Thanks for transcribing the conference call!! I went through and corrected/added in the missing text from the original copy which I have. It is almost as bad as the Web Page, but not quite. Here is the updated version..
*******2/17/98 CONFERENCE CALL TRANSCRIPT********
Here's my transcription of the faxed transcript from the conference call. Thanks to Garfield for making it available to us. The original graphic file can be found at dallas.net
I hope we are finally on the right track. Rich
Note: words that were somewhat unintelligible have been interpolated and are marked with [brackets like this] <~~~ Bracketed Words are now correct..
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Press Conference held on Tuesday February 17, 1998 at 6:30 am PT
FY 98 Second Quarter ending 12/31/97
Good Morning Everybody
This is RP speaking, before we begin, I would like to introduce the participants of this conference call to you.
Daniel Taylor, Executive VP Marketing
Mark Skiba, Chief Technology Officer
And
Mark Bestow, Chief Financial Officer
I would assume that by now everybody has seen our press release and also might have had an opportunity to review our Second Quarter Financial Filing, which we have filed on Friday.
I assume that most of you are very disappointed by these financial results, especially since the company seemed to have been on a turn around path after the last quarter. Let me assure you, WE STILL ARE!
Naturally we are disappointed ourselves having to present such results today. While we are disappointed with the financial results, we would like to point out that these are figures contain:
1 Large $s amounts for Deferred Revenues
2 A substantial increase in Reserves for the past
3 Substantial reserves for the 2nd quarter
4 A substantial one-time write off
5 Some restructuring costs
While Daniel Taylor and I had started the process evaluating the Company's management structure, the basis of our technology, the products released based on that technology and the methods used launching and subsequently marketing these products. Very carefully several months ago, we had also started taking action to change crucial components of our business model at the same time. This is mainly demonstrated by the way we began to assemble a top industry management team several months ago to expedite putting the company back on the right track.
With the help and long standing industry contacts of those new team members we have intensified our critical approach to product development, marketing and PR and have CONTINUED the challenge of getting the best possible management team of industry leading experts into place as quickly as possible, the two final additions will be announced this week. We are now complete, or very close to completion with this process. With the position of a strong president remaining open.
At the same time we have begun a restructuring process, eliminated positions within the company, which were not as crucial for revenue production and earnings, also eliminated an entire unprofitable subsidiary, true to our improved and refined business model.
Lead by Mark Skiba, we have considerably broadened the pool of talent developing technology for us, have expanded the technology basis for our future product releases and have put mechanisms and programs in place that will ensure [better] [sales] success in the [channel]. Daniel Taylor and Mark Skiba will address that later in detail.
With this in mind, I will pass to Mark Bestow who will address our financials.
Mark Bestow,
Thank you Ranier
Good Morning
For the quarter ended December 31,1997, the company reported a net loss of $3.77 million or $0.16 loss per share on revenues of negative ($1.55) million. This compares with a net loss of $1.50 million or $0.09 loss per share on revenues of $600 thousand during the second quarter of the previous year.
In our [continued] efforts to successfully implement our Refined Business Model, we have [continued to] aggressively impacted our financial estimates this quarter (as we had [done] in the year end statements) in the following manner.
* We have increased reserves by approximately $2 million, which resulted in negative net revenue of $1.5 million. This action was taken in order to help the company better manage rising [DSOs], a industry wide problem, while sunsetting an number of underperforming products, which is consistent with the company's application of conservative revenue recognition policies. Naturally this does not mean the company had no or negative revenue. The negative revenue number arises purely out of a presentation based on GAP treatments.
* These numbers are compounded by the fact that our 2nd quarter sales were [driven by just] one product, Zipper, compared to several products in the 1st quarter, fewer products being released. A result out of our revised product release requirements. On top of the earlier mentioned reserves, additional reserves were applied to the [sales] of this product.
And now focusing on our expenses,
* R&D, Marketing and Selling, and G&A expenses were dramatically reduced by $1.2 million as compared to the second quarter of Fiscal 1997. This occurred mainly as a result of the consequent implementation of our new Business Model, which the company will apply in the same manner moving forward.
* [The] quarter's [loss] also included a significant one-time restructuring charge of over [$450 thousand] related to the disposition of the Company's wholly-owned development subsidiary in Israel.
For the three months ended December 31, 1997, the company reported a net loss of $3.39 million or $0.14 loss per share on revenues of $1.20 million. This compares with a net loss of $3.8 million, or $0.22 loss per share on revenues of $700 thousand during the same period the previous year.
I would like to point out that our operating expenses were reduced nearly $1 million as compared to the previous year due to cost controls, which if consequently being applied in the future will position the company for improved earnings in the future.
Looking at our balance sheet, the most significant change is the decrease in Accounts Receivable, which resulted from a $1.5 million reduction in Deferred Revenues along with an additional $2 million reserve allowance.
Regarding other financial matters,
We have approximately 24.1 million shares outstanding at the close of this quarter. Up slightly from 22.5 million shares outstanding at September 30, 1997, with no significant number of shares left for conversion out of our original debenture.
Additionally we now have a Corporate Controller on-board (former Disney) who has been instrumental in implementing our [strict] cost cutting controls, along with aggressive Account Receivable collection efforts.
In closing I would like to state that we are very pleased with our financial decisions and direction and the financial team of Syncronys strongly believes that these aggressive financial impacts will lead to a leaner and more aggressive company moving forward.
I will now turn the call back to Ranier.
Thank you Mark
Mark and I will both be available to answer any of the financial questions you might have at the end of the conference call. You may want to address different officers with your questions depending on the nature of your questions.
Since this new management team has joined us, we have made the most significant changes and progress in the Development and Marketing areas. Accordingly, Mark Skiba will introduce you to some of our new technologies and Daniel Taylor will address Marketing. Unfortunately, we cannot be quite as detailed about some of these technologies as we would like to be at this point in time (for obvious reasons), but hopefully Marks presentation will provide a strong insight and more will be detailed releases over the weeks to come.
Mark Skiba
Insert Marketing presentation
(NOTE: MUST HAVE BEEN CUT OUT OF THE FAX - RICH)
Back to Ranier
This was an outline of our new technology, which the company believes, will without a doubt and combined with a much improved PR effort and product launch strategy lead us into a new future. Daniel Taylor will now speak about the marketing and PR approach for some of these products and the company in general.
DGT
Let me describe the marketing perspective.
The results of the past quarter reflect slower sell-through than projected. This effected [our] historical products those introduced over the last year as well as our recent products launched over the past two quarters.
Management has analyzed the situation. We stopped looked and listened and made the following adjustments to assure better results for our new products.
1 We eliminated the Macintosh products. Even though they were critically acclaimed, the Mac market has essentially imploded, leaving virtually no market with the retail channel and only, in the Macintosh field, an expensive and unprofitable direct mail channel.
2 We have sunset six underperforming PC products. These products were of two types (a) encryption/security products that failed as a category for everyone in the category and (b) performance products. The difficulty with performance products is the difficulty in managing a durable performance gain with rapid changes in operating systems and hardware (such as faster CD-ROMs and cheaper RAM). The market for these products seems [to] be [stagnating].
3 This pruning has enabled us to focus our marketing efforts and resources on our new products that have significant revenue potential. Big Disk is a prime example. Big Disk manages multiple hard drives or multiple partitions. The market for this product is upwards of [60M]
4 Moving forward, we have for the first time a technological platform - the Smart Files Technology. Big Disk is the first product using this technology. Besides other unrelated products, we have upwards of 5 additional products based on this Smart Files Technology that we will be releasing over the next two quarters. We will be announcing these products in the coming weeks and months.
5 Each of these products is backed by intensive and independent market research that defines and quantifies market demand as well as functionality, positioning and identity. And what has this research show us? Operating software, applications and files are creating ever increasing demands for disk space. At the same time hard drives are getting bigger and cheaper. A 6 GB hard drive is now about $200. The Smart Files Technology will take advantage of these two emerging forces and supply needed additional value to the user.
6 The market today is not just about technology, but how we are brining PRODUCTS to market. We have made some fundamental changes here.
7 We have assembled a team with a proven track record of brining hit products to market. Recent additions include Mark Skiba, our CTO. Joe Cheng, our VP of OEM and Asian Sales and Marketing, both from Quarterdeck. We have now completed our team with several key additions which we will announcing this week. I can say that morale within the company has never been higher and that momentum is palpable.
8 We are now launching our products into more than simply the North American retail market. While our leading retail presence remains unchallenged, we have added online marketing and have engaged a leading web-marketing firm to accelerate implementation of the program. This is generating market mind share and revenues in its own right as well as driving retail sales. We will be making a major exclusive online debut for BigDisk on ZD-Net in several weeks (on March 5th).
As well, we have added direct marketing again with a specialist direct marketing firm. Our first campaign is focused on Big Disk. We have already announced that Western Digital will be participating in this campaign.
9 International markets now [represent] up to 45% of domestic markets. Our objective is to establish international distribution in all key markets based on the very profitable republishing model. In Japan, the second larges computer market in the world, we have announced the appointment of Winning Run as our partner. Joe Cheng, our VP of Asian Sales just returned from a very successful medial tour in Japan. We are in the process of adding new publishers and converting existing agency relationships into republishing relationships. We are following the same model in Europe. All republishing revenues will produce profits right at the bottom line.
10 We have also announced an OEM relationship with Askey, the world's second largest modem manufacturer. Askey will be including OEM versions of four products with their modems. (at their cost) - Initially 500k modems, which means that potentially 2 million of our products will be introduced directly to potential buyers. Users can then upgrade to the full versions via the web or a toll-free number. We are already in discussions to expand our relationship with Askey and we have a number of other OEM opportunities we are working on which we will be announcing going forward.
11 We have also completed a program to revamp our retail presence with new packaging and better administration of our marketing programs to ensure we get the bang for our buck. Our entire approach to customer support is also being revamped with a new focus on web-based support and more responsive telephone support creating a valuable interactive tool which can be used for potential revenue generation. This is work-in-progress and we will be making further announcements here.
12 Finally in addition to adding OEM. Direct, Online and International revenue [streams], we are currently in the planning stages of moving into the corporate marketplace. Our approach, consistent with our business plan will be to stay lean and develop the key relationships that provide the maximum leverage and minimum overhead. This is a significant step. The corporate market is characterized by longer and more technical sales cycles, a greater emphasis on [support]. The revenue curve of course is larger per sale and more durable as MIS [departments?] follow product through future revs.
13 (NOTE: 13 is circled on the fax) The bottom line for Syncronys is products that meet a market demand, based on a proprietary platform, launched concurrently into multiple channels by a team with a proven track record.
Back to Ranier
Thank you Daniel
As Daniel has presented, the company during the last four months has very critically assessed its strengths and weaknesses and has taken steps to address all inadequacies. The team has established a plan to aggressively improve revenue generation and earnings power by leveraging its promising Smart Files Technology products not only through its existing and preeminent retail channels, but also [into five] new sales channels:
OEM
Direct
Electronic Commerce - Online
Corporate
Asian and European Republishing
All this is being implemented at a rapid pace by a new team of officers and managers with a proven track record and by applying intensive marketing research [before] the company even enters into the development of a new product. Every product will have a premium launch plan that will be implemented by a team of PR experts and product managers coordinated with the appropriate retail channel activities determined far in advance and custom tailored to the target market. Every team member is extremely motivated and incented to work hard to [further] develop and implement its new business model in order to:
1. Produce the most innovative and useful software products
2. Introduce products based on proven market research and provide strong and timely launch support
3. Reduce product release volatility by staggering product releases appropriately
4. Respond more quickly to the rapidly changing conditions in the [industry]
5. Continue to lower [fix] cost, development expenses and risk
6. Add additional sales channels to its already existing distribution network
We believe that finally the company has most of its critical components in place, is on track to release 6-7 new and viable products during the next six months and with its lean and variable cost structure has produced an infrastructure capable of producing [solid] revenue growth by a seasoned team of industry experts. |
