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BroadVision, Inc. (NASDAQ:BVSN)

Q2 2014 Results Earnings Conference Call

July 30, 2014, 05:00 PM ET

Executives

Peter Chu - CFO, VP, Strategy and Products

Lou Leporace - VP and General Manager, Americas

Analysts

Operator

Hello, and welcome to the BroadVision, Q2 Year 2014 Earnings Announcement and Investor Conference Event. My name is Eric. I will be your operator for today's call. At this time all participants are in a listen-only mode. Later we will conduct a question-and-answer session. Please note this conference is being recorded.

I will now turn the call over to Peter Chu. Mr. Chu, you may begin.

Peter Chu

Thank you. Good afternoon, everyone. My name is Peter Chu, CFO and Vice President of Strategy and Products at BroadVision. Welcome to our 2014 Q2 financial results announcement and conference call.

I will first provide our standard cautionary comments on forward-looking statements and other legal matters, then review the second quarter results which were announced in the press release earlier this afternoon. Next I will have my colleague provide a product and marketing update and then 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 section under Investor Information section under Press Releases. You can also view our SEC filings and historical financial results under the Company header under the Investor Information section under SEC Filings.

Now I will review the second quarter results, our Q2, 2014 results in terms of P&L, balance sheet and other operating highlights.

Let’s start with revenue; Q2 total revenues were $3.2 million with $1.3 million in licenses, $1 million in maintenance and $0.9 million in consulting services. Sequentially this compares to Q1 ‘14 total revenues of $3.0 million, with $1.2 million in licenses and $1.2 million in maintenance and $0.6 million in consulting services.

In comparison Q2, 2013 revenues were $4.1 million, with $1.4 million in licenses and $1.8 million in maintenance and $0.9 million in consulting services. Q2 2014 revenues by region were 36% Americas; 23% EMEA; and 41% APJ; compared to 39% Americas; 26% EMEA; and 35% APJ in quarter one 2014 and 44% Americas, 31% EMEA and 25% APJ in Q2, 2013. 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.

Now let me cover the expenses; on GAAP basis total operating costs plus cost of revenues were $5.4 million in Q2, 2014 compared to $5.4 million in Q1, 2014 and $5.5 million in Q2, 2013.

Now, income, in Q2 2014, we generated a GAAP net loss of $2.3 million or $0.49 or $0.49 on the dollar per basic and diluted share compared to a net loss of $2.3 million or $0.49 per basic and diluted shares in Q1, 2014 and a net loss of $1.1 million or $0.23 per basic and diluted share in Q2, 2013.

Now on cost centers, looking at our four main call centers first cost of goods sold concentrated mainly on cost of services and cloud hosting was $1.4 million in Q2, 2014 compared to $1 million in Q1, 2014. Second, R&D expenses for Q2, 2014 were $1.8 million same as Q1, 2014. Sales and marketing expenses for Q2, 2014 were $1.4 million compared to $1.5 million in Q1, 2014. Finally G&A expenses for Q2, 2014 were $0.9 million compared to $1.0 million at the end of Q1, 2014.

Now on to the 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 compared to $45.9 million at the end of Q1, 2014. Accounts receivable were $1.9 million at the end of Q2, 2014 compared to $2.7 million at the end of Q1, 2014.

Day sales outstanding in Q2, 2014 was 54 days compared to 80 days in Q1, 2014. Prepaid expenses and other current assets were $1.3 million at the end of Q2, 2014 compared to $1.4 million at the end of Q1, 2014. Other non-current assets were $0.4 million at the end of Q2, 2014 same as Q1, 2014. Accounts payables were $0.5 million at the end of Q2, 2014 compared to $0.4 million at the end of Q1 2014.

Accrued expenses were $2.6 million at the end of Q2, 2014 compared to $2.3 million at the end of Q1, 2014. Deferred maintenance was $1.8 million at the end of Q2, 2014 compared to $2.6 million in Q1, 2014.

Unearned revenue was $2.2 million at the end of Q2, 2014 compared to $2.5 million in Q1, 2014. Other non-current liabilities were $0.8 million at the end of Q2 '14 same as in Q1, 2014.

Now I will turn to Lou for a product and marketing update.

Lou Leporace

Thank you, Peter. Good day everyone. My name is Lou Leporace, Vice President of Sales and Marketing at BroadVision. While the second quarter had its share of challenges the company did release a new service and I want to share exciting news about this new product family currently in a number of customer trials and soon to be released to a broader market later this quarter. I also want to share news about several improvements the company has made in its business infrastructure.

First, I will share news about the product. Yesterday BroadVision made Vmoso available through its new website and through select mobile stores. Vmoso is a family of next generation unified communication and collaboration solutions for the enterprise, which has been under development for the past three years. A personal version of the product is now available for download with an enterprise version soon to follow. Individuals may download the free mobile app from Google Play today and soon from the app store. An enterprise version will be available late this quarter and organizations interested in working with the enterprise version should contact sales at BroadVision.com.

Vmoso is a realtime mobile social enterprise UCC tool that unifies business communication in a single easy to use solution. Users can chat, post messages, manage emails and tasks, carry on private discussions, share files and organize all communications for sharing and reference.

As with all BroadVision products and services, the enterprise grade security built into Vmoso protects your business communication. Vmoso supports leading corporate encryption and authentication standards to protect users and corporate assets throughout the system. Vmoso also allows clear separation of personal and corporate activities and enable an organization’s IT managers to secure the corporate activities behind organizational boundaries.

Vmoso’s interoperability enables integration with existing enterprise systems such as CRM, CMS and ERP systems as well as new application development efforts to leverage its rich social, communication and collaborative capabilities. The integration approaches supported include open ATI access, messaging integration and traditional import and export of data.

Now I will share some news about the improvements to BroadVision sales and market infrastructure. Concurrent with our product development effort our marketing team has created a new web presence for BroadVision and its family of solutions. The goal is to facilitate sales through digital channels and to enable far more -- more far reaching marketing efforts. BroadVision has invested in new market automation analytics and social engagement tools that are now being employed to both increase and improve prospects and customer engagements.

The investment in our business infrastructure serves to improve our ability to discover and engage in new business opportunities and increase awareness of our products and services. Our new web presence enables customers to find, download and sign up with service more quickly and easily and enables the company to more readily raise awareness and visibility about its product and services through social and business channels.

The introduction of Vmoso’s UCC capabilities complements BroadVision’s existing product offerings to deliver a full engagement suit. Comprehensive engagement solutions encompass aspects of unified communication and collaboration from myVmoso, personalization and e-commerce technology from our BV-9 product line and social and portal capabilities of our Clearvale product line.

We are very excited to be able to offer a comprehensive portfolio of engagement solutions to a wide base of customers. I encourage you to visit our new broadvision.com website to learn more about our new products and to try our new service.

In conclusion after a vigorous period of development testing and customer input we’re very excited to announce the public availability of myVmoso a quick start version of Vmoso for enterprise, SMBs, SOHO and individual users, now available on Google Play and soon to be available in the App store. Other products from the Vmoso family will be released over the next few months.

Vmoso highlights mobility while emphasizing enterprise class security through the unification of email, instant messaging, file sharing, work flow, social networking into one cohesive and convenient user experience enables everyone to engage with anyone about anything, from anywhere at any time. Vmoso maintains a hybrid networking approach pioneered by BroadVision enabling organizations to connect securely and effectively with their internal and external workforce, partners and customers. It is built on a secure cloud based infrastructure and embraces the most effective mobile communication paradigm. It is a unified communication collaboration center for the digitally connected individuals that maybe easily organized and managed by an organization to offer secure and effective communication and collaboration.

And with those remarks I’d like to thank you for listening. And now let’s open it up to your questions.

Question-and-Answer Session

Operator

Thank you. We will now begin the question-and-answer session. (Operator Instructions). And we do have a question from [Jonathan Honiq]. Please go ahead.

Unidentified Analyst

Okay, so, I am very large holder. I was on the call last time and I have a couple of very easy questions. First what’s the best number to get someone at the company to speak to?

Peter Chu

So Jonathan please we have our listed general number but I would say if you don’t mind if you would contact me directly on my extension 1111.

Unidentified Analyst

Okay. And is there any way you can give us any guidance on when you expect the...

Peter Chu

Jonathan I apologize, I think it’s -- I will, if you don’t mind sending me an email I will send you my direct line.

Unidentified Analyst

Okay, that’s great.

Peter Chu

[inaudible]

Unidentified Analyst

Can you give us any guidance as when you think the company is going to turn the corner? I mean is there any way you can give any sort of guidance in terms of the cash burn?

Peter Chu

It’s that I can’t offer enough detail to support that at this time. As you see that we actually even though we're still investing at a pretty consistent rate but you're seeing that we're actually managing expenses very, very carefully if you do watch us quarter-to-quarter.

Unidentified Analyst

I do watch quarter-by-quarter. What about any new products that you guys might be working on? Is there anything in the pipeline that you can discuss?

Peter Chu

Can't talk about expectations, details of product but what you do see we talked about it more in terms of what's coming, but what we actually announced this quarter like in the press release Liu just mentioned from yesterday is the new family of product that complements all the offerings that we had out there so far and while it is early we expect to be able to bring in the business on that beyond this quarter.

Unidentified Analyst

Is there somebody you look to partner up with for sales in Vmoso or is it something you're going to tackle with your own sales force?

Peter Chu

That part is -- we have not changed our go-to-market strategy, especially with the new technology such as similar to Clearvale and Vmoso we will be using our dual strategy of going with partners who are geographic-savvy and at times vertical savvy but at same time we'll also be going to market on our own to sort of work on their light house accounts as well as very large global accounts.

Unidentified Analyst

Okay. And in terms of how you get paid for Vmoso could you discuss the payment schedule for the enterprises that sign up?

Peter Chu

The payment schedule will be very similar to Clearvale. It is a subscription model. It's a cloud-based service and the details will be revealed as we roll out the different features that are available for premium customers et cetera.

Unidentified Analyst

Okay, and obviously at this point we're trading at -- let's call $9, $9.50 a share which is approximately cash per share and you guys seem excited on the calls every quarter and the cash is continuing to decline. Is there reason why there is no insider buying from the company over the past few years?

Peter Chu

I think that, to that remark there just I don't have the detail in front of me but there is not a lot of insider, in terms of -- I think we have a very healthy vesting program that we offer incentive to our employees, key employees in the company. And beyond that I am afraid I can't comment on specific details but if you see that, I think we have a very healthy incentive program promoting people to be aligned with our shareholders.

Unidentified Analyst

Okay, I mean it's a shame if I was working at a one of the start-up companies in Silicon Valley they would at least assign some value to the enterprise value of this corporation and it seems like no one’s out there. Again I mean you could reach out to some of these small firms to do a presentation or something. There hasn’t been one announcement until last night at 4:20 after the market in the entire quarter. I mean one that's a terrible time to put a press release for a company. And two, I mean there should be a little bit more Investor Relations go to, to get the investors to understand why this should move forward? Is this something that the company has discussed or it's just the same old BroadVision?

Peter Chu

Well, Jonathan I think that's a very good point you make. And at this particular point because being involved both on the field as well as now as CFO I think that for us we're very a conservative company in that sense, to talk about a new very exciting technology which we have invested heavily as you just commented on.

We actually are -- we will be talking more and more about it, but the way we want to talk about is actually when we have substantial results to show, whether it’s in the form of material deals and represented customers, we'll be very happy to share with people as opposed to just talking. Currently we're talking about a product announcement but as more material details do surface we'll be very happy to share with the community out there.

Unidentified Analyst

Okay. So my last question, so you're happy with where you're making your investments is who would Vmoso compete with? Who in marketplace right now are you -- would be going head on with so that we could sort of get a valuation on when you do get revenues in the door who we can compare your company to?

Peter Chu

Well, I think it starts with the traditional suspects. I mean you can sort of draw the big circle so you can draw very, very tight circles to pick to that landscape. It is a communication collaboration tool and that's put a square in part to really extend and complement what we have done with the Clearvale family. But obviously as you extend these solutions to address more --because the Vmoso focuses on mobility as well as its ability to consolidate and deliver real time information, unified information to a single spot in the cloud for quicker access, as you can see as a general productivity solution enterprises this starts to take us even maybe beyond where Clearvale has been. Again we expect to have a lot of competition both from very young start-ups in this space to a lot of the traditional players that’s have been out there thinking about social, thinking about productivity and thinking about collaboration.

Unidentified Analyst

Can you name a few of those companies just please, I am really not -- I am sort of in the company I have big position based upon the valuation but I am not very tech savvy.

Peter Chu

Okay. Well, the traditional market that Clearvale has been in people -- well we are not really in position to talk about competitors. But if you go ahead look at enterprise social networking solutions you will see publically listed companies very easily and I’ll happy to talk to you perhaps offline as well as shareholders.

Unidentified Analyst

All right, I appreciate the comments today and I wish you best of luck.

Peter Chu

Thanks Jonathan.

Operator

And at this time, I am showing no further questions. (Operator Instructions).

Peter Chu

Well hopefully we have delivered a lot of good information to the people out there on the line and if there are no other questions I want to -- Liu and I want to thank you all on behalf of BroadVision for joining the call and if there are no questions we will see you in another quarter’s time.

Operator

Thank you. Ladies and gentlemen, this concludes today's conference. Thank you for participating. You may now disconnect. Speakers please stand-by for post conference.

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