Vonage Reports Second Quarter 2021 Financial Results

-Vonage Communications Platform (VCP) Service Revenues Grew 23% Year over Year
-Company Raises Full-year VCP Revenue and Adjusted EBITDA Guidance

Vonage Holdings Corp.  a global leader in cloud communications helping businesses accelerate their digital transformation, announced results for the quarter ended June 30, 2021.

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Second Quarter 2021 Highlights:

• Vonage Communications Platform Revenues of $276 million
  • VCP Service Revenues increased 23%
  • API Revenues increased 40%
  • Unified Communications & Contact Center Service Revenues increased 7%
• Consolidated Net Income of $62 thousand and Adjusted EBITDA of $49 million
• VCP adjusted EBITDA of $1 million marks the first quarter of VCP profitability

“We had a strong second quarter, demonstrating our continued operational execution and delivery against our strategic transformation plan. Our growth is being driven by product innovation and a stronger go-to-market focus in the areas where our products bring the greatest value to our customers, and we can win a disproportionate share of the market,” said Rory Read, Chief Executive Officer. “In the quarter, VCP service revenues increased 23% year over year. API revenues grew 40% driven by strong growth from new and existing customers, and broad-based demand across geographies, verticals and customer size.”

“Unified Communications (UC) and Contact Center (CC) service revenue growth increased to 7% in the second quarter. We continue to see an increasing need for combined UC and CC solutions, and 10 out of our top 15 deals in the quarter included an integrated UC and CC solution. Based on our pipeline, bookings, and improved execution, we are well positioned to accelerate revenue growth to the high single digits in the fourth quarter, and double digits growth in 2022.”

Read continued, “Customer needs are rapidly growing across their communications and engagement platforms, driven by secular tailwinds like cloud migration, digital transformation, and more recently, hybrid working models. Vonage is in a unique position to offer comprehensive Unified Communications, Contact Center and programmable APIs through our Vonage Communications Platform to meet these needs.”

Second Quarter 2021 Vonage Communications Platform Highlights (compared to the year-ago quarter)

• Vonage Communications Platform revenues, which consist of Unified Communications, Contact Center and API revenues, were $276 million. VCP service revenues were $260 million, a 23% increase.
• API revenues grew 40% driven by broad-based demand across geographies, verticals and customer size, and dollar-based net expansion (DBNE) was 125%.
• Unified Communications and Contact Center service revenues grew 7%, ahead of expectations.
• VCP Service Revenue per Customer was $632 per month, up 24%.
• VCP Service Revenue Churn of 1.0% was essentially flat.

Second Quarter 2021 Consumer Segment Results (compared to the year-ago quarter)

• Consumer Revenues were $75 million, down 11%.
• Customer churn was unchanged at 1.5%.
• Average revenue per line (ARPU) was $29.37, an increase of $1.78.
• Ended the quarter with approximately 836 thousand consumer subscriber lines
  • 95% of these customers are tenured over two years and 81% are tenured over five years.

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Product Innovation

• Increased Vonage Video API session size to 5,000 active participants and launched Multi-party Video SDK to serve the online learning, events and other markets.
• Launched regional media zones to expand country coverage for Vonage’s Video API.
• Enhanced Vonage’s Messages API with HIPAA compliance to serve the healthcare market.
• Released 50+ enterprise-grade Vonage Business Communications (UC) calling and messaging features for Microsoft Teams integration.
• Launched Vonage Contact Center (CC) integration with Salesforce for Service Cloud Voice for Partner Telephony.

Industry Accolades

• Named a Leader in the IDC MarketScape: Worldwide CPaaS 2021 Vendor Assessment.
• Named a Leader in the Aragon Research Globe™ for Unified Communications and Collaboration, 2021.
• Recognized by Gartner Peer Insights ‘Voice of the Customer’: UCaaS Worldwide Report.
  • Vonage received a 94% Willingness to Recommend score from customers and a rating of 4.7/5.0 in the Product Capability category.
• Named by Salesforce.org as winner of its 2021 Cross-Industry Independent Software Vendor (ISV) Partner of the Year EMEA Award for the second consecutive year.

Consolidated Income and Balance Sheet

For the second quarter of 2021, Vonage reported consolidated revenues of $351 million, up from $311 million in the year-ago quarter. GAAP net income was $62 thousand, or $0.00 per share, versus a net loss of $8 million in the prior-year period, or ($0.03) per share. Second quarter adjusted net income⁽¹⁾ was $13 million or $0.05 per share, up from adjusted net income⁽¹⁾ of $10 million or $0.04 per share in the prior-year period.

For the second quarter, the Company generated Adjusted EBITDA⁽²⁾ of $49 million, and Adjusted EBITDA minus Capex⁽²⁾ of $36 million. Net Cash from Operations was $42 million and Free Cash Flow⁽³⁾ was $29 million for the quarter. As of June 30, 2021, the Company had a Net Debt to Last Twelve Months Adjusted EBITDA ratio of 2.5 times.

Updated 2021 and Third Quarter Outlook

For the full year 2021, the Company now expects the following:

• Vonage Communications Platform segment revenues in the range of $1.095 billion to $1.106 billion; within this:
  • Vonage Communications Platform service revenues are expected to grow in the low 20% area
• Consumer revenues in the $288 million range
• Consolidated revenues in the range of $1.383 billion to $1.394 billion
• Vonage Communications Platform adjusted EBITDA in the range of $4 million to $9 million
• Consumer adjusted EBITDA in the $185 million range
• Consolidated adjusted EBITDA in the range of $189 million to $194 million
• Capex in the $65 million range

For the third quarter of 2021, Vonage expects the following:

• Vonage Communications Platform revenues in the range of $276 million to $280 million
  • Vonage Communications Platform service revenues are expected to grow in the low 20% area
• Consumer revenues in the $69 million range
• Consolidated revenues in the range of $345 million to $349 million
• Vonage Communications Platform adjusted EBITDA in the $1 million to $3 million range
• Consumer adjusted EBITDA in the $45 million range
• Consolidated Adjusted EBITDA in the range of $46 million to $48 million
• Capex in the $16 million range

Conference Call and Webcast

The company will host a conference call to discuss its financial results for the second quarter of 2021 and other matters at 8:30 AM Eastern Time. To participate, please dial (877) 407-9716. International callers should dial (201) 493-6779.

A live webcast of the conference call will be available on the Vonage Investor Relations website. A replay of the webcast will also be available shortly after the conclusion of the call, and may be accessed through Vonage’s Investor Relations website or by dialing (844) 512-2921 or (412) 317-6671 for international callers, and entering the passcode 13714228.

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