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):  August 15, 2016
 
QUEST RESOURCE HOLDING CORPORATION
(Exact Name of Registrant as Specified in 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
 
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 following provisions:
o	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)	
o	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)	
o	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))	
o	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))	

 

 
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 August 15, 2016.
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 www.qrhc.com, although we reserve the right to discontinue that availability at any time.
 
Item 9.01.  Financial Statements and Exhibits.
 	(a)	Financial Statements of Business Acquired .	
Not applicable.
 	(b)	Pro Forma Financial Information .	
Not applicable.
 	(c)	Shell Company Transactions .	
Not applicable.
 	(d)	Exhibits.	
 
Exhibit
Number	 	Exhibits	
99.1	 	Press Release from Quest Resource Holding Corporation, dated August 15, 2016, entitled “Quest Resource Reports Second Quarter 2016 Results”  	

 

 
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.
 
Date: August 15, 2016	 	 	 	QUEST RESOURCE HOLDING CORPORATION	
 	 	 	 	
 	 	 	 	By:	 	/s/ S. Ray Hatch	
 	 	 	 	 	 	S. Ray Hatch	
 	 	 	 	 	 	President and Chief Executive Officer	

 

EXHIBIT INDEX
 
99.1	Press Release from Quest Resource Holding Corporation, dated August 15, 2016, entitled “Quest Resource Reports Second Quarter 2016 Results”   	

 
Exhibit 99.1

Quest Resource Reports Second Quarter 2016 Results

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.
Second Quarter 2016 Operational Highlights
 	·	Increased revenue by $4.5 million, or 10.7%, to $46.8 million for the second quarter of 2016 over the comparable quarter last year	
 	·	Improved gross profit by $238,000 for the quarter ended June 30, 2016 from the comparable quarter in 2015	
 	·	Expanded portfolio of customer user service locations (number of customers x locations per customer x services per location) to approximately 96,000 at the end of the second quarter	
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:  

 	·	developing a turnkey solution for automotive dealerships to manage the Takata airbag recall,	
 	·	implementing comprehensive food-waste recycling programs with two of the nation’s largest grocers to reduce punitive taxes and comply with newly enacted regulations, and	
 	·	deploying our vendor network to transition a customer’s full service line within 24 hours.”	
"We will continue to develop industry transforming solutions and deliver innovations designed to drive continued margin improvement in future quarters," concluded Mr. Hatch.
Second Quarter Financial Results
Revenue
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 and Gross Profit
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.

 
Operating Expenses
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 and Net Loss per Share
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.
EBITDAS
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.")
For more information on Quest, visit www.QRHC.com.
Reconciliation of U.S. GAAP to Non-GAAP Financial Measures
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.")
About Quest Resource Holding Corporation
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.
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 statements or expectations regarding our belief that we have be gun 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 d etail 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 r isks 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:
 
John Liviakis
Liviakis Financial
415-389-4670
john@liviakis.com
 
Financial Tables Follow

 
Quest Resource Holding Corporation and Subsidiaries
OPERATING HIGHLIGHTS
(Unaudited)
(In thousands, except per share amounts)
 
 	 	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	 	
 
RECONCILIATION OF NET LOSS TO ADJUSTED EBITDAS
(Unaudited)
(In thousands)
 
 	 	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	)	

 
BALANCE SHEETS
(In thousands)
 
 	 	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	 	
 
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