GNSY Genesys S.A. ADS (MM)

Genesys Conferencing (Euronext Eurolist C: FR0004270270) (NASDAQ: GNSY), a global multimedia conferencing service leader, today reported financial results for the quarter ended September 30, 2006. All results are reported under International Financial Reporting Standards (IFRS). In the third quarter of 2006, volume increased 11.5% to 556.9 million minutes compared to 499.4 million minutes in the third quarter of 2005. Revenue1 decreased 5.5% to �34.1 million in the third quarter of 2006 compared to �36.1 million in the third quarter of 2005. In US dollars, revenue for the third quarter of 2006 was $43.5 million a 1.1% decrease compared to $44.0 million in the third quarter of 2005. The decrease reflects the exceptionally high level of revenue in the third quarter of 2005 generated by Genesys Event Services and, as previously announced, the loss of a major customer late in the fourth quarter of 2005. Despite the anticipated decline in third quarter revenue, the company continues to expect 2006 total revenue to remain stable when compared to 2005. �Our focus on delivering high-value multimedia collaboration services to large enterprises is proving successful, as we continue to gain greater market penetration in a highly competitive environment,� commented Fran�ois Legros, Chairman and Chief Executive Officer. �The next generation of Genesys Meeting Center, to be launched in the next few weeks, has been designed for easy and fast enterprise-wide deployment and will allow us to further drive customer adoption of our services.� Gross profit was �21.1 million for the third quarter of 2006, compared to �23.9 million for the third quarter of 2005. Gross margin was 61.9% compared to 66.1% for the third quarter of 2005. Gross margin remains in the company�s targeted range of above 60% of revenue. Operating income was �2.5 million for the third quarter of 2006, compared to �2.9 million for the third quarter of 2005. Operating profitability partially reflects the reduction in operating expenses from �20.2 million in the third quarter of 2005 to �18.1 million in the third quarter of 2006, as part of the company�s continuous efforts to improve efficiency and reduce general and administrative expenses. Net income was �41 thousand for the third quarter of 2006, compared to �1.4 million for the third quarter of 2005. The year-over-year change in third quarter net income largely reflects the decline in operating income, the previously reported increase in non-cash, deferred income tax expense and the non-cash impact of exchange rate fluctuations which negatively impacted net income by �0.9 million between the third quarter of 2005 and 2006. Earnings before interest, taxes, depreciation and amortization (EBITDA2) and before stock-based compensation was �5.1 million for the third quarter of 2006, compared to �6.0 million for the third quarter of 2005. As of September 30, 2006, the company�s net cash3 was �3.6 million and its net debt was �26.9 million compared to �4.1 million and �71.9 million as of December 31, 2005, respectively. Net cash reflects �8.5 million of company investments in equipment and capitalized development costs made in the nine months ended September 30, 2006, largely related to the development of the company�s VoIP initiatives and preparation for the commercial introduction of the next generation of Genesys Meeting Center in the fourth quarter of 2006. Guidance The following contains forward-looking guidance regarding Genesys Conferencing�s financial outlook, based on current expectations and a fixed currency rate of exchange of EUR 1.00 = USD 1.25, similar to the average exchange rate for 2005. Actual results may differ materially, and the company may not update any forward-looking statements made in this press release. Consistent with previously issued financial outlook, the company expects for the full-year ended December 31, 2006: Revenue to be in the range of �140 to �144 million EBITDA2 to be in the range of �22 to �25 million Net income to be positive Conference Call and Webcast Chairman and CEO Fran�ois Legros and EVP/Chief Financial Officer Michael E. Savage will host a conference call on Wednesday, November 15, 2006, at 5:30 p.m. Central European Time or 11:30 a.m. Eastern Time to discuss third- quarter 2006 financial results. The conference may be accessed at: http://events.webeventservices.com/genesys/2006/11/15/ A replay of the call will be available at http://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) Net cash includes cash and cash equivalents less bank overdrafts. 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. During 2005, and continuing through the first nine months of 2006, the U.S. dollar has fluctuated compared to the euro. As a result, the comparability of the company�s revenues and results of operations expressed in euros were affected. 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 Conferencing with the Securities and Exchange Commission on May 18, 2006. Although Genesys Conferencing�s 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. Genesys Conferencing�Connecting the World for 20 Years Founded in 1986, Genesys Conferencing is a leading provider of converged collaboration and communication services to thousands of organisations worldwide, including more than 200 of the Fortune Global 500. The company�s flagship product, Genesys Meeting Center, provides an integrated 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 C in France (FR0004270270) and on the NASDAQ in the U.S. (GNSY). Additional information is available at www.genesys.com. GENESYS CONFERENCING Consolidated Balance Sheets (IFRS, in thousands of euros, except share data) � December 31, 2005 September 30, 2006 Unaudited ASSETS Non current assets Goodwill, customer lists and technology �33,330 �35,698 Other intangible assets, net 5,663� 6,953� Tangible assets, net 16,011� 16,453� Financial assets, net 1,074� 1,565� Deferred tax assets 2,488� 1,159� Investments in affiliated companies 278� -� Total non current assets 58,844� 61,828� Current assets Accounts receivable, less allowances (�1,547 and �1,107 at December 31, 2005 and September 30, 2006, respectively) 27,692� 26,223� Prepaid expenses and other current assets 9,072� 11,491� Marketable securities 45� 795� Cash at bank 5,870� 5,647� Total current assets 42,679� 44,156� TOTAL ASSETS �101,523 �105,984 � LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT) Shareholders' equity (deficit) Ordinary shares, nominal value of �1 per share 18,307,756 shares issued and outstanding at December 31, 2005 and 69,798,286 shares issued and outstanding at September 30, 2006 �18,308 �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� 3,735� Reserve for stock-based compensation 2,605� 3,024� Accumulated deficit (223,429) (218,442) Net income (loss) for the period 4,544� 346� Currency translation adjustments 668� 3,419� Total shareholders' equity (deficit) (8,254) 41,722� Provisions for risks and charges 720� 563� Deferred tax liability 59� 595� Long-term debt Long-term portion of long-term debt 62,474� 29,344� Long-term portion of capitalized lease obligations 39� 277� Total long-term debt and other liabilities 63,292� 30,779� Current liabilities Bank overdrafts 1,851� 2,892� Accounts payable and accrued liabilities 13,254� 12,235� Other taxes payable and deferred compensation 9,493� 11,072� Income taxes payable 3,148� 2,836� Current portion of provision for risks and charges 907� 719� Current portion of long-term debt 13,483� 769� Current portion of capitalized lease obligations 4� 62� Other current liabilities 4,345� 2,898� Total current liabilities 46,485� 33,483� LIABILITIES AND SHAREHOLDERS' EQUITY �101,523 �105,984 GENESYS CONFERENCING Consolidated Statements of Operations Unaudited (IFRS, in thousands of euros, except share and per share data) � Three months endedSeptember 30, Nine months endedSeptember 30, 2005� 2006� 2005� 2006� Revenue Services �36,109 �34,135 �106,478 �106,414 � Cost of revenue Services 12,238� 12,997� 37,015� 38,140� Gross profit 23,871� 21,138� 69,463� 68,274� Operating expenses Research and development 632� 553� 1,962� 2,897� Selling and marketing 10,351� 9,928� 30,006� 31,816� General and administrative 9,261� 7,620� 25,683� 22,859� Restructuring charge -� -� 292� -� Amortization of intangibles 718� 586� 2,102� 1,959� 20,962� 18,687� 60,045� 59,531� Operating income 2,909� 2,451� 9,418� 8,743� Interest income 83� 22� 124� 80� Interest expense (1,696) (884) (5,123) (2,527) Foreign exchange gain (loss) 291� (562) (263) (2,212) Other income (expense) 30� (403) 30� (1,283) Equity in income of affiliated companies 21� -� 57� -� Income tax credit (expense) (224) (583) (466) (2,455) Net income (loss) �1,414 �41 �3,777 �346 Basic net income per share �0.08 �0.00 �0.20 �0.01 Diluted net income per share �0.08 �0.00 �0.20 �0.01 Number of outstanding shares used in computing basic net income (loss) per share 18,446,451� 69,912,650� 18,446,451� 60,105,225� � Number of outstanding shares used in computing basic net income (loss) per share 18,567,897� 69,912,650� 18,567,897� 60,105,225� GENESYS CONFERENCING Note to the Consolidated Financial Statements Unaudited (In thousands of euros) � Three months endedSeptember 30, Nine months endedSeptember 30, NOTE A- EBITDA calculation 2005� 2006� 2005� 2006� Operating income �2,909 �2,451 �9,418 �8,743 Amortization of identifiable intangible assets 718� 586� 2,102� 1,959� Depreciation 2,088� 1,984� 6,466� 6,294� EBITDA �5,715 �5,021 �17,986 �16,996 Stock-based compensation 306� 96� 920� 460� EBITDA before stock-based compensation �6,021 �5,117 �18,906 �17,456 Genesys Conferencing (Euronext Eurolist C: FR0004270270) (NASDAQ: GNSY), a global multimedia conferencing service leader, today reported financial results for the quarter ended September 30, 2006. All results are reported under International Financial Reporting Standards (IFRS). In the third quarter of 2006, volume increased 11.5% to 556.9 million minutes compared to 499.4 million minutes in the third quarter of 2005. Revenue(1) decreased 5.5% to EUR 34.1 million in the third quarter of 2006 compared to EUR 36.1 million in the third quarter of 2005. In US dollars, revenue for the third quarter of 2006 was $43.5 million a 1.1% decrease compared to $44.0 million in the third quarter of 2005. The decrease reflects the exceptionally high level of revenue in the third quarter of 2005 generated by Genesys Event Services and, as previously announced, the loss of a major customer late in the fourth quarter of 2005. Despite the anticipated decline in third quarter revenue, the company continues to expect 2006 total revenue to remain stable when compared to 2005. "Our focus on delivering high-value multimedia collaboration services to large enterprises is proving successful, as we continue to gain greater market penetration in a highly competitive environment," commented Francois Legros, Chairman and Chief Executive Officer. "The next generation of Genesys Meeting Center, to be launched in the next few weeks, has been designed for easy and fast enterprise-wide deployment and will allow us to further drive customer adoption of our services." Gross profit was EUR 21.1 million for the third quarter of 2006, compared to EUR 23.9 million for the third quarter of 2005. Gross margin was 61.9% compared to 66.1% for the third quarter of 2005. Gross margin remains in the company's targeted range of above 60% of revenue. Operating income was EUR 2.5 million for the third quarter of 2006, compared to EUR 2.9 million for the third quarter of 2005. Operating profitability partially reflects the reduction in operating expenses from EUR 20.2 million in the third quarter of 2005 to EUR 18.1 million in the third quarter of 2006, as part of the company's continuous efforts to improve efficiency and reduce general and administrative expenses. Net income was EUR 41 thousand for the third quarter of 2006, compared to EUR 1.4 million for the third quarter of 2005. The year-over-year change in third quarter net income largely reflects the decline in operating income, the previously reported increase in non-cash, deferred income tax expense and the non-cash impact of exchange rate fluctuations which negatively impacted net income by EUR 0.9 million between the third quarter of 2005 and 2006. Earnings before interest, taxes, depreciation and amortization (EBITDA(2)) and before stock-based compensation was EUR 5.1 million for the third quarter of 2006, compared to EUR 6.0 million for the third quarter of 2005. As of September 30, 2006, the company's net cash(3) was EUR 3.6 million and its net debt was EUR 26.9 million compared to EUR 4.1 million and EUR 71.9 million as of December 31, 2005, respectively. Net cash reflects EUR 8.5 million of company investments in equipment and capitalized development costs made in the nine months ended September 30, 2006, largely related to the development of the company's VoIP initiatives and preparation for the commercial introduction of the next generation of Genesys Meeting Center in the fourth quarter of 2006. Guidance The following contains forward-looking guidance regarding Genesys Conferencing's financial outlook, based on current expectations and a fixed currency rate of exchange of EUR 1.00 = USD 1.25, similar to the average exchange rate for 2005. Actual results may differ materially, and the company may not update any forward-looking statements made in this press release. Consistent with previously issued financial outlook, the company expects for the full-year ended December 31, 2006: -- Revenue to be in the range of EUR 140 to EUR 144 million -- EBITDA(2) to be in the range of EUR 22 to EUR 25 million -- Net income to be positive Conference Call and Webcast Chairman and CEO Francois Legros and EVP/Chief Financial Officer Michael E. Savage will host a conference call on Wednesday, November 15, 2006, at 5:30 p.m. Central European Time or 11:30 a.m. Eastern Time to discuss third- quarter 2006 financial results. The conference may be accessed at: http://events.webeventservices.com/genesys/2006/11/15/ 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. During 2005, and continuing through the first nine months of 2006, the U.S. dollar has fluctuated compared to the euro. As a result, the comparability of the company's revenues and results of operations expressed in euros were affected. 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 Conferencing with the Securities and Exchange Commission on May 18, 2006. Although Genesys Conferencing's 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. Genesys Conferencing--Connecting the World for 20 Years Founded in 1986, Genesys Conferencing is a leading provider of converged collaboration and communication services to thousands of organisations worldwide, including more than 200 of the Fortune Global 500. The company's flagship product, Genesys Meeting Center, provides an integrated 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 C 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 September 30, 2006 ------------------ ------------------ Unaudited ASSETS Non current assets Goodwill, customer lists and technology EUR 33,330 EUR 35,698 Other intangible assets, net 5,663 6,953 Tangible assets, net 16,011 16,453 Financial assets, net 1,074 1,565 Deferred tax assets 2,488 1,159 Investments in affiliated companies 278 - ------------------ ------------------ Total non current assets 58,844 61,828 Current assets Accounts receivable, less allowances (EUR 1,547 and EUR 1,107 at December 31, 2005 and September 30, 2006, respectively) 27,692 26,223 Prepaid expenses and other current assets 9,072 11,491 Marketable securities 45 795 Cash at bank 5,870 5,647 ------------------ ------------------ Total current assets 42,679 44,156 ------------------ ------------------ TOTAL ASSETS EUR 101,523 EUR 105,984 ================== ================== 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 September 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 3,735 Reserve for stock-based compensation 2,605 3,024 Accumulated deficit (223,429) (218,442) Net income (loss) for the period 4,544 346 Currency translation adjustments 668 3,419 ------------------ ------------------ Total shareholders' equity (deficit) (8,254) 41,722 Provisions for risks and charges 720 563 Deferred tax liability 59 595 Long-term debt Long-term portion of long-term debt 62,474 29,344 Long-term portion of capitalized lease obligations 39 277 ------------------ ------------------ Total long-term debt and other liabilities 63,292 30,779 Current liabilities Bank overdrafts 1,851 2,892 Accounts payable and accrued liabilities 13,254 12,235 Other taxes payable and deferred compensation 9,493 11,072 Income taxes payable 3,148 2,836 Current portion of provision for risks and charges 907 719 Current portion of long-term debt 13,483 769 Current portion of capitalized lease obligations 4 62 Other current liabilities 4,345 2,898 ------------------ ------------------ Total current liabilities 46,485 33,483 ------------------ ------------------ LIABILITIES AND SHAREHOLDERS' EQUITY EUR 101,523 EUR 105,984 ================== ================== *T -0- *T GENESYS CONFERENCING Consolidated Statements of Operations Unaudited (IFRS, in thousands of euros, except share and per share data) Three months ended Nine months ended September 30, September 30, ----------------------- ----------------------- 2005 2006 2005 2006 ----------- ----------- ----------- ----------- Revenue Services EUR 36,109 EUR 34,135 EUR 106,478 EUR 106,414 Cost of revenue Services 12,238 12,997 37,015 38,140 ----------- ----------- ----------- ----------- Gross profit 23,871 21,138 69,463 68,274 Operating expenses Research and development 632 553 1,962 2,897 Selling and marketing 10,351 9,928 30,006 31,816 General and administrative 9,261 7,620 25,683 22,859 Restructuring charge - - 292 - Amortization of intangibles 718 586 2,102 1,959 ----------- ----------- ----------- ----------- 20,962 18,687 60,045 59,531 ----------- ----------- ----------- ----------- Operating income 2,909 2,451 9,418 8,743 Interest income 83 22 124 80 Interest expense (1,696) (884) (5,123) (2,527) Foreign exchange gain (loss) 291 (562) (263) (2,212) Other income (expense) 30 (403) 30 (1,283) Equity in income of affiliated companies 21 - 57 - Income tax credit (expense) (224) (583) (466) (2,455) ----------- ----------- ----------- ----------- Net income (loss) EUR 1,414 EUR 41 EUR 3,777 EUR 346 =========== =========== =========== =========== Basic net income per share EUR 0.08 EUR 0.00 EUR 0.20 EUR 0.01 =========== =========== =========== =========== Diluted net income per share EUR 0.08 EUR 0.00 EUR 0.20 EUR 0.01 =========== =========== =========== =========== Number of outstanding shares used in computing basic net income (loss) per share 18,446,451 69,912,650 18,446,451 60,105,225 Number of outstanding shares used in computing basic net income (loss) per share 18,567,897 69,912,650 18,567,897 60,105,225 *T -0- *T GENESYS CONFERENCING Note to the Consolidated Financial Statements Unaudited (In thousands of euros) Three months ended Nine months ended September 30, September 30, ------------------- --------------------- NOTE A- EBITDA calculation 2005 2006 2005 2006 --------- --------- ---------- ---------- Operating income EUR 2,909 EUR 2,451 EUR 9,418 EUR 8,743 Amortization of identifiable intangible assets 718 586 2,102 1,959 Depreciation 2,088 1,984 6,466 6,294 --------- --------- ---------- ---------- EBITDA EUR 5,715 EUR 5,021 EUR 17,986 EUR 16,996 --------- --------- ---------- ---------- Stock-based compensation 306 96 920 460 EBITDA before stock-based compensation EUR 6,021 EUR 5,117 EUR 18,906 EUR 17,456 ========= ========= ========== ========== *T