Vonage Reports Fourth Quarter 2021 Financial Results

HOLMDEL, N.J., Feb. 24, 2022 (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 and full year ended December 31, 2021.

Fourth Quarter 2021 Highlights:

• Consolidated revenue of $366 million, an increase of 13% year-over-year
  • Consumer revenue of $66 million, a decrease of 16% year-over-year
  • Vonage Communications Platform (VCP) revenue of $300 million, an increase of 23% year-over-year
    • VCP Service revenue of $287 million, an increase of 25% year-over-year
      • API revenue of $165 million, an increase of 38% year-over-year
      • Unified Communications & Contact Center Service revenue of $122 million, an increase of 10% year-over-year
• Consolidated Net Loss of $22 million, a decrease of $8 million from the prior year
• Consolidated Adjusted EBITDA⁽¹⁾ of $50 million, an increase of $2 million from the prior year
  • VCP Adjusted EBITDA of $6 million, an increase of $10 million from the prior year
  • Consumer Adjusted EBITDA of $43 million, a decrease of $9 million from the prior year

Full Year 2021 Highlights:

• Consolidated revenue of $1.409 billion, an increase of 13% year-over-year
  • Consumer revenue of $289 million, a decrease of 13% year-over-year
  • Vonage Communications Platform (VCP) revenue of $1.120 billion, an increase of 22% year-over-year
    • VCP Service revenue of $1.062 billion, an increase of 24% year-over-year
      • API revenue of $591 million, an increase of 42% year-over-year
      • Unified Communications & Contact Center Service revenue of $471 million, an increase of 7% year-over-year
• Consolidated Net Loss of $24 million, an increase of $12 million from the prior year
• Consolidated Adjusted EBITDA of $198 million, an increase of $27 million from the prior year
  • VCP Adjusted EBITDA of $11 million, an increase of $68 million from the prior year
  • Consumer Adjusted EBITDA of $187 million, a decrease of $40 million from the prior year

Vonage will not host a conference call to discuss its results for the fourth quarter and full year 2021 or provide financial guidance for the first quarter or full year 2022 due to the previously announced proposed acquisition of Vonage by Ericsson.

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.

Investor Contact: Monica Gould, 212.871.3927, [email protected]

Media Contact: Jo Ann Tizzano, 732.365.1363, [email protected]

(1) This is a non-GAAP financial measure. Refer below to Table 3 for a reconciliation to GAAP net loss.

VONAGE HOLDINGS CORP.

TABLE 1. CONSOLIDATED FINANCIAL DATA

(Dollars in thousands, except per share amounts)

	Three Months Ended												For the Years Ended
	December 31,				September 30,				December 31,				December 31,
		2021				2021				2020				2021				2020
	(unaudited)				(unaudited)				(unaudited)				(unaudited)				(audited)
Statement of Operations Data:
Revenues, access and product revenues	$	350,167			$	341,544			$	306,773			$	1,339,063			$	1,185,357
USF revenues		16,138				16,797				16,522				69,952				62,577
Total revenues		366,305				358,341				323,295				1,409,015				1,247,934
Operating Expenses:
Service, access and product cost of revenues (excluding depreciation and amortization of $16,895, $15,817, $15,455, $61,874, and $51,408, respectively)		174,923				161,067				133,694				624,557				490,946
USF cost of revenues		16,138				16,797				16,522				69,952				62,577
Sales and marketing		80,702				86,826				80,100				335,217				342,053
Engineering and development		19,961				17,636				22,387				80,667				81,484
General and administrative		70,164				44,063				41,569				202,461				182,106
Depreciation and amortization		23,572				22,507				24,853				88,780				88,917
		385,460				348,896				319,125				1,401,634				1,248,083
(Loss) Income from operations		(19,155	)			9,445				4,170				7,381				(149	)
Other Income (Expense):
Interest expense		(6,924	)			(7,045	)			(7,384	)			(28,348	)			(32,160	)
Other income (expense), net		1,119				(100	)			160				905				314
		(5,805	)			(7,145	)			(7,224	)			(27,443	)			(31,846	)
Loss before income taxes		(24,960	)			2,300				(3,054	)			(20,062	)			(31,995	)
Income tax benefit (expense)		2,809				(4,332	)			(10,911	)			(4,435	)			(4,217	)
Net loss	$	(22,151	)		$	(2,032	)		$	(13,965	)		$	(24,497	)		$	(36,212	)
Loss per common share:
Basic and diluted	$	(0.09	)		$	(0.01	)		$	(0.06	)		$	(0.10	)		$	(0.15	)
Weighted-average common shares outstanding:
Basic and diluted		252,791				252,101				248,586				251,500				246,082

VONAGE HOLDINGS CORP.

TABLE 1. CONSOLIDATED FINANCIAL DATA - (Continued)

(Dollars in thousands, except per share amounts)

	Three Months Ended												For the Years Ended
	December 31,				September 30,				December 31,				December 31,
		2021				2021				2020				2021				2020
	(unaudited)				(unaudited)				(unaudited)				(unaudited)				(audited)
Statement of Cash Flow Data:
Net cash provided by operating activities	$	25,304			$	43,886			$	32,449			$	158,711			$	83,880
Net cash used in investing activities		(20,735	)			(12,768	)			(14,489	)			(62,719	)			(52,723	)
Net cash used in financing activities		(33,030	)			(21,986	)			(23,721	)			(117,257	)			(10,850	)
Capital expenditures, acquisition of intangible assets, acquisition and development of software assets		(13,735	)			(12,768	)			(14,489	)			(55,719	)			(52,723	)

		December 31,			December 31,
		2021			2020
		(unaudited)			(audited)
Balance Sheet Data (at period end):
Cash and cash equivalents		$	18,342		$	43,078
Restricted cash			1,967			1,919
Accounts receivable, net of allowance			147,622			116,304
Prepaid expenses and other current assets			37,388			38,361
Deferred customer acquisition costs, current and non-current			101,403			85,690
Property and equipment, net			24,334			31,621
Goodwill			615,134			624,328
Operating lease right of use assets			31,855			29,330
Software, net			106,516			80,638
Intangible assets, net			161,134			204,267
Deferred tax assets			109,087			106,374
Other assets			33,362			33,926
Total assets		$	1,388,144		$	1,395,836
Accounts payable and accrued expenses		$	226,497		$	175,544
Deferred revenue, current			61,420			65,506
Total notes payable, net and indebtedness under revolving credit facility, including current portion			130,500			215,500
Operating lease liabilities, current and non-current			43,056			42,573
Convertible senior notes, net			305,609			290,784
Other liabilities			3,341			3,155
Total liabilities		$	770,423		$	793,062
Total stockholders' equity		$	617,721		$	602,774

 

VONAGE HOLDINGS CORP.

TABLE 2. SUMMARY CONSOLIDATED OPERATING DATA

(Dollars in thousands, except per line amounts)

(unaudited)

The table below includes summarized income statement information that our management uses to measure the operating performance of the Vonage Communications Platform focused portion of our business:

Vonage Communications Platform	Three Months Ended												For the Years Ended
	December 31,				September 30,				December 31,				December 31,
		2021				2021				2020				2021				2020
Statement of Operations Data:
Revenues, access and product revenues	$	292,699			$	281,311			$	238,673			$	1,092,267			$	893,076
USF revenues		7,403				6,845				6,056				27,858				21,981
Total revenues		300,102				288,156				244,729				1,120,125				915,057
Operating Expenses:
Service, access and product cost of revenues excluding depreciation and amortization		167,062				152,939				125,214				590,623				455,558
USF cost of revenues		7,403				6,845				6,056				27,858				21,981
Sales and marketing		77,362				83,227				77,083				320,717				329,702
Engineering and development		19,173				16,519				20,181				76,936				73,012
General and administrative		66,720				42,439				38,425				190,936				167,704
Depreciation and amortization		23,412				22,325				24,433				87,872				85,210
		361,132				324,294				291,392				1,294,942				1,133,167
Loss from operations	$	(61,030	)		$	(36,138	)		$	(46,663	)		$	(174,817	)		$	(218,110	)

The table below includes revenues and cost of revenues that our management uses to measure the growth and operating performance of the Vonage Communications Platform focused portion of our business:

Vonage Communications Platform	Three Months Ended												For the Years Ended
	December 31,				September 30,				December 31,				December 31,
		2021				2021				2020				2021				2020
Revenues:
Service revenues	$	286,820			$	274,031			$	230,077			$	1,061,745			$	856,492
Access and product revenues(1)		5,879				7,280				8,596				30,522				36,584
Service, access and product revenues excluding USF		292,699				281,311				238,673				1,092,267				893,076
USF revenues		7,403				6,845				6,056				27,858				21,981
Total revenues	$	300,102			$	288,156			$	244,729			$	1,120,125			$	915,057
Cost of Revenues:
Service cost of revenues(2)	$	158,013			$	144,156			$	114,491			$	552,537			$	413,079
Access and product cost of revenues(1)		9,049				8,783				10,723				38,086				42,479
Service, access and product cost of revenues excluding USF		167,062				152,939				125,214				590,623				455,558
USF cost of revenues		7,403				6,845				6,056				27,858				21,981
Total cost of revenues	$	174,465			$	159,784			$	131,270			$	618,481			$	477,539
Service margin %		44.9	%			47.4	%			50.2	%			48.0	%			51.8	%
Gross margin % excluding USF (Service, access and product margin %)		42.9	%			45.6	%			47.5	%			45.9	%			49.0	%
Gross margin %		41.9	%			44.5	%			46.4	%			44.8	%			47.8	%

(1)	Includes customer premise equipment, access, professional services, and shipping and handling.
(2)	Excludes depreciation and amortization of $16,735, $15,635, $15,331 for the quarters ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively, and $60,966 and $47,701 for the years ended December 31, 2021 and 2020, respectively.

The table below includes key operating data that our management uses to measure the growth and operating performance of the business focused portion of our business:

Vonage Communication Platform	Three Months Ended												For the Years Ended
	December 31,				September 30,				December 31,				December 31,
		2021				2021				2020				2021				2020
Service revenue per customer	$	678			$	657			$	552			$	637			$	516
Vonage Communications Platform revenue churn		0.5	%			0.6	%			1.3	%			0.6	%			1.1	%

The table below includes summarized income statement information that our management uses to measure the operating performance of the Consumer focused portion of our business:

Consumer	Three Months Ended									For the Years Ended
	December 31,			September 30,			December 31,			December 31,
	2021			2021			2020			2021			2020
Statement of Operations Data:
Revenues, access and product revenues	$	57,468		$	60,233		$	68,100		$	246,796		$	292,281
USF revenues		8,735			9,952			10,466			42,094			40,596
Total revenues		66,203			70,185			78,566			288,890			332,877
Operating Expenses:
Service, access and product cost of revenues excluding depreciation and amortization		7,861			8,128			8,480			33,934			35,388
USF cost of revenues		8,735			9,952			10,466			42,094			40,596
Sales and marketing		3,340			3,599			3,017			14,500			12,351
Engineering and development		788			1,117			2,206			3,731			8,472
General and administrative		3,444			1,624			3,144			11,525			14,402
Depreciation and amortization		160			182			420			908			3,707
		24,328			24,602			27,733			106,692			114,916
Income from operations	$	41,875		$	45,583		$	50,833		$	182,198		$	217,961

The table below includes revenues and cost of revenues that our management uses to measure the growth and operating performance of the Consumer focused portion of our business:

Consumer	Three Months Ended												For the Years Ended
	December 31,				September 30,				December 31,				December 31,
		2021				2021				2020				2021				2020
Revenues:
Service revenues	$	57,405			$	60,162			$	68,022			$	246,553			$	292,003
Access and product revenues(1)		63				71				78				243				278
Service, access and product revenues excluding USF		57,468				60,233				68,100				246,796				292,281
USF revenues		8,735				9,952				10,466				42,094				40,596
Total revenues	$	66,203			$	70,185			$	78,566			$	288,890			$	332,877
Cost of Revenues:
Service cost of revenues(2)	$	7,436			$	7,607			$	8,080			$	31,968			$	33,550
Access and product cost of revenues(1)		425				521				400				1,966				1,838
Service, access and product cost of revenues excluding USF		7,861				8,128				8,480				33,934				35,388
USF cost of revenues		8,735				9,952				10,466				42,094				40,596
Total cost of revenues	$	16,596			$	18,080			$	18,946			$	76,028			$	75,984
Service margin %		87.0	%			87.4	%			88.1	%			87.0	%			88.5	%
Gross margin % excluding USF (Service, access and product margin %)		86.3	%			86.5	%			87.5	%			86.3	%			87.9	%
Gross margin %		74.9	%			74.2	%			75.9	%			73.7	%			77.2	%

(1)	Includes customer premise equipment, access, professional services, and shipping and handling.
(2)	Excludes depreciation and amortization of $160, $182, and $124 for the quarters ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively, and $908 and $3,707 for the years ended December 31, 2021 and 2020, respectively.

The table below includes key operating data that our management uses to measure the growth and operating performance of the consumer focused portion of our business:

Consumer	Three Months Ended												For the Years Ended
	December 31,				September 30,				December 31,				December 31,
		2021				2021				2020				2021				2020
Average monthly revenues per line	$	27.82			$	28.47			$	28.13			$	28.50			$	27.77
Subscriber lines (at period end)		779,179				807,265				909,965				779,179				909,965
Customer churn		1.4	%			1.5	%			1.7	%			1.4	%			1.7	%

VONAGE HOLDINGS CORP.

TABLE 3. RECONCILIATION OF GAAP NET LOSS

TO ADJUSTED EBITDA AND TO ADJUSTED EBITDA MINUS CAPEX

(Dollars in thousands)

(unaudited)

	Three Months Ended												For the Years Ended
	December 31,				September 30,				December 31,				December 31,
		2021				2021				2020				2021				2020
Net Loss	$	(22,151	)		$	(2,032	)		$	(13,965	)		$	(24,497	)		$	(36,212	)
Interest expense		6,924				7,045				7,384				28,348				32,160
Income tax		(2,809	)			4,332				10,911				4,435				4,217
Depreciation and amortization		23,572				22,507				24,853				88,780				88,917
Amortization of costs to implement cloud computing arrangements		840				818				938				3,515				2,885
EBITDA		6,376				32,670				30,121				100,581				91,967
Share-based expense		32,325				17,247				11,695				79,900				45,667
Acquisition related transaction and integration costs		10,120				—				—				10,120				—
Organizational transformation (1)		—				—				—				—				5,119
Restructuring activities (2)		—				—				3,731				2,655				18,913
Other non-recurring items (3)		916				944			$	2,654				4,314				8,518
Adjusted EBITDA	$	49,737			$	50,861				48,201			$	197,570			$	170,184
Consumer Adjusted EBITDA	$	43,297			$	45,839			$	52,169			$	186,856			$	227,152
VCP Adjusted EBITDA		6,440				5,022				(3,968	)			10,714				(56,968	)
Adjusted EBITDA		49,737				50,861				48,201				197,570				170,184
Less:
Capital expenditures		(2,214	)			(2,058	)			(2,853	)			(8,996	)			(10,571	)
Intangible assets		(62	)			431				(52	)			256				(312	)
Acquisition and development of software assets		(11,459	)			(11,141	)			(11,584	)			(46,979	)			(41,840	)
Adjusted EBITDA Minus Capex	$	36,002			$	38,093			$	33,712			$	141,851			$	117,461

(1)	The cost identified as "Organizational transformation" are related to the Company's previously announced goal of becoming a pure-play software-as-a-service ("SaaS") company, offering a suite of communications solutions for businesses. These costs include employee related exits including CEO succession, system change management, facility exit costs, and rebranding.
(2)	Restructuring activities relate to the Company's business-wide optimization and alignment project initiated in 2020 and include employee related exits and further facility exit costs executed upon as part of the overall project.
(3)	Other non-recurring items principally include certain litigation charges and other non-recurring project costs such as the review of the Consumer business and the business optimization project, both of which were initiated in 2020.

VONAGE HOLDINGS CORP.

TABLE 4. RECONCILIATION OF GAAP NET LOSS TO

NET INCOME (LOSS) EXCLUDING ADJUSTMENTS

(Dollars in thousands, except per share amounts)

(unaudited) 

	Three Months Ended												For the Years Ended
	December 31,				September 30,				December 31,				December 31,
		2021				2021				2020				2021				2020
Net loss	$	(22,151	)		$	(2,032	)		$	(13,965	)		$	(24,497	)		$	(36,212	)
Amortization of acquisition - related intangibles		10,823				10,733				13,131				43,141				53,539
Amortization of costs to implement cloud computing arrangements		840				818				938				3,515				2,885
Acquisition related transaction and integration costs		10,120				—				—				10,120				—
Amortization of debt discount		3,402				3,349				3,210				13,230				12,532
Organizational transformation (1)		—				—				—				—				5,119
Restructuring activities (2)		—				—				3,731				2,655				18,913
Other non-recurring items (3)		916				944				2,654				4,314				8,518
Tax effect on adjusting items		(6,787	)			(4,120	)			(4,969	)			(20,014	)			(21,316	)
Net (loss) income excluding adjustments	$	(2,837	)		$	9,692			$	4,730			$	32,464			$	43,978
Loss per common share:
Basic and diluted	$	(0.09	)		$	(0.01	)		$	(0.06	)		$	(0.10	)		$	(0.15	)
Weighted-average common shares outstanding:
Basic and diluted		252,791				252,101				248,586				251,500				246,082
Earnings per common share, excluding adjustments:
Basic	$	(0.01	)		$	0.04			$	0.02			$	0.13			$	0.18
Diluted	$	(0.01	)		$	0.04			$	0.02			$	0.12			$	0.17
Weighted-average common shares outstanding:
Basic		252,791				252,101				248,586				251,500				246,082
Diluted		252,791				260,851				258,211				270,831				254,874

(1)	The cost identified as "Organizational transformation" are related to the Company's previously announced goal of becoming a pure-play software-as-a-service ("SaaS") company, offering a suite of communications solutions for businesses. These costs include employee related exits including CEO succession, system change management, facility exit costs, and rebranding.
(2)	Restructuring activities relate to the Company's business-wide optimization and alignment project initiated in 2020 and include employee related exits and further facility exit costs executed upon as part of the overall project.
(3)	Other non-recurring items principally include certain litigation charges and other non-recurring project costs such as the review of the Consumer business and the business optimization project, both of which were initiated in 2020.

VONAGE HOLDINGS CORP.

TABLE 5. FREE CASH FLOW

(Dollars in thousands)

(unaudited)

	Three Months Ended												For the Years Ended
	December 31,				September 30,				December 31,				December 31,
		2021				2021				2020				2021				2020
Net cash provided by operating activities	$	25,304			$	43,886			$	32,449			$	158,711			$	83,880
Less:
Capital expenditures		(2,214	)			(2,058	)			(2,853	)			(8,996	)			(10,571	)
Intangible assets		(62	)			431				(52	)			256				(312	)
Acquisition and development of software assets		(11,459	)			(11,141	)			(11,584	)			(46,979	)			(41,840	)
Free cash flow	$	11,569			$	31,118			$	17,960			$	102,992			$	31,157

VONAGE HOLDINGS CORP.

TABLE 6. RECONCILIATION OF INDEBTEDNESS UNDER REVOLVING CREDIT FACILITY, AND CONVERTIBLE SENIOR NOTES TO NET DEBT

(Dollars in thousands)

(unaudited)

		December 31,			December 31,
		2021			2020
Convertible senior notes, net			305,609			290,784
Notes payable and indebtedness under revolving credit facility, net of current maturities			130,500			215,500
Unamortized debt related costs			3,919			5,512
Unamortized discount on debt			35,472			48,704
Gross debt			475,500			560,500
Less:
Unrestricted cash			18,342			43,078
Net debt		$	457,158		$	517,422

Use of Non-GAAP Financial Measures

This press release includes measures defined as non-GAAP financial measures by Regulation G adopted by the Securities and Exchange Commission, including: adjusted EBITDA, adjusted EBITDA less Capex, adjusted net income, constant currency, net debt (cash), and free cash flow.

Adjusted EBITDA

Vonage uses adjusted EBITDA as a principal indicator of the operating performance of its business.

Vonage defines adjusted EBITDA as GAAP net income (loss) before interest, tax, depreciation and amortization, share-based expense, amortization of costs to implement cloud computing arrangements, acquisition related transaction and integration costs, organizational transformation costs and other non-recurring items. The costs identified as "organizational transformation" are related to the Company's previously announced goal of becoming a pure-play software-as-a-service ("SaaS") company, offering a suite of communications solutions for businesses. These costs include employee related exits, system change management, facility exit costs, and rebranding.

Vonage believes that adjusted EBITDA permits a comparative assessment of its operating performance, relative to its performance based on its GAAP results, while isolating the effects of interest, tax, depreciation and amortization, which may vary from period to period without any correlation to underlying operating performance; of share-based expense, which is a non-cash expense that also varies from period to period; of one-time acquisition related transaction and integration costs, organizational transformation costs and other non-recurring items. Organizational transformation consists principally of costs in connection with exits of employees and facilities, system migration costs and certain professional related fees. Restructuring activities relate to the Company's business-wide optimization and alignment project initiated in 2020 and include employee related exit costs and further facility exit costs executed upon as part of the overall project. Other non-recurring items principally include certain litigation charges and other non-recurring project costs such as the review of the Consumer business and the business optimization project, both of which were initiated in 2020.

The Company provides information relating to its adjusted EBITDA so that investors have the same data that the Company employs in assessing its overall operations. The Company believes that trends in its adjusted EBITDA are valuable indicators of the operating performance of the Company on a consolidated basis.

The Company does not reconcile its forward-looking adjusted EBITDA to the corresponding GAAP measure of net income because stock-based compensation expense and other non-recurring items cannot be reasonably calculated or predicted at this time as they may be significantly impacted by future events, the timing and nature of which cannot be reasonably calculated or predicted at this time.  Accordingly, a reconciliation is not available without unreasonable effort.

Adjusted EBITDA less Capex

Vonage uses adjusted EBITDA less Capex as an indicator of the operating performance of its business. The Company provides information relating to its adjusted EBITDA less Capex so that investors have the same data that the Company employs in assessing its overall operations. The Company believes that trends in its Adjusted EBITDA less Capex are valuable indicators of the operating performance of the Company on a consolidated basis because they provide our investors with insight into current performance and period-to-period performance.

Adjusted net income

Vonage defines adjusted net income, as GAAP net income (loss) excluding amortization of acquisition-related intangible assets, amortization of costs to implement cloud computing arrangements, acquisition related transaction and integration costs, amortization of debt discount, organizational transformation costs, other non-recurring items and tax effect on adjusting items.

The Company believes that excluding these items will assist investors in evaluating the Company's operating performance and in better understanding its results of operations as amortization of acquisition-related intangible assets is a non-cash item, one-time acquisition related transaction and integration costs, organizational transformation, other non-recurring items, and tax effect on adjusting items are not reflective of operating performance. Organizational transformation consists principally of costs in connection with exits of employees and facilities, system migration costs and certain related professional fees. Other non-recurring items principally include certain litigation charges and other non-recurring project costs.

Constant Currency

Vonage reviews its results of operations on both an as reported and on a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period local currency financial results using the prior period exchange rates and comparing these adjusted amounts to our prior period reported results.

Net debt (cash)

Vonage defines net debt (cash) as indebtedness under revolving credit facility, convertible senior notes, discount on debt, and debt related costs less unrestricted cash.

Vonage uses net debt (cash) as a measure of assessing leverage, as it reflects the gross debt under the Company's credit agreements and capital leases less cash available to repay such amounts. The Company believes that net cash is also a factor that first parties consider in valuing the Company.

Free cash flow

Vonage defines free cash flow as net cash provided by operating activities minus capital expenditures, purchase of intangible assets, and acquisition and development of software assets.

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, after 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 such as debt service that are not deducted from the measure.

The non-GAAP financial measures used by Vonage may not be directly comparable to similarly titled measures reported by other companies due to differences in accounting policies and items excluded or included in the adjustments, which limits its usefulness as a comparative measure. These non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.

The Company does not reconcile its forward-looking adjusted business total revenue and adjusted business service revenue to the corresponding GAAP measures due to the significant variability and difficulty in making accurate forecasts with respect to the various acquisition-related and one-time events that we exclude, as they may be significantly impacted by future events the timing and nature of which are difficult to predict or are not within the control of management.  As such, the Company has determined that reconciliations of these forward-looking non-GAAP financial measures to the corresponding GAAP measures is not available without unreasonable effort.

Safe Harbor Statement

This press release contains forward-looking statements, including statements about future financial results, growth priorities or plans, revenues, adjusted EBITDA, churn, seats, lines or accounts, average revenue per customer, cost of communications services, capital expenditures, new products and related investment, and other statements that are not historical facts or information, that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. In addition, 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 the 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, but are not limited to: the competition we face; the expansion of competition in the cloud communications market; incremental business, regulatory, and reputational risks related to the pending Ericsson merger; timing and satisfaction of the closing conditions related to the Ericsson merger; our ability to adapt to rapid changes in the cloud communications market; realizing the expected benefits of our business optimization or other cost-savings plans; risks related to the acquisition or integration of businesses we have acquired; our ability to scale our business and grow efficiently; the nascent state of the cloud communications for business market; our ability to retain customers and attract new customers cost-effectively; developing and maintaining effective distribution channels; risks associated with sales of our services to medium-sized and enterprise customers; the effects of COVID-19 on our business; our reliance on third-party hardware and software; our dependence on third-party vendors; reliance on third parties for our 911 services; the impact of fluctuations in economic conditions, particularly on our small and medium business customers; the effects of significant foreign currency fluctuations; developing and maintaining market awareness and a strong brand; retaining senior executives and other key employees; security breaches and other compromises of information security; system disruptions or flaws in our technology and systems; our ability to comply with data privacy and related regulatory matters; unfavorable litigation or governmental investigations; our ability to obtain or maintain relevant intellectual property licenses or to protect our trademarks and internally developed software; fraudulent use of our name or services; intellectual property and other litigation that have been and may be brought against us; rapid developments in global API regulation and uncertainties relating to regulation of VoIP services; liability under anti-corruption laws or from governmental export controls or economic sanctions; risks associated with the taxation of our business; governmental regulation and taxes in our international operations; our history of net losses and ability to achieve consistent profitability in the future; our ability to fully realize the benefits of our net operating loss carry-forwards if an ownership change occurs; actions of activist shareholders; restrictions in our debt agreements that may limit our operating flexibility; our ability to obtain additional financing if required; risks associated with the settlement and conditional conversion of our Convertible Senior Notes; potential effects the capped call transactions may have on our stock in connection with our Convertible Senior Notes; certain provisions of our charter documents; and other factors that are set forth in the "Risk Factors" in our Annual Report on Form 10-K and in the Company's Quarterly Reports on Form 10-Q filed with the SEC. While the Company may elect to update forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so except as required by law, and therefore, you should not rely on these forward-looking statements as representing the Company's views as of any date subsequent to today.