Proginet Corporation (PRGF-OTCBB)
Interview with:
Kevin M. Kelly, Director, President and CEO
Business News, Financial News, Stocks, Money & Investment Ideas, CEO Interview
and Information on their
software to enable the controlled integration of data across enterprises of all sizes, with their CyberFusion®, SIFT, SecurPass®, and ePS™ products able to support all major computing platforms, from PCs to mainframes.


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The security space is the fastest growing software market by far. There is incredible demand for the kind of software we provide. With that, we expect that the marketplace will be driving Proginet’s growth very effectively

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Computer Services

Proginet Corporation

200 Garden City Plaza
Garden City, NY 11530

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Kevin M. Kelly
Director, President and CEO

Interview conducted by:
Lynn Fosse, Senior Editor
March 24, 2005

Kevin M. Kelly, Director
President and CEO

Kevin M. Kelly is Director, President and Chief Executive Officer of Proginet Corporation. Mr. Kelly was elected President in June 1994, and had previously served for several years as an outside director. Under his leadership, Proginet has completed four successful acquisitions, including the mainframe product lines of both Microsoft Corporation and Novell, Inc., and gained U.S. SEC approval to list on the OTCBB (symbol: PRGF). Prior to this, Mr. Kelly served as Chief Operating Officer of CDC Systems, managing an organization of over 1,500 employees. From 1984 to 1992, Mr. Kelly served as Senior Vice President of Nationar Bank, a correspondent commercial bank in New York. Previously, Mr. Kelly was Division Executive and Vice President of Chase Manhattan Bank, one of the world's premier banking organizations. Mr. Kelly holds a BS from Iona College.

Company Profile:
Proginet Corporation develops software to enable the controlled integration of data across enterprises of all sizes. Throughout its 20 year history, the company has earned a solid reputation for its multi-platform expertise and dedication to customer service. Its products, including CyberFusion®, SIFT, SecurPass®, and ePS™, support all major computing platforms, from PCs to mainframes. Proginet’s global customer base spans more than 23 countries and includes many Fortune 500 companies. The company is headquartered in Garden City, NY, and is publicly traded under the symbol [OTCBB: PRGF].

SIFT (Secure Internet File Transfer) is a centrally managed Web service that allows organizations to securely exchange information over the Internet. SIFT enables businesses to transmit data without the need for partners to purchase or install software; all they need is a standard Web browser.

CyberFusion® is software that delivers secure, reliable file transfer capabilities across both corporate networks and the Internet. CyberFusion combines enterprise-strength automation, remote execution, central administration, and comprehensive auditing capabilities with industry-standard encryption and compression to provide guaranteed, secure delivery.

SecurPass® is a password-management product suite that lets systems administrators provide password synchronization and self-service password reset to corporate users across all major computing platforms and business applications.

ePS™ software extends the Enterprise Single Sign-On (SSO) functionality of Microsoft® Host Integration Server (HIS) 2004 beyond the Windows® environment to non-Windows platforms across the enterprise. Users can access any application for which they have proper authorization without logging onto each operating system or platform separately.

CEOCFOinterviews: Mr. Kelly, you have been with the company for about eleven years, what was your vision when you came to Proginet, and how has that played out?
Mr. Kelly: "The vision was that Proginet was a software development company that focused on the large complex enterprise. The company developed technology that allowed companies to integrate their heterogeneous computing environments. Those were the days where distributed processing was becoming much more popular and companies needed to leverage those investments in terms of integrating Windows platforms, UNIX platforms, IBM’s OS/400 – make it all work together. My vision when I came to Proginet was to develop technologies that would be industrial-strength, and bring the disciplines and controls of the mainframe world, to the distributed processing world. That took a long time but we believe we have been quite successful at developing such technologies."

CEOCFOinterviews: What services are you providing for your clients?
Mr. Kelly: "Proginet provides two major technologies; a managed file transfer suite of products and an identity and password management suite of security products. On the file transfer side, we provide CyberFusion® and SIFT (Secure Internet File Transfer), which are both secure file transfer solutions. Those two products taken in unison allow large enterprises to move and manage their information within their entire complex, or their internal environment, and at the same time interconnect with their partners and third parties outside of their enterprise – including connecting with customers through secure internet file transfer. On the security side, we provide password management, including synchronization, as well as identity management that allows for individuals in large enterprises to manage and change their password and have the changes propagate through all those platforms I mentioned."

CEOCFOinterviews: You recently made an acquisition related to password management and security, how will that change Proginet?
Mr. Kelly: "The acquisition that we did recently was a company called Blockade Systems Corp., out of Canada. That is consistent with Proginet’s overall strategy; developing software internally and selling it to the marketplace, and acquiring technologies that are synergistic and complementary to Proginet’s security suite and managed file transfer suite. Blockade had technologies that were complementary and similar to Proginet in terms of password synchronization and a password reset technology. In addition, they had two other technologies that add additional capability to Proginet’s suite of products. One is called ESaccess, which allows for access over the Internet or password management to the retail market as well as to partners over the Internet. The other product is a product called ManageID which allows us to extend our overall solution further in the password management and password synchronization market – where enterprises can include the addition of users into the database – streamlining the process and making it easier for enterprises to self-manage passwords and reduce costs at the help desk."

CEOCFOinterviews: Are many companies taking advantage of both sides of your business?
Mr. Kelly: "The beautiful thing about our technologies is that both of them are great in terms of being mission critical applications. On the managed file transfer side, we have over 100 customers in banking, over 100 customers in the insurance and financial services industry, and another 100 customers in other industries around the world. We have customers in over thirty countries and in many instances; we have one of the top five enterprises in those countries, using our managed file transfer technology to conduct their day-to-day business. The largest insurance company in France has over 25,000 file transfers in a day. The largest bank in Italy has over 700 branches where they are moving data back-and-forth many times a day and closing out their production environment using fusion technology. In the US we have a car manufacturer who sends their car designs and blueprints using CyberFusion® - relying on its compression methodology, its encryption methodologies and the like, to ensure the secure protection of the data as it moves from one location to another. On the file transfer side, then, our technology is clearly pervasive throughout the various market places. On the security side, we have some corporations using our password management for over 100,000 employees. Again, like in the CyberFusion® managed file transfer space, the enterprises are using it for total reliability and scalability in terms of managed access to computers – and that is employees, and third-party relationships as well as customers. We have been very successful on the secure password side as well as the CyberFusion side. Just as I have described in file transfer, we have customers with our secure password solutions in about twenty-five of those thirty countries, as I mentioned a moment ago. Both products are strong in terms of product revenue growth. On a year-to-year basis, we typically see a swing of 45-55 to 55-45 in terms of the revenues generated by those two products."

CEOCFOinterviews: How do you intend to build the business?
Mr. Kelly: "In terms of growth, we expect our growth in three ways. One, through strategic alliances. With regard to our sales overseas, we have eighteen distributors who resell our products. We expect to continue to expand our indirect channel markets that way. We expect to continue to do domestic sales growth through our direct sales organization. We are going to continue to do acquisitions. We do expect that through our organic growth, we can increase our revenues by about 50% per year. For example, last year the fiscal year 2004 ending July 31, Proginet revenues were $6.3 million. This current fiscal year we will be expecting revenues to exceed $9 million and with our recent acquisition of Blockade, and other acquisitions to come, we expect to increase our revenues by another 50% because of acquisitions. We are projecting annual revenue growth to be about a hundred percent or greater in the next few years."

CEOCFOinterviews: Will you tell us about the revenue model?
Mr. Kelly: "Proginet has over 50% of our revenue, which is recurring revenue, for maintenance and services for the customers to whom we license our software. As a result, over 65% of our expenses are covered by these recurring revenues. The company remains strong in terms of cash flows and this year in EBITDA we expect to have in excess of $2 million and produce a profit in excess of half-a-million dollars. The model is to continue to grow through acquisitions and add to our recurring maintenance space, in addition to generating revenue through sales and licensing of our technology."

CEOCFOinterviews: What is the competitive landscape like in your part of the industry and why are people choosing Proginet?
Mr. Kelly: "The enterprise software space is highly competitive and yet it is a large space in terms of the multiplicity and complexities of the technologies that are offered in the marketplace. In the managed file transfer space, we have a couple of major competitors including Sterling Commerce, which is now owned by SBC, and Axway, which is another large competitor. A recent report from the Gartner group indicates that those two players are going to the more broad systems integration space and they are not going to be specializing on managed file transfer by itself. We see that as a major competitive advantage for Proginet, where we can partner with other alliance partners in making sure we provide the best of the best when it comes to integration of the technologies in today’s very complex environment where you have Sarbanes Oxley, HIPAA Legislation, Graham-Leach-Bliley. They are related to the financial services industry and all of those require that companies solve very specific problems related to the control, movement, and auditability of the data that moves within the enterprise and outside the enterprise. While we have large competitors, the space we play in, in terms of the mainframe environment, puts Proginet at a competitive advantage. The security space is a complex environment, and more levels of security are typically required by the large enterprise. Proginet specializes in a niche market, which is password management and password reset, plus the technologies I described, relative to our recent Blockade acquisition. That niche market, allows Proginet to be one of the only players that support the very large enterprise organizations with that technology. As such, we have been fortunate enough to have that technology leveraged with OEM partners throughout the world, including Beta Systems, Netegrity. Courion Systems has licensed our software rights to imbed it into their own products as well. We have been very successful in providing our niche solution into some other major OEM partners. When customers want to have a password synchronization or a reset solution, and more robust security solutions, Proginet is the choice."

CEOCFOinterviews: Are there other areas of the world where you would like to enter?
Mr. Kelly: "Yes and no. Yes in that we would like to conquer the world, but in reality, we are only a company of $10 million in revenue and growing too fast would likely strain our infrastructure in terms of expanding further. We have some customers in Asia, but we have no plans currently to be aggressive into the Asian market. We have recent activities relative to Australia where we expanded into that area. With a competent distributor in-place now, we expect that that market will be growing for us. Other than that, we expect to ‘stick to our knitting’ in terms of North America, Europe, and South America in terms of the three primary spaces in the world that we are going to focus on."

CEOCFOinterviews: In closing, why should potential investors be interested and what should they know that they might not realize when they first look at the company?
Mr. Kelly: "Proginet is somewhat of anomaly in the software industry because we have positive cash flow and we are profitable. That, I believe, puts us in a small percentage of software companies. Secondly, the multiple in terms of our selling prices of our stock, gives a multiple of 1.6 times revenues. That is very low for a software company that has the kind of technology we have and that is growing rapidly. Anyone that has an interest in investing, has a greater likelihood that they can be successful in investing in Proginet more so than they would investing in the IBMs or the Computer Associates in terms of return on investment. The other thing to keep in mind is that the security space is the fastest growing software market by far. There is incredible demand for the kind of software we provide. With that, we expect that the marketplace will be driving Proginet’s growth very effectively. Proginet has a customer base of 400-plus organizations; really a who’s who of major corporations around the world. We have not taken advantage of that base at this stage, in terms of cross-selling. Proginet has initiated several new initiatives to contact our existing customer base who give us high mark in terms of support and service, and cross-sell technologies that they are currently not using. The combination of our low market-cap, the demand for security products, our customer base and the fundamentals of being positive cash flow and profitable, I believe to be very strong factors for anybody to consider in terms of investing in Proginet."


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"Proginet has initiated several new initiatives to contact our existing customer base who give us high mark in terms of support and service, and cross-sell technologies that they are currently not using. The combination of our low market-cap, the demand for security products, our customer base and the fundamentals of being positive cash flow and profitable, I believe to be very strong factors for anybody to consider in terms of investing in Proginet." - Kevin M. Kelly


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