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BroadSoft, Inc. (BSFT)

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BroadSoft (BSFT)

Q4 2012 Earnings Call

February 27, 2013 5:00 pm ET

Executives

John Kiang

Michael Tessler - Co-Founder, Chief Executive Officer, President and Executive Director

James A. Tholen - Chief Financial Officer, Principal Accounting Officer, Assistant Secretary and Assistant Treasurer

Analysts

Richard Valera - Needham & Company, LLC, Research Division

George C. Notter - Jefferies & Company, Inc., Research Division

Kent Schofield - Goldman Sachs Group Inc., Research Division

Sanjit Singh - Wedbush Securities Inc., Research Division

Dmitry Netis - William Blair & Company L.L.C., Research Division

Presentation

Operator

Good day, ladies and gentlemen, and welcome to your BroadSoft Q4 2012 Earnings Call. [Operator Instructions] And as a reminder, today's conference is being recorded.

And now, I would like to introduce your host for today, John Kiang.

John Kiang

Thank you, John. Good afternoon, everyone, and thank you for joining us on today's conference call to discuss BroadSoft's results for the fourth quarter and year ended December 31, 2012. This call is also being broadcast live over the web and can be accessed in the Investor Relations section of the BroadSoft website at www.broadsoft.com.

With me on today's call are Michael Tessler, BroadSoft's President and Chief Executive Officer; and Jim Tholen, BroadSoft's Chief Financial Officer.

This afternoon, BroadSoft issued a press release discussing its financial results for the fourth quarter and 12-month period ended December 31, 2012. If you would like a copy of the release, you can access it on our website or the SEC's EDGAR website.

We would like to remind you that during the course of this conference call, BroadSoft management may make forward-looking statements, including statements regarding the company's future financial and operating end results, future market conditions, the plans and objectives of management for future operations, and the company's future product offerings. These forward-looking statements are not historical facts, but are rather all based on BroadSoft's current expectations and beliefs, and are based on information currently available to us.

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, those factors contained in the Risk Factors section of the company's Form 10-K for the year ended December 31, 2012, filed today, February 27, 2013, with the SEC.

All information provided in this conference call is as of February 27, 2013. Except as required by law, we undertake no obligation to update publicly any forward-looking statement made on this call to confirm the statements or actual results or changes in our expectations. Also, in light of Regulation FD, we advise you that it is BroadSoft's policy not to comment on our financial guidance other than in public communications.

Please note that when we discuss EPS, we are referring to diluted EPS. In addition, certain financial measures we use on this call are expressed on a non-GAAP basis and have been adjusted to exclude the impact of noncash stock-based compensation and amortization expense related to acquired intangible assets, noncash tax expense and noncash interest expense on our convertible notes. Collectively, these items totaled $8.5 million in the quarter.

Also on this call, when we use the term cost of sales, gross margin, operating expense, operating margin, operating income or net income, we are referring to non-GAAP figures. We have provided reconciliations of these non-GAAP measures in our earnings release, which is available in the Investor Relations section of our website located at www.broadsoft.com. Finally, we define non-GAAP tax rate as the rate calculated by dividing on an annual basis our estimated non-GAAP pretax income by our anticipated cash taxes.

I will now turn the call over to BroadSoft's President and CEO, Michael Tessler. Mike?

Michael Tessler

Good afternoon, and thank you for taking the time to discuss our fourth quarter and full year 2012 results. I'm joining you today from the Mobile World Congress, the largest mobile industry trade show in Barcelona, Spain.

With the global telecommunication industry focused on [indiscernible], I thought I would take a few minutes to highlight some of our results from the region. We're very encouraged by the progress we've made in Europe as seen on the positive sell-through rates of our customers in 2012. This resulted in strong reorders for host of Unified Communications throughout the region in Q4, helping to drive 30% year-over-year revenue growth during the quarter. Along with a number of new service launches by our European operators, we're also pleased that many of our mobile operator customers introduced new fixed-mobile convergence services in the second half of the year. We believe that these fixed-mobile convergence market offers will be a strong business driver in the European market, which we confirm this week at Mobile World Congress.

Looking back, on 2012, we successfully delivered on our strategic plan with the introduction of our UC-One platform, the extension of our product line into mobile operators and the expansion of our cloud business into BroadCloud PBX. The goal of UC-One is to provide our customer a single platform that combines all the critical elements required for them to launch a wide range of Unified Communications solution that meet the needs of the market segments they serve, from micro-businesses to small and medium businesses to large enterprises. And UC-One does all of this in a low total cost of ownership. Recognizing the importance of mobile, we have architected mobility to our solutions and products. We've made integrating with existing mobile networks simple, and a core competency of our platform. We have optimized our clients' cloud and software solutions to enable mobility in all of our services across a wide range of devices. As a result, end users can take advantage of all of our UC-One capabilities with virtually any device anywhere.

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