Vonage Holdings Corp.

Greetings and welcome to the bondage first quarter 2021 earnings conference call during the presentation all participants will be in a listen only mode. Afterwards, we will conduct a question and answer session at that time, if you have a question, please press the one followed by the four on your telephone. If at any time during the conference, you need to reach an operator, please press star and zero. As a reminder, this conference is being recorded. I would now like to turn the conference over to Hunter Blankenbaker, Vice President, Investor Relations. Please go ahead.

Thank you, Operator, and good morning and welcome to our first quarter 2021 earnings conference call. Speaking on the call this morning is Rory Reid, Chief Executive Officer, and Steve Lasher, Chief Financial Officer. Also joining us is Jay Bellissimo, our Chief Operating Officer. Rory will discuss our strategy and first quarter results, and Steve will provide a more detailed view on our first quarter results, second quarter guidance, and updated full year 2021 guidance. Slides that accompany today's discussion are available on the IR website. At the conclusion of our prepared remarks, We'll be happy to take your questions. As referenced on slide two, I would like to remind everyone that statements made during this call may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are based on management's expectations, depend on assumptions that may be incorrect or imprecise, and are subject to risks and uncertainties It could cause actual results to differ materially. More information about those risks and uncertainties is highlighted on the second page of the slides and contained in our SEC filings. We caution listeners not to rely unduly on these statements and disclaim any intent or obligation to update. During this call, we will be referring to non-GAAP financial measures. A reconciliation to GAAP is available in a first quarter earnings press release or the first quarter earnings slides posted on the IR website. So, with that, I'll turn the call over to Rory.

Thanks, Hunter, and good morning, everyone. I hope you are well and staying safe. The rate of digital transformation continues to accelerate for businesses everywhere. Companies are accelerating their e-commerce and e-support plans, and industries like telehealth, remote education, and virtual events have seen unprecedented increases in growth rates. New forms of customer engagements are driving a communications revolution. Digital transformation of business communications is becoming a critical driver of business outcomes as hybrid work environments and work from anywhere are the new standards, and customers expect to interact with businesses across any channel based on what they prefer. Enabling this transformation are cloud-based communication solutions. This is where we have a unique and differentiated value proposition. Our single global cloud communication platform, BCP, allows us to provide solutions using our APIs contact center, and unified communications to enable our customers to deliver greater experiences for their employees and customers. We believe this is the right strategy to address a market opportunity expected to reach more than $80 billion in 2023. Today, I'll focus my comments on two areas. One, our strong first quarter results, which demonstrate improving execution across our business. and two, the progress we're making on our strategic initiatives, including go-to-market and product innovation. Steve Lasher will follow with a more detailed review of the quarter, second quarter guidance, and an updated full-year guidance. Beginning with consolidated results, we are pleased with the start of the new year. Consolidated revenues of $333 million grew 12%, An adjusted EBITDA of $48 million increased 24% year-over-year. Free cash flow was $31 million, our highest first quarter cash flow in over a decade, enabling us to further invest in growth initiatives. Total Vonage communication platform revenues were $255 million. Service revenues were $240 million, increasing 23% year-over-year. and $10 million sequentially. API continued to see broad-based strength across industries, geographies, and company sizes. Unified communications and contact center revenues were better than expected due to outperformance of all products, including VBC, VCC, and VBE. And we continued to see traction on cross sales. Six of our top 10 deals in the quarter included both VBC and VCC. Our growth, coupled with disciplined expense management, drove VCP first quarter adjusted EBITDA of a negative $2 million ahead of expectations and a $19 million year-over-year improvement. These results reflect the initial efforts of our business optimization and strategic alignment work to improve efficiency and execution while defining our business plan to drive faster growth. We are pleased with our initial progress, but there is more work to do to fully capitalize on the market opportunity in front of us. With the business now on a solid foundation, we are well positioned to accelerate investments in product innovation, go-to-market, our people, and potential acquisitions to drive long-term durable growth. Moving to first quarter highlights by product, API revenues increased 47% year-over-year to $126 million. A key driver of performance was dollar-based net expansion, which increased to 135% in the quarter. We saw broad-based usage growth across products and industry, with e-commerce, technology, and healthcare verticals showing particular strength. Some of the largest and most innovative organizations in the world, including Amazon, Google, and DocPlanner, expanded their relationship and usage with Vonage in the quarter. We also saw solid growth from existing customers as well as new logos. New customer acquisition was strong in the first quarter. One example is an operator of well-known restaurant brands with more than 50,000 locations worldwide. The company selected our SMS API to improve customer experience by providing status updates on their orders and deliveries. High-value APIs grew 112% year-over-year with continued strength in healthcare, collaboration, and education. Video was our largest and fastest growing product, with usage of our voice, verify, and messaging APIs accelerated. We delivered several new voice API features to increase customer adoption and expand our market. These included in-app voice API integration through WebSocket, the ability to accept payments over voice, and a voice SDK to support streaming services. As we discussed at our investor day, we are investing in our direct sales, sales engineering, partner ecosystem, and product development within API. The first quarter results reflect the initial impact of these investments, and we plan to further invest in these areas to drive continued long-term growth. Now moving to unified communications and contact center products, service revenues grew 4% ahead of expectations. Within the micro and small business cohorts, our renewed focus and disciplined investments are making a positive impact on our pipeline and win rate. We've now moved from high-touch, mostly human interaction across sales, provisioning, and support to an efficient, nearly all e-commerce experience for this customer segment. We're also leveraging Vonage AI in our customer care effort, which is enhancing the customer experience. As a result, we've lowered the cost of acquisition and decreased churn. We will continue to ramp up our investments here. Within the channel, we're encouraged by the results of our focus and investment in infrastructure, support, training, and incentive programs. Our platform strategy and products are resonating well within the channel. Pipeline is building as expected. and nine of our top 10 deals in the quarter were partner-related. At the end of March, we launched Vonage Accelerate, a strategic growth initiative that includes significant investments into improving our overall partner experience and incentive programs, including a fully redesigned channel program and our re-architected partner portal. With this strong commitment to the channel, we are seeing positive results and strong engagement and our partners value the ability to automate the entire lifecycle of deals from lead to quote to cash within this new portal. Based on the success of go-to-market enhancements and our improving UC and CC pipeline, we are confident in return to year-over-year bookings growth in the second quarter and reaching high single digits revenue growth in the fourth quarter across this product portfolio. During the quarter, we continued to innovate across the Vonage communication platform to strengthen our differentiation. On Vonage Business Communications, our UC cloud-based product, we added SMS and MMS integrations to Microsoft Teams to supplement our existing voice direct routing capabilities. Our pipeline here is growing well, and several of our largest first quarter deals included the Teams integration. One example is a 140-year-old financial services company for military families that selected our platform to replace their legacy on-prem solution. The company chose Vonage's integrated UC and CC communication solutions to improve their remote capabilities, reduce agent call handling times, and increase analytics while improving their return on investment. Microsoft Teams and Salesforce integrations were key features that enabled us to win in this competitive process. Security, privacy, and trust by design are a core principle at Vonage, and we continue to invest in talent, technology, and processes to achieve this. Leveraging our robust compliance certifications, customers across industries digitize their workflows with confidence. In the first quarter, we added several security enhancements, including single sign-on via SAML and system for cross-domain identity management. And in March, we added a significant product release within the Vonage Contact Center. This release demonstrates the value of our VCP platform strategy. Within this product release, we are leveraging our native video API for embedded video chat within the Vonage Contact Center. and we're enhancing omni-channel capabilities with native web chat, which routes requests directly to appropriately skilled agents within an organization. Both enhancements enable better agent and customer interactions, solve problems faster, and help our customers create better, more personalized experiences for their customers. Our work is being recognized by industry analysts. Just this week, we were named the leader in IDC's CPaaS marketscape. And in the first quarter, we were named a major player in IDC's UCaaS marketscape for SMB and enterprise. Of note, all three reports highlight the strength of Bonage Communication Platform, which provides us with the ability to better serve our customers ever-evolving needs through a complete control of our product roadmap. Additionally, in the Gardner Peer Insights Voice of the Customer UCAS Worldwide Report published in April, Vonage received the Customer Choice Distinction for North America and recognition in several categories, including the highest rating in the Valuation and Contracting category and the second highest rating in the Integration and Deployment service and support, and product capability categories. We also received the second highest rating in the willingness to recommend category. This report is based on end user customer reviews of technology providers in the business cloud communication space and reinforces our belief in a customer first approach and our commitment to delivering innovative solutions and services that build trusted partnerships, foster loyalty, and enhance customer engagement. I want to thank our team members around the world for their continued dedication to our customers. We're creating a culture based on accountability and execution. Every Vonage team member has clarity on what's expected of them and how their work fits into our overall company goals. This is fundamental to executing our strategy and delivering on our commitments to our customers, partners, and shareholders. In summary, we continue to make steady progress. Our go-to-market initiatives are showing initial signs of success, and we're accelerating innovation across the Vonage communication platform to enhance and expand our market. We are seeing increased demand across our portfolio product, which is resonating with customers of all sizes in a time where digital transformation and intelligent communications are fundamental to their success. We have more work to do, but we are confident we are on the right path to achieving our long-term goals of our rule of 40 to be in the mid-20s range for 2022 and above 30 in 2023 as we continue to realize our vision of accelerating the world's ability to connect. I look forward to updating you on our continued progress throughout the year. Now I'll turn it over to Steve.