Vonage posts Q2 gains, announces $50M stock buyback program

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Vonage Holdings Corp. (NYSE: VG), the largest U.S. Internet-based telephony company, on Wednesday announced quarterly earnings that exceeded Wall Street analysts' projections.

Vonage reported second-quarter adjusted earnings of $35 million, up from $32 million in the previous three-month period, but far less than the $44 million posted in the year-ago period.  

The Holmdel, N.J.-based digital phone services provider reported Q2 net income of $21 million, or $0.09 per share, up from $19 million, or $0.08 per share, sequentially, and down from $26 million, or $0.11 per share, a year ago. 

For the three-month period ended June 30, analysts projected Vonage would generate, on average, per-share earnings of $0.07, down 30 percent from the year-ago period, the Wall St. Cheat Sheet reported.

Meanwhile, Vonage's revenue for Q2 totaled $212 million, down from $216 million sequentially, partly because of lower Universal Service Fund fees. The company reported average revenue per user was $29.98, down from $30.42 sequentially, and $30.28 in the year-ago period.

For the current quarter, analysts project, on average, revenue of $212.1 million, nearly 3 percent lower than Q3 2011 revenue. For the full year, analysts expect Vonage to post total revenue of $845.4 million down 3 percent from 2011 total revenue of $870.3 million, according to Zacks Investor Research.

Amid improvements in customer satisfaction, Vonage said customer churn fell to 2.5 percent, from 2.8 percent in Q1 2012.

"Operationally, we continued to improve our core business," Vonage CEO Marc Lefar said. "We substantially lowered churn, reduced customer line losses from the prior quarter, and attracted new international customers with offers targeted to Pakistani and Mexican callers."

Vonage reported its Q2 ratio of assets to liabilities was at 0.65.

"The current ratio is an indication of a firm's liquidity and ability to meet creditor demands and generally, a ratio less than one could indicate a company may have difficulty meeting current obligations," read a Wall St. Cheat Sheet post Wednesday before Vonage posted its financial report.

In its earnings statement, Vonage announced that its board of directors authorized a stock buyback program to repurchase up to $50 million in shares by the end of 2013.

"This reflects our strategy of taking a balanced approach to capital allocation as we invest for growth and deliver value to shareholders, while maintaining ample cash to fund the ongoing operational needs of our business," Lefar said.

In an earnings call with analysts, Lefar touted Vonage's financial health. "Our balance sheet is stronger than it's ever been. We now have essentially no net debt for the first time since 2007. We grew EBITDA by $3 million sequentially to $35 million after investing $4 million in growth initiatives," he noted.

On Wednesday afternoon, shares of Vonage Holdings were at $1.99, down $0.20, or 11.17 percent, in trading on the New York Stock Exchange.

Shares of Vonage have a strong-buy/hold ranking from Zacks Investor Research, which put a $1.80 per-share target price on Vonage stock.

For more:
  - read the Vonage earnings release
  - read the Wall St. Cheat Sheet post
  - see Vonage equity data (.pdf - sub. req.)

Special Report: Enterprise communications in the second quarter of 2012

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