SOURCE: BroadSoft, Inc.

BroadSoft, Inc.

August 06, 2012 16:15 ET

BroadSoft Reports Second Quarter 2012 Financial Results

GAITHERSBURG, MD--(Marketwire - Aug 6, 2012) - 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 quarter ended June 30, 2012.

Financial Highlights for the Second Quarter of 2012

  • Total revenue increased 26% year-over-year to $40.5 million

  • GAAP gross profit equaled 79% of total revenue; non-GAAP gross profit equaled 82% of total revenue

  • GAAP income from operations totaled $5.6 million or 14% of revenue; non-GAAP income from operations totaled $9.9 million or 24% of revenue

  • GAAP diluted EPS equaled $0.08 per common share; non-GAAP diluted EPS equaled $0.33 per common share

Results for the three months ended June 30, 2012

Total revenue rose to $40.5 million in the second quarter of 2012, an increase of 26% compared to $32.2 million in the second quarter of 2011. 

Net income for the second quarter of 2012 was $2.4 million, or $0.08 per diluted common share, compared to net income of $15.8 million, or $0.57 per diluted common share, in the second quarter of 2011. Second quarter 2011 results included an income tax benefit of $9.9 million, or $0.36 per diluted common share, resulting from the release of a tax valuation allowance relating to net deferred tax assets. 

On a non-GAAP basis, net income in the second quarter of 2012 was $9.4 million, or $0.33 per diluted common share, compared to non-GAAP net income of $7.6 million, or $0.27 per diluted common share, in the second quarter of 2011. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.

Results for the six months ended June 30, 2012

Total revenue was $78.9 million for the first six months of 2012, compared to $61.8 million for the first six months of 2011, reflecting year-over-year growth of 28%.

Net income for the first six months of 2012 was $4.1 million, or $0.14 per diluted common share, compared to net income of $19.5 million, or $0.70 per diluted common share, for the first six months of 2011. Results for the six months ended June 30, 2011 included an income tax benefit of $9.9 million, or $0.36 per diluted common share, resulting from the release of a tax valuation allowance relating to net deferred tax assets.

On a non-GAAP basis, net income for the first six months of 2012 was $17.5 million or $0.62 per diluted common share, compared to non-GAAP net income of $13.0 million, or $0.47 per diluted common share, in the first six months of 2011. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.

Management Commentary

"BroadSoft had a strong second quarter and first half of 2012. We are executing well and demand for our software and services continues to grow," said Michael Tessler, president and chief executive officer, BroadSoft. "To continue to deliver on our commitment to drive innovative solutions for our customers, today we announced our acquisition of the assets of Adaption Technologies, which we believe will help us enhance our BroadCloud Software-as-a-Service (SaaS) delivery platform. BroadCloud will now include BroadWorks' award winning features and functionality, helping speed time-to-market of our service provider customers' Unified Communications offerings."

"We delivered a strong second quarter, marked by a 26% increase in revenue compared to the year ago period," said Jim Tholen, chief financial officer, BroadSoft. "Both our non-GAAP operating income and net income improved relative to last year's second quarter. We also generated a very healthy $11.7 million in cash flow from operations and ended the quarter with cash, cash equivalents and investments totaling $194 million."

Guidance

For the third quarter of 2012, BroadSoft anticipates revenue of $40 to $42 million inclusive of approximately $0.5 million in revenue from a partial-quarter contribution from the Adaption acquisition. The Company also expects to achieve earnings on a non-GAAP basis of $0.27 to $0.33 per diluted common share which includes expected dilution from the Adaption acquisition of approximately $0.02 per share.

For the full year 2012, BroadSoft expects revenue of $162 to $167 million which includes approximately $1.3 million in contribution from the Adaption acquisition. The Company anticipates full year 2012 earnings on a non-GAAP basis of $1.30 to $1.40 per diluted common share, which includes expected dilution of approximately $0.04 per share for the Adaption acquisition.

Conference Call

BroadSoft will discuss its second quarter results and business outlook today via teleconference at 5:00 p.m. Eastern Time. To participate in the teleconference, callers can dial the toll free number 1-877-312-5517 (U.S. callers only) or 1-760-666-3772 (from outside the U.S.). The conference call can also be heard live via audio webcast at http://investors.broadsoft.com/events.cfm. To help ensure the conference begins on time, please dial in or connect via the web five minutes prior to the scheduled start time. 

For those unable to participate in the live call, an audio replay will be available between 8:00 p.m. Eastern Time August 6, 2012 and 11:59 p.m. Eastern Time August 13, 2012 by calling 1-855-859-2056 or 1-404-537-3406, with Conference ID 10547785. A recording of the call will be available two hours following the conclusion of the call at http://investors.broadsoft.com until November 5, 2012.

BroadSoft has provided in this release, and will provide on this afternoon's teleconference, financial information that has not been prepared in accordance with generally accepted accounting principles, or GAAP. BroadSoft uses these non-GAAP financial measures internally in analyzing its financial results and believes they are useful to investors, as a supplement to GAAP measures, in evaluating BroadSoft's ongoing operational performance. BroadSoft's management regularly uses these non-GAAP financial measures to understand and manage its business and believes 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 afternoon'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, 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 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 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 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.

With respect to our expectations under "Guidance" above, reconciliation of non-GAAP earnings per share guidance to the closest corresponding GAAP measure 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 and other non-GAAP financial measures in this release and on this afternoon's teleconference is not meant to be a substitute for "net income," "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," "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; 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; the Company's ability to integrate and achieve the expected benefits from its recent acquisitions, including Adaption Technologies; 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-Q for the quarter ended June 30, 2012 filed with the Securities and Exchange Commission, or SEC, today and the Company's Form 10-K for the year ended December 31, 2011 filed with the SEC on February 29, 2012, and in the Company's other filings with the SEC. All information in this release is as of August 6, 2012. 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 brand 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 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 June 30, 2012, 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.

BSFT-F

   
BroadSoft, Inc.  
Condensed Consolidated Balance Sheets  
(unaudited)  
   
    June 30,
 2012
    December 31,
 2011
 
    (In thousands, except share and per share data)  
Assets:                
Current assets:                
  Cash and cash equivalents   $ 84,253     $ 94,072  
  Short-term investments     89,568       92,749  
  Accounts receivable, net of allowance for doubtful accounts of $379 and $54 at June 30, 2012 and December 31, 2011, respectively     39,839       47,048  
  Deferred tax assets     12,409       12,968  
  Other current assets     7,451       4,435  
    Total current assets     233,520       251,272  
Long-term assets:                
  Property and equipment, net     4,708       4,221  
  Long-term investments     20,405       5,000  
  Restricted cash     959       959  
  Intangible assets, net     7,682       8,842  
  Goodwill     20,207       17,276  
  Other long-term assets     7,310       3,386  
    Total long-term assets     61,271       39,684  
      Total assets   $ 294,791     $ 290,956  
Liabilities and stockholders' equity:                
Current liabilities:                
  Accounts payable and accrued expenses   $ 12,272     $ 14,999  
  Notes payable and bank loans, current portion     475       891  
  Deferred revenue, current portion     46,816       55,372  
      Total current liabilities     59,563       71,262  
                 
Convertible senior notes     84,048       81,737  
Notes payable and bank loans     448       461  
Deferred revenue     1,978       1,764  
Deferred tax liabilities     3,973       1,433  
Other long-term liabilities     1,149       1,056  
      Total liabilities     151,159       157,713  
                 
Stockholders' equity:                
                 
Common stock, par value $0.01 per share; 100,000,000 shares authorized at June 30, 2012 and December 31, 2011; 27,581,558 and 27,106,393 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively     276       271  
  Additional paid-in capital     198,710       191,714  
  Accumulated other comprehensive loss     (3,226 )     (2,557 )
  Accumulated deficit     (52,128 )     (56,185 )
Total stockholders' equity     143,632       133,243  
Total liabilities and stockholders' equity   $ 294,791     $ 290,956  
                 
                 
                 
BroadSoft, Inc.  
Condensed Consolidated Statements of Operations  
(Unaudited)  
   
    Three Months Ended
June 30,
    Six Months Ended
June 30,
 
    2012   2011     2012   2011  
    (In thousands, except per share data)  
Revenue:                            
  Licenses   $ 22,501   $ 19,202     $ 43,766   $ 34,393  
  Maintenance and services     18,015     12,977       35,093     27,440  
    Total revenue     40,516     32,179       78,859     61,833  
                             
Cost of revenue:                            
  Licenses     2,515     1,345       4,575     2,621  
  Maintenance and services     5,249     4,635       10,702     8,950  
  Amortization of intangibles     557     251       1,116     490  
    Total cost of revenue     8,321     6,231       16,393     12,061  
                             
Gross profit     32,195     25,948       62,466     49,772  
                             
Operating expenses:                            
  Sales and marketing     11,608     9,077       22,680     17,561  
  Research and development     9,131     6,730       17,607     13,546  
  General and administrative     5,880     4,496       11,694     8,882  
    Total operating expenses     26,619     20,303       51,981     39,989  
                             
Income from operations     5,576     5,645       10,485     9,783  
                             
Other expense, net:     1,603     194       3,182     171  
Income before income taxes     3,973     5,451       7,303     9,612  
  Provision for (benefit from) income taxes     1,617     (10,340 )     3,246     (9,874 )
Net income   $ 2,356   $ 15,791     $ 4,057   $ 19,486  
                             
                             
Net income per common share available to BroadSoft, Inc. common stockholders:                            
  Basic   $ 0.09   $ 0.59     $ 0.15   $ 0.74  
  Diluted   $ 0.08   $ 0.57     $ 0.14   $ 0.70  
                             
Weighted average common shares outstanding:                            
  Basic     27,550     26,670       27,392     26,189  
  Diluted     28,253     27,939       28,238     27,796  
                             
Stock-based compensation expense included above:                            
  Cost of revenue   $ 483   $ 211     $ 891   $ 277  
  Sales and marketing     1,391     415       2,528     749  
  Research and development     1,101     510       1,900     757  
  General and administrative     806     765       1,653     1,220  
                             
                             
                             
Summary of Consolidated Cash Flow Activity  
(unaudited)  
   
    Six Months Ended
June 30,
 
    2012     2011  
    (in thousands)  
       
Net cash provided by operating activities   8,233     12,025  
Net cash used in investing activities   (17,103 )   (19,090 )
Net cash (used in) provided by financing activities   (904 )   117,727  
             
             
             
BroadSoft, Inc.
 
Reconciliation of Non-GAAP Financial Measures  
(Unaudited)  
   
    Three Months Ended
June 30,
    Three Months Ended     Six Months Ended
June 30,
 
    2012     2011     March 31, 2012     2012     2011  
    (In thousands)  
                                         
Non-GAAP gross profit:                                        
GAAP gross profit   $ 32,195     $ 25,948     $ 30,271     $ 62,466     $ 49,772  
  (percent of total revenue)     79 %     81 %     79 %     79 %     80 %
Plus:                                        
  Stock-based compensation expense     483       211       408       891       277  
  Amortization of acquired intangible assets     557       251       559       1,116       490  
                                         
Non-GAAP gross profit   $ 33,235     $ 26,410     $ 31,238     $ 64,473     $ 50,539  
  (percent of total revenue)     82 %     82 %     81 %     82 %     82 %
                                         
GAAP license gross profit   $ 19,429     $ 17,606     $ 18,646     $ 38,075     $ 31,282  
  (percent of related revenue)     86 %     92 %     88 %     87 %     91 %
Plus:                                        
  Stock-based compensation expense     174       62       141       315       92  
  Amortization of acquired intangible assets     557       251       559       1,116       490  
                                         
Non-GAAP license gross profit   $ 20,160     $ 17,919     $ 19,346     $ 39,506     $ 31,864  
  (percent of related revenue)     90 %     93 %     91 %     90 %     93 %
                                         
GAAP maintenance and services gross profit   $ 12,766     $ 8,342     $ 11,625     $ 24,391     $ 18,490  
  (percent of related revenue)     71 %     64 %     68 %     70 %     67 %
Plus:                                        
  Stock-based compensation expense     309       149       267       576       185  
                                         
Non-GAAP maintenance and services gross profit   $ 13,075     $ 8,491     $ 11,892     $ 24,967     $ 18,675  
  (percent of related revenue)     73 %     65 %     70 %     71 %     68 %
                                         
                                         
                                         
BroadSoft, Inc.
 
Reconciliation of Non-GAAP Financial Measures (continued)  
(Unaudited)  
   
    Three Months Ended
June 30,
    Three Months Ended     Six Months Ended
June 30,
 
    2012     2011     March 31, 2012     2012     2011  
    (In thousands)  
Non-GAAP income from operations:                                        
GAAP income from operations   $ 5,576     $ 5,645     $ 4,909     $ 10,485     $ 9,783  
  (percent of total revenue)     14 %     18 %     13 %     13 %     16 %
Plus:                                        
  Stock-based compensation expense     3,781       1,901       3,191       6,972       3,003  
  Amortization of acquired intangible assets     557       251       559       1,116       490  
                                         
Non-GAAP income from operations   $ 9,914     $ 7,797     $ 8,659     $ 18,573     $ 13,276  
  (percent of total revenue)     24 %     24 %     23 %     24 %     21 %
                                         
GAAP operating expense   $ 26,619     $ 20,303     $ 25,362     $ 51,981     $ 39,989  
                                         
Less:                                        
  Stock-based compensation expense     3,298       1,690       2,783       6,081       2,726  
                                         
Non-GAAP operating expense   $ 23,321     $ 18,613     $ 22,579     $ 45,900     $ 37,263  
  (as percent of total revenue)     58 %     58 %     59 %     58 %     60 %
                                         
GAAP sales and marketing expense   $ 11,608     $ 9,077     $ 11,072     $ 22,680     $ 17,561  
                                         
Less:                                        
  Stock-based compensation expense     1,391       415       1,137       2,528       749  
                                         
Non-GAAP sales and marketing expense   $ 10,217     $ 8,662     $ 9,935     $ 20,152     $ 16,812  
  (as percent of total revenue)     25 %     27 %     26 %     26 %     27 %
                                         
GAAP research and development expense   $ 9,131     $ 6,730     $ 8,476     $ 17,607     $ 13,546  
                                         
Less:                                        
  Stock-based compensation expense     1,101       510       799       1,900       757  
                                         
Non-GAAP research and development expense   $ 8,030     $ 6,220     $ 7,677     $ 15,707     $ 12,789  
  (as percent of total revenue)     20 %     19 %     20 %     20 %     21 %
                                         
GAAP general and administrative expense   $ 5,880     $ 4,496     $ 5,814     $ 11,694     $ 8,882  
                                         
Less:                                        
  Stock-based compensation expense     806       765       847       1,653       1,220  
                                         
Non-GAAP general and administrative expense   $ 5,074     $ 3,731     $ 4,967     $ 10,041     $ 7,662  
  (as percent of total revenue)     13 %     12 %     13 %     13 %     12 %
                                         
                                         
                                         
BroadSoft, Inc.
 
Reconciliation of Non-GAAP Financial Measures (continued)  
(Unaudited)  
   
    Three Months Ended
June 30,
    Three Months Ended   Six Months Ended
June 30,
 
    2012   2011     March 31, 2012   2012   2011  
    (In thousands, except per share data)  
Non-GAAP net income and income per share:                                  
GAAP net income   $ 2,356   $ 15,791     $ 1,701   $ 4,057   $ 19,486  
                                   
Adjusted for:                                  
  Stock-based compensation expense     3,781     1,901       3,191     6,972     3,003  
  Amortization of acquired intangible assets     557     251       559     1,116     490  
  Non-cash interest expense on our convertible notes     1,273     172       1,242     2,515     172  
  Non-cash tax provision (benefit)     1,425     (10,496 )     1,463     2,888     (10,140 )
                                   
Non-GAAP net income   $ 9,392   $ 7,619     $ 8,156   $ 17,548   $ 13,011  
                                   
                                   
GAAP net income per basic common share   $ 0.09   $ 0.59     $ 0.06   $ 0.15   $ 0.74  
                                   
Adjusted for:                                  
  Stock-based compensation expense     0.14     0.07       0.12     0.25     0.11  
  Amortization of acquired intangible assets     0.02     0.01       0.02     0.04     0.02  
  Non-cash interest expense on our convertible notes     0.04     0.01       0.05     0.09     0.01  
  Non-cash tax provision (benefit)     0.05     (0.39 )     0.05     0.11     (0.38 )
                                   
Non-GAAP net income per basic common share   $ 0.34   $ 0.29     $ 0.30   $ 0.64   $ 0.50  
                                   
                                   
GAAP net income per diluted common share   $ 0.08   $ 0.57     $ 0.06   $ 0.14   $ 0.70  
                                   
Adjusted for:                                  
  Stock-based compensation expense     0.13     0.07       0.11     0.25     0.11  
  Amortization of acquired intangible assets     0.02     0.01       0.02     0.04     0.02  
  Non-cash interest expense on our convertible notes     0.05     0.01       0.05     0.09     0.01  
  Non-cash tax provision (benefit)     0.05     (0.39 )     0.05     0.10     (0.37 )
                                   
Non-GAAP net income per diluted common share   $ 0.33   $ 0.27     $ 0.29   $ 0.62   $ 0.47  
                                   

Contact Information

  • Contact Information

    For further information contact:

    Investor Relations:
    John Kiang
    +1-240-720-0625
    Email Contact

    Industry Analyst / Media Relations:
    Elaine Myada
    +1-240-720-9558
    Email Contact

    Brian Lustig
    +1-301-775-6203
    Email Contact