HOLMDEL, N.J., Aug. 3, 2017 /PRNewswire/ -- Vonage Holdings
Corp. (NYSE: VG), a leading provider of business cloud
communications, today announced results for the quarter ended
June 30, 2017.
Consolidated Results
"We had an outstanding second quarter, and we are pleased with
the team's performance," said Alan
Masarek, Vonage Chief Executive Officer. "We've taken bold
steps to transform Vonage into a market leading business cloud
communications company. Our value proposition is resonating well,
and we are confident that our focus on delivering better business
outcomes for our customers will lead to accelerated long-term
growth."
"Within Vonage Business, we continue to execute on our
priorities to accelerate UCaaS revenue growth within the Mid-market
and Enterprise segments, as well as drive strong revenue growth in
CPaaS. We also continue to pull the right levers to optimize and
extend the value of Consumer Services, highlighted by record low
churn."
For the second quarter of 2017, Vonage reported revenues of
$252 million, an 8% increase from the
year ago quarter. Income from Operations was $7 million, up from $5
million in the prior year. Adjusted Operating Income Before
Depreciation and Amortization ("Adjusted OIBDA")1 was
$41 million, up from $40 million in the prior year. GAAP net income
was $5 million or $0.02 per share, up from $218 thousand or $0.00 per share in the year ago quarter. Adjusted
net income2 was $15
million or $0.07 per share, up
from $10 million or $0.05 per share in the year ago quarter.
Business Segment Results
- Vonage Business revenues, which include $35 million of Nexmo revenues, were $124 million. Nexmo revenues include an
incremental $3.9 million as the
Company determined it is required to report a portion of revenues
on a gross rather than net basis. CPaaS organic revenue growth was
44%3.
- The Company continues to see strong traction from Enterprise
customers and signed four Enterprise deals representing
$30 million in total contract value
in the second quarter.
- Ending seats at Vonage Business were 683,000, up from 592,000
seats in the year ago quarter, a 15% increase.
- Vonage Business revenue churn was 1.4%, flat sequentially and
from the prior year.
- The Vonage API Platform increased its registered developers to
309,000, a sequential increase of 61,000, a record number of
quarterly developer adds.
Consumer Segment Results
- Consumer Services revenues were $128
million in the second quarter of 2017 compared to
$132 million in the first quarter of
2017. This represents the lowest sequential dollar revenue decline
in 13 quarters.
- Consumer customer churn was a record reported low 1.9%.
- Average revenue per line ("ARPU") in Consumer Services was
$26.33, up from $26.10 sequentially and down from $26.61 in the year ago period.
- The Consumer segment ended the second quarter with 1.6 million
subscriber lines.
Patent Portfolio
Vonage continues to execute on its strategy to develop
innovative technologies and to protect its valuable intellectual
property. The Company was granted 11 new patents in the second
quarter and now has more than 160 U.S. patents.
Guidance Update
Vonage is updating its CPaaS revenue expectations to reflect the
Company's requirement to report a portion of Nexmo revenues on a
gross rather than net basis, as well as higher organic growth. The
Company now expects 2017 Business revenues, which includes both
UCaaS and CPaaS, to increase from prior guidance by $15 million, equating to a range of $498 million to $504 million. Corresponding total
revenue guidance is likewise adjusted to between $981 million and $996 million. The Company
reaffirmed 2017 Adjusted OIBDA guidance of at least $165 million.
Conference Call and Webcast
Management will host a conference call to discuss the second
quarter 2017 results and other matters on Thursday, August 3, 2017 at 8:30 AM Eastern Time. To participate, please dial
(866) 807-9684 approximately 10 minutes prior to the call.
International callers should dial (412) 317-5415.
A webcast will be available through Vonage's Investor Relations
website at http://ir.vonage.com. A replay of the call and webcast
will be available shortly after the conclusion of the call and may
be accessed through Vonage's Investor Relations website at
http://ir.vonage.com or by dialing (877) 344-7529. International
callers should dial (412) 317-0088. The replay passcode is
10110947.
- This is a non-GAAP financial measure. Refer below to Table 3
for a reconciliation to GAAP income from operations.
- This is a non-GAAP financial measure. Refer below to Table 4
for a reconciliation to GAAP net income.
- We define organic growth as the increase in Business revenues
after giving pro forma effect for the acquisition of Nexmo, the
change in accounting treatment with respect to certain CPaaS
revenues being recognized on a gross rather than net basis and the
exclusion of one-time items. See Table 3 for reference.
VONAGE HOLDINGS
CORP.
|
TABLE 1.
CONSOLIDATED FINANCIAL DATA
|
(Dollars in
thousands, except per share amounts)
|
|
|
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
(revised)
(1)
|
|
|
|
(revised)
(1)
|
Statement of
Income Data:
|
|
|
|
|
|
|
|
|
|
Revenues
|
$
|
251,836
|
|
|
$
|
243,347
|
|
|
$
|
233,675
|
|
|
$
|
495,183
|
|
|
$
|
460,499
|
|
|
|
|
|
|
|
|
|
|
|
Operating
Expenses:
|
|
|
|
|
|
|
|
|
|
Cost of service
(excluding depreciation and amortization of $6,863,
$6,782, $6,985, $13,645, and $13,818, respectively)
|
97,674
|
|
|
87,596
|
|
|
76,078
|
|
|
185,270
|
|
|
145,228
|
|
Cost of goods
sold
|
6,187
|
|
|
7,293
|
|
|
8,352
|
|
|
13,480
|
|
|
17,418
|
|
Sales and
marketing
|
79,738
|
|
|
81,931
|
|
|
83,344
|
|
|
161,669
|
|
|
162,945
|
|
Engineering and
development
|
6,670
|
|
|
8,370
|
|
|
7,243
|
|
|
15,040
|
|
|
14,077
|
|
General and
administrative
|
36,514
|
|
|
35,086
|
|
|
35,053
|
|
|
71,600
|
|
|
61,723
|
|
Depreciation and
amortization
|
18,394
|
|
|
17,947
|
|
|
18,218
|
|
|
36,341
|
|
|
35,197
|
|
|
245,177
|
|
|
238,223
|
|
|
228,288
|
|
|
483,400
|
|
|
436,588
|
|
Income from
operations
|
6,659
|
|
|
5,124
|
|
|
5,387
|
|
|
11,783
|
|
|
23,911
|
|
Other income
(expense):
|
|
|
|
|
|
|
|
|
|
Interest
income
|
4
|
|
|
5
|
|
|
25
|
|
|
9
|
|
|
46
|
|
Interest
expense
|
(3,861)
|
|
|
(3,703)
|
|
|
(3,057)
|
|
|
(7,564)
|
|
|
(5,503)
|
|
Other income
(expense), net
|
686
|
|
|
(220)
|
|
|
104
|
|
|
466
|
|
|
258
|
|
|
(3,171)
|
|
|
(3,918)
|
|
|
(2,928)
|
|
|
(7,089)
|
|
|
(5,199)
|
|
Income before income
tax expense
|
3,488
|
|
|
1,206
|
|
|
2,459
|
|
|
4,694
|
|
|
18,712
|
|
Income tax benefit
(expense)
|
1,337
|
|
|
4,707
|
|
|
(2,241)
|
|
|
6,044
|
|
|
(10,563)
|
|
Net income
|
4,825
|
|
|
5,913
|
|
|
218
|
|
|
10,738
|
|
|
8,149
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.02
|
|
|
$
|
0.03
|
|
|
$
|
—
|
|
|
$
|
0.05
|
|
|
$
|
0.04
|
|
Diluted
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
$
|
—
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
223,492
|
|
|
220,371
|
|
|
213,558
|
|
|
221,930
|
|
|
213,800
|
|
Diluted
|
239,938
|
|
|
239,486
|
|
|
222,700
|
|
|
239,923
|
|
|
223,978
|
|
|
(1) Revised due to
the correction of prior period financial statements.
|
VONAGE HOLDINGS
CORP.
|
TABLE 1.
CONSOLIDATED FINANCIAL DATA - (Continued)
|
(Dollars in
thousands, except per share amounts)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
(unaudited)
|
|
|
|
|
|
(revised)
(1)
|
|
|
|
(revised)
(1)
|
Statement of Cash
Flow Data:
|
|
|
|
|
|
|
|
|
|
Net cash provided by
operating activities
|
$
|
15,432
|
|
|
$
|
17,261
|
|
|
$
|
25,059
|
|
|
$
|
32,693
|
|
|
$
|
42,527
|
|
Net cash used in
investing activities
|
(7,518)
|
|
|
(6,759)
|
|
|
(171,908)
|
|
|
(14,277)
|
|
|
(182,785)
|
|
Net cash used in
financing activities
|
(7,838)
|
|
|
(13,540)
|
|
|
135,318
|
|
|
(21,378)
|
|
|
106,323
|
|
Capital expenditures,
intangible assets, and development of software
assets
|
(8,798)
|
|
|
(7,081)
|
|
|
(10,396)
|
|
|
(15,879)
|
|
|
(21,603)
|
|
|
(1) Revised due to the
adoption of new Accounting Standard Updates and the correction of
prior period financial statements.
|
|
|
June
30,
|
|
December
31,
|
|
|
2017
|
|
2016
|
|
|
(unaudited)
|
|
(revised)
(1)
|
Balance Sheet Data
(at period end):
|
|
|
|
|
Cash and cash
equivalents
|
|
$
|
26,825
|
|
|
$
|
29,078
|
|
Marketable
securities
|
|
—
|
|
|
601
|
|
Restricted
cash
|
|
1,802
|
|
|
1,851
|
|
Accounts receivable,
net of allowance
|
|
36,185
|
|
|
36,688
|
|
Inventory, net of
allowance
|
|
3,503
|
|
|
4,116
|
|
Prepaid expenses and
other current assets
|
|
28,111
|
|
|
29,188
|
|
Deferred customer
acquisition costs, current and non-current
|
|
1,945
|
|
|
3,136
|
|
Property and
equipment, net
|
|
44,688
|
|
|
48,415
|
|
Goodwill
|
|
366,806
|
|
|
360,363
|
|
Software,
net
|
|
23,867
|
|
|
21,971
|
|
Intangible assets,
net
|
|
188,076
|
|
|
199,256
|
|
Deferred tax
assets
|
|
204,286
|
|
|
184,210
|
|
Other
assets
|
|
15,302
|
|
|
16,793
|
|
Total
assets
|
|
$
|
941,396
|
|
|
$
|
935,666
|
|
Accounts payable and
accrued expenses
|
|
$
|
107,215
|
|
|
$
|
139,946
|
|
Deferred revenue,
current and non-current
|
|
31,531
|
|
|
32,892
|
|
Total notes payable,
net of debt related costs and indebtedness under revolving credit
facility, including current portion
|
|
314,703
|
|
|
318,874
|
|
Capital lease
obligations
|
|
1,067
|
|
|
3,428
|
|
Other
liabilities
|
|
4,710
|
|
|
3,985
|
|
Total
liabilities
|
|
$
|
459,226
|
|
|
$
|
499,125
|
|
Total stockholders'
equity
|
|
$
|
482,170
|
|
|
$
|
436,541
|
|
|
|
|
|
|
|
|
|
|
(1) Revised due to the
correction of prior period financial statements.
|
VONAGE HOLDINGS
CORP.
|
TABLE 2. SUMMARY
CONSOLIDATED OPERATING DATA
|
(unaudited)
|
|
The table below
includes revenues and cost of revenues that our management uses to
measure the growth and operating performance of the business
focused portion of our business:
|
|
Business
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Service
|
$
|
103,825
|
|
|
$
|
92,291
|
|
|
$
|
67,079
|
|
|
$
|
196,116
|
|
|
$
|
123,552
|
|
Product
(1)
|
13,392
|
|
|
13,360
|
|
|
13,265
|
|
|
26,752
|
|
|
26,177
|
|
Service and
Product
|
117,217
|
|
|
105,651
|
|
|
80,344
|
|
|
222,868
|
|
|
149,729
|
|
USF
|
6,497
|
|
|
6,151
|
|
|
5,368
|
|
|
12,648
|
|
|
9,803
|
|
Total Business
Revenues
|
$
|
123,714
|
|
|
$
|
111,802
|
|
|
$
|
85,712
|
|
|
$
|
235,516
|
|
|
$
|
159,532
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
Revenues:
|
|
|
|
|
|
|
|
|
|
Service
(2)
|
$
|
49,246
|
|
|
$
|
39,195
|
|
|
$
|
22,527
|
|
|
$
|
88,441
|
|
|
$
|
37,930
|
|
Product
(1)
|
12,456
|
|
|
13,202
|
|
|
12,902
|
|
|
25,658
|
|
|
25,364
|
|
Service and
Product
|
61,702
|
|
|
52,397
|
|
|
35,429
|
|
|
114,099
|
|
|
63,294
|
|
USF
|
6,497
|
|
|
6,151
|
|
|
5,369
|
|
|
12,648
|
|
|
9,814
|
|
Cost of
Revenues
|
$
|
68,199
|
|
|
$
|
58,548
|
|
|
$
|
40,798
|
|
|
$
|
126,747
|
|
|
$
|
73,108
|
|
|
|
|
|
|
|
|
|
|
|
Service margin
%
|
52.6%
|
|
|
57.5%
|
|
|
66.4%
|
|
|
54.9%
|
|
|
69.3%
|
|
Gross margin % ex-USF
(Service and product margin %)
|
47.4%
|
|
|
50.4%
|
|
|
55.9%
|
|
|
48.8%
|
|
|
57.7%
|
|
Gross margin
%
|
44.9%
|
|
|
47.6%
|
|
|
52.4%
|
|
|
46.2%
|
|
|
54.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes customer
premise equipment, access, professional services, and shipping and
handling.
|
|
(2) Excludes
depreciation and amortization of $5,003, $4,875, and $4,473 for the
quarters ended June 30, 2017, March 31, 2017, and June 30, 2016,
respectively and $9,878 and $8,792 for the six months ended June
30, 2017 and June 30, 2016, respectively.
|
|
The table below
includes revenues and cost of revenues that our management uses to
measure the growth and operating performance of the consumer
focused portion of our business:
|
|
Consumer
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues:
|
|
|
|
|
|
|
|
|
|
Service
|
$
|
115,636
|
|
|
$
|
119,117
|
|
|
$
|
133,462
|
|
|
$
|
234,753
|
|
|
$
|
271,234
|
|
Product
(1)
|
201
|
|
|
203
|
|
|
160
|
|
|
404
|
|
|
307
|
|
Service and
Product
|
115,837
|
|
|
119,320
|
|
|
133,622
|
|
|
235,157
|
|
|
271,541
|
|
USF
|
12,285
|
|
|
12,225
|
|
|
14,341
|
|
|
24,510
|
|
|
29,426
|
|
Total Business
Revenues
|
$
|
128,122
|
|
|
$
|
131,545
|
|
|
$
|
147,963
|
|
|
$
|
259,667
|
|
|
$
|
300,967
|
|
|
|
|
|
|
|
|
|
|
|
Cost of
Revenues:
|
|
|
|
|
|
|
|
|
|
Service
(2)
|
$
|
21,435
|
|
|
$
|
22,100
|
|
|
$
|
25,727
|
|
|
$
|
43,535
|
|
|
$
|
52,247
|
|
Product
(1)
|
1,942
|
|
|
2,016
|
|
|
3,564
|
|
|
3,958
|
|
|
7,865
|
|
Service and
Product
|
23,377
|
|
|
24,116
|
|
|
29,291
|
|
|
47,493
|
|
|
60,112
|
|
USF
|
12,285
|
|
|
12,225
|
|
|
14,341
|
|
|
24,510
|
|
|
29,426
|
|
Cost of
Revenues
|
$
|
35,662
|
|
|
$
|
36,341
|
|
|
$
|
43,632
|
|
|
$
|
72,003
|
|
|
$
|
89,538
|
|
|
|
|
|
|
|
|
|
|
|
Service margin
%
|
81.5%
|
|
|
81.4%
|
|
|
80.7%
|
|
|
81.5%
|
|
|
80.7%
|
|
Gross margin % ex-USF
(Service and product margin %)
|
79.8%
|
|
|
79.8%
|
|
|
78.1%
|
|
|
79.8%
|
|
|
77.9%
|
|
Gross margin
%
|
72.2%
|
|
|
72.4%
|
|
|
70.5%
|
|
|
72.3%
|
|
|
70.2%
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Includes customer
premise equipment, access, professional services, and shipping and
handling.
|
|
|
(2) Excludes
depreciation and amortization of $1,860, $1,907, and $2,512 for the
quarters ended June 30, 2017, March 31, 2017, and June 30, 2016,
respectively and $3,767 and $5,026 for the six months ended June
30, 2017 and June 30, 2016, respectively.
|
The table below
includes key operating data that our management uses to measure the
growth and operating performance of the business focused portion of
our business:
|
|
Business
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues
(1)
|
$
|
123,714
|
|
|
$
|
111,802
|
|
|
$
|
85,712
|
|
|
$
|
235,516
|
|
|
$
|
159,532
|
|
Average monthly
revenues per seat (2)
|
$
|
43.99
|
|
|
$
|
43.98
|
|
|
$
|
44.76
|
|
|
$
|
43.93
|
|
|
$
|
44.65
|
|
Seats (at period end)
(2) (3)
|
683,079
|
|
|
658,792
|
|
|
591,707
|
|
|
683,079
|
|
|
591,707
|
|
Revenue churn
(2)
|
1.4%
|
|
|
1.4%
|
|
|
1.4%
|
|
|
1.4%
|
|
|
1.4%
|
|
|
|
|
|
(1) Includes revenue
of $35,171, $26,245, and $7,698, respectively, for the quarters
ended June 30, 2017, March 31, 2017, and June 30, 2016 and $61,416
and $7,698, respectively, for the six months ended June 30, 2017
and June 30, 2016 from CPaaS, which was acquired on June 3,
2016.
|
(2) UCaaS
only
|
|
|
|
(3) Seats (at period
end) included an adjustment of 13,352 for the three and six months
ended June 30, 2016.
|
|
|
|
The table below
includes key operating data that our management uses to measure the
growth and operating performance of the consumer focused portion of
our business:
|
|
Consumer
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Revenues
|
$
|
128,122
|
|
|
$
|
131,545
|
|
|
$
|
147,963
|
|
|
$
|
259,667
|
|
|
$
|
300,967
|
|
Average monthly
revenues per line
|
$
|
26.33
|
|
|
$
|
26.10
|
|
|
$
|
26.61
|
|
|
$
|
26.18
|
|
|
$
|
26.64
|
|
Subscriber lines (at
period end)
|
1,594,857
|
|
|
1,648,927
|
|
|
1,824,668
|
|
|
1,594,857
|
|
|
1,824,668
|
|
Customer
churn
|
1.9%
|
|
|
2.2%
|
|
|
2.1%
|
|
|
2.0%
|
|
|
2.2%
|
|
VONAGE HOLDINGS
CORP.
|
TABLE 3.
RECONCILIATION OF GAAP BUSINESS REVENUES TO ADJUSTED BUSINESS
REVENUES
|
(Dollars in
thousands)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Total Business
revenues(1)
|
$
|
123,714
|
|
|
$
|
111,802
|
|
|
$
|
85,172
|
|
|
$
|
235,516
|
|
|
$
|
159,532
|
|
|
|
|
|
|
|
|
|
|
|
Total UCaaS revenues
(1)
|
$
|
88,543
|
|
|
$
|
85,557
|
|
|
$
|
78,014
|
|
|
$
|
174,100
|
|
|
$
|
151,834
|
|
Early termination
letter
|
—
|
|
|
—
|
|
|
(500)
|
|
|
—
|
|
|
(500)
|
|
Bad debt policy
reclassification
|
—
|
|
|
—
|
|
|
(431)
|
|
|
—
|
|
|
(431)
|
|
Accounts receivable
write-down
|
—
|
|
|
319
|
|
|
—
|
|
|
319
|
|
|
—
|
|
Adjusted total UCaaS
revenues
|
88,543
|
|
|
85,876
|
|
|
77,083
|
|
|
174,419
|
|
|
150,903
|
|
Hosted Infrastructure
Sale
|
(1,100)
|
|
|
(1,621)
|
|
|
(1,575)
|
|
|
(2,721)
|
|
|
(3,022)
|
|
Adjusted total UCaaS
revenues
|
87,443
|
|
|
84,255
|
|
|
75,508
|
|
|
171,698
|
|
|
147,881
|
|
Less: Product
revenues
|
13,392
|
|
|
13,360
|
|
|
13,265
|
|
|
26,752
|
|
|
26,177
|
|
Less: USF
revenues
|
6,497
|
|
|
6,151
|
|
|
5,368
|
|
|
12,648
|
|
|
9,803
|
|
Adjusted total UCaaS
service revenues
|
$
|
67,554
|
|
|
$
|
64,744
|
|
|
$
|
56,875
|
|
|
$
|
132,298
|
|
|
$
|
111,901
|
|
|
|
|
|
|
|
|
|
|
|
Total CPaaS revenues
(1)
|
$
|
35,171
|
|
|
$
|
26,245
|
|
|
$
|
7,698
|
|
|
$
|
61,416
|
|
|
$
|
7,698
|
|
Nexmo pre-acquisition
revenues
|
—
|
|
|
—
|
|
|
14,198
|
|
|
—
|
|
|
14,198
|
|
Pro forma CPaaS
revenues
|
35,171
|
|
|
26,245
|
|
|
21,896
|
|
|
61,416
|
|
|
21,896
|
|
Net-to-gross revenue
reporting adjustment
|
—
|
|
|
3,374
|
|
|
2,481
|
|
|
3,374
|
|
|
2,481
|
|
Adjusted total CPaaS
revenues
|
$
|
35,171
|
|
|
$
|
29,619
|
|
|
$
|
24,377
|
|
|
$
|
64,790
|
|
|
$
|
24,377
|
|
|
(1) Total
Business revenues is comprised of revenues from UCaaS and
CPaaS
|
VONAGE HOLDINGS
CORP.
|
TABLE 4.
RECONCILIATION OF GAAP INCOME FROM OPERATIONS
|
TO ADJUSTED
OIBDA AND TO ADJUSTED OIBDA MINUS CAPEX
|
(Dollars in
thousands)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
Income from
operations
|
$
|
6,659
|
|
|
$
|
5,124
|
|
|
$
|
5,387
|
|
|
$
|
11,783
|
|
|
$
|
23,911
|
|
Depreciation and
amortization
|
18,394
|
|
|
17,947
|
|
|
18,218
|
|
|
36,341
|
|
|
35,197
|
|
Share-based
expense
|
7,412
|
|
|
7,064
|
|
|
7,962
|
|
|
14,476
|
|
|
14,265
|
|
Acquisition related
transaction and integration costs
|
18
|
|
|
139
|
|
|
5,057
|
|
|
157
|
|
|
5,150
|
|
Organizational
transformation
|
4,000
|
|
|
—
|
|
|
—
|
|
|
4,000
|
|
|
—
|
|
Acquisition related
consideration accounted for as compensation
|
4,310
|
|
|
6,763
|
|
|
3,312
|
|
|
11,073
|
|
|
3,312
|
|
Adjusted
OIBDA
|
40,793
|
|
|
37,037
|
|
|
39,936
|
|
|
$
|
77,830
|
|
|
$
|
81,835
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
(5,294)
|
|
|
(3,701)
|
|
|
(7,053)
|
|
|
$
|
(8,995)
|
|
|
$
|
(15,948)
|
|
Acquisition and
development of software assets
|
(3,504)
|
|
|
(3,380)
|
|
|
(3,343)
|
|
|
$
|
(6,884)
|
|
|
$
|
(5,655)
|
|
Adjusted OIBDA Minus
Capex
|
$
|
31,995
|
|
|
$
|
29,956
|
|
|
$
|
29,540
|
|
|
$
|
61,951
|
|
|
$
|
60,232
|
|
VONAGE HOLDINGS
CORP.
|
TABLE 5.
RECONCILIATION OF GAAP NET INCOME ATTRIBUTABLE TO VONAGE
TO
|
NET INCOME
ATTRIBUTABLE TO VONAGE EXCLUDING ADJUSTMENTS
|
(Dollars in
thousands, except per share amounts)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
(revised)
(1)
|
|
|
|
(revised)
(1)
|
Net income
|
$
|
4,825
|
|
|
$
|
5,913
|
|
|
$
|
218
|
|
|
$
|
10,738
|
|
|
$
|
8,149
|
|
Amortization of
acquisition - related intangibles
|
9,069
|
|
|
8,999
|
|
|
8,274
|
|
|
18,068
|
|
|
15,236
|
|
Acquisition related
transaction and integration costs
|
18
|
|
|
139
|
|
|
5,057
|
|
|
157
|
|
|
5,150
|
|
Acquisition related
consideration accounted for as compensation
|
4,310
|
|
|
6,763
|
|
|
3,312
|
|
|
11,073
|
|
|
3,312
|
|
Organizational
transformation
|
4,000
|
|
|
—
|
|
|
—
|
|
|
4,000
|
|
|
—
|
|
Tax effect on
adjusting items
|
(7,188)
|
|
|
(6,569)
|
|
|
(6,876)
|
|
|
(13,757)
|
|
|
(9,791)
|
|
Adjusted net
income
|
$
|
15,034
|
|
|
$
|
15,245
|
|
|
$
|
9,985
|
|
|
$
|
30,279
|
|
|
$
|
22,056
|
|
Earnings per common
share:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.02
|
|
|
$
|
0.03
|
|
|
$
|
—
|
|
|
$
|
0.05
|
|
|
$
|
0.04
|
|
Diluted
|
$
|
0.02
|
|
|
$
|
0.02
|
|
|
$
|
—
|
|
|
$
|
0.04
|
|
|
$
|
0.04
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
223,492
|
|
|
220,371
|
|
|
213,558
|
|
|
221,930
|
|
|
213,800
|
|
Diluted
|
239,938
|
|
|
239,486
|
|
|
222,700
|
|
|
239,923
|
|
|
223,978
|
|
Earnings per common
share, excluding adjustments:
|
|
|
|
|
|
|
|
|
|
Basic
|
$
|
0.07
|
|
|
$
|
0.07
|
|
|
$
|
0.05
|
|
|
$
|
0.14
|
|
|
$
|
0.10
|
|
Diluted
|
$
|
0.06
|
|
|
$
|
0.06
|
|
|
$
|
0.04
|
|
|
$
|
0.13
|
|
|
$
|
0.10
|
|
Weighted-average
common shares outstanding:
|
|
|
|
|
|
|
|
|
|
Basic
|
223,492
|
|
|
220,371
|
|
|
213,558
|
|
|
221,930
|
|
|
213,800
|
|
Diluted
|
239,938
|
|
|
239,486
|
|
|
222,700
|
|
|
239,923
|
|
|
223,978
|
|
|
(1) Revised due to
the correction of prior period financial statements.
|
VONAGE HOLDINGS
CORP.
|
TABLE 6. FREE CASH
FLOW
|
(Dollars in
thousands)
|
(unaudited)
|
|
|
Three Months
Ended
|
|
Six Months
Ended
|
|
June
30,
|
|
March
31,
|
|
June
30,
|
|
June
30,
|
|
2017
|
|
2017
|
|
2016
|
|
2017
|
|
2016
|
|
|
|
|
|
(Revised)
(1)
|
|
|
|
(Revised)
(1)
|
Net cash provided by
operating activities
|
$
|
15,432
|
|
|
$
|
17,261
|
|
|
$
|
25,059
|
|
|
$
|
32,693
|
|
|
$
|
42,527
|
|
Less:
|
|
|
|
|
|
|
|
|
|
Capital
expenditures
|
(5,294)
|
|
|
(3,701)
|
|
|
(7,053)
|
|
|
(8,995)
|
|
|
(15,948)
|
|
Acquisition and
development of software assets
|
(3,504)
|
|
|
(3,380)
|
|
|
(3,343)
|
|
|
(6,884)
|
|
|
(5,655)
|
|
Free cash
flow
|
$
|
6,634
|
|
|
$
|
10,180
|
|
|
$
|
14,663
|
|
|
$
|
16,814
|
|
|
$
|
20,924
|
|
|
(1) Revised due to
the adoption of new Accounting Standard Updates and the correction
of prior period financial statements.
|
VONAGE HOLDINGS
CORP.
|
TABLE 7.
RECONCILIATION OF NOTES PAYABLE, INDEBTEDNESS UNDER
REVOLVING
|
CREDIT
FACILITY, AND CAPITAL LEASES TO NET DEBT
|
(Dollars in
thousands)
|
(unaudited)
|
|
|
|
June
30,
|
|
December
31,
|
|
|
2017
|
|
2016
|
Current maturities of
capital lease obligations
|
|
$
|
1,021
|
|
|
$
|
3,288
|
|
Current portion of
notes payable
|
|
18,750
|
|
|
18,750
|
|
Notes payable and
indebtedness under revolving credit facility, net of current
maturities and debt related costs
|
|
295,953
|
|
|
300,124
|
|
Unamortized debt
related cost
|
|
859
|
|
|
1,064
|
|
Capital lease
obligations, net of current maturities
|
|
46
|
|
|
140
|
|
Gross debt
|
|
316,629
|
|
|
323,366
|
|
Less:
|
|
|
|
|
Unrestricted cash and
marketable securities
|
|
26,825
|
|
|
29,679
|
|
Net debt
|
|
$
|
289,804
|
|
|
$
|
293,687
|
|
About Vonage
Vonage (NYSE: VG) is a leading
provider of cloud communications services for business. Vonage
transforms the way people work and businesses operate through a
portfolio of cloud-based communications solutions that enable
internal collaboration among employees, while also keeping
companies closely connected with their customers, across any mode
of communication, on any device. Vonage's API Platform provides
tools for voice, messaging and phone verification services,
allowing developers to embed contextual, programmable
communications into mobile apps, websites and business systems,
enabling enterprises to easily communicate relevant information to
their customers in real time, anywhere in the world, through text
messaging, chat, social media and voice. The Company also provides
a robust suite of feature-rich residential communication solutions.
In 2015 and 2016, Vonage was named a Visionary in the Gartner Magic
Quadrant for Unified Communications as-a-Service, Worldwide. Vonage
has also earned the Frost & Sullivan Growth Excellence
Leadership Award for Hosted IP and Unified Communications and
Collaboration (UCC) Services. For more information, visit
www.vonage.com.
Use of Non-GAAP Financial Measures
This press release includes measures defined as non-GAAP
financial measures by Regulation G adopted by the Securities and
Exchange Commission, including: adjusted Operating Income Before
Depreciation and Amortization ("adjusted OIBDA"), adjusted OIBDA
less Capex, adjusted net income, net debt (cash), free cash flow
and adjusted revenues.
Adjusted OIBDA
Vonage uses adjusted OIBDA as a principal indicator of the
operating performance of its business.
Vonage defines adjusted OIBDA as GAAP income (loss) from
operations excluding depreciation and amortization, share-based
expense, acquisition related transaction and integration costs,
change in contingent consideration, acquisition related
consideration accounted for as compensation, organizational
transformation costs and loss on sublease.
Vonage believes that adjusted OIBDA permits a comparative
assessment of its operating performance, relative to its
performance based on its GAAP results, while isolating the effects
of depreciation and amortization, which may vary from period to
period without any correlation to underlying operating performance;
of share-based expense, which is a non-cash expense that also
varies from period to period; of one-time acquisition related
transaction and integration costs, acquisition related
consideration accounted for as compensation and change in
contingent consideration, organizational transformation costs and
loss on sublease.
The Company provides information relating to its adjusted OIBDA
so that investors have the same data that the Company employs in
assessing its overall operations. The Company believes that trends
in its Adjusted OIBDA are valuable indicators of the operating
performance of the Company on a consolidated basis.
The Company does not reconcile its forward-looking adjusted
OIBDA to the corresponding GAAP measure of income from operations
due to the significant variability and difficulty in making
accurate forecasts with respect to the various expenses we exclude,
as they may be significantly impacted by future events the
timing and nature of which are difficult to predict or are not
within the control of management. As such, the Company has
determined that reconciliations of this forward-looking non-GAAP
financial measure to the corresponding GAAP measure is not
available without unreasonable effort.
Adjusted OIBDA less Capex
Vonage uses adjusted OIBDA less Capex as an indicator of the
operating performance of its business. The Company provides
information relating to its adjusted OIBDA less Capex so that
investors have the same data that the Company employs in assessing
its overall operations. The Company believes that trends in its
Adjusted OIBDA less Capex are valuable indicators of the operating
performance of the Company on a consolidated basis because they
provide our investors with insight into current performance and
period-to-period performance.
Adjusted net income
Vonage defines adjusted net income, as GAAP net income (loss)
excluding amortization of acquisition-related intangible assets,
acquisition related transaction and integration costs, change in
contingent consideration, acquisition related consideration
accounted for as compensation, loss on sublease and tax effect on
adjusting items.
The Company believes that excluding these items will assist
investors in evaluating the Company's operating performance and in
better understanding its results of operations as amortization of
acquisition-related intangible assets is a non-cash item, one-time
acquisition related transaction and integration costs, change in
contingent consideration, acquisition related consideration
accounted for as compensation, loss on sublease and tax effect on
adjusting items are not reflective of operating performance.
Net debt (cash)
Vonage defines net debt (cash) as the current maturities of
capital lease obligations, current portion of notes payable, notes
payable and indebtedness under revolving credit facility, net of
current maturities and debt related costs, and capital lease
obligations, net of current maturities, less unrestricted cash and
marketable securities.
Vonage uses net debt (cash) as a measure of assessing leverage,
as it reflects the gross debt under the Company's credit agreements
and capital leases less cash available to repay such amounts. The
Company believes that net cash is also a factor that first parties
consider in valuing the Company.
Free cash flow
Vonage defines free cash flow as net cash provided by operating
activities minus capital expenditures, purchase of intangible
assets, and acquisition and development of software assets.
Vonage considers free cash flow to be a liquidity measure that
provides useful information to management about the amount of cash
generated by the business that, after the acquisition of equipment
and software, can be used by Vonage for debt service and strategic
opportunities. Free cash flow is not a measure of cash available
for discretionary expenditures since the Company has certain
non-discretionary obligations such as debt service that are not
deducted from the measure.
The non-GAAP financial measures used by Vonage may not be
directly comparable to similarly titled measures reported by other
companies due to differences in accounting policies and items
excluded or included in the adjustments, which limits its
usefulness as a comparative measure. These non-GAAP financial
measures should be considered in addition to results prepared in
accordance with GAAP, but should not be considered a substitute
for, or superior to, GAAP results.
Safe Harbor Statement
This press release contains forward-looking statements,
including statements about acquisitions, acquisition integration,
growth priorities or plans, revenues, adjusted OIBDA, churn, seats,
lines or accounts, average revenue per user, cost of telephony
services, the Company's share repurchase plan, capital
expenditures, new products and related investment, and other
statements that are not historical facts or information, that
constitute forward-looking statements for purposes of the safe
harbor provisions under The Private Securities Litigation Reform
Act of 1995. In addition, other statements in this press release
that are not historical facts or information may be forward-looking
statements. The forward-looking statements in this release are
based on information available at the time the statements are made
and/or management's belief as of that time with respect to future
events and involve risks and uncertainties that could cause actual
results and outcomes to be materially different. Important factors
that could cause such differences include, but are not limited to:
the competition we face; the expansion of competition in the cloud
communications market; our ability to adapt to rapid changes in the
cloud communications market; the nascent state of the cloud
communications for business market; our ability to retain customers
and attract new customers; the risk associated with developing and
maintaining effective internal sales teams and effective
distribution channels; risks related to the acquisition or
integration of businesses we have acquired; security breaches and
other compromises of information security; risks associated with
sales of our services to medium-sized and enterprise customers; our
reliance on third party hardware and software; our dependence on
third party facilities, equipment, systems and services; system
disruptions or flaws in our technology and systems; our ability to
scale our business and grow efficiently; our dependence on third
party vendors; the impact of fluctuations in economic conditions,
particularly on our small and medium business customers; our
ability to comply with data privacy and related regulatory matters;
our ability to obtain or maintain relevant intellectual property
licenses; failure to protect our trademarks and internally
developed software; fraudulent use of our name or services;
intellectual property and other litigation that have been and may
be brought against us; reliance on third parties for our 911
services; uncertainties relating to regulation of VoIP services;
risks associated with legislative, regulatory or judicial actions
regarding our CPaaS products; the impact of governmental export
controls or sanctions on our CPaaS products; our ability to
establish and expand strategic alliances; risks associated with
operating abroad; risks associated with the taxation of our
business; risks associated with a material weakness in our internal
controls; our dependence upon key personnel; governmental
regulation and taxes in our international operations; liability
under anti-corruption laws; our dependence on our customers'
existing broadband connections; differences between our services
and traditional telephone service; restrictions in our debt
agreements that may limit our operating flexibility; foreign
currency exchange risk; the market for our stock; our ability to
obtain additional financing if required; any reinstatement of
holdbacks by our credit card processors; our history of net losses
and ability to achieve consistent profitability in the future; and
other factors that are set forth in the "Risk Factors" in our
Annual Report on Form 10-K for the year ended December 31, 2016, in the Company's Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K. While the
Company may elect to update forward-looking statements at some
point in the future, the Company specifically disclaims any
obligation to do so, and therefore, you should not rely on these
forward-looking statements as representing the Company's views as
of any date subsequent to today.
(vg-f)
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SOURCE Vonage