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Press Release -- November 7th, 2011
Source: Broadsoft
Tags: Earnings, Equipment, Exchange, Video

BroadSoft Reports Record Third Quarter 2011 Financial Results

GAITHERSBURG, MD -- November 7, 2011 -- 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 record third quarter and nine months revenue and profitability for the period ended September 30, 2011.

Financial Highlights For the Third Quarter of 2011

  • Total revenue increased 60% year-over-year to $35.7 million
  • GAAP gross profit increased to 83% of total revenue; non-GAAP gross profit increased to 84% of total revenue
  • GAAP income from operations increased to $9.2 million or 26% of revenue; non-GAAP income from operations increased to $11.3 million or 32% of revenue
  • GAAP diluted EPS increased to $0.26 per common share compared to GAAP EPS of $0.05 per share in the third quarter of 2010; non-GAAP diluted EPS increased to $0.38 per common share compared to $0.08 per share in the third quarter of 2010

Results for the three months ended September 30, 2011

Total revenue rose to $35.7 million in the third quarter of 2011, an increase of 60% compared to $22.3 million in the third quarter of 2010.

Net income for the third quarter of 2011 was $7.3 million, or $0.26 per diluted common share, compared to net income of $1.2 million, or $0.05 per basic and diluted share in the third quarter of 2010.

On a non-GAAP basis, net income in the third quarter of 2011 was $10.5 million, or $0.38 per diluted share, compared to non-GAAP net income of $2.2 million, or $0.08 per diluted share, in the third quarter of 2010. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.

Management Commentary
"We believe our third quarter results demonstrate the significant value offered by our hosted unified communications applications," said Michael Tessler, president and chief executive officer, BroadSoft. "To further strengthen the offerings of our service provider customers, we recently announced BroadTouch, a simple and intuitive user experience interface that enables end users to harness the combined power of BroadWorks and BroadCloud services. Moreover, we expanded our solutions in both the business and consumer segments with the acquisitions of iLinc and Movial Applications."

"We are very pleased to report record third quarter results, which were driven by broad-based demand from our service provider customers, highlighted by a sizeable order for our newly updated hosted call center applications," said Jim Tholen, chief financial officer, BroadSoft. "Our margins and profitability rose to near record levels as our non-GAAP income from operations advanced to 32% of total revenue during the third quarter. In addition, we generated $9.9 million in cash flow from operations and ended the quarter with cash, cash equivalents and investments totaling $192 million."

Results for the nine months ended September 30, 2011

Total revenue was $97.5 million for the first nine months of 2011, an increase of 63% compared to $59.8 million for the first nine months of 2010.

Net income for the first nine months of 2011 was $26.8 million, or $0.96 per diluted share, compared to a net loss of $3.2 million, or $(0.24) per basic and diluted share in the first nine months of 2010. In addition, GAAP results for the nine months ended September 30, 2011 included an income tax benefit of $10.0 million, or $0.36 per diluted common share, resulting from the release of a tax valuation allowance.

On a non-GAAP basis, net income in the first nine months of 2011 was $23.8 million, or $0.85 per diluted share, compared to a non-GAAP net loss of $0.4 million, or $(0.02) per basic and diluted share in the first nine months of 2010. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.

Guidance

For the fourth quarter of 2011, BroadSoft anticipates revenue of $36.0 to $38.0 million. For the fourth quarter, the Company expects to achieve earnings on a non-GAAP basis of $0.23 to $0.30 per diluted share, and on a GAAP basis of $0.17 to $0.24 per diluted share. GAAP results include an estimated income tax benefit of $0.06 per diluted common share resulting from the release of a tax valuation allowance.

For the full year 2011, BroadSoft is increasing its guidance and now expects revenue of $133.0 to $135.0 million, reflecting growth of 39% to 41% over 2010 revenue of $95.6 million. The Company anticipates full year 2011 earnings on a non-GAAP basis of $1.08 to $1.15 per diluted common share and on a GAAP basis of $1.12 to $1.19 per diluted common share.

The fourth quarter and full year GAAP and non-GAAP expectations include the impact of the Company's recent acquisitions of iLinc Communications, Inc. and Movial Applications Oy, which closed on September 30, 2011 and October 21, 2011, respectively. As part of the guidance above, the Company expects these acquisitions to contribute an aggregate of approximately $1 million in revenue for the fourth quarter of 2011.

Conference Call

For those unable to participate in the live call, an audio replay will be available between 11:00 a.m. Eastern Time November 7, 2011 and 11:59 p.m. Eastern Time November 24, 2011 by calling Toll-Free: 1-855-859-2056 or +1-404-537-3406, with Conference ID: 13862317. A recording of the call will be available two hours following the conclusion of the call at http://investors.broadsoft.com until December 7, 2011.

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 income (loss) and net income (loss) per share. BroadSoft defines non-GAAP net income (loss) as net income (loss) plus stock-based compensation expense, amortization expense for acquired intangible assets and non-cash interest expense on the Company's convertible notes, less tax benefit related to valuation allowance release. BroadSoft defines 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 loss per share for the three and nine months ended September 30, 2010, BroadSoft adjusted the GAAP weighted average shares outstanding to include shares of redeemable convertible preferred stock on an "as-if-converted to common stock" basis. BroadSoft considers 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 investors can compare BroadSoft's core business operating results over multiple periods.

Non-GAAP gross margin, license gross margin and maintenance and services gross margin. BroadSoft defines non-GAAP gross margin as gross margin plus stock-based compensation expense and amortization expense for acquired intangible assets. BroadSoft considers 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 BroadSoft provides further breakdown of non-GAAP gross margin between license and maintenance services, the Company adds back the stock-based compensation expense and amortization expense, as applicable, to the related gross margin.

Non-GAAP income (loss) from operations. BroadSoft defines non-GAAP income (loss) from operations as income (loss) from operations plus stock-based compensation expense and amortization expense for acquired intangible assets. BroadSoft considers non-GAAP income (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 investors can compare BroadSoft's core business operating results over multiple periods. Where BroadSoft provides further breakdown of non-GAAP operating expenses for sales and marketing, research and development and general and administrative, the Company deducts 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 morning'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. BroadSoft's 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, 2011 filed with the Securities and Exchange Commission, or SEC, on November 7, 2011, and in the Company's other filings with the SEC. All information in this release is as of November 7, 2011. 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, 2011, 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,

                                                    2011           2010

                                               -------------  -------------

                                                (In thousands, except share

                                                    and per share data)

Assets:

Current assets:

  Cash and cash equivalents                    $      85,825  $      47,254

  Short-term investments                              78,919         13,703

  Accounts receivable, net of allowance for

   doubtful accounts of $100 and $38 at

   September 30, 2011 and December 31, 2010,

   respectively                                       33,613         40,491

  Deferred tax asset                                  19,819              -

  Other current assets                                 5,359          4,866

                                               -------------  -------------

    Total current assets                             223,535        106,314

                                               -------------  -------------

Long-term assets:

  Property and equipment, net                          4,119          3,590

  Long-term investments                               27,177          4,970

  Restricted cash                                        937            972

  Intangible assets, net                               7,583          3,709

  Goodwill                                            11,490          6,226

  Other long-term assets                               3,160          1,575

                                               -------------  -------------

    Total long-term assets                            54,466         21,042

                                               -------------  -------------

      Total assets                             $     278,001  $     127,356

                                               =============  =============

Liabilities and stockholders' equity:

Current liabilities:

  Accounts payable and accrued expenses        $      12,987  $      12,439

  Notes payable and bank loans, current portion          864          1,170

  Deferred revenue, current portion                   48,084         57,437

                                               -------------  -------------

      Total current liabilities                       61,935         71,046

Convertible senior notes                              80,609              -

Notes payable and bank loans                               -            800

Deferred revenue, net of current portion               1,920          1,827

Deferred tax liability                                 6,922              -

Other long-term liabilities                            1,045          1,138

                                               -------------  -------------

      Total liabilities                              152,431         74,811

                                               -------------  -------------

Stockholders' equity:

    Preferred stock, $0.01 par value per share;

     5,000,000 shares authorized at September

     30, 2011 and December 31, 2010; no shares

     issued and outstanding at September 30,

     2011 and December 31, 2010                            -              -

    Common stock, par value $0.01 per share;

     100,000,000 shares authorized at September

     30, 2011 and December 31, 2010; 27,006,421

     and 25,452,227 shares issued and

     outstanding at September 30, 2011 and

     December 31, 2010, respectively                     270            255

    Additional paid-in capital                       189,226        142,508

    Accumulated other comprehensive loss              (2,275)        (1,736)

    Accumulated deficit                              (61,651)       (88,482)

                                               -------------  -------------

Total stockholders' equity                           125,570         52,545

                                               -------------  -------------

Total liabilities and stockholders' equity     $     278,001  $     127,356

                                               -------------  -------------

                              BroadSoft, Inc.

              Condensed Consolidated Statements of Operations

                                (Unaudited)

                              Three Months Ended       Nine Months Ended

                                September 30,            September 30,

                           ----------------------- ------------------------

                               2011        2010        2011         2010

                           ----------- ----------- -----------  -----------

                                 (In thousands, except per share data)

Revenue:

  Licenses                 $    17,414 $    12,876 $    51,807  $    32,215

  Maintenance and services      18,266       9,396      45,706       27,633

                           ----------- ----------- -----------  -----------

    Total revenue               35,680      22,272      97,513       59,848

Cost of revenue:

  Licenses                       1,275       1,373       3,896        3,616

  Maintenance and services       4,568       3,329      13,518       10,556

  Amortization of

   intangibles                     236         186         726          571

                           ----------- ----------- -----------  -----------

    Total cost of revenue        6,079       4,888      18,140       14,743

                           ----------- ----------- -----------  -----------

Gross profit                    29,601      17,384      79,373       45,105

Operating expenses:

  Sales and marketing            8,581       7,789      26,142       22,601

  Research and development       6,587       4,787      20,133       14,230

  General and

   administrative                5,269       3,349      14,151       10,236

                           ----------- ----------- -----------  -----------

    Total operating

     expenses                   20,437      15,925      60,426       47,067

                           ----------- ----------- -----------  -----------

Income (loss) from

 operations                      9,164       1,459      18,947       (1,962)

Other expense, net:              1,543          13       1,714          874

                           ----------- ----------- -----------  -----------

Income (loss) before income

 taxes                           7,621       1,446      17,233       (2,836)

  Provision for (benefit

   from) income taxes              276         237      (9,598)         363

                           ----------- ----------- -----------  -----------

|Net income (loss)         $     7,345 $     1,209 $    26,831  $    (3,199)

                           =========== =========== ===========  ===========

Net income (loss) per

 common share available to

 BroadSoft, Inc. common

 stockholders:

  Basic                    $      0.27 $      0.05 $      1.01  $     (0.24)

  Diluted                  $      0.26 $      0.05 $      0.96  $     (0.24)

Weighted average common

 shares outstanding:

  Basic                         26,953      24,688      26,447       13,369

  Diluted                       27,935      26,646      27,839       13,369

Stock-based compensation

 expense included above:

  Cost of revenue          $       287 $        63 $       564  $       155

  Sales and marketing              466         239       1,215          604

  Research and development         506         196       1,263          463

  General and

   administrative                  631         324       1,851          984

                 Summary of Consolidated Cash Flow Activity

                                (unaudited)

                                                      Nine Months Ended

                                                        September 30,

                                                 --------------------------

                                                     2011          2010

                                                 ------------  ------------

Net cash provided by operating activities              21,887        10,392

Net cash used in investing activities                (100,869)       (3,123)

Net cash provided by financing activities             117,614        19,314

                              BroadSoft, Inc.

               Reconciliation of Non-GAAP Financial Measures

                                (Unaudited)

                                              Three

                       Three Months Ended     Months     Nine Months Ended

                          September 30,       Ended        September 30,

                                             June 30,

                         2011       2010       2011       2011       2010

                      ---------  ---------  ---------  ---------  ---------

                                          (In thousands)

Non-GAAP gross

 profit:

GAAP gross profit     $  29,601  $  17,384  $  25,948  $  79,373  $  45,105

  (percent of total

   revenue)                  83%        78%        81%        81%        75%

Plus:

  Stock-based

   compensation

   expense                  287         63        211        564        155

  Amortization of

   acquired

   intangible assets        236        186        251        726        571

                      ---------  ---------  ---------  ---------  ---------

Non-GAAP gross profit $  30,124  $  17,633  $  26,410  $  80,663  $  45,831

                      =========  =========  =========  =========  =========

  (percent of total

   revenue)                  84%        79%        82%        83%        77%

GAAP license gross

 profit               $  15,903  $  11,317  $  17,606  $  47,185  $  28,028

  (percent of related

   revenue)                  91%        88%        92%        91%        87%

Plus:

  Stock-based

   compensation

   expense                  110         21         62        203         69

  Amortization of

   acquired

   intangible assets        236        186        251        726        571

Non-GAAP license

 gross profit         $  16,249  $  11,524  $  17,919  $  48,114  $  28,668

                      =========  =========  =========  =========  =========

  (percent of related

   revenue)                  93%        89%        93%        93%        89%

GAAP maintenance and

 services gross

 profit               $  13,698  $   6,067  $   8,342  $  32,188  $  17,077

  (percent of related

   revenue)                  75%        65%        64%        70%        62%

Plus:

  Stock-based

   compensation

   expense                  177         42        149        361         86

Non-GAAP maintenance

 and services gross

 profit               $  13,875  $   6,109  $   8,491  $  32,549  $  17,163

                      =========  =========  =========  =========  =========

  (percent of related

   revenue)                  76%        65%        65%        71%        62%

                              BroadSoft, Inc.

         Reconciliation of Non-GAAP Financial Measures (continued)

                                (Unaudited)

                                             Three

                      Three Months Ended     Months     Nine Months Ended

                         September 30,       Ended        September 30,

                                            June 30,

                        2011       2010       2011       2011       2010

                     ---------  ---------  ---------  ---------  ---------

                                         (In thousands)

Non-GAAP income from

 operations:

GAAP income (loss)

 from operations     $   9,164  $   1,459  $   5,645  $  18,947  $  (1,962)

  (percent of total

   revenue)                 26%         7%        18%        19%        (3)%

Plus:

  Stock-based

   compensation

   expense               1,890        822      1,901      4,893      2,206

  Amortization of

   acquired

   intangible assets       236        186        251        726        571

                     ---------  ---------  ---------  ---------  ---------

Non-GAAP income from

 operations          $  11,290  $   2,467  $   7,797  $  24,566  $     815

                     =========  =========  =========  =========  =========

  (percent of total

   revenue)                 32%        11%        24%        25%         1%

GAAP operating

 expense             $  20,437  $  15,925  $  20,303  $  60,426  $  47,067

Less:

  Stock-based

   compensation

   expense               1,603        759      1,690      4,329      2,051

                     ---------  ---------  ---------  ---------  ---------

Non-GAAP operating

 expense             $  18,834  $  15,166  $  18,613  $  56,097  $  45,016

                     =========  =========  =========  =========  =========

  (as percent of

   total revenue)           53%        68%        58%        58%        75%

GAAP sales and

 marketing expense   $   8,581  $   7,789  $   9,077  $  26,142  $  22,601

Less:

  Stock-based

   compensation

   expense                 466        239        415      1,215        604

                     ---------  ---------  ---------  ---------  ---------

Non-GAAP sales and

 marketing expense   $   8,115  $   7,550  $   8,662  $  24,927  $  21,997

                     =========  =========  =========  =========  =========

  (as percent of

   total revenue)           23%        34%        27%        26%        37%

GAAP research and

 development expense $   6,587  $   4,787  $   6,730  $  20,133  $  14,230

Less:

  Stock-based

   compensation

   expense                 506        196        510      1,263        463

                     ---------  ---------  ---------  ---------  ---------

Non-GAAP research and

 development expense $   6,081  $   4,591  $   6,220  $  18,870  $  13,767

                     =========  =========  =========  =========  =========

  (as percent of

   total revenue)           17%        21%        19%        19%        23%

GAAP general and

 administrative

 expense             $   5,269  $   3,349  $   4,496  $  14,151  $  10,236

Less:

  Stock-based

   compensation

   expense                 631        324        765      1,851        984

                     ---------  ---------  ---------  ---------  ---------

Non-GAAP general and

 administrative

 expense             $   4,638  $   3,025  $   3,731  $  12,300  $   9,252

                     =========  =========  =========  =========  =========

  (as percent of

   total revenue)           13%        14%        12%        13%        15%
                             BroadSoft, Inc.

        Reconciliation of Non-GAAP Financial Measures (continued)

                               (Unaudited)

                                            Three

                     Three Months Ended    Months     Nine Months Ended

                       September 30,        Ended       September 30,

                                          June 30,

                      2011       2010       2011       2011       2010

                   ---------  ---------  ---------  ---------  --------

                           (In thousands, except per share data)

Non-GAAP net income (loss)

 and income (loss) per

 share:

GAAP net income

 (loss)            $   7,345  $   1,209  $  15,791  $  26,831  $ (3,199)

Adjusted for:

 Stock-based

  compensation

  expense              1,890        822      1,901      4,893     2,206

 Amortization of

  acquired

  intangible

  assets                 236        186        251        726       571

 Non-cash interest

  expense on our

  convertible

  notes                1,159          -        172      1,331         -

 Tax benefit

  related to

  valuation

  allowance

  release                (84)         -     (9,926)   (10,010)        -

                   ---------  ---------  ---------  ---------  --------

Non-GAAP net

 income (loss)     $  10,546  $   2,217  $   8,189  $  23,771  $   (422)

                   =========  =========  =========  =========  ========

GAAP net income

 (loss) per basic

 common share      $    0.27  $    0.05  $    0.59  $    1.01  $  (0.24)

Adjusted for:

 Adjustment for

  preferred stock

  conversion (1)           -          -          -          -      0.09

 Stock-based

  compensation

  expense               0.07       0.03       0.07       0.19      0.10

 Amortization of

  acquired

  intangible

  assets                0.01       0.01       0.01       0.03      0.03

 Non-cash interest

  expense on our

  convertible

  notes                 0.04          -       0.01       0.05         -

 Tax benefit

  related to

  valuation

  allowance

  release              (0.00)         -      (0.37)     (0.38)        -

                   ---------  ---------  ---------  ---------  --------

Non-GAAP net

 income (loss) per

 basic common

 share             $    0.39  $    0.09  $    0.31  $    0.90  $  (0.02)

                   =========  =========  =========  =========  ========

GAAP net income

 per diluted

 common share (2)  $    0.26  $    0.05  $    0.57  $    0.96

Adjusted for:

 Stock-based

  compensation

  expense               0.07       0.03       0.06       0.17

 Amortization of

  acquired

  intangible

  assets                0.01          -       0.01       0.03

 Non-cash interest

  expense on our

  convertible

  notes                 0.04          -       0.01       0.05

 Tax benefit

  related to

  valuation

  allowance

  release                  -          -      (0.36)     (0.36)

                   ---------  ---------  ---------  ---------

Non-GAAP net

 income per

 diluted common

 share             $    0.38  $    0.08  $    0.29  $    0.85

                   =========  =========  =========  =========

Non-GAAP weighted

 average shares

 outstanding:(3)

GAAP weighted

 average shares

 outstanding                                                     13,369

Adjusted for:

 Adjustment for

  convertible

  preferred stock

  conversion                                                      8,119

Non-GAAP weighted

 average shares

 outstanding                                                     21,488

(1) For purposes of the calculation of non-GAAP net loss per basic and diluted common share for the nine months ended September 30, 2010, GAAP weighted average shares outstanding was adjusted as if the conversion of all shares of redeemable convertible preferred stock into common stock occurred at the beginning of the period.

(2) Net income (loss) per diluted common share for the nine months ended September 30, 2010 is not presented because the effect of the share equivalents is anti-dilutive given the Company's losses for this period. As a result, non-GAAP net loss per diluted common share is equal to non-GAAP net loss per basic common share for the period.

(3) For the calculation of GAAP weighted average shares outstanding, the shares of common stock underlying shares of redeemable convertible preferred stock were not included for the period prior to the Company's initial public offering of its common stock, whereas for the non-GAAP weighted average shares outstanding, the conversion of all shares of redeemable convertible preferred stock was assumed to have occurred at the beginning of the period.

                              BroadSoft, Inc.

           Reconciliation of Expected Non-GAAP Financial Measures

                                (Unaudited)

 Guidance

                           Three Months Ending           Year Ending

                             December 31, 2011         December 31, 2011

                         ------------------------  ------------------------

                           Low End      High End     Low End      High End

                         -----------  -----------  -----------  -----------

                                (In thousands, except per share data)

Non-GAAP net income:

GAAP net income          $     4,900  $     6,700  $    31,400  $    33,300

Adjusted for:

  Stock-based

   compensation expense        1,900        1,900        6,800        6,800

  Amortization of

   acquired intangible

   assets                        250          250        1,000        1,000

  Non-cash interest

   expense on our

   convertible notes           1,200        1,200        2,600        2,600

  Tax benefit related to

   valuation allowance

   release                    (1,600)      (1,600)     (11,610)     (11,610)

                         -----------  -----------  -----------  -----------

Non-GAAP net income      $     6,650  $     8,450  $    30,190  $    32,090

                         ===========  ===========  ===========  ===========

Non-GAAP net income per

 share:

GAAP net income per

 diluted common share    $      0.17  $      0.24  $      1.12  $      1.19

Adjusted for:

  Stock-based

   compensation expense         0.07         0.07         0.24         0.24

  Amortization of

   acquired intangible

   assets                       0.01         0.01         0.04         0.04

  Non-cash interest

   expense on our

   convertible notes            0.04         0.04         0.09         0.09

  Tax benefit related to

   valuation allowance

   release                     (0.06)       (0.06)       (0.41)       (0.41)

                         -----------  -----------  -----------  -----------

Non-GAAP net income per

 diluted common share    $      0.23  $      0.30  $      1.08  $      1.15

                         ===========  ===========  ===========  ===========


Source: BroadSoft, Inc.

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