RADVISION Reports Fourth Quarter and Full Year 2007 Results

RADVISION® (Nasdaq: RVSN) today reported that revenues for the fourth quarter of 2007 were $22.3 million, in line with the Company’s forecast, compared to revenues of $25.3 million reported in the fourth quarter of 2006. The Company incurred an operating loss of $0.2 million for the fourth quarter of 2007 compared with operating income of $3.4 million in the fourth quarter of 2006. Excluding the effects of stock-based compensation expense related to the adoption of FAS123R in both periods, non-GAAP operating income was $1.1 million in the fourth quarter of 2007 compared with $4.7 million in fourth quarter of 2006. Net income for the fourth quarter of 2007 was $2.5 million, or $0.11 per diluted share, compared with $7.2 million, or $0.31 per diluted share, in the 2006 fourth quarter. Excluding the effect of stock-based compensation expense (which amounted to $1.4 million or $0.07 per diluted share in the 2007 fourth quarter and $1.3 million or $0.06 per diluted share in the 2006 fourth quarter), non-GAAP net income for the fourth quarter of 2007 was $3.8 million, or $0.18 per diluted share, compared with $8.5 million, or $0.37 per diluted share, reported in the fourth quarter of 2006. The Company had forecast that net income for the fourth quarter of 2007 would approximate $1.2 million or $0.06 per diluted share including a tax benefit of $0.1 million and stock-based compensation expense of $1.4 million related to the adoption of FAS123R. The Company recorded a higher tax benefit, totaling $1.6 million and equivalent to $0.07 per diluted share, for the 2007 fourth quarter, which compares with a tax benefit of $2.1 million, equivalent to $0.09 per diluted share, in the fourth quarter of 2006. The stock-based compensation expense was in line with the Company’s forecast. The Company further noted that its financial income for the fourth quarter of 2007 was reduced by $380,000, equivalent to $0.02 per diluted share, due to valuation allowance of certain investment securities. Business unit revenues for the fourth quarter of 2007 consisted of $17.1 million in Networking Business Unit (NBU) sales compared with $18.9 million in the fourth quarter of 2006, and $5.2 million in Technology Business Unit (TBU) sales compared with $6.4 million in the 2006 fourth quarter. For the full year 2007, revenues were $92.0 million, operating income was $2.0 million and net income was $9.9 million or $0.44 per diluted share. Excluding the effect of stock-based compensation expense (which amounted to $5.4 million or $0.24 per diluted share), non-GAAP operating income for 2007 was $7.4 million and net income was $15.3 million or $0.68 per diluted share. For full year 2006, revenues were $91.0 million, operating income was $8.5 million and net income was $15.2 million or $0.67 per diluted share. Excluding the effects of stock-based compensation expense (amounting to $4.8 million and equivalent to $0.21 per diluted share) and a patent settlement reserve recognized in the 2006 third quarter (of $1.9 million, and equivalent to $0.08 per diluted share), operating income for full year 2006 was $15.2 million and net income was $21.9 million or $0.96 per diluted share, on a non-GAAP basis. The Company ended 2007 with approximately $130.7 million in cash and liquid investments, equivalent to $6.09 per basic share, a decrease of $4.5 million from September 30, 2007. The decrease reflects a decrease in cash flow from operating activities of $0.2 million, which includes one time amortization of auction rate securities in the amount of $0.6 million, by the use of $4.0 million for the repurchase of 351,179 Company shares and $0.3 million of capital expenditures. Boaz Raviv, Chief Executive Officer, commented: "The successful introduction of our SCOPIA 5.5 platform with High Definition Continuous Presence enabled us to regain our footing in the fourth quarter. The technology and cost advantages of SCOPIA 5.5, which includes SCOPIA Desktop for easy connectivity between room conferencing systems and the desktop, enabled us to make additional inroads in our market. Sales through our reseller channel increased 49% sequentially. Our fourth quarter results also included higher than forecasted sales through Cisco, our largest channel partner, which rose 15% from the third quarter of 2007.” Mr. Raviv added: "Positive momentum in our marketplace, especially in enterprise, and a favorable competitive environment further supported our progress in the fourth quarter. As the only independent networking infrastructure provider, we now have a singular opportunity to build market share, resume our growth and accelerate our progress. We plan to pursue that opportunity aggressively. We have unified our Networking Business Unit to sharpen our focus on the enterprise market. We will increase our investment in R&D and marketing and sales in our NBU in 2008 to support and expand our OEM and reseller channels and deliver additional market-leading technology. We also will continue to invest in the product development roadmap of our Technology Business Unit. Although TBU revenues were less than forecast in the fourth quarter due to deal slippage, it continues to build our reputation as a technology leader with award-winning products and advances in SIP Server and IMS technology. We expect our investment company-wide to begin benefiting our revenues and operating profitability in the second half of the year.” Guidance The following statements are forward-looking, and actual results may differ materially. The Company expects to report revenues for the first quarter of 2008 of approximately $20.0 million and a net loss of approximately $3.5 million or $0.18 per diluted share. This includes stock-based compensation expense related to the adoption of FAS123R of $1.4 million or $0.07 per diluted share. Excluding this item, the first quarter 2008 non-GAAP net loss is expected to be $2.1 million or $0.11 per diluted share. That compares to first quarter 2007 revenues of $24.3 million, including $1.3 million related to the DVS II contract, and net income of $3.5 million or $0.15 per diluted share, which included stock-based compensation expense of $1.3 million or $0.06 per diluted share related to the adoption of FAS123R. Excluding the effect of stock-based compensation expense, net income for the first quarter of 2007 was $4.9 million or $0.21 per diluted share. (Full details are available on the Company’s web site at www.radvision.com.) GAAP versus NON-GAAP Presentation To supplement the consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), the Company uses non-GAAP measures of operating results, net income and earnings per share, which are adjusted from results based on GAAP to exclude the expenses recorded for stock compensation in accordance with SFAS 123(R). These non-GAAP financial measures are provided to enhance overall understanding of the current financial performance and prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management, and investors as these non-GAAP results exclude the expenses recorded for stock compensation in accordance with SFAS 123(R) that the Company believes are not indicative of the core operating results. Further, these non-GAAP results are one of the primary indicators management uses for assessing the Company's performance, allocating resources and planning and forecasting future periods. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. These non-GAAP measures may be different than the non-GAAP measures used by other companies. Fourth Quarter 2007 Earnings Conference Call/Webcast RADVISION will hold a conference call to discuss its fourth quarter 2007 results and first quarter 2008 outlook, today, Thursday, February 7, at 9:00 a.m. (Eastern). To access the conference call, please dial 1-877-601-3546 (International dialers may call +1-210-839-8500) by 8:45 a.m. (Eastern). The passcode "RADVISION” will be required to access the live conference call. A live webcast of the conference call also will be available on the Company's website and archived on the site until the next quarter. Simply click on the following link or copy it onto your browser: www.radvision.com/Corporate/Investors/FinancialReports/. A replay of the call will be available beginning approximately one hour after the conclusion of the call through 11:00 p.m. (Eastern) on February 14th. To access the replay, please dial 1-866-516-0670 (International dialers may call +1-203-369-2034). The PowerPoint presentation highlighting key financial metrics as well as the first quarter 2008 estimate also will be available in the Investor Relations section of the company’s website. The presentation will be available beginning at 8:00 a.m. (Eastern) on February 7th and will be archived on the website until the end of the first quarter. About RADVISION RADVISION (Nasdaq: RVSN) is the industry’s leading provider of market-proven products and technologies for unified visual communications over IP and 3G networks. With its complete set of standards-based video networking infrastructure and developer toolkits for voice, video, data and wireless communications, RADVISION is driving the unified communications evolution by combining the power of video, voice, data and wireless – for high definition videoconferencing systems, innovative converged mobile services, and highly scalable video-enabled desktop platforms on IP, 3G and emerging next-generation networks. For more information about RADVISION, visit www.radvision.com. This press release contains forward-looking statements that are subject to risks and uncertainties. Factors that could cause actual results to differ materially from these forward-looking statements include, but are not limited to, general business conditions in the industry, changes in demand for products, the timing and amount or cancellation of orders and other risks detailed from time to time in RADVISION’s filings with the Securities Exchange Commission, including its Annual Report on Form 20-F. These documents contain and identify other important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. Stockholders and other readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date on which they are made. We undertake no obligation to update publicly or revise any forward-looking statement. CONSOLIDATED STATEMENTS OF INCOME U.S. dollars in thousands, except per share data     Three months ended December 31, Twelve months ended December 31, 2007   2006 2007   2006 Unaudited Audited   Revenues $ 22,316 $ 25,261 $ 91,983 $ 91,023 Cost of revenues   4,570     5,252   18,425   18,165   Gross profit   17,746     20,009   73,558   72,858   Operating costs and expenses: Research and development 7,510 6,855 30,329 25,331 Marketing and selling 8,507 7,847 32,627 30,648 General and administrative 1,968 1,887 8,633 6,492 Patent settlement reserve   -     -   -   1,900   Total operating costs and expenses   17,985     16,589   71,589   64,371   Operating income (loss) (239 ) 3,420 1,969 8,487 Financial income, net   1,082     1,621   6,095   5,825   Income before taxes on income 843 5,041 8,064 14,312 Taxes benefit   1,610     2,114   1,790   936   Net income $ 2,453   $ 7,155 $ 9,854 $ 15,248   Basic net earnings per Ordinary share $ 0.11   $ 0.33 $ 0.45 $ 0.69   Weighted Average Number of Shares Outstanding During the Period – Basic   21,477,449     22,012,523   21,951,028   22,076,563   Diluted net earnings per Ordinary share $ 0.11   $ 0.31 $ 0.44 $ 0.67 Weighted Average Number of Shares Outstanding During the Period – Diluted   21,615,088     22,829,275   22,482,019   22,747,188 CONSOLIDATED STATEMENTS OF INCOME U.S. dollars in thousands, except per share data Reconciliation of GAAP to NON-GAAP Operating Results To supplement the consolidated financial statements presented in accordance with generally accepted accounting principles ("GAAP"), the Company uses non-GAAP measures of operating results, net income and earnings per share, which are adjusted from results based on GAAP to exclude one time patent settlement reserve and the expenses recorded for stock compensation in accordance with SFAS 123(R). These non-GAAP financial measures are provided to enhance overall understanding of the current financial performance and prospects for the future. Specifically, the Company believes the non-GAAP results provide useful information to both management, and investors as these non-GAAP results exclude one time patent settlement reserve and the expenses recorded for stock compensation in accordance with SFAS 123(R) that the Company believes are not indicative of the core operating results. Further, these non-GAAP results are one of the primary indicators management uses for assessing the Company's performance, allocating resources and planning and forecasting future periods. These measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for or superior to GAAP results. These non-GAAP measures may be different than the non-GAAP measures used by other companies. The following table reconciles the GAAP to non-GAAP operating results: Three months ended December 31, 2007 (Unaudited) GAAP results (as reported)   Non-GAAPadjustmentshare-basedcompensation   Non-GAAP results Pro Forma   Gross profit $ 17,746 $ 131 $ 17,877 Total operating costs and expenses $ 17,985 $ (1,249 ) $ 16,736 Operating income (loss) $ (239 ) $ 1,380 $ 1,141 Income before taxes on income $ 843 $ 1,380 $ 2,223 Net income $ 2,453   $ 1,380   $ 3,833 Basic net earnings per Ordinary share $ 0.11   $ 0.07   $ 0.18 Diluted net earnings per Ordinary share $ 0.11   $ 0.07   $ 0.18   Three months ended December 31, 2006 (Unaudited) GAAP results (as reported) Non-GAAPadjustmentshare-basedcompensation Non-GAAP results Pro Forma   Gross profit $ 20,009 $ 109 $ 20,118 Total operating costs and expenses $ 16,589 $ (1,210 ) $ 15,379 Operating income $ 3,420 $ 1,319 $ 4,739 Income before taxes on income $ 5,041 $ 1,319 $ 6,360 Net income $ 7,155   $ 1,319   $ 8,474 Basic net earnings per Ordinary share $ 0.33   $ 0.05   $ 0.38 Diluted net earnings per Ordinary share $ 0.31   $ 0.06   $ 0.37 CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands, except per share data   Twelve months ended December 31, 2007 (Unaudited) GAAP results (as reported)   Non-GAAPadjustmentshare-basedcompensation   Non-GAAP results Pro Forma   Gross profit $ 73,558 $ 411 $ 73,969 Total operating costs and expenses $ 71,589 $ (5,037 ) $ 66,552 Operating income $ 1,969 $ 5,448 $ 7,417 Income before taxes on income $ 8,064 $ 5,448 $ 13,512 Net income $ 9,854 $ 5,448   $ 15,302 Basic net earnings per Ordinary share $ 0.45 $ 0.25   $ 0.70 Diluted net earnings per Ordinary share $ 0.44 $ 0.24   $ 0.68         Twelve months ended December 31, 2006 (Unaudited) GAAP results (as reported) Non-GAAPadjustmentshare-basedcompensationand patentsettlementreserve Non-GAAP results Pro Forma   Gross profit $ 72,858 $ 373 $ 73,231 Total operating costs and expenses $ 64,371 $ (6,304 ) $ 58,067 Operating income $ 8,487 $ 6,677 $ 15,164 Income before taxes on income $ 14,312 $ 6,677 $ 20,989 Net income $ 15,248 $ 6,677   $ 21,925 Basic net earnings per Ordinary share $ 0.69 $ 0.30   $ 0.99 Diluted net earnings per Ordinary share $ 0.67 $ 0.29   $ 0.96 CONSOLIDATED BALANCE SHEETS U.S. dollars in thousands, except per share data   December 31, December 31, 2007 2006 Unaudited Audited ASSETS   CURRENT ASSETS: Cash and cash equivalents *) $ 45,370 $ 23,110 Short-term bank deposits *) 42,242 48,357 Short-term marketable securities *) 28,037 36,048 Trade receivables 15,011 12,866 Other accounts receivable and prepaid expenses 8,464 5,838 Inventories   1,560     2,979     Total current assets   140,684     129,198     LONG-TERM INVESTMENTS AND RECEIVABLES: Long-term bank deposits *) - 11,365 Long-term marketable securities *) 15,093 26,691 Long-term prepaid expenses 1,618 - Severance pay fund 4,555 3,481 Long-term deferred tax asset   3,394     2,797     Total long-term investments and receivables   24,660     44,334     Property and equipment, net   5,237     3,609     Goodwill   2,966     2,966     Other intangible assets, net   1,362     2,452     Total assets $ 174,909   $ 182,559     LIABILITIES AND SHAREHOLDERS' EQUITY   CURRENT LIABILITIES: Trade payables $ 2,389 $ 2,919 Deferred revenues 6,429 8,748 Accrued expenses and other accounts payable   12,607     13,870     Total current liabilities   21,425     25,537     Accrued severance pay   5,656     4,417     Total liabilities   27,081     29,954     SHAREHOLDERS' EQUITY: Ordinary shares of NIS 0.1 par value 234 228 Additional paid-in capital 135,327 126,944 Treasury stock (21,662 ) (1,670 ) Accumulated other comprehensive income 55 - Retained earnings   33,874     27,103     Total shareholders' equity   147,828     152,605     Total liabilities and shareholders' equity $ 174,909   $ 182,559     *) Total cash and liquid investments $ 130,742   $ 145,571   CONSOLIDATED STATEMENTS OF CASH FLOWS U.S. dollars in thousands   Year ended December 31, 2007   2006 Unaudited Audited Cash flows from operating activities: Net income $ 9,854 $ 15,248 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 3,633 2,939 Accrued interest, amortization of premium and accretion of discount on marketable securities and bank deposits, net 385 (905 ) Amortization of deferred stock compensation 5,448 4,776 Gain on sale of property and equipment - (22 ) Tax benefit relating to loss carryforwards resulting from exercise of stock options - (2,011 ) Increase in trade receivables, net (2,145 ) (609 ) Increase in other accounts receivable and prepaid expenses (754 ) (846 ) Decrease (increase) in inventories 1,419 (386 ) Increase in long-term prepaid expenses (1,618 ) - Increase in deferred tax asset (2,380 ) (1,571 ) Increase (decrease) in trade payables (530 ) 1,136 Increase (decrease) in deferred revenues (2,319 ) 215 Increase (decrease) in accrued expenses and other accounts payable (1,263 ) 1,992 Accrued severance pay, net   165     224     Net cash provided by operating activities   9,895     20,180     Cash flows from investing activities: Proceeds from redemption of marketable securities 64,360 63,633 Purchase of marketable securities (45,148 ) (62,982 ) Proceeds from withdrawal of bank deposits 142,831 19,132 Purchase of bank deposits (125,521 ) (49,315 ) Purchase of property and equipment (4,171 ) (2,268 ) Proceeds from sale of property and equipment   -     22     Net cash provided by (used in) investing activities   32,351     (31,778 )   Cash flows from financing activities: Purchase of treasury stock (27,017 ) (6,992 ) Exercise of options by employees 6,931 6,762 Tax benefit related to exercise of stock options   100     2,011     Net cash provided by (used in) financing activities   (19,986 )   1,781     Increase (decrease) in cash and cash equivalents 22,260 (9,817 ) Cash and cash equivalents at beginning of period   23,110     32,927     Cash and cash equivalents at end of period $ 45,370   $ 23,110     Supplemental disclosure of non-cash flows from investing and financing activities: Receivables on account of shares $ -   $ 148