A 2013 acquisition laid the foundation for Kofax Inc.’s fastest-growing line of business as corporations seek to replace human workers with automated software in the digital age.
It’s called robotic process automation, essentially software that mimics human actions—like using a mouse to surf Web pages or a keyboard to update a spreadsheet—to fulfill a variety of manual, repetitive tasks.
“You can program a robot to re-execute itself every minute, every hour, every day, every week,” said Kofax Chief Executive Reynolds Bish. “It then acts, essentially, as a delegate.”
The business software maker is so bullish on the emerging technology, it’s declared 2018 the “Year of the Robot.”
And the numbers seem to justify the focus. Its RPA business now accounts for about $45 million, or roughly 12.5% of the Irvine-based company’s $360 million in annual sales, according to Bish. Meanwhile, Massachusetts-based market tracker Forrester Research Inc. forecasts sales and services in the global robotic market to rise from $250 million in 2016 to $2.9 billion in 2021.
The company’s core RPA products, Kofax Kapow and Kofax TotalAgility, attracted contracts worth more than $25 million in the fourth quarter, including the company’s most valued deal yet in the segment. The unnamed customers included a top 10 global bank and a reseller.
Kofax has certified more than 165 resellers in its global channel partner program to meet demand for RPA software, particularly in the financial services and logistics sectors as the former shrinks branch counts and the latter seeks to streamline business operations. The moves led to a 50% Kofax sales jump in the reseller program over two years, according to the company, which has struck other alliances with big consultants and systems integrators, such as Deloitte and Infosys.
Software robots are created without complex coding or lengthy development cycles for ease of use and time savings, according to Kofax, and have the ability to handle a wide range of daily tasks, including customer and sales-relationship management computer entry; retrieving and assembling information for financial reporting; managing accounts payable and receivable; and running processes that identify, authenticate, procure and handle pricing queries.
“We can automate all that with a robot,” Bish said.
The core technology was acquired five years ago in a $47 million deal for Kapow Software, a Palo Alto company that specialized in data integration software. Kapow’s annual revenue was about $15 million, and it had about 150 customers.
“It’s the fastest-growing product line since we acquired it,” Bish said.
Kofax has invested more than $50 million in research and development since the Kapow buy, bolstering the technology in-house through a network of off-shore developers in Demark and St. Petersburg, Russia, which is home to 150 Kofax employees. It’s also integrated features from acquisitions, such as a $13.5 million deal for Pennsylvania-based Altosoft Inc., a business intelligence and analytics software developer acquired a few months before Kapow.
Kofax employs about 1,600, 325 of them in Irvine.
Its RPA customer base has grown to more than 600 in the banking, insurance, supply chain and distribution, finance, accounting, marketing and customer service sectors, including Union Bank, Audi and Arrow Electronics.
The company has more than 21,000 total customers.
Efficiency Its Game
Kofax, which got its start in 1985 in Irvine, built a brand with scanning software to streamline information flow, eliminate paper, reduce costs, and improve customer service.
The company changed hands three times in as many years, going from a publicly traded company to a privately held one along the way.
Its last sale came in July, when Lexmark International sold its enterprise software business, which consisted of Kofax, ReadSoft and Perceptive, for an estimated $1.2 billion to Chicago-based private equity firm Thoma Bravo.
Kofax was publicly traded for years in the United Kingdom, under parent company, Dicom Group PLC, which acquired it in late 1999. It officially moved its headquarters to Irvine, which had long been its operational base—in 2008 when Bish engineered a turnaround that included changing the name of parent company Dicom Group to Kofax.
It began trading on the Nasdaq in December 2013 under the symbol KFX, raising $11 million in an initial public offering that valued it at about $536 million. The first IPO in the local tech sector in several years was intended to boost awareness and reflect the company’s changing base of investors as it further distanced itself from its U.K. roots.
It was sold in May 2015 for $1 billion to Lexington, Kentucky-based Lexmark, ending its short stint as a U.S. public company with a bang, attracting a nearly 50% premium on its share price. The deal nearly doubled the size of Lexmark’s enterprise software business to $700 million in annual revenue.
Lexmark was taken private in 2016 in a $3.6 billion takeover by a consortium of Chinese investors that included Legend Capital Management Co. Ltd. in Beijing and Hong Kong-based electronics manufacturer Apex Technology Co. Ltd. and PAG Asia Capital, an independent alternative investment firm that manages $18 billion in capital.
Shortly after the sale, the Chinese investors engaged Bish to carve out the software business, which included 14 acquisitions made over the years. ReadSoft was the 11th, Kofax the last.
In mid-April Bish struck a deal to sell Lexmark’s enterprise software division to Thoma Bravo, which has more than $17 billion in capital commitments through several funds.
“We’ve been very pleased with what we’ve created since then,” he told the Business Journal.
