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BroadSoft Reports First Quarter 2013 Financial Results

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GAITHERSBURG, MD -- (Marketwired) -- 05/06/13 -- 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 March 31, 2013.

Financial Highlights for the First Quarter of 2013

Total revenue increased 3% year-over-year to $39.6 million

GAAP gross profit was 75% of total revenue; non-GAAP gross profit was 80% of total revenue

GAAP loss from operations totaled $3.8 million; non-GAAP income from operations totaled $5.6 million or 14% of revenue

GAAP basic and diluted EPS was $(0.08) per common share; non-GAAP diluted EPS was $0.18 per common share



Results for the three months ended March 31, 2013

Total revenue rose to $39.6 million in the first quarter of 2013, an increase of 3% compared to $38.3 million in the first quarter of 2012.

Net loss for the first quarter of 2013 was $2.3 million, or $0.08 per basic and diluted common share, compared to net income of $1.7 million, or $0.06 per diluted common share, in the first quarter of 2012.

On a non-GAAP basis, net income in the first quarter of 2013 was $5.1 million, or $0.18 per diluted common share, compared to non-GAAP net income of $8.2 million, or $0.29 per diluted common share, in the first quarter of 2012. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.

Management Commentary

"I am pleased with both our financial performance and the progress we made against our strategic objectives in the first quarter," said Michael Tessler, president and chief executive officer, BroadSoft. "The undeniable shift by enterprises from premise-based PBX solutions to cloud-based, mobile-centric unified communications is a significant opportunity for our service provider customers. In the first quarter, we had an increasing number of customers further leverage their investment in our UC-One platform in order to meet this demand. We also had significant interest in our BroadCloud PBX capabilities, as many existing and prospective customers are investigating the accelerated time-to-market benefits of this service delivery platform in order to rapidly capitalize on this growing market trend."

"We had a solid start to 2013 with billings growth in the first quarter of 16% year-over-year. We were particularly pleased with the growth in our core hosted UC business and continued revenue strength in Europe," said Jim Tholen, chief financial officer, BroadSoft. "It was also a strong cash-generating quarter for us; total cash, cash equivalents and investments increased by $11 million from year-end 2012 to over $204 million. We look forward to building upon these successes throughout the rest of the year."

Guidance

For the second quarter of 2013, BroadSoft anticipates revenue of $40 to $44 million. The Company also expects to achieve earnings on a non-GAAP basis of $0.15 to $0.25 per diluted common share.

For the full year 2013, BroadSoft continues to expect revenue of $181 to $189 million and earnings on a non-GAAP basis of $1.10 to $1.35 per diluted common share.

Conference Call

BroadSoft will discuss its first quarter 2013 results and its 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, 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 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 profit, license gross profit, subscription and maintenance support gross profit, and professional services and other gross profit. BroadSoft defines non-GAAP gross profit as gross profit plus stock-based compensation expense and amortization expense for acquired intangible assets. BroadSoft considers non-GAAP gross profit to be a useful metric for management and our investors because it excludes the effect of certain non-cash expenses so management and its investors can compare BroadSoft's sales margins over multiple periods. Where BroadSoft provides further breakdown of non-GAAP gross profit between license, subscription and maintenance support and professional services and other, the Company adds back the stock-based compensation expense and amortization expense, as applicable, to the related gross profit.

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

Non-GAAP income from operations. BroadSoft defines non-GAAP income from operations as income from operations plus stock-based compensation expense and amortization expense for acquired intangible assets. BroadSoft considers non-GAAP income from operations to be a useful metric for management and investors because it excludes the effect of certain non-cash expenses so management and investors can compare BroadSoft's core business operating results over multiple periods. Where BroadSoft provides further breakdown of non-GAAP operating expenses for sales and marketing, research and development and general and administrative, the Company deducts stock-based compensation expense included in the applicable expense item.

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, 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, billings 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," "billings" and other non-GAAP financial measures may differ from similarly titled non-GAAP measures used by other companies and may differ from period to period. In reporting non-GAAP measures in the future, management may make other adjustments for expenses and gains it does not consider reflective of core operating performance in a particular period and may modify "non-GAAP net income," "non-GAAP net income per share," "non-GAAP gross margin," "non-GAAP income from operations," "billings" and such other non-GAAP measures by excluding these expenses and gains.

Forward-Looking Statements

This press release may contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements may be identified by their use of terms and phrases such as "anticipate," "expect," "will," "believe," "continue" and other similar terms and phrases, and such forward-looking statements include, but are not limited to, the statements regarding the Company's future financial performance set forth under the heading "Guidance." The outcome of the events described in these forward-looking statements is subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from the results anticipated by these forward-looking statements, including, but not limited to: the Company's dependence on the success of BroadWorks® and on its service provider customers to sell services using its applications; the Company's dependence in large part on service providers' continued deployment of, and investment in, their IP-based networks; claims that the Company infringes the intellectual property rights of others; the Company's ability to integrate and achieve the expected benefits from its recent acquisitions, 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-K for the year ended December 31, 2012 filed with the SEC on February 27, 2013, and in the Company's other filings with the SEC. All information in this release is as of May 6, 2013. 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

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 March 31, 2013, 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) March 31, December 31, 2013 2012 ------------- ------------- (In thousands, except share and per share data)Assets:Current assets: Cash and cash equivalents $ 92,487 $ 90,545 Short-term investments 74,893 73,075 Accounts receivable, net of allowance for doubtful accounts of $141 and $139 at March 31, 2013 and December 31, 2012, respectively 42,124 48,980 Deferred tax assets 3,529 3,732 Other current assets 10,883 10,796 ------------- ------------- Total current assets 223,916 227,128 ------------- -------------Long-term assets: Property and equipment, net 7,647 7,361 Long-term investments 37,435 30,102 Restricted cash 584 584 Intangible assets, net 10,410 11,247 Goodwill 37,250 37,529 Other long-term assets 19,486 12,955 ------------- ------------- Total long-term assets 112,812 99,778 ------------- ------------- Total assets $ 336,728 $ 326,906 ============= =============Liabilities and stockholders' equity:Current liabilities: Accounts payable and accrued expenses $ 12,704 $ 15,686 Notes payable and bank loans, current portion 539 555 Deferred revenue, current portion 56,100 49,368 ------------- ------------- Total current liabilities 69,343 65,609Convertible senior notes 87,689 86,451Notes payable and bank loans 402 414Deferred revenue 3,480 11,781Deferred tax liabilities - -Other long-term liabilities 1,477 1,416 ------------- ------------- Total liabilities 162,391 165,671 ------------- -------------Stockholders' equity:Common stock, par value $0.01 per share; 100,000,000 shares authorized at March 31, 2013 and December 31, 2012; 28,023,873 and 27,913,471 shares issued and outstanding at March 31, 2013 and December 31, 2012, respectively 280 279 Additional paid-in capital 224,124 208,073 Accumulated other comprehensive loss (3,641) (3,008) Accumulated deficit (46,426) (44,109) ------------- -------------Total stockholders' equity 174,337 161,235 ------------- -------------Total liabilities and stockholders' equity $ 336,728 $ 326,906 ============= ============= BroadSoft, Inc. Condensed Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, ---------------------------- 2013 2012 ------------- ------------- (In thousands, except per share data)Revenue: License software $ 20,842 $ 21,265 Subscription and maintenance support 15,185 12,373 Professional services and other 3,598 4,705 ------------- ------------- Total revenue 39,625 38,343Cost of revenue: License software 2,460 2,221 Subscription and maintenance support 4,613 3,388 Professional services and other 2,693 2,463 ------------- ------------- Total cost of revenue 9,766 8,072 ------------- -------------Gross profit 29,859 30,271Operating expenses: Sales and marketing 13,729 11,072 Research and development 12,368 8,476 General and administrative 7,519 5,814 ------------- ------------- Total operating expenses 33,616 25,362 ------------- -------------(Loss) Income from operations (3,757) 4,909Other expense, net: 1,675 1,579 ------------- -------------(Loss) Income before income taxes (5,432) 3,330(Benefit from) provision for income taxes (3,115) 1,629 ------------- -------------Net (loss) income $ (2,317) $ 1,701 ============= =============Net (loss) income per common share: Basic $ (0.08) $ 0.06 Diluted $ (0.08) $ 0.06Weighted average common shares outstanding: Basic 27,974 27,235 Diluted 27,974 28,234Stock-based compensation expense included above: Cost of revenue $ 997 $ 408 Sales and marketing 2,758 1,137 Research and development 2,878 799 General and administrative 1,911 847 BroadSoft, Inc. Summary of Consolidated Cash Flow Activity (Unaudited) Three Months Ended March 31, -------------------------- 2013 2012 ------------ ------------ (in thousands)Net cash provided by (used in) operating activities 4,899 (3,454)Net cash used in investing activities (10,262) (1,300)Net cash provided by (used in) financing activities 7,508 (557) Billings (Unaudited) Three Months Ended March 31, 2013 2012 ------------- ------------- (In thousands)Beginning of period deferred revenue balance $ 61,149 $ 57,136End of period deferred revenue balance 59,580 51,631 ------------- -------------Decrease in deferred revenue (1,569) (5,505)Revenue 39,625 38,343 ------------- -------------Revenue plus net change in deferred revenue 38,056 32,838








BroadSoft, Inc. Reconciliation of Non-GAAP Financial Measures (Unaudited) Three Months Ended March 31, ---------------------------- 2013 2012 ------------- ------------- (In thousands)Non-GAAP cost of revenue:GAAP license cost of revenue $ 2,460 $ 2,221Less:Stock-based compensation expense 233 141Amortization of acquired intangibles 211 241 ------------- -------------Non-GAAP license cost of revenue $ 2,016 $ 1,839 ============= =============GAAP subscription and maintenance support cost of revenue $ 4,613 $ 3,388Less:Stock-based compensation expense 544 162Amortization of acquired intangibles 588 318 ------------- -------------Non-GAAP subscription and maintenance support cost of revenue $ 3,481 $ 2,908 ------------- -------------GAAP professional services and other cost of revenue $ 2,693 $ 2,463Less:Stock-based compensation expense 220 105 ------------- -------------Non-GAAP professional services and other cost of revenue $ 2,473 $ 2,358 ============= =============Non-GAAP gross profit:GAAP gross profit $ 29,859 $ 30,271 (percent of total revenue) 75% 79%Plus: Stock-based compensation expense 997 408 Amortization of acquired intangible assets 799 559 ------------- -------------Non-GAAP gross profit $ 31,655 $ 31,238 ============= ============= (percent of total revenue) 80% 81%GAAP license gross profit $ 18,382 $ 19,044 (percent of related revenue) 88% 90%Plus: Stock-based compensation expense 233 141 Amortization of acquired intangible assets 211 241 ------------- -------------Non-GAAP license gross profit $ 18,826 $ 19,426 ============= ============= (percent of related revenue) 90% 91%GAAP subscription and maintenance support gross profit $ 10,572 $ 8,985 (percent of related revenue) 70% 73%Plus: Stock-based compensation expense 544 162 Amortization of acquired intangible assets 588 318 ------------- -------------Non-GAAP subscription and maintenance support gross profit $ 11,704 $ 9,465 ============= ============= (percent of related revenue) 77% 76%GAAP professional services and other gross profit $ 905 $ 2,242 (percent of related revenue) 25% 48%Plus: Stock-based compensation expense 220 105 ------------- -------------Non-GAAP professional services and other gross profit $ 1,125 $ 2,347 ============= ============= (percent of related revenue) 31% 50%








BroadSoft, Inc. Reconciliation of Non-GAAP Financial Measures (continued) (Unaudited) Three Months Ended March 31, 2013 2012 ------------- ------------- (In thousands)Non-GAAP income from operations:GAAP (loss) income from operations $ (3,757) $ 4,909 (percent of total revenue) (9)% 13%Plus: Stock-based compensation expense 8,544 3,191 Amortization of acquired intangible assets 799 559 ------------- -------------Non-GAAP income from operations $ 5,586 $ 8,659 ============= ============= (percent of total revenue) 14% 23%GAAP operating expense $ 33,616 $ 25,362Less: Stock-based compensation expense 7,547 2,783 ------------- -------------Non-GAAP operating expense $ 26,069 $ 22,579 ============= ============= (as percent of total revenue) 66% 59%GAAP sales and marketing expense $ 13,729 $ 11,072Less: Stock-based compensation expense 2,758 1,137 ------------- -------------Non-GAAP sales and marketing expense $ 10,971 $ 9,935 ============= ============= (as percent of total revenue) 28% 26%GAAP research and development expense $ 12,368 $ 8,476Less: Stock-based compensation expense 2,878 799 ------------- -------------Non-GAAP research and development expense $ 9,490 $ 7,677 ============= ============= (as percent of total revenue) 24% 20%GAAP general and administrative expense $ 7,519 $ 5,814Less: Stock-based compensation expense 1,911 847 ------------- -------------Non-GAAP general and administrative expense $ 5,608 $ 4,967 ============= ============= (as percent of total revenue) 14% 13%








BroadSoft, Inc. Reconciliation of Non-GAAP Financial Measures (continued) (Unaudited) Three Months Ended March 31, 2013 2012 ------------ ------------ (In thousands, except per share data)Non-GAAP net income and income per share:GAAP net (loss) income $ (2,317) $ 1,701 (6)% 4%Adjusted for: Stock-based compensation expense 8,544 3,191 Amortization of acquired intangible assets 799 559 Non-cash interest expense on our convertible notes 1,339 1,242 Non-cash tax (benefit) provision (3,220) 1,463 ------------ ------------Non-GAAP net income $ 5,145 $ 8,156 ============ ============ 13% 21%GAAP net (loss) income per basic common share $ (0.08) $ 0.06Adjusted for: Stock-based compensation expense 0.31 0.12 Amortization of acquired intangible assets 0.03 0.02 Non-cash interest expense on our convertible notes 0.04 0.05 Non-cash tax (benefit) provision (0.12) 0.05 ------------ ------------Non-GAAP net income per basic common share $ 0.18 $ 0.30 ============ ============GAAP net (loss) income per diluted common share $ (0.08) $ 0.06Adjusted for: Stock-based compensation expense 0.30 0.11 Amortization of acquired intangible assets 0.03 0.02 Non-cash interest expense on our convertible notes 0.04 0.05 Non-cash tax (benefit) provision (0.11) 0.05 ------------ ------------Non-GAAP net income per diluted common share * $ 0.18 $ 0.29 ============ ============ * For the quarter ended March 31, 2013, the diluted non-GAAP earnings pershare calculation included the dilutive effect of stock-based awards for theweighted average common shares outstanding. Total shares outstanding fordiluted earnings per share calculation was 28,638,847 shares.



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