss per diluted share attributable to common stockholders was $(0.10), compared with $(0.09) per diluted share during the third quarter of 2022.

•Adjusted EBITDA was $3.7 million, compared with $3.8 million during the third quarter of 2022.

•Adjusted net income per diluted share was $0.02 compared with adjusted net income of $0.04 per diluted share during the third quarter of 2022.

Year-to-Date 2023 Highlights (September 30, 2023) 

•Revenue was $219.0 million, a 1.2% decrease compared with the same period of 2022. 

•Gross profit was $38.6 million, a 1.2% increase compared with the same period of 2022. 

•Gross margin was 17.6% of revenue compared to 17.2% during the same period of 2022.

•GAAP net loss per diluted share attributable to common stockholders was $(0.25), compared with $(0.14) during the same period of 2022. 

•Year-to-date Adjusted EBITDA was $12.7 million, compared to $14.1 million during the same period of 2022. 

•Adjusted net income per diluted share was $0.12, compared with $0.29 per diluted share during the same period of 2022.

“Gross profit dollars for the third quarter increased slightly in comparison with the prior year but were below our expectations for sequential growth. We estimate that gross profit dollar contribution from RWS was approximately $800,000 below our expectations. This included approximately $500,000 of unfavorable adjustments to costs of sales, which were identified during the process of completing the systems integration of RWS. In addition, we had a billing adjustment of approximately $400,000 for a large, quickly-ramping customer. Excluding these adjustments, our business performed well and was in line with results from the second quarter. We’ve taken action to improve the efficiencies of RWS and estimate $1.7 million in annualized cost savings beginning in the fourth quarter of this year.” said S. Ray Hatch, President and Chief Executive Officer of the Company.

“While the pace of adding new business has been slower than we would have liked, we are encouraged by recent progress and expect sequential growth in gross profit dollars for the fourth quarter. Additionally, in recent months we have seen a noticeable uptick in the number and size of opportunities in our pipeline. Due to our initiatives, we expect to end the year strong, as a ramp of new business from both new and existing customers offsets what is normally a seasonally weaker quarter. In addition, we continue to build our operating platform, investing in capabilities, which will enable us to drive operating efficiencies and to continually enhance our customer service. Importantly, our outlook for profitable growth in fourth quarter and 2024 remains positive.”

Third Quarter 2023 Earnings Conference Call and Webcast

Quest will conduct a conference call on Tuesday, November 14, 2023, at 5:00 PM ET, to review the financial results for the third quarter ended September 30, 2023. Investors interested in participating on the live call can dial 1-855-327-6837 or 1-631-891-4304. 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. 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, non-GAAP financial measures, "Adjusted EBITDA," and “Adjusted Net Income” are presented. From time-to-time, Quest considers and uses these supplemental measures 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 these non-GAAP measures because it considers them an important supplemental measure of Quest's performance. Quest's definition of these adjusted financial measures may differ from similarly named measures used by others. Quest believes these measures facilitate 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. These non-GAAP measures have limitations as an analytical tool and should not be considered in isolation or as a substitute for the Company's GAAP measures. (See attached tables "Reconciliation of Net Loss to Adjusted EBITDA" and “Adjusted Net Income Per Share”).

About Quest Resource Holding Corporation

Quest is a national provider of waste and recycling services that enable larger businesses to excel in achieving their environmental and sustainability goals and responsibilities. Quest delivers focused expertise across multiple industry sectors to build single-source, client-specific solutions that generate quantifiable business and sustainability results. Addressing a wide variety of waste streams and recyclables, Quest provides information and data that tracks and reports the environmental results of Quest’s services, gives actionable data to improve business operations, and enables Quest’s clients to excel in their business and sustainability 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. The forward-looking statements include, but are not limited to, our expectation that our momentum will continue through the rest of the year, our belief that we are well positioned to continue to weather a challenging economic environment, execute our growth strategies and our positive outlook for profitable growth during 2023 and the next year. 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, the spread of major epidemics (including Coronavirus) and other related uncertainties such as government-imposed travel restrictions, interruptions to supply chains, commodity price fluctuations, and extended shut down of businesses, and other factors discussed in greater detail in our filings with the Securities and Exchange Commission (“SEC”), including our Annual Report on Form 10-K for the year ended December 31, 2022. 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 September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Revenue	$	70,425		$	73,358		$	219,036		$	221,785
Cost of revenue		57,995			61,175			180,471			183,685
Gross profit		12,430			12,183			38,565			38,100
Selling, general, and administrative		9,620			9,333			28,250			27,976
Depreciation and amortization		2,342			2,473			7,219			7,308
Total operating expenses		11,962			11,806			35,469			35,284
Operating income		468			377			3,096			2,816
Interest expense		(2,408	)		(1,911	)		(7,407	)		(5,057	)
Loss before taxes		(1,940	)		(1,534	)		(4,311	)		(2,241	)
Income tax expense		111			152			650			479
Net loss	$	(2,051	)	$	(1,686	)	$	(4,961	)	$	(2,720	)
Net loss applicable to common stockholders	$	(2,051	)	$	(1,686	)	$	(4,961	)	$	(2,720	)
Net loss per common share:
Basic	$	(0.10	)	$	(0.09	)	$	(0.25	)	$	(0.14	)
Diluted	$	(0.10	)	$	(0.09	)	$	(0.25	)	$	(0.14	)
Weighted average number of common shares outstanding:
Basic		20,060			19,368			19,985			19,298
Diluted		20,060			19,368			19,985			19,298

RECONCILIATION OF NET LOSS TO ADJUSTED EBITDA

(Unaudited)

(In thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Net loss	$	(2,051	)	$	(1,686	)	$	(4,961	)	$	(2,720	)
Depreciation and amortization		2,438			2,554			7,486			7,541
Interest expense		2,408			1,911			7,407			5,057
Stock-based compensation expense		289			413			950			998
Acquisition, integration, and related costs		374			327			1,026			2,301
Other adjustments		141			176			172			485
Income tax expense		111			152			650			479
Adjusted EBITDA	$	3,710		$	3,847		$	12,730		$	14,141

ADJUSTED NET INCOME (LOSS) PER SHARE

(Unaudited)

(In thousands)

	Three Months Ended September 30,						Nine Months Ended September 30,
	2023			2022			2023			2022
Reported net loss (1)	$	(2,051	)	$	(1,686	)	$	(4,961	)	$	(2,720	)
Amortization of intangibles (2)		2,224			2,222			6,668			6,617
Acquisition, integration, and related costs (3)		374			327			1,026			2,301
Other adjustments (4)		2			—			(75	)		—
Adjusted net income	$	549		$	863		$	2,658		$	6,198
Diluted earnings (loss) per share:
Reported net loss	$	(0.10	)	$	(0.09	)	$	(0.25	)	$	(0.14	)
Adjusted net income	$	0.02		$	0.04		$	0.12		$	0.29
Weighted average number of common shares outstanding:
Diluted (5)		22,425			21,642			22,218			21,575

(1) Applicable to common stockholders

(2) Reflects the elimination of non-cash amortization of acquisition-related intangible assets

(3) Reflects the add back of acquisition/integration related transaction costs

(4) Reflects adjustments to earn-out fair value

(5) Reflects adjustment for dilution when adjusted net income is positive

BALANCE SHEETS

(In thousands, except per share amounts)

	September 30,			December 31,
	2023			2022
	(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	870		$	9,564
Accounts receivable, less allowance for doubtful accounts of $2,357    and $2,176 as of September 30, 2023 and December 31, 2022, respectively		49,932			45,891
Prepaid expenses and other current assets		2,746			2,310
Total current assets		53,548			57,765
Goodwill		84,258			84,258
Intangible assets, net		27,768			33,557
Property and equipment, net, and other assets		4,866			5,911
Total assets	$	170,440		$	181,491
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	40,916		$	32,207
Other current liabilities		2,498			4,689
Current portion of notes payable		1,159			1,159
Total current liabilities		44,573			38,055
Notes payable, net		56,786			70,573
Other long-term liabilities		1,396			1,724
Total liabilities		102,755			110,352
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000 shares authorized, no shares    issued and outstanding as of September 30, 2023 and December 31, 2022		—			—
Common stock, $0.001 par value, 200,000 shares authorized,    19,960 and 19,696 shares issued and outstanding as    of September 30, 2023 and December 31, 2022, respectively		20			20
Additional paid-in capital		175,383			173,876
Accumulated deficit		(107,718	)		(102,757	)
Total stockholders’ equity		67,685			71,139
Total liabilities and stockholders’ equity	$	170,440		$	181,491

# # #

XML

Cover	Nov. 14, 2023
Cover [Abstract]
Document Type	8-K
Amendment Flag	false
Document Period End Date	Nov. 14, 2023
Entity File Number	001-36451
Entity Registrant Name	QUEST RESOURCE HOLDING CORPORATION
Entity Central Index Key	0001442236
Entity Tax Identification Number	51-0665952
Entity Incorporation, State or Country Code	NV
Entity Address, Address Line One	3481 Plano Parkway
Entity Address, City or Town	The Colony
Entity Address, State or Province	TX
Entity Address, Postal Zip Code	75056
City Area Code	(972)
Local Phone Number	464-0004
Written Communications	false
Soliciting Material	false
Pre-commencement Tender Offer	false
Pre-commencement Issuer Tender Offer	false
Title of 12(b) Security	Common Stock, $0.001 par value
Trading Symbol	QRHC
Security Exchange Name	NASDAQ
Entity Emerging Growth Company	false