- Fourth Quarter Revenue Grows 19% to $216 Million -
- Company Generates Adjusted Operating Income Excluding Charges(1) of $6 Million
-
- 4Q07 Net Loss Excluding Charges(2) Narrows to $9 Million from $65 Million
Year-over-Year -
HOLMDEL, N.J., Feb 13, 2008 /PRNewswire-FirstCall via COMTEX News Network/ --
Vonage Holdings Corp. (NYSE: VG), a leading provider of broadband telephone
service, today announced results for the quarter and year ended December 31,
2007.
Revenue for the fourth quarter 2007 grew to a record $216 million, up 19%
from $181 million in the fourth quarter 2006, driven by an increase in
subscriber lines.
For the fourth quarter of 2007, the Company reported a GAAP net loss of $11
million or $0.07 per share. Excluding certain charges(2), net loss narrowed to
$9 million, or $0.06 per share, down from $65 million reported in the fourth
quarter 2006. Adjusted operating income excluding certain charges(1) was $6
million in the quarter, a significant improvement from a loss of $53 million in
the year-ago quarter.
Jeffrey Citron, Vonage Chairman, said, "Although 2007 was a difficult period
marked by numerous legal challenges, Vonage maintained its focus on improving
the business. We improved our marketing efficiency, reduced our cost structure
and for the first time in our history, generated positive adjusted operating
income in the fourth quarter. Looking to 2008, we are confident in our ability
to grow the business profitably and provide customers innovative, feature-rich
and cost-effective communications services."
Fourth Quarter 2007 Financial and Operating Highlights
Fourth quarter 2007 revenue grew to $216 million, an increase of 19% from
$181 million in the year-ago quarter. The year-over-year increase was driven by
growth in subscriber lines.
Average monthly revenue per line in the fourth quarter 2007 was $28.19, down
from $28.25 in the year-ago quarter and $28.24 reported in the third quarter
2007. Average monthly telephony services revenue per line for the quarter
increased to $27.42, in line with $27.41 reported a year ago and up from $27.32
sequentially.
In the fourth quarter 2007, direct cost of telephony services was $54
million, up from $52 million a year ago and in line with the third quarter 2007.
On a per line basis, average direct cost of telephony services fell to $7.11,
down from $8.13 in the year ago quarter and $7.30 sequentially as the Company
continued to benefit from call routing efficiency and scale.
Direct cost of goods sold for the quarter was $17 million, up from $12
million in the year-ago quarter and in line with the prior quarter. Direct
margin(3) increased to 67% of revenues from 65% in the year-ago quarter.
Selling, general and administrative ("SG&A") expense excluding certain
charges(4) was $77 million, down from $82 million in the year-ago quarter, and
$81 million sequentially.
Pre-marketing operating income excluding certain charges(1) was $81 million,
up from $49 million in the year-ago quarter and $71 million sequentially.
Marketing expense for the quarter was $63 million, or 29% of revenue, down
sharply from $96 million, or 53% of revenue a year ago. Marketing expense was up
slightly from the third quarter 2007. Marketing cost per gross subscriber line
addition ("SLAC") was $223 in the fourth quarter 2007. As expected, SLAC
increased slightly from $206 in the third quarter due to seasonal costs of
advertising. The Company expects the cost of acquisition will be within $225-
$250 for 2008.
Vonage added 56,000 net subscriber lines during the quarter to end the year
at nearly 2.6 million lines.
Excluding certain charges, adjusted income from operations(1) was $6 million
in the fourth quarter 2007, up from a loss of $53 million in the year ago
quarter and a loss of $1 million sequentially. The Company generated $3 million
in adjusted operating income in the fourth quarter 2007. John Rego, Vonage CFO
said, "This is a significant accomplishment for the Company and reflects our
ability to grow while effectively managing costs. We reached this milestone
ahead of plan, and did so in a turbulent year."
Average monthly customer churn remained flat sequentially at 3.0% in the
fourth quarter 2007.
Current cash and marketable securities and restricted cash on December 31,
2007 was $190 million. This includes $39 million in restricted cash used as
collateral for routine business operations. The change in cash from the prior
quarter was driven by settlement payments of $202 million, capital expenditures
of $9 million, cash provided from operations(5) of $15 million and an $8 million
increase in restricted cash. This is the second consecutive quarter of positive
cash generation from operations.
Year-End 2007 Results
Revenue for 2007 increased to $828 million, up 36% from $607 million in 2006.
Adjusted loss from operations excluding certain charges(1) narrowed to $46
million from $238 million in 2006. Net loss excluding certain charges(2) in 2007
narrowed to $90 million from $286 million the prior year. GAAP net loss was $265
million or $1.70 per share in 2007.
Vonage added 356,000 net subscriber lines in 2007 and finished the year with
nearly 2.6 million lines in service, 16% above the year-ago level of 2.2 million
lines.
Convertible Debt Refinancing Update
Vonage has $253 million in convertible debt, which can be put to the Company
in December 2008. The Company with its financial advisors is currently in
discussions with several parties regarding a refinancing of the debt. While the
result of such discussions cannot be predicted with certainty, Vonage believes
that it will be able to resolve its financial issues and meet its obligations.
There can be no assurance, however, that Vonage will be able to resolve these
issues in the near term. Assuming the Company has no resolution by the time it
files its annual report on Form 10-K, the Company expects that its auditors'
report on its 2007 financial statements will include an explanatory paragraph
regarding the Company's ability to continue as a going concern.
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