10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2014

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period from to

Commission File Number: 001-35469

VOCERA COMMUNICATIONS, INC.

(Exact name of registrant as specified in its charter)

Delaware	94-3354663
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

Vocera Communications, Inc.

525 Race Street

San Jose, CA 95126

(408) 882-5100

(Address and telephone number of principal executive offices)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x  No  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuance to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

Large accelerated filer	¨	Accelerated filer	x
Non-accelerated filer	¨	Smaller reporting company	¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Class	Outstanding at May 5, 2014
Common Stock, $0.0003 par value per share	25,163,358

VOCERA COMMUNICATIONS, INC.

QUARTERLY REPORT ON FORM 10-Q

FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2014

INDEX

PART I: FINANCIAL INFORMATION

		Page No.
Item 1.	Financial Statements (Unaudited)	3
	Condensed Consolidated Balance Sheets	3
	Condensed Consolidated Statements of Operations	4
	Condensed Consolidated Statements of Comprehensive Income (Loss)	5
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	24
Item 4.	Controls and Procedures	25
	PART II: OTHER INFORMATION
Item 1.	Legal Proceedings	25
Item 1A.	Risk Factors	26
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	40
Item 3.	Defaults Upon Senior Securities	41
Item 4.	Mine Safety Disclosures	41
Item 5.	Other Information	41
Item 6.	Exhibits	42
Signatures

2

PART I: FINANCIAL INFORMATION

Item 1. Financial Statements (Unaudited)

Vocera Communications, Inc.

Condensed Consolidated Balance Sheets

(In Thousands, Except Share and Par Amounts)

(Unaudited)

	March 31, 2014			December 31, 2013
Assets
Current assets
Cash and cash equivalents	$	25,912		$	39,652
Short-term investments	95,847			88,024
Accounts receivable, net of allowance	20,151			23,543
Other receivables	801			882
Inventories	5,340			5,665
Prepaid expenses and other current assets	2,593			1,892
Total current assets	150,644			159,658
Property and equipment, net	4,957			5,365
Intangible assets, net	2,664			1,544
Goodwill	7,678			5,575
Other long-term assets	1,014			965
Total assets	$	166,957		$	173,107
Liabilities and stockholders' equity
Current liabilities
Accounts payable	$	2,656		$	3,531
Accrued payroll and other current liabilities	8,901			9,841
Deferred revenue, current	25,177			26,133
Total current liabilities	36,734			39,505
Deferred revenue, long-term	6,470			6,398
Other long-term liabilities	1,736			1,641
Total liabilities	44,940			47,544
Commitments and contingencies (Note 7)
Stockholders' equity
Preferred stock, $0.0003 par value - 5,000,000 shares authorized as of March 31, 2014 and December 31, 2013; zero shares issued and outstanding	—			—
Common stock, $0.0003 par value - 100,000,000 shares authorized as of March 31, 2014 and December 31, 2013; 25,128,149 and 24,967,140 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively	8			7
Additional paid-in capital	192,832			189,966
Accumulated other comprehensive income	—			23
Accumulated deficit	(70,823		)	(64,433		)
Total stockholders’ equity	122,017			125,563
Total liabilities and stockholders’ equity	$	166,957		$	173,107

The accompanying notes are an integral part of these condensed consolidated financial statements.

3

Vocera Communications, Inc.

Condensed Consolidated Statements of Operations

(In Thousands, Except Per Share Amounts)

(Unaudited)

	Three months ended March 31,
	2014			2013
Revenue
Product	$	14,189		$	12,960
Service	10,487			9,453
Total revenue	24,676			22,413
Cost of revenue
Product	4,990			4,610
Service	4,814			4,084
Total cost of revenue	9,804			8,694
Gross profit	14,872			13,719
Operating expenses
Research and development	4,066			3,614
Sales and marketing	12,743			10,232
General and administrative	4,397			3,298
Total operating expenses	21,206			17,144
Loss from operations	(6,334		)	(3,425		)
Interest income	87			24
Other expense, net	(65		)	(47		)
Loss before income taxes	(6,312		)	(3,448		)
Provision for income taxes	(77		)	(51		)
Net loss	$	(6,389	)	$	(3,499	)
Net loss per share
Basic and diluted	$	(0.26	)	$	(0.14	)
Weighted average shares used to compute net loss per share
Basic and diluted	25,047			24,282

The accompanying notes are an integral part of these condensed consolidated financial statements.

4

Vocera Communications, Inc.

Condensed Consolidated Statements of Comprehensive Loss

(In Thousands)

(Unaudited)

	Three months ended March 31,
	2014			2013
Net loss	$	(6,389	)	$	(3,499	)
Other comprehensive loss, net:
Change in unrealized loss on investments, net	(23		)	(4		)
Comprehensive loss	$	(6,412	)	$	(3,503	)

The accompanying notes are an integral part of these condensed consolidated financial statements.

5

Vocera Communications, Inc.

Condensed Consolidated Statements of Cash Flows

(In Thousands)

(Unaudited)

	Three months ended March 31,
	2014			2013
Cash flows from operating activities
Net loss	$	(6,389	)	$	(3,499	)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	734			536
Change in non-cash interest income, net	23			14
Loss on disposal of property and equipment	76			—
Allowance for doubtful accounts	7			23
Inventory write-down	15			26
Change in lease-related performance liabilities	(106		)	—
Stock-based compensation expense	2,598			1,704
Excess tax benefits from employee stock plans	—			(257		)
Changes in operating assets and liabilities:
Accounts receivable	3,571			6,789
Other receivables	81			115
Inventories	311			(1,819		)
Prepaid expenses and other assets	(750		)	(932		)
Accounts payable	(881		)	133
Accrued payroll and other liabilities	(987		)	(3,844		)
Deferred revenue	(974		)	(1,175		)
Net cash used in operating activities	(2,671		)	(2,186		)
Cash flows from investing activities
Purchase of property and equipment	(264		)	(1,502		)
Business acquisitions, net of cash acquired	(3,500		)	—
Purchase of short-term investments	(41,318		)	—
Maturities of short-term investments	33,005			24,971
Sales of short-term investments	446			—
Net cash (used in) provided by investing activities	(11,631		)	23,469
Cash flows from financing activities
Cash from lease-related performance obligations	307			106
Payment for repurchase of early exercised options	(11		)	(3		)
Excess tax benefits from employee stock plans	—			257
Proceeds from issuance of common stock from the employee stock purchase plan	—			1,596
Proceeds from exercise of stock options	433			421
Tax withholdings paid on behalf of employees for net share settlement	(167		)	—
Proceeds from exercise of common stock warrants	—			226
Net cash provided by financing activities	562			2,603
Net (decrease) increase in cash and cash equivalents	(13,740		)	23,886
Cash and cash equivalents at beginning of period	39,652			92,521
Cash and cash equivalents at end of period	$	25,912		$	116,407
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment in accounts payable and accrued liabilities	$	63		$	257

The accompanying notes are an integral part of these condensed consolidated financial statements.

6

Notes to Unaudited Condensed Consolidated Financial Statements

1. The Company and Summary of Significant Accounting Policies

Organization and Business

Vocera Communications, Inc. (the “Company”) is a provider of secure, integrated, intelligent communication solutions, focused on empowering mobile workers in healthcare, hospitality, energy, and other mission-critical mobile work environments, in the United States and internationally. The majority of the Company's business is currently generated from sales of its solutions in the healthcare market, but the Company is expanding its sales and marketing efforts to enter and grow in other markets. Vocera helps its healthcare customers improve patient safety and satisfaction, and increase hospital efficiency and productivity through its Communication and Care Experience solutions. These have been installed in more than 1,200 healthcare and non-healthcare organizations worldwide.

The Vocera Communication System, which includes an intelligent enterprise software platform, a lightweight, wearable, voice-controlled communication badge, and smartphone applications, enables users to connect instantly with other staff simply by saying the name, function or group name of the desired recipient. It also securely delivers text messages and alerts directly to and from smartphones, replacing legacy pagers. The Vocera Care Experience is a hosted, software solution suite that coordinates and streamlines patient-to-provider and provider-to-provider communication across the continuum of care.  The solution is used to provide personalized patient instructions and education, alert and notify physicians and caregivers of patients’ changing care plans, and track patient satisfaction pre, during, and post-hospitalization.  Vocera Care Experience is complemented by the Company’s Experience Innovation Network, a membership-based program to spread the adoption of leading strategies to improve patient and staff experience.

The Company was incorporated in Delaware on February 16, 2000. The Company formed wholly-owned subsidiaries Vocera Communications UK Ltd and Vocera Communications Australia Pty Ltd. in 2005, Vocera Hand-Off Communications, Inc., Vocera Canada, Ltd. and ExperiaHealth, Inc. in 2010 and Vocera Communications India Private Ltd. in 2013.

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission, and include the accounts of Vocera and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. The year-end condensed balance sheet data was derived from the Company's audited financial statements, but does not include all disclosures required by U.S. GAAP.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim consolidated financial information. The results for the quarter presented are not necessarily indicative of the results to be expected for the year ending December 31, 2014 or for any other interim period or any other future year.

Use of Estimates

The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. The estimates include, but are not limited to, revenue recognition, useful lives assigned to long-lived assets, excess and obsolete inventory charges, warranty reserves, stock-based compensation expense, provisions for income taxes and contingencies. Actual results could differ from these estimates, and such differences could be material to the Company’s financial position and results of operations.

Revenue Recognition

The Company derives revenue from the sales of communication badges, smartphone application software, perpetual software licenses for enterprise software that is essential to the functionality of the communication badges, software maintenance, extended warranty and professional services. The Company also derives revenue from the sale of licenses for software that is not essential to the functionality of the communication badges. The Company's revenue recognition policy has not changed from that described in its Annual Report on Form 10-K for the year ended December 31, 2013.

7

A portion of the Company's sales are made through multi-year lease agreements with customers. When these arrangements are considered sales-type leases, upon delivery of leased products to customers, the Company recognizes revenue for such products in an amount equal to the net present value of the minimum lease payments. Unearned income is recognized as part of product revenue under the effective interest method. The Company recognizes revenue related to executory costs when such executory costs are incurred.

Proceeds from transfers of sales-type leases to third-party financial companies are allocated between the net investment in sales-type leases and the executory cost component for remaining service obligations based on relative present value. The difference between the amount of proceeds allocated to the net investment in lease and the carrying value of the net investment in lease is included in product revenue. Proceeds allocated to the executory cost component are accounted for as financing liabilities.

For the three months ended March 31, 2014 and 2013, the Company transferred $0.5 million and $0.2 million, respectively of lease receivables in non-recourse sales to third-party financial companies, with immaterial net gains. For the three months ended March 31, 2014 and 2013, the Company recorded $0.3 million and $0.1 million, respectively, of financing liabilities for future performance of executory service obligations. For lease receivables retained as of March 31, 2014 and December 31, 2013, the Company recorded $1.3 million and $1.4 million of net investment in sales-type leases, respectively, equivalent to the minimum lease payments less the unearned interest portion.

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued new guidance for the gross versus net presentation of unrecognized tax benefits. The FASB concluded that an unrecognized tax benefit should be presented as a reduction of a deferred tax asset for a net operating loss (“NOL”) or other tax credit carryforward when settlement in this manner is available under the tax law. The new guidance was effective for the Company's first quarter of 2014, applied prospectively. Adoption of this standard was not significant to the Company's financial position or results of operations.

In April 2014, the FASB issued revised guidance for reporting discontinued operations and disclosures of disposals of components of an entity. Under the new guidance, only disposals representing a strategic shift in the entity’s operations and financial results will be presented as discontinued operations. In addition, the new guidance requires certain expanded disclosures about discontinued operations and limited disclosures for a disposal not qualifying for such reporting. The Company’s effective date for these amendments will be the first quarter of 2015, with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial position or results of operations.

2. Fair Value of Financial Instruments

The Company’s cash and cash equivalents and short-term investments are carried at their fair values with any differences from their amortized cost recorded in equity as unrealized gains (losses) on marketable securities. As a basis for determining the fair value of its assets and liabilities, the Company established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. For the three months ended March 31, 2014, there have been no transfers between Level 1 and Level 2 fair value instruments and no transfers in or out of Level 3.

The Company's money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The fair value of the Company's Level 2 fixed income securities are obtained from independent pricing services, which may use quoted market prices for identical or comparable instruments or model-driven valuations using observable market data or other inputs corroborated by observable market data. . The Company does not have any financial instruments which are valued using Level 3 inputs.

8

The Company’s assets that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of March 31, 2014 and December 31, 2013, are summarized as follows (in thousands):

	March 31, 2014						December 31, 2013
	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets
Money market funds	$	5,507	$	—	$	5,507	$	22,991	$	—	$	22,991
Certificates of deposits	—		246		246		—		—		—
Commercial paper	—		3,599		3,599		—		900		900
U.S. government agency securities	—		11,596		11,596		—		11,279		11,279
U.S. Treasury securities	—		5,207		5,207		—		5,235		5,235
Municipal debt securities	—		4,723		4,723		—		4,765		4,765
Corporate debt securities	—		81,403		81,403		—		67,055		67,055
Total assets measured at fair value	$	5,507	$	106,774	$	112,281	$	22,991	$	89,234	$	112,225

The Company had no liabilities as of March 31, 2014 and December 31, 2013 that were measured at fair value on a recurring basis.

9

3. Cash, Cash Equivalents and Short-Term Investments

The following tables present current and prior-year-end balances for cash, cash equivalents and short-term investments (in thousands):

	As of March 31, 2014
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair value
Cash and cash equivalents:
Demand deposits and other cash	$	9,478	$	—	$	—		$	9,478
Money market funds	5,507		—		—			5,507
Commercial paper	1,000		—		—			1,000
Certificates of deposit	246		—		—			246
Corporate debt securities	9,682		—		(1		)	9,681
Total cash and cash equivalents	25,913		—		(1		)	25,912
Short-Term Investments:
Commercial paper	2,599		—		—			2,599
U.S. government agency securities	11,591		6		(1		)	11,596
U.S. Treasury securities	5,203		4		—			5,207
Municipal debt securities	4,715		8		—			4,723
Corporate debt securities	71,735		17		(30		)	71,722
Total short-term investments	95,843		35		(31		)	95,847
Total cash, cash equivalents and short-term investments	$	121,756	$	35	$	(32	)	$	121,759

	As of December 31, 2013
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair value
Cash and cash equivalents:
Demand deposits and other cash	$	15,451	$	—	$	—		$	15,451
Money market funds	22,991		—		—			22,991
Commercial paper	150		—		—			150
Corporate debt securities	1,060		—		—			1,060
Total cash and cash equivalents	39,652		—		—			39,652
Short-Term Investments:
Commercial paper	750		—		—			750
U.S. government agency securities	11,275		5		(1		)	11,279
U.S. Treasury securities	5,233		2		—			5,235
Municipal debt securities	4,758		7		—			4,765
Corporate debt securities	65,982		20		(7		)	65,995
Total short-term investments	87,998		34		(8		)	88,024
Total cash, cash equivalents and short-term investments	$	127,650	$	34	$	(8	)	$	127,676

The Company has determined that the unrealized losses on its short-term investments as of March 31, 2014 and December 31, 2013 do not constitute an "other than temporary impairment." The unrealized losses for the short-term investments have all been in a continuous unrealized loss position for less than twelve months. The Company’s conclusion of no “other than temporary impairment” is based on the high credit quality of the securities, their short remaining maturity (less than five months, weighted average) and the Company’s intent and ability to hold such loss securities until maturity.

10

Classification of the cash, cash equivalent and short-term investments by contractual maturity was as follows:

(in thousands)	One year or shorter		Between 1 and 2 years		Total
Balances as of March 31, 2014
Cash and cash equivalents (1)	$	25,912	$	—	$	25,912
Short-term investments	87,798		8,049		95,847
Cash, cash equivalents and short-term investments	$	113,710	$	8,049	$	121,759
Balances as of December 31, 2013
Cash and cash equivalents (1)	$	39,652	$	—	$	39,652
Short-term investments	71,464		16,560		88,024
Cash, cash equivalents and short-term investments	$	111,116	$	16,560	$	127,676
(1) Includes demand deposits and other cash, money market funds and other cash equivalent securities, all with 0-90 day maturity at purchase.

All the above tables exclude restricted cash, primarily held in certificates of deposit, of $0.3 million as of March 31, 2014 and December 31, 2013, which is classified within prepaid expenses and other current assets on the balance sheet.

4. Net Loss Per Share

For fiscal years preceding 2013, basic and diluted net (loss) income per common share were presented in conformity with the two-class method required for participating securities.

For the three months ended March 31, 2014 and 2013, the two-class method is not applicable due to the net losses, which must be attributed entirely to the common shareholders. Additionally, as of March 31, 2014 and December 31, 2013, there were only 6,821 and 26,463 shares of participating securities, respectively, consisting of repurchasable shares issued from early exercise of options and unvested restricted shares; thus the future effect of participating securities would generally be immaterial, even in years with net income.

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share amounts):

	Three months ended March 31,
	2014			2013
Numerator:
Net loss	$	(6,389	)	$	(3,499	)
Denominator:
Weighted-average shares used to compute net loss per common share -basic and diluted	25,047			24,282
Net loss per share
Basic and diluted	$	(0.26	)	$	(0.14	)

The following securities were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:

	Three months ended March 31,
(in thousands)	2014	2013
Options to purchase common stock	3,305	3,180
Common stock subject to repurchase	7	36
Warrants to purchase common stock	44	44
Restricted stock units	802	441
Restricted stock awards	—	12

11

5. Goodwill and Intangible Assets

Goodwill

As of March 31, 2014 and December 31, 2013, the Company had $7.7 million and $5.6 million of goodwill acquired. During the three months ended March 31, 2014, the Company recorded additional goodwill of $2.1 million for the mVisum acquisition (see Note 11, "Business acquisition"). As of March 31, 2014, there were no changes in circumstances indicating that the carrying values of goodwill or acquired intangibles may not be recoverable.

Intangible Assets

Acquisition-related intangible assets are amortized either straight-line, or over the life of the assets on a basis that resembles the economic benefit of the assets. This yields amortization in the latter case that is higher in earlier periods of the useful life.

The gross carrying amounts of intangible assets which  have been fully amortized are removed annually in the subsequent first quarter balance sheet presentation. In the three months ended March 31, 2014, a fully amortized non-compete agreement intangible with $70,000 original cost (and accumulated amortization) was removed from the table of intangibles carrying cost, offset by increases in intangibles related to the mVisum acquisition, as described in Note 11.

The estimated useful lives and carrying value of acquired intangible assets are as follows:

		March 31, 2014						December 31, 2013
(in thousands)	Range of Useful Life (years)	Gross  Carrying  Amount		Accumulated Amortization		Net  Carrying  Amount		Gross  Carrying  Amount		Accumulated Amortization		Net  Carrying  Amount
Developed technology	4 to 7	$	2,710	$	1,363	$	1,347	$	1,880	$	1,264	$	616
Customer relationships	7 to 9	2,520		1,516		1,004		2,350		1,449		901
Non-compete agreements	2 to 4	260		10		250		70		70		—
Trademarks and trade names	4 to 7	110		47		63		70		43		27
Intangible assets		$	5,600	$	2,936	$	2,664	$	4,370	$	2,826	$	1,544

Amortization expense was $0.2 million and $0.2 million for the three months ended March 31, 2014 and March 31, 2013, respectively.

Amortization of acquired intangible assets is reflected in the cost of revenue or operating expenses, depending on the nature of the intangible. The estimated future amortization of existing acquired intangible assets as of March 31, 2014 was as follows:

(in thousands)	Future amortization
2014 (remaining nine months)	$	605
2015	626
2016	495
2017	394
2018	275
2019	229
Thereafter	40
Future amortization expense	$	2,664

6. Balance Sheet Components

Inventories

(in thousands)	March 31, 2014		December 31, 2013
Raw materials	$	806	$	806
Finished goods	4,534		4,859
Total inventories	$	5,340	$	5,665

12

Property and equipment, net

(in thousands)	March 31, 2014			December 31, 2013
Computer equipment and software	$	7,681		$	7,345
Furniture, fixtures and equipment	923			924
Leasehold improvements	2,131			2,125
Manufacturing tools and equipment	3,083			3,081
Construction in process	357			555
Property and equipment, at cost	14,175			14,030
Less: Accumulated depreciation	(9,218		)	(8,665		)
Property and equipment, net	$	4,957		$	5,365

Depreciation and amortization expense was $0.5 million and $0.4 million for the three months ended March 31, 2014 and March 31, 2013, respectively.

Net investment in sales-type leases

The Company has sales-type leases with terms of 1.25 to 4 years. Sales-type lease receivables are collateralized by the underlying equipment. The components of our net investment in sales-type leases are as follows:

(in thousands)	March 31, 2014			December 31, 2013
Minimum payments to be received on sales-type leases	$	2,365		$	2,597
Less: Unearned interest income and executory costs	(1,101		)	(1,167		)
Net investment in sales-type leases	1,264			1,430
Less: Current portion	(593		)	(620		)
Non-current net investment in sales-type leases	$	671		$	810

There were no allowances for doubtful accounts on these leases as of March 31, 2014 and December 31, 2013. There is no guaranteed or unguaranteed residual value on the leased equipment. The current and non-current net investments in sales-types leases as of March 31, 2014 are reported as components of the consolidated balance sheet captions "other receivables" and "other long-term assets," respectively.

The minimum payments expected to be received for future years under sales-type leases as of March 31, 2014 were as follows:

(in thousands)	Future lease payments
2014 (nine months remaining)	$	697
2015	806
2016	633
2017	229
Total	$	2,365

Accrued payroll and other current liabilities

13

(in thousands)	March 31, 2014		December 31, 2013
Payroll and related expenses	$	4,721	$	5,065
Accrued payables	1,607		2,259
Deferred rent, current portion	450		490
Lease financing, current portion	655		528
Product warranty	722		840
Sales and use tax payable	252		259
Other	494		400
Total accrued payroll and other current liabilities	$	8,901	$	9,841

The changes in the Company's product warranty reserve are as follows:

	Three months ended March 31,
(in thousands)	2014			2013
Warranty balance at the beginning of the period	$	840		$	297
Warranty expense accrued for shipments in period	298			74
Changes in estimate related to pre-existing warranties	51			49
Warranty settlements made	(467		)	(213		)
Warranty balance at the end of the period	$	722		$	207

7. Commitments and Contingencies

Non-cancelable Purchase Commitments

The Company enters into non-cancelable purchase commitments with its third-party manufacturer whereby the Company is required to purchase any inventory held by the third party manufacturer that have been purchased by them based on confirmed orders from the Company. As of March 31, 2014 and December 31, 2013, approximately $3.2 million and $3.1 million, respectively, of raw material inventory was purchased and held by the third-party manufacturer which was subject to such purchase requirements.

Leases

The Company leases office space for its headquarters and subsidiaries under non-cancelable operating leases, which will expire between December 2014 and April 2017. The San Jose, California headquarters lease expires on March 31, 2016, with a single three-year extension option at rates approximating the then-fair market value. The Company recognizes rent expense on a straight-line basis over the lease period, and has accrued for rent expense incurred but not paid. Facilities rent expense was $0.5 million and $0.5 million for the three months ended March 31, 2014 and March 31, 2013, respectively.

Future minimum lease payments at March 31, 2014 under non-cancelable operating leases are as follows:

(in thousands)	Operating leases
2014 (remaining nine months)	$	1,283
2015	1,693
2016	538
2017	33
Total minimum lease payments	$	3,547

Indemnifications

The Company undertakes, in the ordinary course of business, to (i) defend customers and other parties from certain third-party claims associated with allegations of trade secret misappropriation, infringement of copyright, patent or other intellectual property right, or tortious damage to persons or property and (ii) indemnify and hold harmless such parties from certain resulting damages, costs and other liabilities. The term of these undertakings may be perpetual and the maximum potential

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liability of the Company under certain of these undertakings is not determinable. Based on its historical experience, the Company believes the liability associated with these undertakings is minimal.

The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual. The Company currently has directors and officers insurance. As there has been no significant history of losses, no expense accrual has been made.

Securities Litigation

On August 1, 2013, a purported securities class action entitled Michael Brado v. Vocera Communications Inc., et al. was filed in the United States District Court for the Northern District of California, against the Company and certain of its officers, its board of directors, a former director and the underwriters for the Company's initial public offering.A second purported securities class action, entitled Duncan v. Vocera Communications Inc., et al., was filed on August 21, 2013, also in the Northern District of California, against the same parties. On September 27, 2013, the Court ordered the matters related. The suits purport to allege claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) and 20(a) of the Exchange Act of 1934 for allegedly misleading statements in the registration statement for the Company's initial public offering and in subsequent communications regarding its business and financial results. The suits are purportedly brought on behalf of purchasers of the Company's securities between March 28, 2012 and May 3, 2013, and seek compensatory damages, rescission, fees and costs, as well as equitable and injunctive or other relief. The plaintiffs’ motion for consolidation of the actions and for appointment of lead plaintiff has been granted, and the Company anticipates that the plaintiffs will file an amended consolidated complaint.  No responses to the current complaints are due at this time.

Due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of this matter. The Company is unable at this time to determine whether the outcome of the litigation would have a material impact on its results of operations, financial condition or cash flow. The Company has not established any reserve for any potential liability relating to this lawsuit, because this contingency is not considered probable and reasonably estimable.

From time to time, the Company may be involved in other lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters which arise in the ordinary course of business.

8. Stock-based Compensation and Awards

Stock Option Activity

A summary of the stock option activity for the three months ended March 31, 2014 is presented below:

	Options outstanding
	Number of Options		Weighted Average Exercise Price		Weighted average remaining contractual term	Aggregate intrinsic value
					(in years)	(in thousands)
Outstanding at December 31, 2013	3,287,207		$	9.62	6.8	$	24,880
Options granted	105,730		16.52
Options exercised	(148,237	)	2.92
Options canceled	(13,113	)	21.25
Outstanding at March 31, 2014	3,231,587		$	10.10	6.5	$	24,763

At March 31, 2014, there was $8.0 million of unrecognized net compensation cost related to options which is expected to be recognized over a weighted-average period of 2.45 years. The Company did not grant non-employee options in either of the three months ended March 31, 2014 or 2013. As of March 31, 2014, there were 1,424,575 shares that remained available for future issuance of options, restricted stock units (“RSUs”) or other equity awards under the 2012 Equity Incentive Plan.

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The Company uses the Black-Scholes option-pricing model to calculate the fair value of stock options on their grant date. The following assumptions were used for each respective period for employee stock options:

	Three months ended March 31,
	2014	2013
Expected Term (in years)	5.41	5.43
Volatility	48.2%	48.1%
Risk-free interest rate	1.59%	0.81%
Dividend yield	0%	0%

Exercise of common stock warrants

During the three months ended March 31, 2013, holders of common stock warrants exercised 34,142 shares for cash proceeds of $0.2 million. There were no cash exercises of warrants during three months ended March 31, 2014.

Employee Stock Purchase Plan

In March 2012, the Company’s 2012 Employee Stock Purchase Plan (the “ESPP”) was approved. During the three months ended March 31, 2014, no shares of common stock were purchased, as the current six months offering period ends May 14, 2014. During the three months ended March 31, 2013, employees purchased 115,784 shares of common stock at an average purchase price of $13.79. As of March 31, 2014, 443,591 shares remained available for future issuance under the ESPP.

The following Black-Scholes option-pricing assumptions were used for each respective period for the ESPP:

	Three months ended March 31,
	2014	2013
Expected Term (in years)	0.50	0.50
Volatility	36.0%	33.3%
Risk-free interest rate	0.10%	0.13%
Dividend yield	0%	0%

Restricted Stock Awards and Restricted Stock Units

A summary of restricted stock and RSU activity for the three months ended March 31, 2014 is presented below:

	Restricted Stock Awards				Restricted Stock Units
	Number of shares		Weighted Average Grant Date Fair Value per Share		Number of shares		Weighted Average Grant Date Fair Value per Share
Outstanding at December 31, 2013	12,076		$	12.42	755,271		$	19.24
Granted	—		—		86,236		16.44
Vested	(12,076	)	12.42		(25,389	)	25.74
Forfeited	—		—		(13,935	)	20.34
Outstanding at March 31, 2014	—		$	—	802,183		$	18.71

At March 31, 2014, there was no remaining unrecognized net compensation cost related to restricted stock awards. At March 31, 2014, there was $10.4 million of unrecognized net compensation cost related to RSUs, which is expected to be recognized over a weighted-average period of 1.9 years.

Allocation of Stock-Based Compensation Expense

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The following table presents the stock-based compensation allocation of expense (both for employees and non-employees):

	Three months ended March 31,
(in thousands)	2014		2013
Cost of revenue	$	286	$	222
Research and development	220		209
Sales and marketing	967		579
General and administrative	1,125		694
Total stock-based compensation	$	2,598	$	1,704

9. Segments

The Company has two operating segments which are both reportable business segments: (i) Product and (ii) Service, both of which are comprised of Vocera’s and its wholly-owned subsidiaries’ results of operations. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer.

The CODM regularly receives information related to revenue, cost of revenue, and gross profit for each operating segment, and uses this information to assess performance and make resource allocation decisions. All other financial information, including operating expenses and assets, is prepared and reviewed by the CODM on a consolidated basis. Assets are not a measure used to assess the performance of the Company by the CODM; therefore, the Company does not report assets by segment internally or in its financial statements.

The following table presents a summary of the operating segments:

	Three months ended March 31,
(in thousands)	2014			2013
Revenue
Product	$	14,189		$	12,960
Service	10,487			9,453
Total revenue	24,676			22,413
Cost of Revenue
Product	4,990			4,610
Service	4,814			4,084
Total cost of revenue	9,804			8,694
Gross profit
Product	9,199			8,350
Service	5,673			5,369
Total gross profit	14,872			13,719
Operating expenses	21,206			17,144
Interest (expense) income, net and other	22			(23		)
Loss before income taxes	$	(6,312	)	$	(3,448	)

10. Income Taxes

The provision for income taxes was $77,000 and $51,000 for the three months ended March 31, 2014 and 2013, respectively. The expense in both periods was primarily due to income taxes in foreign jurisdictions.

As of March 31, 2014, the Company has provided a valuation allowance against certain federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance.  If management's

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assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which management makes the determination.

As of March 31, 2014, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for the year ended December 31, 2013.

11. Business acquisition

On January 13, 2014, the Company acquired certain assets and certain liabilities of mVisum, Inc. (“mVisum”), an innovative provider of alarm management technology solutions for health systems, for $3.5 million in cash. The acquisition enabled the Company to enhance its existing platform with complementary communications solutions for healthcare and other mission-critical environments.

The following table presents the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date:

(in thousands)	Fair value acquired
Accounts receivable	$	187
Intangibles
Developed technology	830
Non-compete agreement	260
Customer relationships	170
Trademarks and trade names	40
Goodwill	2,103
Total assets	3,590
Deferred revenue	(90		)
Net assets acquired	$	3,500

The estimated fair values of identifiable intangible assets were primarily determined using discounted cash flow models. The acquired intangible assets are amortized over their estimated useful lives of 4.0 to 7.0 years with a weighted average amortization period of 5.7 years.

The excess of the acquisition consideration over the fair values of the underlying net assets acquired was recorded as goodwill. Goodwill is largely attributable to the synergy of mVisum’s proprietary solutions with the Company’s existing customer base, dedicated sales force and cross selling opportunities with the Company’s other solutions. Goodwill is not amortized but instead is tested for impairment at least annually or more frequently if indicators of impairment are present. For federal income tax purposes, the entire purchase consideration, including goodwill, is deductible over fifteen years. The goodwill recorded from the acquisition of mVisum is attributed to the Product reporting unit.

The Company incurred $0.2 million of acquisition-related costs that were expensed as incurred. These costs are recorded as general and administrative expenses in the consolidated statement of operations. Additionally, in connection with the acquisition the Company established a retention bonus plan for mVisum with potential additional compensation over a two-year period of approximately $0.5 million, based on achievement of operating objectives and continued employment. Such amounts are not considered part of the purchase consideration and will be recorded as earned as future compensation expense. The acquisition did not result in material contributions to revenue or net loss in the consolidated financial statements since the acquisition date. Additionally, pro forma financial information is not provided for consolidated revenue and net loss, since the acquisition was not material to the consolidated financial statements.

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our other Securities and Exchange Commission, or SEC, filings, including our Annual Report on Form 10-K for the year ended December 31, 2013, filed with the SEC on March 17, 2014. These discussions contain forward-looking statements

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reflecting our current expectations that involve risks and uncertainties which are subject to safe harbors under the Securities Act of 1933, as amended, or the Securities Act, and the Securities Exchange Act of 1934, as amended, or the Exchange Act. These forward-looking statements include, but are not limited to, statements concerning our plans, objectives, expectations and intentions, future financial position, future revenues, projected costs, expectations regarding demand and acceptance for our technologies, growth opportunities and trends in the market in which we operate, prospects and plans and objectives of management. The words “anticipates,” “believes,” “estimates," “expects,” “intends,” “may,” “plans,” “projects,” “will,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause our actual results to differ materially from those in the forward-looking statements, including, without limitation, the risks set forth in Part II, Item 1A, “Risk Factors” in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission. We do not assume any obligation to update any forward-looking statements.

Business Overview

We are a provider of secure, integrated, intelligent communication solutions, focused on empowering mobile workers in healthcare, hospitality, energy, and other mission-critical mobile work environments, in the U.S. and internationally. The significant majority of our business is currently generated from sales of our solutions in the healthcare market, but we are working to expand our sales and marketing efforts to enter and grow in other markets. We help our healthcare customers improve patient safety and satisfaction, and increase hospital efficiency and productivity through our Communication and Care Experience solutions. As of March 31, 2014, these have been installed in more than 1,200 healthcare and non-healthcare organizations worldwide.

We outsource the manufacturing of our products. Our outsourced manufacturing model allows us to scale our business without the significant capital investment and on-going expenses required to establish and maintain manufacturing operations. We work closely with our contract manufacturer, SMTC Corporation, and key suppliers to manage the procurement, quality and cost of components. We seek to maintain an optimal level of finished goods inventory to meet our forecast sales and unanticipated shifts in sales volume and mix.

Our diverse customer base ranges from large hospital systems to small local hospitals, as well as other healthcare facilities and customers in non-healthcare markets. We have very low customer revenue concentrations. Our largest end-customer represented 5.7%, 1.1% and 2.7% of revenue for the three months ended March 31, 2014, and the years ended December 31, 2013 and 2012, respectively. While we have international customers in other English speaking countries such as Canada, the United Kingdom and Australia, most of our customers are located in the United States. International customers represented 14.6%, 10.5% and 10.7% of our revenue in the three months ended March 31, 2014, and the years ended December 31, 2013 and 2012, respectively. We plan to expand our presence in other international markets.

To date, substantially all of our revenue has been derived from sales of our Voice Communication solution, including product maintenance and related services. Revenue increased 10.1% from $22.4 million for the three months ended March 31, 2013 to $24.7 million for the three months ended March 31, 2014. For the three months ended March 31, 2014, we recorded a net loss of $6.4 million compared to a net loss of $3.5 million for the three months ended March 31, 2013.

Although we achieved several significant milestones in the first quarter of 2014, we experienced a continuation of challenging hospital spending conditions, which resulted in first quarter bookings below our expectations. As others in our industry experienced, hospitals began 2014 with a cautious operating and spending approach.

Some aspects of healthcare reform continue to change and evolve. At the same time, patient population trends and expectations for 2014 are not clear. While there are indications that there are a number of newly insured Americans who may utilize hospital and other healthcare services, the actual behaviors and usage patterns of these newly insured people is difficult to predict.

Critical Accounting Policies and Estimates

There have been no changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates described in our Annual Report on Form 10-K for the year ended December 31, 2013.

Revenue. We generate revenue from the sale of products and services. Revenue is recognized when persuasive evidence of an arrangement exists, delivery has occurred, the price is fixed or determinable and collection is probable.

Revenue is comprised of the following:

• Product. Our solutions include both hardware and software. We refer to hardware revenue as device revenue, which includes revenue from sales of our communication badges and badge accessories, including batteries, battery chargers,

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lanyards, clips and other ancillary badge components. Software revenue is derived primarily from the sale of perpetual licenses to our Voice Communication solution. We derive additional software revenue from the sale of term licenses which can be renewed on a subscription basis. Product revenue is generally recognized upon shipment of hardware and perpetual licenses and, in the case of term licenses, ratably over the applicable term.

• Service. We receive service revenue from sales of software maintenance, extended warranties and professional services. Software maintenance is typically invoiced annually in advance, recorded as deferred revenue and recognized as revenue ratably over the service period. Our professional services revenue is based on both time and materials, and fixed price contracts, and is recognized as the services are provided. Extended warranties are invoiced in advance, recorded as deferred revenue and recognized ratably over the extended warranty period.

Provision for Income Taxes. We are subject to income taxes in certain countries where we sell our solutions. We anticipate that in the future as we expand our sale of solutions to customers outside the United States, we may become subject to taxation based on the foreign statutory rates in additional countries where these sales take place and our effective tax rate could fluctuate accordingly.

As of March 31, 2014, we have provided a valuation allowance against certain federal and state deferred tax assets. Based on all available evidence, on a jurisdictional basis, including our historical operating results, and the uncertainty of predicting our future income, the valuation allowance reduces our deferred tax assets to an amount that is more likely than not to be realized.  We continue to evaluate the realizability of deferred tax assets and the related valuation allowance.  If our assessment of the deferred tax assets or the corresponding valuation allowance were to change, we would record the related adjustment to income during the period in which management makes the determination.

Results of Operations

The following table presents our results of operations for the periods indicated. The period-to-period comparisons of results are not necessarily indicative of results for future periods.

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		Three months ended March 31,
Consolidated statement of operations data:		2014					2013
	(unaudited)
(in thousands)		Amount			% Revenue		Amount			% Revenue
Revenue
Product		$	14,189		57.5	%	$	12,960		57.8	%
Service		10,487			42.5		9,453			42.2
Total revenue		24,676			100.0		22,413			100.0
Cost of revenues
Product		4,990			20.2		4,610			20.6
Service		4,814			19.5		4,084			18.2
Total cost of revenues		9,804			39.7		8,694			38.8
Gross profit		14,872			60.3		13,719			61.2
Operating expenses:
Research and development		4,066			16.5		3,614			16.1
Sales and marketing		12,743			51.6		10,232			45.7
General and administrative		4,397			17.8		3,298			14.7
Total operating expenses		21,206			85.9		17,144			76.5
Loss from operations		(6,334		)	(25.7	)	(3,425		)	(15.3	)
Interest income		87			0.4		24			0.1
Interest expense		—			—		—			—
Other expense, net		(65		)	(0.3	)	(47		)	(0.2	)
Loss before income taxes		(6,312		)	(25.6	)	(3,448		)	(15.4	)
Provision for income taxes		(77		)	(0.3	)	(51		)	(0.2	)
Net loss		$	(6,389	)	(25.9	)%	$	(3,499	)	(15.6	)%

Comparison of the three months ended March 31, 2014 and 2013

Revenue:

	Three months ended March 31,
	2014		2013		Change
(in thousands)	Amount		Amount		Amount			%
Product revenue
Devices	$	10,233	$	9,942	$	291		2.9	%
Software	3,956		3,018		938			31.1
Total product	14,189		12,960		1,229			9.5
Service revenue
Maintenance and support	8,380		7,344		1,036			14.1
Professional services and training	2,107		2,109		(2		)	(0.1	)
Total service	10,487		9,453		1,034			10.9
Total revenue	$	24,676	$	22,413	$	2,263		10.1

Total revenue for the three months ended March 31, 2014 increased $2.3 million, or 10.1%, from the three months ended March 31, 2013.While our revenue for the three months ended March 31, 2014 increased from the three months ended March 31,

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2013, we experienced a continuation of challenging hospital spending conditions. As others in our industry experienced, U.S. hospitals began 2014 with a cautious operating and spending approach as hospital decision-makers continue to evaluate the trends in patient populations and the impact of healthcare reform. Discretionary hospital spending and capital investments remain under strict scrutiny, which has had the effect of elongating the sales cycle.

Product revenue for the three months ended March 31, 2014 increased $1.2 million, or 9.5%, from the three months ended March 31, 2013. Device revenue for the three months ended March 31, 2014 increased $0.3 million, or 2.9%, and software revenue increased $0.9 million, or 31.1% from the three months ended March 31, 2013. The increase in device revenue, which related entirely to our Voice Communication solution, was primarily due to an increase in unit sales of badges and related accessories. The increase in software revenue was mainly a result of an increase in sales of Voice Communication software licenses, primarily attributable to increased sales to existing customers for both existing facility expansions and new facility deployments.

Service revenue for the three months ended March 31, 2014 increased $1.0 million, or 10.9%, from the three months ended March 31, 2013. Software maintenance and support revenue for the three months ended March 31, 2014 increased $1.0 million, or 14.1%, and professional services and training revenue decreased less than $0.1 million, or 0.1%, from the three months ended March 31, 2013. Of the increase in software maintenance and support revenue, $0.6 million was primarily a result of a larger customer base and $0.4 million was primarily a result of an increase in extended warranty revenue.

Cost of revenue:

	Three months ended March 31,
	2014			2013			Change
(in thousands)	Amount			Amount			Amount			%
Cost of revenue
Product	$	4,990		$	4,610		$	380		8.2	%
Service	4,814			4,084			730			17.9
Total cost of revenue	$	9,804		$	8,694		$	1,110		12.8
Gross margin
Product	64.8		%	64.4		%	0.4		%
Service	54.1			56.8			(2.7		)
Total gross margin	60.3			61.2			(0.9		)

Cost of product revenue for the three months ended March 31, 2014 increased $1.1 million, or 12.8%, from the three months ended March 31, 2013. The cost of product revenue increased due to an increase in the number of units sold and increases in operations and warranty expenses offset by a decrease in the average cost of the B3000 badges. Product gross margin as a percentage of revenue increased in the three months ended March 31, 2014 compared to the corresponding period in 2013, due primarily to a higher mix of software revenue and a decrease in the average cost of the B3000 badges, partially offset by higher operations and warranty expenses. We expect the cost to manufacture the B3000 to decline marginally throughout the remainder of 2014.

Cost of service revenue for the three months ended March 31, 2014 increased $0.7 million, or 17.9%, from the three months ended March 31, 2013. This increase was primarily due to a $0.4 million increase in employee wages, other personnel and travel costs in our services organization to support growth in customer deployments and technical support, a $0.2 million increase in extended warranty expenses and a $0.1 million increase in stock based compensation. Service gross margin as a percentage of revenue decreased in the three months ended March 31, 2014 compared to the corresponding period in 2013 due to lower absorption of our labor costs as we added service personnel.

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Operating expenses:

	Three months ended March 31,
	2014		2013		Change
(in thousands)	Amount		Amount		Amount		%
Operating expenses:
Research and development	$	4,066	$	3,614	$	452	12.5	%
Sales and marketing	12,743		10,232		2,511		24.5
General and administrative	4,397		3,298		1,099		33.3
Total operating expenses	$	21,206	$	17,144	$	4,062	23.7

Research and development expense. Research and development expense for the three months ended March 31, 2014 increased $0.5 million, or 12.5%, from the three months ended March 31, 2013. This increase was primarily due to the increase in personnel costs and other expenses associated with an increase in headcount from 59 at March 31, 2013 to 73 at March 31, 2014.

Sales and marketing expense. Sales and marketing expense for the three months ended March 31, 2014 increased $2.5 million, or 24.5%, from the three months ended March 31, 2013. This increase was primarily due to a $1.5 million increase in personnel related and travel costs in connection with the increase in headcount from 145 at March 31, 2013 to 162 at March 31, 2014, an increase of $0.4 million in stock-based compensation, an increase of $0.3 million in marketing expenses, and a $0.3 million increase related to fees paid to contractors and consultants.

General and administrative expense. General and administrative expense for the three months ended March 31, 2014 increased $1.1 million, or 33.4%, from the three months ended March 31, 2013. The increase was primarily due to $0.4 million in stock based compensation, $0.5 million in outside services, and $0.2 million of personnel costs.

Interest Income and Other Expense, Net :

	Three months ended March 31,
(in thousands)	2014			2013			Change
Interest income	$	87		$	24		$	63
Other expense, net	(65		)	(47		)	(18		)

Interest income. Interest income for the three months ended March 31, 2014 increased $0.1 million over the prior year period due to interest earned from higher cash balances.

Other expense, net. Other expense, net consists primarily of foreign exchange gains and losses. For the three months ended March 31, 2014, the amount decreased over the prior year period due to unfavorable changes in foreign exchange rates.

Liquidity and Capital Resources

As of March 31, 2014, we had cash and cash equivalents and short-term investments of $121.8 million and no outstanding borrowings, which was largely attributable to the net proceeds of two common stock offerings in 2012. We believe that our existing sources of liquidity will satisfy our working capital and capital requirements for at least the next twelve months and the foreseeable future.

	Three months ended March 31,
(in thousands)	2014			2013
Consolidated Statements of Cash Flow Data:
Net cash used in operating activities	$	(2,671	)	$	(2,186	)
Net cash (used in) provided by investing activities	(11,631		)	23,469
Net cash provided by financing activities	562			2,603
Net (decrease) increase in cash and cash equivalents	$	(13,740	)	$	23,886

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Operating activities

Cash used in operating activities was $2.7 million for the three months ended March 31, 2014, due to a net loss of $6.4 million, that included non-cash items such as depreciation and amortization of $0.7 million for property and equipment and acquired intangible assets and stock-based compensation of $2.6 million. The decrease in accounts receivable by $3.6 million, which was attributable to collections on prior periods' invoices exceeding the current periods' billings, contributed to cash flows as did the $0.5 million increase in accrued liabilities for ESPP payroll contributions for the May 2014 purchase date, a $0.3 million seasonal increase in accrued vacation liabilities, together with a $0.3 million decrease in inventories and $0.1 million decrease in other receivables. These factors were offset by cash outflows due to a $1.0 million decrease in deferred revenue, a $0.7 million decrease in accrued commissions, a $0.3 million net reduction in accrued bonuses that reflected year-end bonus payouts, a $0.9 million decrease in accounts payable, a $0.8 million increase in prepaid expenses and a $0.8 million decrease in professional services and other liabilities.

Cash used by operating activities was $2.2 million for the three months ended March 31, 2013, due to a net loss of $3.5 million, partially offset by excluded non-cash items of depreciation and amortization of $0.5 million for property and equipment and acquired intangible assets and stock-based compensation of $1.7 million. The decrease in accounts receivable of $6.8 million contributed to cash flows, attributable to collections on prior periods' invoices exceeding the current periods' billings. These factors were offset by cash outflows due to a $2.5 million net reduction in accrued bonuses that reflected year-end bonus payouts, a $1.2 million net reduction in accrued liabilities for ESPP payroll contributions used in purchases, a $1.8 million increase in inventories, a $1.2 million decrease in deferred revenue and an increase in prepaid and other assets of $0.9 million and the reclassification to financing cash flows of $0.3 million of excess tax benefits from employee stock plans.

Investing activities

Cash used in investing activities was $11.6 million for the three months ended March 31, 2014, due to $3.5 million for the mVisum business acquisition and $41.3 million for purchases of short-term investments, partly offset by $33.0 million and $0.4 million of short-term investment maturities and investment sales, respectively. An additional $0.3 million of cash was used for the purchase of property and equipment and leasehold improvements.

Cash provided by investing activities of $23.5 million for the three months ended March 31, 2013 was primarily due to $25.0 million of short-term investment maturities without any purchases, partially offset by $1.5 million for the purchase of property and equipment and leasehold improvements, including $0.7 million for our ERP implementation project and $0.4 million for our headquarters building expansion.

Financing activities

Cash provided by financing activities was $0.6 million for the three months ended March 31, 2014, primarily attributable to $0.4 million of proceeds from stock option exercises and $0.3 million of cash from lease-related performance obligations. This was partially offset by a $0.2 million decrease for employees' taxes paid on net share settlement. There were no ESPP purchases during this period.

Cash provided by financing activities was $2.6 million for the three months ended March 31, 2013, primarily attributable to $1.6 million proceeds from our initial ESPP purchase for the initial eleven month offering period, $0.4 million proceeds from stock option exercises, $0.2 million proceeds from common stock warrant exercises, $0.1 million of cash from lease-related performance obligations and $0.3 million of excess tax benefits from employee stock plans.

Off-Balance Sheet Arrangements

During the three months ended March 31, 2014, we did not have any relationships with unconsolidated organizations or financial partnerships, such as structured finance or special purpose entities, that would have been established for the purpose of facilitating off-balance sheet arrangements or other contractually narrow or limited purposes. Refer to Note 7 to the condensed consolidated financial statements, "Commitments and Contingencies," for a discussion of our non-cancelable purchase commitments.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

The primary objective of our investment activities is to preserve principal while maximizing yields without significantly increasing risk. To achieve this objective, historically we have invested in money market funds. With the proceeds from our two public offerings in 2012, we have invested in a broader portfolio of high credit quality short-term securities. To minimize the exposure due to an adverse shift in interest rates, we maintain an average portfolio duration of one year or less.

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Our primary exposure to market risk is interest income and expense sensitivity, which is affected by changes in the general level of the interest rates in the United States. However, because of the short-term nature of our interest-bearing securities, a 10% change in market interest rates would not be expected to have a material impact on our consolidated financial condition or results of operations.

Historically our operations have consisted of research and development and sales activities in the United States. As a result, our financial results have not been materially affected by factors such as changes in foreign currency exchange rates or economic conditions in foreign markets. We are developing plans to expand our international presence. Accordingly, we expect that our exposure to changes in foreign currency exchange rates and economic conditions may increase in future periods.

Item 4.Controls and Procedures

Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures are designed to ensure that information required to be disclosed by us in reports filed or submitted under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission's rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in reports filed under the Exchange Act is accumulated and communicated to management, including principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

As of March 31, 2014, we carried out an evaluation under the supervision of, and with the participation of our management, including our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act. Based on our evaluation, our Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures were effective as of March 31, 2014.

Changes in Internal Control over Financial Reporting

There was no change in our internal control over financial reporting which occurred during the period covered by this Quarterly Report on Form 10-Q which has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II: OTHER INFORMATION

Item 1. Legal Proceedings

From time to time, we may be involved in lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters which arise in the ordinary course of business.

Securities Litigation

On August 1, 2013 a purported securities class action entitled Brado v. Vocera Communications Inc., et al. was filed in the United States District Court for the Northern District of California against us and certain of our officers, our board of directors, a former director and the underwriters for our initial public offering. A second purported securities class action, entitled Duncan v. Vocera Communications Inc., et al., was filed on August 21, 2013, also in the Northern District of California, against the same parties. On September 27, 2013, the Court ordered the matters related. The suits purport to allege claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) and 20(a) of the Exchange Act of 1934 for allegedly misleading statements in the registration statement for our initial public offering and in subsequent communications regarding our business and financial results. The suits are purportedly brought on behalf of purchasers of our securities between March 28, 2012 and May 3, 2013, and seek compensatory damages, rescission, fees and costs, as well as equitable and injunctive or other relief. The plaintiffs’ motion for consolidation of the actions and for appointment of lead plaintiff has been granted, and we anticipate that the plaintiffs will file an amended consolidated complaint. No responses to the current complaints are due at this time.

Due to the inherent uncertainties of litigation, we cannot accurately predict the ultimate outcome of this matter. We are unable at this time to determine whether the outcome of the litigation would have a material impact on our results of operations, financial condition or cash flow. We have not established any reserve for any potential liability relating to this lawsuit.

From time to time, we may be involved in other lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters which arise in the ordinary course of business.

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Item 1A. Risk Factors

Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below, together with all of the other information set forth in this Quarterly Report on Form 10-Q. Our business, financial condition, results of operations or future prospects could be materially and adversely harmed if any of the following risks, or other risks or uncertainties that are not yet identified or that we currently believe are immaterial, actually occur. The trading price of our common stock could decline due to any of these risks or uncertainties, and, as a result, you may lose all or part of your investment.

Risks related to our business and industry

We have incurred significant losses in the past, and may experience losses in the future. As a result, our business may be harmed and our stock price could decline.

We have incurred significant losses in the past and reported a net loss of $6.4 million for the three months ended March 31, 2014. As of March 31, 2014, we had an accumulated deficit of $70.8 million. If we cannot achieve profitability in future periods, our business may be harmed and our stock price could further decline.

Our ability to be profitable in the future depends upon continued demand for our communication solutions from existing and new customers. Further market adoption of our solutions, including increased penetration within our existing customers, depends upon our ability to improve patient safety and satisfaction and increase hospital efficiency and productivity, and to bring value to customers outside of healthcare. Additionally, further adoption of our solutions in non-healthcare markets depends on our ability to modify our products to successfully respond to the challenges in those markets and our sales efforts to reach the customers in those markets. In addition, our profitability will be affected by, among other things, our ability to execute on our business strategy, the timing and size of orders, the pricing and costs of our solutions, macroeconomic conditions affecting the health care industry and the extent to which we invest in sales and marketing, research and development and general and administrative resources.

We depend on sales of our Vocera Communication solution in the healthcare market for substantially all of our revenue, and any decrease in its sales would harm our business.

To date, substantially all of our revenue has been derived from sales of our Vocera Communication solution to the healthcare market and, in particular, hospitals. Any decrease in revenue from sales of our Vocera Communication solution would harm our business. Sales of our Vocera Communication solution to the healthcare market accounted for 91%, 91% and 92% of our revenue for the three months ended March 31, 2014, and for the years ended December 31, 2013 and 2012, respectively. In addition, we obtained a significant portion of these sales from existing hospital customers. We anticipate that sales of our Vocera Communication solution will represent a significant portion of our revenue for the foreseeable future. While we are evaluating new solutions for non-healthcare markets, we may not be successful in applying our technology in any of these markets, or in selling our solutions to customers in these markets. We do not anticipate that sales of our Vocera Communication solution in non-healthcare markets will represent a significant portion of our revenue for the foreseeable future.

Our success depends in part upon the deployment of our Vocera Communication solution by new hospital customers, the expansion and upgrade of our solution at existing customers, and our ability to continue to provide on a timely basis cost-effective solutions that meet the requirements of our hospital customers. Our Vocera Communication solution requires a substantial upfront investment by customers. Typically, our hospital customers initially deploy our solution for specific users in specific departments before expanding our solution into other departments or for other users. The cost of the initial deployment depends on the number of users and departments involved, the size and age of the hospital and the condition of the existing wireless infrastructure, if any, within the hospital.

Even if hospital personnel determine that our Vocera Communication solution provides compelling benefits over their existing communications methods, their hospitals may not have, or may not be willing to spend, the resources necessary to install and maintain wireless infrastructure to initially deploy and support our solution or expand our solution to other departments or users. Hospitals are currently facing significant budget constraints, ever increasing demands from a growing number of patients and impediments to obtaining reimbursements for their service. In addition, hospitals, including both governmental and non-governmental customers, are experiencing budgeting issues due to the ongoing effects of and uncertainty around the continuing impact of federal government sequestration on Medicare reimbursement rates and the federal budget, as well as continuing changes in the implementation of the Patient Protection and Affordable Care Act of 2010 ("ACA") and other healthcare reform legislation. As a consequence, we may continue to experience a slowdown and deferral of orders for our Vocera

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Communication solution that could negatively impact our sales. We believe hospitals are currently allocating funds for capital and infrastructure improvements to benefit from electronic medical records incentives and, for compliance with ICD-10 diagnosis coding requirements, which may impact their ability to purchase and deploy our solution. We might not be able to sustain or increase our revenue from sales of our Vocera Communication solution, or achieve the growth rates that we envision, if hospitals continue to face significant budgetary constraints and reduce their spending on communications systems.

Our sales cycle can be lengthy and unpredictable, which may cause our revenue and operating results to fluctuate significantly.

Our sales cycles can be lengthy and unpredictable. Our sales efforts involve educating our customers about the use and benefits of our solutions, including the technical capabilities of our solutions and the potential cost savings and productivity gains achievable by deploying them. Customers typically undertake a significant evaluation process, which frequently involves not only our solutions but also their existing communications methods and those of our competitors, and can result in a lengthy sales cycle of nine to twelve months or more. We spend substantial time, effort and money in our sales efforts without any assurance that our efforts will produce any sales. In addition, purchases of our solutions are frequently subject to budget constraints, multiple approvals, and unplanned administrative, processing and other delays. For example, we experienced elongated sales cycles due to uncertainty surrounding healthcare reform and lower hospital admission trends in 2013 and the first quarter of 2014. At this time, hospitals in the U.S. face significant uncertainty over the continuing impact of federal government sequestration, the country’s debt ceiling and federal budget, and continuing changes in the implementation and deadlines for compliance with the ACA and other healthcare reform legislation, as well as potential future statutes and rulemaking.

If our business does not grow as we expect, or we are not able to manage our growth effectively, our operating results will suffer.

We have experienced significant growth in our revenues and operations in the past. Our growth has placed, and may continue to place, strains on our management systems, infrastructure and other resources. We plan to hire additional direct sales and marketing personnel domestically and internationally, acquire complementary businesses, technologies or assets, and increase our investment in research and development. Our future operating results depend to a large extent on our ability to successfully implement these plans and manage our anticipated expansion. To do so successfully we must, among other things:

• manage our expenses in line with our operating plans and current business environment;

• maintain and enhance our operational, financial and management controls, reporting systems and procedures;

• integrate acquired businesses, technologies or assets;

• manage operations in multiple locations and time zones; and

• develop and deliver new solutions and enhancements to existing solutions efficiently and reliably.

We expect to incur costs associated with the investments made to support our growth before the anticipated benefits or the returns are realized, if at all. If we are unable to grow our business as expected or manage our future growth effectively, we may not be able to take advantage of market opportunities or develop new solutions or enhancements to existing solutions. We may also fail to satisfy customer requirements, maintain quality, execute our business plan or respond to competitive pressures, which could result in lower revenue and a decline in the share price of our common stock.

Our revenue and operating results have fluctuated, and are likely to continue to fluctuate, which may make our quarterly results difficult to predict, cause us to miss analyst expectations and cause the price of our common stock to decline.

Our operating results may be difficult to predict, even in the near term, and are likely to fluctuate as a result of a variety of factors, many of which are outside of our control.

Comparisons of our revenue and operating results on a period-to-period basis may not be meaningful. You should not rely on our past results as an indication of our future performance. Each of the following factors, among others, could cause our operating results to fluctuate from quarter to quarter:

• the financial health of our healthcare customers and budgetary constraints on their ability to upgrade their communications;

• changes in the regulatory environment affecting our healthcare customers, including impediments to their ability to obtain reimbursement for their services;

• our ability to expand our sales and marketing operations;

• the procurement and deployment cycles of our healthcare customers and the length of our sales cycles;

• variations in the amount of orders booked in a prior quarter but not delivered until later quarters;

• our mix of solutions and pricing, including discounts by us or our competitors;

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• our ability to expand into non-healthcare markets;

• our ability to forecast demand and manage lead times for the manufacture of our solutions; and

• our ability to develop and introduce new solutions and features to existing solutions that achieve market acceptance.

Developments in the healthcare industry and governing regulations could negatively affect our business.

Substantially all of our revenue is derived from customers in the healthcare industry, in particular, hospitals. The healthcare industry is highly regulated and is subject to changing political, legislative, regulatory and other influences. Developments generally affecting the healthcare industry, including new regulations or new interpretations of existing regulations, could adversely affect spending on information technology and capital equipment by reducing funding, changing healthcare pricing or delivery or creating impediments for obtaining healthcare reimbursements, which together with declining admission trends,  could cause our sales to decline and negatively impact our business. For example, the profit margins of our hospital customers are modest, and pending changes in reimbursement for healthcare costs may reduce the overall solvency of our customers or cause further deterioration in their financial or business condition.

Since 2009, three significant bills were signed into law that impact the U.S. healthcare system.  Those bills include The Health Information Technology for Economic and Clinical Health Act, enacted under Title XIII of the American Recovery and Reinvestment Act of 2009 ("HITECH Act"), the ACA, and the Health Care and Education Reconciliation Act of 2010. Together, these acts drive substantive changes over several years to the operating processes, reimbursements and rules governing the U.S. healthcare system. The actual end effect of these laws on the marketplace is not yet fully understood.

We believe that our healthcare customers are unsure of the impact that a number of the elements of those acts will have on their business, and cannot predict the timing and requirements of the final rules issued by the U.S. Department of Health and Human Services ("HHS") for these statutes, making managing their business operations more difficult.  Further, as has been experienced since 2010, as these final rules are created by HHS, a number of aspects of the acts have been interpreted, modified or delayed. For example, sudden changes in the rules for individuals buying insurance through state or federal health insurance exchanges, and individual and employer mandates to have and offer insurance coverage, have challenged hospitals’ abilities to forecast patient utilization and revenues, and to set operational plans and budget accordingly.

Federal budget activities also impact our customers.  The federal budget sequestration, which went into effect in March 2013, automatically cut Medicare reimbursement rates and cut federal department budgets, including at the Department of Defense, which also operates hospitals that are prospective customers. We believe sequestration had a significant impact on our customers and our business in 2013. As part of the Bipartisan Budget Act of 2013, signed into law on December 26, 2013, the Medicare reimbursement rate cut established in the March 2013 sequester was maintained and extended, although the cuts to Department of Defense and its hospitals were lifted. We further believe that it is likely that additional legislative changes and rulemaking by HHS will continue. In addition, many state governments are changing or expanding their healthcare laws, adding additional complexity to understanding the potential impacts.

We are unable to predict the full impact of these new and changing rules on our hospital customers and others in the healthcare industry.  Impacts of these rules could materially affect our customers’ ability to budgetfor or purchase our products. The healthcare industry has changed significantly in recent years and we expect that significant changes will continue to occur. We cannot assure you that the markets for our solutions will continue to exist at current levels or that we will have adequate technical, financial and marketing resources to react to changes in those markets.

If we fail to increase market awareness of our brand and solutions, and expand our sales and marketing operations, our business could be harmed.

We intend to continue to add personnel and resources in sales and marketing as we focus on expanding awareness of our brand and solutions and capitalize on sales opportunities with new and existing customers. Our efforts to improve sales of our solutions will result in an increase in our sales and marketing expense and general and administrative expense, and these efforts may not be successful. Some newly hired sales and marketing personnel may subsequently be determined to be unproductive and have to be replaced, resulting in operational and sales delays and incremental costs. If we are unable to significantly increase the awareness of our brand and solutions or effectively manage the costs associated with these efforts, our business, financial condition and operating results could be harmed.

We primarily compete in the rapidly evolving and competitive healthcare market, and if we fail to effectively respond to competitive pressures, our business and operating results could be harmed.

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We believe that at this time the primary competition for our Vocera Communication solution consists of traditional methods using wired phones, pagers and overhead intercoms. While we believe that our system is superior to these legacy methods, our solution requires a significant infrastructure investment by a hospital and many hospitals may not recognize the value of implementing our solution.

Manufacturers and distributors of product categories such as cellular phones, smartphone applications, pagers, mobile radios and in-building wireless telephones attempt to sell their products to hospitals as components of an overall communication system. Of these product categories, in-building wireless telephones represent the most significant competition for the sale of our solution. The market for in-building wireless phones is dominated by communications companies such as Cisco Systems, Ascom and Spectralink. In addition, the proliferation of smartphones and related applications may represent a new category of competitive offerings.

While we do not have a directly comparable competitor that provides a richly featured Vocera Communication system for the healthcare market, we could face such competition in the future. Potential competitors in the healthcare or communications markets include large, multinational companies with significantly more resources to dedicate to product development and sales and marketing. These companies may have existing relationships within the hospital, which may enhance their ability to gain a foothold in our market. Customers may prefer to purchase a more highly integrated or bundled solution from a single provider or an existing supplier rather than a new supplier, regardless of performance or features. Accordingly, if we fail to effectively respond to competitive pressures, we could experience pricing pressure, reduced profit margins, higher sales and marketing expenses, lower revenue and the loss of market share, any of which would harm our business, operating results or financial condition.

If we fail to offer high-quality services and support for any of our solutions, our ability to sell those solutions will be harmed.

Our ability to sell our Vocera Communication or Care Experience solutions is dependent upon our professional services and technical support teams providing high-quality services and support. Our professional services team assists our customers with their wireless infrastructure assessment, clinical workflow design, communication solution configuration, training and project management during the pre-deployment and deployment stages. Once our solutions are deployed within a customer’s facility, the customer typically depends on our technical support team to help resolve technical issues, assist in optimizing the use of our solutions and facilitate adoption of new functionality. If we do not effectively assist our customers in deploying our solutions, succeed in helping our customers quickly resolve technical and other post-deployment issues, or provide effective ongoing support services, our ability to expand the use of our solutions with existing customers and to sell our solutions to new customers will be harmed. If deployment of our solutions is unsatisfactory, as has been the case with certain third-party deployments in the past, we may incur significant costs to attain and sustain customer satisfaction. As we rapidly hire new services and support personnel, we may inadvertently hire underperforming people who will have to be replaced, or fail to effectively train such employees, leading in some instances to slower growth, additional costs and poor customer relations. In addition, the failure of channel partners to provide high-quality services and support in markets outside the United States could also harm sales of our solutions.

We depend on a number of sole source and limited source suppliers, and if we are unable to source our components from them, our business and operating results could be harmed.

We depend on sole and limited source suppliers for several hardware components of our Vocera Communication solution, including our batteries and integrated circuits. We purchase inventory generally through individual purchase orders. Any of these suppliers could cease production of our components, cease to provide the necessary levels of support for our use of their components, experience capacity constraints, material shortages, work stoppages, financial difficulties, cost increases or other reductions or disruptions in output, cease operations or be acquired by, or enter into exclusive arrangements with, a competitor. These suppliers typically rely on purchase orders rather than long-term contracts with their suppliers, and as a result, even if available, the supplier may not be able to secure sufficient materials at reasonable prices or of acceptable quality to build our components in a timely manner. Any of these circumstances could cause interruptions or delays in the delivery of our solutions to our customers, and this may force us to seek components from alternative sources, which may not have the required specifications, or be available in time to meet demand or on commercially reasonable terms, if at all. Any of these circumstances may also force us to redesign our solutions if a component becomes unavailable in order to incorporate a component from an alternative source.

Our solutions incorporate multiple software components obtained from licensors on a non-exclusive basis, such as voice recognition software, software supporting the runtime execution of our software platform, and database and reporting software.

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Our license agreements can be terminated for cause. In many cases, these license agreements specify a limited term and are only renewable beyond that term with the consent of the licensor. If a licensor terminates a license agreement for cause, objects to its renewal or conditions renewal on modified terms and conditions, we may be unable to obtain licenses for equivalent software components on reasonable terms and conditions, including licensing fees, warranties or protection from infringement claims. Some licensors may discontinue licensing their software to us or support of the software version used in our solutions. In such circumstances, we may need to redesign our solutions at substantial cost to incorporate alternative software components or be subject to higher royalty costs. Any of these circumstances could adversely affect the cost and availability of our solutions.

Third-party licensors generally require us to incorporate specific license terms and conditions in our agreements with our customers. If we are alleged to have failed to incorporate these license terms and conditions, we may be subject to claims by these licensors, incur significant legal costs defending ourselves against such claims and, if such claims are successful, be subject to termination of licenses, monetary damages, or an injunction against the continued distribution of one or more of our solutions.

Because we depend upon a contract manufacturer, our operations could be harmed and we could lose sales if we encounter problems with this manufacturer.

We do not have internal manufacturing capabilities and rely upon a contract manufacturer, SMTC Corporation, ("SMTC"), to produce the primary hardware component of our Vocera Communication solution. We have entered into a manufacturing agreement with SMTC that is terminable by either party with advance notice and that may also be terminated for a material uncured breach. We also rely on original design manufacturers, or ODMs, to produce accessories, including batteries, chargers and attachments. Any of these suppliers could cease production of our components, cease to provide the necessary levels of support for our use of their components, experience capacity constraints, material shortages, work stoppages, financial difficulties, cost increases or other reductions or disruptions in output, cease operations or be acquired by, or enter into exclusive arrangements with, a competitor. If SMTC or an ODM is unable or unwilling to continue manufacturing components of our solutions in the volumes that we require, fails to meet our quality specifications or significantly increases its prices, we may not be able to deliver our solutions to our customers with the quantities, quality and performance that they expect in a timely manner. As a result, we could lose sales and our operating results could be harmed.

SMTC or ODMs may experience problems that could impact the quantity and quality of components of our Vocera Communication solution, including disruptions in their manufacturing operations due to equipment breakdowns, labor strikes or shortages, component or material shortages and cost increases. SMTC and these ODMs generally rely on purchase orders rather than long-term contracts with their suppliers, and as a result, may not be able to secure sufficient components or other materials at reasonable prices or of acceptable quality to build components of our solutions in a timely manner. The majority of the components of our Vocera Communication solution are manufactured in Asia or Mexico and adverse changes in political or economic circumstances in those locations could also disrupt our supply and quality of components of our solutions.

Companies occasionally encounter unexpected difficulties in ramping up production of new products, and we may experience such difficulties with future generations of our products. SMTC and our ODMs also manufacture products for other companies. Generally, our orders represent a relatively small percentage of the overall orders received by SMTC and these ODMs from their customers; therefore, fulfilling our orders may not be a priority in the event SMTC or an ODM is constrained in its ability to fulfill all of its customer obligations. In addition, if SMTC or an ODM is unable or unwilling to continue manufacturing components of our solutions, we may have to identify one or more alternative manufacturers. The process of identifying and qualifying a new contract manufacturer or ODM can be time consuming, and we may not be able to substitute suitable alternative manufacturers in a timely manner or at an acceptable cost. Additionally, transitioning to a new manufacturer may cause us to incur additional costs and delays if the new manufacturer has difficulty manufacturing components of our solutions to our specifications or quality standards.

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If we fail to forecast our manufacturing requirements accurately, or fail to properly manage our inventory with our contract manufacturer, we could incur additional costs and experience manufacturing delays, which can adversely affect our operating results.

We place orders with our contract manufacturer, SMTC, and we and SMTC place orders with suppliers based on forecasts of customer demand. Because of our international low cost sourcing strategy, our lead times are long and cause substantially more risk to forecasting accuracy than would result were lead times shorter. Our forecasts are based on multiple assumptions, each of which may introduce errors into our estimates affecting our ability to meet our customers' demands for our solutions. We also may face additional forecasting challenges due to product transitions in the components of our solutions, or to our suppliers discontinuing production of materials and subcomponents required for our solutions. If demand for our solutions increases significantly, we may not be able to meet demand on a timely basis, and we may need to expend a significant amount of time working with our customers to allocate limited supply and maintain positive customer relations, or we may incur additional costs in order to source additional materials and subcomponents to produce components of our solutions or to expedite the manufacture and delivery of additional inventory. If we underestimate customer demand, our contract manufacturer may have inadequate materials and subcomponents on hand to produce components of our solutions, which could result in manufacturing interruptions, shipment delays, deferral or loss of revenue, and damage to our customer relationships. Conversely, if we overestimate customer demand, we and SMTC may purchase more inventory than required for actual customer orders, resulting in excess or obsolete inventory, thereby increasing our costs and harming our operating results.

If hospitals do not have and are not willing to install, upgrade and maintain the wireless infrastructure required to effectively operate our Vocera Communication solution, then they may experience technical problems or not purchase our solution at all.

The effectiveness of our Vocera Communication solution depends upon the quality and compatibility of the communications environment that our healthcare customers maintain. Our solutions require voice-grade wireless, or Wi-Fi, installed through large enterprise environments, which can vary from hospital to hospital and from department to department within a hospital. Many hospitals have not installed a voice-grade wireless infrastructure. If potential customers do not have a wireless network that can properly and fully interoperate with our Vocera Communication solution, then such a network must be installed, or an existing Wi-Fi network must be upgraded or modified, for example, by adding access points in stairwells, for our Vocera Communication solution to be fully functional. The additional cost of installing or upgrading a Wi-Fi network may dissuade potential customers from installing our solution. Furthermore, if changes to a customer's physical or information technology environment cause integration issues or degrade the effectiveness of our solution, or if the customer fails to upgrade or maintain its environment as may be required for software releases or updates or to ensure our solution's effectiveness, the customer may not be able to fully utilize our solution or may experience technical problems, or these changes may impact the performance of other wireless equipment being used. If such circumstances arise, prospective customers may not purchase or existing customers may not expand their use of or deploy upgraded versions of our Vocera Communication solution, thereby harming our business and operating results.

If we fail to achieve and maintain certification for certain U.S. federal standards, our sales to U.S. government customers will suffer.

We believe that a significant opportunity exists to sell our products to healthcare facilities in the Veterans Administration and Department of Defense (DoD). These customers require independent certification of compliance with specific requirements relating to encryption, security, interoperability and scalability, including Federal Information Processing Standard (FIPS) 140-2 and, as to DoD, certification by its Joint Interoperability and Test Command and under its Information Assurance Certification and Accreditation Process. We have received certification under certain of these standards for military-specific configurations of the Vocera communication solution incorporating the B2000 and B3000 badges. We are continuing to carry out further compliance activities. A failure on our part to achieve and maintain compliance, both as to current products and as to new product versions, could adversely impact our revenue.

Our expanded efforts to sell our communications solutions in non-healthcare markets may not be successful.

Our primary focus has been on selling our communications solutions to the healthcare market, with other markets addressed only opportunistically.  We recently expanded our sales efforts to customers outside the healthcare markets, including hospitality, energy and other mobile work environments. We may not be successful in further penetrating the non-healthcare markets upon which we are initially focusing, or other new markets. To date, our Vocera Communication solution has been deployed in over 200 customers in non-healthcare markets. Total revenue from non-healthcare customers accounted for 5%, 3% and 3% of our revenue for the three months ended March 31, 2014, and for the years ended December 31, 2013 and 2012,

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respectively. If we cannot maintain these customers by providing communications solutions that meet their requirements, if we cannot successfully expand our communications solutions in non-healthcare markets, or if our solutions are adopted more slowly than we anticipate, we may not obtain significant revenue from these markets. We may experience challenges as we expand in non-healthcare markets, including pricing pressure on our solutions and technical issues as we adapt our solutions for the requirements of new markets. Our communications solutions also may not contain the functionality required by these non-healthcare markets or may not sufficiently differentiate us from competing solutions such that customers can justify deploying our solutions.

If we fail to successfully develop and introduce new solutions and features to existing solutions, our revenue, operating results and reputation could suffer.

Our success depends, in part, upon our ability to develop and introduce new solutions and features to existing solutions that meet existing and new customer requirements. We may not be able to develop and introduce new solutions or features on a timely basis or in response to customers’ changing requirements, or that sufficiently differentiate us from competing solutions such that customers can justify deploying our solutions. We may experience technical problems and additional costs as we introduce new features to our software platform, deploy future models of our wireless badges and integrate new solutions with existing customer clinical systems and workflows. In addition, we may face technical difficulties as we expand into non-English speaking countries and incorporate non-English speech recognition capabilities into our Vocera Communication solution. We also may incur substantial costs or delays in the manufacture of any additional new products or models as we seek to optimize production methods and processes at our contract manufacturer. In addition, we expect that we will at least initially achieve lower gross margins on new models, while endeavoring to reduce manufacturing costs over time. If any of these problems were to arise, our revenue, operating results and reputation could suffer.

If we do not achieve the anticipated strategic or financial benefits from our acquisitions or if we cannot successfully integrate them, our business and operating results could be harmed.

We have acquired, and in the future may acquire, complementary businesses, technologies or assets that we believe to be strategic, such as our recent mVisum acquisition. We may not achieve the anticipated strategic or financial benefits, or be successful in integrating any acquired businesses, technologies or assets. If we cannot effectively integrate our Vocera Communication solution with our Secure Messaging and Care Experience solutions and successfully market and sell these solutions, we may not achieve market acceptance for, or significant revenue from, these new solutions.

Integrating newly acquired businesses, technologies and assets could strain our resources, could be expensive and time consuming, and might not be successful. Our recent acquisition exposes us and we will be further exposed, if we acquire or invest in additional businesses, technologies or assets, to a number of risks, including that we may:

• experience technical issues as we integrate acquired businesses, technologies or assets into our existing communications solutions;

• encounter difficulties leveraging our existing sales and marketing organizations, and direct sales channels, to increase our revenue from acquired businesses, technologies or assets;

• find that the acquisition does not further our business strategy, we overpaid for the acquisition or the economic conditions underlying our acquisition decision have changed;

• have difficulty retaining the key personnel of acquired businesses;

• suffer disruption to our ongoing business and diversion of our management's attention as a result of transition or integration issues and the challenges of managing geographically or culturally diverse enterprises; and

• experience unforeseen and significant problems or liabilities associated with quality, technology and legal contingencies relating to the acquisition, such as intellectual property or employment matters.

In addition, from time to time we may enter into negotiations for acquisitions that are not ultimately consummated. These negotiations could result in significant diversion of management time, as well as substantial out-of-pocket costs. If we were to proceed with one or more significant acquisitions in which the consideration included cash, we could be required to use a substantial portion of our available cash. To the extent we issue shares of capital stock or other rights to purchase capital stock, including options and warrants, the ownership of existing stockholders would be diluted. In addition, acquisitions may result in the incurrence of debt, contingent liabilities, large write-offs, or other unanticipated costs, events or circumstances, any of which could harm our operating results.

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We generally recognize revenue from maintenance and support contracts over the contract term, and changes in sales may not be immediately reflected in our operating results.

We generally recognize revenue from our customer maintenance and support contracts ratably over the contract term, which is typically 12 months, in some cases subject to an early termination right. Revenue from our maintenance and support contracts accounted for 34%, 31% and 26% of our revenue for the three months ended March 31, 2014, and for the years ended December 31, 2013 and 2012, respectively. A portion of the revenue we report in each quarter is derived from the recognition of deferred revenue relating to maintenance and support contracts entered into during previous quarters. Consequently, a decline in new or renewed maintenance and support by our customers in any one quarter may not be immediately reflected in our revenue for that quarter. Such a decline, however, will negatively affect our revenue in future quarters. Accordingly, the effect of significant downturns in sales and market acceptance of our services and potential changes in our rate of renewals may not be fully reflected in our operating results until future periods.

Our success depends upon our ability to attract, integrate and retain key personnel, and our failure to do so could harm our ability to grow our business.

Our success depends, in part, on the continuing services of our senior management and other key personnel, and our ability to continue to attract, integrate and retain highly skilled personnel, particularly in engineering, sales and marketing. Competition for highly skilled personnel is intense, particularly in the Silicon Valley where our headquarters are located. If we fail to attract, integrate and retain key personnel, our ability to grow our business could be harmed.

The members of our senior management and other key personnel are at-will employees, and may terminate their employment at any time without notice. If they terminate their employment, we may not be able to find qualified individuals to replace them on a timely basis or at all and our senior management may need to divert their attention from other aspects of our business. Former employees may also become employees of a competitor. We may also have to pay additional compensation to attract and retain key personnel. We also anticipate hiring additional engineering, marketing and sales, and services personnel to grow our business. Often, significant amounts of time and resources are required to train these personnel. We may incur significant costs to attract, integrate and retain them, and we may lose them to a competitor or another company before we realize the benefit of our investments in them.

Our international operations subject us, and may increasingly subject us in the future, to operational, financial, economic and political risks abroad.

Although we derive a relatively small portion of our revenue from customers outside the United States, we believe that non-U.S. customers could represent an increasing share of our revenue in the future. During the three months ended March 31, 2014 and the years ended December 31, 2013 and 2012, we generated 14.6%, 10.5% and 10.7% of our revenue, respectively, from customers outside of the United States, including Canada, the United Kingdom, Australia, the Republic of Ireland and New Zealand. In April 2014, we also opened a new innovation center in India. Accordingly, we are subject to risks and challenges that we would not otherwise face if we conducted our business solely in the United States, including:

• challenges incorporating non-English speech recognition capabilities into our solutions as we expand into non-English speaking jurisdictions;

• difficulties integrating our solutions with wireless infrastructures with which we do not have experience;

• difficulties integrating local dialing plans and applicable PBX standards;

• challenges associated with delivering support, training and documentation in several languages;

• difficulties in staffing and managing personnel and resellers;

• the need to comply with a wide variety of foreign laws and regulations, including increasingly stringent data privacy regulations, requirements for export controls for encryption technology, employment laws, changes in tax laws and tax audits by government agencies;

• political and economic instability in, or foreign conflicts that involve or affect, the countries of our customers;

• difficulties in collecting accounts receivable and longer accounts receivable payment cycles;

• exposure to competitors who are more familiar with local markets;

• limited or unfavorable intellectual property protection in some countries; and

• currency exchange rate fluctuations, which could affect the price of our solutions relative to locally produced solutions.

Any of these factors could harm our existing international business, impair our ability to expand into international markets or harm our operating results.

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Our solutions are highly complex and may contain software or hardware errors that could harm our reputation and operating results.

Our solutions incorporate complex technology, are deployed in a variety of complex hospital environments and must interoperate with many different types of devices and hospital systems. While we test the components of our solutions for defects and errors prior to release, we or our customers may not discover a defect or error until after we have deployed our solution, integrated it into the hospital environment and our customer has commenced general use of the solution. In addition, our solutions in some cases are integrated with hardware and software offered by “middleware” vendors in order to interoperate with nurse call systems, device alarms and other hospital systems. If we cannot successfully integrate our solution with these vendors as needed or if any hardware or software of these vendors contains any defect or error, then our solution may not perform as designed, or may exhibit a defect or error.

Any defects or errors in, or which are attributed to, our solutions, could result in:

• delayed market acceptance of our affected solutions;

• loss of revenue or delay in revenue recognition;

• loss of customers or inability to attract new customers;

• diversion of engineering or other resources for remedying the defect or error;

• damage to our brand and reputation;

• increased service and warranty costs; and

• legal actions by our customers and hospital patients, including product liability claims.

If any of these occur, our operating results and reputation could be harmed.

We face potential liability related to the privacy and security of personal information collected through our solutions.

In connection with our healthcare communications business, we handle and have access to personal health information subject in the United States to the Health Insurance Portability and Accountability Act of 1996, or HIPAA, the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, regulations issued pursuant to these statutes, state privacy and security laws and regulations, and associated contractual obligations as a “business associate” of healthcare providers. These statutes, regulations and contractual obligations impose numerous requirements regarding the use and disclosure of personal health information with which we must comply. Our failure to accurately anticipate the application or interpretation of these statutes, regulations and contractual obligations as we develop our solutions, a failure by us to comply with their requirements (e.g., evolving encryption and security requirements) or an allegation that defects in our products have resulted in noncompliance by our customers could create material civil and/or criminal liability for us, resulting in adverse publicity and negatively affecting our business.

In addition, the use and disclosure of personal health information is subject to regulation in other jurisdictions in which we do business or expect to do business in the future. Those jurisdictions may attempt to apply such laws extraterritorially or through treaties or other arrangements with U.S. governmental entities. We might unintentionally violate such laws, such laws may be modified and new laws may be enacted in the future which may increase the chance that we violate them. Any such developments, or developments stemming from enactment or modification of other laws, or the failure by us to comply with their requirements or to accurately anticipate the application or interpretation of these laws could create material liability to us, result in adverse publicity and negatively affect our business.

For example, the European Union, or EU, adopted the Data Protection Directive, or DPD, imposing strict regulations and establishing a series of requirements regarding the storage of personally identifiable information on computers or recorded on other electronic media. This has been implemented by all EU member states through national laws. DPD provides for specific regulations requiring all non-EU countries doing business with EU member states to provide adequate data privacy protection when receiving personal data from any of the EU member states. Similarly, Canada’s Personal Information and Protection of Electronic Documents Act provides Canadian residents with privacy protections in regard to transactions with businesses and organizations in the private sector and sets out ground rules for how private sector organizations may collect, use and disclose personal information in the course of commercial activities. A finding that we have failed to comply with applicable laws and regulations regarding the collection, use and disclosure of personal information could create liability for us, result in adverse publicity and negatively affect our business.

Any legislation or regulation in the area of privacy and security of personal information could affect the way we operate our services and could harm our business. The costs of compliance with, and the other burdens imposed by, these and other laws or regulatory actions may prevent us from selling our solutions or increase the costs associated with selling our solutions, and may affect our ability to invest in or jointly develop solutions in the United States and in foreign jurisdictions. Further, we cannot

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assure you that our privacy and security policies and practices will be found sufficient to protect us from liability or adverse publicity relating to the privacy and security of personal information.

The failure of our equipment lease customers to pay us under leasing agreements with them that we do not sell to third party lease finance companies could harm our revenue and operating results.

In 2012 we began offering our badges and related hardware accessories to our customers through multi-year equipment lease agreements. In connection with each sale, we recognize product-related revenue at the net present value of the lease payment stream once our obligations related to such sale have been met. We plan to sell the bulk of these leases, including the related accounts receivables, to third party lease finance companies on a non-recourse basis. We will have to retain unsold leases in-house, which will expose us to the creditworthiness of such equipment lease customers over the lease term. For the leases that we retain in-house, our ability to collect payments from a customer or to recognize revenue for the sale could be impaired if the customer fails to meet its obligations to us such as in the case of its bankruptcy filing or deterioration in its financial position, or has other creditworthiness issues, any of which could harm our revenue and operating results.

Our use of open source and non-commercial software components could impose risks and limitations on our ability to commercialize our solutions.

Our solutions contain software modules licensed under open source and other types of non-commercial licenses, including the GNU Public License, the GNU Lesser Public License, the Apache License and others. We also may incorporate open source and other licensed software into our solutions in the future. Use and distribution of such software may entail greater risks than use of third-party commercial software, as licenses of these types generally do not provide warranties or other contractual protections regarding infringement claims or the quality of the code. Some of these licenses require the release of our proprietary source code to the public if we combine our proprietary software with open source software in certain manners. This could allow competitors to create similar products with lower development effort and time and ultimately result in a loss of sales for us.

The terms of many open source and other non-commercial licenses have not been judicially interpreted and there is a risk that such licenses could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to commercialize our solutions. In such event, in order to continue offering our solutions, we could be required to seek licenses from alternative licensors, which may not be available on a commercially reasonable basis or at all, to re-engineer our solutions or to discontinue the sale of our solutions in the event we cannot obtain a license or re-engineer our solutions on a timely basis, any of which could harm our business and operating results. In addition, if an owner of licensed software were to allege that we had not complied with the conditions of the corresponding license agreement, we could incur significant legal costs defending ourselves against such allegations. In the event such claims were successful, we could be subject to significant damages, be required to disclose our source code, or be enjoined from the distribution of our solutions.

Claims of intellectual property infringement could harm our business.

Vigorous protection and pursuit of intellectual property rights has resulted in protracted and expensive litigation for many companies in our industry. Although claims of this kind have not materially affected our business to date, there can be no assurance of the absence of such claims in the future. Any claims or proceedings against us, whether meritorious or not, could be time consuming, result in costly litigation, require significant amounts of management time, result in the diversion of significant operational resources, or require us to enter into royalty or licensing agreements, any of which could harm our business and operating results.

Intellectual property lawsuits are subject to inherent uncertainties due to the complexity of the technical issues involved, and we cannot be certain that we will be successful in defending ourselves against intellectual property claims. In addition, we currently have a limited portfolio of issued patents compared to many other industry participants, and therefore may not be able to effectively utilize our intellectual property portfolio to assert defenses or counterclaims in response to patent infringement claims or litigation brought against us by third parties. Further, litigation may involve patent holding companies or other adverse patent owners who have no relevant products and against whom our potential patents may provide little or no deterrence.

Many potential litigants have the capability to dedicate substantially greater resources to enforce their intellectual property rights and to defend claims that may be brought against them. Furthermore, a successful claimant could secure a judgment that requires us to pay substantial damages or prevents us from distributing certain solutions or performing certain services. We might also be required to seek a license and pay royalties for the use of such intellectual property, which may not be available

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on commercially acceptable terms or at all. Alternatively, we may be required to develop non-infringing technology, which could require significant effort and expense and may ultimately not be successful.

If we are unable to protect our intellectual property rights, our competitive position could be harmed or we could be required to incur significant expenses to enforce our rights.

Our success depends, in part, on our ability to protect our proprietary technology. We protect our proprietary technology through patent, copyright, trade secret and trademark laws in the United States and similar laws in other countries. We also protect our proprietary technology through licensing agreements, nondisclosure agreements and other contractual provisions. These protections may not be available in all cases or may be inadequate to prevent our competitors from copying, reverse engineering or otherwise obtaining and using our technology, proprietary rights or solutions in an unauthorized manner. The laws of some foreign countries may not be as protective of intellectual property rights as those in the United States, and mechanisms for enforcement of intellectual property rights may be inadequate. In addition, third parties may seek to challenge, invalidate or circumvent our patents, trademarks, copyrights and trade secrets, or applications for any of the foregoing. Our competitors may independently develop technologies that are substantially equivalent, or superior, to our technology or design around our proprietary rights. In each case, our ability to compete could be significantly impaired.

To prevent unauthorized use of our intellectual property rights, it may be necessary to prosecute actions for infringement or misappropriation of our proprietary rights. Any such action could result in significant costs and diversion of our resources and management's attention, and there can be no assurance that we will be successful in such action. Furthermore, many of our current and potential competitors have the ability to dedicate substantially greater resources to enforce their intellectual property rights than us. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing or misappropriating our intellectual property. While we plan to continue to protect our intellectual property with, among other things, patent protection, there can be no assurance that:

• current or future U.S. or foreign patent applications will be approved;

• our issued patents will protect our intellectual property and not be held invalid or unenforceable if challenged by third parties;

• we will succeed in protecting our technology adequately in all key jurisdictions in which we or our competitors operate; or

• others will not independently develop similar or competing products or methods or design around any patents that may be issued to us.

Our failure to obtain patents with claims of a scope necessary to cover our technology, or the invalidation of our patents, or our inability to protect any of our intellectual property, may weaken our competitive position and harm our business and operating results. We might be required to spend significant resources to monitor and protect our intellectual property rights. We may initiate claims or litigation against third parties for infringement of our proprietary rights or to establish the validity of our proprietary rights. Any litigation, whether or not it is resolved in our favor, could result in significant expense to us and divert the efforts of our technical and management personnel, which may harm our business, operating results and financial condition.

Some of our solutions are and others could become subject to regulation by the U.S. Food and Drug Administration or similar foreign agencies, which could increase our operating costs.

We provide products that may become subject to regulation by the FDA, and similar agencies in other countries, or the jurisdiction of these agencies could be expanded in the future to include our solutions. The FDA regulates certain products, including software-based products, as “medical devices” based, in part, on the intended use of the product and the risk the device poses to the patient should the device fail to perform properly. Although we have concluded that our wireless badge is a general-purpose communications device not subject to FDA regulation, the FDA could disagree with our conclusion, or changes in our solutions or the FDA’s evolving regulation could lead to FDA regulation of our solutions. If these products were deemed to be medical devices, they would be subject to the 2.3% excise tax under the Affordable Care Act. Canada and many other countries in which we sell or may sell our solutions could also have similar regulations applicable to our solutions, some of which may be subject to change or interpretation. We may incur substantial operating costs if we are required to register our solutions or components of our solutions as regulated medical devices under U.S. or foreign regulations, obtain premarket approval from the FDA or foreign regulatory agencies, and satisfy the extensive reporting requirements. In addition, failure to comply with these regulations could result in enforcement actions and monetary penalties. A clinical communications product acquired from mVisum, Inc. is regulated by the FDA as a Class II medical device.

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Product liability or other liability claims could cause us to incur significant costs, adversely affect the sales of our solutions and harm our reputation.

Our solutions are utilized by healthcare professionals and others in the course of providing patient care. It is possible that patients, family members, physicians, nurses or others may allege we are responsible for harm to patients or healthcare professionals due to defects in, the malfunction of, the characteristics of, or the operation of, our solutions. Any such allegations could harm our reputation and ability to sell our solutions.

Components of our solutions utilizing Wi-Fi also emit radio frequency, or RF, energy. RF emissions have been alleged, in connection with cellular phones, to have adverse health consequences. While these components of our solutions comply with guidelines applicable to such emissions, some may allege that these components of our solutions cause adverse health consequences or applicable guidelines may change making these components of our solutions non-compliant. Regulatory agencies in the United States and other countries in which we do or plan to do business may implement regulations concerning RF emissions standards. In addition, healthcare professionals have alleged and may allege in the future that magnets in our badges may emit electromagnetic radiation or otherwise interfere with implanted medical or other devices. Any such allegations or non-compliance, or any regulatory developments, including any changes affecting the transmission of radio signals, could negatively impact the sales of our solutions, require costly modifications to our solutions and harm our reputation.

Although our customer agreements contain terms and conditions, including disclaimers of liability, that are intended to reduce or eliminate our potential liability, we could be required to spend significant amounts of management time and resources to defend ourselves against product liability, tort, warranty or other claims. If any such claims were to prevail, we could be forced to pay damages, comply with injunctions or stop distributing our solutions. Even if potential claims do not result in liability to us, investigating and defending against these claims could be expensive and time consuming and could divert management's attention away from our business. We maintain general liability insurance coverage, including coverage for errors and omissions; however, this coverage may not be sufficient to cover large claims against us or otherwise continue to be available on acceptable terms. Further, the insurer could attempt to disclaim coverage as to any particular claim.

Our business is subject to the risks of earthquakes, fire, floods and other natural catastrophic events, and to interruption by man-made problems such as power disruptions or terrorism.

Our corporate headquarters are located in the San Francisco Bay Area, a region known for seismic activity, and many critical components of our solutions are sourced in Asia and Mexico, regions known to suffer natural disasters. A significant natural disaster, such as an earthquake, fire or a flood, occurring at our headquarters, our other facilities or where our contract manufacturer or its suppliers are located, could harm our business, operating results and financial condition. In addition, acts of terrorism could cause disruptions in our business, the businesses of our customers and suppliers, or the economy as a whole. We also rely on information technology systems to communicate among our workforce located worldwide, and in particular, our senior management, general and administrative, and research and development activities that are coordinated with our corporate headquarters in the San Francisco Bay Area. Any disruption to our internal communications, whether caused by a natural disaster or by man-made problems, such as power disruptions, in the San Francisco Bay Area, Asia or Mexico could delay our research and development efforts, cause delays or cancellations of customer orders or delay deployment of our solutions, which could harm our business, operating results and financial condition.

We may require additional capital to support our business growth, and such capital may not be available.

We intend to continue to make investments to support business growth and may require additional funds to respond to business challenges, which include the need to develop new solutions or enhance existing solutions, enhance our operating infrastructure, expand our sales and marketing capabilities, expand into non-healthcare markets, and acquire complementary businesses, technologies or assets. Accordingly, we may need to engage in equity or debt financing to secure funds. Equity and debt financing, however, might not be available when needed or, if available, might not be available on terms satisfactory to us. If we raise additional funds through equity financing, our stockholders may experience dilution. Debt financing, if available, may involve covenants restricting our operations or our ability to incur additional debt. If we are unable to obtain adequate financing or financing on terms satisfactory to us, our ability to continue to support our business growth and to respond to business challenges could be significantly limited as we may have to delay, reduce the scope of or eliminate some or all of our initiatives, which could harm our operating results.

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As an “emerging growth company” under the JOBS Act, we are permitted to, and may, rely on exemptions from certain disclosure and governance requirements.

As an “emerging growth company” under the Jumpstart Our Business Startups Act, or JOBS Act, we are permitted to, and may, rely on exemptions from certain disclosure and governance requirements. For example, for so long as we are an emerging growth company, which can last, at most, until the first fiscal year following the fifth anniversary of our initial public offering, we will not be required to:

• have our independent registered public accounting firm report on our internal control over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act;

• comply with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor's report providing additional information about the audit and the financial statements;

• provide the “compensation discussion and analysis” and certain compensation tables for our named executive officers in our Form 10-K or annual proxy statement; and

• submit certain executive compensation matters to stockholder advisory votes, such as “say on pay” and “say on frequency.”

We could be an emerging growth company for up to five years. However, if the market value of our common stock that is held by non-affiliates exceeds $700 million as of June 30th of any year, we could cease to be an “emerging growth company” as of the following December 31st. This threshold was not reached for June 30, 2013. After exceeding the threshold, as of each fiscal year end, our independent registered public accounting firm will be required to evaluate and report on our internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act. While management has established plans to accommodate the additional assessment and attestation procedures and related costs of Section 404(b) compliance, we may incur additional costs or require additional management time to comply with Section 404(b) in a timely manner.

If we do not maintain effective internal control over financial reporting or disclosure controls and procedures in the future, the accuracy and timeliness of our financial reporting may be adversely affected.

The Sarbanes-Oxley Act requires, among other things, that we assess the effectiveness of our internal control over financial reporting annually and disclosure controls and procedures quarterly. In particular, we must obtain confidence in our internal control over financial reporting to allow management to report on the effectiveness of our internal control over financial reporting as required by Section 404 of the Sarbanes-Oxley Act. To the extent we find a material weakness or other deficiency in our internal control over financial reporting, the accuracy and timeliness of our financial reporting may be adversely affected.

Multiple negative consequences could ensue if a material weakness in our internal control over financial reporting is identified in the future, or we are not able to comply with the requirements of Section 404 in a timely manner or we do not maintain effective controls. For example, our reported financial results could be materially misstated or could be restated, we could receive an adverse opinion regarding our controls from our independent registered public accounting firm (once such opinion is required under the Sarbanes-Oxley Act), or we could be subject to investigations or sanctions by regulatory authorities. All of these outcomes would require additional financial and management resources, and the market price of our stock could decline.

We will continue to incur increased costs as a result of operating as a public company and our management will have to devote substantial time to public company compliance obligations.

As a public company, we will continue to incur substantial legal, accounting and other expenses that we did not incur as a private company. We will continue to incur substantial expenses even though we as an “emerging growth company” may rely upon the disclosure and governance exemptions under the JOBS Act. The Sarbanes-Oxley Act of 2002, or Sarbanes-Oxley Act, as well as rules subsequently implemented by the SEC and our stock exchange, impose various requirements on public companies, including changes in corporate governance practices. Our management and other personnel will need to devote a substantial amount of time to these compliance requirements and any new requirements that the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 may impose on public companies. Moreover, these rules and regulations, along with compliance with accounting principles and regulatory interpretations of such principles, as amended by the JOBS Act, have increased and will continue to increase our legal, accounting and financial compliance costs and have made and will continue to make some activities more time-consuming and costly.

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We face risks related to securities litigation that could result in significant legal expenses and settlement or damage awards.

We are currently, and may in the future become, subject to claims and litigation alleging violations of the securities laws or other related claims, which could harm our business and require us to incur significant costs. For example, on August 1, 2013 and August 21, 2013, purported securities class actions were filed in the United States District Court for the Northern District of California against us and certain of our officers, our board of directors, a former director and the underwriters for our initial public offering. The suits purport to allege claims for allegedly misleading statements in the registration statement for our initial public offering and in subsequent communications regarding our business and financial results. Regardless of the outcome, these matters or future litigation may require significant attention from management and could result in significant legal expenses, settlement costs or damage awards that could have a material impact on our financial position, results of operations and cash flows.

Compliance with the SEC's new rule for disclosures on sourcing of conflict minerals may be time consuming and costly and could adversely affect our reputation.

Under the Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010, the SEC has adopted a new rule that applies to companies that use certain minerals and metals, known as conflict minerals, in their products, including certain products manufactured for them by third parties. The new rule will require companies that use conflict minerals in the production of their products to  conduct diligence as to whether or not such minerals originate from the Democratic Republic of Congo and adjoining countries and to file certain information with the SEC about the use of these minerals. We will incur additional costs to comply with the due diligence and disclosure requirements.  In addition, depending upon our findings, or our inability to make reliable findings, about the source of any conflict minerals that we use, our reputation could be harmed. The first conflict minerals report is due June 2, 2014. To date, we have not incurred any material incremental costs, but we may in the future.

Risks related to our common stock

The market price of our common stock may be volatile, and your investment in our stock could suffer a decline in value.

There has been significant volatility in the market price and trading volume of equity securities, which is often unrelated or disproportionate to the financial performance of the companies issuing the securities. These broad market fluctuations may negatively affect the market price of our common stock. The market price of our common stock could fluctuate significantly in response to the factors described in this “Risk Factors” section and elsewhere in this Form 10-Q and other factors, many of which are beyond our control, including:

• actual or anticipated variation in anticipated operating results of us or our competitors;

• the financial projections we may provide to the public, any changes in these projections or our failure to meet these projections;

• announcements by us or our competitors of new solutions, new or terminated significant contracts, commercial relationships or capital commitments;

• failure of securities analysts to maintain coverage of us, changes in financial estimates by any securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors;

• developments or disputes concerning our intellectual property or other proprietary rights;

• commencement of, or our involvement in, litigation;

• announced or completed acquisitions of businesses, technologies or assets by us or our competitor;

• changes in operating performance and stock market valuations of other technology companies generally, or those in our industry in particular;

• price and volume fluctuations attributable to inconsistent trading volume levels of our common stock;

• our public float relative to the total number of shares of our common stock that are issued and outstanding;

• price and volume fluctuations in the overall stock market, including as a result of trends in the economy as a whole;

• rumors and market speculation involving us or other companies in our industry;

• any major change in our management;

• unfavorable economic conditions and slow or negative growth of our markets; and

• other events or factors, including those resulting from war or incidents of terrorism.

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If securities or industry analysts issue an adverse or misleading opinion regarding our stock or do not publish research or reports about our business, our stock price could decline.

The trading market for our common stock depends in part on the research and reports that securities or industry analysts publish about us and our business. We do not control these analysts or the content and opinions included in their reports. The price of our common stock could decline if one or more analysts downgrade our common stock or if those analysts issue other unfavorable commentary or cease publishing reports about us or our business. If one or more analysts cease coverage of our company or fail to regularly publish reports about our company, we could lose visibility in the financial market, which in turn could cause our stock price to decline. Further, securities or industry analysts may elect not to provide research coverage of our common stock and such lack of research coverage may adversely affect the market price of our common stock.

The concentration of our capital stock ownership with insiders will likely limit your ability to influence corporate matters.

Our executive officers, directors, current 5% or greater stockholders and entities affiliated with any of them together beneficially own approximately 43% of our common stock outstanding as of March 31, 2014. These stockholders, if they act together, will have significant influence over all matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, and may take actions that may not be in the best interests of our other stockholders. This concentration of ownership could also limit stockholders’ ability to influence corporate matters. Accordingly, corporate actions might be taken even if other stockholders, including you, oppose them, or may not be taken even if other stockholders view them as in the best interests of our stockholders. This concentration of ownership may have the effect of delaying or preventing a change of control of our company, may make the approval of certain transactions difficult or impossible without the support of these stockholders and might adversely affect the market price of our common stock.

We have never paid cash dividends on our capital stock, and we do not anticipate paying any dividends in the foreseeable future.

We have never paid cash dividends on any of our capital stock and currently intend to retain our future earnings to fund the development and growth of our business. As a result, capital appreciation, if any, of our common stock will be the sole source of gain for the foreseeable future.

Our charter documents and Delaware law could discourage, delay or prevent a change of control of our company or change in our management that stockholders consider favorable and cause our stock price to decline.

Certain provisions of our restated certificate of incorporation and restated bylaws and Delaware law could discourage, delay or prevent a change of control of our company or change in our management that the stockholders of our company consider favorable. These provisions:

• authorize the issuance of “blank check” preferred stock that our board of directors could issue to increase the number of outstanding shares and to discourage a takeover attempt;

• prohibit stockholder action by written consent, requiring all stockholder actions to be taken at a meeting of stockholders;

• establish advance notice procedures for nominating candidates to our board of directors or proposing matters that can be acted upon by stockholders at stockholder meetings;

• limit the ability of our stockholders to call special meetings of stockholders;

• prohibit stockholders from cumulating their votes for the election of directors;

• permit newly created directorships resulting from an increase in the authorized number of directors or vacancies on our board of directors to be filled only by majority vote of our remaining directors, even if less than a quorum is then in office;

• provide that our board of directors is expressly authorized to make, alter or repeal our bylaws;

• establish a classified board of directors so that not all members of our board are elected at one time;

• provide that our directors may be removed only for “cause” and only with the approval of the holders of at least 66 2/3rds percent of our outstanding stock; and

• require super-majority voting to amend certain provisions in our certificate of incorporation and bylaws.

Section 203 of the Delaware General Corporation Law may also discourage, delay or prevent a change of control of our company.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

Use of Proceedsfrom Public Offering of Common Stock

None.

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Issuer Purchases of Equity Securities

The table below provides information with respect to repurchases of unvested shares of our common stock made pursuant to our 2000 Stock Option Plan, as amended, and our 2006 Stock Option Plan, as amended. All shares in the table below were shares repurchased as a result of us exercising our right of repurchase for unvested shares under our stock option plans and not pursuant to a publicly announced plan or program.

Period	Total Number of Shares Purchased	Average Price Paid Per Share		Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs	Maximum Number of Shares that May Yet be Purchased Under the Plans or Programs
January 1 - January 31, 2014	469	$	2.16	0	0
February 1 - February 28, 2014	1,562	2.16		0	0
March 1 - March 31, 2014	624	11.10		0	0
Total	2,655	$	4.26	0	0

Item 3. Defaults Upon Senior Securities

None.

Item 4. Mine Safety Disclosures

None.

Item 5. Other Information

None.

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Item 6. Exhibits

Exhibit Number	Exhibit title
31.01	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.02	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.01+	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS††	XBRL Instance Document
101.SCH††	XBRL Taxonomy Schema Linkbase Document
101.CAL††	XBRL Taxonomy Calculation Linkbase Document
101.DEF††	XBRL Taxonomy Definition Linkbase Document
101.LAB††	XBRL Taxonomy Labels Linkbase Document
101.PRE††	XBRL Taxonomy Presentation Linkbase Document

+

This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.

††

In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934,as amended, and otherwise is not subject to liability under these sections.

42

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

		VOCERA COMMUNICATIONS, INC.
Date: May 9, 2014	By:	/S/    Brent D. Lang
		Brent D. Lang Chief Executive Officer
		(Principal Executive Officer)
Date: May 9, 2014	By:	/S/    William R. Zerella
		William R. Zerella Chief Financial Officer
		(Principal Financial Officer)

43

EXHIBIT INDEX

Exhibit Number	Exhibit title
31.1	Certification of Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
31.2	Certification of Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1+	Certification of Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
101.INS††	XBRL Instance Document
101.SCH††	XBRL Taxonomy Schema Linkbase Document
101.CAL††	XBRL Taxonomy Calculation Linkbase Document
101.DEF††	XBRL Taxonomy Definition Linkbase Document
101.LAB††	XBRL Taxonomy Labels Linkbase Document
101.PRE††	XBRL Taxonomy Presentation Linkbase Document
+	This certification shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date hereof and irrespective of any general incorporation language in any filings.
††	In accordance with Rule 406T of Regulation S-T, the information in these exhibits is furnished and deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Exchange Act of 1934,as amended, and otherwise is not subject to liability under these sections.

44

EX-31.01

EXHIBIT 31.01

CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, Brent D. Lang, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Vocera Communications, Inc.:

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2014	/s/ Brent D. Lang
	Brent D. Lang
	Chief Executive Officer

EX-31.02

EXHIBIT 31.02

CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) OR 15d-14(a) OF

THE SECURITIES EXCHANGE ACT OF 1934, AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

I, William R. Zerella, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Vocera Communications, Inc.:

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) for the registrant and have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: May 9, 2014	/s/ William R. Zerella
	William R. Zerella
	Chief Financial Officer

EX-32.01

EXHIBIT 32.01

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

PURSUANT TO 18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

Pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Brent D. Lang, Chief Executive Officer of Vocera Communications, Inc. (the “Company”), and William R. Zerella, Chief Financial Officer of the Company, each hereby certifies that, to his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended March 31, 2014, to which this Certification is attached as Exhibit 32.01 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

In Witness Whereof, the undersigned have set their hands hereto as of the 9th day of May 2014.

/s/ Brent D. Lang	/s/ William R. Zerella
Brent D. Lang	William R. Zerella
Chief Executive Officer	Chief Financial Officer

XML

Balance Sheet Components Property and Equipment (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 14,175,000		$ 14,030,000
Less: Accumulated depreciation	(9,218,000)		(8,665,000)
Property and equipment, net	4,957,000		5,365,000
Depreciation, Depletion and Amortization [Abstract]
Depreciation	500,000	400,000
Computer equipment and software
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	7,681,000		7,345,000
Furniture, fixtures and equipment
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	923,000		924,000
Leasehold improvements
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	2,131,000		2,125,000
Manufacturing tools and equipment
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	3,083,000		3,081,000
Construction in process
Property, Plant and Equipment [Line Items]
Property, Plant and Equipment, Gross	$ 357,000		$ 555,000

XML

Business Acquisition Business acquisition - PPA (Details) (USD $)			0 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Jan. 13, 2014 Net assets of mVisum, Inc. [Member]	Jan. 13, 2014 Net assets of mVisum, Inc. [Member] Developed technology	Jan. 13, 2014 Net assets of mVisum, Inc. [Member] Noncompete Agreements	Jan. 13, 2014 Net assets of mVisum, Inc. [Member] Customer relationships	Jan. 13, 2014 Net assets of mVisum, Inc. [Member] Trademarks and trade names
Business Acquisition [Line Items]
Payments to Acquire Businesses, Gross			$ 3,500,000
Business Combination, Acquisition Related Costs			200,000
Business combination, future bonus compensation			500,000
Business Combination, Recognized Identifiable Assets Acquired, Goodwill, and Liabilities Assumed, Net [Abstract]
Business Combination, Receivables acquired			187,000
Business Combination, Finite-Lived Intangibles acquired				830,000	260,000	170,000	40,000
Goodwill	7,678,000	5,575,000	2,103,000
Total assets acquired including Goodwill			3,590,000
Business Combination, Deferred Revenue acquired			(90,000)
Business Combination, Net assets acquired			$ 3,500,000

XML

Stock-based Compensation and Awards Summary of restricted stock activity (Details) (USD $) In Millions, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014
Restricted Stock Awards
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Comp, Nonvested Awards, Comp Cost unRecognized, Awards Other than Options	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Number of shares, Outstanding, Beginning balance	12,076
Wtd Avg Grant Date Fair Value per Share, Outstanding, Beginning balance	$ 12.42
Number of shares, Granted	0
Weighted Average Grant Date Fair Value per Share, Granted	$ 0.00
Number of shares, Vested	(12,076)
Weighted Average Grant Date Fair Value per Share, Vested	$ 12.42
Number of shares, Forfeited	0
Weighted Average Grant Date Fair Value per Share, Forfeited	$ 0.00
Number of shares, Outstanding, Ending balance	0
Wtd Avg Grant Date Fair Value per Share, Outstanding, Ending balance	$ 0.00
Restricted Stock Units
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock Comp, Nonvested Awards, Comp Cost unRecognized, Awards Other than Options	$ 10.4
Stock Comp-other than options - Period for Recognition- Comp cost not yet rocognized	1 year 11 months 5 days
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]
Number of shares, Outstanding, Beginning balance	755,271
Wtd Avg Grant Date Fair Value per Share, Outstanding, Beginning balance	$ 19.24
Number of shares, Granted	86,236
Weighted Average Grant Date Fair Value per Share, Granted	$ 16.44
Number of shares, Vested	(25,389)
Weighted Average Grant Date Fair Value per Share, Vested	$ 25.74
Number of shares, Forfeited	(13,935)
Weighted Average Grant Date Fair Value per Share, Forfeited	$ 20.34
Number of shares, Outstanding, Ending balance	802,183
Wtd Avg Grant Date Fair Value per Share, Outstanding, Ending balance	$ 18.71

XML

Business Acquisition Business acquisition - Useful lives overall (Details) (Net assets of mVisum, Inc. [Member])	0 Months Ended
	Jan. 13, 2014
Business Acquisition [Line Items]
Acquired Finite-lived Intangible Assets, Weighted Average Useful Life	5 years 8 months 1 day
Minimum
Business Acquisition [Line Items]
Finite-Lived Intangible Asset, Useful Life	4 years
Maximum
Business Acquisition [Line Items]
Finite-Lived Intangible Asset, Useful Life	7 years

XML

Stock-based Compensation and Awards Narrative (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Proceeds from warrant exercises	$ 0	$ 226,000
Stock Options
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Unamortized Compensation Cost, Stock Options	8,000,000
Uamortized Compensation Cost Not yet Recognized, Period Remaining, Options	2 years 5 months 12 days
2012 Stock Option Plan | Stock options and restricted stock units [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Number of Shares Available for Grant	1,424,575
Cash Exercise [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Shares issued, Exercise of Stock Warrants	0	34,142
Proceeds from warrant exercises		$ 200,000

XML

Cash, Cash Equivalents and Short-term Investments Contractual maturities of cash, cash equivalent and short-term investment (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Schedule of Available-for-sale Securities [Line Items]
Cash and cash equivalents (1)	$ 25,912	$ 39,652
Short-term investments	95,847	88,024
Cash, cash equivalents and short-term investments	121,759	127,676
Maturity up to one year [Member]
Schedule of Available-for-sale Securities [Line Items]
Cash and cash equivalents (1)	25,912	39,652
Short-term investments	87,798	71,464
Cash, cash equivalents and short-term investments	113,710	111,116
maturity between 1 and 2 years [Member]
Schedule of Available-for-sale Securities [Line Items]
Cash and cash equivalents (1)	0	0
Short-term investments	8,049	16,560
Cash, cash equivalents and short-term investments	$ 8,049	$ 16,560

XML

Balance Sheet Components Balance sheet components - future payments sales type leases (Tables)

3 Months Ended

Mar. 31, 2014

Investment in sales-type leases [Line Items]

Schedule of Future Minimum Lease Payments for Capital Leases [Table Text Block]

The minimum payments expected to be received for future years under sales-type leases as of March 31, 2014 were as follows:

(in thousands)	Future lease payments
2014 (nine months remaining)	$	697
2015	806
2016	633
2017	229
Total	$	2,365

XML

Stock-based Compensation and Awards Share based compensaton allocated to expense captions (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 2,598	$ 1,704
Cost of Sales [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	286	222
Research and Development Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	220	209
Selling and Marketing Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	967	579
General and Administrative Expense [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock-based compensation expense	$ 1,125	$ 694

XML

Balance Sheet Components Future payments- sales type leases (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Leases - future payments sales type leases [Abstract]
Sales-type Leases, Future Minimum Payments, Remainder of 2014	$ 697
Sales-type Leases, Future Minimum Payments-2015	806
Sales-type Leases, Future Minimum Payments-2016	633
Sales-type Leases, Future Minimum Payments-2017	229
Net Investment in Sales Type Leases, Future Minimum Payments-Gross	$ 2,365	$ 2,597

XML

Goodwill and intangible assets Future amortization schedule (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Goodwill and intangible assets [Abstract]
Finite-Lived Intangibles, AmortExp Remainder 2014	$ 605
Finite-Lived Intangibles, AmortExp, 2015	626
Finite-Lived Intangibles, AmortExp, 2016	495
Finite-Lived Intangibles, AmortExp, 2017	394
Finite-Lived Intangibles, AmortExp, 2018	275
Finite-Lived Intangibles, AmortExp, 2019	229
Finite-Lived Intangibles, AmortExp, after 5th Year	40
Finite-Lived Intangible Assets, Net	$ 2,664	$ 1,544

XML

Segments Summary of the operating segments (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014 Segments	Mar. 31, 2013
Segment Reporting Information [Line Items]
Number of reportable segments	2
Revenue
Product	$ 14,189	$ 12,960
Service	10,487	9,453
Total revenue	24,676	22,413
Cost of revenue
Product	4,990	4,610
Service	4,814	4,084
Cost of Goods and Services Sold	9,804	8,694
Gross profit
Product	9,199	8,350
Service	5,673	5,369
Total gross profit	14,872	13,719
Calculation of pretax profit (loss) [Abstract]
Operating expenses	21,206	17,144
Interest (expense) income, net and other	22	23
Loss before income taxes	$ (6,312)	$ (3,448)

XML

Stock-based Compensation and Awards Summary of stock option activity (Details) (Stock Options, USD $) In Thousands, except Share data, unless otherwise specified	0 Months Ended		3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2014
Stock Options
Rollforward for Options, Outstanding [Roll Forward]
Number of Options, Outstanding, Beginning balance			3,287,207
Weighted Average Exercise Price, Outstanding, Beginning balance			$ 9.62
Wtd avg remaining term, Outstanding, Beginning	6 years 5 months 19 days	6 years 9 months 22 days
Aggregate intrinsic value, Outstanding, Beginning balance			$ 24,880
Number of Options, Options granted			105,730
Weighted Average Exercise Price, Options granted			$ 16.52
Number of Options, Options exercised			(148,237)
Weighted Average Exercise Price, Options exercised			$ 2.92
Options, Forfeitures and Expirations in Period			(13,113)
Options, Forfeitures and Expirations in Period, Weighted Average Exercise Price			$ 21.25
Number of Options, Outstanding, Ending Balance	3,231,587	3,287,207	3,231,587
Weighted Average Exercise Price, Outstanding, Ending balance	$ 10.10	$ 9.62	$ 10.10
Wtd avg remaining term, Outstanding, Endiing	6 years 5 months 19 days	6 years 9 months 22 days
Aggregate intrinsic value, Outstanding, Ending balance	$ 24,763	$ 24,880	$ 24,763

XML

Cash, Cash Equivalents and Short-term Investments

3 Months Ended

Mar. 31, 2014

Cash and Cash Equivalents [Abstract]

Cash, Cash Equivalents, and Short-term Investments

Cash, Cash Equivalents and Short-Term Investments

The following tables present current and prior-year-end balances for cash, cash equivalents and short-term investments (in thousands):

	As of March 31, 2014
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair value
Cash and cash equivalents:
Demand deposits and other cash	$	9,478	$	—	$	—		$	9,478
Money market funds	5,507		—		—			5,507
Commercial paper	1,000		—		—			1,000
Certificates of deposit	246		—		—			246
Corporate debt securities	9,682		—		(1		)	9,681
Total cash and cash equivalents	25,913		—		(1		)	25,912
Short-Term Investments:
Commercial paper	2,599		—		—			2,599
U.S. government agency securities	11,591		6		(1		)	11,596
U.S. Treasury securities	5,203		4		—			5,207
Municipal debt securities	4,715		8		—			4,723
Corporate debt securities	71,735		17		(30		)	71,722
Total short-term investments	95,843		35		(31		)	95,847
Total cash, cash equivalents and short-term investments	$	121,756	$	35	$	(32	)	$	121,759

	As of December 31, 2013
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair value
Cash and cash equivalents:
Demand deposits and other cash	$	15,451	$	—	$	—		$	15,451
Money market funds	22,991		—		—			22,991
Commercial paper	150		—		—			150
Corporate debt securities	1,060		—		—			1,060
Total cash and cash equivalents	39,652		—		—			39,652
Short-Term Investments:
Commercial paper	750		—		—			750
U.S. government agency securities	11,275		5		(1		)	11,279
U.S. Treasury securities	5,233		2		—			5,235
Municipal debt securities	4,758		7		—			4,765
Corporate debt securities	65,982		20		(7		)	65,995
Total short-term investments	87,998		34		(8		)	88,024
Total cash, cash equivalents and short-term investments	$	127,650	$	34	$	(8	)	$	127,676

The Company has determined that the unrealized losses on its short-term investments as of March 31, 2014 and December 31, 2013 do not constitute an "other than temporary impairment." The unrealized losses for the short-term investments have all been in a continuous unrealized loss position for less than twelve months. The Company’s conclusion of no “other than temporary impairment” is based on the high credit quality of the securities, their short remaining maturity (less than five months, weighted average) and the Company’s intent and ability to hold such loss securities until maturity.

Classification of the cash, cash equivalent and short-term investments by contractual maturity was as follows:

(in thousands)	One year or shorter		Between 1 and 2 years		Total
Balances as of March 31, 2014
Cash and cash equivalents (1)	$	25,912	$	—	$	25,912
Short-term investments	87,798		8,049		95,847
Cash, cash equivalents and short-term investments	$	113,710	$	8,049	$	121,759
Balances as of December 31, 2013
Cash and cash equivalents (1)	$	39,652	$	—	$	39,652
Short-term investments	71,464		16,560		88,024
Cash, cash equivalents and short-term investments	$	111,116	$	16,560	$	127,676
(1) Includes demand deposits and other cash, money market funds and other cash equivalent securities, all with 0-90 day maturity at purchase.

All the above tables exclude restricted cash, primarily held in certificates of deposit, of $0.3 million as of March 31, 2014 and December 31, 2013, which is classified within prepaid expenses and other current assets on the balance sheet.

XML

Balance Sheet Components investment in sales type leases (Details) (USD $) In Thousands, unless otherwise specified			3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013	Mar. 31, 2014 Minimum	Mar. 31, 2014 Maximum
Capital Leased Assets [Line Items]
Lessors, Capital Leases, Term of contract			1 year 3 months	4 years 0 months
Net Investment in Sales Type Leases, Future Minimum Payments-Gross	$ 2,365	$ 2,597
Net Investment in Sales Type Leases, Deferred Income	(1,101)	(1,167)
Net Investment in Sales Type Leases	1,264	1,430
Net Investment in Sales Type Leases, Current	(593)	(620)
Net Investment in Sales Type Leases, Noncurrent	$ 671	$ 810

XML

Business Acquisition (Tables)

3 Months Ended

Mar. 31, 2014

Business Combinations - Purchase price allocation [Abstract]

Schedule of Recognized Identified Assets Acquired and Liabilities Assumed [Table Text Block]

The following table presents the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date:

(in thousands)	Fair value acquired
Accounts receivable	$	187
Intangibles
Developed technology	830
Non-compete agreement	260
Customer relationships	170
Trademarks and trade names	40
Goodwill	2,103
Total assets	3,590
Deferred revenue	(90		)
Net assets acquired	$	3,500

XML

Segments (Tables)

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Summary of the operating segments

The following table presents a summary of the operating segments:

	Three months ended March 31,
(in thousands)	2014			2013
Revenue
Product	$	14,189		$	12,960
Service	10,487			9,453
Total revenue	24,676			22,413
Cost of Revenue
Product	4,990			4,610
Service	4,814			4,084
Total cost of revenue	9,804			8,694
Gross profit
Product	9,199			8,350
Service	5,673			5,369
Total gross profit	14,872			13,719
Operating expenses	21,206			17,144
Interest (expense) income, net and other	22			(23		)
Loss before income taxes	$	(6,312	)	$	(3,448	)

XML

Commitments Schedule of Future Minimum Rental Payments for Operating Leases (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Mar. 31, 2014 Inventories	Dec. 31, 2013 Inventories
Unrecorded Unconditional Purchase Obligation [Line Items]
Non-cancelable purchase commitment with a third party manufacturer to purchase inventory			$ 3,200,000	$ 3,100,000
Operating Leases, Rent Expense	500,000	500,000
Operating Leases, Future Minimum Payments Due, by FY
Remainder of 2014	1,283,000
2015	1,693,000
2016	538,000
2017	33,000
Total minimum lease payments	$ 3,547,000

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The Company and Summary of Significant Accounting Policies Sales type lease data (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Summary of significant accounting policies [Abstract]
sales type capital leases transfered to banks	$ 500,000	$ 200,000
Initial financing liability during period incurred for future executory services on transfered leases	300,000	100,000
Net Investment in Sales Type Leases	$ 1,264,000		$ 1,430,000

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Fair value of financial instruments Schedule of assets and liabilities measured at fair value on a recurring basis, by level (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Dec. 31, 2013
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	$ 0
Fair Value, Assets, Level 1 to Level 2 Transfers, Amount	0
Assets, Fair Value Disclosure [Abstract]
Cash and Cash Equivalents, Fair Value Disclosure	25,912	39,652
AFS Securities, Fair Value Disclosure	95,847	88,024
Fair Value, Level 3 Transfers in, Description	0
Fair Value, Measurement with Unobservable Inputs Reconciliation, Recurring Basis, Asset Transfers Into Level 3	0
Fair Value, Measurements, Recurring | Level 1
Assets, Fair Value Disclosure [Abstract]
Total assets measured at fair value	5,507	22,991
Fair Value, Measurements, Recurring | Level 2
Assets, Fair Value Disclosure [Abstract]
Total assets measured at fair value	106,774	89,234
Fair Value, Measurements, Recurring | Total
Assets, Fair Value Disclosure [Abstract]
Total assets measured at fair value	112,281	112,225
Fair Value, Measurements, Recurring | Money market funds | Level 1
Assets, Fair Value Disclosure [Abstract]
Cash and Cash Equivalents, Fair Value Disclosure	5,507	22,991
Fair Value, Measurements, Recurring | Money market funds | Level 2
Assets, Fair Value Disclosure [Abstract]
Cash and Cash Equivalents, Fair Value Disclosure	0	0
Fair Value, Measurements, Recurring | Money market funds | Total
Assets, Fair Value Disclosure [Abstract]
Cash and Cash Equivalents, Fair Value Disclosure	5,507	22,991
Fair Value, Measurements, Recurring | Certificates of Deposit | Level 1
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	0	0
Fair Value, Measurements, Recurring | Certificates of Deposit | Level 2
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	246	0
Fair Value, Measurements, Recurring | Certificates of Deposit | Total
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	246	0
Fair Value, Measurements, Recurring | Commercial paper | Level 1
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	0	0
Fair Value, Measurements, Recurring | Commercial paper | Level 2
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	3,599	900
Fair Value, Measurements, Recurring | Commercial paper | Total
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	3,599	900
Fair Value, Measurements, Recurring | U.S. government agency securities | Level 1
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	0	0
Fair Value, Measurements, Recurring | U.S. government agency securities | Level 2
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	11,596	11,279
Fair Value, Measurements, Recurring | U.S. government agency securities | Total
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	11,596	11,279
Fair Value, Measurements, Recurring | U.S. Treasury securities | Level 1
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	0	0
Fair Value, Measurements, Recurring | U.S. Treasury securities | Level 2
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	5,207	5,235
Fair Value, Measurements, Recurring | U.S. Treasury securities | Total
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	5,207	5,235
Fair Value, Measurements, Recurring | Municipal debt securities | Level 1
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	0	0
Fair Value, Measurements, Recurring | Municipal debt securities | Level 2
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	4,723	4,765
Fair Value, Measurements, Recurring | Municipal debt securities | Total
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	4,723	4,765
Fair Value, Measurements, Recurring | Corporate debt securities | Level 1
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	0	0
Fair Value, Measurements, Recurring | Corporate debt securities | Level 2
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	81,403	67,055
Fair Value, Measurements, Recurring | Corporate debt securities | Total
Assets, Fair Value Disclosure [Abstract]
AFS Securities, Fair Value Disclosure	$ 81,403	$ 67,055

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Fair value of financial instruments

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Fair value of financial instruments

Fair Value of Financial Instruments

The Company’s cash and cash equivalents and short-term investments are carried at their fair values with any differences from their amortized cost recorded in equity as unrealized gains (losses) on marketable securities. As a basis for determining the fair value of its assets and liabilities, the Company established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. For the three months ended March 31, 2014, there have been no transfers between Level 1 and Level 2 fair value instruments and no transfers in or out of Level 3.

The Company's money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The fair value of the Company's Level 2 fixed income securities are obtained from independent pricing services, which may use quoted market prices for identical or comparable instruments or model-driven valuations using observable market data or other inputs corroborated by observable market data. . The Company does not have any financial instruments which are valued using Level 3 inputs.

The Company’s assets that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of March 31, 2014 and December 31, 2013, are summarized as follows (in thousands):

	March 31, 2014						December 31, 2013
	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets
Money market funds	$	5,507	$	—	$	5,507	$	22,991	$	—	$	22,991
Certificates of deposits	—		246		246		—		—		—
Commercial paper	—		3,599		3,599		—		900		900
U.S. government agency securities	—		11,596		11,596		—		11,279		11,279
U.S. Treasury securities	—		5,207		5,207		—		5,235		5,235
Municipal debt securities	—		4,723		4,723		—		4,765		4,765
Corporate debt securities	—		81,403		81,403		—		67,055		67,055
Total assets measured at fair value	$	5,507	$	106,774	$	112,281	$	22,991	$	89,234	$	112,225

The Company had no liabilities as of March 31, 2014 and December 31, 2013 that were measured at fair value on a recurring basis.

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Cash, Cash Equivalents and Short-term Investments Schedule of Avaialable for Sale Securities (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Schedule of available for sale securities [Line Items]
Restricted cash	$ 305	$ 305
Cash and cash equivalents [Abstract]
Net Investment in Sales Type Leases, Future Minimum Payments-Gross	2,365	2,597
Cash and Cash Equivalents, Amortized Cost	25,913	39,652
Cash And Cash Equivalents, Gross Unrealized Gains	0	0
Cash And Cash Equivalents, Gross Unrealized Losses	(1)	0
Cash and Cash Equivalents, Fair Value Disclosure	25,912	39,652
Short-term Investments [Abstract]
AFS Securities, Amortized Cost Basis	95,843	87,998
Available-for-sale Securities, Gross Unrealized Gain1	35	34
Available-for-sale Securities, Gross Unrealized Loss1	(31)	(8)
AFS Securities, Fair Value Disclosure	95,847	88,024
Cash, Cash Equivalents, and Short-term Investments [Abstract]
Cash, Cash Equiv. And S-T Investments, Amortized Cost	121,756	127,650
Cash, Cash Equiv. And S-T Investments, Gross Unrealized Gains	35	34
Cash, Cash Equiv. And S-T Investments, Gross Unrealized Losses	(32)	(8)
Cash, Cash Equiv. And S-T Investments, Fair Value Disclosure	121,759	127,676
Demand deposits and other cash
Cash and cash equivalents [Abstract]
Cash and Cash Equivalents, Amortized Cost	9,478	15,451
Cash And Cash Equivalents, Gross Unrealized Gains	0	0
Cash And Cash Equivalents, Gross Unrealized Losses	0	0
Cash and Cash Equivalents, Fair Value Disclosure	9,478	15,451
Money market funds
Cash and cash equivalents [Abstract]
Cash and Cash Equivalents, Amortized Cost	5,507	22,991
Cash And Cash Equivalents, Gross Unrealized Gains	0	0
Cash And Cash Equivalents, Gross Unrealized Losses	0	0
Cash and Cash Equivalents, Fair Value Disclosure	5,507	22,991
Commercial Paper in CE
Cash and cash equivalents [Abstract]
Cash and Cash Equivalents, Amortized Cost	1,000	150
Cash And Cash Equivalents, Gross Unrealized Gains	0	0
Cash And Cash Equivalents, Gross Unrealized Losses	0	0
Cash and Cash Equivalents, Fair Value Disclosure	1,000	150
Certificates of Deposit
Cash and cash equivalents [Abstract]
Cash and Cash Equivalents, Amortized Cost	246
Cash And Cash Equivalents, Gross Unrealized Gains	0
Cash And Cash Equivalents, Gross Unrealized Losses	0
Cash and Cash Equivalents, Fair Value Disclosure	246
Corporate Debt Securities [Member]
Cash and cash equivalents [Abstract]
Cash and Cash Equivalents, Amortized Cost	9,682	1,060
Cash And Cash Equivalents, Gross Unrealized Gains	0	0
Cash And Cash Equivalents, Gross Unrealized Losses	(1)	0
Cash and Cash Equivalents, Fair Value Disclosure	9,681	1,060
Commercial paper in STI
Short-term Investments [Abstract]
AFS Securities, Amortized Cost Basis	2,599	750
Available-for-sale Securities, Gross Unrealized Gain1	0	0
Available-for-sale Securities, Gross Unrealized Loss1	0	0
AFS Securities, Fair Value Disclosure	2,599	750
U.S. Treasury securities
Short-term Investments [Abstract]
AFS Securities, Amortized Cost Basis	5,203	5,233
Available-for-sale Securities, Gross Unrealized Gain1	4	2
Available-for-sale Securities, Gross Unrealized Loss1	0	0
AFS Securities, Fair Value Disclosure	5,207	5,235
Municipal debt securities
Short-term Investments [Abstract]
AFS Securities, Amortized Cost Basis	4,715	4,758
Available-for-sale Securities, Gross Unrealized Gain1	8	7
Available-for-sale Securities, Gross Unrealized Loss1	0	0
AFS Securities, Fair Value Disclosure	4,723	4,765
Corporate Debt Securities [Member]
Short-term Investments [Abstract]
AFS Securities, Amortized Cost Basis	71,735	65,982
Available-for-sale Securities, Gross Unrealized Gain1	17	20
Available-for-sale Securities, Gross Unrealized Loss1	(30)	(7)
AFS Securities, Fair Value Disclosure	71,722	65,995
U.S. government agency securities
Short-term Investments [Abstract]
AFS Securities, Amortized Cost Basis	11,591	11,275
Available-for-sale Securities, Gross Unrealized Gain1	6	5
Available-for-sale Securities, Gross Unrealized Loss1	(1)	(1)
AFS Securities, Fair Value Disclosure	$ 11,596	$ 11,279

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Balance Sheet Components Accrued Liabilities (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Accrued Liabilities, Current [Abstract]
Payroll and related expenses	$ 4,721	$ 5,065
Accrued payables	1,607	2,259
Deferred Rent Credit, Current	450	490
Lease financing, current portion	655	528
Product warranty	722	840
Sales and use tax payable	252	259
Other	494	400
Total accrued payroll and other current liabilities	$ 8,901	$ 9,841

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Income Taxes (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Income Tax Disclosure [Abstract]
Income Tax Expense (Benefit)	$ 77	$ 51

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Current assets
Cash and cash equivalents	$ 25,912	$ 39,652
Short-term investments	95,847	88,024
Accounts receivable, net of allowance	20,151	23,543
Other receivables	801	882
Inventories	5,340	5,665
Prepaid expenses and other current assets	2,593	1,892
Total current assets	150,644	159,658
Property and equipment, net	4,957	5,365
Intangible assets, net	2,664	1,544
Goodwill	7,678	5,575
Other long-term assets	1,014	965
Total assets	166,957	173,107
Current liabilities
Accounts payable	2,656	3,531
Accrued payroll and other current liabilities	8,901	9,841
Deferred revenue, current	25,177	26,133
Total current liabilities	36,734	39,505
Deferred revenue, long-term	6,470	6,398
Other long-term liabilities	1,736	1,641
Total liabilities	44,940	47,544
Commitments and contingencies (Note 7)
Stockholders' equity
Preferred stock, $0.0003 par value - 5,000,000 shares authorized as of March 31, 2014 and December 31, 2013; zero shares issued and outstanding	0	0
Common stock, $0.0003 par value - 100,000,000 shares authorized as of March 31, 2014 and December 31, 2013; 25,128,149 and 24,967,140 shares issued and outstanding as of March 31, 2014 and December 31, 2013, respectively	8	7
Additional paid-in capital	192,832	189,966
Accumulated other comprehensive income	0	23
Accumulated deficit	(70,823)	(64,433)
Total stockholders’ equity	122,017	125,563
Total liabilities and stockholders’ equity	$ 166,957	$ 173,107

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Commitments Litigation: alleged shareholder class action (Details) (Uninsured Risk [Member], Pending Litigation [Member], Michael Brado v Vocera Communications, Inc., et al [Member])	3 Months Ended
	Mar. 31, 2014
Uninsured Risk [Member] | Pending Litigation [Member] | Michael Brado v Vocera Communications, Inc., et al [Member]
Loss Contingencies [Line Items]
Loss Contingency, Lawsuit Filing Date	August 1, 2013
Loss Contingency, Name of Plaintiff	Michael Brado v. Vocera Communications Inc., et al
Loss Contingency, Name of Defendant	against the Company and certain of its officers, its board of directors, a former director and the underwriters for the Company's initial public offering.
Loss Contingency, Domicile of Litigation	the United States District Court for the Northern District of California
Loss Contingency, Allegations	A second purported securities class action, entitled Duncan v. Vocera Communications Inc., et al., was filed on August 21, 2013, also in the Northern District of California, against the same parties. On September 27, 2013, the Court ordered the matters related. The suits purport to allege claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) and 20(a) of the Exchange Act of 1934 for allegedly misleading statements in the registration statement for the Company's initial public offering and in subsequent communications regarding its business and financial results. The suits are purportedly brought on behalf of purchasers of the Company's securities between March 28, 2012 and May 3, 2013
Loss Contingency, Damages Sought	seek compensatory damages, rescission, fees and costs, as well as equitable and injunctive or other relief
Loss Contingency, Actions Taken by Defendant	The plaintiffs’ motion for consolidation of the actions and for appointment of lead plaintiff has been granted, and the Company anticipates that the plaintiffs will file an amended consolidated complaint.  No responses to the current complaints are due at this time
Loss Contingency, Inestimable Loss	Due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of this matter. The Company is unable at this time to determine whether the outcome of the litigation would have a material impact on its results of operations, financial condition or cash flow. The Company has not established any reserve for any potential liability relating to this lawsuit, because this contingency is not considered probable and reasonably estimable.

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Cash flows from operating activities
Net loss	$ (6,389)	$ (3,499)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	734	536
Change in non-cash interest income, net	23	14
Loss on disposal of property and equipment	76	0
Allowance for doubtful accounts	7	23
Inventory write-down	15	26
Change in lease-related performance liabilities	(106)	0
Stock-based Compensation	2,598	1,704
Excess tax benefits from employee stock plans	0	(257)
Changes in operating assets and liabilities:
Accounts receivable	3,571	6,789
Other receivables	(81)	(115)
Inventories	311	(1,819)
Prepaid expenses and other assets	(750)	(932)
Accounts payable	(881)	133
Accrued payroll and other liabilities	(987)	(3,844)
Deferred revenue	(974)	(1,175)
Net cash used in operating activities	(2,671)	(2,186)
Cash flows from investing activities
Purchase of property and equipment	264	1,502
Business Acquisitions, Net of Cash Acquired	3,500	0
Purchase of short-term investments	(41,318)	0
Maturities of short-term investments	33,005	24,971
Sales of short-term investments	446	0
Net cash (used in) provided by investing activities	(11,631)	23,469
Cash flows from financing activities
Cash from lease-related performance obligations	307	106
Payment for repurchase of early exercised options	(11)	(3)
Excess tax benefits from employee stock plans	0	257
Proceeds from issuance of common stock from the employee stock purchase plan	0	1,596
Proceeds from exercise of stock options	433	421
Tax withholdings paid on behalf of employees for net share settlement	(167)	0
Proceeds from exercise of common stock warrants	0	226
Net cash provided by financing activities	562	2,603
Net (decrease) increase in cash and cash equivalents	(13,740)	23,886
Cash and cash equivalents at beginning of period	39,652	92,521
Cash and cash equivalents at end of period	25,912	116,407
Supplemental disclosure of non-cash investing and financing activities:
Property and equipment in accounts payable and accrued liabilities	$ 63	$ 257

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Income (loss) per share Schedule of antidilutive securities excluded from computation of earnings per share (Details) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Options to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	3,305	3,180
Common stock subject to repurchase
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	7	36
Warrants to purchase common stock
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	44	44
Restricted stock units
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	802	441
Restricted stock awards
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
Antidilutive Securities Excluded from Computation of Earnings Per Share, Amount	0	12

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Goodwill and intangible assets (Tables)

3 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Schedule of Finite-Lived Intangible Assets [Table Text Block]

The estimated useful lives and carrying value of acquired intangible assets are as follows:

		March 31, 2014						December 31, 2013
(in thousands)	Range of Useful Life (years)	Gross  Carrying  Amount		Accumulated Amortization		Net  Carrying  Amount		Gross  Carrying  Amount		Accumulated Amortization		Net  Carrying  Amount
Developed technology	4 to 7	$	2,710	$	1,363	$	1,347	$	1,880	$	1,264	$	616
Customer relationships	7 to 9	2,520		1,516		1,004		2,350		1,449		901
Non-compete agreements	2 to 4	260		10		250		70		70		—
Trademarks and trade names	4 to 7	110		47		63		70		43		27
Intangible assets		$	5,600	$	2,936	$	2,664	$	4,370	$	2,826	$	1,544

Schedule of Finite-Lived Intangible Assets, Future Amortization Expense [Table Text Block]

Amortization of acquired intangible assets is reflected in the cost of revenue or operating expenses, depending on the nature of the intangible. The estimated future amortization of existing acquired intangible assets as of March 31, 2014 was as follows:

(in thousands)	Future amortization
2014 (remaining nine months)	$	605
2015	626
2016	495
2017	394
2018	275
2019	229
Thereafter	40
Future amortization expense	$	2,664

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Goodwill and intangible assets Schedule of Finite-Lived Intangible Assets (Details) (USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Goodwill and Intangible Assets Disclosure [Abstract]
Goodwill	$ 7,678,000		$ 5,575,000
Goodwill, Acquired During Period	2,100,000
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	5,600,000		4,370,000
Accumulated Amortization	2,936,000		2,826,000
Finite-Lived Intangible Assets, Net	2,664,000		1,544,000
Intangibles- period amortization expense [Abstract]
Amortization expense	200,000	200,000
Fully amortized Intangible removed from table	70,000
Developed technology
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	2,710,000		1,880,000
Accumulated Amortization	1,363,000		1,264,000
Finite-Lived Intangible Assets, Net	1,347,000		616,000
Customer relationships
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	2,520,000		2,350,000
Accumulated Amortization	1,516,000		1,449,000
Finite-Lived Intangible Assets, Net	1,004,000		901,000
Noncompete Agreements
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	260,000		70,000
Accumulated Amortization	10,000		70,000
Finite-Lived Intangible Assets, Net	250,000		0
Trademarks and trade names
Finite-Lived Intangible Assets [Line Items]
Gross Carrying Amount	110,000		70,000
Accumulated Amortization	47,000		43,000
Finite-Lived Intangible Assets, Net	$ 63,000		$ 27,000
Minimum | Developed technology
Finite-Lived Intangible Assets, Useful Life
Finite-Lived Intangible Asset, Useful Life	4 years
Minimum | Customer relationships
Finite-Lived Intangible Assets, Useful Life
Finite-Lived Intangible Asset, Useful Life	7 years
Minimum | Noncompete Agreements
Finite-Lived Intangible Assets, Useful Life
Finite-Lived Intangible Asset, Useful Life	2 years
Minimum | Trademarks and trade names
Finite-Lived Intangible Assets, Useful Life
Finite-Lived Intangible Asset, Useful Life	4 years
Maximum | Developed technology
Finite-Lived Intangible Assets, Useful Life
Finite-Lived Intangible Asset, Useful Life	7 years
Maximum | Customer relationships
Finite-Lived Intangible Assets, Useful Life
Finite-Lived Intangible Asset, Useful Life	9 years
Maximum | Noncompete Agreements
Finite-Lived Intangible Assets, Useful Life
Finite-Lived Intangible Asset, Useful Life	4 years
Maximum | Trademarks and trade names
Finite-Lived Intangible Assets, Useful Life
Finite-Lived Intangible Asset, Useful Life	7 years

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Balance Sheet Components Balance sheet components- Investment in sales-type leases (Tables)

3 Months Ended

Mar. 31, 2014

Investment in sales-type leases [Line Items]

Schedule of Components of Leveraged Lease Investments [Table Text Block]

Net investment in sales-type leases

The Company has sales-type leases with terms of 1.25 to 4 years. Sales-type lease receivables are collateralized by the underlying equipment. The components of our net investment in sales-type leases are as follows:

(in thousands)	March 31, 2014			December 31, 2013
Minimum payments to be received on sales-type leases	$	2,365		$	2,597
Less: Unearned interest income and executory costs	(1,101		)	(1,167		)
Net investment in sales-type leases	1,264			1,430
Less: Current portion	(593		)	(620		)
Non-current net investment in sales-type leases	$	671		$	810

There were no allowances for doubtful accounts on these leases as of March 31, 2014 and December 31, 2013. There is no guaranteed or unguaranteed residual value on the leased equipment. The current and non-current net investments in sales-types leases as of March 31, 2014 are reported as components of the consolidated balance sheet captions "other receivables" and "other long-term assets," respectively.

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The Company and Summary of Significant Accounting Policies

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

The Company and Summary of Significant Accounting Policies

The Company and Summary of Significant Accounting Policies

Organization and Business

Vocera Communications, Inc. (the “Company”) is a provider of secure, integrated, intelligent communication solutions, focused on empowering mobile workers in healthcare, hospitality, energy, and other mission-critical mobile work environments, in the United States and internationally. The majority of the Company's business is currently generated from sales of its solutions in the healthcare market, but the Company is expanding its sales and marketing efforts to enter and grow in other markets. Vocera helps its healthcare customers improve patient safety and satisfaction, and increase hospital efficiency and productivity through its Communication and Care Experience solutions. These have been installed in more than 1,200 healthcare and non-healthcare organizations worldwide.

The Vocera Communication System, which includes an intelligent enterprise software platform, a lightweight, wearable, voice-controlled communication badge, and smartphone applications, enables users to connect instantly with other staff simply by saying the name, function or group name of the desired recipient. It also securely delivers text messages and alerts directly to and from smartphones, replacing legacy pagers. The Vocera Care Experience is a hosted, software solution suite that coordinates and streamlines patient-to-provider and provider-to-provider communication across the continuum of care.  The solution is used to provide personalized patient instructions and education, alert and notify physicians and caregivers of patients’ changing care plans, and track patient satisfaction pre, during, and post-hospitalization.  Vocera Care Experience is complemented by the Company’s Experience Innovation Network, a membership-based program to spread the adoption of leading strategies to improve patient and staff experience.

The Company was incorporated in Delaware on February 16, 2000. The Company formed wholly-owned subsidiaries Vocera Communications UK Ltd and Vocera Communications Australia Pty Ltd. in 2005, Vocera Hand-Off Communications, Inc., Vocera Canada, Ltd. and ExperiaHealth, Inc. in 2010 and Vocera Communications India Private Ltd. in 2013.

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission, and include the accounts of Vocera and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. The year-end condensed balance sheet data was derived from the Company's audited financial statements, but does not include all disclosures required by U.S. GAAP.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim consolidated financial information. The results for the quarter presented are not necessarily indicative of the results to be expected for the year ending December 31, 2014 or for any other interim period or any other future year.

Use of Estimates

The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. The estimates include, but are not limited to, revenue recognition, useful lives assigned to long-lived assets, excess and obsolete inventory charges, warranty reserves, stock-based compensation expense, provisions for income taxes and contingencies. Actual results could differ from these estimates, and such differences could be material to the Company’s financial position and results of operations.

Revenue Recognition

The Company derives revenue from the sales of communication badges, smartphone application software, perpetual software licenses for enterprise software that is essential to the functionality of the communication badges, software maintenance, extended warranty and professional services. The Company also derives revenue from the sale of licenses for software that is not essential to the functionality of the communication badges. The Company's revenue recognition policy has not changed from that described in its Annual Report on Form 10-K for the year ended December 31, 2013.

A portion of the Company's sales are made through multi-year lease agreements with customers. When these arrangements are considered sales-type leases, upon delivery of leased products to customers, the Company recognizes revenue for such products in an amount equal to the net present value of the minimum lease payments. Unearned income is recognized as part of product revenue under the effective interest method. The Company recognizes revenue related to executory costs when such executory costs are incurred.

Proceeds from transfers of sales-type leases to third-party financial companies are allocated between the net investment in sales-type leases and the executory cost component for remaining service obligations based on relative present value. The difference between the amount of proceeds allocated to the net investment in lease and the carrying value of the net investment in lease is included in product revenue. Proceeds allocated to the executory cost component are accounted for as financing liabilities.

For the three months ended March 31, 2014 and 2013, the Company transferred $0.5 million and $0.2 million, respectively of lease receivables in non-recourse sales to third-party financial companies, with immaterial net gains. For the three months ended March 31, 2014 and 2013, the Company recorded $0.3 million and $0.1 million, respectively, of financing liabilities for future performance of executory service obligations. For lease receivables retained as of March 31, 2014 and December 31, 2013, the Company recorded $1.3 million and $1.4 million of net investment in sales-type leases, respectively, equivalent to the minimum lease payments less the unearned interest portion.

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued new guidance for the gross versus net presentation of unrecognized tax benefits. The FASB concluded that an unrecognized tax benefit should be presented as a reduction of a deferred tax asset for a net operating loss (“NOL”) or other tax credit carryforward when settlement in this manner is available under the tax law. The new guidance was effective for the Company's first quarter of 2014, applied prospectively. Adoption of this standard was not significant to the Company's financial position or results of operations.

In April 2014, the FASB issued revised guidance for reporting discontinued operations and disclosures of disposals of components of an entity. Under the new guidance, only disposals representing a strategic shift in the entity’s operations and financial results will be presented as discontinued operations. In addition, the new guidance requires certain expanded disclosures about discontinued operations and limited disclosures for a disposal not qualifying for such reporting. The Company’s effective date for these amendments will be the first quarter of 2015, with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial position or results of operations.

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Condensed Consolidated Balance Sheets Condensed Consolidated Balance Sheets (Paranthetical) (USD $)	Mar. 31, 2014	Dec. 31, 2013
Liabilities and stockholders' equity
Common stock par value	$ 0.0003	$ 0.0003
Common stock shares authorized	100,000,000	100,000,000
Common stock shares issued	25,128,149	24,967,140
Common stock shares outstanding	25,128,149	24,967,140
Preferred Stock
Liabilities and stockholders' equity
Preferred stock par value	$ 0.0003	$ 0.0003
Preferred stock shares authorized	5,000,000	5,000,000
Preferred stock shares issued	0	0
Preferred stock shares outstanding	0	0

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Business Acquisition (Notes)

3 Months Ended

Mar. 31, 2014

Business Combinations - Purchase price allocation [Abstract]

Business Combination Disclosure [Text Block]

Business acquisition

On January 13, 2014, the Company acquired certain assets and certain liabilities of mVisum, Inc. (“mVisum”), an innovative provider of alarm management technology solutions for health systems, for $3.5 million in cash. The acquisition enabled the Company to enhance its existing platform with complementary communications solutions for healthcare and other mission-critical environments.

The following table presents the fair value of the identifiable assets acquired and liabilities assumed as of the acquisition date:

(in thousands)	Fair value acquired
Accounts receivable	$	187
Intangibles
Developed technology	830
Non-compete agreement	260
Customer relationships	170
Trademarks and trade names	40
Goodwill	2,103
Total assets	3,590
Deferred revenue	(90		)
Net assets acquired	$	3,500

The estimated fair values of identifiable intangible assets were primarily determined using discounted cash flow models. The acquired intangible assets are amortized over their estimated useful lives of 4.0 to 7.0 years with a weighted average amortization period of 5.7 years.

The excess of the acquisition consideration over the fair values of the underlying net assets acquired was recorded as goodwill. Goodwill is largely attributable to the synergy of mVisum’s proprietary solutions with the Company’s existing customer base, dedicated sales force and cross selling opportunities with the Company’s other solutions. Goodwill is not amortized but instead is tested for impairment at least annually or more frequently if indicators of impairment are present. For federal income tax purposes, the entire purchase consideration, including goodwill, is deductible over fifteen years. The goodwill recorded from the acquisition of mVisum is attributed to the Product reporting unit.

The Company incurred $0.2 million of acquisition-related costs that were expensed as incurred. These costs are recorded as general and administrative expenses in the consolidated statement of operations. Additionally, in connection with the acquisition the Company established a retention bonus plan for mVisum with potential additional compensation over a two-year period of approximately $0.5 million, based on achievement of operating objectives and continued employment. Such amounts are not considered part of the purchase consideration and will be recorded as earned as future compensation expense. The acquisition did not result in material contributions to revenue or net loss in the consolidated financial statements since the acquisition date. Additionally, pro forma financial information is not provided for consolidated revenue and net loss, since the acquisition was not material to the consolidated financial statements.

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Document and Entity Information Document (USD $)	3 Months Ended
	Mar. 31, 2014	May 05, 2014	Dec. 31, 2013
Document Information [Line Items]
Common stock par value	$ 0.0003		$ 0.0003
Entity Registrant Name	VOCERA COMMUNICATIONS, INC.
Entity Central Index Key	0001129260
Document Type	10-Q
Document Period End Date	Mar. 31, 2014
Amendment Flag	false
Document Fiscal Year Focus	2014
Document Fiscal Period Focus	Q1
Current Fiscal Year End Date	--12-31
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		25,163,358
Common stock shares authorized	100,000,000		100,000,000
Common stock shares issued	25,128,149		24,967,140
Common stock shares outstanding	25,128,149		24,967,140
Preferred Stock
Document Information [Line Items]
Preferred stock par value	$ 0.0003		$ 0.0003
Preferred stock shares authorized	5,000,000		5,000,000
Preferred stock shares issued	0		0
Preferred stock shares outstanding	0		0

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The Company and Summary of Significant Accounting Policies The Company and Summary of Significant Accounting Policies (Policies)

3 Months Ended

Mar. 31, 2014

Accounting Policies [Abstract]

Nature of Operations [Text Block]

Organization and Business

Vocera Communications, Inc. (the “Company”) is a provider of secure, integrated, intelligent communication solutions, focused on empowering mobile workers in healthcare, hospitality, energy, and other mission-critical mobile work environments, in the United States and internationally. The majority of the Company's business is currently generated from sales of its solutions in the healthcare market, but the Company is expanding its sales and marketing efforts to enter and grow in other markets. Vocera helps its healthcare customers improve patient safety and satisfaction, and increase hospital efficiency and productivity through its Communication and Care Experience solutions. These have been installed in more than 1,200 healthcare and non-healthcare organizations worldwide.

The Vocera Communication System, which includes an intelligent enterprise software platform, a lightweight, wearable, voice-controlled communication badge, and smartphone applications, enables users to connect instantly with other staff simply by saying the name, function or group name of the desired recipient. It also securely delivers text messages and alerts directly to and from smartphones, replacing legacy pagers. The Vocera Care Experience is a hosted, software solution suite that coordinates and streamlines patient-to-provider and provider-to-provider communication across the continuum of care.  The solution is used to provide personalized patient instructions and education, alert and notify physicians and caregivers of patients’ changing care plans, and track patient satisfaction pre, during, and post-hospitalization.  Vocera Care Experience is complemented by the Company’s Experience Innovation Network, a membership-based program to spread the adoption of leading strategies to improve patient and staff experience.

The Company was incorporated in Delaware on February 16, 2000. The Company formed wholly-owned subsidiaries Vocera Communications UK Ltd and Vocera Communications Australia Pty Ltd. in 2005, Vocera Hand-Off Communications, Inc., Vocera Canada, Ltd. and ExperiaHealth, Inc. in 2010 and Vocera Communications India Private Ltd. in 2013.

Basis of Presentation

Basis of Presentation

The Company’s unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”) and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the U.S. Securities and Exchange Commission, and include the accounts of Vocera and its wholly owned subsidiaries. All intercompany balances and transactions have been eliminated. Certain information and note disclosures normally included in financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Accordingly, these unaudited interim condensed consolidated financial statements should be read in conjunction with the annual audited consolidated financial statements and notes thereto contained in the Company's Annual Report on Form 10-K for the year ended December 31, 2013. The year-end condensed balance sheet data was derived from the Company's audited financial statements, but does not include all disclosures required by U.S. GAAP.

In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the Company’s interim consolidated financial information. The results for the quarter presented are not necessarily indicative of the results to be expected for the year ending December 31, 2014 or for any other interim period or any other future year.

Use of Estimates

Use of Estimates

The preparation of the accompanying unaudited condensed consolidated financial statements in conformity with U.S. GAAP requires the Company to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expense during the reporting periods. The estimates include, but are not limited to, revenue recognition, useful lives assigned to long-lived assets, excess and obsolete inventory charges, warranty reserves, stock-based compensation expense, provisions for income taxes and contingencies. Actual results could differ from these estimates, and such differences could be material to the Company’s financial position and results of operations.

Revenue Recognition

Revenue Recognition

The Company derives revenue from the sales of communication badges, smartphone application software, perpetual software licenses for enterprise software that is essential to the functionality of the communication badges, software maintenance, extended warranty and professional services. The Company also derives revenue from the sale of licenses for software that is not essential to the functionality of the communication badges. The Company's revenue recognition policy has not changed from that described in its Annual Report on Form 10-K for the year ended December 31, 2013.

Lease, Policy

A portion of the Company's sales are made through multi-year lease agreements with customers. When these arrangements are considered sales-type leases, upon delivery of leased products to customers, the Company recognizes revenue for such products in an amount equal to the net present value of the minimum lease payments. Unearned income is recognized as part of product revenue under the effective interest method. The Company recognizes revenue related to executory costs when such executory costs are incurred.

Proceeds from transfers of sales-type leases to third-party financial companies are allocated between the net investment in sales-type leases and the executory cost component for remaining service obligations based on relative present value. The difference between the amount of proceeds allocated to the net investment in lease and the carrying value of the net investment in lease is included in product revenue. Proceeds allocated to the executory cost component are accounted for as financing liabilities.

Recent Accounting Pronouncements

Recent Accounting Pronouncements

In July 2013, the Financial Accounting Standards Board (“FASB”) issued new guidance for the gross versus net presentation of unrecognized tax benefits. The FASB concluded that an unrecognized tax benefit should be presented as a reduction of a deferred tax asset for a net operating loss (“NOL”) or other tax credit carryforward when settlement in this manner is available under the tax law. The new guidance was effective for the Company's first quarter of 2014, applied prospectively. Adoption of this standard was not significant to the Company's financial position or results of operations.

In April 2014, the FASB issued revised guidance for reporting discontinued operations and disclosures of disposals of components of an entity. Under the new guidance, only disposals representing a strategic shift in the entity’s operations and financial results will be presented as discontinued operations. In addition, the new guidance requires certain expanded disclosures about discontinued operations and limited disclosures for a disposal not qualifying for such reporting. The Company’s effective date for these amendments will be the first quarter of 2015, with early adoption permitted. The adoption of this guidance is not expected to have a significant impact on the Company’s financial position or results of operations.

Fair Value of Fin. Instruments, Policy

Fair Value of Financial Instruments

The Company’s cash and cash equivalents and short-term investments are carried at their fair values with any differences from their amortized cost recorded in equity as unrealized gains (losses) on marketable securities. As a basis for determining the fair value of its assets and liabilities, the Company established a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs other than the quoted prices in active markets that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data which requires the Company to develop its own assumptions. This hierarchy requires the Company to use observable market data, when available, and to minimize the use of unobservable inputs when determining fair value. For the three months ended March 31, 2014, there have been no transfers between Level 1 and Level 2 fair value instruments and no transfers in or out of Level 3.

The Company's money market funds are classified within Level 1 of the fair value hierarchy because they are valued using quoted market prices. The fair value of the Company's Level 2 fixed income securities are obtained from independent pricing services, which may use quoted market prices for identical or comparable instruments or model-driven valuations using observable market data or other inputs corroborated by observable market data

Goodwill, Policy

Goodwill

As of March 31, 2014 and December 31, 2013, the Company had $7.7 million and $5.6 million of goodwill acquired. During the three months ended March 31, 2014, the Company recorded additional goodwill of $2.1 million for the mVisum acquisition (see Note 11, "Business acquisition"). As of March 31, 2014, there were no changes in circumstances indicating that the carrying values of goodwill or acquired intangibles may not be recoverable.

Intangible Assets, Policy

Intangible Assets

Acquisition-related intangible assets are amortized either straight-line, or over the life of the assets on a basis that resembles the economic benefit of the assets. This yields amortization in the latter case that is higher in earlier periods of the useful life.

Purchase commitments

Non-cancelable Purchase Commitments

The Company enters into non-cancelable purchase commitments with its third-party manufacturer whereby the Company is required to purchase any inventory held by the third party manufacturer that have been purchased by them based on confirmed orders from the Company. As of March 31, 2014 and December 31, 2013, approximately $3.2 million and $3.1 million, respectively, of raw material inventory was purchased and held by the third-party manufacturer which was subject to such purchase requirements.

Operating leases

Leases

The Company leases office space for its headquarters and subsidiaries under non-cancelable operating leases, which will expire between December 2014 and April 2017. The San Jose, California headquarters lease expires on March 31, 2016, with a single three-year extension option at rates approximating the then-fair market value. The Company recognizes rent expense on a straight-line basis over the lease period, and has accrued for rent expense incurred but not paid.

Segment Reporting, Policy

The Company has two operating segments which are both reportable business segments: (i) Product and (ii) Service, both of which are comprised of Vocera’s and its wholly-owned subsidiaries’ results of operations. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer.

The CODM regularly receives information related to revenue, cost of revenue, and gross profit for each operating segment, and uses this information to assess performance and make resource allocation decisions. All other financial information, including operating expenses and assets, is prepared and reviewed by the CODM on a consolidated basis. Assets are not a measure used to assess the performance of the Company by the CODM; therefore, the Company does not report assets by segment internally or in its financial statements.

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Revenue
Product	$ 14,189	$ 12,960
Service	10,487	9,453
Total revenue	24,676	22,413
Cost of revenue
Product	4,990	4,610
Service	4,814	4,084
Total cost of revenue	9,804	8,694
Gross profit	14,872	13,719
Operating expenses
Research and development	4,066	3,614
Sales and marketing	12,743	10,232
General and administrative	4,397	3,298
Total operating expenses	21,206	17,144
Loss from operations	(6,334)	(3,425)
Interest income	87	24
Other expense, net	(65)	(47)
Loss before income taxes	(6,312)	(3,448)
Provision for income taxes	(77)	(51)
Net loss	$ (6,389)	$ (3,499)
Net loss per share
Basic and Diluted	$ (0.26)	$ (0.14)
Weighted average shares used to compute net loss per share
Basic and Diluted	25,047	24,282

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Balance Sheet Components

3 Months Ended

Mar. 31, 2014

Balance Sheet Components [Abstract]

Balance Sheet Components

Balance Sheet Components

Inventories

(in thousands)	March 31, 2014		December 31, 2013
Raw materials	$	806	$	806
Finished goods	4,534		4,859
Total inventories	$	5,340	$	5,665

Property and equipment, net

(in thousands)	March 31, 2014			December 31, 2013
Computer equipment and software	$	7,681		$	7,345
Furniture, fixtures and equipment	923			924
Leasehold improvements	2,131			2,125
Manufacturing tools and equipment	3,083			3,081
Construction in process	357			555
Property and equipment, at cost	14,175			14,030
Less: Accumulated depreciation	(9,218		)	(8,665		)
Property and equipment, net	$	4,957		$	5,365

Depreciation and amortization expense was $0.5 million and $0.4 million for the three months ended March 31, 2014 and March 31, 2013, respectively.

Net investment in sales-type leases

The Company has sales-type leases with terms of 1.25 to 4 years. Sales-type lease receivables are collateralized by the underlying equipment. The components of our net investment in sales-type leases are as follows:

(in thousands)	March 31, 2014			December 31, 2013
Minimum payments to be received on sales-type leases	$	2,365		$	2,597
Less: Unearned interest income and executory costs	(1,101		)	(1,167		)
Net investment in sales-type leases	1,264			1,430
Less: Current portion	(593		)	(620		)
Non-current net investment in sales-type leases	$	671		$	810

There were no allowances for doubtful accounts on these leases as of March 31, 2014 and December 31, 2013. There is no guaranteed or unguaranteed residual value on the leased equipment. The current and non-current net investments in sales-types leases as of March 31, 2014 are reported as components of the consolidated balance sheet captions "other receivables" and "other long-term assets," respectively.

The minimum payments expected to be received for future years under sales-type leases as of March 31, 2014 were as follows:

(in thousands)	Future lease payments
2014 (nine months remaining)	$	697
2015	806
2016	633
2017	229
Total	$	2,365

Accrued payroll and other current liabilities

(in thousands)	March 31, 2014		December 31, 2013
Payroll and related expenses	$	4,721	$	5,065
Accrued payables	1,607		2,259
Deferred rent, current portion	450		490
Lease financing, current portion	655		528
Product warranty	722		840
Sales and use tax payable	252		259
Other	494		400
Total accrued payroll and other current liabilities	$	8,901	$	9,841

The changes in the Company's product warranty reserve are as follows:

	Three months ended March 31,
(in thousands)	2014			2013
Warranty balance at the beginning of the period	$	840		$	297
Warranty expense accrued for shipments in period	298			74
Changes in estimate related to pre-existing warranties	51			49
Warranty settlements made	(467		)	(213		)
Warranty balance at the end of the period	$	722		$	207

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Goodwill and intangible assets

3 Months Ended

Mar. 31, 2014

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and intangible assets

Goodwill and Intangible Assets

Goodwill

As of March 31, 2014 and December 31, 2013, the Company had $7.7 million and $5.6 million of goodwill acquired. During the three months ended March 31, 2014, the Company recorded additional goodwill of $2.1 million for the mVisum acquisition (see Note 11, "Business acquisition"). As of March 31, 2014, there were no changes in circumstances indicating that the carrying values of goodwill or acquired intangibles may not be recoverable.

Intangible Assets

Acquisition-related intangible assets are amortized either straight-line, or over the life of the assets on a basis that resembles the economic benefit of the assets. This yields amortization in the latter case that is higher in earlier periods of the useful life.

The gross carrying amounts of intangible assets which  have been fully amortized are removed annually in the subsequent first quarter balance sheet presentation. In the three months ended March 31, 2014, a fully amortized non-compete agreement intangible with $70,000 original cost (and accumulated amortization) was removed from the table of intangibles carrying cost, offset by increases in intangibles related to the mVisum acquisition, as described in Note 11.

The estimated useful lives and carrying value of acquired intangible assets are as follows:

		March 31, 2014						December 31, 2013
(in thousands)	Range of Useful Life (years)	Gross  Carrying  Amount		Accumulated Amortization		Net  Carrying  Amount		Gross  Carrying  Amount		Accumulated Amortization		Net  Carrying  Amount
Developed technology	4 to 7	$	2,710	$	1,363	$	1,347	$	1,880	$	1,264	$	616
Customer relationships	7 to 9	2,520		1,516		1,004		2,350		1,449		901
Non-compete agreements	2 to 4	260		10		250		70		70		—
Trademarks and trade names	4 to 7	110		47		63		70		43		27
Intangible assets		$	5,600	$	2,936	$	2,664	$	4,370	$	2,826	$	1,544

Amortization expense was $0.2 million and $0.2 million for the three months ended March 31, 2014 and March 31, 2013, respectively.

Amortization of acquired intangible assets is reflected in the cost of revenue or operating expenses, depending on the nature of the intangible. The estimated future amortization of existing acquired intangible assets as of March 31, 2014 was as follows:

(in thousands)	Future amortization
2014 (remaining nine months)	$	605
2015	626
2016	495
2017	394
2018	275
2019	229
Thereafter	40
Future amortization expense	$	2,664

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Balance Sheet Components (Tables)

3 Months Ended

Mar. 31, 2014

Balance Sheet Components [Abstract]

Inventories

Inventories

(in thousands)	March 31, 2014		December 31, 2013
Raw materials	$	806	$	806
Finished goods	4,534		4,859
Total inventories	$	5,340	$	5,665

Property and Equipment

Property and equipment, net

(in thousands)	March 31, 2014			December 31, 2013
Computer equipment and software	$	7,681		$	7,345
Furniture, fixtures and equipment	923			924
Leasehold improvements	2,131			2,125
Manufacturing tools and equipment	3,083			3,081
Construction in process	357			555
Property and equipment, at cost	14,175			14,030
Less: Accumulated depreciation	(9,218		)	(8,665		)
Property and equipment, net	$	4,957		$	5,365

Depreciation and amortization expense was $0.5 million and $0.4 million for the three months ended March 31, 2014 and March 31, 2013, respectively.

Accrued Liabilities

Accrued payroll and other current liabilities

(in thousands)	March 31, 2014		December 31, 2013
Payroll and related expenses	$	4,721	$	5,065
Accrued payables	1,607		2,259
Deferred rent, current portion	450		490
Lease financing, current portion	655		528
Product warranty	722		840
Sales and use tax payable	252		259
Other	494		400
Total accrued payroll and other current liabilities	$	8,901	$	9,841

Schedule of Product Warranty Liability

The changes in the Company's product warranty reserve are as follows:

	Three months ended March 31,
(in thousands)	2014			2013
Warranty balance at the beginning of the period	$	840		$	297
Warranty expense accrued for shipments in period	298			74
Changes in estimate related to pre-existing warranties	51			49
Warranty settlements made	(467		)	(213		)
Warranty balance at the end of the period	$	722		$	207

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Fair value of financial instruments (Tables)

3 Months Ended

Mar. 31, 2014

Fair Value Disclosures [Abstract]

Schedule of assets and liabilities measured at fair value on a recurring basis, by level

The Company’s assets that are measured at fair value on a recurring basis, by level, within the fair value hierarchy as of March 31, 2014 and December 31, 2013, are summarized as follows (in thousands):

	March 31, 2014						December 31, 2013
	Level 1		Level 2		Total		Level 1		Level 2		Total
Assets
Money market funds	$	5,507	$	—	$	5,507	$	22,991	$	—	$	22,991
Certificates of deposits	—		246		246		—		—		—
Commercial paper	—		3,599		3,599		—		900		900
U.S. government agency securities	—		11,596		11,596		—		11,279		11,279
U.S. Treasury securities	—		5,207		5,207		—		5,235		5,235
Municipal debt securities	—		4,723		4,723		—		4,765		4,765
Corporate debt securities	—		81,403		81,403		—		67,055		67,055
Total assets measured at fair value	$	5,507	$	106,774	$	112,281	$	22,991	$	89,234	$	112,225

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Segments

3 Months Ended

Mar. 31, 2014

Segment Reporting [Abstract]

Segments

Segments

The Company has two operating segments which are both reportable business segments: (i) Product and (ii) Service, both of which are comprised of Vocera’s and its wholly-owned subsidiaries’ results of operations. Operating segments are defined as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker (“CODM”), or decision making group, in deciding how to allocate resources and in assessing performance. The Company’s CODM is its Chief Executive Officer.

The CODM regularly receives information related to revenue, cost of revenue, and gross profit for each operating segment, and uses this information to assess performance and make resource allocation decisions. All other financial information, including operating expenses and assets, is prepared and reviewed by the CODM on a consolidated basis. Assets are not a measure used to assess the performance of the Company by the CODM; therefore, the Company does not report assets by segment internally or in its financial statements.

The following table presents a summary of the operating segments:

	Three months ended March 31,
(in thousands)	2014			2013
Revenue
Product	$	14,189		$	12,960
Service	10,487			9,453
Total revenue	24,676			22,413
Cost of Revenue
Product	4,990			4,610
Service	4,814			4,084
Total cost of revenue	9,804			8,694
Gross profit
Product	9,199			8,350
Service	5,673			5,369
Total gross profit	14,872			13,719
Operating expenses	21,206			17,144
Interest (expense) income, net and other	22			(23		)
Loss before income taxes	$	(6,312	)	$	(3,448	)

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Commitments

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Commitments

Commitments and Contingencies

Non-cancelable Purchase Commitments

The Company enters into non-cancelable purchase commitments with its third-party manufacturer whereby the Company is required to purchase any inventory held by the third party manufacturer that have been purchased by them based on confirmed orders from the Company. As of March 31, 2014 and December 31, 2013, approximately $3.2 million and $3.1 million, respectively, of raw material inventory was purchased and held by the third-party manufacturer which was subject to such purchase requirements.

Leases

The Company leases office space for its headquarters and subsidiaries under non-cancelable operating leases, which will expire between December 2014 and April 2017. The San Jose, California headquarters lease expires on March 31, 2016, with a single three-year extension option at rates approximating the then-fair market value. The Company recognizes rent expense on a straight-line basis over the lease period, and has accrued for rent expense incurred but not paid. Facilities rent expense was $0.5 million and $0.5 million for the three months ended March 31, 2014 and March 31, 2013, respectively.

Future minimum lease payments at March 31, 2014 under non-cancelable operating leases are as follows:

(in thousands)	Operating leases
2014 (remaining nine months)	$	1,283
2015	1,693
2016	538
2017	33
Total minimum lease payments	$	3,547

Indemnifications

The Company undertakes, in the ordinary course of business, to (i) defend customers and other parties from certain third-party claims associated with allegations of trade secret misappropriation, infringement of copyright, patent or other intellectual property right, or tortious damage to persons or property and (ii) indemnify and hold harmless such parties from certain resulting damages, costs and other liabilities. The term of these undertakings may be perpetual and the maximum potential liability of the Company under certain of these undertakings is not determinable. Based on its historical experience, the Company believes the liability associated with these undertakings is minimal.

The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising from willful misconduct of the individual. The Company currently has directors and officers insurance. As there has been no significant history of losses, no expense accrual has been made.

Securities Litigation

On August 1, 2013, a purported securities class action entitled Michael Brado v. Vocera Communications Inc., et al. was filed in the United States District Court for the Northern District of California, against the Company and certain of its officers, its board of directors, a former director and the underwriters for the Company's initial public offering.A second purported securities class action, entitled Duncan v. Vocera Communications Inc., et al., was filed on August 21, 2013, also in the Northern District of California, against the same parties. On September 27, 2013, the Court ordered the matters related. The suits purport to allege claims under Sections 11, 12(a)(2) and 15 of the Securities Act of 1933 and Section 10(b) and 20(a) of the Exchange Act of 1934 for allegedly misleading statements in the registration statement for the Company's initial public offering and in subsequent communications regarding its business and financial results. The suits are purportedly brought on behalf of purchasers of the Company's securities between March 28, 2012 and May 3, 2013, and seek compensatory damages, rescission, fees and costs, as well as equitable and injunctive or other relief. The plaintiffs’ motion for consolidation of the actions and for appointment of lead plaintiff has been granted, and the Company anticipates that the plaintiffs will file an amended consolidated complaint.  No responses to the current complaints are due at this time.

Due to the inherent uncertainties of litigation, the Company cannot accurately predict the ultimate outcome of this matter. The Company is unable at this time to determine whether the outcome of the litigation would have a material impact on its results of operations, financial condition or cash flow. The Company has not established any reserve for any potential liability relating to this lawsuit, because this contingency is not considered probable and reasonably estimable.

From time to time, the Company may be involved in other lawsuits, claims, investigations and proceedings, consisting of intellectual property, commercial, employment and other matters which arise in the ordinary course of business.

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Stock-based Compensation and Awards

3 Months Ended

Mar. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Stock-based Compensation and Award

Stock-based Compensation and Awards

Stock Option Activity

A summary of the stock option activity for the three months ended March 31, 2014 is presented below:

	Options outstanding
	Number of Options		Weighted Average Exercise Price		Weighted average remaining contractual term	Aggregate intrinsic value
					(in years)	(in thousands)
Outstanding at December 31, 2013	3,287,207		$	9.62	6.8	$	24,880
Options granted	105,730		16.52
Options exercised	(148,237	)	2.92
Options canceled	(13,113	)	21.25
Outstanding at March 31, 2014	3,231,587		$	10.10	6.5	$	24,763

At March 31, 2014, there was $8.0 million of unrecognized net compensation cost related to options which is expected to be recognized over a weighted-average period of 2.45 years. The Company did not grant non-employee options in either of the three months ended March 31, 2014 or 2013. As of March 31, 2014, there were 1,424,575 shares that remained available for future issuance of options, restricted stock units (“RSUs”) or other equity awards under the 2012 Equity Incentive Plan.

The Company uses the Black-Scholes option-pricing model to calculate the fair value of stock options on their grant date. The following assumptions were used for each respective period for employee stock options:

	Three months ended March 31,
	2014	2013
Expected Term (in years)	5.41	5.43
Volatility	48.2%	48.1%
Risk-free interest rate	1.59%	0.81%
Dividend yield	0%	0%

Exercise of common stock warrants

During the three months ended March 31, 2013, holders of common stock warrants exercised 34,142 shares for cash proceeds of $0.2 million. There were no cash exercises of warrants during three months ended March 31, 2014.

Employee Stock Purchase Plan

In March 2012, the Company’s 2012 Employee Stock Purchase Plan (the “ESPP”) was approved. During the three months ended March 31, 2014, no shares of common stock were purchased, as the current six months offering period ends May 14, 2014. During the three months ended March 31, 2013, employees purchased 115,784 shares of common stock at an average purchase price of $13.79. As of March 31, 2014, 443,591 shares remained available for future issuance under the ESPP.

The following Black-Scholes option-pricing assumptions were used for each respective period for the ESPP:

	Three months ended March 31,
	2014	2013
Expected Term (in years)	0.50	0.50
Volatility	36.0%	33.3%
Risk-free interest rate	0.10%	0.13%
Dividend yield	0%	0%

Restricted Stock Awards and Restricted Stock Units

A summary of restricted stock and RSU activity for the three months ended March 31, 2014 is presented below:

	Restricted Stock Awards				Restricted Stock Units
	Number of shares		Weighted Average Grant Date Fair Value per Share		Number of shares		Weighted Average Grant Date Fair Value per Share
Outstanding at December 31, 2013	12,076		$	12.42	755,271		$	19.24
Granted	—		—		86,236		16.44
Vested	(12,076	)	12.42		(25,389	)	25.74
Forfeited	—		—		(13,935	)	20.34
Outstanding at March 31, 2014	—		$	—	802,183		$	18.71

At March 31, 2014, there was no remaining unrecognized net compensation cost related to restricted stock awards. At March 31, 2014, there was $10.4 million of unrecognized net compensation cost related to RSUs, which is expected to be recognized over a weighted-average period of 1.9 years.

Allocation of Stock-Based Compensation Expense

The following table presents the stock-based compensation allocation of expense (both for employees and non-employees):

	Three months ended March 31,
(in thousands)	2014		2013
Cost of revenue	$	286	$	222
Research and development	220		209
Sales and marketing	967		579
General and administrative	1,125		694
Total stock-based compensation	$	2,598	$	1,704

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Income Taxes

3 Months Ended

Mar. 31, 2014

Income Tax Disclosure [Abstract]

Income Taxes

Income Taxes

The provision for income taxes was $77,000 and $51,000 for the three months ended March 31, 2014 and 2013, respectively. The expense in both periods was primarily due to income taxes in foreign jurisdictions.

As of March 31, 2014, the Company has provided a valuation allowance against certain federal and state deferred tax assets. Management continues to evaluate the realizability of deferred tax assets and the related valuation allowance.  If management's assessment of the deferred tax assets or the corresponding valuation allowance were to change, the Company would record the related adjustment to income during the period in which management makes the determination.

As of March 31, 2014, there were no material changes to either the nature or the amounts of the uncertain tax positions previously determined for the year ended December 31, 2013.

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Income (loss) per share Schedule of the computation of basic and diluted net income (loss) per share (Details) (USD $) In Thousands, except Share data, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013	Dec. 31, 2013
Calculation of net income (loss) per share [Line Items]
participating securities	6,821		26,463
Numerator:
Net loss	$ (6,389)	$ (3,499)
Denominator:
Weighted Average Number of Shares Outstanding, Basic and Diluted	25,047,000	24,282,000
Net loss per share
Earnings Per Share, Basic and Diluted	$ (0.26)	$ (0.14)

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Stock-based Compensation and Awards Summary of ESPP assumptiuons used (Details) (2012 Employee Stock Purchase Plan, ESPP, USD $)	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
ESPP Fair Value Assumptions
Expected Term (in years)	0 years 6 months	0 years 6 months
Volatility	36.00%	33.30%
Interest Rate	0.10%	0.13%
Dividend yield	0.00%	0.00%
ESPP plan details [Abstract]
ESPP Number of Shares Available for Grant	443,591
ESPP Shares Purchased for Award	0	115,784
Vesting period of options granted	6 months
Year to date [Member]
ESPP plan details [Abstract]
ESPP Per Share Weighted Average Price of Shares Purchased		$ 13.79

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Income (loss) per share (Tables)

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Schedule of the computation of basic and diluted net income (loss) per share

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share amounts):

	Three months ended March 31,
	2014			2013
Numerator:
Net loss	$	(6,389	)	$	(3,499	)
Denominator:
Weighted-average shares used to compute net loss per common share -basic and diluted	25,047			24,282
Net loss per share
Basic and diluted	$	(0.26	)	$	(0.14	)

Schedule of antidilutive securities excluded from computation of earnings per share

The following securities were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:

	Three months ended March 31,
(in thousands)	2014	2013
Options to purchase common stock	3,305	3,180
Common stock subject to repurchase	7	36
Warrants to purchase common stock	44	44
Restricted stock units	802	441
Restricted stock awards	—	12

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Commitments (Tables)

3 Months Ended

Mar. 31, 2014

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

Future minimum lease payments at March 31, 2014 under non-cancelable operating leases are as follows:

(in thousands)	Operating leases
2014 (remaining nine months)	$	1,283
2015	1,693
2016	538
2017	33
Total minimum lease payments	$	3,547

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Stock-based Compensation and Awards Summary of assumptions used (Details) (Employee Stock Option [Member])	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Employee Stock Option [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Expected Term (in years)	5 years 4 months 28 days	5 years 5 months 5 days
Volatility	48.20%	48.10%
Interest Rate	1.59%	0.81%
Dividend yield	0.00%	0.00%

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Balance Sheet Components Schedule of Product Liability (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Movement in Standard and Extended Product Warranty, Increase (Decrease) [Roll Forward]
Product warranty accrual, at the beginning of the period	$ 840	$ 297
Warranty expenses accrued	298	74
Product Warranty Accrual, Preexisting, Increase (Decrease)	51	49
Warranty settlements made	(467)	(213)
Product warranty accrual, at the end of period	$ 722	$ 207

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Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended
	Mar. 31, 2014	Mar. 31, 2013
Statement of Comprehensive Income [Abstract]
Net loss	$ (6,389)	$ (3,499)
Other comprehensive loss, net:
Change in unrealized loss on investments, net	(23)	(4)
Comprehensive loss	$ (6,412)	$ (3,503)

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Income (loss) per share

3 Months Ended

Mar. 31, 2014

Earnings Per Share [Abstract]

Income (loss) per share

Net Loss Per Share

For fiscal years preceding 2013, basic and diluted net (loss) income per common share were presented in conformity with the two-class method required for participating securities.

For the three months ended March 31, 2014 and 2013, the two-class method is not applicable due to the net losses, which must be attributed entirely to the common shareholders. Additionally, as of March 31, 2014 and December 31, 2013, there were only 6,821 and 26,463 shares of participating securities, respectively, consisting of repurchasable shares issued from early exercise of options and unvested restricted shares; thus the future effect of participating securities would generally be immaterial, even in years with net income.

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except per share amounts):

	Three months ended March 31,
	2014			2013
Numerator:
Net loss	$	(6,389	)	$	(3,499	)
Denominator:
Weighted-average shares used to compute net loss per common share -basic and diluted	25,047			24,282
Net loss per share
Basic and diluted	$	(0.26	)	$	(0.14	)

The following securities were not included in the calculation of diluted shares outstanding as the effect would have been anti-dilutive:

	Three months ended March 31,
(in thousands)	2014	2013
Options to purchase common stock	3,305	3,180
Common stock subject to repurchase	7	36
Warrants to purchase common stock	44	44
Restricted stock units	802	441
Restricted stock awards	—	12

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Stock-based Compensation and Awards (Tables)

3 Months Ended

Mar. 31, 2014

Disclosure of Compensation Related Costs, Share-based Payments [Abstract]

Rollforward of stock option activity

A summary of the stock option activity for the three months ended March 31, 2014 is presented below:

	Options outstanding
	Number of Options		Weighted Average Exercise Price		Weighted average remaining contractual term	Aggregate intrinsic value
					(in years)	(in thousands)
Outstanding at December 31, 2013	3,287,207		$	9.62	6.8	$	24,880
Options granted	105,730		16.52
Options exercised	(148,237	)	2.92
Options canceled	(13,113	)	21.25
Outstanding at March 31, 2014	3,231,587		$	10.10	6.5	$	24,763

Stock option valuation assumptions

The following assumptions were used for each respective period for employee stock options:

	Three months ended March 31,
	2014	2013
Expected Term (in years)	5.41	5.43
Volatility	48.2%	48.1%
Risk-free interest rate	1.59%	0.81%
Dividend yield	0%	0%

ESPP Valuation Assumptions

The following Black-Scholes option-pricing assumptions were used for each respective period for the ESPP:

	Three months ended March 31,
	2014	2013
Expected Term (in years)	0.50	0.50
Volatility	36.0%	33.3%
Risk-free interest rate	0.10%	0.13%
Dividend yield	0%	0%

Rollforward of RSA and RSU activty

A summary of restricted stock and RSU activity for the three months ended March 31, 2014 is presented below:

	Restricted Stock Awards				Restricted Stock Units
	Number of shares		Weighted Average Grant Date Fair Value per Share		Number of shares		Weighted Average Grant Date Fair Value per Share
Outstanding at December 31, 2013	12,076		$	12.42	755,271		$	19.24
Granted	—		—		86,236		16.44
Vested	(12,076	)	12.42		(25,389	)	25.74
Forfeited	—		—		(13,935	)	20.34
Outstanding at March 31, 2014	—		$	—	802,183		$	18.71

Allocation of Recognized Period Costs

The following table presents the stock-based compensation allocation of expense (both for employees and non-employees):

	Three months ended March 31,
(in thousands)	2014		2013
Cost of revenue	$	286	$	222
Research and development	220		209
Sales and marketing	967		579
General and administrative	1,125		694
Total stock-based compensation	$	2,598	$	1,704

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Balance Sheet Components Inventories (Details) (USD $) In Thousands, unless otherwise specified	Mar. 31, 2014	Dec. 31, 2013
Inventory, Net [Abstract]
Raw materials	$ 806	$ 806
Finished goods	4,534	4,859
Total inventories	$ 5,340	$ 5,665

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Cash, Cash Equivalents and Short-term Investments (Tables)

3 Months Ended

Mar. 31, 2014

Cash and Cash Equivalents [Abstract]

Schedule of cash, cash equivalents and available-for-sale investments

The following tables present current and prior-year-end balances for cash, cash equivalents and short-term investments (in thousands):

	As of March 31, 2014
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair value
Cash and cash equivalents:
Demand deposits and other cash	$	9,478	$	—	$	—		$	9,478
Money market funds	5,507		—		—			5,507
Commercial paper	1,000		—		—			1,000
Certificates of deposit	246		—		—			246
Corporate debt securities	9,682		—		(1		)	9,681
Total cash and cash equivalents	25,913		—		(1		)	25,912
Short-Term Investments:
Commercial paper	2,599		—		—			2,599
U.S. government agency securities	11,591		6		(1		)	11,596
U.S. Treasury securities	5,203		4		—			5,207
Municipal debt securities	4,715		8		—			4,723
Corporate debt securities	71,735		17		(30		)	71,722
Total short-term investments	95,843		35		(31		)	95,847
Total cash, cash equivalents and short-term investments	$	121,756	$	35	$	(32	)	$	121,759

	As of December 31, 2013
	Amortized Cost		Unrealized Gains		Unrealized Losses			Fair value
Cash and cash equivalents:
Demand deposits and other cash	$	15,451	$	—	$	—		$	15,451
Money market funds	22,991		—		—			22,991
Commercial paper	150		—		—			150
Corporate debt securities	1,060		—		—			1,060
Total cash and cash equivalents	39,652		—		—			39,652
Short-Term Investments:
Commercial paper	750		—		—			750
U.S. government agency securities	11,275		5		(1		)	11,279
U.S. Treasury securities	5,233		2		—			5,235
Municipal debt securities	4,758		7		—			4,765
Corporate debt securities	65,982		20		(7		)	65,995
Total short-term investments	87,998		34		(8		)	88,024
Total cash, cash equivalents and short-term investments	$	127,650	$	34	$	(8	)	$	127,676

Investments Classified by Contractual Maturity Date [Table Text Block]

Classification of the cash, cash equivalent and short-term investments by contractual maturity was as follows:

(in thousands)	One year or shorter		Between 1 and 2 years		Total
Balances as of March 31, 2014
Cash and cash equivalents (1)	$	25,912	$	—	$	25,912
Short-term investments	87,798		8,049		95,847
Cash, cash equivalents and short-term investments	$	113,710	$	8,049	$	121,759
Balances as of December 31, 2013
Cash and cash equivalents (1)	$	39,652	$	—	$	39,652
Short-term investments	71,464		16,560		88,024
Cash, cash equivalents and short-term investments	$	111,116	$	16,560	$	127,676
(1) Includes demand deposits and other cash, money market funds and other cash equivalent securities, all with 0-90 day maturity at purchase.