BroadSoft, Inc. (BSFT)

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BroadSoft, Inc. (BSFT)

Q3 2012 Earnings Call

November 5, 2012 5:00 PM ET


John Kiang – IR

Mike Tessler – President and CEO

Jim Tholen – CFO


Brent Bracelin – Pacific Crest

Simona Jankowski – Goldman Sachs

George Notter – Jefferies

Dmitry Netis – William Blair

Catharine Trebnick – Northland Securities

Sanjit Singh – Wedbush

Rich Valera – Needham & Company



Good day, ladies and gentlemen, and welcome to the BroadSoft Q3 2012 Earnings Conference Call. At this time, all participants are in a listen-only mode. Later, we’ll have a question-and-answer session and instructions will follow at that time. (Operator Instructions) I would now like to turn the conference over to your host for today, Mr. John Kiang. Sir, you may begin.

John Kiang

Thank you, Mary. Good afternoon, everyone, and thank you for joining us on today’s conference call to discuss BroadSoft’s results for the third quarter ended September 30, 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

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 third quarter ended September 30, 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’s management may make forward-looking statements, including statements regarding the company’s future financial and operating results, future market conditions, the plans and objectives of management for future operations, the effect of our recent acquisition of Adaption Technologies and the company’s future product offerings. These forward-looking statements are not historical facts, but rather are 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, 2011 filed with the SEC on February 29, 2012, its Form 10-Q for the quarter ended June 30, 2012 filed on August 6, 2012 and in our other SEC filings.

All information provided in this conference call is as of November 5, 2012. Except as required by law, we undertake no obligations to update publicly any forward-looking statement made on this call to conform the statements to 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 non-cash stock compensation and amortization expense related to acquired intangible assets, non-cash tax expense and non-cash interest expense on our convertible notes. Collectively, these items totaled $6.8 million in the quarter. 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

Additionally, non-GAAP license cost of sales for the quarter excluded $385,000 in stock-based compensation expense and $730,000 in acquired intangible amortization expense. Finally, we define non-GAAP tax rate as the rate calculated by dividing on an annual basis our estimated non-GAAP pre-tax income by our anticipated cash tax.

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

Mike Tessler

Good afternoon and thank you for taking the time to discuss our third quarter 2012 results. We had another solid quarter with revenue growing 13% year-over-year to $40.2 million. Billings grew 45% year-over-year to $45.4 million and we delivered non-GAAP earnings per share of $0.35.

We had strong revenue growth in Europe along with strong order growth across all geographies. We had one customer account for over 10% of revenue in the quarter who had not previously been a 10% customer. And from a product standpoint, we had a strong hosted Unified Communications and SIP trunking orders from customers globally.

In the third quarter, we came in at the low end of our revenue guidance range. However, we continue to feel very pleased with the trajectory of our business. We had very strong billings, both on a Q3 and a year-to-date basis. We recently announced significant new products and go-to-market enhancements and we just completed an extremely successful users’ conference. I’d like to now provide some details about the latter two items.

Just two weeks ago, almost 900 individuals from over 35 countries joined us from Scottsdale, Arizona, where we celebrated the 10th anniversary of our annual users’ conference, BroadSoft Connections. At this year’s event, the energy and excitement around our newest capabilities and the growing success of our customer’s hosted communication services was the highest we’d experienced. I kicked off BroadSoft’s Connections with the introduction of UC One, which I believe is one of the most strategic announcements we’ve made in the last several years.

The UC One combines all the critical elements of Unified Communications into a single platform that our service provider customers can leverage to launch a wide range of different solutions. It also brings together our core competencies around user experience, mobility, openness and go-to-market support.

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