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FILING PURSUANT TO RULE
425 OF THE SECURITIES
ACT OF 1933 AND RULE
14(a)-12 OF THE
SECURITIES EXCHANGE ACT
OF 1934
FILER: EXCALIBUR
TECHNOLOGIES CORPORATION
SUBJECT COMPANY:
EXCALIBUR TECHNOLOGIES
CORPORATION
NO. 0-9747
The following is a script for a November 21, 2000 conference call concerning the
Third Quarter Financial Results of Excalibur Technologies Corporation.
[EXCALIBUR TECHNOLOGIES LOGO]
Excalibur Technologies Corporation
FY '01 Q3 Financial Results
Conference Call Script
NOVEMBER 21, 2000
8:30 A.M. EST
FINAL
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Conference Call Phone Number: (212) 346-0281
Conference Reservation Number: 16567918
Excalibur Main Conf. Room Phone Number: (703) 917-9324
Conference Call Chairpersons: Pat Condo
8:15 a.m. {The primary operator will call Pat Condo at (703) 917-9324.
The operator will ensure he or she can hear all participants
clearly and verify the title of the call, speaker names and each
speaker's title. The operator will stay on the line and count down
the time remaining prior to the start of the call. The operator
will stay on the line throughout the call and continuously monitor
sound quality.}
8:30 a.m. {The operator will ask Excalibur if the participants are
ready to begin the call. If additional time is needed prior to the
start of the call, the operator will ask the callers to please
standby.
When the Excalibur participants are ready to begin, the operator
will ask for 10 (ten) seconds of quiet while remote callers are
connected and the tape is started.}
NOTE: DURING THE 10 SECONDS OF QUIET, IT IS IMPERATIVE THAT SILENCE BE
OBSERVED. ALL CALLERS WILL BE ABLE TO HEAR ANY DISCUSSIONS THAT
OCCUR DURING THIS TIME.
OPERATOR: "Ladies and gentlemen, thank you for standing-by. Welcome to the
Excalibur Technologies Corporation Fiscal Year 2001 third quarter
financial results conference call. At this time, all participants
are in "listen" mode only. Later, we will conduct a question and
answer session in interactive mode. At that time, if you have a
question, you will need to press the "1" key, followed by the "4"
key on your push-button phone.
As a reminder, this conference is being recorded today, November
21, 2000. Moderator for today's call is Mr. Pat Condo, president
and chief executive officer of Excalibur Technologies. Mr. Condo,
please proceed."
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CONDO: Good morning everyone and welcome. I'm Pat Condo, president and
chief executive officer of Excalibur Technologies. With me today
is Jim Buchanan our chief financial officer.
Last night, we issued our press release containing financial
results for Excalibur's Fiscal Year 2001 third quarter that ended
October 31. Following our presentation, we'll respond to questions
in an interactive format.
Let me begin by asking Jim to review our FY2001 third quarter
results.
BUCHANAN
[Financial Discussion]
During this call, we the management of Excalibur may make comments
about our future expectations, plans and prospects that could
constitute forward-looking statements as defined by the Private
Securities Litigation Act of 1995. Actual results may differ
materially from our expectations as the result of various
important factors, including but not limited to, the success of
our relationships with strategic partners, the competitiveness of
our products, the timeliness of our product releases, and the
impact of a rapidly changing marketplace. Risk factors are
reported in Excalibur's Form 10-K for the year ended January 31,
2000, and other SEC filings.
Today, I'm pleased to report our financial results again are in
line with our expectations. Overall, we increased revenues by 47
percent compared to the quarter one year ago. This increase
resulted principally
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from continued growth in our existing customer base and
partnerships, and through acquisition of new licensing agreements.
Our total revenue for the third quarter was $12.3 million compared
to $8.4 million for the same quarter last year. Total software
revenue for the quarter equaled $10.6 million, an increase of 51
percent over last year. Maintenance revenue was $1.7 million, a 25
percent increase when compared to the same quarter one year ago.
Total expenses for the quarter were $12.8 million. This represents
a 36 percent increase in expenses over our third quarter expenses
last fiscal year. We expected to see our expenses increase as we
begin to lay the foundation for the formal creation of Convera
Corporation later this year. For example, during Q3, we began
establishing the infrastructure that Convera will need and use to
assert its first mover position in the rich-content management
market segment.
The cost of software revenues in this year's third quarter
increased 96 percent to $2.4 million, as a result of increased
software sales along with a change in the mix of revenue. This
quarter we had some deals with a higher than average mix of third
party licensing costs and services associated with them. This had
the effect of increasing the cost of software revenue. The cost of
maintenance revenues in the third quarter decreased 36 percent
over the same period last year due to changes implemented in the
fourth quarter of last year that streamlined the customer support
organization, thus reducing overall costs. Gross
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margin percentage declined slightly to 78 percent in the third
quarter this year, compared to about 79 percent in the third
quarter of last year.
Sales and marketing expense in the third quarter was $5.5 million,
an increase of 36 percent over last year. This reflects the
continuing investments we're making not only domestically, but
throughout the world, to ensure the continued vitality of our
existing software business. For example, the office we established
in France just closed a significant RetrievalWare agreement with
Peugeot in Q3, and through our support of, and partnership with,
OCS in Spain, we've not only extended our capabilities in the
rapidly growing Latin America marketplace but also have increased
our presence through the OCS portal, "Grand Avenue," one of
Spain's leading web destinations.
Research and development expenses were $2.9 million. That is a 35
percent increase over last year. General and administrative
expenses increased 14 percent from our third quarter last year to
$1.6 million, reflecting an increase to support the Company's
continued business growth.
Other income for the third quarter was about $100 thousand,
bringing our net loss for the quarter to about $400 thousand,
which is approximately 2 cents per common share. This compares to
a net loss of about $1 million in the third fiscal quarter of last
year, or about 7 cents per common share.
For the nine months ended October 31, 2000, total revenue was
$33.1 million, an increase of 31 percent over total revenue of
$25.2 million
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reported for the same period last fiscal year. The Company
recorded a net loss of $2.0 million, or 14 cents per common share,
compared to a net loss of $3.0 million, or 21 cents per common
share, in the same period last fiscal year.
As you may know, we focus our software sales efforts on three
basic market segments: (1) corporate intranet portals, (2)
Internet e-businesses and online content providers, and (3)
original equipment manufacturers or OEMs. For the third quarter,
66 percent of our license revenue resulted from corporate intranet
sales, 17 percent from Internet online services, and 17 percent
from OEMs.
For the first nine months, intranet sales accounted for 50% of our
license revenue, online services for 27% and OEM agreements for
23%. This compares with intranet sales of 38%, online services of
26% and OEM sales of 36% in the first three quarters of last year.
So, during the first part of this fiscal year, we've seen revenues
weighted more heavily on the intranet business, indicating that
more and more corporations and government agencies are utilizing
our capabilities to manage their content throughout their
networks. As we look toward the formation of Convera, and our
plans to integrate Intel Interactive Media Services' security and
rights management technologies with Excalibur's content management
products, our more than 500 enterprise accounts become strategic
opportunities to upgrade our installed base with new products and
services.
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The financing terms being demanded by the market, long-standing
business practices in Europe, and a higher mix of business from
European customers combined to keep our DSO higher than we like
and expect. We remain focused on moving our DSO more in keeping
with our expectations, and hope to report continued progress on
this issue in our next quarterly conference.
Turning now to our results by product line, total revenue in the
third quarter for our RetrievalWare family of products was
$9.7million, an increase of 29 percent over last year. Net
operating income for the text business segment was approximately
$.01 million in the third quarter, compared to net operating
income of $.02 million in the third quarter last year.
Total revenue for the text business segment for the first nine
months of this fiscal year was $28.1 million, an increase of 32%
when compared with $21.3 million last year. Net operating profit
for the nine months totaled $1.8 million compared to an operating
profit of about $100 thousand for the first nine months of last
year.
For the Screening Room Product line and the video business
segment, total revenue for the quarter was approximately $2.6
million this year, as compared to $800 thousand last year,
representing year-over-year growth of 212%. The video business
segment incurred a net operating loss of $0.5 million in the third
quarter of this fiscal year, compared with a net operating loss of
$1.3 million during the same period last year. While somewhat
larger than foreseen at the beginning of this fiscal year, the
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increased expenses in the video segment of our business are in
keeping with our expected ramp up for Convera Corporation, where
video will play a central role in our future business strategies.
For the first nine months of this year, the video business segment
group has generated $4.9 million in revenue, versus $3.9 million
in the first nine months of last year. The video segment incurred
a net operating loss of $4.3 million for the first three quarters
of FY 2001, compared to a net operating loss of $2.9 million for
the first nine months of last year.
At the end of the third quarter, our cash balance was $10.3
million, compared to a balance of $11.8 million at the end of the
second quarter this year. So, in looking at cash flow, we had a
net use of about $1.5 million of cash during the third quarter and
have a net use of about $0.8 million for the first nine months
this year.
Pat?
CONDO
[Business Discussion]
Thanks, Jim. Q3 affirms Excalibur's continued execution of its
business plan. During the quarter we signed significant new
software license agreements across a broad spectrum of accounts
for both our text and our video products businesses. New corporate
software license agreements in Q3 included Peugeot Automotive
Group, Sandia National Labs, the Internal Revenue Service, the
Social Security Administration,
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MasterCard International, Jones Day and Marsh & McClelland law
firms, Sumitomo Bank Capital Markets, the U.S. Senate, and many
more.
Q3 yielded not only sustained growth in the core Excalibur
business, but also saw significant progress in our planning for
the expected formation of Convera Corporation, the new company
expected to be formed through the combination of Excalibur's
entire business operations with the three operating units that
make up Intel's Interactive Media Services division.
On November 17, 2000, we filed Convera's S-4 registration
statement, and current Excalibur shareholders can expect to
receive their proxy statements in the next few days. We encourage
all shareholders to read the proxy statement carefully. As
disclosed in the proxy statement, Management believes this
transaction to be in the best interests of the company and
encourages all Excalibur shareholders to vote in favor of the
combination and return their proxies as soon as possible. We have
tentatively scheduled our Annual Meeting of the Shareholders for
10 a.m. on December 21, 2000 at the Sheraton New York Hotel &
Towers in New York City to act on this and other appropriate
matters of the corporation.
Over the last 6 months Intel and Excalibur have planned a business
strategy for Convera made up of specific offerings that will
enable content owners to extract value from their high-worth
content inside the enterprise, on the Web, across interactive TV
and through wireless
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devices. Our planned strategy addresses two specific business
categories--products and services:
- The PRODUCTS business affords content owners
advanced INTERNAL capabilities for managing
multimedia assets by deploying our RetrievalWare,
Screening Room and DRM products and capabilities on
customer-based network infrastructures and premises.
This business segment addresses the needs of
mid-to-global scale customers who have the
wherewithal to manage and distribute content
utilizing internal resources, and provides a
seamless migration path to Convera's services
offerings as the size and complexity of their assets
grow, or as their needs change. This is the
traditional Excalibur software licensing business
augmented by the addition of new DRM products and
new features and functions for existing products.
The services business addresses two classes of customers--hosted
services customers and end-to-end services customers.
- Convera's HOSTED services will give content owners
access to our RetrievalWare, Screening Room and DRM
products and capabilities in a hosted environment.
In this way, they can select only those products and
capabilities needed for their business critical
operations without the cost and time constraints
required for an in-house deployment. A hosted
services account, as just one example, might deploy
all of its training video in a searchable,
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stream-able database hosted outside the
organization. Hosted services are ideally suited to
large- and mid-sized content-rich organizations and
Global 2000 enterprises that are unable, or
unwilling, to establish the internal infrastructure
needed to effectively manage and distribute their
rich media content across worldwide IP networks.
- Convera's END-TO-END services will give content
owners a COMPREHENSIVE, OUTSOURCED solution for
monetizing high-value content over the Web. It sits
between content owners and end users to manage the
essential steps required to ingest, organize,
maintain, access, re-express, enhance, protect and
distribute valuable content over multiple
distribution platforms, such as 56K, broadband and
wireless devices, and with an array of business
model support including digital ad insertion,
subscriptions and pay-per view. This turnkey,
end-to-end solution is ideally suited to an elite
group of branded content owners focused on
exploiting IP networks as a significant distribution
channel. Targeted END-TO-END accounts include sports
leagues, entertainment studios, news and information
providers and training organizations. Our services
customers can use Convera-selected facilities for
their hosting requirements (such as IOS, Exodus,
ATT), or the provider of their choice.
The need for these solutions is present now in the marketplace and
growing. As just one example, in Q3, two products business
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customers--KGO in San Francisco and KABC in Los Angeles--deployed
Excalibur Screening Room as a central enabling technology in the
workflow of their newsrooms, demonstrating the growing importance
content management is playing and will play in the new digital
rich media environment. Equally important, KGO/KABC serve as
technology test beds for the ABC television network--deploying and
stressing technologies and solutions for potential deployment in
other ABC locations. Their licensing of Screening Room provides
yet another indicator of the growing attention content owners are
giving advanced content management technologies.
Similarly, the NBA/Intel agreement that was announced in September
and will be assigned to Convera following the expected close of
our transaction, is one of the first significant deals involving
the migration of branded, high value content to the Web. It's an
example of the growing appetite branded content owners have for
harnessing the power of the Internet as a new delivery platform
and as a new medium.
Under the agreement, the NBA will bring three distinct offerings
to the Web: personalized highlights, access to their rich, 50-year
archive of basketball video, and ultimately real-time distribution
of a new class of basketball video coverage--coverage that engages
the viewer in an interactive experience where he or she can
choose, for example, which camera angle to watch. After the
expected close, Convera's plan is to power these offerings through
its unique END-TO-END services solution. Video will be ingested,
encoded, made searchable, enhanced
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with interactive content, packaged and re-packaged, secured and
distributed in a comprehensive turnkey solution that enables the
NBA to confidently extract value from its content on the Web.
Convera will share in the revenues the NBA derives directly, such
as through subscriptions and pay-per-view, and indirectly, such as
through syndication, from its Internet initiatives.
Closing the transaction with Intel will signal a new beginning for
Excalibur, but not the end of what we've spent the past 20 years
building. We believe we're in the right place at the right time to
capitalize on the growing marketplace for multimedia, video-rich,
content management solutions.
And while organizations may compete against us for some part of
the end-to-end solution we envision providing, we believe no
competitor currently has, or has announced, a comprehensive
solution on a par with the planned offerings for the new company.
Just as important, we believe Convera will commence operations
with an impressive array of resources in the multimedia content
management market segment--resources and capabilities focused on
achieving a leading role in multimedia content management,
including:
- Over 650 customers worldwide, representing literally
millions of users, of which some 40% are engaged in
the media, broadcasting and entertainment
industries;
- Approximately $160 million in cash reserves;
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- Upwards of 400 people, with over 200 directly
engaged in engineering, and another 150 or so
engaged in selling, marketing and supporting our
products and solutions;
- A rich portfolio of patented and proprietary
technologies directly relevant to multimedia content
management;
- A comprehensive suite of customer solutions ranging
from on-site customer-deployed products to
end-to-end services for monetizing branded content
on the Web;
- High-level distribution and representation
partnerships worldwide;
- And an ongoing relationship with Intel through
Convera's board and ownership.
This concludes my remarks. We'll open up the call for our
interactive session in a moment. But before doing that, let me
address a question several of you submitted before the call today,
asking when we'll provide guidance about Convera. Our plan at this
point is to provide guidance about the new company as soon as
practical--perhaps even immediately--after completion of the
Excalibur Annual Shareholders Meeting and the expected close of
the Intel/Excalibur transaction.
[Interactive Q&A]
Now, let me ask the operator to brief you on the interactive
portion of the question and answer session and then we will open
it up for your questions.
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OPERATOR: {"Ladies and gentlemen, we will now begin the interactive portion
of the question and answer session. To ask a question, please
press the "1" followed by the "4" on your push-button phone. You
will hear a three tone prompt acknowledging your request and your
questions will be polled in the order they are received. After you
have stated your question, your line will be placed back into
listen only. If your question has been answered and you would like
to withdraw your polling request, you may do so by pressing the
"1" followed by the "3" on your push-button phone. If you are
using a speakerphone, please pick up your handset before pressing
the numbers. One moment please for the first question."}
[The operator will introduce each question:]
OPERATOR: "Mr. Doe, please state your company name, followed by your
question."
NOTE: Excalibur needs to keep track of time, and cue the operator that
you would like to conclude the call by saying, "WE HAVE TIME FOR
FIVE/TWO/ONE MORE QUESTIONS."
PLEASE CUE THE OPERATOR WHEN YOUR CONVERSATION WITH EACH CALLER
HAS ENDED SO THAT THE OPERATOR CAN CONNECT THE NEXT CALLER TO ASK
A QUESTION. (I.E. "NEXT QUESTION...") Also, if you need to review
documents in order to prepare your answer to a question, please
let callers know by saying, "One moment please" to avoid silence.
When there are no more questions, the operator will say, "If there
are any additional questions, please press the "1" followed by the
"4" at this time.
After all questions, the operator will say, "Mr. Condo, there are
no further questions at this time. Please continue."
CONDO: This concludes our FY01 third quarter financial results conference
call. Let me remind those of you who have been unable to
participate in all of today's call a playback of our call will be
available for 24 hours following the conclusion of today's
conference. To playback the conference, dial 800-633-8284
(domestic) or 858-812-6440 (international) and enter reservation
number 16567918 when prompted.
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In addition, a web playback will be available for the next 30
days. To access the web playback simply go to Excalibur's web
site, www.excalib.com and click on Excalibur 3rd Quarter Financial
Results Web Playback or go to www.themeetingson.com and enter
reservation number 16567918.
Thank you all for participating.
OPERATOR: {"Ladies and Gentlemen, that does conclude our conference for
today. You may all disconnect and thank you for participating."}
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Excalibur and Intel filed a preliminary proxy statement/prospectus (and
amendments thereto) and other relevant documents concerning the merger with the
Securities and Exchange Commission (the "Commission"). For a description of the
direct or indirect interests in the transactions concerning the solicitation, we
refer you to this preliminary proxy statement/prospectus and the definitive
proxy statement/prospectus which Excalibur and Intel plan to file with the
Commission.
WE URGE INVESTORS AND STOCKHOLDERS TO READ THE PROXY STATEMENT/PROSPECTUS AND
ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE COMMISSION BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION. Investors and stockholders will be able to obtain
free copies of these documents at the Commission's website at www.sec.gov. and
upon oral or written request to Excalibur Technologies Corporation, 1921 Gallows
Road, Suite 200, Vienna, Virginia 22182, Attention: Investor Relations
(telephone number (703) 761-3700.
INVESTORS AND STOCKHOLDERS SHOULD READ THE PROXY STATEMENT/PROSPECTUS CAREFULLY
BEFORE MAKING A DECISION CONCERNING THE MERGER.
Intel, Excalibur and their respective officers and directors may be deemed to be
participants in the solicitation of proxies from Excalibur stockholders with
respect to the transactions contemplated by the merger agreement. Information
concerning the participants in the solicitation is set forth in the proxy
statement/prospectus.
This document contains forward-looking statements, which are based upon current
expectations or beliefs, as well as a number of assumptions about future events.
The reader is cautioned not to put undue reliance on these forward-looking
statements, as these statements are subject to numerous factors and
uncertainties, including without limitation, business and economic conditions
and growth, continued success in technological advances, costs related to the
proposed merger, the inability to obtain governmental approval of the proposed
merger, substantial delay in the expected closing of the merger and the risk
that the business of the Interactive Media Services division of Intel and
Excalibur's businesses will not be integrated successfully, any of which may
cause actual results to differ materially from those described in the
statements. In addition to the factors discussed above, other factors that could
cause actual results to differ materially are discussed in Intel's and
Excalibur's most recent Form 10-Q and Form 10-K filings with the Commission.
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