Font ResizeChief Executive Officer Marc Lefar said the company made some progress in keeping its existing customers, but a pullback in TV advertising led to lower recruitment of new customers.
The company had underestimated, he said, how much traffic the TV advertisements were driving to its Web site and other recruitment channels.
Vonage posted a quarterly loss of $6.9 million, or 4 cents per share, compared with a loss of $23.2 million, or 15 cents per share, in the same period a year ago.
Sales were $228 million, up 11 percent from last year.
Analysts polled by Thomson Financial had expected a loss of 6 cents per share on $227 million in revenue.
The company was a pioneer in Internet telephone service, supplying customers with adapters that let them plug their home phones into their broadband connections.
It added hundreds of thousands of customers per quarter as recently as two years ago, but growth tapered off as Vonage battled patent lawsuits and faced growing competition from similar services provided by cable companies.
The Holmdel, N.J.-based company ended June with 2.6 million subscribers, up from nearly 2.5 million a year before.
Churn, or the percentage of customers leaving each month, was at 3 percent, down from 3.3 percent
The company has been trying to improve customer service, in part by increasing training for its support personnel and introducing new adapters.
"We're pleased with some of the progress we've seen on churn," Lefar said. "We still have a ton of work to do there."
Making its marketing more effective has been another priority for the company, which spends 29 percent of its revenue on advertising.
Shares of Vonage fell 7 cents, more than 5 percent, to $1.26 in afternoon trading.
Citigroup analyst Michael Rollins reiterated a "hold" rating on the stock Thursday, saying an upcoming convertible debt refinancing should provide support. But he remain cautious on the fundamentals of the business.
(This version CORRECTS Corrects Lefar's title. UPDATES stock price.)
