##### Table of Contents



UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 
 FORM 10-Q
  þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For The Quarterly Period Ended March 31, 2011
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the Transition Period from  to
 Commission File Number 333-142946
 Broadview Networks Holdings, Inc.
  Delaware
    
    11-3310798(State or other jurisdiction of incorporation or organization)
    
    (I.R.S. Employer Identification No.)800 Westchester Avenue,Suite N501 Rye Brook, NY 10573
    
    10573(Address of principal executive offices)
    
    (Zip code)
 (914) 922-7000
 o o
 o o
  Large accelerated filer o
    
    Accelerated filer o
    
    Non-accelerated filer þ
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
  Class
    
    Outstanding at May 9, 2011Class A Common Stock, $.01 par value per share
    
    9,333,680Class B Common Stock, $.01 par value per share
    
    360,050




---



##### 



TABLE OF CONTENTS
 PART I  FINANCIAL INFORMATIONItem 1. Financial Statements
    
    
    5Condensed Consolidated Balance Sheets as of March 31, 2011(unaudited) and December 31, 2010
    
    
    5Unaudited Condensed Consolidated Statements of Operations for the three months ended March
31, 2011 and 2010
    
    
    6Unaudited Condensed Consolidated Statements of Cash Flows for the three months ended March
31, 2011 and 2010
    
    
    7Notes to Unaudited Condensed Consolidated Financial Statements
    
    
    8Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    11Item 3. Quantitative and Qualitative Disclosures About Market Risk
    
    
    19Item 4. Controls and Procedures
    
    
    20PART II  OTHER INFORMATIONItem 1. Legal Proceedings
    
    
    21Item 1A. Risk Factors
    
    
    21Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    21Item 3. Defaults Upon Senior Securities
    
    
    21Item 4. (Removed and Reserved)
    
    
    21Item 5. Other Information
    
    
    21Item 6. Exhibits
    
    
    22Signatures
    
    
    23Exhibit 31.1Exhibit 31.2Exhibit 32.1Exhibit 32.2
   2




---



##### Table of Contents



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
  
    
    servicing and refinancing our substantial indebtedness;
    
    our history of net losses;
    
    the elimination or relaxation of certain regulatory rights and protections;
    
    billing and other disputes with vendors;
    
    failure to maintain interconnection and service agreements with incumbent local
exchange and other carriers;
    
    the loss of customers in an adverse economic environment;
    
    regulatory uncertainties in the communications industry;
    
    system disruptions or the failure of our information systems to perform as expected;
    
    the failure to anticipate and keep up with technological changes;
    
    inability to provide services and systems at competitive prices;
    
    difficulties associated with collecting payment from incumbent local exchange carriers,
interexchange carriers and wholesale customers;
    
    the highly competitive nature of the communications market in which we operate
including competition from incumbents, cable operators and other new market entrants, and
declining prices for communications services;
    
    continued industry consolidation;
    
    restrictions in connection with our indenture governing the notes and credit agreement
governing the revolving credit facility;
    
    government regulation;
  3




---



##### Table of Contents




    
    increased regulation of Internet-protocol-based service providers;
    
    vendor bills related to past periods;
    
    the ability to maintain certain real estate leases and agreements;
    
    interruptions in the business operations of third party service providers;
    
    limits on our ability to seek indemnification for losses from individuals and entities
from whom we have acquired assets and operations;
    
    the financial difficulties faced by others in our industry;
    
    the failure to retain and attract management and key personnel;
    
    the failure to manage and expand operations effectively;
    
    the failure to successfully integrate future acquisitions, if any;
    
    misappropriation of our intellectual property and proprietary rights;
    
    the possibility of incurring liability for information disseminated through our
network;
    
    service network disruptions due to software or hardware bugs of the network equipment;
and
    
    fraudulent usage of our network and services.
   4




---



##### Table of Contents



PART I  FINANCIAL INFORMATION
 
 Item 1.
    
    Financial Statements
 Broadview Networks Holdings, Inc.
 
 Condensed Consolidated Balance Sheets
 (dollars in thousands)
 March 31,
    
    
    December 31,2011
    
    
    2010(Unaudited)ASSETSCurrent assets:Cash and cash equivalents
    
    $
    10,546
    
    
    $
    25,204Certificates of deposit
    
    
    2,387
    
    
    
    2,894Investment securities
    
    
    13,556
    
    
    
    13,554Accounts receivable, less allowance for doubtful accounts of $12,622 and $10,664
    
    
    36,971
    
    
    
    35,945Other current assets
    
    
    11,630
    
    
    
    10,718Total current assets
    
    
    75,090
    
    
    
    88,315Property and equipment, net
    
    
    85,589
    
    
    
    85,144Goodwill
    
    
    98,238
    
    
    
    98,238Intangible assets, net of accumulated amortization of $41,154 and $39,747
    
    
    13,646
    
    
    
    15,053Other assets
    
    
    7,616
    
    
    
    8,075Total assets
    
    $
    280,179
    
    
    $
    294,825LIABILITIES AND STOCKHOLDERS DEFICIENCYCurrent liabilities:Revolving credit facility
    
    $
    17,122
    
    
    $
    Accounts payable
    
    
    12,900
    
    
    
    12,431Accrued expenses and other current liabilities
    
    
    17,652
    
    
    
    29,232Taxes payable
    
    
    6,497
    
    
    
    9,361Deferred revenues
    
    
    8,588
    
    
    
    8,555Current portion of capital lease obligations
    
    
    2,367
    
    
    
    2,298Total current liabilities
    
    
    65,126
    
    
    
    61,877Long-term debt
    
    
    301,711
    
    
    
    319,108Deferred rent payable
    
    
    3,578
    
    
    
    3,086Deferred revenues
    
    
    1,063
    
    
    
    1,133Capital lease obligations, net of current portion
    
    
    3,870
    
    
    
    2,682Deferred income taxes payable
    
    
    4,252
    
    
    
    4,009Other
    
    
    456
    
    
    
    769Total liabilities
    
    
    380,056
    
    
    
    392,664Stockholders deficiency:Common stock A  $.01 par value; authorized 80,000,000 shares, issued 9,342,509 shares
and outstanding 9,333,680 shares
    
    
    107
    
    
    
    107Common stock B  $.01 par value; authorized 10,000,000 shares, issued and outstanding
360,050 shares
    
    
    4
    
    
    
    4Series A Preferred stock  $.01 par value; authorized 89,526 shares, designated, issued
and outstanding
87,254 shares entitled in liquidation to $181,922 and $176,623
    
    
    1
    
    
    
    1Series A-1 Preferred stock  $.01 par value; authorized 105,000 shares, designated,
issued and
outstanding 100,702 shares, entitled in liquidation to $209,961 and $203,845
    
    
    1
    
    
    
    1Series B Preferred stock  $.01 par value; authorized 93,180 shares, designated, issued
and outstanding
91,187 shares entitled in liquidation to $190,122 and $184,585
    
    
    1
    
    
    
    1Series B-1 Preferred stock  $.01 par value; authorized 86,000 shares, designated and
issued 64,986
shares, and outstanding 64,633 shares entitled in liquidation to $134,759 and $130,834
    
    
    1
    
    
    
    1Series C Preferred stock  $.01 par value; authorized 52,332 shares, designated, issued
and outstanding
14,402 shares entitled in liquidation to $22,591 and $21,717
    
    
    
    
    
    
    Additional paid-in capital
    
    
    140,811
    
    
    
    140,811Accumulated deficit
    
    
    (240,626
    )
    
    
    (238,588
    )Treasury stock, at cost
    
    
    (177
    )
    
    
    (177
    )Total stockholders deficiency
    
    
    (99,877
    )
    
    
    (97,839
    )Total liabilities and stockholders deficiency
    
    $
    280,179
    
    
    $
    294,825
 See notes to unaudited condensed consolidated financial statements.
  5




---



##### Table of Contents



Broadview Networks Holdings, Inc.
 
 Unaudited Condensed Consolidated Statements of Operations
 (dollars in thousands)
 Three Months Ended March 31,2011
    
    
    2010Revenues
    
    $
    98,419
    
    
    $
    105,706Operating expenses:Cost of revenues (exclusive of depreciation and amortization)
    
    
    45,837
    
    
    
    50,060Selling, general and administrative
    
    
    34,770
    
    
    
    37,769Depreciation and amortization
    
    
    9,781
    
    
    
    11,408Total operating expenses
    
    
    90,388
    
    
    
    99,237Income from operations
    
    
    8,031
    
    
    
    6,469Interest expense
    
    
    (9,717
    )
    
    
    (9,922
    )Interest income
    
    
    20
    
    
    
    4Loss before provision for income taxes
    
    
    (1,666
    )
    
    
    (3,449
    )Provision for income taxes
    
    
    (372
    )
    
    
    (288
    )Net loss
    
    $
    (2,038
    )
    
    $
    (3,737
    )
 See notes to unaudited condensed consolidated financial statements.
  6




---



##### Table of Contents



Broadview Networks Holdings, Inc.
 
 Unaudited Condensed Consolidated Statements of Cash Flows
 (dollars in thousands)
 Three Months Ended March 31,2011
    
    
    2010Cash flows from operating activities
    
    $
    (2,038
    )
    
    $
    (3,737
    )Net lossAdjustments to reconcile net loss to net cash used in operating activities:Depreciation
    
    
    8,371
    
    
    
    7,888Amortization of deferred financing costs
    
    
    674
    
    
    
    656Amortization of intangible assets
    
    
    1,407
    
    
    
    3,505Amortization of bond premium
    
    
    (275
    )
    
    
    (245
    )Provision for doubtful accounts
    
    
    566
    
    
    
    1,411Share-based compensation
    
    
    
    
    
    
    59Deferred income taxes
    
    
    243
    
    
    
    242Other
    
    
    (316
    )
    
    
    14Changes in operating assets and liabilities:Accounts receivable
    
    
    (1,592
    )
    
    
    1,293Other current assets
    
    
    (912
    )
    
    
    979Other assets
    
    
    (215
    )
    
    
    (53
    )Accounts payable
    
    
    469
    
    
    
    (493
    )Accrued expenses and other current liabilities
    
    
    (14,444
    )
    
    
    (14,857
    )Deferred revenues
    
    
    (37
    )
    
    
    (156
    )Deferred rent payable
    
    
    492
    
    
    
    95Net cash used in operating activities
    
    
    (7,607
    )
    
    
    (3,399
    )Cash flows from investing activitiesPurchases of property and equipment
    
    
    (8,816
    )
    
    
    (7,709
    )Purchases of investment securities
    
    
    (13,556
    )
    
    
    (38,554
    )Sales of investment securities
    
    
    13,557
    
    
    
    38,556Other
    
    
    507
    
    
    
    (3
    )Net cash used in investing activities
    
    
    (8,308
    )
    
    
    (7,710
    )Cash flows from financing activitiesRepayments of revolving credit facility
    
    
    
    
    
    
    (100
    )Proceeds from capital lease financing
    
    
    2,006
    
    
    
    22Payments on capital lease obligations
    
    
    (749
    )
    
    
    (932
    )Net cash provided by (used in) financing activities
    
    
    1,257
    
    
    
    (1,010
    )Net decrease in cash and cash equivalents
    
    
    (14,658
    )
    
    
    (12,119
    )Cash and cash equivalents at beginning of period
    
    
    25,204
    
    
    
    21,975Cash and cash equivalents at end of period
    
    $
    10,546
    
    
    $
    9,856
 See notes to unaudited condensed consolidated financial statements.
  7




---



##### Table of Contents



Broadview Networks Holdings, Inc.
 
 Notes to Unaudited Condensed Consolidated Financial Statements
 (dollars in thousands)
 1. Organization and Description of Business
 Basis of Presentation
    2. Investment Securities
  3. Recent Accounting Pronouncements
   8




---



##### Table of Contents



Broadview Networks Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in thousands)
 3. Recent Accounting Pronouncements (continued)
  4. Fair Value of Financial Instruments
   5. Commitments and Contingencies
    9




---



##### Table of Contents



Broadview Networks Holdings, Inc.
Notes to Unaudited Condensed Consolidated Financial Statements
(dollars in thousands)
 6. Long-term Debt Guarantees
  7. Income Taxes
   10




---



##### Table of Contents



Item 2.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations
 The following discussion and analysis of our financial condition and results of operations
should be read in conjunction with the Unaudited Condensed Consolidated Financial Statements and
Notes to the Unaudited Condensed Consolidated Financial Statements included elsewhere in this
quarterly report and our Form 10-K for the year ended December 31, 2010 filed with the Securities
and Exchange Commission (the SEC). Certain information contained in the discussion and analysis
set forth below and elsewhere in this quarterly report, including information with respect to our
plans and strategies for our business and related financing, includes forward-looking statements
that involve risk and uncertainties. In evaluating such statements, existing and prospective
investors should specifically consider the various factors identified in this quarterly report that
could cause results to differ materially from those expressed in such forward-looking statements,
including matters set forth in our Form 10-K for the year ended December 31, 2010 filed with the
SEC.
 Overview
      11




---



##### Table of Contents



Results of Operations
  Three Months Ended March 31,2011
    
    
    2010Revenues:Voice and data services
    
    
    85.8
    %
    
    
    87.6
    %Wholesale
    
    
    5.7
    %
    
    
    5.0
    %Access
    
    
    6.2
    %
    
    
    5.2
    %Total network services
    
    
    97.7
    %
    
    
    97.8
    %Other
    
    
    2.3
    %
    
    
    2.2
    %Total revenues
    
    
    100.0
    %
    
    
    100.0
    %Operating expenses:Network services
    
    
    45.6
    %
    
    
    46.6
    %Other cost of revenues
    
    
    1.0
    %
    
    
    0.8
    %Selling, general and administrative
    
    
    35.3
    %
    
    
    35.7
    %Depreciation and amortization
    
    
    9.9
    %
    
    
    10.8
    %Total operating expenses
    
    
    91.8
    %
    
    
    93.9
    %Income from operations
    
    
    8.2
    %
    
    
    6.1
    %Interest expense, net of interest income
    
    
    (9.9
    %)
    
    
    (9.4
    %)Loss before provision for income taxes
    
    
    (1.7
    %)
    
    
    (3.3
    %)Provision for income taxes
    
    
    (0.4
    %)
    
    
    (0.3
    %)Net loss
    
    
    (2.1
    %)
    
    
    (3.6
    %)
  12




---



##### Table of Contents



Key Components of Results of Operations
 Revenues
   Cost of Revenues (exclusive of depreciation and amortization)
  
    
    leasing local loops and digital T-1 lines which connect our customers to our network;
    
    leasing high capacity digital lines that connect our switching equipment to our
collocations;
    
    leasing high capacity digital lines that interconnect our network with the incumbent
local exchange carriers;
    
    leasing space, power and terminal connections in the incumbent local exchange carrier
central offices for collocating our equipment;
    
    signaling system network connectivity; and
    
    Internet transit and peering, which is the cost of delivering Internet traffic from our
customers to the public Internet.
    13




---



##### Table of Contents



Gross Profit (exclusive of depreciation and amortization)
   Three Months Ended March 31,2011
    
    
    2010Income from operations
    
    $
    8,031
    
    
    $
    6,469Depreciation and amortization
    
    
    9,781
    
    
    
    11,408Selling, general and administrative
    
    
    34,770
    
    
    
    37,769Gross profit
    
    $
    52,582
    
    
    $
    55,646
 Selling, General and Administrative
   Depreciation and Amortization
  Adjusted EBITDA Presentation
   14




---



##### Table of Contents



Three Months Ended March 31,2011
    
    
    2010Net loss
    
    $
    (2,038
    )
    
    $
    (3,737
    )Add back non-EBITDA items included in net loss:Depreciation and amortization
    
    
    9,781
    
    
    
    11,408Interest expense, net of interest income
    
    
    9,697
    
    
    
    9,918Provision for income taxes
    
    
    372
    
    
    
    288EBITDA
    
    
    17,812
    
    
    
    17,877Severance and related separation costs
    
    
    152
    
    
    
    39Professional fees related to strategic initiatives
    
    
    42
    
    
    
    32Share-based compensation
    
    
    
    
    
    
    59Adjusted EBITDA
    
    $
    18,006
    
    
    $
    18,007
  Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
   Three Months Ended March 31,2011
    
    
    2010% of Total
    
    
    
    
    
    
    % of TotalAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    % ChangeRevenues:Network services
    
    $
    96,166
    
    
    
    97.7
    %
    
    $
    103,389
    
    
    
    97.8
    %
    
    
    (7.0
    %)Other
    
    
    2,253
    
    
    
    2.3
    %
    
    
    2,317
    
    
    
    2.2
    %
    
    
    (2.8
    %)Total revenues
    
    
    98,419
    
    
    
    100.0
    %
    
    
    105,706
    
    
    
    100.0
    %
    
    
    (6.9
    %)Cost of revenues:Network services
    
    
    44,899
    
    
    
    45.6
    %
    
    
    49,255
    
    
    
    46.6
    %
    
    
    (8.8
    %)Other
    
    
    938
    
    
    
    1.0
    %
    
    
    805
    
    
    
    0.8
    %
    
    
    16.5
    %Total cost of revenues
    
    
    45,837
    
    
    
    46.6
    %
    
    
    50,060
    
    
    
    47.4
    %
    
    
    (8.4
    %)Gross profit:Network services
    
    
    51,267
    
    
    
    52.1
    %
    
    
    54,134
    
    
    
    51.2
    %
    
    
    (5.3
    %)Other
    
    
    1,315
    
    
    
    1.3
    %
    
    
    1,512
    
    
    
    1.4
    %
    
    
    (13.0
    %)Total gross profit
    
    $
    52,582
    
    
    
    53.4
    %
    
    $
    55,646
    
    
    
    52.6
    %
    
    
    (5.5
    %)
  15




---



##### Table of Contents



Revenues
  Three Months Ended March 31,2011
    
    
    2010% of Total
    
    
    
    
    
    
    % of TotalAmount
    
    
    Revenues
    
    
    Amount
    
    
    Revenues
    
    
    % ChangeRevenues:Voice and data services
    
    $
    84,399
    
    
    
    85.8
    %
    
    $
    92,625
    
    
    
    87.6
    %
    
    
    (8.9
    %)Wholesale
    
    
    5,656
    
    
    
    5.7
    %
    
    
    5,236
    
    
    
    5.0
    %
    
    
    8.0
    %Access
    
    
    6,111
    
    
    
    6.2
    %
    
    
    5,528
    
    
    
    5.2
    %
    
    
    10.5
    %Total network services
    
    
    96,166
    
    
    
    97.7
    %
    
    
    103,389
    
    
    
    97.8
    %
    
    
    (7.0
    %)Other
    
    
    2,253
    
    
    
    2.3
    %
    
    
    2,317
    
    
    
    2.2
    %
    
    
    (2.8
    %)Total revenues
    
    $
    98,419
    
    
    
    100.0
    %
    
    $
    105,706
    
    
    
    100.0
    %
    
    
    (6.9
    %)
  Cost of Revenues (exclusive of depreciation and amortization)
  Gross Profit (exclusive of depreciation and amortization)
   16




---



##### Table of Contents



Selling, General and Administrative
  Depreciation and Amortization
  Interest
  Three Months Ended March 31,2011
    
    
    2010Interest expense
    
    $
    9,717
    
    
    $
    9,922Weighted average debt outstanding
    
    $
    322,731
    
    
    $
    327,852Effective interest rate
    
    
    12.04
    %
    
    
    12.11
    %
 Off-Balance Sheet Arrangements
   Liquidity and Capital Resources
   17




---



##### Table of Contents



Disputes
  Three Months Ended March 31, 2011 Compared to Three Months Ended March 31, 2010
 Cash Flows from Operating Activities
  Cash Flows from Investing Activities
  Cash Flows from Financing Activities
   18




---



##### Table of Contents



Application of Critical Accounting Policies and Estimates
  Other Matters
  
 Item 3.
    
    Quantitative and Qualitative Disclosures About Market Risk
        19




---



##### Table of Contents



Item 4.
    
    Controls and Procedures
 Evaluation of Disclosure Controls and Procedures
   Changes in Internal Control Over Financial Reporting
   20




---



##### Table of Contents



PART II  OTHER INFORMATION
 
 Item 1.
    
    Legal Proceedings
    
 Item 1A.
    
    Risk Factors
  
 Item 2.
    
    Unregistered Sales of Equity Securities and Use of Proceeds
  
 Item 3.
    
    Defaults Upon Senior Securities
  
 Item 4.
    
    (Removed and Reserved)
 
 Item 5.
    
    Other Information
   21




---



##### Table of Contents



Item 6.
    
    Exhibits
  Exhibit No.
    
    Description31.1
    
    
    Certification of the Companys Chief Executive Officer pursuant to Exchange Act Rules
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of the Companys Chief Financial Officer pursuant to Exchange Act Rules
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of the Companys Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of the Companys Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  22




---



##### Table of Contents



SIGNATURES
  BROADVIEW NETWORKS HOLDINGS, INC.By:
    /s/ Michael K. RobinsonName:
    Michael K. RobinsonTitle:
    Chief Executive Officer, President and
DirectorBy:
    /s/ Corey RinkerName:
    Corey RinkerTitle:
    Chief Financial Officer, Treasurer and
Assistant Secretary  23




---



##### Table of Contents



EXHIBIT INDEX
 ExhibitNo.
    
    Description31.1
    
    
    Certification of the Companys Chief Executive Officer pursuant to Exchange Act Rules
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.31.2
    
    
    Certification of the Companys Chief Financial Officer pursuant to Exchange Act Rules
13a-14(a)/15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.32.1
    
    
    Certification of the Companys Chief Executive Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.32.2
    
    
    Certification of the Companys Chief Financial Officer pursuant to 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
  24