Vonage (VG) is down 14% despite reporting in-line fourth quarter results and solid fiscal 2018 guidance.
The company reported fourth quarter revenue up 3% to $254 million, in-line with guidance.
Vonage Business revenues were $134 million, representing 53% of total revenues and 21% GAAP growth in the fourth quarter of 2017. Fourth quarter UCaaS revenues were $94 million, of which $74 million were service revenues. Service revenues increased 16% year-over-year on an organic basis. Nexmo, the Vonage API Platform (CPaaS) revenues were $40 million in the fourth quarter of 2017, a year-over-year increase of 36% on an organic basis. The Company increased its registered developers on the Vonage API Platform to 430,000, a sequential increase of 59,000.
Consumer revenues were $120 million in the fourth quarter, down 12% from the prior year quarter, and the fifth consecutive quarter of a lower year-over-year rate of decline in revenue. The Consumer segment ended the fourth quarter with ~ 1.5 million subscriber lines.
Adjusted EPS of $0.09 was in-line with consensus and adjusted OIBDA (operating income before depreciation and amortization) was up 38% to $51 million.
Vonage's slowly melting consumer business proved cash flow to fund growth in Vonage Business (CPaaS and UCaaS), which no accounts for more than half of revenue.
Vonage guided for fiscal 2018 revenue of $1.03-1.045 billion and adjusted OIBDA of at least $195 million, both were above estimates. Vonage sees Business revenue up 20% to $590-605 million with Consumer revenue down 12-13% to $435-440 million.
On the call, management said CPaaS revenue would remain near 40%. In Q&A, an analyst noted that was better than expected but implied UCaaS growth below estimates. Vonage cited slower growth among smaller enterprises (in-line with the market), where VG has more market share.
Another potential issue that arose on the call came from another delay in a Vonage bundled offering available on Amazon Web Services (AMZN). Vonage management said the Vonage Essentials plus Chime bundle should be available in the second quarter after delaying the launch until early 2018 last quarter. Management is citing the automation of sales tax collection on Amazon's end. The companies have a deep relationship but any hiccup with Amazon can be cause with concern.
VG hit a three-month low this morning. The stock trades at ~12.5x EV/OIBDA and ~2.4 sales estiamtes for 2018.