2002 Half-Year Financial Statements Strategy and Business ... · 2002 Half-Year Financial...
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2002 Half-Year Financial StatementsStrategy and Business Outlook
Jean-Michel Bérard (CEO)
Emmanuel Olivier (CFO)
Paris, 26 September 2002
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
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
Esker at a Glance
300 employees worldwideSubsidiaries on 3 continentsAround 50 countries covered by distribution channels60 distributors worldwide90% of sales outside France2.5 million users worldwide
Esker at a Glance
Esker at a Glance--Sales by Geography
USA56%
France11%
Spain3%
UK14%
Benelux3%
Germany6%
Australia4%
Italy3%
Jean-Michel BérardCEO
Co-Founder of Esker
Emmanuel Olivier
VP Finance and Investor
Relations
Dan SpeerCEO Esker US
Jean-Jacques Bérard
VP Research & Development
Lynn WeatherbyVP Corporate
Marketing
Mitch BaxterVP Business Development
Esker at a Glance--Management
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
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 ServersDeliveryWare
Host Access solutionsAllow enterprises to access centralized applications (IBM Mainframes & AS 400, HP, DG, Unix servers…) from a PC via local networks or the Web.
Esker’s Offerings : IID (Intelligent Information Delivery)
Fax servers : 15 years experience3rd 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 worldVSI-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 2001Pulse : 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, email, SMS, fax, XML…
IID Solutions
The Enterprise Using Esker DeliveryWare
IID Solutions
A market with high growth potential90% of paper-based documents originate as electronicdocuments (Aberdeen)Per Gartner Group:
By 2004 DOM servers will become as pervasive asnetworked 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
Host Access Solutions : A Mature Market
Size: $1 billion a yearMarket driversØ Compliance with evolving operating systems (Windows
2000, Windows XP)Ø Migration to newer architectures (from PC-to-host to
Web-to-Host)Market forecastØ Esker believes the Host Access market will decline by 10
to 20% a year by 2005
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
Product InnovationsFebruary 2002 : VSI-Fax for Notes 3.5New features : Ø Enriched functionalitiesØ Optimal reliabilityØ On-ramp to Pulse
June 2002 : Pulse 2.0New features :Ø Certified connector to mySAP.com™Ø Web interfaceØ Remote management for distributed environments
July 2002 : Tun®Plus 11.5New features :Ø SCP Protocol (Secure Copy Protocol)Ø Windows XP compatibilityØ € support for PC-to-Host and Web-to-Host
Some New Partners
February 2002 : Esker and Novaxel partner to create thecommunicating 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…
Pulse Success Confirmed
January 2002 : Esker Software recognized in the Distributed Output Management Magic Quadrant by Gartner GroupMore than 250 customers after 18 months—12% of Esker’s sales worldwideSome of our customers :
::Industry ::Banking / Insurance::Food & Beverage
:: Healthcare
:: Computer technolgy
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
2002 Half-Year Financial StatementsEsker’s Financial Rationale for Growth
Esker’s strategy is well balanced between its two product lines:Ø Host Access :
• Mature products• Low investment• Capitalize on existing channels and gain market share• High profitability
Ø IID : • New product with high growth potential• Demands high investment in R&D, sales, marketing
Growth financed through optimization of existing commercial worldwide infrastructure
2002 Half-Year Financial StatementsBottom Line
Sales : - 3.9%Ø IID + 23.3%Ø Host Access : - 20.9%
Operating income: € -0.98 millionØ Including non recurring expenses € 184 KØ Same level as 2001 excluding non-recurring costsØ Well controlled operating expenses
Conservative accounting policies to prepare for future profitabilityØ Full depreciation of deferred tax assets € 271 KØ Impairment test on goodwill results in additional write down in
the amount of € 910 KPositive operating cash flow € 0.4 million
2002 Half-Year Financial StatementsSales by Product Line(in M€)
- 3.9 %15.7915.17Esker
- 20.9 %9.787.73Host Access
+ 23.3 %5.977.36IID
GrowthH1 2001H1 2002
2002 Half-Year Financial StatementsQuarterly Sales Worldwide (in M€)
7,43
8,37 8,24 8,27
7,467,71
0
1
2
3
4
5
6
7
8
9
Q1 2001 Q2 2001 Q3 2001 Q4 2001 Q1 2002 Q2 2002
2002 Half-Year Financial StatementsQuarterly Sales by Product Line
1 500 000
2 500 000
3 500 000
4 500 000
5 500 000
6 500 000
7 500 000
8 500 000
Q101 Q201 Q301 Q401 Q102 Q202
IID
HA
Esker
IIDHAEsker
2002 Half-Year Financial StatementsIncome Statement as of 30 June 2002
In K €uros H1-2002 H1-2001 2 001
Sales 15 167 15 787 32 314 COGS -1 406 -1 343 -2 919
% of sales -9,3% -8,5% -9,0%Gross margin 13 761 14 444 29 395 R&D expenses -3 045 -3 446 -6 797
% of sales -20% -22% -21%Selling expenses -6 280 -5 925 -11 795
% of sales -41% -38% -37%Marketing expenses -2 925 -3 451 -6 577
% of sales -19% -22% -20%Admin. & general expenses -2 607 -2 513 -5 485
% of sales -17% -16% -17%EBIT -1 096 -891 -1 258 Interest income 118 191 292 Operating income -979 -700 -966 Extraordinary items -199 -269 -772 Amortization of goodwill -1 047 -137 -273 Income taxes -365 -129 -182 Net loss -2 590 -1 234 -2 194
2002 Half-Year Financial StatementsEBIT Analysis
In K €uros H1-2002 H1-2001K€ %
Sales 15 167 15 787 -620 -3,9%COGS -1 406 -1 343 -63 4,7%
% of sales -9,3% -8,5% -0,8%Gross margin 13 761 14 444 -683 -4,7%
% of sales 90,7% 91,5% -1%R&D expenses -3 045 -3 446 401 -11,6%
% of sales -20% -22% 2%Selling expenses -6 280 -5 925 -356 6,0%
% of sales -41% -38% -4%Marketing expenses -2 925 -3 451 526 -15,2%
% of sales -19% -22% 3%Admin. & general expenses -2 607 -2 513 -94 3,8%
% of sales -17% -16% -1%Operating expenses 16 263 - 16 678 - 414 -2,5%EBIT -1 096 -891 -206 23,1%
Change
2002 Half-Year Financial StatementsEBIT Analysis
Esker benefits from cost saving plans implemented in 2001Ø Operating expenses decrease (excl. Unrecurring) - 3,6%Ø Improvement in marketing efficiency - 15%Ø R&D reorganization with 2 centers of competence
in Lyon & Madison - 12%Ø Investment in selling activities continues + 3%
Non-recurring expenses (net) € 184KØ Bad debt reserve - € 297KØ Collection of previously reserved receivables + 113K
2002 Half-Year Financial StatementsEBIT Analysis
New cost control plan lauched in August 2002Ø Annual savings expected € 1MØ Implementation completedØ Focused on US operationsØ Expected costs € 0,2 MØ Principles :
• 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
2002 Half-Year Financial StatementsExtraordinary Items
Comprising :
Ø Reserves on treasury stock € - 123 K• Esker holds 3.95% of its own stock
Ø Amortization of trademarks in relation to the goodwill impairment test (see slide 28) € - 76 K
2002 Half-Year Financial StatementsGoodwill Impairment Test
Compliance with the latest COB guidance
Ø Impairment test based on total value of goodwill, including portion historically netted against shareholders’ equity
Ø Current value based on discounted future cash flow analysis
Esker goodwill before impairment write down :
As of 30/06/02 % in K€ Gross Dep. Net Gross Dep. Net Gross Dep. Net B/S
Teubner 1 669 682 - 988 9 107 3 719 - 5 388 10 776 4 400 - 6 376 15,5%Alcom 80 28 - 52 1 236 433 - 803 1 316 461 - 855 6,1%Persoft 858 240 - 618 11 394 3 187 - 8 207 12 252 3 427 - 8 825 7,0%
Total 2 607 950 - 1 658 21 737 7 338 - 14 399 24 344 8 288 - 16 056 10,7%
Netted against Paid in Cap. GW - TotalGW on balance sheet
2002 Half-Year Financial StatementsGoodwill Impairment Test
Summary of write down of goodwill as of 30 June 2002
Goodwill remaining on the balance sheetØ 100% of goodwill pertaining to the Teubner fax business (basis for Esker’s
DeliveryWare strategy)
Ø 45% of Persoft goodwill (Host Access): declining but profitable product line
Future annual amortization expenses reduced by€ 215 K
In K € Write downNBV @
06/30/2002NBV after
write down
Persoft Discounted cash flows 339 618 279
AlcomFull write down
Product discontinued52 52 0
Teubner
Write down of goodwill allocated to discontinued or mature product lines
based on initial valuation of company
519 987,5 468
Total 910 1658 748
2002 Half-Year Financial StatementsDeferred Taxes
Compliance with French GAAP (CRC 99-02)
Ø All deferred tax assets are fully reserved on the balance sheet (NOLs and temporary differences)
Ø P&L impact as of 30 June 2002 : € 271 K
Ø 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
2002 Half-Year Financial StatementsTotal Impact of Non-Recurring Items (in K€)
Net loss 2 590 -
Non recurring itemsOperating expenses 184 Extraordinary items 199 Amortization of goodwill 910 Reduction of future amortization expense 107 Deferred tax reserve 271
Non recurring total 1 671
Net loss excluding unrecurring items 919 -
2002 Half-Year Financial StatementsCash Flow Statement
CASH PROVIDED BY OPERATING ACTIVITIESSelf financing capacity -261
Net income -2 590Allowance for depreciation & amortization 2 058Deferred taxes 271
Change in working capital -660Inventory -23Accounts receivable & prepaid expenses -925Accounts payable and deferred revenue -288
NET CASH PROVIDED BY OPERATING ACTIVITIES 399
CASH USED IN INVESTING ACTIVITIESIncrease of fixed assets 658Acquisition of fixed assets 658NET CASH USED IN INVESTING ACTIVITIES -658
CASH PROVIDED BY FINANCING ACTIVITIESIncrease in share capital 0Treasury shares 0Increase in financial debt 0NET CASH PROVIDED BY FINANCING ACTIVITIES 0
NET CHANGE IN CASH FOR THE PERIOD -258
Cash at beginning of period 7 956Change for the period -258Impact of currency fluctuations -167Cash at end of period 7 530
2002 Half-Year Financial StatementsJune 30, 2002, Balance Sheet
A healthy financial situation
€ 3,1 million of deferred revenue as of 30 June 2002
06/30/2002 12/31/2002in K €
SHAREHOLDERS EQUITY 10 506 13 328
Reserves for risks 135 177 Financial debt 11 8 Trade accounts payable 3 893 4 351 Deferred revenue 3 094 2 992
TOTAL 17 638 20 855
ASSETS 06/30/2002 12/31/2002In K €
Intangible assets 1 226 2 457 Tagible assets 1 333 1 152 Other fixed assets 59 60 FIXED ASSETS 2 617 3 669
Inventories 284 308 Trade accounts receivable 5 756 6 669 Other receivables 897 1 192 Deferred tax assets 309 Cash & cash equivalents (1) 7 664 8 214 TOTAL CURRENT ASSETS 14 602 16 691
Prepaid expenses 419 496
TOTAL ASSETS 17 638 20 855
(1) Includes treasury shares € 123 K
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
Esker on the Euronext ListEsker’s Ownership Structure as of 30 June 2002
Benoît Borrits2%
David Droman6%
venture capital1%
J-M Bérard9%
Thomas Wolfe8%
Russell Teubner7%
Others3%
Public60%
Esker S.A.4%
Esker on the Euronext ListShare Price
Euroclear : 3581
Market Cap. : 5,6 M€Number of Shares : 3,4 M€
NextEconomy
Market capitalization
Ø 17% of 2001 sales
Ø 75% of cash held
Ø 50% of shareholder’s equity
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
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/ChannelERP, IDAR, DOM, vertical ISVs…
Strategy & 2002 Outlook—IID
Product StrategyPositioning :
- Clear separation between Fax Servers and DeliveryWareNew features :
- Forms Processing- Hybrid mail (outside France)- Archiving- Unix support
Complete solution :- Packaged offerings (product + professional services)- 24h/7d support- New technical parterships (hybrid mail, archiving)
Strategy & 2002 Outlook—IID / Host Access
Esker is re-balancing its product portfolio
If H1 2002 trends are confirmed, growth will accelerate through 2005
1 500 000
2 500 000
3 500 000
4 500 000
5 500 000
6 500 000
7 500 000
8 500 000
9 500 000
10 500 000
11 500 000
Q101
Q301
Q102
Q302
Q103
Q303
Q104
Q304
Q105
Q305
IID
HA
Esker
Polynomial(Esker)
Projections based on 2002 trends
Strategy & 2002 Outlook—Our Goal
Become the worldwide leader in electronic delivery of business documents…
…and consolidate existing complementary markets to accelerate our development :
Ø Print managementØ Forms ProcessingØ ArchivingØ EDI-XML Ø Fax servers…
2002 Outlook
Our markets will remain soft through H2 2002
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
Esker starts a new growth area :Ø Highly promising project targeting a growing marketØ Very positive initial results
Esker will benefit from its experience :Ø Mature products will generate positive cash flows to
accelerate the success of the IID product lineØ Installed base speeds up market penetration for new
productsØ International infrastructure (people & subsidiaries) will
help Esker become a worldwide leader in IID marketsEsker has all the necessary resources to succeed and stay independent
Conclusion
2002 Half-Year Financial StatementsStrategy and Business Outlook
Jean-Michel Bérard (CEO)
Emmanuel Olivier (CFO)
Paris, 26 September 2002