Transcript of interview:
Company Profile
TAVA Technologies, Inc. (OTC BB: TAVA) a control systems integrator, provides software applications, system design and configuration in the manufacturing process control industry.
URL: www.tavatech.com
More on Yahoo!
Interview
WSR: Describe what your company does and its biographical history?
TAVA: TAVA is what is generally known as an IT service company. Our charter is that we provide information technology solutions to manufacturing and process industries. Fundamentally, we operate from the process control layer, where computer technology is used to control machines and process functions in the manufacture of products. This is sometimes referred to as fundamental factory automation, although we are not a robotics supplier. Our approach in that arena is purely from a system integration side. We go from that layer up to something that is known in our industry as manufacturing execution systems. Those systems take information from that process layer, do retrieval and data management of that information, allow local management to make better manufacturing decisions, and provide yield information.
The next step up the food chain, if you will, is into supply chain management systems. Again, that process information is applied on a broader scale throughout the organization performance. Supply chain management systems or packages, are supplied by companies like i2, Manugistics, and others who are pretty well known.
Then finally into the occasional, enterprise resource planning system where we are not an ERP implementor. In large part, our activity is in the areas that I've just mentioned. But we do have ERP competence and find that particularly in the middle market arena that we're called upon to execute either A) connections with the other work that we do, or B) actually get involved directly in middle market ERP systems.
From a functional standpoint across those layers, we provide a range of services from fundamental consulting -- helping people work through their IT integration plans. We do some level of outsourcing but that's not a large part of our business. Although it is gaining in interest and opportunity, it's not really a mature business in our particular market segment.
As a systems integration firm we're unique in that we do some select product development. For example, a proprietary product that we've developed along the way supports our Year 2000 practice. We have no intention to become a software house, but we look for those kinds of opportunities to do unique things that are repeatable across a larger client base.
I have been with the company 3 1/2 years. It was then and continues to be the only public company that is really focused clearly on this particular part of the IT service environment. We recognized early that there was an opportunity to develop a consolidation strategy across a very fragmented supply side of this market. There are a lot of three, five and $7 million system integrators servicing this particular market space across the U.S. So, we set a 2 1/2-year target to build a national presence through acquisition. As a result we currently have about 560 to 600 employees and with strong growth possibilities for our business.
WSR: Who are your typical clients?
TAVA: Typical clients are Fortune 1000 and the larger organizations like Boeing, Chevron, Amgen, Johnson & Johnson, Kraft Foods, Monsanto, Boise Cascade, Cyprus Amax, and Kimberly Clark. We approach our business across vertical markets, including pharmaceutical, aerospace -- airport operations is an interesting application for us -- food processing, and water treatment. It's the large companies that understand the value of integrated enterprise IT and are making the investment in this arena.
WSR: You've described a very specific niche. What's your overall marketing strategy in terms of letting potential clients know exactly what you do?
TAVA: Again, it depends on the vertical market. The typical approaches are trade shows, advertising, publicity, articles in trade journals and other promotions. A lot of our activity is straight client support and client extension with our existing client base, which brings referrals. We do have a very professional and well-staffed sales force that numbers about 27 people.
What has been an absolute rocket for us is the fact that we developed an early Y2K competence in the embedded technology and process control layer. We were among the first, if not the first, to put that product and service onto the market. That has just done huge things for us in terms of getting us in front of new clients, and in front of different decision-makers within those clients. Maybe a year ago we were doing business for one of the Johnson & Johnson facilities across their position in the U.S. Today as a result of the Y2K opportunity, we are working in most if not all of those facilities. That's has been a fabulous marketing series for us.
WSR: It seems that it indeed has been fabulous because you've just reported a year of record revenues. Perhaps you could give us a snapshot of how well you've been doing?
TAVA: Well, our year over year revenues went up 30 percent. That doesn't truly reflect the magnitude of change that the company has gone through here. We are almost double revenues for the fourth quarter ending June 30, 1998 versus the fourth quarter last. What's more, we are currently operating at a run rate now that essentially continues that two times multiplier from prior year. Profitability, earnings before interest, taxes, depreciation and amortization has jumped several orders of magnitude from where we were a year ago. We were frankly still in the midst of having completed the last acquisition and beginning to sweat through the issues of consolidation and standardization of process and methodology.
So we're growing extremely quickly right now. As an example, I think last January 1 our head count was around 300. We're sitting here today at around 600. And we'll probably add between 50 and 150 people in the course of the next 60 days.
WSR: You mentioned a Y2K product. How dependent is your future growth on Y2K?
TAVA: We view Y2K, as I said earlier, as a fabulous extension of our core business practice. And we're doing the same thing that we ordinarily do for clients, but with a slightly different reason. Instead of addressing their IT issues from a process improvement, information flow improvement standpoint we're addressing them from the "take a look at my Y2K issue" standpoint. What we try to do for clients, of course, is to chart a path for them that does both.
The money our clients are spending is heavily dedicated to Y2K, but it's not currently in place of money that they would ordinarily spend on general IT projects. As their Y2K activity issues are put to rest, that money will be re-diverted back to general process improvement application. So we aren't worried about the transition of that, if you will. We believe that we'll drive right on through that transition and enjoy the benefits of a significantly expanded client base. We've added over a hundred new Fortune 1000 clients in the last nine months.
WSR: Earlier you mentioned that you had made an acquisition. Are there any more possibilities on the horizon?
TAVA: Yes. We have an impending acquisition that has already been announced –- Mangan Inc. in Los Angeles. The company fits well in terms of providing some specific industry expertise in the oil & gas refining arena that will be very helpful to us as we go forward. There are other acquisition opportunities that we continue to review and that will remain a solid part of our strategy on a go forward basis.
WSR: What is the profile of the acquisition usually?
TAVA: Our target right now would be roughly a minimum of $10 million in revenue. We're trying to work up from there if you will. The unfortunate thing is in the core business arena, because the market is in fact highly fragmented, there aren't a lot of companies that are necessarily that much larger. Now, as we are moving into other areas such as supply chain applications and even ERP, that profile can change. In those areas we'd probably look for something probably twice that size.
WSR: Do you have any competitors?
TAVA: Our competition is generally a smaller regional system integrator, who may be servicing a specific geographic area. Vis-a-vis that competitive position, we have the national presence that we can draw upon to support larger projects that translates to all of their geographically diverse manufacturing sites.
WSR: With rapid technological changes and then your own rapid growth, what do you see as the main challenges to keep your ship sailing smoothly?
TAVA: Well, the challenge we have right now is this very strong wind at our back in terms of tremendous demand for our products and services, and a tremendous name recognition as a new player in this market. So the challenge is to continue to provide client satisfaction in the face of growth, and recruiting people. The advantage that we enjoy in that arena is that even though I say we've doubled our staff in the last nine months with 14 locations across the U.S., we're not drawing all of those from one pool. As the only public company that is focused in this arena, we have some recruiting advantages that private companies do not, given our size, scope and the opportunity that we offer potential recruits. We've doubled once, and doubling the second time from a larger base should actually be easier.
WSR: If one of our audience were to consider buying stock in your company, what are the key items that you would tell them to look at this point before they moved ahead?
TAVA: Well, I think the important understanding of our organization is that we're an IT service company but we operate in a different niche than the sort of classical names that people would ordinarily think of. Now that said, for somebody to be comfortable they need to understand a little bit more about what our organization is and be comfortable with the inherent growth in that arena.
The one place to go certainly to understand that is an organization like AMR Research (formerly Advanced Manufacturing Research), who is very well regarded and publishes frequently on the growth in manufacturing IT. That's step number one. Second, of course to understand our strategy in providing the national presence so we can deal with Fortune 1000 accounts on a consolidated account basis. Finally, there's a piece in this that there truly is from our perspective. We expect a next wave of IT spending coming. That spending will be really focused on this integration of information, real-time information from the process layer up into the ERP systems. There's been a lot of money spent over the last 10 years installing ERP backbones in organizations. Those ERP systems operate that much better if they're fed with real-time information. The focus of that real-time information is on the factory floor. We know where that information is.
We know how to get it to them. We know how to supply it up to the ERP system. So we're on the front end of a large wave phenomenon that we believe is going to sweep through industry here as well.
Copyright © 1998 Starwood Media Group, Inc. ALL RIGHTS RESERVED
Important Terms Of Use & Conditions
|
