Tangoe
Nov 5, 2014

Tangoe, Inc. Announces Third 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 third quarter ended September 30, 2014.

"While our third quarter results and fourth quarter outlook are lower than expected due to the timing associated with incremental revenue from existing customer expansion, Tangoe continues to deliver a solid combination of growth and profitability," stated Al Subbloie, president and CEO of Tangoe. "We believe the company is well positioned to increase growth as our enhanced Matrix Connection Lifecycle Management suite continues to resonate with customers globally."

Third 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 November 5, 2014, Tangoe is providing guidance for its fourth quarter and full year 2014.

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 2014 and business outlook. To access this call, dial 888.505.4368 (United States), or 719.457.2648 (international), with conference ID #3083162. 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 19, 2014, by dialing 877.870.5176 (United States), or 858.384.5517 (international). The recording access code is #3083162.

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 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 ability to increase growth and 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 11, 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

Nine Months Ended
September 30, September 30,
  2013     2014     2013     2014  
 
Revenue:
Recurring technology and services $ 42,623 $ 48,184 $ 124,056 $ 141,252
Strategic consulting, software licenses and other   4,997     6,297     14,831     16,297  
Total revenue   47,620     54,481     138,887     157,549  
 
Cost of revenue:
Recurring technology and services 19,019 23,035 56,645 66,633
Strategic consulting, software licenses and other   2,327     2,419     6,353     6,760  
Total cost of revenue   21,346     25,454     62,998     73,393  
 
Gross profit 26,274 29,027 75,889 84,156
 
Operating expenses:
Sales and marketing 8,504 9,494 24,101 29,621
General and administrative 8,953 9,918 25,749 28,550
Research and development 4,907 5,767 14,656 16,690
Depreciation and amortization 2,586 2,347 7,623 7,426
Restructuring charge   -     -     654     -  
Income from operations 1,324 1,501 3,106 1,869
 
Other income, net
Interest expense (89 ) (33 ) (352 ) (81 )
Interest income 15 8 50 26
Other income   327     94     1,093     79  
Income before income tax provision 1,577 1,570 3,897 1,893
Income tax provision   22     635     668     1,628  
Net income $ 1,555   $ 935   $ 3,229   $ 265  
 
Net income per common share:
Basic $ 0.04   $ 0.02   $ 0.09   $ 0.01  
Diluted $ 0.04   $ 0.02   $ 0.08   $ 0.01  
 
Weighted average number of common share:
Basic   37,698     38,799     37,546     38,609  
Diluted   40,872     41,109     40,240     41,134  
 
           
TANGOE, INC.
Consolidated Balance Sheets
(in thousands)
 
December 31, September 30,
  2013     2014  
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 43,182 $ 48,918
Accounts receivable 43,273 52,186
Prepaid expenses and other current assets   4,537     6,184  
Total current assets 90,992 107,288
COMPUTERS, FURNITURE AND EQUIPMENT-NET 4,317 5,049
 
OTHER ASSETS:
Intangible assets-net 36,637 30,722
Goodwill 65,963 65,686
Security deposits and other non-current assets   935     1,487  
TOTAL ASSETS $ 198,844   $ 210,232  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 9,570 $ 9,331
Accrued expenses 8,871 8,588
Deferred revenue-current portion 9,063 10,022
Notes payable-current portion 1,831 1,222
Other current liabilities   160     -  
Total current liabilities 29,495 29,163
 
OTHER LIABILITIES:
Deferred taxes and other non-current liabilities 3,598 4,181
Deferred revenue-less current portion 1,536 648
Notes payable-less current portion   203     161  
Total liabilities   34,832     34,153  
 
 
COMMITMENT AND CONTINGENCIES
 
STOCKHOLDERS' EQUITY
Common Stock 4 4
Additional paid-in capital 202,808 215,310
Warrants for common stock 10,610 10,610
Accumulated deficit (48,795 ) (48,530 )
Other comprehensive loss   (615 )   (1,315 )
Total stockholders' equity   164,012     176,079  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 198,844   $ 210,232  
 
         
TANGOE, INC.
Condensed Consolidated Statements of Cash Flows (unaudited)
(in thousands)
 
 
For the Nine Months Ended
September 30,
  2013     2014  
 
Operating activities:
Net income $ 3,229 $ 265
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of debt discount 280 45
Amortization of leasehold interest (74 ) (74 )
Depreciation and amortization 7,623 7,426
Decrease in deferred rent liability (36 ) (29 )
Amortization of marketing agreement intangible assets 194 332
Allowance for doubtful accounts 68 90
Deferred income taxes 282 733
Stock based compensation expense 9,773 14,605
Restructuring charge 654 -
Foreign exchange adjustment (138 ) 32
Decrease in fair value of contingent consideration (1,041 ) -
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (2,465 ) (9,167 )
Prepaid expenses and other current assets (1,048 ) (1,260 )
Other assets 127 (357 )
Accounts payable 195 (204 )
Accrued expenses and other current liabilities (1,656 ) (323 )
Deferred revenue   616     90  
Net cash provided by operating activities   16,583     12,204  
Investing activities:
Purchases of computers, furniture and equipment (1,800 ) (2,699 )
Cash paid in connection with acquisitions, net of cash received   (19,543 )   (881 )
Net cash used in investing activities   (21,343 )   (3,580 )
Financing activities:
Borrowings of debt - 177
Repayment of debt (745 ) (658 )
Repurchase of common stock (6,235 ) (4,000 )
Proceeds from exercise of stock options and stock warrants   3,946     1,897  
Net cash used in financing activities   (3,034 )   (2,584 )
 
 
Effect of exchange rate on cash (159 ) (304 )
 
 
Net (decrease) increase in cash and cash equivalents (7,953 ) 5,736
Cash and cash equivalents, beginning of period   50,211     43,182  
Cash and cash equivalents, end of period $ 42,258   $ 48,918  
 
 
TANGOE, INC.
Calculation of Non-GAAP Operating Income (Unaudited)
(in thousands)
                                       
Three Months Ended Nine Months Ended
September 30, September 30,
2013   2014 2013   2014
  % of     % of   % of     % of
  Amount Revenue Amount Revenue Amount Revenue Amount Revenue
Income from operations $ 1,324 2.8 % $ 1,501 2.8 % $ 3,106 2.2 % $ 1,869 1.2 %
 
Add:
Stock based compensation expense 3,302 6.9 % 4,750 8.7 % 9,773 7.0 % 14,605 9.3 %
Amortization of intangibles 2,082 4.4 % 1,780 3.3 % 6,176 4.4 % 5,736 3.6 %
Restructuring charge   - 0.0 %   - 0.0 %   654 0.5 %   - 0.0 %
Non-GAAP income from operations $ 6,708 14.1 % $ 8,031 14.7 % $ 19,709 14.2 % $ 22,210 14.1 %
 
 
TANGOE, INC.
Reconciliation of Net income to Adjusted EBITDA (Unaudited)
(in thousands)
                                       
Three Months Ended Nine Months Ended
September 30, September 30,
2013   2014 2013   2014
  % of     % of   % of     % of
  Amount Revenue Amount Revenue Amount Revenue Amount Revenue
Net income $ 1,555 3.3 % $ 935 1.7 % $ 3,229 2.3 % $ 265 0.2 %
Interest expense 89 0.2 % 33 0.1 % 352 0.3 % 81 0.1 %
Other income (327 ) -0.7 % (94 ) -0.2 % (1,093 ) -0.8 % (79 ) -0.1 %
Interest income (15 ) 0.0 % (8 ) 0.0 % (50 ) 0.0 % (26 ) 0.0 %
Income tax provision 22 0.0 % 635 1.2 % 668 0.5 % 1,628 1.0 %
Depreciation and amortization 2,586 5.4 % 2,347 4.3 % 7,623 5.5 % 7,426 4.7 %
Amortization of marketing agreement intangible assets 72 0.2 % 113 0.2 % 194 0.1 % 332 0.2 %
Amortization of leasehold interest (25 ) -0.1 % (25 ) 0.0 % (74 ) -0.1 % (74 ) 0.0 %
Stock based compensation expense 3,302 6.9 % 4,750 8.7 % 9,773 7.0 % 14,605 9.3 %
Restructuring charge   -   0.0 %   -   0.0 %   654   0.5 %   -   0.0 %
Adjusted EBITDA $ 7,259   15.2 % $ 8,686   15.9 % $ 21,276   15.3 % $ 24,158   15.3 %
 
               
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,
    2013       2014     2013       2014  
Net income $ 1,555 $ 935 $ 3,229 $ 265
 
Add:
Stock based compensation expense 3,302 4,750 9,773 14,605
Restructuring charge - - 654 -
Amortization of intangibles 2,082 1,780 6,176 5,736
Amortization of debt discount 64 9 280 45
Other income   (327 )   (94 )   (1,093 )   (79 )
Non-GAAP net income $ 6,676   $ 7,380   $ 19,019   $ 20,572  
 
 
Non-GAAP net income per share: diluted $ 0.16   $ 0.18   $ 0.47   $ 0.50  
 
Fully diluted weighted average shares outstanding   40,872     41,109     40,240     41,134  
 
               
TANGOE, INC.
Stock Based Compensation Expense (Unaudited)
(in thousands)
           
Three Months Ended Nine Months Ended
September 30, September 30,
  2013   2014 2013   2014
Cost of revenue $ 529 $ 641 $ 1,609 $ 3,338
Sales and marketing 978 1,275 2,747 4,013
General and administrative 1,551 2,069 4,664 5,204
Research and development   244   765   753   2,050
Total $ 3,302 $ 4,750 $ 9,773 $ 14,605
 
 
TANGOE, INC.
Calculation of Unlevered Free Cash Flow (Unaudited)
(in thousands)
                       
Three Months Ended Nine Months Ended
September 30, September 30,
  2013   2014 2013   2014
Net cash provided by operating activities $ 5,933   $ 6,280 $ 16,583   $ 12,204
 
Add:
Interest payments, net 24 12 65 23
 
Subtract:
Capital Expenditures   840   648   1,800   2,699
Unlevered Free Cash Flow $ 5,117 $ 5,644 $ 14,848 $ 9,528
 

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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