Quest Solution, Inc. Reports Profitable Third Quarter
Third Quarter Adjusted EBITDA of $1.1 Million, Cash Flow From Operations of $2.89 Million, Positive as Expected and Growth Continues
/EINPresswire.com/ -- EUGENE, OR -- (Marketwired) -- 11/12/15 -- Quest Solution, Inc., the "Company" (OTCBB: QUES), today announced financial results for the third quarter and nine months ended September 30, 2015.
Third Quarter and Subsequent Highlights
- Net revenues of $16.7 million, an increase of 83.5% compared to the prior year;
- Adjusted Earnings Before Interest, Taxes and Depreciation and Amortization ("Adjusted EBITDA") of $1,127,697, positive as expected, and adjusted for stock-based compensation;
- Net income of $697,356, or $0.02 per share;
- Cash flow from operations of $2.89 million;
- Completed acquisition of ViascanQdata and named Gilles Gaudreault as Chief Executive Officer of the Company;
- Expanded component and service providers for "Total Solution as a Service" offering;
- Streamlined capital structure and reduced ongoing interest expense through settlement of debt with a former Company executive; and
- Year-to-date, the Company has secured approximately $4.3 million in new long-term service contracts, increasing the deferred revenue and providing a leading indicator of future revenue.
Third Quarter Select Financial Results
For the Three Months Ended
---------------------------------------
September 30, 2015 September 30, 2014
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Revenues, net $ 16,711,339 $ 9,084,462
Gross profit $ 3,187,795 $ 1,664,587
Gross profit margin 19.08% 18.3%
Interest expense $ (274,349) $ (375)
Net income $ 697,356 $ 62,786
Earnings per share - basic $ 0.02 $ 0.00
Earnings per share - diluted $ 0.02 $ 0.00
Weighted average shares outstanding -
basic 36,637,523 33,660,416
Weighted average shares outstanding -
diluted 39,630,570 50,445,416
Deferred revenue, net $ 1,023,203 $ 0
Adjusted EBITDA $ 1,127,697 $ 124,358
"This was an important strategic and tactical quarter for Quest Solution, highlighted by the acquisition of ViascanQdata which was effective October 1, 2015, and augmented by strong financial results, including our first GAAP profit," commented Gilles Gaudreault, new Chief Executive Officer of the Company. "We anticipate that the new Quest Solution will grow organically and deliver expanded profit margins as we strategically shift our revenue mix more toward bar code consumables and media and recurring services. We expect to have ample cross-selling opportunities within our existing customer base, and together, believe we are positioned to bid for and win larger projects with more significant global customers who want to work with a single vendor prepared to meet their expanding needs. I am excited about the future for Quest Solution."
"For the second quarter in a row, we delivered positive Adjusted EBITDA," added Tom Miller, President of the Company. "This quarter benefited from a customer requesting earlier delivery of certain orders, resulting in an uptick in revenues. We expect the fourth quarter to normalize. Longer-term, we are focused on unlocking synergies related to the ViascanQdata acquisition, and are already benefitting from a consolidated sales organization. Today, we have over 30 sales personnel in the field, compared with 17 at the beginning of the year, and we believe that this organization enables us to service the business opportunities coming our way."
Third Quarter Financial Results
Revenue
Revenues for the three month period ended September 30, 2015 increased 83.5% to $16.7 million compared to $9.1 million for the three months ended September 30, 2014. This increase was due primarily to the acquisition of Bar Code Solutions ("BCS") in November 2014 and the Company's additional sales activity in the third quarter of 2015. Third quarter net revenues of $16.7 million represented an increase of 23% over second quarter ending June 30, 2015.
Gross Margin
Gross margin percent increased slightly over 2014 after adjusting for changes in related party COG's charges that occurred in 2014 and changes to deferral of hardware and software maintenance contracts which began in 2015.
Net Income
Net income for the three month period ended September 30, 2015 was $697,000 compared to $63,000 for the three months ended September 30, 2014.
Adjusted EBITDA
The Company's operating expenses during both quarters ended September 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 EBITDA for the quarter ended September 30, 2015 was approximately $1.1 million compared to Adjusted EBITDA of $124,385 for the quarter ended September 30, 2014. Please refer to the financial tables included below for a reconciliation of generally accepted accounting principles in the United States ("GAAP") to non-GAAP financial results.
Year-to-Date Financial Results
Revenue
Net Revenues for the nine month period ended September 30, 2015 increased 57% to $40.9 million compared to $26.1 million for the nine months ended September 30, 2014. This increase was due primarily to the acquisition of BCS in November 2014 as well as additional synergies and organic growth of the Company. The unaudited pro-forma revenue of the Company and BCS for 2014 would have been approximately $39 million, so in comparing the two companies year over year, there was an approximate 5% increase (or approximately $2 million) due to organic growth of both companies.
Gross Margin
"Gross margin percent increased slightly over 2014 after adjusting for changes in related party COG's charges that occurred in 2014 and changes to deferral of hardware and software maintenance contracts which began in 2015.
Net Income
Net loss for the nine month period ended September 30, 2015 was $10,000 compared to net income of $47,000 for the nine months ended September 30, 2014. The decrease in net income is attributable to an increase in gross profit offset by an increase in interest expense of $1.1 million and higher operating expenses.
Adjusted EBITDA
The Company's operating expenses during both nine month periods ended September 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 EBITDA for the nine months ended September 30, 2015 was approximately $1.4 million compared to Adjusted EBITDA of $150,482 for the nine months ended September 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 $8.1 million and deferred costs of $7.1 million. This net deferred revenue of $1.0 million at September 30, 2015 will be recognized in income over the term of the contracts, normally one to five years, with three years being the average term.
Backlog
The Company's backlog of signed, contracted orders at September 30, 2015 was approximately $3.2 million. The backlog reflects orders expected to be delivered in the fourth quarter.
2015 Outlook
The Company modified its full-year 2015 financial guidance to include the acquisition of ViascanQdata. Management now expects:
- Pro forma full-year revenue of approximately $60-65 million, inclusive of the contribution of three months from ViascanQdata, which was acquired by Quest Solution, effective October 1, 2015, and accounting for retail rollouts that were accelerated, benefitting the third quarter.
- 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.
"We believe that we are making good progress on the integration of ViascanQdata into the Company's existing operations, and working to unlock the synergies we have identified," added Mr. Gaudreault. "We expect to provide our outlook for 2016 in March, when we report our fourth quarter results of operations and have the benefit of a few months as a combined entity."
About Quest Solution, Inc.
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.
Additional information about the Company is available at http://questsolution.com.
Information about Forward-Looking Statements
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, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. 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 the Company'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 the Company's filings with the United States Securities and Exchange Commission (the "SEC"). 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 the Company, please refer to the Company's recent SEC filings, which are available at http://www.sec.gov. The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.
Quest Solution, Inc.
Consolidated Combined Statements of Earnings
For the three months For the nine months
ending September 30 ending September 30
------------------------ ------------------------
2015 2014 2015 2014
----------- ----------- ----------- -----------
REVENUES
Gross Sales $16,961,830 $ 9,120,927 $41,405,032 $26,287,892
Less sales returns,
discounts, &
allowances (250,491) (36,465) (460,108) (147,024)
----------- ----------- ----------- -----------
Total Revenues 16,711,339 9,084,462 40,944,924 26,140,868
Cost of goods sold
Cost of goods sold 13,523,544 7,072,614 32,031,714 20,086,597
Cost of goods sold,
related party - 347,261 - 1,041,784
----------- ----------- ----------- -----------
Cost of goods sold,
related party 13,523,544 7,419,875 32,031,714 21,128,381
Gross Profit 3,187,795 1,664,587 8,913,210 5,012,487
Operating expenses
General and
administrative 597,269 222,857 2,507,423 723,447
Salary and employee
benefits 1,773,129 1,252,445 4,952,181 3,895,458
Depreciation and
amortization 24,052 7,067 69,916 17,889
Stock compensation 63,800 54,130 522,677 84,215
Professional fees 92,359 110,005 288,922 377,769
----------- ----------- ----------- -----------
Total operating expenses 2,550,609 1,646,504 8,341,119 5,098,778
----------- ----------- ----------- -----------
----------- ----------- ----------- -----------
Income (loss) from
operations 637,186 18,083 572,091 (86,291)
----------- ----------- ----------- -----------
Other income (expenses):
Gain on debt settlement - 29,999 - 181,948
Loss on license
settlement - - - (93,578)
Loss on note receivable
settlement - - - (18,995)
Interest expense (274,349) (375) (1,012,415) (1,375)
Other income (39,981) 15,079 55,709 65,294
Gain on intangible
license settlement 374,500 - 374,500 -
----------- ----------- ----------- -----------
Total other income
(expenses) 60,170 44,703 (582,206) 133,294
Net income (loss) $ 697,356 $ 62,786 $ (10,115) $ 47,003
=========== =========== =========== ===========
Net income (loss) per
share - basic $ 0.02 $ 0.00 $ (0.00) $ 0.00
=========== =========== =========== ===========
Net income (loss) per
share - diluted $ 0.02 $ 0.00 $ (0.00) $ 0.00
=========== =========== =========== ===========
----------- ----------- ----------- -----------
Weighted average number
of common shares
outstanding - basic 36,637,523 33,660,416 35,702,188 33,334,616
----------- ----------- ----------- -----------
Weighted average number
of common shares
outstanding - diluted 39,630,570 50,445,416 39,630,570 50,119,616
----------- ----------- ----------- -----------
Quest Solution, Inc.
Consolidated Combined Balance Sheets
As of
----------------------------
Sep. 30, 2015 Dec. 31, 2014
------------- -------------
ASSETS
Current assets
Cash $ 264,943 $ 233,741
Accounts receivable, net of allowances of
$20,249 and $62,800, respectively 12,900,238 9,099,229
Inventory 481,282 606,231
Prepaids 936,064 191,498
Other current assets 457,951 377,060
------------- -------------
Total current assets 15,040,478 10,507,759
Fixed assets, net of accumulated depreciation
of $1,838,350 and $1,781,086, respectively 186,118 206,662
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 4,218 466,870
Customer Relationships 4,390,000 4,390,000
Other assets 591,599 317,304
------------- -------------
Total assets $ 38,313,136 $ 33,989,318
============= =============
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued liabilities $ 11,180,064 $ 7,406,146
Accrued interest and liabilities, related
party 293,561 51,806
Line of credit 1,247,634 1,819,345
Advances, related party 400,000 50,000
Accrued payroll and sales tax 2,026,272 917,079
Deferred revenue, net 1,023,203 297,277
Current portion of note payable 150,000 310,000
Notes payable, related parties, current
portion 6,912,498 4,201,650
Other current liabilities 748,583 548,050
------------- -------------
Total current liabilities 23,981,815 15,601,353
Long term liabilities
Note payable, related party, net of debt
discount 11,708,947 17,007,175
Deferred tax liability - 29,783
Other long term liabilities 296,572 157,495
------------- -------------
Total liabilities 35,987,334 32,795,806
Stockholders' equity
Preferred stock; $0.001 par value; 25,000,000
shares authorized 500,000 and 500,000 shares 500 500
Common stock; $0.001 par value; 100,000,000
shares authorized; 37,613,978 and 35,029,495
shares outstanding of September 30, 2015 and
December 31, 2014, respectively. 37,613 35,029
Additional paid-in capital 19,039,961 17,900,139
Accumulated (deficit) (16,752,272) (16,742,156)
------------- -------------
Total stockholders' equity 2,325,802 1,193,512
------------- -------------
Total liabilities and stockholders' equity $ 38,313,136 $ 33,989,318
============= =============
Quest Solution, Inc.
Unaudited
Reconciliation of GAAP Measures to Non-GAAP Measures
Three Months Ending Nine Months Ending
September 30, September 30,
2015 2014 2015 2014
----------- ----------- ----------- -----------
EBITDA Calculation:
Net (loss) Income $ 697,356 $ 62,786 $ (10,115) $ 47,003
Depreciation &
Amortization $ 24,052 $ 7,067 $ 69,916 $ 17,889
Income Tax (benefit) $ - $ - $ - $ -
Interest Expense $ 274,349 $ 375 $ 1,012,415 $ 1,375
----------- ----------- ----------- -----------
EBITDA $ 995,757 $ 70,228 $ 1,072,216 $ 66,267
----------- ----------- ----------- -----------
Adjusted EBITDA
Calculation:
----------- ----------- ----------- -----------
EBITDA $ 995,757 $ 70,228 $ 1,072,216 $ 66,267
----------- ----------- ----------- -----------
Stock and Warrants Issued
for Services $ -
stock compensation $ 131,940 $ 54,130 $ 336,896 $ 84,215
----------- ----------- ----------- -----------
Adjusted EBITDA $ 1,127,697 $ 124,358 $ 1,409,112 $ 150,482
----------- ----------- ----------- -----------
Net Revenue $16,711,339 $ 9,084,462 $40,944,924 $26,140,868
EBITDA % of Net Revenue 6.75% 1.37% 3.44% 0.58%
Investor Relations & Financial Media
Investor Contact:
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Brett Maas
(646) 536-7331
brett@haydenir.com
Cameron Donahue
(651) 653-1854
cameron@haydenir.com
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