"2018 was a year of great strategic progress for Vonage, fueled by our financial strength," said Vonage CEO Alan Masarek. "We significantly advanced our strategy by acquiring TokBox, the industry leader in WebRTC programmable video, and NewVoiceMedia, a world leader in contact center as a service. Both are integral to our One Vonage platform strategy and our ability to deliver great employee and customer experiences. Vonage now owns its entire technology stack across unified communications, contact center, and programmable APIs, and uniquely covers the entire cloud communications total addressable market."
Mr. Masarek continued, "In addition to the important progress we made advancing our product strategy, we also strengthened our go-to-market execution. Our investments in the Midmarket and Enterprise, including sales leadership and a more experienced team, are generating improved productivity and increased momentum. As we enter 2019, we have a very clear focus on continued growth, sales execution, and innovation, and we believe we are well positioned to accelerate growth in 2019."
Business Segment Results
- Vonage Business Service revenues in the fourth quarter of 2018 were
$149 million , representing 32% GAAP growth. For the full year 2018, Vonage Business Service revenues were$527 million , a 26% GAAP increase.- Adjusted to include acquisitions for all periods and other one-time items, Vonage Business Service revenues increased 22% in the fourth quarter. For the full year 2018, Vonage Business Service revenues grew 23% on the same adjusted basis.(1)
- Vonage Business segment revenues in the fourth quarter of 2018 were
$170 million , representing 62% of total revenues, 27% GAAP growth and 28% growth in constant currency. For the full year 2018, Vonage Business segment revenues were$608 million , representing 22% GAAP growth and 20% growth in constant currency.- On the same adjusted basis, Vonage Business revenues increased 19% in the fourth quarter and 19% for the full year 2018.(1)
- Service Revenue per customer was
$392 per month, a 20% year-over-year increase, reflecting the Company's move up-market. - Business Revenue Churn was 1.1%, improving from 1.2% in the year-ago quarter.
- Registered developers on Vonage's API Platform increased to 735,000.
Other Business Segment 2018 Highlights
- Acquired NewVoiceMedia, the largest privately-owned, pure-play, cloud contact center as a service ("CCaaS") company globally. NewVoiceMedia is in the Leader's quadrant of the Gartner CCaaS Magic Quadrant for
Western Europe for the second year in a row; was recently named a strong performer in the Forrester Wave™ for Cloud Contact Centers; and was included for the third consecutive year on the Forbes Magazine Cloud 100, a list of the top 100 private cloud companies in revenue, sales growth, valuation and culture. - Acquired TokBox, the global leader in WebRTC programmable video. The acquisition accelerated Vonage's platform strategy and meaningfully broadened the Vonage API Platform by adding video to its existing strength in voice, SMS, and IP messaging.
- Invested significantly in Vonage Business Cloud, including new features, service quality, scalability, and user experience. Received several industry awards, including TMCNet Unified Communications Product of the Year, UC Today's Most Innovative Product and the Mobile Breakthrough award for the Vonage Business Cloud mobile app.
Consumer Segment Results
- For the fourth quarter of 2018, Consumer revenues were
$104 million , down 13% year-over-year. - For the full year 2018, Consumer revenues were
$441 million , down 12% year-over-year, as planned. - Customer churn was 1.8%, down from 1.9% in the year-ago quarter.
- Average revenue per line ("ARPU") in Consumer was
$26.32 , stable compared to the year-ago quarter. - Ended the fourth quarter of 2018 with approximately 1.3 million consumer subscriber lines.
- Tenured customers, defined as those with the Company for more than two years, increased to 87% of the base. The churn rate of this tenured cohort remains at 1.5%.
Consolidated Income and Balance Sheet
For the full year 2018, Vonage reported consolidated revenues of
For the fourth quarter of 2018, Vonage reported consolidated revenues of
For the full year, Adjusted Operating Income Before Depreciation and Amortization ("Adjusted OIBDA")(3) was
2019 Outlook
For the full year 2019, Vonage expects the following (based on constant currency as of February 2019; percentage references represent mid-point of the guidance range):
- Vonage Business segment revenues in the range of
$795 million to$815 million , representing approximately 32% GAAP growth and 20% adjusted growth. Within this, Business Service adjusted revenue growth of 23%. - Consumer revenues in the range of
$375 million to$380 million , representing a 14% decline, reflecting the Company's continued focus on optimizing the segment for cash flow. - Consolidated revenues in the range of
$1.170 billion to$1.195 billion , representing approximately 13% GAAP growth. - Consolidated Adjusted OIBDA in the range of
$160 million to$165 million , including the write-down of approximately$5 million of deferred revenue from the acquisition of NewVoiceMedia. - Capex in the
$40 million area, reflecting increased investment in the One Vonage integrated platform. - Total debt will increase in the first quarter, given cash usage and working capital seasonality in addition to the progression of Adjusted OIBDA during the year, and decline thereafter.
For the first quarter of 2019, Vonage expects the following:
- Vonage Business revenues in the range of
$177 million to$179 million . - Consumer revenues in the range of
$99 million to$100 million . - Consolidated Adjusted OIBDA in the low
$30 million area, including approximately$3 million of deferred revenue write-down from the acquisition of NewVoiceMedia.- The first quarter of 2019 will reflect the impact of the first full quarter of owning both TokBox and NewVoiceMedia, including the corresponding deferred revenue write-down impact, as well as the annual resetting of Cash Bonus accruals and seasonal increases in Marketing expense.
Conference Call and Webcast
The Company will host a conference call to discuss its financial results for the Fourth Quarter and Full Year 2018 and other matters at 8:30 AM Eastern Time. To participate, please dial (866) 891-8177. International callers should dial (412) 902-6756.
A live webcast of the conference call will be available on the Vonage Investor Relations website. A replay of the webcast will also be available shortly after the conclusion of the call and may be accessed through Vonage's Investor Relations website or by dialing (877) 344-7529 or (412) 317-0088 for international callers and entering the passcode 10128592.
(1) This is a non-GAAP financial measure. Refer below to Table 5 for a reconciliation to GAAP total business revenues and business service revenues.
(2) This is a non-GAAP financial measure. Refer below to Table 4 for a reconciliation to GAAP net income.
(3) This is a non-GAAP financial measure. Refer below to Table 3 for a reconciliation to GAAP income from operations.
(4) This is a non-GAAP financial measure. Refer below to Table 6 for a reconciliation to GAAP cash from operations.
|
VONAGE HOLDINGS CORP. |
|||||||||||||||||||
|
TABLE 1. CONSOLIDATED FINANCIAL DATA |
|||||||||||||||||||
|
(Dollars in thousands, except per share amounts) |
|||||||||||||||||||
|
Three Months Ended |
For the Years Ended |
||||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
||||||||||||||||
|
2018 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
(audited) |
|||||||||||||||
|
Statement of Operations Data: |
|||||||||||||||||||
|
Revenues |
$ |
273,803 |
$ |
261,531 |
$ |
254,020 |
$ |
1,048,782 |
$ |
1,002,286 |
|||||||||
|
Operating Expenses: |
|||||||||||||||||||
|
Cost of revenues (excluding depreciation and amortization |
111,873 |
104,351 |
103,266 |
426,995 |
404,954 |
||||||||||||||
|
Sales and marketing |
82,232 |
74,380 |
78,006 |
311,433 |
313,251 |
||||||||||||||
|
Engineering and development |
16,635 |
14,309 |
7,634 |
52,139 |
29,630 |
||||||||||||||
|
General and administrative |
37,948 |
37,620 |
24,126 |
135,324 |
122,537 |
||||||||||||||
|
Depreciation and amortization |
19,094 |
16,024 |
18,003 |
70,980 |
72,523 |
||||||||||||||
|
267,782 |
246,684 |
231,035 |
996,871 |
942,895 |
|||||||||||||||
|
Income from operations |
6,021 |
14,847 |
22,985 |
51,911 |
59,391 |
||||||||||||||
|
Other Income (Expense): |
|||||||||||||||||||
|
Interest expense |
(5,774) |
(3,036) |
(3,483) |
(15,068) |
(14,868) |
||||||||||||||
|
Other income (expense), net |
(749) |
347 |
327 |
(318) |
1,270 |
||||||||||||||
|
(6,523) |
(2,689) |
(3,156) |
(15,386) |
(13,598) |
|||||||||||||||
|
Income before income taxes |
(502) |
12,158 |
19,829 |
36,525 |
45,793 |
||||||||||||||
|
Income tax expense |
(6,441) |
(2,570) |
(75,102) |
(797) |
(79,726) |
||||||||||||||
|
Net income (loss) |
$ |
(6,943) |
$ |
9,588 |
$ |
(55,273) |
$ |
35,728 |
$ |
(33,933) |
|||||||||
|
Earning (loss) per common share: |
|||||||||||||||||||
|
Basic |
$ |
(0.03) |
$ |
0.04 |
$ |
(0.24) |
$ |
0.15 |
$ |
(0.15) |
|||||||||
|
Diluted |
$ |
(0.03) |
$ |
0.04 |
$ |
(0.24) |
$ |
0.14 |
$ |
(0.15) |
|||||||||
|
Weighted-average common shares outstanding: |
|||||||||||||||||||
|
Basic |
239,649 |
239,303 |
229,339 |
237,499 |
225,311 |
||||||||||||||
|
Diluted |
239,649 |
249,516 |
229,339 |
248,892 |
225,311 |
||||||||||||||
|
VONAGE HOLDINGS CORP. |
|||||||||||||||||||
|
TABLE 1. CONSOLIDATED FINANCIAL DATA - (Continued) |
|||||||||||||||||||
|
(Dollars in thousands, except per share amounts) |
|||||||||||||||||||
|
Three Months Ended |
For the Years Ended |
||||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
||||||||||||||||
|
2018 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
|
(unaudited) |
(unaudited) |
(unaudited) |
(unaudited) |
(audited) |
|||||||||||||||
|
Statement of Cash Flow Data: |
|||||||||||||||||||
|
Net cash provided by operating activities |
$ |
28,742 |
$ |
28,528 |
$ |
47,458 |
$ |
123,205 |
$ |
128,058 |
|||||||||
|
Net cash used in investing activities |
(358,046) |
(37,177) |
(7,111) |
(407,230) |
(30,737) |
||||||||||||||
|
Net cash provided by (used in) financing activities |
308,342 |
7,903 |
(39,485) |
258,212 |
(96,242) |
||||||||||||||
|
Capital expenditures and acquisition and development of software |
(9,861) |
(4,878) |
(8,061) |
(26,746) |
(33,289) |
||||||||||||||
|
December 31, |
December 31, |
|||||||
|
2018 |
2017 |
|||||||
|
(unaudited) |
(audited) |
|||||||
|
Balance Sheet Data (at period end): |
||||||||
|
Cash and cash equivalents |
$ |
5,057 |
$ |
31,360 |
||||
|
Restricted cash |
2,047 |
1,967 |
||||||
|
Accounts receivable, net of allowance |
75,342 |
44,159 |
||||||
|
Inventory, net of allowance |
1,470 |
2,971 |
||||||
|
Prepaid expenses and other current assets |
34,130 |
31,285 |
||||||
|
Deferred customer acquisition costs, current and non-current |
49,636 |
— |
||||||
|
Property and equipment, net |
49,262 |
46,754 |
||||||
|
Goodwill |
598,499 |
373,764 |
||||||
|
Software, net |
17,430 |
22,252 |
||||||
|
Intangible assets, net |
299,911 |
173,270 |
||||||
|
Deferred tax assets |
102,560 |
110,892 |
||||||
|
Other assets |
24,144 |
20,007 |
||||||
|
Total assets |
$ |
1,259,488 |
$ |
858,681 |
||||
|
Accounts payable and accrued expenses |
$ |
140,632 |
$ |
115,472 |
||||
|
Deferred revenue, current and non-current |
53,447 |
30,576 |
||||||
|
Total notes payable, net of debt related costs and indebtedness under revolving credit facility, including current |
519,228 |
232,515 |
||||||
|
Other liabilities |
10,413 |
7,080 |
||||||
|
Total liabilities |
$ |
723,720 |
$ |
385,783 |
||||
|
Total stockholders' equity |
$ |
535,768 |
$ |
472,898 |
||||
|
VONAGE HOLDINGS CORP. |
|||||||||||||||||||
|
TABLE 2. SUMMARY CONSOLIDATED OPERATING DATA |
|||||||||||||||||||
|
(Dollars in thousands, except per line amounts) |
|||||||||||||||||||
|
(unaudited) |
|||||||||||||||||||
|
The table below includes revenues and cost of revenues that our management uses to measure the growth and operating |
|||||||||||||||||||
|
Business |
Three Months Ended |
For the Years Ended |
|||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
||||||||||||||||
|
2018 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
|
Revenues: |
|||||||||||||||||||
|
Service revenues |
$ |
149,004 |
$ |
133,709 |
$ |
113,304 |
$ |
526,707 |
$ |
417,118 |
|||||||||
|
Access and product revenues(1) |
12,394 |
12,427 |
13,349 |
50,068 |
54,971 |
||||||||||||||
|
Service, access and product revenues |
161,398 |
146,136 |
126,653 |
576,775 |
472,089 |
||||||||||||||
|
USF revenues |
8,601 |
7,499 |
7,447 |
31,369 |
26,833 |
||||||||||||||
|
Total revenues |
$ |
169,999 |
$ |
153,635 |
$ |
134,100 |
$ |
608,144 |
$ |
498,922 |
|||||||||
|
Cost of Revenues: |
|||||||||||||||||||
|
Service cost of revenues(2) |
$ |
66,179 |
$ |
59,600 |
$ |
50,013 |
$ |
239,096 |
$ |
184,054 |
|||||||||
|
Access and product cost of revenues(1) |
14,790 |
14,887 |
14,369 |
58,081 |
57,906 |
||||||||||||||
|
Service, access and product cost of revenues |
80,969 |
74,487 |
64,382 |
297,177 |
241,960 |
||||||||||||||
|
USF revenues |
8,601 |
7,499 |
7,447 |
31,374 |
26,833 |
||||||||||||||
|
Total cost of revenues |
$ |
89,570 |
$ |
81,986 |
$ |
71,829 |
$ |
328,551 |
$ |
268,793 |
|||||||||
|
Service margin % |
55.6 |
% |
55.4 |
% |
55.9 |
% |
54.6 |
% |
55.9 |
% |
|||||||||
|
Gross margin % ex-USF (Service, access and product margin %) |
49.8 |
% |
49.0 |
% |
49.2 |
% |
48.5 |
% |
48.7 |
% |
|||||||||
|
Gross margin % |
47.3 |
% |
46.6 |
% |
46.4 |
% |
46.0 |
% |
46.1 |
% |
|||||||||
|
(1) Includes customer premise equipment, access, professional services, and shipping and handling. |
|||||||||||||||||||
|
(2) Excludes depreciation and amortization of |
|||||||||||||||||||
|
The table below includes revenues and cost of revenues that our management uses to measure the growth and operating |
|||||||||||||||||||
|
Consumer |
Three Months Ended |
For the Years Ended |
|||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
||||||||||||||||
|
2018 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
|
Revenues: |
|||||||||||||||||||
|
Service revenues |
$ |
92,435 |
$ |
97,093 |
$ |
107,674 |
$ |
394,389 |
$ |
454,340 |
|||||||||
|
Access and product revenues(1) |
87 |
92 |
27 |
559 |
525 |
||||||||||||||
|
Service, access and product revenues |
92,522 |
97,185 |
107,701 |
394,948 |
454,865 |
||||||||||||||
|
USF revenues |
11,282 |
10,711 |
12,219 |
45,690 |
48,499 |
||||||||||||||
|
Total revenues |
$ |
103,804 |
$ |
107,896 |
$ |
119,920 |
$ |
440,638 |
$ |
503,364 |
|||||||||
|
Cost of Revenues: |
|||||||||||||||||||
|
Service cost of revenues(2) |
$ |
10,389 |
$ |
10,661 |
$ |
17,485 |
$ |
47,439 |
$ |
80,454 |
|||||||||
|
Access and product cost of revenues(1) |
632 |
993 |
1,733 |
5,289 |
7,208 |
||||||||||||||
|
Service, access and product cost of revenues |
11,021 |
11,654 |
19,218 |
52,728 |
87,662 |
||||||||||||||
|
USF revenues |
11,282 |
10,711 |
12,219 |
45,716 |
48,499 |
||||||||||||||
|
Total cost of revenues |
$ |
22,303 |
$ |
22,365 |
$ |
31,437 |
$ |
98,444 |
$ |
136,161 |
|||||||||
|
Service margin % |
88.8 |
% |
89.0 |
% |
83.8 |
% |
88.0 |
% |
82.3 |
% |
|||||||||
|
Gross margin % ex-USF (Service, access and product margin %) |
88.1 |
% |
88.0 |
% |
82.2 |
% |
86.6 |
% |
80.7 |
% |
|||||||||
|
Gross margin % |
78.5 |
% |
79.3 |
% |
73.8 |
% |
77.7 |
% |
72.9 |
% |
|||||||||
|
(1) Includes customer premise equipment, access, professional services, and shipping and handling. |
|||||||||||||||||||
|
(2) Excludes depreciation and amortization of |
|||||||||||||||||||
|
The table below includes key operating data that our management uses to measure the growth and operating performance |
|||||||||||||||||||
|
Business |
Three Months Ended |
For the Years Ended |
|||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
||||||||||||||||
|
2018 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
|
Service revenue per customer |
$ |
392 |
$ |
362 |
$ |
328 |
$ |
358 |
$ |
327 |
|||||||||
|
Business revenue churn |
1.1 |
% |
1.1 |
% |
1.2 |
% |
1.1 |
% |
1.2 |
% |
|||||||||
|
The table below includes key operating data that our management uses to measure the growth and operating performance |
|||||||||||||||||||
|
Consumer |
Three Months Ended |
For the Years Ended |
|||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
||||||||||||||||
|
2018 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
|
Average monthly revenues per line |
$ |
26.32 |
$ |
26.30 |
$ |
26.33 |
$ |
26.42 |
$ |
26.19 |
|||||||||
|
Subscriber lines (at period end) |
1,287,649 |
1,341,662 |
1,492,067 |
1,287,649 |
1,492,067 |
||||||||||||||
|
Customer churn |
1.8 |
% |
1.8 |
% |
1.9 |
% |
1.8 |
% |
2.0 |
% |
|||||||||
|
VONAGE HOLDINGS CORP. |
|||||||||||||||||||
|
TABLE 3. RECONCILIATION OF GAAP INCOME FROM OPERATIONS |
|||||||||||||||||||
|
TO ADJUSTED OIBDA AND TO ADJUSTED OIBDA MINUS CAPEX |
|||||||||||||||||||
|
(Dollars in thousands) |
|||||||||||||||||||
|
(unaudited) |
|||||||||||||||||||
|
Three Months Ended |
For the Years Ended |
||||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
||||||||||||||||
|
2018 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
|
Income from operations |
$ |
6,021 |
$ |
14,847 |
$ |
22,985 |
$ |
51,911 |
$ |
59,391 |
|||||||||
|
Depreciation and amortization |
19,094 |
16,024 |
18,003 |
70,980 |
72,523 |
||||||||||||||
|
Share-based expense |
9,330 |
8,484 |
8,035 |
33,020 |
30,105 |
||||||||||||||
|
Acquisition related transaction and integration costs |
4,704 |
9,509 |
— |
14,645 |
172 |
||||||||||||||
|
Acquisition related consideration accounted for as |
— |
39 |
823 |
1,425 |
12,782 |
||||||||||||||
|
Organizational transformation |
2,030 |
923 |
1,101 |
6,073 |
5,101 |
||||||||||||||
|
Adjusted OIBDA |
41,179 |
49,826 |
50,947 |
178,054 |
180,074 |
||||||||||||||
|
Less: |
|||||||||||||||||||
|
Capital expenditures |
(8,345) |
(2,900) |
(6,125) |
(19,032) |
(21,915) |
||||||||||||||
|
Acquisition and development of software assets |
(1,516) |
(1,978) |
(1,936) |
(7,714) |
(11,374) |
||||||||||||||
|
Adjusted OIBDA Minus Capex |
$ |
31,318 |
$ |
44,948 |
$ |
42,886 |
$ |
151,308 |
$ |
146,785 |
|||||||||
|
VONAGE HOLDINGS CORP. |
|||||||||||||||||||
|
TABLE 4. RECONCILIATION OF GAAP NET INCOME TO |
|||||||||||||||||||
|
NET INCOME EXCLUDING ADJUSTMENTS |
|||||||||||||||||||
|
(Dollars in thousands, except per share amounts) |
|||||||||||||||||||
|
(unaudited) |
|||||||||||||||||||
|
Three Months Ended |
For the Years Ended |
||||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
||||||||||||||||
|
2018 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
|
Net (loss) income |
$ |
(6,943) |
$ |
9,588 |
$ |
(55,273) |
$ |
35,728 |
$ |
(33,933) |
|||||||||
|
Amortization of acquisition - related intangibles |
11,770 |
8,746 |
9,220 |
37,940 |
36,545 |
||||||||||||||
|
Acquisition related transaction and integration costs |
4,704 |
9,509 |
— |
14,645 |
172 |
||||||||||||||
|
Acquisition related consideration accounted for as |
— |
39 |
823 |
1,425 |
12,782 |
||||||||||||||
|
Organizational transformation |
2,030 |
923 |
1,101 |
6,073 |
5,101 |
||||||||||||||
|
Tax impact on TCJA |
— |
— |
69,378 |
— |
69,378 |
||||||||||||||
|
Tax effect on adjusting items |
(370) |
(7,283) |
(4,604) |
(15,131) |
(22,558) |
||||||||||||||
|
Net income excluding adjustments |
$ |
11,191 |
$ |
21,522 |
$ |
20,645 |
$ |
80,680 |
$ |
67,487 |
|||||||||
|
Earnings (loss) per common share: |
|||||||||||||||||||
|
Basic |
$ |
(0.03) |
$ |
0.04 |
$ |
(0.24) |
$ |
0.15 |
$ |
(0.15) |
|||||||||
|
Diluted |
$ |
(0.03) |
$ |
0.04 |
$ |
(0.24) |
$ |
0.14 |
$ |
(0.15) |
|||||||||
|
Weighted-average common shares outstanding: |
|||||||||||||||||||
|
Basic |
239,649 |
239,303 |
229,339 |
237,499 |
225,311 |
||||||||||||||
|
Diluted |
239,649 |
249,516 |
229,339 |
248,892 |
225,311 |
||||||||||||||
|
Earnings per common share, excluding adjustments: |
|||||||||||||||||||
|
Basic |
$ |
0.05 |
$ |
0.09 |
$ |
0.09 |
$ |
0.34 |
$ |
0.30 |
|||||||||
|
Diluted |
$ |
0.04 |
$ |
0.09 |
$ |
0.08 |
$ |
0.32 |
$ |
0.28 |
|||||||||
|
Weighted-average common shares outstanding: |
|||||||||||||||||||
|
Basic |
239,649 |
239,303 |
229,339 |
237,499 |
225,311 |
||||||||||||||
|
Diluted |
249,208 |
249,516 |
245,725 |
248,892 |
241,933 |
||||||||||||||
|
VONAGE HOLDINGS CORP. |
|||||||||||||||||||
|
TABLE 5. RECONCILIATION OF GAAP BUSINESS SEGMENT AND BUSINESS SEGMENT SERVICE REVENUES |
|||||||||||||||||||
|
TO ADJUSTED BUSINESS SEGMENT AND ADJUSTED BUSINESS SEGMENT SERVICE REVENUES |
|||||||||||||||||||
|
(Dollars in thousands) |
|||||||||||||||||||
|
(unaudited) |
|||||||||||||||||||
|
Three Months Ended |
For the Years Ended |
||||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
||||||||||||||||
|
2018 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
|
Business total revenue |
$ |
169,999 |
$ |
153,635 |
$ |
134,100 |
$ |
608,144 |
$ |
498,922 |
|||||||||
|
Deferred revenue adjustment from acquired companies |
2,173 |
— |
— |
2,173 |
— |
||||||||||||||
|
Revenue from acquired companies (prior to acquisition) less |
6,102 |
19,052 |
18,209 |
63,191 |
65,094 |
||||||||||||||
|
Outage credits and significant one-time items |
1,500 |
— |
(1,100) |
2,433 |
2,274 |
||||||||||||||
|
Adjusted business total revenue |
$ |
179,774 |
$ |
172,687 |
$ |
151,209 |
$ |
675,941 |
$ |
566,290 |
|||||||||
|
Business service revenues |
$ |
149,004 |
$ |
133,709 |
$ |
113,304 |
$ |
526,707 |
$ |
417,118 |
|||||||||
|
Deferred revenue adjustment from acquired companies |
2,173 |
— |
— |
2,173 |
— |
||||||||||||||
|
Revenue from acquired companies (prior to acquisition) less |
6,083 |
18,961 |
18,009 |
62,858 |
64,450 |
||||||||||||||
|
Outage credits and significant one-time items |
1,500 |
— |
(1,100) |
2,433 |
2,274 |
||||||||||||||
|
Adjusted business service revenues |
$ |
158,760 |
$ |
152,670 |
$ |
130,213 |
$ |
594,171 |
$ |
483,842 |
|||||||||
|
VONAGE HOLDINGS CORP. |
|||||||||||||||||||
|
TABLE 6. FREE CASH FLOW |
|||||||||||||||||||
|
(Dollars in thousands) |
|||||||||||||||||||
|
(unaudited) |
|||||||||||||||||||
|
Three Months Ended |
For the Years Ended |
||||||||||||||||||
|
December 31, |
September 30, |
December 31, |
December 31, |
||||||||||||||||
|
2018 |
2018 |
2017 |
2018 |
2017 |
|||||||||||||||
|
Net cash provided by operating activities |
$ |
28,742 |
$ |
28,528 |
$ |
47,458 |
$ |
123,205 |
$ |
128,058 |
|||||||||
|
Less: |
|||||||||||||||||||
|
Capital expenditures |
(8,345) |
(2,900) |
(6,125) |
(19,032) |
(21,915) |
||||||||||||||
|
Acquisition and development of software assets |
(1,516) |
(1,978) |
(1,936) |
(7,714) |
(11,374) |
||||||||||||||
|
Free cash flow |
$ |
18,881 |
$ |
23,650 |
$ |
39,397 |
$ |
96,459 |
$ |
94,769 |
|||||||||
|
VONAGE HOLDINGS CORP. |
||||||||
|
TABLE 7. RECONCILIATION OF NOTES PAYABLE, INDEBTEDNESS UNDER REVOLVING CREDIT |
||||||||
|
(Dollars in thousands) |
||||||||
|
(unaudited) |
||||||||
|
December 31, |
December 31, |
|||||||
|
2018 |
2017 |
|||||||
|
Current maturities of capital lease obligations |
$ |
— |
$ |
140 |
||||
|
Current portion of notes payable |
10,000 |
18,750 |
||||||
|
Notes payable and indebtedness under revolving credit facility, net of current maturities and debt related costs |
509,228 |
213,766 |
||||||
|
Unamortized debt related costs |
772 |
672 |
||||||
|
Gross debt |
520,000 |
233,328 |
||||||
|
Less: |
||||||||
|
Unrestricted cash |
5,057 |
31,360 |
||||||
|
Net debt |
$ |
514,943 |
$ |
201,968 |
||||
About Vonage
Vonage (NYSE: VG) is redefining business communications. True to our roots as a technology disruptor, we've embraced technology to transform how companies communicate to create better business outcomes. Our unique cloud communications platform brings together a robust unified communications solution with the agility of embedded communications APIs. This powerful combination enables businesses to collaborate more productively and engage their customers more effectively across messaging, chat, social media, video and voice.
The Company also provides a robust suite of feature-rich residential communication solutions.
Vonage Holdings Corp. is headquartered in
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), and free cash flow.
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, organizational transformation costs, 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.
Adjusted business total revenue and Adjusted business service revenues
Vonage defines adjusted business total revenue and adjusted business service revenues as business segment revenue and business segment service revenues to give effect for acquisition-related activities and other one-time items.
The Company does not reconcile its forward-looking adjusted business total revenue and adjusted business service revenue to the corresponding GAAP measures due to the significant variability and difficulty in making accurate forecasts with respect to the various acquisition-related and one-time events that 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 these forward-looking non-GAAP financial measures to the corresponding GAAP measures is not available without unreasonable effort.
Safe Harbor Statement
This press release contains forward-looking statements, including statements about acquisitions, acquisition integration, financing activity, growth priorities or plans, revenues, adjusted OIBDA, churn, seats, lines or accounts, average revenue per user, cost of telephony services, 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; risks related to the acquisition or integration of businesses we have acquired; 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 cost-effectively; the risk associated with developing and maintaining effective internal sales teams and effective distribution channels; 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 comply with data privacy and related regulatory matters; 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 obtain or maintain relevant intellectual property licenses or to protect our trademarks and internally developed software; restrictions in our debt agreements that may limit our operating flexibility; our ability to obtain additional financing if required; 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 business services; risks associated with legislative, regulatory or judicial actions regarding our business products; risks associated with operating abroad; risks associated with the taxation of our business; governmental regulation and taxes in our international operations; liability under anti-corruption laws or from governmental export controls or economic sanctions; our dependence on our customers' unimpeded access to broadband connections; foreign currency exchange risk; our history of net losses and ability to achieve consistent profitability in the future; our ability to fully realize the benefits of our net operating loss carry-forwards if an ownership change occurs; certain provisions of our charter documents; 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, 2018 and in the Company's Quarterly Reports on Form 10-Q filed with the SEC. 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 except as required by law, 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 Holdings Corp.