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Vonage Holdings Corp. Reports Third Quarter 2009 Results.

Article Excerpt
- Adjusted EBITDA(1) Increases to $33 Million - - Net Income Excluding Adjustments(2) Increases to $5 Million or $0.03 per Share - - Vonage World Subscribers Exceed 400,000 - - Company Reports Revenue of $222 Million -

HOLMDEL, N.J., Nov. 4 /PRNewswire-FirstCall/ -- Vonage Holdings Corp. , a leading provider of high-quality voice and messaging services over broadband networks, today announced results for the third quarter ended September 30, 2009.

Vonage reported record adjusted earnings before interest, taxes, depreciation and amortization ("EBITDA")(1) of $33 million, up from $15 million in the year ago quarter and $31 million sequentially. This is the eighth consecutive quarter of record high adjusted EBITDA.

Revenue of $222 million was down 2% year-over-year, and up 1% sequentially. The Company generated net income, excluding adjustments(2), of $5 million or $0.03 per share. This is an improvement from a net loss of $8 million in the third quarter of 2008 and net income, excluding adjustments of $1 million, sequentially.

As a result of the sharp increase in the price of Vonage's stock during the quarter, the conversion feature of the Company's third lien convertible notes increased in value. GAAP accounting requires the Company to take a mark-to-market charge as a result of this increase. Net loss was $55 million or $0.33 per share, driven primarily by the $63 million non-cash charge associated with the conversion feature. This compares to a net loss of $8 million in the third quarter of 2008 and net income of $2 million sequentially.

Marc Lefar, Vonage Chief Executive Officer, said, "We generated strong financial results during the quarter as Vonage again produced record level adjusted EBITDA on higher sequential revenue."

"Despite economic challenges and the impact of wireless substitution, our subscriber base grew during the latter part of the quarter as the new Vonage World service gained traction. We also continued to make progress against initiatives launched last year to enhance the value of our core product, reduce costs and improve the customer experience."

"The market response to Vonage World, which provides unlimited calling to more than 60 countries, was very strong. Average weekly gross line additions in the final six weeks of the quarter were more than double the previous seven weeks of the quarter."

"In October, we released Vonage Mobile, our first mobile calling application for smartphones. This application is focused on the international calling market and provides significant improvements in convenience and savings versus calling cards and wireless carriers. Vonage Mobile works over cellular and Wi-Fi networks. Over the next few months, we expect to launch Vonage World for Mobile, a flat-rate plan that mirrors the Vonage World residential plan. Discounts for customers of both services are planned. Vonage Mobile is available as a free download on the iPhone(R), BlackBerry(R), and iPod touch(R)."

Vonage World

In August 2009, the Company launched Vonage World. There are more than 400,000 subscribers on the World plan today, including new Vonage subscribers and existing customers who have migrated from other plans.

Key indicators which correlate to lower churn are showing positive trends: -- Return rates for new Vonage World customers in the first 30 days are nearly half that...