Vonage Holdings Corp. (VG) reported mixed financial results for the second quarter of 2014. While net income surpassed the Zacks Consensus Estimate, total revenue fell below the same.
Quarterly net income came in at $5.5 million or 2 cents per share compared with $4.6 million or 2 cents per share in the year-ago quarter. However, second-quarter adjusted earnings per share of 7 cents easily outpaced the Zacks Consensus Estimate of 4 cents.
Quarterly total revenue was $218.9 million, down 0.8% year over year and also below the Zacks Consensus Estimate of $222 million.
Quarterly gross margin stood at 71.8%, flat year over year. Operating income was a little over $12 million, reflecting a rise of 16.4% year over year. Operating margin was 5.5% compared with 4.7% in the year-ago quarter. Adjusted EBITDA was $29.4 million, remaining almost same year over year. In the reported quarter, Vonage repurchased 3.5 million shares of its common stocks for a total consideration of $13 million.
In the second quarter of 2014, Vonage generated $24.1 million of cash from operations against $18.9 million in the prior-year quarter. Free cash flow in the reported quarter was $17.7 million compared with $11.2 million in the year-ago quarter.
At the end of the second quarter of 2014, Vonage had approximately $55 million of cash and $90 million of outstanding debt compared with $84.7 million of cash and $121.7 million outstanding debt at the end of 2013. The debt-to-capitalization ratio, at the end of the reported quarter was 0.21 against 0.27 at the end of 2013.
Important Operating Metrics
During the second quarter of 2014, Vonage lost 6,695 subscriber lines which brought the total to 2,548,734 subscriber lines as on Jun 30, 2014. Average monthly customer churn was 2.6% against 2.4% in the prior-year quarter. Average monthly operating revenue per line was $28.59 as against $29.06 in the prior-year quarter.
Average monthly direct cost of telephony services per line was $6.84 compared with $7.60 in the year-ago quarter. Marketing costs per gross subscriber line addition $342 compared with $375 in the year-ago quarter. Direct margin was 71.7% against 69.4% in the prior-year quarter.
Vonage Business Solutions
Quarterly total revenue was $22.6 million, up 50.8% year over year. Average monthly customer churn was 1.9%.
Other Stocks to Consider
Vonage currently sports a Zacks Rank #3 (Hold). Other better-ranked stocks in the Communication Services industry that are worth considering include Chunghwa Telecom Co. Ltd. (CHT), Nippon telegraph and Telephone Corp. (NTT) and Cincinnati Bell Inc. (CBB). All three stocks currently carry a Zacks Rank #2 (Buy).
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