Good day and welcome to the Quest Resource Holding Corp. Fourth Quarter and Full-Year 2014 Conference Call. Today’s conference is being recorded. At this time, I would like to turn the conference over to Mr. Rob Fink, Hayden IR. Please go ahead.

Thank you, Operator. I would like to welcome everyone to Quest fourth quarter and full year 2014 earnings call. Hosting the call today are Brian Dick, President and Chief Executive Officer and Laurie Latham, Senior Vice President and Chief Financial Officer. Before I turn the call over to Management, I'd like to remind everyone that this conference call may contain predictions, estimates, and other forward-looking statements regarding future events or future performance of Quest. Use of words like anticipate, project, estimate, expect, intend, believe and other similar expressions is intended to identify those forward-looking statements. Forward-looking statements also include statements regarding Quest's future opportunities for growth, Quest's expectation for revenues, margins and profitability in the future, Quest's industry position and industry trends and future opportunities related to Quest's e-commerce website and comprehensive global directory. Such forward-looking statements represent Quest’s current judgment about the future and they are subject to various risks and uncertainties. Risk factors and other considerations that could cause Quest's actual results to be materially different are described in Quest's Securities filings including its Forms 10-K, 10-Q and 8-K. You can find those documents on Quest's website at www.qrhc.com. Quest does not assume any obligation to update that information. Actual events or results may differ materially from those projected including, as a result of changing market trends, reduced demand and competitive nature of Quest's industries. In addition to this conference call we'll include a substantial amount of industry and market data and other statistical information as well as Quest's observations and views about industry conditions and developments. The data and information are based on Quest's estimate, independent publications, government publications, reports by market research firms and other sources. Although Quest believes these sources are reliable and the data and other information are accurate, we caution that Quest does not independently verify the reliability of these sources or the accuracy of information. In addition Quest's observations and views about industry position and development are its own and may not be supported by or agreed with by other industry participants and observers. Certain non-GAAP financial measures will be discussed during this call. These non-GAAP measures are used by management to make strategic decisions, forecast future results and evaluate the company's current performance. Management believes the presentation of these non-GAAP financial measures will be useful to investors understanding and assessment of the company to ongoing core operations and prospects for the future. Unless it is otherwise stated it should be assumed that any financials discussed in this conference call will be on a non-GAAP basis. A full reconciliation of non-GAAP to GAAP financial measures are included in the earnings [report]. With all that said I'd now like to introduce Brian Dick and turn the call over to him. Brian the call is yours.

Thanks Rob. Good afternoon and welcome to Quest's inaugural quarterly earnings call and webcast. Thank you all for joining us today. Twenty fourteen was a very productive and successful year for Quest as we more than doubled our previous year's reported revenue with 174.5 million of revenue generated as well as generated positive EBITDA of 1.4 million which was an improvement of more than 9 million over the prior year. We significantly strengthened our balance sheet with the successful completion of a public offering that raised $16.3 million in net proceeds that were used to retire outstanding debt and add capital to our balance sheet. During 2014 we added a significant number of new clients reducing our overall concentration risk and adding higher margin business to our overall portfolio to establish a basis for continued margin improvement over time. At the same time the number of client locations, a key operating metric and leading indicator of our future results rose from over 15,000 unique locations at the end of 2013 to over 20,000 locations at the end of 2014. Subsequent to year-end we topped the 32,000 location marker before the end of the first quarter in 2015. Quest is well positioned to contain this growth and expansion as we aim to reach 500 million in revenue, expand our margins and achieve sustainable profitability in the next two to four years. Before we get into a more detailed review of the quarter and the full year, since this is our first earnings call, I'd like to take a minute to provide everyone and particularly those who maybe new to our company, a brief history of our business and some inside into the market as well as key catalyst that we believe will drive sustainable long-term profitability for our company. I was…

Well, thank you Brian and good afternoon to all of you on the call today. Revenues for the fourth quarter reached 46.8 million compared with 37.9 million for the corresponding period in 2013, an increase of 23.5% driven primarily by organic growth in recycling and waste service fees and commodity revenue. Gross margin for the quarter was 7.6% compared with 4.9% for the corresponding period last year. Earnings before interest, taxes, depreciation, amortization and stock related non-cash charges or EBITDA was a loss of 412,000 for the fourth quarter of 2014 compared with a loss of 874,000 in the fourth quarter of 2013. The improvement was primarily driven by a decrease in net loss coupled with lower interest expense as a result of retiring 22 million in debt in September of 2014. That was partially offset by slightly higher depreciation and amortization and an increase in stocked-based compensation. We compute EBITDA, which is a non-GAAP financial measure, as reflected in today’s press release reconciliation table to provide additional insight into our financial performance. The loss per basic and diluted share was $0.02 for the fourth quarter of 2014 compared with the loss per basic and diluted share of $0.04 for the fourth quarter of 2013. For the 2014 year, revenue increased by 106.9 million or 158.4% increase to 174.5 million up from 67.5 million in 2013. The increase was primarily due to a 38.5 million or 28% organic growth increase in service and commodity revenue from the prior year and a 68.9 million increase from consolidating a full year of the recycling and waste services fees in 2014 compared with a partial year in 2013, which was subsequent to our acquisition of Quest Resource Management Group which occurred on July 16, 2013. This growth in revenue has reduced our customer…

Thank you. (Operator Instructions) We’ll take our first question from William Bremer with Maxim Group.

Very nice granularity on the underlying business, Brian, appreciated. You also mentioned you added some higher margin businesses during the quarter. Can you touch base on that a little bit?

Well as we talked about in our release the single stream typical commodities like cardboard, plastics those things as well as solid waste are very competitive and that is where we do see our lowest margins. Where we see our larger margins and our ability to expand is in our specialty services, so certainly we see the opportunity in the hazardous waste space for retailers as that one of the specialty services, as well as our food waste recovery and recycling businesses that we feel we have a unique position in and really is being driven now from a regulatory standpoint to drive this food waste out of recycling landfill. So as usual we can’t predict where new business is going to come from, but we do see a lot of positive movement towards interest in our specialty services like hazardous waste and food waste.

My next question is based on just the overall, what we’re seeing in the G&A expenses that came in a little bit higher than what I was anticipating for the quarter at $4.4 million. Just wondering and maybe this is a question for Laurie, is that sort of the run rate I should be using going forward or was there some type of maybe one time charges that affected the fourth quarter both year-over-year and sequentially?

Well, we have had a lot of growth in our business so we have had an increase just year-over-year with the increased operational people we’ve added. But in addition to that, especially if you look at compared to Q3, in Q3 we did have a pickup in our expenses from a benefit of subleasing our old space in Phoenix and that was over $500,000 and is a one-time occurrence but that did reduce our expenses in Q3. One of the other things that will fluctuate quarter-to-quarter to some level is the capitalized software developments that we do, some quarters it will be higher and as far as sort of capitalized some quarters it’s lower and in Q4 it was lower. So the only other additional thing that happened in Q4 is we did experience a little higher level of bad debt expense and although it’s something that is really even significant in comparison to our revenues that we did scrub through some of our accounts and went ahead and did some reserving on some of those bad debts.

Okay, so what type of level should we have a run rate going forward throughout 2015 then on SG&A?

Well, I think that Q4 is a pretty good representation. It will probably fluctuate like I said up and down from that level and if we continue to add substantial levels of clients, we will have some increase in our operating personnel cost.

Okay, and so looking at your gross margins Brian and Laurie, you just voiced about the-- and we’re all cognizant of the underlying commodities. Is it fair to assume that first quarter and maybe the first half of the year will be sort of in the same type of gross margin range as this fourth quarter came in?

I think our gross margins are dictated by our customer mix and obviously what service lines are coming in. With the downturn of the used oil revenue from the commodity market, we will see lowered revenue but because of our business model and the strength that it provides us of not having inventory and not being in a hedge situation, we will actually see an increased margin that from activity due to the lower revenue, so we do have that fixed fee if you will in between or fixed percentage of a marketed scale that will increase our margin by percentage, and as you have seen from our recent releases, our entrée into the hazardous waste space, we feel is again one of those specialty markets that will see some continued gross margin improvement with that.

Okay, so basically a nicer run rate going forward there. And then just a question on the total share fully diluted, I realize that the options and the warrants were anti-dilutive, so what should we be using as a fully diluted in terms of shares outstanding for 2015?

So at the moment, at the end of the year in addition to the 111.6 million shares that we had outstanding, we had approximately 13 million in warrants and an additional 5.5 million in outstanding options that would bring you to a total of 130.1 million roughly.

We will take our next question from Marco Rodriguez with Stonegate Capital Partners.

Wondering if maybe you could talk a little bit more about the gross margins, it’s kind of question out a little bit, I hear you guys are obviously adding higher margin clients. There is a negative impact here in the short term on the commodity business but some of your commentary seems to indicate that these margin should be going up and sequentially they were down, so can you talk a little bit more about what kind of were the drivers there in Q4 and then maybe if you could provide some sort of percent of revenue that of your commodity business did that represents?

Well Marco if you look at year-over-year Q4, we’ve actually had a fairly large improvement, Q4 year ago was 4.9, Q4 this year is 7.6. So there are some adjustments that tend to come through in the fourth quarter, we did have a few of those adjustments that came through, whether they were little contractual or expense adjustments, so some of the adjustments caused part of that decline and part of it was just the mix of the different kinds of services that we had in the fourth quarter. Do you have anything else to add to that Brian at the moment?

I think that yes…

In a nutshell really where we are and as far as a percentage of our commodities as we have certainly discussed before that our commodity portion of all of our revenue runs somewhere around 25% to 30% and our -- during 2014, and our oil related portion of the commodity percentages has been about half in 2014. Now of course those percentages will change as we’re going into 2015 but that gives you a little bit of insight.

One clarification Marco [indiscernible]

Yes.

Just one clarification on the statement that you made, just so we can be clear, is the used motor oil marketplace is down, revenue will be down but Quest operates in a fixed percentage on a floating scale that the commodity changes, so we will see a gross margin increase in those services, our revenues will be down but we’re still making the same net percentages that are associated with our scales and our matrix that we have for that.

Got it, okay that’s helpful and then maybe you can talk a little bit more about the organic growth initiatives, I believe you guys commented the fact that organic growth for fiscal '14 was about 28% maybe if you can talk about some sort of any sort of sales and marketing initiatives you have planned for '15 and how we should be kind of thinking about the growth rate ramp in '15?

Sure that’s certainly one of the things that we think is exciting about our company is obviously we’ve grown the business to this year ending at almost $175 million but it’s clear that we have many customers that we don’t have full penetration in as far as the overall services that we could provide. So many of our customers that have come in over the last two to three years have brought us in at one service, two services maybe a state or region and so we have a dedicated client services team that is focused on that continued growth of new services and new locations in providing solutions, if you will, that will grow our relationship. So we have a dedicated team inside of Quest that manages each client on a day-to-day basis for that type of growth as well as our sales team is focused on that as well and we think that we have a lot to do in organic growth, not just new business but with those existing customers. So from a sales and marketing standpoint it’s not a new initiative, it’s a structure that we’ve had in place since the start of Quest but it’s something that from our standpoint, we don’t have to add new business and new clients to grow our business significantly.

Also our door had a lot of people come to it, because of volatility in the oil industry right now, we have had a lot of opportunity.

Yes, we certainly -- our unique position of allowing for a large organization to utilize regional players puts us in a really unique position for our clients that have never had an opportunity to utilize a mix of subcontractors and providers that may only cover one state or one area or one city for that matter and so with the unique business model that Quest can provide to them, they know that there is another national solution other than some of the larger players in these individual industries and so to a large point, we’ve had a very busy end of the last year into this first quarter of sales activity and meetings.

Got it. Is there a plan at all to add additional head count on the sales side?

Yes, we’re always looking to add, as we talked about last year, we’ve added an additional four sales people to our team in 2014 and we want to continue that trend, but we want to do it with the right people. One of the things that’s unique about Quest is our business model and it’s definitely a relationship sell, it’s a sell of expertise and you know we’re looking for people that have the industry knowledge and long term history in that industry but also our custom is selling in a relationship consulting manner if you will, versus a price list and so as we find those qualified people, we’re certainly interested and have many openings for those types of people in our company. We expect to add somewhere between seven and ten sales team members by the end of this year 2015.

Got it and last quick question, I will jump back in the queue. On the balances side, can you talk a little bit about your cash use for fiscal '15 and how we should be thinking about cash flow through the fiscal year?

So between cash we have on the balance sheet and our operations along with our line of credit, we feel we are in a good position as we’re moving through 2015. So, we feel we’re in a good position and that’s where we see our cash flow coming from.

Do you have, I'm sorry go ahead.

I was just going to add to -- sorry Marco. I was just going to add to our statement, our capital needs are really driven by two things in our business and that would be continued growth for the needs of working capital. So as we add new clients, we’re having to staff in advance for those new clients whether that would be in our accounting team or client services team, so many times we will have to staff a few months early to get ready for large client adds and then the other thing that we would have the need for capital and additional cash beyond what we have today would be acquisition opportunities, which we are looking at and we are aggressively searching for the right fit to provide potentially an acquisition growth plan for us. With that said, we still think that organically we can grow this business at the same rate, so we’re not focused for our growth on acquisitions but because of the public currency we have available to us and our structure that we have now, we feel that we are positioned well for an acquisition but those would be the only two things. If we have a significant amount of growth in 2015 beyond maybe our expectations or we have an opportunity for an acquisition, other than that our cash position seems to be adequate.

Got it and then if I may just one more quick follow-up in regard to that. Do you expect to be cash flow positive in fiscal ’15? And then on the acquisition side maybe if you could provide some sort of color on I don’t know whether you got a deep pipeline or what sort of opportunities you might be looking at this time?

Marco when you say cash flow positive, there is really two parts of our cash flow, we already -- when you look at just sort of operational cash flow from the P&L perspective, we vary up and down but we’re pretty close to a breakeven, but then as you look over at our balance sheet and our need for capital, for working capital that’s where we may continue to consume cash as we add large clients and fund that start-up cost and fund that AR and AP cycle. So that’s how I sort of look at it, I look at it from that two perspectives from the operational and from also requirements we have from a balance sheet working capital position.

Got it and acquisitions, what those -- were those in the pipeline for you guys?

Well we don’t really comment on pipeline of acquisitions but we can say that it’s something that we find as attractive for us. We feel that we’re ready, as an organization we have a very strong management team and it’s something that we are -- when we look for acquisitions, we’re looking for the opportunity to take that core business they may have and expand and so as we look at potential acquisitions the most important thing for us is what does their customer make up and can we add in businesses that we specialize in like grocery store clients that may have food waste or automotive service clients that we can add in our used oil and tires and other things. So to that point, our ears are open, our eyes are watching and of course we have both support from our management team and Board for that process but nothing that we can identify at this time.

We will take our next question from Nelson Obus with Wynnefield Capital.

Yes, I am a little new to the story but I realize that your top-line can move around depending on the price of commodities et cetera, yet you have kind of put a goal out there two to four years out. Why wouldn’t you also put a goal out there for EBITDA margin so that we could get a sense of whether this business lends itself to operating leverage or not?

Well we see the -- obviously when we set the goal of the top-line revenue it equates to many different things in our business and so from an EBITDA standpoint, we are focused on the growth of the business that we feel that we will, as we get bigger, we will have the scale to better negotiate contracts, more buying power, the ability to leverage in our staff and our team and so as we look at our business, our focus is building our systems internally for this growth pattern of what we believe to be 500 million. We’re focused on growing and promoting our management team to be ready for these types of level and so we’re not as a business focused on our EBTIDA because we want to focus on the growth side of our business. We’ll continue to increase our margins, we’ll continue to increase the number of locations and clients which overall will give us better buying power which all will translate in, so when you look at the $500 million goal I think it’s more of -- there is many other factors beneath that drive that overall goal and locations, customers, volumes all those things are really important to us in getting to that where we feel is a very exciting level for us.

What would be the argument for not doing a reverse split because with $1.25 stock is not taken serious in many institutional quarters and you do have a large market cap, so I am interested in -- I’m sure you’ve discussed this but you know why wouldn’t you do -- why wouldn’t you move forward, I mean you are projecting a respectable business model, a respectable company and then you’re putting yourself in the category of marginal penny stocks which really don’t play in the U.S., this isn’t England?

Well, I’ll respond this way. Both of the management team and our Board of Directors, we’re very aware and focused and sensitive to how we are perceived in the market, what is the right approach for our shareholders and we’re very aligned with the shareholders out there and addressing those. So these are types of things that we’re always considering. We’re always looking at and try to formulate the best plans as we go forward.

Well maybe your brokers like this because they get higher margins. but I mean the reality is that you lose a significant component of credibility by representing yourself as a penny stock and frankly, I would beg to differ with you, I think that if you have shareholders who feel that they want to own $1.40 or $1.20 stock as opposed to $12 stock, you probably don’t want to those shareholders because they are not long term holders who are buying into the development of the Company. I mean if I had a business and somebody came to me with offered me a service and I had $1.25 share price and I knew something about the market, I would -- it would be a bit of a red flag, that’s all I am saying and I think it’s something you should think about if you want to be taken seriously at the institutional level, there are a number of institutional firms that won’t even look at a stock under five.

I think we hear your concern and your comments and that’s -- we’re all open to that and I think that’s -- its great feedback and we will take it under advisement of course it’s been on the topics before and your opinion is respected and appreciated.

Just final one other question, I mean very interesting your big picture of arguments and so on an so forth about why this Company has a bright future. How would you characterize the reaction of your competitors and people that you’re going to have to displace in the markets to some of the macro trends that are very, very clear to me given where I live and then and very valid. I mean are they ignoring them, are they incapable of executing nimbly or are they going to give you a battle, I am just, I am curious what your take on that is?

Well of course there is always going to be competition. These service lines that we are in or are getting into or are expanding into, we’re always going to have competition and I think that the thing that differentiates us from some of the larger competitors is our flexibility, a lot of times within these different bigger companies they have a certain way that they invoice, a certain way they collect things, a certain types of container. Whatever those things may be and because we are truly working on the same side of the table as the client, they can kind of drive these solutions that fit best for their business. And so I think there is always going to be competition and there is always going to be decision of A and B but I think we’re the Company that can align ourselves the best with our clients and that’s why we feel confident is this new regulatory pressures and moving in an industry, that’s why we think we’re aligned better than some of our larger competitors because of that difference in business philosophy.

I guess I do have one more question and I don’t mean this negatively although I may -- what exactly were your bad debt write-offs? Because I am not excited -- a Company that has EBITDA margins that are so low, which I am willing to accept cannot sort of just brush off bad debt write-offs as being a small part of the top line, I think because if it get too high, it’s going to wipe out your EBITDA and cause you – what exactly were the write-offs in the quarter or in the year?

As disclosed in our 10-K they were around 400,000 for this year.

That’s tiny, okay and that’s in keeping with the fact you’re doing incredibly -- you’re dealing with credible. I think that’s a very important metric and I think that underlines the fact that your customers are credible. It’s a good thing to come right out with okay because if you are doing 400,000 on almost $200 million of revenues or whatever over a hundred million of revenues that’s very, very good.

Thank you.

(Operator Instructions) It appears there are no further questions in the queue. That does conclude today’s conference. Thank you for your participation. You may now disconnect.