• Revenue: $73.1 million, a 2% decrease year-over-year and a 1% increase sequentially.

• EBITDA: More than $5 million for the second consecutive quarter.

• Gross Profit: $13.5 million, flat year-over-year and sequentially.

• SG&A Expenses: $9.4 million, an increase of $200,000 year-over-year and a decrease of $400,000 sequentially.

• Cash from Operations: $807,000 generated in the second quarter.

• CapEx: $2.2 million for the quarter, $4.2 million year-to-date.

• Available Borrowing Capacity: $17.7 million on a $35 million operating line, $2.5 million on a $5 million term loan facility.

• Notes Payable: $73.8 million at the end of the quarter, up from $67.8 million at the beginning of the year.

• Warning! GuruFocus has detected 5 Warning Signs with QRHC.

Release Date: August 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Quest Resource Holding Corp (NASDAQ:QRHC) delivered strong results with over $5 million in EBITDA for the second consecutive quarter.

• The company has successfully implemented efficiency programs and organic growth initiatives, leading to a growing pipeline of new customers.

• QRHC achieved three seven-figure expansions with existing clients, demonstrating successful execution of their land and expand strategy.

• The company has increased its borrowing capacity and extended debt maturities, providing financial flexibility for future growth.

• QRHC's technology improvements, including AP automation, are expected to enhance operational efficiency and reduce costs, contributing to improved margins.

Negative Points

• Revenue growth was slower than expected due to customer-related delays in onboarding new clients.

• Lower-than-expected volumes from a large industrial client negatively impacted revenue and gross profit.

• Sequential gross profit growth was flat due to client-related delays and lower volumes from key clients.

• Accounts receivable days remained elevated, impacting cash flow, although this is expected to be temporary.

• The company faces challenges in achieving its target of 100% zero-touch invoice processing, with some hurdles remaining.

Q & A Highlights

Q: Can you confirm if the land and expand opportunities with existing clients this quarter are new, and how many similar opportunities do you see across your client base? A: Yes, the three expansions mentioned are new and incremental to the previous quarter. We see numerous opportunities as we continue to add high-quality clients with diverse needs, and our team expands its capabilities.

Q: Are you still targeting 80% zero-touch invoice processing by the end of this year, and how will this impact margins? A: We aim for 100% zero-touch, with near-term visibility to reach 80-90%. This will drive significant efficiencies, expected to start impacting margins by Q4, and fully realized early next year.