OREANDA-NEWS. BroadSoft, Inc. (NASDAQ: BSFT), a leading global provider of hosted cloud-based enterprise communications software and services to the telecommunications industry, today announced financial results for the quarter ended June 30, 2016.

Financial Highlights for the Second Quarter of 2016

  • Total revenue increased 27% year-over-year to $81.7 million
  • GAAP gross profit equaled 72% of total revenue; non-GAAP gross profit equaled 77% of total revenue
  • GAAP income from operations totaled $0.6 million; non-GAAP income from operations totaled $15.9 million or 19% of revenue
  • GAAP basic and diluted net loss per share equaled $(0.10) per common share; non-GAAP diluted earnings per share equaled $0.49 per common share

Results for the three months ended June 30, 2016

Total revenue rose to $81.7 million in the second quarter of 2016, an increase of 27% compared to $64.5 million in the second quarter of 2015.

Net loss for the second quarter of 2016 was $(2.9) million, or $(0.10) per basic and diluted common share, compared to net loss of $(5.3) million, or $(0.18) per basic and diluted common share in the second quarter of 2015.

On a non-GAAP basis, net income in the second quarter of 2016 was $15.0 million, or $0.49 per diluted common share, compared to non-GAAP net income of $9.7 million, or $0.32 per diluted common share, in the second quarter of 2015. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.

Results for the six months ended June 30, 2016

Total revenue rose to $154.9 million for the first six months of 2016, an increase of 29% compared to $120.2 million for the first six months of 2015.

Net loss for the first six months of 2016 was $(4.4) million, or $(0.15) per basic and diluted common share, compared to a net loss of $(8.2) million, or $(0.28) per basic and diluted common share for the first six months of 2015.

On a non-GAAP basis, net income for the first six months of 2016 was $26.0 million, or $0.87 per diluted common share, compared to non-GAAP net income of $17.0 million, or $0.57 per diluted common share, for the first six months of 2015. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.

Management Commentary

"In the second quarter, we delivered strong results as we achieved robust double-digit revenue growth," said Michael Tessler, president and chief executive officer, BroadSoft. "We see more and more service provider customers around the world launching and promoting truly converged fixed and mobile unified communications services based on BroadSoft solutions. This is a great validation of our products and vision. We will continue to innovate to remain the industry leader as the business communications market continues to evolve."

Guidance

For the third quarter of 2016, BroadSoft anticipates revenue of $78 to $83 million. The company also expects to achieve earnings on a non-GAAP basis of $0.26 to $0.41 per diluted common share. For the full year 2016, BroadSoft expects revenue in the range of $332 million to $340 million and non-GAAP EPS in the range of $1.95 to $2.15.

A reconciliation of non-GAAP earnings per share guidance, as well as projected non-GAAP cost of sales and operating expenses to be discussed on this morning's teleconference, 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 and stock-based compensation expense. We expect the variability of the above charges to have a significant, and potentially unpredictable, impact on our future GAAP financial results.

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.

 

   
BroadSoft, Inc.  
CONSOLIDATED BALANCE SHEETS  
(in thousands, except share and per share data)  
   
  June 30,
2016		     December 31,
2015		  
  (Unaudited)        
Assets:              
Current assets:              
  Cash and cash equivalents $ 138,520     $ 175,857  
  Short-term investments   125,592       72,531  
  Accounts receivable, net of allowance for doubtful accounts of $65 and $85 at June 30, 2016 and December 31, 2015, respectively   105,775       108,113  
  Other current assets   14,388       13,155  
    Total current assets   384,275       369,656  
Long-term assets:              
  Property and equipment, net   20,483       19,481  
  Long-term investments   92,866       102,385  
  Intangible assets, net   23,567       18,835  
  Goodwill   80,020       72,275  
  Deferred tax assets   8,572       1,661  
  Other long-term assets   6,771       8,081  
    Total long-term assets   232,279       222,718  
      Total assets $ 616,554     $ 592,374  
Liabilities and stockholders' equity:              
Current liabilities:              
    Accounts payable and accrued expenses $ 31,177     $ 28,667  
    Deferred revenue, current portion   100,712       106,483  
        Total current liabilities   131,889       135,150  
    Convertible senior notes   194,562       188,331  
    Deferred revenue   6,593       4,571  
    Other long-term liabilities   6,070       7,289  
        Total liabilities   339,114       335,341  
Commitments and contingencies              
Stockholders' equity:              
    Preferred stock, $0.01 par value per share; 5,000,000 shares authorized at June 30, 2016 and December 31, 2015; no shares issued and outstanding at June 30, 2016 and December 31, 2015   --       --  
    Common stock, par value $0.01 per share; 100,000,000 shares authorized at June 30, 2016 and December 31, 2015; 29,736,368 and 29,080,197 shares issued and outstanding at June 30, 2016 and December 31, 2015, respectively.   297       291  
    Additional paid-in capital   359,063       333,153  
    Accumulated other comprehensive loss   (16,200 )     (13,810 )
    Accumulated deficit   (65,720 )     (62,601 )
Total stockholders' equity   277,440       257,033  
Total liabilities and stockholders' equity $ 616,554     $ 592,374  
               
               
               
BroadSoft, Inc.  
CONSOLIDATED STATEMENTS OF OPERATIONS  
(in thousands, except per share data)  
   
  Three Months Ended
June 30,		     Six Months Ended
June 30,		  
  2016     2015     2016     2015  
  (Unaudited)     (Unaudited)  
Revenue:                              
  License software $ 33,597     $ 30,091     $ 64,506     $ 53,027  
  Subscription and maintenance support   36,800       27,026       69,839       52,435  
  Professional services and other   11,324       7,367       20,512       14,693  
    Total revenue   81,721       64,484       154,857       120,155  
Cost of revenue:                              
  License software   2,169       2,869       3,898       5,540  
  Subscription and maintenance support   11,456       10,227       22,166       19,171  
  Professional services and other   8,921       7,125       17,280       11,520  
    Total cost of revenue   22,546       20,221       43,344       36,231  
Gross profit   59,175       44,263       111,513       83,924  
Operating expenses:                              
  Sales and marketing   25,951       21,567       49,274       39,114  
  Research and development   20,068       16,266       38,189       30,550  
  General and administrative   12,603       11,306       23,916       20,411  
    Total operating expenses   58,622       49,139       111,379       90,075  
Income (loss) from operations   553       (4,876 )     134       (6,151 )
Other expense:                              
  Interest expense   3,926       2,027       7,779       4,016  
  Interest income   (664 )     (282 )     (1,267 )     (496 )
  Other, net   185       (484 )     (326 )     1,223  
    Total other expense, net   3,447       1,261       6,186       4,743  
Loss before income taxes   (2,894 )     (6,137 )     (6,052 )     (10,894 )
  Provision for (benefit from) income taxes   1       (849 )     (1,648 )     (2,701 )
Net loss $ (2,895 )   $ (5,288 )   $ (4,404 )   $ (8,193 )
Net loss per common share:                              
  Basic and diluted $ (0.10 )   $ (0.18 )   $ (0.15 )   $ (0.28 )
Weighted average common shares outstanding:                              
  Basic and diluted   29,449       29,230       29,295       29,111  
Stock-based compensation expense included above:                              
  Cost of revenue $ 2,171     $ 2,347     $ 3,893     $ 3,386  
  Sales and marketing   4,792       4,818       8,348       7,236  
  Research and development   4,020       4,067       7,165       6,505  
  General and administrative   2,629       2,562       4,880       4,103  
                                 
                                 
                                 
BroadSoft, Inc.  
SUMMARY OF CONSOLIDATED CASH FLOW ACTIVITY  
(Unaudited)  
   
  Six Months Ended
June 30,		  
  2016     2015  
  (in thousands)  
Cash provided by (used in):              
  Operating activities $ 32,689     $ 13,665  
  Investing activities   (72,802 )     (33,822 )
  Financing activities   3,230       (1,889 )
                 
                 
                 
BroadSoft, Inc.
BILLINGS (REVENUE PLUS NET CHANGE IN DEFERRED REVENUE)
(Unaudited)
 
  Three Months Ended
June 30,		   Six Months Ended
June 30,
  2016   2015   2016     2015
  (in thousands)
Beginning of period deferred revenue balance $ 102,725   $ 101,367   $ 111,054     $ 101,456
End of period deferred revenue balance   107,305     107,726     107,305       107,726
  Increase (decrease) in deferred revenue   4,580     6,359     (3,749 )     6,270
Revenue   81,721     64,484     154,857       120,155
  Revenue plus net change in deferred revenue $ 86,301   $ 70,843     151,108       126,425
                           
                           
                           
BroadSoft, Inc.
LICENSE SOFTWARE BILLINGS
(Unaudited)
 
  Three Months Ended
June 30,		   Six Months Ended
June 30,
  2016     2015   2016     2015
  (in thousands)
Beginning of period deferred license software revenue balance $ 27,853     $ 30,771   $ 33,200     $ 26,495
End of period deferred license software revenue balance   26,798       32,582     26,798       32,582
  Increase (decrease) in deferred license software revenue   (1,055 )     1,811     (6,402 )     6,087
License software revenue   33,597       30,091     64,506       53,027
  License software revenue plus net change in deferred license software revenue $ 32,542     $ 31,902   $ 58,104     $ 59,114
                             
                             
                             
BroadSoft, Inc.
SUBSCRIPTION AND MAINTENANCE SUPPORT BILLINGS
(Unaudited)
 
  Three Months Ended
June 30,		   Six Months Ended
June 30,
  2016   2015   2016     2015
  (in thousands)
Beginning of period deferred subscription and maintenance support revenue balance $ 57,464   $ 51,204   $ 61,399     $ 52,764
End of period deferred subscription and maintenance support revenue balance   60,381     53,951     60,381       53,951
  Increase (decrease) in deferred subscription and maintenance support revenue   2,917     2,747     (1,018 )     1,187
Subscription and maintenance support revenue   36,800     27,026     69,839       52,435
  Subscription and maintenance support revenue plus net change in deferred subscription and maintenance support revenue $ 39,717   $ 29,773   $ 68,821     $ 53,622
                           
                           
                           
BroadSoft, Inc.  
PROFESSIONAL SERVICES AND OTHER BILLINGS  
(Unaudited)  
   
  Three Months Ended
June 30,		   Six Months Ended
June 30,		  
  2016   2015   2016   2015  
  (in thousands)  
Beginning of period deferred professional services and other revenue balance $ 17,408   $ 19,392   $ 16,455   $ 22,197  
End of period deferred professional services and other revenue balance   20,126     21,193     20,126     21,193  
  Increase (decrease) in deferred professional services and other revenue   2,718     1,801     3,671     (1,004 )
Professional services and other revenue   11,324     7,367     20,512     14,693  
  Professional services and other revenue plus net change in deferred professional services and other revenue $ 14,042   $ 9,168   $ 24,183   $ 13,689  
                           
                           
                           
BroadSoft, Inc.  
RECONCILIATION OF NON-GAAP FINANCIAL MEASURES  
(Unaudited)  
   
  Three Months Ended
June 30,		     Six Months Ended
June 30,		  
  2016     2015     2016     2015  
  (in thousands)  
Non-GAAP cost of revenue:                              
GAAP license cost of revenue $ 2,169     $ 2,869     $ 3,898     $ 5,540  
  (percent of related revenue)   6 %     10 %     6 %     10 %
Less:                              
  Stock-based compensation expense   168       374       326       537  
  Amortization of acquired intangible assets   335       419       669       868  
Non-GAAP license cost of revenue $ 1,666     $ 2,076     $ 2,903     $ 4,135  
  (percent of related revenue)   5 %     7 %     5 %     8 %
                               
                               
GAAP subscription and maintenance support cost of revenue $ 11,456     $ 10,227     $ 22,166     $ 19,171  
  (percent of related revenue)   31 %     38 %     32 %     37 %
Less:                              
  Stock-based compensation expense   833       1,114       1,486       1,721  
  Amortization of acquired intangible assets   1,183       1,056       2,235       2,111  
Non-GAAP subscription and maintenance support cost of revenue $ 9,440     $ 8,057     $ 18,445     $ 15,339  
  (percent of related revenue)   26 %     30 %     26 %     29 %
                               
                               
GAAP professional services and other cost of revenue $ 8,921     $ 7,125     $ 17,280     $ 11,520  
  (percent of related revenue)   79 %     97 %     84 %     78 %
Less:                              
  Stock-based compensation expense   1,170       859       2,081       1,128  
    Amortization of acquired intangible assets $ 175     $ 58     $ 350     $ 58  
Non-GAAP professional services and other cost of revenue $ 7,576     $ 6,208     $ 14,849     $ 10,334  
  (percent of related revenue)   67 %     84 %     72 %     70 %
                               
  Three Months Ended
June 30,		     Six Months Ended
June 30,		  
  2016     2015     2016     2015  
  (in thousands)  
Non-GAAP gross profit:                              
GAAP gross profit $ 59,175     $ 44,263     $ 111,513     $ 83,924  
  (percent of total revenue)   72 %     69 %     72 %     70 %
Plus:                              
  Stock-based compensation expense   2,171       2,347       3,893       3,386  
  Amortization of acquired intangible assets   1,693       1,533       3,254       3,037  
Non-GAAP gross profit $ 63,039     $ 48,143     $ 118,660     $ 90,347  
  (percent of total revenue)   77 %     75 %     77 %     75 %
                               
                               
GAAP license gross profit $ 31,428     $ 27,222     $ 60,608     $ 47,487  
  (percent of related revenue)   94 %     90 %     94 %     90 %
Plus:                              
  Stock-based compensation expense   168       374       326       537  
  Amortization of acquired intangible assets   335       419       669       868  
Non-GAAP license gross profit $ 31,931     $ 28,015     $ 61,603     $ 48,892  
  (percent of related revenue)   95 %     93 %     95 %     92 %
                               
                               
GAAP subscription and maintenance support gross profit $ 25,344     $ 16,799     $ 47,673     $ 33,264  
  (percent of related revenue)   69 %     62 %     68 %     63 %
Plus:                              
  Stock-based compensation expense   833       1,114       1,486       1,721  
  Amortization of acquired intangible assets   1,183       1,056       2,235       2,111  
Non-GAAP subscription and maintenance support gross profit $ 27,360     $ 18,969     $ 51,394     $ 37,096  
  (percent of related revenue)   74 %     70 %     74 %     71 %
                               
                               
GAAP professional services and other gross profit $ 2,403     $ 242     $ 3,232     $ 3,173  
  (percent of related revenue)   21 %     3 %     16 %     22 %
Plus:                              
  Stock-based compensation expense   1,170       859       2,081       1,128  
    Amortization of acquired intangible assets $ 175     $ 58     $ 350     $ 58  
Non-GAAP professional services and other gross profit $ 3,748     $ 1,159     $ 5,663     $ 4,359  
  (percent of related revenue)   33 %     16 %     28 %     30 %
                               
  Three Months Ended
June 30,		     Six Months Ended
June 30,		  
  2016     2015     2016     2015  
  (in thousands)  
Non-GAAP income from operations:                              
GAAP loss from operations $ 553     $ (4,876 )   $ 134     $ (6,151 )
  (percent of total revenue)   1 %     (8 )%     -- %     (5 )%
Plus:                              
  Stock-based compensation expense   13,612       13,794       24,286       21,230  
  Amortization of acquired intangible assets   1,693       1,533       3,254       3,037  
Non-GAAP income from operations $ 15,858     $ 10,451     $ 27,674     $ 18,116  
  (percent of total revenue)   19 %     16 %     18 %     15 %
                               
                               
GAAP operating expense $ 58,622     $ 49,139     $ 111,379     $ 90,075  
  (percent of total revenue)   72 %     76 %     72 %     75 %
Less:                              
  Stock-based compensation expense   11,441       11,447       20,393       17,844  
Non-GAAP operating expense $ 47,181     $ 37,692     $ 90,986     $ 72,231  
  (percent of total revenue)   58 %     58 %     59 %     60 %
                               
                               
GAAP sales and marketing expense $ 25,951     $ 21,567     $ 49,274     $ 39,114  
  (percent of total revenue)   32 %     33 %     32 %     33 %
Less:                              
  Stock-based compensation expense   4,792       4,818       8,348       7,236  
Non-GAAP sales and marketing expense $ 21,159     $ 16,749     $ 40,926     $ 31,878  
  (percent of total revenue)   26 %     26 %     26 %     27 %
                               
                               
GAAP research and development expense $ 20,068     $ 16,266     $ 38,189     $ 30,550  
  (percent of total revenue)   25 %     25 %     25 %     25 %
Less:                              
  Stock-based compensation expense   4,020       4,067       7,165       6,505  
Non-GAAP research and development expense $ 16,048     $ 12,199     $ 31,024     $ 24,045  
  (percent of total revenue)   20 %     19 %     20 %     20 %
                               
                               
GAAP general and administrative expense $ 12,603     $ 11,306     $ 23,916     $ 20,411  
  (percent of total revenue)   15 %     18 %     15 %     17 %
Less:                              
  Stock-based compensation expense   2,629       2,562       4,880       4,103  
Non-GAAP general and administrative expense $ 9,974     $ 8,744     $ 19,036     $ 16,308  
  (percent of total revenue)   12 %     14 %     12 %     14 %
                               
  Three Months Ended
June 30,		     Six Months Ended
June 30,		  
  2016     2015     2016     2015  
  (in thousands, except per share data)  
Non-GAAP net income and income per share:                              
GAAP net loss $ (2,895 )   $ (5,288 )   $ (4,404 )   $ (8,193 )
  (percent of total revenue)   (4 )%     (8 )%     (3 )%     (7 )%
Adjusted for:                              
  Stock-based compensation expense   13,612       13,794       24,286       21,230  
  Amortization of acquired intangible assets   1,693       1,533       3,254       3,037  
  Non-cash interest expense on our convertible senior notes   3,144       1,576       6,231       3,116  
  Foreign currency transaction losses (gains)   185       (484 )     (326 )     1,223  
  Non-cash tax benefit   (786 )     (1,406 )     (3,018 )     (3,409 )
Non-GAAP net income $ 14,953     $ 9,725     $ 26,023     $ 17,004  
  (percent of total revenue)   18 %     15 %     17 %     14 %
                               
                               
GAAP net loss per basic common share $ (0.10 )   $ (0.18 )   $ (0.15 )   $ (0.28 )
Adjusted for:                              
  Stock-based compensation expense   0.46       0.47       0.83       0.73  
  Amortization of acquired intangible assets   0.06       0.05       0.11       0.10  
  Non-cash interest expense on our convertible senior notes   0.11       0.05       0.21       0.11  
  Foreign currency transaction losses (gains)   0.01       (0.02 )     (0.01 )     0.04  
  Non-cash tax benefit   (0.03 )     (0.05 )     (0.10 )     (0.12 )
Non-GAAP net income per basic common share $ 0.51     $ 0.33     $ 0.89     $ 0.58  
                               
                               
GAAP net loss per diluted common share $ (0.10 )   $ (0.18 )   $ (0.15 )   $ (0.28 )
Adjusted for:                              
  Stock-based compensation expense   0.44       0.46       0.81       0.71  
  Amortization of acquired intangible assets   0.06       0.05       0.11       0.10  
  Non-cash interest expense on our convertible senior notes   0.10       0.05       0.21       0.10  
  Foreign currency transaction losses (gains)   0.01       (0.02 )     (0.01 )     0.04  
  Non-cash tax benefit   (0.03 )     (0.05 )     (0.10 )     (0.11 )
Non-GAAP net income per diluted common share $ 0.49     $ 0.32     $ 0.87     $ 0.57  
                               

* For the three and six months ended June 30, 2016 and 2015, the non-GAAP net income per diluted common share calculation included the dilutive effect of stock-based awards and for the three and six months ended June 30, 2016, the non-GAAP net income per diluted common share calculation included the effect of the premium feature of the 1.00% convertible senior notes due in 2022 (which, in each case, 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 30,629 thousand and 29,930 thousand for the three months ended June 30, 2016 and 2015 and 30,044 thousand and 29,741 thousand for the six months ended June 30, 2016 and 2015, respectively.