Backweb (NASDAQ:BWEB)
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BackWeb Technologies Ltd. (Nasdaq:BWEB), a leading
provider of offline and mobile Web software, today reported financial
results for its second quarter and six months ended June 30, 2006. The
Company also reported that it is being impacted by a May 2006
implementation of the $1.00 minimum bid price rule to the securities
of all non-U.S. companies listed on the Nasdaq Capital Market. As a
non-U.S. company, BackWeb was previously exempt from the minimum bid
price rule. The Company has now received notification from The Nasdaq
Stock Market indicating that for 30 consecutive business days, the bid
price of BackWeb's Ordinary Shares has closed below the minimum $1.00
per share requirement for continued inclusion on the Nasdaq Capital
Market. BackWeb has been given until January 16, 2007 to gain
compliance with the Rule.
Q2 Results
BackWeb reported Q2 2006 revenue of $1.14 million, below revenue
of $1.66 million in Q1 2006 and revenue of $1.72 million in Q2 2005.
The decrease in total revenue was a result of lower consulting and
license revenue. License revenue declined as several larger
anticipated sales were not completed as expected. Consulting revenue
declined as one expected customer project was delayed, and the Company
is seeing an increasing share of BackWeb product-related services
performed by BackWeb partners.
License sales in the Q2 2006 period were $462,000 and consisted of
orders from Janssen, L.P., a division of Johnson & Johnson; Bristol
Meyers Squibb; and the United States Department of Agriculture, as
well as recognition of other license and royalty revenues. As
anticipated, Q2 2006 included no license revenue contribution from
F-Secure Corporation, whereas during Q1 2006 and Q2 2005 the Company
recognized license revenue of $245,000 and $375,000, respectively,
from this customer.
Total net expenses in the quarter were $2.24 million, resulting in
a net loss of $1.10 million, or $0.03 per share, for Q2 2006. This
compares to a net loss of $842,000, or $0.02 per share, in Q1 2006 and
a net loss of $233,000, or $0.01 per share, in Q2 2005. Non-cash
stock-based compensation (FAS 123R) related expenses of approximately
$100,000 were included in operating expenses in both Q2 2006 and in Q1
2006, with no comparable expense reflected in the second quarter and
six months results of 2005. Q1 and Q2 2006 were the first periods in
which FAS 123R expenses were included in the Company's income
statement.
BackWeb's CEO, Bill Heye, stated, "In Q2 we did not convert
several larger opportunities in our pipeline into orders, many of
which we believe will close in coming quarters. Although revenue was
down for the quarter and clearly a disappointment, our market remains
solid with a pipeline of opportunities and increased activity and
sales prospects with our partners. Our current customers continue to
license additional software and to renew their maintenance contracts
at a rate greater than 80%.
"As discussed before, we view the continued development of key
partnerships as a primary strategic goal, and we are executing on that
goal. This quarter, one of our license sales was driven by a new
solutions integration partner, and our other license sales were made
to customers with whom our partners are active. Working with partners
cost effectively raises awareness for our products and drives license
sales. It also helps our customers integrate their BackWeb solutions
more easily into their existing service provider relationships and
results in the lowest total cost of ownership. Our work with global
and regional services partners such as Tata Consultancy Services,
BearingPoint, Wipro Technologies, BusinessEdge Solutions and Adjoined
Consulting (now Kanbay International) has accelerated.
"As these partnerships have expanded, our direct consulting
services revenue has decreased and our consulting services headcount
is too high. We are therefore reducing our expenses so that we can
better align our costs with revenues as we pursue our goal of
profitability."
Through planned staffing reductions in its services unit, some
other departments and certain other expense reductions, BackWeb seeks
to reduce its ongoing expenses by approximately 20% from Q2 2006
levels. The reductions are designed to reduce the Company's quarterly
cash burn and conserve its cash position. BackWeb anticipates a charge
of approximately $200,000 in the third quarter to reflect severance
and other costs related to the personnel and expense reductions. The
Q3 charge is expected to offset initial cost reductions and contribute
to total expenses in Q3 that should be equal to or slightly above Q2
2006 levels. The reductions will begin to benefit the Company's Q4
2006 results.
BackWeb's Vice President, Finance, Ken Holmes, commented, "Our
guiding strategy continues to be growing our customer base and revenue
through productive partnerships with industry leaders while also
ensuring BackWeb remains sufficiently funded to support this business
model. The reductions we are making now, which make both financial and
strategic sense, should enhance our ability to execute our business
plan going forward.
"BackWeb's balance sheet and cash position remained sound, with no
long-term debt and cash investments totaling approximately $6.2
million as of June 30, 2006. Q2 cash flow benefited from collection of
accounts receivable related to large sales completed in prior quarters
that were not collected until the second quarter of 2006. Given
planned spending levels following our expense reductions, we believe
BackWeb has sufficient capital to meet the needs of the business going
forward and to execute on our business plan."
NASDAQ Non-Compliance Notice
In May 2006, Nasdaq implemented a change in its continued listing
requirements to stipulate that non-U.S. companies must now comply with
Nasdaq Marketplace Rule 4320(e)(2)(E)(i) (the Rule) which states that
the closing per share bid price of Nasdaq listed companies must be at
or above at $1.00. As a result, BackWeb must now comply with this Rule
and has received notification from Nasdaq indicating that for the last
30 consecutive business days, the bid price of the Company's Ordinary
Shares has closed below the minimum $1.00 per share requirement for
continued inclusion on the Nasdaq Capital Market. In accordance with
Nasdaq rules, BackWeb will be provided 180 calendar days, or until
January 16, 2007, to gain compliance by having the bid price of its
shares close at $1.00 per share or more for a minimum of 10
consecutive trading days.
If BackWeb has not gained compliance by January 16, 2007, Nasdaq
staff will determine if the Company continues to meet The Nasdaq
Capital Market initial listing criteria as set forth in Marketplace
Rule 4320(e), except for the bid price requirement. If it meets the
initial listing criteria, Nasdaq staff will notify the Company that it
has been granted an additional 180 calendar-day compliance period. If
the Company is not eligible for an additional compliance period,
Nasdaq staff will provide written notification that the Company's
Ordinary Shares will be delisted. At that time, the Company may appeal
the Nasdaq staff's determination to delist its Ordinary Shares to a
Nasdaq Listing Qualifications Panel.
About BackWeb Technologies:
BackWeb (http://www.backweb.com) mobilizes critical web
applications and content for mobile workforces and remote offices.
Mobile professionals can be productive anytime, anywhere, without
interruption, regardless of connection status or network availability.
BackWeb's patented web and polite synchronization mobile solution
delivers a seamless and simple user experience. The solution is
commonly deployed to sales forces, field employees, mobile managers
and remote operations. Typical e-business applications include
enterprise sales force automation, CRM, e-learning and training and
Human Capital Management (HCM). Content examples include document
repositories and rich media.
BackWeb customers include market leaders such as Boehringer
Ingelheim, Eastman Kodak, GE Healthcare, Hewlett-Packard, Johnson &
Johnson, KLA Tencor, Lam Research, and Pfizer. BackWeb also serves
customers through partnerships with BEA, Oracle PeopleSoft and SAP.
BackWeb's operations are cantered in San Jose, California, New York,
New York, and Rosh Ha 'akin, Israel. Make every minute of your mobile
professional's day productive; visit www.backweb.com or call (877)
222-5932.
(C) 2006 BackWeb Technologies Ltd. All rights reserved. BackWeb is
a registered trademark and Offline Access Server is a trademark of
BackWeb Technologies Ltd. All other trademarks are property of their
respective owners.
Cautionary Note regarding Forward-Looking Statements
Statements in this news release, which are not purely historical,
are forward-looking statements within the meaning of Section 27A of
the Securities Act of 1933 and Section 21E of the Securities Exchange
Act of 1934, including statements of beliefs, plans, expectations or
intentions regarding the future. Such forward-looking statements
include, but are not limited to, statements regarding: the demand for
the Company's products and services and its pipeline of opportunities;
the level of activity and sales prospects with the Company's partners;
planned measures to reduce the Company's expenses, including planned
staffing reductions in the Company's services unit and outsourcing
some services to partners; the level of savings the Company expects to
realize, and the amount of the charge the Company expects to incur
from such measures; the Company's ability to meet the needs of its
business and execute on its business plan based on its level of
capital; and the Company's ability to regain compliance with NASDAQ's
minimum bid price per share requirement. Actual results could differ
materially from those in such forward-looking statements. Factors that
could cause actual results to differ materially from expectations
include, but are not limited to: the Company has a history of
operating losses and expects to continue to incur losses; the
uncertainty of market acceptance of offline access products or our
ability to license those products to customers; general economic
conditions or any downturn in IT industry spending; the ability of
BackWeb to develop innovative technology and deliver solutions that
meet customer needs; and the potential emergence of competitive
technologies or competitor companies. In addition, please refer to our
periodic filings with the Securities and Exchange Commission,
including our report on Form 10-Q for the quarter ended March 31,
2006, which contain more detailed descriptions of the risk factors
facing our business. BackWeb assumes no obligation to update any of
the forward-looking statements in this release.
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BackWeb Technologies Ltd.
Condensed Consolidated Statements of Operations
(In thousands, except per share data)
Three months ended Six months ended
---------------------- ---------------------
June 30, June 30, June 30, June 30,
2006 2005 2006 2005
Unaudited Unaudited Unaudited Unaudited
---------- ---------- ---------- ---------
Revenue:
License $ 462 $ 859 $ 1,253 $ 1,627
Service 680 859 1,545 1,748
---------- ---------- ---------- ---------
Total revenue 1,142 1,718 2,798 3,375
Cost of revenue:
License 19 7 40 13
Service 182 193 422 351
---------- ---------- ---------- ---------
Total cost of
revenue 201 200 462 364
---------- ---------- ---------- ---------
Gross profit 941 1,518 2,336 3,011
---------- ---------- ---------- ---------
Operating expenses:
Research and
development 619 547 1,202 1,140
Sales and marketing 980 805 2,054 1,530
General and
administrative 479 446 1,084 850
---------- ---------- ---------- ---------
Total operating
expenses 2,078 1,798 4,340 3,520
---------- ---------- ---------- ---------
Loss from operations (1,137) (280) (2,004) (509)
Finance and other
income, net 40 47 65 27
---------- ---------- ---------- ---------
Net loss $ (1,097) $ (233) $ (1,939) $ (482)
========== ========== ========== =========
Net loss per share $ (0.03) $ (0.01) $ (0.03) $ (0.01)
========== ========== ========== =========
Shares used in
computing net loss per
share 41,250 40,993 41,181 40,923
========== ========== ========== =========
BackWeb Technologies Ltd.
Condensed Consolidated Balance Sheets
(In thousands)
June 30, December 31,
2006 2005
Unaudited
-----------
ASSETS
Current assets:
Cash and investments $ 6,168 $ 7,876
Trade accounts receivable, net 1,308 1,554
Other current assets 427 325
----------- -----------
Total current assets 7,903 9,755
Long-term investments and other assets 44 35
Property and equipment, net 177 213
----------- -----------
Total assets $ 8,124 $ 10,003
=========== ===========
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued liabilities $ 1,844 $ 1,978
Deferred revenue 890 976
----------- -----------
Total current liabilities 2,734 2,954
Long-term liabilities - 8
Total shareholders' equity 5,390 7,041
----------- -----------
Total liabilities and shareholders'
equity $ 8,124 $ 10,003
=========== ===========
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