Vonage Holdings Corp.

Greetings and welcome to Vonage Second Quarter 2021 Earnings. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during a conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Hunter Blankenbaker, Vice President, Investor Relations. Thank you. You may begin.

Okay, thank you, Operator, and good morning and welcome to our second quarter 2021 earnings conference call. Speaking on the call this morning is Rory Reed, 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 second quarter results, and Steve will provide a more detailed view on our second quarter results, third 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 that could cause actual results to differ materially. More information about these 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 the second quarter earnings press release or the second quarter earnings slides posted on the IR website. So with that, I'll turn the call over to Rory.

Thanks, Hunter, and hello, everyone. Thank you for joining us today. I hope you and your families are safe and healthy. It's been just over a year since I became CEO of Vonage, and we are delivering significant progress against our strategic transformation plan and committed business results. Over the past year, we have implemented important changes to strengthen our Vonage communication platform business to drive faster growth and better capture the major market opportunities across our product portfolio. We started executing this transformation by optimizing our business for improved operational efficiency, and we are on track to reduce operating expenses by $50 million in 2021, net our strategic investments. The strategic investments we have made are focused on driving growth through product innovation and a stronger go-to-market in areas where our products bring the greatest value to our customers and where we can win a disproportional share of the market. Our world-class leadership team is now in place. And our new culture, the Vonage Way, has every Vonage team member focused on driving execution, through accountability, collaboration, and a customer-first mentality. Today, I'll focus my comments on our strong second quarter Vonage communication platform results, reflecting improving momentum driven by good execution and on the progress we're making on our strategic investment. Steve Lasher will follow with a more detailed review of the quarter and updated guidance. Vonage communication platform services revenue were $260 million, driven by accelerating growth rate of 23% up from 18% a year ago. Second quarter, BCP adjusted EBITDA improved $19 million year over year, and we reached positive BCP adjusted EBITDA of $1 million earlier than planned. As a software technology company, our results are being measured through a progressive improvement of a rule of 40. This quarter, our rule of 40 result was 23, up from 10 in the second quarter a year ago. This is ahead of the schedule we covered with you during our investor day in March. API revenues increased 40% year over year to $144 million in the quarter. Our strong growth was driven by broad-based demand across geographies, verticals, and customer size. We saw particular strength in the messaging area. as economies and industries continue to reopen and accelerate demand. Whether it's receiving medical attention through telehealth, tracking a package or food delivery, booking a ride-sharing service, providing fraud protection, connecting with the right customer support agent, or enabling video and voice communications across thousands of office locations, Vonage does that. Our global scale and diversity remain key differentiators. We delivered strong growth across each of our geographies, and we are continuing to invest in new markets and industries to further expand our addressable market. Additionally, our API product breadth and deep industry expertise provided a significant advantage in these high growth API markets today and well into the future. One industry I'd like to highlight is the emerging social media platform space, where Vonage provides services to eight of the top 13 global social media platforms. Our growth from existing customers was also strong. Dollar-based net expansion was 125% in the quarter, driven by accelerating usage growth in e-commerce, social media, gaming, with travel and hospitality showing particular strength. A great land and expand example this quarter is Amerisave Mortgage Company. Amerisave selected our messaging product in early 2021 to enhance their customer engagement and support in order to simplify the loan process. After a smooth implementation and scaling to meet their business needs, Amerisave has now also implemented our Verify API to help them protect against fraud. Additional expanded relationships across our API products include, among other, a major international audio streaming and digital media services provider, a leading online travel booking platform, and a major China-based data center and cloud computing provider. Our investments in go-to-market also drove strong new customer growth, where Cree and Krafton are good examples. Cree, a European-based digital healthcare platform that provides services to more than 3 million patients across Europe, chose Vonage's video API to power its platform to enable patients to consult with clinicians digitally from anywhere at any time. This added functionality for Cree will remove barriers to patient care, such as long wait times, busy phone lines, to help those in need of essential healthcare. Krafton Incorporated, a South Korean video game holding company known for Player Unknown's Battlegrounds, often referred to as PUBG, wanted to prevent excessive game addiction among minors. They chose Vonage's Verify API authentication services to differentiate adults from minors to monitor minors' playing time. The importance of security and compliance is critical to our customers. and we will continue to invest in HIPAA, PCI, SOX2 compliance to increase our market opportunity. In the second quarter, we enhance compliance certifications for our messaging API with the addition of HIPAA compliance and added regional media zones to our video API. Our API products continue their strong momentum in the second quarter, and we expect this to continue for the balance of the year. Now moving to Unified Communications and Contact Center products. Service revenues grew 7% ahead of expectations. Our go-to-market and product initiatives drove solid positive year-over-year bookings growth for the quarter as we expected. Our revenue growth increased to mid-single digits in the second quarter, and based on our pipeline bookings and improved execution, We are well positioned to accelerate revenue growth to the high single digits in the fourth quarter and double digits growth in 2022. Ten of our top 15 wins this quarter included an integrated unified communications and contact center solution. We believe this will be an important driver moving forward. I'll highlight two examples. The London borough of Hackney selected Vonage's UC and CC solution to move more than 3,500 UC seats and 170 contact center seats to the cloud from an on-prem solution to modernize employee collaboration and provide better experiences for the borough's more than 300,000 residents. Another key win was a Fortune 1000 global consumer goods company that needed to integrate its Salesforce CRM with its internal business communication solutions and contact center. Vonage's deep integration with Salesforce and our ability to provide an integrated UC and CC solution with advanced features, reporting, analytics, and AI capabilities were key differentiators in this win. Within the channel, the additional resources, support, and training we have implemented through Vonage Accelerate are driving early positive results. Channel bookings increase sequentially, and five of our top 10 deals, including our two largest deals in the quarter, came from the channel. We will continue to invest in this critical route to market. In the contact center product space, We will continue to partner with Salesforce to drive growth, where I believe we are a leading early partner in Salesforce Service Cloud Voice Partner Telephony Program. This represents an important opportunity for us. Vonage Contact Center brings automation, intelligence, and global calling capability to Service Cloud Voice, combining voice, digital channel, and CRM data into one central view for a unified agent and digital channel experience. Vonage Contact Center has a 4.9 out of five rating based on more than 800 reviews on the Salesforce App Exchange. Salesforce also recently named Vonage the 2021 Cross Industry Independent Software Vendor Partner of the Year in EMEA for the second consecutive year. We will invest and execute to capture this unique opportunity for Vonage with our powerful partner, Salesforce. In summary, second quarter results were strong and continued to improve. This is demonstrating our operational execution and delivery against our strategic transformation plan over the past year. We are showing material progress on our go-to-market initiatives, and we are innovating faster to provide differentiated experiences and solutions for our customers. We are clearly operating in a very large and growing market, which is expected to reach $80 billion in 2024, driven by secular tailwinds like cloud migration, digital transformation, and more recently, hybrid working models. We believe Vonage is in a unique position to offer comprehensive unified communications, contact center, and programmable APIs through our Vonage communications platform. Customer needs are rapidly growing across their communication and engagement platforms. And we will continue to see an increased need for combined UC and CC solutions and the continued strong growth of embedded API programmable communications markets. We are encouraged by our momentum and are confident in our ability to grow and gain scale in this rapidly expanding cloud communications market. I would like to thank our talented team members around the world for their support over the past year and for their passion and commitment to our customers. We are building a culture of execution and we will continue to deliver. This year marks Vonage's 20th year in business, and we believe the best is yet to come. With that, I'll turn it over to Steve.