================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10 - Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the Quarter Ended
June 30, 1999
Or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission File Number 0-28252
BroadVision, Inc.
-----------------
(Exact name of registrant as specified in its charter)
Delaware 94-3184303
-------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
585 Broadway, Redwood City, California 94063
-------------------------------------- -----
(Address of principal executive offices) (Zip code)
(650) 261-5100
---------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90
YES X NO
--------- ---------
As of July 31, 1999, there were 25,561,000 shares of the Registrant's
Common Stock issued and outstanding.
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<PAGE>
<TABLE>
BROADVISION, INC. AND SUBSIDIARIES
FORM 10-Q
QUARTER ENDED JUNE 30, 1999
TABLE OF CONTENTS
<CAPTION>
Page No.
--------
<S> <C> <C>
PART I FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Balance Sheets -
June 30, 1999 and December 31, 1998 3
Consolidated Statements of Operations and Comprehensive Income-
Three and six months ended June 30, 1999 and 1998 4
Consolidated Statements of Cash Flows -
Six months ended June 30, 1999 and 1998 5
Notes to Consolidated Financial Statements 6
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
Item 3. Quantitative and Qualitative Disclosures about Market Risk 18
PART II OTHER INFORMATION
Item 1. Legal Proceedings 18
Item 2. Changes in Securities and Use of Proceeds 18
Item 3. Defaults upon Senior Securities 18
Item 4. Submission of Matters to a Vote of Security Holders 18
Item 5. Other Information 19
Item 6. Exhibits and Reports on Form 8-K 19
SIGNATURES 19
</TABLE>
2
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
BROADVISION, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(In thousands, except per share data)
<CAPTION>
June 30, December 31,
1999 1998
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents $ 53,735 $ 61,878
Short-term investments 18,823 --
Accounts receivable, less allowance for doubtful accounts and
returns of $1,018 and $788, for 1999 and 1998, respectively 21,479 15,361
Prepaids and other 3,820 3,589
--------- ---------
Total current assets 97,857 80,828
Property and equipment, net 9,978 8,034
Long-term investments 28,286 11,546
Other 1,077 1,154
--------- ---------
Total assets $ 137,198 $ 101,562
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Accounts payable $ 3,336 $ 2,243
Accrued expenses 7,312 4,933
Unearned revenue 3,298 1,918
Deferred maintenance 10,165 6,157
Current portion of capital lease obligations 547 709
Current portion of long-term debt 548 548
--------- ---------
Total current liabilities 25,206 16,508
Long-term debt 2,600 2,924
Deferred income taxes 529 --
Other 51 321
--------- ---------
Total liabilities 28,386 19,753
Commitments
Stockholders' equity:
Convertible preferred stock, $0.0001 par value; 5,000 shares
authorized; none issued and outstanding -- --
Common stock, $0.0001 par value; 50,000 shares authorized;
25,438 and 24,796 shares issued and outstanding for 1999 and
1998, respectively 3 2
Additional paid-in capital 109,306 98,767
Deferred compensation (389) (555)
Accumulated other comprehensive income, net of tax 13,243 3,198
Accumulated deficit (13,351) (19,603)
--------- ---------
Total stockholders' equity 108,812 81,809
--------- ---------
Total liabilities and stockholders' equity $ 137,198 $ 101,562
========= =========
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
3
<PAGE>
<TABLE>
BROADVISION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME
(In thousands, except per share amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
------------------- --------------------
1999 1998 1999 1998
------------------- --------------------
<S> <C> <C> <C> <C>
Revenues:
Software licenses $ 15,484 $ 8,018 $ 28,267 $ 15,297
Services 7,992 3,367 13,673 6,167
-------- -------- -------- --------
Total Revenues 23,476 11,385 41,940 21,464
Cost of revenues:
Cost of software licenses 1,037 213 1,784 400
Cost of services 4,624 2,092 7,945 3,711
-------- -------- -------- --------
Total cost of revenues 5,661 2,305 9,729 4,111
-------- -------- -------- --------
Gross profit 17,815 9,080 32,211 17,353
Operating expenses:
Research and development 3,268 2,049 6,169 4,083
Sales and marketing 10,019 6,243 17,684 12,104
General and administrative 1,611 760 2,882 1,585
-------- -------- -------- --------
Total operating expenses 14,898 9,052 26,735 17,772
-------- -------- -------- --------
Operating income (loss) 2,917 28 5,476 (419)
Other income, net 593 665 1,110 613
-------- -------- -------- --------
Income before provision
for income taxes 3,510 693 6,586 194
Provision for income taxes 195 -- 334 --
-------- -------- -------- --------
Net income $ 3,315 $ 693 $ 6,252 $ 194
======== ======== ======== ========
Basic earnings per share $ 0.13 $ 0.03 $ 0.25 $ 0.01
======== ======== ======== ========
Diluted earnings per share $ 0.12 $ 0.03 $ 0.22 $ 0.01
======== ======== ======== ========
Shares used in computing:
Basic earnings per share 25,123 24,011 24,886 22,244
======== ======== ======== ========
Diluted earnings per share 28,154 26,771 27,946 24,819
======== ======== ======== ========
Comprehensive income:
Net income $ 3,315 $ 693 $ 6,252 $ 194
Other comprehensive income, net of tax:
Unrealized long-term investment gains 2,816 -- 10,044 --
-------- -------- -------- --------
Total Comprehensive income $ 6,131 $ 693 $ 16,296 $ 194
======== ======== ======== ========
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
4
<PAGE>
<TABLE>
BROADVISION, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
<CAPTION>
Six Months Ended June 30,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Cash flows from operating activities:
Net income $ 6,252 $ 194
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 1,921 1,316
Amortization of deferred compensation 166 180
Allowance for doubtful accounts and returns 230 283
Amortization of prepaid royalties 167 --
Revenue recognized on noncash transaction -- (1,031)
Changes in operating assets and liabilities:
Accounts receivable (6,348) (541)
Prepaids and other (246) (514)
Accounts payable and accrued expenses 3,472 348
Unearned revenue and deferred maintenance 5,388 419
-------- --------
Net cash provided by operating activities 11,002 654
Cash flows from investing activities:
Additions to property and equipment (3,865) (2,074)
Purchase of long-term investment -- (1,500)
Other assets (90) (139)
Purchase of short-term investments (18,823) --
Maturity of short-term investments -- 796
-------- --------
Net cash used for investing activities (22,778) (2,917)
Cash flows from financing activities:
Net change in restricted cash -- 1,400
Issuance of common stock 4,373 55,455
Debt (repayments) proceeds (324) 1,095
Capital lease payments (416) (425)
-------- --------
Net cash provided by financing activities 3,633 57,525
Net (decrease) increase in cash and cash equivalents (8,143) 55,262
Cash and cash equivalents at beginning of period 61,878 8,277
-------- --------
Cash and cash equivalents at end of period $ 53,735 $ 63,539
======== ========
Supplemental disclosures of cash flow information:
Cash paid for interest $ 177 $ 172
======== ========
Cash paid for income taxes $ 431 $ 84
======== ========
Non-cash investing and financing activities:
Unrealized gain on long-term investments, net of tax of $6,695 $ 10,045 $ --
======== ========
Contributed capital - Income tax benefits from stock option exercises $ 6,167 $ --
======== ========
Other current and noncurrent assets acquired in noncash revenue transaction $ -- $ 1,250
======== ========
Unearned revenue and deferred maintenance - noncash revenue transaction $ -- $ 219
======== ========
Acquisition of equipment under capital lease $ -- $ 215
======== ========
Deferred compensation forfeited due to voluntary terminations $ -- $ 693
======== ========
<FN>
See Accompanying Notes to Consolidated Financial Statements
</FN>
</TABLE>
5
<PAGE>
BROADVISION, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1. Organization and Summary of Significant Accounting Policies
Nature of Business - BroadVision, Inc. ("BroadVision" or the "Company")
develops, markets and supports scalable fully integrated application software
solutions exclusively designed to manage one-to-one relationships for the
extended enterprise.
The Company provides total end-to-end solutions that allow a business
to capitalize on the Internet as a unique platform and take full advantage of
emerging technologies. By utilizing BroadVision products and technology, a
business is empowered to enhance commerce, provide critical self-service
functions, and deliver targeted personalized information to customers,
suppliers, distributors, employees, or any other constituent of the extended
enterprise on a real time interactive basis.
Basis of Presentation - The accompanying consolidated financial statements
include the accounts of BroadVision and its wholly owned subsidiaries. They have
been prepared in accordance with the established guidelines for interim
financial information as provided by the instructions to Form 10-Q and Article
10 of Regulation S-X. All significant intercompany transactions have been
eliminated in consolidation.
The financial results and related information as of June 30, 1999 and
for the three and six months ended June 30, 1999 and 1998 are unaudited. The
balance sheet at December 31, 1998, has been derived from the audited
consolidated financial statements at that date but does not necessarily reflect
all of the informational disclosures previously reported in accordance with
Generally Accepted Accounting Principles. In the Company's opinion, the
consolidated financial statements presented herein include all necessary
adjustments, consisting of normal recurring adjustments, to fairly state the
Company's financial position, results of operations, and cash flows for the
periods indicated.
The accompanying consolidated financial statements should be read in
conjunction with the consolidated financial statements and notes thereto
included with the Company's Form 10-K and other documents that have been filed
with the Securities and Exchange Commission. The results of the Company's
operations for the interim periods presented are not necessarily indicative of
operating results for the full fiscal year or any future interim periods.
6
<PAGE>
Net Loss Per Share - Statement of Financial Accounting Standard ("SFAS") No.
128, Earnings Per Share, requires the presentation of basic and diluted earnings
per share. Earnings per share is calculated by dividing net income applicable to
common stockholders by a weighted average number of shares outstanding for the
period. Basic earnings per share are determined solely on common shares;
whereas, diluted earnings per share includes common equivalent shares, as
determined under the treasury stock method.
<TABLE>
The following table sets forth basic and diluted earnings per share
computational data for the periods presented (in thousands, except per share
amounts):
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
1999 1998 1999 1998
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net income $ 3,315 $ 693 $ 6,252 $ 194
======= ======= ======= =======
Weighted average common shares outstanding
utilized for basic earnings per share 25,123 24,011 24,886 22,244
Weighted average common equivalent shares
outstanding:
Employee common stock options 2,766 2,700 2,795 2,502
Common stock warrants 30 60 30 73
------- ------- ------- -------
Total weighted average common and common
equivalent shares outstanding utilized
for diluted earnings per share 28,154 26,771 27,946 24,819
======= ======= ======= =======
Basic earnings per share $ 0.13 $ 0.03 $ 0.25 $ 0.01
======= ======= ======= =======
Diluted earnings per share $ 0.12 $ 0.03 $ 0.22 $ 0.01
======= ======= ======= =======
</TABLE>
New Accounting Pronouncements - The Financial Accounting Standards Board
("FASB") issued SFAS No. 133, Accounting for Derivative Instruments and Hedging
Activities, as amended by SFAS No. 137. SFAS No. 133 addresses the accounting
for derivative instruments, including certain derivative instruments embedded in
other contracts. Under SFAS No. 133, entities are required to record and carry
all derivative instruments at fair value as either assets or liabilities. The
accounting for changes in fair value (i.e., gains or losses) of a derivative
instrument depends on whether it qualifies as part of a hedging relationship,
has been so designated as such and the underlying reason for holding it. The
Company must adopt SFAS No. 133, as amended, by January 1, 2001, and does not
expect such adoption will have any material effect on its financial statements.
In December 1998, the Accounting Standards Executive Committee ("AcSEC") of
the American Institute of Certified Public Accountants issued Statement of
Position ("SOP") 98-9 Software Revenue Recognition, With Respect to Certain
Transactions, which requires recognition of revenue using the "residual method"
in a multiple-element arrangement when fair value does not exist for one or more
of the delivered elements in the arrangement. Under the "residual method", the
total fair value of the undelivered elements is deferred and subsequently
recognized in accordance with SOP 97-2. The Company will adopt SOP 98-9 on
January 1, 2000. The Company does not expect a material change to its revenue
accounting as a result of the provisions of SOP 98-9.
7
<PAGE>
Note 2. Selective Balance Sheet Detail
Property and equipment consisted of the following (in thousands):
June 30, December 31,
1999 1998
-------- --------
Furniture and fixtures $ 1,164 $ 1,001
Computers and software 12,263 8,662
Leasehold improvements 3,826 3,725
-------- --------
17,253 13,388
Less accumulated depreciation and amortization (7,275) (5,354)
-------- --------
$ 9,978 $ 8,034
======== ========
Accrued expenses consisted of the following
(in thousands):
June 30, December 31,
1999 1998
-------- --------
Employee benefits $ 1,008 $ 678
Commissions and bonuses 2,526 2,013
Taxes payable 1,173 785
Royalties payable 1,009 138
Other 1,596 1,319
-------- --------
$ 7,312 $ 4,933
======== ========
Note 3. Commercial Credit Facilities
The Company has various credit facilities with a commercial lender. The
credit facilities include a note payable ($3.1 million as of June 30, 1999), a
term debt credit facility that provides for up to $3.0 million in total
borrowings, and a revolving line of credit that provides for up to $5.0 million
of additional borrowings based on eligible accounts receivable. As of June 30,
1999, the Company had no outstanding borrowings under its term debt credit
facility and total outstanding commitments of $2.8 million in the form of
standby letters of credit under its revolving line of credit. The Company's
credit facilities include covenants that impose certain restrictions on the
payment of dividends and other distributions and require the Company to maintain
monthly financial covenants, including a minimum quick ratio, tangible net worth
ratio and minimum cash reserves. The minimum cash reserves covenant is replaced
with a "minimum debt service coverage ratio" upon six consecutive quarters of
profitability. Borrowings are collateralized by a security interest in
substantially all of the Company's owned assets. As of June 30, 1999, the
Company was in compliance with its commercial credit facility covenants.
Note 4. Geographic, Segment and Significant Customer Information
The Company adopted the provisions of SFAS No. 131, Disclosure about
Segments of an Enterprise and Related Information, during 1998. SFAS No. 131
establishes standards for the reporting by public business enterprises of
information about operating segments, products and services, geographic areas,
and major customers. The methodology for determining what information is
reported is based on the organization of operating segments and the related
information that Chief Operating Decision Maker ("CODM") uses for operational
decisions and financial performance assessments.
8
<PAGE>
The Company sells its products and provides services worldwide through
a direct sales force, independent distributors, value-added resellers, and
system integrators. It currently operates in three primary regions, the
Americas, which includes North and South America; Europe, which includes Eastern
and Western Europe and the Middle East; and Asia/Pacific, which includes the
Pacific Rim and the Far East.
The Company's CODM is considered to be the Company's Chief Executive
Officer ("CEO"). The CEO reviews financial information presented on a
consolidated basis accompanied by disaggregated information for products and
services and revenues by geographic region for purposes of making operating
decisions and assessing financial performance.
Disaggregated financial information regarding the Company's products
and services and revenues by geographic region is as follows (in thousands):
Three Months Ended Six Months Ended
June 30, June 30,
----------------- -----------------
1999 1998 1999 1998
------- ------- ------- -------
Software licenses:
One-To-One Enterprise $ 1,179 $ 4,384 $ 4,586 $ 8,354
One-To-One WebApps 14,305 3,634 23,681 6,943
Services 5,332 2,257 9,063 4,269
Maintenance 2,660 1,110 4,610 1,898
------- ------- ------- -------
Total Revenues $23,476 $11,385 $41,940 $21,464
======= ======= ======= =======
Revenues:
Americas $18,405 $ 5,753 $29,746 $11,815
Europe 3,675 4,025 7,637 6,804
Asia/Pacific 1,396 1,607 4,557 2,845
------- ------- ------- -------
Total Company $23,476 $11,385 $41,940 $21,464
======= ======= ======= =======
June 30, December 31,
1999 1998
-------- --------
Identifiable assets:
Americas $134,748 $ 99,343
Europe 1,880 1,754
Asia/Pacific 570 465
-------- --------
Total Company $137,198 $101,562
======== ========
During the three months ended June 30, 1999, and the three and six
months ended June 30, 1998, no single customer accounted for more than 10% of
the Company's total revenues. During the six months ended June 30, 1999, one
customer accounted for 11% of the Company's total revenues.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
EXCEPT FOR THE HISTORICAL INFORMATION CONTAINED HEREIN, THE FOLLOWING
DISCUSSION CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND
UNCERTAINTIES. THE COMPANY'S ACTUAL RESULTS COULD DIFFER SIGNIFICANTLY FROM
THOSE DISCUSSED HEREIN. FACTORS THAT COULD CAUSE OR CONTRIBUTE TO SUCH
DIFFERENCES INCLUDE, BUT ARE NOT LIMITED TO, THOSE DISCUSSED HEREIN WITH THIS
QUARTERLY REPORT ON FORM 10-Q, THE COMPANY'S ANNUAL REPORT ON FORM 10-K, AND
OTHER DOCUMENTS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION. ANY SUCH
FORWARD-LOOKING STATEMENTS SPEAK ONLY AS OF THE DATE SUCH STATEMENTS ARE MADE.
OVERVIEW
BroadVision develops, markets and supports scalable fully integrated
application software solutions exclusively designed to manage one-to-one
relationships for the extended enterprise. The Company provides total end-to-end
solutions, which allow a business to capitalize on the Internet as a unique
platform and take full advantage of emerging technologies. By utilizing
BroadVision products and technology, a business is empowered to enhance
commerce, provide critical self-service functions, and deliver targeted
personalized information to customers, suppliers, distributors, employees, or
any other constituent of the extended enterprise on a real time interactive
basis.
BroadVision's product line provides a competitive advantage for
businesses by allowing them to specifically tailor Web-site content to the
personalized needs and interests of individual visitors on a real-time
interactive basis together with the means to execute secure transactions. The
BroadVision One-To-One(TM) applications accomplish this by profiling Web-site
visitor data, dynamically organizing enterprise information, and targeting
specifically tailored content to each individual visitor based on easily
constructed business rules. The Company believes the competitive advantages of
these applications include, among other things, enhanced customer satisfaction
and loyalty, increased business volumes, lower cost structures to service
customers and execute transactions, as well as significantly enhanced employee
productivity.
The Company's core product, BroadVision One-To-One Enterprise, was
first made commercially available in December 1995. A complementary family of
packaged application products (BroadVision One-To-One Commerce, BroadVision
One-To-One Financial, and BroadVision One-To-One Knowledge) was first introduced
in 1997 and are built upon and tightly integrated with the Company's core
technology. These complementary application products provide specifically
enhanced functionality for the distinct customer requirements involved in
managing one-to-one relationships within product merchandising, financial
services, and knowledge management. The Company sells its products and services
worldwide through direct sales forces, independent distributors, value-added
resellers, and system integrators. It also has a global network of strategic
business relationships with key industry platform and Web developer partners.
RESULTS OF OPERATIONS
Revenues
The Company's revenues are derived from software license fees and fees
charged for its services. The Company recognizes software license revenues when
a non-cancelable license agreement has been signed and the customer acknowledges
an unconditional obligation to pay, the software product has been delivered,
there are no uncertainties surrounding product acceptance, the fees are fixed
and determinable, and collection is considered probable. Revenues allocated to
software license fees, in general, are recognized upon consummation of the sale.
10
<PAGE>
The Company's professional services include its Strategic Services
Group, its Interactive Services Group, its Content and Creative Services Group,
its Education Services Group, and its Technical Support Group. Consulting
related services are typically recognized as services are performed. Maintenance
fees relating to technical support and upgrades are recognized ratably over the
contracted period, which is typically one year.
<TABLE>
Total Company revenues increased 106% during the current quarter ended
June 30, 1999 to $23.5 million as compared to $11.4 million for the quarter
ended June 30, 1998. For the six months ended June 30, 1999, total Company
revenues increased 95% to $41.9 million as compared to $21.5 million for the
comparable period during 1998. A summary of the Company's revenues by geographic
region is as follows:
<CAPTION>
(In thousands) Software % Services % Total %
------- ----- -------- ------- ------- -----
<S> <C> <C> <C> <C> <C> <C>
Three Months Ended:
June 30, 1999
Americas $12,163 79% $ 6,242 785 $18,405 78%
Europe 2,362 15 1,313 16 3,675 16
Asia/Pacific 959 6 437 6 1,396 6
------- ----- ------- ------- ------- -----
Total $15,484 100% $ 7,992 100% $23,476 100%
======= ===== ======= ======= ======= =====
June 30, 1998
Americas $ 3,391 42% $ 2,362 70% $ 5,753 51%
Europe 3,478 43 547 16 4,025 35
Asia/Pacific 1,149 15 458 14 1,607 14
------- ----- ------- ------- ------- -----
Total $ 8,018 100% $ 3,367 100% $11,385 100%
======= ===== ======= ======= ======= =====
Six Months Ended:
June 30, 1999
Americas $19,619 69% $10,127 74% $29,746 71%
Europe 4,830 17 2,807 21 7,637 18
Asia/Pacific 3,818 14 739 5 4,557 11
------- ----- ------- ------- ------- -----
Total $28,267 100% $13,673 100% $41,940 100%
======= ===== ======= ======= ======= =====
June 30, 1998
Americas $ 7,501 49% $ 4,314 70% $11,815 55%
Europe 5,731 37 1,073 17 6,804 32
Asia/Pacific 2,065 14 780 13 2,845 13
------- ----- ------- ------- ------- -----
Total $15,297 100% $ 6,167 100% $21,464 100%
======= ===== ======= ======= ======= =====
</TABLE>
Software product license revenues increased 93% during the current
quarter ended June 30, 1999 to $15.5 million as compared to $8.0 million for the
quarter ended June 30, 1998. For the six months ended June 30, 1999, license
revenues increased 85% to $28.3 million as compared to $15.3 million for the
comparable period during 1998.
The increase in software license revenues is attributable to continued
strong market acceptance for the Company's core competencies and technology; the
Company's strategic focus of leveraging its partner relationships; the expanding
sales volumes of its three complementary WebApp packaged solutions (BroadVision
One-To-One Commerce - Retail and Business, BroadVision One-To-One Financial, and
BroadVision One-To-One Knowledge); an increasingly larger installed customer
base that contributes to repeat business Web-site deployment licensing; and to a
lesser extent, product pricing increases that were effective October 1, 1998.
The WebApp packaged solutions were first introduced in 1997 and have become an
integral part of the Company's total applications solution that has proven to be
a successful strategy for a highly evolving and intensely competitive
marketplace.
11
<PAGE>
The Company continues to make available newly enhanced applications and
associated tools for targeted industries that require unique one-to-one
relationship management functionality, such as product merchandising, retail
financial services, and knowledge management. The Company's core product,
BroadVision One-To-One Enterprise, was significantly enhanced with Version 4,
which was shipped during September 1998. In addition, enhanced versions of
BroadVision One-To-One Commerce and BroadVision One-To-One Financial Version 4
application products were shipped during December 1998. And more recently,
during the quarter ended June 30, 1999, the Company made available its next
generation version of the BroadVision One-To-One Design Center product; and
specialized versions of its BroadVision One-To-One Commerce, which are sold as
Commerce Retail and Commerce Business. Also during 1998, the Company enhanced
its associated One-To-One tools which included the BroadVision One-To-One
Command Center (used by non-technical business managers to make rapid changes to
their Web-site without a programmer's intervention); the BroadVision One-To-One
Publishing Center (which allows a distributed team of non-technical content
experts to collaboratively manage every aspect of content management), and the
BroadVision One-To-One Instant Publisher (a tool designed for casual content
contributors).
The Company places an emphasis on expanding its strategic alliances
with key industry partners and has entered into various arrangements to develop
highly specialized applications and reduce the development time cycle associated
with Web applications. The Company expects to introduce these additional
specialized products during 1999 and beyond.
Some of the Company's strategic alliances to date include arrangements
with Hewlett-Packard Company ("HP") to jointly develop and brand a new
generation of e-commerce and knowledge-management solutions; Cisco Systems to
create unique Cisco-BroadVision One-To-One reference architecture, configuration
guides, and performance scalability benchmarks; Securities First Technologies,
Inc. ("S1") to jointly develop and market products based on VFM, S1's suite of
Internet-based financial services applications; and Sema Group to jointly
develop and market BroadVision One-To-One applications for the
telecommunications sector.
To date the Company has achieved good market acceptance for its
products and has experienced continued revenue growth. The Company anticipates
that international revenues will account for a significant amount of total
revenues, and management expects to continue to commit significant time and
financial resources to the maintenance and ongoing development of direct and
indirect international sales and support channels. There can be no assurance,
however, that the Company will be able to maintain or increase international or
domestic market acceptance for its family of products.
Total services revenues increased 137% during the current quarter ended
June 30, 1999 to $8.0 million as compared to $3.4 million for the quarter ended
June 30, 1998. For the six months ended June 30, 1999, services revenues
increased 122% to $13.7 million as compared to $6.2 million for the comparable
period during 1998.
The increase in professional services revenue is a result of the
Company's increased business volumes and a higher level of customer support
revenues derived from an increasingly larger installed customer base. The
Company continues to maintain its emphasis on leveraging its partner integrator
relationships and has continued to add internal headcount within its
professional services organizations to support the higher business volumes.
During the quarter ended June 30, 1999, the Company licensed
approximately 63 new customers (including system integration/distributor
partners), which compares with approximately 24 during the quarter ended June
30, 1998. Maintenance support revenues continue to increase and were $2.7
million for the quarter ended June 30, 1999 as compared to $1.1 million for the
quarter ended June 30, 1998. As of June 30, 1999, the Company had licensed over
375 customers which compares with over 250 as of December 31, 1998 and over 175
as of June 30, 1998.
12
<PAGE>
Cost of Revenues
Cost of license revenues include royalties payable to third parties for
software that is either embedded in, or bundled and sold with, the Company's
products; commissioned agent fees paid to distributors; and the costs of product
media, duplication, packaging and other manufacturing costs.
Cost of services consists primarily of employee-related costs,
third-party consultant fees incurred on consulting projects, post-contract
customer support, and instructional training services.
<TABLE>
A summary of the cost of revenues for the periods presented is as
follows:
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
---------------------------------------- -------------------------------------
(In thousands) 1999 % 1998 % 1999 % 1998 %
- -------------- ------ -- ------ -- ------ -- ------ --
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Cost of software licenses [1] $1,037 7% $ 213 3% $1,784 6% $ 400 3%
------ -- ------ -- ------ -- ------ --
Cost of services [2] 4,624 58 2,092 62 7,945 58 3,711 60
------ -- ------ -- ------ -- ------ --
Total cost of revenues [3] $5,661 24% $2,305 20% $9,729 23% $4,111 19%
------ -- ------ -- ------ -- ------ --
<FN>
[1] - Percentage is calculated based on total software license revenues for the
period indicated
[2] - Percentage is calculated based on total services revenues for the period
indicated
[3] - Percentage is calculated based on total revenues for the period indicated
</FN>
</TABLE>
Cost of software licenses increased 387% in absolute dollar terms
during the current quarter ended June 30, 1999 to $1.0 million as compared to
$213,000 for the quarter ended June 30, 1998. For the six months ended June 30,
1999, cost of software licenses increased 346% to $1.8 million as compared to
$400,000 for the comparable period during 1998.
The increase in cost of software licenses, in both absolute dollar and
relative percentage terms, is principally a result of royalties paid to third
party vendors for software that was bundled and sold with the Company's
products. The higher third party software sales add incremental revenues to the
Company's own product sales but carry a higher cost of license factor in
relation to the Company's own product sales. Royalty costs for third party
software embedded in the Company's product decreased in relative percentage
terms as a result of the Company renegotiating a previously existing percentage
based royalty arrangement into a prepaid fixed fee royalty for the period
through 2001.
Cost of services increased 121% during the current quarter ended June
30, 1999 to $4.6 million as compared to $2.1 million for the quarter ended June
30, 1998. For the six months ended June 30, 1999, cost of services increased
114% to $7.9 million as compared to $3.7 million for the comparable period
during 1998.
The increase in cost of services in absolute dollar terms is a result
of expanded business volumes as evidenced by increased services revenues.
Overall costs increased as a result of additions to the Company's professional
services staff and the employment of outside consultants to meet short-term
consulting arrangements. The decrease in cost of services as a percentage of
services revenues for the quarter ended June 30, 1999 is a result of less
utilization of outside consultants in relation to the extent previously utilized
during the prior period.
The Company expects that services costs will continue to increase in
absolute dollars as the Company continues to expand its services organization to
support higher business volumes.
13
<PAGE>
Operating Expenses and Other Income, net
<TABLE>
Research and development expenses consist primarily of salaries,
employee-related benefit costs, and consulting fees incurred in association with
the development of the Company's products. Costs incurred for the research and
development of new software products are expensed as incurred until such time
that technological feasibility, in the form of a working model, is established
at which time such costs are capitalized subject to recoverability. The costs
incurred by the Company subsequent to the establishment of a working model but
prior to general release have not been significant. To date, the Company has not
capitalized any software development costs. Sales and marketing expenses consist
primarily of salaries, employee-related benefit costs, commissions and other
incentive compensation, travel and entertainment, and marketing program related
expenditures such as collateral materials, trade shows, public relations, and
creative services. General and administrative expenses consist primarily of
salaries, employee-related benefit costs, and professional service fees.
<CAPTION>
Three Months Ended June 30, Six Months Ended June 30,
-------------------------------------- --------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
(In thousands) 1999 % [1] 1998 % [1] 1999 % [1] 1998 % [1]
------- ----- ------- ----- ------- ----- ------- -----
Research and Development $ 3,268 14% $ 2,049 18% $ 6,169 15% $ 4,083 19%
Sales and Marketing 10,019 43 6,243 55 17,684 42 12,104 56
General and Administrative 1,611 6 760 7 2,882 7 1,585 8
------- ----- ------- ----- ------- ----- ------- -----
Total Operating Expenses $14,898 63% $ 9,052 80% $26,735 64% $17,772 83%
======= ===== ======= ===== ======= ===== ======= =====
<FN>
[1] - Expressed as a percent of total revenues for the period indicated
</FN>
</TABLE>
Research and development expenses increased 59% during the current
quarter ended June 30, 1999 to $3.3 million as compared to $2.0 million for the
quarter ended June 30, 1998. For the six months ended June 30, 1999, research
and development expenses increased 51% to $6.2 as compared to $4.1 million for
the comparable period during 1998. The increase in research and development
expenses in absolute dollar terms is primarily attributable to personnel costs
for added headcount within those operations involved in the enhancement of
existing applications and the development of the Company's next generation of
products. Research and development expenses, as a percentage of total revenues,
decreased because revenues have increased at a higher rate relative to expenses.
The Company expects research and development expenses will continue to increase
in absolute dollar terms.
Sales and marketing expenses increased 60% during the current quarter
ended June 30, 1999 to $10.0 million as compared to $6.2 million for the quarter
ended June 30, 1998. For the six months ended June 30, 1999, sales and marketing
expenses increased 46% to $17.7 million as compared to $12.1 million for the
comparable period during 1998. The increases in sales and marketing expenses in
absolute dollar terms reflect the cost of hiring additional sales and marketing
personnel, developing and expanding sales distribution channels, and expanding
promotional activities and marketing related programs. Sales and marketing
expenses, as a percentage of total revenues, decreased because revenues have
increased at a higher rate relative to expenses. The Company expects sales and
marketing expenses will continue to increase in absolute dollar terms.
General and administrative expenses increased 112% during the current
quarter ended June 30, 1999 to $1.6 million as compared to $760,000 for the
quarter ended June 30, 1998. For the six months ended June 30, 1999, general and
administrative expenses increased 82% to $2.9 million as compared to $1.6
million for the comparable period during 1998. The increase in general and
administrative expenses in absolute dollar terms is attributable to additional
administrative and management personnel, higher professional fees and additional
infrastructure to support the expansion of the Company's operations. General and
administrative expenses, as a percentage of total revenues, decreased because
revenues have increased at a higher rate relative to expenses. The Company
expects general and administrative expenses will continue to increase in
absolute dollar terms.
14
<PAGE>
Income Taxes
During the quarter ended June 30, 1999, the Company recognized tax
expense of $195,000 for an effective tax rate of approximately 5.6%. Due to the
Company's continuing trend of positive earnings, the Company reversed a portion
of its valuation allowance against the previously established deferred tax
assets for which realization is considered more likely than not.
LIQUIDITY AND CAPITAL RESOURCES
June 30, December 31,
(In thousands) 1999 1998
-------- -------
Cash, cash equivalents and
liquid short-term
investments $ 72,558 $61,878
======== =======
Working capital $ 72,651 $64,320
======== =======
Working capital ratio 3.9 : 1 4.9 : 1
======== =======
At June 30, 1999, the Company had $72.6 million of cash, cash
equivalents and liquid short-term investments, which represents an increase of
$10.7 million as compared to December 31, 1998. The Company currently has no
significant capital commitments other than obligations under operating leases
and $3.1 million of outstanding term debt under its existing credit facility
with a commercial bank.
Cash provided by operating activities was $11.0 million and $650,000
for the six months ended June 30, 1999 and 1998, respectively. Cash used for
investing activities was $22.8 million and $2.9 million for the six months ended
June 30, 1999 and 1998, respectively, and was primarily for capital expenditures
and purchase of short-term investments. Cash provided by financing activities
was $3.6 million and $57.5 million for the six months ended June 30, 1999 and
1998, respectively, and consists primarily of proceeds from the issuance of
common stock.
The Company believes that its available cash and short-term investment
resources, cash generated from operations and amounts available under its
commercial credit facilities will be sufficient to meet its expected working
capital and capital expenditure requirements for at least the next 12 months.
This estimate is a forward-looking statement that involves risks and
uncertainties, and actual results may vary as a result of a number of factors,
including those discussed under "Risk Factors" and elsewhere herein. The Company
may need to raise additional funds in order to support more rapid expansion,
develop new or enhanced services, respond to competitive pressures, acquire
complementary businesses or technologies, or respond to unanticipated
requirements. The Company may seek to raise additional funds through private or
public sales of securities, strategic relationships, bank debt, financing under
leasing arrangements, or otherwise. If additional funds are raised through the
issuance of equity securities, the percentage ownership of the stockholders of
the Company will be reduced, stockholders may experience additional dilution, or
such equity securities may have rights, preferences, or privileges senior to
those of the holders of the Company's Common Stock. There can be no assurance
that additional financing will be available on acceptable terms, if at all. If
adequate funds are not available or are not available on acceptable terms, the
Company may be unable to develop or enhance its products, take advantage of
future opportunities, or respond to competitive pressures or unanticipated
requirements, which could have a material adverse effect on the Company's
business, financial condition, and operating results.
15
<PAGE>
FACTORS AFFECTING QUARTERLY OPERATING RESULTS
The Company expects to experience significant fluctuations in quarterly
operating results that may be caused by many factors including, but not limited
to, those discussed below and herein with this quarterly report on Form 10-Q, as
contained in the Company's annual report on Form 10-K under the caption "Risk
Factors" and elsewhere therein, and as disclosed in other documents filed with
the Securities and Exchange Commission. Significant fluctuations in future
quarterly operating results may be caused by many factors including, among
others, the timing of introductions or enhancements of products and services by
the Company or its competitors, the length of the Company's sales cycle, market
acceptance of new products, the pace of development of the market for online
commerce, the mix of the Company's products sold, the size and timing of
significant orders and the timing of customer production or deployment, demand
for the Company's products, changes in pricing policies by the Company or its
competitors, changes in the Company's sales incentive plans, budgeting cycles of
its customers, customer order deferrals in anticipation of new products or
enhancements by the Company or its competitors, nonrenewal of maintenance
agreements, product life cycles, software defects and other product quality
problems, changes in strategy, changes in key personnel, the extent of
international expansion, seasonal trends, the mix of distribution channels
through which the Company's products are sold, the mix of international and
domestic sales, changes in the level of operating expenses to support projected
growth, and general economic conditions. The Company anticipates that a
significant portion of its revenues will be derived from a limited number of
orders, and the timing of receipt and fulfillment of any such orders is expected
to cause material fluctuations in the Company's operating results, particularly
on a quarterly basis. As with many software companies, the Company anticipates
that it will make the major portion of each quarter's deliveries near the end of
each quarter and, as a result, short delays in delivery of products at the end
of a quarter could adversely affect operating results for that quarter. In
addition, the Company intends to continue to increase its personnel, including
its domestic and international direct sales force. The timing of such expansion
and the rate at which new sales people become productive could also cause
material fluctuations in the Company's quarterly operating results.
Due to the foregoing factors, quarterly revenues and operating results
are difficult to forecast, and the Company believes that period-to-period
comparisons of its operating results will not necessarily be meaningful and
should not be relied upon as any indication of future performance. It is likely
that the Company's future quarterly operating results from time to time will not
meet the expectations of market analysts or investors, which may have an adverse
effect on the price of the Company's Common Stock. The Company anticipates that
its operating expenses will continue to be substantial in relation to total
revenues as it continues the development of its technology, increases its sales
and marketing activities, and creates and expands its distribution channels. In
addition, the Company's limited operating history makes the prediction of future
results of operations difficult and, accordingly, there can be no assurance that
the Company will be able to sustain its revenue growth or profitability. The
Company's limited operating history also requires that its prospects be
evaluated in light of the risks and uncertainties frequently encountered by a
company in its early stages of development. Some of these risks and
uncertainties relate to the new and rapidly evolving nature of the markets in
which the Company operates. These related market risks include, among other
things, the early stage of the developing online commerce market, the dependence
of online commerce on the development of the Internet and its related
infrastructure, the uncertainty pertaining to widespread adoption of online
commerce, and the risk of government regulation of the Internet. Other risks and
uncertainties facing the Company relate to the Company's ability to, among other
things, successfully implement its marketing strategies, respond to competitive
developments, continue to develop and upgrade its products and technologies more
rapidly than its competitors, and commercialize its products and services by
incorporating these enhanced technologies. There can be no assurance that the
Company will succeed in addressing any or all of these risks. A more complete
description of these and other risks relating to the Company's business is set
forth in the Company's annual report on Form 10-K under the caption "Risk
Factors" and elsewhere therein and other documents filed with the Securities and
Exchange Commission.
16
<PAGE>
Year 2000 Compliance
Background and Risks - Many currently installed computer systems and software
and devices with imbedded technology are coded to two digits for time sensitive
dating purposes. Beginning with the year 2000, these date code fields will need
to be four digit functional in order to distinguish between 21st century dates
and 20th century dates. For example, computer programs that have date sensitive
software may incorrectly recognize a date using "00" as the year 1900 rather
than the year 2000. As a result, computer systems, software products and devices
with imbedded technology used by many companies may need to be upgraded to
comply with such "Year 2000" requirements. This type of Year 2000 error could
potentially cause system failures or miscalculations that could disrupt
operations, including among other things a temporary inability to process
transactions, issue invoices or engage in similar normal business activities.
Although the Company's products are Year 2000 compliant, the Company believes
that the purchasing patterns of customers could potentially be affected by Year
2000 issues as companies expend significant resources to correct or patch their
current software systems for Year 2000 compliance. These expenditures may result
in reduced funds available to purchase software products such as those offered
by the Company, which could have a material adverse effect on the Company's
business, financial condition, and operating results. In addition, even if the
Company's products are Year 2000 compliant, other systems or software used by
the Company's customers may not be Year 2000 compliant. The failure of such
noncompliant third-party software or systems could affect the perceived
performance of the Company's products, which could have a material adverse
effect on the Company's business, financial condition, and operating results.
State of Readiness - The Company uses various financial and managerial
information systems within its operations in the United States, Europe and Asia,
which the Company believes to be or will be Year 2000 compliant by the end of
1999. As part of its normal course of business, the Company analyzes its
information system requirements in relation to its business operating goals and
strategic objectives and is implementing new systems during 1999 that will be
Year 2000 compliant. The Company has also analyzed its other systems and its
material suppliers and vendors for Year 2000 issues which it believes to be or
will be Year 2000 compliant by the end of 1999. Such other systems include
non-information technology systems and services utilized by the Company in its
business operations, such as power, telecommunications, security and general
facilities.
Costs for Year 2000 Compliance - Costs that may be incurred by the Company
pertaining to Year 2000 compliance issues include identification, assessment,
remediation and testing efforts, as well as potential costs to be incurred by
the Company with respect to Year 2000 issues of third parties. To date, the
costs incurred by the Company directly related to Year 2000 issues have been
minimal, even in cases where non-compliant information technology systems were
redeployed or replaced.
Contingency Plans - The Company has a contingency plan for handling Year 2000
problems that are not detected and corrected prior to their occurrence and
continues to assess its Year 2000 exposure areas in order to determine what
additional steps, beyond those identified by the Company's internal review to
date, are advisable. The Company's contingency plan includes adequate internal
resources that would be available to analyze, assess and direct remediation
efforts to address potential issues, back up systems that don't rely on
computers, and alternative sources of supply. The Company presently believes
that the Year 2000 issue will not pose significant operational problems for the
Company. However, any failure of the Company to adequately address any
unforeseen Year 2000 issue could adversely affect the Company's business,
financial condition, and results of operations. In addition, if all of the Year
2000 issues are not properly identified, or adequate assessment, remediation and
testing are not effected timely with respect to Year 2000 problems that are
identified, there can be no assurance that the Year 2000 issue would not have a
material adverse impact on the Company's results of operations or adversely
affect the Company's relationships with customers, vendors, partners or others.
Additionally, there can be no assurance that the Year 2000 issues of other
entities will not have a material adverse impact on the Company's systems or
results of operations.
17
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company's market risk exposure for interest rate changes relates
primarily to its investment portfolio. The Company had no derivative financial
instruments as of June 30, 1999 or December 31, 1998. The Company places its
investment portfolio in high quality instruments and the amount of credit
exposure to any one issue, issuer and type of instrument is limited. The Company
does not expect any material loss with respect to its investment portfolio. The
Company's investment portfolio holdings as of June 30, 1999 were analyzed to
determine their sensitivity to interest rate changes. As part of our sensitivity
analysis, we assumed an adverse change in interest rates of between 50 and 250
basis points and the expected effect was not material. The Company is also
subject to market risk relating to equity price changes concerning its long-term
investment holdings, which consist of marketable and non-marketable equity
securities. As of June 30, 1999, the Company's long-term investment holdings had
a carrying value of $28.3 million, a historical cost of value of $8.3 million
and associated unrealized gains of $19.9 million.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On December 11, 1998, BroadVision filed a lawsuit against Art
Technology Group, Inc. ("ATG") in the Northern District of California. The
complaint alleges that ATG is infringing BroadVision's U.S. Patent No. 5,710,887
and seeks injunctive relief and unspecified damages. On February 3, 1999, ATG
filed an answer and counterclaim against BroadVision in which ATG seeks
declaratory judgment for non-interference and declaratory judgment for
invalidity of the patent. Trial is set for October 16, 2000.
ITEM 2. CHANGES IN SECURITIES AND USE OF PROCEEDS
Not applicable
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
Not applicable
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) The Annual Meeting of Stockholders of the Company was held on May 12,
1999.
(b) Pehong Chen, David L. Anderson, Yogen K Dalal, Koh Boon Hwee, Todd A.
Garrett and Carl Pascarella were elected as directors.
(c) The matters voted upon and the voting of the stockholders with respect
thereto are as follows:
(i) The election of directors.
For Withheld
---------- --------
Pehong Chen, 20,816,729 146,170
David L. Anderson, 20,817,064 145,835
Yogen K Dalal, 20,817,034 145,865
Koh Boon Hwee, 20,817,079 145,820
Todd A. Garrett 20,817,064 145,835
Carl Pascarella 20,817,064 145,835
18
<PAGE>
(ii) To approve the Company's Equity Incentive Plan, as amended, to
increase the aggregate number of shares of Common Stock
authorized for issuance under such plan by 900,000:
For: 14,878,751 Against: 6,069,634
Abstain: 14,514 Broker Non-Vote 0
(iii) To approve the Company's Employee Stock Purchase Plan, as
amended, to increase the aggregate number of shares of Common
Stock authorized for issuance under such plan by 300,000:
For: 20,742,608 Against: 203,236
Abstain: 17,055 Broker Non-Vote 0
(iv) To ratify the selection of KPMG LLP as independent auditors of
the Company for the fiscal year ending December 31, 1999:
For: 20,944,727 Against: 10,467
Abstain: 7,505 Not Voted 200
ITEM 5. OTHER INFORMATION
Not applicable
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Item Description
---- -----------
27 Financial Data Schedule
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.
BROADVISION, INC
Date: August 13, 1999 /s/ Pehong Chen
------------------------- -------------------------------
Pehong Chen
President and Chief Executive Officer
(Principal Executive Officer)
Date: August 13, 1999 /s/ Randall C. Bolten
------------------------- -------------------------------
Randall C. Bolten
Vice President, Operations and
Chief Financial Officer
(Principal Financial and
Accounting Officer)
19
<PAGE>
INDEX TO EXHIBITS
Exhibit
No. Description
- ------- -----------
27 Financial Data Schedule
20
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM BROADVISION
INC.'S FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 1999 AS REPORTED
IN ITS FORM 10-Q FOR THE PERIOD THEN ENDED AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FORM 10-Q FILED WITH THE SECURITIES AND EXCHANGE COMMISSION.
EPS PRIMARY REPRESENTS BASIC NET INCOME (LOSS) PER SHARE. THE COMPANY HAS NOT
FILED A RESTATED FINANCIAL DATA SCHEDULE RELATING TO THE THREE MONTHS ENDED JUNE
30, 1998 BECAUSE AMOUNTS PREVIOUSLY REPORTED FOR EPS-PRIMARY AND EPS-DILUTED DO
NOT DIFFER FROM THE AMOUNTS THAT WOULD BE REPORTED UNDER CURRENT GUIDELINES FOR
BASIC AND DILUTED EARNINGS PER SHARE, RESPECTIVELY.
</LEGEND>
<MULTIPLIER> 1
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<EXCHANGE-RATE> 1.000
<CASH> 53,735
<SECURITIES> 18,823
<RECEIVABLES> 22,497
<ALLOWANCES> (1,018)
<INVENTORY> 0
<CURRENT-ASSETS> 97,857
<PP&E> 17,254
<DEPRECIATION> (7,276)
<TOTAL-ASSETS> 137,198
<CURRENT-LIABILITIES> 25,206
<BONDS> 0
0
0
<COMMON> 109,309
<OTHER-SE> (497)
<TOTAL-LIABILITY-AND-EQUITY> 137,198
<SALES> 28,267
<TOTAL-REVENUES> 41,940
<CGS> 1,784
<TOTAL-COSTS> 9,729
<OTHER-EXPENSES> 26,735
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,110
<INCOME-PRETAX> 6,586
<INCOME-TAX> 334
<INCOME-CONTINUING> 6,252
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 6,252
<EPS-BASIC> 0.25
<EPS-DILUTED> 0.22
</TABLE>
