Tangoe, Inc. Announces Fourth Quarter And Full Year 2012 Financial Results

Tangoe, Inc. (NASDAQ: TNGO), a leading global provider of communications lifecycle management (CLM) software and related services, today announced financial results for its fourth quarter and full year ended December 31, 2012.

“Our fourth quarter marked a strong finish to the year, and it was highlighted by revenue growth that was above our expectations,” stated Al Subbloie, president and CEO of Tangoe. “During 2012 we significantly increased the scale of Tangoe, expanded our product offering and enhanced our lead in the CLM market place. Our market share gains continue to be fueled by the combination of new customer wins, robust cross sell activity, momentum with our strategic alliance partners, geographic expansion and strong renewal rates.”

Subbloie added, “Tangoe entered 2013 with strong momentum as we continue to grow our pipeline of opportunities and scale our global distribution resources. We continue to expect the company to deliver a combination of strong organic growth and margin expansion during 2013. In addition, we believe that Tangoe has further improved its position to become the primary winner in the multi-billion dollar CLM opportunity over the long-term.”

Fourth Quarter 2012 Financial Highlights
  • Revenue: Total revenue for the fourth quarter was $44.0 million, an increase of 51% on a year-over-year basis. Recurring technology and services revenue was $39.0 million, an increase of 51% on a year-over-year basis. Strategic consulting, software licenses and other services revenue contributed the remaining $5.0 million of total revenue for the fourth quarter of 2012.
  • Operating Income: GAAP operating income for the fourth quarter was $2.3 million, compared to a GAAP operating income of $1.2 million for the fourth quarter of 2011. Non-GAAP operating income for the fourth quarter was $7.2 million, representing an increase of 106% compared to $3.5 million for the fourth quarter of 2011.
  • Net Income (Loss): GAAP net income for the fourth quarter was $1.9 million, compared to $0.9 million of net income for the same period last year. GAAP diluted income per share for the fourth quarter was $0.05, based on 40.7 million weighted-average diluted shares outstanding, compared to income per share of $0.02, based on 38.5 million weighted-average diluted shares outstanding, for the same period last year.Non-GAAP net income for the fourth quarter was $6.8 million, up 113% compared to $3.2 million for the fourth quarter of 2011. Non-GAAP diluted net income per share for the fourth quarter was $0.17 based on 40.7 million weighted-average diluted shares outstanding compared to $0.08 per share based on 38.5 million weighted-average diluted shares outstanding for the same period last year.
  • Adjusted EBITDA: Adjusted EBITDA for the fourth quarter was $7.5 million, an increase of 103% compared to $3.7 million for the fourth quarter of 2011. Adjusted EBITDA margin was a record 17.1% for the fourth quarter of 2012, an increase compared to a 12.7% margin for the same period last year.
  • Cash and Cash Flow: As of December 31, 2012, Tangoe had cash and cash equivalents of $50.2 million, a decrease of $5.5 million from the end of the prior quarter due primarily to the payment of deferred purchase price obligations for acquisitions and the repurchase of common shares during the quarter.The company generated $3.2 million in net cash from operations for the fourth quarter of 2012, compared to $4.8 million during the fourth quarter of 2011. The company generated $2.7 million in unlevered free cash flow for the quarter, compared to $4.4 million during the fourth quarter of 2011.

Full Year 2012 Financial Highlights
  • Revenue: Total revenue for the full year 2012 was $154.5 million, an increase of 47% on a year-over-year basis. Recurring technology and services revenue was $138.0 million, an increase of 47% on a year-over-year basis. Strategic consulting, software licenses and other services contributed the remaining $16.5 million of total revenue for 2012.
  • Operating Income: GAAP operating income for the full year 2012 was $4.4 million, compared to GAAP operating income of $2.6 million for 2011. Non-GAAP operating income was $21.1 million, representing an increase of 74% compared to $12.1 million for 2011.
  • Net Income (Loss): GAAP net income for the full year 2012 was $3.0 million, compared to a $3.0 million net loss for 2011. GAAP diluted net income per share was $0.08 based on 39.9 million weighted-average diluted shares outstanding for the full year 2012, compared to a loss per share of $0.31, after deducting dividends and accretion related to our preferred stock and based on 16.4 million weighted-average diluted shares outstanding for 2011.Non-GAAP net income for the full year 2012 was $19.7 million, up 105% compared to $9.6 million for 2011. Non-GAAP diluted net income per share for 2012 was $0.50 based on 39.9 million weighted-average diluted shares outstanding, an increase of 72% compared to $0.29 per share based on 33.5 million weighted-average diluted shares outstanding for 2011.
  • Adjusted EBITDA: Adjusted EBITDA for the full year 2012 was $22.3 million, an increase of 76% compared to $12.7 million for 2011. Adjusted EBITDA margin was 14.4% for 2012, representing a record annual adjusted EBITDA margin and an increase compared to a 12.1% margin for 2011.
  • Cash Flow: The Company generated $16.7 million in net cash from operations during the full year 2012, compared to $10.1 million in 2011. The Company generated $15.0 million in unlevered free cash flow for 2012, an increase of 41% compared to $10.6 million for 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 February 13, 2013, Tangoe is providing guidance for its first quarter and raising its full year 2013 guidance:
  • First Quarter 2013 Guidance: Total revenue is expected to be in the range of $43.8 million to $44.3 million. Adjusted EBITDA is expected to be in the range of $6.4 million to $6.6 million. Non-GAAP net income per share is expected to be approximately $0.14 based on approximately 40.8 million weighted-average diluted shares outstanding.
  • Full Year 2013 Guidance: Total revenue is expected to be in the range of $188.5 million to $191.5 million. Adjusted EBITDA is expected to be in the range of $31.0 million to $32.0 million. Non-GAAP net income per share is expected to be in the range of $0.67 to $0.70 based on approximately 41.0 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 2012 and business outlook. To access this call, dial 800.390.5705 (United States), or 719.325.2271 (international), with conference ID #2193548. 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 27, 2012, by dialing 877.870.5176 (United States), or 858.384.5517 (international). The recording access code is #2193548.

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, other expense, income tax provision, depreciation and amortization, amortization of marketing agreement intangible assets, stock-based compensation expense and, for 2011 only, restructuring charge and 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 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 November 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
Twelve Months Ended
December 31, December 31,
2011 2012 2011 2012
 
Revenue:
Recurring technology and services $ 25,778 $ 39,010 $ 93,671 $ 137,979
Strategic consulting, software licenses and other   3,463     4,960     11,270     16,533  
Total revenue   29,241     43,970     104,941     154,512  
 
Cost of revenue:
Recurring technology and services 12,397 18,167 44,814 63,976
Strategic consulting, software licenses and other   1,532     1,792     5,165     6,627  
Total cost of revenue   13,929     19,959     49,979     70,603  
 
Gross profit 15,312 24,011 54,962 83,909
 
Operating expenses:
Sales and marketing 4,874 7,108 16,648 24,840
General and administrative 4,922 7,487 17,777 29,317
Research and development 3,142 4,570 11,860 16,696
Depreciation and amortization 1,171 2,498 4,551 8,666
Restructuring charge   -     -     1,549     -  
Income from operations 1,203 2,348 2,577 4,390
 
Other income (expense), net:
Interest expense (184 ) (260 ) (3,047 ) (943 )
Interest income 24 20 45 80
Other expense - (9 ) - (9 )
Increase in fair value of warrants for redeemable convertible preferred stock   -     -     (1,996 )   -  
Income (loss) before income tax provision 1,043 2,099 (2,421 ) 3,518
Income tax provision   140     172     534     480  
Net income (loss) 903 1,927 (2,955 ) 3,038
Preferred dividends - - (2,168 ) -
Accretion of redeemable convertible preferred stock   -     -     (37 )   -  
Income (loss) applicable to common stockholders $ 903   $ 1,927   $ (5,160 ) $ 3,038  
 
Income (loss) per common share:
Basic $ 0.03   $ 0.05   $ (0.31 ) $ 0.08  
Diluted $ 0.02   $ 0.05   $ (0.31 ) $ 0.08  
 
Weighted average number of common share:
Basic   32,972     37,720     16,412     36,492  
Diluted   38,493     40,673     16,412     39,870  
 
TANGOE, INC.
Consolidated Balance Sheets
(in thousands)
   
December 31,
2011 2012
ASSETS (Unaudited)
CURRENT ASSETS:
Cash and cash equivalents $ 43,407 $ 50,211
Accounts receivable 25,311 38,309
Prepaid expenses and other current assets   2,503     3,384  
Total current assets 71,221 91,904
COMPUTERS, FURNITURE AND EQUIPMENT-NET 3,334 3,999
 
OTHER ASSETS:
Intangible assets-net 28,800 44,249
Goodwill 36,266 65,825
Security deposits and other non-current assets   1,241     1,291  
TOTAL ASSETS $ 140,862   $ 207,268  
 
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES:
Accounts payable $ 6,605 $ 9,128
Accrued expenses 7,061 12,035
Deferred revenue-current portion 9,051 9,648
Notes payable-current portion 7,904 22,443
Other current liabilities   1,079     305  
Total current liabilities 31,700 53,559
 
OTHER LIABILITIES:
Deferred rent and other non-current liabilities 1,659 3,543
Deferred revenue-less current portion 2,624 1,415
Notes payable-less current portion   8,290     131  
Total liabilities   44,273     58,648  
 
 
COMMITMENT AND CONTINGENCIES
 
STOCKHOLDERS' EQUITY
Common Stock 3 4
Additional paid-in capital 142,905 191,581
Warrants for common stock 10,610 10,610
Less: notes receivable for purchase of common stock (93 ) -
Accumulated deficit (56,795 ) (53,757 )
Other comprehensive (loss) income   (41 )   182  
Total stockholders' equity   96,589     148,620  
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $ 140,862   $ 207,268  
 
TANGOE, Inc.
Consolidated Statements of Cash Flows
(in thousands)
 

For the Years EndedDecember 31,
2011   2012
Operating activities:
Net (loss) income $ (2,955 ) $ 3,038
Adjustments to reconcile net (loss) income to net cash provided by operating activities:
Amortization of debt discount 1,339 801
Amortization of leasehold interest - (99 )
Depreciation and amortization 4,551 8,666
Restructuring charge 1,549 -
(Decrease) increase in deferred rent liability (58 ) 19
Amortization of marketing agreement intangible assets 92 174
Allowance for doubtful accounts 23 96
Deferred income taxes 305 183
Stock based compensation 3,980 9,165
Foreign exchange loss - 46
Increase in fair value of warrants for redeemable convertible preferred stock 1,996 -
Changes in assets and liabilities, net of acquisitions:
Accounts receivable (4,437 ) (5,883 )
Prepaid expenses and other assets 47 170
Other assets (381 ) (19 )
Accounts payable 3,054 1,310
Accrued expenses (184 ) 885
Deferred revenue   1,226     (1,864 )
Net cash provided by operating activities   10,147     16,688  
Investing activities:
Purchases of computers, furniture and equipment (853 ) (1,820 )
Cash paid in connection with acquisitions   (22,194 )   (38,410 )
Net cash used in investing activities   (23,047 )   (40,230 )
Financing activities:
Repayment of debt (38,018 ) (9,676 )
Borrowings of debt 20,000 778
Proceeds from public offerings, net of issuance costs 66,989 37,729
Repurchase of common stock - (2,700 )
Deferred financing costs (170 ) -
Proceeds from notes receivable - 93
Proceeds from exercise of stock options and stock warrants   1,593     4,174  
Net cash provided by financing activities   50,394     30,398  
 
Effect of exchange rate on cash - (52 )
 
Net increase in cash and cash equivalents 37,494 6,804
Cash and cash equivalents, beginning of period   5,913     43,407  
Cash and cash equivalents, end of period $ 43,407   $ 50,211  
 
TANGOE, INC.
Calculation of Non-GAAP Operating Income (Unaudited)
(in thousands)
                               
Three Months Ended Twelve Months Ended
December 31, December 31,
2011   2012 2011   2012
  % of   % of   % of   % of
  Amount Revenue Amount Revenue Amount Revenue Amount Revenue
Income from operations $ 1,203 4.1 % $ 2,348 5.3 % $ 2,577 2.5 % $ 4,390 2.8 %
 
Add:
Stock based compensation expense 1,316 4.5 % 2,626 6.0 % 3,980 3.8 % 9,165 5.9 %
Restructuring costs - 0.0 % - 0.0 % 1,549 1.5 % - 0.0 %
Amortization of intangibles 828 2.8 % 2,034 4.6 % 3,052 2.9 % 6,744 4.4 %
Amortization of debt discount 158 0.5 % 231 0.5 % 698 0.7 % 801 0.5 %
Amortization of deferred financing costs   - 0.0 %   - 0.0 %   227 0.2 %   - 0.0 %
Non-GAAP income from operations $ 3,505 12.0 % $ 7,239 16.5 % $ 12,083 11.5 % $ 21,100 13.7 %
 
TANGOE, INC.
Reconciliation of Net (loss) income to Adjusted EBITDA (Unaudited)
(in thousands)
                               
Three Months Ended Twelve Months Ended
December 31, December 31,
2011   2012 2011   2012
  % of   % of   % of   % of
  Amount Revenue Amount Revenue Amount Revenue Amount Revenue
Net income (loss) $ 903 3.1 % $ 1,927 4.4 % $ (2,955 ) -2.8 % $ 3,038 2.0 %
Interest expense 184 0.6 % 260 0.6 % 3,047 2.9 % 943 0.6 %
Interest income (24 ) -0.1 % (20 ) 0.0 % (45 ) 0.0 % (80 ) -0.1 %
Other (income) expense - 0.0 % 9 0.0 % - 0.0 % 9 0.0 %
Income tax provision 140 0.5 % 172 0.4 % 534 0.5 % 480 0.3 %
Depreciation and amortization 1,171 4.0 % 2,498 5.7 % 4,551 4.3 % 8,666 5.6 %
Amortization of marketing agreement intangible assets 27 0.1 % 55 0.1 % 92 0.1 % 174 0.1 %
Amortization of leasehold interest - 0.0 % (25 ) -0.1 % - 0.0 % (99 ) -0.1 %
Stock based compensation expense 1,316 4.5 % 2,626 6.0 % 3,980 3.8 % 9,165 5.9 %
Restructuring charge - 0.0 % - 0.0 % 1,549 1.5 % - 0.0 %
Increase in fair value of warrants for redeemable convertible preferred stock   -   0.0 %   -   0.0 %   1,996   1.9 %   -   0.0 %
Adjusted EBITDA $ 3,717   12.7 % $ 7,502   17.1 % $ 12,749   12.1 % $ 22,296   14.4 %
 
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,
  2011   2012 2011   2012
Net income (loss) $ 903 $ 1,927 $ (2,955 ) $ 3,038
 
Add:
Stock based compensation expense 1,316 2,626 3,980 9,165
Restructuring charge - - 1,549 -
Amortization of intangibles 828 2,034 3,052 6,744
Amortization of debt discount 158 231 698 801
Amortization of deferred financing costs - - 227 -
Increase in fair value of warrants for redeemable convertible preferred stock - - 1,996 -
Orix loan repayment - - 400 -
Term loan debt discount   -   -   641     -
Non-GAAP net income $ 3,205 $ 6,818 $ 9,588   $ 19,748
 
 
Non-GAAP net income per share: diluted $ 0.08 $ 0.17 $ 0.29   $ 0.50
 
Fully diluted weighted average shares outstanding   38,493   40,673   33,503     39,870
 
TANGOE, INC.
Stock Based Compensation Expense (Unaudited)
(in thousands)
               
Three Months Ended Twelve Months Ended
December 31, December 31,
    2011   2012 2011   2012
Cost of revenue $ 170 $ 400 $ 669 $ 1,347
Sales and marketing 612 678 1,201 2,133
General and administrative 487 1,378 1,934 5,105
Research and development   47   170   176   580
Total $ 1,316 $ 2,626 $ 3,980 $ 9,165
 
TANGOE, INC.
Calculation of Unlevered Free Cash Flow (Unaudited)
(in thousands)
               
Three Months Ended Twelve Months Ended
December 31, December 31,
  2011   2012 2011   2012
Net cash provided by operating activities $ 4,836 $ 3,153 $ 10,147 $ 16,688
 
Add:
Interest payments, net 20 33 1,620 127
IPO Expense payments - - 466 -
 
Subtract:
Capital Expenditures   451   487   1,599   1,820
Unlevered Free Cash Flow $ 4,405 $ 2,699 $ 10,634 $ 14,995
 

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