AVISTAR COMMUNICATIONS CORPORATION 
By Revenue, EBITDA, Net Income and Cash Flow all Increase; Metrics Move into Positive Territory
Financial highlights for the quarter ended
-- Total revenue, in accordance with Generally Accepted Accounting
Principles, was $3.1 million, as compared to $1.9 million for the
quarter ended December 31, 2007, an increase of 62%. Revenue was also
15% above $2.7 million in third quarter 2008. The third and second
quarters of 2008 also had sequential quarterly improvements in revenue
of 51% and 56% respectively.
-- Operating expense, which includes research & development, sales
& marketing and general and administrative, was $3.1 million for the
fourth quarter of 2008, as compared to $5.6 million for the fourth
quarter 2007 and $3.1 million for the third quarter of 2008,
representing the fifth quarter of sequential improvement and 45% and 1%
improvement respectively.
-- Net loss was $231,000 or $0.01 per share, as compared to a loss of $3.7
million, or $0.11 per share in the fourth quarter of 2007 and a loss of
$774,000 or $0.02 per share in the third quarter of 2008, representing a
94% and 70% improvement respectively and the third sequential quarterly
decrease in net loss.
-- The cash and cash equivalent balance at December 31, 2008 was $4.9
million. The company generated positive cash flow from operations during
the fourth quarter of 2008 of $456,000. The comparable cash burn from
operations during the fourth quarter of 2007 was $3.2 million and the
third quarter cash burn was $1.3 million. This is the first quarter in
the history of the firm that positive cash flow from operations has been
achieved without a significant IP settlement.
-- Adjusted EBITDA, which is a key metric used by the management team, for
the fourth quarter of 2008 was $591,000 profit compared to a loss of
$2.9 million in the fourth quarter of 2007 and $53,000 profit during the
third quarter of 2008. This shows a more than 1,000% improvement on
third quarter and even larger improvement compared to the fourth quarter
2007.
-- Revenue for the twelve months ended December 31, 2008 was $8.8 million,
compared to revenue of $12.0 million for the twelve months ended
December 31, 2007, representing a 27% year-over-year decrease due to a
patent licensing agreement in the second quarter of 2008. This is
primarily due to the firm's maturation over the past 12 months as
it focuses on normalized and regular product revenue metrics rather than
exceptional settlement income from licensing of intellectual property,
which was previously combined with revenue as a separate metric. Avistar
reported a net loss of $6.4 million, or $0.18 per share, for the twelve
months ended December 31, 2008 compared to a net loss of $2.9 million,
or $0.09 per basic share for the twelve months ended December 31, 2007.
Included in those net loss results were $1.5 million and $2.7 million of
employee stock compensation expense for 2008 and 2007, respectively.
"As anticipated from our last earnings conference call and the guidance provided on
"We continue to execute our plan, which established a significantly reduced cost structure during the first half of 2008 and then focused on the top line and revenue momentum during the second half," Moss continued. "This sequencing was designed to translate our cost savings directly into strong bottom-line improvement as revenues expanded. I'm pleased to report that the company is on track and will continue to focus on top line priorities moving forward. Our primary metric for 2009 will therefore shift from adjusted EBITDA (our turnaround metric) to include Net Income and positive cash flows as well, which are the principal engines for shareholder value."
Moss continued, "We continue to deliver what we say we will. The guidance we issued to the market for the fourth quarter, which was another milestone for the firm, was hit, demonstrating that our business is becoming more predictable. We have reduced concentration risk and radically diversified our go-to-market strategy. Our technology is beginning to gain the competitive leadership and recognition it absolutely deserves and our productivity levels are significantly greater than years past. Now, we must ensure that revenue growth, stronger brand recognition in the market and 25% higher gross margins compared to 2008, result in net income and cash flow growth during 2009 without including possible planned patent licensing activity.
"We have a company that at this point can fund itself without large capital injections from IP engagements. This not only is a healthy position to be in but also offers our shareholders visibility into a model where we will defend our IP vigorously, will not compromise what we consider an incredibly valuable asset by licensing at values below industry standards, and when we are successful that success will be realized directly on the bottom line. We are in a strong position to realize such opportunities, but in no rush.
"Other significant developments during the fourth quarter of 2008 included:
-- Avistar technology was well recognized when it was named IBM Lotus
'Best Unified Communications and Collaboration Solution for
2009' as well as TMC's 'Best Internet Telephony
Technology.' We believe these accolades will accelerate as we
continue our success in the video communications marketplace.
-- Avistar was granted five new patents in real-time communications,
bringing the total patents in the portfolio to 96. New patents from late
in the third quarter through year-end 2008 nearly double Avistar's
existing 13 patents in the real-time communications area, which includes
wireless communications, mobile devices, directories and servers used to
provide these services. They of course include all prior art and
commentary made by Microsoft in conversations that we continue to have
with them.
-- Finally our VAR and distribution partner program continues to grow with
another 10 resellers signed up and over 2,000 seats sold through
resellers during the fourth quarter.
"Overall we are on plan and the fourth quarter should be considered an important success. The Avistar team executed well, during a very difficult turnaround in 2008, and generated excellent results in the fourth quarter.
"We will be conducting a conference call tomorrow,
To participate in the conference call at
About Avistar Communications Corporation
Avistar (Nasdaq: AVSR) is a leader in desktop video communications, providing proven business-class technology. Avistar's desktop videoconferencing installations include more than 100,000 committed desktop seats worldwide, bringing together business users any time and any place. Companies such as IBM Corp., Sony Corp., LifeSize Communications, Inc. and Polycom Inc. use Avistar technology to power their unified communications solutions. Avistar works with leading-edge technology partners and resellers including CityIS, Beyondis and Fontel in more than 40 countries. For more information, go to www.avistar.com.
For more perspective on Avistar, visit the CEO Blog at: avistarblog.blogspot.com.
Forward-Looking Statements
Statements made in this news release that are not purely historical, including but not limited to statements regarding expected payments from IBM including future royalty payments, completion of deliverables by Avistar, improvements in our revenue visibility and momentum and continued progress in our efforts to control costs and grow revenues, including 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 -
AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
for the three and twelve months ended December 31, 2008 and 2007
(in thousands, except per share data)
Three Months Twelve Months
Ended December 31, Ended December 31,
--------------- ---------------
2008 2007 2008 2007
---- ---- ---- ----
(unaudited) (unaudited)
Revenue:
Product $1,842 $945 $3,957 $3,462
Licensing 280 150 954 5,016
Services, maintenance
and support 987 819 3,844 3,477
--- --- ----- -----
Total revenue 3,109 1,914 8,755 11,955
----- ----- ----- ------
Costs and expenses:
Cost of product
revenue* 551 586 2,195 2,684
Cost of services,
maintenance and
support revenue* 646 503 2,352 2,243
Income from
settlement and
patent licensing (1,055) (1,055) (4,226) (16,226)
Research and
development* 1,268 2,153 5,200 7,670
Sales and marketing* 769 1,573 3,521 6,192
General and
administrative* 1,046 1,837 5,729 12,465
----- ----- ----- ------
Total costs and
expenses 3,225 5,597 14,771 15,028
----- ----- ------ ------
Loss from operations (116) (3,683) (6,016) (3,073)
---- ------ ------ ------
Other (expense) income:
Interest income 12 39 94 346
Other expense, net (127) (49) (462) (211)
---- --- ---- ----
Total other (expense)
income, net (115) (10) (368) 135
---- --- ---- ---
Net loss $(231) $(3,693) $(6,384) $(2,938)
===== ======= ======= =======
Net loss per share $(0.01) $(0.11) $(0.18) $(0.09)
====== ====== ====== ======
Weighted average shares
used in calculating
net loss per share 34,568 34,448 34,551 34,290
*Including stock based
compensation of:
Cost of products,
services, maintenance
and support revenue $61 $46 $141 $188
Research and
development 200 249 511 879
Sales and marketing 62 145 38 614
General and
administrative 250 286 817 1,008
--- --- --- -----
$573 $726 $1,507 $2,689
==== ==== ====== ======
AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED BALANCE SHEETS
as of December 31, 2008 and December 31, 2007
(in thousands, except share and per share data)
December 31, December 31,
2008 2007
---- ----
(unaudited)
Assets:
Current assets:
Cash and cash equivalents $4,898 $4,077
Marketable securities - 799
- ---
Total cash, cash
equivalents and
marketable securities 4,898 4,876
Accounts receivable, net
of allowance for doubtful
accounts of $20 and $24
at December 31, 2008 and
2007, respectively 2,701 1,385
Inventories 307 428
Deferred settlement and
patent licensing costs 1,100 1,256
Prepaid expenses and
other current assets 320 462
--- ---
Total current assets 9,326 8,407
Property and equipment, net 310 767
Long-term deferred
settlement and patent
licensing costs - 1,117
Other assets 157 286
--- ---
Total assets $9,793 $10,577
====== =======
Liabilities and Stockholders'
Equity (Deficit):
Current liabilities:
Line of credit $7,000 $5,100
Accounts payable 579 1,287
Deferred income from
settlement and
patent licensing 4,751 5,520
Deferred services
revenue and customer
deposits 3,687 2,231
Accrued liabilities
and other 1,382 1,451
----- -----
Total current
liabilities 17,399 15,589
Long-term liabilities:
Long-term convertible
debt 7,000 -
Long-term deferred
income from settlement
and patent licensing and
other 23 4,814
-- -----
Total liabilities 24,422 20,403
------ ------
Stockholders' equity
(deficit):
Common stock, $0.001 par
value; 250,000,000
shares authorized at
December 31, 2008 and 2007;
35,750,680 and 35,678,807
shares issued including
treasury shares at
December 31, 2008 and 2007,
respectively 36 36
Less: treasury common stock,
1,182,875 shares at
December 31, 2008 and 2007
respectively, at cost (53) (53)
Additional paid-in-
capital 97,506 95,925
Accumulated deficit (112,118) (105,734)
-------- --------
Total stockholders'
equity (deficit) (14,629) (9,826)
------- ------
Total liabilities
and stockholders'
equity (deficit) $9,793 $10,577
====== =======
AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY
THREE AND TWELVE MONTHS ENDED DECEMBER 31, 2008
FINANCIAL RESULTS: RECONCILIATION OF GAAP
MEASURES TO NON-GAAP MEASURES
(in thousands)
Reconciliation of Net Loss to Adjusted EBITDA
Three Months
Ended December 31,
---------------
2008 2007
---- ----
(unaudited)
Net loss $(231) $(3,693)
Interest income (12) (39)
Other expense, net 127 49
Depreciation 134 98
--- --
EBITDA 18 (3,585)
Stock-based compensation expense 573 726
--- ---
Adjusted EBITDA $591 $(2,859)
==== =======
Twelve Months
Ended December 31,
---------------
2008 2007
---- ----
(unaudited)
Net loss $(6,384) $(2,938)
Interest income (94) (346)
Other expense, net 462 211
Depreciation 538 468
--- ---
EBITDA (5,478) (2,605)
Stock-based compensation expense 1,507 2,689
----- -----
Adjusted EBITDA $(3,971) $84
======= ===
AVISTAR COMMUNICATIONS CORPORATION AND SUBSIDIARY
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
for the twelve months ended December 31, 2008 and 2007
(in thousands)
Twelve Months
Ended December 31,
---------------
2008 2007
---- ----
(unaudited)
Cash Flows from Operating Activities:
Net loss $(6,384) $(2,938)
Adjustments to reconcile net loss to net cash used
in operating activities:
Depreciation 538 468
Stock based compensation for options issued to
consultants and employees 1,507 2,689
Provision for doubtful accounts (4) (27)
Changes in assets and liabilities:
Accounts receivable (1,312) 51
Inventories 121 284
Prepaid expenses and other current assets 142 72
Deferred settlement and patent licensing costs 1,273 1,274
Other assets 129 1
Accounts payable (708) (291)
Deferred income from settlement and patent
Licensing and other (5,560) (5,494)
Deferred services revenue and customer deposits 1,456 252
Accrued liabilities and other (69) (812)
--- ----
Net cash used in operating activities (8,871) (4,471)
------ ------
Cash Flows from Investing Activities:
Purchase of short-term marketable securities - (799)
Maturities of short-term marketable securities 799 -
Sale of property and equipment 8 -
Purchase of property and equipment (89) (979)
--- ----
Net cash provided by (used in) investing activities 718 (1,778)
--- ------
Cash Flows from Financing Activities:
Line of credit payments (5,100) -
Borrowings on line of credit 7,000 2,100
Proceeds from debt issuance 7,000 -
Net proceeds from issuance of common stock 74 372
-- ---
Net cash provided by financing activities 8,974 2,472
----- -----
Net increase (decrease) in cash and cash equivalents 821 (3,777)
Cash and cash equivalents, beginning of year 4,077 7,854
----- -----
Cash and cash equivalents, end of year $4,898 $4,077
====== ======
SOURCE Avistar Communications Corporation
