Prospectus Summary
This summary highlights selected information contained elsewhere in this prospectus. This summary does not contain all the information you should consider before investing in our common stock. You should read the entire prospectus carefully, including "Risk Factors" beginning on page 5 and our consolidated financial statements and related notes beginning on page F-1, before making an investment decision.
SpeechWorks
SpeechWorks is a leading provider of software products and professional services that enable enterprises and communications carriers to offer automated, speech-activated services over any telephone. With our speech recognition solutions, consumers can direct their own calls, obtain information and conduct transactions automatically, simply by speaking naturally over any telephone, anytime. Our e-business solutions are designed to help businesses build sustainable customer relationships over the telephone, provide improved and cost-effective customer service systems, increase the returns on their internet-related investments and capitalize on a variety of new business opportunities.
We currently offer two speech recognition solutions for over-the-telephone applications, the SpeechWorks 6 platform and our recently introduced SpeechSite package. SpeechWorks 6 is a comprehensive set of software tools and core speech recognition technologies that can be used to build state-of-the-art, speech- activated services. With our SpeechWorks 6 platform, companies can quickly design and deploy speech-activated applications, in multiple languages, that enable their customers to buy travel tickets, trade mutual funds, get health care referrals, update account records, send messages and conduct a myriad of other transactions that extend web-based e-business to any telephone.
SpeechSite, which is based on the SpeechWorks 6 platform, is a packaged application that brings the web model of self-service to the telephone. SpeechSite answers and directs telephone calls, delivers company information and provides fax back services. Like a website, SpeechSite can link to other services and deliver various types of information services to callers. However, SpeechSite uses a spoken interface rather than a visual browser.
We complement our products with a professional services organization that offers a range of services including application development and project management. We have designed these services to shorten time-to-market, reduce project implementation risk and improve our clients' competitive position. We believe that our ability to successfully deliver an integrated solution to our clients that includes both software and professional services provides us with a significant competitive advantage.
Enterprises are building speech-activated services with our products that will automate and enhance customer service by making it easier for customers to retrieve information and conduct transactions without waiting on hold or speaking to an agent. Examples of phrases that can be understood by applications enabled by our software are: "What is my checking account balance?" and "Buy 100 shares of General Electric at the market price." These services can improve the caller's experience and save expensive customer service representative providers.
Communication carriers and their partners are building speech-activated services with our products that we believe have the potential to change the way people use the telephone for network services. Applications have been built, and enabled by our software, that can understand phrases such as "Call Mike Phillips at home," and "Forward this message to Bill O'Farrell." In addition, a new class of service providers, known as voice or speech portals, is using our software to build applications that can understand phrases such as: "What is the weather in Paris?" and "What was the score of the Red Sox game today?" These services can differentiate one carrier's service offering from another and increase the ability of carriers to attract and retain users.
Since shipping our first products in 1996, we have received numerous awards for our product capabilities and our industry leadership, including Industry Week's Technology of the Year Award and Frost & Sullivan's Market Strategy Leadership Award. To date, we have licensed SpeechWorks software to more than 150 clients worldwide in a variety of industries including retail, financial services, pharmaceuticals, telecommunications, technology, distribution and travel. Our clients include Amtrak, Apple Computer, BellSouth IntelliVentures, CellularOne, Continental Airlines, DLJ Direct, E*TRADE, MapQuest.com, MCI WorldCom, McKessonHBOC, NetByTel.com, Nortel Networks, Quack.com, SingTel Mobile, United Airlines and Universal Electronics.
Our goal is to become the leading global provider of speech-activated solutions for e-business. The key elements of our strategy are to:
.maintain our leadership position in the market for speech-enabled e- business solutions, .extend our technology lead, . leverage our professional services capabilities to accelerate acceptance of our speech-activated solutions, .expand our international presence, .expand our sales channels to drive market penetration, and .build awareness of our brand.
Our principal executive offices are located at 695 Atlantic Avenue, Boston, Massachusetts 02111. Our telephone number is 617-428-4444. Our primary web site is located at www.speechworks.com. The information contained on this web site is not a part of this prospectus. We were incorporated in Massachusetts in May 1994 and reincorporated in Delaware in August 1995.
The Offering
Common stock offered by SpeechWorks........ shares Common stock to be outstanding after this offering.................................. shares Use of proceeds............................ Primarily for general corporate purposes, including working capital, marketing, capital expenditures and potential strategic acquisitions or investments. See "Use of Proceeds." Proposed Nasdaq National Market symbol..... SPWX The share amounts in this table are based on shares outstanding as of April 14, 2000. This table excludes:
. 9,798,633 shares of common stock reserved for issuance under our stock option plans of which 4,699,315 shares are issuable upon exercise of stock options outstanding as of April 14, 2000 with a weighted average exercise price of $1.76 per share, . 807,237 shares of common stock reserved for issuance upon the exercise of warrants outstanding as of April 14, 2000 with a weighted average exercise price of $2.02 per share, and . shares of common stock reserved for issuance under our employee stock purchase plan.
Unless otherwise indicated, all information in this prospectus:
. reflects the automatic conversion of all of our outstanding convertible preferred stock into 16,415,158 shares of common stock upon the closing of this offering, .reflects a three-for-two stock split of shares of our common stock effected on January 5, 2000, . assumes the filing of our restated certificate of incorporation and the adoption of our amended and restated bylaws, each as contemplated to be in effect as of the closing of this offering, and .assumes no exercise of the underwriters' over-allotment option.
Summary Consolidated Financial Data The table below sets forth summary financial data for the periods indicated. It is important that you read this information together with "Management's Discussion and Analysis of Financial Condition and Results of Operations" and our consolidated financial statements and related notes for the years ended December 31, 1997, 1998 and 1999 beginning on page F-1. The pro forma basic and diluted net loss per common share reflects the assumed conversion of all outstanding convertible preferred stock into common stock upon completion of this offering as if such conversion occurred on January 1, 1999 or, if later, the date of original issue.
Year Ended December 31, 1997 1998 1999 (in thousands, except per share data) Consolidated Statement of Operations Data: Total revenue........................................ $2,042 $5,850 $14,011 Gross profit......................................... 1,220 2,926 5,880 Loss from operations................................. (2,880) (5,979) (15,739) Net loss............................................. (2,520) (5,760) (15,463) Net loss attributable to common stockholders......... (3,053) (6,549) (17,367) Basic and diluted net loss per common share.......... $(0.83) $(1.44) $ (3.28) Shares used in computing basic and diluted net loss per common share.................................... 3,696 4,537 5,298 Pro forma basic and diluted net loss per common share............................................... $ (0.87) Shares used in computing pro forma basic and net loss per common share.................................... 17,686 The pro forma balance sheet data give effect to the issuance of 2,544,681 shares of series E convertible preferred stock on April 11, 2000 for net proceeds of $19.9 million and the conversion upon the completion of this offering of all of our outstanding convertible preferred stock into a total of 16,415,158 shares of common stock. The pro forma as adjusted balance sheet data further adjust the pro forma data to give effect to the sale by us in this offering of shares of common stock at an assumed initial offering price of $ per share (the mid-point of the range set forth on the cover page of this prospectus) which, after deducting the underwriting discounts and commissions and estimated offering expenses, results in net proceeds to us of $ million.
December 31, 1999
Pro
Pro Forma As
Actual Forma Adjusted
(in thousands)
Consolidated Balance Sheet Data: Cash and cash equivalents............................. $11,474 $31,404 $ Working capital....................................... 12,133 32,063 Total assets.......................................... 20,566 40,496 Long-term debt, less current portion.................. 833 833 833 Redeemable convertible preferred stock................ 43,507 -- -- Total stockholders' equity (deficit).................. (28,248) 35,189