ANNUAL REPORT 2007
World-leader in the document automation market
ReadSoft is a world-leading supplier of document automation software with more than 5,000 customers worldwide.
The company develops and markets products that enable automated data entry and the management of a diverse flow of documents, in electronic formats and on paper. With ReadSoft DOCUMENTS, the customer can read all types of documents, process them in an easily managed workflow that is integrated with the business systems, forward the processed information with electronic solutions and ultimately archive all data. For the customer, this technology entails considerable savings and efficiency enhancements.
Since its founding in 1991, ReadSoft has grown to become a worldwide cor- porate group with subsidiaries in Europe, North and South America, Asia and Australia. ReadSoft also has a large number of local and global partners.
ReadSoft’s headquarters are located in Helsingborg, Sweden and the Group’s main research and development units are located in Stockholm, Sweden, Frankfurt, Germany, Wroclaw, Poland, Copenhagen, Denmark and Helsingborg, Sweden.
The company invests 10-15 percent of its sales in research and development.
In 2007, total sales reached SEK 525 million and profit after tax was SEK 18 million. ReadSoft had approximately 450 employees at year-end.
ReadSoft has been listed on the OMX Nordic Exchange in Stockholm since 1999.
Corporate Communication, Malmö
A N N U A L R E P O R T 2 0 0 7
2007 in brief 1
CEO’s statement 2
Targets and strategies 4
Company 6 Market 10 Competitors 12 Research and development 14 People, the environment and ethics 16
2007 in brief 20
The share 2007 22
Risks and risk management 24
Corporate governance 26
Administration report 2007 28-50 Consolidated income statement 30 Consolidated balance sheet 31 Consolidated cash-fl ow statement 33 Change in equity, Group 34 Income statement, Parent Company 35 Balance sheet, Parent Company 36 Cash-fl ow statement, Parent Company 38 Change in equity, Parent Company 39
Notes 40
Audit report 51
Board of Directors 52
Corporate management 53
6-year summary 54
Defi nitions 54
Addresses 56
Interim reports, annual reports and ReadSoft’s press releases can be orde- red from ReadSoft AB, Södra Kyrkogatan 4, SE-252 23 Helsingborg, Sweden, by phone +46 (0)42-490 21 00, e-mail: info@readsoft.com or at www.
readsoft.com.
Financial calendar
Annual General Meeting April 23
Interim Report January-March April 23 Interim Report January-June August 12 Interim Report January-September October 22 Year-end Report January-December February 11, 2009
Notice to attend the Annual General Meeting
The Annual General Meeting will be held at 3:00 p.m. on Wednesday, April 23, 2008, at Marina Plaza in Helsingborg, Sweden. Registration and light re- freshments 2:00-3:00 p.m.
Entitlement to participate in the Annual General Meeting
Shareholders wishing to participate in the Annual General Meeting must be listed in the share register kept by VPC AB (the Swedish Securities Register Center) not later than April 17, 2008 and must notify the company of their intention to attend not later than 4:00 p.m. on April 17, 2008.
Registration
Register at www.readsoft.com, by mail to ReadSoft AB, Södra Kyrkogatan 4, SE-252 23 Helsingborg, by telephone on +46 (0)42-490 21 00 or by fax on +46 (0)42-490 21 20. When registering, please state your name, address, telephone number, personal identity or corporate registration number, the number and type of shares you hold, and indicate any assistants.
Nominee shareholders
To be entitled to participate in the Annual General Meeting, shareholders who have allowed their shares to be registered with a nominee must tem- porarily re-register the shares with VPC in their own name. The change of registration must be made not later than April 17 and should be requested well in advance of that date.
Notice
Notice of the General Meeting will be given not later than four weeks prior to the meeting in Post- och Inrikes Tidningar, Dagens Industri and on ReadSoft’s website: www.readsoft.com.
ReadSoft is a public company, Corporate Registration Number 556398-1066.
All values are expressed in Swedish kronor. Kronor is abbreviated to SEK, thousands of kronor to SEK 000s and millions of kronor to SEK million. Figures in brackets refer to 2006 unless other- wise stated.
Data regarding markets and competition are ReadSoft’s own assessments, unless a specifi c source is given. These assessments are based on the best and most recently available facts, inclu- ding from published sources in the public sector and IT industries.
This report contains future-oriented information based on the ReadSoft management’s current expectations. Although the management considers expectations expressed in such future- oriented information as reasonable, no guarantee can be given that these expectations will prove correct. Consequently, actual future results can vary considerably compared with what is expressed in the future-oriented information due to such factors as changed conditions in the economy, market and competition, changes in legal requirements and other political measures and fl uctua- tions in exchange rates.
ANNUAL REPORT 2007
World-leader in the document automation market
ReadSoft is a world-leading supplier of document automation software with more than 5,000 customers worldwide.
The company develops and markets products that enable automated data entry and the management of a diverse flow of documents, in electronic formats and on paper. With ReadSoft DOCUMENTS, the customer can read all types of documents, process them in an easily managed workflow that is integrated with the business systems, forward the processed information with electronic solutions and ultimately archive all data. For the customer, this technology entails considerable savings and efficiency enhancements.
Since its founding in 1991, ReadSoft has grown to become a worldwide cor- porate group with subsidiaries in Europe, North and South America, Asia and Australia. ReadSoft also has a large number of local and global partners.
ReadSoft’s headquarters are located in Helsingborg, Sweden and the Group’s main research and development units are located in Stockholm, Sweden, Frankfurt, Germany, Wroclaw, Poland, Copenhagen, Denmark and Helsingborg, Sweden.
The company invests 10-15 percent of its sales in research and development.
In 2007, total sales reached SEK 525 million and profit after tax was SEK 18 million. ReadSoft had approximately 450 employees at year-end.
ReadSoft has been listed on the OMX Nordic Exchange in Stockholm since 1999.
Corporate Communication, Malmö
A N N U A L R E P O R T 2 0 0 7
2007 in brief 1
CEO’s statement 2
Targets and strategies 4
Company 6 Market 10 Competitors 12 Research and development 14 People, the environment and ethics 16
2007 in brief 20
The share 2007 22
Risks and risk management 24
Corporate governance 26
Administration report 2007 28-50 Consolidated income statement 30 Consolidated balance sheet 31 Consolidated cash-fl ow statement 33 Change in equity, Group 34 Income statement, Parent Company 35 Balance sheet, Parent Company 36 Cash-fl ow statement, Parent Company 38 Change in equity, Parent Company 39
Notes 40
Audit report 51
Board of Directors 52
Corporate management 53
6-year summary 54
Defi nitions 54
Addresses 56
Interim reports, annual reports and ReadSoft’s press releases can be orde- red from ReadSoft AB, Södra Kyrkogatan 4, SE-252 23 Helsingborg, Sweden, by phone +46 (0)42-490 21 00, e-mail: info@readsoft.com or at www.
readsoft.com.
Financial calendar
Annual General Meeting April 23
Interim Report January-March April 23 Interim Report January-June August 12 Interim Report January-September October 22 Year-end Report January-December February 11, 2009
Notice to attend the Annual General Meeting
The Annual General Meeting will be held at 3:00 p.m. on Wednesday, April 23, 2008, at Marina Plaza in Helsingborg, Sweden. Registration and light re- freshments 2:00-3:00 p.m.
Entitlement to participate in the Annual General Meeting
Shareholders wishing to participate in the Annual General Meeting must be listed in the share register kept by VPC AB (the Swedish Securities Register Center) not later than April 17, 2008 and must notify the company of their intention to attend not later than 4:00 p.m. on April 17, 2008.
Registration
Register at www.readsoft.com, by mail to ReadSoft AB, Södra Kyrkogatan 4, SE-252 23 Helsingborg, by telephone on +46 (0)42-490 21 00 or by fax on +46 (0)42-490 21 20. When registering, please state your name, address, telephone number, personal identity or corporate registration number, the number and type of shares you hold, and indicate any assistants.
Nominee shareholders
To be entitled to participate in the Annual General Meeting, shareholders who have allowed their shares to be registered with a nominee must tem- porarily re-register the shares with VPC in their own name. The change of registration must be made not later than April 17 and should be requested well in advance of that date.
Notice
Notice of the General Meeting will be given not later than four weeks prior to the meeting in Post- och Inrikes Tidningar, Dagens Industri and on ReadSoft’s website: www.readsoft.com.
ReadSoft is a public company, Corporate Registration Number 556398-1066.
All values are expressed in Swedish kronor. Kronor is abbreviated to SEK, thousands of kronor to SEK 000s and millions of kronor to SEK million. Figures in brackets refer to 2006 unless other- wise stated.
Data regarding markets and competition are ReadSoft’s own assessments, unless a specifi c source is given. These assessments are based on the best and most recently available facts, inclu- ding from published sources in the public sector and IT industries.
This report contains future-oriented information based on the ReadSoft management’s current expectations. Although the management considers expectations expressed in such future- oriented information as reasonable, no guarantee can be given that these expectations will prove correct. Consequently, actual future results can vary considerably compared with what is expressed in the future-oriented information due to such factors as changed conditions in the economy, market and competition, changes in legal requirements and other political measures and fl uctua-
New platform and
new solutions
increasing the lead
ReadSoft is a leading supplier of software for document automation to more than 5,000 customers worldwide. Since its founding in 1991, ReadSoft has grown to become a worldwide corporate Group with subsidiaries in Europe, North and South America, Asia and Australia.
ReadSoft is headquartered in Helsingborg, Sweden and employs approximately 450 people. ReadSoft has been listed on the OMX Nordic Exchange in Stockholm since 1999.
Why does ReadSoft exist?
ReadSoft develops software that makes it possible to simplify the handling of documents by automating business processes. This means that our customers can devote the time and money they save by using our technology for their own core business. We offer highly advanced solutions for all kinds of document management.
Regardless of format or media, the documents can be interpreted and the information can be integrated into various types of business systems.
What does ReadSoft offer?
With our products, companies can automate their document management, which generates a number of advantages:
• Lower document management costs
• Increased security since the documents cannot be manipu- lated without discovery
• Increased control and management of the document fl ow
• Increased effi ciency as the information is available to all We also assist our customers with consulting services, operational support, training, service and support on fi ve continents.
Five strong reasons for choosing ReadSoft
1. Leading market position in a growing market 2. Complete proprietary solutions for the manage-
ment of business documents in SAP and ORA- CLE environments
3. Global presence
4. A strong sales and delivery organization for increased growth
5. New and improved software platform launched during 2007
Who are ReadSoft’s customers?
Our customers are located around the world in, for example, the engineering industry, tele - communication and insurance companies, banks, authorities, retailers and market research fi rms. Our offering is particularly attractive to multinational corporations and other customers with large document fl ows.
How does ReadSoft make money?
Our sources of revenue are software license sales, service contracts, training and customized development, as well as some hardware.
When our software is fully developed and license sales can begin, the production cost per license is very small, almost negligible. The sales of our product licenses thereby provide high profi t margins. The service offering is packaged around the products, and the ongoing service contracts comprise a considerable part of our sales.
What is ReadSoft’s competitive situation?
We are the clear market leader in the segment for process and transaction management. This market segment is the largest in the overall market for document automation software as well as the segment expected to grow the most in coming years.
* The overall market is fragmented, with some 40 competitors.
The fi ve largest companies represents about 50 percent of the market for process and transaction management.
* Source: Harvey Spencer Associates Inc.
Chile ReadSoft S. A.
Roger de Flor 2871, Ofi cina 203 Las Condes, Santiago
Chile
Telephone +56 2 232 3123 Fax +56 2 232 3265 e-mail info-cl@readsoft.com Denmark
ReadSoft AS Vibeholmsvej 18 DK-2605 Brøndby Denmark
Telephone +45 39 15 66 00 Fax +45 39 15 66 20 e-mail info-dk@readsoft.com ReadSoft Consit AS
Vibeholmsvej 18 DK-2605 Brøndby Denmark
Telephone +45 39 15 66 00 Fax +45 39 15 66 20 e-mail: info-consit@readsoft.com France
ReadSoft SAS.
46, Rue de Paris 786 00 Maisons-Laffi tte France
Telephone +33 1 34 93 28 13 Fax +33 1 34 93 28 29 e-mail info-fr@readsoft.com
Norway ReadSoft Norge AS Lysaker torg 15
P. O. Box 251, 1326 Lysaker Norway
Telephone +47 6781 82 83 Fax +47 6781 82 80 e-mail info-no@readsoft.com Poland
ReadSoft Ebydos sp. z.o.o Ul. Ruska 2
50-079 Wroclaw Poland
Telephone +48 7179 301 10 Fax +48 7179 301 13 e-mail info-ebydos@readsoft.com Spain
ReadSoft España, S. L.
Avda. de la Vega, 15 281 08 Alcobendas/Madrid Spain
Telephone +34 91 383 36 47 Fax +34 91 766 98 13 e-mail info-es@readsoft.com United Kingdom
ReadSoft Ltd Platinum House North Second Street Central Milton Keynes MK9 IBZ
UK
Telephone +44 1908 688 000 Fax +44 1908 688 099 e-mail info-uk@readsoft.com
Germany ReadSoft GmbH Hugenottenallee 175 63263 Neu-Isenburg Germany
Telephone +49 6102 71 62 0 Fax +49 6102 71 62 62 e-mail info-de@readsoft.com ReadSoft Ebydos AG
Walther-von-Cronborg-Platz 2 60594 Frankfurt am Main Germany
Telephone +49 6990 43 26 0 Fax +49 6990 43 26 13 e-mail info-ebydos@readsoft.com United States
ReadSoft Inc.
3838 N. Causeway Blvd Suite 2620
Metairie, LA 70002 USA
Telephone +1 504 841 0100 Fax +1 504 841 0144 e-mail info-us@readsoft.com
Subsidiary ReadSoft partner
National offi ce Local offi ce
R E A D S O F T I N B R I E F A D D R E S S E S
New platform and
new solutions
increasing the lead
ReadSoft is a leading supplier of software for document automation to more than 5,000 customers worldwide. Since its founding in 1991, ReadSoft has grown to become a worldwide corporate Group with subsidiaries in Europe, North and South America, Asia and Australia.
ReadSoft is headquartered in Helsingborg, Sweden and employs approximately 450 people. ReadSoft has been listed on the OMX Nordic Exchange in Stockholm since 1999.
Why does ReadSoft exist?
ReadSoft develops software that makes it possible to simplify the handling of documents by automating business processes. This means that our customers can devote the time and money they save by using our technology for their own core business. We offer highly advanced solutions for all kinds of document management.
Regardless of format or media, the documents can be interpreted and the information can be integrated into various types of business systems.
What does ReadSoft offer?
With our products, companies can automate their document management, which generates a number of advantages:
• Lower document management costs
• Increased security since the documents cannot be manipu- lated without discovery
• Increased control and management of the document fl ow
• Increased effi ciency as the information is available to all We also assist our customers with consulting services, operational support, training, service and support on fi ve continents.
Five strong reasons for choosing ReadSoft
1. Leading market position in a growing market 2. Complete proprietary solutions for the manage-
ment of business documents in SAP and ORA- CLE environments
3. Global presence
4. A strong sales and delivery organization for increased growth
5. New and improved software platform launched during 2007
Who are ReadSoft’s customers?
Our customers are located around the world in, for example, the engineering industry, tele - communication and insurance companies, banks, authorities, retailers and market research fi rms. Our offering is particularly attractive to multinational corporations and other customers with large document fl ows.
How does ReadSoft make money?
Our sources of revenue are software license sales, service contracts, training and customized development, as well as some hardware.
When our software is fully developed and license sales can begin, the production cost per license is very small, almost negligible. The sales of our product licenses thereby provide high profi t margins. The service offering is packaged around the products, and the ongoing service contracts comprise a considerable part of our sales.
What is ReadSoft’s competitive situation?
We are the clear market leader in the segment for process and transaction management. This market segment is the largest in the overall market for document automation software as well as the segment expected to grow the most in coming years.
* The overall market is fragmented, with some 40 competitors.
The fi ve largest companies represents about 50 percent of the market for process and transaction management.
* Source: Harvey Spencer Associates Inc.
Chile ReadSoft S. A.
Roger de Flor 2871, Ofi cina 203 Las Condes, Santiago
Chile
Telephone +56 2 232 3123 Fax +56 2 232 3265 e-mail info-cl@readsoft.com Denmark
ReadSoft AS Vibeholmsvej 18 DK-2605 Brøndby Denmark
Telephone +45 39 15 66 00 Fax +45 39 15 66 20 e-mail info-dk@readsoft.com ReadSoft Consit AS
Vibeholmsvej 18 DK-2605 Brøndby Denmark
Telephone +45 39 15 66 00 Fax +45 39 15 66 20 e-mail: info-consit@readsoft.com France
ReadSoft SAS.
46, Rue de Paris 786 00 Maisons-Laffi tte France
Telephone +33 1 34 93 28 13 Fax +33 1 34 93 28 29 e-mail info-fr@readsoft.com
Norway ReadSoft Norge AS Lysaker torg 15
P. O. Box 251, 1326 Lysaker Norway
Telephone +47 6781 82 83 Fax +47 6781 82 80 e-mail info-no@readsoft.com Poland
ReadSoft Ebydos sp. z.o.o Ul. Ruska 2
50-079 Wroclaw Poland
Telephone +48 7179 301 10 Fax +48 7179 301 13 e-mail info-ebydos@readsoft.com Spain
ReadSoft España, S. L.
Avda. de la Vega, 15 281 08 Alcobendas/Madrid Spain
Telephone +34 91 383 36 47 Fax +34 91 766 98 13 e-mail info-es@readsoft.com United Kingdom
ReadSoft Ltd Platinum House North Second Street Central Milton Keynes MK9 IBZ
UK
Telephone +44 1908 688 000 Fax +44 1908 688 099 e-mail info-uk@readsoft.com
Germany ReadSoft GmbH Hugenottenallee 175 63263 Neu-Isenburg Germany
Telephone +49 6102 71 62 0 Fax +49 6102 71 62 62 e-mail info-de@readsoft.com ReadSoft Ebydos AG
Walther-von-Cronborg-Platz 2 60594 Frankfurt am Main Germany
Telephone +49 6990 43 26 0 Fax +49 6990 43 26 13 e-mail info-ebydos@readsoft.com United States
ReadSoft Inc.
3838 N. Causeway Blvd Suite 2620
Metairie, LA 70002 USA
Telephone +1 504 841 0100 Fax +1 504 841 0144 e-mail info-us@readsoft.com
Subsidiary ReadSoft partner
National offi ce Local offi ce
R E A D S O F T I N B R I E F A D D R E S S E S
R E A D S O F T I N B R I E F
2007 in brief
• Net sales increased by 14 percent to SEK 525.0 million (459.8).
• Net profi t after tax amounted to SEK 17.8 million (38.8).
• EBITDA for 2007 amounted to SEK 30.3 million (34.9).
• Cash fl ow from operating activities amounted to SEK 32.4 million (44.8).
During the year, we focused on a number of investments in the future.
• 100 new employees, primarily in the sales and delivery organization.
• Established sales companies in Kuala Lumpur, Malaysia and Amsterdam, the Netherlands.
• The next generation of the ReadSoft DOCUMENTS platform was launched.
• The launch of ReadSoft DOCUMENTS for Mailrooms with the CLASSIFY and INDEX products.
• The launch of WEB BOARD, MOBILE APPROVAL and INFO MAIL within the SAP segment.
• The launch of APPROVE.
Key data
2007 2006 2005
Net sales, SEK million 525.0 459.8 400.9
Sales growth, % 14.2 14.7 11.8
EBITDA, SEK million 30.3 34.9 37.9
Profit after tax, SEK million 17.8 38.8 52.0
EBITDA, % 5.8 7.6 9.4
Profit margin after tax, % 3.4 8.4 13.0
Equity/assets ratio, % 46.2 48.7 48.5
Return on equity, % 7.1 19.0 37.0
Number of employees at close of period 451 381 301
Equity per share, SEK 8.05 7.49 5.41
Net earnings per share, SEK 0.55 1.22 1.67
Share price at close of period, SEK 14.90 27.40 29.60
Sales rolling 12 months per geographic market, SEK million
Rest of Europe Nordic region USA and rest of world
50 100 150 200 250 300
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
2005 2006 2007
Sales, rolling 12 months, SEK million
2005 2006 2007
0 100 200 300 400 500 600
Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4
C E O ’ S S TAT E M E N T
In 2007, we focused on investments for long-term growth and profi tability. We began the year with an entirely new strategic position after the two acquisitions we made late in the preceding year and with several new proprietary products that were launched at about the same time. We then had complete proprietary solutions for the management of invoices and other
A growing market in transition
The market for document automation has great poten- tial and is expected to grow by up to 16 percent annually until 2010, according to a market analysis conducted by Harvey Spencer Associates Inc. According to the same analysis, ReadSoft has a market share of approximately 15 percent in its segment and is thereby the largest in the world, with the closest competitor holding about 8 percent of the market.
We also notice that interest from companies around the world is growing. Many of them are already planning for increased automation of document manage- ment by, for example, establishing service centers where administration within a corporate group is centralized.
Some markets develop signifi cantly faster than others and a pleasing aspect for us is the rapid growth we noted in the US in 2007, when our sales grew by 74 percent during the year. We currently see no signs of a business decline in our industry, but should any change occur, we have the preparedness required. We know from experience that we can be adversely affected by a strong business decline, but it has also been our experience that moderate pressure in the market usually generates interest in cost rationalizations, which benefi t us.
Focus on business documents drives growth As early as a few years ago, we made a strategic decision to address global corporations and focus on solutions that automate the management of large groups of busi- ness documents that exist worldwide. For this reason, we chose to focus our invoice processing solutions on the SAP and ORACLE business systems, which are currently used by a majority of the major multinational corporations. This provided us with a major advantage over our global competitors, which can only offer one solution regardless of the systems.
With regard to the segment of small and medium- sized companies, we have developed solutions to fi t Microsoft Dynamics, a fast-growing business system directed at this market.
To take further advantage of this competitive advantage, we are
We drive the market for document
automation
it has also been our experience ure in the market usually generates nalizations, which benefi t us.
documents drives growth rs ago, we made a strategic decision rporations and focus on solutions
anagement of large groups of busi- exist worldwide. For this reason, ur invoice processing solutions on
E business systems, which are majority of the major multinational
ovided us with a major advantage petitors, which can only offer one
f the systems.
he segment of small and medium- have developed solutions amics, a fast-growing
cted at this market.
dvantage of this e, we are
“ A pleasing aspect for us is the rapid growth we noted in the US”
documents in both SAP and ORACLE environments, as well as the fi rst generation of a system to connect to other ERP systems. We also had a new product platform with solutions for the classifi cation and indexation of all kinds of documents, an electronic mailroom. In light of the major opportunities this gave us in the market, we decided to focus on rapidly expanding our sales and delivery organization in 2007 to take advantage of the potential we see in the company.
C E O ’ S S TAT E M E N T
strengthening ReadSoft’s organization during 2008 by dividing development and marketing in these areas. This is strategically important since invoice management is what drives the market for document automation. We are already world leaders in this segment with slightly more than 3,000 installations, which can be compared with the closest competitor, which has around 350 installations according to a study conducted by a trade magazine in the US.
A stronger sales organization
Today, we cultivate the market on two levels: direct sales to the major multinational corporations and sales to small and medium-sized enterprises through partners.
Large companies most often choose to work with us directly without any middlemen. Consequently, we have developed an expert proprietary sales and distribution organization that can meet our customers’ needs worldwide.
We plan to cultivate the small and medium-sized corpo- rate customers mainly through our partners who will then also take care of implementation. For this type of customer, sales through partners is a more effective form of distribution than direct sales, but time is required to build up partner sales, which consequently is a long- term strategy that must be realized gradually. Our target is for 50 percent of our sales to be made through partners. Today, this fi gure is 30-35 percent.
2008 – Acceleration!
Looking back at the past year, I can say that we truly succeeded in developing ReadSoft in a positive manner during the year. We strongly expanded our organization and at the same time supplied solutions, one-after-another, to companies worldwide. I would like to thank all of our committed and skilled ReadSoft employees, who made this possible.
During 2007, we hired more than 100 new employees and at the time of writing, we have approximately 475 employees in the Group. With the investments we made in our organization, we are beginning to achieve the critical mass required to be able to increase profi tability and accelerate growth. As mentioned before, in 2007 we prioritized growth ahead of margins, which can also be seen in our profi t. I am convinced that these funds are a good investment. Presuming that the market does not decline signifi cantly due to the economy, we will now be able to pick up the pace in ReadSoft during 2008.
February 2008
Jan Andersson
President and CEO ReadSoft
Did you know…
…that ReadSoft’s CEO Jan Andersson was the Chair- man of the Board for the document management trade association in the US, AIIM, in 2007. It was the fi rst time a non-American held the position.
in our organization, we are critical mass required to b and accelerate growth. As prioritized growth ahead o seen in our profi t. I am co good investment. Presumin decline signifi cantly due to able to pick up the pace in February 2008
Jan Andersson
President and CEO ReadSof
TA R G E T S A N D S T R AT E G I E S
Clear strategies
for profi table
growth
ReadSoft’s vision is to free companies around the world from manual handling of documents by offering document automa- tion. On the way there, our long-term fi nancial target is to grow by 20-25 percent per year, in other words more than the underlying anticipated market growth, and to do so profi tably with an operating margin of at least 15 percent EBITDA.
Our products are based on the ReadSoft DOCUMENTS technical platform, which has innovation, quality and sim- plicity as its primary key words. The platform ensures that the solutions require a minimum of time to be installed, which means that we can achieve volume in sales. It is able to read all types of documents, regardless of format and media.
With the products we have developed based on the platform, we can offer our customers comprehensive solutions, in which the documents are managed in an unbroken workfl ow that can be integrated with various business systems.
Connects to leading ERP systems
To make our offering in invoice processing as strong as possible, we made a strategic decision at an early stage to connect our solutions to the market-leading business systems from SAP, Oracle and Microsoft.
During 2006, we acquired two companies that spe- cialized in developing solutions for two of these business systems, namely SAP and Oracle. The acquired companies are now fully integrated in ReadSoft and have broadened our product portfolio, expertise and know-how in these respective special areas. We now have an even better overall solution with regard to invoice processing within the framework of ReadSoft DOCUMENTS for Invoices.
According to Harvey Spencer Associates Inc., invoice processing solutions drive the market for document automation. This gives us the opportunity to sell more and larger solutions, at the same time as it creates the conditions to introduce new customers to the possibili- ties of automating other business documents as well.
During 2007, our marketing companies were re- organized based on our specialist expertise in SAP, Oracle, Microsoft and data capture. During this year, our development units will undergo a similar change to thereby further build on the strength in the concept.
Innovative product development
We always want to be one step ahead of our competi- tors. To retain our world-leading position, continuous product development and good market awareness are crucial. In 2007, we launched the next generation of ReadSoft DOCUMENTS and developed a solution that makes it possible to interpret and classify documents with Chinese, Japanese and Korean characters.
About 80 people work full-time at ReadSoft to develop new and existing solutions.
Packaged solutions
We build and package solutions for SAP and Oracle as well as other business systems. These packaged solu- tions make it even easier for customers to get started with document automation. At the same time, it makes our sales and deliveries more effi cient. The packaged solutions also mean that we increase our license sales in
Sales growth, %
2004
2003 2005 2006 2007
0 5 10 15 20 25
EBITDA, SEK million
0 5 10 15 20 25 30 35 40
2004
2003 2005 2006 2007
Did you know…
…that among ReadSoft’s more than 5,000 customers worldwide, there are such well-known companies as IKEA, BMW, TeliaSonera, SAS, ABB, Avon, Bosch, Carlsberg, Canon and Lego.
TA R G E T S A N D S T R AT E G I E S
relation to the number of consulting hours in an initial delivery, which creates the conditions for greater vol- umes.
We are also working to develop solutions that can be offered to small and medium-sized companies with a minimum of operational support.
Global presence
With our own representation on fi ve continents, we can help both multinational companies that need global solutions and local companies that are specialized in a particular market or industry. Our partners often have supplemental products and are resellers in markets where we do not have our own sales force, or they collaborate with our sales companies.
We have a need to be able to deliver our own complete solutions with both products and support for large customers, particularly in less mature markets. In more mature markets, we often work with our partners.
Greater market coverage A stronger organization
To further intensify our marketing and installation capac- ity, we expanded our organization with more than 100 new employees during 2007. We also established two new sales companies in strategically important locations.
In Kuala Lumpur, Malaysia, we are building our initial bridgehead for an expansion in Asia and in Amsterdam, the Netherlands, we have placed ourselves in the middle of the attractive Benelux region with both existing and prospective customers. The markets of both of these regions will primarily be cultivated with the help of our partners.
Partners for growth
Our strategy for continued growth continues to be to work with partners – in terms of both sales and delivery.
During 2007, our partner organization was expanded further. This primarily means that we work even more closely with the partners that we perceive as the most useful and effective. As a part of our long-term goals, we want to increase partner sales from today’s 30-35 percent to about 50 percent of our total sales. We can
thereby increase the volume of license sales without needing to tie up a great deal of human resources.
Proprietary development complemented by acquisitions
To further increase the pace of our development work, we have the ambition of acquiring more businesses in the next few years. Another reason for acquisitions is to increase our market presence in new markets.
Companies that can strengthen our distribution capacity and secure strategically important market posi- tions are also of interest to us, as are companies that complement our technical expertise. Companies that sell products closely related to our own and can give us leading positions in markets that are large and important to us are also of interest.
Resources for implementation Financial strength
We have fi nancial strength with a strong balance sheet.
Our cash fl ow is also favorable. Because the market is fragmented and is being consolidated, we want to further strengthen our balance sheet to be well prepared to participate in this consolidation process. Accordingly, the dividend policy will remain restrictive.
The balance sheet is also strong as a result of well- balanced management of our development costs. The costs for the development of new products are capital- ized in accordance with IFRS principles and amortized over their commercial lifetime, which is two to fi ve years.
Strong human resources
Many of our employees have doctoral degrees and industry experience is extensive. This means that there is a high level of analytical expertise and experience from research-related and commercially focused opera- tions. Combined with the experiences from earlier acquisitions, this means that we have the expertise to acquire and integrate companies and operations.
Did you know…
…that ReadSoft was voted
“Best of AIIM” fi ve times during the world’s largest document management trade fair, AIIM in the US.
Everyone benefi ts from
C O M PA N Y
document automation
Most companies around the world have a great deal to gain by simplifying their man- agement of business processes and docu- ments. Our business concept is to develop software that makes it possible to fully automate document management and then sell licenses to use it.
During 2007, we launched the next generation of our world-leading software platform, ReadSoft DOCUMENTS.
It now allows companies to manage all types of documents – regardless of whether they are e-mails, faxes, paper documents or handwritten notes and correspondence – entirely automatically.
Our unique solutions mean that our customers avoid devoting time to manually sorting, reading and entering data from different documents. At the same time, the documents are made traceable, which means that they cannot be manipulated without it being discovered. In addition, the risk of erroneous data entry is reduced.
Through the documents being digitized at an early stage, the information immediately becomes available to the entire organization and the resources that were previously spent on manually processing both digital and paper-based documents can instead be devoted to the core business.
Benefi ts all the way
Our platform creates major benefi ts for companies, organizations and authorities. They receive a digital center for the sorting and distribution of incoming documents and correspondence to the right business processes. Consequently, the platform can automatically delivery information and documents such as invoices,
Capture
With ReadSoft DOCUMENTS, the company can capture and extract information from all kinds of documents such as letters, handwritten messages, faxes, e-mails with attachments, data from digital pens, EDI and web forms.
Understand
The core of ReadSoft DOCU- MENTS is its Intelligent Data Recognition (IDR). Through a very advanced system, the cap- tured information can be inter- preted, analyzed and classifi ed with a high degree of reliability to then be sorted into relevant categories.
Did you know…
…that more than 80 percent of all information a company receives is unstructured? Approximately SEK 135 billion to SEK 200 billion is spent every year on the collection, interpre- tation and data entry of business information.
Source: Harvey Spencer
C O M PA N Y
Process
Depending on the kind of busi- ness a company conducts, differ- ent documents are processed in different ways, based on their content. ReadSoft DOCUMENTS validates and verifi es this infor- mation and ensures that it ends up at the intended destination.
Integrate
Only when information comes to use is it converted into a business tool. Therefore, our platform can simply and smoothly be integrated into the leading business systems from SAP, Oracle and Microsoft, to name a few, for automatic invoice entry, validation and coding.
Exchange
ReadSoft DOCUMENTS also makes it easy to quickly exchange documents such as invoices, orders of goods and waybills through secure, encrypted e-mail.
Background
GMAC-RFC is a mortgage institute that offers competi- tive products in all market segments and is currently the tenth-largest mortgage institution in the UK. The company’s loans are only available through brokers or partners. The number of employees is approximately 800.
Problem
GMAC already had a document-management solution that was installed in 2001 and comprised a central part of the company’s handling of loan applications.
The existing system lacked fl exibility and function- ality. It could not handle e-mail and could only pull up a limited number of document types that were based on predefi ned barcodes. Accordingly, manual handling was still required for a large number of documents.
Solution
In cooperation with a partner in the UK, Perceptive Software, ReadSoft was able to offer a solution by which GMAC retained its existing structure, while the function- ality was considerably expanded.
Using Perceptive Software’s scanner system, Image- Now, and ReadSoft’s DOCUMENTS for Mailrooms, a complete solution was created that simultaneously pulls up paper documents, digital documents, faxes and e-mail, analyzes the content, classifi es and indexes them, keeps related documents together and ensures that they get to the correct person or department, ready for processing.
The documents are also searchable and the information is available for the accounting system. For GMAC, this means that it can increase its effi ciency and reduce costs.
Administrators can also focus on the content of applica- tions. GMAC has also started to review the possibility of increasing the number of document types to be included.
In total, 80 different document types are handled, orga- nized in 22 different categories. The study has already shown that GMC could save about SEK 1.5 million each year by automating all documents.
loan applications and claims reports to all kinds of archive, business, authorization and records management systems.
At the same time, it can electronically exchange documents with suppliers and customers.
For global and multinational companies, our solu- tions create signifi cantly faster, simpler and more effi cient management of complex and worldwide business processes.
Everything needed for a complete fl ow
Our cooperative relationships with partners enable us to take advantage of complementing technologies and solutions at the same time as we provide our partners with access to our unique functionality and expertise.
Besides broadening our offering, these relationships also increase the potential for more rapid expansion in new markets.
By taking advantage of our partners’ consultants, we can also offer small companies an effective and expert implementation of complete solutions.
With ReadSoft DOCUMENTS as a base and together with our partners, we can consequently offer all companies a complete solution for automatic document management – from receiving a document to integrating the informa- tion with any business system whatsoever.
GMAC-RFC
“The study has already demonstrated that the GMC mortgage institute will be able to save about SEK 1.5 million each year by automating all documents.”
Russell Holmes, New Business Development Manager – Financial Services, ReadSoft UK
Every part of a company’s business has its own specifi c needs. Therefore, we have developed a number of smart and simple solutions to manage incoming business documents based on our ReadSoft DOCUMENTS software platform. In addition to products, our solutions offer a number of related services, such as start-up, service contracts, support and, in certain cases, also hardware.
Licenses and software
The solution, ReadSoft DOCUMENTS for Mailrooms, con- sists of two interacting products: CLASSIFY and INDEX.
CLASSIFY recognizes what type of document it is, to then be able to send it to the right recipient system.
INDEX automatically extracts key information from all kinds of business documents. Together, they automate the work of sorting, classifying and distributing incoming documents for the business processes and give the customer or the department a single point of contact, whether the documents come in an envelope, by fax or by e-mail.
The solution, ReadSoft DOCUMENTS for Invoices, consists of a number of freestanding products that jointly create a complete solution for invoice processing. The web- based interface gives the user full control over where the invoices are in the process. This means better control over invoices, cash fl ows, and received and invoiced goods and services. The INVOICES product interprets and classifi es both paper and electronic invoices and then extracts data from them. INVOICES can be inte- grated with any business, authorization and archive system, and besides being a part of our own complete solutions, is also often a part of our partners’ solutions for invoice processing.
With the program, INVOICE COCKPIT, ReadSoft DOCUMENTS for Invoices acquires a complete link to SAP without any changes in the SAP standard. The docu- ment management chain is thereby complete, all the way from scanning and interpretation to updates in the business system. The program can be complemented with several, value-adding components: WEB CYCLE, which creates a fully integrated solution for the workfl ow within SAP with regard to incoming invoices; ANALYZER, which is a reporting and analysis tool; WEB BOARD, which enables suppliers to send their invoices over the Internet; MOBILE APPROVAL, which allows the user to authorize invoices offl ine (such as over a mobile phone) and INFO MAIL, which gives suppliers automatic responses to status inquiries regarding invoices during processing.
INVOICEIT is specially designed to manage invoices in Oracle E-Business Suite. This program becomes a natural part of Oracle’s business system and authoriza- tion workfl ow without requiring any special integration or customization.
APPROVE is an electronic workfl ow with an autho- rization function that can be integrated with a number of different business systems. This program is primarily designed for integration with Microsoft’s business systems, but can easily be adapted to others.
The ReadSoft DOCUMENTS for EDI software sends documents electronically via encrypted e-mail.
Through our technology, suppliers can easily and at little expense abandon envelopes and postage as a method, and instead send invoices and other documents electronically.
A complete
product family for
business documents
Did you know…
…that ReadSoft’s products can be delivered in 13 different languages, including Chinese? The products can also manage documents in many more languages…
C O M PA N Y
Background
Green Mountain Power is an electricity company owned by the Northern New England Energy Corporation, a wholly owned subsidiary of Gaz Métro, which is a leading energy company in Québec with a long history of invest- ments in Vermont. Green Mountain Power transmits, distributes and sells electricity and related services in the state of Vermont and has a service area that includes about a quarter of Vermont’s population. The company has approximately 92,000 customers.
Problem
Green Mountain Power found that it was spending far too much time and money handling invoices. The company’s policy is to work for an improved environment and it also wanted to have a solution that reduced the use of paper through a more electronic process.
Accordingly, it sought a system that made it possible to capture data from suppliers’ invoices. The aim was to create a system that could be linked to its business system, Oracle E-Business Suite and which would com- pletely replace manual handling.
Solution
ReadSoft supplied the ReadSoft DOCUMENTS for Invoices solution, comprising INVOICES, INVOICEIT, and EMAIL. In addition to supplying the software, ReadSoft handled implementation, which involved installation, testing and support when the system was put into operation.
The system was installed entirely on schedule and has been in use since September 2007. Green Mountain Power is extremely satisfi ed with the products and the service. Among other steps, the company is now consid- ering ensuring that it receives discounts from its suppliers for early payment, which it has not been able to enjoy previously. Green Mountain Power also anticipates that the time spent on handling complaints from salespeople can be substantially reduced.
The solution, ReadSoft DOCUMENTS for Forms, con- sists of the FORMS software, which extracts data from all kinds of forms, such as order management, market surveys and population censuses. The information can then be sent to the target system of choice or a data- base at the customer. This saves both time and money, since the demanding manual entry of information disap- pears entirely.
Service contracts
Thanks to our global organization, we can offer our customers service and support worldwide, which is a major advantage for multinational corporations, among others. Software upgrades are also included in the ser- vice contracts. Since our solutions are a business-critical component of our customers’ operations, the service contracts are usually arranged to cover service over several years.
Services
We offer the customer operational support, which involves quickly getting started with effi cient production and specialist support to maintain productivity at a high level.
We train the customers when new system solutions are introduced. Training can range from specifi c short- term services to taking complete control of the entire training process.
ReadSoft DOCUMENTS also functions as a platform for customized solutions. In connection with a customer project, our consultants can charge for time spent on customized functionality, which is then integrated into the products and sold to existing users.
Our consulting organization assists the customer through all phases of the process, from analysis to imple- mentation. For example, this can be a matter of integrating business systems and archives.
Hardware
To be able to offer our customers a complete solution, we also offer third-party products from partners, mainly scanners, as a complement to our own products.
C O M PA N Y
“The power company Green Mountain Power now intends to ensure that it receives discounts for early payment and to substan- tially reduce the time spent on handling complaints from salespersons.”
Cliff Autin, Senior Consultant ReadSoft North America
Green Mountain Power
M A R K E T
The search for faster
information and
lower cost
ReadSoft is the market leader in the Data Capture for Process and Transaction Management segment. This segment accounts for 34 percent of the overall market for automatic document management and is consequently the largest subsegment.
During 2006, it accounted for the largest growth, 11 percent, which was a marked increase compared with 7 percent in the period 2004-2005.
Between 2005 and 2006, the overall market for automatic document management, including products, services and maintenance, grew to approximately SEK 8.5 billion. Not including the companies that were not in the market in 2005, this corresponds to a growth of slightly more than 16 percent.
This increase is due in part to growing need to fi nd more effective ways of managing companies and greater understanding of the benefi ts software offers to the users, and in part to increased sales among small and medium-sized companies. The increase exceeds global growth in IT.
All indications are that this trend will continue and annual growth is now forecast to be approximately 16 percent to and including 2010, when the global market is expected to have sales of nearly SEK 16 billion.
Greater insight that the need exists
More than 80 percent of all information a company receives is unstructured and it is estimated that between USD 20 to 30 billion is spent every year on collecting, interpreting and entering business information. However, this is largely done through manual entry on a computer.
On the other hand, there is a trend of greater automation in document management, primarily due to a continuously growing proportion of digitized information and higher personnel costs. Although a large part of manual data entry has been moved to low-cost countries such as China and India, salary costs have gradually begun to increase in these countries as well, as their domestic markets grow.
At the same time, accelerating development and global competition mean that companies are in greater need of improving the interaction of different departments, acquiring more and faster information and continuously cutting costs.
This has resulted in the growing use of Intelligent Data Recognition (IDR), primarily in invoice processing, where solutions connected to SAP and Oracle-based workfl ows provide major cost savings. At the same time, there is great potential for other applications, since IDR can be used for the management of all incoming information and integration with various ERP systems.
IDR can in many ways reduce the need for EDI solu- tions and standardized XML formats (used to structure and organize information and data). For example, insur- ance companies and banks can more easily check that documents contain the correct information.
A general trend driving market growth is for collective IT investments to increasingly be allocated to areas such as coordination, regulatory compliance, market awareness, computer integration and security. For example, according to International Data Group’s (IDG) Executive Report of January 2008, automatic document management ranks third on the list of important investments during
Segment distribution 2006
Data Capture for Transaction Processing
& Process Management, 34%
Full Text Capture, 16%
Batch & Distributed Batch Capture, 26%
Ad-Hoc & Desktop Capture, 24%
Global market for document automation software in 2006
North America, 54%
Europe, Middle East, Africa, 36%
Rest of the world, 10%
Did you know…
…that ReadSoft’s history began in 1988 when two university colleagues, Jan Andersson and Lars Appel- stål, began programming a system to interpret hand- written information? They called their program Eyes
& Hands.
Source: Harvey Spencer Associates Inc.
M A R K E T
2008 as selected by IT managers. Requirements for transparency and being able to monitor business events in real time also increase the need to be able to extract and process information from business documents in as early a phase as possible.
This benefi ts the suppliers that can offer compre- hensive solutions that capture, interpret and classify information and can be easily integrated with the major established business systems from SAP, Oracle and Microsoft.
Global regulatory requirements on document management
The global economy is driving the development of regu- lations that are not limited by borders and will prevent fi nancial crime and other improprieties. Consequently, companies with global operations must increasingly install common systems that follow a certain standard, which benefi ts the market for automatic document management.
One example is Basel II, which means that every bank that conducts business in different countries must have risk management systems. Other examples include the US Patriot Act, which affects all companies that export to the US and all of those who live in the US and have a bank account abroad. The US corporate legislation, the Sarbanes Oxley Act (SOX), affects both companies in the US and the rest of the world. Within the EU, directives have been issued that will harmonize various kinds of business operations within the entire union.
Regulations similar to SOX will also enter into effect in Japan during 2008.
These regulations mean that all listed companies must standardize and control their information in more effective and secure ways. This results in IT systems gradually becoming more similar in all countries. This is a trend that primarily benefi ts the suppliers that can offer multinational corporations both standardized document management solutions and global support.
Background
With 18 million customers, 6,100 distributors and SEK 79.6 billion in sales, SFR is France’s second-largest mobile phone operator. The company is 56-percent owned by Vivendi and 44 percent by Vodafone.
Problem
SFR’s accounts department sought a solution that could centralize administration and automate the handling of approximately 200,000 invoices received by the company each year. To be able to automate the entire fl ow, from electronic ordering to electronic invoicing, a solution was required that could be connected with the company’s existing SAP system. In addition, it was important to be able to meet SFR’s internal auditing rules and the require- ments of the Sarbanes Oxley Act (SOX).
Solution
SFR selected a solution that comprised a number of prod- ucts within the framework of ReadSoft DOCUMENTS for Invoices: INVOICES, which automatically registers the information on incoming invoices, INVOICE COCKPIT, which is a control feature for incoming invoices in a SAP environment, WEBCYCLE, an electronic workfl ow in a SAP environment, and ANALYZER, a reporting and analysis tool.
As well as improving its internal processes, mobile phone operator SFR also anticipates being able to better capitalize on the skills of its personnel. The fl ow of information will be simpler, faster and also traceable, from beginning to end. The company also anticipates being able to pay its suppliers more rapidly, which will lead to better relations and benefi t both parties.
“Mobile phone operator SFR will now be able to pay its suppliers more rapidly, which will lead to better relations and benefi t both parties.”
Christian Goizet, Key Account Manager ReadSoft France
Sources: Harvey Spencer Associates Inc., IDG, SOX
SFR
Five forces that drive the market
Companies with multinational operations increasingly coordinate and centralize their fi nancial administration from a single geographic location. Document manage- ment solutions are becoming crucial for global compa- nies to be able to have functional and smooth business processes with different units spread worldwide.
The increase in e-commerce transactions entails accelerating cycles in business. To be able to compete, companies must be able to manage all kinds of docu- ments at a speed that is adjusted to electronic trans- fer. This means that Intelligent Data Recognition (IDR) must be used to capture and interpret data from
documents. Sources: Harvey
Spencer Associates Inc.
Security is becoming increasingly important in pace with laws and regulations, such as the Swedish Code of Corporate Governance and US corporate legislation, SOX, placing major demands on documents not being able to be changed or manipulated. Document manage- ment solutions automatically store information and can indicate if anything has been changed or manipulated.
The integration of various IT systems and requirements to be able to extract information from them more easily and quickly means that the need for document management solutions is growing.
The pure volume of documents continues to grow in pace with economic growth. This is true of both elec- tronic documents and paper documents. Global eco- nomic growth is forecast at around 5 percent in 2008.
C O M P E T I TO R S
The largest segment is
growing the fastest and we are
leading development
The market for document automation soft- ware is fragmented, but is being consolidated.
This segment represents 34 percent of the Data Capture market, forecast to reach approximately USD 900 million in 2010.
There is a trend for large companies to buy small companies to gain access to technology and new markets. This is according to Harvey Spencer Associates in its report of June 2006
“Software Document Capture Supplier Vendors.”
The market is changing through increased e-commerce and the need to process information faster. The volume of documents is growing at the same time as competi- tion is becoming tougher. Some of the trends that the analyst fi rm, Harvey Spencer, sees are the following:
• The market in the US is maturing. Several small companies are under considerable pressure. The smallest players are disappearing, changing direction or being bought up.
• The largest players in the industry have a wide range in their product offerings and their reach extends to both North America and Europe. Forming partnerships and new routes to markets is becoming increasingly important. Examples of this include EMC’s acquisition of Captiva and Dicom’s acquisition of Kofax. Autonomy acquired Verity, relaunched the Cardiff brand and is now among the fi ve largest players in Data Capture.
• Invoice processing is offered by growing numbers of suppliers. The most advanced suppliers offer integrated SAP solutions.
• The electronic mailroom, which transfers and for- wards incoming letters electronically, is being received with growing interest.
There are some 40 competing document automation software companies in the world. ReadSoft has maintained its market-leading position in the segment for process and transaction management. This market segment is the largest in the overall market for document automation software. The fi ve largest companies accounted for approximately 48 percent of the market for process and transaction management in 2006.
It is diffi cult to make a statement regarding the competitors’ strengths and weaknesses with regard to their underlying technical solutions, as they are not
Data Capture for Process and Transaction Management, 2006
ReadSoft 15%
EMC/Captiva 8%
TopImage Systems 8%
Autonomy/Cardiff 6%
Dicom/Kofax 6%
Next five players, 25%
Others, 32%
Source: Harvey Spencer Associates inc.
