- Revenue: $64.1 million, up 10% year over year.
- Non-GAAP Net Income: $4.1 million.
- Cash Flow from Operations: $7.1 million.
- Debt Reduction: Reduced by $3 million to $8.5 million.
- Stock Repurchase: $1.8 million spent to repurchase stock.
- Business Subscription and Services Revenue: 60% of total subscription and services revenue, up from 57% in the prior year.
- Product and Other Revenue: $4.6 million, up from $3.6 million in the prior year.
- Core Users: 1,244,000, up from 1,239,000 in Q1.
- Business Users: 500,000, an increase of 12,000 from Q1.
- ARPU (Average Revenue Per User): $15.07, up 4% year over year.
- Subscription and Services Gross Margin: 72%, down from 73% in the prior year.
- Product and Other Gross Margin: Negative 69%, improved from negative 73% in the prior year.
- Total Gross Margin: 62%, down from 63% in the prior year.
- Total Operating Expenses: $35.2 million, up 6% year over year.
- Sales and Marketing Expenses: $17.6 million, down 1% year over year.
- Research and Development Expenses: $12.2 million, up 15% year over year.
- G&A Expenses: $5.4 million, up from $4.9 million in the prior quarter.
- Adjusted EBITDA: $5.6 million, a record for the company.
- Total Cash and Investments: $16.6 million.
- Trailing 12-Month Operating Cash Flow: $18 million, a record for the company.
- Trailing 12-Month Free Cash Flow: $12 million, up 154% year over year.
- Headcount: 1,130 employees and contractors.
- Q3 Revenue Guidance: $64.2 million to $64.6 million.
- Q3 Net Income Guidance: $4.1 million to $4.3 million.
- Full Fiscal Year 2025 Revenue Guidance: $254 million to $255.5 million.
- Full Fiscal Year 2025 Non-GAAP Net Income Guidance: $15.7 million to $16.2 million.
- Full Fiscal Year 2025 Adjusted EBITDA Guidance: $21.5 million to $22 million.
- Full Fiscal Year 2025 Non-GAAP Diluted EPS Guidance: $0.57 to $0.59.
Release Date: August 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Ooma Inc (OOMA, Financial) reported Q2 revenue of $64.1 million, exceeding guidance and showing a 10% year-over-year increase.
- Q2 non-GAAP net income was $4.1 million, also above guidance.
- Cash flow from operations nearly doubled from Q1 to $7.1 million, allowing the company to reduce debt by $3 million.
- Ooma Business, including UCaaS, POTS replacement, and wholesale solutions, performed well, with new feature releases and integrations boosting Ooma Office.
- A significant partnership with a top 10 incumbent local exchange carrier to resell AirDial and Ooma Telo was announced, potentially expanding market reach significantly.
Negative Points
- Subscription and services gross margin decreased to 72% from 73% in the prior year, partly due to the lower margin of 2600Hz.
- Product and other gross margin remained negative, though slightly improved from the previous year.
- Operating expenses increased by $2 million year-over-year, driven by higher research and development costs and G&A expenses.
- Residential subscription and services revenue declined by 1% year-over-year.
- The company anticipates churn from its largest customer, IWG, in the second half of the fiscal year, which could impact revenue.
Q & A Highlights
Q: Are there any updates on the sales cycle or install pace for AirDial customers, particularly enterprise ones?
A: Eric Stang, CEO: Nothing special to report. The sales cycle and pace remain as discussed previously, with larger customers often starting with a portion of their needs before moving to full rollout. Smaller customers can have installations completed within a month.
Q: You mentioned a top 10 service provider in the US selling AirDial to its residential customers. Will this impact residential customer numbers in the second half of the year or early next year?
A: Eric Stang, CEO: The incumbent local exchange carrier will resell AirDial to business customers and Ooma Telo to residential customers. While it's too early to provide specific guidance, these are significant opportunities for Ooma, expected to unfold over the next three to four months.
Q: Can you provide an update on the large 2600Hz customer and their rollout plans?
A: Eric Stang, CEO: The customer is expected to launch their product in beta form in September, with a potential general availability rollout by year-end. They aim to roll out to most of their customer base through next year, potentially reaching the 100,000-user mark.
Q: How is the pipeline for 2600Hz skewed between wholesale and CPaaS customers?
A: Eric Stang, CEO: The pipeline is more skewed towards the wholesale model today, with many customers looking to replace Metaswitch. However, there are also opportunities in the CPaaS space.
Q: Can you provide more details on the ILEC win and its competitive landscape?
A: Eric Stang, CEO: We believe we are the only vendor for both POTS replacement and residential copper line replacement solutions for this ILEC. The competitive advantages and value of our solutions made it easier for us to stand out.
Q: What are the main drivers behind the net retention rate improving to 100%?
A: Shigeyuki Hamamatsu, CFO: The improvement was mainly due to better churn rates for business users. However, the net retention rate may dip back to 99% due to anticipated churn from IWG in the second half.
Q: How is the AirDial launch in Canada progressing?
A: Eric Stang, CEO: The launch is off to a good start, but more market development is needed. We have a reseller in Canada and have had some wins, but there is more market opportunity to tap into.
Q: Can you size the residential and enterprise opportunity for the local carrier you discussed?
A: Eric Stang, CEO: We believe the carrier is a top 10 ILEC in the country, with hundreds of thousands of residential and business lines. This represents a significant opportunity for Ooma.
Q: How are the US Cellular and T-Mobile reseller partnerships contributing and expected to ramp up?
A: Eric Stang, CEO: T-Mobile is a strong partner for AirDial and is also selling some residential products. US Cellular is selling AirDial and will begin selling Ooma Office. Both partnerships are expected to grow.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
