Vonage reported third quarter revenue of $161 million and a non-GAAP adjusted loss from operations of $53 million. As usual, the company had robust growth - but there are cracks appearing in what has been the most bullish part of the Vonage story, it’s rapid growth rate.
- Revenue was up 12% sequentially, and $118% year-over-year; that’s good, but not as good as last quarter, when revenue grew 21% sequentially and 141% year-over-year.
- The company had 204,591 net subscriber additions in the quarter, down from 256,000 in the second quarter.
- Total subscribers grew 11% sequentially, down from 16% sequential growth in the second quarter.
- Average monthly churn was 2.6%, up from 2.3% in both the second quarter and the year-ago quarter.
- Vonage says average telephony revenue per subscriber line was flat with last quarter at $26.33; actually, it was down a tad from $26.40. But I quibble.
- This might be the most telling data: marketing costs were $91 million, about flat with $90 million in the previous quarter. Marketing costs per gross subscriber line hit $254, up 6%. But what matters more is marketing costs per net subscriber line. And that number - which the company does not specifically report, you have to calculate it - jumped to $444.79, from $351.56. Or to look at it another way, the company’s marketing was 20% less effective at increasing the subscriber count than it was just one quarter earlier.
- Vonage reduced its forecast for 2006 year-end subscriber count to 2.2 million to 2.3 million, from a previous forecast of 2.3 million to 2.45 million. No change in the rest of its guidance, which includes hitting its first quarter of “positive adjusted operating income” as soon as the first quarter of 2008.
This is not going over well on the Street: Vonage shares are down 44 cents at $7.01.
VG 6 month chart: