Vonage Holdings Corp. Reports Fourth Quarter and Full Year 2012 Results

Wed Feb 13, 2013 8:00am EST

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Company Announces:
HOLMDEL, N.J.,  Feb. 13, 2013  /PRNewswire/ -- Vonage Holdings Corp. (NYSE: VG),
a leading provider of communications services connecting people through
cloud-connected devices worldwide, today announced results for the fourth
quarter and full year ended  December 31, 2012. In addition, the Company
announced three noteworthy developments including a new  $145 million  credit
facility; a new  $100 million  share repurchase authorization; and its
international joint venture with Datora in  Brazil.

New Credit Facility

Capitalizing on the low interest rate environment and the Company's strong
financial position, on  February 11, 2013, Vonage entered into a new  $145
million  credit agreement to provide increased financial flexibility for
investments in growth.  The new debt agreement consists of a three-year,  $70
million  senior secured term loan bearing interest at LIBOR plus 3.125 percent
and a  $75 million  revolving credit facility.  The Company used  $43 million 
of the proceeds of the term loan to retire all of the existing debt under its
prior facility.  

Share Repurchase Program

On  February 7, 2013, Vonage's Board of Directors authorized a new  $100 million
 share repurchase program to be concluded by the end of 2014.  This new  $100
million  program replaces the Company's prior  $50 million  share repurchase
program.  As of  February 12, 2013, Vonage had repurchased a total of 14 million
shares of its common stock for  $33 million  under the prior repurchase program,
including repurchases of 8 million shares of its common stock for $19 million
during the fourth quarter and 12 million shares for  $28 million  for the full
year 2012.   

Joint Venture in  Brazil  with Datora

As highlighted in its press release this morning, Vonage has entered into an
agreement to form a joint venture with Brazilian-based Datora Telecom to deliver
communications services in Brazil.  This is Vonage's second international
partnership in less than one year, and follows the Company's partnership with 
Globe  in  the Philippines  announced in May of 2012.

Brazil  represents a substantial growth opportunity for Vonage, with 67 million
total households, 17 million broadband households and more than one million
expats. Founded in 1993, Datora is a diversified, licensed telecommunications
provider focused on innovative voice and data solutions for carriers in  Brazil 
and other countries around the world. Datora was the first company to operate
VoIP services in  Latin America, and the first telecom provider in  Brazil  to
be issued a Mobile Virtual Network Operator (MVNO) license. The company has a
significant physical presence in  Brazil, with points of presence in the
country's most important economic centers, and more than 200 interconnection
agreements with leading carriers in the countries where it does business. 

Summary of Fourth Quarter and Full Year 2012 Results  

Marc Lefar, Vonage Chief Executive Officer, commented, "We delivered strong
fourth quarter financial results as we grew revenue and maintained adjusted
EBITDA at third quarter levels, even as we increased our investment in growth
initiatives.  We attracted new customers to our international and domestic
calling plans, although gains in these areas were offset by declines in other
segments of our business."

"For the year, we continued to improve our business operations as we reduced
customer care and termination costs. Churn declined by 30 basis points from the
beginning of the year, reflecting improvements in customer care and retention
processes, and higher customer satisfaction. Executing on our growth
initiatives, we strengthened our mobile platform as we attracted users to our
Vonage Mobile app and Extensions products, and expanded internationally through
our partnership in the Philippines.  We are building on this progress with our
new joint venture in  Brazil."

"As part of our balanced approach to capital allocation, we are announcing a new
 $100 million  buyback reflecting our continued confidence in our cash flow
generation capability and the value in our stock.  In addition, we've entered
into a new credit agreement providing us with enhanced financial flexibility to
invest in growth."

Fourth Quarter Financial and Operating Results

Vonage reported adjusted earnings before interest, taxes, depreciation and
amortization ("EBITDA")1  of  $34 million, flat sequentially, and down from  $40
million  in the year ago quarter, consistent with the Company's previously
stated plan to increase investment in strategic growth initiatives by  $5-$10
million  per quarter in 2012.  The Company invested  $7 million  in growth
initiatives in the fourth quarter.  Income from operations was  $24 million, up
from  $23 million  sequentially and down from  $28 million  in the year ago
quarter.  

GAAP net income was  $13 million  or  $0.06  per share, flat sequentially, and
down from GAAP net income of  $350 million  or  $1.55  per share in the year ago
quarter.  The prior year's quarter included a one-time income tax benefit which
resulted from the release of the Company's valuation allowance as it determined
that its net operating losses were likely to be used prior to their expiration.
Net income excluding adjustments2 was  $23 million  or  $0.10  per share, up
from  $21 million  or  $0.09  per share sequentially, and down from  $26 million
 or  $0.11  per share in the year ago quarter.   

Revenue totaled  $214 million, up from  $208 million  sequentially due to
targeted price increases and higher Universal Service Fund ("USF") and
international pay-per-use revenue.  Revenue declined from  $216 million  in the
year ago quarter primarily due to lower average lines and plan mix.  Average
revenue per user ("ARPU") was  $30.15, up from  $29.31  sequentially due
primarily to targeted price increases and higher USF and international
pay-per-use revenue.  ARPU was down from  $30.19  in the year ago quarter due to
plan mix.  

Direct cost of telephony services ("COTS") was  $57 million, up from  $55
million  sequentially due to higher USF fees, which are a pass-through, and down
from  $59 million  in the year ago quarter as a result of lower domestic and
international termination costs. On a per line basis, COTS was  $8.02, up from 
$7.80  sequentially and down from  $8.24  in the fourth quarter of last year.   

Direct cost of goods sold was  $10 million, flat sequentially and
year-over-year.  Direct margin3  was 69%, up from 68% sequentially and
year-over-year.  

Selling, general and administrative ("SG&A") expense was  $62 million, up from 
$60 million  sequentially, and up from  $59 million  in the year ago quarter due
to the expansion of the Company's community sales channel.   

Marketing expense was  $53 million, up from  $51 million  in third quarter, and
up from  $52 million  in the year ago quarter. Subscriber line acquisition cost
("SLAC") was  $347, up from  $299  sequentially and  $306  in the year ago
quarter.   

During the fourth quarter, the Company added new customers to its international
and new BasicTalk domestic calling plans.  Gains in these segments were offset
by declines in the Pakistani segment as a result of the unexpected decision by
the Government of Pakistan to increase the cost to terminate international calls
to  Pakistan  by approximately 500 percent. This decision compelled Vonage to
remove  Pakistan  from its unlimited Vonage World plan.  The resulting lower
customer value proposition contributed, in part, to lower gross line additions
in the fourth quarter of 152,000, down from 172,000 sequentially. 

Although most of the churn impact in this segment was offset by improvements in
other calling segments, the total impact from  Pakistan  resulted in more than a
15,000 net line reduction from the third quarter. Adjusted for the impact of 
Pakistan, net line additions for the quarter would have been positive and
roughly flat versus the third quarter.

Customer churn was 2.5%, flat sequentially and down from 2.7% a year ago as a
result of sustained improvements in customer satisfaction and more effective
retention processes.  Net lines losses narrowed to 6,000 in the fourth quarter
2012, an improvement from 14,000 net lines lost a year ago and down from 9,000
net line additions sequentially.   

As of  December 31, 2012, cash and cash equivalents, including  $6 million  in
restricted cash, totaled  $103 million. Capital expenditures for the quarter
were  $12 million, slightly lower than the Company's expectations due to the
timing of expenditures. Free cash flow4  was  $49 million, up from  $17 million 
in the third quarter due primarily to changes in working capital.  

Full Year 2012 Financial and Operating Results

Vonage reported adjusted EBITDA of  $135 million, down from  $168 million  the
prior year reflecting the Company's investment of  $23 million  in growth
initiatives.  The Company generated income from operations of  $65 million, down
from  $116 million  in the prior year.   

GAAP net income was  $37 million  or  $0.16  per share, a decrease from GAAP net
income of  $409 million  or  $1.82  per share in 2011, which included the
release of the  $326 million  valuation allowance against the Company's net
deferred tax assets in 2011.  Net income was  $84 million  or  $0.37  per share
excluding adjustments, down from  $99 million  or  $0.44  per share excluding
adjustments reported in 2011.

Revenue was  $849 million, down from  $870 million  the prior year primarily due
to plan mix and lower activation fee revenue.  Cash generated from operations
was  $120 million  and capital expenditures totaled  $27 million.  The resulting
free cash flow was  $93 million.  

Growth Initiatives

The Company continues to execute on its strategic growth initiatives.  Over the
past 18 months, Vonage has built a robust mobile platform capable of delivering
high quality voice and messaging services across wired and wireless data
networks for most devices running iOS and Android.  Vonage Extensions, which
creates a unified international calling capability for home and mobile services,
has been well received.  In less than two years, 28% of the Company's customer
base has signed up to use Vonage on their mobile devices.  Reflecting the
Company's progress executing against its mobile strategy, 24% of international
calling minutes now originate from mobile devices.  In addition, the number of
downloads and users of the Vonage Mobile app continues to accelerate.

Following the Company's technical trial of its low-cost international roaming
product, which allows customers traveling outside their home country to avoid
high roaming fees, the Company plans to expand its roaming service in the coming
months. In this same timeframe, Vonage also plans to add video capability to the
suite of high quality communications services delivered by Vonage Mobile.

Building on this progress, in 2013, the Company expects to continue to invest in
targeted ethnic segments, commercialize its Basic Talk product line in the U.S.,
enhance its mobile product offerings, prepare to go to market in  Brazil, and
pursue other international partnerships.   

Outlook

During 2013, Vonage expects to continue to invest  $5-$10 million  per quarter
in its strategic growth initiatives. The Company may choose to increase or
reduce the level of quarterly investment depending on the success of its
initiatives. Vonage continues to expect new initiatives to generate  $100
million  in annualized revenue by the fourth quarter of 2014.  The Company
expects capital expenditures of  $30-35 million  in 2013.

1This is a non-GAAP financial measure. Refer below to Table 3 for a
reconciliation to GAAP income from operations. 2This is a non-GAAP financial
measure. Refer below to Table 4 for a reconciliation to GAAP net income. 3Direct
margin is defined as operating revenues less direct cost of telephony services
and direct cost of goods sold as a percentage of revenues. 4This is a non-GAAP
financial measure. Refer below to Table 5 for a reconciliation to GAAP cash
provided by operating activities.

 VONAGE HOLDINGS CORP.                                                                                                                                                                                                                                    
 TABLE 1. CONSOLIDATED FINANCIAL DATA                                                                                                                                                                                                                     
 (Dollars in thousands, except per share amounts)                                                                                                                                                                                                         
                                                                                                                                                                                                                                                   
                                              Three Months Ended                                                                                                               For the Years Ended                                                     
                                              December 31,                                                   September 30,                  December 31,                   December 31,                                                            
                                              2012                                                           2012                           2011                           2012                                       2011                       
                                              (unaudited)                                                                                                                                                                                            
 Statement of Operations Data:                                                                                                                                                                                                                   
 Revenues                                     $   213,711                                                    $   207,584                    $   215,690                    $   849,114                                $   870,323                
                                                                                                                                                                                                                                                 
 Operating Expenses:                                                                                                                                                                                                                             
 Direct cost of telephony services            56,814                                                         55,245                         58,847                         231,877                                    236,149                    
 
 (excluding depreciation and amortization                                                                                                                                                                                                      
 
 of $3,534, $3,722, $3,969, $15,115,                                                                                                                                                                                                           
 
 and $15,824, respectively)                                                                                                                                                                                                                    
 Direct cost of goods sold                    9,568                                                          10,444                         10,125                         39,133                                     41,756                     
 Selling, general and administrative          62,461                                                         59,676                         58,579                         242,368                                    234,754                    
 Marketing                                    52,801                                                         51,361                         51,604                         212,540                                    204,263                    
 Depreciation and amortization                8,052                                                          8,110                          8,638                          33,324                                     37,051                     
 Loss from abandonment of software assets     -                                                              -                              -                              25,262                                     -                          
                                              189,696                                                        184,836                        187,793                        784,504                                    753,973                    
 Income from operations                       24,015                                                         22,748                         27,897                         64,610                                     116,350                    
 Other expense:                                                                                                                                                                                                                                                      
 Interest income                              29                                                             30                             23                             109                                        135                        
 Interest expense                             (1,267)                                                        (1,402)                        (2,002)                        (5,986)                                    (17,118)                   
 Change in fair value of stock warrant        -                                                              -                              -                              -                                          (950)                      
 Loss on extinguishment of notes              -                                                              -                              -                              -                                          (11,806)                   
 Other (expense) income, net                  (16)                                                           28                             (266)                          (11)                                       (271)                      
                                              (1,254)                                                        (1,344)                        (2,245)                        (5,888)                                    (30,010)                   
 Income before income tax (expense) benefit   22,761                                                         21,404                         25,652                         58,722                                     86,340                     
 Income tax (expense) benefit                 (9,928)                                                        (8,191)                        324,494                        (22,095)                                   322,704                    
 Net income                                   $   12,833                                                     $   13,213                     $   350,146                    $   36,627                                 $   409,044                
 Net income per common share:                                                                                                                                                                                                                    
 Basic                                        $       0.06                                                   $       0.06                   $         1.55                 $       0.16                               $        1.82              
 Diluted                                      $       0.06                                                   $       0.06                   $         1.48                 $       0.16                               $        1.69              
 Weighted-average common shares outstanding:                                                                                                                                                                                                     
 Basic                                        219,379                                                        225,555                        225,572                        224,264                                    224,324                    
 Diluted                                      228,107                                                        233,708                        237,342                        232,633                                    241,744                    
                                                                                                                                                                                                                                                 


                                                                                      Three Months Ended                                                                                                           For the Years Ended                                                                
                                                                                      December 31,                                                  September 30,                 December 31,                 December 31,                                                        
                                                                                      2012                                                          2012                          2011                         2012                                       2011                   
                                                                                      (unaudited)                                                                                                                                                                                    
 Statement of Cash Flow Data:                                                                                                                                                                                                                                                        
 Net cash provided by operating activities                                            $   61,046                                                    $   18,157                    $   38,645                   $   119,843                                $   146,786            
 Net cash used in investing activities                                                (12,011)                                                      (1,120)                       (13,249)                     (25,472)                                   (37,604)               
 Net cash used in financing activities                                                (26,129)                                                      (15,513)                      (22,522)                     (56,257)                                   (130,138)              
 Capital expenditures, intangible asset purchases and development of software assets  (12,009)                                                      (1,402)                       (13,250)                     (26,750)                                   (38,653)               
                                                                                                                                                                                                                                                                                 


 VONAGE HOLDINGS CORP.                                                                                                                
 TABLE 1. SUMMARY CONSOLIDATED FINANCIAL DATA - (Continued)                                                                           
 (Dollars in thousands, except per share amounts)                                                                                     
                                                                                                                                      
                                                              December 31,                             December 31,               
                                                              2012                                     2011                       
 Balance Sheet Data:                                                                                                              
 Cash and cash equivalents                                    $    97,110                              $     58,863               
 Restricted cash                                              5,656                                    6,929                      
 Accounts receivable, net of allowance                        20,416                                   17,862                     
 Inventory, net of allowance                                  5,470                                    6,715                      
 Prepaid expenses and other current assets                    15,487                                   16,820                     
 Deferred customer acquisition costs                          5,765                                    5,685                      
 Property and equipment, net                                  60,533                                   67,978                     
 Software, net                                                19,560                                   45,661                     
 Debt related costs, net                                      772                                      2,007                      
 Intangible assets, net                                       6,681                                    9,056                      
 Total deferred tax assets, including current portion, net    306,113                                  325,601                    
 Other assets                                                 3,826                                    3,038                      
 Total assets                                                 $   547,389                              $   566,215                
 Accounts payable and accrued expenses                        $   129,815                              $   135,740                
 Deferred revenue                                             36,533                                   39,981                     
 Total notes payable, including current portion               42,500                                   70,833                     
 Capital lease obligations                                    15,561                                   17,665                     
 Other liabilities                                            1,565                                    2,429                      
 Total liabilities                                            $   225,974                              $   266,648                
 Total stockholders' equity                                   $   321,415                              $   299,567                
                                                                                                                                  


 VONAGE HOLDINGS CORP.                                                                                                                                                                                                                                             
 TABLE 2. SUMMARY CONSOLIDATED OPERATING DATA                                                                                                                                                                                                                      
 (unaudited)                                                                                                                                                                                                                                                       
                                                                                                                                                                                                                                                                   
                                           Three Months Ended                                                                                                           For the Years Ended                                                                     
                                           December 31,                                                  September 30,                 December 31,                 December 31,                                                        
                                           2012                                                          2012                          2011                         2012                                       2011                   
 Gross subscriber line additions           152,319                                                       171,628                       168,538                      652,750                                    672,274                
 Change in net subscriber lines            (5,708)                                                       9,440                         (13,834)                     (15,071)                                   (29,996)               
 Subscriber lines (at period end)          2,359,816                                                     2,365,524                     2,374,887                    2,359,816                                  2,374,887              
 Average monthly customer churn            2.5%                                                          2.5%                          2.7%                         2.6%                                       2.6%                   
 Average monthly operating                 $   30.15                                                     $   29.31                     $   30.19                    $   29.89                                  $   30.35              
 
 revenue per line                                                                                                                                                                                                                   
 Average monthly direct cost of telephony  $     8.02                                                    $     7.80                    $     8.24                   $     8.16                                 $     8.23             
 
 services per line                                                                                                                                                                                                                  
 Marketing costs per gross subscriber      $      347                                                    $      299                    $      306                   $      326                                 $     304              
 
 line addition                                                                                                                                                                                                                      
 Employees (excluding temporary help)      983                                                           971                           1,008                        983                                        1,008                  
 
 (at period end)                                                                                                                                                                                                                    
 Direct margin as a % of revenues          68.9%                                                         68.4%                         68.0%                        68.1%                                      68.1%                  
                                                                                                                                                                                                                                      


 VONAGE HOLDINGS CORP.                                                                                                                                                                                                                          
 TABLE 3. RECONCILIATION OF GAAP INCOME FROM OPERATIONS                                                                                                                                                                                         
 TO ADJUSTED EBITDA                                                                                                                                                                                                                             
 (Dollars in thousands)                                                                                                                                                                                                                         
 (unaudited)                                                                                                                                                                                                                                    
                                                                                                                                                                                                                           
                                Three Months Ended                                                                                                           For the Years Ended                                                 
                                December 31,                                                  September 30,                 December 31,                 December 31,                                                        
                                2012                                                          2012                          2011                         2012                                       2011                   
 Income from operations         $   24,015                                                    $   22,748                    $   27,897                   $   64,610                                 $   116,350            
 Depreciation and amortization  8,052                                                         8,110                         8,638                        33,324                                     37,051                 
 Loss from abandonment of       -                                                             -                             -                            25,262                                     -                      
 
 software assets                                                                                                                                                                                                         
 Share-based expense            2,374                                                         3,473                         3,819                        11,975                                     14,279                 
 Adjusted EBITDA                34,441                                                        34,331                        40,354                       135,171                                    167,680                
                                                                                                                                                                                                                           


 VONAGE HOLDINGS CORP.                                                                                                                                                                                                                                                         
 TABLE 4. RECONCILIATION OF GAAP NET INCOME TO                                                                                                                                                                                                                                 
 NET INCOME EXCLUDING ADJUSTMENTS                                                                                                                                                                                                                                              
 (Dollars in thousands, except per share amounts)                                                                                                                                                                                                                              
 (unaudited)                                                                                                                                                                                                                                                                   
                                                                                                                                                                                                                                                                               
                                                      Three Months Ended                                                                                                           For the Years Ended                                                                      
                                                      December 31,                                                  September 30,                 December 31,                 December 31,                                                                   
                                                      2012                                                          2012                          2011                         2012                                       2011                         
 Net income                                           $   12,833                                                    $   13,213                    $   350,146                  $   36,627                                 $   409,044                  
 Loss from abandonment of software assets             -                                                             -                             -                            25,262                                     -                            
 Change in fair value of stock warrant                -                                                             -                             -                            -                                          950                          
 Income tax expense (benefit)                         9,928                                                         8,191                         (324,494)                    22,095                                     (322,704)                    
 Loss on extinguishment of notes                      -                                                             -                             -                            -                                          11,806                       
 Net income excluding adjustments                     $   22,761                                                    $   21,404                    $     25,652                 $   83,984                                 $    99,096                  
 Net income per common share:                                                                                                                                                                                                                          
 Basic                                                $       0.06                                                  $       0.06                  $         1.55               $       0.16                               $        1.82                
 Diluted                                              $       0.06                                                  $       0.06                  $         1.48               $       0.16                               $        1.69                
 Weighted-average common shares outstanding:                                                                                                                                                                                                           
 Basic                                                219,379                                                       225,555                       225,572                      224,264                                    224,324                      
 Diluted                                              228,107                                                       233,708                       237,342                      232,633                                    241,744                      
 Net income per common share, excluding adjustments:                                                                                                                                                                                                   
 Basic                                                $       0.10                                                  $       0.09                  $        0.11                $      0.37                                $       0.44                 
 Diluted                                              $       0.10                                                  $       0.09                  $        0.11                $      0.36                                $       0.41                 
 Weighted-average common shares outstanding:                                                                                                                                                                                                           
 Basic                                                219,379                                                       225,555                       225,572                      224,264                                    224,324                      
 Diluted                                              228,107                                                       233,708                       237,342                      232,633                                    241,807                      


 VONAGE HOLDINGS CORP.                                                                                                                                                                                                                                     
 TABLE 5. FREE CASH FLOW                                                                                                                                                                                                                                   
 (Dollars in thousands)                                                                                                                                                                                                                                    
 (unaudited)                                                                                                                                                                                                                                               
                                                                                                                                                                                                                                  
                                   Three Months Ended                                                                                                           For the Years Ended                                                                     
                                                                                                                                                                                                                                  
                                   December 31,                                                  September 30,                 December 31,                 December 31,                                                             
                                   2012                                                          2012                          2011                         2012                                           2011                   
 Net cash provided by operating    $   61,046                                                    $   18,157                    $   38,645                   $   119,843                                    $   146,786            
 
 activities                                                                                                                                                                                                                     
 Less:                                                                                                                                                                                                                            
 Capital expenditures              (9,206)                                                       (865)                         (3,783)                      (13,763)                                       (12,636)               
 Intangible assets                 -                                                             -                             (3,725)                      -                                              (3,725)                
 Acquisition and development       (2,803)                                                       (537)                         (5,742)                      (12,987)                                       (22,292)               
 
 of software assets                                                                                                                                                                                                             
 Free cash flow                    $   49,037                                                    $   16,755                    $   25,395                   $   93,093                                     $   108,133            


 VONAGE HOLDINGS CORP.                                                                                                            
 TABLE 6. RECONCILIATION OF NOTES PAYABLE AND CAPITAL LEASES TO NET (CASH) DEBT                                                   
 (Dollars in thousands)                                                                                                           
 (unaudited)                                                                                                                      
                                                                                                                                  
                                                          December 31,                     December 31,  
                                                          2012                             2011          
                                                                                                         
 Current maturities of capital lease obligations          $      2,471                     $     2,104                     
 Current portion of notes payable                         28,333                           28,333                          
 Notes payable, net of discount and current maturities    14,167                           42,500                          
 Capital lease obligations, net of current maturities     13,090                           15,561                          
 Gross debt                                               58,061                           88,498                          
 Less:                                                                                                   
 Unrestricted cash                                        97,110                           58,863                          
 Net (cash) debt                                          $   (39,049)                     $   29,635                      


About Vonage

Vonage (NYSE: VG) is a leading provider of communications services connecting
individuals through cloud-connected devices worldwide. Our technology serves
approximately 2.4 million subscriber lines. We provide feature-rich, affordable
communication solutions that offer flexibility, portability and ease-of-use. Our
Vonage World plan offers unlimited calling to more than 60 countries with
popular features like call waiting, call forwarding and visual voicemail -- for
one low monthly rate. Our Vonage Mobileapp lets users make free high-definition
calls and send free texts to all users of the app, worldwide. The app works over
Wi-Fi, 3G and 4G wireless data networks. Vonage's service is sold on the web and
through regional and national retailers including Wal-Mart, Best Buy, Kmart and
Sears, and is available to customers in the U.S. (www.vonage.com),  Canada 
(www.vonage.ca) and the  United Kingdom  (www.vonage.co.uk).  

Vonage Holdings Corp. is headquartered in  Holmdel, New Jersey. Vonage is a
registered trademark of Vonage Marketing LLC., owned by Vonage America Inc.

To follow Vonage on Twitter, please visit  www.twitter.com/vonage. To become a
fan on Facebook, go to  www.facebook.com/vonage. To subscribe on YouTube, visit 
www.youtube.com/vonage.

Use of Non-GAAP Financial Measures  

This press release includes the following measures defined as non-GAAP financial
measures by the Securities and Exchange Commission: adjusted earnings before
interest, taxes, depreciation and amortization ("adjusted EBITDA"), net income
excluding adjustments, net (cash) debt and free cash flow.  

Vonage uses adjusted EBITDA as a principal indicator of the operating
performance of its business.  

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 depreciation and amortization and loss from
abandonment of software assets, which may vary from period to period without any
correlation to underlying operating performance, and of share-based expense,
which is a non-cash expense that also varies from period to period.  

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
and of its ability to produce operating cash flow to fund working capital needs,
to service debt obligations, and to fund capital expenditures.  

The Company has also excluded from its net income the change in fair value of
stock warrant, loss on extinguishment of notes, the income tax
expense/(benefit), and loss from abandonment of software assets.  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 when these events occurred on a comparative basis.  

Vonage uses net (cash) debt 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) debt
is also a factor that third parties consider in valuing the Company.  

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.  

Vonage defines adjusted EBITDA as GAAP income from operations excluding
depreciation and amortization, share-based expense, and loss from abandonment of
software assets.  

Vonage defines net income excluding adjustments, as GAAP net income excluding
the change in fair value of stock warrant, the loss on extinguishment of notes,
the income tax expense/(benefit), and loss from abandonment of software assets. 


Vonage defines net (cash) debt as the current and long-term portion of notes
payable and capital lease obligations plus unamortized discount on notes payable
less unrestricted cash.  

Vonage defines free cash flow as net cash provided by operating activities minus
capital expenditures, intangible assets and acquisition and development of
software assets.  

Conference Call and Webcast  

Management will host a webcast discussion of the quarter and full year results
on  Wednesday, February 13, 2013  at  10:00 AM Eastern Time. To participate,
please dial (877) 359-9508 approximately ten minutes prior to the call.
International callers should dial (224) 357-2393. A replay will be available
approximately two hours after the conclusion of the call until midnight 
February 19, 2013, and may be accessed by dialing (855) 859-2056. International
callers should dial (404) 537-3406. The replay passcode is: 90371714.

The webcast will be broadcast live through Vonage's Investor Relations website
at  http://ir.vonage.com. Windows Media Player or RealPlayer is required to
listen to this webcast. A replay will be available shortly after the live
webcast.  

Safe Harbor Statement  

This press release contains forward-looking statements regarding growth
strategy, including new products, and related investment, cash flow, revenues
from new initiatives, the Company's stock repurchase plan, and capital and
software expenditures. 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; our ability to adapt to rapid changes in the market for voice and
messaging services; our ability to retain customers and attract new customers;
our ability to establish and expand strategic alliances; governmental regulation
and related actions and taxes in the countries that we operate; increased market
and competitive risks, including currency restrictions, in our international
operations; risks related to the acquisition or integration of future businesses
or joint ventures; our ability to obtain or maintain relevant intellectual
property licenses; intellectual property and other litigation that have been and
may be brought against us; failure to protect our trademarks and internally
developed software; security breaches and other compromises of information
security; our dependence on third party facilities, equipment, systems and
services; system disruptions or flaws in our technology and systems;
uncertainties relating to regulation of VoIP services; liability under
anti-corruption laws; results of regulatory inquiries into our business
practices; fraudulent use of our name or services; our ability to maintain data
security; our dependence upon key personnel; our dependence on our customers'
existing broadband connections; differences between our service and traditional
phone services, including our 911 service; restrictions in our debt agreements
that may limit our operating flexibility; our ability to obtain additional
financing if required; any reinstatement of holdbacks by our vendors; our
history of net losses and ability to achieve consistent profitability in the
future; the Company's available capital resources and other financial and
operational performance which may cause the Company not to make share
repurchases as currently anticipated or to commence or suspend such repurchases
from time to time without prior notice; and other factors that are set forth in
the "Risk Factors" section and other sections of Vonage's Annual Report on Form
10-K for the year ended December 31, 2011, as well as in the Company's Quarterly
Reports on Form 10-Q and Current Reports on Form 8-K. While the Company may
elect to update forward-looking statements at some point in the future, it
specifically disclaims any obligation to do so, and therefore, you should not
rely on these forward-looking statements as representing the Company's views
subsequent to today.  

(vg-f)  



SOURCE  Vonage Holdings Corp.


Vonage Investor Contact: Leslie Arena, +1-732-203-7372, leslie.arena@vonage.com;
Vonage Media Contact: Jo Ann Tizzano, +1-732-365-1363, joann.tizzano@vonage.com

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