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Q4 2012 Earnings Call

February 13, 2013 05:00 PM ET


Gary Martino - President and CFO

Al Subbloie - CEO


Tom Ernst - Deutsche Bank

David Lynn - Barclays

Terry Tillman - Raymond James

Tom Roderick - Stifel Nicolaus

Joel Fishbein - Lazard Capital Markets

Richard Baldry - Wunderlich Securities


Good afternoon. My name is Jessica and I will be your conference operator for today. At this time, I would like to welcome everyone to the Tangoe Fourth Quarter and Full Year 2012 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers remarks there will be a question-and-answer session. (Operator Instructions).

Thank you. I would now like to turn the call over to Gary Martino, Chief Financial Officer. Please go ahead.

Gary Martino

Thank you. Good afternoon and welcome to the Tangoe fourth quarter and full year 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 in our most recent quarterly report on Form 10-Q which is on file with the SEC.

Also during the course of 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

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

Al Subbloie

Thanks Gary. I’d like to thank everyone for joining us on the call today. We remain pleased with our Company’s continued high level of execution, which contributed to better than expected fourth quarter revenue and a strong finish to a record year for Tangoe.

During 2012, we further validated the strength of our business strategy which was focused on delivering a combination of strong organic growth, complimented by strategic M&A within our fragmented market opportunity.

Over the course of the year, we significantly increased the scale of Tangoe, expanded our industry leading product offering and enhanced our leadership position in the CLM market. Looking ahead to 2013, we believe Tangoe is well positioned to continue gaining market share as a result of our growing pipeline of opportunities and the significant expansion in our global distribution resources.

As Gary will detail in a moment, we continue to expect Tangoe to deliver a combination of strong organic growth and margin expansion during the 2013, and we have slightly increased the preliminary 2013 revenue guidance we shared on our last call.

From a longer term perspective, we have never felt better about Tangoe’s market position and ability to be the primary winner in the multibillion dollar CLM market opportunity. With that background, let me review our summary level financial results for the fourth quarter.

Total revenues increased 51% year-over-year to $44 million and were above the high-end of our guidance range. Recurring revenue was up 51% year-over-year due in part to the ongoing 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 strong return on investment to our customers and to offer innovative products that our customers and partners demand.

From profitability perspective, adjusted EBITDA for the fourth quarter increased 103% year-over-year to $7.5 million and as a percentage of revenue was over 17% a record for the company. Across the board, it was a strong and better than expected finish to the year.

We continue to see strong demand for our communications lifecycle management solutions as market share gains were driven by a combination of new account wins, up and cross selling traction with existing customer, momentum with our strategic alliance partners, geographic expansion and solid execution of our acquisition integrations.

Now, I’d like to provide an update on some of our key accomplishments during the fourth quarter. We increased total spend under management to $23.8 billion which was up 42% year-over-year and 5% on a sequential basis from last quarter.

The strong growth of our spend under management was driven by a combination of moving deployments into production with both new and existing customers and the high renewal rates I just referenced.

We again experienced strong new customer activity adding 39 new logos during the fourth quarter, compared to 22 during the same period last year. In addition, for the full year 2012, we added a 145 new logos, an increase of 51% compared to the 96 added during the 2011.

As a remainder, last quarter we increased our customer ad performance goal to a range of 25 to 35 from our previous range of 20 to 30, primarily due to the expansion in our sale resources, which continues to be on track with the anticipated growth we mentioned on the Q3 call.

The increase in our customer ads is positive for the long term as Tangoe has a proven history of expanding customer relationships through additional products and expansion across additional business units and geographies.

During the quarter, we closed transactions with new and existing blue chip customers such as Capital One, Granger, Debolt, Craft, McAfee, Phillips, Macquarie, Fosters, and Just Energy among others. In addition to the transactions I just mentioned we closed several other customer up-sell deals from our acquired base including HP, Marsh & McLennan, Shell, and Timco.

As we shared in the past, it isn’t until after we completed the migration process over to Tangoe’s platform that we typically begin our up sell and cross sell efforts as that is the point in time when customers can really benefit from our broad intergraded suite of solutions.

We believe that these deals highlight the value of Tangoe’s suite of integrated CLM solutions and the up sell opportunities that exist with many of the large global enterprise customers that we have gained from our acquired companies.

Another driver of our strong growth was our continued traction with strategic alliance channel partners. We continue to benefit from our go-to-market partnerships with IBM, HP, AT&T, Dell and Xerox during the fourth quarter as we close the number of bundled deals across our suite of fixed, mobile and mobile device and real-time expense management solutions. We believe this continues to highlight Tangoe’s value proposition as the white label CLM provider of choice for the world’s largest outsourcers, system integrators, and carriers.

During 2012, our strategic alliances contributed 24% of our new annual recurring revenue book, though this may vary on a quarterly basis. We were pleased to recently announce that LIME the Caribbean Division of Cable & Wireless has adopted Tangoe’s rTEM solution as a value added offering to provide its enterprise and residential customers usage management capabilities for real-time expense monitoring of mobile devices.

In addition to rTEM, Tangoe’s carrier solution portfolio includes Managed Mobility Services, otherwise called MMS, telecom expense management, bill aggregation and presentation, usage management for consumers and on device real-time international roaming usage and cost management.

We are currently seeing increase interested for our carrier solution worldwide due to our ability to add value to a carrier’s enterprise and residential customers and we look forward to updating you on our progress with the carrier channel over the course of the year.

Finally, I’d like to take a few minutes to highlight the drivers of our organic recurring revenue growth. To start the market remains highly under penetrated. As I just mentioned we target 25 to 35 new customers on a quarterly basis.

While well up from our previous target, there is a long runway of market penetration ahead when you compare our customer list to the Global 5000 and furthermore considered Tangoe’s market leadership position.

We also see a significant opportunity to bring our full suite of solutions to our large and global customer base. During 2012, 30% of our annual recurring revenue booked came from the expansion of our existing customer relationships including increased geographic deployment, adoption of incremental solutions across our fixed mobile MDM, rTEM solutions, the general increase in spend under management in addition to the up sell opportunities from previously acquired companies.

Another key aspect of our growth strategy is to expand our international operations. Of the $435 billion in available global telecom spend; we believe that half or more is internationally based. Of Tangoe’s $23.8 billion in spend under management, $5.9 billion is non-U.S. telecom spend, compared to $4.7 billion at the end of 2011.

During Q4, we expanded our presence in Asia-Pacific with new offices in Australia, in addition to relocating our Amsterdam office to accommodate growth in the EMEA region. We also added several new logos outside the U.S. including Schlumberger, Infor Global, and Telefonica and recently added direct sale resources in Latin America.

In addition, we planned to continue leveraging our strategic alliances to complement our direct selling efforts and extend our reach. As we discussed earlier, the company is in position to continue to benefit from our relationships with some of the world’s largest outsourcers, system integrators, and carriers as our joint pipelines continue to grow nicely.

Finally, we remain in position to exploit the mobile and bring-your-own device revolution. Tangoe has had ongoing success selling our MDM and rTEM solutions as a bundle, with our mobile and fixed TEM offerings, further evidence that one of our key strengths is the fact that we are the only provider to operator complete intergraded solution for enterprises. While MDM and rTEM represent under 10% of our revenue today, they represent attractive long term upside considering the explosive growth in connected devices, Smartphone and tablet adoption.

To this end, we continue to enhance our MDM solution during the fourth quarter. Specifically we announced the expansion of our MDM solution to include intergraded mobile device containerization functionality, which will help our enterprise customers meet the challenges of BYOD access to enterprise resources.

This comprehensive smartphone and tablet solution addresses device usage, device and network access and data and application security and it’s designed to manage critical enterprise issues across the entire communications lifecycle.

We also announced MDM support for Window 8 on Nokia, Samsung, and HTC mobile devices which will enable enterprises to procure, configure, secure, deploy and manage these devices in addition to those running on iOS, Android and Blackberry.

So in summary, we are very pleased with our fourth quarter results and remain confident in our ability to continue growing market share due to our scale, intergraded offering and global capacities. We entered 2013 with strong momentum and a business model that provides us with a very high level of visibility into our future financial performance. We believe that we’re still in the early stages of growth than a multibillion dollar market opportunity and Tangoe continues to expand our leadership position.

With that let me turn it over Gary to provide more details.

Gary Martino

Thank Al, our strong performance in the quarter reflects solid execution across our business and continued demand for Tangoe’s intergraded CLM solution. I will first provide with additional details on our fourth quarter and full year performance and we’ll then conclude with our outlook for the first quarter and full year of 2013.

And now turning to our fourth quarter results, starting with the P&L, total revenue was $44 million, up 51% year-over-year exceeding the high-end of our guidance range of $42.1 million to $42.6 million. The primary driver of the revenue upside in the quarter was our recurring revenue, which was up 51% year-over-year to $39 million. While we will not be breaking it out on a quarterly basis in 2013, we thought it would be helpful to mention that Symphony contributed $5.0 million to total recurring revenues during the quarter.

Our non-recurring revenue generated the remaining $5 million of total revenue for the fourth quarter, including approximately $300,000 from acquired Symphony customers. As we have mentioned on previous earnings calls, our non-recurring revenue can fluctuate from quarter-to-quarter.

And now drilling down further into some of the drivers of revenue. We ended the quarter with $23.8 billion in spend under management, which is up approximately 42%, compared to the end of the fourth quarter of 2011. During 2012 30% of our new annual recurring revenue booked was with existing customers which reflects our ability to leverage our large and growing client base to cross sell solutions.

In addition our channel partners accounted for 24% of our new annual recurring revenue booked which reflects our ability to leverage external sales resources to drive growth and market share gain in a cost effective manner.

And now turning to expenses and profitability for the fourth quarter, our GAAP gross profit was $24 million versus $15.3 million from the same period during the previous year. Our GAAP operating income for the quarter was $2.3 million, compared to an operating income of $1.2 million during the fourth quarter of 2011.

Our GAAP net income per share was $0.05 for the fourth quarter of 2012 based on $40.7 million fully diluted shares, compared to net income of $0.02 per share on $38.5 million fully diluted shares in the year ago period.

Now taking a look at our results on a non-GAAP basis, our gross margin percentage was 55.5%, which is up from 52.9% in the same quarter last year. We are pleased with our ability to improve gross margins during the quarter as the fourth quarter was the first full quarter of including Symphony's performance in Tango's results. And Symphony has historically had lower gross margins than Tango.

Our non-GAAP operating income, which excludes stock based compensation expense and the amortization of intangibles associated with acquisitions among other things was $7.2 million for the quarter, an increase of 106% on a year-over-year basis and representing 16.5% of revenue.

Non-GAAP net income per share was $0.17, based on $40.7 million fully diluted shares and exceeded our guidance of $0.15 to $0.16 per share. This compares to $0.08 per share based on 38.5 million shares in the year ago period. Our fourth quarter adjusted EBITDA was $7.5 million at the high end of our guidance range. This represented an increase of 103% compared to the same quarter last year and a record adjusted EBITDA margin of 17.1%.

Now let me run through seven summary level financial results for the full year. Total revenue for 2012 was $154.5 million, up 47% year over year. Non GAAP gross margin was 55.2% and contributed to non GAAP operating income of $21.1 million, which was up 74% year-over-year.

Non-GAAP diluted net income per share was $0.50 for the year based on 39.9 million shares, up 72% compared to $0.29 per share based on $33.5 million shares in 2012. During 2012 GAAP diluted net income per share was $0.08, based on 39.9 million weighted average diluted shares outstanding compared to a loss of $0.31 after deducting dividends and accretions related to our preferred stock and based on $16.4 million weighted average diluted shares outstanding for 2011.

And now turning to the balance sheet, we ended the quarter with $50.2 million in cash which is down from $55.7 million at the end of the third quarter, primarily due to the payment of deferred purchase price obligations of $5.6 million and related to the acquisitions and the repurchase of common shares.

During the fourth quarter we repurchased approximately $4.4 million of stock, of which approximately $1.7 million was settled in Q1. As a reminder we announced a $20 million share repurchase program in late November of 2012.

During the fourth quarter we generated $3.2 million in cash flow from operations and 2.7 million in unleveraged free cash flow, compared to $4.8 million and $4.4 million respectively in the fourth quarter of 2011. The year-over-year decline was primarily due to a slight delay of receiving payments from one of our large channel partners, a majority of which we have already collected in the first quarter.

As we have mentioned in the past, quarterly cash flow can have variability due to the number of moving parts and our trend of strong and growing cash flow remains the same. On a full year basis we generated $16.7 million in cash flow from operations, up 65% over 2011.

Unlevered free cash flow was $15 million, up 42% over 2011, and was approximately $2 million below our guidance due to delayed payments from our channel partners that I just mentioned. As a reminder our unlevered free cash flow metric adds back net interest payments and IPO expense payments for 2011 only, while subtracting capital expenditures.

I’d like to now finish with some thoughts regarding our financial outlook. Starting with the full year 2013, we are currently targeting revenue to be in the range of $188.5 million to $191.5 million for the full year 2013, representing growth of 22% to 24% year-over-year, up from our prior guidance of a $188 million to $191 million. This continues to imply organic recurring revenue growth of approximately 16% to 18% for the full year 2013, albeit off of stronger than expected actual 2012 results.

As a reminder we are using the most narrow definition of organic growth that includes acquisitions after an acquisition has been with the company for four full quarters. In addition due to the impact from rolling in our acquisitions except Symphony starting Q1 2013, we continue to expect to start the year at a calculated organic growth rate below 16% to 18% range and end the year above the 16% to 18% range, which we believe is most indicative of the level of our long term recurring organic revenue growth model of 20%.

Also, there remains no change to our multiyear goal of targeting 20% organic recurring revenue growth which we believe we are well positioned to achieve based on the growth and continued execution of our sales force, increasing momentum of up-selling and cross selling to existing customers and continued traction with our strategic alliance partners.

From a profitability perspective, we expect 2013 adjusted EBITDA of $31 million to $32 million, up 39% to 43% in a year-over-year basis, which represents an annual adjusted EBITDA margin of 16.6% at the midpoint, and 220 basis point of margin expansion on a year-over-year basis compared to 2012.

We expect full year 2013 non-GAAP net income per share which excludes stock based compensation and amortization related to acquisitions among other things to be in the range of $0.67 to $0.70, up 34% to 40% on a year-over-year basis, based on approximately 41 million weighted average diluted shares outstanding and a tax provision of approximately $1 million.

Finally we expect free cash flow to be the range of $25 million to $26 million for the full year 2013, which represents growth of 67% to 73% on a year over year basis. Our free cash flow for 2013 is expected to benefit from the previously mentioned receipt of a few million dollars from our channel partner that was scheduled to make their payment before the end of 2012.

Now turning to the first quarter of 2013, total revenue for the first quarter is expected to be in the range of $43.8 million to $44.3 million, a growth of 28% to 30% year over year. While we are not guiding to specific line items, we directionally expect non-recurring revenues to decline sequentially after an unusually strong fourth quarter.

Adjusted EBITDA is expected to be the range of $6.4 million to $6.6 million, representing an adjusted EBITDA margin of approximately 14.8% at the midpoint. The sequential decline in adjusted EBITDA margin in Q1 compared to Q4 reflects our typical increase in costs early in the year associated with payroll taxes, sales kick off and higher marketing budgets.

Similar to 2012 we expect Q1 to be in the low point and ramp throughout the year. Our non GAAP net income per share which excludes stock based compensation and amortization related to acquisitions among other things is expected to be approximately $0.14 based on approximately $40.8 million weighted average diluted shares outstanding, and a tax provision of approximately $200,000.

So in summary, we are very pleased with our continued strong execution in our core business evidenced by our strong finish to a record year. We expect to continue seeing increased leverage as we scale our business and extend our leadership position in the CLM market by enhancing our technology, expanding our new customer base and increasing the spend of our existing customer base, in addition to introducing new channel partnerships, all of which will also enhance our long term organic growth opportunity.

With that we’d be happy to take any of your questions.

Question-and-Answer Session


(Operator Instructions). Our first question comes from Tom Ernst from Deutsche Bank.

Tom Ernest - Deutsche Bank

I wanted to ask you a couple of big picture questions this quarter. Lots of detail on this call, so I think it was pretty clear on the numbers. The first one, in our channel checking this quarter with customers and partners, we heard a lot more awareness and interest in not only the MDM line. I'm going to have a follow on, so let me ask you first about MDM. So I heard you say in the call that feature sets growing, you mentioned a couple of capabilities that we picked up on as well. I'm curious if that interest and demand that we're picking up on, is that translating into an inflection in that business that you are seeing in terms of either already orders or pipeline. How is the opportunity growing on MDM?

Al Subbloie

Tom, I appreciate the question. Yes, we are having some benefit in the integrated messaging. As we've been saying for a long time, we believe that the MDM market from a health perspective is a standalone market, we believe philosophically that the overall lifecycle of the device is really mode strategic for the enterprise.

So we sell the bundled solution, we're definitely getting an uptick in the bundle. We saw that in Q4 and obviously in our guidance, in our growth expectation for 2013 MDM is one key component of all the things that we do. We have other obviously things that are going on that we feel good about, but we're definitely seeing some of that in the marketplace. I do want to caution you that the deal size of the MDM component is generally smaller than the deal size of the core but when you add it as a bundled offering it obviously gives us the opportunity for increased sub sell cross sell in the customer base. That answers the question Tom?

Tom Ernst - Deutsche Bank

It does. I want to ask you about something else we picked up a couple of anecdotes on. And that's we're hearing of customers trying to pull you into managing IT hardware spend management or IT systems spend management. And it sounds like you've been resistant on that but it sounds like there was some pretty great demand. Is that something you'd ever consider doing?

Al Subbloie

Yes it is - and I'm not afraid to mention it. As you know in the user group meeting that I know you attended and a number of other people did as well, in the new matrix CLM solution that we talked about and showed our customers, it is our intent to be able to accommodate a degree of IT management.

As you know the tablet from my perspective is a mobile device and it's not a far reach for us to get over to the laptop and the desktop, which starts to really begin to become an IT management. So the process in some of the newer development innovation over the next 12 to 24 months, we do plan on extending the region into that spend. We'll get more details off everybody.

Tom Ernst - Deutsche Bank

One final big picture question, so the debate is and you mentioned here at the end of the call that your target is to grow organic recurring by 20% annually when you've normalized the customer, so you've moved the bases. What's the most recent acquisition over the last two years? Are you finding that the class of customers you've moved first are driving that kind of organic growth already? So I recognize that that's not happening across the whole base. But across the four most recent larger acquisitions are the earliest migrations following the pattern that's consistent with 20% organic growth.

Al Subbloie

Yes, I'd say yes, a good example was in the last call, you know talked about the SAP deal which was a large deal for us which was an upsell from one of the earlier acquisitions as we know we're headlong into the profit line migrations and really just beginning the symphony migration so yes, it is going at least as planned. We're pleased with the progress, certainly a lot of work to do and the teams are busy between our organic ads and the migrations we have plenty of implementations going on, but we can handle it, we've built the internal systems to do it well and we see the internal results emerging and that's part of why we think we had a good quarter and feel good about 2013.


We'll now go to David Lynn from Barclays.

David Lynn - Barclays

I just have another big picture but macro question. Did you see any of macro slowdown or reduction in appetite for larger deals amongst your customer base towards the end of the quarter?

Al Subbloie

No. We did not and I’ll remind everybody that the ROI on our solution is compelling, typically in year. If we go back in time even in the heart of the financial issues that the world faced in '08, '09, and beyond, we didn't see any issues we continue not to see any macro issues and again aren't concerned about that on a go forward basis and no, we continue to see the pipeline grow. I think everybody knows we're expanding our sales organization and we're bringing on good productive resources and by the way these statements I'm making are global statements, not just here in the U.S., we're seeing good market opportunities as we thought we would in Asia-Pac in AMEA, Latin America, Canada etcetera.

David Lynn - Barclays

I think last call you mentioned a number of current reps that you had, maybe I missed the discourse but I didn't quite get the number and I think you also talked about targeting 50% growth in the number of reps for the first half of '13. I was just wondering how that's tracking?

Al Subbloie

Good question. You didn’t hear the number, I didn’t actually state the number but I believe the last call we mentioned that we were approximately 50 caring folks. I don’t mind sharing that we are now approximately at the end of the quarter, approximately 60. Directly on target with our goal and I think we shared with everybody. We'd be looking in the mid-70s by midpoint of the year. I feel very good about that. Our pipeline of hiring is strong and good productive resources, so we're on target with what we told everybody.


Our next question comes from Terry Tillman from Raymond James.

Terry Tillman - Raymond James

As you guys have kind of pushed the agenda here in terms of evolving this market from just a basis 10 solution to CLM and last quarter we saw this large SAP commitment where I think it's global and it's all encumber thing. I've asked this a couple of times in the past, but I'd like to get an update. In terms of like the 39 new customers, are you seeing any change where you're seeing more of these bigger commitments out front in terms of, hey we want to do all regions or we want to go across the mobile (inaudible). Do you still see the majority of new customers doing more of a peace mail approach?

Al Subbloie

It's both Terry, but there is no doubt there is a trend, that trend's been going on. It continues to go on. As we look into 2013, it looks like it will continue to trend towards a global view. It's certainly our advantage in the market as you know. Our footprint across the globe has increased dramatically and we continue and will continue to increase that footprint. We're believers in local presence in most of these markets, so you'll see us aggressively in the next couple of years continue to do that. But there is no doubt there is a trend towards the global acquisition of our products. Saying that, I also caution you that not everybody buys globally. Not all companies have their act together enough to have a centralized view and when they don’t they will buy regionally. It's one of the reasons why we believe in regional presence because we still do deals and will continue to do deals in region that begin to give us the up sell opportunity across the globe.

Gary Martino

And when they buy globally, obviously they can't rollout the whole globe all at once. So it typically will be a kind of a phase rollout if they're buying globally.

Terry Tillman - Raymond James

Got it and I guess for either of you all, in terms of the carrier side out, it does seem like we're hearing more commentary about carriers as an opportunity as opposed to competitors. Maybe you could give us a sense of how relevant carriers are in that 24% of the total ARR number for '12. And into '13, what's happening? Are you replacing like a smaller point solution from either of these new services that they're able to offer their customers by what have you.

Al Subbloie

Really the latter. I mean the last part you said which was offering new services and I think what's happening and it's pretty clear that it's trending globally which is why you're hearing about it, and we think in the next couple of years we'll certainly be adding more carrier partners. I think the mobile revolution has created a bit of resurgence for a carrier to want to be able to have and increase the relationship with their customers. You've heard me use the term mobility management services, MMS, it's a term I think you'll hear more about and it's really a specialty term within CLM that focuses on mobile and if you think about all the things that we do. We believe we have a very comprehensive MMS solution and carriers are going to find it difficult to build this organically with the complexity that we've certainly overcome over the last many years. Much easier for them to light label solutions through Tangoe and then in addition to that, the periphery of real time expense management and really for them being able to manage bill shock which has become a problem for the carriers it really adds to the ability to have a stronger relationship with Tangoe across many different areas. So I think we feel like it's a bigger partnership opportunity than a competitive one and again we're seeing that right now in the marketplace.

Terry Tillman - Raymond James

And guys this is my last question Gary for you is just, as we look at operating cash flow for the year you gave us that commentary and the guidance for free cash flow, but is there going to be a seasonality skew in terms of the first quarter because of that channel partner payment and could you help us how we should build out our cash flow on a more quarterly basis, so what's the biggest quarter that sort of thing, thanks a lot.

Gary Martino

Yes, I think as we touched on again we've said this on a consistent basis that clearly cash flow can vary good amount from quarter to quarter. That said, I think we've shared that we think Q1 will benefit from the timing on that channel partner, so you know typically you might model a down tick in Q1 we wouldn't do that here in this scenario, we should have a good Q1, and from there we would probably have a reasonably consistent year. Again, we might have a quarter that's slightly stronger than another but we feel good about the overall guidance of 25 to 26, which is little bit stronger than we may have guided before this fall over. And you can see that with the growth rate of the cash, you know the cash flow growth rate is even higher than the adjusted EBITDA guidance growth rate.


(Operator Instructions). We'll now go to Tom Roderick from Stifel Nicolaus.

Tom Roderick - Stifel Nicolaus

So Gary I wanted to just kind of dig through the guidance and the notion of the organic where you talk about acceleration throughout the year. I guess the question behind it would be, you know what gives you the confidence that you're going to see that acceleration. How much of it have you already booked already that gives you that confidence versus what you're seeing in the pipeline? And then the second part of the question is, how much do you need to kind of turn around the acquired businesses which in some cases had been flat, some cases have been down. But how much do you need to sort of accelerate HCL Telewares profit line relative to getting those customers on your platform and up selling them.

Gary Martino

Well one of the reasons that we've talked about this in the past, one of the reasons for the ramp is also just kind of a mathematical element which is simply when you roll in all that acquired revenue into that base from the prior year, when you're doing the comparison, obviously as we've shared a lot of that revenue isn't growing yet, because some of it hasn't been migrated and some of it hasn’t been migrated for that long. So, some of it's a mathematical equation that once you roll that all in, obviously for a short period of time that will have an impact on your growth rate. But if you continue to execute throughout the year and you work through the math, what will happen is as you add quarter-to-quarter you'll expand that growth rate because you're kind of growing into that base if you will. So all of that said, obviously we don’t share kind of backlog or anything like that if you will. But we enter a quarter we have a high degree of visibility, you know that we gave guidance at the end of Q3 for next year. So we felt comfortable doing that, you know maybe a little earlier than others and obviously that's based on the business dynamics.

Tom Roderick - Stifel Nicolaus

Got it. I heard you say that Symphony contributed $5 million of recurring earlier in the call. Did I hear you say that the aggregate of the other acquired business was $5 million or did I misunderstand that. And if I did, do you have that number what the aggregate of the other acquired sort of inorganic thesis were on the recurring side?

Gary Martino

You may be thinking about we moved right to non-recurring which happened to be for the quarter happened to be 5 million as well.

Tom Roderick - Stifel Nicolaus

Got it.

Gary Martino

And then Symphony, the Symphony recurring revenue was 5 million and if you may recall, we guided 4.9 so it was right in line with that guidance for Symphony recurring. We haven't broken out everything else and because of the number of acquisitions as we shared, we tried to focus on kind of creating an outline for people going forward so that they can understand the metrics as we roll in everything into the base and then really just the only thing then we're dealing with is Symphony.

Tom Roderick - Stifel Nicolaus

Got you. Last one from me and a broader question for both of you here. It's been a few quarters now since you've done much in the way of M&A, you've been utilizing your cash to buy back stock, what's your appetite look like on the M&A front as we get into 2013 here.

Gary Martino

Consistent with what we said in the Q3 call is that we will not be as active as we have historically, you know certainly with anything significant. That said over the long haul, we still have an M&A strategy, but you know I think it's been good. We've been focused like a laser on assimilating which is good for the business, growing the sales organization so we're actively expanding into geographical regions. So you should see the same general strategy from us here in the near quarter, quarters coming up.


We will now go to Joel Fishbein from Lazard.

Joel Fishbein - Lazard Capital Markets

I've a follow up on what Terry asked you about - the new logos, are they any average deal sizes or metrics that you can give us regarding the new logos, how big they are in terms of size. I know you gave us the total spend but is there any correlation between that and the number of new logos.

Al Subbloie

Let me start from the beginning, we got about roughly a quarter of our business from the alliance channels, little under a third from our customers and the balance from our direct organization (inaudible), that's been a fairly consistent breakdown. We've shared historically that our ASP has been in the rough 150-200,000 (inaudible) revenue range. You know overall for the year we haven't really see a major shift in that but I again will caution everybody that our range can be anywhere from a low of 30-50 upwards of several million. And we see that consistently, it's been the case. We see that going into our pipeline in 2013. Some of that difference, Joel, can be because a company, A, might be very large and buy everything from us globally or a company may buy one piece in a region. Yet the balance of that can come through obviously up-sell cross sell. We haven’t seen any real shift in that model, and overall you're looking at an ASP that is in that range of 150 to 200.

Joel Fishbein - Lazard Capital Markets

Great. And then other follow up just to that in terms of you've on planned with regards to your new hires in terms of (inaudible). How are you managing or monitoring their productivity ramp and is that as you scaled up the organization. Is that continued with the metrics that you wanted to be?

Al Subbloie

So it is - we're excited about the team. We actually just came off our global sales kick off meeting that we had last week here in Orange. And it was a great kick off to the year, you know when we quote those numbers, I want to remind you or quoting that the peer quote recurring headcount. We're not quoting the sales management tier above that, which is increased fairly dramatically and managing those resources. Not management tier has a tremendous amount of experience and the smart (inaudible) because the number of those folks actually came from industry as are some of the sales reps that were bringing on board. When they do, they get productive quicker than when we have someone that does not come out of industry and that ramp maybe longer. A normal ramp might be 6 to 8 months ramp for a new rep. If you're an industry rep, you could be on the 3 to 5 months range just because they're more experienced, you just have to learn our products. We also have a full bore training group now, that we certify everybody. So we've enhanced the resources to really bring these folks up to speed in the entire organization. I've been simply quoting (inaudible) but the overall organization has expanded nicely.


(Operator Instructions) We'll now go to Richard Baldry from Wunderlich Securities.

Richard Baldry - Wunderlich Securities

Thanks. Can you just talk a little about the competitive environment. You've really done a good job with taking new line of competitors out. I'm wondering if there is anything new year seeing, anyone who has really faded away and then maybe in your partners in your channels, whether any or disproportionate sort of contributors or if it sales split fairly evenly to kind of minimize risk of overconcentration on the partnerships? Thanks.

Al Subbloie

Thanks for the question. Let me take your last question first, I think as I look back on the years, it's been a fairly balanced partner model across our partnerships. So much so that I'm a believer in having it generally expand not with the ridiculous number of new partners, but I think we have a well-balanced model, I don’t feel we have really any degree of dependency across all those partners, so that’s been a positive I’d expect that to be the same in terms of 2013 and beyond. To what was the first question again would your remind me.

Richard Baldry - Wunderlich Securities

To the competitive environment you see any real changes in it all.

Al Subbloie

I am out there quite a bit. I think in general we have expanded the distance between TANGOE and the rest of the market pretty dramatically since going public. I think remind everybody we had said we were greater than three times larger than the nearest competitor and we probably double or close to triple that distance between us in the rest of the market, it doesn’t mean we don’t competition, the geographical expansion strategy we have there are off in local player in those markets that might be a big intrigue but again we have the global advantage growing in those marketplaces, so overall I would not say the competitor going stronger if anything there is probably been slight weakening overtime given the distance we’ve created with competition.


And there are no further questions, so I’d like to turn the conference back over to our presenter for any additional and closing remarks.

Al Subbloie

Well I just want to thank everyone for joining the call. We’re obviously billing a very good about strong 2012 and we feel very good going into 2013 and beyond in executing our expansion strategy really it’s throughout the globe and certainly we’ll be looking forward to sharing our progress with everybody on the Q1 call. Thanks for joining us today.


This concludes today’s presentation. Thank you all for your participation.

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