UNITED STATES SECURITIES AND EXCHANGE COMMISSION • WASHINGTON, D.C. 20549 |
x | Annual Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 | or | o | Transition Report Pursuant to Section 13 or 15(d) of The Securities Exchange Act of 1934 | ||
For the fiscal year ended December 31, 2016 | For the transition period from to | |||||
Delaware | 11-3547680 | |
(State or other jurisdiction of incorporation or organization) | (I.R.S. Employer Identification No.) | |
23 Main Street, Holmdel, New Jersey | 07733 | |
(Address of principal executive offices) | (Zip Code) |
Title of each class | Name of each exchange on which registered | |
Common Stock, Par Value $0.001 Per Share | The New York Stock Exchange |
Page | ||
PART I | ||
Item 1. | ||
Item 1A. | ||
Item 1B. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
PART II | ||
Item 5. | ||
Item 6. | ||
Item 7. | ||
Item 7A. | ||
Item 8. | ||
Item 9. | ||
Item 9A. | ||
Item 9B. | ||
PART III | ||
Item 10. | ||
Item 11. | ||
Item 12. | ||
Item 13. | ||
Item 14. | ||
PART IV | ||
Item 15. | ||
FORWARD-LOOKING STATEMENTS |
FINANCIAL INFORMATION PRESENTATION |
OVERVIEW AND STRATEGY |
SERVICE OFFERINGS |
NETWORK OPERATIONS |
MARKETING |
SALES AND DISTRIBUTION |
INTELLECTUAL PROPERTY |
COMPETITION |
SEGMENT INFORMATION |
FINANCIAL INFORMATION ABOUT GEOGRAPHIC AREAS |
EMPLOYEES |
AVAILABLE INFORMATION |
• | traditional telephone and wireless service providers such as AT&T, Verizon Communications, CenturyLink, Sprint, T-Mobile, and Verizon Wireless; |
• | cable companies such as Altice, Cablevision, Comcast Corporation, Cox Communications, and Spectrum; and |
• | software as a service (SaaS) companies and other alternative communication providers, such as Twilio, EvolveIP, Jive, Mitel, RingCentral, Shoretel, Thinking Phone, West Unified Communications Services, 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. |
Location | Business Use | Square Footage | Lease Expiration Date | ||
Holmdel, New Jersey | Corporate Headquarters, Network Operations, Customer Services, Sales and Marketing, Administration | 350,000 | 2023 | ||
New York, New York | Sales and Marketing, Administration, and Product Development | 10,166 | 2026 | ||
Dallas, Texas | Sales and Marketing, Administration, and Product Development | 5,567 | 2021 | ||
Atlanta, Georgia | Sales and Marketing, Administration, and Product Development | 90,209 | 2020 | ||
Scottsdale, Arizona | Network Operations, Customer Services, Marketing, and Administration | 37,870 | 2021 | ||
Englewood, Colorado | Sales and Marketing | 9,573 | 2021 | ||
Minneapolis, Minnesota | Sales and Marketing | 2,206 | 2017 | ||
Murray, Utah | Sales and Marketing | 1,062 | 2017 | ||
Oak Brook, Illinois | Sales and Marketing | 4,890 | 2019 | ||
Houston, Texas | Sales and Marketing | 4,040 | 2020 | ||
McLean, Virginia | Network Operations, Customer Services, Sales and Marketing, Administration | 33,656 | 2017 | ||
Philadelphia, Pennsylvania | Network Operations, Customer Services, Sales and Marketing | 5,795 | 2020 | ||
San Francisco, CA | Sales and Marketing, Administration, and Customer Services | 5,000 | 2018 | ||
London, United Kingdom | Sales and Marketing, Administration | 10,185 | 2020 | ||
Tel Aviv, Israel | Application Development | 7,158 | 2020 | ||
577,377 |
Price Range of Common Stock | |||||||
High | Low | ||||||
2016 | |||||||
Fourth quarter | $ | 7.57 | $ | 6.10 | |||
Third quarter | $ | 6.75 | $ | 5.43 | |||
Second quarter | $ | 6.29 | $ | 3.82 | |||
First quarter | $ | 5.88 | $ | 4.13 | |||
2015 | |||||||
Fourth quarter | $ | 7.42 | $ | 5.61 | |||
Third quarter | $ | 6.69 | $ | 4.59 | |||
Second quarter | $ | 5.20 | $ | 4.44 | |||
First quarter | $ | 5.16 | $ | 3.74 |
COMPARISON OF THE CUMULATIVE TOTAL RETURN ON COMMON STOCK BETWEEN DECEMBER 31, 2011 AND DECEMBER 31, 2016 |
December 31, | |||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||
Vonage Holdings Corp. | $ | 96.73 | $ | 135.92 | $ | 155.51 | $ | 234.29 | $ | 279.59 | |||||||||
NASDAQ Telecommunications | $ | 102.00 | $ | 126.50 | $ | 137.77 | $ | 127.44 | $ | 146.39 | |||||||||
S&P 500 | $ | 113.41 | $ | 146.98 | $ | 163.72 | $ | 162.53 | $ | 178.02 | |||||||||
NASDAQ Composite (DJ) | $ | 112.93 | $ | 139.10 | $ | 144.97 | $ | 135.66 | $ | 147.88 |
COMPARISON OF THE CUMULATIVE TOTAL RETURN ON COMMON STOCK BETWEEN DECEMBER 31, 2011 AND DECEMBER 31, 2016 |
December 31, | |||||||||||||||||||
2012 | 2013 | 2014 | 2015 | 2016 | |||||||||||||||
Vonage Holdings Corp. | $ | 96.73 | $ | 135.92 | $ | 155.51 | $ | 234.29 | $ | 279.59 | |||||||||
NASDAQ Telecommunications | $ | 102.00 | $ | 126.50 | $ | 137.77 | $ | 127.44 | $ | 146.39 | |||||||||
Russell 2000 Index | $ | 114.63 | $ | 157.05 | $ | 162.60 | $ | 153.31 | $ | 183.17 | |||||||||
NASDAQ Computer | $ | 112.48 | $ | 148.41 | $ | 177.91 | $ | 189.02 | $ | 212.21 |
For the years ended December 31, | |||||||||||||||||||
(In thousands, except per share amounts) | 2016 (1) | 2015 (2) | 2014 (3) | 2013 (4) | 2012 | ||||||||||||||
Statement of Operations Data: | |||||||||||||||||||
Total revenues | $ | 955,621 | $ | 895,072 | $ | 868,854 | $ | 829,067 | $ | 849,114 | |||||||||
Operating Expenses: | |||||||||||||||||||
Cost of services (5) | 321,373 | 261,768 | 231,383 | 237,244 | 259,224 | ||||||||||||||
Cost of goods sold | 33,777 | 34,210 | 36,500 | 37,586 | 39,133 | ||||||||||||||
Sales and marketing | 330,969 | 347,896 | 373,737 | 366,307 | 340,130 | ||||||||||||||
Engineering and development | 29,759 | 27,220 | 20,869 | 14,794 | 17,304 | ||||||||||||||
General and administrative | 123,304 | 109,153 | 98,780 | 83,107 | 70,127 | ||||||||||||||
Depreciation and amortization | 72,285 | 61,833 | 49,514 | 36,054 | 33,324 | ||||||||||||||
Loss from abandonment of software assets | — | — | — | — | 25,262 | ||||||||||||||
911,467 | 842,080 | 810,783 | 775,092 | 784,504 | |||||||||||||||
Income from operations | 44,154 | 52,992 | 58,071 | 53,975 | 64,610 | ||||||||||||||
Other Income (Expense): | |||||||||||||||||||
Interest income | 79 | 89 | 207 | 307 | 109 | ||||||||||||||
Interest expense | (13,042 | ) | (8,786 | ) | (6,823 | ) | (6,557 | ) | (5,986 | ) | |||||||||
Other (expense) income, net | (346 | ) | (842 | ) | 11 | (104 | ) | (11 | ) | ||||||||||
(13,309 | ) | (9,539 | ) | (6,605 | ) | (6,354 | ) | (5,888 | ) | ||||||||||
Income from continuing operations before income tax expense | 30,845 | 43,453 | 51,466 | 47,621 | 58,722 | ||||||||||||||
Income tax (expense) benefit | (12,938 | ) | (18,418 | ) | (21,759 | ) | (18,194 | ) | (22,095 | ) | |||||||||
Income from continuing operations | $ | 17,907 | $ | 25,035 | $ | 29,707 | $ | 29,427 | $ | 36,627 | |||||||||
Loss from discontinued operations | — | (1,615 | ) | (10,260 | ) | (1,626 | ) | — | |||||||||||
Loss on disposal, net of taxes | — | (824 | ) | — | — | — | |||||||||||||
Discontinued operations | — | (2,439 | ) | (10,260 | ) | (1,626 | ) | — | |||||||||||
Net Income | 17,907 | 22,596 | 19,447 | 27,801 | 36,627 | ||||||||||||||
Plus: Net loss from discontinued operations attributable to noncontrolling interest | $ | — | $ | 59 | $ | 819 | $ | 488 | $ | — | |||||||||
Net income attributable to Vonage | $ | 17,907 | $ | 22,655 | $ | 20,266 | $ | 28,289 | $ | 36,627 | |||||||||
Net Income per common share - continuing operations: | |||||||||||||||||||
Basic | $ | 0.08 | $ | 0.12 | $ | 0.14 | $ | 0.14 | $ | 0.16 | |||||||||
Diluted | $ | 0.08 | $ | 0.11 | $ | 0.14 | $ | 0.13 | $ | 0.16 | |||||||||
Net Loss per common share - discontinuing operations attributable to Vonage: | |||||||||||||||||||
Basic | — | (0.01 | ) | (0.04 | ) | (0.01 | ) | — | |||||||||||
Diluted | — | (0.01 | ) | (0.04 | ) | (0.01 | ) | — | |||||||||||
Net Income per common share - attributable to Vonage: | |||||||||||||||||||
Basic | 0.08 | 0.11 | 0.10 | 0.13 | 0.16 | ||||||||||||||
Diluted | 0.08 | 0.10 | 0.09 | 0.13 | 0.16 | ||||||||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||
Basic | 215,751 | 213,147 | 209,822 | 211,563 | 224,264 | ||||||||||||||
Diluted | 231,941 | 224,110 | 219,419 | 220,520 | 232,633 |
For the years ended December 31, | |||||||||||||||||||
(dollars in thousands) | 2016 (1) | 2015 (2) | 2014 (3) | 2013 (4) | 2012 | ||||||||||||||
Statement of Cash Flow Data: | |||||||||||||||||||
Net cash provided by operating activities | $ | 87,012 | $ | 129,731 | $ | 92,542 | $ | 88,243 | $ | 119,843 | |||||||||
Net cash used in investing activities | (190,733 | ) | (152,696 | ) | (118,528 | ) | (120,985 | ) | (25,472 | ) | |||||||||
Net cash provided by (used in) financing activities | 74,498 | 40,205 | (14,239 | ) | 21,891 | (56,257 | ) | ||||||||||||
December 31, | |||||||||||||||||||
(dollars in thousands) | 2016 (1) | 2015 (2) | 2014 (3) | 2013 (4) | 2012 | ||||||||||||||
Balance Sheet Data: | |||||||||||||||||||
Cash, cash equivalents and marketable securities | $ | 29,679 | $ | 67,634 | $ | 47,959 | $ | 84,663 | $ | 97,110 | |||||||||
Property and equipment, net | 48,415 | 49,483 | 49,630 | 52,243 | 60,533 | ||||||||||||||
Goodwill and intangible assets, net | 559,619 | 360,305 | 253,376 | 160,477 | 6,681 | ||||||||||||||
Total deferred tax assets, including current portion, net | 188,966 | 226,572 | 247,016 | 264,900 | 306,113 | ||||||||||||||
Restricted cash | 1,851 | 2,587 | 3,405 | 4,405 | 5,656 | ||||||||||||||
Total assets | 940,422 | 784,566 | 674,460 | 642,158 | 547,042 | ||||||||||||||
Total notes payable and indebtedness under revolving credit facility, including current portion | 318,874 | 210,392 | 156,032 | 121,075 | 42,153 | ||||||||||||||
Capital lease obligations | 3,428 | 7,761 | 10,201 | 13,090 | 15,561 | ||||||||||||||
Total liabilities | 499,125 | 395,825 | 330,963 | 304,122 | 225,627 | ||||||||||||||
Redeemable noncontrolling interest | — | — | — | (38 | ) | — | |||||||||||||
Total stockholders’ equity | 441,297 | 388,741 | 343,497 | 338,074 | 321,415 |
OVERVIEW |
Business | For the Years Ended December 31, | ||||||||||
2016 | 2015 | 2014 | |||||||||
Revenues (1) | $ | 376,352 | $ | 219,027 | $ | 94,444 | |||||
Average monthly revenues per seat (2) | $ | 44.94 | $ | 42.79 | $ | 32.44 | |||||
Seats (at period end) (2) | 638,096 | 541,884 | 311,193 | ||||||||
Revenue churn (2) | 1.4 | % | 1.2 | % | 1.2 | % | |||||
Registered developers (3) | 206,734 | N/A | N/A |
Consumer | For the Years Ended December 31, | ||||||||||
2016 | 2015 | 2014 | |||||||||
Revenues | $ | 579,269 | $ | 676,045 | $ | 774,410 | |||||
Average monthly revenues per subscriber line | $ | 26.43 | $ | 27.58 | $ | 28.64 | |||||
Subscriber lines (at period end) | 1,711,366 | 1,940,825 | 2,144,681 | ||||||||
Customer churn | 2.2 | % | 2.3 | % | 2.6 | % |
REVENUES |
OPERATING EXPENSES |
> | Access charges that we pay to other telephone 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 equipment sold to our customers or retailers. |
> | The cost of shipping and handling. |
> | The cost of certain products including equipment 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. |
> | Impairment of investment in software assets. |
OTHER INCOME (EXPENSE) |
> | 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. |
RESULTS OF OPERATION |
For the Years Ended December 31, | ||||||||
2016 | 2015 | 2014 | ||||||
Revenues | 100 | % | 100 | % | 100 | % | ||
Operating Expenses: | ||||||||
Cost of services (excluding depreciation and amortization) | 34 | 29 | 27 | |||||
Cost of goods sold | 3 | 4 | 4 | |||||
Sales and marketing | 35 | 39 | 43 | |||||
Engineering and development | 3 | 3 | 2 | |||||
General and administrative | 13 | 12 | 11 | |||||
Depreciation and amortization | 7 | 7 | 6 | |||||
95 | 94 | 93 | ||||||
Income from operations | 5 | 6 | 7 | |||||
Other Income (Expense): | ||||||||
Interest income | — | — | — | |||||
Interest expense | (2 | ) | (1 | ) | (1 | ) | ||
Other expense, net | — | — | — | |||||
(2 | ) | (1 | ) | (1 | ) | |||
Income from continuing operation before income tax expense | 3 | 5 | 6 | |||||
Income tax expense | (1 | ) | (2 | ) | (3 | ) | ||
Income from continuing operations | 2 | 3 | 3 | |||||
Loss from discontinued operations | — | — | (1 | ) | ||||
Loss on disposal, net of taxes | — | — | — | |||||
Discontinued operations | — | — | (1 | ) | ||||
Net income | 2 | 3 | 2 | |||||
Plus: Net loss from discontinued operations attributable to noncontrolling interest | — | — | — | |||||
Net income attributable to Vonage | 2 | % | 3 | % | 2 | % |
Revenues, Cost of Services and Cost of Goods Sold | For the years ended December 31, | Dollar Change 2016 vs. 2015 | Dollar Change 2015 vs. 2014 | Percent Change 2016 vs. 2015 | Percent Change 2015 vs. 2014 | ||||||||||||||||||||
(in thousands, except percentages) | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Revenues | $ | 955,621 | $ | 895,072 | $ | 868,854 | $ | 60,549 | $ | 26,218 | 7 | % | 3 | % | |||||||||||
Cost of services (1) | 321,373 | 261,768 | 231,383 | 59,605 | 30,385 | 23 | % | 13 | % | ||||||||||||||||
Cost of goods sold | 33,777 | 34,210 | 36,500 | (433 | ) | (2,290 | ) | (1 | )% | (6 | )% |
Business Revenues, Cost of Revenues and Gross Margin | For the years ended December 31, | Dollar Change 2016 vs. 2015 | Dollar Change 2015 vs. 2014 | Percent Change 2016 vs. 2015 | Percent Change 2015 vs. 2014 | ||||||||||||||||||||
(in thousands, except percentages) | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||
Service revenues | $ | 301,877 | $ | 170,489 | $ | 89,198 | $ | 131,388 | $ | 81,291 | 77 | % | 91 | % | |||||||||||
Product revenues (1) | 52,450 | 35,545 | 2,041 | 16,905 | 33,504 | 48 | % | — | % | ||||||||||||||||
Service and product revenues | 354,327 | 206,034 | 91,239 | 148,293 | 114,795 | 72 | % | 126 | % | ||||||||||||||||
USF revenues | 22,025 | 12,993 | 3,205 | 9,032 | 9,788 | 70 | % | 305 | % | ||||||||||||||||
Total revenues | 376,352 | 219,027 | 94,444 | 157,325 | 124,583 | 72 | % | 132 | % | ||||||||||||||||
Cost of revenues | |||||||||||||||||||||||||
Service cost of revenues (2) | 111,485 | 44,997 | 17,885 | 66,488 | 27,112 | 148 | % | 152 | % | ||||||||||||||||
Product cost of revenues (1) | 51,129 | 31,185 | 6,861 | 19,944 | 24,324 | 64 | % | 355 | % | ||||||||||||||||
Service and product cost of revenues | 162,614 | 76,182 | 24,746 | 86,432 | 51,436 | 113 | % | 208 | % | ||||||||||||||||
USF cost of revenues | 22,036 | 13,022 | 3,248 | 9,014 | 9,774 | 69 | % | 301 | % | ||||||||||||||||
Total cost of revenues | 184,650 | 89,204 | 27,994 | 95,446 | 61,210 | 107 | % | 219 | % | ||||||||||||||||
Gross margin | |||||||||||||||||||||||||
Service margin | 190,392 | 125,492 | 71,313 | 64,900 | 54,179 | 52 | % | 76 | % | ||||||||||||||||
Gross margin ex-USF (Service and product margin) | 191,713 | 129,852 | 66,493 | 61,861 | 63,359 | 48 | % | 95 | % | ||||||||||||||||
Gross margin | $ | 191,702 | $ | 129,823 | $ | 66,450 | $ | 61,879 | $ | 63,373 | 48 | % | 95 | % | |||||||||||
Gross margin % | |||||||||||||||||||||||||
Service margin % | 63.1 | % | 73.6 | % | 79.9 | % | |||||||||||||||||||
Gross margin ex-USF (Service and product margin) % | 54.1 | % | 63.0 | % | 72.9 | % | |||||||||||||||||||
Gross margin % | 50.9 | % | 59.3 | % | 70.4 | % |
Consumer Revenues, Cost of Revenues and Gross Margin | For the years ended December 31, | Dollar Change 2016 vs. 2015 | Dollar Change 2015 vs. 2014 | Percent Change 2016 vs. 2015 | Percent Change 2015 vs. 2014 | ||||||||||||||||||||
(in thousands, except percentages) | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Revenues | |||||||||||||||||||||||||
Service revenues | $ | 522,515 | $ | 612,822 | $ | 705,224 | $ | (90,307 | ) | $ | (92,402 | ) | (15 | )% | (13 | )% | |||||||||
Product revenues (1) | 702 | 645 | 1,202 | 57 | (557 | ) | 9 | % | (46 | )% | |||||||||||||||
Service and product revenues | 523,217 | 613,467 | 706,426 | (90,250 | ) | (92,959 | ) | (15 | )% | (13 | )% | ||||||||||||||
USF revenues | 56,052 | 62,578 | 67,984 | (6,526 | ) | (5,406 | ) | (10 | )% | (8 | )% | ||||||||||||||
Total revenues | 579,269 | 676,045 | 774,410 | (96,776 | ) | (98,365 | ) | (14 | )% | (13 | )% | ||||||||||||||
Cost of revenues | |||||||||||||||||||||||||
Service cost of revenues (2) | 100,054 | 123,580 | 142,184 | (23,526 | ) | (18,604 | ) | (19 | )% | (13 | )% | ||||||||||||||
Product cost of revenues (1) | 14,394 | 20,616 | 29,721 | (6,222 | ) | (9,105 | ) | (30 | )% | (31 | )% | ||||||||||||||
Service and product cost of revenues | 114,448 | 144,196 | 171,905 | (29,748 | ) | (27,709 | ) | (21 | )% | (16 | )% | ||||||||||||||
USF cost of revenues | 56,052 | 62,578 | 67,984 | (6,526 | ) | (5,406 | ) | (10 | )% | (8 | )% | ||||||||||||||
Total cost of revenues | 170,500 | 206,774 | 239,889 | (36,274 | ) | (33,115 | ) | (18 | )% | (14 | )% | ||||||||||||||
Gross margin | |||||||||||||||||||||||||
Service margin | 422,461 | 489,242 | 563,040 | (66,781 | ) | (73,798 | ) | (14 | )% | (13 | )% | ||||||||||||||
Gross margin ex-USF (Service and product margin) | 408,769 | 469,271 | 534,521 | (60,502 | ) | (65,250 | ) | (13 | )% | (12 | )% | ||||||||||||||
Gross margin | $ | 408,769 | $ | 469,271 | $ | 534,521 | $ | (60,502 | ) | $ | (65,250 | ) | (13 | )% | (12 | )% | |||||||||
Gross margin % | |||||||||||||||||||||||||
Service gross margin % | 80.9 | % | 79.8 | % | 79.8 | % | |||||||||||||||||||
Gross margin ex-USF (Service and product margin) % | 78.1 | % | 76.5 | % | 75.7 | % | |||||||||||||||||||
Gross margin % | 70.6 | % | 69.4 | % | 69.0 | % |
Sales and Marketing | For the years ended December 31, | Dollar Change 2016 vs. 2015 | Dollar Change 2015 vs. 2014 | Percent Change 2016 vs. 2015 | Percent Change 2015 vs. 2014 | ||||||||||||||||||||
(in thousands, except percentages) | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Sales and marketing | $ | 330,969 | $ | 347,896 | $ | 373,737 | $ | (16,927 | ) | $ | (25,841 | ) | (5 | )% | (7 | )% |
Engineering and Development | For the years ended December 31, | Dollar Change 2016 vs. 2015 | Dollar Change 2015 vs. 2014 | Percent Change 2016 vs. 2015 | Percent Change 2015 vs. 2014 | ||||||||||||||||||||
(in thousands, except percentages) | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Engineering and development | $ | 29,759 | $ | 27,220 | $ | 20,869 | $ | 2,539 | $ | 6,351 | 9 | % | 30 | % |
General and Administrative | For the years ended December 31, | Dollar Change 2016 vs. 2015 | Dollar Change 2015 vs. 2014 | Percent Change 2016 vs. 2015 | Percent Change 2015 vs. 2014 | ||||||||||||||||||||
(in thousands, except percentages) | 2016 | 2015 | 2014 | ||||||||||||||||||||||
General and administrative | $ | 123,304 | $ | 109,153 | $ | 98,780 | $ | 14,151 | $ | 10,373 | 13 | % | 11 | % |
Depreciation and Amortization | For the years ended December 31, | Dollar Change 2016 vs. 2015 | Dollar Change 2015 vs. 2014 | Percent Change 2016 vs. 2015 | Percent Change 2015 vs. 2014 | ||||||||||||||||||||
(in thousands, except percentages) | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Depreciation and amortization | $ | 72,285 | $ | 61,833 | $ | 49,514 | $ | 10,452 | $ | 12,319 | 17 | % | 25 | % |
Other Income (Expense) | For the years ended December 31, | Dollar Change 2016 vs. 2015 | Dollar Change 2015 vs. 2014 | Percent Change 2016 vs. 2015 | Percent Change 2015 vs. 2014 | ||||||||||||||||||||
(in thousands, except percentages) | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Interest income | $ | 79 | $ | 89 | $ | 207 | $ | (10 | ) | $ | (118 | ) | (11 | )% | (57 | )% | |||||||||
Interest expense | (13,042 | ) | (8,786 | ) | (6,823 | ) | (4,256 | ) | (1,963 | ) | (48 | )% | (29 | )% | |||||||||||
Other income (expense), net | (346 | ) | (842 | ) | 11 | 496 | (853 | ) | 59 | % | (7,755 | )% | |||||||||||||
$ | (13,309 | ) | $ | (9,539 | ) | $ | (6,605 | ) |
Income Tax Expense | For the years ended December 31, | Dollar Change 2016 vs. 2015 | Dollar Change 2015 vs. 2014 | Percent Change 2016 vs. 2015 | Percent Change 2015 vs. 2014 | ||||||||||||||||||||
(in thousands, except percentages) | 2016 | 2015 | 2014 | ||||||||||||||||||||||
Income tax expense | $ | (12,938 | ) | $ | (18,418 | ) | $ | (21,759 | ) | $ | 5,480 | $ | 3,341 | 30 | % | 15 | % | ||||||||
Effective tax rate | 42 | % | 43 | % | 42 | % |
Discontinued Operations Attributable to Vonage | For the years ended December 31, | Dollar Change 2016 vs. 2015 | Dollar Change 2015 vs. 2014 | Percent Change 2016 vs. 2015 | Percent Change 2015 vs. 2014 | ||||||||||||||||||||
2016 | 2015 | 2014 | |||||||||||||||||||||||
Loss from discontinued operations | $ | — | $ | (1,615 | ) | $ | (10,260 | ) | $ | 1,615 | $ | 8,645 | 100 | % | 84 | % | |||||||||
Loss on disposal, net of taxes | — | (824 | ) | — | 824 | (824 | ) | 100 | % | — | % | ||||||||||||||
Discontinued operations | — | (2,439 | ) | (10,260 | ) | 2,439 | 7,821 | 100 | % | 76 | % | ||||||||||||||
Loss from discontinued operations attributable to noncontrolling interest | — | 59 | 819 | (59 | ) | (760 | ) | (100 | )% | (93 | )% | ||||||||||||||
Loss from discontinued operations attributable to Vonage | — | (2,380 | ) | (9,441 | ) | 2,380 | 7,061 | 100 | % | 75 | % |
QUARTERLY RESULTS OF OPERATIONS |
For the quarter ended | |||||||||||||||||||||||||||||||
(dollars in thousands, except operating data) | Mar 31, 2015 | Jun 30, 2015 (5) | Sep 30, 2015 (6) | Dec 31, 2015 | Mar 31, 2016 | Jun 30, 2016 (7) | Sep 30, 2016 | Dec 31, 2016 | |||||||||||||||||||||||
Total revenues | $ | 219,730 | $ | 221,858 | $ | 223,360 | $ | 230,124 | $ | 226,824 | $ | 233,675 | $ | 248,359 | $ | 246,763 | |||||||||||||||
Operating expenses: | |||||||||||||||||||||||||||||||
Cost of services (1) | 61,853 | 64,209 | 67,193 | 68,513 | 69,150 | 76,078 | 87,377 | 88,768 | |||||||||||||||||||||||
Cost of goods sold | 9,190 | 8,217 | 8,206 | 8,597 | 9,066 | 8,352 | 8,591 | 7,768 | |||||||||||||||||||||||
Sales and marketing | 85,564 | 84,385 | 88,028 | 89,919 | 79,601 | 83,344 | 83,731 | 84,293 | |||||||||||||||||||||||
Engineering and development | 6,605 | 6,864 | 6,830 | 6,921 | 6,834 | 7,243 | 8,075 | 7,607 | |||||||||||||||||||||||
General and administrative | 23,234 | 27,162 | 28,860 | 29,897 | 26,670 | 35,053 | 27,538 | 34,043 | |||||||||||||||||||||||
Depreciation and amortization | 13,945 | 14,463 | 15,446 | 17,979 | 16,979 | 18,218 | 18,018 | 19,070 | |||||||||||||||||||||||
200,391 | 205,300 | 214,563 | 221,826 | 208,300 | 228,288 | 233,330 | 241,549 | ||||||||||||||||||||||||
Income from operations | 19,339 | 16,558 | 8,797 | 8,298 | 18,524 | 5,387 | 15,029 | 5,214 | |||||||||||||||||||||||
Other income (expense): | |||||||||||||||||||||||||||||||
Interest income | 20 | 21 | 24 | 24 | 21 | 25 | 19 | 14 | |||||||||||||||||||||||
Interest expense | (1,935 | ) | (2,088 | ) | (2,222 | ) | (2,541 | ) | (2,446 | ) | (3,057 | ) | (3,974 | ) | (3,565 | ) | |||||||||||||||
Other (expense) income, net | (577 | ) | 32 | (50 | ) | (247 | ) | 154 | 104 | (495 | ) | (109 | ) | ||||||||||||||||||
(2,492 | ) | (2,035 | ) | (2,248 | ) | (2,764 | ) | (2,271 | ) | (2,928 | ) | (4,450 | ) | (3,660 | ) | ||||||||||||||||
Income from continuing operations before income tax expense | 16,847 | 14,523 | 6,549 | 5,534 | 16,253 | 2,459 | 10,579 | 1,554 | |||||||||||||||||||||||
Income tax expense | (6,998 | ) | (6,176 | ) | (3,116 | ) | (2,128 | ) | (8,322 | ) | (1,562 | ) | (1,501 | ) | (1,553 | ) | |||||||||||||||
Net income from continuing operations | 9,849 | 8,347 | 3,433 | 3,406 | 7,931 | 897 | 9,078 | 1 | |||||||||||||||||||||||
Loss from discontinued operations | (1,615 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||
Loss on disposal, net of taxes | (824 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||
Discontinued operations | (2,439 | ) | — | — | — | — | — | — | — | ||||||||||||||||||||||
Net income | 7,410 | 8,347 | 3,433 | 3,406 | 7,931 | 897 | 9,078 | 1 | |||||||||||||||||||||||
Plus: Net loss from discontinued operations attributable to noncontrolling interest | 59 | — | — | — | — | — | — | — | |||||||||||||||||||||||
Net income attributable to Vonage | $ | 7,469 | $ | 8,347 | $ | 3,433 | $ | 3,406 | $ | 7,931 | $ | 897 | $ | 9,078 | $ | 1 | |||||||||||||||
Net Income per common share - continuing operations: | |||||||||||||||||||||||||||||||
Basic | $ | 0.05 | $ | 0.04 | $ | 0.02 | $ | 0.02 | $ | 0.04 | $ | — | $ | 0.04 | $ | — | |||||||||||||||
Diluted | $ | 0.04 | $ | 0.04 | $ | 0.02 | $ | 0.01 | $ | 0.04 | $ | — | $ | 0.04 | $ | — | |||||||||||||||
Net Loss per common share - discontinuing operations attributable to Vonage: | |||||||||||||||||||||||||||||||
Basic | $ | (0.01 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Diluted | $ | (0.01 | ) | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||
Net Income per common share - attributable to Vonage: | |||||||||||||||||||||||||||||||
Basic | $ | 0.04 | $ | 0.04 | $ | 0.02 | $ | 0.02 | $ | 0.04 | $ | — | $ | 0.04 | $ | — | |||||||||||||||
Diluted | $ | 0.03 | $ | 0.04 | $ | 0.02 | $ | 0.01 | $ | 0.04 | $ | — | $ | 0.04 | $ | — | |||||||||||||||
Weighted-average common shares outstanding: | |||||||||||||||||||||||||||||||
Basic | 211,844 | 213,582 | 213,291 | 213,864 | 214,039 | 213,558 | 217,000 | 218,375 | |||||||||||||||||||||||
Diluted | 220,589 | 222,188 | 225,182 | 227,751 | 224,225 | 222,700 | 234,868 | 237,670 |
For the quarter ended | |||||||||||||||||||||||
(dollars in thousands, except operating data) | Mar 31, 2015 | Jun 30, 2015 (5) | Sep 30, 2015 (6) | Dec 31, 2015 | Mar 31, 2016 | Jun 30, 2016 (7) | Sep 30, 2016 | Dec 31, 2016 | |||||||||||||||
Operating Data: | |||||||||||||||||||||||
Business | |||||||||||||||||||||||
Revenues (2) | 41,900 | 49,102 | 57,075 | 70,949 | 73,820 | 85,712 | 106,309 | 110,511 | |||||||||||||||
Average monthly revenues per seat (3) | 43.05 | 42.28 | 41.56 | 44.79 | 44.25 | 44.76 | 45.50 | 44.65 | |||||||||||||||
Seat (at period end) (3) | 337,649 | 401,256 | 514,184 | 541,884 | 570,358 | 591,707 | 615,728 | 638,096 | |||||||||||||||
Revenue churn (3) | 1.4 | % | 1.3 | % | 1.3 | % | 1.1 | % | 1.3 | % | 1.4 | % | 1.4 | % | 1.4 | % | |||||||
Registered developers (4) | N/A | N/A | N/A | N/A | N/A | 155,287 | 175,759 | 206,734 | |||||||||||||||
Consumer | |||||||||||||||||||||||
Revenues | 177,830 | 172,756 | 166,285 | 159,175 | 153,004 | 147,963 | 142,050 | 136,252 | |||||||||||||||
Average monthly revenues per subscriber line | 27.97 | 27.79 | 27.38 | 26.93 | 26.68 | 26.61 | 26.36 | 26.11 | |||||||||||||||
Subscriber lines (at period end) | 2,094,365 | 2,049,424 | 1,998,982 | 1,940,825 | 1,881,826 | 1,824,668 | 1,767,212 | 1,711,366 | |||||||||||||||
Customer churn | 2.4 | % | 2.2 | % | 2.3 | % | 2.2 | % | 2.2 | % | 2.1 | % | 2.2 | % | 2.2 | % |
(1) | Excludes depreciation and amortization of $5,724, $6,005, $6,415, and $6,724 for the quarters ended March 31, June 30, September 30 and December 31, 2015, respectively, and $6,833, $6,985, $7,460, and $7,211 for the quarters ended March 31, June 30, September 30 and December 31, 2016, respectively. |
(2) | Includes revenues from CPaaS of $7,698, $23,909, and $26,541 for the quarters ended June 30, 2016, September 30, 2016, and December 31, 2016, respectively. |
(3) | UCaaS only. |
(4) | CPaaS only. |
(5) | The quarter ended June 30, 2015 includes the impacts of the acquisition of Simple Signal, which was completed on April 1, 2015. |
(6) | The quarter ended September 30, 2015 includes the impacts of the acquisition of iCore, which was completed on August 31, 2015. |
(7) | The quarter ended June 30, 2016 includes the impacts of the acquisition of Nexmo, which was completed on June 3, 2016. |
LIQUIDITY AND CAPITAL RESOURCES |
For the years ended December 31, | |||||||||||
(dollars in thousands) | 2016 | 2015 | 2014 | ||||||||
Net cash provided by operating activities | $ | 87,012 | $ | 129,731 | $ | 92,542 | |||||
Net cash used in investing activities | (190,733 | ) | (152,696 | ) | (118,528 | ) | |||||
Net cash provided by (used in) financing activities | 74,498 | 40,205 | (14,239 | ) |
> | 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 |
> | 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 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, 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. |
CONTRACTUAL OBLIGATIONS AND OTHER COMMERCIAL COMMITMENTS |
Payments Due by Period | |||||||||||||||||||
(dollars in thousands) | Total | Less than 1 year | 2-3 years | 4-5 years | After 5 years | ||||||||||||||
(unaudited) | |||||||||||||||||||
Contractual Obligations: | |||||||||||||||||||
2016 term note | $ | 110,938 | $ | 18,750 | $ | 37,500 | $ | 54,688 | $ | — | |||||||||
2016 revolving credit facility | $ | 209,000 | — | — | 209,000 | ||||||||||||||
Interest related to 2016 term note | 10,884 | 4,014 | 5,861 | 1,009 | — | ||||||||||||||
Interest related to 2016 revolving credit facility | 28,302 | 8,080 | 16,194 | 4,028 | |||||||||||||||
Capital lease obligations | 3,568 | 3,428 | 140 | — | — | ||||||||||||||
Operating lease obligations | 55,905 | 9,969 | 21,401 | 12,932 | 11,603 | ||||||||||||||
Purchase obligations | 203,273 | 86,048 | 104,512 | 4,000 | 8,713 | ||||||||||||||
Total contractual obligations | $ | 621,870 | $ | 130,289 | $ | 185,608 | $ | 285,657 | $ | 20,316 | |||||||||
Other Commercial Commitments: | |||||||||||||||||||
Standby letters of credit | $ | 1,578 | $ | 1,578 | $ | — | $ | — | $ | — | |||||||||
Total contractual obligations and other commercial commitments | $ | 623,448 | $ | 131,867 | $ | 185,608 | $ | 285,657 | $ | 20,316 |
SUMMARY OF CRITICAL ACCOUNTING POLICIES AND ESTIMATES |
> | 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; |
> | assumptions used in determining the need for, and amount of, a valuation allowance on net deferred tax assets, and; |
> | assumptions used in determining the contingent consideration in connection with the Nexmo acquisition. |
> | Providing equipment, if any, to the customer that enables our telephony services; and |
> | Providing services. |
OFF-BALANCE SHEET ARRANGEMENTS |
> | LIBOR (applicable to one-, two-, three-, six-, or twelve-month periods) plus an applicable margin equal to 2.50% if our |
> | 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. |
> | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of the assets of the company; |
> | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of our management and directors; and |
> | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. |
/s/ ALAN MASAREK | /s/ DAVID PEARSON | |
Alan Masarek Director, Chief Executive Officer | David T. Pearson Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer and Duly Authorized Officer) |
Balance at Beginning of Period | Additions | Less Deductions | Other | Balance at End of Period | |||||||||||||||||
Revenue | Expense | ||||||||||||||||||||
Allowance for Doubtful Accounts: | |||||||||||||||||||||
Year ended December 31, 2016 | $ | 1,091 | $ | (51 | ) | $ | 1,053 | $ | — | $ | — | $ | 2,093 | ||||||||
Year ended December 31, 2015 | 607 | 492 | (8 | ) | — | — | 1,091 | ||||||||||||||
Year ended December 31, 2014 | 683 | 117 | (193 | ) | — | — | 607 | ||||||||||||||
Inventory Obsolescence: | |||||||||||||||||||||
Year ended December 31, 2016 | $ | 686 | $ | — | $ | 589 | $ | (1,158 | ) | $ | — | $ | 117 | ||||||||
Year ended December 31, 2015 | 181 | — | 1,882 | (1,377 | ) | — | 686 | ||||||||||||||
Year ended December 31, 2014 | 229 | — | 757 | (805 | ) | — | 181 | ||||||||||||||
Valuation Allowance for Deferred Taxes: | |||||||||||||||||||||
Year ended December 31, 2016 | $ | 20,456 | $ | — | $ | (1,910 | ) | (1) | $ | — | $ | — | 18,546 | ||||||||
Year ended December 31, 2015 | 17,451 | — | 3,005 | (1) | — | — | 20,456 | ||||||||||||||
Year ended December 31, 2014 | 16,922 | — | 4,865 | (1) | — | (4,336 | ) | (2 | ) | 17,451 |
(1) | Amounts charged (credited) to expense represent change in valuation allowance. |
(2) | Represents reversal of estimated valuation allowance on Vocalocity's deferred tax assets at date of acquisition. |
Exhibit Number | Description of Exhibit | |
2.1 | Agreement and Plan of Merger, dated October 9, 2013, by and among Vonage, Vista Merger Corp., Vocalocity and the Representative (12). | |
2.2 | Agreement and Plan of Merger, dated November 4, 2014, by and among Vonage, Thunder Acquisition Corp., Telesphere and the Representative (23) | |
2.3 | Agreement and Plan of Merger, dated August 19, 2015, by and among Vonage Holdings Corp., Cirrus Acquisition Corp., iCore Networks, Inc. and Stephen G. Canton, as the Representative (18) | |
2.4 | Agreement and Plan of Merger, dated May 5, 2016, by and among Vonage Holdings Corp., Neptune Acquisition Corp., Nexmo and the Representative (32) | |
2.5 | Amendment No. 1 to Agreement and Plan of Merger, dated June 2, 2016, by and among Vonage Holdings Corp., Neptune Acquisition Corp., Nexmo and the Representative (33) | |
3.1 | Restated Certificate of Incorporation of Vonage Holdings Corp.(3) | |
3.2 | Amended and Restated By-Laws of Vonage Holdings Corp., effective as of December 10, 2015 (7) | |
4.1 | Form of Certificate of Vonage Holdings Corp. Common Stock(2) | |
4.2 | Tax Benefits Preservation Plan, dated as of June 7, 2012, by and between Vonage Holdings Corp. and American Stock Transfer & Trust Company, LLC, as Rights Agent, including as Exhibit A the form of Certificate of Designation of the Company's Series A Participating Preferred Stock and as Exhibit B the forms of Right Certificate and of Election to Purchase (17) | |
10.1 | Vonage Holdings Corp. 2015 Equity Incentive Plan. (27)* | |
10.2 | Form of Nonqualified Stock Option Agreement for Employees under the 2001 Stock Incentive Plan(1)* | |
10.3 | Form of Nonqualified Stock Option Agreement for Outside Directors under the 2001 Stock Incentive Plan(1)* | |
10.4 | Vonage Holdings Corp. 2006 Incentive Plan (Amended and Restated through June 6, 2013)(10)* | |
10.5 | Form of Restricted Stock Unit Agreement under the Vonage Holdings Corp. 2006 Incentive Plan(4)* | |
10.6 | Form of Nonqualified Stock Option Agreement under the Vonage Holdings Corp. 2006 Incentive Plan(13)* | |
10.7 | Form of Restricted Stock Agreement under the Vonage Holdings Corp. 2006 Incentive Plan(4)* | |
10.8 | Form of Restricted Stock Agreement for Non-Executive Directors under the Vonage Holdings Corp. 2006 Incentive Plan (8)* | |
10.9 | Form of Nonqualified Stock Option Agreement for Non-Executive Directors (Quarterly Grants) under the Vonage Holdings Corp. 2006 Incentive Plan (8)* |
10.10 | Form of Nonqualified Stock Option Agreement for Non-Executive Directors (Sign-on Grant) under the Vonage Holdings Corp. 2006 Incentive Plan (8)* | |
10.11 | Vonage Holdings Corp. 401(k) Retirement Plan(1)* | |
10.12 | Lease Agreement, dated March 24, 2005, between 23 Main Street Holmdel Associates LLC and Vonage USA Inc.(1) | |
10.13 | Amendment to Lease Agreement, dated November 1, 2006, between 23 Main Street Holmdel Associates LLC and Vonage USA Inc.(31) | |
10.14 | Amendment to Lease Agreement, dated December 1, 2015, between 23 Main Street Holmdel Associates LLC and Vonage USA Inc.(31) | |
10.15 | Amended and Restated Non-Compete Agreement dated as of October 17, 2008 by and between Vonage Holdings Corp. and Jeffrey A. Citron(9) | |
10.16 | Form of Nonqualified Stock Option Agreement for Jeffrey A. Citron under the Vonage Holdings Corp. 2006 Incentive Plan(28)* | |
10.17 | Letter Agreement, dated February 6, 2012, between Vonage Holdings Corp. and Graham McGonigal(16)* | |
10.18 | Employment Agreement dated as of April 25, 2013 by and between Vonage Holdings Corp. and David T. Pearson (20)* | |
10.19 | Letter Agreement, dated April 2, 2015, between Vonage Holdings Corp. and Edward M. Gilvar (22)* | |
10.20 | Employment Agreement dated as of December 2, 2013 by and between Vonage Holdings Corp. and Joseph Redling (29)* | |
10.21 | Letter Agreement dated as of June 9, 2015 by and between Vonage Holdings Corp. and Omar Javaid (15)* | |
10.22 | Letter Agreement, dated July 15, 2009, between Vonage Holdings Corp. and Kurt Rogers(11)* | |
10.23 | Amendment to Letter Agreement, dated December 22, 2010, between Vonage Holdings Corp. and Kurt Rogers(14)* | |
10.24 | Second Amendment to Letter Agreement, dated March 27, 2012, between Vonage Holdings Corp. and Kurt Rogers(16)* | |
10.25 | Amendment to Letter Agreement between Vonage Holdings Corp. and Kurt Rogers (19)* | |
10.26 | Non-Executive Director Compensation Program (31)* | |
10.27 | Form of Indemnification Agreement between Vonage Holdings Corp. and its directors and certain officers(5)* | |
10.28 | Employment Agreement dated as of October 6, 2014 by and between Vonage Holdings Corp. and Alan Masarek (30)* | |
10.29 | Letter Agreement dated as of September 18, 2014 by and between Vonage Holdings Corp. and Pablo Calamera (24)* | |
10.30 | Letter Agreement dated as of November 4, 2014 by and between Vonage Holdings Corp. and Clark Peterson (30)* | |
10.31 | Letter Agreement dated as of October 19, 2015 by and between Vonage Holdings Corp. and Susan Quackenbush (31)* | |
10.32 | Settlement and Patent License Agreement, dated December 21, 2007, between Vonage Holdings Corp. and AT&T Corp.(6) | |
10.33† | Route Management Services Addendum (the “Addendum”), by and between Vonage America Inc., a wholly-owned subsidiary of Vonage Holdings Corp., and Tata Communications (America) Inc., effective as of July 1, 2013. (20) | |
10.34 | First Amendment to Employment Agreement by and between Vonage Holdings Corp. and Alan Masarek (31)* | |
10.35† | Amendment to Route Management Services Addendum (the “Addendum”), by and between Vonage America Inc., a wholly-owned subsidiary of Vonage Holdings Corp., and Tata Communications (America) Inc., effective as of December 23, 2015. (31) | |
10.36† | Route Management Services Addendum (the “Addendum”), by and between Vonage America Inc., a wholly-owned subsidiary of Vonage Holdings Corp., and Tata Communications (America) Inc., effective as of July 1, 2016. (31) | |
10.37 | Credit Agreement, dated as of July 29, 2011 among Vonage Holdings Corp. and Vonage America Inc., as borrowers, various lenders, JPMorgan Chase Bank, N.A., as Administrative Agent, and RBS Citizens, N.A., as Syndication Agent.(25) | |
10.38 | Amendment No. 1, dated February 11, 2013, by and among Vonage America Inc. and Vonage Holdings Corp., as borrowers, various lenders, and JPMorgan Chase Bank, N.A., as Administrative Agent, under that certain Credit Agreement dated as of July 29, 2011 by and among the Borrowers, the Lenders and the Administrative Agent (19) | |
10.39 | Amendment No. 2, dated July 26, 2013, by and among Vonage America Inc. and Vonage Holdings Corp., as borrowers, various lenders, and JPMorgan Chase Bank, N.A., as Administrative Agent, under that certain Credit Agreement dated as of July 29, 2011 by and among the Borrowers, the Lenders and the Administrative Agent (21) | |
10.40 | Credit Agreement, dated August 13, 2014, by and among Vonage America Inc. and Vonage Holdings Corp., as borrowers, various lenders, and JPMorgan Chase Bank, N.A., as Administrative Agent, Citizens Bank, N.A., as Syndication Agent, and Silicon Valley Bank and Suntrust Bank, as Documentation Agents (24) | |
10.41 | Amended and Restated Credit Agreement among Vonage America Inc., Vonage Holdings Corp., the Lenders from time to time party thereto, JPMorgan Chase Bank, N.A., 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. (26) | |
10.42 | Nexmo Inc. 2011 Stock Plan (34) | |
10.43 | Amendment No. 1 to Amended and Restated Credit Agreement, dated June 3, 2016, by and among Vonage America Inc., a Delaware corporation, Vonage Holdings Corp., 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 (35) | |
21.1 | List of Subsidiaries of Vonage Holdings Corp.(36) | |
23.1 | Consent of BDO USA, LLP, independent registered public accounting firm(36) | |
31.1 | Certification of our 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(36) | |
31.2 | Certification of our 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(36) | |
32.1 | Certification of our 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(36) |
(1) | Incorporated by reference to Amendment No. 1 to Vonage Holdings Corp.’s Registration Statement on Form S-1 (File No. 333-131659) filed on April 7, 2006. |
(2) | Incorporated by reference to Amendment No. 5 to Vonage Holdings Corp.’s Registration Statement on Form S-1 (File No. 333-131659) filed on May 8, 2006. |
(3) | Incorporated by reference to Vonage Holdings Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on August 4, 2006. |
(4) | Incorporated by reference to Vonage Holding Corp.’s Annual Report on Form 10-K (File No. 001-32887) filed on April 17, 2007. |
(5) | Incorporated by reference to Vonage Holding Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on November 14, 2007. |
(6) | Incorporated by reference to Vonage Holding Corp.’s Annual Report on Form 10-K (File No. 001-32887) filed on March 17, 2008. |
(7) | Incorporated by reference to Vonage Holding Corp.’s Current Report on Form 8-K (File No. 001-32887) filed on December 11, 2015. |
(8) | Incorporated by reference to Vonage Holding Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on August 11, 2008. |
(9) | Incorporated by reference to Vonage Holding Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on November 10, 2008. |
(10) | Incorporated by reference to Vonage Holding Corp.’s Current Report on Form 8-K (File No. 001-32887) filed on June 6, 2013. |
(11) | Incorporated by reference to Vonage Holding Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on November 6, 2009. |
(12) | Incorporated by reference to the Current Report on Form 8-K (File No. 001-32887) filed by on October 10, 2013. |
(13) | Incorporated by reference to Vonage Holding Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on May 7, 2010. |
(14) | Incorporated by reference to Vonage Holding Corp.’s Annual Report on Form 10-K (File No. 001-32887) filed on February 17, 2011. |
(15) | Incorporated by reference to Vonage Holding Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on November 4, 2015. |
(16) | Incorporated by reference to Vonage Holding Corp.’s Current Report on Form 10-Q (File No. 001-32887) filed on May 3, 2012. |
(17) | Incorporated by reference to Vonage Holding Corp.’s Current Report on Form 8-K (File No. 001-32887) filed on June 8, 2012. |
(18) | Incorporated by reference to Vonage Holding Corp.’s Current Report on Form 8-K (File No. 001-32887) filed on August 20, 2015. |
(19) | Incorporated by reference to Vonage Holding Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on May 1, 2013. |
(20) | Incorporated by reference to Vonage Holding Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on July 31, 2013. |
(21) | Incorporated by reference to Vonage Holding Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on November 6, 2013. |
(22) | Incorporated by reference to Vonage Holding Corp.’s Annual Report on Form 10-Q (File No. 001-32887) filed on May 7, 2015. |
(23) | Incorporated by reference to Vonage Holding Corp.’s Current Report on Form 8-K (File No. 001-32887) filed on November 5, 2014. |
(24) | Incorporated by reference to Vonage Holding Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on November 5, 2014. |
(25) | Incorporated by reference to Vonage Holding Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on August 4, 2011. |
(26) | Incorporated by reference to Vonage Holding Corp.’s Quarterly Report on Form 10-Q (File No. 001-32887) filed on July 30, 2015. |
(27) | Incorporated by reference to Vonage Holding Corp.’s Current Report on Form 8-K (File No. 001-32887) filed on June 3, 2015. |
(28) | Incorporated by reference to Vonage Holding Corp.’s Current Report on Form 8-K (File No. 001-32887) filed on August 4, 2008. |
(29) | Incorporated by reference to Vonage Holding Corp.’s Annual Report on Form 10-K (File No. 001-32887) filed on February 13, 2014. |
(30) | Incorporated by reference to Vonage Holding Corp.’s Annual Report on Form 10-K (File No. 001-32887) filed on February 13, 2015. |
(31) | Incorporated by reference to Vonage Holding Corp.’s Annual Report on Form 10-K (File No. 001-32887) filed on February 12, 2016. |
(32) | Incorporated by reference to Vonage Holdings Corp.’s Quarterly Report on Form 8-K (File No. 001-32887) filed on May 5, 2016. |
(33) | Incorporated by reference to Vonage Holdings Corp.’s Quarterly Report on Form 8-K (File No. 001-32887) filed on June 6, 2016. |
(34) | Incorporated by reference to Vonage Holding Corp.’s Registration Statement on Form S-8 (File No. 001-32887) filed on June 29, 2016. |
(35) | Incorporated by reference to Vonage Holdings Corp.’s Quarterly Report on Form 8-K (File No. 001-32887) filed on June 6, 2016. |
(36) | Filed herewith. |
† | Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an order or application for confidential treatment pursuant to the Securities Act of 1933, as amended or the Securities Exchange Act of 1934, as amended. |
* | Management contract or compensatory plan or arrangement. |
VONAGE HOLDINGS CORP. | ||||
Dated: | February 28, 2017 | By: | /S/ DAVID PEARSON | |
David Pearson | ||||
David T. Pearson Chief Financial Officer and Treasurer (Principal Financial and Accounting Officer and Duly Authorized Officer) |
Signature | Title | Date | ||
/S/ ALAN MASAREK | Director, Chief Executive Officer | February 28, 2017 | ||
Alan Masarek | (principal executive officer) | |||
/S/ DAVID T. PEARSON | Chief Financial Officer | February 28, 2017 | ||
David T. Pearson | and Treasurer (principal financial officer and principal accounting officer) | |||
/S/ JEFFREY A. CITRON | Director, Chairman | February 28, 2017 | ||
Jeffrey A. Citron | ||||
/S/ HAMID AKHAVAN | ||||
Hamid Akhavan | Director | February 28, 2017 | ||
/S/ NAVEEN CHOPRA | Director | February 28, 2017 | ||
Naveen Chopra | ||||
/S/ STEPHEN FISHER | Director | February 28, 2017 | ||
Stephen Fisher | ||||
/S/ CAROLYN KATZ | Director | February 28, 2017 | ||
Carolyn Katz | ||||
/S/ JOHN J. ROBERTS | Director | February 28, 2017 | ||
John J. Roberts | ||||
/S/ CARL SPARKS | Director | February 28, 2017 | ||
Carl Sparks | ||||
/S/ GARY STEELE | Director | February 28, 2017 | ||
Gary Steele |
Page | |
VONAGE HOLDINGS CORP. CONSOLIDATED BALANCE SHEETS |
(In thousands, except par value) | December 31, 2016 | December 31, 2015 | |||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 29,078 | $ | 57,726 | |||
Marketable securities | 601 | 9,908 | |||||
Accounts receivable, net of allowance of $2,093 and $1,091, respectively | 36,688 | 19,913 | |||||
Inventory, net of allowance of $117 and $686, respectively | 4,116 | 5,542 | |||||
Deferred customer acquisition costs, current | 2,610 | 4,074 | |||||
Deferred tax assets, current | — | 23,985 | |||||
Prepaid expenses and other current assets | 29,188 | 15,659 | |||||
Total current assets | 102,281 | 136,807 | |||||
Property and equipment, net | 48,415 | 49,483 | |||||
Goodwill | 360,363 | 222,106 | |||||
Software, net | 21,971 | 20,710 | |||||
Deferred customer acquisition costs, non-current | 526 | 431 | |||||
Debt related costs, net | 2,333 | 2,053 | |||||
Restricted cash | 1,851 | 2,587 | |||||
Intangible assets, net | 199,256 | 138,199 | |||||
Deferred tax assets, non-current | 188,966 | 202,587 | |||||
Other assets | 14,460 | 9,603 | |||||
Total assets | $ | 940,422 | $ | 784,566 | |||
Liabilities and Stockholders’ Equity | |||||||
Liabilities | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 30,751 | $ | 42,798 | |||
Accrued expenses | 109,195 | 96,127 | |||||
Deferred revenue, current portion | 32,442 | 32,605 | |||||
Current maturities of capital lease obligations | 3,288 | 4,398 | |||||
Current portion of notes payable | 18,750 | 15,000 | |||||
Total current liabilities | 194,426 | 190,928 | |||||
Indebtedness under revolving credit facility | 209,000 | 119,000 | |||||
Notes payable, net of debt related cost and current portion | 91,124 | 76,392 | |||||
Deferred revenue, net of current portion | 450 | 851 | |||||
Capital lease obligations, net of current maturities | 140 | 3,363 | |||||
Other liabilities, net of current portion in accrued expenses | 3,985 | 5,291 | |||||
Total liabilities | 499,125 | 395,825 | |||||
Commitments and Contingencies | — | — | |||||
Stockholders’ Equity | |||||||
Common stock, par value $0.001 per share; 596,950 shares authorized at December 31, 2016 and December 31, 2015; 282,319 and 268,947 shares issued at December 31, 2016 and December 31, 2015, respectively; 219,001 and 214,280 shares outstanding at December 31, 2016 and December 31, 2015, respectively | 282 | 270 | |||||
Additional paid-in capital | 1,310,847 | 1,224,947 | |||||
Accumulated deficit | (637,113 | ) | (655,020 | ) | |||
Treasury stock, at cost, 63,318 shares at December 31, 2016 and 54,667 shares at December 31, 2015 | (219,125 | ) | (179,779 | ) | |||
Accumulated other comprehensive loss | (13,594 | ) | (1,677 | ) | |||
Total stockholders’ equity | 441,297 | 388,741 | |||||
Total liabilities and stockholders’ equity | $ | 940,422 | $ | 784,566 |
VONAGE HOLDINGS CORP. CONSOLIDATED STATEMENTS OF INCOME |
For the years ended December 31, | |||||||||||
(In thousands, except per share amounts) | 2016 | 2015 | 2014 | ||||||||
Total revenues | $ | 955,621 | $ | 895,072 | $ | 868,854 | |||||
Operating Expenses: | |||||||||||
Cost of services (excluding depreciation and amortization of $28,489, $24,868, and $19,405, respectively) | 321,373 | 261,768 | 231,383 | ||||||||
Cost of goods sold | 33,777 | 34,210 | 36,500 | ||||||||
Sales and marketing | 330,969 | 347,896 | 373,737 | ||||||||
Engineering and development | 29,759 | 27,220 | 20,869 | ||||||||
General and administrative | 123,304 | 109,153 | 98,780 | ||||||||
Depreciation and amortization | 72,285 | 61,833 | 49,514 | ||||||||
911,467 | 842,080 | 810,783 | |||||||||
Income from operations | 44,154 | 52,992 | 58,071 | ||||||||
Other Income (Expense): | |||||||||||
Interest income | 79 | 89 | 207 | ||||||||
Interest expense | (13,042 | ) | (8,786 | ) | (6,823 | ) | |||||
Other (expense) income, net | (346 | ) | (842 | ) | 11 | ||||||
(13,309 | ) | (9,539 | ) | (6,605 | ) | ||||||
Income from continuing operations before income tax expense | 30,845 | 43,453 | 51,466 | ||||||||
Income tax expense | (12,938 | ) | (18,418 | ) | (21,759 | ) | |||||
Income from continuing operations | 17,907 | 25,035 | 29,707 | ||||||||
Loss from discontinued operations | — | (1,615 | ) | (10,260 | ) | ||||||
Loss on disposal, net of taxes | — | (824 | ) | — | |||||||
Discontinued operations | — | (2,439 | ) | (10,260 | ) | ||||||
Net income | 17,907 | 22,596 | 19,447 | ||||||||
Plus: Net loss from discontinued operations attributable to noncontrolling interest | — | 59 | 819 | ||||||||
Net income attributable to Vonage | $ | 17,907 | $ | 22,655 | $ | 20,266 | |||||
Net income per common share - continuing operations: | |||||||||||
Basic | $ | 0.08 | $ | 0.12 | $ | 0.14 | |||||
Diluted | $ | 0.08 | $ | 0.11 | $ | 0.14 | |||||
Net loss per common share - discontinued operations attributable to Vonage: | |||||||||||
Basic | $ | — | $ | (0.01 | ) | $ | (0.04 | ) | |||
Diluted | $ | — | $ | (0.01 | ) | $ | (0.04 | ) | |||
Net income per common share - attributable to Vonage: | |||||||||||
Basic | $ | 0.08 | $ | 0.11 | $ | 0.10 | |||||
Diluted | $ | 0.08 | $ | 0.10 | $ | 0.09 | |||||
Weighted-average common shares outstanding: | |||||||||||
Basic | 215,751 | 213,147 | 209,822 | ||||||||
Diluted | 231,941 | 224,110 | 219,419 |
VONAGE HOLDINGS CORP. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME |
For the years ended December 31, | |||||||||||
(In thousands) | 2016 | 2015 | 2014 | ||||||||
Net income | $ | 17,907 | $ | 22,596 | $ | 19,447 | |||||
Other comprehensive income (loss): | |||||||||||
Foreign currency translation adjustment | (11,937 | ) | 493 | (3,633 | ) | ||||||
Discontinued operations cumulative translation adjustment | — | 974 | — | ||||||||
Unrealized loss on available-for-sale securities | 20 | (13 | ) | (8 | ) | ||||||
Total other comprehensive (loss) income | (11,917 | ) | 1,454 | (3,641 | ) | ||||||
Comprehensive income | 5,990 | 24,050 | 15,806 | ||||||||
Comprehensive income attributable to noncontrolling interest: | |||||||||||
Comprehensive income | — | 59 | 819 | ||||||||
Comprehensive loss from discontinued operations | — | — | (9 | ) | |||||||
Total comprehensive income attributable to noncontrolling interest | — | 59 | 810 | ||||||||
Comprehensive income attributable to Vonage | $ | 5,990 | $ | 24,109 | $ | 16,616 |
VONAGE HOLDINGS CORP. CONSOLIDATED STATEMENTS OF CASH FLOWS |
For the years ended December 31, | |||||||||||
(In thousands) | 2016 | 2015 | 2014 | ||||||||
Cash flows from operating activities: | |||||||||||
Net income | $ | 17,907 | $ | 22,596 | $ | 19,447 | |||||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||||||
Depreciation and amortization and impairment charges | 37,651 | 35,620 | 34,464 | ||||||||
Amortization of intangibles | 34,634 | 26,404 | 16,943 | ||||||||
Deferred tax expense | 7,302 | 13,949 | 19,128 | ||||||||
Change in contingent consideration | (16,472 | ) | — | — | |||||||
Loss on foreign currency | — | 1,358 | — | ||||||||
Allowance for doubtful accounts | 1,053 | (8 | ) | (193 | ) | ||||||
Allowance for obsolete inventory | 589 | 1,882 | 757 | ||||||||
Amortization of debt related costs | 1,080 | 997 | 1,072 | ||||||||
Share-based expense | 40,682 | 27,541 | 21,070 | ||||||||
Noncontrolling interest | — | 907 | — | ||||||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||||||
Accounts receivable | (9,642 | ) | 185 | 4,887 | |||||||
Inventory | 800 | 2,815 | 36 | ||||||||
Prepaid expenses and other current assets | (10,182 | ) | (1,904 | ) | 4,106 | ||||||
Deferred customer acquisition costs | 1,357 | 421 | 230 | ||||||||
Other assets | (4,857 | ) | (1,660 | ) | (5,790 | ) | |||||
Accounts payable | (13,604 | ) | (3,830 | ) | (8,454 | ) | |||||
Accrued expenses | (354 | ) | 4,768 | (13,042 | ) | ||||||
Deferred revenue | (2,126 | ) | (3,682 | ) | (1,910 | ) | |||||
Other liabilities | 1,194 | 1,372 | (209 | ) | |||||||
Net cash provided by operating activities | 87,012 | 129,731 | 92,542 | ||||||||
Cash flows from investing activities: | |||||||||||
Capital expenditures | (26,146 | ) | (17,323 | ) | (12,436 | ) | |||||
Purchase of intangible assets | (50 | ) | (2,500 | ) | — | ||||||
Purchase of marketable securities | (5,664 | ) | (9,982 | ) | (7,170 | ) | |||||
Maturities and sales of marketable securities | 14,991 | 7,223 | — | ||||||||
Acquisition and development of software assets | (11,538 | ) | (14,183 | ) | (11,819 | ) | |||||
Acquisition of business, net of cash acquired | (163,093 | ) | (116,927 | ) | (88,098 | ) | |||||
Decrease in restricted cash | 767 | 996 | 995 | ||||||||
Net cash used in investing activities | (190,733 | ) | (152,696 | ) | (118,528 | ) | |||||
Cash flows from financing activities: | |||||||||||
Principal payments on capital lease obligations | (8,583 | ) | (3,549 | ) | (2,889 | ) | |||||
Principal payments on notes and revolving credit facility | (72,812 | ) | (47,500 | ) | (41,666 | ) | |||||
Proceeds received from draw down of revolving credit facility and issuance of notes payable | 181,250 | 102,000 | 77,000 | ||||||||
Debt related costs | (1,316 | ) | (2,007 | ) | (1,910 | ) | |||||
Common stock repurchases | (32,902 | ) | (15,911 | ) | (49,338 | ) | |||||
Proceeds from exercise of stock options | 8,861 | 7,172 | 4,564 | ||||||||
Net cash provided by (used in) financing activities | 74,498 | 40,205 | (14,239 | ) | |||||||
Effect of exchange rate changes on cash | 575 | (311 | ) | (3,641 | ) | ||||||
Net change in cash and cash equivalents | (28,648 | ) | 16,929 | (43,866 | ) | ||||||
Cash and cash equivalents, beginning of period | 57,726 | 40,797 | 84,663 | ||||||||
Cash and cash equivalents, end of period | $ | 29,078 | $ | 57,726 | $ | 40,797 | |||||
Supplemental disclosures of cash flow information: | |||||||||||
Cash paid during the periods for: | |||||||||||
Interest | $ | 11,621 | $ | 7,834 | $ | 5,252 | |||||
Income taxes | $ | 5,335 | $ | 2,516 | $ | 2,491 | |||||
Non-cash financing transactions during the periods for: | |||||||||||
Common stock repurchases | $ | — | $ | — | $ | 661 | |||||
Issuance of common stock in connection with acquisition of business | $ | 31,591 | $ | 5,578 | $ | 22,727 | |||||
Purchase of intangible assets | $ | — | $ | 5,000 | $ | — | |||||
Contingent consideration in connection with acquisition of business | $ | 16,472 | $ | — | $ | — | |||||
Assumption of options in connection with acquisition of business | $ | 4,779 | $ | — | $ | — |
VONAGE HOLDINGS CORP. CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY AND REDEEMABLE NONCONTROLLING INTEREST |
(In thousands) | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Accumulated Other Comprehensive Income | Non-controlling interest | Total | Redeemable non-controlling interest | Net Income | |||||||||||||||||||||||||
Balance at December 31, 2013 | $ | 247 | $ | 1,136,289 | $ | (697,941 | ) | $ | (101,040 | ) | $ | 519 | $ | — | $ | 338,074 | $ | (38 | ) | |||||||||||||||
Stock option exercises | 10 | 4,554 | 4,564 | |||||||||||||||||||||||||||||||
Share-based expense | 21,070 | 21,070 | ||||||||||||||||||||||||||||||||
Share-based award activity | (9,004 | ) | (9,004 | ) | ||||||||||||||||||||||||||||||
Common stock repurchases | (49,263 | ) | (49,263 | ) | ||||||||||||||||||||||||||||||
Acquisition of business | 7 | 22,749 | (468 | ) | 22,288 | |||||||||||||||||||||||||||||
Foreign currency translation adjustment | (3,642 | ) | 9 | (3,633 | ) | |||||||||||||||||||||||||||||
Unrealized loss on available-for-sale securities | (8 | ) | (8 | ) | ||||||||||||||||||||||||||||||
Transfer of noncontrolling interest | (706 | ) | (706 | ) | 706 | |||||||||||||||||||||||||||||
Net income | 20,266 | (151 | ) | 20,115 | (668 | ) | 19,447 | |||||||||||||||||||||||||||
Balance at December 31, 2014 | 264 | 1,184,662 | (677,675 | ) | (159,775 | ) | (3,131 | ) | (848 | ) | 343,497 | — | ||||||||||||||||||||||
Stock option exercises | 5 | 7,167 | 7,172 | |||||||||||||||||||||||||||||||
Share-based expense | 27,541 | 27,541 | ||||||||||||||||||||||||||||||||
Share-based award activity | (4,754 | ) | (4,754 | ) | ||||||||||||||||||||||||||||||
Common stock repurchases | (15,250 | ) | (15,250 | ) | ||||||||||||||||||||||||||||||
Acquisition of business | 1 | 5,577 | 5,578 | |||||||||||||||||||||||||||||||
Foreign currency translation adjustment | 1,467 | 1,467 | ||||||||||||||||||||||||||||||||
Unrealized loss on available-for-sale securities | (13 | ) | (13 | ) | ||||||||||||||||||||||||||||||
Net income | 22,655 | 848 | 23,503 | |||||||||||||||||||||||||||||||
Balance at December 31, 2015 | 270 | 1,224,947 | (655,020 | ) | (179,779 | ) | (1,677 | ) | — | 388,741 | ||||||||||||||||||||||||
Stock option exercises | 5 | 8,856 | 8,861 | |||||||||||||||||||||||||||||||
Share-based expense | 40,682 | 40,682 | ||||||||||||||||||||||||||||||||
Share-based award activity | (6,444 | ) | (6,444 | ) | ||||||||||||||||||||||||||||||
Common stock repurchases | (32,902 | ) | (32,902 | ) | ||||||||||||||||||||||||||||||
Acquisition of business | 7 | 36,362 | 36,369 | |||||||||||||||||||||||||||||||
Foreign currency translation adjustment | (11,937 | ) | (11,937 | ) | ||||||||||||||||||||||||||||||
Unrealized loss on available-for-sale securities | 20 | 20 | ||||||||||||||||||||||||||||||||
Net income | 17,907 | — | 17,907 | |||||||||||||||||||||||||||||||
Balance at December 31, 2016 | $ | 282 | $ | 1,310,847 | $ | (637,113 | ) | $ | (219,125 | ) | $ | (13,594 | ) | $ | — | $ | 441,297 |
NATURE OF OPERATIONS |
SIGNIFICANT ACCOUNTING POLICIES |
> | 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; |
> | assumptions used in determining the need for, and amount of, a valuation allowance on net deferred tax assets, and; |
> | assumptions used in determining the contingent consideration in connection with the Nexmo acquisition. |
> | Providing equipment, if any, to the customer that enables our telephony services; and |
> | Providing services. |
For the years ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Numerator | |||||||||||
Income from continuing operations | $ | 17,907 | $ | 25,035 | $ | 29,707 | |||||
Discontinued operations | — | (2,439 | ) | (10,260 | ) | ||||||
Plus: Net loss from discontinued operations attributable to noncontrolling interest | — | 59 | 819 | ||||||||
Loss from discontinued operations attributable to Vonage | — | (2,380 | ) | (9,441 | ) | ||||||
Net income attributable to Vonage | $ | 17,907 | $ | 22,655 | $ | 20,266 | |||||
Denominator | |||||||||||
Basic weighted average common shares outstanding | 215,751 | 213,147 | 209,822 | ||||||||
Dilutive effect of stock options and restricted stock units | 16,190 | 10,963 | 9,597 | ||||||||
Diluted weighted average common shares outstanding | 231,941 | 224,110 | 219,419 | ||||||||
Basic net income per share | |||||||||||
Basic net income per share - from continuing operations | $ | 0.08 | $ | 0.12 | $ | 0.14 | |||||
Basic net loss per share - from discontinued operations attributable to Vonage | — | (0.01 | ) | (0.04 | ) | ||||||
Basic net income per share - attributable to Vonage | $ | 0.08 | $ | 0.11 | $ | 0.10 | |||||
Diluted net income per share | |||||||||||
Diluted net income per share - from continuing operations | $ | 0.08 | $ | 0.11 | $ | 0.14 | |||||
Diluted net loss per share - from discontinued operations attributable to Vonage | — | (0.01 | ) | (0.04 | ) | ||||||
Diluted net income per share - attributable to Vonage | $ | 0.08 | $ | 0.10 | $ | 0.09 |
For the years ended December 31, | ||||||||
2016 | 2015 | 2014 | ||||||
Restricted stock units | 8,282 | 5,827 | 5,454 | |||||
Employee stock options | 9,030 | 13,600 | 18,428 | |||||
17,312 | 19,427 | 23,882 |
December 31, 2016 | December 31, 2015 | ||||||
Nontrade receivables | $ | 3,147 | $ | 2,113 | |||
Services | 10,854 | 8,066 | |||||
Telecommunications | 3,239 | 3,138 | |||||
Insurance | 935 | 939 | |||||
Marketing | 1,307 | 779 | |||||
Prepaid hosting | 8,453 | 59 | |||||
Other prepaids | 1,253 | 565 | |||||
Prepaid expenses and other current assets | $ | 29,188 | $ | 15,659 |
December 31, 2016 | December 31, 2015 | ||||||
Building (under capital lease) | $ | 25,709 | $ | 25,709 | |||
Network equipment and computer hardware | 93,437 | 89,025 | |||||
Leasehold improvements | 44,293 | 48,872 | |||||
Customer premise equipment | 9,700 | 7,292 | |||||
Furniture | 4,239 | 2,508 | |||||
Vehicles | 203 | 214 | |||||
177,581 | 173,620 | ||||||
Less: accumulated depreciation and amortization | (129,166 | ) | (124,137 | ) | |||
Property and equipment, net | $ | 48,415 | $ | 49,483 |
December 31, 2016 | December 31, 2015 | ||||||
Customer premise equipment | $ | 9,700 | $ | 7,292 | |||
Less: accumulated depreciation | (4,248 | ) | (2,068 | ) | |||
Customer premise equipment, net | $ | 5,452 | $ | 5,224 |
December 31, 2016 | December 31, 2015 | ||||||
Purchased | $ | 73,509 | $ | 67,248 | |||
Licensed | — | 909 | |||||
Internally developed | 36,088 | 36,088 | |||||
109,597 | 104,245 | ||||||
Less: accumulated amortization | (87,626 | ) | (83,535 | ) | |||
Software, net | $ | 21,971 | $ | 20,710 |
2017 | $ | 9,960 | |
2018 | 7,263 | ||
2019 | 3,897 | ||
2020 | 851 | ||
Total | $ | 21,971 |
December 31, 2016 | December 31, 2015 | ||||||
Debt related costs related to Revolving Credit Facility | $ | 5,965 | $ | 5,044 | |||
Less: accumulated amortization | (3,632 | ) | (2,991 | ) | |||
Debt related costs, net | $ | 2,333 | $ | 2,053 |
December 31, 2016 | December 31, 2015 | ||||||
Letter of credit-lease deposits | $ | 1,578 | $ | 2,498 | |||
Cash reserves | 273 | 89 | |||||
Restricted cash | $ | 1,851 | $ | 2,587 |
December 31, 2016 | December 31, 2015 | ||||||
Deposits | $ | 1,329 | $ | — | |||
Tax credits | 6,623 | 6,623 | |||||
Long-term prepaid hosting | 5,244 | — | |||||
Others | 1,264 | 2,980 | |||||
Other assets | $ | 14,460 | $ | 9,603 |
December 31, 2016 | December 31, 2015 | ||||||
Compensation and related taxes and temporary labor | $ | 35,308 | $ | 33,196 | |||
Marketing | 11,979 | 24,891 | |||||
Taxes and fees | 18,976 | 11,808 | |||||
Acquisition related consideration accounted for as compensation | 6,608 | — | |||||
Telecommunications | 14,724 | 9,111 | |||||
Settlement | 5,000 | — | |||||
Other accruals | 11,383 | 11,546 | |||||
Customer credits | 2,074 | 1,779 | |||||
Professional fees | 1,680 | 2,080 | |||||
Accrued interest | 66 | 22 | |||||
Inventory | 1,168 | 1,514 | |||||
Credit card fees | 229 | 180 | |||||
Accrued expenses | $ | 109,195 | $ | 96,127 |
December 31, 2016 | December 31, 2015 | ||||||
Foreign currency translation adjustment | $ | (13,593 | ) | $ | (1,656 | ) | |
Unrealized loss on available-for-sale securities | (1 | ) | (21 | ) | |||
Accumulated other comprehensive (loss) income | $ | (13,594 | ) | $ | (1,677 | ) |
Balance at January 1, 2015 | $ | 142,544 | |
Increase in goodwill related to acquisition of Simple Signal | 17,687 | ||
Increase in goodwill related to acquisition of iCore | 63,294 | ||
Increase in goodwill related to acquisition of gUnify | 660 | ||
Decrease in goodwill related to working capital and tax adjustments of Telesphere | (2,079 | ) | |
Balance at December 31, 2015 | 222,106 | ||
Increase in goodwill related to acquisition of Simple Signal | 16 | ||
Increase in goodwill related to acquisition of iCore | 2,314 | ||
Increase in goodwill related acquisition of Nexmo | 143,073 | ||
Currency translation adjustments | (7,146 | ) | |
Balance at December 31, 2016 | $ | 360,363 |
December 31, 2016 | December 31, 2015 | ||||||
Customer relationships | $ | 173,187 | $ | 92,609 | |||
Developed technology | 88,609 | 75,694 | |||||
Patents and patent licenses | 20,214 | 20,164 | |||||
Trademark | — | 560 | |||||
Trade names | 1,820 | 760 | |||||
Non-compete agreements | 3,845 | 2,933 | |||||
Gross Carrying Amount | 287,675 | 192,720 | |||||
Customer relationships | (39,413 | ) | (21,777 | ) | |||
Developed technology | (31,364 | ) | (18,880 | ) | |||
Patents and patent licenses | (14,667 | ) | (12,066 | ) | |||
Trademark | — | (543 | ) | ||||
Trade names | (787 | ) | (260 | ) | |||
Non-compete agreements | (2,188 | ) | (995 | ) | |||
Accumulated Amortization | (88,419 | ) | (54,521 | ) | |||
Customer relationships | 133,774 | 70,832 | |||||
Developed technology | 57,245 | 56,814 | |||||
Patents and patent licenses | 5,547 | 8,098 | |||||
Trademark | — | 17 | |||||
Trade names | 1,033 | 500 | |||||
Non-compete agreements | 1,657 | 1,938 | |||||
Net Carrying Amount | $ | 199,256 | $ | 138,199 |
2017 | $ | 37,255 | |
2018 | 33,988 | ||
2019 | 30,670 | ||
2020 | 26,322 | ||
2021 | 20,623 | ||
Thereafter | 50,398 | ||
Total | $ | 199,256 |
For the years ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
USF fees | $ | 78,077 | $ | 75,570 | $ | 71,188 | |||||
Disconnect fee, net of credits and bad debt | $ | 1,927 | $ | 706 | $ | 554 | |||||
Initial activation fees | $ | 600 | $ | 779 | $ | 1,085 | |||||
Customer equipment rental | $ | 4,980 | $ | 3,677 | $ | — | |||||
Customer equipment fees | $ | 7,397 | $ | 6,141 | $ | 715 | |||||
Equipment recovery fees | $ | 73 | $ | 77 | $ | 80 | |||||
Shipping and handling fees | $ | 2,448 | $ | 2,473 | $ | 2,374 | |||||
Access revenues | $ | 39,981 | $ | 26,192 | $ | — | |||||
Professional service fees | $ | 3,251 | $ | 1,308 | $ | 105 |
For the years ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
USF costs | $ | 78,077 | $ | 75,599 | $ | 71,230 | |||||
Access costs | $ | 30,220 | $ | 17,024 | $ | — | |||||
Professional service costs | $ | 1,525 | $ | 568 | $ | 83 |
For the years ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Shipping and handling cost | $ | 5,495 | $ | 5,197 | $ | 6,028 |
For the years ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Advertising costs | $ | 75,587 | $ | 103,320 | $ | 141,138 |
For the years ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Acquisition related transaction costs | $ | 4,863 | $ | 2,585 | $ | 2,466 | |||||
Change in contingent consideration | $ | (11,472 | ) | $ | — | $ | — | ||||
Organizational transformation | $ | 2,435 | $ | — | $ | — | |||||
Loss on sublease | $ | 744 | $ | — | $ | — | |||||
Acquisition related integration costs | $ | — | $ | 25 | $ | 100 | |||||
Acquisition related consideration accounted for as compensation | $ | 16,780 | $ | — | $ | — |
For the years ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Network equipment and computer hardware | $ | 15,269 | $ | 12,571 | $ | 13,449 | |||||
Software | 10,387 | 12,627 | 10,116 | ||||||||
Capital leases | 2,200 | 2,200 | 2,200 | ||||||||
Other leasehold improvements | 5,400 | 5,190 | 4,434 | ||||||||
Customer premise equipment | 2,670 | 2,147 | 75 | ||||||||
Furniture | 803 | 430 | 194 | ||||||||
Vehicles | 72 | 71 | 31 | ||||||||
Patents | 2,600 | 1,740 | 1,833 | ||||||||
Trademarks | 18 | 72 | 72 | ||||||||
Customer relationships | 17,731 | 11,594 | 8,539 | ||||||||
Acquired technology | 12,542 | 11,768 | 6,296 | ||||||||
Trade names | 541 | 148 | 100 | ||||||||
Non-compete agreements | 1,202 | 1,082 | 101 | ||||||||
71,435 | 61,640 | 47,440 | |||||||||
Property and equipment impairments | 521 | 193 | 1,959 | ||||||||
Software impairments | 329 | — | 115 | ||||||||
Depreciation and amortization expense | $ | 72,285 | $ | 61,833 | $ | 49,514 |
For the years ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Debt related costs amortization | $ | 1,080 | $ | 997 | $ | 1,072 |
For the years ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Net (losses) gains resulting from foreign exchange transactions | $ | (346 | ) | $ | (860 | ) | $ | 10 |
For the years ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
United States | $ | 31,076 | $ | 38,115 | $ | 44,044 | |||||
Foreign | (231 | ) | 5,338 | 7,422 | |||||||
$ | 30,845 | $ | 43,453 | $ | 51,466 |
For the years ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Current: | |||||||||||
Federal | $ | (621 | ) | $ | (1,846 | ) | $ | (1,452 | ) | ||
Foreign | (1,064 | ) | (1,667 | ) | (376 | ) | |||||
State and local taxes | (3,951 | ) | (956 | ) | (803 | ) | |||||
$ | (5,636 | ) | $ | (4,469 | ) | $ | (2,631 | ) | |||
Deferred: | |||||||||||
Federal | $ | (7,794 | ) | $ | (11,289 | ) | $ | (15,239 | ) | ||
Foreign | 2 | (1,088 | ) | (2,985 | ) | ||||||
State and local taxes | 490 | (1,572 | ) | (904 | ) | ||||||
(7,302 | ) | (13,949 | ) | (19,128 | ) | ||||||
$ | (12,938 | ) | $ | (18,418 | ) | $ | (21,759 | ) |
December 31, 2016 | December 31, 2015 | ||||||
Current assets and liabilities: | |||||||
Deferred revenue | $ | — | $ | 12,096 | |||
Accounts receivable and inventory allowances | — | 640 | |||||
Accrued expenses | — | 11,249 | |||||
Deferred tax assets, net, current | $ | — | $ | 23,985 | |||
Non-current assets and liabilities: | |||||||
Accounts receivable and inventory allowances | $ | 816 | $ | — | |||
Deferred rent | 630 | — | |||||
Contingent consideration | 6,238 | — | |||||
Acquired intangible assets and property and equipment | (61,486 | ) | (33,129 | ) | |||
Accrued expenses | 10,145 | (1,054 | ) | ||||
Research and development and alternative minimum tax credit | 8,039 | 6,630 | |||||
Stock option compensation | 24,026 | 20,545 | |||||
Capital leases | (7,762 | ) | (6,442 | ) | |||
Deferred revenue | 11,362 | (634 | ) | ||||
Net operating loss carryforwards | 215,504 | 237,127 | |||||
207,512 | 223,043 | ||||||
Valuation allowance | (18,546 | ) | (20,456 | ) | |||
Deferred tax assets, net, non-current | $ | 188,966 | $ | 202,587 |
For the years ended December 31, | ||||||||
2016 | 2015 | 2014 | ||||||
U.S. Federal statutory tax rate | 35 | % | 35 | % | 35 | % | ||
Permanent items | (5 | )% | 3 | % | 3 | % | ||
State and local taxes, net of federal benefit | 7 | % | 2 | % | 3 | % | ||
International tax (reflects effect of losses for which tax benefit not realized) | — | % | 1 | % | — | % | ||
Valuation reserve for income taxes and other | 5 | % | 2 | % | 1 | % | ||
Effective tax rate | 42 | % | 43 | % | 42 | % |
Federal | State | ||||||
2017 | $ | — | $ | 22,299 | |||
2018 | — | 19,287 | |||||
2019 | — | 12,652 | |||||
2020 | — | 8,333 | |||||
2021 | — | 6,754 | |||||
2022 | — | 3,671 | |||||
2023 | — | 3,303 | |||||
2024 | — | 1,674 | |||||
2025 | — | 571 | |||||
2026 | 124,009 | 505 | |||||
2027 | 235,966 | 1,324 | |||||
2028 | 39,145 | 7,100 | |||||
2029 | 17,482 | 2,921 | |||||
2030 | 107,085 | 5,198 | |||||
2031 | 8,012 | 3,379 | |||||
2032 | 2,808 | 2,120 | |||||
2033 | 3,555 | 4,287 | |||||
2034 | 7,177 | 18,147 | |||||
2035 | 25,185 | 23,549 | |||||
2036 | 5,052 | 11,774 | |||||
Total | $ | 575,476 | $ | 158,848 |
December 31, 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 | 91,124 | — | |||||
2.50-3.25% Revolving credit facility - due 2020 | 209,000 | — | |||||
Total Long-term note and revolving credit facility | $ | 300,124 | $ | 195,392 |
2016 Credit Facility | |||
2017 | $ | 18,750 | |
2018 | 18,750 | ||
2019 | 18,750 | ||
2020 | 54,688 | ||
Minimum future payments of principal | 110,938 | ||
Less: unamortized debt related costs | 1,064 | ||
current portion | 18,750 | ||
Long-term portion | $ | 91,124 |
> | 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 |
> | 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 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 |
> | 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. |
> | LIBOR (applicable to one-, two-, three-, six-, or twelve-month periods) plus an applicable margin equal to 2.875% if our consolidated leverage ratio is less than 0.75 to 1.00, 3.125% 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 3.375% 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 federal funds effective rate from time to time plus 0.50%, (b) the prime rate of JPMorgan Chase Bank, N.A., and (c) the adjusted LIBO rate applicable to one month interest periods plus 1.00%, plus an applicable margin equal to 1.875% if our consolidated leverage ratio is less than 0.75 to 1.00, 2.125% if our consolidated leverage ratio is greater than or equal 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; |
> | a consolidated fixed coverage charge ratio of no less than 1.75 to 1.00 subject to adjustment to exclude up to $80,000 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. |
> | Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and |
> | 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. |
December 31, 2016 | December 31, 2015 | ||||||
Level 1 Assets | |||||||
Money market fund (1) | $ | 300 | $ | 57 | |||
Level 2 Assets | |||||||
Available-for-sale securities (2) | $ | 601 | $ | 9,908 | |||
Level 3 Liabilities | |||||||
Contingent consideration (3) | $ | — | $ | — |
December 31, 2016 | |||
Beginning balance | $ | — | |
Initial contingent consideration at fair value | 16,472 | ||
Change in fair value included in net income attributable to Vonage | (16,472 | ) | |
Ending balance | $ | — |
December 31, 2016 | December 31, 2015 | ||||||
Shares of common stock repurchased | 7,400 | 3,320 | |||||
Value of common stock repurchased | $ | 32,762 | $ | 15,195 |
2016 | 2015 | 2014 | ||||||
Risk-free interest rate | 1.17-2.12% | 1.38-1.80% | 1.78-2.19% | |||||
Expected stock price volatility | 47.52-72.50% | 73.55-83.14% | 85.28-86.93% | |||||
Dividend yield | 0.00 | % | 0.00 | % | 0.00 | % | ||
Expected life (in years) | 6.25 | 6.25 | 6.25 |
Payout Schedule | |||
Percentile Ranking | % of Target Earned | ||
80% | 200% | ||
50% | 100% | ||
30% | 50% | ||
< | 30% | —% |
2016 | 2015 | 2014 | ||||||
Risk-free interest rate | 1.12 | % | 0.98 | % | 0.69 | % | ||
Expected stock price volatility | 42.61 | % | 40.21 | % | 48.91 | % | ||
Dividend yield | 0.00 | % | 0.00 | % | 0.00 | % | ||
Expected life (in years) | 2.79 | 2.79 | 2.79 |
Shares Authorized | Shares Available for Grant | Stock Options Outstanding | Restricted Stock and Restricted Stock Units | ||||||||
Options assumed from acquisition | — | 1,750 | 1,750 | — | |||||||
2006 Incentive Plan | 71,669 | — | 15,685 | 5,943 | |||||||
2015 Incentive Plan | 23,919 | 13,841 | 145 | 6,873 | |||||||
Total as of December 31, 2016 | 95,588 | 15,591 | 17,580 | 12,816 |
• | a maximum of 20,000 shares may be issued under the plan pursuant to incentive stock options; |
• | a maximum of 10,000 shares may be issued pursuant to options and stock appreciation rights granted to any participant in a calendar year; |
• | a maximum of $5,000 may be paid pursuant to annual awards granted to any participant in a calendar year; and |
• | a maximum of $10,000 may be paid (in the case of awards denominated in cash) and a maximum of 10,000 shares may be issued (in the case of awards denominated in shares) pursuant to awards, other than options, stock appreciation rights or annual awards, granted to any participant in a calendar year. |
Stock Options Outstanding | Restricted Stock and Restricted Stock Units Outstanding | ||||||||||||
Number of Shares | Weighted Average Exercise Price Per Share | Number of Shares | Weighted Average Grant Date Fair Market Value Per Share | ||||||||||
(in thousands) | (in thousands) | ||||||||||||
Balance at December 31, 2013 | 32,837 | $ | 2.73 | 5,182 | $ | 2.92 | |||||||
Stock options granted | 6,865 | 3.47 | |||||||||||
Stock options exercised | (10,504 | ) | 1.65 | ||||||||||
Stock options canceled | (3,547 | ) | 3.19 | ||||||||||
Restricted stocks and restricted stock units granted | 5,240 | 4.71 | |||||||||||
Restricted stocks and restricted stock units exercised | (1,734 | ) | 2.83 | ||||||||||
Restricted stocks and restricted stock units canceled | (860 | ) | 3.32 | ||||||||||
Balance at December 31, 2014 | 25,651 | 3.31 | 7,828 | 4.09 | |||||||||
Stock options granted | 505 | 4.41 | |||||||||||
Stock options exercised | (3,495 | ) | 2.82 | ||||||||||
Stock options canceled | (2,658 | ) | 4.41 | ||||||||||
Restricted stocks and restricted stock units granted | 6,354 | 5.37 | |||||||||||
Restricted stocks and restricted stock units exercised | (2,436 | ) | 3.63 | ||||||||||
Restricted stocks and restricted stock units canceled | (1,359 | ) | 4.67 | ||||||||||
Balance at December 31, 2015 | 20,003 | 3.28 | 10,387 | 4.91 | |||||||||
Stock options granted | 79 | 5.91 | |||||||||||
Stock options assumed from acquisition | 2,188 | 1.03 | |||||||||||
Stock options exercised | (3,614 | ) | 2.61 | ||||||||||
Stock options canceled | (1,076 | ) | 8.62 | ||||||||||
Restricted stocks and restricted stock units granted | 7,024 | 4.93 | |||||||||||
Restricted stocks and restricted stock units exercised | (3,030 | ) | 4.04 | ||||||||||
Restricted stocks and restricted stock units canceled | (1,565 | ) | 5.11 | ||||||||||
Balance at December 31, 2016-stock options | 17,580 | $ | 2.82 | ||||||||||
Balance at December 31, 2016-Restricted stock and restricted stock units | 12,816 | $ | 5.15 | ||||||||||
Exercisable at December 31, 2016 | 11,633 | $ | 2.76 | ||||||||||
Unvested shares at December 31, 2015 | 8,931 | $ | 3.23 | ||||||||||
Unvested shares at December 31, 2016 | 5,947 | $ | 2.94 |
Stock Options Outstanding | Stock Options Exercisable | ||||||||||||||||||||||
Range of Exercise Prices | Stock Options Outstanding | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Aggregate Intrinsic Value | Stock Options Vested and Exercisable | Weighted Average Remaining Contractual Life | Weighted Average Exercise Price | Aggregate Intrinsic Value | |||||||||||||||
(in thousands) | (in years) | (in thousands) | (in thousands) | (in years) | (in thousands) | ||||||||||||||||||
$0.33 to $1.43 | 4,036 | 1.23 | 2,866 | 1.28 | |||||||||||||||||||
$1.44 to $1.99 | 51 | 1.71 | 51 | 1.71 | |||||||||||||||||||
$2.00 to $4.00 | 11,988 | 3.12 | 7,441 | 3.01 | |||||||||||||||||||
$4.01 to $7.34 | 1,505 | 4.77 | 1,275 | 4.66 | |||||||||||||||||||
$7.35 to $35.00 | — | — | — | — | |||||||||||||||||||
17,580 | 5.9 | 2.82 | $ | 70,829 | 11,633 | 5.1 | 2.76 | $ | 47,602 |
December 31, 2016 | |||||||||||||||
Capital Leases | Operating Leases | Committed Sub-lease Income | Net Operating Leases | ||||||||||||
2017 | $ | 3,428 | $ | 10,173 | $ | (204 | ) | $ | 9,969 | ||||||
2018 | 140 | 11,923 | (613 | ) | $ | 11,310 | |||||||||
2019 | — | 10,704 | (613 | ) | $ | 10,091 | |||||||||
2020 | — | 8,342 | (613 | ) | $ | 7,729 | |||||||||
2021 | — | 5,816 | (613 | ) | $ | 5,203 | |||||||||
Thereafter | — | 12,625 | (1,022 | ) | $ | 11,603 | |||||||||
Total minimum payments required | 3,568 | $ | 59,583 | $ | (3,678 | ) | $ | 55,905 | |||||||
Less amounts representing interest | (140 | ) | |||||||||||||
Minimum future payments of principal | 3,428 | ||||||||||||||
Current portion | 3,288 | ||||||||||||||
Long-term portion | $ | 140 |
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 |
Restricted Stock | Restricted Cash | Assumed Options | Interest Expense | Total | |||||||||||||||
2016 | $ | 7,380 | $ | 6,353 | $ | 2,700 | $ | 255 | $ | 16,688 | |||||||||
2017 | 6,197 | 5,383 | 1,293 | 271 | 13,144 | ||||||||||||||
2018 | 661 | 620 | 424 | 46 | 1,751 | ||||||||||||||
2019 | — | — | 76 | — | 76 | ||||||||||||||
Total | $ | 14,238 | $ | 12,356 | $ | 4,493 | $ | 572 | $ | 31,659 |
Estimated Fair Value | |||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ | 16,094 | |
Accounts receivable | 8,764 | ||
Prepaid expenses and other current assets | 3,507 | ||
Total current assets | 28,365 | ||
Property and equipment | 757 | ||
Software, net | 242 | ||
Intangible assets | 101,770 | ||
Restricted cash | 51 | ||
Total assets acquired | 131,185 | ||
Liabilities | |||
Current liabilities: | |||
Accounts payable | 1,841 | ||
Accrued expenses | 9,299 | ||
Deferred revenue, current portion | 1,735 | ||
Total current liabilities | 12,875 | ||
Deferred tax liabilities, net, non-current | 29,355 | ||
Total liabilities assumed | 42,230 | ||
Net identifiable assets acquired | 88,955 | ||
Goodwill | 143,073 | ||
Total purchase price | $ | 232,028 |
Amount | |||
Customer relationships | $ | 85,900 | |
Developed technologies | 13,768 | ||
Non-compete agreements | 972 | ||
Trade names | 1,130 | ||
$ | 101,770 |
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 | 3,979 | ||
Deferred revenue, current portion | 576 | ||
Current maturities of capital lease obligations | 557 | ||
Total current liabilities | 8,456 | ||
Capital lease obligations, net of current maturities | 552 | ||
Deferred tax liabilities, net, non-current | 8,487 | ||
Total liabilities assumed | 17,495 | ||
Net identifiable assets acquired | 29,379 | ||
Goodwill | 63,310 | ||
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, net, 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 |
Estimated Fair Value | |||
Assets | |||
Current assets: | |||
Cash and cash equivalents | $ | 70 | |
Accounts receivable | 2,925 | ||
Inventory | 386 | ||
Prepaid expenses and other current assets | 398 | ||
Total current assets | 3,779 | ||
Property and equipment | 5,731 | ||
Software | 3 | ||
Intangible assets | 50,925 | ||
Deferred tax assets, net, non-current | 51 | ||
Other assets | 76 | ||
Total assets acquired | 60,565 | ||
Liabilities | |||
Current liabilities: | |||
Accounts payable | 1,202 | ||
Accrued expenses | 4,108 | ||
Deferred revenue, current portion | 1,156 | ||
Total current liabilities | 6,466 | ||
Total liabilities assumed | 6,466 | ||
Net identifiable assets acquired | 54,099 | ||
Goodwill | 60,231 | ||
Total purchase price | $ | 114,330 |
Amount | |||
Customer relationships | $ | 10,699 | |
Developed technologies | 35,508 | ||
Non-compete agreements | 2,526 | ||
MPLS network | 2,192 | ||
$ | 50,925 |
For the years ended December 31, | |||||||
2016 | 2015 | ||||||
Revenue | $ | 989,846 | $ | 958,416 | |||
Net income attributable to Vonage | 13,159 | 5,679 | |||||
Net income attributable to Vonage per share - basic | 0.06 | 0.03 | |||||
Net income attributable to Vonage per share - diluted | 0.05 | 0.02 |
> | an increase in amortization expense of $8,148 and $9,121 for the year ended 2016 and 2015, respectively, related to the identified intangible assets of Nexmo; |
> | a decrease in income tax expense of $3,376 and $12,807 for the year ended 2016 and 2015, respectively, related to pro forma adjustments and Nexmo's results prior to acquisition; |
> | the exclusion of our transaction-related expenses of $5,923 for the year ended 2016; |
> | an increase in interest expense of $2,499 and $6,450 for the years ended 2016 and 2015, respectively, associated with borrowings under our revolving credit facility; and |
> | a decrease in general and administrative expense attributable to acquisition related consideration accounted for as compensation of $13,287, offset by a change in the contingent consideration of $11,472, for the year ended 2016 and an increase in general and administrative expense attributable to acquisition related consideration accounted for as compensation of $3,080 for the year 2015. |
For the years ended December 31, | |||||||||||
(In thousands, except per share amounts) | 2016 | 2015 | 2014 | ||||||||
Revenues | $ | — | $ | 33 | $ | 99 | |||||
Operating expenses | — | 1,648 | 10,358 | ||||||||
Loss from discontinued operations | — | (1,615 | ) | (10,259 | ) | ||||||
Loss on disposal, net of taxes | — | (824 | ) | (1 | ) | ||||||
Net loss from discontinued operations | — | (2,439 | ) | (10,260 | ) | ||||||
Plus: Net loss from discontinued operations attributable to noncontrolling interest | — | 59 | 819 | ||||||||
Net loss from discontinued operations attributable to Vonage | $ | — | $ | (2,380 | ) | $ | (9,441 | ) |
Year ended December 31, 2016 | |||||||||||
Business | Consumer | Total | |||||||||
Revenues | |||||||||||
Service revenues | $ | 301,877 | $ | 522,515 | $ | 824,392 | |||||
Product revenues (1) | 52,450 | 702 | 53,152 | ||||||||
Service and product revenues | 354,327 | 523,217 | 877,544 | ||||||||
USF revenues | 22,025 | 56,052 | 78,077 | ||||||||
Total revenues | 376,352 | 579,269 | 955,621 | ||||||||
Cost of revenues | |||||||||||
Service cost of revenues (2) | 111,485 | 100,054 | 211,539 | ||||||||
Product cost of revenues (1) | 51,129 | 14,394 | 65,523 | ||||||||
Service and product cost of revenues | 162,614 | 114,448 | 277,062 | ||||||||
USF cost of revenues | 22,036 | 56,052 | 78,088 | ||||||||
Total cost of revenues | 184,650 | 170,500 | 355,150 | ||||||||
Gross margin | |||||||||||
Service margin | 190,392 | 422,461 | 612,853 | ||||||||
Product margin | 1,321 | (13,692 | ) | (12,371 | ) | ||||||
Gross margin ex-USF (Service and product margin) | 191,713 | 408,769 | 600,482 | ||||||||
USF margin | (11 | ) | — | (11 | ) | ||||||
Gross margin | $ | 191,702 | $ | 408,769 | $ | 600,471 |
Gross margin % | ||||||||
Service margin % | 63.1 | % | 80.9 | % | 74.3 | % | ||
Gross margin ex-USF (Service and product margin %) | 54.1 | % | 78.1 | % | 68.4 | % | ||
Gross margin % | 50.9 | % | 70.6 | % | 62.8 | % |
Year ended December 31, 2015 | |||||||||||
Business | Consumer | Total | |||||||||
Revenues | |||||||||||
Service revenues | $ | 170,489 | $ | 612,822 | $ | 783,311 | |||||
Product revenues (1) | 35,545 | 645 | 36,190 | ||||||||
Service and product revenues | 206,034 | 613,467 | 819,501 | ||||||||
USF revenues | 12,993 | 62,578 | 75,571 | ||||||||
Total revenues | 219,027 | 676,045 | 895,072 | ||||||||
Cost of revenues | |||||||||||
Service cost of revenues (2) | 44,997 | 123,580 | 168,577 | ||||||||
Product cost of revenues (1) | 31,185 | 20,616 | 51,801 | ||||||||
Service and product cost of revenues | 76,182 | 144,196 | 220,378 | ||||||||
USF cost of revenues | 13,022 | 62,578 | 75,600 | ||||||||
Total cost of revenues | 89,204 | 206,774 | 295,978 | ||||||||
Gross margin | |||||||||||
Service margin | 125,492 | 489,242 | 614,734 | ||||||||
Product margin | 4,360 | (19,971 | ) | (15,611 | ) | ||||||
Gross margin ex-USF (Service and product margin) | 129,852 | 469,271 | 599,123 | ||||||||
USF gross margin | (29 | ) | — | (29 | ) | ||||||
Total gross margin | $ | 129,823 | $ | 469,271 | $ | 599,094 |
Gross margin % | ||||||||
Service margin % | 73.6 | % | 79.8 | % | 78.5 | % | ||
Gross margin ex-USF (Service and product margin %) | 63.0 | % | 76.5 | % | 73.1 | % | ||
Gross margin % | 59.3 | % | 69.4 | % | 66.9 | % |
Year ended December 31, 2014 | |||||||||||
Business | Consumer | Total | |||||||||
Revenues | |||||||||||
Service revenues | $ | 89,198 | $ | 705,224 | $ | 794,422 | |||||
Product revenues (1) | 2,041 | 1,202 | 3,243 | ||||||||
Service and product revenues | 91,239 | 706,426 | 797,665 | ||||||||
USF revenues | 3,205 | 67,984 | 71,189 | ||||||||
Total revenues | 94,444 | 774,410 | 868,854 | ||||||||
Cost of revenues | |||||||||||
Service cost of revenues (2) | 17,885 | 142,184 | 160,069 | ||||||||
Product cost of revenues (1) | 6,861 | 29,721 | 36,582 | ||||||||
Service and product cost of revenues | 24,746 | 171,905 | 196,651 | ||||||||
USF cost of revenues | 3,248 | 67,984 | 71,232 | ||||||||
Total cost of revenues | 27,994 | 239,889 | 267,883 | ||||||||
Gross margin | |||||||||||
Service margin | 71,313 | 563,040 | 634,353 | ||||||||
Product margin | (4,820 | ) | (28,519 | ) | (33,339 | ) | |||||
Gross margin ex-USF (Service and product margin) | 66,493 | 534,521 | 601,014 | ||||||||
USF margin | (43 | ) | — | (43 | ) | ||||||
Gross margin | $ | 66,450 | $ | 534,521 | $ | 600,971 |
Gross margin % | ||||||||
Service margin % | 79.9 | % | 79.8 | % | 79.9 | % | ||
Gross margin ex-USF (Service and product margin %) | 72.9 | % | 75.7 | % | 75.3 | % | ||
Gross margin % | 70.4 | % | 69.0 | % | 69.2 | % |
For the years ended December 31, | |||||||||||
2016 | 2015 | 2014 | |||||||||
Revenues: | |||||||||||
United States | $ | 872,147 | $ | 854,706 | $ | 823,857 | |||||
Canada | 27,417 | 25,935 | 30,294 | ||||||||
United Kingdom | 17,365 | 14,431 | 14,703 | ||||||||
Other Countries (1) | 38,692 | — | — | ||||||||
$ | 955,621 | $ | 895,072 | $ | 868,854 |
December 31, 2016 | December 31, 2015 | ||||||
Long-lived assets: | |||||||
United States | $ | 629,269 | $ | 430,150 | |||
United Kingdom | 450 | 270 | |||||
Israel | 286 | 78 | |||||
$ | 630,005 | $ | 430,498 |
For the Quarter Ended | ||||||||||||||
March 31, | June 30, (1) | September 30, | December 31, | Total | ||||||||||
Year Ended 2016 | ||||||||||||||
Revenue | 226,824 | 233,675 | 248,359 | 246,763 | 955,621 | |||||||||
Income from continuing operations | 7,931 | 897 | 9,078 | 1 | 17,907 | |||||||||
Net income attributable to Vonage per common share: | ||||||||||||||
Basic net income per share | ||||||||||||||
Basic net income per share-from continuing operations | 0.04 | — | 0.04 | — | ||||||||||
Diluted net income per share | ||||||||||||||
Diluted net income per share-from continuing operations | 0.04 | — | 0.04 | — | ||||||||||
For the Quarter Ended | ||||||||||||||
March 31, | June 30, (2) | September 30, (3) | December 31, | Total | ||||||||||
Year Ended 2015 | ||||||||||||||
Revenue | 219,730 | 221,858 | 223,360 | 230,124 | 895,072 | |||||||||
Income from continuing operations | 9,849 | 8,347 | 3,433 | 3,406 | 25,035 | |||||||||
Loss from discontinued operations attributable to Vonage | (2,380 | ) | — | — | — | (2,380 | ) | |||||||
Net income attributable to Vonage | 7,469 | 8,347 | 3,433 | 3,406 | 22,655 | |||||||||
Net income attributable to Vonage per common share: | ||||||||||||||
Basic net income per share | ||||||||||||||
Basic net income per share-from continuing operations | 0.05 | 0.04 | 0.02 | 0.02 | ||||||||||
Basic net income per share-from discontinued operations attributable to Vonage | (0.01 | ) | — | — | — | |||||||||
Basic net income per share-net income attributable to Vonage | 0.04 | 0.04 | 0.02 | 0.02 | ||||||||||
Diluted net income per share | ||||||||||||||
Diluted net income per share-from continuing operations | 0.04 | 0.04 | 0.02 | 0.01 | ||||||||||
Diluted net income per share-from discontinued operations attributable to Vonage | (0.01 | ) | — | — | — | |||||||||
Diluted net income per share-net income attributable to Vonage | 0.03 | 0.04 | 0.02 | 0.01 |
Name | Jurisdiction of Incorporation | |
Vonage America Inc. | Delaware | |
Vonage Wireless Inc. | Delaware | |
Vonage Business Inc. | Delaware | |
Vonage Business Networks, Inc. | Delaware | |
Vonage Worldwide Inc. | Delaware | |
Vonage International Inc. | Delaware | |
Vonage Canada Corp. | British Columbia, Canada | |
Vonage A/S | Denmark | |
Vonage B.V. | The Netherlands | |
Vonage Limited | United Kingdom | |
Vonage Limited | Hong Kong | |
Vonage India Private Limited | India | |
Vonage Applications Inc. | Delaware | |
Vonage Apps. Ltd. | Israel | |
Vonage Foundation Corp. | Delaware (Non-Profit) | |
Nexmo Inc. | Delaware | |
Nexmo Limited | England & Wales | |
Nexmo Asia Pacific Limited | Hong Kong | |
Nexmo Pte. Ltd. | Singapore | |
Nexmo World Services Limited | England & Wales | |
Date: | February 28, 2017 | /s/ Alan Masarek | |
Alan Masarek | |||
Chief Executive Officer |
Date: | February 28, 2017 | /s/ David T. Pearson |
David T. Pearson | ||
Chief Financial Officer and Treasurer |
Date: | February 28, 2017 | /s/ Alan Masarek |
Alan Masarek | ||
Chief Executive Officer |
Date: | February 28, 2017 | /s/ David T. Pearson |
David T. Pearson | ||
Chief Financial Officer and Treasurer |
Document And Entity Information - USD ($) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Jan. 31, 2017 |
Jun. 30, 2016 |
|
Document And Entity Information [Abstract] | |||
Entity Registrant Name | VONAGE HOLDINGS CORP | ||
Entity Central Index Key | 0001272830 | ||
Current Fiscal Year End Date | --12-31 | ||
Entity Filer Category | Large Accelerated Filer | ||
Document Type | 10-K | ||
Document Period End Date | Dec. 31, 2016 | ||
Document Fiscal Year Focus | 2016 | ||
Document Fiscal Period Focus | FY | ||
Amendment Flag | false | ||
Entity Common Stock, Shares Outstanding | 219,678,428 | ||
Entity Well-known Seasoned Issuer | No | ||
Entity Voluntary Filers | No | ||
Entity Current Reporting Status | Yes | ||
Entity Public Float | $ 1,136,593,480 |
Consolidated Balance Sheets (Parenthetical) - USD ($) shares in Thousands, $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 2,093 | $ 1,091 |
Inventory, allowance | $ 117 | $ 686 |
Common stock, par value (USD per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized | 596,950 | 596,950 |
Common stock, shares issued | 282,319 | 268,947 |
Common stock, shares outstanding | 219,001 | 214,280 |
Treasury stock, shares | 63,318 | 54,667 |
Consolidated Statements of Income (Parenthetical) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Statement [Abstract] | |||
Depreciation and Amortization | $ 28,489 | $ 24,868 | $ 19,405 |
Basis of Presentation and Significant Accounting Policies |
12 Months Ended | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Basis of Presentation and Significant Accounting Policies | Basis of Presentation and Significant Accounting Policies
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. We transform the way people work and businesses operate through a portfolio of cloud-based communications solutions that enable internal collaboration among employees, while also keeping companies closely connected with their customers, across any mode of communication, on any device. Through our Nexmo subsidiary, we are a global leader in the Communications-Platform-as-a-Service (“CPaaS”) segment of the cloud communications market. We provide 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. Nexmo has a global network of interconnected carriers delivering its API-based communications platform, enabling businesses to communicate with their customers reliably and with ease, no matter where in the world they are located. We also provide a robust suite of feature-rich residential communication solutions. Customers in the United States represented 91% of our consolidated revenues at December 31, 2016, with the balance in Canada, the United Kingdom, and other countries. Nexmo Inc. ("Nexmo") has operations in the United States, United Kingdom, Hong Kong, and Singapore, and provides CPaaS solutions to our customers located in many countries around the world.
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 consolidated a majority-owned entity in Brazil where we had the ability to exercise controlling influence. The ownership interest of the noncontrolling party was 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 believed 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 revenues and customer equipment (which enables our services) and shipping revenues. 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. Our recently acquired subsidiary, Nexmo, provides CPaaS solutions to our customers. Through Nexmo, we provide innovative communication 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. Nexmo has a global network of interconnected carriers delivering its API-based communications platform, enabling businesses to communicate with their customers reliably and with ease, no matter where in the world they are located. Nexmo has two types of revenue activities: Revenue is primarily derived from supplying messaging (SMS and Voice) services to customers. Revenue is recognized in the period when messages are sent by the customer. Revenue is recognized based on the price on the website pricing page or as otherwise agreed with the customer. Our trading customers operate within the communications industry as service providers or bulk SMS aggregators. With our trading business, we sell to trading specialists who are delivering voice or SMS messages on behalf of their customers. Typically, trade is based on single supply route and margins, which are effectively fixed at a deal level, represent the value of the transaction to us. As such, for the trading business we record revenue on a net basis as service providers deliver messages. 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 Services 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 $22,447, $18,350, and $13,034 for the years ended December 31, 2016, 2015, and 2014, 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. Advertising Expenses Advertising costs are expensed as incurred. 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 year ended December 31, 2016, 2015, and 2014. 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 years ended December 31, 2016, 2015, and 2014. 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 Sheet 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. Restricted Cash and Letters of Credit We had a cash collateralized letter of credit for $1,578 and $2,498 as of December 31, 2016 and 2015, respectively, mainly related to lease deposits for our Holmdel office. In the aggregate, cash reserves and collateralized letters of credit of $1,851 and $2,587 were recorded as long-term restricted cash at December 31, 2016 and 2015, respectively. 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% 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. 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. 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 2013 to present, our New Jersey tax returns remain open from 2012 to present, our Canada tax return remains open from 2014 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. The Canada Revenue Agency concluded their audit and there were no changes. 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% 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. Foreign Currency Generally, the functional currency of our non-United States subsidiaries is the local currency. However, the functional currency of Nexmo's United States's subsidiary is the euro. 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:
The following shares were excluded from the calculation of diluted income per share because of their anti-dilutive effects:
Comprehensive Income 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 January 2017, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-04. "Intangibles - Goodwill and Other. The ASU simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test. This ASU is effective for an annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact of adopting ASU 2017-04 on our consolidated financial statements and related disclosures. In December 2016, FASB issued ASU 2016-20, "Revenue from Contract with Customers - Technical Corrections and Improvements to Topic 606". In May 2016, 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, "Deferral of the Effective Date". 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 in the initial stages of evaluating the effect of adopting ASU2016-20, ASU 2016-12, ASU 2016-10, ASU 2016-08, ASU 2015-14, and ASU 2014-09 on our consolidated financial statements and related disclosures and continue to evaluate all transition methods. In November 2016, FASB issued ASU 2016-18, "Statement of Cash Flows". This ASU requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We will adopt this ASU in the first quarter of 2017. The adoption of ASU 2016-01 will not have a material impact on our consolidated financial statements and related disclosures. In March 2016, FASB issued 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, recognition of share-based expense, 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 will adopt this ASU in the first quarter of 2017. We will elect to account for forfeitures when they occur versus our current practice of estimating the number of awards that are expected to vest. The election of this new practice will result in a one-time adjustment to our accumulated deficit for the difference of the two practices through the end of 2016. The adoption of ASU 2016-09 will not have a material impact 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. The adoption of this ASU will increase assets and liabilities for operating leases. 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. Management has adopted ASU 2015-17 effective for the fourth quarter of 2016. We presented the net deferred tax assets as noncurrent, reclassified any current deferred tax assets in the consolidated balance sheet on a prospective basis, and we did not adjusted the prior periods. If the period ended December 31, 2015 was adjusted, the deferred income taxes would be a non-current deferred tax assets of $226,572. 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 permitted at the beginning of an interim and annual reporting period. The adoption of ASU 2015-11 is not expected to have a material impact on our consolidated financial statements and related disclosures. |
Supplemental Balance Sheet Account Information |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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
The total expected future annual amortization of software is as follows:
Debt related costs, net
Restricted cash
Other assets
Accrued expenses
Accumulated other comprehensive (loss) income
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Goodwill and Intangible Assets |
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill The following table provides a summary of the changes in the carrying amounts of goodwill:
Goodwill During the year ended December 31, 2016, the Company recorded an immaterial correction of an error related to the overstatement of certain deferred tax assets recorded in connection with acquisition accounting that were outside of the measurement period. The Company recognized a $2,298 decrease in deferred tax assets, net and a $2,298 increase to goodwill on the consolidated balance sheet as of December 31, 2016. Management performed an evaluation under Staff Accounting Bulletin No. 108 and concluded the effect of the adjustment is immaterial to the current period’s financial statements. The correction of the error did not have an effect on our consolidated statements of operations or on our consolidated statements of cash flows for the year ended December 31, 2016. Intangible assets, net The carrying values of intangible assets were as follows:
Represents customer relationships, developed technology, trade names and non-compete agreements identified in the acquisition of businesses. In addition, includes patents and trademarks we have purchased and licensed, including in connection with the settlement of litigation. 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 to twelve years; developed technology is being amortized on an accelerated basis over an estimated useful life of eight years; patents and patent licenses are being amortized over their weighted average remaining lives; trademark is being amortized on a straight-line basis over eight years; trade names are being amortized on a straight-line basis over two to three years; and the non-compete agreements are being amortized on a straight-line basis over two to three years. The total expected future annual amortization is as follows:
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Supplemental Income Statement Account Information |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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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
Amounts included in cost of services
Amounts included in cost of goods sold
Amounts included in sales and marketing
Amounts included in general and administrative expense
Depreciation and amortization expense
Amounts included in interest expense
Amounts included in other income (expense), net
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Income Taxes |
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Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes The components of income from continuing operations before income tax expense are as follows:
The components of the income tax expense are as follows:
The following table summarizes deferred tax assets resulting from differences between financial accounting basis and tax basis of assets and liabilities.
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. Until the fourth quarter of 2011, we recorded a valuation allowance fully against our net deferred tax assets. In 2011, we completed our first full year of taxable income and completed our budgetary process for periods subsequent to 2011, which anticipates continued taxable income in the future. Based upon these factors and our sustained profitable operating performance over the past three years excluding certain losses associated with our prior convertible notes and our December 2010 debt refinancing, our evaluation determined that the benefit resulting from our net deferred tax assets (namely, the NOLs), are likely to be realized prior to their expiration. Accordingly, we released the related valuation allowance against our United States federal and Canada net deferred tax assets, and a portion of the allowance against our state net deferred tax assets as certain NOLs may expire prior to utilization due to shorter utilization periods in certain states, resulting in a one-time non-cash income tax benefit of $325,601 and a corresponding net deferred tax asset of $325,601 in the fourth quarter of 2011. We still maintain a full valuation allowance against our United Kingdom net deferred tax assets as we are unable to conclude that it is more likely than not that some or all of the related United Kingdom net deferred tax assets will be realized. In connection with the acquisition of Nexmo, we recorded a deferred tax liability of $37,507 related to the $101,770 of identified intangible assets that will be amortized for financial reporting purposes but not for tax purposes and a deferred tax asset of $7,686 related to NOLs. In connection with the acquisition of iCore, 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. In connection with the acquisition of Simple Signal, we recorded a 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. In connection with the acquisition of Telesphere, we recorded a deferred tax liability of $17,050 related to the $50,925 of identified intangible assets that will be amortized for financial reporting purposes but not for tax purposes and a deferred tax asset of $17,101 related to NOLs. 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. The reconciliation between the United States statutory federal income tax rate and the effective rate is as follows:
As of December 31, 2016, we had NOLs for United States federal and state tax purposes of $575,476 and $158,848, respectively, expiring at various times from years ending 2017 through 2036 as follows:
United States federal and state NOLs of $18,923 represent excess tax benefits from the exercise of share based awards which will be recorded in additional paid-in capital when realized. We had NOLs for United Kingdom tax purposes of $43,006 with no expiration date. Under Section 382 of the Internal Revenue Code, if we undergo an “ownership change” (generally defined as a greater than 50% change (by value) in our equity ownership over a three-year period), our ability to use our pre-change of control NOLs and other pre-change tax attributes against our post-change income may be limited. The Section 382 limitation is applied annually so as to limit the use of our pre-change NOLs to an amount that generally equals the value of our stock immediately before the ownership change multiplied by a designated federal long-term tax-exempt rate. At December 31, 2016, there were no limitations on the use of our NOLs except for certain of the NOLs of Vocalocity as of the date of acquisition. |
Long-Term Debt and Revolving Credit Facility |
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Long-Term Debt And Revolving Credit Facility | Long-Term Debt and Revolving Credit Facility A schedule of long-term debt at December 31, 2016 and 2015 is as follows:
At December 31, 2016, future payments under long-term debt obligations over each of the next five years and thereafter are 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 In 2016, we made mandatory repayment of $14,062 under the term note. In addition, we repaid the $45,000 outstanding under the revolving credit facility. 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 December 31, 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, 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 to be 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 was allocated as follows: $733 to the term note and $895 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 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 repayments of $3,750 under the term note in 2016 and $7,500 under the term note in 2015. In addition, we repaid the $10,000 outstanding under the revolving credit facility in 2016 and $30,000 outstanding under the revolving credit facility in 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 would have been 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. 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 loans 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 increases 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 are 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. 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 were to be used for general corporate purposes. We also incurred $1,910 of fees in connection with the 2014 Credit Facility, which were 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. 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. 2014 Credit Facility Terms The following description summarizes the material terms of the 2014 Credit Facility: The loans under the 2014 Credit Facility were to mature in August 2018. Principal amounts under the 2014 Credit Facility were repayable in quarterly installments of $5,000 per quarter for the term note. The unused portion of our revolving credit facility incurred a 0.40% commitment fee. Outstanding amounts under the 2014 Credit Facility, at our option, bore interest at:
The 2014 Credit Facility provided greater flexibility to us in funding acquisitions and restricted payments, such as stock buybacks, than the 2013 Credit Facility. We were able to prepay the 2014 Credit Facility at our option at any time without premium or penalty. The 2014 Credit Facility was subject to mandatory prepayments in amounts equal to:
Subject to certain restrictions and exceptions, the 2014 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 $60,000 plus an amount equal to repayments of the term note upon providing documentation reasonably satisfactory to the administrative agent. The 2014 Credit Facility included customary representations and warranties and affirmative covenants of the borrowers. In addition, the 2014 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 up to $8,000 increased permitted capital expenditures. The 2014 Credit Facility contained customary events of default that may permit acceleration of the debt. During the continuance of a payment default, interest would accrue 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. |
Fair Value of Financial Instruments |
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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 believed 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 December 31, 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. (3) Included in accrued expenses on our consolidated balance sheet. The following summarizes the changes in liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
Our contingent consideration liability is valued using a discounted cash flow valuation method encompassing significant unobservable inputs. The inputs include estimated revenue scenarios for the applicable performance periods, probability weightings assigned to revenue scenarios and the discount rate applied. Nexmo shareholders may earn a contingent consideration 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 contingent consideration payable to the holders of Nexmo stock is determined based on (i) the achievement of certain revenue targets for the calendar year 2016, and (ii) Nexmo’s revenues received from its top customers following the closing. The contingent consideration 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 contingent consideration was $17,840 at the acquisition date and included that amount in acquisition cost at the net present value amount of $16,472. As of September 30, 2016, we have adjusted our probability weighting based upon updated information and have reduced the value of the contingent consideration to $9,866 with a net present value of $9,110. This reduction in the contingent consideration of $7,362 was recorded in general and administrative expenses. As of December 31, 2016, Nexmo did not achieve performance targets but the parties have agreed to a $5,000 settlement that will be paid in the first quarter of 2017. As such we reduced the contingent consideration to $0 and recorded the reduction of the remaining net present value of $9,110 in general and administrative expenses. The $5,000 settlement has also been reflected in accrued expenses within the consolidated balance sheets and in general and administrative expenses in the consolidated statements of income. 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 December 31, 2016 and 2015. We believe the fair value of our debt at December 31, 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. |
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 our existing $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 as of December 31, 2016 and 2015:
As of December 31, 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. |
Employee Benefit Plans |
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Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Employee Benefit Plans | Employee Benefit Plans Share-Based Compensation Our stock option program is a long-term retention program that is intended to attract, retain and provide incentives for talented employees, officers and directors, and to align stockholder and employee interests. Currently, we grant options from our 2015 Equity Incentive Plan. Our 2006 Stock Incentive Plan was terminated by our board of directors in 2015 and our 2001 Stock Incentive Plan was terminated by our board of directors in 2008. As such, share-based awards are no longer granted under either the 2006 and the 2001 Stock Incentive Plans. Under the 2015 Equity Incentive Plan, share-based awards can be granted to all employees, including executive officers, outside consultants, and non-employee directors. Vesting periods for share-based awards are generally three or four years for both plans. Awards granted under each plan expire in five or ten years from the effective date of grant. As of April 2010, the Company began routinely granting awards with a ten year expiration period. The fair value for these options was estimated at the date of grant using a Black-Scholes option-pricing model. The assumptions used to value options are as follows:
Beginning January 1, 2006, we estimated the volatility of our stock using historical volatility of comparable public companies in accordance with guidance in FASB ASC 718, “Compensation-Stock Compensation”. Beginning in the first quarter of 2008, we used the historical volatility of our common stock to measure expected volatility for future option grants. The risk-free interest rate assumption is based upon observed interest rates appropriate for the term of our employee stock options. The expected term of employee stock options represents the weighted-average period that the stock options are expected to remain outstanding, which we derive based on our historical settlement experience. Beginning in 2014, we issued restricted performance stock units with vesting that is contingent on both total shareholder return ("TSR") compared to members of our peer group and continued service. For the market-based restricted performance stock units issued during the year ended December 31, 2016 and December 31, 2015, the payouts at vesting which are linearly interpolated between the percentiles specified below are as follows:
Notwithstanding the foregoing, if our TSR is negative for the performance period, then the vesting percentage shall not exceed 100%. In addition, we reduce the shares available for grant to cover the potential payout of 200%. To value these market-based restricted performance stock units, we used a Monte Carlo simulation model on the date of grant. Compensation expense for restricted stock units with performance and market conditions is recognized over the requisite service period using the straight-line method and includes the impact of estimated forfeitures. The assumptions used to value these market based restricted performance stock units are as follows:
Our stock incentive plans as of December 31, 2016 are summarized as follows (in thousands):
2006 Incentive Plan In May 2006, we adopted the 2006 Incentive Plan. The 2006 Incentive Plan permits the grant of stock options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance units, annual awards, and other awards based on, or related to, shares of our common stock. Options awarded under our 2006 Incentive Plan may be non-qualified stock options or may qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended. Our 2006 Incentive Plan contains various limits with respect to the types of awards, as follows:
The 2006 Incentive Plan was terminated upon the adoption of our 2015 Equity Incentive Plan. No additional awards may be made pursuant to the 2006 Incentive Plan. 2015 Equity Incentive Plan On June 3, 2015, we adopted our 2015 Equity Incentive Plan. Shares issued under the plan may be authorized and unissued shares or may be issued shares that we have reacquired. Shares covered by awards that are forfeited, canceled or otherwise expire without having been exercised or settled, or that are settled by cash or other non-share consideration, will become available for issuance pursuant to a new award. Shares that are tendered or withheld to pay the exercise price of an award or to satisfy tax withholding obligations will not be available for issuance pursuant to new awards. At December 31, 2016, 13,841 shares were available for future grant under the 2015 Equity Incentive Plan. The 2015 Equity Incentive Plan permits the grant of stock options, restricted stock, restricted stock units, stock appreciation rights, performance stock, performance units, annual awards, and other awards based on, or related to, shares of our common stock. Options awarded under our 2015 Equity Incentive Plan may be non-qualified stock options or may qualify as incentive stock options under Section 422 of the Internal Revenue Code of 1986, as amended. For purposes of complying with the requirements of Section 162(m) of the Internal Revenue Code of 1986, as amended, the maximum number of shares of common stock that may be subject to stock options, stock appreciation rights, performance-based restricted stock awards, performance-based RSUs and performance-based stock awards granted to any participant other than a non-employee director during any calendar year will be limited to 10,000 shares of common stock for each such award type individually. The maximum number of shares of common stock that may be subject to stock options, stock appreciation rights, restricted stock awards, RSUs and stock awards granted to any non-employee director during any calendar year will be limited to 10,000 shares of common stock for all such award types in the aggregate. Further, the maximum amount that may become payable to any one Participant during any one calendar year under all Cash Performance Awards intended to qualify as “performance-based compensation” under Section 162(m) of the Code is limited to $5,000. Our 2015 Equity Incentive Plan will terminate on June 3, 2025. The following table summarizes the activity for all awards under both of our stock incentive plans:
The weighted average exercise price of options granted was $5.91, $4.41, and $3.47 for the years ended December 31, 2016, 2015, and 2014, respectively. The weighted average grant date fair market value of restricted stock and restricted stock units granted was $4.93, $5.37, and $4.71 during the year ended December 31, 2016, 2015, and 2014, respectively. The aggregate intrinsic value of exercised stock options for the years ended December 31, 2016, 2015, and 2014 was $12,142, $8,040, and $22,962, respectively. The aggregate intrinsic value of exercised restricted stock and restricted stock units for the years ended December 31, 2016, 2015, and 2014 was $12,248, $8,844, and $4,909, respectively. The weighted average grant date fair market value of stock options granted was $3.01, $3.09, and $2.55 for the years ended December 31, 2016, 2015, and 2014. Total share-based compensation expense recognized for the years ended December 31, 2016, 2015, and 2014 was $40,682, $27,541, and $21,070, respectively, which were recorded to selling, general and administrative expense in the consolidated statement of income. As of December 31, 2016, total unamortized share-based compensation was $32,020, accounting for forfeitures when they occur, which is expected to be amortized over the remaining vesting period of each grant, up to the next 48 months. Compensation costs for all share-based awards are recognized using the ratable single-option approach on an accrual basis and are amortized using an accelerated amortization schedule. Our current policy is to issue new shares to settle the exercise of stock options and prospectively, the vesting of restricted stock units. Information regarding the options outstanding as of December 31, 2016 is summarized below:
The aggregate intrinsic value of restricted stock units outstanding was $87,789 as of December 31, 2016. Retirement Plan In March 2001, we established a 401(k) Retirement Plan (the “Retirement Plan”) available to employees who meet the plan’s eligibility requirements. Participants may elect to contribute a percentage of their compensation to the Retirement Plan up to a statutory limit. We may make a contribution to the Retirement Plan in the form of a matching contribution. The employer matching contribution is 50% of each employee’s contributions not to exceed $6 in 2014, 2015, and 2016. Our expense related to the Retirement Plan was $5,015, $3,676, and $2,959 in 2016, 2015, and 2014, respectively. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies | Commitments and Contingencies Capital Leases Assets financed under capital lease agreements are included in property and equipment in the consolidated balance sheet and related depreciation and amortization expense is included in the consolidated statements of operations. On March 24, 2005, we entered into a lease for our headquarters in Holmdel, New Jersey. We took possession of a portion of the office space at the inception of the lease, another portion on August 1, 2005 and took over the remainder of the office space in early 2006. The overall lease term is twelve years and five months. In connection with the lease, we issued a letter of credit which requires $7,350 of cash as collateral, which is classified as restricted cash. Part of the cash was released, leaving a balance of $1,578 at December 31, 2016. The gross amount of the building recorded under capital leases totaled $25,709 as of December 31, 2016 and accumulated depreciation was approximately $24,243 as of December 31, 2016. In November 2015, we entered into the fourth amendment to our headquarters lease effective December 1, 2015. The amendment extend the term of the lease for a period of seventy-four months to commence September 1, 2017 and continue through October 31, 2023. Based on the terms of the lease, it is considered an operating lease when it becomes effective on September 1, 2017. Operating Leases We have entered into various non-cancelable operating lease agreements for certain of our existing office and telecommunications co-location space in the United States and for international subsidiaries with original lease periods expiring between 2017 and 2026. We are committed to pay a portion of the buildings’ operating expenses as determined under the agreements. At December 31, 2016, future payments under capital leases and minimum payments under non-cancelable operating leases are as follows over each of the next five years and thereafter:
Rent expense was $7,495 for 2016, $6,378 for 2015, and $7,007 for 2014. Stand-by Letters of Credit We have stand-by letters of credit totaling $1,578 and $2,498, as of December 31, 2016 and 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 several commitments primarily commitments to vendors who will provide local inbound services, provide customer care services, provide efax service, provide carrier operation, provide data center with technical supports, provide networks and telephone related services, provide marketing infrastructure and services, provide customer caller ID, provide electricity to our office, license patents to us, partner with us in international operations, process LNP orders, and lease office space to us. In certain cases, we may terminate these arrangements early upon payment of specified fees. These commitments total $203,273. Of this total amount, we expect to purchase $86,048 in 2017, $84,959 in 2018, $19,553 in 2019, $2,000 in 2020 and 2021, and $8,713 thereafter, respectively. These amounts do not represent our entire anticipated purchases in the future, but represent only those items for which we are contractually committed. We also purchase products and services as needed with no firm commitment. For this reason, the amounts presented do not provide a reliable indicator of our expected future cash outflows or changes in our expected cash position. Litigation From time to time, in addition to those identified below, 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 also 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. 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 in the United States District Court for the Eastern District of Virginia against Aptela. 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. Bear Creek appealed the Board’s decision to the United States Court of Appeals for the Federal Circuit. Briefing on the appeal is complete and pending oral argument before the Court on March 13, 2017. 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 December 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 appealed to the Federal Circuit, filing its opening brief on December 15, 2016. On December 20, 2016, the Patent Office filed a notice of intervention in the appellate proceedings. Both the Patent Office’s and Cisco’s responsive briefs are due on March 13, 2017. Commercial Litigation Merkin & Smith, et als. 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. A joint status report was filed with the District Court on December 23, 2016. 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. The petition is pending. 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, 2016. 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. The D.C. Circuit held oral argument on this appeal on February 8, 2017. 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. The FCC adopted its new privacy rules at its October 27, 2016 open meeting. The rules do not provide for vicarious liability for vendors and provide an exemption from the rules in certain instances for business voice customers. Numerous parties have filed petitions for reconsideration. 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 VoIP service. 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 December 31, 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 December 31, 2016. Employment Agreements Our Chief Executive Officer is subject to an employment contract with a minimum salary commitment that is subject to annual review. He is also eligible for an annual performance bonus with a target based upon his then annual salary. The term of the employment contract with our Chief Executive Officer expires in 2017. In the event of the termination of our Chief Executive Officer’s employment, depending upon the circumstances, he will be entitled to severance benefits equal to (i) twelve months base salary plus his target bonus amount for the year in which his employment terminates, payable over the twelve months period following termination of employment, (ii) a pro rata share (based on the portion of the year elapsed) of his bonus for the year in which his employment terminates, payable when, as and if under the Company’s bonus program such bonus would otherwise be paid, but in no event later than March 15th of the year following the year to which such bonus relates, (iii) any prior year bonus amounts earned but unpaid as of the termination date, (iv) other accrued but unpaid compensation and benefits under the Company’s benefits plans, (v) amounts to cover specified health care coverage premiums and (vi) vesting of certain equity awards pursuant to the terms of such awards. |
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Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Acquisition of Business | Acquisition of Business Acquisition of Nexmo Nexmo Inc. 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 amended 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 was 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 were eligble to 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 contingent consideration payable to the holders of Nexmo stock is determined based on (i) the achievement of certain revenue targets for the calendar year 2016, and (ii) Nexmo’s revenues received from its top customers following the closing. The contingent consideration 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 contingent consideration is $17,840 at the acquisition date and included that amount in acquisition cost at the net present value amount of $16,472. As of September 30, 2016, we have adjusted our probability weighting based upon updated information and have reduced the value of the contingent consideration to $9,866 with a net present value of $9,110. This reduction in the contingent consideration of $7,362 was recorded in general and administrative expenses. As of December 31, 2016, Nexmo did not achieve performance targets but the parties have agreed to a $5,000 settlement that the parties expect to be paid in the first quarter of 2017. As such we reduced the contingent consideration to $0 and recorded the reduction of the remaining net present value of $9,110 in general and administrative expenses. The $5,000 settlement has also been reflected in accrued expenses within the consolidated balance sheets and in general and administrative expenses in the consolidated statements of income. 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 post-acquisition expense assuming all amounts vest, of which $31,087 will be recorded as compensation expense and $572 will be recorded as interest expense as continued employment is a condition of receiving consideration. The post-acquisition expense will be recorded as follows:
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 $5,500 in acquisition related transaction costs, which were recorded in general and administrative expense in the accompanying Consolidated Statements of Income. 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 are being amortized on an accelerated basis over an estimated useful life of twelve years, the developed technologies are being amortized on an accelerated basis over an estimated useful life of eight years, the non-compete agreements are being amortized on a straight-line basis over three years, and trade names are being amortized on a straight-line basis over two years. In addition, we recorded a deferred tax liability of $37,507 related to the $101,770 of identified intangible assets that will be amortized for financial reporting purposes but not for tax purposes and a deferred tax asset of $7,686 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 was 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 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 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 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. 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 Telesphere Pursuant to the Agreement and Plan of Merger (the “Telesphere Merger Agreement ”), dated November 4, 2014, by and among Vonage, Thunder Acquisition Corp., a Washington corporation and newly formed wholly owned subsidiary of Vonage (“Merger Sub”), Telesphere Networks Ltd. ("Telesphere"), and each of John Chapple and Gary O’Malley, as representative of the securityholders of Telesphere (collectively, the “Representative”). On December 15, 2014, Merger Sub merged with and into Telesphere, and Telesphere became a wholly owned subsidiary of Vonage (the “Merger”). Telesphere offers a comprehensive range of cloud voice and UCaaS services, including advanced call center solutions, collaboration, mobile office, and HD multi-point video conferencing. Facilitating its cloud services delivery, Telesphere also provides integrated MPLS services over its nationwide network enabling quality of service (QoS) management and security increasingly required by businesses utilizing extensive UCaaS features. We acquired Telesphere for $114,330, including 6,825 shares of Vonage common stock (which shares had an aggregate value of approximately $22,727 based upon the closing stock price on December 15, 2014) and cash consideration of $91,603 (of which $3,610 was paid in January 2015) including payment of $676 for excess cash as of closing date, a reduction for closing working capital of $105, reductions for indebtedness and transaction expenses of Telesphere that remained unpaid as of closing, and deposits into the escrow funds. We financed the transaction with $24,603 of cash and $67,000 from our 2014 revolving credit facility. The aggregate consideration will be allocated among Telesphere equity holders. Pursuant to the Acquisition Agreement, $10,725 of the cash consideration and $2,875 of the stock consideration was placed in escrow (the "Holdback") for unknown liabilities that may have existed as of the acquisition date. $11,600 of the Holdback, which was included as part of the acquisition consideration, was paid to the former Telesphere shareholders within 18 months from the closing date of the Acquisition. $2,000 of the Holdback, which was included as part of the acquisition consideration, will be paid for such unknown tax specific liabilities or to the former Telesphere shareholders within 36 months from the closing date of the Acquisition. During 2015 and 2014, we incurred $102 and $2,446, respectively, in acquisition related transaction costs, which were recorded in selling, general and administrative expense in the accompanying Consolidated Statements of Operations. The results of operations of the Telesphere 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 Telesphere 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. During the first quarter of 2015, the Company completed the process of allocating the acquisition price to identified intangible assets acquired as of the closing date, which had been in process as of December 31, 2014. The fair values assigned to tangible and identifiable intangible assets acquired and liabilities assumed are based on management’s estimates and assumptions. The December 31, 2014 balance sheet has been revised to reflect the allocation of the purchase price for Telesphere based upon completion of our valuation analysis of intangible assets. The key revision was to record identified intangible assets of $50,925 with a corresponding reduction to goodwill. The table below summarizes the Telesphere assets acquired and liabilities assumed as of December 15, 2014 as follows:
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 MPLS network are being amortized on an accelerated basis over an estimated useful life of seven years; developed technology is being amortized on an accelerated basis over an estimated useful life of ten years; and the non-compete agreements are being amortized on a straight-line basis over three years. In addition, we recorded a deferred tax liability of $17,050 related to the $50,925 of identified intangible assets that will be amortized for financial reporting purposes but not for tax purposes and a deferred tax asset of $17,101 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. Pro forma financial information (unaudited) The following unaudited supplemental pro forma information presents the combined historical results of operations of Vonage and Nexmo for the years 2016 and 2015, as if the acquisition had been completed at January 1, 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 $58,148 and net loss of $11,847 attributable to Nexmo for the year ended December 31, 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 consists of the 30.0% interest in this subsidiary 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. In connection with the wind down, we incurred approximately $111 and $1,972 in cash and non-cash charges, respectively, in the fourth quarter of 2014 related to severance-related expenses and asset write downs. 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 and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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. 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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Industry Segment and Geographic Information |
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Industry Segment and Geographic Information | Industry Segment and Geographic Information ASC 280 "Segment Reporting" establishes reporting standards for an enterprise's business segments and related disclosures about its products, services, geographic areas and major customers. Under ASC 280, the method for determining what information to report is based upon the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance. Our chief operating decision-makers review revenue and gross margin information for each of our reportable segments, but do not review operating expenses on a segment by segment basis. In addition, with the exception of goodwill and intangible assets, we do not identify or allocate our assets by the reportable segments. Historically, we have had two operating segments that we have aggregated for reporting purposes. In 2016, as a result of the acquisition of Nexmo, we no longer meet the aggregation criteria for operating segments and now have the following two reportable segments: Business For our Business customers, we provide innovative, cloud-based Unified Communications as a Service, or UCaaS, solutions, comprised of integrated voice, text, video, data, collaboration, and mobile applications over our flexible, scalable Session Initiation Protocol (SIP) based Voice over Internet Protocol, or VoIP, network. Through Nexmo, the Vonage API Platform, we also offer Communications Platform as a Service, or CPaaS, solutions designed to enhance the way businesses communicate with their customers embedding communications into apps, websites and business processes. Together we have a robust set of product families tailored to serve the full range of the business value chain, from the small and medium business, or SMB, market, through mid-market and enterprise markets. We provide customers with multiple deployment options, designed to provide the reliability and quality of service they demand. We provide customers the ability to integrate our cloud communications platform with many cloud-based productivity and CRM solutions, including Google’s G Suite, Zendesk, Salesforce’s Sales Cloud, Oracle, Clio, and other CRM solutions. In combination, our products and services permit our business customers to communicate with their customers and employees through any cloud-connected device, in any place, at any time without the often costly investment required with on-site equipment. Consumer For our Consumer customers, we enable users to access and utilize our UCaaS services and features, via a single “identity,” either a number or user name, regardless of how they are connected to the Internet, including over 3G, LTE, Cable, or DSL broadband networks. This technology enables us to offer our Consumer customers attractively priced voice and messaging services and other features around the world on a variety of devices. For our segments we categorize revenues as follows: Services revenues. Services revenues consists primarily of revenue attributable to our communication services for Consumer and UCaaS and CPaaS services for Business, Product revenues. Product revenues includes equipment sold to customers, shipping and handling, professional services, and broadband access. USF revenues. USF revenues represent contributions to the Federal Universal Service Fund (“USF”) and related fees. For our segments we categorize cost of revenues as follows: Services cost of revenues. Services cost of revenues consists of costs associated with network operations and technical support personnel, communication origination, and termination services provided by third party carriers and excludes depreciation and amortization. Product cost of revenues. Product cost of revenues includes equipment sold to customers, shipping and handling, professional services, cost of certain products including equipment or services that we give customers as promotions, and broadband access. USF cost of revenues. USF cost of revenues represent contributions to the Federal Universal Service Fund (“USF”) and related fees. Information about our segment results for the years ended December 31, 2016, 2015, and 2014 were as follows:
(1) Includes customer premise equipment, access, professional services, and shipping and handling. (2) Excludes depreciation and amortization of $18,820, $9,669, and $28,489, respectively.
(1) Includes customer premise equipment, access, professional services, and shipping and handling. (2) Excludes depreciation and amortization of $15,819, $9,049, and $24,868, respectively.
(1) Includes customer premise equipment, access, professional services, and shipping and handling. (2) Excludes depreciation and amortization of $6,487, $12,918, and $19,405, respectively.
Information about our operations by geographic location is as follows:
(1) No individual other international country represented greater than 1% of total revenue during the periods presented.
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Quarterly Financial Information (Unaudited) |
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Quarterly Financial Information Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly Financial Information (Unaudited) | Quarterly Financial Information (Unaudited) The following table sets forth the reviewed consolidated quarterly financial information for 2016 and 2015:
(1)The quarter ended June 30, 2016 includes the impacts of the acquisition of Nexmo, which was completed on June 3, 2016. (2)The quarter ended June 30, 2015 includes the impacts of the acquisition of Simple Signal, which was completed on April 1, 2015. (3)The quarter ended September 30, 2015 includes the impacts of the acquisition of iCore, which was completed on August 31, 2015. |
Basis of Presentation and Significant Accounting Policies (Policies) |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||
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 consolidated a majority-owned entity in Brazil where we had the ability to exercise controlling influence. The ownership interest of the noncontrolling party was 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 believed 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 revenues and customer equipment (which enables our services) and shipping revenues. 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. Our recently acquired subsidiary, Nexmo, provides CPaaS solutions to our customers. Through Nexmo, we provide innovative communication 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. Nexmo has a global network of interconnected carriers delivering its API-based communications platform, enabling businesses to communicate with their customers reliably and with ease, no matter where in the world they are located. Nexmo has two types of revenue activities: Revenue is primarily derived from supplying messaging (SMS and Voice) services to customers. Revenue is recognized in the period when messages are sent by the customer. Revenue is recognized based on the price on the website pricing page or as otherwise agreed with the customer. Our trading customers operate within the communications industry as service providers or bulk SMS aggregators. With our trading business, we sell to trading specialists who are delivering voice or SMS messages on behalf of their customers. Typically, trade is based on single supply route and margins, which are effectively fixed at a deal level, represent the value of the transaction to us. As such, for the trading business we record revenue on a net basis as service providers deliver messages. 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/Goods Sold | Cost of Services 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 Expenses | 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 $22,447, $18,350, and $13,034 for the years ended December 31, 2016, 2015, and 2014, 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 and Cash Equivalents | 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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Marketable 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. 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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Accounts Receivable | 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. |
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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 year ended December 31, 2016, 2015, and 2014. |
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Intangible Assets | 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 years ended December 31, 2016, 2015, and 2014. 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 Sheet 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% 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. 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. 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 2013 to present, our New Jersey tax returns remain open from 2012 to present, our Canada tax return remains open from 2014 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. The Canada Revenue Agency concluded their audit and there were no changes. 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% 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. 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. |
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Foreign Currency | Foreign Currency Generally, the functional currency of our non-United States subsidiaries is the local currency. However, the functional currency of Nexmo's United States's subsidiary is the euro. 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 | 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 | Comprehensive Income 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 January 2017, Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-04. "Intangibles - Goodwill and Other. The ASU simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test. This ASU is effective for an annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact of adopting ASU 2017-04 on our consolidated financial statements and related disclosures. In December 2016, FASB issued ASU 2016-20, "Revenue from Contract with Customers - Technical Corrections and Improvements to Topic 606". In May 2016, 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, "Deferral of the Effective Date". 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 in the initial stages of evaluating the effect of adopting ASU2016-20, ASU 2016-12, ASU 2016-10, ASU 2016-08, ASU 2015-14, and ASU 2014-09 on our consolidated financial statements and related disclosures and continue to evaluate all transition methods. In November 2016, FASB issued ASU 2016-18, "Statement of Cash Flows". This ASU requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period, any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We will adopt this ASU in the first quarter of 2017. The adoption of ASU 2016-01 will not have a material impact on our consolidated financial statements and related disclosures. In March 2016, FASB issued 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, recognition of share-based expense, 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 will adopt this ASU in the first quarter of 2017. We will elect to account for forfeitures when they occur versus our current practice of estimating the number of awards that are expected to vest. The election of this new practice will result in a one-time adjustment to our accumulated deficit for the difference of the two practices through the end of 2016. The adoption of ASU 2016-09 will not have a material impact 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. The adoption of this ASU will increase assets and liabilities for operating leases. 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. Management has adopted ASU 2015-17 effective for the fourth quarter of 2016. We presented the net deferred tax assets as noncurrent, reclassified any current deferred tax assets in the consolidated balance sheet on a prospective basis, and we did not adjusted the prior periods. If the period ended December 31, 2015 was adjusted, the deferred income taxes would be a non-current deferred tax assets of $226,572. 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 permitted at the beginning of an interim and annual reporting period. The adoption of ASU 2015-11 is not expected to have a material impact on our consolidated financial statements and related disclosures. |
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Leases | Capital Leases Assets financed under capital lease agreements are included in property and equipment in the consolidated balance sheet and related depreciation and amortization expense is included in the consolidated statements of operations. |
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Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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:
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Securities excluded from calculation of diluted earnings per common share because of anti-dilutive effects | The following shares were excluded from the calculation of diluted income per share because of their anti-dilutive effects:
|
Supplemental Balance Sheet Account Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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, plant and equipment | Property and equipment, net
Customer premise equipment, net
Software, net
The total expected future annual amortization of software is as follows:
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Schedule of debt issuance costs, net | Debt related costs, net
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Schedule of restricted cash | Restricted cash
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Schedule of other assets | Other assets
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Schedule of accrued liabilities | Accrued expenses
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Schedule of accumulated other comprehensive (loss) income | Accumulated other comprehensive (loss) income
|
Goodwill and Intangible Assets (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Goodwill and Intangible Assets Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Goodwill | The following table provides a summary of the changes in the carrying amounts of goodwill:
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Intangible assets, net | The carrying values of intangible assets were as follows:
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Total expected future annual amortization | The total expected future annual amortization is as follows:
|
Supplemental Income Statement Account Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Supplemental income statement information | Amounts included in revenues
Amounts included in cost of services
Amounts included in cost of goods sold
Amounts included in sales and marketing
Amounts included in general and administrative expense
Depreciation and amortization expense
Amounts included in interest expense
Amounts included in other income (expense), net
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Income Taxes (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Components of income before income tax expense | The components of income from continuing operations before income tax expense are as follows:
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Components of income tax expense | The components of the income tax expense are as follows:
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Components of deferred tax assets and liabilities | The following table summarizes deferred tax assets resulting from differences between financial accounting basis and tax basis of assets and liabilities.
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Reconciliation of income tax rate | The reconciliation between the United States statutory federal income tax rate and the effective rate is as follows:
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Summary of net operating loss carryforwards | As of December 31, 2016, we had NOLs for United States federal and state tax purposes of $575,476 and $158,848, respectively, expiring at various times from years ending 2017 through 2036 as follows:
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Long-Term Debt and Revolving Credit Facility (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of long-term debt | A schedule of long-term debt at December 31, 2016 and 2015 is as follows:
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Future payments under long-term debt obligations | At December 31, 2016, future payments under long-term debt obligations over each of the next five years and thereafter are as follows:
|
Fair Value of Financial Instruments (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value Disclosures [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Assets and Liabilities Measured on 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 December 31, 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. (3) Included in accrued expenses on our consolidated balance sheet. |
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Fair Value, Liabilities Measured on Recurring and Nonrecurring Basis | The following summarizes the changes in liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3):
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Common Stock (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||
Common stock repurchases | We repurchased the following shares of common stock with cash resources under the 2014 $100,000 repurchase program as of December 31, 2016 and 2015:
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Employee Benefit Plans (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Assumptions used to value options | The fair value for these options was estimated at the date of grant using a Black-Scholes option-pricing model. The assumptions used to value options are as follows:
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Payout vesting schedule | For the market-based restricted performance stock units issued during the year ended December 31, 2016 and December 31, 2015, the payouts at vesting which are linearly interpolated between the percentiles specified below are as follows:
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Assumptions made on restricted performance stock units | To value these market-based restricted performance stock units, we used a Monte Carlo simulation mode |
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Summary of stock incentive plans | Our stock incentive plans as of December 31, 2016 are summarized as follows (in thousands):
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Summary of award activity | The following table summarizes the activity for all awards under both of our stock incentive plans:
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Information regarding options outstanding by exercise price range | Information regarding the options outstanding as of December 31, 2016 is summarized below:
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Commitments and Contingencies (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commitments and Contingencies Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Future payments under capital leases and minimum payments under non-cancelable operating leases | At December 31, 2016, future payments under capital leases and minimum payments under non-cancelable operating leases are as follows over each of the next five years and thereafter:
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Acquisition of Business (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Business Combinations [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of allocated acquisition costs | The consideration was allocated to acquisition cost as follows:
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Schedule of business acquisition liabilities to be expensed | The post-acquisition expense will be recorded as follows:
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Estimated fair values of assets acquired and liabilities assumed | 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:
The table below summarizes the Telesphere assets acquired and liabilities assumed as of December 15, 2014 as follows:
The table below summarizes the Nexmo assets acquired and liabilities assumed as of June 3, 2016:
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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:
The intangible assets as of the closing date of the acquisition included:
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Pro forma financial information | Pro forma financial information (unaudited) The following unaudited supplemental pro forma information presents the combined historical results of operations of Vonage and Nexmo for the years 2016 and 2015, as if the acquisition had been completed at January 1, 2015.
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Discontinued Operations (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Discontinued Operations and Disposal Groups [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of the results from discontinued operations | The results of operations of this discontinued operation are as follows:
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Industry Segment and Geographic Information (Tables) |
12 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Dec. 31, 2016 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of results by segment | Information about our segment results for the years ended December 31, 2016, 2015, and 2014 were as follows:
(1) Includes customer premise equipment, access, professional services, and shipping and handling. (2) Excludes depreciation and amortization of $18,820, $9,669, and $28,489, respectively.
(1) Includes customer premise equipment, access, professional services, and shipping and handling. (2) Excludes depreciation and amortization of $15,819, $9,049, and $24,868, respectively.
(1) Includes customer premise equipment, access, professional services, and shipping and handling. (2) Excludes depreciation and amortization of $6,487, $12,918, and $19,405, respectively.
Information about our operations by geographic location is as follows:
(1) No individual other international country represented greater than 1% of total revenue during the periods presented. |
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Schedule of long lived assets by geographic area |
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Quarterly Financial Information (Unaudited) (Tables) |
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Quarterly Financial Information Disclosure [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Quarterly financial information | The following table sets forth the reviewed consolidated quarterly financial information for 2016 and 2015:
(1)The quarter ended June 30, 2016 includes the impacts of the acquisition of Nexmo, which was completed on June 3, 2016. (2)The quarter ended June 30, 2015 includes the impacts of the acquisition of Simple Signal, which was completed on April 1, 2015. (3)The quarter ended September 30, 2015 includes the impacts of the acquisition of iCore, which was completed on August 31, 2015. |
Basis of Presentation and Significant Accounting Policies - Earnings Per Share, Antidilutive Securities (Details) - shares shares in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Earnings per share, antidilutive securities: | |||
Antidilutive securities excluded from earnings per common share | 17,312 | 19,427 | 23,882 |
Restricted stock units | |||
Earnings per share, antidilutive securities: | |||
Antidilutive securities excluded from earnings per common share | 8,282 | 5,827 | 5,454 |
Stock options | |||
Earnings per share, antidilutive securities: | |||
Antidilutive securities excluded from earnings per common share | 9,030 | 13,600 | 18,428 |
Supplemental Balance Sheet Account Information - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Nontrade receivables | $ 3,147 | $ 2,113 |
Services | 10,854 | 8,066 |
Telecommunications | 3,239 | 3,138 |
Insurance | 935 | 939 |
Marketing | 1,307 | 779 |
Prepaid hosting | 8,453 | 59 |
Other prepaids | 1,253 | 565 |
Prepaid expenses and other current assets | $ 29,188 | $ 15,659 |
Supplemental Balance Sheet Account Information - Property and Equipment (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Property and Equipment: | ||
Property equipment, gross | $ 177,581 | $ 173,620 |
Less: accumulated depreciation and amortization | (129,166) | (124,137) |
Property and equipment, net | 48,415 | 49,483 |
Building (under capital lease) | ||
Property and Equipment: | ||
Property equipment, gross | 25,709 | 25,709 |
Network equipment and computer hardware | ||
Property and Equipment: | ||
Property equipment, gross | 93,437 | 89,025 |
Leasehold improvements | ||
Property and Equipment: | ||
Property equipment, gross | 44,293 | 48,872 |
Customer premise equipment | ||
Property and Equipment: | ||
Property equipment, gross | 9,700 | 7,292 |
Less: accumulated depreciation and amortization | (4,248) | (2,068) |
Property and equipment, net | 5,452 | 5,224 |
Furniture | ||
Property and Equipment: | ||
Property equipment, gross | 4,239 | 2,508 |
Vehicles | ||
Property and Equipment: | ||
Property equipment, gross | $ 203 | $ 214 |
Supplemental Balance Sheet Account Information - Software (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Property and Equipment: | ||
Software, gross | $ 109,597 | $ 104,245 |
Less: accumulated amortization | (87,626) | (83,535) |
Software, net | 21,971 | 20,710 |
Purchased | ||
Property and Equipment: | ||
Software, gross | 73,509 | 67,248 |
Licensed | ||
Property and Equipment: | ||
Software, gross | 0 | 909 |
Internally developed | ||
Property and Equipment: | ||
Software, gross | $ 36,088 | $ 36,088 |
Supplemental Balance Sheet Account Information - Software Future Annual Amortization (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
2017 | $ 9,960 | |
2018 | 7,263 | |
2019 | 3,897 | |
2020 | 851 | |
Software, net | $ 21,971 | $ 20,710 |
Supplemental Balance Sheet Account Information - Debt Related Costs, Net (Details) - USD ($) $ in Thousands |
Dec. 31, 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 | (3,632) | (2,991) |
Debt related costs, net | $ 2,333 | $ 2,053 |
Supplemental Balance Sheet Account Information - Restricted Cash (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Restricted cash: | ||
Restricted cash | $ 1,851 | $ 2,587 |
Letter of credit-lease deposits | ||
Restricted cash: | ||
Restricted cash | 1,578 | 2,498 |
Cash reserves | ||
Restricted cash: | ||
Restricted cash | $ 273 | $ 89 |
Supplemental Balance Sheet Account Information - Other Assets (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Deposits | $ 1,329 | $ 0 |
Tax credits | 6,623 | 6,623 |
Long-term prepaid hosting | 5,244 | 0 |
Others | 1,264 | 2,980 |
Other assets | $ 14,460 | $ 9,603 |
Supplemental Balance Sheet Account Information - Accrued Expenses (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Compensation and related taxes and temporary labor | $ 35,308 | $ 33,196 |
Marketing | 11,979 | 24,891 |
Taxes and fees | 18,976 | 11,808 |
Acquisition related consideration accounted for as compensation | 6,608 | 0 |
Telecommunications | 14,724 | 9,111 |
Settlement Liabilities, Current | 5,000 | 0 |
Other accruals | 11,383 | 11,546 |
Customer credits | 2,074 | 1,779 |
Professional fees | 1,680 | 2,080 |
Accrued interest | 66 | 22 |
Inventory | 1,168 | 1,514 |
Credit card fees | 229 | 180 |
Accrued expenses | $ 109,195 | $ 96,127 |
Supplemental Balance Sheet Account Information - Accumulated Other Comprehensive Income (Loss) (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Organization, Consolidation and Presentation of Financial Statements [Abstract] | ||
Foreign currency translation adjustment | $ (13,593) | $ (1,656) |
Unrealized loss on available-for-sale securities | (1) | (21) |
Accumulated other comprehensive (loss) income | $ (13,594) | $ (1,677) |
Goodwill and Intangible Assets - Goodwill Rollforward (Details) - USD ($) $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Goodwill [Roll Forward] | ||
Goodwill, beginning of period | $ 222,106 | $ 142,544 |
Decrease in goodwill related to working capital and tax adjustments of Telesphere | (2,079) | |
Currency translation adjustments | (7,146) | |
Goodwill, end of period | 360,363 | 222,106 |
Simple Signal | ||
Goodwill [Roll Forward] | ||
Increase for goodwill acquired | 16 | 17,687 |
iCore | ||
Goodwill [Roll Forward] | ||
Increase for goodwill acquired | 2,314 | 63,294 |
gUnify | ||
Goodwill [Roll Forward] | ||
Increase for goodwill acquired | $ 660 | |
Nexmo | ||
Goodwill [Roll Forward] | ||
Increase for goodwill acquired | $ 143,073 |
Goodwill and Intangible Assets - Expected Future Annual Amortization (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Goodwill and Intangible Assets Disclosure [Abstract] | ||
2017 | $ 37,255 | |
2018 | 33,988 | |
2019 | 30,670 | |
2020 | 26,322 | |
2021 | 20,623 | |
Thereafter | 50,398 | |
Net Carrying Amount | $ 199,256 | $ 138,199 |
Supplemental Income Statement Account Information - Revenues (Details) - Revenues - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Supplemental Income Statement Information [Line Items] | |||
USF fees | $ 78,077 | $ 75,570 | $ 71,188 |
Disconnect fee, net of credits and bad debt | 1,927 | 706 | 554 |
Initial activation fees | 600 | 779 | 1,085 |
Customer equipment rental | 4,980 | 3,677 | 0 |
Customer equipment fees | 7,397 | 6,141 | 715 |
Equipment recovery fees | 73 | 77 | 80 |
Shipping and handling fees | 2,448 | 2,473 | 2,374 |
Access revenues | 39,981 | 26,192 | 0 |
Professional service fees | $ 3,251 | $ 1,308 | $ 105 |
Supplemental Income Statement Account Information - Cost of Services (Details) - Direct cost of telephony services - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Supplemental Income Statement Information [Line Items] | |||
USF costs | $ 78,077 | $ 75,599 | $ 71,230 |
Access costs | 30,220 | 17,024 | 0 |
Professional service costs | $ 1,525 | $ 568 | $ 83 |
Supplemental Income Statement Account Information - Cost of Goods Sold (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Direct cost of goods sold | |||
Supplemental Income Statement Information [Line Items] | |||
Shipping and handling cost | $ 5,495 | $ 5,197 | $ 6,028 |
Supplemental Income Statement Account Information - Sales and Marketing (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Marketing | |||
Supplemental Income Statement Information [Line Items] | |||
Advertising costs | $ 75,587 | $ 103,320 | $ 141,138 |
Supplemental Income Statement Account Information - General and Administrative (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Supplemental Income Statement Information [Line Items] | |||
Change in contingent consideration | $ (16,472) | $ 0 | $ 0 |
General and Administrative Expense | |||
Supplemental Income Statement Information [Line Items] | |||
Acquisition related transaction costs | 4,863 | 2,585 | 2,466 |
Change in contingent consideration | (11,472) | 0 | 0 |
Organizational transformation | 2,435 | 0 | 0 |
Loss on sublease | 744 | 0 | 0 |
Acquisition related integration costs | 0 | 25 | 100 |
Acquisition related consideration accounted for as compensation | $ 16,780 | $ 0 | $ 0 |
Supplemental Income Statement Account Information - Interest Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Supplemental Income Statement Information [Line Items] | |||
Amortization of debt related costs | $ 1,080 | $ 997 | $ 1,072 |
Debt related costs amortization | |||
Supplemental Income Statement Information [Line Items] | |||
Amortization of debt related costs | $ 1,080 | $ 997 | $ 1,072 |
Supplemental Income Statement Account Information - Other Income (Expense), Net (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Other expense, net | |||
Supplemental Income Statement Information [Line Items] | |||
Net (losses) gains resulting from foreign exchange transactions | $ (346) | $ (860) | $ 10 |
Income Taxes - Components of Income Before Income Tax Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Tax Disclosure [Abstract] | |||
United States | $ 31,076 | $ 38,115 | $ 44,044 |
Foreign | (231) | 5,338 | 7,422 |
Income from continuing operations before income tax expense | $ 30,845 | $ 43,453 | $ 51,466 |
Income Taxes - Components of Income Tax Expense (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Current: | |||
Federal | $ (621) | $ (1,846) | $ (1,452) |
Foreign | (1,064) | (1,667) | (376) |
State and local taxes | (3,951) | (956) | (803) |
Current income tax expense (benefit) | (5,636) | (4,469) | (2,631) |
Deferred: | |||
Federal | (7,794) | (11,289) | (15,239) |
Foreign | 2 | (1,088) | (2,985) |
State and local taxes | 490 | (1,572) | (904) |
Deferred income tax expense (benefit) | (7,302) | (13,949) | (19,128) |
Income tax expense (benefit) | $ (12,938) | $ (18,418) | $ (21,759) |
Income Taxes - Deferred Tax Assets and Liabilities (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2011 |
---|---|---|---|
Current assets and liabilities: | |||
Deferred revenue | $ 0 | $ 12,096 | |
Accounts receivable and inventory allowances | 0 | 640 | |
Accrued expenses | 0 | 11,249 | |
Deferred tax assets, net, current | 0 | 23,985 | |
Non-current assets and liabilities: | |||
Accounts receivable and inventory allowances | 816 | 0 | |
Deferred rent | 630 | 0 | |
Contingent consideration | 6,238 | 0 | |
Acquired intangible assets and property and equipment | (61,486) | (33,129) | |
Accrued expenses | 10,145 | 1,054 | |
Research and development and alternative minimum tax credit | 8,039 | 6,630 | |
Stock option compensation | 24,026 | 20,545 | |
Capital leases | (7,762) | (6,442) | |
Deferred revenue | 11,362 | 634 | |
Net operating loss carryforwards | 215,504 | 237,127 | $ 325,601 |
Deferred tax assets and liabilities, noncurrent | 207,512 | 223,043 | |
Valuation allowance | (18,546) | (20,456) | |
Deferred tax assets, net, non-current | $ 188,966 | $ 202,587 |
Income Taxes - Income Tax Rate Reconciliation (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Reconciliation of income tax rate: | |||
U.S. Federal statutory tax rate | 35.00% | 35.00% | 35.00% |
Permanent items | (5.00%) | 3.00% | 3.00% |
State and local taxes, net of federal benefit | 7.00% | 2.00% | 3.00% |
International tax (reflects effect of losses for which tax benefit not realized) | 0.00% | 1.00% | 0.00% |
Valuation reserve for income taxes and other | 5.00% | 2.00% | 1.00% |
Effective tax rate | 42.00% | 43.00% | 42.00% |
Long-Term Debt and Revolving Credit Facility - Future Payments Under Long-term Debt Obligations (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Debt Instrument [Line Items] | ||
Long-term portion | $ 300,124 | $ 195,392 |
Term Loan | Secured debt | 2016 Credit Facility | ||
Debt Instrument [Line Items] | ||
2017 | 18,750 | |
2018 | 18,750 | |
2019 | 18,750 | |
2020 | 54,688 | |
Minimum future payments of principal | 110,938 | |
Less: unamortized debt related costs | 1,064 | |
Less: current portion | 18,750 | |
Long-term portion | $ 91,124 | $ 0 |
Fair Value of Financial Instruments Fair Value of Financial Instruments (Details) - Fair Value, Measurements, Recurring - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Level 1 Assets | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Money market fund | $ 300 | $ 57 |
Level 2 Assets | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Available-for-sale securities | 601 | 9,908 |
Level 3 Liabilities | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Contingent consideration | $ 0 | $ 0 |
Fair Value of Financial Instruments Changes in Liabilities, Fair Value (Details) $ in Thousands |
12 Months Ended |
---|---|
Dec. 31, 2016
USD ($)
| |
Fair Value, Liabilities Measured on Recurring Basis, Unobservable Input Reconciliation, Calculation [Roll Forward] | |
Beginning balance | $ 0 |
Initial contingent consideration at fair value | 16,472 |
Change in fair value included in net income attributable to Vonage | (16,472) |
Ending balance | $ 0 |
Common Stock - Narrative (Details) - USD ($) |
Dec. 09, 2014 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Feb. 12, 2013 |
Jul. 25, 2012 |
Jun. 07, 2012 |
---|---|---|---|---|---|---|
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 repurchase | $ 50,000,000 | |||||
Remaining authorized amount of stock repurchase program | $ 16,682,000 | |||||
$100,000 repurchase program | ||||||
Common stock repurchases: | ||||||
Authorized amount of stock repurchase | $ 100,000,000 | $ 100,000,000 | ||||
Remaining authorized amount of stock repurchase program | $ 52,043,000 | $ 219,000 | ||||
Repurchase period | 4 years |
Common Stock - Repurchased Shares of Common Stock (Details) - USD ($) shares in Thousands, $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Common stock repurchases: | |||
Value of common stock repurchased | $ 32,902 | $ 15,250 | $ 49,263 |
2014 Repurchase Program | |||
Common stock repurchases: | |||
Stock repurchased during period (in shares) | 7,400 | 3,320 | |
Value of common stock repurchased | $ 32,762 | $ 15,195 |
Employee Benefit Plans - Share-based Compensation, Assumptions Used (Details) |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Stock options | |||
Share-based compensation: | |||
Risk-free interest rate, minimum | 1.17% | 1.38% | 1.78% |
Risk-free interest rate, maximum | 2.12% | 1.80% | 2.19% |
Expected stock price volatility, minimum | 47.52% | 73.55% | 85.28% |
Expected stock price volatility, maximum | 72.50% | 83.14% | 86.93% |
Dividend yield | 0.00% | 0.00% | 0.00% |
Expected life (in years) | 6 years 3 months | 6 years 3 months | 6 years 3 months |
Restricted stock and restricted stock units | |||
Share-based compensation: | |||
Risk-free interest rate | 1.12% | 0.98% | 0.69% |
Expected stock price volatility | 42.61% | 40.21% | 48.91% |
Dividend yield | 0.00% | 0.00% | 0.00% |
Expected life (in years) | 2 years 9 months 15 days | 2 years 9 months 15 days | 2 years 9 months 15 days |
Employee Benefit Plans - SBC, Total Share Return (Details) |
12 Months Ended |
---|---|
Dec. 31, 2016 | |
Share-based compensation: | |
% of Target Earned | 100.00% |
Restricted stock and restricted stock units | |
Share-based compensation: | |
% of Target Earned | 200.00% |
Restricted stock and restricted stock units | Tranche One | |
Share-based compensation: | |
Percentile Ranking | 30.00% |
% of Target Earned | 0.00% |
Restricted stock and restricted stock units | Tranche Two | |
Share-based compensation: | |
Percentile Ranking | 30.00% |
% of Target Earned | 50.00% |
Restricted stock and restricted stock units | Tranche Three | |
Share-based compensation: | |
Percentile Ranking | 50.00% |
% of Target Earned | 100.00% |
Restricted stock and restricted stock units | Tranche Four | |
Share-based compensation: | |
Percentile Ranking | 80.00% |
% of Target Earned | 200.00% |
Commitments and Contingencies - Leases (Details) - USD ($) $ in Thousands |
Dec. 31, 2016 |
Dec. 31, 2015 |
---|---|---|
Capital leases, future minimum payments due: | ||
2017 | $ 3,428 | |
2018 | 140 | |
2019 | 0 | |
2020 | 0 | |
2021 | 0 | |
Thereafter | 0 | |
Total minimum payments required | 3,568 | |
Less amounts representing interest | (140) | |
Minimum future payments of principal | 3,428 | |
Current portion | 3,288 | $ 4,398 |
Long-term portion | 140 | $ 3,363 |
Operating Leases | ||
2017 | 10,173 | |
2018 | 11,923 | |
2019 | 10,704 | |
2020 | 8,342 | |
2021 | 5,816 | |
Thereafter | 12,625 | |
Total minimum payments required | 59,583 | |
Committed Sub-lease Income | ||
2017 | (204) | |
2018 | (613) | |
2019 | (613) | |
2020 | (613) | |
2021 | (613) | |
Thereafter | (1,022) | |
Total minimum payments required | (3,678) | |
Net Operating Leases | ||
2017 | 9,969 | |
2018 | 11,310 | |
2019 | 10,091 | |
2020 | 7,729 | |
2021 | 5,203 | |
Thereafter | 11,603 | |
Total minimum payments required | $ 55,905 |
Acquisition of Business - Allocated Acquisition Costs (Details) - Nexmo - USD ($) $ in Thousands |
Jun. 03, 2016 |
May 05, 2016 |
---|---|---|
Business Acquisition, Contingent Consideration [Line Items] | ||
Cash paid at closing (inclusive of cash acquired) | $ 179,186 | |
Stock paid at closing | 31,591 | $ 31,591 |
Variable Payout Amount | 16,472 | |
Employee Payout Amount | 4,779 | |
Acquisition Cost | 232,028 | $ 231,122 |
Cash acquired in acquisition | $ 16,094 |
Acquisition of Business - Post Acquisition Liabilities To Be Expensed (Details) - Nexmo $ in Thousands |
Jun. 03, 2016
USD ($)
|
---|---|
Business Combination, Post-Acquisition Liabilities To Be Expensed, Interest Expense [Abstract] | |
Total | $ 31,087 |
Business Combination, Post-Acquisition Liabilities To Be Expensed, Compensation Expenses [Abstract] | |
2016 | 255 |
2017 | 271 |
2018 | 46 |
2019 | 0 |
Total | 572 |
Business Combination, Post-Acquisition Liabilities To Be Expensed [Abstract] | |
2016 | 16,688 |
2017 | 13,144 |
2018 | 1,751 |
2019 | 76 |
Total | 31,659 |
Restricted Stock | |
Business Combination, Post-Acquisition Liabilities To Be Expensed, Interest Expense [Abstract] | |
2016 | 7,380 |
2017 | 6,197 |
2018 | 661 |
2019 | 0 |
Total | 14,238 |
Restricted Cash | |
Business Combination, Post-Acquisition Liabilities To Be Expensed, Interest Expense [Abstract] | |
2016 | 6,353 |
2017 | 5,383 |
2018 | 620 |
2019 | 0 |
Total | 12,356 |
Assumed Options | |
Business Combination, Post-Acquisition Liabilities To Be Expensed, Interest Expense [Abstract] | |
2016 | 2,700 |
2017 | 1,293 |
2018 | 424 |
2019 | 76 |
Total | $ 4,493 |
Acquisition of Business - Pro Forma Information (Details) - USD ($) $ / shares in Units, $ in Thousands |
12 Months Ended | |
---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
|
Business Combinations [Abstract] | ||
Revenue | $ 989,846 | $ 958,416 |
Net income attributable to Vonage | $ 13,159 | $ 5,679 |
Net income attributable to Vonage per share - basic (USD per share) | $ 0.06 | $ 0.03 |
Net income attributable to Vonage per share - diluted (USD per share) | $ 0.05 | $ 0.02 |
Noncontrolling Interest and Redeemable Noncontrolling Interest (Details) - Consolidated Foreign Subsidiary - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Dec. 31, 2014 |
Dec. 31, 2015 |
Sep. 30, 2013 |
|
Noncontrolling Interest [Line Items] | |||
Redeemable noncontrolling interest ownership percentage held by joint venture partner | 4.00% | 30.00% | |
Payments for restructuring | $ 111 | $ 500 | |
Business exit costs | $ 1,972 |
Discontinued Operations Narrative (Details) - USD ($) $ in Thousands |
12 Months Ended | ||
---|---|---|---|
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Loss on disposal, net of taxes | $ 0 | $ 824 | $ 0 |
Brazilian Market, Telephony Services and Related Joint Ventures | Discontinued Operations | |||
Income Statement, Balance Sheet and Additional Disclosures by Disposal Groups, Including Discontinued Operations [Line Items] | |||
Loss on disposal, net of taxes | $ 0 | 824 | $ 1 |
Write-off of noncontrolling interest | 907 | ||
Foreign currency loss on intercompany loan forgiveness | 783 | ||
Residual cumulative translations | 192 | ||
Partial offset by tax benefit | $ 1,058 |
Quarterly Financial Information (Unaudited) (Details) - USD ($) $ / shares in Units, $ in Thousands |
3 Months Ended | 12 Months Ended | |||||||||
---|---|---|---|---|---|---|---|---|---|---|---|
Dec. 31, 2016 |
Sep. 30, 2016 |
Jun. 30, 2016 |
Mar. 31, 2016 |
Dec. 31, 2015 |
Sep. 30, 2015 |
Jun. 30, 2015 |
Mar. 31, 2015 |
Dec. 31, 2016 |
Dec. 31, 2015 |
Dec. 31, 2014 |
|
Quarterly Financial Information Disclosure [Abstract] | |||||||||||
Revenue | $ 246,763 | $ 248,359 | $ 233,675 | $ 226,824 | $ 230,124 | $ 223,360 | $ 221,858 | $ 219,730 | $ 955,621 | $ 895,072 | $ 868,854 |
Income from continuing operations | $ 1 | $ 9,078 | $ 897 | $ 7,931 | 3,406 | 3,433 | 8,347 | 9,849 | 17,907 | 25,035 | 29,707 |
Loss from discontinued operations attributable to Vonage | 0 | 0 | 0 | (2,380) | 0 | (2,380) | (9,441) | ||||
Net income attributable to Vonage | $ 3,406 | $ 3,433 | $ 8,347 | $ 7,469 | $ 17,907 | $ 22,655 | $ 20,266 | ||||
Basic net income per share | |||||||||||
Basic net income per share-from continuing operations (USD per share) | $ 0.00 | $ 0.04 | $ 0.00 | $ 0.04 | $ 0.02 | $ 0.02 | $ 0.04 | $ 0.05 | $ 0.08 | $ 0.12 | $ 0.14 |
Basic net income per share-from discontinued operations attributable to Vonage (USD per share) | 0.00 | 0.00 | 0.00 | (0.01) | 0.00 | (0.01) | (0.04) | ||||
Basic net income per share - attributable to Vonage (USD per share) | 0.02 | 0.02 | 0.04 | 0.04 | 0.08 | 0.11 | 0.10 | ||||
Diluted net income per share | |||||||||||
Diluted net income per share-from continuing operations (USD per share) | $ 0.00 | $ 0.04 | $ 0.00 | $ 0.04 | 0.01 | 0.02 | 0.04 | 0.04 | 0.08 | 0.11 | 0.14 |
Diluted net income per share-from discontinued operations attributable to Vonage (USD per share) | 0.00 | 0.00 | 0.00 | (0.01) | 0.00 | (0.01) | (0.04) | ||||
Diluted net income per share - attributable to Vonage (USD per share) | $ 0.01 | $ 0.02 | $ 0.04 | $ 0.03 | $ 0.08 | $ 0.10 | $ 0.09 |
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