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Vonage Holdings: Third Quarter Consolidated Financial Results

The following excerpt is from the company's SEC filing.

“Our strong financial and operational results reflect the continued execution of our strategy to drive organic and inorganic growth in Vonage Business while taking disciplined actions to release the inherent profitability in Consumer Services. The third quarter marks our third consecutive quarter of consolidated revenue growth, driven by our strong revenue growth in Vonage Business. We also had another quarter of excellent cash flows from Consumer Services, which continue to support our investments in the high-growth UCaaS for business sector,” said Alan Masarek, Chief Executive Officer of Vonage.

Mr. Mas arek continued, “We made great progress building the foundation to become the clear market leader in cloud communications. We completed the acquisition of iCore Networks

solidifying our position in the mid-market and enterprise segments. We invested in the “Business of Better” campaign to establish Vonage as a leading business services brand. And, we made significant progress integrating our recent acquisitions to build a scalable, efficient organization capable of serving the full spectrum of business customers from SMB up through large enterprises.”

For the third quarter of 2015, Vonage reported revenue of $223 million, up from $215 million in the year ago quarter. Income from operations was $9 million in the third quarter of 2015, down from $15 million in the prior year period. Adjusted earnings before interest, taxes, depreciation and amortization

(“adjusted EBITDA”) for the third quarter were $34 million, a 13% increase over the prior year period. GAAP net income was $3 million or $0.02 per share, down from $5 million or $0.02 per share in the year ago quarter. Adjusted net income

was $14 million or $0.07 per share, flat year-over-year.

Vonage Business Results

On August 31, 2015, Vonage completed the acquisition of iCore Networks Inc. (“iCore”), which deepens the Company’s penetration in the mid-market and enterprise segment, expands the Company’s direct sales force and product set and strengthens the Company's national footprint

iCore is a leading provider of BroadSoft-based and Microsoft Skype for Business UCaaS solutions, as well as complementary desktop cloud services, including Infrastructure as a Service and virtual desktop

iCore’s September results, adjusted down for purchase accounting, are included in the Company’s operating results.

Revenue at Vonage Business was $57 million in the third quarter, a year-over-year increase of 134% on a GAAP basis. Vonage Business revenue growth was 36% on an organic basis, as if the Company owned Telesphere and SimpleSignal for all periods, but excluding iCore.

Revenue churn at Vonage Business was 1.3% in the third quarter, flat sequentially and year-over-year.

Ending seats were 514,000, up from 242,000 seats in the year ago quarter, reflecting strong organic growth and the addition of Telesphere, SimpleSignal and iCore customers.

Gartner named Vonage a Visionary in its 2015 Magic Quadrant for Unified Communications as a Service, Worldwide. Gartner highlighted Vonage’s brand

account management and customer support, and ability to integrate with leading cloud applications, as key strengths and reasons for placement in the Visionary Quadrant. Also in the quarter, Vonage was awarded Frost & Sullivan’s 2015 Growth Excellence Leadership Award for Hosted IP and Unified Communications and Collaboration Services. Vonage received a rating of Excellent in both Growth Performance and Customer Impact categories, scoring highest among all providers ranked by Frost & Sullivan.

Consumer Services Results

In the third quarter, the Company continued to improve the profitability and cash flow of Consumer Services through its disciplined approach to marketing efficiency and new customer acquisitions

Revenue in Consumer Services was $166 million in the third quarter, compared to $190 million in the prior year period, reflecting the Company’s decision to redeploy capital into the rapidly growing UCaaS for business sector.

Consumer customer churn improved to 2.3% in the third quarter, down from 2.6% in the year ago quarter.

Average revenue per line (“ARPU”) was $27.38, down from $27.60 in the year ago period.

Consumer net line losses were approximately 50,000 due to the Company's continued focus on improving the quality of customers it acquires and driving increased profitability

Vonage’s Consumer Services ended the third quarter with two 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 seven new patents in the third quarter and now owns 98 U.S. patents, with 245 U.S. patent applications pending, along with many foreign patents and pending applications in jurisdictions worldwide.

Share Repurchase

In the third quarter, Vonage repurchased 0.4 million shares of stock for $1.8 million at an average price of $4.90 under its current, four-year $100 million program. Year-to-date, the Company has repurchased 3.3 million shares at an average price of $4.58. Since beginning its repurchase programs in August 2012, the Company has repurchased 48 million shares for $148 million at a highly accretive average price of $3.08.

Updated 2015 Guidance

The Company is updating and has increased its 2015 revenue and EBITDA guidance given greater visibility on full year results and the closing of the iCore acquisition. Vonage expects total 2015 GAAP revenue of $891 million to $895 million and adjusted EBITDA of $142 million to $144 million.

Conference Call and Webcast

Management will host a webcast discussion of the third quarter on Wednesday, November 4, 2015 at 8:30 AM Eastern Time. To participate, please dial (877) 359-9508 approximately 10 minutes prior to the call. International callers should dial (224) 357-2393.

The webcast will be broadcast live through Vonage's Investor Relations website at Windows Media Player or RealPlayer is required to listen to this webcast. 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 or by dialing (855) 859-2056. International callers should dial (404) 537-3406. The replay passcode is 57571351.

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.



(Dollars in thousands, except per share amounts)

Three Months Ended

Nine Months Ended

September 30,

June 30,


Statement of Income Data:







Operating Expenses:

Cost of service (excluding depreciation and amortization of $6,415, $6,005, $4,704, $18,144, and $14,956, respectively)






Cost of goods...