5 Questions with Steven Koles of Hemisphere GPS (TSX:HEM)

Calgary’s Hemisphere GPS (TSX:HEM) is taking GPS to the next level. That level is the business world, where Hemisphere products help excavators, hydrographic surveyers, even snow grooming operators become more efficient.

But it’s in agriculture where the company is seeing the greatest impact. Sales of Hemisphere GPS’s agriculture segment are making gains in South America, Australia and Asia. The company also says it is but starting to see renewed strength in the US agriculture sector after the U.S. Department of Agriculture increased its projection for net farm income $77.1-billion, which would make it fourth highest year ever in the United States. Hemisphere’s agriculture products enable seed and chemicals to be applied more efficiently, and can actually increase crop yields.

Cantech Letter talked to Steven Koles, President and CEO of Hemisphere GPS.

Tell us a bit about your business. How do you make money?

Hemisphere GPS is a global leader in the design and manufacture of GPS technology for precision agriculture applications. Under the brand name Outback Guidance, we sell in-cab navigation, automated steering and boom section control technologies. These technologies help farmers reduce overlap when planting, spraying and harvesting which ultimately saves input costs such as time, fuel, chemical, fertilizer, seed and equipment maintenance. Our precision positioning, guidance and machine control applications are also used in construction, marine, survey and original equipment manufacturing.

Is your space growing? How are you positioned to benefit?

Yes, our markets are growing globally. Precision agriculture is becoming more important in addressing global food shortage issues. Environmental demands to reduce the fuel, fertilizer and pesticide used in agriculture are also supported by precision farming. We have rapidly expanded our scope in both new and existing markets. Through new product innovation, we have grown our portfolio of products to include new vertical markets such as surveying and construction. Whereas, in existing markets, we have built on our current portfolio of products and expanded our sales into new regions across the globe including China, India, Russia, Australia, and South America. We now distribute our products into more than 50 countries. Our strong portfolio of intellectual property, over 50 patents, and a large distribution network gives us the opportunity to grow our sales and market share across all aspects of our business.

What is the most common misconception about your company or its business?

One of the largest misconceptions regarding our precision agriculture products is that GPS guidance and auto steering is only for large farmers. This is not the case. Farmers of all sizes directly reap the benefits of our precision agriculture technology. We have a scalable portfolio of precision farming solutions that can easily be tailored to meet the unique needs of every farmer, regardless of size. From basic visual guidance to centimeter-level auto steering, our line of Outback Guidance products provide farmers with an extremely fast return on investment – often in the first season.

What’s your financial situation like?

Hemisphere GPS has a very strong balance sheet with over $30M in working capital, $12M in cash and no debt. Our objective is to profitably grow revenues in 2011 by a minimum of 25%. We put significant investments into R&D during the economic downtown so that we could maximize our innovation and build a stronger portfolio for when market growth re-emerged. We can confidently state that after a record number of number products launched in 2010, we have a much stronger portfolio today with which we can generate significant returns off for our shareholders.

What is your key competitive advantage?

Our largest competitive advantage is the simplicity of our products, as well as our sales and distribution model. Our products compete on all levels and price points, but we differentiate ourselves through our ability to provide customers, such as farmers, with very simplified solutions despite the complexity of the underlying technology. Through a combined model of brick & mortar distribution and e-commerce, we provide our customers with the best sales and service in the industry.