Vonage Holdings Corp. Earnings: Strong Margins Continue

Vonage Holdings Corp. (NYSE:VG) reported its results for the fourth quarter. Vonage Holdings is a provider of broadband Voice over Internet Protocol telephone services to residential and small office customers.

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Vonage Holdings Corp Earnings Cheat Sheet for the Fourth Quarter

Results: Reported a profit of $40 million ($1.48 per diluted share) in the quarter. Vonage Holdings Corp. had a net loss of $41.7 million or a loss 20 cents per share in the year earlier quarter.

Revenue: Fell 0.7% to $216 million from the year earlier quarter.

Actual vs. Wall St. Expectations: Vonage Holdings Corp. reported adjusted net income of 11 cents per share. By that measure, the company beat the mean estimate of 10 cents per share. Analysts were expecting revenue of $218 million.

Quoting Management: Marc Lefar, Vonage Chief Executive Officer, said, “We are pleased to report record high annual net income, excluding adjustments and adjusted EBITDA along with free cash flow in excess of $100 million for the second consecutive year. For the quarter, we maintained adjusted EBITDA above $40 million, the fifth consecutive quarter, while net income, excluding adjustments grew 68 percent over the prior year.”

“Now that we have stabilized our core business and are generating meaningful cash flow, we will accelerate our investment in strategic growth initiatives during 2012. While reducing adjusted EBITDA in the short term, we believe this investment will fund growth in mobile and geographic expansion. Even with this increased level of funding, we expect to further strengthen our cash position during the year.”

“The time is right to increase our investment in organizational capacity and marketing. Early response to last week’s launch of Vonage Mobile has exceeded all of our expectations. The potential to rapidly build a global calling community with many millions of users is not unrealistic. And, we plan to invest in international opportunities as our partnerships and service offerings are brought to market.”

Key Stats:

Last quarter marked the fifth consecutive quarter of gross margins expanding as the company’s gross margin expanded 0.3 percentage point to 68.1% from the year earlier quarter. Over that span, margins have grown on average 1.8 percentage points per quarter on a year-over-year basis.

The company has now topped analyst estimates for the last four quarters. It beat the mark by 2 cents in the third quarter, by 3 cents in the second quarter, and by one cent in the first quarter.

Revenue fell last quarter after seeing a rise the quarter before. Revenue rose 1.1% to $216.5 million in the third quarter from the year earlier.

Looking Forward: Expectations for the company’s next quarter results are lower than they have been. Over the past sixty days, the average estimate for first quarter of the next fiscal year has fallen from 11 cents per share to 10 cents. Over the past three months, the average estimate for the fiscal year has climbed from 34 cents per to share to 39 cents.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com