For fourth quarter 2013, BroadSoft should meet or beat consensus estimates. We expect a large chunk of deferred revenue to come off the balance sheet and billings to show significant improvement sequentially in virtually all areas license, subscription, and maintenance on easy comparisons with the exception of professional services, which rebounded sharply in the third quarter.

With respect to the outlook, the swing factor in the first quarter will be revenue recognition on the large portion of the $15 million deal, which, admittedly, has the potential to slip into the second quarter ($10 million was earmarked for revenue in the first half of the year, according to management). Forecasting the company’s outlook given the lumpiness of revenue recognition has become increasingly difficult. However, we remain comfortable with the full-year consensus growth projections of 15% given overarching market trends, company-specific catalysts, and a relatively favorable carrier capital expenditure environment this year.

We expect the company to benefit from: 1) healthy growth and sell-through rates in hosted UC and SIP trunking at major customers, including Verizon (VZ $46.81; Market Perform), Comcast (CMCSA $54.64), XO, and several European carriers; 2) full revenue recognition of the $15 million deal (we believe Telstra for Australia Department of Defense); 3) $8 million of incremental subscription revenue from HIPCOM/finocom acquisitions; and 4) VoLTE (from SaskTel and Sprint [S $8.02; Underperform]), which may show up in revenue in late 2014.

BT Amalfi Project – another large hosted UC deal in the bag. Our industry discussions reveal that BroadSoft recently won a sizable contract at BT (BT $64.66), code named Amalfi Project, displacing Genband as an incumbent application server vendor (Genband will continue to supply IP session border controller and TDM infrastructure). We heard that a mix of newly gained relationships following the acquisition of HIPCOM (previewed in our August 19 note) and organic efforts—featuring strong carrier-grade features— contributed to the win. The size and other details of the deal remain vague at this juncture, but heavily discounted pricing, which BroadSoft intends to recoup on future maintenance streams collected over the life of the contract, we heard, was a swing factor.