26 February 2009

HOLMDEL, N.J., Feb 26, 2009 /PRNewswire-FirstCall via COMTEX News Network/ -- Vonage Holdings Corp. (NYSE: VG), a leading provider of broadband telephone service, today announced results for the quarter and year ended December 31, 2008.

Full Year 2008

Revenue increased to $900 million for the year, up 9 percent from $828 million in 2007. Net loss excluding debt extinguishment costs(2) narrowed to $34 million from $93 million excluding certain charges(2). GAAP net loss was $65 million or $0.41 per share in 2008.

Marc Lefar, Vonage Chief Executive Officer, said, "We improved our financial position throughout 2008, and for the first time in Vonage's history, delivered adjusted operating profit and positive cash from operations for a full year. Vonage also delivered record level pre-marketing operating income(1) reflecting increasing levels of cash generated by the existing customer base. This progress occurred despite the uncertainty and challenges of the current economy."

"While our financial performance was sound, we fell short in our ability to substantially grow our subscriber base. However, we are confident Vonage has significant opportunities to create future value for shareholders," Mr. Lefar said. "Not only is the business model solid, but the market opportunity for digital voice remains robust."

Mr. Lefar noted the company is implementing strategic imperatives across the enterprise to focus the company's resources and yield meaningful results that are expected to accelerate throughout the year.

"We are launching a range of initiatives," he said, "including improving the customer experience; enhancing our distribution and marketing; improving quality and reliability; initiating new products and features; optimizing our cost structure; and improving talent management."

"We are secure these actions will drive Vonage forward as a business model poised to achieve significant new growth."

Fourth Quarter 2008

Net loss excluding debt extinguishment costs(2) narrowed to $10 million in the fourth quarter 2008 from $12 million excluding certain charges the prior year. Including $31 million in debt extinguishment costs, GAAP net loss increased to $41 million or $0.26 per share in the fourth quarter 2008 from $14 million or $0.09 the prior year.

Revenue in 2008 increased 3 percent from the prior year to $222 million driven by an increase in average revenue per line ("ARPU") and subscriber lines. Revenue declined 2 percent sequentially as a result of a decline in ARPU.

ARPU was $28.33, up from $28.19 in the year-ago quarter and down from $28.75 sequentially. Telephony services ARPU was $27.28, down from $27.42 reported a year ago and $27.52 sequentially. The sequential decline in telephony services ARPU was the result of a decline in currency value of the Canadian dollar and British pound and an adjustment in international revenue which totaled $0.33. Excluding these impacts, telephony services ARPU increased $0.09 sequentially.

The Company lost 14,700 net subscriber lines, finishing the quarter with more than 2.6 million lines in service. Churn declined to 2.9% from 3.0% sequentially.

For the eighth consecutive quarter, pre-marketing operating income excluding certain charges(1) ("PMOI"), increased, climbing to a record high $92 million in the fourth quarter 2008. This is up from $81 million excluding certain charges(1) in the year-ago quarter and $91 million sequentially. On a per line basis, PMOI increased to $11.70, up from $10.52 excluding certain charges in the year-ago quarter and $11.55 sequentially.

Direct cost of telephony services increased to $57 million, up from $54 million in the prior year and flat sequentially. On a per line basis, direct cost of telephony services was $7.22, up from $7.11 in the year ago quarter and $7.20 sequentially.

Direct cost of goods sold was $18 million, up slightly from $17 million in the year-ago quarter and down from $21 million sequentially. Direct margin(3) of 66% was flat on a year-over-year and sequential basis.

Selling, general and administrative ("SG&A") expense fell to $69 million from $77 million excluding certain charges(4) in the prior year and $73 million sequentially. For the fifth consecutive quarter, excluding certain charges, SG&A as a percent of revenue declined, falling to 31% from 36% in the year ago quarter and 32% sequentially.

Marketing expense of $62 million was flat on a year-over-year basis and down $3 million sequentially. Marketing cost per gross subscriber line addition ("SLAC") rose to $309 from $272 in the third quarter 2008.

For the first time in its history, Vonage reported positive operating income, generating $3 million in operating income, up from operating losses of $9 million in the year-ago quarter and $3 million sequentially.

Cash, marketable securities and restricted cash on December 31, 2008 was $86 million. Cash used for operations was $6 million. Capital expenditures for the quarter were $6 million.

Vonage LLC

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