Quest Resource Holding Corp

Previous wording

The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in or incorporated by reference into this Form 10-Q, including statements regarding our future operating results, future financial position, business strategy, objectives, goals, plans, prospects, and markets, and plans and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “targets,” “contemplates,” “projects,” “predicts,” “may,” “might,” “plan,” “will,” “would,” “should,” “could,” “can,” “potential,” “continue,” “objective,” or the negative of those terms, or similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. Specific forward-looking statements in this Form 10-Q include statements regarding the impact, if any, of the adoption of an ASU on our consolidated financial statements; any changes to inflation rates; exposure to significant interest, currency, or credit risks arising from our financial instruments; and sufficiency of our cash and cash equivalents, borrowing capacity, and cash generated from operations to fund our operations for the next 12 months. All forward-looking statements included herein are based on information available to us as of the date hereof and speak only as of such date. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. The forward-looking statements contained in or incorporated by reference into this Form 10-Q reflect our views as of the date of this Form 10-Q about future events and are subject to risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ significantly from those expressed or implied in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, performance, or achievements. A number of factors, including the state of the U.S. economy in general, general economic conditions and the potential effect of inflationary pressures and increased interest rates on our cost of doing business, could cause actual results to differ materially from those indicated by the forward-looking statements and other risks detailed from time to time in our reports to the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”).

Current wording

The statements contained in this Quarterly Report on Form 10-Q that are not purely historical are forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical facts contained in or incorporated by reference into this Form 10-Q, including statements regarding our future operating results, future financial position, business strategy, objectives, goals, plans, prospects, and markets, and plans and objectives for future operations, are forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “estimates,” “expects,” “intends,” “targets,” “contemplates,” “projects,” “predicts,” “may,” “might,” “plan,” “will,” “would,” “should,” “could,” “can,” “potential,” “continue,” “objective,” or the negative of those terms, or similar expressions intended to identify forward-looking statements. However, not all forward-looking statements contain these identifying words. Specific forward-looking statements in this Form 10-Q include statements regarding the impact, if any, of the adoption of an ASU on our consolidated financial statements; any changes to inflation rates; exposure to significant interest, currency, or credit risks arising from our financial instruments; and sufficiency of our cash and cash equivalents, borrowing capacity, and cash generated from operations to fund our operations for the next 12 months. All forward-looking statements included herein are based on information available to us as of the date hereof and speak only as of such date. Except as required by law, we undertake no obligation to update any forward-looking statements to reflect events or circumstances after the date of such statements. The forward-looking statements contained in or incorporated by reference into this Form 10-Q reflect our views as of the date of this Form 10-Q about future events and are subject to risks, uncertainties, assumptions, and changes in circumstances that may cause our actual results, performance, or achievements to differ significantly from those expressed or implied in any forward-looking statement. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future events, results, performance, or achievements. A number of factors, including the state of the U.S. economy, general economic conditions and the potential effect of inflationary pressures and increased interest rates on our cost of doing business, could cause actual results to differ materially from those indicated by the forward-looking statements and other risks detailed from time to time in our reports to the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2023 (the “2023 Annual Report”).

Previous wording

Three and Six Months Ended June 30, 2024 and 2023 Operating Results

Current wording

Three and Nine Months Ended September 30, 2024 and 2023 Operating Results

Previous wording

The following table summarizes our operating results for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table summarizes our operating results for the three and nine months ended September 30, 2024 and 2023:

Previous wording

Three and Six Months Ended June 30, 2024, compared to Three and Six Months Ended June 30, 2023

Current wording

Three and Nine Months Ended September 30, 2024, compared to Three and Nine Months Ended September 30, 2023

Previous wording

For the quarter ended June 30, 2024, revenue was $73.1 million, a decrease of $1.4 million, or 1.8%, compared to $74.5 million for the quarter ended June 30, 2023. For the six months ended June 30, 2024, revenue was $145.8 million, a decrease of $2.8 million, or 1.9%, compared to $148.6 million for the six months ended June 30, 2023.

Current wording

For the quarter ended September 30, 2024, revenue was $72.8 million, an increase of $2.4 million, or 3.3%, compared to $70.4 million for the quarter ended September 30, 2023. For the nine months ended September 30, 2024, revenue was $218.6 million, a decrease of $0.4 million, or 0.2%, compared to $219.0 million for the nine months ended September 30, 2023.

Previous wording

The decline in revenue for the quarter ended June 30, 2024 was attributable to lower volumes from four customers, whose margins were lower overall than the rest of the business, resulting in a decrease of revenues of approximately $11 million, which includes lower than expected production volumes at one of our largest customers due to soft conditions in their end market. This was mostly offset by both newly added customers in the quarter ended June 30, 2024 and strong overall demand for the remaining business which, in total, contributed approximately $10 million in additional revenue, an increase of 18% from the same period in 2023.

Current wording

The increase in revenue for the quarter ended September 30, 2024 was attributable to newly added customers in the quarter ended September 30, 2024 and strong overall demand in existing customer base which, in total, contributed approximately $16 million in additional revenue, an increase of 32% from the same period in 2023. This was partially offset by lower volumes due to lost customers and to soft conditions in certain customer end markets, resulting in a decrease of revenues of approximately $13 million.

Previous wording

For the six months ended June 30, 2024, the decrease in revenue was attributable to lower volumes from four customers, whose margins were lower overall than the rest of the business, resulting in a decrease of revenues of approximately $20 million, which includes lower than expected production volumes at one of our largest customers due to soft conditions in their end market. This was mostly offset by both newly added customers in the current quarter and strong overall demand for the remaining business which, in total, contributed approximately $17 million in additional revenue, an increase of 15% from the same period in 2023.

Current wording

For the nine months ended September 30, 2024, the decrease in revenue was attributable to lower volumes from lost customers, whose margins were lower overall than the rest of the business, resulting in a decrease of revenues of approximately $33 million, which includes lower than expected production volumes at one of our largest customers due to soft conditions in their end market. This was mostly offset by both newly added customers in the current quarter and strong overall demand for the remaining business which, in total, contributed approximately $33 million in additional revenue, an increase of 22% from the same period in 2023.

Previous wording

Cost of revenue decreased $1.4 million to $59.6 million for the quarter ended June 30, 2024 from $61.0 million for the quarter ended June 30, 2023. Cost of revenue decreased $4.3 million to $118.2 million for the six months ended June 30, 2024 compared to $122.5 million for the six months ended June 30, 2023. The changes were primarily due to the same reasons impacting the decrease in revenue.

Current wording

Cost of revenue increased $3.1 million to $61.1 million for the quarter ended September 30, 2024 from $58.0 million for the quarter ended September 30, 2023. We experienced higher cost of revenue as a percentage of revenue in the quarter ended September 30, 2024 due to onboarding and ramping up of new customers. Cost of revenue decreased $1.2 million to $179.3 million for the nine months ended September 30, 2024, compared to $180.5 million for the nine months ended September 30, 2023. The changes were primarily due to the same reasons impacting the decrease in revenue.

Previous wording

Gross profit for the quarter ended June 30, 2024 was $13.5 million, compared to $13.5 million for the quarter ended June 30, 2023. The gross profit margin was 18.5% for the quarter ended June 30, 2024, compared to 18.1% for the same quarter of 2023. Gross profit for the six months ended June 30, 2024 was $27.6 million, compared to $26.1 million for the six months ended June 30, 2023. The gross profit margin was 18.9% for the six months ended June 30, 2024, compared to 17.6% for the six months ended June 30, 2023. The changes in gross profit and gross profit margin percentage for the quarter and year to date periods were primarily due to the net impacts of the changes in both revenue and cost of revenue combined with broad margin gains across most of our business.

Current wording

Gross profit for the quarter ended September 30, 2024 was $11.7 million, compared to $12.4 million for the quarter ended September 30, 2023. The gross profit margin was 16.1% for the quarter ended September 30, 2024, compared to 17.7% for the same quarter of 2023. Gross profit margin was negatively impacted in the quarter ended September 30, 2024 by approximately 2% due to a combination of temporarily lower revenues and higher cost of revenue for an isolated group of customers in a specific end market. Additionally, margins were impacted in the quarter by approximately 1% as new customers typically come on board at lower margins and can take multiple quarters to ramp. Gross profit for the nine months ended September 30, 2024 was $39.3 million, compared to $38.6 million for the nine months ended September 30, 2023. The gross profit margin was 18.0% for the nine months ended September 30, 2024, compared to 17.6% for the nine months ended September 30, 2023. The changes in gross profit and gross profit margin percentage for the quarter and year to date periods were primarily due to the net impacts of the changes in both revenue and cost of revenue combined with broad margin gains across most of our business.

Previous wording

Operating expenses were $11.8 million and $11.7 million for the quarters ended June 30, 2024 and 2023, respectively. Operating expenses were $23.9 million and $23.5 million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Operating expenses were $12.6 million and $12.0 million for the quarters ended September 30, 2024 and 2023, respectively. Operating expenses were $36.6 million and $35.5 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

Selling, general, and administrative expenses were $9.4 million and $9.2 million for the quarters ended June 30, 2024 and 2023, respectively. The increase primarily relates to increases in labor related expenses which was mostly offset by reductions in bad debt expense. Selling, general, and administrative expenses were $19.2 million and $18.6 million for the six months ended June 30, 2024 and 2023, respectively. The increase primarily relates to increases in labor related expenses.

Current wording

Selling, general, and administrative expenses were $10.3 million and $9.6 million for the quarters ended September 30, 2024 and 2023, respectively. The increase primarily relates to increases in labor related expenses. Selling, general, and administrative expenses were $29.5 million and $28.2 million for the nine months ended September 30, 2024 and 2023, respectively. The increase primarily relates to increases in labor related expenses and certain professional fees.

Previous wording

Operating expenses for the quarters ended June 30, 2024 and 2023 included depreciation and amortization of $2.4 million and $2.5 million, respectively. Operating expenses for the six months ended June 30, 2024 and 2023 included depreciation and amortization of $4.7 million and $4.9 million, respectively.

Current wording

Operating expenses for the quarters ended September 30, 2024 and 2023 included depreciation and amortization of $2.4 million and $2.3 million, respectively. Operating expenses for the nine months ended September 30, 2024 and 2023 included depreciation and amortization of $7.1 million and $7.2 million, respectively.

Previous wording

Interest expense was $2.6 million and $2.6 million for the quarters ended June 30, 2024 and 2023, respectively. Interest expense was $5.1 million and $5.0 million for the six months ended June 30, 2024 and 2023, respectively. The slight increase is primarily due to increases in base interest rates, increased borrowings under our revolving credit facility, partially offset by reduced borrowings from voluntary paydowns on the term loan in 2023. We are amortizing debt issuance costs of $3.7 million and OID of $1.8 million to interest expense over the life of the related debt arrangements as discussed in Note 7 to our condensed consolidated financial statements.

Current wording

Interest expense was $2.7 million and $2.4 million for the quarters ended September 30, 2024 and 2023, respectively. Interest expense was $7.8 million and $7.4 million for the nine months ended September 30, 2024 and 2023, respectively. The increase is primarily due to increased borrowings under our revolving credit facility and our equipment term loan, partially offset by reduced borrowings from voluntary paydowns on the term loan in 2023. We are amortizing debt issuance costs of $3.8 million and OID of $1.8 million to interest expense over the life of the related debt arrangements as discussed in Note 7 to our condensed consolidated financial statements.

Previous wording

We recorded a provision for income tax of $684,113 and $170,779 for the quarters ended June 30, 2024 and 2023, respectively. We recorded a provision for income tax of $743,461 and $539,283 for the six months ended June 30, 2024 and 2023, respectively. The provision for income tax is primarily attributable to state tax obligations based on current estimated state tax apportionments for states with no net operating loss carryforwards, federal income tax after anticipated utilization of all federal net operating loss carryforwards by year end, and other timing differences.

Current wording

We recorded an income tax benefit of $(0.3) million and a provision for income taxes of $0.1 million for the quarters ended September 30, 2024 and 2023, respectively. We recorded a provision for income tax of $0.5 million and $0.7 million for the nine months ended September 30, 2024 and 2023, respectively. The provision/(benefit) for income tax is primarily attributable to state tax obligations based on current estimated state tax apportionments for states with no net operating loss carryforwards, federal income tax after anticipated utilization of all federal net operating loss carryforwards by year end, and other timing differences.

Previous wording

Net loss for the quarter ended June 30, 2024 was $(1.5) million, compared to net loss of $(0.9) million for the quarter ended June 30, 2023. Net loss for the six months ended June 30, 2024 was $(2.2) million, compared to net loss of $(2.9) million for the six months ended June 30, 2023. The explanations above detail the majority of the changes related to the change in net results.

Current wording

Net loss for the quarter ended September 30, 2024 was $(3.4) million, compared to net loss of $(2.1) million for the quarter ended September 30, 2023. Net loss for the nine months ended September 30, 2024 was $(5.6) million, compared to net loss of $(5.0) million for the nine months ended September 30, 2023. The explanations above detail the majority of the changes related to the change in net results.

Previous wording

Net loss per basic and diluted share attributable to common stockholders was $(0.07) and $(0.04) for the quarters ended June 30, 2024 and 2023, respectively. Net loss per basic and diluted share attributable to common stockholders was $(0.11) and $(0.15) for the six months ended June 30, 2024 and 2023, respectively.

Current wording

Net loss per basic and diluted share attributable to common stockholders was $(0.16) and $(0.10) for the quarters ended September 30, 2024 and 2023, respectively. Net loss per basic and diluted share attributable to common stockholders was $(0.27) and $(0.25) for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

The basic and diluted weighted average number of shares of common stock outstanding were approximately 20.5 million and 20.0 million for the three months ended June 30, 2024 and 2023, respectively. The basic and diluted weighted average number of shares of common stock outstanding were approximately 20.4 million and 19.9 million for the six months ended June 30, 2024 and 2023, respectively.

Current wording

The basic and diluted weighted average number of shares of common stock outstanding were approximately 20.7 million and 20.1 million for the three months ended September 30, 2024 and 2023, respectively. The basic and diluted weighted average number of shares of common stock outstanding were approximately 20.5 million and 20.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Previous wording

For the three months ended June 30, 2024, Adjusted EBITDA (as defined below), a non-GAAP financial measure, increased 2.1% to $5.1 million from $5.0 million for the three months ended June 30, 2023. For the six months ended June 30, 2024, Adjusted EBITDA increased 13.7% to $10.3 million from $9.0 million for the same period in 2023.

Current wording

For the three months ended September 30, 2024, Adjusted EBITDA (as defined below), a non-GAAP financial measure, decreased 31.7% to $2.5 million from $3.7 million for the three months ended September 30, 2023. For the nine months ended September 30, 2024, Adjusted EBITDA increased 0.5% to $12.8 million from $12.7 million for the same period in 2023.

Previous wording

We use the non-GAAP measurement of earnings before interest, taxes, depreciation, amortization, stock-related compensation charges, and other adjustments, or “Adjusted EBITDA,” to evaluate our performance. Adjusted EBITDA is a non-GAAP measure that is also frequently used by analysts, investors and other interested parties to evaluate the market value of companies considered to be in similar businesses. We suggest that Adjusted EBITDA be viewed in conjunction with our reported financial results or other financial information prepared in accordance with GAAP. For the three and six months ended June 30, 2024, other adjustments included certain professional fees as well as certain administrative fees related to borrowings. For the three and six months ended June 30, 2023, other adjustments included severance and project costs as well as certain administrative costs related to borrowings.

Current wording

We use the non-GAAP measurement of earnings before interest, taxes, depreciation, amortization, stock-related compensation charges, and other adjustments, or “Adjusted EBITDA,” to evaluate our performance. Adjusted EBITDA is a non-GAAP measure that is also frequently used by analysts, investors and other interested parties to evaluate the market value of companies considered to be in similar businesses. We suggest that Adjusted EBITDA be viewed in conjunction with our reported financial results or other financial information prepared in accordance with GAAP.

Previous wording

The following table reflects the reconciliation of net loss to Adjusted EBITDA for the three and six months ended June 30, 2024 and 2023:

Current wording

The following table reflects the reconciliation of net loss to Adjusted EBITDA for the three and nine months ended September 30, 2024 and 2023:

Previous wording

Adjusted Net Income and Adjusted Net Income per Diluted Share

Current wording

Adjusted Net Income (Loss) and Adjusted Net Income (Loss) per Diluted Share

Previous wording

Adjusted net income, a non-GAAP financial measure, was $0.7 million for the three months ended June 30, 2024, compared with $1.5 million for the three months ended June 30, 2023. Adjusted net income was $2.3 million for the six months ended June 30, 2024, compared with $2.1 million for the six months ended June 30, 2023. We present adjusted net income and adjusted net income per diluted share, both non-GAAP financial measures, supplementally because they are widely used by investors as a valuation measure in the solid waste industry. Management uses adjusted net income and adjusted net income per diluted share as two of the principal measures to evaluate and monitor the ongoing financial performance of our operations. We provide adjusted net income to exclude the effects of items management believes impact the comparability of operating results between periods. Adjusted net income has limitations due to the fact that it excludes items that have an impact on our financial condition and results of operations. Adjusted net income and adjusted net income per diluted share are not a substitute for, and should be used in conjunction with, GAAP financial measures. Other companies may calculate these non-GAAP financial measures differently. Our adjusted net income and adjusted net income per diluted share for the three and six months ended June 30, 2024 and 2023 are calculated as follows:

Current wording

Adjusted net income (loss), a non-GAAP financial measure, was $(1.1) million for the three months ended September 30, 2024, compared with $0.5 million for the three months ended September 30, 2023. Adjusted net income was $1.2 million for the nine months ended September 30, 2024, compared with $2.7 million for the nine months ended September 30, 2023. We present adjusted net income (loss) and adjusted net income (loss) per diluted share, both non-GAAP financial measures, supplementally because they are widely used by investors as a valuation measure in the solid waste industry. Management uses adjusted net income (loss) and adjusted net income (loss) per diluted share as two of the principal measures to evaluate and monitor the ongoing financial performance of our operations. We provide adjusted net income (loss) to exclude the effects of items management believes impact the comparability of operating results between periods. Adjusted net income (loss) has limitations due to the fact that it excludes items that have an impact on our financial condition and results of operations. Adjusted net income (loss) and adjusted net income (loss) per diluted share are not a substitute for, and should be used in conjunction with, GAAP financial measures. Other companies may calculate these non-GAAP financial measures differently. Our adjusted net income (loss) and adjusted net income (loss) per diluted share for the three and nine months ended September 30, 2024 and 2023 are calculated as follows:

Previous wording

As of June 30, 2024 and December 31, 2023, we had $1.0 million and $0.3 million in cash and cash equivalents, respectively. Working capital was $21.6 million and $15.7 million as of June 30, 2024 and December 31, 2023, respectively.

Current wording

As of September 30, 2024 and December 31, 2023, we had $1.1 million and $0.3 million in cash and cash equivalents, respectively. Working capital was $22.0 million and $15.7 million as of September 30, 2024 and December 31, 2023, respectively.

Previous wording

We believe our existing cash and cash equivalents of $1.0 million, our borrowing availability under our $35.0 million ABL Facility (as defined and discussed in Note 7 to our condensed consolidated financial statements), and cash expected to be generated from operations will be sufficient to fund our operations for the next 12 months and thereafter for the foreseeable future. Our known current- and long-term uses of cash include, among other possible demands, capital expenditures, lease payments and repayments to service debt and other long-term obligations. We have no agreements, commitments, or understandings with respect to any such placements of our securities and any such placements could be dilutive to our stockholders.

Current wording

We believe our existing cash and cash equivalents of $1.1 million, our borrowing availability under our $35.0 million ABL Facility (as defined and discussed in Note 7 to our condensed consolidated financial statements), and cash expected to be generated from operations will be sufficient to fund our operations for the next 12 months and thereafter for the foreseeable future. Our known current- and long-term uses of cash include, among other possible demands, capital expenditures, lease payments and repayments to service debt and other long-term obligations. We have no agreements, commitments, or understandings with respect to any such placements of our securities and any such placements could be dilutive to our stockholders.

Previous wording

The following discussion relates to the major components of our cash flows for the six months ended June 30, 2024 and 2023.

Current wording

The following discussion relates to the major components of our cash flows for the nine months ended September 30, 2024 and 2023.

Previous wording

Net cash used in operating activities was $(0.8) million for the six months ended June 30, 2024 compared with net cash provided by operating activities of $6.3 million for the six months ended June 30, 2023.

Current wording

Net cash used in operating activities was $(1.3) million for the nine months ended September 30, 2024 compared with net cash provided by operating activities of $6.7 million for the nine months ended September 30, 2023.

Previous wording

Net cash used in operating activities for the six months ended June 30, 2024 related primarily to the net effect of the following:

Current wording

Net cash used in operating activities for the nine months ended September 30, 2024 related primarily to the net effect of the following:

Previous wording

non-cash items of $6.9 million, which primarily related to depreciation, amortization of intangible assets and debt issuance costs, provision for doubtful accounts, and stock-based compensation; and

Current wording

non-cash items of $10.8 million, which primarily related to depreciation, amortization of intangible assets and debt issuance costs, provision for doubtful accounts, and stock-based compensation; and

Previous wording

net cash used in the net change in operating assets and liabilities of $(5.6) million, primarily associated with relative changes in accounts receivable, accounts payable, and accrued liabilities. This includes an earn-out payment of $(1.0) million.

Current wording

net cash used in the net change in operating assets and liabilities of $(6.5) million, primarily associated with relative changes in accounts receivable, accounts payable, and accrued liabilities, including an earn-out payment of $(1.0) million.

Previous wording

Net cash provided by operating activities for the six months ended June 30, 2023 related primarily to the net effect of the following:

Current wording

Net cash provided by operating activities for the nine months ended September 30, 2023 related primarily to the net effect of the following:

Previous wording

non-cash items of $6.9 million, which primarily related to depreciation, amortization of intangible assets and debt issuance costs, provision for doubtful accounts, and stock-based compensation; and

Current wording

non-cash items of $10.5 million, which primarily related to depreciation, amortization of intangible assets and debt issuance costs, provision for doubtful accounts, and stock-based compensation; and

Previous wording

net cash provided by the net change in operating assets and liabilities of $2.4 million, primarily associated with relative changes in accounts receivable, accounts payable, and accrued liabilities.

Current wording

net cash provided by the net change in operating assets and liabilities of $1.1 million, primarily associated with relative changes in accounts receivable, accounts payable, and accrued liabilities.

Previous wording

Cash used in investing activities for the six months ended June 30, 2024 was $(4.8) million and primarily related to the purchase of $(3.1) million in compactors and related equipment. Cash used in investing activities for the six months ended June 30, 2023 was $(0.8) million. Other investing activities are primarily from purchases of intangible assets such as software development costs and other property and equipment.

Current wording

Cash used in investing activities for the nine months ended September 30, 2024 was $(5.2) million and primarily related to the purchase of compactors and related equipment. Cash used in investing activities for the nine months ended September 30, 2023 was $(1.3) million. Other investing activities are primarily from purchases of intangible assets such as software development costs and other property and equipment.

Previous wording

Net cash provided by financing activities for the six months ended June 30, 2024 was $6.3 million, primarily from net borrowings of $4.0 million on our ABL Facility and $2.5 million borrowings from our PNC equipment term loan. Net cash used in financing activities for the six months ended June 30, 2023 was $(12.1) million, primarily from net repayments of $(6.8) million on our ABL Facility and $(5.5) million repayment of long-term debt. See Note 7 to our condensed consolidated financial statements for a discussion of the ABL Facility and other notes payable.

Current wording

Net cash provided by financing activities for the nine months ended September 30, 2024 was $7.3 million, primarily from net borrowings of $5.3 million on our ABL Facility and $2.5 million borrowings from our PNC equipment term loan. Net cash used in financing activities for the nine months ended September 30, 2023 was $(14.1) million, primarily from net repayments of $(6.8) million on our ABL Facility and $(7.8) million repayment of long-term debt. See Note 7 to our condensed consolidated financial statements for a discussion of the ABL Facility and other notes payable.

Previous wording

Although the overall economy has experienced some inflationary pressures, we do not believe that inflation had a material impact on us during the six months ended June 30, 2024 and 2023. We believe that current inflationary increases in costs, such as fuel, labor, and certain capital items, can be addressed by our flexible pricing structures and cost recovery fees allowing us to recover certain of the cost of inflation from our customer base. Consistent with industry practice, many of our contracts allow us to pass through certain costs to our customers or adjust pricing. Although we believe that we should be able to offset many cost increases that result from inflation in the ordinary course of business, we may be required to absorb at least part of these costs increases due to competitive pressures or delays in timing of rate increases. Although we have not been materially affected by inflation in the past, we can provide no assurance that we will not be affected in the future by higher rates of inflation and increases in interest rates.

Current wording

Although the overall economy has experienced some inflationary pressures, we do not believe that inflation had a material impact on us during the nine months ended September 30, 2024 and 2023. We believe that current inflationary increases in costs, such as fuel, labor, and certain capital items, can be addressed by our flexible pricing structures and cost recovery fees allowing us to recover certain of the cost of inflation from our customer base. Consistent with industry practice, many of our contracts allow us to pass through certain costs to our customers or adjust pricing. Although we believe that we should be able to offset many cost increases that result from inflation in the ordinary course of business, we may be required to absorb at least part of these costs increases due to competitive pressures or delays in timing of rate increases. Although we have not been materially affected by inflation in the past, we can provide no assurance that we will not be affected in the future by higher rates of inflation and increases in interest rates.

Previous wording

Our discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These areas include carrying amounts of accounts receivable, goodwill and other intangible assets, stock-based compensation expense, deferred taxes and the fair value of assets and liabilities acquired in asset acquisitions. We base our estimates on historical experience, our observance of trends in particular areas, and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual amounts could differ significantly from amounts previously estimated. For a discussion of our critical accounting policies, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Annual Report. There have been no significant changes in our critical accounting policies during the six months ended June 30, 2024.

Current wording

Our discussion and analysis of our financial condition and results of operations are based on our condensed consolidated financial statements, which have been prepared in accordance with GAAP. The preparation of our condensed consolidated financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue, expenses, and related disclosure of contingent assets and liabilities. On an ongoing basis, we evaluate our estimates, including those related to areas that require a significant level of judgment or are otherwise subject to an inherent degree of uncertainty. These areas include carrying amounts of accounts receivable, goodwill and other intangible assets, stock-based compensation expense, deferred taxes and the fair value of assets and liabilities acquired in business acquisitions. We base our estimates on historical experience, our observance of trends in particular areas, and information or valuations and various other assumptions that we believe to be reasonable under the circumstances and which form the basis for making judgments about the carrying value of assets and liabilities that may not be readily apparent from other sources. Actual amounts could differ significantly from amounts previously estimated. For a discussion of our critical accounting policies, refer to Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our 2023 Annual Report. There have been no significant changes in our critical accounting policies during the nine months ended September 30, 2024.