x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 11-3547680 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
23 Main Street, Holmdel, NJ | 07733 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | x | Accelerated filer | o | |
Non-accelerated filer | o (Do not check if a smaller reporting company) | Smaller reporting company | o |
Class | Outstanding at | July 31, 2016 | |||
Common Stock, par value $0.001 | 216,428,636 | shares |
Page | ||
Item 1. | ||
Item 2. | ||
Item 3. | ||
Item 4 | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
Item 1. | Financial Statements |
June 30, 2016 | December 31, 2015 | ||||||
Assets | (unaudited) | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 24,331 | $ | 57,726 | |||
Marketable securities | 8,074 | 9,908 | |||||
Accounts receivable, net of allowance of $3,620 and $1,091, respectively | 35,272 | 19,913 | |||||
Inventory, net of allowance of $406 and $686, respectively | 4,288 | 5,542 | |||||
Deferred customer acquisition costs, current | 3,102 | 4,074 | |||||
Deferred tax assets, current | 23,985 | 23,985 | |||||
Prepaid expenses and other current assets | 21,557 | 15,659 | |||||
Total current assets | 120,609 | 136,807 | |||||
Property and equipment, net | 52,563 | 49,483 | |||||
Goodwill | 362,269 | 222,106 | |||||
Software, net | 21,288 | 20,710 | |||||
Deferred customer acquisition costs, non-current | 487 | 431 | |||||
Debt related costs, net | 2,674 | 2,053 | |||||
Restricted cash | 1,938 | 2,587 | |||||
Intangible assets, net | 225,997 | 138,199 | |||||
Deferred tax assets, non-current | 169,582 | 202,587 | |||||
Other assets | 3,311 | 9,603 | |||||
Total assets | $ | 960,718 | $ | 784,566 | |||
Liabilities and Stockholders’ Equity | |||||||
Liabilities | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 49,700 | $ | 42,798 | |||
Accrued expenses | 79,135 | 96,127 | |||||
Deferred revenue, current portion | 33,070 | 32,605 | |||||
Current maturities of capital lease obligations | 4,615 | 4,398 | |||||
Current portion of notes payables | 18,750 | 15,000 | |||||
Total current liabilities | 185,270 | 190,928 | |||||
Indebtedness under revolving credit facility | 239,000 | 119,000 | |||||
Notes payable, net of debt related costs and current portion | 100,277 | 76,392 | |||||
Deferred revenue, net of current portion | 592 | 851 | |||||
Capital lease obligations, net of current maturities | 1,067 | 3,363 | |||||
Other liabilities, net of current portion in accrued expenses | 19,436 | 5,291 | |||||
Total liabilities | 545,642 | 395,825 | |||||
Commitments and Contingencies | — | — | |||||
Stockholders’ Equity | |||||||
Common stock, par value $0.001 per share; 596,950 shares authorized at June 30, 2016 and December 31, 2015; 279,227 and 268,947 shares issued at June 30, 2016 and December 31, 2015, respectively; 216,311 and 214,280 shares outstanding at June 30, 2016 and December 31, 2015, respectively | 281 | 270 | |||||
Additional paid-in capital | 1,280,998 | 1,224,947 | |||||
Accumulated deficit | (646,192 | ) | (655,020 | ) | |||
Treasury stock, at cost, 62,916 shares at June 30, 2016 and 54,667 shares at December 31, 2015 | (216,647 | ) | (179,779 | ) | |||
Accumulated other comprehensive loss | (3,364 | ) | (1,677 | ) | |||
Total stockholders’ equity | 415,076 | 388,741 | |||||
Total liabilities and stockholders’ equity | $ | 960,718 | $ | 784,566 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Total revenues | $ | 233,675 | $ | 221,858 | $ | 460,499 | $ | 441,588 | |||||||
Operating Expenses: | |||||||||||||||
Cost of service (excluding depreciation and amortization of $6,985, $6,005, $13,818, and $11,729 respectively) | 76,078 | 64,209 | 145,228 | 126,062 | |||||||||||
Cost of goods sold | 8,352 | 8,217 | 17,418 | 17,407 | |||||||||||
Sales and marketing | 83,344 | 84,385 | 162,945 | 169,949 | |||||||||||
Engineering and development | 7,243 | 6,864 | 14,077 | 13,469 | |||||||||||
General and administrative | 35,053 | 27,162 | 61,723 | 50,396 | |||||||||||
Depreciation and amortization | 18,218 | 14,463 | 35,197 | 28,408 | |||||||||||
228,288 | 205,300 | 436,588 | 405,691 | ||||||||||||
Income from operations | 5,387 | 16,558 | 23,911 | 35,897 | |||||||||||
Other Income (Expense): | |||||||||||||||
Interest income | 25 | 21 | 46 | 41 | |||||||||||
Interest expense | (3,057 | ) | (2,088 | ) | (5,503 | ) | (4,023 | ) | |||||||
Other income (expense), net | 104 | 32 | 258 | (545 | ) | ||||||||||
(2,928 | ) | (2,035 | ) | (5,199 | ) | (4,527 | ) | ||||||||
Income from continuing operations before income tax expense | 2,459 | 14,523 | 18,712 | 31,370 | |||||||||||
Income tax expense | (1,562 | ) | (6,176 | ) | (9,884 | ) | (13,174 | ) | |||||||
Income from continuing operations | 897 | 8,347 | 8,828 | 18,196 | |||||||||||
Loss from discontinued operations | — | — | — | (1,615 | ) | ||||||||||
Loss on disposal, net of taxes | — | — | — | (824 | ) | ||||||||||
Discontinued operations | — | — | — | (2,439 | ) | ||||||||||
Net income | 897 | 8,347 | 8,828 | 15,757 | |||||||||||
Plus: Net loss from discontinued operations attributable to noncontrolling interest | — | — | — | 59 | |||||||||||
Net income attributable to Vonage | $ | 897 | $ | 8,347 | $ | 8,828 | $ | 15,816 | |||||||
Net income per common share - continuing operations: | |||||||||||||||
Basic | $ | — | $ | 0.04 | $ | 0.04 | $ | 0.09 | |||||||
Diluted | $ | — | $ | 0.04 | $ | 0.04 | $ | 0.08 | |||||||
Net loss per common share - discontinued operations attributable to Vonage: | |||||||||||||||
Basic | $ | — | $ | — | $ | — | $ | (0.01 | ) | ||||||
Diluted | $ | — | $ | — | $ | — | $ | (0.01 | ) | ||||||
Net income attributable to Vonage per common share: | |||||||||||||||
Basic | $ | — | $ | 0.04 | $ | 0.04 | $ | 0.07 | |||||||
Diluted | $ | — | $ | 0.04 | $ | 0.04 | $ | 0.07 | |||||||
Weighted-average common shares outstanding: | |||||||||||||||
Basic | 213,558 | 213,582 | 213,800 | 212,711 | |||||||||||
Diluted | 222,700 | 222,188 | 223,978 | 221,557 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Net income | $ | 897 | $ | 8,347 | $ | 8,828 | $ | 15,757 | |||||||
Other comprehensive income (loss): | |||||||||||||||
Foreign currency translation adjustment | (1,691 | ) | 1 | (1,713 | ) | 313 | |||||||||
Discontinued operations cumulative translation adjustment | — | — | — | 974 | |||||||||||
Unrealized loss on available-for-sale securities | 4 | (2 | ) | 26 | (6 | ) | |||||||||
Total other comprehensive income (loss) | (1,687 | ) | (1 | ) | (1,687 | ) | 1,281 | ||||||||
Comprehensive income | (790 | ) | 8,346 | 7,141 | 17,038 | ||||||||||
Comprehensive loss attributable to noncontrolling interest: | |||||||||||||||
Comprehensive loss | — | — | — | 59 | |||||||||||
Total comprehensive loss attributable to non-controlling interest | — | — | — | 59 | |||||||||||
Comprehensive income attributable to Vonage | $ | (790 | ) | $ | 8,346 | $ | 7,141 | $ | 17,097 |
Six Months Ended | |||||||
June 30, | |||||||
2016 | 2015 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 8,828 | $ | 15,757 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization and impairment charges | 18,579 | 17,253 | |||||
Amortization of intangibles | 16,618 | 11,346 | |||||
Deferred tax expense | 8,218 | 11,046 | |||||
Loss on foreign currency | — | 1,358 | |||||
Allowance for doubtful accounts | 597 | (9 | ) | ||||
Allowance for obsolete inventory | 352 | 1,234 | |||||
Amortization of debt related costs | 517 | 464 | |||||
Share-based expense | 16,670 | 12,192 | |||||
Non-controlling interest | — | 907 | |||||
Changes in operating assets and liabilities: | |||||||
Accounts receivable | (7,176 | ) | (6,129 | ) | |||
Inventory | 906 | 994 | |||||
Prepaid expenses and other current assets | (2,587 | ) | (3,527 | ) | |||
Deferred customer acquisition costs | 913 | 811 | |||||
Other assets | (331 | ) | (946 | ) | |||
Accounts payable | 5,095 | (6,594 | ) | ||||
Accrued expenses | (27,277 | ) | (9,684 | ) | |||
Deferred revenue | (1,534 | ) | (1,333 | ) | |||
Other liabilities | 173 | 821 | |||||
Net cash provided by operating activities | 38,561 | 45,961 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (15,948 | ) | (4,960 | ) | |||
Purchase of marketable securities | (5,664 | ) | (4,509 | ) | |||
Maturities and sales of marketable securities | 7,524 | 2,130 | |||||
Acquisition and development of software assets | (5,655 | ) | (5,542 | ) | |||
Acquisition of businesses, net of cash acquired | (163,093 | ) | (25,252 | ) | |||
Decrease in restricted cash | 690 | 998 | |||||
Net cash used in investing activities | (182,146 | ) | (37,135 | ) | |||
Cash flows from financing activities: | |||||||
Principal payments on capital lease obligations | (6,329 | ) | (1,616 | ) | |||
Principal payments on notes and revolving credit facility | (33,437 | ) | (10,000 | ) | |||
Proceeds received from draw down of revolving credit facility and issuance of notes payable | 181,250 | 20,000 | |||||
Debt related costs | (1,316 | ) | — | ||||
Common stock repurchases | (32,902 | ) | (13,760 | ) | |||
Proceeds from exercise of stock options | 3,023 | 4,277 | |||||
Net cash provided by (used in) financing activities | 110,289 | (1,099 | ) | ||||
Effect of exchange rate changes on cash | (99 | ) | (38 | ) | |||
Net change in cash and cash equivalents | (33,395 | ) | 7,689 | ||||
Cash and cash equivalents, beginning of period | 57,726 | 40,797 | |||||
Cash and cash equivalents, end of period | $ | 24,331 | $ | 48,486 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the periods for: | |||||||
Interest | $ | 4,833 | $ | 3,531 | |||
Income taxes | $ | 3,163 | $ | 1,481 | |||
Non-cash transactions during the periods for: | |||||||
Common stock repurchases | $ | — | $ | 322 | |||
Issuance of common stock in connection with acquisition of business | $ | 31,591 | $ | 5,578 | |||
Variable payout amount in connection with acquisition of business | $ | 16,472 | $ | — | |||
Assumption of options in connection with acquisition of business | $ | 4,779 | $ | — |
Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Accumulated Other Comprehensive Income (Loss) | Total | ||||||||||||||||||
Balance at December 31, 2015 | $ | 270 | $ | 1,224,947 | $ | (655,020 | ) | $ | (179,779 | ) | $ | (1,677 | ) | $ | 388,741 | ||||||||
Stock option exercises | 4 | 3,019 | 3,023 | ||||||||||||||||||||
Share-based expense | 16,670 | 16,670 | |||||||||||||||||||||
Share-based award activity | (3,966 | ) | (3,966 | ) | |||||||||||||||||||
Common stock repurchases | (32,902 | ) | (32,902 | ) | |||||||||||||||||||
Acquisition of business | 7 | 36,362 | 36,369 | ||||||||||||||||||||
Foreign currency translation adjustment | (1,713 | ) | (1,713 | ) | |||||||||||||||||||
Unrealized loss on available-for-sale securities | 26 | 26 | |||||||||||||||||||||
Net income | 8,828 | 8,828 | |||||||||||||||||||||
Balance at June 30, 2016 | $ | 281 | $ | 1,280,998 | $ | (646,192 | ) | $ | (216,647 | ) | $ | (3,364 | ) | $ | 415,076 |
• | the useful lives of property and equipment, software costs, and intangible assets; |
• | assumptions used for the purpose of determining share-based compensation using the Black-Scholes option pricing model and Monte Carlo simulation model (“Models”), and various other assumptions that we believe to be reasonable; the key inputs for these Models include our stock price at valuation date, exercise price, the dividend yield, risk-free interest rate, life in years, and historical volatility of our common stock; and |
• | assumptions used in determining the need for, and amount of, a valuation allowance on net deferred tax assets. |
• | Providing equipment, if any, to the customer that enables our services; and |
• | Providing services. |
• | Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. |
• | Level 2: Observable prices that are based on inputs not quoted on active markets but corroborated by market data. |
• | Level 3: Unobservable inputs when there is little or no market data available, thereby requiring an entity to develop its own assumptions. The fair value hierarchy gives the lowest priority to Level 3 inputs. |
June 30, 2016 | December 31, 2015 | ||||||
Level 1 Assets | |||||||
Money market fund (1) | $ | 1,969 | $ | 57 | |||
Level 2 Assets | |||||||
Available-for-sale securities (2) | $ | 8,074 | $ | 9,908 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Numerator | ||||||||||||||||
Income from continuing operations | $ | 897 | $ | 8,347 | $ | 8,828 | $ | 18,196 | ||||||||
Discontinued operations | — | — | $ | — | $ | (2,439 | ) | |||||||||
Plus: Net loss from discontinued operations attributable to noncontrolling interest | $ | — | $ | — | $ | — | $ | 59 | ||||||||
Loss from discontinued operations attributable to Vonage | $ | — | $ | — | $ | — | $ | (2,380 | ) | |||||||
Net income attributable to Vonage | $ | 897 | $ | 8,347 | $ | 8,828 | $ | 15,816 | ||||||||
Denominator | ||||||||||||||||
Basic weighted average common shares outstanding | 213,558 | 213,582 | 213,800 | 212,711 | ||||||||||||
Dilutive effect of stock options and restricted stock units | 9,142 | 8,606 | 10,178 | 8,846 | ||||||||||||
Diluted weighted average common shares outstanding | 222,700 | 222,188 | 223,978 | 221,557 | ||||||||||||
Basic net income per share | ||||||||||||||||
Basic net income per share-from continuing operations | $ | — | $ | 0.04 | $ | 0.04 | $ | 0.09 | ||||||||
Basic net loss per share-from discontinued operations attributable to Vonage | $ | — | $ | — | $ | — | $ | (0.01 | ) | |||||||
Basic net income per share-net income attributable to Vonage | $ | — | $ | 0.04 | $ | 0.04 | $ | 0.07 | ||||||||
Diluted net income per share | ||||||||||||||||
Diluted net income per share-from continuing operations | $ | — | $ | 0.04 | $ | 0.04 | $ | 0.08 | ||||||||
Diluted net loss per share-from discontinued operations attributable to Vonage | $ | — | $ | — | $ | — | $ | (0.01 | ) | |||||||
Diluted net income per share-net income attributable to Vonage | $ | — | $ | 0.04 | $ | 0.04 | $ | 0.07 |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Restricted stock units | 12,851 | 7,596 | 12,012 | 7,196 | ||||||||
Stock options | 14,597 | 16,169 | 14,400 | 16,329 | ||||||||
27,448 | 23,765 | 26,412 | 23,525 |
June 30, 2016 | December 31, 2015 | ||||||
Nontrade receivables | $ | 2,755 | $ | 2,113 | |||
Services | 7,903 | 8,066 | |||||
Telecommunications | 7,394 | 3,138 | |||||
Insurance | 45 | 939 | |||||
Marketing | 2,294 | 779 | |||||
Other prepaids | 1,166 | 624 | |||||
Prepaid expenses and other current assets | $ | 21,557 | $ | 15,659 |
June 30, 2016 | December 31, 2015 | ||||||
Building (under capital lease) | $ | 25,709 | $ | 25,709 | |||
Network equipment and computer hardware | 99,266 | 89,025 | |||||
Leasehold improvements | 49,350 | 48,872 | |||||
Customer premise equipment | 7,811 | 7,292 | |||||
Furniture | 3,775 | 2,508 | |||||
Vehicles | 203 | 214 | |||||
186,114 | 173,620 | ||||||
Less: accumulated depreciation and amortization | (133,551 | ) | (124,137 | ) | |||
Property and equipment, net | $ | 52,563 | $ | 49,483 |
June 30, 2016 | December 31, 2015 | ||||||
Customer premise equipment | $ | 7,811 | $ | 7,292 | |||
Less: accumulated depreciation | (3,041 | ) | (2,068 | ) | |||
Customer premise equipment, net | $ | 4,770 | $ | 5,224 |
June 30, 2016 | December 31, 2015 | ||||||
Purchased | $ | 70,338 | $ | 67,248 | |||
Licensed | 909 | 909 | |||||
Internally developed | 36,219 | 36,088 | |||||
107,466 | 104,245 | ||||||
Less: accumulated amortization | (86,178 | ) | (83,535 | ) | |||
Software, net | $ | 21,288 | $ | 20,710 |
June 30, 2016 | December 31, 2015 | ||||||
Debt related costs related to Revolving Credit Facility | $ | 5,965 | $ | 5,044 | |||
Less: accumulated amortization | (3,291 | ) | (2,991 | ) | |||
Debt related costs, net | $ | 2,674 | $ | 2,053 |
June 30, 2016 | December 31, 2015 | ||||||
Letter of credit-lease deposits | $ | 1,576 | $ | 2,498 | |||
Cash reserves | 362 | 89 | |||||
Restricted cash | $ | 1,938 | $ | 2,587 |
June 30, 2016 | December 31, 2015 | ||||||
Customer relationships | $ | 182,007 | $ | 92,609 | |||
Developed technology | 87,614 | 75,694 | |||||
Patents and patent licenses | 20,164 | 20,164 | |||||
Trademarks | 560 | 560 | |||||
Trade names | 3,144 | 760 | |||||
Non-compete agreements | 3,628 | 2,933 | |||||
Intangible assets, gross | 297,117 | 192,720 | |||||
Customer relationships | (30,539 | ) | (21,777 | ) | |||
Developed technology | (24,633 | ) | (18,880 | ) | |||
Patents and patent licenses | (13,431 | ) | (12,066 | ) | |||
Trademarks | (560 | ) | (543 | ) | |||
Trade names | (435 | ) | (260 | ) | |||
Non-compete agreements | (1,522 | ) | (995 | ) | |||
Less: accumulated amortization | (71,120 | ) | (54,521 | ) | |||
Customer relationships | 151,468 | 70,832 | |||||
Developed technology | 62,981 | 56,814 | |||||
Patents and patent licenses | 6,733 | 8,098 | |||||
Trademarks | — | 17 | |||||
Trade names | 2,709 | 500 | |||||
Non-compete agreements | 2,106 | 1,938 | |||||
Intangible assets, net | $ | 225,997 | $ | 138,199 |
June 30, 2016 | December 31, 2015 | ||||||
Long term non-trade receivable | — | 6,623 | |||||
Others | 3,311 | 2,980 | |||||
Other assets | $ | 3,311 | $ | 9,603 |
June 30, 2016 | December 31, 2015 | ||||||
Compensation and related taxes and temporary labor | $ | 25,499 | $ | 33,196 | |||
Marketing | 14,444 | 24,891 | |||||
Taxes and fees | 6,711 | 11,808 | |||||
Litigation and settlements | 23 | 23 | |||||
Telecommunications | 14,102 | 9,111 | |||||
Other accruals | 11,196 | 11,523 | |||||
Customer credits | 1,570 | 1,779 | |||||
Professional fees | 4,572 | 2,080 | |||||
Accrued interest | 37 | 22 | |||||
Inventory | 715 | 1,514 | |||||
Credit card fees | 266 | 180 | |||||
Accrued expenses | $ | 79,135 | $ | 96,127 |
June 30, 2016 | December 31, 2015 | ||||||
Foreign currency translation adjustment | (3,369 | ) | (1,656 | ) | |||
Unrealized loss on available-for sale securities | 5 | (21 | ) | ||||
Accumulated other comprehensive loss | $ | (3,364 | ) | $ | (1,677 | ) |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
USF fees | $ | 19,709 | $ | 19,028 | $ | 39,229 | $ | 37,543 | ||||||||
Disconnect fees, net of credits and bad debt | $ | 796 | $ | 160 | $ | 1,010 | $ | 362 | ||||||||
Initial activation fees | $ | (58 | ) | $ | 188 | $ | 310 | $ | 408 | |||||||
Customer equipment rental | $ | 1,179 | $ | 912 | $ | 2,281 | $ | 1,682 | ||||||||
Customer equipment fees | $ | 1,705 | $ | 1,351 | $ | 3,786 | $ | 2,524 | ||||||||
Equipment recovery fees | $ | 26 | $ | 17 | $ | 44 | $ | 32 | ||||||||
Shipping and handling fees | $ | 571 | $ | 621 | $ | 1,179 | $ | 1,224 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
USF costs | $ | 19,709 | $ | 19,028 | $ | 39,229 | $ | 37,543 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Shipping and handling cost | $ | 1,307 | $ | 1,274 | $ | 2,769 | $ | 2,559 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Advertising costs | $ | 20,079 | $ | 26,579 | $ | 36,958 | $ | 54,828 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Acquisition related transaction costs | $ | 5,057 | $ | 222 | $ | 5,150 | $ | 660 | ||||||||
Acquisition related integration costs | $ | — | $ | 8 | $ | — | $ | 25 | ||||||||
Acquisition related consideration accounted for as compensation | $ | 3,312 | $ | — | $ | 3,312 | $ | — |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Network equipment and computer hardware | $ | 3,907 | $ | 3,058 | $ | 7,740 | $ | 5,948 | ||||||||
Software | 2,591 | 3,259 | 5,320 | 6,332 | ||||||||||||
Capital leases | 550 | 550 | 1,100 | 1,100 | ||||||||||||
Other leasehold improvements | 1,351 | 1,266 | 2,706 | 2,491 | ||||||||||||
Customer premise equipment | 649 | 505 | 1,278 | 965 | ||||||||||||
Furniture | 213 | 97 | 375 | 192 | ||||||||||||
Vehicles | 18 | 17 | 36 | 33 | ||||||||||||
Patents | 682 | 311 | 1,364 | 622 | ||||||||||||
Trademarks | — | 18 | 18 | 36 | ||||||||||||
Customer relationships | 4,928 | 2,228 | 8,777 | 4,457 | ||||||||||||
Acquired technology | 2,950 | 2,897 | 5,755 | 5,717 | ||||||||||||
Trade names | 122 | 25 | 176 | 50 | ||||||||||||
Non-compete agreements | 274 | 232 | 528 | 464 | ||||||||||||
18,235 | 14,463 | 35,173 | 28,407 | |||||||||||||
Property and equipment impairments | (17 | ) | — | 24 | 1 | |||||||||||
Software impairments | — | — | — | — | ||||||||||||
Depreciation and amortization expense | $ | 18,218 | $ | 14,463 | $ | 35,197 | $ | 28,408 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Debt related costs amortization | $ | 266 | $ | 226 | $ | 517 | $ | 464 |
Three Months Ended | Six Months Ended | |||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Net loss resulting from foreign exchange transactions | $ | 95 | $ | 13 | $ | 251 | $ | (554 | ) |
June 30, 2016 | December 31, 2015 | ||||||
2.50-3.00% Term note - due 2019, net of debt related costs | — | 76,392 | |||||
2.50-3.00% Revolving credit facility - due 2019 | — | 119,000 | |||||
2.50-3.25% Term note - due 2020, net of debt related costs | 100,277 | — | |||||
2.50-3.25% Revolving credit facility - due 2020 | 239,000 | — | |||||
Total Long-term note and revolving credit facility | $ | 339,277 | $ | 195,392 |
Term Note | |||
2016 | $ | 9,375 | |
2017 | 18,750 | ||
2018 | 18,750 | ||
2019 | 18,750 | ||
2020 | 54,688 | ||
Minimum future payments of principal | 120,313 | ||
Less: unamortized debt related costs | 1,286 | ||
current portion | 18,750 | ||
Long-term portion | $ | 100,277 |
• | LIBOR (applicable to one-, two-, three-, six-, or twelve-month periods) plus an applicable margin equal to 2.50% if our consolidated leverage ratio is less than 0.75 to 1.00, 2.75% if our consolidated leverage ratio is greater than or equal to 0.75 to 1.00 and less than 1.50 to 1.00, 3.00% if our consolidated leverage ratio is greater than or equal to 1.50 to 1.00 and less than 2.5 to 1.00, and 3.25% if our consolidated leverage ratio is greater than or equal to 2.50 to 1.00, payable on the last day of each relevant interest period or, if the interest period is longer than three months, each day that is three months after the first day of the interest period, or |
• | the base rate determined by reference to the highest of (a) the prime rate of JPMorgan Chase Bank, N.A., (b) the federal funds effective rate from time to time plus 0.50%, and (c) the adjusted LIBO rate applicable to one month interest periods plus 1.00%, plus an applicable margin equal to 1.50% if our consolidated leverage ratio is less than 0.75 to 1.00, 1.75% if our consolidated leverage ratio is greater than or equal to 0.75 to 1.00 and less than 1.50 to 1.00, 2.00% if our consolidated leverage ratio is greater than or equal to 1.50 to 1.00 and less than 2.50 to 1.00, and 2.25% if our consolidated leverage ratio is greater than or equal to 2.5 to 1.00, payable on the last business day of each March, June, September, and December and the maturity date of the 2016 Credit Facility. |
• | 100% of the net cash proceeds from any non-ordinary course sale or other disposition of our property and assets for consideration in excess of a certain amount subject to customary reinvestment provisions and certain other exceptions and |
• | 100% of the net cash proceeds received in connection with other non-ordinary course transactions, including insurance proceeds not otherwise applied to the relevant insurance loss. |
• | a consolidated leverage ratio of no greater than 3.25 to 1.00 as of the end of the fiscal quarter of Holdings ending June 30, 2016 and for each of the three consecutive fiscal quarters ending immediately thereafter; and a consolidated leverage ratio of no less than 2.75 to 1.00 as of the end of any fiscal quarter of Holdings, commencing with the fiscal quarter ending June 30, 2017, with a limited step-up to 3.25 to 1.00 for a period of four consecutive quarters, in connection with an acquisition; |
• | a consolidated fixed coverage charge ratio of no less than 1.75 to 1.00 subject to adjustment to exclude up to $80,000 million in specified restricted payments; |
• | minimum cash of $25,000 including the unused portion of the revolving credit facility; and |
• | maximum capital expenditures not to exceed $55,000 during any fiscal year, provided that the unused amount of any permitted capital expenditures in any fiscal year may be carried forward to the next following fiscal year. |
• | LIBOR (applicable to one-, two-, three-, six-, or twelve-month periods) plus an applicable margin equal to 2.50% if our consolidated leverage ratio is less than 0.75 to 1.00, 2.75% if our consolidated leverage ratio is greater than or equal to 0.75 to 1.00 and less than 1.50 to 1.00, and 3.00% if our consolidated leverage ratio is greater than or equal to 1.50 to 1.00, payable on the last day of each relevant interest period or, if the interest period is longer than three months, each day that is three months after the first day of the interest period, or |
• | the base rate determined by reference to the highest of (a) the prime rate of JPMorgan Chase Bank, N.A., (b) the federal funds effective rate from time to time plus 0.50%, and (c) the adjusted LIBO rate applicable to one month interest periods plus 1.00%, plus an applicable margin equal to 1.50% if our consolidated leverage ratio is less than 0.75 to 1.00, 1.75% if our consolidated leverage ratio is greater than or equal to 0.75 to 1.00 and less than 1.50 to |
• | 100% of the net cash proceeds from any non-ordinary course sale or other disposition of our property and assets for consideration in excess of a certain amount subject to customary reinvestment provisions and certain other exceptions and |
• | 100% of the net cash proceeds received in connection with other non-ordinary course transactions, including insurance proceeds not otherwise applied to the relevant insurance loss. |
• | a consolidated leverage ratio of no greater than 2.25 to 1.00, with a limited step-up to 2.75 to 1.00 for a period of four consecutive quarters, in connection with an acquisition made during the first two years of the 2015 Credit Facility; |
• | a consolidated fixed coverage charge ratio of no less than 1.75 to 1.00 subject to adjustment to exclude up to $80,000 million in specified restricted payments; |
• | minimum cash of $25,000 including the unused portion of the revolving credit facility; and |
• | maximum capital expenditures not to exceed $55,000 during any fiscal year, provided that the unused amount of any permitted capital expenditures in any fiscal year may be carried forward to the next following fiscal year. |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2016 | 2015 (1) | 2016 | 2015 (1) | ||||||||||||
Shares of common stock repurchased | 5,747 | 1,169 | 7,400 | 2,948 | |||||||||||
Value of common stock repurchased | $ | 24,754 | $ | 5,605 | $ | 32,762 | $ | 13,374 |
Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | ||||||||||||||
2016 | 2015 | 2016 | 2015 | ||||||||||||
Revenues | $ | — | $ | — | $ | — | $ | 33 | |||||||
Operating expenses | — | — | — | 1,648 | |||||||||||
Loss from discontinued operations | — | — | — | (1,615 | ) | ||||||||||
Loss on disposal, net of taxes | — | — | — | (824 | ) | ||||||||||
Net loss from discontinued operations | — | — | — | (2,439 | ) | ||||||||||
Plus: Net loss from discontinued operations attributable to noncontrolling interest | $ | — | $ | — | $ | — | $ | 59 | |||||||
Net loss from discontinued operations attributable to Vonage | $ | — | $ | — | $ | — | $ | (2,380 | ) |
Cash paid at closing (inclusive of cash acquired of $16,094) | $ | 179,186 | |
Stock paid at closing | 31,591 | ||
Variable Payout Amount (described below) | 16,472 | ||
Employee Payout Amount (described below) | 4,779 | ||
Acquisition Cost | $ | 232,028 |
Estimated Fair Value | |||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ | 16,094 | |
Accounts receivable | 8,764 | ||
Prepaid expenses and other current assets | 3,364 | ||
Total current assets | 28,222 | ||
Property and equipment | 757 | ||
Software, net | 242 | ||
Intangible assets | 105,100 | ||
Restricted cash | 51 | ||
Total assets acquired | 134,372 | ||
Liabilities | |||
Current liabilities: | |||
Accounts payable | 1,841 | ||
Accrued expenses | 8,095 | ||
Deferred revenue, current portion | 1,735 | ||
Total current liabilities | 11,671 | ||
Deferred tax liabilities, net, non-current | 31,546 | ||
Total liabilities assumed | 43,217 | ||
Net identifiable assets acquired | 91,155 | ||
Goodwill | 140,873 | ||
Total purchase price | $ | 232,028 |
Amount | |||
Customer relationships | $ | 90,000 | |
Developed technologies | 12,000 | ||
Non-compete agreements | 700 | ||
Trade names | 2,400 | ||
$ | 105,100 |
Estimated Fair Value | |||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ | 1,014 | |
Accounts receivable | 1,492 | ||
Inventory | 191 | ||
Prepaid expenses and other current assets | 1,017 | ||
Total current assets | 3,714 | ||
Property and equipment | 4,437 | ||
Software | 281 | ||
Intangible assets | 38,064 | ||
Restricted cash | 183 | ||
Other assets | 195 | ||
Total assets acquired | 46,874 | ||
Liabilities | |||
Current liabilities: | |||
Accounts payable | 3,344 | ||
Accrued expenses | 3,985 | ||
Deferred revenue, current portion | 576 | ||
Current maturities of capital lease obligations | 557 | ||
Total current liabilities | 8,462 | ||
Capital lease obligations, net of current maturities | 552 | ||
Deferred tax liabilities, net, non-current | 8,487 | ||
Total liabilities assumed | 17,501 | ||
Net identifiable assets acquired | 29,373 | ||
Goodwill | 63,316 | ||
Total purchase price | $ | 92,689 |
Amount | |||
Customer relationships | $ | 37,720 | |
Non-compete agreements | 104 | ||
Trade names | 240 | ||
$ | 38,064 |
Estimated Fair Value | |||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ | 53 | |
Accounts receivable | 832 | ||
Inventory | 67 | ||
Prepaid expenses and other current assets | 143 | ||
Total current assets | 1,095 | ||
Property and equipment | 979 | ||
Software | 401 | ||
Intangible assets | 6,407 | ||
Deferred tax assets, non-current | 741 | ||
Total assets acquired | 9,623 | ||
Liabilities | |||
Current liabilities: | |||
Accounts payable | 785 | ||
Accrued expenses | 593 | ||
Deferred revenue, current portion | 370 | ||
Total current liabilities | 1,748 | ||
Total liabilities assumed | 1,748 | ||
Net identifiable assets acquired | 7,875 | ||
Goodwill | 17,703 | ||
Total purchase price | $ | 25,578 |
Amount | |||
Customer relationships | $ | 5,090 | |
Developed technologies | 994 | ||
Non-compete agreements | 303 | ||
Trade names | 20 | ||
$ | 6,407 |
Six Months Ended | ||||||||
June 30, | ||||||||
2016 | 2015 | |||||||
Revenue | $ | 494,094 | $ | 468,647 | ||||
Net income attributable to Vonage | $ | 5,887 | $ | 6,522 | ||||
Net income attributable to Vonage per share - basic | $ | 0.03 | $ | 0.03 | ||||
Net income attributable to Vonage per share - diluted | $ | 0.03 | $ | 0.03 |
• | a decrease in income tax expense of $2,219 and $7,011 for the six months ended June 30, 2016 and June 30, 2015, respectively, related to pro forma adjustments and Nexmo's results prior to acquisition; |
• | the exclusion of our acquisition-related expenses of $7,910 for the six months ended June 30, 2016; |
• | an increase in interest expense of $2,643 and $3,172 for the six months ended June 30, 2016 and June 30, 2015, respectively, associated with borrowings under our revolving line of credit; and |
• | an increase in amortization expense of $6,502 and $7,802 for the six months ended June 30, 2016 and June 30, 2015, respectively, related to the identified intangible assets of Nexmo. |
Balance at December 31, 2015 | $ | 222,106 | ||
Increase in goodwill related to acquisition of iCore | 22 | |||
Increase in goodwill related to acquisition of Simple Signal | 16 | |||
Increase in goodwill related acquisition of Nexmo | 140,873 | |||
Currency translation adjustments | (748 | ) | ||
Balance at June 30, 2016 | $ | 362,269 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Consumer | Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues | $ | 147,963 | $ | 172,756 | $ | 300,967 | $ | 350,586 | ||||||||
Average monthly revenues per subscriber line | $ | 26.61 | $ | 27.79 | $ | 26.64 | $ | 27.86 | ||||||||
Subscriber lines (at period end) | 1,824,668 | 2,049,424 | 1,824,668 | 2,049,424 | ||||||||||||
Customer churn | 2.1 | % | 2.2 | % | 2.2 | % | 2.3 | % |
Business | Three Months Ended | Six Months Ended | ||||||||||||||
June 30, | June 30, | |||||||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||||||
Revenues (1) | $ | 85,712 | $ | 49,102 | $ | 159,532 | $ | 91,002 | ||||||||
Average monthly revenues per seat (2) | $ | 45.52 | $ | 42.28 | $ | 45.18 | $ | 42.58 | ||||||||
Seats (at period end) (2) | 578,355 | 401,256 | 578,355 | 401,256 | ||||||||||||
Revenue churn (2) | 1.4 | % | 1.3 | % | 1.4 | % | 1.4 | % |
• | Access charges that we pay to other companies to terminate domestic and international calls on the public switched telephone network, with a portion of these payments ultimately being made to incumbent telephone companies. When a Vonage subscriber calls another Vonage subscriber, we do not pay an access charge. |
• | The cost of leasing Internet transit services from multiple Internet service providers. This Internet connectivity is used to carry VoIP session initiation signaling and packetized audio media between our subscribers and our regional data centers. |
• | The cost of leasing from other companies the telephone numbers that we provide to our customers. We lease these telephone numbers on a monthly basis. |
• | The cost of co-locating our regional data connection point equipment in third-party facilities owned by other companies, Internet service providers or collocation facility providers. |
• | The cost of providing local number portability, which allows customers to move their existing telephone numbers from another provider to our service. Only regulated telecommunications providers have access to the centralized number databases that facilitate this process. Because we are not a regulated telecommunications provider, we must pay other telecommunications providers to process our local number portability requests. |
• | The cost of complying with FCC regulations regarding VoIP emergency services, which require us to provide enhanced emergency dialing capabilities to transmit 911 calls for our customers. |
• | Taxes that we pay on our purchase of telecommunications services from our suppliers or imposed by government agencies such as Federal USF and related fees. |
• | License fees for use of third party intellectual property. |
• | The personnel and related expenses of certain network operations and technical support employees and contractors. |
• | The cost of the equipment that we provide to residential customers who subscribe to our service through our direct sales channel in excess of activation fees when an activation fee is collected. Business customers' purchased equipment is recorded on a net basis. The remaining cost of customer equipment is deferred up to the activation fee collected and amortized over the estimated average customer life. |
• | The cost of the equipment that we sell directly to retailers. |
• | The cost of shipping and handling for customer equipment, together with the installation manual, that we ship to customers. |
• | The cost of certain products or services that we give customers as promotions. |
• | Advertising costs, which comprise a majority of our sales and marketing expense and include online, television, direct mail, alternative media, promotions, sponsorships, and inbound and outbound telemarketing. |
• | Creative and production costs. |
• | The costs to serve and track our online advertising. |
• | Certain amounts we pay to retailers for activation commissions. |
• | The cost associated with our customer referral program. |
• | The personnel and related expenses of sales and marketing employees and contractors. |
• | Transaction fees paid to credit card, debit card, and ECP companies and other third party billers such as iTunes, which may include a per transaction charge in addition to a percent of billings charge. |
• | The cost of customer support and collections. |
• | Systems and information technology support. |
• | The personnel and related expenses of developers responsible for new products and software engineers maintaining and enhancing existing products. |
• | Personnel and related costs for executive, legal, finance, and human resources employees and contractors. |
• | Share-based expense related to share-based awards to employees, directors, and consultants. |
• | Rent and related expenses. |
• | Professional fees for legal, accounting, tax, public relations, lobbying, and development activities. |
• | Acquisition related transaction and integration costs. |
• | Litigation settlements. |
• | Depreciation of our network equipment, furniture and fixtures, and employee computer equipment. |
• | Depreciation of Company-owned equipment in use at customer premises. |
• | Amortization of leasehold improvements and purchased and developed software. |
• | Amortization of intangible assets (developed technology, customer relationships, non-compete agreements, patents, trademarks and trade names). |
• | Loss on disposal or impairment of property and equipment. |
• | Interest income on cash and cash equivalents. |
• | Interest expense on notes payable, patent litigation judgments and settlements and capital leases. |
• | Amortization of debt related costs. |
• | Accretion of notes. |
• | Realized and unrealized gains (losses) on foreign currency. |
• | Gain (loss) on extinguishment of notes. |
• | Realized gains (losses) on sale of marketable securities. |
Three Months Ended | Six Months Ended | |||||||||||
June 30, | June 30, | |||||||||||
2016 | 2015 | 2016 | 2015 | |||||||||
Revenues | 100 | % | 100 | % | 100 | % | 100 | % | ||||
Operating Expenses: | ||||||||||||
Cost of service (excluding depreciation and amortization) | 33 | 29 | 32 | 29 | ||||||||
Cost of goods sold | 3 | 4 | 4 | 4 | ||||||||
Sales and marketing | 36 | 38 | 35 | 38 | ||||||||
Engineering and development | 3 | 3 | 3 | 3 | ||||||||
General and administrative | 15 | 12 | 13 | 11 | ||||||||
Depreciation and amortization | 8 | 6 | 8 | 7 | ||||||||
98 | 92 | 95 | 92 | |||||||||
Income from operations | 2 | 8 | 5 | 8 | ||||||||
Other Income (Expense): | ||||||||||||
Interest income | — | — | — | — | ||||||||
Interest expense | (1 | ) | (1 | ) | (1 | ) | (1 | ) | ||||
Other income (expense), net | — | — | — | — | ||||||||
(1 | ) | (1 | ) | (1 | ) | (1 | ) | |||||
Income from continuing operations before income tax expense | 1 | 7 | 4 | 7 | ||||||||
Income tax expense | (1 | ) | (3 | ) | (2 | ) | (3 | ) | ||||
Income from continuing operations | — | 4 | 2 | 4 | ||||||||
Loss from discontinued operations | — | — | — | — | ||||||||
Loss on disposal, net of taxes | — | — | — | — | ||||||||
Discontinued operations | — | — | — | — | ||||||||
Net income | — | 4 | 2 | 4 | ||||||||
Plus: Net loss from discontinued operations attributable to noncontrolling interest | — | — | — | — | ||||||||
Net income attributable to Vonage | — | % | 4 | % | 2 | % | 4 | % |
(in thousands, except percentages) | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||||
2016 | 2015 | Dollar Change | Percent Change | 2016 | 2015 | Dollar Change | Percent Change | |||||||||||||||||||||||
Revenues | $ | 233,675 | $ | 221,858 | $ | 11,817 | 5 | % | $ | 460,499 | $ | 441,588 | $ | 18,911 | 4 | % | ||||||||||||||
Cost of service (1) | 76,078 | 64,209 | 11,869 | 18 | % | 145,228 | 126,062 | 19,166 | 15 | % | ||||||||||||||||||||
Cost of goods sold | 8,352 | 8,217 | 135 | 2 | % | 17,418 | 17,407 | 11 | — | % | ||||||||||||||||||||
149,245 | 149,432 | (187 | ) | — | % | 297,853 | 298,119 | (266 | ) | — | % |
(1) | Excludes depreciation and amortization of $6,985, $6,005, $13,818, and $11,729, respectively. |
(in thousands, except percentages) | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||||
2016 | 2015 | Dollar Change | Percent Change | 2016 | 2015 | Dollar Change | Percent Change | |||||||||||||||||||||||
Sales and marketing | $ | 83,344 | $ | 84,385 | $ | (1,041 | ) | (1 | )% | $ | 162,945 | $ | 169,949 | $ | (7,004 | ) | (4 | )% |
(in thousands, except percentages) | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||||
2016 | 2015 | Dollar Change | Percent Change | 2016 | 2015 | Dollar Change | Percent Change | |||||||||||||||||||||||
Engineering and development | $ | 7,243 | $ | 6,864 | $ | 379 | 6 | % | $ | 14,077 | $ | 13,469 | $ | 608 | 5 | % |
(in thousands, except percentages) | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||||
2016 | 2015 | Dollar Change | Percent Change | 2016 | 2015 | Dollar Change | Percent Change | |||||||||||||||||||||||
General and administrative | $ | 35,053 | $ | 27,162 | $ | 7,891 | 29 | % | $ | 61,723 | $ | 50,396 | $ | 11,327 | 22 | % |
(in thousands, except percentages) | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||||
2016 | 2015 | Dollar Change | Percent Change | 2016 | 2015 | Dollar Change | Percent Change | |||||||||||||||||||||||
Depreciation and amortization | $ | 18,218 | $ | 14,463 | $ | 3,755 | 26 | % | $ | 35,197 | $ | 28,408 | $ | 6,789 | 24 | % |
(in thousands, except percentages) | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||||
2016 | 2015 | Dollar Change | Percent Change | 2016 | 2015 | Dollar Change | Percent Change | |||||||||||||||||||||||
Interest income | $ | 25 | $ | 21 | $ | 4 | 19 | % | $ | 46 | $ | 41 | $ | 5 | 12 | % | ||||||||||||||
Interest expense | (3,057 | ) | (2,088 | ) | (969 | ) | (46 | )% | (5,503 | ) | (4,023 | ) | (1,480 | ) | (37 | )% | ||||||||||||||
Other income (expense), net | 104 | 32 | 72 | 225 | % | 258 | (545 | ) | 803 | 147 | % | |||||||||||||||||||
$ | (2,928 | ) | $ | (2,035 | ) | $ | (893 | ) | $ | (5,199 | ) | $ | (4,527 | ) | $ | (672 | ) |
(in thousands, except percentages) | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||||
2016 | 2015 | Dollar Change | Percent Change | 2016 | 2015 | Dollar Change | Percent Change | |||||||||||||||||||||||
Income tax expense | $ | (1,562 | ) | $ | (6,176 | ) | $ | 4,614 | 75 | % | $ | (9,884 | ) | $ | (13,174 | ) | $ | 3,290 | 25 | % | ||||||||||
Effective tax rate | 63.5 | % | 42.5 | % | 52.8 | % | 42.0 | % |
(in thousands, except percentages) | Three Months Ended | Six Months Ended | ||||||||||||||||||||||||||||
June 30, | June 30, | |||||||||||||||||||||||||||||
2016 | 2015 | Dollar Change | Percent Change | 2016 | 2015 | Dollar Change | Percent Change | |||||||||||||||||||||||
Loss from discontinued operations | $ | — | $ | — | $ | — | — | % | $ | — | $ | (1,615 | ) | $ | 1,615 | 100 | % | |||||||||||||
Loss on disposal, net of taxes | $ | — | $ | — | $ | — | — | % | $ | — | $ | (824 | ) | $ | 824 | 100 | % | |||||||||||||
Discontinued operations | $ | — | $ | — | $ | — | $ | — | $ | (2,439 | ) | $ | 2,439 | |||||||||||||||||
Loss from discontinued operations attributable to noncontrolling interest | $ | — | $ | — | $ | — | — | % | $ | — | $ | 59 | $ | (59 | ) | (100 | )% | |||||||||||||
Loss from discontinued operations attributable to Vonage | $ | — | $ | — | $ | — | — | % | $ | — | $ | (2,380 | ) | $ | 2,380 | 100 | % |
Six Months Ended | |||||||
June 30, | |||||||
2016 | 2015 | ||||||
(in thousands) | |||||||
Net cash provided by operating activities | $ | 38,561 | $ | 45,961 | |||
Net cash used in investing activities | (182,146 | ) | (37,135 | ) | |||
Net cash (used in) provided by financing activities | 110,289 | (1,099 | ) |
• | LIBOR (applicable to one-, two-, three-, six-, or twelve-month periods) plus an applicable margin equal to 2.50% if our consolidated leverage ratio is less than 0.75 to 1.00, 2.75% if our consolidated leverage ratio is greater than or equal to 0.75 to 1.00 and less than 1.50 to 1.00, 3.00% if our consolidated leverage ratio is greater than or equal to 1.50 to 1.00 and less than 2.5 to 1.00, and 3.25% if our consolidated leverage ratio is greater than or equal to 2.50 to 1.00, payable on the last day of each relevant interest period or, if the interest period is longer than three months, each day that is three months after the first day of the interest period, or |
• | the base rate determined by reference to the highest of (a) the prime rate of JPMorgan Chase Bank, N.A., (b) the federal funds effective rate from time to time plus 0.50%, and (c) the adjusted LIBO rate applicable to one month interest periods plus 1.00%, plus an applicable margin equal to 1.50% if our consolidated leverage ratio is less than 0.75 to 1.00, 1.75% if our consolidated leverage ratio is greater than or equal to 0.75 to 1.00 and less than 1.50 to 1.00, 2.00% if our consolidated leverage ratio is greater than or equal to 1.50 to 1.00 and less than 2.50 to 1.00, and 2.25% if our consolidated leverage ratio is greater than or equal to 2.5 to 1.00, payable on the last business day of each March, June, September, and December and the maturity date of the 2016 Credit Facility. |
• | 100% of the net cash proceeds from any non-ordinary course sale or other disposition of our property and assets for consideration in excess of a certain amount subject to customary reinvestment provisions and certain other exceptions and |
• | 100% of the net cash proceeds received in connection with other non-ordinary course transactions, including insurance proceeds not otherwise applied to the relevant insurance loss. |
• | a consolidated leverage ratio of no greater than 3.25 to 1.00 as of the end of the fiscal quarter of Holdings ending June 30, 2016 and for each of the three consecutive fiscal quarters ending immediately thereafter; and a consolidated leverage ratio of no less than 2.75 to 1.00 as of the end of any fiscal quarter of Holdings, commencing with the fiscal quarter ending June 30, 2017, with a limited step-up to 3.25 to 1.00 for a period of four consecutive quarters, in connection with an acquisition; |
• | a consolidated fixed coverage charge ratio of no less than 1.75 to 1.00 subject to adjustment to exclude up to $80,000 million in specified restricted payments; |
• | minimum cash of $25,000 including the unused portion of the revolving credit facility; and |
• | maximum capital expenditures not to exceed $55,000 during any fiscal year, provided that the unused amount of any permitted capital expenditures in any fiscal year may be carried forward to the next following fiscal year. |
• | LIBOR (applicable to one-, two-, three-, six-, or twelve-month periods) plus an applicable margin equal to 2.50% if our consolidated leverage ratio is less than 0.75 to 1.00, 2.75% if our consolidated leverage ratio is greater than or equal to 0.75 to 1.00 and less than 1.50 to 1.00, and 3.00% if our consolidated leverage ratio is greater than or equal to 1.50 to 1.00, payable on the last day of each relevant interest period or, if the interest period is longer than three months, each day that is three months after the first day of the interest period, or |
• | the base rate determined by reference to the highest of (a) the prime rate of JPMorgan Chase Bank, N.A., (b) the federal funds effective rate from time to time plus 0.50%, and (c) the adjusted LIBO rate applicable to one month interest periods plus 1.00%, plus an applicable margin equal to 1.50% if our consolidated leverage ratio is less than 0.75 to 1.00, 1.75% if our consolidated leverage ratio is greater than or equal to 0.75 to 1.00 and less than 1.50 to 1.00, and 2.00% if our consolidated leverage ratio is greater than or equal to 1.50 to 1.00, payable on the last business day of each March, June, September, and December and the maturity date of the 2015 Credit Facility. |
• | 100% of the net cash proceeds from any non-ordinary course sale or other disposition of our property and assets for consideration in excess of a certain amount subject to customary reinvestment provisions and certain other exceptions and |
• | 100% of the net cash proceeds received in connection with other non-ordinary course transactions, including insurance proceeds not otherwise applied to the relevant insurance loss. |
• | a consolidated leverage ratio of no greater than 2.25 to 1.00, with a limited step-up to 2.75 to 1.00 for a period of four consecutive quarters, in connection with an acquisition made during the first two years of the 2015 Credit Facility; |
• | a consolidated fixed coverage charge ratio of no less than 1.75 to 1.00 subject to adjustment to exclude up to $80,000 million in specified restricted payments; |
• | minimum cash of $25,000 including the unused portion of the revolving credit facility; and |
• | maximum capital expenditures not to exceed $55,000 during any fiscal year, provided that the unused amount of any permitted capital expenditures in any fiscal year may be carried forward to the next following fiscal year. |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
• | LIBOR (applicable to one-, two-, three-, six-, or twelve-month periods) plus an applicable margin equal to 2.50% if our consolidated leverage ratio is less than 0.75 to 1.00, 2.75% if our consolidated leverage ratio is greater than or equal to 0.75 to 1.00 and less than 1.50 to 1.00, 3.00% if our consolidated leverage ratio is greater than or equal to 1.50 to 1.00 and less than 2.5 to 1.00, and 3.25% if our consolidated leverage ratio is greater than or equal to 2.50 to 1.00, payable on the last day of each relevant interest period or, if the interest period is longer than three months, each day that is three months after the first day of the interest period, or |
• | the base rate determined by reference to the highest of (a) the prime rate of JPMorgan Chase Bank, N.A., (b) the federal funds effective rate from time to time plus 0.50%, and (c) the adjusted LIBO rate applicable to one month interest periods plus 1.00%, plus an applicable margin equal to 1.50% if our consolidated leverage ratio is less than |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
• | traditional telephone service providers such as AT&T, Verizon Communications, CenturyLink, Sprint, T-Mobile, and Verizon Wireless; |
• | cable companies such as Cablevision, Charter Communications, Comcast Corporation, Cox Communications, and Time Warner Cable; and |
• | software as a service (SaaS) companies and other alternative communication providers, such as Twilio, EvolveIP, Jive, Mitel, RingCentral, ShoretelSky, Thinking Phone, West UC, 8x8 and other providers of cloud communications services. |
> | result in the loss of a substantial number of existing customers or prohibit the acquisition of new customers; |
> | cause us to accelerate expenditures to preserve existing revenues; |
> | cause existing or new vendors to require prepayments or letters of credit; |
> | cause our credit card processors to demand reserves or letters of credit or make holdbacks; |
> | result in substantial employee layoffs; |
> | materially and adversely affect our brand in the marketplace and cause a substantial loss of goodwill; |
> | cause our stock price to decline significantly; |
> | materially and adversely affect our liquidity, including our ability to pay debts and other obligations as they become due; |
> | cause us to change our business methods or services; |
> | require us to cease certain business operations or offering certain products and services; and |
> | lead to our bankruptcy or liquidation. |
> | Requirements to provide E911 service; |
> | Communications Assistance for Law Enforcement Act (“CALEA”) obligations; |
> | Obligation to support Universal Service; |
> | Customer Proprietary Network Information (“CPNI”) requirements; |
> | Disability access obligations; |
> | Local Number Portability requirements; |
> | Service discontinuance notification obligations; |
> | Outage reporting requirements; and |
> | Rural call completion reporting and rules related to ring signal integrity. |
> | Payment of state and local E911 fees; and |
> | State Universal Service support obligations. |
> | Requirement to provide 911 service; and |
> | Local Number Portability requirements. |
> | Requirement to provide 999/112 service; and |
> | Number Portability requirements. |
> | Both our E-911 and emergency calling services are different, in significant respects, from the 911 service associated with traditional wireline and wireless telephone providers and, in certain cases, with other VoIP providers. |
> | In the event of a power loss or Internet access interruption experienced by a customer, our service is interrupted. Unlike some of our competitors, we have not installed batteries at customer premises to provide emergency power for our customers’ equipment if they lose power, although we do have backup power systems for our network equipment and service platform. |
> | Our customers may experience lower call quality than they are used to from traditional wireline telephone companies, including static, echoes, and delays in transmissions. |
> | Our customers may experience higher dropped-call rates than they are used to from traditional wireline telephone companies. |
> | Customers who obtain new phone numbers from us do not appear in the phone book and their phone numbers are not available through directory assistance services offered by traditional telephone companies. |
> | Our customers cannot accept collect calls. |
> | Our customers cannot call premium-rate telephone numbers such as 1-900 numbers and 976 numbers. |
> | consolidate or merge; |
> | create liens; |
> | incur additional indebtedness; |
> | dispose of assets; |
> | consummate acquisitions; |
> | make investments; or |
> | pay dividends and other distributions. |
> | changes in our earnings or variations in operating results; |
> | any shortfall in revenue or increase in losses from levels expected by securities analysts; |
> | judgments in litigation; |
> | operating performance of companies comparable to us; |
> | general economic trends and other external factors; and |
> | market conditions and competitive pressures that prevent us from executing on our future growth initiatives. |
> | permit our board of directors to issue additional shares of common stock and preferred stock and to establish the number of shares, series designation, voting powers (if any), preferences, other special rights, qualifications, limitations or restrictions of any series of preferred stock; |
> | limit the ability of stockholders to amend our restated certificate of incorporation and second amended and restated bylaws, including supermajority requirements; |
> | allow only our board of directors, Chairman of the board of directors or Chief Executive Officer to call special meetings of our stockholders; |
> | eliminate the ability of stockholders to act by written consent; |
> | require advance notice for stockholder proposals and director nominations; |
> | limit the removal of directors and the filling of director vacancies; and |
> | establish a classified board of directors with staggered three-year terms. |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Period | (a) Total Number of Shares Purchased | (b) Average Price Paid per Share | (c) Total Number of Shares Purchased as Part of Publicly Announced Plans or Programs | (d) Approximate Dollar Value of Shares that May Yet be Purchased under the Plans or Program | |||||||||
April 1, 2016 - April 30, 2016 | 630 | $ | 4.63 | 630 | $ | 73,881 | |||||||
May 1, 2016 - May 31, 2016 | 4,827 | $ | 4.23 | 4,827 | $ | 53,471 | |||||||
June 1, 2016 - June 30, 2016 | 290 | $ | 4.92 | 290 | $ | 52,043 | |||||||
5,747 | 5,747 |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Mine Safety Disclosures |
Item 5. | Other Information |
Item 6. | Exhibits |
2.1 | Agreement and Plan of Merger, dated May 5, 2016, by and among Vonage, Neptune Acquisition Corp., Nexmo and the Representative (incorporated by reference to the Current Report on Form 8-K filed by Vonage with the Securities and Exchange Commission on May 5, 2016). (2) | ||
2.2 | Amendment No. 1 to Agreement and Plan of Merger, dated June 2, 2016, by and among Vonage, Neptune Acquisition Corp., Nexmo and the Representative (3) | ||
10.1 | Amendment No. 1 to Amended and Restated Credit Agreement, dated June 3, 2016, by and among Vonage America Inc., a Delaware corporation, Holdings, Citizens Bank, N.A., Fifth Third Bank, MUFG Union Bank, N.A., Silicon Valley Bank, SunTrust Bank, Keybank National Association, Santander Bank, N.A., Capital One National Association, First Niagara Bank, N.A., and JPMorgan Chase Bank, N.A., as Administrative Agent (4) | ||
10.2 | Nexmo Inc. 2011 Stock Plan (5) | ||
31.1 | Certification of the Company’s Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1) | ||
31.2 | Certification of the Company’s Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1) | ||
32.1 | Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1) | ||
101 | The following financial statements from Vonage Holdings Corp.’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2016, filed with the Securities and Exchange Commission on August 2, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; (v) the Consolidated Statements of Stockholders’ Deficit; and (vi) the Notes to Consolidated Financial Statements. |
VONAGE HOLDINGS CORP. | |||||
Dated: | August 3, 2016 | By: | /s/ David T. Pearson | ||
David T. Pearson Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer and Duly Authorized Officer) |
2.1 | Agreement and Plan of Merger, dated May 5, 2016, by and among Vonage, Neptune Acquisition Corp., Nexmo and the Representative (incorporated by reference to the Current Report on Form 8-K filed by Vonage with the Securities and Exchange Commission on May 5, 2016). (2) | ||
2.2 | Amendment No. 1 to Agreement and Plan of Merger, dated June 2, 2016, by and among Vonage, Neptune Acquisition Corp., Nexmo and the Representative (3) | ||
10.1 | Amendment No. 1 to Amended and Restated Credit Agreement, dated June 3, 2016, by and among Vonage America Inc., a Delaware corporation, Holdings, Citizens Bank, N.A., Fifth Third Bank, MUFG Union Bank, N.A., Silicon Valley Bank, SunTrust Bank, Keybank National Association, Santander Bank, N.A., Capital One National Association, First Niagara Bank, N.A., and JPMorgan Chase Bank, N.A., as Administrative Agent (4) | ||
10.2 | Nexmo Inc. 2011 Stock Plan (5) | ||
31.1 | Certification of the Company’s Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1) | ||
31.2 | Certification of the Company’s Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1) | ||
32.1 | Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1) | ||
101 | The following financial statements from Vonage Holdings Corp.’s Quarterly Report on Form 10-Q for the three and six months ended June 30, 2016, filed with the Securities and Exchange Commission on August 2, 2016, formatted in XBRL (eXtensible Business Reporting Language): (i) the Consolidated Balance Sheets; (ii) the Consolidated Statements of Operations; (iii) the Consolidated Statements of Comprehensive Income; (iv) the Consolidated Statements of Cash Flows; (v) the Consolidated Statements of Stockholders’ Deficit; and (vi) the Notes to Consolidated Financial Statements. |
Date: | August 3, 2016 | /s/ Alan Masarek | |
Alan Masarek | |||
Chief Executive Officer |
Date: | August 3, 2016 | /s/ David T. Pearson |
David T. Pearson | ||
Chief Financial Officer and Treasurer |
Date: | August 3, 2016 | /s/ Alan Masarek |
Alan Masarek | ||
Chief Executive Officer |
Date: | August 3, 2016 | /s/ David T. Pearson |
David T. Pearson | ||
Chief Financial Officer and Treasurer |
Document And Entity Information - shares |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jul. 31, 2016 |
|
Document And Entity Information [Abstract] | ||
Document Type | 10-Q | |
Amendment Flag | false | |
Document Period End Date | Jun. 30, 2016 | |
Entity Registrant Name | VONAGE HOLDINGS CORP | |
Entity Central Index Key | 0001272830 | |
Current Fiscal Year End Date | --12-31 | |
Document Fiscal Year Focus | 2016 | |
Document Fiscal Period Focus | Q2 | |
Entity Filer Category | Large Accelerated Filer | |
Entity Common Stock, Shares Outstanding | 216,428,636 |
Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 3,620 | $ 1,091 |
Inventory, allowance | $ 406 | $ 686 |
Common stock, par value (USD per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 596,950,000 | 596,950,000 |
Common stock, shares issued | 279,227,000 | 268,947,000 |
Common stock, shares outstanding | 216,311,000 | 214,280,000 |
Treasury stock, shares | 62,916,000 | 54,667,000 |
Consolidated Statements of Income (Parenthetical) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Income Statement [Abstract] | ||||
Depreciation and Amortization | $ 6,985 | $ 6,005 | $ 13,818 | $ 11,729 |
Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Net income | $ 897 | $ 8,347 | $ 8,828 | $ 15,757 |
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | (1,713) | |||
Unrealized loss on available-for-sale securities | 4 | (2) | 26 | (6) |
Total other comprehensive income (loss) | (1,687) | (1) | (1,687) | 1,281 |
Comprehensive income | (790) | 8,346 | 7,141 | 17,038 |
Comprehensive loss attributable to noncontrolling interest: | ||||
Total comprehensive loss attributable to non-controlling interest | 0 | 0 | 0 | 59 |
Comprehensive income attributable to Vonage | (790) | 8,346 | 7,141 | 17,097 |
Continuing Operations | ||||
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | (1,691) | 1 | (1,713) | 313 |
Discontinued operations | ||||
Other comprehensive income (loss): | ||||
Foreign currency translation adjustment | $ 0 | $ 0 | $ 0 | $ 974 |
Consolidated Statement Of Stockholders' Equity - 6 months ended Jun. 30, 2016 - USD ($) $ in Thousands |
Total |
Common Stock |
Additional Paid-in Capital |
Accumulated Deficit |
Treasury Stock |
Accumulated Other Comprehensive Income (Loss) |
---|---|---|---|---|---|---|
Balance at Dec. 31, 2015 | $ 388,741 | $ 270 | $ 1,224,947 | $ (655,020) | $ (179,779) | $ (1,677) |
Increase (Decrease) in Stockholders' Equity [Roll Forward] | ||||||
Stock option exercises | 3,023 | 4 | 3,019 | |||
Share-based expense | 16,670 | 16,670 | ||||
Share-based award activity | (3,966) | (3,966) | ||||
Common stock repurchases | (32,902) | (32,902) | ||||
Acquisition of business | 36,369 | 7 | 36,362 | |||
Foreign currency translation adjustment | (1,713) | (1,713) | ||||
Unrealized loss on available-for-sale securities | 26 | 26 | ||||
Net income | 8,828 | 8,828 | ||||
Balance at Jun. 30, 2016 | $ 415,076 | $ 281 | $ 1,280,998 | $ (646,192) | $ (216,647) | $ (3,364) |
Basis of Presentation and Significant Accounting Policies |
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Basis of Presentation and Significant Accounting Policies | Basis of Presentation and Significant Accounting Policies Nature of Operations Vonage Holdings Corp. (“Vonage”, “Company”, “we”, “our”, “us”) is incorporated as a Delaware corporation. We are a leading provider of cloud communications services for businesses and consumers. We transform the way people work and businesses operate through a portfolio of 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. We also provide a robust suite of feature-rich residential communication solutions. Customers in the United States represented 93% of our combined subscriber lines and seats at June 30, 2016, with the balance in Canada and the United Kingdom. Unaudited Interim Financial Information The accompanying unaudited interim consolidated financial statements and information have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these financial statements contain all normal and recurring adjustments considered necessary to present fairly the financial position, results of operations, cash flows, and statement of stockholders’ equity for the periods presented. The results for the three and six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the full year. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on February 12, 2016. Significant Accounting Policies Principles of Consolidation The consolidated financial statements include the accounts of Vonage and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. We also consolidate a majority-owned entity in Brazil where we had the ability to exercise controlling influence. The ownership interest of the noncontrolling party is presented as noncontrolling interest. On March 31, 2015, the Company completed its previously announced exit from the Brazilian market for consumer telephony services and the associated wind down of its joint venture operations in the country. The results of Brazilian operations are presented as discontinued operations for all periods presented. The results of companies acquired or disposed of are included in the consolidated financial statements from the effective date of the acquisition or up to the date of disposal. Use of Estimates Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including the following:
We base our estimates on historical experience, available market information, appropriate valuation methodologies, and on various other assumptions that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Revenue Recognition Operating revenues consist of services revenue and customer equipment (which enables our services) and shipping revenue. The point in time at which revenues are recognized is determined in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, Revenue Recognition, and Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition. At the time a customer signs up for our services, there are the following deliverables:
The equipment is generally provided free of charge to our customers and in most instances there are no fees collected at sign-up. We record the fees collected for shipping the equipment to the customer, if any, as shipping and handling revenue at the time of shipment. Services Revenue Substantially all of our revenues are services revenues, which are derived primarily from monthly subscription fees that customers are charged under our service plans. We also derive services revenues from per minute fees for international calls if not covered under a plan, including calls made via applications for mobile devices and other stand-alone products, and for any calling minutes in excess of a customer’s monthly plan limits. Monthly subscription fees are automatically charged to customers’ credit cards, debit cards or electronic check payments ("ECP"), in advance and are recognized over the following month when services are provided. Revenues generated from international calls and from customers exceeding allocated call minutes under limited minute plans are recognized as services are provided, that is, as minutes are used, and are billed to a customer's credit cards, debit cards or ECP in arrears. As a result of multiple billing cycles each month, we estimate the amount of revenues earned from international calls and from customers exceeding allocated call minutes under limited minute plans but not billed from the end of each billing cycle to the end of each reporting period and record these amounts as accounts receivable. These estimates are based primarily upon historical minutes and have been consistent with our actual results. We also provide rebates to customers who purchase their customer equipment from retailers and satisfy minimum service period requirements. These rebates in excess of activation fees are recorded as a reduction of revenues over the service period based upon the estimated number of customers that will ultimately earn and claim the rebates. In the United States, we charge regulatory, compliance, E-911, and intellectual property-related fees on a monthly basis to defray costs, and to cover taxes that we are charged by the suppliers of telecommunications services. In addition, we charge customers Federal Universal Service Fund (“USF”) fees. We recognize revenue on a gross basis for USF and related fees. We record these fees as revenue when billed. All other taxes are recorded on a net basis. Customer Equipment and Shipping Revenue Customer equipment and shipping revenues consist of revenues from sales of customer equipment to wholesalers or directly to customers for replacement devices, or for upgrading their device at the time of customer sign-up for which we charge an additional fee. In addition, customer equipment and shipping revenues include revenues from the sale of VoIP telephones in order to access our small and medium business services. Customer equipment and shipping revenues also include the fees that customers are charged for shipping their customer equipment to them. Customer equipment and shipping revenues include sales to our retailers, who subsequently resell this customer equipment to customers. Revenues are reduced for payments to retailers and rebates to customers, who purchased their customer equipment through these retailers, to the extent of customer equipment and shipping revenues. Cost of Service Cost of service consists of costs that we pay to third parties in order to provide services. These costs include access and interconnection charges that we pay to other companies to terminate domestic and international phone calls on the public switched telephone network. In addition, these costs include the cost to lease phone numbers, to co-locate in other companies’ facilities, to provide enhanced emergency dialing capabilities to transmit 911 calls, and to provide local number portability. These costs also include taxes that we pay on telecommunications services from our suppliers or are imposed by government agencies such as federal universal service fund (“USF”) contributions and royalties for use of third parties’ intellectual property. In addition, these costs include certain personnel and related costs for network operations and technical support that are attributable to revenue generating activities. Cost of Goods Sold Cost of goods sold consists primarily of costs that we incur when a customer signs up for our service. These costs include the cost of customer equipment for customers who subscribe through the direct sales channel in excess of activation fees. In addition, these costs include the amortization of deferred customer equipment, the cost of shipping and handling for customer equipment, the installation manual that accompanies the customer equipment, and the cost of certain promotions. Sales and Marketing Expenses Sales and marketing expenses consist primarily of personnel and related costs for employees and contractors directly associated with our sales and marketing activities, internet advertising fees, radio and billboard advertising, public relations, commissions paid to employees, resellers and other third parties, trade shows, marketing and promotional activities, customer support, credit card fees, collections, and systems and information technology support. Engineering and Development Expenses Engineering and development expenses primarily include personnel and related costs for developers responsible for new products, and software engineers maintaining and enhancing existing products. These costs have been reclassified from selling, general and administrative expenses. Research and development costs related to new product development included in engineering and development were $5,402 and $4,644 for the three months ended June 30, 2016 and 2015 and $10,310 and $8,699 for the six months ended June 30, 2016 and 2015, respectively. Costs for research, including predevelopment efforts prior to establishing technological feasibility of software expected to be marketed, are expensed as incurred. Development costs are capitalized when technological feasibility has been established and anticipated future revenues support the recoverability of the capitalized amounts. Capitalization stops when the product is available for general release to customers. Due to the short time period between achieving technological feasibility and product release and the insignificant amount of costs incurred during such periods, we have not capitalized any software development, and have expensed these costs as incurred. General and Administrative Expenses General and administrative expenses primarily relate to our executive, finance, human resources, legal, and information technology organizations. General and administrative expenses primarily consist of personnel costs, stock compensation, board of directors' costs, professional fees for legal, accounting, tax, compliance and information systems, travel, recruiting expense and, rent and related expenses. Cash, Cash Equivalents and Marketable Securities We maintain cash with several investment grade financial institutions. Highly liquid investments, which are readily convertible into cash, with original maturities of three months or less, are recorded as cash equivalents. Management determines the appropriate classification of our investments in debt and marketable equity securities at the time of purchase and reevaluates such designation at each balance sheet date. Our debt and marketable equity securities have been classified and accounted for as available for sale. We may or may not hold securities with stated maturities until maturity. In response to changes in the availability of and the yield on alternative investments as well as liquidity requirements, we may sell these securities prior to their stated maturities. These securities are carried at fair value, with the unrealized gains and losses reported as a component of other comprehensive income (loss). Any realized gains or losses on the sale of marketable securities are determined on a specific identification method, and such gains and losses are reflected as a component of other income or expense. Certain Risks and Concentrations Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents, marketable securities, and accounts receivable. They are subject to fluctuations in both market value and yield based upon changes in market conditions, including interest rates, liquidity, general economic conditions, and conditions specific to the issuers. Accounts receivable are typically unsecured and are derived from revenues earned from customers primarily located in the United States. A portion of our accounts receivable represents the timing difference between when a customer’s credit card is billed and the subsequent settlement of that transaction with our credit card processors. This timing difference is generally three days for substantially all of our credit card receivables. We have never experienced any accounts receivable write-offs due to this timing difference. In addition, we collect subscription fees in advance, minimizing our accounts receivable and bad debt exposure. If a customer’s credit card, debit card or ECP is declined, we generally suspend international calling capabilities as well as their ability to incur domestic usage charges in excess of their plan minutes. Generally, if the customer’s credit card, debit card or ECP could not be successfully processed during three billing cycles (i.e., the current and two subsequent monthly billing cycles), we terminate the account. In addition, we automatically charge any per minute fees to our customers’ credit card, debit card or ECP monthly in arrears. To further mitigate our bad debt exposure, a customer’s credit card, debit card or ECP will be charged in advance of their monthly billing if their international calling or overage charges exceed a certain dollar threshold. Inventory Inventory consists of the cost of customer equipment and is stated at the lower of cost or market, with cost determined using the average cost method. We provide an inventory allowance for customer equipment that has been returned by customers but may not be able to be reissued to new customers or returned to the manufacturer for credit. Property and Equipment Property and equipment includes acquired assets and those accounted for under capital leases and consist principally of network equipment and computer hardware, software, furniture, and leasehold improvements. Company-owned equipment in use at customer premises is also included in property and equipment. In addition, the lease of our corporate headquarters has been accounted for as a capital lease and is included in property and equipment. Network equipment and computer hardware and furniture are stated at cost with depreciation provided using the straight-line method over the estimated useful lives of the related assets, which range from three to five years. Leasehold improvements are amortized over their estimated useful life of the related assets or the life of the lease, whichever is shorter. The cost of renewals and substantial improvements is capitalized while the cost of maintenance and repairs is charged to operating expenses as incurred. Company-owned customer premises equipment is depreciated on a straight-line basis over three years. Our network equipment and computer hardware, which consists of routers, gateways, and servers that enable our telephony services, is subject to technological risks and rapid market changes due to new products and services and changing customer demand. These changes may result in future adjustments to the estimated useful lives or the carrying value of these assets, or both. Software Costs We capitalize certain costs, such as purchased software and internally developed software that we use for customer acquisition and customer care automation tools, in accordance with FASB ASC 350-40, “Internal-Use Software”. Computer software is stated at cost less accumulated amortization and the estimated useful life is two to five years. Goodwill Goodwill acquired in the acquisition of a business is accounted for based upon the excess fair value of consideration transferred over the fair value of net assets acquired in the business combination. Goodwill is tested for impairment on an annual basis on October 1st and, when specific circumstances dictate, between annual tests. When impaired, the carrying value of goodwill is written down to fair value. The goodwill impairment test involves evaluating qualitative information to determine if it is more than 50% likely that the fair value of a reporting unit is less than its carrying value. If such a determination is made, then the traditional two-step goodwill impairment test described below must be applied. The first step, identifying a potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying value of the reporting unit exceeds its fair value, the second step would need to be conducted; otherwise, no further steps are necessary as no potential impairment exists. The second step, measuring the impairment loss, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. Any excess of the reporting unit goodwill carrying value over the respective implied fair value is recognized as an impairment loss. There was no impairment of goodwill for the three and six months ended June 30, 2016. Intangible Assets Intangible assets acquired in the settlement of litigation or by direct purchase are accounted for based upon the fair value of assets received. Purchased-intangible assets are accounted for based upon the fair value of assets received. Purchased-intangible assets are amortized on a straight-line or accelerated basis over the periods of benefit, ranging from two to ten years. We perform a review of purchased-intangible assets whenever events or changes in circumstances indicate that the useful life is shorter than we had originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, we assess the recoverability of purchased-intangible assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful life of the asset is shorter than originally estimated, we accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful life. There was no impairment of purchased-intangible assets identified for the three and six months ended June 30, 2016. Patents and Patent Licenses Patent rights acquired in the settlement of litigation or by direct purchase are accounted for based upon the fair value of assets received. Long-Lived Assets We evaluate impairment losses on long-lived assets used in operations when events and changes in circumstances indicate that the assets might be impaired. If our review indicates that the carrying value of an asset will not be recoverable, based on a comparison of the carrying value of the asset to the undiscounted future cash flows, the impairment will be measured by comparing the carrying value of the asset to its fair value. Fair value will be determined based on quoted market values, discounted cash flows or appraisals. Impairments of property and equipment are recorded in the statement of income as part of depreciation expense. Debt Related Costs Costs incurred in raising debt are deferred and amortized as interest expense using the effective interest method over the life of the debt. A portion of these costs are netted against the underlying notes payable in accordance with ASU 2015-15, "Interest-Imputation of Interest". Noncontrolling Interest and Redeemable Noncontrolling Interest We consolidate a majority-owned entity where we have the ability to exercise controlling influence. The ownership interest of the noncontrolling party is presented as noncontrolling interest in the Consolidated Balance Sheets as Stockholders' Equity. If we are required to repurchase the noncontrolling interest at fair value, subject to adjustment, under a put option or other contractual redemption requirement, we will report the noncontrolling interest as redeemable in the Consolidated Balance Sheets between liabilities and equity. We adjust the redeemable noncontrolling interest to the redemption values on each balance sheet date with changes recognized as an adjustment to retained earnings, or in the absence of retained earnings, as an adjustment to additional paid-in capital when it becomes probable the noncontrolling interest will become redeemable. Derivatives We do not hold or issue derivative instruments for trading purposes. However, in accordance with FASB ASC 815, “Derivatives and Hedging” (“FASB ASC 815”), we review our contractual obligations to determine whether there are terms that possess the characteristics of derivative financial instruments that must be accounted for separately from the financial instrument in which they are embedded. We recognize these features as liabilities in our consolidated balance sheet at fair value each period and recognize any change in the fair value in our statement of operations in the period of change. We estimate the fair value of these liabilities using available market information and appropriate valuation methodologies. Income Taxes We recognize deferred tax assets and liabilities at enacted income tax rates for the temporary differences between the financial reporting bases and the tax bases of our assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. Our net deferred tax assets primarily consist of net operating loss carry forwards (“NOLs”). We are required to record a valuation allowance against our net deferred tax assets if we conclude that it is more likely than not that taxable income generated in the future will be insufficient to utilize the future income tax benefit from our net deferred tax assets (namely, the NOLs) prior to expiration. We periodically review this conclusion, which requires significant management judgment. If we are able to conclude in a future period that a future income tax benefit from our net deferred tax assets has a greater than 50 percent likelihood of being realized, we are required in that period to reduce the related valuation allowance with a corresponding decrease in income tax expense. This would result in a non-cash benefit to our net income in the period of the determination. In the fourth quarter of 2011, we released $325,601 of valuation allowance. We periodically review this conclusion, which requires significant management judgment. In the future, if available evidence changes our conclusion that it is more likely than not that we will utilize our net deferred tax assets prior to their expiration, we will make an adjustment to the related valuation allowance and income tax expense at that time. In subsequent periods, we would expect to recognize income tax expense equal to our pre-tax income multiplied by our effective income tax rate, an expense that was not recognized prior to the reduction of the valuation allowance. Our effective rate may differ from the federal statutory rate due, in part, to our foreign operations and certain discrete period items. The 2016 estimated annual effective tax rate is expected to approximate 44%, but may fluctuate due to the timing of other discrete period transactions. We file income tax returns in the U.S. on a federal basis and in U.S. state and foreign jurisdictions. Our federal tax return remains subject to examination by the Internal Revenue Service from 2012 to present, our New Jersey tax returns remain open from 2011 to present, our Canada tax return remains open from 2011 to present, and other domestic and foreign tax returns remain open for all periods to which those filings relate. Our consolidated corporate income tax return for 2013 has been selected for examination by the Internal Revenue Service. Our Canadian corporate income tax returns for 2012 and 2013 have been selected for examination by the Canada Revenue Agency. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution. We have not had any unrecognized tax benefits. We recognize interest and penalties accrued related to unrecognized tax benefits as components of our income tax provision. We have not had any interest and penalties accrued related to unrecognized tax benefits. Business Combinations We account for business combinations using the acquisition method of accounting. The acquisition method of accounting requires that the purchase price, including the fair value of contingent consideration, of the acquisition be allocated to the assets acquired and liabilities assumed using the fair values determined by management as of the acquisition date. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, the Company’s estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent the Company identifies adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations. We include the results of all acquisitions in our Consolidated Financial Statements from the date of acquisition. Acquisition related transaction costs, such as banking, legal, accounting and other costs incurred in connection with an acquisition, are expensed as incurred in general and administrative expense. Acquisition related integration costs include costs associated with exit or disposal activities, which do not meet the criteria of discontinued operations, including costs for employee, lease, and contract terminations, facility closing or other exit activities. Additionally, these costs include expenses directly related to integrating and reorganizing acquired businesses and include items such as employee retention costs, recruiting costs, certain moving costs, certain duplicative costs during integration and asset impairments. These costs are expensed as incurred in general and administrative expense. Acquisition related consideration accounted for as compensation expense, such as restricted cash, restricted stock and option related costs incurred in connection with an acquisition are included in general and administrative expense. Fair Value of Financial Instruments Effective January 1, 2008, we adopted FASB ASC 820-10-25, “Fair Value Measurements and Disclosures”. This standard establishes a framework for measuring fair value and expands disclosure about fair value measurements. We did not elect fair value accounting for any assets and liabilities allowed by FASB ASC 825, “Financial Instruments”. FASB ASC 820-10 defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820-10 describes the following three levels of inputs that may be used:
Although management believes its valuation methods were appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could have resulted in a different fair value measurement at the reporting date. The following table presents the assets that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of June 30, 2016 and December 31, 2015:
(1) Included in cash and cash equivalents on our consolidated balance sheet. (2) Included in marketable securities on our consolidated balance sheet. Fair Value of Other Financial Instruments The carrying amounts of our financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, approximate fair value because of their short maturities. The carrying amounts of our capital leases approximate fair value of these obligations based upon management’s best estimates of interest rates that would be available for similar debt obligations at June 30, 2016 and December 31, 2015. We believe the fair value of our debt at June 30, 2016 was approximately the same as its carrying amount as market conditions, including available interest rates, credit spread relative to our credit rating, and illiquidity, remain relatively unchanged from the issuance date of our debt on June 3, 2016 for a similar debt instrument. Foreign Currency Generally, the functional currency of our non-United States subsidiaries is the local currency. The financial statements of these subsidiaries are translated to United States dollars using month-end rates of exchange for assets and liabilities, and average rates of exchange for revenues, costs, and expenses. Translation gains and losses are deferred and recorded in accumulated other comprehensive income as a component of stockholders’ equity. Share-Based Compensation We account for share-based compensation in accordance with FASB ASC 718, “Compensation-Stock Compensation”. Under the fair value recognition provisions of this pronouncement, share-based compensation cost is measured at the grant date based on the fair value of the award, reduced as appropriate based on estimated forfeitures, and is recognized as expense over the applicable vesting period of the stock award using the accelerated method. The excess tax benefit associated with stock compensation deductions have not been recorded in additional paid-in capital. When evaluating whether an excess tax benefit has been realized, share based compensation deductions are not considered realized until NOLs are no longer sufficient to offset taxable income. Such excess tax benefits will be recorded when realized. Earnings per Share Net income per share has been computed according to FASB ASC 260, “Earnings per Share”, which requires a dual presentation of basic and diluted earnings per share (“EPS”). Basic EPS represents net income divided by the weighted average number of common shares outstanding during a reporting period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, including stock options and restricted stock units under our 2001 Stock Incentive Plan and 2006 Incentive Plan, were exercised or converted into common stock. The dilutive effect of outstanding stock options and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. In applying the treasury stock method for stock-based compensation arrangements, the assumed proceeds are computed as the sum of the amount the employee must pay upon exercise and the amounts of average unrecognized compensation cost attributed to future services. The following table sets forth the computation for basic and diluted net income per share for the three and six months ended June 30, 2016:
For the three and six months ended June 30, 2016, the following were excluded from the calculation of diluted earnings per common share because of their anti-dilutive effects:
Comprehensive Income (Loss) Comprehensive income consists of net income (loss) and other comprehensive items. Other comprehensive items include foreign currency translation adjustments and unrealized gains (losses) on available for sale securities. Recent Accounting Pronouncements In May 2016, Financial Accounting Standards Board (“FASB”) issued ASU 2016-12, "Revenue from Contract with Customers - Narrow-Scope Improvements and Practical Expedients". In April 2016, FASB issued ASU 2016-10, "Revenue from Contracts with Customers - Identifying Performance Obligations and Licensing". In March 2016, FASB issued ASU 2016-08, "Revenue from Contract with Customers - Principal versus Agent Considerations (Reporting Revenue Gross versus Net)". In August 2015, FASB issued ASU 2015-14 deferring the effective date to annual and interim periods. In May 2014, FASB issued ASU 2014-09, "Revenue from Contracts with Customers". The core principle of these ASUs are that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2016-12 affect only the narrow aspects of the guidance, such as assessing the collectibility criterion and accounting for contracts that do not meet the criterion, presentation of sales and other similar taxes collected from customers, non-cash consideration, and contract modifications at transition. ASU 2016-10 clarifies two aspects of the guidance: identifying performance obligations and the licensing implementation. The intention of the ASU 2016-08 is to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2015-14 defers the effective date to annual and interim periods beginning on or after December 15, 2017, and early adoption will be permitted, but not earlier than the original effective date of annual and interim periods beginning on or after December 15, 2016, for public entities. ASU 2014-09 is a comprehensive new revenue recognition model for revenue from contract with customers. We will adopt these ASUs when effective. We are currently evaluating the impacts of adopting ASU 2016-12, ASU 2016-10, ASU 2016-08, ASU 2015-14, and ASU 2014-09 on our consolidated financial statements and related disclosures. In March 2016, FASB issued Accounting Standards Update ("ASU") 2016-09, "Improvements to Employee Share-Based Payment Accounting". This ASU is issued as part of its Simplification Initiative. The areas for simplification in this ASU involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted for any entity in any interim or annual period. We are currently evaluating the impact of adopting ASU 2016-09 on our consolidated financial statements and related disclosures. In February 2016, FASB issued ASU 2016-02, "Leases". This ASU increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for all entities. We are currently evaluating the impact of adopting ASU 2016-02 on our consolidated financial statements and related disclosures. In January 2016, FASB issued ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities". This ASU provide guidance concerning certain matters involving the recognition, measurement, and disclosure of financial assets and financial liabilities. The guidance does not alter the basic framework for classifying debt instruments held as financial assets. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is not permitted, with some exceptions. The adoption of ASU 2016-01 will not have a material impact on our consolidated financial statements and related disclosures. In November 2015, FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes". This ASU simplifies the presentation of deferred income taxes and requires deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. This ASU may be applied either prospectively or retrospectively to all periods presented. We are currently evaluating the impact of adopting ASU 2015-17 on our consolidated financial statements and related disclosures. In July 2015, FASB issued ASU 2015-11, "Simplifying the Measurement of Inventory". This ASU applies to inventory that is measured using first-in, first-out ("FIFO") or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predicable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, first-out ("LIFO") or the retail inventory. This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption on permitted at the beginning of an interim and annual reporting period. We are currently evaluating the impact of adopting ASU 2015-11 on our consolidated financial statements and related disclosures. |
Supplemental Balance Sheet Account Information |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Balance Sheet Account Information | Supplemental Balance Sheet Account Information Prepaid expenses and other current assets
Property and equipment, net
Customer premise equipment, net
Software, net
Debt related costs, net
Restricted cash
Intangible assets, net
Other assets
Accrued expenses
Accumulated other comprehensive loss
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Supplemental Income Statement Account Information |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental Income Statement Account Information | Supplemental Income Statement Account Information Amounts included in revenues
Amount included in cost of services
Amount included in cost of goods sold
Amount included in sales and marketing
Amounts included in general and administrative expense
Depreciation and amortization expense
Amount included in interest expense
Amount included in other income (expense), net
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Long-Term Note and Revolving Credit Facility |
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Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Long-Term Note and Revolving Credit Facility | Long-Term Note and Revolving Credit Facility A schedule of long-term note and revolving credit facility at June 30, 2016 and December 31, 2015 is as follows:
At June 30, 2016, future payments under term note obligations over each of the next five years and thereafter were as follows:
2016 Financing On June 3, 2016, we entered into Amendment No. 1 to the Amended and Restated Credit Agreement (the “2016 Credit Facility”) consisting of a $125,000 term note and a $325,000 revolving credit facility. The co-borrowers under the 2016 Credit Facility are the Company and Vonage America Inc., the Company’s wholly owned subsidiary. Obligations under the 2016 Credit Facility are guaranteed, fully and unconditionally, by the Company’s other United States material subsidiaries and are secured by substantially all of the assets of each borrower and each guarantor. The lenders under the 2016 Credit Facility are JPMorgan Chase Bank, N.A., Citizens Bank, N.A., Fifth Third Bank, MUFG Union Bank, N.A., Silicon Valley Bank, SunTrust Bank, Keybank National Association, Santander Bank, N.A., Capital One National Association, and First Niagara Bank, N.A. J.P. Morgan Securities LLC and Citizens Bank, N.A. acted as joint lead bookrunners, and J.P. Morgan Securities LLC, Citizens Bank, N.A., Fifth Third Bank, MUFG Union Bank, N.A., Silicon Valley Bank, and SunTrust Robinson Humphrey Inc. acted as joint lead arrangers. Use of Proceeds We used $197,750 of the net available proceeds of the 2016 Credit Facility to retire all of the debt under our 2015 Credit Facility. We used $179,000 from our 2016 Credit Facility in connection with the acquisition of Nexmo on June 3, 2016. Remaining proceeds from the term note and the undrawn revolving credit facility under the 2016 Credit Facility will be used for general corporate purposes. We also incurred fees of $1,316 in connection with the 2016 Credit Facility, of which $395 was allocated to the term note and $921 was allocated to the revolving credit facility. The unamortized fees of $2,740 in connection with the 2015 Credit Facility were allocated as follows: $930 to the term note and $1,810 to the revolving credit facility. In adopting ASU 2015-03, fees allocated to the term note were reported in the balance sheet as a direct deduction from the face amount of the liability and in adopting ASU 2015-15, fees allocated to the revolving credit facility were reported in the balance sheet as an asset. These fees are amortized to interest expenses over the life of the debt using the effective interest method for the term note and straight line method for the revolving credit facility. Repayments We made mandatory repayment of $4,687 under the term note for the six months ended June 30, 2016. In addition, we repaid the $15,000 outstanding under the revolving credit facility for the six months ended June 30, 2016. 2016 Credit Facility Terms The following description summarizes the material terms of the 2016 Credit Facility: The loans under the 2016 Credit Facility mature in June 2020. Principal amounts under the 2016 Credit Facility are repayable in quarterly installments of approximately $4,688 for the term note. The unused portion of our revolving credit facility incurs a 0.45% commitment fee. Such commitment fee will be reduced to 0.40% if our consolidated leverage ratio is greater than or equal to 1.50 to 1.00 and less than 2.50 to 1.00, 0.375% if our consolidated leverage ratio is greater than or equal to 0.75 to 1.00 and less than 1.50 to 1.00, and to 0.35% if our consolidated leverage ratio is less than 0.75 to 1.00. Outstanding amounts under the 2016 Credit Facility, at our option, will bear interest at:
The 2016 Credit Facility provides greater flexibility to us in funding acquisitions and restricted payments, such as stock buybacks, than did the 2015 Credit Facility. We may prepay the 2016 Credit Facility at our option at any time without premium or penalty. The 2016 Credit Facility is subject to mandatory prepayments in amounts equal to:
Subject to certain restrictions and exceptions, the 2016 Credit Facility permits us to obtain one or more incremental term notes and/or revolving credit facilities in an aggregate principal amount of up to $100,000 plus an amount equal to repayments of the term note upon providing documentation reasonably satisfactory to the administrative agent. The 2016 Credit Facility includes customary representations and warranties and affirmative covenants of the borrowers. In addition, the 2016 Credit Facility contains customary negative covenants, including, among other things, restrictions on the ability of us and our subsidiaries to consolidate or merge, create liens, incur additional indebtedness, dispose of assets, consummate acquisitions, make investments, and pay dividends and other distributions. We must also comply with the following financial covenants:
In addition, annual excess cash flow increases permitted capital expenditures. As of June 30, 2016, we were in compliance with all covenants, including financial covenants, for the 2016 Credit Facility. The 2016 Credit Facility contains customary events of default that may permit acceleration of the debt. During the continuance of a payment default, interest will accrue on overdue amounts at a default interest rate of 2% above the interest rate which would otherwise be applicable, in the case of loans, and at a rate equal to the rate applicable to base rate loans plus 2%, in the case of all other amounts. 2015 Financing On July 27, 2015, we entered into a credit agreement (the “2015 Credit Facility”) consisting of a $100,000 term note and a $250,000 revolving credit facility. The co-borrowers under the 2015 Credit Facility were the Company and Vonage America Inc., the Company’s wholly owned subsidiary. Obligations under the 2015 Credit Facility were guaranteed, fully and unconditionally, by the Company’s other United States material subsidiaries and were secured by substantially all of the assets of each borrower and each guarantor. The lenders under the 2015 Credit Facility were JPMorgan Chase Bank, N.A., Citizens Bank, N.A., Fifth Third Bank, MUFG Union Bank, N.A., Silicon Valley Bank, SunTrust Bank, Keybank National Association, Santander Bank, N.A., Capital One National Association, and First Niagara Bank, N.A. JPMorgan Chase Bank, N.A. was a party to the agreement as administrative agent, Citizens Bank, N.A. as syndication agent, and Fifth Third Bank, MUFG Union Bank, N.A., Silicon Valley Bank, and SunTrust Bank as documentation agents. J.P. Morgan Securities LLC and Citizens Bank, N.A. acted as joint lead bookrunners, and J.P. Morgan Securities LLC, Citizens Bank, N.A., Fifth Third Bank, MUFG Union Bank, N.A., Silicon Valley Bank, and SunTrust Robinson Humphrey Inc. acted as joint lead arrangers. Use of Proceeds We used $167,000 of the net available proceeds of the 2015 Credit Facility to retire all of the debt under our 2014 Credit Facility. Remaining proceeds from the term note and the undrawn revolving credit facility under the 2015 Credit Facility were used for general corporate purposes. We also incurred fees of $2,007 in connection with the 2015 Credit Facility, of which $602 was allocated to the term note and $1,405 was allocated to the revolving credit facility. The unamortized fees of $1,628 in connection with the 2014 Credit Facility were allocated as follows: $733 to the term note and $895 to the revolving credit facility. In adopting ASU 2015-03, fees allocated to the term note were reported in the balance sheet as a direct deduction from the face amount of the liability and in adopting ASU ASU 2015-15, fees allocated to the revolving credit facility were reported in the balance sheet as as asset. These fees are amortized to interest expenses over the life of the debt using the effective interest method for the term note and straight line method for the revolving credit facility. We used $82,000 from our 2015 revolving credit facility in connection with the acquisition of iCore on August 31, 2015. Repayments We made mandatory repayment of $3,750 under the term note for the six months ended June 30, 2016 and $7,500 under the term note for the year ended December 31, 2015. In addition, we repaid the $10,000 outstanding under the revolving credit facility for the six months ended June 30, 2016 and $30,000 outstanding under the revolving credit facility for the year ended December 31, 2015. 2015 Credit Facility Terms The following description summarizes the material terms of the 2015 Credit Facility: The loans under the 2015 Credit Facility were to mature in July 2019. Principal amounts under the 2015 Credit Facility were repayable in quarterly installments of $3,750 for the term note. The unused portion of our revolving credit facility incurred a 0.40% commitment fee. Such commitment fee reduced to 0.375% if our consolidated leverage ratio was greater than or equal to 0.75 to 1.00 and less than 1.50 to 1.00 and to 0.35% if our consolidated leverage ratio was less than 0.75 to 1.00. Outstanding amounts under the 2015 Credit Facility, at our option, bore interest at:
The 2015 Credit Facility provided greater flexibility to us in funding acquisitions and restricted payments, such as stock buybacks, than did the 2014 Credit Facility. We were able to prepay the 2015 Credit Facility at our option at any time without premium or penalty, and did so in connection with the 2016 Credit Facility. The 2015 Credit Facility was subject to mandatory prepayments in amounts equal to:
Subject to certain restrictions and exceptions, the 2015 Credit Facility permitted us to obtain one or more incremental term notes and/or revolving credit facilities in an aggregate principal amount of up to $90,000 plus an amount equal to repayments of the term note upon providing documentation reasonably satisfactory to the administrative agent. The 2015 Credit Facility included customary representations and warranties and affirmative covenants of the borrowers. In addition, the 2015 Credit Facility contained customary negative covenants, including, among other things, restrictions on the ability of us and our subsidiaries to consolidate or merge, create liens, incur additional indebtedness, dispose of assets, consummate acquisitions, make investments, and pay dividends and other distributions. We were also required to comply with the following financial covenants:
In addition, annual excess cash flow increased permitted capital expenditures. The 2015 Credit Facility contained customary events of default that permitted acceleration of the debt. During the continuance of a payment default, interest would have accrued on overdue amounts at a default interest rate of 2% above the interest rate which would otherwise be applicable, in the case of loans, and at a rate equal to the rate applicable to base rate loans plus 2%, in the case of all other amounts. 2014 Financing On August 13, 2014, we entered into a credit agreement (the “2014 Credit Facility”) consisting of a $100,000 term note and a $125,000 revolving credit facility. The co-borrowers under the 2014 Credit Facility were us and Vonage America Inc., our wholly owned subsidiary. Obligations under the 2014 Credit Facility were guaranteed, fully and unconditionally, by our other material United States subsidiaries and were secured by substantially all of the assets of each borrower and each guarantor. The lenders under the 2014 Credit Facility were JPMorgan Chase Bank, N.A., Citizens Bank, N.A., Silicon Valley Bank, SunTrust Bank, Fifth Third Bank, Keybank National Association, and MUFG Union Bank, N.A. JPMorgan Chase Bank, N.A. was a party to the agreement as administrative agent, Citizens Bank, N.A. as syndication agent, and Silicon Valley Bank and SunTrust Bank as documentation agents. J.P. Morgan Securities LLC and Citizens Bank, N.A. acted as joint lead bookrunners, and J.P. Morgan Securities LLC, Citizens Bank, N.A., Silicon Valley Bank, and SunTrust Robinson Humphrey Inc. acted as joint lead arrangers. We used $20,000 and $67,000 from our 2014 revolving credit facility in connection with the acquisitions of Simple Signal on April 1, 2015 and Telesphere on December 15, 2014, respectively. Use of Proceeds We used $90,000 of the net available proceeds of the 2014 Credit Facility to retire all of the debt under our 2013 Credit Facility. Remaining proceeds from the term note and the undrawn revolving credit facility under the 2014 Credit Facility was available for general corporate purposes. We also incurred $1,910 of fees in connection with the 2014 Credit Facility, which was amortized, along with the unamortized fees of $668 in connection with the 2013 Credit Facility, to interest expense over the life of the debt using the effective interest method. |
Common Stock |
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Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock | Common Stock Net Operating Loss Rights Agreement On June 7, 2012, we entered into a Tax Benefits Preservation Plan ("Preservation Plan") designed to preserve stockholder value and tax assets. Our ability to use our tax attributes to offset tax on U.S. taxable income would be substantially limited if there were an "ownership change" as defined under Section 382 of the U.S. Internal Revenue Code. In general, an ownership change would occur if one or more "5-percent shareholders," as defined under Section 382, collectively increase their ownership in us by more than 50 percent over a rolling three-year period. In connection with the adoption of the Preservation Plan, our board of directors declared a dividend of one preferred share purchase right for each outstanding share of the Company’s common stock. The preferred share purchase rights were distributed to stockholders of record as of June 18, 2012, as well as to holders of the Company's common stock issued after that date, but will only be activated if certain triggering events under the Preservation Plan occur. Under the Preservation Plan, preferred share purchase rights will work to impose significant dilution upon any person or group which acquires beneficial ownership of 4.9% or more of the outstanding common stock, without the approval of our board of directors, from and after June 7, 2012. Stockholders that own 4.9% or more of the outstanding common stock as of the opening of business on June 7, 2012, will not trigger the preferred share purchase rights so long as they do not (i) acquire additional shares of common stock or (ii) fall under 4.9% ownership of common stock and then re-acquire shares that in the aggregate equal 4.9% or more of the common stock. The Preservation Plan was set to expire no later than the close of business June 7, 2013, unless extended by our board of directors. On June 6, 2013, at the Vonage 2013 annual meeting of stockholders, stockholders ratified the extension of the Preservation Plan through June 7, 2015. On April 2, 2015, after consultation with our advisors, our board of directors determined to extend the Preservation Plan through June 30, 2017, subject to ratification of the extension by stockholders at our 2015 annual meeting of stockholders. On June 3, 2015, at the Vonage 2015 annual meeting of stockholders, stockholders ratified the extension of the Preservation Plan through June 30, 2018. Common Stock Repurchases On July 25, 2012, our board of directors authorized a program to repurchase up to $50,000 of Vonage common stock (the "$50,000 repurchase program") through December 31, 2013. On February 7, 2013, our board of directors discontinued the remainder of the $50,000 repurchase program effective at the close of business on February 12, 2013 with $16,682 of availability remaining, and authorized a new program to repurchase up to $100,000 of Vonage common stock (the "2012 $100,000 repurchase program") by December 31, 2014. As of December 31, 2014, approximately $219 remained of our 2012 $100,000 repurchase program. The repurchase program expired on December 31, 2014. On December 9, 2014, Vonage's Board of Directors authorized a new program for the Company to repurchase up to $100,000 of its outstanding common stock (the "2014 $100,000 repurchase program"). Repurchases under the 2014 $100,000 repurchase program program are expected to be made over a four-year period ending on December 31, 2018. Under the 2014 $100,000 repurchase program, the timing and amount of repurchases will be determined by management based on its evaluation of market conditions, the trading price of the stock and will vary based on available capital resources and other financial and operational performance, market conditions, securities law limitations, and other factors. Repurchases may be made in the open market or through private transactions from time to time. The repurchases will be made using available cash balances. In any period, under each repurchase program, cash used in financing activities related to common stock repurchases may differ from the comparable change in stockholders' equity, reflecting timing differences between the recognition of share repurchase transactions and their settlement for cash. We repurchased the following shares of common stock with cash resources under the 2014 $100,000 repurchase program during the three and three months ended June 30, 2016 and 2015:
(1) including 65 shares, or $321, of common stock repurchases settled in July 2015; excluding commission of $1. As of June 30, 2016, $52,043 remained of our 2014 $100,000 repurchase program. The repurchase program expires on December 31, 2018 but may be suspended or discontinued at any time without notice. In any period under the 2014 $100,000 repurchase program, cash used in financing activities related to common stock repurchases may differ from the comparable change in stockholders' equity, reflecting timing differences between the recognition of share repurchase transactions and their settlement for cash. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies Litigation IP Matters Bear Creek Technologies, Inc. On February 22, 2011, Bear Creek Technologies, Inc. (“Bear Creek”) filed a lawsuit against Vonage Holdings Corp., Vonage America Inc., Vonage Marketing LLC, and Aptela Inc. (the latter two entities being former subsidiaries of Vonage Holdings Corp. now merged into Vonage America Inc. and Vonage Business Inc., respectively) in the United States District Court for the Eastern District of Virginia alleging that Vonage’s and Aptela’s products and services are covered by United States Patent No. 7,889,722, entitled “System for Interconnecting Standard Telephony Communications Equipment to Internet Protocol Networks” (the “'722 Patent”). The suit also named numerous other defendants. On August 17, 2011, the Court dismissed Bear Creek’s case against the Vonage entities and Aptela, and all but one of the other defendants. Later, on August 17, 2011, Bear Creek re-filed its complaint in the United States District Court for the District of Delaware against the same Vonage entities; and re-filed its complaint against Aptela in the United States District Court for the Eastern District of Virginia. On May 2, 2012, the litigations against Vonage and Aptela were consolidated for pretrial proceedings with twelve other actions in the District of Delaware. Vonage filed an answer to Bear Creek’s complaint, including counterclaims of non-infringement and invalidity of the ‘722 patent. Aptela, which filed a motion to dismiss Bear Creek’s complaint on September 27, 2011, has not yet answered, as its motion remains pending. On November 5, 2012, Bear Creek filed an answer to Vonage’s counterclaims. On July 17, 2013, the Court stayed the case pending resolution of the reexamination of the ‘722 patent requested by Cisco Systems, Inc. (“Cisco”), described below. On May 5, 2015, the Court closed the case, with leave to reopen if further attention by the Court is required. A request for reexamination of the validity of the ‘722 Patent was filed on September 12, 2012 by Cisco. Cisco’s request was granted on November 28, 2012. On March 24, 2014, the United States Patent and Trademark Office issued an Action Closing Prosecution, confirming its rejection of all claims of the ‘722 patent. Bear Creek’s November 14, 2014 appeal of that decision to the Patent Trial and Appeal Board was denied on December 29, 2015. On July 25, 2016, Bear Creek filed its opening brief with the United States Court of Appeals for the Federal Circuit, appealing the Patent Trial and Appeal Board’s decision. The brief was rejected for failure to comply with the Federal Circuit’s rules, and the corrected brief is due August 9, 2016. RPost Holdings, Inc. On August 24, 2012, RPost Holdings, Inc., RPost Communications Limited, and RMail Limited (collectively, “RPost”) filed a lawsuit against StrongMail Systems, Inc. (“StrongMail”) in the United States District Court for the Eastern District of Texas alleging that StrongMail’s products and services, including its electronic mail marketing services, are covered by United States Patent Nos. 8,224,913, 8,209,389, 8,161,104, 7,966,372, and 6,182,219. On February 11, 2013, RPost filed an amended complaint, adding 27 new defendants, including Vonage America Inc. RPost’s amended complaint alleges willful infringement of the RPost patents by Vonage and each of the other new defendants because they are customers of StrongMail. StrongMail has agreed to fully defend and indemnify Vonage in this lawsuit. Vonage answered the complaint on May 7, 2013. On September 17, 2015, the Court ordered the consolidation for pre-trial purposes of this case with other cases by RPost. The lead case has been administratively closed and stayed since January 30, 2014 due to multiple pending actions by third parties regarding ownership of the patents at issue. On June 1, 2016, the parties in the consolidated actions filed a joint notice regarding status of the co-pending actions. Plaintiffs requested that the stay be lifted, while defendants maintain that the stay should remain in place. AIP Acquisition LLC. On January 3, 2014, AIP Acquisition LLC (“AIP”), filed a lawsuit against Vonage Holdings Corp., Vonage America, Inc., and Vonage Marketing LLC in the U.S. District Court for the District of Delaware alleging that Vonage’s products and services are covered by United States Patent No. 7,269,247. Vonage filed an answer and counterclaims on February 25, 2014. AIP filed an amended complaint on March 18, 2014, which Vonage answered on April 4, 2014. On April 8, 2014, the Court stayed the case pending final resolution of non-party Level 3’s inter partes review request of United States Patent No. 7,724,879, which is a continuation of the ‘247 patent. On October 8, 2014, the Patent Office issued a Final Written Decision, finding all challenged claims of the ‘879 patent to be invalid. On November 10, 2015, the Federal Circuit rejected AIP’s appeal and affirmed the Patent Office’s rejection of the ‘879 patent. Cisco petitioned for inter partes review of the ‘247 patent on November 25, 2014, which was granted on May 20, 2015. On May 18, 2016, the Patent Office issued a Final Written Decision, finding all challenged claims of the ‘247 patent to be invalid. AIP filed a Notice of Appeal to the Federal Circuit on July 18, 2016. Commercial Litigation Merkin & Smith, et al. On September 27, 2013, Arthur Merkin and James Smith filed a putative class action lawsuit against Vonage America, Inc. in the Superior Court of the State of California, County of Los Angeles, alleging that Vonage violated California’s Unfair Competition Law by charging its customers fictitious 911 taxes and fees. On October 30, 2013, Vonage filed a notice removing the case to the United States District Court for the Central District of California. On November 26, 2013, Vonage filed its Answer to the Complaint. On December 4, 2013, Vonage filed a Motion to Compel Arbitration, which the Court denied on February 4, 2014. On March 5, 2014, Vonage appealed that decision to the United States Court of Appeals for the Ninth Circuit. On March 26, 2014, the district court proceedings were stayed pending the appeal. On February 29, 2016, the Ninth Circuit reversed the district court’s ruling and remanded with instructions to grant the motion to compel arbitration. On March 22, 2016, Merkin and Smith filed a petition for rehearing. On May 4, 2016, the Ninth Circuit withdrew its February 29, 2016 decision and issued a new order reversing the district court’s order and remanded with instructions to compel arbitration. The Ninth Circuit also declared as moot the petition for rehearing. On June 27, 2016, the lower court stayed the case pending arbitration. From time to time, in addition to those identified above, we are subject to legal proceedings, claims, investigations, and proceedings in the ordinary course of business, including claims of alleged infringement of third-party patents and other intellectual property rights, commercial, employment, and other matters. From time to time we receive letters or other communications from third parties inviting us to obtain patent licenses that might be relevant to our business or alleging that our services infringe upon third party patents or other intellectual property. In accordance with generally accepted accounting principles, we make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss or range of loss can be reasonably estimated. These provisions, if any, are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Litigation is inherently unpredictable. We believe that we have valid defenses with respect to the legal matters pending against us and are vigorously defending these matters. Given the uncertainty surrounding litigation and our inability to assess the likelihood of a favorable or unfavorable outcome in the above noted matters and our inability to reasonably estimate the amount of loss or range of loss, it is possible that the resolution of one or more of these matters could have a material adverse effect on our consolidated financial position, cash flows or results of operations. Regulation Telephony services are subject to a broad spectrum of state and federal regulations. Because of the uncertainty over whether Voice over Internet Protocol (“VoIP”) should be treated as a telecommunications or information service, we have been involved in a substantial amount of state and federal regulatory activity. Implementation and interpretation of the existing laws and regulations is ongoing and is subject to litigation by various federal and state agencies and courts. Due to the uncertainty over the regulatory classification of VoIP service, there can be no assurance that we will not be subject to new regulations or existing regulations under new interpretations, and that such change would not introduce material additional costs to our business. Federal - Net Neutrality Clear and enforceable net neutrality rules make it more difficult for broadband Internet service providers to block or discriminate against Vonage service. In addition, explicitly applying net neutrality rules to wireless broadband Internet service providers could create greater opportunities for VoIP applications that run on wireless broadband Internet service. In December 2010, the FCC adopted net neutrality rules that applied strong net neutrality rules to wired broadband Internet service providers and limited rules to wireless broadband Internet service providers. On January 14, 2014, the D.C. Circuit Court of Appeals vacated a significant portion of the 2010 rules. On May 15, 2014, the FCC issued a Notice of Proposed Rulemaking (NPRM) proposing new net neutrality rules. After public response to the NPRM, the FCC adopted new neutrality rules on February 26, 2015. These rules prohibit broadband Internet service providers from: (1) blocking or throttling lawful content applications, or services; (2) imposing paid prioritization arrangements; and (3) unreasonably interfering or unreasonably disadvantaging consumers or edge providers. In addition, broadband Internet service providers are required to make certain disclosures regarding their network management practices, network performance, and commercial terms. These net neutrality rules apply the same requirements to wired and wireless broadband Internet service providers. Several parties have filed appeals which are pending at the D.C. Circuit Court of Appeals. Oral arguments at the D.C. Circuit Court of Appeals were held on December 4, 2015. On June 14, 2016, the D.C. Circuit of Appeals denied the appeals. Several parties filed a petition for rehearing en banc on July 29, 2016. Federal - Lifeline Reform On March 31, 2016, the FCC adopted an order modernizing the Lifeline program. The Lifeline program previously subsidized voice service for low-income customers and is one component of the federal universal service fund. The order refocuses the program to subsidize broadband. Increased adoption of broadband services expands the market for Vonage services. The order will also likely increase the overall size of the federal universal fund and lead to increased USF contribution levels for Vonage services subject to assessment for federal USF. Federal - Rural Call Completion Issues On February 7, 2013, the FCC released a Notice of Proposed Rulemaking (NPRM) on rural call completion issues. The NPRM proposed new detailed reporting requirements to gauge rural call completion performance. Rural carriers have argued that VoIP provider call completion performance to rural areas is generally poor. On October 28, 2013, the FCC adopted an order on rural call completion imposing new reporting obligations and restricting certain call signaling practices. The call signaling rules went into effect on January 31, 2014. We filed for extensions of the rules, which the FCC granted, and as of April 17, 2014, we were compliant with the FCC call signaling rules. The effective date for the reporting requirements was April 1, 2015. We could be subject to an FCC enforcement action in the future in the event the FCC took the position that our rural call completion performance is inadequate or we were not compliant with the FCC’s order. Federal - Numbering Rights On April 18, 2013, the FCC issued a Notice of Proposed Rulemaking (NPRM) that proposed to modify FCC rules to allow VoIP providers to directly access telephone numbers. In addition, the FCC granted a waiver from its existing rules to allow Vonage to conduct a trial of direct access to telephone numbers. The trial would allow the FCC to obtain real-world data on direct access to telephone numbers by VoIP providers to inform consideration of the NPRM. Direct access to telephone numbers would facilitate IP to IP interconnection, which may allow VoIP providers to provide higher quality, lower cost services, promote the deployment of innovative new voice services, and experience reductions in the cost of telephony services. Vonage successfully completed the trial in certain markets and filed the required reports on the trial with the FCC. On January 31, 2014, the FCC Wireline Competition Bureau issued a positive report on the trial, concluding that Vonage's successful trial confirmed the technical feasibility of interconnected VoIP providers obtaining telephone numbers directly from the numbering administrators. On June 18, 2015, the FCC adopted an order that modifies its rules to allow interconnected VoIP providers to directly access telephone numbers. Part of the order required approval from the Office of Management and Budget ("OMB") prior to the rule change becoming effective. On February 4, 2016, the FCC announced that OMB had approved the order and would begin accepting applications for authorization beginning on February 18, 2015. Vonage applied for authorization, and on March 31, 2016 received authorization. On December 23, 2015, the National Association of Regulatory Utility Commissioners filed an appeal of the June 18, 2015 FCC order at the D.C. Circuit Court of Appeals. This appeal is pending. Federal - Privacy Rules On April 1, 2016, the FCC issued a Notice of Proposed Rulemaking (NPRM) that proposed the adoption of privacy rules for providers of broadband Internet access service and updating its rules for voice services to make them consistent with the proposed privacy rules for broadband Internet access services. In addition to regulating customer proprietary network information (CPNI), a category of information that the FCC has traditionally regulated for voice services, the FCC proposed to regulate use of customer personal information (PI), a broader set of information than CPNI, by broadband and voice service providers. Further, the NPRM would regulate voice and broadband provider privacy policies and data security practices, including imposing vicarious liability for vendors who handle PI and CPNI on behalf of a broadband or voice provider. Finally, the NPRM would impose another data breach reporting notification obligation on voice and broadband providers on top of existing state data breach notification requirements. State Telecommunications Regulation In general, the focus of interconnected VoIP telecommunications regulation is at the federal level. On November 12, 2004, the FCC issued a declaratory ruling providing that our service is subject to federal regulation and preempted the Minnesota Public Utilities Commission (“MPUC”) from imposing certain of its regulations on us. The FCC's decision was based on its conclusion that our service is interstate in nature and cannot be separated into interstate and intrastate components. On March 21, 2007, the United States Court of Appeals for the 8th Circuit affirmed the FCC's declaratory ruling preempting state regulation of our service. While this ruling does not exempt us from all state oversight of our service, it effectively prevents state telecommunications regulators from imposing certain burdensome and inconsistent market entry requirements and certain other state utility rules and regulations on our service. State regulators continue to probe the limits of federal preemption in their attempts to apply state telecommunications regulation to interconnected VoIP service. On July 16, 2009, the Nebraska Public Service Commission and the Kansas Corporation Commission filed a petition with the FCC seeking a declaratory ruling or, alternatively, adoption of a rule declaring that state authorities may apply universal service funding requirements to nomadic VoIP providers. We participated in the FCC proceedings on the petition. On November 5, 2010, the FCC issued a declaratory ruling that allowed states to assess state USF on nomadic VoIP providers on a going forward basis provided that the states comply with certain conditions to ensure that imposing state USF does not conflict with federal law or policy. More recently on July 28, 2015, the MPUC found that it has authority to regulate Charter’s fixed, interconnected VoIP service. Charter challenged the MPUC’s order at the U.S. District Court for Minnesota. This challenge is currently pending. We expect that state public utility commissions and state legislators will continue their attempts to apply state telecommunications regulations to nomadic VoIP service. Stand-by Letters of Credit We had stand-by letters of credit totaling $1,576 and $2,498, as of June 30, 2016 and December 31, 2015, respectively. End-User Commitments We are obligated to provide telephone services to our registered end-users. The costs related to the potential utilization of minutes sold are expensed as incurred. Our obligation to provide this service is dependent on the proper functioning of systems controlled by third-party service providers. We do not have a contractual service relationship with some of these providers. Vendor Commitments We have committed to lease a co-location facility from a vendor. We have committed to pay this vendor approximately $500 in 2016 and $1,000 in 2017 and 2018, and $500 in 2019, respectively. We have committed to purchase local inbound services from a vendor. We have committed to pay this vendor approximately $900 in 2016, $1,400 in 2017, and $500 in 2018, respectively. State and Municipal Taxes In accordance with generally accepted accounting principles, we make a provision for a liability for taxes when it is both probable that a liability has been incurred and the amount of the liability or range of liability can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. For a period of time, we did not collect or remit state or municipal taxes (such as sales, excise, utility, use, and ad valorem taxes), fees or surcharges (“Taxes”) on the charges to our customers for our services, except that we historically complied with the New Jersey sales tax. We have received inquiries or demands from a number of state and municipal taxing and 911 agencies seeking payment of Taxes that are applied to or collected from customers of providers of traditional public switched telephone network services. Although we have consistently maintained that these Taxes do not apply to our service for a variety of reasons depending on the statute or rule that establishes such obligations, we are now collecting and remitting sales taxes in certain of those states including a number of states that have changed their statutes to expressly include VoIP. In addition, many states address how VoIP providers should contribute to support public safety agencies, and in those states we remit fees to the appropriate state agencies. We could also be contacted by state or municipal taxing and 911 agencies regarding Taxes that do explicitly apply to VoIP and these agencies could seek retroactive payment of Taxes. As such, we have a reserve of $1,763 as of June 30, 2016 as our best estimate of the potential tax exposure for any retroactive assessment. We believe the maximum estimated exposure for retroactive assessments is approximately $2,600 as of June 30, 2016. |
Noncontrolling Interest and Redeemable Noncontrolling Interest |
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Noncontrolling Interest [Abstract] | |
Noncontrolling Interest and Redeemable Noncontrolling Interest | Noncontrolling Interest and Redeemable Noncontrolling Interest In the third quarter of 2013, we formed a consolidated foreign subsidiary in Brazil in connection with our previously announced joint venture in Brazil, which created a redeemable noncontrolling interest. The redeemable noncontrolling interest consisted of the 30.0% interest in this subsidiary initially held by our joint venture partner. In 2014, our joint venture partner did not make required capital calls and correspondingly its interest was diluted to 4% and was no longer contingently redeemable. As such, we reclassified the redeemable noncontrolling interest previously included in the mezzanine section of our Consolidated Balance Sheets to noncontrolling interest in the Stockholders' Equity section of our Consolidated Balance Sheets. In December 2014, we announced plans to exit the Brazilian market for consumer telephony services and wind down our joint venture operations in the country. We completed the process at the end of the first quarter of 2015. We expect to avoid material operating losses in Brazil in 2016 due to the significant planned incremental investment that would have been required to scale the business. In connection with the wind down, we incurred approximately $500 in cash charges in 2015 related to contract terminations and severance-related expenses. |
Discontinued Operations |
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Discontinued Operations | Discontinued Operations On March 31, 2015, the Company completed its previously announced exit from the Brazilian market for consumer telephony services and the associated wind down of its joint venture operations in the country. In 2015, the Company incurred a loss on disposal of $824. The loss on disposal is comprised of the write-off of noncontrolling interest of $907, foreign currency loss on intercompany loan forgiveness of $783, and residual cumulative translation of $192, partially offset by a tax benefit of $1,058. The results of operations of this discontinued operation are as follows:
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Acquisition of Business | Acquisition of Business Acquisition of Nexmo Nexmo is a global leader in the Communications-Platform-as-a-Service (“CPaaS”) segment of the cloud communications market. Nexmo provides innovative communication application program interfaces (“APIs”) for text messaging and voice communications, allowing developers and enterprises to embed contextual communications into mobile apps, websites and business workflows via text, social media, chat apps and voice. Pursuant to the Agreement and Plan of Merger dated May 5, 2016, by and among the Company, Neptune Acquisition Corp., a Delaware corporation and newly formed indirect, wholly owned subsidiary of Vonage (“Merger Sub”), Nexmo, a Delaware corporation, and Shareholder Representative Services LLC, a Colorado limited liability company, as representative of the security holders of Nexmo, on June 3, 2016, Merger Sub, on the terms and subject to the conditions thereof, merged with and into Nexmo, and Nexmo became a wholly owned indirect subsidiary of Vonage. On June 2, 2016, Vonage, Merger Sub, Nexmo and the Representative entered into Amendment No. 1 to the Merger Agreement (the “ Amendment”). The Amendment amends the Merger Agreement to, among other things, (1) increase the purchase price payable to the Nexmo securityholders by the amount of unrestricted cash and cash equivalents of Nexmo in lieu of the declaration of a dividend or other distribution of such unrestricted cash and cash equivalents to the Nexmo securityholders, (2) clarify the treatment of enterprise management incentive options issued by Nexmo to certain of its employees located in the United Kingdom, and (3) add certain technical provisions with respect to deposits made to the escrow agent and the exchange agent in connection with the closing of the transactions contemplated by the Merger Agreement. Under the agreement, Nexmo shareholders are receiving consideration of $231,122, with an additional earn-out opportunity (the "Variable Payout Amount") of up to $20,000 contingent upon Nexmo achieving certain performance targets. Of the consideration, $194,684 (net of cash acquired of $16,094) was paid at close, consisting of $163,093 of cash (net of $16,094 of cash acquired) and 6,823 in shares of Vonage common stock valued at $31,591. The remaining $36,438 of the $231,122 purchase price is in the form of restricted cash, restricted stock and options held by Nexmo management and employees (the "Employee Payout Amount"), subject to vesting requirements over time and to be amortized to compensation expense quarterly until vested. We financed the transaction with $179,000 from our 2016 Credit Facility. The purchase price is subject to adjustments pursuant to the merger agreement for closing cash and working capital of Nexmo, reductions for indebtedness and transaction expenses of Nexmo that remained unpaid as of closing, and escrow fund deposits. The aggregate consideration will be allocated among Nexmo equityholders. The consideration was allocated to acquisition cost as follows:
In addition, Nexmo shareholders may earn a Variable Payout Amount of up to $20,000, subject to the achievement of certain performance targets during the 12 month period following the closing of the transaction. The Variable Payout Amount payable to the holders of Nexmo stock is determined based on (i) Nexmo’s revenues received from its top customers following the closing, and (ii) the achievement of certain revenue targets during the 12 month period following the Closing. The Variable Payout Amount may be in the form of cash, a number of shares of Vonage common stock or a combination thereof, at our sole discretion. We estimated using probability weighting that the value of the Variable Payout Amount is $17,840 at the acquisition date and is included in acquisition cost at the net present value amount of $16,472. In addition, Nexmo management and employees may earn an Employee Payout Amount of $36,438 attributable to restricted cash, restricted stock and assumed options, of which $4,779 is included in acquisition cost as service had been provided pre-acquisition and $31,659 will be recorded as compensation expense as continued employment is a condition of receiving consideration. Pursuant to the merger agreement, $20,372 of the cash consideration and $5,081 of the stock consideration were placed in escrow for unknown liabilities that may have existed as of the acquisition date. During 2016, we incurred approximately $5,000 in acquisition related transaction costs, which were recorded in general and administrative expense in the accompanying Consolidated Statements of Income. The results of operations of the Nexmo business and the estimated fair values of the assets acquired and liabilities assumed have been included in our consolidated financial statements since the date of the acquisition. The acquisition was accounted for using the acquisition method of accounting under which assets and liabilities of Nexmo were recorded at their respective fair values including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets. We do not expect any portion of this goodwill to be deductible for tax purposes. The goodwill attributable to the acquisition has been recorded as a non-current asset and is not amortized, but is subject to an annual review for impairment. The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date. The fair values assigned to identifiable intangible assets assumed were based on management’s current estimates and assumptions and is considered preliminary. The estimated fair values of the identified current assets, property and equipment, software and other assets acquired and current liabilities assumed are also considered preliminary and are based on the most recent information available. We believe that the most recent information available provides a reasonable basis for assigning fair value, but we anticipate receiving additional information, and, as such, the provisional measurements of fair value set forth below are subject to change. We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. The table below summarizes the Nexmo assets acquired and liabilities assumed as of June 3, 2016:
The intangible assets as of the closing date of the acquisition included:
Indications of fair value of the intangible assets acquired in connection with the acquisition were determined using either the income, market or replacement cost methodologies. The intangible assets are being amortized over periods which reflect the pattern in which economic benefits of the assets are expected to be realized. The customer relationships and developed technologies are being amortized on an accelerated basis over an estimated useful life of ten years and the non-compete agreements and trade names are being amortized on a straight-line basis over three years. In addition, we recorded a deferred tax liability of $37,825 related to the $105,100 of identified intangible assets that will be amortized for financial reporting purposes but not for tax purposes and a deferred tax asset of $6,279 related to NOLs. The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents the amount of goodwill resulting from the acquisition. We do not expect any portion of this goodwill to be deductible for tax purposes. The goodwill attributable to the acquisition has been recorded as a non-current asset and is not amortized, but is subject to an annual review for impairment. We believe the factors that contributed to goodwill include synergies that are specific to our consolidated business, the acquisition of a talented workforce that provides us with expertise in the small and medium business market, as well as other intangible assets that do not qualify for separate recognition. Acquisition of iCore Pursuant to the Agreement and Plan of Merger dated August 19, 2015 by and among the Company, Cirrus Acquisition Corp., a Delaware corporation and newly formed indirect, wholly owned subsidiary of Vonage (“Merger Sub”), iCore, and Stephen G. Canton, as representative of the security holders of iCore, on August 31, 2015, Merger Sub, on the terms and subject to the conditions thereof, merged with and into iCore, and iCore became a wholly owned indirect subsidiary of Vonage. iCore provides cloud-based unified communications and collaboration services, delivering voice, video, and mobile communications solutions to business customers. iCore is a natural complement to our rapid growing UCaaS business and strengthens our national footprint. We acquired iCore for $92,689 in cash consideration, subject to adjustments pursuant to the merger agreement for closing cash and working capital of iCore, reductions for indebtedness and transaction expenses of iCore that remained unpaid as of closing, and escrow fund deposits. We financed the transaction with $10,689 of cash and $82,000 from our 2015 revolving credit facility. The aggregate consideration will be allocated among iCore equity holders. Pursuant to the merger agreement, $9,200 of the cash consideration was placed in escrow for unknown liabilities that may have existed as of the acquisition date. During 2015, we incurred $1,353 in acquisition related transaction costs, which were recorded in general and administrative expense in the accompanying Consolidated Statements of Income. The results of operations of the iCore business and the estimated fair values of the assets acquired and liabilities assumed have been included in our consolidated financial statements since the date of the acquisition. The acquisition was accounted for using the acquisition method of accounting under which assets and liabilities of iCore were recorded at their respective fair values including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets. We do not expect any portion of this goodwill to be deductible for tax purposes. The goodwill attributable to the acquisition has been recorded as a non-current asset and is not amortized, but is subject to an annual review for impairment. The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date. The fair values assigned to identifiable intangible assets assumed will be based on management’s estimates and assumptions. The estimated fair values of the identified current assets, property and equipment, software and other assets acquired and current liabilities assumed are considered preliminary and are based on the most recent information available. We believe that the information provides a reasonable basis for assigning fair value, but we are waiting for additional information, primarily related to income, sales, excise, and ad valorem taxes which are subject to change. Thus, the provisional measurements of fair value set forth below are subject to change. We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. The table below summarizes the iCore assets acquired and liabilities assumed as of August 31, 2015:
The intangible assets as of the closing date of the acquisition included:
Indications of fair value of the intangible assets acquired in connection with the acquisition were determined using either the income, market or replacement cost methodologies. The intangible assets are being amortized over periods which reflect the pattern in which economic benefits of the assets are expected to be realized. The customer relationships are being amortized on an accelerated basis over an estimated useful life of ten years; developed technology is being amortized on an accelerated basis over an estimated useful life of eight years; and the non-compete agreements and trade names are being amortized on a straight-line basis over two years. In addition, we recorded a deferred tax liability of $12,944 related to the $38,064 of identified intangible assets that will be amortized for financial reporting purposes but not for tax purposes and a deferred tax asset of $4,457 related to NOLs. The excess of purchase price over the fair value amounts assigned to the assets acquired and liabilities assumed represents the amount of goodwill resulting from the acquisition. We do not expect any portion of this goodwill to be deductible for tax purposes. The goodwill attributable to the acquisition has been recorded as a non-current asset and is not amortized, but is subject to an annual review for impairment. We believe the factors that contributed to goodwill include synergies that are specific to our consolidated business, the acquisition of a talented workforce that provides us with expertise in the small and medium business market, as well as other intangible assets that do not qualify for separate recognition. Acquisition of Simple Signal Pursuant to the Agreement and Plan of Merger dated March 15, 2015 by and among Vonage Holdings Corp., a Delaware corporation, Stratus Acquisition Corp., a California corporation and an indirect wholly owned subsidiary of Parent (“Merger Sub”), Simple Signal Inc., a California corporation (“Simple Signal”) and Simplerep, LLC, a Colorado limited liability company, as representative of the security holders of Simple Signal, on April 1, 2015, Merger Sub merged with and into Simple Signal, and Simple Signal became a wholly owned indirect subsidiary of Vonage. Simple Signal provides cloud-based unified communications and collaboration services, delivering voice, video, and mobile communications solutions to business customers. Simple Signal is a natural complement to our expanding UCaaS business. We acquired Simple Signal for $25,578, including 1,111 shares of Vonage common stock (which shares had an aggregate value of approximately $5,578 based upon the closing stock price on April 1, 2015) and cash consideration of $20,000, subject to adjustments pursuant to the merger agreement for closing cash and working capital of Simple Signal, reductions for indebtedness and transaction expenses of Simple Signal that remained unpaid as of closing, and escrow fund deposits. We financed the transaction with $20,000 from our 2014 revolving credit facility. The aggregate consideration will be allocated among Simple Signal equityholders. Pursuant to the merger agreement, $2,356 of the cash consideration and $1,144 of the stock consideration was placed in escrow for unknown liabilities that may have existed as of the acquisition date. During 2015, we incurred $470 in acquisition related transaction costs, which were recorded in general and administrative expense in the accompanying Consolidated Statements of Income. The results of operations of the Simple Signal business and the estimated fair values of the assets acquired and liabilities assumed have been included in our consolidated financial statements since the date of the acquisition. The acquisition was accounted for using the acquisition method of accounting under which assets and liabilities of Simple Signal were recorded at their respective fair values including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets. We do not expect any portion of this goodwill to be deductible for tax purposes. The goodwill attributable to the acquisition has been recorded as a non-current asset and is not amortized, but is subject to an annual review for impairment. The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. The estimated fair values of assets acquired and liabilities assumed are considered preliminary and are based on the most recent information available. We believe that the information provides a reasonable basis for assigning the fair values of assets acquired and liabilities assumed, but we are waiting for additional information, primarily related to income, sales, excise, and ad valorem taxes which are subject to change. Thus, the provisional measurements of fair value set forth below are subject to change. We expect to finalize the valuation as soon as practicable, but not later than one year from the acquisition date. The table below summarizes the Simple Signal assets acquired and liabilities assumed as of April 1, 2015:
The intangible assets as of the closing date of the acquisition included:
Indications of fair value of the intangible assets acquired in connection with the acquisition were determined using either the income, market or replacement cost methodologies. The intangible assets are being amortized over periods which reflect the pattern in which economic benefits of the assets are expected to be realized. The customer relationships are being amortized on an accelerated basis over an estimated useful life of ten years; developed technology is being amortized on an accelerated basis over an estimated useful life of eight years; and the non-compete agreements and trade names are being amortized on a straight-line basis over two years. In addition, we recorded a net deferred tax liability of $2,441 related to the $6,407 of identified intangible assets that will be amortized for financial reporting purposes but not for tax purposes and a deferred tax asset of $3,182 related to NOLs. Pro forma financial information The following unaudited supplemental pro forma information presents the combined historical results of operations of Vonage and Nexmo for the six months ended June 30, 2016 and June 30, 2015, as if the Acquisitions had been completed at the beginning of 2015.
The pro forma financial information includes certain adjustments to reflect expenses in the appropriate pro forma periods as though the companies were combined as of the beginning of 2015. These adjustments include:
The Company recorded revenue of $7,698 and net loss of $1,356 attributable to Nexmo for the six months ended June 30, 2016. Goodwill The following table provides a summary of the changes in the carrying amounts of goodwill:
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Basis of Presentation and Significant Accounting Policies (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Unaudited Interim Financial Information | Unaudited Interim Financial Information The accompanying unaudited interim consolidated financial statements and information have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the instructions for Form 10-Q. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these financial statements contain all normal and recurring adjustments considered necessary to present fairly the financial position, results of operations, cash flows, and statement of stockholders’ equity for the periods presented. The results for the three and six months ended June 30, 2016 are not necessarily indicative of the results to be expected for the full year. These unaudited interim consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2015 filed with the Securities and Exchange Commission on February 12, 2016. |
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Principles of Consolidation | Principles of Consolidation The consolidated financial statements include the accounts of Vonage and its wholly-owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation. We also consolidate a majority-owned entity in Brazil where we had the ability to exercise controlling influence. The ownership interest of the noncontrolling party is presented as noncontrolling interest. On March 31, 2015, the Company completed its previously announced exit from the Brazilian market for consumer telephony services and the associated wind down of its joint venture operations in the country. The results of Brazilian operations are presented as discontinued operations for all periods presented. The results of companies acquired or disposed of are included in the consolidated financial statements from the effective date of the acquisition or up to the date of disposal. |
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Use of Estimates | Use of Estimates Our consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates and assumptions that affect the amounts reported and disclosed in the consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. On an ongoing basis, we evaluate our estimates, including the following:
We base our estimates on historical experience, available market information, appropriate valuation methodologies, and on various other assumptions that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. |
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Revenue Recognition | Revenue Recognition Operating revenues consist of services revenue and customer equipment (which enables our services) and shipping revenue. The point in time at which revenues are recognized is determined in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104, Revenue Recognition, and Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) 605, Revenue Recognition. At the time a customer signs up for our services, there are the following deliverables:
The equipment is generally provided free of charge to our customers and in most instances there are no fees collected at sign-up. We record the fees collected for shipping the equipment to the customer, if any, as shipping and handling revenue at the time of shipment. Services Revenue Substantially all of our revenues are services revenues, which are derived primarily from monthly subscription fees that customers are charged under our service plans. We also derive services revenues from per minute fees for international calls if not covered under a plan, including calls made via applications for mobile devices and other stand-alone products, and for any calling minutes in excess of a customer’s monthly plan limits. Monthly subscription fees are automatically charged to customers’ credit cards, debit cards or electronic check payments ("ECP"), in advance and are recognized over the following month when services are provided. Revenues generated from international calls and from customers exceeding allocated call minutes under limited minute plans are recognized as services are provided, that is, as minutes are used, and are billed to a customer's credit cards, debit cards or ECP in arrears. As a result of multiple billing cycles each month, we estimate the amount of revenues earned from international calls and from customers exceeding allocated call minutes under limited minute plans but not billed from the end of each billing cycle to the end of each reporting period and record these amounts as accounts receivable. These estimates are based primarily upon historical minutes and have been consistent with our actual results. We also provide rebates to customers who purchase their customer equipment from retailers and satisfy minimum service period requirements. These rebates in excess of activation fees are recorded as a reduction of revenues over the service period based upon the estimated number of customers that will ultimately earn and claim the rebates. In the United States, we charge regulatory, compliance, E-911, and intellectual property-related fees on a monthly basis to defray costs, and to cover taxes that we are charged by the suppliers of telecommunications services. In addition, we charge customers Federal Universal Service Fund (“USF”) fees. We recognize revenue on a gross basis for USF and related fees. We record these fees as revenue when billed. All other taxes are recorded on a net basis. Customer Equipment and Shipping Revenue Customer equipment and shipping revenues consist of revenues from sales of customer equipment to wholesalers or directly to customers for replacement devices, or for upgrading their device at the time of customer sign-up for which we charge an additional fee. In addition, customer equipment and shipping revenues include revenues from the sale of VoIP telephones in order to access our small and medium business services. Customer equipment and shipping revenues also include the fees that customers are charged for shipping their customer equipment to them. Customer equipment and shipping revenues include sales to our retailers, who subsequently resell this customer equipment to customers. Revenues are reduced for payments to retailers and rebates to customers, who purchased their customer equipment through these retailers, to the extent of customer equipment and shipping revenues. |
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Cost of Services and Goods Sold | Cost of Service Cost of service consists of costs that we pay to third parties in order to provide services. These costs include access and interconnection charges that we pay to other companies to terminate domestic and international phone calls on the public switched telephone network. In addition, these costs include the cost to lease phone numbers, to co-locate in other companies’ facilities, to provide enhanced emergency dialing capabilities to transmit 911 calls, and to provide local number portability. These costs also include taxes that we pay on telecommunications services from our suppliers or are imposed by government agencies such as federal universal service fund (“USF”) contributions and royalties for use of third parties’ intellectual property. In addition, these costs include certain personnel and related costs for network operations and technical support that are attributable to revenue generating activities. Cost of Goods Sold Cost of goods sold consists primarily of costs that we incur when a customer signs up for our service. These costs include the cost of customer equipment for customers who subscribe through the direct sales channel in excess of activation fees. In addition, these costs include the amortization of deferred customer equipment, the cost of shipping and handling for customer equipment, the installation manual that accompanies the customer equipment, and the cost of certain promotions. |
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Sales and Marketing Expense | Sales and Marketing Expenses Sales and marketing expenses consist primarily of personnel and related costs for employees and contractors directly associated with our sales and marketing activities, internet advertising fees, radio and billboard advertising, public relations, commissions paid to employees, resellers and other third parties, trade shows, marketing and promotional activities, customer support, credit card fees, collections, and systems and information technology support. |
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Engineering and Development Expenses | Engineering and Development Expenses Engineering and development expenses primarily include personnel and related costs for developers responsible for new products, and software engineers maintaining and enhancing existing products. These costs have been reclassified from selling, general and administrative expenses. Research and development costs related to new product development included in engineering and development were $5,402 and $4,644 for the three months ended June 30, 2016 and 2015 and $10,310 and $8,699 for the six months ended June 30, 2016 and 2015, respectively. Costs for research, including predevelopment efforts prior to establishing technological feasibility of software expected to be marketed, are expensed as incurred. Development costs are capitalized when technological feasibility has been established and anticipated future revenues support the recoverability of the capitalized amounts. Capitalization stops when the product is available for general release to customers. Due to the short time period between achieving technological feasibility and product release and the insignificant amount of costs incurred during such periods, we have not capitalized any software development, and have expensed these costs as incurred. |
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General and Administrative Expenses | General and Administrative Expenses General and administrative expenses primarily relate to our executive, finance, human resources, legal, and information technology organizations. General and administrative expenses primarily consist of personnel costs, stock compensation, board of directors' costs, professional fees for legal, accounting, tax, compliance and information systems, travel, recruiting expense and, rent and related expenses. |
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Cash, Cash Equivalents and Marketable Securities | Cash, Cash Equivalents and Marketable Securities We maintain cash with several investment grade financial institutions. Highly liquid investments, which are readily convertible into cash, with original maturities of three months or less, are recorded as cash equivalents. |
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Debt and Marketable Equity Securities | Management determines the appropriate classification of our investments in debt and marketable equity securities at the time of purchase and reevaluates such designation at each balance sheet date. Our debt and marketable equity securities have been classified and accounted for as available for sale. We may or may not hold securities with stated maturities until maturity. In response to changes in the availability of and the yield on alternative investments as well as liquidity requirements, we may sell these securities prior to their stated maturities. These securities are carried at fair value, with the unrealized gains and losses reported as a component of other comprehensive income (loss). Any realized gains or losses on the sale of marketable securities are determined on a specific identification method, and such gains and losses are reflected as a component of other income or expense. |
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Certain Risks and Concentrations | Certain Risks and Concentrations Financial instruments that potentially subject us to concentrations of credit risk consist principally of cash equivalents, marketable securities, and accounts receivable. They are subject to fluctuations in both market value and yield based upon changes in market conditions, including interest rates, liquidity, general economic conditions, and conditions specific to the issuers. Accounts receivable are typically unsecured and are derived from revenues earned from customers primarily located in the United States. |
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Trade and Other Accounts Receivable | A portion of our accounts receivable represents the timing difference between when a customer’s credit card is billed and the subsequent settlement of that transaction with our credit card processors. This timing difference is generally three days for substantially all of our credit card receivables. We have never experienced any accounts receivable write-offs due to this timing difference. In addition, we collect subscription fees in advance, minimizing our accounts receivable and bad debt exposure. If a customer’s credit card, debit card or ECP is declined, we generally suspend international calling capabilities as well as their ability to incur domestic usage charges in excess of their plan minutes. Generally, if the customer’s credit card, debit card or ECP could not be successfully processed during three billing cycles (i.e., the current and two subsequent monthly billing cycles), we terminate the account. In addition, we automatically charge any per minute fees to our customers’ credit card, debit card or ECP monthly in arrears. To further mitigate our bad debt exposure, a customer’s credit card, debit card or ECP will be charged in advance of their monthly billing if their international calling or overage charges exceed a certain dollar threshold. |
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Inventory | Inventory Inventory consists of the cost of customer equipment and is stated at the lower of cost or market, with cost determined using the average cost method. We provide an inventory allowance for customer equipment that has been returned by customers but may not be able to be reissued to new customers or returned to the manufacturer for credit. |
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Property and Equipment | Property and Equipment Property and equipment includes acquired assets and those accounted for under capital leases and consist principally of network equipment and computer hardware, software, furniture, and leasehold improvements. Company-owned equipment in use at customer premises is also included in property and equipment. In addition, the lease of our corporate headquarters has been accounted for as a capital lease and is included in property and equipment. Network equipment and computer hardware and furniture are stated at cost with depreciation provided using the straight-line method over the estimated useful lives of the related assets, which range from three to five years. Leasehold improvements are amortized over their estimated useful life of the related assets or the life of the lease, whichever is shorter. The cost of renewals and substantial improvements is capitalized while the cost of maintenance and repairs is charged to operating expenses as incurred. Company-owned customer premises equipment is depreciated on a straight-line basis over three years. Our network equipment and computer hardware, which consists of routers, gateways, and servers that enable our telephony services, is subject to technological risks and rapid market changes due to new products and services and changing customer demand. These changes may result in future adjustments to the estimated useful lives or the carrying value of these assets, or both. |
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Software Costs | Software Costs We capitalize certain costs, such as purchased software and internally developed software that we use for customer acquisition and customer care automation tools, in accordance with FASB ASC 350-40, “Internal-Use Software”. Computer software is stated at cost less accumulated amortization and the estimated useful life is two to five years. |
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Goodwill | Goodwill Goodwill acquired in the acquisition of a business is accounted for based upon the excess fair value of consideration transferred over the fair value of net assets acquired in the business combination. Goodwill is tested for impairment on an annual basis on October 1st and, when specific circumstances dictate, between annual tests. When impaired, the carrying value of goodwill is written down to fair value. The goodwill impairment test involves evaluating qualitative information to determine if it is more than 50% likely that the fair value of a reporting unit is less than its carrying value. If such a determination is made, then the traditional two-step goodwill impairment test described below must be applied. The first step, identifying a potential impairment, compares the fair value of a reporting unit with its carrying amount, including goodwill. If the carrying value of the reporting unit exceeds its fair value, the second step would need to be conducted; otherwise, no further steps are necessary as no potential impairment exists. The second step, measuring the impairment loss, compares the implied fair value of the reporting unit goodwill with the carrying amount of that goodwill. Any excess of the reporting unit goodwill carrying value over the respective implied fair value is recognized as an impairment loss. There was no impairment of goodwill for the three and six months ended June 30, 2016. |
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Intangible Assets and Patents | Intangible Assets Intangible assets acquired in the settlement of litigation or by direct purchase are accounted for based upon the fair value of assets received. Purchased-intangible assets are accounted for based upon the fair value of assets received. Purchased-intangible assets are amortized on a straight-line or accelerated basis over the periods of benefit, ranging from two to ten years. We perform a review of purchased-intangible assets whenever events or changes in circumstances indicate that the useful life is shorter than we had originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances exist, we assess the recoverability of purchased-intangible assets by comparing the projected undiscounted net cash flows associated with the related asset or group of assets over their remaining lives against their respective carrying amounts. Impairments, if any, are based on the excess of the carrying amount over the fair value of those assets. If the useful life of the asset is shorter than originally estimated, we accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful life. There was no impairment of purchased-intangible assets identified for the three and six months ended June 30, 2016. Patents and Patent Licenses Patent rights acquired in the settlement of litigation or by direct purchase are accounted for based upon the fair value of assets received. |
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Long-Lived Assets | Long-Lived Assets We evaluate impairment losses on long-lived assets used in operations when events and changes in circumstances indicate that the assets might be impaired. If our review indicates that the carrying value of an asset will not be recoverable, based on a comparison of the carrying value of the asset to the undiscounted future cash flows, the impairment will be measured by comparing the carrying value of the asset to its fair value. Fair value will be determined based on quoted market values, discounted cash flows or appraisals. Impairments of property and equipment are recorded in the statement of income as part of depreciation expense. |
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Debt Related Costs | Debt Related Costs Costs incurred in raising debt are deferred and amortized as interest expense using the effective interest method over the life of the debt. A portion of these costs are netted against the underlying notes payable in accordance with ASU 2015-15, "Interest-Imputation of Interest". |
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Noncontrolling Interest and Redeemable Noncontrolling Interest | Noncontrolling Interest and Redeemable Noncontrolling Interest We consolidate a majority-owned entity where we have the ability to exercise controlling influence. The ownership interest of the noncontrolling party is presented as noncontrolling interest in the Consolidated Balance Sheets as Stockholders' Equity. If we are required to repurchase the noncontrolling interest at fair value, subject to adjustment, under a put option or other contractual redemption requirement, we will report the noncontrolling interest as redeemable in the Consolidated Balance Sheets between liabilities and equity. We adjust the redeemable noncontrolling interest to the redemption values on each balance sheet date with changes recognized as an adjustment to retained earnings, or in the absence of retained earnings, as an adjustment to additional paid-in capital when it becomes probable the noncontrolling interest will become redeemable. |
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Derivatives | Derivatives We do not hold or issue derivative instruments for trading purposes. However, in accordance with FASB ASC 815, “Derivatives and Hedging” (“FASB ASC 815”), we review our contractual obligations to determine whether there are terms that possess the characteristics of derivative financial instruments that must be accounted for separately from the financial instrument in which they are embedded. We recognize these features as liabilities in our consolidated balance sheet at fair value each period and recognize any change in the fair value in our statement of operations in the period of change. We estimate the fair value of these liabilities using available market information and appropriate valuation methodologies. |
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Income Taxes | Income Taxes We recognize deferred tax assets and liabilities at enacted income tax rates for the temporary differences between the financial reporting bases and the tax bases of our assets and liabilities. Any effects of changes in income tax rates or tax laws are included in the provision for income taxes in the period of enactment. Our net deferred tax assets primarily consist of net operating loss carry forwards (“NOLs”). We are required to record a valuation allowance against our net deferred tax assets if we conclude that it is more likely than not that taxable income generated in the future will be insufficient to utilize the future income tax benefit from our net deferred tax assets (namely, the NOLs) prior to expiration. We periodically review this conclusion, which requires significant management judgment. If we are able to conclude in a future period that a future income tax benefit from our net deferred tax assets has a greater than 50 percent likelihood of being realized, we are required in that period to reduce the related valuation allowance with a corresponding decrease in income tax expense. This would result in a non-cash benefit to our net income in the period of the determination. In the fourth quarter of 2011, we released $325,601 of valuation allowance. We periodically review this conclusion, which requires significant management judgment. In the future, if available evidence changes our conclusion that it is more likely than not that we will utilize our net deferred tax assets prior to their expiration, we will make an adjustment to the related valuation allowance and income tax expense at that time. In subsequent periods, we would expect to recognize income tax expense equal to our pre-tax income multiplied by our effective income tax rate, an expense that was not recognized prior to the reduction of the valuation allowance. Our effective rate may differ from the federal statutory rate due, in part, to our foreign operations and certain discrete period items. The 2016 estimated annual effective tax rate is expected to approximate 44%, but may fluctuate due to the timing of other discrete period transactions. We file income tax returns in the U.S. on a federal basis and in U.S. state and foreign jurisdictions. Our federal tax return remains subject to examination by the Internal Revenue Service from 2012 to present, our New Jersey tax returns remain open from 2011 to present, our Canada tax return remains open from 2011 to present, and other domestic and foreign tax returns remain open for all periods to which those filings relate. Our consolidated corporate income tax return for 2013 has been selected for examination by the Internal Revenue Service. Our Canadian corporate income tax returns for 2012 and 2013 have been selected for examination by the Canada Revenue Agency. We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50 percent likelihood of being realized upon ultimate resolution. We have not had any unrecognized tax benefits. We recognize interest and penalties accrued related to unrecognized tax benefits as components of our income tax provision. We have not had any interest and penalties accrued related to unrecognized tax benefits. |
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Business Combinations | Business Combinations We account for business combinations using the acquisition method of accounting. The acquisition method of accounting requires that the purchase price, including the fair value of contingent consideration, of the acquisition be allocated to the assets acquired and liabilities assumed using the fair values determined by management as of the acquisition date. Goodwill as of the acquisition date is measured as the excess of consideration transferred over the net of the acquisition date fair values of assets acquired and the liabilities assumed. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed at the acquisition date, the Company’s estimates are inherently uncertain and subject to refinement. As a result, during the measurement period, which may be up to one year from the acquisition date, the Company records adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent the Company identifies adjustments to the preliminary purchase price allocation. Upon the conclusion of the measurement period or final determination of the values of assets acquired or liabilities assumed, whichever comes first, any subsequent adjustments are recorded to the consolidated statements of operations. We include the results of all acquisitions in our Consolidated Financial Statements from the date of acquisition. Acquisition related transaction costs, such as banking, legal, accounting and other costs incurred in connection with an acquisition, are expensed as incurred in general and administrative expense. Acquisition related integration costs include costs associated with exit or disposal activities, which do not meet the criteria of discontinued operations, including costs for employee, lease, and contract terminations, facility closing or other exit activities. Additionally, these costs include expenses directly related to integrating and reorganizing acquired businesses and include items such as employee retention costs, recruiting costs, certain moving costs, certain duplicative costs during integration and asset impairments. These costs are expensed as incurred in general and administrative expense. |
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Fair Value of Financial Instruments | Fair Value of Financial Instruments Effective January 1, 2008, we adopted FASB ASC 820-10-25, “Fair Value Measurements and Disclosures”. This standard establishes a framework for measuring fair value and expands disclosure about fair value measurements. We did not elect fair value accounting for any assets and liabilities allowed by FASB ASC 825, “Financial Instruments”. FASB ASC 820-10 defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. FASB ASC 820-10 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. FASB ASC 820-10 describes the following three levels of inputs that may be used:
Although management believes its valuation methods were appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could have resulted in a different fair value measurement at the reporting date. The following table presents the assets that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of June 30, 2016 and December 31, 2015:
(1) Included in cash and cash equivalents on our consolidated balance sheet. (2) Included in marketable securities on our consolidated balance sheet. Fair Value of Other Financial Instruments The carrying amounts of our financial instruments, including cash and cash equivalents, accounts receivable, and accounts payable, approximate fair value because of their short maturities. The carrying amounts of our capital leases approximate fair value of these obligations based upon management’s best estimates of interest rates that would be available for similar debt obligations at June 30, 2016 and December 31, 2015. We believe the fair value of our debt at June 30, 2016 was approximately the same as its carrying amount as market conditions, including available interest rates, credit spread relative to our credit rating, and illiquidity, remain relatively unchanged from the issuance date of our debt on June 3, 2016 for a similar debt instrument. |
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Foreign Currency | Foreign Currency Generally, the functional currency of our non-United States subsidiaries is the local currency. The financial statements of these subsidiaries are translated to United States dollars using month-end rates of exchange for assets and liabilities, and average rates of exchange for revenues, costs, and expenses. Translation gains and losses are deferred and recorded in accumulated other comprehensive income as a component of stockholders’ equity. |
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Share-Based Compensation | Share-Based Compensation We account for share-based compensation in accordance with FASB ASC 718, “Compensation-Stock Compensation”. Under the fair value recognition provisions of this pronouncement, share-based compensation cost is measured at the grant date based on the fair value of the award, reduced as appropriate based on estimated forfeitures, and is recognized as expense over the applicable vesting period of the stock award using the accelerated method. The excess tax benefit associated with stock compensation deductions have not been recorded in additional paid-in capital. When evaluating whether an excess tax benefit has been realized, share based compensation deductions are not considered realized until NOLs are no longer sufficient to offset taxable income. Such excess tax benefits will be recorded when realized. |
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Earnings per Share | Earnings per Share Net income per share has been computed according to FASB ASC 260, “Earnings per Share”, which requires a dual presentation of basic and diluted earnings per share (“EPS”). Basic EPS represents net income divided by the weighted average number of common shares outstanding during a reporting period. Diluted EPS reflects the potential dilution that could occur if securities or other contracts to issue common stock, including stock options and restricted stock units under our 2001 Stock Incentive Plan and 2006 Incentive Plan, were exercised or converted into common stock. The dilutive effect of outstanding stock options and restricted stock units is reflected in diluted earnings per share by application of the treasury stock method. In applying the treasury stock method for stock-based compensation arrangements, the assumed proceeds are computed as the sum of the amount the employee must pay upon exercise and the amounts of average unrecognized compensation cost attributed to future services. |
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Comprehensive Income (Loss) | Comprehensive Income (Loss) Comprehensive income consists of net income (loss) and other comprehensive items. Other comprehensive items include foreign currency translation adjustments and unrealized gains (losses) on available for sale securities. |
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Recent Accounting Pronouncements | Recent Accounting Pronouncements In May 2016, Financial Accounting Standards Board (“FASB”) issued ASU 2016-12, "Revenue from Contract with Customers - Narrow-Scope Improvements and Practical Expedients". In April 2016, FASB issued ASU 2016-10, "Revenue from Contracts with Customers - Identifying Performance Obligations and Licensing". In March 2016, FASB issued ASU 2016-08, "Revenue from Contract with Customers - Principal versus Agent Considerations (Reporting Revenue Gross versus Net)". In August 2015, FASB issued ASU 2015-14 deferring the effective date to annual and interim periods. In May 2014, FASB issued ASU 2014-09, "Revenue from Contracts with Customers". The core principle of these ASUs are that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The amendments in ASU 2016-12 affect only the narrow aspects of the guidance, such as assessing the collectibility criterion and accounting for contracts that do not meet the criterion, presentation of sales and other similar taxes collected from customers, non-cash consideration, and contract modifications at transition. ASU 2016-10 clarifies two aspects of the guidance: identifying performance obligations and the licensing implementation. The intention of the ASU 2016-08 is to improve the operability and understandability of the implementation guidance on principal versus agent considerations. ASU 2015-14 defers the effective date to annual and interim periods beginning on or after December 15, 2017, and early adoption will be permitted, but not earlier than the original effective date of annual and interim periods beginning on or after December 15, 2016, for public entities. ASU 2014-09 is a comprehensive new revenue recognition model for revenue from contract with customers. We will adopt these ASUs when effective. We are currently evaluating the impacts of adopting ASU 2016-12, ASU 2016-10, ASU 2016-08, ASU 2015-14, and ASU 2014-09 on our consolidated financial statements and related disclosures. In March 2016, FASB issued Accounting Standards Update ("ASU") 2016-09, "Improvements to Employee Share-Based Payment Accounting". This ASU is issued as part of its Simplification Initiative. The areas for simplification in this ASU involve several aspects of the accounting for share-based payment transactions, including the income tax consequences, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Early adoption is permitted for any entity in any interim or annual period. We are currently evaluating the impact of adopting ASU 2016-09 on our consolidated financial statements and related disclosures. In February 2016, FASB issued ASU 2016-02, "Leases". This ASU increases transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements. This ASU is effective for fiscal years beginning after December 15, 2018, including interim periods within those fiscal years. Early adoption is permitted for all entities. We are currently evaluating the impact of adopting ASU 2016-02 on our consolidated financial statements and related disclosures. In January 2016, FASB issued ASU 2016-01, "Recognition and Measurement of Financial Assets and Financial Liabilities". This ASU provide guidance concerning certain matters involving the recognition, measurement, and disclosure of financial assets and financial liabilities. The guidance does not alter the basic framework for classifying debt instruments held as financial assets. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is not permitted, with some exceptions. The adoption of ASU 2016-01 will not have a material impact on our consolidated financial statements and related disclosures. In November 2015, FASB issued ASU 2015-17, "Balance Sheet Classification of Deferred Taxes". This ASU simplifies the presentation of deferred income taxes and requires deferred tax liabilities and assets be classified as non-current in a classified statement of financial position. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. Earlier application is permitted for all entities as of the beginning of an interim or annual reporting period. This ASU may be applied either prospectively or retrospectively to all periods presented. We are currently evaluating the impact of adopting ASU 2015-17 on our consolidated financial statements and related disclosures. In July 2015, FASB issued ASU 2015-11, "Simplifying the Measurement of Inventory". This ASU applies to inventory that is measured using first-in, first-out ("FIFO") or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predicable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, first-out ("LIFO") or the retail inventory. This ASU is effective for annual and interim periods beginning after December 15, 2016, and should be applied prospectively with early adoption on permitted at the beginning of an interim and annual reporting period. We are currently evaluating the impact of adopting ASU 2015-11 on our consolidated financial statements and related disclosures. |
Basis of Presentation and Significant Accounting Policies (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assets measured at fair value on a recurring basis | The following table presents the assets that are measured and recognized at fair value on a recurring basis classified under the appropriate level of the fair value hierarchy as of June 30, 2016 and December 31, 2015:
(1) Included in cash and cash equivalents on our consolidated balance sheet. (2) Included in marketable securities on our consolidated balance sheet. |
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Computation for basic and diluted net (loss) income per share | The following table sets forth the computation for basic and diluted net income per share for the three and six months ended June 30, 2016:
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Securities excluded from calculation of diluted earnings per common share because of anti-dilutive effects | For the three and six months ended June 30, 2016, the following were excluded from the calculation of diluted earnings per common share because of their anti-dilutive effects:
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Supplemental Balance Sheet Account Information (Tables) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of prepaid expenses and other current assets | Prepaid expenses and other current assets
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Schedule of property, equipment and software, net | Property and equipment, net
Customer premise equipment, net
Software, net
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Schedule of debt related costs, net | Debt related costs, net
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Schedule of restricted cash | Restricted cash
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Schedule of intangible assets, net | Intangible assets, net
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Schedule of other assets | Other assets
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Schedule of accrued expenses | Accrued expenses
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Schedule of accumulated other comprehensive loss | Accumulated other comprehensive loss
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Supplemental Income Statement Account Information (Tables) |
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental income statement account information | Amounts included in revenues
Amount included in cost of services
Amount included in cost of goods sold
Amount included in sales and marketing
Amounts included in general and administrative expense
Depreciation and amortization expense
Amount included in interest expense
Amount included in other income (expense), net
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Long-Term Note and Revolving Credit Facility (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | A schedule of long-term note and revolving credit facility at June 30, 2016 and December 31, 2015 is as follows:
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Future payments under long-term debt obligations | At June 30, 2016, future payments under term note obligations over each of the next five years and thereafter were as follows:
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Common Stock (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common stock repurchases | We repurchased the following shares of common stock with cash resources under the 2014 $100,000 repurchase program during the three and three months ended June 30, 2016 and 2015:
(1) including 65 shares, or $321, of common stock repurchases settled in July 2015; excluding commission of $1. |
Discontinued Operations (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of disposal groups, including discontinued operations | The results of operations of this discontinued operation are as follows:
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Acquisition of Business (Tables) |
6 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Jun. 30, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of consideration allocated to acquisition | The consideration was allocated to acquisition cost as follows:
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Estimated fair values of assets acquired and liabilities assumed | The table below summarizes the Nexmo assets acquired and liabilities assumed as of June 3, 2016:
The table below summarizes the iCore assets acquired and liabilities assumed as of August 31, 2015:
The table below summarizes the Simple Signal assets acquired and liabilities assumed as of April 1, 2015:
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Intangible assets acquired | The intangible assets as of the closing date of the acquisition included:
The intangible assets as of the closing date of the acquisition included:
The intangible assets as of the closing date of the acquisition included:
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Schedule of goodwill | The following table provides a summary of the changes in the carrying amounts of goodwill:
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Pro forma information | The following unaudited supplemental pro forma information presents the combined historical results of operations of Vonage and Nexmo for the six months ended June 30, 2016 and June 30, 2015, as if the Acquisitions had been completed at the beginning of 2015.
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Basis of Presentation and Significant Accounting Policies - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
|||||
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Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Available-for-sale securities | $ 8,074 | $ 9,908 | |||||
Fair value, measurements, recurring | Level 1 assets | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Money market fund | [1] | 1,969 | 57 | ||||
Fair value, measurements, recurring | Level 2 assets | |||||||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | |||||||
Available-for-sale securities | [2] | $ 8,074 | $ 9,908 | ||||
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Basis of Presentation and Significant Accounting Policies - Earnings Per Share, Antidilutive Securities (Details) - shares shares in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Earnings per share, antidilutive securities: | ||||
Antidilutive securities excluded from earnings per common share | 27,448 | 23,765 | 26,412 | 23,525 |
Restricted stock units | ||||
Earnings per share, antidilutive securities: | ||||
Antidilutive securities excluded from earnings per common share | 12,851 | 7,596 | 12,012 | 7,196 |
Stock options | ||||
Earnings per share, antidilutive securities: | ||||
Antidilutive securities excluded from earnings per common share | 14,597 | 16,169 | 14,400 | 16,329 |
Supplemental Balance Sheet Account Information - Prepaid expenses and other current assets (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Nontrade receivables | $ 2,755 | $ 2,113 |
Services | 7,903 | 8,066 |
Telecommunications | 7,394 | 3,138 |
Insurance | 45 | 939 |
Marketing | 2,294 | 779 |
Other prepaids | 1,166 | 624 |
Prepaid expenses and other current assets | $ 21,557 | $ 15,659 |
Supplemental Balance Sheet Account Information - Software (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Property, Plant and Equipment [Line Items] | ||
Software, gross | $ 107,466 | $ 104,245 |
Less: accumulated amortization | (86,178) | (83,535) |
Software, net | 21,288 | 20,710 |
Purchased | ||
Property, Plant and Equipment [Line Items] | ||
Software, gross | 70,338 | 67,248 |
Licensed | ||
Property, Plant and Equipment [Line Items] | ||
Software, gross | 909 | 909 |
Internally developed | ||
Property, Plant and Equipment [Line Items] | ||
Software, gross | $ 36,219 | $ 36,088 |
Supplemental Balance Sheet Account Information - Debt related costs, net (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Debt related costs related to Revolving Credit Facility | $ 5,965 | $ 5,044 |
Less: accumulated amortization | (3,291) | (2,991) |
Debt related costs, net | $ 2,674 | $ 2,053 |
Supplemental Balance Sheet Account Information - Restricted Cash (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Restricted cash: | ||
Restricted cash | $ 1,938 | $ 2,587 |
Letter of credit-lease deposits | ||
Restricted cash: | ||
Restricted cash | 1,576 | 2,498 |
Cash reserves | ||
Restricted cash: | ||
Restricted cash | $ 362 | $ 89 |
Supplemental Balance Sheet Account Information - Other Assets (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Long term non-trade receivable | $ 0 | $ 6,623 |
Others | 3,311 | 2,980 |
Other assets | $ 3,311 | $ 9,603 |
Supplemental Balance Sheet Account Information - Accrued expense (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Compensation and related taxes and temporary labor | $ 25,499 | $ 33,196 |
Marketing | 14,444 | 24,891 |
Taxes and fees | 6,711 | 11,808 |
Litigation and settlements | 23 | 23 |
Telecommunications | 14,102 | 9,111 |
Other accruals | 11,196 | 11,523 |
Customer credits | 1,570 | 1,779 |
Professional fees | 4,572 | 2,080 |
Accrued interest | 37 | 22 |
Inventory | 715 | 1,514 |
Credit card fees | 266 | 180 |
Accrued expenses | $ 79,135 | $ 96,127 |
Supplemental Balance Sheet Account Information - Accumulated other comprehensive loss (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Foreign currency translation adjustment | $ (3,369) | $ (1,656) |
Unrealized loss on available-for sale securities | 5 | (21) |
Accumulated other comprehensive loss | $ (3,364) | $ (1,677) |
Supplemental Income Statement Account Information - Revenues (Details) - Revenues - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Supplemental Income Statement Information [Line Items] | ||||
USF fees | $ 19,709 | $ 19,028 | $ 39,229 | $ 37,543 |
Disconnect fees, net of credits and bad debt | 796 | 160 | 1,010 | 362 |
Initial activation fees | (58) | 188 | 310 | 408 |
Customer equipment rental | 1,179 | 912 | 2,281 | 1,682 |
Customer equipment fees | 1,705 | 1,351 | 3,786 | 2,524 |
Equipment recovery fees | 26 | 17 | 44 | 32 |
Shipping and handling fees | $ 571 | $ 621 | $ 1,179 | $ 1,224 |
Supplemental Income Statement Account Information - Cost of Services (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Cost of services | ||||
Supplemental Income Statement Information [Line Items] | ||||
USF costs | $ 19,709 | $ 19,028 | $ 39,229 | $ 37,543 |
Supplemental Income Statement Account Information - Cost of Goods Sold (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Cost of goods sold | ||||
Supplemental Income Statement Information [Line Items] | ||||
Shipping and handling cost | $ 1,307 | $ 1,274 | $ 2,769 | $ 2,559 |
Supplemental Income Statement Account Information - Sales and Marketing (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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Sales and marketing | ||||
Supplemental Income Statement Information [Line Items] | ||||
Advertising costs | $ 20,079 | $ 26,579 | $ 36,958 | $ 54,828 |
Supplemental Income Statement Account Information - General and Administrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
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General and administrative expense | ||||
Supplemental Income Statement Information [Line Items] | ||||
Acquisition related transaction costs | $ 5,057 | $ 222 | $ 5,150 | $ 660 |
Acquisition related integration costs | 0 | 8 | 0 | 25 |
Acquisition related consideration accounted for as compensation | $ 3,312 | $ 0 | 3,312 | $ 0 |
Nexmo | ||||
Supplemental Income Statement Information [Line Items] | ||||
Acquisition related transaction costs | $ 5,000 |
Supplemental Income Statement Account Information - Interest Expense (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Supplemental Income Statement Information [Line Items] | ||||
Amortization of debt related costs | $ 517 | $ 464 | ||
Interest expense | ||||
Supplemental Income Statement Information [Line Items] | ||||
Amortization of debt related costs | $ 266 | $ 226 | $ 517 | $ 464 |
Supplemental Income Statement Account Information - Other Income (Expense), Net (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | ||
---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Supplemental Income Statement Information [Line Items] | ||||
Net loss resulting from foreign exchange transactions | $ 0 | $ (1,358) | ||
Other income (expense), net | ||||
Supplemental Income Statement Information [Line Items] | ||||
Net loss resulting from foreign exchange transactions | $ 95 | $ 13 | $ 251 | $ (554) |
Long-Term Note and Revolving Credit Facility - Future Payment Under Long-term Debt (Details) - USD ($) $ in Thousands |
Jun. 30, 2016 |
Dec. 31, 2015 |
---|---|---|
Debt Instrument [Line Items] | ||
Long-term portion | $ 339,277 | $ 195,392 |
Term note | Secured debt | 2016 Credit Facility | ||
Debt Instrument [Line Items] | ||
2016 | 9,375 | |
2017 | 18,750 | |
2018 | 18,750 | |
2019 | 18,750 | |
2020 | 54,688 | |
Minimum future payments of principal | 120,313 | |
Less: unamortized debt related costs | 1,286 | |
current portion | 18,750 | |
Long-term portion | $ 100,277 | $ 0 |
Common Stock - Common Stock Repurchases (Details) - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | 6 Months Ended | ||||||
---|---|---|---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
[1] | Jun. 30, 2016 |
Jun. 30, 2015 |
||||
Common stock repurchases: | ||||||||
Value of common stock repurchased | $ 32,902 | |||||||
2014 repurchase program | ||||||||
Common stock repurchases: | ||||||||
Shares of common stock repurchased | 5,747 | 1,169 | 7,400 | 2,948 | [1] | |||
Value of common stock repurchased | $ 24,754 | $ 5,605 | $ 32,762 | $ 13,374 | [1] | |||
2014 repurchase program, unsettled at period end | ||||||||
Common stock repurchases: | ||||||||
Shares of common stock repurchased | 65 | |||||||
Value of common stock repurchased | $ 321 | |||||||
Commission costs on shares repurchased | $ 1 | |||||||
|
Common Stock - Narrative (Details) |
Dec. 09, 2014
USD ($)
|
Jun. 07, 2012 |
Jun. 30, 2016
USD ($)
|
Dec. 31, 2014
USD ($)
|
Feb. 12, 2013
USD ($)
|
Feb. 07, 2013
USD ($)
|
Jul. 25, 2012
USD ($)
|
---|---|---|---|---|---|---|---|
Equity [Abstract] | |||||||
Conversion of common to preferred shares under declared dividend right | 1 | ||||||
Maximum ownership percentage limit under the NOL Rights Agreement in which significant dilution would be imposed | 4.90% | ||||||
$50,000 repurchase program | |||||||
Common stock repurchases: | |||||||
Authorized amount of stock repurchased | $ 50,000,000 | $ 50,000,000 | |||||
Remaining authorized amount of stock repurchased program | $ 16,682,000 | ||||||
2012 repurchase program | |||||||
Common stock repurchases: | |||||||
Authorized amount of stock repurchased | $ 100,000,000 | ||||||
Remaining authorized amount of stock repurchased program | $ 219,000 | ||||||
Stock repurchase program, period in force | 4 years | ||||||
2014 repurchase program | |||||||
Common stock repurchases: | |||||||
Authorized amount of stock repurchased | $ 100,000,000 | ||||||
Remaining authorized amount of stock repurchased program | $ 52,043,000 |
Noncontrolling Interest and Redeemable Noncontrolling Interest - Narrative (Details) - Consolidated foreign subsidiary - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2015 |
Dec. 31, 2014 |
Sep. 30, 2013 |
|
Noncontrolling Interest [Line Items] | |||
Redeemable noncontrolling interest percentage ownership | 4.00% | 30.00% | |
Cash charges related to contract terminations and severance-related expenses | $ 500 |
Discontinued Operations - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 6 Months Ended | 12 Months Ended | ||
---|---|---|---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
Jun. 30, 2016 |
Jun. 30, 2015 |
Dec. 31, 2015 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Loss on disposal, net of taxes | $ 0 | $ 0 | $ 0 | $ 824 | |
Discontinued operations | Brazilian market, telephony services and related joint ventures | |||||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||||
Loss on disposal, net of taxes | $ 0 | $ 0 | $ 0 | $ 824 | $ 824 |
Write-off of noncontrolling interests | 907 | ||||
Intercompany loan forgiveness | 783 | ||||
Residual cumulative translation | 192 | ||||
Net tax benefit related to the write-off | $ 1,058 |
Acquisition of Business - Acquisition Cost (Details) - Nexmo - USD ($) $ in Thousands |
Jun. 03, 2016 |
May 05, 2016 |
---|---|---|
Business Acquisition [Line Items] | ||
Cash acquired | $ 16,094 | $ 16,094 |
Cash paid at closing (inclusive of cash acquired of $16,094) | 179,186 | |
Stock paid at closing | 31,591 | 31,591 |
Variable Payout Amount | 16,472 | |
Employee Payout Amounts | 4,779 | |
Acquisition Cost | $ 232,028 | $ 231,122 |
Acquisition of Business - Pro Forma Information (Details) - USD ($) $ / shares in Units, $ in Thousands |
6 Months Ended | |
---|---|---|
Jun. 30, 2016 |
Jun. 30, 2015 |
|
Business Combinations [Abstract] | ||
Revenue | $ 494,094 | $ 468,647 |
Net income attributable to Vonage | $ 5,887 | $ 6,522 |
Pro forma, earnings per share, basic (in dollars per share) | $ 0.03 | $ 0.03 |
Pro forma, earnings per share, diluted (in dollars per share) | $ 0.03 | $ 0.03 |
Acquisition of Business - Goodwill (Details) $ in Thousands |
6 Months Ended |
---|---|
Jun. 30, 2016
USD ($)
| |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 222,106 |
Goodwill, ending balance | 362,269 |
iCore | |
Goodwill [Roll Forward] | |
Increase in goodwill related to acquisitions | 22 |
Simple Signal | |
Goodwill [Roll Forward] | |
Increase in goodwill related to acquisitions | 16 |
Nexmo | |
Goodwill [Roll Forward] | |
Increase in goodwill related to acquisitions | 140,873 |
Currency translation adjustments | $ (748) |
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