News Column

BROADVISION INC - 10-Q - Management's Discussion and Analysis of Financial Condition and Results of Operations

August 8, 2014

This report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. These forward-looking statements are generally identified by words such as "expect," "anticipate," "intend," "believe," "hope," "assume," "estimate," "plan," "will" and other similar words and expressions. These forward-looking statements, including, but not limited to, statements regarding expectations for working capital requirements, anticipated increases in competition and assumptions regarding the impact of certain products on future revenue, involve risks and uncertainties that could cause our actual results to differ materially from those expressed or implied in the forward-looking statements as a result of certain factors, including those described herein and in our most recently filed Annual Report on Form 10-K and other documents filed with the SEC. We undertake no obligation to publicly release any revisions to the forward-looking statements or to reflect events and circumstances after the date of this document.

Critical Accounting Policies, Estimates and Judgments

There have been no material changes in our critical accounting policies, estimates and judgments during the six month period ended June 30, 2014 compared to the disclosures in Part II, Item 7 of our Annual Report on Form 10-K for the year ended December 31, 2013, other than as disclosed herein.

Recent Accounting Pronouncements

For information with respect to recent accounting pronouncements, if any, and the impact of these pronouncements on our Condensed Consolidated Financial Statements, if any, see Note 1 of Notes to Condensed Consolidated Financial Statements included elsewhere in this Quarterly Report.

Results of Operations 9



--------------------------------------------------------------------------------

Table of Contents



The following table sets forth certain items reflected in our Condensed Consolidated Statements of Comprehensive Loss expressed as a percent of total revenues for the periods indicated:

Three Months Ended Six Months Ended June 30, June 30, 2014 2013 2014 2013 Revenues: Software licenses 40 % 34 % 40 % 38 % Services 60 66 60 62 Total revenues 100 100 100 100 Cost of revenues: Cost of software revenues 1 1 1 1 Cost of services 42 26 38 28 Total cost of revenues 43 27 39 29 Gross profit 57 73 61 71 Operating expenses: Research and development 56 45 59 45 Sales and marketing 43 37 46 37 General and administrative 28 25 31 27 Total operating expenses 127 107 136 109 Operating loss (70) (34) (75) (38) Interest income, net - 1 - 1 Other income (loss), net (3) 6 (1) (4) Loss before provision for income taxes (73) (27) (76) (41) Provision for income taxes (1) - - - Net loss (74) % (27) % (76) % (41) %



Revenues. License revenue from the sales of software licenses for the three months ended June 2014 was $1.3 million, down $0.1 million, or 7% from $1.4 million for the three months ended June 30, 2013. License revenue from the sales of software licenses for the six months ended June 30, 2014 was $2.5 million, down $0.5 million, or 17% from $3.0 million for the six months ended June 30, 2013. Maintenance revenue, which is generally derived from maintenance contracts sold with initial customer licenses and from subsequent contract renewals, for the three months ended June 30, 2014 was $1.0 million, down $0.7 million, or 41% from $1.7 million for the three months ended June 30, 2013.

Maintenance revenue for the six months ended June 30, 2014 was $2.2 million, down $1.2 million, or 35% from $3.4 million for the six months ended June 30, 2013. Consulting revenue, which is generally related to services in connection with our licensed software, remained unchanged at $0.9 million for each of the three months ended June 30, 2014 and 2013. Consulting revenue remained unchanged at $1.5 million for the six months ended June 30, 2014 and 2013. Revenues for the six months ended June 30, 2014 were $6.1 million, down

$1.8 million, or 22% from revenues for the six months ended June 30, 2013, mainly due to the decline of our legacy business.

Cost of software licenses. Cost of software licenses includes the cost of our Cloud hosting operation, net costs of product media, duplication, packaging, and other manufacturing costs as well as royalties payable to third parties for software that is either embedded in, or bundled and sold with, our products. Cost of software licenses for the three months ended June 30, 2014decreased to $45,000 compared to $46,000 for the same period in the prior year. Cost of software licenses for the six months ended June 30, 2014 increased $19,000 compared to the same period in 2013. The increase was primarily due to an increase in the cost of our Cloud hosting operation.

Cost of services. Cost of services consists primarily of employee-related costs, third-party consultant fees incurred on consulting projects, post-contract customer support and instructional training services. Cost of services was $1.3 million for the three months ended June 30, 2014, up $0.2 million, or 18%, from $1.1 million for the three months ended June 30, 2013. Cost of services was $2.3 million for the six months ended June 30, 2014, up $0.1 million, or 5%, from $2.2 million for the six months ended June 30, 2013.

10



--------------------------------------------------------------------------------

Table of Contents



Research and development. Research and development expenses consist primarily of salaries, employee-related benefit costs and consulting fees incurred in association with the development of our products. Research and development expenses remained unchanged at $1.8 million for the three months ended June 30, 2014 and 2013. Research and development expenses remained unchanged around $3.6 million for the six months ended June 30, 2014 and 2013.

Sales and marketing. Sales and marketing expenses consist primarily of salaries, employee-related benefit costs, commissions and other incentive compensation, travel and entertainment and marketing program-related expenditures such as for collateral materials, trade shows, public relations, advertising and creative services. Sales and marketing expenses were $1.3 million for the three months ended June 30, 2014, down $0.2 million, or 13%, from $1.5 million for the three months ended June 30, 2013. Sales and marketing expenses remained unchanged around $2.9 million for the six months ended June 30, 2014 and 2013.

General and administrative. General and administrative expenses consist primarily of salaries, employee-related benefit costs, provisions and credits related to uncollectible accounts receivable, professional service fees and legal fees. Our general and administrative expenses were $0.9 million for the three months ended June 30, 2014, down $0.1 million, or 10%, from $1.0 million for the three month periods ended June 30, 2013. Our general and administrative expenses were $1.9 million for the six months ended June 30, 2014, down $0.2 million, or 10%, from $2.1 million for the six month periods ended June 30, 2013.

Interest income, net. Net interest income includes interest income on investment funds. We generated $31,000 and $101,000 in interest income from our cash and cash equivalents as well as short-term investment balances during the six months ended June 30, 2014 and 2013, respectively.

Other income, net. Other income, net during the six months ended June 30, 2014, was a loss of $76,000 compared to a loss of $0.3 million for the six months ended June 30, 2013. The variance between the periods was primarily due to losses and gains from the remeasurement of the foreign currency exchange rate fluctuation on our Euro cash and investment balances.

Provision for income taxes. The provision for income taxes was $29,000 for the six months ended June 30, 2014 compared to a provision for income tax of $19,000 for the six months ended June 30, 2013. The provision for the six months ended June 30, 2014 and 2013 primarily relates to foreign income tax expenses.

Liquidity and Capital Resources

Overview



We continue to maintain a strong cash position as shown on our Condensed Consolidated Balance Sheet. As of June 30, 2014, we had $43.9 million of cash and cash equivalents and short-term investments with no long-term debt borrowings, as compared to a balance of $46.4 million of cash and cash equivalents and short-term investments at December 31, 2013.

We continued to focus on expense control in the second quarter of 2014.

Operating expenses for the second quarter of 2014 and 2013 were $4.0 million and $4.3 million, respectively. For the three months ended June 30, 2014, net loss was $2.3 million, or ($0.49) per share. This compares to net loss of $1.1 million, or ($0.23) per share, for the three months ended June 30, 2013.

The following table represents our liquidity at June 30, 2014 and December 31, 2013 (dollars in thousands):

June 30, December 31, 2014 2013 Cash and cash equivalents $ 31,482$ 36,865 Short-term investments $ 12,446$ 9,535 Working capital $ 40,063$ 43,754 Working capital ratio 6.64 6.90



Cash Used For Operating Activities

Cash used for operating activities was $2.9 million for the six months ended June 30, 2014, mainly attributable to a $4.6 million operating loss offset by noncash items and changes in operating assets and liabilities. Cash used for operating activities was $2.9 million for

11



--------------------------------------------------------------------------------

Table of Contents



the six months ended June 30, 2013, mainly attributable to a $3.0 million operating loss offset by noncash items and changes in operating assets and liabilities.

Cash (Used For) Provided By Investing Activities

Cash used for investing activities was $2.9 million for the six months ended June 30, 2014. Cash provided by investing activities was $20.4 million for the six months ended June 30, 2013. Both periods' changes are primarily related to the purchases or maturities of short-term investments in bonds and certificates of deposit.

Cash Provided By Financing Activities

Cash provided by financing activities was $0.4 million for the six months ended June 30, 2014, primarily from cash received in connection with employees' exercise of stock options and purchases of common stock under the Employee Stock Purchase Plan. Cash provided by financing activities was $0.2 million for the six months ended June 30, 2013, primarily from purchases of common stock under the Employee Stock Purchase Plan.

Leases and Other Contractual Obligations

As of June 30 2014, we leased our headquarters facility and other facilities under non-cancelable operating lease agreements each of which will expire during or before February 2017.

Off-Balance Sheet Arrangements

We did not have any off-balance sheet arrangements in the second quarter of 2014 or in any prior periods.


For more stories on investments and markets, please see HispanicBusiness' Finance Channel



Source: Edgar Glimpses


Story Tools






HispanicBusiness.com Facebook Linkedin Twitter RSS Feed Email Alerts & Newsletters