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Vonage Announces Strong Fourth Quarter and Full Year 2016 Results, Highlighted by 72% Growth in 2016 Vonage Business Revenue

– 2016 Consolidated Revenues of $956 Million, a 7% increase
– Operating Income of $44 Million; Adjusted OIBDA of $160 Million, an 11% increase
– Fourth Quarter Vonage Business Total Revenue of $111 Million, a 56% increase
– Fourth Quarter CPaaS Revenue of $27 Million, a 43% pro-forma increase
– Announced as Amazon Web Services launch partner for Amazon Chime; combination to bring unmatched productivity to Vonage Business users

HOLMDEL, N.J., Feb. 14, 2017 — Vonage Holdings Corp. (NYSE: VG), a leading provider of cloud communications services for businesses, today announced results for the fourth quarter and full year ended December 31, 2016.

Consolidated Results

“In 2016, we utilized our strong cash flows to invest in our growth, including the strategic acquisition of Nexmo and significant investments in the Vonage Business sales infrastructure,” said Vonage CEO Alan Masarek.

“With these investments, we made great progress executing on our transformation and significantly advanced our strategy to become the Clear Leader in Cloud Communications. Through the integration of our UCaaS and CPaaS solutions, we have assembled the most comprehensive product offering in the global Cloud Communications market. This unique value proposition drives better outcomes for our business customers and deepens our customer relationships. At the same time, our team continues to deliver strong financial results. We generated consolidated revenue growth for the third consecutive year and the highest adjusted OIBDA in five years, driven by the successful optimization of our Consumer segment.”

For the full year 2016, Vonage reported revenue of $956 million, up from $895 million in the prior year. Income from operations was $44 million, down from $53 million in the prior year. Adjusted Operating Income Before Depreciation and Amortization (“Adjusted OIBDA”)1 was $160 million, an 11% increase over the prior year. GAAP net income was $18 million or $0.08 per share for the full year 2016, down from $23 million or $0.11 per share in 2015. Adjusted net income2 was $45 million or $0.21 per share, up from $39 million, or $0.18 per share in the prior year.

For the fourth quarter of 2016, Vonage reported revenue of $247 million, up from $230 million in the year ago quarter. Income from operations was $5 million, down from $8 million in the prior year quarter. Adjusted OIBDA for the fourth quarter was $37 million, up from $34 million in the year ago quarter. GAAP net income was breakeven, or $0.00 per share, down from $3 million in the prior year period, or $0.02 per share. Adjusted net income was $7 million or $0.03 per share, down from $8 million or $0.04 per share.

Additional Reporting Information

Consistent with Vonage’s continued transformation into cloud communications, the Company is providing more visibility into the financial trends in its Business and Consumer segments.  The Company will report both revenue and cost of service for its Business segment, comprised of its Unified Communications as a Service (UCaaS) and Communications Platform as a Service (CPaaS) offerings, and for its Consumer segment, comprised of its legacy residential VoIP offerings. Vonage is reporting this additional information for the fourth quarter and full year 2016 and will continue reporting these metrics in the future.

Business Segment Results

  • Total Business revenue grew 56% year-over-year to $111 million in the fourth quarter of 2016; Full year revenue increased 72% year-over-year to $376 million.
  • Business service revenue was $92 million, a 69% increase from the fourth quarter of 2015; Full year service revenue was $302 million, up 77% from the prior year.
  • UCaaS revenue churn was 1.4% in the fourth quarter, flat sequentially and up from 1.1% in the year ago quarter.
  • UCaaS ending seats were 638,000, up from 542,000 seats in the year ago quarter, reflecting strong organic growth.
  • Announced by Amazon Web Services as a launch partner for Amazon Chime. This combination brings together the power of Vonage’s cloud voice communications capabilities with Amazon Chime, a web-conferencing and collaboration suite, to provide a scalable, enterprise-grade unified communications solution for Vonage Business customers.
  • The Vonage API Platform, formerly Nexmo, generated fourth quarter 2016 revenue of $27 million, a 43% pro-forma year-over-year increase.
  • The Vonage API Platform increased its registered developer count to 207,000, a 54% year-over-year increase.
  • Announced Kenny Wyatt as the Company’s new Chief Revenue Officer. Mr. Wyatt will set the global direction for sales and revenue across the Company’s UCaaS and CPaaS offerings.

Consumer Segment Results

  • Revenue in Consumer was $136 million in the fourth quarter, down 14% from the prior year’s quarter. Full year 2016 revenue was $579 million, down 14%, reflecting the Company’s decision to redeploy capital into the Vonage Business segment.
  • Consumer customer churn was 2.2% in the fourth quarter, in line with the year ago quarter.
  • Average revenue per line (“ARPU”) in Consumer Services was $26.11, down from $26.93 in the year ago period.
  • The Consumer segment ended the fourth quarter with 1.7 million subscriber lines.

Patent Portfolio

Vonage continues to develop innovative technologies and to protect its valuable intellectual property. The Company was granted a record 40 new patents in 2016,  and as of December 31, 2016, the Company owned 146 U.S. patents, with nearly 200 U.S. patent applications pending.

Share Repurchase

Vonage repurchased 7.4 million shares for $33 million at an average price of $4.43 in 2016. This represents approximately one-third of the four-year, $100 million authorization the Company initiated in the beginning of 2015. The Company has repurchased 55.6 million shares for $181 million, at a highly accretive average price of $3.26, since the Company began repurchasing stock in August 2012. Vonage’s share repurchase program has provided strong returns for shareholders and it continues to be one of the key components of the Company’s capital allocation plan. The execution of the buyback program is subject to change as market conditions, M&A opportunities and capital allocation priorities warrant.

2017 Outlook

For full year 2017, Vonage expects the following:

  • Consolidated revenues in the range of $970 million to $985 million
  • Total Business revenue, which includes UCaaS and CPaaS, in the range of $487 million to $493 million
  • Consumer revenue in the range of $483 million to $492 million  reflecting the Company’s continued focus on optimizing the business for profitability and cash flow
  • Consolidated Adjusted OIBDA of at least $165 million
  • Capex of approximately $40 million

Conference Call and Webcast

Management will host a webcast discussion of the fourth quarter, full year 2016, and other matters on Tuesday, February 14, 2017 at 8:30 AM Eastern Time. To participate, please dial (877) 359-9508 approximately 10 minutes prior to the call. International callers should dial (224) 357-2393.

The webcast will be broadcast live through Vonage’s Investor Relations website at http://ir.vonage.com. A replay of the call and webcast will be available shortly after the conclusion of the call and may be accessed through Vonage’s Investor Relations website at http://ir.vonage.com or by dialing (855) 859-2056. International callers should dial (404) 537-3406. The replay passcode is 63295132.

(1) This is a non-GAAP financial measure. Refer below to Table 3 for a reconciliation to GAAP income from operations.
(2) This is a non-GAAP financial measure. Refer below to Table 4 for a reconciliation to GAAP net income.

More at http://pr.vonage.com/releasedetail.cfm?ReleaseID=1011721

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