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Exhibit 99.1
Web Site Results/chinadotcom
Conference Call Script
Paul Warburg
Good morning. Thanks for joining us today to discuss these two exciting
transactions which we've announced in the past two days: our acquisition of Web
Site Results, which we announced earlier today, and the expanded strategic
relationship with chinadotcom, announced yesterday. I'm Paul Warburg, vice
president of investor relations. Joining me on the call is David Moore, chief
executive officer, Andy Johns, chief financial officer and Joel Herskovits,
director of investor relations.
Before we get started, I want to remind you to please keep in mind that during
the course of the conference call, we will be providing forward-looking
statements that are subject to risk factors and uncertainties. I urge you to
review our Report on Form 10-Q to review the cautionary statements and risk
factors contained therein.
I would now like to turn the call over to Dave Moore, chief executive officer.
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DAVE MOORE
Thanks Paul. And thank you all again for joining us today to discuss the
acquisition of Website Results and the expansion of 24/7 Media's relationship
with chinadotcom.
On today's call, my comments will center on the strategic implications of both
transactions. I will then turn the call over to Andy Johns who will guide you
through the financial benefits. Afterwards, we will open the call up to your
questions.
As you have heard me say before, 24/7 Media's vision is to be the preeminent
global provider of interactive marketing solutions and services.
We have communicated to you our three pronged business strategy to achieve this
vision, namely:
o First, to continue to diversify our business model by providing our
clients with the broadest and most comprehensive set of interactive
marketing solutions in the industry
o Second, to more effectively cross sell our solutions to both high
quality dot com and traditional advertisers as well as our web site
clients
o Finally, to deliver our industry leading solutions on a global scale,
meeting the explosive worldwide growth in online advertising.
Execution of this strategy will result in even stronger 24/7 Media financial
performance.
o Diversification of our business model provides additional growth
opportunities
o Leveraging our customer base increases revenues, and improves
operating margins
o Expanding our leadership in international operations taps into
entirely new, incremental revenue streams which leverage the existing
24/7 Media infrastructure
Both transactions that we are discussing today generate high-margin incremental
revenues for 24/7 Media. More importantly, they are accretive, thereby
accelerating our drive to profitability.
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With this in mind, let me now turn to our discussion of Website Results.
Website Results is an Internet marketing technologies firm based in Los Angeles.
The company's service targets Web sites and direct marketers that wish to
receive highly targeted traffic from the major Internet search engines. Their
ASP model charges based on the incremental traffic generated, allowing WSR's
clients to accurately measure the effectiveness of their campaigns.
Web Site Results sets itself apart from other Internet traffic solutions
providers in two major ways
o One, WSR's proven technology has demonstrated the ability to deliver
one of the strongest backend conversion rates with a high return on ad
dollars spent.
o And Two, WSR is the only company delivering search engine traffic
which has developed a robust, scalable technology infrastructure to
implement modifications on an immediate and continuous basis.
The benefits of this service to our clients are many.
o First, it expands advertisers' online marketing options from banner,
buttons and email to now include search engine traffic
o Second, it drives higher levels of targeted traffic from search
engines to client Web sites
o Third, the technology produces enhanced visibility of client Web sites
on relevant keyword searches
o Fourth, clients are charged only for incremental click throughs and,
o Finally, conversion rates are higher than untargeted advertising as
consumers are actively seeking products and services related to the
key words in the search
Likewise, the benefits to 24/7 Media are clear:
o Web Site Results provides a new online, interactive advertising
channel that complements our Network and email channels
o WSR provides a new, high margin incremental revenue stream
o It is a fully scalable business model, complementing our third party
ad serving and email technology platforms
o It increases 24/7 Media network traffic and,
o Finally, it accelerates 24/7 Media's drive to profitability, which
Andy will elaborate on in just a few minutes.
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In summary, Web Site Results broadens the suite of interactive solutions we
offer. It represents another complementary solution to cross sell to both new
and existing clients. Finally, it reaffirms 24/7 Media's leading position of
providing the most comprehensive suite of online marketing solutions.
I will now shift the discussion to our expanded relationship with chinadotcom.
24/7 Media and chinadotcom have had a strategic relationship in place since
1998. The expansion of the partnership enables 24/7 Media to provide additional
industry leading technology-based marketing solutions to 24/7 Media Asia, a
subsidiary of chinadotcom. Under the expanded relationship, 24/7 Media will
provide 24/7 Media Asia with the following interactive marketing services:
o Customer acquisition solutions, including the 24/7 Connect technology
platform to deliver online advertisements and 24/7 Mail's targeted
email solutions
o Customer retention tools that help 24/7 Media Asia's clients manage
their growing customer base
o Customer reward programs, including AwardTrack, that develop customer
affinity and loyalty
o Measurement tools that manage campaign and retention initiatives
The expanded relationship will generate additional incremental revenue streams
for both 24/7 Media and 24/7 Media Asia, while achieving the benefits of the
common 24/7 Connect technology platform. Additionally, the territory covered by
the partnership has been expanded to include India and New Zealand.
The benefits from this expanded relationship are as follows:
o The expanded relationship increases 24/7 Media Asia's leadership
position in Asia
o We now own approximately 20% of this valuable business
o We achieve this position with minimal capital investment, by
leveraging our relationship with chinadotcom
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o 24/7 Media recognizes an expanded, high margin recurring revenue
stream in the form of perpetual royalty and licensing payments across
multiple product lines
In short, chinadotcom is an excellent strategic partner. It has executed its
strategy of establishing 24/7 Media Asia as the dominant player in the online
advertising market in Asia. The modified agreement enables 24/7 Media to build
upon our already solid track record and deliver the full suite of online
solutions to the Asian marketplace.
In summary, the strategic benefits of both transactions are readily apparent: we
have added another complimentary component to online advertising in search
engine optimization, we expanded our opportunity for cross selling our products
and services to our clients, and we further broadened our global reach.
I would now like to turn the call over to Andy Johns, chief financial officer of
24/7 Media.
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ANDY JOHNS
Thanks Dave.
Dave just outlined the strategic benefits of both the Web Site Results
acquisition and the enhanced strategic relationship with chinadotcom. I would
like to outline the financial implications of both transactions.
I will start with Web Site results. As you saw in the release, the acquisition
price of WSR was $95 million. We purchased the company using 7.1 million shares
of 24/7 Media stock, of which 60% was issued to WSR's shareholders at the close
and the remainder is to be issued based on an EBIT earn out basis which extends
through 2001.
Website Results currently serves in excess of 200 customers including 100 of the
largest, most recognizable companies on the Internet. It is adding roughly 20
new clients per month. Well known clients include Ebay, E*TRADE and Fogdog, to
name just a few. Additionally, WSR has an outstanding customer retention rate.
Web Site Results is a profitable company. In the first six months of this year,
the company generated well over $6 million in revenue, with exceptionally high
gross margin, and generated over $4 million in EBIT. We anticipate that EBIT
should continue to grow sequentially on a percentage basis in the low-to-mid
teens over the next 3-5 quarters.
Sequential revenue growth should be in-line or slightly ahead of our EBIT growth
expectations.
Web Site Results financial performance will be included in our Technology
breakout on the P&L. The WSR model provides a highly predictable, recurring
revenue stream, consistent with other ASP offerings.
The expansion of the chinadotcom partnership agreement and its implications for
our financial performance are similarly exciting to us.
We are forecasting an additional $1 million in revenue for the remaining two
quarters of this year and approximately $2-3 million for next year. These
numbers could ramp considerably if market conditions accelerate.
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Also, as part of deepening the relationship with chinadotcom, we received 19.9%
of 24/7 Media Asia in exchange for 2.5 million shares of 24/7 Media common
stock.
Revenues we receive will be in the form of licensing and royalty payments, and,
as a result, will see the majority fall to the bottom line. As part of this
agreement, royalties become perpetual, rather than having the 10 year timeframe
as set forth in the original agreement.
The net impact of these transactions on our consolidated results is the
following:
o Given the mid quarter closing dates, we still anticipate minor
benefits in the third quarter and, therefore, are comfortable in
indicating that these two deals, combined, will add about $1 1/2
million in revenue and $1 million in positive contribution to the
bottom line to current guidance. Average share count for the quarter
will be approximately 37 1/2 million.
o The true benefits of the transactions will become evident in the 4th
quarter. Therefore, models should take into account the full impact of
WSR. Shares outstanding will increase to roughly 42 million.
o Shares outstanding will increase to about 43 million during the first
half of '01 and 44 million during the second half of '01, as the
escrowed shares related to the Website Results earnout get earned.
Modeling out these results can yield a pull forward of cash breakeven from the
current consensus by two quarters to 4Q01. Additionally, as many of you know, we
are currently in the midst of our budget process to take advantage of the new
organizational structure that we recently implemented. This process should
result in an additional update to that timetable to breakeven by our 3Q00
earnings release.
This information should be sufficient detail for you to be able to update your
models.
That ends our prepared remarks. I would like to turn the call back over to the
conference call operator and take your questions.
At end of Q&A
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DAVID MOORE
Again, I would like to thank you for joining us today to discuss these very
positive events. We look forward to talking to you soon.
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