Vonage 2015 Annual Report Download - page 9

3 VONAGE ANNUAL REPORT 2015
We generate revenue through the acquisition and retention
of consumer services customers. We are focused on optimizing the
consumer services business by increasing profitability to improve the
strong cash flows of the business. Our focus on operations during the
past five years has led to a significantly improved cost structure. We
have implemented operational efficiencies throughout our business and
have substantially reduced domestic and international termination costs
per minute, as well as customer care costs. We achieved these structural
costs reductions while concurrently delivering significantly improved
network call quality and customer service performance. These
improvements in customer experience have contributed to the
stabilization in churn over recent periods. During 2015, we continued
our disciplined focus on marketing efficiency by shifting customer
acquisition spend to our higher performing channels, improving the
quality of customers we acquire and driving lower churn, all of which
drive higher customer life-time value. This focus has led to a reallocation
of certain marketing spend to direct response and digital platforms and
away from our assisted selling channel, which utilized direct face-to-
face selling across multiple retail chains and community and event
venues.
The result of these initiatives has been to create a strong cash
flow business which provides financial stability, as well as cost synergies
and structural advantages to our business serving the UCaaS business
market.
Services outside of the United States. We currently have
operations in the United States, United Kingdom, and Canada and
believe that our low-cost Internet based communications platform
enables us to cost effectively deliver voice and messaging services to
other locations throughout the world. In December 2014 we announced
plans to exit the Brazilian market for residential telephony services and
wind down our joint venture operations in the country. The Company
completed this process at the end of the first quarter of 2015. This
decision underscores the Company’s focus on providing UCaaS
solutions to domestic consumer services and SMB, medium and large
enterprise customers, which offer higher investment return
opportunities.
Information on our revenues, operating income, and
identifiable assets appears in Note 1 to our consolidated financial
statements included in Item 8 hereof.
We had approximately 2.5 million combined consumer
subscriber lines and business seats as of December 31, 2015, of which
93% were in the United States. We also have customers in Canada and
the United Kingdom.
SERVICE OFFERINGS
Business Services
We provide a robust feature-rich range of communication
services enabling businesses to interact with their customers, prospects
and partners in a more efficient and effective manner. We provide
services ranging from basic dial tone to services such as call queue,
conferencing, call groups, mobile functionality, CRM integration, and
detailed analytics - allowing our customers a high level of visibility into
their business at prices that are often significantly lower than that of
traditional on premises solutions. These services can be delivered over-
the-top of the customers’ existing connectivity or bundled through our
private MPLS connectivity service. Today more than over 514,000
business seats rely on Vonage to meet their communication needs,
putting Vonage in a leading position within the UCaaS space. Our
services are delivered through either proprietary networks or through
trusted third parties to ensure our offerings provide all of the critical
functions business needed for one of their most important business
tools.
Vonage Essentials. Vonage Essentials is targeted to smaller
customers and utilizes our proprietary call processing platform, which
is purpose built for SMB customers to deliver cloud-based
communication services. It provides a cost-effective, scalable, feature-
rich solution, delivered over-the-top of a customer’s broadband. We
offer a number of service plans which include basic metered extensions
to unlimited calling plans. Our standard lines come fully functional with
numerous standard features. Unlimited Extensions is our most popular
business service plan. Under this plan businesses can make flat rate,
unlimited domestic calls (U.S. and Canada) each month. As of
December 31, 2015, over 95% of our business customers were on an
unlimited usage domestic calling plan. SMBs may also choose metered
extension plans under which they are charged per-minute usage for
both domestic and international calls. This plan is primarily used by
customers with temporary or seasonal workers to save resources where
phones are not heavily used during the workday.
Our standard features include: Admin Portal, Call Announce,
Call Continuity, Call Screening, Call Waiting, Caller ID, Directory
Assistance (411), Dynamic Caller ID, Emergency Assistance (911), Do
Not Disturb, Multiple Devices on One Extension, Set Caller ID, Seven-
Digit Dialing, Voicemail, Call Continuity, Work From Anywhere, Cell
Phone Integration, Vonage Business Mobile, Never Miss a Call, Web
Portal Interface, and Call Pass.
In addition to our standard functionality we have a number of
add-on services for an additional monthly fee, including: Paperless Fax,
Call Group, Call Queue, Conference Bridge, Main Company Number,
Toll Free Number, Local or Geographic Number, Voicemail
Transcription, On-Demand or Company Call Recording Service, Call
Monitoring Services with Listen, Whisper and Barge, and Paging
Groups.
All of our Vonage Essentials offerings allow free access to
our mobile application. The mobile application allows users to choose
WiFi, 3G and 4G and the extended features provide caller ID as if the
user were calling from their office. Additional features include the ability
to update account profiles, manage devices, and contact call logs
directly from their mobile devices. We also offer virtual extensions, which
connects employees to a business phone number through their mobile
phones. A virtual extension is an additional dedicated direct dial number
forwarded to the employee's mobile phone number, allowing employees
to be reached from anywhere.
Vonage Premier. Vonage Premier is a purpose-built cloud
based platform for mid-market and enterprise customers, providing a
complete set of enhanced unified communication and collaboration
services, including: voice, data, video, mobile and contact center
services. We focus on customers for whom guaranteed quality of service
and uniformity of services across all locations is critical. We deliver
services to this customer base over our private, nation-wide, fully
redundant, secure IP MPLS network using 21 network POPs that allow
us to deliver dedicated, secure and private bandwidth utilizing all forms
of last mile technologies including T1, NxT1, EoC and Fiber and
bandwidth ranging from 1.5Mbps to 1Gbps. Services we deliver include
Wide Area Networking (WAN), Internet Access, MPLS VPN, Managed
Firewall, Hosted UCaaS, Hosted Video Conferencing, Web
Collaboration, Secure Instant Messaging & Presence, Mobility and
Fixed Mobile Convergence, and Hosted Contact Center.
Vonage Premier services include advanced features such as
Single Number Reach (which provides each user one number, available
over numerous devices including desk phones, tablets and
smartphones), Shared Line Appearance, Busy Lamp Field, Phone
Paging, Outlook Integration, IM, Presence, and Video. Vonage also
delivers Session Initiation Protocol (SIP) Trunking, over the same
network, to customers using premises PBXs, with the ability to overlay
UCaaS features where the premises PBX is deficient or for disaster
recovery and business continuity requirements. This product also
supports a hybrid deployment where some locations may be fully hosted
and others may continue to use the premises PBX. Vonage Premier
customers also have the ability to utilize our gUnify middleware layer to
integrate communications with the core, Software-as-a-Service (SaaS)-
based business applications that companies use as part of their every-
day workflow, such as Google for Work, Salesforce, Zendesk, and
others.
Vonage Premier customers also receive access to a custom-
built portal through which they can fully administer all services, online
bill pay, manage trouble tickets, manage bandwidth and services,
access detailed Call Analytics, and execute Moves, Adds and Changes.