GNSY Genesys S.A. ADS (MM)

Genesys Conferencing (Euronext Eurolist: FR0004270270) (NASDAQ: GNSY), a global multimedia conferencing service leader, today reported financial results for the second quarter ended June 30, 2006. All results are reported under International Financial Reporting Standards (IFRS). Revenue and Margin In the second quarter of 2006, total volume increased to 569.5 million minutes compared to 510.5 million minutes in the second quarter of 2005. On a sequential basis compared to the first quarter of 2006, total volume increased by an additional 17.3 million minutes. Genesys Meeting Center volume increased to 534.6 million minutes, of which over 68.0% was generated under the Multimedia Minute program. In the second quarter of 2006, revenue(1) was EUR 35.9 million compared to revenue of EUR 36.2 million in the second quarter of 2005. In U.S. dollars, revenue was USD 45.1 million compared to USD 45.6 million in the second quarter of 2005. Strong revenue growth from new and existing customers significantly offset the effect of the previously announced loss of a major customer at the end of 2005. "Our strong volume growth continues to demonstrate the appeal of our value proposition to large enterprises," said Francois Legros, Chairman and CEO of Genesys Conferencing. "This quarter, volume based on the Multimedia Minute reached over five million minutes daily, reflecting new business wins as well as our ability to effectively drive enterprise-wide adoption of our collaboration solutions by this demanding market segment." Gross profit for the second quarter of 2006 was EUR 24.1 million, resulting in a gross margin of 67.2%. Excluding a one-time federal excise tax credit of approximately EUR 1.4 million, gross profit was EUR 22.7 million compared to gross profit of EUR 23.8 million in the second quarter of 2005. Gross margin, excluding the one-time credit, was 63.1% in the second quarter of 2006, and, while down compared to a gross margin of 65.5% in the second quarter of 2005, it remained stable compared to the first quarter of 2006. Profitability Operating expenses in the second quarter of 2006 were EUR 18.9 million compared to EUR 19.7 million in the second quarter of 2005. These costs were comprised of: research and development expenses of EUR 1.1 million in the second quarter of 2006 compared to EUR 0.6 million in the second quarter of 2005; selling and marketing expenses of EUR 10.4 million in both the second quarter of 2006 and 2005; and general and administrative expenses of EUR 7.4 million in the second quarter of 2006 compared to EUR 8.7 million in the second quarter of 2005. Excluding a EUR 0.6 million benefit recorded this period in connection with a reevaluation of a balance sheet reserve, operating expenses were EUR 19.5 million in the second quarter of 2006 compared to EUR 19.7 million in the second quarter of 2005 and reflect the company's efforts to stabilize total operating costs while consistently reinvesting in growth initiatives. "Our investment in research and development reflects our commitment to technological innovation, such as Voice over IP. Our expanded R&D capability enables us to respond quickly to customer requirements and to be well positioned to leverage the market's growth," Legros said. Earnings before interest, taxes, depreciation and amortization (EBITDA(2)) and before stock-based compensation expenses were EUR 7.5 million for the second quarter of 2006. EBITDA, excluding both credits noted above, was EUR 5.4 million for the second quarter of 2006 compared to EUR 6.6 million in the second quarter of 2005 and compared with EUR 4.8 million in the first quarter of 2006. Stock-based compensation expense was EUR 63,000 and EUR 327,000 for the second quarter of 2006 and 2005, respectively. Net income for the second quarter of 2006 was EUR 1.0 million, or EUR 0.01 per diluted share, compared to net income of EUR 1.0 million, or EUR 0.06 per diluted share, in the second quarter of 2005. Liquidity As of June 30, 2006, the company's net cash(3) was EUR 4.4 million and its net debt was EUR 25.3 million compared to net debt of EUR 72.0 million as of December 31, 2005. Conference Call and Webcast Chairman and CEO Francois Legros and EVP/Chief Financial Officer Michael E. Savage will host a conference call on Monday, August 14, 2006, at 5:30 p.m. Central European Time or 11:30 a.m. Eastern Time to discuss second- quarter 2006 financial results. The conference may be accessed at: http://events.webeventservices.com/genesys/2006/08/14/. A replay of the call will be available at http://www.genesys.com. -0- *T (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) Net cash includes cash and cash equivalents less bank overdrafts. *T 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 was significantly impacted. 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 18, 2006. Although Genesys' management 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, audio and video conferencing services to thousands of organizations worldwide, including more than 200 of the Fortune Global 500. The company's services are designed to meet the full range of communication needs within the large enterprise, from collaborative team meetings to 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 more than 20 countries across North America, Europe and Asia Pacific, the company offers an unmatched global presence and strong local support. Genesys Conferencing is publicly traded on Euronext Eurolist in France (FR0004270270) and on the NASDAQ in the U.S. (GNSY). Additional information is available at www.genesys.com. -0- *T GENESYS CONFERENCING Consolidated Balance Sheets (IFRS, in thousands of euros, except share data) December 31, 2005 June 30, 2006 ----------------- ----------------- Unaudited ASSETS Non current assets Goodwill, customer lists and technology EUR 33,330 EUR 35,246 Other intangible assets, net 5,663 6,490 Tangible assets, net 16,011 16,034 Financial assets, net 1,074 1,389 Deferred tax assets 2,488 1,668 Investments in affiliated companies 278 - ----------------- ----------------- Total non current assets 58,844 60,827 Current assets Accounts receivable, less allowances (EUR 1,547 and EUR 1,087 at December 31, 2005 and June 30, 2006, respectively) 27,692 26,995 Prepaid expenses and other current assets 9,072 10,679 Marketable securities 45 15 Cash at bank 5,870 6,847 ----------------- ----------------- Total current assets 42,679 44,536 ----------------- ----------------- TOTAL ASSETS EUR 101,523 EUR 105,363 ================= ================= LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Shareholders' equity (deficit) Ordinary shares, nominal value of EUR 1 per share 18,307,756 shares issued and outstanding at December 31, 2005 and 69,798,286 shares issued and outstanding at June 30, 2006 EUR 18,308 EUR 69,798 Common shares to be issued 139 136 Additional paid-in capital 185,080 179,706 Additional paid-in capital to be issued 3,831 3,780 Reserve for Stock-based compensation 2,605 2,944 Accumulated deficit (223,429) (218,432) Net income (loss) for the period 4,544 306 Currency translation adjustments 668 2,917 ----------------- ----------------- Total shareholders' equity (deficit) (8,254) 41,155 Provisions for risks and charges 779 515 Long-term debt Long-term portion of long-term debt 62,474 28,528 Long-term portion of capitalized lease obligations 39 277 ----------------- ----------------- Total long-term debt and other liabilities 63,292 29,320 Current liabilities Bank overdrafts 1,851 2,462 Accounts payable and accrued liabilities 13,254 14,848 Other taxes payable and deferred compensation 9,493 10,276 Income taxes payable 3,148 1,952 Current portion of provision for risks and charges 907 709 Current portion of long-term debt 13,483 765 Current portion of capitalized lease obligations 4 88 Other current liabilities 4,345 3,788 ----------------- ----------------- Total current liabilities 46,485 34,888 ----------------- ----------------- LIABILITIES AND SHAREHOLDERS' EQUITY EUR 101,523 EUR 105,363 ================= ================= GENESYS CONFERENCING Consolidated Statements of Operations Unaudited (IFRS, in thousands of euros, except share and per share data) Three months ended June 30, Six months ended June 30, --------------------------- ------------------------- 2005 2006 2005 2006 ------------- ------------- ------------- ----------- Revenue Services EUR 36,246 EUR 35,902 EUR 70,368 EUR 72,280 Cost of Revenue Services 12,486 11,786 24,776 25,143 ------------- ------------- ------------- ----------- Gross Profit 23,760 24,116 45,592 47,137 Operating expenses Research and development 679 1,142 1,330 2,344 Selling and marketing 10,356 10,394 19,656 21,887 General and administrative 8,708 7,392 16,478 15,239 Restructuring charge (88) - 238 - Amortization of intangibles 683 626 1,382 1,374 ------------- ------------- ------------- ----------- 20,338 19,554 39,084 40,844 ------------- ------------- ------------- ----------- Operating income 3,422 4,562 6,508 6,293 Interest income 22 7 42 58 Interest expense (1,479) (428) (3,446) (1,642) Foreign exchange gain (loss) (627) (2,213) (552) (1,650) Other income (expense) (88) (386) 19 (881) Equity in income of affiliated companies 32 - 37 - Income tax credit (expense) (261) (505) (243) (1,872) ------------- ------------- ------------- ----------- Net income (loss) EUR 1,021 EUR 1,037 EUR 2,365 EUR 306 ------------- ------------- ------------- ----------- Basic and diluted net income (loss) per share EUR 0.06 EUR 0.01 EUR 0.13 EUR 0.01 ============= ============= ============= =========== Number of outstanding shares used in computing basic and diluted net income (loss) per share 18,372,841 69,936,981 18,372,841 55,144,122 GENESYS CONFERENCING Note to the Consolidated Financial Statements Unaudited (In thousands of euros) Three months ended June 30, Six months ended June 30, --------------------------- ------------------------- NOTE A- EBITDA calculation 2005 2006 2005 2006 ------------- ------------- ------------ ------------ Operating income EUR 3,422 EUR 4,562 EUR 6,508 EUR 6,293 Amortization of identifiable intangible assets 683 626 1,382 1,374 Depreciation 2,203 2,263 4,378 4,311 ------------- ------------- ------------ ------------ EBITDA EUR 6,308 EUR 7,451 EUR 12,268 EUR 11,978 ------------- ------------- ------------ ------------ Stock-based compensation 327 63 650 364 EBITDA before stock-based compensation EUR 6,635 EUR 7,514 EUR 12,918 EUR 12,342 ============= ============= ============ ============ *T