SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
----------------------
F O R M 6-K
REPORT OF FOREIGN PRIVATE ISSUER PURSUANT TO RULE 13a-16 OR
15d-16 UNDER THE SECURITIES EXCHANGE ACT OF 1934
For the month of May 2005
RADVISION LTD.
(Name of Registrant)
24 Raoul Wallenberg Street, Tel Aviv 69719, Israel
(Address of Principal Executive Office)
Indicate by check mark whether the registrant files or will
file annual reports under cover of Form 20-F or Form 40-F.
Form 20-F [X] Form 40-F [ ]
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): [ ]
Indicate by check mark if the registrant is submitting the
Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): [ ]
Indicate by check mark whether by furnishing the information
contained in this Form, the registrant is also thereby furnishing the
information to the Commission pursuant to Rule 12g3-2(b) under the Securities
Exchange Act of 1934.
Yes [ ] No [X]
If "Yes" is marked, indicate below the file number assigned to
the registrant in connection with Rule 12g3-2(b): 82- ____________
This Form 6-K is being incorporated by reference into the Registrant's Form S-8
Registration Statements File Nos. 333-45422, 333-53814, 333-55130, 333-66250,
333-82488, 333-104377 and 333-116964.
RADVision Ltd.
6-K Items
1. RADVision Ltd. Condensed Consolidated Financial Statements and
Management's Discussion and Analysis of Financial Condition and
Results of Operations for the Quarterly Period ended March 31, 2005.
ITEM 1
RADVISION LTD.
INDEX
Page
--------------------------------------------------------------------------------
I - Financial Information:
1. Condensed Consolidated Balance Sheets as of March 31, 2005 and
December 31, 2004....................................................2
Condensed Consolidated Statements of Income -
for the Three Months ended March 31, 2005 and 2004...................3
Condensed Consolidated Statements of Cash Flows -
for the Three Months ended March 31, 2005 and 2004...................4
Notes to Condensed Consolidated Financial Statements.....................6
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.......................14
3. Quantitative and Qualitative Disclosure About Market Risk...............20
I - Financial Information
1.
RADVISION LTD. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2005
U.S. DOLLARS IN THOUSANDS
UNAUDITED
INDEX
Page
----
Consolidated Balance Sheets 2
Consolidated Statements of Income 3
Consolidated Statements of Cash Flows 4 - 5
Notes to Consolidated Financial Statements 6 - 13
- - - - - - - - - - - - - - -
1
RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data
March 31, December 31,
2005 2004
---------- ------------
Unaudited Audited
--------- ----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 12,289 $ 20,206
Short-term bank deposits 14,533 11,799
Short-term marketable securities 48,432 39,612
Trade receivables (net of allowance for doubtful accounts
of $1,276 as of March 31, 2005 and December 31, 2004) 10,346 10,063
Other accounts receivable and prepaid expenses 3,410 3,900
Inventories 1,141 1,220
--------- ---------
Total current assets 90,151 86,800
----- --------- ---------
LONG-TERM ASSETS:
Long-term bank deposits 6,063 5,384
Long-term marketable securities 25,976 33,365
Severance pay fund 2,705 2,733
--------- ---------
Total long-term assets 34,744 41,482
----- --------- ---------
PROPERTY AND EQUIPMENT, NET 2,962 2,647
--------- ---------
GOODWILL 3,059 647
--------- ---------
OTHER INTANGIBLE ASSETS, NET 4,559 306
--------- ---------
Total assets $ 135,475 $ 131,882
----- ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 1,468 $ 1,939
Deferred revenues 6,345 7,517
Accrued expenses and other accounts payable 12,123 11,949
--------- ---------
Total current liabilities 19,936 21,405
----- --------- ---------
ACCRUED SEVERANCE PAY 3,749 3,701
--------- ---------
Total liabilities 23,685 25,106
----- --------- ---------
SHAREHOLDERS' EQUITY:
Ordinary shares of NIS 0.1 par value:
Authorized - 25,000,000 shares as of March 31, 2005 and December 31, 2004;
Issued - 20,859,418 and 20,152,045 shares as of March 31, 2005 and
December 31, 2004, respectively; Outstanding - 19,623,566 and 20,859,418
shares as of March 31, 2005 and December 31, 2004, respectively 200 196
Additional paid-in capital 109,783 107,267
Retained earnings (accumulated deficit) 1,807 (687)
--------- ---------
Total shareholders' equity 111,790 106,776
----- --------- ---------
Total liabilities and shareholders' equity $ 135,475 $ 131,882
----- ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
2
RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
U.S. dollars in thousands, except per share data
Three months ended
March 31,
-----------------
2005 *) 2004
------- -------
Unaudited
-----------------
Revenues $16,280 $14,261
------- -------
Operating costs and expenses:
Cost of revenues 2,776 3,097
Research and development 4,655 3,780
Marketing and selling 5,757 5,837
General and administrative 1,159 1,240
------- -------
Total operating costs and expenses 14,347 13,954
----- ------- -------
Operating income 1,933 307
Financial income, net 561 412
------- -------
Net income $ 2,494 $ 719
======= =======
Basic net earnings per Ordinary share $ 0.12 $ 0.04
======= =======
Diluted earnings per Ordinary share $ 0.11 $ 0.03
======= =======
*) Restated (see Note 1c).
The accompanying notes are an integral part of the consolidated financial
statements.
3
RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. dollars in thousands
Three months ended
March 31,
-------------------------------------
2005 *) 2004
----------------- -----------------
Unaudited
-------------------------------------
Cash flows from operating activities:
-------------------------------------
Net income $ 2,494 $ 719
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization 453 530
Accrued interest and amortization of premium on held-to-maturity marketable
securities and bank deposits 20 832 *
Severance pay, net 76 (55)
Decrease (increase) in trade receivables, net (283) 223
Decrease (increase) in other accounts receivable and prepaid expenses 699 (634)
Decrease (increase) in inventories 79 (218)
Increase (decrease) in trade payables (471) 1,555
Increase (decrease) in deferred revenues (1,322) 1,671
Decrease in other accounts payable and accrued expenses (26) (2,210)
----------------- -----------------
Net cash provided by operating activities 1,719 2,413
----------------- -----------------
Cash flows from investing activities:
-------------------------------------
Proceeds from redemption of held-to-maturity marketable securities 2,062 20,380
Purchase of held-to-maturity marketable securities (3,474) (11,906)
Proceeds from withdrawal of bank deposits 7,659 11,735
Purchase of bank deposits (11,111) (12,919)
Purchase of property and equipment (604) (516)
Purchase of FVC assets (1) (7,001) -
----------------- -----------------
Net cash provided by (used in) investing activities (12,469) 6,774
----------------- -----------------
Cash flows from financing activities:
-------------------------------------
Issuance of Ordinary shares and Treasury stock for cash upon exercise of options - 1,294
Exercise of options by employees 2,833 -
----------------- -----------------
Net cash provided by financing activities 2,833 1,294
----------------- -----------------
Increase (decrease) in cash and cash equivalents (7,917) 10,481
Cash and cash equivalents at the beginning of the period 20,206 16,433
----------------- -----------------
Cash and cash equivalents at the end of the period $ 12,289 $ 26,914
================= =================
Supplemental disclosure of non-cash flow from investing and financing activities:
---------------------------------------------------------------------------------
Issuance of Ordinary shares upon sale of Treasury stock $ - $ 86
================= =================
Loss on issuance of Ordinary shares upon sale of Treasury stock $ - $ 375
================= =================
Receivables on account of shares $ 162 $ -
-------------------------------- ================= =================
*) Restated (see Note 1c).
The accompanying notes are an integral part of the consolidated financial
statements.
4
RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. dollars in thousands
(1) Supplemental disclosure of cash flow information:
-------------------------------------------------
In March 2005, the Company acquired the assets of First Virtual
Communication Inc. ("FVC") The net fair value of the assets acquired and
the liabilities assumed at the date of acquisition was as follows:
Working capital, excluding cash and cash equivalents $ 172
Property and equipment 57
Technology 3,295
Distribution networks 1,065
Goodwill 2,412
-------
$ 7,001
=======
The accompanying notes are an integral part of the consolidated financial
statements.
5
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 1:- GENERAL
a. Radvision Ltd. ("the Company"), an Israeli corporation, designs,
develops and supplies products and technology that enable
real-time voice, video and data communications over packet
networks, including the Internet and other networks based on the
Internet protocol.
The Company's products and technology are used by its customers
to develop systems that enable enterprises and service providers
to use packet networks for real-time IP ("Internet Protocol")
communications.
The Company operates under two reportable segments: 1) the
"networking" business unit (or "NBU"), which focuses on a
networking product and is responsible for developing networking
products for IP-centric voice, video and data conferencing
services; and 2) the "technology" business unit (or "TBU"), which
focuses on creating developer toolkits for the underlying IP
communication protocols and testing tools needed for real-time
voice and video over IP.
The Company has six wholly-owned subsidiaries: Radvision Inc. in
the United States, Radvision HK in Hong Kong, Radvision U.K. in
the United Kingdom, Radvision Japan KK in Japan that are
primarily engaged in selling and marketing the Company's products
and technology, Radvision Communication Development (Beijing) Co.
Ltd. in China that is primarily engaged in research and
development, and Radvision B.V., in the Netherlands that is a
holding company.
b. Acquisition of assets of First Virtual Communication Inc.:
Following a bidding process held under the supervision of a
United States Bankruptcy Court, the Company acquired
substantially all of the assets of First Virtual Communications
and its wholly-owned subsidiary, CUseeMe Networks, Inc. on an "as
is" basis on March 15, 2005. FVC creates leading software
products that enable interactive voice, video and data
collaboration over IP-based networks. The transaction was
provided for by a cash purchase price of $ 7,496 including
transaction costs.
The acquisition was accounted under the purchase method of
accounting. Accordingly, all assets and liabilities were recorded
at their estimated market values as of the date acquired, and
results of FVC's operations have been included in the
consolidated financial statements commencing with the date of
acquisition.
6
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 1:- GENERAL (Cont.)
Based upon a preliminary valuation of tangible and intangible
assets acquired, the Company has allocated the total cost of the
acquisition to FVC net assets as follows:
Tangible assets acquired (including cash and cash
equivalents) $ 724
Intangible assets:
Technology 3,295
Distribution networks 1,065
Goodwill 2,412
-------
Total consideration $7,496
=======
c. Restatement of previously-issued financial statements:
------------------------------------------------------
As described in Note 13 to the annual financial statements and in
Form 20-F for the year ended December 31, 2004, in January 2001,
the Company entered into a lease agreement with related parties
for a period of five years. Subsequently, the Company surrendered
the property before inception of the lease. The parties to the
lease agreement disputed the extent of damages caused by this
action and agreed to proceed to binding arbitration. The
presiding arbitrator issued his ruling on February 12, 2004,
stating the amount the Company owed was $ 400. The Company had
previously accrued a liability of $1,461 in respect of the
aforementioned dispute.
Prior to the issuance of the arbitration ruling, the Company had
announced its 2003 financial results, but had not yet filed its
annual report on Form10-K for the year ended December 31, 2003.
In the 2003 audited financial statements the arbitration ruling
was treated as a "Type II" event as defined in AU 560 of the
PCAOB auditing standards ("AU 560") and, accordingly full
disclosure concerning the event was provided in the 2003 audited
financial statements while no revision was made to the $1,461
accrual.
In the process of preparing the financial statements for the year
ended December 31, 2004, the accounting treatment relating to
this event was reconsidered and consequently it was concluded
that the arbitration ruling issued on February 14, 2004
represents a "Type I" event according to AU 560, due to the fact
that the above ruling, which became available subsequent to the
period covered by the 2003 financial statements, but before
issuance of such financial statements, provided additional
evidence with respect to conditions that existed on December 31,
2003 and affected estimates used in preparing the 2003 financial
statements. Consequently, the estimated provision relating to the
aforementioned dispute is being revised from $1,461 to $400 in
the 2003 fiscal year and the financial statements are being
restated accordingly.
As a result of this restatement, the Company recorded
restructuring income of $1,061 in the year ended December 31,
2003, resulting in increased net income and decreased accrued
expenses in that amount.
7
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 1:- GENERAL (Cont.)
The impact of the aforementioned restatement with respect to the
financial statements as of March 31, 2004 and for the three month
period then ended is summarized below:
Statement of income data:
Three months ended
March 31, 2004 (unaudited)
--------------------------------------------------
Previously As
reported Adjustment restated
-------------- -------------- --------------
Restructuring income $ 1,061 $ 1,061 $ -
============== ============== ==============
Operating income $ 1,368 $ 1,061 $ 307
============== ============== ==============
Net income $ 1,780 $ 1,061 $ 719
============== ============== ==============
Basic net earnings per Ordinary share $ 0.09 $ 0.05 $ 0.04
============== ============== ==============
Basic and diluted net loss per Ordinary share $ 0.08 $ 0.05 $ 0.03
============== ============== ==============
Balance sheet data:
March 31, 2004 (unaudited)
------------------------------------------------
Previously As
reported Adjustment restated
------------ -------------- --------------
Other accounts payable and accrued expenses $ 9,830 $ (1,061) $ 8,769
============ ============== ==============
Total current liabilities $ 20,373 $ (1,061) $ 19,312
============ ============== ==============
Accumulated deficit $ (5,130) $ (1,061) $ (6,191)
============ ============== ==============
Total shareholders' equity $ 96,400 $ (1,061) $ 95,339
============ ============== ==============
8
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 1:- GENERAL (Cont.)
Cash flow data:
Three months ended
March 31, 2004 (unaudited)
--------------------------------------------------
Previously Adjustment As
reported restated
-------------- -------------- --------------
Net income $ 1,780 $ 1,061 $ 719
============== ============== ==============
Restructuring income $ 1,061 $ (1,061) $ -
============== ============== ==============
Net cash provided by operating activities $ 2,413 $ - $ 2,413
============== ============== ==============
d. New accounting pronouncements:
In December 2004, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 123(R),
"Share-Based Payment" ("Statement No. 123R"), which is a revision
of Statement No. 123 and supersedes APB No. 25. The Statement
addresses the accounting for transactions in which an enterprise
receives employee services in exchange for (a) equity instruments
of the enterprise or (b) liabilities that are based on the fair
value of the enterprise's equity instruments or that may be
settled by the issuance of such equity instruments. The Statement
eliminates the ability to account for share-based compensation
transactions using APB No. 25, and generally would require
instead that such transactions be accounted for using a grant
date fair-value based method. Companies will now be required to
recognize an expense for compensation cost related to share-based
payment arrangements including stock options and employee stock
purchase plans. In March 2005, the Securities and Exchange
Commission ("SEC") issued Staff Accounting Bulletin No. 107,
"Share-Based Payment" ("SAB 107"), which provided further
clarification on the implementation of Statement No. 123R. In
April 2005, the SEC announced a deferral of the effective date of
Statement No. 123R for calendar year companies until January 1,
2006. It is expected that the new rules of Statement No. 123R
will be applied on a modified perspective basis. The Company is
currently evaluating option valuation methodologies and
assumptions in light of Statement No. 123R and SAB 107. Current
estimates of option values using the Black-Scholes method (as
shown above) may not be indicative of results from valuation
methodologies ultimately adopted by the Company.
9
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the annual financial
statements of the Company as of December 31, 2004 are applied
consistently in these financial statements.
a. Use of estimates:
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the amounts reported
in the financial statements and accompanying notes. Actual
results could differ from those estimates.
b. For further information, refer to the consolidated financial
statements as of December 31, 2004.
c. Accounting for stock-based compensation:
The Company has elected to follow Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" ("APB
No. 25") and FASB No. Interpretation No. 44, "Accounting for
Certain Transactions Involving Stock Compensation" ("FIN No. 44")
in accounting for its employee stock option plans. Under APB No.
25, when the exercise price of the Company's stock options is
less than the market price of the underlying shares on the date
of grant, compensation expense is recognized.
Under Statement of Financial Accounting Standard No. 123,
"Accounting for Stock-Based Compensation ("SFAS No. 123"), pro
forma information regarding net income and net earnings per share
is required, and has been determined as if the Company had
accounted for its employee stock options under the fair value
method of SFAS No. 123. The fair value for these options is
amortized over their vesting period and estimated at the date of
grant using a Black - Scholes Option Valuation Model with the
following weighted-average assumptions for the three months ended
March 31, 2005 and 2004:
Three months ended
March 31,
-----------------------------------
2005 *) 2004
---------------- ----------------
Unaudited
-----------------------------------
Risk free interest 3.95% 2.47%
Dividend yields 0% 0%
Volatility 0.382 0.438
Expected life 3 4
10
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Pro forma information under SFAS No. 123:
Three months ended
March 31,
-----------------------------------
2005 *) 2004
---------------- ----------------
Unaudited
-----------------------------------
Net income as reported $ 2,494 $ 719
================ ================
Add: stock based compensation expense determined under APB 25 $ - $ -
================ ================
Deduct: stock-based compensation expense determined under fair
value method for all awards $ 891 $ 870
================ ================
Pro forma net profit (loss) $ 1,603 $ (151)
================ ================
Basic earnings per share, as reported $ 0.12 $ 0.04
================ ================
Diluted earnings per share, as reported $ 0.11 $ 0.03
================ ================
Pro forma basic net income per share $ 0.04 $ 0.001
================ ================
Pro forma diluted net income per share $ 0.04 $ 0.001
================ ================
*) Restated (see Note 1c).
NOTE 3:- UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with generally accepted accounting
principles for interim financial information. Accordingly, they do not
include all the information and footnotes required by generally
accepted accounting principles for complete financial statements. In
the opinion of management, all adjustments (consisting of normal
recurring accruals) considered necessary for a fair presentation have
been included. Operating results for the three months ended March 31,
2005, are not necessarily indicative of the results of operations that
may be expected for the year ended December 31, 2005.
11
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 4:- INVENTORIES
March 31, December 31,
2005 2004
--------------- ----------------
Unaudited
---------------
Raw materials $ 873 $ 1,091
Finished products 268 129
--------------- ----------------
$ 1,141 $ 1,220
=============== ================
NOTE 5:- ACCRUED EXPENSES AND OTHER ACCOUNTS PAYABLE
Employees and employee accruals $ 2,975 $ 2,408
Accrued expenses 9,148 9,541
--------------- ----------------
$ 12,123 $ 11,949
=============== ================
NOTE 6:- SEGMENTS AND CUSTOMER INFORMATION
Three months ended
March 31,
------------------------------------
2005 2004
---------------- -----------------
Unaudited
------------------------------------
Revenues:
NBU $ 10,725 $ 10,166
TBU 5,555 4,095
---------------- -----------------
Total revenues $ 16,280 $ 14,261
----- ================ =================
Cost of revenues:
NBU $ 2,420 $ 2,827
TBU 356 270
---------------- -----------------
Total cost of revenues $ 2,776 $ 3,097
----- ================ =================
12
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands
NOTE 7;- EARNINGS PER SHARE
The following table sets forth the calculation of basic and diluted
earnings per share:
Three months ended
March 31,
------------------------------------
2005 *) 2004
---------------- -----------------
Unaudited
------------------------------------
Numerator:
Net income $ 2,494 $ 719
================ =================
Diluted earnings per share - income $ 2,494 $ 719
================ =================
Number of shares:
Denominator:
Denominator for basic earnings per share - weighted
average of Ordinary shares 20,714,218 19,484,208
Effect of dilutive securities:
Employee stock options and unvested restricted shares 1,318,971 2,082,575
---------------- -----------------
22,033,189 21,566,783
================ =================
*) Restated (see Note 1c).
- - - - - - - - - - - -
2. Management's Discussion and Analysis of Financial Condition and Results of
Operations
---------------------------------------------------------------------------
This information should be read in conjunction with the condensed consolidated
financial statements and notes included in Condensed Consolidated Financial
Statements for the Quarterly Period ended March 31, 2005 above and the audited
financial statements and notes thereto and Item 5. Operating And Financial
Review And Prospects contained in our 2004 Annual Report on Form 20-F. The
discussion and analysis which follows may contain trend analysis and other
"forward-looking statements" within the meaning of Section 27A of the Securities
Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934,
and within the Private Securities Litigation Reform Act of 1995, as amended.
Such forward-looking statements reflect our current views with respect to future
events and financial results. These include statements regarding our earnings,
projected growth and forecasts, and similar matters that are not historical
facts. Forward-looking statements usually include the verbs, "anticipates,"
"believes," "estimates," "expects," "intends," "plans," "projects,"
"understands" and other verbs suggesting uncertainty. We remind shareholders
that forward-looking statements are merely predictions and therefore are
inherently subject to uncertainties and other factors that could cause the
actual results, performance, levels of activity, or our achievements, or
industry results, to differ materially from those expressed or implied by the
forward-looking statements. Readers are cautioned not to place undue reliance on
these forward-looking statements, which speak only as of the date hereof. We
undertake no obligation to publicly release any revisions to these
forward-looking statements to reflect events or circumstances after the date
hereof or to reflect the occurrence of unanticipated events. We have attempted
to identify additional significant uncertainties and other factors affecting
forward-looking statements in the section entitled "Risk Factors" and elsewhere
in our 2004 Annual Report on Form 20-F.
Overview
We are the industry's leading provider of high quality, scalable and easy-to-use
products and technologies for videoconferencing, video telephony, and the
development of converged voice, video and data over Internet Protocol, or IP,
and 3G networks. We have approximately 420 customers worldwide including
Alcatel, Cisco, FastWeb, NTT/DoCoMo, Philips, Panasonic, Samsung, Shanghai Bell,
Siemens, Sony and Tandberg. Hundreds of thousands of end-users around the world
today communicate over a wide variety of networks using products and solutions
based on or built around our multimedia communication platforms and software
development solutions.
In the beginning of 2001, we created two separate business units corresponding
to our two product lines to enable our product development and product marketing
teams to respond quickly to evolving market needs with new product
introductions.
Our Networking Business Unit, or NBU, offers one of the broadest and most
complete set of multimedia communication and videoconferencing network solutions
for IP, ISDN, SIP and 3G-based networks, supporting most end points in the
industry today. These products are sold primarily to resellers and OEMs who use
this infrastructure to develop and install advanced IP and ISDN-based
communication systems for enterprise customers. The NBU also provides
14
service providers, both 3G wireless and wireline, with integrated solutions that
enable the delivery of converged IP-based multimedia streaming and video
telephony applications to corporate customers as a managed service, residential
broadband customers, and 3G subscribers worldwide. We are currently in the
process of separating the NBU into two separate business units. The Enterprise
Business Unit will focus on the sale of multimedia communication and
videoconferencing network solutions for enterprise customers, including desktop
applications. The Service Providers Business Unit will provide products and
solutions for service providers, both 3G wireless and wireline, to allow these
customers to provide high scale, large capacity multimedia communication and
video conferencing within their chosen environment.
Our Technology Business Unit, or TBU, is a one-stop shop of voice and video over
IP and 3G Development toolkits. The TBU provides protocol development tools and
platforms, as well as associated solutions such as testing platforms and IP
phone toolkits that enable equipment vendors and service providers to develop
and deploy new IP and 3G-based converged networks, services, and technologies.
Our TBU also provides professional services to our customers, assisting them
with integrating our technology into their products. RADVISION's TBU solutions
include developer toolkits for SIP, MEGACO/H.248, MGCP, H.323, and 3G-324M. It
also includes RADVISION's ProLab(TM) Test Management Suite and IP phone toolkit.
Today you may find RADVISION toolkits implemented in a wide range of
environments from chipsets to simple user devices like IP phones, and from
integrated video systems through carrier class network devices like gateways,
switches, soft switches and 3G multimedia gateways.
Following a bidding process held under the supervision of a United States
Bankruptcy Court, we acquired substantially all of the assets of First Virtual
Communications, Inc, or FVC, and its wholly owned subsidiary, CUseeMe Networks,
Inc. on an "as is" basis. The transaction closed on March 15, 2005. The
transaction, provided for a cash purchase price of $7,150,000. Due to certain
cash adjustments the actual purchase price was less then $7,000,000. We have
hired approximately thirty-one former employees of FVC that were based in
Nashua, New Hampshire and hired the former Chief Executive Officer of FVC on a
consulting basis. The newly hired employees will be involved in marketing,
selling and supporting the acquired FVC products. We acquired leading software
products that enable interactive voice, video and data collaboration over
IP-based networks. The products provide cost-effective, integrated end-to-end
solutions for large-scale deployments from the desktop to the conference room
and also enable best-of-breed collaborative conferencing solutions to be
extended to ISDN and ATM networks. FVC's Click to Meet(TM) product provides
integrated and scalable desktop conferencing solutions. Click to Meet products
are fully integrated with a single software architecture consisting of the
Conference Server, the Conference Client and the Middleware to tie them
together. Click to Meet products are widely deployed worldwide and offer a
robust set of functionalities.
Our Strategy
Our goal is to be the leading provider of solutions that enable real-time
multimedia (voice, video and data) collaboration and communication over packet
networks. We provide solutions at every level - protocol developer toolkits,
professional services, network infrastructure, as well as integrated solutions
that compliment the communication solutions of other vendors such as those from
Cisco, Sony, Microsoft and Alcatel. We believe that the combination of offering
IP-centric networking products, along with software toolkits, positions us as a
key enabling vendor in the evolution of IP communications. Both of our product
lines are essential for building IP networks
15
that support real time voice and video communication with full interoperability
with legacy ISDN/PSTN networks and technologies.
Results of Operations
The following table presents, as a percentage of total revenues, condensed
statements of operations data for the periods indicated:
Three months
ended March 31,
----------------
2005 *) 2004
----- -------
% %
Revenues 100.0 100.0
Operating expenses
Cost of revenues............................. 17.1 21.7
Research and development..................... 28.6 26.5
Marketing and selling........................ 35.4 40.9
General and administrative................... 7.1 8.7
Total operating expenses........................ 88.2 97.8
Operating income (loss),........................ 11.8 2.2
Financial income................................ 3.4 2.9
Net income...................................... 15.2 5.1
*) Restated (see Note 1c to the financial statements).
Three Months Ended March 31, 2005 Compared with Three Months Ended March 31,
2004
Revenues. We generate revenues from sales of our networking products that are
primarily sold in the form of stand-alone products, and our technology products
that are primarily sold in the form of software development kits, as well as
related maintenance and support services. We generally recognize revenues from
the sale of our products upon shipment and when collection is probable. Revenues
generated from maintenance and support services are deferred and recognized
ratably over the period of the term of service. We price our networking products
on a per unit basis, and grant discounts based upon unit volumes. We price our
software development kits on the basis of a fixed-fee plus royalties from
products developed using the software development kits. We sell our products and
technology through direct sales and various indirect distribution channels in
North America, Europe, the Middle East and the Far East.
Our revenues increased from $14.3 million for the three months ended March 31,
2004 to $16.3 million for the three months ended March 31, 2005. This increase
was due to a $500,000 increase in sales of our networking products, and a $1.5
million increase in sales of our technology products. The results reflect better
than expected sales with increased sales in North America, Europe, the Middle
East and Asia Pacific.
Revenues from networking products increased from $10.2 million for the three
months ended March 31, 2004 to $10.7 million for the three months ended March
31, 2005, an increase of $500,000 or 5.5%.
Revenues from technology products increased from $4.1 million for the three
months ended March 31, 2004 to $5.6 million for the three months ended March 31,
2005. Revenues from
16
licenses increased from $1.7 million in the three months ended March 31, 2004 to
$2.5 million in the three months ended March 31, 2005. Revenues from royalties
increased from $900,000 in the three months ended March 31, 2004 to $940,000 in
the three months ended March 31, 2005. Maintenance revenues increased from $1.0
million in the three months ended March 31, 2004 period to $1.5 million in the
three months ended March 31, 2005. Revenues from professional services with
respect to research and development increased from $400,000 in the three months
ended March 31, 2004 to $535,000 in the three months ended March 31, 2005.
Revenues from sales to customers in the United States increased from $8.0
million, or 56.0% of revenues, for the three months ended March 31, 2004 to $8.5
million, or 52.1% of revenues for the three months ended March 31, 2005, an
increase of $500,000, or 6.1%. This increase in sales to customers in the United
States was primarily attributable to increased sales to non-Cisco channels and
due to initial revenues from Click to Meet.
Revenues from sales to customers in Europe and the Middle East increased from
$4.0 million for the three month period ended March 31, 2004, or 27.7% of
revenues, to $4.7 million, or 28.6% of revenues, for the three months ended
March 31, 2005.
Revenues from sales to customers in the Asia Pacific region increased from $2.3
million, or 16.2% of revenues, for the three months ended March 31, 2004 to $3.1
million, or 19.3% of revenues, for the three months ended March 31, 2005, an
increase of $800,000 or 35.9% due to strong growth and increased market demand
for our NBU products, particularly in China.
Cost of Revenues. Cost of revenues decreased from $3.1 million for the three
month period ended March 31, 2004 to $2.8 million for the three months ended
March 31, 2005, a decrease of $300,000, or 10.4%. Gross profit as a percentage
of revenues increased from 78.3% for the three months ended March 31, 2004 to
82.9% for the three months ended March 31, 2005, due to the increased proportion
of TBU product sales that have higher profit margins and due to a different mix
of NBU product sales.
Research and Development. Research and development expenses increased from $3.8
million for the three months ended March 31, 2004 to $4.7 million for the three
months ended March 31, 2005, an increase of $900,000 or 23.1%. This increase was
primarily attributable to an increase in the number of research and development
personnel.
Marketing and Selling. Marketing and selling expenses remain constant at
approximately $5.8 million for the three months ended March 31, 2004 and 2005.
Marketing and selling expenses as a percentage of revenues decreased from 40.9%
for the three months ended March 31, 2004 to 35.4% for the three months ended
March 31, 2005. In addition to the temporary savings related to a freeze on new
recruitment, we decreased our marketing and selling expenses in the Asia Pacific
region, where we streamlined operations, reduced the number of distributors and
initiated direct sales to some accounts, thereby reducing commission expenses.
General and Administrative. General and administrative expenses remain constant
at approximately $1.2 million for the three months ended March 31, 2004 and
2005. General and administrative expenses as a percentage of revenues were 8.7%
for the three months ended March 31, 2004 and 7.1% for the three months ended
March 31, 2005.
17
Operating Income. We recorded operating income of $307,000 for the three months
ended March 31, 2004 as compared to operating income of $1.9 million for the
three months ended March 31, 2005.
Financial Income. We recorded financial income of $412,000 for the three months
ended March 31, 2004 compared to $561,000 for the three months ended March 31,
2005. This income was principally derived from the investment of the proceeds of
our March 2000 initial public offering and private placement. Our financial
income increased principally as a result of higher prevailing interest rates.
Liquidity and Capital Resources
We generated $1.7 million from operating activities for the three months ended
March 31, 2005 compared to $2.4 million in the same period in 2004. This amount
was primarily attributable to net income of $2.5 million, a $700,000 decrease in
other receivables and prepaid expenses, and depreciation and amortization
expenses of $450,000. These increases in cash generated by our operating
activities were offset in part by a $1.3 million decrease in other payables,
deferred revenues and accrued expenses and $300,000 increase in trade
receivables.
Net cash used in investing activities was approximately $12.5 million for the
three months ended March 31, 2005. Of the cash used in investing activities
during the three months ended March 31, 2005, $7.0 million was used to acquire
substantially all of the assets of FVC and its wholly owned subsidiary, CUseeMe
Networks, Inc. on March 15, 2005, and $600,000 was used for purchases of
property and equipment.
Our financing activities generated $2.8 million for the three months ended March
31, 2005 compared to $1.3 million in the same period in 2004. This amount is
attributable to proceeds from the exercise of employee stock options.
Our capital requirements are dependent on many factors, including market
acceptance of our products and the allocation of resources to our research and
development efforts, as well as our marketing and sales activities. We plan to
pursue strategic initiatives and make operating investments in 2005 as we
position our company to realize on what we perceive to be increasing market
opportunities in the coming years. We anticipate that our cash resources will be
used primarily to fund our operating activities, as well as for capital
expenditures. We may establish additional operations as we expand globally.
On February 28, 2001, we announced that our board of directors had authorized
the repurchase of up to 10% of our outstanding shares in open market
transactions from time to time at prevailing market prices. We completed the
share repurchase program in the first fiscal quarter of 2002, having purchased
1,866,115 ordinary shares at a total cost of $11.8 million, or an average price
of $6.30 per share. At the beginning of 2003, we began to reissue the
repurchased shares upon exercise of employee stock options.
On August 28, 2002, we announced that our board of directors had authorized the
repurchase of up to $10 million or 2 million of our ordinary shares in the open
market from time to time at prevailing market prices. During April 2003, we
started to repurchase our ordinary shares based on the instruction of our board
of directors. As of December 31, 2003 we had purchased 14,000
18
ordinary shares at a total cost of $78,000, or an average price of $5.55 per
share. We did not repurchase any shares in 2004.
As of December 31, 2004 we reissued all of the ordinary shares purchased under
our repurchase programs.
Off-Balance Sheet Arrangements
We are not a party to any material off-balance sheet arrangements. In addition,
we have no unconsolidated special purpose financing or partnership entities that
are likely to create material contingent obligations.
Second Quarter 2005 Guidance
o Second quarter net sales are expected to be approximately $18.0 million, an
increase of approximately $2.3 million, or 14.6%, compared with the second
quarter of 2004.
o Net income is expected to increase to approximately $2.7 million or $0.12
per share, a 140% increase compared with the second quarter of 2004.
These projections are subject to substantial uncertainty that could cause our
future results to differ materially from the guidance we have provided.
3. Quantitative And Qualitative Disclosure About Market Risks
----------------------------------------------------------
We are exposed to a variety of risks, including changes in interest rates and
foreign currency fluctuations.
Interest Rate Risk
As of March 31, 2005, we had cash and cash equivalents and short-term
investments of $75.3 million. We invest our cash surplus in time deposits, cash
deposits, U.S. federal agency securities and corporate bonds with an average
credit rating of AA. These investments are not purchased for trading or other
speculative purposes. Due to the nature of these investments, we believe that we
do not have a material exposure to market risk.
Our exposure to market risks for changes in interest rates is limited since we
do not have any material indebtedness.
Foreign Currency Exchange Risk
We develop products in Israel and sell them in North America, Asia and several
European countries. As a result our financial results could be affected by
factors such as changes in foreign currency exchange rates or weak economic
conditions in foreign markets.
19
Our foreign currency exposure with respect to our sales is mitigated, and we
expect it will continue to be mitigated, through salaries, materials and support
operations, in which part of these costs are denominated in NIS.
Since the beginning of 2005, the NIS has appreciated approximately 1.2% against
the dollar. The appreciation has resulted in a deflation rate in Israel, which
was approximately 0.6% in the first three month of 2005 compared to an annual
inflation rate of 1.2% in 2004 and to an annual deflation rate of 1.9% in 2003.
Since most of our sales are quoted in dollars, and a portion of our expenses are
incurred in NIS, our results may be adversely affected by a change in the rate
of inflation in Israel or if such change in the rate of inflation is not offset,
or is offset on a lagging basis, by a corresponding devaluation of the NIS
against the dollar and other foreign currencies.
20
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
RADVISION LTD.
(Registrant)
/s/Arnold Taragin
-----------------
Arnold Taragin
Corporate Vice President
and General Counsel
Date: May 10, 2005