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Press Release -- August 9th, 2010
Source: Broadsoft
Tags: Exchange, Video

BroadSoft Reports Second Quarter 2010 Financial Results

GAITHERSBURG, August 9, 2010 - BroadSoft, Inc. (NASDAQ:BSFT, news, filings), the leading provider of Internet protocol-based, or IP-based, communications services to the global telecommunications industry, today announced financial results for the quarter and six months ended June 30, 2010.

Results for the three months ended June 30, 2010

Total revenue was $19.8 million in the second quarter of 2010, compared to $17.7 million in the second quarter of 2009, reflecting period over period growth of 11%.

Net loss for the second quarter of 2010 was $1.8 million, or $(0.20) per basic and diluted share, compared to a net loss of $2.6 million, or $(0.42) per basic and diluted share in the second quarter of 2009. GAAP results for the second quarter of 2010 included $1.1 million of non-cash stock-based compensation expense and $0.2 million of amortization expense related to acquired intangible assets.

On a non-GAAP basis, net loss in the second quarter of 2010 was $0.5 million or $(0.03) per basic and diluted share, compared to a non-GAAP net loss of $0.6 million, or $(0.03) per basic and diluted share, in the second quarter of 2009. Non-GAAP net loss for these periods excludes the impact of non-cash stock-based compensation expense and amortization expense related to acquired intangible assets.

Results for the six months ended June 30, 2010

Total revenue was $37.6 million for the first six months of 2010, compared to $31.4 million for the first six months of 2009, reflecting period over period growth of 20%.

Net loss for the first six months of 2010 was $4.4 million, or $(0.58) per basic and diluted share, compared to a net loss of $7.9 million, or $(1.26) per basic and diluted share in the first six months of 2009. GAAP results for the first six months of 2010 included $1.4 million of non-cash stock-based compensation expense and $0.4 million of amortization expense related to acquired intangible assets.

On a non-GAAP basis, net loss in the first six months of 2010 was $2.6 million or $(0.13) per basic and diluted share, compared to a non-GAAP net loss of $5.0 million, or $(0.26) per basic and diluted share in the first six months of 2009. Non-GAAP net loss for these periods excludes the impact of non-cash stock-based compensation expense and amortization expense related to acquired intangible assets.

Management Commentary

"We are delighted to report financial results that exceeded our expectations, driven by growth from both new and existing customers," said Michael Tessler, president and chief executive officer of BroadSoft. "During the second quarter, our license revenue increased 20%, to $10.6 million, compared to the first quarter of this year, reflecting service providers' demand, as they transition from TDM to IP-based communications, for our flagship product, BroadWorks, which enables carriers to deliver feature-rich IP-based communications services to their enterprise and consumer customers. We are proud to have recently completed our initial public offering and are excited by the opportunity to share our story with a wider audience."

"We believe our software license model and maintenance and service revenues provide visibility that gives us confidence in our ability to execute against our growth objectives." said Jim Tholen, chief financial officer of BroadSoft. "Gross margins increased to 76% on a non-GAAP basis and we were able to decrease operating expenses as a percentage of revenue, pointing to the operating leverage in our model. During the quarter, we generated $4.4 million in cash flow from operations and ended the quarter with cash, cash equivalents and investments totaling $47.4 million."

Conference Call

BroadSoft will discuss its second quarter and six month results and business outlook today via teleconference at 8:00 a.m. Eastern Time. To participate in the teleconference, callers can dial the toll free number 1-877-312-5517 (U.S. callers only) or +1-760-666-3772 (from outside the U.S.). The conference call can also be heard live via audio webcast at http://investors.broadsoft.com/eventdetail.cfm?eventid=84283. To help ensure the conference begins on time, please dial in or connect via the web five minutes prior to the scheduled start time.

For those unable to participate in the live call, an audio replay will be available between 11:00 a.m. Eastern Time August 9, 2010 and 11:59 p.m. Eastern Time August 23, 2010 by calling 1-800-642-1687 or +1-706-645-9291, with Conference ID 90526404. A recording of the call will be available two hours following the conclusion of the call at http://investors.broadsoft.com until September 9, 2010.

Use of Non-GAAP Financial Measures

BroadSoft has provided in this release, and will provide on this morning's teleconference, financial information that has not been prepared in accordance with generally accepted accounting principles, or GAAP. BroadSoft uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating BroadSoft's ongoing operational performance. BroadSoft's management regularly uses these non-GAAP financial measures to understand and manage its business and believes that these non-GAAP financial measures provide meaningful supplemental information regarding the Company's performance by excluding certain non-cash expenses, and may include additional adjustments for items that are infrequent in nature. BroadSoft believes that the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial results with other companies in BroadSoft's industry, many of which present similar non-GAAP financial measures to investors. A reconciliation of the non-GAAP financial measures included in this release and to be discussed on this morning's teleconference to the most directly comparable GAAP financial measures is set forth below.

Non-GAAP net loss and net loss per share. We define non-GAAP net loss as net loss plus stock-based compensation expenses and amortization expense related to acquired intangible assets. We define non-GAAP loss per share as non-GAAP net loss divided by the weighted average shares outstanding. Also, in calculating non-GAAP net loss per share for the three and six months ended June 30, 2010 and June 30, 2009, we adjusted the GAAP weighted average shares outstanding to include shares of redeemable convertible preferred stock on an "as-if-converted to common stock" basis. We consider these non-GAAP financial measures to be useful metrics for management and investors because they exclude the effect of certain non-cash expenses so that management and our investors can compare BroadSoft's recurring core business operating results over multiple periods.

Non-GAAP gross margin, license gross margin and maintenance and professional services gross margin. We define non-GAAP gross margin as gross margin plus stock-based compensation expenses and amortization expense related to acquired intangible assets. We consider non-GAAP gross margin to be a useful metric for management and investors because it excludes the effect of certain non-cash expenses so that management and its investors can compare BroadSoft's recurring sales margins over multiple periods. Where we provide further breakdown of non-GAAP gross margin between license and maintenance and professional services, we add back the stock-based compensation expense and amortization expense, as applicable, to the related gross margin.

Non-GAAP loss from operations. We define non-GAAP loss from operations as loss from operations plus stock-based compensation expenses and amortization expense related to acquired intangible assets. We consider non-GAAP loss from operations to be a useful metric for management and investors because it excludes the effect of certain non-cash expenses so that management and our investors can compare BroadSoft's recurring core business operating results over multiple periods. Where we provide further breakdown of non-GAAP operating expenses for sales and marketing, research and development and general and administrative, we deduct stock-based compensation expense included in the applicable expense item.

The presentation of non-GAAP net loss, non-GAAP net loss per share, non-GAAP gross margin, non-GAAP loss from operations and other non-GAAP financial measures in this release and on this morning's teleconference is not meant to be a substitute for "net loss," "net loss per share," "gross margin," "loss from operations" or other financial measures presented in accordance with GAAP, but rather should be evaluated in conjunction with such data. The Company's definition of "non-GAAP net loss," "non-GAAP net loss per share," "non-GAAP gross margin," "non-GAAP loss from operations" and other non-GAAP financial measures may differ from similarly titled non-GAAP measures used by other companies and may differ from period to period. In reporting non-GAAP measures in the future, management may make other adjustments for expenses and gains that it does not consider reflective of core operating performance in a particular period and may modify "non-GAAP net loss" and "non-GAAP net loss per share," "non-GAAP gross margin," "non-GAAP loss from operations" and such other non-GAAP measures by excluding these expenses and gains.

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by their use of terms and phrases such as "believe" and other similar terms and phrases. The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to: the Company's dependence on the success of BroadWorks and on its service provider customers to sell services using its applications; claims that the Company infringes the intellectual property rights of others; the Company's dependence in large part on service providers' continued deployment of, and investment in, their IP-based networks; and the Company's ability to expand its product offerings, as well as those factors contained in the "Risk Factors" section of the Company's final prospectus dated June 16, 2010, filed with the SEC pursuant to Rule 424(b) of the Securities Act of 1933, as amended, and in the Company's other filings with the SEC. All information in this release is as of August 9, 2010. Except as required by law, the Company undertakes no obligation to update publicly any forward-looking statement made herein for any reason to conform the statement to actual results or changes in the Company's expectations.

About BroadSoft

BroadSoft provides software that enables fixed-line, mobile and cable service providers to deliver voice and multimedia services over their IP-based networks. The Company's software, BroadWorks®, enables service providers to provide enterprises and consumers with a range of cloud-based, or hosted, IP multimedia communications, such as hosted IP private branch exchanges, video calling, unified communications, collaboration and converged mobile and fixed-line services.

Financial Statements

The financial statements set forth below are not the complete set of the Company's financial statements for the quarter and are presented below without footnotes. Readers are encouraged to obtain and carefully review BroadSoft's Quarterly Report on Form 10-Q for the quarter ended June 30, 2010, including all financial statements contained therein and the footnotes thereto, when it is filed with the SEC. Once filed with the SEC, the Form 10-Q may be retrieved from the SEC's website at www.sec.gov or from BroadSoft's website at www.broadsoft.com.

Contact Information

For further information contact:

Investor Relations:
Monica Gould
+1-212-551-1459
monica@blueshirtgroup.com

Industry Analyst / Media Relations:
Alex Moorhouse
Mi Liberty
+44 (0) 207 751 4444
amoorhouse@miliberty.com

BroadSoft, Inc.
Condensed Consolidated Balance Sheets
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BroadSoft, Inc.
Condensed Consolidated Statements of Income
(Unaudited)

Summary of Consolidated Cash Flow Activity
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BroadSoft, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)

(1) For calculation of GAAP weighted average shares outstanding, the shares of common stock underlying shares of redeemable convertible preferred stock are not included for the periods prior to the IPO, whereas for the non-GAAP weighted average shares outstanding, we assume conversion of all shares of redeemable convertible preferred stock at the beginning of each respective period.

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