SageworksInc.GlobeSt.com

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GlobeSt.com: Sageworks promises to transform complexfinancial numbers into plain language. In brief, tell me about thetechnology behind that mission.

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Filipponi: Our patented expert system takes incomestatement and balance sheet inputs and calculates a series offinancial ratios. The ratios are then benchmarked againstindustry-specific peers and graded in order to produce a narrativeanalysis on the company's financial position. We comment onliquidity, profitability, sales, borrowing and assets usage. Thetechnology was developed to help business owners understand theirfinances better.

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Globest.com: What are your primary products?

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Filipponi: We have three primary products: ProfitCents,the expert system narrative financial analysis technology, a creditanalysis tool called Sageworks Analyst, which is used by communitybanks, and Sageworks Index, our private companyindustry-benchmarking platform.

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GlobeSt.com: Can commercial real estate professionals,including brokers, developers and lenders, benefit from the use ofany of your products? Would it be beneficial, perhaps, for theowner of a shopping center to study certain industry benchmarksbefore signing a lease with a specific company?

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Filipponi: Yes, commercial real estate professionals canuse our industry data to evaluate their own business's performanceand, as you suggest, to study industry benchmarks before signing alease. We have accumulated data on approximately 95% of industry byNAICS codes. For example, if the owner of a piece of commercialreal estate was trying to decide whether or not to lease space to aparticular CPA firm, they could use our tool to research thefinancial state of the industry. If they wanted to see the trendsin profitability and the ability to service debt for Offices ofCPAs (NAICS code 541211), then they could easily use our tool to doso. They could also get the companies financials, plug them intoour system, and get a direct comparison between that particular CPAfirm and the average metrics for that industry.

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Globest.com: To date, has there been much interest inyour products from the real estate community?

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Filipponi: We have not focused a lot of attention on thereal estate community, outside of the community bank market. Wehave a tool called Real Estate Analyst, which is part of ourSageworks Analyst credit analysis suite. It allows banks to inputspreads and stress test the income from operations and value basedon vacancy rates and other factors. It also generates a report withuseful metrics such as the debt service coverage ratio and networth, among other profitability, activity, and liquidity ratios,so that the bank and can have a tool to help them make decisions onwhether or not to lend, what amount to lend, etc.

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Globest.com: If technology has evolved to the pointthat data can be transformed to understandable language, thenshouldn't we expect businesses, especially bankers, to make betterdecisions? In other words, shouldn't the use of tools like thesehave prevented the mistakes that resulted in this current crisis inthe economy?

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Filipponi: Yes and no. Our technology is very useful inhelping financial professionals [including bankers]and businessowners make sense out of financial statements and ratios. However,like other technology, the onus ultimately falls on the user. Theuser must determine how to use the software and how to bring inoutside data to combine with our analysis for greater context. Webelieve that when used in the proper context, our tools can be veryuseful for performing an accurate financial analysis on a companyor group of companies, as well as individuals and pieces of realestate, to identify problem areas and fix them before they get outof hand.

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