x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
o | TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 |
Delaware | 11-3547680 | |
(State or other jurisdiction of incorporation or organization) | (IRS Employer Identification No.) | |
23 Main Street, Holmdel, NJ | 07733 | |
(Address of principal executive offices) | (Zip Code) |
Large accelerated filer | x | Accelerated filer | o | |
Non-accelerated filer | o | (Do not check if a smaller reporting company) | ||
Smaller reporting company | o | Emerging growth company | o | |
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. |
Class | Outstanding at | April 30, 2018 | |||
Common Stock, par value $0.001 | 237,489,060 | shares |
Part 1 - Financial Information | ||
Page | ||
Item 1. | Condensed Consolidated Financial Statements and Notes | |
Item 2. | ||
Item 3. | ||
Item 4 | ||
Item 1. | ||
Item 1A. | ||
Item 2. | ||
Item 3. | ||
Item 4. | ||
Item 5. | ||
Item 6. | ||
March 31, 2018 | December 31, 2017 | ||||||
Assets | |||||||
Current assets: | |||||||
Cash and cash equivalents | $ | 23,536 | $ | 31,360 | |||
Accounts receivable, net of allowance of $2,106 and $2,258, respectively | 43,927 | 44,159 | |||||
Inventory, net of allowance of $158 and $108, respectively | 2,934 | 2,971 | |||||
Deferred customer acquisition costs, current | 8,637 | — | |||||
Prepaid expenses | 27,970 | 23,763 | |||||
Other current assets | 6,036 | 7,522 | |||||
Total current assets | 113,040 | 109,775 | |||||
Property and equipment, net of accumulated depreciation of $88,754 and $87,792, respectively | 44,296 | 46,754 | |||||
Goodwill | 377,735 | 373,764 | |||||
Software, net of accumulated amortization of $96,748 and $93,858, respectively | 22,511 | 22,252 | |||||
Deferred customer acquisition costs | 29,501 | — | |||||
Restricted cash | 1,835 | 1,967 | |||||
Intangible assets, net of accumulated amortization of $134,246 and $124,573, respectively | 166,506 | 173,270 | |||||
Deferred tax assets | 111,653 | 110,892 | |||||
Other assets | 20,647 | 20,007 | |||||
Total assets | $ | 887,724 | $ | 858,681 | |||
Liabilities and Stockholders’ Equity | |||||||
Current liabilities: | |||||||
Accounts payable | $ | 31,543 | $ | 29,766 | |||
Accrued expenses | 74,123 | 85,706 | |||||
Deferred revenue, current portion | 28,874 | 30,255 | |||||
Current portion of notes payable | 18,750 | 18,750 | |||||
Total current liabilities | 153,290 | 164,477 | |||||
Indebtedness under revolving credit facility | 146,000 | 141,000 | |||||
Notes payable, net of debt related costs and current portion | 68,165 | 72,765 | |||||
Other liabilities | 8,071 | 7,541 | |||||
Total liabilities | 375,526 | 385,783 | |||||
Commitments and Contingencies (Note 7) | |||||||
Stockholders’ Equity | |||||||
Common stock, par value $0.001 per share; 596,950 shares authorized at March 31, 2018 and December 31, 2017; 306,541 and 298,174 shares issued at March 31, 2018 and December 31, 2017, respectively; 236,889 and 230,939 shares outstanding at March 31, 2018 and December 31, 2017, respectively | 306 | 298 | |||||
Additional paid-in capital | 1,384,718 | 1,375,391 | |||||
Accumulated deficit | (623,189 | ) | (672,561 | ) | |||
Treasury stock, at cost, 69,652 shares at March 31, 2018 and 67,235 shares at December 31, 2017 | (270,759 | ) | (244,239 | ) | |||
Accumulated other comprehensive income | 21,122 | 14,009 | |||||
Total stockholders’ equity | 512,198 | 472,898 | |||||
Total liabilities and stockholders’ equity | $ | 887,724 | $ | 858,681 |
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Total revenues | $ | 253,573 | $ | 243,347 | |||
Operating Expenses: | |||||||
Cost of revenues (exclusive of depreciation and amortization) | 103,567 | 94,889 | |||||
Sales and marketing | 77,136 | 81,931 | |||||
Engineering and development | 10,820 | 8,370 | |||||
General and administrative | 27,582 | 35,086 | |||||
Depreciation and amortization | 16,800 | 17,947 | |||||
Total operating expenses | 235,905 | 238,223 | |||||
Income from operations | 17,668 | 5,124 | |||||
Other Income (Expense): | |||||||
Interest expense | (3,161 | ) | (3,703 | ) | |||
Other income (expense), net | (253 | ) | (215 | ) | |||
Total other income (expense), net | (3,414 | ) | (3,918 | ) | |||
Income before income taxes | 14,254 | 1,206 | |||||
Income tax benefit | 10,270 | 4,707 | |||||
Net income | $ | 24,524 | $ | 5,913 | |||
Earnings per common share: | |||||||
Basic | $ | 0.11 | $ | 0.03 | |||
Diluted | $ | 0.10 | $ | 0.02 | |||
Weighted-average common shares outstanding: | |||||||
Basic | 233,034 | 220,371 | |||||
Diluted | 248,481 | 239,486 |
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Net income | $ | 24,524 | $ | 5,913 | |||
Other comprehensive income: | |||||||
Foreign currency translation adjustment, net of tax expense of $2 and $429, respectively | 6,333 | 3,047 | |||||
Unrealized gain on available-for-sale securities, net of tax expense of $0 and $0, respectively | — | 21 | |||||
Unrealized gain on derivatives, net of tax expense of $302 and $0, respectively | 780 | — | |||||
Total other comprehensive income | 7,113 | 3,068 | |||||
Comprehensive income | $ | 31,637 | $ | 8,981 |
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Cash flows from operating activities: | |||||||
Net income | $ | 24,524 | $ | 5,913 | |||
Adjustments to reconcile net income to net cash provided by operating activities: | |||||||
Depreciation and amortization | 7,419 | 8,569 | |||||
Amortization of intangibles | 9,207 | 9,378 | |||||
Deferred income taxes | (10,655 | ) | (5,803 | ) | |||
Amortization of deferred customer acquisition costs | 2,159 | — | |||||
Allowance for doubtful accounts | 586 | 343 | |||||
Allowance for obsolete inventory | 214 | 138 | |||||
Amortization of debt issuance costs | 258 | 276 | |||||
Loss on disposal of fixed assets | 174 | 240 | |||||
Share-based expense | 7,164 | 11,106 | |||||
Changes in operating assets and liabilities, net of acquisitions: | |||||||
Accounts receivable | 271 | 4,425 | |||||
Inventory | (179 | ) | 340 | ||||
Prepaid expenses and other current assets | (2,627 | ) | (716 | ) | |||
Deferred customer acquisition costs | (5,813 | ) | — | ||||
Accounts payable | 1,622 | 8,189 | |||||
Accrued expenses | (10,190 | ) | (24,219 | ) | |||
Deferred revenue | (1,434 | ) | (1,374 | ) | |||
Other assets and liabilities | 768 | 456 | |||||
Net cash provided by operating activities | 23,468 | 17,261 | |||||
Cash flows from investing activities: | |||||||
Capital expenditures | (3,250 | ) | (3,701 | ) | |||
Maturities and sales of marketable securities | — | 322 | |||||
Acquisition and development of software assets | (3,147 | ) | (3,380 | ) | |||
Net cash used in investing activities | (6,397 | ) | (6,759 | ) | |||
Cash flows from financing activities: | |||||||
Principal payments on capital lease obligations and other financing obligations | (59 | ) | (3,663 | ) | |||
Principal payments on notes and revolving credit facility | (9,687 | ) | (4,688 | ) | |||
Proceeds received from draw down of revolving credit facility and issuance of notes payable | 10,000 | 15,000 | |||||
Common stock repurchases | — | (9,542 | ) | ||||
Employee taxes paid on withholding shares | (27,487 | ) | (14,095 | ) | |||
Proceeds from exercise of stock options | 2,171 | 3,448 | |||||
Net cash used in financing activities | (25,062 | ) | (13,540 | ) | |||
Effect of exchange rate changes on cash | 35 | 128 | |||||
Net decrease in cash, cash equivalents, and restricted cash | (7,956 | ) | (2,910 | ) | |||
Cash, cash equivalents, and restricted cash, beginning of period | 33,327 | 30,929 | |||||
Cash, cash equivalents, and restricted cash, end of period | $ | 25,371 | $ | 28,019 | |||
Supplemental disclosures of cash flow information: | |||||||
Cash paid during the periods for: | |||||||
Interest | $ | 2,781 | $ | 3,210 | |||
Income taxes | $ | 2,333 | $ | 740 | |||
Non-cash investing activities: | |||||||
Capital expenditures included in accounts payable and accrued liabilities | $ | 1,315 | $ | 3,722 |
Shares | Common Stock | Additional Paid-in Capital | Accumulated Deficit | Treasury Stock | Accumulated Other Comprehensive Income | Total | ||||||||||||||||||||
Balance at December 31, 2017 | 230,939 | $ | 298 | $ | 1,375,391 | $ | (672,561 | ) | $ | (244,239 | ) | $ | 14,009 | $ | 472,898 | |||||||||||
Cumulative effect adjustment upon the adoption of Topic 606 | 24,848 | 24,848 | ||||||||||||||||||||||||
Stock option exercises | 8,366 | 8 | 2,163 | 2,171 | ||||||||||||||||||||||
Share-based expense | 7,164 | 7,164 | ||||||||||||||||||||||||
Employee taxes paid on withholding shares | (2,416 | ) | (26,520 | ) | (26,520 | ) | ||||||||||||||||||||
Foreign currency translation adjustment | 6,333 | 6,333 | ||||||||||||||||||||||||
Unrealized gain on derivatives | 780 | 780 | ||||||||||||||||||||||||
Net income | 24,524 | 24,524 | ||||||||||||||||||||||||
Balance at March 31, 2018 | 236,889 | $ | 306 | $ | 1,384,718 | $ | (623,189 | ) | $ | (270,759 | ) | $ | 21,122 | $ | 512,198 |
March 31, 2018 | December 31, 2017 | ||||||
Level 2 Measurements | |||||||
Interest rate swaps (1) | $ | 2,367 | $ | 1,285 |
March 31, 2018 | December 31, 2017 | ||||||
Cash and cash equivalents | $ | 23,536 | $ | 31,360 | |||
Cash collateralized letter of credit-lease deposits | 1,509 | 1,563 | |||||
Cash reserves | 326 | 404 | |||||
Restricted cash | 1,835 | 1,967 | |||||
Cash, cash equivalents, and restricted cash | $ | 25,371 | $ | 33,327 |
March 31, 2018 | December 31, 2017 | ||||||
Customer relationships | $ | 118,884 | $ | 122,393 | |||
Developed technology | 43,377 | 46,004 | |||||
Patents and patent licenses | 3,651 | 4,030 | |||||
Trade names | 179 | 352 | |||||
Non-compete agreements | 415 | 491 | |||||
Intangible assets, net | $ | 166,506 | $ | 173,270 |
March 31, 2018 | December 31, 2017 | ||||||
Compensation and related taxes and temporary labor | $ | 18,338 | $ | 30,059 | |||
Marketing | 10,296 | 10,759 | |||||
Taxes and fees | 11,330 | 13,353 | |||||
Acquisition related consideration accounted for as compensation | 2,934 | 2,534 | |||||
Telecommunications | 17,284 | 16,068 | |||||
Other accruals | 6,913 | 7,078 | |||||
Customer credits | 4,277 | 2,310 | |||||
Professional fees | 1,688 | 1,618 | |||||
Inventory | 1,063 | 1,927 | |||||
Accrued expenses | $ | 74,123 | $ | 85,706 |
Balance at December 31, 2017 | $ | 373,764 | ||
Foreign currency translation adjustments | 3,971 | |||
Balance at March 31, 2018 | $ | 377,735 |
Three Months Ended | |||||||||||
March 31, 2018 | |||||||||||
Business | Consumer | Total | |||||||||
Primary geographical markets | |||||||||||
United States | $ | 100,866 | $ | 107,268 | $ | 208,134 | |||||
Canada | 649 | 6,388 | 7,037 | ||||||||
United Kingdom | 6,483 | 3,249 | 9,732 | ||||||||
Other Countries (1) | 28,670 | — | 28,670 | ||||||||
136,668 | 116,905 | 253,573 | |||||||||
Major Sources of Revenue | |||||||||||
Service revenues | $ | 116,302 | $ | 104,394 | $ | 220,696 | |||||
Access and product revenues | 12,531 | 91 | 12,622 | ||||||||
USF revenues | 7,835 | 12,420 | 20,255 | ||||||||
136,668 | 116,905 | 253,573 |
March 31, 2018 | |||
Receivables (1) | $ | 44,683 | |
Contract liabilities (2) | 29,180 |
Three Months Ended | ||||||||
March 31, | ||||||||
2018 | 2017 | |||||||
Numerator | ||||||||
Net income | $ | 24,524 | $ | 5,913 | ||||
Denominator | ||||||||
Basic weighted average common shares outstanding | 233,034 | 220,371 | ||||||
Dilutive effect of stock options and restricted stock units | 15,447 | 19,115 | ||||||
Diluted weighted average common shares outstanding | 248,481 | 239,486 | ||||||
Basic earnings per share | ||||||||
Basic earnings per share | $ | 0.11 | $ | 0.03 | ||||
Diluted earnings per share | ||||||||
Diluted earnings per share | $ | 0.10 | $ | 0.02 |
Three Months Ended | ||||||
March 31, | ||||||
2018 | 2017 | |||||
Restricted stock units | 1,346 | 5,976 | ||||
Stock options | 1,469 | 6,802 | ||||
2,815 | 12,778 |
March 31, 2018 | December 31, 2017 | ||||||
2.50-3.25% Term note - due 2020, net of debt related costs | $ | 68,165 | $ | 72,765 | |||
2.50-3.25% Revolving credit facility - due 2020 | 146,000 | 141,000 | |||||
Total Long-term note and revolving credit facility | $ | 214,165 | $ | 213,765 |
Three Months Ended | ||||
March 31, | ||||
2018 | ||||
Accumulated OCI beginning balance | $ | 965 | ||
Mark-to-market of cash flow hedge accounting contracts | 780 | |||
Accumulated OCI ending balance, net of tax of $622 | $ | 1,745 | ||
Gains expected to be realized from accumulated OCI during the next 12 months | $ | — |
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Shares of common stock repurchased | — | 1,599 | |||||
Value of common stock repurchased | $ | — | $ | 9,510 |
Three Months Ended | |||||||||||
March 31, 2018 | |||||||||||
Business | Consumer | Total | |||||||||
Revenues | |||||||||||
Service revenues | $ | 116,302 | $ | 104,394 | $ | 220,696 | |||||
Access and product revenues (1) | 12,531 | 91 | 12,622 | ||||||||
Service, access and product revenues | 128,833 | 104,485 | 233,318 | ||||||||
USF revenues | 7,835 | 12,420 | 20,255 | ||||||||
Total revenues | 136,668 | 116,905 | 253,573 | ||||||||
Cost of revenues | |||||||||||
Service cost of revenues (2) | 52,982 | 14,014 | 66,996 | ||||||||
Access and product cost of revenues (1) | 14,491 | 1,794 | 16,285 | ||||||||
Service, access and product cost of revenues | 67,473 | 15,808 | 83,281 | ||||||||
USF cost of revenues | 7,840 | 12,446 | 20,286 | ||||||||
Total cost of revenues | 75,313 | 28,254 | 103,567 | ||||||||
Segment gross margin | |||||||||||
Service margin | 63,320 | 90,380 | 153,700 | ||||||||
Access and product margin | (1,960 | ) | (1,703 | ) | (3,663 | ) | |||||
Gross margin ex-USF (Service, access and product margin) | 61,360 | 88,677 | 150,037 | ||||||||
USF margin | (5 | ) | (26 | ) | (31 | ) | |||||
Segment gross margin | $ | 61,355 | $ | 88,651 | $ | 150,006 | |||||
Segment gross margin % | |||||||||||
Service margin % | 54.4 | % | 86.6 | % | 69.6 | % | |||||
Gross margin ex-USF (Service, access and product margin %) | 47.6 | % | 84.9 | % | 64.3 | % | |||||
Segment gross margin % | 44.9 | % | 75.8 | % | 59.2 | % |
Three Months Ended | |||||||||||
March 31, 2017 | |||||||||||
Business | Consumer | Total | |||||||||
Revenues | |||||||||||
Service revenues | $ | 91,797 | $ | 119,117 | $ | 210,914 | |||||
Access and product revenues (1) | 13,854 | 203 | 14,057 | ||||||||
Service, access and product revenues | 105,651 | 119,320 | 224,971 | ||||||||
USF revenues | 6,151 | 12,225 | 18,376 | ||||||||
Total revenues | 111,802 | 131,545 | 243,347 | ||||||||
Cost of revenues | |||||||||||
Service cost of revenues (2) | 37,409 | 22,100 | 59,509 | ||||||||
Access and product cost of revenues (1) | 14,988 | 2,016 | 17,004 | ||||||||
Service, access and product cost of revenues | 52,397 | 24,116 | 76,513 | ||||||||
USF cost of revenues | 6,151 | 12,225 | 18,376 | ||||||||
Total cost of revenues | 58,548 | 36,341 | 94,889 | ||||||||
Segment gross margin | |||||||||||
Service margin | 54,388 | 97,017 | 151,405 | ||||||||
Access and product margin | (1,134 | ) | (1,813 | ) | (2,947 | ) | |||||
Gross margin ex-USF (Service, access and product margin) | 53,254 | 95,204 | 148,458 | ||||||||
USF margin | — | — | — | ||||||||
Segment gross margin | $ | 53,254 | $ | 95,204 | $ | 148,458 | |||||
Segment gross margin % | |||||||||||
Service margin % | 59.2 | % | 81.4 | % | 71.8 | % | |||||
Gross margin ex-USF (Service, access and product margin %) | 50.4 | % | 79.8 | % | 66.0 | % | |||||
Segment gross margin % | 47.6 | % | 72.4 | % | 61.0 | % |
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Total reportable gross margin | $ | 150,006 | $ | 148,458 | |||
Sales and marketing | 77,136 | 81,931 | |||||
Engineering and development | 10,820 | 8,370 | |||||
General and administrative | 27,582 | 35,086 | |||||
Depreciation and amortization | 16,800 | 17,947 | |||||
Income from operations | 17,668 | 5,124 | |||||
Interest expense | (3,161 | ) | (3,703 | ) | |||
Other income (expense), net | (253 | ) | (215 | ) | |||
Income before income taxes | $ | 14,254 | $ | 1,206 |
Three Months Ended | |||||||
March 31, | |||||||
2018 | 2017 | ||||||
Revenues: | |||||||
United States | $ | 208,134 | $ | 213,324 | |||
Canada | 7,037 | 7,445 | |||||
United Kingdom | 9,732 | 5,345 | |||||
Other Countries (1) | 28,670 | 17,233 | |||||
$ | 253,573 | $ | 243,347 |
March 31, 2018 | December 31, 2017 | ||||||
Long-lived assets: | |||||||
United States | $ | 610,475 | $ | 615,432 | |||
United Kingdom | 346 | 365 | |||||
Israel | 227 | 243 | |||||
$ | 611,048 | $ | 616,040 |
Three Months Ended | ||||||||
March 31, | ||||||||
2018 | 2017 | |||||||
Income before income taxes | $ | 14,254 | $ | 1,206 | ||||
Income tax benefit | 10,270 | 4,707 | ||||||
Effective tax rate | (72.0 | )% | (390.3 | )% |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operations |
Business | Three Months Ended | |||||||
March 31, | ||||||||
2018 | 2017 | |||||||
Service revenue per customer | $ | 328 | $ | 317 | ||||
Business revenue churn | 1.2 | % | 1.2 | % | ||||
Average monthly revenues per seat (1) | $ | 42.70 | $ | 43.98 | ||||
Seats (at period end) (1) | 751,199 | 658,792 | ||||||
UCaaS revenue churn (1) | 1.3 | % | 1.4 | % |
Consumer | Three Months Ended | |||||||
March 31, | ||||||||
2018 | 2017 | |||||||
Average monthly revenues per subscriber line | $ | 26.58 | $ | 26.10 | ||||
Subscriber lines (at period end) | 1,439,669 | 1,648,927 | ||||||
Customer churn | 1.9 | % | 2.2 | % |
Three Months Ended | ||||||
March 31, | ||||||
2018 | 2017 | |||||
Total revenues | 100 | % | 100 | % | ||
Operating Expenses: | ||||||
Cost of revenues (exclusive of depreciation and amortization) | 41 | 39 | ||||
Sales and marketing | 30 | 34 | ||||
Engineering and development | 4 | 3 | ||||
General and administrative | 11 | 15 | ||||
Depreciation and amortization | 7 | 7 | ||||
Total operating expenses | 93 | 98 | ||||
Income from operations | 7 | 2 | ||||
Other Income (Expense): | ||||||
Interest expense | (1 | ) | (2 | ) | ||
Other income (expense), net | — | — | ||||
Total other income (expense), net | (1 | ) | (2 | ) | ||
Income before income taxes | 6 | — | ||||
Income tax benefit | 4 | 2 | ||||
Net income | 10 | % | 2 | % |
(in thousands, except percentages) | Three Months Ended | ||||||||||||||
March 31, | |||||||||||||||
2018 | 2017 | Dollar Change | Percent Change | ||||||||||||
Revenues | $ | 253,573 | $ | 243,347 | $ | 10,226 | 4 | % | |||||||
Cost of revenues | 103,567 | 94,889 | 8,678 | 9 | % | ||||||||||
Gross margin | $ | 150,006 | $ | 148,458 | $ | 1,548 | 1 | % |
Three Months Ended | |||||||||||||||
March 31, | |||||||||||||||
(in thousands, except percentages) | 2018 | 2017 | Dollar Change | Percent Change | |||||||||||
Revenues | |||||||||||||||
Service revenues | $ | 116,302 | $ | 91,797 | $ | 24,505 | 27 | % | |||||||
Access and product revenues (1) | 12,531 | 13,854 | (1,323 | ) | (10 | )% | |||||||||
Service, access and product revenues | 128,833 | 105,651 | 23,182 | 22 | % | ||||||||||
USF revenues | 7,835 | 6,151 | 1,684 | 27 | % | ||||||||||
Total revenues | 136,668 | 111,802 | 24,866 | 22 | % | ||||||||||
Cost of revenues | |||||||||||||||
Service cost of revenues (2) | 52,982 | 37,409 | 15,573 | 42 | % | ||||||||||
Access and product cost of revenues (1) | 14,491 | 14,988 | (497 | ) | (3 | )% | |||||||||
Service, access and product cost of revenues | 67,473 | 52,397 | 15,076 | 29 | % | ||||||||||
USF cost of revenues | 7,840 | 6,151 | 1,689 | 27 | % | ||||||||||
Total cost of revenues | 75,313 | 58,548 | 16,765 | 29 | % | ||||||||||
Segment gross margin | |||||||||||||||
Service margin | 63,320 | 54,388 | 8,932 | 16 | % | ||||||||||
Gross margin ex-USF (Service, access and product margin) | 61,360 | 53,254 | 8,106 | 15 | % | ||||||||||
Segment gross margin | $ | 61,355 | $ | 53,254 | $ | 8,101 | 15 | % |
Segment gross Margin % | ||||||||||
Service margin % | 54.4 | % | 59.2 | % | ||||||
Gross margin ex-USF (Service, access and product margin) % | 47.6 | % | 50.4 | % | ||||||
Segment gross margin % | 44.9 | % | 47.6 | % |
(1) | Includes customer premise equipment, access, and shipping and handling. |
(2) | Excludes depreciation and amortization for the three months ended March 31, 2018 of $4,973 and for the three months ended March 31, 2017 of $4,875, respectively. |
(in thousands) | |||
Service gross margin increased 16% primarily due to continued growth of our service offerings to our Business customers consistent with our overall organic growth in our Business customer base of 15% as compared to the prior year quarter | $ | 8,932 | |
Access and product gross margin decreased 73% due to higher costs providing access services to Business customers during the current quarter | (826 | ) | |
USF gross margin decreased mainly due to payment during the quarter for USF fees not collected in 2017 | (5 | ) | |
Increase in segment gross margin | 8,101 |
Three Months Ended | |||||||||||||||
March 31, | |||||||||||||||
(in thousands, except percentages) | 2018 | 2017 | Dollar Change | Percent Change | |||||||||||
Revenues | |||||||||||||||
Service revenues | $ | 104,394 | $ | 119,117 | $ | (14,723 | ) | (12 | )% | ||||||
Access and product revenues (1) | 91 | 203 | (112 | ) | (55 | )% | |||||||||
Service, access and product revenues | 104,485 | 119,320 | (14,835 | ) | (12 | )% | |||||||||
USF revenues | 12,420 | 12,225 | 195 | 2 | % | ||||||||||
Total revenues | 116,905 | 131,545 | (14,640 | ) | (11 | )% | |||||||||
Cost of revenues | |||||||||||||||
Service cost of revenues (2) | 14,014 | 22,100 | (8,086 | ) | (37 | )% | |||||||||
Access and product cost of revenues (1) | 1,794 | 2,016 | (222 | ) | (11 | )% | |||||||||
Service, access and product cost of revenues | 15,808 | 24,116 | (8,308 | ) | (34 | )% | |||||||||
USF cost of revenues | 12,446 | 12,225 | 221 | 2 | % | ||||||||||
Total cost of revenues | 28,254 | 36,341 | (8,087 | ) | (22 | )% | |||||||||
Segment gross margin | |||||||||||||||
Service margin | 90,380 | 97,017 | (6,637 | ) | (7 | )% | |||||||||
Gross margin ex-USF (Service, access and product margin) | 88,677 | 95,204 | (6,527 | ) | (7 | )% | |||||||||
Segment gross margin | $ | 88,651 | $ | 95,204 | $ | (6,553 | ) | (7 | )% |
Segment gross Margin % | |||||||||
Service margin % | 86.6 | % | 81.4 | % | |||||
Gross margin ex-USF (Service, access and product margin) % | 84.9 | % | 79.8 | % | |||||
Segment gross margin % | 75.8 | % | 72.4 | % |
(1) | Includes customer premise equipment and shipping and handling. |
(2) | Excludes depreciation and amortization for the three months ended March 31, 2018 of $1,461 and for the three months ended March 31, 2017 of $1,907, respectively. |
(in thousands) | |||
Service gross margin decreased primarily due to a decrease in subscriber lines of 13% resulting in lower gross margin of $8,515 as we have reallocated resources to attract more profitable business customers. This was offset by a slight increase in average revenue per customer and lower overall costs incurred by the Consumer segment resulting in increased gross margin of $1,878. | $ | (6,637 | ) |
Access and product gross margin increased 6% primarily due lower equipment costs associated with sales to customers during the current quarter | 110 | ||
USF gross margin decreased mainly due to payment during the quarter for USF fees not collected in 2017 | (26 | ) | |
Decrease in segment gross margin | (6,553 | ) |
Three Months Ended | |||||||||||||||
March 31, | |||||||||||||||
(in thousands, except percentages) | 2018 | 2017 | Dollar Change | Percent Change | |||||||||||
Sales and marketing | $ | 77,136 | $ | 81,931 | $ | (4,795 | ) | (6 | )% | ||||||
Engineering and development | 10,820 | 8,370 | 2,450 | 29 | % | ||||||||||
General and administrative | 27,582 | 35,086 | (7,504 | ) | (21 | )% | |||||||||
Depreciation and amortization | 16,800 | 17,947 | (1,147 | ) | (6 | )% | |||||||||
Total other operating expenses | $ | 132,338 | $ | 143,334 | $ | (10,996 | ) | (8 | )% |
• | Sales and marketing expense decreased by $4,795 due to a reduction in marketing through traditional media outlets. Also attributing to the decline in sales and marketing expense was a decrease in commissions upon adoption of Topic 606 as costs to acquire Business customers is deferred and amortized over the life of the associated customer. Prior to adoption, commissions were expensed as they were earned. |
• | Engineering and development expense increased by $2,450 in connection with the Company's continued transformation focused on innovation especially in regards to developing further functionality related to its proprietary platform in order to support customers through the mid-market and enterprise sector. |
• | General and administrative expense decreased by $7,504 due in part to integration and severance costs incurred during the prior year quarter which did not occur during the three months ended March 31, 2018. |
• | Depreciation and amortization expense decreased by $1,147 primarily due to the expiration of the Company's capital lease in August 2017 associated with its office location in Holmdel, New Jersey. |
(in thousands, except percentages) | Three Months Ended | ||||||||||||||
March 31, | |||||||||||||||
2018 | 2017 | Dollar Change | Percent Change | ||||||||||||
Interest expense | (3,161 | ) | (3,703 | ) | (542 | ) | (15 | )% | |||||||
Other income (expense), net | (253 | ) | (215 | ) | 38 | 18 | % | ||||||||
$ | (3,414 | ) | $ | (3,918 | ) | $ | (504 | ) |
Three Months Ended | ||||||||||
March 31, | ||||||||||
(in thousands) | 2018 | 2017 | Dollar Change | |||||||
Net cash provided by operating activities | $ | 23,468 | $ | 17,261 | 6,207 | |||||
Net cash used in investing activities | (6,397 | ) | (6,759 | ) | 362 | |||||
Net cash used in financing activities | (25,062 | ) | (13,540 | ) | (11,522 | ) |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
Item 4. | Controls and Procedures |
Item 1. | Legal Proceedings |
Item 1A. | Risk Factors |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
Item 3. | Defaults Upon Senior Securities |
Item 4. | Mine Safety Disclosures |
Item 5. | Other Information |
Item 6. | Exhibits |
31.1 | |||
31.2 | |||
32.1 | |||
101 | The following financial statements from Vonage Holdings Corp.’s Quarterly Report on Form 10-Q for the three months ended March 31, 2018, filed with the Securities and Exchange Commission on May 8, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Cash Flows; (v) the Condensed Consolidated Statements of Stockholders’ Equity; and (vi) the Notes to Condensed Consolidated Financial Statements. |
* | Management contract or compensatory plan or arrangement. |
VONAGE HOLDINGS CORP. | |||||
Dated: | May 8, 2018 | By: | /s/ David T. Pearson | ||
David T. Pearson Chief Financial Officer and Treasurer (Principal Financial Officer and Duly Authorized Officer) |
31.1 | |||
31.2 | |||
32.1 | |||
101 | The following financial statements from Vonage Holdings Corp.’s Quarterly Report on Form 10-Q for the three months ended March 31, 2018, filed with the Securities and Exchange Commission on May 8, 2018, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Cash Flows; (v) the Condensed Consolidated Statements of Stockholders’ Equity; and (vi) the Notes to Condensed Consolidated Financial Statements. |
* | Management contract or compensatory plan or arrangement. |
Date: | May 8, 2018 | /s/ Alan Masarek | |
Alan Masarek | |||
Chief Executive Officer |
Date: | May 8, 2018 | /s/ David T. Pearson |
David T. Pearson | ||
Chief Financial Officer and Treasurer |
Date: | May 8, 2018 | /s/ Alan Masarek |
Alan Masarek | ||
Chief Executive Officer |
Date: | May 8, 2018 | /s/ David T. Pearson |
David T. Pearson | ||
Chief Financial Officer and Treasurer |
Document And Entity Information |
3 Months Ended |
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Mar. 31, 2018
shares
| |
Document And Entity Information [Abstract] | |
Document Type | 10-Q |
Amendment Flag | false |
Document Period End Date | Mar. 31, 2018 |
Entity Registrant Name | VONAGE HOLDINGS CORP |
Entity Central Index Key | 0001272830 |
Current Fiscal Year End Date | --12-31 |
Document Fiscal Year Focus | 2018 |
Document Fiscal Period Focus | Q1 |
Entity Filer Category | Large Accelerated Filer |
Entity Common Stock, Shares Outstanding | 237,489,060 |
Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Statement of Financial Position [Abstract] | ||
Accounts receivable, allowance | $ 2,106 | $ 2,258 |
Inventory, allowance | 158 | 108 |
PP&E, accumulated amortization | 88,754 | 87,792 |
Software, accumulated amortization | 96,748 | 93,858 |
Intangible assets, accumulated amortization | $ 134,246 | $ 124,573 |
Common stock, par value (USD per share) | $ 0.001 | $ 0.001 |
Common stock, shares authorized (in shares) | 596,950,000 | 596,950,000 |
Common stock, shares issued n(in shares) | 306,541,000 | 298,174,000 |
Common stock, shares outstanding (in shares) | 236,889,000 | 230,939,000 |
Treasury stock, shares (in shares) | 69,652,000 | 67,235,000 |
Condensed Consolidated Statements of Income - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
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Mar. 31, 2018 |
Mar. 31, 2017 |
|
Income Statement [Abstract] | ||
Total revenues | $ 253,573 | $ 243,347 |
Operating Expenses: | ||
Cost of revenues (exclusive of depreciation and amortization) | 103,567 | 94,889 |
Sales and marketing | 77,136 | 81,931 |
Engineering and development | 10,820 | 8,370 |
General and administrative | 27,582 | 35,086 |
Depreciation and amortization | 16,800 | 17,947 |
Total operating expenses | 235,905 | 238,223 |
Income from operations | 17,668 | 5,124 |
Other Income (Expense): | ||
Interest expense | (3,161) | (3,703) |
Other income (expense), net | (253) | (215) |
Total other income (expense), net | (3,414) | (3,918) |
Income before income taxes | 14,254 | 1,206 |
Income tax benefit | 10,270 | 4,707 |
Net income | $ 24,524 | $ 5,913 |
Earnings per common share: | ||
Basic (usd per share) | $ 0.11 | $ 0.03 |
Diluted (usd per share) | $ 0.10 | $ 0.02 |
Weighted-average common shares outstanding: | ||
Basic (in shares) | 233,034 | 220,371 |
Diluted (in shares) | 248,481 | 239,486 |
Condensed Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Statement of Comprehensive Income [Abstract] | ||
Net income | $ 24,524 | $ 5,913 |
Other comprehensive income: | ||
Foreign currency translation adjustment | 6,333 | 3,047 |
Unrealized gain on available-for-sale securities, net of tax expense of $0 and $0, respectively | 0 | 21 |
Unrealized gain on derivatives, net of tax expense of $302 and $0, respectively | 780 | 0 |
Total other comprehensive income | 7,113 | 3,068 |
Comprehensive income | 31,637 | 8,981 |
Foreign currency translation adjustment, net of tax expense of $2 and $429, respectively | 2 | 429 |
Other Comprehensive Income (Loss), Available-for-sale Securities, Tax | 0 | 0 |
Unrealized gain on derivatives, net of tax expense of $302 and $0, respectively | $ 302 | $ 0 |
Nature of Business |
3 Months Ended |
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Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Basis of Presentation | Nature of Business Nature of Operations Vonage Holdings Corp. (“Vonage”, “Company”, “we”, “our”, “us”) is incorporated as a Delaware corporation. At Vonage, we are redefining business communications. We are embracing technology to transform how businesses communicate to create better business outcomes. Our cloud communications platform enables businesses of all sizes to collaborate more productively and engage their customers more efficiently across any device. All of our cloud communications solutions are designed to allow businesses to be more productive by integrating communications with all their existing business productivity tools and our programmable solutions allow customers to engage with their customers via embedded voice, chat, or messaging to create seamless and contextual communications that makes doing business easier for end customers. 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, or SIP, based Voice over Internet Protocol, or VoIP, network. We also offer Communications Platform as a Service, or CPaaS, solutions designed to enhance the way businesses communicate with their customers by embedding communications into apps, websites and business processes. 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. We provide a robust suite of feature-rich residential communication solutions that allow consumers to connect their home phones and mobile phones on one number and we offer attractive international long distance rates that help create a loyal base of satisfied customers. Customers in the United States represented 82% and 88% of our consolidated revenues for the three months ended March 31, 2018 and 2017, respectively, with the balance in Canada, the United Kingdom, and other countries. Nexmo Inc. ("Nexmo") has operations in the United States, the United Kingdom, Hong Kong, and Singapore, and provides CPaaS solutions to our customers located in many countries around the world. Unaudited Interim Financial Information The accompanying unaudited interim condensed consolidated financial statements and information have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the SEC's regulations for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these financial statements contain all normal and recurring adjustments considered necessary to present fairly the financial position, results of operations and comprehensive income, cash flows, and statement of stockholders’ equity for the periods presented. The results for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on February 27, 2018. Use of Estimates Our condensed 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 condensed consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. Reclassifications Reclassifications have been made to our condensed consolidated financial statements for the prior year period to conform to classification used in the current year period. The reclassifications did not affect results from operations or net assets. |
Summary of Significant Accounting Policies |
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Accounting Policies [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Summary of Significant Accounting Policies | Summary of Significant Accounting Policies This footnote should be read in conjunction with the complete description of our significant accounting policies under Note 2, Summary of Significant Accounting Policies to our Annual Report on Form 10-K for the year ended December 31, 2017. Cost of Revenues Cost of revenues excludes depreciation and amortization expense of $6,434 and $6,782 for the three months ended March 31, 2018 and 2017, respectively. In addition, costs of goods sold included in cost of revenues during three months ended March 31, 2018 and 2017 were $6,297 and $7,293, respectively. Advertising Costs We incurred advertising costs included in sales and marketing of $14,521 and $17,343 for the three months ended March 31, 2018 and 2017, respectively. Engineering and Development Expenses Engineering and development expenses predominantly include personnel and related costs for developers responsible for research and development of new products. Fair Value of Financial Instruments The Company records certain of its financial assets at fair value on a recurring basis. The Company's financial instruments, which include cash and cash equivalents, accounts receivable and accounts payable, approximate fair value because of their short-term 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 March 31, 2018 and December 31, 2017. We believe the fair value of our debt at March 31, 2018 and December 31, 2017 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. We account for financial assets using a framework that establishes a hierarchy that ranks the quality and reliability of the inputs, or assumptions, we use in the determination of fair value, and we classify financial assets and liabilities carried at fair value in one of the following three categories: •Level 1 - quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. •Level 2 - observable prices that are based on inputs not quoted on active markets but corroborated by market data; and •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. 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 March 31, 2018 and December 31, 2017:
(1) Included in other assets on our condensed consolidated balance sheets. Supplemental Balance Sheet Information Cash, cash equivalents and restricted cash
Intangible assets, net
Accrued expenses
Goodwill The following table provides a summary of the changes in the carrying amounts of goodwill which is attributable to our business segment:
Recent Accounting Pronouncements In August 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-12, "Derivatives and Hedging". The ASU improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and simplifies the application of the hedge accounting guidance in current generally accepted accounting principles ("GAAP"). It also amends the disclosures requirements by requiring a tabular disclosure related to the effect on the incomes statement of fair value and cash flow hedges and eliminating the ineffective portion of the change in fair value of hedging instrument disclosures. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance and are applied to hedging relationships existing on the date of adoption. We do not expect a material impact of adopting ASU 2017-12 on our condensed consolidated financial statements and related disclosures. In January 2017, FASB issued 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. The adoption of ASU 2017-04 will not have a material impact on our condensed 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 our assets and liabilities for real estate and equipment operating leases for which we are the lessee. We will adopt this ASU when effective. We are currently evaluating the effect of adopting ASU 2016-02 on our condensed consolidated financial statements and related disclosures. The following standards were adopted by the Company during the current period: In October 2016, FASB issued ASU 2016-16, "Income Taxes". This ASU improves the accounting for income tax consequences of intra-entity transfers of assets other than inventory. This ASU is effective for fiscal years beginning after December 15, 2017 on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We adopted this ASU on January 1, 2018 and the adoption of this ASU did not have a material impact on our condensed consolidated financial statements and related disclosures. In August 2016, FASB issued ASU 2016-15, "Statement of Cash Flows". This ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This ASU is effective for fiscal years beginning after December 15, 2017 on a retrospective basis. Early adoption is permitted, including adoption in an interim period. We adopted this ASU on January 1, 2018 and the adoption of this ASU did not have a material impact on our condensed 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. We adopted this ASU on January 1, 2018 and the adoption of this ASU did not have a material impact on our condensed consolidated financial statements and related disclosures. In May 2014, FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)". This ASU, as amended, provided comprehensive guidance on the recognition of revenue from contracts with customers arising from the transfer of goods and services, guidance on accounting for certain contract costs and new disclosures. Topic 606 also amends the current guidance for the recognition of costs to obtain and fulfill contracts with customers requiring that all incremental costs of obtaining and direct costs of fulfilling contracts with customers such as commissions be deferred and recognized over the expected customer life. On January 1, 2018, we adopted this ASU. Refer to Note 3. Revenue Recognition for related disclosures required upon adoption. |
Revenue Recognition |
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Revenue Recognition [Table Text Block] | Revenue Recognition On January 1, 2018, the Company adopted the guidance of ASC Topic 606, Revenue from Contracts with Customers using the modified retrospective method applied to those contracts which were not completed as of January 1, 2018. Our results for reporting periods beginning after January 1, 2018 are presented in accordance with the provisions under Topic 606 but any prior period amounts have not been adjusted and continue to be reported in accordance with our revenue recognition policy as further described in Note 2, Summary of Significant Accounting Policies to our Annual Report on Form 10-K for the year ended December 31, 2017. In connection with our adoption of Topic 606, we recognized a net increase to opening retained earnings of $24,848, net of tax, as of January 1, 2018 related to commissions paid associated with the acquisition of business customers and associated deferred tax liability. Upon our adoption of Topic 606, we measure revenue based upon consideration specified by contracts with our customers. Revenue is recognized when our performance obligation under the contract is satisfied by transferring control over the product or service to the customer. We derive our revenues for our Consumer and Business segments primarily from the sale of our communication services and customer equipment as further described below. The majority of the Company's contracts with customers have a single performance obligation for service revenues. We recognize revenue with customers when control transfers, which occurs upon delivery of a service or product. For our Business segment, the typical life of a customer for service is 6 years. The adoption of Topic 606 did not result in a change in the timing of how the Company recognizes revenue. Service Revenues Substantially all of our revenues are service revenues, which are derived from monthly subscription fees under usage based billing arrangements, and, in Vonage Enterprise, one of our business service offerings, contract-based services plans. For consumer customers in the United States, we offer domestic and international rate plans, including a variety of residential plans and mobile plans. For business customers, we offer small and medium business, mid-market, and enterprise customers several service plans with different pricing structures and contractual requirements ranging in duration from month-to-month to three years. In addition, we provide managed equipment to business customers for a monthly fee. Customers also have the opportunity to purchase premium features for additional fees. We also derive service 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. For a portion of our customers, 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 as service is provided. Service revenue also includes supplying messaging (SMS and Voice) services to customers as part of our CPaaS offerings. Revenue is recognized in the period when messages are sent by the customer. We also transact with providers or bulk SMS aggregators and sell services to these customers who then onsell to their customers. Since the aggregator is our customer, revenue is recognized on a gross basis with related costs included in cost of revenues. 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. These charges, along with the remittance to the relevant government entity, are recorded on a net basis. In addition, we charge customers Federal Universal Service Fund ("USF") fees from customers to recover our obligation to contribute to the fund, as allowed by the Federal Communications Commission ("FCC"). We recognize USF revenue on a gross basis and record the related fees in cost of revenues. Customer Equipment and Shipping Revenues Revenues are generated from sales of customer equipment primarily 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. Disaggregation of Revenue The following table details our revenue from customers disaggregated by primary geographical market, source of revenue, and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue for our Business and Consumer segments.
(1) No individual other international country represented greater than 10% of total revenue during the periods presented. In addition, the Company recognizes service revenues from its customers through subscription services provided or through usage or pay-per-use type arrangements. During the three months ended March 31, 2018, the Company recognized $152,453 related to subscription services, $51,186 related to usage, and $49,934 related to other revenues such as USF, other regulatory fees, and credits. Contract Assets and Liabilities The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:
(1) Amounts included in accounts receivables other than $756 included in other current assets on our condensed consolidated balance sheet. (2) Amounts included in deferred revenues and other liabilities on our condensed consolidated balance sheet. Our deferred revenue represents the advance consideration received from customers for subscription services and is predominantly recognized over the following month as transfer of control occurs. During the three months ended March 31, 2018, the Company recognized revenue of $119,371 related to its contract liabilities. We expect to recognize $28,874 into revenue over the next twelve months related to our deferred revenue as of March 31, 2018. Contract Acquisition Costs We have various commission programs for which eligible employees and third parties may earn commission on sales of services and products to customers. We expect that these commission fees are recoverable and therefore we have capitalized $38,138 and $34,484 as contract costs as of March 31, 2018 and January 1, 2018, respectively, included within deferred customer acquisitions costs, current and deferred customer acquisition costs on our condensed consolidated balance sheet. In addition, we established a deferred tax liability associated with the transition asset of $9,636. Capitalized commission fees are amortized to sales and marketing expense based on the transfer of goods or services to which the assets relate which is six years for Business customers. During the three months ended March 31, 2018, the amount amortized to sales and marketing was $2,159 and there were no impairment losses recognized in relation to the costs capitalized. In addition, the Company expenses sales commissions for those commission plans where the customer arrangement is a month-to-month contract and for commission of residual cost and renewals. |
Earnings Per Share |
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Earnings Per Share | Earnings Per Share The following table sets forth the computation for basic and diluted earnings per share for the three months ended March 31, 2018 and 2017:
For the three months ended March 31, 2018 and 2017, the following were excluded from the calculation of diluted earnings per common share because of their anti-dilutive effects:
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Long-Term Note and Revolving Credit Facility |
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Long-Term Note and Revolving Credit Facility | Long-Term Note and Revolving Credit Facility This footnote should be read in conjunction with the complete description of our financing arrangements under Note 7, Long-Term Debt and Revolving Credit Facility to our Annual Report on Form 10-K for the year ended December 31, 2017. A schedule of long-term note and revolving credit facility at March 31, 2018 and December 31, 2017 is 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 $125.0 million term note and a $325.0 million 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. During the three months ended March 31, 2018, we made mandatory repayments of $4.7 million under the term note and made discretionary repayments of $5.0 million under the revolving credit facility and borrowed $10 million under the revolving credit facility. In addition, the effective interest rate was 4.69% as of March 31, 2018. Interest Rate Swaps On July 14, 2017, we executed on three interest rate swap agreements in order to hedge the variability of expected future cash interest payments related to the 2016 Credit Facility. The swaps have an aggregate notional amount of $150 million and became effective on July 31, 2017 and will expire on June 3, 2020 concurrent with the term of the 2016 Credit Facility. Under the swaps our interest rate is fixed at 4.7%. The interest rate swaps are accounted for as cash flow hedges in accordance with ASC 815, Derivatives and Hedging. As of March 31, 2018, the fair market value of the swaps was $2,367, which is included in other assets on our condensed consolidated balance sheet. As of March 31, 2018, the critical terms of the swap agreements have not changed and therefore, there is no ineffectiveness to be recorded and all changes in the fair value of the interest rate swaps are recorded in accumulated other comprehensive income ("OCI"). The following table summarizes the effects of ASC 815 on the Company's accumulated OCI balance attributable to cash flow derivatives:
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Common Stock |
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Common Stock | Common Stock As of March 31, 2018 and December 31, 2017, the Company had 596,950 shares of common stock authorized and had 8,154 shares available for grants under our share-based compensation programs as of March 31, 2018. For a detailed description of our share-based compensation programs refer to Note 10, Employee Stock Benefit Plans in our Annual Report on Form 10-K for the year ended December 31, 2017. Common Stock Repurchases On December 9, 2014, Vonage's Board of Directors authorized a program for the Company to repurchase up to $100.0 million of its outstanding common stock (the "2014 $100.0 million repurchase program"). Repurchases under the 2014 $100.0 million repurchase program are expected to be made over a four-year period ending on December 31, 2018. We repurchased the following shares of common stock with cash resources under the 2014 $100.0 million repurchase program during the three months ended March 31, 2018 and 2017:
As of March 31, 2018, $42,533 remained of our 2014 $100.0 million 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 $100.0 million repurchase program, cash used in financing activities related to common stock repurchases may differ from the comparable change in stockholders' equity, reflecting timing differences between the recognition of share repurchase transactions and their settlement for cash. |
Commitments and Contingencies |
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Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Commitments and Contingencies 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 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 matters noted below 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 condensed consolidated financial position, cash flows or results of operations. Litigation IP Matters 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. In a parallel Arizona district court litigation involving RPost, certain of the asserted patent claims were invalidated on June 7, 2016, which decision was affirmed by the Federal Circuit, with the Supreme Court denying certiorari on December 11, 2017. On March 1, 2018, 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. Commercial Litigation Merkin & Smith, et al. On September 27, 2013, Arthur Merkin and James Smith filed a putative class action lawsuit against Vonage America, Inc. in the Superior Court of the State of California, County of Los Angeles, alleging that Vonage violated California’s Unfair Competition Law by charging its customers fictitious 911 taxes and fees. On October 30, 2013, Vonage filed a notice removing the case to the United States District Court for the Central District of California. On November 26, 2013, Vonage filed its Answer to the Complaint. On December 4, 2013, Vonage filed a Motion to Compel Arbitration, which the Court denied on February 4, 2014. On March 5, 2014, Vonage appealed that decision to the United States Court of Appeals for the Ninth Circuit. On March 26, 2014, the district court proceedings were stayed pending the appeal. On February 29, 2016, the Ninth Circuit reversed the district court’s ruling and remanded with instructions to grant the motion to compel arbitration. On March 22, 2016, Merkin and Smith filed a petition for rehearing. On May 4, 2016, the Ninth Circuit withdrew its February 29, 2016 decision and issued a new order reversing the district court’s order and remanded with instructions to compel arbitration. The Ninth Circuit also declared as moot the petition for rehearing. On June 27, 2016, the lower court stayed the case pending arbitration. A joint status report was filed with the District Court on December 23, 2016. A second joint status report was filed with the District Court on March 23, 2017. A third joint status report was filed with the District Court on June 27, 2017. A fourth joint status report was filed with the District Court on September 26, 2017. A fifth joint status report was filed with the District Court on December 26, 2017. DSA Promotions, LLC v. Vonage America, Inc. On September 28, 2017, DSA Promotions, LLC ("DSA") filed suit in the District Court of Dallas County, Texas, seeking payment of approximately $162 for goods and materials provided by DSA to Vonage. Vonage was served with the Original Petition and Request for Disclosure on October 13, 2017. DSA makes its claim based upon the doctrine of suit on a sworn account, quantum meruit and unjust enrichment. Vonage removed the matter from Dallas County District Court to the United States Federal Court for the Northern District of Texas, Dallas Division, on November 6, 2017. On November 20, 2017, Vonage filed a motion to transfer venue to New Jersey. On December 4, 2017, DSA filed its response and brief in opposition to the motion to transfer venue. On February 27, 2018, the District court for the Northern District of Texas, Dallas Division, granted Vonage’s motion to transfer the matter to the District Court of New Jersey. On March 18, 2018 the Court entered a Consent Order of Dismissal, with prejudice, whereby Vonage did not have to pay any monies to DSA. Regulation Telephony services are subject to a broad spectrum of state, federal and foreign 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 Federal Communications Commission, or 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, or 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. In December 2017, the FCC issued a decision reversing its prior position on net neutrality. The decision allows for paid prioritization. Numerous public interest groups and some companies are currently or expected to challenge the order in court. It is also anticipated that Congress may introduce legislation to overrule the FCC's decision and reinstate net neutrality. Federal - Rural Call Completion Issues On February 7, 2013, the FCC released a 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. On June 22, 2017, the FCC issued a Second Further Notice of Proposed Rulemaking. The FCC has proposed changes to the FCC's rules that allegedly would more effectively address rural call completion problems while reducing burdens on covered providers. Vonage reviewed and evaluated the FCC's proposed changes and provided input to The Voice on the Net, or VON, Coalition, an organization that works to advance regulatory policies for IP-enabled communications. Federal - NPRM - Number Slamming On July 13, 2017, the FCC adopted a NPRM regarding ways to protect consumers from number slamming and cramming without impeding competition or impairing the ability of consumers to switch providers. Vonage is monitoring this NPRM. Federal - NPRM Toll Free Assignment Modernization On September 26, 2017, the FCC issued a NPRM regarding the modernization of toll free number assignment. The FCC proposes amending its rules to allow for the use of an auction to assign certain toll free numbers - such as vanity and repeater numbers - in order to better promote the equitable and efficient use of numbers (especially as afforded by the opening of the 833 toll free code). Vonage continues to monitor activity with respect to this NPRM. Federal - NOI - Enterprise Communications Systems Access to 911 On September 26, 2017, the FCC adopted a Notice of Inquiry, or NOI, with respect to 911 access, routing and location in Enterprise Communication Systems. Vonage continues to monitor activity related to this NOI. Federal - Access to Telecommunication Equipment and Services by Persons with Disabilities At its open meeting on for October 24, 2017, the FCC applied its wireline hearing aid compatibility rules/standards to handsets that provide advanced communication services, which includes interconnected and non-interconnected VoIP. The rules include certain coupling and volume control requirements that would allow the handsets to work better for persons with hearing aids. There are also testing and certification requirements, which typically apply to the handset manufacturer. The FCC also adopted a requirement for volume control in wireless handsets. The new rules have a two-year phase in for new phones and do not require the modification to existing handsets. On April 5, 2018 the FCC’s Consumer and Governmental Affairs Bureau issued a public notice seeking comment on the accessibility of communications technologies for the 2018 Biennial Report required by the Twenty First Century Communications and Video Accessibility Act. The report must be filed with Congress on or before October 8, 2018. The Bureau sought comments by April 26, 2018. Vonage will monitor activity via the VON Coalition. Federal - Rules and Policies Regarding Caller ID Services At its open meeting on October 24, 2017, the FCC issued a report and order regarding amendments to the FCC's rules to exempt threatening calls from current Caller ID blocking roles so that, among other changes, law enforcement and security personnel have timely access to information they need to aid their investigations. The order exempts threatening calls from the CPN privacy rules. Federal - Number Portability NPRM and NOI At its open meeting on October 24, 2017, the FCC released a NPRM that would allow carriers flexibility in conducting number portability database queries to promote nationwide number portability and eliminate the dialing party requirement as it applies to interexchange service. The NOI seeks comments on industry number portability models and how number administration might be improved for more efficient technical, operational, administrative and legal processes. Vonage is working with the VON Coalition and is monitoring this NPRM and NOI. Federal - Second Further Notice of Proposed Rulemaking - Unwanted calls to reassigned telephone numbers On March 23, 2018, the FCC issued its Second NPRM seeking comments on ways to address unwanted calls to reassigned telephone numbers. The FCC is seeking comment on, among other issues, (1) the specific information that callers need from a reassigned numbers database, and (2) the best way to make that information available to callers that want it. The rules are intended to benefit consumers by reducing unwanted calls intended for another consumer while helping callers avoid the costs of calling the wrong consumer, including potential violations of the TCPA. Vonage will continue to monitor this rulemaking through the VON Coalition. 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, or 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. In September 2017 amicus briefs were filed in support of the Minnesota PUC's appeal of the Charter decision by AARP, the AARP Foundation, Professor Barbara Cherry, the National Association of Regulatory Utility Commissioners and the national Association of State Consumer Advocates and the Mid-Minnesota Legal Aid. On August 14, 2017, the Arizona Corporation Commission issued an opinion and order with respect to amendments to the Arizona Universal Services Fund. The rulemaking allows for, among other things, the collection of additional USF surcharges in Arizona to fund the E-rate Broadband Special Construction Project Matching Fund Program. The Arizona Corporation Commission held hearings on September 12 and 13, 2017. Vonage will continue to monitor this rulemaking to determine its effect upon its business activities within Arizona. California PUC transitioning local number portability from Neustar to iConectiv The Number Portability Administration Center in California is transitioning from Neustar to iConectiv/Telcordia on May 20, 2018. Vonage is taking the necessary actions to ensure continued access to the NPAC after the transition. We expect that state public utility commissions and state legislators will continue their attempts to apply state telecommunications regulations to nomadic 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 established reserves of $1,238 and $1,147 as of March 31, 2018 and December 31, 2017, respectively, as our best estimate of the potential tax exposure for any retroactive assessment. UK OFCOM Investigation On April 3, 2018, the UK Office of Communications ("OFCOM") launched an investigation to determine Vonage Limited’s compliance with General Condition 3.1 and Section 105A of the Communications Act 2003, which cover obligations of communication providers to take necessary measures to, among other things, maintain network availability and access to emergency services. In cases where violations are found, Ofcom has the authority to issue monetary penalties in accordance with its Guidelines and limitations imposed by statute. In April 2018, Vonage submitted its responses to Ofcom’s first request for information, and anticipates that a second request will be forthcoming in May 2018. OFCOM has stated that it expects to conclude the evidence gathering phase of its investigation in May 2018, after which it will publish a further update on the case status. |
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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-maker reviews revenue and gross margin information for each of our reportable segments, but does 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. Business For our Business customers, we provide innovative, cloud-based UCaaS solutions, comprised of integrated voice, text, video, data, collaboration, and mobile applications over our flexible, scalable SIP based VoIP network. Through Nexmo, the Vonage API Platform, we also offer 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 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/4G, 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 Software Defined Wide Area Network, or SD-WAN, UCaaS and CPaaS services for Business, Access and product revenues. Product revenues include equipment sold to customers, shipping and handling, professional services, and broadband access. Beginning January 1, 2018, we also included revenues associated with providing access services to Business customers. We have adjusted the quarter ended March 31, 2017 to include these revenues in access and product revenues which were previously included in service revenues. USF revenues. USF revenues represent fees passed on to customers to offset required contributions to the USF. 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. Access and 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. As noted above, beginning January 1, 2018, we also included costs associated with providing access services to Business customers. We have adjusted the quarter ended March 31, 2017 to include these costs in access and product revenues which were previously included in service cost of revenues. USF cost of revenues. USF cost of revenues represents contributions to the Federal USF and related fees. Information about our segment results for the three months ended March 31, 2018 were as follows:
(1) Includes customer premise equipment, access, and shipping and handling. (2) Excludes depreciation and amortization of $4,973 and $1,461 for the three months ended March 31, 2018. Information about our segment results for the three months ended March 31, 2017 were as follows:
(1) Includes customer premise equipment, access, and shipping and handling. (2) Excludes depreciation and amortization of $4,875 and $1,907 for the three months ended March 31, 2017. A reconciliation of the total of the reportable segments' gross margin to consolidated income before income taxes is as follows:
Information about our operations by geographic location is as follows:
(1) No individual other international country represented greater than 10% of total revenue during the periods presented.
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Incomes Taxes |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Taxes | Income Taxes Effective Tax Rate The income tax benefit consisted of the following:
We recognize income tax equal to pre-tax income multiplied by our effective income tax rate. In addition, adjustments are recorded for discrete period items and changes to our state effective tax rate which can cause the rate to fluctuate from quarter to quarter. For the three months ended March 31, 2018, our effective tax rate was different than the statutory rate due to a permanent adjustment of $6,702 related to the new Global Intangible Low-Taxed Income ("GILTI") tax rules that were enacted as part of tax reform enacted in December 2017. In addition, the Company recorded a discrete period tax benefit of $15,307 which was recognized related to excess tax benefits on equity compensation recognized in the first quarter of 2018. For the three months ended March 31, 2017, our effective tax rate was different than the statutory rate due to a discrete period tax expense of $6,031 recorded due to expired stock options recognized in the first quarter of 2017. On December 22, 2017, the United States enacted the Tax Cuts and Jobs Act ("TCJA") which reformed tax policy in the United States with the primary impact resulting in reducing the corporate tax rate from 35% to 21% beginning January 1, 2018. This resulted in an expense of $69,378 recognized by the Company during the year ended December 31, 2017 attributable to the re-measurement of the Company's deferred tax assets as of December 31, 2017. Due to the timing of the enactment and the complexity involved in applying the provisions of the TCJA, the Company has made reasonable estimates of the effects and recorded provisional amounts in our financial statements as of December 31, 2017. During the first quarter we reviewed further information and interpreted the TCJA utilizing additional guidance issued by the U.S. Treasury Department, the Internal Revenue Service and other regulatory bodies. We have made no adjustments to the provisional amounts recorded related to the re-measurement of the deferred tax asset as well as the conclusion regarding the applicability of repatriation tax. The Company will continue to analyze the effects of the TCJA on the Company’s operations and will record any adjustments associated with the enactment of the legislature during the measurement period as provided by SAB 118. Uncertain Tax Positions The Company had an uncertain tax position of $1,086 as of March 31, 2018 and December 31, 2017. Generally, the Company recognizes interest and penalties related to uncertain tax positions in income taxes . The Company did not have any interest or penalties related to this uncertain tax position during the three months ended March 31, 2018 and March 31, 2017. Net Operating Loss Carry Forwards ("NOLs") As of March 31, 2018, we had cumulative domestic Federal NOLs of $556,368 and cumulative state NOLs of $146,254, expiring at various times through 2037. In addition, we had NOLs for United Kingdom tax purposes of $50,142 with no expiration date. On June 8, 2017, at the Vonage 2017 annual meeting of stockholders, stockholders ratified the extension of the Tax Benefits Preservation Plan ("Preservation Plan") through June 30, 2019. Refer to Note 9, Common Stock to our Annual Report on Form 10-K for the year ended December 31, 2017 for a complete description of the Preservation Plan. |
Nature of Business Organization, Consolidation and Presentation of Financial Statements (Policies) |
3 Months Ended |
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Mar. 31, 2018 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Unaudited Interim Financial Information | Unaudited Interim Financial Information The accompanying unaudited interim condensed consolidated financial statements and information have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the SEC's regulations for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these financial statements contain all normal and recurring adjustments considered necessary to present fairly the financial position, results of operations and comprehensive income, cash flows, and statement of stockholders’ equity for the periods presented. The results for the three months ended March 31, 2018 are not necessarily indicative of the results to be expected for the full year. These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, 2017 filed with the Securities and Exchange Commission on February 27, 2018. |
Use of Estimates | Use of Estimates Our condensed 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 condensed consolidated financial statements and the accompanying notes. Actual results could differ materially from these estimates. |
Summary of Significant Accounting Policies (Policies) |
3 Months Ended |
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Mar. 31, 2018 | |
Accounting Policies [Abstract] | |
Cost of Revenues | Cost of Revenues Cost of revenues excludes depreciation and amortization expense of $6,434 and $6,782 for the three months ended March 31, 2018 and 2017, respectively. |
Advertising Costs | Advertising Costs We incurred advertising costs included in sales and marketing of $14,521 and $17,343 for the three months ended March 31, 2018 and 2017, respectively. |
Engineering and Development Expenses | Engineering and Development Expenses Engineering and development expenses predominantly include personnel and related costs for developers responsible for research and development of new products. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The Company records certain of its financial assets at fair value on a recurring basis. The Company's financial instruments, which include cash and cash equivalents, accounts receivable and accounts payable, approximate fair value because of their short-term 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 March 31, 2018 and December 31, 2017. We believe the fair value of our debt at March 31, 2018 and December 31, 2017 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. |
Recent Accounting Pronouncements | Recent Accounting Pronouncements In August 2017, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") 2017-12, "Derivatives and Hedging". The ASU improves the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and simplifies the application of the hedge accounting guidance in current generally accepted accounting principles ("GAAP"). It also amends the disclosures requirements by requiring a tabular disclosure related to the effect on the incomes statement of fair value and cash flow hedges and eliminating the ineffective portion of the change in fair value of hedging instrument disclosures. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance and are applied to hedging relationships existing on the date of adoption. We do not expect a material impact of adopting ASU 2017-12 on our condensed consolidated financial statements and related disclosures. In January 2017, FASB issued 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. The adoption of ASU 2017-04 will not have a material impact on our condensed 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 our assets and liabilities for real estate and equipment operating leases for which we are the lessee. We will adopt this ASU when effective. We are currently evaluating the effect of adopting ASU 2016-02 on our condensed consolidated financial statements and related disclosures. The following standards were adopted by the Company during the current period: In October 2016, FASB issued ASU 2016-16, "Income Taxes". This ASU improves the accounting for income tax consequences of intra-entity transfers of assets other than inventory. This ASU is effective for fiscal years beginning after December 15, 2017 on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings as of the beginning of the period of adoption. We adopted this ASU on January 1, 2018 and the adoption of this ASU did not have a material impact on our condensed consolidated financial statements and related disclosures. In August 2016, FASB issued ASU 2016-15, "Statement of Cash Flows". This ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This ASU is effective for fiscal years beginning after December 15, 2017 on a retrospective basis. Early adoption is permitted, including adoption in an interim period. We adopted this ASU on January 1, 2018 and the adoption of this ASU did not have a material impact on our condensed 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. We adopted this ASU on January 1, 2018 and the adoption of this ASU did not have a material impact on our condensed consolidated financial statements and related disclosures. In May 2014, FASB issued ASU 2014-09, "Revenue from Contracts with Customers (Topic 606)". This ASU, as amended, provided comprehensive guidance on the recognition of revenue from contracts with customers arising from the transfer of goods and services, guidance on accounting for certain contract costs and new disclosures. Topic 606 also amends the current guidance for the recognition of costs to obtain and fulfill contracts with customers requiring that all incremental costs of obtaining and direct costs of fulfilling contracts with customers such as commissions be deferred and recognized over the expected customer life. On January 1, 2018, we adopted this ASU. Refer to Note 3. Revenue Recognition for related disclosures required upon adoption. |
Summary of Significant Accounting Policies (Tables) |
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Accounting Policies [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Fair Value, Assets 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 March 31, 2018 and December 31, 2017:
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Schedule of Restricted Cash | Cash, cash equivalents and restricted cash
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Schedule of Intangible Assets, Net | Intangible assets, net
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Schedule of Accrued Expenses | Accrued expenses
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Schedule of Goodwill | The following table provides a summary of the changes in the carrying amounts of goodwill which is attributable to our business segment:
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Revenue Recognition Revenue from Customer (Tables) |
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Revenue from Contract with Customer [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Disaggregation of Revenue | The table also includes a reconciliation of the disaggregated revenue for our Business and Consumer segments.
(1) No individual other international country represented greater than 10% of total revenue during the periods presented. |
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Contract Assets and Liabilities | The following table provides information about receivables, contract assets and contract liabilities from contracts with customers:
(1) Amounts included in accounts receivables other than $756 included in other current assets on our condensed consolidated balance sheet. |
Earnings Per Share (Tables) |
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Earnings Per Share [Abstract] | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Earnings Per Share, Basic and Diluted | The following table sets forth the computation for basic and diluted earnings per share for the three months ended March 31, 2018 and 2017:
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Schedule of Antidilutive Securities Excluded from Computation of Earnings Per Share | For the three months ended March 31, 2018 and 2017, the following were excluded from the calculation of diluted earnings per common share because of their anti-dilutive effects:
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Long-Term Note and Revolving Credit Facility (Tables) |
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||
Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Long-Term Debt | A schedule of long-term note and revolving credit facility at March 31, 2018 and December 31, 2017 is as follows:
|
||||||||||||||||||||||||||||||||||||||||||||||||||
Accumulated OCI Balance Attributable to Cash Flow Derivatives | The following table summarizes the effects of ASC 815 on the Company's accumulated OCI balance attributable to cash flow derivatives:
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Common Stock (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Equity [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Common Stock Repurchases | We repurchased the following shares of common stock with cash resources under the 2014 $100.0 million repurchase program during the three months ended March 31, 2018 and 2017:
|
Industry Segment and Geographic Information (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Segment Reporting [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Revenue from External Customers by Geographic Areas | Information about our segment results for the three months ended March 31, 2018 were as follows:
(1) Includes customer premise equipment, access, and shipping and handling. (2) Excludes depreciation and amortization of $4,973 and $1,461 for the three months ended March 31, 2018. Information about our segment results for the three months ended March 31, 2017 were as follows:
(1) Includes customer premise equipment, access, and shipping and handling. (2) Excludes depreciation and amortization of $4,875 and $1,907 for the three months ended March 31, 2017. A reconciliation of the total of the reportable segments' gross margin to consolidated income before income taxes is as follows:
Information about our operations by geographic location is as follows:
(1) No individual other international country represented greater than 10% of total revenue during the periods presented. |
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Long-lived Assets by Geographic Areas |
|
Incomes Taxes (Tables) |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 31, 2018 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Income Tax Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Schedule of Effective Income Tax Rate Reconciliation | The income tax benefit consisted of the following:
|
Nature of Business - Nature of Operation (Details) |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
United States | ||
Concentration Risk [Line Items] | ||
Customer representation of revenue, percentage | 82.00% | 88.00% |
Summary of Significant Accounting Policies - Cost of Services (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Accounting Policies [Abstract] | ||
Depreciation and amortization | $ 6,434 | $ 6,782 |
Cost of goods sold | $ 6,297 | $ 7,293 |
Summary of Significant Accounting Policies - Advertising Cost (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Accounting Policies [Abstract] | ||
Advertising Expense | $ 14,521 | $ 17,343 |
Summary of Significant Accounting Policies - Fair Value of Financial Instruments (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Available-for-sale securities | Fair value, measurements, recurring | ||
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items] | ||
Derivative Instruments in Hedges, Assets, at Fair Value | $ 2,367 | $ 1,285 |
Summary of Significant Accounting Policies - Cash, Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
Mar. 31, 2017 |
Dec. 31, 2016 |
---|---|---|---|---|
Cash, Cash Equivalents, and Restricted Cash [Line Items] | ||||
Cash and cash equivalents | $ 23,536 | $ 31,360 | ||
Restricted cash and cash equivalents | 1,835 | 1,967 | ||
Cash, cash equivalents, and restricted cash | 25,371 | 33,327 | $ 28,019 | $ 30,929 |
Standby letters of credit | ||||
Cash, Cash Equivalents, and Restricted Cash [Line Items] | ||||
Restricted cash and cash equivalents | 1,509 | 1,563 | ||
Cash reserve | ||||
Cash, Cash Equivalents, and Restricted Cash [Line Items] | ||||
Restricted cash and cash equivalents | $ 326 | $ 404 |
Summary of Significant Accounting Policies - Accrued Expenses (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Accounting Policies [Abstract] | ||
Compensation and related taxes and temporary labor | $ 18,338 | $ 30,059 |
Marketing | 10,296 | 10,759 |
Taxes and fees | 11,330 | 13,353 |
Acquisition related consideration accounted for as compensation | 2,934 | 2,534 |
Telecommunications | 17,284 | 16,068 |
Other accruals | 6,913 | 7,078 |
Accrued Customer Credits, Current | 4,277 | 2,310 |
Accrued Professional Fees, Current | 1,688 | 1,618 |
Accrued Inventory | 1,063 | 1,927 |
Accrued expenses | $ 74,123 | $ 85,706 |
Summary of Significant Accounting Policies - Goodwill (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Goodwill [Roll Forward] | |
Goodwill, beginning balance | $ 373,764 |
Foreign Currency Translation Adjustments | 3,971 |
Goodwill, ending balance | $ 377,735 |
Revenue Recognition Contract with Customer, Asset and Liability (Details) $ in Thousands |
Mar. 31, 2018
USD ($)
|
---|---|
Revenue from Contract, Asset and Liability [Abstract] | |
Receivables (1) | $ 44,683 |
Contract liabilities (2) | $ 29,180 |
Revenue Recognition Narrative (Details) - USD ($) |
3 Months Ended | 12 Months Ended | |||
---|---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2018 |
Jan. 01, 2018 |
Dec. 31, 2017 |
|
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Receivables (1) | $ 44,683,000 | ||||
Revenues | 253,573,000 | $ 243,347,000 | |||
Deferred Revenue, Additions | 119,371,000 | ||||
Capitalized Contract Cost, Net | 29,501,000 | $ 0 | |||
Deferred Tax Liabilities, Deferred Expense, Other Capitalized Costs | $ 9,636,000 | ||||
Capitalized Contract Cost, Amortization | 2,159,000 | 0 | |||
Scenario, Forecast | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Deferred Revenue, Additions | $ 28,874,000 | ||||
Restatement Adjustment | Accounting Standards Update 2014-09 | Accumulated Deficit | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Cumulative Effect of New Accounting Principle in Period of Adoption | 24,848,000 | ||||
Subscription services | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 152,453,000 | ||||
Usage | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 51,186,000 | ||||
USF and others | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | 49,934,000 | ||||
Prepaid Expenses and Other Current Assets | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Receivables (1) | 756,000 | ||||
Current and Non-Current Portion | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Capitalized Contract Cost, Net | 38,138,000 | $ 34,484,000 | |||
Business | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | $ 136,668,000 | 111,802,000 | |||
Customer Life | 6 years | ||||
Consumer | |||||
Revenue, Initial Application Period Cumulative Effect Transition [Line Items] | |||||
Revenues | $ 116,905,000 | $ 131,545,000 | |||
Customer Life | 4 years |
Earnings Per Share - Schedule of Earnings Per Share Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Numerator | ||
Net income | $ 24,524 | $ 5,913 |
Denominator | ||
Basic (in shares) | 233,034 | 220,371 |
Dilutive effect of stock options and restricted stock units (in shares) | 15,447 | 19,115 |
Diluted (in shares) | 248,481 | 239,486 |
Basic earnings per share | ||
Basic earnings per share (usd per share) | $ 0.11 | $ 0.03 |
Diluted earnings per share | ||
Diluted earnings per share (usd per share) | $ 0.10 | $ 0.02 |
Earnings Per Share - Schedule of Antidilutive Securities (Details) - shares shares in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Earnings per share, antidilutive securities: | ||
Antidilutive securities excluded from earnings per common share (in shares) | 2,815 | 12,778 |
Restricted stock units | ||
Earnings per share, antidilutive securities: | ||
Antidilutive securities excluded from earnings per common share (in shares) | 1,346 | 5,976 |
Stock options | ||
Earnings per share, antidilutive securities: | ||
Antidilutive securities excluded from earnings per common share (in shares) | 1,469 | 6,802 |
Long-Term Note and Revolving Credit Facility - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Debt Instrument [Line Items] | |||
Long-term debt | $ 214,165 | $ 213,765 | |
Unrealized gain on derivatives, net of tax expense of $302 and $0, respectively | 302 | $ 0 | |
Term note | Secured debt | 2.50-3.25% Term note - due 2020 | |||
Debt Instrument [Line Items] | |||
Long-term debt | $ 68,165 | 72,765 | |
Term note | Minimum | Secured debt | 2.50-3.25% Term note - due 2020 | |||
Debt Instrument [Line Items] | |||
Debt instrument, stated percentage | 2.50% | ||
Term note | Maximum | Secured debt | 2.50-3.25% Term note - due 2020 | |||
Debt Instrument [Line Items] | |||
Debt instrument, stated percentage | 3.25% | ||
Revolving credit facility | Line of credit | 2.50-3.25% Revolving credit facility - due 2020 | |||
Debt Instrument [Line Items] | |||
Long-term debt | $ 146,000 | $ 141,000 | |
Revolving credit facility | Minimum | Line of credit | 2.50-3.25% Revolving credit facility - due 2020 | |||
Debt Instrument [Line Items] | |||
Debt instrument, stated percentage | 2.50% | ||
Revolving credit facility | Maximum | Line of credit | 2.50-3.25% Revolving credit facility - due 2020 | |||
Debt Instrument [Line Items] | |||
Debt instrument, stated percentage | 3.25% | ||
Accumulated Other Comprehensive Income | |||
Debt Instrument [Line Items] | |||
Unrealized gain on derivatives, net of tax expense of $302 and $0, respectively | $ 622 |
Long-Term Note and Revolving Credit Facility - Interest Rate Swap (Details) $ in Thousands |
3 Months Ended |
---|---|
Mar. 31, 2018
USD ($)
| |
Debt Disclosure [Abstract] | |
Balance at beginning of period | $ 965 |
Mark-to-market of cash flow hedge accounting contracts | 780 |
Balance at end of period | 1,745 |
Gains expected to be realized from accumulated OCI during the next 12 months | $ 0 |
Long-Term Note and Revolving Credit Facility - Narrative (Details) - USD ($) |
3 Months Ended | ||
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Jun. 03, 2016 |
|
Debt Instrument [Line Items] | |||
Principal payments on notes and revolving credit facility | $ (9,687,000) | $ (4,688,000) | |
Proceeds received from draw down of revolving credit facility and issuance of notes payable | $ 10,000,000 | $ 15,000,000 | |
Derivative, Number of Instruments Held | 3 | ||
Derivative, Amount of Hedged Item | $ 150,000,000 | ||
Derivative, Fixed Interest Rate | 4.70% | ||
Mark-to-market of cash flow hedge accounting contracts | $ 780,000 | ||
Term note | Secured debt | |||
Debt Instrument [Line Items] | |||
Principal payments on notes and revolving credit facility | (4,700,000) | ||
Revolving credit facility | Secured debt | |||
Debt Instrument [Line Items] | |||
Principal payments on notes and revolving credit facility | $ (5,000,000) | ||
2016 Credit Facility | |||
Debt Instrument [Line Items] | |||
Line of credit facility, interest rate at period end | 4.69% | ||
2016 Credit Facility | Term note | Secured debt | |||
Debt Instrument [Line Items] | |||
Debt instrument, face amount | $ 125,000,000 | ||
2016 Credit Facility | Revolving credit facility | Line of credit | |||
Debt Instrument [Line Items] | |||
Line of credit, maximum borrowing capacity | $ 325,000,000 |
Common Stock - Narrative (Details) - USD ($) |
Dec. 09, 2014 |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|---|
Common stock repurchases: | |||
Common stock, shares authorized (in shares) | 596,950,000 | 596,950,000 | |
Shares available for grant (in shares) | 8,154,000 | ||
2014 repurchase program | |||
Common stock repurchases: | |||
Authorized amount of stock repurchased | $ 100,000,000 | ||
Stock repurchase program, period in force | 4 years | ||
Remaining authorized amount of stock repurchased program | $ 42,533,000 | ||
Common Stock | |||
Common stock repurchases: | |||
Common stock, shares authorized (in shares) | 596,950,000 | 596,950,000 |
Common Stock - Schedule of Common Stock Repurchases (Details) - 2014 repurchase program - USD ($) shares in Thousands, $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Common stock repurchases: | ||
Shares of common stock repurchased (in shares) | 0 | 1,599 |
Value of common stock repurchased | $ 0 | $ 9,510 |
Commitments and Contingencies - Narrative (Details) $ in Thousands |
3 Months Ended | ||
---|---|---|---|
Feb. 11, 2013
Defendant
|
Mar. 31, 2018
USD ($)
|
Dec. 31, 2017
USD ($)
|
|
Loss Contingencies [Line Items] | |||
Loss contingency, damages sought, value | $ 162 | ||
Pending litigation | RPost Holdings, Inc. Vs. Vonage America Inc. | Patent claims | |||
Loss Contingencies [Line Items] | |||
Number of defendants | Defendant | 27 | ||
Threatened litigation | Collection And Remittance Of State And Municipal Taxes | |||
Loss Contingencies [Line Items] | |||
Reserve for potential tax liability pending new requirements from state or municipal agencies | $ 1,238 | $ 1,147 |
Industry Segment and Geographic Information - Schedule of Segment Results (Details) - USD ($) $ in Thousands |
3 Months Ended | |||||||
---|---|---|---|---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | $ 253,573 | $ 243,347 | ||||||
Cost of revenues | 103,567 | 94,889 | ||||||
Segment gross margin | $ 150,006 | $ 148,458 | ||||||
Segment gross margin % | 59.20% | 61.00% | ||||||
Business | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | $ 136,668 | $ 111,802 | ||||||
Cost of revenues | 75,313 | 58,548 | ||||||
Segment gross margin | $ 61,355 | $ 53,254 | ||||||
Segment gross margin % | 44.90% | 47.60% | ||||||
Consumer | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | $ 116,905 | $ 131,545 | ||||||
Cost of revenues | 28,254 | 36,341 | ||||||
Segment gross margin | $ 88,651 | $ 95,204 | ||||||
Segment gross margin % | 75.80% | 72.40% | ||||||
Service revenues | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | $ 220,696 | $ 210,914 | ||||||
Cost of revenues | [1] | 66,996 | 59,509 | |||||
Segment gross margin | $ 153,700 | $ 151,405 | ||||||
Segment gross margin % | 69.60% | 71.80% | ||||||
Service revenues | Business | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | $ 116,302 | $ 91,797 | ||||||
Cost of revenues | [1] | 52,982 | 37,409 | |||||
Segment gross margin | $ 63,320 | $ 54,388 | ||||||
Segment gross margin % | 54.40% | 59.20% | ||||||
Depreciation and amortization | $ 4,973 | $ 4,875 | ||||||
Service revenues | Consumer | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | 104,394 | 119,117 | ||||||
Cost of revenues | [1] | 14,014 | 22,100 | |||||
Segment gross margin | $ 90,380 | $ 97,017 | ||||||
Segment gross margin % | 86.60% | 81.40% | ||||||
Depreciation and amortization | $ 1,461 | $ 1,907 | ||||||
Product revenues | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | [2] | 12,622 | 14,057 | |||||
Cost of revenues | [2] | 16,285 | 17,004 | |||||
Segment gross margin | (3,663) | (2,947) | ||||||
Product revenues | Business | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | 12,531 | 13,854 | [2] | |||||
Cost of revenues | [2] | 14,491 | 14,988 | |||||
Segment gross margin | (1,960) | (1,134) | ||||||
Product revenues | Consumer | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | 91 | 203 | [2] | |||||
Cost of revenues | [2] | 1,794 | 2,016 | |||||
Segment gross margin | (1,703) | (1,813) | ||||||
Service, access and product revenues | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | 233,318 | 224,971 | ||||||
Cost of revenues | 83,281 | 76,513 | ||||||
Segment gross margin | $ 150,037 | $ 148,458 | ||||||
Segment gross margin % | 64.30% | 66.00% | ||||||
Service, access and product revenues | Business | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | $ 128,833 | $ 105,651 | ||||||
Cost of revenues | 67,473 | 52,397 | ||||||
Segment gross margin | $ 61,360 | $ 53,254 | ||||||
Segment gross margin % | 47.60% | 50.40% | ||||||
Service, access and product revenues | Consumer | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | $ 104,485 | $ 119,320 | ||||||
Cost of revenues | 15,808 | 24,116 | ||||||
Segment gross margin | $ 88,677 | $ 95,204 | ||||||
Segment gross margin % | 84.90% | 79.80% | ||||||
USF revenues | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | $ 20,255 | $ 18,376 | ||||||
Cost of revenues | 20,286 | 18,376 | ||||||
Segment gross margin | (31) | 0 | ||||||
USF revenues | Business | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | 7,835 | 6,151 | ||||||
Cost of revenues | 7,840 | 6,151 | ||||||
Segment gross margin | (5) | 0 | ||||||
USF revenues | Consumer | ||||||||
Segment Reporting Information [Line Items] | ||||||||
Revenues | 12,420 | 12,225 | ||||||
Cost of revenues | 12,446 | 12,225 | ||||||
Segment gross margin | $ (26) | $ 0 | ||||||
|
Industry Segment and Geographic Information - Reconciliation of the Reportable Segments' Gross Margin (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Segment Reporting [Abstract] | ||
Segment gross margin | $ 150,006 | $ 148,458 |
Sales and marketing | 77,136 | 81,931 |
Engineering and development | 10,820 | 8,370 |
General and administrative | 27,582 | 35,086 |
Depreciation and amortization | 16,800 | 17,947 |
Income from operations | 17,668 | 5,124 |
Interest Expense | (3,161) | (3,703) |
Other income (expense), net | (253) | (215) |
Income before income taxes | $ 14,254 | $ 1,206 |
Industry Segment and Geographic Information - Schedule of Revenue by Geographic Location (Details) - USD ($) $ in Thousands |
3 Months Ended | ||||
---|---|---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
||||
Segment Reporting Information [Line Items] | |||||
Revenues | $ 253,573 | $ 243,347 | |||
United States | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 208,134 | 213,324 | |||
Canada | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 7,037 | 7,445 | |||
United Kingdom | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 9,732 | 5,345 | |||
Other Countries | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | 28,670 | [1] | $ 17,233 | ||
Maximum | Other Countries | |||||
Segment Reporting Information [Line Items] | |||||
Revenues | $ 0 | ||||
|
Industry Segment and Geographic Information - Schedule of Long Lived Assets (Details) - USD ($) $ in Thousands |
Mar. 31, 2018 |
Dec. 31, 2017 |
---|---|---|
Segment Reporting Information [Line Items] | ||
Long-lived assets | $ 611,048 | $ 616,040 |
United States | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets | 610,475 | 615,432 |
United Kingdom | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets | 346 | 365 |
Israel | ||
Segment Reporting Information [Line Items] | ||
Long-lived assets | $ 227 | $ 243 |
Income Taxes - Effective Tax Rate (Details) - USD ($) $ in Thousands |
3 Months Ended | |
---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
|
Income Tax Disclosure [Abstract] | ||
Income before income taxes | $ 14,254 | $ 1,206 |
Income tax benefit | $ 10,270 | $ 4,707 |
Effective tax rate | (72.00%) | (390.30%) |
Income Taxes - Narrative (Details) - USD ($) $ in Thousands |
3 Months Ended | 12 Months Ended | |
---|---|---|---|
Mar. 31, 2018 |
Mar. 31, 2017 |
Dec. 31, 2017 |
|
Operating Loss Carryforwards [Line Items] | |||
Effective tax rate | $ 15,307 | $ 6,031 | |
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount | $ 69,378 | ||
Unrecognized Tax Benefits | 1,086 | $ 1,086 | |
Domestic Tax Authority | |||
Operating Loss Carryforwards [Line Items] | |||
Operating loss carryforwards | 556,368 | ||
State and Local Jurisdiction | |||
Operating Loss Carryforwards [Line Items] | |||
Operating loss carryforwards | 146,254 | ||
Foreign Tax Authority | Her Majesty's Revenue and Customs (HMRC) | |||
Operating Loss Carryforwards [Line Items] | |||
Operating loss carryforwards | 50,142 | ||
GILTI | |||
Operating Loss Carryforwards [Line Items] | |||
Effective Income Tax Rate Reconciliation, Change in Enacted Tax Rate, Amount | $ 6,702 |
Label | Element | Value |
---|---|---|
Accounting Standards Update 2014-09 [Member] | ||
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets | us-gaap_NewAccountingPronouncementOrChangeInAccountingPrincipleCumulativeEffectOfChangeOnEquityOrNetAssets1 | $ 24,848,000 |
Accounting Standards Update 2014-09 [Member] | Retained Earnings [Member] | ||
New Accounting Pronouncement or Change in Accounting Principle, Cumulative Effect of Change on Equity or Net Assets | us-gaap_NewAccountingPronouncementOrChangeInAccountingPrincipleCumulativeEffectOfChangeOnEquityOrNetAssets1 | $ 24,848,000 |
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