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BVSN > SEC Filings for BVSN > Form 10-Q on 8-Nov-2012All Recent SEC Filings

Show all filings for BROADVISION INC

Form 10-Q for BROADVISION INC


8-Nov-2012

Quarterly Report


Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations

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.


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Critical Accounting Policies, Estimates and Judgments

There have been no material changes in our critical accounting policies, estimates and judgments during the nine month period ended September 30, 2012 compared to the disclosures in Part II, Item 8 of our Annual Report on Form 10-K for the year ended December 31, 2011, other than as disclosed herein.

Recent Accounting Pronouncements

There have been no recent accounting pronouncements or changes in accounting pronouncements during the nine months ended September 30, 2012, as compared to the recent accounting pronouncements described in our Annual Report on Form 10-K for the year ended December 31, 2011, that are of significance, or potential significance to us.

Results of Operations



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



                                         Three Months Ended                     Nine Months Ended
                                           September 30,                         September 30,
                                     2012                2011                2012               2011
Revenues:
  Software licenses                        35  %               32  %              35  %              29  %
  Services                                 65                  68                 65                 71
   Total revenues                         100                 100                100                100
Cost of revenues:
  Cost of software licenses                 1                   0                  1                  0
  Cost of services                         32                  35                 32                 35
   Total cost of revenues                  33                  35                 33                 35
Gross profit                               67                  65                 67                 65
Operating expenses:
  Research and development                 43                  36                 43                 38
  Sales and marketing                      35                  31                 39                 33
  General and administrative               25                  23                 27                 23
  Restructuring charges, net                0                   1                  0                  4
    Total operating expenses              103                  91                109                 98
Operating loss                            (36  )              (26  )             (42  )             (33   )
Interest income, net                        2                   2                  3                  2
Other income (loss), net                   34                 (15  )               6                  5
Loss before provision for
income taxes                                0                 (39  )             (33  )             (26   )
Income taxes expense                       (2  )                0                 (1  )              (1   )
Net loss                                   (2  )%             (39  )%            (34  )%            (27  )%

Revenues. License revenue from the sales of software licenses for the three months ended September 30, 2012 was $1.3 million, remaining unchanged from the prior year. License revenue from the sales of software licenses for the nine months ended September 2012 was $3.8 million, down $0.1 million, or 3% from $3.9 million for the nine months ended September 30, 2011. Maintenance revenue, which is generally derived from maintenance contracts sold with initial customer licenses and from subsequent contract renewals, for the three months ended September 30, 2012 was $1.7 million, down $0.4 million or 19% from $2.1 million for the three months ended September 30, 2011. Maintenance revenue for the nine months ended September 30, 2012 was $5.2 million, down $1.5 million or 22% from $6.7 million for the nine months ended September 30, 2011. Consulting revenue, which is generally related to services in connection with our licensed software for the three months ended September 30, 2012 was $0.6 million, down $0.2 million, or 25% from the three months ended September 30, 2011. Consulting revenue was $2.0 million for the nine months ended September 30, 2012, down $0.8 million, or 29%, from $2.8 million for the nine months ended June 30, 2011. The decrease of revenues was due to product transitioning. We are investing heavily


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in our new product, Clearvale, while our older products mature. We may not be able to generate substantial revenue from Clearvale, but if we are able to do so, it will take time for such new product revenue to ramp up.

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 September 30, 2012 increased $38,000 compared to the same period in year 2011. Cost of software licenses for the nine months ended September 30, 2012 increased $63,000 compared to the same period in year 2011. The increase was mainly due to the increase of 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 $1.2 million for the three months ended September 30, 2012, down $0.3 million, or 20%, from $1.5 million for the three months ended September 30, 2011. Cost of services was $3.6 million for the nine months ended September 30, 2012, down $1.1 million, or 23%, from $4.7 million for the nine months ended September 30, 2011. This decrease was mainly due to lower contract expenses in response to lower revenues.

Research and development. The 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 $1.6 million for the three months ended September 30, 2012 and 2011. Research and development expenses were $4.8 million for the nine months ended September 30, 2012, down $0.2 million, or 4%, from $5.0 million for the nine months ended September 30, 2011. This decrease was mainly due to the reduction of research and development expenses related to our legacy products, which exceeded the increase in research and development expenses related to our new Clearvale products.

Sales and marketing. The 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 remained unchanged at $1.3 million for the three months ended September 30, 2012 and 2011. During the third quarter of 2012, we reversed a $0.3 million litigation expense accrual, a non-cash credit redeemable for our software products, as reported in our Quarterly Report on Form 10-Q for the quarter ended September 30, 2010. This credit expired, unused, during the third quarter of 2012. Sales and marketing expenses remained unchanged around $4.4 million for the nine months ended September 30, 2012 and 2011. Excluding the $0.3 million reversal, sales and marketing expenses increased due to concerted efforts to sell and promote Clearvale.

General and administrative. The 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 remained unchanged at $0.9 million for the three months ended September 30, 2012 and 2011. Our general and administrative expenses remained unchanged at approximately $3.1 million for the nine months ended September 30, 2012 and 2011.

Restructuring charges, net. The net restructuring charge of $12,000 for the nine-month period ended September 30, 2012 pertained to operating expenses paid in the period in excess of the initial estimated accrual for our vacant office space in Redwood City. The net restructuring charge of $488,000 for the nine-months ended September 30, 2011 was attributable to rent payments and operating expense payments made by us for that portion of our Redwood City facilities that we did not occupy and that we were not able to sublease in the period.

Interest income, net. Net interest income includes interest income on investment funds. We generated $312,000 in interest income from our cash and cash equivalents as well as short-term investment balances during the nine months ended September 30, 2012 and 2011, respectively.

Other income (loss), net. Other income (loss), net during the nine months ended September 30, 2012, was income of $0.6 million for the nine months ended September 30, 2012, and 2011, respectively. For the quarter ended September 30, 2012, other income (loss), net included a return of capital in the amount of $785,000 from a cost method investment that was written off in 2002. The remaining change was primarily due to unrealized gain from currency rate fluctuations on our Euro cash and short-term investment balance in the quarter ended September 30, 2012. The variance between the periods was primarily due to unrealized losses and gains from currency exchange rate fluctuation on our Euro cash and investment balances.

Provision for Income taxes. The provision for income taxes was $76,000 for the three months ended September 30, 2012 compared to a provision for income tax expense of $20,000 for the three months ended September 30, 2011. The provision for income taxes was $106,000 for the nine months ended September 30, 2012, down $11,000 or 12%, from $95,000 for the nine months ended September 30, 2011. The provision for the nine months ended September 30, 2012 and 2011 primarily relates to foreign tax and state income tax expenses.


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Liquidity and Capital Resources

Overview

We continue to maintain a strong cash position as shown on our Condensed Consolidated Balance Sheet. As of September 30, 2012, we had $52.0 million of cash and cash equivalents and short-term investments with no long-term debt borrowings, as compared to a balance of $54.4 million of cash and cash equivalents and short-term investments at December 31, 2011.

We continued to focus on expense control in the third quarter of 2012. Operating expenses for the third quarter of 2012 and 2011 were $3.7 million and $3.9 million, respectively. For the three months ended September 30, 2012, net loss was $66,000, or $0.01 per diluted share. This compares to net loss of $1.6 million, or $0.36 per diluted share, for the three months ended September 30, 2011.

The following table represents our liquidity at September 30, 2012 and December 31, 2011 (dollars in thousands):

                                     September 30,     December 31,
                                         2012              2011

Cash and cash equivalents          $        17,147    $      45,405
Short-term investments             $        34,886    $       9,009
Restricted cash, current portion   $         1,038    $       1,022
Working capital                    $        49,133    $      50,419
Working capital ratio                         7.84             5.90

Cash Used For Operating Activities

Cash used for operating activities was $5.1 million for the nine months ended September 30, 2012, and was mainly attributable to a $3.9 million operating loss offset by noncash items and changes in operating assets and liabilities. Cash used for operating activities was $4.2 million for the nine months ended September 30, 2011, and was mainly attributable to a $3.6 million operating loss and a decrease in cash collection from accounts receivable due to lower revenues.

Cash (Used For) Provided By Investing Activities

Cash used for investing activities was $25.3 million for the nine months ended September 30, 2012, primarily related to the net maturities of short-term investments in bonds and certificates of deposit and return of capital received from a previously written-off cost-method investment. Cash provided by investing activities was $8.9 million for the nine months ended September 30, 2011. This figure reflects short-term investments in bonds and certificates of deposit.

Cash Provided By Financing Activities

Cash provided by financing activities was $2.0 million for the nine months ended September 30, 2012, primarily consisting of 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 $262,000 for the nine months ended September 30, 2011 and primarily consisted of cash received from employees' purchases of common stock under the Employee Stock Purchase Plan, as amended.

Leases and Other Contractual Obligations

During the second quarter of 2012, we leased our headquarters facility and other facilities under non-cancelable operating lease agreements expiring in the year 2015. A total of $1.0 million of restricted cash as shown on our Condensed Consolidated Balance Sheets represents collateral for the letter of credit which was issued in connection with our previous facility lease obligation.

Off-Balance Sheet Arrangements


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We did not have any off-balance sheet arrangements in the third quarter of 2012 or in any prior periods.

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