BROADSOFT REPORTS THIRD QUARTER 2017 FINANCIAL RESULTS

GAITHERSBURG, MD, November 6, 2017 – BroadSoft, Inc. (NASDAQ:BSFT, news, filings), a global market leader in cloud business software for unified communication as a service (UCaaS), and provider of team collaboration and contact center as a service (CCaaS), today announced financial results for the quarter ended September 30, 2017.

Financial Highlights for the Third Quarter of 2017

• Total revenue increased 9% year-over-year to $91.5 million
• GAAP gross profit equaled 71% of total revenue; non-GAAP gross profit equaled 75% of total revenue
• GAAP income from operations totaled $0.6 million; non-GAAP income from operations totaled $16.8 million or 18% of revenue
• GAAP basic and diluted net loss per share equaled $(0.09) per common share; non-GAAP diluted earnings per share equaled $0.38 per common share

Results for the three months ended September 30, 2017

Total revenue rose to $91.5 million in the third quarter of 2017, an increase of 9% compared to $84.1 million in the third quarter of 2016.

Net loss for the third quarter of 2017 was $(2.7) million, or $(0.09) per basic and diluted common share, compared to net loss of $(0.6) million, or $(0.02) per basic and diluted common share in the third quarter of 2016.

On a non-GAAP basis, net income in the third quarter of 2017 was $12.4 million, or $0.38 per diluted common share, compared to non-GAAP net income of $12.7 million, or $0.40 per diluted common share, in the third quarter of 2016.

Results for the nine months ended September 30, 2017

Total revenue rose to $259.9 million for the first nine months of 2017, an increase of 9% compared to $239.0 million for the first nine months of 2016.

Net loss for the first nine months of 2017 was $(16.2) million, or $(0.53) per basic and diluted common share, compared to a net loss of $(5.0) million, or $(0.17) per basic and diluted common share for the first nine months of 2016.

On a non-GAAP basis, net income for the first nine months of 2017 was $27.0 million, or $0.84 per diluted common share, compared to non-GAAP net income of $33.0 million, or $1.08 per diluted common share, for the first nine months of 2016.

Conference Call

As previously announced on October 23, 2017, the Company has entered into a merger agreement with Cisco Systems, Inc. (“Cisco”) under which Cisco will acquire the Company for $55.00 per share in an all-cash transaction. The acquisition is expected to close during the first quarter of calendar year 2018, subject to customary closing conditions and regulatory review.

Due to the pending merger, the Company will not be updating its outlook for fiscal 2017 and will not be hosting a conference call for its third quarter 2017 business results.

Non-GAAP Methodology Change

In the third quarter of 2017, we changed our method of calculating our non-GAAP provision for income taxes in accordance with the SEC’s Non-GAAP Financial Measures Compliance and Disclosure Interpretation. To assist investors to better understand the change, we are providing the calculations under our new method and the prior method – please see “Reconciliation of Non-GAAP Financial Measures” below.

The “New Method” consists of current and deferred income tax expense commensurate with the non-GAAP measure of profitability utilizing our projected effective long-term statutory tax rate (i.e. the rate we expect to be applicable to us after we implement our planned international restructuring and without giving effect to the merger with Cisco). We currently believe this effective long-term statutory tax rate will be approximately 26% of Non-GAAP pre-tax income. The “Prior Method” consists of current and deferred income tax expense commensurate with our cash income tax rate. We believe our long-term effective GAAP tax rate will be lower than the U.S. statutory tax rate based upon the planned restructuring (and without giving effect to the merger).

Non-GAAP financial measures:

BroadSoft has provided in this release 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 BroadSoft’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 cost of revenue, license software cost of revenue, subscription and maintenance cost of revenue and professional services and other cost of revenue. We define non-GAAP cost of revenue as a cost of revenue less stock-based compensation expense and amortization expense for acquired intangible assets. We consider 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 investors can compare our cost of revenue over multiple periods.

Non-GAAP gross profit, license software gross profit, subscription and maintenance support gross profit and professional services and other gross profit. We define non-GAAP gross profit as gross profit plus stock-based compensation expense and amortization expense for acquired intangible assets. We consider 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 investors can compare our sales margins over multiple periods.

Non-GAAP income from operations. We define non-GAAP operating income as income from operations plus stock-based compensation expense and amortization expense for acquired intangible assets. We consider non-GAAP operating income 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 our core business operating results over multiple periods.

Non-GAAP operating expenses, sales and marketing expense, research and development expense and general and administrative expense. We define 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, we define 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.

Non-GAAP net income and net income per share. We define non-GAAP net income as net income plus stock-based compensation expense, amortization expense for acquired intangible assets, non-cash interest expense on our convertible senior notes, foreign currency transaction gains and losses adjusted for our non-GAAP tax provision, which is our estimated current and deferred income tax expense commensurate with the non-GAAP measure of profitability utilizing our projected effective long-term statutory tax rate to which we expect that we will be subject after we implement our expected reorganization of our international operations (and without giving effect to the Merger). We define non-GAAP income per share as non-GAAP net income divided by the weighted average shares outstanding.

The presentation of non-GAAP net income, non-GAAP net income per share, non-GAAP gross margin, non-GAAP income 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,” “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” 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” 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.  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: BroadSoft’s ability to expand its BroadCloud offering geographically and increase the associated recurring service revenue; BroadSoft’s dependence on the success of BroadWorks and on its service provider customers to sell services using its applications; BroadSoft’s dependence in large part on service providers’ continued deployment of, and investment in, their IP-based networks; claims that BroadSoft infringes the intellectual property rights of others; BroadSoft’s ability to integrate and achieve the expected benefits from its recent acquisitions; and BroadSoft’s ability to expand its product offerings, as well as those factors contained in the “Risk Factors” sections of BroadSoft’s Form 10-K for the year ended December 31, 2016 filed with the SEC on February 23, 2017, and in BroadSoft’s other filings with the SEC. All information in this release is as of November 6, 2017. Except as required by law, BroadSoft 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 BroadSoft’s expectations.

Financial Statements

The financial statements set forth below are not the complete set of BroadSoft’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 September 30, 2017, 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.