Vonage Holdings Corp. Reports First Quarter 2011 Results

Vonage Holdings Corp., a leading provider of communications services connecting individuals through broadband devices worldwide, announced results for the first quarter ended March 31, 2011.

Marc Lefar, Vonage Chief Executive Officer, said, "Vonage continued to deliver strong financial results as we generated record high EBITDA and net income.  We improved average revenue per user, reduced costs and continued to deliver on our strategy to penetrate international calling segments.  There are more than one million subscribers, representing 43% of our base, on Vonage World."

Revenue was $220 million, a decrease from $228 million in the year ago quarter primarily due to a $6 million reduction in deferred earnings related to the discontinuation of activation fees.  Revenue increased sequentially from $218 million.  Average revenue per user was $30.45, a decrease from $31.37 in the prior year and up from $30.20 sequentially.

Telephony services ARPU decreased to $30.23 from $30.90 a year ago due primarily to impacts from lower deferred activation revenue.  Telephony services ARPU increased sequentially from $29.78 due to improvements in customer mix, lower bad debt and higher Universal Service Fees.  

(3) Direct margin is defined as operating earnings less direct cost of telephony services and direct cost of goods sold as a percentage of earnings.

Vonage is a leading provider of communications services connecting individuals through broadband devices worldwide. Our innovation serves in broad outline 2.4 million subscribers. 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 voicemail - for one low, flat monthly rate.

Vonage uses adjusted EBITDA and pre-marketing operating income as principal indicators of the operating performance of its business.

Vonage believes that pre-marketing operating income is an important metric to evaluate the profitability of the existing customer base to justify the level of continued investment in growing that customer base. Just in case, as the Company is focused on growing both its revenue and customer base, the Company has chosen to invest significant amounts on its marketing activities to acquire and replace subscribers.

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, afterwards 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 just as debt service that are not deducted from the measure.

Vonage defines pre-marketing operating income as GAAP income from operations excluding customer equipment and shipping revenue, direct cost of goods sold, depreciation and amortization, marketing and share-based expense.

This press release contains forward-looking statements regarding growth strategy, debt repayment, cash flow, and financial results.  To boot, 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 that 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 however are not limited to: the competition the Company faces; the Company's ability to adapt to rapid changes in the market for voice and messaging services; the Company's ability to retain clients and attract new clients; results of pending litigation and intellectual property and other litigation that may be brought against the Company; failure to protect the Company's trademarks and internally developed software; the Company's ability to obtain or maintain relevant intellectual property licenses; the Company's dependence on third party facilities, equipment, systems, and services; system disruptions or flaws in the Company's innovation; fraudulent use of the Company's name or services; the Company's ability to maintain data security; results of regulatory inquiries into the Company's business practices; the Company's ability to obtain additional financing if required; restrictions in the Company's debt agreements that may limit the Company's operating flexibility; any reinstatement of holdbacks by the Company's vendors; the Company's dependence on the Company's clients' existing broadband connections; uncertainties relating to regulation of VoIP (Voice over Internet Protocol) services; increased governmental regulation, currency restrictions, and other restraints and burdensome taxes and risks incident to foreign operations; differences between the Company's service and traditional phone services, including the Company's 911 service;  the Company's dependence upon key personnel; the Company's history of net losses and ability to achieve consistent profitability hereafter; 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, 2010, as then as in the Company's Quarterly Reports on Form 10-Q and Current Reports on Form 8-K. During the Company may elect to update forward-looking statements at some point hereafter, it exactly disclaims any obligation to do so, and to sum up, you should not rely on these forward-looking statements as representing the Company's views as of any date subsequent to today.