BigBand Networks Announces Third Quarter Results and Restructuring Plan

Business Wire, Oct 30, 2007

The following table shows our Non-GAAP anticipated results for the quarter ending December 31, 2007 reconciled to the GAAP anticipated results. Our Non-GAAP anticipated results exclude (i) amortization of intangible assets, (ii) stock-based compensation, and (iii) restructuring-related expenses.

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Non-GAAP Financial Measures

BigBand reports all financial information required in accordance with generally accepted accounting principles (GAAP), but it believes that evaluating its 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 this non-GAAP information because it is useful in understanding our performance as it excludes non-cash and other special charges that many investors feel may obscure our true operating costs. Likewise, management uses these non-GAAP measures to manage and assess the profitability of its business and does not consider amortization of intangible assets, preferred stock warrant expense or stock-based compensation expense, which are non-cash charges, in managing its operations. Specifically, we do not consider stock-based compensation expense when developing and monitoring budgets and spending. The economic substance behind our decision to exclude preferred stock warrant expense, share-based compensation and amortization of intangible assets relates to these charges being non-cash in nature. As a result, BigBand uses calculations of non-GAAP operating income, net income, net income per share and gross margin, which exclude, net of tax, amortization of intangible assets, preferred stock warrant expense, and stock-based compensation, to evaluate its ongoing operations and to allocate resources within the organization.

BigBand also excludes restructuring charges, including (i) employee severance and other termination benefits, (ii) lease termination costs and other expenses associated with exiting a facility, (iii) impairment of inventory relating to the retirement of our CMTS platform and (iv) retirement of CMTS-related fixed assets, from its non-GAAP financial measure, including its calculations of non-GAAP gross margins, operating expense, net income (loss) and net income (loss) per share. Expenses related to severance and inventory impairment will have a significant cash impact on BigBand's results of operations, including its net income (loss) as measured in accordance with GAAP. However, BigBand's management believes such charges incurred to realign its operating expenses with its anticipated future revenues and, consequently, does not consider these costs as a normal component of its expenses related to ongoing operations. As a result, BigBand's management believes it is useful for itself and investors to review both GAAP information that includes such charges and non-GAAP financial measures that exclude these charges to have a better understanding of the overall performance of BigBand's ongoing business operations and its performance in the periods presented.