Quest Resource Holding Corp (QRHC) 2014 Q4 法說會逐字稿

Good day and welcome to the Quest Resource Holding Corp. fourth-quarter and full-year 2014 earnings call. Today's conference is being recorded. At this time I would like to turn the conference over to Mr. Rob Fink, Hayden IR. Please go ahead.

Thank you, operator. I would like to welcome everyone to Quest's fourth-quarter and full-year 2014 earnings call. Hosting the call today are Brian Dick, President and Chief Executive Officer, and Laurie Latham, Senior Vice President and Chief Financial Officer.

Before I turn the call over to management I would 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, object, estimate, expect, intend, believe, and other similar expressions is intended to identify those forward-looking statements.

Forward-looking statements also include statements regarding Quest's future opportunities for growth, Quest's expectations for revenue, margins and profitability in the future, Quest's industry position and industry trend and future opportunities related to Quest's e-commerce website and comprehensive disposal directory. Such forward-looking statements represent Quest's current judgment about the future and they are subject to various risks and uncertainties.

Risk factors and other considerations that could cause Quest's actual results to be materially different are described in Quest's securities filings, including its form 10-K, 10-Q and 8-K. You can find those documents on Quest's website at www.qrhc.com. Quest does not assume any obligation to update that information. Actual events or results may differ materially from those projected including as a result of changing market trends, reduced demand and competitive nature of Quest industries.

In addition, this conference call will include a substantial amount of industry and market data and other statistical information as well as Quest's observations and views about industry conditions and developments. The data and information are based on Quest's estimates, independent publications, government publications, 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 these sources or the accuracy of information. In addition, Quest's observations and views about industry conditions and developments are its own and may not be supported by or agreed with by other industry participants and observers.

Certain non-GAAP financial measures will 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 and 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 conference call will be on a non-GAAP basis. Full reconciliations of non-GAAP to GAAP financial measures are included in the earnings release. With all that said I would now like to introduce Brian Dick and turn the call over to him. Brian, the call is yours.

Thanks, Rob. Good afternoon and welcome to Quest's inaugural quarterly earnings call and webcast. Thank you all for joining us today. 2014 was a very productive and successful year for Quest as we more than doubled our previous year's reported revenue with $174.5 million of revenue generated as well as generated positive EBITDA of $1.4 million, which was an improvement of more than $9 million over the prior year.

We significantly strengthened our balance sheet with the successful completion of a public offering that raised $16.3 million in net proceeds that were used to retire outstanding debt and add capital to our balance sheet.

During 2014 we added a significant number of new clients, reducing our overall concentration risk and adding higher margin business to our overall portfolio to establish a basis for continued margin improvement over time.

At the same time, the number of client locations, a key operating metric and leading indicator of our future results, rose from over 15,000 unique locations at the end of 2013 to over 20,000 locations at the end of 2014. Subsequent to yearend we topped the 32,000 location marker before the end of the first quarter in 2015.

Quest is well-positioned to continue this growth and expansion as we aim to reach $500 million in revenue, expand our margins and achieve sustainable profitability in the next two to four years.

Before we get into a more detailed review of the quarter and the full year, since this is our first earnings call, I would like to take a minute to provide everyone, and particularly those who may be new to our Company, a brief history of our business and some insight into the market as well as key catalysts that we believe will drive sustainable long-term profitability for our Company.

I was a cofounder of Quest Resource Management Group, which was formerly known as Quest Recycling Services in 2007 after spending more than a decade working for a number of well-established waste management and environmental contracting service companies. At the time a longtime client, Walmart, was faced with a challenge; they had just unveiled Sustainability 360, a companywide directive to make environmental concerns central to all business decisions.

As a part of this directive Walmart launched a Zero Waste program to minimize waste streams and reduce the use of landfills through sustainable recycling programs that would minimize its environmental impact while optimizing its financial impact.

Walmart identified several key types of waste they wanted to recycle as a part of this initiative, but quickly found out that a national infrastructure that can handle the volume that they produced in an efficient and economically viable way was not readily available. It was from this unmet concept that Quest was born.

What started out as a trial program in a single state with a single service line, scrap tire recycling, was quickly rolled out as a national program over the following 18 months. Prior to Quest scrap tires from Walmart's Tire & Lube Express centers and Sam's Club Tire & Battery centers were handled by hundreds of local suppliers which was inefficient and difficult to manage.

In addition, to meet the goals set forth for sustainability they needed a process to ensure higher end usage of scrap tires, including the ability to sell [tire direct] products in their stores and clubs or use them in various construction projects.

Quest was able to build a subcontractor network that was able to assist them, ensuring that the scrap tires were collected, processed and recycled, in some cases in rubber mulch that was then returned to the Company as a product and sold in its retail stores and clubs.

Walmart was an early adopter of the idea that operational efficiencies can be converted into environmentally sustainable solutions and as a source of profit that may have otherwise been overlooked or mismanaged. Walmart remains our largest client today.

Since launching as a startup in 2007 we have grown revenues year after year, significantly expanding the breadth of our service offerings, strengthened our overall network of service providers and invested heavily into the development of our internal systems needed to scale our business.

In July of 2013, Quest Resource Management Group was fully acquired by a public holding company, Infinity Resources Holding Corp., and its wholly-owned subsidiary, Earth911 Incorporated. The Company of the combined entities was now renamed and is what we know today as Quest Resource Holding Corporation. The companies and the operations of Quest are located in the Frisco, Texas area.

Today Quest manages an integrated recycling solutions program for some the largest companies in the world at over 32,000 unique client locations in all 50 states, Canada, and Puerto Rico. We are the one stop recycling solutions Company with a national footprint that allows our clients to maximize the value of their waste while reducing the overall cost and impact to the environment.

Our clients are a very diverse group that span from retail, automotive, industrial, municipalities, hospitality, foodservice, healthcare and property management industries. They include blue-chip companies such as Walmart, Sam's Club, Kroger, AT&T and the largest Pizza Hut franchisee group owned by NPC International, among many others. The US waste management industry is estimated to be a $55 billion market according to the Waste Business Journal. At Quest we are focused on addressing a subset of that overall market.

Our target market includes the 50 largest retailers, grocery store chains and restaurants, the 100 largest automotive car dealerships as well as top manufacturing facilities and office buildings managed by large management groups, which collectively is estimated to be $2.7 billion. We have selected this portion of the overall market as our focus because the business within the target market has potential to capture the highest return on investment for our offerings and realize the most significant environmental impact.

Our value proposition in this business is quite simple: we reduce the recycling and disposable cost by decreasing the ecological footprints with a quantifiable ROI. We provide extraordinary client care with a single point of contact for all their locations across the country. We also effectively manage thousands of recyclers and waste haulers to collect, transport and process waste streams into valuable resources.

And because we don't manage fleets, recycling plants -- or recycling plants our requirements for capital assets are minimal and we'll be able to provide scale through our network of contractors. As a result we can quickly roll out and provide our services at a competitive price point and maintain flexibility to add or change services as our clients' needs evolve.

We also differentiates ourselves by providing a wider offering of services, the majority of which are specialty programs such as hazardous materials, food waste, automotive waste services as well as other recyclables.

These specialty programs are often what attracts new clients to Quest and provides us with an entree into their company, which I will discuss later in this call. They also provide us with the opportunity to expand our relationships with clients over time.

To give you a sense of the value that we provide our clients, let me turn to a brief discussion on how we address three primary waste stream groups: food waste; automotive and industrial waste; solid waste and single stream. So let me talk about first food waste and food waste recycling services.

We believe that we manage the largest food waste recovery program in the industry. With a national footprint we managed over 500,000 tons of organic material and over 12,000 tons of meat and seafood from over 9,000 client locations in 2014 alone.

This waste had previously been disposed of in landfills and often represented as much as 35% to 40% of a grocery store chain or restaurants' total waste. Through our programs food waste is collected, processed and turned into compost, animal feed, additives or other materials that reduce the landfill waste.

The second area is our automotive and industrial waste stream services, which addresses the waste minimization needs of car dealerships, automotive aftermarket retailers and fleet operators. In 2014 we managed the recycling of 23.5 million gallons of used motor oil, 6,800 tons of used oil filters and 15.6 million tires at over 8,000 client locations.

Our hazardous waste program provides industry-leading expertise designed specifically to help retailers reduce their risk of noncompliance and protect their brands. With these services retailers of all size can manage their waste as well as the data, reporting and training necessary to remain compliant.

The collection of hazardous waste is increasingly becoming a more intricate part of our business. Earlier, in March of 2015, we announced the addition of 13,000 locations to our hazardous waste program, which included a small box discount retailer with over 12,000 locations. We believe this is a positive indicator for the demand for these services.

Our third area that I will talk about is our solid waste and single stream material waste services, which include more commonly recyclable items such as cardboard, plastics and other materials. We are positioned well in this part of the industry but, as you might expect, we face a wider and more significant competition from the large number of service providers in this area.

We provide one or multiple services to some of the largest companies in the world. We have grown our business from an idea: a single state trial service with Walmart in 2007 to over 20,000 locations in 2014 and now more than 32,000 locations as of today. Over the past seven years we have achieved this growth while retaining 99% of our client locations.

As I think about our business going forward there are also two macro trends and one client trend that we believe will fuel our growth in 2015 and position ourselves to reach the stated goal of $500 million in revenue in the next two to four years.

The first macro trend creating opportunities for us is the changing regulatory environment. Regulatory issues and more stringent control of material bound for disposal are making the management of solid waste an increasingly challenging program for businesses.

The Environmental Protection Agency, along with state and local governments, are expected to continue the trend of restricting the amount of potentially recyclable materials bound for landfills. These restrictions can create additional opportunity for us as proper disposal of this material becomes more specialized and companies look to outsource the handling of solid waste in order to gain efficiencies and reduce their overall cost to meet regulatory requirements.

As an example, over the last 12 to 18 months large national retailers have been fined and penalized hundreds of millions of dollars for the mismanagement of hazardous waste by the EPA, state regulators and Department of Justice. Not to mention the impact a violation can have on the company's reputation and brand.

Regulators are increasingly monitoring national retailers for the improper disposal of pesticides, batteries, electronic devices, over-the-counter medicines, bleach, paint, aerosols, automotive products, solvents, pharmaceuticals and other hazardous waste. In addition, the disposal of expired or damaged products has increasingly been coming under scrutiny.

The automotive industry is also bracing for a significant impact in 2015 due to strengthened EPA regulations in the regulation of nonmetallic used oil filters, higher pressure monitoring systems, air bags and seat belt tensioners to name a few.

In addition to those, the Massachusetts Food Waste Ban signals an increasing level of awareness at a state and local level to mandate food waste recycling and eliminate it from landfills. We see the state and local trend continuing across the future as local landfills have less capacity and tighter regulatory restrictions.

The second macro trend we believe will drive growth in our business is increased sustainability mandates from large corporations. More and more corporations are seeing the value in setting tangible sustainability goals and focusing on their environmental performance, increasing employee satisfaction, enhancing their public image and bolstering their bottom line.

Over 70% of companies with annual revenue greater than $1 billion publicly communicate their overall sustainability strategy and 50% have publicly set goals for waste to landfill reductions. We applaud these initiatives but the reality is the goals set in the corporate office are often challenging to accomplish.

The operations managers tasking (sic) with carrying out those initiatives to advance these goals often lack the resources and know-how to implement and, more importantly, monitor their progress. Quest provides that solution. We work with our clients to identify the path of sustainability, develop, deploy and help manage programs that deliver their desired goals.

As more Fortune 500 companies work to advance their sustainability goals and show progress we are confident that we are well positioned to service the growing demand with our solution services.

And finally, the third factor we expect to grow -- to drive our growth in this business is expanding our existing client relationships for organic growth. Many of our clients come to us initially with assistance on one specific program or to address a specific challenge.

As we build relationships with our clients and they see the value we add we have additional opportunities to expand these relationships and grow our business organically. Similar to the expansion we experienced with Walmart whereby we have grown our relationship from one program to five, we have a track record of expanding these relationships with other clients as well.

The results speak for themselves and our success in maximizing efficiency for clients and reducing their ecological footprint are supported by our positive financial and operational results. There remains significant opportunity to cross sell and further penetrate our existing client base.

On the digital and data side of our business, we have two areas where we see opportunities for growth. The first is through Earth911.com, a website and online community which is focused on low waste living and green -- and clean and green lifestyle. This site manages a comprehensive disposal directly for locations within the United States. The site attracts millions of visitors each year, has page views in the tens of millions and generates digital advertising revenue for our Company.

In the fourth quarter of 2014 we launched an e-commerce component to our site. Our advertisers are supporting of this new offering. We are cautiously optimistic that the incremental revenue may be generated from this offering and 2015 and 2016 will be the limited ongoing investment.

In addition, as we scale and continue to grow our business on the service side we believe there could be opportunities to monetize the data that we collect through our national footprint. While it's still early to tell and to know, we will not be able -- we think some day we will be able to capitalize on this data and we're optimistic those opportunities will continue to exist.

With that I would like to turn over the call to Laurie for a more detailed review of our financial results. Laurie, please go ahead.

Why, thank you, Brian, and good afternoon to all of you on the call today. Revenue for the fourth quarter reached $46.8 million compared with $37.9 million for the corresponding period in 2013, an increase of 23.5% driven primarily by organic growth in recycling and waste service fees and commodity revenue. Gross margin for the quarter was 7.6% compared with 4.9% for the corresponding period last year.

Earnings before interest, taxes, depreciation, amortization and stock related non-cash charges, or EBITDA, was a loss of $412,000 for the fourth quarter of 2014 compared with a loss of $874,000 in the fourth quarter of 2013.

The improvement was primarily driven by a decrease in net loss coupled with lower interest expense as a result of retiring $22 million in debt in September of 2014. That was partially offset by slightly higher depreciation and amortization and an increase in stock-based compensation.

We compute EBITDA, which is a non-GAAP financial measure, as reflected in today's press release reconciliation table to provide additional insight into our financial performance. The loss per basic and diluted share was $0.02 for the fourth quarter of 2014 compared with a loss per basic and diluted share of $0.04 for the fourth quarter of 2013.

For the 2014 year revenue increased by $106.9 million or a 158.4% increase to $174.5 million, up from $67.5 million in 2013. The increase was primarily due to the $38.5 million or 28% organic growth increase in service and commodity revenue from the prior year and a $68.9 million increase from consolidating a full year of the recycling and waste services fees in 2014 compared with a partial year in 2013 which was subsequent to our acquisition of Quest Resource Management Group which occurred on July 16, 2013.

This growth in revenue has reduced our customer concentration with Walmart, our largest client, which represented approximately 59% of our 2014 revenue versus 76% of our 2013 revenue. The gross margin for 2014 was 8.2% of total revenue compared with 7.5% for 2013. The increase in gross margin was primarily due to increased revenue from recycling and waste services and commodity revenue as compared with the prior year.

For the year ended December 31, 2014, EBITDA was $1.4 million compared with an EBITDA loss of $7.9 million in the prior year. The $9.3 million improvement was primarily driven by narrowing of the net loss, a decrease in stock-based compensation, which was partially offset by an increase in depreciation and amortization, primarily driven and related to the acquisition-related intangible assets from 2013. The loss per basic and diluted share for 2014 was $0.10 compared with a loss per basic and diluted share of $0.23 for 2013.

Now turning to the balance sheet for just a moment, as of December 31, 2014, we had $3.2 million in cash and cash equivalents as compared to $2.7 million as of December 31, 2013. Our working capital as of December 31, 2014, was $1.3 million, this was a $6.7 million improvement from the working capital deficit of $5.4 million as of December 31, 2013. Total long-term debt outstanding as of December 31, 2014 was $45,000, a significant reduction from the $17.4 million outstanding as of December 31, 2013.

For the third quarter of 2014 we successfully completed a public offering of our common stock for net proceeds of approximately $16.3 million. We utilized a majority of the proceeds to repay $11 million of our convertible secured notes.

This repayment combined with the concurrent conversion of an additional $11 million of the convertible secured notes into shares of our common stock resulted in an overall reduction of $22 million in debt. As a result the related interest and financing costs of more than $4 million will not recur subsequent to 2014.

Turning now to our outlook. As Brian indicated earlier, we are focused on achieving $500 million in revenues in the next two to four years and expect to see the continuation of increasing our client base and therefore increasing annual revenue in the upcoming year.

In addition, as we enter into 2015, and as a result of lower petroleum prices, the pricing of the secondary market for used motor oil has declined significantly. We have some flexibility against fluctuating commodity prices as a result of our business model since we capture a fixed spread by serving as broker between our client, the seller and a contracted buyer.

We expect that commodity-related revenue as a percentage of total revenue may fluctuate until used oil prices recover. That said, the higher prices for used oil over the past few years, and now the declining prices from a decade ago, have disrupted the status quo in the market.

Many used oil service providers who are not protected against the risk of commodity pricing fluctuations relied heavily on elevated secondary market pricing to make collections economically viable. Others may have debt to service or lack flexibility in changing the end-use options for the used oil they collect.

At current market pricing we believe we are well positioned to capture market share from those that can no longer service clients in a cost-effective manner or who have not had the flexibility in valuing their used oil from a regional or spot market perspective.

Increases in volume and client growth will certainly help offset the reduction in commodity pricing and we believe position us to grow our commodity-related business over the near- and long-term.

That concludes our prepared remarks and we'd like to know open up the call for your questions. Operator?

(Operator Instructions). William Bremer, Maxim Group.

Very nice granularity on the underlying business, Brian, appreciate it. You also mentioned you added some higher-margin businesses during the quarter. Can you touch base on that a little bit?

Well, as we talked about in our release, the single stream typical commodities like cardboard, plastics, those things as well as solid waste are very competitive. And that is where we do see our lowest margins. Where we see our larger margins and our ability to expand is in our specialty services.

So certainly we see the opportunity in the hazardous waste space for retailers as [that one] of specialty services, as well as our food waste recovery and recycling businesses that we feel we have a unique position in and really is being driven now from a regulatory standpoint to drive this food waste out of the recycling landfill.

So as usual, we can't predict where new business is going to come from. But we do see a lot of positive movement towards interest in our specialty services like hazardous waste and food waste.

Great. My next question -- my next question is based on just the overall what we are seeing in the G&A expenses. That came in a little bit higher than what I was anticipating for the quarter at $4.4 million. Just wondering, maybe this is a question for Laurie, is that sort of the run rate I should be using going forward? Or was there some type of maybe one-time charges that affected the fourth quarter both year over year and sequentially?

Well, we have had a lot of growth in our business so we have had an increase just year over year with the increased operational people we have added. But in addition to that, especially if you look at compared to Q3, in Q3 we did have a pickup in our expenses from a benefit of subleasing our old space in Phoenix. And that was over $500,000 and it is a one-time occurrence. But that did reduce our expenses in Q3.

One of the other things that will fluctuate quarter to quarter to some level is the capitalized software developments that we do. Some quarters it will be higher as far as what is capitalized, some quarters it is lower. And in Q4 it was lower.

So the only other additional thing that (technical difficulty) in Q4 is we did experience a little higher level of bad debt expense, although it is nothing that is really even significant in comparison to our revenues, but we did scrub through some of our accounts and went ahead and did some reserving on some of those bad debts.

Okay, so what type of level should we have a run rate going forward throughout 2015 then on SG&A?

Well, I think that Q4 is a pretty good representation, it will probably fluctuate, like I said, up and down from that level. And if we continue to add substantial levels of clients we will have some increase in our operating personnel cost.

Okay. And so, looking at your gross margins, Brian and Laurie, you just voiced about the (inaudible) cognizant of underlying commodities. Is it fair to assume that first quarter and maybe the first half of the year will be sort of the same type of gross margin range as this fourth quarter came in?

Our gross margins are dictated by our customer mix and obviously what service lines are coming in. With the downturn of the used oil revenue from the commodity market we will see lower revenue. But because of our business model and the strength that it provides us of not having inventory and not being in a hedged just situation, we will actually see an increased margin from that activity due to the lower revenues.

So we do have that fixed fee, if you will, in between or fixed percentage of a marketed scale. That will increase our margin by a percentage. And as you have seen from our recent releases, our entree into the hazardous waste space we feel is again one of those specialty markets that will see some continued gross margin improvement with that.

Okay. So basically a nice run rate going forward there. And then just a question on the total shares fully diluted. I realize that the options and the warrants were anti-dilutive. So what should we be using as a fully diluted in terms of shares outstanding for 2015?

Well, at the moment at the end of the year, in addition to the 111.6 million shares that we had outstanding, we had approximately [13 million] in warrants and an additional [5.5 million] in outstanding options that would bring you to a total of [130.1 million] roughly.

Okay, thank you. I will get back in queue.

Marco Rodriguez, Stonegate Capital Partners.

Wondering if maybe you could talk a little bit more about the gross margins, just kind of flesh that out a little bit. I hear you guys are obviously adding higher margin clients. There is a negative impact here in the short term on the commodity business. But some of your commentary seems to indicate that these margins should be going up and sequentially they were down.

But can you talk a little bit more about what kind of were the drivers there in Q4? And then maybe if you could provide some sort of percent of revenues of your commodity business that that represents?

Well, Marco, if you look at year over year Q4, we have actually had a fairly large improvement, Q4 a year ago was [4.9], Q4 this year [7.6]. So there are some adjustments that tend to come through in the fourth quarter. We did have a few of those adjustments that came through whether they were little contractual or expense adjustments.

So some of the adjustments caused part of that decline. And in addition to that, part of it was just the mix of the different kinds of services that we had in the fourth quarter. Did you have anything else to add to that, Brian, at the moment? I think that's --

I think that -- yes, (multiple speakers).

-- in a nutshell really where we are. And as far as a percentage of our commodities, as we have certainly discussed before, that our commodity portion of all of our revenue runs somewhere around 25% to 30% and our -- during 2014. And our oil-related portion of the commodity percentages has been about half in 2014. Now of course those percentages will change as we are going into 2015. But that gives you a little bit of insight.

And while I've (multiple speakers) clarification, Marco.

Yes.

Just one clarification on a statement that you made just so we can be clear is the used motor oil marketplace is down, revenue will be down, but Quest operates in a fixed percentage on a floating scale that the commodity changes.

So we will see a gross margin increase in those services. Our revenues will be down, but we are still making the same net percentages that are associated with our scales and our matrix that we have for that.

Got it, okay, that is helpful. And then maybe you can talk a little bit more about the organic growth initiatives. I believe you guys commented the fact that organic growth for fiscal 2014 was about 28%. Maybe if you can talk about some sort of -- any sort of sales and marketing initiatives you have planned for 2015 and how we should be kind of thinking about the growth rate ramp in 2016.

Sure, that is certainly one of the things that we think is exciting about our Company is obviously we have grown the business to this year ending at almost $175 million. But it is clear that we have many customers that we don't have full penetration in as far as the overall services that we can provide.

So, many of our customers that have come in over the last two to three years have brought us in at one service, two services, maybe a state or region. And so, we have a dedicated client services team that is focused on that continued growth of new services and new locations and providing solutions, if you will, that will grow our relationship.

So we have a dedicated team inside of Quest that manages each client on a day-to-day basis for that type of growth, as well as our sales team is focused on that as well. And we think that we have a lot to do in organic growth, not just new business but with those existing customers.

So from a sales and marketing standpoint it is not a new initiative, it is a structure that we have had in place since the start of Quest. But it is something that from our standpoint we don't have to add new business and new clients to grow our business significantly.

Plus our door has had a lot of people come to it but because of volatility in the oil industry right now we have had a lot of opportunity --.

Yes, we certainly -- our unique position of allowing for a large organization to utilize regional players puts us in a really unique position for our clients that have never had an opportunity to utilize a mix of subcontractors and providers that may only cover one state or one area or one city, for that matter.

And so, with the unique business model that Quest can provide to them they know that there is another national solution other than some of the larger players in these individual industries. And so to Laurie's point, we've had a very busy end of the last year into this first quarter of sales activity and meetings.

Is there a plan at all to add additional headcount on the sales side?

Yes, we are always looking to add. As we talked about last year, we have added an additional four salespeople to our team in 2014. And we want to continue that trend, but we want to do it with the right people. One of the things that is unique again about Quest is our business model. And it is definitely a relationship sell, it is a sell of expertise.

And we are looking for people that have the industry knowledge and long-term history in that industry. But also are accustomed to selling in a relationship consulting manner, if you will, versus a price lift.

And so, as we find those qualified people we are certainly interested and have many openings for those types of people in our Company. We expect [to add] somewhere between seven and 10 sales teams -- members by the end of this year, 2015.

Got it. And last quick question and I will jump back in the queue. On the balance sheet side, can you talk a little bit about your cash needs for fiscal 2015 and how we should be thinking about cash flow through the fiscal year?

So, between cash we have on the balance sheet and our operations, along with our line of credit, we feel we're in a good position as we are moving through 2015. So we feel we are in a good position and that is where we see our cash flow coming from.

Do you (multiple speakers). I'm sorry, go ahead?

I'm sorry.

I was just going to add to -- sorry, Marco. I was just going to add to Laurie's statement. Our capital needs are really driven by two themes in our business and that would be continued growth for the needs of working capital. So as we add new clients we are having to staff in advance for those new clients whether that be in our accounting team or client services team.

So many times we will have to staff a few months early to get ready for a large client add. And then the other thing that we would have the need for capital and additional cash beyond what we have today would be acquisition opportunities, which we are looking at and we are aggressively searching for the right fit to provide potentially an acquisition growth plan for us.

With that said we still think that organically we can grow this business at the same rate. So we are not focused for our growth on acquisitions but, because of the public currency we have available to us and our structure that we have now, we feel that we are positioned well for an acquisition.

But those would be the only two things -- if we have a significant amount of growth in 2015 beyond maybe our expectations or we have an opportunity for an acquisition, other than that our cash position seems to be adequate.

Got it. And then if I might, just one more quick (inaudible) in regard to that. Do you expect to be cash flow positive in fiscal 2015? And then on the acquisition side, maybe you can provide some sort of color on -- I don't know whether you have got a deep pipeline or what sort of opportunities you might be looking at (technical difficulty)? Thanks.

Marco, when you say cash flow positive there is really two parts of our cash flow. We already -- when you look at just sort of operational cash flow from the P&L perspective we vary up-and-down, but we are pretty close to breakeven.

But then as you look over at our balance sheet and our need for capital, for working capital, that is where we may continue to consume cash as we add large clients and fund that startup cost and fund that AR and AP cycle.

So that is how I look at it, I look at it from that two perspectives, from the operational and though from also requirements we have from a balance sheet working capital position.

Got it. And acquisitions, what those might look like in the pipeline for you guys?

Well, we don't really comment on pipeline of acquisitions. But we can say that it is something that we find as attractive for us. We feel that we are ready. As an organization we have a very strong management team and it is something that when we look for acquisitions we are looking for the opportunity to take that core business they may have and expand.

And so, as we look at potential acquisitions the most important thing for us is what is their customer make up and can we add in businesses that we specialize in like grocery store clients that may have food waste or automotive service clients that we can add in our used oil and tires and other things.

So to that point, our ears are open, our eyes are watching and of course we have full support from our management team and Board for that process. But nothing that we can identify at this time.

Got it. Thanks a lot, guys.

Nelson Obus, Wynnefield Capital.

I'm a little new to the story, but I realize that your top line can move around depending on the price of commodities, etc. Yet you have kind of put a goal out there two do four years out. Why wouldn't you also put a goal out there for EBITDA margin so that we could get a sense of whether this business lends itself to operating leverage or not?

Well, we see obviously when we set the goal of the top-line revenue it equates to many different things in our business. And so, from an EBITDA standpoint we are focused on the growth of the business. That we feel that we will -- as we get bigger, we will have the scale to better negotiate contracts, more buying power, the ability to leverage our staff and our team.

And so, as we look at our business our focus is building our systems internally for this growth pattern of what we believe to be $500 million. We are focused on growing and promoting our management team to be ready for these types of levels. And so we are not, as a business, focused on our EBITDA because we want to focus on the growth side of our business.

We will continue to increase our margins, we will continue to increase the number of locations and clients, which overall will give us better buying power, which all will translate in. So when you look at the $500 million goal, I think it is more of there is many other factors beneath that that drive that overall goal and locations, customers, volumes, all those things are really important to us in getting to that, where we feel is a very exciting level for us.

Okay, fair enough. What would be the argument for not doing a reverse split? Because $1.25 stock is not taken seriously in many institutional quarters. And you do have a large market cap. So I am interested in -- I am sure you have discussed this, but why wouldn't you move forward?

I mean, you are projecting a respectable business model, a respectable Company and then you are putting yourself in the category of marginal penny stocks, which really don't play in the US, this isn't England.

Well, I will respond this way, both as a management team and our Board of Directors, we are very aware and focused and sensitive to how we are perceived in the market, what is the right approach for our shareholders. And we are very aligned with the shareholders out there in addressing those. So these are types of things that we are always considering, we are always looking at and trying to formulate the best plans as we go forward.

Well, maybe (multiple speakers) your brokers like this because they get higher margins. But I mean -- the reality is that you lose a significant component of credibility by representing yourself as a penny stock. And frankly I would beg to differ with you.

I think that if you have shareholders who feel that they want to own a $1.40 -- or a $1.40 or $1.20 stock as opposed to a $12 stock you probably don't want those shareholders because they are not long-term holders who are buying into the development of the Company.

I mean if I had a business and somebody came to me with a -- offered to be a service and I had a $1.25 share price and I knew something about the market, I would -- it would be a bit of a red flag, that is all I am saying.

And I think it is something that you should think about if you want to be taken seriously at the institutional level. There are a number of institutional firms that won't even look at a stock under [$5.00].

I think we hear your concern and your comments and that is -- we are all open to that. And I think that it's great feedback and we will take it under advisement. Of course it's been on the topics before and your opinion is respected and appreciated.

And just final, one other question, I mean very interesting your big picture arguments and so on and so forth about why this Company has a bright future.

How would you characterize the reaction of your competitors and people that you are going to have to displace in the market to some of the macro trends that are very, very clear to me given where I live and very valid? I mean are they ignoring them, are they incapable of executing nimbly? Are they going to give you a battle? I am curious on what your take on that is?

Well, of course there is always going to be competition. These service lines that we are in or are getting into or expanding into we are always going to have competition. And I think that the thing that differentiates us from some of the larger competitors is our flexibility.

A lot of times within these different bigger companies they have a certain way that they invoice, a certain way they collect things, a certain type of container, whatever those things may be. And because we are truly working on the same side of the table as the client, they can kind of drive these solutions and see fits best for their business.

So I think there's always going to be competition and there's always going to be a decision of A and B. But I think we are the Company that can align ourselves the best with our clients. And that is why we feel confident as these new regulatory pressures and movement in the industry, that is why we think we are aligned better than some of our larger competitors because of that difference in business philosophy.

I guess I do have one more question, and I don't mean this negatively. Although -- what exactly were your bad debt write-offs? Because I am not excited -- a Company that has EBITDA that are so low can -- which I am willing to accept, cannot sort of just brush off bad debt write-offs as being a small part of the top line. Because if it gets too high it is going to wipe out your EBITDA and cause you --. What exactly were the write offs in the quarter or in the year?

As disclosed in our 10-K they were around $400,000 for this year.

Well, that's tiny, okay. And that is in keeping with the fact you are dealing with credible -- I think that is a very important metric and I think that underlines the fact that your customers are credible. It is a good thing to come right out with, okay, because if you are doing $400,000 on almost $200 million of revenues or whatever, over $100 million of revenues, that is very, very good.

Thank you.

(Operator Instructions). It appears there are no further questions in the queue. That does conclude today's conference. Thank you for your participation. You may now disconnect.