Joe Ragan’s transformative leadership at GTSI

April 16, 2008 by Lisa Singh

Over the last few years, GTSI — an enterprise solutions and services provider to the government — has been a company in transition, moving from its old role of being a traditional government reseller of IT products into a total solutions provider. Today, the company is well-positioned to go out and grow the services business. A big part of that growth can be credited to Joe Ragan, and his leadership as CFO. Ragan recently talked with us about the joys and challenges of his new role as CFO, how he’s help turn GTSI around, and what hot trends might very well shape public companies in the DC area and beyond.

How did you get to be CFO at GTSI?

Joe Ragan: I started in the Deloitte practice office in Washington, D.C., with Deloitte and Touche. I worked for several large local companies, but the largest local company was the AES Corporation. I had an opportunity to live and work abroad in Buenos Aries, Argentina, then came back to Northern Virginia. I also worked for other public companies as well as ventured capital-backed companies and, ultimately, today I am the CFO of GTSI in Chantilly.

What is the key to recent success and turnaround at GTSI?

Joe Ragan: I started with the company in 2006. The company was experiencing a short term period of distress; there was some difficulty implementing a new ERPsystem. We had to recover from that difficult time by recapitalizing and refinancing the company. And, actually [we] went through a restatement in 2006, where we restated 15 quarters of prior results. In 2007, we were really able to rebuild the company, driving toward profitability and establishing new lines of credit.

Today, we currently have over $300 million dollars in debt capacity whereas in 2006 we had nearly zero. We really drove the cash conversion rate and improved the balance sheet dynamic so that not only were we able to stabilize the company, but we positioned the company for future growth and entry into the services sector. The company is transforming from a traditional government reseller for IT products into a total solutions provider. Both financing and the services are wrapped around our product offering, so we become the total solutions provider for many of our government customers.

We currently have 82 contract vehicles, which serve as a great platform to drive the services business to the next level. Organic growth is not primarily the key to significant increases in services revenue. We are currently active in several M&A transactions and are reviewing many different alternatives —that is really going to be the key to the transformation of the company.

What is the biggest challenge of this industry transition?

Joe Ragan: At first it was the stabilization of the company and building up from a finance perspective a real world class finance team. We have the right people in place today to really take the company to the next level. We have an incredible management team. The CEO [Jim Leto] has been able to retain all the vice presidents and everyone on the executive staff for the last two years. There have been some departures but zero have left voluntarily. The team is stable and high quality. Everyone is focused on driving services, as well as leasing transactions through the company.

The stabilization, refinancing and recapitalization of the company have been major issues and just yesterday we paid off our last remaining piece of subordinate debt that we had in our refinancing. We had to put our subordinate debt in place to support our senior credit facility. Yesterday, we paid off our subordinate debt from operating cash flows. That was a major accomplishment, so as of today we have zero debt drawn on any of our facilities. The company is very well positioned today to go out and grow the services business.

This part of the business is very different from a cash flow perspective. Obviously longer lead times to get the business but then 2 to 3 year initiatives so financing is a little different than the product business. So, we really have to establish a strong working capital backbone to support the services business so we continue to do that as well as support any acquisition activity. We have the ability to go out and not only finance the working capital end of the services business but acquire services business as well.

How important is the acquisition strategies as part of your overall strategy?

Joe Ragan: I think that we can be very successful without acquiring a company. Our growth rates have been significant in the services business where we started with basically zero three years ago and quickly went to nearly 20 million in services revenue in 2007. We will end the year with approximately $150 million gross services revenue out of a total revenue basis of over $700 million. We really have a strong team that would like to drive that growth rate even faster.

It is very difficult to maintain 100 percent compound annual growth rate in any business without adding some acquisition. It is an important part of our strategy if we want to sustain the growth rate we have had in the services sector, not so important if we want to sustain a slower growth path.

What are some of the hot trends you are tracking on a macro level on the CFO world that will impact GTSI along with other public companies in the DC area?

Joe Ragan: I think the relationship with the external auditors has actually improved. It got very difficult immediately following just because companies didn’t know how to interpret the act. What conversations could you have with the auditors and couldn’t you have? Much of that has been sorted out now and I think we have slowly come back to a much better relationship with outside auditors. Much of that has stabilized now and I think that the implementation of internal control structures has pretty much been done for at least accelerated filers, so some of that focus has diminished.

[Also] the job market has transitioned a bit to where it is as not difficult to get quality help. There was a point where there were no local financial resources available. I think that environment has improved significantly for Northern Virginia employers.

Have you recently won some awards? And what have they meant to you and the company?

Joe Ragan: I was very honored in December to receive the CFO of the year award for large government contractors from the Washington Business Journal. It was a great honor to be recognized and certainly in that group. I was fortunate that there have been several award winners at GTSI; I am just one of the many. We have a very strong management team but it was a real honor to be recognized.

Your family has a long history in business, [Joe Ragan’s Coffee] tell us about your relationship with your father in that business and what that has been like?

Joe Ragan: I don’t work for Joe Ragan’s Coffee, but it is our family business. I have worked for Joe Ragan’s Coffee along with other family members; my brothers, sisters etc. It is a long-standing business and is the largest coffee and office product business in Washington. It is very successful in many acquisitions of long-standing names in the area and very pervasive. They put over 45 trucks on the road a day, so it’s likely that you will see them if you are in an office or on the road. It’s very successful and I am very proud of my family and my dad for starting that business 40 years ago.

What is something most people don’t know about you personally?

Joe Ragan: When I have time I enjoy participating in a Judo club at Georgetown University. It is a club I joined 35 years ago when I was 11 years old. It is a tremendous activity. It is a difficult commute to Georgetown now that I am in Chantilly but it is something that I really like to do and have done for a long time.

Posted in GTSI, CFO, Joe Ragan