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Press Release -- May 4th, 2015
Source: Broadsoft
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BroadSoft Reports First Quarter 2015 Financial Results

GAITHERSBURG, MD -- (Marketwired) -- 05/04/15 -- 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 ended March 31, 2015.

Financial Highlights for the First Quarter of 2015

  • Total revenue increased 27% year-over-year to $55.7 million
  • GAAP gross profit equaled 72% of total revenue; non-GAAP gross profit equaled 76% of total revenue
  • GAAP income from operations totaled $0.1 million; non-GAAP income from operations totaled $7.7 million or 14% of revenue
  • GAAP basic and diluted net loss per share equaled $(0.07) per common share; non-GAAP diluted earnings per share equaled $0.24 per common share

Results for the three months ended March 31, 2015

Total revenue rose to $55.7 million in the first quarter of 2015, an increase of 27% compared to $43.9 million in the first quarter of 2014.

Net loss for the first quarter of 2015 was $(2.0) million, or $(0.07) per basic and diluted common share, compared to net loss of $(7.5) million, or$(0.26) per basic and diluted common share in the first quarter of 2014.

On a non-GAAP basis, net income in the first quarter of 2015 was $7.3 million, or $0.24 per diluted common share, compared to non-GAAP net income of $2.2 million, or $0.07 per diluted common share, in the first quarter of 2014. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.

Management Commentary

"We had a great start to 2015," said Michael Tessler, president and chief executive officer, BroadSoft. "We believe this was a result of both positive market demand trends, as well as our execution against our strategic focus areas of driving adoption of true unified communications, broadening our cloud delivery and promoting end-user sell-through. We look forward to continuing this momentum through the remainder of 2015."

"In the first quarter, we delivered strong earnings and cash flow results and we were particularly pleased with the level of software billings in what is typically our seasonally most challenging quarter," said Jim Tholen, chief financial officer, BroadSoft. "We entered 2015 with a focus on investing to deliver against our substantial market opportunity and we plan to continue to drive those investments for the remainder of the year."

Guidance

For the second quarter of 2015, BroadSoft anticipates revenue of $59 to $64 million. The Company also expects to achieve earnings on a non-GAAP basis of $0.24 to $0.36 per diluted common share. For the full year 2015, BroadSoft expects revenue of $260 to $268 million and earnings on a non-GAAP basis of $1.42 to $1.66 per diluted common share.

Conference Call

BroadSoft will discuss its first quarter 2015 results and its business outlook today via teleconference at 8:30 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/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, a recording will be available shortly after the conclusion of the call athttp://investors.broadsoft.com/events.cfm and will remain available until immediately prior to our next earnings call.

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 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 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 financial measures:

Non-GAAP net income and net income per share. BroadSoft defines non-GAAP net income as net income plus stock-based compensation expense, foreign currency gains and losses, amortization expense for acquired intangible assets, non-cash interest expense on the Company's convertible notes, and non-cash tax expense included in the GAAP tax provision. BroadSoft defines non-GAAP income per share as non-GAAP net income divided by the weighted average shares outstanding. 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 management and investors can compare BroadSoft's core business operating results over multiple periods.

Non-GAAP gross profit, license gross profit, subscription and maintenance support gross profit, and professional services and other gross profit.BroadSoft defines non-GAAP gross profit as gross profit plus stock-based compensation expense and amortization expense for acquired intangible assets. BroadSoft considers non-GAAP gross profit to be a useful metric for management and our investors because it excludes the effect of certain non-cash expenses so management and its investors can compare BroadSoft's sales margins over multiple periods. Where BroadSoft provides further breakdown of non-GAAP gross profit between license, subscription and maintenance support and professional services and other, the Company adds back the stock-based compensation expense and amortization expense, as applicable, to the related gross profit.

Non-GAAP cost of revenue, license cost of revenue, subscription and maintenance support cost of revenue, and professional services and other cost of revenue. BroadSoft defines non-GAAP cost of revenue as cost of revenue less stock-based compensation expense and amortization expense for acquired intangible assets. BroadSoft considers non-GAAP cost of revenue to be a useful metric for management and our investors because it excludes the effect of certain non-cash expenses so management and its investors can compare BroadSoft's cost of revenue over multiple periods. Where BroadSoft provides further breakdown of non-GAAP cost of revenue between license, subscription and maintenance support and professional services and other, the Company subtracts the stock-based compensation expense and amortization expense, as applicable, to the related cost of revenue.

Non-GAAP income from operations. BroadSoft defines non-GAAP income from operations as income from operations plus stock-based compensation expense and amortization expense for acquired intangible assets. BroadSoft considers non-GAAP income from operations to be a useful metric for management and investors because it excludes the effect of certain non-cash expenses so 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.

Non-GAAP operating expenses, sales and marketing expense, research and development expense and general and administrative expense. BroadSoftdefines non-GAAP operating expenses as operating expense plus stock-based compensation expense allocated to sales and marketing, research and development and general and administrative expenses. Similarly, BroadSoft defines non-GAAP sales and marketing, research and development and general and administrative expenses as the relevant GAAP measure plus stock-based compensation expense allocated to the particular expense item.

Billings. BroadSoft defines billings as revenue plus the net change in our deferred revenue balance for a particular period. BroadSoft believes that billings are a key measure of our business activity.

With respect to our expectations under "Guidance" above, and regarding certain of the projections discussed on this morning's teleconference, reconciliation of both non-GAAP earnings per share guidance, and of projections regarding non-GAAP cost of sales and non-GAAP operating expenses in the second quarter of 2015, to the closest corresponding GAAP measures is not available without unreasonable efforts on a forward-looking basis due to the high variability, complexity and low visibility with respect to the charges excluded from these non-GAAP measures, in particular, the measures and effects of non-cash income taxes, which are extremely difficult to project as a result of our tax status in a number of foreign jurisdictions, and stock-based compensation expense specific to equity compensation awards that are directly impacted by unpredictable fluctuations in our stock price. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future GAAP financial results.

The presentation of non-GAAP net income, non-GAAP net income per share, non-GAAP gross margin, non-GAAP income from operations, billings 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," "net income per share," "gross margin," "income 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," "non-GAAP net income per share," "non-GAAP gross margin," "non-GAAP income from operations," "billings" 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 it does not consider reflective of core operating performance in a particular period and may modify "non-GAAP net income," "non-GAAP net income per share," "non-GAAP gross margin," "non-GAAP income from operations," "billings" 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," "expect," "will," "believe," "continue" 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; the Company's dependence in large part on service providers' continued deployment of, and investment in, their IP-based networks; claims that the Company infringes the intellectual property rights of others; the Company's ability to integrate and achieve the expected benefits from its recent acquisitions; and the Company's ability to expand its product offerings, as well as those factors contained in the "Risk Factors" sections of the Company's Form 10-K for the year ended December 31, 2014 filed with the SEC on February 25, 2015, and in the Company's other filings with the SEC. All information in this release is as of May 4, 2015. 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 is the leading provider of software and services that enable mobile, fixed-line and cable service providers to offer Unified Communicationsover their Internet Protocol networks. The Company's core communications platform enables the delivery of a range of enterprise and consumer calling, messaging and collaboration communication services, including private branch exchanges, video calling, text messaging 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 the year 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 March 31, 2015, including all financial statements contained therein and the footnotes thereto, once the report 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.
CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share data)
March 31,
2015
December 31,
2014
(Unaudited)
Assets:
Current assets:
Cash and cash equivalents $ 97,031 $ 101,543
Short-term investments 70,342 68,923
Accounts receivable, net of allowance for doubtful accounts of $274 and $286 at March 31, 2015 and December 31, 2014, respectively 72,544 81,794
Deferred tax assets, current 29,224 14,302
Other current assets 14,572 12,678
Total current assets 283,713 279,240
Long-term assets:
Property and equipment, net 15,877 14,363
Long-term investments 57,586 52,030
Intangible assets, net 17,520 15,568
Goodwill 66,791 65,303
Deferred tax assets 7,136 10,495
Other long-term assets 9,467 8,296
Total long-term assets 174,377 166,055
Total assets $ 458,090 $ 445,295
Liabilities and stockholders' equity:
Current liabilities:
Accounts payable and accrued expenses $ 24,504 $ 21,222
Deferred revenue, current portion 83,549 87,423
Total current liabilities 108,053 108,645
Convertible senior notes 98,487 97,049
Deferred revenue 17,818 14,033
Deferred tax liabilities 1,189 1,289
Other long-term liabilities 4,217 4,030
Total liabilities 229,764 225,046
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.01 par value per share; 5,000,000 shares authorized at March 31, 2015 and December 31, 2014; no shares issued and outstanding at March 31, 2015 andDecember 31, 2014 - -
Common stock, par value $0.01 per share; 100,000,000 shares authorized at March 31, 2015 and December 31, 2014; 29,071,592 and 28,943,336 shares issued and outstanding at March 31, 2015 and December 31, 2014, respectively 291 290
Additional paid-in capital 293,923 279,642
Accumulated other comprehensive loss (11,911 ) (7,712 )
Accumulated deficit (53,977 ) (51,971 )
Total stockholders' equity 228,326 220,249
Total liabilities and stockholders' equity $ 458,090 $ 445,295
BroadSoft, Inc.
CONSOLIDATED STATEMENTS OF OPERATIONS
(in thousands, except per share data)
Three Months Ended
March 31,
2015 2014
(Unaudited)
Revenue:
License software $ 22,936 $ 17,142
Subscription and maintenance support 25,409 21,126
Professional services and other 7,326 5,650
Total revenue 55,671 43,918
Cost of revenue:
License software 2,622 2,122
Subscription and maintenance support 8,787 7,446
Professional services and other 4,403 3,489
Total cost of revenue 15,812 13,057
Gross profit 39,859 30,861
Operating expenses:
Sales and marketing 17,268 17,856
Research and development 13,668 13,325
General and administrative 8,804 8,905
Total operating expenses 39,740 40,086
Income (loss) from operations 119 (9,225 )
Other expense:
Interest expense, net 1,775 1,772
Other, net 1,707 37
Total other expense, net 3,482 1,809
Loss before income taxes (3,363 ) (11,034 )
Benefit from income taxes (1,357 ) (3,582 )
Net loss $ (2,006 ) $ (7,452 )
Net loss per common share:
Basic $ (0.07 ) $ (0.26 )
Diluted $ (0.07 ) $ (0.26 )
Weighted average common shares outstanding:
Basic 28,991 28,419
Diluted 28,991 28,419
Stock-based compensation expense included above:
Cost of revenue $ 841 $ 1,191
Sales and marketing 2,138 3,414
Research and development 1,823 3,206
General and administrative 1,241 2,571
BroadSoft, Inc.
SUMMARY OF CONSOLIDATED CASH FLOW ACTIVITY
(in thousands)
Three Months Ended
March 31,
2015 2014
(Unaudited)
Cash provided by (used in):
Operating activities $ 4,129 $ 6,800
Investing activities (15,463 ) (25 )
Financing activities 8,368 3,969
BroadSoft, Inc.
BILLINGS
(Unaudited)
Three Months Ended
March 31,
2015 2014
(in thousands)
Beginning of period deferred revenue balance $ 101,456 $ 77,662
End of period deferred revenue balance 101,367 74,078
Decrease in deferred revenue (89 ) (3,584 )
Revenue 55,671 43,918
Revenue plus net change in deferred revenue $ 55,582 $ 40,334
BroadSoft, Inc.
LICENSE SOFTWARE BILLINGS
(Unaudited)
Three Months Ended
March 31,
2015 2014
(in thousands)
Beginning of period deferred license software revenue balance $ 26,495 $ 20,149
End of period deferred license software revenue balance 30,771 18,760
Decrease in deferred license software revenue 4,276 (1,389 )
License software revenue 22,936 17,142
License software revenue plus net change in deferred license software revenue $ 27,212 $ 15,753
BroadSoft, Inc.
SUBSCRIPTION AND MAINTENANCE SUPPORT BILLINGS
(Unaudited)
Three Months Ended
March 31,
2015 2014
(in thousands)
Beginning of period deferred subscription and maintenance support revenue balance $ 52,764 $ 46,975
End of period deferred subscription and maintenance support revenue balance 51,204 46,986
Decrease in deferred subscription and maintenance support revenue (1,560 ) 11
Subscription and maintenance support revenue 25,409 21,126
Subscription and maintenance support revenue plus net change in deferred subscription and maintenance support revenue $ 23,849 $ 21,137
BroadSoft, Inc.
PROFESSIONAL SERVICES AND OTHER BILLINGS
(Unaudited)
Three Months Ended
March 31,
2015 2014
(in thousands)
Beginning of period deferred professional services and other revenue balance $ 22,197 $ 10,538
End of period deferred professional services and other revenue balance 19,392 8,332
Increase in deferred professional services and other revenue (2,805 ) (2,206 )
Professional services and other revenue 7,326 5,650
Professional services and other revenue plus net change in deferred professional services and other revenue $ 4,521 $ 3,444
BroadSoft, Inc.
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES
(Unaudited)
Three Months Ended
March 31,
2015 2014
(in thousands)
Non-GAAP cost of revenue:
GAAP license cost of revenue $ 2,622 $ 2,122
(percent of related revenue) 11 % 12 %
Less:
Stock-based compensation expense 114 256
Amortization of acquired intangible assets 449 226
Non-GAAP license cost of revenue $ 2,059 $ 1,640
(percent of related revenue) 9 % 10 %
GAAP subscription and maintenance support cost of revenue $ 8,787 $ 7,446
(percent of related revenue) 35 % 35 %
Less:
Stock-based compensation expense 450 690
Amortization of acquired intangible assets 1,055 1,184
Non-GAAP subscription and maintenance support cost of revenue $ 7,282 $ 5,572
(percent of related revenue) 29 % 26 %
GAAP professional services and other cost of revenue $ 4,403 $ 3,489
(percent of related revenue) 60 % 62 %
Less:
Stock-based compensation expense 277 245
Non-GAAP professional services and other cost of revenue $ 4,126 $ 3,244
(percent of related revenue) 56 % 57 %
Three Months Ended
March 31,
2015 2014
(in thousands)
Non-GAAP gross profit:
GAAP gross profit $ 39,859 $ 30,861
(percent of total revenue) 72 % 70 %
Plus:
Stock-based compensation expense 841 1,191
Amortization of acquired intangible assets 1,504 1,410
Non-GAAP gross profit $ 42,204 $ 33,462
(percent of total revenue) 76 % 76 %
GAAP license gross profit $ 20,314 $ 15,020
(percent of related revenue) 89 % 88 %
Plus:
Stock-based compensation expense 114 256
Amortization of acquired intangible assets 449 226
Non-GAAP license gross profit $ 20,877 $ 15,502
(percent of related revenue) 91 % 90 %
GAAP subscription and maintenance support gross profit $ 16,622 $ 13,680
(percent of related revenue) 65 % 65 %
Plus:
Stock-based compensation expense 450 690
Amortization of acquired intangible assets 1,055 1,184
Non-GAAP subscription and maintenance support gross profit $ 18,127 $ 15,554
(percent of related revenue) 71 % 74 %
GAAP professional services and other gross profit $ 2,923 $ 2,161
(percent of related revenue) 40 % 38 %
Plus:
Stock-based compensation expense 277 245
Non-GAAP professional services and other gross profit $ 3,200 $ 2,406
(percent of related revenue) 44 % 43 %
Three Months Ended
March 31,
2015 2014
(in thousands)
Non-GAAP income from operations:
GAAP income (loss) from operations $ 119 $ (9,225 )
(percent of total revenue) - % (21 )%
Plus:
Stock-based compensation expense 6,043 10,382
Amortization of acquired intangible assets 1,504 1,410
Non-GAAP income from operations $ 7,666 $ 2,567
(percent of total revenue) 14 % 6 %
GAAP operating expense $ 39,740 $ 40,086
(percent of total revenue) 71 % 91 %
Less:
Stock-based compensation expense 5,202 9,191
Non-GAAP operating expense $ 34,538 $ 30,895
(percent of total revenue) 62 % 70 %
GAAP sales and marketing expense $ 17,268 $ 17,856
(percent of total revenue) 31 % 41 %
Less:
Stock-based compensation expense 2,138 3,414
Non-GAAP sales and marketing expense $ 15,130 $ 14,442
(percent of total revenue) 27 % 33 %
GAAP research and development expense $ 13,668 $ 13,325
(percent of total revenue) 25 % 30 %
Less:
Stock-based compensation expense 1,823 3,206
Non-GAAP research and development expense $ 11,845 $ 10,119
(percent of total revenue) 21 % 23 %
GAAP general and administrative expense $ 8,804 $ 8,905
(percent of total revenue) 16 % 20 %
Less:
Stock-based compensation expense 1,241 2,571
Non-GAAP general and administrative expense $ 7,563 $ 6,334
(percent of total revenue) 14 % 14 %
Three Months Ended
March 31,
2015 2014
(in thousands, except per share data)
Non-GAAP net income and income per share:
GAAP net loss $ (2,006 ) $ (7,452 )
(percent of total revenue) (4 )% (17 )%
Adjusted for:
Stock-based compensation expense 6,043 10,382
Amortization of acquired intangible assets 1,504 1,410
Non-cash interest expense on our notes 1,540 1,432
Foreign currency transaction losses (gains) 1,707 37
Non-cash tax benefit (1,506 ) (3,626 )
Non-GAAP net income $ 7,282 $ 2,183
(percent of total revenue) 13 % 5 %
GAAP net loss per basic common share $ (0.07 ) $ (0.26 )
Adjusted for:
Stock-based compensation expense 0.21 0.37
Amortization of acquired intangible assets 0.05 0.05
Non-cash interest expense on our notes 0.05 0.05
Foreign currency transaction losses (gains) 0.06 -
Non-cash tax benefit (0.05 ) (0.13 )
Non-GAAP net income per basic common share $ 0.25 $ 0.08
GAAP net loss per diluted common share $ (0.07 ) $ (0.26 )
Adjusted for:
Stock-based compensation expense 0.20 0.35
Amortization of acquired intangible assets 0.05 0.05
Non-cash interest expense on our notes 0.05 0.05
Foreign currency transaction losses (gains) 0.06 -
Non-cash tax benefit (0.05 ) (0.12 )
Non-GAAP net income per diluted common share * $ 0.24 $ 0.07

* For the three months ended March 31, 2015 and 2014, the non-GAAP net income per diluted common share calculation included the dilutive effect of stock-based awards on the weighted average diluted common shares outstanding (such stock-based awards were not reflected in the corresponding GAAP diluted share calculations, as their effect would have been anti-dilutive as a result of the net losses for these periods). Total diluted weighted average common shares outstanding used for calculating non-GAAP net income per diluted common share were 30,082 thousand and 29,747 thousand for the three months ended March 31, 2015 and 2014, respectively.

BSFT-F

Contact Information
For further information contact:
Investor Relations:
John Kiang, CFA
+1-240-720-0625
jkiang@broadsoft.com

Media Contacts:
Caroline Higgins
Hotwire PR London, for BroadSoft UK
+44 (0) 20 7608 4643
caroline.higgins@hotwirepr.com

Brian Lustig
Bluetext PR for BroadSoft US
+1 301.775.6203
brian@bluetext.com

Source: BroadSoft, Inc.

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