Thursday, February 28, 2013

Hyland Acquires AnyDoc

Well this is one that might have occurred 10 years ago...Document imaging-centric ECM ISV Hyland Software has acquired AnyDoc Software. It's always been a good fit, as both companies have sold primarily through reseller channels and certainly have complimentary technology. Hyland and AnyDoc, in fact, share several channel partners who integrate AnyDoc's capture on the front end with Hyland's ECM on the back.

A couple years ago, Hyland made a move to go more aggressively after the capture space and even introduced some proprietary invoice capture technology that was designed to leverage its OnBase repository's integration with line of business systems. On top of that, there were rumors that Hyland was doing a fairly efficient job replacing AnyDoc capture technology with its own capture at some of the customer sites of Hershey Systems- a higher education integrator that Hyland acquired in 2010. But, our question for Hyland has always been, "Why re-invent the wheel when there is already a market full of great capture software out there?"

Of course, all that should be under water under the bridge now, as AnyDoc and its mature and proven capture technology are now part of Hyland.

Back in the mid-1990's, AnyDoc was one of the pioneers in automated data capture from documents. And, in the late 1990s, it was about the same size as Hyland. Since then, Hyland has grown to more than $230 million in annual revenue (per a recent article in the Plain Dealer), while our estimates have AnyDoc still at under $20 million. The reasons for this are likely multiple, but one definitely is that Hyland has done a much better job cultivating and growing its channel than AnyDoc has.

For example, while AnyDoc was one of the pioneers in automated invoice capture, it decided to go primarily direct with the initial version of its invoice capture software because it felt the technology was too complex for its reseller channel at the time. You can imagine the conflict that created. Meanwhile, while Hyland has introduced some direct sales into its mix, it's also done a good job moving upstream and really securing a lot of the top resellers in the document/imaging workflow space.

The synergies between the two companies should be great. AnyDoc's software, which was never its weakness, will now be available to the entire Hyland channel. Plus, Hyland larger support and development team will be able to help it move forward. In fact, there are already some ex-AnyDoc employees working for Hyland. Hyland gets a mature and robust capture product, which should only assist with their efforts in the ECM space - where leaders like Documentum, Open Text, and IBM, have also acquired capture ISVs.

TIS Projects Strong Growth for 2013

As it pre-announced in early January, Top Image Systems' 2012 fourth quarter numbers were somewhat disappointing. For the the three months ended Dec. 31, 2012, TIS reported just a 1% increase in revenue to $7.4 million. This brought its year-end total $31.3 million - still a 9% increase over its 2012 revenue.

TIS CEO Ido Schechter seemed optimistic about the capture ISV's prospects for 2012. He is quoted in the financials press release, "For 2013, we are providing guidance of revenue growth between 13% and 20%, indicating revenues of between $35.3 million and $37.7 million. We expect non-GAAP operating income in the range of $4.6 million to $4.9 million."

As we reported, earlier this month, TIS has re-organized its sales force to better sell its entire set of solutions on the global level. In addition to its document capture software, which is popular in digital mailroom, invoice capture, census, and other types of forms processing applications, TIS recently introduced a suite of capture products for mobile devices.

Part of the reason for TIS' optimistic revenue projections certainly has to do with the potential of the market related to mobile transactions. From their financials press release, "Gartner estimated that the mobile transaction market was approximately $170 billion in 2012 with 200 million mobile payment users, and estimates it will grow on average 40% per year to approximately $600 billion in 2016 with 400 million users. The pipeline of deals, variety of viable, revenue-generating use cases and market potential we are seeing for mobile capture is enormous.”

Harvey Spencer Associates has also projected low double-digit growth for the document capture market annually through 2016. These two markets combined should put TIS in a good position to realize its 13-20% growth projections for 2013.

Tuesday, February 12, 2013

A Closer look at Kofax's half-year numbers

Lot of interesting stuff in Kofax's report regarding its half year numbers .

First off, the Irvine, CA-based ISV's numbers were down fairly significantly:
  • total revenue for the quarter was $63.7 million, which represented a decline of approximately 8% in constant currency from the previous year's second quarter (Kofax fiscal year ends on June 30, so its 2013 Q2 ended Dec. 31)
  • software license sales were down significantly  - 24% - compared to the Q2 numbers for fiscal 2012. For Q2 2013, license revenue was just $25 million.
As usual, Kofax had plenty of reasons for this shortfall:
  •  Apparently 2012 fiscal first half was unusually strong. CEO Reynolds Bish. "We noted that the prior year period had a very significant record. So the revenues for the first half of last fiscal year were significantly ahead of anything we had reported for that period in the past."
  • That said, Bish gave two reasons why Q2 2013 revenue was lower than anticipated:
  1. "We had a very large mid-seven-figure transaction slip out of the quarter into a future quarter. We still expect to close that at some point, but are not able to accurately forecast that."
  2. "Our software license revenues in the Americas was also lower than we anticipated, principally because of all the changes that we began implementing in our overall sales organization during October."
Okay, so that's most of the bad news. Kofax EBITDA was also down almost 40%, but the company still managed to generate $15 million in cash through the first half of the year and has $87 million in cash in the bank.

Lot more interesting stuff that we'll get into some more details on in our upcoming issue of DIR, but basically Kofax hired Forrester to double-check some of Harvey Spencer Associates' numbers of the capture market. While Forrester's market size number were actually slightly larger than HSA's, their growth figures for capture were somewhat lower. And Bish blamed the Q2 software license decline squarely on Kofax's traditional capture business, while in the meantime spinning Kofax's future direction toward the newly defined SPA (smart process application) market.

SPA basically combines mobile and traditional capture with BPM and analytics to create high-end vertical applications. Forrester listed SPA as just a $600 million market in 2012, but with CAGR of close to 60% through 2016 - a much higher growth figure than it has for the individual capture and BPM spaces.

Bish concluded that he is optimistic in Kofax's immediate prospects for improving results, in part due to a revamped sales structure (we'll get into more detail in DIR), as well as, well, less than stellar Q3 2012 results that will be easy to improve on: "So, we certainly expect to report relatively significant year-over-year growth during the current quarter, expect that to continue into the half-year, and as a result of that, we have a pretty high level of confidence of returning to reporting more consistent software license and total revenue growth."

At last check, Kofax stock was trading at less than two and three-quarters British pounds per share on the London Stock Exchange, a drop of about 15% from what it was trading previous to the half year results being announced.

Wednesday, February 06, 2013

Top Image Sysems Reorganizes Sales Force

Top Image Systems, the Tel Aviv-based ISV that specializes in document capture solutions, recently announced it would reorganizing its worldwide sales force. According to a press release, "The Company is setting up a Global Solutions group to develop, manage and support market-driven solutions worldwide." Michael Schrader, who was formerly the managing director of TIS EMEA, has been appointed CTO and SVP, Global Solutions for TIS.

Historically, the majority of TIS' revenue has come EMEA, with invoice processing and digital mailroom solutions providing the primary markets. TIS also has a strong business in census processing worldwide. Last year, TIS launched a suite of mobile capture products aimed initially at the U.S. banking market and opened on office in New York City.

With the new re-organization, it sounds like TIS is now going to be selling both the mobile technology and its invoice and digital mailroom products worldwide. CEO Ido Schechter has been put in charge of TIS customer facing Field Operations Group.

Like many other public companies, TIS should be announcing its year-end 2012 results shortly. It has already projected 2012 revenue to come in at around $31 million, which represents close to 10% growth, but is lower than TIS previous guidance. In an earlier press release, TIS blamed delays in some major deals and the falling value of the Euro for the shortcomings.

There has been little mention of sales of the mobile capture technology yet, although the U.S. office has been only open since last summer. TIS has tried on previous occasions to market its traditional capture technology in the U.S. and has had some success in recent years working through its partner TransCentra - a partnership that began with J&B Software.

However, now TIS is a larger and more established company. It has also done acquisitions in the U.K. and Asia-Pacific, and with the U.S. office, it certainly has a global sales footprint established.

Kofax receives Data Matching patent

Document capture and BPM ISV Kofax has received a patent related to matching data captured from scanned documents with data from a back-end system like an ERP application. This a fairly common practice in many document imaging applications, especially involving invoice capture - one area that Kofax says it is already using the technology.

The patent is number 8,345,981 with the US Patent and Trademark Office. It's entitled "Systems, methods, and computer program products for determining document validity." Basically it describes a process for applying OCR to a scanned document, extracting information from it, identifying a complementary document in the back-end system, mapping the information on the scanned document to the info on back-end system document, and checking the info captured by OCR against the info. on the back-end system document.

Kofax originally filed for the patent in Feb. 2009. I'm not sure how its approval is going to affect the market or if Kofax plans on enforcing it, but it seems to me the practice that Kofax has described is in pretty widespread use, especially in the area of invoice capture today, and it was already being done prior to 2009. In the press release, Kofax notes that it plans to expand use of this technology into the EOB processing space.