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March 31, 2020

December 31, 2019

Receivables⁽¹⁾

Contract liabilities ⁽²⁾

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Summary of Significant Accounting Policies - Goodwill (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Dec. 31, 2019
- Schedule of Goodwill [Abstract]
Goodwill	$ 591,022	$ 602,970
Goodwill, Foreign Currency Translation Gain (Loss)	$ 11,948

Condensed Consolidated Balance Sheets - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
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
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
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

Condensed Consolidated Statements of Comprehensive (Loss) / Income - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Other comprehensive income (loss):
Net loss	$ (3,755)	$ (534)
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

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Long-Term Debt - Narrative (Details) $ / shares in Units, $ in Thousands	1 Months Ended	3 Months Ended				12 Months Ended
	Jun. 30, 2019 USD ($) $ / shares $ / unit shares	Jun. 30, 2020 USD ($)	Mar. 31, 2020 USD ($) $ / shares	Jun. 30, 2019 USD ($) $ / shares $ / unit	Mar. 31, 2019 USD ($)	Dec. 31, 2019 USD ($)	Jul. 31, 2018 USD ($)	Jul. 31, 2017 USD ($)	Jul. 14, 2017 agreement
Debt Instrument [Line Items]
Principal	$ 300,000		$ 345,000	$ 300,000
Interest rate, stated percentage	1.75%		1.75%	1.75%
Additional principal amount	$ 45,000			$ 45,000
Total net proceeds after deduction				$ 334,800
Converted instrument, amount	$ 1,000
Converted shares issued (in shares) \| shares	59.8256
Debt instrument, conversion price (in dollar per share) \| $ / shares	$ 16.72		$ 16.72	$ 16.72
Derivative, cap price (in dollars per share) \| $ / unit	23.46			23.46
Payments for capped call transactions						$ 28,325
Related income tax benefit	$ 6,772			$ 6,772
Principal payments on notes and revolving credit facility			$ 0		$ 2,500
Proceeds from issuance of long-term debt			45,000		41,500
Derivative, number of instruments held \| agreement									3
Derivative, amount of hedged item								$ 150,000
Derivative, fixed interest rate								4.70%
Derivative Instruments in Hedges, Liabilities, at Fair Value			$ 218
Derivative Instruments in Hedges, Assets, at Fair Value						$ 18
2018 Credit Facility
Debt Instrument [Line Items]
Line of credit facility, interest rate at period end			3.71%
2018 Credit Facility \| Term note \| Secured debt
Debt Instrument [Line Items]
Principal							$ 100,000
Principal payments on notes and revolving credit facility					2,500
2018 Credit Facility \| Revolving credit facility \| Line of credit
Debt Instrument [Line Items]
Line of credit, maximum borrowing capacity							$ 500,000
Proceeds from issuance of long-term debt			$ 45,000		$ 41,500
Subsequent Event [Member] \| 2018 Credit Facility \| Revolving credit facility \| Line of credit
Debt Instrument [Line Items]
Proceeds from issuance of long-term debt		$ 30,000

Condensed Consolidated Statement of Stockholders' Equity - USD ($) $ in Thousands	Total	Common Stock	Additional Paid-in Capital	Accumulated Deficit	Treasury Stock	Accumulated Other Comprehensive Income
Beginning Balance at Dec. 31, 2018	$ 535,768	$ 310	$ 1,415,682	$ (611,985)	$ (275,009)	$ 6,770
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock option exercises	480	4	476
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 (loss) gain on derivatives	(687)					(687)
Net loss	(534)			(534)
Ending Balance at Mar. 31, 2019	530,142	314	1,424,173	(612,061)	(293,575)	11,291
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Cumulative effect adjustment upon the adoption of new accounting standards	458
Cumulative effect adjustment upon the adoption of new accounting standards \| Accounting Standards Update 2016-02				458
Beginning Balance at Dec. 31, 2019	567,062	316	1,494,469	(631,009)	(306,043)	9,329
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Stock option exercises	155	4	151
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) gain on derivatives	(418)					(418)
Net loss	(3,755)			(3,755)
Ending Balance at Mar. 31, 2020	$ 538,713	$ 320	$ 1,506,664	$ (634,764)	$ (318,791)	$ (14,716)

Long-Term Debt - Schedule of Net Carrying Amount of Liability Component of Notes (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019	Jun. 30, 2019
Debt Disclosure [Abstract]
Principal	$ 345,000		$ 300,000
Unamortized discount	(58,180)
Unamortized issuance cost	(6,709)	$ (7,108)
Net carrying amount	$ 280,111

Leases - Leases

3 Months Ended

Mar. 31, 2020

Leases [Abstract]

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

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.

Leases - Supplemental Cash Flow - Operating Leases (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Leases [Abstract]
Cash paid for amounts included in the measurement of lease liabilities	$ 4,139
Right-of-use assets obtained in exchange for operating lease liability	$ 1,261

- Long-Term Debt (Tables)

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Schedule of Long-Term Debt

The following table summarizes the Company's long-term debt as of March 31, 2020 and December 31, 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

Schedule of Net Carrying Amount of Liability and Equity Components of Notes

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

Schedule of Interest Expense Recognized Related to Notes

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



	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

Accumulated OCI Balance Attributable to Cash Flow Derivatives

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

- Definition

Tabular disclosure of long-debt instruments or arrangements, including identification, terms, features, collateral requirements and other information necessary to a fair presentation. These are debt arrangements that originally required repayment more than twelve months after issuance or greater than the normal operating cycle of the entity, if longer.

+ References

Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 210
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.5-02.22)
-URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682

Reference 2: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 1A
-URI http://asc.fasb.org/extlink&oid=114775744&loc=d3e28541-108399

Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 6
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21506-112644

Reference 4: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 235
-SubTopic 10
-Section S99
-Paragraph 1
-Subparagraph (SX 210.4-08.(e),(f))
-URI http://asc.fasb.org/extlink&oid=26873400&loc=d3e23780-122690

Reference 5: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 45
-Paragraph 2
-URI http://asc.fasb.org/extlink&oid=114775744&loc=d3e28551-108399

Reference 6: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
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-Section 50
-Paragraph 7
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21521-112644

Reference 7: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
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-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21538-112644

Reference 8: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 942
-SubTopic 470
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=75038535&loc=d3e64711-112823

Reference 9: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 835
-SubTopic 30
-Section 55
-Paragraph 8
-URI http://asc.fasb.org/extlink&oid=114775985&loc=d3e28878-108400

Reference 10: http://fasb.org/us-gaap/role/ref/legacyRef
-Publisher FASB
-Name Accounting Standards Codification
-Topic 505
-SubTopic 10
-Section 50
-Paragraph 3
-URI http://asc.fasb.org/extlink&oid=109259400&loc=d3e21475-112644

+ Details

Income Taxes - Effective Tax Rate (Details) - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Income Tax Disclosure [Abstract]
Loss before income taxes	$ (4,005)	$ (10,584)
Income tax benefit	$ 250	$ 10,050
Effective tax rate	6.20%	95.00%

Incomes Taxes (Tables)

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

Schedule of Effective Income Tax Rate Reconciliation

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		%

Schedule of Unrecognized Tax Benefits Roll Forward

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

Long-Term Debt - Schedule of Interest Expense Recognized Related to Notes (Details) $ in Thousands	3 Months Ended
	Mar. 31, 2020 USD ($)
Debt Disclosure [Abstract]
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

Leases - Narratives (Details) - USD ($)	3 Months Ended
Leases - Narratives (Details) - USD ($)	Mar. 31, 2020	Mar. 31, 2019
Leases [Abstract]
Modificationofoperatingleaseliability	$ 15,825
Operating lease, expense	2,965,000	$ 3,941,000
Operating Leases, Income Statement, Sublease Revenue	$ 319	$ 266
Operating lease, weighted average remaining lease term	4 years 1 month 6 days
Operating lease, discount rate	5.04%

Common Stock Schedule of Stock by Class (Details) - shares shares in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Outstanding, Balance at beginning of period (in shares)	242,849	239,743
Shares issued under the 2015 Equity Incentive Plan (in shares)	4,072	4,497
Employee taxes paid on withholding shares (in shares)	(1,675)	(1,864)
Outstanding, Balance at end of period (in shares)	245,246	242,376
Common Stock Issued
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Issued, Balance at beginning of period (in shares)	315,808	309,736
Shares issued under the 2015 Equity Incentive Plan (in shares)	4,072	4,497
Employee taxes paid on withholding shares (in shares)	0	0
Issued, Balance at end of period (in shares)	319,880	314,233
Treasury Stock
Increase (Decrease) in Stockholders' Equity [Roll Forward]
Treasury, Balance at beginning of period (in shares)	72,959	69,993
Shares issued under the 2015 Equity Incentive Plan (in shares)	0	0
Employee taxes paid on withholding shares (in shares)	(1,675)	(1,864)
Treasury, Balance at end of period (in shares)	74,634	71,857

Income Taxes - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended
Income Taxes - Narrative (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Mar. 31, 2019	Dec. 31, 2019	Dec. 31, 2018
Operating Loss Carryforwards [Line Items]
Discrete period tax benefit	$ 2,115	$ 4,749
Uncertain tax position	714		$ 914	$ 1,107
Incurred penalties and interest expense		$ 0
Domestic Tax Authority
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	509,313
State and Local Jurisdiction
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	237,667
Foreign Tax Authority \| Her Majesty's Revenue and Customs (HMRC)
Operating Loss Carryforwards [Line Items]
Operating loss carryforwards	$ 165,104

Industry Segment and Geographic Information

3 Months Ended

Mar. 31, 2020

Segment Reporting [Abstract]

Industry Segment and Geographic Information

ASC 280, 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, our Applications Group provides innovative, cloud-based UCaaS and CCaaS solutions, comprised of integrated voice, text, video, data, collaboration, and mobile applications over our flexible, scalable SIP based VoIP network. The API Platform Group also 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 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 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 and messaging services and other features around the world on a variety of devices.

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,

Access and product revenues. Product revenues include equipment sold to customers, shipping and handling, professional services, and broadband 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 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.

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, 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 USF and related fees.

Information about our segment results for the three and three months ended March 31, 2020 were as follows:



	Three Months Ended
	March 31, 2020
	Business			Consumer			Total
Revenues
Service revenues	$	195,649		$	77,243		$	272,892
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	4,482			9,898			14,380
Total revenues	210,253			87,204			297,457

Cost of revenues
Service cost of revenues⁽²⁾	92,357			8,512			100,869
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	4,482			9,898			14,380
Total cost of revenues	108,435			18,983			127,418

Segment gross margin
Service margin	103,292			68,731			172,023
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	$	101,818		$	68,221		$	170,039

Segment gross margin %
Service margin %	52.8		%	89.0		%	63.0		%
Gross margin excluding USF (Service, access and product margin %)	49.5		%	88.2		%	60.1		%
Segment gross margin %	48.4		%	78.2		%	57.2		%

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

(2) Excludes depreciation and amortization of $8,519 and $1,090 for the three months ended March 31, 2020, respectively.

Information about our segment results for the three and three months ended March 31, 2019 were as follows:



	Three Months Ended
	March 31, 2019
	Business			Consumer			Total
Revenues
Service revenues	$	159,345		$	89,000		$	248,345
Access and product revenues ⁽¹⁾	11,697			68			11,765
Service, access and product revenues excluding USF	171,042			89,068			260,110
USF revenues	8,555			10,876			19,431
Total revenues	179,597			99,944			279,541

Cost of revenues
Service cost of revenues⁽²⁾	69,854			9,258			79,112
Access and product cost of revenues ⁽¹⁾	13,871			997			14,868
Service, access and product cost of revenues excluding USF	83,725			10,255			93,980
USF cost of revenues	8,555			10,876			19,431
Total cost of revenues	92,280			21,131			113,411

Segment gross margin
Service margin	89,491			79,742			169,233
Access and product margin	(2,174		)	(929		)	(3,103		)
Gross margin excluding USF (Service, access and product margin)	87,317			78,813			166,130
USF margin	—			—			—
Segment gross margin	$	87,317		$	78,813		$	166,130

Segment gross margin %
Service margin %	56.2		%	89.6		%	68.1		%
Gross margin excluding USF (Service, access and product margin %)	51.1		%	88.5		%	63.9		%
Segment gross margin %	48.6		%	78.9		%	59.4		%

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

(2) Excludes depreciation and amortization of $8,214 and $1,204 for the three months ended March 31, 2019, respectively.

A reconciliation of the total of the reportable segments' gross margin to consolidated income before income taxes is as follows:



	Three Months Ended
	March 31,
	2020			2019
Total reportable gross margin	$	170,039		$	166,130
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
Income (Loss) from operations	3,848			(2,592		)

Interest expense	(8,082		)	(7,576		)
Other income (expense), net	229			(416		)
Loss before income tax benefit	$	(4,005	)	$	(10,584	)

Information about our operations by geographic location is as follows:



	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

Long-Term Debt - Schedule of Long-Term Debt (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Debt Instrument [Line Items]
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

- Definition

The carrying value as of the balance sheet date of the noncurrent portion of long-term obligations drawn from a line of credit, which is a bank's commitment to make loans up to a specific amount. Examples of items that might be included in the application of this element may consist of letters of credit, standby letters of credit, and revolving credit arrangements, under which borrowings can be made up to a maximum amount as of any point in time conditional on satisfaction of specified terms before, as of and after the date of drawdowns on the line. Includes short-term obligations that would normally be classified as current liabilities but for which (a) postbalance sheet date issuance of a long term obligation to refinance the short term obligation on a long term basis, or (b) the enterprise has entered into a financing agreement that clearly permits the enterprise to refinance the short-term obligation on a long term basis and the following conditions are met (1) the agreement does not expire within 1 year and is not cancelable by the lender except for violation of an objectively determinable provision, (2) no violation exists at the BS date, and (3) the lender has entered into the financing agreement is expected to be financially capable of honoring the agreement.

+ References + Details

Incomes Taxes

3 Months Ended

Mar. 31, 2020

Income Tax Disclosure [Abstract]

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 not 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.

Revenue Recognition (Tables)

3 Months Ended

Mar. 31, 2020

Revenue from Contract with Customer [Abstract]

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

Contract with Customer, Asset and Liability

The following table provides information about receivables and contract liabilities from contracts with customers:

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

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

Long-Term Debt

3 Months Ended

Mar. 31, 2020

Debt Disclosure [Abstract]

Long-Term Debt

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

The following table summarizes the Company's long-term debt as of March 31, 2020 and December 31, 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

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



	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 July 31, 2018, the Company entered into the 2018 Credit Facility consisting of a $100 million senior secured term loan and a $500 million revolving credit facility. The co-borrowers under the 2018 Credit Facility are the Company and Vonage America Inc., the Company’s wholly owned subsidiary. Obligations under the 2018 Credit Facility are guaranteed, fully and unconditionally, by the Company’s other United States subsidiaries and are secured by substantially all of the assets of each borrower and each guarantor.

During the three months ended March 31, 2020, we borrowed $45 million under the revolving credit facility. In addition, the effective interest rate was 3.71% as of 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 Swaps

On July 14, 2017, we executed on three interest rate swap agreements in order to hedge the variability of expected future cash interest payments. The swaps have an aggregate notional amount of $150 million and were effective from July 31, 2017 through June 3, 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.

As of March 31, 2020 and December 31, 2019, the fair market value of the swaps was a liability of $218 and an asset of $18, respectively, which is included in other assets on our condensed consolidated balance sheet. 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

Leases - Lessee, Operating Lease, Liability, Maturity (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Leases [Abstract]
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

Revenue Recognition - Narrative (Details) - USD ($) $ in Thousands	3 Months Ended		12 Months Ended
	Mar. 31, 2020	Mar. 31, 2019	Mar. 31, 2021	Dec. 31, 2019
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Total revenues	$ 297,457	$ 279,541
Recognized revenue, contract liabilities	108,875	100,434
Amortization of deferred customer acquisition costs	3,661	2,530
Scenario, Forecast
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Recognized revenue, contract liabilities			$ 61,022
Subscription services
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Total revenues	156,455	162,546
Usage
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Total revenues	93,047	67,847
USF and others
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Total revenues	47,955	49,148
Current and Non-Current Portion
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Customer acquisition cost	73,862			$ 68,982
Business
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Total revenues	$ 210,253	$ 179,597
Typical life of a customer	7 years
Maximum
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, Performance Obligation, Description of Timing	3
Minimum
Revenue, Initial Application Period Cumulative Effect Transition [Line Items]
Revenue, Performance Obligation, Description of Timing	1

Summary of Significant Accounting Policies - Accrued Expenses (Details) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Accounting Policies [Abstract]
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

Earnings Per Share - Schedule of Earnings Per Share Basic and Diluted (Details) - USD ($) $ / shares in Units, shares in Thousands, $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 2019
Numerator
Net loss	$ (3,755)	$ (534)
Denominator
Basic and Diluted (in shares)	243,627	240,527
Basic and diluted loss per share
Basic and Diluted	$ (0.02)	$ 0

- Definition

The portion of profit or loss for the period, net of income taxes, which is attributable to the parent.

+ References + Details

Cover Page - shares	3 Months Ended
Cover Page - shares	Mar. 31, 2020	May 01, 2020
Cover [Abstract]
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Mar. 31, 2020
Document Transition Report	false
Entity File Number	001-32887
Entity Registrant Name	VONAGE HOLDINGS CORP
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	11-3547680
Entity Address, Address Line One	23 Main Street
Entity Address, City or Town	Holmdel
Entity Address, State or Province	NJ
Entity Address, Postal Zip Code	07733
City Area Code	732
Local Phone Number	528-2600
Title of 12(b) Security	Common Stock, par value $0.001
Trading Symbol	VG
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Large Accelerated Filer
Entity Small Business	false
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		245,368,168
Amendment Flag	false
Entity Central Index Key	0001272830
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2020
Document Fiscal Period Focus	Q1

Summary of Significant Accounting Policies - Fair Value of Financial Instruments (Details) $ in Thousands	Dec. 31, 2019 USD ($)
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Derivative Instruments in Hedges, Assets, at Fair Value	$ 18

Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2020

Accounting Policies [Abstract]

Restrictions on Cash and Cash Equivalents

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

Schedule of Finite-Lived Intangible Assets

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

Schedule of Accrued Liabilities

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

Schedule of Goodwill

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

Condensed Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Mar. 31, 2020	Dec. 31, 2019
Statement of Financial Position [Abstract]
Accounts receivable, allowance	$ 6,736	$ 5,494
Inventory, allowance	73	76
PP&E, accumulated amortization	111,169	109,646
Software, accumulated amortization	103,067	102,133
Intangible assets, accumulated amortization	$ 233,079	$ 221,182
Common stock, par value (usd per share)	$ 0.001	$ 0.001
Common stock, shares authorized (in shares)	596,950,000	596,950,000

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	3 Months Ended
	Mar. 31, 2020	Mar. 31, 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)
Increase (Decrease) in Other Operating Assets	(669)	(3,022)
Increase (Decrease) in Other Operating Assets and Liabilities, Net	(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)
Payments to Acquire Intangible Assets	75	0
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	0	(2,500)
Proceeds from issuance of long-term debt	45,000	41,500
Payments of debt issuance costs	0	(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
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