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 August 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 Three and Six Month Periods ended June 30, 2005.
ITEM 1
RADVISION LTD.
INDEX
Page
--------------------------------------------------------------------------------
I - Financial Information:
1. Condensed Consolidated Balance Sheets as of June 30, 2005 and
December 31, 2004..................................................2
Condensed Consolidated Statements of Income -
for the Three and Six Months ended June 30, 2005 and 2004..........3
Condensed Consolidated Statements of Cash Flows -
for the Six Months ended June 30, 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 JUNE 30, 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
- - - - - - - - - - - - - - -
RADVISON LTD. AND ITS SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
--------------------------------------------------------------------------------
U.S. dollars in thousands, except share data
June 30, December
2005 31, 2004
----------- -----------
Unaudited Audited
----------- -----------
ASSETS
CURRENT ASSETS:
Cash and cash equivalents $ 16,360 $ 20,206
Short-term bank deposits 17,529 11,799
Short-term marketable securities 52,446 39,612
Trade receivables (net of allowance
for doubtful accounts of
$1,276 at June 30, 2005 and December 31, 2004) 11,101 10,063
Other accounts receivable and prepaid expenses 2,969 3,900
Inventories 1,011 1,220
--------- ---------
Total current assets 101,416 86,800
----- --------- ---------
LONG-TERM ASSETS:
Long-term bank deposits 5,143 5,384
Long-term marketable securities 20,909 33,365
Severance pay fund 2,608 2,733
--------- ---------
Total long-term assets 28,660 41,482
----- --------- ---------
PROPERTY AND EQUIPMENT, NET 3,035 2,647
--------- ---------
GOODWILL 3,059 647
--------- ---------
OTHER INTANGIBLE ASSETS, NET 4,179 306
--------- ---------
Total assets $ 140,349 $ 131,882
----- ========= =========
LIABILITIES AND SHAREHOLDERS' EQUITY
CURRENT LIABILITIES:
Trade payables $ 1,925 $ 1,939
Deferred revenues 7,589 7,517
Accrued expenses and other accounts payable 10,804 11,949
--------- ---------
Total current liabilities 20,318 21,405
----- --------- ---------
ACCRUED SEVERANCE PAY 3,597 3,701
--------- ---------
Total liabilities 23,915 25,106
----- --------- ---------
SHAREHOLDERS' EQUITY:
Ordinary shares of NIS 0.1 par value:
Authorized - 25,000,000 shares at
June 30, 2005 and December 31, 2004;
Issued - 21,130,527 and 20,569,018
shares at June 30, 2005 and December 31,
2004, respectively; Outstanding - 21,130,527
and 20,569,018 shares at June 30, 2005 and
December 31, 2004, respectively 207 196
Additional paid-in capital 111,524 107,267
Retained earnings (accumulated deficit) 4,703 (687)
--------- ---------
Total shareholders' equity 116,434 106,776
----- --------- ---------
Total liabilities and shareholders' equity $ 140,349 $ 131,882
----- ========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
2
RADVISON LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
--------------------------------------------------------------------------------
U.S. dollars in thousands, except per share data
Three months ended Six months ended
June 30, June 30,
--------------------- ---------------------
2005 2004 2005 *)2004
------- ------- ------- --------
Unaudited
-------------------------------------------------
Revenues $17,473 $15,705 $33,753 $29,966
------- ------- ------- -------
Operating costs and expenses:
Cost of revenues 3,103 3,398 5,879 6,495
Research and development 5,054 4,282 9,709 8,062
Marketing and selling 6,006 6,127 11,763 11,964
General and administrative 1,152 1,210 2,311 2,450
------- ------- ------- -------
Total operating costs and expenses 15,315 15,017 29,662 28,971
----- ------- ------- ------- -------
Operating income 2,158 688 4,091 995
Financial income, net 768 432 1,329 844
------- ------- ------- -------
Income before taxes on income 2,926 1,120 5,420 1,839
Taxes on income 30 - 30 -
------- ------- ------- -------
Net income $ 2,896 $ 1,120 $ 5,390 $ 1,839
======= ======= ======= =======
Basic net earnings per Ordinary share $ 0.14 $ 0.06 $ 0.26 $ 0.09
======= ======= ======= =======
Diluted net earnings per Ordinary share $ 0.13 $ 0.05 $ 0.24 $ 0.09
======= ======= ======= =======
*) Restated (see Note 1c).
The accompanying notes are an integral part of the consolidated financial
statements.
3
RADVISON LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. dollars in thousands
Six months ended
June 30,
---------------------
2005 *)2004
--------- --------
Unaudited
---------------------
Cash flows from operating activities:
-------------------------------------
Net income $ 5,390 $ 1,839
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation & Amortization 1,234 1,114
Gain on sale of property and equipment (13) (3)
Accrued interest and amortization of premium on held-to-maturity
marketable securities and bank deposits 347 1,147
Increase in trade receivables, net (1,038) (491)
Decrease (increase) in other receivables and prepaid expenses 1,005 (581)
Decrease in inventories 209 2
Increase (decrease) in trade payables (14) 152
Increase (decrease) in deferred revenues 22 2,970
Increase (decrease) severance pay, net 21 (132)
Decrease in accrued expenses and other accounts payable (1,445) (823)
-------- --------
Net cash provided by operating activities 5,718 5,194
-------- --------
Cash flows from investing activities:
-------------------------------------
Proceeds from redemption of held-to-maturity marketable securities 8,756 21,430
Purchase of held-to-maturity marketable securities (9,470) (21,356)
Proceeds from withdrawal of bank deposits 9,251 17,044
Purchase of bank deposits (14,751) (19,149)
Purchase of property and equipment (1,084) (1,243)
Proceeds from sale of property and equipment 19 13
Purchase of FVC's assets, net (1) (7,001) -
-------- --------
Net cash used in investing activities (14,280) (3,261)
-------- --------
Cash flows from financing activities:
-------------------------------------
Issuance of treasury stock for cash upon exercise of options by
employees - 2,104
Issuance of Ordinary shares due to exercise of options by employees 4,716 -
-------- --------
Net cash provided by financing activities 4,716 2,104
-------- --------
Increase (decrease) in cash and cash equivalents (3,846) 4,037
Cash and cash equivalents at beginning of period 20,206 16,433
-------- --------
Cash and cash equivalents at end of period $ 16,360 $ 20,470
======== ========
*) Restated (see Note 1c).
The accompanying notes are an integral part of the consolidated financial
statements.
4
RADVISON LTD. AND ITS SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
--------------------------------------------------------------------------------
U.S. dollars in thousands
Six months ended
June 30,
---------------------
2005 *)2004
-------- ---------
Unaudited
----------------------
Supplemental disclosure of non-cash flow from investing
-------------------------------------------------------
and financing activities:
-------------------------
Issuance of Ordinary shares upon sale of treasury stock $ - $ (87)
======== ========
Loss on issuance of Ordinary shares upon sale of treasury stock $ - $ 837
======== ========
Receivables on account of shares $ 27 $ -
======== ========
*) Restated (see Note 1c).
(1) Supplement 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 network 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
--------------------------------------------------------------------------------
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 carried
out 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 from the date of
acquisition
6
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
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
--------------------------------------------------------------------------------
NOTE 1:- GENERAL (Cont.)
The impact of the aforementioned restatement with respect to the
financial statements as of June 30, 2004 and for the six month
period then ended is summarized below:
Statement of income data:
Six months ended
June 30, 2004 (unaudited)
-----------------------------------------
Previously As
reported Adjustment restated
------------ ------------- ---------
Restructuring income $ 1,061 $ (1,061) $ -
=========== ============ =========
Operating income $ 2,056 $ (1,061) $ 995
=========== ============ =========
Net income $ 2,900 $ (1,061) $ 1,839
=========== ============ =========
Basic net earnings per Ordinary share $ 0.15 $ (0.06) $ 0.09
=========== ============ =========
Basic and diluted net loss per Ordinary
share $ 0.13 $ (0.04) $ 0.09
=========== ============ =========
Cash flow data:
Six months ended
June 30, 2004 (unaudited)
-----------------------------------------
Previously As
reported Adjustment restated
----------- ------------ ----------
Net income $ 2,900 $ (1,061) $ 1,839
=========== =========== =========
Restructuring income $ 1,061 $ (1,061) $ -
=========== =========== =========
Net cash provided by operating
activities $ 5,194 $ - $ 5,194
=========== =========== =========
8
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 1:- GENERAL (Cont.)
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
--------------------------------------------------------------------------------
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 six months and
three months ended June 30, 2005 and 2004:
Three months ended Six months ended
June 30, June 30,
------------------------ ------------------------
2005 2004 2005 2004
----------- ---------- ----------- ----------
Unaudited
---------------------------------------------------
Risk free interest 3.81% 3.81% 3.83% 3.22%
Dividend yields 0% 0% 0% 0%
Volatility 0.392 0.432 0.391 0.435
Expected life 3 4 3 4
10
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 2:- SIGNIFICANT ACCOUNTING POLICIES (Cont.)
Pro forma information under SFAS No. 123:
Three months ended Six months ended
June 30, June 30,
------------------------ ------------------------
2005 2004 2005 *) 2004
----------- ---------- ----------- ----------
Unaudited
---------------------------------------------------
Net income as reported $ 2,896 $ 1,120 $ 5,390 $ 1,839
Deduct - stock-based
compensation expense
determined under fair
value method for all
awards 814 862 1,705 1,732
--------- --------- --------- ---------
Pro forma net income $ 2,082 $ 258 $ 3,685 $ 107
========= ========= ========= =========
Basic net earnings per
Ordinary share, as
reported $ 0.14 $ 0.06 $ 0.26 $ 0.09
========= ========= ========= =========
Pro forma basic net
earnings per Ordinary
share $ 0.10 $ 0.01 $ 0.18 $ 0.01
========= ========= ========= =========
Diluted net earnings per
Ordinary share as
reported $ 0.13 $ 0.05 $ 0.24 $ 0.09
========= ========= ========= =========
Pro forma diluted net
earnings per Ordinary
share $ 0.10 $ 0.01 $ 0.17 $ 0.01
========= ========= ========= =========
*) 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 six months ended June 30,
2005, are not necessarily indicative of the results of operations that
may be expected for the year ended December 31, 2005.
NOTE 4:- INVENTORIES
June 30, December 31,
2005 2004
---------- ------------
Unaudited Audited
---------- -------------
Raw materials $ 819 $ 1,091
Finished products 192 129
---------- -----------
$ 1,011 $ 1,220
========== ===========
11
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 5:- ACCRUED EXPENSES AND OTHER ACCOUNTS PAYABLE
June 30, December 31,
2005 2004
--------------- ---------------
Unaudited Audited
--------------- ---------------
Employees and employee accruals $ 2,657 $ 2,408
Accrued expenses 8,147 9,541
---------- -----------
$ 10,804 $ 11,949
========== ==========
NOTE 6:- SEGMENTS AND CUSTOMER INFORMATION
Three months ended Six months ended
June 30, June 30,
----------------------- ----------------------
2005 2004 2005 2004
---------- ---------- ----------- ---------
Unaudited
------------------------------------------------
Revenues:
NBU $ 11,891 $ 11,298 $ 22,616 $ 21,464
TBU 5,582 4,407 11,137 8,502
---------- ---------- --------- ---------
Total revenues $ 17,473 $ 15,705 $ 33,753 $ 29,966
----- ========== ========== ========= =========
Cost of revenues:
NBU $ 2,724 $ 3,077 $ 5,144 $ 5,904
TBU 379 321 735 591
---------- ---------- --------- ---------
Total cost of revenues $ 3,103 $ 3,398 $ 5,879 $ 6,495
----- ========== ========== ========= =========
12
RADVISION LTD. AND ITS SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
NOTE 7:- EARNINGS PER SHARE
The following table sets forth the calculation of basic and diluted
earnings per share:
Three months ended Six months ended
June 30, June 30,
------------------------ ------------------------
2005 2004 2005 *)2004
---------- ---------- ----------- ----------
Unaudited
---------------------------------------------------
Numerator:
Net income $ 2,896 $ 1,120 $ 5,390 $ 1,839
=========== =========== =========== ============
Number of shares:
Denominator:
Weighted average number of
Ordinary shares outstanding
during the year used to
compute basic net earnings
per share 20,994,973 19,710,729 20,854,595 19,597,463
Incremental shares attributable
to exercise of outstanding
options (assuming proceeds
would be used to purchase
treasury stock) 1,025,973 1,689,675 1,172,473 1,886,131
----------- ----------- ----------- -----------
Weighted average number of
Ordinary shares used to
compute diluted net
earnings per share 22,020,946 21,400,404 22,027,068 21,483,594
=========== =========== =========== ===========
Basic earnings per share $ 0.14 $ 0.06 $ 0.26 $ 0.09
=========== =========== =========== ===========
Diluted earnings per share $ 0.13 $ 0.05 $ 0.24 $ 0.09
=========== =========== =========== ===========
*) Restated (see Note 1c).
- - - - - - - - - - - -
13
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 the Condensed Consolidated Financial
Statements for the Three and Six Months ended June 30, 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 service
providers, both 3G wireless and wireline, with integrated solutions that enable
the
14
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.
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. 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 are 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 that support real time voice and
video communication with full interoperability with legacy ISDN/PSTN networks
and technologies.
15
Results of Operations
The following table presents, as a percentage of total revenues, condensed
statements of operations data for the periods indicated:
Three months Six months
ended June 30, ended June 30,
-------------- --------------
2005 2004 2005 *)2004
---- ---- ---- ------
Unaudited
-----------------------------------
Revenues 100% 100% 100% 100%
Operating costs and expenses:
Cost of revenues..................... 17.8 21.6 17.4 21.7
Research and development............. 28.9 27.3 28.8 26.9
Marketing and selling................ 34.4 39.0 34.9 39.9
General and administrative........... 6.6 7.7 6.8 8.2
Total operating expenses.............. 87.7 95.6 87.9 96.7
Operating Income ..................... 12.3 4.4 12.1 3.3
Financial income, net.................. 4.4 2.8 3.9 2.8
Net income............................. 16.7 7.2 16.0 6.1
*) Restated (see Note 1c to the financial statements).
Three Months Ended June 30, 2005 Compared with Three Months Ended June 30, 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
the Americas, Europe, and Asia Pacific.
Our revenues increased from $15.7 million for the three months ended June 30,
2004 to $17.5 million for the three months ended June 30, 2005. This increase
was due to a $1.2 million increase in sales of our technology products and a
$600,000 increase in sales of our networking products. The results reflect
increased sales in the Americas and Asia Pacific.
Revenues from networking products increased from $11.3 million for the three
months ended June 30, 2004 to $11.9 million for the three months ended June 30,
2005, an increase of $600,000 or 5.2%.
Revenues from technology products increased from $4.4 million for the three
months ended June 30, 2004 to $5.6 million for the three months ended June 30,
2005. Revenues from licenses increased from $1.8 million in the three months
ended June 30, 2004 to $2.7 million in the three months ended June 30, 2005.
Maintenance revenues increased from $1.1 million in the three months ended June
30, 2004 to $1.6 million in the three months ended June 30, 2005. Revenues
16
from royalties decreased from $900,000 in the three months ended June 30, 2004
to $850,000 in the three months ended June 30, 2005. Revenues from professional
services with respect to research and development decreased from $440,000 in the
three months ended June 30, 2004 to $210,000 in the three months ended June 30,
2005.
Revenues from sales to customers in the Americas increased from $7.6 million, or
48.6% of revenues, for the three months ended June 30, 2004 to $8.9 million, or
50.7% of revenues for the three months ended June 30, 2005, an increase of $1.3
million, or 17.1%. This increase in sales to customers in the Americas was
primarily attributable to increased sales to non-Cisco channels, revenues from
technology products and due to revenues from Click to Meet.
Revenues from sales to customers in Europe and the Middle East decreased from
$5.4 million for the three month period ended June 30, 2004, or 34.2% of
revenues, to $5 million, or 28.3% of revenues, for the three months ended June
30, 2005.
Revenues from sales to customers in the Asia Pacific region increased from $2.5
million, or 16.2% of revenues, for the three months ended June 30, 2004 to $3.7
million, or 21.1% of revenues, for the three months ended June 30, 2005, an
increase of 1.2 million or 48% due to strong growth and increased market demand
for our NBU products, particularly in Korea and Taiwan.
Cost of Revenues. Cost of revenues decreased from $3.4 million for the three
month period ended June 30, 2004 to $3.1 million for the three months ended June
30, 2005, a decrease of $300,000, or 8.7%. Gross profit as a percentage of
revenues increased from 78.4% for the three months ended June 30, 2004 to 82.2%
for the three months ended June 30, 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 $4.3
million for the three months ended June 30, 2004 to $5.1 million for the three
months ended June 30, 2005, an increase of $800,000 or 18.0%. This increase was
primarily attributable to an increase in the number of research and development
personnel, mainly due to the FVC acquisition.
Marketing and Selling. Marketing and selling expenses decreased from $6.1
million for the three months ended June 30, 2004 to $6.0 million for the three
months ended June 30, 2005, a decrease of $100,000 or 2.0%. Marketing and
selling expenses as a percentage of revenues decreased from 39.0% for the three
months ended June 30, 2004 to 34.4% for the three months ended June 30, 2005. 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 remained
constant at about $1.2 million for the three months ended June 30, 2004 and
2005. General and administrative expenses as a percentage of revenues decreased
from 7.7% for the three months ended June 30, 2004 to 6.6% for the three months
ended June 30, 2005.
Operating Income. Our operating income increased from $700,000 for the three
months ended June 30, 2004 to $2.2 million for the three months ended June 30,
2005.
17
Financial Income. We recorded financial income of $450,000 for the three months
ended June 30, 2004 compared to $800,000 for the three months ended June 30,
2005. This income was principally derived from the investment of the proceeds of
our March 2000 initial public offering, cash generated from operating activities
and exercise of options by employees. Our financial income increased principally
as a result of higher prevailing interest rates.
Six Months Ended June 30, 2005 Compared with Six Months Ended June 30, 2004
Revenues. Our revenues increased from $30.0 million for the six months ended
June 30, 2004 to $33.8 million for the six months ended June 30, 2005. This
increase was due to a $2.6 million increase in sales of our technology products
and a $1.2 million increase in sales of our networking products. The result
reflects better than expected sales with increased sales in the Americas,
Europe, the Middle East and Asia Pacific.
Revenues from networking products increased from $21.5 million for the six
months ended June 30, 2004 to $22.6 million for the six months ended June 30,
2005, an increase of $1.1 million or 5.1%.
Revenues from technology products increased from $8.5 million for the six months
ended June 30, 2004 to $11.1 million for the six months ended June 30, 2005.
Revenues from licenses increased from $3.6 million in the six months ended June
30, 2004 to $5.3 million in the six months ended June 30, 2005. Maintenance
revenues increased from $2.1 million in the six months ended June 30, 2004 to
$3.2 million in the six months ended June 30, 2005. Revenues from royalties
remain constant at about $1.8 million in the six months ended June 30, 2004 and
2005. Revenues from professional services with respect to research and
development decreased from $850,000 in the six months ended June 30, 2004 to
$750,000 in the six months ended June 30, 2005.
Revenues from sales to customers in the Americas increased from $15.4 million,
or 51.4% of revenues, for the six months ended June 30, 2004 to $17.0 million,
or 50.4% of revenues for the six months ended June 30, 2005, an increase of $1.6
million, or 10.4%. This increase in sales to customers in the Americas was
primarily attributable to increased sales to non-Cisco channels, revenues from
technology products and revenues from Click to Meet.
Revenues from sales to customers in Europe and the Middle East increased from
$9.3 million for the six month period ended June 30, 2004, or 31.1% of revenues,
to $9.6 million, or 28.4% of revenues, for the six months ended June 30, 2005.
Revenues from sales to customers in the Asia Pacific region increased from $4.9
million, or 16.2% of revenues, for the six months ended June 30, 2004 to $6.8
million, or 20.2% of revenues, for the six months ended June 30, 2005, an
increase of $1.9 million or 38.8% due to strong growth and increased market
demand for our NBU products, particularly in China, Korea and Taiwan.
Cost of Revenues. Cost of revenues decreased from $6.5 million for the six month
period ended June 30, 2004 to $5.9 million for the six months ended June 30,
2005, a decrease of $600,000, or 9.5%. Gross profit as a percentage of revenues
increased from 78.3% for the six months ended June 30, 2004 to 82.6% for the six
months ended June 30, 2005, due to the increased proportion
18
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 $8.1
million for the six months ended June 30, 2004 to $9.7 million for the six
months ended June 30, 2005, an increase of $1.6 million or 20.4%. This increase
was primarily attributable to an increase in the number of research and
development personnel.
Marketing and Selling. Marketing and selling expenses decreased from $12.0
million for the six months ended June 30, 2004 to $11.8 million for the six
month ended June 30, 2005. Marketing and selling expenses as a percentage of
revenues decreased from 39.9% for the six months ended June 30, 2004 to 34.9%
for the six months ended June 30, 2005. 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 decreased from
$2.4 million for the six months ended June 30, 2004 to $2.3 million for the six
months ended June 30, 2005, a decrease of $100,000 or 5.8%. General and
administrative expenses as a percentage of revenues were 8.2% for the six months
ended June 30, 2004 and 6.8% for the six months ended June 30, 2005.
Operating Income. Our operating income increased from $1.0 million for the six
months ended June 30, 2004 to $4.1 million for the six months ended June 30,
2005.
Financial Income. We recorded financial income of $850,000 for the six months
ended June 30, 2004 compared to $1.3 million for the six months ended June 30,
2005. This income was principally derived from the investment of the proceeds of
our March 2000 initial public offering and exercise of options by employees. Our
financial income increased principally as a result of higher prevailing interest
rates.
Liquidity and Capital Resources
We generated $5.7 million from operating activities for the six months ended
June 30, 2005 compared to $5.2 million in the same period in 2004. This amount
was primarily attributable to net income of $5.4 million, a $1.5 million
decrease in other receivables prepaid expenses accrued interest and inventories,
and depreciation and amortization expenses of $1.2 million. These increases in
cash generated by our operating activities were offset in part by a $1.4 million
decrease in other payables, deferred revenues and accrued expenses and $1.0
million increase in trade receivables.
Net cash used in investing activities was approximately $14.3 million for the
six months ended June 30, 2005. Of the cash used in investing activities during
the six months ended June 30, 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, $6.2 million, net was used for purchases of
bank deposits and marketable securities and $1.1 million was used for purchases
of property and equipment.
19
Our financing activities generated $4.7 million for the six months ended June
30, 2005 compared to $2.1 million in the same period in 2004. This amount is
attributable to proceeds received 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
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.
Third Quarter 2005 Guidance
Third quarter net sales are expected to be approximately $18.5 million, an
increase of approximately $1.8 million, or 10.8%, compared with the third
quarter of 2004.
o Net income is expected to increase to approximately $3.4 million or $0.15
per diluted share, a 243% increase compared with the third 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 June 30, 2005, we had cash and cash equivalents and short-term investments
of $112.4 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.
20
Foreign Currency Exchange Risk
We develop products in Israel and sell them in the Americas, 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.
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 devaluated approximately 6.1% against
the dollar. The inflation rate in Israel was approximately 0.5% in the first six
months 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.
21
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: August 18, 2005