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Intermap
Technologies Corporation (IMP.a) |
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CEOCFO CEOCFO Monthly Analyst |
"To print this page go to file and left click on print" Intermap
Technologies- new business model of creating a new terrain elevation database and
licensing sales out of the database giving them a competitive edge Bio of CEO, CEOCFOinterviews: Mr.
Bullock, please give us a brief history of Intermap Technologies. Mr. Bullock: “When a team of us got together and decided to start a new company in 1996, we recognized that there was exciting new technology coming to the digital mapping market. We evaluated the technology and felt that it could propel the world to a new level of detail about the earth and its surface. We decided to captured the technology, proved its capability and then continued to improve and developed it. Today, six years later, we feel that technology is now hitting its stride. In addition to that, we have added a unique and new business model for the mapping industry. This model might be similar to the ‘build, own and operate’ philosophy in some other areas of the public infrastructure. It is using the private sector’s muscle to build databases, have them private-sector-owned and operated and also to be able to sell license data out of that data base.” CEOCFOinterviews: What is it that you actually do at Intermap? Mr. Bullock: “We are building data bases; the world is a big place to map. We just finished collecting all the data, at much higher resolution and accuracy, for the first nation to be mapped with our new technology. We called the program NEXTMap Britain, and collected 200 thousand square kilometers of data including over eight billion elevation points; that data is now being processed. We have already succeeded in selling two additional licenses for this country-wide data set. The year of 2003 will be the year where we really ‘hit the pavement’ with this new data and start selling it widely.” CEOCFOinterviews: Whom did you do this for and why did they want it? Mr. Bullock: “We are very proud of this sale because it is a record breaking sale in terms of being the first country that is mapped coast-to-coast and North to South at one meter accuracy for both horizontal latitude/longitude as well as elevation. It is also the first time that an entire country has been mapped for elevation purposes without the government paying the bill. In this case, it was our customers, Norwich Union Insurance Company, who paid the bill. Their reason for doing it is that they want to put flood risk insurance on a sound scientific basis and be able to match premiums with actual levels of risk for any given property. Better elevation data means better flood modeling equals better risk analysis. ” CEOCFOinterviews: Do you go out and approach people or do they come to you? Mr. Bullock: “This started as ‘missionary’ work. In 1998, which was our second year of operation, we did a pilot project for flood mapping on the Thames River through London. We showed that to the insurance industry and two years later, it led to a contract to do all of Britain.” CEOCFOinterviews: These are very long-range plans and sales that you work on, is that correct? Mr. Bullock: “That is true.” CEOCFOinterviews: How did you put together your sales team? Mr. Bullock: “We all worked together in a previous enterprise that we sold together in 1995.Our team is experienced in mapping around the world. We know the landscape quite well and have a great deal of international experience. As we looked at the capabilities of new technologies and asked ourselves which technical areas would this data provide the greatest benefit in the early stages, hydrology was identified as one of those areas, as were wireless telecom, transportation and homeland security and several other market sectors.” CEOCFOinterviews: What is your unique capability in mapping? Mr. Bullock: “Our unique capability is that we use radar technology to make measurements of the shape of the earth and we can do that with a single pass of a jet aircraft. We can measure the height of the land and its geographical extent in X and Y, so we call it “XYZ”. It is automated and labor is sparse. The first topographic mapping of England took a hundred years. We did the entire area at much higher accuracy in about three months of data collection and about another nine months to get all the data processed and into the hands of the customers. One hundred years vs. one year, thousands of people vs. our team in the U.K., about twenty people.” CEOCFOinterviews: What must be done with the data after it is collected? Mr. Bullock: “The data is all returned to our headquarters in Denver. We have a large array of computers that check the navigation accuracy. We have to know where the aircraft is to approximately a ten-centimeter accuracy for the entire flight. We use a global positioning satellite system to determine accuracy. The radar signals are captured in the coherent interferogram that is processed through computer algorithms. It takes our whole array of computers about twenty-four hours to process three hours of data collected by the Learjet. Once that is done, we have a data set that exactly mimics the shape of the earth. Its is then run through a final set of editing tasks. Human eyes are on every map sheet; they look for blunders and remove them as well as edit things such as bodies of water.” CEOCFOinterviews: Is this proprietary technology for what you are developing? Mr. Bullock: “The original technology was sponsored by the Department of Defense. Their goal is to have a technology that would allow them to go to a place like Bosnia and be able to map the whole country before they put anybody on the ground; we mapped Bosnia as one of the early projects. Since taking the technology over in 1996, much of the hardware has been changed; I would say 90% of the system now is new. We have improved the throughput by over a hundred times and we have improved the accuracy by a factor of ten, since taking over the technology.” CEOCFOinterviews: What about competing technologies? Mr. Bullock: “We had two groups that competed with us in Germany; one went into financial trouble and we bought them out last year; the other group still exists and they do compete with us from time-to-time. However, they have not shown an inclination to enter into the new business model of creating new database and then licensing sales out of the database.” CEOCFOinterviews: Are governments still a big part or your business and who is your single largest customer? Mr. Bullock: “Governments are still a big part of our business and the U.S. military is still our single largest customer. We have mapped the Panama Canal and some military bases that are being decommissioned such as ADAC Island; we mapped that entire island. We have also participated in some of mapping for the ‘war on drugs’ and the war on terror. Although the U.S. military and government have been our primary customers, we do have a broader base of customers on the commercial side.” CEOCFOinterviews: What is it that you are doing for The Boeing Company? Mr. Bullock: “We have several efforts going with The Boeing Company (NYSE: BA). However, the one that was recently announced is an effort where we are a sub-contractor to one of the Boeing units called “Boeing Autometric” to apply our processing and production experience to a space shuttle mission that was conducted abut two years ago. The mission collected data on a worldwide basis, using the same radar technology as we use in the LEAR jet. Although at shuttle altitudes the data is not as accurate, it does however produce a worldwide database that is uniform. We brought our experience and knowledge to the Boeing Autometric team and the team has been allocated about 55% of the world to do the production and processing over the next two years.” CEOCFOinterviews: Is research a big part of what you do? Mr. Bullock: “It is; one cannot stay at the fore-front of technology without a continual reinvestment. That was one of the benefits of working with Boeing Autometric on the shuttle mission. We took our experience and automated some of the techniques that we applied to processing airborne data and were able to reduce the cost of getting this shuttle data processed for government, by a large factor.” CEOCFOinterviews: Are your currently looking for partnerships and if so, how are you going about that? Mr. Bullock: “We are very dependent upon good relations with other people in the industry. For example, our Company is quite small and we own the best topographical database of England, but the question is how do we exploit that. We need partners that are on the ground in England, so we signed up a master distributor in England. Getmapping plc and put one of our people in his office to work with their staff and promote the sale of the data. Similarly, in the U.S., we are working with people like Boeing and others that have interest in the new digital technology. We have partnerships with Digital Globe, Space Imaging, Inc. (private) and other people that are very important to us.” CEOCFOinterviews: I’m assuming that the earth does not change very much over long periods of time so once you get the data, how long is it good for and is there a need for upgrades? Mr. Bullock: “The shape of the earth doesn’t change very much, but what we do on the surface of the earth does change. With a project like NEXTMap Britain and our next project that we hope to develop this year, NEXTMap U.S.A., once we have established the basic framework, we believe the data will be valuable for ten to twenty years. However, like any product, one would invest in up-grades and tuning. Primarily where we see changes is on the fringes of urban areas where land is being redeveloped from rural to urban. We see an upgrading program that involves re-mapping the fringes of cities. Perhaps there might be a cataclysmic event, like the Mount St. Helens eruption or a new freeway being developed and we will capture those and add them to the database as we go along.” CEOCFOinterviews: What is your cash and credit position? Mr. Bullock: “We just finished our fourth quarter. Cash wise we are sitting at about two-and-a-half million in the bank. We are using a line of credit right now and are at a period where we are making quite heavy use of working capital because we are finishing our next mapping of Britain project, which used quite a bit of working capital. We will now go into data selling, which will recover the invested cash over the next six months. Similarly we have started on a very large product over seas that is using working capital right now. Over the next six months we will recover that working capital and our forecast is that we will repay all of our bank clients and have several million in cash by the end of the second quarter.” CEOCFOinterviews: What are your recurring expenses? Mr. Bullock: “The first and largest expense of the Company is salaries; the second is depreciation of plant and equipment. The third largest expense is the field expenses to support the air and ground crews while they are on location.” CEOCFOinterviews: When you are doing the projects, if you are not working directly with the government, do you have to be involved with others while you are doing your projects? Mr. Bullock: “Generally we are entirely self-contained. We put our own people out to support the aircraft, our own GPS (Global Positioning System) crews and technology in the field, so that we are entirely self-contained. We do use support facilities for aircraft refueling and local maintenance. Depending on what our relationships are, we will also sub-contract out some of the field support work such to support our good relationship with AeroMap in Anchorage, Alaska. Each year we have done several million dollars worth of work in Alaska and we sub-contract work to them. When they have people on site, it is easier for them and it builds good relationships for us with people in Alaska.” CEOCFOinterviews: Do you see additional acquisitions on the horizon for you? Mr. Bullock: “We are growing rapidly and our gross revenue in 2001 was about $20,000,000.00 (twenty million dollars). Next year, 2004, we believe it will be double that. We have doubled the size and capacity of the Company in about twelve months. Although we did buy the assets of Aero Sensing and opened our Munich office, we did not take any of their contracts but simply bought the plant and the people. I still rate this all as internal growth. We are looking to see if there are sensible acquisitions, but right now, I do not have any in mind.” CEOCFOinterviews: How do you manage the growth and what do you need to be careful of as you grow as rapidly as it appears you will be? Mr. Bullock: “I think the single most important thing is to continue to look after customers. We just hired a market consultant to interview our customers and ask them what we are doing right and what we are doing wrong. We have earned a tremendous amount of customer loyalty by sticking to our business and making sure we always under-promise and over-deliver. Every time we have delivered a product, it has been in excess of the specifications that we have agreed to in the contract. Our challenges are to make sure that our Company continues to work as a team, that we have a vision of the needs of our customers, are responsive to our customers and that we maintain consistent quality. We are the first mapping company in North America to be ISO certified. I have just reorganized our quality department and isolated it under a Vice President. All of the quality operations including recurrent training will report through the Quality VP directly to me.” CEOCFOinterviews: You mentioned customer loyalty, who is coming back to you repeatedly? Mr. Bullock: “We have very loyal customers. For example, Norwich Union Insurance Company for whom we did the pilot project for in 1998, came back to us saying ‘let’s do the entire country’ because we had delivered a high quality product. In addition, we are now talking to Norwich about other countries where they have insurance opportunities. Similarly, we have several U.S. government customers; the U.S. Geological Survey, The National Oceanographic and Atmospheric Agency and US DOD (Department of Defense). All of them have become multi-year customers and buy from us each year in a new area of interest.” CEOCFOinterviews: How do you get the people who do this work? Mr. Bullock: “We
have been very fortunate in that the University system produces absolutely wonderful young
people with good computer skills; they are energetic and great to have in the office. We
have had no problem finding computer skilled young people to work in our production
operations. There is also plenty of talent in the senior levels of the Mapping Industry
who are looking for new ways of doing business. I believe the Mapping Industry as a whole
is going through a tremendous transformation and it is not well recognized by many
companies.” CEOCFOinterviews: In closing, what would you say to potential investors and current shareholders? Mr. Bullock: “We have an experienced team and are well-known
in the industry. We couple that with great technology, which is ground-breaking in terms
of the rapidity and accuracy with which it can produce maps. We have an innovative
business model, which is a harbinger of the future in the way this business is going to
change from being essentially an industry that has only sold to professional users, to
becoming an industry that sells to a much broader consumer market.” |
