Quest Resource Holding Corporation

Thank you for standing by. This is the conference operator. Welcome to the Quest Resorts Holden Corp. 4th Quarter 2022 Earnings Conference Call. As a reminder, all participants are in lesson-only mode and this conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then 1 on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Dave Mosberg, investor relations representative. Please go ahead.

Thank you, Brenda, and thank you, everyone, for joining us on the call. Before we begin, 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 are intended to identify those forward-looking statements. 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 results could differ materially from those discussed in the forward-looking statements as a result of various factors which are discussed in greater detail in Quest filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such statements and to consult our SEC filings for additional risks and uncertainties. Quest 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 observations and views about industry conditions and developments. The data and information are based on Quest estimates, independent publications, government publications, and 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 the sources or the accuracy of the information. Certain non-GAAP financial measures will also 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 is useful to investors understanding the 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 in this call will be on a non-GAAP basis. Full reconciliation of non-gap-to-gap financial measures are included in today's earnings release. With all that said, I'll now turn the call over to Ray Hatch, President and Chief Executive Officer.

Ray Hatch Thank you, Dave, and thanks, everyone, for your interest and quest. Overall, we had a strong year in 2022 with 70 percent growth in gross profit dollars. We managed through tremendous growth during the year, expanding relationships with existing customers and a significant ramp from new customers. Growth also came from integrating four acquisitions during 2022. Three of these acquisitions have gone according to plan, but the fourth, RWS, caused challenges for us during this past year. It is a good business with a strong customer base, but process issues hampered the performance. The good news is that we've addressed the RWS issues and we've already begun to see substantial improvements from that acquisition thus far in the first quarter and expect to fully realize the plan contribution through 2023. Outside of RWS, our business performed well. We are executing well on all of our strategies. We continue to move new opportunities through our pipeline. We continue to build our operating platform, investing in capabilities which will enable us to drive operating efficiencies, integrate acquisitions more quickly, and to continually enhance our customer service. Importantly, our outlook for profitable growth in 2023 and beyond remains unchanged. Because RWS had such a large impact on the fourth quarter and the year, before I turn the call over to Brett to review financials, I'm going to give you an update on what's going on there and an overview of the corrective actions we've taken. To give you a little background, when we made the RWS acquisition at the end of 2021, this was the largest acquisition that we have made to date, and we decided to integrate the business over a longer time period. The plan was to pursue cross-selling opportunities and implement Quest business processes at RWS, but wait to fully integrate until we have more time to operate the business. The thinking was that this would allow us to achieve the highest contribution from the acquisition, while at the same time to avoid disrupting the business. In retrospect, waiting to fully integrate RWS quickly was a mistake, which caused two major issues. First, because of the information gaps at RWS, it was challenging to implement our vendor optimization processes there, which entails working with vendors in areas such as volume pricing, right sizing, and route optimization. Second, our normal process of passing through contracted cost increases and fuel surcharges was not being done with a subset of the RWS customers. We estimate these factors combined to reduce gross profit dollars by approximately $1.5 million for 2022. We've implemented Quest best practice across RWS business and have realigned management reporting structure for each department. Our accounting, operation, sales and marketing groups are now fully integrated as of the end of the year. And we expect systems integrations to be completed during the third quarter. We've corrected the process to pass through costs and fuel surcharges that are part of the contractual agreements at RWS. While we can't bill and catch up for past periods, we started to see benefits of implementing pass-through costs, and fuel surcharges to RWS customers starting in January. We've addressed information gaps and implemented vendor management improvements. We're seeing the benefits in the first quarter and expect to see improvements in gross profit throughout the year. Along with the continued strength of our core business, the corrective actions we have taken have already begun to result in incremental improvement during the first quarter. As we said in the press release, the trajectory is positive. Preliminary results for January and February show gross profits averaging approximately $4.25 million per month and revenue averaging $24 million per month, with further improvement expected across the remainder of the year. While expected contribution from RWS was delayed, I want to reiterate that our view of the potential of the business and our original financial expectations remain intact. It's important to note that customer relationships remain strong, and in fact we've been able to successfully cross-sell RWS services to existing Quest clients. Equally important, we've also maintained or improved relationships with RWS vendors. I'll now turn the call over to our CFO, Brett Johnston, for our final financial overview, and I'll be back to discuss strategies. Brett?