Tangoe
May 8, 2014

Tangoe, Inc. Announces First Quarter 2014 Financial Results

ORANGE, Conn.--(BUSINESS WIRE)-- Tangoe, Inc. (NASDAQ: TNGO), a leading global provider of Connection Lifecycle Management (CLM) software and related services, today announced financial results for its first quarter ended March 31, 2014.

"During the first quarter, customer interest remained high as evidenced by the strength in new customer additions, expansion with existing customers and growth in our recurring revenue," stated Al Subbloie, president and CEO of Tangoe. "We have always shared that non-recurring revenue, which is the less strategic component of our business, can be variable quarter-to-quarter and this was the element of our business that caused revenue and profitability to be slightly below our expectations for the quarter. We remain optimistic about the company's future which is supported by the ongoing strong demand for our integrated solution and our expectation for total revenue to remain on track for the full year 2014."

First Quarter 2014 Financial Highlights

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 May 8, 2014, Tangoe is providing guidance for its second quarter and full year 2014.

Quarterly Conference Call

Tangoe will host a conference call today at 5:00 p.m. EDT to review the company's financial results for the first quarter 2014 and business outlook. To access this call, dial 800.967.7144 (United States), or 719.325.2322 (international), with conference ID #1611182. 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 May 22, 2014, by dialing 877.870.5176 (United States), or 858.384.5517 (international). The recording access code is #1611182.

About Tangoe

Tangoe (NASDAQ:TNGO) is a leading global provider of Connection Lifecycle Management 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, track, manage, secure, and support various connections in an enterprise's connection lifecycle, including mobile, fixed, machine-to-machine, cloud software and services, enterprise social, and IT connections. 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 2013 only, restructuring charge; less amortization of leasehold interest, interest income and 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, other income, and, for 2013 only, restructuring charge. 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 Annual Report on Form 10-K as filed with the Securities and Exchange Commission on March 17, 2014. 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

March 31,
2013 2014
 
Revenue:
Recurring technology and services $ 40,048 $ 45,999
Strategic consulting, software licenses and other   4,812     4,395  
Total revenue   44,860     50,394  
 
Cost of revenue:
Recurring technology and services 18,755 21,398
Strategic consulting, software licenses and other   2,061     2,334  
Total cost of revenue   20,816     23,732  
 
Gross profit 24,044 26,662
 
Operating expenses:
Sales and marketing 7,392 9,945
General and administrative 8,127 8,788
Research and development 4,945 5,129
Depreciation and amortization 2,489 2,607
Restructuring charge   155     -  
Income from operations 936 193
 
Other income (expense), net
Interest expense (162 ) (37 )
Interest income 19 9
Other income   563     13  
Income before income tax provision 1,356 178
Income tax provision   231     445  
Net income (loss) $ 1,125   $ (267 )
 
Net income (loss) per common share:
Basic $ 0.03   $ (0.01 )
Diluted $ 0.03   $ (0.01 )
 
Weighted average number of common share:
Basic   37,547     38,364  
Diluted   40,459     38,364  
 
 
TANGOE, INC.
Consolidated Balance Sheets
(in thousands)
       
December 31, March 31,
2013 2014
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 43,182 $ 46,079
Accounts receivable 43,273 44,807
Prepaid expenses and other current assets   4,537     5,791  
Total current assets 90,992 96,677
COMPUTERS, FURNITURE AND EQUIPMENT-NET 4,317 4,888
 
OTHER ASSETS:
Intangible assets-net 36,637 34,548
Goodwill 65,963 65,900
Security deposits and other non-current assets   935     1,052  
TOTAL ASSETS $ 198,844   $ 203,065  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,570 $ 9,776
Accrued expenses 8,871 8,179
Deferred revenue-current portion 9,063 9,649
Notes payable-current portion 1,831 1,705
Other current liabilities   160     -  
Total current liabilities 29,495 29,309
 
OTHER LIABILITIES:
Deferred taxes and other non-current liabilities 3,598 3,881
Deferred revenue-less current portion 1,536 663
Notes payable-less current portion   203     255  
Total liabilities   34,832     34,108  
 
 
COMMITMENT AND CONTINGENCIES
 
STOCKHOLDERS' EQUITY
Common Stock 4 4
Additional paid-in capital 202,808 208,178
Warrants for common stock 10,610 10,610
Accumulated deficit (48,795 ) (49,062 )
Other comprehensive loss   (615 )   (773 )
Total stockholders' equity   164,012     168,957  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 198,844   $ 203,065  
 
 
TANGOE, INC.
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
       
 
For the Three Months Ended
March 31,
2013 2014
 
Operating activities:
Net income (loss) $ 1,125 $ (267 )
Adjustments to reconcile net income (loss) to net cash provided by operating activities:
Amortization of debt discount 136 25
Amortization of leasehold interest (24 ) (24 )
Depreciation and amortization 2,489 2,607
Decrease in deferred rent liability (15 ) (31 )
Amortization of marketing agreement intangible assets 55 108
Allowance for doubtful accounts 23 30
Deferred income taxes 111 307
Foreign exchange adjustment (138 ) -
Stock based compensation expense 3,099 4,197
Decrease in fair value of contingent consideration (517 ) -
Changes in assets and liabilities, net of acquisitions:
Accounts receivable 452 (1,593 )
Prepaid expenses and other current assets (198 ) (1,035 )
Other assets 35 (340 )
Accounts payable 1,529 183
Accrued expenses and other current liabilities (2,052 ) (807 )
Deferred revenue   (268 )   (283 )
Net cash provided by operating activities   5,842     3,077  
Investing activities:
Purchases of computers, furniture and equipment (273 ) (1,218 )
Cash paid in connection with acquisitions, net of cash received   (8,789 )   -  
Net cash used in investing activities   (9,062 )   (1,218 )
Financing activities:
Borrowings of debt - 177
Repayment of debt (307 ) (276 )
Repurchase of common stock (3,235 ) -
Proceeds from exercise of stock options and stock warrants   306     1,173  
Net cash (used in) provided by financing activities   (3,236 )   1,074  
 
 
Effect of exchange rate on cash (201 ) (36 )
 
 
Net (decrease) increase in cash and cash equivalents (6,657 ) 2,897
Cash and cash equivalents, beginning of period   50,211     43,182  
Cash and cash equivalents, end of period $ 43,554   $ 46,079  
 
 
TANGOE, INC.
Calculation of Non-GAAP Operating Income (Unaudited)
(in thousands)
                       
Three Months Ended
March 31,
2013     2014
    % of     % of
  Amount Revenue Amount Revenue
Income from operations $ 936 2.1 % $ 193 0.4 %
 
Add:
Stock based compensation expense 3,099 6.9 % 4,197 8.3 %
Amortization of intangibles 2,024 4.5 % 2,036 4.0 %
Restructuring charge   155 0.3 %   - 0.0 %
Non-GAAP income from operations $ 6,214 13.9 % $ 6,426 12.8 %
 
 
TANGOE, INC.
Reconciliation of Net (loss) income to Adjusted EBITDA (Unaudited)
(in thousands)
                       
Three Months Ended
March 31,
2013     2014
    % of     % of
  Amount Revenue Amount Revenue
Net income (loss) $ 1,125 2.5 % $ (267 ) -0.5 %
Interest expense 162 0.4 % 37 0.1 %
Other income (563 ) -1.3 % (13 ) 0.0 %
Interest income (19 ) 0.0 % (9 ) 0.0 %
Income tax provision 231 0.5 % 445 0.9 %
Depreciation and amortization 2,489 5.5 % 2,607 5.2 %
Amortization of marketing agreement intangible assets 55 0.1 % 108 0.2 %
Amortization of leasehold interest (24 ) -0.1 % (24 ) 0.0 %
Stock based compensation expense 3,099 6.9 % 4,197 8.3 %
Restructuring charge   155   0.3 %   -   0.0 %
Adjusted EBITDA $ 6,710   15.0 % $ 7,081   14.1 %
 
 
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
March 31,
  2013     2014
Net income (loss) $ 1,125 $ (267 )
 
Add:
Stock based compensation expense 3,099 4,197
Restructuring charge 155 -
Amortization of intangibles 2,024 2,036
Amortization of debt discount 136 25
Other income   (563 )   (13 )
Non-GAAP net income $ 5,976   $ 5,978  
 
 
Non-GAAP net income per share: diluted $ 0.15   $ 0.15  
 
Fully diluted weighted average shares outstanding   40,459     40,969  
 
 
TANGOE, INC.
Stock Based Compensation Expense (Unaudited)
(in thousands)
           
Three Months Ended
March 31,
  2013     2014
Cost of revenue $ 554 $ 1,488
Sales and marketing 813 1,256
General and administrative 1,472 1,035
Research and development   260   418
Total $ 3,099 $ 4,197
 
 
TANGOE, INC.
Calculation of Unlevered Free Cash Flow (Unaudited)
(in thousands)
           
Three Months Ended
March 31,
  2013     2014
Net cash provided by operating activities $ 5,842 $ 3,077
 
Add:
Interest payments, net 21 9
 
Subtract:
Capital Expenditures   273   1,218
Unlevered Free Cash Flow $ 5,590 $ 1,868
 
 

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

Source: Tangoe, Inc.

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