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CEOCFO CEOCFO Monthly Analyst |
Focused
on Connecting the World! Software Technology T/R Systems 1300 Oakbrook Drive Lyle W. Newkirk Interview conducted by: CEOCFOinterviews.com Brief History of T/R Systems We
have a software company and the software enhances the process of printing to digital
devices. We manage digital files and
route them to production type output devices in a much more orderly and cost effective
manner than the more traditional methods. At T/R Systems, Connecting the
World of Digital Documents is not a new concept; its our way of doing
business. Since 1991, T/R Systems has achieved success through a focus on excellence,
creating and delivering new ways for digital document communications to occur. Like many of the successful
technology companies of our time, T/R Systems grew out of the basement of one of its
founders into a publicly held, industry leader. Achieving business success after business
success. T/R Systems is considered one of the true innovators in the digital document
technologies and products market. CEOCFOinterviews
- Does this eliminate all the paperwork? Mr. Newkirk
Paper is being used now more than ever. We dont embrace the concept of doing away
with paper, as much as coming up with a more efficient way of routing the information to
the printed document. We do however, consider
as an output, digital files, just as one would consider paper. CEOCFOinterviews
Who are your primary customers? Are
there any particular groups? Mr. Newkirk
It s a real wide group.
Our customers would include any corporation that has in-plant print
needs, commercial printers, and quick printers such as Sir Speedy or Kwik Kopy, colleges
and universities and facilities management groups. CEOCFOinterviews
What products do you have now? Mr. Newkirk
We have 4 products right now. The
traditional product is MicroPress. That has
been our bread and butter up to this point. About
a year ago we released e-Ticket that allows the use of the Internet in terms of managing
and controlling print jobs. About a year ago
we released Microimager that is a scanning software that enhances scanning as part of the
overall print process. Our new product is
called M@estro which is a software only product that basically handles the distribution of
documents opposed to the others that handle production of documents. CEOCFOinterviews
Do all your products work together with other products? Mr. Newkirk
Yes. Weve
embraced from day one an open architecture so we can work with all the industry standard
software and that, of course, allows our 4 products to work together harmoniously. CEOCFOinterviews
Does Microimager recognize the different brands of scanners? Mr. Newkirk
Its built for one specific scanner and we sell that scanner as
well. In order to be effective you need a
scanner that is able to handle a lot of documents very quickly with a very high
resolution. Therefore, we are standardized on
one scanner. CEOCFOinterviews Do you sell any hardware products? Mr. Newkirk
We do sell some print output devices mainly through our independent
channel. Weve been selling those since
day one. Additionally, well sell
servers that our software is loaded on. CEOCFOinterviews
How easy to use is the software? Mr. Newkirk
If you are used to using standard Microsoft office products like
Word, Excel, Power Point, etc. our screens look just like those screens do. Weve built the product around that type of
look and feel. So persons who are accustomed
to using that can pick up our product pretty quickly. CEOCFOinterviews
Going forward, are you going to stay with the 4 products you have now or do
you see yourself expanding on that or enhancing what you have? Mr. Newkirk
One of our intentions is to continue to enhance the products that we
have. We will and are looking at other
products and solutions. Two years ago we only
had MicroPress, 6 months ago we had MicroPress, Microimager and e-Ticket now we have
M@estro. So if you look at our pattern I
would say that it is likely that we will have other products in the future. CEOCFOinterviews
How long has this company been in existence? Mr. Newkirk
- The Company has been around for 10 years however; the MicroPress has
only been shipping since the very end of 1995. In
a way, I view our company as beginning the day the MicroPress began shipping. Prior to that we did a lot of engineering
services type work that we dont do any more. CEOCFOinterviews
What accounted for your first quarter results? Mr. Newkirk
There are a number of things that accounted for our first quarter
results being down from a year ago. One is
the overall state of the global economy. We
are a global company even though most of our revenue to date has been in North America; we
are expanding to Asia and Europe. The economy
has been down. Our product is a capital type
item and IT expenditures are down. Thats
part of whats going on. We also sell
into OEM distributors and weve got some of the best in the business. Weve got Ricoh, IKON, Kyocera, Minolta,
Hitachi, and Toshiba. One of the things
weve noticed is that those OEM partners have basically decreased significantly the
amount of inventory of our product theyre carrying so thats caused our sales
to go down. Additionally, our product line
has become rather complex and were working on some simplification of our overall
product line to get our sales back to where they should be.
The big reason I think is the reluctance by end users to make IT expenditures in
this uncertain economy. The good news is end
users still very well receive our products. Nobody
really does what we do, we are not a commodity, and nobody can match our features. Were not losing to a competitor; were
just down because the overall economy is down. CEOCFOinterviews
- As far as the growth of the company, do you see internally driven growth or do
you see acquisitions for the future? Mr. Newkirk
Were not anticipating an acquisition binge because Im not sure
that is really the best way to grow. We would
clearly consider acquisitions of certain technologies that we couldnt make ourselves
so its something weve considered and continue to consider going forward but I
would not expect a rash of acquisitions. CEOCFOinterviews
How much do you spend in R&D a year? Mr. Newkirk
What Im going to tell you is how much we spent last quarter
and the reason Im doing it that way is we built up our R&D infrastructure
significantly in the second half of last year in anticipation of a lot of new products
that will be coming on the market in the second half of this year. In the first quarter we spent $1.7 million on
R&D. That equates to almost $7 million a
year. CEOCFOinterviews
Does your company have the stamina and cash to move forward? Mr. Newkirk
Yes. We did an IPO in January of 2000. We actually were positive in terms of cash flow
from operations. Last year we generated $2
million in cash from operations. Our cash at
the end of April was $22 million and were very thankful that the cash is there and
we feel it is enough to get us through this tough time. CEOCFOinterviews
Is there anything you would do differently than what has been done with the
company? Mr. Newkirk
For several years now weve had multiple growth strategies and
those strategies are growth through additional distribution, growth through new products,
geographical expansion and expansion in terms of products sold to existing partners. The truth is, those are still our strategies and
to that extent I think we have done what we said we would do. I guess if I could go back in time 12 months, I
wish that we had been a little bit quicker to pick up on the down turn of the economy. CEOCFOinterviews
What can you tell us about the new distribution in Hong Kong and the new
partner you have? Mr. Newkirk
It is an existing partner. The
partner is Ricoh and theyve been a partner for about a year and a half. However, whats significant with Hong
Kong is we began with Ricoh in North America and now were moving to a more worldwide
distribution with Ricoh. Hong Kong has some
opportunities; if youve read the press release, you saw that were also
anticipating moving into mainland China at some point and I cant even begin to
fathom what that means in terms of numbers. It
is exciting and we will work together with Ricoh to get it done. CEOCFOinterviews
- Do you rely more heavily on one partner than another? Mr. Newkirk
Some partners are bigger than others.
We try to focus on all of them but also have aligned our sales force to
maximize our opportunities by partner. CEOCFOinterviews
How much time do you spend giving assistance once you have sold the products
and how much follow-up do you do? Mr. Newkirk
It depends on how digitally literate the end user is. We have end users that are very digitally
literate. Theyll purchase our product,
theyll install it themselves and have it up and running that same day and almost
nothing needs to be done. In other cases some
hand holding needs to occur. So it really
varies depending on installation and on the sophistication by the end user. CEOCFOinterviews
Do you have enough manpower to sustain the company? Mr. Newkirk
We have just over 150 people and because of the uncertainty in the
economic climate we said that we werent going to grow our staffing until we had
better visibility. The truth is I think we
are adequately staffed for our run rate today unless revenue picks up and then we will
need more people. That problem will solve
itself. We have always been able to attract
employees based on our company culture, our company story and the benefits package that we
put together. Furthermore, we dont lose
a lot of employees because we try to create a climate where people like to come to work
here. Attracting and retaining good employees
is critical and weve been able to do it up to this point. CEOCFOinterviews
- As far as revenue growth, where do you see the majority of growth coming from? Mr. Newkirk -
Up to this point the majority of our revenue has come from North America. We feel like there is tremendous opportunity in
Europe and in Asia. Weve been working
toward those opportunities. So far we only
distribute in Europe through Minolta and Hitachi. If
we were able to get the other guys distributing in Europe we would see some kind of pick
up. Its been a core part of our overall
growth strategy for a while and we continue to work on it.
We built up our European staff about a year ago to handle what we
expected the growth in Europe to be. CEOCFOinterviews
What would you say to a potential investor? Mr. Newkirk
We are a company that is an acknowledged market leader in our space
with great technology, a very sound and seasoned management team, a history of
profitability and cash flow generation and a company that has more new products in the
pipeline today than its ever had. We
have all the right ingredients. Also, we are working on more connections to more devices
than we ever had in our history by far and some of them are with partners that we have not
announced yet. CEOCFOinterviews
Is there anything else you would like to discuss? Mr. Newkirk Yes. I would like to tell you a little more about M@estro because it is so new. M@estro will probably get us into additional markets through system integrators and ERP type providers in addition to the partners weve worked with in the past.
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