Vonage 2008 Annual Report Download - page 44

For the
Q
uarter Ende
d
Mar 31,
2007
Jun 30
,
2007
S
ep 30
,
200
7
Dec 31,
2007
M
ar 31,
2008
Jun 30
,
2008
Sep 30,
2008
Dec 31
,
2008
O
perating Data
:
G
ross subscriber line additions 332,493 236,840 299,978 283,907 281,329 230,832 238,430 201,423
N
e
t
subsc
ri
be
r lin
e add
iti
o
n
s
(
reductions
)
165,646 56,691 77,763 56,016 30,133 2,080 9,460
(
14,744
)
S
ubscriber lines at end of period 2,389,757 2,446,448 2,524,211 2,580,227 2,610,360 2,612,440 2,621,900 2,607,15
6
Average monthly customer churn 2.4% 2.5% 3.0% 3.0% 3.3% 3.0% 3.0% 2.9
%
Average monthly revenue per line
$
28.31
$
28.38
$
28.24
$
28.19
$
28.85
$
29.04
$
28.75
$
28.33
A
verage mont
hl
yte
l
ep
h
ony serv
i
ces
revenue
p
er line $ 27.36 $ 27.63 $ 27.32 $ 27.42 $ 27.87 $ 27.92 $ 27.52 $ 27.28
Avera
g
e monthly direct costs o
f
t
elephon
y
services per line
$
8.03
$
7.21
$
7.30
$
7.11
$
7.26
$
7.22
$
7.20
$
7.2
2
M
ar
k
et
i
ng costs per gros
s
subscriber line additions $ 273.24 $ 286.72 $ 206.30 $ 223.06 $ 216.47 $ 282.89 $ 272.24 $ 309.1
0
E
mployees at end o
f
period 1,729 1,421 1,559 1,543 1,722 1,662 1,573 1,49
1
(
1
)
Excludes de
p
reciation and amortization of
$
4,113,
$
4,191,
$
4,312 and
$
5,818, for the
q
uarters ended March 31, June 30, Se
p
tember 30
and December 31, 2007, respectivel
y
, and
$
4,701,
$
4,728,
$
4,908 and
$
5,917, for the quarters ended March 31, June 30, September 30
an
dD
ecem
b
er 31, 2008, respect
i
ve
l
y
.
(2) $132,951 and $1,349 of sellin
g
,
g
eneral and administrative expense was recorded in the third and fourth quarters of 2007, respectively
,
related to the settlements o
f
our IP liti
g
ation.
(3) In the fourth quarter of 2007, we accelerated the amortization of the deferred financing costs from the original five-year term of our con-
v
ertible notes to a three-year term since the notes could be put to us on December 16, 2008. We recorded
$
2,372 of amortization in the
quarter relating to prior period, which we considered to be immaterial to the current and prior periods.
T
e
l
ep
h
ony serv
i
ces revenue.
T
e
l
ep
h
ony serv
i
ces revenu
e
g
enera
ll
y
h
as
i
ncrease
d
on a quarter
l
y
b
as
i
sw
i
t
h
t
h
e except
i
o
n
o
f
the third and
f
ourth quarters o
f
2008. The reduction in teleph-
ony services revenue in the third quarter of 2008 was related to
an
i
ncrease
i
n promot
i
ona
l
act
i
v
i
t
y
an
d
customer cre
di
ts
i
ssue
d
p
rimaril
yf
or customer retention. The decrease in revenue in th
e
f
ourth quarter of 2008 was primarily due to a decline in both th
e
C
anadian dollar and British pound. In addition, an adjustment of
$
788 was recorded to reduce international revenue relating to
p
r
i
or
p
er
i
o
d
s, w
hi
c
h
we cons
id
ere
d
to
b
e
i
mmater
i
a
l
to t
h
e cur
-
r
ent an
d
pr
i
or per
i
o
d
s
.
D
irect costs of telephony services.
D
irect costs of telephon
y
s
erv
i
ces
h
ave rema
i
ne
d
cons
i
stent eac
h
quarter.
R
oyalty. Verizon royalty expense was eliminated sub-
se
q
uent to our settlement with Verizon in
O
ctober 2007
.
D
irect cost of goods sold
.
The fluctuations in direct cost of
g
oo
d
sso
ld
expenses
b
etween t
h
e quarters was
d
ue to t
h
em
ix
in the type of customer equipment sold and the fluctuations i
n
th
esu
b
scr
ib
er
li
ne a
ddi
t
i
ons.
I
na
ddi
t
i
on,
i
n 2008 t
h
ere wer
e
incremental costs
f
rom the reduction in the period over which
deferred customer e
q
ui
p
ment costs are amortized
.
Sellin
g
,
g
eneral and administrative
.
S
ellin
g
,
g
eneral and
administrative expenses generally have decreased on a quarterly
basis with the exce
p
tion of the third
q
uarter of 2007, due to th
e
settlement o
f
several IP liti
g
ation cases. In 2007, sellin
g
,
g
enera
l
and administrative cost declined primarily due to the reductio
n
i
ns
h
are-
b
ase
d
compensat
i
on expense.
F
or 2008, se
lli
n
g
,
g
en
-
eral and administrative cost declined primaril
y
due to the reduc
-
t
ion in legal and consulting costs.
M
arketin
g
.Marketin
g
expense declined in the
f
irst hal
f
o
f
2
007, primarily driven by the plan to balance growth with pro
f
it
-
a
bility and has remained steady throu
g
h the fourth quarter o
f
2008
.
LIQUIDITY AND CAPITAL RESOURCES
O
vervie
w
The followin
g
table sets forth a summary of our cash flows for the periods indicated:
For the Years Ended December 31
,
(
dollars in thousand
s
)
2008 200
7
2006
Net cash provided by (used in) operating activities
$
655
$
(270,926)
$
(188,898
)
Net cash provided by
(
used in
)
investing activitie
s
40,486 131,457
(
210,798
)
Net cash provided by
(
used in
)
financing activities
(
65,470
)
245 477,42
9
36
VO
NA
G
E ANN
U
AL REP
O
RT 2008