Aspect Executive Interview
Jim Freeze, CMO, Aspect
Aspect Files Chapter 11 Petition in Plan to Restructure And Reduce Debt Load and Focus on Continuing Business Transformation
Aspect Software, one of the leading providers of contact center software systems and equipment, recently filed bankruptcy to enable the reduction of a $795 million debt burden that has inhibited the company’s efforts to continue its transformative pattern of investing in next-generation technology.
In a mid–March Chapter 11 petition, Aspect said a capital restructuring plan backed by a consortium of its creditors would eliminate $320 million of second-lien debt and convert $60 million of first-lien debt into 100% of the reorganized company’s equity.
According to Jim Freeze, Senior VP and CMO of Aspect, the plan represents the best option for Aspect’s future success. “We’ve been examining alternatives for more than a year now and have determined that this is the most appropriate course of action to help us move forward from an older capital structure that was based on an entirely different business model,” he said. “Over the past three years, we’ve undergone a major transformation from being a company that had a limited product set in the contact center space and no cloud story to speak about to becoming a business focused on providing cutting edge-software solutions and substantial cloud capability.”
Just two years ago, Aspect, which had long been thought of as strictly an on premise provider, had virtually no cloud revenue. But after investing $160 million in technology agreements, partnerships in research, and the acquisitions of hosted IVR and multichannel self-service provider Voxeo, Interactive Text Response (ITR) and natural language user interface provider LinguaSys, Aspect was able to dramatically change the equation, deriving over 60% of its product bookings from cloud-based solutions by Q4 2015.
“We now serve 2,200 call centers in more than 70 nations, generating annual sales of more than $400 million, with EBITDA (earnings before interest, taxes, depreciation and amortization) of nearly $100 million,” noted Freeze. “Our ongoing business base is healthy and thriving. But we had a balance sheet issue: we found ourselves in a leveraged position where we were using most of our earnings to service and make payments on debt. Thus, we are restructuring our debt through what is known as a ‘prearranged transaction’ facilitated with several of our creditors. It’s a quick 90 to105-day process and during that period, our customers will see no notable difference: same people, same products, and same service.”
While bankruptcy filings to restructure debt are a common business practice – Donald Trump has gone through the process four times over the past quarter century — Freeze is aware that the word itself can have a “toxic” connotation. “There will be none of the pejorative implications that people associate with it; all of our bills are being paid and we expect none of our suppliers to be affected, he said. “
Instead of cutting R&D or slashing the salesforce, which Freeze sees as a “self-fulfilling prophecy for failure”, Aspect will emerge stronger than ever. “I’m more excited than ever before about our direction,” he said. “Over the coming months, the market can expect substantial new product announcements from us, more robust cloud offerings and an ongoing commitment to research.”
Freeze sees the decision to restructure debt as part of the transition from being a CapEx company to a cloud provider. “It’s a strategy that assures continuity to our customers and enhances our capacity to compete over the long-term by continuing to accelerate investments in our product and service capabilities.”