Vonage Holdings Corp. Reports Fourth Quarter and Full Year 2010 Results

Vonage Holdings Corp., a leading provider of low-cost communications services connecting individuals through broadband devices worldwide, today announced results for the fourth quarter and full year ended December 31, 2010.

Vonage reported record adjusted earnings earlier interest, taxes, depreciation and amortization1 of $41 million, an increase from $35 million sequentially and up from $34 million in the year ago quarter.  Revenue of $218 million increased from $214 sequentially and decreased from $224 million year-over-year. Income from operations was $26 million, an increase from $20 million sequentially and up from $19 million in the year ago quarter.

Average revenue per user increased to $30.20 from $29.72 sequentially driven by customer mix and higher customer equipment and shipping revenue and decreased from $30.54 in the year ago quarter.  Telephony services ARPU increased to $29.78 from $29.45 sequentially reflecting an increase in the number of clients taking higher priced rate plans and a lower impact from promotions, and decreased from $29.84 a year ago.

Telephony services revenue increased to $873 million driven by improved customer mix as the Company increased the number of clients on its Vonage World plan and selective price increases for enhanced features of its product offerings.  Total revenue declined to $885 million from $889 million in 2009 due to a reduction in deferred earnings from legacy activation fees that were largely phased out in mid-2009.  Average revenue per subscriber increased to $30.48 from $29.49, up for the third consecutive year.  

Vonage is a leading provider of low-cost communications services connecting individuals through broadband devices worldwide. Our research 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. To boot, 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, adjusted EBITDA, gross additions, net line additions, impact of product initiatives on earnings, debt repayment and capital and software expenditures. Just in case, 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 research; 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, 2009, 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 conclusively, you should not rely on these forward-looking statements as representing the Company's views as of any date subsequent to today.