Tangoe, Inc. Announces Fourth Quarter and Full Year 2013 Financial Results

  Tangoe, Inc. Announces Fourth Quarter and Full Year 2013 Financial Results

Full Year Highlights:

  *Total revenue of $188.9 million, up 22% year-over-year
  *GAAP operating income of $5.1 million; non-GAAP operating income of $27.3
    million
  *GAAP EPS of $0.12; non-GAAP EPS of $0.65, up 30% year-over-year
  *Adjusted EBITDA of $29.7 million, representing an adjusted EBITDA margin
    of 15.7% and year-over-year growth of 33%

Business Wire

ORANGE, Conn. -- February 12, 2014

Tangoe, Inc. (NASDAQ: TNGO), a leading global provider of Connection Lifecycle
Management (CLM) software and related services, today announced financial
results for its fourth quarter and full year ended December 31, 2013.

“The company’s fourth quarter performance was highlighted by continued strong
growth in customer additions and upsells of our integrated offerings into our
expanded customer base,” stated Al Subbloie, president and CEO of Tangoe.
“During 2013, Tangoe further validated the strength of its strategy as we
expanded our scale, customer base, geographic presence and technology
leadership. Looking forward, we believe we are well positioned to sustain our
momentum and gain market share, which is reflected by our strong 2014 revenue
and profitability guidance.”

Fourth Quarter 2013 Financial Highlights

  *Revenue: Total revenue for the fourth quarter was $50.0 million, an
    increase of 14% on a year-over-year basis. Recurring technology and
    services revenue was $44.4 million, an increase of 14% on a year-over-year
    basis. Strategic consulting, software licenses and other services revenue
    contributed the remaining $5.6 million of total revenue for the fourth
    quarter of 2013.
  *Operating Income: GAAP operating income for the fourth quarter was $2.0
    million,  compared to GAAP operating income of $2.3 million for the fourth
    quarter of 2012. Non-GAAP operating income for the fourth quarter was $7.6
    million,  compared to $7.0 million for the fourth quarter of 2012.
  *Net Income: GAAP net income for the fourth quarter was $1.7 million,
    compared to $1.9 million of GAAP net income for the same period last year.
    GAAP diluted net income per share for the fourth quarter was $0.04, based
    on 41.3 million weighted-average diluted shares outstanding, compared to
    income per share of $0.05, based on 40.7 million weighted-average diluted
    shares outstanding, for the same period last year.

    Non-GAAP net income for the fourth quarter was $7.3 million, compared to
    $6.8 million for the fourth quarter of 2012. Non-GAAP diluted net income
    per share for the fourth quarter was $0.18 based on 41.3 million
    weighted-average diluted shares outstanding compared to $0.17 per share
    based on 40.7 million weighted-average diluted shares outstanding for the
    same period last year.
  *Adjusted EBITDA: Adjusted EBITDA for the fourth quarter was $8.4 million
    compared to $7.5 million for the fourth quarter of 2012. Adjusted EBITDA
    margin was 16.8% for the fourth quarter of 2013.
  *Cash and Cash Flow: As of December 31, 2013, Tangoe had cash and cash
    equivalents of $43.2 million, an increase of $0.9 million from the end of
    the prior quarter due primarily to the generation of unlevered free cash
    flow and proceeds from the exercise of stock options during the quarter,
    which was partially offset by the repurchase of common stock and payment
    of deferred purchase price obligations for acquisitions.

    The company generated $4.8 million in net cash from operations for the
    fourth quarter of 2013, compared to $3.2 million during the fourth quarter
    of 2012. The company generated $4.0 million in unlevered free cash flow
    for the quarter, compared to $2.7 million during the fourth quarter of
    2012.

Full Year 2013 Financial Highlights

  *Revenue: Total revenue for the full year 2013 was $188.9 million, an
    increase of 22% on a year-over-year basis. Recurring technology and
    services revenue was $168.5 million, an increase of 22% on a
    year-over-year basis. Strategic consulting, software licenses and other
    services contributed the remaining $20.4 million of total revenue for
    2013.
  *Operating Income: GAAP operating income for the full year 2013 was $5.1
    million,  compared to GAAP operating income of $4.4 million for 2012.
    Non-GAAP operating income was $27.3 million,  representing an increase of
    35% compared to $20.3 million for 2012.
  *Net Income: GAAP net income for the full year 2013 was $5.0 million,
    compared to a $3.0 million for 2012. GAAP diluted net income per share was
    $0.12 based on 40.5 million weighted-average diluted shares outstanding
    for the full year 2013, compared to $0.08 based on 39.9 million
    weighted-average diluted shares outstanding for 2012.

    Non-GAAP net income for the full year 2013 was $26.3 million, up 33%
    compared to $19.8 million for 2012. Non-GAAP diluted net income per share
    for 2013 was $0.65 based on 40.5 million weighted-average diluted shares
    outstanding, an increase of 30% compared to $0.50 per share based on 39.9
    million weighted-average diluted shares outstanding for 2012.
  *Adjusted EBITDA: Adjusted EBITDA  for the full year 2013 was $29.7
    million, an increase of 33% compared to $22.3 million for 2012. Adjusted
    EBITDA margin was 15.7% for 2013, an increase compared to a 14.4% margin
    for 2012.
  *Cash Flow: The Company generated $21.4 million in net cash from operations
    during the full year 2013, compared to $16.7 million in 2012. The Company
    generated $18.9 million in unlevered free cash flow for 2013, an increase
    of 26% compared to $15.0 million for 2012.

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 February 12, 2014, Tangoe is providing guidance for its first quarter
and full year 2014.

  *First Quarter 2014 Guidance: Total revenue is expected to be in the range
    of $50.7 million to $51.4 million. Adjusted EBITDA is expected to be in
    the range of $7.6 million to $7.9 million. Non-GAAP net income per share
    is expected to be approximately $0.17 based on approximately 41.5 million
    weighted-average diluted shares outstanding.
  *Full Year 2014 Guidance: Total revenue is expected to be in the range of
    $220.0 million to $224.0 million. Adjusted EBITDA is expected to be in the
    range of $37.0 million to $39.0 million. Non-GAAP net income per share is
    expected to be in the range of $0.77 to $0.82 based on approximately 42.0
    million weighted-average diluted shares outstanding.

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 fourth quarter and full year 2013 and
business outlook. To access this call, dial 877.852.6581 (United States), or
719.325.4857 (international), with conference ID #9837067. 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 February 26, 2014, by
dialing 877.870.5176 (United States), or 858.384.5517 (international). The
recording access code is #9837067.

About Tangoe

Tangoe (NASDAQ:TNGO) is a leading global provider of Connection Lifecycle
Management (CLM) software and services to a wide range of global enterprises
and service providers. The company's Connection Lifecycle Management
technology, Matrix, is an on-demand suite of software and services designed to
turn on, manage, secure, and support various connections in an enterprise's
communications lifecycle, including mobile, fixed, machine, cloud, social, and
IT. 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 plus
interest expense, income tax provision, depreciation and amortization,
amortization of marketing agreement intangible assets, stock-based
compensation expense and, for 2012 only, other expense, and for 2013 only,
restructuring charge; less amortization of leasehold interest, interest income
and, for 2013 only, other income. Non-GAAP operating income excludes
stock-based compensation expense, amortization of intangible assets and, for
2013 only, restructuring charge. Non-GAAP net income excludes stock-based
compensation expense, amortization of intangible assets, amortization of debt
discount, and, for 2012 only, other expense, and for 2013 only, restructuring
charge and other income. Unlevered free cash flow is defined as net cash
provided by operating activities plus net interest 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," “target,” "would" 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 November 12,
2013. 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        Twelve Months Ended
                           December 31,              December 31,
                           2012         2013         2012          2013
                                                                   
Revenue:
Recurring technology and   $ 39,010     $ 44,428     $ 137,979     $ 168,484
services
Strategic consulting,
software licenses and       4,960      5,599      16,533      20,430  
other
Total revenue               43,970     50,027     154,512     188,914 
                                                                   
Cost of revenue:
Recurring technology and     18,167       19,583       63,976        76,228
services
Strategic consulting,
software licenses and       1,792      2,397      6,627       8,750   
other
Total cost of revenue       19,959     21,980     70,603      84,978  
                                                                   
Gross profit                 24,011       28,047       83,909        103,936
                                                                   
Operating expenses:
Sales and marketing          7,108        9,281        24,840        33,382
General and                  7,487        9,016        29,317        34,765
administrative
Research and development     4,570        4,914        16,696        19,570
Depreciation and             2,498        2,829        8,666         10,452
amortization
Restructuring charge        -          -          -           654     
Income from operations       2,348        2,007        4,390         5,113
                                                                   
Other income (expense),
net
Interest expense             (260   )     (49    )     (943    )     (401    )
Interest income              20           10           80            60
Other (expense) income      (9     )    108        (9      )    1,201   
Income before income tax     2,099        2,076        3,518         5,973
provision
Income tax provision        172        343        480         1,011   
Net income                 $ 1,927     $ 1,733     $ 3,038      $ 4,962   
                                                                   
Net income per common
share:
Basic                      $ 0.05      $ 0.05      $ 0.08       $ 0.13    
Diluted                    $ 0.05      $ 0.04      $ 0.08       $ 0.12    
                                                                   
Weighted average number
of common shares:
Basic                       37,720     38,184     36,492      37,706  
Diluted                     40,673     41,272     39,870      40,472  
                                                                   

TANGOE, INC.
Consolidated Balance Sheets
(in thousands)
                                                               
                                                   December 31,   December 31,
                                                   2012           2013
ASSETS
CURRENT ASSETS:
Cash and cash equivalents                          $  50,211      $  43,182
Accounts receivable - net                             38,309         43,273
Prepaid expenses and other current assets            3,384        4,537   
Total current assets                                  91,904         90,992
COMPUTERS, FURNITURE AND EQUIPMENT-NET                3,999          4,317
                                                                  
OTHER ASSETS:
Intangible assets-net                                 44,249         36,637
Goodwill                                              65,825         65,963
Security deposits and other non-current assets       1,291        935     
TOTAL ASSETS                                       $  207,268    $  198,844 
                                                                  
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable                                   $  9,128       $  9,570
Accrued expenses                                      12,035         8,871
Deferred revenue-current portion                      9,648          9,063
Notes payable-current portion                         22,443         1,831
Other current liabilities                            305          160     
Total current liabilities                             53,559         29,495
                                                                  
OTHER LIABILITIES:
Deferred taxes and other non-current liabilities      3,543          3,598
Deferred revenue-less current portion                 1,415          1,536
Notes payable-less current portion                   131          203     
Total liabilities                                    58,648       34,832  
                                                                  
                                                                  
COMMITMENT AND CONTINGENCIES
                                                                  
STOCKHOLDERS' EQUITY
Common stock                                          4              4
Additional paid-in capital                            191,581        202,808
Warrants for common stock                             10,610         10,610
Accumulated deficit                                   (53,757 )      (48,795 )
Other comprehensive gain (loss)                      182          (615    )
Total stockholders' equity                           148,620      164,012 
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY         $  207,268    $  198,844 
                                                                  

TANGOE, INC.
Condensed Consolidated Statements of Cash Flows
(in thousands)
                                                                
                                                                   
                                                   For the Twelve Months Ended
                                                   December 31,
                                                   2012            2013
                                                                   
Operating activities:
Net income                                         $  3,038        $ 4,962
Adjustments to reconcile net income to net cash
provided by operating activities:
Amortization of debt discount                         801            305
Amortization of leasehold interest                    (99      )     (99     )
Depreciation and amortization                         8,666          10,452
Increase (decrease) in deferred rent liability        19             (47     )
Amortization of marketing agreement intangible        174            305
assets
Allowance for doubtful accounts                       96             106
Deferred income taxes                                 183            400
Foreign exchange adjustment                           46             (138    )
Restructuring charge                                  -              654
Stock based compensation expense                      9,165          13,259
Decrease in fair value of contingent                  -              (1,041  )
consideration
Changes in assets and liabilities, net of
acquisitions:
Accounts receivable                                   (5,883   )     (5,089  )
Prepaid expenses and other assets                     170            (407    )
Other assets                                          (19      )     191
Accounts payable                                      1,310          32
Accrued expenses                                      885            (2,409  )
Deferred revenue                                     (1,864   )    (23     )
Net cash provided by operating activities            16,688       21,413  
Investing activities:
Purchases of computers, furniture and equipment       (1,820   )     (2,643  )
Cash paid in connection with acquisitions, net       (38,410  )    (20,845 )
of cash received
Net cash used in investing activities                (40,230  )    (23,488 )
Financing activities:
Net repayment of debt                                 (8,898   )     (1,006  )
Proceeds from repayment of notes receivable           93             -
Proceeds from follow on offering, net of              37,729         -
issuance costs
Repurchase of common stock                            (2,700   )     (8,590  )
Proceeds from exercise of stock options and          4,174        4,861   
stock warrants
Net cash provided by (used in) financing             30,398       (4,735  )
activities
                                                                   
                                                                   
Effect of exchange rate on cash                       (52      )     (219    )
                                                                   
                                                                   
Net increase (decrease) in cash and cash              6,804          (7,029  )
equivalents
Cash and cash equivalents, beginning of period       43,407       50,211  
Cash and cash equivalents, end of period           $  50,211      $ 43,182  
                                                                   

TANGOE, Inc.
Calculation of Non-GAAP Operating Income (Unaudited)
(in thousands)
                                                                         
                Three Months Ended                     Twelve Months Ended
                December 31,                           December 31,
                2012               2013               2012                2013
                         % of              % of               % of               % of
               Amount    Revenue   Amount    Revenue  Amount     Revenue   Amount     Revenue
Income from     $ 2,348   5.3   %   $ 2,007   4.0   %   $ 4,390    2.8   %   $ 5,113    2.7   %
operations
                                                                                        
Add:
Stock based
compensation      2,626   6.0   %     3,486   7.0   %     9,165    5.9   %     13,259   7.0   %
expense
Restructuring     -       0.0   %     -       0.0   %     -        0.0   %     654      0.3   %
charge
Amortization
of intangible    2,034   4.6   %    2,133   4.3   %   6,744    4.4   %    8,309    4.4   %
assets
Non-GAAP
income from     $ 7,008   15.9  %   $ 7,626   15.2  %  $ 20,299   13.1  %   $ 27,335   14.5  %
operations
                                                                                        

TANGOE, Inc.
Reconciliation of Net income to Adjusted EBITDA (Unaudited)
(in thousands)
                                                                                 
                Three Months Ended                         Twelve Months Ended
                December 31,                               December 31,
                2012                 2013                 2012                  2013
                           % of                % of                 % of                 % of
               Amount      Revenue   Amount      Revenue  Amount       Revenue   Amount       Revenue
Net income      $ 1,927     4.4   %   $ 1,733     3.5   %   $ 3,038      2.0   %   $ 4,962      2.6   %
Interest          260       0.6   %     49        0.1   %     943        0.6   %     401        0.2   %
expense
Other expense     9         0.0   %     (108  )   -0.2  %     9          0.0   %     (1,201 )   -0.6  %
(income)
Interest          (20   )   0.0   %     (10   )   0.0   %     (80    )   -0.1  %     (60    )   0.0   %
income
Income tax        172       0.4   %     343       0.7   %     480        0.3   %     1,011      0.5   %
provision
Depreciation
and               2,498     5.7   %     2,829     5.7   %     8,666      5.6   %     10,452     5.5   %
amortization
Amortization
of marketing
agreement         55        0.1   %     111       0.2   %     174        0.1   %     305        0.2   %
intangible
assets
Amortization
of leasehold      (25   )   -0.1  %     (25   )   0.0   %     (99    )   -0.1  %     (99    )   -0.1  %
interest
Stock based
compensation      2,626     6.0   %     3,486     7.0   %     9,165      5.9   %     13,259     7.0   %
expense
Restructuring    -        0.0   %    -        0.0   %   -         0.0   %    654       0.3   %
charge
Adjusted        $ 7,502    17.1  %   $ 8,408    16.8  %  $ 22,296    14.4  %   $ 29,684    15.7  %
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      Twelve Months Ended
                                 December 31,            December 31,
                                2012      2013         2012      2013
Net income                       $ 1,927   $ 1,733      $ 3,038   $ 4,962
                                                                    
Add:
Stock based compensation           2,626      3,486        9,165      13,259
expense
Restructuring charge               -          -            -          654
Amortization of intangible         2,034      2,133        6,744      8,309
assets
Amortization of debt discount      231        25           801        305
Other expense (income)            9         (108   )    9         (1,201 )
Non-GAAP net income              $ 6,827    $ 7,269     $ 19,757   $ 26,288 
                                                                    
                                                                    
Non-GAAP net income per share:   $ 0.17     $ 0.18      $ 0.50     $ 0.65   
diluted
                                                                    
Fully diluted weighted average    40,673    41,272     39,870    40,472 
shares outstanding
                                                                    

TANGOE, Inc.
Stock Based Compensation Expense (Unaudited)
(in thousands)
                                                      
                             Three Months Ended   Twelve Months Ended
                             December 31,         December 31,
                           2012      2013      2012      2013
Cost of revenue              $  400    $ 499     $  1,347  $ 2,108
Sales and marketing             678       1,194      2,133     3,941
General and administrative      1,378     1,556      5,105     6,220
Research and development       170      237       580      990
Total                        $  2,626   $ 3,486   $  9,165   $ 13,259
                                                             

TANGOE, Inc.
Calculation of Unlevered Free Cash Flow (Unaudited)
(in thousands)
                                                               
                                      Three Months Ended   Twelve Months Ended
                                      December 31,         December 31,
                                     2012      2013      2012      2013
Net cash provided by operating        $  3,153  $ 4,830   $ 16,688  $ 21,413
activities
                                                                      
Add:
Interest payments, net                   33        21        127        86
                                                                      
Subtract:
Capital Expenditures                    487      843      1,820     2,643
Unlevered Free Cash Flow              $  2,699   $ 4,008   $ 14,995   $ 18,856

Contact:

Investor Contact:
ICR, Inc.
Seth Potter, 512-344-0277
investor.relations@tangoe.com
or
Media Contact:
PAN Communications, Inc.
Nikki Festa/Ariel Burch, 617-502-4300
tangoe@pancomm.com
 
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