qrhc-ex991

The Colony, Texas – August 15, 2016 – Quest Resource Holding Corporation (Nasdaq: QRHC) (“Quest”), a leader in sustainability, recycling, and resource management, today announced financial results for the second quarter ended June 30, 2016.

Ray Hatch, President and Chief Executive Officer, commented, "Although there is more to do, we have begun to observe positive results from the initiatives we launched this year. While second quarter revenue was up double-digits and user service locations increased by 4,000 from June 30, 2015 to 2016, we were even more pleased to see our gross profit for the second quarter of 2016 improve by $238,000 compared with the second quarter of 2015. In addition, our Adjusted EBITDAS for the second quarter of 2016 improved by $227,000 compared with the first quarter of 2016. We believe this gross profit improvement validates our strategy to focus on market-driven, complex, non-commodity tasks to sustain Quest’s long-term success.”

Mr. Hatch continued, "We demonstrated the breadth and depth of our business model to provide value to our customers by delivering innovative solutions, including the following:

"We will continue to develop industry transforming solutions and deliver innovations designed to drive continued margin improvement in future quarters," concluded Mr. Hatch.

For the quarter ended June 30, 2016, revenue was $46.8 million, an increase of $4.5 million, or 10.7%, compared with $42.3 million for the quarter ended June 30, 2015. The increase was primarily due to a combination of new and expanded services with customers added after the second quarter of 2015.

Cost of revenue increased $4.3 million to $43.2 million for the quarter ended June 30, 2016 from $38.9 million for the quarter ended June 30, 2015. The increase related primarily to the cost of servicing the new and expanded services with customers added after the second quarter of 2015. Gross profit increased $238,000 to $3.7 million for the quarter ended June 30, 2016 from $3.4 million for the quarter ended June 30, 2015.

For the quarter ended June 30, 2016, operating expenses increased $767,000 to $5.6 million from $4.9 million for the comparable quarter in 2015. The increase related primarily to an increase in stock-related compensation of $209,000 and in selling, general, and administrative expenses of approximately $350,000 for integrating and servicing an increased number of customer locations in the quarter ended June 30, 2016. Operating expenses also included depreciation and amortization of $1.0 million for the quarters ended June 30, 2016 and 2015.

Net loss for the quarter ended June 30, 2016 was $(2.0) million compared with a net loss of $(1.5) million for the quarter ended June 30, 2015. Net loss per basic and diluted share was $(0.14) for the quarter ended June 30, 2016 compared with a net loss per basic and diluted share of $(0.11) for the quarter ended June 30, 2015.

Adjusted EBITDAS was a loss of $(394,000) for the quarter ended June 30, 2016 compared with a loss of $(149,000) for the quarter ended June 30, 2015. (See attached table "Reconciliation of Net Loss to Adjusted EBITDAS.")

In this press release, a non-GAAP financial measure, "Adjusted EBITDAS," 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 and other expense, (iii) stock-based compensation expense, and (iv) income tax expense, and (2) non-GAAP measures that exclude such information. 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 Loss to Adjusted EBITDAS.")

Quest provides businesses with one-stop management programs to reuse, recycle, and dispose of a wide variety of waste streams and recyclables generated by their businesses. Quest’s comprehensive reuse, recycling, and proper disposal management programs are designed to enable regional and national customers to have a single point of contact for managing a variety of waste streams and recyclables. Quest also operates environmentally based social media and online data platforms that contain information and instructions necessary to empower consumers and consumer product companies to recycle or properly dispose of household products and materials. Quest’s directory of local recycling and proper disposal options empowers consumers directly and enables consumer product companies to empower their customers by giving them the guidance necessary for the proper recycling or disposal of a wide range of household products and materials, including the “why, where, and how” of recycling.

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 statements or expectations regarding our belief that we have begun to observe positive results from initiatives launched earlier in the year; our belief that we have demonstrated the breadth and depth of our business model to provide value to our customers by delivering various innovative solutions; and our belief that we will continue to develop industry transforming solutions and deliver innovations designed to drive continued margin improvement in future quarters. 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, 2015. 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.

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Revenue	$	46,844		$	42,330		$	92,615		$	82,339
Cost of revenue		43,189			38,914			85,474			75,637
Gross profit		3,655			3,416			7,141			6,702
Selling, general, and administrative		4,638			3,906			9,293			7,683
Depreciation and amortization		1,008			972			2,026			1,951
Total operating expenses		5,646			4,878			11,319			9,634
Operating loss		(1,991	)		(1,462	)		(4,178	)		(2,932	)
Interest expense		(57	)		(42	)		(114	)		(91	)
Income tax expense		—			—			—			—
Net loss	$	(2,048	)	$	(1,504	)	$	(4,292	)	$	(3,023	)
Net loss applicable to common stockholders	$	(2,048	)	$	(1,504	)	$	(4,292	)	$	(3,023	)
Net loss per common share:
Basic and diluted	$	(0.14	)	$	(0.11	)	$	(0.30	)	$	(0.22	)

Weighted average number of common shares outstanding:
Basic and diluted		14,840			13,961			14,409			13,957

	Three Months Ended						Six Months Ended
	June 30,						June 30,
	2016			2015			2016			2015
Net loss	$	(2,048	)	$	(1,504	)	$	(4,292	)	$	(3,023	)
Depreciation and amortization		1,047			972			2,074			1,951
Interest expense		57			42			114			91
Stock-based compensation expense		550			341			1,089			626
Income tax expense		—			—			—			—
Adjusted EBITDAS	$	(394	)	$	(149	)	$	(1,015	)	$	(355	)

	June 30,			December 31,
	2016			2015
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents	$	2,025		$	2,989
Accounts receivable, less allowance for doubtful accounts of $163 and $587 as of June 30, 2016 and December 31, 2015, respectively		35,567			33,299
Prepaid expenses and other current assets		1,775			947
Total current assets		39,367			37,235

Goodwill		58,337			58,337
Intangible assets, net		10,201			11,828
Property and equipment, net, and other assets		2,298			1,609
Total assets	$	110,203		$	109,009

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable and accrued liabilities	$	36,142		$	34,847
Deferred revenue and other current liabilities		467			329
Total current liabilities		36,609			35,176

Line of credit		4,000			4,000
Other long-term liabilities		388			341
Total liabilities		40,997			39,517

Commitments and contingencies

Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000 shares authorized, no shares issued or outstanding as of June 30, 2016 and December 31, 2015		—			—
Common stock, $0.001 par value, 200,000 shares authorized, 14,845 and 13,974 shares issued and outstanding as of June 30, 2016 and December 31, 2015, respectively		15			14
Additional paid-in capital		156,352			152,347
Accumulated deficit		(87,161	)		(82,869	)
Total stockholders’ equity		69,206			69,492
Total liabilities and stockholders’ equity	$	110,203		$	109,009