Management's Discussion and Analysis of Financial Condition and Results of Operations ("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. Our MD&A should be read in conjunction with our Annual Report on Form 10-K for the fiscal year ended December 31, 2011, as well as our reports on Form 8-K and other publicly available information. Amounts in tabular format are presented in thousands, except per share data, or otherwise indicated.

Overview

IntraLinks is a leading global provider of Software-as-a-Service ("SaaS") solutions for securely managing content, exchanging critical business information and collaborating within and among organizations. Our cloud-based solutions enable organizations to control, track, search and exchange 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 service enterprise and governmental agencies in over 57 countries across a variety of industries, including financial services, pharmaceutical, biotechnology, consumer, energy, industrial, legal, 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 entirely through a multi-tenant SaaS architecture in which a single instance of our software serves all of our customers. We sell our solutions directly through an internal sales team with industry-specific expertise, and indirectly through a customer referral network and channel partners. During the quarter ended March 31, 2012, we generated $50.8 million in revenue, of which approximately 40% was derived from international sales across 57 countries.

Key Metrics

We evaluate our operating and financial performance using various performance indicators, as well as the macroeconomic trends affecting the demand for our solutions in our principal markets. We also monitor relevant industry performance, including transactional activity in the debt capital markets and M&A market globally, 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 cash flow provided by operating activities, including deferred revenue, under "Liquidity and Capital Resources". Other measures of our performance, including adjusted gross margin, adjusted operating income, adjusted net income, adjusted EBITDA and adjusted EBITDA margin, and free cash flow are defined and discussed under "Non-GAAP Financial Measures" below.

                                       Three Months Ended
                                            March 31,
                                        2012          2011
Results of Operations Data:
Revenue                              $   50,785     $ 52,407
Non-GAAP Gross margin                      76.2 %       80.5 %
Non-GAAP adjusted operating income   $    2,785     $ 10,836
Non-GAAP adjusted net income         $    1,052     $  6,094
Non-GAAP adjusted EBITDA             $    7,064     $ 15,785
Non-GAAP adjusted EBITDA margin            13.9 %       30.1 %

Consolidated Balance Sheet Data:
Deferred revenue at March 31,        $   39,032     $ 35,239

Cash Flows Data:
Cash flows provided by operations    $    1,529     $  5,316
Free cash flow                       $   (4,642 )   $   (143 )

In addition to the metrics listed in the table above, our management regularly analyzes customer contract data, including aggregate contract values, contract durations and payment terms. Management also monitors sales and marketing activity, customer renewal rates, the mix of subscription and transaction business and international revenue growth to evaluate various aspects of our operating and financial performance. These items are discussed elsewhere in this Management's Discussion and Analysis of Financial Condition and Results of Operations.

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 ("GAAP" or "U.S. GAAP"), including non-GAAP gross margin, non-GAAP adjusted operating income, non-GAAP adjusted net income, non-GAAP adjusted EBITDA and EBITDA margin, and free cash flow. These non-GAAP measures are not based on any standardized methodology prescribed by GAAP and are not necessarily comparable to similar measures presented by other companies. A reconciliation of non-GAAP measures is included below.

Management defines its non-GAAP financial measures as follows:

• Non-GAAP gross margin represents the corresponding GAAP measure adjusted to exclude (1) stock-based compensation expense and (2) amortization of intangible assets.

• Non-GAAP adjusted operating income represents the corresponding GAAP measure adjusted to exclude (1) stock-based compensation expense, (2) amortization of intangible assets and (3) costs related to public stock offerings.

• Non-GAAP adjusted net income represents the corresponding GAAP measure adjusted to exclude (1) stock-based compensation expense, (2) amortization of intangible assets and (3) costs related to public stock offerings. Non-GAAP adjusted net income is calculated using an estimated long-term effective tax rate.

• Non-GAAP adjusted EBITDA represents net (loss) income adjusted to exclude (1) interest expense, (2) income tax provision (benefit), (3) depreciation and amortization, (4) amortization of intangible assets, (5) stock-based compensation expense, (6) amortization of debt issuance costs, (7) other income, net and (8) costs related to public stock offerings.

• Non-GAAP adjusted EBITDA margin represents adjusted EBITDA as a percentage of revenue.

• Free cash flow represents cash flow from operations less 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 as well as additional information that is useful for evaluating our operating performance. Additionally, management 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-to-period basis, because these measures exclude items that are not representative of our operating performance, such as amortization of intangible assets, interest expense and fair value adjustments to the interest rate swap. Management believes that including these costs in our results of operations causes 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 costs related to intangible assets. However, non-GAAP gross margin, non-GAAP adjusted operating income, non-GAAP adjusted net income, non-GAAP adjusted EBITDA and EBITDA margin, and free cash flow are not measures of financial performance under U.S. GAAP and, accordingly, should not be considered as alternatives to gross margin, operating income, net income (loss), and cash flows provided by operations as indicators of operating performance.

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

                                                        Three Months Ended
                                                             March 31,
                                                         2012          2011
Gross profit                                          $   35,280     $ 38,791
Gross margin                                                69.5 %       74.0 %
Cost of revenue - stock-based compensation expense           108           71
Cost of revenue - amortization of intangible assets        3,309        3,309
Non-GAAP Gross profit                                 $   38,697     $ 42,171
Non-GAAP Gross margin                                       76.2 %       80.5 %

(Loss) income from operations                         $   (5,717 )   $  1,653
Stock-based compensation expense                           1,345        1,972
Amortization of intangible assets                          7,157        7,157
Costs related to public stock offerings                        ?           54
Non-GAAP adjusted operating income                    $    2,785     $ 10,836

Net (loss) income before income tax                   $   (6,806 )   $    222
Stock - based compensation expense                         1,345        1,972
Amortization of intangible assets                          7,157        7,157
Costs related to public stock offerings                        ?           54
Non-GAAP adjusted net income before tax                    1,696        9,405
Non-GAAP Income tax provision                                644        3,311
Non-GAAP adjusted net income                          $    1,052     $  6,094

Net (loss) income                                     $   (5,584 )   $    483
Interest expense                                           2,136        2,994
Income tax benefit                                        (1,222 )       (261 )
Depreciation and amortization                              4,279        4,949
Amortization of intangible assets                          7,157        7,157
Stock-based compensation expense                           1,345        1,972
Amortization of debt issuance costs                          191          367
Other income, net(1)                                      (1,238 )     (1,930 )
Costs related to public stock offerings                        ?           54
Non-GAAP adjusted EBITDA                              $    7,064     $ 15,785
Non-GAAP adjusted EBITDA margin                             13.9 %       30.1 %

Cash flow provided by operations                      $    1,529     $  5,316
Capital expenditures                                      (6,171 )     (5,459 )
Free cash flow                                        $   (4,642 )   $   (143 )

(1) "Other income, net" primarily includes foreign currency transaction gains and losses and fair value adjustments to our interest rate swap.

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 to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses, and related disclosure of contingent assets and liabilities on an ongoing basis. We evaluate these estimates including those related to the determination of the fair value of stock options and estimated forfeitures of equity-based awards, the fair value of our 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 the Company's deferred tax assets, accruals for certain compensation expenses, allowances for doubtful accounts and reserves for customer credits. We base 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.

During the three months ended March 31, 2012, there were no material changes to our significant accounting policies from those contained in our Annual Report on Form 10-K for the fiscal year ended December 31, 2011.

Recently Adopted Accounting Pronouncements

On May 12, 2011, the Financial Accounting Standards Board ("FASB") issued revised authoritative guidance covering fair value measurements and disclosures. The amended guidance include provisions for (1) the application of concepts of "highest and best use" and "valuation premises", (2) an option to measure groups of offsetting assets and liabilities on a net basis, (3) incorporation of certain premiums and discounts in fair value measurements, and (4) measurement of the fair value of certain instruments classified in shareholders' equity. The revised guidance is effective for interim and annual periods beginning after December 15, 2011. We adopted this authoritative guidance effective January 1, 2012. The adoption of this authoritative guidance had no material impact on our consolidated financial statements.

On June 16, 2011 the FASB issued revised authoritative guidance covering Presentation of Comprehensive Income, which revises the manner in which entities present comprehensive income in their financial statements. The revised guidance removes the presentation options in the former guidance and requires entities to report components of comprehensive income in either a continuous statement of comprehensive income, or two separate but consecutive statements. The revised authoritative guidance does not change the items that must be reported in other comprehensive income. The revised guidance is effective for interim and fiscal years beginning after December 15, 2011. We adopted this authoritative guidance effective January 1, 2012, and have included the presentation of comprehensive
(loss) income in a separate statement that immediately follows the Consolidated Statements of Operations in this Quarterly Report on Form 10-Q.

Results of Operations



The following table sets forth consolidated statements of operations data for
each of the periods indicated as a percentage of total revenues.



                                        Three Months Ended
                                             March 31,
                                        2012           2011
Revenue:
Enterprise                                 45.8 %        45.9 %
M&A                                        39.3 %        38.9 %
DCM                                        14.9 %        15.2 %
Total revenue                             100.0 %       100.0 %
Cost of revenue                            30.5 %        26.0 %
Gross profit                               69.5 %        74.0 %
Operating expenses:
Product development                         8.7 %        11.6 %
Sales and marketing                        48.0 %        40.5 %
General and administrative                 24.0 %        18.7 %
Total operating expenses                   80.7 %        70.9 %
(Loss) income from operations             (11.3 )%        3.2 %
Interest expense                            4.2 %         5.7 %
Amortization of debt issuance costs         0.4 %         0.7 %
Other income, net                          (2.4 )%       (3.7 )%
Net (loss) income before income tax       (13.4 )%        0.4 %
Income tax benefit                         (2.4 )%       (0.5 )%
Net (loss) income                         (11.0 )%        0.9 %

Comparison of the Three Months Ended March 31, 2012 and 2011

Revenue

Revenue decreased to $50.8 million for the three months ended March 31, 2012, from $52.4 million for the three months ended March 31, 2011. The following table sets forth revenues by our principal markets, Enterprise, Mergers and Acquisitions ("M&A") and Debt Capital Markets ("DCM"), for the three months ended March 31, 2012 compared to the three months ended March 31, 2011, the percentage increase or decrease between those periods, and the percentage of total revenue that each principal market represented for those periods:

                                                                                     % Revenue
                  Three Months Ended                                            Three Months Ended
                       March 31,                                                     March 31,
                                                                  %
                   2012          2011        (Decrease)      (Decrease)          2012          2011
Enterprise      $   23,261     $ 24,044     $       (783 )          (3.3 )%         45.8 %       45.9 %
M&A                 19,977       20,383             (406 )          (2.0 )%         39.3 %       38.9 %
DCM                  7,547        7,980             (433 )          (5.4 )%         14.9 %       15.2 %
Total revenue   $   50,785     $ 52,407     $     (1,622 )          (3.1 )%        100.0 %      100.0 %

Enterprise- The results for the three months ended March 31, 2012 reflect a decrease in Enterprise revenue of $0.8 million or 3.3%, as compared to the three months ended March 31, 2011. The decrease in Enterprise revenue for the three month period, as compared to the prior year period, was primarily driven by a reduced level of utilization by one significant Enterprise customer. This decrease was partially offset by revenues attributable to a net increase in our customer base.

M&A - The results for the three months ended March 31, 2012 reflect a decrease in M&A revenue of $0.4 million, or 2.0%, as compared to the three months ended March 31, 2011. Despite global market share gains, the decrease in M&A revenue, during the three month period, as compared to the prior year period, was primarily driven by differences in the timing, phasing and size of deals during the respective comparable periods.

DCM - The results for the three months ended March 31, 2012 reflect a decrease in DCM revenue of $0.4 million, or 5.4%, as compared to the three months ended March 31, 2011. The results for the current period largely reflect the impact of a lower customer base compared to the prior year period.

We believe our revenue growth will be driven by the following key trends:
expanded geographic focus to establish wider distribution of our services, ongoing investment in our platform to continue to meet customer needs, and increased focus on providing the types of services that generate repeat business and expand our subscription base. Our revenue growth will also be driven by our ability to increase our market share by winning business from our competition and by adding new clients that are not yet taking advantage of services such as ours. We believe that the continued investments in our platform and operational infrastructure will allow us to service more clients, including those with larger-scale requirements.

Cost of Revenue and Gross Margin



The following table presents cost of revenue, gross profit and gross margin for
the three months ended March 31, 2012, compared to the three months ended March
31, 2011:



                             Three Months Ended
                                  March 31,              Increase        % Increase
                              2012          2011        (Decrease)       (Decrease)
         Cost of revenue   $   15,505     $ 13,616     $      1,889             13.9 %
         Gross profit          35,280       38,791           (3,511 )           (9.1 )%
         Gross margin            69.5 %       74.0 %           (4.5 )%

The results for the three months ended March 31, 2012 reflect an increase in cost of revenue of $1.9 million, or 13.9%, as compared to the three months ended March 31, 2011. The increase in cost of revenue for the three month period, as compared to the prior year period, was attributed primarily to (i) a $1.2 million increase in headcount-related expenses, primarily salaries for additional personnel, which is in line with the investment strategy of our business, (ii) a $0.4 million increase in hosting costs to support expanded data capacity, and (iii) a $0.2 million increase in rent and communications costs due to the expansion of our research and development headquarters in Charlestown Massachusetts to support our growing employee base. Cost of revenue as a percentage of revenue was 30.5% for the three months ended March 31, 2012, compared to 26.0% for the three months ended March 31, 2011, driving gross margin to decrease by 4.5 percentage points for the three months ended March 31, 2012.

Operating Expenses

Total operating expenses for the three months ended March 31, 2012 increased by approximately $3.9 million, or 10.4%, as compared to the three months ended March 31, 2011.

The following table presents the components of operating expenses for the three months ended March 31, 2012 compared to the three months ended March 31, 2011:

                                  Three Months Ended
                                       March 31,              Increase        % Increase
                                   2012          2011        (Decrease)       (Decrease)
   Product development          $    4,440     $  6,069     $     (1,629 )          (26.8 )%
   Sales and marketing              24,392       21,243            3,149             14.8 %
   General and administrative       12,165        9,826            2,339             23.8 %
   Total operating expenses     $   40,997     $ 37,138     $      3,859             10.4 %

Product Development - The results for the three months ended March 31, 2012 reflect a 26.8% decrease in product development expense of $1.6 million, as compared to the three months ended March 31, 2011. The decrease in product development expense during the three month period was primarily driven by the capitalization of $1.4 million of development expense on our existing platform, offset by the commencement of development activities for new initiatives. Product development expense as a percentage of revenue was 8.7% for the three months ended March 31, 2012 compared to 11.6% for the three months ended March 31, 2011.

Total product development costs comprise both capitalized software and product development expense.

                                     Three Months Ended
                                          March 31,              Increase        % Increase
                                      2012          2011        (Decrease)       (Decrease)
 Capitalized software              $     5,769     $ 3,838     $      1,931             50.3 %
 Product development expense             4,440       6,069           (1,629 )          (26.8 )%
 Total product development costs   $    10,209     $ 9,907     $        302              3.0 %

For the three months ended March 31, 2012, product development costs totaled $10.2 million, consisting of $5.8 million of capitalized software related to product development enhancements and $4.4 million in product development expense. For the three months ended March 31, 2011, product development costs totaled $9.9 million, consisting of $6.1 million of capitalized software related to product development enhancements and $3.8 million of product development expense. For the three month period, as compared to the prior year period, total product development costs increased by $0.3 million, generally flat compared to the prior year period. Total product development costs as a percentage of revenue was 20.1% for the three months ended March 31, 2012, compared to 18.9% for the three months ended March 31, 2011.

Sales and Marketing - The results for the three months ended March 31, 2012 reflect an increase in sales and marketing expense of $3.1 million, or 14.8%, as compared to the three months ended March 31, 2011. The increase in sales and marketing expense for the three month period, as compared to the prior year period, was primarily driven by an increase of (i) $1.7 million in headcount-related expenses, primarily salaries, bonus and benefits, reflecting additional sales and marketing personnel, (ii) $0.8 million related to marketing programs and initiatives tied to brand awareness, and (iii) $0.4 million related to rent, communications and software licenses to support the increase in additional sales and marketing employees. Sales and marketing expense as a percentage of revenue was 48.0% for the three months ended March 31, 2012 compared to 40.5% for the three months ended March 31, 2011.

General and Administrative - The results for the three months ended March 31, 2012 reflect an increase in general and administrative expense of $2.3 million, or 23.8%, as compared to the three months ended March 31, 2011. The increase in general and administrative expense for the three month period, as compared to the prior year period, was primarily driven by (i) an increase of $1.2 million in headcount-related expenses, primarily salaries, bonus, and benefits reflecting additional headcount necessary to support the growth strategy of our business and our public company status, (ii) $0.6 million in severance benefits for two former executives that separated from the Company during the three months ended March 31, 2012, and (iii) an increase of $0.9 million in companywide internal software license and maintenance costs driven by system improvements and additional licenses to accommodate increased headcount. These increases were partially offset by a net decrease of $0.5 million in stock-based compensation costs, primarily driven by the forfeiture of equity awards granted to the executives noted above who separated from the company during the three months ended March 31, 2012. General and administrative expense as a percentage of revenue was 24.0% for the three months ended March 31, 2012 compared to 18.7% for the three months ended March 31, 2011.

Non-Operating Expenses



The following table presents the components of non-operating expenses for the
three months ended March 31, 2012 compared to the three months ended March 31,
2011:



                                            Three Months Ended
                                                March 31,
                                           2012            2011        (Decrease)      % (Decrease)
Interest expense                        $     2,136     $    2,994     $      (858 )           (28.7 )%
Amortization of debt issuance costs     $       191     $      367     $      (176 )           (48.0 )%
Other income, net                       $    (1,238 )   $   (1,930 )   $      (692 )           (35.9 )%

Interest Expense

Interest expense for the three months ended March 31, 2012 decreased by $0.9 million, or 28.7%, compared to the three months ended March 31, 2011. The decrease was primarily driven by the use of our net proceeds received from our follow-on public stock offering in April 2011, to repay $34.6 million of our outstanding debt on our First Lien Credit Facility. Additionally, the decrease was a result of the notional amount on our interest rate swap decreasing to . . .