Echo Consolidated Holdings Group, a family of Dallas-area electronics recycling, ITAD and IT services companies, recently expanded into the mobile phone trade-in business by acquiring CExchange.
The acquisition fits with Echo Consolidated Holdings Group’s (ECHG) strategy of acquiring companies with strong leaders and customers that fit into ECHG’s resale ecosystem, said Tommy McGuire, president of ECHG.
“Our industry is 100% relationship based,” he said in an interview. “The way that companies grow is by strong, long-term relationships, and CExchange has a lot of those.”
Moving into phone trade-in services
Before the acquisition, ECHG was made up of three companies: Echo Environmental, ITAD USA and Teladvance.
Echo Environmental operates 166,000-square-foot, R2-certified facility in Carrollton, Texas (near Dallas), providing e-scrap recycling, solar panel recycling and other destruction and de-manufacturing services. The company recovers a number of valuable commodities from electronics sourced from businesses. The company employs a 60-person disassembly team and uses shredders for targeted streams.
ITAD USA serves businesses in the Dallas-Fort Worth region. It has a 35,000-square-foot facility in Carrollton, two miles from Echo Environmental. It sells remarketable equipment through wholesale and e-commerce channels and sends all scrap devices to Echo for recycling.
Teladvance is an ITAD company based in Addison, Texas (also near Dallas). McGuire said ECHG has shifted Teladvance’s ITAD customers to ITAD USA and is rebranding Teladvance to focus on providing pre-owned IT hardware and offering related IT services, including software services.
ECHG first announced a move to add CExchange to the list on Feb. 21. Its press release described an agreement to lend $1.5 million to CExchange with warrant and call-option agreements to acquire all of CExchange’s equity interests. McGuire explained the deal was essentially a loan that will convert into equity, but the deal is being treated as an acquisition.
With a facility in Carrollton, CExchange provides in-store and online phone trade-in programs for large retailers, including Walmart, Target and Costco. Its services include reverse logistics and device refurbishing and resale. McGuire noted the company is a top-rated seller on eBay.
A press release notes the acquisition allows ECHG and CExchange to offer customers a full suite of services, including trade-in, returns management, asset recovery and end-of-life recycling.
An evolving group of companies
The businesses that now make up ECHG have experienced a number of changes over the past year.
On May 20, 2019, Dallas Gold and Silver Exchanges (DGSE) Companies bought the assets of Echo Environmental and ITAD USA for $6.9 million, a quarterly financial filing shows. DGSE, which is involved in buying and selling jewelry and other valuables, acquired the assets from precious metals company Elemetal, LLC. The two companies have had business dealings and financial arrangements going back years.
To fund the purchase, DGSE borrowed $6.9 million from John R. Loftus, who was Elemetal’s CEO, president and chairman and who owned Elemetal’s stock (Loftus is now DGSE’s CEO and president and its largest shareholder). At the same time, DGSE borrowed another $3 million from Loftus to pay off other parties it owed money to.
A few months later, in August 2019, DGSE Companies announced it had acquired Teladvance. The purchase price wasn’t disclosed.
In December 2019, Dallas-headquartered DGSE rebranded and restructured.
DGSE changed its name to Envela Corporation, which now has two different business segments: DGSE LLC, which operates the Dallas Gold and Silver Exchange, Charleston Gold & Diamond Exchange and Bullion Express brands; and ECHG LLC, which now houses Echo Environmental, ITAD USA, Teladvance and CExchange companies.
Financial filings show the DGSE business brings in considerably more revenue than ECHG, but the electronics recycling and reuse business has been more profitable. During the third quarter of 2019, ECHG brought in $6.2 million in sales revenues, $3.2 million in gross profit and $1 million in net income. During that time, DGSE brought in $16.7 million in sales revenues, $2 million in gross profit and $30,000 in net income.
The filing also shows the profitability of recycling versus reuse. During the third quarter, the recycling business brought in $5.1 million in revenue and $2.4 million in gross profit, for a margin of about 47%. The reuse business brought in $1.1 million in revenue and $760,000 in gross profit, for a margin of nearly 71%. Combined, the recycling and reuse businesses had a 51% margin.
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