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

May 07, 2010 | About:
10qk

10qk

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Vonage Holdings Corp. (VG) filed Quarterly Report for the period ended 2010-03-31.

Vonage Holdings Corp. has a market cap of $328 million; its shares were traded at around $1.64 with a P/E ratio of 82 and P/S ratio of 0.4. VG is in the portfolios of Jim Simons of Renaissance Technologies LLC, Steven Cohen of SAC Capital Advisors.

Highlight of Business Operations:

From March 2, 2010 through March 24, 2010, we received Notices of Conversion from certain holders of our 20% senior secured third lien notes due 2015 (the Convertible Notes) indicating their desire to convert a portion of the Convertible Notes. The Convertible Notes were converted into shares of our common stock at a rate equal to 3,448.2759 shares for each $1,000 principal amount of Convertible Notes, or approximately $0.29 per share. During the quarter ended March 31, 2010, we received Notices of Conversion of $3,095 principal amount. In the aggregate, during 2009 and 2010, $15,400 principal amount of Convertible Notes were converted into 53,103 shares of our common stock.

On April 22, 2010, we offered to prepay loans under the 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 March 31, 2010 was $48,064. While certain holders of loans under the First Lien Senior Facility waived their right to receive the prepayment as permitted under the Credit Documentation, the $24,032 offered was paid on April 27, 2010 to holders that did not waive the prepayment. Of this amount $23,187 was applied to the outstanding principal balance and $845 was applied to accrued but unpaid interest. A loss on extinguishment, representing unamortized debt discount and debt related costs, of approximately $4,000 will be recorded in the three-month period ending June 30, 2010 as a result of this prepayment.

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 $31.37 for the three months ended March 31, 2010 compared to $28.86 for the three months ended March 31, 2009. This increase was due primarily to pricing actions that we have taken in the past year. We do not expect average revenue per line to continue to increase in the second quarter due to greater second quarter impact of a pricing promotion that began in March 2010.

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 $30.90 for the three months ended March 31, 2010 from $27.78 for the three months ended March 31, 2009. This increase was due primarily to pricing actions that we have taken in the past year.

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 $8.60 for the three months ended March 31, 2010 compared to $6.67 for the three months ended March 31, 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 year as customer demand for Vonage World continues to grow.

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 $318.26 for the three months ended March 31, 2010 compared to $289.90 for the three months ended March 31, 2009 primarily due to increasing competition including wireless substitution and customer acquisition and targeting efforts not being as effective as planned.

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