XNAS:BSFT BroadSoft Inc Quarterly Report 10-Q Filing - 6/30/2012

Effective Date 6/30/2012

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Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

 

FORM 10-Q

 

 

(Mark One)

 

    x     QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended June 30, 2012

or

 

    ¨     TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 001-34777

 

 

BroadSoft, Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   52 2130962

(State or other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer

Identification No.)

9737 Washingtonian Boulevard, Suite 350

Gaithersburg, MD

  20878
(Address of principal executive offices)   (Zip Code)

(301) 977-9440

Registrant’s telephone number, including area code:

(former name, former address and former fiscal year, if changed since last report)

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes   x     No   ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).     Yes   x     No   ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer”, “accelerated filer”, and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   x    Accelerated filer   ¨
Non-accelerated filer   ¨  (Do not check if a smaller reporting company)    Smaller reporting company   ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes   ¨     No   x

The number of shares outstanding of the Registrant’s common stock, par value $0.01 per share, on August 2, 2012, was 27,590,101.

 

 

 


Table of Contents

BroadSoft, Inc.

Table of Contents

 

        Page No.  
PART I.   FINANCIAL INFORMATION     3   
ITEM 1.   Financial Statements:     3   
  Unaudited Condensed Consolidated Balance Sheets as of June 30, 2012 and December 31, 2011     3   
  Unaudited Condensed Consolidated Statements of Operations for the three and six months ended June 30, 2012 and 2011     4   
  Unaudited Consolidated Statements of Comprehensive Income for the three and six months ended June 30, 2012 and 2011     5   
  Unaudited Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the six months ended June 30, 2012 and 2011     6   
  Unaudited Condensed Consolidated Statements of Cash Flows for the six months ended June 30, 2012 and 2011     7   
  Notes to Unaudited Condensed Consolidated Financial Statements     8   
ITEM 2.   Management’s Discussion and Analysis of Financial Condition and Results of Operations     20   
ITEM 3.   Quantitative and Qualitative Disclosures About Market Risk     36   
ITEM 4.   Controls and Procedures     37   
PART II.   OTHER INFORMATION     37   
ITEM 1.   Legal Proceedings     37   
ITEM 1A.   Risk Factors     37   
ITEM 2.   Unregistered Sales of Equity Securities and Use of Proceeds     38   
ITEM 3.   Defaults Upon Senior Securities     38   
ITEM 4.   Mine Safety Disclosures     38   
ITEM 5.   Other Information     38   
ITEM 6.   Exhibits     38   
  EX-31.1  
  EX-31.2  
  EX-32.1  
  EX-32.2  
  101.INS XBRL  
  101.SCH XBRL  
  101.CAL XBR  
  101.DEF XBRL  
  101.LAB XBRL  
  101.PRE XBRL  

 

2


Table of Contents

Part I. Financial Information

 

Item 1. Financial Statements

BroadSoft, Inc.

Unaudited Condensed Consolidated Balance Sheets

 

     June 30,
2012
    December 31,
2011
 
     (In thousands, except share
and per share data)
 

Assets:

    

Current assets:

    

Cash and cash equivalents

   $ 84,253      $ 94,072   

Short-term investments

     89,568        92,749   

Accounts receivable, net of allowance for doubtful accounts of $379 and $54 at June 30, 2012 and December 31, 2011, respectively

     39,839        47,048   

Deferred tax assets

     12,409        12,968   

Other current assets

     7,451        4,435   
  

 

 

   

 

 

 

Total current assets

     233,520        251,272   
  

 

 

   

 

 

 

Long-term assets:

    

Property and equipment, net

     4,708        4,221   

Long-term investments

     20,405        5,000   

Restricted cash

     959        959   

Intangible assets, net

     7,682        8,842   

Goodwill

     20,207        17,276   

Other long-term assets

     7,310        3,386   
  

 

 

   

 

 

 

Total long-term assets

     61,271        39,684   
  

 

 

   

 

 

 

Total assets

   $ 294,791      $ 290,956   
  

 

 

   

 

 

 

Liabilities and stockholders’ equity:

    

Current liabilities:

    

Accounts payable and accrued expenses

   $ 12,272      $ 14,999   

Notes payable and bank loans, current portion

     475        891   

Deferred revenue, current portion

     46,816        55,372   
  

 

 

   

 

 

 

Total current liabilities

     59,563        71,262   

Convertible senior notes

     84,048        81,737   

Notes payable and bank loans

     448        461   

Deferred revenue

     1,978        1,764   

Deferred tax liabilities

     3,973        1,433   

Other long-term liabilities

     1,149        1,056   
  

 

 

   

 

 

 

Total liabilities

     151,159        157,713   
  

 

 

   

 

 

 

Commitments and contingencies (Note 9)

    

Stockholders’ equity:

    

Preferred stock, $0.01 par value per share; 5,000,000 shares authorized at June 30, 2012 and December 31, 2011; no shares issued and outstanding at June 30, 2012 and December 31, 2011

     —          —     

Common stock, par value $0.01 per share; 100,000,000 shares authorized at June 30, 2012 and December 31, 2011; 27,581,558 and 27,106,393 shares issued and outstanding at June 30, 2012 and December 31, 2011, respectively

     276        271   

Additional paid-in capital

     198,710        191,714   

Accumulated other comprehensive loss

     (3,226     (2,557

Accumulated deficit

     (52,128     (56,185
  

 

 

   

 

 

 

Total stockholders’ equity

     143,632        133,243   
  

 

 

   

 

 

 

Total liabilities and stockholders’ equity

   $ 294,791      $ 290,956   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

3


Table of Contents

BroadSoft, Inc.

Unaudited Condensed Consolidated Statements of Operations

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2012     2011     2012     2011  
     (In thousands, except per share data)  

Revenue:

        

Licenses

   $ 22,501      $ 19,202      $ 43,766      $ 34,393   

Maintenance and services

     18,015        12,977        35,093        27,440   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total revenue

     40,516        32,179        78,859        61,833   

Cost of revenue:

        

Licenses

     2,515        1,345        4,575        2,621   

Maintenance and services

     5,249        4,635        10,702        8,950   

Amortization of intangibles

     557        251        1,116        490   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total cost of revenue

     8,321        6,231        16,393        12,061   
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     32,195        25,948        62,466        49,772   

Operating expenses:

        

Sales and marketing

     11,608        9,077        22,680        17,561   

Research and development

     9,131        6,730        17,607        13,546   

General and administrative

     5,880        4,496        11,694        8,882   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     26,619        20,303        51,981        39,989   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from operations

     5,576        5,645        10,485        9,783   

Other expense (income):

        

Interest income

     (120     (44     (237     (87

Interest expense

     1,723        238        3,419        258   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other expense, net

     1,603        194        3,182        171   
  

 

 

   

 

 

   

 

 

   

 

 

 

Income before income taxes

     3,973        5,451        7,303        9,612   

Provision for (benefit from) income taxes

     1,617        (10,340     3,246        (9,874
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 2,356      $ 15,791      $ 4,057      $ 19,486   
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per common share available to BroadSoft, Inc. common stockholders:

        

Basic

   $ 0.09      $ 0.59      $ 0.15      $ 0.74   

Diluted

   $ 0.08      $ 0.57      $ 0.14      $ 0.70   

Weighted average common shares outstanding:

        

Basic

     27,550        26,670        27,392        26,189   

Diluted

     28,253        27,939        28,238        27,796   

Stock-based compensation expense included above:

        

Cost of revenue

   $ 483      $ 211      $ 891      $ 277   

Sales and marketing

     1,391        415        2,528        749   

Research and development

     1,101        510        1,900        757   

General and administrative

     806        765        1,653        1,220   

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

4


Table of Contents

BroadSoft, Inc.

Unaudited Consolidated Statements of Comprehensive Income

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2012     2011     2012     2011  
     (In thousands)  

Net income

   $ 2,356      $ 15,791      $ 4,057      $ 19,486   

Other comprehensive income (loss), net of tax:

        

Foreign currency translation adjustment

     (737     (168     (690     (271

Unrealized (loss) gain on investments

     (14     (2     21        3   
  

 

 

   

 

 

   

 

 

   

 

 

 

Total other comprehensive income (loss), net of tax

     (751     (170     (669     (268
  

 

 

   

 

 

   

 

 

   

 

 

 

Comprehensive income

   $ 1,605      $ 15,621      $ 3,388      $ 19,218   
  

 

 

   

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

5


Table of Contents

BroadSoft, Inc.

Unaudited Consolidated Statements of Stockholders’ Equity (Deficit)

(In thousands, except per share data)

 

           BroadSoft, Inc. Stockholders’ Equity (Deficit)  
     Total
Stockholders’
Equity
    Common Stock Par
Value $0.01 Per Share
     Additional
Paid-in
Capital
    Accumulated
Other
Comprehensive
Loss
    Accumulated
Deficit
 
       Shares      Amount         

Balance December 31, 2011

   $ 133,243        27,106       $ 271       $ 191,714      $ (2,557   $ (56,185
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Issuance of common stock for exercise of stock options and vesting of RSUs, net of effect of early exercises and withholding tax

     90        475         5         85        —          —     

Stock-based compensation expense

     6,972        —           —           6,972        —          —     

Tax windfall benefits on exercises of stock options

     (61     —           —           (61     —          —     

Foreign currency translation adjustment

     (690     —           —           —          (690     —     

Unrealized gain on investments

     21        —           —           —          21        —     

Net income

     4,057        —           —           —          —          4,057   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance June 30, 2012

   $ 143,632        27,581         276         198,710        (3,226     (52,128
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance December 31, 2010

   $ 52,545        25,452       $ 255       $ 142,508      $ (1,736   $ (88,482

Issuance of common stock for exercise of stock options and vesting of RSUs, net of effect of early exercises and withholding tax

     2,815        1,436         14         2,801        —          —     

Stock-based compensation expense

     2,723        —           —           2,723        —          —     

Equity component of convertible senior notes issuance

     39,151        —           —           39,151        —          —     

Tax windfall benefits on exercises of stock options

     77        —           —           77        —          —     

Foreign currency translation adjustment

     (268     —           —           —          (268     —     

Unrealized gain on investments

     —          —           —           —          —          —     

Net income

     19,486        —           —           —          —          19,486   
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

Balance June 30, 2011

   $ 116,529        26,888       $ 269       $ 187,260      $ (2,004   $ (68,996
  

 

 

   

 

 

    

 

 

    

 

 

   

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

6


Table of Contents

BroadSoft, Inc.

Unaudited Condensed Consolidated Statements of Cash Flows

 

     Six Months Ended
June 30,
 
     2012     2011  
     (In thousands)  

Cash flows from operating activities:

    

Net income

   $ 4,057      $ 19,486   

Adjustment to reconcile net income to net cash (used in) provided by operating activities:

    

Depreciation and amortization

     2,289        1,302   

Amortization of software licenses

     1,047        910   

Stock-based compensation expense

     6,972        3,003   

Provision for doubtful accounts

     326        17   

Provision for (benefit from) deferred income taxes

     2,801        (9,926

Tax windfall benefits from (provision for) stock option exercises

     —          77   

Non-cash interest expense on convertible senior notes

     2,515        172   

Other

     —          (8

Changes in operating assets and liabilities, net of acquisitions:

    

Accounts receivable

     6,884        6,424   

Other current and long-term assets

     (7,725     (699

Accounts payable, accrued expenses and other long-term liabilities

     (2,591     (3,883

Current and long-term deferred revenue

     (8,342     (4,885
  

 

 

   

 

 

 

Net cash provided by operating activities

     8,233        11,990   
  

 

 

   

 

 

 

Cash flows from investing activities:

    

Purchases of property and equipment

     (1,660     (879

Payments for acquisitions, net of cash acquired

     (3,219     —     

Purchases of marketable securities

     (56,675     (31,482

Proceeds from sale of marketable securities

     12,251        13,271   

Proceeds from maturities of marketable securities

     32,200        —     

Change in restricted cash

     —          35   
  

 

 

   

 

 

 

Net cash used in investing activities

     (17,103     (19,055
  

 

 

   

 

 

 

Cash flows from financing activities:

    

Proceeds from issuance of convertible senior notes, net of issuance costs

     —          115,688   

Proceeds from the exercise of stock options

     1,139        3,195   

Taxes paid on vesting of RSUs

     (1,614     (380

Notes payable and bank loans - payments

     (429     (776
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     (904     117,727   
  

 

 

   

 

 

 

Effect of exchange rate changes on cash and cash equivalents

     (45     68   
  

 

 

   

 

 

 

Net (decrease) increase in cash and cash equivalents

     (9,819     110,730   

Cash and cash equivalents, beginning of period

     94,072        47,254   
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 84,253      $ 157,984   
  

 

 

   

 

 

 

The accompanying notes are an integral part of these condensed consolidated financial statements.

 

7


Table of Contents

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

1. Nature of Business

BroadSoft, Inc. (“BroadSoft” or the “Company”), a Delaware corporation, was formed in 1998. The Company is the leading global provider of software and services that enable mobile, fixed-line and cable service providers to deliver Unified Communications and other voice and multimedia services over their Internet protocol-based, or IP-based, networks. The Company’s core communications platform consists of three offerings: BroadWorks, BroadCloud and BroadTouch.

2. Financial Statement Presentation

Principles of Consolidation

The accompanying unaudited condensed consolidated financial statements include the accounts and results of operations of the Company and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in the accompanying condensed consolidated financial statements.

Interim Financial Presentation

The accompanying unaudited condensed consolidated financial statements and footnotes have been prepared in accordance with Generally Accepted Accounting Principles in the United States of America (“U.S. GAAP”) as contained in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification for interim financial information and Article 10 of Regulation S-X issued by the United States Securities and Exchange Commission (the “SEC”). Accordingly, they do not include all the information and footnotes required by U.S. GAAP for annual fiscal reporting periods. In the opinion of management, the interim financial information includes all adjustments of a normal recurring nature necessary for a fair presentation of the results of operations, financial position, changes in stockholders’ equity (deficit) and cash flows. The results of operations for the six months ended June 30, 2012 are not necessarily indicative of results that may be expected for the year ending December 31, 2012 or any other period. The accompanying condensed consolidated financial statements are unaudited and should be read in conjunction with the audited consolidated financial statements and notes thereto included in the Company’s Form 10-K for the fiscal year ended December 31, 2011 filed with the SEC on February 29, 2012.

Use of Estimates

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual amounts could differ from these estimates.

Recent Accounting Pronouncements

In September 2011, the FASB issued ASU 2011-08, “Intangibles – Goodwill and Other: Testing Goodwill for Impairment,” which simplifies the periodic testing of goodwill for impairment. This guidance will allow companies to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test required under current accounting standards. This guidance will be effective for the Company’s annual goodwill impairment test performed in 2012 and is not expected to have a material impact on the Company’s consolidated financial statements.

3. Investments and Fair Value Disclosures

Investments in Marketable Securities

Marketable debt securities that the Company does not intend to hold to maturity are classified as available-for-sale, are carried at fair value and are included on the Company’s balance sheet as either

 

8


Table of Contents

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

short-term or long-term investments depending on their maturity. Investments with original maturities greater than three months that mature less than one year from the consolidated balance sheet date are classified as short-term investments. Investments with maturities greater than one year from the consolidated balance sheet date are classified as long-term investments. Available-for-sale investments are marked-to-market at the end of each reporting period, with unrealized holding gains or losses, which represent changes in the fair value of the investment, reflected in accumulated other comprehensive income (loss), a separate component of stockholders’ equity. The Company’s primary objective when investing excess cash is preservation of principal.

 

     June 30, 2012  
     Contracted
Maturity
   Carrying
Value
 
          (in thousands)  

Money market funds

   demand    $ 53,160   
     

 

 

 

Total cash equivalents

      $ 53,160   
     

 

 

 

U.S. agency notes

   30 - 382 days    $ 30,708   

Commercial paper

   9 - 258 days      27,502   

Corporate bonds

   32 - 349 days      31,358   
     

 

 

 

Total short-term investments

      $ 89,568   
     

 

 

 

U.S. agency notes

   368 - 514 days    $ 17,991   

Corporate bonds

   401 days      2,414   
     

 

 

 

Total long-term investments

      $ 20,405   
     

 

 

 

Fair Value

The following table summarizes the carrying and fair value of the Company’s financial assets and liabilities (in thousands):

 

     June 30, 2012      December 31, 2011  
     Carrying
Value
     Fair Value      Carrying
Value
     Fair Value  

Assets

           

Cash equivalents and certificates of deposit *

   $ 54,165       $ 54,165       $ 71,147       $ 71,147   

Short and long-term investments

     109,973         109,973         97,749         97,749   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total assets

   $ 164,138       $ 164,138       $ 168,896       $ 168,896   
  

 

 

    

 

 

    

 

 

    

 

 

 

Liabilities

           

Convertible senior notes **

   $ 84,048       $ 120,000       $ 81,737       $ 120,000   

Notes payable and bank loans

     923         923         1,352         1,352   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total liabilities

   $ 84,971       $ 120,923       $ 83,089       $ 121,352   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

* Does not include $31.1 million and $23.9 million of operating cash balances as of June 30, 2012 and December 31, 2011, respectively.
** The carrying value represents the bifurcated debt component only, while the fair value is based on the principal amount of the notes, which did not separate the liability and equity components of the debt instrument.

 

9


Table of Contents

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

The carrying amounts of the Company’s other financial instruments, accounts receivable, accounts payable and accrued expenses, approximate their respective fair values due to their short-term nature. (See Note 7 Borrowings for additional information on the fair value of debt.)

The Company uses a three-tier fair value measurement hierarchy to classify and disclose all assets and liabilities measured at fair value on a recurring basis, as well as assets and liabilities measured at fair value on a non-recurring basis, in periods subsequent to their initial measurement. The three tiers are defined as follows:

 

   

Level 1. Observable inputs based on unadjusted quoted prices in active markets for identical instruments and include the Company’s investments in money market funds and certificates of deposit;

 

   

Level 2. Inputs valued using quoted market prices for similar instruments, nonbinding market prices that are corroborated by observable market data and include the Company’s investments and marketable securities in U.S. agency notes, commercial paper and corporate bonds; and

 

   

Level 3. Unobservable inputs for which there is little or no market data, which require the reporting entity to develop its own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The Company evaluates its financial assets and liabilities subject to fair value measurements on a recurring basis to determine the appropriate level of classification for each reporting period. This determination requires significant judgments to be made. There were no transfers between classifications during the periods. The following tables summarize the values (in thousands):

 

     June 30, 2012      Level 1      Level 2      Level 3  

Money market funds

   $ 53,160       $ 53,160       $ —         $ —     

Certificates of deposit

     1,005         1,005         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents and certificates of deposit

     54,165         54,165         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

U.S. agency notes

     48,699         —           48,699         —     

Commercial paper

     27,502         —           27,502         —     

Corporate bonds

     33,772         —           33,772         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investments

     109,973         —           109,973         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents, certificates of deposit and investments

   $ 164,138       $ 54,165       $ 109,973       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 
     December  31,
2011
     Level 1      Level 2      Level 3  

Money market funds

   $ 70,142       $ 70,142       $ —         $ —     

Certificates of deposit

     1,005         1,005         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents and certificates of deposit

     71,147         71,147         —           —     
  

 

 

    

 

 

    

 

 

    

 

 

 

U.S. agency notes

     27,672         —           27,672         —     

Commercial paper

     15,735         —           15,735         —     

Corporate bonds

     54,342         —           54,342         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total investments

     97,749         —           97,749         —     
  

 

 

    

 

 

    

 

 

    

 

 

 

Total cash equivalents, certificates of deposit and investments

   $ 168,896       $ 71,147       $ 97,749       $ —     
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

Assets Measured at Fair Value on a Nonrecurring Basis

The Company measures certain assets, including property and equipment, goodwill and intangible assets, at fair value on a nonrecurring basis. These assets are recognized at fair value when they are deemed to be other-than-temporarily impaired. During the six months ended June 30, 2012 and 2011, there were no fair value measurements of assets or liabilities measured at fair value on a nonrecurring basis subsequent to their initial recognition.

4. Goodwill

The following table provides a summary of the changes in the carrying amounts of goodwill (in thousands):

 

Balance as of December 31, 2011, gross

   $  17,276   

Accumulated impairment loss

     —     
  

 

 

 

Balance as of December 31, 2011, net

     17,276   

Increase in goodwill related to acquisitions

     3,177   

Other

     (246
  

 

 

 

Balance as of June 30, 2012, gross

     20,207   

Accumulated impairment loss

     —     
  

 

 

 

Balance as of June 30, 2012, net

   $ 20,207   
  

 

 

 

The increase in “goodwill related to acquisitions” is a result of the acquisition in April 2012 of a research and development workforce. Any change in the goodwill amounts resulting from foreign currency translations are presented as “Other” in the above table.

5. Deferred Revenue

Deferred revenue represents amounts billed to or collected from customers for which the related revenue has not been recognized because one or more of the revenue recognition criteria have not been met. Deferred revenue consisted of the following (in thousands):

 

     June 30,
2012
     December 31,
2011
 

Licenses

   $ 12,933       $ 20,608   

Maintenance and services

     35,861         36,528   
  

 

 

    

 

 

 
   $ 48,794       $ 57,136   
  

 

 

    

 

 

 

Current portion

   $ 46,816       $ 55,372   

Non-current portion

     1,978         1,764   
  

 

 

    

 

 

 
   $ 48,794       $ 57,136   
  

 

 

    

 

 

 

6. Software Licenses

The Company was previously party to an agreement that provided the Company the right to distribute third-party software on a per-user basis up to 35,000,000 licenses over a four-year period for $6.4 million. The arrangement required the Company to pay a per-user license fee for licenses distributed in excess of 35,000,000. The cost was amortized to cost of revenue over a 3.5 year period ending May 2012, based on the greater of actual usage or the straight line method. The Company continues to pay maintenance and support fees under this agreement.

In 2011, the Company entered into a new agreement that provides the Company the right to distribute this third-party software on an unlimited basis through May 2016 at a total cost of $10.2 million, of which

 

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BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

$6.5 was paid during the quarter ended March 31, 2012. To the extent annual billed license revenue over the four-year period exceeds $460 million, the Company would be required to pay additional fees. The additional $10.2 million is being amortized to cost of revenue over the four-year period beginning in June 2012 (after expiration of the previous agreement), based on the straight line method.

Amortization expense related to these agreements was approximately $1.0 million and $0.9 million for the six months ended June 30, 2012 and 2011, respectively.

7. Borrowings

Convertible Senior Notes

In June 2011, the Company issued $120.0 million aggregate principal amount of 1.50% convertible senior notes due in 2018 (the “Notes”). The Notes are senior unsecured obligations of the Company, with interest payable semi-annually in cash at a rate of 1.50% per annum, and will mature on July 1, 2018, unless earlier repurchased, redeemed or converted.

The Notes may be converted by the holders of Notes at their option on any day prior to the close of business on the scheduled trading day immediately preceding April 1, 2018 only under the following circumstances: (a) during the five business-day period after any ten consecutive trading-day period (the “measurement period”) in which the trading price per Note for each day of that measurement period was less than 98% of the product of the last reported sale price of the Company’s common stock and the applicable conversion rate on each such day; (b) during any calendar quarter (and only during such quarter) after the calendar quarter ended June 30, 2012, if the last reported sale price of the common stock for 20 or more trading days in a period of 30 consecutive trading days ending on the last trading day of the immediately preceding calendar quarter exceeds 130% of the applicable conversion price in effect on the last trading day of the immediately preceding calendar quarter; (c) upon the occurrence of specified corporate events; or (d) if the Company calls the Notes for redemption. The Notes will be convertible, regardless of the foregoing circumstances, at any time from, and including, April 1, 2018 through the second scheduled trading day immediately preceding the maturity date.

The initial conversion rate for the Notes is 23.8126 shares of the Company’s common stock per $1,000 principal amount of Notes, equivalent to a conversion price of approximately $41.99 per share of common stock. The conversion price will be subject to adjustment in some events, but will not be adjusted for accrued interest. In addition, if a make-whole fundamental change, as defined in the indenture governing the Notes (the “Indenture”), occurs prior to the maturity date, the Company will in some cases increase the conversion rate for a holder that elects to convert its Notes in connection with such make-whole fundamental change. Upon conversion, the Company will pay cash up to the aggregate principal amount of the Notes to be converted and deliver shares of the common stock in respect of the remainder, if any, of the conversion obligation in excess of the aggregate principal amount of the Notes being converted. While the Notes were not convertible as of June 30, 2012, if the Notes were convertible, no shares would have been distributed upon conversion because the conversion price was above the stock price as of such date.

Holders of the Notes may require the Company to repurchase some or all of the Notes for cash, subject to certain exceptions, upon a fundamental change, as defined in the Indenture, at a repurchase price equal to 100% of the principal amount of the Notes being repurchased, plus any accrued and unpaid interest up to but excluding the relevant repurchase date.

The Company may not redeem the Notes prior to July 1, 2015. Beginning July 1, 2015, the Company may redeem for cash all or part of the Notes (except for the Notes that the Company is required to repurchase as described above) if the last reported sale price of the common stock exceeds 140% of the applicable conversion price for 20 or more trading days in a period of 30 consecutive trading days ending on the trading day immediately prior to the date of the redemption notice. The redemption price will equal the

 

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BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

sum of 100% of the principal amount of the Notes to be redeemed, plus accrued and unpaid interest, plus a “make-whole premium” payment. The Company must make the make-whole premium payments on all Notes called for redemption prior to the maturity date, including Notes converted after the date the Company delivered the notice of redemption.

The Company has separately accounted for the liability and equity components of the convertible debt instrument by allocating the gross proceeds from the issuance of the Notes between the liability component and the embedded conversion option, or equity component. This allocation was done by first estimating an interest rate at the time of issuance for similar notes that do not include the embedded conversion option. This interest rate, estimated at 8%, was used to compute the initial fair value of the liability component of $79.4 million. The excess of the gross proceeds received from the issuance of the Notes over the initial amount allocated to the liability component, of $40.6 million, was allocated to the embedded conversion option, or equity component. This excess is reported as a debt discount and subsequently amortized as interest expense, using the interest method, through July 2018, the maturity date of the Notes. Offering costs, consisting of the initial purchasers’ discount and offering expenses payable by the Company, were $4.3 million. These offering costs were allocated to the liability component and the equity component based on the relative valuations of such components. As a result, $2.9 million of the offering costs were classified as debt issuance costs and recorded on the balance sheet in other assets. This amount is being amortized as interest expense through the July 2018 maturity date of the Notes. The unamortized offering costs at June 30, 2012 were $2.4 million. The remaining $1.4 million of offering costs were allocated to the equity component.

The following table shows the amounts recorded within the Company’s financial statements with respect to the Notes (in thousands):

 

     June 30,
2012
    December 31,
2011
 

Convertible debt principal

   $ 120,000      $ 120,000   

Unamortized debt discount

     (35,952     (38,263
  

 

 

   

 

 

 

Net carrying amount of convertible debt

   $ 84,048      $ 81,737   
  

 

 

   

 

 

 

The following table presents the interest expense recognized related to the Notes (in thousands):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Contractual interest expense

   $ 450       $ 50       $ 900       $ 50   

Amortization of debt issuance costs

     102         11         203         11   

Accretion of debt discount

     1,171         161         2,312         161   
  

 

 

    

 

 

    

 

 

    

 

 

 

Net interest expense

   $ 1,723       $ 222       $ 3,415       $ 222   
  

 

 

    

 

 

    

 

 

    

 

 

 

As of June 30, 2012, the unamortized equity component, which will be amortized over approximately six years, was $36.0 million.

Installment Loans

In May 2008, the Company amended a software license and maintenance agreement that provided the Company the right to distribute third party software for a one-time fee of approximately $6.4 million. The agreement was financed with an installment bank loan with an effective interest rate of 4.0%. The loan provided for a payment of $0.4 million at loan inception and scheduled principal repayments of $0.4 million each quarter commencing July 1, 2008, with the final payment payable on April 1, 2012. At March 31, 2012, the loan was paid in full and at December 31, 2011, the liability for the installment bank loan amounted to approximately

$0.4 million.

 

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BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

In connection with the acquisition of Movial Applications, Inc. in October 2011, the Company assumed five installment loans with Tekes, the Finnish Funding Agency for Technology and Innovation, totaling $1.0 million. The terms of the loans are governed by the Finnish Act on State Lending and State Guarantees, Government Decree on Research, Development and Innovation Funding. The loans funded approved research and development projects, repayment terms are on a per project basis, and the interest rate on each loan is variable, which was 3.0% as of June 30, 2012. The Company expects to repay these loans in full during 2012.

Fair value for the Company’s borrowings is estimated using quoted market prices for similiar instruments and by observable market data. The Company believes its creditworthiness and the financial market in which it operates has not materially changed since entering into the arrangements, therefore the carrying value of the borrowings approximates their fair values at June 30, 2012 and December 31, 2011. If measured at fair value in the financial statements, long-term debt (including the current portion) would be classified as Level 2 in the fair value hierarchy.

The aggregate maturities of borrowings as of June 30, 2012 were as follows (in thousands):

 

2012

   $ 476   

2013

     53   

2014

     125   

2015

     125   

2016, and thereafter

     120,144   
  

 

 

 
   $ 120,923   
  

 

 

 

8. Stock-based Compensation

Equity Incentive Plans

In 1999, the Company adopted the 1999 Stock Incentive Plan (the “1999 Plan”). The 1999 Plan provided for the grant of incentive stock options, nonqualified stock options, restricted stock awards and stock appreciation rights. The 1999 Plan terminated in June 2009 whereby no new options or awards are permitted to be granted. In April 2009, the Company adopted the 2009 Equity Incentive Plan. This plan provides for the grant of incentive stock options, nonqualified stock options, restricted stock awards, restricted stock units (“RSUs”) and stock appreciation rights. In June 2010, in connection with the Company’s initial public offering (“IPO”), the 2009 Equity Incentive Plan was amended and restated to provide for, among other things, annual increases in the share reserve (as amended and restated, the “2009 Plan”). At the same time, an additional 333,333 shares of common stock were added to the share reserve. On January 1, 2011 and 2012, 1,145,860 and 1,219,787 shares, respectively, were added to the 2009 Plan. At June 30, 2012, the Company had 1,456,383 shares of common stock available for issuance under the 2009 Plan.

Stock-based compensation expense recognized by the Company was as follows (in thousands):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Stock options

   $ 1,673       $ 433       $ 3,062       $ 934   

Restricted stock awards

     —           19         —           42   

Restricted stock units

     2,108         1,449         3,910         2,027   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total recognized stock-based compensation expense

   $ 3,781       $ 1,901       $ 6,972       $ 3,003   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

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BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

Stock Options

The following table presents summary information related to stock options:

 

     Number of
Options
Outstanding
    Weighted
Average
Exercise
Price
     Weighted
Average
Remaining
Contractual
Term (years)
     Aggregate
Intrinsic
Value
 

Balance, December 31, 2011

     1,682,911      $ 11.82         

Granted

     258,600           

Exercised

     (376,211        

Forfeited

     (78,958        
  

 

 

         

Balance, June 30, 2012

     1,486,342      $ 17.25         7.91       $ 22,443,987   
  

 

 

         

Vested at June 30, 2012

     714,097      $ 4.76         6.90       $ 17,522,120   

Exercisable at June 30, 2012

     752,556      $ 4.64         6.84       $ 18,295,189   

The Company granted 258,600 stock options during the six months ended June 30, 2012 and 102,700 stock options during the six months ended June 30, 2011. For the six months ended June 30, 2012 and June 30, 2011, the intrinsic value of stock options exercised was $12.8 million and $53.2 million, respectively, and cash received from stock options exercised was $1.1 million and $3.2 million, respectively. At June 30, 2012, unrecognized stock-based compensation expense related to unvested options was $7.2 million, which is scheduled to be recognized over a weighted average period of 1.44 years.

Restricted Stock Units

The following table presents a summary of activity for RSUs:

 

     Number  of
RSUs
    Weighted
Average Grant
Date Fair Value
 

Balance, December 31, 2011

     367,315      $ 27.17   

Granted

     399,262        33.87   

Vested

     (150,802     23.04   

Forfeited

     (39,608     34.71   
  

 

 

   

Balance, June 30, 2012

     576,167      $ 32.49   
  

 

 

   

During the six months ended June 30, 2012, the Company granted 316,025 RSUs to certain officers and employees, which vest over four years following the date of grant, and 16,003 RSUs to certain officers that were fully vested at the date of grant. In addition, the Company granted 12,234 RSUs to certain directors that vest quarterly through December 31, 2012. During the six months ended June 30, 2012, the Company granted 55,000 Performance Stock Units to certain officers, which vest on December 31, 2013, subject to the recipients’ satisfying the performance criteria of the awards. During the six months ended June 30, 2011, the Company granted an aggregate of 104,000 RSUs to certain officers and 86,950 RSUs to certain employees, which vest over four years following the date of grant. In addition, the Company granted 7,153 RSUs to certain directors that vested quarterly through December 31, 2011. At June 30, 2012, unrecognized stock-based compensation expense related to unvested RSUs was $8.9 million, which is scheduled to be recognized over a weighted average period of 1.57 years.

 

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BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

Tax Benefits

Upon adoption of the FASB’s guidance on stock-based compensation, the Company elected the alternative transition method (short cut method) provided for calculating the tax effects of stock-based compensation. The alternative transition method includes simplified methods to establish the beginning balance of the additional paid in capital (“APIC”) pool related to the tax effects of employee stock-based compensation, and to determine the subsequent impact on the APIC pool and consolidated statements of cash flows related to the tax effect of employee stock-based compensation awards that are outstanding upon adoption.

The Company applies a with-and-without approach in determining its intra-period allocation of tax expense or benefit attributable to stock-based compensation deductions. Tax deductions in excess of previously recorded benefits (windfalls) included in net operating loss carryforwards but not reflected in deferred tax assets were $70.7 million and $60.2 million at June 30, 2012 and December 31, 2011, respectively.

9. Commitments and Contingencies

In the normal course of business, the Company enters into contracts and agreements that may contain representations and warranties and provide for general indemnifications. The Company’s exposure under these agreements is unknown because it involves claims that may be made in the future, but have not yet been made. The Company has not paid any claims or been required to defend any action related to indemnification obligations to date.

In accordance with its bylaws and certain agreements, the Company has indemnification obligations to its officers and directors for certain events or occurrences, subject to certain limits, while they are serving at the Company’s request in such capacity. There have been no claims to date under these indemnification obligations.

In addition, the Company is involved in litigation incidental to the conduct of its business. The Company is not a party to any lawsuit or proceeding that, in the opinion of management, is reasonably possible to have a material adverse effect on its financial position, results of operations or cash flows.

10. Taxes

The Company’s provision for income taxes is determined using an estimate of its annual effective tax rate for each of its legal entities in accordance with the accounting guidance for income taxes. Where the Company has entities with losses and does not expect to release the tax benefits in the foreseeable future, those entities are excluded from the effective tax calculation. Non-recurring and discrete items that impact tax expense are recorded in the period incurred.

In determining the Company’s provision for income taxes, net deferred tax assets, liabilities, valuation allowances and uncertain tax positions, management is required to make judgments and estimates related to projections of domestic and foreign profitability, the timing and extent of the utilization of loss carryforwards, applicable tax rates, transfer pricing methods, expected tax authority positions on audit and prudent and feasible tax planning strategies. Judgments and estimates related to the Company’s projections and assumptions are inherently uncertain and, therefore, actual results could differ materially from projections.

As of June 30, 2012, the Company had U.S. net operating loss carryforwards of approximately $99.0 million, foreign net operating loss carryforwards of approximately $13.3 million, and domestic and foreign research and experimentation tax credit carryforwards of $2.1 million. Certain net operating losses expire in 2012 although the Company expects to utilize them prior to their expiration. The earliest net operating loss with a deferred tax asset established expires in 2019. The utilization of domestic and foreign net operating loss and tax credit carryforwards

 

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Table of Contents

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

may be subject to annual limitations due to ownership changes as provided by the local tax law. The Company has not recorded a deferred tax liability for undistributed earnings of $0.5 million of certain foreign subsidiaries, since such earnings are considered to be reinvested indefinitely. If the earnings were distributed, the Company would be subject to federal income and foreign withholding taxes. Determination of an unrecognized deferred income tax liability with respect to such earnings is not practicable.

The following table summarizes the Company’s provision for (benefit from) income taxes included in its unaudited condensed consolidated statements of operations for the periods indicated (in thousands):

 

     Three Months Ended
June 30,
    Six Months Ended
June 30,
 
     2012     2011     2012     2011  

Interim period provision for income taxes before valuation allowance

   $ 1,653      $ (414   $ 3,313      $ 52   

Decrease due to valuation allowance

     (36     (9,926     (67     (9,926
  

 

 

   

 

 

   

 

 

   

 

 

 

Provision for (benefit from) income taxes

   $ 1,617      $ (10,340   $ 3,246      $ (9,874
  

 

 

   

 

 

   

 

 

   

 

 

 

11. Income per share data

Basic income per common share is computed based on the weighted average number of outstanding shares of common stock. Diluted income per common share adjusts the basic weighted average common shares outstanding for the potential dilution that could occur if stock options, restricted stock and convertible securities were exercised or converted into common stock.

The following table presents a reconciliation of the numerator and denominator of the basic and diluted earnings per share computation. In the table below, net income represents the numerator and weighted average common shares outstanding represents the denominator:

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  
     (In thousands except per share data)  

Net income

   $ 2,356       $ 15,791       $ 4,057       $ 19,486   

Weighted average basic common shares outstanding

     27,550         26,670         27,392         26,189   

Dilutive effect of stock-based awards

     703         1,269         846         1,607   
  

 

 

    

 

 

    

 

 

    

 

 

 

Weighted average diluted common shares outstanding

     28,253         27,939         28,238         27,796   
  

 

 

    

 

 

    

 

 

    

 

 

 

Earnings per share:

           

Basic

   $ 0.09       $ 0.59       $ 0.15       $ 0.74   

Diluted

   $ 0.08       $ 0.57       $ 0.14       $ 0.70   

Due to the cash settlement feature of the principal amount of the Notes, we only include the impact of the premium feature in our diluted earnings per common share calculation when the average stock price exceeds the conversion price of the Notes, which did not occur for the three or six months ended June 30, 2012.

For the three and six months ended June 30, 2012 and 2011, certain stock options to purchase common stock were not included in the computation of diluted earnings per share as their effect was anti-dilutive

 

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Table of Contents

BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

because their exercise prices exceeded the average market price of the Company’s common stock during the period. The weighted average effect of potentially dilutive securities that have been excluded from the calculation of diluted net income per common share because the effect was anti-dilutive was as follows (in thousands):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Restricted stock units and awards

     5         84         89         42   

Early exercise shares

     —           —           —           1   

Stock options

     512         35         450         18   

12. Segment and Geographic Information

Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, in deciding how to allocate resources and in assessing performance. The Company’s chief operating decision maker is its chief executive officer (the “CEO”). The CEO reviews financial information presented on a consolidated basis, along with information about revenue by geographic region for purposes of allocating resources and evaluating financial performance. Discrete information on a geographic basis, except for revenue, is not provided below the consolidated level to the CEO. The Company has concluded that it operates in one segment and has provided the required enterprise-wide disclosures.

Revenue by geographic area is based on the location of the end-user carrier. The following tables present revenue and long-lived assets, net, by geographic area (in thousands):

 

     Three Months Ended
June 30,
     Six Months Ended
June 30,
 
     2012      2011      2012      2011  

Revenues:

           

United States

   $ 23,041       $ 20,801       $ 48,870       $ 37,873   

EMEA

     9,756         4,898         15,502         9,645   

APAC

     3,478         3,809         8,531         7,382   

Other

     4,241         2,671         5,956         6,933   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total Revenue

   $ 40,516       $ 32,179       $ 78,859       $ 61,833   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

     June 30,
2012
     December 31,
2011
 

Long-Lived Assets, net

     

United States

   $ 11,946       $ 9,603   

EMEA

     355         269   

APAC

     156         155   

Other

     520         596   
  

 

 

    

 

 

 

Total Long-Lived Assets, net

   $ 12,977       $ 10,623   
  

 

 

    

 

 

 

 

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BroadSoft, Inc.

Notes to Unaudited Condensed Consolidated Financial Statements

 

13. Subsequent Event

On August 6, 2012, the Company completed its acquisition of the assets of Adaption Technologies Ventures, Ltd. (“Adaption Technologies”), a provider of hosted business VoIP solutions. The Company expects the acquisition to enhance its BroadCloud Software-as-a-Service delivery platform. The Company will now be able to deliver as part of its BroadCloud offerings BroadWorks features and functionality. The purchase price for Adaption Technologies was approximately $22 million and the Company funded the acquisition with cash on hand. Because this acquisition recently closed, the Company has not yet completed the initial purchase price allocation.

 

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ITEM 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and Annual Report on Form 10-K for the year ended December 31, 2011 filed with the Securities and Exchange Commission, or SEC, on February 29, 2012.

This Quarterly Report on Form 10-Q contains forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995, that involve substantial risks and uncertainties. All statements other than statements of historical facts contained in this Quarterly Report on Form 10-Q are forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or other similar expressions. Forward-looking statements in this Quarterly Report on Form 10-Q may include statements about:

 

   

our dependence on the success of BroadWorks;

 

   

our dependence on our service provider customers to sell services using our applications;

 

   

claims that we infringe intellectual property rights of others;

 

   

our ability to protect our intellectual property;

 

   

competitive factors, including but not limited to industry consolidation, entry of new competitors into our market, and new product and marketing initiatives by our competitors;

 

   

any potential loss of or reductions in orders from certain significant customers;

 

   

our ability to predict our revenue, operating results and gross margin accurately;

 

   

the length and unpredictability of our sales cycles;

 

   

our ability to expand our product offerings;

 

   

our international operations;

 

   

our significant reliance on distribution partners in international markets;

 

   

our ability to sell our products in certain markets;

 

   

our ability to manage our growth, including our increased headcount;

 

   

the attraction and retention of qualified employees and key personnel;

 

   

the interoperability of our products with service provider networks;

 

   

our ability to realize the benefits of our recent acquisitions and the successful integration of the personnel, technologies, and customers from such acquisitions;

 

   

the quality of our products and services, including any undetected errors or bugs in our software; and

 

   

our ability to maintain proper and effective internal controls.

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 those factors we discuss in the “Risk Factors” sections of this Quarterly Report on Form 10-Q, our Annual Report on Form 10-K for the fiscal year ended December 31, 2011 and in our other filings with the SEC. You should read these factors and the other cautionary statements made in this Quarterly Report on Form 10-Q as being applicable to all related forward-looking statements wherever they appear in this Quarterly Report on Form 10-Q. These risks are not exhaustive. Although we believe the expectations reflected in the forward-looking statements are based on reasonable assumptions, we can give no assurance we will attain these expectations or that any deviations will not be material. Except as required by law, we undertake no obligation to update publicly any forward-looking statements for any reason after the date of this Quarterly Report on Form 10-Q to conform these statements to actual results or to changes in our expectations.

Company Overview

We are the leading global provider of software and services that enable mobile, fixed-line and cable service providers to deliver Unified Communications and other voice and multimedia services over their Internet protocol, IP, based networks. Our core communications platform consists of three offerings:

 

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BroadWorks. Our BroadWorks software powers Unified Communications applications, such as call processing, hosted IP Centrex (also referred to as hosted PBX) and SIP Trunking. Typically, we license our BroadWorks software on a perpetual license basis to service providers who implement our software within their networks to offer UC and other VoIP services to their end-users. Since our inception, most of our revenues have come from license and maintenance and support fees for our BroadWorks software.

 

   

BroadCloud. Our BroadCloud services, which were introduced in 2010, are Unified Communications services hosted and/or managed by us, and resold by service providers, under their brand. We also offer our web collaboration services directly to enterprises. Typically, service providers pay us a monthly recurring fee for providing such services. Although we do not derive a significant portion or our revenues from BroadCloud services, we believe there is a growing acceptance by service providers of BroudCloud-type service offerings.

 

   

BroadTouch. We introduced BroadTouch at the end of 2011. BroadTouch user experience client applications enable carriers to put the power of our Unified Communications services in the hands of the end-user, whether they are communicating using a desktop computer, laptop, smartphone or tablet.

BroadWorks. The BroadWorks software enables our service provider customers to provide enterprises and consumers with a range of cloud-based, or hosted, communications offerings, such as hosted IP Centrex, video calling, Unified Communications, or UC, SIP Trunking, Voice over Long Term Evolution, or VoLTE, Unified Messaging, call centers and audio conferencing. BroadWorks performs a critical network function by serving as the software element that delivers and coordinates voice, video and messaging communications through a service provider’s IP-based network. Service providers use BroadWorks to offer services that generate new revenue, reduce subscriber churn, capitalize on their investments in IP-based networks and help them migrate services from their legacy, circuit-based networks, including such IP communications services across 4G wireless networks, such as Long Term Evolution, or LTE, networks. We believe we are well positioned to enable service providers to capitalize on their IP-based network investments by efficiently and cost-effectively offering a broad suite of services to their end-users.

BroadWorks is installed on industry-standard servers, typically located in service providers’ data centers. It interoperates with service providers’ core networks, accesses other networks for interworking with end-users’ communications devices and connects to service providers’ support and billing systems.

BroadCloud. Our BroadCloud hosted or “cloud” service offering enables our service provider customers to offer their end-users additional UC applications, such as web collaboration, video conferencing, instant messaging, or IM, presence and short messaging. We also offer our web collaboration services directly to enterprises. Unlike our more traditional software offerings, in our BroadCloud offering, these applications are hosted and/or managed on our network. The key objectives of providing these services from our own BroadCloud network include expediting our service provider customers’ time to market by our hosting and managing the services and enabling the service provider to brand such UC applications.

BroadTouch. BroadTouch enables our service provider customers to offer compelling end user client experiences using our BroadTouch communications clients for smartphones, tablets, desktops and laptops. These clients are often referred to as “soft phones” and the BroadTouch clients allow enterprise and consumer end-users the full range of the service provider’s BroadWorks and BroadCloud services through a client experience branded by the service provider.

We were incorporated in Delaware in 1998 and we began selling BroadWorks in 2001. Over 500 service providers in more than 65 countries have purchased and/or are delivering services utilizing our software, including 18 of the top 25 telecommunications service providers globally, as measured by revenue in the year ended December 31, 2010. We sell our products to service providers both directly and indirectly through distribution partners, such as telecommunications equipment vendors, value-added resellers, or VARs, and other distributors.

 

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Industry

We believe telecommunications service providers are facing significant challenges to their traditional business models, including declining revenues in their legacy businesses (both fixed line and mobile), rapidly evolving customer communications demands and the need to generate returns on their increasing investments in IP-based networks. Historically, service providers derived much of their revenue from providing reliable voice and highspeed data access. However, these legacy services have been increasingly commoditized as technological and regulatory changes have brought increased competition and lower prices. At the same time, enterprises and consumers have started to seek new and enhanced cloud-based communications services, which can provide service providers with opportunities to counter falling legacy revenues and increase subscriber growth. Service providers are using both their existing IP-based networks and third-party cloud-based platforms to deliver these services to their customers.

We believe that, as service providers look to rapidly introduce these new UC services through their own networks, they need a product like BroadWorks that is capable of coordinating delivery of a large and rapidly increasing number of applications, operating across heterogeneous network elements and devices, ensuring high levels of reliability and quality and efficiently scaling as more subscribers are added.

Company Strategy

Our goal is to strengthen our position as the leading global provider of IP communications application servers by enabling service providers to increase revenue opportunities by delivering feature-rich services to their enterprise and consumer subscribers. Key elements of our strategy include:

 

   

Extend our technology leadership and product depth and breadth. We intend to provide an industry-leading solution through continued focus on product innovation and substantial investment in research and development for new features, applications and services.

 

   

Drive revenue growth by:

 

   

Assisting our current service provider customers to sell more of their currently-deployed BroadWorks and BroadCloud services. We support our service provider customers by regularly offering enhanced and new features to their current applications, as well as providing tools and training to help them market their services to subscribers.

 

   

Selling new applications and features to our current service provider customers. Although our initial engagement with a service provider may be for a single initiative or business unit, once services using our core applications communications platform are deployed by a service provider, we believe we are well-positioned to sell additional applications and features to that service provider, as software (BroadWorks) and/or through our BroadCloud services delivery platform. These BroadSoft service offerings can be tied together with service provider-branded BroadTouch mobile smart phone and tablet, and personal computer clients.

 

   

Continuing to acquire new customers. Our customers are located around the world and include 18 of the top 25 telecommunications service providers globally. We believe we are well positioned to grow by adding customers in regions where we already have a strong presence, by expanding our geographic footprint and by penetrating more deeply into some types of service provider customers, such as additional cable and mobile service providers.

 

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Pursue selected acquisitions and collaborations that complement our strategy. We intend to continue to pursue acquisitions and collaborations where we believe they are strategic to strengthen our leadership position.

Key Financial Highlights

Some of our key financial highlights for the quarter ended June 30, 2012 include:

 

   

Total revenue increased by 26% to $40.5 million, compared to $32.2 million in the quarter ended June 30, 2011;

 

   

Gross profit increased to $32.2 million, compared to $25.9 million in the quarter ended June 30, 2011;

 

   

Gross margin decreased to 79%, compared to 81% in the quarter ended June 30, 2011;

 

   

Operating income was $5.6 million, or 14% of total revenue, compared to $5.6 million, or 18% of total revenue, in the quarter ended June 30, 2011;

 

   

Deferred revenue was $48.8 million as of June 30, 2012, a decrease of $2.8 million in the quarter ended June 30, 2012, compared to a decrease of $3.4 million in the same period in 2011;

 

   

Revenue plus net change in deferred revenue increased by 31% to $37.7 million, compared to $28.8 million in the quarter ended June 30, 2011; and

 

   

Cash provided by operating activities was $11.7 million, compared to $8.9 million for the quarter ended June 30, 2011.

Components of Operating Results

Revenue

We derive our revenue from the sale of licenses, maintenance and services. We recognize revenue when all revenue recognition criteria have been met in accordance with revenue recognition guidance. This guidance provides that revenue should be recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collection is probable.

Our total revenue consists of the following:

 

   

Licenses. We derive license revenue from the sale of perpetual software licenses. We price our software based on the types of features and applications provided and on the number of subscriber licenses sold. These factors impact the average selling price of our licenses and the comparability of average selling prices. Our license revenue may vary significantly from quarter to quarter or from year to year as a result of long sales and deployment cycles, variations in customer ordering practices and the application of management’s judgment in applying complex revenue recognition rules. Our deferred license revenue balance consists of software orders that do not meet all the criteria for revenue recognition. We are unable to predict the proportion of orders that will meet all the criteria for revenue recognition relative to those orders that will not meet all such criteria and, as a result, we cannot forecast whether any historical trends in recognized license revenue and deferred license revenue will continue. As of June 30, 2012, our deferred license revenue balance was $12.9 million.

 

   

Maintenance and services. We generally sell annual maintenance contracts with our software licenses. These contracts provide for software updates, upgrades and technical support. Our typical warranty on licensed software is 90 days and, during this period, our customers are entitled to receive maintenance and support without the purchase of a maintenance contract. After the expiration of the warranty period, our customers must purchase an annual maintenance contract to continue receiving ongoing software maintenance and customer support. We also sell professional services, which consist of implementation, training and consulting services. As of June 30, 2012, our deferred maintenance and services revenue balance was $35.9 million.

 

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Cost of Revenue

Our total cost of revenue consists of the following:

 

   

Cost of license revenue. A substantial majority of the cost of license revenue consists of royalties paid to third parties whose technology or products are sold as part of BroadWorks and, to a lesser extent, amortization of acquired technology. Most of these royalty payments are for the underlying embedded data base technology within BroadWorks for which we currently incur a fixed expense and/or pay a fixed fee per quarter, which will increase beginning in June 2012 as a result of a recently executed third-party license agreement. Such costs are expensed in the period in which they are incurred.

 

   

Cost of maintenance and services revenue. Cost of maintenance and services revenue consists primarily of personnel-related expenses and other direct costs associated with the support, maintenance and implementation of our software licenses, as well as training and consulting services. Personnel expenses include salaries, commissions, benefits, bonuses, reimbursement of expenses and stock-based compensation. Such costs are expensed in the period in which they are incurred.

Gross Profit

Gross profit is the calculation of total revenue minus cost of revenue. Our gross profit as a percentage of revenue, or gross margin, has been and will continue to be affected by a variety of factors, including:

 

   

Mix of license, maintenance and services revenue. We generate higher gross margins on license revenue compared to maintenance and services revenue.

 

   

Growth or decline of license revenue. A substantial portion of cost of license revenue is fixed and is expensed in the period in which it occurs. This cost consists primarily of the royalty payments to our embedded database provider. If license revenue increases, these fixed payments will decline as a percentage of revenue. If license revenue declines, these fixed payments will increase as a percentage of revenue.

 

   

Impact of deferred revenue. If we are unable to determine vendor-specific objective evidence, or VSOE, of fair value for any undelivered element within an arrangement, or any other revenue recognition criteria have not been met, the applicable revenue derived from the arrangement is deferred, including license, maintenance and services revenue, until all elements for which we could not determine VSOE have been delivered or other revenue recognition criteria have been met. However, the cost of revenue, including the costs of license, maintenance and services, is typically expensed in the period in which it is incurred. Therefore, if relatively more revenue is deferred in a particular period, gross margin would decline in that period. Because the ability to recognize revenue on sales depends largely on the terms of the sale arrangement, and because we are not able to predict the proportion of orders that will not meet all the criteria for revenue recognition, we cannot forecast whether any historical trends in gross margin will continue.

Revenue Plus (Decrease) Increase in Deferred Revenue

We believe revenue we recognize in a particular period plus the net change in our deferred revenue balance is a key measure of our sales activity for that period. The (decrease) increase in deferred revenue illustrates how the balance in deferred revenue has changed over a period of time.

Operating Expenses

Operating expenses consist of sales and marketing, research and development and general and administrative expenses. Salaries and personnel costs are the most significant component of each of these expense categories. We grew to 559 employees at June 30, 2012 from 487 employees at December 31, 2011, and we expect to continue to hire new employees to support our anticipated growth.

 

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Sales and marketing expenses. Sales and marketing expenses consist primarily of salaries and personnel costs for our sales and marketing employees, including stock-based compensation, commissions and bonuses. Additional expenses include marketing programs, consulting, travel and other related overhead. We expect our sales and marketing expenses to increase in the foreseeable future as we further increase the number of our sales and marketing professionals and expand our marketing activities. Over the long term, we expect sales and marketing expenses to decrease as a percentage of total revenue as sales grow. During the remainder of 2012, however, we do not expect sales and marketing expenses to decrease as a percentage of total revenue.

Research and development expenses. Research and development expenses consist primarily of salaries and personnel costs for development employees, including stock-based compensation and bonuses. Additional expenses include costs related to development, quality assurance and testing of new software and enhancement of existing software, consulting, travel and other related overhead. We engage third-party international and domestic consulting firms for various research and development efforts, such as software development, documentation, quality assurance and software support. We intend to continue to invest in our research and development efforts, including by hiring additional development personnel and by using outside consulting firms for various research and development efforts. We believe continuing to invest in research and development efforts is essential to maintaining our competitive position. We expect research and development expenses to increase in the foreseeable future, but over the long-term to decrease as a percentage of total revenue as sales grow.

General and administrative expenses. General and administrative expenses consist primarily of salary and personnel costs for administration, finance and accounting, legal, information systems and human resources employees, including stock-based compensation and bonuses. Additional expenses include consulting and professional fees, travel, insurance and other corporate expenses. We expect general and administrative expenses to increase in the foreseeable future, but over the long-term to decrease as a percentage of total revenue as sales grow.

Stock-Based Compensation

We include stock-based compensation as part of cost of revenue and operating expenses in connection with the grant or modification of stock options and other equity awards to our directors, employees and consultants. We apply the fair value method in accordance with authoritative guidance for determining the cost of stock-based compensation. The total cost of the grant or modification is measured based on the estimated fair value of the award at the date of grant or modification. The fair value is then recognized as stock-based compensation expense over the requisite service period, which is the vesting period, of the award. For the three months ended June 30, 2012 and 2011, we recorded stock-based compensation expense of $3.8 million and $1.9 million, respectively. For the six months ended June 30, 2012 and 2011, we recorded stock-based compensation expense of $7.0 million and $3.0 million, respectively.

Based on stock options and other equity awards outstanding as of June 30, 2012, we expect to recognize future expense related to the non-vested portions of such options and other equity awards in the amount of $16.1 million over a weighted average period of approximately 1.52 years.

Other Expense (Income), Net

Other expense (income), net consists primarily of interest income and interest expense. Interest income represents interest received on our cash and cash equivalents, marketable securities and restricted cash. Interest expense consists primarily of the interest related to the Notes and our five installment loans with Tekes.

Income Tax Expense

Income tax expense consists of U.S. federal, state and foreign income taxes. We are required to pay income taxes in certain states and foreign jurisdictions. Historically, we have not been required to pay U.S. federal income taxes due to our accumulated net operating losses. As of June 30, 2012, we had net operating loss carryforwards of approximately $99.0 million to offset future taxable income in the U.S.

 

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Recent Accounting Pronouncements

In September 2011, the FASB issued ASU 2011-08, “Intangibles – Goodwill and Other: Testing Goodwill for Impairment,” which simplifies the periodic testing of goodwill for impairment. This guidance will allow companies to first assess qualitative factors to determine whether it is necessary to perform the two-step quantitative goodwill impairment test required under current accounting standards. This guidance will be effective for our annual goodwill impairment test performed in 2012 and is not expected to have a material impact on our consolidated financial statements.

Results of Operations

Comparison of the three months ended June 30, 2012 and 2011

Revenue

 

     Three Months Ended June 30,     Period-to-Period Change  
     2012     2011    
     Amount      Percent
of Total
Revenue
    Amount      Percent
of Total
Revenue
    Amount     Percentage  
     (dollars in thousands)  

Revenue by Type:

              

Licenses

   $ 22,501         56   $ 19,202         60   $ 3,299        17

Maintenance and services

     18,015         44        12,977         40        5,038        39   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

Total revenue

   $ 40,516         100   $ 32,179         100   $ 8,337        26
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

Revenue by Geography:

              

Americas

   $ 27,282         67   $ 23,472         73   $ 3,810        16

EMEA

     9,756         24        4,898         15        4,858        99   

APAC

     3,478         9        3,809         12        (331     (9
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

Total revenue

   $ 40,516         100   $ 32,179         100   $ 8,337        26
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

   

Total revenue for the three months ended June 30, 2012 increased by 26%, or $8.3 million, to $40.5 million, compared to the same period in 2011. This growth was driven by a 17% increase in license revenue and a 39% increase in maintenance and services revenue. Deferred revenue decreased by $2.8 million for the three months ended June 30, 2012, compared to a decrease of $3.4 million for the same period in 2011.

Revenue from the Americas for the three months ended June 30, 2012 increased by 16%, or $3.8 million, to $27.3 million compared to the same period in 2011. The increase in the Americas revenue for the three months ended June 30, 2012 was primarily due to growth in software license sales, particularly our hosted UC and trunking applications, consumer applications and related maintenance, in addition to strong growth in services. Europe, Middle East and Africa, or EMEA, revenue for the three months ended June 30, 2012 increased 99%, or $4.9 million, to $9.8 million compared to the same period in 2011. The increase in EMEA revenue for the three months ended June 30, 2012 was primarily due to growth in software license sales, particularly our hosted UC and trunking applications, and related maintenance. Asia Pacific, or APAC, revenue for the three months ended June 30, 2012 decreased by 9%, or $0.3 million, to $3.5 million compared to the same period in 2011. The decrease in APAC revenue for the three months ended June 30, 2012 was primarily due to certain software orders received during the quarter that did not meet the criteria for revenue recognition and as a result, the associated revenue was deferred.

 

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License Revenue

License revenue for the three months ended June 30, 2012 increased by 17%, or $3.3 million, to $22.5 million. The increase in license revenue for the three months ended June 30, 2012 was driven by strong growth in sales of software licenses in EMEA as well as the Americas. Deferred license revenue decreased by $1.4 million for the three months ended June 30, 2012, compared to a decrease of $0.9 million for the same period in 2011. The decrease in deferred revenue for the three months ended June 30, 2012 was primarily driven by license orders that we deferred in prior periods and for which we recognized the revenue in the quarter.

Maintenance and Services Revenue

Maintenance and services revenue for the three months ended June 30, 2012 increased by 39%, or $5.0 million, to $18.0 million, compared to the same period in 2011. The increase in maintenance and services revenue was the result of growth in our installed base of customers and licenses and growth in demand by our customers for our professional service offerings and inclusion of revenue recognized for an order that was previously deferred. Deferred maintenance and services revenue decreased by $1.4 million for the three months ended June 30, 2012, compared to a $2.5 million decrease for the same period in 2011. The decrease in deferred revenue for the three months ended June 30, 2012 was primarily driven by license orders that we deferred in prior periods and for which we recognized the revenue in the quarter.

Cost of Revenue and Gross Profit

 

     Three Months Ended June 30,     Period-to-Period Change  
     2012     2011    
     Amount      Percent
of
Related
Revenue
    Amount      Percent
of
Related
Revenue
    Amount      Percentage  
     (dollars in thousands)  

Cost of Revenue:

               

Licenses (1)

   $ 3,072         14   $ 1,596         8   $ 1,476         92

Maintenance and services

     5,249         29        4,635         36        614         13   
  

 

 

      

 

 

      

 

 

    

Total cost of revenue

   $ 8,321         21   $ 6,231         19   $ 2,090         34
  

 

 

      

 

 

      

 

 

    

Gross Profit:

               

Licenses (1)

   $ 19,429         86   $ 17,606         92   $ 1,823         10

Maintenance and services

     12,766         71        8,342         64        4,424         53   
  

 

 

      

 

 

      

 

 

    

Total gross profit

   $ 32,195         79   $ 25,948         81   $ 6,247         24
  

 

 

      

 

 

      

 

 

    

 

(1) Includes amortization of intangibles aggregating $557 and $251 for the three months ended June 30, 2012 and 2011, respectively.

For the three months ended June 30, 2012, gross margin decreased to 79% of revenue, compared to 81% for the same period in 2011. Our gross profit increased by 24%, or $6.2 million, to $32.2 million. We experienced an increase in both license gross profit and maintenance and services gross profit for the three months ended June 30, 2012, primarily due to growth in license revenue and maintenance and services revenue.

For the three months ended June 30, 2012, license gross margin decreased to 86% as compared to 92% in the same period in 2011, and license gross profit increased by 10% to $19.4 million. License cost of revenue increased by 92% to $3.1 million for the three months ended June 30, 2012. This increase was primarily due to an increase of $0.3 million in amortization of acquired intangibles as a result of our business acquisitions in 2011, an increase of $0.3 million in personnel-related expenses due to increased headcount, an increase of $0.3 million due to the new embedded database arrangement and an increase of $0.7 million for third-party software expenses.

 

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For the three months ended June 30, 2012, maintenance and services gross margin increased to 71% compared to 64% for the same period in 2011. Our maintenance and services gross profit increased by 53% to $12.8 million, due to increased services revenue. Maintenance and services cost of revenue increased by 13% to $5.2 million for the three months ended June 30, 2012 as compared to the same period in 2011.

Operating Expenses

 

     Three Months Ended June 30,     Period-to-Period
Change
 
     2012     2011    
     Amount      Percent
of Total
Revenue
    Amount      Percent
of Total
Revenue
    Amount      Percentage  
     (dollars in thousands)  

Sales and marketing

   $ 11,608         29   $ 9,077         28   $ 2,531         28

Research and development

     9,131         23        6,730         21        2,401         36   

General and administrative

     5,880         15        4,496         14        1,384         31   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Total operating expenses

   $ 26,619         66   $ 20,303         63   $ 6,316         31
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Sales and Marketing. Sales and marketing expense increased by 28%, or $2.5 million, to $11.6 million for the three months ended June 30, 2012. The primary driver of this increase was a $1.8 million increase in personnel-related costs, of which $1.0 million related to stock-based compensation expense.

Research and Development. Research and development expense increased by 36%, or $2.4 million, to $9.1 million for the three months ended June 30, 2012. This increase was primarily due to a $1.9 million increase in personnel-related costs, of which $0.6 million related to stock-based compensation expense, driven by both organic growth and our recent acquisitions.

General and Administrative. General and administrative expense increased by 31%, or $1.4 million, to $5.9 million for the three months ended June 30, 2012. This increase was primarily attributable to a $0.3 million increase in personnel-related costs, a $0.3 million increase in bad debt expense, a $0.2 million increase in equipment and software expense and a $0.1 million increase in professional fees. Key drivers of this growth in expense were costs incurred in completing, integrating and managing our recent acquisitions.

Income from Operations

We had income from operations of $5.6 million for the three months ended June 30, 2012, compared to $5.6 million for the same period in 2011.

 

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Other Expense (Income)

 

     Three Months Ended June 30,              
     2012     2011     Period-to-Period
Change
 
     Amount     Percent
of Total
Revenue
    Amount     Percent
of Total
Revenue
    Amount     Percentage  
     (dollars in thousands)  

Interest income

   $ (120     *      $ (44     *      $ (76     172

Interest expense

     1,723        4     238        1     1,485        NM   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total other expense, net

   $ 1,603        4   $ 194        1   $ 1,409        NM   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

* Less than 1%

NM – Not meaningful

Interest income for the three months ended June 30, 2012 increased by $0.1 million as compared to the same period in 2011. The increase in interest income was due to an increase in excess cash invested in marketable securities as compared to the 2011 period. Interest expense for the three months ended June 30, 2012 increased by $1.5 million as a result of the issuance of the Notes.

Provision For (Benefit From) Income Taxes

Income tax expense was $1.6 million for the three months ended June 30, 2012, compared to benefit from income taxes of $10.3 million for the same period in 2011. The income tax expense for the three months ended June 30, 2012 relates primarily to current foreign and state taxes and the utilization of deferred tax assets in the U.S. Changes in our taxes are due primarily to the change in the mix of earnings by jurisdiction and due to the fact that in the three months ended June 30, 2011, the tax expense was offset by the reduction in valuation allowance forecasted for 2011. The following table summarizes our provision for (benefit from) income taxes included in our unaudited condensed consolidated statements of operations for the periods indicated:

 

     Three Months Ended
June 30,
 
     2012     2011  
     (in thousands)  

Interim period provision for income taxes before valuation allowance

   $ 1,653      $ (414

Release of valuation allowance

     (36     (9,926
  

 

 

   

 

 

 

Provision for (benefit from) income taxes

   $ 1,617      $ (10,340
  

 

 

   

 

 

 

 

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Comparison of the six months ended June 30, 2012 and 2011

Revenue

 

     Six Months Ended June 30,               
     2012     2011     Period-to-Period Change  
     Amount      Percent
of Total
Revenue
    Amount      Percent
of Total
Revenue
    Amount      Percentage  
     (dollars in thousands)  

Revenue by Type:

               

Licenses

   $ 43,766         55   $ 34,393         56   $ 9,373         27

Maintenance and services

     35,093         45        27,440         44        7,653         28   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Total revenue

   $ 78,859         100   $ 61,833         100   $ 17,026         28
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Revenue by Geography:

               

Americas

   $ 54,826         70   $ 44,806         72   $ 10,020         22

EMEA

     15,502         20        9,645         16        5,857         61   

APAC

     8,531         10        7,382         12        1,149         16   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Total revenue

   $ 78,859         100   $ 61,833         100   $ 17,026         28
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Total revenue for the six months ended June 30, 2012 increased by 28%, or $17.0 million, to $78.9 million, compared to the same period in 2011. This growth was driven by a 27% increase in license revenue and a 28% increase in maintenance and services revenue. Deferred revenue decreased by $8.3 million for the six months ended June 30, 2012, compared to a decrease of $4.9 million for the same period in 2011.

Revenue from the Americas for the six months ended June 30, 2012 increased by 22%, or $10.0 million, to $54.8 million compared to the same period in 2011. The increase in the Americas revenue for the six months ended June 30, 2012 was primarily due to growth in software license sales, particularly our hosted UC and trunking applications, consumer applications and related maintenance, in addition to strong growth in services. EMEA revenue for the six months ended June 30, 2012 increased 61%, or $5.9 million, to $15.5 million compared to the same period in 2011. The increase in EMEA revenue for the six months ended June 30, 2012 was primarily due to growth in software license sales, particularly our hosted UC and trunking applications, and related maintenance. APAC revenue for the six months ended June 30, 2012 increased by 16%, or $1.1 million, to $8.5 million compared to the same period in 2011. The increase in APAC revenue for the six months ended June 30, 2012 was primarily due to growth in software license sales due to general growth in our hosted UC applications and related maintenance.

License Revenue

License revenue for the six months ended June 30, 2012 increased by 27%, or $9.4 million, to $43.8 million. The increase in license revenue for the six months ended June 30, 2012 was driven by strong growth in sales of software licenses in the Americas. Deferred license revenue decreased by $7.7 million for the six months ended June 30, 2012, compared to a decrease of $1.5 million for the same period in 2011. The decrease in deferred revenue for the six months ended June 30, 2012 was primarily driven by license orders that we deferred in prior periods and for which we recognized the revenue in the period.

Maintenance and Services Revenue

Maintenance and services revenue for the six months ended June 30, 2012 increased by 28%, or $7.7 million, to $35.1 million, compared to the same period in 2011. The increase in maintenance and services revenue was the result of growth in our installed base of customers and licenses and growth in demand by our customers for our professional service offerings. Deferred maintenance and services revenue decreased by $0.6 million for the six months ended June 30, 2012, compared to a $3.4 million decrease for the same period in 2011. The decrease in deferred revenue was a result of the growth of software licenses purchased by our installed base of customers and new customers.

 

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Table of Contents

Cost of Revenue and Gross Profit

 

     Six Months Ended June 30,     Period-to-Period
Change
 
     2012     2011    
     Amount      Percent
of
Related
Revenue
    Amount      Percent
of
Related
Revenue
    Amount      Percentage  
     (dollars in thousands)  

Cost of Revenue:

               

Licenses (1)

   $ 5,691         13   $ 3,111         9   $ 2,580         83

Maintenance and services

     10,702         30        8,950         33        1,752         20   
  

 

 

      

 

 

      

 

 

    

Total cost of revenue

   $ 16,393         21   $ 12,061         20   $ 4,332         36
  

 

 

      

 

 

      

 

 

    

Gross Profit:

               

Licenses (1)

   $ 38,075         87   $ 31,282         91   $ 6,793         22

Maintenance and services

     24,391         70        18,490         67        5,901         32   
  

 

 

      

 

 

      

 

 

    

Total gross profit

   $ 62,466         79   $ 49,772         80   $ 12,694         26
  

 

 

      

 

 

      

 

 

    

 

(1) Includes amortization of intangibles aggregating $1,116 and $490 for the six months ended June 30, 2012 and 2011, respectively.

For the six months ended June 30, 2012, gross margin decreased to 79% of revenue, compared to 80% for the same period in 2011. Our gross profit increased by 26%, or $12.7 million, to $62.5 million. We experienced an increase in both license gross profit and maintenance and services gross profit for the six months ended June 30, 2012, primarily due to growth in license revenue and maintenance and services revenue.

For the six months ended June 30, 2012, license gross margin decreased to 87% as compared to 91% in the same period in 2011, and license gross profit increased by 22% to $38.1 million. License cost of revenue increased by 83% to $5.7 million for the six months ended June 30, 2012. This increase was primarily due to an increase of $0.6 million in amortization of acquired intangibles as a result of our business acquisitions in 2011, an increase of $1.1 million for third-party software expenses and a $0.6 million increase in personnel-related expenses due to an increase in headcount.

For the six months ended June 30, 2012, maintenance and services gross margin increased to 70% compared to 67% for the same period in 2011. Our maintenance and services gross profit increased by 32% to $24.4 million, due to increased services revenue. Maintenance and services cost of revenue increased by 20% to $10.7 million for the six months ended June 30, 2012 as compared to the same period in 2011. The increase in maintenance and services cost of revenue was primarily due to a $1.0 million increase in personnel-related costs due to an increase in services personnel working directly on specific projects for certain customers that will also be included in future releases of our products.

 

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Table of Contents

Operating Expenses

 

     Six Months Ended June 30,     Period-to-Period
Change
 
     2012     2011    
     Amount      Percent
of Total
Revenue
    Amount      Percent
of Total
Revenue
    Amount      Percentage  
     (dollars in thousands)  

Sales and marketing

   $ 22,680         29   $ 17,561         28   $ 5,119         29

Research and development

     17,607         22        13,546         22        4,061         30   

General and administrative

     11,694         15        8,882         15        2,812         32   
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Total operating expenses

   $ 51,981         66   $ 39,989         65   $ 11,992         30
  

 

 

    

 

 

   

 

 

    

 

 

   

 

 

    

Sales and Marketing. Sales and marketing expense increased by 29%, or $5.1 million, to $22.7 million for the six months ended June 30, 2012. The primary drivers of this increase were a $3.7 million increase in personnel-related costs, of which $1.8 million relates to stock compensation expense and a $0.3 million increase in outside consulting expenses.

Research and Development. Research and development expense increased by 30%, or $4.1 million, to $17.6 million for the six months ended June 30, 2012. This increase was primarily due to a $3.2 million increase in personnel-related costs, of which $1.1 million relates to stock compensation expense, driven by both organic growth and our recent acquisitions.

General and Administrative. General and administrative expense increased by 32%, or $2.8 million, to $11.7 million for the six months ended June 30, 2012. This increase was primarily attributable to a $1.2 million increase in personnel-related costs, of which $0.4 million relates to stock compensation expense, and a $0.5 million increase in professional fees. Key drivers of this growth in expense were the costs incurred in completing, integrating and managing our recent acquisitions.

Income from Operations

We had income from operations of $10.5 million for the six months ended June 30, 2012, compared to $9.8 million for the same period in 2011. The increase in income from operations for the six months ended June 30, 2012 was primarily a result of revenue and associated gross profit growing more quickly than expenses increased.

Other Expense (Income)

 

     Six Months Ended June 30,     Period-to-Period
Change
 
     2012     2011    
     Amount     Percent
of Total
Revenue
    Amount     Percent
of Total
Revenue
    Amount     Percentage  
    

(dollars in thousands)

 

Interest income

   $ (237     *      $ (87     *      $ (150     172

Interest expense

     3,419        4     258        0     3,161        NM   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

Total other expense, net

   $ 3,182        4   $ 171        0   $ 3,011        NM   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

* Less than 1%

NM – Not meaningful

 

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Table of Contents

Interest income for the six months ended June 30, 2012 increased $0.2 million as compared to the same period in 2011. The increase in interest income was due to an increase in excess cash invested in marketable securities. Interest expense for the six months ended June 30, 2012 increased by $3.2 million compared to the 2011 period, primarily as a result of the issuance of the Notes.

Provision For (Benefit from) Income Taxes

Income tax expense was $3.2 million for the six months ended June 30, 2012, compared to a benefit of $9.9 million for the same period in 2011. The income tax expense for the six months ended June 30, 2012 relates primarily to current foreign and state taxes and the utilization of deferred tax assets in the U.S. Changes in our taxes are due primarily to the change in the mix of earnings by jurisdiction and due to the fact that in the six months ended June 30, 2011, the tax expense was offset by the reduction in valuation allowance forecasted for 2011. The following table summarizes our provision for (benefit from) income taxes included in our unaudited condensed consolidated statements of operations for the periods indicated (in thousands):

 

     Six Months Ended
June 30,
 
     2012     2011  

Interim period provision for income taxes before valuation allowance

   $ 3,313      $ 52   

Release of valuation allowance

     (67     (9,926
  

 

 

   

 

 

 

Provision for (benefit from) income taxes

   $ 3,246      $ (9,874
  

 

 

   

 

 

 

Liquidity and Capital Resources

Resources

Since the beginning of 2009, we have funded our operations principally with cash provided by operating activities, which has resulted primarily from growth in revenue and deferred revenue. In June 2010, we completed our initial public offering through which we raised net proceeds of $40.0 million. In December 2010, we completed our follow-on offering through which we raised net proceeds of $9.9 million. In June 2011, we completed the offering of our Notes, with net proceeds from the offering of approximately $115.7 million.

 

33


Table of Contents

Cash and Cash Equivalents, Accounts Receivable and Working Capital

The following tables present a summary of our cash and cash equivalents, accounts receivable, working capital and cash flows for the periods indicated (in thousands).

 

     June 30,
2012
    December 31,
2011
 

Cash and cash equivalents

   $ 84,253      $ 94,072   

Accounts receivable, net

     39,839        47,048   

Working capital

     173,957        180,010   
     Six Months Ended
June 30,
 
     2012     2011  

Cash (used in) provided by:

    

Operating activities

   $ 8,233      $ 11,990   

Investing activities

     (17,103     (19,055

Financing activities

     (904     117,727   

Our cash and cash equivalents at June 30, 2012 were held for working capital and other general corporate purposes and were invested primarily in demand deposit accounts or money market funds. We do not enter into investments for trading or speculative purposes. Restricted cash, which totaled $1.0 million at June 30, 2012 and is not included in cash and cash equivalents, consisted primarily of certificates of deposit that secure letters of credit related to operating leases for office space.

Operating Activities

For the six months ended June 30, 2012, net cash provided by operating activities was $8.2 million, compared to $12.0 million for the same period in 2011. Cash provided by operating activities during the period was primarily a result of net income of $4.1 million, aggregate non-cash expenses of $16.0 million (including stock-based compensation expense of $7.0 million, non-cash interest on convertible debt of $2.5 million, depreciation and amortization of $2.3 million, amortization of software licenses of $1.0 million, and provision for deferred income taxes of $2.8 million) and a $6.9 million decrease in accounts receivable. These amounts were partially offset by an $8.3 million decrease in deferred revenue, a $7.7 increase in other assets (which was predominantly attributable to our up-front payment of a $6.5 million fee in connection with our recently executed third party licensing agreement), and a $2.6 million decrease in accounts payable, accrued expenses and other long-term liabilities.

Investing Activities

Our investing activities have consisted primarily of purchases of marketable securities and property and equipment.

For the six months ended June 30, 2012, net cash used in investing activities was $17.1 million, compared to $19.1 million for the same period in 2011. This decrease was primarily attributable to a $6.0 million decrease in net purchases of marketable securities, offset by $3.2 million used for an acquisition.

Financing Activities

For the six months ended June 30, 2012, net cash used in financing activities was $0.9 million, compared to net cash provided by financing activities of $117.7 million for the same period in 2011. The change is primarily the result of our receipt of $115.7 million of cash upon the issuance of the Notes during the 2011 period and a $2.1 million decrease in proceeds from stock option exercises compared to the 2011 period, as well as a $1.2 million increase in cash paid for taxes on the vesting of restricted stock units compared to the 2011 period.

 

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Table of Contents

Borrowings and Credit Facilities

Convertible Senior Notes

In June 2011, we issued $120.0 million aggregate principal amount of our Notes. The Notes are our senior unsecured obligations, with interest payable semi-annually in cash at a rate of 1.50% per annum, and will mature on July 1, 2018, unless earlier repurchased, redeemed or converted.

The initial conversion rate for the Notes is approximately $41.99 per share. The conversion price will be subject to adjustment in some events, but will not be adjusted for accrued interest. Upon conversion, we will pay cash up to the aggregate principal amount of the Notes to be converted and deliver shares of our common stock in respect of the remainder, if any, of the conversion obligation in excess of the aggregate principal amount of the Notes being converted. See footnote 7 to our Unaudited Condensed Consolidated Financial Statements contained elsewhere in this report for additional details about the Notes.

Bank of America Installment Loan

We were party to an installment loan with Bank of America, in the original principal amount of $6.4 million, to finance the payment of a one-time license and maintenance fee in connection with our license of certain third party software. The interest rate on the loan was fixed at 4.0%. The loan provided for scheduled quarterly principal repayments of $0.4 million with the final principal payment due on April 1, 2012. During the quarter ended March 31, 2012, we made the final payment under the loan and the loan has now been paid in full.

Tekes

In connection with our acquisition of Movial Applications, Inc. in October 2011, we assumed five installment loans with Tekes, the Finnish Funding Agency for Technology and Innovation, totalling $1.0 million. The terms of the loans are governed by the Finnish Act on State Lending and State Guarantees, Government Decree on Research, Development and Innovation Funding. The loans are for funding approved research and development projects, repayment terms are on a per project basis, and the interest rate on each loan is variable, which is currently 3.0%. We expect to repay these loans in full during 2012.

Operating and Capital Expenditure Requirements

We believe that the cash generated from operations, our current cash and investment balances and interest income we earn on these balances will be sufficient to meet our anticipated cash requirements through at least the next 12 months. In the future, we expect our operating and capital expenditures to grow as we increase headcount, expand our business activities, grow our customer base and implement and enhance our information technology and enterprise resource planning system. As sales grow, we expect our accounts receivable balance to increase.

If our available cash resources are insufficient to satisfy our capital requirements, we may seek to sell equity or debt securities or enter into a credit facility. The sale of equity and convertible debt securities may result in dilution to our stockholders and those securities may have rights senior to those of our common shares. If we raise additional funds through the issuance of debt securities, including convertible debt, these securities could contain covenants that would restrict our operations. We may require additional capital beyond our currently anticipated amounts. Additional capital may not be available on reasonable terms, or at all.

 

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Table of Contents

Contractual Obligations

We have contractual obligations for non-cancelable office space, notes payable and other short-term and long-term liabilities. The following table discloses aggregate information about our contractual obligations and periods in which payments are due as of June 30, 2012 (in thousands):

 

     Payments Due by Year  
     Total      Remainder
of 2012
     2013 - 2014      2015 - 2016      After 2016  

Convertible Senior Notes, including interest *

   $ 130,800       $ —         $ 3,600       $ 3,600       $ 123,600   

Operating lease obligations

     10,965         981         3,681         3,168         3,135   

Equipment leases

     141         37         102         2         —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 141,906       $ 1,018       $ 7,383       $ 6,770       $ 126,735   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

* Contractual interest obligations related to our Notes totaled $10.8 million at June 30, 2012, including $3.6 million, $3.6 million and $3.6 million due in years 2013-2014, 2015 - 2016 and after 2016, respectively.

As of June 30, 2012, we had unrecognized tax benefits of $0.7 million, which did not include any interest or penalties. We do not expect to recognize any of these benefits in 2012. Furthermore, we are not able to provide a reliable estimate of the timing of future payments relating to these unrecognized benefits.

Off-Balance Sheet Arrangements

As of June 30, 2012, we did not have any significant off-balance sheet arrangements, as defined in Item 303(a)(4)(ii) of SEC Regulation S-K.

 

Item 3. Quantitative and Qualitative Disclosures About Market Risk

We are exposed to market risk related to changes in interest rates and foreign currency exchange rates. We do not use derivative financial instruments for speculative, hedging or trading purposes, although in the future we may enter into interest rate or exchange rate hedging arrangements to manage the risks described below.

Interest Rate Risk

The interest rate is fixed on all our outstanding loan balances; consequently, we do not have exposure to risks due to increases in the variable rates tied to indexes. We maintain a short-term investment portfolio consisting mainly of highly liquid short-term money market funds, which we consider to be cash equivalents. Our restricted cash consists primarily of certificates of deposit that secure letters of credit related to operating leases for office space. These securities and investments earn interest at variable rates and, as a result, decreases in market interest rates would generally result in decreased interest income. At June 30, 2012, we had long-term debt of $120.0 million associated with our Notes, which are fixed rate instruments. We would not expect a 10% change in interest rates to have a material impact on our results of operations.

Foreign Currency Exchange Risk

Substantially all of our sales contracts are currently denominated in U.S. dollars. Therefore, we have minimal foreign currency exchange risk with respect to our revenue. With international operations, we

 

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Table of Contents

face exposure to adverse movements in foreign currency exchange rates. These exposures may change over time as business practices evolve and if our exposure increases, adverse movement in foreign currency exchange rates could have a material adverse impact on our financial results. Historically, our primary exposures have been related to non-U.S. dollar denominated operating expenses in Canada, Europe and the APAC region. As a result, our results of operations would generally be adversely affected by a decline in the value of the U.S. dollar relative to these foreign currencies. However, we believe this exposure is not material at this time. As we continue to grow our international operations, our exposure to foreign currency risk could become more significant. We do not currently engage in currency hedging activities to limit the risk of exchange rate fluctuations.

 

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our chief executive officer and our chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2012. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of June 30, 2012, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting identified in connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

 

Item 1. Legal Proceedings

From time to time, we are a defendant in litigation arising out of the ordinary course of business. Except as described in our Annual Report on Form 10-K for the year ended December 31, 2011, we are not a party to any material, pending legal proceeding, nor are we aware of any pending legal proceeding to which any of our officers, directors, or any beneficial holders of 5% or more of our common stock are adverse to us or have a material interest adverse to us.

 

Item 1A. Risk Factors

Except as noted below, there have been no material changes in risk factors from those disclosed in Part 1, Item 1A, “Risk Factors” of our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, which was filed with the Securities and Exchange Commission on February 29, 2012.

Regulation of IP-based networks and commerce may increase, compliance with these regulations may be time-consuming, difficult and costly and, if we fail to comply, our sales might decrease.

In general, the telecommunications industry is highly regulated. However, to date Congress and the Federal Communications Commission, or the FCC, have imposed less regulation on IP- based services and networks. We could be adversely affected by regulation of IP-based services or networks in any country where we do business, including the United States. Such regulations could include matters such as using or providing VoIP services or protocols, encryption technology and access charges for service providers. The adoption of such regulations could prohibit entry into a target market or force us to withdraw products in one or more jurisdictions. As a result, overall demand for our products could decrease and, at the same time, the cost of selling our products could increase, either of which, or the combination of both, could have a material adverse effect on our business, operating results and financial condition.

In addition, the convergence of the public switched telephone network, or PSTN, and IP-based networks could become subject to governmental regulation, including the imposition of access fees or other tariffs, that could adversely affect the market for our products and services. User uncertainty regarding future policies and regulations may also affect demand for communications products such as ours. We may be required, or we may otherwise deem it necessary or advisable, to alter our products to address actual or anticipated changes in the regulatory environment. Our inability to timely alter our products or address any regulatory changes may have a material adverse effect on our financial condition, results of operations or cash flows.

Our recent acquisition of the assets of Adaption Technologies Ventures, Ltd., a provider of hosted business VoIP solutions, subjects us to additional regulation. Such providers are subject to certain FCC rules and regulations, including with respect to the provision of enhanced 911 services, or E911 services, disability access requirements, communications assistance for law enforcement requirements, customer proprietary network information requirements, and other requirements. If we become subject to the rules and regulations applicable to such providers in individual states, or such existing state rules and regulations are amended or modified to apply to such services, we may incur significant increased costs, and we may have to restructure our hosted VoIP services business, exit certain markets, or raise the price of these services, any of which could cause these services to be less attractive to our customers. We are unable to predict the impact, if any, that future legislation, judicial decisions or FCC or other regulations concerning hosted VoIP service providers generally may have on our business, financial condition, and results of operations, and if we fail to comply with applicable state or federal rules associated with such services, including the provision of E911 services, we may be exposed to significant liability.

 

37


Table of Contents
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

a) Sales of Unregistered Securities

None.

(b) Use of Proceeds from Public Offering of Common Stock

In June 2010, we completed our initial public offering. We raised a total of $45.5 million in gross proceeds from the initial public offering, or $40.0 million in net proceeds after deducting underwriting discounts and commissions of $3.2 million and other estimated offering costs of $2.3 million.

We intend to use the remaining net proceeds from the offering for working capital and other general corporate purposes, including financing our growth, developing new products and funding capital expenditures. Pending such usage, we have invested the net proceeds primarily in short-term, interest-bearing investment grade securities.

 

Item 3. Defaults Upon Senior Securities.

None.

 

Item 4. Mine Safety Disclosures.

None.

 

Item 5. Other Information.

None.

 

Item 6. Exhibits.

 

Exhibit

Number

  

Description of Document

  3.1    Amended and Restated Certificate of Incorporation. (1)
  3.2    Amended and Restated Bylaws. (2)
  4.1    Indenture, dated as of June 20, 2011, by and between the Company and Wells Fargo Bank, N.A., as Trustee. (3)
  4.2    Form of Note representing the Company’s 1.50% Convertible Senior Notes due 2018. (3)
31.1    Certification by Chief Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2    Certification by Chief Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1    Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2    Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS XBRL#    Instance Document

 

38


Table of Contents
101.SCH XBRL#    Taxonomy Extension Schema
101.CAL XBRL#    Taxonomy Extension Calculation Linkbase
101.DEF XBRL#    Taxonomy Extension Definition Linkbase
101.LAB XBRL#    Taxonomy Extension Label Linkbase
101.PRE XBRL#    Taxonomy Extension Presentation Linkbase

 

(1) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K (File No. 001-34777) filed with the Securities and Exchange Commission on June 25, 2010 and incorporated herein by reference.
(2) Previously filed as an exhibit to the registrant’s Registration Statement on Form S-1 (Registration No. 333-165484) filed with the Securities and Exchange Commission on March 15, 2010 and incorporated herein by reference.
(3) Previously filed as an exhibit to the registrant’s Current Report on Form 8-K (File No. 1-34777) filed with the Securities and Exchange Commission on June 21, 2011 and incorporated by reference herein.
# Pursuant to Rule 406T of Regulation S-T, the Interactive Data Files included in Exhibit 101 hereto are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, are deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise are not subject to liability under those Sections.

 

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Table of Contents

SIGNATURE

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

BROADSOFT, INC.
By:  

/s/ James A. Tholen

  James A. Tholen
  Chief Financial Officer
 

(Principal Financial and Accounting

Officer and duly authorized signatory)

Date: August 6, 2012

 

40

XNAS:BSFT BroadSoft Inc Quarterly Report 10-Q Filling

BroadSoft Inc XNAS:BSFT Stock - Get Quarterly Report SEC Filing of BroadSoft Inc XNAS:BSFT stocks, including company profile, shares outstanding, strategy, business segments, operations, officers, consolidated financial statements, financial notes and ownership information.

XNAS:BSFT BroadSoft Inc Quarterly Report 10-Q Filing - 6/30/2012
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