Barry, thank you for your summary. After listening to it, I decided that the interview was so good, everyone should be given the opportunity to read what was said.
As a result, the following post is intended as a more complete summary of the interview that Mr. Gerald Pesut, the President of Advanced Systems International (ASI) recently conducted with Wall Street Interviews.
I have taken the time to transcribe this interview, as I consider this information as invaluable when determining the long term growth and strength of this company. I have also taken the liberty of lightly editing some of the text to ensure that the information would fit under each of the respective headings below.
For the record, I do not work for ASI. However, I do own shares in this company. Based on my research and knowledge of this industry, I plan to continue to add more shares to my portfolio whenever possible. I feel that the shares in this company are going to significantly appreciate in value as more investors understand their story. This is why I am taking the time to prepare this information.
For ease of presentation, I have regrouped Mr. Pesut's comments into the following topic areas.
- Status of the Company
- Products & Innovation
- Customers
- Value to Customers
- Financing
- Business Plan
- Management Team
- Partnerships
Status of the Company
They are now in their Growth Stage of their Business Plan.
ASI has also now entered their Profitability Stage as well.
In 1994, they demonstrated their first product to Chrysler
In 1995, Chrysler decided that their product offered the excellent functionality and they determined that it was the best product for their needs.
Chrysler required some additional features to be added to the base product, and they also requested that some performance characteristics be enhanced.
ASI then put together a consortium style partnership that enabled them to develop a very high quality Time & Attendance and Labour Distribution product.
Mr. Pesut feels that they are now ready to take a big piece of the business in a growing market.
Products & Innovation
Their core product took 70 man years to develop.
ASI currently has the largest T& A application running on a client server platform in the U.S.. They provide solutions to the industry's specific business needs and performance requirements.
Through their involvement with their clients, ASI realized that there was an opportunity to assist them with the smooth implementation of their ERP systems. Also, they recognized the challenges that having data stored in many different formats throughout an organization posed for their clients. ASI found that they were able to assist their clients with data capture and distributions throughout their organization.
Because of this, the management of ASI realized that there was a whole new opportunity in the MiddleWare industry. They recognized the need and set out to fill it.
What they did was to develop a second product that would enable organizations to collect, move, and access data throughout the whole organization which is a core requirement for Business to Business ECommerce.
By the end of 1998, they now had two products: Time and Attendance / Labour Management, and a Middleware product.
They now have two proven products in two growth markets that will continue to do very well
Customers
They have a very strong base of customers.
Many of their customers have branches, and plants, located throughout the world.
The functionality of their products are very strong as they have to deal in the high end work load that the Fortune 1000 companies require.
They have grown their customer base to include world class companies such as Sara Lee, Dana, and Ford, and they have their products installed in core plants within these companies.
Their customers are those who are in the Fortune 1000 and 2000 ranks.
They started with the Auto Makers, and now have branched off to include the Auto Suppliers, Food Processing Manufacturers, Furniture Manufacturers, and the Entertainment industry.
They have recently signed a contract with Volvo's trucking division, and have just announced an agreement with Imperial Tobacco in Canada.
Their Middleware application is based on a strong engine. This modular component application enables it to hook into many different data sources, such as SAP, Oracle, etc..
One of their current customers has a combined total of 160 plants within their organization. ASI has the initial contract to install their applications in 17 of their plants.
As it stands now, ASI could grow a thriving business strictly within its existing customer base!
Value to Customers
ASI's products help their customers to reduce costs, increase labour productivity, and increase their operation's overall efficiencies.
Their Middleware's modular components enable it to hook into many different data sources, such as SAP, Oracle, etc.. This results in a reduction of a company's overall ERP system implementation costs.
These systems generally run into the millions of dollars, and if the ASI solution can shorten a company's install cycle, then this will result in a reduction in costs, and increase the chances for a successful implementation. All of these factors will contribute to a customer's greater overall ROI on their multi million dollar mission critical projects.
They are able to easily accommodate any customization for customers who require it. Large organizations often want applications to fit their needs. As a result, (and as mentioned earlier) ASI has developed their core products around the principles of modularity. In order to provide a customer with a good fit of function and performance - ASI has built a series of tables into their products.
All a company needs to do is to select their requirements from the menu of features, and the product can be developed for their specific needs.
Just factoring in the savings in administration costs alone, a customer can generally expect a full return on their investment within 6 to 9 months. The labour savings and operating efficiencies they receive are an added bonus. The enhanced productivity of the work force within an organization often results in tremendous savings in it own right.
They have a relatively short cycle of between when the sale has been made to the time when the implementation of the product begins. This process can take between 2 to 3 months - with full implementation taking up to a maximum of six months.
ASI works through a proven process of understanding the business needs, determining the functional requirements, coding the applications to accept the specific requirements, and then installing at the site. They also have the capability of providing their customers with 24/7 help desk support.
The Payback for the installs occurs early in the cycle.
Financing
This company is well funded, and they do not have to borrow money to expand their operations.
They have a strong and loyal base of investors who are ready, willing, and able to fund a planned move to the Small Cap market of the NASDAQ!
The target for this move to the NASDAQ (possibly assisted via a second round of financing) is the second half of 1999.
Business Plan
This company has been in business since 1991.
The recent release of the 1999 first quarter results have shown that they are now ahead of both their profitability expectations and plans. Mr. Pesut, mentioned that they are anxious to take the next steps.
They are following their business plan, and the company is on target!
They are now in the growth phase of their business plan, and they enjoy the unique luxury of being profitable at the same time.
The 1st Quarter results were +3 cents per share as compared to a recent year over year loss of - 4 cents per share. Last year was a major development year in that they focused on the building and proving their products. They also spent last year growing their implementation and sales capabilities of the business.
In the 1st quarter, their net income was 18% of their overall revenues. The upcoming quarter will see continued strength in both net income and revenues. Sales for the second quarter are budgeted to be $2 million.
Some of the key goals they will be shooting for is to realize revenues of $11 ½ million in 1999. They also have budgeted for a profit of $2.4 million on those sales.
They are currently expanding their sales organization, and now have representatives in 7 different cities.
They also are expecting revenues to increase in their existing centres where they have installations now in place.
They are moving to continue to further develop their Business to Business, E commerce, and Time and Attendance / Labour Management products.
They see themselves as now taking advantage of the opportunities that E Business provides. They are providing the means to share information between the value rings of each organization. By doing so, they then will have positioned themselves to become an important and key component in this process.
Mr. Pesut stated that the Business to Business market is growing at more than 100% per year.
The time it takes to move from pitching the sale to receiving payment is very short (in relative terms). Their sales to revenue cycle is short due to the way that they have built their product.
Management team
People who started the company conducted the T&A install within the Canadian Postal System. At the time, this was the largest such install in Canada.
Mr. Pesut explained that ASI has a strong management team who knows how to function within successful start up companies, and then skillfully manage growth within that company.
The management team is experienced in this field. Key members of this team can draw from their experiences they had while holding senior management positions within ASI's major competitors.
ASI has both a top notch technical and sales teams who are capable of delivering on all counts.
Partnerships
When the initial product was in the prototype stage, Chrysler funded the development work, ASI provided the core product, and Perot systems performed most of coding work.
This partnership proved very fortunate for ADSN. This is because, as a small company they were able to take full advantage of the resources and expertise of these large and very successful corporations. These partners assisted them in developing a world class - leading edge product.
From that early development work, they ended up releasing their product in 1997. This install took place in one of the Chrysler company's plants.
To help them to explain their business model, unique features, and competitive advantages to the world, they have just linked up with a strong PR firm who has experience in this area. This company will assist them in communicating their success story to the rest of the industry.
Their partners include some of the strongest and most recognizable names in the industry. They include . . . EDS, SAP, CMI, and Microsoft.
Throughout this coming year, they will be expanding their relations with their partners. These partnerships involve hardware, software, and integration partnerships.
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In summary . . .
I believe that this company has solidly established themselves as an important, and value added, partner to some of the most respected and financially solid corporations in the world. Their products are innovative, they meet specific business needs, they solve problems, and add efficiencies and value to their customers' operations. Their business plan is being well executed, and the management team is strong and confident in their future.
ASI is growing rapidly, and I am confident that so to will the value of my investment in this company.
Crazy Canuk
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