News Column

INTRALINKS HOLDINGS, INC. - 10-Q - : MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

August 8, 2014

Management's Discussion and Analysis of Financial Condition and Results of Operations, or MD&A, is intended to provide a reader of our financial statements with a narrative from the perspective of our management on our financial condition, results of operations, liquidity and certain other factors that may affect our future results. The following discussion and analysis should be read in conjunction with our consolidated financial statements and notes thereto appearing elsewhere in this Quarterly Report on Form-10Q and the audited consolidated financial statements including in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013. This discussion contains forward-looking statements that involve significant risks and uncertainties. As a result of many factors, such as those set forth under the heading "Risk Factors" in Item 1A of Part I of our Annual Report on Form 10-K for the fiscal year ended December 31, 2013, our actual results may differ materially from those anticipated in these forward-looking statements. Executive Overview Intralinks is a leading global provider of Software-as-a-Service, or SaaS, solutions for secure content management and collaboration within and among organizations. Our cloud-based solutions enable organizations to control, track, search, exchange and collaborate on time-sensitive information inside and outside the firewall, all within a secure and easy-to-use environment. Our customers rely on our cost-effective solutions to manage large amounts of electronic information, accelerate information intensive business processes, reduce time to market, optimize critical information workflow, meet regulatory and risk management requirements and collaborate with business counterparties in a secure, auditable and compliant manner. We help our customers eliminate many of the inherent risks and inefficiencies of using email, fax, courier services and other existing solutions to collaborate and exchange information. At our founding in 1996, we introduced cloud-based collaboration for the debt capital markets industry and, shortly thereafter, extended our solutions to merger and acquisition transactions. Today, we serve enterprises and governmental agencies across a variety of industries, including financial services, pharmaceutical, manufacturing, biotechnology, consumer, energy, telecommunications, industrial, legal, agriculture, insurance, real estate and technology, which use our solutions for the secure management and online exchange of information within and among organizations. Across all of our principal markets, we help transform a wide range of slow, expensive and information-intensive tasks into streamlined, efficient and real-time business processes. We deliver our solutions through redundant multi-customer SaaS systems and use primary instances of our software to serve all of our customers. We sell our solutions directly through a field team with industry-specific expertise, an inside sales team and indirectly through a customer referral network and channel partners. During the six months ended June 30, 2014, we generated $122.8 million in revenue, 42.3% of which was derived from sales across 83 countries outside of the United States. 18



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In April 2013, we broadly launched Intralinks VIA, a secure and scalable SaaS solution for enterprise content sharing and collaboration within and beyond the corporate firewall. Designed for business collaboration in a wide variety of markets and industries, Intralinks VIA enables users to sync, share and revoke access or 'unshare' files, work efficiently on group projects, and manage content wherever it travels. In addition, in January 2014, we announced the broad availability of Intralinks VIA Enterprise, a new version of our Intralinks VIA offering that incorporates advanced capabilities of the Intralinks platform previously available in our Connect product. With Intralinks VIA Enterprise, customers can manage the full life cycle of content, both inside and across the enterprise boundary, from ad hoc creation and editing through structured storage and publication through final archiving and disposal. Further, in April 2013, we announced the acquisitions of PE-Nexus and MergerID, which we combined in September 2013 to create DealNexus, an online platform for the deal making community that brings together qualified M&A professionals with matching deal criteria and opportunities. The DealNexus platform offers a low-cost and confidential way for deal makers to market deals broadly and then find and engage the best buyers or capital partners. In April 2014, we acquired docTrackr, Inc., or docTrackr, and its leading digital rights management technology. With this acquisition, we will be able to offer plug-in free digital rights management across our platform. Throughout 2013 and continuing into 2014, we have made and continue to make enhancements and improvements in our infrastructure based on the operational assessments we conducted during 2012; we are continuing a redesign of our sales model, focusing on improving marketing and demand generation, refining our high-velocity inside sales model and sales specialization in our enterprise sales force; we are following the Agile development methodology; and we are focusing on our program of intellectual property protection and on generating and identifying a significant number of innovations. Key Metrics We evaluate our operating and financial performance using various performance indicators, as well as against the macroeconomic trends affecting the demand for our solutions in our principal markets. We also monitor relevant industry performance, including the mergers and acquisitions, or M&A, market globally and transactional activity in the debt capital markets, or DCM, to provide insight into the success of our sales activities as compared to our peers and to estimate our market share in each of our principal markets. Our management relies on the key performance indicators set forth below to help us evaluate growth trends, establish budgets, measure the effectiveness of our sales and marketing efforts and assess operational efficiencies. We discuss revenue under "Results of Operations" and net cash provided by operating activities under "Liquidity and Capital Resources." Other measures of our performance, including non-GAAP adjusted gross profit, non-GAAP adjusted gross margin, non-GAAP adjusted operating income, non-GAAP adjusted net income, non-GAAP adjusted EBITDA, non-GAAP adjusted EBITDA margin, and free cash flow are defined and discussed under "Non-GAAP Financial Measures" below. Three Months Ended June



30, Six Months Ended June 30,

2014 2013 2014 2013 Consolidated Statement of Operations Data: (In



thousands)

Revenue $ 63,557$ 57,742$ 122,798$ 112,763 Non-GAAP adjusted gross profit $ 48,613$ 43,749$ 93,019$ 85,359 Non-GAAP adjusted gross margin 76.5 % 75.8 % 75.7 % 75.7 % Non-GAAP adjusted operating income $ 1,550$ 3,824$ 3,555$ 7,509 Non-GAAP adjusted net income $ 240 $ 1,475 $ 934 $ 2,512 Non-GAAP adjusted EBITDA $ 7,632$ 8,845$ 15,789$ 17,361 Non-GAAP adjusted EBITDA margin 12.0 % 15.3 % 12.9 % 15.4 % Consolidated Statement of Cash Flows Data: Net cash provided by operating activities $ 14,025$ 11,826$ 10,887$ 19,757 Free cash flow $ 2,843$ 4,871$ (6,658 )$ 5,632 Non-GAAP Financial Measures This Form 10-Q includes information about certain financial measures that are not prepared in accordance with generally accepted accounting principles in the United States, or GAAP or U.S. GAAP, including non-GAAP adjusted gross profit and non-GAAP adjusted gross margin, non-GAAP adjusted operating income, non-GAAP adjusted net income, non-GAAP adjusted EBITDA and non-GAAP adjusted EBITDA margin and free cash flow. These non-GAAP financial measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. 19



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Management defines its non-GAAP financial measures as follows: Non-GAAP adjusted gross profit represents the corresponding GAAP measure

adjusted to exclude, if applicable: (1) amortization of intangible assets

and (2) stock-based compensation expense. Non-GAAP adjusted operating income represents the corresponding GAAP



measure adjusted to exclude, if applicable: (1) amortization of intangible

assets, (2) stock-based compensation expense, (3) impairment charges or asset write-offs and (4) costs related to public stock offerings.



Non-GAAP adjusted net income represents the corresponding GAAP measure

adjusted to exclude, if applicable: (1) amortization of intangible assets,

(2) stock-based compensation expense, (3) impairment charges or asset

write-offs, (4) costs related to debt repayments and (5) costs related to

public stock offerings. The income tax expense included in non-GAAP

adjusted net income is calculated using an estimated long-term effective

tax rate. Non-GAAP adjusted EBITDA represents net loss adjusted to exclude, if applicable: (1) depreciation and amortization, (2) amortization of



intangible assets, (3) stock-based compensation expense, (4) impairment

charges or asset write-offs, (5) interest expense, (6) amortization of debt

issuance costs, (7) other expense (income), net, (8) costs related to public stock offerings and (9) income tax (benefit) expense. Free cash flow represents net cash provided by operating activities less capitalized software development costs and capital expenditures. Management believes that these non-GAAP financial measures, when viewed with our results under U.S. GAAP and the accompanying reconciliations, provide useful information about our period-over-period growth and provide additional information that is useful for evaluating our operating performance. In addition, free cash flow provides management with useful information for managing the cash needs of our business. Management also believes that these non-GAAP financial measures provide a more meaningful comparison of our operating results against those of other companies in our industry, as well as on a period-over-period basis, because these measures exclude items that are not representative of our operating performance, such as amortization of intangible assets and interest expense. Management believes that including these costs in our results of operations results in a lack of comparability between our operating results and those of our peers in the industry, the majority of which are not highly leveraged and do not have comparable amortization expense related to intangible assets. However, non-GAAP adjusted gross profit, non-GAAP adjusted operating income, non-GAAP adjusted net income, non-GAAP adjusted EBITDA and free cash flow are not measures of financial performance under U.S. GAAP and, accordingly, should not be considered as substitutes for or superior to gross profit, loss from operations, net loss and net cash provided by operating activities as indicators of operating performance. 20



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The table below provides reconciliations of U.S. GAAP financial measures to the non-GAAP financial measures discussed above:

Three Months Ended June 30, Six Months Ended June 30, 2014 2013 2014 2013 (In thousands) Gross profit $ 46,474$ 41,519$ 88,713$ 80,973 Gross margin 73.1 % 71.9 % 72.2 % 71.8 % Cost of revenue - amortization of intangible assets 2,045 2,081 4,034 4,069 Cost of revenue - stock-based compensation expense 94 149 272 317 Non-GAAP adjusted gross profit $ 48,613$ 43,749$ 93,019$ 85,359 Non-GAAP adjusted gross margin 76.5 % 75.8 % 75.7 % 75.7 % Loss from operations $ (6,963 )$ (4,155 )$ (13,156 )$ (8,430 ) Amortization of intangible assets 5,945 5,967 11,814 11,811 Stock-based compensation expense 2,568 2,012 4,897 4,128



Non-GAAP adjusted operating income $ 1,550$ 3,824$ 3,555$ 7,509 Net loss before income tax

$ (8,127 )$ (5,600 )$ (15,205 )$ (11,888 ) Amortization of intangible assets 5,945 5,967 11,814 11,811 Stock-based compensation expense 2,568 2,012 4,897 4,128 Non-GAAP adjusted net income before tax 386 2,379 1,506 4,051 Non-GAAP income tax expense 146 904 572 1,539 Non-GAAP adjusted net income $ 240 $ 1,475 $ 934 $ 2,512 Net loss $ (5,673 )$ (4,358 )$ (11,052 )$ (8,913 ) Depreciation and amortization 6,082 5,021 12,234 9,852 Amortization of intangible assets 5,945 5,967 11,814 11,811 Stock-based compensation expense 2,568 2,012 4,897 4,128 Interest expense 1,005 1,152 1,965 2,274 Amortization of debt issuance costs 177 104 293 216 Other (income) expense, net (18 ) 189 (209 ) 968 Income tax benefit (2,454 ) (1,242 ) (4,153 ) (2,975 ) Non-GAAP adjusted EBITDA $ 7,632$ 8,845$ 15,789$ 17,361 Non-GAAP adjusted EBITDA margin 12.0 % 15.3 % 12.9 % 15.4 % Net cash provided by operating activities $ 14,025$ 11,826$ 10,887$ 19,757 Capitalized software development costs (8,163 ) (5,480 ) (13,102 ) (10,836 ) Capital expenditures (3,019 ) (1,475 ) (4,443 ) (3,289 ) Free cash flow $ 2,843$ 4,871$ (6,658 )$ 5,632 Critical Accounting Policies and Estimates The discussion and analysis of our financial condition and results of operations are based upon our Consolidated Financial Statements, which have been prepared in accordance with U.S. GAAP. The preparation of these financial statements requires us, on an ongoing basis, to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities. The following accounting estimates are viewed by management to be critical because they require significant judgment on the part of management. Management has discussed and reviewed the development, selection and disclosure of critical accounting estimates with our Audit Committee. Among the estimates we review are those related to the determination of the fair value of equity-based awards, including estimated forfeitures of such awards, the fair value of our single reporting unit, valuation of intangible assets (and their related useful lives), fair value of financial instruments, certain components of the income tax provisions, including valuation allowances on deferred tax assets, accruals for certain compensation expenses, allowances for doubtful accounts and reserves for customer credits. We base our estimates and assumptions on historical experience and on various other factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. Actual results may differ from those estimates under different assumptions or conditions. Our financial results could be materially different if other methodologies were used or 21



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if management modified its assumptions. During the six months ended June 30, 2014, there were no material changes to our significant accounting policies from those included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2013. Revenue Recognition We derive revenue principally through fixed commitment contracts under which we provide customers various services, including access to our cloud-based Intralinks Platform, which includes Intralinks exchanges and Intralinks VIA, as well as the related customer support and other services. We currently sell our services under service contracts that we categorize as either "subscription" or "transaction" arrangements, as follows: Subscription arrangements include those customer contracts with an initial



term of 12 months or more that automatically renew for successive terms of

at least 12 months. Because some long-term customers will not accept

automatic renewal terms, we also consider among our subscription customers

those whose contracts have been extended upon mutual agreement for at

least one renewal term of at least 12 months. We believe subscription

arrangements appeal mainly to customers that have integrated our service

offerings into their business processes and plan to use our service

offerings for a series of expected projects or on an ongoing basis.

Subscription arrangements afford customers of our exchange products

several benefits, including the ability to manage the creation, opening

and closing of any number of exchanges at their convenience during the

commitment period, and potentially lower pricing than they would generally

be charged under a single-event contract.

Transaction arrangements include those customer contracts with an initial

term of less than 12 months. We also consider transaction customers to be

those first-time customers whose contracts do not have an automatic

renewal clause and who have not yet renewed their contracts by mutual

agreement. We believe these types of arrangements appeal mainly to customers who have a single discrete project. Unlike subscription contracts, which generally renew for at least one year at a time, transaction contracts continue in effect after their initial term on a month-to-month basis until the customer terminates, often by closing the relevant exchange. Revenue from both subscription and transaction contracts is recognized ratably over the contracted service period, provided that there is persuasive evidence of an arrangement, the service has been provided to the customer, collection is reasonably assured, the amount of fees to be paid by the customer is fixed or determinable and we have no significant remaining obligation at the completion of the contracted term. In circumstances where we have a significant remaining obligation after completion of the initial contract term, revenue is recognized ratably over the extended service period. Our contracts do not contain general rights of return. Under most subscription arrangements for our exchange offering, an annual fixed commitment fee is determined based on the aggregate value of the expected number of exchanges required over the term, the type of exchanges expected to be opened, the number of users that are expected to access each exchange and the volume of data expected to be managed in the exchanges. We bill customers with annual commitment fees in advance, generally in four equal quarterly installments. Similarly, a transaction contract for a single project will have a fee covering services for the expected duration of the project, for which we generally bill customers in full, in advance, upon the commencement of the contract. Subscription and transaction fees billed in advance are recorded initially in accounts receivable and deferred revenue, until such time that the relevant revenue recognition criteria have been met, at which time the related amounts are included in revenue. Annual subscription fees, as well as the fixed fees payable upfront under transaction contracts, are payable in full and are non-refundable regardless of actual usage of services. Similarly, while customers may close exchanges and cease using services, our contracts generally do not allow for cancellation or termination for convenience during the contract term. We reserve the right under subscription and transaction contracts to charge customers for loading data or adding users to exchanges in excess of their original usage estimates. Incremental fees for overages are billed monthly or quarterly in arrears and the related revenue is recognized ratably from the point that the overage is measured through the remaining contract term, or the remaining contract quarter, depending on the usage terms within the customer contract. Our customers do not have a contractual right, or the ability, to take possession of the Intralinks software at any time during the hosting period, or to contract with an unrelated third party to host the Intralinks software. Therefore, revenue recognition for our services is not accounted for under the specific guidance of the Financial Accounting Standards Board, or the FASB, on software revenue recognition. We recognize revenue for our services ratably over the related service period, as described above. We offer our services to customers through single-element and multiple-element arrangements, some of which contain offerings for optional services, including document scanning, data archiving and other professional services. In accordance with the FASB's guidance on multiple-deliverable arrangements, we have evaluated the deliverables in our arrangements to determine whether they represent separate units of accounting and, specifically whether the deliverables have value to our customers on a standalone 22



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basis. We have determined that the services delivered to customers under our existing arrangements generally represent a single unit of accounting. Revenue for optional services is recognized as delivered, or as completed, provided that the general revenue recognition criteria described above are met. We will continue to evaluate the nature of the services offered to customers under our fixed commitment contracts, as well as our pricing practices, to determine if a change in policy regarding multiple-element arrangements and related disclosures is warranted in future periods. Additionally, certain of our contracts contain provisions for set-up, implementation and other professional services relating to the customer's use of our platform. We believe that these set-up, implementation and other professional services provide value to the customer over the entire period that the exchange is active, including renewal periods, and therefore the revenue related to these services is recognized over the longer of the contract term or the estimated relationship life. We will continue to evaluate the length of the amortization period of the revenue related to set-up, implementation and other professional service fees to determine if a change is warranted in future periods. In the normal course of business we may agree to sales concessions with our customers. We maintain an allowance to reserve for potential credits issued to customers based on historical patterns of actual credits issued. Expenses associated with maintaining this reserve are recorded as a reduction to revenue. Deferred revenue represents the billed but unearned portion of existing contracts for services to be provided. Deferred revenue does not include the unbilled portion of existing contractual commitments of our customers. Accordingly, our deferred revenue balance does not represent the total contract value of outstanding arrangements. Amounts that have been invoiced but not yet collected are recorded as revenue or deferred revenue, as appropriate, and are included in our accounts receivable balances. Deferred revenue that will be recognized during the subsequent 12-month period is classified as "Deferred revenue," with the remaining portion as non-current deferred revenue as a component of "Other long-term liabilities" on the Consolidated Balance Sheets. Goodwill - At June 30, 2014, we had $224.4 million of goodwill. Our acquisition of docTrackr on April 23, 2014 resulted in an addition to goodwill of approximately $8.5 million. Goodwill is assessed for impairment annually as of October 1 or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of a reporting unit below its carrying value. The goodwill impairment test is based on our single operating segment and reporting unit structure. No goodwill impairment was identified in any of the periods presented. In 2011, the FASB issued authoritative guidance which gives entities the option to qualitatively assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value. If the entity elects to perform a qualitative assessment and concludes it is not more likely than not that the fair value of the reporting unit is less than its carrying value, no further assessment of that reporting unit's goodwill is necessary; otherwise goodwill must be tested for impairment using a two-step process. The first step involves a comparison of the estimated fair value of an entity's reporting unit to its carrying value, including goodwill. If the estimated fair value of a reporting unit exceeds its carrying value, goodwill of the reporting unit is not impaired and the second step of the impairment test is not necessary. If the carrying value of a reporting unit exceeds its estimated fair value, then the second step of the goodwill impairment test must be performed. The second step of the goodwill impairment test compares the implied fair value of the reporting unit's goodwill with its carrying value to measure the amount of impairment, if any. If the carrying value of a reporting unit's goodwill exceeds the implied fair value of that goodwill, an impairment is recognized in an amount equal to that excess. The process of evaluating the potential impairment of goodwill is highly subjective and requires significant judgment. When performing the quantitative analysis, we utilize valuation techniques consistent with the market approach and income approach to measure fair value for purposes of impairment testing. An estimate of fair value can be affected by many assumptions, requiring that management make significant judgments in arriving at these estimates, including the expected operational performance of our business in the future, market conditions and other factors. Although there are inherent uncertainties in this assessment process, the estimates and assumptions we use to estimate future cash flows (including sales growth, pricing of our services, market penetration, competition, technological obsolescence, fair value of net operating loss carryforwards and discount rates) are consistent with our internal planning. Significant changes in these estimates and the related assumptions, changes in market capitalization, or changes in qualitative factors affecting us in the future, could result in an impairment charge related to our goodwill. 23



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Results of Operations The following table sets forth Consolidated Statements of Operations data as a percentage of total revenues. Three Months Ended June 30,



Six Months Ended June 30,

2014 2013 2014 2013 Revenue 100.0 % 100.0 % 100.0 % 100.0 % Cost of revenue 26.9 % 28.1 % 27.8 % 28.2 % Gross profit 73.1 % 71.9 % 72.2 % 71.8 % Operating expenses: Sales and marketing 47.0 % 47.2 % 45.6 % 46.3 % General and administrative 28.5 % 23.8 % 28.5 % 24.7 % Product development 8.6 % 8.1 % 8.9 % 8.3 % Total operating expenses 84.1 % 79.1 % 83.0 % 79.3 % Loss from operations (11.0 )% (7.2 )% (10.7 )% (7.5 )% Interest expense 1.6 % 2.0 % 1.6 % 2.0 % Amortization of debt issuance costs 0.3 % 0.2 % 0.2 % 0.2 % Other (income) expense, net - % 0.3 % (0.2 )% 0.9 % Net loss before income tax (12.8 )% (9.7 )% (12.4 )% (10.5 )% Income tax benefit (3.9 )% (2.2 )% (3.4 )% (2.6 )% Net loss (8.9 )% (7.5 )% (9.0 )% (7.9 )% Comparison of the Three Months Ended June 30, 2014 and 2013 Revenue Total revenue was $63.6 million for the three months ended June 30, 2014, up $5.8 million, or 10.1%, from $57.7 million for the three months ended June 30, 2013, primarily due to a $6.2 million, or 23.4%, increase in M&A revenue. % Revenue Three Months Ended June 30, Increase % Increase Three Months Ended June 30, 2014 2013 (Decrease) (Decrease) 2014 2013 (In thousands) M&A $ 32,488$ 26,321$ 6,167 23.4 % 51.1 % 45.6 % Enterprise 23,418 23,576 (158 ) (0.7 )% 36.9 % 40.8 % DCM 7,651 7,845 (194 ) (2.5 )% 12.0 % 13.6 % Total revenue $ 63,557$ 57,742$ 5,815 10.1 % 100 % 100 % M&A - The results for the three months ended June 30, 2014 reflect an increase in M&A revenue of $6.2 million, or 23.4%, as compared to the three months ended June 30, 2013. The increase in M&A revenue reflects a higher volume of strategic business transactions, which led to market share gains in most of the geographic regions in which we operate. Also contributing to the increase in M&A revenue was an increase in the average deal size as compared to the same period in the prior year. Enterprise - The results for the three months ended June 30, 2014 remain largely unchanged as compared to the same period in the prior year. DCM - The results for the three months ended June 30, 2014 reflect a decrease in DCM revenue of $0.2 million, or 2.5%, as compared to the three months ended June 30, 2013. The decrease in DCM revenue primarily reflects a lower volume of loan syndication transactions during the second quarter of 2014. We believe our revenue growth will be driven, barring unforeseen circumstances, by our ongoing investments in our platform and in enhanced service offerings such as our Intralinks VIA offering, by improving our mid-market M&A advisory firm coverage, by expanding our focus on underrepresented geographies and by increasing our overall market share in our strategic transactions business. We believe that our continued investments in our platform, services and operational infrastructure will allow us to serve a greater number of clients more efficiently, including those with larger-scale requirements. 24



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Cost of Revenue and Gross Profit

Three Months Ended June 30, 2014 2013 Increase % Increase (In thousands) Cost of revenue $ 17,083$ 16,223$ 860 5.3 % Gross profit $ 46,474$ 41,519 4,955 11.9 % Gross margin 73.1 % 71.9 % 1.2 % Cost of revenue for the three months ended June 30, 2014 increased $0.9 million, or 5.3%, as compared to the three months ended June 30, 2013, largely due to a $0.8 million increase in amortization of capitalized software related to the enhancement of our service offerings, as well as an increase in employee related expenses of $0.6 million primarily due to an increase in headcount. Operating Expenses Total operating expenses for the three months ended June 30, 2014 increased by $7.8 million, or 17.0%, as compared to the three months ended June 30, 2013. Three Months Ended June 30, Increase % Increase 2014 2013 (Decrease) (Decrease) (In thousands) Sales and marketing $ 29,872$ 27,275$ 2,597 9.5 % General and administrative 18,105 13,719 $ 4,386 32.0 % Product development 5,460 4,680 $ 780 16.7 % Total operating expenses $ 53,437$ 45,674$ 7,763 17.0 % Sales and Marketing - The results for the three months ended June 30, 2014 reflect an increase in sales and marketing expense of $2.6 million, or 9.5%, as compared to the three months ended June 30, 2013, primarily due to increases in salaries and benefits expense of $1.4 million and travel and entertainment expenses of $0.7 million, largely due to increased headcount. The increase was also partially due to an increase in rent expense of $0.3 million, which was largely due to a one-time early termination fee related to our future relinquishment of a portion of the premises leased under our Charlestown, Massachusetts lease. General and Administrative - The results for the three months ended June 30, 2014 reflect an increase in general and administrative expense of $4.4 million, or 32.0%, as compared to the three months ended June 30, 2013, driven by increases in (i) employee compensation related expense of $0.9 million, primarily from increased headcount and an increase in stock-based compensation expense due to an increase in equity awards granted to key employees, (ii) professional fees of $0.8 million due, in part, to transaction costs associated with the acquisition of docTrackr and other strategic initiatives, (iii) bad debt expense of $0.6 million, (iv) software maintenance and licensing fees of $0.5 million in support of enhancements to our IT infrastructure, and (v) consulting fees of $0.4 million primarily relating to the implementation of financial systems to support the growth in our business. Product Development - The results for the three months ended June 30, 2014 reflect an increase in product development expense of $0.8 million, or 16.7%, as compared to the three months ended June 30, 2013, which was primarily due to an increase in employee compensation and related benefits of $0.6 million, which was largely due to an increase in headcount. Total product development costs are comprised of both capitalized software and product development expense. Three Months Ended June 30, Increase % Increase 2014 2013 (Decrease) (Decrease) (In thousands) Capitalized software $ 7,524 $ 5,233$ 2,291 43.8 % Product development expense 5,460 4,680 780 16.7 % Total product development costs $ 12,984$ 9,913



$ 3,071 31.0 %

The increase in total product development costs of $3.1 million, or 31.0%, was largely due to an increase in headcount and consulting fees related to the continued development of our Intralinks platform.

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Non-Operating Expenses

Three Months Ended June 30, Increase % Increase 2014 2013 (Decrease) (Decrease) (In thousands) Interest expense $ 1,005$ 1,152$ (147 ) (12.8 )% Amortization of debt issuance costs $ 177 $ 104 $ 73 70.2 % Other (income) expense, net $ (18 ) $



189 $ 207 109.5 %

Interest Expense - Interest expense for the three months ended June 30, 2014 decreased by $0.1 million, or 12.8% as compared to the three months ended June 30, 2013. Excluding capitalized interest of $0.5 million for the three months ended June 30, 2014, interest expense increased $0.4 million or 33.3%, due to a higher interest rate and higher average debt outstanding related to the refinancing of our credit facility in February 2014. Other (Income) Expense, Net - Other (income) expense, net for the three months ended June 30, 2014 and June 30, 2013 primarily related to foreign currency transaction (gains) and losses, respectively. Income Tax Benefit Our effective tax rates for the three months ended June 30, 2014 and 2013 of 30.2% and 22.2%, respectively, differ from the U.S Federal statutory tax rate primarily due to stock-based compensation expenses for incentive stock options, or ISOs, and our employee stock purchase plan, or ESPP, which are not tax-deductible, as well as foreign income taxes and state and local income taxes, partially offset by research and development tax credits and tax benefits from ISO disqualifications. Comparison of the Six Months Ended June 30, 2014 and 2013 Revenue Total revenue was $122.8 million for the six months ended June 30, 2014, up $10.0 million, or 8.9%, from $112.8 million for the six months ended June 30, 2013, primarily due to a $11.5 million, or 22.7%, increase in M&A revenue. % Revenue Six Months Ended June 30, Increase % Increase Six Months Ended June 30, 2014 2013 (Decrease) (Decrease) 2014 2013 (In thousands) M&A $ 62,136$ 50,627$ 11,509 22.7 % 50.6 % 44.9 % Enterprise 45,961 47,513 (1,552 ) (3.3 )% 37.4 % 42.1 % DCM 14,701 14,623 78 0.5 % 12.0 % 13.0 % Total revenue $ 122,798$ 112,763$ 10,035 8.9 % 100 % 100 % M&A - The results for the six months ended June 30, 2014 reflect an increase in M&A revenue of $11.5 million, or 22.7%, as compared to the six months ended June 30, 2013. The increase in M&A revenue reflects a higher volume of strategic business transactions, which led to market share gains in most of the geographic regions in which we operate. Enterprise - The results for the six months ended June 30, 2014 reflect a decrease in Enterprise revenue of $1.6 million, or 3.3%, as compared to the six months ended June 30, 2013, due primarily to the continued repositioning of our Enterprise offerings. DCM - The results for the six months ended June 30, 2014 remain largely unchanged as compared to the same period in the prior year. We believe our revenue growth will be driven, barring unforeseen circumstances, by our ongoing investments in our platform and in enhanced service offerings such as our Intralinks VIA offering, by improving our mid-market M&A advisory firm coverage, by expanding our focus on underrepresented geographies and by increasing our overall market share in our strategic transactions business. We believe that our continued investments in our platform, services and operational infrastructure will allow us to serve a greater number of clients more efficiently, including those with larger-scale requirements. 26



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Cost of Revenue and Gross Profit

Six Months Ended June 30, 2014 2013 Increase % Increase (In thousands) Cost of revenue $ 34,085$ 31,790$ 2,295 7.2 % Gross profit $ 88,713$ 80,973 7,740 9.6 % Gross margin 72.2 % 71.8 % 0.4 % Cost of revenue for the six months ended June 30, 2014 increased $2.3 million, or 7.2%, as compared to the six months ended June 30, 2013, largely due to a $1.8 million increase in amortization of capitalized software related to the enhancement of our service offerings, as well as an increase in employee related expenses of $1.0 million primarily due to an increase in headcount. Operating Expenses Total operating expenses for the six months ended June 30, 2014 increased by $12.5 million, or 13.9%, as compared to the six months ended June 30, 2013. Six Months Ended June 30, Increase % Increase 2014 2013 (Decrease) (Decrease) (In thousands) Sales and marketing $ 55,991$ 52,188$ 3,803 7.3 % General and administrative 34,953 27,857 7,096 25.5 % Product development 10,925 9,358 1,567 16.7 % Total operating expenses $ 101,869$ 89,403$ 12,466 13.9 % Sales and Marketing - The results for the six months ended June 30, 2014 reflect an increase in sales and marketing expense of $3.8 million, or 7.3%, as compared to the six months ended June 30, 2013, driven by increases in (i) employee compensation related expenses of $1.9 million, primarily due to increased headcount, (ii) travel and entertainment expenses of $1.2 million, primarily related to increased headcount as well as the timing of our annual sales conference, which took place in the first quarter of 2014 as opposed to the third quarter of 2013, and (iii) commissions expense to third-party partners of $0.6 million primarily due to new channel partners in 2014. General and Administrative - The results for the six months ended June 30, 2014 reflect an increase in general and administrative expense of $7.1 million, or 25.5%, as compared to the six months ended June 30, 2013, driven by increases in (i) employee compensation and related expense of $1.9 million, primarily due to an increase in headcount, as well as stock-based compensation expense related to an increase in equity awards granted to key employees, (ii) professional fees of $1.8 million primarily due to transaction costs associated with the acquisition of docTrackr and other strategic initiatives, (iii) software maintenance and licensing fees of $1.0 million in support of enhancements to our IT infrastructure, and (iv) bad debt expense of $0.9 million. Product Development - The results for the six months ended June 30, 2014 reflect an increase in product development expense of $1.6 million, or 16.7%, as compared to the six months ended June 30, 2013, driven by increases in employee compensation and related expense of $0.9 million, primarily due to an increase in headcount, and an increase in software maintenance and licensing fees of $0.3 million in support of enhancements to our IT infrastructure. Total product development costs are comprised of both capitalized software and product development expense. Six Months Ended June 30, Increase % Increase 2014 2013 (Decrease) (Decrease) (In thousands) Capitalized software $ 13,054$ 10,334$ 2,720 26.3 % Product development expense 10,925 9,358 1,567 16.7 % Total product development costs $ 23,979$ 19,692



$ 4,287 21.8 %

The increase in total product development costs of $4.3 million, or 21.8%, was largely due to an increase in headcount, as well as consulting fees related to the continued development of our Intralinks platform. 27



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Non-Operating Expenses

Six Months Ended June 30, Increase % Increase 2014 2013 (Decrease) (Decrease) (In thousands) Interest expense $ 1,965$ 2,274$ (309 ) (13.6 )% Amortization of debt issuance costs $ 293$ 216$ 77 35.6 % Other (income) expense, net $ (209 )$ 968



$ 1,177 (121.6 )%

Interest Expense - Interest expense for the six months ended June 30, 2014 decreased by $0.3 million, or 13.6%, as compared to the six months ended June 30, 2013. Excluding capitalized interest of $0.9 million in for the six months ended June 30, 2014, interest expense increased $0.6 million or 25.9%, due to a higher interest rate and higher average debt balance outstanding related to the refinancing of our credit facility in February 2014. Other (Income) Expense, Net - Other (income) expense, net for the six months ended June 30, 2014 and June 30, 2013 primarily related to foreign currency transaction (gains) and losses, respectively. Income Tax Benefit Our effective tax rates for the six months ended June 30, 2014 and 2013 of 27.3% and 25.0%, respectively, differ from the U.S Federal statutory tax rate primarily due to stock-based compensation expenses for ISOs and our ESPP, which are not tax-deductible, as well as foreign income taxes and state and local income taxes, partially offset by research and development tax credits and tax benefits from ISO disqualifications. Cash Flows June 30, 2014 2013 (In thousands) Cash and cash equivalents $ 37,581$ 42,476 Six Months Ended June 30, 2014 2013 (In thousands) Net cash provided by operating activities $ 10,887$ 19,757 Net cash used in investing activities (25,609 ) (19,735 ) Net cash provided by (used in) financing activities 1,226 (835 )



Effect of foreign exchange rate changes on cash and cash equivalents

537 (509 ) Net decrease in cash and cash equivalents $ (12,959 )



$ (1,322 )

Operating Activities Net cash provided by operating activities during the six months ended June 30, 2014 was $10.9 million, as a result of $13.6 million in cash generated from results of operations after adjusting for non-cash items, partially offset by a net decrease in our operating assets and liabilities of $2.7 million. The net decrease in operating assets and liabilities consisted primarily of: (i) an increase of $4.0 million in accounts receivable related, in part, to increased billings and (ii) a decrease of $2.0 million in accrued expenses and other liabilities primarily related to payment of bonus and commissions related to 2013, partially offset by (iii) an increase of $1.4 million in accounts payable due to the timing of payments and (iv) an increase of $1.2 million in deferred revenue. Additionally, net cash provided by operating activities during the six months ended June 30, 2014 consisted of a net loss of $11.1 million plus adjustments for non-cash items including (a) depreciation and amortization of $12.2 million, (b) amortization of intangible assets of $11.8 million and (c) stock-based compensation expense of $4.9 million, partially offset by (d) a deferred tax benefit of $6.3 million. 28



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Net cash provided by operating activities during the six months ended June 30, 2013 was $19.8 million, as a result of $13.5 million in cash generated from results of operations after adjusting for non-cash items, and a net increase in our operating assets and liabilities of $6.3 million. The net increase in operating assets and liabilities consisted primarily of: (i) an increase of $7.6 million in accounts payable due more effective cash management, and (ii) a $3.8 million increase in deferred revenue, partially offset by (a) an increase of $2.8 million in prepaid expenses and other assets, due primarily to prepaid licensing costs related to software that provides enhanced functionality as compared to our historic infrastructure and more favorable vendor pricing secured from multiple vendors, and (b) an increase of $1.9 million in accounts receivable related, in part, to higher billings. Additionally, net cash provided by operating activities during the six months ended June 30, 2013 consisted of a net loss of $8.9 million plus adjustments for non-cash items including (a) depreciation and amortization of $9.9 million, (b) amortization of intangible assets of $11.8 million, (c) stock-based compensation expense of $4.1 million, partially offset by (d) a deferred tax benefit of $4.8 million. Investing Activities Net cash used in investing activities for the six months ended June 30, 2014 and 2013 was $25.6 million and $19.7 million, respectively. During the six months ended June 30, 2014 and 2013, purchases of investments of $24.9 million and $25.0 million, respectively and maturities of investments of $24.5 million and $22.4 million, respectively primarily consisted of corporate securities. During the six months ended June 30, 2014, we used $8.8 million in cash, net of cash acquired of $0.2 million, to acquire all of the outstanding shares of docTrackr. During the six months ended June 30, 2014, we purchased a minority interest in a privately held company for $1.5 million, which is accounted for under the cost method. Cash used in investing activities related to capital expenditures for infrastructure during the six months ended June 30, 2014 and 2013 was $4.4 million and $3.3 million, respectively. Investments in capitalized software development costs for the six months ended June 30, 2014 and 2013 were $13.1 million and $10.8 million, respectively. We anticipate capital expenditures and investments in our software development may increase in future periods, in line with our growth strategy. Additionally, during the six months ended June 30, 2014, $2.4 million in cash that was restricted in 2013 was returned to us. Financing Activities Net cash provided by financing activities for the six months ended June 30, 2014 of $1.2 million includes $79.2 million in proceeds related to the refinancing of our Term Loan Credit Facility of which $75.1 million was used to pay-off all the outstanding indebtedness under our Prior Credit Facility and $2.7 million was used to pay debt issuance costs related to the Term Loan Credit Facility and the Revolving Credit Facility. Net cash used in financing activities for the six months ended June 30, 2013 of $0.8 million includes $0.6 million of repayments of outstanding finance arrangements and $0.4 million of payments on long-term debt. Cash paid for interest, net of capitalized interest during the six months ended June 30, 2014 and 2013 was $1.3 million and $2.2 million, respectively. Covenants On February 24, 2014, we entered into our Term Loan Credit Facility and the Revolving Credit Facility, collectively, our Credit Facilities. On June 20, 2014, we amended our Revolving Credit Facility to, among other things, increase the maximum commitment to $15.0 million. The Credit Facilities are subject to certain affirmative and negative covenants, both financial and non-financial. These covenants include the timely submission of unqualified audited financial statements to the lender, as well as customary restrictions on certain activities, including the following, which are subject to lender approval, with certain exceptions: incurring additional indebtedness other than in the normal course of business;



creating liens or other encumbrances on our assets;

engaging in merger or acquisition transactions;

making investments; and

entering into asset sale agreements or paying dividends or making distributions on and repurchasing our stock. The Term Loan Credit Facility requires us to comply with a Consolidated Net Leverage Ratio (as defined under the Term Loan Credit Facility). The Consolidated Net Leverage Ratio must be less than or equal to 3.25 to 1.00 as of the last day of each fiscal quarter through March 31, 2015 and less than or equal to 3.00 to 1.00 as of the last day of each fiscal quarter ending thereafter through the maturity date. For purposes of testing our Consolidated Net Leverage Ratio, we are permitted to net from our outstanding total indebtedness up to $20.0 million of our cash and cash equivalents. 29



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The Revolving Credit Facility includes a springing Fixed Charge Coverage Ratio (as defined in the Revolving Credit Facility), which we must comply with any time our cash and cash equivalents held in deposit or securities accounts subject to a lien in favor of our revolving loan lenders falls below $10.0 million or if an Event of Default (as defined in the Revolving Credit Facility) occurs (in either case, a "Fixed Charge Coverage Trigger Event"). The Fixed Charge Coverage Ratio is tested as of the last day of the fiscal quarter preceding the Fixed Charge Coverage Trigger Event and as of the last day of each subsequent fiscal quarter during the Fixed Charge Coverage Compliance Period (as defined in the Revolving Credit Facility). The Fixed Charge Coverage Ratio must be greater than or equal to 1.05 to 1 as of the last day of each fiscal quarter through March 31, 2015 and greater than or equal to 1.10 to 1 as of the last day of each fiscal quarter ending thereafter through the maturity date. We were in compliance with all applicable financial and non-financial covenants as of June 30, 2014. The agreements governing our credit facilities also contain customary events of default, including, but not limited to, cross-defaults among these agreements. Although we currently expect to remain in compliance with these existing covenants, any breach of these covenants or a change in control could result in a default, and subsequent cross-defaults, under our credit agreements, which could cause all of the outstanding indebtedness to become immediately due and payable and terminate all commitments from our lenders to extend further credit. Liquidity and Capital Resources We currently use the net cash generated from operations to fund our working capital needs and our capital expenditure requirements. At June 30, 2014, we had $37.6 million in cash and cash equivalents, $34.9 million in investments, and $41.2 million in accounts receivable, net of allowance for doubtful accounts and credit reserves. We believe that we have sufficient cash resources to continue operations for at least the next 12 to 24 months. If the credit markets were to experience a period of disruption, as has happened in the past, it could adversely affect our access to financing, as well as our revenue growth (due to our customer base in the DCM and M&A markets). Additionally, if the national or global economy or credit market conditions in general were to deteriorate, it is possible that those changes could adversely affect our credit ratings, which, among other things, could have a material adverse effect on our ability to obtain external financing or to refinance our existing indebtedness. Our corporate credit ratings and rating agency outlooks as of June 30, 2014 are summarized in the table below. Rating Agency Rating Outlook Moody's B2 Stable Standard & Poor's B+ Stable Credit rating agencies review their ratings periodically, and therefore the credit rating assigned to us by each agency may be subject to revision at any time. Factors that can affect our credit ratings include changes in our operating performance, the economic environment, our financial position, conditions in any of our principal markets and changes in our business strategy. If weak financial market conditions or competitive dynamics cause any of these factors to deteriorate, we could see a reduction in our corporate credit rating. Contractual Obligations and Commitments The following table sets forth, as of June 30, 2014, certain significant cash obligations that will affect our future liquidity: Total Less than 1 - 3 3 - 5 More than 1 year Years Years 5 years (In thousands) Long-term debt, including current portion $ 79,974$ 937$ 1,637$ 77,400 $ - Interest on long-term debt 28,008 6,570 11,808 9,630 - Operating leases 45,066 6,687 10,556 9,912 17,911 Third-party hosting commitments 5,956 3,795 2,161 - - Other 189 151 38 - - Total $ 159,193$ 18,140$ 26,200$ 96,942$ 17,911 Long-Term Debt and Interest on Long-Term Debt Interest on long-term debt in the table above includes interest payments on (i) the Term Loan Credit Facility through its maturity date, February 24, 2019, based on the amount of debt outstanding and the June 30, 2014 interest rate of 7.25%, representing a 2.00% floor, plus a margin of 5.25%, (ii) issued letters of credit under the Revolving Credit Facility, which bear interest at a rate of 2.50% and (iii) a commitment fee of 0.50% on the unused balance under the Revolving Credit Facility. 30



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Other Financing Arrangements In June 2011, we entered into a financing arrangement in the amount of $1.2 million for third-party software, including financing costs of $0.1 million to be repaid over a 50-month period ending in July 2015. Operating Leases and Third-party Hosting Commitments Our principal executive office in New York, New York occupies 43,304 square feet that is subject to a lease agreement that expires in July 2021. In addition, in March 2014, we entered into a lease for 51,325 square feet of office space in Waltham, Massachusetts. The term of this lease commenced in July 2014 and will continue until it expires in October 2024. Further, we have a facility in Charlestown, Massachusetts that occupies 36,557 square feet under a lease that expires in August 2014 with respect to 16,982 square feet and in December 2015 with respect to the remaining 19,575 square feet. We also maintain space in Amsterdam, Chicago, Frankfurt, Hong Kong, London, Miami, Paris, San Francisco, SÃo Paulo, Singapore, Sydney and Tokyo for our sales and services activities. We believe that our facilities are adequate for our current needs. However, we may obtain additional office space to house additional services personnel in the near future, and we may require other additional office space as our business grows. Our commitments to our third-party hosting provider expire in December 2015. Our hosting obligations are largely impacted by service expansion requirements in line with the growth of our business. Uncertain Tax Positions Our tax reserves for uncertain tax positions of $4.6 million (including interest and penalties of $0.3 million) are included within "Other long-term liabilities" on our Consolidated Balance Sheet as of June 30, 2014. Unrecognized tax benefits totaled $4.3 million and $3.9 million at June 30, 2014 and December 31, 2013, respectively. We do not expect that the balance of unrecognized tax benefits will significantly increase or decrease over the next twelve months. We are not able to reasonably estimate when we would make any cash payments required to settle these liabilities beyond the next twelve months, but we do not believe that the ultimate settlement of our obligations will materially affect our liquidity. Off-Balance Sheet Arrangements We do not currently have, and did not have during the periods presented, any off-balance sheet arrangements (as defined under the rules promulgated by the SEC) such as relationships with unconsolidated entities or financial partnerships, which are often referred to as structured finance or special purpose entities, that are established for the purpose of facilitating financing transactions that are not required to be reflected on our Consolidated Balance Sheets.


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