2002 Half-Year Financial Statements Strategy and Business Outlook. Jean-Michel Bérard (CEO) Emmanuel Olivier (CFO)

Transcription

1 2002 Half-Year Financial Statements Strategy and Business Outlook Jean-Michel Bérard (CEO) Emmanuel Olivier (CFO) Paris, 26 September 2002

2 Agenda Esker at a Glance Esker s Product Offering H1 Main Events Financial Information as of June 30, 2002 Esker on the Euronext List Strategy & 2002 Outlook

3 Esker at a Glance Independent software vendor Founded in 1985 Listed on the Nouveau Marché (Euronext Paris) since 1997 Member of the Euronext List s NextEconomy segment Worldwide leader in Intelligent Information Delivery (IID) and Host Access solutions 2001 sales: 32.3 million

4 Esker at a Glance 300 employees worldwide Subsidiaries on 3 continents Around 50 countries covered by distribution channels 60 distributors worldwide 90% of sales outside France 2.5 million users worldwide

5 Esker at a Glance--Sales by Geography USA 56% France 11% Germany 6% Benelux 3% UK 14% Australia 4% Spain 3% Italy 3%

6 Esker at a Glance--Management Jean-Michel Bérard CEO Co-Founder of Esker Dan Speer CEO Esker US Emmanuel Olivier VP Finance and Investor Relations Jean-Jacques Bérard VP Research & Development Lynn Weatherby VP Corporate Marketing Mitch Baxter VP Business Development

7 Agenda Esker at a Glance Esker s Product Offering H1 Main Events Financial Information as of June 30, 2002 Esker on the Euronext List Strategy & 2002 Outlook

8 Esker s Offering : 2 product lines IID solutions (Intelligent Information Delivery) Multi channel e-document delivery servers allowing customers to automatically send documents from their business applications (ERP, CRM ) Fax Servers DeliveryWare Host Access solutions Allow enterprises to access centralized applications (IBM Mainframes & AS 400, HP, DG, Unix servers ) from a PC via local networks or the Web.

9 Esker s Offerings : IID (Intelligent Information Delivery) Fax servers : 15 years experience 3 rd largest fax server vendor worldwide (IDC) Pulse for Fax : a complete range of products for the enterprise wanting to connect its IT insfrastructure (ERP, CRM, Exchange ) to the fax world VSI-FAX for Unix : Production fax servers for Unix and Linux. VSI-FAX for Notes : The only complete fax solution for the Lotus Notes / Domino environment DeliveryWare : launched February 2001 Pulse : a complete solution for intelligent delivery of business documents. Connected to the enterprise s information system, Pulse captures data streams or documents (invoices, collection reminders, purchase orders ) directly from the originating application. Pulse then provides multi channel electronic or semi-electronic delivery, of these documents according to recipients preferences via hybrid mail, , SMS, fax, XML

10 IID Solutions The Enterprise Using Esker DeliveryWare

11 IID Solutions A market with high growth potential 90% of paper-based documents originate as electronic documents (Aberdeen) Per Gartner Group: By 2004 DOM servers will become as pervasive as networked print servers (0.7 probability) DOM is approximately a US$560 million market that is growing at 35 % CAGR. The IID market should reach $2 billion by 2005

12 Host Access Solutions : A Mature Market Size: $1 billion a year Market drivers Compliance with evolving operating systems (Windows 2000, Windows XP) Migration to newer architectures (from PC-to-host to Web-to-Host) Market forecast Esker believes the Host Access market will decline by 10 to 20% a year by 2005

13 Agenda Esker at a Glance Esker s Product Offering H1 Main Events Financial Information as of June 30, 2002 Esker on the Euronext List Strategy & 2002 Outlook

14 Product Innovations February 2002 : VSI-Fax for Notes 3.5 New features : Enriched functionalities Optimal reliability On-ramp to Pulse June 2002 : Pulse 2.0 New features : Certified connector to mysap.com Web interface Remote management for distributed environments July 2002 : Tun Plus 11.5 New features : SCP Protocol (Secure Copy Protocol) Windows XP compatibility support for PC-to-Host and Web-to-Host

15 Some New Partners February 2002 : Esker and Novaxel partner to create the communicating archival solution a complete solution for the paperless enterprise, from document delivery to archive April 2002 : Infogen adds Pulse to its ERP Adonix X3 offering May 2002 : Azur Technology adds Pulse to its archival solution, Group Doc Solutions June 2002 : Damaris adds Pulse to its Numérichèque solution to send copies of checks electronically Partners already signed : Cincom, France Telecom, La Poste, Mobius, Créatis

16 Pulse Success Confirmed January 2002 : Esker Software recognized in the Distributed Output Management Magic Quadrant by Gartner Group More than 250 customers after 18 months 12% of Esker s sales worldwide Some of our customers : ::Industry ::Food & Beverage ::Banking / Insurance :: Computer technolgy :: Healthcare

17 Agenda Esker at a Glance Esker s Product Offering H1 Main Events Financial Information as of June 30, 2002 Esker on the Euronext List Strategy & 2002 Outlook

18 2002 Half-Year Financial Statements Esker s Financial Rationale for Growth Esker s strategy is well balanced between its two product lines: Host Access : Mature products Low investment Capitalize on existing channels and gain market share High profitability IID : New product with high growth potential Demands high investment in R&D, sales, marketing Growth financed through optimization of existing commercial worldwide infrastructure

19 2002 Half-Year Financial Statements Bottom Line Sales : - 3.9% IID % Host Access : % Operating income: Including non recurring expenses million 184 K Same level as 2001 excluding non-recurring costs Well controlled operating expenses Conservative accounting policies to prepare for future profitability Full depreciation of deferred tax assets 271 K Impairment test on goodwill results in additional write down in the amount of 910 K Positive operating cash flow 0.4 million

20 2002 Half-Year Financial Statements Sales by Product Line(in M ) H H Growth IID % Host Access % Esker %

21 2002 Half-Year Financial Statements Quarterly Sales Worldwide (in M ) 9 8 7,43 8,37 8,24 8,27 7,46 7, Q Q Q Q Q Q2 2002

22 2002 Half-Year Financial Statements Quarterly Sales by Product Line IID HA Esker Esker HA Q101 Q201 Q301 Q401 Q102 Q202 IID

23 2002 Half-Year Financial Statements Income Statement as of 30 June 2002 In K uros H H Sales COGS % of sales -9,3% -8,5% -9,0% Gross margin R&D expenses % of sales -20% -22% -21% Selling expenses % of sales -41% -38% -37% Marketing expenses % of sales -19% -22% -20% Admin. & general expenses % of sales -17% -16% -17% EBIT Interest income Operating income Extraordinary items Amortization of goodwill Income taxes Net loss

24 2002 Half-Year Financial Statements EBIT Analysis In K uros H H Change K % Sales ,9% COGS ,7% % of sales -9,3% -8,5% -0,8% Gross margin ,7% % of sales 90,7% 91,5% -1% R&D expenses ,6% % of sales -20% -22% 2% Selling expenses ,0% % of sales -41% -38% -4% Marketing expenses ,2% % of sales -19% -22% 3% Admin. & general expenses ,8% % of sales -17% -16% -1% Operating expenses ,5% EBIT ,1%

25 2002 Half-Year Financial Statements EBIT Analysis Non-recurring expenses (net) Bad debt reserve Collection of previously reserved receivables 184K - 297K + 113K Esker benefits from cost saving plans implemented in 2001 Operating expenses decrease (excl. Unrecurring) - 3,6% Improvement in marketing efficiency - 15% R&D reorganization with 2 centers of competence in Lyon & Madison - 12% Investment in selling activities continues + 3%

26 2002 Half-Year Financial Statements EBIT Analysis New cost control plan lauched in August 2002 Annual savings expected Implementation completed Focused on US operations Expected costs Principles : 1M 0,2 M Decrease of R&D investment in mature products Redeployment of R&D skills to set up professional services team around IID products Reduction of central marketing costs IS infrastructure reduced and consolidated in Lyon Variable compensation plan for all executives based on WW profitability

27 2002 Half-Year Financial Statements Extraordinary Items Comprising : Reserves on treasury stock Esker holds 3.95% of its own stock K Amortization of trademarks in relation to the goodwill impairment test (see slide 28) - 76 K

28 2002 Half-Year Financial Statements Goodwill Impairment Test Compliance with the latest COB guidance Impairment test based on total value of goodwill, including portion historically netted against shareholders equity Current value based on discounted future cash flow analysis Esker goodwill before impairment write down : As of 30/06/02 GW on balance sheet Netted against Paid in Cap. GW - Total % in K Gross Dep. Net Gross Dep. Net Gross Dep. Net B/S Teubner ,5% Alcom ,1% Persoft ,0% Total ,7%

29 2002 Half-Year Financial Statements Goodwill Impairment Test Summary of write down of goodwill as of 30 June 2002 Goodwill remaining on the balance sheet 100% of goodwill pertaining to the Teubner fax business (basis for Esker s DeliveryWare strategy) 45% of Persoft goodwill (Host Access): declining but profitable product line Future annual amortization expenses reduced by 215 K In K Write down 06/30/2002 NBV after write down Persoft Discounted cash flows Alcom Full write down Product discontinued Teubner Write down of goodwill allocated to discontinued or mature product lines based on initial valuation of company ,5 468 Total

30 2002 Half-Year Financial Statements Deferred Taxes Compliance with French GAAP (CRC 99-02) All deferred tax assets are fully reserved on the balance sheet (NOLs and temporary differences) P&L impact as of 30 June 2002 : 271 K Those tax assets, although not present on the balance sheet, remain available for the company and will reduce future tax expenses as the company returns to profitability

31 2002 Half-Year Financial Statements Total Impact of Non-Recurring Items (in K ) Net loss Non recurring items Operating expenses 184 Extraordinary items 199 Amortization of goodwill 910 Reduction of future amortization expense 107 Deferred tax reserve 271 Non recurring total Net loss excluding unrecurring items - 919

32 2002 Half-Year Financial Statements Cash Flow Statement CASH PROVIDED BY OPERATING ACTIVITIES Self financing capacity -261 Net income Allowance for depreciation & amortization Deferred taxes 271 Change in working capital -660 Inventory -23 Accounts receivable & prepaid expenses -925 Accounts payable and deferred revenue -288 NET CASH PROVIDED BY OPERATING ACTIVITIES 399 CASH USED IN INVESTING ACTIVITIES Increase of fixed assets 658 Acquisition of fixed assets 658 NET CASH USED IN INVESTING ACTIVITIES -658 CASH PROVIDED BY FINANCING ACTIVITIES Increase in share capital 0 Treasury shares 0 Increase in financial debt 0 NET CASH PROVIDED BY FINANCING ACTIVITIES 0 NET CHANGE IN CASH FOR THE PERIOD -258 Cash at beginning of period Change for the period -258 Impact of currency fluctuations -167 Cash at end of period 7 530

33 2002 Half-Year Financial Statements June 30, 2002, Balance Sheet ASSETS 06/30/ /31/2002 In K in K 06/30/ /31/2002 Intangible assets Tagible assets Other fixed assets FIXED ASSETS Inventories Trade accounts receivable Other receivables Deferred tax assets 309 Cash & cash equivalents (1) TOTAL CURRENT ASSETS SHAREHOLDERS EQUITY Reserves for risks Financial debt 11 8 Trade accounts payable Deferred revenue TOTAL Prepaid expenses TOTAL ASSETS (1) Includes treasury shares 123 K A healthy financial situation 3,1 million of deferred revenue as of 30 June 2002

34 Agenda Esker at a Glance Esker s Product Offering H1 Main Events Financial Information as of June 30, 2002 Esker on the Euronext List Strategy & 2002 Outlook

35 Esker on the Euronext List Esker s Ownership Structure as of 30 June 2002 Russell Teubner 7% venture capital 1% David Droman 6% Benoît Borrits 2% Others 3% Esker S.A. 4% Thomas Wolfe 8% Public 60% J-M Bérard 9%

36 Esker on the Euronext List Share Price Euroclear : 3581 Market Cap. : 5,6 M Number of Shares : 3,4 M NextEconomy Market capitalization 17% of 2001 sales 75% of cash held 50% of shareholder s equity

37 Agenda Esker at a Glance Esker s Product Offering H1 Main Events Financial Information as of June 30, 2002 Esker on the Euronext List Strategy & 2002 Outlook

38 Strategy & 2002 Outlook IID Sales Strategy Very Large Accounts (in Esker s installed base) Banking, Insurance, Retail, Government Large Accounts SAP/Manufacturing (new business) Solution type approach to both IS and business executives Indirect/Channel ERP, IDAR, DOM, vertical ISVs

39 Strategy & 2002 Outlook IID Product Strategy Positioning : - Clear separation between Fax Servers and DeliveryWare New features : - Forms Processing - Hybrid mail (outsidefrance) - Archiving - Unix support Complete solution : - Packaged offerings (product + professional services) - 24h/7d support - New technical parterships (hybrid mail, archiving)

40 Strategy & 2002 Outlook IID / Host Access IID HA Esker Polynomial (Esker) Esker is re-balancing its product portfolio If H trends are confirmed, growth will accelerate through Q101 Q301 Q102 Q302 Q103 Q303 Q104 Q304 Q105 Q305 Projections based on 2002 trends

41 Strategy & 2002 Outlook Our Goal Become the worldwide leader in electronic delivery of business documents and consolidate existing complementary markets to accelerate our development : Print management Forms Processing Archiving EDI-XML Fax servers

42 2002 Outlook Our markets will remain soft through H North American market is particularly at risk Forecasted IID growth : + 25 % Annual forecasted sales : 30 to 32 M Operating income : 0 to 2 % of sales

43 Conclusion Esker starts a new growth area : Highly promising project targeting a growing market Very positive initial results Esker will benefit from its experience : Mature products will generate positive cash flows to accelerate the success of the IID product line Installed base speeds up market penetration for new products International infrastructure (people & subsidiaries) will help Esker become a worldwide leader in IID markets Esker has all the necessary resources to succeed and stay independent

44 2002 Half-Year Financial Statements Strategy and Business Outlook Jean-Michel Bérard (CEO) Emmanuel Olivier (CFO) Paris, 26 September 2002