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BroadVision, Inc. (NASDAQ:BVSN)

Q2 2013 Earnings Conference Call

July 31, 2013; 05:00 p.m. ET

Executives

Peter Chu - Vice President of Strategy, Products & Marketing

Dr. Shin-Yuan Tzou - Chief Financial Officer

Analysts

Operator

Hello, and welcome to the BroadVision, Q2 Year 2013 Earnings Announcement and Investor Conference Event.

Throughout the call all participants will be in a listen-only mode and afterwards there will be a question-and-answer session. (Operator Instructions).

Today I am pleased to present Peter Chu. Please go ahead with your meeting.

Peter Chu

Thank you and good afternoon everyone. My name is Peter Chu, Vice President of Strategy, Products and Marketing at BroadVision. Welcome to our 2013, Q2 financial results announcement and conference call.

I will first provide our standard cautionary comments on forward-looking statements and other legal matters. Next, Dr. Shin-Yuan Tzou, our CFO, will review the second quarter results, which were announced in a press release earlier this afternoon. Next I will provide product and marketing updates and we’ll wrap up with a summary. As always we will be pleased to take your questions following the formal portion of the call.

During the course of this conference call BroadVision may make forward-looking statements. All forward-looking statements included in this call are based upon information available to BroadVision as of the date of this call, including statements regarding our expectations of future financial results and product releases, and BroadVision assumes no obligation to update or correct any such forward-looking statements.

These statements are not guarantees of future performance and actual results could differ materially from BroadVision’s current expectations. Actual future results may be impacted by various important factors, including without limitation changes in the market, competitive environment and macroeconomic conditions.

Additional information on potential factors that could affect the company’s financial results is included in the company’s periodic reports on Forms 10-K and 10-Q, and other documents filed with the SEC. All statements and information can also be found on our website at www.broadvision.com under the Company/Investor Information/Press Releases page. You can also view our SEC filings and historical financial results under the company-investor information-SEC filings page.

Now I will turn the call over to Shin-Yuan.

Shin-Yuan

Thanks Peter. Now our Q2 2013 results in terms of P&L, balance sheet and other operating highlights. Q2 total revenue was $4.1 million, with $1.4 million in licenses, $1.8 million in maintenance and $0.9 million in consulting services.

Sequentially this compares to Q1 '13 total revenue of $3.8 million, with $1.6 million in licenses, $1.6 million in maintenance and $0.6 million in consulting services. In comparison, Q2 '12 total revenues were $3.6 million, with $1.2 million in licenses, $1.7 million in maintenance and $0.7 million in consulting services.

Q2 '13 revenues by region were 44% Americas, 31% EMEA, and 25% APJ, compared to 39% Americas, 29% EMEA, and 22% APJ in Q1 '13, and 41% Americas, 38% EMEA, and 21% APJ in Q2 '12. As we have discussed in the past, we expect our geographical mix to fluctuate somewhat from quarter-to-quarter, mainly due to our small footprint.

Expenses: On a GAAP basis, total operating cost plus cost of revenue were $5.4 million in Q12 ’13, same as in Q1 ’13 and Q2 ’12. In Q2 ’13 was generated a GAAP net loss of $1.1 million or $0.23 per basic and diluted share, compared to a net loss of $2.1 million or $0.46 per basic and diluted share in Q1 '13, and a net loss of $2.5 million or $0.54 per basic and diluted share in Q2 '12.

Looking at our four main cost centers; first cost of goods sold, concentrated mainly on cost of services and cloud hosting was $1.1 million in Q2 '13 compared to $1.2 million in Q1 '13. Second, R&D expenses for Q2 '13 was $1.8 million compared to $1.7 million in Q1 '13. Sales and marketing expenses of Q2 '13 was $1.5 million compared to $1.4 million in Q1 '13. Finally, G&A expenses for Q2 '13 was $1.0 million compared to $1.1 million in Q1 '13.

Balance sheet: As of end of June '13 we had $49.5 million of cash and cash equivalents and short-term investments, with no long term debt, compared to $51.4 million at the end of Q1 '13. Accounts receivable were $2.1 million at the end of Q2 '13 compared to $2.4 million at the end of Q1 '13. Day sales outstanding in Q2 '13 was 49 days compared to 56 days in Q1 '13. Prepaid expenses and other current assets were $1.2 million at the end of Q2 '13, compared to $1.1 million in Q1 ’13.

Other non-recurring assets was (inaudible) at the end Q2 '13, same as in Q1 '13. Accounts payable was $0.6 million at the end of Q2 '13 compared to $0.8 million in Q1 '13. Accrued expenses were $2.1 million at the end of Q2 '13, compared to $2.0 million in Q1 '13.

Deferred maintenance was $2.5 million at the end of Q2 '13, compared to $3.5 million in Q1 '13. Earned revenue was $2.3 million at the end of Q2 '13, compared to $2.4 million in Q1 '13. Other non-current liabilities was $0.9 million at the end of Q2 '13 compared to $1.0 million in Q1 '13.

I'll now turn to Peter for product and marketing updates. Peter?

Peter Chu

Thank you. In Q2 our R&D efforts have been focused on meeting clinical customer needs and to reach engagement and functional debts of our engagement management solutions.

Our customers have chosen Clearvale for ease of customization and deployment, mobility coverage, social analytics and workflow capabilities. We continue to enhance our solution to better support deal room and escalation situations, compliance management, employee and partner on-boarding and off-boarding and knowledge circulation.

At BroadVision we invest to create greater choices and options for our valued customers. Specifically we have introduced task templates, which allows users to share workload processes with employees, partners and customers for a more consistent and efficient collaboration.

Clearvale tasks enables customers to organize add on collaborations, to maximize investment in existing systems of record, such as CRN, ERP and document storage systems. Social collaboration enhances an organizations productivity, through a more timely issued resolution and better capturing and circulating of knowledge.

In Q2 we conducted 26 Clearvale partner and paid customer transaction in manufacturing, healthcare, distribution, finance and IT industry sectors. Clearvale customers come in all sizes, but primary mid-size enterprises and from different verticals worldwide, including all of our key focuses in knowledge intensive, interaction intensive and service intensive industries such as technology, telecom, consulting, healthcare, retail, education, etcetera.

While most bookings remain relatively small, because customers generally start with a limited trial for something as new as social business that could lead to considerable upside for future growth if these customers expand their usage in the future upon successful adoption, the so called long-tail effect.

We are also excited to report that leading accounts, which include some, very large organizations continue to increase their user base significantly after the first year of adoption.

In Q2 we have expanded our EMEA market with Italiaonline, The Barnet Group and the BondPR amongst new customers. In the Americas we added new resellers, including Wild at Work, Collective HR, i2i benefits to name a few.

In China we added new capital partners and customers including Strong Union, Agile and ICG China. In Japan we’ve added new customers including (inaudible) and we are seeing the successful rollout of NTT Communications task management services based on Clearvale, both externally and internally.

Thus we can continue to enhance our integrated enterprise $2 suite further that consist of the following components: Clearvale enterprise, the comprehensive enterprise platform of the engagement. If offers the most expandable network of networks, which maximizes business returns through effective knowledge distribution and powerful workflows to get more work down.

Clearvale Express; the simplified version of Clearvale targeted for easy adoption and viral expansion. It is easily upgradeable to an enterprise solution.

Clearvale Passport: our platform as a service solution created for Telcos and ISPs, as well at resellers such as systems integrators, hardware OEMs and vertical and horizontal software buyers. This solution enables our partners to offer their own cloud based social business ecosystem without any heavy upfront investment. And BroadVision 9, our mobile and social engagement management solutions, integrated with K2 e-business relationship management platform.

With respect to go-to-market strategy, we continue to invest in both direct and partnership approach. We extended our web presence through our company portal, as well as launching newer programs in select geographies around the world. The successful expansion of a global partner’s ecosystem with additions of key partners across all major continents, a strong allegation of the value proposition and commitment of BroadVision’s unique partners approach.

In conclusion, we continue our development to establish BroadVision as a key player in enterprise social network business. We continue to focus and invest in our product solutions and go-to-market strategy. The go-to-market strategy consists of a two-pronged approach to acquire lighthouse customers through direct sales efforts and in parallel the development of our valuable and global network of partners through our Passport channel program, where partners can market their own branded, cloud-based social enterprise ecosystems powered by Clearvale.

In closing, Clearvale is unique in its depth and breadth as a comprehensive platform for enterprises embracing the virtual, mobile and social business paradigm. Our compelling cloud based mobile and multi-lingual offerings will enable greater penetration of organizations across industries.

Our product teams continue to enhance our enterprise social networking solutions to increase productivity. The focus of our product strategy has always been to focus on four core areas of differentiation where we lead in our industry. They are; one, social business processes; two, social ecosystems for the network of networks, built to mimic real business relationships and processes; three, social analytics for accountability and engagement of option; and four, the most partner friendly enablement platform.

With that, we thank you for listening. Now, lets open it up to your questions.

Question-and-Answer Session

Operator

Thank you. (Operator Instructions). Our first question is from Dan Pellicano (ph). Please go ahead with your question.

Unidentified Participant

Nice quarter. I’m definitely impressed with some of these deals that you’ve been putting out there. I had two questions for you related to the balance sheet. The cash position sits about $49.5 million right now?

Dr. Shin-Yuan Tzou

Yes.

Unidentified Participant

Okay. So I guess it’s a two-part question. Have you considered spending any money on marketing and maybe a sales force to enhance the success that you have obviously been having with the Clearvale and secondly, have you considered using some of those funds for a possible buyback or maybe a special one-time dividend or anything of that effect?

Dr. Shin-Yuan Tzou

With regarding extending our effort on sales and marketing, we do spend a necessary amount of our cash on sales and marketing as we move forward and this quarter the sales and marketing spending was a little bit higher than the previous quarters and we whenever it is necessary to bring out our self marketing, we will do so.

The second and third questions were about buy back and dividends. We have gotten such questions in the past and we’ve considered that pretty carefully. At this point we think the best way to use our cash is to spend on our R&D.

As you know that, our company was (inaudible) but we are actually a futile company, spending and investing heavily in our new social enterprising business. We are a self-funded company using our legacy business, as well as our $2 million cash.

So we believe this is the way to process our cash, whether they are sending everything to like a bank or something, just trying with these interest rates and then return back to the investor. We think we can add better values by doing what we are good at, which is the R&D feeding product and then expanding into the market. Again, we don’t have any plan to pay special dividends or buy back.

Unidentified Participant

Have you considered a buyback, a small buyback? I mean, just to get the share price moving a little bit?

Dr. Shin-Yuan Tzou

Like I said, we have received questions like that. We don’t have any plans to buyback.

Unidentified Participant

Okay, and as far as you know I know that your moving a lot of these applications and moving to the cloud, are there any particular vendors that your trying to align with, with the Clearvale platform, any of the larger players or are you just going to still try to stick more towards these small and medium sized deals that you’ve been working on.

Peter Chu

That’s a good question Dan. For us the end users are small and medium sized enterprises. But as we’ve discussed in our Passport programs, we are recruiting some of the larger partners out there who are now NTT Communication, we have Softbank and many others around the world who are large partners for distribution and resale of the solution.

Unidentified Participant

Okay. I mean, I know that you guys compare it more to the business-to-business cloud computing, but have you thought of any of – I’ve been seeing a lot of spending recently in some of the video cloud markets as far as – and one of the companies in particular that’s in your – not competitor by any such imagination, but of the lower price break-off.

I’ve seen that company make pretty much double their share price going after the same type of small and medium sized end user contracts, albeit a different venue. Do you have any platforms set up to move in to anything related to the video type of cloud or any of the mobile applications that have been more of a present.

Peter Chu

Well, I think what you speak off is perhaps a very interesting niche in the video cloud. The way we look at it Dan, when you look at enterprise social B2B, its actually a very large, encompassing our way of looking at how business will have a lot of different content.

They use text, pictorial, they use video content, which is all a part like the system that they already handled, such B2B interactions and to that we think that there is the enterprise social and networking as a market and it has a solution. We are still very early in that market, which is actually a very, very large market for us to address.

Unidentified Participant

Yes. I mean its seems with the success that your having from Clearvale, it seems that at some point it may even be a viable standalone business that you guys could potentially spend off. I mean I know its probably years off the pipe down the road, but if you continue to sign these deals like that, I think that might end up adding a lot of value to the price of the stocks. I know its secondary along in the business, but obviously they’ve been languishing down here in the single digits for a while.

Peter Chu

Okay, yes. No I think as you’ve heard Shin-Yuan and I both, as a company we are very bullish in the potential of enterprise social networking. So your comment, we are exactly going in that direction of trying to create as much value going forward, investing in to new technology, in to new market place that holds a lot of promise.

Unidentified Participant

Okay. Well listen, congratulations on my belief to be a good quarter. I definitely think that if you did may be consider even a small buyback of 1 million shares or so, something in that neighbor, I think you’d really get the stock moving and maybe get some new market makers into it, but other than that, congratulations on a pretty solid quarter guys.

Peter Chu

Well, thank you for the comment.

Unidentified Participant

Have a nice day.

Peter Chu

Thank you.

Operator

(Operator Instructions). We have no further questions at this time. Are there any closing remarks?

Peter Chu

I just want to thank everybody for participating and we will see you in the next quarter.

Operator

Thank you ladies and gentlemen. This concludes the BroadVision, Q2 Year 2013 Earnings Announcement and Investor Conference event. Thank you all for participating. You may now disconnect your lines.

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