Striking the right balance

The electronics recycling industry has encountered its share of challenges recently, with depressed commodity pricing, troubled state-mandated extended producer responsibility (EPR) programs, cathode ray tube- (CRT-) glass-related issues and declining precious metals content as devices become more compact.

Because of its focus on remarketing and regeneration, however, HiTech, an information technology asset disposition (ITAD) company headquartered in Oklahoma City, has insulated itself somewhat from the harsh winds that are battering those companies that have prioritized commodity recovery and participation in state-mandated EPR programs. Emphasizing remarketing and redeployment along with transparency and customer service has helped HiTech grow despite the challenging environment.

CEO Lane Epperson, who co-founded the company with Peter Roberts and Jimmy Gent (who recently retired) in 2002, says, “Our business philosophy is that real success comes from excellent customer service based on integrity [and] transparency and is driven by challenging ourselves and our competitors to continual improvement. I think quality and spirit of service is what it takes to be successful in any industry, as well as the perseverance to keep driving through both good times and tough ones.”

Mitigating risk

HiTech began as a used IT trading company. “We bought largely from end users, leasing companies and OEMs (original equipment manufacturers),” Epperson says. “At that time, many of the large end users were still doing data destruction in-house.”

Eventually, he says, these companies began looking for risk mitigation services in addition to asset recovery services. “We evolved as a company and discovered our purpose: to become a best-in-class IT asset disposition provider capable of giving our clients the ultimate in risk prevention and brand protection.”

Epperson says HiTech processed 440,000 serialized electronics assets in 2015, which equates to more than 7 million pounds. However, he adds, “It is good to keep in mind that what we do is process primarily for reuse and therefore aren’t weight or price-per-pound focused.”

Most of the assets the company processes are from enterprises—Fortune 500 companies, public entities and other large organizations.

“Our basic process is to receive the equipment by bar coding each piece for secure, serialized tracking, then run it through a pallet skate to the triage line,” Epperson explains. Next, HiTech audits and tests the equipment and performs data overwriting using server racks outfitted for this purpose.

HiTech views securing clients’ data, which its website, http://htassets.net, refers to as its clients’ “most important asset,” as its foremost job. “We leave nothing to chance as the serial number for every device is tracked in TrackIT—our industry-leading ERP (enterprise resource planning).”

HiTech’s customers have shown a preference for data overwriting over physical destruction to take advantage of resale opportunities. However, he says, the company does shred drives at the request of clients as well as drives that are inoperable or that cannot be properly wiped because they contain bad sectors.

Epperson says HiTech uses a proprietary combination of overwriting software that varies depending on the drive type and size.

Recovering value

He describes the current resale market as “insatiable,” with a trend toward mobility in the form of tablets and smartphones. Epperson says enterprise customers diverge somewhat from individual consumers in terms of what they are purchasing, however.

“There is a trend toward more companies looking to extend the lives of their assets,” he says, adding that asset redeployment within an enterprise helps achieve this.

While refresh cycles vary from industry to industry and from enterprise to enterprise, he says, typically enterprises refresh PCs, servers and networking equipment every three to seven years.

According to the company’s website, “Extending useful life can generate meaningful value for an organization as long as you are confident that these devices will stand the test of additional time.”

To ensure this, HiTech employs what it calls its “Max-Yield” process when processing, repairing and selling devices. The company says this system helps to maximize the number of assets it can remarket and the average selling price of those units.

All of HiTech’s executive and most of its administrative functions happen at its Oklahoma City headquarters. The company also performs triage/value assessment; functionality testing; data erasure; data shredding; logistical support; repair (to board level); marketing; value recovery, including parts recovery; dismantling; and separation of some commodities at the 65,000-square-foot facility.

Its 12,500-square-foot Memphis, Tennessee, plant focuses on collection, logistical services, triage and inventory control, Epperson says.

“We are an electronics recycling company deriving more than 90 percent of our income from selling laptops, servers, smartphones, etc., for use in the secondary market rather than traditional commodity recycling,” he says.

“Only a small part of our revenue is derived from traditional scrap commodity recycling, and that is not done by us but by audited downstream vendors,” Epperson adds, noting that this figure amounts to roughly 5 percent of overall revenue.

The Responsible Recycling Practices- (R2-) and Recycling Industry Operating Standard- (RIOS-) certified company tests all of its incoming devices, making repairs as necessary.

HiTech customarily wholesales its tested enterprise and PC equipment to distributors, refurbishers, retailers and network maintenance and support firms, he says, and occasionally sells directly via the web.

Looking forward

In 2015, HiTech’s executive leadership decided to seek what Epperson describes as “a true growth and financial partnership.” He says, “We had one co-founder ready to retire, while I and the rest of our management team were ready to take HiTech to the next level.”

Epperson says HiTech evaluated several interested financial groups before partnering with Caretta, a Chicago-based growth equity investment platform, and GBT Capital, a Phoenix-based investment firm, which acquired a majority stake in HiTech in the first quarter of this year.

The partnership enables HiTech to expand its services to include mobile data destruction in the form of physical destruction and data overwriting and to increase its geographic coverage area, he says.

Like HiTech, Epperson says Caretta and GBT Capital are committed to providing best-in-class services with a focus on customer service and environmental responsibility. “The people there shared our sense of purpose in regard to responsible recycling, secure data destruction and global sustainability,” he adds.

While HiTech began by focusing on PC-related devices, it has shifted toward mobile and higher-end enterprise equipment more recently. When receiving these devices, HiTech often must invest more time and energy to customize them for the secondary market. “They are not quite as plug and play as PCs and laptops,” Epperson says, noting they require more labor in the area of data security, too.

Networking equipment also requires a specialized approach, including more testing equipment, expertise and infrastructure, Epperson says.

HiTech’s future plans include evolving its data destruction services to include mobile data overwriting and supporting documentation, he says.

Additionally, HiTech plans to invest in upgrading its facilities and furthering its organizational depth in all areas of the business, Epperson says. “We’re focused on getting the right people in the right spots.”

Wherever the future finds HiTech, Epperson says he’ll enjoy the journey. “All information technology is inherently interesting, so when that is combined with the dynamic (and demanding) nature of reverse logistics, the endless variety and condition of IT hardware we receive makes for a business that is as interesting as any,” he says. “If you add on the tremendous fulfillment we enjoy by solving client headaches and helping them sleep better at night by providing secure sustainable processes, it is a great way to make a living.”

The author is managing editor of Recycling Today and can be contacted at dtoto@gie.net.