Earnings Call Transcript - QRHC Q3 2023

Operator, Operator

Thank you for your patience. This is the conference operator. Welcome to the Quest Resource Holding Corp’s Third Quarter 2023 Earnings Conference Call. Please note that all participants are in listen-only mode and the conference is being recorded. I will now hand over the call to Dave Mossberg from Investor Relations. Please proceed.

Dave Mossberg, Investor Relations

Thank you. This is Dave Mossberg. Your line is cutting out a little bit. So I am going to go ahead and get started. Let me know if you can hear us. Well, 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 the 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's 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 to do so by law. In addition, in this call, we may include 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 and 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 has not independently verified the reliability of the sources or the accuracy of the information. Certain non-GAAP financial measures will be discussed during the 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 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 reconciliation 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 Ray Hatch, President and Chief Executive Officer.

Ray Hatch, President and CEO

Thank you, Dave, and thanks, everyone, for your interest in Quest. I want to start off by emphasizing how excited I am about what lies ahead for Quest in the next several years. We have made significant strides in laying the foundation for growth and earnings. This year, we have made a lot of positive progress, building our growth engine and investing in technology to drive efficiencies to support that growth. In recent months, we have seen a noticeable uptick in the number and the size of opportunities in our pipeline, and we have seen a faster than anticipated ramp-up at one of our largest new customers. We also have a robust outlook for growth. In addition, at the end of the third quarter we completed the systems integration of RWS. We uncovered isolated issues related to RWS legacy systems, which resulted in cost of sales adjustments, mostly related to the activity prior to 2023. This is the primary cause of gross profit dollars from RWS being approximately $800,000 below our expectations during the third quarter. While RWS systems integration has been frustrating, it is complete and we have taken action to realize approximately $1.7 million in annualized SG&A cost savings, beginning in the fourth quarter of this year. In addition, we are bringing online several technology enhancements to our platform. We expect these enhancements to improve efficiency, scalability and continuously improve our client value proposition. In summary, I am more excited than ever with the underlying strength and the foundation of our business. I am looking forward to realizing the resulting bottom-line improvements from our investments in the platform. I'll now turn the call over to our CFO, Brett Johnston, for a financial overview. I will be back soon to discuss progress on our strategies.

Brett Johnston, CFO

Thanks, Ray, and good afternoon, everyone. A quick note about the sequential decrease in revenue. It was primarily related to commodity price fluctuations and normal quarterly volume fluctuations. As discussed on previous calls, commodity price fluctuations have not historically had material effects on gross profit dollars. Our customer agreements produced consistent gross profit dollars, based on volumes that are not tied to commodity price fluctuations. For those of you new to the story, this is the reason we use gross profit dollars as a key metric to measure financial performance. During the third quarter, gross profit dollars were $12.4 million, an increase of 2% versus the third quarter last year and a $1.1 million sequential decrease from the second quarter. The sequential decrease primarily reflected $800,000 from the underperformance of RWS. To a lesser extent, sequential comparisons were affected by decreased contribution from an RWS client that has been acquired by another company. That company that acquired this RWS client manages waste disposal internally, and decided to manage the RWS client similarly. As part of the process of fully integrating RWS onto our platform, we have gained efficiencies and have been able to reduce headcount and cut operating costs at RWS. We anticipate approximately $1.7 million in annualized cost savings beginning in the fourth quarter of this year. Sequential comparisons during the third quarter were also affected by a billing adjustment of approximately $400,000 from a quickly ramping new customer. While it did affect third quarter results, it represents a very small percentage of this client's total billings, and we maintain a strong relationship with this client. In fact, excluding this adjustment, the contribution from this client grew during the third quarter and continues to ramp in the fourth. Looking to the fourth quarter, we expect gross profit dollars to increase sequentially from the third quarter, and expect our performance to be more in line with our performance in the second quarter. We expect our growth in the quarter will ramp and will mostly offset typical fourth quarter seasonality. In addition, we will benefit from the cost cutting at RWS and overall efficiency gains beginning in the fourth quarter. Moving on to SG&A expenses, which were $9.6 million during the third quarter compared to $9.3 million during the same period last year, and in line with our expectations. Looking forward, we expect lower integration costs and we expect to gain efficiencies from the investments we have made in our platform. We plan to continue to reinvest these savings into growth initiatives that further improve efficiencies and increase our ability to bring value to our clients. As a result, we expect SG&A expenses will be about $9.5 million in the fourth quarter. Going forward, we expect to begin to see the steady benefits of both cost reductions at RWS and investments in technology and process improvements, which will lower our costs and improve ongoing operating efficiencies. As gross profit dollars increase, we expect operating expenses to grow at a slower pace, as we deliver improving operating leverage in the quarters to come. During the third quarter, depreciation and amortization was $2.3 million, which was relatively flat with the prior year. Moving on to a review of the cash flow and balance sheet. We are in good shape liquidity-wise and continue to enhance our liquidity. In this high-interest rate environment, we have been actively looking to reduce interest expense by optimizing cash management, carrying less cash and minimizing our borrowings on the line of credit. Our cash balance was $870,000 at the end of this quarter and we have $5.4 million drawn on our $25 million operating borrowing line. This compares to $12.2 million at the beginning of the year. We will continue to evaluate our overall leverage and ways to reduce our overall interest expense. Year-to-date, we produced $6.6 million in operating cash flow and the third quarter marked our fourth straight quarter of positive operating cash flow. At the end of the quarter, we had $56.8 million in notes payable versus $70.6 million at the beginning of the year. To summarize, this represents a $14 million reduction in long-term debt year-to-date, which included $7 million of voluntary term loan prepayments. The balance of the reduction reflects normal principal payments and lower borrowings on our asset-based line with P&C. Through our cash management efforts and the reduction in borrowings, we expect to reduce interest expense by more than $1 million on an annualized basis. At this time, I'll turn the call back to Ray.

Ray Hatch, President and CEO

Thank you, Brett. While the cleanup adjustments for RWS have been frustrating and have made our quarterly comparisons challenging, I want to emphasize the conviction in our trajectory and the overall outlook for the company. We've made tremendous progress during the last several years and are as confident as ever about our outlook for continued double-digit growth over the next several years. We are now running all of our business on a common platform, so through our integration efforts and other measures, we've been able to lower headcount and can now begin to realize greater efficiencies from these acquired operations. As I said earlier, we'll recognize approximately $1.7 million in annualized savings from RWS in the fourth quarter. In addition, we expect to continue to lower overall operating costs and drive efficiencies across our operating platform. Let me make a brief comment about the macro environment and concerns over inflation and economic uncertainty. During the third quarter, we continued to see stable activity across our end markets. We managed cost pressures and fluctuations in the price of recycled materials as well. The waste business is generally resistant to recessions, and our clients continue to generate waste during the top and the bottom of the cycle. We also have compelling and differentiated value propositions, which create strong client relationships that endure during periods of economic weakness. Through our value add, we strive to have long-term strategic relationships with our customers rather than relationships that are transactional in nature. To illustrate that point, we recently reviewed the longevity of our top 20 clients and noticed that the average engagement for Quest was over nine years. We also recently signed a new five-year extension and expansion agreement with one of our largest and longest-standing clients. While our core business is strong, the one area where economic uncertainty has affected us has been the pace of adding new business, which is slower than we would have liked over this past year, but a portion of our new clients' onboarding ramp has been slower than expected. With certain clients, waste disposal is managed at a local level, and in several of those cases, the rollout of our programs approved by and being driven by the corporate level has taken longer than we expected. We also have several large opportunities that have taken longer than expected to get signed. Anecdotally, these clients and prospects are telling us they believe strongly in our programs, but in some cases, other priorities have pushed back implementations. We don't have prospects falling out; they're just not moving as quickly as we anticipated. I would also note that this is not the case across the board and we're winning new business while still seeing growth from existing clients. Moving on to a discussion of our growth. I feel very good about the organic growth we have in front of us. We have multiple sources of growth that give us confidence in our ability to post double-digit gains in gross profit over the next several years. We expect growth to come from onboarding activities of recent wins. In some cases, it can take 12 to 18 months to fully ramp clients, and there are several new clients still in the process of ramping, which will provide embedded growth for at least the next year. While the pace of onboarding has been slower than we would like with some clients, we have others that are accelerating the deployment of our programs. As we discussed last quarter, we began onboarding a new client during September at a small portion of their 380 locations. In a short period of time, this client has validated our value proposition and is now asking to roll out services to all their locations faster than we had originally expected. In addition, we are being asked to handle a broader line of services than we had previously planned. With the acceleration of the rollout, we expect this could turn into an eight-figure record revenue contributor closer to the shorter end of our 12 to 18 month timeframe. I should reiterate that this is a new end-market vertical for us. There are a few large potential clients in this end market, and we are pursuing peers in this space. The services we provide for this client will have some overlap with our capabilities and existing waste streams, but it will also give us the scale required to add capabilities for new waste streams, and we will, in turn, introduce these to other new clients. Regarding new business, during the quarter, we had a win with a new automotive service client with a rapidly growing base of 50 locations. We expect this client to generate seven figures in revenue at maturity. In addition, during the third quarter, we had significant wins with existing clients in the retail, automotive and restaurant end markets. Our land and expand strategy has consistently delivered solid growth from our existing client base for the last five years, and we feel there are ample opportunities for continued growth from our existing clients for multiple years to come. We are making new investments in our sales force, which should also provide a driver for growth. On the last call, we spoke about adding a proven new sales leader. In addition, we are investing in sales operations that will allow our sales team to spend more time closing deals and less time on administrative functions, such as proposals and lead generation. Furthermore, we're looking to shorten the sales cycle by simplifying our contracts and using our new sourcing tool to turnaround proposals much more quickly. Our new sourcing tool allows our staff to look across the entire footprint of vendors for qualification and pricing data. This tool reduces the time our staff needs to find the optimal solution from days to minutes. These investments in sales should help us to grow our pipeline, shorten the sales cycle and create a better yield in converting proposals into agreements going forward. Another source of growth will come from our growing pipeline of opportunities. As we said in the release, in recent months, we have seen a noticeable uptick in the number and size of the opportunities in our pipeline. There are several factors likely driving the improvement. The single biggest reason is related to having referenceable clients that can attest to our strong value proposition. As we have demonstrated our value, we have been successful in adding new clients, and it has been much easier to open discussions with potential clients. I hesitate to estimate when or if these deals may close, but I can say several very large opportunities have progressed to the final stages of approval, and I am confident we will add several new clients in the coming quarters. I also want to reiterate that we have a large opportunity to drive gross profit dollar growth and on the cost side by optimizing the business we have in hand. Over the last three years, we have more than doubled the size of our business, with about two-thirds of that growth coming from acquisitions and new clients. As we bring revenue onto our platform, we have proven our ability to optimize the cost of services through vendor relations and procurement management that drives our continued growth and gross profit dollars. Before I move to our outlook, I want to talk a little bit about the investment we are making in technology. Over the years, we have built a technology platform that we will be able to scale to the size of a much larger enterprise. The technology platform we have built has been the key deciding factor for several competitive wins and helped us to maintain enduring client relationships due to the incremental value we provide. In recent years, we have stepped up investments in our technology platform, so we can stay ahead and continuously improve client value, efficiency and scalability. We intend to introduce our new technology improvements during the first half of next year. These improvements will enable us to further automate and lower the cost of processing invoices and provide a major enhancement to our ability to scale. For example, this will allow us to further automate the processing of vendor invoices and achieve significant cost savings and margin improvements. Regarding our outlook. Based on the progress we have made, I am extremely encouraged with the underlying strength of our business and our ability to generate profitable growth. We expect to end the year strong with sequential improvement in both gross profit dollars and EBITDA. We expect to be a strong cash flow generator in the year of 2023. We have multiple sources of organic growth. We will continue to drive operating efficiencies and invest in capabilities. Pressure to improve sustainability, increasing regulation, and increasing costs of landfills continue to lower the bar for the adoption of our recycling services. We have a tremendous white space of opportunity and we are very optimistic that we will continue with positive momentum over the next several years. I look forward to keeping you updated on our progress. We would now like the operator to provide instructions on how listeners can queue up for questions.

Operator, Operator

Thank you. Our first question is from Aaron Spychalla with Craig-Hallum. Please go ahead.

Aaron Spychalla, Analyst

Good afternoon, Ray and Brett. Thanks for taking the questions. Maybe first for me. You kind of touched on it a little bit, but just with the uptake in kind of number and size of deals in the pipeline. It sounds like it is pretty broad-based. But can you just talk about some of the drivers behind that and any areas or end markets in particular?

Ray Hatch, President and CEO

Actually, there are several end markets, Aaron. Thanks for your questions. Industrial continues to be a real opportunity for us, and there are some opportunities in retail as well. I think I mentioned in the remarks that referenceable clients have helped us quite a bit. But also, we have had a lot of work going on and prospecting is starting to come to fruition. So the focus that our leadership team on the sales side has been putting a lot of great new prospects on top is starting to prove out, and we are excited about that.

Aaron Spychalla, Analyst

All right. Good. Thanks for that. And then maybe just on the food waste and Proganics. Seeing numerous states start to implement kind of reduction goals on the food side and penalties starting kind of early in 2024. Can you just give us an update there on where conversations stand with customers and how you see this business contributing to growth going forward?

Ray Hatch, President and CEO

Yes, sure. And you are absolutely right, Aaron. Food waste continues to be an area of focus and it continues to be probably the biggest opportunity or target for diversion from landfills. We have some great customers in that space today and we have some tremendous prospects that we are talking to as well. And to be honest with you, in many cases, grocers are really starting to look at opportunities to do more diversion than they did in the past, based on those pressures that you are referencing, Aaron. So I encourage more and more regulation and pressures. It speeds up the sales process, and we are encouraged by that.

Operator, Operator

The next question is from Gerry Sweeney with ROTH Capital.

Gerry Sweeney, Analyst

Going back to the RWS and then I think the $400,000 charge for the ramp-up, two different issues, but maybe looking at root cause. Is there any concern about processes, systems, etc., that you have to take a look at to make sure this doesn't happen again? Or how do we look at kind of the mitigation strategies around this?

Brett Johnston, CFO

Hey, this is Brett. I'll address that question. Regarding RWS, I wouldn't categorize these as widespread issues; they were mainly limited to two specific challenges that were tough to pinpoint. We made significant efforts to improve our visibility within RWS before integrating them into our current system. However, we still noticed some gaps that surfaced as we launched the new systems. We are now confident in our processes, managed by our accounting and operational teams, leading to much improved visibility and consistency in our recent numbers since going live. As for the rapidly ramping customer, it's a large client, but their impact is a very small percentage overall. This issue isn't related to systems or processes; it stemmed from a mistake that went unrecognized over time, resulting in a true-up. These situations can occur, and while we strive to avoid them, we don't see any widespread concerns about similar issues.

Gerry Sweeney, Analyst

Was the issue with RWS specific to the third quarter, or was it a problem that had been lingering from previous quarters during the integration process?

Brett Johnston, CFO

It was a lingering issue. As we stated, most of it was related to activities prior to 2023. So kind of sitting in there, and even most of that was non-cash.

Gerry Sweeney, Analyst

And then on the sales cycle, it seems like it some areas taking longer. I'm just curious if there are any industries that are moving, maybe the ramp up is going faster than you anticipated and some are slower. And in particular, maybe if you have a lot of referenceable accounts in one industry, is that sales cycle sort of faster than an industry where you have fewer referenceable accounts?

Ray Hatch, President and CEO

Yes, referenceable customers definitely help speed up the process, Gerry. There's no question. It's almost like due diligence that doesn't have to be performed by the prospect. So I don't think there's an industry-specific delay or improvement at or in-market specific. I mean, I think it depends on where the prospect is in their decision cycle, how they do it. Some of them are more complex than others. Some have a ridiculously long, frankly sign-off process that goes through numerous departments. Some of them are much quicker than that. But I guess what I'm saying is I don't see that as in-market-specific. It's more company culture-specific and how quickly they make decisions.

Gerry Sweeney, Analyst

Some very large companies have opportunities for signing that may arise over the course of a year or a cycle. Is that part of the situation? It relates to how these companies manage their outsourcing services. Is that another perspective to consider?

Ray Hatch, President and CEO

If your question was larger companies, Gerry, they take longer, is that what you are saying? I couldn't hear you very clearly.

Gerry Sweeney, Analyst

Yes. It is actually yes.

Ray Hatch, President and CEO

Okay. Yes. It relates to complexity, right? The larger the company, the more locations and waste streams they have, typically leading to more bureaucracy. So there is a trend where larger companies take longer, there’s no doubt about it.

Gerry Sweeney, Analyst

Final question and then I will jump back to queue. Any competition popping up? Obviously, I mean, you mentioned one client that went away, but that was internalized, right? Completely understandable. But just curious if you are seeing any competition even on the fringes or what's happening out there on that landscape?

Ray Hatch, President and CEO

We discuss this frequently, Gerry. I appreciate you repeating that. The client we mentioned lost was acquired by another company, and they decided to handle it internally, so it wasn't related to us. It's worth noting that we also experience growth when our clients acquire other companies. This can happen in both directions. As for competition, I haven't observed many changes. I've been monitoring our price points in light of changing economic conditions, and I haven't seen any significant shifts. The industry remains highly competitive, and overall, things have remained consistent.

Operator, Operator

The next question is from Sameer Joshi with H.C. Wainwright. Please go ahead.

Sameer Joshi, Analyst

Good afternoon, guys. Thanks for taking my questions. Just on RWS, it seems that the revenue loss also played into this quarter. It seems $6 million less than year-over-year growth here. Is there any reason for that lost revenue or can you just shed some light on that?

Brett Johnston, CFO

Yes, I can address that. We certainly have the commodities impacting the business. So, part of this is related to a decline in overall commodity values. We also mentioned the lost customer, which contributed to some of the revenue loss this quarter. Additionally, the remaining impact likely stems from adjustments made throughout last year.

Sameer Joshi, Analyst

Okay. Some of my other questions have been answered. But just checking on, I think on the last call, you mentioned double-digit growth in gross profit dollars and in adjusted EBITDA for 2023. Are we still on track for that?

Ray Hatch, President and CEO

Yes. I mean, if you take out the exceptions that I think Brett did a really good job of laying out. I mean, we are there. But we are looking to continue that. The outlook is strong going forward, definitely strong going forward in future quarters.

Sameer Joshi, Analyst

And then the last one, was there any further principal payments made to Monroe? I think in the last quarter around $2 million was prepaid.

Brett Johnston, CFO

No. We did not make another one subsequent to this quarter. We did talk at the end or in our Q2 earnings call that we had made one subsequent. So we did have a payment of $2 million within the quarter, but we talked about that one as being a subsequent transaction to Q2.

Operator, Operator

The next question is from Greg Kitt with Pinnacle Fund. Please go ahead.

Greg Kitt, Analyst

Hi, Ray and Brett. I wanted to ask a question about Brett's commentary. It seems that Brett expects a sequential gross profit increase in the fourth quarter and something similar to Q2. Since Q2 gross profit was 13.5, should I interpret that statement to mean that you think Q4 will also be around 13.5?

Brett Johnston, CFO

I believe that serves as our baseline for the overall performance of the business, Greg. We mentioned that there are opportunities and growth ahead. In the fourth quarter of last year, we discussed some cyclicality or seasonality that can vary significantly from customer to customer. Therefore, we don't have complete visibility on how this will affect Q4. However, in terms of business strength, we view Q2 as a better indicator of continued sequential performance. With the adjustments we've discussed, we align closely with Q2.

Greg Kitt, Analyst

Thank you. And I wanted to make sure that, I understood how much of the adjustment was to gross profit in the quarter? I think that you highlighted $500,000 of RWS was a gross profit impact, and then was the $400,000 impact with the one fast-growing customer, was that also a gross profit impact? So was it $900,000 reduction to gross profit, or was it more?

Brett Johnston, CFO

Yes, that's correct. It is about a $900,000 adjustment to gross profit that we took in Q3.

Greg Kitt, Analyst

Okay, great. We're approaching double-digit gross profit growth for the year, considering an addition of $900,000 which brings us to about $13.5 million in gross profit for Q4, although it might be slightly lower this year. I hear your confidence in achieving double-digit growth moving forward, and you've mentioned various areas where that can be achieved. I would appreciate your insight on how much of this growth is expected from your existing customers and the wins already secured, how much is from optimization, and whether there's a specific target, like needing to acquire $1 million in gross profit to reach 10%, or if you believe that growth is already within reach.

Ray Hatch, President and CEO

Yes, that's difficult to quantify, Greg, mainly because there's a go-get aspect that is always challenging to define. First of all, the optimization you mentioned, related to profit, involves our existing clients. Dave's team has been doing an excellent job of reducing costs and maximizing efficiency, which has significantly increased our gross profit over time. This remains a major factor for us. I would estimate that more than half of this opportunity lies with our existing clients. The potential for new business looks more promising than it has in previous periods. Therefore, our confidence is quite high. We already have a solid foundation with our existing clients and have mapped out many strategies to enhance our gross profit, which are scheduled and organized. We feel optimistic about this.

Greg Kitt, Analyst

Regarding the $1.7 million in SG&A cost savings from RWS, you mentioned some of that being reflected in the fourth quarter. However, I also heard you state that SG&A is expected to be around $9.5 million. Can you clarify how much of the $1.7 million, which breaks down to about $425,000 per quarter, you anticipate will impact Q4, as opposed to starting in Q4 and benefiting future quarters?

Brett Johnston, CFO

Yes, most of it should be in Q4. We'll get a little bit of additional pickup after Q4, but most all of it will be in place. We've got a couple of other SG&A lines that are coming in and offsetting a bit of that. But overall, we expect the full amount to be realized in quarter four.

Greg Kitt, Analyst

You have implemented the cost savings plan very early, around the beginning of September. Do you believe that most of the savings will be realized in the fourth quarter?

Brett Johnston, CFO

Yes, it kind of had a rolling aspect to it, so this wasn't a one-time thing. But yes, we've certainly by the end of Q3 had most of the savings already realized.

Ray Hatch, President and CEO

So it's important to note that this isn't a want to do; this is already done. And we've given the annualized number, but the execution of the initiative is already completed.

Greg Kitt, Analyst

And then on the new customer that I think you said was going to start ramping September 1st, that sounded like that was going great. Is there total number of locations 380 locations or is that just the size of the initial opportunity that they gave you?

Brett Johnston, CFO

No, that's the number of locations. The size of the initial opportunity varies because some locations are smaller while others are larger. It's not uniform. Therefore, the number of locations is less significant than the waste generated and its volume. It begins with one component, and we are adding waste streams as we progress. I’m really proud of our team for convincing them to speed up and move forward with additional waste streams and locations rather than delaying the process longer than we expected. There is still a phased approach, Greg, but we are pretty confident it has accelerated from our initial expectations.

Greg Kitt, Analyst

That's awesome. And is there a way to think about the opportunity with some of those competitors, which it sounds like you think you are also pursuing, are any of those in that bucket? I think you quantified, Ray, as something like far along in the process and/or maybe at the closing stages something. I don't remember the exact way you described it, but is there a way to think about how some of those other competitors are in the pipeline, where they are?

Ray Hatch, President and CEO

I understand your question, Greg, and I think you are going to understand that I continue to be reticent for competitive reasons to speak to that much detail. But there are a lot of opportunities that are created by other competitors, frankly, that aren't taking care of their clients as well as we think we can. But I am probably not going to mention anything specific relative to that. I think you understand that.

Greg Kitt, Analyst

Yes. My last question is about whether you have looked into refinancing your debt, as mentioned during the last quarterly call. I recall you discussing that, but I could be mistaken. Brett's comments suggested that you are focused on lowering your interest expenses by managing your cash effectively, and you've done a commendable job with that this year, along with reducing your debt principal. I would appreciate hearing your thoughts on your refinancing plans.

Brett Johnston, CFO

Hey, Greg. This is Brett again. Yes, I will take that. We did talk in Q2 that we were having conversations and we have continued to have conversations and continue to be excited about the opportunities that we have for refinancing. We are taking a really slow, deliberate approach to it because we have got a lot of exciting growth opportunities that we have talked about during the call. And we want to make sure that whatever we set up is in place to really help to support that growth over the longer term. So we are taking a little bit more time. It's certainly not because we don't have really good options. We continue to be really excited about potential partners that we have got out there. But we're just going to take a little bit more time to diligently ensure we get the right arrangement in place.

Operator, Operator

The next question is from George Melas with MKH Management. Please go ahead.

George Melas, Analyst

Hi, guys. I would like to extend and then maybe a more sort of detailed question. On the growth question, Ray, you talked about doubling over the last three years and about one-third of that coming from existing customers. So I would suffice with some very simple math that suggests that you should have grown with your existing base by roughly 10% per year. But it seems a little high to me. And I wonder if that's about how where the numbers fall around 10% in terms of organic growth.

Ray Hatch, President and CEO

George, I am going to answer your question that I believe I heard. Unfortunately, the connection is not good. But I think your question was around the doubling of our business and one-third came from existing clients in essence. But the fact that you did the math, and it sounds like 10% is a little high. Is that what you're thinking? Is that what you're asking, George?

George Melas, Analyst

Yes, exactly. And is that the goal going forward?

Ray Hatch, President and CEO

Yes. It does seem, I bet it is actually what this team has been doing. And that's growth in gross profit dollars, not revenue necessarily. And so we talked about the procurement initiatives about continuing to leverage and optimize the waste services and create more value from the commodities. And the team has been doing that. So yes, George, those numbers are accurate, and we are really thankful to have those long-term relationships with these great clients, and we are able to do that.

George Melas, Analyst

So as you go, as you look forward to '24 and '25 with the improvements in the platform that you are making, is that still what you expect in terms of gross profit dollars, in terms of organic growth? Are you sort of targeting 10%? Or how do you think about it?

Ray Hatch, President and CEO

We are aiming for overall growth of 10%. We expect consistent contributions from our existing clients. The enhancements in our platform will have several benefits, but they will likely increase our selling, general, and administrative expenses due to the automation features. While these improvements may not significantly boost gross profit, there are still elements that will, such as the procurement tool that allows us to find better pricing and locations more quickly. To answer your question, we expect the contribution growth from existing clients to remain stable, similar to the trends we've seen in recent years. Additionally, our technology platform will provide significant advantages, particularly in terms of scalability and internal cost efficiency.

Brett Johnston, CFO

Yes. We continue to see that as an opportunity. ARR was slightly higher this quarter compared to the last quarter, but we faced some timing issues with projects that started late. As a result, we haven't had the chance to collect on those yet, along with some delayed billings as we transitioned to our new system. There's nothing alarming about this, but we are actively seeking opportunities. However, it's challenging as we are dealing with large customers who are also managing their working capital. Particularly as we approach the end of the year, they tend to postpone payments. Nonetheless, we remain focused on this and believe there are opportunities for improvement.

Operator, Operator

This concludes the question-and-answer session. I'd like to turn the conference back over to Ray Hatch for any closing remarks.

Ray Hatch, President and CEO

Thank you, operator. I just want to take this opportunity, guys. I want to reiterate our positive outlook. I want to make sure that I came across as I intended that very, very confident. When you look at our business today and look forward, I don't think I've ever felt better about where we're headed. I mean, there's so many positive things on in the forefront. So I'm very, very encouraged by that. I want to thank you again for all your interest in Quest. I'm really appreciative of our shareholders and the support that we get from you guys. And I want to thank the rest of the Quest team. I never want to forget this. For the ongoing efforts to deliver value to the client and to the shareholders. They put in a lot of time and effort and work, and it shows in those client retention, client relationships, client contract resigning, those types of things. They don't happen if you're not doing a good job. And these guys are doing a great job. I'm very appreciative of that. We have a number of key initiatives that we're working on, and we've really started ramping them up as we move into Q4. And I'm really excited about what they're going to do. They're going to be enhancements to our platform, enhancements to our ability to grow revenue and to grow gross profit, which should yield a greater EBITDA going forward. So that's kind of where we are. Again, excited about it. I hope you are too. Looking forward to keeping you up to date in the quarters to come. And thanks again.

Operator, Operator

This concludes today's conference call. You may disconnect your line. Thank you for participating and have a pleasant day.