QRHC - NASDAQ

Good day, everyone. And welcome to Quest Resource Holding Corporation First Quarter 2025 Earnings Call. At this time, all lines are in a listen-only mode. And we’ll open the floor for your questions and comments after the presentation. It is now my pleasure to turn the floor over to your, Mr. David Mossberg, Investor Relations Representative. Sir, the floor is yours.

Thank you, Matthew, and thank you, everyone, for joining us on the call. Before we begin, I’d 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, project, estimate, expect, intend, believe and other similar expressions are intended to identify those forward-looking statements. Such forward-looking statements are based on Quest’s current expectations, estimates, projections, beliefs and assumptions, and involve significant risks and uncertainties. Actual events or Quest results could differ materially from those discussed in the forward-looking statements as a result of various factors which are discussed in greater detail in Quest filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such statements and to consult our SEC filings for additional risks and uncertainties. Quest forward-looking statements are presented as of the date made, and we disclaim any duty to update such statements unless required by law to do so. In addition, in this call, we may include industry and market data and other statistical information, as well as Quest observations and views about industry conditions and developments. The data and information are based on Quest estimates, independent publications, government publications, and reports by market research firms and other sources. Although, Quest believes these sources are reliable and that data and information are accurate, we caution that Quest has not independently verified the reliability of the sources or the accuracy of the information. 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 for investors’ understanding of the 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 call will be on a non-GAAP basis. Full reconciliations of non-GAAP to GAAP financial measures are included in today’s earnings release. With all that said, I’ll now turn the call over to Dan Friedberg, Chairman of the Board.

Thank you, Dave. Good afternoon, and thank you for joining us on today's call. Joining me today are Perry Moss, CEO, and Brett Johnston, our CFO. Before I turn it over to Brett and Perry, I want to emphasize our commitment as a board and a management team to aggressively driving change and enhancing shareholder value. The results in the first quarter were as expected. As discussed in our last call, we decisively implemented a series of actions, which we expect will drive both near and long-term improvements. We completed the sale of the non-core part of the RWS business, which had been a source of inconsistent financial performance. In addition to the ongoing cost savings related to exiting this business, the sale generated $5 million in cash, which is used to reduce debt. In total, our cost reduction actions have reduced SG&A costs by $3 million on an annualized basis and should be reflected in lower SG&A costs going forward. We added two highly experienced executives, promoting Perry Moss to CEO and adding Nick Ober as Senior Vice President of Operations, adding to an already strong operating team. We expect even further long-term savings and efficiency gains as we implement ongoing initiatives and drive process improvements. We are focused on generating cash, improving profitability, lowering debt, and increasing operating efficiency. In addition, by working in partnership with our lenders, PNC and Monroe, we have amended the terms of our debt agreements. These changes will provide increased flexibility as we implement our operating improvements over the coming months. Finally, we wanted to welcome Bob Lipstein to the Board of Directors. We met Bob over a year ago. Bob is a seasoned financial executive, has an audit background, with a Big Four firm and will be a good addition to the Board. In summary, we have implemented a series of changes in our cost structure, in our management team, in our operating philosophy, all focused on improving operating performance. We are pleased with the progress of these changes and are beginning to see the initial operating benefits. In addition, I would like to stress that our value proposition continues to resonate with prospective and existing clients, and our pipeline of opportunities continues to grow. With that, I'll turn the call over to Brett and Perry. Brett?

Thanks, Dan, and good afternoon, everyone. During the first quarter, we continued to make progress with onboarding new clients. As expected, this progress was offset by lower volumes at a select number of larger clients in the industrial sector, the effect of past client attrition, and temporarily elevated expenses, all of which were discussed on our last call. In addition, we have begun to see the positive impact of efficiency initiatives and the cost reduction in SG&A. Revenue for the first quarter was $68.4 million, which was a decrease of 6% from a year ago and down 2% sequentially from the fourth quarter. The decrease in revenue was attributable to lower volumes due to client attrition and lower volumes at a select number of larger clients, both factors that we have described on previous calls. Client attrition contributed approximately $7 million to the decline in revenue. This includes lost revenue from clients in the divested mall-related business, which contributed approximately half of the loss. Other revenue was down approximately $8 million, which was mostly related to lower volumes at certain large clients. As we said previously, the relationships with these clients continue to be strong, and there are opportunities to add services with them in the long term. However, client volumes have decreased for now, which is likely to continue to affect volumes for at least the next several quarters. These revenue decreases were only partially offset by revenue from new clients. New clients secured during 2024 finished the first quarter at approximately 80% of their anticipated run rate. We expect last year's new clients to provide incremental growth in both revenue and gross profit dollars as we complete the rollout and optimize services this year. During the first quarter, gross profit dollars were $10.9 million, a 22% decrease from last year, and a 2% increase sequentially from the fourth quarter. As anticipated, the year-over-year decrease in gross profit dollars was primarily related to four factors. First, lower contribution due to customer attrition. Second, lower volumes at a select number of larger clients. Third, a shift in revenue mix. And fourth, the temporary increase in cost of services. Regarding the mixed shift, as we discussed on previous calls, we had less revenue from more mature client relationships where the margin profile has been optimized, and it was replaced by revenue from new clients and expanding engagements, where it typically takes several quarters to optimize the margin profile. Regarding higher than anticipated cost of services, as we also discussed previously, we experienced a temporary increase in costs associated with customer onboarding and the implementation of our vendor management platform. With these efforts complete, we do not expect temporary increases in cost of service to continue going forward. We expect sequential improvements in gross profit dollars beginning in the second quarter as we benefit from efficiency initiatives and growth. Moving on to SG&A, which was $11.4 million during the first quarter, an increase of $1.6 million versus last year, and a $1.3 million increase sequentially from the fourth quarter. The sequential increase is primarily related to separation costs and the resumption of bonus accruals. We expect SG&A costs to decrease sequentially in the second quarter as we benefit from increased efficiencies and lower costs. Beginning in the second half of the year, we expect SG&A to be approximately $9.5 million per quarter. Before I move on, we had a couple of non-cash charges during the first quarter. The first was a $4.4 million loss related to the sale of the non-core portion of the RWS business. In addition, we recorded a $1.7 million adjustment to the carrying value of the intangible assets related to customer attrition of acquired clients. Moving on to a review of the cash flows and balance sheets. At the end of the first quarter, we had $1.4 million in cash, approximately $21 million of available borrowing capacity on our $45 million operating borrowing lines. For the first quarter, we used approximately $1.1 million in cash to fund operations, which was related to an increase in working capital. As we described on previous calls, our accounts receivable balances are at elevated levels. I will note that we have great relationships with clients elevated DSOs are not related to collectability. DSOs have been impacted by the timing of collections from a few of our largest customers, and we continue to work with them to accelerate the pace of collections. In addition, with the implementation of our automated AP system, we will be able to build at a faster pace, further accelerating our cash cycle and lowering DSOs. We expect to see improvements in DSOs by the end of the second quarter. We received $5 million in proceeds from the sale of the non-core portion of the RWS business. In addition to the cash proceeds, there is a $6.5 million earn out payable by the buyer over three years. We used $2.5 million of the cash proceeds to reduce borrowings on the Monroe line, and the balance resulted in a $1 million net reduction in the balance with PNC. We also amended our agreements with Monroe and PNC so that we have additional time to realize the positive effects of our initiatives on our profitability and cash flow. Our rates have returned to the level prior to the refinancing in December, and will return to the lower levels once we return to our historic run rate. And in further support of that, our covenants have been eased through 2025 with a quarter to three quarter turn easing of the leverage covenant ratios. Additionally, we will be tested on leverage in FCCR with an annualized buildup of trailing 12 months of adjusted EBITDA, starting with our Q2 results. Finally, at the end of the quarter, we had $74.1 million in notes payable versus $76 million at the beginning of the year. At this time, I'll turn the call over to Perry.

Thank you, Brett. Since our last call two months ago, we have been hard at work and are making progress on our short-term initiatives and continuing to develop our long-term initiatives. Our key priorities, as discussed during our last call, are to improve EBITDA, improve cash generation, and pay down debt. First, we have established an operations excellence initiative as part of a cultural shift in our company. Our culture remains client-centric, focused on providing exceptional value. However, with this shift, we have a greater emphasis on performance and accountability. We are establishing metrics and processes that we will use to benchmark, measure, and target improvement levels across the entire organization. This fully integrated effort will look to drive process improvements, improve cash flow, accelerate automation, enhance employee experience, increase customer value add, expand margins, and accelerate the achievement of scale benefits. This is similar to initiatives that helped create a positive change in our sales organization and is now being rolled out across the entire company. This is a key to coaching and motivating employees. Key to demonstrating value to clients. And key to driving performance. Since our last call, we have initiated several projects that are now in flight and expected to deliver improved results. We'll have more details in the coming quarters. In addition to the vendor management platform, which is helping us move to zero-touch processing, we are developing workflows which will drive process improvements across our value chain. This will increase efficiencies, lower operating costs, drive improved customer service, and improve profitability and create a strong foundation as we scale the business. These activities are ongoing and build upon the efforts made over the last two years and are focused on accelerating them and increasing their financial impact. We are also working to optimize the significant amount of new customers that we have been onboarding in the past several quarters. As we have described in the past, it can take several quarters for us to optimize service for clients. We share in these improvements and optimizations with our clients, and as the relationship matures, we improve the margin profile of the business. The optimization is well underway, and we expect to see continued improvement in the margin profile from new customers throughout the year. In addition to driving operational improvements, we have been growing and moving opportunities through our sales pipeline. Our pipeline is robust, and our salesforce is executing a structured and disciplined plan to add new clients. Given the nature of our business, we don't estimate when deals in the pipeline may close, but I can say that opportunities are progressing through our funnel, and we believe we will continue to add new clients and client expansions. And finally, we are very focused on expanding our share of wallet of existing customers. We add significant value to customers and believe there are opportunities to systemically grow our existing customers. Regarding our outlook, some of the actions we have taken are beginning to show results. The cost we incurred on a temporary basis related to onboarding new clients and the transition to a new AP system are abating. In addition, we are a few weeks past the cost reduction actions we took during the first quarter, and we are starting to see the effects of that. These initiatives are continuing to take hold, and we expect steady improvement as we move through this year. Historically, we have performed well during economic downturns, and we are monitoring our markets and customers closely. Our industrial clients have shown some weakness, and given the uncertainty in the economy generally, volume with them may be impacted. With that said, we have great relationships with these clients and believe there are opportunities to do more with them in the longer term. Overall, for 2025, we expect to show both top and bottom line growth and expect to resume more meaningful growth as we exit the year. Before we open it up for questions, I want to reiterate Dan's statement at the beginning of the call. The board, management, and our entire team are committed to aggressively drive change and enhance shareholder value. The market for our asset light model remains robust. We are gaining share, clients are providing us strong referrals, and we have opportunities to increase our share of wallet, and our cost-oriented value proposition is resonating loudly. In addition, we are committed to maintaining a solid balance sheet, and our priority for capital allocation remains the repayment of debt. And we are and will continue to take decisive action to improve our ability to execute, generate consistent, sustainable, and profitable growth going forward. We would now like the operator to provide instructions on how listeners can queue up for questions. Operator?

[Operator Instructions] Your first question is coming from Aaron Spychalla from Craig-Hallum.

Yes. Hi, Perry and Brett. Thanks for taking the question. Maybe first for me, it's been kind of eight weeks since the last call, and Perry, you kind of focused a lot on operational excellence and used the analogy of kind of pressurized pipe with the growth that you've been experiencing. Just curious if, you've kind of identified any leaks or kind of gaps since then, and just kind of any notable KPIs to highlight as we focus on execution moving forward.

Yes. So I do remember that analogy, and yes, the first thing that we have done is we started to baseline all of our processes. So when we talk about operational initiative or operational excellence initiative, we're not referring to just operations, but it's really the new way that we're running the company. So it involves the way we manage our vendors, our customers, the way we pay our bills, the way we process invoices. It's really the entire value chain that we're focused on. So yes, we have indeed identified, flaws and gaps in the process. The processes were not broken, as I had mentioned before, but we've certainly identified some weaknesses. We have designed processes to fix those gaps. We've implemented a number of them. In addition to implementing those changes to kind of our longer-term initiatives, we've also implemented some, I call them quick hits, but some quick initiatives to drive some immediate impact beginning in Q2. So, I remain optimistic and bullish about our ability to execute. the challenge that we have is we have just not converted our business into profit, and that really comes from filling those gaps and increasing efficiencies in our operations, which is precisely what we're doing. So, yes, there's more to come, but we certainly have begun the path to improvement and beginning to see results.

Your next question is coming from Gerry Sweeney from ROTH Capital.

Yes, good afternoon, Perry and Brett. Thanks for taking my call. You're seeing some weakness in end markets, I think, with some of your more mature companies. Just curious if that has increased over the last eight weeks. Obviously, we woke up today and the world's getting better, but just curious as to what you're seeing out there in the general market.

Yes, I'll take that, at least initially. I don't think we're seeing any increase in the weakness in our market. And at least I remain hopeful that with some of the new developments perhaps, we'll see some strength returning. But, yes, no significant change. Demand and volumes are slightly down. And I don't see necessarily any change in the immediate future, but certainly hopeful.

Got you. And I'm sorry. One of the comments was a little tongue-in-cheek. But the other part was, what about the pipeline? Obviously, there's some uncertainty into the markets that have percolated over the last couple of weeks. Are you seeing longer sales cycles starting to emerge? Are people pulling back? Basically saying, let’s see what happens? Or how does that pipeline look?

Yes, that's great. Yes, great question. So, with some of our opportunities, we've seen a bit of a slowdown. And I don't think it's anything that will last for a significant time. I think decision makers are just being a bit more cautious before kind of pulling the trigger. What's interesting, however, is we are attracting prospects that have never used this model before. And I think it's because of the uncertainty in the economy. Companies are, they're back to business. They're back to running their business as efficiently as possible. They're looking for cost savings. They're looking for efficiencies. And these are primary value propositions of our model. So, while we have seen some slowdown, maybe in a couple of prospects, but nothing significant, we're seeing increased demand, actually, for our services. And I measure our pipeline by different stages in the sales cycle. And I'm most interested in the final two stages of our sales cycle. Those two stages are more robust than they've ever been. So, as I mentioned in my comments, I anticipate our growth to continue.

Got it. One for Brett. Obviously, DSOs a little higher, maybe even stubbornly higher. How do we bring those down a little bit? I mean, obviously, we're in a period of uncertainty. Companies, again, pull things back in, maybe a little bit slower pay. You're a little bit of a smaller company compared to some of your clients. So what are the strategies to sort of bring that DSO day count down?

Yes. I think first and foremost, we've got a couple of larger clients that have moved just across the quarter. We've been talking about that. We've had good conversations. Some of it's just inefficiency in processing those through. Certainly, no concerns with collectability or relationships there. And it's just ongoing conversations that we're having. We've seen some improvement. We just haven't been able to quite get those inside the quarter yet. But we continue to work and have good conversations. And then as we talked about in the prepared remarks, the focus has been near term or over the last year on the AP system. That was critical to kind of provide a path on some of these other initiatives as well. One of which gives us increased visibility into missing invoices and other types of things that we can now get better visibility in, be proactive and go out and find those and get those across the finish line to be built. Sometimes it's just missing volumes that are needed. But it's getting that efficiency now on the billing side, which is much more customer specific. So it can be a little bit more challenging, but there's some definite opportunities there for us to improve.

Got it. So maybe to summarize, even getting the bills out a little faster, a little bit cleaner, a little bit more efficiency so they can be paid a little bit faster, but also visibility on some of the, we'll call them problem children and just being able to find them and recognize some of those issues before they get a little bit more outdated. Is that sort of fair?

Yes, that's a good summary, Gerry.

Your next question is coming from Owen Rickert from Northland Capital Markets.

Hey guys, thank you for taking my question here. Quickly, are there any notable changes in some of your end customer behavior or volumes just across your end market that stood out this quarter or more specifically over the last month and a half other than in the industrial segment, just given some of the macro and tariff uncertainty?

Yes. Other than our industrial sector, no, not at all. In fact, as I said, we've actually seen some uptick in demand for the services that we provide. So the other end markets we haven't seen any effect.

Your next question is coming from Nelson Obus from Wynnefield Capital.

Hi, there guys. On the narrative for the term customer attrition has come up three or four times and obviously half of it is the asset sale, but the other half, $3 million to $4 million, is there any common denominator that you found that has caused a customer to leave you and go to a competitor?

Hey, Nelson. This is Brett. I'll take that. Yes, we have seen some attrition. As a reminder, you know this, but always helpful to remind Quest, not only Quest, but just the industry in general, generally is very sticky. So, we certainly expect this to continue, but we certainly have been hit with some isolated attrition that has mostly been related to customers being acquired with different programs in place. We've seen some movement there. As you mentioned, half of that was related to the business that was exited. That business has been really inconsistent over the last year, especially. Then just outside of the attrition, we continue to talk about some of the challenges on the industrial side, but it's really isolated to those customers that have been acquired with different programs in terms of just core attrition.

Yes, that makes sense. And I'm just curious. I am sorry. You talked about bonus accrual. If I'm an employee of the company in this quarter, how do I merit bonus accrual? I'm curious.

Well, our bonuses are built over an annualized forecast. This is, as you would imagine, last year, there was very low level of bonus paid out, if any, to most employees. It's that buildup of the annualized, and it'll certainly get trued up based on the performance of the company over this year.

I see. It's based on your yearly estimate that the board's approved, correct?

Yes.

It's measured at the end of the year based on total performance.

Sure. Got it. I assume the salesmen are rewarded in a different mode, given that their task is different.

Nelson, they're on a commission plan and they don't earn a bonus.

Good. I hope they make a lot of money on commissions.

I do as well. I really hope they do well. We hold that team very, very accountable. They've got very high goals. I have high standards for the sales team. We track every move they make. Unfortunately, we've had to make a couple of moves for some people that weren't performing, but we've got a Class A team. As I said, the pipeline is very robust.

Your next question is coming from Greg Kitt from Pinnacle Family Office.

Hi. Thank you for taking my questions. Perry, I think this quarter reflects your work two weeks into the job as CEO. And so I don't think it's really fair to look at Q1 and say, hey, this is really representative of all the impact from the changes that you're putting into place. I hear you guys talking about gross profit increasing and SG&A decreasing. What would be a fair timetable to evaluate a lot of these initiatives that you're putting in place? Do you think a year from now that a lot of this will have taken effect and we'll see material results? It sounds like some of it starts in Q2.

Yes. I think that's fair, Greg. I appreciate your earlier comment about my short time in the position. But I've been in this industry for 35 years. I know where to look. And ,yes, I think a year from now we're going to look like a very different company. I expect to see results beginning Q2, but largely in Q3 and Q4 they'll come to fruition. And look, the cultural shift that we're making, this isn't a one-time effort. We're changing the culture of the company where the strategy is about continuous improvement, never being satisfied with where we're at and always striving to do better. So, I don't want to sound like we're taking some quick hits and some quick initiatives and then we'll sit back and relax. This is never going to end. We'll constantly strive to improve.

Thank you. On the comments around attrition, I think in Brett's commentary he said something like past client attrition. Was there any material attrition in this quarter or this was all the attrition that you had previously referenced on the Q4 call?

Yes, I'll take that, Greg. Most of it substantially from previous attrition that we've talked about.

One thing to add, Greg, is we take attrition very seriously. I do especially. We've instituted a new customer retention plan where I'll be personally involved. So I'm getting out to meet our top customers, developing higher-level relationships, redeveloping specific customer plans for every one of our customers, which include how do we add value to those customers? How do we expand our margins? We're establishing cadences on how often to visit customers. Times are changing now where customers are welcoming us back into their offices, so we're taking advantage of that. And we're measuring the progress. We're also tracking share of wallet, which is just now really beginning. So, there is a top priority effort on my part to focus on customer retention.

Do you mean customers are welcoming you back in because of COVID policies or something?

Yes, they're back in the office or when they're not. I mean, people are kind of back to business again. For the longest time, people didn't want to get out of their pajamas to come out and eat. It's all changing again. I'm happy to see that. Yes, you're welcome.

Did RWS, the divested part of RWS, have any associated SG&A also, or were all the costs to serve that revenue in COGS?

Hey, Greg, this is Brett again. Yes, there were certainly a lot of direct costs associated with that business. It was a fairly high-touch business. So as we announced as part of our reduction that we announced in March, those have fled through as well. Some of those were direct, and some of those are related to the REIT business as well.

Okay. So the SG&A reduction that you talked about for the second half, I think you said $9.5 million a quarter. Is there some way to think about how much of that improvement is from the RWS divestiture versus these other initiatives?

No. Well, just to be clear, the $3 million in annualized savings that we discussed, that was all in place at the end of Q1. So we get that full run rate for the rest of this year. As we continue to look and drive additional efficiencies through the business, we'll look to see some additional savings in the back half of the year. But that full $3 million is already realized starting in Q2.

Thank you. My last question is just on the AR, which people have talked about. But I think it's always interesting to just see what the size of the opportunity is. I think if you can get to that 65 days where the company had been in the past, and I think you were in the 50s for a lot of ‘23, but if you can get to 65 days, there's like $15 million of cash that you can free up. I know that you believe that you can see an improvement into Q2. Like what is going to stop you from getting to 65 days at some point? Because where you are with your debt agreement just created a little bit of an increased cost until you can start to get back to these new rates that you'd agreed to in December.

I think the only thing that would really stop us is, we've talked about this, we're dealing with larger clients where we may not have as much leverage as we'd like. But the flip side of that is we continue to bring on new clients at much better terms. So as we continue to, because newer clients are a larger percentage of the overall business, given any other initiatives or changes, we should be able to get back to that.

Your next question is coming from Aaron Spychalla from Craig-Hallum.

Yes, hi. Again, apologies. I'm kind of juggling multiple calls. So obviously, most of the questions I had were asked there. Maybe one, on optimizing the new business, I saw you kind of called out the impact in the first quarter. Just wanted to understand how you're thinking margins can improve as we move through the year on that front and just focus as you win further new business and kind of shortening that time period.

So, we've got a number of initiatives underway, both to improve the current gross profit for existing customers as well as adding new customers. Other initiatives are obviously to reduce SG&A. So, we have three guiding lights right now, and that is improving EBITDA, improving cash flow, and paying down debt. So, All of the initiatives that we have underway right now are contributing to either improved EBITDA or gross profit. Aaron, there's a number of these projects in flight right now. So, I prefer not to get involved in each of them, but kind of at the high level, we have major projects in sourcing the contracts. We have major projects involved in procure-to-pay. And then we've got significant work being done in order to cash. If you really looked at our workflow and summed them up into three kind of big buckets, those are them. And we're keenly focused on all three. And we do expect them to contribute to improved GP and EBITDA.

Your next question comes from George Melas from MKH Management.

Great. Thank you. Good afternoon. I have a follow-up question on the receivables. They're roughly at 85 days. And I'm just wondering what your contracts spell out with customers, because I doubt that they are. I imagine most of your customers are, you have 30 or 60-day payments with them. So I'm just trying to understand how it could be 85. And do you have any customer contracts where you have 90-day terms?

Hey, George. It's Brett. I'll take that. Certainly, our terms range client to client. It's tough to pin down or talk about any specific. But going back to the comments around improving the billing rates, billing faster, that's tied up outside. The clock hasn't started with those clients yet. They're still accrued revenue. We need to get them billed out faster so that we can start the clock on the actual terms with the clients. So that accrued piece is what we're intently focused on, because we see that as the most near-term opportunity to unlock some cash.

Okay. Do you have a sense of how quickly you actually bill customers? Is it 15 days or 20 days that it takes you from the date of service to bill the customer?

Yes. It's hard. It's so client-driven on the billing side. It depends. Some of it's contractually on when we can bill. Some of it's based on how much of a percentage of a client's billings are dependent on volumes that we have to get from our vendors. So there is a lot in there, but we're certainly as part of these initiatives and part of this performance culture measuring these things on a day-to-day basis, weekly basis, setting thresholds, and making improvements one by one.

Okay. And then thank you for providing sort of some clarity on the revenue changes, the attrition and the lower volume. If we do some very, very simple math, the revenue is roughly down $4 million year-over-year, and the attrition and the lower volume, that's roughly $15 million. So it means that you added $11 million in revenue. Roughly how much of that is the existing customers versus those that you added? So I should say customers pre-2024 versus those that you added in 2024. I imagine the ones you added are the lion's share of that, but I'm not sure.

Yes, 100%. You're right. Majority of that's new clients added throughout 2024.

Okay. Great. And then one quick final question. Those clients added in 2024, I think they came at slightly lower gross margin because I think the company had sort of some confidence that over time you can increase those gross margins. Did we somewhat miscalculate there a little bit and take customers at a meaningfully lower initial gross margin, or maybe I just got the wrong narrative on that?

Yes, I wouldn't say we miscalculated at all. Some of these just have a longer tail. You miss the buildup of previous clients that we've had that we've matured now and where they were brought in. But we look at this on an individual case-by-case basis when we sign off on these deals. We have a pretty robust pricing committee process that everything goes through. And we certainly always keep in mind what the long-term potential of these clients are. Sometimes those take a little bit longer. Sometimes those additional locations have to come up for contract again. Some of the services as well. It's largely client-by-client, yes, some of these have taken a little bit longer to ramp up.

George, I don't think we overestimated. To maximize the margin in this business, it can take several quarters. But I can tell you and reassure you that we are working very aggressively with our hauling partners to deliver incremental value to our customers, which will expand margins. But it does take a few quarters to fully optimize those new customers.