GlobeNewswire Inc | Nov 16, 2020 04:00PM EST

November 16, 2020

THE COLONY, Texas, Nov. 16, 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 third quarter ended September 30, 2020.

ThirdQuarter 2020 Highlights

-- Revenue was $23.7 million, a 0.9% decrease compared with the third quarter of 2019. -- Gross profit was $4.6 million, a 4.5% decrease compared with the third quarter of 2019. -- Gross margin was 19.2% of revenue, compared with 19.9% for the third quarter of 2019. -- Operating expenses decreased 2.4% to $4.4 million and included $355,000 ($0.02 per share) of professional fee expenses related to M&A related activities. -- Net (loss) income per share attributable to common stockholders was $(0.02) compared with $0.00 during the third quarter of 2019. Included within the net loss per share for the third quarter was a non-cash deemed dividend adjustment of $(205,000), or $(0.01) per share, attributable to a change in warrants issued in a March 2016 public offering of common stock. -- Adjusted EBITDA increased 15.0% to $989,000, compared with $860,000 during the third quarter of 2019.

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

-- Revenue was $71.0 million, a 6.6% decrease compared with the same period of 2019. -- Gross profit was $13.5 million, a 4.2% decrease compared with the same period of 2019. -- Gross margin was 19.0% of revenue, a 50 basis point improvement compared with 18.5% for the same period of 2019. -- Other income of $1.4 million, or $0.09 per share, represented the use of PPP Loan proceeds to fund eligible expenses under the CARES Act. -- Net income (loss) per share attributable to common shareholders improved to $0.04, compared with $(0.01) during the same period of 2019. Included within the net loss per share for the third quarter was a non-cash deemed dividend adjustment of $(205,000), or $(0.01) per share, attributable to anti-dilution provisions of warrants issued in a March 2016 public offering of common stock. -- Year-to-date Adjusted EBITDA was $2.7 million, a 7.4% increase compared to the same period of 2019.

We delivered 15% growth in Adjusted EBITDA during the third quarter, reflecting stability in our customer base, our flexible cost structure, and a tight control over costs. While customer activity levels in those end markets that were most severely impacted by COVID-19 are still below last year, volumes have improved sequentially and are stabilizing. Partially offsetting the headwind in these markets, we continue to see strength in other areas, such as grocery and specialty retail, which make up a large portion of our overall mix, said S. Ray Hatch, President and Chief Executive Officer. While there is still near-term uncertainty regarding the direction and pace of an economic recovery, we are encouraged that since the end of the quarter, we have seen pockets of growth from the expansion of programs with existing customers and the movement of new opportunities in our sales pipeline.

In addition, we completed our first acquisition as part of our broader M&A strategy, further leveraging the scale and scope of our national service platform. The acquisition of Green Remedies Waste & Recycling brings the potential for additional growth in an attractive end market, as well as significant EBITDA contribution. We expect that continued support of our customers, organic growth opportunities in our pipeline, and contributions from acquisitions like Green Remedies provide diversified revenue mix, ongoing revenue and gross profit growth, increased profitability through operating leverage, and attractive shareholder returns.

Third Quarter 2020 Earnings Conference Call and Webcast

Quest will conduct a conference call today, November 16, 2020, at 5:00 PM ET, to review the financial results for the third quarter ended September 30, 2020. Investors interested in participating on the live call can dial 1-866-548-4713 within the U.S. or 1-323-794-2093 from abroad, referencing conference ID: 2631839. The conference call, which may include forward-looking statements, is also being webcast and is available via the investor relations section of Quests website at http://investors.qrhc.com/. A replay of the webcast will be archived on Quests 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, Quests 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 Quests 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.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 belief we have operations in place to sustainably support profitability while consistently providing excellent customer service; our belief that our outlook for growth from our existing customer base remains solid and our pipeline of new business is growing; our belief that our acquisition of Green Remedies brings the potential for additional growth and significant EBITDA contribution; our expectation that continued support of our customers, organic growth opportunities in our pipeline, and contributions from acquisitions like Green Remedies provide diversified revenue mix, ongoing revenue and gross profit growth, increased profitability through operating leverage, and attractive shareholder returns; 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, LLCJoe Noyons 817.778.8424

Quest Resource Holding Corporation and Subsidiaries

STATEMENTS OF OPERATIONS(Unaudited)(In thousands, except per share amounts)

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Revenue $ 23,701 $ 23,926 $ 71,002 $ 76,020 Cost of revenue 19,144 19,154 57,527 61,956 Gross profit 4,557 4,772 13,475 14,064 Selling, general, and 4,291 4,221 12,678 12,663 administrativeDepreciation and 150 330 818 982 amortizationTotal operating 4,441 4,551 13,496 13,645 expensesOperating income (loss) 116 221 (21 ) 419 Other income 150 ? 1,408 ? Interest expense (73 ) (119 ) (244 ) (344 ) Loss on extinguishment (168 ) ? (168 ) ? of debtIncome before taxes 25 102 975 75 Income tax expense 92 55 64 165 Net income (loss) $ (67 ) $ 47 $ 911 $ (90 )

) (205 (205 ) ? Deemed dividend forwarrant down round ?featureNet income (loss) )applicable to common $ (272 $ 47 $ 706 $ (90 )stockholdersNet income (loss) per common share:Basic $ (0.02 ) $ 0.00 $ 0.04 $ (0.01 )Diluted $ (0.02 ) $ 0.00 $ 0.04 $ (0.01 ) Weighted average numberof common shares outstanding:Basic 17,290 15,350 16,055 15,340 Diluted 17,290 15,399 16,070 15,340

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

Three Months Ended Nine Months Ended September 30, September 30, 2020 2019 2020 2019 Net income (loss) $ (67 ) $ 47 $ 911 $ (90 )Depreciation and amortization 176 354 872 1,056 Interest expense 73 119 244 344 Stock-based compensation expense 324 285 1,101 758 Other adjustments 391 ? (528 ) 248 Income tax expense 92 55 64 165 Adjusted EBITDA $ 989 $ 860 $ 2,664 $ 2,481

BALANCE SHEETS(In thousands, except per share amounts)

September December 30, 31, 2020 2019 (Unaudited )ASSETS Current assets: Cash and cash equivalents $ 6,427 $ 3,411 Accounts receivable, less allowance for doubtfulaccounts of $873and $767 as of September 30, 15,151 13,900 2020 and December 31, 2019, respectivelyPrepaid expenses and other current assets 1,343 1,110 Total current assets 22,921 18,421 Goodwill 58,208 58,208 Intangible assets, net 915 1,591 Property and equipment, net, and other assets 2,545 2,436 Total assets $ 84,589 $ 80,656 LIABILITIES AND STOCKHOLDERS? EQUITY Current liabilities: Accounts payable and accrued liabilities $ 13,011 $ 13,317 Deferred revenue and other current liabilities 22 19 Total current liabilities 13,033 13,336 Revolving credit facility, net 4,163 4,535 Other long-term liabilities 659 1,141 Total liabilities 17,855 19,012 Commitments and contingencies Stockholders? equity: Preferred stock, $0.001 par value, 10,000 sharesauthorized, noshares issued or outstanding as of ? ? September 30, 2020 and December 31, 2019Common stock, $0.001 par value, 200,000 sharesauthorized, 18,381 and 15,373 shares issued and 18 15 outstanding asof September 30, 2020 and December31, 2019, respectivelyAdditional paid-in capital 165,239 160,858 Accumulated deficit (98,523 ) (99,229 )Total stockholders? equity 66,734 61,644 Total liabilities and stockholders? equity $ 84,589 $ 80,656