BroadVision, Inc. (NASDAQ:BVSN)
Q3 2012 Earnings Conference Call
October 24, 2012 05:00 p.m. ET
Peter Chu – VP, Strategy & Product Management
Shin-Yuan Tzou – CFO
James Fenkner – Redstar Management
Good afternoon everyone. My name is Peter Chu , Vice President of Strategy and Product Management at BroadVision. Welcome to our 2012 Q3 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 third quarter results which were announced in a press release earlier this afternoon.
Next I will provide product and marketing updates and 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. Now our Q3 2012 results in terms of P&L, balance sheet and other operating highlights. Q3 total revenues were $3.6 million with $1.3 million in licenses, $1.7 million in maintenance and $0.6 million in consulting services. Sequentially this compares to Q2 ‘12 total revenues of $3.6 million with $1.2 million in licenses, $1.7 million in maintenance and $0.7 million in consulting services. In comparison, Q3 2011 total revenues were $4.2 million with $1.3 million in licenses, $2.1 million in maintenance and $0.8 million in consulting services.
Q3 ‘12 revenues by region were 44% Americas, 35% EMEA and 21% APJ compared to 41% Americas, 36% EMEA and 21% APJ in Q2 ‘12 and 37% Americas, 37% EMEA and 26% APJ in Q3 ‘11.
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 $4.9 million in Q3 ‘12 compared to $5.4 million in Q2 ‘12 and $5.3 million in Q3 ‘11. In Q3 ‘12, we generated a GAAP net loss of $66,000 or $0.01 per basic and diluted share compared to a net loss of $2.5 million or $0.54 of per basic and diluted share in Q2 ‘12 and a net loss of $1.6 million or $$0.36 per basic and diluted share in Q3 ‘11.
Q3 ‘12 results benefited from three one-time items. First, we received $785,000 cash previously (inaudible) on our investment sales as reported in our 10-Q for Q3 2010. Second, we reversed a $300,000 litigation expense accrual which was a non-cash credit redeemable for our software products as reported also in our 10-Q for Q3 2010. This credit expired in Q3 ‘12 and used. Third, we recorded a foreign exchange gain of $433,000, the company does not engage in active foreign currency trading. The foreign exchange gain was due to book adjustments of certain balance sheet items primarily our deposit in Europe to reflect dollar exchange rate fluctuations during the quarter.
Looking at our four main cost centers, first costs of goods sold, concentrated mainly on cost of services and the cloud hosting was $1.2 million in Q3 ‘12 same as in Q2 ‘12. Sales and marketing expense for Q3 ‘12 was $1.3 million down from $1.5 million in Q2 ‘12, primarily due to the 300 K accrual reversal mentioned earlier.
Finally, G&A expenses for Q3 ‘12 was $0.9 million compared with $1.1 million in Q2 ‘12. Balance sheet, as of September 30, 2012; we had $52 million of cash and cash equivalents and short-term investments with no long-term debt same as at the end of Q2 ‘12.
We have no exposure to any auction raised securities or ARS. Account receivables were $2.2 million at the end of Q3 ‘12 compared to $2.8 million Q2 ‘12. Base shares outstanding in Q3 ‘12 was 55 days compared to the 71 days in Q2 ‘12.
Prepaid expenses and other current assets were $2.1 million at the end of Q3 ‘12 compared to $2.4 million in Q2 ‘12. Other non-current assets was $0.5 million at the end of Q3 ‘12 compared to $0.6 million in Q2 ‘12.
Account payables were $0.7 million at the end of Q3 ‘12 compared to the $0.5 million at the end of Q2 ‘12. Accrued expenses were $2.0 million at the end of Q3 ‘12 compared to $2.3 million in Q2 ‘12. Accrued maintenance was $2.8 million at the end of Q3 ‘12 compared to $3.3 million in Q2 ‘12. Non-current revenues were $1.8 million at the end of Q3 ‘12 compared to $2.3 million in Q2 ‘12. Other non-current liabilities were $1.2 million at the end of Q3 ‘12 compared to the $1.1 million in Q2 ‘12.
Other non current liabilities were $1.2….
Now I will turn to Peter for a color on the marketing update. Peter.
Thank you Shin-Yuan. With BroadVision Clearvale we we’re focusing our business primarily in enterprise social networking space generally known as Enterprise 2.0. This is a very exciting new mega-trend in IT and global business evolution especially when put in the context of cloud computing.
The adoption of enterprise social networking is growing both in terms of it’s affectability to different business functional areas as well as diverse industry sectors. Nevertheless opportunities and growth rates are still modest with respect to the full market potential, the substantive business paradigm shift.
Beyond customer services we’re seeing adoption of high technology manufacturing, retail, travel and healthcare sectors. The proliferation of our solution both in terms of digital footprint and engagement of customers has been fuelled by the growth of mobile devices across enterprises such our investments create a compelling multi-platform mobility strategy across leading devices such as IOS, Androids, smartphones and tablets has been well received by our customers.
Our ability to offer both mobile apps in conjunction with mobile browser support has provided our customers with greater choices and options. Our valuable proposition to deliver a virtual, mobile and social platform of engagement is well aligned with enterprise customer’s needs to transform their communication and collaboration efforts within an outside enterprise by leveraging the latest cause in mobile technology platforms.
Additionally enterprise social networks are becoming a necessity for global enterprises within increasing and critical needs to connect more effectively and seamlessly, employees and partners across time zones and geographies are cloud based and compelling mobility powered enterprise social solutions with 12 leading European and Asian languages that differentiate our product from multi-national organizations. We added Russian support earlier this year.
In Q3, we did Clearvale partner and paid customer transactions in manufacturing, travel, resale, IT industry sectors. Clearvale customers come in all sizes while primarily midsized enterprises and from different verticals worldwide, including all of our key focuses being knowledge-intensive, interaction intensive and service intensive industries such as technology, consulting, BPO, telecom, 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, they could lead to considerable upsides for future growth, if customers expand their usage in the future upon successful adoption, the so called long tail effect. We’re also excited to report that leaving accounts are now increasing the user base significantly after their first year of adoption.
In Q3, we continue to focus our R&D investments and the critical customer needs, which are to expand the reach, engagement and functional depth of the social enterprise network solutions. As we continue to build on our platform of enterprise grade services, we’ll focus on security, flexibility and scalability. We added functionalities to enhance customer use cases around Clearvale hybrid networks.
Clearvale hybrid networks are being deployed to implement social B2B and B2D applications. Let me share with you a few sample applications that are driving adoption. First is the application in partner in supplier engagement and management networks. So, utilization of social collaborations enhances what has been in place with traditional CRM solutions. But it adds a dimension of dynamic engagement of internal and external participants such as in believe in partners.
The cloud based and mobile enabled social solutions offer anytime, anywhere collaboration which increases speed, quality and discovery of critical information for improved productivity and results.
Our second area of new developments and customer interest is in the area of financial service providers. The applications in demand are for engagement of service providers and partners to jointly engage and manage clients. Our financial services industry require speedy and accurate product in compliance information and distribution. But also requires discretion customized by the recipient groups
But Clearvale stands out as an enterprise social network built with powerful information sharing and distribution capabilities combined with comparable levels of security and control over where and whom and which information will be shared. We also report progress in these new industries and new application areas in due course.
Thus, we continue to enhance our integrated Enterprise 2.0 Suite Clearvale which consist the following components. Clearvale Enterprise, which is the comprehensive enterprise platform of engagement. It offers the most accessible network of networks, which maximizes business returns by embedding viral social behavior into business relationships and processes.
Clearvale Express, the simplified version of Clearvale targets for easy adoption and viral expansion. It is easily upgradeable to our enterprise solution. Clearvale PassPort which embodies the above solutions in one integrated suite, it is our platform as a service solution both cloud host, such as Telcos and ISPs as well as resellers such as systems integrators, hardware OEMs and vertical horizontal software bars. The solution enabled our partners to offer their own cloud based social business ecosystems without any heavy upfront investment.
With respect to global market strategy, we’re investing in both direct and partnership approach. Marketing has revamped our web presence to our company portal whilst launching new programs in select geographies around the world. We continue to develop Clearvale PassPort channel programs on a worldwide basis and have made very exciting progress across the board, including Telcos and other service providers, large systems integrators and smaller regional resellers.
Last but not least, we’re also actively engaged with existing K2 and QS customers. With key service engagements and license upgrades. For instance (inaudible) AR or lighthouse K2 customers, continues to be key customer for QuickSilver, seeing a few highlights.
In conclusion we continue our developments (inaudible) and Clearvale as a key player in the enterprise and 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-prong approach, we acquired our lighthouse customers to our SET Social Enterprise Transformation Program, and in parallel the development of a valuable and global network of partners through our PassPort channel program whereby partners can market their brands cloud based social enterprise ecosystem powered by Clearvale.
In closing, Clearvale is unique in it’s depth and breadth as a comprehensive platform for enterprise embracing 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 Clearvale collaboration solutions to increase productivity and efficiency across business processes. The focus of our product strategy has always been to focus on four core areas of differentiation where we meet our industry. They are, one, social business processes, two, social ecosystem or network of networks, which are built in many wheel business relationship and processes. And three social analytics for engagements and four, full solution delivered as a partner enabled platform.
With that, we thank you for listening and now let’s open it up for your questions.
Thank you. (Operator Instructions). First question is from James Fenkner with Redstar Management. Please go ahead with your question.
James Fenkner – Redstar Management
Yes hello Chu.
James Fenkner – Redstar Management
I wanted to see if you could provide a little bit more color in the – in terms of the metrics of the social business services that are provided by BroadVision. Specifically there is – I understand that there was a Clearvale free platform, has that increased acceptance, has there been any quantitative increase in the enterprise package, any of the metrics would be useful? And another question, not specific to the metrics which I would like to ask afterwards?
Well, we continue to offer the Clearvale Express as a platform and the numbers are – we actually do see upticks in that. But at the same time this is essentially a very quick and viral product out there. We’re seeing continued interest but at the same time we have also consistent rates of conversion from Clearvale Express into the Clearvale enterprise products.
And at this time we’re not disclosing the actual conversion rates but it is a part of our strategy as we continue to put more marketing programs and channels around it with web presence as well sizable presence we are seeing improvements.
James Fenkner – Redstar Management
Okay, thank you. In the – this is probably more of a common question. But in terms of the cash and cash equivalents, it’s quite large given that what the cash burn rate is, this has been historically been for the business. If you could talk about why it’s kept so relatively high and why it isn’t reduced phase say through dividends or share buybacks?
We, as you can see that our cash level is very high compared to the size of the revenue. But we are actually burning cash this year. And the company is focusing on building ourselves up for the new Clearvale business. And we would expect that we will invest further in our R&D and sales and marketing. And we believe that the best way to use our cash is to build out the company’s equity in our intellectual property, in our market presence rather than simply returning the cash in the form or dividend or return of equity.
James Fenkner – Redstar Management
Okay, thank you. Just a follow-up, is there a vision as to what the increase in R&D as our marketing will be going forward, do you have a sense of increasing – is it going to increase two times, three times historical levels?
We will continue to invest in sales and marketing and R&D. On the other hand we are also prudent we recognize our current financial situation. So we will maintain a good balance going forward between our cash level and how we grow – we want to grow but we will do it in a prudent way.
James Fenkner – Redstar Management
Okay, thank you very much for your answers.
(Operator Instructions). We have no further questions at this time.
Okay. If there are no further questions, we want to thank everybody for listening. And we will see you another quarter.
Thank you ladies and gentlemen. This concludes today’s conference. Thank you all for attending. You may now disconnect your lines.
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