$QUES earnings are out, Growth Continues, Organic growth continues, Cash flow up
ZERO DILUTION, HOW MANY PENNY OR EVEN NYSE STOCKS CAN SAY THAT?
Please remember, as you read this, they changed the way they report earnings as of Jan 2015. They now defer revenue and earnings on software over the life of the contract, this despite them actually GETTING the entire revenue and profit up front. They didn't do this in 2014,
Thus the revenue for 6 months is actually closer to $30 million and they are profitable by about .045 cents!......if they would be reporting now, as they did in 2014
Also note, the huge interest expense paid every quarter for the purchase of QUES and BCS....imagine how great the bottom line will be as the debt goes down.
They say 2nd half will be even better, and that doesn't include Canada deal
All in all, we are on the right horse!
Published: Aug 13, 2015 8:30 a.m. ET
Second Quarter Adjusted EBITDA of $1.1 Million, Cash Flow From Operations $1.6 Million, Positive as Expected and Growth Continues; Reaffirms Full-Year 2015 Revenue Guidance
HENDERSON, NV, Aug 13, 2015 (Marketwired via COMTEX) -- Quest Solution, Inc, "The Company" (otcqb:QUES), today announced financial results for the second quarter and six months ended June 30, 2015 and reaffirmed full-year 2015 financial guidance.
Second Quarter and Subsequent Highlights
-- Second quarter net revenues of $13.6 million, up 82.4% compared to the
-- Adjusted EBITDA of $1.1 million; positive as expected
-- Cash flow from operations of $1.6 million
-- Signed patent license agreement with NCR enabling "Smart Targeted
-- Signed agreement with Hyperion Partners to create and launched Quest
Total Solution as a Service (QTSaaS) concept
-- Expanded sales force into New York and Chicago
-- Expanded Board of Directors with the addition of W. Austin Lewis IV as
an independent director
Second Quarter Comparative Select Financial Results
For the Three Months Ended
June 30, June 30,
Revenues, net $ 13,557,615 $ 7,434,246
Gross profit $ 3,330,810 $ 1,360,324
Gross profit margin 24.6% 18.3%
Interest expense $ (342,794) $ (400)
Net income (loss) $ (285,449) $ (262,305)
Earnings per share - basic $ (0.01) $ (0.01)
Earnings per share - diluted $ (0.01) $ (0.01)
Weighted average shares outstanding - basic 35,414,484 35,510,416
Weighted average shares outstanding - diluted 40,219,637 35,510,416
Net deferred revenue balance at 6/30/15 $ 804,584 $ -
Accounts Receivable balance at 6/30/15 $ 10,109,443 $ 4,420,610
Adjusted EBITDA $ 1,089,902 $ (253,391)
"As expected, we delivered positive Adjusted EBITDA for the second quarter and continue to expect additional improvement in this metric as we progress through the second half of the year," commented Tom Miller, Quest Solution's Chief Executive Officer. "As we extract synergies from recent business combinations and continue to shift of our business model towards more contracts that bundle services with our innovative hardware and software solutions, we expect our top and bottom line to continue to grow. Partnering and teaming with leading technology companies as we have is reducing our time to market with innovative, mobile and cloud-based solutions to drive quick returns on investment for our customers and further establish our recurring revenue model. Our recent win with a leading PVC piping component manufacturer is a perfect example of how our team's ingenuity and deep understanding of this long-time customer's business is expected to lead to a larger share of their technology spend. Working with this customer puts our solution to work in one of the country's largest home supply retailers and expands our opportunities to leverage our knowledge and experience for additional growth."
"To support the increasing number of opportunities in the marketplace we further expanded geographic coverage by adding sales teams in New York and Chicago over the last six months," added Miller. "These are industry-leading technology experts with a with a proven record of success in selling solutions and building deep and wide customer relationships in our target markets We will continue to add and develop strategically placed salespeople who can sell bundled solution and service projects that help to support our near and long-term growth objectives and are expected to increase our base of recurring revenue."
Scot Ross, Quest's CFO, added, "Our solutions-based strategy is gaining momentum in the marketplace, increasing the portion of our business that represents recurring revenue. With an increased percentage of revenue under long term contracts, we are gaining greater visibility into expected future financial results and are thereby confirming our full-year 2015 revenue guidance today. As of June 30, 2015, our backlog of business to be delivered over the next 6 months stands at $ 4.6 million and the net deferred revenue balance was approximately $805,000, representing hardware and service net revenue under contract that is deferred to future periods and will be recognized when services are delivered. As a reminder, this is EBITDA for which we have received the cash and paid the expense and will recognize for accounting purposes over the life of the contracts." Ross continued, "Additionally, our cash flow from operations was approximately $1.6 million, which is attributable to the integration efforts achieved during the quarter from the sales and operations team performance.
Second Quarter Financial Results
Revenues for the three month period ended June 30, 2015 increased 82% to $13.6 million compared to $7.4 million for the three months ended June 30, 2014. This increase was due primarily to the acquisition of BCS in November 2014 and additional Quest organic sales activity sold in the second quarter of 2015. Second quarter net revenues of $13.6 million represented an increase of 27% over first quarter ending March 31, 2015.
For the second quarter of 2015, gross profit margin was 24.6% of total revenues compared to 18.3% in the second quarter of 2014. The gross margin improvement was due primarily to the additional revenue generated from the BCS acquisition and the operational efficiencies achieved from the continued integration efforts of the combined companies.
Net Income (Loss)
Net GAAP accounting loss for the three month period ended June 30, 2015 was $285,449 compared to a net loss of $262,305 for the three months ended June 30, 2014.
The company's operating expenses during both quarters ended June 30, 2015 and 2014 included non-cash expenses including depreciation, amortization of acquisition intangibles and stock-based compensation for employee and director stock options. Without the effect of these non-cash expenses, Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization ("Adjusted EBITDA"
for the quarter ended June 30, 2015 was approximately $1.09 million compared to negative Adjusted EBITDA of $253,000 for the quarter ended June 30, 2014. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP financial results.
Year-to-Date Financial Results
Net Revenues for the six month period ended June 30, 2015 increased 42% to $24.2 million compared to $17.1 million for the six months ended June 30, 2014. This increase was due primarily to the acquisition of BCS in November 2014. The unaudited pro-forma revenue of Quest and BCS for 2014 would have been $19.7 million, so in comparing the two companies year over year, there was an approximate 23% increase (or $4.8 million) due to organic growth of both companies.
For the first six months of 2015, gross profit margin was 23.6% of total revenues compared to 19.6% in the first six months of 2014. The gross margin improvement was due primarily to increased sales from the BCS acquisition in November 2014, continued integration efforts and operational efficiencies achieved during the quarter and year to date.
Net Income (Loss)
Net accounting loss for the six month period ended June 30, 2015 was $708,000 compared to a net loss of $16,000 for the six months ended June 30, 2014. The decrease in net income is attributable to the increase in interest expense of $737,000, of which $400,000 is non-cash original issue discount classified as interest expense in accordance with GAAP.
The company's operating expenses during both six month periods ended June 30, 2015 and 2014 included non-cash expenses including depreciation, amortization of acquisition intangibles and stock-based compensation for employee and director stock options. Without the effect of these non-cash expenses, Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization ("Adjusted EBITDA"
for the six months ended June 30, 2015 was approximately $1.1 million compared to Adjusted EBITDA of $26,000 for the six months ended June 30, 2014. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP financial results.
Balance Sheet Summary
Net deferred revenue consists of prepaid third party hardware service agreements, software maintenance service contracts and the related costs and expenses recorded net of the revenue charged. As stated in the footnotes to the financials, the company had deferred revenue of $7.3 million and deferred costs of $6.5 million. This net deferred revenue of $805,000 at June 30, 2015 will be recognized in income over the term of the contracts, normally 1 - 5 years, with 3 years being the average term.
The Company's backlog of signed, contracted orders at June 30, 2015 was approximately $4.6 million. The backlog reflects orders expected to be delivered during 3rd and 4th quarters of 2015..
The company reiterated full-year 2015 financial guidance.
-- Revenue of $62-$68 million, representing top-line growth between 5-15%
-- Gross margin as a percentage of sales for the full year 2015 to
continue to show slight improvement as the company exits the year
-- Management anticipating generating positive Adjusted EBITDA in the
third and fourth quarter as well, with improvement each quarter for
the remainder of the year
-- The above excludes impact from Viascan acquisition which is expected
to close in the third quarter of 2015. Viascan is expected to
contribute incremental revenue of $22 - $25 million and be accretive
to Adjusted EBITDA.
About Quest Solution, Inc
Quest Solution, Inc. is a leading provider in the technology, software, and mobile data collection systems business. In November 2014, the Company announced that Bar Code Specialties, Inc. (BCS) joined with Quest Solution, Inc. The Company intends on continuing to acquire existing companies with revenues and positive cash flow.
Quest Solution, Inc. serves as a national mobility and data collection systems integrator with a focus on design, delivery, deployment and support of fully integrated mobile solutions. The Company takes a consultative approach by offering end to end solutions that include hardware, software, communications and full lifecycle management services. The highly tenured team of professionals simplifies the integration process and delivers proven problem solving solutions backed by numerous customer references.
The BCS acquisition and letter of intent with ViascanQData is in addition to the recently announced creation of a wholly-owned division focused on commercializing Intellectual Property, Patents and Distribution of industry-specific technologies in an array of new verticals. The new division will focus on the acquisition of existing intangibles, which we anticipate will provide immediate value to the company.
Information about Forward-Looking Statements
"Safe Harbor" Statement under the Private Securities Litigation Reform Act of 1995 Statements in this press release relating to plans, strategies, economic performance and trends, projections of results of specific activities or investments, and other statements that are not descriptions of historical facts may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995, Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934. This release contains "forward-looking statements" that include information relating to future events and future financial and operating performance. The words "may," "would," "will," "expect," "estimate," "can," "believe," "potential" and similar expressions and variations thereof are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results, and will not necessarily be accurate indications of the times at, or by, which that performance or those results will be achieved. Forward-looking statements are based on information available at the time they are made and/or management's good faith belief as of that time with respect to future events, and are subject to risks and uncertainties that could cause actual performance or results to differ materially from those expressed in or suggested by the forward-looking statements. Important factors that could cause these differences include, but are not limited to: fluctuations in demand for Quest Solution, Inc.'s products, the introduction of new products, the Company's ability to maintain customer and strategic business relationships, the impact of competitive products and pricing, growth in targeted markets, the adequacy of the Company's liquidity and financial strength to support its growth, and other information that may be detailed from time-to-time in Quest Solution Inc.'s filings with the United States Securities and Exchange Commission. Examples of such forward looking statements in this release include statements regarding growth in our parts and vehicle sales and increases in our ability to produce new products. For a more detailed description of the risk factors and uncertainties affecting Quest Solution, Inc. please refer to the Company's recent Securities and Exchange Commission filings, which are available at http://www.sec.gov
. Quest Solution, Inc. undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Financial Tables Follow
Quest Solution, Inc.
Consolidated Statements of Earnings
For the three months For the six months
ending June 30, ending June 30,
2015 2014 2015 2014
Gross Sales $13,731,186 $ 7,516,700 $24,443,202 $17,166,965
Less sales returns,
discounts & allowances (173,571) (82,454) (209,617) (110,559)
Total Revenues 13,557,615 7,434,246 24,233,585 17,056,406
Cost of goods sold
Cost of goods sold 10,226,805 5,726,660 18,508,170 13,013,983
Cost of goods sold,
related party - 347,262 - 694,523
Total costs of goods sold 10,226,805 6,073,922 18,508,170 13,708,506
Gross profit 3,330,810 1,360,324 5,725,415 3,347,900
administrative 795,076 255,538 1,807,520 500,693
Salary and employee
benefits 1,854,620 1,261,297 3,179,052 2,643,013
amortization 20,368 2,928 45,864 10,822
Stock compensation 420,253 5,586 458,877 30,085
Professional fees 108,083 137,989 196,563 267,764
Total operating expenses 3,198,400 1,663,338 5,687,876 3,452,377
Income (loss) from
operations 132,410 (303,014) 37,539 (104,477)
Other income (expenses):
Gain on debt settlement - - - 151,949
Loss on license
settlement - - - (93,578)
Loss on note receivable
settlement - - - (18,995)
Taxes (64,322) - (64,209) -
Interest expense (342,794) (400) (738,066) (1,000)
Other expenses (38,093) - (38,485) -
Other income 27,350 41,109 95,690 50,215
Total other income
(expenses) (417,859) 40,709 (745,070) 88,591
Net Income Before Income
Taxes (285,449) (262,305) (707,531) (15,886)
(Provision) Benefit for
Deferred - - - -
Current - - - -
Net income (loss) $ (285,449) $ (262,305) $ (707,531) $ (15,886)
Net income (loss) per
share - basic $ (0.01) $ (0.01) $ (0.02) $ (0.00)
Net income (loss) per
share - diluted $ (0.01) $ (0.01) $ (0.02) $ (0.00)
Weighted average number
of common shares
outstanding - basic 35,414,484 35,510,416 35,224,128 33,385,416
Weighted average number
of common shares
outstanding - diluted 40,219,637 35,510,416 40,219,637 33,385,416
Quest Solution, Inc.
Consolidated Balance Sheets
June 30, December 31,
Cash $ 322,317 $ 233,741
Accounts receivable, net of allowances of
$52,924 and $62,800, respectively 10,109,443 9,099,229
Inventory 383,350 606,231
Prepaids 669,887 191,498
Other current assets 1,450 377,060
Total current assets 11,486,447 10,507,759
Fixed assets, net of accumulated depreciation
of $3,062,903 and $1,781,086, respectively 181,587 206,662
Deferred tax asset 1,299,417 1,299,417
Goodwill 14,101,306 14,101,306
Trade name 2,700,000 2,700,000
Intangibles, net 568,067 466,870
Customer Relationships 4,390,000 4,390,000
Other assets 641,749 317,304
Total assets $ 35,368,573 $ 33,989,318
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Accounts payable and accrued liabilities $ 8,564,562 $ 7,406,146
Accrued interest and liabilities, related party 278,770 51,806
Line of credit 1,718,128 1,819,345
Advances, related party 400,000 50,000
Accrued payroll and sales tax 1,661,789 917,079
Deferred revenue, net 804,584 297,277
Current portion of note payable 150,000 310,000
Notes payable, related parties, current portion 2,805,857 4,201,650
Other current liabilities 403,608 548,425
Total current liabilities 16,780,667 15,601,353
Long term liabilities
Note payable, related party, net of debt
discount 17,076,599 17,007,175
Deferred tax liability - 29,783
Other long term liabilities 307,822 157,495
Total liabilities 34,171,720 32,795,806
Stockholders' equity (deficit)
Preferred stock; $0.001 par value; 25,000,000
shares authorized 500,000 and 500,000 shares
outstanding as of June 30, 2015 and December
31, 2014, respectively. 500 500
Common stock; $0.001 par value; 100,000,000
shares authorized; 36,616,495 and 35,029,495
shares outstanding of June 30, 2015 and
December 31, 2014, respectively. 36,616 35,029
Additional paid-in capital 18,609,425 17,900,139
Accumulated (deficit) (17,449,688) (16,742,156)
Total stockholders' equity (deficit) 1,196,853 1,193,512
Total liabilities and stockholders' equity $ 35,368,573 $ 33,989,318
Quest Solution, Inc.
Reconciliation of GAAP Measures to Non-GAAP Measures
3 months ended
June 30, 2015
Net income (loss) $ (285,449)
Stock based compensation and options 440,560
Deferred revenue net 507,307
Interest expenses 342,794
Adjusted EBITDA $ 1,089,902
6 months ended
June 30, 2015
Net income (loss) $ (707,531)
Stock based compensation and options 458,877
Deferred revenue net 507,307
Interest expenses 738,066
Adjusted EBITDA $ 1,106,792