Vonage Strengthens UCaaS Business Through Agreement to Acquire Simple Signal Inc.

PRESS RELEASE: Vonage Holdings Corp., a leading provider of cloud communications services for consumers and businesses, has entered into a definitive agreement to acquire privately-held Simple Signal Inc., a leading provider of Unified Communications-as-a-Service (UCaaS) and collaboration solutions to small and medium businesses (SMBs), for a purchase price of $25.25 million.

“The acquisition of SimpleSignal deepens Vonage’s penetration in UCaaS and demonstrates our commitment to execute on our organic and inorganic growth strategy in the sector,” said Alan Masarek, Vonage Chief Executive Officer. “SimpleSignal is a natural complement to Vonage’s rapidly expanding UCaaS business. It has a proven track record of providing feature-rich solutions required by larger SMBs, strong channel and strategic partnerships, and a common underlying technology platform. This acquisition further positions Vonage as a clear leader in Unified Communications.”

Complementary Technology Platform

SimpleSignal offers a broad range of voice, video, mobile and app services to address the evolving needs of SMBs, a market Vonage defines as businesses with 1 to 1,000 employees. SimpleSignal uses BroadSoft’s BroadWorks platform to provide the VoIP component of its integrated portfolio of unified communications and managed solutions. This is the same BroadSoft-based platform used by Vonage, resulting in ease of integration for SimpleSignal customers. SimpleSignal customers stand to benefit from being part of Vonage given its national MPLS network supported by 16 POPs, proprietary user-friendly Zeus provisioning and customer management tools, and substantial investment in innovative new products and services.

Strong Channel and Customer Relationships

SimpleSignal sells its solutions primarily through a nationwide network of indirect channel partners. This enhanced channel presence meaningfully broadens Vonage’s already strong market coverage, providing Vonage access to new channel partnerships and geographies, and the ability to further penetrate existing relationships. Combined, Vonage’s channel organization will have significant resources and scale, and will be one of the largest in the UCaaS sector.

SimpleSignal has a strong base of 1,600 customers and additional white label partners. SimpleSignal provides solutions with carrier-grade reliability across their own MPLS network and bring your own broadband (BYOB) delivery options. SimpleSignal has been particularly successful at providing business-quality voice and rich communication features utilizing new technologies to extend MPLS-like quality to BYOB customers.

Transaction Terms, Financing and Anticipated Synergies

Vonage is paying total consideration of $25.25 million for SimpleSignal, comprised of approximately $20 million in cash and approximately 1.1 million shares in Vonage common stock representing $5 million, subject to customary closing adjustments and indemnity escrow arrangements. This purchase price is approximately 1.5 times estimated 2015 SimpleSignal revenues.

The cash component of the transaction will be financed through cash from the balance sheet and from the Company’s credit facility, resulting in pro-forma net debt to adjusted 2014 EBITDA of approximately 1.2 times as of December 31, 2014. This provides the Company ample additional capacity to continue to execute its inorganic growth strategy.

The transaction is expected to close within the next several weeks and requires no regulatory approvals.

Given the similarities of the businesses and their common technology, Vonage expects to achieve synergies from network operations, general and administrative, and the use of technology for serving customers. Annual recurring cost synergies are expected to exceed $1.7 million in 2016.