Quest Solution Reports Second Quarter 2018 Results; Company Achieves Positive Shareholders’ Equity
- First half revenue increased 4% to $29M over 2017
- Shareholders’ Equity improved by $9.9 Million compared to December 31,2017 and by $15.8 million over June 30 2017; Company achieves positive Shareholders’ Equity of $0.3 million
EUGENE, Ore., Aug. 20, 2018 (GLOBE NEWSWIRE) -- Quest Solution, Inc. (OTCQB:QUES), a specialty systems integrator focused on field and supply chain mobility announced its financial results for the three and six-month periods ended June 30, 2018.
Highlights:
- First half revenue growth of 4% to $29.0 million compared to first six months of 2017
- Second quarter revenue growth of 2% compared to the second quarter of last year
- Adjusted EBITDA for the first six months of 2018 of $1.04 million
- Strengthening balance sheet and positive shareholders’ equity of $0.3 million, a $15.8 million increase over June 30, 2017
Financial Results:
Shai Lustgarten, CEO, commented, “When we began our turnaround efforts several months ago, we emphasized our commitment to turning the business around and building sustained shareholder value. Within only one year we reduced the total liabilities by $15.2M and achieved positive Shareholders’ equity of $0.3M compared to a $15.5M deficit at June 30, 2017. This elimination of debt and enhanced financial strength also resulted in millions in future cash savings and an improved foundation for the future growth of the Company, but resulted in non-cash one-time charges and restructuring costs for the quarter.”
Mr. Lustgarten continued, “Concurrent with the balance sheet enhancements we achieved 4% revenue growth for the six month period and modest 2% revenue growth for the second quarter. Leveraging our unmatched Fortune 500 customer base, talented employee base and dedicated sales team we are focused on adding new proprietary technologies to our product offering to further distinguish Quest from its competitors and drive growth and higher margins.”
Quest reported revenues of $13.8 million for the quarter ended June 30, 2018 compared to $13.5 million in the comparable 2017 period. The increase was primarily related to strong execution by the Company’s sales team. Gross margin of 21% was consistent with the second quarter of 2017. Total operating expenses for the second quarter of 2018 increased 33% to $3.8 million, primarily related to equity grants to the Company’s officers, directors, employees and key consultants, increases in sales commissions related to revenue growth, and increased professional fees.
Net loss attributable to common stockholders in the second quarter of 2018 was $2.4 million, or a loss of $0.06 per share, compared to a net loss of $0.4 million, or a loss of $0.01 per share, in the second quarter of 2017. This is primarily due to charges related to the conversion of $1.5 million in debt and accrued interest equity in the second quarter, which resulted in a non-cash expense of $1.26 million. Adjusted EBITDA (Adjusted Earnings Before Interest, Taxes, Depreciation and Amortization) for the second quarter of 2018 was $0.57 million compared to $0.54 million in the prior year. Shareholders’ equity improved to $0.3 million at June 30, 2018, compared to a deficit of $1.2 million at December 31, 2017 and $15.5 million at June 30, 2017.
For the six months ended June 30, 2018, Quest reported revenues of $29.0 million as compared to $27.9 million in the prior year period. The increase was primarily related to strong execution by the Company’s sales team. Gross margin of 21% was consistent with the first half of 2017. Total operating expenses for the first six months of 2018 increased 32% to $7.6 million, primarily related to equity grants to the Company’s officers, directors, employees and key consultants, increases in sales commissions related to revenue growth, and increased professional fees.
Net loss attributable to common stockholders was $3.3 million, or a loss of $0.08 per share on a six-month basis, compared to a net loss of $0.7 million, or a loss of $0.02 per share in the comparable 2017 period. Adjusted EBITDA for the first half of 2018 was $1.04 million compared to $1.09 million in the prior year.
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. Please refer to the financial tables included below for a reconciliation of GAAP to non-GAAP results.
About Quest Solution, Inc.
Quest Solution is a Specialty Systems Integrator focused on Field and Supply Chain Mobility. We are also a manufacturer and distributor of consumables (labels, tags, and ribbons), RFID solutions, and barcoding printers. Founded in 1994, Quest is headquartered in Eugene, Oregon, with offices in the United States. Rated in the Top 1% of global solution providers, Quest specializes in the design, deployment and management of enterprise mobility solutions including Automatic Identification and Data Capture (AIDC), Mobile Cloud Analytics, RFID (Radio Frequency Identification), and proprietary Mobility software. Our mobility products and services offering is designed to identify, track, trace, share and connect data to enterprise systems such as CRM or ERP solutions. Our customers are leading Fortune 500 companies from several sectors including manufacturing, retail, distribution, food / beverage, transportation and logistics, health care and chemicals / gas / oil.
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, the Company’s ability to manage credit and debt structures from vendors, debt holders and secured lenders, the Company’s ability to successfully integrate its acquisitions, risks related to the sale of Quest Solution Canada Inc. to Viascan Group Inc. 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, among others, statements regarding revenue growth, driving sales, operational and financial initiatives, cost reduction and profitability, and simplification of operations. 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, unless otherwise required by law.
QUEST SOLUTION, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS
(UNAUDITED)
| For the three months | For the six months | |||||||||||||||
| ending June 30, | ending June 30, | |||||||||||||||
| 2018 | 2017 | 2018 | 2017 | |||||||||||||
| Revenues | ||||||||||||||||
| Total Revenues | $ | 13,777,187 | $ | 13,485,145 | $ | 28,957,734 | $ | 27,922,701 | ||||||||
| Cost of goods sold | ||||||||||||||||
| Cost of goods sold | 10,927,850 | 10,685,448 | 22,942,305 | 22,131,057 | ||||||||||||
| Total costs of goods sold | 10,927,850 | 10,685,448 | 22,942,305 | 22,131,057 | ||||||||||||
| Gross profit | 2,849,337 | 2,799,697 | 6,015,430 | 5,791,644 | ||||||||||||
| Operating expenses | ||||||||||||||||
| General and administrative | 560,154 | 414,162 | 1,037,009 | 827,107 | ||||||||||||
| Salary and employee benefits | 2,258,777 | 1,840,807 | 4,861,342 | 3,786,690 | ||||||||||||
| Depreciation and amortization | 435,179 | 441,512 | 872,577 | 883,912 | ||||||||||||
| Professional fees | 513,058 | 138,147 | 805,920 | 241,424 | ||||||||||||
| Total operating expenses | 3,767,167 | 2,834,628 | 7,576,848 | 5,739,133 | ||||||||||||
| Income (loss) from operations | (917,831 | ) | (34,931 | ) | (1,561,418 | ) | 52,511 | |||||||||
| Other income (expenses): | ||||||||||||||||
| Interest expense | (364,852 | ) | (376,398 | ) | (659,617 | ) | (732,056 | ) | ||||||||
| Other (expenses) income | (1,126,841 | ) | (17,917 | ) | (1,124,297 | ) | (23,959 | ) | ||||||||
| Total other expenses | (1,491,693 | ) | (394,315 | ) | (1,783,914 | ) | (756,015 | ) | ||||||||
| Net Loss Before Income Taxes | (2,409,524 | ) | (429,246 | ) | (3,345,332 | ) | (703,504 | ) | ||||||||
| Provision for Income Taxes | ||||||||||||||||
| Current | (45,848 | ) | (19,210 | ) | (59,044 | ) | (76,110 | ) | ||||||||
| Total Provision for Income Taxes | (45,848 | ) | (19,210 | ) | (59,044 | ) | (76,110 | ) | ||||||||
| Net Loss attributable to Quest Solution Inc. | $ | (2,455,372 | ) | $ | (448,456 | ) | $ | (3,404,376 | ) | $ | (779,614 | ) | ||||
| Less: Preferred stock – Series C dividend | (46,826 | ) | (47,024 | ) | (94,950 | ) | (93,531 | ) | ||||||||
| Net loss attributable to the common stockholders | $ | (2,408,546 | ) | $ | (402,432 | ) | $ | (3,309,426 | ) | $ | (686,083 | ) | ||||
| Net income (loss) per share - basic | $ | (0.06 | ) | $ | (0.01 | ) | $ | (0.08 | ) | $ | (0.02 | ) | ||||
| Net loss per share from continuing operations - basic | $ | (0.06 | ) | $ | (0.01 | ) | $ | (0.08 | ) | $ | (0.02 | ) | ||||
| Weighted average number of common shares outstanding - basic | 41,856,966 | 35,795,675 | 42,099,171 | 35,472,251 | ||||||||||||
QUEST SOLUTION, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(UNAUDITED)
| As of | ||||||||
| June 30, 2018 |
December 31, 2017 |
|||||||
| ASSETS | ||||||||
| Current assets | ||||||||
| Cash | $ | 30,799 | $ | 24,634 | ||||
| Restricted Cash | 665,477 | 684,610 | ||||||
| Accounts receivable, net | 8,975,241 | 6,387,734 | ||||||
| Inventory, net | 1,049,045 | 439,720 | ||||||
| Prepaid expenses | 278,099 | 476,840 | ||||||
| Other current assets | 23,449 | 126,187 | ||||||
| Total current assets | 11,022,109 | 8,139,725 | ||||||
| Fixed assets, net | 69,589 | 92,803 | ||||||
| Goodwill | 10,114,164 | 10,114,164 | ||||||
| Trade name, net | 2,070,981 | 2,359,481 | ||||||
| Customer Relationships, net | 4,748,581 | 5,310,938 | ||||||
| Other assets | 34,963 | 39,512 | ||||||
| Total assets | $ | 28,060,386 | $ | 26,056,623 | ||||
| LIABILITIES AND STOCKHOLDERS’ (DEFICIT) | ||||||||
| Current liabilities | ||||||||
| Accounts payable and accrued liabilities | $ | 13,958,637 | $ | 13,239,810 | ||||
| Accrued interest on note payable | - | 38,430 | ||||||
| Line of credit | 4,954,169 | 3,667,417 | ||||||
| Accrued payroll and sales tax | 3,129,622 | 1,531,233 | ||||||
| Deferred revenue, net | 4,360 | 761,194 | ||||||
| Current portion of note payable | 2,062,940 | 3,429,025 | ||||||
| Notes payable, related parties | 319,500 | 106,500 | ||||||
| Other current liabilities | 1,041,410 | 121,117 | ||||||
| Total current liabilities | 25,470,638 | 22,894,726 | ||||||
| Long term liabilities | ||||||||
| Note payable, related party | 1,810,500 | 3,222,900 | ||||||
| Accrued interest, related party | 4,880 | 165,014 | ||||||
| Long term portion of note payable | 130,294 | 130,294 | ||||||
| Deferred revenue, net | - | 452,024 | ||||||
| Other long term liabilities | 383,218 | 439,833 | ||||||
| Total liabilities | 27,799,530 | 27,304,791 | ||||||
| Stockholders’ (deficit) | ||||||||
| Series A Preferred stock; $0.001 par value; 1,000,000 shares designated and 0 shares outstanding as of June 30, 2018 and December 31, 2017, respectively. |
- | - | ||||||
| Series B Preferred stock; $0.001 par value; 1 share designated and 0 shares outstanding as of June 30, 2018 and December 31, 2017, respectively. |
- | - | ||||||
| Series C Preferred stock; $0.001 par value; 15,000,000 shares designated, 4,828,530 shares outstanding as of June 30, 2018 and December 31, 2017, respectively, liquidation preference of $1.00 per share and a cumulative dividend of $0.06 per share. |
4,829 | 4,829 | ||||||
| Common stock; $0.001 par value; 100,000,000 shares designated, 48,433,472 and 36,828,371 shares outstanding of June 30, 2018 and December 31, 2017, respectively. |
48,522 | 36,828 | ||||||
| Common stock to be repurchased by the Company | (230,490 | ) | (230,490 | ) | ||||
| Additional paid-in capital | 38,279,099 | 34,495,659 | ||||||
| Accumulated (deficit) | (37,841,103 | ) | (35,554,994 | ) | ||||
| Total stockholders’ equity / (deficit) | 260,856 | (1,248,168 | ) | |||||
| Total liabilities and stockholders’ equity / (deficit) | $ | 28,060,386 | $ | 26,056,623 | ||||
QUEST SOLUTION, INC.
RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(UNAUDITED)
| For the three months | For the six months | |||||||||||
| ending June 30, | ending June 30, | |||||||||||
| EBITDA Calculation: | 2018 | 2017 | 2018 | 2017 | ||||||||
| Net loss | (2,455,372 | ) | (448,456 | ) | (3,404,376 | ) | (779,614 | ) | ||||
| Income Taxes | 45,848 | 19,210 | 59,044 | 76,110 | ||||||||
| Depreciation & Amortization | 435,179 | 441,512 | 872,577 | 883,912 | ||||||||
| Interest Expense | 364,852 | 376,398 | 659,617 | 732,056 | ||||||||
| EBITDA | (1,609,493 | ) | 388,664 | (1,816,138 | ) | 912,464 | ||||||
| Adjusted EBITDA Calculation: | ||||||||||||
| EBITDA | (1,609,493 | ) | 388,664 | (1,816,138 | ) | 912,464 | ||||||
| Non Cash stock compensation | 396,371 | 122,289 | 1,077,847 | 149,045 | ||||||||
| Debt conversion expenses | 1,264,237 | - | 1,264,237 | - | ||||||||
| Restructuring expenses | 14,222 | 26,880 | 14,222 | 26,880 | ||||||||
| One time nonrecurring costs | 501,660 | - | 501,660 | - | ||||||||
| Adjusted EBITDA | 566,997 | 537,833 | 1,041,828 | 1,088,389 | ||||||||
| Net Revenue | 13,777,187 | 13,485,145 | 28,957,734 |
27,922,701 |
||||||||
| Adjusted EBITDA as a % of Net Revenue | 4.11 | % | 3.98 | % | 3.60 | % | 3.90 | % | ||||
Investor Contact:
John Nesbett/Jen Belodeau
Institutional Marketing Services (IMS)
203.972.9200
jnesbett@institutionalms.com
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