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

September 04, 2009 | About:
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Vonage Holdings Corp. (VG) filed Amended Quarterly Report for the period ended 2009-03-31.

VONAGE HOLDINGS CORP. is a leading provider of digital phone services with over two million subscriber lines. Their award-winning technology enables anyone to make and receive phone calls with a touch tone telephone almost anywhere a broadband Internet connection is available. They offer feature-rich and cost-effective communication services that offer users an experience similar to traditional telephone services.The Residential Premium Unlimited and Small Business Unlimited calling plans offer consumers unlimited local and long distance calling and popular features like call waiting call forwarding and voicemail - for one low flat monthly rate. Vonage's service is sold on the web and throughnational retailers including Best Buy Circuit City Wal-Mart Stores Inc. and Target and is available to customers in the U.S. Canada and the United Kingdom. Vonage Holdings Corp. has a market cap of $235.3 million; its shares were traded at around $1.5 with and P/S ratio of 0.3.

Highlight of Business Operations:

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 slightly to $28.86 for the three months ended March 31, 2009 compared to $28.85 for the three months ended March 31, 2008. This increase is due to incremental customer equipment revenue, incremental international volume, lower credit activity and the benefit of incremental amortization of activation fees due to the change in the average customer relationship period partially offset by lower subscription fees due to changes in plan mix, foreign currency and incremental bad debt. This increase includes a benefit of $0.19 due to the adjustment of the opening subscriber line count.

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 decreased to $27.78 for the three months ended March 31, 2009 from $27.87 for the three months ended March 31, 2008. This decrease includes a benefit of $0.18 due to the adjustment of the opening subscriber line count.

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 $6.67 for the three months ended March 31, 2009 compared to $7.26 for the three months ended March 31, 2008 due primarily to the decrease in customer base and better rates from our service providers. This decrease includes a $0.04 increase due to the adjustment of the opening subscriber line count.

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 increased to $289.90 for the three months ended March 31, 2009 compared to $216.47 for the three months ended March 31, 2008 due primarily to our plan to spend more to grow our business and a reduction in gross subscriber line additions compared to the prior year primarily due to increasing wireless substitution, worsening economic conditions and customer acquisition and targeting efforts not being as effective as planned.

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