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Vonage Holdings Corp. Reports Operating Results (10-Q)

August 05, 2010 | About:
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10qk

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Vonage Holdings Corp. (VG) filed Quarterly Report for the period ended 2010-06-30.

Vonage Holdings Corp. has a market cap of $478.7 million; its shares were traded at around $2.27 with a P/E ratio of 17.5 and P/S ratio of 0.6. VG is in the portfolios of Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

On July 16, 2010, we offered to prepay loans under our senior secured first lien credit facility (the First Lien Senior Facility) in an aggregate amount equal to 50% of Consolidated Excess Cash Flow (as defined in the Credit Documentation). Consolidated Excess Cash Flow for the three months ended June 30, 2010 was $81,551. While certain holders of loans under the First Lien Senior Facility waived their right to receive the prepayment as permitted under the Credit Documentation, $4,655 was paid on July 21, 2010 to holders that did not waive the prepayment. Of this amount, $4,499 was applied to the outstanding principal balance and $156 was applied to accrued but unpaid interest. In addition, we offered to prepay loans under our senior secured second lien credit facility (the Second Lien Senior Facility) in an aggregate amount equal to amounts waived under the First Lien Senior Facility prepayment offer. While certain holders of loans under the Second Lien Senior Facility waived their right to receive the prepayment as permitted under the Credit Documentation, $13,281 was paid on July 21, 2010 to holders that did not waive the prepayment. Of this amount, $13,128 was applied to the outstanding principal balance and $153 was applied to accrued but unpaid interest. A loss on extinguishment, representing acceleration of unamortized debt discount, debt related costs, and administrative agent fees, of approximately $731 for the First Lien Senior Facility and $813 for Second Lien Senior Facility will be recorded in the three-month period ending September 30, 2010 as a result of the prepayments. As a result of these prepayments, together with a prepayment in April 2010, we reduced the principal amount of the First Lien Senior Facility and the Second Lien Senior Facility by an aggregate of $40,814.

Average monthly revenue per line. Average monthly revenue per line for a particular period is calculated by dividing our total revenue for that period by the simple average number of subscriber lines for the period, and dividing the result by the number of months in the period. The simple average number of subscriber lines for the period is the number of subscriber lines on the first day of the period, plus the number of subscriber lines on the last day of the period, divided by two. Our average monthly revenue per line increased to $31.21 for the three months ended June 30, 2010 compared to $28.88 for the three months ended June 30, 2009. This increase was due primarily to an increase in the number of customers signing up for higher priced rate plans, pricing actions that we have taken in the past year, and improved customer quality that reduced bad debt costs. We do not expect average revenue per line to continue to increase in the second half of the year due to the impact of pricing promotions.

Average monthly telephony services revenue per line. Average monthly telephony services revenue per line for a particular period is calculated by dividing our total telephony services revenue for that period by the simple average number of subscriber lines for the period, and dividing the result by the number of months in the period. Our average monthly telephony services revenue per line increased to $30.71 for the three months ended June 30, 2010 from $28.18 for the three months ended June 30, 2009. This increase was due primarily to an increase in the number of customers signing up for higher priced rate plans, pricing actions that we have taken in the past year, and improved customer quality that reduced bad debt costs.

Average monthly direct cost of telephony services per line. Average monthly direct cost of telephony services per line for a particular period is calculated by dividing our direct cost of telephony services for that period by the simple average number of subscriber lines for the period, and dividing the result by the number of months in the period. We use the average monthly direct cost of telephony services per line to evaluate how effective we are at managing our costs of providing service. Our average monthly direct cost of telephony services per line was $8.72 for the three months ended June 30, 2010 compared to $6.76 for the three months ended June 30, 2009, due primarily to higher costs from higher international call volume associated with Vonage World, partially offset by more favorable rates negotiated with our service providers. Direct cost of telephony services is expected to continue to increase during the second half of the year as the usage from our growing base of Vonage World customers is expected to more than offset the savings on more favorable rates.

Marketing cost per gross subscriber line addition. Marketing cost per gross subscriber line addition is calculated by dividing our marketing expense for a particular period by the number of gross subscriber line additions during the period. Marketing expense does not include the cost of certain customer acquisition activities, such as rebates and promotions, which are accounted for as an offset to revenues, or customer equipment subsidies, which are accounted for as direct cost of goods sold. As a result, it does not represent the full cost to us of obtaining a new customer. Marketing cost per gross subscriber line addition decreased to $318.23 for the three months ended June 30, 2010 compared to $363.01 for the three months ended June 30, 2009, primarily due to reduced marketing spending and an increase in gross subscriber line additions compared to the prior year due to pricing promotions and plan offerings.

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