Sageworks Inc. GlobeSt.com

GlobeSt.com: Sageworks promises to transform complex financial numbers into plain language. In brief, tell me about the technology behind that mission.

Filipponi: Our patented expert system takes income statement and balance sheet inputs and calculates a series of financial ratios. The ratios are then benchmarked against industry-specific peers and graded in order to produce a narrative analysis on the company's financial position. We comment on liquidity, profitability, sales, borrowing and assets usage. The technology was developed to help business owners understand their finances better.

Globest.com: What are your primary products?

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

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

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

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

Filipponi: We have not focused a lot of attention on the real estate community, outside of the community bank market. We have a tool called Real Estate Analyst, which is part of our Sageworks Analyst credit analysis suite. It allows banks to input spreads and stress test the income from operations and value based on vacancy rates and other factors. It also generates a report with useful metrics such as the debt service coverage ratio and net worth, among other profitability, activity, and liquidity ratios, so that the bank and can have a tool to help them make decisions on whether or not to lend, what amount to lend, etc.

Globest.com: If technology has evolved to the point that data can be transformed to understandable language, then shouldn't we expect businesses, especially bankers, to make better decisions? In other words, shouldn't the use of tools like these have prevented the mistakes that resulted in this current crisis in the economy?

Filipponi: Yes and no. Our technology is very useful in helping financial professionals [including bankers]and business owners make sense out of financial statements and ratios. However, like other technology, the onus ultimately falls on the user. The user must determine how to use the software and how to bring in outside data to combine with our analysis for greater context. We believe that when used in the proper context, our tools can be very useful for performing an accurate financial analysis on a company or group of companies, as well as individuals and pieces of real estate, to identify problem areas and fix them before they get out of hand.

Instant Insights /

Sageworks: Making Tools to Craft Financial Decisions

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