OOMA INC Q4 FY2025 earnings call

• Focus on four segments: cloud communications for smaller-sized businesses, POTS replacement (direct and via resellers), wholesale platform services, and residential telephony.
• In Q4, achieved $65.1 million revenue and $5.8 million non-GAAP net income. FY'25 saw 8% revenue growth and 17% growth in non-GAAP net income.
• Progress in SMB segment: 60% of new Office users opted for higher-tier services, and secured new office customers. In POTS replacement, Marriott extended brand certification to AirDial, making it the only recommended POTS replacement solution by Marriott; Frost & Sullivan named AirDial competitive strategy leader. Progress with resellers, including a large cable provider on track to resell AirDial by end-March and Frontier Communications testing Ooma Telo for residential POTS replacement.
• Wholesale platform services launched new turnkey apps and expanded sales resources. Residential telephony began ramping sales at CLEC and made progress with Frontier Communications.

For Q4 FY'25, Ooma achieved $65.1 million of revenue. Business subscription and services revenue accounted for 61% of total revenue, while product and other revenue was $4.5 million. For FY'25, total revenue was $256.9 million, up 8% year-over-year, with business subscription and services revenue growing 13% year-over-year. The company ended Q4 with 1,234,000 core users, 503,000 of which were business users (41% of total core users). The blended average monthly subscription and services revenue per core user increased 4% year-over-year to $15.26.

• Q1 FY'26 revenue guidance: $64.7 million to $65.1 million (includes $4.4 million to $4.6 million product revenue). Net income guidance: $5.1 million to $5.4 million, non-GAAP diluted EPS $0.18 to $0.19.
• Full FY'26 revenue guidance: $267 million to $270 million. Non-GAAP net income guidance: $22 million to $23.5 million. Adjusted EBITDA guidance: $27.5 million to $29 million. Non-GAAP diluted EPS guidance: $0.77 to $0.82 per share. Revenue guidance reflects churn from IWG and challenges with AirDial revenue ramp; profitability metrics expected to grow meaningfully over 2025.

• Uncertainty in partner sign-ups and timing of AirDial revenue ramp with new partners.
• Churn from IWG in the first quarter and potential future changes.
• Market dynamics affecting the pace of POTS replacement adoption, making it difficult to predict revenue growth precisely.

Q: What are you seeing in the SMB environment?

A: Q4 is typically slower for SMBs due to holidays, but things picked up in January. SMB growth remains strong with 60% of new Office users opting for higher-tier services.

Q: How are you assisting resale partners in driving sales and adding new resellers?

A: Have over 20 partners reselling Ooma AirDial. Goal is to add a couple of resellers every quarter. Focus on partnering with entities looking to replace POTS lines and leveraging Ooma's complete solution.

Q: What's the visibility with the large cable partner for POTS replacement?

A: The large cable partner is on track to start reselling AirDial by end-March, but the pace of revenue ramp is hard to predict as it's early in implementation.

Q: Will churn from IWG continue after the first quarter?

A: Churn from IWG is expected to stabilize after the first quarter. While there could be growth opportunities if plans with IWG unfold positively, the company expects to be in a stable spot post-first quarter.

Q: Can you provide more granularity on SMB market excluding AirDial?

A: Ooma sees good market opportunity in SMBs with millions of small businesses in North America yet to move to the cloud. Most new customers are switching from POTS or other providers, not from other cloud providers.

Q: What's the expected revenue growth distribution for FY'26?

A: Business subscription growth is expected to be faster in the second half of FY'26, driven by AirDial installation and 2600Hz growth.

Q: How is 2600Hz monetized and what about growth expectations?

A: Growth from 2600Hz is expected to come from new customer wins and some incremental growth from existing base. Revenue ramp will take time as new customers adopt the solution. Impact on revenue will be greater in FY'27 than FY'26.

Q: How do you address competition in POTS replacement?

A: Compete with aggregators by working with resale partners. Have won large customers from competitors by offering a better product solution. Focus on expanding through resellers and driving brand recognition like Marriott certification.