EX-99.1 2 a8-kerq122exhibit991.htm EX-99.1 Document


Exhibit 99.1
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Vonage Reports First Quarter 2022 Financial Results

HOLMDEL, N.J., May 5, 2022 -- Vonage Holdings Corp. (Nasdaq: VG), a global leader in cloud communications helping businesses accelerate their digital transformation, today announced results for the quarter ended March 31, 2022.

First Quarter 2022 Highlights:
Consolidated revenue of $359 million, an increase of 8% year-over-year
Consumer revenue of $62 million, a decrease of 19% year-over-year
Vonage Communications Platform (VCP) revenue of $296 million, an increase of 16% year-over-year
VCP Service revenue of $284 million, an increase of 18% year-over-year
API revenue of $162 million, an increase of 28% year-over-year
Unified Communications & Contact Center Service revenue of $123 million, an increase of 7% year-over-year
Consolidated Net Loss of $17 million, a decrease of $17 million from the prior year
Consolidated Adjusted EBITDA(1) of $44 million, a decrease of $4 million from the prior year
VCP Adjusted EBITDA of $2 million, an increase of $4 million from the prior year
Consumer Adjusted EBITDA of $42 million, a decrease of $8 million from the prior year

Vonage will not host a conference call to discuss its results for the first quarter 2022 or provide financial guidance for the second quarter or full year 2022 due to the previously announced proposed acquisition of Vonage by Ericsson.

About Vonage

Vonage (Nasdaq:VG), a global cloud communications leader, helps businesses accelerate their digital transformation. Vonage's Communications Platform is fully programmable and allows for the integration of Video, Voice, Chat, Messaging and Verification into existing products, workflows and systems. Vonage's fully programmable unified communications and contact center applications are built from the Vonage platform and enable companies to transform how they communicate and operate from the office or anywhere, providing enormous flexibility and ensuring business continuity.

Vonage Holdings Corp. is headquartered in New Jersey, with offices throughout the United States, Europe, Israel and Asia. To follow Vonage on Twitter, please visit twitter.com/vonage. To become a fan on Facebook, go to facebook.com/vonage. To subscribe on YouTube, visit youtube.com/vonage.

Investor Contact: Monica Gould, 212.871.3927, ir@vonage.com

Media Contact: Jo Ann Tizzano, 732.365.1363, joann.tizzano@vonage.com

(1) This is a non-GAAP financial measure. Refer below to Table 3 for a reconciliation to GAAP net loss.




VONAGE HOLDINGS CORP.
TABLE 1. CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share amounts)
(unaudited)
 
Three Months Ended
 March 31, December 31, March 31,
 2022 2021 2021
Statement of Operations Data:
Service, access and product revenues$344,852 $350,167 $314,793 
USF revenues13,976 16,138 18,107 
Total revenues358,828 366,305 332,900 
Operating Expenses:
Service, access and product cost of revenues (excluding depreciation and amortization of $17,679, $16,895, and $13,647, respectively)
168,409 174,923 138,680 
USF cost of revenues13,976 16,138 18,107 
Sales and marketing78,878 80,702 81,474 
Engineering and development20,760 19,961 20,360 
General and administrative70,456 70,164 44,933 
Depreciation and amortization25,195 23,572 20,417 
377,674 385,460 323,971 
(loss) Income from operations(18,846)(19,155)8,929 
Other Income (Expense):
Interest expense(3,653)(6,924)(7,298)
Other income (expense), net511 1,119 174 
(3,142)(5,805)(7,124)
(Loss) Income before income tax(21,988)(24,960)1,805 
Income tax benefit (expense) 4,866 2,809 (2,181)
Net loss$(17,122)$(22,151)$(376)
Loss per common share:
Basic and diluted$(0.07)$(0.09)$— 
Weighted-average common shares outstanding:
Basic and diluted254,666 252,791 249,638 







VONAGE HOLDINGS CORP.
TABLE 1. CONSOLIDATED FINANCIAL DATA - (Continued)
(Dollars in thousands, except per share amounts)
(unaudited)
Three Months Ended
 March 31, December 31, March 31,
 2022 2021 2021
Statement of Cash Flow Data: 
Net cash provided by operating activities$40,871 $25,304 $47,318 
Net cash used in investing activities(20,417)(20,735)(16,480)
Net cash used in financing activities(24,073)(33,030)(21,019)
Capital expenditures, acquisition of intangible assets net of proceeds on sale of intangible assets, acquisition and development of software assets(20,417)(13,735)(16,480)
 
March 31,December 31,
  2022 2021
Balance Sheet Data:  
Cash and cash equivalents $15,719 $18,342 
Restricted cash 2,172 1,967 
Accounts receivable, net of allowance 145,895 147,622 
Prepaid expenses and other current assets 37,728 37,388 
Deferred customer acquisition costs, current and non-current 101,697 101,403 
Property and equipment, net 20,155 24,334 
Goodwill612,214 615,134 
Operating lease right of use assets32,221 31,855 
Software, net 110,707 106,516 
Intangible assets, net 149,199 161,134 
Deferred tax assets121,996 109,087 
Other assets 32,753 33,362 
Total assets $1,382,456  $1,388,144 
Accounts payable and accrued expenses $232,031 $226,497 
Operating lease liabilities, current and non-current45,021 43,056 
Deferred revenue, current  53,978 61,420 
Total notes payable, net and indebtedness under revolving credit facility, including current portion 130,500 130,500 
Convertible senior notes, net340,620 305,609 
Other liabilities 5,006 3,341 
Total liabilities $807,156  $770,423 
Total stockholders' equity $575,300 $617,721 






VONAGE HOLDINGS CORP.
TABLE 2. SUMMARY CONSOLIDATED OPERATING DATA
(Dollars in thousands, except per line amounts)
(unaudited)

The table below includes summarized income statement information that our management uses to measure the operating performance of the Vonage Communications Platform focused portion of our business:
Vonage Communications PlatformThree Months Ended
 March 31,December 31,March 31,
 202220212021
Statement of Operations Data:
Service, access and product revenues$289,662 $292,699 $249,040 
USF revenues6,748 7,403 6,414 
Total revenues296,410 300,102 255,454 
Operating Expenses:
Service, access and product cost of revenues excluding depreciation and amortization160,629 167,062 129,643 
USF cost of revenues6,748 7,403 6,414 
Sales and marketing77,723 77,362 77,824 
Engineering and development20,228 19,173 19,523 
General and administrative65,565 66,720 40,768 
Depreciation and amortization25,054 23,412 20,080 
355,947 361,132 294,252 
Loss from operations$(59,537)$(61,030)$(38,798)

The table below includes revenues and cost of revenues that our management uses to measure the growth and operating performance of the Vonage Communications Platform focused portion of our business:
Vonage Communications PlatformThree Months Ended
 March 31, December 31, March 31,
 2022 2021 2021
Revenues:
   Service revenues$284,198 $286,820 $240,442 
   Access and product revenues(1)
5,464 5,879 8,598 
      Service, access and product revenues excluding USF289,662 292,699 249,040 
   USF revenues6,748 7,403 6,414 
Total revenues$296,410 $300,102 $255,454 
Cost of Revenues:
   Service cost of revenues(2)
$150,427 $158,013 $120,017 
   Access and product cost of revenues(1)
10,202 9,049 9,626 
      Service, access and product cost of revenues excluding USF160,629 167,062 129,643 
   USF cost of revenues6,748 7,403 6,414 
Total cost of revenues$167,377 $174,465 $136,057 
Service margin %47.1 %44.9 %50.1 %
Gross margin % excluding USF (Service, access and product margin %)44.5 %42.9 %47.9 %
Gross margin %43.5 %41.9 %46.7 %
(1) Includes customer premise equipment, access, and shipping and handling.
(2) Excludes depreciation and amortization of $17,538, $16,735, and $13,310 for the quarters ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively.






The table below includes key operating data that our management uses to measure the growth and operating performance of the Vonage Communications Platform focused portion of our business:
Vonage Communications PlatformThree Months Ended
 March 31, December 31, March 31,
 2022 2021 2021
Service revenue per customer$677 $678 $582 
Vonage Communications Platform service revenue churn0.6 %0.5 %0.5 %
The table below includes summarized income statement information that our management uses to measure the operating performance of the Consumer focused portion of our business:
ConsumerThree Months Ended
 March 31,December 31,March 31,
 202220212021
Statement of Operations Data:
Service , access and product revenues$55,190 $57,468 $65,753 
USF revenues7,228 8,735 11,693 
Total revenues62,418 66,203 77,446 
Operating Expenses:
Service, access and product cost of revenues excluding depreciation and amortization7,780 7,861 9,037 
USF cost of revenues7,228 8,735 11,693 
Sales and marketing1,155 3,340 3,650 
Engineering and development532 788 837 
General and administrative4,891 3,444 4,165 
Depreciation and amortization141 160 337 
21,727 24,328 29,719 
Income from operations$40,691 $41,875 $47,727 

The table below includes revenues and cost of revenues that our management uses to measure the growth and operating performance of the Consumer focused portion of our business:
ConsumerThree Months Ended
 March 31, December 31, March 31,
 2022 2021 2021
Revenues:
   Service revenues$55,132 $57,405 $65,697 
   Access and product revenues(1)
58 63 56 
      Service, access and product revenues excluding USF55,190 57,468 65,753 
   USF revenues7,228 8,735 11,693 
Total revenues$62,418 $66,203 $77,446 
Cost of Revenues:
   Service cost of revenues(2)
$7,228 $7,436 $8,513 
   Access and product cost of revenues(1)
552 425 524 
      Service, access and product cost of revenues excluding USF7,780 7,861 9,037 
   USF cost of revenues7,228 8,735 11,693 
Total cost of revenues$15,008 $16,596 $20,730 
Service margin %86.9 %87.0 %87.0 %
Gross margin % excluding USF (Service, access and product margin %)85.9 %86.3 %86.3 %
Gross margin %76.0 %74.9 %73.2 %
(1) Includes customer premise equipment and shipping and handling.
(2) Excludes depreciation and amortization of $141, $160, $337 for the quarters ended March 31, 2022, December 31, 2021 and March 31, 2021, respectively.




The table below includes key operating data that our management uses to measure the growth and operating performance of the Consumer focused portion of our business:
 
ConsumerThree Months Ended
 March 31, December 31, March 31,
 2022 2021 2021
Average monthly revenues per line$27.23 $27.82 $29.05 
Subscriber lines (at period end)749,108 779,179 867,243 
Customer churn1.6 %1.4 %1.9 %






VONAGE HOLDINGS CORP.
TABLE 3. RECONCILIATION OF GAAP NET (LOSS) INCOME TO ADJUSTED EBITDA AND TO ADJUSTED EBITDA MINUS CAPEX
(Dollars in thousands)
(unaudited)
 
Three Months Ended
 March 31,December 31, March 31,
20222021 2021
Net loss$(17,122)$(22,151)$(376)
Interest expense3,653 6,924 7,298 
Income tax(4,866)(2,809)2,181 
Depreciation and amortization25,195 23,572 20,417 
Amortization of costs to implement cloud computing arrangements1,175 840 896 
EBITDA8,035 6,376 30,416 
Share-based expense29,042 32,325 14,566 
Acquisition related transaction and integration costs1,744 10,120 — 
Exit activities - severance and lease abandonment (1)
2,103 — 1,294 
Other non-recurring items (2)
3,135 916 1,891 
Adjusted EBITDA44,059 49,737 48,167 
Consumer Adjusted EBITDA$41,893 $43,297 $50,013 
VCP Adjusted EBITDA2,166 6,440 (1,846)
Adjusted EBITDA44,059 49,737 48,167 
Less:
Capital expenditures(2,773)(2,214)(2,553)
Intangible assets(21)(62)(62)
Acquisition and development of software assets(17,623)(11,459)(13,865)
Adjusted EBITDA Minus Capex$23,642 $36,002 $31,687 

(1) Exit activities - severance and lease abandonment relate to the Company's business-wide optimization and alignment project initiated in 2020 which included employee related exits and further facility exit costs executed upon as part of the overall project.
(2) Other non-recurring items principally include certain litigation charges including defense costs, acquisition related consideration accounted for as compensation, long term incentive award and other non-recurring project costs such as the review of the Consumer business.





VONAGE HOLDINGS CORP.
TABLE 4. RECONCILIATION OF GAAP NET (LOSS) INCOME TO
NET INCOME EXCLUDING ADJUSTMENTS
(Dollars in thousands, except per share amounts)
(unaudited) 
Three Months Ended
March 31,December 31,March 31,
202220212021
Net loss$(17,122)$(22,151)$(376)
Amortization of acquisition - related intangibles9,483 10,823 10,794 
Amortization of costs to implement cloud computing arrangements1,175 840 896 
Amortization of debt discount— 3,402 3,261 
Acquisition related transaction and integration costs1,744 10,120 — 
Exit activities - severance and lease abandonment (1)
2,103 — 1,294 
Other non-recurring items (2)
3,135 916 1,891 
Tax effect on adjusting items(4,586)(6,787)(4,715)
Net (loss) income excluding adjustments$(4,068)$(2,837)$13,045 
Loss per common share:
Basic and diluted$(0.07)$(0.09)$— 
Weighted-average common shares outstanding:
Basic and diluted254,666 252,791 249,638 
(Loss) Income per common share, excluding adjustments:
Basic$(0.02)$(0.01)$0.05 
Diluted$(0.02)$(0.01)$0.05 
Weighted-average common shares outstanding:
Basic254,666 252,791 249,638 
Diluted254,666 252,791 259,031 

(1) Exit activities - severance and lease abandonment relate to the Company's business-wide optimization and alignment project initiated in 2020 which included employee related exits and further facility exit costs executed upon as part of the overall project.
(2) Other non-recurring items principally include certain litigation charges including defense costs, acquisition related consideration accounted for as compensation, long term incentive award and other non-recurring project costs such as the review of the Consumer business.


VONAGE HOLDINGS CORP.
TABLE 5. FREE CASH FLOW
(Dollars in thousands)
(unaudited)
 
Three Months Ended
March 31,December 31,March 31,
202220212021
Net cash provided by operating activities$40,871 $25,304 $47,318 
Less:
Capital expenditures(2,773)(2,214)(2,553)
Proceeds from sale of intangible assets, net of payment for intangible assets(21)(62)(62)
Acquisition and development of software assets(17,623)(11,459)(13,865)
Free cash flow$20,454 $11,569 $30,838 






VONAGE HOLDINGS CORP.
TABLE 6. RECONCILIATION OF INDEBTEDNESS UNDER REVOLVING CREDIT FACILITY AND CONVERTIBLE SENIOR NOTES TO NET DEBT
(Dollars in thousands)
(unaudited)
 
March 31,December 31,
20222021
Notes payable and indebtedness under revolving credit facility, net of current maturities $130,500 $130,500 
Convertible senior notes, net340,620 305,609 
Unamortized discount on debt4,380 3,919 
Unamortized debt related costs— 35,472 
Gross debt475,500 475,500 
Less:
Unrestricted cash15,719 18,342 
Net debt$459,781 $457,158 




Use of Non-GAAP Financial Measures
This press release includes measures defined as non-GAAP financial measures by Regulation G adopted by the Securities and Exchange Commission, including: adjusted EBITDA, adjusted EBITDA less Capex, adjusted net income, constant currency, net debt (cash), and free cash flow.
Adjusted EBITDA
Vonage uses adjusted EBITDA as a principal indicator of the operating performance of its business.
Vonage defines adjusted EBITDA as GAAP net income (loss) before interest, tax, depreciation and amortization, share-based expense, amortization of costs to implement cloud computing arrangements, acquisition related transaction and integration costs, exit activities - severance and lease abandonment, and other non-recurring items.
Vonage believes that adjusted EBITDA permits a comparative assessment of its operating performance, relative to its performance based on its GAAP results, while isolating the effects of interest, tax, depreciation and amortization, which may vary from period to period without any correlation to underlying operating performance; of share-based expense, which is a non-cash expense that also varies from period to period; of one-time acquisition related transaction and integration costs, exit activities - severance and lease abandonment, and other non-recurring items. Exit activities - severance and lease abandonment relate to the Company's business-wide optimization and alignment project initiated in 2020 which included employee related exits and further facility exit costs executed upon as part of the overall project. Other non-recurring items principally include certain litigation charges including defense costs, acquisition related consideration accounted for as compensation, long term incentive award and other non-recurring project costs such as the review of the Consumer business. The items excluded from adjusted EBITDA are not separately evaluated for each reportable operating segment.
The Company provides information relating to its adjusted EBITDA so that investors have the same data that the Company employs in assessing its overall operations. The Company believes that trends in its adjusted EBITDA are valuable indicators of the operating performance of the Company on a consolidated basis.
The Company does not reconcile its forward-looking adjusted EBITDA to the corresponding GAAP measure of net income because stock-based compensation expense and other non-recurring items cannot be reasonably calculated or predicted at this time as they may be significantly impacted by future events, the timing and nature of which cannot be reasonably calculated or predicted at this time.  Accordingly, a reconciliation is not available without unreasonable effort.
Adjusted EBITDA less Capex
Vonage uses adjusted EBITDA less Capex as an indicator of the operating performance of its business. The Company provides information relating to its adjusted EBITDA less Capex so that investors have the same data that the Company employs in assessing its overall operations. The Company believes that trends in its Adjusted EBITDA less Capex are valuable indicators of the operating performance of the Company on a consolidated basis because they provide our investors with insight into current performance and period-to-period performance.
Adjusted net income
Vonage defines adjusted net income, as GAAP net income (loss) excluding amortization of acquisition-related intangible assets, amortization of costs to implement cloud computing arrangements, acquisition related transaction and integration costs, amortization of debt discount, exit activities - severance and lease abandonment, other non-recurring items and tax effect on adjusting items.




The Company believes that excluding these items will assist investors in evaluating the Company's operating performance and in better understanding its results of operations as amortization of acquisition-related intangible assets is a non-cash item, one-time acquisition related transaction and integration costs, exit activities - severance and lease abandonment, other non-recurring items, and tax effect on adjusting items are not reflective of operating performance. Exit activities - severance and lease abandonment relate to the Company's business-wide optimization and alignment project initiated in 2020 which included employee related exits and further facility exit costs executed upon as part of the overall project. Other non-recurring items principally include certain litigation charges including defense costs, acquisition related consideration accounted for as compensation, long term incentive award and other non-recurring project costs such as the review of the Consumer business.
Constant Currency
Vonage reviews its results of operations on both an as reported and on a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period local currency financial results using the prior period exchange rates and comparing these adjusted amounts to our prior period reported results.
Net debt (cash)
Vonage defines net debt (cash) as indebtedness under revolving credit facility, convertible senior notes, discount on debt, and debt related costs less unrestricted cash.
Vonage uses net debt (cash) as a measure of assessing leverage, as it reflects the gross debt under the Company's credit agreements and capital leases less cash available to repay such amounts. The Company believes that net cash is also a factor that first parties consider in valuing the Company.
Free cash flow
Vonage defines free cash flow as net cash provided by operating activities minus capital expenditures, purchase of intangible assets, and acquisition and development of software assets.
Vonage considers free cash flow to be a liquidity measure that provides useful information to management about the amount of cash generated by the business that, after the acquisition of equipment and software, can be used by Vonage for debt service and strategic opportunities. Free cash flow is not a measure of cash available for discretionary expenditures since the Company has certain non-discretionary obligations such as debt service that are not deducted from the measure.
The non-GAAP financial measures used by Vonage may not be directly comparable to similarly titled measures reported by other companies due to differences in accounting policies and items excluded or included in the adjustments, which limits its usefulness as a comparative measure. These non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.






Safe Harbor Statement
This press release contains forward-looking statements, including statements about future financial results, growth priorities or plans, revenues, adjusted EBITDA, churn, seats, lines or accounts, average revenue per customer, cost of communications services, capital expenditures, new products and related investment, and other statements that are not historical facts or information, that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. In addition, other statements in this press release that are not historical facts or information may be forward-looking statements. The forward-looking statements in this release are based on information available at the time the statements are made and/or management's belief as of that time with respect to future events and involve risks and uncertainties that could cause actual results and outcomes to be materially different. Important factors that could cause such differences include, but are not limited to: the competition we face; the expansion of competition in the cloud communications market; incremental business, regulatory, and reputational risks related to the pending Ericsson merger; timing and satisfaction of the closing conditions related to the Ericsson merger; our ability to adapt to rapid changes in the cloud communications market; realizing the expected benefits of our business optimization or other cost-savings plans; risks related to the acquisition or integration of businesses we have acquired; our ability to scale our business and grow efficiently; the nascent state of the cloud communications for business market; our ability to retain customers and attract new customers cost-effectively; developing and maintaining effective distribution channels; risks associated with sales of our services to medium-sized and enterprise customers; the effects of COVID-19 on our business; our reliance on third-party hardware and software; our dependence on third-party vendors; reliance on third parties for our 911 services; the impact of fluctuations in economic conditions, particularly on our small and medium business customers; the effects of significant foreign currency fluctuations; developing and maintaining market awareness and a strong brand; retaining senior executives and other key employees; security breaches and other compromises of information security; system disruptions or flaws in our technology and systems; our ability to comply with data privacy and related regulatory matters; unfavorable litigation or governmental investigations; our ability to obtain or maintain relevant intellectual property licenses or to protect our trademarks and internally developed software; fraudulent use of our name or services; intellectual property and other litigation that have been and may be brought against us; rapid developments in global API regulation and uncertainties relating to regulation of VoIP services; liability under anti-corruption laws or from governmental export controls or economic sanctions; risks associated with the taxation of our business; governmental regulation and taxes in our international operations; our history of net losses and ability to achieve consistent profitability in the future; our ability to fully realize the benefits of our net operating loss carry-forwards if an ownership change occurs; actions of activist shareholders; restrictions in our debt agreements that may limit our operating flexibility; our ability to obtain additional financing if required; risks associated with the settlement and conditional conversion of our Convertible Senior Notes; potential effects the capped call transactions may have on our stock in connection with our Convertible Senior Notes; certain provisions of our charter documents; and other factors that are set forth in the “Risk Factors” in our Annual Report on Form 10-K and in the Company's Quarterly Reports on Form 10-Q filed with the SEC. While the Company may elect to update forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so except as required by law, and therefore, you should not rely on these forward-looking statements as representing the Company's views as of any date subsequent to today.
(vg-f)