Venture Global, Inc. Q4 FY2020 earnings call

Management Statement and Operational Highlights

• Rory thanked the Vonage team worldwide for their support during 2020 and mentioned helping StoryCorps, a national nonprofit.
• Steve Lasher discussed consolidated Q4 and full-year 2020 performance, including consolidated revenues growth, OpEx optimization, and the start of providing additional disclosures on VCP and Consumer segments.
• Rory mentioned the comprehensive strategic review of the consumer business, aiming to provide greater transparency to investors and the right decision to focus on VCP's strategic pivot.

Segment Performance

• Vonage Communication Platform (VCP) Segment:
  • Q4 2020 service revenues were $230 million, up 17%. Full-year 2020 VCP service revenues were $856 million, a 19% increase.
  • API revenues in Q4 were $190 million, up 33%, with high-value APIs growing 130%. Unified Communications and Contact Center service revenues in Q4 were $111 million, up 4%.
  • Q4 VCP gross margin was 46%, down 100 basis points year-over-year; full-year 2020 VCP gross margins were 48%, up 100 basis points.
  • Q4 VCP adjusted EBITDA was negative $4 million, improving from prior year.
• Consumer Segment:
  • Q4 2020 revenues were $79 million, and totaled $333 million for the full year, a 14% decrease. Ended Q4 with approximately 900,000 consumer subscriber lines.
  • Consumers average monthly revenue per line was $28.13. Churn rate was 1.7%.
  • Consumer adjusted EBITDA was $52 million in Q4 and $227 million for the full year.

Guidance

• First Quarter 2021:
  • Expect VCP revenues in the range of $240 million to $244 million. VCP service revenue growth of approximately 16% to 18%. API growth in the 34% to 36% range. UC and CC service revenue growth in the low single digits.
  • Expect VCP adjusted EBITDA to be in the range of negative $7 million to negative $3 million.
  • Expect consumer revenues in the $75 million range and adjusted EBITDA of approximately $49 million.
  • Consolidated total revenue expected to be $314 million to $318 million, and adjusted EBITDA in the $42 million to $46 million range.
• Full Year 2021:
  • Expect VCP total revenues in the range of $1.038 billion to $1.054 billion, with service revenue growth of 15% to 17% driven by API growth approaching 30% and UC and CC service revenue growth in the low to mid-single digits.
  • Expect VCP adjusted EBITDA to be positive in the $5 million to $9 million range.
  • Expect consumer revenue in the $285 million range and adjusted EBITDA in the $185 million to $189 million range.
  • Total consolidated revenues expected to be in the range of $1.323 billion to $1.339 billion.
  • Expect full year 2021 adjusted EBITDA in the $190 million to $200 million range.

Risks

• Statements made during the call may be forward-looking statements subject to risks and uncertainties that could cause actual results to differ materially, including assumptions that may be incorrect or imprecise, and market uncertainties.

Question and Answer

Q: Thanks for taking the question. So just to dig in to start on the consumer division how are the interest levels during the sales process? And what was the valuation that you were trying to achieve here? And just given how extensive this review was, does this really close the book on Vonage potentially selling its consumer business?

A: Hey, Ryan thank you for the question. There's no question we went through a comprehensive strategic review. First, we had to understand and we brought in accounting and professional consultants to really dissect the business and pull it apart, because it's always been our intention to give greater transparency to our investors so that they could understand VCP, the Vonage Communication Platform and the Consumer business. It was definitely robust approaching 70 strategic and financial sponsor, there's no question, we went through two rounds of discussion. And we had quite a number of interest, but at the end of the day Ryan, it really comes down to this is a very efficient access of capital for us. We can run it efficiently without distraction and this gives us real flexibility as we continue the strategic pivot of Vonage from its traditional heritage to this leader in the global communication platform space. There's no question, we'll continue to invest in VCP to drive faster growth, as I mentioned in the progression of the Rule of 40 over the next three years. And that's something we'll dig into at the Analyst Day on March 5. But I believe that this is clearly the right decision. And clearly, we closed the book on this one. End of discussion.

Q: Thanks for taking the question. So just to dig in to start on the consumer division how are the interest levels during the sales process? And what was the valuation that you were trying to achieve here? And just given how extensive this review was, does this really close the book on Vonage potentially selling its consumer business?

A: Hey, Ryan thank you for the question. There's no question we went through a comprehensive strategic review. First, we had to understand and we brought in accounting and professional consultants to really dissect the business and pull it apart, because it's always been our intention to give greater transparency to our investors so that they could understand VCP, the Vonage Communication Platform and the Consumer business. It was definitely robust approaching 70 strategic and financial sponsor, there's no question, we went through two rounds of discussion. And we had quite a number of interest, but at the end of the day Ryan, it really comes down to this is a very efficient access of capital for us. We can run it efficiently without distraction and this gives us real flexibility as we continue the strategic pivot of Vonage from its traditional heritage to this leader in the global communication platform space. There's no question, we'll continue to invest in VCP to drive faster growth, as I mentioned in the progression of the Rule of 40 over the next three years. And that's something we'll dig into at the Analyst Day on March 5. But I believe that this is clearly the right decision. And clearly, we closed the book on this one. End of discussion.

Q: Thanks for taking the question. So just to dig in to start on the consumer division how are the interest levels during the sales process? And what was the valuation that you were trying to achieve here? And just given how extensive this review was, does this really close the book on Vonage potentially selling its consumer business?

A: Hey, Ryan thank you for the question. There's no question we went through a comprehensive strategic review. First, we had to understand and we brought in accounting and professional consultants to really dissect the business and pull it apart, because it's always been our intention to give greater transparency to our investors so that they could understand VCP, the Vonage Communication Platform and the Consumer business. It was definitely robust approaching 70 strategic and financial sponsor, there's no question, we went through two rounds of discussion. And we had quite a number of interest, but at the end of the day Ryan, it really comes down to this is a very efficient access of capital for us. We can run it efficiently without distraction and this gives us real flexibility as we continue the strategic pivot of Vonage from its traditional heritage to this leader in the global communication platform space. There's no question, we'll continue to invest in VCP to drive faster growth, as I mentioned in the progression of the Rule of 40 over the next three years. And that's something we'll dig into at the Analyst Day on March 5. But I believe that this is clearly the right decision. And clearly, we closed the book on this one. End of discussion.