1. (From Ray in Cambridge): You have managed to grow your top line despite
a major housing crisis in the United States and a softening market
internationally. Does this mean that you exposure to this is limited? What
if the slowdown in commercial real estate deepens? How would this affect
JFG: The company is working its way through one of the largest economic
downturns in recent history. Being in the sector that we are, we were
among the first to feel its impact. Anticipating declining revenues as
our customers were being forced to deal with significant demand declines,
we took some serious cost reduction measures to ensure that we would
maintain adequate profit cash flow levels.
As for our exposure to the housing crisis, in fact in normal times we are
more dependent on the renovation market as opposed to new housing starts.
However, these are far from normal times. A significant prolonged housing
crisis combined with the credit crunch and valuation declines have
effectively significantly impacted the renovation sector as people find it
difficult to add investment through renovation to a home that is declining
With varying degrees, the same applies to the commercial sector. What the
company has to do during these tough times is keep its cost structure
under control and adjust it in line with revenues as best it can without
damaging its ability to grow the business when economy begin to turn, by
maintaining key development programs and deferring others and focusing on
sales activities that can generate revenue in the short term.
2. (From Allan in Nanoose Bay): TWT’s liabilities have almost doubled in
2008 over 2007. I would like to know what steps you are taking to improve
on your present financial status to a positive P/E. I also wonder if you
have any intention of making your software Linux friendly.
JFG: The company’s liabilities increased from $28.4 million to $46.3 million from October 2007 to October 2008. In the first quarter of fiscal 2008,
the company concluded two acquisitions, one of which was the Company’s
single largest competitor in the world. The Company raised $15 million in
debt in order to partially finance this acquisition. This debt, in
addition to the liabilities added by the companies acquired, represents
essentially all of the increase in liabilities.
As to the Linux issue, it is not in our plans to invest in a second
platform based on Linux. 20-20 is a gold partner with Microsoft which in
itself is a key component to our strategic direction of creating a single
platform to be used by various players in the industry to exchange data.
The costs of maintaining two parallel platforms would be prohibitive for
the Company at this stage.
3. (From Adam in Toronto): Why the need to have 10 members on your Board
of Directors? Some of the largest companies in the world, I’m thinking
Microsoft and Research in Motion have fewer directors. Doesn’t a more
manageable size of perhaps six to seven members make sense for a company
the size of 20/20?
JFG: 20-20 became a public company approximately 4.5 years ago. Prior to then, the company had been operations as private company which had been funded
in part by a few rounds of venture capital. As is common practice, the
investors required that they each have representatives on the board of
Directors. Over the years these members have been very valuable to the
company in terms of guidance, governance and business knowledge
complimenting the management team effectively.
When we accessed the public markets, it was even more important to have
the support of our members to assist the management, and they continue to
do so, in its plans to grow the business profitably in an environment
which is quite different from one of a private company.
4. (From Bruce in Burnaby): 20/20 is becoming a great Canadian success
story! Congratulations. Now that you have become much larger do you see
spending on research and development increasing or decreasing over the
JFG: We expect to maintain our spending in research and development in the range of 16-17% of revenues on a going forward basis which of course would
mean that spending would likely increase as revenues increase. This
percentage is currently higher because of lower revenues.
5. (From Terry in Montreal): 20/20 describes itself as “the world’s
leading provider of computer-aided design, sales software and
manufacturing for the interior design industry”. How large is this space?
Is it large enough for your company to continue to grow or is it a niche
JFG: We evaluate the market space to over 1 B$ worldwide. There are plenty of
opportunities around the world in all sectors. Here are few examples.
• North American markets – Sell our new solutions, including our ERP
software for the residential and office furniture sectors and by
accelerating our penetration of new high-potential market segments such as
• In Northern Europe, leverage our strengths and continue to push our 2
brands, 20-20 and Fusion in the U.K. residential market, and also develop
the emerging bathroom sector and the untapped office furniture segments
and the market for our web applications, including in Scandinavian
• In Southern Europe, build upon our electronic catalogs and ERP solutions
for the kitchen and closet sectors, along with our solutions for
residential furniture manufacturers
• As for Central and Eastern Europe, take advantage of our existing
customer base, which delivers to over 140 kitchen, office and residential
furniture manufacturers, mission critical ERP solutions, a position which
gives us an exceptional entry into this new geographical market
• Continue to seize further growth opportunities in emerging markets,
namely in the Asia-Pacific region, especially in China, Russia as well as
in Brazil and other Latin American countries.