Q2 2021 Ooma Inc Earnings Call
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If you requiring further assistance. Please press star Zero I would now like to him the conference over to your Speaker today, Matt Robison. Thank you. Please go ahead Sir.
Good day, everyone and welcome to the second quarter fiscal year 2021 earnings call.
My name is Matt Robison, <unk> director of IR and corporate development on the call with me today, our CEO, Eric Stine CFO Ravi Narula.
After market close today, well my issued its second quarter earnings Press release business were released is also available on the company's website <unk> Dot com.
This call is being webcast live and it's accessible from a link on the events page of the Investor Relations section of our website. That's like will be active for replay of this call for at least one year telephonic replay will also be available for weeks started this evening <unk> PM Eastern time dialing information for it is included in todays earnings press release.
During today's presentation or executives will make forward looking statements within the meaning of the federal Securities law.
Forward looking statements generally relate to future events or future financial or operating performance expectations and beliefs regarding these matters may not materialize and actual results and financial periods 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 this related.
For the impact of the Cobot 19 pandemic and those risk more fully described in our filings with the Securities and Exchange Commission.
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 otherwise stated the financial measures to be disclosed on this call will be on a non-GAAP basis non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with gap.
The discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures discussed in this call to the most directly comparable GAAP financial measures are included in our earnings press release, which is available on their website.
On this call will give guidance for third quarter and full year fiscal 2021 non-GAAP basis. Also in addition to our press release, an 8-K filing events and presentations page and investors section as well as the quarterly results page of the financial information section of our website include links to cost 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 to Additionally, our investor presentation slides include GAAP to non-GAAP reconciliation that also provides resolution of GAAP expenses that are excluded from non-GAAP metrics now I will hand, the call over <unk>.
Thank you Matt.
Hi, everyone. Welcome to aim is Q2 fiscal year 2021 earnings call I'm pleased to talk with you today.
Q2 was an outstanding quarter from a financially as we exceeded our expectations on both the top and bottom line.
Q2 revenues grew to 41 point Fourmillion non-GAAP net income was 3.1 million or 8% to revenue.
We also generated approximately 2.5 million of cash flow from operations in the quarter I.
I appreciate the hard work put in by all members of that limit team to achieve these results.
Looking at Q2, particularly excited by our progress winning larger customers in solving increasingly complex customer deployments.
One such example is a chain of hearing loss clinics with 13 locations in Maryland.
Previously this company had different phone providers in different locations, we're struggling struggling to stay in touch with its customers because of cobot driven office closures.
He was able to step in and provide one unified solution across all locations.
In the words of the administrator at the company, who can now control phone services easily across all locations.
Office has been a lifesaver.
A second example is a large enterprise customer where we currently serve over 2000 over their home based call Center agents in North America.
Historically this customer has used in conjunction with P.S.T.N. routing in a hybrid Voip P.S.P.S.T. and deployment.
We're now engaged with this customer to appear directly to them eliminate the P.S.T.N. element and improve both cost and quality.
Our ability to provide seamless work from home solutions also helped drive larger new customer wins in Q2.
When new customer of ours, who isn't insurance and benefits company with over 100 employees.
It was faced with the challenge of some employees working from home, while others are spending part of their work week in the office.
This company switched Eva because of our ability to operate across.
There are work environments, and they particularly valued use of our powerful mobile app, nor online portals pretty easy set up and called flow administration.
Our responsive customer support was an important differentiator in this win as well.
Last quarter I mentioned, we have secured many locations representing a large national brand with much of this opportunity coming to us through referrals.
I'm pleased to report that we expanded further in Q2 and we now serve over 1000 independent locations of this national brands.
More broadly we believe our strengths in serving small businesses translate well to serving larger businesses cooperate many small distributed locations.
At the enterprise level, what are there more significant wins was a customer with over 100 users who wanted to convert away from an on premise solution that was among other things serving their call center needs.
In this case it only took us about one week to bring the customer up on the enterprise, including implementation from implementation excuse me over call Center functionality.
In Q2, we also announced a new enterprise private label reseller M.T.A. solutions in Alaska.
One leg of our differentiated enterprise strategy is to engage private label resellers, who want to maintain fully their end customer relationships.
<unk> enterprise private label resellers can have full control over naming pricing and features offered well in the background can handle the complex regulatory matters if desired.
In general a key element of our strategy strategy and planned. This year is our focus on sales and marketing execution and I believe we're seeing good progress some of our sales efforts remain hampered by restrictions still in place to fight cobot, but we see this lessening with time.
Overall, we believe we believe we have strong solutions today for the needs of both smaller and larger businesses and that our strategy is working.
In addition to sales and marketing execution. The second key element of our strategy and planned. This year is to introduce new breakout features that provide customers a broader solution and increase our revenue per customer.
Last quarter, we announced the major advance in this regard with the launch of human connect which you'll recall is our wireless internet solution for both backup and primary internet use.
I'm pleased to report that we now have hundreds of customer accounts using connect.
More than half of these accounts of selected a $99 per month or greater service plan to support primary internet use.
The top reasons. These accounts site for purchasing connect our poor DSL performance.
System cable outages.
And insurance to ensure communications are always operational.
Our newest feature announcement is roumell wildfire, which we're very excited to have launched just last week to select customers.
In general small businesses have been left behind when it comes to the most advanced technology solutions, usually because of excessive cost and complexity.
Well <unk>, we can bring enterprise grade Wi Fi is a service to even the smallest businesses security performance management and forced called quality of service and customizable guests networks can all be enabled in an easy to use turnkey solution and for a modest charge per month.
Well I play based IP phones become easily supported as well.
We're extremely pleased to have partnered with extreme networks to make this possible.
Strategically lumewave five fits perfectly into our long term vision to enable small business to sound and operate like big businesses.
At an affordable price.
Well do my wife, why we can now offer small businesses, a winning combination of communications Internet and why I find that working all managed in the cloud by Obama.
And what the launch of room Wi Fi is a major advance our vision is to provide an even broader infrastructure solution in the future for businesses.
I'm also pleased to introduce to here in enhancements that will be available soon for our <unk> office approach here of service.
You'll recall that our approach here costs customers, an additional $5 per month per user and provides a number of advanced features today, including use of our desktop out advanced call blocking and call recording.
Currently about 25% of our new customers step up to take the problem pick up the pro tier.
As part of our strategy to continue to enhance the pro tier and increase its adoption. We're now in beta test with select customers and we will soon be launching video collaboration in screen sharing.
We believe this will be invaluable addition to the approach or which will help spear spur adoption and it will be an exceptional value in comparison to many other providers.
Turning now to our sprint and T. Mobile partnership you recall the T mobile powers, our human connect and we enable T mobile to resell them office sprint omni.
We announced last quarter that with the sprint T mobile merger it was unclear, but the new organizations strategy will be and we adopted a cautious outlook.
Our understanding now is that T mobile intends to focus on a more narrow portfolio is in does not plan to continue selling sprint omni.
Nonetheless, our relationship remains in place and T mobile will continue to power Houma connect.
We're also jointly exploring other possibilities between our two organizations.
And finally regarding our largest customer for whom we provide service to more than 20000 users today.
I can report that are proof of concept trials in a new geographic region of the world outside of North America have progressed well.
We don't yet have clarity on when the customer will want to roll out on a larger scale.
But we believe we are well placed to do so when a decision has reached.
Beyond this I'm pleased to report that we secured an additional north American opportunity with this customer. This is a new revenue opportunity, but more importantly, we believe it will position us favorably post cobot for when the customer chooses to expand further.
I will now turn the call over to Robby to discuss our results and outlook in more detail and then we turn with some closing remarks.
Thanks, Eric and good afternoon, everyone. It's what a stock I want to tanks and diet my team for their hard work during these challenging times and for helping us deliver strong financial results.
With that I'll begin with a review of our second quarter financial results, then provide our outlook for the third quarter and full year fiscal 21.
Even with extraordinary challenges created by the pandemic you once again delivered a strong performance this quarter achieving $41.4 million important revenue.
And exceeding our previously issued revenue guidance range of $40 million to $40.5 million.
These results reflect solid performance from both our sales and marketing channels on a yearly basis that 11% revenue growth in Q2 was driven by well my business, which now accounts for 43% of revenue.
Year to 38% in the prior year quarter.
Net income for the second quarter off. This grew 21 was $3.1 million, which exceeds our previously issued guidance range of $1.5 million at $2 million.
Increased profitability stems from lower personnel costs, including lower travel expenses as well as from other operational efficiencies, while continuing to focus on what long term growth objectives, which remain unchanged.
Now some details on our Q2 revenue and key customer activities.
And the subscription and services revenue grew 26% on a year over year basis, and residential revenue grew 3% year over year.
On a combined basis, we achieved a 12% year over year drilling in subscription and services revenue for both business and residential.
Overall subscription and services revenue as a percentage of total revenue was 93% compared to 92% for the prior year quarter.
Product revenue for the second quarter was $2.9 million consistent for the prior year quarter getting Q2, we saw improvements in orders from our direct customers as well as activities relating to our largest and reseller partners.
In the second quarter, we made good progress with the largest customer we have referenced on speed is called.
With this customer for the expanded our service offerings in North America and the recently performed proof of concept prize outside North America as Eric just mentioned, we're optimistic that as a pandemic situation improved even see for the increase in activity with this customer.
Also we had been closely watching the PMO been spent merger for sometime <unk> decision to knock reset Houma does not cause a material impact on our results as we had taken a conservative approach to this relationship as it relates to our guidance.
On a positive note, we continue to partner with T mobile on well not connect and Onyx coding other opportunities that aligned with our long term strategy.
Now some details on other key customer metrics, we had 1.053 million quoted users at the end of the second quarter up from 1.023 million at the end of the prior year quarter.
We added a number of business customers online sales and marketing activities as well as to lives and other resellers.
At the end of the second quarter, 23% of I quote unquote users were business users contributing 43% of booking revenue.
Our average monthly subscription and services revenue politically user ARPU increased 9% to $11 an 88 cents.
From $10, a 93 cents in the pride in Florida.
Yes, very piece with this ARPU growth driven by new service offerings, including My office Pro.
I want to highlight a major milestone achievement regarding our and will exit recurring revenue, which has now crossed the $150 million Ahmad and which grew 12% on a year over year basis.
For the last few months I'll, let Andrew churn rate increased by a couple of pleasant taste points, which we attribute to defend that me accordingly, our net dollar subscription retention rate was 95% compared 202% for the priority in Florida.
Now some color on a gross margins.
Subscription and services gross margins for the second quarter was 71% up from 69% for the same period last year.
This improvement was driven by a number of factors, including economies of scale and efficiency is created from Broadsmart, partially offset by increases in telecom taxes in the collector.
Product and other gross margins for the second quarter, what negative 45% compared to negative 28% by the same period last year.
This margin decline resulted from increased shipping costs.
And that promotional activities during the quarter.
As a reminder, our strategy is to get our hardware products to customers in.
Enables us to generate high margin subscription revenue and positive customer lifetime value.
On an overall basis gross margin increased to 62% off from 61% in the Friday influx.
And now some details on operating expenses.
Operating expenses for the second quarter was $22.9 million down $1.1 million or 5%, Italy.
Sales and marketing expenses for the second quarter was $11 million or 27% afford or revenue down 9% year over year.
This decrease was driven by new associates activities.
Residential business it used to fuel future sales expenses due to the pandemic and eliminated costs associated with smart can which was discontinued in October 2019.
During the quarter, we increased our marketing activities relating to my business, which helped drive business using a decent given our strong momentum in Q2. He will continue to invest in these programs to fuel future growth.
Research and development expenses was $7.9 million, a 19% of total revenue down from $8.3 million, a 5% year over year.
This decline in R&D was primarily a result of the discontinuation of smart Kim.
While we continue to develop new features and integration support my office and well my enterprise.
G.N. expenses were $3.9 million or 9% of total revenue compared to $3.6 million for the prior year quarter.
This increase was driven by higher public company infrastructure costs, such as insurance and Soc census.
During Q2, our net income of $3.1 million resulted in an earnings per share of 13 cents on a diluted basis compared to four cents loss per share in the prior year period.
Well the second quarter fiscal 21, adjusted EBITDA earnings improved to $3.7 million, representing a 9% margin what's isn't lost a $528000 for the prior year quarter.
<unk> EBITDA earnings for the first half of fiscal 21, plus $6.7 million.
<unk> EBITDA loss of approximately $1 million are the same feed it last year.
We ended the quarter with total cash and investments up $25.3 million with no debt cash generated from operations for the second quarter fiscal 21, plus $2.5 million driven by increased profitability streamline connections from our customers and reduced inventory levels.
Cash used in operations was approximately $400000 in the same period last year.
Nick in the second quarter, we added a number of his personnel primarily contractors enable future growth.
Certainly we ended the quarter with a total of 930 forward employees and contractors up from 836 for the same period last year.
It has been a year since our acquisition of Broadsmart in 2019, so like to provide an update on some of our key achievements stemming from that transaction.
First and foremost, we're fully integrated broadsmart and Duma and realized significant operational inefficiencies.
Second we have now leveraging thought smart.
Mobiuss into enterprise, which helped us increase to scale up my business.
Third we have increased the number of channel partners that we sell to as a result off the acquisition.
We had achieving our goal to create long term shareholder value by our strategic growth well my business.
Because that in fact, we have made significant progress by adding both small and large businesses.
For example, more than 20% off our business users I'd now larger businesses and given our differentiated product and going to market strategy, we're optimistic about sustaining this momentum.
Clarity you define a large business as one which has an annual <unk> off $10000 Ardmore.
With that I'll now provide details on our third quarter and full year fiscal 21 guidance again, our guidance is non gap and has been adjusted thought expenses, such as stock based compensation and amortization of intangibles.
We expect total revenue for the third quarter fiscal 21 to be in the range of $41 million to $41.8 million.
We expect third quarter non-GAAP net income to be in the range of $1.7 million to $2.2 million, but non-GAAP diluted EPS is expected to be between seven cents a nine cents.
We have assumed 22.5 million weighted average basic shares and 24 million weighted average diluted shares outstanding for Q3.
Our full year fiscal 21, we now expect total revenue for fiscal 21 to be in the range of hundred $63 million hundred $64.5 million, an increase from a previously issued guidance range of hundred $61 million $264 million.
We expect non-GAAP net income for fiscal 21 to be in the range of $8 million to $9.5 million an increase from from our previously issued guidance range of $5 million to $7 million.
Non-GAAP diluted EPS is expected to be in the range of 34 cents to 40 cents.
We have assumed 22.4 million weighted average basic shares and 23.7 million weighted average diluted shares outstanding for fiscal 21 in summary, very pleased with our second quarter results, which demonstrate continued strength in the execution I thought long term strategy.
I'll pass it back to Eric for some closing remarks, okay.
Thanks, Bobby.
Like last quarter, our current business view is that while we are seeing some improvement in the economy will still face effects from the pandemic through the rest of this year and likely into next year.
Nonetheless, we believe we're executing well on or sales and marketing initiatives and our energized by the results were achieving in particular with larger sized customers.
Also finding that our new features and capabilities most significantly the desktop out expanded video collaboration and screen sharing Houma connect and now I'm a Wi Fi.
Our and we'll open up new opportunities.
Our outlook is to deliver profitable growth, while continuing to invest in future.
All in we believe our strategy is working we can capitalize on significant opportunity going forward.
Later.
As a reminder to ask a question you will need to press star one on your telephone.
To withdraw your question press, the pound or hash key please standby, while we compile the culinary roster.
Your first question comes from the line of Mike Latam, One with Northland Capital markets. Your line is open.
Great.
Thanks very much.
Yeah I guess.
The market still little fluid here can you give a sense of how things transpired kind of by month over the last three or four months and but I'm talking about a little bit on the churn side as well as on the demand side, just getting a flavor for kind of a month by month correction here.
Well looking at Q2, we've seen pretty good demand through the quarter I wouldn't say that theres been a hockey stick in any way in that regard.
I think with churn we saw churn go up in Q1, as we talked it stabilized and its a has not gone up further in some cases has come come down.
Got it okay great.
And then in terms of your new why it's high offering.
How do you see that playing out here is there a clear device or service that you're going to be kind of easily replacing among current customers or is this more of a new customer thing.
I think people both although I think we'll see our biggest penetration with new customers.
It's not uncommon for a customer when they're changing their phone service moving to the cloud to look at their whole.
Networking strategy and their needs.
You know well find customers wanting to put why phones in the business, where it's easier to do then then running cabling.
With a with a wife why solution. We can ensure those phones will work properly with within poor quality of service and we can also just provide a turnkey solution. So they can kind of get the full package from us without having to struggle with that are bringing the others to to do implementation I mean, it's a very very much.
It should managed service by us the customer will by the end points from us and once their installed in their locations all the rest of it essentially done by us for the customer, including the the ongoing monitoring and any customization that they need to have it work just the way they were they want so.
I think there's a lot of value in the service, but obviously, we're just getting started with it will have to see how it develops.
Yeah, and then just last time, you talked about a new north American opportunity with the year Laurie I think your largest customer is that more seats is that new services being added in.
How should we think about the size of that new opportunity.
It is a.
It is it is large and scope, but it is not.
Delivering the full service the way we've traditionally done for them in the users. We have today, it's kind of a partial step forward with them, which will allow us to.
ER save them, some money and provide them some better quality of service.
And over time, I believe that can lead to substantial more growth for us as we bring the other elements of our service to those users. So.
I I think it's large and scope, but it's not as much revenue as we would've had per user before but it's only a partial.
Implementation and the rest will flow we hope in the future.
Okay, great. Thank you Ross.
Next question comes from the line of Josh Nichols with B. Riley Your line is open.
Yeah. Thanks for taking my question.
Really good to see the topline be awesome flowing down with the even in margin expansion quarter over quarter here. Robbie I think you mentioned with the Broadsmart acquisition fully integrated that you're seeing a little bit more focus on the var channel.
Any specific specific to provide on that front as far as some of the traction you're seeing.
What percentage of the company sales are coming from bar, what's your expectation going forward and the opportunity set.
Josh Thank you.
What I said, yes, we are seeing some good traction fund.
Vars and resellers.
If I look at the overall well my perspective.
Todd and reseller contribution generally it has been around it has been growing increasing pretty then it's I don't want to do but more than one third of the total revenue coming from Vars and resellers and into longer term, we expect it to be at around 50% off on overall.
Use of growth so I think they're making good progress at this time, which brought smacked was also playing a role in that growth, but we had been bundling logsdon recent other programs for us for a couple of years now and we're seeing some good momentum.
<unk>.
Thanks, and then just to get back to the company's largest customer I know you've been working through beta or an opportunity outside of North America.
One is still fair to assume that the opportunity set for that is comparable to the 20000 CE Gen domestically and two is there any of that really built into guidance for the back half of the year or is that excluded because it's still beta.
It is in scope.
The size that you mentioned, they're all that probably talk about guidance or.
We are.
Obviously have included all incorporated the talk process off what all investments will take and how much.
Upside could there be but until upsides really happened, obviously I would want to take a cautious approach to that so there is some element off and it's expenses. Some element of revenue built in but a very small let him in a and b would want to make sure.
I don't disappoint. So I think we are optimistic about this opportunity, but I am taking a cautious I probably from a guidance perspective.
Thanks for the clarity on that front and then last question me.
Good to see the companies continue to to on leases New features now you have wildfire as well.
Could you provide a little bit more detail on the timing for when you expected draw. This news solution that is going to have a like video conferencing and some of the features or what do you think the company's value proposition versus other people. It appears on that market.
Yeah.
We have it out and working today as some customers. This is for whom office now.
Froome enterprise, we've always had video conferencing and we even made some improvements to it earlier this year.
Our small business customers have generally not had that much interest in this kind of a service, but obviously in these times, that's changing and so we want to be able to neighborhood as part of our office pro tier.
Economically it's going to be a great value to be able have that included as part of all the other things that you get just for the extra $5 a month.
And as I said, we have some customers.
Now in beta, it's going very very well I have no doubt that this quarter it will roll out extensively [noise].
Thanks, Good Robby.
Thank you. Thank you.
Your next question comes from the line of Matt stop <unk> with William Blair. Your line is open.
Hey, guys. Thanks for taking my questions and congrats on the solid results I guess first I know it looks touch on I guess, another one of the partner channel.
Unfortunate to see the update with sprint omni, but it's good to see relationship with T. Mobile is still intact and there still seems to be opportunity there.
I'd love to get any.
Additional thoughts around potential for.
I guess moving forward that partnership and then as you think about the pipeline for additional carrier partnerships. How do you. How do you think about that how's that shaping up and what do you see the importance of that specific channel looking like going forward in terms of contribution to the business.
Yeah.
As you said, we still have a strong partnership with T. Mobile and you know this narrowing of their portfolio doesn't just extend to us that they're doing a fairly extensively as far as I can tell cutting back to much more of a core business focus and I can appreciate that.
You know things can always develop differently down the line, but but for the moment that that's the outlook we have we.
Are excited about some of the forward looking things, we're doing strategically internally and they are interested in some of those things and we'll just have to see how about on on holds with them.
And they do of course as I said earlier continue to power connect which is an important a fixed wireless solution that we do together with them.
In terms of additional partnerships or we think about more broadly than just other carriers and we are in discussions with other parties today in various forms and in various.
With various scope and potential.
And that's something I think we're good at Arse, our solutions are set up to work with others in a in those kinds of ways and so.
We continue to a drive towards seeing more more of that developed for us.
Right right, it's good to hear.
And then just one more on the international piece, obviously, you've talked a bit about you know the positive results from the GRC.
Waiting for the timing there how do you think about further expansion internationally or other opportunities or maybe avenues.
You could see that expansion outside of North America.
We're not rushing to expand internationally just to do so with a large fleet customer it's a very economic move for us and so that's what will propel us to do it we already today and a number of countries three or four countries in Europe, Australia Yep users in other countries as well.
Japan comes to mind.
So we are not adverse to enabling any international opportunity that's needed as part of a a business opportunity that makes sense, but our current focus for sales and marketing today is North America, unless we have a large customer that that we can leverage to expand further.
We think we are going to be able to do that internationally into new geographic region with this a large customer that we've talked about its just a matter really of when this whole pandemic situation has.
I think gotten away a little bit of some of the timing of what we're doing with them, but the need is there and the but in the economic sense for the partnership is there and so in what we're doing together is going well. So I do believe overtime, we'll see all this come together just as we've discussed.
That's helpful. Thanks, again for taking my questions.
Sure.
Your next question comes from the line of Joe Goodwin JMP Securities. Your line is open.
Hey, guys. Thank you so much for taking the question just first on the on the guidance. It looks like you're just from the mid point. The Fourq you shows a sequential decline is that just conservatism there anything we should be thinking about.
Given what does this ravi given how the.
Such a high.
Subscription revenue.
Finally, we don't see decline in subscription revenue sequentially. So I I would just say, it's the range, which have given given it just six months out into pandemic, but I think I would say we have seen generally speaking and sequentially subscription services revenue growth, we had could be.
Small variability is on the product revenue side effect.
If there is a bigger bigger issue in November December January given the and I make and some brick and mortar stores, maybe close that's probably the only reason I could highlight.
Where we could be at a low end of the range, but and that's why you can probably to conduct some conservatism or some unknowns that around it.
But 90% more than 90% of a subscription revenue subscription revenue, which is very stable and predictable.
Yeah. Thank you and then and then just on on the business subscription line.
What's called the right way of thinking beyond this year I mean, how do you guys kind of think about.
The gross trajectory of that business I mean is it fair to assume.
Of low mid Twentys for the foreseeable future I guess, how do you how do you just think about the internally.
I would love to be I leave continue to invest into the business sites I would love to see the growth rates in the future, but this year is a very different deal with lots of challenges and situations. So I would say next year I expect I would hope to be more than 50 person different revenue coming from business. That's one thing I've heard.
Want to see that Andrew, but probably provide more color and guidance for our growth rate, but next year in terms of business in our Q4 earnings call, but right now I would say that some unknowns for example, dislodge customer hogs got impacted we are some of the some of the plans we had planned earlier this year.
Slightly being pushed out some people want to see what's happening with this pandemic, but we are I think we have better position. We have very good growth engines. Good channels of bogs resellers are there have you have all the right channels and opportunities ahead of US we just have to see how does.
Well the 19 situation comes out over the next six months.
Great. Thank you.
Again, if he would like to ask a question press star one on your telephone.
Next question comes from the line, Brian Kinstlinger with Alliance Global Partners. Your line is open.
Great. Thank you.
Obviously, we've seen a little bit of slow down in terms of year over year growth in business subscribers clearly.
Kogut has slowed that business development.
Tommy beginning to open.
Lot of people back in the office, obviously, not everybody our conversations changing with enterprises and when might we see additions begin to accelerate.
Sorry, how is what changing with enterprises.
Some conversations I mean, it sounds like in the last three or four or five months. We've seen this development slow you've had some challenges businesses had challenges as their opening does it sound like they are getting more comfortable with moving forward and implementing some of your solutions and.
Mike that lead in the near term to an acceleration the year over year growth rate business subscribers.
Yeah.
You know it's interesting there isn't just one answer to that question silver customers.
Our moving from a an on prem or a very disjointed solution to somebody that's much more capable working across the there you know their needs and in those cases, it's it's a I think theres been a little an acceleration to to make changes with the.
Pandemic and the pressures it's put a number of other customers, though have hunkered down little bit to save cost in even people, we've been talking to those customers might might be on furlough or or or not with the company anymore. So we've seen a whole range of things happened with customers.
Generally I think the customer demand is strong and I don't think a lack of customer demand is going to hold us back because we as we look forward I think if any thing where we've been impacted the most is the ability of all of our sales channels and teams to be as effective as we want them to be particularly those.
Those channels and teams that are that are.
You know talking to customers directly or.
More engaged face to face.
I do think it's getting better but I think we've got farther to go and I think we have to plan a little bit in our outlook for somewhat of a second balance. If you will later this year as cold weather comes back and things, but all that said I feel pretty optimistic that our solution.
Once or just what the customers need.
And.
Once.
Once we engaged with the customer we have a very good success rate with with winning the business in moving forward. So.
I I'm I'm.
I am feeling.
I said it in the script I think things are are gradually getting better for us too as we look forward and we'll be able leverage that as we go too.
Great and be involved that great. The if you can speak to the pipeline, especially in terms of the enterprises and became small business case, notwithstanding your largest customer are you over the last six months, where we are today are you seeing.
The pipeline growing once it shrunk given quoted.
I'm, just curious kind of what the near term opportunity in terms of conversations and people RFP the machine at their RFP.
That looking like.
Our pipeline.
Has a you know again, it's affected a little bit by channel and by the way I described earlier, but generally speaking our pipeline is robust and ended is growing as we sit here today.
Okay.
The last question I had few questions about your largest customer.
Sounds to me like compared to last time, we talk a little bit more unclear about when.
Installation may move forward is that a cold good results or is that some other factor that's going out with that customer.
So I mentioned two things about this customer yes with this with these trials we've done into new geographic area I think that because of the pandemic.
The customers I'm, not able to move as fast with some of the.
You know implementation that they wanted to do but I do still believe we will see that happen, but I also mentioned that we have since we talked last secured a new opportunity in North America without customer, which.
It's a nice step forward and positions us well for even more business as we go beyond.
Implementing what we're implementing now with them so I.
I think all things are in a good spot in and Oh, Yeah. Ideally you know the pandemic wouldn't happen everything will be running forward as fast we were before but I still think.
We're going to see things come together nicely.
Great. Thank you.
Yep.
Your next question comes from the line of Matthew Harrigan with benchmark. Your line is open.
Oh, thank you.
Video conferencing at some point, probably sooner than people expected given kind of it becomes somewhat derrick where as part of peoples product. Okay. If you will but can you talk more about your offering there or what does that.
Affects your pricing power.
For a period of time and then just generically seasons. So much more utility all worked at home and all that you think that eventually translate to higher pricing power on the business side were over a period of time, particularly as the economy becomes more robust hopefully inevitably next year.
Yeah, I think that's a good question, what we incorporate today Froome enterprise.
It is at a higher price point than what we will do with whom office for a smaller business, but room office solution that we're building into a.
The office pro tier is its got some limitations, they're not they're not particularly significant but they its basically it's a good solid video conferencing and screen sharing solution that will satisfy most businesses. There will eventually be a premium tier that capability, which would allow us to.
<unk> price higher for say a power users someone wants to have you know even larger conferences even longer conferences, maybe some special features in those conferences.
But.
Yeah, we're our strategy, though I think you've heard us talk about so little bit we really do believe we have.
We're very cost effective than what we do as a business and a we're currently piling more and more capability in the room office pro to make it just as a great value to the end customer and.
I think that are adding video screen sharing is just one more step along the way there and it puts us in a favorable position than the market versus others. So I think it's a little bit of both I think what we're doing is gonna be very effective but I will also be the base for and even higher tier of services, we look for.
Sure.
Thanks, Eric.
Sure.
No no further questions at this time I will turn the call back over to Eric's day.
Well, great I really appreciate everyone joining us today.
We're.
Very happy with the our results for Q2 and very excited about the new things, we're doing and and the success, we're having a larger scale and look forward to updating you on all that after Q3. Thank you.
Ladies and gentlemen, this concludes today's conference call. Thank you for participating now disconnect.
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