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FILING PURSUANT TO RULE 425 OF THE
SECURITIES ACT OF 1933 AND RULE 14(a)-12
OF THE SECURITIES EXCHANGE ACT OF 1934
FILER: EXCALIBUR TECHNOLOGIES CORPORATION
SUBJECT COMPANY: EXCALIBUR TECHNOLOGIES
CORPORATION
NO. 0-9747
The following is a transcript of an August 22, 2000 conference call concerning
the Second Quarter Financial Results of Excalibur Technologies Corporation.
[EXCALIBUR TECHNOLOGIES LOGO]
Excalibur Technologies Corporation
FY '01 Q2 Financial Results
Conference Call Script
AUGUST 22, 2000
8:30 A.M. EST
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Excalibur Technologies Corporation
Tuesday, August 22, 2000
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Conference Call Phone Number: (212) 346-6400
Conference Reservation Number: 15910468
Excalibur Main Conf. Room Phone Number: (703) 917-9324
Conference Call Chairpersons: Pat Condo
8:15 a.m. {The primary operator will call Pat Condo at (703) 917-9324. The
operator will ensure he or she can hear all participants clearly and
verify the title of the call, speaker names and each speaker's title.
The operator will stay on the line and count down the time remaining
prior to the start of the call. The operator will stay on the line
throughout the call and continuously monitor sound quality.}
8:30.a.m. {The operator will ask Excalibur if the participants are ready to
begin the call. If additional time is needed prior to the start of the
call, the operator will ask the callers to please standby.
When the Excalibur participants are ready to begin, the operator will
ask for 10 (ten) seconds of quiet while remote callers are connected
and the tape is started.}
NOTE: DURING THE 10 SECONDS OF QUIET, IT IS IMPERATIVE THAT SILENCE BE
OBSERVED. ALL CALLERS WILL BE ABLE TO HEAR ANY DISCUSSIONS THAT OCCUR
DURING THIS TIME.
OPERATOR: "Ladies and gentlemen, thank you for standing-by. Welcome to the
Excalibur Technologies Corporation Fiscal Year 2000 second quarter
financial results conference call. At this time, all participants are
in "listen" mode only. Later, we will conduct a question and answer
session in interactive mode. At that time, if you have a question, you
will need to press the "1" key, followed by the "4" key on your
push-button phone.
As a reminder, this conference is being recorded today, August 22,
2000. Moderator for today's call is Mr. Pat Condo, president and chief
executive officer of Excalibur Technologies. Mr. Condo, please
proceed."
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CONDO: Good morning everyone and welcome. I'm Pat Condo, president and chief
executive officer of Excalibur Technologies. With me today is Joanne
Hannafin, director of finance. Jim Buchanan is unable to attend.
Last night, we issued our press release containing financial results
for Excalibur's Fiscal Year 2000 second quarter that ended July 31.
Following our presentation, we'll respond to questions in an
interactive format. If your question is not addressed on the call
today, please call our Investor Relations department at (703)
761-3700.
Let me begin by reviewing our FY2000 second quarter results.
[Financial Discussion]
During this call, we the management of Excalibur may make comments
about our future expectations, plans and prospects that could
constitute forward-looking statements as defined by the Private
Securities Litigation Act of 1995. Actual results may differ
materially from our expectations as the result of various important
factors, including but not limited to, the success of our
relationships with strategic partners, the competitiveness of our
products, the timeliness of our product releases, and the impact of a
rapidly changing marketplace. Risk factors are reported in Excalibur's
Form 10-K for the year ended January 31, 2000, and other SEC filings.
Today, I'm pleased to report our financial results again are in line
with our expectations. Overall, we increased revenues by 25 percent
compared to the quarter one year ago. This increase resulted
principally from growth in our existing customer base and
partnerships, and by new
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licensing agreements. Our total revenue for the second quarter was
$11.4 million compared to $9.1 million for the same quarter last year.
Total software revenue for the quarter equaled $10 million, an
increase of 27 percent over last year. Maintenance revenue was $1.4
million, a 16 percent increase when compared to the same quarter one
year ago.
Total expenses for the quarter were $11.5 million. This represents a
23 percent increase in expenses over our second quarter expenses last
fiscal year. The increase in operating expenses is attributable
primarily to increased spending in sales and marketing and increased
investment in text and visual research and development. The cost of
software revenues in this year's second quarter increased 35 percent
to $1.7 million, as a result of increased software sales. The cost of
maintenance revenues in the second quarter decreased 41 percent over
the same period last year due to changes implemented in the fourth
quarter of last year that streamlined the customer support
organization, thus reducing overall costs. Gross margin percentage
improved to 82% percent in the second quarter this year, compared to
about 80 percent in the second quarter of last year.
Sales and marketing expense in the second quarter was $5.4 million, an
increase of 45 percent over last year. This reflects the continuing
investments we're making to drive and close business. For example, we
recently began direct sales operations in Germany, where we just
closed one of our largest ever RetrievalWare sales with Deutsche Post.
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Research and development expenses were $2.8 million. That is a 20
percent increase over last year. General and administrative expenses
decreased 15 percent from our second quarter last year to $1.2
million.
Other income for the second quarter was about $133 thousand, bringing
our net loss for the quarter to about $2 thousand, which is
approximately breakeven per common share. This compares to a net loss
of about $200 thousand in the second fiscal quarter of last year, or
about a penny per common share.
For the six months ended July 31, 2000, total revenue was $20.8
million, an increase of 23 percent over total revenue of $16.8 million
reported for the same period last fiscal year. The Company recorded a
net loss of $1.7 million, or 11 cents per common share, compared to a
net loss of $2.1 million, or 15 cents per common share, in the same
period last fiscal year.
As you may know, we focus our sales efforts on three basic market
segments: Internet e-businesses and online content providers,
corporate intranet portals, and original equipment manufacturers or
OEMs. For the second quarter, 23 percent of our license revenue
resulted from Internet online services sales, 50 percent from intranet
portals and 27 percent from OEMs.
For the first half, online revenue accounted for 32% of our business,
intranet sales for 40% and OEM agreements for 27%. This compares
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Tuesday, August 22, 2000
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with 21%, 40% and 39% for online, intranet and OEM sales respectively
in the first half of last year.
Our DSO was up a bit this quarter largely due to a few accounts in
Europe, and we're focusing collection efforts in this area to bring
the DSO more in line with our expectations.
Turning now to our results by product line, total revenue in the
second quarter for the Applications Group and our RetrievalWare family
of products was $9.8 million, an increase of 42 percent over last
year. The Applications Group had net income of about $1.5 million in
the second quarter, compared to net income of $82 thousand last year.
RetrievalWare continued making strong inroads not only in online and
eCommerce accounts, but also in its traditionally strong corporate
portal, government and OEM business lines. During the quarter,
noteworthy licensing arrangements were signed with Deutsche Post, the
Chicago Tribune, Bell Atlantic (now Verizon), Optima, Nikoyo Limited,
KDN, Chadwyck-Healey, Wiznet and Intersect in the corporate portals
and online segments, and new agreements were signed with the FDA,
USDA, and the U.S. Military Joint Special Operations Command in the
government sector.
Total Applications Group revenue for the first six months of this
fiscal year is $18.5 million, compared with $13.7 million last year.
Net income for the Applications Group for the six months totals $2.1
million
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compared to a loss of about $50 thousand, excluding special charges,
for the first six months of last year.
For the Media Services Group and the Screening Room Product line,
total revenue for the quarter was about $1.6 million this year, as
compared to $2.2 million last year, and exceeded this year's budgeted
revenue for the quarter by $100 thousand. The total number of
Screening Room deals signed in Q2 grew 40% this year, from 10 in Q2
last year to 14 in Q2 this year.
The Media Services Group incurred a net loss of $1.5 million in the
second quarter of this fiscal year, compared with a net loss of $0.3
million during the same period last year, which was in keeping with
our expectation.
During the quarter, the Media Services Group entered into new
agreements with the Discovery Channel, webADTV, Digital Island,
InterGraph, USGS, and several others, as we continued to see demand
grow for our video content management solution among end users and
ASPs.
For the first six months of this year, the Media Services group has
generated $2.3 million in revenue, versus $3.1 million in the first
six months of last year. The Media Services Group incurred a net loss
of $3.8 million for the first half of FY 2001, compared to a net loss
of $1.6 million for the first half of last year.
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At the end of the second quarter, our cash balance was $11.8 million,
compared to a balance of $10.8 million at the end of the first quarter
this year. So, in looking at cash flow, we added about $1 million in
cash during the second quarter, which was largely due to proceeds from
stock option exercises.
[Business Discussion]
As many of you know, earlier this year we announced an agreement with
Intel Corporation that provides for the formation of a new company by
merging Excalibur's entire business operations with the three
operating units that make up Intel's Interactive Media Services
division. These three units include more than 60 people and will bring
to the new company relationships with a number of customers, several
of whom have entered into multi-year contracts. In addition, Intel
will contribute 14 patents and patent applications, source code
components and licenses for additional Intel technology, as well as
$150 million at closing to the new company. These assets will be
combined with Excalibur's existing business which includes advanced
text, image and video indexing and content management software, and
over 600 customers primarily in the media, entertainment and
broadcasting businesses.
The transaction, of course, is subject to regulatory review, Excalibur
shareholder approval and other normal closing conditions; however, all
other necessary corporate approvals have been obtained by Excalibur
and Intel.
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Today, I'm pleased to report we're making continued progress on the
proposed merger. We filed our preliminary proxy with the SEC on August
14, 2000. We expect to mail our definitive proxy statement to our
shareholders in time for an anticipated close of the transaction this
Fall.
A transition team made up of senior managers from Excalibur and Intel
has held several meetings to facilitate integration and business plan
development for the new company. We're making good progress planning
for areas such as: corporate naming; personnel recruitment; product
development strategy; licensing, pricing and business practices;
worldwide marketing and sales plans; and business and market
development. We're also in the process of setting up the new board,
which will be comprised of both Intel and Excalibur designees, as well
as two outside directors.
Our vision for this new company is to achieve a leading role in
interactive media services on the Web. Our mission is to enable the
owners and creators of premium, high-value content to make that
content readily available securely and profitably on the Web.
We're targeting customers that have proven business models for using
their content to make money in traditional media, and now want to
create a new experience via an interactive medium. Major sports
leagues, news and information companies, and training and education
companies are examples of our initial focus.
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Our planned solution will deliver all of the connecting infrastructure
content owners need to:
o Archive and index their assets,
o Search and edit them online,
o Augment and enhance them with interactive content, such as
statistics, discographies and educational material,
o Pre-process them into thematic packages, such as highlights or
series,
o Protect them with advanced tamper-resistant software,
o Wrap them with business model support, such as eCommerce,
subscriptions and pay-per-view,
o Package them for 56K through broadband distribution, and then
o Hand them off to a wide range of distribution channels, such as
edge distributors like Digital Island, Akamai and Intel Internet
Media Services, last mile distributors such as AOL or @Home
Cable, set-top boxes and even wireless devices.
We see the new company having several revenue-making opportunities as
this model is implemented:
o First, by offering turnkey services for a monthly fee - or in
some cases through a revenue-sharing arrangement - that integrate
all
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of our capabilities into a single, hosted platform for bringing
branded content to the Web;
o Second, by working with Application Service Providers, or ASPs,
to provide our applications on a fee basis as value-added
components of their services;
o Third, by continuing to license software as applications to end
users for use on customer premises; and finally
o By continuing to license our technologies to OEMs for inclusion
in their solutions.
Over time, our strategy is to transition the company from primarily a
products company with a licensing model, to a service company with
recurring revenues. We expect to continue to sell product to customers
whom we believe, because of volume or cost needs, will eventually move
to the service model. We also intend to maintain a healthy OEM
licensing business to further our stature as a supplier of base
technology and to capture ongoing revenue as those customers sell
their products to the market. We plan to provide a more complete view
of our business moving forward once the merger takes place. Today, we
remain comfortable with existing analyst views on the current
Excalibur business.
We are extremely enthusiastic about the new company and optimistic
about its future. While organizations may compete against us for some
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part of the end-to-end solution we envision providing, no competitor,
in our view, currently has, or has announced, a comprehensive solution
on a par with the offering planned for the new company. We are
building a company we believe will have the people, the technology,
the resources, the customers, the associations and the vision needed
to achieve our goals.
[Pre-determined Questions]
This concludes my remarks. Now, with thanks to all of you who sent in
questions via fax and e-mail, we'll address a few questions that
represented common lines of inquiry and then open it up for our
interactive session.
The first question is:
1. What guidance can you give regarding the outlook for your third
quarter?
A. We're currently in the business planning process for the
combined company, but it's not possible at present to
ascertain what impact, if any, the new business
opportunities before us may have on Excalibur's business.
Interest in the new company is strong, and we've heard from
many organizations, not only in Excalibur's current customer
base, but also among our prospects, about opportunities that
likely wouldn't have been known to us without this proposed
merger. However, we're not yet at a point where we can
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offer a combined view or any guidance about the new
company's prospects going forward. We do expect, though, to
have that view after the transaction closes and intend to
affirmatively share that view once our planning is complete.
In the meantime, a number of analysts do have reports
available on Excalibur as a standalone company.
2. When will the merger close?
A. As we noted earlier, just last week we filed our preliminary
proxy for review. We anticipate having the definitive proxy
in our shareholders' hands in ample time for the transaction
to close as expected this Fall.
3. Is the video business developing as you expected?
A. So far. As I noted earlier, our revenues this past quarter
actually exceeded our budget expectation by about $100
thousand and the number of deals closed showed a nice
increase - going from 10 in Q2 last year to 14 in Q2 this
year. We did see our year-over-year revenue decline
somewhat, but that was expected, since last year in Q2 we
recognized revenue from agreements with StorageTek and
INTERVU that we didn't expect to recur this year.
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4. How will the Intel merger enlarge your addressable market?
A. Not only will does the merger promise to add new products
for new market segments - such as tamper resistant software
- to our family of software product offerings, it also opens
up an entirely new market segment - the Interactive Media
Services market segment - to us. This segment, according to
media industry research firm Kagan & Associates, will be a
$16 billion market by 2004, and we believe the new company
will be uniquely positioned to capitalize on it.
Now, I'd like to ask the operator to brief you on the interactive
portion of the question and answer session and then we will open it up
for your questions.
OPERATOR: {"Ladies and gentlemen, we will now begin the interactive portion of
the question and answer session. To ask a question, please press the
"1" followed by the "4" on your push-button phone. You will hear a
three tone prompt acknowledging your request and your questions will
be polled in the order they are received. After you have stated your
question, your line will be placed back into listen only. If your
question has been answered and you would like to withdraw your polling
request, you may do so by pressing the "1" followed by the "3" on your
push-button phone. If you are using a speakerphone, please pick up
your handset before pressing the numbers. One moment please for the
first question."}
[The operator will introduce each question:]
OPERATOR: "Mr. Doe, please state your company name, followed by your question."
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NOTE: Excalibur needs to keep track of time, and cue the operator that you
would like to conclude the call by saying, "WE HAVE TIME FOR FIVE/TWO
/ONE MORE QUESTIONS."
PLEASE CUE THE OPERATOR WHEN YOUR CONVERSATION WITH EACH CALLER HAS
ENDED SO THAT THE OPERATOR CAN CONNECT THE NEXT CALLER TO ASK A
QUESTION. (I.E. "NEXT QUESTION...") Also, if you need to review
documents in order to prepare your answer to a question, please let
callers know by saying, "One moment please" to avoid silence.
When there are no more questions, the operator will say, "If there are
any additional questions, please press the "1" followed by the "4" at
this time.
After all questions, the operator will say, "Mr. Condo, there are no
further questions at this time. Please continue."
CONDO: This concludes our FY01 second quarter financial results conference
call. If your question was not addressed in this session, please call
our investor relations department who will coordinate the answer, or
you may fax your question to (703) 748-1255, or you can e-mail it to
info@excalib.com. Thank you all for participating.
OPERATOR: {"Ladies and Gentlemen, that does conclude our conference for today.
You may all disconnect and thank you for participating."}
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Excalibur and Intel filed a preliminary proxy statement/prospectus and other
relevant documents concerning the merger with the Securities and Exchange
Commission (the "Commission"). For a description of the direct or indirect
interests in the transactions concerning the solicitation, we refer you to this
preliminary proxy statement/prospectus and the definitive proxy
statement/prospectus which Excalibur and Intel plan to file with the Commission.
WE URGE INVESTORS AND STOCKHOLDERS TO READ THE PROXY STATEMENT/PROSPECTUS AND
ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE COMMISSION BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. Investors and stockholders will be able to obtain
free copies of these documents at the Commission's website at www.sec.gov. and
upon oral or written request to Excalibur Technologies Corporation, 1921 Gallows
Road, Suite 200, Vienna, Virginia 22182, Attention: Investor Relations
(telephone number (703) 761-3700.
INVESTORS AND STOCKHOLDERS SHOULD READ THE PROXY STATEMENT/PROSPECTUS CAREFULLY
BEFORE MAKING A DECISION CONCERNING THE MERGER.
Intel, Excalibur and their respective officers and directors may be deemed to be
participants in the solicitation of proxies from Excalibur stockholders with
respect to the transactions contemplated by the merger agreement. Information
concerning the participants in the solicitation will be set forth in the proxy
statement/prospectus when it is filed with the Commission.
This document contains forward-looking statements, which are based upon current
expectations or beliefs, as well as a number of assumptions about future events.
The reader is cautioned not to put undue reliance on these forward-looking
statements, as these statements are subject to numerous factors and
uncertainties, including without limitation, business and economic conditions
and growth, continued success in technological advances, costs related to the
proposed merger, the inability to obtain governmental approval of the proposed
merger, substantial delay in the expected closing of the merger and the risk
that the business of the Interactive Media Services division of Intel and
Excalibur's businesses will not be integrated successfully, any of which may
cause actual results to differ materially from those described in the
statements. In addition to the factors discussed above, other factors that could
cause actual results to differ materially are discussed in Intel's and
Excalibur's most recent Form 10-Q and Form 10-K filings with the Commission.
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