TNGO

Tangoe, Inc. (TNGO)

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Tangoe, Inc. (TNGO)

Q3 2012 Earnings Call

November 6, 2012 05:00 pm ET

Executives

Albert Subbloie Jr. – Chief Executive Officer

Gary Martino – Chief Financial Officer

Analysts

Tom Ernst – Deutsche Bank

Tom Roderick – Stifel Nicolaus

Terry Tillman – Raymond James

Richard Baldry – Wunderlich Securities

Presentation

Operator

Good afternoon. My name is Erin and I will be your conference operator today. At this time, I would like to welcome everyone to the Tangoe’s Third Quarter 2012 Earnings Conference Call. After the speakers remarks there will be a question-and-answer session. (Operator Instructions)

Now I’d now like to turn the call over to Gary Martino, Chief Financial Officer. Please go ahead sir.

Gary Martino

Thank you. Good afternoon and welcome to the Tangoe’s third quarter 2012 earnings call. We’ll be discussing the results announced in our press release issued after the market closed today.

Again, I’m Gary Martino, Chief Financial Officer of Tangoe, with me on the call is Al Subbloie, Tangoe’s Chief Executive Officer. During the call we will make statements related to our business that maybe considered forward-looking statements under Federal Securities Laws. These statements reflect our views only as of today and should not be reflected upon as representing our views as of any subsequent date.

These statements reflect our current views regarding the future and are subject to a variety of risks and uncertainties that could cause actual results to differ materially from expectations. For discussion of material risks and other important factors that could affect our results, please refer to those contained that our most recent quarterly report on Form 10-Q which is on file with the SEC.

Also during today’s call, we’ll refer to certain non-GAAP financial measures. There is a reconciliation schedule showing GAAP versus non-GAAP results currently available in our press release issued after the close of the market today, which is located on our website at www.tangoe.com.

With that, I’ll turn the call over to Al, and then I’ll come back a bit later to provide some further details regarding our financials and our forward-looking outlook. Al?

Albert Subbloie Jr.

Thanks Gary. I’d like to thank everyone for joining us on the call today. We’re very pleased with our company’s continued high level of execution, which led the strong third quarter results that again exceeded our expectations across each of our key operating metrics.

Tangoe continues to expand it’s market share leadership through the combination of new account wins, expansion with existing customers, traction with our strategic alliance partners and solid execution of our M&A strategy. Taking a look at our results for the third quarter, we continued to see strong demand for our Communications Lifecycle Management solutions, as total revenues increased 47% to $40.1 million, with our recurring revenue growing 48% year-over-year. Some of key enablers of our strong recurring revenue were the expansion in our sales resources, the strengthening of our market leadership position and our high renewal rates, which remained in the mid-90% range.

Our strong renewal rates continue to be driven by our ability to deliver a significant ROI to our customers and to offer innovative products that our customers and partners demand.

From a profitability perspective, adjusted EBITDA increased 82% year-over-year to $6 million. In addition, strong cash flows from operations contributed to un-levered free cash flow growth of 157% on a year-over-year basis and an un-levered free cash flow margin of 14%.

Now, I’d like to provide an update on some of our key accomplishments during the third quarter. We increased total spend under management to $22.6 billion during the third quarter, which was up 48% year-over-year. The strong growth of our spend under management was driven by a combination of moving deployments into production with both new and existing customers, the acquisition of Symphony TEM business and the high renewal rates I just referenced.

The momentum in Q3 was also due to the growing awareness of Tangoe’s ability to deliver a compelling return on investment and value proposition for our customers, evidenced by the attendance and excitement from Tangoe’s user conference in Orlando a few weeks ago, where we had a great reception to our long-term product roadmap.

Among the highlights of the conference, we announced matrix CLM our next generation Communications Lifecycle Management solution suite which we plan to fulfill through a series of incremental and integrated product releases over the next several years as part of our expanded innovation program moving forward. It is expected to be purpose bill to embrace the latest trends impacting large enterprises including the mobile device revolution including Tablets and smart devices, new alternative expense models like bring your own device, hybrid liability and pay as you go, IT Cloud services of lifecycle management, increase use of social networks in the enterprise, shipping complex global carrier dynamics and support for SIM enabled devices or machine to machine rapidly entering every facet of our lives at work and at home.

We expect the strategic technology vision will lead to innovations in Tangoe’s technology that range from incremental technology enhancements in most of our planned releases moving forward to new integrated add-on products. In doing so, we will remain true to Tangoe’s legacy of helping our customers drive cost savings while gaining visibility and control over their communication assets.

We also intend to expand support for security, policy, individual productivity and predicted analytics associated with all types of individual communications transactions. We believe that our core technology components combined with our strategic acquisitions provide the foundation for Tangoe to execute this exciting vision.

Read the rest of this transcript for free on seekingalpha.com