BroadSoft, Executive Insights: Tier 1 Projects, Q2 and Full Year Outlook
On Monday, BroadSoft, Inc. (NASDAQ:BSFT) reported its first quarter earnings and discussed the following topics in its earnings conference call. Here’s what executives shared with analysts and investors.
Tier 1 Projects
George Notter – Jefferies & Company: I wanted to ask about some of the lumps in your business. This quarter it sounded like you had a couple of projects that flowed through I think from the maintenance and professional services side, can you remind me how big those were and what kind of impact those had on the deferred revenue number?
James Tholen – CFO: George its Jim. So I mean there’s lots of ins and outs. It was – I guess suffice it to say that none of the projects were of the size of Telstra or Verizon. So it was more – it was several projects not one in particular that was of that kind of magnitude.
George Notter – Jefferies & Company: If I go back and I think about the Telstra or Verizon examples from the past, I assume that looking forward is it fair to say that you don’t see any more projects of that size and scale falling through the deferred revenue line? Are they more a lump sum in front of us from where you can see now?
James Tholen – CFO: None are of that magnitude. I think we will continue to have some large Tier 1 projects going in and out of deferred but as we have talked about in the past we are in a more of a book-to-bill kind of model now. Kind of across the business less go through the balance sheet.
George Notter – Jefferies & Company: I think you also mentioned earlier that visibility is still challenging in terms of trying to figure out when operators go commercial with your product and start generating license sales is that – I assume that that’s not a new experience for you guys that’s something you have seen in times past and this is more the same or what did you mean by that when you made that statement?
James Tholen – CFO: I actually think it’s from a longer term perspective it’s a little more challenging now than it was about a year ago in terms of kind of carrier buying patterns and what size of order even on reorders, and I think it’s just a little bit more of a KG environment out there with telcos making CapEx. I think we are – it’s less impact on our business and perhaps to others because it’s mostly success-based capital, but it’s still murkier than it was. If you look at the different kind of deals that feed our forecasts, you have the current customers deployed in current applications – current customers with new applications and new customers, and I think it’s especially current customers with new applications and decisions from carriers on new wins that are the most difficult to forecast right now.
Q2 and Full Year Outlook
Jeff Kvaal – Barclays Capital: My question is about the outlook both for the second quarter and the full year. You’ve chosen to guide us down a little bit in the second quarter and what typically looks to have been an up-quarter for you? And then secondly, you have chosen not to raise the full year (view) just by a little bit of outperformance here in the first quarter. Has something changed the outlook or how should we be thinking about those deviations?
James Tholen – CFO: Sure. Jeff, it’s Jim. So, I think it (probably) is more – we outperformed in Q1 over trend line than we’re guiding down to Q2, that we had particularly strong Q4; strong Q1 going into the year. So, we’re – there is still some variability in the business and wanted to be a little cautious going into Q2. Then, the same thing really for the year; as we said in the script, and really we said on the call and we announced Q4, it’s still – we feel strong and as good as we ever have on the business, but the visibility on forecasting to the end of the year is still a little murky and we’re just being a little cautious until the year firms out.
Jeff Kvaal – Barclays Capital: Do you – I mean even the flat sequential number for June is unusual. Do you feel like there is some inventory of licenses in the channel somewhere that need to be burnt through?
James Tholen – CFO: Let’s add that – I mean I think, again, we had a kind of bond buster ordering in Q4, again a solid Q1, and so we’re just – I think Q2 looks fine, but it’s in that – one or two deals can move you from up sequential to just down a bit.