How Quest Resource Holding Corp. (NASDAQ: QRHC) Plans to Use Business Waste to Fuel Triple-Digit, Top-Line Growth

Humans are a wasteful bunch, and our habits in the business world are no different. While a minimal amount of waste in the workplace is recycled, Texas-based Quest Resource Holdings (NASDAQ: QRHC) believes the nation’s corporations can do a lot better. As a provider of sustainability, recycling and environmental services, Quest is focused on strengthening its own top line while helping large corporations reduce their operating cost and minimize their eco-footprint.

Through its Quest Resource Management Group and Early911 subsidiaries, Quest designs and manages sustainability, recycling and resource management programs for the automotive, grocery/restaurant, industrial, property management and sustainability industries. With more than 38,000 client locations across the country, Quest has managed more than 1.37 million tons of waste, including used motor oil, trash, organics, used tires and card board.

In January 2017, Quest expanded its reach into the construction and demolition (C&D) industry, which spent $1.18 billion in 2016 alone – marking the industry’s highest level of spending in a decade.  According to the Department of Commerce, the increase correlates with rising demand for project services and waste management as construction companies seek to minimize risk and cost, increase insight and control, and address environmental goals of clients.

For Quest, this means opportunity. Quest leverages its national footprint and cloud-based service and reporting platform to provide clients the ability to control cost, access waste disposal alternatives, streamline logistics, and increase efficiencies. Using the C&D industry as an example of this strategy, Quest’s construction-centered offerings include general requirement services such as temporary offices, storage containers, toilets and hand washing stations, holding tanks, water tanks and dumpsters. C&D waste and recycling services include solutions for materials such as wood, concrete, roofing, drywall, metal, plastic and blast media recycling, as well as hazardous and non-hazardous waste.

These solutions are executed through a time-saving, streamlined process in which Quest handles incoming requests, schedules and manages services, and provides LEED® credit tracking and sustainability reporting, enabling busy construction managers to focus on building their projects.

To facilitate its own growth, Quest operates an organic and acquisition-based strategy that creates a base of recurring revenues generated through fees for waste and recycling services, the sale of recyclable material in the commodity market, professional services, and the sale of operational products such as waste collection containers, compacting equipment and fleet maintenance products.

In 2016, backed with a credit facility with up to $20 million in borrowing capacity, the company refined its go-to-market strategy to optimize its market opportunities and reinforce the foundation for growth. The plan enabled the expansion of existing markets, entry into new industry verticals, and wins from new and existing customers.

These initiatives enabled the company to drive fourth-quarter revenues to $45.0 million, a year-over-year increase of 2%. Full-year 2016 revenues of $184 million represent an increase of 8% from total revenues in 2015. In the fourth quarter of 2016 the company also improved its gross margin by 50 basis points to 8.2%, and narrowed its net loss to $1.3 million compared to $2.8 million for the comparable quarter of 2015.

Pivoting off this growth, the company has its sight set on a market opportunity valued at $55 billion, with anticipation for continued momentum.

“We expect improved performance in 2017, reflecting our refocused go-to-market strategy and our efforts to enhance the value add of our services portfolio. Those initiatives, including our focused approach to customer acquisition, are expected to result in 1% to 2% improvement in gross margin and positive Adjusted EBITDA by the end of 2017,” S. Ray Hatch, president and CEO of Quest, stated in the earnings release. “Long term, we expect our strategy will return the company to double-digit top-line growth. In addition, we plan to show continued growth during the next several years and have established a three-to-five-year gross margin target in the low to mid-teens and an Adjusted EBITDA margin target of 4% to 6%.”

For more information visit www.qrhc.com

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