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Tangoe, Inc. Announces Third Quarter 2012 Financial Results

  Tangoe, Inc. Announces Third Quarter 2012 Financial Results

  *Total revenue of $40.1 million, up 47% year-over-year
  *GAAP operating income of $0.9 million; non-GAAP operating income of $5.7
    million, up 84% year-over-year
  *GAAP net income of $0.6 million; non-GAAP net income of $5.4 million
  *Adjusted EBITDA of $6.0 million, up 82% year-over-year

Business Wire

ORANGE, Conn. -- November 06, 2012

Tangoe, Inc. (NASDAQ: TNGO), a leading global provider of communications
lifecycle management (CLM) software and related services, today announced
financial results for its third quarter ended September 30, 2012.

“We are very pleased with the company’s strong execution during the third
quarter, which resulted in revenue and profitability that exceeded our
expectations,” stated Albert Subbloie, president and CEO of Tangoe. “The
compelling value proposition associated with Tangoe’s suite of integrated
solutions continued to fuel the strong growth of our recurring revenue during
the quarter. We again had a very strong quarter for new customer additions, in
addition to enjoying significant success expanding many of our existing
relationships with large, global customers.”

Subbloie added, “We are very excited about our long-term product roadmap,
which we believe will further expand Tangoe’s leadership position and market
share gains. Demand for CLM solutions remains strong, and we continue to be
optimistic about the company’s future. This is supported by our increased
financial guidance for 2012, as well as our initial guidance of continued
strong revenue growth and adjusted EBITDA margin expansion for the full year
2013.”

Third Quarter 2012 Financial Highlights

  *Revenue:  Total revenue for the third quarter was $40.1 million, an
    increase of 47% on a year-over-year basis. Recurring technology and
    services revenue was $36.1 million, an increase of 48% on a year-over-year
    basis. Strategic consulting, software licenses and other services revenue
    contributed the remaining $4.0 million of total revenue for the third
    quarter of 2012.
  *Operating Income: GAAP operating income for the third quarter was $0.9
    million,  compared to a GAAP operating loss of $0.4 million for the third
    quarter of 2011. Non-GAAP operating income for the third quarter was $5.7
    million,  representing an increase of 84% compared to $3.1 million for the
    third quarter of 2011.
  *Net Income (Loss):  GAAP net income for the third quarter was $0.6
    million, compared to a $1.9 million net loss for the same period last
    year. GAAP diluted income per share for the third quarter was $0.01, based
    on 41.0 million weighted-average diluted shares outstanding, compared to a
    loss per share of $0.10, after deducting dividends and accretion related
    to our preferred stock and based on 22.8 million weighted-average shares
    outstanding, for the same period last year.

    Non-GAAP net income for the third quarter was $5.4 million, up 100%
    compared to $2.7 million for the third quarter of 2011. Non-GAAP diluted
    net income per share for the third quarter was $0.13 based on 41.0 million
    weighted-average diluted shares outstanding compared to $0.08 per share
    based on 35.1 million weighted-average diluted shares outstanding for the
    same period last year.
  *Adjusted EBITDA:  Adjusted EBITDA  for the third quarter was $6.0 million,
    an increase of 82% compared to $3.3 million for the third quarter of 2011.
    Adjusted EBITDA margin was 15.0% for the third quarter of 2012, an
    increase compared to a 12.2% margin for the same period last year.
  *Cash and Cash Flow: As of September 30, 2012, Tangoe had cash and cash
    equivalents of $55.7 million, a decrease of $22.7 million from the end of
    the prior quarter due primarily to the acquisition of Symphony Teleca’s
    TEM business.

    The company generated $6.0 million in net cash from operations for the
    third quarter of 2012, compared to $1.7 million during the third quarter
    of 2011. The company generated $5.4 million in unlevered free cash flow
    for the quarter, an increase of 157% compared to $2.1 million during the
    third quarter of 2011.

A reconciliation of GAAP to non-GAAP financial measures has been provided in
the financial statement tables included in this press release. An explanation
of these measures is also included below under the heading “Non-GAAP Financial
Measures.”

Financial Outlook

As of November 6, 2012, Tangoe is providing guidance for its fourth quarter
and raising its full year 2012 guidance. In addition, the company is
establishing its initial guidance for the full year 2013:

  *Fourth Quarter 2012 Guidance: Total revenue is expected to be in the range
    of $42.1 million to $42.6 million. Adjusted EBITDA is expected to be in
    the range of $7.2 million to $7.6 million. Non-GAAP net income per share
    is expected to be in the range of $0.15 to $0.16 based on approximately
    41.0 million weighted-average diluted shares outstanding.
  *Full Year 2012 Guidance: Total revenue is expected to be in the range of
    $152.6 million to $153.1 million. Adjusted EBITDA is expected to be in the
    range of $22.0 million to $22.4 million. Non-GAAP net income per share is
    expected to be in the range of $0.48 to $0.49 based on approximately 39.9
    million weighted-average diluted shares outstanding.
  *Full Year 2013 Guidance: Total revenue is expected to be in the range of
    $188.0 million to $191.0 million. Adjusted EBITDA is expected to be in the
    range of $31.0 million to $32.0 million.

Quarterly Conference Call

Tangoe will host a conference call today at 5:00 p.m. EST to review the
company's financial results for the third quarter of 2012 and business
outlook. To access this call, dial 888.857.6931 (United States), or
719.325.2383 (international), with conference ID #3882483. A live webcast of
the conference call will be accessible from the investor relations page of
Tangoe's website at http://investor.tangoe.com/, and a recording will be
archived and accessible at http://investor.tangoe.com/events.cfm. A recording
of this conference call will also be available through November 20, 2012, by
dialing 877.870.5176 (United States), or 858.384.5517 (international). The
recording access code is #3882483.

About Tangoe

Tangoe is a leading global provider of Communications Lifecycle Management
(CLM) software and services to a wide range of global enterprises. CLM
encompasses the entire lifecycle of an enterprise’s communications assets and
services, including planning and sourcing, procurement and provisioning,
inventory and usage management, mobile device management, invoice processing,
expense allocation and accounting, and asset decommissioning and disposal.
Tangoe’s Communications Management Platform (CMP) is an on-demand suite of
software designed to manage and optimize the complex processes and expenses
associated with this lifecycle for both fixed and mobile communications assets
and services. Tangoe’s customers can also manage their communications assets
and services by engaging Tangoe’s client service group.

Additional information about Tangoe can be found at www.tangoe.com. Tangoe is
a registered trademark of Tangoe, Inc.

Non-GAAP Financial Measures

Adjusted EBITDA discussed in this press release is defined as net income
(loss) plus interest expense, income tax provision, depreciation and
amortization, amortization of marketing agreement intangible assets,
stock-based compensation expense and, for 2011 only, restructuring charge and
decrease (increase) in fair value of warrants for redeemable convertible
preferred stock; less amortization of leasehold interest and interest income.
Non-GAAP operating income excludes stock-based compensation expense,
amortization of intangible assets, amortization of debt discount, and, for
2011 only, restructuring charge and amortization of deferred financing costs.
Non-GAAP net income excludes stock-based compensation expense, amortization of
intangible assets, amortization of debt discount, and, for 2011 only,
restructuring charge, term loan repayment fee, term loan debt discount,
amortization of deferred financing costs and decrease (increase) in fair value
of warrants for redeemable convertible preferred stock. Unlevered free cash
flow is defined as net cash provided by operating activities plus net interest
payments and, for 2011 only, IPO related expense payments, less capital
expenditures. Management presents these non-GAAP financial measures because it
considers them to be important supplemental measures of performance.
Management uses the non-GAAP financial measures for planning purposes,
including analysis of the company's performance against prior periods, the
preparation of operating budgets and determination of appropriate levels of
operating and capital investments. Management also believes that the non-GAAP
financial measures provide additional insight for analysts and investors in
evaluating the company's financial and operational performance. However, these
non-GAAP financial measures have limitations as an analytical tool and are not
intended to be an alternative to financial measures prepared in accordance
with GAAP. We intend to provide these non-GAAP financial measures as part of
our future earnings discussions and, therefore, the inclusion of these
non-GAAP financial measures will provide consistency in our financial
reporting. A reconciliation of these non-GAAP measures to GAAP is provided in
the accompanying tables.

Forward-Looking Statements

This press release contains forward-looking statements that involve
substantial risks and uncertainties. All statements, other than statements of
historical facts, included in this press release regarding our strategy,
future operations, future financial position, future revenue, projected costs,
prospects, plans and objectives of management are forward-looking statements.
The words "anticipate," "believe," "estimate," "expect," "intend," "may,"
"plan," "would," “target” and similar expressions are intended to identify
forward-looking statements, although not all forward-looking statements
contain these identifying words. These forward-looking statements include,
among other things, statements about our estimates regarding future revenue
and financial performance. We may not actually achieve the expectations
disclosed in our forward-looking statements, and you should not place undue
reliance on our forward-looking statements. Actual results or events could
differ materially from the expectations disclosed in the forward-looking
statements we make. More information about potential factors that could affect
our business and financial results is contained in our Quarterly Report on
Form 10-Q as filed with the Securities and Exchange Commission on August 14,
2012. Additional information will also be set forth in our future quarterly
reports on Form 10-Q, annual reports on Form 10-K and other filings that we
make with the Securities and Exchange Commission. We do not intend, and
undertake no duty, to release publicly any updates or revisions to any
forward-looking statements contained herein.


TANGOE, INC.
Consolidated Statements of Operations (unaudited)
(in thousands, except per share amounts)
                                                              
                            Three Months Ended        Nine Months Ended
                            September 30,             September 30,
                             2011       2012       2011       2012    
                                                                   
Revenue:
Recurring technology and    $ 24,456     $ 36,138     $ 67,893     $ 98,969
services
Strategic consulting,
software licenses and        2,856      4,000      7,807      11,573  
other
Total revenue                27,312     40,138     75,700     110,542 
                                                                   
Cost of revenue:
Recurring technology and      11,926       16,696       32,391       45,809
services
Strategic consulting,
software licenses and        1,142      1,588      3,659      4,835   
other
Total cost of revenue        13,068     18,284     36,050     50,644  
                                                                   
Gross profit                  14,244       21,854       39,650       59,898
                                                                   
Operating expenses:
Sales and marketing           4,113        6,275        11,774       17,732
General and                   4,683        8,083        12,855       21,830
administrative
Research and development      3,023        4,263        8,718        12,126
Depreciation and              1,249        2,297        3,380        6,168
amortization
Restructuring charge         1,549      -          1,549      -       
(Loss) income from            (373   )     936          1,374        2,042
operations
                                                                   
Other income (expense),
net:
Interest expense              (1,427 )     (256   )     (2,863 )     (683    )
Interest income               14           22           21           60
Decrease (increase) in
fair value of warrants
for redeemable               19         -          (1,996 )    -       
convertible preferred
stock
(Loss) income before          (1,767 )     702          (3,464 )     1,419
income tax provision
Income tax provision         88         121        394        308     
Net (loss) income             (1,855 )     581          (3,858 )     1,111
Preferred dividends           (310   )     -            (2,168 )     -
Accretion of redeemable
convertible preferred        (5     )    -          (37    )    -       
stock
(Loss) income applicable    $ (2,170 )   $ 581       $ (6,063 )   $ 1,111   
to common stockholders
                                                                   
(Loss) income per common
share:
Basic                       $ (0.10  )   $ 0.02      $ (0.56  )   $ 0.03    
Diluted                     $ (0.10  )   $ 0.01      $ (0.56  )   $ 0.03    
                                                                   
Weighted average number
of common share:
Basic                        22,769     37,410     10,831     36,079  
Diluted                      22,769     40,963     10,831     39,616  
                                                                             


TANGOE, INC.
Consolidated Balance Sheets
(in thousands)
                                                              
                                                  December 31,   September 30,
                                                    2011         2012     
ASSETS                                                           (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents                         $  43,407      $  55,736
Accounts receivable                                  25,311         33,223
Prepaid expenses and other current assets           2,503        3,282    
Total current assets                                 71,221         92,241
COMPUTERS, FURNITURE AND EQUIPMENT-NET               3,334          4,009
                                                                 
OTHER ASSETS:
Intangible assets-net                                28,800         46,334
Goodwill                                             36,266         65,880
Security deposits and other non-current assets      1,241        1,407    
TOTAL ASSETS                                      $  140,862    $  209,871  
                                                                 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                                  $  6,605       $  8,269
Accrued expenses                                     7,061          9,416
Deferred revenue-current portion                     9,051          9,795
Notes payable-current portion                        7,904          28,557
Other current liabilities                           1,079        326      
Total current liabilities                            31,700         56,363
                                                                 
OTHER LIABILITIES:
Deferred rent and other non-current liabilities      1,659          3,620
Deferred revenue-less current portion                2,624          1,546
Notes payable-less current portion                  8,290        227      
Total liabilities                                   44,273       61,756   
                                                                 
                                                                 
COMMITMENT AND CONTINGENCIES
                                                                 
STOCKHOLDERS' EQUITY
Common Stock                                         3              4
Additional paid-in capital                           142,905        192,917
Warrants for common stock                            10,610         10,610
Less: notes receivable for purchase of common        (93     )      -
stock
Accumulated deficit                                  (56,795 )      (55,684  )
Other comprehensive (loss) income                   (41     )     268      
Total stockholders' equity                          96,589       148,115  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY        $  140,862    $  209,871  
                                                                             


TANGOE, Inc.
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
                                                    Nine Months Ended
                                                     September 30,
                                                      2011       2012    
Operating activities:
Net (loss) income                                    $ (3,858  )   $ 1,111
Adjustments to reconcile net (loss) income to net
cash provided by operating activities:
Amortization of debt discount                          1,181         570
Amortization of leasehold interest                     -             (74     )
Depreciation and amortization                          3,380         6,168
Restructuring charge                                   1,549         -
(Decrease) increase in deferred rent liability         (101    )     34
Amortization of marketing agreement intangible         65            119
assets
Allowance for doubtful accounts                        23            -
Deferred income taxes                                  221           75
Stock based compensation                               2,664         6,539
Foreign exchange loss                                  -             40
Increase in fair value of warrants for redeemable      1,996         -
convertible preferred stock
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable                                    (5,831  )     (826    )
Prepaid expenses and other assets                      86            783
Other assets                                           (327    )     (136    )
Accounts payable                                       3,189         459
Accrued expenses                                       (364    )     113
Deferred revenue                                      1,438       (1,440  )
Net cash provided by operating activities             5,311       13,535  
Investing activities:
Purchases of computers, furniture and equipment        (482    )     (1,333  )
Cash paid in connection with acquisitions             (8,166  )    (38,410 )
Net cash used in investing activities                 (8,648  )    (39,743 )
Financing activities:
Repayment of debt                                      (37,715 )     (2,986  )
Borrowings of debt                                     20,000        -
Proceeds from public offerings, net of issuance        66,998        37,729
costs
Proceeds from warrant exercises                        182           88
Deferred financing costs                               (170    )     -
Proceeds from notes receivable                         -             93
Proceeds from exercise of options                     650         3,653   
Net cash provided by financing activities             49,945      38,577  
                                                                   
Effect of exchange rate on cash                        -             (40     )
                                                                   
Net increase in cash and cash equivalents              46,608        12,329
Cash and cash equivalents, beginning of period        5,913       43,407  
Cash and cash equivalents, end of period             $ 52,521     $ 55,736  
                                                                             


TANGOE, INC.
Calculation of Non-GAAP Operating Income (Unaudited)
(in thousands)
                                                                          
                Three Months Ended                        Nine Months Ended
                September 30,                             September 30,
                2011                 2012                2011               2012
                           % of               % of               % of                % of
               Amount      Revenue   Amount    Revenue   Amount    Revenue   Amount     Revenue
(Loss) income
from            $ (373  )   -1.4  %   $ 936     2.3   %   $ 1,374   1.8   %   $ 2,042    1.8   %
operations
                                                                                         
Add:
Stock based
compensation      897       3.3   %     2,755   6.9   %     2,664   3.5   %     6,539    5.9   %
expense
Restructuring     1,549     5.7   %     -       0.0   %     1,549   2.0   %     -        0.0   %
costs
Amortization
of                757       2.8   %     1,821   4.5   %     2,159   2.9   %     4,710    4.3   %
intangibles
Amortization
of debt           165       0.6   %     212     0.5   %     540     0.7   %     570      0.5   %
discount
Amortization
of deferred      153      0.6   %    -       0.0   %    227     0.3   %    -        0.0   %
financing
costs
Non-GAAP
income from     $ 3,148    11.5  %   $ 5,724   14.3  %   $ 8,513   11.2  %   $ 13,861   12.5  %
operations
                                                                                               


TANGOE, INC.
Reconciliation of Net (loss) income to Adjusted EBITDA (Unaudited)
(in thousands)
                                                                                  
                Three Months Ended                          Nine Months Ended
                September 30,                               September 30,
                2011                 2012                2011                 2012               
                            % of                 % of                 % of                  % of
               Amount       Revenue   Amount      Revenue  Amount       Revenue   Amount       Revenue
Net (loss)      $ (1,855 )   -6.8  %   $ 581       1.4   %   $ (3,858 )   -5.1  %   $ 1,111      1.0   %
income
Interest          1,427      5.2   %     256       0.6   %     2,863      3.8   %     683        0.6   %
expense
Interest          (14    )   -0.1  %     (22   )   -0.1  %     (21    )   0.0   %     (60    )   -0.1  %
income
Income tax        88         0.3   %     121       0.3   %     394        0.5   %     308        0.3   %
provision
Depreciation
and               1,249      4.6   %     2,297     5.7   %     3,380      4.5   %     6,168      5.6   %
amortization
Amortization
of marketing
agreement         16         0.1   %     46        0.1   %     65         0.1   %     119        0.1   %
intangible
assets
Amortization
of leasehold      -          0.0   %     (25   )   -0.1  %     -          0.0   %     (74    )   -0.1  %
interest
Stock based
compensation      897        3.3   %     2,755     6.9   %     2,664      3.5   %     6,539      5.9   %
expense
Restructuring     1,549      5.7   %     -         0.0   %     1,549      2.0   %     -          0.0   %
charge
(Decrease)
Increase in
fair value of
warrants for     (19    )   -0.1  %    -        0.0   %   1,996     2.6   %    -         0.0   %
redeemable
convertible
preferred
stock
Adjusted        $ 3,338     12.2  %   $ 6,009    15.0  %  $ 9,032     11.9  %   $ 14,794    13.4  %
EBITDA
                                                                                                       


TANGOE, INC.
Calculation of Non-GAAP Net Income and Non-GAAP Net Income per Share
(Unaudited)
(in thousands, except per share data)
                                                               
                                 Three Months Ended      Nine Months Ended
                                 September 30,           September 30,
                                 2011      2012      2011      2012
Net (loss) income                $ (1,855 )   $ 581      $ (3,858 )   $ 1,111
                                                                      
Add:
Stock based compensation           897          2,755      2,664        6,539
expense
Restructuring charge               1,549        -          1,549        -
Amortization of intangibles        757          1,821      2,159        4,710
Amortization of debt discount      165          212        540          570
Amortization of deferred           153          -          227          -
financing costs
(Decrease) Increase in fair
value of warrants for              (19    )     -          1,996        -
redeemable convertible
preferred stock
Orix loan repayment                400          -          400          -
Term loan debt discount           641        -         641        -
Non-GAAP net income              $ 2,688     $ 5,369    $ 6,318     $ 12,930
                                                                      
                                                                      
Non-GAAP net income per share:   $ 0.08      $ 0.13     $ 0.20      $ 0.33
diluted
                                                                      
Fully diluted weighted average    35,124     40,963    31,640     39,616
shares outstanding
                                                                        


TANGOE, INC.
Stock Based Compensation Expense (Unaudited)
(in thousands)
                                                     
                             Three Months Ended   Nine Months Ended
                             September 30,        September 30,
                             2011    2012     2011    2012
Cost of revenue              $  178     $ 362     $ 499     $ 947
Sales and marketing             207       586       589       1,455
General and administrative      466       1,643     1,447     3,727
Research and development       46       164      129      410
Total                        $  897     $ 2,755   $ 2,664   $ 6,539
                                                            


TANGOE, INC.
Calculation of Unlevered Free Cash Flow (Unaudited)
(in thousands)
                                                               
                                       Three Months Ended   Nine Months Ended
                                       September 30,        September 30,
                                        2011    2012     2011    2012
Net cash provided by operating         $  1,733   $ 5,993   $ 5,311   $ 13,535
activities
                                                                      
Add:
Interest payments, net                    627       22        1,600     94
IPO Expense payments                      -         -         466       -
                                                                      
Subtract:
Capital Expenditures                     306      583      1,148    1,333
Unlevered Free Cash Flow               $  2,054   $ 5,432   $ 6,229   $ 12,296

Contact:

Investor Contact:
ICR
Seth Potter, 512-344-0277
ir@tangoe.com
or
Media Contact:
PAN Communications, Inc.
Kristin Conforti, 617-502-4300
tangoe@pancomm.com
 
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