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 2006
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, 2006.
ITEM 1
RADVISION LTD. AND ITS SUBSIDIARIES
INTERIM CONSOLIDATED FINANCIAL STATEMENTS
AS OF MARCH 31, 2006
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 - 12
- - - - - - - - - - - - - - -
RADVISION LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share and per share data
March 31, December 31,
2006 2005
------------ -------------
Unaudited Audited
------------ -------------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 17,137 $ 32,927
Short-term bank deposits 31,900 17,503
Short-term marketable securities 42,134 46,015
Trade receivables (net of allowance for doubtful
accounts of $ 734 at March 31, 2006 and December 31, 2005) 8,712 12,257
Other accounts receivable and prepaid expenses 3,505 4,318
Inventories 3,520 2,593
-------- --------
Total current assets 106,908 115,613
----- -------- --------
LONG-TERM INVESTMENTS AND RECEIVABLES:
Long-term bank deposits 16,343 11,395
Long-term marketable securities 28,145 17,111
Severance pay fund 2,958 2,931
-------- --------
Total long-term investments and receivables 47,446 31,437
----- -------- --------
PROPERTY AND EQUIPMENT, NET 3,551 3,190
-------- --------
GOODWILL 2,966 2,966
-------- --------
INTANGIBLE ASSETS, NET 3,269 3,542
-------- --------
Total assets $164,140 $156,748
----- ======== ========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 1,495 $ 1,783
Deferred revenues 8,777 8,533
Other accounts payable and accrued expenses 12,087 12,122
-------- --------
Total current liabilities 22,359 22,438
----- -------- --------
ACCRUED SEVERANCE PAY 3,903 3,643
-------- --------
Total liabilities 26,262 26,081
----- -------- --------
SHAREHOLDERS' EQUITY:
Ordinary shares of NIS 0.1 par value:
Authorized - 25,000,000 shares at March 31, 2006
and December 31, 2005; Issued and outstanding -
22,186,739 and 21,803,997 shares at March 31,
2006 and December 31, 2005, respectively 226 218
Additional paid-in capital 119,724 116,446
Deferred stock compensation 1,028 -
Retained earnings 16,900 14,003
-------- --------
Total shareholders' equity 137,878 130,667
----- -------- --------
Total liabilities and shareholders' equity $164,140 $156,748
----- ======== ========
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,
-------------------------------
2006 (*) 2005
---------- ----------
Unaudited
-------------------------------
Revenues:
Products $11,612 $ 9,498
License and royalties 3,977 3,504
Services 4,547 3,278
------- -------
Total revenues 20,136 16,280
----- ------- -------
Cost of revenues:
Products 2,482 2,258
Services 1,169 518
------- -------
Total cost of revenues 3,651 2,776
----- ------- -------
Gross profit 16,485 13,504
------- -------
Operating costs and expenses:
Research and development 5,745 4,655
Marketing and selling 7,399 5,757
General and administrative 1,461 1,159
------- -------
Total operating costs and expenses 14,605 11,571
----- ------- -------
Operating income 1,880 1,933
Financial income, net 1,271 561
------- -------
Income before taxes on income 3,151 2,494
Taxes on income, net 254 -
------- -------
Net income $ 2,897 $ 2,494
======= =======
Basic net earnings per Ordinary share $ 0.13 $ 0.12
======= =======
Diluted net earnings per Ordinary share $ 0.13 $ 0.11
======= =======
(*) See Note 2 to consolidated financial statements. Net income for the three
months ended March 31, 2006 included stock-based compensation expense under
SFAS 123(R) of $1,028 which consisted of stock-based compensation expense.
There was no stock-based compensation expense related to employee stock
options under SFAS 123(R) in the three months ended March 31, 2005 because
the Company did not adopt the recognition provisions of SFAS 123(R).
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,
--------------------------
2006 2005
---------- ----------
Unaudited
--------------------------
Cash flows from operating activities:
-------------------------------------
Net income $ 2,897 $ 2,494
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 687 453
Accrued interest and amortization of premium
on held-to-maturity marketable
securities and bank deposits, net (344) 20
Amortization of deferred stock compensation 1,028 -
Decrease (increase) in trade receivables, net 3,545 (283)
Decrease in other accounts receivable and prepaid expenses 951 699
Increase (decrease) in deferred revenues 244 (1,322)
Decrease (increase) in inventories (927) 79
Increase in deferred tax asset (54) -
Decrease in trade payables (288) (471)
Decrease in other accounts payable and accrued expenses (35) (26)
Increase in accrued severance pay, net 233 76
-------- --------
Net cash provided by operating activities 7,937 1,719
-------- --------
Cash flows from investing activities:
-------------------------------------
Proceeds from redemption of
held-to-maturity marketable securities 15,454 2,062
Purchase of held-to-maturity marketable securities (22,466) (3,474)
Proceeds from withdrawal of bank deposits 5,282 7,659
Purchase of bank deposits (24,424) (11,111)
Purchase of property and equipment (775) (604)
Purchase of FVC assets (1) - (7,001)
-------- --------
Net cash used in investing activities (26,929) (12,469)
-------- --------
Cash flows from financing activities:
-------------------------------------
Exercise of options by employees 3,032 2,833
Tax benefit related to exercise of stock options 170 -
-------- --------
Net cash provided by financing activities 3,202 2,833
-------- --------
Decrease in cash and cash equivalents (15,790) (7,917)
Cash and cash equivalents at the beginning of the period 32,927 20,206
-------- --------
Cash and cash equivalents at the end of the period $ 17,137 $ 12,289
======== ========
Supplemental disclosure of non-cash
-----------------------------------
flow from investing and financing activities:
---------------------------------------------
Receivables on account of shares $ 99 $ 162
======== ========
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 $ 265
Property and equipment 57
Technology 3,285
Distribution networks 1,075
Goodwill 2,319
------
$7,001
======
5
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share data
NOTE 1:- GENERAL
a. RADVISION Ltd. ("the Company") is an Israeli corporation which
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 ("IP").
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 communications.
The Company operates under two reportable segments: 1) the
Networking Business Unit (or "NBU"), which focuses on networking
solutions and products and is responsible for developing
networking products for IP-centric voice, video and data
conferencing services; and 2) the Technology Business Unit
("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 seven 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, RADVISION
FRANCE S.A.R.L in France, RADVISION B.V. in the Netherlands, all
of which are primarily engaged in marketing the Company's
products and technology, and RADVISION Communication Development
(Beijing) Co. Ltd. in China, which is primarily engaged in
research and development.
b. Acquisition of assets and the business of First Virtual
Communication Inc ("FVC"):
On March 15, 2005, following a bidding process held under the
supervision of a United States Bankruptcy Court, the Company
acquired substantially all of the assets of FVC and its
wholly-owned subsidiary, CUseeMe Networks, Inc. FVC creates
leading software products that enable interactive voice, video
and data collaboration over IP-based networks. The cash purchase
price for the acquisition, including transaction costs, was
$7,496.
The acquisition was accounted for under the purchase method of
accounting, in accordance with SFAS No. 141, and accordingly, the
purchase price was allocated to the assets acquired and the
liabilities assumed based on their estimated fair value at the
date of acquisition and the results of FVC's operations were
included in the consolidated financial statements commencing from
the date of acquisition. The excess of the purchase price over
the estimated fair value of the net assets acquired was recorded
as goodwill. The purchase price of the acquisition was determined
and paid based on significant consideration for synergistic and
strategic benefits.
6
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share data
NOTE 1:- GENERAL (Cont.)
Based upon a valuation of tangible and intangible assets
acquired, the Company has allocated the total cost of the
acquisition to FVC's net assets as follows:
Tangible assets acquired (including cash and
cash equivalents) $ 1,167
Liabilities assumed (350)
Intangible assets:
Technology 3,285
Distribution networks 1,075
Goodwill 2,319
------
Total consideration $7,496
======
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES
The significant accounting policies applied in the annual financial
statements of the Company as of December 31, 2005 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, 2005.
c. Accounting for stock-based compensation:
On January 1, 2006, the Company adopted Statement of Financial
Accounting Standards No. 123 (revised 2004), "Share-Based
Payment" ("SFAS 123(R)"), which requires the measurement and
recognition of compensation expense for all share-based payment
awards made to employees and directors, including employee stock
options and employee stock purchases related to employee stock
purchase plans ("employee stock purchases") based on estimated
fair values. SFAS 123(R) supersedes the Company's previous
accounting under Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" ("APB 25") for periods
beginning January 1, 2006.
The Company adopted SFAS 123(R) using the modified prospective
transition method. In accordance with the modified prospective
transition method, the Company's Consolidated Financial
Statements for prior periods have not been restated to reflect,
and do not include, the impact of SFAS 123(R). Stock-based
compensation expense recognized under SFAS 123(R) for the three
months ended March 31, 2006 was $1,028 which consisted of
stock-based compensation expense related to employee stock
options (see d. below).
7
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
SFAS 123(R) requires companies to estimate the fair value of
share-based payment awards on the date of grant using an
option-pricing model. The value of the portion of the award that
is ultimately expected to vest is recognized as expense over the
requisite service periods in the Company's Consolidated Statement
of Operations. Prior to the adoption of SFAS 123(R), the Company
accounted for stock-based awards to employees and directors using
the intrinsic value method in accordance with APB 25 as allowed
under Statement of Financial Accounting Standards No. 123,
"Accounting for Stock-Based Compensation" ("SFAS 123"). There was
no stock-based compensation expense related to employee stock
options and employee stock purchases recognized during the three
months ended March 31, 2005.
In conjunction with the adoption of SFAS 123(R), the Company
estimates option values using the Black-Scholes method of
attributing the value of stock-based compensation to expense
using the straight-line method. The option-pricing model requires
a number of assumptions, of which the most significant are,
expected stock price volatility, the expected pre-vesting
forfeiture rate and the expected option term (the amount of time
from the grant date until the options are exercised or expire).
Expected volatility was calculated based upon actual historical
stock price movements over the most recent periods ending March
31, 2006 equal to the expected option term. Expected pre-vesting
forfeitures were estimated based on actual historical pre-vesting
forfeitures over the most recent periods ending March 31, 2006
for the expected option term. The expected option term was
calculated using the "simplified" method permitted by SAB 107.
The fair value 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,
2006 and 2005:
Three months ended
March 31,
----------------------
2006 2005
------- --------
Unaudited
----------------------
Risk free interest 4.39% 4.01%
Dividend yields 0% 0%
Volatility 0.560 0.367
Expected life 6.16 4
Pro-Forma Stock Compensation Expense for the Quarterly Period
Ended March 31, 2005
For the quarterly period ended March 31, 2005, the Company
applied the intrinsic value method of accounting for stock
options as prescribed by APB 25, whereby compensation expense is
equal to the excess, if any, of the quoted market price of the
stock over the exercise price at the grant date of the award.
Since all options granted during the quarterly period ended March
31, 2005 had an exercise price equal to the closing market price
of the underlying common stock on the grant date, no compensation
expense was recognized. If compensation expense had been
recognized based on the estimated fair value of each option
granted in accordance with the provisions of SFAS 123, as amended
by Statement of Financial Accounting Standard 148, net income and
net income per share would have been reduced to the following
pro-forma amounts:
8
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Three months
ended March 31,
2005
---------------
Unaudited
---------------
Net income as reported $ 2,494
Deduct: stock-based compensation expense
determined under fair value
method for all awards 891
-------
Pro forma net income $ 1,603
=======
Basic earnings per share, as reported $ 0.12
=======
Diluted earnings per share, as reported $ 0.11
=======
Pro forma basic net income per share $ 0.08
=======
Pro forma diluted net income per share $ 0.07
=======
Pro-forma compensation expense under SFAS 123, among other
computational differences, does not consider potential
pre-vesting forfeitures. Because of these differences, the
pro-forma stock compensation expense presented above for the
prior quarterly period ended March 31, 2005 under SFAS 123 and
the stock compensation expense recognized during the current
quarterly period ended March 31, 2006 under SFAS 123(R) are not
directly comparable. In accordance with the modified prospective
transition method of SFAS 123(R), the prior comparative quarterly
results have not been restated.
d. Reconciliation of GAAP to Non-GAAP Operating Results:
To supplement our consolidated financial statements presented in
accordance with generally accepted accounting principles
("GAAP"), we use non-GAAP measures of operating results, net
income and earnings per share, which are adjusted from results
based on GAAP to exclude the expenses we recorded for stock
compensation in accordance with SFAS 123(R). These non-GAAP
financial measures are provided to enhance overall understanding
of our current financial performance and our prospects for the
future. Specifically, we believe the non-GAAP results provide
useful information to both management, and investors as these
non-GAAP results exclude the expenses we recorded for stock
compensation in accordance with SFAS 123(R)that we believe are
not indicative of our core operating results. Further, these
non-GAAP results are one of the primary indicators management
uses for assessing our performance, allocating resources and
planning and forecasting future periods. These measures should be
considered in addition to results prepared in accordance with
GAAP, but should not be considered a substitute for or superior
to GAAP results. These non-GAAP measures may be different than
the non-GAAP measures used by other companies.
9
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share data
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
The following table reconciles the GAAP to non-GAAP
Operating Results:
Three months ended March 31,
-----------------------------------------------------------------
2006 2005
------------------------------------------------ ----------------
(Unaudited)
-----------------------------------------------------------------
non-GAAP
adjustment
GAAP results share-based non-GAAP GAAP results
(as reported) compensation results (as reported)
-------------- --------------- -------------- --------------
Revenues $ 20,136 $ - $ 20,136 $ 16,280
Cost of revenues 3,651 69 3,582 2,776
-------------- --------------- -------------- --------------
Gross profit 16,485 69 16,554 13,504
-------------- --------------- -------------- --------------
Operating costs and expenses:
Research and development 5,745 299 5,446 4,655
Marketing and selling 7,399 439 6,960 5,757
General and administrative 1,461 221 1,240 1,159
-------------- --------------- -------------- --------------
Total operating costs and expenses 14,605 959 13,646 11,571
----- -------------- --------------- -------------- --------------
Operating income 1,880 1,028 2,908 1,933
Financial income, net 1,271 - 1,271 561
-------------- --------------- -------------- --------------
Income before taxes on income 3,151 1,028 4,179 2,494
Taxes on income 254 - 254 -
-------------- --------------- -------------- --------------
Net income $ 2,897 $ 1,028 $ 3,925 $ 2,494
============== =============== ============== ==============
Basic net earnings per Ordinary share $ 0.13 $ 0.05 $ 0.18 $ 0.12
============== =============== ============== ==============
Weighted average number of shares outstanding
during the period - basic 21,995,368 21,995,368 20,714,218
============== ============== ==============
Diluted net earnings per Ordinary share $ 0.13 $ 0.04 $ 0.17 $ 0.11
============== =============== ============== ==============
Weighted average number of shares outstanding
during the period - diluted 22,460,281 22,460,281 22,033,189
============== ============== ==============
10
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share data
NOTE 3:- UNAUDITED INTERIM FINANCIAL STATEMENTS
The accompanying unaudited interim consolidated financial statements
have been prepared in accordance with GAAP for interim financial
information. Accordingly, they do not include all the information and
footnotes required by GAAP 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, 2006,
are not necessarily indicative of the results of operations that may
be expected for the year ended December 31, 2006.
NOTE 4:- INVENTORIES
March 31, December 31,
2006 2005
------------ --------------
Unaudited Audited
------------ --------------
Raw materials $ 3,023 $ 2,451
Finished products 497 142
------------ --------------
$ 3,520 $ 2,593
============ ==============
NOTE 5:- OTHER ACCOUNTS PAYABLE AND ACCRUED EXPENSES
March 31, December 31,
2006 2005
------------ -------------
Unaudited Audited
------------ -------------
Payroll and related accruals $ 2,944 $ 3,133
Accrued expenses and other liabilities 9,143 8,989
------------ -------------
$ 12,087 $ 12,122
============ =============
11
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share data
NOTE 6:- SEGMENTS REPORTING
Three months ended
March 31,
---------------------------
2006 2005
--------- --------
Unaudited
---------------------------
Revenues:
NBU $ 14,127 $ 10,725
TBU 6,009 5,555
--------- --------
Total revenues $ 20,136 $ 16,280
----- ========= ========
Cost of revenues:
NBU $ 3,344 $ 2,420
TBU 307 356
--------- --------
Total cost of revenues $ 3,651 $ 2,776
----- ========= ========
NOTE 7:- EARNINGS PER SHARE
The following table sets forth the calculation of basic and diluted
earnings per share:
Three months ended
March 31,
------------------------
2006 2005
---------- ----------
Unaudited
------------------------
Numerator:
Net income $ 2,897 $ 2,494
========== ==========
Number of shares:
Denominator:
Denominator for basic earnings per
share - weighted average
of ordinary shares 21,995,368 20,714,218
Effect of dilutive securities:
Employee stock options and unvested
restricted shares 464,913 1,318,971
---------- ----------
22,460,281 22,033,189
========== ==========
Basic net earnings per ordinary share $ 0.13 $ 0.12
========== ==========
Diluted net earnings per ordinary share $ 0.13 $ 0.11
========== ==========
- - - - - - - - - - - -
12
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, 2006 above and the audited
financial statements and notes thereto and Item 5. Operating and Financial
Review and Prospects contained in our 2005 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 significant uncertainties and other factors affecting
forward-looking statements in the section entitled "Risk Factors" and elsewhere
in our 2005 Annual Report on Form 20-F.
Background
We design, develop and supply products and technology that enable
real-time voice, video and data communication over packet networks, including
the Internet and other other Internet Protocol, or IP, networks. We were
incorporated in January 1992, commenced operations in October 1992 and commenced
sales of our products in the fourth quarter of 1994. Since our initial public
offering on March 14, 2000, our ordinary shares have been listed on the NASDAQ
National Market (symbol: RVSN) and our ordinary shares have also traded on the
Tel Aviv Stock Exchange since October 20, 2002.
We have seven wholly-owned subsidiaries: RADVISION Inc. in the United
States, RADVISION (HK) Ltd. in Hong Kong, RADVISION (UK) Ltd. in the United
Kingdom, RADVISION FRANCE S.A.R.L. in France, RADVISION Japan KK in Japan,
RADVISION B.V. in the Netherlands, all of which are primarily engaged in the
sale and marketing of our products and technology, and RADVISION Communication
Development (Beijing) Co. Ltd. in China., which is primarily engaged in research
and development.
Our revenues are generated in U.S. dollars or are linked to the dollar
and a majority of our expenses are incurred in U.S. dollars. Consequently, we
use the dollar as our functional currency. Transactions and balances in other
currencies are re-measured into dollars according to the principles in Financial
Accounting Standards Board Statement No. 52. Gains and losses
13
arising from re-measurement are reflected in the statements of operations as
financial income or expenses as appropriate.
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 IP and 3G (Third Generation)
networks. 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.
We have approximately 450 customers worldwide including Aethra,
Alcatel, Cisco, Lucent, Microsoft, Nortel, NTT/DoCoMo, Orange Telecom, Philips,
Panasonic, Qualcomm, Samsung, Shanghai Bell, Siemens, Sony and Telecom Italy.
Since 2001, we have conducted our business through 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, H.323 and 3G-based networks, supporting most end
points in the industry today. These products are sold to the enterprise market,
U.S. federal government and service provider market.
On March 15, 2005, 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. We acquired FVC's
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)
products provide integrated and scalable desktop conferencing solutions. Click
to Meet(TM) 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(TM) products are widely used worldwide and
offer a robust set of functionalities. The purchase price was approximately $7.0
million. We also hired approximately thirty-one former employees of FVC that
were based in Nashua, New Hampshire, and who were involved in marketing, selling
and supporting the acquired FVC products. In the year ended December 31, 2005,
we recognized revenues of $5.1 million from Click to Meet(TM) products as part
of our NBU segment.
Our Technology Business Unit, or TBU, is a one-stop-shop for developer
platforms that equipment vendors use to build voice and video over IP and 3G
products and solutions. 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 solutions include developer toolkits for SIP, MEGACO/H.248, MGCP, H.323,
and 3G-
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324M, as well as our ProLab(TM) Test Management Suite and IP Phone Toolkit. Our
toolkits have been used by developers in a wide range of environments from
chipsets to simple user devices such as IP phones, and from integrated video
systems through carrier class network devices such as gateways, switches, soft
switches and 3G multimedia gateways.
Both business units also provide professional services to customers,
assisting them to integrate our technology into their products and to customize
our products to their specific needs.
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 and 3G networks. We provide solutions at every level - protocol
developer toolkits, professional services, network infrastructure, as well as
integrated solutions that complement the communication solutions of other
vendors such as those from Alcatel, Cisco, Microsoft and Sony. 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.
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,
---------------
2006 2005
---- ----
% %
Revenues....................................... 100.0 100.0
Cost of revenues............................... 18.1 17.1
Gross profit................................ 81.9 82.9
Operating expenses
Research and development.................... 28.5 28.6
Marketing and selling....................... 36.7 35.4
General and administrative.................. 7.3 7.1
Total operating expenses....................... 72.5 71.1
Operating income............................... 9.4 11.8
Financial income............................... 6.3 3.4
Taxes on income................................ 1.3 -
Net income..................................... 14.4 15.2
Three Months Ended March 31, 2006 Compared with
Three Months Ended March 31, 2005
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
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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 the Americas, Europe, the Middle East and the Asia-Pacific region.
Our revenues increased from $16.3 million for the three months ended
March 31, 2005 to $20.1 million for the three months ended March 31, 2006, an
increase of $3.8 million, or 23.3%. This increase was due to a $3.4 million
increase in sales of our networking products and a $400,000 increase in sales of
our technology products.
Revenues from networking products increased from $10.7 million for the
three months ended March 31, 2005 to $14.1 million for the three months ended
March 31, 2006, an increase of $3.4 million, or 31.7%. The increase in revenues
from networking products was primarily attributable to $2.3 million in revenues
from the sales of the Click to Meet products that we acquired from FVC in March
2005 and an increase of $1.8 million in revenues from our 3G products.
Revenues from technology products increased from $5.6 million for the
three months ended March 31, 2005 to $6.0 million for the three months ended
March 31, 2006, an increase of $400,000, or 7.1%. The increase in revenues from
technology products was attributable to a $300,000 increase in maintenance
revenues and a $600,000 increase in revenues from royalties. This was offset in
part by a $200,000 decrease in software license fees and a $300,000 decrease in
professional services with respect to customization services.
Revenues from sales to customers in the Americas increased from $8.5
million, or 52.1% of revenues, for the three months ended March 31, 2005 to $9.8
million, or 48.8% of revenues, for the three months ended March 31, 2006, an
increase of $1.3 million, or 15.3%. This increase in sales to customers in the
Americas was primarily attributable to increased sales to Cisco and from sales
of the Click to Meet products.
Revenues from sales to customers in Europe and the Middle East
increased from $4.7 million for the three month period ended March 31, 2005, or
28.6% of revenues, to $6.5 million, or 32.3% of revenues, for the three months
ended March 31, 2006, an increase of $1.8 million, or 38.3%. This increase in
sales to customers in Europe and the Middle East was primarily attributable to
an increase in sales of our 3G and Click to Meet products.
Revenues from sales to customers in the Asia-Pacific region increased
from $3.1 million, or 19.3% of revenues, for the three months ended March 31,
2005 to $3.8 million, or 18.9% of revenues, for the three months ended March 31,
2006, an increase of $700,000, or 22.6%. This increase in sales to customers in
the Asia-Pacific region was primarily attributable to an increase in sales of
our 3G and TBU products.
Cost of Revenues. Our cost of revenues consists of component and
material costs, direct labor costs, subcontractor fees, overhead related to
manufacturing and depreciation of manufacturing equipment. Our gross margin is
affected by the selling prices for our products, as well as the proportion of
our revenues generated from the sale of our technology products as
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compared to our networking products and the proportion of our revenues generated
from the sale of our software solutions as compared to our hardware products in
our NBU segment.
Cost of revenues increased from $2.8 million for the three month
period ended March 31, 2005 to $3.7 million for the three months ended March 31,
2006, an increase of $0.9 million, or 32.1%. Gross profit as a percentage of
revenues decreased from 82.9% for the three months ended March 31, 2005 to 81.9%
for the three months ended March 31, 2006, due to the increased proportion of
NBU product sales that have lower profit margins. In addition, cost of revenues
for the three months ended March 31, 2006 included $100,000 of stock-based
compensation recorded under Financial Accounting Standards Board Statement No.
123(revised 2004), "Share-Based Payment," or FASB No. 123(R).
Research and Development. Our research and development expenses
consist primarily of compensation and related costs for research and development
personnel, expenses for testing facilities and depreciation of equipment.
Research and development expenses increased from $4.7 million for the three
months ended March 31, 2005 to $5.7 million for the three months ended March 31,
2006, an increase of $1.0 million or 21.3%. This increase was primarily
attributable to an increase in the number of research and development personnel,
mainly due to the acquisition of the Click to Meet products. In addition,
research and development expenses for the three months ended March 31, 2006
included $300,000 of stock-based compensation recorded under FASB No. 123(R).
Marketing and Selling. Our marketing and selling expenses consist
primarily of compensation and related costs for sales personnel, marketing
personnel, sales commissions, marketing programs, public relations, promotional
materials, travel expenses and trade show exhibit expenses. Marketing and
selling expenses increased from $5.8 million for the three months ended March
31, 2005 to $7.4 million for the three months ended March 31, 2006. Marketing
and selling expenses as a percentage of revenues increased from 35.4% for the
three months ended March 31, 2005 to 36.7% for the three months ended March 31,
2006. This increase was primarily attributable to an increase in the number of
marketing and sales personnel. In addition, marketing and selling expenses for
the three months ended March 31, 2006 included $400,000 of stock-based
compensation recorded under FASB No. 123(R).
General and Administrative. Our general and administrative expenses
consist primarily of salaries and related expenses for executive, accounting and
human resources personnel, professional fees, provisions for doubtful accounts
and other general corporate expenses. General and administrative expenses
increased from $1.2 million for the three months ended March 31, 2005 to $1.5
million for the three months ended March 31, 2006. General and administrative
expenses as a percentage of revenues were 7.1% for the three months ended March
31, 2005 and 7.3% for the three months ended March 31, 2006. This increase was
primarily attributable $200,000 of stock-based compensation recorded under FASB
No. 123(R).
Operating Income. We recorded operating income of $1.9 million for
both the three months ended March 31, 2005 and for the three months ended March
31, 2006.
Financial Income, Net. Our financial income consists primarily of
interest earned on our bank deposits and other liquid investments, and gains and
losses from the re-measurement of
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monetary balance sheet items denominated in non-dollar currencies into dollars.
We recorded financial income, net of $561,000 for the three months ended March
31, 2005 compared to $1.3 million for the three months ended March 31, 2006.
Financial income for both periods was principally derived from the investment of
the proceeds of our March 2000 initial public offering and private placement,
the exercise of options by employees and cash generated from operating
activities. The increase in our financial income in the three months ended March
31, 2006 was primarily as a result of higher prevailing interest rates and an
increase in cash generated from operating activities.
Liquidity and Capital Resources
We generated $7.9 million from operating activities for the three
months ended March 31, 2006 compared to $1.7 million in the same period in 2005.
Cash provided by our operating activities for three months ended March 31, 2006
was primarily attributable to net income of $2.9 million, a $3.5 million
decrease in trade receivables, a $1.0 million decrease in other receivables and
prepaid expenses, $1.0 million of amortization of deferred stock compensation
and depreciation and amortization expenses of $700,000. The increase in cash
provided by our operating activities was offset in part by a $1.2 million
increase in inventories and decreased trade payables.
Net cash used in investing activities was approximately $26.9 million
for the three months ended March 31, 2006. Of such cash used in investing
activities, $800,000 was used for purchases of property and equipment.
Our financing activities generated $3.2 million for the three months
ended March 31, 2006 compared to $2.8 million in the same period in 2005. Cash
provided by financing activities in both periods was primarily 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 2006
as we position our company to realize 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.
Second Quarter 2006 Guidance
o Net sales for the second quarter of 2006 are expected to be
approximately $21.5 million, an increase of approximately $4.0
million, or 22.9%, compared with the second quarter of 2005.
o Net income for the second quarter of 2006 is expected to increase to
approximately 3.1$ million, or $0.14 per share, a 7.0% increase
compared with the second quarter of 2005.
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These projections are subject to substantial uncertainty that could
cause our future results to differ materially from the guidance we have
provided.
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.
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, 2006, we had cash and cash equivalents and short-term
investments of $91.2 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 the Americas, the
Asia-Pacific region, Europe and the Middle East. 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.
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 New Israeli
Shekels, or NIS.
Since the beginning of 2006, the NIS has devaluated approximately 1.3%
against the dollar. The devaluation has resulted in an inflation rate in Israel,
which was approximately 0.6% in the first three months of 2006 compared to an
annual inflation rate of 2.4% in 2005 and of 1.2% in 2004.
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.
Risk Factors
There have been no material changes in our risk factors since we last
reported under Part I, Item 3D., of our Annual Report on Form 20-F for the year
ended December 31, 2005.
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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)
By: /s/Arnold Taragin
-----------------
Arnold Taragin
Corporate Vice President and General Counsel
Date: May 15, 2006