2014 BroadSoft Analyst Day. June 5, 2014

(1)

2014 BroadSoft Analyst Day

(2)

2014 BroadSoft Analyst Day Agenda

Registration

Welcome and Introduction

John Kiang

Company, Vision, Products

Michael Tessler, Chief Executive Officer

Scott Hoffpauir, Chief Technology Officer

Non-financial Q&A

Michael Tessler/Scott Hoffpauir

Lunch Break

Financials

Jim Tholen, Chief Financial Officer

Financial Q&A

Jim Tholen

Product Demonstrations

Dag Peak, Luca Piccolo

10:00 – 11:00

11:00 – 11:05

11:05 – 12:00

12:00 – 12:30

12:30 – 1:00

1:00 – 1:30

1:30 – 2:00

2:00 – 2:30

(3)

3

Safe Harbor Statement

This presentation contains forward-looking statements within the meaning of the Private

Securities Litigation Reform Act of 1995. These forward-looking statements may be identified

by their use of terms and phrases such as “believe,” “will,” “estimate,” “continue,” “anticipate,”

“intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these

terms or other similar expressions and include statements concerning future financial and

operating performance. The outcome of the events described in these forward-looking

statements is subject to known and unknown risks, uncertainties and other factors that could

cause actual results to differ materially from the results anticipated by these forward-looking

statements, including, but not limited to: the Company's dependence on the success of

BroadWorks and on its service provider customers to sell services using its applications; the

Company's dependence in large part on service providers' continued deployment of, and

investment in, their IP-based networks; claims that the Company infringes the intellectual

property rights of others; the Company's ability to integrate and achieve the expected benefits

from its recent acquisitions, including finocom AG, Hosted IP Communications (Europe)

Limited and Adaption Technologies; and the Company's ability to expand its product offerings,

as well as those factors contained in the "Risk Factors" sections of the Company's Form 10-K

for the year ended December 31, 2013 filed with the SEC on February 28, 2014, and in the

Company's other filings with the SEC. All information in this release is as of June 5, 2014.

Except as required by law, the Company undertakes no obligation to update publicly any

forward-looking statement made herein for any reason to conform the statement to actual

results or changes in the Company's expectations.

(4)

(5)

The BroadSoft Mission

Powering the transformation

to hosted Unified

Communications

Enabling end-users to be

productive anywhere,

anytime on any device

Supporting the entire range

of enterprise segments

Delivering solutions via

software or cloud

(6)

(7)

The BroadSoft Solution

7

BroadSoft ®, Inc. 2014

Hosted PBX Features

SIP Trunking

Instant Messaging and

Presence

Audio, Video and Web

Conferencing

Desktop and File Sharing

Call Centers

Front Office

Auto Attendants

Automatic Call Distribution

Corporate Directory Access

Text Messaging

(8)

• Delivering a broad range of

Unified Communications

services

• Seamlessly integrated

across devices

Meeting the Needs of All Enterprise Segments

Large

Ent

1000+

Mid Market

100-1000

seats

Small Business

<100 seats

Micro Business

(9)

Small Business: 2-100 Seats

9 _{BroadSoft ®, Inc. 2014}

(10)

(11)

Mid-market and Large Enterprise:

100-1000 & 1000+ Seats

11

BroadSoft ®, Inc. Proprietary and Confidential, do not copy, duplicate or distribute. _{BroadSoft ®, Inc. 2014}

(12)

Because Enterprises Are Moving Their

Communications to the Cloud...

Looking for productivity tools

Offers elasticity and agility

Lower investment with shift from capex to opex

Easier to roll out then on-site PBX systems

(13)

...the Legacy PBX Business Is Shrinking...

13

1_{MZA Consultants data}

2_{Total 2013 market size data from Eastern Management Group}

Avaya

Cisco

Unify (Siemens)

Other

2011-2013 PBX Line Shipments

1 Enterprise Hosted UC Supplants the $47B

2 _{PBX Product and Services Market}

61 Million

_{59 Million}

56 Million

2011

2012

2013

(14)

...But We Are Still Early in This Journey

2014

time

• 3% current business lines are

hosted

1 • Assuming 35% penetration at end

of year 5 = $17B

1 _{total addressable}

market (Software & maintenance

only)

(15)

Why Service Providers Will Win Significant Share

Established brands with proven, superior

Quality of Service



Own the network



Mobile access growing factor

Range of diversified offers to meet

market segment requirements



From SOHO to Large Enterprise



Ability to bundle services

Customer base – established business

relationships



Low acquisition costs



Lower customer churn

Support – efficient & cost effective

(16)

Cloud Is Disruptive to Legacy Players

Legacy players still dependent on hardware and system sales

Channels depend on professional services



Installation and MACs (moves, adds and changes)

Limited geographic reach

Costly brand marketing and aggressive competition

Hard to cloud-enable a legacy business



Lack of multi-tenancy



Lack of distribution support



Limited support for mobility

(17)

Service Providers Very Engaged in Chasing the $27B

Market for UC

17

IDC - Worldwide Unified Communications and Collaboration

2012–2017 Forecast

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

2012

2013

2014

2015

2016

2017

CEBP

Collaborative applications

Mobile PBX/UC

Customer service applications

Contact center services

Business VoIP/UC services

IP telephony lines

Demand from

enterprises

Additional revenue

opportunity from new

services

ARPU growth driver

Enables them to upsell

their current

customers

Deals are now group

wide

Senior leadership

focus

(18)

(19)

BroadSoft Unique

Differentiators

(20)

BroadSoft Unified Communications

The only Unified Communications platform built for

Service Providers

(21)

Unified Communications for Business

Hosted PBX Features

SIP Trunking

Instant Messaging and

Presence

Audio, Video and Web

Conferencing

Desktop and File Sharing

Call Centers

Front Office

Auto Attendants

Automatic Call Distribution

Corporate Directory Access

Text Messaging

21

(22)

• Delivering a broad range of

Unified Communications

services

• Seamlessly integrated

across devices

UC-One Experience

Large

Ent

1000+

Mid Market

100-1000

seats

Small Business

<100 seats

Micro Business

(23)

Experience – Customer Example

23

(24)

UC-One Mobility

Mobility and Ubiquitous Access are the Future

Overlay UC-One on mobile

supporting Bring-Your-Own

Device (BYOD) trend

Single subscription supporting

multiple devices

Seamless mobility across

smartphone, tablet, desk phone

and WebRTC enabled web

(25)

Mobile Network Integration

BroadSoft ®, Inc. 2014 25

IMS

IN

3G

HLR

MSC

EPC

3G

Handset

VoLTE

Handset

SCF

Interworks with IN through

BroadWorks SCF

IMS/GSMA Compliant VoLTE

TAS and SCC-AS

Full business services



Traditional Business Calling



Advanced UC

Uses native dialer on phone

UC-One client for advanced

collaboration features



Messaging, Presence,

Service Management

(26)

Start with fixed-mobile

convergance offer

Add Unified

Communications

Same offer used

with VoLTE

Dokumentations-

phase

Präsentation der

Mobile Operators Focused on Business Market

(27)

The only truly open Unified Communications platform

that allows service providers to customize their offers

UC-One Openness

Access Devices

Network Components

Business Systems

Vertical Applications

Documented APIs

Connectors

Interoperability Testing

WebRTC

27 _{BroadSoft ®, Inc. 2014}

(28)

Selected BroadSoft Partners

Carrier Network Systems

Enterprise Equipment

Communications Devices

(29)

Integration Enables Offer Differentiation

Horizontal, business process integration – WebRTC

demonstration

Vertical application integration



Hospitality with SDD’s JazzFusion

(30)

Demand Generation

Sales

Enablement

Customer

Fulfillment

Collaborating with customers to

drive adoption of UC-One offers

UC-One Go-To-Market

Launch

• Launch support

• Co-op marketing

Grow

• Co-op marketing

• Health check

• Consulting

Extend

• Consulting

(31)

Telecom Italia Support

Micro Business

Up to 10 Users

SMB

10-250 Users

Mid Market

250-1000 Users

LE

1000+

Users

Segment

TI Top Account



Targeted at

Telecom Italia’s

largest customers



Hosted service

sold with TI access



Full UC product



Sold direct and via

channels

TI SMB



SMB service



50 seats or below



Sold to ~1M small

and micro businesses

(32)

Flexible Service Delivery Options

Application Software

Hosted by the service provider

Licensed selling model

Broad range of services

Flexible to meet business needs

White Label Services

Hosted by BroadSoft

Monthly Recurring Charges

Fast time-to-market for UC

Automated business process

(33)

Designed to streamline the introduction and operation of

brandable cloud services for service providers

End-to-end business process

solution

Enables repeatable success

 Standardization for scale

 Automation for consistency and

speed

 Customization for flexibility

 Simplification for use and support

BroadCloud Includes an Operationalized Business

Process

33

Operationalized

Business

Process

(34)

Integrated Operating and Billing Modules

Sales & Order

Management



Service Definition



Customer

Discovery



Quoting



Qualify & Order

1

Service Deliver



Provisioning



Customer Setup

2

Support



Tier 1 Support

Customer Service



Tier 2+ Technical

Support

3

Billing



Invoicing



Credit & Accounts

Receivable

(35)

UC-One Vision

Voice

Mobility / BYOD

Business-VoLTE

Unified

Communications

Rich Team Collaboration

Video Conferencing

Persistent Project Rooms

Huddle/Team Rooms

Thin (WebRTC) Clients

Call Recording

B2C-B2B

Strategic Verticals

Integrated

Business Applications

Contact Centers

CRMs

Email, Contacts, Calendars

File Sync and Sharing

Printing / Faxing

Project Management

Federated Web Services

Web Conferencing

Web Hosting, eCommerce

(36)

(37)

Today’s Agenda

A View to 2014 Revenue and Billings



Software



SaaS



Hosted UC & Sell-Through

Business Model – 2014 and Long Term

(38)

2014 Revenue Guidance Build-up

($ millions)

Actual

Guidance

Y-Y

Guidance

Y-Y

Product

2013

2014E Low

% Growth

2014E High

% Growth

Software

94.4 $100

6%

$104

10%

SaaS

12.5

24 92%

25 100%

Maintenance

56.9

64 13%

PS & Other

14.7

18 22%

19 29%

(39)

Over the Long-Run, Billings Growth Approximates

Revenue Growth

Total Revenue & Billings

Revenue & Billings by Product

(40)

Balanced BroadSoft 2013 Billings Dynamics

Customer Diversity

1 Geographic Mix

1

(41)

Software Billings View

CAGR = 24%

CAGR = 33%

CAGR = (13)%

41

(42)

(43)

Software Pricing

(44)

Today’s Agenda

A View to 2014 Revenue and Billings



Software



SaaS



Hosted UC & Sell-Through

(45)

BroadCloud Hosted UC growth

Legacy direct-to-enterprise businesses were companies acquired

primarily for technology and team; their solutions are being

redirected to existing BSFT sell-through carrier model; expect

current direct-to-enterprise revenue streams to be flat to down

CAGR = 130%

(46)

(47)

Why Cloud Matters #1 – Tier 2 Service Provider

(48)

Why Cloud Matters #2 – Tier 1 Incumbent Service

Provider

(49)

Why BroadCloud?

Better for Service Providers



Reduced IT implementation complexity



Faster time-to-market and time-to-revenue (6 months vs 18 months+)



Locked-in attractive margins regardless of size of customer base



No internal resources required for upgrades and patches



Optionality for transition to software model

Better for BroadSoft



Recurring revenue model



Share-of-wallet higher given additional services provided (implementation,

provisioning, customer support, etc).



Potential faster time-to-revenue



Limited incremental opex; leverage much of same sales/marketing, R&D

and G&A as software business

(50)

Today’s Agenda

A View to 2014 Revenue and Billings



Software



SaaS



Hosted UC & Sell-Through

(51)

BroadSoft Hosted (Software + SaaS

1 _{) Billings Growth}

1_{Hosted SaaS billings includes UC & Cloud PBX}

CAGR = 28%

(52)

Estimated BroadSoft-Powered Hosted Subscribers in

Service at Year End

1

(53)

Total Hosted UC Subscriber Bases

1

1_{BroadSoft estimates as of March 2014}

(54)

Today’s Agenda

A View to 2014 Revenue and Billings



Software



SaaS



Hosted UC & Sell-Through

(55)

Gross Margin

1 Detail – Long-term View

US & EMEA Cloud PBX

expansion investment

55

(56)

(57)

Operating Expense

1 _Detail

57

1_{Cost of Sales, Operating Expense and Operating Margin are non-GAAP figures}

2011 Op Margin

= 26%

2012 Op Margin

= 26%

2013 Op Margin

= 21%

57

(58)

BroadSoft Best-in-Class in Operating Margin and

R&D investment

(59)

Long Term Profit Model

59

* 2012 figures exclude stock compensation of $15.0M and amortization expense of $2.7M.

** 2013 figures exclude stock compensation of $41.7M and amortization expense of $3.9M.

Note: Figures may not sum due to rounding

BroadSoft ®, Inc. 2014.

2012

2013

Long Term

Non-GAAP*

Non-GAAP**

Model

Gross Margin

83%

82%

80 - 83%

Operating

Expenses

57%

60%

~52 - 53%

Operating

(60)

Themes

Hosted UC is our growth engine



Sell-through data suggest business and service provider channel

robust prior to any real market inflection point



Our “channel” ownership provides us enormous leverage

Cloud gives us profound opportunity



Good for us and the service provider



Very leverageable for us from an economic model perspective



We already have as many end points as most of the OTT folks do

Plan is to leverage Hosted UC growth while continuing

strategic investments

(61)

Final Thoughts

Unmatched scale and breadth of service provider customers



Over 600 ‘channel’ customers, including 19 of the 25 largest



Customers in 76 countries

The largest installed based of hosted end-customers



Over 9 million hosted UC subscribers

1 

Nearly 100,000 BroadCloud subscribers

Creating a lucrative ecosystem for our customers



Over $3 billion in annual run-rate service provider revenue (enterprise

end-customers) enabled by BSFT

2

1

_{BroadSoft estimates as of March 2014, based on available information}

2

_{BroadSoft estimate based on subscriber counts and assumed average service provider ARPU}

(62)

GAAP / Non-GAAP Reconciliation

Years Ended December 31,

2011 2012 2013

(in thousands)

GAAP license gross profit $ 71,212 $ 81,107 $ 85,167

(percent of related revenue) 92% 90% 90%

Plus:

Stock-based compensation expense 331 553 1,098 Amortization of acquired intangible assets 704 938 856 Non-GAAP license gross profit $ 72,247 $ 82,598 $ 87,121

GAAP subscription gross profit $ $ 514 $ 5,600 $ 10,817

Plus:

Stock-based compensation expense 56 360 1,584 Amortization of acquired intangible assets 590 1,721 3,023 Non-GAAP subscription gross profit $ $ (133) $ 3,518 $ 6,210

(percent of related revenue) (8%) 51% 50%

GAAP maintenance support gross profit $ $ 33,377 $ 42,939 $ 48,544

Plus:

Stock-based compensation expense 277 479 1,079 Amortization of acquired intangible assets 0 0 0 Non-GAAP maintenance support gross profit $ $ 33,100 $ 42,460 $ 47,465

(63)

GAAP / Non-GAAP Reconciliation

63 BroadSoft ®, Inc. 2014 Years Ended December 31, 2011 2012 2013 (in thousands) Non-GAAP income from operations:

GAAP income from operations $ 27,436 $ 25,404 $ (7,337)

(percent of total revenue) 20% 15% (4%)

Plus:

Stock-based compensation expense 7,201 15,022 41,684

Amortization of acquired intangible assets 1,295 2,660 3,879

Non-GAAP income from operations $ 35,932 $ 43,086 $ 38,226

(percent of total revenue) 26% 26% 21%

GAAP operating expense $ 85,654 $ 106,952 $ 144,450

Less:

Non-GAAP operating expense $ 79,369 $ 93,761 $ 107,627

(percent of total revenue) 57% 60%

GAAP sales and marketing expense $ $ 38,376 $ 47,911 $ 62,174

Less:

Non-GAAP sales and marketing expense $ 36,392 $ 42,302 $ 47,838

GAAP research and development expense $ 27,744 $ 36,178 $ 49,696

Less:

Non-GAAP research and development expense $ 25,843 $ 31,680 $ 36,471

GAAP general and administrative expense $ 19,534 $ 22,863 $ 32,580

Less:

Non-GAAP general and administrative expense $ 17,134 $ 19,779 $ 23,318

(64)

GAAP / Non-GAAP Reconciliation

Billings

2008 2009 2010 2011 2012 2013

Beginning of period deferred revenue balance

$

14,687

$

21,179

$

40,047

$

59,264

$

57,136

$

61,149

End of period deferred revenue balance

21,179

40,047

59,264

57,136

61,149

77,662

Increase (decrease) in deferred revenue

6,492

18,868

19,217

(2,128)

4,013

16,513

Revenue

61,830

68,887

95,623

138,064

164,842

178,494

Revenue plus net change in deferred revenue

$

68,322

$

87,755

$

114,840

$

135,936

$

168,855

$

195,007

(in thousands) Year ended December 31,

(65)

GAAP / Non-GAAP Reconciliation (cont’d)

65 BroadSoft ®, Inc. 2014

License Software Billings 2010 2011 2012 2013

(in thousands)

Beginning of period deferred license software revenue balance $ 19,563 $ 25,628 $ 20,608 $ 18,375 End of period deferred license software revenue balance 25,628 20,608 18,375 20,149 Increase (decrease) in deferred license software revenue 6,065 (5,021) (2,233) 1,774 License software revenue 53,302 77,289 89,750 94,408

License software revenue plus net change in deferred license

software revenue $ 59,367 $ 72,268 $ 87,517 $ 96,182

Subscriptions & Maintenance Support Billings 2010 2011 2012 2013 (in thousands)

Beginning of period deferred subscription & maintenance support

revenue balance $ 14,802 $ 23,324 $ 29,288 $ 35,853 End of period deferred subscription & maintenance support

revenue balance 23,324 29,288 35,853 46,975 Increase (decrease) in deferred subscription & maintenance

support revenue 8,523 5,964 6,565 11,122 Subscription & maintenance support revenue 33,743 42,462 58,249 69,357

Subscription & maintenance support revenue plus net change

in deferred subscription & maintenance support revenue $ 42,266 $ 48,426 $ 64,814 $ 80,479

Professional Services and Other Billings 2010 2011 2012 2013

(in thousands)

Beginning of period deferred professional services and other

revenue balance $ 5,682 $ 10,311 $ 7,240 $ 6,921 End of period deferred professional services and other revenue

balance 10,311 7,240 6,921 10,538 Increase (decrease) in deferred professional services and other

revenue 4,629 (3,071) (319) 3,617 Professional services and other revenue 8,578 18,313 16,843 14,728

Professional services and other revenue plus net change in

deferred professional services and other revenue $ 13,207 $ 15,242 $ 16,524 $ 18,345

Year ended December 31,

(66)