Quintek Technologies Inc. (QTEK.OB)
Interview with:
Robert Steele, Chairman and CEO
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
Business Process Outsourcing (BPO) services and solutions that enable companies to secure and manage their key data processing demands with optimal efficiency and minimal costs..


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With new management in place and restructuring completed Quintek Technologies is positioned to build on their last six quarters of strong revenue results

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Business Services

Quintek Technologies Inc.

17951 Lyons Circle
Huntington Beach, CA 92647

Phone: 714-848-7741

Robert Steele
Chairman and CEO

Interview conducted by:
Walter Banks, Publisher
December 15, 2005

Robert Steele
Chairman and CEO

Mr. Steele assembled and led the team that created iBrite, Inc. a wireless / mobile software company, where they raised two rounds of financing and established contractual partnerships with AOL and Global Knowledge. Prior to that, Mr. Steele and two co-Founders, grew CADD Microsystems, Inc., (CMI) to be the number-one provider of Computer Aided Design (CAD) software, training and consulting services to the Federal Government. Mr. Steele has sold and managed systems integration and consulting projects for the design, engineering departments and information management departments of major clientele such as; ABB, Lucent Technologies, The Marmon Group, Federal Aviation Administration (FAA), General Services Administration (GSA), and the National Reconnaissance Office (NRO).

Company Profile:
Quintek Technologies, Inc. (OTC BB: QTEK), through its wholly owned subsidiaries Quintek Services, Inc. (QSI), and Sapphire Consulting Services, Inc., provide services to enable fortune 500 and Global 2000 corporations to reduce costs and maximize revenues.

QSI delivers Business Process Outsourcing (BPO) services and solutions that enable companies to secure and manage their key data processing demands with optimal efficiency and minimal costs. As a next-generation technology company, Quintek is unhindered by outdated information technology systems, and thus is able to deploy best-of-breed solutions in all aspects of BPO. The Aberdeen Group, a provider of IT market intelligence, forecasts 13% annual growth for the BPO industry through 2005, when the market is projected to reach $248 billion.

Sapphire Consulting Services, Inc. offers a broad range of supply chain management consulting services. Sapphire assists Organizations to create a higher level of customer satisfaction, enhance supply chain capability and achieve consistent competitive advantage through reduced product cost, reduced inventory investment and improved supply chain security. A study by IDC found the SCM services market will expand from $26.1 billion in 2002 to $40.5 billion in 2007, representing a five-year compound annual growth rate (CAGR) of 9.2%

CEOCFO: Mr. Steele, how long have you been with Quintek and what changes have taken place since you joined the company?
Mr. Steele: “Quintek, provides background services that reduce our customers’ cost and enable them to focus on their core competencies. We do this by converting their mission critical documents from hard copy into electronic formats. We make these documents readily available and organized and automate the routing and approval processes of these documents by the internet.  We strive to do this with the best customer service and the fastest turn-around and best price possible. I came to be involved with Quintek in 2003; the company was actually founded in 1991 and trades over-the-counter under the symbol QTEK. Prior to me joining the company, I already had more than ten years experience in the document imaging industry specifically with fortune 500 customers like TRW Inc. (NYSE: TRW), Whirlpool Corporation (NYSE: WHR), Verizon Communications (NYSE: VZ), and The Boeing Company (NYSE: BA). I was brought on by the board-of-directors and shareholders to refocus the company in a new direction.  The direction that the new management team and I have been focused on for about a year-and-a-half is primarily in services and we have had some big wins as a result. We are working with GMAC Mortgage (a wholly owned subsidiary of General Motors Acceptance Corporation), one of the top-ten mortgage originators in the United States. We are working with Nalco, a $3 billion NYSE company. We are also working with Amgen Inc. (NASDAQ: AMGN), one of the largest biotech companies. We have premiere partners such as FedEx Kinko’s (NYSE: FDX), so in my tenure, our team has been able to deliver the best revenue results to date and we feel we can continue to produce that growth going forward.”

CEOCFO: Many people do not understand the importance of document imaging; there are security issues within large companies. Will you explain a bit about the market to our readers and the importance of document imaging?
Mr. Steele: “The first concept is that paper is not going away. There was a book put out in 2001 called, The Myth of the Paperless Office, by Abigail J. Sellen and Richard H.R. Harper, put out by the MIT Press. It showed that during the rise of the internet technology, we produce on average 30 to 40% more paper in corporate America than we did before. These findings are backed by statistics from The American Forced Paper Association, which shows similar growth in paper usage over the same time-period. It is a fact that we use paper to process business transactions and we will continue to do that for the foreseeable future.
It is a human medium that people are comfortable with that is effective. What we specialize in is helping our customers accept the reality of the paper in their companies and move those processes forward as efficiently as possible. Specifically we do this in three sectors; the mortgage document processing sector, the healthcare claims processing sector and the accounts payable processing sector. The total addressable market that Quintek is calling on is a $4 billion market.

We arrive at that as follows: in mortgage processing in 2006, it is forecast that there will be $1.8 trillion worth of mortgage origination. Our addressable market is services for helping companies electronically convert mortgage documents from paper into electronic images such as PDF, and then upload them into their document management systems. With the average mortgage nationwide at $180,000, this results in approximately 10,000,000 transactions in 2006. At an average of 200 pages per transaction at an average of $0.13 per page, this translates into a $260 million addressable market. In the healthcare claims sector, there were fifteen billion healthcare claims filed in 2004. For just the services we offer, at the market rate of approximately $0.10, per claim, we size this market at approximately $1.5 billion. In accounts payable processing, the fortune 500 revenues last year were about $8.2 trillion; our research shows that companies using our service spend on average .025 percent of their revenue on AP outsourcing, so we sized the accounts payable document processing market at about $1.7 billion dollars for a total of a $4 billion addressable market growth.”

CEOCFO: So you provide the technology and the service.
Mr. Steele: “We are a service provider, so we use Best-of-Breed technology and our expertise is in delivering the people and the processes to be able to perform these functions for the least cost to us and the least cost to our customers.”

CEOCFO: They then literally send you the documentation and you would turn them into a PDF, is that correct?
Mr. Steele: “Exactly! With healthcare claims and with accounts payable, we provide a mailroom outsourcing service, for instance, with an accounts payable application, the purchase orders that our customers use actually have a mailing address that goes to a post office box that we are in control of and the customer never touches a paper invoice. The first time they see it is as an email in a PDF format asking whether or not it is approved for payment, sent directly to the person that ordered the purchase order.”

CEOCFO: What would you say are the drivers?
Mr. Steele: “The drivers here are that the technology has become mature and these are processes that when done internally by the customers represent significant costs. In our model, we charge a per-document rate, what that does for the customer is translates a fixed cost for them doing it themselves into a veritable cost, and that is very appealing. Therefore, the cyclical trends and volumes of invoices and volumes of mortgage documents at their cost, ebbs and flows and our business model is set-up to accommodate that. Not only can we do it cheaper than the customer can per document, but over six or twelve months the costs are considerably lower.”

CEOCFO: What allows you to do this at a reasonable rate for the customer and on your end to still make a profit?
Mr. Steele: “It is specialization. Because we specialize in these three verticals, and we have several decades worth of knowledge on our team as well as processes that are refined and efficient, it is sort of like the basic concept of an assembly line. Our costs are therefore lower yet profitable for us, and a value to the customer.”

CEOCFO: How do you reach your potential customers?
Mr. Steele: “We have a direct sales force and we have partnerships that are valuable to us in terms of growing our sales. FedEx Kinko’s is one of our sales partners; they have a dedicated sales force that sells print-room outsourcing services to their customers, so this is different than their retail storefront operation. Those sales people also sell our imaging services. We have been very successful with FedEx Kinko’s and Amgen. Additionally, we have a relationship with Single Source Partners, Inc., which is a provider of solutions to the mortgage industry; they represent Quintek imaging to their mortgage customers. We have an exclusive relationship with them. It was through that relationship that we came to do business with GMAC. We have just recently announced in the healthcare sector, our partnership with Manhattan Data, Inc., which is an offshore BPO (Business Process Outsourcing) company, they have 300 people in Karachi, Pakistan and 60 people in Karla, India. They specialize in the processing of healthcare claims. Anyone in the United States that wants to realize a cost savings by having their healthcare claims processed, I am sure the first step is to get the healthcare claims from paper into an additional format and that is the relationship between us and Manhattan Data. Choosing partners where there is a win-win situation has been key to driving our revenue rapidly.”

CEOCFO: What do you think you need to do over the next couple of years to see your business grow?
Mr. Steele: “The first part of our growth strategy is our value proposition, which is better, faster, cheaper, so we are competing with large, established multi-billion dollar companies. EDS (Electronic Data Systems – NYSE: EDS) and ACS (Affiliated Computer Services Inc.) are our primary competitors in outsourcing in the sectors we go after.”

CEOCFO: What sets you apart from your competitors?
Mr. Steele: “The fact that we can deliver service better, faster and cheaper. We have the most modern equipment and a level of customer focus that the larger multi-billion dollar companies cannot provide. We can deliver a faster turn-around and we can do it at less cost. We take that value proposition to the market and maintain that advantage by recruiting and retaining the best people as well as providing excellent customer service. Strategically, there is a need in the market for a mid-market company with a national presence. There is a threshold below which our larger competitors are not interested in the business. We find that that mid-market is very large and there is a lot of need out there. For instance, if a contract is less than a million dollars a year in revenue, then an EDS or an ACS is not necessarily interested in that business. More and more, even large multi-billion dollar customers want to do what we call surgical outsourcing where they want to outsource a smaller initiative. We are happy to do a contract of $500 thousand a year. There is a mid-market there. We are a national company; we have operations in Massachusetts and Philadelphia; because we are not just a regional company, we are able to win that business. To further grow, we will penetrate for new accounts, continue to add sales reps and service the partnerships that I mentioned.”

CEOCFO: What states are you in?
Mr. Steele: “Currently, we are in several different states across the U.S., such as Massachusetts, Pennsylvania, California and Washington.”

CEOCFO: Are you considering expansion?
Mr. Steele: “Yes, we plan to have representation in the top 20 markets in the United States within three years.”

CEOCFO: In order to do that, will you need to add to your team?
Mr. Steele: “Yes, we will need to expand the team significantly.”

CEOCFO: Does your growth strategy include acquisitions?
Mr. Steele: “Our growth strategy is not based on an acquisition strategy. We believe that in order to provide the compelling value that we provide, that it is best to build a uniform culture from the ground, up. There have been a number of companies that have tried to grow through acquisition in this space and we believe that the results are out there that are public knowledge and show that our growth strategy has a higher chance of success with the shareholders in the long-term.”

CEOCFO: In deciding on new products and services, do you see further additions to your product or service offerings?
Mr. Steele: “We are completely confident that we can grow the business to more that $30 million in sales just in the exact direction we are going in.”

CEOCFO: Can you talk about sales and revenues, as well as the current financial position of the company?
Mr. Steele: “Certainly! Our fiscal year ended June 30th; we had our best fiscal year ever ending June 30th of 2005 with $1.5 million in sales. We continued that trend with sales of $693 thousand for the fiscal year ending September 30th. The June 30th was the best revenue results in the company’s 14-year history. The next quarter results were very strong. The balance sheet has improved dramatically over the last four or five quarters and has grown from $147 thousand in assets to more than $1.2 million in assets over the last five quarters.”

CEOCFO: Most of our readers are in the investment community, do you put a major effort into reaching investors and can you tell us if you have float available for interested investors?
Mr. Steele: “Yes, we have approximately 3000 shareholders and the stock trades on a 3-month average of more than 200,000 shares a day. We are very pleased to have an active interest in our stock.”

CEOCFO: Do you go out and do conferences?
Mr. Steele: “Yes, we presented at the Financial Services Exchange in November in Philadelphia. Andrew Haag our CFO was just at the National Investment Banking Association conference (NIBA) in Las Vegas. We are regularly out in the marketplace in front of investors. We have presented the Southern California Investment Association, we have presented at NIBA in Miami and Florida last year. We are out at investor conferences and with individual investors on a regular basis. I flew to Dallas to meet with a group of our investors two months ago, so we put a lot of time and energy to communicate with the market.”

CEOCFO: Do you do most of your investors relations in-house or do you have an outside firm?
Mr. Steele: “We have a multi-tiered strategy, so we do most of the work ourselves.”

CEOCFO: In closing, what would you like to say to potential investors, perhaps something they might miss when they first look at Quintek?
Mr. Steele: “In March of last year, about a year-and-a-half ago, we came out and said that we would get into the outsourcing services space. We said that we would get a major mortgage company, we said that we would get a major biotech company, we said that we would get a major accounts payable company as a customer, and indeed over the last year-and-a-half we have done all of those things. We beat the revenue projections that we put out a year-and-a-half ago and we did $887 thousand in sales for the fiscal year ending June 30th. We beat that by about 40% doing $1.5 million in sales. We have consistently delivered on what we said we were going to do. We feel that we have entered a rapidly growing multi-billion dollar industry with a $4 billion addressable market. We have demonstrated that we can deliver between 30 and 60% gross margins. We have the experience on the management team. We currently have more than $8 million in long-term contract value. We have a business model that features recurring revenue stream and six quarters of strong revenue results. We feel that now is a great time to get involved in Quintek.”


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“We have the most modern equipment and a level of customer focus that the larger multi-billion dollar companies cannot provide. We can deliver a faster turn-around and we can do it at less cost. We take that value proposition to the market and maintain that advantage by recruiting and retaining the best people as well as providing excellent customer service. Strategically, there is a need in the market for a mid-market company with a national presence. There is a threshold below which our larger competitors are not interested in the business. We find that that mid-market is very large and there is a lot of need out there.” - Robert Steele


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