10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.  20549

FORM 10-Q

(Mark One)

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

For the quarterly period ended September 30, 2013

or

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

For the transition period from   to   

Commission File Number: 001-35247

TANGOE, INC.

(Exact name of registrant as specified in its charter)

Delaware (State or other jurisdiction of incorporation or organization)	06-1571143 (I.R.S. Employer Identification Number)
35 Executive Blvd. Orange, Connecticut (Address of principal executive offices)	06477 (Zip Code)

(203) 859-9300

(Registrant’s telephone number, including area code)

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 o

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 pursuant 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 o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.  See the definitions of “large accelerated filer”, “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o	Accelerated filer x
Non-accelerated filer o (Do not check if a smaller reporting company)	Smaller reporting company o

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

There were 38,243,892 shares of our common stock outstanding on November 1, 2013.

TABLE OF CONTENTS

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets as of December 31, 2012 and September 30, 2013	4
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, 2012 and 2013	5
	Condensed Consolidated Statements of Comprehensive Income for the Three and Nine Months Ended September 30, 2012 and 2013	6
	Condensed Consolidated Statement of Changes in Stockholders’ Equity for the Nine Months Ended September 30, 2013	7
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2012 and 2013	8
	Notes to Condensed Consolidated Financial Statements	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	29
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	42
Item 4.	Controls and Procedures	42
PART II - OTHER INFORMATION
Item 1.	Legal Proceedings	43
Item 1A.	Risk Factors	44
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	55
Item 6.	Exhibits	56
	Signatures	57

2

PRELIMINARY NOTES

When we use the terms “Tangoe,” the “Company,” “we,” “us” and “our,” we mean Tangoe, Inc. and its consolidated subsidiaries.

Forward-Looking Statements

This quarterly report on Form 10-Q contains forward-looking statements that involve substantial risks and uncertainties. All statements, other than statements of historical facts, included in this quarterly report regarding our strategy, future operations, future financial position, future revenue, projected costs, prospects, plans and objectives of management are forward-looking statements. The words “anticipate,” “believe,” “estimate,” “expect,” “intend,” “may,” “plan,” “target,” “would” and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements include, among other things, statements about:

·our estimates regarding expenses and future revenue;

·our plans to develop, improve and market our products and services;

·the advantages of our products and services as compared to those of others;

·our ability to attract and retain customers;

·our financial performance;

·our ability to establish and maintain intellectual property rights;

·our ability to retain and hire necessary employees and appropriately staff our operations; and

·our estimates regarding capital requirements and needs for additional financing.

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. Actual results or events could differ materially from the plans, intentions and expectations disclosed in the forward-looking statements we make. The important factors discussed below under Part II “Other Information”, Item 1A. “Risk Factors”, among others, could cause actual results or events to differ materially from the forward-looking statements that we make. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

You should read this quarterly report and the documents that we have filed as exhibits to this quarterly report with the understanding that our actual future results may be materially different from what we expect. We do not assume any obligation to update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

We expressly qualify in their entirety all forward-looking statements attributable to us or any person acting on our behalf by the cautionary statements contained or referred to in this section.

3

PART I - FINANCIAL INFORMATION

Item 1. Condensed Consolidated Financial Statements

TANGOE, INC.

Condensed Consolidated Balance Sheets

(in thousands, except share and per share amounts)

				September 30,
	December 31,			2013
	2012			(Unaudited)
ASSETS
CURRENT ASSETS:
Cash and cash equivalents	$	50,211		$	42,258
Accounts receivable, less allowances of $198 and $345, respectively	38,309			40,656
Prepaid expenses and other current assets	3,384			5,177
Total current assets	91,904			88,091
COMPUTERS, FURNITURE AND EQUIPMENT-NET	3,999			4,248
OTHER ASSETS:
Intangible assets-net	44,249			38,766
Goodwill	65,825			65,993
Security deposits and other non-current assets	1,291			981
TOTAL ASSETS	$	207,268		$	198,079
LIABILITIES AND STOCKHOLDERS’ EQUITY
CURRENT LIABILITIES:
Accounts payable	$	9,128		$	9,494
Accrued expenses	12,035			9,442
Deferred revenue-current portion	9,648			9,695
Notes payable-current portion	22,443			3,372
Other current liabilities	305			533
Total current liabilities	53,559			32,536
OTHER LIABILITIES:
Deferred rent and other non-current liabilities	3,543			3,477
Deferred revenue-less current portion	1,415			1,566
Notes payable-less current portion	131			201
Total liabilities	58,648			37,780
COMMITMENTS AND CONTINGENCIES (NOTE 12)
STOCKHOLDERS’ EQUITY
Common stock, par value $0.0001 per share-150,000,000 shares authorized as of December 31, 2012 and September 30, 2013; 37,613,327 and 38,125,858 shares issued and outstanding as of December 31, 2012 and September 30, 2013, respectively	4			4
Additional paid-in capital	191,581			200,762
Warrants for common stock	10,610			10,610
Accumulated deficit	(53,757		)	(50,528		)
Other comprehensive gain (loss)	182			(549		)
Total stockholders’ equity	148,620			160,299
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY	$	207,268		$	198,079

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

4

TANGOE, INC.

Condensed Consolidated Statements of Operations (unaudited)

(in thousands, except per share amounts)

	Three Months EndedSeptember 30,						Nine Months EndedSeptember 30,
	2012			2013			2012			2013
Revenue:
Recurring technology and services	$	36,138		$	42,623		$	98,969		$	124,056
Strategic consulting, software licenses and other	4,000			4,997			11,573			14,831
Total revenue	40,138			47,620			110,542			138,887
Cost of revenue:
Recurring technology and services	16,696			19,019			45,809			56,645
Strategic consulting, software licenses and other	1,588			2,327			4,835			6,353
Total cost of revenue	18,284			21,346			50,644			62,998
Gross profit	21,854			26,274			59,898			75,889
Operating expenses:
Sales and marketing	6,275			8,504			17,732			24,101
General and administrative	8,083			8,953			21,830			25,749
Research and development	4,263			4,907			12,126			14,656
Depreciation and amortization	2,297			2,586			6,168			7,623
Restructuring charge	—			—			—			654
Income from operations	936			1,324			2,042			3,106
Other income (expense), net
Interest expense	(256		)	(89		)	(683		)	(352		)
Interest income	22			15			60			50
Other income	—			327			—			1,093
Income before income tax provision	702			1,577			1,419			3,897
Income tax provision	121			22			308			668
Net income	$	581		$	1,555		$	1,111		$	3,229
Income per common share:
Basic	$	0.02		$	0.04		$	0.03		$	0.09
Diluted	$	0.01		$	0.04		$	0.03		$	0.08
Weighted average number of common shares:
Basic	37,410			37,698			36,079			37,546
Diluted	40,963			40,872			39,616			40,240

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

5

TANGOE, INC.

Condensed Consolidated Statements of Comprehensive Income (unaudited)

(in thousands)

	For the Three Months Ended				For the Nine Months Ended
	September 30,				September 30,
	2012		2013		2012		2013
Net income	$	581	$	1,555	$	1,111	$	3,229
Foreign currency translation adjustment	556		427		309		(731		)
Total comprehensive income	$	1,137	$	1,982	$	1,420	$	2,498

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

6

TANGOE, INC.

Condensed Consolidated Statement of Changes in Stockholders’ Equity (unaudited)

For the Nine Months Ended September 30, 2013

(in thousands, except share amounts)

	Common Stock				Additional			Common					Other			Total
	Number of				Paid-In			Stock		Accumulated			Comprehensive			Stockholders’
	Shares		Amount		Capital			Warrants		Deficit			Income (loss)			Equity
Balance December 31, 2012	37,480,710		$	4	$	191,581		$	10,610	$	(53,757	)	$	182		$	148,620
Net income	—		—		—			—		3,229			—			3,229
Foreign currency translation adjustment	—		—		—			—		—			(731		)	(731		)
Issuance of shares to employees and board of directors	64,966		—		363			—		—			—			363
Issuance of shares from exercise of stock options	847,134		—		3,912			—		—			—			3,912
Issuance of shares from exercise of stock warrants	14,907		—		34			—		—			—			34
Issuance of shares from vesting of restricted stock units	84,100		—		—			—		—			—			—
Repurchase of common stock	(365,959	)	—		(4,538		)	—		—			—			(4,538		)
Stock-based compensation	—		—		9,410			—		—			—			9,410
Balance September 30, 2013	38,125,858		$	4	$	200,762		$	10,610	$	(50,528	)	$	(549	)	$	160,299

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

7

TANGOE, INC.

Condensed Consolidated Statements of Cash Flows (unaudited)

(in thousands)

	Nine Months Ended September 30,
	2012			2013
Operating activities:
Net income	$	1,111		$	3,229
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of debt discount	570			280
Amortization of leasehold interest	(74		)	(74		)
Depreciation and amortization	6,168			7,623
Increase (decrease) in deferred rent liability	34			(36		)
Amortization of marketing agreement intangible assets	119			194
Allowance for doubful accounts	—			68
Deferred income taxes	75			282
Stock based compensation	6,539			9,773
Restructuring charge	—			654
Foreign exchange adjustment	40			(138		)
Decrease in fair value of contingent consideration	—			(1,041		)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable	(826		)	(2,465		)
Prepaid expenses and other assets	783			(1,048		)
Other assets	(136		)	127
Accounts payable	459			195
Accrued expenses	113			(1,656		)
Deferred revenue	(1,440		)	616
Net cash provided by operating activities	13,535			16,583
Investing activities:
Purchases of computers, furniture and equipment	(1,333		)	(1,800		)
Cash paid in connection with acquisitions, net of cash received	(38,410		)	(19,543		)
Net cash used in investing activities	(39,743		)	(21,343		)
Financing activities:
Repayment of debt	(2,986		)	(745		)
Proceeds from repayment of notes receivable	93			—
Repurchase of common stock	—			(6,235		)
Proceeds from exercise of stock options and stock warrants	3,741			3,946
Proceeds from follow on offering, net of issuance costs	37,729			—
Net cash provided by (used in) financing activities	38,577			(3,034		)
Effect of exchange rate on cash	(40		)	(159		)
Net increase (decrease) in cash and cash equivalents	12,329			(7,953		)
Cash and cash equivalents, beginning of period	43,407			50,211
Cash and cash equivalents, end of period	$	55,736		$	42,258

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

8

Notes to Condensed Consolidated Financial Statements (Unaudited)

1.Organization, Description of Business

Nature of Operations

Tangoe, Inc. (the “Company”), a Delaware corporation, was incorporated on February 9, 2000 as TelecomRFQ, Inc. During 2001, the Company changed its name to Tangoe, Inc. The Company provides communications lifecycle management software and related services to a wide range of enterprises, including large and medium-sized businesses and other organizations. Communications lifecycle management encompasses the entire lifecycle of an enterprise’s communications assets and services, including planning and sourcing, procurement and provisioning, inventory and usage management, mobile device management, real-time telecommunications expense management, invoice processing, expense allocation and accounting, forward and reverse logistics and asset decommissioning and disposal. The Company’s Communications Management Platform is an on-demand suite of software designed to manage and optimize the complex processes and expenses associated with this lifecycle for both fixed and mobile communications assets and services. The Company’s customers can also engage the Company through its client services group to manage their communications assets and services through its Communications Management Platform.

Public Offerings

In August 2011, the Company completed its initial public offering whereby it sold 7,500,000 shares of common stock at a price to the public of $10.00 per share.  The Company received proceeds from its initial public offering of $66.0 million, net of underwriting discounts and commissions and other offering costs of $3.8 million.

As part of the initial public offering, an additional 2,585,500 shares of common stock were sold by certain existing stockholders at a price to the public of $10.00 per share, including 1,315,500 shares sold by such stockholders upon the exercise of the underwriters’ option to purchase additional shares.  The Company did not receive any proceeds from the sale of such shares by the selling stockholders.

In April 2012, the Company completed a public offering whereby it sold 2,200,000 shares of common stock at a price to the public of $18.50 per share.  The Company received proceeds from this public offering of $38.5 million, net of underwriting discounts and commissions but before offering costs of $0.7 million.

As part of this public offering, an additional 7,000,000 shares of common stock were sold by certain existing stockholders at a price to the public of $18.50 per share, including 1,200,000 shares sold by such stockholders upon the exercise of the underwriters’ option to purchase additional shares.  The Company did not receive any proceeds from the sale of such shares by the selling stockholders.

The Company’s common stock is traded on the NASDAQ Global Select Market.

Basis of Presentation of Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the Company’s financial position and results of operations for the periods presented have been included. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, for any other interim period or for any other future year.

The consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 as filed with the Securities Exchange Commission (“SEC”) on March 18, 2013 (the “2012 Form 10-K”).

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2012 included in the 2012 Form 10-K.  Since the date of those financial statements, there have been no material changes to the Company’s significant accounting policies.

9

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

2.Business Combinations

Anomalous Networks, Inc.

On January 10, 2012 (the “Anomalous Acquisition Date”), the Company entered into a Share Purchase Agreement (the “Anomalous Purchase Agreement”) with Anomalous Networks Inc., a corporation incorporated under the laws of Canada (“Anomalous”), and the shareholders of Anomalous, under which the Company agreed to purchase all of the outstanding equity of Anomalous (the “Anomalous Share Purchase”). This acquisition reflects the Company’s strategy to broaden its suite of offerings and to provide real-time telecommunication expense management capabilities. On the same day, the Anomalous Share Purchase was effected in accordance with the terms of the Anomalous Purchase Agreement with the Company acquiring all of the outstanding equity of Anomalous for aggregate consideration of (i) approximately $3,500,000 in cash paid at the closing, (ii) $979,000 in cash payable on the first anniversary of the closing, (iii) 165,775 unregistered shares of the Company’s common stock and (iv) 132,617 unvested and unregistered shares of the Company’s common stock with vesting based on achievement of revenue targets relating to sales of Anomalous products and services for periods through January 31, 2013. The Company paid the full $979,000 of deferred cash consideration in January 2013.  In March 2013, the 132,617 unvested and unregistered shares of the Company’s common stock were cancelled and retired because the revenue targets related to sales of Anomalous products and services were not achieved.

Anomalous Purchase Price Allocation

The allocation of the total purchase price of Anomalous’ net tangible and identifiable intangible assets was based upon the estimated fair value of those assets as of January 10, 2012. In accordance with Accounting Standards Classification (“ASC”) 805, Business Combinations, the Company valued the 165,775 of unregistered shares of common stock by using the closing price of the Company’s common stock on the NASDAQ Global Market on the acquisition date and applying a 20% marketability discount to the fair value of the unregistered shares.  The marketability discount was applied since the unregistered shares were subject to a lock-up period of one year.  The Company allocated the excess of purchase price over the identifiable intangible and net tangible assets to goodwill. The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	3,521
Common stock	1,984
Deferred cash consideration	1,495
	$	7,000
Allocation of Purchase Consideration:
Current assets	$	1,140
Property and equipment	47
Other assets	10
Identifiable intangible assets	2,857
Goodwill	4,477
Total assets acquired	8,531
Accounts payable and accrued expenses	(394		)
Deferred taxes	(767		)
Deferred revenue	(370		)
	$	7,000

10

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

The goodwill and identifiable intangible assets related to the Anomalous acquisition are not tax deductible. The Company estimated the fair value of intangible assets using the income, cost and market approaches to value the identifiable intangible assets, which are subject to amortization. The following table presents the Company’s estimates of fair value of the identifiable intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Technology	$	2,017	5.0
Non-compete covenants	553		2.0
Customer relationships	236		4.0
Tradenames	51		3.0
Total identifiable intangible assets	$	2,857

ttMobiles Limited

On February 21, 2012 (the “ttMobiles Acquisition Date”), the Company entered into a Share Purchase Agreement (the “ttMobiles Purchase Agreement”), with the holders of all of the issued share capital of ttMobiles Limited, a private limited company incorporated in England (“ttMobiles”), under which the Company agreed to purchase all of the issued share capital of ttMobiles (the “ttMobiles Share Purchase”). On the same day, the ttMobiles Share Purchase was effected in accordance with the terms of the ttMobiles Purchase Agreement, with the Company acquiring all of the outstanding equity of ttMobiles for aggregate consideration of (i) £4.0 million in cash paid at the closing, and (ii) £1.5 million in cash payable on the first anniversary of the closing (the “Deferred Consideration”).  The Company paid the full £1.5 million of Deferred Consideration in February 2013.

ttMobiles Purchase Price Allocation

The allocation of the total purchase price of ttMobiles’ net tangible and identifiable intangible assets was based upon the estimated fair value of those assets as of February 21, 2012. The Company allocated the excess of purchase price over the identifiable intangible and net tangible assets to goodwill. The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	6,359
Deferred cash consideration	2,315
	$	8,674
Allocation of Purchase Consideration:
Current assets	$	2,469
Property and equipment	188
Identifiable intangible assets	4,288
Goodwill	3,557
Total assets acquired	10,502
Accounts payable and accrued expenses	(848		)
Deferred taxes	(954		)
Deferred revenue	(26		)
	$	8,674

11

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

The goodwill and identifiable intangible assets related to the ttMobiles acquisition are not tax deductible. The Company estimated the fair value of intangible assets using the income, cost and market approaches to value the identifiable intangible assets, which are subject to amortization. The following table presents the Company’s estimates of fair value of the identifiable intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Customer relationships	$	2,606	9.0
Technology	1,178		5.0
Tradenames	388		4.0
Non-compete covenants	116		2.0
Total identifiable intangible assets	$	4,288

12

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

Symphony Teleca Services, Inc.

On August 8, 2012, the Company entered into an Asset Purchase Agreement (the “Symphony Purchase Agreement”) with Symphony Teleca Services, Inc., a Delaware corporation (“Symphony”), under which the parties agreed to the purchase by the Company of Symphony’s telecommunications expense management business (the “TEM Business”) through an asset purchase (the “Symphony Acquisition”).  As part of the Symphony Acquisition and also on August 8, 2012, a newly formed subsidiary of the Company, Tangoe India Softek Services Private Limited, an Indian private limited company (“Tangoe India”), entered into a Business Purchase Agreement (the “Indian Purchase Agreement”) with Symphony Services Corporation (India) Private Limited (“Symphony India”) with respect to the purchase of certain assets and hiring of employees of the acquired business located in India.  On the same day, the Symphony Acquisition was effected in accordance with the terms of the Symphony Purchase Agreement.  At the closing of the Symphony Acquisition, the Company acquired the TEM Business for net consideration of $40.2 million, subject to certain adjustments (the “Cash Purchase Price”), payable as described below, plus an earn-out payable in the amount of up to $4.0 million based on achievement of revenue targets for the acquired business for periods through June 30, 2013.  No earn-out is payable because the revenue targets were not achieved.  The Cash Purchase Price, after giving effect to certain adjustments, is payable as follows: (i) approximately $29.2 million in cash paid at the closing, (ii) approximately $4.4 million in cash payable on the six-month anniversary of the closing, which includes $2.5 million related to the Indian Purchase Agreement, and (iii) approximately $6.4 million in cash payable on the one-year anniversary of the closing.  As part of the Symphony Acquisition, the Company acquired a balance sheet for the TEM Business, which included net assets of approximately $5.4 million.  The Company made the six-month anniversary payment of $4.4 million in February 2013.   The full installment due on August 8, 2013 of approximately $6.4 million, and amounts that became payable under the earn-out, were subject to set-off rights of the Company with respect to indemnities given by Symphony under the Symphony Purchase Agreement.  Among other things, these indemnity obligations related to representations and warranties given by Symphony under the Symphony Purchase Agreement and by Symphony India under the Indian Purchase Agreement.  Certain of the indemnities were subject to limitations, including a threshold and deductible, certain caps and limited survival periods.  The Company made a payment on the one-year anniversary of the closing in the amount of $4.9 million, consisting of the one-year anniversary payment of $6.4 million less $1.3 million withheld pending the resolution of certain indemnity matters, and less a net asset adjustment based on the final closing balance sheet of $0.2 million.  In October 2013, the Company and Symphony resolved the indemnity matters and the Company paid the $1.3 million that it had previously deducted from the one-year anniversary payment.  During a post-closing transition period that lasted through February 2013, Symphony and Symphony India provided to the Company certain transition services pending completion of the opening of certain Tangoe India facilities, the procurement of certain Indian tax registrations and the subsequent transfer to Tangoe India of the Indian assets and employees being hired.  These services included making available to the Company on a continuing basis the services previously provided by Symphony India to the TEM Business.

Symphony Purchase Price Allocation

The allocation of the total purchase price of Symphony’s net tangible and identifiable intangible assets was based upon estimated fair values of those assets as of August 8, 2012.  The Company allocated the excess of purchase price over the identifiable intangible and net tangible assets to goodwill. The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	29,208
Deferred cash consideration	10,793
	$	40,001
Allocation of Purchase Consideration:
Current assets	$	5,628
Property and equipment	602
Identifiable intangible assets	13,790
Goodwill	20,936
Total assets acquired	40,956
Accounts payable and accrued expenses	(335		)
Deferred revenue	(620		)
	$	40,001

13

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

The goodwill and identifiable intangible assets related to the Symphony acquisition are tax deductible. The Company estimated the fair value of intangible assets using the income, cost and market approaches to value the identifiable intangible assets, which are subject to amortization. The following table presents the Company’s estimates of fair value of the identifiable intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Customer relationships	$	9,680	9.0
Technology	4,050		5.0
Tradename	60		3.0
Total identifiable intangible assets	$	13,790

oneTEM GmbH

On April 18, 2013 (“oneTEM Closing Date”), the Company entered into a Share Purchase Agreement (the “oneTEM Purchase Agreement”), with the holders of all of the issued share capital of oneTEM GmbH, a private limited company incorporated in Germany (“oneTEM”), under which the Company agreed to purchase all of the issued share capital of oneTEM (the “oneTEM Share Purchase”).  This acquisition reflects the Company’s continued strategy to expand in the European marketplace.   On the oneTEM Closing Date, the oneTEM Share Purchase was effected in accordance with the terms of the oneTEM Purchase Agreement, with the Company acquiring all of the outstanding equity of oneTEM for aggregate consideration of (i) €0.9 million in cash paid at the closing, and (ii) deferred consideration of €0.4 million in cash payable on the first anniversary of the closing.  In addition, the Company is obligated to pay additional deferred cash consideration following the first four anniversaries of the oneTEM Closing Date, pursuant to an earn-out formula based upon the business beginning to generate annual recurring revenue from specified customers and then year-over-year increases in annual recurring revenue from those specified customers during the earn-out periods.  The earn-out period begins with the first full month after the oneTEM Closing Date and continues for four consecutive 12-month periods.  The Company valued this contingent consideration at €0.2 million. The purchase is subject to a net asset adjustment pursuant to which the purchase price would be increased or decreased to the extent the net asset position of oneTEM is more or less than a specified target.  The deferred consideration is subject to set-off rights of the Company with respect to certain indemnities given by the former holders of the issued share capital of oneTEM under the oneTEM Purchase Agreement until the deferred consideration is paid in full.  The Company has included the operating results of oneTEM in its consolidated financial statements since the date of acquisition, including $0.3 million of strategic consulting, software licenses and other revenue.

14

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

oneTEM Purchase Price Allocation

The allocation of the total purchase price of oneTEM’s net tangible and identifiable intangible assets was based upon management’s preliminary estimate of the fair values of those assets taking into account all relevant information available.  Actual amounts for each of the fair values of the assets acquired and liabilities assumed may vary.  The Company allocated the excess of purchase price over the identifiable intangible and net tangible assets to goodwill. The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	1,221
Deferred cash consideration	433
Fair value of contingent consideration	183
	$	1,837
Allocation of Purchase Consideration:
Current assets	$	565
Property and equipment	10
Identifiable intangible assets	870
Goodwill	655
Total assets acquired	2,100
Accounts payable and accrued expenses	(152		)
Taxes payable	(111		)
	$	1,837

The goodwill and identifiable intangible assets related to the oneTEM acquisition are not tax deductible. The Company estimated the fair value of intangible assets using the income, cost and market approaches to value the identifiable intangible assets, which are subject to amortization. The following table presents the Company’s estimates of fair value of the identifiable intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Customer relationships	$	535	8.0
Covenants not to compete	298		2.0
Tradename	37		2.7
Total identifiable intangible assets	$	870

15

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

Unaudited Pro Forma Results

The following table presents the unaudited pro forma results of the Company for the three and nine months ended September 30, 2012 and 2013 as if the acquisitions of Anomalous, ttMobiles and oneTEM occurred at the beginning of 2012.  Due to the inability of the Company to anticipate and estimate on a forward-looking basis incremental costs allocated to the Symphony TEM Business by Symphony and the uncertainty and difficulty of calculating the specific costs required to meaningfully present the effects of the acquisition and the costs of operating the Symphony TEM Business, the Company has not included the Symphony TEM Business in the unaudited pro forma results for the three and nine months ended September 30, 2012 below.  The unaudited pro forma revenue for the Symphony TEM Business was $2.4 million for the period of July 1, 2012 through August 8, 2012, the acquisition date, and $13.0 million for the period of January 1, 2012 through August 8, 2012, the acquisition date.  The unaudited pro forma revenue for the Symphony TEM Business for the three and nine months ended September 30, 2012 is not included in the unaudited pro forma results below.  These results are not intended to reflect the actual operations of the Company had these acquisitions occurred at January 1, 2012.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share amounts)	2012		2013		2012		2013
Revenue	$	40,458	$	47,620	$	113,337	$	139,138
Operating income	967		1,324		2,128		3,004
Net income	584		1,555		1,094		3,127
Basic income per common share	$	0.02	$	0.04	$	0.03	$	0.08
Diluted income per common share	$	0.01	$	0.04	$	0.03	$	0.08

3. Income per Share Applicable to Common Stockholders

The following table sets forth the computations of income per share applicable to common stockholders for the three and nine months ended September 30, 2012 and 2013:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share amounts)	2012		2013		2012		2013
Basic net income per common share
Net income	$	581	$	1,555	$	1,111	$	3,229
Basic income per common share	$	0.02	$	0.04	$	0.03	$	0.09
Weighted-average common shares outstanding	37,410		37,698		36,079		37,546
Diluted net income per common share
Net income	$	581	$	1,555	$	1,111	$	3,229
Diluted income per common share	$	0.01	$	0.04	$	0.03	$	0.08
Weighted-average common shares used to compute diluted net income per share	40,963		40,872		39,616		40,240

Diluted income per common share for the periods presented does not reflect the following potential common shares as the effect would be anti-dilutive.

Outstanding stock options	2,169	2,315	2,169	2,565
Outstanding restricted stock units	176	476	173	587
Common stock warrants	10	7	10	9

16

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

4. Computers, Furniture and Equipment-Net

Computers, furniture and equipment-net consist of:

	As of
	December 31,			September 30,
(in thousands)	2012			2013
Computers and software	$	10,018		$	11,499
Furniture and fixtures	1,032			1,174
Leasehold improvements	1,166			1,360
	12,216			14,033
Less accumulated depreciation	(8,217		)	(9,785		)
Computers, furniture and equipment-net	$	3,999		$	4,248

Computers and software includes equipment under capital leases totaling approximately $2.5 million at December 31, 2012 and September 30, 2013. Accumulated depreciation on equipment under capital leases totaled approximately $2.0 million and $2.3 million as of December 31, 2012 and September 30, 2013, respectively. Depreciation and amortization expense associated with computers, furniture and equipment was $1.5 million and $1.6 million for the nine months ended September 30, 2012 and 2013, respectively.

5.     Intangible Assets and Goodwill

The following table presents the components of the Company’s intangible assets as of December 31, 2012 and September 30, 2013:

							Weighted
	December 31,			September 30,			Average Useful
(in thousands)	2012			2013			Life (in years)
Patents	$	1,054		$	1,054		8.0
Less: accumulated amortization	(766		)	(864		)
Patents, net	288			190
Technological know-how	15,141			15,070			6.1
Less: accumulated amortization	(4,913		)	(7,126		)
Technological know-how, net	10,228			7,944
Customer relationships	37,358			37,879			8.7
Less: accumulated amortization	(10,793		)	(14,052		)
Customer relationships, net	26,565			23,827
Convenants not to compete	881			1,159			2.0
Less: accumulated amortization	(517		)	(830		)
Convenants not to compete, net	364			329
Strategic marketing agreement	6,203			6,203			10.0
Less: accumulated amortization	(293		)	(486		)
Strategic marketing agreement, net	5,910			5,717
Tradenames	843			877			3.8
Less: accumulated amortization	(196		)	(365		)
Tradenames, net	647			512
Trademarks	247			247			Indefinite
Intangible assets, net	$	44,249		$	38,766

17

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

The related amortization expense of intangible assets for the nine months ended September 30, 2012 and 2013 was $4.7 million and $6.1 million, respectively.  The Company’s estimate of future amortization expense for acquired intangible assets that exist at September 30, 2013 is as follows:

(in thousands)
October 1, 2013 to December 31, 2013	$	2,118
2014	7,563
2015	6,100
2016	5,782
2017	6,026
Thereafter	10,930
Total	$	38,519

The following table presents the changes in the carrying amounts of goodwill for the nine months ended September 30, 2013.

	Carrying
(in thousands)	Amount
Balance at December 31, 2012	$	65,825
oneTEM	655
Foreign exchange translation effect	(487		)
Balance at September 30, 2013	$	65,993

18

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

6.Restructuring Charge

In September 2011, the Company recorded a restructuring charge as a result of the consolidation of office space in New Jersey. The consolidation of office space eliminated redundant office space acquired as part of the acquisition of substantially all of the assets and certain liabilities of HCL Expense Management Services, Inc. (“HCL-EMS”) in January 2011 and of certain assets and liabilities of Telwares, Inc. and its subsidiary Vercuity, Inc. (“Telwares”) in March 2011.  The original charge reflected the fair value of the remaining rent payments for the office space the Company ceased using, net of estimated sublease income, plus real estate commissions and office relocation costs. During the three months ended March 31, 2013, the Company recorded an adjustment of $0.1 million to the original restructuring charge as a result of the Company’s inability to sublease the office space in the time period originally expected.  During the nine months ended September 30, 2013, the Company negotiated a lease termination agreement with the landlord of its New Jersey office space.  The agreement terminated the remaining term of the lease effective June 30, 2013 for a settlement fee of $0.9 million.  The Company recorded an adjustment of $0.5 million to the restructuring charge as a result of the lease termination agreement.  The liability related to the restructuring charge is included in other current liabilities on the Company’s condensed consolidated balance sheet. The following table summarizes the activity in the liabilities related to the restructuring charge for the nine months ended September 30, 2013:

	Lease costs, net
	of estimated
(in thousands)	sublease income			Other Costs			Total
Remaining liability at December 31, 2012	$	613		$	(8	)	$	605
Cash payments	(736		)	—			(736		)
Non-cash charges and other	2			8			10
Restructuring charge	654			—			654
Remaining liability at September 30, 2013	533			0			533
	Less: current portion						(533		)
	Long-term portion						$	0

7.Debt

As of December 31, 2012 and September 30, 2013, debt outstanding included the following:

	December 31,			September 30,
(in thousands)	2012			2013
HCL-EMS contingent consideration, net of unamortized discount of $12 and $0 at December 31, 2012 and September 30, 2013, respectively. Payable as described below.	$	2,046		$	891
Deferred Telwares purchase price, net of unamortized discount of $24 and $0 at December 31, 2012 and September 30, 2013, respectively.	1,226			—
Deferred ProfitLine purchase price, net of unamortized discount of $62 and $0 at December 31, 2012 and September 30, 2013, respectively. Payable as described below.	4,438			23
Deferred Anomalous purchase price, net of unamortized discount of $1 and $0 at December 31, 2012 and September 30, 2013, respectively.	978			—
Deferred ttMobiles purchase price, net of unamortized discount of $10 and $0 at December 31, 2012 and September 30, 2013, respectively.	2,420			—
Deferred Symphony purchase price, net of unamortized discount of $128 and $0 at December 31, 2012 and September 30, 2013, respectively. Payable as described below.	10,662			1,279
Deferred oneTEM purchase price and contingent consideration, net of unamortized discount of $111 at September 30, 2013. Payable as described below.	—			660
Capital lease and other obligations	804			720
Total notes payable	$	22,574		$	3,573
Less current portion	$	(22,443	)	$	(3,372	)
Notes payable, less current portion	$	131		$	201

19

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

Contingent HCL-EMS Consideration

The purchase consideration for the acquisition of HCL-EMS includes deferred cash consideration. The deferred cash consideration includes contingent cash payments following each of the first and second anniversaries of the closing date of the HCL-EMS acquisition on January 25, 2011 (the “HCL-EMS Closing Date”), pursuant to an earn-out formula based upon specified revenues from specified customers acquired from HCL-EMS, subject to set-off rights of the Company with respect to indemnities given by HCL-EMS under the Asset Purchase Agreement entered into in December 2010 in connection with the HCL-EMS acquisition (the “HCL-EMS APA”). No interest accrues on the deferred cash consideration; however, the Company recorded imputed interest in the amount of $0.6 million based on the Company’s weighted average cost of debt as of the date of the acquisition. The obligation to pay the deferred cash consideration is unsecured. In 2012, the Company and HCL-EMS agreed that the gross amount of the first year earn-out would be $1.9 million and the Company paid that amount to HCL-EMS.  In April 2013, the Company and HCL-EMS agreed that the gross amount of the second year earn-out would be $1.9 million.  In early August 2013, the Company paid $1.0 million of the second year earn-out to HCL-EMS, and retained the balance of the second year earn-out in the amount of $0.9 million pending resolution of an outstanding indemnity matter.  The only adjustments to the balance in 2013 were the accretion of imputed interest, the adjustment of the second year earn-out estimate to actual and the partial payment of the second year earn-out.

Deferred Telwares Purchase Price

The purchase consideration for the acquisition of Telwares included deferred cash consideration. The deferred cash consideration included payments of $1.25 million on March 16, 2012 and $1.25 million on March 16, 2013, subject to set-off rights of the Company with respect to indemnities given by Telwares under an Asset Purchase Agreement entered into in March 2011 in connection with the Telwares acquisition.  The Company paid the first installment of $1.25 million on March 16, 2012.  The installment payable on March 16, 2013 was subject to a potential reduction of up to $0.5 million relating to the achievement of certain recurring revenue goals during the three months ended June 30, 2012.  The Company and Telwares agreed that the amount of that reduction would be $0.4 million and the Company paid the resulting installment of deferred cash consideration of $0.9 million in March 2013.  No interest accrued on the deferred cash consideration; however, the Company recorded imputed interest in the amount of $0.3 million based on the Company’s weighted average cost of debt as of the date of the acquisition. The obligation to pay the deferred cash consideration was unsecured. The only adjustments to the balance in 2013 were the accretion of imputed interest, the reduction in deferred consideration as described above and the payment of the second installment.

Deferred ProfitLine Purchase Price

On December 19, 2011, the Company and Snow Acquisition Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (the “Acquisition Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with ProfitLine, Inc., a Delaware corporation (“ProfitLine”), and Doug Carlisle, solely in his capacity as Stockholder Representative under the Merger Agreement, under which the parties agreed to the merger of the Acquisition Sub with and into ProfitLine (the “Merger”) with ProfitLine surviving the Merger as a wholly owned subsidiary of the Company.  The purchase consideration for the acquisition of ProfitLine included deferred cash consideration consisting of payments of $9.0 million in installments of $4.5 million each on December 19, 2012 and June 19, 2013, subject to set-off rights of the Company and the surviving corporation with respect to indemnities given by the former stockholders of ProfitLine under the Merger Agreement.  The Company paid $4.1 million in December 2012, which represented the first installment of $4.5 million less indemnity claims of $0.4 million. The Company paid $4.1 million in July 2013, which represented the second and final installment of $4.5 million less indemnity claims of $0.4 million.  One payee, who was entitled to receive $23,000, did not respond to the Company’s communications until October 2013, and therefore the $23,000 was withheld by the Company until October 2013.  No interest accrued on the deferred cash consideration; however, the Company recorded imputed interest in the amount of $0.3 million based on the Company’s weighted-average cost of debt as of the date of the acquisition.  The obligation to pay the deferred cash consideration was unsecured.  The only adjustments to the balance in 2013 were the accretion of imputed interest and the payment of the second and final installment.

20

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

Deferred Anomalous Purchase Price

As described in Note 2, the purchase consideration for the acquisition of Anomalous included deferred cash consideration.  The deferred cash consideration included a payment of $979,000 in cash on the first anniversary of the Anomalous Acquisition Date, subject to set-off rights of the Company with respect to indemnities given by the former shareholders of Anomalous under the Anomalous Purchase Agreement.  The Company paid the full $979,000 of deferred cash consideration in January 2013. No interest accrued on the deferred cash consideration; however, the Company recorded imputed interest in the amount of $29,000 based on the Company’s weighted average cost of debt as of the date of the acquisition.  The obligation to pay the deferred cash consideration was unsecured.   The only adjustments to the balance in 2013 were the accretion of imputed interest and the payment of the deferred cash consideration.

Deferred ttMobiles Purchase Price

As described in Note 2, the purchase consideration for the acquisition of ttMobiles included deferred cash consideration.  The deferred cash consideration included a payment of £1.5 million in cash payable on the first anniversary of the ttMobiles Acquisition Date. The Company paid this £1.5 million of deferred consideration in February 2013. No interest accrued on the deferred cash consideration; however, the Company recorded imputed interest in the amount of $0.1 million based on the Company’s weighted average cost of debt as of the date of the acquisition.  The obligation to pay the deferred cash consideration was unsecured.  The only adjustments to the balance in 2013 were the accretion of imputed interest, foreign exchange adjustment and payment of the deferred cash consideration.

Deferred Symphony Purchase Price

As described in Note 2, the purchase consideration for the acquisition of the Symphony TEM Business included deferred cash consideration.  The deferred cash consideration included payments of $4.4 million in cash payable on the six-month anniversary of the closing of the Symphony acquisition, which included $2.5 million of consideration related to the Indian Purchase Agreement, and $6.4 million in cash payable on the twelve-month anniversary of closing of the Symphony Acquisition.  In addition, the acquisition consideration included an earn-out payable in the amount of up to $4.0 million based on achievement of revenue targets for the acquired business for periods through June 30, 2013.  No earn-out is payable because the revenue targets were not achieved.  The Company made the six-month anniversary payment of $4.4 million in February 2013.  The Company made a payment on the one-year anniversary of the closing in the amount of $4.9 million, consisting of the one-year anniversary payment of $6.4 million less $1.3 million withheld pending the resolution of certain indemnity matters, and less a net asset adjustment based on the final closing balance sheet of $0.2 million.  In October 2013, the Company and Symphony resolved the indemnity matters and the Company paid the $1.3 million that it had previously deducted from the one-year anniversary payment. No interest accrued on the deferred cash consideration; however, the Company recorded imputed interest in the amount of $0.2 million based on the Company’s weighted average cost of debt as of the date of the acquisition.  The obligation to pay the deferred cash consideration was unsecured.  The full installment due on August 8, 2013 of approximately $6.4 million and amounts that potentially could become payable under the earn-out were subject to set-off rights of the Company with respect to indemnities given by Symphony under the Symphony Purchase Agreement.  Among other things, these indemnity obligations related to representations and warranties given by Symphony under the Symphony Purchase Agreement and by Symphony India under the Indian Purchase Agreement.  Certain of the indemnities were subject to limitations, including a threshold and deductible, certain caps and limited survival periods.   The only adjustments to the balance in 2013 were the accretion of imputed interest and the payment of the six- and twelve-month installments.

Deferred oneTEM Purchase Price

As described in Note 2, the purchase consideration for the acquisition of oneTEM includes deferred cash consideration.  The deferred cash consideration includes a payment of €0.4 million in cash payable on the first year anniversary of the closing of the oneTEM acquisition.  In addition, the acquisition consideration includes an earn-out payable pursuant to an earn-out formula based upon the business beginning to generate annual recurring revenue from specified customers and then year-over-year increases in annual recurring revenue from those specified customers during the earn out periods.  The earn-out period begins with the first full month after the oneTEM Closing Date and continues for four consecutive 12-month periods.  The Company valued this contingent consideration at €0.2 million.  No interest accrues on the deferred cash consideration; however, the Company recorded imputed interest in the amount of €0.1 million based on weighted average cost of capital as of the date of the acquisition.  The deferred consideration is subject to set-off rights of the Company with respect to certain indemnities given by the former holders of the issued share capital of oneTEM under the oneTEM Purchase Agreement until the deferred consideration is paid.

21

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

8.Stockholders’ Equity

Common Stock—As of December 31, 2012 and September 30, 2013, the number of authorized shares of common stock, par value $0.0001 per share, was 150,000,000, of which 37,613,327 and 38,125,858 were issued and outstanding, respectively.

During the nine months ended September 30, 2012, the Company issued 165,775 unregistered shares of its common stock and 132,617 unvested and unregistered shares of its common stock as part of the Anomalous purchase consideration, as described in Note 2.  During the nine months ended September 30, 2013, the Company cancelled and retired the 132,617 unvested and unregistered shares of its common stock.  Additionally, the Company issued 5,991 and 58,975 shares of its common stock to certain of its employees and members of its board of directors, respectively, during the nine months ended September 30, 2013 under the provisions of the Company’s 2011 Stock Incentive Plan (the “2011 Plan”).

At the June 5, 2013 annual meeting of the Company’s stockholders, an amendment to the 2011 Plan to reserve an additional 1,000,000 shares of common stock for issuance under the 2011 Plan was approved by a majority of the Company’s stockholders.  The Company’s board of directors had previously approved such amendment.

In November 2012, the Company’s board of directors authorized a share repurchase program under which the Company may repurchase up to $20 million of its outstanding common stock on the open market or in privately negotiated transactions.  During the nine months ended September 30, 2013, the Company repurchased 365,959 shares of common stock at an average price per share, including broker commissions, of $12.40, for an aggregate purchase price of $4.5 million.

Preferred Stock—As of December 31, 2012 and September 30, 2013, the number of authorized shares of preferred stock, par value $0.0001 per share, was 5,000,000, of which 0 were issued and outstanding.

Common Stock Warrants—During the nine months ended September 30, 2013, warrant holders exercised warrants to purchase a total of 14,907 shares of common stock.  The Company received proceeds of $34,700 related to these warrant exercises.

On March 22, 2011, the Company issued a warrant to purchase up to 1,282,789 shares of its common stock to Dell Products, L.P. (“Dell”) in connection with the entry of the Company and Dell into a 49-month strategic relationship agreement. Under the terms of the warrant, the 1,282,789 shares of common stock may become exercisable upon the achievement of certain annual recurring revenue thresholds over the 49-month period. The warrant is exercisable at $5.987 per share. As of September 30, 2013, none of the shares that may become exercisable under this warrant were probable of being earned and becoming vested and accordingly no value was ascribed to this warrant. On a quarterly basis the Company reviews the actual annual recurring revenue related to the Dell strategic relationship agreement to determine if it is probable that Dell will reach any of the annual recurring revenue thresholds that would result in warrant shares being earned and becoming vested, and to the extent the Company deems it probable that any warrant shares will be earned and become vested, the Company will record the fair value of those shares to intangible assets and non-current liabilities using a Black-Scholes valuation model and mark to market each period thereafter until such time as the warrant shares are actually earned and vest.

On October 9, 2009, the Company issued a warrant to purchase up to 3,198,402 shares of its common stock to International Business Machines Corporation (“IBM”) in connection with the entry of the Company and IBM into a five-year strategic relationship agreement. Under the terms of the warrant, 890,277 shares of common stock were vested and exercisable immediately upon execution of the agreement. Up to an additional 2,308,125 shares of common stock were to become exercisable upon the achievement of certain billing thresholds over a three-year period. The warrant was exercisable at $4.148 per share. (Certain terms of this warrant were amended on June 8, 2011, as described in the paragraph below). The Company valued the initial 890,277 shares of common stock exercisable under the warrant at $1.7 million using the Black-Scholes valuation model at the time of the signing of the agreement. The Black-Scholes valuation assumptions included an expected term of seven years, volatility of 67.77% and a risk free interest rate of 2.93%. The Company recorded the $1.7 million value of the initial 890,277 shares of common stock as an increase to warrants for common stock and an increase to other non-current assets on the Company’s consolidated balance sheet. During the three months ended December 31, 2009, the Company determined that it was probable that IBM would reach certain of the billing thresholds to have an additional 947,103 shares of common stock become exercisable. The additional shares of common stock exercisable under the warrant were valued at $1.4 million using the Black-Scholes valuation model at the time the Company determined it was probable they would reach the billing thresholds. The Black-Scholes valuation assumptions included an expected term of 5.8 years, volatility of 61.15% and a risk free interest rate of 2.28%. The

22

Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

Company recorded the value of the additional shares of common stock to intangible assets and non-current liabilities.  In December 2010, the Company reviewed the actual billings to date related to the strategic relationship agreement and determined it was probable IBM would reach the billing thresholds to earn 624,755 shares of the additional 947,103 shares of common stock accrued. The Company reversed $920,000 of market value related to the 322,348 shares of common stock no longer deemed probable of being earned.

On June 8, 2011, certain terms of the common stock warrant described above were amended by the Company and IBM. Under the terms of the amended warrant agreement, an additional 624,755 shares of common stock were vested and exercisable immediately (in addition to the 890,277 shares previously vested and exercisable), the additional warrant shares that could be earned were reduced from 2,308,125 to 651,626 shares of common stock, and the methodology for earning the additional warrant shares was revised to be based on specified new contractual revenue commitments from IBM that could occur between June 8, 2011 and June 30, 2012. Based on this amendment, the maximum number of warrant shares (issued and issuable) to IBM was reduced from 3,198,402 to 2,166,658 shares of common stock. The fair value of the 624,755 warrant shares vested as a result of this amendment was determined to be $4.5 million using the Black-Scholes valuation model at the time of the amendment. The Black-Scholes valuation assumptions included an expected term of 5.3 years, volatility of 59.58% and a risk free interest rate of 1.64%. The Company recorded these vested warrant shares as an increase to warrants for common stock, reversed the non-current liability associated with the previous accrual for these warrant shares, and the difference was added to intangible assets and is being amortized in proportion to the expected revenue over the remainder of the original ten-year period noted below. On August 30, 2011, the Company issued 930,511 shares of its common stock to IBM upon the exercise by IBM of this warrant, pursuant to a cashless exercise feature.  As a result of the cashless exercise, 584,521 warrant shares were cancelled in lieu of the payment of cash consideration to the Company.  As of June 30, 2012, the vesting terms of the amended warrant agreement between the Company and IBM expired with IBM earning no additional warrant shares.  As a result, no further warrant shares are issuable under this warrant agreement.

The Company began to amortize the intangible asset in the first quarter of 2010, with the related charge recorded as contra-revenue. The related charge to revenue will be in proportion to expected revenue over approximately a ten-year period. For the nine months ended September 30, 2012 and 2013, the Company recorded $119,259 and $194,189, respectively, of amortization as a contra-revenue charge related to the common stock warrant. The warrant value was marked to market on a quarterly basis until the warrant shares were earned and vested or expired unearned and unvested.

A summary of warrants exercised to purchase common stock during the nine months ended September 30, 2013 is presented below:

	Number of
	Stock
Warrants	Warrants
Outstanding at beginning of the year	25,617
Exercised	(14,907		)
Issued	—
Cancelled	—
Outstanding at end of the period	10,710
Weighted average exercise price	$	13.26

Stock Options—As of September 30, 2013, the Company had five stock-based compensation plans, the Employee Stock Option/Stock Issuance Plan (the “Employee Plan”), the Executive Stock Option/Stock Issuance Plan (the “Executive Plan”), the 2005 Stock Incentive Plan (the “2005 Plan”), the Traq Amended and Restated 1999 Stock Plan (the “1999 Plan”) and the 2011 Plan.  In connection with the Company’s initial public offering, the Company’s board of directors determined that no future stock awards would be made under the Employee Plan, the Executive Plan, the 2005 Plan and the 1999 Plan.   The 2011 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards and other stock-based awards.

Under the provisions of the Employee Plan, the Executive Plan, the 2005 Plan, the 1999 Plan and the 2011 Plan (the “Plans”), the exercise price of each option is determined by the Company’s board of directors or by a committee appointed by the board of directors.  Under the 2011 Plan, the exercise price of all stock options must not be less than the

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Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

fair market value of a share of common stock on the date of grant. The period over which options vest and become exercisable, as well as the term of the options, is determined by the board of directors or the committee appointed by the board of directors. The options generally vest over 4 years and expire 10 years after the date of the grant. During the nine months ended September 30, 2013, the Company’s board of directors granted options to purchase an aggregate of 463,475 shares of common stock under the 2011 Plan to employees and non-employees, at a weighted average exercise price of $14.25 per share.

A summary of the status of stock options issued pursuant to the Plans during the nine months ended September 30, 2013 is presented below:

Options	Number of Shares		Weighted Average Exercise Price		Weighted Average Contractual Life (years)
Outstanding at beginning of the year	6,854,369		$	7.92
Granted	463,475		$	14.25
Forfeited	(119,067	)	$	13.01
Exercised	(847,134	)	$	4.62
Outstanding at end of the period	6,351,643		$	8.73	7.1
Exercisable at end of the period	3,933,447		$	6.54	6.4
Available for future grants at September 30, 2013	1,018,338

The intrinsic values of options outstanding, vested and exercised during the nine months ended September 30, 2013 were as follows:

	2013
	Number of	Intrinsic
	Options	Value
Outstanding	6,351,643	$	95,907,266
Vested	3,933,447	$	68,020,878
Exercised	847,134	$	12,276,044

During the nine months ended September 30, 2013, employees and former employees of the Company exercised options to purchase a total of 847,134 shares of common stock at exercise prices ranging from $0.25 to $20.39 per share. Proceeds from the stock option exercises totaled $3.9 million.

Restricted Stock Units—During the nine months ended September 30, 2013, the Company issued 627,534 restricted stock units to certain employees under the provisions of the 2011 Plan and 84,100 restricted stock units vested resulting in an equal number of shares of common stock being issued. The grants of restricted stock units made during the nine months ended September 30, 2013 had an aggregate value of $9.3 million.  The value of a restricted stock unit award is determined based on the closing price of the Company’s common stock on the date of grant.  A restricted stock unit award entitles the holder to receive shares of the Company’s common stock as the award vests. The restricted stock units vest over periods that range from 2 to 4 years.  Stock-based compensation expense is amortized on a straight-line basis over the vesting period.

For the nine months ended September 30, 2013, the Company recorded stock-based compensation expenses of $3.0 million related to restricted stock units.

As of September 30, 2013, there was $9.3 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested restricted stock units. This amount will be amortized on a straight-line basis over the requisite service period related to the restricted unit grants.

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Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

A summary of the status of restricted stock units issued pursuant to the Plans during the nine months ended September 30, 2013 is presented below:

Restricted Stock Units	Number of Shares		Weighted Average Fair Value
Outstanding at beginning of the year	221,314		$	17.27
Granted	627,534		$	14.85
Vested	(84,100	)	$	17.14
Forfeited	(1,050	)	$	15.08
Outstanding at end of the period	763,698		$	15.30

In accordance with ASC 718, Share Based Payment (“ASC 718”), total compensation expense for stock-based compensation awards was $6.5 million and $9.8 million for the nine months ended September 30, 2012 and 2013, respectively, which is included on the accompanying condensed consolidated statements of operations as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2013		2012		2013
Cost of goods sold	$	362	$	529	$	947	$	1,609
Sales and marketing expenses	586		978		1,455		2,747
General and administrative expenses	1,643		1,551		3,727		4,664
Research and development	164		244		410		753
Total stock-based employee compensation	$	2,755	$	3,302	$	6,539	$	9,773

Stock-based employee compensation expense for equity awards granted since January 1, 2006 will be recognized over the following periods as follows (in thousands):

Years Ending December 31,
2013	$	3,272
2014	11,718
2015	8,106
2016	2,333
2017	123
	$	25,552

Stock-based compensation costs for stock options are generally based on the fair value calculated from the Black-Scholes valuation model on the date of grant. The Black-Scholes valuation model requires the Company to estimate key assumptions such as expected volatility, expected terms, risk-free interest rates and dividend yields. The Company determined the assumptions in the Black-Scholes valuation model as follows: expected volatility is a combination of the Company’s competitors’ historical volatility; expected term is calculated using the “simplified” method prescribed in ASC 718; and the risk free rate is based on the U.S. Treasury yield on 5 and 7-year instruments in effect at the time of grant. A dividend yield is not used, as the Company has never paid cash dividends and does not currently intend to pay cash dividends. The Company periodically reviews the assumptions and modifies the assumptions accordingly.

As part of the requirements of ASC 718, the Company is required to estimate potential forfeitures of stock grants and adjust compensation cost recorded accordingly. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated

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Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock-based compensation expense to be recognized in future periods. The fair values of stock grants are amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is shown in the operating activities section of the statement of cash flows.

The fair value of the options granted during 2013 was determined at the date of grant using the Black-Scholes valuation model with the following assumptions:

	2013
Expected dividend yield	0%
Risk-free interest rate	1.04% to 1.86%
Expected term (in years)	5.7 - 6.1 years
Expected volatility	56.34% - 56.84%

Based on the above assumptions, the weighted average fair value per share of stock options granted during the nine months ended September 30, 2013 was approximately $7.55.

9.     Income Taxes

The income tax provision differs from the expected tax provisions computed by applying the U.S. Federal statutory rate to income before income taxes primarily because the Company has historically maintained a full valuation allowance on its deferred tax assets, tax deductions related to stock-based compensation, and to a lesser extent because of the impact of state income taxes.  As described in the 2012 Form 10-K, the Company maintains a full valuation allowance in accordance with ASC 740, Accounting for Income Taxes, on its net deferred tax assets.  Until the Company achieves and sustains an appropriate level of profitability, it plans to maintain a valuation allowance on its net deferred tax assets.

10.    Fair Value Measurement

The Company records certain financial assets and liabilities at fair value on a recurring basis. The Company determines fair values based on that price it would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.

The prescribed fair value hierarchy and related valuation methodologies are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, directly or indirectly, such as a quoted price for similar assets or liabilities in active markets.

Level 3—Inputs are unobservable and are only used to measure fair value when observable inputs are not available. The inputs reflect the entity’s own assumptions and are based on the best information available. This allows for the fair value of an asset or liability to be measured when no active market for that asset or liability exists.

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Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

The following table discloses the assets and liabilities measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012 and the basis for that measurement:

	Fair Value Measurement at September 30, 2013
(in thousands)	Total		Level 1		Level 2		Level 3
Money market	$	18,336	$	18,336	$	—	$	—
Contingent HCL-EMS acquisition consideration	891		—		—		891
Contingent oneTEM acquisition consideration	198		––		––		198
	$	19,425	$	18,336	$	—	$	1,089

	Fair Value Measurement at December 31, 2012
(in thousands)	Total		Level 1		Level 2		Level 3
Money market	$	28,094	$	28,094	$	—	$	—
Contingent HCL-EMS acquisition consideration	2,046		—		—		2,046
	$	30,140	$	28,094	$	—	$	2,046

The changes in the fair value of the Level 3 liability for the nine months ended September 30, 2013 are as follows:

	Contingent acquisition consideration
	Nine Months Ended September 30, 2013
(in thousands)	HCL-EMS			oneTEM
Balance, beginning of period	$	2,046		$	—
Initial earn-out consideration	—			181
Imputed Interest	12			17
Cash payments	(1,000		)	––
Second year earn-out adjustment	(167		)	—
Balance, end of period	$	891		$	198

The Company’s investment in overnight money market institutional funds, which amounted to $28.1 million and $18.3 million at December 31, 2012 and September 30, 2013, respectively, is included in cash and cash equivalents on the accompanying condensed consolidated balance sheets and is classified as a Level 1 input.

The acquisition of HCL-EMS includes a contingent consideration agreement that requires additional consideration to be paid by the Company following each of the first and second anniversaries of the HCL-EMS Closing Date, pursuant to an earn-out formula ranging from 7.5% to 15% of specified revenues from specified customers acquired, subject to set-off rights of the Company with respect to indemnities given by HCL-EMS under the HCL-EMS APA.  The fair value of the contingent consideration recognized was $3.4 million which was estimated by applying the income approach. The key assumptions include (a) a discount rate of 10.5% and (b) probability adjusted levels of revenue between approximately $12.6 million and $13.9 million. As of September 30, 2013, there were no changes in the recognized amounts, except for the accretion of interest, adjustment of the second year earn-out estimate to actual and the partial payment of the second year earn-out.

The acquisition of oneTEM includes a contingent consideration agreement that requires additional consideration to be paid by the Company following each of the first four anniversaries of the oneTEM Closing Date, pursuant to an earn-out formula of 9% of annual recurring revenue generated from specified customers in the first year and then year-over-year increase in annual recurring revenue from those specified customers during the earn-out periods.  The earn-out period begins with the first full month after the oneTEM Closing Date and continues for four consecutive 12- month periods.  The contingent consideration is subject to set-off rights of the Company with respect to indemnities given by the former holders of the issued share capital of oneTEM under the oneTEM Purchase Agreement.  The fair value of the contingent consideration recognized was $0.2 million, which was estimated by applying the income approach. The key assumptions include (a) a discount rate of 15% and (b) probability adjusted levels of initial and then increased annual recurring revenue between approximately $0.2 million and $0.3 million.

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Notes to Condensed Consolidated Financial Statements - continued (Unaudited)

The carrying amounts of the Company’s other non-cash financial instruments including accounts receivable and accounts payable approximate their fair values due to the relatively short-term nature of these instruments. The carrying amounts of the Company’s deferred purchase price consideration to ProfitLine and Symphony approximate fair value as the effective interest rates approximate market rates.

11.      Supplemental Cash Flow Information

Information about other cash flow activities during the nine months ended September 30, 2012 and 2013 is as follows:

	Nine months ended September 30,
(in thousands)	2012		2013
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	94	$	65
Income tax payments	$	284	$	345
NON-CASH TRANSACTIONS:
Deferred purchase price in connection with Anomalous acquisition	$	950	$	—
Deferred purchase price in connection with ttMobiles acquisition	$	2,315	$	—
Deferred purchase price in connection with Symphony acquisition	$	10,942	$	––
Deferred purchase price in connection with oneTEM acquisition	$	—	$	616
Issuance of common stock in payment of board of directors fees	$	20	$	—
Cashless exercise of warrants	$	479	$	—

12.     Commitments and Contingencies

During the normal course of business, the Company becomes involved in various routine legal proceedings including issues pertaining to patent infringement, customer disputes, employee matters and acquisition-related post-closing disputes.  The Company does not believe that the outcome of these matters will have a material adverse effect on its financial condition.

The Company has entered into non-cancellable operating leases for the rental of office space in various locations that expire between 2013 and 2019.  Some of the leases provide for lower payments in the beginning of the term which gradually escalate during the term of the lease. The Company recognizes rent expense on a straight-line basis over the lease term, which gives rise to a deferred rent liability on the balance sheet.  The Company also has entered into agreements with third-party hosting facilities, which expire between 2013 and 2016.

The Company is also obligated under several leases covering computer equipment and software, which the Company has classified as capital leases.  Additionally, the Company has entered into several operating leases for various office equipment items, which expire between January 2014 and July 2015.

Rent expense, included in general and administrative expense, was approximately $3.6 million and $4.2 million for the nine months ended September 30, 2012 and 2013, respectively.

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

You should read the following discussion and analysis of our financial condition and results of operations together with our financial statements and the related notes and other financial information included elsewhere in this quarterly report. Some of the information contained in this discussion and analysis or set forth elsewhere in this quarterly report, including information with respect to our plans and strategy for our business and related financing, include forward-looking statements that involve risks and uncertainties. You should review the “Risk Factors” and “Forward-Looking Statements” sections of this quarterly report for a discussion of important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.

Overview

Tangoe is a leading global provider of communications lifecycle management, or CLM, software and services to a wide range of large and medium-sized commercial enterprises and governmental agencies. CLM encompasses the entire lifecycle of an enterprise’s communications assets and services, including planning and sourcing, procurement and provisioning, inventory and usage management, mobile device management, real-time telecommunications expense management, invoice processing, expense allocation and accounting, forward and reverse logistics and asset decommissioning and disposal. Our on-demand Communications Management Platform is a suite of software designed to manage and optimize the complex processes and expenses associated with this lifecycle for both fixed and mobile communications assets and services. Our customers can engage us through our client services group to manage their communications assets and services using our Communications Management Platform.

Our solution can provide a significant return on investment by enabling an enterprise to identify and resolve billing errors, to optimize communications service plans for its usage patterns and needs, and to manage used and unused communications assets and services. Our solution allows enterprises to improve the productivity of their employees by automating the provisioning of communications assets and services, and to reduce costs by controlling and allocating communications expenses. It also allows enterprises to enforce regulatory requirements and internal policies governing the use of communications assets and services.

We designed our business model to sell recurring technology and services leveraging our Communications Management Platform. We review four key business metrics to help us monitor the performance of our business model and to identify trends affecting our business. The measures that we believe are the primary indicators of our quarterly and annual performance are as follows:

Adjusted EBITDA.  We define Adjusted EBITDA as net income plus interest expense, income tax provision, depreciation and amortization, amortization of marketing agreement intangible assets, stock-based compensation expense and, for 2013 only, restructuring charge; less amortization of leasehold interest, for 2013 only, other income and interest income and also include in Adjusted EBITDA adjustments for other non-cash and non-recurring items applicable for the periods presented.  Our management uses Adjusted EBITDA to measure our operating performance because it does not include the impact of items not directly resulting from our core business and certain non-cash expenses such as depreciation and amortization and stock-based compensation. We believe that this measure provides us with additional useful information to measure and understand our performance on a consistent basis, particularly with respect to changes in performance from period to period. We use Adjusted EBITDA in the preparation of our annual operating budgets and to measure and evaluate the effectiveness of our business strategies. Adjusted EBITDA is not calculated in accordance with generally accepted accounting principles in the United States of America, or GAAP, and is not a substitute for or superior to financial measures determined in accordance with GAAP. Other companies in our industry may calculate Adjusted EBITDA in a manner differently from us, which reduces its usefulness as a comparative measure.  Our Adjusted EBITDA has increased annually for each fiscal year since 2007 and we expect it to continue to increase in our fiscal year ending December 31, 2013.

Recurring technology and services revenue growth.  In 2006, we began a strategic initiative to transition our business model from selling transactional software licenses to providing recurring technology-enabled services leveraging both our technology and communications industry experience. We further implemented this initiative with the acquisition of Traq Wireless, Inc., or Traq, as discussed below. Traq’s revenue base was primarily recurring, which substantially increased our 2007 recurring revenue. We regularly review our recurring revenue growth to measure our success.

We intend to continue to focus our sales and marketing efforts on increasing our recurring technology and services-related customer base, and we expect that our recurring technology and services revenue will increase in absolute dollars and as a percentage of total revenue over the next 12 months due to our expectation that we will be able to:

·retain a high percentage of the revenue we currently derive from our existing customers;

·sell additional product and service offerings to our existing customers; and

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·add a significant number of new customers.

We believe that we will be able to retain a high percentage of our existing recurring technology and services revenue due to our revenue retention rates, and the current levels of customer usage of our products and services, which we review on a monthly basis to provide an indication of impending increases or decreases in billed revenue for future periods.

We believe that we will be able to sell additional product and service offerings to our existing customers in the next year based on our analysis of revenue on a per-customer basis for the last 12 months, which indicates that our customers on an aggregate basis have generally increased their usage of our solution on a quarterly basis.

We believe that we will be able to add a significant number of new customers over the next 12 months as we continue to expand internationally and increase our share of the domestic market.

Deferred revenue.  Our deferred revenue consists of the amounts that have been invoiced but that have not yet been recognized as revenue, including advanced billed and undelivered portions of our Communication Management Platform subscriptions and related services, maintenance on our software licenses and implementation fees. We invoice our services to many of our customers in advance, with the intervals ranging from 1 to 12 months. We monitor our deferred revenue balance as this balance represents revenue to be recognized over the next 12 months except for a portion of implementation and software subscription fees.  Implementation fees are recognized ratably over twice the term of the contract, which we estimate to be the expected life of the customer relationship.  Software subscription fees are recognized ratably over the service period.  As of September 30, 2013, implementation fees and software subscription fees represented $2.5 million and $0.1million, respectively, of the $11.3 million deferred revenue balance.

Revenue retention rates.  In addition, we consider our revenue retention rates. Since we began to fully realize the benefits of our recurring revenue model in 2009, our revenue retention rates have been higher than 90%. We measure revenue retention rates by assessing on a dollar basis the recurring technology and services revenue we retain for the same customer and product set in a given period versus the prior year period. We cannot predict our revenue retention rates in future periods. Our use of a revenue retention rate has limitations as an analytical tool, and you should not consider it in isolation. Other companies in our industry may calculate revenue retention rates differently, which reduces its usefulness as a comparative measure.

We also review a number of other quantitative and qualitative trends in monitoring our performance, including our share of the CLM market, our customer satisfaction rates, our ability to attract, hire and retain a sufficient number of talented employees to staff our growing business and the development and performance of our solutions. Our review of these factors can affect aspects of our business and operations on an on-going basis, including potential acquisition strategies and investment in specific areas of product development or service support.

Certain Trends and Uncertainties

The following represents a summary of certain trends and uncertainties, which could have a significant impact on our financial condition and results of operations. This summary is not intended to be a complete list of potential trends and uncertainties that could impact our business in the long or short term. This summary, however, should be considered along with the factors identified in the “Risk Factors” section of this Quarterly Report on Form 10-Q.

·The CLM market is characterized by rapid technological change and frequent new product and service introductions, including frequent introductions of new technologies and devices. To achieve and maintain market acceptance for our solution, we must effectively anticipate these changes and offer software products and services that respond to them in a timely manner. If we fail to develop software products and services that satisfy customer preferences in a timely and cost-effective manner, our ability to renew our agreements with existing customers and our ability to create or increase demand for our solution will be harmed.

·We believe that competition will continue to increase. Increased competition could result from existing competitors or new competitors that enter the market because of the potential opportunity. We will continue to closely monitor competitive activity and respond accordingly. Increased competition could have an adverse effect on our financial condition and results of operations.

·We continue to closely monitor current economic conditions, as any decline in the general economic environment that negatively affects the financial condition of our customers could have an adverse effect on our financial condition and results of operations. For example, during the most recent economic downturn, our customer cancellation rate during the first quarter of 2009 increased to a quarterly rate of over three times the average of the prior four quarters, partly as a result of customer bankruptcies. Although economic conditions have generally improved, there has not been a full recovery to the levels that generally existed prior to the downturn. If economic conditions in the United States and other countries do not continue to improve, we may face greater risks in operating our business.

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Acquisitions

On January 10, 2012, we acquired all of the outstanding equity of Anomalous Networks Inc., or Anomalous, a provider of real-time telecommunications expense management solutions. The aggregate purchase price was approximately $9.0 million, which consisted of approximately $3.5 million in cash paid at the closing, approximately $1.0 million in cash payable on the first anniversary of the closing, 165,775 unregistered shares of our common stock and 132,617 unvested and unregistered shares of our common stock with vesting based on achievement of revenue targets relating to sales of Anomalous products and services for periods through January 31, 2013. We paid the full $1.0 million of deferred cash consideration in January 2013.   In March 2013, we cancelled and retired the 132,617 unvested and unregistered shares of our common stock due to the revenue targets related to the sales of Anomalous products and services not being achieved.  The transaction costs were immaterial and were expensed as incurred.

On February 21, 2012, we acquired all of the issued share capital of ttMobiles Limited, or ttMobiles, a provider of mobile communications management solutions and services based in the United Kingdom. The purchase price was £5.5 million, which consisted of £4.0 million in cash paid at the closing and £1.5 million in cash payable on the first anniversary of the closing. We paid the full £1.5 million of deferred cash consideration in February 2013.  The transaction costs were immaterial and were expensed as incurred.

On August 8, 2012, we acquired substantially all of the assets of the telecommunications expense management division of Symphony Teleca Services, Inc., or Symphony, pursuant to an asset purchase agreement, or the Symphony Purchase Agreement.  On the same date, a newly formed subsidiary of ours, Tangoe India Softek Services Private Limited, an Indian private limited company, or Tangoe India, entered into a business purchase agreement, or the Indian Purchase Agreement, with Symphony Services Corporation (India) Private Limited, or Symphony India, with respect to the purchase of certain assets and employees of the acquired business located in India.  The net purchase price was $40.2 million, which consisted of $29.2 million in cash paid at the closing, approximately $4.4 million in cash payable on the six-month anniversary of the closing, and approximately $6.4 million in cash payable on the one-year anniversary of the closing. In addition, the acquisition consideration included an earn-out payable in the amount of up to $4.0 million based on achievement of revenue targets for the acquired business for periods through June 30, 2013.  No earn-out is payable because the revenue targets were not achieved.  We made the six-month anniversary payment of $4.4 million in February 2013.  The full installment due on August 8, 2013 of approximately $6.4 million, and amounts that potentially became payable under the earn-out, were subject to set-off rights that we had with respect to indemnities given by Symphony under the Symphony Purchase Agreement.  Among other things, these indemnity obligations related to representations and warranties given by Symphony under the Symphony Purchase Agreement and by Symphony India under the Indian Purchase Agreement.  Certain of the indemnities were subject to limitations, including a threshold and deductible, certain caps and limited survival periods.  We made a payment on the one-year anniversary of the closing in the amount of $4.9 million, consisting of the one-year anniversary payment of $6.4 million less $1.3 million withheld pending the resolution of certain indemnity matters, and less a net asset adjustment based on the final closing balance sheet of $0.2 million.  In October 2013, we and Symphony resolved the indemnity matters and we paid the $1.3 million that we had previously deducted from the one-year anniversary payment.  During a post-closing transition period that lasted through February 2013, Symphony and Symphony India provided to us certain transition services, pending completion of the opening of certain Tangoe India facilities, the procurement of certain Indian tax registrations and the subsequent transfer to Tangoe India of the Indian assets and employees being hired.  These services included making available to us on a continuing basis the services previously provided by Symphony India to Symphony.  The transaction costs were immaterial and were expensed as incurred.

On April 18, 2013, we acquired all of the issued share capital of oneTEM GmbH, or oneTEM, a provider of strategic consulting services based in Germany.  The purchase price was approximately €1.5 million, which consisted of €0.9 million in cash paid at the closing and €0.4 million in cash payable on the first anniversary of the closing. In addition, the acquisition consideration includes an earn-out payable pursuant to an earn-out formula based upon the business beginning to generate annual recurring revenue from specified customers and then year-over-year increases in annual recurring revenue from those specified customers during the earn out periods.  The earn-out period begins with the first full month after the closing and continues for four consecutive 12-month periods.  The fair value of the earn-out consideration was valued at €0.2 million, which was estimated by applying the income approach.  The transaction costs were immaterial and were expensed as incurred.

We continue to migrate to our platforms the customers of several of the businesses that we acquired during 2011 and 2012.  We have completed the migration of the Telwares customers, and the migrations of the HCL-EMS, ProfitLine and Symphony customers are in various stages of completion.  While to date we have successfully migrated a number of these customers, there can be no assurance that we will complete these migrations in a timely manner or at all and the cost of these migrations may be more significant than we have estimated.  We may pursue additional acquisitions of, or investments in, businesses, services and technologies that will expand the functionality of our solution, provide access to new markets or customers, or otherwise complement our existing operations.

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Sources of Revenue

Recurring technology and services revenue.  We derive our recurring technology and services revenue primarily from subscriptions and services related to our Communications Management Platform. We recognize revenue for software and related services when all of the following conditions are met: (a) there is persuasive evidence of an arrangement; (b) the service has been provided to the customer; (c) the collection of the contracted fee is probable; and (d) the amount of the fees to be paid by the customer is fixed and determinable. These services include help desk, asset procurement and provisioning, and carrier dispute resolution. The recurring technology and services revenue is recognized ratably over the contract term.

In 2006, we began a strategic initiative to transition our business model from selling non-recurring transactional software licenses to providing recurring technology and services leveraging both our technology and communications industry experience.

We license our on-demand software and sell related services primarily on a subscription basis under agreements that typically have terms ranging from 24 to 60 months.  Our recurring technology and services revenue is driven by the amount of communications spend that we manage and the scope of the products and services that we provide to our customers.  Under our fixed line contracts, we typically charge our customers a percentage of managed communications spend that is determined based on the products and services that we provide.  Under our mobile contracts, we typically charge our customers fees that are based on the mobile products and services that we provide and the number of devices for which we provide those products and services.  As of September 30, 2013, we managed a total of approximately $26.8 billion in annual communications expense as compared to approximately $22.6 billion in annual communications expense as of September 30, 2012.  Our customers are typically subject to a minimum charge for up to a specified threshold amount of communications spend or number of mobile devices under management and additional charges to the extent those specified thresholds are exceeded. Prior to 2010, as a result of limited history regarding customer renewals, implementation fees related to subscription agreements for our Communications Management Platform with terms equal to or less than 36 months were recognized over 36 months and implementation fees related to subscription agreements with terms exceeding 36 months were recognized over the life of the agreement. In 2010, due to having greater evidence regarding customer renewals, we believed it was appropriate to extend the estimated expected life of the customer relationship to be equal to twice the contract life calculated on a per-customer basis and to recognize implementation fees ratably over this period. This change did not have a material impact on our consolidated financial statements. Many of our subscription contracts are non-cancelable, although customers have the right to terminate for cause if we materially fail to perform.

In 2010, we began to amortize the value of a warrant to purchase common stock issued to IBM as part of a strategic relationship agreement. This related charge will be recorded as contra-revenue in proportion to total expected revenue from the agreement. We recorded $46,323 and $72,000 of amortization as a contra-revenue charge during the three months ended September 30, 2012 and 2013, respectively and $119,259 and $194,189 of amortization as a contra-revenue charge during the nine months ended September 30, 2012 and 2013, respectively.

Strategic consulting, software licenses and other revenue.  In addition to our subscription fees, revenue is generated to a lesser extent by strategic consulting, software licenses, mobile device activation fees and sales of telecommunication accessories. Strategic consulting consists primarily of fees charged for contract negotiations and bill audits. Contract negotiation fees include both fixed project fees and incentive fees driven by the amount of savings that we are able to generate over the customer’s existing communications rates. These fees are recognized when fixed and determinable, usually when the customer and carrier execute the contract. Bill audit fees are driven by the amount of savings that we are able to generate by reviewing current and prior communications invoices against the customer’s existing contracts. These fees are recognized when fixed and determinable, usually when the carrier agrees to issue a credit or refund to our customer.

On occasion, we license our Communications Management Platform to our customers on a perpetual basis. If we are able to derive vendor-specific objective evidence on the undelivered elements, the software portion is recognized when the revenue recognition criteria is met; otherwise the contract is recognized ratably over the contract life. Other professional services are recognized as the services are performed. We have an agreement with a carrier whereby we receive an activation fee for procuring a mobile device. The activation revenue is recognized upon confirmation from the carrier that the device has been procured.  The revenue related to the sale of telecommunication accessories is recognized upon shipment of the accessories to the customer.

We expect our strategic consulting, software licenses and other revenue to remain relatively constant in absolute dollars, but to decrease as a percentage of total revenue, as we continue to focus our sales and marketing efforts on our recurring technology and services revenue model.

We historically have derived substantially all of our revenue from United States-based customers. We intend to build our international sales operations by increasing our direct sales force abroad. We expect our international revenue to increase in absolute dollars and as a percentage of total revenue.

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Cost of Revenue and Gross Profit

Cost of recurring technology and services revenue.  Cost of recurring technology and services revenue consists primarily of costs associated with our data center operations, customer product support centers and our client services group. This includes personnel-related costs such as salary, stock-based compensation and other compensation-related costs, subcontractor fees, hosting fees, communications costs and royalties related to third-party software included in our solution when our solution is licensed on a non-perpetual basis.

Cost of strategic consulting, software licenses and other revenue.  Cost of strategic consulting, software licenses and other revenue consists primarily of personnel-related costs, including salary, stock-based compensation and other compensation-related costs and subcontractor fees directly related to delivering the service and to a lesser extent, the cost of the telecommunications accessories sold.

As our customer base continues to grow, we expect our cost of revenue to increase in absolute dollars as we expand our data center and customer support operations to support our continued growth. Our cost of revenue could fluctuate as a percentage of revenue on a quarterly basis but remain relatively stable on an annual basis based on the mix of software and services sold and average contractual selling price.

Gross profit.  Gross profit as a percentage of revenue is affected by two main factors—the mix of software and services sold and the average contractual selling price. We expect our gross profit in absolute dollars to increase, but that our gross profit as a percentage of revenue will be affected as we integrate the businesses of our recent acquisitions, which have historically operated with lower margins than our business. We believe that over time we will achieve improvements in those margins as we integrate the acquired operations and capture the operating efficiencies of the overall business.

Operating Expense

Operating expense consists of sales and marketing, general and administrative, research and development and depreciation and amortization. Other than for depreciation and amortization expense, personnel-related costs are the most significant component of all of these operating expenses. We expect to continue to hire a significant number of new employees in order to support our overall growth. In any particular period, the timing of additional hires could materially affect our operating results, both in absolute dollars and as a percentage of revenue.

Sales and marketing.  Sales and marketing expense consists primarily of personnel-related costs, including salary, stock-based compensation and other compensation-related costs for our sales, marketing and business development employees, the cost of marketing programs such as on-line lead generation, promotional events, such as trade shows, user conferences, seminars and webinars, the cost of business development programs, travel related costs and sales commissions. Sales commission rates are calculated at the time a contract is signed. The sales commission rate is applied to the contract’s first year of revenue to calculate sales commission expense.  Sales commission expense is accrued and expensed at the time we invoice the customer and is paid to the salesperson either when the invoice is collected or ratably over the next 5 quarters. Generally, new sales personnel require time to become familiar with our software and services and do not begin to generate sales immediately, which can result in increased sales and marketing expense without any immediate increase in revenue. We expect sales and marketing expense to increase in absolute dollars, but remain relatively constant as a percentage of revenue in the near term, with potential increases in the long term as a percentage of revenue, as we continue to hire sales and marketing personnel in the United States and internationally to expand our solution globally.

General and administrative.  General and administrative expense consists of personnel-related costs, including salary, stock-based compensation and other compensation-related costs for finance and accounting, executive, human resources, legal and information technology personnel, rent and facility costs, legal and other professional fees, and other corporate expenses. We are incurring and will continue to incur costs associated with being a public company, including corporate insurance costs as well as certain personnel costs and professional fees, including legal and accounting fees as they relate to financial reporting and maintaining compliance with Section 404 of the Sarbanes-Oxley Act. We expect general and administrative expense to remain at approximately its current level in the near term and to decrease as a percentage of revenue.

Research and development.  Research and development expense primarily consists of personnel-related costs, including salary, stock-based compensation and other compensation-related costs for development personnel, and fees to our outside contract development vendors. We anticipate that our research and development team will continue to focus on expanding our software and services and increasing the functionality of our current offerings. We expect research and development expense to increase in absolute dollars, but the rate of increase in the investment will likely be lower than the rate of growth in our revenue in the near term.

Depreciation and amortization.  Depreciation and amortization expense primarily consists of the non-cash write-down of tangible and intangible assets over their expected economic lives. We expect this expense to continue to grow in absolute dollars and potentially as a percentage of revenue as we continue to grow and incur capital expenditures to improve our technological infrastructure and acquire assets through potential future acquisitions.

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Other Income (Expense), Net

Other income (expense), net consists primarily of interest expense on our short and long-term debt, interest income on our cash and cash equivalents balance and for 2013 only, decrease in the fair value of contingent consideration. We have historically invested our cash in money market investments. We expect our interest income to vary in each reporting period depending on our average cash balances and interest rates.

Income Tax Provision

Income tax provision consists of federal and state corporate income taxes resulting from our operations in the United States, as well as operations in various foreign jurisdictions. We expect income tax expense to vary each reporting period depending upon taxable income fluctuations and the availability of tax benefits from net loss carryforwards.

As of December 31, 2012, we had U.S. federal net operating loss carryforwards of approximately $98.0 million, which, if unused, expire from 2020 to 2032, and U.S. federal research and development tax credit carryforwards of approximately $3.0 million, which expire through 2029. We have engaged in several transactions since our inception that have resulted in a change in control as defined by Section 382 of the Internal Revenue Code, which limits our ability to utilize these net operating loss and tax credit carryforwards in the future. As of December 31, 2012, $33.0 million of our net operating loss and tax credit carryforwards were so limited. At December 31, 2012, we recorded a valuation allowance against the full amount of our deferred tax assets, as management believes it is uncertain that they will be fully realized. If we determine in the future that we will be able to realize all or a portion of our net operating loss or tax credit carryforwards, an adjustment to our net operating loss or tax credit carryforwards would increase net income in the period in which we make such a determination.

Critical Accounting Policies

Our financial statements are prepared in accordance with GAAP. The preparation of our financial statements and related disclosures requires us to make estimates, assumptions and judgments that affect the reported amount of assets, liabilities, revenue, costs and expenses, and related disclosures. We base our estimates and assumptions on historical experience and other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Our actual results may differ from these estimates under different assumptions and conditions. Our most critical accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2012 included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2012 filed with the Securities and Exchange Commission, or the SEC, on March 18, 2013, which we refer to as the 2012 Form 10-K.  Since the date of those financial statements, there have been no material changes to our significant accounting policies.

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Results of Operations for the Three and Nine Month Periods Ended September 30, 2012 and 2013

The following table presents consolidated statements of operations data for the periods indicated.  These consolidated results of operations are not necessarily indicative of the consolidated results of operations that will be achieved in any future period.

	Three Months Ended September 30,								Nine Months Ended September 30,
(in thousands, except percentages)	2012			% of revenue	2013			% of revenue	2012			% of revenue	2013			% of revenue
Revenue:
Recurring technology and services	$	36,138		90%	$	42,623		90%	$	98,969		90%	$	124,056		89%
Strategic consulting, software licenses and other	4,000			10%	4,997			10%	11,573			10%	14,831			11%
Total revenue	40,138			100%	47,620			100%	110,542			100%	138,887			100%
Cost of revenue:
Recurring technology and services	16,696			42%	19,019			40%	45,809			41%	56,645			41%
Strategic consulting, software licenses and other	1,588			4%	2,327			5%	4,835			4%	6,353			5%
Total cost of revenue(1)	18,284			46%	21,346			45%	50,644			46%	62,998			45%
Gross profit	21,854			54%	26,274			55%	59,898			54%	75,889			55%
Operating expense:
Sales and marketing (1)	6,275			16%	8,504			18%	17,732			16%	24,101			17%
General and administrative (1)	8,083			20%	8,953			19%	21,830			20%	25,749			19%
Research and development(1)	4,263			11%	4,907			10%	12,126			11%	14,656			11%
Depreciation and amortization	2,297			6%	2,586			5%	6,168			6%	7,623			5%
Restructuring charge	—			—	—			0%	—			0%	654			0%
Income from operations	936			2%	1,324			3%	2,042			2%	3,106			2%
Other income (expense), net
Interest expense	(256		)	(1)%	(89		)	0%	(683		)	(1)%	(352		)	0%
Interest income	22			0%	15			0%	60			0%	50			0%
Other income	—			—	327			1%	—			—	1,093			1%
Income before income tax provision	702			2%	1,577			3%	1,419			1%	3,897			3%
Income tax provision	121			0%	22			0%	308			0%	668			0%
Net income	$	581		1%	$	1,555		3%	$	1,111		1%	$	3,229		2%

(1) Amounts in table above include stock-based compensation expense, as follows:

Cost of revenue	$	362	$	529	$	947	$	1,609
Sales and marketing	586		978		1,455		2,747
General and administrative	1,643		1,551		3,727		4,664
Research and development	164		244		410		753
	$	2,755	$	3,302	$	6,539	$	9,773

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Revenue

The following table presents our components of revenue for the periods presented:

	Three Months Ended September 30,				Increase			Nine Months Ended September 30,				Increase
(in thousands, except percentages)	2012		2013		$		%	2012		2013		$		%
Recurring technology and services	$	36,138	$	42,623	$	6,485	18%	$	98,969	$	124,056	$	25,087	25%
Strategic consulting, software licenses and other	4,000		4,997		997		25%	11,573		14,831		3,258		28%
Total revenue	$	40,138	$	47,620	$	7,482	19%	$	110,542	$	138,887	$	28,345	26%

Our recurring technology and services revenue increased $6.5 million, or 18%, for the three months ended September 30, 2013 as compared to the same period of 2012.  Of this increase $5.9 million was attributable to an increase in the volume of fixed and mobile communications assets and service offerings being managed or provided through our on-demand communication management platform for existing and new customers, excluding customers acquired in acquisitions since January 1, 2011 except to the extent such acquisition customers purchased new products or services following the applicable acquisition.  The increase was driven in part by a 27% increase in our total number of recurring revenue customers to 645 as of September 30, 2013, which amount excludes 333 acquisition customers for total recurring revenue customers of 978 as of September 30, 2013, from 508 as of September 30, 2012, which amount excludes 358 acquisition customers for total recurring revenue customers of 866 as of September 30, 2012.  The $0.6 million balance of our increase for the three months ended September 30, 2013 as compared to the same period in 2012 was attributable to an increase in revenue from customers acquired in connection with acquisitions since January 1, 2011 to $13.9 million for the three months ended September 30, 2013 from $13.3 million for the three months ended September 30, 2012 including for purposes of this calculation revenue from acquisition customers who renewed their contracts with us after the applicable acquisition but excluding revenues from post-acquisition sales of new products and services.  This increase was principally attributable to revenues from customers acquired in connection with an acquisition in the three months ended September 30, 2012 being included for the full three-month period ended September 30, 2013 as compared to only the portion of the three-month period ended September 30, 2012 following such acquisition.

Our strategic consulting, software licenses and other revenue increased $1.0 million, or 25%, for the three months ended September 30, 2013 as compared to the same period of 2012, primarily due to increases in strategic sourcing and consulting revenue of $1.1 million and telecommunication accessories sales revenue of $0.3 million.  These increases were partially offset by a $0.4 million decrease in software license fee and other revenues.

Our recurring technology and services revenue increased $25.1 million, or 25%, for the nine months ended September 30, 2013 as compared to the same period of 2012.  Of this increase $16.3 million was attributable to an increase in the volume of fixed and mobile communications assets and service offerings being managed or provided through our on-demand communication management platform for existing and new customers, excluding customers acquired in acquisitions since January 1, 2011 except to the extent such acquisition customers purchased new products or services following the applicable acquisition.  The increase was driven in part by the increase in our total number of recurring revenue customers between September 30, 2012 and September 30, 2013 described above.  The $8.8 million balance of our increase for the nine months ended September 30, 2013 as compared to the same period in 2012 was attributable to an increase in revenue from customers acquired in connection with acquisitions since January 1, 2011 to $42.7 million for the nine months ended September 30, 2013 from $33.9 million for the nine months ended September 30, 2012 including  for purposes of this calculation revenue from acquisition customers who renewed their contracts with us after the applicable acquisition but excluding revenues from post-acquisition sales of new products and services.  This increase was principally attributable to revenues from customers acquired in connection with an acquisition in the nine months ended September 30, 2012 being included for the full nine-month period ended September 30, 2013 as compared to only the portion of the nine-month period ended September 30, 2012 following such acquisition.

Our strategic consulting, software licenses and other revenue increased $3.3 million, or 28%, for the nine months ended September 30, 2013 as compared to the same period of 2012, primarily due to increases in  strategic sourcing and consulting revenue of $3.3 million, other revenue of $1.1 million and telecommunications accessories sales revenue of $0.7 million.  These increases were partially offset by a $1.1 million decrease in mobile activation revenue and $0.7 million decrease in software license fee revenue.

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Costs and Expenses

Cost of Revenue

The following table presents our cost of revenue:

	Three Months Ended September 30,				Increase			Nine Months Ended September 30,				Increase
(in thousands, except percentages)	2012		2013		$		%	2012		2013		$		%
Recurring technology and services	$	16,696	$	19,019	$	2,323	14%	$	45,809	$	56,645	$	10,836	24%
Strategic consulting, software licenses and other	1,588		2,327		739		47%	4,835		6,353		1,518		31%
Total cost of revenue	$	18,284	$	21,346	$	3,062	17%	$	50,644	$	62,998	$	12,354	24%
Gross profit	$	21,854	$	26,274	$	4,420	20%	$	59,898	$	75,889	$	15,991	27%
Gross margin	54%		55%					54%		55%

Our recurring technology and services cost of revenue increased $2.3 million for the three months ended September 30, 2013 as compared to the same period in 2012.  This increase is primarily due to an increase in personnel-related costs, including an increase in salary and other compensation-related costs, of $2.4 million and an increase in travel-related expenses and other infrastructure costs of $0.4 million.  The increases in personnel-related costs and travel-related expenses and other infrastructure costs were primarily attributable to providing support for customer growth in our recurring technology and services business. These increases were partially offset by a $0.5 million decrease in third-party contractor costs.

Our strategic consulting, software licenses and other cost of revenue increased $0.7 million for the three months ended September 30, 2013 as compared to the same period in 2012, primarily due to an increase in personnel-related costs, including an increase in salary and other compensation-related costs, of $0.4 million and a $0.3 million increase in the costs associated with our sales of mobile telecommunications accessories as a result of increased sales volume.  The increase in personnel-related costs was related to an increase in strategic consulting revenue.

As a percentage of revenue, gross profit increased to 55% for the three months ended September 30, 2013 as compared to 54% for the same period in 2012.  This increase in gross margin was primarily due to the cost efficiencies gained from migrated customers operating on our platform and an increase in strategic consulting, software licenses and other revenues, which can have a higher gross margin than other sources of revenue.  The $4.4 million increase in gross profit in absolute dollars was primarily due to increased revenue.

Our recurring technology and services cost of revenue increased $10.8 million for the nine months ended September 30, 2013 as compared to the same period in 2012.  This increase is primarily due to an increase in personnel-related costs, including an increase in salary and other compensation-related costs, of $10.0 million and an increase in travel-related expenses and other infrastructure costs of $1.4 million.  The increases in personnel-related costs and travel-related expenses and other infrastructure costs were primarily attributable to providing support for customer growth in our recurring technology and services business.  These increases were partially offset by a $0.5 million decrease in third-party contractor costs.

Our strategic consulting, software licenses and other cost of revenue increased $1.5 million for the nine months ended September 30, 2013 as compared to the same period in 2012, primarily as a result of a $0.9 million increase in salary and other compensation-related costs and a $0.6 million increase in the costs associated with our sales of mobile telecommunication accessories as a result of increased sales volume.  The increase in personnel-related costs was related to strategic consulting revenues.

As a percentage of revenue, gross profit increased to 55% for the nine months ended September 30, 2013 as compared to 54% for the same period in 2012.  This increase in gross margin was primarily due to the cost efficiencies gained from migrated customers operating on our platform and an increase in strategic consulting, software licenses and other revenues, which can have a higher gross margin than other sources of revenue.  The $16.0 million increase in gross profit in absolute dollars was primarily due to increased revenue.

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Operating Expense

The following table presents our components of operating expense for the periods presented:

	Three Months Ended September 30,									Nine Months Ended September 30,
	2012			2013						2012			2013
			% of			% of	Change					% of			% of	Change
(in thousands, except percentages)	Amount		Revenue	Amount		Revenue	$		%	Amount		Revenue	Amount		Revenue	$		%
Sales and marketing	$	6,275	16%	$	8,504	18%	$	2,229	36%	$	17,732	16%	$	24,101	17%	$	6,369	36%
General and administrative	8,083		20%	8,953		19%	870		11%	21,830		20%	25,749		19%	3,919		18%
Research and development	4,263		11%	4,907		10%	644		15%	12,126		11%	14,656		11%	2,530		21%
Depreciation and amortization	2,297		6%	2,586		5%	289		13%	6,168		6%	7,623		5%	1,455		24%
Restructuring charge	—		0%	—		0%	—		*	—		0%	654		0%	654		*
Total operating expense	$	20,918	52%	$	24,950	52%	$	4,032	19%	$	57,856	52%	$	72,783	52%	$	14,927	26%

* = Not meaningful

Sales and marketing expense.  Our sales and marketing expense increased $2.2 million for the three months ended September 30, 2013 as compared to the same period of 2012, primarily due to an increase in personnel-related costs, including salary and other compensation-related costs, of $2.2 million, as we increased the number of global direct and indirect sales force employees to accommodate growth in sales opportunities, and an increase in travel expense of $0.1 million as a result of the increased headcount.

Our sales and marketing expense increased $6.4 million for the nine months ended September 30, 2013 as compared to the same period of 2012, primarily due to an increase in personnel-related costs, including salary and other compensation-related costs, of $6.0 million, as we increased the number of global direct and indirect sales force employees to accommodate growth in sales opportunities, and an increase in travel and other expenses of $0.4 million as a result of the increased headcount.

General and administrative expense.  Our general and administrative expenses increased $0.9 million for the three months ended September 30, 2013 as compared to the same period of 2012, primarily as a result of increases in facility and overhead costs of $0.6 million, primarily attributable to the overhead costs associated with additional facilities, and personnel-related costs, including salary and other compensation-related costs, of $0.3 million, as a result of increased headcount.

Our general and administrative expenses increased $3.9 million for the nine months ended September 30, 2013 as compared to the same period of 2012, primarily as a result of increases in personnel-related costs, including salary and other compensation-related costs, of $2.0 million, including increased employee compensation and benefits of $1.1 million as a result of increased headcount and stock-based compensation expense of $0.9 million as a result of the increased value of the annual stock-based equity awards, facility and overhead costs of $1.7 million, primarily attributable to the overhead costs associated with additional facilities, and professional fees of $0.2 million, which includes accounting and legal fees.

Research and development expense.  Our research and development expenses increased $0.6 million for the three months ended September 30, 2013 as compared to the same period of 2012, primarily due to increased personnel-related costs, including salary and other compensation-related costs, of $0.7 million primarily arising from increased headcount.  This increase in personnel-related costs was slightly offset by a $0.1 million decrease in third-party consultant expenses.  The higher costs were primarily the result of an initiative to enhance the functionality of our products and improve our ability to scale for increased demand.

Our research and development expenses increased $2.5 million for the nine months ended September 30, 2013 as compared to the same period of 2012, primarily due to increased personnel-related costs, including salary and other compensation-related costs, of $2.4 million primarily arising from increased headcount.  In addition, we incurred a $0.1 million increase in third-party consultant expenses.  The higher costs were primarily the result of an initiative to enhance the functionality of our products and improve our ability to scale for increased demand.

Depreciation and amortization expense.  Depreciation and amortization expenses increased $0.3 million for the three months ended September 30, 2013 as compared to the same period of 2012, partially due to an increase in amortization expense of $0.2 million.  The increase in amortization expense was result of higher intangible assets as result of the Symphony and oneTEM acquisitions   Depreciation expense of $0.5 million was comparable for the respective three-month periods ended September 30, 2013 and 2012.

Depreciation and amortization expenses increased $1.5 million for the nine months ended September 30, 2013 as compared to the same period of 2012, partially due to an increase in amortization expense of $1.4 million.  The increase in amortization expense was result of higher intangible assets as result of the Anomalous, ttMobiles and Symphony acquisitions and, to a lesser extent, the oneTEM acquisition. Depreciation expense of $1.5 million was comparable for the respective nine-month periods ended September 30, 2013 and 2012.

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Restructuring charge.  The restructuring charge recorded during the nine months ended September 30, 2013 was a result of a lease termination agreement executed with the landlord of our New Jersey office space acquired as part of the acquisition of HCL-EMS.  The agreement terminated the remaining term of the lease effective June 30, 2013 for a settlement fee of $0.9 million.  We recorded an adjustment of $0.5 million to the restructuring charge as a result of the lease termination agreement and $0.1 million restructuring charge as a result of our inability to sublease the office space in the time period originally expected.

Other Income (Expense), Net

The following table presents our components of other income (expense), net for the periods presented:

	Three Months Ended September 30,						Change		Nine Months Ended September 30,						Change
(in thousands)	2012			2013			$		2012			2013			$
Interest expense	$	(256	)	$	(89	)	167		$	(683	)	$	(352	)	331
Interest income	22			15			(7	)	60			50			(10	)
Other income	—			327			327		—			1,093			1,093

Interest Expense.  The decrease in interest expense for the three and nine months ended September 30, 2013 as compared to the same periods of 2012 was a result of the higher average debt balance in 2012 related to the HCL-EMS, Telwares, Anomalous and ttMobiles deferred consideration balances.

Interest Income.  Interest income was comparable for the respective three and nine-month periods ended September 30, 2013 and 2012.

Other Income.  Other income for the three months ended September 30, 2013 primarily consisted of a $0.3 million decrease in fair value of deferred cash consideration as a result of various matters related to the HCL and ProfitLine acquisitions.

Other income for the nine months ended September 30, 2013 primarily consisted of the $0.4 million reduction in the Telwares deferred cash consideration as a result of not achieving certain recurring revenue targets, $0.3 million reduction in the ProfitLine deferred cash consideration as a result of settlement of certain indemnity claims, a $0.2 million adjustment of the HCL-EMS year two earn-out estimate to actual and a $0.2 million reduction in the Symphony deferred cash consideration as a result of a net asset shortfall adjustment.

Income Tax Provision

Our income tax provision decreased $0.1 million for the three months ended September 30, 2013 as compared to the same period of 2012, due to a decrease in state income taxes.

Our income tax provision increased $0.4 million for the nine months ended September 30, 2013 as compared to the same period of 2012, due to an increase in deferred income taxes related to tax amortization taken on indefinite-lived intangible assets from the Symphony acquisition, a reduction of Tangoe Canada’s R&D tax credit reserve and income tax expense related to our Indian subsidiary.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have funded our operations primarily from cash from operations, private placements of preferred stock, subordinated notes, term loans, revolving credit facilities and public offerings of equity. As of September 30, 2013, we had cash and cash equivalents of $42.3 million and accounts receivable of $40.7 million and amounts due under various debts and credit facilities of $3.6 million. In April 2012, we raised $37.8 million in net proceeds through a follow-on public offering of our common stock. We intend to use the proceeds from this offering for working capital and other general corporate purposes, which may include financing our growth, developing new solutions and funding capital expenditures, acquisitions and investments. Our remaining outstanding debt relates to the deferred consideration for the HCL-EMS, ProfitLine, Symphony and oneTEM acquisitions and capital lease and other financing obligations.

We believe that our existing cash and cash equivalents and our cash flow from operating activities will be sufficient to meet our anticipated cash needs for at least the next twelve months. To the extent our cash and cash equivalents and cash flow from operating activities are insufficient to fund our future activities, we may need to raise additional funds through bank credit arrangements or public or private equity or debt financings. We also may need to raise additional funds in the event we determine in the future to effect one or more

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acquisitions of, or investments in, businesses, services or technologies. If additional funding is required, we may not be able to obtain bank credit arrangements or to effect an equity or debt financing on terms acceptable to us or at all.

The following table sets forth our cash and cash equivalents and the major sources and uses of cash for each of the periods set forth below:

	December 31,		September 30,
(in thousands)	2012		2013
Cash and cash equivalents	$	50,211	$	42,258

	Nine Months Ended September 30,
(in thousands)	2012			2013
Net cash provided by operating activities	$	13,535		$	16,583
Net cash used in investing activities	(39,743		)	(21,343		)
Net cash provided by (used in) financing activities	38,577			(3,034		)
Effect of exchange rate on cash	(40		)	(159		)
Net increase (decrease) in cash and cash equivalents	$	12,329		$	(7,953	)

Cash Flows from Operating Activities

Operating activities provided $16.6 million of net cash during the nine months ended September 30, 2013, which resulted from our net income of $3.2 million for the nine months ended September 30, 2013 principally supplemented by non-cash charges of stock-based compensation of $9.8 million, depreciation and amortization of $7.6 million and a restructuring charge of $0.7 million.  Cash provided by operating activities was adversely impacted by a $2.5 million increase in accounts receivable, a $1.5 million decrease in accounts payable and accrued expenses and a $1.2 million increase in prepaid and other expenses during the nine months ended September 30, 2013.

Operating activities provided $13.5 million of net cash during the nine months ended September 30, 2012, which resulted from our net income of $1.1 million for the nine months ended September 30, 2012 principally supplemented by non-cash charges of stock-based compensation of $6.5 million and depreciation and amortization of $6.2 million. Cash provided by operating activities was adversely impacted by a $1.4 million decrease in deferred revenue and a $0.8 million increase in accounts receivable during the nine months ended September 30, 2012.

Cash Flows from Investing Activities

Cash used in investing activities totaled $21.3 million during the nine months ended September 30, 2013 and consisted of $19.5 million paid in connection with the Telwares, HCL, ProfitLine, Anomalous, ttMobiles, Symphony and oneTEM acquisitions, net of cash acquired and capital expenditures of $1.8 million primarily related to the purchase of computer equipment and software.

Cash used in investing activities totaled $39.7 million during the nine months ended September 30, 2012 and consisted of $38.4 million paid in connection with the 2012 acquisitions and capital expenditures of $1.3 million primarily related to the purchase of computer equipment and software.

Cash Flows from Financing Activities

Cash flows used in financing activities totaled $3.0 million during the nine months ended September 30, 2013 primarily consisting of $6.2 million of cash used to repurchase our common stock, which includes $1.7 million of cash paid for shares repurchased in trades entered in 2012 which settled in 2013, and debt repayments of $0.7 million partly offset by proceeds from the exercise of stock options and stock warrants of $3.9 million.

Cash flows provided by financing activities totaled $38.6 million during the nine months ended September 30, 2012 primarily due to $37.7 million of net proceeds from our follow-on offering, net of underwriting discounts and commissions and offering costs, and $3.7 million in proceeds from the exercise of stock options and stock warrants.  Cash provided by financing activities was adversely impacted by debt repayments of $3.0 million.

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Contractual Obligations

The following table summarizes our material contractual obligations at September 30, 2013 and the effect such obligations are expected to have on our liquidity and cash flows in future periods.

	Payments due by period
			Less than						More than
(dollars in thousands)	Total		1 year		1-3 years		3-5 years		5 years
Operating lease obligations	$	19,855	$	6,684	$	11,392	$	1,025	$	754
Capital lease and other obligations	721		716		5		—		—
Interest on capital lease obligations	16		16		—		—		—
Symphony deferred purchase price	1,279		1,279		––		––		––
ProfitLine deferred purchase price	23		23		—		—		—
HCL-EMS contingent consideration	891		891		—		—		—
oneTEM deferred purchase price	659		463		196		—		––
	$	23,444	$	10,072	$	11,593	$	1,025	$	754

·Operating lease obligations include minimum lease obligations with remaining terms in excess of one year primarily related to office space as well as certain equipment.

·Capital lease and other obligations include minimum lease obligations with remaining terms in excess of one year related to computer hardware and software.

·Symphony deferred purchase price consists of $1.3 million that we withheld from the deferred cash consideration paid on August 8, 2013, pending resolution of certain indemnity matters.  This remaining balance was paid in October 2013.

·ProfitLine deferred purchase price consists $23,000 payable to a payee who did not respond to our communications until October 2013.  This remaining balance was paid in October 2013.

·HCL-EMS contingent consideration consists of an amount withheld from the payment due on the second anniversary of the HCL-EMS closing date of January 25, 2011, pending resolution of certain indemnity matters.

·oneTEM deferred purchase price consists of $0.6 million, which includes $0.4 million of deferred purchase price payable on the April 18, 2014 and contingent consideration totaling $0.2 million payable following the next 4 anniversaries of the oneTEM closing date of April 18, 2013.

Off-Balance Sheet Arrangements

We do not engage in any off-balance sheet financing activities, nor do we have any interest in entities referred to as variable interest entities.

Recent Accounting Pronouncements

For information regarding recent accounting pronouncements, refer to Note 3 to our financial statements included in the 2012 Form 10-K.

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Item 3. Quantitative and Qualitative Disclosures About Market Risk

Market risk represents the risk of loss that may impact our financial position due to adverse changes in financial market prices and rates. Our market risk exposure is primarily the result of fluctuations in interest rates as well as, to a lesser extent, inflation. We may also face exchange rate risk in the future, as we expand our business internationally.

Interest Rate Risk

At September 30, 2013, we had unrestricted cash and cash equivalents totaling $42.3 million. These amounts were held for working capital purposes and were invested primarily in deposits and money market funds. We do not enter into investments for trading or speculative purposes. Due to the short-term nature of these investments, we believe that we do not have any material exposure to changes in the fair value of our investment portfolio as a result of changes in interest rates. Declines in interest rates, however, would reduce future investment income.

Foreign Exchange Risk

We sell our solution worldwide. As a result, our financial results could be affected by factors such as changes in foreign currency exchange rates or weak economic conditions in foreign markets. Since our sales are currently denominated in U.S. dollars, a strengthening of the dollar could make our products less competitive in foreign markets and our accounts receivable more difficult to collect. We do not currently hedge our exposure to foreign currency exchange rate fluctuations and we believe that we do not have any material exposure to changes in foreign currency exchange rates. We may, however, hedge such exposure to foreign currency exchange rate fluctuations in the future.

Inflation Risk

Inflation and changing prices have not had a material effect on our business, and we do not expect that they will materially affect our business in the foreseeable future. However, the impact of inflation on replacement costs of equipment, cost of revenue and operating expenses, especially employee compensation costs, may not be readily recoverable in the pricing of our offerings.

Item 4. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), refers to controls and procedures that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our disclosure controls and procedures are designed to provide reasonable assurance of achieving their control objectives.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as of September 30, 2013, the end of the period covered by this Quarterly Report on Form 10-Q. Based upon such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that our disclosure controls and procedures were effective at the reasonable assurance level as of such date.

Changes in Internal Controls

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

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PART II -OTHER INFORMATION

Item 1. Legal Proceedings

We are from time to time subject to various legal proceedings and claims, either asserted or unasserted, which arise in the ordinary course of business. While the outcome of these claims cannot be predicted with certainty, our management does not believe that the outcome of any of these legal matters will have a material adverse effect on our consolidated financial statements.

On March 1, 2013, Lewis Stein, a purported purchaser of our common stock, filed a complaint in the United States District Court for the District of Connecticut against us, our President and Chief Executive Officer and our Chief Financial Officer, Stein v. Tangoe, Inc., Albert R. Subbloie, Jr. and Gary R. Martino.  The plaintiff alleges violations of Sections 10(b) and 20(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 10b-5 promulgated under the Exchange Act. The plaintiff seeks to represent a class of purchasers of our common stock from December 20, 2011 through September 5, 2012 and alleges that during this period the market price of our common stock was inflated by false or misleading statements principally concerning the results of our business.  On April 30, 2013, Mr. Stein and another purported purchaser of our common stock, James Gibson, filed a motion to be appointed as lead plaintiffs in connection with this putative class action and to have their attorneys approved as lead counsel.  The court held a hearing on May 13, 2013 to appoint a lead plaintiff and lead counsel for all of the cases consolidated with this action.  The court denied without prejudice Mr. Stein’s and Mr. Gibson’s motion to be appointed as lead plaintiffs in connection with this putative class action and to have their attorneys approved as lead counsel.  On May 17, 2013, Mr. Gibson withdrew his request to be appointed as lead plaintiff in connection with this putative class action, and Mr. Stein filed a renewed request to be appointed as lead plaintiff in connection with this putative class action and to have his attorneys approved as lead counsel.  On August 19, 2013, the court allowed Mr. Stein’s motion to be appointed as lead plaintiff in connection with this putative class action and to have his attorneys approved as lead counsel.  On October 18, 2013, Mr. Stein filed a consolidated amended complaint (the “Amended Complaint”), which alleges violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated under the Exchange Act.  In the Amended Complaint, Mr. Stein seeks to represent a class of purchasers of our common stock from July 27, 2011 through September 4, 2012 and alleges that during this period the market price of our common stock was inflated by false or misleading statements principally concerning the results of our business.  The Amended Complaint asserts claims against us, Mr. Subbloie, Mr. Martino, and Gary P. Golding, one of our directors.  The outcome of this matter is not presently determinable.

On March 15, 2013, Calvin Rector, a purported purchaser of our common stock, filed a complaint in the United States District Court for the District of Connecticut against us, our President and Chief Executive Officer and our Chief Financial Officer, Rector v. Tangoe, Inc., Albert R. Subbloie, Jr. and Gary R. Martino.  The plaintiff alleges violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated under the Exchange Act. The plaintiff seeks to represent a class of purchasers of our common stock from December 20, 2011 through September 5, 2012 and alleges that during this period the market price of our common stock was inflated by false or misleading statements principally concerning the results of our business.  On April 3, 2013, the Court consolidated this case with the Stein case discussed above.

On April 12, 2013, Timothy Kelley, a purported purchaser of our common stock, filed a complaint in the United States District Court for the District of Connecticut against us, our President and Chief Executive Officer and our Chief Financial Officer, Kelley v. Tangoe, Inc., Albert R. Subbloie, Jr. and Gary R. Martino.  The plaintiff alleges violations of Sections 10(b) and 20(a) of the Exchange Act and Rule 10b-5 promulgated under the Exchange Act. The plaintiff seeks to represent a class of purchasers of our common stock from December 20, 2011 through September 5, 2012 and alleges that during this period the market price of our common stock was inflated by false or misleading statements principally concerning the results of our business.  On April 26, 2013, the court consolidated the case with the Stein case discussed above.

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Item 1A. Risk Factors

Risks Related to Our Business and Our Industry

We have had a history of losses since our incorporation in February 2000.

We were incorporated in February 2000.  We experienced net losses of $2.6 million in 2009, $1.8 million in 2010 and $3.0 million in 2011. Although we were profitable for the year ended December 31, 2012 and the nine months ended September 30, 2013 with net income of $3.0 million and $3.2 million, respectively, we cannot predict if we will be able to maintain profitability in the future. We expect to continue making significant future expenditures to develop and expand our business.   As a result of these increased expenditures, we will have to generate and sustain substantially increased revenue to maintain profitability, which we may be unable to do. We may also encounter unforeseen difficulties, complications, product delays and other unknown factors that require additional expenditures. In addition, the percentage growth rates we achieved in prior periods may not be sustainable and we may not be able to increase our revenue sufficiently in absolute dollars to maintain profitability and we may incur significant losses for the foreseeable future.

If the market for communications lifecycle management services does not grow as we expect, our business will be harmed.

The market for communications lifecycle management, or CLM, services is developing, and it is not certain whether these services will achieve market acceptance and sustain high demand. Some businesses have invested substantial personnel and financial resources into developing internal solutions for CLM, so they may not perceive the benefit of our external solution. If businesses do not perceive the benefits of outsourced CLM services, the CLM market may not continue to develop or may develop more slowly than we expect, either of which would reduce our revenue and profitability.

Our quarterly operating results may fluctuate in the future. As a result, we may fail to meet or exceed the expectations of research analysts or investors, which could cause our stock price to decline.

Our quarterly operating results may fluctuate as a result of a variety of factors, many of which are outside of our control. If our quarterly operating results or guidance fall below the expectations of research analysts or investors, the price of our common stock could decline substantially. Fluctuations in our quarterly operating results or guidance may be due to a number of factors, including, but not limited to:

·our ability to attract new customers, obtain renewals from existing customers and increase sales to existing customers;

·the purchasing and budgeting cycles of our customers;

·changes in our pricing policies or those of our competitors;

·the amount and timing of operating costs and capital expenditures related to the operation, maintenance and expansion of our business;

·service outages or security breaches;

·the timing and success of new service introductions and upgrades by us or our competitors;

·the timing of costs related to the development or acquisition of technologies, services or businesses;

·the timing of collection of payments from channel partners;

·the financial condition of our customers; and

·general economic, industry and market conditions.

In addition, the accounting treatment of the warrant shares that may become issuable to Dell could have an impact on our quarterly operating results. We currently value the warrant shares that are deemed probable of becoming exercisable on a mark-to-market basis until they are earned. Increases or decreases in our stock price will affect the mark-to-market adjustments of the common stock warrant shares, which will increase or decrease contra-revenue charges. The value of the warrant shares will fluctuate until the warrant shares are deemed exercisable and the value is fixed. This accounting treatment is applicable whether or not our Dell-related revenue actually increases or decreases in line with the market value of our common stock, and thus could cause significant fluctuations in our quarterly operating results.

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Because we collect and recognize revenue over the terms of our customer agreements, the lack of customer renewals or new customer agreements may not be immediately reflected in our operating results.

We collect and recognize revenue from our customers over the terms of their customer agreements with us. As a result, the aggregate effect of a decline in new or renewed customer agreements in any one quarter would not be fully recognized in our revenue for that quarter and would negatively affect our revenue in future quarters. Consequently, the aggregate effect of significant downturns in sales of our solution would not be fully reflected in our results of operations until future periods. For instance, as a result of the financial crisis in the second half of 2008, we experienced a higher-than-normal cancellation rate in the first three months of 2009, much of which was attributable to customers that had gone out of business. As a result of such cancellations, our total revenue for the following periods was negatively affected. Our subscription model also makes it difficult for us to rapidly increase our revenue through additional sales in any period, as revenue from new customers is generally collected and recognized over the applicable contract term.

If we are unable to retain our existing customers, our revenue and results of operations would grow more slowly than expected or decline and results of operations would be impaired.

We sell our on-demand software products and related services pursuant to agreements that are generally two to five years in duration, and have in some cases acquired businesses with customer contracts with shorter terms. Our customers have no obligation to renew their agreements after their terms expire and some of our customers may terminate their agreements for convenience. These agreements may not be maintained or renewed on the same or on more profitable terms. As a result, our ability to both maintain and grow our revenue depends in part on customer renewals. We may not be able to accurately predict future trends in customer renewals, and our customers’ renewal rates may decline or fluctuate because of several factors, including their satisfaction or dissatisfaction with our software products, the prices of our software products, the prices of products and services offered by our competitors or reductions in our customers’ spending levels. In addition, customers that are acquired by companies using competing service offerings may be required to begin using those competing service offerings, rather than renew their license arrangements with us. If our customers do not renew their agreements for our software products, renew on less favorable terms, or do not purchase additional functionality, our revenue may grow more slowly than expected or decline.

We face intense competition, and our failure to compete successfully would make it difficult for us to add and retain customers and would impede the growth of our business.

The CLM market is highly fragmented, competitive and rapidly evolving. We compete with other technology and outsourced service providers selling telecommunications expense management and/or mobile device management solutions as well as with solutions developed internally by enterprises seeking to manage their communications expenses and assets. We compete with other technology and outsourced service providers primarily on the basis of customer references, ability to deliver, breadth of solution and pricing. We and other technology and outsourced service providers compete with internally developed CLM solutions primarily on the basis of the relative cost of implementing a third-party solution as compared to inefficiencies or lack of functionality in internally developed CLM solutions.

The intensity of competition in the CLM market has resulted in pricing pressure as the market has developed. We expect the intensity of competition to increase in the future as existing competitors develop their capabilities and as new companies, which could include mobile technology and solution providers and one or more large communications carriers, enter our market. Some of these competitors, such as large communications carriers, may offer telecommunications expense management and/or mobile device management solutions as part of a broad outsource offering for mobile communications services. Increased competition could result in additional pricing pressure, reduced sales, shorter term lengths for customer contracts, lower margins or the failure of our solution to achieve or maintain broad market acceptance. If we are unable to compete effectively, it will be difficult for us to maintain our pricing rates and add and retain customers, and our business, financial condition and results of operations will be harmed.

Some of our actual and potential competitors may enjoy competitive advantages over us, such as greater name recognition, longer operating histories, more varied services and larger marketing budgets, as well as greater financial, technical and other resources. As a result, our competitors may be able to respond more quickly than we can to new or changing opportunities, technologies, standards or customer requirements or devote greater resources to the promotion and sale of their products and services than we can.

Industry consolidation may result in increased competition.

The CLM market is highly fragmented, and we believe that it is likely that some of our existing competitors will consolidate or will be acquired. Some of our competitors have made or may make acquisitions or may enter into partnerships or other strategic relationships to offer a more comprehensive solution than they individually had offered. In addition, new entrants not currently considered to be competitors may enter the market through acquisitions, partnerships or strategic relationships, such as with Vodafone’s acquisitions of TnT Expense Management and Quickcomm in October 2010, Emptoris’ acquisition of Rivermine in January 2011 and the subsequent acquisition of Emptoris/Rivermine by IBM in February 2012 and Dimension Data’s acquisition of Xigo in December 2012. We expect these trends to continue as companies attempt to strengthen or maintain their market positions. The companies resulting from such combinations may create

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more compelling service offerings and may offer greater pricing flexibility than we can or may engage in business practices that make it more difficult for us to compete effectively, including on the basis of price, sales and marketing programs, technology or service functionality. In addition, combinations such as IBM’s acquisition of Emptoris/Rivermine may result in situations in which we may begin to compete in some CLM offerings with companies with which we have partnerships or strategic relationships.  Any of the competitive pressures described above could result in a substantial loss of customers or a reduction in our revenue.

We are currently migrating to our platforms the customers of several businesses that we recently acquired and we may in the future expand by acquiring or investing in other businesses, which may divert our management’s attention and consume resources that are necessary to sustain our business.

We are currently migrating the customers of HCL-EMS, ProfitLine and Symphony, which we acquired during 2011 and 2012.   While to date we have successfully migrated a number of these customers, there can be no assurance that we will complete the migration in a timely manner or at all and the cost of such migration may be more significant than we have estimated.   Our business strategy includes the potential future acquisition of, or investment in, complementary businesses, services or technologies. These acquisitions, investments or new business relationships may result in unforeseen difficulties and expenditures. We may encounter difficulties assimilating or integrating the businesses, technologies, products, services, personnel or operations of companies we have acquired or companies that we may in the future acquire. These difficulties may arise if the key personnel of the acquired company choose not to work for us, the company’s technology or services do not easily integrate with ours or we have difficulty retaining the acquired company’s customers due to changes in its management or for other reasons. These acquisitions may also disrupt our business, divert our resources and require significant management attention that would otherwise be available for development of our business. Moreover, the anticipated benefits of any acquisition, investment or business relationship may not be realized or we may be exposed to unknown liabilities. In addition, any future acquisition may require us to:

·issue additional equity securities that would dilute our stockholders;

·use cash that we may need in the future to operate our business;

·incur debt on terms unfavorable to us or that we are unable to repay;

·incur large charges or substantial liabilities; or

·become subject to adverse tax consequences, substantial depreciation or deferred compensation charges.

If any of these risks materializes, our business and operating results would be harmed.

Our sales cycles can be long, unpredictable and require considerable time and expense, which may cause our operating results to fluctuate.

Our sales cycle, which is the time between initial contact with a potential customer and the ultimate sale, is often lengthy and unpredictable. Some of our potential customers already have partial CLM solutions in place under fixed-term contracts, which limits their ability to commit to purchase our solution in a timely fashion. In addition, our potential customers typically undertake a significant evaluation process that can last six to nine months or more, and which requires us to expend substantial time, effort and money educating them about the capabilities of our offerings and the potential cost savings they can bring to an organization. Furthermore, the purchase of our solution typically also requires coordination and agreement across many departments within a potential customer’s organization, which further contributes to our lengthy sales cycle. As a result, we have limited ability to forecast the timing and size of specific sales. Any delay in completing, or failure to complete, sales in a particular quarter or year could harm our business and could cause our operating results to vary significantly.

If a communications carrier prohibits customer disclosure of communications billing and usage data to us, the value of our solution to customers of that carrier would be impaired, which may limit our ability to compete for their business.

Certain of the software functionality and services we offer depend on our ability to access a customer’s communications billing and usage data. For example, our ability to offer outsourced or automated communications bill auditing, billing dispute resolution, bill payment, cost allocation and expense optimization depends on our ability to access this data. If a communications carrier were to prohibit its customers from disclosing this information to us, those enterprises would only be able to use these billing-related aspects of our solution on a self-serve basis, which would impair the value of our solution to those enterprises. This in turn could limit our ability to compete with the internally developed CLM solutions of those enterprises, require us to incur additional expenses to license access to that billing and usage data from the communications carrier, if such a license is made available to us at all, or put us at a competitive disadvantage against any third-party CLM service provider that licenses access to that data.

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Our long-term success depends, in part, on our ability to expand the sales of our solution to customers located outside of the United States, and thus our business is susceptible to risks associated with international sales and operations.

We are currently expanding our international sales and operations, including particularly in the United Kingdom, the Netherlands, Germany, other parts of Europe, Canada, India, China, Australia and Latin America. This international expansion will subject us to new risks that we have not faced in the United States and the countries in which we currently conduct business. These risks include:

·continued geographic localization of our software products, including translation into foreign languages and adaptation for local practices and regulatory requirements;

·lack of familiarity with and unexpected changes in foreign regulatory requirements;

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

·difficulties in managing and staffing international implementations and operations;

·challenges in integrating our software with multiple country-specific billing or communications support systems for international customers;

·challenges in providing procurement, help desk and fulfillment capabilities for our international customers;

·fluctuations in currency exchange rates;

·potentially adverse tax consequences, including the complexities of foreign value added or other tax systems and restrictions on the repatriation of earnings;

·the burdens of complying with a wide variety of foreign laws and legal standards;

·increased financial accounting and reporting burdens and complexities;

·potentially slower adoption rates of CLM services internationally;

·political, social and economic instability abroad, terrorist attacks and security concerns in general; and

·reduced or varied protection for intellectual property rights in some countries.

Operating in international markets also requires significant management attention and financial resources. The investment and additional resources required to establish operations and manage growth in other countries may not produce desired levels of revenue or profitability.

Further expansion into international markets could require us to comply with additional billing, invoicing, communications, data privacy and similar regulations, which could make it costly or difficult to operate in these markets.

Many international regulatory agencies have adopted regulations related to where and how communications bills may be sent and how the data on such bills must be handled and protected. For instance, certain countries, such as Germany, restrict communications bills from being sent outside of the country, either physically or electronically, and certain countries, such as Brazil, Germany, Italy and Spain, require that certain information be encrypted or redacted before bills may be transmitted electronically. These regulations vary from jurisdiction to jurisdiction and international expansion of our business could subject us to additional similar regulations. Failure to comply with these regulations could result in significant monetary penalties and compliance with these regulations could require expenditure of significant financial and administrative resources.

In addition, personally identifiable information is increasingly subject to legislation and regulations in numerous jurisdictions around the world, the intent of which is to protect the privacy of personal information that is collected, processed and transmitted in or from the governing jurisdiction. Our failure to comply with applicable privacy laws and regulations or any security breakdown that results in the unauthorized release of personally identifiable information or other customer data could result in fines or proceedings by governmental agencies or private individuals, which could harm our results of operations.

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If we fail to effectively manage and develop our strategic relationships with our channel partners, or if those third parties choose not to market and sell our solution, our operating results would suffer.

The successful implementation of our strategic goals is dependent in part on strategic relationships with our channel partners to offer our solution to a larger customer base than we can reach through our current direct sales and marketing efforts. Some of our strategic relationships are relatively new and, therefore, it is uncertain whether these third parties will be able to market and sell our solution successfully or provide the volume and quality of customers that we currently expect.

Our success depends in part on the ultimate success of our channel partners and their ability to market and sell our solution. Some of these third parties have previously entered, and may in the future enter, into strategic relationships with our competitors. For example, IBM acquired Emptoris in February 2012, and Rivermine is a subsidiary of Emptoris. Further, many of our channel partners have multiple strategic relationships and they may not regard us as significant to their businesses. Our channel partners may terminate their respective relationships with us, pursue other partnerships or relationships, or attempt to develop or acquire products or services that compete with our solution. Our channel partners also may interfere with our ability to enter into other desirable strategic relationships.

If we are unable to manage and develop our strategic relationships, our potential customer base may grow more slowly than we anticipate and we may have to devote substantially more resources to the distribution, sales and marketing of our solution, which would increase our costs and decrease our earnings.

We have experienced rapid growth in recent periods. If we fail to manage our growth effectively, we may be unable to execute our business plan, maintain high levels of service or address competitive challenges adequately.

We increased our number of full-time employees from 347 at December 31, 2008, to 439 at December 31, 2009, to 541 at December 31, 2010, to 1,004 at December 31, 2011 and to 1,383 at December 31, 2012, and our total revenue from $37.5 million in 2008, to $55.9 million in 2009, to $68.5 million in 2010, to $104.9 million in 2011 and to $154.5 million in 2012. Our growth has placed, and may continue to place, a significant strain on our managerial, administrative, operational, financial and other resources. We intend to further expand our overall business, customer base, headcount and operations both domestically and internationally. Growing and managing a global organization and a geographically dispersed workforce will require substantial management effort and significant additional investment in our infrastructure. We will be required to continue to improve our operational, financial and management controls and our reporting procedures and we may not be able to do so effectively.

The loss of key personnel or an inability to attract and retain additional personnel may impair our ability to grow our business.

We are highly dependent upon the continued service and performance of our senior management team and key technical and sales personnel, including our founder, President and Chief Executive Officer, and none of these individuals is party to an employment agreement with us. The replacement of these individuals likely would involve expenditure of significant time and financial resources, and their loss might significantly delay or prevent the achievement of our business objectives.

We plan to continue to expand our work force both domestically and internationally to increase our customer base and revenue. We face intense competition for qualified individuals from numerous technology, software and communications companies. Our ability to achieve significant revenue growth will depend, in large part, on our success in recruiting, training and retaining sufficient numbers of personnel to support our growth. New hires may require significant training and may take significant time before they achieve full productivity. Our recent hires and planned hires may not become as productive as we expect, and we may be unable to hire or retain sufficient numbers of qualified individuals. If our recruiting, training and retention efforts are not successful or do not generate a corresponding increase in revenue, our business will be harmed.

Our software manages and interfaces with our customers’ mission-critical networks and systems. Disruptions in the functioning of these networks and systems caused by our software could subject us to substantial liability and damage our reputation.

We assist our customers in the management of their mission-critical communications networks and systems and our software directly interfaces with these networks and systems as well as with enterprise resource planning and other enterprise software and systems. Failures of software could result in significant interruptions in our customers’ communications capabilities and enterprise operations. For example, unknown defects in our mobile device management software, or unknown incompatibilities of this software with our customers’ mobile devices, could result in losses of functionality of these devices. If such interruptions occur, we may not be able to remedy them in a timely fashion and our customers’ ability to operate their enterprises could be severely compromised. Such interruptions could cause our customers to lose revenue and could damage their reputations. In turn, these disruptions could subject us to substantial liabilities and result in irreparable damage to our reputation, delays in payments from our customers or refusals by our customers to make such payments, any of which could harm our business, financial condition or results of operations.

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The emergence of one or more widely used, standardized communications devices or billing or operational support systems could limit the value and operability of our solution and our ability to compete with the manufacturers of such devices or the carriers using such systems in providing CLM services.

Our solution derives its value in significant part from our software’s ability to interface with and support the interoperation of diverse communications devices, billing systems and operational support systems. The emergence of a single or a small number of widely used communications devices, billing systems or operational support systems using consolidated, consistent sets of standardized interfaces for the interaction between communications service providers and their enterprise customers could significantly reduce the value of our solution to our customers and potential customers. Furthermore, any such communications device, billing system or operational support system could make use of proprietary software or technology standards that our software might not be able to support. In addition, the manufacturer of such device, or the carrier using such billing system or operational support system, might actively seek to limit the interoperability of such device, billing system or operational support system with our software products for competitive or other reasons. The resulting lack of compatibility of our software products would put us at a significant competitive disadvantage, or entirely prevent us from competing, in that segment of the potential CLM market if such manufacturer or carrier, or its authorized licensees, were to develop one or more CLM solutions competitive with our solution.

A continued proliferation and diversification of communications technologies or devices could increase the costs of providing our software products or limit our ability to provide our software products to potential customers.

Our ability to provide our software products is dependent on the technological compatibility of our systems with the communications infrastructures and devices of our customers and their communications service providers. The development and introduction of new communications technologies and devices requires us to expend significant personnel and financial resources to develop and maintain interoperability of our software products with these technologies and devices. The communications industry has recently been characterized by rapid change and diversification in both product and service offerings. Continued proliferation of communications products and services could significantly increase our research and development costs and increase the lag time between the initial release of new technologies and products and our ability to provide support for them in our software products, which would limit the potential market of customers that we have the ability to serve.

We may not successfully develop or introduce new and enhanced software and service offerings, and as a result we may lose existing customers or fail to attract new customers and our revenue may suffer.

Our future financial performance and revenue growth depend upon the successful development, introduction and customer acceptance of new and enhanced versions of our software and service offerings. We are continually seeking to develop and acquire enhancements to our solution as well as new offerings to supplement our existing solution and we are subject to all of the risks inherent in the development and integration of new technologies, including unanticipated performance, stability, and compatibility problems, any of which could result in material delays in introduction and acceptance, significantly increased costs, adverse publicity and loss of sales. If we are unable to deliver new solutions or upgrades or other enhancements to our existing solution on a timely and cost-effective basis, our business will be harmed.

We may not be able to respond to rapid technological changes with new software products and services, which could harm our sales and profitability.

The CLM market is characterized by rapid technological change and frequent new product and service introductions, driven in part by frequent introductions of new technologies and devices in the communications industry, frequent changes in, and resulting inconsistencies between, the billing platforms utilized by major communications carriers and the changing demands of customers regarding the means of delivery of CLM solutions. To achieve and maintain market acceptance for our solution, we must effectively anticipate these changes and offer software products and services that respond to them in a timely manner. Customers may require features and capabilities that our current solution does not have. If we fail to develop software products and services that satisfy customer preferences in a timely and cost-effective manner, our ability to renew our agreements with existing customers and our ability to create or increase demand for our solution will be harmed.

Actual or perceived breaches of our security measures, or governmental required disclosure of customer information could diminish demand for our solution and subject us to substantial liability.

In the processing of communications transactions, we receive, transmit and store a large volume of sensitive customer information, including call records, billing records, contractual terms, and financial and payment information, including credit card information, and we have entered into contractual obligations to maintain the confidentiality of certain of this information. Any person who circumvents our security measures could steal proprietary or confidential customer information or cause interruptions in our operations and any such lapse in security could expose us to litigation, substantial contractual liabilities, loss of customers or damage to our reputation or could otherwise harm our business. We incur significant costs to protect against security breaches and may incur significant additional costs to alleviate problems caused by any breaches.  In addition, if we are required to disclose any of this sensitive customer information to governmental authorities, that disclosure could expose us to a risk of losing customers or could otherwise harm our business.

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If customers believe that we may be subject to requirements to disclose sensitive customer information to governmental authorities, or that our systems and software products do not provide adequate security for the storage of confidential information or its transmission over the Internet or corporate extranets, or are otherwise inadequate for Internet or extranet use, our business will be harmed. Customers’ concerns about security could deter them from using the Internet to conduct transactions that involve confidential information, including transactions of the types included in our solution, so our failure to prevent security breaches, or the occurrence of well-publicized security breaches affecting the Internet in general, could significantly harm our business and financial results.

If we are unable to protect our intellectual property rights and other proprietary information, it will reduce our ability to compete for business.

If we are unable to protect our intellectual property rights and other proprietary information, our competitors could use our intellectual property to market software products similar to our own, which could decrease demand for our solution. We rely on a combination of patent, copyright, trademark, service mark and trade secret laws, as well as confidentiality procedures and contractual restrictions, to establish and protect our intellectual property rights and proprietary information, all of which provide only limited protection.  We have nineteen issued patents and seventeen patent applications pending. We cannot assure you that our issued patents, any patents that may issue from our patent applications pending or any other intellectual property rights that we currently hold or may in the future acquire will prove to be enforceable in actions against alleged infringers or otherwise provide sufficient protection of any competitive advantages that we may have.  In addition, any action that we take to enforce our patents or other intellectual property rights may be costly, time-consuming and a significant diversion of management attention from the continued growth and development of our business.

We endeavor to enter into agreements with our employees and contractors and agreements with parties with whom we do business to limit access to and disclosure of our proprietary information. The steps we have taken, however, may not prevent unauthorized use or the reverse engineering of our technology. Moreover, others may independently develop technologies that are competitive with ours or infringe our intellectual property. Enforcement of our intellectual property rights also depends on our successful legal actions against these infringers, but these actions may not be successful, even when our rights have been infringed.

Furthermore, effective patent, copyright, trademark, service mark and trade secret protection may not be available in every country in which we offer our software products.

Assertions by a third party that our software products or technology infringes its intellectual property, whether or not correct, could subject us to costly and time-consuming litigation or expensive licenses.

There is frequent litigation in the communications and technology industries based on allegations of infringement or other violations of intellectual property rights. As we face increasing competition and become increasingly visible as a publicly traded company, the possibility of intellectual property rights claims against us may grow. These claims, whether or not successful, could:

·divert management’s attention;

·result in costly and time-consuming litigation;

·require us to enter into royalty or licensing agreements, which may not be available on acceptable terms, or at all; or

·require us to redesign our software products to avoid infringement.

As a result, any third-party intellectual property claims against us could increase our expenses and impair our business.

In addition, although we have licensed proprietary technology, we cannot be certain that the owners’ rights in such technology will not be challenged, invalidated or circumvented. Furthermore, many of our customer agreements require us to indemnify our customers for certain third-party intellectual property infringement claims, which could increase our costs as a result of defending such claims and may require that we pay damages if there were an adverse ruling related to any such claims. These types of claims could harm our relationships with our customers, may deter future customers from purchasing our software products or could expose us to litigation for these claims. Even if we are not a party to any litigation between a customer and a third party, an adverse outcome in any such litigation could make it more difficult for us to defend our intellectual property in any subsequent litigation in which we are a named party.

We outsource certain of our research and development activities to third-party contractors, and a loss of or deterioration in these relationships could adversely affect our ability to introduce new software products or enhancements in a timely fashion.

Certain of our research and development activities are carried out by third-party contractors, located both in the United States and abroad. The loss of or deterioration in any of these relationships for any reason could require us to establish alternative relationships or to complete these research and development activities using our internal research and development staff, either of which could result in increased costs to us and impair our ability to introduce new software products or enhancements in a timely fashion. Our use of such

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third-party contractors also increases the risk that our intellectual property could be misappropriated or otherwise disclosed to our competitors, either of which could harm our competitiveness and harm our future revenue.

Defects or errors in our software products could harm our reputation, impair our ability to sell our products and result in significant costs to us.

Our software products are highly complex and may contain undetected defects or errors, including defects and errors arising from the work of our outsourced development teams, that may result in product failures or otherwise cause our software products to fail to perform in accordance with customer expectations. Because our customers use our software products for important aspects of their businesses, any defects or errors in, or other performance problems with, our software products could hurt our reputation and may damage our customers’ businesses. If that occurs, we could lose future sales or our existing customers could elect to not renew their customer agreements with us. Product performance problems could result in loss of market share, failure to achieve market acceptance and the diversion of development resources from software enhancements. If our software products fail to perform or contain a technical defect, a customer might assert a claim against us for damages. We may not have contractual limitations on damages claims that could be asserted against us. Whether or not we are responsible for our software’s failure or defect, we could be required to spend significant time and money in litigation, arbitration or other dispute resolution, and potentially pay significant settlements or damages.

We use a limited number of data centers to deliver our software products. Disruption of service at these facilities could harm our business.

We host our software products and serve all of our customers from twelve third-party data center facilities. We do not control the operation of these facilities. American Internet Services operates our data center in San Diego, California; AT&T operates our data centers in Secaucus, New Jersey and the Netherlands; Data Foundry operates our data center in Austin, Texas; iWeb Technologies operates our data center in Montreal, Canada; NTT Communications operates one of our data centers in Slough, United Kingdom and our data center in London, United Kingdom; FireHost operates our other data center in Slough, United Kingdom; Amazon Web Services operates our data center in Sydney, Australia and our data center in Dublin, Ireland; Verizon Business operates our data center in Billerica, Massachusetts; and SunGard operates our data center in Nashville, Tennessee.  Our agreements for the use of these data center facilities vary in term length, some being month-to-month and others expiring at various dates from 2013 through 2016. The owners of these facilities have no obligation to continue such arrangements beyond their current terms, which are as short as the current month in the case of month-to-month arrangements, nor are they obligated to renew their agreements with us on commercially reasonable terms, or at all. If we are unable to continue such arrangements or renew these agreements on commercially reasonable terms, we may be required to transfer to new data center facilities and we may incur significant costs in connection with doing so. Any changes in third-party service levels at our data centers or any errors, defects, disruptions or other performance problems with our software products could harm our reputation and damage our business. Interruptions in the availability of our software products might reduce our revenue, cause us to issue credits to customers, subject us to potential liability, cause customers to terminate their subscriptions or harm our renewal rates.

While we take precautions such as data redundancy, back-up and disaster recovery plans to prevent service interruptions, our data centers are vulnerable to damage or interruption from human error, intentional bad acts, pandemics, earthquakes, hurricanes, floods, fires, war, terrorist attacks, power losses, hardware failures, systems failures, communications failures and similar events. The occurrence of a natural disaster or an act of terrorism, or vandalism or other misconduct, a decision to close the facilities without adequate notice or other unanticipated problems could result in lengthy interruptions in the availability of our software products.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could harm our operating results, our ability to operate our business and investors’ views of us.

Ensuring that we have adequate internal financial and accounting controls and procedures in place so that we can produce accurate financial statements on a timely basis is a costly and time-consuming effort that needs to be evaluated frequently. Our internal control over financial reporting constitutes a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles in the United States of America.  Under Section 404 of the Sarbanes-Oxley Act of 2002, or the Sarbanes-Oxley Act, our management is required to evaluate the effectiveness of our internal control over financial reporting as of the end of each fiscal year and to report on this evaluation in our Annual Report on Form 10-K for the year.  In addition, so long as we remain an accelerated filer or a large accelerated filer under the rules of the Securities and Exchange Commission, or the SEC, our independent registered public accounting firm will be required to audit our management’s annual evaluation of internal control over financial reporting and report on this audit in our Annual Report on Form 10-K for the year. If we are not able to comply with the requirements of Section 404, or if we or our independent registered public accounting firm identify deficiencies in our internal control over financial reporting that are deemed to be material, the market price of our stock may decline and we could be subject to sanctions or investigations by the NASDAQ Stock Market, the SEC or other regulatory authorities.

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The technologies in our software products may be subject to open source licenses, which may restrict how we can use or distribute our software products or require that we release the source code of our software products subject to those licenses.

Certain of our software products incorporate so-called “open source” software, and we may incorporate further open source software into our software products in the future. Such open source software is generally licensed by its authors or other third parties under open source licenses. If we fail to comply with these licenses, we may be subject to certain conditions, including requirements that we offer our software products that incorporate the open source software for no cost, that we make available the source code for modifications or derivative works we create based upon, incorporating or using the open source software and that we license such modifications or derivative works under the terms of the particular open source license. If an author or other third party that distributes such open source software were to allege that we had not complied with the conditions of one or more of these licenses, we could be required to incur significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our software products that contain the open source software and required to comply with the foregoing conditions.

We provide minimum service-level commitments to many of our customers, and our inability to meet those commitments could result in significant loss of customers, harm to our reputation and costs to us.

Many of our customer agreements currently, and may in the future, require that we meet minimum service level commitments regarding items such as platform availability, invoice processing speed and order processing speed. If we are unable to meet the stated service level commitments under these agreements many of our customers will have the right to terminate their agreements with us and we may be contractually obligated to provide our customers with credits or pay other penalties. If our software products are unavailable for significant periods of time we may lose a substantial number of our customers as a result of these contractual rights, we may suffer harm to our reputation and we may be required to provide our customers with significant credits or pay our customers significant contractual penalties, any of which could harm our business, financial condition, results of operations.

Risks Related to Ownership of Our Common Stock

Insiders have substantial control over us and will be able to influence corporate matters.

As of November 1, 2013, our directors and executive officers and their affiliates beneficially owned, in the aggregate, approximately 16.4% of our outstanding common stock.  As a result, these stockholders may be able to exercise significant influence over matters requiring stockholder approval, including the election of directors and approval of significant corporate transactions, such as a merger or other sale of our company or its assets. The stock ownership of these stockholders could limit your ability to influence corporate matters and may have the effect of delaying or preventing a third party from acquiring control over us.

Our failure to raise additional capital or generate the cash flows necessary to expand our operations and invest in our software products could reduce our ability to compete successfully.

We may need to raise additional funds, and we may not be able to obtain additional debt or equity financing on favorable terms, if at all. If we raise additional equity financing, our stockholders may experience significant dilution of their ownership interests, and the per-share value of our common stock could decline. If we engage in debt financing, we may be required to accept terms that restrict our ability to incur additional indebtedness and force us to maintain specified liquidity or other ratios. If we need additional capital and cannot raise it on acceptable terms, we may not be able to, among other things:

·develop or enhance our software products;

·continue to expand our research and development and sales and marketing efforts;

·acquire complementary technologies, products or businesses;

·expand our operations, in the United States or internationally;

·hire, train and retain employees; or

·respond to competitive pressures or unanticipated working capital requirements.

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An active trading market for our common stock may not be sustained, and investors may not be able to resell their shares at or above the price at which such shares were purchased.

Although we have listed our common stock on The NASDAQ Global Select Market, an active trading market for our shares may not be sustained. In the absence of an active trading market for our common stock, investors may not be able to sell their common stock at or above the prices at which they acquired their shares or at the time that they would like to sell.

Our stock price may be volatile, and the market price of our common stock may decrease.

The market price of our common stock may be subject to significant fluctuations. Our stock price is volatile, and from July 27, 2011, the first day of trading of our common stock, to November 1, 2013, the trading prices of our stock have ranged from $8.01 to $26.05 per share. As a result of this volatility, investors may not be able to sell their common stock at or above the price they paid for it. Some of the factors that may cause the market price of our common stock to fluctuate include:

·fluctuations in our quarterly financial results or the quarterly financial results of companies perceived to be similar to us;

·changes in estimates of our financial results or recommendations by securities analysts;

·failure of any of our software products to achieve or maintain market acceptance;

·changes in market valuations of similar companies;

·success of competitive products or services;

·changes in our capital structure, such as future issuances of securities or the incurrence of debt;

·announcements by us or our competitors of significant products, services, contracts, acquisitions or strategic alliances;

·regulatory developments in the United States, foreign countries or both;

·litigation involving our company, our general industry or both;

·additions or departures of key personnel;

·general perception of the future of the CLM market or our software products;

·investors’ general perception of us; and

·changes in general economic, industry and market conditions.

In addition, if the market for technology stocks or the stock market in general experiences a loss of investor confidence, the trading price of our common stock could decline for reasons unrelated to our business, financial condition or results of operations. If any of the foregoing occurs, it could cause our stock price to fall and may expose us to class action lawsuits that, even if unsuccessful, could be costly to defend and a distraction to management.

A significant portion of our total outstanding shares may be sold into the public market in the near future, which could cause the market price of our common stock to drop significantly, even if our business is doing well.

Sales of a substantial number of shares of our common stock in the public market could occur at any time.  Our outstanding shares of common stock may be freely sold in the public market at any time to the extent permitted by Rules 144 and 701 under the Securities Act of 1933, as amended, which we refer to as the Securities Act, or to the extent such shares have already been registered under the Securities Act and are held by non-affiliates of ours.

In addition, as of November 1, 2013, there were 6,223,948 shares subject to outstanding options and 761,077 shares subject to issuance on vesting of outstanding restricted stock units, all of which we have registered under the Securities Act on a registration statement on Form S-8. These shares will be able to be freely sold in the public market upon issuance as permitted by any applicable vesting requirements, to the extent applicable. Furthermore, as of November 1, 2013, there were 10,710 shares subject to outstanding warrants. These shares will become eligible for sale in the public market to the extent such warrants are exercised as permitted by any applicable vesting requirements and Rules 144 and 701 under the Securities Act.

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If securities or industry analysts do not publish or cease publishing research or reports about us, our business or our market, or if they adversely change their recommendations regarding our stock or if others publish or disseminate unfavorable reports or analyses regarding us, our business, our market or our stock, our stock price could decline.

The trading market for our common stock will be influenced by the research and reports that industry or securities analysts may publish about us, our business, our market or our competitors. If any of the analysts who may cover us adversely change their recommendations regarding our stock, or provide relatively more favorable recommendations about our competitors, our stock price would likely decline. If any analyst who covers us were to cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could cause our stock price or trading volume to decline. If others publish or disseminate unfavorable reports or analyses about us, our business, our markets or our stock, our stock price could decline.

Our management will have broad discretion over the use of our cash reserves and might not use such funds in ways that increase the value of your investment.

Our management will have broad discretion to use our cash reserves, if any, and you will be relying on the judgment of our management regarding the application of these funds. Our management might not apply these funds in ways that increase the value of your investment. Our management might not be able to yield a significant return, if any, on any investment of these cash reserves. You will not have the opportunity to influence our decisions on how to use our cash reserves.

We do not expect to declare any dividends in the foreseeable future.

We do not anticipate declaring any cash dividends to holders of our common stock in the foreseeable future. Consequently, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment. Investors seeking cash dividends should not purchase our common stock.

Anti-takeover provisions contained in our certificate of incorporation and bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Our certificate of incorporation, bylaws and Delaware law contain provisions that could have the effect of rendering more difficult or discouraging an acquisition deemed undesirable by our board of directors. Our corporate governance documents include provisions:

·authorizing blank check preferred stock, which could be issued with voting, liquidation, dividend and other rights superior to our common stock;

·limiting the liability of, and providing indemnification to, our directors and officers;

·limiting the ability of our stockholders to call and bring business before special meetings and to take action by written consent in lieu of a meeting;

·requiring advance notice of stockholder proposals for business to be conducted at meetings of our stockholders and for nominations of candidates for election to our board of directors;

·controlling the procedures for the conduct and scheduling of board of directors and stockholder meetings;

·limiting the determination of the number of directors on our board of directors and the filling of vacancies or newly created seats on the board to our board of directors then in office; and

·providing that directors may be removed by stockholders only for cause.

These provisions, alone or together, could delay hostile takeovers and changes in control of our company or changes in our management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203 of the Delaware General Corporation Law, which prevents some stockholders holding more than 15% of our outstanding common stock from engaging in certain business combinations without approval of the holders of substantially all of our outstanding common stock. Any provision of our certificate of incorporation or bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

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

Purchases of Equity Securities by the Issuer and Affiliated Purchasers

The following table provides information about our repurchases of equity securities during the periods indicated that are registered by us pursuant to Section 12 of the Securities Exchange Act of 1934, as amended:

					(d)
				(c)	Maximum Number (or
	(a)	(b)		Total Number of	Approximate Dollar
	Total Number	Average		Shares Purchased	Value) of Shares that May
	of Shares	Price Paid		as Part of Publicly	Yet Be Purchased
Period	Purchased (1)	per Share (2)		Announced Programs	Under the Program (1)
					$	11,065,932
July 1, 2013 - July 31, 2013	—	$	—	—	$	11,065,932
August 1, 2013 - August 31, 2013	—	$	—	—	$	11,065,932
September 1, 2013 - September 30, 2013	—	$	—	—	$	11,065,932
Total	—	$	—	—	$	11,065,932

(1)         On November 28, 2012, we announced that our board of directors had authorized a share repurchase program under which we may repurchase up to $20 million of our outstanding common stock on the open market or in privately negotiated transactions.

(2)The Average Price Paid per Share includes broker commissions

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Item 6.   Exhibits

Exhibit No.	Description of Exhibit
31.1	Certification of Chief Executive Officer pursuant to Rules 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.
31.2	Certification of Chief Financial Officer pursuant to Rules 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.
32.1	Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
32.2	Certification of 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 Extension Schema Document
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document
101.LAB	XBRL Taxonomy Extension Label Linkbase Document
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document

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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.

	Tangoe, Inc.
Date: November 12, 2013	/s/ Gary R. Martino
	Gary R. Martino
	Chief Financial Officer

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EX-31.1

EXHIBIT 31.1

Certification of Chief Executive Officer

pursuant to Rules 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, Albert R. Subbloie, Jr., certify that:

1.I have reviewed this quarterly report on Form 10-Q of Tangoe, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15 d-15(f)), 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: November 12, 2013

/ s / Albert R. Subbloie, Jr.

Albert R. Subbloie, Jr.

President, Chief Executive Officer and Chairman of the Board

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EX-31.2

EXHIBIT 31.2

Certification of Chief Financial Officer

pursuant to Rules 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, Gary R. Martino, certify that:

1.   I have reviewed this quarterly report on Form 10-Q of Tangoe, 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)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15 d-15(f)), 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: November 12, 2013

/ s / Gary R. Martino

Gary R. Martino

Chief Financial Officer

1

EX-32.1

EXHIBIT  32.1

Certification of Chief Executive Officer

pursuant to 18 U.S.C. Section 1350, as adopted

pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002

In connection with the Quarterly Report on Form 10-Q of Tangoe, Inc. for the quarterly period ended September 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Albert R. Subbloie, Jr., as Chief Executive Officer of Tangoe, Inc., hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Tangoe, Inc.

Dated: November 12, 2013

By:	/ s / Albert R. Subbloie, Jr.
Albert R. Subbloie, Jr.
President, Chief Executive Officer and Chairman of the Board

1

EX-32.2

EXHIBIT  32.2

Certification of Chief Financial Officer

pursuant to 18 U.S.C. Section 1350, as adopted

pursuant to Section 906 of the Sarbanes-Oxley Act Of 2002

In connection with the Quarterly Report on Form 10-Q of Tangoe, Inc. for the quarterly period ended September 30, 2013, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), Gary R. Martino, as Chief Financial Officer of Tangoe, Inc., hereby certifies, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that, to the best of his knowledge the Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of Tangoe, Inc.

Dated: November 12, 2013

/ s / Gary R. Martino

Gary R. Martino

Chief Financial Officer

1

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Fair Value Measurement

9 Months Ended

Sep. 30, 2013

Fair Value Measurement

Fair Value Measurement

10.    Fair Value Measurement

The Company records certain financial assets and liabilities at fair value on a recurring basis. The Company determines fair values based on that price it would receive to sell an asset or pay to transfer a liability in an orderly transaction between market participants at the measurement date and in the principal or most advantageous market for that asset or liability.

The prescribed fair value hierarchy and related valuation methodologies are as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date.

Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, directly or indirectly, such as a quoted price for similar assets or liabilities in active markets.

Level 3—Inputs are unobservable and are only used to measure fair value when observable inputs are not available. The inputs reflect the entity’s own assumptions and are based on the best information available. This allows for the fair value of an asset or liability to be measured when no active market for that asset or liability exists.

The following table discloses the assets and liabilities measured at fair value on a recurring basis as of September 30, 2013 and December 31, 2012 and the basis for that measurement:

	Fair Value Measurement at September 30, 2013
(in thousands)	Total		Level 1		Level 2		Level 3
Money market	$	18,336	$	18,336	$	—	$	—
Contingent HCL-EMS acquisition consideration	891		—		—		891
Contingent oneTEM acquisition consideration	198		––		––		198
	$	19,425	$	18,336	$	—	$	1,089

	Fair Value Measurement at December 31, 2012
(in thousands)	Total		Level 1		Level 2		Level 3
Money market	$	28,094	$	28,094	$	—	$	—
Contingent HCL-EMS acquisition consideration	2,046		—		—		2,046
	$	30,140	$	28,094	$	—	$	2,046

The changes in the fair value of the Level 3 liability for the nine months ended September 30, 2013 are as follows:

	Contingent acquisition consideration
	Nine Months Ended September 30, 2013
(in thousands)	HCL-EMS			oneTEM
Balance, beginning of period	$	2,046		$	—
Initial earn-out consideration	—			181
Imputed Interest	12			17
Cash payments	(1,000		)	––
Second year earn-out adjustment	(167		)	—
Balance, end of period	$	891		$	198

The Company’s investment in overnight money market institutional funds, which amounted to $28.1 million and $18.3 million at December 31, 2012 and September 30, 2013, respectively, is included in cash and cash equivalents on the accompanying condensed consolidated balance sheets and is classified as a Level 1 input.

The acquisition of HCL-EMS includes a contingent consideration agreement that requires additional consideration to be paid by the Company following each of the first and second anniversaries of the HCL-EMS Closing Date, pursuant to an earn-out formula ranging from 7.5% to 15% of specified revenues from specified customers acquired, subject to set-off rights of the Company with respect to indemnities given by HCL-EMS under the HCL-EMS APA.  The fair value of the contingent consideration recognized was $3.4 million which was estimated by applying the income approach. The key assumptions include (a) a discount rate of 10.5% and (b) probability adjusted levels of revenue between approximately $12.6 million and $13.9 million. As of September 30, 2013, there were no changes in the recognized amounts, except for the accretion of interest, adjustment of the second year earn-out estimate to actual and the partial payment of the second year earn-out.

The acquisition of oneTEM includes a contingent consideration agreement that requires additional consideration to be paid by the Company following each of the first four anniversaries of the oneTEM Closing Date, pursuant to an earn-out formula of 9% of annual recurring revenue generated from specified customers in the first year and then year-over-year increase in annual recurring revenue from those specified customers during the earn-out periods.  The earn-out period begins with the first full month after the oneTEM Closing Date and continues for four consecutive 12- month periods.  The contingent consideration is subject to set-off rights of the Company with respect to indemnities given by the former holders of the issued share capital of oneTEM under the oneTEM Purchase Agreement.  The fair value of the contingent consideration recognized was $0.2 million, which was estimated by applying the income approach. The key assumptions include (a) a discount rate of 15% and (b) probability adjusted levels of initial and then increased annual recurring revenue between approximately $0.2 million and $0.3 million.

The carrying amounts of the Company’s other non-cash financial instruments including accounts receivable and accounts payable approximate their fair values due to the relatively short-term nature of these instruments. The carrying amounts of the Company’s deferred purchase price consideration to ProfitLine and Symphony approximate fair value as the effective interest rates approximate market rates.

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Condensed Consolidated Statements of Operations (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Revenue:
Recurring technology and services	$ 42,623	$ 36,138	$ 124,056	$ 98,969
Strategic consulting, software licenses and other	4,997	4,000	14,831	11,573
Total revenue	47,620	40,138	138,887	110,542
Cost of revenue:
Recurring technology and services	19,019	16,696	56,645	45,809
Strategic consulting, software licenses and other	2,327	1,588	6,353	4,835
Total cost of revenue	21,346	18,284	62,998	50,644
Gross profit	26,274	21,854	75,889	59,898
Operating expenses:
Sales and marketing	8,504	6,275	24,101	17,732
General and administrative	8,953	8,083	25,749	21,830
Research and development	4,907	4,263	14,656	12,126
Depreciation and amortization	2,586	2,297	7,623	6,168
Restructuring charge			654
Income from operations	1,324	936	3,106	2,042
Other income (expense), net
Interest expense	(89)	(256)	(352)	(683)
Interest income	15	22	50	60
Other income	327		1,093
Income before income tax provision	1,577	702	3,897	1,419
Income tax provision	22	121	668	308
Net income	$ 1,555	$ 581	$ 3,229	$ 1,111
Income per common share:
Basic (in dollars per share)	$ 0.04	$ 0.02	$ 0.09	$ 0.03
Diluted (in dollars per share)	$ 0.04	$ 0.01	$ 0.08	$ 0.03
Weighted average number of common shares:
Basic (in shares)	37,698	37,410	37,546	36,079
Diluted (in shares)	40,872	40,963	40,240	39,616

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Income per Share Applicable to Common Stockholders

9 Months Ended

Sep. 30, 2013

Income per Share Applicable to Common Stockholders

Income per Share Applicable to Common Stockholders

3. Income per Share Applicable to Common Stockholders

The following table sets forth the computations of income per share applicable to common stockholders for the three and nine months ended September 30, 2012 and 2013:

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share amounts)	2012		2013		2012		2013
Basic net income per common share
Net income	$	581	$	1,555	$	1,111	$	3,229
Basic income per common share	$	0.02	$	0.04	$	0.03	$	0.09
Weighted-average common shares outstanding	37,410		37,698		36,079		37,546
Diluted net income per common share
Net income	$	581	$	1,555	$	1,111	$	3,229
Diluted income per common share	$	0.01	$	0.04	$	0.03	$	0.08
Weighted-average common shares used to compute diluted net income per share	40,963		40,872		39,616		40,240

Diluted income per common share for the periods presented does not reflect the following potential common shares as the effect would be anti-dilutive.

Outstanding stock options	2,169	2,315	2,169	2,565
Outstanding restricted stock units	176	476	173	587
Common stock warrants	10	7	10	9

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Restructuring Charge (Tables)

9 Months Ended

Sep. 30, 2013

Restructuring Charge

Summary of the activity in the liabilities related to the restructuring charge

	Lease costs, net
	of estimated
(in thousands)	sublease income			Other Costs			Total
Remaining liability at December 31, 2012	$	613		$	(8	)	$	605
Cash payments	(736		)	—			(736		)
Non-cash charges and other	2			8			10
Restructuring charge	654			—			654
Remaining liability at September 30, 2013	533			0			533
	Less: current portion						(533		)
	Long-term portion						$	0

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Supplemental Cash Flow Information

9 Months Ended

Sep. 30, 2013

Supplemental Cash Flow Information

Supplemental Cash Flow Information

11.      Supplemental Cash Flow Information

Information about other cash flow activities during the nine months ended September 30, 2012 and 2013 is as follows:

	Nine months ended September 30,
(in thousands)	2012		2013
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	94	$	65
Income tax payments	$	284	$	345
NON-CASH TRANSACTIONS:
Deferred purchase price in connection with Anomalous acquisition	$	950	$	—
Deferred purchase price in connection with ttMobiles acquisition	$	2,315	$	—
Deferred purchase price in connection with Symphony acquisition	$	10,942	$	––
Deferred purchase price in connection with oneTEM acquisition	$	—	$	616
Issuance of common stock in payment of board of directors fees	$	20	$	—
Cashless exercise of warrants	$	479	$	—

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Stockholders' Equity (Details) (USD $) In Millions, except Share data, unless otherwise specified	1 Months Ended	9 Months Ended		0 Months Ended	9 Months Ended	1 Months Ended		9 Months Ended
	Nov. 30, 2012	Sep. 30, 2013	Dec. 31, 2012	Jun. 05, 2013 2011 Plan	Sep. 30, 2013 2011 Plan	Mar. 31, 2013 Anomalous	Jan. 31, 2012 Anomalous	Sep. 30, 2012 Anomalous
Common Stock
Common stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
Common stock, shares authorized		150,000,000	150,000,000
Common stock, shares issued		38,125,858	37,613,327
Common stock, shares outstanding		38,125,858	37,613,327
Unregistered shares of common stock issued as a consideration							165,775	165,775
Unvested and unregistered shares of common stock with vesting based upon achievement of revenue targets							132,617	132,617
Unvested and unregistered shares of common stock cancelled and retired						132,617
Shares issued					5,991
Issuance of shares to employees and board of directors (in shares)					58,975
Additional number of common shares reserved for future issuance				1,000,000
Authorized amount of shares repurchased	$ 20
Shares repurchased		365,959
Average price of shares repurchased and retired (in dollars per share)		$ 12.40
Amount of shares repurchased and retired		$ 4.5
Preferred Stock
Preferred stock, par value (in dollars per share)		$ 0.0001	$ 0.0001
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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Fair Value Measurement (Tables)

9 Months Ended

Sep. 30, 2013

Fair Value Measurement

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

	Fair Value Measurement at September 30, 2013
(in thousands)	Total		Level 1		Level 2		Level 3
Money market	$	18,336	$	18,336	$	—	$	—
Contingent HCL-EMS acquisition consideration	891		—		—		891
Contingent oneTEM acquisition consideration	198		––		––		198
	$	19,425	$	18,336	$	—	$	1,089

	Fair Value Measurement at December 31, 2012
(in thousands)	Total		Level 1		Level 2		Level 3
Money market	$	28,094	$	28,094	$	—	$	—
Contingent HCL-EMS acquisition consideration	2,046		—		—		2,046
	$	30,140	$	28,094	$	—	$	2,046

Changes in the fair value of the Level 3 liability

	Contingent acquisition consideration
	Nine Months Ended September 30, 2013
(in thousands)	HCL-EMS			oneTEM
Balance, beginning of period	$	2,046		$	—
Initial earn-out consideration	—			181
Imputed Interest	12			17
Cash payments	(1,000		)	––
Second year earn-out adjustment	(167		)	—
Balance, end of period	$	891		$	198

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Stockholders' Equity (Tables)

9 Months Ended

Sep. 30, 2013

Stockholders' Equity

Summary of warrants exercised to purchase common stock

	Number of
	Stock
Warrants	Warrants
Outstanding at beginning of the year	25,617
Exercised	(14,907		)
Issued	—
Cancelled	—
Outstanding at end of the period	10,710
Weighted average exercise price	$	13.26

Summary of status of stock options issued pursuant to the plans

Options	Number of Shares		Weighted Average Exercise Price		Weighted Average Contractual Life (years)
Outstanding at beginning of the year	6,854,369		$	7.92
Granted	463,475		$	14.25
Forfeited	(119,067	)	$	13.01
Exercised	(847,134	)	$	4.62
Outstanding at end of the period	6,351,643		$	8.73	7.1
Exercisable at end of the period	3,933,447		$	6.54	6.4
Available for future grants at September 30, 2013	1,018,338

Summary of intrinsic values of options outstanding, vested and exercised

	2013
	Number of	Intrinsic
	Options	Value
Outstanding	6,351,643	$	95,907,266
Vested	3,933,447	$	68,020,878
Exercised	847,134	$	12,276,044

Summary of status of restricted stock units issued pursuant to the plans

Restricted Stock Units	Number of Shares		Weighted Average Fair Value
Outstanding at beginning of the year	221,314		$	17.27
Granted	627,534		$	14.85
Vested	(84,100	)	$	17.14
Forfeited	(1,050	)	$	15.08
Outstanding at end of the period	763,698		$	15.30

Schedule of total compensation expense for stock-based compensation awards included in the accompanying condensed consolidated statements of operations

In accordance with ASC 718, Share Based Payment (“ASC 718”), total compensation expense for stock-based compensation awards was $6.5 million and $9.8 million for the nine months ended September 30, 2012 and 2013, respectively, which is included on the accompanying condensed consolidated statements of operations as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2013		2012		2013
Cost of goods sold	$	362	$	529	$	947	$	1,609
Sales and marketing expenses	586		978		1,455		2,747
General and administrative expenses	1,643		1,551		3,727		4,664
Research and development	164		244		410		753
Total stock-based employee compensation	$	2,755	$	3,302	$	6,539	$	9,773

Schedule of stock-based employee compensation expense for equity awards granted

Stock-based employee compensation expense for equity awards granted since January 1, 2006 will be recognized over the following periods as follows (in thousands):

Years Ending December 31,
2013	$	3,272
2014	11,718
2015	8,106
2016	2,333
2017	123
	$	25,552

Schedule of valuation assumptions used to determine value of options granted during the year using Black-Scholes valuation model

	2013
Expected dividend yield	0%
Risk-free interest rate	1.04% to 1.86%
Expected term (in years)	5.7 - 6.1 years
Expected volatility	56.34% - 56.84%

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Intangible Assets and Goodwill (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Intangible assets
Net	$ 38,519,000
Trademarks	247,000		247,000
Intangible assets, net	38,766,000		44,249,000
Amortization expense of intangible assets	6,100,000	4,700,000
Estimate of future amortization expense for acquired intangible assets
October 1, 2013 to December 31, 2013	2,118,000
2014	7,563,000
2015	6,100,000
2016	5,782,000
2017	6,026,000
Thereafter	10,930,000
Net	38,519,000
Patents
Intangible assets
Gross	1,054,000		1,054,000
Less: accumulated amortization	(864,000)		(766,000)
Net	190,000		288,000
Weighted Average Useful Life	8 years
Estimate of future amortization expense for acquired intangible assets
Net	190,000		288,000
Technological know-how
Intangible assets
Gross	15,070,000		15,141,000
Less: accumulated amortization	(7,126,000)		(4,913,000)
Net	7,944,000		10,228,000
Weighted Average Useful Life	6 years 1 month 6 days
Estimate of future amortization expense for acquired intangible assets
Net	7,944,000		10,228,000
Customer relationships
Intangible assets
Gross	37,879,000		37,358,000
Less: accumulated amortization	(14,052,000)		(10,793,000)
Net	23,827,000		26,565,000
Weighted Average Useful Life	8 years 8 months 12 days
Estimate of future amortization expense for acquired intangible assets
Net	23,827,000		26,565,000
Covenants not to compete
Intangible assets
Gross	1,159,000		881,000
Less: accumulated amortization	(830,000)		(517,000)
Net	329,000		364,000
Weighted Average Useful Life	2 years
Estimate of future amortization expense for acquired intangible assets
Net	329,000		364,000
Strategic marketing agreement
Intangible assets
Gross	6,203,000		6,203,000
Less: accumulated amortization	(486,000)		(293,000)
Net	5,717,000		5,910,000
Weighted Average Useful Life	10 years
Estimate of future amortization expense for acquired intangible assets
Net	5,717,000		5,910,000
Tradenames
Intangible assets
Gross	877,000		843,000
Less: accumulated amortization	(365,000)		(196,000)
Net	512,000		647,000
Weighted Average Useful Life	3 years 9 months 18 days
Estimate of future amortization expense for acquired intangible assets
Net	$ 512,000		$ 647,000

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Stockholders' Equity (Details 3) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013 item	Sep. 30, 2012
Stock option
Number of stock-based compensation plans			5
Proceeds from stock option exercises
Stock-based compensation expenses	$ 3,302,000	$ 2,755,000	$ 9,773,000	$ 6,539,000
Stock Options
Stock option
Vesting period			4 years
Award expiration from grant date			10 years
Number of Shares
Outstanding at beginning of the year (in shares)			6,854,369
Granted (in shares)			463,475
Forfeited (in shares)			(119,067)
Exercised (in shares)			(847,134)
Outstanding at end of the period (in shares)	6,351,643		6,351,643
Exercisable at end of the period (in shares)	3,933,447		3,933,447
Available for future grants at the end of the period (in shares)	1,018,338		1,018,338
Weighted Average Exercise Price
Outstanding at beginning of the year (in dollars per share)			$ 7.92
Granted (in dollars per share)			$ 14.25
Forfeited (in dollars per share)			$ 13.01
Exercised (in dollars per share)			$ 4.62
Outstanding at end of the period (in dollars per share)	$ 8.73		$ 8.73
Exercisable at end of the period (in dollars per share)	$ 6.54		$ 6.54
Weighted Average Contractual Life (years)
Outstanding at end of the period			7 years 1 month 6 days
Exercisable at end of the period			6 years 4 months 24 days
Intrinsic Value
Outstanding	95,907,266		95,907,266
Vested			68,020,878
Exercised			12,276,044
Proceeds from stock option exercises
Proceeds from stock option exercises			3,900,000
Stock Options | Minimum
Weighted Average Exercise Price
Exercised (in dollars per share)			$ 0.25
Stock Options | Maximum
Weighted Average Exercise Price
Exercised (in dollars per share)			$ 20.39
Restricted Stock Units
Proceeds from stock option exercises
Aggregate fair value of grant			9,300,000
Stock-based compensation expenses			3,000,000
Total unrecognized compensation cost, net of estimated forfeitures, related to unvested units	$ 9,300,000		$ 9,300,000
Number of Shares
Outstanding at beginning of the year (in shares)			221,314
Granted (in shares)			627,534
Vested (in shares)			(84,100)
Forfeited (in shares)			(1,050)
Outstanding at end of the period (in shares)	763,698		763,698
Weighted Average Fair Value
Outstanding at beginning of the year (in dollars per share)			$ 17.27
Granted (in dollars per share)			$ 14.85
Vested (in dollars per share)			$ 17.14
Forfeited (in dollars per share)			$ 15.08
Outstanding at end of the period (in dollars per share)	$ 15.30		$ 15.30
Restricted Stock Units | Minimum
Stock option
Vesting period			2 years
Restricted Stock Units | Maximum
Stock option
Vesting period			4 years

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Income per Share Applicable to Common Stockholders (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Basic net income per common share
Net income	$ 1,555	$ 581	$ 3,229	$ 1,111
Basic income per common share (in dollars per share)	$ 0.04	$ 0.02	$ 0.09	$ 0.03
Weighted-average common shares outstanding	37,698	37,410	37,546	36,079
Diluted net income per common share
Net income	$ 1,555	$ 581	$ 3,229	$ 1,111
Diluted income per common share (in dollars per share)	$ 0.04	$ 0.01	$ 0.08	$ 0.03
Weighted-average common shares used to compute diluted net income per share	40,872	40,963	40,240	39,616

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Fair Value Measurement (Details) (USD $)	1 Months Ended		0 Months Ended			1 Months Ended			0 Months Ended																9 Months Ended		9 Months Ended
	Jan. 31, 2011 HCL-EMS Minimum	Jan. 31, 2011 HCL-EMS Maximum	Apr. 18, 2013 oneTEM item	Jan. 25, 2011 Level 3 HCL-EMS Income approach	Apr. 18, 2013 Level 3 oneTEM Income approach	Jan. 31, 2011 Level 3 Contingent consideration HCL-EMS Income approach	Jan. 31, 2011 Level 3 Contingent consideration HCL-EMS Income approach Minimum	Jan. 31, 2011 Level 3 Contingent consideration HCL-EMS Income approach Maximum	Apr. 18, 2013 Level 3 Contingent consideration oneTEM Income approach	Apr. 18, 2013 Level 3 Contingent consideration oneTEM Income approach Minimum	Apr. 18, 2013 Level 3 Contingent consideration oneTEM Income approach Maximum	Sep. 30, 2013 Recurring basis Total	Dec. 31, 2012 Recurring basis Total	Sep. 30, 2013 Recurring basis Total Contingent consideration HCL-EMS	Dec. 31, 2012 Recurring basis Total Contingent consideration HCL-EMS	Sep. 30, 2013 Recurring basis Total Contingent consideration oneTEM	Sep. 30, 2013 Recurring basis Total Money market institutional funds	Dec. 31, 2012 Recurring basis Total Money market institutional funds	Sep. 30, 2013 Recurring basis Level 1	Dec. 31, 2012 Recurring basis Level 1	Sep. 30, 2013 Recurring basis Level 1 Money market institutional funds	Dec. 31, 2012 Recurring basis Level 1 Money market institutional funds	Sep. 30, 2013 Recurring basis Level 3	Dec. 31, 2012 Recurring basis Level 3	Sep. 30, 2013 Recurring basis Level 3 Contingent consideration HCL-EMS	Dec. 31, 2012 Recurring basis Level 3 Contingent consideration HCL-EMS	Sep. 30, 2013 Recurring basis Level 3 Contingent consideration oneTEM
Fair value measurement
Cash and cash equivalents																	$ 18,336,000	$ 28,094,000			$ 18,336,000	$ 28,094,000
Recognized amount														891,000	2,046,000	(198,000)									891,000	2,046,000	(198,000)
Total												19,425,000	30,140,000						18,336,000	28,094,000			1,089,000	2,046,000
Percentage of specified revenues from specified customers acquired, used in determining contingent consideration	7.50%	15.00%	9.00%
Contingent consideration recognized			(183,000)	3,400,000	200,000
Discount rate assumption, used in determining contingent consideration (as a percent)						10.50%			15.00%
Probability adjusted levels of revenue assumption, used in determining contingent consideration							12,600,000	13,900,000		200,000	300,000
Changes in the fair value of the Level 3 liability
Balance, Beginning of Period																									2,046,000
Initial earn-out consideration																											181,000
Imputed interest																									12,000		17,000
Cash payments																									(1,000,000)
Second year earn-out adjustment																									(167,000)
Balance, End of Period																									$ 891,000		$ 198,000
Number of anniversaries for which additional consideration payable following the closing date			4
Number of consecutive 12-month earn-out period			4

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Debt (Tables)

9 Months Ended

Sep. 30, 2013

Debt

Schedule of debt outstanding

	December 31,			September 30,
(in thousands)	2012			2013
HCL-EMS contingent consideration, net of unamortized discount of $12 and $0 at December 31, 2012 and September 30, 2013, respectively. Payable as described below.	$	2,046		$	891
Deferred Telwares purchase price, net of unamortized discount of $24 and $0 at December 31, 2012 and September 30, 2013, respectively.	1,226			—
Deferred ProfitLine purchase price, net of unamortized discount of $62 and $0 at December 31, 2012 and September 30, 2013, respectively. Payable as described below.	4,438			23
Deferred Anomalous purchase price, net of unamortized discount of $1 and $0 at December 31, 2012 and September 30, 2013, respectively.	978			—
Deferred ttMobiles purchase price, net of unamortized discount of $10 and $0 at December 31, 2012 and September 30, 2013, respectively.	2,420			—
Deferred Symphony purchase price, net of unamortized discount of $128 and $0 at December 31, 2012 and September 30, 2013, respectively. Payable as described below.	10,662			1,279
Deferred oneTEM purchase price and contingent consideration, net of unamortized discount of $111 at September 30, 2013. Payable as described below.	—			660
Capital lease and other obligations	804			720
Total notes payable	$	22,574		$	3,573
Less current portion	$	(22,443	)	$	(3,372	)
Notes payable, less current portion	$	131		$	201

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Condensed Consolidated Statement of Changes in Stockholders' Equity (USD $) In Thousands, except Share data, unless otherwise specified	Total	Common Stock	Additional Paid-In Capital	Common Stock Warrants	Accumulated Deficit	Other Comprehensive Income (loss)
Balance at Dec. 31, 2012	$ 148,620	$ 4	$ 191,581	$ 10,610	$ (53,757)	$ 182
Balance (in shares) at Dec. 31, 2012		37,480,710
Increase (Decrease) in Stockholders' Equity
Net income	3,229				3,229
Foreign currency translation adjustment	(731)					(731)
Issuance of shares to employees and board of directors	363		363
Issuance of shares to employees and board of directors (in shares)		64,966
Issuance of shares from exercise of stock options	3,912		3,912
Issuance of shares from exercise of stock options (in shares)		847,134
Issuance of shares from exercise of stock warrants	34		34
Issuance of shares from exercise of stock warrants (in shares)		14,907
Issuance of shares from vesting of restricted stock units (in shares)		84,100
Repurchase of common stock	(4,538)		(4,538)
Repurchase of common stock (in shares)		(365,959)
Stock-based compensation	9,410		9,410
Balance at Sep. 30, 2013	$ 160,299	$ 4	$ 200,762	$ 10,610	$ (50,528)	$ (549)
Balance (in shares) at Sep. 30, 2013		38,125,858

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Organization, Description of Business

9 Months Ended

Sep. 30, 2013

Organization, Description of Business

Organization, Description of Business

1. Organization, Description of Business

Nature of Operations

Tangoe, Inc. (the “Company”), a Delaware corporation, was incorporated on February 9, 2000 as TelecomRFQ, Inc. During 2001, the Company changed its name to Tangoe, Inc. The Company provides communications lifecycle management software and related services to a wide range of enterprises, including large and medium-sized businesses and other organizations. Communications lifecycle management encompasses the entire lifecycle of an enterprise’s communications assets and services, including planning and sourcing, procurement and provisioning, inventory and usage management, mobile device management, real-time telecommunications expense management, invoice processing, expense allocation and accounting, forward and reverse logistics and asset decommissioning and disposal. The Company’s Communications Management Platform is an on-demand suite of software designed to manage and optimize the complex processes and expenses associated with this lifecycle for both fixed and mobile communications assets and services. The Company’s customers can also engage the Company through its client services group to manage their communications assets and services through its Communications Management Platform.

Public Offerings

In August 2011, the Company completed its initial public offering whereby it sold 7,500,000 shares of common stock at a price to the public of $10.00 per share.  The Company received proceeds from its initial public offering of $66.0 million, net of underwriting discounts and commissions and other offering costs of $3.8 million.

As part of the initial public offering, an additional 2,585,500 shares of common stock were sold by certain existing stockholders at a price to the public of $10.00 per share, including 1,315,500 shares sold by such stockholders upon the exercise of the underwriters’ option to purchase additional shares.  The Company did not receive any proceeds from the sale of such shares by the selling stockholders.

In April 2012, the Company completed a public offering whereby it sold 2,200,000 shares of common stock at a price to the public of $18.50 per share.  The Company received proceeds from this public offering of $38.5 million, net of underwriting discounts and commissions but before offering costs of $0.7 million.

As part of this public offering, an additional 7,000,000 shares of common stock were sold by certain existing stockholders at a price to the public of $18.50 per share, including 1,200,000 shares sold by such stockholders upon the exercise of the underwriters’ option to purchase additional shares.  The Company did not receive any proceeds from the sale of such shares by the selling stockholders.

The Company’s common stock is traded on the NASDAQ Global Select Market.

Basis of Presentation of Interim Financial Statements

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”) for interim financial information and with the instructions to Form 10-Q and Article 10 of Regulation S-X. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for the fair statement of the Company’s financial position and results of operations for the periods presented have been included. Operating results for the three and nine months ended September 30, 2013 are not necessarily indicative of the results that may be expected for the year ending December 31, 2013, for any other interim period or for any other future year.

The consolidated balance sheet at December 31, 2012 has been derived from the audited financial statements at that date, but does not include all of the disclosures required by GAAP. The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes thereto contained in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2012 as filed with the Securities Exchange Commission (“SEC”) on March 18, 2013 (the “2012 Form 10-K”).

Significant Accounting Policies

The Company’s significant accounting policies are disclosed in the audited consolidated financial statements for the year ended December 31, 2012 included in the 2012 Form 10-K.  Since the date of those financial statements, there have been no material changes to the Company’s significant accounting policies.

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Computers, Furniture and Equipment-Net

9 Months Ended

Sep. 30, 2013

Computers, Furniture and Equipment-Net

Computers, Furniture and Equipment-Net

4. Computers, Furniture and Equipment-Net

Computers, furniture and equipment-net consist of:

	As of
	December 31,			September 30,
(in thousands)	2012			2013
Computers and software	$	10,018		$	11,499
Furniture and fixtures	1,032			1,174
Leasehold improvements	1,166			1,360
	12,216			14,033
Less accumulated depreciation	(8,217		)	(9,785		)
Computers, furniture and equipment-net	$	3,999		$	4,248

Computers and software includes equipment under capital leases totaling approximately $2.5 million at December 31, 2012 and September 30, 2013. Accumulated depreciation on equipment under capital leases totaled approximately $2.0 million and $2.3 million as of December 31, 2012 and September 30, 2013, respectively. Depreciation and amortization expense associated with computers, furniture and equipment was $1.5 million and $1.6 million for the nine months ended September 30, 2012 and 2013, respectively.

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Business Combinations

9 Months Ended

Sep. 30, 2013

Business Combinations

Business Combinations

2. Business Combinations

Anomalous Networks, Inc.

On January 10, 2012 (the “Anomalous Acquisition Date”), the Company entered into a Share Purchase Agreement (the “Anomalous Purchase Agreement”) with Anomalous Networks Inc., a corporation incorporated under the laws of Canada (“Anomalous”), and the shareholders of Anomalous, under which the Company agreed to purchase all of the outstanding equity of Anomalous (the “Anomalous Share Purchase”). This acquisition reflects the Company’s strategy to broaden its suite of offerings and to provide real-time telecommunication expense management capabilities. On the same day, the Anomalous Share Purchase was effected in accordance with the terms of the Anomalous Purchase Agreement with the Company acquiring all of the outstanding equity of Anomalous for aggregate consideration of (i) approximately $3,500,000 in cash paid at the closing, (ii) $979,000 in cash payable on the first anniversary of the closing, (iii) 165,775 unregistered shares of the Company’s common stock and (iv) 132,617 unvested and unregistered shares of the Company’s common stock with vesting based on achievement of revenue targets relating to sales of Anomalous products and services for periods through January 31, 2013. The Company paid the full $979,000 of deferred cash consideration in January 2013.  In March 2013, the 132,617 unvested and unregistered shares of the Company’s common stock were cancelled and retired because the revenue targets related to sales of Anomalous products and services were not achieved.

Anomalous Purchase Price Allocation

The allocation of the total purchase price of Anomalous’ net tangible and identifiable intangible assets was based upon the estimated fair value of those assets as of January 10, 2012. In accordance with Accounting Standards Classification (“ASC”) 805, Business Combinations, the Company valued the 165,775 of unregistered shares of common stock by using the closing price of the Company’s common stock on the NASDAQ Global Market on the acquisition date and applying a 20% marketability discount to the fair value of the unregistered shares.  The marketability discount was applied since the unregistered shares were subject to a lock-up period of one year.  The Company allocated the excess of purchase price over the identifiable intangible and net tangible assets to goodwill. The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	3,521
Common stock	1,984
Deferred cash consideration	1,495
	$	7,000
Allocation of Purchase Consideration:
Current assets	$	1,140
Property and equipment	47
Other assets	10
Identifiable intangible assets	2,857
Goodwill	4,477
Total assets acquired	8,531
Accounts payable and accrued expenses	(394		)
Deferred taxes	(767		)
Deferred revenue	(370		)
	$	7,000

The goodwill and identifiable intangible assets related to the Anomalous acquisition are not tax deductible. The Company estimated the fair value of intangible assets using the income, cost and market approaches to value the identifiable intangible assets, which are subject to amortization. The following table presents the Company’s estimates of fair value of the identifiable intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Technology	$	2,017	5.0
Non-compete covenants	553		2.0
Customer relationships	236		4.0
Tradenames	51		3.0
Total identifiable intangible assets	$	2,857

ttMobiles Limited

On February 21, 2012 (the “ttMobiles Acquisition Date”), the Company entered into a Share Purchase Agreement (the “ttMobiles Purchase Agreement”), with the holders of all of the issued share capital of ttMobiles Limited, a private limited company incorporated in England (“ttMobiles”), under which the Company agreed to purchase all of the issued share capital of ttMobiles (the “ttMobiles Share Purchase”). On the same day, the ttMobiles Share Purchase was effected in accordance with the terms of the ttMobiles Purchase Agreement, with the Company acquiring all of the outstanding equity of ttMobiles for aggregate consideration of (i) £4.0 million in cash paid at the closing, and (ii) £1.5 million in cash payable on the first anniversary of the closing (the “Deferred Consideration”).  The Company paid the full £1.5 million of Deferred Consideration in February 2013.

ttMobiles Purchase Price Allocation

The allocation of the total purchase price of ttMobiles’ net tangible and identifiable intangible assets was based upon the estimated fair value of those assets as of February 21, 2012. The Company allocated the excess of purchase price over the identifiable intangible and net tangible assets to goodwill. The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	6,359
Deferred cash consideration	2,315
	$	8,674
Allocation of Purchase Consideration:
Current assets	$	2,469
Property and equipment	188
Identifiable intangible assets	4,288
Goodwill	3,557
Total assets acquired	10,502
Accounts payable and accrued expenses	(848		)
Deferred taxes	(954		)
Deferred revenue	(26		)
	$	8,674

The goodwill and identifiable intangible assets related to the ttMobiles acquisition are not tax deductible. The Company estimated the fair value of intangible assets using the income, cost and market approaches to value the identifiable intangible assets, which are subject to amortization. The following table presents the Company’s estimates of fair value of the identifiable intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Customer relationships	$	2,606	9.0
Technology	1,178		5.0
Tradenames	388		4.0
Non-compete covenants	116		2.0
Total identifiable intangible assets	$	4,288

Symphony Teleca Services, Inc.

On August 8, 2012, the Company entered into an Asset Purchase Agreement (the “Symphony Purchase Agreement”) with Symphony Teleca Services, Inc., a Delaware corporation (“Symphony”), under which the parties agreed to the purchase by the Company of Symphony’s telecommunications expense management business (the “TEM Business”) through an asset purchase (the “Symphony Acquisition”).  As part of the Symphony Acquisition and also on August 8, 2012, a newly formed subsidiary of the Company, Tangoe India Softek Services Private Limited, an Indian private limited company (“Tangoe India”), entered into a Business Purchase Agreement (the “Indian Purchase Agreement”) with Symphony Services Corporation (India) Private Limited (“Symphony India”) with respect to the purchase of certain assets and hiring of employees of the acquired business located in India.  On the same day, the Symphony Acquisition was effected in accordance with the terms of the Symphony Purchase Agreement.  At the closing of the Symphony Acquisition, the Company acquired the TEM Business for net consideration of $40.2 million, subject to certain adjustments (the “Cash Purchase Price”), payable as described below, plus an earn-out payable in the amount of up to $4.0 million based on achievement of revenue targets for the acquired business for periods through June 30, 2013.  No earn-out is payable because the revenue targets were not achieved.  The Cash Purchase Price, after giving effect to certain adjustments, is payable as follows: (i) approximately $29.2 million in cash paid at the closing, (ii) approximately $4.4 million in cash payable on the six-month anniversary of the closing, which includes $2.5 million related to the Indian Purchase Agreement, and (iii) approximately $6.4 million in cash payable on the one-year anniversary of the closing.  As part of the Symphony Acquisition, the Company acquired a balance sheet for the TEM Business, which included net assets of approximately $5.4 million.  The Company made the six-month anniversary payment of $4.4 million in February 2013.   The full installment due on August 8, 2013 of approximately $6.4 million, and amounts that became payable under the earn-out, were subject to set-off rights of the Company with respect to indemnities given by Symphony under the Symphony Purchase Agreement.  Among other things, these indemnity obligations related to representations and warranties given by Symphony under the Symphony Purchase Agreement and by Symphony India under the Indian Purchase Agreement.  Certain of the indemnities were subject to limitations, including a threshold and deductible, certain caps and limited survival periods.  The Company made a payment on the one-year anniversary of the closing in the amount of $4.9 million, consisting of the one-year anniversary payment of $6.4 million less $1.3 million withheld pending the resolution of certain indemnity matters, and less a net asset adjustment based on the final closing balance sheet of $0.2 million.  In October 2013, the Company and Symphony resolved the indemnity matters and the Company paid the $1.3 million that it had previously deducted from the one-year anniversary payment.  During a post-closing transition period that lasted through February 2013, Symphony and Symphony India provided to the Company certain transition services pending completion of the opening of certain Tangoe India facilities, the procurement of certain Indian tax registrations and the subsequent transfer to Tangoe India of the Indian assets and employees being hired.  These services included making available to the Company on a continuing basis the services previously provided by Symphony India to the TEM Business.

Symphony Purchase Price Allocation

The allocation of the total purchase price of Symphony’s net tangible and identifiable intangible assets was based upon estimated fair values of those assets as of August 8, 2012.  The Company allocated the excess of purchase price over the identifiable intangible and net tangible assets to goodwill. The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	29,208
Deferred cash consideration	10,793
	$	40,001
Allocation of Purchase Consideration:
Current assets	$	5,628
Property and equipment	602
Identifiable intangible assets	13,790
Goodwill	20,936
Total assets acquired	40,956
Accounts payable and accrued expenses	(335		)
Deferred revenue	(620		)
	$	40,001

The goodwill and identifiable intangible assets related to the Symphony acquisition are tax deductible. The Company estimated the fair value of intangible assets using the income, cost and market approaches to value the identifiable intangible assets, which are subject to amortization. The following table presents the Company’s estimates of fair value of the identifiable intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Customer relationships	$	9,680	9.0
Technology	4,050		5.0
Tradename	60		3.0
Total identifiable intangible assets	$	13,790

oneTEM GmbH

On April 18, 2013 (“oneTEM Closing Date”), the Company entered into a Share Purchase Agreement (the “oneTEM Purchase Agreement”), with the holders of all of the issued share capital of oneTEM GmbH, a private limited company incorporated in Germany (“oneTEM”), under which the Company agreed to purchase all of the issued share capital of oneTEM (the “oneTEM Share Purchase”).  This acquisition reflects the Company’s continued strategy to expand in the European marketplace.   On the oneTEM Closing Date, the oneTEM Share Purchase was effected in accordance with the terms of the oneTEM Purchase Agreement, with the Company acquiring all of the outstanding equity of oneTEM for aggregate consideration of (i) €0.9 million in cash paid at the closing, and (ii) deferred consideration of €0.4 million in cash payable on the first anniversary of the closing.  In addition, the Company is obligated to pay additional deferred cash consideration following the first four anniversaries of the oneTEM Closing Date, pursuant to an earn-out formula based upon the business beginning to generate annual recurring revenue from specified customers and then year-over-year increases in annual recurring revenue from those specified customers during the earn-out periods.  The earn-out period begins with the first full month after the oneTEM Closing Date and continues for four consecutive 12-month periods.  The Company valued this contingent consideration at €0.2 million. The purchase is subject to a net asset adjustment pursuant to which the purchase price would be increased or decreased to the extent the net asset position of oneTEM is more or less than a specified target.  The deferred consideration is subject to set-off rights of the Company with respect to certain indemnities given by the former holders of the issued share capital of oneTEM under the oneTEM Purchase Agreement until the deferred consideration is paid in full.  The Company has included the operating results of oneTEM in its consolidated financial statements since the date of acquisition, including $0.3 million of strategic consulting, software licenses and other revenue.

oneTEM Purchase Price Allocation

The allocation of the total purchase price of oneTEM’s net tangible and identifiable intangible assets was based upon management’s preliminary estimate of the fair values of those assets taking into account all relevant information available.  Actual amounts for each of the fair values of the assets acquired and liabilities assumed may vary.  The Company allocated the excess of purchase price over the identifiable intangible and net tangible assets to goodwill. The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	1,221
Deferred cash consideration	433
Fair value of contingent consideration	183
	$	1,837
Allocation of Purchase Consideration:
Current assets	$	565
Property and equipment	10
Identifiable intangible assets	870
Goodwill	655
Total assets acquired	2,100
Accounts payable and accrued expenses	(152		)
Taxes payable	(111		)
	$	1,837

The goodwill and identifiable intangible assets related to the oneTEM acquisition are not tax deductible. The Company estimated the fair value of intangible assets using the income, cost and market approaches to value the identifiable intangible assets, which are subject to amortization. The following table presents the Company’s estimates of fair value of the identifiable intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Customer relationships	$	535	8.0
Covenants not to compete	298		2.0
Tradename	37		2.7
Total identifiable intangible assets	$	870

Unaudited Pro Forma Results

The following table presents the unaudited pro forma results of the Company for the three and nine months ended September 30, 2012 and 2013 as if the acquisitions of Anomalous, ttMobiles and oneTEM occurred at the beginning of 2012.  Due to the inability of the Company to anticipate and estimate on a forward-looking basis incremental costs allocated to the Symphony TEM Business by Symphony and the uncertainty and difficulty of calculating the specific costs required to meaningfully present the effects of the acquisition and the costs of operating the Symphony TEM Business, the Company has not included the Symphony TEM Business in the unaudited pro forma results for the three and nine months ended September 30, 2012 below.  The unaudited pro forma revenue for the Symphony TEM Business was $2.4 million for the period of July 1, 2012 through August 8, 2012, the acquisition date, and $13.0 million for the period of January 1, 2012 through August 8, 2012, the acquisition date.  The unaudited pro forma revenue for the Symphony TEM Business for the three and nine months ended September 30, 2012 is not included in the unaudited pro forma results below.  These results are not intended to reflect the actual operations of the Company had these acquisitions occurred at January 1, 2012.

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share amounts)	2012		2013		2012		2013
Revenue	$	40,458	$	47,620	$	113,337	$	139,138
Operating income	967		1,324		2,128		3,004
Net income	584		1,555		1,094		3,127
Basic income per common share	$	0.02	$	0.04	$	0.03	$	0.08
Diluted income per common share	$	0.01	$	0.04	$	0.03	$	0.08

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Stockholders' Equity (Details 4) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Total compensation expense for stock-based employee compensation awards
Total stock-based employee compensation	$ 3,302	$ 2,755	$ 9,773	$ 6,539
Stock-based employee compensation expense to be recognized for equity awards granted since January 1, 2006
2013	3,272		3,272
2014	11,718		11,718
2015	8,106		8,106
2016	2,333		2,333
2017	123		123
Total stock-based employee compensation yet to be recognized	25,552		25,552
Cost of goods sold
Total compensation expense for stock-based employee compensation awards
Total stock-based employee compensation	529	362	1,609	947
Sales and marketing expenses
Total compensation expense for stock-based employee compensation awards
Total stock-based employee compensation	978	586	2,747	1,455
General and administrative expenses
Total compensation expense for stock-based employee compensation awards
Total stock-based employee compensation	1,551	1,643	4,664	3,727
Research and development
Total compensation expense for stock-based employee compensation awards
Total stock-based employee compensation	$ 244	$ 164	$ 753	$ 410

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Supplemental Cash Flow Information (Tables)

9 Months Ended

Sep. 30, 2013

Supplemental Cash Flow Information

Schedule of information about other cash flow activities

	Nine months ended September 30,
(in thousands)	2012		2013
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for:
Interest	$	94	$	65
Income tax payments	$	284	$	345
NON-CASH TRANSACTIONS:
Deferred purchase price in connection with Anomalous acquisition	$	950	$	—
Deferred purchase price in connection with ttMobiles acquisition	$	2,315	$	—
Deferred purchase price in connection with Symphony acquisition	$	10,942	$	––
Deferred purchase price in connection with oneTEM acquisition	$	—	$	616
Issuance of common stock in payment of board of directors fees	$	20	$	—
Cashless exercise of warrants	$	479	$	—

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Income per Share Applicable to Common Stockholders (Details 2) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Outstanding stock options
Potentially dilutive securities
Potential dilutive securities considered as anti-dilutive	2,315	2,169	2,565	2,169
Outstanding restricted stock units
Potentially dilutive securities
Potential dilutive securities considered as anti-dilutive	476	176	587	173
Common stock warrants
Potentially dilutive securities
Potential dilutive securities considered as anti-dilutive	7	10	9	10

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Debt (Details)			0 Months Ended		9 Months Ended				0 Months Ended			1 Months Ended	0 Months Ended	1 Months Ended				0 Months Ended	1 Months Ended				0 Months Ended						1 Months Ended		0 Months Ended	9 Months Ended				9 Months Ended				1 Months Ended						1 Months Ended								0 Months Ended	1 Months Ended
	Sep. 30, 2013 USD ($)	Dec. 31, 2012 USD ($)	Mar. 16, 2013 Telwares Installment payment due March 16, 2012 USD ($)	Mar. 16, 2012 Telwares Installment payment due March 16, 2012 USD ($)	Sep. 30, 2013 Telwares Installment payment due March 16, 2012 USD ($)	Sep. 30, 2013 Telwares Installment payment due March 16, 2013 USD ($)	Mar. 16, 2013 Telwares Consideration payable on achievement of revenue targets Maximum USD ($)	Dec. 19, 2011 ProfitLine USD ($)	Dec. 19, 2012 ProfitLine Installment payment due December 19, 2012 USD ($)	Jun. 19, 2013 ProfitLine Installment payment due June 19, 2013 After payment of first installment and before payment of second installment USD ($)	Jan. 10, 2012 Anomalous USD ($)	Jan. 31, 2013 Anomalous Installment payment due first anniversary after closing (January 10, 2013) USD ($)	Feb. 21, 2013 ttMobiles Installment payment due February 21, 2013 GBP (£)	Feb. 28, 2013 ttMobiles Installment payment due February 21, 2013 GBP (£)	Sep. 30, 2013 Symphony USD ($)	Aug. 08, 2012 Symphony USD ($)	Sep. 30, 2013 Symphony Minimum USD ($)	Aug. 08, 2013 Symphony Cash payable on twelve month anniversary of the closing USD ($)	Oct. 31, 2013 Symphony Cash payable on twelve month anniversary of the closing USD ($)	Feb. 28, 2013 Symphony Cash payable on the six-month anniversary of the closing USD ($)	Sep. 30, 2013 Symphony Cash payable on the six-month anniversary of the closing USD ($)	Sep. 30, 2013 Symphony Consideration payable on achievement of revenue targets USD ($)	Apr. 18, 2013 oneTEM item	Apr. 18, 2013 oneTEM Cash payable on first year anniversary of the closing EUR (€)	Sep. 30, 2013 Contingent consideration HCL-EMS USD ($)	Dec. 31, 2012 Contingent consideration HCL-EMS USD ($)	Jan. 25, 2011 Contingent consideration HCL-EMS USD ($)	Dec. 31, 2012 Contingent consideration HCL-EMS Installment payment due March 16, 2012 USD ($)	Aug. 31, 2013 Contingent consideration HCL-EMS Installment payment due March 16, 2013 USD ($)	Apr. 30, 2013 Contingent consideration HCL-EMS Installment payment due March 16, 2013 USD ($)	Apr. 18, 2013 Contingent consideration oneTEM Cash payable on first year anniversary of the closing EUR (€) item	Sep. 30, 2013 Contingent consideration oneTEM Cash payable on first year anniversary of the closing EUR (€) item	Sep. 30, 2013 Deferred purchase price Telwares USD ($)	Dec. 31, 2012 Deferred purchase price Telwares USD ($)	Mar. 16, 2011 Deferred purchase price Telwares USD ($)	Sep. 30, 2013 Deferred purchase price Telwares Consideration payable on achievement of revenue targets USD ($)	Sep. 30, 2013 Deferred purchase price ProfitLine USD ($)	Dec. 31, 2012 Deferred purchase price ProfitLine USD ($)	Dec. 19, 2011 Deferred purchase price ProfitLine USD ($)	Dec. 31, 2012 Deferred purchase price ProfitLine Installment payment due December 19, 2012 USD ($)	Jul. 31, 2013 Deferred purchase price ProfitLine Installment payment due June 19, 2013 USD ($)	Oct. 31, 2013 Deferred purchase price ProfitLine Installment payment due June 19, 2013 USD ($) item	Sep. 30, 2013 Deferred purchase price Anomalous USD ($)	Dec. 31, 2012 Deferred purchase price Anomalous USD ($)	Jan. 10, 2012 Deferred purchase price Anomalous USD ($)	Jan. 31, 2013 Deferred purchase price Anomalous Installment payment due first anniversary after closing (January 10, 2013) USD ($)	Sep. 30, 2013 Deferred purchase price ttMobiles USD ($)	Dec. 31, 2012 Deferred purchase price ttMobiles USD ($)	Feb. 21, 2012 Deferred purchase price ttMobiles USD ($)	Sep. 30, 2013 Deferred purchase price Symphony USD ($)	Dec. 31, 2012 Deferred purchase price Symphony USD ($)	Aug. 08, 2012 Deferred purchase price Symphony USD ($)	Sep. 30, 2013 Deferred purchase price Symphony Maximum USD ($)	Aug. 08, 2013 Deferred purchase price Symphony Cash payable on twelve month anniversary of the closing USD ($)	Oct. 31, 2013 Deferred purchase price Symphony Cash payable on twelve month anniversary of the closing USD ($)	Sep. 30, 2013 Deferred purchase price and contingent consideration oneTEM USD ($)	Sep. 30, 2013 Capital lease and other obligations USD ($)	Dec. 31, 2012 Capital lease and other obligations USD ($)
Debt
Total notes payable	$ 3,573,000	$ 22,574,000																							$ 891,000	$ 2,046,000								$ 1,226,000			$ 23,000	$ 4,438,000						$ 978,000				$ 2,420,000		$ 1,279,000	$ 10,662,000					$ 660,000	$ 720,000	$ 804,000
Less current portion	(3,372,000)	(22,443,000)
Notes payable, less current portion	201,000	131,000
Gross amount of earn-out							500,000										4,000,000	6,400,000			4,400,000	40,200,000						1,900,000	900,000	1,900,000
Unamortized discount																									0	12,000							0	24,000			0	62,000					0	1,000			0	10,000		0	128,000					111,000
Deferred cash consideration								9,000,000			979,000					4,400,000
Deferred cash consideration					1,250,000	1,250,000			4,500,000				1,500,000											400,000								400,000
Deferred cash consideration paid												979,000		1,500,000				4,900,000		4,400,000									1,000,000											4,100,000	4,100,000					979,000								4,900,000
Payment			1,250,000	1,250,000														6,400,000																						4,500,000	4,500,000													6,400,000
Agreed reduction in gross amount of the year first earn-out																																				400,000
Deferred cash consideration paid related to indemnity matters																		1,300,000																						400,000	400,000													1,300,000
Number of payees entitled to receive deferred cash consideration																																										1
Deferred cash consideration due to one of the stockholders whom the entity was unable to locate																																										23,000
Amount of deferred cash consideration due to payee and withheld by the Company for not responding to the Company's communications																																										23,000
Imputed interest recorded based on weighted average cost of debt																											600,000					100,000			300,000				300,000						29,000				100,000			200,000
Deferred cash consideration change in purchase price due to net asset adjustment																		200,000																																				200,000
Amount paid for indemnity matters resolved which was previously deducted from deferred cash consideration																			1,300,000																																				1,300,000
Contingent consideration under Indian purchase agreement																					2,500,000
Contingent advance escrow deposit										4,500,000
Earn-out payable, maximum amount																																																					4,000,000
Earn-out payable															0																																			0
Deferred cash consideration paid related to installment resulting from reduction in potential cash payment																																				900,000
Number of consecutive 12-month earn-out period																							4								4	4
Earn-out period																															12 months	12 months
Deferred cash consideration for four consecutive 12-month earn-out periods																															€ 200,000	€ 200,000

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Commitments and Contingencies (Details) (USD $) In Millions, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Rent expense, included in general and administrative expense
Rent expense	$ 4.2	$ 3.6

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Condensed Consolidated Balance Sheets (Parenthetical) (USD $) In Thousands, except Share data, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
Condensed Consolidated Balance Sheets
Accounts receivable, allowances (in dollars)	$ 345	$ 198
Common stock, par value (in dollars per share)	$ 0.0001	$ 0.0001
Common stock, shares authorized	150,000,000	150,000,000
Common stock, shares issued	38,125,858	37,613,327
Common stock, shares outstanding	38,125,858	37,613,327

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Debt

9 Months Ended

Sep. 30, 2013

Debt

Debt

7. Debt

As of December 31, 2012 and September 30, 2013, debt outstanding included the following:

	December 31,			September 30,
(in thousands)	2012			2013
HCL-EMS contingent consideration, net of unamortized discount of $12 and $0 at December 31, 2012 and September 30, 2013, respectively. Payable as described below.	$	2,046		$	891
Deferred Telwares purchase price, net of unamortized discount of $24 and $0 at December 31, 2012 and September 30, 2013, respectively.	1,226			—
Deferred ProfitLine purchase price, net of unamortized discount of $62 and $0 at December 31, 2012 and September 30, 2013, respectively. Payable as described below.	4,438			23
Deferred Anomalous purchase price, net of unamortized discount of $1 and $0 at December 31, 2012 and September 30, 2013, respectively.	978			—
Deferred ttMobiles purchase price, net of unamortized discount of $10 and $0 at December 31, 2012 and September 30, 2013, respectively.	2,420			—
Deferred Symphony purchase price, net of unamortized discount of $128 and $0 at December 31, 2012 and September 30, 2013, respectively. Payable as described below.	10,662			1,279
Deferred oneTEM purchase price and contingent consideration, net of unamortized discount of $111 at September 30, 2013. Payable as described below.	—			660
Capital lease and other obligations	804			720
Total notes payable	$	22,574		$	3,573
Less current portion	$	(22,443	)	$	(3,372	)
Notes payable, less current portion	$	131		$	201

Contingent HCL-EMS Consideration

The purchase consideration for the acquisition of HCL-EMS includes deferred cash consideration. The deferred cash consideration includes contingent cash payments following each of the first and second anniversaries of the closing date of the HCL-EMS acquisition on January 25, 2011 (the “HCL-EMS Closing Date”), pursuant to an earn-out formula based upon specified revenues from specified customers acquired from HCL-EMS, subject to set-off rights of the Company with respect to indemnities given by HCL-EMS under the Asset Purchase Agreement entered into in December 2010 in connection with the HCL-EMS acquisition (the “HCL-EMS APA”). No interest accrues on the deferred cash consideration; however, the Company recorded imputed interest in the amount of $0.6 million based on the Company’s weighted average cost of debt as of the date of the acquisition. The obligation to pay the deferred cash consideration is unsecured. In 2012, the Company and HCL-EMS agreed that the gross amount of the first year earn-out would be $1.9 million and the Company paid that amount to HCL-EMS.  In April 2013, the Company and HCL-EMS agreed that the gross amount of the second year earn-out would be $1.9 million.  In early August 2013, the Company paid $1.0 million of the second year earn-out to HCL-EMS, and retained the balance of the second year earn-out in the amount of $0.9 million pending resolution of an outstanding indemnity matter.  The only adjustments to the balance in 2013 were the accretion of imputed interest, the adjustment of the second year earn-out estimate to actual and the partial payment of the second year earn-out.

Deferred Telwares Purchase Price

The purchase consideration for the acquisition of Telwares included deferred cash consideration. The deferred cash consideration included payments of $1.25 million on March 16, 2012 and $1.25 million on March 16, 2013, subject to set-off rights of the Company with respect to indemnities given by Telwares under an Asset Purchase Agreement entered into in March 2011 in connection with the Telwares acquisition.  The Company paid the first installment of $1.25 million on March 16, 2012.  The installment payable on March 16, 2013 was subject to a potential reduction of up to $0.5 million relating to the achievement of certain recurring revenue goals during the three months ended June 30, 2012.  The Company and Telwares agreed that the amount of that reduction would be $0.4 million and the Company paid the resulting installment of deferred cash consideration of $0.9 million in March 2013.  No interest accrued on the deferred cash consideration; however, the Company recorded imputed interest in the amount of $0.3 million based on the Company’s weighted average cost of debt as of the date of the acquisition. The obligation to pay the deferred cash consideration was unsecured. The only adjustments to the balance in 2013 were the accretion of imputed interest, the reduction in deferred consideration as described above and the payment of the second installment.

Deferred ProfitLine Purchase Price

On December 19, 2011, the Company and Snow Acquisition Sub, Inc., a Delaware corporation and a wholly owned subsidiary of the Company (the “Acquisition Sub”), entered into an Agreement and Plan of Merger (the “Merger Agreement”) with ProfitLine, Inc., a Delaware corporation (“ProfitLine”), and Doug Carlisle, solely in his capacity as Stockholder Representative under the Merger Agreement, under which the parties agreed to the merger of the Acquisition Sub with and into ProfitLine (the “Merger”) with ProfitLine surviving the Merger as a wholly owned subsidiary of the Company.  The purchase consideration for the acquisition of ProfitLine included deferred cash consideration consisting of payments of $9.0 million in installments of $4.5 million each on December 19, 2012 and June 19, 2013, subject to set-off rights of the Company and the surviving corporation with respect to indemnities given by the former stockholders of ProfitLine under the Merger Agreement.  The Company paid $4.1 million in December 2012, which represented the first installment of $4.5 million less indemnity claims of $0.4 million. The Company paid $4.1 million in July 2013, which represented the second and final installment of $4.5 million less indemnity claims of $0.4 million.  One payee, who was entitled to receive $23,000, did not respond to the Company’s communications until October 2013, and therefore the $23,000 was withheld by the Company until October 2013.  No interest accrued on the deferred cash consideration; however, the Company recorded imputed interest in the amount of $0.3 million based on the Company’s weighted-average cost of debt as of the date of the acquisition.  The obligation to pay the deferred cash consideration was unsecured.  The only adjustments to the balance in 2013 were the accretion of imputed interest and the payment of the second and final installment.

Deferred Anomalous Purchase Price

As described in Note 2, the purchase consideration for the acquisition of Anomalous included deferred cash consideration.  The deferred cash consideration included a payment of $979,000 in cash on the first anniversary of the Anomalous Acquisition Date, subject to set-off rights of the Company with respect to indemnities given by the former shareholders of Anomalous under the Anomalous Purchase Agreement.  The Company paid the full $979,000 of deferred cash consideration in January 2013. No interest accrued on the deferred cash consideration; however, the Company recorded imputed interest in the amount of $29,000 based on the Company’s weighted average cost of debt as of the date of the acquisition.  The obligation to pay the deferred cash consideration was unsecured.   The only adjustments to the balance in 2013 were the accretion of imputed interest and the payment of the deferred cash consideration.

Deferred ttMobiles Purchase Price

As described in Note 2, the purchase consideration for the acquisition of ttMobiles included deferred cash consideration.  The deferred cash consideration included a payment of £1.5 million in cash payable on the first anniversary of the ttMobiles Acquisition Date. The Company paid this £1.5 million of deferred consideration in February 2013. No interest accrued on the deferred cash consideration; however, the Company recorded imputed interest in the amount of $0.1 million based on the Company’s weighted average cost of debt as of the date of the acquisition.  The obligation to pay the deferred cash consideration was unsecured.  The only adjustments to the balance in 2013 were the accretion of imputed interest, foreign exchange adjustment and payment of the deferred cash consideration.

Deferred Symphony Purchase Price

As described in Note 2, the purchase consideration for the acquisition of the Symphony TEM Business included deferred cash consideration.  The deferred cash consideration included payments of $4.4 million in cash payable on the six-month anniversary of the closing of the Symphony acquisition, which included $2.5 million of consideration related to the Indian Purchase Agreement, and $6.4 million in cash payable on the twelve-month anniversary of closing of the Symphony Acquisition.  In addition, the acquisition consideration included an earn-out payable in the amount of up to $4.0 million based on achievement of revenue targets for the acquired business for periods through June 30, 2013.  No earn-out is payable because the revenue targets were not achieved.  The Company made the six-month anniversary payment of $4.4 million in February 2013.  The Company made a payment on the one-year anniversary of the closing in the amount of $4.9 million, consisting of the one-year anniversary payment of $6.4 million less $1.3 million withheld pending the resolution of certain indemnity matters, and less a net asset adjustment based on the final closing balance sheet of $0.2 million.  In October 2013, the Company and Symphony resolved the indemnity matters and the Company paid the $1.3 million that it had previously deducted from the one-year anniversary payment. No interest accrued on the deferred cash consideration; however, the Company recorded imputed interest in the amount of $0.2 million based on the Company’s weighted average cost of debt as of the date of the acquisition.  The obligation to pay the deferred cash consideration was unsecured.  The full installment due on August 8, 2013 of approximately $6.4 million and amounts that potentially could become payable under the earn-out were subject to set-off rights of the Company with respect to indemnities given by Symphony under the Symphony Purchase Agreement.  Among other things, these indemnity obligations related to representations and warranties given by Symphony under the Symphony Purchase Agreement and by Symphony India under the Indian Purchase Agreement.  Certain of the indemnities were subject to limitations, including a threshold and deductible, certain caps and limited survival periods.   The only adjustments to the balance in 2013 were the accretion of imputed interest and the payment of the six- and twelve-month installments.

Deferred oneTEM Purchase Price

As described in Note 2, the purchase consideration for the acquisition of oneTEM includes deferred cash consideration.  The deferred cash consideration includes a payment of €0.4 million in cash payable on the first year anniversary of the closing of the oneTEM acquisition.  In addition, the acquisition consideration includes an earn-out payable pursuant to an earn-out formula based upon the business beginning to generate annual recurring revenue from specified customers and then year-over-year increases in annual recurring revenue from those specified customers during the earn out periods.  The earn-out period begins with the first full month after the oneTEM Closing Date and continues for four consecutive 12-month periods.  The Company valued this contingent consideration at €0.2 million.  No interest accrues on the deferred cash consideration; however, the Company recorded imputed interest in the amount of €0.1 million based on weighted average cost of capital as of the date of the acquisition.  The deferred consideration is subject to set-off rights of the Company with respect to certain indemnities given by the former holders of the issued share capital of oneTEM under the oneTEM Purchase Agreement until the deferred consideration is paid.

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Condensed Consolidated Statements of Comprehensive Income (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Sep. 30, 2013	Sep. 30, 2012
Condensed Consolidated Statements of Comprehensive Income
Net income	$ 1,555	$ 581	$ 3,229	$ 1,111
Foreign currency translation adjustment	427	556	(731)	309
Total comprehensive income	$ 1,982	$ 1,137	$ 2,498	$ 1,420

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Condensed Consolidated Balance Sheets (USD $) In Thousands, unless otherwise specified	Sep. 30, 2013	Dec. 31, 2012
CURRENT ASSETS:
Cash and cash equivalents	$ 42,258	$ 50,211
Accounts receivable, less allowances of $198 and $345, respectively	40,656	38,309
Prepaid expenses and other current assets	5,177	3,384
Total current assets	88,091	91,904
COMPUTERS, FURNITURE AND EQUIPMENT-NET	4,248	3,999
OTHER ASSETS:
Intangible assets-net	38,766	44,249
Goodwill	65,993	65,825
Security deposits and other non-current assets	981	1,291
TOTAL ASSETS	198,079	207,268
CURRENT LIABILITIES:
Accounts payable	9,494	9,128
Accrued expenses	9,442	12,035
Deferred revenue-current portion	9,695	9,648
Notes payable-current portion	3,372	22,443
Other current liabilities	533	305
Total current liabilities	32,536	53,559
OTHER LIABILITIES:
Deferred rent and other non-current liabilities	3,477	3,543
Deferred revenue-less current portion	1,566	1,415
Notes payable-less current portion	201	131
Total liabilities	37,780	58,648
COMMITMENTS AND CONTINGENCIES (NOTE 12)
STOCKHOLDERS' EQUITY
Common stock, par value $0.0001 per share-150,000,000 shares authorized as of December 31, 2012 and September 30, 2013; 37,613,327 and 38,125,858 shares issued and outstanding as of December 31, 2012 and September 30, 2013, respectively	4	4
Additional paid-in capital	200,762	191,581
Warrants for common stock	10,610	10,610
Accumulated deficit	(50,528)	(53,757)
Other comprehensive gain (loss)	(549)	182
Total stockholders' equity	160,299	148,620
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY	$ 198,079	$ 207,268

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Organization, Description of Business (Details) (Common Stock, USD $) In Millions, except Share data, unless otherwise specified	1 Months Ended
	Aug. 31, 2011 Initial public offering	Aug. 31, 2011 Initial public offering Underwriter option	Apr. 30, 2012 April 2012 public offering	Apr. 30, 2012 April 2012 public offering Underwriter option
Public Offerings
Issuance of shares, net of issuance costs (in shares)	7,500,000		2,200,000
Price to the public (in dollars per share)	$ 10.00		$ 18.50
Proceeds from initial public offering, net of underwriting discounts and commissions and other offering costs	$ 66.0		$ 38.5
Offering costs	$ 3.8		$ 0.7
Stock sold by certain existing stockholders (in shares)	2,585,500	1,315,500	7,000,000	1,200,000

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Intangible Assets and Goodwill (Tables)

9 Months Ended

Sep. 30, 2013

Intangible Assets and Goodwill

Schedule of components of intangible assets

							Weighted
	December 31,			September 30,			Average Useful
(in thousands)	2012			2013			Life (in years)
Patents	$	1,054		$	1,054		8.0
Less: accumulated amortization	(766		)	(864		)
Patents, net	288			190
Technological know-how	15,141			15,070			6.1
Less: accumulated amortization	(4,913		)	(7,126		)
Technological know-how, net	10,228			7,944
Customer relationships	37,358			37,879			8.7
Less: accumulated amortization	(10,793		)	(14,052		)
Customer relationships, net	26,565			23,827
Convenants not to compete	881			1,159			2.0
Less: accumulated amortization	(517		)	(830		)
Convenants not to compete, net	364			329
Strategic marketing agreement	6,203			6,203			10.0
Less: accumulated amortization	(293		)	(486		)
Strategic marketing agreement, net	5,910			5,717
Tradenames	843			877			3.8
Less: accumulated amortization	(196		)	(365		)
Tradenames, net	647			512
Trademarks	247			247			Indefinite
Intangible assets, net	$	44,249		$	38,766

Schedule of estimate of future amortization expense for acquired intangible assets

(in thousands)
October 1, 2013 to December 31, 2013	$	2,118
2014	7,563
2015	6,100
2016	5,782
2017	6,026
Thereafter	10,930
Total	$	38,519

Schedule of changes in carrying amounts of goodwill

	Carrying
(in thousands)	Amount
Balance at December 31, 2012	$	65,825
oneTEM	655
Foreign exchange translation effect	(487		)
Balance at September 30, 2013	$	65,993

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Supplemental Cash Flow Information (Details) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid for interest	$ 65	$ 94
Cash paid for income tax payments	345	284
NON-CASH TRANSACTIONS:
Issuance of common stock in payment of board of director fees		20
Cashless exercise of warrants		479
Anomalous
NON-CASH TRANSACTIONS:
Deferred purchase price		950
ttMobiles
NON-CASH TRANSACTIONS:
Deferred purchase price		2,315
oneTEM
NON-CASH TRANSACTIONS:
Deferred purchase price	616
Symphony
NON-CASH TRANSACTIONS:
Deferred purchase price		$ 10,942

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Stockholders' Equity (Details 2) (USD $)	9 Months Ended			1 Months Ended			9 Months Ended		1 Months Ended			1 Months Ended	9 Months Ended		12 Months Ended			1 Months Ended		1 Months Ended	3 Months Ended	1 Months Ended			0 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012	Mar. 31, 2011 Dell strategic relationship agreement	Oct. 31, 2009 IBM strategic relationship agreement	Oct. 09, 2009 IBM strategic relationship agreement Achievement of certain thresholds Maximum	Sep. 30, 2013 Common Stock Warrants	Mar. 22, 2011 Common Stock Warrants Dell strategic relationship agreement	Mar. 31, 2011 Common Stock Warrants Dell strategic relationship agreement Achievement of certain thresholds	Mar. 22, 2011 Common Stock Warrants Dell strategic relationship agreement Achievement of certain thresholds	Mar. 22, 2011 Common Stock Warrants Dell strategic relationship agreement Achievement of certain thresholds Maximum	Aug. 31, 2011 Common Stock Warrants IBM strategic relationship agreement	Sep. 30, 2013 Common Stock Warrants IBM strategic relationship agreement	Sep. 30, 2012 Common Stock Warrants IBM strategic relationship agreement	Dec. 31, 2012 Common Stock Warrants IBM strategic relationship agreement	Oct. 09, 2009 Common Stock Warrants IBM strategic relationship agreement	Oct. 09, 2009 Common Stock Warrants IBM strategic relationship agreement Maximum	Oct. 31, 2009 Common Stock Warrants IBM strategic relationship agreement Vested and exercisable immediately upon execution of agreement	Oct. 09, 2009 Common Stock Warrants IBM strategic relationship agreement Vested and exercisable immediately upon execution of agreement	Oct. 31, 2009 Common Stock Warrants IBM strategic relationship agreement Achievement of certain thresholds	Dec. 31, 2009 Common Stock Warrants IBM strategic relationship agreement Achievement of certain billing thresholds probable, initial assumption	Dec. 31, 2010 Common Stock Warrants IBM strategic relationship agreement Achievement of certain billing thresholds probable, actual billings to date	Jun. 30, 2012 Common Stock Warrants Amended IBM strategic relationship agreement	Jun. 08, 2011 Common Stock Warrants Amended IBM strategic relationship agreement Maximum	Jun. 08, 2011 Common Stock Warrants Amended IBM strategic relationship agreement Vested and exercisable immediately upon execution of agreement	Jun. 08, 2011 Common Stock Warrants Amended IBM strategic relationship agreement Achievement of certain thresholds Maximum
Warrants
Shares issued in cash exercise							14,907
Proceeds related to warrant exercise							$ 34,700
Shares issued in cashless exercise												930,511
Number of shares which can be purchased from issuance of warrant						2,308,125	0			1,282,789	1,282,789						3,198,402		890,277		947,103	624,755		2,166,658	624,755	651,626
Term of strategic relationship agreement				49 months	5 years				49 months
Exercise price of warrant (in dollars per share)							$ 13.26	$ 5.987								$ 4.148
Period of achievement of certain billing thresholds required for exercise of warrants																				3 years
Value of shares exercisable under the warrant	10,610,000		10,610,000																1,700,000		1,400,000				4,500,000
Expected term																		7 years			5 years 9 months 18 days				5 years 3 months 18 days
Expected volatility (as a percent)																		67.77%			61.15%				59.58%
Risk-free interest rate (as a percent)																		2.93%			2.28%				1.64%
Market value reversed for shares of common stock no longer deemed probable of being earned																						920,000
Number of shares no longer deemed probable of being earned																						322,348
Number of additional warrant shares earned																							0
Number of warrant shares issuable																							0
Intangible asset amortization period															10 years
Amortization recorded as a contra-revenue charge related to common stock warrant	$ 194,000	$ 119,000											$ 194,189	$ 119,259
Warrants exercised to purchase common stock
Outstanding at beginning of the year (in shares)							25,617
Exercised (in shares)							(14,907)
Cancelled (in shares)							0					(584,521)
Outstanding at end of the period (in shares)							10,710
Weighted average exercise price (in dollars per share)							$ 13.26	$ 5.987								$ 4.148

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Intangible Assets and Goodwill (Details 2) (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013
Changes in carrying amounts of goodwill
Balance at the beginning of the period	$ 65,825
Foreign exchange translation effect	(487)
Balance at the end of the period	65,993
oneTEM
Changes in carrying amounts of goodwill
Goodwill	$ 655

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Restructuring Charge (Details) (USD $)	3 Months Ended	6 Months Ended	9 Months Ended
	Mar. 31, 2013	Jun. 30, 2013	Sep. 30, 2013
Restructuring Charge
Adjustment to restructuring charges for inability to sublease the office space	$ 100,000
Settlement fees for lease termination		900,000
Adjustment to restructuring charges for lease termination		500,000
Activity in the liabilities related to the restructuring charge
Remaining liability at the beginning of the period	605,000	605,000	605,000
Cash payments			(736,000)
Non-cash charges and other			10,000
Restructuring charge			654,000
Remaining liability at the end of the period			533,000
less: current portion			(533,000)
Long-term portion			0
Lease costs, net of estimated sublease income
Activity in the liabilities related to the restructuring charge
Remaining liability at the beginning of the period	613,000	613,000	613,000
Cash payments			(736,000)
Non-cash charges and other			2,000
Restructuring charge			654,000
Remaining liability at the end of the period			533,000
Other Costs
Activity in the liabilities related to the restructuring charge
Remaining liability at the beginning of the period	(8,000)	(8,000)	(8,000)
Non-cash charges and other			8,000
Remaining liability at the end of the period			$ 0

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Restructuring Charge

9 Months Ended

Sep. 30, 2013

Restructuring Charge

Restructuring Charge

6. Restructuring Charge

In September 2011, the Company recorded a restructuring charge as a result of the consolidation of office space in New Jersey. The consolidation of office space eliminated redundant office space acquired as part of the acquisition of substantially all of the assets and certain liabilities of HCL Expense Management Services, Inc. (“HCL-EMS”) in January 2011 and of certain assets and liabilities of Telwares, Inc. and its subsidiary Vercuity, Inc. (“Telwares”) in March 2011.  The original charge reflected the fair value of the remaining rent payments for the office space the Company ceased using, net of estimated sublease income, plus real estate commissions and office relocation costs. During the three months ended March 31, 2013, the Company recorded an adjustment of $0.1 million to the original restructuring charge as a result of the Company’s inability to sublease the office space in the time period originally expected.  During the nine months ended September 30, 2013, the Company negotiated a lease termination agreement with the landlord of its New Jersey office space.  The agreement terminated the remaining term of the lease effective June 30, 2013 for a settlement fee of $0.9 million.  The Company recorded an adjustment of $0.5 million to the restructuring charge as a result of the lease termination agreement.  The liability related to the restructuring charge is included in other current liabilities on the Company’s condensed consolidated balance sheet. The following table summarizes the activity in the liabilities related to the restructuring charge for the nine months ended September 30, 2013:

	Lease costs, net
	of estimated
(in thousands)	sublease income			Other Costs			Total
Remaining liability at December 31, 2012	$	613		$	(8	)	$	605
Cash payments	(736		)	—			(736		)
Non-cash charges and other	2			8			10
Restructuring charge	654			—			654
Remaining liability at September 30, 2013	533			0			533
	Less: current portion						(533		)
	Long-term portion						$	0

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Business Combinations (Details)	3 Months Ended		9 Months Ended						1 Months Ended		9 Months Ended			1 Months Ended			1 Months Ended		1 Months Ended		1 Months Ended				0 Months Ended	1 Months Ended	0 Months Ended				1 Months Ended	3 Months Ended	7 Months Ended	9 Months Ended				1 Months Ended		0 Months Ended	1 Months Ended	0 Months Ended					0 Months Ended		9 Months Ended	0 Months Ended
	Sep. 30, 2013 USD ($)	Sep. 30, 2012 USD ($)	Sep. 30, 2013 USD ($)	Sep. 30, 2012 USD ($)	Sep. 30, 2013 Technology	Sep. 30, 2013 Customer relationships	Sep. 30, 2013 Non-compete covenants	Sep. 30, 2013 Tradenames	Mar. 31, 2013 Anomalous	Jan. 31, 2012 Anomalous	Sep. 30, 2013 Anomalous	Sep. 30, 2012 Anomalous	Jan. 10, 2012 Anomalous USD ($)	Jan. 31, 2013 Anomalous Installment payment due first anniversary after closing (January 10, 2013) USD ($)	Jan. 31, 2012 Anomalous Technology	Jan. 10, 2012 Anomalous Technology USD ($)	Jan. 31, 2012 Anomalous Customer relationships	Jan. 10, 2012 Anomalous Customer relationships USD ($)	Jan. 31, 2012 Anomalous Non-compete covenants	Jan. 10, 2012 Anomalous Non-compete covenants USD ($)	Jan. 31, 2012 Anomalous Tradenames	Jan. 10, 2012 Anomalous Tradenames USD ($)	Feb. 21, 2012 ttMobiles USD ($)	Feb. 21, 2012 ttMobiles GBP (£)	Feb. 21, 2013 ttMobiles Installment payment due February 21, 2013 GBP (£)	Feb. 28, 2013 ttMobiles Installment payment due February 21, 2013 GBP (£)	Feb. 21, 2012 ttMobiles Technology USD ($)	Feb. 21, 2012 ttMobiles Customer relationships USD ($)	Feb. 21, 2012 ttMobiles Non-compete covenants USD ($)	Feb. 21, 2012 ttMobiles Tradenames USD ($)	Aug. 08, 2012 Symphony USD ($)	Sep. 30, 2012 Symphony USD ($)	Aug. 08, 2012 Symphony USD ($)	Sep. 30, 2012 Symphony USD ($)	Sep. 30, 2013 Symphony USD ($)	Sep. 30, 2013 Symphony Minimum USD ($)	Sep. 30, 2013 Symphony Consideration payable on achievement of revenue targets USD ($)	Feb. 28, 2013 Symphony Cash payable on the six-month anniversary of the closing USD ($)	Sep. 30, 2013 Symphony Cash payable on the six-month anniversary of the closing USD ($)	Aug. 08, 2013 Symphony Installment payment due August 08, 2013 USD ($)	Oct. 31, 2013 Symphony Installment payment due August 08, 2013 USD ($)	Aug. 08, 2012 Symphony Technology USD ($)	Aug. 08, 2012 Symphony Customer relationships USD ($)	Aug. 08, 2012 Symphony Tradenames USD ($)	Apr. 18, 2013 oneTEM USD ($) item	Apr. 18, 2013 oneTEM EUR (€)	Apr. 18, 2013 oneTEM Installment payment due first anniversary of closing EUR (€)	Apr. 18, 2013 oneTEM Installment payment due first anniversary of closing Contingent consideration EUR (€) item	Sep. 30, 2013 oneTEM Installment payment due first anniversary of closing Contingent consideration EUR (€) item	Apr. 18, 2013 oneTEM Customer relationships USD ($)	Apr. 18, 2013 oneTEM Non-compete covenants USD ($)	Apr. 18, 2013 oneTEM Tradenames USD ($)
Business combinations
Deferred cash consideration													$ 979,000																		$ 4,400,000		$ 4,400,000
Contingent consideration under Indian purchase agreement																																							2,500,000
Deferred cash consideration																									1,500,000																						400,000		400,000
Contingent consideration																																				4,000,000	40,200,000		4,400,000	6,400,000
Deferred cash consideration paid														979,000												1,500,000												4,400,000		4,900,000
Unregistered shares of common stock issued as a consideration										165,775		165,775
Unvested and unregistered shares of common stock with vesting based upon achievement of revenue targets										132,617		132,617
Unvested and unregistered shares of common stock cancelled and retired									132,617
Number of unregistered and unvested shares of the common stock valued by using closing price											165,775
Marketability discount rate applied to the fair value of the unregistered and unvested shares (as a percent)											20.00%
Net assets																															5,400,000		5,400,000
Number of anniversaries for which additional consideration payable following the closing date																																													4			4
Number of consecutive 12-month earn-out period																																													4			4	4
Earn-out period																																																12 months	12 months
Deferred cash consideration for four consecutive 12-month earn-out periods																																																200,000	200,000
Strategic consulting, software licenses and other revenue	4,997,000	4,000,000	14,831,000	11,573,000																																									300,000
Anniversary payment																																								6,400,000
Deferred cash consideration paid related to indemnity matters																																								1,300,000
Deferred cash consideration change in purchase price due to net asset adjustment																																								200,000
Amount paid for indemnity matters resolved which was previously deducted from deferred cash consideration																																									1,300,000
Earn-out payable																																			0
Breakdown of purchase price
Cash													3,521,000										6,359,000	4,000,000							29,208,000		29,208,000												1,221,000	900,000
Common stock													1,984,000
Fair value of deferred purchase price													1,495,000										2,315,000								10,793,000		10,793,000												433,000
Fair value of contingent consideration																																													183,000
Total													7,000,000										8,674,000								40,001,000		40,001,000												1,837,000
Allocation of Purchase Consideration:
Current assets													1,140,000										2,469,000								5,628,000		5,628,000												565,000
Property and equipment													47,000										188,000								602,000		602,000												10,000
Other assets													10,000
Identifiable intangible assets													2,857,000			2,017,000		236,000		553,000		51,000	4,288,000				1,178,000	2,606,000	116,000	388,000	13,790,000		13,790,000									4,050,000	9,680,000	60,000	870,000					535,000	298,000	37,000
Goodwill													4,477,000										3,557,000								20,936,000		20,936,000												655,000
Total assets acquired													8,531,000										10,502,000								40,956,000		40,956,000												2,100,000
Accounts payable and accrued expenses													(394,000)										(848,000)								(335,000)		(335,000)												(152,000)
Taxes payable																																													(111,000)
Deferred taxes													(767,000)										(954,000)
Deferred revenue													(370,000)										(26,000)								(620,000)		(620,000)
Total													7,000,000										8,674,000								40,001,000		40,001,000												1,837,000
Weighted Average Useful Life					6 years 1 month 6 days	8 years 8 months 12 days	2 years	3 years 9 months 18 days							5 years		4 years		2 years		3 years						5 years	9 years	2 years	4 years												5 years	9 years	3 years						8 years	2 years	2 years 8 months 12 days
Unaudited pro forma results
Revenue	47,620,000	40,458,000	139,138,000	133,337,000																											2,400,000	5,500,000	13,000,000	10,600,000
Operating income	1,324,000	967,000	3,004,000	2,128,000
Net income	$ 1,555,000	$ 584,000	$ 3,127,000	$ 1,094,000
Basic income per common share (in dollars per share)	$ 0.04	$ 0.02	$ 0.08	$ 0.03
Diluted income per common share (in dollars per share)	$ 0.04	$ 0.01	$ 0.08	$ 0.03
Lock-up period of unregistered shares										1 year

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Stockholders' Equity (Details 5) (USD $)	9 Months Ended
	Sep. 30, 2013
Assumption for fair value of the option granted
Weighted average fair value per share of stock options granted	$ 7.55
Stock options and restricted stock units
Assumption for fair value of the option granted
Expected dividend yield (as a percent)	0.00%
Risk-free interest rate, minimum (as a percent)	1.04%
Risk-free interest rate, maximum (as a percent)	1.86%
Expected volatility, minimum (as a percent)	56.34%
Expected volatility, maximum (as a percent)	56.84%
Stock options and restricted stock units | Minimum
Assumption for fair value of the option granted
Expected term	5 years 8 months 12 days
Stock options and restricted stock units | Maximum
Assumption for fair value of the option granted
Expected term	6 years 1 month 6 days
Stock Options | Minimum
Assumption for fair value of the option granted
Term of U.S. Treasury yield used in determining risk-free rate	5 years
Stock Options | Maximum
Assumption for fair value of the option granted
Term of U.S. Treasury yield used in determining risk-free rate	7 years

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Income Taxes

9 Months Ended

Sep. 30, 2013

Income Taxes

Income Taxes

9.     Income Taxes

The income tax provision differs from the expected tax provisions computed by applying the U.S. Federal statutory rate to income before income taxes primarily because the Company has historically maintained a full valuation allowance on its deferred tax assets, tax deductions related to stock-based compensation, and to a lesser extent because of the impact of state income taxes.  As described in the 2012 Form 10-K, the Company maintains a full valuation allowance in accordance with ASC 740, Accounting for Income Taxes, on its net deferred tax assets.  Until the Company achieves and sustains an appropriate level of profitability, it plans to maintain a valuation allowance on its net deferred tax assets.

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Intangible Assets and Goodwill

9 Months Ended

Sep. 30, 2013

Intangible Assets and Goodwill

Intangible Assets and Goodwill

5.     Intangible Assets and Goodwill

The following table presents the components of the Company’s intangible assets as of December 31, 2012 and September 30, 2013:

							Weighted
	December 31,			September 30,			Average Useful
(in thousands)	2012			2013			Life (in years)
Patents	$	1,054		$	1,054		8.0
Less: accumulated amortization	(766		)	(864		)
Patents, net	288			190
Technological know-how	15,141			15,070			6.1
Less: accumulated amortization	(4,913		)	(7,126		)
Technological know-how, net	10,228			7,944
Customer relationships	37,358			37,879			8.7
Less: accumulated amortization	(10,793		)	(14,052		)
Customer relationships, net	26,565			23,827
Convenants not to compete	881			1,159			2.0
Less: accumulated amortization	(517		)	(830		)
Convenants not to compete, net	364			329
Strategic marketing agreement	6,203			6,203			10.0
Less: accumulated amortization	(293		)	(486		)
Strategic marketing agreement, net	5,910			5,717
Tradenames	843			877			3.8
Less: accumulated amortization	(196		)	(365		)
Tradenames, net	647			512
Trademarks	247			247			Indefinite
Intangible assets, net	$	44,249		$	38,766

The related amortization expense of intangible assets for the nine months ended September 30, 2012 and 2013 was $4.7 million and $6.1 million, respectively.  The Company’s estimate of future amortization expense for acquired intangible assets that exist at September 30, 2013 is as follows:

(in thousands)
October 1, 2013 to December 31, 2013	$	2,118
2014	7,563
2015	6,100
2016	5,782
2017	6,026
Thereafter	10,930
Total	$	38,519

The following table presents the changes in the carrying amounts of goodwill for the nine months ended September 30, 2013.

	Carrying
(in thousands)	Amount
Balance at December 31, 2012	$	65,825
oneTEM	655
Foreign exchange translation effect	(487		)
Balance at September 30, 2013	$	65,993

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Condensed Consolidated Statements of Cash Flows (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012
Operating activities:
Net income	$ 3,229	$ 1,111
Adjustments to reconcile net income to net cash provided by operating activities:
Amortization of debt discount	280	570
Amortization of leasehold interest	(74)	(74)
Depreciation and amortization	7,623	6,168
Increase (decrease) in deferred rent liability	(36)	34
Amortization of marketing agreement intangible assets	194	119
Allowance for doubful accounts	68
Deferred income taxes	282	75
Stock based compensation	9,773	6,539
Restructuring charge	654
Foreign exchange adjustment	(138)	40
Decrease in fair value of contingent consideration	(1,041)
Changes in assets and liabilities, net of acquisitions:
Accounts receivable	(2,465)	(826)
Prepaid expenses and other assets	(1,048)	783
Other assets	127	(136)
Accounts payable	195	459
Accrued expenses	(1,656)	113
Deferred revenue	616	(1,440)
Net cash provided by operating activities	16,583	13,535
Investing activities:
Purchases of computers, furniture and equipment	(1,800)	(1,333)
Cash paid in connection with acquisitions, net of cash received	(19,543)	(38,410)
Net cash used in investing activities	(21,343)	(39,743)
Financing activities:
Repayment of debt	(745)	(2,986)
Proceeds from repayment of notes receivable		93
Repurchase of common stock	(6,235)
Proceeds from exercise of stock options and stock warrants	3,946	3,741
Proceeds from follow on offering, net of issuance costs		37,729
Net cash provided by (used in) financing activities	(3,034)	38,577
Effect of exchange rate on cash	(159)	(40)
Net increase (decrease) in cash and cash equivalents	(7,953)	12,329
Cash and cash equivalents, beginning of period	50,211	43,407
Cash and cash equivalents, end of period	$ 42,258	$ 55,736

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Computers, Furniture and Equipment-Net (Details) (USD $)	9 Months Ended
	Sep. 30, 2013	Sep. 30, 2012	Dec. 31, 2012
Computers, furniture and equipment-net
Computers, furniture and equipment-gross	$ 14,033,000		$ 12,216,000
Less accumulated depreciation	(9,785,000)		(8,217,000)
Computers, furniture and equipment-net	4,248,000		3,999,000
Depreciation and amortization expense	1,600,000	1,500,000
Computers and software
Computers, furniture and equipment-net
Computers, furniture and equipment-gross	11,499,000		10,018,000
Equipment under capital leases
Computers, furniture and equipment-net
Computers, furniture and equipment-gross	2,500,000		2,500,000
Less accumulated depreciation	2,300,000		2,000,000
Furniture and fixtures
Computers, furniture and equipment-net
Computers, furniture and equipment-gross	1,174,000		1,032,000
Leasehold improvements
Computers, furniture and equipment-net
Computers, furniture and equipment-gross	$ 1,360,000		$ 1,166,000

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Commitments and Contingencies

9 Months Ended

Sep. 30, 2013

Commitments and Contingencies

Commitments and Contingencies

12.     Commitments and Contingencies

During the normal course of business, the Company becomes involved in various routine legal proceedings including issues pertaining to patent infringement, customer disputes, employee matters and acquisition-related post-closing disputes.  The Company does not believe that the outcome of these matters will have a material adverse effect on its financial condition.

The Company has entered into non-cancellable operating leases for the rental of office space in various locations that expire between 2013 and 2019.  Some of the leases provide for lower payments in the beginning of the term which gradually escalate during the term of the lease. The Company recognizes rent expense on a straight-line basis over the lease term, which gives rise to a deferred rent liability on the balance sheet.  The Company also has entered into agreements with third-party hosting facilities, which expire between 2013 and 2016.

The Company is also obligated under several leases covering computer equipment and software, which the Company has classified as capital leases.  Additionally, the Company has entered into several operating leases for various office equipment items, which expire between January 2014 and July 2015.

Rent expense, included in general and administrative expense, was approximately $3.6 million and $4.2 million for the nine months ended September 30, 2012 and 2013, respectively.

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Stockholders' Equity

9 Months Ended

Sep. 30, 2013

Stockholders' Equity

Stockholders' Equity

8. Stockholders’ Equity

Common Stock—As of December 31, 2012 and September 30, 2013, the number of authorized shares of common stock, par value $0.0001 per share, was 150,000,000, of which 37,613,327 and 38,125,858 were issued and outstanding, respectively.

During the nine months ended September 30, 2012, the Company issued 165,775 unregistered shares of its common stock and 132,617 unvested and unregistered shares of its common stock as part of the Anomalous purchase consideration, as described in Note 2.  During the nine months ended September 30, 2013, the Company cancelled and retired the 132,617 unvested and unregistered shares of its common stock.  Additionally, the Company issued 5,991 and 58,975 shares of its common stock to certain of its employees and members of its board of directors, respectively, during the nine months ended September 30, 2013 under the provisions of the Company’s 2011 Stock Incentive Plan (the “2011 Plan”).

At the June 5, 2013 annual meeting of the Company’s stockholders, an amendment to the 2011 Plan to reserve an additional 1,000,000 shares of common stock for issuance under the 2011 Plan was approved by a majority of the Company’s stockholders.  The Company’s board of directors had previously approved such amendment.

In November 2012, the Company’s board of directors authorized a share repurchase program under which the Company may repurchase up to $20 million of its outstanding common stock on the open market or in privately negotiated transactions.  During the nine months ended September 30, 2013, the Company repurchased 365,959 shares of common stock at an average price per share, including broker commissions, of $12.40, for an aggregate purchase price of $4.5 million.

Preferred Stock—As of December 31, 2012 and September 30, 2013, the number of authorized shares of preferred stock, par value $0.0001 per share, was 5,000,000, of which 0 were issued and outstanding.

Common Stock Warrants—During the nine months ended September 30, 2013, warrant holders exercised warrants to purchase a total of 14,907 shares of common stock.  The Company received proceeds of $34,700 related to these warrant exercises.

On March 22, 2011, the Company issued a warrant to purchase up to 1,282,789 shares of its common stock to Dell Products, L.P. (“Dell”) in connection with the entry of the Company and Dell into a 49-month strategic relationship agreement. Under the terms of the warrant, the 1,282,789 shares of common stock may become exercisable upon the achievement of certain annual recurring revenue thresholds over the 49-month period. The warrant is exercisable at $5.987 per share. As of September 30, 2013, none of the shares that may become exercisable under this warrant were probable of being earned and becoming vested and accordingly no value was ascribed to this warrant. On a quarterly basis the Company reviews the actual annual recurring revenue related to the Dell strategic relationship agreement to determine if it is probable that Dell will reach any of the annual recurring revenue thresholds that would result in warrant shares being earned and becoming vested, and to the extent the Company deems it probable that any warrant shares will be earned and become vested, the Company will record the fair value of those shares to intangible assets and non-current liabilities using a Black-Scholes valuation model and mark to market each period thereafter until such time as the warrant shares are actually earned and vest.

On October 9, 2009, the Company issued a warrant to purchase up to 3,198,402 shares of its common stock to International Business Machines Corporation (“IBM”) in connection with the entry of the Company and IBM into a five-year strategic relationship agreement. Under the terms of the warrant, 890,277 shares of common stock were vested and exercisable immediately upon execution of the agreement. Up to an additional 2,308,125 shares of common stock were to become exercisable upon the achievement of certain billing thresholds over a three-year period. The warrant was exercisable at $4.148 per share. (Certain terms of this warrant were amended on June 8, 2011, as described in the paragraph below). The Company valued the initial 890,277 shares of common stock exercisable under the warrant at $1.7 million using the Black-Scholes valuation model at the time of the signing of the agreement. The Black-Scholes valuation assumptions included an expected term of seven years, volatility of 67.77% and a risk free interest rate of 2.93%. The Company recorded the $1.7 million value of the initial 890,277 shares of common stock as an increase to warrants for common stock and an increase to other non-current assets on the Company’s consolidated balance sheet. During the three months ended December 31, 2009, the Company determined that it was probable that IBM would reach certain of the billing thresholds to have an additional 947,103 shares of common stock become exercisable. The additional shares of common stock exercisable under the warrant were valued at $1.4 million using the Black-Scholes valuation model at the time the Company determined it was probable they would reach the billing thresholds. The Black-Scholes valuation assumptions included an expected term of 5.8 years, volatility of 61.15% and a risk free interest rate of 2.28%. The Company recorded the value of the additional shares of common stock to intangible assets and non-current liabilities.  In December 2010, the Company reviewed the actual billings to date related to the strategic relationship agreement and determined it was probable IBM would reach the billing thresholds to earn 624,755 shares of the additional 947,103 shares of common stock accrued. The Company reversed $920,000 of market value related to the 322,348 shares of common stock no longer deemed probable of being earned.

On June 8, 2011, certain terms of the common stock warrant described above were amended by the Company and IBM. Under the terms of the amended warrant agreement, an additional 624,755 shares of common stock were vested and exercisable immediately (in addition to the 890,277 shares previously vested and exercisable), the additional warrant shares that could be earned were reduced from 2,308,125 to 651,626 shares of common stock, and the methodology for earning the additional warrant shares was revised to be based on specified new contractual revenue commitments from IBM that could occur between June 8, 2011 and June 30, 2012. Based on this amendment, the maximum number of warrant shares (issued and issuable) to IBM was reduced from 3,198,402 to 2,166,658 shares of common stock. The fair value of the 624,755 warrant shares vested as a result of this amendment was determined to be $4.5 million using the Black-Scholes valuation model at the time of the amendment. The Black-Scholes valuation assumptions included an expected term of 5.3 years, volatility of 59.58% and a risk free interest rate of 1.64%. The Company recorded these vested warrant shares as an increase to warrants for common stock, reversed the non-current liability associated with the previous accrual for these warrant shares, and the difference was added to intangible assets and is being amortized in proportion to the expected revenue over the remainder of the original ten-year period noted below. On August 30, 2011, the Company issued 930,511 shares of its common stock to IBM upon the exercise by IBM of this warrant, pursuant to a cashless exercise feature.  As a result of the cashless exercise, 584,521 warrant shares were cancelled in lieu of the payment of cash consideration to the Company.  As of June 30, 2012, the vesting terms of the amended warrant agreement between the Company and IBM expired with IBM earning no additional warrant shares.  As a result, no further warrant shares are issuable under this warrant agreement.

The Company began to amortize the intangible asset in the first quarter of 2010, with the related charge recorded as contra-revenue. The related charge to revenue will be in proportion to expected revenue over approximately a ten-year period. For the nine months ended September 30, 2012 and 2013, the Company recorded $119,259 and $194,189, respectively, of amortization as a contra-revenue charge related to the common stock warrant. The warrant value was marked to market on a quarterly basis until the warrant shares were earned and vested or expired unearned and unvested.

A summary of warrants exercised to purchase common stock during the nine months ended September 30, 2013 is presented below:

	Number of
	Stock
Warrants	Warrants
Outstanding at beginning of the year	25,617
Exercised	(14,907		)
Issued	—
Cancelled	—
Outstanding at end of the period	10,710
Weighted average exercise price	$	13.26

Stock Options—As of September 30, 2013, the Company had five stock-based compensation plans, the Employee Stock Option/Stock Issuance Plan (the “Employee Plan”), the Executive Stock Option/Stock Issuance Plan (the “Executive Plan”), the 2005 Stock Incentive Plan (the “2005 Plan”), the Traq Amended and Restated 1999 Stock Plan (the “1999 Plan”) and the 2011 Plan.  In connection with the Company’s initial public offering, the Company’s board of directors determined that no future stock awards would be made under the Employee Plan, the Executive Plan, the 2005 Plan and the 1999 Plan.   The 2011 Plan provides for the grant of incentive stock options, nonstatutory stock options, restricted stock awards and other stock-based awards.

Under the provisions of the Employee Plan, the Executive Plan, the 2005 Plan, the 1999 Plan and the 2011 Plan (the “Plans”), the exercise price of each option is determined by the Company’s board of directors or by a committee appointed by the board of directors.  Under the 2011 Plan, the exercise price of all stock options must not be less than the fair market value of a share of common stock on the date of grant. The period over which options vest and become exercisable, as well as the term of the options, is determined by the board of directors or the committee appointed by the board of directors. The options generally vest over 4 years and expire 10 years after the date of the grant. During the nine months ended September 30, 2013, the Company’s board of directors granted options to purchase an aggregate of 463,475 shares of common stock under the 2011 Plan to employees and non-employees, at a weighted average exercise price of $14.25 per share.

A summary of the status of stock options issued pursuant to the Plans during the nine months ended September 30, 2013 is presented below:

Options	Number of Shares		Weighted Average Exercise Price		Weighted Average Contractual Life (years)
Outstanding at beginning of the year	6,854,369		$	7.92
Granted	463,475		$	14.25
Forfeited	(119,067	)	$	13.01
Exercised	(847,134	)	$	4.62
Outstanding at end of the period	6,351,643		$	8.73	7.1
Exercisable at end of the period	3,933,447		$	6.54	6.4
Available for future grants at September 30, 2013	1,018,338

The intrinsic values of options outstanding, vested and exercised during the nine months ended September 30, 2013 were as follows:

	2013
	Number of	Intrinsic
	Options	Value
Outstanding	6,351,643	$	95,907,266
Vested	3,933,447	$	68,020,878
Exercised	847,134	$	12,276,044

During the nine months ended September 30, 2013, employees and former employees of the Company exercised options to purchase a total of 847,134 shares of common stock at exercise prices ranging from $0.25 to $20.39 per share. Proceeds from the stock option exercises totaled $3.9 million.

Restricted Stock Units—During the nine months ended September 30, 2013, the Company issued 627,534 restricted stock units to certain employees under the provisions of the 2011 Plan and 84,100 restricted stock units vested resulting in an equal number of shares of common stock being issued. The grants of restricted stock units made during the nine months ended September 30, 2013 had an aggregate value of $9.3 million.  The value of a restricted stock unit award is determined based on the closing price of the Company’s common stock on the date of grant.  A restricted stock unit award entitles the holder to receive shares of the Company’s common stock as the award vests. The restricted stock units vest over periods that range from 2 to 4 years.  Stock-based compensation expense is amortized on a straight-line basis over the vesting period.

For the nine months ended September 30, 2013, the Company recorded stock-based compensation expenses of $3.0 million related to restricted stock units.

As of September 30, 2013, there was $9.3 million of total unrecognized compensation cost, net of estimated forfeitures, related to unvested restricted stock units. This amount will be amortized on a straight-line basis over the requisite service period related to the restricted unit grants.

A summary of the status of restricted stock units issued pursuant to the Plans during the nine months ended September 30, 2013 is presented below:

Restricted Stock Units	Number of Shares		Weighted Average Fair Value
Outstanding at beginning of the year	221,314		$	17.27
Granted	627,534		$	14.85
Vested	(84,100	)	$	17.14
Forfeited	(1,050	)	$	15.08
Outstanding at end of the period	763,698		$	15.30

In accordance with ASC 718, Share Based Payment (“ASC 718”), total compensation expense for stock-based compensation awards was $6.5 million and $9.8 million for the nine months ended September 30, 2012 and 2013, respectively, which is included on the accompanying condensed consolidated statements of operations as follows (in thousands):

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2013		2012		2013
Cost of goods sold	$	362	$	529	$	947	$	1,609
Sales and marketing expenses	586		978		1,455		2,747
General and administrative expenses	1,643		1,551		3,727		4,664
Research and development	164		244		410		753
Total stock-based employee compensation	$	2,755	$	3,302	$	6,539	$	9,773

Stock-based employee compensation expense for equity awards granted since January 1, 2006 will be recognized over the following periods as follows (in thousands):

Years Ending December 31,
2013	$	3,272
2014	11,718
2015	8,106
2016	2,333
2017	123
	$	25,552

Stock-based compensation costs for stock options are generally based on the fair value calculated from the Black-Scholes valuation model on the date of grant. The Black-Scholes valuation model requires the Company to estimate key assumptions such as expected volatility, expected terms, risk-free interest rates and dividend yields. The Company determined the assumptions in the Black-Scholes valuation model as follows: expected volatility is a combination of the Company’s competitors’ historical volatility; expected term is calculated using the “simplified” method prescribed in ASC 718; and the risk free rate is based on the U.S. Treasury yield on 5 and 7-year instruments in effect at the time of grant. A dividend yield is not used, as the Company has never paid cash dividends and does not currently intend to pay cash dividends. The Company periodically reviews the assumptions and modifies the assumptions accordingly.

As part of the requirements of ASC 718, the Company is required to estimate potential forfeitures of stock grants and adjust compensation cost recorded accordingly. The estimate of forfeitures will be adjusted over the requisite service period to the extent that actual forfeitures differ, or are expected to differ, from such estimates. Changes in estimated forfeitures will be recognized through a cumulative catch-up adjustment in the period of change and will also impact the amount of stock-based compensation expense to be recognized in future periods. The fair values of stock grants are amortized as compensation expense on a straight-line basis over the vesting period of the grants. Compensation expense recognized is shown in the operating activities section of the statement of cash flows.

The fair value of the options granted during 2013 was determined at the date of grant using the Black-Scholes valuation model with the following assumptions:

	2013
Expected dividend yield	0%
Risk-free interest rate	1.04% to 1.86%
Expected term (in years)	5.7 - 6.1 years
Expected volatility	56.34% - 56.84%

Based on the above assumptions, the weighted average fair value per share of stock options granted during the nine months ended September 30, 2013 was approximately $7.55.

XML

Computers, Furniture and Equipment-Net (Tables)

9 Months Ended

Sep. 30, 2013

Computers, Furniture and Equipment-Net

Schedule of computers, furniture and equipment-net

	As of
	December 31,			September 30,
(in thousands)	2012			2013
Computers and software	$	10,018		$	11,499
Furniture and fixtures	1,032			1,174
Leasehold improvements	1,166			1,360
	12,216			14,033
Less accumulated depreciation	(8,217		)	(9,785		)
Computers, furniture and equipment-net	$	3,999		$	4,248

XML

Business Combinations (Tables)

9 Months Ended

Sep. 30, 2013

Business combinations

Schedule of unaudited pro forma results, as if the acquisitions occurred at beginning of the period

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share amounts)	2012		2013		2012		2013
Revenue	$	40,458	$	47,620	$	113,337	$	139,138
Operating income	967		1,324		2,128		3,004
Net income	584		1,555		1,094		3,127
Basic income per common share	$	0.02	$	0.04	$	0.03	$	0.08
Diluted income per common share	$	0.01	$	0.04	$	0.03	$	0.08

Anomalous

Business combinations

Schedule of breakdown between purchase price and the allocation of the total purchase price

The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	3,521
Common stock	1,984
Deferred cash consideration	1,495
	$	7,000
Allocation of Purchase Consideration:
Current assets	$	1,140
Property and equipment	47
Other assets	10
Identifiable intangible assets	2,857
Goodwill	4,477
Total assets acquired	8,531
Accounts payable and accrued expenses	(394		)
Deferred taxes	(767		)
Deferred revenue	(370		)
	$	7,000

Schedule of estimates of fair value of identifiable intangible assets acquired

The following table presents the Company’s estimates of fair value of the identifiable intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Technology	$	2,017	5.0
Non-compete covenants	553		2.0
Customer relationships	236		4.0
Tradenames	51		3.0
Total identifiable intangible assets	$	2,857

ttMobiles

Business combinations

Schedule of breakdown between purchase price and the allocation of the total purchase price

The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	6,359
Deferred cash consideration	2,315
	$	8,674
Allocation of Purchase Consideration:
Current assets	$	2,469
Property and equipment	188
Identifiable intangible assets	4,288
Goodwill	3,557
Total assets acquired	10,502
Accounts payable and accrued expenses	(848		)
Deferred taxes	(954		)
Deferred revenue	(26		)
	$	8,674

Schedule of estimates of fair value of identifiable intangible assets acquired

The following table presents the Company’s estimates of fair value of the identifiable intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Customer relationships	$	2,606	9.0
Technology	1,178		5.0
Tradenames	388		4.0
Non-compete covenants	116		2.0
Total identifiable intangible assets	$	4,288

Symphony

Business combinations

Schedule of breakdown between purchase price and the allocation of the total purchase price

The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	29,208
Deferred cash consideration	10,793
	$	40,001
Allocation of Purchase Consideration:
Current assets	$	5,628
Property and equipment	602
Identifiable intangible assets	13,790
Goodwill	20,936
Total assets acquired	40,956
Accounts payable and accrued expenses	(335		)
Deferred revenue	(620		)
	$	40,001

Schedule of estimates of fair value of identifiable intangible assets acquired

The following table presents the Company’s estimates of fair value of the identifiable intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Customer relationships	$	9,680	9.0
Technology	4,050		5.0
Tradename	60		3.0
Total identifiable intangible assets	$	13,790

oneTEM

Business combinations

Schedule of breakdown between purchase price and the allocation of the total purchase price

The following table presents the breakdown between cash and deferred purchase price and the allocation of the total purchase price (in thousands):

Purchase consideration:
Cash	$	1,221
Deferred cash consideration	433
Fair value of contingent consideration	183
	$	1,837
Allocation of Purchase Consideration:
Current assets	$	565
Property and equipment	10
Identifiable intangible assets	870
Goodwill	655
Total assets acquired	2,100
Accounts payable and accrued expenses	(152		)
Taxes payable	(111		)
	$	1,837

Schedule of estimates of fair value of identifiable intangible assets acquired

The following table presents the Company’s estimates of fair value of the identifiable intangible assets acquired (in thousands):

Description	Fair Value		Weighted Average Useful Life (in years)
Customer relationships	$	535	8.0
Covenants not to compete	298		2.0
Tradename	37		2.7
Total identifiable intangible assets	$	870

XML

Document and Entity Information	9 Months Ended
	Sep. 30, 2013	Nov. 01, 2013
Document and Entity Information
Entity Registrant Name	TANGOE INC
Entity Central Index Key	0001182325
Document Type	10-Q
Document Period End Date	Sep. 30, 2013
Amendment Flag	false
Current Fiscal Year End Date	--12-31
Entity Current Reporting Status	Yes
Entity Filer Category	Accelerated Filer
Entity Common Stock, Shares Outstanding		38,243,892
Document Fiscal Year Focus	2013
Document Fiscal Period Focus	Q3

XML

Income per Share Applicable to Common Stockholders (Tables)

9 Months Ended

Sep. 30, 2013

Income per Share Applicable to Common Stockholders

Schedule of computations of income per share applicable to common stockholders

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
(in thousands, except per share amounts)	2012		2013		2012		2013
Basic net income per common share
Net income	$	581	$	1,555	$	1,111	$	3,229
Basic income per common share	$	0.02	$	0.04	$	0.03	$	0.09
Weighted-average common shares outstanding	37,410		37,698		36,079		37,546
Diluted net income per common share
Net income	$	581	$	1,555	$	1,111	$	3,229
Diluted income per common share	$	0.01	$	0.04	$	0.03	$	0.08
Weighted-average common shares used to compute diluted net income per share	40,963		40,872		39,616		40,240

Schedule of potential common shares excluded from computation of diluted (loss) income per common share as the effect would be anti-dilutive

Outstanding stock options	2,169	2,315	2,169	2,565
Outstanding restricted stock units	176	476	173	587
Common stock warrants	10	7	10	9