Great write up! I’ve been a shareholder of QRHC for a bit now and I’m still quite intrigued with their upside. I was wondering what you thought of the most recent earnings?
They mentioned there was the $10m favorable swing to revenue in the quarter as a result of the new customers + some increase with existing. So call it a $40m annualized increase, or ~15% annualized growth, from just gains in Q2 alone. And that was before (1) any contribution from the 8-figure win coming on 8/1, (2) any contribution from two “large” (7-figures or above I assume) wins that were delayed until 7/1, and (3) only partial contribution in the quarter for I assume almost all the other 2024 wins to varying degrees (and where “customer delays” caused “slower than expected ramp”).
So essentially everything was on track for even better peak growth numbers (by a lot) than what I detail (once you factor in similar or better gains coming in Q3).
The problem of course was they had this ~$9m swing in the opposite direction at the same time from the ~4 industrial clients, but predominantly one client, due to “lower production volumes.” This was the piece that surprised me. I had not anticipated that such a large negative swing was possible (without actually losing a client)…
If we say the one client made up ~$5m of the $9m of negative swing, that would be a $20m annualized drop from one customer…The largest customer they have is no larger than $45-50m, so that would be almost a 50% decline in revenue from a customer in a quarter (if it came from a smaller customer, would be an even larger decline). I’m just surprised that a client could take down spend on waste & recycling by this much…
If these industrial clients are reducing production to below normalized levels, that’s obviously better. In that case, this lost revenue should be a tailwind for Quest in the coming months/years and you end up in a similar spot anyway. If instead the clients are reducing production back to normalized levels (from peak-ish type levels), then that would be worse. I assume it’s more of the former b/c they said this client was slowing volumes “temporarily.” If I have a chance to ask mgmt about it, will report back.
In any event, I’m still a long-term holder and am hopeful for a good Q3. They did sign some new large expansions with existing clients that should be hitting in Q3 (in part) on top of the wins discussed above. Unfortunately, it looked like they were in line for 25%+ growth, so stings a bit to not be able to hit that…
Great write up! I’ve been a shareholder of QRHC for a bit now and I’m still quite intrigued with their upside. I was wondering what you thought of the most recent earnings?
Great write up! I’ve been a shareholder of QRHC for a bit now and I’m still quite intrigued with their upside. I was wondering what you thought of the most recent earnings?
It surprised me a bit to be honest.
They mentioned there was the $10m favorable swing to revenue in the quarter as a result of the new customers + some increase with existing. So call it a $40m annualized increase, or ~15% annualized growth, from just gains in Q2 alone. And that was before (1) any contribution from the 8-figure win coming on 8/1, (2) any contribution from two “large” (7-figures or above I assume) wins that were delayed until 7/1, and (3) only partial contribution in the quarter for I assume almost all the other 2024 wins to varying degrees (and where “customer delays” caused “slower than expected ramp”).
So essentially everything was on track for even better peak growth numbers (by a lot) than what I detail (once you factor in similar or better gains coming in Q3).
The problem of course was they had this ~$9m swing in the opposite direction at the same time from the ~4 industrial clients, but predominantly one client, due to “lower production volumes.” This was the piece that surprised me. I had not anticipated that such a large negative swing was possible (without actually losing a client)…
If we say the one client made up ~$5m of the $9m of negative swing, that would be a $20m annualized drop from one customer…The largest customer they have is no larger than $45-50m, so that would be almost a 50% decline in revenue from a customer in a quarter (if it came from a smaller customer, would be an even larger decline). I’m just surprised that a client could take down spend on waste & recycling by this much…
If these industrial clients are reducing production to below normalized levels, that’s obviously better. In that case, this lost revenue should be a tailwind for Quest in the coming months/years and you end up in a similar spot anyway. If instead the clients are reducing production back to normalized levels (from peak-ish type levels), then that would be worse. I assume it’s more of the former b/c they said this client was slowing volumes “temporarily.” If I have a chance to ask mgmt about it, will report back.
In any event, I’m still a long-term holder and am hopeful for a good Q3. They did sign some new large expansions with existing clients that should be hitting in Q3 (in part) on top of the wins discussed above. Unfortunately, it looked like they were in line for 25%+ growth, so stings a bit to not be able to hit that…
thanks for the write up! i was wondering if you could clarify how you calculated the pre-synergy multiples for RWS and Instream?
Thanks for reading! The pre-synergy EBITDA figure (and post synergy) for RWS/Instream is in the table at the very bottom of this PR: https://www.globenewswire.com/news-release/2021/12/08/2348164/0/en/Quest-Resource-Holding-Corporation-Acquires-Two-Asset-Light-Waste-Services-Companies.html
thanks for the clarification!
Great write up! I’ve been a shareholder of QRHC for a bit now and I’m still quite intrigued with their upside. I was wondering what you thought of the most recent earnings?