Tellza Communications (TSX: TEL) CEO INTERVIEW


Tellza Communications
CEO: Gary Clifford



WSA: Good day from Wall Street, this is Juan Costello, Senior Analyst with the Wall Street Analyzer.  Joining us today is Gary Clifford, the CEO for Tellza Communications.  The company trades on the Toronto Stock Exchange, ticker symbol is TEL.  Thanks for joining us today there Gary.

Gary Clifford: Thanks very much Juan, I appreciate having the opportunity to speak with you guys today.

WSA: Certainly anytime. So,  starting off please give us a history and overview of the company?

Gary Clifford: Sure. We’ve been in business for over 20 years and we provide voice telecommunication services to some of the largest phone companies around the world, brands that would be very familiar to anyone who uses a telephone.  It’s a really neat industry, it has gone through commoditization over the last 20 years. Initially triggered by deregulation then accelerated by changes in technology.

WSA:  Great, and bring us up to the speed on some of your most recent news including the Q3 results, which were particularly strong?

Gary Clifford:  Yes sure. Well, 2016 has been a great year for Tellza; we took over the company six years ago with a turnover of $100 million, today we have turnover in excess of $400 million.  The core management team is comprised of Mike, Ali, and myself. Our focus at the time was to ready the Company for commoditization.  We invested significantly in infrastructure to lower operating costs and grew volumes to maintain profitability.

We knew the pricing was going to continue to collapse and we knew that to have a solid recurring cash flow business we needed to be highly automated, to have a robust infrastructure and great technology.  

Also, in 2016, we’ve expanded our business model and have now entered the support service business for financial products.

We made an investment in a company called RightWay Funding.  They’re a structured settlements company based in the US and we purchased 33% for $5.5 million earlier this year with $2 million of that money going right into helping the company expand its profitability.  And since we’ve made that investments six months ago the Company has  paid out a million dollars in dividends to the shareholders and management are anticipating a doubling of profit over the next 12 months.  So we’re very excited about RightWay. We also made a second smaller investment in a factoring company and that’s a longer investment cycle.  We see this later investment as a three to five year investment and we’re really excited about that company as well.

Our plan at this time is to take our excess cash flow and deploy them into new areas, now that we fully invested in infrastructure to sustain the profitability of our core business.  Along the way we have been buying our shares back in the market for cancellation. We have bought back 20% of our company since 2011 and we’re set to buy back another 5% by the time 2016 finishes for a total of 25% over five years of the outstanding stock.

Juan Costello: Well, good and so what are the key trends that you’re seeing right now in this sector and how are you positioning the company to capitalize?

Gary Clifford: We’ve seen an exit from people who have not made the efforts to invest in infrastructure.  There has been so much, so many demands on the telecom industry as technologies evolve.  The really big telcos spend their money on new cellular technology and expanding their data networks as the world adopts smart phones.  However, voice remains a necessary evil of the telecommunication space and the large phone companies haven’t always had the budgets, the interest or the resources to continue to invest to reduce the cost of voice communications, which creates a perfect sweet spot for us.

We love the business, we’re excited to be in it. We can provide call services for all the large phone companies very cost effectively.  It’s a thin margin business,  it’s a reoccurring business and when you’re in there and you are working with the largest carriers around the world delivering billions of minutes annually. We have a very solid business that has lots of barriers areas of entries. We feel very good about our business and our industry.

WSA: Good, so talk about your key products and the recent progress you’ve had as well as future milestones there?

Gary Clifford: Yeah  our key products for is—we terminate telephone calls in the international markets and domestically in the US for the major phone companies. So we’re an aggregator in our industry that’s what we’re called.  We aggregate all the minutes together, all the buying power together.

WSA:  Right and perhaps you can talk a little bit about your background experience Gary and  the key management team there?

Gary Clifford:  Sure, well myself I come from private equity side.  I’m a turnaround guy, a special situations guy. I tend to get involved in troubled companies or companies looking to get to the next level.  Mike, who is our current Communications CEO, he is an amazing operator, one of the smartest telecom guys I’ve ever met.  He runs our day-to-day sales and procurement teams and makes sure that our network is full of traffic. We have our technology guru Ali.  Ali built our network and he has built all of our technology platforms that allows us to run 30,000 to 40,000 simultaneous phone calls at any point in time fully integrating business and finance cradle to grave.  Our business runs 365 by 24, it’s a real high volume business.  Our sales guys they love our system.  They get to log right into it and see what’s going on in terms of their own compensation plans. Ali’s the creator of our systems, spent $15 million and 10 years to perfect this and we’re delivering annually now 15 billion minutes across that platform.  Mike, Ali and myself are the cornerstone, we are supported by a great number of people on our sales side and then people inside of our individual brand and we all come together as a good team.

We run a very lean shop because when you’re a business that runs 1% to 2% margins you don’t have a lot of room for fluff, you don’t have a lot of room for mistakes, or wastage.   We’re very cost efficient; we’re very focused on every penny we spend in the company.  Management are big owners of the company.  Together with strategic shareholder’s management owns 75% of the company and 25% of the company is held by the public, we don’t give stock options to anybody.  Everybody paid for their shares.  We don’t have any dilutive instruments.

We just show up to work every day and we do our best just to make our own company be more successful and like every other company we have made some mistakes along the way and we learn from them and we grow.  And so the technology background, the operating background, and the specialty background came together to form this great company under the management of Ali, Mike and myself.

WSA:  Well, great and once again joining us today is Gary Clifford, the CEO for Tellza Communications.  The company trades on the Toronto Stock Exchange, ticker symbol TEL.  Currently trading at $1.75 a share, market cap is about $20 million and before we conclude here Gary to recap some of your key points; why do you believe investors should consider the company as a good investment opportunity today?

Gary Clifford:  I think our stock is a great buy.  We have a proven track record of operating success in a difficult commoditizing industry and we love our business, we love what we do, we’re happy to be here.  We’re owners, we think like owners, not just like managers and we’ve spent the last six years building our company instead of talking about our company. And so, there’s not been a lot of time helping people understand our story, understand our success.  We focused on building a track record.  We think we’re going to continue to have a great track record moving forward and we have a great partnership inside the company and so we’re just excited about it and we think that as people learn about our story and what we’ve done I think they’ll be excited too. That’s really our synopsis.

WSA:   Well, we certainly look forward to continue and track the company’s growth and report on your upcoming progress and we would like to thank you for taking the time to join us today Gary and update our investor audience on Tellza.  It was great having you on.

Gary Clifford:  Thanks and I appreciate your time very much.  Have yourself a great day.


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