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Vonage Announces Strong Third Quarter 2016 Results, Highlighted by 86% Revenue Growth in Vonage Business

OCTOBER 26, 2016

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HOLMDEL, N.J., Oct. 26, 2016 /PRNewswire/ -- Vonage Holdings Corp. (NYSE: VG), a leading provider of Cloud Communications for Business, today announced results for the third quarter ended September 30, 2016.

Third Quarter Consolidated Financial Results

For the third quarter of 2016, Vonage reported revenues of $248 million, up from $223 million in the year ago quarter. GAAP Income from Operations was $15 million, up from $9 million in the prior year. Adjusted Operating Income Before Depreciation and Amortization ("Adjusted OIBDA")1 for the third quarter was $41 million, up from $34 in the prior year period. GAAP net income was $9 million or $0.04 per share, up from $3 million or $0.02 per share in the year ago quarter. Adjusted net income2 was $19 million or $0.09 per share, up from $11 million or $0.05 per share in the year ago quarter.

"Our results reflect good progress integrating our acquisitions and building a winning product and go-to-market value proposition for our customers," said Vonage CEO Alan Masarek. "The significant investments in Vonage Business continue to support our growth initiatives, highlighted by 86% revenue growth in the third quarter. Our disciplined focus on profitability continues to produce strong results, highlighted by a 21% increase in adjusted OIBDA."

Mr. Masarek continued, "We are very pleased with the progress we've made executing on our strategy to be the Clear Leader in Business Cloud Communications. The integration of our UCaaS and CPaaS solutions will create the most vertically integrated communications company in our industry, with the scale and capabilities to provide better outcomes for our business customers."

Third Quarter Operating Results

  • Vonage Business revenue, which includes $24 million of Nexmo revenue, was $106 million, an 86% year-over-year increase on a GAAP basis.
  • Ending seats at Vonage Business were 616,000, up from 514,000 seats in the year ago quarter, a 20% increase.
  • Vonage Business revenue churn was 1.4%, compared to 1.3% in the year ago quarter.
  • The Vonage API platform, formerly Nexmo, launched its next generation voice application interface, effectively doubling the Company's addressable market in CPaaS by opening up the broader, programmable voice market.
  • Revenue from Consumer Services was $142 million, compared to $166 million in the prior year period. This decline is consistent with the Company's strategy to optimize the profitability of Consumer Services, while redeploying capital into the high-growth Business Cloud Communications sector.
  • Consumer customer churn improved to 2.2%, down from 2.3% in the year ago quarter.

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 third quarter and now owns 132 U.S. patents, with 200 U.S. patent applications pending, along with many foreign patents and pending applications in jurisdictions worldwide.

Guidance Update

The Company is updating its 2016 full year guidance due to greater visibility on its full year results. Vonage continues to expect consolidated annual GAAP revenue of $950 to $960 million. Within this, the Company is raising guidance for Vonage Business revenues to a range of $374 to $377 million, up from $365 to $370 million. Adjusted OIBDA is expected to be in the range of $158 to $160 million, up from "at least $150 million."

Conference Call and Webcast

Management will host a webcast discussion of the third quarter 2016 on Wednesday, October 26, 2016 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 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 (855) 859-2056. International callers should dial (404) 537-3406. The replay passcode is 91321658.

(1) This is a non-GAAP financial measure. Refer below to Table 3 for a reconciliation to GAAP income from operations.

(2) This is a non-GAAP financial measure. Refer below to Table 4 for a reconciliation to GAAP net income.

 

 

VONAGE HOLDINGS CORP.

TABLE 1. CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except per share amounts)
 
 

Three Months Ended

  

Nine Months Ended
 

September 30,

  

June 30,

  

September 30,

  

September 30,
 

2016

  

2016

  

2015

  

2016

  

2015
 

(unaudited)

  

(unaudited)

  

(unaudited)

  

(unaudited)

Statement of Income Data:

                  

Revenues

$

248,359

    

$

233,675

    

$

223,360

    

$

708,858

    

$

664,948

  
                   

Operating Expenses:

                  

Cost of service (excluding depreciation and amortization of
$7,460, $6,985, $6,415, $21,278, and $18,144, respectively)

87,377

    

76,078

    

67,193

    

232,605

    

193,255

  

Cost of goods sold

8,591

    

8,352

    

8,206

    

26,009

    

25,613

  

Sales and marketing

83,731

    

83,344

    

88,028

    

246,676

    

257,977

  

Engineering and development

8,075

    

7,243

    

6,830

    

22,152

    

20,299

  

General and administrative

27,538

    

35,053

    

28,860

    

89,261

    

79,256

  

Depreciation and amortization

18,018

    

18,218

    

15,446

    

53,215

    

43,854

  
 

233,330

    

228,288

    

214,563

    

669,918

    

620,254

  

Income from operations

15,029

    

5,387

    

8,797

    

38,940

    

44,694

  

Other income (expense):

                  

Interest income

19

    

25

    

24

    

65

    

65

  

Interest expense

(3,974)

    

(3,057)

    

(2,222)

    

(9,477)

    

(6,245)

  

Other income (expense), net

(495)

    

104

    

(50)

    

(237)

    

(595)

  
 

(4,450)

    

(2,928)

    

(2,248)

    

(9,649)

    

(6,775)

  

Income from continuing operations before income tax expense

10,579

    

2,459

    

6,549

    

29,291

    

37,919

  

Income tax expense

(1,501)

    

(1,562)

    

(3,116)

    

(11,385)

    

(16,290)

  

Income from continuing operations

9,078

    

897

    

3,433

    

17,906

    

21,629

  

Loss from discontinued operations

—

    

—

    

—

    

—

    

(1,615)

  

Loss on disposal, net of taxes

—