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Quest Resources — Custom and Sustainable Solutions for Waste and Recyclables Management


Quest Resources Holding Corp. (NASDAQ:QRHC) is an award-winning environmental management services company which provides the services for recycling, reuse and disposal of waste on behalf of large North American corporations. Quest deals with a full range of wastes, from expired food to used motor oil, scrap metal and demolition debris. Its largest revenue areas comprise fees for transporting waste and recycling, followed by waste commodity sales, and then energy consulting and merchandise. The latter includes sales of equipment and eco-friendly anti-freeze.

Quest designs and manages waste service programs, and then processes all the data, reports and invoices from third party subcontractors who operate regionally or locally. “We really believe that our data platform is key,” said Quest CEO Ray Hatch. “We take care of all the data and create a consolidated report for the client.”

A compelling part of Quest’s services is Q-link, the company’s unique service and data platform. The platform provides a consolidated spread of waste and service spending. On Q-link, clients can compare disposal options and identify problems without having to understand every detail themselves.

A Texas-based company, Quest had relatively humble origins. It began managing automobile waste. QRHC has since spread its reach across many different industries and verticals, exploiting its scalable, asset-light business model to grow rapidly between 2013 and 2016. Today, Quest’s 120 employees oversee an estimated 1.37 million tons of waste annually at almost 40,000 separate locations in the U.S. and Canada. Quest’s 80 clients include Fortune 500 companies,, many of which sign multi-year contracts, creating a dependable recurring revenue model for QRHC.

Total Market Opportunity: $55 Billion

Quest targets the top 50-100 companies in each vertical ranging from retail, automotive dealerships, and restaurants to manufacturing, property management and construction. The company anticipates its efforts in construction & demolition, and manufacturing to be a core growth-driver. Of large corporate clients, “our market share in total is about 6.5 points,” said Hatch. “We feel we have the only national footprint, complete with every waste stream offering out there, so we’re really excited about that.” In terms of market share growth, Quest is primarily focused on the manufacturing & industrial, and construction & demolition sectors.


Investment Highlights

  • Leader in environmental & sustainability services and program management.
  • Clients include some of the largest Fortune 500 companies in North America.
  • Broad Coverage: Manages over 40,000 unique customer locations reaching into every zip code in the U.S., as well as into Canada and Puerto Rico.
  • Waste and recyclables management solutions to reduce both costs and environmental footprint.
  • Asset light business model and recurring revenue model.
  • Diverse revenue sources:
    • Waste & Recycling Services
    • Commodity Sales (recyclable material)
    • Professional Services (Leed accreditations and energy efficiency consulting, waste audits, strategic planning)
    • Sale of Operational Products (waste collection containers, compacting equipment, fleet maintenance products)
  • Focused on achieving significant margin improvement.
  • Tight share structure: nearly 52 percent insider ownership.

Market Problem

Quest Resources provides solutions to key market problems including growing regulation, changing consumer preferences, and opacity in waste vendor markets.

Growing Regulation

A large retailer’s daily operation might involve dozens of different types of waste at any given store. All of these waste streams have their own rules and regulations for proper handling and disposal, and these regulations have become more complex and demanding with time.

For Quest’s big clients, however, all these different forms of waste are a byproduct and not the core of their business, says Hatch. Nevertheless, the stakes are still high, with possible multi-million dollar fines when companies improperly handle or dispose of their waste. Companies are thus pressured to spend a great deal of money and time managing something which they may consider tertiary. They need ways to simplify and trim the costs on this side of their business.

Changing Consumer Preferences

Another market problem is changing consumer preferences. This is particularly true with the ascendence of millennials, perhaps the most over-analyzed and least understood cohort in history. By at least one estimate, however, this some 80 million strong age group will possess $200 billion in purchasing power in 2017. Hatch explains it’s this generation that will determine a shift towards more environmentally conscientious buying, with some companies greening their operations to appeal to this segment of consumers.

Opacity in waste vendor markets

A final issue touches on the nature of waste vendor markets. Quest’s large clients face a mosaic of smaller waste vendors. Many of these companies may be partial to their own capital intensive services, like landfills, says Hatch. They are thus not incentivized to divert waste if that’s the most cost effective and environmentally smart decision for clients. On top of that, most clients will not have much background in waste management, making it hard for them to evaluate their ROI or environmental footprint.

“When you talk to these folks about their spending on waste,” said Hatch, “all they tend to know is how much they have spent every month or quarter. They don’t understand which elements of waste is driving it. They’re not able to leverage their spread across the country into a much (hopefully) lower cost of goods. They are not able to see the sources of the spend and where it’s going.”

Market Solution

Quest offers simplified, strategic waste and recyclables services and management solutions tailored to match clients’ needs.

Enter Quest. The company provides several unique advantages for its clients. First, it makes their waste spend data visible and objective through its scalable Q-link platform. Quest CEO Ray Hatch claims that by simplifying these corporations’ waste management data, Quest ensures they have the information necessary to make good operational decisions.


On top of that, Quest also lacks heavy capital investments, like trucks or landfills, ensuring it can make decisions on behalf of clients objectively, diverting waste to where it’s most effective in the company’s pre-figured network of subcontractors across the U.S. and Canada.

That’s yet another of Quest’s stated advantages: its reach.

“We touch almost every zip code in America,” said Hatch. “When you’re a large national account, you don’t have to worry whether Quest can take care of this state or that state. We’re able to take care of them all.”

Finally, Quest brings what it considers its deep experience in waste management and energy consultation. With this asset, they can help corporations identify the locations — if not the causes — of problems before they turn into major liabilities or penalties. The company can thus offer a suite of services, layering consultation and audits on top of its basic waste management and data packages for further revenue.

Growth Strategy
Growth and increased profitability means running a lean and mean operation while targeting industries that will benefit the most from Quest’s specialty services.

Quest’s growth strategy is focused on increasing its profitability. As of 2016 figures, the company’s gross margin sits at 7.7 percent. But the company is pursuing a multi-pronged strategy it hopes will improve that figure to roughly 13.5 percent by 2023 based on analyst estimates.

“Revenue and gross margin — we’re trying to make sure we balance those,” said CFO Laurie Latham. “Not all customers are created equal. You have to have some discipline. We’re going to be targeting the right customers who appreciate the value of our services. And when I say appreciate, I mean they have a real operational and fundamental requirement for those services.”

Asset-light Business
Part of Quest’s next phase of growth involves capitalizing on the company’s existing strengths. That includes exploiting the company’s technologically advanced and asset-light business model. The company generated $184 million in revenue last year and handled almost 1.4 million tons of waste, with operating costs of $19 million and a staff of only 120. Most of the heavy, capital intensive work is taken care of by waste subcontractors. Quest management believes the company can thus continue to grow for the next few years without significantly increasing its employee count requirements

“When a new large client comes on board, we don’t have to invest a ton of capital — we can deploy quickly and do it inexpensively because we really offer technology and expertise, and have the network already in place,” said Hatch.

Construction & Demolition Markets
Quest also wants to improve margins by aggressively expanding its market share in new industries and verticals, targeting companies that will offer higher returns, while keeping its business model streamlined. One such area is Construction & Demolition (C&D) waste management — a market the U.S. Census Bureau estimates at $1.18 billion in spending in the first 11 months of 2016 — a large increase over past years. As Quest management notes, construction projects operate on thin margins and long project durations, with unavoidable uncertainty. C&D companies thus seek to minimize risks and costs, and increase control — which is one reason they might turn to Quest. Another issue C&D’s face are customer-driven objectives, like environmental goals (such as LEED energy certification on new buildings).

Quest hopes to create a one-stop solution for these companies, offering waste stream management and LEED certification consultation. Towards this end, on January 30, 2017, Quest announced the launch of a new suite of service offerings for C&D companies.

Manufacturing & Industrial

Another focus is the industrial or manufacturing sector. “Industrial clients typically have many different complex kinds of waste flows and recycling needs,” said Latham, “and we’re really able to shine in this sector because our specialty is handling 100 percent of their needs and we can do that at each of their plants across the United States.”

In October 2016, Quest announced signing a Fortune 100 that manufactures agricultural, construction and forestry equipment. This new client alone is estimated to bring in potential annual revenue of $50 million.


S. Ray Hatch, Chief Executive Officer

S. Ray Hatch is a senior executive with in-depth experience building profitable business and orchestrating transformational growth. He brings over 25 years of experience in both the waste management and food services industries where he managed 600+ employees, and over a billion dollars in revenue, developed impactful strategies, built and lead cohesive teams that delivered long term value for all stakeholders. Hatch recently served as President of Merchants Market Group, an international food service distribution company, from 2014 to 2016. From 2008 to 2014, he served in various executive roles with Oakleaf Waste Management, a provider of waste outsourcing that was acquired by Waste Management. Prior experience includes positions ranging from Division President to Chief Sales and Marketing Officer. Hatch is a graduate of Abilene Christian University where he earned a BBA in Marketing. He has served on numerous boards including industry, educational and non-profit.

Laurie L. Latham, Chief Financial Officer

Laurie L. Latham is a senior executive with the ability to effectively operate and collaborate in an entrepreneurial environment, to translate complex ideas to simple terms for operational and informational purposes and to apply strong interpersonal and negotiating skills in developing customer and business relationships. Her operational and financial experience spans public and private entities including over 20 years within technology driven businesses. In addition, Latham has been in public practice with national and regional accounting firms, including KPMG Peat Marwick, and her earlier career experience included roles within the oil and gas, real estate, and agricultural industries. She is a Certified Public Accountant.

Dave Sweitzer, Chief Operating Officer

Dave Sweitzer ] has over 20 years’ experience in the waste, recycling, property management, and business services industries. He most recently served as Chief Sales Officer, Executive Vice President, and Senior Vice President of Sales at SMS Assist, a $1 billion market cap company. Prior to SMS Assist, he was Director of Business Development at Waste Management as well as Client Solutions Vice President at Oakleaf Waste Management.

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