For some companies, change is hard to track even from year to year. QuestAir CEO Jonathan Wilkinson can pinpoint his company's transformative moment to a two-day retreat in 2002.
Before then, Vancouver-based QuestAir (TSX:QAR) was a venture-capital-funded developer of technology for automotive fuel cell applications. Founded in 1996 in an era when Wilkinson says companies like DaimlerChrysler and General Motors were promising to have tens of thousands of fuel-cell-powered cars on the road within a decade, QuestAir (market cap of $65 million) attracted over $60 million from VC firms like Ventures West and GrowthWorks Capital. But by 2002 it was clear that fuel cell technology was not growing at the rates initially predicted. QuestAir's annual revenues were south of $200,000. The company needed to find a new path to profitability.
Enter Wilkinson. Formerly with strategic consulting firm Bain and Company, he was VP since 1999 before taking over as CEO in 2002. He knew some tough decisions had to be made. At the retreat his team opted for a definitive shift in direction: rather than focus solely on development, QuestAir would turn to finding industrial applications for its existing products selling advanced gas purification systems to customers in the gas, oil refining and chemical processing industries for applications such as hydrogen purification.
As a result the client focus shifted as well from smaller plants to the pursuit of large-scale organizations like Exxon Mobil. Says Wilkinson, “We started getting more aggressive in terms of selling, and we also started to scale up the capacity of the systems we had so that we could compete in a broader marketplace on systems that sold for a higher dollar value.”
Its relationship with Exxon Mobil has been a close one and in 2004 QuestAir went public on the basis of 'adsorption' technology the two companies had jointly developed. The technology will see commercial application sometime in 2007.
Brock Winterton, an analyst with Clarus Securities (which also trades QuestAir), notes that hydrogen purification is in demand. “Big potential demand lies in [QuestAir's] new product being developed with Exxon Mobil for refinery waste hydrogen gas purification. Its newer markets for methane clean-up in the biogas and landfill gas segments have also been showing some strength in North America and Europe.”
While QuestAir's target customer has changed, its environmental focus appears to remain intact: the technology helps refineries recover hydrogen and reuse it to both lower processing costs and reduce emissions. The change has also resulted in a significant increase in revenue growth. “This year we've told the market we should do in the range of $10 million so there's been fair growth in the revenue profile,” says Wilkinson. While a turnaround seems underway, QuestAir faces some turbulence yet: earnings per share remain slightly negative and the stock has been relatively volatile over the last year, ranging from $2.04 to $0.75.
Nevertheless, Wilkinson says there was no other road QuestAir could have taken but this one. “I think this company wouldn't have continued to exist if we hadn't made that kind of a change.”
