UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-Q



x☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Quarterly Period Ended ~~September 30, 2017~~March 31, 2020



o☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the Transition Period From __________ to __________

Commission File Number 001-32887

VONAGE HOLDINGS ~~CORP.~~CORP.

(Exact name of registrant as specified in its charter)



Delaware					11-3547680
(State or other jurisdiction of incorporation or organization)					(IRS Employer Identification No.)

23 Main Street ~~Holmdel, NJ~~	Holmdel	,	NJ	,	07733
(Address of principal executive offices)					(Zip Code)

Registrant’s telephone number, including area code: ~~(732)~~ (732) 528-2600

(Former name, former address and former fiscal year, if changed since last report): Not Applicable

Securities registered pursuant to Section 12(b) of the Act:



Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.001	VG	Nasdaq Global Select Market

Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No o

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files). Yes x No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a ~~nonaccelerated~~non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	x	Accelerated filer	o

Non-accelerated filer	o	~~(Do not check if a smaller reporting company)~~
Smaller reporting company	o☐	Emerging growth company	o☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes o☐ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.



Class	Outstanding at		~~October 31, 2017~~May 1, 2020
Common Stock, par value $0.001		~~228,671,311~~245,368,168		shares

VONAGE HOLDINGS CORP.

INDEX



Part 1 - Financial Information

		Page
Item 1.	Condensed Consolidated Financial Statements and Notes
	~~Condensed Consolidated Balance Sheets as of September 30, 2017 (Unaudited) and December 31, 2016~~	3
	~~Unaudited Condensed Consolidated Statements of Income for the Three and Nine Months Ended September 30, 2017 and 2016~~	4
	~~Unaudited~~ Condensed Consolidated Balance Sheets as of March 31, 2020 and December 31, 2019	4
	Condensed Consolidated Statements of ~~Comprehensive Income~~Operations for the Three ~~and Nine~~ Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	5
	~~Unaudited~~ Condensed Consolidated Statements of ~~Cash Flows~~Comprehensive Loss for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019	6
	~~Unaudited~~ Condensed Consolidated ~~Statement~~Statements of ~~Stockholders’ Equity~~Cash Flows for the ~~Nine~~Three Months Ended ~~September 30, 2017~~March 31, 2020 and 2019	7
	Condensed Consolidated Statement of Stockholders’ Equity for the Three Months Ended March 31, 2020 and 2019	8
	Notes to Unaudited Condensed Consolidated Financial Statements	89

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	3025

Item 3.	Quantitative and Qualitative Disclosures About Market Risk	4337

Item 4	Controls and Procedures	4338

Part II. Other Information

Item 1.	Legal Proceedings	4539

Item 1A.	Risk Factors	4539

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	4540

Item 3.	Defaults Upon Senior Securities	4540

Item 4.	Mine Safety Disclosures	4540

Item 5.	Other Information	4540

Item 6.	Exhibits	4641

	Signature	4742

Financial Information Presentation

For the financial information discussed in this Quarterly Report on Form 10-Q, other than per share and per line amounts, dollar amounts are presented in thousands, except where noted.

GLOSSARY OF TERMS

When the following terms and abbreviations appear in the text of this report, they have the meanings indicated below:



2018 Credit Facility		$100 million senior secured term loan and $500 million revolving facility due 2023
Convertible Senior Notes		$345 million aggregate principal amount of 1.75% convertible notes due 2024
API		Application Program Interfaces
API Platform Group		Comprised of CPaaS programmable communication solutions for business customers
Applications Group		Comprised of UCaaS and CCaaS communication solutions for business customers
ASC		The FASB Accounting Standards Codification, which the FASB established as the source of authoritative GAAP
ASU		Accounting Standards Updates - updates to the ASC
CCaaS		Contact Center as a Service
CPaaS		Communications Platform as a Service
CRM		Customer Relationship Management
Exchange Act		The Securities Exchange Act of 1934, as amended
EPS		Earnings Per Share
FASB		Financial Accounting Standards Board
FCC		Federal Communications Commission
IP		Internet Protocol
LIBOR		London Inter-Bank Offered Rate
MPLS		Multi-Protocol Label Switching
NOLs		Net Operating Losses
SaaS		Software as a Service
SAB		Staff Accounting Bulletin
SD-WAN		Software-Defined Wide Area Network
SEC		U.S. Securities and Exchange Commission
SIP		Session Initiation Protocol
SMB		Small to medium-sized business
SMS		Short Message Service
UCaaS		Unified Communications as a Service
USF		Federal Universal Service Fund
VoIP		Voice over Internet Protocol

PART 1 - FINANCIAL INFORMATION

ITEM 1 - CONDENSED CONSOLIDATED FINANCIAL STATEMENTS AND NOTES

VONAGE HOLDINGS CORP.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In thousands, except par value)

~~(Unaudited)~~



	March 31, 2020			December 31, 2019
Assets	(Unaudited)
Current assets:
Cash and cash equivalents	$	43,073		$	23,620
Accounts receivable, net of allowance of $6,736 and $5,494, respectively	96,238			101,813
Inventory, net of allowance of $73 and $76, respectively	1,346			1,475
Deferred customer acquisition costs, current portion	14,971			13,834
Prepaid expenses	26,263			22,338
Other current assets	11,175			9,988
Total current assets	193,066			173,068
Property and equipment, net of accumulated depreciation of $111,169 and $109,646, respectively	43,144			48,371
Operating lease right-of-use assets	33,735			50,847
Goodwill	591,022			602,970
Software, net of accumulated amortization of $103,067 and $102,133, respectively	50,678			40,300
Deferred customer acquisition costs	58,891			55,148
Restricted cash	2,039			2,015
Intangible assets, net of accumulated amortization of $233,079 and $221,182, respectively	227,979			249,905
Deferred tax assets	106,262			108,347
Other assets	32,813			33,729
Total assets	$	1,339,629		$	1,364,700
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	32,789		$	42,366
Accrued expenses	118,907			137,589
Deferred revenue, current portion	61,022			59,464
Operating lease liabilities, current portion	11,917			12,477
Total current liabilities	224,635			251,896
Indebtedness under revolving credit facility	265,500			220,500
Convertible senior notes, net	280,111			276,658
Operating lease liabilities	28,018			45,722
Other liabilities	2,652			2,862
Total liabilities	800,916			797,638
Commitments and Contingencies (Note 9)
Stockholders’ Equity:
Common stock, par value $0.001 per share; 596,950 shares authorized at March 31, 2020, and December 31, 2019	320			316
Additional paid-in capital	1,506,664			1,494,469
Accumulated deficit	(634,764		)	(631,009		)
Treasury stock, at cost	(318,791		)	(306,043		)
Accumulated other comprehensive (loss) income	(14,716		)	9,329
Total stockholders’ equity	538,713			567,062
Total liabilities and stockholders’ equity	$	1,339,629		$	1,364,700

September 30,
2017 December 31,
2016
Assets
(revised)⁽¹⁾
Current assets:
Cash and cash equivalents $ 29,869
$ 29,078
Marketable securities —
601
Accounts receivable, net of allowance of $2,897 and $2,093, respectively 42,435
36,688
Inventory, net of allowance of $124 and $117, respectively 2,683
4,116
Deferred customer acquisition costs, current 1,466
2,610
Prepaid expenses 23,324
26,041
Other current assets 2,686
3,147
Total current assets 102,463
102,281
Property and equipment, net of accumulated depreciation of $143,265 and $129,166, respectively 45,760
48,415
Goodwill 371,535
360,363
Software, net of accumulated amortization of $94,917 and $87,626, respectively 23,574
21,971
Restricted cash 1,827
1,851
Intangible assets, net of accumulated amortization of $117,905 and $88,419, respectively 181,522
199,256
Deferred tax assets 192,879
184,210
Other assets 15,059
17,319
Total assets $ 934,619
$ 935,666
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable $ 33,070
$ 30,751
Accrued expenses 76,163
109,195
Deferred revenue, current portion 31,332
32,442
Current maturities of capital lease obligations 206
3,288
Current portion of notes payable 18,750
18,750
Total current liabilities 159,521
194,426
Indebtedness under revolving credit facility 182,000
209,000
Notes payable, net of debt related costs and current portion 77,361
91,124
Other liabilities 6,123
4,575
Total liabilities 425,005
499,125

Commitments and Contingencies (Note 7)

Stockholders’ Equity
Common stock, par value $0.001 per share; 596,950 shares authorized at September 30, 2017 and December 31, 2016; 295,633 and 282,319 shares issued at September 30, 2017 and December 31, 2016, respectively; 228,478 and 219,001 shares outstanding at September 30, 2017 and December 31, 2016, respectively 295
282
Additional paid-in capital 1,359,975
1,310,847
Accumulated deficit (617,288 ) (641,869 )
Treasury stock, at cost, 67,155 shares at September 30, 2017 and 63,318 shares at December 31, 2016 (243,594 ) (219,125 )
Accumulated other comprehensive loss 10,226
(13,594 )
Total stockholders’ equity 509,614
436,541
Total liabilities and stockholders’ equity $ 934,619
$ 935,666

~~(1) see Note 3.~~ ~~Correction of Prior Period Financial Statements~~

See accompanying notes to condensed consolidated financial statements.

VONAGE HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF ~~INCOME~~OPERATIONS

(In thousands, except per share amounts)

(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016

(revised)⁽¹⁾

(revised)⁽¹⁾
Total revenues $ 253,083
$ 248,359
$ 748,266
$ 708,858

Operating Expenses:
Cost of service (exclusive of depreciation and amortization) 96,632
87,377
281,902
232,605
Cost of goods sold 6,306
8,591
19,786
26,009
Sales and marketing 73,576
83,731
235,245
246,676
Engineering and development 6,956
8,075
21,996
22,152
General and administrative 26,811
27,538
98,411
89,261
Depreciation and amortization 18,179
18,018
54,520
53,215
Total operating expenses 228,460
233,330
711,860
669,918
Income from operations 24,623
15,029
36,406
38,940
Other Income (Expense):
Interest income 3
19
12
65
Interest expense (3,821 ) (3,974 ) (11,385 ) (9,477 )
Other income (expense), net 465
(495 ) 931
(237 )
Total other income (expense), net (3,353 ) (4,450 ) (10,442 ) (9,649 )
Income before income taxes 21,270
10,579
25,964
29,291
Income tax expense (10,668 ) (3,539 ) (4,624 ) (14,102 )
Net income $ 10,602
$ 7,040
$ 21,340
$ 15,189
Earnings per common share:
Basic $ 0.05
$ 0.03
$ 0.10
$ 0.07
Diluted $ 0.04
$ 0.03
$ 0.09
$ 0.07
Weighted-average common shares outstanding:
Basic 227,943
217,000
223,956
214,872
Diluted 242,720
234,868
242,552
227,499



	Three Months Ended
	March 31,
	2020			2019

Revenues:
Service, access and product revenues	$	283,077		$	260,110
USF revenues	14,380			19,431
Total revenues	297,457			279,541

Operating Expenses:
Service, access and product cost of revenues (excluding depreciation and amortization)	113,038			93,980
USF cost of revenues	14,380			19,431
Sales and marketing	85,621			95,523
Engineering and development	19,203			16,526
General and administrative	40,882			35,459
Depreciation and amortization	20,485			21,214
Total operating expenses	293,609			282,133
Income (loss) from operations	3,848			(2,592		)
Other Income (Expense):
Interest expense	(8,082		)	(7,576		)
Other income (expense), net	229			(416		)
Total other expense, net	(7,853		)	(7,992		)
Loss before income tax benefit	(4,005		)	(10,584		)
Income tax benefit	250			10,050
Net loss	$	(3,755	)	$	(534	)

Loss per common share:
Basic and diluted	$	(0.02	)	$	—
Weighted-average common shares outstanding:
Basic and diluted	243,627			240,527

~~(1) see Note 3.~~ ~~Correction of Prior Period Financial Statements~~

See accompanying notes to condensed consolidated financial statements.

VONAGE HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) / INCOME

(In thousands)

(Unaudited)

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016

(revised)⁽¹⁾

(revised)⁽¹⁾
Net income $ 10,602
$ 7,040
$ 21,340
$ 15,189
Other comprehensive income:
Foreign currency translation adjustment 6,390
3,372
23,622
1,659
Unrealized (loss)/gain on available-for-sale securities —
(3 ) 1
23
Unrealized gain on derivatives 197
—
197
—
Total other comprehensive income 6,587
3,369
23,820
1,682
Comprehensive income $ 17,189
$ 10,409
$ 45,160
$ 16,871



	Three Months Ended
	March 31,
	2020			2019

Net loss	$	(3,755	)	$	(534	)
Other comprehensive income (loss):
Foreign currency translation adjustment, net of tax (benefit) expense of ($470) and 433, respectively	(23,627		)	5,208
Unrealized loss on derivatives, net of tax (benefit) expense of ($50) and $28, respectively	(418		)	(687		)
Total other comprehensive (loss) income	(24,045		)	4,521
Comprehensive (loss) income	$	(27,800	)	$	3,987

~~(1) see Note 3.~~ ~~Correction of Prior Period Financial Statement~~s

See accompanying notes to condensed consolidated financial statements.

VONAGE HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In thousands)

(Unaudited)



	Three Months Ended
	March 31,
	2020			2019
Cash flows from operating activities:
Net loss	$	(3,755	)	$	(534	)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization	6,331			6,656
Amortization of intangibles	14,154			14,558
Deferred income taxes	1,468			(10,283		)
Amortization of deferred customer acquisition costs	3,661			2,530
Allowances for doubtful accounts and obsolete inventory	1,448			80
Amortization of financing costs and debt discount	3,656			270
Loss on disposal of property and equipment	741			514
Share-based expense	11,116			8,015
Changes in derivatives	(133		)	(133		)
Changes in operating assets and liabilities:
Accounts receivable	2,361			1,083
Inventory	127			179
Prepaid expenses and other current assets	(5,387		)	170
Deferred customer acquisition costs	(9,042		)	(7,459		)
Accounts payable and accrued expenses	(25,459		)	(10,793		)
Deferred revenue	2,934			(312		)
Other assets - deferred cloud computing implementation costs	(669		)	(3,022		)
Other assets and liabilities	(1,049		)	1,231
Net cash provided by operating activities	2,503			2,750
Cash flows used in investing activities:
Capital expenditures	(2,887		)	(5,277		)
Purchase of intangible assets	(75		)	—
Acquisition and development of software assets	(10,273		)	(5,497		)
Net cash used in investing activities	(13,235		)	(10,774		)
Cash flows provided by/(used in) financing activities:
Payments for short and long-term debt	—			(2,500		)
Proceeds from issuance of long-term debt	45,000			41,500
Payments of debt issuance costs	—			(128		)
Employee taxes paid on withholding shares	(12,656		)	(18,566		)
Proceeds from exercise of stock options	155			480
Net cash provided by financing activities	32,499			20,786
Effect of exchange rate changes on cash	(2,290		)	260
Net increase in cash, cash equivalents, and restricted cash	19,477			13,022
Cash, cash equivalents, and restricted cash, beginning of period	25,635			7,104
Cash, cash equivalents, and restricted cash, end of period	$	45,112		$	20,126
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Interest	$	2,866		$	6,929
Income taxes	$	1,249		$	148
Non-cash investing activities:
Acquisition of long-term assets included in accounts payable and accrued expenses	$	2,119		$	334

Nine Months Ended
September 30,
2017
2016⁽¹⁾
Cash flows from operating activities:
Net income $ 21,340
$ 15,189
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation, amortization and impairment charges 25,930
27,841
Amortization of intangibles 28,458
25,374
Deferred income taxes 2,475
11,647
Change in contingent consideration —
(7,362 )
Allowance for doubtful accounts 562
720
Allowance for obsolete inventory 339
514
Amortization of debt issuance costs 300
800
Gain on sale of business (1,377 ) —
Loss on disposal of fixed assets 132
—
Share-based expense 28,997
27,128
Changes in operating assets and liabilities, net of acquisitions:
Accounts receivable (3,970 ) (5,244 )
Inventory 1,156
582
Prepaid expenses and other current assets 3,369
(2,161 )
Deferred customer acquisition costs 1,284
1,906
Accounts payable 1,388
(17,252 )
Accrued expenses (32,390 ) (7,509 )
Deferred revenue (1,477 ) (2,785 )
Other assets and liabilities 4,084
226
Net cash provided by operating activities 80,600
69,614
Cash flows from investing activities:
Capital expenditures (15,790 ) (19,980 )
Purchase of marketable securities —
(5,664 )
Maturities and sales of marketable securities 602
9,036
Acquisition and development of software assets (9,438 ) (8,987 )
Acquisition of businesses, net of cash acquired —
(163,042 )
Proceeds from sale of business 1,000
—
Net cash used in investing activities (23,626 ) (188,637 )
Cash flows from financing activities:
Principal payments on capital lease obligations and other financing obligations (5,701 ) (7,453 )
Principal payments on notes and revolving credit facility (56,063 ) (48,125 )
Proceeds received from draw down of revolving credit facility and issuance of notes payable 15,000
181,250
Debt related costs —
(1,316 )
Common stock repurchases (9,542 ) (32,902 )
Employee taxes paid on withholding shares (14,927 ) (4,359 )
Proceeds from exercise of stock options 14,476
6,169
Net cash (used)/provided by financing activities (56,757 ) 93,264
Effect of exchange rate changes on cash 550
518
Net decrease in cash, cash equivalents, and restricted cash 767
(25,241 )
Cash, cash equivalents, and restricted cash, beginning of period 30,929
60,313
Cash, cash equivalents, and restricted cash, end of period $ 31,696
$ 35,072
Supplemental disclosures of cash flow information:
Cash paid during the periods for:
Interest $ 10,147
$ 8,216
Income taxes $ 5,395
$ 5,165
Non-cash investing and financing activities:
Capital expenditures included in accounts payable and accrued liabilities $ 2,231
$ 2,962
Issuance of common stock in connection with acquisition of business $ —
$ 31,591
Contingent consideration in connection with acquisition of business $ —
$ 16,472
Assumption of options in connection with acquisition of business $ —
$ 4,779

~~(1) See Note 2.~~ ~~Summary of Significant Accounting Policies~~ ~~for reclassification due to the adoptions of new Accounting Standard Updates and Note 3.~~ ~~Correction of Prior Period Financial Statements~~

See accompanying notes to condensed consolidated financial statements.

VONAGE HOLDINGS CORP.

CONDENSED CONSOLIDATED STATEMENT OF STOCKHOLDERS’ EQUITY

(In thousands)

(Unaudited)

Shares Common Stock
Additional
Paid-in
Capital

Accumulated
Deficit

Treasury
Stock

Accumulated
Other
Comprehensive
Income (Loss)
Total
Balance at December 31, 2016 (Revised) ⁽¹⁾
219,001
$ 282
$ 1,310,847
$ (641,869 ) $ (219,125 ) $ (13,594 ) $ 436,541
Cumulative effect adjustment upon the adoption of ASU 2016-09 5,668
3,241
8,909
Stock option exercises 13,314
13
14,463
14,476
Share-based expense 28,997
28,997
Employee taxes paid on withholding shares (2,238 ) (14,927 ) (14,927 )
Common stock repurchases (1,599 ) (9,542 ) (9,542 )
Foreign currency translation adjustment 23,622
23,622
Unrealized gain on available-for-sale securities 1
1
Unrealized gain on derivatives 197
197
Net income 21,340
21,340
Balance at September 30, 2017 228,478
$ 295
$ 1,359,975
$ (617,288 ) $ (243,594 ) $ 10,226
$ 509,614



	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Income			Total
Balance at December 31, 2018	$	310	$	1,415,682	$	(611,985	)	$	(275,009	)	$	6,770		$	535,768
Cumulative effect adjustment upon the adoption of Topic 842					458									458
Stock option exercises	4		476											480
Share-based expense			8,015											8,015
Employee taxes paid on withholding shares								(18,566		)				(18,566		)
Foreign currency translation adjustment											5,208			5,208
Unrealized gain on derivatives											(687		)	(687		)
Net loss					(534		)							(534		)
Balance at March 31, 2019	$	314	$	1,424,173	$	(612,061	)	$	(293,575	)	$	11,291		$	530,142

~~(1) see Note 3.~~ ~~Correction of Prior Period Financial Statements~~



	Common Stock		Additional Paid-in Capital		Accumulated Deficit			Treasury Stock			Accumulated Other Comprehensive Income			Total
Balance at December 31, 2019	$	316	$	1,494,469	$	(631,009	)	$	(306,043	)	$	9,329		$	567,062
Stock option exercises	4		151											155
Share-based expense			12,044											12,044
Employee taxes paid on withholding shares								(12,748		)				(12,748		)
Foreign currency translation adjustment											(23,627		)	(23,627		)
Unrealized loss on derivatives											(418		)	(418		)
Net loss					(3,755		)							(3,755		)
Balance at March 31, 2020	$	320	$	1,506,664	$	(634,764	)	$	(318,791	)	$	(14,716	)	$	538,713

See accompanying notes to condensed consolidated financial statements.

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Note 1. ~~Basis~~Nature of ~~Presentation~~Business

Nature of Operations

Vonage Holdings Corp. (“Vonage”, “Company”, “we”, “our”, “us”) is incorporated as a Delaware corporation. At Vonage, our strategy is to continually redefine business communications. We are ~~a leading provider of~~making communications more flexible, intelligent and personal to help enterprises the world over stay ahead. We provide unified communications, contact centers and programmable communications APIs, built on what we believe to be the world's most flexible cloud communications ~~services for business.~~platform. True to our roots as a technology disruptor, our flexible approach helps us better serve the growing collaboration, communications, and customer experience needs of companies, across all communications channels.

For our Business customers, we provide innovative, cloud-based Applications, comprised of integrated voice, text, video, data, collaboration, and mobile applications over our flexible, scalable SIP based VoIP network. We ~~transform~~also offer API solutions designed to enhance the way ~~people work and~~ businesses ~~operate through a portfolio of cloud-based communications solutions that enable internal collaboration among employees, while also keeping companies closely connected~~communicate with their customers ~~across any mode of communication, on any device.~~

~~Through our Nexmo subsidiary which was acquired on June 3, 2016, we are a global leader in the Communications-Platform-as-a-Service ("CPaaS") segment of the cloud~~by embedding communications ~~market, providing innovative communication application program interfaces ("APIs") for text messaging and voice communications, allowing developers and enterprises to embed contextual communications~~ into ~~mobile~~ apps, websites and business ~~workflows via text, social media, chat apps~~processes. In combination, our products and voice. With just few lines of code, developers can send and receive text messages and build programmable voice applications. Nexmo, the Vonage API Platform can scale from one API call to billions. The platform makes it easy for any ofservices permit our developers to access communication services via software and APIs. Through Nexmo we have a global network of interconnected carriers delivering our API-based communications platform, enabling businessesbusiness customers to communicate with their customers ~~reliably~~ and employees through any cloud-connected device, in any place, at any time without the often costly investment required with ~~ease, no matter where in~~on-site equipment. We have a robust set of product families tailored to serve the ~~world~~full range of the business value chain, from the SMB market, through mid-market and enterprise markets. We provide customers with multiple deployment options, designed to provide the reliability and quality of service they ~~are located. The addition of~~demand. We provide customers the ability to integrate our ~~Nexmo products~~cloud communications platform with many cloud-based productivity and CRM solutions, including Google’s G Suite, Zendesk, Salesforce’s Sales Cloud, Oracle, and Clio. With our ability to ~~our~~integrate these cloud-based, workplace tools, Vonage integrates the entire business ~~offering allows our customers to address their full~~ communications ~~needs,~~value chain - from employee communications that maximize productivity to ~~employee communications through business to customer communications.~~the direct engagement with customers that APIs provides. When combined with our MPLS network, as well as voice services over customers' broadband networks via our SmartWan solution, we create a differentiated offering.

We also provide a robust suite of feature-rich residential communication ~~solutions.~~solutions that allow consumers to connect their home phones and mobile phones on one number and we offer attractive international long distance rates that help create a loyal base of satisfied customers.

Customers in the United States represented ~~84%~~69% and ~~89%~~73% of our consolidated revenues for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016 and 86% and 92% for the nine months ended September 30, 2017 and 2016,~~2019, respectively, with the balance in Canada, the United Kingdom, China, Singapore, Netherlands, and other ~~countries. Nexmo Inc. ("Nexmo") has operations in the United States, United Kingdom, Hong Kong, and Singapore, and provides CPaaS solutions to our customers located in many~~ countries around the world.

Unaudited Interim Financial Information

The accompanying unaudited interim condensed consolidated financial statements and information have been prepared in accordance with accounting principles generally accepted in the United States and in accordance with the SEC's regulations for interim financial information and with the instructions for Form 10-Q. Accordingly, they do not include all of the information and disclosures required by accounting principles generally accepted in the United States for complete financial statements. In the opinion of management, these financial statements contain all normal and recurring adjustments considered necessary to present fairly the Company's financial position, results of operations, comprehensive income, cash flows, and ~~statement of~~ stockholders’ equity for the periods presented. The results for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 are not necessarily indicative of the results to be expected for the full year.

These unaudited interim condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the year ended December 31, ~~2016~~2019 filed with the Securities and Exchange Commission on February ~~28, 2017~~21, 2020.

Use of Estimates

Our condensed consolidated financial statements and notes thereof are prepared in conformity with accounting principles generally accepted in the United States, which require management to make estimates and assumptions that affect the amounts ~~reported~~of assets and ~~disclosed in~~liabilities at the ~~condensed consolidated~~date of the financial statements and the ~~accompanying notes.~~reported amounts of revenues and expenses during the reporting period. Actual results could differ ~~materially~~ from these ~~estimates.~~

~~Reclassifications~~

~~Reclassifications have been made to our condensed consolidated financial statements for the prior year period to conform to classification used~~estimates, including uncertainty in the current ~~year period. The reclassifications did not affect results from operations or net assets.~~economic environment due to the recent outbreak of the novel coronavirus COVID-19.

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

We base our estimates on historical experience, available market information, appropriate valuation methodologies, and on various other assumptions that we believe to be reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Estimates are used for such items as depreciable lives for long-lived assets including intangible assets, tax provisions, uncollectible accounts, convertible notes, and assets and liabilities assumed in business combinations, among others. In addition, estimates are used to test long-lived assets and goodwill for impairment.

COVID-19 has created and may continue to create uncertainty in customer payments, reduced usage, and issuance of customer credits to distressed customers served by certain product lines. As of the date of our condensed consolidated financial statements, we are not aware of any specific event or circumstance that would require us to update our estimates or judgments. However, these estimates may change as new events occur and additional information is obtained, which may result in changes being recognized in our condensed consolidated financial statements in future periods. In particular and in light of the COVID-19 pandemic, the assumptions and estimates associated with collectability assessment of revenue and credit losses of accounts receivable may have a material impact our consolidated financial statements in future periods, depending on the duration or degree of the impact of the COVID-19 pandemic on the global economy.

Reclassifications

Reclassifications have been made to our condensed consolidated financial statements for the prior year periods to conform to classifications used in the current year periods. The reclassifications did not affect results of operations or net assets.

Note 2. Summary of Significant Accounting Policies

This footnote should be read in conjunction with the complete description of our significant accounting policies under Note 1, ~~Basis~~2, Summary of ~~Presentation and~~ Significant Accounting Policies to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

Service, Access, and Product Cost of ~~Services~~Revenues

~~Cost~~Service, access, and product cost of ~~services~~revenues excludes depreciation and amortization expense of ~~$6,852~~$9,609 and ~~$7,460~~$9,418 for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016~~2019, respectively. In addition, costs of goods sold included in service, access, and ~~$20,497 and $21,278 for~~product cost of revenues during the ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019 were $3,676 and $5,628, respectively.

~~Advertising Costs~~Sales and Marketing Expenses

We incurred advertising costs, which are included in sales and marketing, of ~~$11,423~~$9,460 and ~~$18,765~~$17,750 for the three months ended ~~September 30, 2017~~March 31, 2020 and ~~2016 and $43,760 and $55,723 for the nine months ended September 30, 2017 and 2016,~~2019, respectively.

~~Engineering and Development Expenses~~

Engineering and development expenses primarily include personnel and related costs for developers responsible for new products, and software engineers maintaining and enhancing existing products. Research and development costs related to new product development included in engineering and development were $5,662 and $6,234 for the three months ended September 30, 2017 and 2016 and $17,357 and $16,544 for the nine months ended September 30, 2017 and 2016, respectively.

~~Restructuring Activities~~

During the nine months ended September 30, 2017, we recognized $4 million of costs associated with restructuring activities included in general and administrative expense and is primarily comprised of costs associated with severance and other employee related costs. As of September 30, 2017, $1.2 million remained accrued related to restructuring activities and $2.8 million was paid during the third quarter of 2017.

~~Derivative Financial Instruments~~

~~The Company accounts for derivative financial instruments under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 815,~~ ~~Derivatives and Hedging~~, which requires the Company to record all derivatives on the balance sheet at fair value unless they qualify for a normal purchase or normal sale exception. Changes in the fair value of non-hedge derivatives are immediately recognized into earnings. Changes in the fair value of derivatives accounted for as hedges, if elected for hedge accounting, are either recognized in earnings as an offset to the changes in the fair value of the related hedged assets and liabilities or deferred and recognized as a component of accumulated other comprehensive income ("OCI") until the hedged transactions occur and are recognized in earnings.

Beginning the quarter ended September 30, 2017, the Company entered into three interest rate swaps used to mitigate variability in earnings due to fluctuations in interest rates. Each swap has been designated and qualifies as a cash flow hedges. At the inception of the forward contract, the hedging relationship is expected to be highly effective in achieving offsetting cash flows attributed to the hedged risk. The Company assesses hedge effectiveness under the critical terms matched method at inception and at least quarterly through the life of the hedging relationship. If the critical terms of the interest rate swap match the terms of the forecasted transaction, the Company concludes that the hedge is effective.

Fair Value of Financial Instruments

The Company records certain of its financial assets at fair value on a recurring basis. ~~The~~Certain of the Company's other financial instruments, which ~~includes~~include cash and cash equivalents, restricted cash, accounts receivable and accounts payable, approximate fair value and are classified as Level 1 because of their short-term maturities. The carrying amounts of our capital leases approximate fair value of these obligations based upon management’s best estimates of interest rates that would be available for similar debt obligations at September 30, 2017 and December 31, 2016. We believe the fair value of our ~~debt~~2018 Credit Facility at ~~September 30, 2017~~March 31, 2020 and December 31, 2019 was approximately the same as its carrying amount as market conditions, including available interest rates, credit spread relative to our credit rating, and illiquidity, remain relatively unchanged from the issuance date of our debt ~~on June 3, 2016~~obligations for a similar debt ~~instrument.~~ instrument and are classified as Level 3 within the fair value hierarchy.

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

We account for financial assets using a framework that establishes a hierarchy that ranks the quality and reliability of the inputs, or assumptions, we use in the determination of fair value, and we classify financial assets and liabilities carried at fair value in one of the following three categories:

•Level 1 ~~Measurements~~ - quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets and liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs.

•Level 2 ~~Measurements~~ - observable prices that are based on inputs not quoted on active markets but corroborated by market data; and

•Level 3 ~~Measurements~~ - unobservable inputs when there is little or no market data available, thereby requiring an entity to develop its own assumptions.

The ~~following table presents the assets and liabilities that are measured and recognized at~~ fair value ~~on a recurring basis classified under~~hierarchy gives the ~~appropriate level~~lowest priority to Level 3 inputs.

As of March 31, 2020 and December 31, 2019, the fair value ~~hierarchy~~of the 1.75% convertible senior notes due 2024 (the “Convertible Senior Notes”) was approximately $277,800 and $309,641, respectively. The fair value was determined based on the quoted price for the Convertible Senior Notes in an inactive market on the last trading day of the reporting period and is classified as ~~of September 30, 2017 and December 31, 2016:~~

September 30, 2017 December 31, 2016
Level 1 Measurements
Money market fund ⁽¹⁾
$ —
$ 300
Level 2 Measurements
Available-for-sale securities ⁽²⁾
$ —
$ 601
Interest rate swap ⁽³⁾
$ 197
$ —

~~(1) Included~~Level 2 in ~~cash and cash equivalents on our condensed consolidated balance sheet.~~

~~(2) Included in marketable securities on our condensed consolidated balance sheet.~~

~~(3) Included in other assets on our condensed consolidated balance sheet.~~the fair value hierarchy.

Supplemental Balance Sheet Information

~~Cash,~~The following table provides a reconciliation of cash and cash equivalents and restricted cash reported within the consolidated balance sheets to amounts included in the consolidated statements of cash flows:



	As of March 31,				As of December 31
	2020		2019		2019		2018
Cash and cash equivalents	$	43,073	$	18,254	$	23,620	$	5,057
Restricted cash	2,039		1,872		2,015		2,047
Total cash, cash equivalents and restricted cash	$	45,112	$	20,126	$	25,635	$	7,104

September 30,
2017 December 31, 2016
Cash and cash equivalents $ 29,869
$ 29,078

Cash collateralized letter of credit-lease deposits $ 1,561
$ 1,578
Cash reserves 266
273
Restricted cash $ 1,827
$ 1,851

Cash, cash equivalents, and restricted cash $ 31,696
$ 30,929

Intangible assets, net



	March 31, 2020		December 31, 2019
Customer relationships	$	144,956	$	157,184
Developed technology	80,903		89,199
Patents and patent licenses	1,083		1,326
Trade names	1,037		2,196
Finite-lived intangible assets, net	$	227,979	$	249,905

September 30,
2017 December 31, 2016
Customer relationships 126,758
133,774
Developed technology 49,054
57,245
Patents and patent licenses 4,410
5,547
Trade names 521
1,033
Non-compete agreements 779
1,657
Intangible assets, net $ 181,522
$ 199,256

Accrued expenses



	March 31, 2020		December 31, 2019
Compensation and related taxes and temporary labor	$	24,258	$	40,101
Marketing	17,507		15,294
Taxes and fees	14,846		22,922
Telecommunications	40,148		40,498
Interest	2,426		873
Customer credits	4,067		2,772
Professional fees	4,124		4,482
Inventory	708		871
Other accruals	10,823		9,776
Accrued expenses	$	118,907	$	137,589

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Goodwill

~~Accrued expenses~~The Company's goodwill is derived primarily from the acquisitions of Vocalocity, Telesphere, iCore, Simple Signal, Nexmo, TokBox, and NewVoiceMedia which are included in the Company's Business segment. The following table provides a summary of the changes in the carrying amounts of goodwill:



Balance at December 31, 2019	$	602,970
Foreign currency translation adjustment	(11,948		)
Balance at March 31, 2020	$	591,022

September 30,
2017 December 31, 2016
Compensation and related taxes and temporary labor $ 25,292
$ 35,308
Marketing 11,330
12,754
Taxes and fees 8,537
19,234
Acquisition related consideration accounted for as compensation 2,134
6,608
Telecommunications 15,974
14,896
Settlement —
5,000
Other accruals 7,950
10,473
Customer credits 1,143
2,074
Professional fees 2,844
1,680
Inventory 959
1,168
Accrued expenses $ 76,163
$ 109,195

Recent Accounting Pronouncements

The following standard was adopted by the Company during the three months ended March 31, 2020:

In ~~August 2017, FASB issued Accounting Standards Update ("ASU") 2017-12, "Derivatives and Hedging". The ASU improves~~March 2020, the financial reporting of hedging relationships to better portray the economic results of an entity's risk management activities in its financial statements and simplifies the application of the hedge accounting guidance in current generally accepted accounting principles ("GAAP"). It also amends the disclosures requirements by requiring a tabular disclosure related to the effect on the incomes statement of fair value and cash flow hedges and eliminating the ineffective portion of the change in fair value of hedging instrument disclosures. This ASU is effective for fiscal years beginning after December 15, 2018, and interim periods within those fiscal years. Early adoption is permitted in any interim period after issuance of this ASU. We do not expect a material impact of adopting ASU 2017-12 on our condensed consolidated financial statements and related disclosures.

~~In January 2017,~~ FASB issued ASU 2017-04, "Intangibles - Goodwill and Other". The ASU simplifies the subsequent measurement of goodwill and eliminates Step 2 from the goodwill impairment test. This ASU is effective for an annual or any interim goodwill impairment tests in fiscal years beginning after December 15, 2019 on a prospective basis. Early adoption is permitted for interim or annual goodwill impairment tests performed on testing dates after January 1, 2017. We are currently evaluating the impact of adopting ASU 2017-04 on our condensed consolidated financial statements and related disclosures.

~~In October 2016, FASB issued ASU 2016-16, "Income Taxes"~~2020-04, "Reference Rate Reform (Topic 848)". This ASU ~~improves~~provides an easier and more cost efficient way for companies to modify contracts that reference the London Interbank Offered Rate ("LIBOR") and other rates that are being phased out. The ASU (1) allows eligible contracts that are modified to be accounted for as a continuation of those contracts - a simplification that eliminates the need for companies to reassess or remeasure the contracts for accounting ~~for income tax consequences of intra-entity transfers of assets other than inventory. This ASU~~purposes; (2) permits companies to preserve their hedge accounting during the transition period; and (3) enables companies to make a one-time election to transfer or sell held-to-maturity debt securities that are affected by rate reform. It is effective ~~for fiscal years beginning after December 15, 2017 on a modified retrospective basis through a cumulative-effect adjustment directly to retained earnings~~ as of March 12, 2020 through December 31, 2022. The Company adopted the beginning of the period of adoption. Early adoption is permitted as of the beginning of an annual reporting period for which financial statements have not been issued or made available for issuance. We are currently evaluating the impact of adopting ASU ~~2016-16 on our condensed consolidated financial statements and related disclosures.~~

In August 2016, FASB issued ASU 2016-15, "Statement of Cash Flows". This ASU addresses eight specific cash flow issues with the objective of reducing the existing diversity in practice. This ASU is effective for fiscal years beginning after December 15, 2017 on a retrospective basis. Early adoption is permitted, including adoption in an interim period.when effective. The adoption of this ASU ~~2016-15 will~~did not have a material impact on our condensed consolidated financial statements and related disclosures.

In ~~February 2016,~~December 2019, the FASB issued ASU ~~2016-02, "Leases".~~2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes by removing certain exceptions currently permissible under ASC Topic 740. This ASU ~~increases transparency~~also requires entities to: (1) recognize a franchise tax that is partially based on income as an income-based tax and ~~comparability among organizations by recognizing lease assets~~account for any incremental amounts incurred as non-income based tax; (2) evaluate when a step-up in the tax basis of goodwill should be considered as part of the business combination and ~~lease liabilities on~~when it should be considered a separate transaction;(3) specifying that an entity is not required to allocate the ~~balance sheet~~consolidated amount of current and ~~disclosing key information about leasing arrangements.~~deferred tax expense to a legal entity that is not subject to tax in its separate financial statements; and (4) reflect the effect of an enacted change in tax laws or rates in the annual effective tax rate computation and other minor improvements. This ASU is effective for fiscal years beginning after December 15, ~~2018, including~~2020, and interim periods within those fiscal years. Early adoption of the amendments is permitted, including adoption in any interim period for ~~all entities.~~public business entities for periods for which financial statements have not yet been issued. The Company adopted the new standard on January 1, 2020. The adoption of ~~this~~the ASU will increase our assets and liabilities for real estate and equipment operating leases for which we are the lessee. We will adopt this ASU when effective. We are currently evaluating the effect of adopting ASU 2016-02did not have a material impact on our condensed consolidated financial statements and related disclosures.

In June 2016, the FASB issued ASU 2016-13, "Financial Instruments - Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments which requires the use of a new current expected credit loss ("CECL") model in estimating allowances for doubtful accounts with respect to accounts receivable. Receivables from revenue transactions, or trade receivables, are recognized when the corresponding revenue is recognized under ASC Topic 606, Revenue from Contracts with Customers. The CECL model requires that the Company estimate its lifetime expected credit loss with respect to these receivables and record allowances that when deducted from the balance of the receivables, represent the estimated net amounts expected to be collected. Given the generally short term nature of trade receivables, we do not apply a discounted cash flow methodology. However, the Company considers whether historical loss rates are consistent with expectations of forward-looking estimates for our trade receivables. This ASU is effective for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. The Company adopted of the new standard on January 1, 2020. The adoption of this ASU did not have a material impact on our condensed consolidated financial statements and related disclosures. The Company will continue to actively monitor the impact of the COVID-19 pandemic on its estimate of expected credit losses.

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Note 3. Revenue Recognition

The Company recognizes revenue in accordance with ASC Topic 606, Revenue from Contracts with Customers which is further described in Note 2, Summary of Significant Accounting Policies and Note 3, Revenue Recognition to the consolidated financial statements in our Annual Report on Form 10-K for the year ended December 31, 2019.

Disaggregation of Revenue

The following tables detail our revenue from customers disaggregated by primary geographical market and source of revenue. The tables also include a reconciliation of the disaggregated revenue for our Business and Consumer segments.



	Three Months Ended						Three Months Ended
	March 31, 2020						March 31, 2019
	Business		Consumer		Total		Business		Consumer		Total
Primary geographical markets
United States	$	126,547	$	80,007	$	206,554	$	112,438	$	91,866	$	204,304
Canada	1,933		4,566		6,499		1,407		5,168		$	6,575
United Kingdom	16,291		2,631		18,922		23,881		2,910		$	26,791
Other Countries	65,482		—		65,482		41,871		—		$	41,871
	$	210,253	$	87,204	$	297,457	$	179,597	$	99,944	$	279,541
Major Sources of Revenue
Service revenues	$	195,649	$	77,243	$	272,892	$	159,345	$	89,000	$	248,345
Access and product revenues	10,122		63		10,185		11,697		68		11,765
USF revenues	4,482		9,898		14,380		8,555		10,876		19,431
	$	210,253	$	87,204	$	297,457	$	179,597	$	99,944	$	279,541

In ~~January 2016, FASB issued ASU 2016-01, "Recognition~~addition, the Company recognizes service revenues from its customers through subscription services provided or through usage or pay-per-use type arrangements. During the three months ended March 31, 2020, the Company recognized $156,455 related to subscription services, $93,047 related to usage, and ~~Measurement of Financial~~$47,955 related to other revenues such as USF, other regulatory fees, and credits. During the three months ended March 31, 2019, the Company recognized $162,546 related to subscription services, $67,847 related to usage, and $49,148 related to other revenues such as USF, other regulatory fees, and credits.

Contract Assets and ~~Financial Liabilities". This ASU provide guidance concerning certain matters involving the recognition, measurement,~~Liabilities

The following table provides information about receivables and disclosure of financial assets and financial liabilities. The guidance does not alter the basic framework for classifying debt instruments held as financial assets. This ASU is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Early adoption is not permitted,contract liabilities from contracts with ~~some exceptions. The adoption of ASU 2016-01 will not have a material impact~~customers:

(1) Amounts included in accounts receivables on our condensed consolidated ~~financial statements~~balance sheet.

(2) Amounts included in deferred revenues and ~~related disclosures.~~other liabilities on our condensed consolidated balance sheet.

~~In May 2014, FASB issued ASU 2014-09, "Revenue~~Our deferred revenue represents the advance consideration received from ~~Contracts with Customers (Topic 606)" which was further amended through various updates issued by the FASB thereafter. The amendments of Topic 606 clarify the principles~~customers for ~~recognizing revenue~~subscription services and provide a common revenue standard for U.S. GAAP to improve financial reporting. The core principle of these standards are that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. Topic 606 also amends the current guidance for the recognition of costs to obtain and fulfill contracts with customers requiring that all incremental costs of obtaining and direct costs of fulfilling contracts with customers such as commissions be deferred andis predominantly recognized over the ~~expected customer life. In August 2015, an ASU was issued by~~following performance period which is generally a month as transfer of control occurs. During the ~~FASB which~~three months ended March 31, 2020, the Company recognized revenue of $108,875, related to its contract liabilities. During the three months ended March 31, 2019, the Company recognized revenue of $100,434, related to its contract liabilities. We expect to recognize $61,022 into revenue over the next twelve months related to our deferred ~~the effective date to annual and interim periods beginning on or after December 15, 2017. We will adopt the requirements~~revenue as of ~~the new standard in the first quarter of 2018 and anticipate using the modified retrospective transition method under which the standard will be applied only~~March 31, 2020.

Remaining Performance Obligation

Transaction price allocated to the ~~most current period presented and~~remaining performance obligation represents contracted revenue that has not yet been recognized. The typical subscription term may range from 1 month to 3 years. Contracted revenue as of March 31, 2020 that has not yet been recognized was approximately $0.4 billion. This excludes contracts with an original expected length of less than one year. The Company expects to recognize the ~~cumulative effect~~majority of ~~applying the standard will be recognized at the date of initial application.~~

We are in the process of evaluating the impact of the standard with respect to the terms of our revenue arrangements and will finalize our expected impact of the pronouncement along with implementation of changes to our internal controls and disclosures as necessary to support the new accounting during the fourth quarter of 2017. We expect the timing of recognition of our sales commissions will also be impacted as a substantial portion of these costs which are currently expensed will be capitalized under the revised standard and amortizedits remaining performance obligation over the ~~period of benefit.~~

~~The following standards were adopted by the Company during the current year:~~

In November 2016, FASB issued ASU 2016-18, "Statement of Cash Flows". This ASU requires that a statement of cash flows explains the change during the period in the total of cash, cash equivalents, and amounts generally described as restricted cash or restricted cash equivalents. As a result, amounts generally described as restricted cash and restricted cash equivalents should be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2017, and interim periods within those fiscal years. Early adoption is permitted, including adoption in an interim period, and any adjustments should be reflected as of the beginning of the fiscal year that includes that interim period. We adopted this ASU in the first quarter of 2017 and applied the retrospective transition method for each period presented. For the nine months ended September 30, 2016, $791 and $11 were reclassified from investing activity and effect of exchange rate changes on cash, respectively, and $51, $2,587 and $1,836 were adjusted to acquisition of business, net of cash acquired, and cash, cash equivalents, and restricted cash, beginning of the period and end of the period balances, respectively.

In March 2016, FASB issued ASU 2016-09, "Improvements to Employee Share-Based Payment Accounting". This ASU is issued as part of its Simplification Initiative. The areas for simplification in this ASU involve several aspects of the accounting for share- based payment transactions, including the income tax consequences, recognition of share-based expense, classification of awards as either equity or liabilities, and classification on the statement of cash flows. This ASU is effective for fiscal years beginning after December 15, 2016, including interim periods within those fiscal years. We adopted this ASU in the first quarter of 2017. We elected to account for forfeitures when they occur versus our prior practice of estimating the number of awards that are expected to vest. The election of this new ASU resulted in a one-time adjustment in 2017 to accumulated deficit and to additional paid-in-capital of $5,668 and the corresponding benefit to our accumulated deficit and deferred tax asset of $2,285 related to the reversal of forfeiture rate as of December 31, 2016. In addition, a benefit to our accumulated deficit and deferred tax asset of $6,624 was recorded for excess tax benefits on equity compensation as of December 31, 2016. We also classified cash paid by us when directly withholding shares for tax-withholding purposes as a financing activity. As a result, $4,359 was reclassified from operating activity to financing activity for the nine months ended September 30, 2016.next 18 months.

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

~~In July 2015, FASB issued ASU 2015-11, "Simplifying the Measurement of Inventory". This ASU applies~~Contract Acquisition Costs

We have various commission programs for internal sales personnel and channel partners that are incremental to inventory that is measured using first-in, first-out ("FIFO") or average cost. Under the updated guidance, an entity should measure inventory that is within scope at the lower of cost and net realizable value, which is the estimated selling prices in the ordinary course of business, less reasonably predicable costs of completion, disposal and transportation. Subsequent measurement is unchanged for inventory that is measured using last-in, first-out ("LIFO") or the retail inventory. This ASU is effective for annual and interim periods beginning after December 15, 2016, and is applied prospectively. We adopted ASU 2015-11 in the first quarter of 2017 and the adoption of this ASU did not have a material impact on our condensed consolidated financial statements and related disclosures.

~~Note 3. Correction of Prior Period Financial Statements~~

In connection with the preparation of our condensed consolidated financial statements for the quarter ended March 31, 2017, and our remediation efforts related to the material weakness in our internal control over financial reporting related to our controls over the preparation of the annual tax provision, we identified an error as of December 31, 2016 in our recognition of a deferred tax asset related to contingent consideration with vesting requirements paid in connection with the acquisition of Nexmo. Based in part upon the vesting requirements of contingent consideration, we recorded the consideration as compensation expense in general and administrative expense in our consolidated statements of operations. However, for tax purposes the contingent consideration should have beencustomer contracts. These costs are recorded as ~~merger consideration and not deductible compensation. The correction of this error requires the reversal of the~~ deferred ~~tax asset~~contract acquisition costs on the consolidated balance sheets which eligible employees and ~~related tax benefits~~third parties may earn a commission on sales of ~~$4,756~~services and products to customers. We expect that these commission fees are recoverable and, therefore, we have capitalized $73,862 and $68,982 as contract costs, net of accumulated amortization, as of March 31, 2020 and December 31, ~~2016. In accordance with Staff Accounting Bulletin (“SAB”) No. 99, Materiality,~~2019, respectively, included within deferred customer acquisitions costs, current portion and ~~SAB No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated the error~~deferred customer acquisition costs on our condensed consolidated balance sheet. Capitalized commission fees are amortized to sales and ~~determined that the related impact was not material~~marketing expense over estimated customer life, which is 7 years for Business customers. The amounts amortized to ~~our results of operations or financial position for any prior annual or interim period, but that correcting the $4,756 cumulative impact of the error would be material to our results of operations~~sales and marketing expense were $3,661 and $2,530 for the three months ended March 31, ~~2017. Accordingly, we have corrected~~2020 and March 31, 2019, respectively. There were no impairment losses recognized in relation to the consolidated balance sheets as of December 31, 2016 and will correct this error in all prior periods presented by revising the appropriate condensed consolidated financial statements. This error had no impact oncosts capitalized during the three months ended March 31, ~~2016. The impact~~2020 and 2019. In addition, the Company expenses sales commissions for commission plans related to ~~the consolidated balance sheet as of December 31, 2016~~customer arrangements deemed less than a year and ~~the consolidated statements of income~~ for ~~the three~~residuals and ~~six months ended June 30, 2016, the three and nine months ended September 30, 2016, and the three months and year ended December 31, 2016 is as follows:~~renewals.

Consolidated Balance Sheets
As of December 31, 2016
As Reported Adjustment As Revised

Deferred tax assets, non-current $ 188,966
$ 4,756
$ 184,210
Total assets 940,422
4,756
935,666
Accumulated deficit (637,113 ) 4,756
(641,869 )
Total stockholders' equity 441,297
4,756
436,541
Total liabilities and stockholders' equity 940,422
4,756
935,666

~~VONAGE HOLDINGS CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

Condensed Consolidated Statements of Income
Three Months Ended Six Months Ended
June 30, 2016 June 30, 2016
As Reported Adjustment As Revised As Reported Adjustment As Revised

Income tax expense $ (1,562 ) $ 679
$ (2,241 ) $ (9,884 ) $ 679
$ (10,563 )
Net income 897
679
218
8,828
679
8,149
Net income per common share: ��
   Basic $ —
$ —
$ —
$ 0.04
$ —
$ 0.04
   Diluted $ —
$ —
$ —
$ 0.04
$ —
$ 0.04

Three Months Ended Nine Months Ended
September 30, 2016 September 30, 2016
As Reported Adjustment As Revised As Reported Adjustment As Revised

Income tax expense $ (1,501 ) $ 2,038
$ (3,539 ) $ (11,385 ) $ 2,717
$ (14,102 )
Net income 9,078
2,038
7,040
17,906
2,717
15,189
Net income per common share:
   Basic $ 0.04
$ 0.01
$ 0.03
$ 0.08
$ 0.01
$ 0.07
   Diluted $ 0.04
$ 0.01
$ 0.03
$ 0.08
$ 0.01
$ 0.07

Three Months Ended Year Ended
December 31, 2016 December 31, 2016
As Reported Adjustment As Revised As Reported Adjustment As Revised

Income tax expense $ (1,553 ) $ 2,039
$ (3,592 ) $ (12,938 ) $ 4,756
$ (17,694 )
Net income 1
2,039
(2,038 ) 17,907
4,756
13,151
Net income per common share:
   Basic $ —
$ 0.01
$ (0.01 ) $ 0.08
$ 0.02
$ 0.06
   Diluted $ —
$ 0.01
$ (0.01 ) $ 0.08
$ 0.02
$ 0.06

~~VONAGE HOLDINGS CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

Note 4. Earnings Per Share

The following table sets forth the computation for basic and diluted ~~earnings~~loss per share for the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016:~~2019:



	Three Months Ended
	March 31,
	2020			2019
Numerator
Net loss	$	(3,755	)	$	(534	)
Denominator
Weighted average common shares outstanding for basic and diluted net loss per share	243,627			240,527
Basic and diluted loss per share
Basic and diluted loss per share	$	(0.02	)	$	—

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Numerator
(revised)⁽¹⁾

(revised)⁽¹⁾
Net income $ 10,602
$ 7,040
$ 21,340
$ 15,189
Denominator
Basic weighted average common shares outstanding 227,943
217,000
223,956
214,872
Dilutive effect of stock options and restricted stock units 14,777
17,868
18,596
12,627
Diluted weighted average common shares outstanding 242,720
234,868
242,552
227,499
Basic earnings per share
Basic earnings per share $ 0.05
$ 0.03
$ 0.10
$ 0.07
Diluted earnings per share
Diluted earnings per share $ 0.04
$ 0.03
$ 0.09
$ 0.07

~~(1) see Note 3.~~ ~~Correction of Prior Period Financial Statements~~

For the three ~~and nine~~ months ended ~~September 30, 2017~~March 31, 2020 and ~~2016,~~2019, the following were excluded from the calculation of diluted ~~earnings~~loss per common share because of their anti-dilutive effects:



	Three Months Ended
	March 31,
	2020	2019
Restricted stock units	13,894	10,997
Stock options	4,878	5,643
	18,772	16,640

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Restricted stock units 4,938
8,130
2,458
11,120
Stock options 5,362
9,766
4,023
12,017
10,300
17,896
6,481
23,137

As the Company expects to settle the principal amount of its outstanding convertible senior notes in cash and any excess in cash or shares of the Company’s common stock, the Company uses the treasury stock method for calculating any potential dilutive effect of the conversion spread on diluted net income per share, if applicable. The conversion spread will have a dilutive impact on diluted net income per share of common stock when the average market price of the Company’s common stock for a given period exceeds the conversion price of $16.72 per share. The Company's Convertible Senior Notes are further described in Note 6, Long-Term Debt.

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Note 5. Income Taxes

The income tax consisted of the following:



	Three Months Ended
	March 31,
	2020			2019
Loss before income taxes	$	(4,005	)	$	(10,584	)
Income tax benefit	250			10,050
Effective tax rate	6.2		%	95.0		%

The Company calculates its provision for income taxes during its interim reporting periods by applying an estimate of the annual effective tax rate for the full year "ordinary" income or loss for the respective reporting period. In addition, adjustments are recorded for discrete period items and changes to our state effective tax rate which can cause the rate to fluctuate from quarter to quarter.

For the three months ended March 31, 2020, our effective tax rate was different than the statutory rate primarily due to a discrete period tax benefit of $2,115, which was recognized related to excess tax benefits on equity compensation. In addition, the Company’s actual effective tax rate for the current year has reduced the expected annual benefit as a result of permanent adjustments related to limitations on executive compensation deductibility and inclusion of income in the U.S. due to foreign disregarded entities.

For the three months ended March 31, 2019, our effective tax rate was different than the statutory rate primarily due to a discrete period tax benefit of $4,749, which was recognized related to excess tax benefits on equity compensation for the three months ended March 31, 2019.

On March 27, 2020, the Coronavirus Aid, Relief, and Economic Security Act, which is commonly known as the CARES Act, was enacted into law. As permitted by the CARES Act, the Company intends to accelerate the refund request for previously paid Alternative Minimum Taxes and defer the employer portion of the social security payroll tax. We continue to assess the Company's potential benefits of the CARES Act and ongoing government guidance related to COVID-19.

Uncertain Tax Positions

The Company had uncertain tax benefits of $714 and $914 as of March 31, 2020 and December 31, 2019, respectively. The Company recognizes interest and penalties related to uncertain tax benefits in income tax expense. The Company did 0t incur any interest expense or penalties during the three months ended March 31, 2020 and March 31, 2019, respectively. The following table reconciles the total amounts of uncertain tax benefits:



	March 31, 2020			December 31, 2019
Balance as of January 1	$	914		$	1,107
Increase due to current year positions	—			155
Decrease due to prior year positions	—			(243		)
Decrease due to settlements and payments	(173		)	(86		)
Decrease due to lapse of applicable statute of limitations	—			(71		)
(Decrease) increase due to foreign currency fluctuation	(27		)	52
Uncertain tax benefits as of the end of the period	$	714		$	914

Net Operating Loss Carry Forwards ("NOLs")

As of March 31, 2020, the Company has U.S. Federal and state NOL carryforwards of $509,313 and $237,667, respectively, which expire at various times through 2037. In addition, we have NOLs for United Kingdom tax purposes of $165,104 with no expiration date.

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Note 6. Long-Term ~~Note and Revolving Credit Facility~~Debt

This footnote should be read in conjunction with the complete description of our financing arrangements under Note 6,8, Long-Term Debt ~~and Revolving Credit Facility~~, to the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2019.

~~A schedule~~The following table summarizes the Company's long-term debt as of ~~long-term note~~March 31, 2020 and ~~revolving credit facility at~~ ~~September 30, 2017~~ ~~and~~ December 31, ~~2016~~2019:



	March 31, 2020		December 31, 2019
Revolving credit facility - due 2023	265,500		220,500
Convertible senior notes - due 2024	345,000		345,000
Long-term debt including current maturities	610,500		565,500
Less unamortized discount	58,180		61,234
Less debt issuance costs	6,709		7,108
Total long-term debt	$	545,611	$	497,158

Convertible Senior Notes

In June 2019, the Company issued $300.0 million aggregate principal amount of 1.75% convertible senior notes due 2024 in a private placement and an additional $45.0 million aggregate principal amount of such notes pursuant to the exercise in full of the over-allotment option of the initial purchasers (collectively, "Convertible Senior Notes"). The Convertible Senior Notes are the Company's senior unsecured obligations. The Convertible Senior Notes will mature on June 1, 2024, unless earlier redeemed, repurchased or converted. We may not redeem the notes prior to June 5, 2022. The total net proceeds from the offering, after deducting initial purchase discounts and expenses payable by the Company, were $334.8 million.

Each $1,000 principal amount of the Convertible Senior Notes is initially convertible into 59.8256 shares of the Company's common stock, which is equivalent to an initial conversion price of approximately $16.72 per share. The conversion rate is subject to adjustment upon the occurrence of certain specified events but will not be adjusted for any accrued and unpaid interest. In addition, upon the occurrence of a make-whole fundamental change or a redemption period, each as defined in the indenture setting forth the terms of the Convertible Senior Notes, the Company will, in certain circumstances, increase the conversion rate by a number of additional shares for a holder that elects to convert its Convertible Senior Notes in connection with such make-whole fundamental change or during the relevant redemption period.

Prior to December 1, 2023, the notes will be convertible only upon satisfaction of certain conditions and during certain periods, and thereafter, at any time until the close of business on the second scheduled trading day immediately preceding the maturity date. We will satisfy any conversion election by paying or delivering, as the case may be, cash, shares of common stock or a combination of cash and shares of common stock. During the three months ended March 31, 2020, the conditions allowing holders of the Convertible Senior Notes to convert were not met.

The net carrying amount of the liability component of the Convertible Senior Notes was as follows:



	March 31, 2020
Principal	$	345,000
Unamortized discount	(58,180		)
Unamortized issuance cost	(6,709		)
Net carrying amount	$	280,111

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

September 30,
2017 December 31,
2016
2.50-3.25% Term note - due 2020, net of debt related costs $ 77,361
$ 91,124
2.50-3.25% Revolving credit facility - due 2020 182,000
209,000
Total Long-term note and revolving credit facility $ 259,361
$ 300,124

The following table sets forth the interest expense recognized related to the Convertible Senior Notes:

~~2016 Financing~~



	Three Months Ended
	March 31, 2020
Contractual interest expense	1,509
Amortization of debt discount	3,054
Amortization of debt issuance costs	399
Total interest expense related to the Convertible Senior Notes	4,962

In connection with the pricing of the Convertible Senior Notes and subsequently in connection with the exercise of the initial purchaser's option to purchase additional notes, the Company entered into privately negotiated capped call transactions with certain counterparties (the "Capped Calls"). The Capped Calls each have a strike price of $16.72 per share, subject to certain adjustments, which corresponds to the initial conversion price of the Convertible Senior Notes. The Capped Calls have initial cap prices of $23.46 per share, subject to certain adjustments. The Capped Calls are expected generally to reduce potential dilution to the Company's common stock upon any conversion of notes and/or offset any cash payments the Company is required to make in excess of the aggregate principal amount of converted notes, as the case may be, with such reduction and/or offset subject to a cap. The initial cap price of the Capped Call transactions was $23.46. The net cost of $28,325 incurred to purchase the Capped Calls and related income tax benefit of $6,772 was recorded as a reduction to additional paid-in capital on the Company's consolidated balance sheet and are not accounted for as derivatives.

2018 Term Note and Revolving Credit Facility

On ~~June 3, 2016, we~~July 31, 2018, the Company entered into ~~Amendment No. 1 to~~ the ~~Amended and Restated~~2018 Credit ~~Agreement (the “2016 Credit Facility”)~~Facility consisting of a ~~$125.0~~$100 million senior secured term ~~note~~loan and a ~~$325.0~~$500 million revolving credit facility. The co-borrowers under the ~~2016~~2018 Credit Facility are the Company and Vonage America Inc., the Company’s wholly owned subsidiary. Obligations under the ~~2016~~2018 Credit Facility are guaranteed, fully and unconditionally, by the Company’s other United States ~~material~~ subsidiaries and are secured by substantially all of the assets of each borrower and each guarantor.

We used $197.8 million of the net available proceeds of the 2016 Credit Facility to retire all of the debt under our prior credit facility. We used $179.0 million from our 2016 Credit Facility in connection with the acquisition of Nexmo on June 3, 2016. Remaining proceeds from the term note and the undrawn revolving credit facility under the 2016 Credit Facility will be used for general corporate purposes. During the ~~nine~~three months ended ~~September 30, 2017,~~March 31, 2020, we ~~made mandatory repayments of $14.1 million under the term note and made discretionary repayments of $42.0 million under the revolving credit facility, respectively, and~~ borrowed ~~$15.0~~$45 million under the revolving credit facility. In addition, the effective interest rate was ~~4.25%~~3.71% as of ~~September 30, 2017.~~

March 31, 2020. During the three months ended March 31, 2019, we made mandatory repayments of $2.5 million under the 2018 term note and borrowed $41.5 million under the revolving credit facility. As of March 31, 2020, we were in compliance with all covenants, including financial covenants, for the 2018 Credit Facility. On April 6, 2020, the Company drew $30 million of the amounts available under the revolving portion of the 2018 Credit Facility to increase its cash position in light of volatility in capital markets.

Interest Rate ~~Swap~~Swaps

On July 14, 2017, we executed on ~~three~~3 interest rate swap agreements in order to hedge the variability of expected future cash interest ~~payments related to the 2016 Credit Facility.~~payments. The swaps have an aggregate notional amount of $150 million and were effective onfrom July 31, 2017 through June 3, ~~2020 concurrent with the term of the 2016 Credit Facility.~~2020. Under the swaps our interest rate is fixed at 4.7%. The interest rate swaps are accounted for as cash flow hedges in accordance with ASC 815, Derivatives and Hedging.

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

As of ~~September 30, 2017,~~March 31, 2020 and December 31, 2019, the fair market value of the swaps was ~~$197,~~a liability of $218 and an asset of $18, respectively, which is included in other assets ~~and accumulated OCI~~ on ~~the face of~~ our condensed consolidated balance sheet. As of September 30, 2017, the critical terms of the swap agreements have not changed and therefore, there is no ineffectiveness to be recorded and all changes in the fair value of the interest rate swaps are recorded in accumulated OCI. The following table summarizes the effects of ASC 815 on the Company's accumulated OCI balance attributable to cash flow derivatives:



	Three Months Ended
	March 31,
	2020			2019

Accumulated OCI beginning balance	$	(1,001	)	$	975
Reclassified from accumulated OCI to income:
Due to reclassification of previously deferred gain	(133		)	(133		)
Change in fair value of cash flow hedge accounting contracts, net of tax	(285		)	(554		)
Accumulated OCI ending balance, net of tax benefit of $46 and $365, respectively	$	(1,419	)	$	288
Gains expected to be reclassified from accumulated OCI during the next 12 months	$	531		$	531

Three and Nine Months Ended
September 30,
2017

Accumulated OCI beginning balance $ —
Mark-to-market of cash flow hedge accounting contracts 197
Accumulated OCI ending balance $ 197
Gains expected to be realized from accumulated OCI during the next 12 months $ —

Note 7. Leases

The Company entered into various non-cancelable operating lease agreements for certain of our existing office and telecommunications co-location space as well as operating leases for certain equipment. The operating leases expire at various times through 2026. We are committed to pay a portion of the buildings’ operating expenses as required under the arrangements which we will separate as a non-lease component when readily determinable. The Company did not have any finance leases as of March 31, 2020 and December 31, 2019.

During the three months ended March 31, 2020 and March 31, 2019, the Company incurred operating lease expense of $2,965 and $3,941, respectively, related to its operating leases and sub-lease income of $319 and $266, respectively. Additionally, the remaining weighted average lease term for our operating leases was 4.10 years and the weighted average discount rate utilized to measure the Company's operating leases was 5.04% as of March 31, 2020.

Supplemental cash flow related to the Company's operating leases is as follows:



	Three Months Ended
	March 31, 2020

Cash paid for amounts included in the measurement of lease liabilities	$	4,139
Right-of-use assets obtained in exchange for lease obligations	$	1,261

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Maturities of operating lease liabilities as of March 31, 2020 and December 31, 2019 are as follows:



	March 31, 2020			December 31, 2019

2020 (excluding the three months ended March 31, 2020 for the period ended March 31, 2020)	$	10,841		15,017
2021	11,879			11,663
2022	8,180			7,599
2023	6,552			7,197
2024	2,252			6,592
Thereafter	4,540			21,178
Total lease payments	44,244			69,246
Less imputed interest	(4,309		)	(11,047		)
Total	$	39,935		$	58,199

During the first quarter of 2020, the Company amended one of its office leases to remove a renewal period of 5 years beyond the initial lease term. In the Company's adoption of ASC 842, the Company had included the available renewal term within the transition asset and liability as the renewal was highly probable at the time of adoption. As a result, the Company's operating lease liability was reduced by $15,825 with a corresponding reduction in the Company's operating lease right-of-use assets as of March 31, 2020.

Note 6.8. Common Stock

As of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, the Company had 596,950 shares of common stock authorized and had ~~10,318~~15,521 shares available for grants under our share-based compensation programs as of ~~September 30, 2017.~~March 31, 2020. For a detailed description of our share-based compensation programs refer to Note 9, 10, Employee Stock Benefit Plans in the consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~

~~Common Stock Repurchases~~

~~On December 9, 2014, Vonage's Board of Directors authorized a program for~~2019. The following table reflects the ~~Company to repurchase up to $100.0 million of its outstanding~~changes in the Company's common stock ~~(the "2014 $100.0 million repurchase program"). Repurchases under the 2014 $100.0 million repurchase program are expected to be made over a four-year period ending on December 31, 2018.~~

~~We repurchased the following shares of common stock with cash resources under the 2014 $100.0 million repurchase program during the three~~issued and ~~nine months ended September 30, 2017 and 2016:~~outstanding:



For the Three Months Ended
(in thousands)	Issued	Treasury		Outstanding
Balance at December 31, 2018	309,736	(69,993	)	239,743
Shares issued under the 2015 Equity Incentive Plan	4,497	—		4,497
Employee taxes paid on withholding shares	—	(1,864	)	(1,864	)
Balance at March 31, 2019	314,233	(71,857	)	242,376

Balance at December 31, 2019	315,808	(72,959	)	242,849
Shares issued under the 2015 Equity Incentive Plan	4,072	—		4,072
Employee taxes paid on withholding shares	—	(1,675	)	(1,675	)
Balance at March 31, 2020	319,880	(74,634	)	245,246

Three Months Ended Nine Months Ended
September 30, September 30,
2017 2016 2017 2016
Shares of common stock repurchased —
—
1,599
7,400
Value of common stock repurchased $ —
$ —
$ 9,510
$ 32,762

As of September 30, 2017, $42,533 remained of our 2014 $100.0 million repurchase program. The repurchase program expires on December 31, 2018 but may be suspended or discontinued at any time without notice.

In any period under the 2014 $100.0 million repurchase program, cash used in financing activities related to common stock repurchases may differ from the comparable change in stockholders' equity, reflecting timing differences between the recognition of share repurchase transactions and their settlement for cash.

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Note 7.9. Commitments and Contingencies

Litigation

From time to time ~~in addition to those identified below,~~ we are subject to legal proceedings, claims, investigations, and proceedings in the ordinary course of business, including claims of alleged infringement of third-party patents and other intellectual property rights, commercial, employment, and other matters. From time to time, we receive letters or other communications from third parties inviting us to obtain patent licenses that might be relevant to our business or alleging that our services infringe upon third party patents or other intellectual property. In accordance with generally accepted accounting principles, we make a provision for a liability when it is both probable that a liability has been incurred and the amount of the loss or range of loss can be reasonably estimated. These provisions, if any, are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. Litigation is inherently unpredictable. We believe that we have valid defenses with respect to the legal matters pending against us and are vigorously defending these matters. Given the uncertainty surrounding litigation and our inability to assess the likelihood of a favorable or unfavorable outcome in ~~the~~such matters ~~noted below~~ and our inability to reasonably estimate the amount of loss or range of loss, it is possible that the resolution of one or more of these matters could have a material adverse effect on our condensed consolidated financial position, cash flows or results of operations.

~~VONAGE HOLDINGS CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

~~Litigation~~

~~IP Matters~~

~~RPost Holdings, Inc.~~On August 24, 2012, RPost Holdings, Inc., RPost Communications Limited, and RMail Limited (collectively, “RPost”) filed a lawsuit against StrongMail Systems, Inc. (“StrongMail”) in the United States District Court for the Eastern District of Texas alleging that StrongMail’s products and services, including its electronic mail marketing services, are covered by United States Patent Nos. 8,224,913, 8,209,389, 8,161,104, 7,966,372, and 6,182,219. On February 11, 2013, RPost filed an amended complaint, adding 27 new defendants, including Vonage America Inc. RPost’s amended complaint alleges willful infringement of the RPost patents by Vonage and each of the other new defendants because they are customers of StrongMail. StrongMail has agreed to fully defend and indemnify Vonage in this lawsuit. Vonage answered the complaint on May 7, 2013. On September 17, 2015, the Court ordered the consolidation for pre-trial purposes of this case with other cases by RPost. The lead case has been administratively closed and stayed since January 30, 2014 due to multiple pending actions by third parties regarding ownership of the patents at issue. On September 1, 2017, the parties in the consolidated actions filed a joint notice regarding status of the co-pending actions. Plaintiffs requested that the stay be lifted, while defendants maintain that the stay should remain in place.

~~AIP Acquisition LLC~~. On January 3, 2014, AIP Acquisition LLC (“AIP”), filed a lawsuit against Vonage Holdings Corp., Vonage America, Inc., and Vonage Marketing LLC in the U.S. District Court for the District of Delaware alleging that Vonage’s products and services are covered by United States Patent No. 7,269,247. Vonage filed an answer and counterclaims on February 25, 2014. AIP filed an amended complaint on March 18, 2014, which Vonage answered on April 4, 2014. On April 8, 2014, the Court stayed the case pending final resolution of non-party Level 3’s inter partes review request of United States Patent No. 7,724,879, which is a continuation of the ‘247 patent. On October 8, 2014, the Patent Office issued a Final Written Decision, finding all challenged claims of the ‘879 patent to be invalid. On November 10, 2015, the Federal Circuit rejected AIP’s appeal and affirmed the Patent Office’s rejection of the ‘879 patent.

Cisco petitioned for inter partes review of the ‘247 patent on November 25, 2014, which was granted on May 20, 2015. On May 18, 2016, the Patent Office issued a Final Written Decision, finding all challenged claims of the ‘247 patent to be invalid. AIP appealed to the Federal Circuit, filing its opening brief on December 15, 2016. On December 20, 2016, the Patent Office filed a notice of intervention in the appellate proceedings. Briefing on the appeal is complete, and oral argument was held on October 3, 2017.

~~Commercial Litigation~~

~~Merkin & Smith, et al~~. On September 27, 2013, Arthur Merkin and James Smith filed a putative class action lawsuit against Vonage America, Inc. in the Superior Court of the State of California, County of Los Angeles, alleging that Vonage violated California’s Unfair Competition Law by charging its customers fictitious 911 taxes and fees. On October 30, 2013, Vonage filed a notice removing the case to the United States District Court for the Central District of California. On November 26, 2013, Vonage filed its Answer to the Complaint. On December 4, 2013, Vonage filed a Motion to Compel Arbitration, which the Court denied on February 4, 2014. On March 5, 2014, Vonage appealed that decision to the United States Court of Appeals for the Ninth Circuit. On March 26, 2014, the district court proceedings were stayed pending the appeal. On February 29, 2016, the Ninth Circuit reversed the district court’s ruling and remanded with instructions to grant the motion to compel arbitration. On March 22, 2016, Merkin and Smith filed a petition for rehearing. On May 4, 2016, the Ninth Circuit withdrew its February 29, 2016 decision and issued a new order reversing the district court’s order and remanded with instructions to compel arbitration. The Ninth Circuit also declared as moot the petition for rehearing. On June 27, 2016, the lower court stayed the case pending arbitration. A joint status report was filed with the District Court on December 23, 2016. A second joint status report was filed with the District Court on March 23, 2017. A third joint status report was filed with the District Court on June 27, 2017. A fourth joint status report was filed with the District Court on September 26, 2017.

~~DSA Promotions, LLC v. Vonage America, Inc.~~ ~~On September 28, 2017, DSA Promotions, LLC ("DSA") filed suit in the District Court of Dallas County, Texas, seeking payment of approximately~~ ~~$162~~ for goods and materials provided by DSA to Vonage. Vonage was served with the Original Petition and Request for Disclosure on October 13, 2017. DSA makes its claim based upon the doctrine of suit on a sworn account, quantum meruit and unjust enrichment. Vonage removed the matter from Dallas County District Court to the United States Federal Court for the Northern District of Texas, Dallas Division, on Monday, November 6, 2017. Vonage's responsive pleadings are due on Monday, November 13, 2017.

~~VONAGE HOLDINGS CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

Regulation

Telephony services are subject to a broad spectrum of state, federal and ~~federal~~foreign regulations. Because of the uncertainty over whether Voice over Internet Protocol (“VoIP”) should be treated as a telecommunications or information service, we have been involved in a substantial amount of state and federal regulatory activity. Implementation and interpretation of the existing laws and regulations is ongoing and is subject to litigation by various federal and state agencies and courts. Due to the uncertainty over the regulatory classification of VoIP service, there can be no assurance that we will not be subject to new regulations or existing regulations under new interpretations, and that such change would not introduce material additional costs to our business.

~~Federal - Net Neutrality~~

~~Clear and enforceable~~ The Company continues to monitor federal regulations relating to net neutrality, rules make it more difficult for broadband Internet service providers to block or discriminate against Vonage service. In addition, explicitly applying net neutrality rules to wireless broadband Internet service providers could create greater opportunities for VoIP applications that run on wireless broadband Internet service. In December 2010, the Federal Communications Commission ("FCC") adopted net neutrality rules that applied strong net neutrality rules to wired broadband Internet service providers and limited rules to wireless broadband Internet service providers. On January 14, 2014, the D.C. Circuit Court of Appeals vacated a significant portion of the 2010 rules. On May 15, 2014, the FCC issued a Notice of Proposed Rulemaking (NPRM) proposing new net neutrality rules. After public response to the NPRM, the FCC adopted new neutrality rules on February 26, 2015. These rules prohibit broadband Internet service providers from: (1) blocking or throttling lawful content applications, or services; (2) imposing paid prioritization arrangements; and (3) unreasonably interfering or unreasonably disadvantaging consumers or edge providers. In addition, broadband Internet service providers are required to make certain disclosures regarding their network management practices, network performance, and commercial terms. These net neutrality rules apply the same requirements to wired and wireless broadband Internet service providers. Several parties filed appeals which are pending at the D.C. Circuit Court of Appeals. Oral arguments at the D.C. Circuit Court of Appeals were held on December 4, 2015. On June 14, 2016, the D.C. Circuit of Appeals denied the appeals. Several parties filed a petition for rehearing en banc on July 29, 2016, which was denied on May 1, 2017. On July 2, 2017 Chief Justice John Roberts extended the time within which interested parties could file a petition for a writ of certiorari until September 28, 2017. Multiple interested parties and intervenors filed petitions. The Supreme Court has not yet ruled on the petitions.

~~Federal - Rural Call Completion Issues~~

~~On February 7, 2013, the FCC released a NPRM on~~ rural call completion issues. The NPRM proposed new detailed reporting requirements to gauge rural call completion performance. Rural carriers have argued that VoIP provider call completion performance to rural areas is generally poor. On October 28, 2013, the FCC adopted an order on rural call completion imposing new reporting obligations and restricting certain call signaling practices. The call signaling rules went into effect on January 31, 2014. We filed for extensions of the rules, which the FCC granted, and as of April 17, 2014, we were compliant with the FCC call signaling rules. The effective date for the reporting requirements was April 1, 2015. We could be subject to an FCC enforcement action in the future in the event the FCC took the position that our rural call completion performance is inadequate or we were not compliant with the FCC’s order. On June 22, 2017, the FCC issued a Second Further Notice of Proposed Rulemaking. The FCC has proposed changes to the FCC's rules that allegedly would more effectively address rural call completion problems while reducing burdens on covered providers. Vonage is reviewing and evaluating the FCC's proposed changes.

~~Federal - NPRM - Number Slamming~~

~~On July 13, 2017, the FCC adopted a NPRM regarding ways to protect consumers from~~issues, number slamming, 911 access, access to telecommunication equipment and ~~cramming without impeding competition or impairing the ability~~services by persons with disabilities, caller ID services, number portability, unwanted calls to reassigned numbers, and robocalling. As we continue to expand globally, these types of ~~consumers~~regulations are likely to ~~switch providers. Vonage is monitoring this NPRM.~~

~~Federal - NPRM Toll Free Assignment Modernization~~

On September 26, 2017 the FCC issued a NPRM regarding the modernization of toll free number assignment. The FCC proposes amending its rules to allow for the use of an auction to assign certain toll free numbers - such as vanitybe similarly enacted and ~~repeater numbers - in order to better promote the equitable and efficient use of numbers (especially as afforded~~enforced by the ~~opening of the 833 toll free code). Vonage will continue to monitor activity with respect to this NPRM.~~

~~Federal - NOI - Enterprise Communications Systems Access to 911~~

On September 26, 2017, the FCC adopted a Notice of Inquiry ("NOI") with respect to 911 access, routing and location in Enterprise Communication Systems. Vonage will monitor activity related to this NOI.

~~VONAGE HOLDINGS CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

~~Federal - Access to Telecommunication Equipment and Services by Persons with Disabilities~~

At its open meeting scheduled for October 24, 2017, the FCC applied its wireline hearing aid compatibility rules/standards to handsets that provide advanced communication services, which includes interconnected and non-interconnected Voice over IP. The rules include certain coupling and volume control requirements that would allow the handsets to work better for persons with hearing aids. There are also testing and certification requirements, which typically apply to the handset manufacturer. The FCC also adopted a requirement for volume control in wireless handsets. The new rules have a two-year phase in for new phones and do not require the modification to existing handsets.

~~Federal - Rules and Policies Regarding Caller ID Services~~

At its open meeting on October 24, 2017, the FCC issued a report and order regarding amendments to the Commission’s rules to exempt threatening calls from current Caller ID blocking roles so that, among other changes, law enforcement and security personnel have timely access to information they need to aid their investigations. The order exempts threatening calls from the CPN privacy rules.

~~Federal - Part 43 Report and Order~~

At its open meeting scheduled for October 24, 2017, the FCC issued a report and order based on a March 23, 2017 NPRM to eliminate the filing of annual traffic and revenue reports and streamline circuit capacity reports.

~~Federal - Number Portability NPRM and NOI~~

At its open meeting scheduled for October 24, 2017, the FCC released a NPRM that would allow carriers flexibility in conducting number portability database queries to promote nationwide number portability and eliminate the dialing party requirement as it applies to interexchange service. The NOI seeks comments on industry number portability models and how number administration might be improved for more efficient technical, operational, administrative and legal processes. Vonage is monitoring this NPRM and NOI.

~~State Telecommunications Regulation~~

In general, the focus of interconnected VoIP telecommunications regulation is at the federal level. On November 12, 2004, the FCC issued a declaratory ruling providing that our service is subject to federal regulation and preempted the Minnesota Public Utilities Commission (“MPUC”) from imposing certain of its regulations on us. The FCC's decision was based on its conclusion that our service is interstate in nature and cannot be separated into interstate and intrastate components. On March 21, 2007, the United States Court of Appeals for the 8th Circuit affirmed the FCC's declaratory ruling preempting state regulation of our service.

While this ruling does not exempt us from all state oversight of our service, it effectively prevents state telecommunications regulators from imposing certain burdensome and inconsistent market entry requirements and certain other state utility rules and regulations on our service. State regulators continue to probe the limits of federal preemption in their attempts to apply state telecommunications regulation to interconnected VoIP service. On July 16, 2009, the Nebraska Public Service Commission and the Kansas Corporation Commission filed a petition with the FCC seeking a declaratory ruling or, alternatively, adoption of a rule declaring that state authorities may apply universal service funding requirements to nomadic VoIP providers. We participated in the FCC proceedings on the petition. On November 5, 2010, the FCC issued a declaratory ruling that allowed states to assess state USF on nomadic VoIP providers on a going forward basis provided that the states comply with certain conditions to ensure that imposing state USF does not conflict with federal law or policy.

Minnesota - More recently on July 28, 2015, the MPUC found that it has authority to regulate Charter’s fixed, interconnected VoIP service. Charter challenged the MPUC’s order at the U.S. District Court for Minnesota. This challenge is currently pending. In September 2017 amicus briefs were filed in support of the Minnesota PUC's appeal of the Charter decision by AARP, the AARP Foundation, Professor Barbara Cherry, the National Association of Regulatory Utility Commissioners and the national Association of State Consumer Advocates and the Mid-Minnesota Legal Aid.

Arizona - on August 14, 2017, the Arizona Corporation Commission issued an opinion and order with respect to amendments to the Arizona Universal Services Fund. The rulemaking allows for, among other things, the collection of additional USF surcharges in Arizona to fund the E-rate Broadband Special Construction Project Matching Fund Program. The Commission held hearing on September 12 and 13, 2017. Vonage will continue to monitor this rulemaking to determine its effect upon its business activities within Arizona.

~~We expect that state public utility commissions and state legislators will continue their attempts to apply state telecommunications regulations to nomadic VoIP service.~~

~~VONAGE HOLDINGS CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

local regulatory authorities.

State and Municipal Taxes

In accordance with generally accepted accounting principles, we make a provision for a liability for taxes when it is both probable that a liability has been incurred and the amount of the liability or range of liability can be reasonably estimated. These provisions are reviewed at least quarterly and adjusted to reflect the impacts of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular case. ~~For a period of~~From time to time, we did not collect or remit state or municipal taxes (such as sales, excise, utility, use, and ad valorem taxes), fees or surcharges (“Taxes”) on the charges to our customers for our services, except that we historically complied with the New Jersey sales tax. We have received inquiries ~~or demands~~ from a number of ~~state~~states and ~~municipal~~local taxing agencies with respect to the remittance of sales, use, telecommunications, and ~~911 agencies seeking payment~~excise taxes. Several jurisdictions are currently conducting tax audits of ~~Taxes~~the Company's records. While the Company collects or has accrued for taxes that it believes are ~~applied~~required to or collected from customers of providers of traditional public switched telephone network services. Although we have consistently maintained that these Taxes do not apply to our service for a variety of reasons depending on the statute or rule that establishes such obligations, we are now collecting and remitting sales taxes in certain of those states including a number of states that have changed their statutes to expressly include VoIP. In addition, many states address how VoIP providers should contribute to support public safety agencies, andbe remitted, it has reviewed its positions in those ~~states we remit~~various jurisdictions as well as other regulatory fees ~~to the~~and has established appropriate ~~state agencies. We could also be contacted by state or municipal taxing and 911 agencies regarding Taxes that do explicitly apply to VoIP and these agencies could seek retroactive payment of Taxes.~~reserves. As such, we have established reserves of ~~$901~~$3,703 and ~~$1,763~~$3,175 as of ~~September 30, 2017~~March 31, 2020 and December 31, ~~2016,~~2019, respectively, as our best estimate of the potential tax exposure for any retroactive assessment.

~~Note 8. Acquisitions and Dispositions~~

~~Sale of Hosted Infrastructure Product Line~~

On May 31, 2017, we completed the sale of our Hosted Infrastructure product line for up to $4.0 million consideration comprised of $1.0 million received upon closing an additional $0.5 million of contingent consideration received during the third quarter and the potential for up to $2.5 million further consideration based on the achievement of financial objectives for net sales during the 18 months following closing. The results of our Hosted Infrastructure product line have been included within our business segment. As a result of the sale, we recorded a gain of $1,377 within other income for the nine months ended September 30, 2017. This disposal did not represent a strategic shift in operations and, therefore, did not qualify for presentation as discontinued operations.

~~Acquisition of Nexmo~~

Nexmo is a global leader in the Communications-Platform-as-a-Service (“CPaaS”) segment of the cloud communications market. Nexmo provides innovative communication application program interfaces (“APIs”) for text messaging and voice communications, allowing developers and enterprises to embed contextual communications into mobile apps, websites and business workflows via text, social media, chat apps and voice.

Pursuant to the Agreement and Plan of Merger dated May 5, 2016 and further amended on June 2, 2016, by and among the Company, Neptune Acquisition Corp., a Delaware corporation and newly formed indirect, wholly owned subsidiary of Vonage (“Merger Sub”), Nexmo, a Delaware corporation, and Shareholder Representative Services LLC, a Colorado limited liability company, as representative of the security holders of Nexmo, on June 3, 2016, Merger Sub, on the terms and subject to the conditions thereof, merged with and into Nexmo, and Nexmo became a wholly owned indirect subsidiary of Vonage.

Under the agreement, Nexmo shareholders received consideration of $231,122, with an additional earn-out opportunity (the "contingent consideration") of up to $20,000 contingent upon Nexmo achieving certain performance targets. Of the consideration, $194,684 (net of cash acquired of $16,094) was paid at close, consisting of $163,093 of cash (net of $16,094 of cash acquired) and 6,823 in shares of Vonage common stock valued at $31,591. The remaining $36,438 of the $231,122 purchase price is in the form of restricted cash, restricted stock and options held by Nexmo management and employees (the "Employee Payout Amount"), subject to vesting requirements over time and to be amortized to compensation expense quarterly until vested. We financed the transaction with $179,000 from our 2016 Credit Facility.

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

~~The consideration was allocated to acquisition cost as follows:~~

Cash paid at closing (inclusive of cash acquired of $16,094) $ 179,186
Stock paid at closing 31,591
Contingent consideration (described below) 16,472
Employee Payout Amount (described below) 4,779
Acquisition Cost $ 232,028

In addition, Nexmo shareholders were eligible to earn a Variable Payout Amount of up to $20,000, subject to the achievement of certain performance targets during the 12 month period following the closing of the transaction. We estimated using probability weighting that the value of the contingent consideration was $17,840 at the acquisition date and included that amount in acquisition cost at the net present value amount of $16,472. As of December 31, 2016, Nexmo did not achieve the performance targets necessary to earn the Variable Payout Amount but the parties agreed to a $5,000 settlement that the parties were paid in the first quarter of 2017.

In addition, Nexmo management and employees were eligible to earn an Employee Payout Amount of $36,438 attributable to restricted cash, restricted stock and assumed options, of which $4,779 is included in acquisition cost as service had been provided pre-acquisition and $31,659 will be recorded as post-acquisition expense assuming all amounts vest, of which $31,087 is being recognized as compensation expense and $572 related to interest expense as continued employment is a condition of receiving consideration. Pursuant to the merger agreement, $20,372 of the cash consideration and $5,081 of the stock consideration were placed in escrow for unknown liabilities that may have existed as of the acquisition date.

For the nine months ended September 30, 2017, we incurred approximately $28 and for the three and nine months ended September 30, 2016, we incurred approximately $257 and $5,316, respectively, in acquisition related transaction costs, which were recorded in general and administrative expense in the accompanying condensed consolidated statements of income. For the full year 2016, we incurred approximately $5.5 million in acquisition related transaction costs.

The acquisition was accounted for using the acquisition method of accounting under which assets and liabilities of Nexmo were recorded at their respective fair values including an amount for goodwill representing the difference between the acquisition consideration and the fair value of the identifiable net assets. We do not expect any portion of this goodwill to be deductible for tax purposes. The goodwill attributable to the acquisition has been recorded as a non-current asset and is not amortized, but is subject to an annual review for impairment. The factors that contributed to goodwill include synergies that are specific to our consolidated business, the acquisition of a talented workforce that provides us with expertise in the small and medium business markets, as well as other intangible assets that do not qualify for separate recognition.

The acquisition price was allocated to the tangible and identified intangible assets acquired and liabilities assumed as of the closing date. The fair values assigned to identifiable intangible assets assumed were based on management’s current estimates and assumptions. The accounting for the Nexmo acquisition was completed during the three months ended June 30, 2017, at which point the fair values became final. The table below summarizes the provisional amounts recognized for assets acquired and liabilities assumed as of December 31, 2016 as well as adjustments made through the nine months ended September 30, 2017, when the allocation became final. Measurement period adjustments primarily reflect the tax impact of the acquisition date fair values.

~~VONAGE HOLDINGS CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

~~The purchase price was allocated as follows:~~

Acquisition Date Fair Value as of December 31, 2016 Measurement period adjustments Revised Acquisition Date Fair Value
Assets
Current assets:
Cash and cash equivalents $ 16,094
$ —
$ 16,094
Accounts receivable 8,764
—
8,764
Prepaid expenses and other current assets 3,507
—
3,507
Total current assets 28,365
—
28,365
Property and equipment 757
—
757
Software, net 242
—
242
Intangible assets 101,770
—
101,770
Restricted cash 51
—
51
Total assets acquired 131,185
—
131,185

Liabilities
Current liabilities:
Accounts payable 1,841
—
1,841
Accrued expenses 9,299
—
9,299
Deferred revenue, current portion 1,735
—
1,735
Total current liabilities 12,875
—
12,875
Deferred tax liabilities, net, non-current 29,355
(5,482 ) 23,873
Total liabilities assumed 42,230
(5,482 ) 36,748

Net identifiable assets acquired 88,955
5,482
94,437
Goodwill 143,073
(5,482 ) 137,591
Total purchase price $ 232,028
$ —
$ 232,028

~~Identifiable intangible assets recognized in connection with the acquisition included:~~

Customer relationships $ 85,900
Developed technologies 13,768
Non-compete agreements 972
Trade names 1,130
$ 101,770

~~Goodwill~~

~~The following table provides a summary of the changes in the carrying amounts of goodwill which is attributable to our business segment:~~

Balance at December 31, 2016 $ 360,363
Decrease in goodwill related acquisition of Nexmo (5,482 )
Currency translation adjustments 16,654
Balance at September 30, 2017 $ 371,535

~~VONAGE HOLDINGS CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

~~Pro forma financial information~~

The following unaudited supplemental pro forma information presents the combined historical results of operations of Vonage and Nexmo for the nine months ended September 30, 2016, as if the acquisition had been completed at the beginning of 2016.

Nine Months Ended
September 30,
2016
Revenues $ 743,083
Net income $ 12,718
Earnings per common share - basic $ 0.06
Earnings per common share - diluted $ 0.05

The pro forma financial information includes certain adjustments to reflect expenses in the appropriate pro forma periods as though the companies were combined as of the beginning of 2016 and includes the pro-forma impact of amortization of identifiable intangibles assets and interest expense on borrowings under our revolving line of credit utilized to, in part, finance the acquisition. The pro forma data was also adjusted to eliminate non-recurring transaction costs incurred by us as well as the related tax impact. The pro forma results are not necessarily indicative of the results that we would have achieved had the transaction actually occurred on January 1, 2016 and does not purport to be indicative of future financial operating results nor does it reflect any operating efficiencies and cost savings that may be realized from the integration of the acquisition.

Note 9.10. Industry Segment and Geographic Information

ASC 280, ~~"Segment Reporting"~~Segment Reporting establishes reporting standards for an enterprise's business segments and related disclosures about its products, services, geographic areas and major customers. Under ASC 280, the method for determining what information to report is based upon the way management organizes the operating segments within the Company for making operating decisions and assessing financial performance. Our chief operating decision-maker reviews revenue and gross margin information for each of our reportable segments, but does not review operating expenses on a segment by segment basis. In addition, with the exception of goodwill and intangible assets, we do not identify or allocate our assets by the reportable segments.

Business

For our Business customers, ~~we provide~~our Applications Group provides innovative, cloud-based ~~Unified Communications as a Service, or~~ UCaaS and CCaaS solutions, comprised of integrated voice, text, video, data, collaboration, and mobile applications over our flexible, scalable ~~Session Initiation Protocol (SIP)~~SIP based ~~Voice over Internet Protocol, or~~ VoIP network. ~~Through Nexmo, the Vonage~~The API Platform weGroup also ~~offer Communications Platform as a Service, or~~offers CPaaS solutions designed to enhance the way businesses communicate with their customers embedding communications into apps, websites and business processes. Together we have a robust set of product families tailored to serve the full range of the business value chain, from the ~~small and medium business, or~~ SMB market through mid-market and enterprise markets. We provide customers with multiple deployment options, designed to provide the reliability and quality of service they demand. We provide customers the ability to integrate our cloud communications platform with many cloud-based productivity and CRM solutions, including Google’s G Suite, Zendesk, Salesforce’s Sales Cloud, Oracle, Clio, and other CRM solutions. In combination, our products and services permit our business customers to communicate with their customers and employees through any cloud-connected device, in any place, at any time without the often costly investment required with on-site equipment.

Consumer

For our Consumer customers, we enable users to access and utilize our UCaaS services and features, via ~~their existing internet connections,~~a single “identity,” either a number or user name, regardless of how they are connected to the Internet, including over 3G/4G, LTE, Cable, or DSL broadband networks. This technology enables us to offer our Consumer customers attractively priced voice ~~communication~~and messaging services and other features around the world on a variety of devices.

~~VONAGE HOLDINGS CORP.~~

~~NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS~~

~~(In thousands, except per share amounts)~~

~~(Unaudited)~~

For our segments we categorize revenues as follows:

Services revenues. Services revenues consists primarily of revenue attributable to our communication services for Consumer and Software Defined Wide Area Network, or SD-WAN, UCaaS and CPaaS services for Business,

~~Product~~Access and product revenues. Product revenues include equipment sold to customers, shipping and handling, professional services, and broadband ~~access.~~access, as well as revenues associated with providing access services to Business customers.

USF revenues. USF revenues represent fees passed on to customers to offset required contributions to the ~~Federal Universal Service Fund (“USF”) and related fees.~~USF.

For our segments we categorize cost of revenues as follows:

Services cost of revenues. Services cost of revenues consists of costs associated with network operations and technical support personnel, communication origination, and termination services provided by third party carriers and excludes depreciation and amortization.

~~Product~~Access and product cost of revenues. Product cost of revenues includes equipment sold to customers, shipping and handling, professional services, cost of certain products including equipment or services that we give customers as promotions, and broadband ~~access.~~access, as well as costs associated with providing access services to Business customers.

USF cost of revenues. USF cost of revenues represents contributions to the Federal ~~Universal Service Fund (“USF”)~~USF and related fees.

VONAGE HOLDINGS CORP.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(In thousands, except per share amounts)

(Unaudited)

Information about our segment results for the three and ~~nine~~three months ended ~~September 30, 2017~~March 31, 2020 were as follows:


	Three Months Ended									Nine Months Ended									Three Months Ended
	September 30, 2017									September 30, 2017									March 31, 2020
	Business			Consumer			Total			Business			Consumer			Total			Business			Consumer			Total
Revenues
Service revenues	$	109,483		$	111,913		$	221,396		$	305,599		$	346,666		$	652,265		$	195,649		$	77,243		$	272,892
Product revenues⁽¹⁾	13,085			94			13,179			39,837			498			40,335
Service and product revenues	122,568			112,007			234,575			345,436			347,164			692,600
Access and product revenues⁽¹⁾																			10,122			63			10,185
Service, access and product revenues excluding USF																			205,771			77,306			283,077
USF revenues	6,738			11,770			18,508			19,386			36,280			55,666			4,482			9,898			14,380
Total revenues	129,306			123,777			253,083			364,822			383,444			748,266			210,253			87,204			297,457

Cost of revenues
Service cost of revenues⁽²⁾	50,777			19,434			70,211			139,218			62,969			202,187			92,357			8,512			100,869
Product cost of revenues⁽¹⁾	12,702			1,517			14,219			38,360			5,475			43,835
Service and product cost of revenues	63,479			20,951			84,430			177,578			68,444			246,022
Access and product cost of revenues⁽¹⁾																			11,596			573			12,169
Service, access and product cost of revenues excluding USF																			103,953			9,085			113,038
USF cost of revenues	6,738			11,770			18,508			19,386			36,280			55,666			4,482			9,898			14,380
Total cost of revenues	70,217			32,721			102,938			196,964			104,724			301,688			108,435			18,983			127,418

Segment gross margin
Service margin	58,706			92,479			151,185			166,381			283,697			450,078			103,292			68,731			172,023
Product margin	383			(1,423		)	(1,040		)	1,477			(4,977		)	(3,500		)
Gross margin ex-USF (Service and product margin)	59,089			91,056			150,145			167,858			278,720			446,578
Access and product margin																			(1,474		)	(510		)	(1,984		)
Gross margin excluding USF (Service, access and product margin)																			101,818			68,221			170,039
USF margin	—			—			—			—			—			—			—			—			—
Segment gross margin	$	59,089		$	91,056		$	150,145		$	167,858		$	278,720		$	446,578		$	101,818		$	68,221		$	170,039

Segment gross margin %
Service margin %	53.6		%	82.6		%	68.3		%	54.4		%	81.8		%	69.0		%	52.8		%	89.0		%	63.0		%
Gross margin ex-USF (Service and product margin %)	48.2		%	81.3		%	64.0		%	48.6		%	80.3		%	64.5		%
Gross margin excluding USF (Service, access and product margin %)																			49.5		%	88.2		%	60.1		%
Segment gross margin %	45.7		%	73.6		%	59.3		%	46.0		%	72.7		%	59.7		%	48.4		%	78.2		%	57.2		%



	September 30, 2017			December 31, 2016
Assets				(revised)⁽¹⁾
Current assets:
Cash and cash equivalents	$	29,869		$	29,078
Marketable securities	—			601
Accounts receivable, net of allowance of $2,897 and $2,093, respectively	42,435			36,688
Inventory, net of allowance of $124 and $117, respectively	2,683			4,116
Deferred customer acquisition costs, current	1,466			2,610
Prepaid expenses	23,324			26,041
Other current assets	2,686			3,147
Total current assets	102,463			102,281
Property and equipment, net of accumulated depreciation of $143,265 and $129,166, respectively	45,760			48,415
Goodwill	371,535			360,363
Software, net of accumulated amortization of $94,917 and $87,626, respectively	23,574			21,971
Restricted cash	1,827			1,851
Intangible assets, net of accumulated amortization of $117,905 and $88,419, respectively	181,522			199,256
Deferred tax assets	192,879			184,210
Other assets	15,059			17,319
Total assets	$	934,619		$	935,666
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	33,070		$	30,751
Accrued expenses	76,163			109,195
Deferred revenue, current portion	31,332			32,442
Current maturities of capital lease obligations	206			3,288
Current portion of notes payable	18,750			18,750
Total current liabilities	159,521			194,426
Indebtedness under revolving credit facility	182,000			209,000
Notes payable, net of debt related costs and current portion	77,361			91,124
Other liabilities	6,123			4,575
Total liabilities	425,005			499,125

Commitments and Contingencies (Note 7)

Stockholders’ Equity
Common stock, par value $0.001 per share; 596,950 shares authorized at September 30, 2017 and December 31, 2016; 295,633 and 282,319 shares issued at September 30, 2017 and December 31, 2016, respectively; 228,478 and 219,001 shares outstanding at September 30, 2017 and December 31, 2016, respectively	295			282
Additional paid-in capital	1,359,975			1,310,847
Accumulated deficit	(617,288		)	(641,869		)
Treasury stock, at cost, 67,155 shares at September 30, 2017 and 63,318 shares at December 31, 2016	(243,594		)	(219,125		)
Accumulated other comprehensive loss	10,226			(13,594		)
Total stockholders’ equity	509,614			436,541
Total liabilities and stockholders’ equity	$	934,619		$	935,666



	Three Months Ended						Nine Months Ended
	September 30,						September 30,
	2017			2016			2017			2016
				(revised)⁽¹⁾						(revised)⁽¹⁾
Total revenues	$	253,083		$	248,359		$	748,266		$	708,858

Operating Expenses:
Cost of service (exclusive of depreciation and amortization)	96,632			87,377			281,902			232,605
Cost of goods sold	6,306			8,591			19,786			26,009
Sales and marketing	73,576			83,731			235,245			246,676
Engineering and development	6,956			8,075			21,996			22,152
General and administrative	26,811			27,538			98,411			89,261
Depreciation and amortization	18,179			18,018			54,520			53,215
Total operating expenses	228,460			233,330			711,860			669,918
Income from operations	24,623			15,029			36,406			38,940
Other Income (Expense):
Interest income	3			19			12			65
Interest expense	(3,821		)	(3,974		)	(11,385		)	(9,477		)
Other income (expense), net	465			(495		)	931			(237		)
Total other income (expense), net	(3,353		)	(4,450		)	(10,442		)	(9,649		)
Income before income taxes	21,270			10,579			25,964			29,291
Income tax expense	(10,668		)	(3,539		)	(4,624		)	(14,102		)
Net income	$	10,602		$	7,040		$	21,340		$	15,189
Earnings per common share:
Basic	$	0.05		$	0.03		$	0.10		$	0.07
Diluted	$	0.04		$	0.03		$	0.09		$	0.07
Weighted-average common shares outstanding:
Basic	227,943			217,000			223,956			214,872
Diluted	242,720			234,868			242,552			227,499



	September 30, 2017		December 31, 2016
Level 1 Measurements
Money market fund ⁽¹⁾	$	—	$	300
Level 2 Measurements
Available-for-sale securities ⁽²⁾	$	—	$	601
Interest rate swap ⁽³⁾	$	197	$	—



Consolidated Balance Sheets
	As of December 31, 2016
	As Reported			Adjustment		As Revised

Deferred tax assets, non-current	$	188,966		$	4,756	$	184,210
Total assets	940,422			4,756		935,666
Accumulated deficit	(637,113		)	4,756		(641,869		)
Total stockholders' equity	441,297			4,756		436,541
Total liabilities and stockholders' equity	940,422			4,756		935,666



Condensed Consolidated Statements of Income
		Three Months Ended								Six Months Ended
		June 30, 2016								June 30, 2016
		As Reported			Adjustment		As Revised			As Reported			Adjustment		As Revised

Income tax expense		$	(1,562	)	$	679	$	(2,241	)	$	(9,884	)	$	679	$	(10,563	)
Net income		897			679		218			8,828			679		8,149
Net income per common share:	��
Basic		$	—		$	—	$	—		$	0.04		$	—	$	0.04
Diluted		$	—		$	—	$	—		$	0.04		$	—	$	0.04

		Three Months Ended								Nine Months Ended
		September 30, 2016								September 30, 2016
		As Reported			Adjustment		As Revised			As Reported			Adjustment		As Revised

Income tax expense		$	(1,501	)	$	2,038	$	(3,539	)	$	(11,385	)	$	2,717	$	(14,102	)
Net income		9,078			2,038		7,040			17,906			2,717		15,189
Net income per common share:
Basic		$	0.04		$	0.01	$	0.03		$	0.08		$	0.01	$	0.07
Diluted		$	0.04		$	0.01	$	0.03		$	0.08		$	0.01	$	0.07

		Three Months Ended								Year Ended
		December 31, 2016								December 31, 2016
		As Reported			Adjustment		As Revised			As Reported			Adjustment		As Revised

Income tax expense		$	(1,553	)	$	2,039	$	(3,592	)	$	(12,938	)	$	4,756	$	(17,694	)
Net income		1			2,039		(2,038		)	17,907			4,756		13,151
Net income per common share:
Basic		$	—		$	0.01	$	(0.01	)	$	0.08		$	0.02	$	0.06
Diluted		$	—		$	0.01	$	(0.01	)	$	0.08		$	0.02	$	0.06



	September 30, 2017		December 31, 2016
2.50-3.25% Term note - due 2020, net of debt related costs	$	77,361	$	91,124
2.50-3.25% Revolving credit facility - due 2020	182,000		209,000
Total Long-term note and revolving credit facility	$	259,361	$	300,124



	Three and Nine Months Ended
	September 30,
	2017

Accumulated OCI beginning balance	$	—
Mark-to-market of cash flow hedge accounting contracts	197
Accumulated OCI ending balance	$	197
Gains expected to be realized from accumulated OCI during the next 12 months	$	—



Cash paid at closing (inclusive of cash acquired of $16,094)	$	179,186
Stock paid at closing	31,591
Contingent consideration (described below)	16,472
Employee Payout Amount (described below)	4,779
Acquisition Cost	$	232,028



	Acquisition Date Fair Value as of December 31, 2016		Measurement period adjustments			Revised Acquisition Date Fair Value
Assets
Current assets:
Cash and cash equivalents	$	16,094	$	—		$	16,094
Accounts receivable	8,764		—			8,764
Prepaid expenses and other current assets	3,507		—			3,507
Total current assets	28,365		—			28,365
Property and equipment	757		—			757
Software, net	242		—			242
Intangible assets	101,770		—			101,770
Restricted cash	51		—			51
Total assets acquired	131,185		—			131,185

Liabilities
Current liabilities:
Accounts payable	1,841		—			1,841
Accrued expenses	9,299		—			9,299
Deferred revenue, current portion	1,735		—			1,735
Total current liabilities	12,875		—			12,875
Deferred tax liabilities, net, non-current	29,355		(5,482		)	23,873
Total liabilities assumed	42,230		(5,482		)	36,748

Net identifiable assets acquired	88,955		5,482			94,437
Goodwill	143,073		(5,482		)	137,591
Total purchase price	$	232,028	$	—		$	232,028




Customer relationships	$	85,900
Developed technologies	13,768
Non-compete agreements	972
Trade names	1,130
	$	101,770



Balance at December 31, 2016	$	360,363
Decrease in goodwill related acquisition of Nexmo	(5,482		)
Currency translation adjustments	16,654
Balance at September 30, 2017	$	371,535



	March 31, 2020		December 31, 2019
Long-lived assets:
United States	$	637,027	$	640,277
United Kingdom	274,274		299,660
Israel	1,522		1,609
	$	912,823	$	941,546


(in thousands, except percentages)	Three Months Ended									Nine Months Ended									Three Months Ended
	September 30,									September 30,									March 31,
	2017		2016		Dollar Change			Percent Change		2017		2016		Dollar Change			Percent Change		2020		2019		Dollar Change			Percent Change
Service, access and product revenues																			$	283,077	$	260,110	$	22,967		9	%
USF revenues																			14,380		19,431		(5,051		)	(26	)%
Total revenues	$	253,083	$	248,359	$	4,724		2	%	$	748,266	$	708,858	$	39,408		6	%	297,457		279,541		17,916			6	%
Cost of service	96,632		87,377		9,255			11	%	281,902		232,605		49,297			21	%
Cost of goods sold	6,306		8,591		(2,285		)	(27	)%	19,786		26,009		(6,223		)	(24	)%

Service, access and product cost of revenues																			113,038		93,980		19,058			20	%
USF cost of revenues																			14,380		19,431		(5,051		)	(26	)%
Total cost of revenues⁽¹⁾																			127,418		113,411		14,007			12	%
Gross margin	$	150,145	$	152,391	$	(2,246	)	(1	)%	$	446,578	$	450,244	$	(3,666	)	(1	)%	$	170,039	$	166,130	$	3,909		2	%


(1)	Includes customer premise equipment, access, ~~professional services,~~ and shipping and handling.


(2)	Excludes depreciation and amortization of $8,519 and $8,214 for the three ~~and~~ ~~nine~~ months ended ~~September 30, 2017 of $5,053~~ March 31, 2020 and ~~$14,931, respectively and for the three and~~ ~~nine months ended~~ ~~September 30, 2016 of $5,015, and $13,807,~~2019, respectively.



	(in thousands)
Service gross margin increase is primarily due to overall growth in our Business customer base of 3% as compared to the prior year quarter	$	13,801
Access and product gross margin increased due to lower costs providing access services to Business customers during the current quarter	700
Increase in segment gross margin	$	14,501


(1)	Includes customer premise equipment ~~professional services,~~ and shipping and handling.



	(in thousands)
Service gross margin decreased primarily due to a decrease in subscriber lines of 16% resulting in lower gross margin of $11,493 as we have reallocated resources to focus on attracting Business customers. This was offset by a slight increase in average revenue per customer and lower overall costs incurred by the Consumer segment resulting in increased gross margin of $482	$	(11,011	)
Access and product gross margin increased 45% primarily due lower equipment costs associated with sales to customers during the current quarter	419
Decrease in segment gross margin	$	(10,592	)



	(in thousands)
Increase in operating income adjusted for non-cash items primarily due to higher deferred income tax and stock compensation expense	$	17,014
Decrease in working capital driven primarily by timing of accounts receivable collections, payments to acquire customers, and vendor payments	(17,261		)
Decrease in cash provided by operating activities	$	(247	)



	(in thousands)
Increase in payments to acquire and develop software assets	(4,776		)
Decrease in payments related to capital expenditures	2,390
Increase in payments to acquire new patents	(75		)
Increase in cash used in investing activities	$	(2,461	)



	(in thousands)
Increase in borrowings under the 2018 Credit Facility net of repayments	$	6,000
Decrease in payments associated with taxes on share based compensation due to lower vesting in 2020	5,910
Decrease in payments for debt financing costs during the first quarter of 2020	128
Decrease in proceeds received from exercise of stock options due to fewer exercises in 2020	(325		)
Increase in cash used in financing activities	$	11,713




~~31.1~~	10.1		Renewal Agreement, dated February 26, 2020, among Vonage Holdings Corp., Legion Partners Asset Management LLC, and each of the signatories thereto

31.1		Certification of the Company’s Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002(1)~~2002*

31.2			Certification of the Company’s Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of ~~2002(1)~~2002*

32.1			Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002(1)~~2002*

~~101~~	101.INS		~~The following financial statements from Vonage Holdings Corp.’s Quarterly Report on Form 10-Q for~~XBRL Instance Document - the ~~three~~instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

101.SCH		Inline XBRL Taxonomy Extension Schema Document

101.CAL		Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF		Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB		Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE		Inline XBRL Taxonomy Extension Presentation Linkbase Document

104		Cover Page Interactive Data File (formatted as Inline XBRL and ~~nine months ended September 30, 2017, filed with the Securities and Exchange Commission on November 7, 2017, formatted~~contained in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Cash Flows; (v) the Condensed Consolidated Statements of Stockholders’ Deficit; and (vi) the Notes to Condensed Consolidated Financial Statements.Exhibit 101)


*	~~Management contract or compensatory plan or arrangement.~~



		VONAGE HOLDINGS CORP.

Dated:	~~November~~May 7, ~~2017~~2020	By:	/s/ David T. Pearson
			David T. Pearson Chief Financial Officer ~~and Treasurer~~ (Principal Financial Officer and Duly Authorized Officer)




~~31.1~~			~~Certification of the Company’s Chief Executive Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1)~~

~~31.2~~			~~Certification of the Company’s Chief Financial Officer pursuant to Securities Exchange Act Rules 13a-14(a) and 15d-14(a), as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(1)~~

~~32.1~~			~~Certification of the Company’s Chief Executive Officer and Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002(1)~~

~~101~~			The following financial statements from Vonage Holdings Corp.’s Quarterly Report on Form 10-Q for the three and nine months ended September 30, 2017, filed with the Securities and Exchange Commission on November 7, 2017, formatted in XBRL (eXtensible Business Reporting Language): (i) the Condensed Consolidated Balance Sheets; (ii) the Condensed Consolidated Statements of Operations; (iii) the Condensed Consolidated Statements of Comprehensive Income; (iv) the Condensed Consolidated Statements of Cash Flows; (v) the Condensed Consolidated Statements of Stockholders’ Deficit; and (vi) the Notes to Condensed Consolidated Financial Statements.

March 31, 2020

December 31, 2019

Receivables⁽¹⁾

Contract liabilities ⁽²⁾