Reston, Virginia, and Montpellier, France - August 10, 2005 - Genesys Conferencing
(Euronext Eurolist: FR0004270270) (NASDAQ: GNSY), a global multimedia conferencing
service leader, today reported financial results for the second quarter ended
June 30, 2005. All results are reported under new International Financial Reporting
Standards (IFRS). For comparison purposes, financial results for the second
quarter ended June 30, 2004, have been stated under IFRS and may differ from
the results previously reported for this period under French Generally Accepted
Accounting Principles (GAAP).
Second Quarter 2005 Operating Highlights
- Total volume increased 37.5% from the second quarter of 2004, to 510.8 million
minutes
- Genesys Meeting Center automated services volume increased 43.8% to 474.3
million minutes
- Volume utilizing Multimedia Minute pricing increased 27.0% sequentially
to 101.5 million minutes
- Revenue¹ was €36.2 million, up 6.2% sequentially from the first
quarter of 2005
- Gross margin increased to 65.6%, up from 62.8% in the second quarter of
2004
- EBITDA², excluding stock-based compensation, was €6.6 million,
an18.3% EBITDA margin
- Net income was €0.9 million, including the effect of exchange rate
fluctuations related to the application of IFRS for certain U.S. dollar denominated
financial instruments*
* Please refer to the paragraph "Adoption of International Financial Reporting
Standards" below regarding the application of IFRS and modifications to
previously released first quarter financial information.
Second Quarter 2005 Operating Performance
In the second quarter of 2005, revenue? was €36.2 million, up 1.6%
compared with revenue of €35.7 in the second quarter of 2004 and up 6.2%
sequentially. In U.S. dollars, second quarter 2005 revenue was $45.6 million,
up 6.2% compared to $43.0 million in the second quarter of 2004. Revenue from
Genesys Meeting Center services was 77.4% of total revenue.
"The market interest for our service offering is clearly demonstrated
by our leading volume growth and improved revenue," stated Francois Legros,
Chairman and Chief Executive Officer. "As the large enterprise market is
rapidly adopting multimedia conferencing services, the unique value proposition
of Genesys Meeting Center and the Multimedia Minute is achieving significant
penetration of this strategic customer segment."
Gross margin for the second quarter of 2005 was 65.6% compared to 62.8% for
the second quarter of 2004. Gross margin improvement reflects the cost efficiency
of the Genesys Meeting Center technology platform. Improved economies of scale
have largely offset the effect of the company's increased percentage of revenue
from high-volume, large enterprise customers which traditionally have lower
prices. Gross profit increased €1.4 million, or 6.1%, in the second quarter
of 2005 to €23.8 million.
Selling, general and administrative expenses were €19.7 million in the
second quarter of 2005, down slightly compared to €19.9 million in the
second quarter of 2004. On a sequential basis, selling, general and administrative
expenses increased 11.4% from the first quarter of 2005, primarily related to
the Company's planned addition of new sales personnel.
"Genesys has taken steps to increase its sales presence in key regional
markets in response to customer growth and to further leverage the company's
competitive position within the multimedia conferencing and collaboration market,"
said Legros.
Earnings before interest, taxes, depreciation and amortization (EBITDA?),
before stock-based compensation expense, was €6.6 million for the second
quarter 2005, an 18.3% EBITDA margin compared to €4.0 million and 11.3%,
respectively, for the second quarter of 2004. Second quarter 2004 EBITDA reflected
€1.5 million of restructuring charges. Stock-based compensation expense,
as reported under IFRS, was €306,000 and €386,000 for the second quarters
of 2005 and 2004, respectively.
Net income was €0.9 million, or €0.05 per diluted share, for the
second quarter of 2005 compared to a net loss of €(58.3) million or €(3.17)
per share in the second quarter of 2004. Net income benefits from the company's
improved operating performance and increased gross profit. The net loss in the
second quarter of 2004 primarily reflects a €(63.2) million impairment
of goodwill and other intangibles.
"Net income has been positive for the past two quarters and is an important
indication of the company's improving financial position," stated Michael
Savage, Executive Vice President, and Chief Financial Officer. "With higher
operating margins, the company is better positioned to effectively reinvest
in technology and business initiatives to support future growth."
Adoption of International Financial Reporting Standards
Effective January 1, 2005, the company, like many companies organized in France
and other European countries, adopted the new International Financial Reporting
Standards (IFRS) for reporting of its financial results. The company previously
reported under French GAAP.
At present, there is not a significant body of established practice on which
to draw in forming opinions regarding interpretation and application to assist
companies and their auditors in making determinations regarding the requirements
of IFRS. Thus, practice is continuing to evolve. Based upon its continuing analysis
of the requirements of IFRS and discussions with its auditors, the company has
determined that its calculation of net income under IFRS should include the
effect of exchange rate fluctuations on certain financial instruments particularly,
for the company's U.S. dollar denominated bank credit facility. As a result,
the company's first quarter 2005 financial information has been modified to
reflect the required IFRS application of foreign exchange rate changes on the
portion of the company's U.S dollar denominated bank credit facility held at
Genesys SA, a euro based reporting entity. This modification resulted in the
recognition of a non-cash charge amounting to €1.2 million for the first
quarter of 2005. After considering this modification, on an adjusted basis under
IFRS, the company's net income for the first quarter of 2005 was €1.5 million.
Net income for the first six months of 2005 was €2.4 million, reflecting
a total €2.8 million non-cash charge primarily for the effect of exchange
rate fluctuations. The company also noted that no modification was required
to net income under U.S. GAAP. The treatment of financial instruments under
both U.S. GAAP and IFRS is consistent. Net income as reported under U.S. GAAP,
was €1.8 million and €1.4 million for the first and second quarters
of 2005, respectively, compared to net losses of € (4.1) million and €
(61.4) million for the first and second quarters of 2004, respectively.
The company is not aware of any additional modifications that may need to be
made in connection with the application of IFRS. The company's early IFRS financial
statements may be subject to change for any future guidance issued in connection
with the implementation of IFRS.
Liquidity
As of June 30, 2005, the company's cash? was €5.6 million after deducting
bank overdrafts. On April 30, 2005, the company made its semi-annual principal
and interest expense payments of €4.6 million and €1.9 million, respectively,
under its existing senior credit facility.
Conference Call and Webcast
Chairman and Chief Executive Officer Francois Legros and Executive Vice
President/Chief Financial Officer Michael E. Savage will host a conference call
on Wednesday, August 10, 2005, at 5:30 p.m. Central European Time or 11:30 a.m.
Eastern Time to discuss second quarter 2005 financial results. The conference
call will be web cast live and may be accessed at www.genesys.com. A replay
of the call will be available at www.genesys.com.
___________________________________
(1) Please refer to the paragraph "Impact of Exchange Rates" below
for information regarding the calculation of U.S. dollar amounts.
(2) See attached note to consolidated statements of operations for reconciliation
of Operating Income and EBITDA. The company believes that EBITDA is a meaningful
measure of performance, because it presents the company's results of operations
without the non-cash impact of depreciation and amortization. EBITDA is reported
excluding stock-based compensation expense.
(3) Cash includes cash and cash equivalents less bank overdrafts.
Financial
Tables to Follow
Impact of Exchange Rates
The company serves large enterprises on a worldwide basis. As a result, the
company has extensive international operations and, thus, significant exposure
to exchange rate fluctuations, in particular those of the U.S. dollar. In 2003,
the U.S. dollar declined significantly compared to the euro, and its value further
fluctuated during 2004 and 2005. As a result, the comparability of the company's
revenues and results of operations expressed in euros were significantly impacted.
The company prepares its consolidated financial statements in euros. In order
to demonstrate the impact of the volatility of the U.S. dollar on its revenues
from the second quarter of 2004 to the second quarter of 2005, the company has
recalculated its revenues as if its functional currency had been the U.S. dollar
rather than the euro. For this purpose, the company has used the average for
each quarter of the daily euro/U.S. dollar exchange rate for the second quarters
of 2004 and 2005, respectively, which are the rates it used for translation
purposes in its consolidated income statement.
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 and trends affecting the parties'
financial condition or results of operations.
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. Some of these
factors are described in the Form 20-F that was filed by Genesys with the Securities
and Exchange Commission on May 2, 2005.
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. Except to the extent required by law, 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.
About Genesys Conferencing
Genesys Conferencing is a leading provider of integrated Web, voice and video
conferencing services to over 500,000 users worldwide, including users at nearly
200 of the Global Fortune 500 companies. The company's services are designed
to meet the full range of communication needs within the global enterprise,
from small, collaborative team meetings to large, high profile online events.
The company's flagship product, Genesys Meeting Center, provides a single-platform
multimedia conferencing solution that is easy to use and available on demand.
With offices in 21 countries across North America, Europe and Asia Pacific,
the company offers an unmatched global presence and strong local support. Genesys
Conferencing is listed on the Nouveau Marche in Paris (Euronext: 3955)
and Nasdaq (GNSY). Additional information is available at www.genesys.com.
At Genesys Conferencing
Michael E. Savage
Executive Vice President and Chief Financial Officer
Phone: +1 703 736-7100
michael.savage@genesys.com
Marine Pouvreau
Investor Relations Manager
Phone: +1 703 733-2140
marine.pouvreau@genesys.com