Vonage to Acquire NewVoiceMedia

Transcription

1 Vonage to Acquire NewVoiceMedia Analyst and Investor Briefing September 20,

2 Safe Harbor Caution Concerning Forward-Looking Statements Various remarks that the Company makes contain forward-looking statements, including statements about acquisitions, acquisition integration, financing activity, growth priorities or plans, revenues, adjusted OIBDA, churn, seats, lines or accounts, average revenue per user, cost of telephony services, capital expenditures, new products and related investment, and other statements that are not historical facts or information, that constitute forward-looking statements for purposes of the safe harbor provisions under The Private Securities Litigation Reform Act of In addition, other statements in this press release that are not historical facts or information may be forward-looking statements. The forward-looking statements in this release are based on information available at the time the statements are made and/or management's belief as of that time with respect to future events and involve risks and uncertainties that could cause actual results and outcomes to be materially different. Important factors that could cause such differences include, but are not limited to: the competition we face; the expansion of competition in the cloud communications market; our ability to adapt to rapid changes in the cloud communications market; the nascent state of the cloud communications for business market; our ability to retain customers and attract new customers cost effectively; the risk associated with developing and maintaining effective internal sales teams and effective distribution channels; risks related to the acquisition or integration of businesses we have acquired; security breaches and other compromises of information security; risks associated with sales of our services to medium-sized and enterprise customers; our reliance on third party hardware and software; our dependence on third party facilities, equipment, systems and services; system disruptions or flaws in our technology and systems; our ability to scale our business and grow efficiently; our dependence on third party vendors; the impact of fluctuations in economic conditions, particularly on our small and medium business customers; our ability to comply with data privacy and related regulatory matters; our ability to obtain or maintain relevant intellectual property licenses; failure to protect our trademarks and internally developed software; fraudulent use of our name or services; intellectual property and other litigation that have been and may be brought against us; reliance on third parties for our 911 services; uncertainties relating to regulation of business services; risks associated with legislative, regulatory or judicial actions regarding our business products; risks associated with operating abroad; risks associated with the taxation of our business; risks associated with a material weakness in our internal controls; governmental regulation and taxes in our international operations; liability under anti-corruption laws or from governmental export controls or economic sanctions; our dependence on our customers' broadband connections; restrictions in our debt agreements that may limit our operating flexibility; foreign currency exchange risk; our ability to obtain additional financing if required; any reinstatement of holdbacks by our credit card processors; our history of net losses and ability to achieve consistent profitability in the future; our ability to fully realize the benefits of our net operating loss carry-forwards if an ownership change occurs; certain provisions of our charter documents/ and other factors that are set forth in the Risk Factors in our Annual Report on Form 10-K for the year ended December 31, 2017 and Quarterly Reports on Form 10-Q filed with the SEC. While the Company may elect to update forward-looking statements at some point in the future, the Company specifically disclaims any obligation to do so except as required by law, and therefore, you should not rely on these forward-looking statements as representing the Company's views as of any date subsequent to today. Non-GAAP Financial Measures This presentation contains non-gaap financial measures (including adjusted operating income before depreciation and amortization ( adjusted OIBDA ), adjusted OIBDA less capex, adjusted net income, net debt (cash),free cash flow, organic growth and adjusted revenues), as defined in Regulation G adopted by the SEC. The Company provides a reconciliation of these non-gaap financial measures to the most directly comparable financial measure at the end of the presentation and in the Company's quarterly earnings releases, which can be found on the Vonage Investor Relations website at 2

3 Today s Speakers Alan Masarek Chief Executive Officer Dennis Fois Chief Executive Officer David Pearson Chief Financial Officer 3

4 Vonage to Acquire NewVoiceMedia, a Global Leader in Cloud Contact Center Signed agreement to acquire NewVoiceMedia for equity price of $350 million in cash Enterprise valuation represents 3.8x 2019 projected revenues Expected to close in 4Q 2018 Unique pure-play cloud contact center provider with significant scale, robust technology and differentiated CRM integration Global presence with over 700 primarily mid-market and enterprise customers, and major offices in U.S., EMEA and APAC Revenue growth of over 25% with 60%+ gross margins Leadership team to join Vonage to continue to drive growth and innovation in cloud contact center Creates the Largest Independent Cloud Communications-as-a-Service Provider by Revenue (1) (1) Last quarter annualized, pro forma for acquisition of NewVoiceMedia, Vonage Business Segment only 4

5 NewVoiceMedia Accelerates Vonage s Growth Strategy & Reinforces its Leadership Position in Cloud Communications + 1 Single UCaaS + CCaaS Platform Enables product-level UCaaS + CCaaS combination and cross-sell with owner economics 2 Attractive Global MME Customers Strengthens Vonage s sales footprint and penetration of mid-market and enterprise clients globally 3 Extended API Solution Set Bolsters CPaaS roadmap through future addition of programmable contact center tools 4 Differentiated CRM Strategy Adds deep CRM integration and go-to-market relationships, particularly with Salesforce 5 Contact Center Leadership Positions Vonage at scale in the large and high-growth cloud contact center market 5

6 With the Acquisition of NewVoiceMedia, Vonage Is the Largest Independent Cloud Communications Company by Revenue (1) $672 $591 $582 $333 $226 $186 Vonage Twilio RingCentral 8x8 Five9 Mitel $ in Millions (1) Last quarter annualized, pro forma for acquisition of NewVoiceMedia, Vonage Business Segment only 6

7 Vonage Addresses the Entire Cloud Communications-as-a-Service TAM $3B Programmable Communications $9B CCaaS $18B Programmable Communications $11B CCaaS $38B UCaaS $50B $79B $50B UCaaS The Cloud Communications TAM is expected to grow by 60% over the next 5 years Source: Vonage, IDC (2018) 7

8 NewVoiceMedia Operates at Global Scale 700+ Customers Pure Cloud ALL AGILE & LEAN CONTINUOUS RELEASE 2X DROPS / WEEK 24x7 Support TRUST SITE VISIBILITY $100K+ ARR/Customer 7 GLOBAL POP LOCATIONS SUPPORT 60+ COUNTRIES 5/5 Salesforce.com AppExchange Rating BASED ON 380+ REVIEWS 430 EMPLOYEES ACROSS THE U.S., EMEA AND APAC PoP Locations Customers 1.5B DATA POINTS / DAY >1B MINUTES OVER PLATFORM P.A. Note: As of July

9 NewVoiceMedia is a Unique Cloud Contact Center Asset Largest privately-owned, pure-play, cloud contact center provider Customers Customer Insight Prospects Scalable geo-redundant and native cloud architecture services customers in 60+ countries Deep integration with Salesforce.com and other key CRMs enables improved agent productivity and customer experience Competitively differentiated go-to-market strategy leverages robust CRM relationships to drive sales NVM Cloud Contact Center IVR, Voice, Omnichannel, Dynamic Routing, Screen Pops, Dialer, Sales Cadence CRM AI and Speech Intelligence Employee Incentive, Behavior and Motivation Workforce Management Analytics Buyer Journey Insights Global, Highly Resilient and PCI-Compliant Platform APIs for Extensibility and Integration Global presence with major offices in the U.S., EMEA and APAC and 40% of headcount deployed in technology Customer Service Agents Inside Sales Reps 9

10 Technology Leadership and Longstanding Sales Partnerships Drive High-Quality Customer Base CCaaS Magic Quadrant (1) Selected Go-to-Market Relationship Notable Customers (1) Source: Gartner, CCaaS Magic Quadrant for Western Europe (2017) 10

11 NewVoiceMedia Aligns with Our One Vonage Platform: Our Future, Fully Programmable Communications Software Platform SaaS PaaS Employees Unified Communications (UCaaS) Cloud hosted PBX Collaboration + Team Messaging Contact Centers (CCaaS) Real-time omnichannel communications platform Seamless orchestration across CCaaS platform Customers APIs (CPaaS) Embedded real-time communications Programmable into apps and software Capabilities Voice SMS/Chat Video Verify Conferencing Recording Analytics 40+ Call Features Integrations Network Termination & Peering Relationships Points of Presence Diverse Redundant Backbone 11

12 Financial Overview 12

13 Financial Overview: NewVoiceMedia is Growing Quickly and There is an Opportunity to Accelerate U.S. Penetration $ in Millions $70+ Geographic Mix (% of Revenue) $55 27%+ Y/Y Growth APAC, 7% EMEA, 60% North America, 33% E $126 MRR Per Seat 80%+ Of revenue from Mid-market and Enterprise Customers ~1% Monthly Revenue Churn Note: Fiscal YTD as of July

14 Transaction Highlights Summary $350 million equity consideration in the form of all cash tender offer Vonage retains cash on NewVoiceMedia balance sheet at time of closing Enterprise value represents approximately 3.8x projected 2019 revenue (1) Financing Funded through existing revolver capacity and cash on hand Revolver pricing at L Closing leverage 3.3x Net Debt / LTM Adj. OIBDA De-lever to below 3.0x within two quarters Closing Timeline Anticipated closing in 4Q 2018 Subject to regulatory approval and customary closing conditions Already received necessary shareholder approval of tender offer Financial Impact Expected to be accretive to adj. net income within 2020 Approximately $10 million of run-rate annual synergies COS and G&A cost savings plus cross-sell revenue synergies Deferred revenue write down to lower revenue and adj. OIBDA, primarily in first 12 months of ownership (1) Excludes merger-related purchase accounting adjustments, including with respect to deferred revenue 14

15 Financial Impact of NewVoiceMedia Acquisition Financial Impact From Deferred Revenue As an enterprise software company, NewVoiceMedia generally charges customers in advance for the first year Prepaid cash amount results in deferred revenue on the balance sheet Revenue recorded as the service is provided GAAP purchase accounting requires write-down of portion of deferred revenue, primarily over the next 12 months Reduction based on Vonage s cost to provide the service Reported revenue and adj. OIBDA will be lower through the first year of ownership Adj. OIBDA is reduced by the same dollar amount as revenue Given cash is received upfront, NewVoiceMedia is a working capital-positive business Impact of deferred revenue is accounting-only and non-cash Financial Impact on Vonage s 2018 Results Factors affecting actual revenue and adj. OIBDA reduction include: Closing timing Deferred revenue balance at closing Realization rate of deferred revenue ASC 606 implementation Preliminary 2018 financial impact, assuming November 1 closing and ~$35M deferred revenue balance: Increased GAAP revenue of ~$10 million Reduced GAAP adj. OIBDA of ~$4 million Both of the above were reduced by ~$3 million due to deferred revenue purchase accounting Plan to update guidance on 3Q 2018 earnings call Following greater clarity on above factors Provide information to facilitate organic analysis post-close 15