Vonage Holdings Corp. Q2 2010 Earnings Call Transcript

Vonage Holdings Corp. Q2 2010 Earnings Call Transcript
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Vonage Holdings Corp. (VG)

Q2 2010 Earnings Call

August 04, 2010 10:00 a.m. ET

Executives

Leslie Arena - VP, IR

Marc Lefar - CEO

Barry Rowan - EVP, CFO & CAO

Analysts

Kevin Tumi - Citi Investments

Mike Latimore - Northland Capital

Presentation

Operator

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Good day, everyone and welcome to the Vonage Holdings Corporation Second Quarter 2010 Earnings Conference Call. Just as a reminder, today's is being recorded.

At this time, for opening remarks and introduction, I would like to turn the conference over to Ms. Leslie Arena, Vice President of Investor Relations. Please go ahead.

Leslie Arena

Thank you. Good morning and welcome to our second quarter 2010 conference call. Speaking on our call this morning will be Marc Lefar, Chief Executive Officer; and Barry Rowan, CFO and Chief Administrative Officer. Marc will discuss the company's progress in the quarter and our newly announced Vonage Mobile app for Facebook. Barry will discuss our financial results. Slides that accompany Barry's discussion are available on the Investor Relations website. At the conclusion of our prepared remarks, we will be happy to take your questions.

As referenced on slide 2, I would like to remind everyone that statements made during this call that are not historical facts or information may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These and all forward-looking statements are based on management's current beliefs and expectations and depend on assumptions or data that may be incorrect or imprecise.

Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially. More information about those risks and uncertainties is highlighted on the second page of the slide and contained in Vonage's SEC filings. We caution listeners not to rely unduly on forward-looking statements, and we disclaim any intent or obligation to update them.

During this call, we will be referring to non-GAAP financial measures. A reconciliation of these measures to comparable GAAP measures is available on the Investor Relations website.

And now, I will turn the call over to Marc.

Marc Lefar

Thank you Leslie and thank you all for joining our call today. It's our pleasure to update you on our continuing transformation progress and our operating results for the quarter.

We reported a very strong quarter on many fronts with record-high EBITDA and cash flow generated from operations and solid progress on our balance sheet. At the same time, we took concrete steps that laid the foundation for our future growth. We had a key individuals to our executive team and Board of Directors, launched our exciting new Mobile application for Facebook users and continue to improve the customer experience, reducing churn to its lowest level in three and a half years.

We generated $41 million in EBITDA, a 30% increase in the prior year in our 11th consecutive quarter of increasing EBITDA and generated record-high free cash flow of $81 million during the quarter. We continue to improve the balance sheet as we retired $18 million of debt at par. This is an addition to the $23 million retired last quarter. Taken together, these actions reduced interest expense by $33 million over the life of the loans, this is significant progress.

Operationally, we reduce churns at 2.3% and stabilize our customer base with a modest loss of 5,000 net lines. And we continue to build our team with experienced technology leaders that will expand the capabilities of our network and deliver breakthrough services. In May, we announced the appointment of Amichay Oren, Head of Research and Development. Amichay previously held senior role at JaJah and SAP following SAP's acquisition of Expression, a company that Mr. Oren co-founded.

And yesterday, we announced the additional of Dr. David Nagel to our Board of Directors. Dr. Nagel is widely know for his deep technical background and has helped senior leadership position in consumer technology companies including Apple, AT&T and Palm. He was most recently President and CEO of PalmSource and prior to that, he was Chief Technology Officer AT&T and President of AT&T Labs. We're very pleased to have enjoying the Board.

The decision by these talented individuals to join Vonage is a testament to the attractiveness of our strategy and our commitment to executing on it. Amichay and his team, along with many other Vonage employees are already contributing to the implementation of our vision, they were instrumental and enabling a launch of our new Mobile application for Facebook.

If you look and see the press release, early this morning, we announced an innovative service, allows users with our application to make and receive free mobile calls between Facebook friends anywhere in the world, directly from there friends list with a single touch. It works on WiFi, 3G and 4G networks and is available for the iPhone, iPad -- iPod Touch and Android devices; an iPad app is coming soon.

This new service works for the users existing networking of Facebook friends, so there is no need to remember screen names, to input numbers or create a new user name and a new community. The user simply logs in with there Facebook credentials one time and there friends become here contact list for free calling.

In the past I've talked about how a single familiar identity, such as a user name or number, allows a person to initiate and receive calls and messages for there existing social network or contact list, while on any device. This application brings that concept to life and is a good example of our long term commitment, to deliver great value and a better communication experience.

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