TWST: Could you please give us a brief overview of Synygy today, including a bit of history?

Mr. Stiffler: Synygy is the largest provider of a class of software known as enterprise incentive management (EIM) software. We also provide performance management solutions in the areas of sales performance management and enterprise performance management. The company was founded in 1991, and this quarter is our 43rd consecutive quarter of profitable, quarter-over-quarter revenue growth. We have been growing for 10 years, consistently. That's put us on the Inc. 500 Hall of Fame ' one of only 61 companies in the history of the magazine ' and it put us locally on the Philly 100 for the eighth year in a row. We're now the only company to have ever done that.

TWST: Are there any segments of the markets that you are targeting or is your software used pretty much across the board by all verticals?

Mr. Stiffler: Our client list includes companies across all verticals, including companies like GE Lighting, Coors Brewing, Sun Microsystems and Hewlett-Packard. Mainly large companies, although it applies across the board in all verticals. We have a heavy focus on financial services, insurance, brokerage and banking, as well as health care, including pharmaceuticals and other verticals as well.

TWST: Is size an important factor?

Mr. Stiffler: Size of our clients has been a factor. We have focused on companies with over 1,000 participants; however, we now have solutions for companies as small as 50 participants.

TWST: How are the macroeconomic circumstances currently impacting your company?

Mr. Stiffler: It has slowed our rate of growth, but we continue to grow very impressively because of our business model, which is built on subscription revenue. Once we have a client, they remain a client for a very long time, and we are able to grow our revenue by building on our base of recurring revenue.

TWST: How is your competition reacting to what is going on and what do you consider as your strengths and advantages when you compare yourself to them?

Mr. Stiffler: Our competitors all have traditional software licensing models, and they have been hit very hard by the economic slowdown. We are the only profitable company in our space, and that has given the issue of financial viability importance in the marketplace.

TWST: How do you keep yourself profitable?

Mr. Stiffler: We run the business very soundly. We live within our means. We make investments in the future ' such as in R&D, where we are spending 25% of our revenue, and in sales and marketing ' but we do so within our means.

TWST: During this period of downturn, what area are you de- emphasizing and what are you emphasizing?

Mr. Stiffler: With our focus, we are very much emphasizing the execution of our sales and marketing strategy, making some pretty significant investments in R&D, and using the economic downturn as an opportunity to do selective acquisitions.

TWST: Could you be more specific as far as acquisitions are concerned? What are your target companies or what sort of synergies are you looking for?

Mr. Stiffler: We are looking for companies that extend our product line consistent with our product strategy, which is to focus on broader performance management issues. So not just incentive compensation, but how incentive compensation can be integrated into other performance areas. We announced in September an acquisition of a small company that enabled us to expand the functionality of our performance management offering with our Synygy Objectives product, which is for taking corporate goals and cascading those goals down into individual objectives, linking that to pay and providing real time information to participants.

TWST: Are you a global player or is your business pretty much in America?

Mr. Stiffler: We do have global accounts, so we are not just in the United States.

TWST: Are you planning any significant expansion there or will your focus continue to be in North America?

Mr. Stiffler: Our focus is in North America, because of the large, untapped potential of that marketplace. At the same time, we are bringing on staff and realigning our sales force to focus on international expansion.

TWST: What significant changes are you expecting in your market, let's say, over the next several years?

Mr. Stiffler: I think the biggest change in our marketplace is increased recognition that enterprise incentive management is a key way in which companies can motivate the workforce and that, by properly managing incentive compensation, companies can see a dramatic return on their investment. For instance, Giga recently did a total economic impact study by interviewing our clients and found a 173% internal rate of return over three-year period. That's an annualized internal rate of return of 173% just by investing in our solutions. So given this proven return, the market is recognizing that enterprise incentive management is a solution that all companies need to consider.

TWST: Could you give us a sense of your strategic direction over the next couple of years?

Mr. Stiffler: Our strategic direction is one of focusing on the broader performance management area and linking incentive compensation to the different components of performance management. For instance, in sales performance management, we are linking territory alignments, individual sales quotas, variable pay and real-time metrics and analytics; whereas, in the broader enterprise performance management market, which is of interest especially to people in the human resources area, we are linking corporate goals, individual objectives, variable pay and real- time information. We're really focusing on how to leverage incentive compensation by linking it to upstream and downstream issues of importance to the organization.

TWST: Is this strategy derived from feedback that you have been getting from your clients?

Mr. Stiffler: Absolutely. There is a strong need to get the maximum productivity out of your workforce. Performance management ' providing people with objectives and linking those objectives to pay across the organization, not just in the sales organization ' is what's driving our strategy.

TWST: Do you have the balance sheet to accomplish all of your goals?

Mr. Stiffler: Yes, we do.

TWST: Thus far, how has your company been financed?

Mr. Stiffler: Our company has been financed over the past 10 years through retained earnings, which is unique. We do not have any outside investors or any outside equity investors, nor do we intend to go public. We have used traditional asset-based lending and credit lines as well as some government grants to finance the company.

TWST: I have read in one of your reports that your revenues are in the vicinity of $40 million and you are profitable and you've been profitable for quite sometime. What sort of revenues are you expecting for 2002?

Mr. Stiffler: We will get very close to $40 million.

TWST: What sort of corporate culture have you tried to develop at the company?

Mr. Stiffler: Our corporate culture is one that's based on our core values, which we spell OPTIC; OPTIC stands for ownership, professionalism, teamwork, continuous improvement and client focus. You'll notice that in our core values and in our culture, our focus is on our clients and doing what it takes to satisfy our client's needs. Our culture isn't one that's built on a get- rich-quick scheme or go public and cash out. It is built on our customers and satisfying the needs of our customers.

TWST: As far as you personally are concerned, what is your main concentration day by day? What do you work on the most?

Mr. Stiffler: It changes every month. My focus earlier in the year was on building a world-class software development organization and changing some of our processes internally to both be more productive and have higher quality software. We made investments of over $1 million in tools to improve quality. My focus now is on sales and marketing execution.

TWST: How would a prolonged slowdown in the economy affect a company such as yours? You have been profitable even with what's going on and with other software companies hurting. If this slowdown continues for an extended period of time, will you still be profitable?

Mr. Stiffler: We will still be profitable and in fact we will be a much stronger company than our competitors will be. Our base of recurring revenue will allow us to continue to grow it more slowly ' not the 80%-60% that we were used to growing, but growth in the 20%-50% range. We will be profitable and remain financially viable.

TWST: You said earlier that you have not received any venture financing, but if an opportunity came along to do an IPO, would you be receptive to that?

Mr. Stiffler: No, we would not. We don't believe that that's in the best interest of our clients.

TWST: Realistically, what is the total picture you see for your company in the year 2004 and what are your milestones along the way?

Mr. Stiffler: The total picture is that in 2004, we will have completely rolled out our product strategy and created a much broader product footprint that will enable us to more effectively compete against the larger enterprise software companies so that we are perceived not just as a niche software player, but as an enterprise software company having a broad product footprint.

TWST: With the acquisitions that you are planning, will size be a critical factor?

Mr. Stiffler: Size will absolutely be a critical factor, but the breadth of our product line will be critical also.

TWST: Thank you. (WT)

MARK A. STIFFLER President & CEO Synygy, Inc. 555 North Lane Suite 6000 Conshohocken, PA 19428 (610) 664-7433 www.synygy.com

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