AVISTAR COMMUNICATIONS CORPORATION 
By
Financial highlights for the quarter included:
-- Total revenue, prepared in accordance with GAAP, was $2.7 million, as
compared to $1.8 million for the quarter ended June 30, 2008, an
increase of 51%. The second quarter of 2008 had previously marked a
56% improvement as compared to the first quarter of 2008.
-- Operating expense (research & development, sales & marketing and
general and administrative) was $3.1 million for the third quarter of
2008, as compared to $3.2 million for the second quarter of 2008,
representing the fourth quarter of sequential improvement.
-- Income from settlement and licensing activity, which management sees as
a key component of the company's "top line" performance, was $1.1
million in both the third and second quarters of 2008.
-- Net income represented a loss of $774,000, or $(0.02) per basic and
diluted share, as compared to a loss of $1.6 million, or $(0.05) per
basic and diluted share recorded in the second quarter of 2008.
-- The cash and cash equivalent balance at September 30, 2008 was $4.4
million, representing cash used in operations during the third quarter,
2008 of $1.3 million. The comparable cash used in operations result
during the second quarter of 2008 was $3.2 million.
"As anticipated from our last earnings conference call, results of the
third quarter of 2008 demonstrate our continued ability to build revenue
momentum off of a more efficient cost structure," said
"After establishing a significantly reduced cost structure during the prior quarters of 2008 -- accomplished as part of our turnaround strategy, our focus shifted to the top line and revenue momentum in the third quarter," Moss continued. "This sequencing was designed to translate our cost savings into direct bottom-line improvement as revenues expanded. I'm pleased to report that both goals were accomplished during the third quarter of 2008, with revenue growing by an additional 51% over the improvements of the second quarter, and our net loss improving by 52% from the second quarter."
Moss continued, "While the third quarter evidenced continuing progress in our turnaround, this most recent quarter was perhaps the most significant in the company's history from the vantage point of building for the future. In August we announced a technology agreement with LifeSize Communications Corporation, a global leader in high definition (HD) video conferencing systems, whereby we will integrate our technology with LifeSize's room systems. Following the LifeSize agreement, we signed a product and technology licensing agreement with IBM Corporation in September, under which we will be working with IBM to provide bandwidth management for its unified communications and collaboration solutions. As part of this work, Avistar's C3's dynamic bandwidth management technology is being licensed by IBM. We expect these arrangements to provide improved revenue visibility and momentum over the next several years. As part of the LifeSize and IBM agreements, both corporations are now licensees of our extensive patent portfolio as well.
"In summary - we have previously communicated a comprehensive plan of execution, intended to diversify Avistar's capabilities and prospects, expand our go-to-market strategy, leverage a more efficient cost structure, and monetize our impressive intellectual property asset in a more focused and predictable manner. We believe the third quarter results clearly evidence continuing improvement as we effectively execute that plan. We anticipate continued growth, and have now set our sights on cash-flow break-even and net income profitability milestones, both of which we hope to accomplish in the fourth quarter of 2008.
"Other significant developments during the third quarter of 2008 included:
-- The U.S. Patent & Trademark Office has announced that it has scheduled
the issuance of an additional four patents to Avistar during the month
of October. These new patents cover the areas of instant messaging and
Voice over IP, and importantly, were allowed over the prior art that
Microsoft had relied upon in requesting reexamination of our entire
U.S. patent portfolio in February, 2008. This expanding IP portfolio
underscores the value being placed on our product and technology
offerings, helping to grow our brand, and expand our reputation.
-- New distribution partners were signed in both Europe and the United
States during the quarter, including CityIS Ltd, MVC GMBH, Fontel Inc.,
and Touchline Video Ltd. Expanding our go-to-market strategy through
successful partnering with established distributors and resellers is a
key objective for the next several quarters.
-- Technology Marketing Corporation (TMC) named Avistar's C3 Desktop
Videoconferencing and Collaboration solution as a recipient of a 2008
INTERNET TELEPHONY Excellence Award, in recognition of our deployment
at California State University's Lyles Center for Innovation and
Entrepreneurship. The winners of the 2008 Excellence Awards are
published in the October 2008 issue of INTERNET TELEPHONY magazine.
"We will be conducting a conference call later today, and encourage our investors to participate and find out more about our performance and prospects," Moss concluded.
To participate in the conference call, which begins at
About Avistar Communications Corporation
Avistar (Nasdaq: AVSR) creates technology that provides the missing critical element in unified communications: bringing people in organizations face-to-face, through enhanced communications, for true collaboration anytime, anyplace. Its latest product, Avistar C3, draws on more than a decade of market experience to deliver a single-click desktop videoconferencing and collaboration experience that moves business communications into a new era. Available as a stand-alone solution, or integrated with existing unified communications software from other vendors, Avistar C3 provides users instant messaging-style ability to initiate video communications across and outside the enterprise. Patent protected dynamic bandwidth management enables thousands of users to access desktop videoconferencing, VoIP and streaming media, without requiring substantial new network investment or impairing network performance.
Avistar's desktop videoconferencing and collaboration installations are among the world's largest, including commitments of more than 100,000 desktop seats to be deployed in over 40 countries in the coming years. Clients report as much as a 20 percent reduction in travel expense and carbon emissions, increases in productivity and immeasurably improved relationship building within their organizations, as well as with suppliers and customers. Avistar holds a portfolio of 92 patents for inventions in video and network technology and licenses IP to videoconferencing, rich-media services, public networking and related industries. Current licensees include IBM Corporation, Sony Corporation, Sony Computer Entertainment Inc. (SCEI), Polycom, Inc., Tandberg ASA, Radvision Ltd., LifeSize Communications, Inc. and Emblaze-VCON.
For more information, visit www.avistar.com.
Forward-Looking Statements
Statements made in this news release that are not purely historical, including but not limited to statements regarding the integration of our technology with offerings by LifeSize and IBM, improvements in our revenue visibility and momentum and continued progress in our efforts to control costs and grow revenues, including our goals for cash break-even and net income goals for the fourth quarter of 2008, are forward-looking statements within the meaning of Section 21E of the Securities Exchange Act. Such statements are subject to risks and uncertainties that could cause actual results to differ materially, including such factors, among others, as Avistar's lengthy sales cycle, volatility associated with Avistar's sales and licensing activities, market acceptance of Avistar's products, increased competition in the market for unified communications, technical challenges associated with product development and completion of our deliverables to IBM and others, ongoing technological developments and changing industry standards, and challenges associated with protecting and licensing Avistar's intellectual property. As a result of these and other factors, Avistar expects to experience significant fluctuations in revenue and operating results, and there can be no assurance that Avistar will become or remain profitable in the future, or that its future results will meet expectations. These and other risk factors are discussed in Avistar's Annual Report on Form 10-K and Quarterly Reports on Form 10-Q filed with the Securities and Exchange Commission from time to time. Avistar disclaims any intent or obligation to update these forward-looking statements.
Non-GAAP Financial Measures
This press release and the accompanying tables include a discussion of
adjusted EBITDA, excluding stock-based compensation expense, which is a non-
GAAP financial measure provided as a complement to results provided in
accordance with accounting principles generally accepted in
~ financial statements follow ~
Copyright (C) 2008 Avistar Communications Corporation. All rights reserved. Avistar, AvistarVOS, and the Avistar logo are trademarks or registered trademarks of Avistar Communications Corporation
AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and nine months ended September 30, 2008 and 2007
(in thousands, except per share data)
Three Months Ended Nine Months Ended
September 30, September 30,
2008 2007 2008 2007
(unaudited) (unaudited)
Revenue:
Product $ 1,313 $ 555 $ 2,115 $ 2,517
Licensing 367 313 674 4,866
Services, maintenance
and support 1,025 883 2,857 2,658
Total revenue 2,705 1,751 5,646 10,041
Costs and expenses:
Cost of product revenue* 720 658 1,644 2,098
Cost of services,
maintenance and
support revenue* 584 493 1,706 1,740
Income from settlement
and patent licensing (1,057) (1,057) (3,171) (15,171)
Research and development* 1,122 2,020 3,932 5,517
Sales and marketing* 634 1,583 2,752 4,619
General and
administrative* 1,369 2,217 4,683 10,628
Total costs and expenses 3,372 5,914 11,546 9,431
(Loss) income from
operations (667) (4,163) (5,900) 610
Other (expense) income:
Interest income 15 93 82 307
Other expense, net (122) (56) (335) (162)
Total other (expense)
income, net (107) 37 (253) 145
Net (loss) income $ (774) $ (4,126) $ (6,153) $ 755
Net (loss) income per
share $ (0.02) $ (0.12) $ (0.18) $ 0.02
Weighted average shares
used in calculating
Basic and diluted net
(loss) income per share 34,561 34,379 34,546 34,238
*Including stock based
compensation of:
Cost of products,
services, maintenance
and support revenue $ 54 $ 29 $ 80 $ 142
Research and development 160 246 311 630
Sales and marketing 72 176 (24) 469
General and
administrative 298 254 567 722
$ 584 $ 705 $ 934 $ 1,963
AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
as of September 30, 2008 and December 31, 2007
(in thousands, except share and per share data)
September 30, December 31,
2008 2007
(unaudited)
Assets:
Current assets:
Cash and cash equivalents $ 4,444 $ 4,077
Marketable securities - 799
Total cash, cash equivalents
and marketable securities 4,444 4,876
Accounts receivable, net of
allowance for doubtful accounts
of $43 and $24 at September 30,
2008 and December 31, 2007,
respectively 4,070 1,385
Inventories 434 428
Deferred settlement and patent
licensing costs 1,256 1,256
Prepaid expenses and other
current assets 233 462
Total current assets 10,437 8,407
Property and equipment, net 442 767
Long-term deferred settlement
and patent licensing costs 162 1,117
Other assets 205 286
Total assets $ 11,246 $ 10,577
Liabilities and Stockholders' Equity (Deficit):
Current liabilities:
Line of credit $ 7,000 $ 5,100
Accounts payable 892 1,287
Deferred income from settlement
and patent licensing 5,520 5,520
Deferred services revenue and
customer deposits 3,725 2,231
Accrued liabilities and other 1,468 1,451
Total current liabilities 18,605 15,589
Long-term liabilities:
Long-term convertible debt 7,000 -
Long-term deferred income from
settlement and patent licensing
and other 612 4,814
Total liabilities 26,217 20,403
Stockholders' equity (deficit):
Common stock, $0.001 par value;
250,000,000 shares authorized at
September 30, 2008 and December
31, 2007; 35,750,680 and
35,678,807 shares issued including
treasury shares at September 30,
2008 and December 31, 2007,
respectively 36 36
Less: treasury common stock,
1,182,875 shares at September 30,
2008 and December 31, 2007,
respectively, at cost (53) (53)
Additional paid-in-capital 96,933 95,925
Accumulated deficit (111,887) (105,734)
Total stockholders' equity
(deficit) (14,971) (9,826)
Total liabilities and
stockholders' equity (deficit) $ 11,246 $ 10,577
AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the nine months ended September 30, 2008 and 2007
(in thousands)
Nine Months Ended September 30,
2008 2007
(unaudited)
Cash Flows from Operating Activities:
Net (loss) income $ (6,153) $ 755
Adjustments to reconcile net (loss)
income to net cash used in operating
activities:
Depreciation 404 279
Stock based compensation for options
issued to consultants and employees 934 1,963
Provision for doubtful accounts 19 3
Changes in assets and liabilities:
Accounts receivable (2,704) 137
Inventories (6) 222
Prepaid expenses and other current
assets 229 63
Deferred settlement and patent
licensing costs 955 955
Other assets 81 (2)
Accounts payable (395) 36
Deferred income from settlement and
patent licensing and other (4,202) (4,119)
Deferred services revenue and
customer deposits 1,494 (765)
Accrued liabilities and other 17 (807)
Net cash used in operating activities (9,327) (1,280)
Cash Flows from Investing Activities:
Purchase of short-term marketable
securities - (795)
Maturities of short-term marketable
securities 799 -
Sale of property and equipment 8 -
Purchase of property and equipment (87) (800)
Net cash provided by (used in)
investing activities 720 (1,595)
Cash Flows from Financing Activities:
Line of credit payments (5,100) -
Borrowings on line of credit 7,000 -
Proceeds from debt issuance 7,000 -
Net proceeds from issuance of common
stock 74 353
Net cash provided by financing
activities 8,974 353
Net increase (decrease) in cash and
cash equivalents 367 (2,522)
Cash and cash equivalents, beginning
of year 4,077 7,854
Cash and cash equivalents, end of
period $ 4,444 $ 5,332
AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY
THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2008
FINANCIAL RESULTS: RECONCILIATION OF GAAP MEASURES TO NON-GAAP MEASURES
(in thousands)
Reconciliation of Net (Loss) Income to Adjusted EBITDA
Three Months Ended September 30,
2008 2007
(unaudited)
Net (loss) income $ (774) $ (4,126)
Interest income (15) (93)
Other expense, net 122 56
Depreciation 136 98
EBITDA (531) (4,065)
Stock-based compensation expense 584 705
Adjusted EBITDA $ 53 $ (3,360)
Nine Months Ended September 30,
2008 2007
(unaudited)
Net (loss) income $ (6,153) $ 755
Interest income (82) (307)
Other expense, net 335 162
Depreciation 404 279
EBITDA (5,496) 889
Stock-based compensation expense 934 1,963
Adjusted EBITDA $ (4,562) $ 2,852
SOURCE Avistar Communications Corporation
