Quest Resource Holding Corp Q3 FY2024 earnings call

• Record level of new client onboarding activity and implementation of a new automated vendor management system. • Positive feedback from new clients on smooth onboarding transitions, bolstering the company's reputation. • Technology platform enhancements, including the new automated vendor management solution, expected to drive $2 million to $3 million in recurring cost savings. • Growth sources include existing clients, new clients, ramp of new business secured in 2024, prospect pipeline, and optimization of gross profit dollars through cost-side improvements. • Strong execution in onboarding new clients, with reduced error rates in the vendor management system as it becomes fully operational.

Revenue for the third quarter was $72.8 million, a 3.3% increase year-over-year and roughly flat sequentially from the second quarter. New and existing clients contributed $16 million to third quarter revenue. Gross profit dollars were $11.7 million, a 5.9% decrease from the previous year and a 13.5% decrease sequentially from the second quarter. New clients added in 2024 generated approximately 60% of their anticipated full year revenue run rate during the third quarter.

• Expect to realize more than $20 million in net incremental revenue from new client wins in 2025, less customer attrition. • Expect to complete debt refinancing by the end of the year, anticipating significant reduction in interest rates and improved terms. • Continued focus on efficiency initiatives and operating leverage to drive profitability improvements. • Optimism about future growth despite current quarter's challenges, with strong fundamentals and a robust pipeline.

• Temporary increase in costs related to implementing the new automated vendor management system, including data errors causing service disruptions and temporary higher costs to maintain service levels. • Higher-than-anticipated billing credits due to data discrepancies between clients and vendors. • Economic headwinds in the industrial end market impacting certain clients' volumes and revenue. • Potential impact of election or policy changes on sustainability-focused business, though landfills are predominantly regulated at the state and municipal level.

Q: Gregg Kitt asked about the resolution of issues and why investors should own the stock now A: Ray Hatch stated impact items are controllable and non-controllable; controllables have action plans in place, non-controllables include industrial market challenges but strong companies will rebound; emphasized new clients, pipeline, and efficiency initiatives as reasons for optimism