AirIQ Inc. (IQ)
Interview with:
Donald E. Simmonds, President and CEO
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
wireless Internet applications and services that include: vehicle locating, boundary notification, automated inventory, maintenance reminders, security alerts, vehicle disabling, unauthorized movement alerts and many more features.

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In order to maximize impact, AirIQ has built a versatile service and product model that can cross markets, wireless technology and devices

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AirIQ Inc.

1099 Kingston Road-Ste.233
Pickering, ON Canada L1V 1B5
Phone: 905-831-6444

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Donald E. Simmonds
President and CEO

Interview conducted by:
Lynn Fosse
Senior Editor
June 2004

Donald Simmonds - President & CEO, AirIQ Inc.

Donald Simmonds founded AirIQ in 1997 and has been instrumental in developing the AirIQ concept, as well as identifying and attracting strategic shareholders such as, Bell Mobility, Veridian, GrowthWorks and VenGrowth. Donald was appointed President of AirIQ in 1997 and elected as a director in March 2000. Donald was one of the founders of The Lenbrook Group of companies in 1978. He developed the initial operations, human resource and financial structures, and later became the Vice-President, Corporate Development. Donald was responsible for the strategic development of many of Lenbrook’s enterprises, including Brooktel Inc., Clearnet Inc., Moco Canada Inc. (a distributor of mobile communications equipment and services) and PSB International (a division of Lenbrook Industries Limited that designs, manufactures and distributes home theatre loudspeakers). 

Company Profile:
AirIQ Inc. (Toronto: IQ), headquartered in Pickering, near Toronto, Canada, is a leader in the Telematics marketplace. The Company operates as a wireless Internet applications service provider specializing in Telematics. Telematics is the name given to information and control messages sent wirelessly to and from vehicles and other mobile assets. AirIQ's services are offered to three large commercial markets (rental vehicle, commercial transport and heavy equipment fleets) and the Consumer market. AirIQ gives vehicle owners the abilities to manage and protect their mobiles assets. AirIQ's services include: vehicle locating, boundary notification, automated inventory, maintenance reminders, security alerts, vehicle disabling, unauthorized movement alerts and many more features.

AirIQ combines five advanced technologies: mobile computing intelligence; wireless communications; location-based technologies or Global Positioning System (GPS); the Internet; and, digitized mapping. Vital information about a vehicle's location, heading and speed are accessible once AirIQ OnBoard™ (AirIQ's intelligent vehicle device) is installed into vehicle fleets.  Information from AirIQ OnBoard™ is forwarded to AirIQ OnLine™  (AirIQ's Internet-enabled messaging switch) where managers can view and access fleet information on digital maps via the Internet. In addition, the fleet manager can utilize AirIQ OnLine™ to carry out control functions. For example, a vehicle can be remotely disabled or enabled and the doors can be unlocked with the point and click of a mouse. AirIQ operates a network grade 24/7 service; the up-time objectives of such services are known as "5 nines" or 99.999%.

Fleet owners can leverage the power of their back office software system by integrating it with AirIQ OnLine™.  Using AirIQ's operator initiated actions, automated alerts and fleet management reports in combination with back office software, fleet managers can keep track of vehicle productivity, efficiency and performance. AirIQ's universal data exchange (based on web services architecture) enables simple linkages of AirIQ's services to third-party applications. AirIQ has built an intelligent messaging switch that is capable of communicating with multiple types of wireless networks and devices.  As more wireless network options and device manufacturers emerge within the Telematics industry, AirIQ's clients will benefit from the greater selection.  Much like using a brand of PC to plug into different types of network protocols, customers will benefit from multiple wireless networks and devices to wirelessly plug into AirIQ.

CEOCFOinterviews: Mr. Simmonds, what was your vision when you started AirIQ and where are you today?

Mr. Simmonds: “We actually formed AirIQ out of interest from some of Canada’s top wireless networks. We recognized, at the time, that we had built in-the-ground infrastructure for wireless communications and there was a lot of capacity coming from the digital aspects of those networks. What really was needed for the next phase of wireless service development, were more perfected applications of the use of wireless. When one used voice applications or something like e-mail or text messaging applications, they were very straightforward and could be delivered easily by the networks. When it came to more complex applications, one had to specialize within the application and then market it properly to make it work on each end of the wireless path. That is the vision behind AirIQ - the ability to make vehicles intelligent and communicate to and from a more intelligent vehicle remotely.”

CEOCFOinterviews: How and where are you doing that today?

Mr. Simmonds: “We determined originally that we would start in the commercial fleet business. We launched with rental vehicle fleets, which are very homogenous, that is, rental operations are very much the same throughout the country. We then moved to the commercial transport industry where we service both the power unit and the trailer of trucking operations. And more recently, we entered the heavy equipment industry, through the acquisition of John Deere’s client base. Recently we have announced our move into the consumer Telematics domain where we will now give consumers the ability to access their vehicle’s location on the Internet, or have their vehicle report to their own cell phone if it is speeding or stolen.”

CEOCFOinterviews: What will the cost be?

Mr. Simmonds: “It will have a hardware device and servicing cost and that will be roughly five to six hundred dollars to buy the device and roughly eight to ten dollars a month for the service.”

CEOCFOinterviews: That sounds relatively inexpensive for being able to know where your vehicle is!

Mr. Simmonds: “There is often an insurance discount, which reduces the net cost as well.”

CEOCFOinterviews: I can envision being able to keep track of one’s teenagers or perhaps even a wayward spouse with this system!

Mr. Simmonds: “That is going to be an interesting and relatively substantive part of the security aspects. Our service, unlike services that have historically served these needs, is capable of all of these aspects and much more, therefore we believe it will be the service of choice.”

CEOCFOinterviews: Are you manufacturing the hardware and will you give us an idea of how you do what you do?

Mr. Simmonds: “We are the application service provider. We are wireless agnostic, which means we can run the business over any number of different wireless technologies. We are device independent, which means we can use different manufacturer’s devices on our system. We built it to be as versatile as possible, so that it crosses markets, wireless technology and devices. Therefore we can maximize the impact we have on the markets going forward.”

CEOCFOinterviews: Tell us about a typical customer and why they need your services.

Mr. Simmonds: “A typical customer would be a company whose business relies on the effective and efficient operation of vehicles. In a trucking business for example, the idea is to utilize their moving capital assets in the most ethical manner. This could involve maximizing fleet utilization and making sure that trailers are full the majority of the time rather than sitting empty. Knowing vehicle whereabouts to report a delay or an arrival time to one of their customers, improves service levels. Other examples are, the enforcement of a speed policy to minimize fuel cost, and reporting the whereabouts of trailers every day so that one could see if a trailer has been moved and if it is in the right location. These are all aspects of the service we provide. Our customers use AirIQ’s various services to enhance the efficiency and effectiveness of their own operation.”

CEOCFOinterviews: Is what you provide tamper-resistant?

Mr. Simmonds: “All installation of devices in vehicles are stealth.  There are many locations in a vehicle where the device can be installed, making it difficult for a thief to find it.   We have fail safes built in if the vehicle is tampered with.  One example is, if a vehicle battery is cut, our system will report that to the customer.”

CEOCFOinterviews: It appears that AirIQ is helpful to companies in many ways and very easy for them to understand the value.

Mr. Simmonds: “That is correct, and typically, we try to identify the value of AirIQ to the customer in the beginning of the sales process. One of the things that is interesting, and since we have been at this long enough to know, is that most customers receive more value over time as they utilize the service, than they had predicted at the time they purchased the service. We are quite thrilled with that because not all products live up to the expectations that are provided at the time of purchase. In our case, we tend to find that the customers get more value than they had predicted because they simply find other ways to use it.   This is characteristic of many new technologies. If you think of personal computer technology, which may have been developed for word processing or spreadsheets, is now used for databases, television and all sorts of different things. Effectively, we are seeing the same thing.  There is an expectation that has exceeded over time as the technology is more fully utilized within the business.”

CEOCFOinterviews: Do you typically have long-term contracts?

Mr. Simmonds: “Yes, our contracts tend to be between three and five years.”

CEOCFOinterviews: Are there other types of services similar to yours, and what might you be competing with that is not the same as what AirIQ does?

Mr. Simmonds: “There are other service providers that I would categorize into three areas; first is the area of small companies that try Telematics but can’t really muscle the strength to become the supplier or service provider of choice. It takes a bit of financial capacity and confidence for customers to make a three to five year decision to go with a service provider. Secondly, there are some very mature service providers, but they utilize technologies that are ten to fifteen years old, so their costs may be high or their abilities are somewhat limited. AirIQ entered this market at a time when we could utilize the very latest technologies. To make our services accessible over the internet, so that all customers can utilize the service without communications costs, enabled us to enter markets that will put these devices on every vehicle within their business. I think we are at that point.  There are a few companies that are attempting to do this, but it takes a lot of capital investment to make it run well and at a very high reliability so that customers can depend on the service. That is why our roots become such a strong attribute in-terms of running our business like one would run a phone company.”

CEOCFOinterviews: What is the financial condition of the company?

Mr. Simmonds: “When we started the company we had to build the technology, so we virtually had no revenue during that building process. There was a point where the infrastructure was ready to accept customers and we turned the switch on. It then became a process of adding subscribers because we acquire our revenue one month at a time. The business model is a continuing addition of new subscribers, retaining the old subscribers, and then advancing the services we provide so that we stay competitive and effective for our customers, but not necessarily rebuilding the underlying infrastructure. Our expenses run very level as we acquire customers and support our existing customers while advancing our business. Our revenues continue to increase as we add subscribers and build up our recurring revenue base.”

CEOCFOinterviews: Why is this the right time for the consumer market?

Mr. Simmonds: “There are several factors that make this the right time to go after the consumer Telematics market. First, there is a growing recognition, which I will call, security in all forms, whether that is driven by 9/11 or otherwise, there is an increased consciousness for security. Secondly, the underlying technology components of our systems are now at a point where the consumer economics work. Several years ago a trucking company might have been able to afford a device that cost twelve hundred dollars, but a consumer wouldn’t. Thirdly, I think there is a general appreciation for this type of technology. There is a consumer awareness of the Global Positioning System (GPS), which is our location technology, and what it can do. There is a confidence, trust and awareness that this type of technology can now be applied to consumer vehicles.”

CEOCFOinterviews: What are your rollout plans, and how do you get the consumer on-board?

Mr. Simmonds: “We have a two-pronged approach for release; we have announced our own brand of consumer services, which we will sell through consumer distribution channels. We are also working in what we call a White Label strategy with existing brands and channels that would like to take a solution like ours to their own markets under their own label.”

CEOCFOinterviews: Are you active only in Canada?

Mr. Simmonds: “No, 90% of our current revenues come from the U.S., so we will obviously continue to grow in both markets.”

CEOCFOinterviews: How do you reach the consumer?

Mr. Simmonds: “We reach the consumer through a very traditional distribution, via sellers of automobiles and automobile accessories. In the commercial markets, we sell directly to businesses, so each will have a slightly different marketplace.”

CEOCFOinterviews: Will you tell us about some of your newer services?

Mr. Simmonds: “We keep advancing our services and some of the most exciting services we are adding now is what we call, Vehicle Information. Our menu of services until now is referred to as location-based information, which covers the location of the vehicle, the speed, whether it crosses boundaries at pre-set, etc. This new set of information actually uses the information that is resident in the vehicle that we can access and transmit back to the customer. For example, if the ABS break light is on, the vehicle will be able to report this information to the owner’s phone or computer. That is an example of a broader service set, as we will be able to arm over 2000 diagnostic codes of the vehicle.”

CEOCFOinterviews: I can envision a time when this will become standard in vehicles everywhere. Do you see manufacturers installing it rather than being offered in its current aftermarket format?

Mr. Simmonds: “That is something that our industry and other industries have debated over the years. I remember when the same question was asked of cell phones, which was a business that we were very interested in. The reality is, the engineering life cycles of the automotive manufacturers are three to five years, whereas the life cycle of cell phones were eight months. It was hard to predict exactly what to engineer into the vehicle. There is a natural tendency for this type of product and service that is fairly new and advancing rapidly to be dealt with for a number of years as an after-market product. There is certainly high interest from the automotive OEMs (Original Equipment Manufacturer). However, it is not something that comes quickly.”

CEOCFOinterviews: In closing, why should potential investors be interested and what should they know that perhaps doesn’t jump out at them when they look at AirIQ?

Mr. Simmonds: “Perhaps the most important thing is that our revenues, under GAAP (Generally Accepted Accounting Principles) Accounting Treatment, are amortized revenues. In fact, we only report a month’s worth of revenue at a time even though we have contracted for large revenues in the future. Secondly, if we sell a hardware device, the GAAP Accounting rules cause us to amortize the sale of that device over the length of that contract. Because we account so faithfully in this way, we seem to be a small-scale business when in fact we have acquired tremendous future revenues. Perhaps, that is the one item that isn’t seen when people compare our size and scale as a company in a first blush. We are a recurring revenue business, so typically as our revenues grow, it is a high value revenue type because it comes in monthly and continues.  The business takes investment, so that has to be understood, but we are well on our way in terms of proving out the market and the fact that we can successfully provide such services.”


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