SOURCE: BroadSoft, Inc.

BroadSoft, Inc.

February 29, 2016 07:30 ET

BroadSoft Reports Fourth Quarter and Full Year 2015 Financial Results

GAITHERSBURG, MD--(Marketwired - Feb 29, 2016) - BroadSoft, Inc. (NASDAQ: BSFT), the leading global provider of Internet protocol-based, or IP-based, communications services to the telecommunications industry, today announced financial results for the fourth quarter and twelve-month period ended December 31, 2015.

Financial Highlights for the Fourth Quarter of 2015

  • Total revenue increased 36% year-over-year to $89.6 million
  • GAAP gross profit equaled 78% of total revenue; non-GAAP gross profit equaled 82% of total revenue
  • GAAP income from operations totaled $20.6 million or 23% of revenue; non-GAAP income from operations totaled $32.1 million or 36% of revenue
  • GAAP diluted earnings per share equaled $0.39 per common share; non-GAAP diluted earnings per share equaled $1.04 per common share

Results for the three months ended December 31, 2015

Total revenue rose to $89.6 million in the fourth quarter of 2015, an increase of 36% compared to $65.8 million in the fourth quarter of 2014.

Net income for the fourth quarter of 2015 was $11.6 million, or $0.39 per diluted common share, compared to net income of $7.7 million, or $0.26 per diluted common share in the fourth quarter of 2014.

On a non-GAAP basis, net income in the fourth quarter of 2015 was $30.7 million, or $1.04 per diluted common share, compared to non-GAAP net income of $19.1 million, or $0.65 per diluted common share, in the fourth quarter of 2014. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.

Results for the twelve months ended December 31, 2015

For the full year, total revenue was $278.8 million, an increase of 29% compared to $216.9 million in 2014.

Net income for the full year of 2015 was $0.2 million, or $0.01 per diluted common share, compared to net income of $0.3 million, or $0.01 per diluted common share, in 2014.

On a non-GAAP basis, net income for the full year of 2015 was $58.6 million or $1.96 per diluted common share, compared to non-GAAP net income of $40.1 million, or $1.37 per diluted common share, in 2014. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.

Management Commentary
"We closed out an outstanding 2015 for BroadSoft with a strong fourth quarter," said Michael Tessler, president and chief executive officer, BroadSoft. "In addition to delivering robust financial results, we delivered on our strategic goals. We introduced our vision of the "future of work" and next-generation business communications with Project Tempo. We expanded BroadCloud internationally, including into Japan, and achieved important milestones on several of the large network transformation deals we previously won. I look forward to continuing this momentum in 2016."

"I am delighted with our fourth quarter financial results as we generated strong revenue, non-GAAP earnings and cash flow. I would note that while we had forecast strength in fourth quarter professional services revenue, our actual results exceeded these expectations," said Jim Tholen, chief financial officer, BroadSoft. "We achieved revenue recognition milestones related to a single large network transformation project earlier than anticipated which added an incremental $7 million of services revenue."

Guidance

For the first quarter of 2016, BroadSoft anticipates revenue of $70 to $74 million. The Company also expects to achieve earnings on a non-GAAP basis of $0.20 to $0.32 per diluted common share. For the full year 2016, BroadSoft expects revenue of $332 to $340 million. The Company anticipates full year 2016 earnings on a non-GAAP basis of $1.90 to $2.10 per diluted common share which incorporates approximately $0.05 per share of dilution in aggregate from the Company's recently announced acquisitions.

Conference Call

BroadSoft will discuss its fourth quarter and full year 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 at http://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 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 income from operations as income from operations plus stock-based compensation expense and amortization expense for acquired intangible assets. We consider 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 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 less 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 less 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, loss on repurchase of our convertible senior notes and non-cash tax expense included in the GAAP tax provision. We define non-GAAP income per share as non-GAAP net income divided by the weighted average shares outstanding.

Billings. BroadSoft defines billings as revenue plus the net change in our deferred revenue balance for a particular period. BroadSoft believes that billings is 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 first quarter and full year of 2016, to the closest corresponding GAAP measures are 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," "enable," "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, 2015 to be filed with the SEC on February 29, 2016, and in the Company's other filings with the SEC. All information in this release is as of February 29, 2016. 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 Communications over 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
As described in more detail in the Form 10-K, during the fourth quarter of 2015, the Company changed its policy with respect to the recognition of stock-based compensation expense related to service-only equity awards. The Company has retrospectively applied that policy change in the financial statements and the reconciliation of non-GAAP financial measures set forth below.

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 Annual Report on Form 10-K for the year ended December 31, 2015, including all financial statements contained therein and the footnotes thereto, to be filed with the SEC on February 29, 2016. Once filed with the SEC, the Form 10-K may be retrieved from the SEC's website at www.sec.gov or from BroadSoft's website at www.broadsoft.com.

BSFT-F

   
   
BroadSoft, Inc.  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share and per share data)  
   
  December 31,
 2015
  December 31,
 2014
 
  (Unaudited)      
Assets:            
Current assets:            
  Cash and cash equivalents $ 175,857   $ 101,543  
  Short-term investments   72,531     68,923  
  Accounts receivable, net of allowance for doubtful accounts of $85 and $286 at December 31, 2015 and December 31, 2014, respectively   108,113     81,794  
  Other current assets   13,155     12,272  
    Total current assets   369,656     264,532  
Long-term assets:            
  Property and equipment, net   19,481     14,363  
  Long-term investments   102,385     52,030  
  Intangible assets, net   18,835     15,568  
  Goodwill   72,275     65,303  
  Deferred tax assets   1,661     17,074  
  Other long-term assets   8,081     7,281  
    Total long-term assets   222,718     171,619  
      Total assets $ 592,374   $ 436,151  
Liabilities and stockholders' equity:            
Current liabilities:            
  Accounts payable and accrued expenses $ 28,667   $ 20,787  
  Deferred revenue, current portion   106,483     87,423  
      Total current liabilities   135,150     108,210  
Convertible senior notes   188,331     95,628  
Deferred revenue   4,571     14,033  
Other long-term liabilities   7,289     5,319  
      Total liabilities   335,341     223,190  
Commitments and contingencies            
Stockholders' equity:            
    Preferred stock, $0.01 par value per share; 5,000,000 shares authorized at December 31, 2015 and December 31, 2014; no shares issued and outstanding at December 31, 2015 and December 31, 2014   --     --  
    Common stock, par value $0.01 per share; 100,000,000 shares authorized at December 31, 2015 and December 31, 2014; 29,080,197 and 28,943,336 shares issued and outstanding at December 31, 2015 and December 31, 2014, respectively   291     290  
    Additional paid-in capital   333,153     258,169  
    Accumulated other comprehensive loss   (13,810 )   (7,712 )
    Accumulated deficit   (62,601 )   (37,786 )
Total stockholders' equity   257,033     212,961  
Total liabilities and stockholders' equity $ 592,374   $ 436,151  
             
             
   
BroadSoft, Inc.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except per share data)  
   
  Three Months Ended December 31,   Year Ended December 31,  
  2015   2014   2015     2014  
  (Unaudited)    (Unaudited)    
Revenue:                          
  License software $ 35,438   $ 34,841   $ 119,808     $ 103,311  
  Subscription and maintenance support   30,573     25,192     112,836       92,492  
  Professional services and other   23,580     5,793     46,199       21,054  
    Total revenue   89,591     65,826     278,843       216,857  
Cost of revenue:                          
  License software   2,247     2,577     10,231       9,755  
  Subscription and maintenance support   9,644     8,790     38,602       32,984  
  Professional services and other   7,976     3,424     28,925       14,955  
    Total cost of revenue   19,867     14,791     77,758       57,694  
Gross profit   69,724     51,035     201,085       159,163  
Operating expenses:                          
  Sales and marketing   23,955     18,967     83,806       69,471  
  Research and development   15,225     12,941     60,749       50,125  
  General and administrative   9,920     7,867     41,287       32,993  
    Total operating expenses   49,100     39,775     185,842       152,589  
Income from operations   20,624     11,260     15,243       6,574  
Other expense:                          
  Interest expense, net   3,341     1,797     9,386       7,177  
  Other, net   402     562     5,714       1,300  
    Total other expense, net   3,743     2,359     15,100       8,477  
Income (loss) before income taxes   16,881     8,901     143       (1,903 )
  Provision for (benefit from) income taxes   5,258     1,214     (36 )     (2,199 )
Net income $ 11,623   $ 7,687   $ 179     $ 296  
Net income per common share:                          
  Basic $ 0.40   $ 0.27   $ 0.01     $ 0.01  
  Diluted $ 0.39   $ 0.26   $ 0.01     $ 0.01  
Weighted average common shares outstanding:                          
  Basic   28,906     28,853     29,113       28,654  
  Diluted   29,462     29,272     29,818       29,365  
Stock-based compensation expense included above:                          
  Cost of revenue $ 1,940   $ 1,127   $ 7,227     $ 3,862  
  Sales and marketing   3,773     2,407     13,821       9,856  
  Research and development   2,911     2,666     11,844       10,164  
  General and administrative   1,433     1,049     7,552       6,391  
                           
                           
   
BroadSoft, Inc.  
SUMMARY OF CONSOLIDATED CASH FLOW ACTIVITY  
(in thousands)  
   
  Year ended December 31,  
  2015     2014     2013  
  (Unaudited)              
Cash provided by (used in):                      
  Operating activities $ 44,786     $ 54,759     $ 31,934  
  Investing activities   (88,011 )     (17,558 )     (57,406 )
  Financing activities   118,918       (4,135 )     4,831  
                       
                       
 
BroadSoft, Inc.
BILLINGS
(Unaudited)
 
    Three Months Ended
December 31,
  Year ended December 31,
    2015   2014   2015   2014   2013
    (in thousands)   (in thousands)
Beginning of period deferred revenue balance   $ 109,678   $ 82,848   $ 101,456   $ 77,662   $ 61,149
End of period deferred revenue balance     111,054     101,456     111,054     101,456     77,662
  Increase in deferred revenue     1,376     18,608     9,598     23,794     16,513
Revenue     89,591     65,826     278,843     216,857     178,493
  Revenue plus net change in deferred revenue     90,967     84,434     288,441     240,651     195,006
                               
                               
 
BroadSoft, Inc.
LICENSE SOFTWARE BILLINGS
(Unaudited)
 
    Three Months Ended
December 31,
  Year ended December 31,
    2015   2014   2015   2014   2013
    (in thousands)   (in thousands)
Beginning of period deferred license software revenue balance   $ 32,282   $ 24,179   $ 26,495   $ 20,149   $ 18,375
End of period deferred license software revenue balance     33,200     26,495     33,200     26,495     20,149
  Increase (decrease) in deferred license software revenue     918     2,316     6,705     6,346     1,774
License software revenue     35,438     34,841     119,808     103,311     94,408
  License software revenue plus net change in deferred license software revenue   $ 36,356   $ 37,157   $ 126,513   $ 109,657   $ 96,182
                               
                               
 
BroadSoft, Inc.
SUBSCRIPTION AND MAINTENANCE SUPPORT BILLINGS
(Unaudited)
 
    Three Months Ended
December 31,
  Year ended December 31,
    2015   2014   2015   2014   2013
    (in thousands)   (in thousands)
Beginning of period deferred subscription and maintenance support revenue balance   $ 49,598   $ 42,978   $ 52,764   $ 46,975   $ 35,701
End of period deferred subscription and maintenance support revenue balance     61,399     52,764     61,399     52,764     46,975
  Increase in deferred subscription and maintenance support revenue     11,801     9,786     8,635     5,789     11,274
Subscription and maintenance support revenue     30,573     25,192     112,836     92,492     69,357
  Subscription and maintenance support revenue plus net change in deferred subscription and maintenance support revenue     42,374     34,978     121,471     98,281     80,631
                               
                               
 
BroadSoft, Inc.
PROFESSIONAL SERVICES AND OTHER BILLINGS
(Unaudited)
 
    Three Months Ended
December 31,
  Year ended December 31,
    2015   2014   2015   2014   2013
    (in thousands)   (in thousands)
Beginning of period deferred professional services and other revenue balance   $ 27,798   $ 15,691   $ 22,197   $ 10,538   $ 7,073
End of period deferred professional services and other revenue balance     16,455     22,197     16,455     22,197     10,538
  Increase (decrease) in deferred professional services and other revenue     (11,343 )   6,506     (5,742 )   11,659     3,465
Professional services and other revenue     23,580     5,793     46,199     21,054     14,728
  Professional services and other revenue plus net change in deferred professional services and other revenue   $ 12,237   $ 12,299   $ 40,457   $ 32,713   $ 18,193
                               
                               
   
BroadSoft, Inc.  
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES  
(Unaudited)  
   
    Three Months Ended
December 31,
    Three Months Ended
September 30,
    Year Ended
December 31,
 
    2015     2014     2015     2015     2014  
    (in thousands)  
Non-GAAP cost of revenue:                                        
GAAP license cost of revenue   $ 2,247     $ 2,577     $ 2,444     $ 10,231     $ 9,755  
  (percent of related revenue)     6 %     7 %     8 %     9 %     9 %
Less:                                        
  Stock-based compensation expense     246       170       234       1,017       738  
  Amortization of acquired intangible assets     421       196       430       1,718       871  
Non-GAAP license cost of revenue   $ 1,580     $ 2,211     $ 1,780     $ 7,496     $ 8,146  
  (percent of related revenue)     4 %     6 %     6 %     6 %     8 %
                                         
                                         
GAAP subscription and maintenance support cost of revenue   $ 9,644     $ 8,790     $ 9,784     $ 38,602     $ 32,984  
  (percent of related revenue)     32 %     35 %     33 %     34 %     36 %
Less:                                        
  Stock-based compensation expense     677       750       607       3,006       2,287  
  Amortization of acquired intangible assets     855       1,040       1,010       3,977       4,520  
Non-GAAP subscription and maintenance support cost of revenue   $ 8,112     $ 7,000     $ 8,167     $ 31,619     $ 26,177  
  (percent of related revenue)     27 %     28 %     27 %     28 %     28 %
                                         
                                         
GAAP professional services and other cost of revenue   $ 7,976     $ 3,424     $ 9,418     $ 28,925     $ 14,955  
  (percent of related revenue)     34 %     59 %     119 %     63 %     71 %
Less:                                        
  Stock-based compensation expense     1,017       207       1,060       3,204       837  
  Amortization of acquired intangible assets     175       --       175       408       --  
Non-GAAP professional services and other cost of revenue   $ 6,784     $ 3,217     $ 8,183     $ 25,313     $ 14,118  
  (percent of related revenue)     29 %     56 %     103 %     55 %     67 %
                                         
                                         
    Three Months Ended
December 31,
    Three Months Ended
September 30,
    Year Ended
December 31,
 
    2015     2014     2015     2015     2014  
    (in thousands)  
Non-GAAP gross profit:                                        
GAAP gross profit   $ 69,724     $ 51,035     $ 47,451     $ 201,085     $ 159,163  
  (percent of total revenue)     78 %     78 %     69 %     72 %     73 %
Plus:                                        
  Stock-based compensation expense     1,940       1,127       1,901       7,227       3,862  
  Amortization of acquired intangible assets     1,451       1,236       1,615       6,103       5,391  
Non-GAAP gross profit   $ 73,115     $ 53,398     $ 50,967     $ 214,415     $ 168,416  
  (percent of total revenue)     82 %     81 %     74 %     77 %     78 %
                                         
                                         
GAAP license gross profit   $ 33,191     $ 32,264     $ 28,899     $ 109,577     $ 93,556  
  (percent of related revenue)     94 %     93 %     92 %     91 %     91 %
Plus:                                        
  Stock-based compensation expense     246       170       234       1,017       738  
  Amortization of acquired intangible assets     421       196       430       1,718       871  
Non-GAAP license gross profit   $ 33,858     $ 32,630     $ 29,563     $ 112,312     $ 95,165  
  (percent of related revenue)     96 %     94 %     94 %     94 %     92 %
                                         
                                         
GAAP subscription and maintenance support gross profit   $ 20,929     $ 16,402     $ 20,044     $ 74,234     $ 59,508  
  (percent of related revenue)     68 %     65 %     67 %     66 %     64 %
Plus:                                        
  Stock-based compensation expense     677       750       607       3,006       2,287  
  Amortization of acquired intangible assets     855       1,040       1,010       3,977       4,520  
Non-GAAP subscription and maintenance support gross profit   $ 22,461     $ 18,192     $ 21,661     $ 81,217     $ 66,315  
  (percent of related revenue)     73 %     72 %     73 %     72 %     72 %
                                         
                                         
GAAP professional services and other gross profit   $ 15,604     $ 2,369     $ (1,492 )   $ 17,274     $ 6,099  
  (percent of related revenue)     66 %     41 %     (19 )%     37 %     29 %
Plus:                                        
  Stock-based compensation expense     1,017       207       1,060       3,204       837  
  Amortization of acquired intangible assets     175       --       175       408       --  
Non-GAAP professional services and other gross profit   $ 16,796     $ 2,576     $ (257 )   $ 20,886     $ 6,936  
  (percent of related revenue)     71 %     44 %     (3 )%     45 %     33 %
                                         
                                         
    Three Months Ended
December 31,
    Three Months Ended
September 30,
    Year Ended
December 31,
 
    2015     2014     2015     2015     2014  
    (in thousands)  
Non-GAAP income from operations:                                        
  GAAP income from operations   $ 20,624     $ 11,260     $ 822     $ 15,243     $ 6,574  
(percent of total revenue)     23 %     17 %     1 %     5 %     3 %
Plus:                                        
  Stock-based compensation expense     10,057       7,249       9,157       40,444       30,273  
  Amortization of acquired intangible assets     1,451       1,236       1,615       6,103       5,391  
Non-GAAP income from operations   $ 32,132     $ 19,745     $ 11,594     $ 61,790     $ 42,238  
  (percent of total revenue)     36 %     30 %     17 %     22 %     19 %
                                         
                                         
GAAP operating expense   $ 49,100     $ 39,775     $ 46,629     $ 185,842     $ 152,589  
  (percent of total revenue)     55 %     60 %     67 %     67 %     70 %
Less:                                        
  Stock-based compensation expense     8,117       6,122       7,256       33,217       26,411  
Non-GAAP operating expense   $ 40,983     $ 33,653     $ 39,373     $ 152,625     $ 126,178  
  (percent of total revenue)     46 %     51 %     57 %     55 %     58 %
                                         
                                         
GAAP sales and marketing expense   $ 23,955     $ 18,967     $ 20,703     $ 83,806     $ 69,471  
  (percent of total revenue)     27 %     29 %     30 %     30 %     32 %
Less:                                        
  Stock-based compensation expense     3,773       2,407       2,812       13,821       9,856  
Non-GAAP sales and marketing expense   $ 20,182     $ 16,560     $ 17,891     $ 69,985     $ 59,615  
  (percent of total revenue)     23 %     25 %     26 %     25 %     27 %
                                         
                                         
GAAP research and development expense   $ 15,225     $ 12,940     $ 14,974     $ 60,749     $ 50,125  
  (percent of total revenue)     17 %     20 %     22 %     22 %     23 %
Less:                                        
  Stock-based compensation expense     2,911       2,666       2,428       11,844       10,164  
Non-GAAP research and development expense   $ 12,314     $ 10,274     $ 12,546     $ 48,905     $ 39,961  
  (percent of total revenue)     14 %     16 %     18 %     18 %     18 %
                                         
                                         
GAAP general and administrative expense   $ 9,920     $ 7,868     $ 10,952     $ 41,287     $ 32,993  
  (percent of total revenue)     11 %     12 %     16 %     15 %     15 %
Less:                                        
  Stock-based compensation expense     1,433       1,049       2,016       7,552       6,391  
Non-GAAP general and administrative expense   $ 8,487     $ 6,819     $ 8,936     $ 33,735     $ 26,602  
  (percent of total revenue)     9 %     10 %     13 %     12 %     12 %
                                         
                                         
    Three Months Ended
December 31,
    Three Months Ended
September 30,
    Year Ended
December 31,
 
    2015     2014     2015     2015     2014  
    (in thousands, except per share data)  
Non-GAAP net income and income per share:                                        
GAAP net income   $ 11,622     $ 7,687     $ (3,250 )   $ 179     $ 296  
  (percent of total revenue)     13 %     12 %     (5 )%     *       *  
Adjusted for:                                        
  Stock-based compensation expense     10,057       7,249       9,157       40,444       30,273  
  Amortization of acquired intangible assets     1,451       1,236       1,615       6,103       5,391  
  Non-cash interest expense on our convertible senior notes     3,177       1,521       2,325       8,618       5,906  
  Foreign currency transaction losses     403       562       336       1,962       1,300  
  Loss on repurchase of convertible senior notes     --       --       3,752       3,752       --  
  Non-cash tax provision     3,979       825       (2,997 )     (2,477 )     (3,018 )
Non-GAAP net income   $ 30,689     $ 19,080     $ 10,938     $ 58,581     $ 40,148  
  (percent of total revenue)     34 %     29 %     16 %     21 %     19 %
                                         
                                         
GAAP net income per basic common share   $ 0.40     $ 0.27     $ (0.11 )   $ 0.01     $ 0.01  
Adjusted for:                                        
  Stock-based compensation expense     0.35       0.25       0.31       1.39       1.06  
  Amortization of acquired intangible assets     0.05       0.04       0.06       0.21       0.19  
  Non-cash interest expense on our convertible senior notes     0.11       0.05       0.08       0.30       0.21  
  Foreign currency transaction losses     0.01       0.02       0.01       0.07       0.05  
  Loss on repurchase of convertible senior notes     --       --       0.13       0.13       --  
  Non-cash tax provision     0.14       0.03       (0.10 )     (0.09 )     (0.11 )
Non-GAAP net income per basic common share   $ 1.06     $ 0.66     $ 0.37     $ 2.01     $ 1.40  
                                         
                                         
GAAP net income per diluted common share   $ 0.39     $ 0.26     $ (0.11 )   $ 0.01     $ 0.01  
Adjusted for:                                        
  Stock-based compensation expense     0.34       0.25       0.31       1.36       1.03  
  Amortization of acquired intangible assets     0.05       0.04       0.05       0.20       0.18  
  Non-cash interest expense on our convertible senior notes     0.11       0.05       0.08       0.29       0.20  
  Foreign currency transaction losses     0.01       0.02       0.01       0.07       0.04  
  Loss on repurchase of convertible senior notes     --       --       0.13       0.13       --  
  Non-cash tax provision     0.14       0.03       (0.10 )     (0.08 )     (0.10 )
Non-GAAP net income per diluted common share   $ 1.04     $ 0.65     $ 0.37     $ 1.96     $ 1.37  
                                         

* Less than 1%

^ For the three months ended September 30, 2015, 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 this periods). Total diluted weighted average common shares outstanding used for calculating non-GAAP net income per diluted common share were 508 thousand for the three months ended September 30, 2015.

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