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Vonage Delivers Strong Third Quarter 2017 Results Highlighted by 22% Vonage Business GAAP Revenue Growth

– Consolidated Revenues of $253 Million
– Income from Operations of $25 Million, Record Adjusted OIBDA of $51 Million
– Raises Consolidated Revenue Guidance to at least $1 billion and up to $1.005 billion and Adjusted OIBDA to at least $180 million

HOLMDEL, N.J., Nov. 7, 2017 — Vonage Holdings Corp. (NYSE: VG), a leading provider of business cloud communications, today announced results for the quarter ended September 30, 2017.

Consolidated Results

“Vonage delivered record results in the third quarter driven by our continued investments in Vonage Business, including product, infrastructure and distribution. Highlighted by 22% GAAP growth, Vonage Business revenues exceeded Consumer revenues for the first time. And, we’re improving the revenue trajectory of Consumer and corresponding consolidated cash flow,” said Vonage CEO Alan Masarek.

“Our results demonstrate that we’re delivering on our strategic priorities, using our full suite of cloud communications services to deliver better business outcomes to our customers, and successfully transforming Vonage into a market leader in business cloud communications. On the strength of these results, we are raising our consolidated revenue and OIBDA guidance.”

For the third quarter of 2017, Vonage reported revenues of $253 million, a 2% increase from the year ago quarter. Income from Operations was $25 million, up from $15 million in the prior year. Adjusted Operating Income Before Depreciation and Amortization (“Adjusted OIBDA”)1 was $51 million, up from $41 million in the prior year. GAAP net income was $11 million or $0.05 per share, up from $7 million or $0.03 per share in the year ago quarter. Adjusted net incomewas $17 million or $0.07 per share, up from $13 million or $0.05 per share in the year ago quarter.

Business Segment Results

  • Vonage Business total revenues were $129 million, representing 51% of total consolidated revenues and 22% GAAP growth.
  • UCaaS revenues were $91 million, of which $71 million were service revenues. Service revenues increased 16% year-over-year on an organic3basis; Nexmo, the Vonage API Platform revenues (which are all service revenue) were $38 million, a year-over-year increase of 45% on an organic4basis.
  • Ending UCaaS seats at Vonage Business were 710,000, up from 616,000 seats in the year ago quarter, an increase of 15%.
  • UCaaS revenue churn was 1.2%, down from 1.4% sequentially and the prior year.
  • The Company increased its registered developers on the Vonage API Platform to 371,000, a sequential increase of 62,000.

Consumer Segment Results

  • Consumer revenues were $124 million in the third quarter of 2017 compared to $142 million in the prior year.
  • Consumer customer churn was 1.9%, flat sequentially and down from 2.2% in the year ago quarter.
  • Average revenue per line (“ARPU”) in Consumer was $26.29, down from $26.36 in the year ago period.
  • The Consumer segment ended the third quarter with approximately 1.5 million subscriber lines.
  • Consumer’s tenured customers, defined as those with the Company for more than two years, increased to 81% of the base. The churn rate of this tenured cohort is 1.5%.

Balance Sheet

In the quarter, the Company generated Adjusted OIBDA of $51 million, and Adjusted OIBDA minus Capex5 of $42 million. This enabled the Company to pay down $37 million of debt, resulting in a net debt to Last Twelve Months Adjusted OIBDA ratio of 1.7x. Vonage’s cash flow generation and access to capital supports significant strategic and financial flexibility.

Guidance Update

The Company is raising consolidated 2017 revenue and adjusted OIBDA guidance. Consolidated revenue is now expected to be at least $1 billion and up to $1.005 billion. Adjusted OIBDA is now expected to be at least $180 million. Consumer revenues are now expected to be at least $500 millionand up to $505 million dollars. There is no change to Business revenue guidance, which was updated in August.

Conference Call and Webcast

Management will host a conference call to discuss third quarter financial results and other matters at 8:30 AM Eastern Time. To participate, please dial (866) 807-9684. International callers should dial (412) 317-5415.

A live webcast of the event will be available on the Vonage Investor Relations site. 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 or by dialing (877) 344-7529 or (412) 317-0088, passcode 10113223.

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