Filing under Rule 425 under the Securities
Act of 1933 and deemed filed under Rule 14a-12
of the Securities Exchange Act of 1934.
Filing by Vialog Corporation
Subject Company: VIALOG
SEC File No. of VIALOG: 001-15527
[LOGO] VIALOG(R)
The Conferencing Company
AT THE COMPANY: AT THE FINANCIAL RELATIONS BOARD/BSMG WORLDWIDE:
MICHAEL E. SAVAGE MARILYN WINDSOR DOUG BRODERICK TIM GRACE
CHIEF FINANCIAL OFFICER GENERAL INQUIRIES ANALYST INQUIRIES MEDIA INQUIRIES
(781) 761-6200 (312) 640-6692 (312) 274-2266 (312) 274-2240
FOR IMMEDIATE RELEASE
MONDAY, MARCH 5, 2001
VIALOG REPORTS RECORD RESULTS FOR FOURTH QUARTER, FULL YEAR 2000;
JANUARY 2001 YEAR-OVER-YEAR REVENUE GROWTH 27%,
GROSS MARGIN 59.6%, EBITDA MARGIN 29.6%
RAPID ADOPTION OF AUTOMATED SERVICES BOOSTS GROWTH AND MARGINS
HIGHLIGHTS:
o JANUARY 2001 REVENUE UP 27% OVER PAST YEAR; GROSS MARGIN UP TO 59.6%
o JANUARY 2001 EBITDA MARGIN 29.6%
o CALL VOLUMES UP 39% IN 4Q; 65% IN JANUARY
o READY-TO-MEET NOW $18M ANNUAL RUN RATE
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SUMMARY OF CONSOLIDATED OPERATIONS
THREE MONTHS ENDED TWELVE MONTHS ENDED JANUARY
DECEMBER 31, DECEMBER 31,
----------------------------- -------------------------------- -----------------------------
2000 1999 2000 1999 2001 2000
---- ---- ---- ---- ---- ----
(UNAUDITED) (UNAUDITED)
NET REVENUES $ 19,800 $ 17,714 $ 77,587 $ 68,629 $7,704 $ 6,068
OPERATING INCOME 257 770 5,373 1,568 1,410 600
NET INCOME (LOSS) (3,147) (2,717) (9,156) (12,120) 166 (554)
EPS (0.32) (0.30) (0.97) (1.53) 0.02 (0.06)
EBITDA 3,728 * 3,186 17,674 ** 13,989 *** 2,278 1,354
<FN>
* EXCLUDES $1.0 MILLION IN TELECOM AND ACCOUNTS RECEIVABLE RESERVE ADJUSTMENTS
** EXCLUDES $1.0 MILLION IN ADJUSTMENTS NOTED ABOVE AND $1.7 MILLION WRITEOFF OF DEBT REFINANCING COSTS
*** EXCLUDES $4.2 MILLION RESTRUCTURING AND SEVERANCE CHARGES
</FN>
- ---------------------------------------------------------------------------------------------------------------------------------
BEDFORD, MASS., MARCH 5, 2001--VIALOG CORPORATION (AMEX: VX), a leading provider
of audio, video and Internet conferencing services, today announced record
results for the fourth quarter and year ended December 31, 2000, as well as for
January 2001. Increased call volume, a strong shift towards automated products,
and continued penetration of the company's targeted Fortune 2500 companies drove
the results.
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POWER OF AUTOMATION DRIVING RESULTS
"We're pleased with our record results for the fourth quarter of the year, and
very excited about our prospects for 2001 based upon an exceptional performance
in January," said Kim Mayyasi, Vialog's president and chief executive officer.
"In barely over a year, automated services, including Ready-To-Meet, have grown
to over one-third of our total traffic. This is a high-growth, high-margin
business that now has an $18M annual revenue run rate."
JANUARY RESULTS REFLECT BOOSTED PROFITABILITY FROM AUTOMATION
Mayyasi continued, "Our January results are clearly the best way to illustrate
how automation is driving our business. Our monthly revenues grew 27 percent
over last January to $7.7 million, with most of the growth coming from
Ready-To-Meet. The increased margins are more impressive. Gross margin was 59.6
percent compared with a gross margin of 52.9 percent in January 2000, and the
operating margin was 18.3 percent compared with 9.9 percent last year. Earnings
before interest, taxes, depreciation and amortization (EBITDA) was $2.3 million,
resulting in an EBITDA margin of 29.6 percent, compared with $1.4 million, or an
EBITDA margin of 22.3 percent for January 2000."
AUTOMATION SIGNIFICANTLY IMPACTS FOURTH QUARTER
Net revenues increased 12 percent to a record $19.8 million from $17.7 million
in last year's fourth quarter. The revenue growth resulted from continued
penetration of Vialog's existing customer base and winning new customers within
its Fortune 2500 target market. Of these companies, nearly one-third are Vialog
customers. Strong demand for the company's Ready-To-Meet automated audio service
drove a 14 percent increase in call volumes from the third quarter.
Reported gross margin was 53.7 percent, which is consistent with the gross
margin in the comparable period last year. Reported gross margin includes
$357,000 of additional telecom costs related to a change in prior estimates for
telecom rate changes and other telecom charges.
Mayyasi noted that the gross margins were down from the record 58.0 percent
posted in the 2000 third quarter. "Interestingly, Ready-To-Meet, which has been
instrumental in enhancing our margins in January, was the cause of a temporary
decrease during the fourth quarter," he said. "We saw traffic migrate from
operator-assisted and operator-reserved calls to Ready-To-Meet much faster than
forecast. This resulted in our operations centers being temporarily overstaffed
during the fourth quarter. We identified the issue and adjusted accordingly,
helping to produce the 59.6 percent gross margin in January."
Operating margin was 1.3 percent versus 4.3 percent in the comparable 1999
period. EBITDA was $2.8 million compared with $3.2 million for the same period
last year. Reported EBITDA includes the $357,000 telecom adjustment noted above,
as well as a non-cash charge of $600,000 to increase the accounts receivable
reserve. The net loss was $3.1 million, or $0.32 per share.
RECORD YEAR FOR 2000
For the year, revenues increased 13 percent to $77.6 million from $68.6 million
in 1999. Reported gross margin improved to 55.8 percent, a 300-basis-point
increase, and the operating margin was 9.1 percent compared with 8.4 percent.
EBITDA was $16.7 million versus $14.0 million for the comparable period last
year, a 19 percent increase. The operating margin and EBITDA for 2000 exclude
the $1.7 million writeoff of debt refinancing costs that Vialog took in the
third quarter when refinancing was discontinued as part of the Genesys
Conferencing merger agreement. The operating margin and EBITDA for 1999
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exclude $4.2 million in restructuring and severance charges. The net loss was
$9.2 million, or $0.97 per share, compared with a loss of $12.1 million, or
$1.53 per share in 1999.
"The strategic plan that Vialog's management put in place 18 months ago is
paying off in expanded margins and increased profitability," Mayyasi said. "This
is evident in our gross margin, which is growing faster than the rate of our
revenues."
GENESYS CONFERENCING ACQUISITION
On October 1, 2000, Vialog reached an agreement to be acquired by Genesys
Conferencing, the largest independent conferencing company in Europe and
Asia-Pacific. The acquisition, which will create the world's largest independent
conferencing specialist, is subject to, among other things, the approval of
Vialog shareholders, the approval of issuance of new Genesys Conferencing shares
by Genesys Conferencing shareholders, the refinancing of Vialog's debt, and the
listing of Genesys Conferencing American Depositary Shares (ADSs) on the Nasdaq
stock market. Both companies have scheduled shareholders' meetings for March 23,
2001.
FOURTH QUARTER CONFERENCE CALL
The company will hold a conference call to discuss the fourth-quarter 2000 and
January 2001 results on Monday, March 5, at 11:00 a.m. EST. To hear the
company's conference call and view presentation charts, please log on to
www.vialog.com and follow the instructions. Replay will be available on the same
site.
ABOUT VIALOG
Headquartered in Bedford, Mass., Vialog is a leading provider of
teleconferencing and messaging services, including audioconferencing,
videoconferencing, web conferencing, voicemail broadcast, email broadcast and
fax broadcast. Vialog helps its more than 6,000 corporate customers communicate
more professionally, efficiently and effectively by delivering superior customer
service and an extensive range of enhanced and customized conferencing
solutions. Vialog's common stock (symbol: VX) is quoted on AMEX. For more
information, visit www.vialog.com, or visit www.webconferencing.com for direct,
online access to Vialog's conferencing and messaging services.
FOR FURTHER INFORMATION REGARDING VIALOG FREE OF
CHARGE, VIA FAX DIAL 1-800-PRO-INFO AND USE THE
COMPANY CODE VX. OR VISIT THE VIALOG CORPORATION
WEBSITE AT WWW.VIALOG.COM
TO SCHEDULE ANY OF VIALOG'S SERVICES ONLINE, GO TO WWW.WEBCONFERENCING.COM
TABLES TO FOLLOW . . .
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VIALOG CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE PERIODS ENDED DECEMBER 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
THREE MONTHS ENDED TWELVE MONTHS ENDED
DECEMBER 31, DECEMBER 31,
---------------------------- ----------------------------
2000 1999 2000 1999
----------- ----------- ----------- -----------
(UNAUDITED)
Net revenues $ 19,800 $ 17,714 $ 77,587 $ 68,629
Cost of revenues, excluding depreciation 9,160 8,196 34,304 32,387
Selling, general and administrative expense 7,869 6,332 28,275 23,442
Depreciation expense 1,467 1,184 5,430 4,190
Amortization of goodwill and intangibles 1,047 1,232 4,205 4,060
Non-recurring charge - - - 2,982
----------- ----------- ----------- -----------
Operating income 257 770 5,373 1,568
Interest expense, net (3,604) (3,423) (14,204) (13,524)
----------- ----------- ----------- -----------
Loss before income tax benefit (expense) (3,347) (2,653) (8,831) (11,956)
Income tax benefit (expense) 200 (64) (325) (164)
----------- ----------- ----------- -----------
Net loss $ (3,147) $ (2,717) $ (9,156) $ (12,120)
=========== =========== =========== ===========
Loss per common share--basic and diluted $ (0.32) $ (0.30) $ (0.97) $ (1.53)
=========== =========== =========== ===========
Weighted average common shares outstanding 9,702,126 8,983,647 9,435,278 7,947,333
=========== =========== =========== ===========
EBITDA $ 2,771 $ 3,186 $ 15,008 $ 9,818
=========== =========== =========== ===========
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VIALOG CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)
FOR THE PERIODS ENDED JANUARY 31, 2001 AND 2000
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
ONE MONTH ENDED
JANUARY 31,
----------------------------
2001 2000
----------- -----------
Net revenues $ 7,704 $ 6,068
Cost of revenues, excluding depreciation 3,112 2,857
Selling, general and administrative expense 2,314 1,857
Depreciation expense 518 403
Amortization of goodwill and intangibles 350 351
----------- -----------
Operating income 1,410 600
Interest expense, net (1,244) (1,154)
----------- -----------
Income (loss) before income tax expense 166 (554)
Income tax expense -- --
----------- -----------
Net income (loss) $ 166 $ (554)
=========== ===========
Income (loss) per common share--basic and diluted $ 0.02 $ (0.06)
=========== ===========
Weighted average common shares outstanding 9,829,656 9,133,569
=========== ===========
EBITDA $ 2,278 $ 1,354
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VIALOG CORPORATION
CONSOLIDATED BALANCE SHEETS
AS OF DECEMBER 31, 2000 AND 1999
(IN THOUSANDS, EXCEPT SHARE AND PER SHARE DATA)
DECEMBER 31, DECEMBER 31,
2000 1999
------------ ------------
ASSETS
Current assets:
Cash and cash equivalents $ 459 $ 547
Accounts receivable, net 18,513 11,637
Prepaid expenses 489 435
Other current assets 168 310
--------- ---------
Total current assets 19,629 12,929
Property and equipment, net 22,807 17,814
Deferred debt issuance costs 3,735 3,801
Goodwill and intangible assets, net 59,970 64,094
Other assets 870 583
--------- ---------
Total assets $ 107,011 $ 99,221
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current liabilities:
Debt--current $ 84,295 $ 7,102
Accounts payable and accrued expenses 19,734 9,750
--------- ---------
Total current liabilities 104,029 16,852
Long-term debt, less current portion 4,255 75,827
Other long-term liabilities 719 1,499
Total stockholders' equity (deficit) (1,992) 5,043
--------- ---------
Total liabilities and stockholders' equity (deficit) $ 107,011 $ 99,221
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US SEC FILINGS
Genesys Conferencing has filed a Registration Statement on Form F-4 (No.
333-55392) with the United States Securities and Exchange Commission in
connection with the Vialog transaction. The Form F-4 contains a proxy
statement/prospectus relating to the Vialog special meeting and other related
documents. Vialog has mailed the proxy statement/prospectus contained in the
Form F-4 to its stockholders. The Form F-4 and proxy statement/prospectus
contains important information about Genesys, Vialog, the Vialog transaction and
related matters. Investors and stockholders should read the proxy
statement/prospectus and the other documents filed with the US SEC in connection
with the Vialog transaction carefully before they make any decision with respect
to the Vialog transaction. A copy of the merger agreement with respect to the
Vialog transaction has been filed by Vialog as an exhibit to its Form 8-K dated
October 2, 2000. The Form F-4, the proxy statement/prospectus, the Form 8-K and
all other documents filed with the US SEC in connection with the transaction are
available free of charge at the US SEC's web site at www.sec.gov. In addition,
the proxy statement/prospectus, the Form 8-K and all other documents filed with
the US SEC in connection with the Vialog transaction will be made available to
investors free of charge by calling or writing to:
Genesys S.A.
Pierre Schwich
Chief Financial Officer
4 Rue Jules Ferry, BP 1145
34008 Montpellier, Cedex 1, France
Phone: 33 4 67062755
Email: pierre.schwich@genesys.com
Vialog Corporation
Michael E. Savage
Chief Financial Officer
32 Crosby Drive
Bedford, MA 01730
Phone: 781-761-6200
Email: msavage@vialog.com
In addition to the Form F-4, the proxy statement/prospectus and the other
documents filed with the US SEC in connection with the Vialog transaction,
Vialog is obligated to file annual, quarterly and special reports, proxy
statements and other information with the US SEC. You may read and copy any
reports, statements and other information filed with the US SEC at the US SEC's
public reference rooms at 450 Fifth Street, N.W., Washington, D.C. 20549 or at
the other public reference rooms in New York, New York and Chicago, Illinois.
Please call the US SEC at 1-800-SEC-0330 for further information on public
reference rooms. Filings with the US SEC also are available to the public from
commercial document-retrieval services and at the web site maintained by the US
SEC at http//www.sec.gov.
SOLICITATION OF PROXIES; INTERESTS OF CERTAIN PERSONS IN THE TRANSACTION
The identity of the people who, under SEC rules, may be considered "participants
in the solicitation" of Vialog stockholders in connection with the proposed
merger, and a description of their interests, is available in a SEC filing on
Schedule 14A made by Vialog on October 2, 2000.
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FORWARD-LOOKING STATEMENTS
This release contains statements that constitute forward-looking statements
within the meaning of the U.S. Private Securities Litigation Reform Act of 1995.
Forward-looking statements are statements other than historical information or
statements of current condition. These statements appear in a number of places
in this release and include statements concerning the parties' intent, belief or
current expectations regarding future events, including: the growth of
Ready-to-Meet revenues, the anticipated timing of the Genesys Conferencing
transaction, and the benefits and results of the Genesys Conferencing
transaction. Forward-looking statements are not guarantees of future performance
and involve risks and uncertainties, and actual results may differ materially
from those in the forward-looking statements as a result of various factors.
Although management of the parties believe that their expectations reflected in
the forward looking statements are reasonable based on information currently
available to them, they cannot assure you that the expectations will prove to
have been correct. Accordingly, you should not place undue reliance on these
forward-looking statements. In any event, these statements speak only as of the
date of this release. The parties undertake no obligation to revise or update
any of them to reflect events or circumstances after the date of this release,
or to reflect new information or the occurrence of unanticipated events. Readers
are referred to Vialog's Annual Report to Stockholders and Genesys
Conferencing's and Vialog's other filings with the US SEC for a discussion of
these and other important risk factors concerning the parties and their
respective operations.
Vialog Corporation Fourth Quarter and January 2001 Conference Call Script
March 5, 2001
MARCH 1 VERSION
CHART 1
Kim Mayyasi
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Thank you for joining us this morning. I am Kim Mayyasi, President and CEO. On
the call with me are Michael Savage, our CFO and John Dion, Vice President of
Finance and Treasurer.
Many of you have joined us through our Vialog.com web site and are viewing
presentation charts using Vialog's internet content sharing technology. The
audio portion of the call is being streamed over the Internet as well as
transmitted over the Public Switched Network using our bridging equipment
located in Vialog's Bedford, MA Operations Center. For those of you who can only
hear the audio portion of this call --and would like to view today's
presentation charts -- log into Vialog.com, click the icon labeled, "View and
hear Vialog's earnings call" and follow the simple directions. It is important
to note that this form of group communications demonstrates the power of visual
content transmitted via the web when combined with traditional audio to perform
remote meetings. It is also significant because the underlying internet
presentation technology is provided by Astound Inc - an innovator in web
presentation software - who recently announced their planned merger with
Genesys, S.A. - who is also our merger partner.
However, before I get into my presentation, I'm going to turn the call back to
Doug to read our Safe Harbor Statement. I will then bring you up to date on our
merger with Genesys, briefly review our accomplishments over the past several
months and then Mike will review our fourth quarter and January financial
results.
At the end of our presentation, we will take any questions you may have.
Doug...
Doug Broderick
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Good morning. Statements in this conference call that are not based on
historical facts may be considered forward-looking statements that involve risks
and uncertainties, including but not limited to, changes in the market, the
acceptance of new products and services, new products and announcements from
other companies, changes in technology, the impact of competitive products and
pricing, our dependence on large customer contracts and the successful closing
of the proposed acquisition of Vialog by Genesys S.A.. Additional information on
the factors that could affect the Company's financial results is included in the
Company's 1999 Form 10-K and other Company reports, which are filed with the
SEC.
I would also like to remind you that because Genesys has filed to list American
Depositary Shares on the Nasdaq stock market to facilitate the merger
transaction, Vialog is in a quiet period. Therefore, management may not be able
to answer all of your questions.
Kim...
Kim Mayyasi
- -----------
Thanks, Doug.
CHART 2. THREE THEMES
There are three important themes that I want to share with you this morning. The
first is the pending merger with Genesys, SA and what it means to Vialog
shareholders. The second is that Vialog management's eight-point strategic plan,
put in place 18 months ago, is paying off in expanded margins and increased
profitability. We are experiencing this in our results with gross margins
growing at approximately three times the rate of our revenues. The third theme
is that our new automated products launched last year -- especially
Ready-To-Meet -- are hitting their stride.
CHART 3. GENESYS PROFILE
On October 1, Vialog entered a definitive agreement to merge with France-based
Genesys, SA. This merger combines Vialog, the largest independent conferencing
company in the US, with Genesys, the largest conferencing specialist in Europe
and Asia-Pac. Vialog's 600 employees will join Genesys' 600 employees to create
a global conferencing powerhouse with operations in 17 countries. The new
company will have approximately 16,000 customers, including many of the world's
most recognized multinationals. Genesys has a track record of high growth - both
organically and through acquisition.
CHART 4. MERGER BENEFITS
Overall, this merger with Genesys offers many benefits. It creates the world's
largest teleconferencing specialist with a global presence. It strengthens
Vialog's financial structure by refinancing our debt and leverages Genesys'
leadership in the technology area.
CHART 5. MERGER TIMING
As you can see by the chart your screen, many steps have been successfully
accomplished to obtain the necessary regulatory approvals for the merger --
including Genesys filing the F4 for the ADSs with the SEC on February 12th.
Proxies were mailed to Vialog shareholders on February 14. And we've scheduled a
shareholders meeting for March 23.
CHART 6. POST-MERGER FOOTPRINT
The combined company will have approximately 1200 employees in 17 countries. As
you can see on the chart on your screen, 75% of the combined company's revenues
will originate in North America. This global footprint will be ideal for our
multinational customers and represents a significant revenue opportunity. I have
been asked by Genesys to serve as CEO of Genesys' North American operations -
which I enthusiastically accepted. Over the past several months, twelve
integration teams have been working hard to plan for the merger - so we can hit
the ground running once the merger is completed.
CHART 7. NEWLY WON CUSTOMERS
Over the past month's Vialog's top-line revenue has been growing as result of
increasing demand for our services. As you may remember, we reconfigured our
retail sales force one year ago to best focus on business opportunities within
the Fortune 2500. Historically, Vialog has been particularly successful
targeting companies of this size and we are demonstrating our power as a B2B
marketer. In the beginning of 2000, 600 of America's largest 2500 companies were
Vialog customers. Over the past four quarters, we have added over 200 additional
Fortune 2500 companies to our customer list. That means we have penetrated 30%
of our targeted market. While most of these relationships are starting at modest
levels in terms of monthly revenue, their growth potential is significant as we
further penetrate these young accounts - particularly since many of them are
multinationals and ideal prospects for Genesys' multinational footprint.
Companies added in the fourth quarter include Caterpillar, Barnes & Noble, U.S.
Can, Extended Stay America and Ernst & Young Technologies.
CHART 8. FINANCIAL RESULTS
With respect to financial results, we are now realizing the benefits of the
strategic plan we put into place in August of 1999 when I joined the company. As
you may remember, we improved our margins throughout last year due to the
operating efficiencies gained by consolidating our call centers from nine to
four in the second half of 1999, and then benefiting from increased scale -
especially in areas like our long-distance expenses. We are now entering the
next wave of margin enhancement through automating our services. The primary
product in this regard is Ready-To-Meet which functions as a virtual conference
room that is available 24X7. Demand is very strong for this type of service and
automated services have grown to a $18.M annual run rate as of January. It is a
high-growth, high-margin line of business that is now 33% of our monthly
traffic.
To illustrate the power of automation in driving our bottom line, I want to
discuss our January financial results which are largely driven by Ready-To-Meet.
CHART 9. JANUARY `01 RESULTS
In January, automated audio services were approximately one-third of our
traffic. The rapid adoption of these services is reflected in Vialog's overall
revenue growth of 27% over January 2000 to $7.7M. While this revenue growth is
impressive, it is in margins where we really see the power of automation. Our
gross profit for January was $4.6M - up 43% over the prior January to a healthy
gross margin of 60%. This is a several-hundred-basis-point increase from last
January's 53% gross margin. EBITDA hit $2.3 million, 30% of revenues - up 68%
from last January's $1.4 million.
CHART 10. 4Q FINANCIAL RESULTS - MINUTES, % AUTOMATED
So now let's turn to our fourth quarter results. Call volumes increased to 89.5M
minutes for the quarter with automated audio representing 28.5% of total
traffic.
CHART 11. 4Q FINANCIAL RESULTS - GROWTH %, REVENUE
Revenue for the fourth quarter was $19.8 million which is consistent with
historical growth trends.
CHART 12. 4Q FINANCIAL RESULTS - GROSS MARGIN
Our gross margins for the fourth quarter were 56 % - which, while strong, is
down from 3Q's record-level of 58%. This was due to the faster than anticipated
migration of traffic to lower price per minute automated services that resulted
in our operations centers being temporarily overstaffed during the fourth
quarter. This trend was identified early in the quarter and staff was realigned
- - resulting in the gross margins of 60% in January.
CHART 13. 4Q FINANCIAL RESULTS - EBITDA
The temporary overstaffing in 4Q also impacted EBITDA which was $3.7M in the
fourth quarter - down from $4.2M in the third quarter. Staffing has been brought
into alignment as demonstrated by January's EBITDA of $2.3 million - which is
29.6% of revenues. I should point out that these 4Q results include certain
accounting adjustments that Mike will detail.
Going forward our financial performance will continue to benefit from increased
automation. Further, the Genesys merger offers potential efficiencies to be
gained through increased scale. For example, we are currently negotiating with
our long-distance suppliers to reduce our transport costs by an estimated $3M
annually due to the combined companies traffic volumes.
CHART 14. VIALOG STORY
In closing, it was only a short eighteen months ago that we put into place a
strategic plan that is now yielding powerful financial benefits, as evidenced by
our January results -- 27% top-line growth, 60% gross margins and $2.3 million
in EBITDA--a 30% EBITDA margin. We are strategically positioned with products
that leverage automation and the power of the web. Our sales force is one of the
largest and most aggressive B2B teams in the industry. Four operations centers
consistently execute thousands of conference calls each day with customer focus
and efficiency. Overall, today's Vialog is energized and well positioned to
increase shareholder value.
I would now like to turn the call over to Mike Savage for the financial review.
CHART 15. REVENUE/EBITDA CHART
Mike Savage
- -----------
Thanks, Kim. I now would like to briefly take you through our financials for
4Q2000 and this past January.
FOURTH-QUARTER REVIEW
Our results were a record for the fourth quarter and January 2001.
Revenues reached $19.8 million in the fourth quarter, a record for any quarter
in Vialog's history. They were up 11.8% from $17.7 million in the 1999 period.
Call volume was up 39% over last year illustrating the rapid adoption of the
lower-price-per minute - but higher margin - Ready-to-Meet product.
Ready-to-Meet grew to 28.5% of our 4Q traffic and one-third of January's.
Kim mentioned that our gross margin and EBITDA numbers included certain
accounting adjustments. Our gross margin for the quarter was 56% excluding
$357,000 of additional telecom costs related to a change in prior estimates for
telecom rate changes and other telecom charges.
As Kim discussed, the rapid growth in our Ready-to-Meet automated product caused
overstaffing in our operations centers in 4Q which negatively impacted gross
margin. This situation was identified early in the quarter and staffing levels
are now properly aligned. In fact, our gross margin has increased to 60% in
January 2001.
The temporary overstaffing in 4Q also impacted our EBITDA, as did an increase in
the accounts receivable reserve. We decided to take a more conservative approach
to our accounts receivable reserve and added $600,000. Our fourth quarter
adjusted EBITDA was $3.7 million versus $3.2 million in the prior-year period.
However, in January, 2001, our EBITDA was $2.3 million or 29.6% of revenues.
Net loss was $3.1 million, or $0.32 per share, compared with a net loss of $2.7
million, or $0.30 per share for the fourth quarter of 1999
CHART 16. NET CASH INCOME
>>We also want to focus on net cash flow, which eliminates the impact of all of
these adjustments. We're defining net cash income as net income plus
depreciation, goodwill amortization, non-cash interest charges and other
non-cash charges. For the fourth quarter, net cash income was $198,000, or $0.02
per share. For January, 2001, net cash income was $1.3 million or $0.14 per
share.
CHART 17. YEAR-TO-DATE FINANCIALS
YEAR-END REVIEW
2000 was a record year. Revenues increased to $77.6 million from $68.6 million
in 1999. You may recall from prior conference calls, that revenue growth was
negatively impacted by the loss of WorldCom and other accounts in 1999 due to
merger activity in the industry. Gross margin was up 300 basis points to 55.8%
from 52.8%. Reported EBITDA was $15.0 million in 2000 compared with $9.8 million
in 1999.
Net loss narrowed to $9.4 million, or $0.97 per share, from a net loss of $12.1
million, or $1.53 per share.
That concludes the financial portion of our call and with that, I'd like to turn
the call back over to Kim.
Kim Mayyasi
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CHART 18. VIALOG STORY
Thanks Mike. Just to summarize, we are very excited about our future here at
Vialog. This management team has delivered on the commitments made in August
99's eight-point strategic plan: Our centers are consolidated; our operating
cost structure is tremendously lower and margins are up 900 basis points over
last year. Automation represents the next wave of profit improvements. And, by
merging with Genesys we are creating a global leader in our industry. Now,
before I open the call up for questions, I want to reiterate, as I have in prior
calls, that this management team is committed to driving our growth strategy,
expanding profit margins and maximizing shareholder value.
And with that, we will be happy to answer any questions that you may have.
CHART 21. QUESTIONS?
Operator
- --------
Announces beginning of question-and-answer session.
(*We recommend that you identify yourself if you are switching back and forth
between speakers to answer various questions.)
Operator
- --------
Mr. Mayyasi, at this time there appears to be no further questions. I would
like to turn the conference back over to you for any additional or closing
comments.
Kim Mayyasi
- -----------
We'd like to thank everyone for participating. I look forward to speaking with
you next quarter and reporting on our progress. Thank you.
(Vialog Group Communications Conference Call)
(Confirmation Number: 5031920)
(Date: March 5, 2001)
(Time: 11:00 a.m. EST)
(Header: Vialog)
(Host: Kim Mayyasi)
(Length of Call: 11:44)
OPERATOR: Thank you Mr. Mayyasi. If you have a question at this time,
please press the one key on your touch-tone telephone.
Our first question is from Evan Stein (ph), of EOF (ph). Your question, please.
EVAN STEIN (ph), EOF (ph): Hey there, guys. A couple of questions. Could you
comment -- you gave the January stats (ph). Could you comment on any trends,
whether those type of strong trends were continuing in February?
KIM MAYYASI, VIALOG: Yeah. Evan, it's Kim. A couple of things I want to -- you
have to be careful about when you extrapolate out, particularly month by month.
The -- in February, we have two less business days than you typically have in a
January. And our business, which is very much business-to-business focused, is
entirely driven by number of business days, particularly when you look one month
over the next month. So February, because it has two less business days, will
have correspondingly, of course, a lesser -- a smaller revenue as result of less
days from which to transact business. That, of course, lower revenue will flow
through to a lower EBITDA number quite naturally.
STEIN (ph): Well, I was referring more to year over year as opposed to -- I
realize that, you know, there's seasonality in the quarter ...
MAYYASI: Right, right. I will say it is and -- is that there is a fundamental
shift in the business ready to meet an automation. And that automation is
absolutely driving increased margins, as well as EBITDA and, by the way, even
top line growth. So, I caution you on just taking a ruler and drawing a straight
line outward. There is -- there has been a fundamental change in the dynamics
and cost structure of this business thanks to automation. And that is one reason
why we released these January numbers because we thought that was important to
get out.
STEIN (ph): OK.
MAYYASI: Yeah.
STEIN (ph): Two other quick questions. On the accounts receivable, do you guys
feel that that's pretty well -- you've got your arms around it now, that you'd
taken a write off and feel pretty comfortable with where they are today?
UNIDENTIFIED COMPANY REPRESENTATIVE: Yes. We looked at, of course, at the
end of every quarter, what the reserves should be. And we feel that, you
know, the reserve is certainly adequate right now. We feel it's
conservative. So, we're very comfortable with that level.
STEIN (ph): OK. And then lastly, I know, with Genesys, you really can't
necessarily say too much. Can I just ask, if the stock price is not at whatever
the bottom of the minimum was and Genesys -- and the deal was to be slightly
restructured, meaning you would get a greater percentage of the pro forma
company, could you just give me a feel for how -- I guess you'd have to -- you
have to refile and just sort of, timing on if you needed to change some of the
structural points in terms of time-wise and filings, how would that proceed?
UNIDENTIFIED COMPANY REPRESENTATIVE: Well, implicit in your question, Evan (ph)
is if there was to be a renegotiated contract. And if there was to be a
renegotiated contract, that would call for a recirculation of the proxy, which
could take, you know, four to six weeks, based upon -- based upon our experience
to date.
STEIN (ph): OK. And so, you're saying, if the terms in the sense of if they were
to potentially offer greater shares, that would require an entire refiling. You
couldn't necessarily do an amendment or something that take that time period?
UNIDENTIFIED COMPANY REPRESENTATIVE: Not necessarily. Depending on what the
amendment could possibly contain within it, it is feasible. And we're
talking hypotheticals here. But it is feasible that there could be an
agreement that would not require a recirculation of a proxy.
STEIN (ph): OK. Great. OK. Thanks very much.
OPERATOR: Our next question is from Eric Forsiani (ph) is DM Knott (ph).
Your question please.
ERIC FORSIANI (ph), DM KNOTT (ph): Yes. Hi. Can you hear me?
UNIDENTIFIED COMPANY REPRESENTATIVE: Yes.
FORSIANI (ph): Yes. I was just following up on what Evan (ph) asked. The -- I
understand, from reading this prospectus, that the -- there can be a termination
of the merger agreement two days before the second -- the day of the special
meeting, in which case, you know, the price, the exchange ratio would be
automatically predetermined at a higher amount. Is that correct?
UNIDENTIFIED COMPANY REPRESENTATIVE: Well, let's just review that. Specifically,
what I think would be best to do is when you talk about what happens, if
Genesys' share price, during the pricing period remains below what right now,
with current exchange rates, would be about 37 euros.
So, the first point to make in my -- to take into account is the pricing period
when we talk about, you know, any of these scenarios extends 10 days prior to
the second day prior to the shareholders meeting. So, you can thank -- prior to
close -- so, you can think of it as being day minus two to day minus 12. And it
is volume adjusted.
Now, in terms of the options, assuming that the implied share price of Genesys
remains below that approximately 37-euro threshold, I would recommend that you
take a look at pages 53 and 54 in the prospectus that specifically address that.
And there's three options and only three options that are contained within the
contract that talk to that particular scenario.
Scenario one is that Genesys could top up -- I should say options one is that
Genesys could elect to top up to an effective price of $11.27 per share to
Vialog shareholders. And they would do that by simply issuing more shares.
Option two, should Genesys elect not to do that, would be that Vialog, after
consultation with the board, consultation with shareholders and other advisors,
could walk away from the deal.
Option three is that Vialog could accept the implied price of our stock at that
26.6 percent ownership level.
So, those are the three options at that point in time, again, should the stock
remain below this lower end of the price collar and that pricing period, I
believe, begins this Monday.
FORSIANI (ph): All right. Could I have just one follow up? Can you give any
sense of what Vialog is thinking, should it remain below that price?
UNIDENTIFIED COMPANY REPRESENTATIVE: No. No. At this time, you know, we are
spending much of our effort focused on planning for the merger. We are in daily
contact with our advisors in terms of running various valuation models. But, at
this point, you're dealing with some large hypothetical scenarios. I'd just like
to call out that Genesys' share price, from its low of three trading days ago,
is up 40 percent. So, it's a fairly fluid environment and we're keeping a close
eye on things.
FORSIANI (ph): OK. Thanks very much, (INAUDIBLE).
OPERATOR: Ladies and gentlemen, if there are any additional questions, please
press the one key at this time.
Our next question is from Mike Brellof (ph), of Grace Brothers. Your question
please.
MIKE BRELLOF (ph), GRACE BROTHERS: Hi. Does Genesys have -- do they have all
their bank lines lined up to close the deal on the 23rd?
UNIDENTIFIED COMPANY REPRESENTATIVE: We understand from Genesys that they do
have written commitments and everything is still on schedule for the first
quarter closing. We're -- the target date is March 27th for the closing right
now.
OPERATOR: Ladies and gentlemen, if there are any additional questions, please
press one at this time.
We have a follow-up question from Evan Stein (ph), of EOF (ph). Your question,
please.
STEIN (ph): (INAUDIBLE), could you give us a sense for cap ex in this upcoming
year?
UNIDENTIFIED COMPANY REPRESENTATIVE: Yeah. We should be -- we should be at
actually similar levels to 2000 because of some of the other, kind of,
improvements in lease holds that we did in the year 2000. 2001, we look to
not -- not to exceed what we did in 200.
STEIN (ph): OK. 2000 was approximately ...
UNIDENTIFIED COMPANY REPRESENTATIVE: It was in the eight to nine -- eight to
$9 million range.
STEIN (ph): OK. And then, one follow up on the -- on the Genesys. Does the
Astound (ph) proposed acquisition of Astound (ph) in any way -- is there any,
like cross provisions (ph) between the Vialog-Genesys deal getting done versus
the Astound-Genesys (ph) deal getting done?
UNIDENTIFIED COMPANY REPRESENTATIVE: The -- Evan (ph), the definitive agreement
that was circulated in the proxy/prospectus that you got has no reference at all
to the Astound (ph) transaction. In fact, the -- as you may remember, the
definitive agreement we reached with Genesys was well before the Astound (ph)
transaction was contemplated.
STEIN (ph): Right. OK. Thanks.
OPERATOR: Our next question is from Dan Lance (ph), of Augusta Capital
Management. Your question, please.
ANDY GARSHINE (ph), AUGUSTA CAPITAL MANAGEMENT: Hi. This is Andy Garshine (ph),
Augusta Capital Management. Hi, Mike, how you doing?
MICHAEL SAVAGE, SENIOR VICE PRESIDENT AND CFO, VIALOG: Fine Andy (ph). How are
you?
GARSHINE (ph): I'm fine. Will the Genesys ADSs be listed and available for
trading the day -- or when the merger is consummated.
SAVAGE: Yes, that's right. The intent is that they would begin to trade
simultaneous with the closing.
GARSHINE (ph): OK. Now that your company will be much larger, a much larger
critical mass, will you be able to or have you been in contact with any street
analyst to pick up coverage?
SAVAGE: Yes, we have begun conversations with several analysts who are
interested in following the combined company. And we're working hard on that
right now.
GARSHINE (ph): OK. Well, thank you very much.
SAVAGE: Sure.
OPERATOR: Ladies and gentlemen, if there are any additional questions, please
press the one key at this time.
Mr. Mayyasi, there are no additional questions. Please continue.
MAYYASI: Well, I'd like to thank everyone for participating. And I certainly
look forward to speaking with you next quarter, reporting on how things are
progressing. Thank you.
OPERATOR: Ladies and gentlemen, thank you for your participation in today's
conference. This concludes the program. Have a good day.
END
[LOGO] VIALOG(R)
Q4 2000 and January 2001
Earnings Results
March 5, 2001
THREE IMPORTANT THEMES
================================================================================
o Genesys merger
o Expanding margins
o Automation
[LOGO] VIALOG(R)
GENESYS PROFILE
================================================================================
o #1 in Europe; #1 in Asia-Pacific
o High growth and profitability
o 600 employees in 17 countries
o 10,000 customers worldwide
[LOGO] VIALOG(R)
GENESYS MERGER BENEFITS
================================================================================
o Creates #1 worldwide conferencing specialist
o Global solution for multinationals
o Improved financial structure
- $45M cash on-hand
- Refinance Vialog's debt
o Leverage Genesys technology
[LOGO] VIALOG(R)
GENESYS MERGER - EVENTS
================================================================================
(check mark) 10/01/00 Definitive agreement signed
(check mark) 11/20/00 File F-4
(check mark) 12/22/00 SEC comments received
(check mark) 01/18/01 File amendments to F-4
(check mark) 02/06/01 Receive additional SEC comments
(check mark) 02/08/01 File final F-4 with EDGAR
(check mark) 02/12/01 F-4 declared effective by SEC
(check mark) 02/14/01 Proxy mailed to VX stockholders
[LOGO] VIALOG(R)
GENESYS POST-MERGER FOOTPRINT
================================================================================
[GRAPHIC OMITTED] [GRAPHIC OMITTED] [GRAPHIC OMITTED]
NORTH AMERICA EUROPE ASIA-PACIFIC
------------- ------ ------------
860 people 310 people 40 people
75% of revenue 23% of revenue 2% of revenue
6 audio call centers 2 audio call centers 1 audio call center
2 video call centers 2 video call centers 1 video call center
#1 independent specialist #1 independent specialist #1 independent specialist
in 2001 since 1997 since 1998
RETAIL SALES RESULTS
================================================================================
o 800 of nation's top 2500 companies now VX customers
o 4Q 00 logo "wins":
[LOGO] CATERPILLER(R)
[LOGO] EYT FORMERLY EARNST & YOUNG TECHNOLOGIES
[LOGO] EXTENDED E STAYAMERICA
[LOGO] BARNES&NOBLE
[LOGO] MILLENNIUM PHARMACEUTICALS, INC.
[LOGO] U.S. CAN CORPORATION
[LOGO] VIALOG(R)
FINANCIAL RESULTS
================================================================================
o Revenue growth consistent with historical trends
o Rapid adoption of automated services
o Gross margins growing faster than revenues
[LOGO] VIALOG(R)
JANUARY 01 RESULTS
================================================================================
January 01 January 00 % Increase
---------- ---------- ----------
Revenue $7.7M $6.1M 27%
Gross Margin % 60% 53%
EBITDA $2.3M $1.4M 68%
EBITDA % 30% 22%
[LOGO] VIALOG(R)
VOLUME GROWTH
================================================================================
[GRAPHIC OMITTED]
3Q 99 4Q 99 1Q 00 2Q 00 3Q 00 4Q 00
----- ----- ----- ----- ----- -----
Minutes mm 61.8 64.3 71.8 76.1 78.4 89.5
[GRAPHIC OMITTED]
3Q 99 4Q 99 1Q 00 2Q 00 3Q 00 4Q 00
----- ----- ----- ----- ----- -----
% Volume Automated 0% .8% 3.4% 7.3% 16.2% 28.5%
[LOGO] VIALOG(R)
REVENUE GROWTH
================================================================================
[GRAPHIC OMITTED]
3Q 99 4Q 99 1Q 00 2Q 00 3Q 00 4Q 00
----- ----- ----- ----- ----- -----
$mm 17.0 17.7 19.2 19.4 19.2 19.8
[LOGO] VIALOG(R)
GROSS MARGIN GROWTH
================================================================================
[GRAPHIC OMITTED]
3Q 99 4Q 99 1Q 00 2Q 00 3Q 00 4Q 00 Jan. 01
----- ----- ----- ----- ----- ----- -------
51% 54% 55% 56% 58% 56%* 60%
* Excluding telcom adjustment.
[LOGO] VIALOG(R)
FINANCIAL RESULTS - EBITDA GROWTH
================================================================================
[GRAPHIC OMITTED]
4Q 99 4Q 00 % Change
Revenues $17.7M $19.8M + 12%
EBITDA* $3.2 $3.7* + 17%
* Excludes telcom and A/R reserve adjustment.
[LOGO] VIALOG(R)
THE VIALOG STORY
================================================================================
o Streamlined company with expanding margins
o New products that leverage automation
o Building a global powerhouse with Genesys
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\ /
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INCREASED SHAREHOLDER VALUE
[LOGO] VIALOG(R)
FINANCIAL RESULTS - 4Q 00
================================================================================
[GRAPHIC OMITTED]
Revenue
4Q 99 4Q 00
----- -----
$mm 17.7 19.8
[GRAPHIC OMITTED]
EBITDA
4Q 99 4Q 00*
----- -----
$mm 3.2 3.7
*Excludes telcom and A/R reserve adjustment.
[LOGO] VIALOG(R)
NET CASH INCOME - 4Q 00
================================================================================
4Q 00 Jan. 01
----- -------
Net cash income $198,000 $1,341,000
Net cash income per share .02 .14
[LOGO] VIALOG(R)
FINANCIAL RESULTS: 2000
================================================================================
[GRAPHIC OMITTED]
Revenue
99 00
-- --
$mm 68.6 77.6
[GRAPHIC OMITTED]
EBITDA
99 00
-- --
$mm 9.8 15.0
[LOGO] VIALOG(R)
VIALOG: "THE CONFERENCING COMPANY"
================================================================================
[LOGO] VIALOG(R)
Questions?
Please Press "1"