BigBand Networks Announces Third Quarter 2009 Results

REDWOOD CITY, Calif. - (BUSINESS WIRE) - BigBand Networks, Inc., (NASDAQ: BBND) today reported financial results for the third quarter and nine months ended September 30, 2009.

For the third quarter of 2009, total revenues were $22.2 million, and GAAP net loss was $10.9 million, or ($0.16) per share. This compares to revenues of $48.3 million and GAAP net income of $3.1 million, or $0.05 per diluted share, reported in the third quarter of 2008.

On a non-GAAP basis, the Company reported a net loss of $5.9 million, or ($0.09) per share, in the third quarter of 2009, which compares to non-GAAP net income of $6.5 million, or $0.10 per diluted share, reported in the third quarter of 2008. Third quarter 2009 non-GAAP results exclude $3.8 million of stock-based compensation expense and include a $1.1 million tax benefit for the reduction of taxes provided earlier in the year. The GAAP to non-GAAP reconciling items, for the three and nine month periods ended September 30, 2009 and 2008 can be found in "The Reconciliations of GAAP to Non-GAAP Financial Measures" attached to this press release.

The Company closed the third quarter with $41.8 million in deferred revenue. In addition, cash, cash equivalents and marketable securities were $161.6 million at September 30, 2009.

"We are encouraged by the significant improvement in bookings during the third quarter, compared to the slower order activity experienced in the second quarter of 2009 that resulted in lower revenues in the September period," commented Amir Bassan-Eskenazi, president and CEO of BigBand Networks. "We won major new Switched Digital Video markets, which increased our coverage to more than 28 million homes. In addition, we experienced stronger bookings in other solutions, which increases our confidence for improved operating results in the fourth quarter. Based on interactions with our customers and prospects, we believe operators are preparing to increase capital spending on video equipment in 2010."

For the nine months ended September 30, 2009, total revenues were $105.1 million, and GAAP net loss was $5.5 million, or ($0.08) per share. This compares to total revenues of $131.2 million and GAAP net income of $2.5 million, or $0.04 per diluted share, reported in the nine months ended September 30, 2008. On a non-GAAP basis, the Company reported net income of $6.2 million, or $0.09 per diluted share, in the nine months ended September 30, 2009. This compares to non-GAAP net income of $12.4 million, or $0.18 per diluted share, reported in the nine months ended September 30, 2008.

Fourth Quarter 2009 Business Outlook

For the fourth quarter of 2009, management provides the following outlook:

• Net revenues are expected to be in the range of $32 million to $34 million.
• GAAP gross margins are expected to be in the range of 53% to 55%, which includes $0.6 million in stock-based compensation expense.
• Non-GAAP gross margins are expected to be in the range of 55% to 57%.
• GAAP operating expenses are expected to be in the range of $23.5 million to $24.0 million, which includes $3.3 million of stock-based compensation expense.
• Non-GAAP operating expenses are expected to be in the range of $20.5 million to $21.0 million.
• GAAP provision for income taxes is expected to be a benefit of $0.3 million.
• Non-GAAP provision for income taxes is expected to be a benefit of $0.8 million.
• GAAP net loss per share is expected to range from ($0.07) to ($0.10).
• Non-GAAP net loss per share is expected to be in the range of $0.00 to ($0.03).

The following table shows our non-GAAP business outlook for the quarter ending December 31, 2009 reconciled to our GAAP business outlook. Our non-GAAP business outlook excludes stock-based compensation and income tax benefit.

						Estimated loss per share
						Low		High
				GAAP net loss		($0.07)		($0.10)
				Stock-based compensation		0.06		0.06
				Income tax benefit		0.01		0.01
				Non-GAAP net loss		$0.00		($0.03)

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 and related income taxes which are non-cash charges. Specifically, management does not consider these expenses when developing and monitoring our budgets and spending. The economic substance behind our decision to exclude stock-based compensation and related income taxes relates to these charges being non-cash in nature. As a result, we use calculations of non-GAAP operating income (loss), net income (loss), net income (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 review both GAAP information that includes such charges and non-GAAP information that exclude these charges because management believes such information enables such parties 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.

Conference Call Details for November 3, 2009

BigBand Networks will host a corresponding conference call and live webcast at 2:00 p.m. Pacific Time today. To access the conference call, dial +1-888-846-5003 for the U.S. or Canada and +1-480-629-9856 for international callers. The webcast will be available live on the Investor Relations section of the Company's corporate website at www.bigbandnet.com and via replay beginning approximately two hours after the completion of the call until the Company's announcement of its financial results for the next quarter. An audio replay of the call will also be available to investors beginning at approximately 4:00 p.m. Pacific Time on November 3, 2009 until 11:59 p.m. Pacific Time on November 10, 2009, by dialing +1-800-406-7325 or +1-303-590-3030 for callers outside the U.S. and Canada, and entering passcode 4171235#.

Cautionary Statement

The statements in this release regarding being encouraged by improvement in bookings, increasing our confidence for improved operating results in future periods, operators preparing to increase capital spending on video equipment in 2010 and our GAAP and non-GAAP business outlook, as applicable, with respect to the fourth quarter of 2009 (including revenues, gross margins, operating expenses, taxes and earnings per share) are forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements involve risks and uncertainties that could cause our actual results to differ materially, including, but not limited to: unexpected fluctuations in our business due to the continuing weakness in the global economy, global credit issues, changes in demand for video services, the market acceptance of our products; the financial strength of our current and potential customers; the fluctuations in our gross margins; the concentration of our customer base; competitive developments including pricing pressures; the timing of recognition of a significant portion of our net revenues given the complex systems integration involved; our ability to manage operating expenses effectively; the level of orders that are received and can be shipped in a given quarter; and the general economic, industry or political conditions in the United States or internationally.

For a detailed discussion of these and other risk factors, please refer to BigBand's most recent Form 10-Q for the quarter ended June 30, 2009 and Form 10-K for fiscal year 2008. You can obtain copies of these 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 November 3, 2009 press release, or to reflect the occurrence of unanticipated events.

About BigBand Networks

BigBand Networks, Inc. (NASDAQ: BBND) provides broadband service providers with innovative network 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, video-on-demand and interactive TV. BigBand Networks' customers include more than 200 service providers -- including seven of the ten largest service providers in the U.S. -- and leading cable and telco service providers in North America, Asia and Europe. 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 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)
		As of September 30,				As of December 31,
		2009				2008
		(Unaudited)
ASSETS
Current assets:
Cash and cash equivalents		$	27,527			$	50,981
Marketable securities			134,111				123,654
Total cash, cash equivalents and marketable securities			161,638				174,635
Accounts receivable, net			23,942				26,361
Inventories, net			4,868				6,123
Prepaid expenses and other current assets			3,918				3,716
Total current assets			194,366				210,835
Property and equipment, net			11,810				15,358
Goodwill			1,656				1,656
Other non-current assets			8,947				6,273
Total assets		$	216,779			$	234,122
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable		$	9,048			$	8,350
Accrued compensation and related benefits			6,004				11,433
Current portion of deferred revenues, net			27,938				39,433
Current portion of other liabilities			6,511				9,221
Total current liabilities			49,501				68,437
Deferred revenues, net, less current portion			13,911				21,129
Other liabilities, less current portion			2,097				2,392
Accrued long-term Israeli severance pay			4,067				3,745
Stockholders' equity:
Common stock			66				65
Additional paid-in capital			278,850				265,176
Accumulated other comprehensive income			668				58
Accumulated deficit			(132,381	)			(126,880	)
Total stockholders' equity			147,203				138,419
Total liabilities and stockholders' equity		$	216,779			$	234,122

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,
		2009				2008				2009				2008
Net revenues:
Products		$	12,647			$	38,337			$	68,795			$	104,188
Services			9,555				9,946				36,321				27,012
Total net revenues			22,202				48,283				105,116				131,200
Cost of net revenues:
Products			8,211				16,781				34,193				43,459
Services			2,885				2,941				9,169				9,440
Total cost of net revenues			11,096				19,722				43,362				52,899
Gross profit			11,106				28,561				61,754				78,301
Operating expenses:
Research and development			11,698				13,218				34,308				40,430
Sales and marketing			6,009				7,057				18,313				21,923
General and administrative			4,612				5,411				14,109				15,599
Restructuring charges			-				737				1,356				2,230
Amortization of intangible assets			-				112				-				398
Class action litigation charges			-				-				477				-
Total operating expenses			22,319				26,535				68,563				80,580
Operating (loss) income			(11,213	)			2,026				(6,809	)			(2,279	)
Interest income			544				1,215				2,137				4,086
Other income (expense), net			31				(145	)			(62	)			1,302
(Loss) income before provision for (benefit from) income taxes			(10,638	)			3,096				(4,734	)			3,109
Provision for (benefit from) income taxes			220				(35	)			767				651
Net (loss) income		$	(10,858	)		$	3,131			$	(5,501	)		$	2,458
Basic net (loss) income per common share		$	(0.16	)		$	0.05			$	(0.08	)		$	0.04
Diluted net (loss) income per common share		$	(0.16	)		$	0.05			$	(0.08	)		$	0.04
Shares used in GAAP basic net (loss) income per common share			66,368				64,061				65,666				63,286
Shares used in GAAP diluted net (loss) income per common share			66,368				67,116				65,666				67,208

BigBand Networks, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts, Unaudited)
		Three Months Ended September 30, 2009
		GAAP Results				Stock-based Compensation and Income Taxes				Non-GAAP Results
Net revenues:
Products		$	12,647			$	-			$	12,647
Services			9,555				-				9,555
Total net revenues			22,202				-				22,202
Cost of net revenues:
Products			8,211				(326	)			7,885
Services			2,885				(236	)			2,649
Total cost of net revenues			11,096				(562	)			10,534
Gross profit			11,106				562				11,668
Operating expenses:
Research and development			11,698				(1,346	)			10,352
Sales and marketing			6,009				(687	)			5,322
General and administrative			4,612				(1,210	)			3,402
Total operating expenses			22,319				(3,243	)			19,076
Operating loss			(11,213	)			3,805				(7,408	)
Interest income			544				-				544
Other income			31				-				31
Loss before provision for (benefit from) income taxes			(10,638	)			3,805				(6,833	)
Provision for (benefit from) income taxes			220				(1,114	)			(894	)
Net loss		$	(10,858	)		$	4,919			$	(5,939	)
Basic net loss per common share		$	(0.16	)						$	(0.09	)
Diluted net loss per common share		$	(0.16	)						$	(0.09	)
Shares used in basic net loss per common share			66,368								66,368
Shares used in diluted net loss per common share			66,368								66,368

BigBand Networks, Inc.
Reconciliation of GAAP to Non-GAAP Financial Measures
(In thousands, except per share amounts, Unaudited)
		Nine Months Ended September 30, 2009
		GAAP Results				Stock-based Compensation and Income Taxes				Realignment Expenses				Class action litigation charges				Non-GAAP Results
Net revenues:
Products		$	68,795			$	-			$	-			$	-			$	68,795
Services			36,321				-				-				-				36,321
Total net revenues			105,116				-				-				-				105,116
Cost of net revenues:
Products			34,193				(878	)			73				-				33,388
Services			9,169				(643	)			-				-				8,526
Total cost of net revenues			43,362				(1,521	)			73				-				41,914
Gross profit			61,754				1,521				(73	)			-				63,202
Operating expenses:
Research and development			34,308				(3,566	)			-				-				30,742
Sales and marketing			18,313				(1,751	)			-				-				16,562
General and administrative			14,109				(3,460	)			-				-				10,649
Restructuring charges			1,356				-				(1,356	)			-				-
Class action litigation charges			477				-				-				(477	)			-
Total operating expenses			68,563				(8,777	)			(1,356	)			(477	)			57,953
Operating (loss) income			(6,809	)			10,298				1,283				477				5,249
Interest income			2,137				-				-				-				2,137
Other expense			(62	)			-				-				-				(62	)
(Loss) income before provision for income taxes			(4,734	)			10,298				1,283				477				7,324
Provision for income taxes			767				352				-				-				1,119
Net (loss) income		$	(5,501	)		$	9,946			$	1,283			$	477			$	6,205
Basic net (loss) income per common share		$	(0.08	)														$	0.09
Diluted net (loss) income per common share		$	(0.08	)														$	0.09
Shares used in basic net (loss) income per common share			65,666																65,666
Shares used in diluted net (loss) income per common share			65,666																68,619

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,
		2009				2008				2009				2008
GAAP and Non-GAAP net revenues as reported		$	22,202			$	48,283			$	105,116			$	131,200
GAAP cost of net revenues as reported		$	11,096			$	19,722			$	43,362			$	52,899
Inventory recovery relating to CMTS platform			-				18				73				773
Stock-based compensation expense			(562	)			(390	)			(1,521	)			(1,279	)
Non-GAAP cost of net revenues		$	10,534			$	19,350			$	41,914			$	52,393
GAAP gross profit as reported		$	11,106			$	28,561			$	61,754			$	78,301
Inventory recovery relating to CMTS platform			-				(18	)			(73	)			(773	)
Stock-based compensation expense			562				390				1,521				1,279
Non-GAAP gross profit		$	11,668			$	28,933			$	63,202			$	78,807
As a percentage of net revenues:
GAAP gross profit as reported			50.0	%			59.2	%			58.7	%			59.7	%
Non-GAAP gross profit			52.6	%			59.9	%			60.1	%			60.1	%
GAAP operating (loss) income as reported		$	(11,213	)		$	2,026			$	(6,809	)		$	(2,279	)
Inventory recovery relating to CMTS platform			-				(18	)			(73	)			(773	)
Stock-based compensation expense:
- Cost of net revenues			562				390				1,521				1,279
- Research and development			1,346				984				3,566				2,879
- Sales and marketing			687				659				1,751				1,907
- General and administrative			1,210				1,007				3,460				2,638
Restructuring charges			-				737				1,356				2,230
Amortization of intangible assets			-				112				-				398
Class action litigation charges			-				-				477				-
Non-GAAP operating (loss) income		$	(7,408	)		$	5,897			$	5,249			$	8,279
GAAP net (loss) income as reported		$	(10,858	)		$	3,131			$	(5,501	)		$	2,458
Inventory recovery relating to CMTS platform			-				(18	)			(73	)			(773	)
Stock-based compensation expense			3,805				3,040				10,298				8,703
Restructuring charges			-				737				1,356				2,230
Amortization of intangible assets			-				112				-				398
Class action litigation charges			-				-				477				-
Tax benefits (adjustments)			1,114				(502	)			(352	)			(609	)
Non-GAAP net (loss) income		$	(5,939	)		$	6,500			$	6,205			$	12,407
Basic Non-GAAP net (loss) income per common share		$	(0.09	)		$	0.10			$	0.09			$	0.20
Diluted Non-GAAP net (loss) income per common share		$	(0.09	)		$	0.10			$	0.09			$	0.18
Shares used in Basic Non-GAAP net (loss) income per common share			66,368				64,061				65,666				63,286
Shares used in Diluted Non-GAAP net (loss) income per common share			66,368				67,116				68,619				67,208

for BigBand Networks, Inc.
Investor Relations:
Erica Abrams, +1-415-217-5864
erica@blueshirtgroup.com
Matthew Hunt, +1-415-489-2194
matt@blueshirtgroup.com