Elite Information Group – leader in enterprise solutions for professional services organizations
showing strong financial results

Technology
Computer Networks
NASD: ELTE

Elite Information Group, Inc.

5100 West Goldleaf Circle, Suite 100
Los Angeles, CA 90056
Phone: 323-642-5200



Christopher K. Poole
Chairman, President and
Chief Executive Officer

Interview conducted by:
Walter Banks, Co-Publisher

CEOCFOinterviews.com
October 2001

BIO OF CEO,

Chris Poole
Chairman and Chief Executive Officer, Elite Information Group
Chris joined Elite in 1995 as Chief Operating Officer and was promoted to President in 1997.  In 1999, Chris was elected Chairman and CEO following the divestiture of the company's customer relationship management business in Charlotte and the renaming of the parent company from Broadway and Seymour to Elite Information Group, Inc.  Prior to joining Elite, Chris was the Executive Director at Latham & Watkins, one of the largest law firms in the world.  He joined Latham & Watkins in 1989 as their Director of Technology and helped transform the firm into one of the most advanced users of legal technology in the world.  He holds a BA in Economics from Harvard University and an MBA in Computer Science and Marketing from the Anderson Graduate School for Management at UCLA. 

Elite Information Group, Inc.

Established in 1949, Elite is the world leader in enterprise software solutions for professional services firms.  Elite has installations in more than 800 firms internationally. Elite Information Group is traded on the NASDAQ under the symbol ELTE, and is the parent company to Elite Information Systems, Inc., Elite.com, and Law Manager, Inc. 

Elite's software and database technology has proven itself in professional services firms throughout the world and ranging in size from sole practitioners to over 4000 timekeepers.  Elite is the practice management system used by more than half the AmLaw 100.  65 of the top 100 US law firms use Elite’s Professional Billing System.

Elite’s Professional Services Suite, which was introduced in 2001, addresses the demands of professional services firms outside the legal industry.  Resource management, project management, knowledge management, and travel & expense management integrate seamlessly with Elite’s financial management and billing solutions to provide a robust means of managing service delivery and profitability at the resource level. 

Elite’s Web-based solutions allow professional services firms of any size to benefit from the best systems, service and support in the business.  Elite’s ASP hosting solution, e-Connect from Elite, allows users to access Elite's industry-leading suite of practice and financial management applications in a hosted, secure and reliable environment via the Internet. 

Building on Elite Information Group’s reputation and experience as the leading financial and practice management solution for the legal market, Elite.com provides small and sole practitioner professional services firms an easy way to improve cash flow through the most innovative online time and billing system.  Elite.com leverages the Internet to enable professionals and consultants — anyone who tracks and bills time — to account for time-based activities and expenses and to send out invoices, anytime and anywhere.

Law Manager, Inc. is a leading knowledge management system facilitating the Business-to-Business functions of corporate, government, and law departments for litigation support, case management, matter management, and project management.  By providing web-enabled invoicing and budget analysis at the law firm site, and management of outside counsel matters and vendor relations for in-house counsel, the Law Manager Notebook and Toolkit make the Internet a practical and valuable resource for lawyers and clients alike.

Elite combines strong product development, great technology, and great people to compete in the legal enterprise software vertical and to power its growth in the broader professional services market.  The company strives to hire and retain quality employees.  As a result, the Elite team has the highest level of expertise of any company serving the professional services market.  Many of Elite’s employees have advanced business or technical degrees or both.  Approximately two-thirds of the company’s employees are devoted to customer support, training, and installation..  Virtually all employees have prior experience in professional service firms, accounting, or technical implementation, so they understand the pressures, deadlines, and requirements of the markets they serve.

CEOCFOinterviews - Mr. Poole, can you give us a brief history of Elite? 

Mr. Poole: "Elite was originally a family run company based in Los Angeles. It was founded in l947, and has been in the software business since the early eighties. In 1994 we were acquired by a Charlotte-based software company that was pursuing a consolidation strategy. That corporate entity proved to be unsuccessful, but the Elite core business continued , although Elite to grow and prosper. There ensued a series of divestitures, until we eventually spun off the parent company itself, which was an unusual transaction, taking over our public company listing on NASDAQ and changing the symbol to today’s ELTE."

"I think it is very important for everybody who is reading about our company, to dig in and get the history of Elite. Most of the publicly available information makes it difficult to understand, primarily because we were a private company for a long time, then a wholly owned subsidiary of a company that was sold, and only recently have broken out as an independent public company. If you look at the numbers that our core business has produced over the last several years you actually see a very, very consistent track record of 30 - 35% revenue growth, and this year’s cash flow and earnings growth is even higher. We think we are poised for continued growth, and we are confident about our plan."

CEOCFOinterviews - How long have you been with Elite?

Mr. Poole: "I have been with the company since 1995. I joined as COO and was promoted to CEO and chairman about 2 years ago."

CEOCFOinterviews - What would you say is your most recent and exciting news?

Mr. Poole: "We have a lot of news this year. I would say, probably our best news these days is our financial results. As everyone can see, we are in a very difficult economy. You can read in the papers every day how these great companies are having downyears and laying people off.  However, this company is building a head of steam with record revenues and profits, hiring people, and hopefully doing a good job raising a lot of value for our shareholders."

CEOCFOinterviews - Can you give us a description of your revenue model, how many different ways of developing revenue do you have at this point?

Mr. Poole: "As one of the world’s leading professional service automation firms, we have been a little quiet, and less visible over the last couple of years, since we have never portrayed ourselves as a dot-com kind of a company. We are a good, solid company that sells high-value software and we are making a good return on it today. Our forte is in the timekeeping and billing arena that is the core of all of our software suites. We grew up in the legal vertical, where we became the largest supplier of time, billing and accounting systems for law firms. We now have roughly 60% of the largest 100 firms in the United States as customers and probably 35% of the top 1000 firms. In addition, we have many good customers outside the United States, primarily in Canada, the United Kingdom and Western Europe. We have two suites:  (1) a legal suite, in which we bundle applications that are specifically for law firms, like records management, conflict of interest checking, with the best time and billing "engine" in the industry; and, (2) we have a professional services suite that integrates new software that helps firms do resource or project management and other things that are a little more appropriate outside the legal vertical with financial management."

CEOCFOinterviews - Do you sell software, or services, or is it a combination of both?

Mr. Poole: "It is a combination of both. We use a direct sales channel, design and create our own software, and we do most of our own implementation and training work as well."

CEOCFOinterviews - What percentage of your revenue goes into research and development at this point?

Mr. Poole: "We are spending about 12% of our revenue on R&D, which is relatively standard in our industry, yet is notably high for us. We traditionally have spent closer to 7 or 8% of our revenues on R&D and this year particularly we’ve ramped that up dramatically."

CEOCFOinterviews – Are there any new products coming out in the future that people should look for?

Mr. Poole: "Yes, we have a lot of new things. In fact, our biggest news this year outside of keeping our financial results coming in is the introduction of many new products. We are about to announce what we call the Elite SPO suite which is essentially what I have just described: our suite of practice management software for professional services firms, aimed primarily outside of the legal industry. In addition, we are going to be announcing new applications in other areas that extend what we do. We are trying to stay fairly focused on our strategy of automating professional service firms and building around our core strengths in the time and billing area. We have a new CRM product called APEX and we hope to have some good news to announce shortly. One of the companies we own is called Law Manager. They are based in Pennsylvania, selling primarily practice management tools to corporate legal departments and government agencies. They have just won a couple of very large projects that will begin soon. Yes, there is a lot of good news coming out of the company."

CEOCFOinterviews – Which area of your business has the greatest growth potential?

Mr. Poole: "Under the umbrella of the parent company, Elite Information Group, there are three operating companies. Elite Information Systems is our core business and represents 90% of our revenue: that is what we were talking about most of the time today.

Law Manager, our corporate and government-targeted firm, may this year comprise just a little over 10% of our revenue. It currently has the largest growth potential. Their average sale can go anywhere from 300 thousand to several million dollars. They are focused on a smaller number of larger prospects. They are also much more heavily biased towards service revenue, selling a very sophisticated tool, if you will, that can be customized depending on a clients’ needs. It is primarily used to track large volumes of litigation activity, yet can also be used in a variety of other ways. We have high expectations for Law Manager. They will have record revenues this year and we hope that they will have a very steep growth over the next few years.

Elite.com, a smaller, newer company provides a host of services for small professional services firms doing a very lightweight yet sophisticated tracking of time and billing. Elite.com is a great business, yet has much more uncertainty related to it. Most of its competitors and similar companies are falling by the wayside; their average sale is more like $10 a month per user. You need plenty of subscribers in order to make that business model successful. We feel that it is important to cover the bases as well as the market that we know well, in order that we can cover the sole practitioner, the very small service firm, and we can deal with large service firms and their clients as well. We feel that, on one hand, we are sticking to our knitting and only doing what we know how to do well, yet we also cover the wide span of that market which gives us the growth potential."

CEOCFOinterviews - What is your sales and marketing approach? 

Mr. Poole: "We have traditionally taken a direct sales approach. We originally grew up in a dealer model, distributing our software primarily to dealers in the United States. We transitioned that over a period of many years to a direct sales model, and we now have sales managers positioned all around the United States, Canada, United Kingdom and Western Europe. Our marketing has been relatively minimal over the last several years, because we had established such a good presence in the legal vertical that we did not have to tell people who we were anymore. However, we are going to be revving up our marketing engines once again as we go into new products and new markets."

CEOCFOinterviews - What do clients pay for your software and services?

Mr. Poole: "It ranges over a very broad scale. We price our software based on the size of the organization to which we are selling. Therefore, the selling price can be anywhere from $75,000 to several million dollars. On average, right now, I would say, a new sale is in the $300,000  - $400,000 range. And each new sale consists roughly of 50% software and 50% services."

CEOCFOinterviews - Can you give us a picture of the size of your current market and what it will look like as you branch out?

Mr. Poole: "These numbers are always hard to pin down. The legal industry is a multibillion dollar one in terms of the revenues of the firms. There are anywhere between 15-20 thousand law firms in the United States alone. Most of them are small. We tend to focus on the medium and large customers and that is a several hundred million dollar industry. We do have a fairly high market share and can expect to continue moderate growth in legal. Once we branch outside of legal, the markets, just for systems like the ones we sell, are typically quoted anywhere between $3-6 billion.  We are pretty confident with our strength and our track record that even a fairly low penetration into some of these new markets will fuel a lot of growth for the company."

CEOCFOinterviews - What are some of the new markets?

Mr. Poole: "Primarily, we are going to focus on professional services verticals, like management consulting, systems integrators, accounting firms, any types of professional service firms where it is very important for them to closely track their human resources, (the time those people spend) and then efficiently getting that time billed. We already have customers across a very broad range of verticals, from public relations and advertising to security firms like Pinkertons and Kroll-O’Gara. Having already established that our software is applicable to a wide variety of verticals, we are focused primarily on the largest professional service verticals where time management and billing are very important."

CEOCFOinterviews – Are you staying ahead of your competitors and how are things shaping up as you expand the marketing arena? 

Mr. Poole: "You have to look at the different markets where we do business. In the legal vertical, we are clearly the largest player. We have able competitors, most of them much smaller than we are. However, we feel we have a very strong competitive position in that market and we will continue to pay close attention to our customers and prospects in the legal vertical. Once we branch out, we do get into a little tougher competitive field, where we have already bumped into companies like Oracle or PeopleSoft., Mostly, though, I think we will be competing head-to-head with companies that address the middle market. Obviously we have work to do to establish a track record, yet we feel very confident in our ability to compete with the players there."

CEOCFOinterviews - What do you think gives you that competitive edge?

Mr. Poole: "We already have a very strong customer base that we can reference. That will give us a positive advantage. Moreover, we are a much more stable company than many of the players in that area. We have seen, over the last few years, enough companies come out of nowhere and most of them are going, or have gone out of business. We think we have a good, highly focused strategy, a very high quality, stable work force, and we are well capitalized. Therefore, we think we can go out there and have a lot of success."

CEOCFOinterviews - Is your company focusing on any growth through acquisitions?

Mr. Poole: "No. Traditionally we have focused on organic growth. We have made acquisitions in the past, very judiciously. We acquired another time and billing vendor several years ago and last year we acquired the company that I had mentioned, Law Manager. These are the only acquisitions Elite has made and we want to make sure that we get each one right. We are likely to develop primarily through organic growth, unless we see something that is very closely aligned and in the path of our primary strategy to be in the professional services market.”

CEOCFOinterviews - Are you satisfied with your cash and credit position?

Mr. Poole: "I would almost say that it couldn’t get any better, although you can never have enough cash. We have certainly more than adequate cash reserves to fund our business for quite some time. We never had any debt, and we do not have any debt today."

”We have a very strong balance sheet.  As well, we have maintained for the last several years our cash balances in excess of 20 million dollars and that tends to go up instead of down. The company has a very strong foundation and that is just another reason why we believe in our ability to succeed down the road."

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

Mr. Poole: "Keep an eye on the company closely this year, because we expect to continue to have good news. We had a very strong second quarter and we finished last year by building a significant backlog. We think we are on a very good roll here. It is going to be a lot of hard work to keep it up in this kind of economy, yet we expect a lot of good things to come."