(EDGAR Online via COMTEX) -- Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion together with our condensed consolidated financial statements and the related notes included elsewhere in this Form 10-Q and our audited financial statements included in our Annual Report on Form 10-K. This discussion contains forward-looking statements. These forward-looking statements 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 impact of the COVID-19 pandemic; the competition we face; the expansion of competition in the cloud communications market; risks related to the acquisition or integration of businesses we have acquired; 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; 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 comply with data privacy and related regulatory matters; 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 obtain or maintain relevant intellectual property licenses or to protect our trademarks and internally developed software; restrictions in our debt agreements that may limit our operating flexibility; our ability to obtain additional financing if required; our ability to raise funds necessary to settle conversion of the 2024 convertible senior notes; conditional conversion features of the convertible senior notes; the cash settlement of the convertible senior notes; the effects of the capped call transactions in connection with the convertible senior notes; 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; 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' unimpeded access to broadband connections; foreign currency exchange risk; 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 under "Risk Factors" in Item 1A of our Annual Report on Form 10-K for the fiscal year ended December 31, 2019. While we may elect to update forward-looking statements at some point in the future, we specifically disclaim any obligation to do so, and therefore, you should not rely on these forward-looking statements as representing our views as of any date subsequent to the date this Form 10-Q is filed with the Securities and Exchange Commission.
We are a leading provider of cloud communications services for businesses and consumers. Our business services transform the way people work and businesses operate through a portfolio of communications solutions that enable internal collaboration among employees, while also keeping companies closely connected with their customers, across any mode of communication, on any cloud-connected device. Vonage customers can choose among or combine two separate service delivery options to suit their specific cloud communication needs. They can buy Applications Group solutions as a subscription and they can buy our API Platform Group offerings and consume our cloud communication as a service product as programmable modules, delivered via APIs. We also provide a robust suite of feature-rich residential communication solutions.
Key Operating Data The table below includes key operating data that our management uses to measure the growth and operating performance of the Business segment: Business Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Service revenue per customer $ 509 $ 440 $ 492 $ 416 Business revenue churn 0.9 % 1.0 % 0.9 % 1.0 %
Service Revenue per Customer. Service revenues per customer for a particular period is calculated by dividing the average monthly service revenues for the period by the average number of customers over the number of months in the period. The average number of customers is the number of customers on the first day of the period, plus the number of customers on the last day of the period, divided by two. Service revenues excludes revenues from trading and auction customers. Service revenue per customer increased from $440 for the three months ended June 30, 2019 to $509 for the three months ended June 30, 2020 primarily driven by the Company's successful efforts to attract larger business customers and to expand services provided to our existing business customers. Service revenue per customer increased from $416 for the six months ended June 30, 2019 to $492 for the six months ended June 30, 2020 primarily driven by the Company's successful efforts to attract larger business customers and to expand services provided to our existing business customers.
Consumer Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Average monthly revenues per subscriber line $ 27.59 $ 26.89 $ 27.40 $ 26.62 Subscriber lines (at period end) 998,475 1,185,835 998,475 1,185,835 Customer churn 1.5 % 1.7 % 1.6 % 1.8 %
Average Monthly Revenues per Subscriber Line. Average monthly revenues per subscriber line for a particular period is calculated by dividing our revenues for that period by the simple average number of subscriber lines for the period, and dividing the result by the number of months in the period. The simple average number of subscriber lines for the period is the number of subscriber lines on the first day of the period, plus the number of subscriber lines on the last day of the period, divided by two. Our average monthly revenues per subscriber line increased from $26.89 for the three months ended June 30, 2019 to $27.59 for the three months ended June 30, 2020 due primarily to the Company's ability to retain its more tenured customers. Our average monthly revenues per subscriber line increased from $26.62 for the six months ended June 30, 2019 to $27.40 for the six months ended June 30, 2020 due primarily to the Company's ability to retain its more tenured customers.
Results of Operations The following table sets forth, as a percentage of total revenues, our condensed consolidated statements of operations for the periods indicated: Three Months Ended Six Months Ended June 30, June 30, 2020 2019 2020 2019 Total revenues 100 % 100 % 100 % 100 % Operating Expenses: Cost of revenues (exclusive of depreciation and amortization) 43 43 43 42 Sales and marketing 29 32 29 33 Engineering and development 6 6 6 6 General and administrative 14 12 14 12 Depreciation and amortization 7 7 7 7 Total operating expenses 99 100 99 100 Income from operations 1 - 1 - Other Income (Expense): Interest expense (3) (3) (3) (3) Other income (expense), net - - - - Total other income (expense), net (3) (3) (3) (3) Loss before income tax benefit (2) (3) (2) (3) Income tax (expense) benefit (1) 5 - 4
Management's Discussion of the Results of Operations for the Three and Six Months Ended June 30, 2020 and 2019
(in thousands, except percentages) Three Months Ended Six Months Ended June 30, June 30, . . .
Aug 06, 2020
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