Vonage Holdings beats analysts with Q2 earnings record

Buoyed by reducing its interest expenses by $7 million and $7 million in additional income from operations, Internet phone service provider Vonage reported second quarter earnings that beat analyst estimates, despite a dip in revenue.

The VoIP provider reported net income of $22 million, or 9 cents per share, up from a net loss of $1 million a year ago; adjusted earnings were 10 cents per share. Its revenue was $218 million, down from $225.3 million a year ago. Analysts had expected revenue of $220.6 million and earnings of 8 cents per share.

But dropping ARPU and more competition in the form of a Microsoft-backed Skype, as well as the drop in quarterly revenue could be a problem for the company, which is forecasting growth in subscriber additions for 2011 and EDITDA of $165 million for the year.

The company also faces stiff competition from Google, 8x8, magicJack and other, smaller outfits.

Vonage Chief Executive Marc Lefar said the company is laying a foundation for future growth that would stand up to the increased competition.

"The launches of Extensions and Time to Call enhance our domestic and global service offerings for landline and mobile customers," Lefar said. "Beyond this, we've expanded the availability of our service through agreements with TracFone, Best Buy, Kmart and Sears. And, as a result of our strong financial performance, we have refinanced our debt for the second time in eight months. These are meaningful steps."

Vonage announced completion of a $120 million debt refinancing, which reduced interest rates to LIBOR plus 3.5 percent, resulting in annual savings of $43 million from 2010, allowing the company to look at potential acquisitions in coming months.

The company generated record high adjusted EBITDA of $44 million, up from $41 million in the year-ago quarter and $43 million sequentially. Income from operations increased to $31 million from $24 million in the year-ago quarter and $30 million sequentially.

The $22 million income was a record for the company.

For more:
- see this release
- see this article

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