AgJunction CEO Rick Heiniger talks to Cantech Letter

Heiniger: “Our shareholders are aware of the massive investment we’ve made in guidance and auto-steer technology over the past decade. It’s resulted in the largest and strongest auto-steer patent portfolio in the world.”Doing one thing well.

If you think about the beginnings of our great technology companies, they didn’t begin as the diversified industrials they might have later become. Google did search and did it extraordinarily well. Amazon.com was a top-drawer online bookseller. Cisco was a routing company.

When a small company spreads itself across too many businesses, it’s a red flag. Larger concerns can afford to stumble, but smaller ones simply cannot. Five bad quarters might be the death knell for a junior with an attention span problem.

When founder Rick Heiniger returned to the company he founded last year he found this very scenario. Calgary-based Hemisphere GPS had interesting intellectual property, but lacked focus. Heiniger closed the company’s Calgary office, made some key hires, and instituted a razor sharp focus on the agriculture part of the company’s business, where it holds key advantages that can demand higher margins.

Cantech Letter’s Nick Waddell sat down with Heiniger to talk about the turnaround at the company, now named AgJunction (TSX:AJX).

Rick, you have been CEO of AgJunction for a little more than a year now, what have you accomplished?

We planned and executed the restructuring of our company, equipping it to be profitable while, at the same time better serving precision agriculture. The main initiatives were to sell our non-ag division, close the remaining internal electronics manufacturing, right sizing general overhead and streamlining operations. Now, since restructuring was completed at the end of June, we are putting that same energy toward expanding the business going forward.

Was AgJunction a bloated company when you arrived? You have reduced the head count considerably…

The company was spread thinly across many well intended initiatives. By focusing, we have reduced headcount from about 260 to 160.

What is now the real sweet spot of your business?

Our near term sweet spot is automatic steering. Fortunately, of all precision technologies, automatic steering is leading the pack in adoption. Right out of the gate, it’s the greenest thing you can do for the industry. The improved driving saves approximately 10% of all inputs in Agriculture, and it’s required before moving on to any other precision technique. So we now believe automatic steering will completely replace manual steering over the next few years.

You have numerous patents around precision guidance and automatic steering. Who are the customers of these products?

Our shareholders are aware of the massive investment we’ve made in guidance and auto-steer technology over the past decade. It’s resulted in the largest and strongest auto-steer patent portfolio in the world. We have the art covered almost every way possible, with patents still coming. Auto-steer sells in two channels, aftermarket and OEM. Since manufacturers our now shifting their sights to full adoption, that channel will eventually dominate, but the transition will take a number of years.

How big is the market you are addressing?

The market size calculations are changing dramatically now that OEM’s are making their move. We will key on the annual production quantities of combines, choppers, sprayers, and tractors 100HP and up. We believe no market will be left behind so it should be pretty much global. That’s the market size. Next question is share. Our position is compelling because this is our company specialization, but we certainly don’t take it for granted. We’ll have to earn our way to a strong position.

It seems you were able to turn profitable in your recent Q3 largely due to lower expenses. Are there any more to be had?

We find ways to improve our efficiency all the time. However, we’re being careful not to cut too deeply because this is still a growth business.

What about topline growth? How are you tackling that?

We are growing right now. The restructuring is behind us, so our focus is now on planning. We’re taking a long term view. That means paying attention to both profit and growth sustainably. Precision Agriculture is a gift that’s here to stay to benefit not only the industry but everyone in general because it is such a green technology. It’s a gift we’ll pass on to the next generation and we want AgJunction to be an important part of it all along that journey.

What milestones should investors look for over the next 12-18 months from AgJunction?

We will be making announcements along the way. These will include major product releases. New or augmented business relationships will be announced if we believe they will have a material effect on our future. A couple of caveats. Since many of our clients are well known brands in the industry, we are careful about disclosures. Also, important developments often take considerable time to evolve. Otherwise, be assured we are working hard every day!

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