GAITHERSBURG, MD — (MARKET WIRE) — 11/08/10 — BroadSoft, Inc. (NASDAQ:BSFT, news, filings), the leading global provider of Internet protocol-based, or IP-based, communications services to the telecommunications industry, today announced financial results for the quarter and nine months ended September 30, 2010.
Financial Highlights For the Third Quarter of 2010
- Total revenue increased to $22.3 million; 22% growth relative to Q3 2009 and 13% growth from Q2 2010.
- License revenue increased to $12.9 million; 27% growth relative to Q3 2009 and 22% growth from Q2 2010.
- Non-GAAP diluted EPS increased to $0.08 per common share; GAAP diluted EPS increased to $0.05 per common share
Results for the three months ended September 30, 2010
Total revenue rose to a record $22.3 million in the third quarter of 2010, an increase of 22% compared to $18.2 million in the third quarter of 2009 and an increase of 13% compared to $19.8 million in the second quarter of 2010.
Net income for the third quarter of 2010 was $1.2 million, or $0.05 per diluted common share, compared to a net loss of $0.3 million, or $(0.06) per basic and diluted share in the third quarter of 2009. GAAP results for the third quarter of 2010 included $0.8 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 income in the third quarter of 2010 was $2.2 million or $0.08 per diluted share, compared to non-GAAP net income of $0.6 million, or $0.03 per diluted share, in the third quarter of 2009. Non-GAAP net income for these periods excludes the impact of non-cash stock-based compensation expense and amortization expense related to acquired intangible assets.
Management Commentary
“Our third quarter results were bolstered by the continued growing demand for our consumer and hosted unified communications applications,” said Michael Tessler, president and chief executive officer, BroadSoft. “To further strengthen the position of our telecom service provider customers, we recently announced ‘BroadCloud,’ a cloud-infrastructure service delivery platform, designed to accelerate time-to-market of highly-valued communication options. Our expanded capabilities, which include web collaboration, videoconferencing, instant messaging and presence, enable our service provider customers to offer a comprehensive, branded UC solution to their end customers.”
“In the third quarter of 2010, license revenue improved 27% year-over-year and 22% sequentially. Moreover, our operating leverage enabled us to improve operating margins and achieve profitability ahead of plan,” said Jim Tholen, chief financial officer, BroadSoft. “Gross margins increased for the second quarter in a row, rising to 79% on a non-GAAP basis. In addition, our non-GAAP income from operations rose to 11% of total revenue during the third quarter. During the third quarter, we generated $3.5 million in cash flow from operations, driven by a $7.4 million sequential increase in deferred revenue, and ended the quarter with cash and cash equivalents totaling $49.5 million.”
Results for the nine months ended September 30, 2010
Total revenue was $59.8 million for the first nine months of 2010, compared to $49.6 million for the first nine months of 2009, reflecting period over period growth of 21%.
Net loss for the first nine months of 2010 was $3.2 million, or $(0.24) per basic and diluted share, compared to a net loss of $8.2 million, or $(1.31) per basic and diluted share in the first nine months of 2009. GAAP results for the first nine months of 2010 included $2.2 million of non-cash stock-based compensation expense and $0.6 million of amortization expense related to acquired intangible assets.
On a non-GAAP basis, net loss in the first nine months of 2010 was $0.4 million or $(0.02) per basic and diluted share, compared to a non-GAAP net loss of $4.4 million, or $(0.23) per basic and diluted share in the first nine 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 and the pro forma conversion of the redeemable convertible preferred stock.
Guidance
For the fourth quarter of 2010, BroadSoft anticipates revenue of $31.0 to $32.0 million, which represents growth of 61% to 66% over fourth quarter 2009 revenue of $19.3 million. For the fourth quarter, the Company expects to achieve earnings per share on a non-GAAP basis of $0.28 to $0.31 per diluted share and on a GAAP basis, $0.23 to $0.26 per diluted share. These expectations include the impact of the Company’s recent acquisition of Casabi, Inc., which closed on October 27, 2010.
Conference Call
BroadSoft will discuss its third quarter and nine month results and business outlook today via teleconference at 5:00 p.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/events.cfm. 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 8:00 p.m. Eastern Time November 8, 2010 and 11:59 p.m. Eastern Time November 23, 2010 by calling 1-800-642-1687 or +1-706-645-9291, with Conference ID 14326033. A recording of the call will be available two hours following the conclusion of the call at http://investors.broadsoft.com until December 8, 2010.
Use of Non-GAAP Financial Measures
BroadSoft has provided in this release, and will provide on this afternoon’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 afternoon’s teleconference to the most directly comparable GAAP financial measures is set forth below.
Non-GAAP net income (loss) and net income (loss) per share. We define non-GAAP net income (loss) as net income (loss) plus stock-based compensation expense and amortization expense related to acquired intangible assets. We define non-GAAP income (loss) per share as non-GAAP net income (loss) divided by the weighted average shares outstanding. Also, in calculating non-GAAP net income (loss) per share for the three months ended September 2009 and the nine months ended September 30, 2010 and September 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 our investors because they exclude the effect of certain non-cash expenses so that management and our investors can compare BroadSoft’s 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 expense and amortization expense related to acquired intangible assets. We consider non-GAAP gross margin to be a useful metric for management and our investors because it excludes the effect of certain non-cash expenses so that management and its investors can compare BroadSoft’s 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 income (loss) from operations. We define non-GAAP income (loss) from operations as income (loss) from operations plus stock-based compensation expense and amortization expense related to acquired intangible assets. We consider non-GAAP income (loss) from operations to be a useful metric for management and our investors because it excludes the effect of certain non-cash expenses so that management and our investors can compare BroadSoft’s 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 income (loss), non-GAAP net income (loss) per share, non-GAAP gross margin, non-GAAP income (loss) from operations and other non-GAAP financial measures in this release and on this afternoon’s teleconference is not meant to be a substitute for “net income (loss),” “net income (loss) per share,” “gross margin,” “income (loss) from operations” or other financial measures presented in accordance with GAAP, but rather should be evaluated in conjunction with such data. Our definition of “non-GAAP net income (loss),” “non-GAAP net income (loss) per share,” “non-GAAP gross margin,” “non-GAAP income (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 income (loss),” “non-GAAP net income (loss) per share,” “non-GAAP gross margin,” “non-GAAP income (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 “anticipate,” “enable,” “expect,” “will,” “believe” and other similar terms and phrases, and such forward-looking statements include, but are not limited to, the statements regarding the Company’s future financial performance set forth under the heading “Guidance”. 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 Form 10-Q for the quarter ended September 30, 2010, filed with the SEC on November 8, 2010, and in the Company’s other filings with the SEC. All information in this release is as of November 8, 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 September 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.
BroadSoft, Inc.
Condensed Consolidated Balance Sheets
(Unaudited)
September 30, December 31,
2010 2009
----------- -----------
(In thousands)
Assets
Current assets:
Cash and cash equivalents $ 49,488 $ 22,869
Accounts receivable, net of allowance for
doubtful accounts of $20 and $169
at September 30, 2010 and December 31, 2009,
respectively 30,611 25,471
Other current assets 5,152 4,829
----------- -----------
Total current assets 85,251 53,169
----------- -----------
Long-term assets:
Property and equipment, net 3,104 1,563
Restricted cash 1,057 599
Intangible assets, net 2,592 3,163
Goodwill 5,537 4,728
Other long-term assets 2,039 3,441
----------- -----------
Total long-term assets 14,329 13,494
----------- -----------
Total assets $ 99,580 $ 66,663
=========== ===========
Liabilities, redeemable preferred stock,
redeemable convertible preferred stock and
stockholders' equity (deficit):
Current liabilities:
Notes payable and bank loans, current portion $ 1,179 $ 4,536
Accounts payable and accrued expenses 11,009 11,903
Deferred revenue, current portion 52,255 33,806
----------- -----------
Total current liabilities 64,443 50,245
Notes payable and bank loans 1,194 14,035
Deferred revenue 2,043 6,241
Other long-term liabilities 1,619 756
----------- -----------
Total liabilities 69,299 71,277
----------- -----------
Redeemable preferred stock and redeemable
convertible preferred stock: - 73,186
Stockholders' equity (deficit):
BroadSoft, Inc. stockholders' equity (deficit):
Common stock 247 63
Additional paid-in capital 131,419 20,340
Accumulated other comprehensive loss (1,712) (1,725)
Accumulated deficit (99,673) (96,474)
----------- -----------
Total BroadSoft, Inc. stockholders' equity
(deficit) 30,281 (77,796)
Noncontrolling interest - (4)
----------- -----------
Total stockholders' equity (deficit) 30,281 (77,800)
----------- -----------
Total liabilities and stockholders' equity
(deficit) $ 99,580 $ 66,663
=========== ===========
BroadSoft, Inc.
Condensed Consolidated Statements of Operations
(Unaudited)
Three Months Ended Nine Months Ended
September 30, September 30,
2010 2009 2010 2009
---------- --------- --------- ---------
(In thousands, except per share data)
Revenue:
Licenses $ 12,877 $ 10,170 $ 32,215 $ 27,237
Maintenance and professional
services 9,396 8,024 27,633 22,349
---------- --------- --------- ---------
Total revenue 22,273 18,194 59,848 49,586
Cost of revenue:
Licenses 1,374 1,025 3,616 3,279
Maintenance and professional
services 3,329 3,016 10,556 9,558
Amortization of intangibles 186 210 571 629
---------- --------- --------- ---------
Total cost of revenue 4,889 4,251 14,743 13,466
---------- --------- --------- ---------
Gross profit 17,384 13,943 45,105 36,120
Operating expenses:
Sales and marketing 7,789 7,034 22,601 21,628
Research and development 4,787 3,864 14,230 12,147
General and administrative 3,349 2,683 10,236 8,561
---------- --------- --------- ---------
Total operating expenses 15,925 13,581 47,067 42,336
---------- --------- --------- ---------
Income (loss) from operations 1,459 362 (1,962) (6,216)
Other expense, net: 13 339 874 1,010
Income (loss) before income
taxes 1,446 23 (2,836) (7,226)
Provision for income taxes 237 373 363 1,000
---------- --------- --------- ---------
Net income (loss) 1,209 (350) (3,199) (8,226)
---------- --------- --------- ---------
Net loss attributable to
noncontrolling interest - (1) - (3)
---------- --------- --------- ---------
Net income (loss) attributable
to BroadSoft, Inc. $ 1,209 $ (349) $ (3,199) $ (8,223)
========== ========= ========= =========
Net income (loss) per common
share available to BroadSoft,
Inc. common stockholders:
Basic $ 0.05 $ (0.06) $ (0.24) $ (1.31)
Diluted $ 0.05 $ (0.06) $ (0.24) $ (1.31)
Weighted average common shares
outstanding:
Basic 24,688 6,285 13,369 6,279
Diluted 26,646 6,285 13,369 6,279
Stock-based compensation
expense included above:
Cost of revenue $ 63 $ 86 $ 155 $ 283
Sales and marketing 239 265 604 926
Research and development 196 150 463 665
General and administrative 324 247 984 1,324
Summary of Consolidated Cash Flow Activity
(unaudited)
Nine Months Ended
September 30,
2010 2009
----------- -----------
(In thousands)
Net cash provided by operating activities $ 10,392 $ 9,487
Net cash used in investing activities (3,123) (905)
Net cash provided by (used in) financing
activities 19,314 (2,102)
BroadSoft, Inc.
Reconciliation of Non-GAAP Financial Measures
(Unaudited)
Three
Three Months Ended Months Ended Nine Months Ended
September 30, June 30, September 30,
2010 2009 2010 2010 2009
--------- --------- --------- --------- ---------
(In thousands, except per share data)
Non-GAAP gross
profit:
GAAP gross profit $ 17,384 $ 13,943 $ 14,711 $ 45,105 $ 36,120
(percent of total
revenue) 78% 77% 74% 75% 73%
Plus:
Stock-based
compensation
expense 63 86 57 155 283
Amortization of
acquired
intangible assets 186 210 192 571 629
--------- --------- --------- --------- ---------
Non-GAAP gross
profit $ 17,633 $ 14,239 $ 14,960 $ 45,831 $ 37,032
========= ========= ========= ========= =========
(percent of total
revenue) 79% 78% 76% 77% 75%
GAAP licenses gross
profit $ 11,317 $ 8,935 $ 9,337 $ 28,028 $ 23,329
(percent of
related revenue) 88% 88% 88% 87% 86%
Plus:
Stock-based
compensation
expense 21 45 26 69 150
Amortization of
acquired
intangible assets 186 210 192 571 629
Non-GAAP license
gross profit $ 11,524 $ 9,190 $ 9,555 $ 28,668 $ 24,108
========= ========= ========= ========= =========
(percent of
related revenue) 89% 90% 91% 89% 89%
GAAP maintenance and
professional
services gross
profit $ 6,067 $ 5,008 $ 5,374 $ 17,077 $ 12,791
(percent of
related revenue) 65% 62% 58% 62% 57%
Plus:
Stock-based
compensation
expense 42 41 31 86 133
Non-GAAP maintenance
and professional
services gross
profit $ 6,109 $ 5,049 $ 5,405 $ 17,163 $ 12,924
========= ========= ========= ========= =========
(percent of
related revenue) 65% 63% 59% 62% 58%
Non-GAAP income
(loss) from
operations:
GAAP income (loss)
from operations $ 1,459 $ 362 $ (1,559) $ (1,962) $ (6,216)
(percent of total
revenue) 7% 2% -8% -3% -13%
Plus:
Stock-based
compensation
expense 822 748 1,063 2,206 3,198
Amortization of
acquired
intangible assets 186 210 192 571 629
--------- --------- --------- --------- ---------
Non-GAAP income
(loss) from
operations $ 2,467 $ 1,320 $ (304) $ 815 $ (2,389)
========= ========= ========= ========= =========
(percent of total
revenue) 11% 7% -2% 1% -5%
GAAP operating
expense $ 15,925 $ 13,581 $ 16,270 $ 47,067 $ 42,336
Less:
Stock-based
compensation
expense 822 748 1,063 2,206 3,198
--------- --------- --------- --------- ---------
Non-GAAP operating
expense $ 15,103 $ 12,833 $ 15,207 $ 44,861 $ 39,138
========= ========= ========= ========= =========
(as percent of
total revenue) 68% 71% 77% 75% 79%
GAAP sales and
marketing expense $ 7,789 $ 7,034 $ 7,710 $ 22,601 $ 21,628
Less:
Stock-based
compensation
expense 239 265 254 604 926
--------- --------- --------- --------- ---------
Non-GAAP sales and
marketing expense $ 7,550 $ 6,769 $ 7,456 $ 21,997 $ 20,702
========= ========= ========= ========= =========
(as percent of
total revenue) 34% 37% 38% 37% 42%
GAAP research and
development expense $ 4,787 $ 3,864 $ 4,952 $ 14,230 $ 12,147
Less:
Stock-based
compensation
expense 196 150 201 463 665
--------- --------- --------- --------- ---------
Non-GAAP research
and development
expense $ 4,591 $ 3,714 $ 4,751 $ 13,767 $ 11,482
========= ========= ========= ========= =========
(as percent of
total revenue) 21% 20% 24% 23% 23%
GAAP general and
administrative
expense $ 3,349 $ 2,683 $ 3,608 $ 10,236 $ 8,561
Less:
Stock-based
compensation
expense 324 247 551 984 1,324
--------- --------- --------- --------- ---------
Non-GAAP general and
administrative
expense $ 3,025 $ 2,436 $ 3,057 $ 9,252 $ 7,237
========= ========= ========= ========= =========
(as percent of
total revenue) 14% 13% 15% 15% 15%
Non-GAAP net income
(loss) and income
(loss) per share:
GAAP net income
(loss) $ 1,209 $ (349) $ (1,774) $ (3,199) $ (8,223)
Plus:
Stock-based
compensation
expense 822 748 1,063 2,206 3,198
Amortization of
acquired
intangible assets 186 210 192 571 629
--------- --------- --------- --------- ---------
Non-GAAP net income
(loss) $ 2,217 $ 609 $ (519) $ (422) $ (4,396)
========= ========= ========= ========= =========
GAAP net income
(loss) per basic
common share $ 0.05 $ (0.06) $ (0.20) $ (0.24) $ (1.31)
Plus:
Adjustment for
preferred stock
conversion - 0.04 0.11 0.09 0.88
Stock-based
compensation
expense 0.03 0.04 0.05 0.10 0.17
Amortization of
acquired
intangible assets 0.01 0.01 0.01 0.03 0.03
--------- --------- --------- --------- ---------
Non-GAAP net income
(loss) per basic
common share $ 0.09 $ 0.03 $ (0.03) $ (0.02) $ (0.23)
========= ========= ========= ========= =========
GAAP net income per
diluted common
share (1) $ 0.05 $ (0.06)
Plus:
Adjustment for
preferred stock
conversion - 0.04
Stock-based
compensation
expense 0.03 0.04
Amortization of
acquired
intangible assets - 0.01
--------- ---------
Non-GAAP net income
per diluted common
share $ 0.08 $ 0.03
========= =========
Non-GAAP weighted
average shares
outstanding: (2)
GAAP weighted
average shares
outstanding 24,688 6,285 8,824 13,369 6,279
Add:
Adjustment for
convertible
preferred stock
conversion - 12,712 11,538 8,119 12,712
Non-GAAP weighted
average shares
outstanding 24,688 18,997 20,362 21,488 18,991
(1) The three months ended June 30, 2010, and the nine months ended
September 30, 2010 and 2009 are not presented because the effect of
the share equivalents is anti-dilutive given the Company's losses for
these periods.
(2) For the 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 the conversion of all shares of redeemable convertible
preferred stock at the beginning of each respective period.
BroadSoft, Inc.
Reconciliation of Expected Non-GAAP Financial Measures
(Unaudited)
Three months ended Year Ending
December 31, 2010 December 31, 2010
--------------------- ---------------------
Low End High End Low End High End
---------- ---------- ---------- ---------
(In thousands, except per share data)
Non-GAAP net income:
GAAP net income $ 6,200 $ 7,000 $ 3,000 $ 3,800
Plus:
Stock-based compensation
expense 1,000 1,000 3,200 3,200
Amortization of acquired
intangible assets 200 200 800 800
---------- ---------- ---------- ---------
Non-GAAP net income $ 7,400 $ 8,200 $ 7,000 $ 7,800
========== ========== ========== =========
Non-GAAP income per share:
GAAP net income per basic
common share $ 0.25 $ 0.28 $ 0.18 $ 0.23
Plus:
Adjustment for preferred stock
conversion - - (0.05) (0.06)
Stock-based compensation
expense 0.04 0.04 0.14 0.14
Amortization of acquired
intangible assets 0.01 0.01 0.04 0.04
---------- ---------- ---------- ---------
Non-GAAP net income per basic
common share $ 0.30 $ 0.33 $ 0.31 $ 0.35
========== ========== ========== =========
GAAP net income per diluted
common share $ 0.23 $ 0.26 $ 0.11 $ 0.14
Plus:
Adjustment for preferred stock
conversion - - 0.01 0.01
Stock-based compensation
expense 0.04 0.04 0.13 0.13
Amortization of acquired
intangible assets 0.01 0.01 0.03 0.03
---------- ---------- ---------- ---------
Non-GAAP net income per diluted
common share $ 0.28 $ 0.31 $ 0.28 $ 0.31
---------- ---------- ---------- ---------
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
Source: BroadSoft, Inc.
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