Vonage Holdings Corp. CEO Discusses Q1 2012 Results - Earnings Call Transcript

Vonage Holdings Corp. (VG)

Q1 2012 Earnings Call

May 2, 2012 10:00 a.m. ET

Executives

Leslie Arena - VP IR

Marc Lefar - CEO

Barry Rowan - CFO

Analysts

Mike Latimore - Northland Capital

Robert Routh - Phoenix Partners

Michael Rollins - Citi

Presentation

Operator

Good day, everyone, and welcome to Vonage Holdings Corp. First Quarter 2012 Earnings Conference Call. Just as a reminder, today's call is being recorded.

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

Leslie Arena

Thank you, operator. Good morning and welcome to our first quarter 2012 earnings conference call. Speaking on our call this morning will be Marc Lefar, Chief Executive Officer and Barry Rowan, CFO.

Marc will discuss the company strategy and progress we are making on our growth initiatives and Barry will review our financial results. Slides that accompany Barry's discussion are available on the IR 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 expectations and depend on assumptions 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 slides and contained in our SEC filings. We caution listeners not to rely unduly on forward-looking statements and disclaims any intent or obligation to update them.

During this call, we will be referring to non-GAAP financial measures. A reconciliation to GAAP measures is available on the IR website.

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

Marc Lefar

Thank you, Leslie, and good morning, everyone. We entered 2012 with a financially strong business, characterized by strong flow, our lowest cost structure in six years and a clean balance sheet. With a stable core business, we're continuing to focus our effects to drive revenue in three major areas.

The first, is international long distance, where we will build on our success through continued penetration of ethnic calling segments and expanded distribution. The second, is mobile services, which builds on the recently launched Vonage Mobile platform. And third, is international expansion as we enter new geographic markets outside North America and the UK through strategic partnerships.

In the past year, Vonage world customers have grown from 43% of our base to nearly 50% today. Our base of active international callers now comprises 35% of all customers. In recent months, we continued to grow our international long distance space driven by our continued efforts in Hispanic segment. In the first quarter, we experienced 6% growth in the number of callers to Mexico and Central America.

This builds upon our success that began in 2011 with the launch of our end-to-end Spanish language experience for our customers. This capability has contributed to an increase of 60% in monthly usage to Mexico, the Caribbean and Latin America since the beginning of 2011.

In addition, we've expanded the number of community sales teams and broadened our retail distribution. These channels now deliver over 20% of total sales primarily in key ethnic segments.

In the very near future, we will enhance our current service offerings to better meet the needs of the estimated 700,000 people of Pakistani decent living in the United States and the many millions of Latinos that call internationally to mobile phones.

Although not yet material to our overall financial results, let me take a moment to talk about the tangible progress that we've made in our mobile and international expansion efforts where we've reached several key milestones since the beginning of this year.

On February 8, we launched the Vonage Mobile app. For those of you not familiar with the app, Vonage Mobile is a free downloadable application for iPhone and Android that let's users make free, high definition calls and send free texts to all users of the app worldwide.

It works over Wi-Fi, 3G and 4G wireless data networks. When calling people who don't have the app, users get low cost calling worldwide with pay-per-minute rates that are on average 70% less than major mobile carriers and 30% less than Skype.

With over one million downloads in roughly eight weeks, we are approaching usage of over 10 million minutes per month. While pleased with the first version, we do see opportunities for improvement and we've been steadily updating the app to enhance ease of use, functionality and performance. We've already implemented four releases for IOS and five releases for Android. Just yesterday, we released an update to the app that enhances our messaging solution to allow photos and location sharing and sharing of the app with friends on Facebook and Twitter.

Connection quality, load times when opening the app and battery life are top priorities we are continuing to address. In the coming months, we will add desirable features such as Bluetooth and a low cost international roaming capability that will allow customers traveling outside their home country to avoid high roaming fees.

In addition, we plan to launch standalone mobile services for customers without Smartphones including low cost international calling plans.

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