HOLMDEL, N.J., Nov. 05, 2020 (GLOBE NEWSWIRE) -- Vonage Holdings Corp. (Nasdaq: VG), a global leader in cloud communications helping businesses accelerate their digital transformation, today announced results for the quarter ended September 30, 2020.

“We executed well in the third quarter and delivered solid results,” said Rory Read, Chief Executive Officer. “The Vonage Communications Platform, our single global cloud technology platform, delivers our wide range of powerful services and solutions that enable our customers to transform the way they communicate and operate as the world undergoes a secular shift in how business gets done.”

Read continued, “Vonage Communications Platform service revenues grew 19% year over year. Within this, API revenues grew 35%, highlighted by a 143% increase in high-value API revenues, driven by our leadership in video and another record quarter of new customer additions. Unified Communications and Contact Center Applications service revenue grew 7%, and we signed 17 seven-figure total contract value deals in the quarter, with a 28% increase in average deal size. Our Platform’s flexibility, scalability, security and ease of use were consistent areas of strength in our ability to win.”

Business Optimization and Alignment Project

Vonage has undertaken a multi-quarter initiative to review and optimize the Company’s operations while setting the strategy and business plans for the next two to three years. The work has provided clarity on where the Company needs to create efficiency, position its talent and invest to drive Vonage’s long-term growth and profitability.

Based on this review, the Company has implemented a number of cost saving and efficiency initiatives to improve operations and expects to reduce operating expenses by $8 to $10 million in the fourth quarter of 2020 and approximately $50 million in 2021. This resulted in a restructuring charge of approximately $15 million in the third quarter.

In parallel, Vonage is developing its business strategy and operating plan to make key investments to deliver improved growth and profitability. The Company plans to increase investments in artificial intelligence, high-value API leadership, advancements in mobility, omnichannel capabilities, and expanding its addressable market while tailoring its go-to-market initiatives to reach and win more customers.

“We are taking decisive action to improve the operational effectiveness of our business while making strategic investments where we can win a disproportionate share of the market, and where our communications platform solutions best fit the needs of our customers,” Read commented. “We are also investing in our Sales and Marketing to strengthen our channel presence, effectively reach all customer segments, and increase our cross-sell and upsell opportunities. The management team and our Board are focused on delivering on these strategic initiatives, and we expect to accelerate growth and profitability in 2021 and 2022.”

Third Quarter 2020 Vonage Communications Platform Highlights (compared to the year-ago quarter)

• Vonage Communications Platform (VCP) revenues, which consist of Unified Communications, Contact Center and API revenues, were $234 million. VCP service revenues were $218 million, a 19% increase.
• API revenues grew 35%
  • High-Value API revenues grew 143%, driven by strength in programmable video.
• Service Revenues from Unified Communications and Contact Center (UC and CC) customers grew 7%.
  • Service Revenues from Mid-market and Enterprise UC and CC customers (those with greater than $12,000 of ARR) grew 13%.
• VCP Service Revenue per Customer was $527 per month, up 17%.
• VCP Service Revenue Churn increased to 1.2% from 1.0%.

Third Quarter 2020 Consumer Segment Results (compared to the year-ago quarter)

• Consumer Revenues were $83 million, down 14%.
• Customer churn was stable at 1.8%.
• Average revenue per line ("ARPU") was $28.31, up $0.75.
• Ended the quarter with approximately 1 million Consumer subscriber lines
  • 96% of these customers are tenured over two years and 80% are tenured over five years.

Consolidated Income and Balance Sheet

For the third quarter of 2020, Vonage reported consolidated revenues of $317 million, up from $303 million in the year-ago quarter. GAAP net loss was $10 million, or ($0.04) per share, versus a net loss of $21 million in the prior-year period, or ($0.09) per share. Third quarter adjusted net income⁽¹⁾ was $17 million or $0.07 per share, an increase from a net loss of $4 million or ($0.02) per share in the prior-year period.

For the third quarter, the Company generated Adjusted EBITDA⁽²⁾ of $42 million, and Adjusted EBITDA minus Capex⁽²⁾ of $29 million. Net Cash from Operations was $13 million and Free Cash Flow⁽³⁾ was breakeven for the quarter. As of September 30, 2020, the Company had a Net Debt to Last Twelve Months Adjusted EBITDA ratio of 3.2 times.

Strategic Review of Consumer Segment Update

The Company is nearing completion of the strategic review of its Consumer segment and has engaged advisors to proceed with its potential sale. The marketing process is expected to begin in November 2020. The Company will provide an update once a buyer is identified or at the completion of the process.

Updated 2020 and Fourth Quarter Outlook

The Company is increasing its 2020 revenue and adjusted EBITDA guidance to reflect its solid third quarter and a fourth-quarter above its prior outlook.

For the full year, Vonage now expects the following (based on constant currency as of November 2020):

• Consolidated revenues in the range of $1.239 billion to $1.242 billion
• Total Vonage Communications Platform Revenues in the range of $906 million to $909 million (which includes approximately $22 million of USF revenues)
• Total Consumer Segment Revenues in the $332 million area (which includes approximately $41 million of USF revenues)
• Consolidated Adjusted EBITDA in the $167 million area
• Capex in the $53 million area

For the fourth quarter of 2020, Vonage expects the following:

• Consolidated Revenues in the range of $314 million to $317 million
• Total Vonage Communications Platform Revenues in the range of $236 million to $239 million (which includes approximately $6 million of USF revenues)
• Total Consumer Revenues in the $78 million area (which includes approximately $11 million of USF revenues)
• Consolidated Adjusted EBITDA in the $45 million area

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.