Good day. And welcome to the Quest Resource Holding Corporation Second Quarter 2019 Earnings Call. Today's conference is being recorded.At this time, I would like to turn the conference over to Investor Relations representative David Mossberg. Please go ahead, sir.

Thank you, Edvaldo, and thank you everyone for joining us on the call today. Before we begin, I would 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 are intended to identify those forward-looking statements.Forward-looking statements also include statements regarding Quest's future opportunities for growth, Quest's expectations for revenue, margins and profitability in future periods, Quest's industry position and industry trends, Quest's prospects, outlook and business strategies going forward and Quest's belief regarding progress and timing. Such forward-looking statements are based on Quest's current expectations, estimates, projections, beliefs and assumptions and involve significant risks and uncertainties.Actual events or Quest's results could differ materially from those discussed in the forward-looking statements as a result of various factors, including changing market trends, reducing demand and the competitive nature of Quest's industries, discussed in greater detail on Quest's securities and filings with the Securities and Exchange Commission, including its report on Form 10-K for the year ended December 31, 2018. You are cautioned not to place undue reliance on such statements and to consult our SEC filings for additional risks and uncertainties.You can find those documents on Quest's website at qrhc.com. Quest's forward-looking statements are presented as of the date made and we disclaim any duty to update such statements unless required to do so by law.In addition, in this call, we may include 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 estimates, independent publications, government publications and reports by market research firms and other sources.Although, Quest believes these sources are reliable and their data and other information are accurate, we caution that Quest does not independently verify the reliability of the sources or the accuracy of the information. In addition, Quest's observations and view about its industry conditions and developments are its own and may not be supported or agreed with by other industry participants or 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 to be useful for investors' understanding and assessment of the company's ongoing core operations and prospects for the future.Unless it is otherwise stated, it should be assumed that any financials discussed on this call will be on a non-GAAP basis. Full reconciliations of non-GAAP to GAAP financial measures are included in today's earnings release.And with all that said, I will now turn the call over to Ray Hatch, President and Chief Executive Officer.

Thank you, Dave. And welcome to everyone on our call to discuss second quarter financial results. Joining me today is Laurie Latham, our Senior Vice President and Chief Financial Officer.We are pleased with the trajectory of the business and the strength of our customer relationships. We had good growth in gross profit dollars and adjusted EBITDA on the second quarter. In fact both gross profit and adjusted EBITDA were records for the company.Given the nature of our business requires that we handle multiple ways to ensure our customers the revenue mix changes in the quarter sometimes make comparisons on the topline difficult. This was certainly the case in the second quarter.I’ll ask Laurie to give some more color on that in a moment, but importantly we are and will continue to focus on managing the business to grow gross profit and this is and will continue to be the key metric we used to gauge our success.Based on gross profit results, we had a record second quarter and year-to-date financial performance. Our strategy of focusing on industries, companies, and waste transfer we provide the greatest value add is showing progress.Our pipeline of profitable opportunities continues to grow and among other new business we recently had two wins in the foodservice vertical, what we’re highlighting today is Buffalo Wild Wings which we believe we're positioned to provide significant value going forward.Before I go into more detail, I’ll turn the call over to Laurie to review the financials. Laurie?

Thank you, Ray and good afternoon to everyone on the call. Second quarter revenue was $25.4 million a decrease of 8.9% compared with the second quarter last year. Year-to-date revenue was $52.1 million which was relatively even versus the prior year. There were two primary factors that affected our year-over-year second quarter revenue comparison. These factors had negligible net impact on gross profit contribution in comparison.The first related to the impact of a slowdown in production at one of our largest industrial customers, which affected our lower margin waste stream. This accounted for about half of our Q2 decrease compared with Q2 in 2018.The amount of revenue we derive from this customer from this waste stream is likely to continue to be subject to the same unpredictable Q2 macro factors and may fluctuate from quarter-to-quarter, but should continue to have a negligible impact to our gross profit dollars.With less of this high volume, low margin waste stream and the mix during Q2, our Q2 gross margin increased to a record 18.7%. The other primary factor impacting Q2 revenue comparison was related to our cycling out of our low margin service with another customer during the fourth quarter of 2018. This revenue reduction did not materially impact the gross profit comparison.Moving down the income statement, as Ray indicated, second quarter gross profit was a record increasing 7.3% year-over-year to $4.7 million. Year-to-date gross profit was $9.3 million, a 16.5% growth year-over-year. The improvement in gross profit was due to the combination of increase services from both are continuing and new customer base, along with lower cost of certain subcontracted services.As I said earlier, gross margin for the second quarter was 18.7% of revenue, a quarterly record and a 280-basis-point improvement compared with Q2 last year. The improvement in gross margin over…

Thanks, Laurie. And before we review our progress on our strategies, I want to take a moment to point out a couple of recent changes, the Board made to our governance policies. Our commitment to align management and the Board with shareholder interest is reflected in our latest proxy statement.We approach stock ownership guidelines that align long-term interest of our executive officers and the members of the Board with our stockholders, introduced a derivative trading policy and improved an updated clawback policy for incentive comp.This year we had changes into two of our Board seats, including our Chairman, reduce the size of the board from nine to eight and fundamentally change and broaden our investor base. Both the Board and management have committed to Quest and share a common vision from the significant opportunities to grow and enhance shareholder value.Moving on to the progress of our -- on our strategic initiatives. Progress was evident in the second quarter record performance or gross profit and adjusted EBITDA. In addition, I'm encouraged by several recent wins and the increase interaction we're gaining in our sales efforts.Late in the second quarter we had a Buffalo Wild Wings to the customer. Under the multiyear agreement we will manage the waste and recycling for over 500 Buffalo Wild Wings corporate restaurants located throughout the U.S. and Canada.You may have the release regarding this customer today. A few weeks ago we secured similar contract with another restaurant group with hundreds of locations nationally. Both are wins against incumbent traditional way service providers.This was illustrated how our value proposition is truly differentiated. Our asset light model provides greater flexibility in terms of finding the best solutions to meet both the financial and sustainability goals of our customers.The factors cited by our customers in these wins included a…

[Operator Instructions] We will now take our first question from Gerry Sweeney at ROTH Capital. Go ahead, Gerry.

Hey, Laurie and Ray, thanks for taking my call.

Hi, Gerry.

Hi.

So I wanted to maybe touch a little bit on the Buffalo Wild Wings and the other restaurant win. Just curious as to maybe how long this process took or may be even how challenging it was for you to sort of present your model versus being incumbent or the more traditional waste management company. Obviously or looking at revenue I think you got a great product and just trying to figure out timing in terms of how long the process takes, how challenging it is sort of being a new kid on the block and demonstrating your value. Maybe if you can dig into that a little bit I think that would be helpful?

Yeah. Happy to Gerry. This – as we’ve talked about it before it's not a – it’s a relatively complicated sale, because we're bringing a multifaceted solution to a client that in many cases typically is only got one element of solutions.So the timeframe on this is approximately six months. It's a – relatively long sales cycle but getting the opportunity to be able to show just the holistic approach to the waste program and dollar impact and also the other impacts we talked about.Take awhile, but once you are able to establish that we’re really excited about all the value we’re going to be able show them going forward versus what they have before.

And I guess the follow-up would be to that was – how does your pipeline look now and have you lost any contracts or you just haven't been able to either convince them of value or maybe you weren't as competitive as you thought?

I guess there is an always situations with prospects where prices are primary functions. They are not willing to look at a holistic approach to the waste stream. Those are challenging for us and some we run into say our pipeline on the front side will have a number of those, but they don't usually make it towards the end.But our pipeline actually I think the evidence of having these wins crossover into the contract stage is the evidence that it’s moving to the right if you will. We've really started putting more, more in there.I guess the fact I feel good about our pipeline, it’s lumpy how it moves through sometimes, it's nice to be able to report some wins and we look forward to having more as we go forward. So that tells you I think that there's a number in narrow stage of the pipeline. So we’re excited about it.

That’s fair and I appreciate that. And one final question I talked this one, you talked about lower margin I guess higher volume waste stream, not coming out but maybe slowing down in the quarter from one of your existing customers. Anymore detail you can give around that generally speaking during that sort of higher volume, low margin business would almost be a precursor or maybe some other slowing down of their business in general. But I'm not sure if that's exactly is going to happen just not knowing who it is how operates, et cetera?

Yeah. It’s an industrial client so the commodity is that that it was his – but without going into detail is high revenue low margin. And so, that's why you – still see the growth and I think Laurie has said negligible impact on the gross profit line.

Yeah.

Yeah. So that tells the story. But as part of our overall business yeah actually I would say there are some macros that are affecting them right now that aren’t great. And I can tell you there is a couple, there is some trade that you are aware of them actually – there some trade activity going on out there is that a negative effect dependent on your sector and these guys are in that sector.And there is also along with the cares, but there's also some flooding in some of the agricultural zones, that have impacted them near-term. But we do expect and continue to expect growth from this customer. It just had – it had some quarter-over-quarter impact that was negative.And so I'm trying to your question was can I give you more color on, and I think that said, but as far as the overall business, our gross profit dollars are growing with it still, even with that downturn you saw the gross profit dollars with their client group, which kind of goes back to why we stress gross profit dollars as I measure.So I think we’re in good shape there. But, yeah, we have some clients that time some of these factors -- external factors have a negative impact and it should happen to these buys.

Got it. Okay. No. I appreciate it and I think it was nice power quarter fresh on the two ends that’s great to see as well? Thank you.

Thank you, Gerry.

We will now take our next question from Sameer Joshi from H.C. Wainwright. Please go ahead sir.

Thanks Rah, thanks Laurie for taking my call. Just to follow-up on Gerry’s question the Buffalo Wild Wings contract the 500 sort of current locations and other one with 100 of location. Is there going to be a phased requirement of services there or is it all going to be like starting immediately?

It’s going to…

Is it going to be a fast deployment…

Oh yeah I am sorry.

Is that right Sameer.

Yeah.

So he is asking about?

Go ahead.

So with Buffalo Wild Wings yeah we’re in the field with them already. So we are there an operating.

Fully deployed.

And the other one is we had the more recent and as we have mentioned before those usually take to 60 days to 90 days. So we’re working out the details on that. But its relative soon and we expect it this year.

Yeah. And that -- and to emphasize that point that’s, I know I talk about our business model in a while but this is key point of emphasis and opportunity since we don’t have to go state by state or location by location if something like this.Our operations team can do an implementation or national rollout in a matter of all at one-time it just a couple months. So we have to deploy equipment we’re able to that so we anticipate when we started to service for the second one we have already done another first one. We’ll do all our units at the same time.

Understood. Thanks for that clarification. And aren’t these -- what is the size of these contracts, in other words, will these two contracts replace the two lower margins customers that you are facing problem with…

Well, the size of the contract, yeah, we’ve probably don’t want to be specific. But we can say, what was the price where you came with on that?

So this is one of our more significant contracts that’s in the – we’re expecting it in the millions.

Multi-millions, okay.

Yes.

Okay. We’ll leave as -- I know that’s a little broad but that’s probably as high that we can get Sameer on that. And what was the second part of your question.

Yeah. No. No. It was a multi-millionaire is good enough – answer for me Ray.

Okay.

In terms of over the last two years, we have seen seasonally the third quarter is sort of weaker, is that going to be true this year as well and what are the reasons for that?

Hang on Sameer we are pulling out some paper work here.

Yeah. I don’t know if it’s always the third quarter, but we do have impact because of holidays, really depends on the mix and it also depends on the number of actual service days that occur in the quarter. So some quarters depending on how the calendar falls on the Monday through Friday schedules, because of the large volume of business we do that could have impact.So, I don't know if we could say we're expecting a similar quarter as we had last year. But we do have some fluctuations depending on the mix and the volume and the number of service days, all those play into what our expectations are.

Understood. Just a couple of booking keeping question, the SG&A has been high for the last two quarters around $4.2 million levels I know there were extraordinary one-time charges, but should we expect SG&A to be in the $4 million to $4.2 million going forward per quarter?

Yes, we actually talked about this in the past and it will range between like $4 million to $4.2 million and we had back in Q3 last year, Q4, sometimes have some year-end adjustments that are in our favor, so sometimes its little below there but I would say, yes, it's been pretty even you can see that if it's comparable to Q1 our level and that’s sort of the inside I can give on from that particular item.

Okay, and then the last one. On PP&D, I think increase -- and I am guessing it is for the operating lease liability, can you confirm that?

Yeah. It is. We have about -- on the books at June 30th, we have $1.9 million in the right-of-use and there is $2 million in lease liability that on the liability section between the – yes, so that’s correct.

Thanks a lot. Thanks there for taking my question.

It appears there are no further questions at this time. I’d like to turn the conference back – my apology there seems to be another question from George Melas from MKH Management. Would you like to take the question?

Sure.

Mr. George Melas you can go ahead.

Thanks you for taking the question at the end. Ray or Laurie, just additional question on Buffalo Wild Wing, you replaced them incumbent but you also consolidate a number of providers or did you primarily replay single incumbent?

It is more than one.

More than one provider?

Yes. But we replaced.

Okay. And the key thing is there we’re going to end up part of the waste streams were not being recycled. We’re going to create an environment where they have – their waste chain is going to be diversified out and previously I believe the vast majority of which was going to landfills. So, yes, they have one provider and they are going to have numerous more services than they had in the past because that's the -- we have a broader range of opportunities for that.

Okay. I am not sure I made my question clear but did you consolidate several service provider sale or was it just you replace one and you’re going to handle their waste differently?

We will replace one and we’ll just -- okay, so basically we did have numerous providers. They did had several other providers so there was some consolidation. A lot of time so we consolidated a lot more than that. In this case we had a large traditional waste hauler, they had national coverage for the majority of what they are.

Okay. Great. Great. That’s helpful. And then did you have any 10% customers in the quarter?

The same three – we’ve looked at the end of the year we talked about having three customers that were in excess of 10% and that they remain the same.

Okay. And can you say Laurie how much those three customers were as a percentage of…

I don’t know. We just know that each one of those three is an excess of 10% and then the -- I think the whole amount that we had just close to somewhere around 35%, 40% I think that in our 10K.

Okay. Great. Okay. Thanks very much.

Thank you, George.

At this time there are no further questions. I would like to turn the conference back to Ray Hatch for any additional or closing comments. Go ahead.

Thank you, Operator. I do want to close first I want to thank all of our investors as supporters and thanks everybody in our call for your interest in Quest. We continue to evolve and toward our focus on profitability and growing gross profit and going in extra solutions additional better solutions hopefully to the clients and I want to thank our associates to Quest employees that work so hard to create that opportunity for us to be able to retain grow and win. So thanks everybody. We're excited about where we are, we’re excited about the future. We continue to find ways to generate more profitability and value for our clients in the marketplace. So all of that hopefully adds up to something that can be greatest and move forward so that's all I have Operator. Thanks everybody.

That concludes today’s call. Thank you for participation. You may now disconnect.