Catalyst International, Inc. (CLYS.OB)
Interview with:
James B. Treleaven, President and CEO
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
software that helps companies integrate their supply chains to optimize their business performance.

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Catalyst International delivers software and solutions that enable companies to optimize the performance of their enterprise supply chains. Its supply chain execution software can be found in many of the world’s largest, most complex warehouse operations

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Technology
Software & Programming
(OTC: CLYS.OB)

Catalyst International, Inc.

8989 North Deerwood Drive
Milwaukee, WI 53223
Phone: 414-362-6800


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James B. Treleaven
President and
Chief Executive Officer

Interview conducted by:
Lynn Fosse
Senior Editor

CEOCFOinterviews.com
August 2003

BIO:

James B. Treleaven
CEO and President
Catalyst International

            James B. Treleaven is CEO and President at Catalyst International, Inc. and a director of the firm’s wholly owned subsidiary, Catalyst WMS International Ltd.  He has more than 30 years of senior management, sales, marketing and engineering experience in the applications software industry.

            Prior to joining Catalyst, Mr. Treleaven was President and CEO of a successful Internet start-up company that provides technology infrastructure and services to facilitate international e-commerce.  Before that, he was President of the SmartEnterprise Solutions Division (formerly Dun & Bradstreet Software) at Geac Computer Corporation.

            He has also held a number of senior management positions at a variety of high tech companies including CEO of Visual Intelligence Corporation, Senior Vice President and General Manager of Pansophic Systems, Inc. and Vice President of Marketing at Moore Corporation.  In addition, Mr. Treleaven has held an array of engineering and sales management positions at IBM, Unisys and the Chase Manhattan Bank.

            He holds a B.S. in computer engineering and a Ph.D. in information systems and operations research from Case Western Reserve University.  He also earned an MBA from the University of Minnesota.

Company Profile:
 
Catalyst International, Inc. (OTC: CLYS.OB) helps companies integrate their supply chains to optimize their business performance. For more than 20 years, the company has enabled global Fortune 500 customers to greatly minimize the risks of installing, integrating, and operating WMS software in complex, high-volume warehouse facilities. Catalyst software offers the broadest functionality in the industry and is easy to install, modify, upgrade, and maintain. Its broad array of services includes distribution strategy consulting, pre- and post-implementation audits, a 24/7 customer services center and facilities management. The company offers the industry’s most robust service offerings, from pre-install WMS optimization audits to on-site consulting and management for the entire supply chain IT infrastructure. All Catalyst solutions leverage our consultants’ deep understanding of the strategies, processes and technology that underpin the most successful distribution centers.

Their flagship product, CatalystCommand 9.0, is designed for fast, simple interfaces with customers’ legacy systems, ERP applications, text-based RFID devices, material handling equipment and other applications. It manages inventory, space, people, and equipment by controlling all aspects of distribution center operations, from receiving and putaway to order selection, picking, loading and shipping.

The CatalystConnect™ service practice works hard to understand the goals of customers’ supply chain projects, whether a hardware upgrade, or a total system redesign. It provides comprehensive integration services designed to meet a project’s unique needs. The CatalystConsult services practice is designed to deliver fast, measurable results. Catalyst knows how to upgrade operations to meet changing corporate or customer demands while still hitting current shipping targets. Catalyst analyzes practices, develops master plans and delivers on-target strategic advice and tactical answers. The Company’s deep team of experts can provide counsel throughout the entire lifecycle of the supply chain.

 The CatalystCare Support Plans put customers in charge by enabling them to customize a level of support that's right for their distribution center. No matter how customers design their plan, they can count on Catalyst to resolve their problems and keep their mission-critical WMS applications operating at peak efficiency. Catalyst’s experienced consultants and service representatives also will help customers maximize system ROI, improve customer satisfaction, increase the effectiveness of their workforce, lower total cost of ownership and protect technology investments.

CatalystCare™ custom support services can be tailored to customers’ unique requirements and are backed by Catalyst’s 100% commitment to customer satisfaction. CatalystCare Complete outsourcing services include full-time, on-site support, temporary help with system upgrades or bringing new facilities online, or remote IT management and maintenance. They also provide dedicated experts available "on-call" to provide strategic counsel, resolve operational issues and help plan and design multi-site supply chain IT projects. With CatalystCare Complete, customers are in complete control, using only the resources they need, when and where they need them.

CEOCFOinterviews: Mr. Treleaven, please give us a brief history of Catalyst International and explain the changes you have gone through recently.

Mr. Treleaven: “The last two years have been interesting for Catalyst. We set out a strategy in the summer of 2001 that really had two components. The first was a turn-around phase that was focused on stabilizing the business financially, improving our relationship with our customers and re-orchestrating our products so that we could go forward using the newest technology. We figured that phase would take until about now, and it has been largely successful, improving our earnings from 2001 by almost fifteen million dollars. We kept our revenue stable in a declining market. We completed a new application last year and completed the second one this year during the current quarter. We are now embarking on Phase 2, a growth phase comprised of both organic growth and acquisitions. There are two major pieces to our strategy going forward. One is the consolidation strategy, which is growing the company through acquisitions, adding to our customer base, and getting the scale we need to be one of the two or three leading independent suppliers in the supply chain execution market. The second component has to do with our unique position of supplying the needs of users of ERP-based supply chain execution products, especially SAP. We have a three-and-a-half year, very strong relationship with SAP. With the acquisition of Catalyst Consulting Services this quarter, we have a significant capability to deliver all of the services that we currently deliver to our pre-existing Catalyst customers, to users of SAP products. That is a significant growth market for us and has been throughout the beginning of this year. We are in the beginning of Phase-2, the growth is going very well and we will continue to look for further acquisitions that make sense.”

CEOCFOinterviews: You mentioned changes in the technology; how do you keep up with the changes on an on-going basis?

Mr. Treleaven: “Technology changes very rapidly and most companies spend a lot of time and resources chasing those changes. For us, the good news is, even though our technology is, from a feature perspective, the strongest and most scaleable in the industry, it is largely based on technology that was available in the early- to mid-nineties. Since then, with the advent of component-based architecture and a huge array of development tools, it really makes development of new products and new features of our existing products substantially easier than they were a number of years ago. Because of that, it also makes it easier for us to adapt a new technology when it comes along. Rather than having to change significant pieces of the product, we can actually change smaller pieces of the product to take advantage of the newer technologies as they come along.”

CEOCFOinterviews: What is it that you actually do for your customers?

Mr. Treleaven: “The easiest way to describe our service is, if you went out and looked for the largest, most highly automated warehouses and distribution facilities in the world, the odds are good that Catalyst software is running these facilities. Our customers range from General Motors, Chrysler, Boeing and Honda, to retail companies like Home Depot and Dollar General, to process manufacturers and pharmaceutical companies such as Eli Lilly, to chemical companies such as Aldrich Chemical, plus other significant companies like Reebok and Sony Music.”

CEOCFOinterviews: What sets you apart, and why are they choosing you?

Mr. Treleaven: “There are two major areas that set us apart from the competition. One is our unique relationship with and our understanding of ERP environments. Most of our customers today are looking to find ways to better use the large investment they have made in IT infrastructures over the last five years. Because we can completely integrate rather than just simply interface our products into those environments, and because we understand those environments better than anyone else, we can help our customers grow into these smaller capital investments and significantly improve the ROI (Return On Investment) of larger investments they have made in the recent past. The second thing is we have unique expertise and execution capabilities that cut across multiple products in  heterogeneous environments. This allows us to work with our customers to get the best possible performance from their supply chain and thereby better serve their customers  through improved delivery, performance and accuracy. We are always out there scanning the environment, looking for what new techniques are available. We are very focused on the success of our customers as our primary objective.”

CEOCFOinterviews: Will you please tell us about the “First Ever American Business Awards” and how that helps you?

Mr. Treleaven: “Our strategy is to improve our relationships with our customers. We have a strict definition of customer satisfaction. Our levels were low; less than 25% of our customers were happy with our performance as a supplier. We did a number of things from an execution standpoint to perform better on projects, and that meant changing the culture of the company to be very focused on our customers as our most important stakeholders. As I mentioned earlier, we are really measuring our performance based on the ethics and goals that our customers have set. Rather than saying that the software has a certain level of performance, we would rather make sure that if our customers have a goal with a particular distribution facility, a certain level of inventory accuracy, a reduction in capital utilized, and labor savings, we would measure our results based on that. Over an eighteen-month period, our customers’ satisfaction level increased and is now consistently very close to 100%. Because of that stunning turn-around, we were a finalist for a First Ever American Business Award in the area of customer service and satisfaction.”

CEOCFOinterviews: Is this concept becoming recognized in the industry or are you ahead of the game in realizing how important customer focus is?

Mr. Treleaven: “Most customers and spenders realize that customer focus is important. These projects are inherently complex, and I believe our industry in general has not performed as well as it should have in terms of focusing on helping customers succeed. I believe that in our segment, we are significantly ahead of our competitors in terms of delivering high levels of customer satisfaction.”

CEOCFOinterviews: How long does it take to implement your system and will you tell us about the revenue model?

Mr. Treleaven: “The revenue model is essentially to provide complete solutions to our customers. Those complete solutions generally comprise three pieces. The first is the software and intellectual property that we have developed internally, which is the key to the whole process. The second piece requires hardware from an IT perspective, which consists of network devices and frequency devices that run on the wireless network. We supply all of those as well. The last piece, which is probably the most important, is all the services necessary to sell, maintain and operate the solutions. About 20% of our revenue comes from license fees, a comparable amount from hardware and the remainder from services. The bulk of our revenue is and will remain services, which is necessary in our space. This is profitable revenue for us and is growing. As far as implementation goes, these are complex projects, partly because of what our customers have done and the customized solutions they require.. Nevertheless, we have reduced the implementation phase for even the most complex projects from the range of twelve to eighteen months, to between four and nine months. These projects are lengthy still, but we can turn around a complete facility relatively quickly.”

CEOCFOinterviews: How have you lowered costs?

Mr. Treleaven: “Initially we lowered costs to stabilize the company financially. The majority of our costs are people-related. Catalyst has reduced headcount from 300 to the current 185. The things we have done in terms of service delivery and what we have done to make our product easier to use has allowed us to continue to take costs out of our operation and at the same time increase the level and value of services to our customers.  By focusing on doing things more efficiently, we’ll be able to take on additional revenue with the same number of people that we have today.”

CEOCFOinterviews: Are there other geographic areas or industries where you would like to be involved?

Mr. Treleaven: “Catalyst is a 24 year-old company, and we have focused largely on applications for warehouse or distribution facilities . Recently, we have expanded our product offering to cover the entire supply chain execution footprint.  By targeting areas such as transportation solutions and inventory optimization across the entire network of demand planning, we will broaden our product offering considerably. The other one you mentioned, which is very important to us, is geographic reach. Though we currently derive over 80% of our revenue from the U.S., our target over the next three years is to derive over a third of our revenue from outside the U.S. We have a significant presence in Europe with an office in London. We also have a number of customers in Latin America and recently launched Catalyst Latin America, which is a distribution relationship with a firm based in Guatemala. The area where we have the biggest opportunity for expansion is the Asia Pacific region, where we do not have any presence. We are not going to do anything there right away but will continue to focus on building our presence in Europe and Latin America. Once we have that under control, which will be about another year, then we will look carefully at entering Asia.”

CEOCFOinterviews: What are the main challenges going forward?

Mr. Treleaven: “The challenge for us is always growth; we need to grow to stay competitive in our niche, to remain one of the major players and to sustain profitability. Increasingly our customers are looking for larger vendors because of their concern over the financial stability of smaller companies. We do have significant growth opportunities in our current business, particularly as it relates to the ERP space. Executing the rest of our strategy—growth through acquisitions—will be a challenge. We will be very busy for the next few years.”

CEOCFOinterviews: Why should potential shareholders be interested and what should they know that they may not see when they look at the surface?

Mr. Treleaven: “Right now, Catalyst is a relatively undervalued company, which is perhaps understandable, based on our recent history. However, we believe we are positioned to achieve significant growth by executing the strategy that I outlined. Successful companies in our space have to attract evaluation, and we intend to be one of these companies. The success we have had so far over the last two years suggests that Catalyst does have what it takes. Success will not come easily; it is a very competitive market and the economy is making it difficult. But, I believe we are well-positioned for success.”

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