Venture Global Inc (VG) 2010 Q1 法說會逐字稿

Good day, everyone, and welcome to the Vonage Holdings Corp.'s 2010 earnings conference call. Just a reminder, today's call is being recorded.

At this time for opening remarks and instructions, I would like to turn the conference over to Ms. Leslie Arena, Vice President of Investor Relations. Please go ahead.

Good morning and welcome to our first quarter 2010 conference call. Speaking on our call this morning will be Marc Lefar, Chief Executive Officer, and Barry Rowan, CFO and Chief Administrative Officer.

Marc will discuss the Company's progress and review steps we are taking to drive the business forward. Barry will discuss our financial results. Slides that accompany Barry's discussion are available on the Investor Relations website.

At the conclusion of our prepared remarks, we will be happy to take your questions. As referenced on slide 2, I would like to remind everyone that statements made during this call that are not historical facts or information may be forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These and all forward-looking statements are based on management's current beliefs and expectations and depend on assumptions or data that may be incorrect or imprecise. Such forward-looking statements are subject to risks and uncertainties that 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 Vonage's SEC filings.

We caution listeners not to rely unduly on forward-looking statements and we disclaim any intent or obligation to update them.

During this call, we will be referring to non-GAAP financial measures. A reconciliation of these measures to comparable GAAP measures is available on the Investor Relations website.

And now I'll turn the call over to Marc.

Thank you, Leslie, and thanks to all of you for joining our call.

I would like to begin by welcoming Barry Rowan, our Chief Financial Officer. Barry has been with us for nearly two months now and has hit the ground running. He brings deep wireless industry experience and important leadership skills that are driving the planning and execution of our financial strategies. We are pleased to have him as part of our team. Welcome, Barry.

So let's review our results. We continue to make significant progress improving the fundamentals of our core business while laying the foundation to deliver next-generation services to a rapidly evolving communications market.

Our financial performance for the first quarter was very strong. We reported record high net income of $14 million or $0.07 per share, up from $5 million or $0.03 a share in the same quarter a year ago. We generated $40 million in adjusted EBITDA, our 10th consecutive quarter of growth, driven by aggressive cost management and an increase in average revenue per subscriber. And we reduced expenses in virtually every line item, including customer care and SG&A.

Cash from operations more than doubled sequentially and we generated record high free cash flow of $47 million. This strong cash generation enabled us to reduce our debt by prepaying $23 million in first lien obligations at par. This prepayment will reduce 2010 interest expense by $2.5 million and approximately $13 million over the remaining life of the debt. We expect to generate excess cash flow again next quarter and to make another prepayment offer at that time.

Over the next year, we anticipate making substantial prepayment offers to debt holders as the Company continues to generate cash.

Our results are a testimony to Vonage's solid business model which generated adjusted EBITDA margins of more than 17% during the quarter. Cash generated from the core business provides a solid financial base for driving value and funding new products and services.

We also made solid operational progress as we execute against our strategic imperatives. We are very pleased with the continuing significant improvement in churn which declined to 2.6%, the lowest level in nearly three years. This improvement was driven by two major factors -- first, the quality of Vonage World customers, and second, a relentless focus on improving the end-to-end customer experience.

We also saw an improvement in non-pay churn as a result of a stabilizing economy. Vonage World continues to attract customers who have a lower propensity to churn. Churn rates for these customers are less than half that of non-World customers and churn rates for international callers are even lower as these customers particularly appreciate our compelling value proposition.

Clearly, this product is very sticky. The majority of World customers have "good" or "excellent" credit ratings, further contributing to lower churn. The 30-day return rates for new Vonage World customers continues to be approximately half that of pre-World customers and we now have approximately 750,000 subscribers on this plan.

Our commitment to improving the quality of the customer experience is also paying dividends. Our onboarding queue for new customers as well as ongoing process improvements in customer care helped us achieve best-in-class results for customer satisfaction.

Customers who are "extremely satisfied" or "very satisfied" with Vonage reached 88% in the first quarter. Call handle times declined 9% sequentially and we saw continued positive improvements in first call resolution. These gains are taking place as we increase self-service capabilities online, which will reduce costs over time. This is strong progress.

We also continue to strengthen the quality and reliability of our network. We are focused on reducing the number of customer impacting outages and have shortened the duration of outages 38% sequentially. The availability of customer level call quality metrics enables us to anticipate and address customer problems quickly.

Because our churn results are built on a highly desirable customer profile and strong operating fundamentals, we believe they are sustainable in coming quarters and we are seeing encouraging results thus far in the second quarter.

Achieving operating efficiencies and managing costs also remains a priority. A key example is the cost of telephony services. Through comprehensive supply chain management we have reduced the fees we pay for terminating our traffic, leading to rate reductions of 30% in some countries since launching Vonage World.

We will continue to focus on this area in the coming months and expect to achieve continued unit cost reductions in the second quarter, though overall international long distance usage and cost of telephony services is expected to increase as Vonage World penetration grows.

While some prevailing headwinds persist in our traditional domestic business, such as wireless substitution, we believe we can grow our market share and continue to capitalize on the opportunities in international calling. Worldwide international long distance traffic continues to grow at double-digit rates, far outpacing domestic minute growth.

Despite that growth, carrier pricing remains high, creating opportunities for us to effectively compete on value by driving traffic to our low-cost network. Last year, we introduced Vonage World to capitalize on the opportunities in the ILD market, and this remains an important target of our ongoing growth initiatives.

Nevertheless, we were disappointed with our gross line additions in the first quarter. We did not overcome early softness in the quarter with the $14.99 promotion, which began in March, resulting in lower adds and higher SLAC than we would have liked. While churn improvements helped, we lost 26,000 net subscriber lines in the quarter.

We are taking steps on numerous fronts to improve our market penetration of both domestic and international callers. Building on our success in certain segments of the international long distance market, we are accelerating our multi-segment marketing strategy in others. We've focused resources and hired local market agencies to assist in marketing to each segment.

We recently launched a Spanish-speaking sales center and will soon be launching a Hispanic advertising campaign. Just yesterday we launched an in language Spanish website and we will soon be adding a Spanish-language option to our sales IVR. Over the next several months, we will enable an end-to-end Spanish-language experience.

We launched a marketing program in late March targeted at the Chinese segment. In addition to local market advertising, we launched a public relations outreach initiative that has been picked up by over 40 Chinese publications, highlighting our services and value.

We believe our focused marketing efforts, combined with our solid churn results, will lead to an improvement in net line additions in the second quarter. We also see opportunities for new products and rate plans that address the evolving needs of our targeted customers.

Today, roughly half of the customers on World do not make international calls; and there is a segment of customers who make a limited number of calls. We are actively evaluating opportunities such as limited usage calling plans to more explicitly address these customer needs.

Limited minute plans would allow the Company to better target and retain customers whose value proposition differs from that of the heavy ILD user. Because we understand these customers' usage patterns, we are able to structure calling plans that deliver value while still generating meaningful margins for Vonage.

As we look ahead, our future direction will be built on strong and improving market fundamentals. Demand for mobility, growing smartphone penetration, and the increased availability of broadband networks and Wi-Fi are changing the communications landscape. The explosion of social networking, interactive gaming, and online dating services, for example, dramatically increase the opportunity to connect people, regardless of location or device.

These market dynamics provide Vonage with opportunities to leverage our SIP-based network to deliver compelling new services to consumers, regardless of how they are connected to the Internet - whether on a PC, a gaming console, television, eReader, or mobile phone. With a single "familiar" identity, such as a user name or number, customers can initiate and receive calls and messages from their contact book, social network, or mobile contacts while on any device.

By targeting mobile users who make outbound international calls, the launch of Vonage World and Vonage World for Mobile represent the first step toward delivering voice and messaging to any Internet-connected device. Our initial Mobile application has generated more than 165,000 downloads since launch.

In April, we expanded our Vonage Mobile offerings to additional platforms, enabling AT&T and T-Mobile users to use our product on Android devices. In the next several months, we expect to launch new mobile applications, enabling voice and messaging services directly from friends' lists on existing social communities. While Mobile is still a small contributor to revenue, we are developing valuable market and technical expertise as we systematically leverage our capabilities into this strategically important market.

Going forward, Vonage will continue to introduce new services to take advantage of the changing consumer usage patterns. As more households go wireless only, we will be there to meet them.

Voice and message services will be tied to individual identities such as user name or mobile numbers or shared identities, as in the case of a home phone number or a small business. And the services will be usable across any Internet-connected device. This is true convergence.

As I assess our early progress this year, I am pleased with our financial performance. We delivered record level EBITDA, continued to improve our cost structure and made strong progress reducing churn. We must improve marketing efficiency in our traditional business and further penetrate international calling markets.

At the same time, we are building a business for the future, driven by innovative products and services that will transform our Company. I look forward to sharing our progress with you in coming quarters.

And now I will turn the call over to Barry.

Thank you, Marc. Let me begin by saying that I am thrilled to be at Vonage. I was initially attracted to the Company because I believed in both the business model and the opportunity to leverage our core network technology into the kinds of dynamic market opportunities Marc has described.

I was also impressed by the quality of the team, and my respect for this talented group of people has only deepened since I arrived. I am excited to be here and look forward to meeting with many of you in the upcoming months and quarters.

I am pleased to review our results for the quarter with you. You will see on the top graph on slide 3 that we generated record high net income of $14 million or $0.07 per share for the quarter, which represents an increase from $5 million or $0.03 in the year ago quarter and $4 million or $0.02 in the fourth quarter of last year.

The bottom graph which excludes non-cash adjustments from our convertible debt, thereby depicting a more normalized view of our results, highlights the substantial progress we have made in growing net income from a loss of $8 million in the year ago quarter to $12 million of net income in the first quarter.

Moving to slide 4, adjusted EBITDA was $40 million, nearly double the $21 million reported in the year ago quarter, and up 17% sequentially, driven by lower expenses and modest top line growth. Most of the gain in EBITDA came as a result of cost management and operating efficiencies. We reduced non-media marketing costs, improved agent staffing levels in customer care, reduced compensation and benefits costs through lower headcount and improved international termination rates by roughly 20% sequentially.

Softer than anticipated gross line additions also contributed to the strong EBITDA, as we did not enter the costs associated with acquiring these customers.

Let's walk through some of the details in the income statement, beginning with revenue on slide 5. Revenue for the quarter increased to $228 million from the $224 million level achieved in both the first and fourth quarters of 2009.

Telephony services revenue increased to $225 million. up 4% year over year and 3% sequentially. This improvement was driven by higher average service revenue per user which increased 11% from the first quarter 2009 and 4% sequentially to $30.90.

The year-over-year increase in service ARPU was primarily due to an increase in the number of customers signing up for higher priced rate plans, higher USF, and the increases in fees. We do not anticipate this trend of increasing ARPU to continue into the second quarter due to the greater second quarter impact of our $14.99 promotion, although we expect this downward pressure to be partially offset by other rate favorability.

Moving to slide 6, our direct Cost of Telephony Services, or COTS, was $62 million, up from $52 million in the prior year and $58 million sequentially. There are two offsetting factors affecting COTS. Through active cost management, rates have come down, but with the planned increase in international call volume related to Vonage World, usage has gone up. On a per line basis, COTS was $8.60, up from $7.96 sequentially, but this impact is mitigated by the other kinds of expense reductions we have mentioned.

It is important to note that while COTS is higher for international callers on Vonage World, the net present value of these customers is very attractive. In fact, it is currently higher than that of non-ILD customers, due to lower churn rates.

As Marc discussed, churn for Vonage World customers is less than half that of non-World customers, and churn is even lower for World customers who take advantage of the savings on international calls offered by this popular product.

As we look toward future quarters, we expect total COTS per line will increase, but with a corresponding benefit to our churn performance from these high-value ILD customers.

Direct cost of goods sold was $17 million, flat sequentially, but down from $21 million in the year ago quarter on lower gross line additions.

Let me make one additional point regarding Cost of Goods Sold. Recognizing the meaningful impact of the Vonage device on customer acquisition costs, we have successfully engineered a less expensive device which will meaningfully reduce unit costs without negatively impacting the customer experience. We anticipate introducing this device in the fourth quarter.

The final graph on slide 6 indicates that direct margins of 65% were down from 68% in the first quarter of last year and 66% sequentially. This was expected as it reflects the higher COTS associated with the growth in high-value international calling customers.

Moving to slide 7, our continued focus on operating efficiencies and productivity improvements resulted in SG&A reductions of 11% to $61 million from $68 million in the year ago quarter and from $63 million sequentially. As a percent of revenue, SG&A declined to a record low 27%.

This reduction was achieved through reduced overhead, lowering compensation and benefits costs, and 16% lower customer care expenses per line versus just three months ago. We saw improved efficiency across our customer care operation, including improved agent utilization rates and lower call handle time, aided in part by lower gross line additions.

Slide 8 depicts our Pre-marketing Operating Income or PMOI performance, which reflects the cash generated from our existing customer base as it excludes marketing, cost of goods sold, and equipment and shipping revenue. While this figure of merit should certainly not be viewed in isolation, it does indicate that the existing customer base generated more than $100 million this quarter in total, and a record high of $14.07 or a 46% margin on a per line basis.

We believe this highlights the cash generation capability of the core business, while also emphasizing the potential leverage available from continuing improvements in marketing efficiency.

Turning to slide 9, we indicated last quarter that we expected marketing to be at the low end of recent levels as we reduced marketing dollars to support promotional discounts. Marketing for the quarter was $49 million down 25% from $66 million in the year ago quarter and from $53 million sequentially. Our gross line additions were impacted by this lower absolute level of marketing spend and its timing within the quarter as the expense cuts were made prior to the launch of the $14.99 promotional offer.

These factors, combined with slower penetration into the ethnic segments Marc described, contributed to soft gross line additions which came in at 155,000 for the quarter. The resultant subscriber line acquisition costs of $318 were up 10% from $290 in the prior year and from $281 sequentially.

Turning to slide 10, as Marc described, we are very pleased with the meaningful improvements in churn which declined to 2.6% this quarter. Again, the lowest level in nearly three years. Churn has improved nearly 25% from 3.4% in the third quarter of last year and we are very focused on driving both customer quality and the end-to-end customer experience to hold onto these gains.

While the churn results were strong, they were not enough to offset lower gross line additions and our subscriber base was reduced by 26,000 lines during the quarter.

Now let's move to a discussion of our balance sheet and cash flow results, summarized on slide 11. We generated $51 million in cash from operations during the quarter, increasing total cash to $123 million at quarter end, of which $71 million was restricted.

As our credit quality has continued to improve in recent quarters, and based on the long-term relationships we have developed with our suppliers, we believe we have opportunities to reduce the non-debt portion of restricted cash.

Capital expenditures of $4 million were well below the run rate of 2009 annual capex of $47 million due to the timing of projects. However, at this early point in the year, we still expect full-year capital expenditures to be comparable to 2009 levels.

We believe that part of the attraction of the Vonage business model is the EBITDA margin levels achievable in the business combined with relatively low CapEx requirements, particularly relative to more infrastructure-intensive communications operators.

We are very pleased to report that were able to use the strong cash flow results from this quarter to reduce our debt balance. By taking advantage of the "Excess Cash Flow" provision in our debt agreements, we retired over $23 million of our debt at par.

The agreements provide that once our unrestricted cash balance exceeds $75 million, half of the excess cash flow amount is offered to the debt holders to retire the debt at par. As a result, on April 22, we offered to prepay $24 million in first lien debt.

While certain holders waived their right to receive the prepayment, others accepted the offer, reducing our principal balance on this 16% interest debt by over $23 million with the balance going toward accrued interest. In the second quarter, $4 million will be booked against net income as a cost of early debt retirement resulting from this prepayment.

As we have said in the past, we are comfortable that we can continue to satisfy our debt obligations. That said, this early debt retirement is great news and is part of our continuing focus on opportunities to reduce our debt. This prepayment alone will result in interest savings of $2.5 million for the balance of this year and total savings of $13 million over the remaining term of the debt.

We anticipate generating excess cash flow again next quarter and would then offer 50% of this excess cash flow to our debtholders. Assuming our operating performance continues at expected levels, we would generate sufficient excess cash flow to make additional prepayment offers in subsequent quarters.

Another benefit of the Company's strong cash flow this quarter was the impact on our net debt position. At the end of the quarter, we had a total debt balance of $263 million comprised of debt principal and also including capitalized leases and settlement obligations.

Offsetting this against our unrestricted cash of $52 million and cash collateral of $30 million, and giving effect to our recent $23 million debt repayment, our net debt balance was $158 million. This results in a leverage ratio (net debt to trailing fourth quarter EBITDA) of 1.1x.

The combination of improvements in our financial condition and relatively open credit markets give us reason to continue to explore opportunities for improving our capital structure. As the Company discussed last quarter, in assessing these opportunities we must take into account the premiums for early retirement, and we will only pursue a transaction that makes sense for our Company and our shareholders.

We continually assess our capital structure and, from time to time, discuss with lenders opportunities to repay, refinance, or revise the terms of our credit agreements, though of course there can be no assurance that such efforts will be successful on terms acceptable to us or them.

One last note on our capital structure is that we continued to see additional conversions of our third lien debt-to-equity during the quarter. Of the original $18 million in third lien notes, approximately $15 million has now been converted, leaving $3 million still in place. After these conversions, we had 211 million shares outstanding at the end of the quarter.

As many of you are aware, Vonage achieved full compliance with NYSE listing requirements in March of this year. The decision by the Exchange to remove us from below compliance on an accelerated basis came several months earlier than required and was a result of Vonage's sustained positive financial performance, consistent with the business plan that the Company presented to the NYSE in March of 2009. We are now in full compliance with all NYSE listing requirements.

In summary, it was a strong quarter on many fronts - operationally, financially, and with tangible progress in improving our balance sheet through strong cash flow generation. As we look ahead, we do expect some pressure on EBITDA from the ARPU dynamics we discussed and increased gross line additions, though we reiterate our expectation for EBITDA growth for the full year 2010.

As we lay the foundation for revenue growth, we also recognize that many of the growth initiatives we are undertaking will take time to impact our top-line results, and we wouldn't expect them to significantly affect the financial trajectory of annual revenues until 2011.

Again, I am personally delighted to have joined the Vonage team, and we look forward to providing you with an update on our progress at the end of the second quarter.

And now, Operator, please open the line for questions.

(Operator Instructions). Michael Rollins from Citi Investments.

Good morning. Just had a couple of questions for you. Just wondering if you can give us a little bit more detail in terms of what you are seeing from the current Mobile platform experience?

You said it wasn't a substantial contributor to revenue, but maybe if you could just give us a little more sense of what you're seeing out of that with some metrics?

And then the second question is just on the gross adds for the core business. So you have been throwing some new promotions at the market. You described, I think, the impact from some of that, but is this a situation where investors should just expect a stable to declining base of subscriptions over time or do you see a path to getting back the positive net subscriber growth, you know, call it in the next 12 months? Thanks.

Let me take those in sequence. So, relative to the Mobile platform, the -- in the world of communication, it's easy for both people to think about the traditional way that identities and numbers have worked.

I would encourage you to think less about our first steps onto mobile devices as a Mobile strategy as much as this is about real convergence. This is about no longer being tied to a physical location like the home, but taking an identity or multiple identities that somebody has, whether it is a username from a social community, whether it is a phone number, or if it's a community identity as in the case of a small business that has a small business name or even a home phone with a home phone number which is used by multiple family members, and that all of those identities will be accessible across any Internet-connected device.

The most prevalent is obviously the mobile phone and smartphones give you the flexibility to really be able to propagate this into a good user experience. But you should be thinking about this in the context of not just mobile phones, but everything from gaming consoles to PCs to Pads. Anything that is Internet-connected will have the ability to do messaging and voice enablement and to launch that voice and messaging enablement directly from the community, from existing contact lists, from existing information you have already got in multiple clouds.

So we are talking about what is very much a fledgling business in our Mobile space. It is really limited only to those that are outbound calling to date for international users. So it is relatively small in the grand scheme of things.

We are not going to provide specific detailed metrics on that platform because it represents such a small piece of the broader strategy and you'll see products and services in the balance of this year and into 2011, where we think that vision will become much more clear to you. And you will be able to see how it is a broad communication service that we're selling that is usable across multiple devices, including the traditional plastic of the home phone, but not necessarily, as folks simply choose to cut cords to eliminate the excess fees they pay to traditional carriers.

We just need Internet connection and then we are going to enable all communication across multiple devices. And that is really the direction we are going.

Let's talk about the gross adds situation with new promotions and a pattern to where we see ourselves going. We do envision a pattern -- a path to positive net adds. We expect the next quarter to be improved versus the quarter that we are just reporting now.

We have significant opportunities. We still believe in the international long-distance market within specific ethnic communities where in-language experiences are critical. We have got to get those built and supported to be able to drive the gains we expect.

We also are seeing additional opportunities at the light user level. Folks who still have affinity for the home phone, home phone number and that identity, but the ability to provide them a better value proposition than is included in a $25 plan for folks who aren't using international long-distance calling.

We are seeing that and starting to understand that usage is a result of some of the promotions we put in place and you can expect us to be able to tap into that market in the coming months. And as Barry mentioned a lower-cost adapter device gives us the opportunity to do that at lower acquisition costs and still have good margins while managing migration from our base.

So we still think there is a lot of opportunity. We were disappointed with the quarter and didn't feel like we got as much penetration in the ethnic segments as we had expected. But we still have optimism going forward.

And if I can just build on Marc's comments in terms of how this translates into a financial strategy. We think about the Company in three parts. That the -- and really three corresponding financial strategies with that.

First is the traditional business and a real objective there is to continue to generate very positive cash flow from that business, it can be the growth engine. And then building on that, the second part of that is extensions off of that business like Marc described in the international piece and Vonage World and particularly the ILD color portion of that is probably the best example. And we talked about the value of those customers. Even though they use higher cuts, they also have less churn. So they are very attractive customers.

So we can extend our capability into that piece and then layering on top of that, we would have what you might call next generation Vonage as we are able to tap into and extend some of our initial reach into some of the attractive markets that Marc described.

Thanks very much.

Next question, Operator.

Mike Latimore from Northland Capital.

Good morning. Nice job on the cash flow there in the quarter. Just a question, I guess, looking into the second quarter, is there any working capital changes that might have an effect on this kind of cash flow trend?

We actively work on managing our working capital obviously, and you saw some of that in this quarter. We believe that there are some opportunities for that, although working capital is at a relatively normalized operation level at this point.

We do think that there are opportunities, however, related to that to free up some of the restricted cash that we have. So that, for example, with credit card companies that were required in the early days of Vonage and we think with the very strong financial performance, there will be opportunities to continue to generate cash from those kinds of things.

So we are actively looking at that as we explore ways to free up cash on the balance sheet and we will continue to look for ways to apply that cash flow as is generated to further the business, including ways to further retire the debt like we were able to do this quarter. We are very pleased obviously at those results. And it clearly is directionally where we want to go with regards to the debt.

And then in terms of retiring some of the debt here, was there -- did you -- was there any debt that you offered that was not accepted or was there -- was the full amount accepted in the quarter?

The full amount was accepted in the quarter. You know, we are not at liberty to talk about the details of that. What I can tell you is that I think the patterns were illustrative on a generic basis. They kind of fall into three groups.

First are people who hold equity as well as debt. We saw more of those people taking the offer to have the debt redeemed which, as you expect from an equity standpoint, it reduces the interest expense, it reduces the debt outstanding.

The second category were people who were just debt holders and some of them did not take the offer which, I think, is illustrative of the way they think about the debt which is as a quality piece of paper.

And then there was a third category of people who you could describe as they are not natural holders of the debt. Circumstances change so they had individual circumstances within their own funds. So that was really kind of the complexion of the response to the offer we made this quarter.

Thanks. And then you mentioned that you will have a lower cost product on the fourth quarter. How should we think of that? I mean, maybe 50% less or what -- you said meaningful, but I guess, how should we think about the cost there?

It will be in excess of 20% reduced. We won't give the specifics now, but it's a material reduction.

Okay and then you gave a number, I think you gave the number for a number of subscribers on the Vonage World plan. Can you give that again?

750,000.

Okay. Got it. Thanks. And any -- it's been, I guess, a couple months now for the new lower price plan to be on the market and [you out] in the marketing. Any kind of initial read there? A little more detail in terms of the effectiveness of that offer?

Yes. Just to clarify for folks what you are referring to. We, from time to time, will do price-based promotions. We think about that as one of the marketing elements that we leverage from time to time. Sometimes that will -- in the case this quarter -- will actually spend in promotion as opposed in direct marketing expense.

We launched actually in March a plan that had $14.99 as an introductory price for a period of six months before stepping back up. We did see increase in lift in the month of March versus what we saw in January and February. Things were quite soft after the holidays, but as I mentioned earlier the lift in March was not sufficient to get us back to positive which was a little bit disappointing for us.

I am not going to comment specifically about second quarter progress or results relative to the $14.99 plan except to say that we are feeling pretty bullish about the opportunity for light user plans. Folks who simply see the ILD product and think it's interesting, but it is just not core to their usage.

Of all the Vonage World customers we have coming in, about half of them are actually active users of international long distance calling and if you are not an ILD caller, obviously, the incremental value perceived versus a bundle isn't nearly as great for just domestic use, especially if you are a light user. So we do see some opportunity, both promotionally and potentially, to even go directly with specific types of offerings through limited channels for lighter use customers. And I think you'd expect to see that in the back half of the year.

Great and just last question is on ARPU. You talked about some cross currents in the second quarter here. Should we generally think about it as stable? Or how should we think about ARPU, I guess?

Yes, we talked about those currents that we're going to see the effect of the promotion longer, the $14.99 promotion. As Marc mentioned, it just kicked in really at the beginning of March. So we will see that effect. It will be offset by -- we see some increased fees, for example. But I think I would think about it as stable to declining a bit.

And just call it declining off of the quarter just reported, but generally as you look at this over a longer period of time, you can think about it as relatively stable ARPU.

Next question, Operator.

(Operator Instructions). Ben Sullivan from [Emerson].

Okay, Operator. Are there any other questions?

I see no other questions in queue at this time. Please continue.

Okay. We will conclude our call. Thank you for joining us. Have a good day.

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