Ooma Q1 2026 Earnings Report

Ooma EPS Results

• Actual EPS: N/A
• Consensus EPS: $0.18
• Beat/Miss: N/A
• One Year Ago EPS: N/A

Ooma Revenue Results

• Actual Revenue: N/A
• Expected Revenue: $64.82 million
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

Ooma Announcement Details

• Quarter: Q1 2026
• Date: 5/28/2025
• Time: After Market Closes
• Conference Call Date: Wednesday, May 28, 2025
• Conference Call Time: 5:00PM ET

Ooma (NYSE:OOMA) provides communications services and related technologies for businesses and consumers in the United States and Canada. The company's products and services include Ooma Office, a cloud-based multi-user communications system for small and medium-sized businesses; Ooma Connect, which delivers fixed wireless internet connectivity; and Ooma Enterprise, a unified-communications-as-a-service (UCaaS) solution. It also provides Ooma AirDial, a plain old telephone service; PureVoice HD, a residential phone services; Ooma basic that provides unlimited personal calling within the United States; and Ooma Premier, a suite of advanced calling features on a monthly or annual subscription basis. In addition, the company offers Ooma Telo, a home communications solution designed to serve as the primary phone line in the home; Ooma Telo Air, a wireless Ooma Telo with built-in Wi-Fi and Bluetooth; and Ooma Telo LTE, which combines the Ooma Telo base station with the Ooma LTE Adapter and battery back-up. Further, it provides Ooma Mobile HD app that allows users to make and receive phone calls and access Ooma features and settings; 2600Hz provides business communication applications; Talkatone mobile app; and OnSIP, an UCaaS solutions. The company offers its products through direct sales, distributors, retailers, and resellers, as well as online and sale representatives. Ooma, Inc. was incorporated in 2003 and is headquartered in Sunnyvale, California.

Ooma Q1 2026 Earnings Call Transcript

Key Takeaways

• For Q1 FY26, Ooma reported $65.0 M revenue (up 4% YoY), $5.6 M non-GAAP net income and $6.7 M adjusted EBITDA, both exceeding guidance.
• Ooma AirDial launched with Comcast on schedule, bringing the total to over 30 reseller partners and contributing to multiple large deals in the sales funnel.
• Ooma Office saw improved momentum with more new account wins, a record 61% take rate for premium tiers, and Ooma Enterprise now serves over 500 hotels across North America.
• Core users declined sequentially by 9,000 to 1.225 M, driven by anticipated seat reductions at largest customer Regis.
• Management reaffirmed Q2 revenue guidance of $65.5 M–$66.1 M and FY26 revenue guidance of $267 M–$270 M, while raising the low end of non-GAAP net income to $22.5 M.

Presentation

[Operator]

Good day, and thank you for standing by. Welcome to the Yuma Inc. First Quarter Fiscal Year twenty twenty six Financial Results Conference Call. At this time, all participants are in a listen only mode. After the speakers' presentation, there will be a question and answer session.

[Operator]

Please be advised that today's conference is being recorded. I would now like to turn the conference over to Matt Robison. Please go ahead.

[Matt Robison, Director of IR and Corporate Development at Ooma]

Thanks, Lisa. Good day, everyone, and welcome to the Fiscal First Quarter twenty twenty six Earnings Call of Ooma, Inc. My name is Matt Robison, Ooma's Director of IR and Corporate Development. On the call with me today are Ooma's CEO, Eric Stang and CFO, Sheik Hamamatsu. After the market closed today, Ooma issued its fiscal first quarter twenty twenty six earnings press release.

[Matt Robison, Director of IR and Corporate Development at Ooma]

This release is also available on the company's website, Ooma.com. This call is being webcast live and is accessible from a link on the Events and Presentations page of the Investor Relations section of our website. This link will be active for replay of this call for one year. During today's presentation, our executives will make forward looking statements within the meaning of the federal securities laws. Forward looking statements generally relate to future events or future financial or operating performance.

[Matt Robison, Director of IR and Corporate Development at Ooma]

Our expectations and beliefs regarding these matters may not materialize, and actual results are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today and those risks more fully described in our filings with the Securities and Exchange Commission. The forward looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward looking statements except as required by law. Please note that other than revenue or as otherwise stated, the financial measures to be disclosed on this call will be on a non GAAP basis. The non GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

[Matt Robison, Director of IR and Corporate Development at Ooma]

A discussion of why we present non GAAP financial measures and a reconciliation of the non GAAP financial measures discussed on this call to the most directly comparable GAAP financial measures is included in our earnings press release, which is available on our website. On this call, we will give guidance for second quarter and full year fiscal twenty twenty six on a non GAAP basis. Also, addition to our press release and eight ks filing, the Overview page and Events and Presentations page in the Investor Relations section of our website, as well as the Quarterly Results page of the Financial Information section of our website include links to information about costs and expenses not included in our non GAAP values and key metrics of our core subscription businesses. These are titled Supplemental Financial Disclosure one and Supplemental Financial Disclosure two. Additionally, our investor presentation slides include GAAP to non GAAP reconciliation that also provides a resolution of GAAP expenses that are excluded from non GAAP metrics.

[Matt Robison, Director of IR and Corporate Development at Ooma]

Now I will hand the call over to Ooma's CEO, Eric Stang.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Thank you, Matt. Hi, everyone. Welcome to Ooma's first quarter fiscal year twenty twenty six earnings call. Thank you for joining us. We're pleased to report solid Q1 financial results and share with you the strong start we are making to this fiscal year.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

For our first quarter of FY twenty twenty six, we achieved $65,000,000 of revenue, 5,600,000.0 of non GAAP net income and $6,700,000 of adjusted EBITDA. We're particularly pleased that our net income and adjusted EBITDA exceeded the top end of our range and we were off to a good start toward driving higher profitability this year. Our revenue growth was 4% year over year, which was near the high end of our guidance range as we build momentum this year, particularly for Airdial growth. I'm pleased to say we made particularly great progress on Airdial in Q1 and are optimistic about our outlook, which I will touch on in a few moments. As you know, we focus on four market segments, cloud communications specifically designed for smaller sized businesses, POTS replacement for both business and residential customers, wholesale platform services and residential telephony.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

We believe we're a leader in each of these segments. Our cloud communications solutions performed well in Q1, though our overall results were dampened a little by some expected rightsizing at our largest customer Regis. Regis remains a very important customer and I'm pleased to report that the rightsizing of their business, which we announced starting two quarters ago, is now fully behind us. Both Ooma Office and Ooma Enterprise performed well in Q1, especially in certain verticals we target. Sequentially versus Q4, Ooma Office expanded the number of new account wins and users.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Success in verticals such as dental and medical, insurance and financial services, and legal helped drive this, as did an expanding number of larger sized account wins as we enhance Ooma Office's features to serve larger customers. Along with this, 61% of new Office users in Q1 opted for a premium service tier, which may be our highest ever. Regarding Ooma Enterprise, you recall that hospitality and hotels is one of our key verticals. Our steady progress in this vertical is paying off, and I'm pleased to report that we now serve more than 500 hotels across North America. Switching now to Ooma AirDial, our business POTS replacement solution.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

I have several pieces of good news to share. First, you'll recall that we announced a quarter ago that a major cable company will be reselling Airdial, and we hoped to launch with them in Q1 of this year. I'm very pleased to share with you today that this partner of ours is Comcast, and they launched Airdial on schedule. As I'm sure you can appreciate, their reach is extensive, both with the largest companies in The United States and government entities as well. We are already engaged with them on some very large deals and are still just getting started.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

In addition, we have an expanding number of large deals in the sales funnel with our other resale partners as well and achieved some notable new customer wins in Q1, which we believe will expand in scope as these customers implement Airdial in stages over time. Indicative of the Airdial momentum we see, we signed up several new Airdial reseller partners in Q1, our most ever in a single quarter. Some of these new reseller partners are CLEC's, some are what you might call aggregators, and one is an end equipment provider and servicer. With these wins, we now exceed 30 reseller partners for Airdial, which we believe is significant. Finally, you'll recall I mentioned last quarter that Marriott certified Airdial for use at its properties.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

I can report that this relationship is underway and we now have more than 100 Marriott properties in our sales pipeline. Our wholesale platform services sold as 2,600 Hertz also accelerated in Q1. I'm pleased to report we closed four new customers, which is our most ever in one quarter. These customers are relatively small in size and will take time to implement, but I think they are great validation for our platform. We know these customers looked at other solutions before choosing Ooma two thousand six hundred Hertz.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

One customer is more of a CPaaS type opportunity, much like our large customer win last year, ServiceTitan. As you know, we are excited that our platform offers the APIs and other requirements to win these CPaaS type opportunities as well as replace BroadSoft and Metaswitch in use by carriers and other UCaaS providers. So overall, I believe we made solid progress in Q1 and are off to a good start for fiscal twenty twenty six. I'll now turn the call over to Shig, our CFO, to discuss our results and outlook in more detail and then return with some closing remarks.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

Thank you, Eric, and good afternoon, everyone. I'm going to review our first quarter financial results and then provide our outlook for the second quarter and full year fiscal twenty twenty six. Our first quarter revenue was $65,000,000 at the higher end of our guidance range and was up 4% year over year, driven by the growth of Ooma Business, including AirDial. In Q1, business subscription and services revenue accounted for 62% of total subscription and services revenue as compared to 60% in the prior year quarter. QM product and other revenue came in at $4,800,000 as compared to $4,100,000 in the prior year quarter.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

The year over year growth in product revenue was driven by growth in air dial installations. On the profitability front, Q1 non GAAP net income was $5,600,000 above our guidance range and grew 56% over the prior year quarter. Now some details on our Q1 revenue. Business subscription and services revenue grew 6% year over year in Q1, driven by user growth and ARPU growth. On the residential side, subscription and services revenue was down 2% year over year.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

For the first quarter, total subscription and services revenue was $60,300,000 or 93% of total revenue as compared to $58,400,000 or 93% of total revenue in the prior year quarter. Now some details on our key customer metrics. We ended our first quarter with 1,225,000 core users, which is down from 1,234,000 core users at the end of the fourth quarter. The sequential decline in total core users was primarily due to the seat reductions with IWG, which was anticipated going into Q1. At the end of the first quarter, we had 499,000 business users or 41% of total core users.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

Our blended average monthly subscription and services revenue per core user or ARPU increased 4% year over year to $15.37 driven by an increase in mix of business users, including higher ARPU, Office Pro and Pro Plus users. During the first quarter, we continued to see a healthy Office Pro and Pro Plus take rate with 61% of new Office users opt in for these higher tier services, which was up from 57% in the prior year quarter. Overall, 36 of Ooma Office users have now subscribed to these higher tier services. Our annual exit recurring revenue was $234,000,000 up 33% year over year. Our net dollar subscription retention rate for the quarter was 99% as compared to 98% in the fourth quarter.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

Now some details on our gross margin. Our subscription and services gross margin for the first quarter was 72% as compared to 72% in the prior year. Product and other gross margin for the first quarter was negative 41% as compared to negative 67% for the same period last year. The year over year improvement in product and other gross margin was primarily due to a fully consuming higher cost components we had acquired during the pandemic in the first half of the last fiscal year. On an overall basis, the total gross margin for Q1 was 63% as compared to 63% in the prior quarter.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

The flat overall gross margin year over year reflects a heavier mix of product revenue in Q1 this year versus prior year due to an increase in add on installations, which offsets an improvement in product gross margin. And now some details on our operating expenses. Total operating expenses for the first quarter were $35,400,000 up $200,000 or 1% from the same period last year. Sales and marketing expenses for the first quarter were $18,300,000 or 28% of total revenue, up 3% year over year, primarily driven by higher marketing and channel development activity for Airdial N2600Hz. Research and development expenses were $11,300,000 or 17% of total revenue, down 6% on a year over year basis, primarily driven by headcount management as we continue to focus on R and D efficiency and operating leverage.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

G and A expenses were $5,800,000 or 9% of total revenue for the first quarter compared to $5,500,000 for the prior year quarter. The year over year increase in G and A expenses was primarily due to an increase in personnel related costs. Non GAAP net income for the first quarter was $5,600,000 or diluted earnings per share of $0.20 as compared to $0.14 in the prior year quarter. Adjusted EBITDA for the quarter was $6,700,000 or 10.3% of total revenue and grew 33% over the prior year quarter. We ended the quarter with total cash and investments of $19,000,000 In Q1, we generated $3,700,000 of operating cash flow and $2,500,000 of free cash flow.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

As a reminder, we have a seasonally lower cash flow quarter in Q1 due to the timing of an annual employee bonus payout. On a trailing twelve months basis, we generated $26,700,000 of operating cash flow and $20,500,000 of free cash flow. With strong free cash flow generation, we spent a total of $11,800,000 over the last four quarters, including $3,700,000 in Q1 to buy back stock through a combination of open market repurchase and RSU net share settlement. On the headcount front, we ended our quarter with eleven thirty two employees and contractors. Now I'll provide guidance for the second quarter and full fiscal year 2026.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

Our guidance is on a non GAAP basis and has been adjusted for expenses such as stock based compensation and amortization of intangibles. We expect total revenue for the second quarter of fiscal twenty twenty six to be in the range of $65,500,000 to $66,100,000 which includes $4,800,000 to $5,200,000 of product revenue. We expect the second quarter net income to be in the range of $5,600,000 to $5,900,000 Non GAAP diluted EPS is expected to be between $0.2 to $0.21 We have assumed 28,200,000.0 weighted average diluted shares outstanding for the second quarter. For full fiscal year 2026, we are reaffirming our prior revenue guidance and expect total revenue to be in the range of $267,000,000 to $270,000,000 The full year fiscal twenty twenty six revenue guidance assumes business subscription and services revenue growth rate of 5% to 6% over fiscal 'twenty five, while residential subscription revenue to decline 1% to 2%. In terms of revenue mix for the year, we expect 91% to 92% of total revenue to come from subscription and services revenue and the remainder from products and other revenue.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

In terms of full year non GAAP net income guidance, we are raising the low end of the guidance range and now expect it to be in the range of $22,500,000 to $23,500,000 Updated non GAAP net income guidance for fiscal twenty six includes the impact of approximately $500,000 of tariffs, which is our current best estimate. Based on this guidance range, we estimate our adjusted EBITDA for fiscal twenty twenty six to be $28,000,000 to $29,000,000 We expect non GAAP diluted EPS for fiscal twenty twenty six to be in the range of $0.79 to $0.83 We have assumed approximately 28,400,000.0 weighted average diluted shares outstanding for fiscal twenty twenty six. In summary, we are pleased with a solid start to our fiscal twenty twenty six with a strong year over year growth in adjusted EBITDA along with robust free cash flow over $20,000,000 for the past twelve months. We're excited about growth opportunities in front of us and remain focused on executing to our long term strategy to achieve profitable growth. I'll now pass it back to Eric for some closing remarks.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

Eric?

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Thank you, Shig. As Shig said, we now have a solid Q1 behind us. And more importantly, we increased momentum and added new partners in multiple parts of our business to support our plans this year. We've made significant investments to develop leading solutions in each of our four target segments and are executing well to capitalize on the significant opportunities in front of us. We look forward to sharing our progress in future quarters.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Thank you. We will now take your questions.

[Operator]

Thank you. As a reminder, if you would like to ask a question, please press 11 on your telephone. You'll hear an automated message advising your hand is raised. Also ask that you please wait for your name and company to be announced before proceeding with your question. One moment.

[Operator]

The first question that we have today is coming from Alinda Lee from William Blair. Your line is open.

[Alinda Li, Equity Research Associate at William Blair]

Perfect, thank you. What contributed to the 1% increase in NRR this quarter? And can we expect NRR to stay at around 99 or above going forward with IWG fully realized with their seat terms?

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

Yes. So, retention rate improvement was largely due to the improvement in non Regis subscription revenue. So we're talking about traditional UCaaS solutions offerings and the residential solutions. In Q1, we saw the improvement in the retention rate for the other businesses, which offset the anticipated decline that came through for Regis. So that's really what happened.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

And overall, I think we will we should be remaining 99%, which we have been at prior to Regis churn that we experienced in the last couple of quarters.

[Alinda Li, Equity Research Associate at William Blair]

Perfect. That's helpful. And what are you seeing in the demand what did you see in the demand environment And what are you seeing in the recent months as well?

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

I'm sorry, demand in what?

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

Environment.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Oh, in the demand environment. Would almost say steady as she goes. We haven't seen it improve or deteriorate to any noticeable degree. Yeah, I mean that's really the best I can say about it. That answer is mainly from a UCaaS, Ooma Office, Ooma Enterprise perspective.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

The demand environment for Ooma AirDial is accelerating. There's no question about that. More and more companies are realizing they need to do something, prices continue to go up. And so we're seeing much more interest and willingness to act on that front than perhaps a year ago.

[Alinda Li, Equity Research Associate at William Blair]

That's helpful, thank you.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Thank you.

[Operator]

Thank you. One moment for the next question. And the next question will be coming from the line of Brian Kinstlinger of Alliance Global Partners. Your line is open.

[Brian Kinstlinger, MD, Director of Research & Head of Technology Research at Alliance Global Partners]

Great. Thanks so much. Two questions for me. It's great to hear all the details around AirDial. You mentioned just now demand is accelerating.

[Brian Kinstlinger, MD, Director of Research & Head of Technology Research at Alliance Global Partners]

The fiscal twenty twenty six outlook is unchanged. So I'm curious, is there any change to visibility on when you think adoption will begin to ramp in terms of revenue dollars and in terms of larger scale implementations?

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Yeah. We are, I kind of put it in my script, we have opportunities before us that are greater in size than we've won in the past, and we're excited about them. And I think they're moving along well. So that gives us some perspective on Outlook. Our relationship with Comcast is still very early days.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

And it will be rolling out within Comcast across their sales teams over the rest of this year in a way. And it does take time with larger accounts to move through the sales cycle. So we're optimistic that the early opportunities we're seeing bode well for what we're going to continue to see growing through the rest of this year.

[Brian Kinstlinger, MD, Director of Research & Head of Technology Research at Alliance Global Partners]

Okay. My second question is, you mentioned tariffs in your business, which is relatively small. But tariffs have certainly had a disproportionate impact on SMBs in the short term. What's the impact on this on your subscriber base, as well as the sales cycle for new logos in your UCaaS business?

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Yes, I think that's something we all wonder about, but I can't point to any effect on our customer base or sales opportunity driven from tariffs today. Maybe some of the pauses in tariffs have contributed to that, but we don't we're not hearing from our customer base that because of tariffs they're going to do something differently. And so, said in my script that sequentially versus Q4, we had a nice uptick in number of accounts and users that we won in Q1. Q1 is typically a stronger quarter than Q4, but still, you look at it versus a year ago, it was also strong. So no evidence of that being an issue at this time.

[Brian Kinstlinger, MD, Director of Research & Head of Technology Research at Alliance Global Partners]

Okay, thanks.

[Operator]

Thank you. One moment for the next question. And the next question is coming from the line of Eric Martinuzzi from Lake Street Capital Markets. Your line is open.

[Eric Martinuzzi, Senior Research Analyst at Lake Street Capital]

Yeah, I wanted to congratulate you on the profit outperformance. It looks to be in the operating expense items that you're getting good productivity there. And given the guidance, I'm assuming that productivity persists. Is there anything that we should be anticipating in the out quarters as far as areas maybe that you'll be investing in? Obviously, the R and D is down here, but anything puts and takes between the three buckets between sales, R and D, and G and A?

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Yeah. Hi, Eric. Happy to go into that. I make two observations. One is within the bucket of sales and marketing, which runs 27%, twenty eight % of revenue, we are making a slow and steady shift towards air dial and to some degree towards 2,600 Hertz versus the other two segments we serve.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Not enough to really call out a fundamental change, but still rather than grow the sales and marketing spend, we are allocating where we see our biggest and most significant opportunities. Now R and D running at 17% last quarter is still quite a sizable amount of spend. Spend close to $50,000,000 a year on R and D in the company. And we do have several significant feature enhancements that we're driving towards this year. And they kind of differ by segment.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

But in a nutshell with Ooma Office, we're bringing out more advanced capabilities that make Office appeal to a little bit larger sized businesses and that expands our TAM and we've seen some success with that. We have customers now up to 300, four hundred users. One of our office customers is over 600 users. So we like that trend. Airdial is in pretty good feature shape, but we continue to make remote device management and the way customers can monitor and operate the device more effective, well not effective, more extensive.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

And that is well liked by our customers and a source of differentiation among many for Airdial. And on 2,600 Hertz, we are still in the process of bringing all of the Ooma IP and applications onto that platform, which will appeal to new customers who want a more turnkey solution. And that's going to be a long term project through this year, but we're making 2,600 Hertz significantly stronger with that investment. So there's a lot going on in the company. We're also on 2,600 Hertz continuing to invest particularly in contact center capability.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

That's at the core of some of our recent customer wins. And so those are the areas we're working on. But yes, overall, our longer term target, our mid to range target is to R and D as a percent of revenue to be a little bit lower from what we're spending currently.

[Eric Martinuzzi, Senior Research Analyst at Lake Street Capital]

Okay. And I guess I should have started with the gross margin. You're 72% on the subscription and service, and is that expected to persist at that same level?

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

In a short term, Eric, yes. Main reason for that is we're also investing in the infrastructure and team resources to support the growing installed base and growing new installation as well of Airdial. So we got the near term investment in those capacity a bit. And so perhaps we start to see a little more better improvement towards the back end of the year. But the near term, that's the reason I see a relatively stable 72% subscription gross margin.

[Eric Martinuzzi, Senior Research Analyst at Lake Street Capital]

Okay. And then my last question is on your Airdial partners. A year ago, you had 15 AirDial partners, and today we're over 30. Curious to know about, I'm less concerned about the number of partners you have and really more concerned about how productive the partners are that you have. What about those 15 from a year ago?

[Eric Martinuzzi, Senior Research Analyst at Lake Street Capital]

Have you been pleased with the traction they've got? Have you been disappointed? What have you learned?

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

When we bring on a partner, really a reseller, Airdial reseller, we know from the status of their business what to expect. Some of them are smaller, some of them are more significant. We're very pleased with our largest relationships, T Mobile, U. S. Cellular, Comcast, some of the larger aggregators we work with like SpectraTel and others.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Some of our partners are more focused. It might be a small CLEC with only 5,000 to 10,000 users or something like that. But they're all contributing and that's the main thing. We did bring on a, what I call medium sized CLEC, if you can say it that way. CLEC with the potential for 100,000 users for Airdial.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

We brought them on last fall and we talked about them and they have started rolling out Airdial to their base and are discussing with us about accelerating how fast they go with that. It's very hard to put things like that into our forecast till they happen. And so we're pretty conservative about trying forecast things that are likely to develop until we see them developing. We're excited that they're now having good success with Airdial and growing it. So yes, across our range of resellers, they're all important.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

We support them all and we think it's a great example of the strength of our product solution in the market because they have other folks they could go to and they've come to us.

[Eric Martinuzzi, Senior Research Analyst at Lake Street Capital]

Thanks for taking my questions.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Sure.

[Operator]

Thank you. One moment for the next question. And the next question will be coming from the line of Josh Nichols of B. Riley. Your line is open.

[Josh Nichols, Senior Research Analyst at B.Riley Securities]

Thanks for taking my question. Real quick, just to touch on, I don't think it's been brought up, but I mean, you've seen some really good traction in the hospitality space, 500 hotels across North America. That's one of the largest end markets. I'm just kind of curious if you could elaborate on how quickly that's been ramping up. And do you think that that could be a significant driver going forward and what you think the opportunity set there is over the next year?

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Yeah, it is significant. When we stopped and looked at it, were surprised ourselves in a way. We target winning 50 to 100 hotels a quarter. That's roughly where we aim. Now we hope that we can do better than that perhaps now that the Marriott relationship has been solidified and we can leverage our certification there with Marriott properties.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

But all in, that's kind of the range we try to work in. And generally, we achieve just sales each quarter in that range. Some hotels take Ooma Enterprise, some take Ooma Airdial and some take both. And in either case, getting one success with the customer is an opportunity to then build with the other. But yeah, it's actually quite an extensive segment in terms of opportunity, and I think we could run with it for quite some time.

[Josh Nichols, Senior Research Analyst at B.Riley Securities]

Thanks. And then just to take a little bit deeper dive, we touched on air dial, a good amount, but also 2,600 Hertz. Like,

[Josh Nichols, Senior Research Analyst at B.Riley Securities]

you don't break those out.

[Josh Nichols, Senior Research Analyst at B.Riley Securities]

I assume there's still a relatively immaterial piece of revenue today and like, What's the plans in the future to maybe start divulging a little bit more into maybe some segment reporting or whatnot? Is there a timeline where you think that that may come into play given the backlog that you've been seeing build up over the last year or so?

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Let me give a general answer and then maybe Shig will add to what I say. Our outlook this year is built with acceleration of Airdial. It's built with acceleration of new customer wins on 2,600 Hertz, but we don't expect them to contribute much until next year because of the time to ramp customers. So between the two, we expect more growth out of Airdial than we do out of 2,600 Hertz this year. Both of course started from small bases.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

And so I think we're a ways away from being in a position where we think about trying to break them out separately. But I don't know if Shig wants to share more.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

Yes. I mean, you're obviously right, Josh, in that it's still a low single digit percentage of revenue. That's in total revenue report today, but we're excited about the new customers coming on and pipeline along with sales cycle. But kind of second part of your question, we don't necessarily have a bright line sort of rule or expectation as to when we could start to report more separately. But I think once it starts to get into 10%, fifteen % of revenue kind of a scale, I think we will start to consider being a little bit more, you know, granular about how we disclose and inform the investors in analyst community to share a little more detail.

[Josh Nichols, Senior Research Analyst at B.Riley Securities]

Sounds fair. Appreciate it. Thank you.

[Operator]

Yeah. Thank you. One moment for the next question. And the next question is going to come from the line of Patrick Walravens of Citizens. Your line is open.

[Kincaid LaCorte, Equity Research Associate at Citizen JMP]

Hi, team. This is Kincaid on for Patrick Walravens. I was just wondering if you guys had any significant changes in the competitive environment you could highlight for us. Thanks.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

We're in a competitive environment all the time. That's why we focus on the four segments we do where we think we can really bring the leading solution. And that's how we get competitive advantage and win. And in the segments we target, I think they're more immune to some of the pressures that our industry has had generally. Certainly, Airdial, we're we're selling most of our customers on three or five year contracts.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

And these are applications where once they get installed, they just want them to run and and aren't gonna be wanting to touch them. There's installation effort to put them in place, so that's also a barrier once once you get in. Small business UCaaS, small businesses, you know, need a unique combination of of easy and turnkey installation and great support along with great value. And we've architected a solution built in that way. And we think half or more of the small businesses out there across North America, 1 to 20 employees have yet to move to a cloud type solution.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

So we keep just going at that market pretty straightforwardly, and I don't know that we've particular change in competition in that. So I think the general answer is not anything to call out specifically for you here. And we'll keep monitoring that, but I really think our outlook depends most of all on our own execution.

[Kincaid LaCorte, Equity Research Associate at Citizen JMP]

Alright. Thanks so much.

[Operator]

Thank you. One moment for the next question. Our next question is coming from the line of Matthew Harrigan of The Benchmark Company. Your line is open.

[Matthew Harrigan, Equity Research Analyst at The Benchmark Company LLC]

Thank you. We all well know that cable companies tend to emulate each other on the product pipeline and the tech roadmap, particularly since they don't directly compete. And particularly on business side, they tend to obviously, don't have national footprint. So they work together there especially well. Are you already talking with other cable companies?

[Matthew Harrigan, Equity Research Analyst at The Benchmark Company LLC]

I mean, you've got the largest guinea pig or maybe Capybara and Comcast instance. Are people kind of waiting to see how everything hardens out as far as their execution? And then secondly, in response to the earlier question, you said, I think largely with reference to AirDial, that there are other people that your clients could talk to. When you look at Europe and I know Europe and Asia are not your point of emphasis right now, to say the least. But what are people doing there on the workaround on the copper line replacement?

[Matthew Harrigan, Equity Research Analyst at The Benchmark Company LLC]

And are there competitors over there that aren't present in North America? Or are they some of those very large telecom equipment companies? Because you have a tremendously large TAM for Airdial. And it's just I don't know what the workarounds would be other than paying a lot more money for your copper line right now. I mean, specifically, who are you seeing as competitors as some semblance of a comparable technology solution?

[Matthew Harrigan, Equity Research Analyst at The Benchmark Company LLC]

Thanks.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Sure. Yeah, thank you. So on your first question, we do have a broad effort trying to engage with new reseller partners for Airdial, as you would expect. And our goal is to add at least a couple of partners every quarter and we've met that goal now for two years straight. Yes, you're right that when you work with one cable company, others will notice and they don't directly compete often and that can open some doors for collaboration or just referencing.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

So yeah, we're excited that we can continue to add more reseller partners on Airdial. And I think that will be an important driver of growth for us. On your second question, which I think was particularly focused on Europe, we have some engagements in Europe. Obviously, we're in 32 countries with IWG, but that's on the UCaaS side. We have some engagements in Europe with 2,600 Hertz customers and I think I mentioned a quarter ago that we won a new one in Europe just a quarter ago, which was kind of exciting in The Netherlands.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

But with Airdial, today Airdial is not sold, it's not used I guess I would say outside of North America. We would love to win large carriers for Airdial in Europe or other parts of the world. We don't have a big sales effort going on that, but at any point in time we have some discussions going I would say. And generally our experience so far has been companies taking a slow approach to the problem and seeing if they can't delay the need or implement something internally that will get by. But I do think opportunities will continue to unfold as we look forward.

[Matthew Harrigan, Equity Research Analyst at The Benchmark Company LLC]

Thanks, Eric.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Sure.

[Operator]

Thank you. One moment for the next question. Our next question is coming from the line of Matt Latimore excuse me, Mike Latimore of Northland Capital Markets. Your line is open.

[Vijay Devar, Analyst at Northland Capital Markets]

Hey. Hi. This is Vijay Devar for Mike Latimore. Two questions. One, when will you be done integrating Ooma apps into over 2,600 hertz?

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

I would say end of this year, and I know that seems like a long time and maybe a little bit longer than we originally intended. But 2,600 Hertz really operates in three ways that it goes to market. There's our shared hosted, our private cloud and our global infrastructure. And each one operates a little bit differently, we actually have to enable the capabilities in each one. We have already though launched our mobile app for some customers and our desktop app as well.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

And so we're making, I think, good progress.

[Vijay Devar, Analyst at Northland Capital Markets]

Good. Second one, have you seen any change in sales cycles for 2,600 hertz given the Metaswitch acquisition?

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

That's hard to answer because it's only really since that acquisition that we've invested in sales for 2,600 Hertz, And we do have a small team there today, and I will say they're doing a fantastic job. We had multiple wins of new customers in Q1. And so we are seeing customers receptive. One of the customers we won has their own solution in vertical space and wants to add communications to it. And they could have built it using CPaaS, they instead went with us and that was after looking at competitor solutions.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

So that was a really nice win for us. And another customer, that company also is small but the person running it has a lot of deep knowledge and experience with large carriers in the industry and chose us over others. So I'm seeing good momentum but I don't know if it's us or if it's the market.

[Vijay Devar, Analyst at Northland Capital Markets]

Understood. Thank you.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

You bet.

[Operator]

Thank you. We now have a follow-up coming from the line of Brian Kessler of Alliance. Please go ahead. Your line is open.

[Brian Kinstlinger, MD, Director of Research & Head of Technology Research at Alliance Global Partners]

Great. Thanks so much. I have two questions again. The first one is, I'm wondering if you can quantify the number of lines that churned over the last two quarters at Regis, so we could evaluate the underlying growth of the business.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

Yeah, Brian.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

It's about what we guided.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

It it is. But I guess you're asking for specific quantify. Asking us to quantify. Yeah. It it was about, you know, $12,000 13 thousand dollars in that range in the last two quarters.

[Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer at Ooma]

And we a year ago, we talked about churning in total about 19,000 to $20,000 over the course of last fiscal year and good chunk of that slipped into Q1. So again, I remind you that with the $10,000 or so that churned in Q1, we ended up churning about the same as what we had expected in total a year ago.

[Brian Kinstlinger, MD, Director of Research & Head of Technology Research at Alliance Global Partners]

Got it. So 19 to 20 in total, 12 to 13 in the last two quarters?

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Correct.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

And roughly 10 in the last quarter.

[Brian Kinstlinger, MD, Director of Research & Head of Technology Research at Alliance Global Partners]

Yes, that's helpful. I mean, obviously, we can see the growth there. And then you've clearly in the last, I'd say, two quarters, shifted your focus to driving stronger profits. Assuming Aerodial does enjoy solid adoption, what's a reasonable goal for adjusted EBITDA margin, maybe three years out or more?

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

A lot higher than where we're at. We've brought our adjusted EBITDA up nicely over the last twelve to eighteen months, but I think it's just the start. There's no reason why this business can't be very profitable with 72% margins and our core solutions each in our four segments, pretty well developed and not needing the level of R and D they've taken in the past.

[Brian Kinstlinger, MD, Director of Research & Head of Technology Research at Alliance Global Partners]

Okay, thanks.

[Operator]

Thank you. And at this time I'm not showing any messages in the queue, and I'd like to turn it back to Eric for closing remarks. Please go ahead.

[Eric Stang, President, CEO & Board of Directors Member at Ooma]

Well, you, Lisa, and thank you everyone for joining us today. We really appreciate it and I think we're off to good start for the year. So thank you. I'll let you go. Bye bye.

[Operator]

Thank you all for participating in today's conference call. You may now disconnect.

Participants

Executives

• Matt Robison, Director of IR and Corporate Development
• Eric Stang, President, CEO & Board of Directors Member
• Shig Hamamatsu, Vice President, Chief Financial Officer and Treasurer

Analysts

• Alinda Li, Equity Research Associate at William Blair
• Brian Kinstlinger, MD, Director of Research & Head of Technology Research at Alliance Global Partners
• Eric Martinuzzi, Senior Research Analyst at Lake Street Capital
• Josh Nichols, Senior Research Analyst at B.Riley Securities
• Kincaid LaCorte, Equity Research Associate at Citizen JMP
• Matthew Harrigan, Equity Research Analyst at The Benchmark Company LLC
• Vijay Devar, Analyst at Northland Capital Markets