Corporate Strategies with Tim Connoly on 2/13/05
(Thanks to Mobile205az, of RB)
This is for people who have not been able to hear the talk show. I have put together the interview transcription also for people who want to read and review what was said on the show. I only transposed the first 20 minutes as it takes a very long time to do.. If anyone wants to complete it that would be great…. and may we have a great 2005…..
Tim: “Our guest tonight is a gentleman that I met; I would think it was about 6 months ago now, Jay Wright. Jay Wright is the CEO of Mobile Pro and Jay and I have become much better friends then of course we were in the beginning, and what I am really impressed with Jay and his company is the ability to execute on a plan. Jay had a plan based on mergers and acquisitions, that we are going to let him talk about, but I think that this company is so impressive Mike, and if you’ll take a look at the chart. Look up Mobile Pro, MOBL, and take a look at that chart; for the last year and the last 30 days Mike. This is a company that since Jay has come on and brought in a new plan and arranged new financing and has gone out there and has made some great acquisitions. This company is going places.”
Mike: “Yeah it looks pretty good!”
Tim: “Yeah, yeah it is just not only technically, but it really has a good plan. And I think without any further delay I would like to welcome Jay Wright to the show. I understand Jay you are there on hold? Welcome to the show.”
Jay: “Tim it’s good to be back.”
Tim:” I guess last time we actually had the interview there, in your near home town anyway, Washington, D.C.”
Jay: “We did. That was a lot of fun to get together and be on live radio together. This time we are doing it over the phone, so it is a little bit different; I feel lonely here Tim, wish you were here.”
Tim: It was always more fun right there in the studio wasn’t it? There is more energy in the studio, but speaking of energy, I have in front of me a chart of your stock for the last 30 days. Jay, this is really wonderful. I mean first of all, I guess before we get into the near-term stuff. I would like you to review for our listeners cause there maybe quite a few people that don’t know the Mobile Pro story. And start back from when you joined the company. Why you did, and what your plans were and what happened since then.
Jay: “Sure, Tim thanks. Umm, this is actually quite an exciting story. I became CEO of Mobile Pro fourteen months ago in December 2003 and Mobile Pro was really in tough shape. It was a stock that was below 2 cents a share, the company was in tough shape financially and it didn’t have a plan and it was sort of going nowhere fast. And I came in with a business plan to aggressively grow the company through acquisitions in the telecommunication space. And we’ve done that. We’ve acquired 14 companies over the last 14 months and built a company from no revenue and a pretty weak balance sheet to where we are today, which is a company that is right around a 100 million run rate, a balance sheet that which we will come out with tomorrow of over 22 million dollars of book equity and a company that has been cash flow positive in terms of EBITA from recurring operations for the last 5 months in a row. So it was a lot of hard work, but it has been a lot of fun so far. But we are just getting started. We have a very aggressive plan towards this next year and continue building the company through acquisition and also some interesting alliances and organic strategies that we’ve got. So we are pretty excited about the opportunity here. The market is still generally good for us. It is still a buyers market. We are able to buy revenue and cash flow fairly cheaply and that is a good thing for our share holders.”
Tim: “Well, I think part of what you did that was smart early on was to do essentially a shelf offering of your stock, so you could go out there into the market when the right opportunity comes and acquire quickly.”
Jay: “Absolutely Tim. I mean the hardest part of executing an aggressive acquisition program is having the money there when you need it. And we put in place 100 million dollar stand-by equity line which as you say it is a shelf registration, back in May of 2004 and we are able to utilize that plus some other financing we were able to put along the way to really execute on our strategy.“
Tim: “Now, 14 acquisitions in a year. Most people would say that, that is a lot to integrate. How are you doing that?”
Jay: Well, we are doing that because we have a top management team. On the voice side of our business we have Tom Mazerski. Tom is a 20 year teleco veteran that is now Verizon that was originally Bell Atlantic and he knows how to run a telecom company and he is doing a terrific job for us on the voice side. On the data side we have a guy by the name of Jack Beech, who runs that unit for us. He had been an ISP owner and operator for about a dozen years before we acquired him last March. He was actually our first acquisition; we did that intentionally cause I knew Jack was a guy who knows how to build a successful ISP. He survived during the meltdown that occurred during 2000-2001 and remained profitable throughout so he has done a terrific job. Out of the 14 acquisitions, 10 of them have been internet service providers and Jack has pieced them together and has really started to squeeze the profits out of them. He has a cost reduction plan that is being implemented both in terms of network and in terms of personnel that will significantly add to the profitability to the combined enterprise. So, the key as in any company, you know Tim, is people. And we have great people here at Mobile Pro.
Tim: “Well apparently the market is beginning to recognize it because when the stock was at 2 cents, we’ll call it 13 months ago because we are just into February and closed on Friday at 23.6 cents; there is nothing like an increase in 12 times to make your shareholders happy.”
Jay: “We have a lot of happy shareholders. We believe that there is still a lot of opportunity ahead of us though. We aren’t even at our 52-week high, which is 29.5 cents that we hit the first half of last year. So we still have room to get to that and we believe based in terms of revenues, profitability, and growth opportunities, that if we execute on our strategy that we should be able to have a very good year this year.”
Tim: “Well you had a very good week. You’ve had terrific volumes; we saw increases in the stock, a significant analyst recommended your stock this week, and you are starting to come out tomorrow with your quarterly results. And I am honored that you are willing to come on our show and talk about those results, which will be released before the opening in the morning and with accordance of Reg FD and all that other stuff. So Jay, tell us what the quarter looks like, what you are going to be reporting tomorrow?”
Jay: “Tim, it is always a pleasure to give your listeners sort of a sneak preview of what’s happening here and let me give you 2 or 3 high level bullet points about what we did this last quarter cause it is a lot of good news. As I already mentioned, we’ve built up our balance sheet to over 22 million dollars of book equity that works out to almost 6.5 cents per basic share outstanding. Remember, a year ago this was a company that negative equity, so we moved it up to where we have a very solid base from our balance sheet perspective. Secondly, we had in our fourth quarter record revenue of over 17 million dollars that we are trending up towards our 100 million dollar run rate. The two big acquisitions we did were during the quarter, so we didn’t get the full benefit.
Tim: What were the two acquisitions Jay?
Jay: Those were Close Call America, which we closed in October and DAVL Communications, which we closed in November. Close Call was a 25 million dollar business, developed 50 million dollar business. We got partial credit in the fourth quarter and we will get full credit on them in the first quarter which is terrific. So our revenue looks good, and probably the biggest news, is that the month of December, Mobile Pro, in the first time in its history showed a positive net income. That is true bottom line positive income for the month of December. After depreciation, amortization, interest, everything. A true bottom line net income which we are very proud of with only a year into this growth story to already be into that category. It puts us in a sort of a unique category for high-growth companies like ours.
Tim: Well in particularly since you intend on implementing this M&A plan, it makes you a much more attractive acquirer too.
Jay: Well, absolutely. It makes our currency more viable, and lowers our cost of capital, and that means a higher return for our shareholders. So we are pretty pleased with that.
Tim: You know, December is a profitable month, for the first time in its history. And you are coming into the first quarter where you will get the full benefit of all the acquisitions so you are talking about a 25 million gross revenue quarter?
Jay: Right around 24.5 to 25 million. There is some seasonality where our winters are lower than our summer rates. So definitely in the 24.5 to 25 million is what we are looking for.
Tim: Now explain that to me, why is your winter rate lower than your summer rate?
Jay: Well, the pricing rates aren’t the same, Tim. The usage on telephones in January both regular phones and payphone division are less than it is in the summer months especially in the north, where you can imagine people don’t typically want to stand outside using a payphone in January.
Tim: That makes sense. Tell us a little bit about, by the way we have a phone call and I might as well ask you this. One of your shareholders called and asked us to ask you what is the disposition of the minority shares of DAVL
Jay: It is a great question. DAVL is part of our acquisition that is 100% senior secured debt in November. We were also assigned about 95% of the common equity under the deal we struck with the lender of the time. We agreed to buy out the remaining 5% within 180 days. That’s underway. We will likely be filing with the SEC in the next couple of weeks to get that cashed out so that will happen on schedule and we will then have 100% of the senior debt as well as 100% of the common of DAVL once that gets cleaned up.
Tim: That caller will be very happy to hear that answer. Now Close Call America, how is that unit doing since you acquired it?
Jay: Tom Mazerski is running that unit for us and is doing a tremendous job. Top line is growing at our 20% compounded on an annualized basis. It is just incredible organic growth. Tom has really cracked the code on how to build a phone business. Great, great job, great growth and also I will tell you about our celluar division after our break.
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