It's always a nail-biting experience for investors when a company reports its earnings for the first time after an IPO. This was certainly the case with CallWave (NASDAQ:CALL). Unfortunately, the stock plunged 14.67% to $9.19 on the report.

CallWave is a provider of hosted telecommunications services to mainstream consumers and small businesses. Its business model is based on subscriptions, which has proven successful for such firms as (NYSE:CRM).

Think of CallWave's technology as your phone on steroids. For example, you can answer your home phone without being home, screen calls, and use voice-over-IP technologies.

While many telecom companies post losses, CallWave has been consistently profitable since the first quarter of 2002. In the company's latest quarter, CallWave earned $2.9 million, which was up from $2.3 million in the same period a year ago. Revenues during this period increased from $8.7 million to $11 million.

The company also increased it subscriber base by 26,000 to 823,000. Growth has been organic, with the implementation of indirect marketing agreements, such as with Earthlink (NASDAQ:ELNK). The company is also a heavy user of paid-search advertising with Yahoo! (NASDAQ:YHOO) and Google (NASDAQ:GOOG).

In the quarter, CallWave introduced a new local phone number service in a partnership with Level 3 (NASDAQ:LVLT). This has been successful in converting free users to paid users.

While CallWave's market is growing, it is not growing fast enough for investors. However, with the company's recent IPO, it now can use its stock as currency to build its user base with acquisitions. As indicated by yesterday's stock performance, this is something that the company should consider sooner rather than later.

Fool contributor Tom Taulli does not own stocks mentioned in this article.