GAITHERSBURG, MD, October 31, 2016 - 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 September 30, 2016.
Financial Highlights for the Third Quarter of 2016
- Total revenue increased 22% year-over-year to $84.1 million
- GAAP gross profit equaled 72% of total revenue; non-GAAP gross profit equaled 76% of total revenue
- GAAP income from operations totaled $1.6 million; non-GAAP income from operations totaled $17.3 million or 21% of revenue
- GAAP basic and diluted net loss per share equaled $(0.02) per common share; non-GAAP diluted earnings per share equaled $0.52 per common share
Results for the three months ended September 30, 2016
Total revenue rose to $84.1 million in the third quarter of 2016, an increase of 22% compared to $69.1 million in the third quarter of 2015.
Net loss for the third quarter of 2016 was $(0.6) million, or $(0.02) per basic and diluted common share, compared to net loss of $(3.3) million, or $(0.11) per basic and diluted common share in the third quarter of 2015.
On a non-GAAP basis, net income in the third quarter of 2016 was $16.4 million, or $0.52 per diluted common share, compared to non-GAAP net income of $10.9 million, or $0.37 per diluted common share, in the third quarter of 2015. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.
Results for the nine months ended September 30, 2016
Total revenue rose to $239.0 million for the first nine months of 2016, an increase of 26% compared to $189.3 million for the first nine months of 2015.
Net loss for the first nine months of 2016 was $(5.0) million, or $(0.17) per basic and diluted common share, compared to a net loss of $(11.4) million, or $(0.39) per basic and diluted common share for the first nine months of 2015.
On a non-GAAP basis, net income for the first nine months of 2016 was $42.4 million, or $1.39 per diluted common share, compared to non-GAAP net income of $27.9 million, or $0.94 per diluted common share, for the first nine months of 2015. A reconciliation of non-GAAP and GAAP results is included in the financial tables below.
“I'm pleased to report another strong financial quarter as we achieved 22% year-over-year revenue and significant earnings per share growth,” said Michael Tessler, president and chief executive officer, BroadSoft. “It was also a great quarter from a customer traction perspective. We saw several major product launches by our customers, including a VoLTE-based mobile offering by a major carrier. We believe that these launches, and our customers' continued success in the market, highlight the strategic value of our solutions.”
For the fourth quarter of 2016, BroadSoft anticipates revenue of $94 to $102 million. BroadSoft also expects to achieve earnings on a non-GAAP basis of $0.65 to $0.83 per diluted common share. For the full year 2016, BroadSoft expects revenue in the range of $333 million to $341 million and non-GAAP EPS in the range of $2.04 to $2.22.
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.
BroadSoft will discuss its third quarter 2016 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.
Non-GAAP financial measures:
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 BroadSoft’s performance by excluding certain non-cash expenses, and may include additional adjustments for items that are infrequent in nature. BroadSoft believes the use of these non-GAAP financial measures provides an additional tool for investors to use in evaluating ongoing operating results and trends and in comparing its financial results with other companies in BroadSoft’s industry, many of which present similar non-GAAP financial measures to investors. A reconciliation of the non-GAAP financial measures included in this release and to be discussed on this morning’s teleconference to the most directly comparable GAAP financial measures is set forth below.
Non-GAAP cost of revenue, license software cost of revenue, subscription and maintenance cost of revenue and professional services and other cost of revenue. We define non-GAAP cost of revenue as a cost of revenue less stock-based compensation expense and amortization expense for acquired intangible assets. We consider non-GAAP cost of revenue to be a useful metric for management and our investors because it excludes the effect of certain non-cash expenses so management and investors can compare our cost of revenue over multiple periods.
Non-GAAP gross profit, license software gross profit, subscription and maintenance support gross profit and professional services and other gross profit. We define non-GAAP gross profit as gross profit plus stock-based compensation expense and amortization expense for acquired intangible assets. We consider non-GAAP gross profit to be a useful metric for management and our investors because it excludes the effect of certain non-cash expenses so management and investors can compare our sales margins over multiple periods.
Non-GAAP income from operations. We define non-GAAP operating income as income from operations plus stock-based compensation expense and amortization expense for acquired intangible assets. We consider non-GAAP operating income to be a useful metric for management and investors because it excludes the effect of certain non-cash expenses so management and investors can compare our core business operating results over multiple periods.
Non-GAAP operating expenses, sales and marketing expense, research and development expense and general and administrative expense. We define non-GAAP operating expenses as operating expense plus stock-based compensation expense allocated to sales and marketing, research and development and general and administrative expenses. Similarly, we define non-GAAP sales and marketing, research and development and general and administrative expenses as the relevant GAAP measure plus stock-based compensation expense allocated to the particular expense item.
Non-GAAP net income and net income per share. We define non-GAAP net income as net income plus stock-based compensation expense, amortization expense for acquired intangible assets, non-cash interest expense on our convertible senior notes, foreign currency transaction gains and losses, 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.
The presentation of non-GAAP net income, non-GAAP net income per share, non-GAAP gross margin, non-GAAP income from operations, and other non-GAAP financial measures in this release and on this morning’s teleconference is not meant to be a substitute for “net income,” “net income per share,” “gross margin,” “income from operations” or other financial measures presented in accordance with GAAP, but rather should be evaluated in conjunction with such data. BroadSoft’s definition of “non-GAAP net income,” “non-GAAP net income per share,” “non-GAAP gross margin,” “non-GAAP income from operations” and other non-GAAP financial measures may differ from similarly titled non-GAAP measures used by other companies and may differ from period to period. In reporting non-GAAP measures in the future, management may make other adjustments for expenses and gains it does not consider reflective of core operating performance in a particular period and may modify “non-GAAP net income,” “non-GAAP net income per share,” “non-GAAP gross margin,” “non-GAAP income from operations” and such other non-GAAP measures by excluding these expenses and gains.
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 BroadSoft’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: BroadSoft's ability to expand its BroadCloud offering geographically and increase the associated recurring service revenue; BroadSoft’s dependence on the success of BroadWorks and on its service provider customers to sell services using its applications; BroadSoft’s dependence in large part on service providers’ continued deployment of, and investment in, their IP-based networks; claims that BroadSoft infringes the intellectual property rights of others; BroadSoft’s ability to integrate and achieve the expected benefits from its recent acquisitions; and the BroadSoft’s ability to expand its product offerings, as well as those factors contained in the “Risk Factors” sections of BroadSoft’s Form 10-K for the year ended December 31, 2015 filed with the SEC on February 29, 2016, and in BroadSoft’s other filings with the SEC. All information in this release is as of October 31, 2016. Except as required by law, BroadSoft undertakes no obligation to update publicly any forward-looking statement made herein for any reason to conform the statement to actual results or changes in BroadSoft’s expectations.
BroadSoft is the technology innovator in cloud communication, collaboration, and contact center solutions for businesses and service providers across 80 countries. We are the market share leader for cloud unified communications with an open, mobile and secure platform trusted by 25 of the world's top 30 service providers by revenue. BroadSoft Business empowers users and teams to share ideas and work simply to achieve breakthrough performance.
The financial statements set forth below are not the complete set of BroadSoft’s financial statements for the quarter and the year and are presented below without footnotes. Readers are encouraged to obtain and carefully review BroadSoft’s Quarterly Report on Form 10-Q for the quarter ended September 30, 2016, including all financial statements contained therein and the footnotes thereto, once the report is filed with the SEC. Once filed with the SEC, the Form 10-Q may be retrieved from the SEC’s website at www.sec.gov or from BroadSoft’s website at www.broadsoft.com.