BigBand Networks, Inc. (NASDAQ:BBND), a leader in digital video networking, today reported financial results for the third quarter ended September 30, 2011.

For the third quarter, total revenues were $22.5 million as compared to $26.8 million reported in the third quarter of 2010. GAAP net loss for the third quarter of 2011 was $8.3 million, or ($0.12) per share, compared to GAAP net loss of $7.3 million, or ($0.11) per share, reported in the third quarter of 2010.

On a non-GAAP basis, the Company reported a net loss of $5.9 million, or ($0.08) per share, in the third quarter of 2011, which compares to a non-GAAP net loss of $4.0 million, or ($0.06) per share, reported in the third quarter of 2010. These non-GAAP results exclude $2.4 million of stock compensation expense and related income taxes as compared to $3.2 million of stock compensation expense, restructuring credits and related income taxes in the third quarter of 2010.

The GAAP to non-GAAP reconciling items, for the quarters ended September 30, 2011 and 2010 can be found in “The Reconciliations of GAAP to Non-GAAP Financial Measures” attached to this press release.

The third quarter of 2011 GAAP and non-GAAP results include $1.6 million in charges related to inventory reserve taken against legacy products, as the Company transitions to its newer MSP products. In addition, these GAAP and Non-GAAP results include approximately $0.5 million in general and administrative expenses related to the acquisition of the Company by ARRIS.

The Company closed the third quarter of 2011 with $119.8 million in cash, cash equivalents and marketable securities.

On October 11, 2011, BigBand announced that it has entered into a definitive agreement to be acquired by ARRIS for a purchase price of $2.24 per share in cash. The acquisition will be conducted by means of a tender offer for all of the outstanding shares of BigBand. The tender offer was filed with the SEC on October 21, 2011.

Non-GAAP Financial Measures

BigBand reports all financial information required in accordance with U.S. generally accepted accounting principles (GAAP), but we believe that evaluating our ongoing operating results may be difficult to understand if limited to reviewing only GAAP financial measures. Many of our investors have requested that we disclose non-GAAP information because it is useful in understanding our performance as it excludes non-cash and other one-time charges or benefits that many investors feel may obscure our true operating results. Likewise, management uses non-GAAP measures to manage and assess the profitability of our business going forward and does not consider stock-based compensation expense or restructuring charges and related taxes in managing our operations. Specifically, management does not consider these expenses/benefits when developing and monitoring our budgets and spending. The economic substance behind our decision to exclude stock-based compensation is that this charge is non-cash in nature. We exclude restructuring charges as they are one-time events. As a result, we use calculations of non-GAAP operating loss, net loss, net loss per share and gross margin, which exclude these expenses when evaluating our ongoing operations and allocating resources within the organization.

As a result, our management believes it is useful, for itself and investors, to have access to both GAAP information that includes such charges and non-GAAP financial measures that exclude these charges because management believes such information enables readers of these financial results to have a better understanding of the overall performance of our ongoing business operations in the periods presented.

Whenever we use a non-GAAP financial measure, we provide a reconciliation of the non-GAAP financial measure to the most closely applicable GAAP financial measure. Investors are encouraged to review the related GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most directly comparable GAAP financial measures.

For a detailed discussion of these and other risk factors, please refer to BigBand’s Quarterly Report on Form 10-Q for the three months ended June 30, 2011 and other reports filed with the SEC. You can obtain copies of the reports on the SEC's Web site ( www.sec.gov).

Stockholders of BigBand Networks are cautioned not to place undue reliance on our forward-looking statements, which speak only as of the date such statements are made. BigBand Networks does not undertake any obligation to publicly update any forward-looking statements to reflect events, circumstances or new information after this October 24, 2011 press release, or to reflect the occurrence of unanticipated events.

About BigBand Networks

BigBand Networks, Inc. (NASDAQ:BBND) provides broadband service providers with innovative digital video networking solutions designed to make it easier to move, manage and monetize video. These solutions are based on BigBand's video-networking platforms that are built to enable efficient and reliable delivery across a wide range of services, including digital TV, high definition TV, advanced advertising, IPTV, video-on-demand and interactive TV. BigBand Networks has done business with more than 200 customers in North America, Asia and Europe - including eight of the ten largest cable and telco service providers in North America. BigBand Networks is based in Redwood City, Calif., with offices worldwide. For additional information about the company, please call +1.650.995.5000, email info@bigbandnet.com or visit http://www.bigbandnet.com.

BigBand Networks' brand and product names are service marks, trademarks or registered trademarks of BigBand Networks, Inc. in the United States and other countries. All other marks are the property of their respective owners.
BigBand Networks, Inc.
Condensed Consolidated Balance Sheets
(In thousands, Unaudited)
   
As of September 30, As of December 31,
  2011     2010  
ASSETS
Current assets:
Cash and cash equivalents $ 16,797 $ 21,537
Marketable securities   103,015     122,012  
Total cash, cash equivalents and marketable securities 119,812 143,549
Accounts receivable, net 10,211 5,001
Inventories, net 8,247 11,117
Prepaid expenses and other current assets   3,686     4,190  
Total current assets 141,956 163,857
 
Property and equipment, net 6,454 8,088
Goodwill 1,656 1,656
Other non-current assets   5,963     7,170  
Total assets $ 156,029   $ 180,771  
 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable $ 5,634 $ 4,656
Accrued compensation and related benefits 6,110 5,178
Current portion of deferred revenues, net 15,941 18,143
Current portion of other liabilities   3,822     4,266  
Total current liabilities 31,507 32,243
 
Deferred revenues, net, less current portion 6,787 8,327
Other liabilities, less current portion 1,402 1,692
Accrued long-term Israeli severance pay 4,163 4,376
 
Stockholders’ equity:
Common stock 72 70
Additional paid-in-capital 307,044 299,003
Accumulated other comprehensive (loss) income (506 ) 253
Accumulated deficit   (194,440 )   (165,193 )
Total stockholders’ equity   112,170     134,133  
Total liabilities and stockholders’ equity $ 156,029   $ 180,771  
BigBand Networks, Inc.
Condensed Consolidated Statements of Operations
(In thousands, except per share amounts, Unaudited)
       
Three Months Ended September 30, Nine Months Ended September 30,
  2011     2010     2011     2010  
 
Net revenues:
Products $ 13,921 $ 16,261 $ 33,708 $ 57,747
Services   8,575     10,490     26,931     27,632  
Total net revenues   22,496     26,751     60,639     85,379  
 
Cost of net revenues:
Products 8,931 10,208 20,878 33,534
Services   2,796     2,872     8,631     9,181  
Total cost of net revenues   11,727     13,080     29,509     42,715  
Gross profit   10,769     13,671     31,130     42,664  
 
Operating expenses:
Research and development 10,020 12,432 32,080 39,034
Sales and marketing 4,689 4,483 14,774 16,531
General and administrative 4,335 4,024 11,516 12,560
Restructuring (credits) charges   -     (139 )   2,007     900  
Total operating expenses   19,044     20,800     60,377     69,025  
 
Operating loss (8,275 ) (7,129 ) (29,247 ) (26,361 )
Interest income 191 225 615 1,077
Other income (expense), net   25     (134 )   17     (317 )
Loss before provision for income taxes (8,059 ) (7,038 ) (28,615 ) (25,601 )
Provision for income taxes   192     216     632     63  
Net loss $ (8,251 ) $ (7,254 ) $ (29,247 ) $ (25,664 )
 
Basic and diluted net loss per common share $ (0.12 ) $ (0.11 ) $ (0.42 ) $ (0.38 )
 
Shares used in basic and diluted net loss per common share   71,203     68,853     70,448     68,067  
BigBand Networks, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts, Unaudited)
     
Three Months Ended September 30, 2011
GAAP Results

Stock-based Compensation and Income Taxes

Non-GAAP Results
 
 
Net revenues:
Products $ 13,921 $ - $ 13,921
Services   8,575     -     8,575  
Total net revenues   22,496     -     22,496  
 
Cost of net revenues:
Products 8,931 (176 ) 8,755
Services   2,796     (187 )   2,609  
Total cost of net revenues   11,727     (363 )   11,364  
Gross profit   10,769     363     11,132  
 
Operating expenses:
Research and development 10,020 (875 ) 9,145
Sales and marketing 4,689 (388 ) 4,301
General and administrative   4,335     (641 )   3,694  
Total operating expenses   19,044     (1,904 )   17,140  
 
Operating loss (8,275 ) 2,267 (6,008 )
Interest income 191 - 191
Other income   25     -     25  
Loss before provision for income taxes (8,059 ) 2,267 (5,792 )
Provision for income taxes   192     (85 )   107  
Net loss $ (8,251 ) $ 2,352   $ (5,899 )
 
Basic and diluted net loss per common share $ (0.12 ) $ (0.08 )
 
Shares used in basic and diluted net loss per common share   71,203     71,203  
BigBand Networks, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts, Unaudited)
       
Nine Months Ended September 30, 2011
GAAP Results

Stock-based Compensation and Income Taxes

Restructuring charges

Non-GAAP Results
 
 
Net revenues:
Products $ 33,708 $ - $ - $ 33,708
Services   26,931     -     -     26,931  
Total net revenues   60,639     -     -     60,639  
 
Cost of net revenues:
Products 20,878 (638 ) - 20,240
Services   8,631     (626 )   -     8,005  
Total cost of net revenues   29,509     (1,264 )   -     28,245  
Gross profit   31,130     1,264     -     32,394  
 
Operating expenses:
Research and development 32,080 (3,080 ) - 29,000
Sales and marketing 14,774 (1,102 ) - 13,672
General and administrative 11,516 (2,048 ) - 9,468
Restructuring charges   2,007     -     (2,007 )   -  
Total operating expenses   60,377     (6,230 )   (2,007 )   52,140  
 
Operating loss (29,247 ) 7,494 2,007 (19,746 )
Interest income 615 - - 615
Other income   17     -     -     17  
Loss before provision for income taxes (28,615 ) 7,494 2,007 (19,114 )
Provision for (benefit from) income taxes   632     (229 )   -     403  
Net loss $ (29,247 ) $ 7,723   $ 2,007   $ (19,517 )
 
Basic and diluted net loss per common share $ (0.42 ) $ (0.28 )
 
Shares used in basic and diluted net loss per common share   70,448     70,448  
BigBand Networks, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts and percentages, Unaudited)
       
Three Months Ended September 30, Nine Months Ended September 30,
  2011     2010     2011     2010  
 
GAAP and Non-GAAP net revenues as reported $ 22,496   $ 26,751   $ 60,639   $ 85,379  
 
GAAP cost of net revenues as reported $ 11,727 $ 13,080 $ 29,509 $ 42,715
Stock-based compensation expense   (363 )   (546 )   (1,264 )   (1,722 )
Non-GAAP cost of net revenues $ 11,364   $ 12,534   $ 28,245   $ 40,993  
 
GAAP gross profit as reported $ 10,769 $ 13,671 $ 31,130 $ 42,664
Stock-based compensation expense   363     546     1,264     1,722  
Non-GAAP gross profit $ 11,132   $ 14,217   $ 32,394   $ 44,386  
 
As a percentage of net revenues:
GAAP gross profit as reported   47.9 %   51.1 %   51.3 %   50.0 %
Non-GAAP gross profit   49.5 %   53.1 %   53.4 %   52.0 %
 
GAAP operating loss as reported $ (8,275 ) $ (7,129 ) $ (29,247 ) $ (26,361 )
Stock-based compensation expense:
- Cost of net revenues 363 546 1,264 1,722
- Research and development 875 1,257 3,080 3,944
- Sales and marketing 388 424 1,102 1,735
- General and administrative 641 1,063 2,048 3,272
Restructuring (credits) charges   -     (139 )   2,007     900  
Non-GAAP operating loss $ (6,008 ) $ (3,978 ) $ (19,746 ) $ (14,788 )
 
GAAP net loss as reported $ (8,251 ) $ (7,254 ) $ (29,247 ) $ (25,664 )
Stock-based compensation expense 2,267 3,290 7,494 10,673
Restructuring (credits) charges - (139 ) 2,007 900
Tax benefits (provision)   85     84     229     (41 )
Non-GAAP net loss $ (5,899 ) $ (4,019 ) $ (19,517 ) $ (14,132 )
 
Basic and diluted Non-GAAP net loss per common share $ (0.08 ) $ (0.06 ) $ (0.28 ) $ (0.21 )
 
Shares used in basic and diluted Non-GAAP net loss per common share   71,203     68,853     70,448     68,067  

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