Filed by Kana Communications, Inc.
Pursuant to Rule 425 under the Securities Act of 1933, as amended
and deemed filed pursuant to Rule 14a-12 of the
Securities Exchange Act of 1934, as amended.
Subject Company: Broadbase Software, Inc.
Commission File No.: 000-26789
On May 24, 2001, Kana Communications, Inc. and Broadbase Software, Inc. held a
conference call related to the pending merger involving the two companies, the
transcript of which follows:
Good afternoon, this is Chuck Bay. Thank you for joining us this afternoon. I
am here with the CEO of Kana, Jay Wood and our new CFO, Brett White. We would
like to take this opportunity to give you some initial guidance with respect to
the combination of Kana and Broadbase. Earlier this week we received antitrust
clearance from the Department of Justice to proceed with the merger. We
anticipate that our shareholder meetings will take place on June 28, and,
assuming shareholder approval, that the merger will close early in July. As
such, we believe that it is appropriate to give initial guidance with respect to
the financial model for the combined company. I hope that you have had an
opportunity to review the press release sent out today with respect to this
combined company guidance.
Before I begin, I will ask Brett to read you some cautionary statements in
relation to what you are about to hear...
On this call, we will make forward-looking statements, regarding anticipated
events or the future performance of the proposed combined Kana/Broadbase
company, including projections, expectations, beliefs, intentions, plans and
strategies based upon a proposed merger that has not yet been consummated.
Actual events or results could differ materially.
We want to emphasize that our discussion today is based on initial projections
from each company, that any projection involves judgment, and that individual
judgments may vary. The projections on which our comments today are based, and
the factors that we currently identify as influencing those projections, were
developed by a small subset of management of each company involved in the
preparation of these projections, and do not necessarily represent those of all
employees, managers and Board members of the companies. Moreover, those
projections are based on limited information available to us now on our
respective businesses, and the internal estimates on which each company base its
outlook today and its perception of the factors influencing this outlook are
based on preliminary information.
Although the projections and the factors influencing them will likely change, we
will not inform you when they do and assume no obligation to do so. We will not
update our guidance or any other forward-looking statement until the next
scheduled call. Actual results may differ substantially from what we say today
and no one should assume later in the quarter that the
comments we provide today are still valid. The projections we make today are
particularly speculative given that the merger has not been completed and the
two companies are separate operating entities with limited access to information
from the other. We further note that our projections regarding future revenues
and earnings and the expected benefits of the proposed combination may not be
realized for a number of reasons including the risk that we do not achieve
anticipated sales opportunities or cost reductions, the risks of intense
competition in our markets, and the risk that the merger may not be approved by
the stockholders of Kana and Broadbase and the other conditions of closing may
not be satisfied.
These and other factors are risks associated with each of our businesses that
may affect our operating results and the merger are discussed in the each
company's filings with the Securities and Exchange Commission ("SEC"), including
each company's most recent annual report on Form 10-K and quarterly report on
Form 10-Q, and the Registration Statement on Form S-4 recently filed by Kana.
I will now turn it back to Chuck...
Thanks Brett. As you are aware, Reg FD limits our ability to communicate
significant facts outside of the scope of our press release. As such, we will
be able to answer questions with respect to general business conditions,
customer reactions to the merger, merger integration progress, the remaining
process of closing the merger, and other general topics. We will not be able to
answer questions requesting details about the financial guidance beyond what we
are providing in today's press release.
Combined revenue expectations for this calendar year are approximately $152
million, reflecting 2nd quarter revenue expectations of $35 million and
sequential quarterly growth of approximately 9 to 10 percent through year-end.
Gross margins of 57 to 59 percent are expected in the 2nd quarter, with
sequential improvement to 68 to 69 percent by the fourth quarter.
Sales and Marketing expenses, research and development expenses, and general and
administrative expenses, as a percentage of total revenue, are expected to be
approximately 65%, 31% and 12%, respectively in the 2nd quarter. These costs are
expected to trend down to approximately 54%, 24% and 11%, respectively, by the
fourth quarter.
Pro forma EPS losses (excluding the effect of amortization of stock based
compensation and costs and expenses associated with acquisitions) are expected
to be approximately $.09, $.07, and $.04 for the second, third and fourth
quarters, respectively.
Looking to 2002, annual revenues are expected to be approximately $210 million,
reflecting sequential quarterly growth of approximately 8 to 9 percent
throughout the year.
Gross margins are expected to reach approximately 76 to 78 percent in the 4th
quarter of 2002, with sequential improvements throughout the year.
Sales and marketing expenses, research and development expenses, and general and
administrative expenses, as a percentage of total revenues, are expected to
trend down to approximately 42%, 14% and 9% by the fourth quarter of 2002.
Pro forma EPS (excluding the effect of amortization of stock based compensation
and costs and expenses associated with acquisitions) are expected to be
approximately $.00, $.01, $.03, and $.05 for the first, second, third and fourth
quarters respectively.
As we have communicated to you before, we are very excited about this merger.
We have been working very hard on the integration planning, and we believe that
we will be able to quickly begin to act as one company upon the close of this
merger. It is great to have the opportunity to begin communicating about our
plans for the combined entity. At this point I would like to hand thing over to
you, Jay, if you have any closing remarks.
Thanks Chuck, I would like to add a couple things. Over the past 6 weeks Chuck
and I have been busy meeting with customers and partners around the world. The
reaction to this merger has been very positive. Our customers and prospective
customers have embraced the merger as providing a comprehensive CRM solution
that is unique in the market. Our analytics, marketing, knowledge management,
email, collaboration and contact center applications enable our customers to
better manage their customer relationships no matter how their customers choose
to contact and interact with them. We believe our EJB/J2EE technology is unique
in the CRM market, and is a competitive advantage for Kana. Our integrator
partners are excited about their ability to bring these solutions to Fortune 500
companies around the world.
Thank for your time this afternoon. At this point, we would like to turn the
call back to the operator for any questions.
Cautionary Note Regarding Forward-looking Statements Under the Private
Securities Litigation Reform Act of 1995:
Information in this presentation that involves each company's financial
forecasts, projections, expectations, beliefs, hopes, plans, intentions or
strategies regarding the future are forward-looking statements that involve
risks and uncertainties. These statements include statements about each
company's strategies in the marketplace, its market position and its
relationship with customers. All forward-looking statements included in this
presentation are based upon information available to each company as of the date
of the release, which may likely change, and neither party assumes any
obligation to update any such forward-looking statement. These statements are
not guarantees of future performance and actual results could differ materially
from our current expectations. Factors that could cause or contribute to such
differences include, but are not limited to, slowing economic conditions;
competition in each of our marketplace; risks associated with the evolving and
varying demand for eCRM customer communication and similar software; lack of
market acceptance of each company's products or services; inability to integrate
and enhance existing products and services within budget and on schedule, and
develop new products and services on a timely basis; introduction of new
products or services by competitors; inability to attract and retain qualified
employees; the ability to manage cash and
expenditures; each company's history of losses; the ability to expand sales;
inability to manage business in light of recent management changes and personnel
reductions; litigation over property rights; and general economic factors,
particularly as it affects spending by our prospective customers on software
products such as ours.
In addition, statements that describe the proposed merger and the anticipated
results of combining the product lines and businesses of Kana and Broadbase,
include forward looking statements. The expected benefits of the proposed
combination may not be realized for a number of reasons including the following:
the merger may not be approved by the stockholders of Kana and Broadbase and the
other conditions of closing may not be satisfied; the announcement of the merger
may disrupt the companies' normal sales cycles because their sales forces may be
distracted by the pending business combination or because customers may delay
new orders until the merger is closed and the sales forces and product lines are
combined; the combined product lines may not be as broad as those of some of the
competitors of Kana and Broadbase, and the merger could cause Kana and
Broadbase's business partners and potential competitors to acquire other product
lines that would compete directly with the combined company; Kana and Broadbase
may not be able to rapidly integrate the operations or retain the key employees;
the combined company may not achieve the increase in revenues that it expects or
the optimal mix between license and service revenues that it targets to achieve
its profitability goals. These and other factors are risks associated with each
of our businesses that may affect our operating results are discussed in the
each company's filings with the Securities and Exchange Commission (``SEC''),
including each company's most recent annual report on Form 10-K and quarterly
report on Form 10-Q, and the Registration Statement on Form S-4 filed by Kana.
NOTE: Kana Communications, Kana and the Kana logo are trademarks of Kana
Communications, Inc. Broadbase is a trademark of Broadbase Software, Inc. All
other company and product names may be trademarks of their respective owners.
Additional Information and Where to Find It
Kana Communications has filed a Registration Statement on SEC Form S-4 in
connection with the merger, and Kana and Broadbase expect to mail a Joint Proxy
Statement/Prospectus to stockholders of Kana and Broadbase containing
information about the merger. Investors and security holders of Kana and
Broadbase are urged to read the Registration Statement and Joint Proxy
Statement/Prospectus carefully when they are available. The Registration
Statement and the Joint Proxy Statement/Prospectus contains important
information about Kana, Broadbase, the merger and related matters. Investors and
security holders will be able to obtain free copies of these documents through
the Web site maintained by the U.S. Securities and Exchange Commission at
http://www.sec.gov . Free copies of the Proxy Statement/Prospectus and these
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other documents may also obtained from Broadbase by directing a request through
the Investor Relations portion of Broadbase's site Investor Relations
Department, 500 Broadway, Redwood City, CA 94063 or from Kana at Kana
Communications, Inc., 740 Bay Road, Redwood City, CA 94063, attention: Investor
Relations, telephone: 650-298-9282. In addition to the Registration Statement
and the Proxy Statement/Prospectus, Kana and Broadbase file annual, quarterly
and special reports, proxy statements and other information with the Securities
and Exchange
Commission. You may read and copy any reports, statements or other information
filed by Kana and Broadbase at the SEC public reference rooms at 450 Fifth
Street, N.W., Washington, D.C. 20549 or at any of the SEC's other public
reference rooms in New York, New York and Chicago, Illinois. Please call the SEC
at 800-SEC-0330 for further information on the public reference rooms. Kana
Communications' and Broadbase Software's filings with the SEC are also available
to the public from commercial document-retrieval services and at the Web site
maintained by the SEC at http://www.sec.gov .
Interests of Certain Persons in the Merger
The directors and executive officers of Kana Communications and Broadbase
Software have interests in the merger, some of which may differ from, or may be
in addition to, those of Broadbase Software's stockholders generally. A
description of the interests that Kana Communications and Broadbase Software's
directors and executive officers have in the merger is available in the Joint
Proxy Statement/Prospectus.
Solicitation of Proxies
Kana Communications, its directors, executive officers and certain other members
of its management and employees may be soliciting proxies from Kana stockholders
in favor of the merger. Broadbase Software, its directors, executive officers
and certain other members of its management and employees may be soliciting
proxies from Broadbase stockholders in favor of the merger. Information
concerning the participants are set forth in the Joint Proxy
Statement/Prospectus when it is filed with the Securities and Exchange
Commission.