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Optika – with increased revenue 16% Q2 over Q1 and looking to build on that with their new Acorde™ Payables and Supplier Portal



Technology
Software & Programming
NASD: OPTK

Optika Inc.

7450 Campus Drive, 2^nd Flr.
Colorado, CO 80920
Phone: 719-548-9800



Mark K. Ruport
Chairman, President
and Chief Executive Officer

Interview conducted by:
Walter Banks
Co-Publisher

CEOCFOinterviews.com
August 2002

Bio of CEO,
Mark K. Ruport
President and Chief Executive Officer, Chairman of the Board
Mr. Ruport has been President and Chief Executive Officer of the company since March 1995. Mr. Ruport has 20 years of experience in the computer software and services industry. Prior to joining Optika, he was President and Chief Operating Officer, and subsequently Chief Executive Officer of Interleaf, Inc., from 1990 to 1994, a $117 million public software and services company developing and marketing technical publishing, document management and electronic document distribution software. From 1989 to 1990, Mr. Ruport was Senior Vice President of Informix Software. From 1985 to 1989 Mr. Ruport was Vice President of North American Operations for Cullinet Software having responsibility for all North American sales, customer support, and systems Integration. Mr. Ruport was Vice President of the Federal Region of Applied Data Research from 1983 to 1985. Prior to joining Applied Data Research Mr. Ruport held various sales and sales management positions with Computer Sciences Corporation from 1976 to 1983. Mr. Ruport holds a BS in Business Administration and a MBA from Bowling Green State University (Bowling Green, Ohio).
 
Company Profile:

Optika Inc. (Nasdaq:OPTK), headquartered in Colorado Springs, Colorado, is a leading Enterprise Content Management market provider of imaging, workflow and collaboration software. The key to achieving business efficiency and significant Return on Investment (ROI) is the ability to gain control of your critical business content, automate complex business processes and discuss and resolve transaction discrepancies in real-time over the web. Optika's Acorde™ family of Enterprise Content Management software solutions allows companies to efficiently manage complex business processes and transactions and leverage their ERP or line of business systems.

The Acorde Value Proposition:
Many organizations have spent enormous amounts of money and dedicated thousands of employee hours to implementing critical business applications. Despite these massive investments, the promise of these critical business applications has not been realized due to bottlenecks that continue to exist in the way people actually use these systems. These bottlenecks, which are referred to as "business chokepoints", are found in three primary areas.
1) Capture, Storage and retrieval of data, documents and images.
2) Mapping of critical business processes.
3) Collaboration between internal and external resources.

Acorde enables companies to leverage existing ERP (Enterprise Resource Planning) and line-of-business (LOB) investments by accessing and storing multiple formats of business content, automating processes across the organization and externally with partners and customers, and enabling online, real-time collaboration around transactions. As a result, organizations can significantly improve processing efficiency, decreasing transaction cycle times, reduce operating costs while increasing productivity and enhance customer and partner satisfaction.

Optika’s product pipeline has been built a combination of their strong R&D efforts and collaborations with their clients. They seek to tailor their products to meet specific needs for each industry. Industry focus includes: manufacturing, retail, public sector, higher education, distribution, architecture, engineering, construction and financial services.

Products:
Acorde Context - Through powerful imaging and report management (ERM/COLD) functionality, enables companies to securely capture, store, retrieve and display transaction documents and information, regardless of source or type.

Acorde Process - Provides sophisticated workflow functionality for automating processes and delivering business transaction information, within organizations and over the web to external users.

Acorde Resolve - Allows businesses to build web resolutions hubs, which deliver collaborative tools in a virtual office environment for resolving transaction discrepancies internally and with partners and customers.

Acorde Desktop - Enables companies and departments with the full range of imaging functionality - capture, storage, retrieval and security - for an entry-level system. Easy to install, use and maintain.

The newest offering from Optika:
Acorde Payables - a complete Accounts Payable solution including software, best practices workflow processes, and a set of implementation services. Paper invoices, electronic and paper supporting documents and electronic transactions can create chokepoints in your organization. Optika's Acorde Payables solutions helps enterprises across a variety of industries streamline the processing and approval of vendor invoices and associated transactions, resulting in reduced costs and improved customer and vendor service.

The Acorde Payables Supplier Portal, an optional add-on component to the Acorde Payables solution packages, which allow customers to implement a comprehensive solution in as little as 15 days. Supplier Portal extends the functionality of Optika’s Acorde Payables offerings, enabling enterprises to provide vendors and suppliers with real-time access to documents and transactions in a secure, online forum.

CEOCFOinterviews: Mr. Ruport, please give us a brief overview of Optika, and your most recent exciting news.

Mr. Ruport: “Optika is a software company with a focus on the Enterprise Content Management (ECM) world. We focus our software on increasing the overall performance of ERP (Enterprise Resource Planning) systems. One of the things that we have noticed in the marketplace is that a lot of people have invested substantial money in their ERP systems and are looking for a way to increase their back office productivity. Optika, with our Acorde™ product suite, helps companies do just that. We have been fortunate in the last six months to have a product that provides a substantial ROI (Return On Investment) that companies can justify even in environments like the one we are in today.”

CEOCFOinterviews: It has been pointed out that consumer spending has kept the economy afloat, but enterprises need to see a better return on investment to keep prices down and consumer spending up, which is where Optika comes in.

Mr. Ruport: “Definitely! It is the consumer that has kept the economy afloat. Companies know that in order to be able to maintain that, they have to offer more product and value at a lower price. If you look at companies such as The Home Depot (NYSE: HD) or Costco Wholesale Corporation (Nasdaq: COST), or one of our newest customers, Wyatt Consumer Healthcare, the way they can do that is to get some back-office efficiencies in place to streamline the operations, manage all of the paper and invoices, and to pay people faster and be paid faster. Our products help these companies work with their suppliers to accelerate payment cycle times, and this makes it possible to deliver their products to the market at a lower price, which keeps the consumer engaged.”

CEOCFOinterviews: You are working with several nice industries these days, would you like to talk about them?

Mr. Ruport: “Our first focus is retail. Some of our customers include: The Home Depot, Best Buy, Costco and Eddie Bauer. With these customers, we focus on merchandise accounting and accounts payable, specifically on ways of streamlining their ability to get invoices and contracts in and through the ERP systems and paid. We help them all the way through the collaboration of these issues. One of our largest customers deals with their suppliers in addressing charges, credits and damaged goods. If there is an open invoice posted on the Web, the supplier comes in and he can look at the issues with that open invoice, can resolve those issues, and then be paid more quickly. The retailer saves time and effort of trying to resolve every issue themselves.

The second industry we have had a lot of success in is the engineering and construction industry. URS Corporation (NYSE: URS) is one of the largest engineering services firms. The issue they have is with their ability to bill their customer and provide all the back-up information for those billings of the construction site so they can be paid. You can imagine all of the back-up information when it comes to a very large engineering contract such as a bridge or a building. We help URS manage and organize all of this information so they can speed up the billing process. Another area we focus on is manufacturing.  The ability to automate the back-end process in that market to ensure people get paid faster while keeping the costs down is very important.”

CEOCFOinterviews: What sets you apart from your competitors and what new products have you developed to enhance your product offering to keep you ahead of the competition.

Mr. Ruport: “In today’s world people are more risk averse and they want to make sure the vendor they choose is a partner who really understands their problem, not just a technology company that can talk in acronyms and buzz words. They want a partner who understands what their pain is and then can connect that pain to your technology. That is our biggest differentiator.

Our other key differentiator is our ability to quickly analyze a company’s problem and then use the methodology we have in place to ensure that we can deliver and implement a system within the cost structure and timeframe that delivers ROI to that company.

The third differentiator, and what I think will be increasingly important, is the latest product that we have introduced, the Acorde Supplier Portal. Our Acorde Supplier Portal takes the information in your back office and makes it available in a secure, self-service environment to your suppliers, customers or vendors. The real key becomes whether you can you turn all of that into a ROI that IT managers and CIOs can take to their management and get approved.”

CEOCFOinterviews: How do you go about acquiring the necessary domain knowledge?

Mr. Ruport: “Probably the toughest thing right now is focusing on an area. One example is that as a company, we acquired J.D. Edwards OneWorld ERP systems to run our business. We then integrated our software into OneWorld, which helped us really understand the J.D. Edwards product. We took knowledge we gained by working with OneWorld and introduced our Acorde Payables, which is a combination of our core technology, the integration and a set of services and domain knowledge. After gaining the knowledge with J.D. Edwards, we did the same thing with Oracle and introduced Acorde Payables for Oracle ‘Oracle Corporation (NASD: ORCL)’.  As a result we entered a joint development agreement with Airborne Express. Airborne Express is helping us understand the Oracle environment. We then introduced Acorde Payables for PeopleSoft ‘PeopleSoft, Inc. (NASD: PSFT)’ and entered into agreement with Waste Management. By working with J.D. Edwards, Oracle and PeopleSoft, we have gained the experience through contracts with customers who understand and want to work with us in a cooperative partnership way.”

CEOCFOinterviews: Are there any industries that you are not in yet, which you are contemplating?

Mr. Ruport: “There are a few that we are not in. The Federal Government is one.  The telecommunications and healthcare industries are two others. We don’t really have an initiative to go into those industries, however we do have a very strong North American reseller or partner channel. That partner channel does a lot of state and local government business and they develop their own expertise in particular industries outside of the three that I mentioned. If we don’t go into these industries, we most likely have a partner that has a good knowledge of that industry and can sell our products into these markets.”

CEOCFOinterviews: Can you give us a picture of the current market size that you are in and where you are positioned?

Mr. Ruport: “If you look at the data coming from leading industry analyst firms such as Gartner or IDC, the Enterprise Content Management market, which includes a variety of technologies, is a multi-billion dollar market.  Our niche in that market is the ERP integration that we have been talking about. It is difficult to put a dollar size on this slice of the market, but if you look at the dollar size of the combined ERP markets, the ECM market is about 10% of the entire ERP market. Because our solution is complimentary and usually costs about 10 percent of what the original ERP solution costs, you get a very large market. This is the niche that is important now.”

CEOCFOinterviews: In the current environment, how is your market penetration and growth?

Mr. Ruport: “The current environment is difficult in one respect; you can be working with a customer or a prospect on a plane and have total agreement and budget authorization, working with the person having the authority, and then at the last minute that opportunity or project can be cancelled for reasons unrelated to the actual project. That is even more of a reason that we have to be close to a customer and really understand their business and what they are trying to achieve. As far as penetration, we are beginning to make good headway. If you look at company’s investments in ERP system, they really started ten years ago and hit the peak two or three years ago and now are coming down. It usually takes six months to a year to get those systems up and running, so we will follow that peak and that is only about 10-20% penetrated right now. It’s as if everyone bought a new car 2 years ago and you are selling tires, waiting for them to hit that 40,000-mile mark, and when they do, your business is great. That is what we are doing, everybody bought ERP systems and we are waiting for them to get installed so they can start to turbo charge them.”

CEOCFOinterviews: Has the introduction of the Supplier Portal and Acorde Payables affected your business?

Mr. Ruport: “We introduced the Supplier Portal and Acorde Payables earlier this year. What it has done is it has increased our pipeline or potential customers and shortened our sales cycle. This is because we took the knowledge that we gained from the systems we built for Airborne Express and Waste Management and created a standard platform, which enables us to do design a system for the next company faster and cheaper. We can walk into a company with a package of applications and services with a reduced timeline and a guaranteed return on investment.   The Supplier Portal also generates a significant number of opportunities and leads for us because it provides a vision for what these companies want to do when times begin to get better, which is to leverage the web and collaborate with partners.”

CEOCFOinterviews: Will you continue to invest significantly in R&D, and where will that take your company?

Mr. Ruport: “We have invested heavily in our R&D over the last couple of years, and will continue to invest at a significant rate. Our product is in great shape right now, and we are now focusing on the integration of our products with others.  Our goal is to make our products easier to use with higher performance instead of trying to build a new core technology.

The other areas we will continue to work on are with the expansion of our applications outside of the payables area.  These markets include higher education, which many of our partners are already focusing on, and state and local governments.  There are colleges and universities that use our products today for managing student records and loans, applicant processing and registrations, and some of our partners have developed very good practices around higher education. We are finding that colleges have become sizable businesses and they are going to have to improve their back-office operations just like Home Depot and Georgia Pacific.”

CEOCFOinterviews: Are you positioned well with cash and credit to move forward to build out your business?

Mr. Ruport: “We feel we are in good shape financially.  In the second quarter we increased our revenue 16 percent, and we told investors in our second quarter conference call that we would see increasing revenue in Q3 and Q4. We believe that we will be cash flow positive for the year, so our balance sheet will become stronger.  We have a very strong balance sheet for a company of our size with zero debt and a $3.5 million line of credit.  In addition, we have approximately $8 million in cash, which equates to about $0.90 per share.  Our focus is to increase revenue and return to profitability, and we have the financial resources to make this happen.”

CEOCFOinterviews: What type of growth are you looking for over the next six months?

Mr. Ruport: “For fiscal 2002, we expect our Y/Y revenue to grow 10 to 15 percent.  Compared with other tech companies this is pretty good revenue growth.  While our long-term visibility is still limited due to the general economic conditions, based on increased pipeline of potential customers and the tractions we are gaining with our new products, we believe that we could increase revenue 15 to 20 percent sequentially in fiscal 2003 due to these factors.”

CEOCFOinterviews: In closing, what would you like to say to your current shareholder and potential investors?