Peter Chu - VP, Product Management and Strategy
Shin-Yuan Tzou - CFO
BroadVision, Inc. (BVSN) Q2 2012 Earnings Call July 25, 2012 5:00 PM ET
Good evening ladies and gentlemen and welcome to today's BroadVision Q2 year 2012 earnings announcement and investor teleconference. Please note that all your lines are on listen-only mode and there will be time for a Q&A session, towards the conclusion of this meeting. (Operator Instructions).
And now to start off our conference, I would like to welcome and turn the call over to Mr. Peter Chu, Vice President of Product Management and Strategy. Go ahead sir.
Yes, hi good afternoon everyone. My name is Peter Chu , Vice President of Product Management and Strategy at BroadVision. Welcome to our 2012 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 on behalf of Dr. Pehong Chen, our CEO, I will provide product and marketing updates 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/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.
Thanks, Peter. First, our Q2 2012 results in terms of P&L, balance sheet and other operating highlights. Revenues. Q2 total revenues were 3.6 million with 1.2 million in licenses, 1.7 million in maintenance and 0.7 million in consulting services. Sequentially this compares to Q1 2012 results, total revenue of 3.8 million with 1.4 million in licenses, 1.7 million in maintenance and 0.7 million in consulting services. In comparison, Q2 2011 total revenues were 4.0 million with 1.1 million in licenses, 2.2 million in maintenance and 0.7 million in consulting services. Revenues declined as our older products mature, while the new Clearvale business is the only time to [rent]. Q2 2012 revenues by region were 41% Americas, 38% EMEA and 21% APJ compared to 43% Americas, 36% EMEA and 31% APJ in Q1 2012 and 43% Americas, 34% EMEA and 23% APJ in Q2 2011.
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 GAAP basis, total operating costs plus costs of revenues were 5.4 million in Q2 2012 compared to 5.5 million in Q1 2012 and 6.0 million in Q2 2011. In Q2 2012, we generated a GAAP net loss of 2.5 million or $0.54 per basic and diluted share compared to a net loss of 1.3 million or $0.29 per basic and diluted share in Q1 2012 and a net loss of 1.5 million or $0.34 per basic and diluted share in Q2 ’11. Q2 ‘12 results included a foreign exchange loss of $804,000, the company does not engage in active foreign currency trading. The foreign exchange loss was due to book adjustments of certain balance sheet items primarily our deposit in Europe to reflect the dollar exchange rate for its fluctuation during the quarter.
In June 2012, we completed our headquarter move. Our new address is Suite 210, 1700 Seaport Boulevard, Redwood City which is in the same campus as our previous headquarter. The move did not maturely [impaled] due to expenses after the move the company no longer has excessive real [asset].
Looking at our four main cost centers, first costs of goods sold, concentrated mainly on cost of services and the cost of cloud hosting was $1.2 million in Q2 ‘12 compared to $1.3 million in Q1 ’12.
Second, R&D expenses for Q2 ‘12 were $1.6 million similar in Q1 ‘12. Sales and marketing expense for Q2 ‘12 was $1.5 million same as in Q1 ‘12.
Finally, G&A expenses for Q2 ‘12 was $1.1 million same as in Q1 ‘12. Balance sheet, as of June 30, 2012; we had $52 million of cash and cash equivalents and short-term investments with no long-term debt compared to the $55.3 million at the end of Q1 ‘12.
We have no exposure to any auction raised securities or ARS. Account receivables were $2.8 million at the end of Q2 ‘12 compared to 3.2 in Q1 sales. Base shares outstanding in Q2 2012 was 71 base compared to the 75 base in Q1 '12.
Prepaid expenses in other current assets were $2.4 million at the end of Q2 2012 compared to $2.3 million in Q1 '12. Other non-current asset was $0.6 million at the end of Q2 '12 compared to $0.3 million in Q1 '12.
Account payables were $0.5 million at the end of Q2 '12 compared to the $0.7 million at the end of Q1 '12. Accrued expenses were $2.3 million at the end of Q2 '12 and as in Q1 '12. Maintenance were $3.3 million at the end of Q2 '12 compared to $4.0 million in Q1 '12. Non-current revenue were $2.3 million at the end of Q2 '12 compared to $2.6 million in Q1 '12. Other non-current liabilities were $1.1 million at the end of Q1 '12 compared to the $0.9 million in Q1 '12. I will now turn to Peter for (inaudible) in the marketing update. Peter.
Thank you Shin-Yuan. For the benefits of any new shareholders in the call today once again I would like to recap some of the key messages that we shared with you in the past. With BroadVision Clearvale we are now driving our business primarily in the enterprise social networking space, generally known as Enterprise 2.0 which is a very exciting new megatrend in IT and global business evolution especially when put in the context of cloud computing.
This paradigm shift has already taken place in consumer services as it's evident by all the virtual cloud infrastructure, mobile smart devices such as iPhones, iPads and android devices and popular social networks such Facebook and LinkedIn. The same virtual mobile and social paradigm brings a truly compelling value proposition to the enterprise in even more profound way which is bound to transform how business is done.
One must also recognize that this new way of doing business remains at a nascent stage of enterprise adoption and a new architecture solution together with a new business model and go-to-market plan must be employed and integrated in order to fully elaborate the tremendous market opportunity.
So focus, patience and persistence are the operating keywords here. In the meantime, we continue to make very good progress in solutions, sales and marketing in Q2. In the area of solutions, allow me to share with you a Clearvale solution footprint and roadmap.
Clearvale is our integrated enterprise 2.0 suite consists of the following solutions. Clearvale Enterprise, the comprehensive enterprise platform of engagement. It offers the most extensible network of networks which maximizes business returns by spending valuable social behavior into a real business relationships and processes.
Clearvale Express, the simplified version of Clearvale popular with easy adoption and bio expansion, it is easily upgradable to our enterprise solution.
Clearvale PaasPort which embodies the above solutions in one integrated suite. It is our platform of service solution targeted at both (inaudible) such as telecoms and IFP as well as resellers such as systems integration, hardware OEMs and vertical and horizontal software bars.
This solution enables our partners to offer their own cost based social business ecosystem without any heavy upfront investment. In Q2 we continue to focus our R&D investments to meet critical customer needs which are to expand a reach, engagement and functional depth of the social enterprise network.
Two such efforts are the introduction of Clearvale for Android and further enhancement of Clearvale hybrid networks. First let me talk a little bit about Clearvale for Android. The Clearvale Android app is our latest move to meet the growing demand for connecting the mobile workforce across the most popular device platform.
The native app experience has been very well received by our customers, who believe in combining compelling native UIs on mobile devices such android and Apple’s IOS with a rich functionality of Clearvale.
In doing so, we have made further advances towards anyone, anywhere, anytime objective of deploying highly engaged social networks. Clearvale for Android comes from the heels of recently expanded features in Clearvale for iPhone and iPad. Clearvale for android runs on handset and tablets with Android 2.2 and above and is available in English, simplified and traditional Chinese and Japanese.
And now on to hybrid networks, the new hybrid networks feature for Clearvale provides organizations with the ability to invite participants from different organizations to collaborate seamlessly in security. The multilevel access model enables organizations to share only the intended information to prospects or customer’s, partners and employees with consistency and total control.
Clearvale’s hybrid network enabled enterprise networks are ideal for intranet and extranet solutions within a single unified network of networks. Organizations can implement networks or communities to accurately mirror the real world business situations and facilitate social collaboration to accelerate the speed of business whether it is to close deals faster, respond to customers efficiently and effectively or approve a new partnership agreement.
Now on to sales and Clearvale PaasPort channel development efforts. In Q2, we did 27 Clearvale partner and paid customer transactions. Clearvale customers come in all sizes while primarily midsized in enterprises and from different protocols worldwide, including all of our key focuses being knowledge-intensive, interacting intensive and certain intensive industries such as technology, consulting, BPO, telecom, healthcare, retail, education and more.
While most bookings remain relatively small because customers generally sought with the limited trial for something as new and social business, they could lead considerable upside for future growth, customers expand their usage in the future upon successful adoption, their so called long tail effect.
In Q2, we have made inroads into financial, service, healthcare, retail and few other sectors around the world. One such lighthouse account is CNEH, the National Center for Hospital Expertise. They have selected Clearvale. With more than 500 members, 70 full-time employees and 120 consulting experts, delivering 450 trainings each year to more than 4,500 trainees, CNEH was looking for a collaborative and cost effective solution to deploy both within the company as an infra-net and externally to its members and consultants.
The flexibility by constituents from different organizations will allow CNEH to establish specialized workspaces for communication, account management and collecting intelligence for ongoing projects. CNEH represents a continued success to provide healthcare providers with tools for deeper, more meaningful collaboration, ultimately helping these organizations to better serve their various constituencies. CNEH joins the NHS, British National Health Systems which employees over 1.5 million healthcare professionals, and is the world’s largest employer as part of our Clearvale customer base.
In Q2, we continue to develop Clearvale PaasPort channel programs on a worldwide basis and have made various cutting progress across the board including telcos and other service providers, large system integrators and smaller regional resellers, including The Talking Village, Open Knowledge and (inaudible) in Italy, Power International in Russia and Renewco in Bulgaria. We hope to be able to report additional positive results on many of these efforts in due course.
One of the main efforts has been to perform a train-the-trainer or PaasPort partners on a set methodology. During Q2 between ourselves and partners, we have been involved in more than 12 SET engagements. In addition, we were also actively engaged with existing K2 and QuickSilver over customers with key service engagements and license upgrade. For instance, Deskpro, Aon expanded their K2 commerce footprint; Northrop Grumman engaged us for an important new document solution just to name a few highlights.
Now onto marketing; we believe we make progress in publicizing the Clearvale brand to a multiple marketing avenues including AR, PR, social media and search engine optimization. In the EMEA region we ran two significant events, the Social Business Strategy Summit in London, the Enterprise 2.0 Forum in Milan and in North America we were participants in Info (inaudible) and in Enterprise 2.0 events.
We also ran the seminars in the EMEA region under the name of platform of engagement in social analytics and additional marketing update includes Clearvale is now available in Russian and also Clearvale as I mentioned earlier is now released for the Android platform and we are also continuing to launch a new SET focused ad campaign, the SET methodology that drives adoption of social business platforms. And we also launched a press language campaign covering also Google adverts.
In conclusion, we continue our turnaround efforts to establish BroadVision and Clearvale as the key player in the enterprise social network business. We continue to focus in investing our product solutions and go-to-market strategy. The go-to-market strategy consists of a two pronged approach to acquire lighthouse customers through our SET which stands for Social Enterprise Transformation program and in parallel the development of a valuable and global network of partners through our PaasPort channel program in which partners can market their own branded Cloud based social enterprise ecosystem powered by Clearvale.
In closing, Clearvale is unique in its depth and breadth; and a comprehensive platform for enterprises embracing their virtual, mobile and social business paradigm. Our enhancements offer a complete coverage of mobile platforms including Android, Apple iOS and other mobile devices will enable greater penetration within organizations and result in greater customer productivity.
Similarly, we will continue to invest in the areas of social business process enhancements, network of network which mimic real business relationships and processes and final, but not least, in a must have transmission methodology called SET.
With that, we thank you for listening and now let’s open it up for your questions.
(Operator Instructions) Our first question is from [Jason’s] location. Jason, go ahead.
I have just a really general question; I just wanted to ask how the competitive landscape is changing the social enterprise network field. I know there has been some deflation of some larger companies and I know its process and possible failures in the startups, I guess if you can answer that anyway you want to?
Yeah, I mean from the ground level looking at the competitive landscape things haven't changed too much because we are still at early stage of really when you talk about enterprise social networks adoption. They are still quite a number of players out there and as you mentioned startups do come and go, we actually, we don't keep track of that very closely.
But in general, I think the opportunities are still, I think the fact that the dynamics of the market points to the fact that there is a lot of potential there. And in fact we are seeing more people are joining in the parade in some way, so I think the outlook is still very, very positive for us. We continue to execute to our strategy of product as well as our market penetrations go-to-market strategy and on that standpoint, we really haven't seen anything change in the relative competitive landscape.
(Operator Instructions) Looks like we have no further questions.
Okay, well then, thank you everybody for joining us for our earnings call for Q2 2012 and we will see you another quarter.
Ladies and gentlemen thank you for your time and attendance. This conference is now concluded. Enjoy the remainder of your evening.