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Vonage Reports Fourth Quarter 2021 Financial Results

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Vonage Holdings Corp
Vonage Holdings Corp

HOLMDEL, N.J., Feb. 24, 2022 (GLOBE NEWSWIRE) -- Vonage Holdings Corp. (Nasdaq: VG), a global leader in cloud communications helping businesses accelerate their digital transformation, today announced results for the quarter and full year ended December 31, 2021.

Fourth Quarter 2021 Highlights:

  • Consolidated revenue of $366 million, an increase of 13% year-over-year

    • Consumer revenue of $66 million, a decrease of 16% year-over-year

    • Vonage Communications Platform (VCP) revenue of $300 million, an increase of 23% year-over-year

      • VCP Service revenue of $287 million, an increase of 25% year-over-year

        • API revenue of $165 million, an increase of 38% year-over-year

        • Unified Communications & Contact Center Service revenue of $122 million, an increase of 10% year-over-year

  • Consolidated Net Loss of $22 million, a decrease of $8 million from the prior year

  • Consolidated Adjusted EBITDA(1) of $50 million, an increase of $2 million from the prior year

    • VCP Adjusted EBITDA of $6 million, an increase of $10 million from the prior year

    • Consumer Adjusted EBITDA of $43 million, a decrease of $9 million from the prior year

Full Year 2021 Highlights:

  • Consolidated revenue of $1.409 billion, an increase of 13% year-over-year

    • Consumer revenue of $289 million, a decrease of 13% year-over-year

    • Vonage Communications Platform (VCP) revenue of $1.120 billion, an increase of 22% year-over-year

      • VCP Service revenue of $1.062 billion, an increase of 24% year-over-year

        • API revenue of $591 million, an increase of 42% year-over-year

        • Unified Communications & Contact Center Service revenue of $471 million, an increase of 7% year-over-year

  • Consolidated Net Loss of $24 million, an increase of $12 million from the prior year

  • Consolidated Adjusted EBITDA of $198 million, an increase of $27 million from the prior year

    • VCP Adjusted EBITDA of $11 million, an increase of $68 million from the prior year

    • Consumer Adjusted EBITDA of $187 million, a decrease of $40 million from the prior year

Vonage will not host a conference call to discuss its results for the fourth quarter and full year 2021 or provide financial guidance for the first quarter or full year 2022 due to the previously announced proposed acquisition of Vonage by Ericsson.

About Vonage

Vonage (Nasdaq:VG), a global cloud communications leader, helps businesses accelerate their digital transformation. Vonage's Communications Platform is fully programmable and allows for the integration of Video, Voice, Chat, Messaging and Verification into existing products, workflows and systems. Vonage's fully programmable unified communications and contact center applications are built from the Vonage platform and enable companies to transform how they communicate and operate from the office or anywhere, providing enormous flexibility and ensuring business continuity.

Vonage Holdings Corp. is headquartered in New Jersey, with offices throughout the United States, Europe, Israel and Asia. To follow Vonage on Twitter, please visit twitter.com/vonage. To become a fan on Facebook, go to facebook.com/vonage. To subscribe on YouTube, visit youtube.com/vonage.

Investor Contact: Monica Gould, 212.871.3927, ir@vonage.com

Media Contact: Jo Ann Tizzano, 732.365.1363, joann.tizzano@vonage.com

(1) This is a non-GAAP financial measure. Refer below to Table 3 for a reconciliation to GAAP net loss.


VONAGE HOLDINGS CORP.
TABLE 1. CONSOLIDATED FINANCIAL DATA
(Dollars in thousands, except per share amounts)

Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

2021

2021

2020

2021

2020

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(audited)

Statement of Operations Data:

Revenues, access and product revenues

$

350,167

$

341,544

$

306,773

$

1,339,063

$

1,185,357

USF revenues

16,138

16,797

16,522

69,952

62,577

Total revenues

366,305

358,341

323,295

1,409,015

1,247,934

Operating Expenses:

Service, access and product cost of revenues (excluding depreciation and amortization of $16,895, $15,817, $15,455, $61,874, and $51,408, respectively)

174,923

161,067

133,694

624,557

490,946

USF cost of revenues

16,138

16,797

16,522

69,952

62,577

Sales and marketing

80,702

86,826

80,100

335,217

342,053

Engineering and development

19,961

17,636

22,387

80,667

81,484

General and administrative

70,164

44,063

41,569

202,461

182,106

Depreciation and amortization

23,572

22,507

24,853

88,780

88,917

385,460

348,896

319,125

1,401,634

1,248,083

(Loss) Income from operations

(19,155

)

9,445

4,170

7,381

(149

)

Other Income (Expense):

Interest expense

(6,924

)

(7,045

)

(7,384

)

(28,348

)

(32,160

)

Other income (expense), net

1,119

(100

)

160

905

314

(5,805

)

(7,145

)

(7,224

)

(27,443

)

(31,846

)

Loss before income taxes

(24,960

)

2,300

(3,054

)

(20,062

)

(31,995

)

Income tax benefit (expense)

2,809

(4,332

)

(10,911

)

(4,435

)

(4,217

)

Net loss

$

(22,151

)

$

(2,032

)

$

(13,965

)

$

(24,497

)

$

(36,212

)

Loss per common share:

Basic and diluted

$

(0.09

)

$

(0.01

)

$

(0.06

)

$

(0.10

)

$

(0.15

)

Weighted-average common shares outstanding:

Basic and diluted

252,791

252,101

248,586

251,500

246,082


VONAGE HOLDINGS CORP.
TABLE 1. CONSOLIDATED FINANCIAL DATA - (Continued)
(Dollars in thousands, except per share amounts)

Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

2021

2021

2020

2021

2020

(unaudited)

(unaudited)

(unaudited)

(unaudited)

(audited)

Statement of Cash Flow Data:

Net cash provided by operating activities

$

25,304

$

43,886

$

32,449

$

158,711

$

83,880

Net cash used in investing activities

(20,735

)

(12,768

)

(14,489

)

(62,719

)

(52,723

)

Net cash used in financing activities

(33,030

)

(21,986

)

(23,721

)

(117,257

)

(10,850

)

Capital expenditures, acquisition of intangible assets, acquisition and development of software assets

(13,735

)

(12,768

)

(14,489

)

(55,719

)

(52,723

)


December 31,

December 31,

2021

2020

(unaudited)

(audited)

Balance Sheet Data (at period end):

Cash and cash equivalents

$

18,342

$

43,078

Restricted cash

1,967

1,919

Accounts receivable, net of allowance

147,622

116,304

Prepaid expenses and other current assets

37,388

38,361

Deferred customer acquisition costs, current and non-current

101,403

85,690

Property and equipment, net

24,334

31,621

Goodwill

615,134

624,328

Operating lease right of use assets

31,855

29,330

Software, net

106,516

80,638

Intangible assets, net

161,134

204,267

Deferred tax assets

109,087

106,374

Other assets

33,362

33,926

Total assets

$

1,388,144

$

1,395,836

Accounts payable and accrued expenses

$

226,497

$

175,544

Deferred revenue, current

61,420

65,506

Total notes payable, net and indebtedness under revolving credit facility, including current portion

130,500

215,500

Operating lease liabilities, current and non-current

43,056

42,573

Convertible senior notes, net

305,609

290,784

Other liabilities

3,341

3,155

Total liabilities

$

770,423

$

793,062

Total stockholders' equity

$

617,721

$

602,774



VONAGE HOLDINGS CORP.
TABLE 2. SUMMARY CONSOLIDATED OPERATING DATA
(Dollars in thousands, except per line amounts)
(unaudited)

The table below includes summarized income statement information that our management uses to measure the operating performance of the Vonage Communications Platform focused portion of our business:

Vonage Communications Platform

Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

2021

2021

2020

2021

2020

Statement of Operations Data:

Revenues, access and product revenues

$

292,699

$

281,311

$

238,673

$

1,092,267

$

893,076

USF revenues

7,403

6,845

6,056

27,858

21,981

Total revenues

300,102

288,156

244,729

1,120,125

915,057

Operating Expenses:

Service, access and product cost of revenues excluding depreciation and amortization

167,062

152,939

125,214

590,623

455,558

USF cost of revenues

7,403

6,845

6,056

27,858

21,981

Sales and marketing

77,362

83,227

77,083

320,717

329,702

Engineering and development

19,173

16,519

20,181

76,936

73,012

General and administrative

66,720

42,439

38,425

190,936

167,704

Depreciation and amortization

23,412

22,325

24,433

87,872

85,210

361,132

324,294

291,392

1,294,942

1,133,167

Loss from operations

$

(61,030

)

$

(36,138

)

$

(46,663

)

$

(174,817

)

$

(218,110

)


The table below includes revenues and cost of revenues that our management uses to measure the growth and operating performance of the Vonage Communications Platform focused portion of our business:

Vonage Communications Platform

Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

2021

2021

2020

2021

2020

Revenues:

Service revenues

$

286,820

$

274,031

$

230,077

$

1,061,745

$

856,492

Access and product revenues(1)

5,879

7,280

8,596

30,522

36,584

Service, access and product revenues excluding USF

292,699

281,311

238,673

1,092,267

893,076

USF revenues

7,403

6,845

6,056

27,858

21,981

Total revenues

$

300,102

$

288,156

$

244,729

$

1,120,125

$

915,057

Cost of Revenues:

Service cost of revenues(2)

$

158,013

$

144,156

$

114,491

$

552,537

$

413,079

Access and product cost of revenues(1)

9,049

8,783

10,723

38,086

42,479

Service, access and product cost of revenues excluding USF

167,062

152,939

125,214

590,623

455,558

USF cost of revenues

7,403

6,845

6,056

27,858

21,981

Total cost of revenues

$

174,465

$

159,784

$

131,270

$

618,481

$

477,539

Service margin %

44.9

%

47.4

%

50.2

%

48.0

%

51.8

%

Gross margin % excluding USF (Service, access and product margin %)

42.9

%

45.6

%

47.5

%

45.9

%

49.0

%

Gross margin %

41.9

%

44.5

%

46.4

%

44.8

%

47.8

%


(1)

Includes customer premise equipment, access, professional services, and shipping and handling.

(2)

Excludes depreciation and amortization of $16,735, $15,635, $15,331 for the quarters ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively, and $60,966 and $47,701 for the years ended December 31, 2021 and 2020, respectively.

The table below includes key operating data that our management uses to measure the growth and operating performance of the business focused portion of our business:

Vonage Communication Platform

Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

2021

2021

2020

2021

2020

Service revenue per customer

$

678

$

657

$

552

$

637

$

516

Vonage Communications Platform revenue churn

0.5

%

0.6

%

1.3

%

0.6

%

1.1

%


The table below includes summarized income statement information that our management uses to measure the operating performance of the Consumer focused portion of our business:

Consumer

Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

2021

2021

2020

2021

2020

Statement of Operations Data:

Revenues, access and product revenues

$

57,468

$

60,233

$

68,100

$

246,796

$

292,281

USF revenues

8,735

9,952

10,466

42,094

40,596

Total revenues

66,203

70,185

78,566

288,890

332,877

Operating Expenses:

Service, access and product cost of revenues excluding depreciation and amortization

7,861

8,128

8,480

33,934

35,388

USF cost of revenues

8,735

9,952

10,466

42,094

40,596

Sales and marketing

3,340

3,599

3,017

14,500

12,351

Engineering and development

788

1,117

2,206

3,731

8,472

General and administrative

3,444

1,624

3,144

11,525

14,402

Depreciation and amortization

160

182

420

908

3,707

24,328

24,602

27,733

106,692

114,916

Income from operations

$

41,875

$

45,583

$

50,833

$

182,198

$

217,961


The table below includes revenues and cost of revenues that our management uses to measure the growth and operating performance of the Consumer focused portion of our business:

Consumer

Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

2021

2021

2020

2021

2020

Revenues:

Service revenues

$

57,405

$

60,162

$

68,022

$

246,553

$

292,003

Access and product revenues(1)

63

71

78

243

278

Service, access and product revenues excluding USF

57,468

60,233

68,100

246,796

292,281

USF revenues

8,735

9,952

10,466

42,094

40,596

Total revenues

$

66,203

$

70,185

$

78,566

$

288,890

$

332,877

Cost of Revenues:

Service cost of revenues(2)

$

7,436

$

7,607

$

8,080

$

31,968

$

33,550

Access and product cost of revenues(1)

425

521

400

1,966

1,838

Service, access and product cost of revenues excluding USF

7,861

8,128

8,480

33,934

35,388

USF cost of revenues

8,735

9,952

10,466

42,094

40,596

Total cost of revenues

$

16,596

$

18,080

$

18,946

$

76,028

$

75,984

Service margin %

87.0

%

87.4

%

88.1

%

87.0

%

88.5

%

Gross margin % excluding USF (Service, access and product margin %)

86.3

%

86.5

%

87.5

%

86.3

%

87.9

%

Gross margin %

74.9

%

74.2

%

75.9

%

73.7

%

77.2

%


(1)

Includes customer premise equipment, access, professional services, and shipping and handling.

(2)

Excludes depreciation and amortization of $160, $182, and $124 for the quarters ended December 31, 2021, September 30, 2021 and December 31, 2020, respectively, and $908 and $3,707 for the years ended December 31, 2021 and 2020, respectively.

The table below includes key operating data that our management uses to measure the growth and operating performance of the consumer focused portion of our business:

Consumer

Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

2021

2021

2020

2021

2020

Average monthly revenues per line

$

27.82

$

28.47

$

28.13

$

28.50

$

27.77

Subscriber lines (at period end)

779,179

807,265

909,965

779,179

909,965

Customer churn

1.4

%

1.5

%

1.7

%

1.4

%

1.7

%


VONAGE HOLDINGS CORP.
TABLE 3. RECONCILIATION OF GAAP NET LOSS
TO ADJUSTED EBITDA AND TO ADJUSTED EBITDA MINUS CAPEX
(Dollars in thousands)
(unaudited)

Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

2021

2021

2020

2021

2020

Net Loss

$

(22,151

)

$

(2,032

)

$

(13,965

)

$

(24,497

)

$

(36,212

)

Interest expense

6,924

7,045

7,384

28,348

32,160

Income tax

(2,809

)

4,332

10,911

4,435

4,217

Depreciation and amortization

23,572

22,507

24,853

88,780

88,917

Amortization of costs to implement cloud computing arrangements

840

818

938

3,515

2,885

EBITDA

6,376

32,670

30,121

100,581

91,967

Share-based expense

32,325

17,247

11,695

79,900

45,667

Acquisition related transaction and integration costs

10,120

10,120

Organizational transformation (1)

5,119

Restructuring activities (2)

3,731

2,655

18,913

Other non-recurring items (3)

916

944

$

2,654

4,314

8,518

Adjusted EBITDA

$

49,737

$

50,861

48,201

$

197,570

$

170,184

Consumer Adjusted EBITDA

$

43,297

$

45,839

$

52,169

$

186,856

$

227,152

VCP Adjusted EBITDA

6,440

5,022

(3,968

)

10,714

(56,968

)

Adjusted EBITDA

49,737

50,861

48,201

197,570

170,184

Less:

Capital expenditures

(2,214

)

(2,058

)

(2,853

)

(8,996

)

(10,571

)

Intangible assets

(62

)

431

(52

)

256

(312

)

Acquisition and development of software assets

(11,459

)

(11,141

)

(11,584

)

(46,979

)

(41,840

)

Adjusted EBITDA Minus Capex

$

36,002

$

38,093

$

33,712

$

141,851

$

117,461


(1)

The cost identified as "Organizational transformation" are related to the Company’s previously announced goal of becoming a pure-play software-as-a-service (“SaaS”) company, offering a suite of communications solutions for businesses. These costs include employee related exits including CEO succession, system change management, facility exit costs, and rebranding.

(2)

Restructuring activities relate to the Company's business-wide optimization and alignment project initiated in 2020 and include employee related exits and further facility exit costs executed upon as part of the overall project.

(3)

Other non-recurring items principally include certain litigation charges and other non-recurring project costs such as the review of the Consumer business and the business optimization project, both of which were initiated in 2020.


VONAGE HOLDINGS CORP.
TABLE 4. RECONCILIATION OF GAAP NET LOSS TO
NET INCOME (LOSS) EXCLUDING ADJUSTMENTS
(Dollars in thousands, except per share amounts)
(unaudited)

Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

2021

2021

2020

2021

2020

Net loss

$

(22,151

)

$

(2,032

)

$

(13,965

)

$

(24,497

)

$

(36,212

)

Amortization of acquisition - related intangibles

10,823

10,733

13,131

43,141

53,539

Amortization of costs to implement cloud computing arrangements

840

818

938

3,515

2,885

Acquisition related transaction and integration costs

10,120

10,120

Amortization of debt discount

3,402

3,349

3,210

13,230

12,532

Organizational transformation (1)

5,119

Restructuring activities (2)

3,731

2,655

18,913

Other non-recurring items (3)

916

944

2,654

4,314

8,518

Tax effect on adjusting items

(6,787

)

(4,120

)

(4,969

)

(20,014

)

(21,316

)

Net (loss) income excluding adjustments

$

(2,837

)

$

9,692

$

4,730

$

32,464

$

43,978

Loss per common share:

Basic and diluted

$

(0.09

)

$

(0.01

)

$

(0.06

)

$

(0.10

)

$

(0.15

)

Weighted-average common shares outstanding:

Basic and diluted

252,791

252,101

248,586

251,500

246,082

Earnings per common share, excluding adjustments:

Basic

$

(0.01

)

$

0.04

$

0.02

$

0.13

$

0.18

Diluted

$

(0.01

)

$

0.04

$

0.02

$

0.12

$

0.17

Weighted-average common shares outstanding:

Basic

252,791

252,101

248,586

251,500

246,082

Diluted

252,791

260,851

258,211

270,831

254,874


(1)

The cost identified as "Organizational transformation" are related to the Company’s previously announced goal of becoming a pure-play software-as-a-service (“SaaS”) company, offering a suite of communications solutions for businesses. These costs include employee related exits including CEO succession, system change management, facility exit costs, and rebranding.

(2)

Restructuring activities relate to the Company's business-wide optimization and alignment project initiated in 2020 and include employee related exits and further facility exit costs executed upon as part of the overall project.

(3)

Other non-recurring items principally include certain litigation charges and other non-recurring project costs such as the review of the Consumer business and the business optimization project, both of which were initiated in 2020.


VONAGE HOLDINGS CORP.
TABLE 5. FREE CASH FLOW
(Dollars in thousands)
(unaudited)

Three Months Ended

For the Years Ended

December 31,

September 30,

December 31,

December 31,

2021

2021

2020

2021

2020

Net cash provided by operating activities

$

25,304

$

43,886

$

32,449

$

158,711

$

83,880

Less:

Capital expenditures

(2,214

)

(2,058

)

(2,853

)

(8,996

)

(10,571

)

Intangible assets

(62

)

431

(52

)

256

(312

)

Acquisition and development of software assets

(11,459

)

(11,141

)

(11,584

)

(46,979

)

(41,840

)

Free cash flow

$

11,569

$

31,118

$

17,960

$

102,992

$

31,157


VONAGE HOLDINGS CORP.
TABLE 6. RECONCILIATION OF INDEBTEDNESS UNDER REVOLVING CREDIT FACILITY, AND CONVERTIBLE SENIOR NOTES TO NET DEBT
(Dollars in thousands)
(unaudited)

December 31,

December 31,

2021

2020

Convertible senior notes, net

305,609

290,784

Notes payable and indebtedness under revolving credit facility, net of current maturities

130,500

215,500

Unamortized debt related costs

3,919

5,512

Unamortized discount on debt

35,472

48,704

Gross debt

475,500

560,500

Less:

Unrestricted cash

18,342

43,078

Net debt

$

457,158

$

517,422

Use of Non-GAAP Financial Measures

This press release includes measures defined as non-GAAP financial measures by Regulation G adopted by the Securities and Exchange Commission, including: adjusted EBITDA, adjusted EBITDA less Capex, adjusted net income, constant currency, net debt (cash), and free cash flow.

Adjusted EBITDA

Vonage uses adjusted EBITDA as a principal indicator of the operating performance of its business.

Vonage defines adjusted EBITDA as GAAP net income (loss) before interest, tax, depreciation and amortization, share-based expense, amortization of costs to implement cloud computing arrangements, acquisition related transaction and integration costs, organizational transformation costs and other non-recurring items. The costs identified as “organizational transformation” are related to the Company’s previously announced goal of becoming a pure-play software-as-a-service (“SaaS”) company, offering a suite of communications solutions for businesses. These costs include employee related exits, system change management, facility exit costs, and rebranding.

Vonage believes that adjusted EBITDA permits a comparative assessment of its operating performance, relative to its performance based on its GAAP results, while isolating the effects of interest, tax, depreciation and amortization, which may vary from period to period without any correlation to underlying operating performance; of share-based expense, which is a non-cash expense that also varies from period to period; of one-time acquisition related transaction and integration costs, organizational transformation costs and other non-recurring items. Organizational transformation consists principally of costs in connection with exits of employees and facilities, system migration costs and certain professional related fees. Restructuring activities relate to the Company's business-wide optimization and alignment project initiated in 2020 and include employee related exit costs and further facility exit costs executed upon as part of the overall project. Other non-recurring items principally include certain litigation charges and other non-recurring project costs such as the review of the Consumer business and the business optimization project, both of which were initiated in 2020.

The Company provides information relating to its adjusted EBITDA so that investors have the same data that the Company employs in assessing its overall operations. The Company believes that trends in its adjusted EBITDA are valuable indicators of the operating performance of the Company on a consolidated basis.

The Company does not reconcile its forward-looking adjusted EBITDA to the corresponding GAAP measure of net income because stock-based compensation expense and other non-recurring items cannot be reasonably calculated or predicted at this time as they may be significantly impacted by future events, the timing and nature of which cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation is not available without unreasonable effort.

Adjusted EBITDA less Capex

Vonage uses adjusted EBITDA less Capex as an indicator of the operating performance of its business. The Company provides information relating to its adjusted EBITDA less Capex so that investors have the same data that the Company employs in assessing its overall operations. The Company believes that trends in its Adjusted EBITDA less Capex are valuable indicators of the operating performance of the Company on a consolidated basis because they provide our investors with insight into current performance and period-to-period performance.

Adjusted net income

Vonage defines adjusted net income, as GAAP net income (loss) excluding amortization of acquisition-related intangible assets, amortization of costs to implement cloud computing arrangements, acquisition related transaction and integration costs, amortization of debt discount, organizational transformation costs, other non-recurring items and tax effect on adjusting items.

The Company believes that excluding these items will assist investors in evaluating the Company's operating performance and in better understanding its results of operations as amortization of acquisition-related intangible assets is a non-cash item, one-time acquisition related transaction and integration costs, organizational transformation, other non-recurring items, and tax effect on adjusting items are not reflective of operating performance. Organizational transformation consists principally of costs in connection with exits of employees and facilities, system migration costs and certain related professional fees. Other non-recurring items principally include certain litigation charges and other non-recurring project costs.

Constant Currency

Vonage reviews its results of operations on both an as reported and on a constant currency basis. The constant currency presentation, which is a non-GAAP measure, excludes the impact of fluctuations in foreign currency exchange rates. We believe providing constant currency information provides valuable supplemental information regarding our results of operations, consistent with how we evaluate our performance. We calculate constant currency percentages by converting our current period local currency financial results using the prior period exchange rates and comparing these adjusted amounts to our prior period reported results.

Net debt (cash)

Vonage defines net debt (cash) as indebtedness under revolving credit facility, convertible senior notes, discount on debt, and debt related costs less unrestricted cash.

Vonage uses net debt (cash) as a measure of assessing leverage, as it reflects the gross debt under the Company's credit agreements and capital leases less cash available to repay such amounts. The Company believes that net cash is also a factor that first parties consider in valuing the Company.

Free cash flow

Vonage defines free cash flow as net cash provided by operating activities minus capital expenditures, purchase of intangible assets, and acquisition and development of software assets.

Vonage considers free cash flow to be a liquidity measure that provides useful information to management about the amount of cash generated by the business that, after the acquisition of equipment and software, can be used by Vonage for debt service and strategic opportunities. Free cash flow is not a measure of cash available for discretionary expenditures since the Company has certain non-discretionary obligations such as debt service that are not deducted from the measure.

The non-GAAP financial measures used by Vonage may not be directly comparable to similarly titled measures reported by other companies due to differences in accounting policies and items excluded or included in the adjustments, which limits its usefulness as a comparative measure. These non-GAAP financial measures should be considered in addition to results prepared in accordance with GAAP, but should not be considered a substitute for, or superior to, GAAP results.

The Company does not reconcile its forward-looking adjusted business total revenue and adjusted business service revenue to the corresponding GAAP measures due to the significant variability and difficulty in making accurate forecasts with respect to the various acquisition-related and one-time events that we exclude, as they may be significantly impacted by future events the timing and nature of which are difficult to predict or are not within the control of management. As such, the Company has determined that reconciliations of these forward-looking non-GAAP financial measures to the corresponding GAAP measures is not available without unreasonable effort.

Safe Harbor Statement

This press release contains forward-looking statements, including statements about future financial results, growth priorities or plans, revenues, adjusted EBITDA, churn, seats, lines or accounts, average revenue per customer, cost of communications services, capital expenditures, new products and related investment, and other statements that are not historical facts or information, that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of 1995. In addition, other statements in this press release that are not historical facts or information may be forward-looking statements. The forward-looking statements in this release are based on information available at the time the statements are made and/or management's belief as of that time with respect to future events and involve risks and uncertainties that could cause actual results and outcomes to be materially different. Important factors that could cause such differences include, but are not limited to: the competition we face; the expansion of competition in the cloud communications market; incremental business, regulatory, and reputational risks related to the pending Ericsson merger; timing and satisfaction of the closing conditions related to the Ericsson merger; our ability to adapt to rapid changes in the cloud communications market; realizing the expected benefits of our business optimization or other cost-savings plans; risks related to the acquisition or integration of businesses we have acquired; our ability to scale our business and grow efficiently; the nascent state of the cloud communications for business market; our ability to retain customers and attract new customers cost-effectively; developing and maintaining effective distribution channels; risks associated with sales of our services to medium-sized and enterprise customers; the effects of COVID-19 on our business; our reliance on third-party hardware and software; our dependence on third-party vendors; reliance on third parties for our 911 services; the impact of fluctuations in economic conditions, particularly on our small and medium business customers; the effects of significant foreign currency fluctuations; developing and maintaining market awareness and a strong brand; retaining senior executives and other key employees; security breaches and other compromises of information security; system disruptions or flaws in our technology and systems; our ability to comply with data privacy and related regulatory matters; unfavorable litigation or governmental investigations; our ability to obtain or maintain relevant intellectual property licenses or to protect our trademarks and internally developed software; fraudulent use of our name or services; intellectual property and other litigation that have been and may be brought against us; rapid developments in global API regulation and uncertainties relating to regulation of VoIP services; liability under anti-corruption laws or from governmental export controls or economic sanctions; risks associated with the taxation of our business; governmental regulation and taxes in our international operations; our history of net losses and ability to achieve consistent profitability in the future; our ability to fully realize the benefits of our net operating loss carry-forwards if an ownership change occurs; actions of activist shareholders; restrictions in our debt agreements that may limit our operating flexibility; our ability to obtain additional financing if required; risks associated with the settlement and conditional conversion of our Convertible Senior Notes; potential effects the capped call transactions may have on our stock in connection with our Convertible Senior Notes; certain provisions of our charter documents; and other factors that are set forth in the “Risk Factors” in our Annual Report on Form 10-K and in the Company's Quarterly Reports on Form 10-Q filed with the SEC. While the Company may elect to update forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so except as required by law, and therefore, you should not rely on these forward-looking statements as representing the Company's views as of any date subsequent to today.