Vonage posts profit on one-time charge, but higher churn for Q1

Vonage reported first-quarter earnings Thursday, showing a $5 million profit due to a one-time charge, but higher churn, which put net subscriber lines down more than 6,000 for the quarter. Excluding the one-time, $13 million mark-to-market adjustment for price changes in the company's convertible debt, the company would have reported a net loss of $7.7 million on revenue of $224 million, which was down from the $10.3 million loss the company posted in the fourth quarter of 2008.

While Vonage's ARPU crept up by $0.50 to $28.86 and it brought its customer acquisition cost down $19 to $290 when compared to the previous quarter, its churn increased from 2.9 percent to 3.1 percent. Vonage also appears to have cut about 5 percent of its workforce, as the company ended the quarter with 1,413 employees, down from 1,491 at the end of 2008.

"We continued to improve our financial performance during the first quarter of 2009, with solid gains in adjusted EBITDA as well as increased cash flow from our existing customer base," CEO Marc Lefar said. "We also expanded initiatives during the quarter to improve productivity and reduce costs across the company, while continuing to invest in new growth opportunities including mobile applications and international products and services."

In the earnings release, Vonage announced it has tapped TBWA/Chiat/Day, "a firm known for creating impactful messaging on highly regarded brands," to launch a new marketing campaign for Vonage in the second quarter. It is a questionable decision for Vonage, as the company likely will increase its marketing cost per customer acquisition, a serious drag on the company's bottom line that it appeared to be intent on reducing this quarter. Churn remains a problem as well, and will have to be reduced from current levels for the company to see sequential growth.

For more:
- see the Vonage earnings release here [1]