Q4 2023 Ooma Inc Earnings Call
Good day, everyone. My name is Kelly and I'll be the conference operator for today at this time I'd like to welcome everyone to the fourth quarter and fiscal 2023 results Conference call. Today's call is being recorded all lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session.
If you would like to ask a question. During this time simply press star one on your telephone keypad. If you would like to withdraw your question. Please press star one again at.
At this time I'd like to turn things over to Matthew Robinson. Please go ahead, sir thank.
Thank you Kelly and good day, everyone and welcome to the fourth quarter and fiscal year 2020 earnings call. My name is Matt Robison.
As director of IR and corporate development on the call with me today are CEO , Eric Stang, and CFO should come a lot too.
After the market closed today <unk> issued its fourth quarter and fiscal year 2023 earnings press release. This release is also available on the company's website on the Dot 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.
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.
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 are 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.
For a 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 is included in our earnings press release, which is available on our website on this call. We will give guidance for the first quarter and full year fiscal 2024.
Cap basis also in addition to our press release and 8-K filing the overview page and events and presentations page of the investor.
Section of our website as well as a results page of the financial info section of our website.
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 resolution of GAAP expenses that are excluded from non-GAAP metrics now.
Now I will hand, the call over to CEO , Eric Stang.
Thank you, Matt Hi, everyone welcome to <unk> Q4 fiscal year 2023 earnings call. Thank you for joining us.
My pleasure to talking to you today about our Q4 and FY2023 results and our outlook for FY 'twenty four including the many growth initiatives we have underway.
Q4, FY2023 it was another strong quarter for Umar in fact, it was a record quarter for.
$4 1 million and net income.
$5 1 million in adjusted EBITDA and.
And $3 3 million in cash flow from operations were all records for Umar <unk>.
Overall for FY 'twenty, three achieved 24% growth in business services revenue.
12% overall growth in revenue.
Adjusted EBITDA of over $17 million in.
In cash flow from operations of nearly $9 million.
We ended the year with close to $27 million in cash ahead of our plans to rebuild our cash position. After our successful concept acquisition in late Q2 last year.
With positive cash flow from operations, no debt and several exciting growth initiatives underway I feel we are well positioned for our new <unk>.
School year 'twenty four.
Turning now to our progress in Q4, we continued to execute well on our key growth initiatives for <unk>.
M office, our solution targeted at small to medium sized businesses.
We added features to our pro plus tier of service.
These capabilities included call screening integration.
Integration with Zohar CRM additional call center capabilities.
Improvements to Uber meetings, and new customer analytics.
In FY 'twenty four we plan to add more features to the office pro plus each quarter throughout the year, including further integrations more advanced call center functionality and other exciting features these.
These advances are part of our longer term strategy to expand the customer opportunity for office and to increase increase our <unk>.
I'm pleased to say that in Q4, a little over 50% of our new office users adopted a premium service tier either office pro or office Pro plus which tells US our strategy is working.
Regarding Umar enterprise, we continued our focus on feature development.
In select verticals and channel expansion.
On the enterprise once again in Q4 increased the number of new hospitality customer customer wins compared to prior quarters.
New hotel customers spanned independent operator owners of several hotel brands, including Marriott Hilton Hyatt Sheraton and IHG.
We continue to believe our hybrid solution and integration with approximately 80 different hotel management platforms provides a strong differentiation in this vertical.
We intend this year to increase our sales and marketing effort efforts targeted toward this and other key verticals for enterprise.
We also expect to develop one and possibly more new partners for the enterprise as a means of opening up new vertical market opportunities.
[laughter].
Turning to our international expansion, we executed as expected given the holidays in Q4, adding more users, but at a slower pace than we did in Q3 <unk>.
Currently we provide service to users in 13 countries.
And are about to bring on users in nine additional countries, making 22 in total.
We anticipate that Q1 of this year will be close to if not our strongest quarter ever for bringing on new use users with our largest customer and we expect to continue to add more users with this customer through the balance of the year.
Starting late spring, we expect to enable services in a new geographic region outside of North America and Europe .
To enable services in additional geographic regions before the end of this year.
We anticipate FY 'twenty four will be a milestone year for whom is international expansion.
Position us to broaden our customer base and new markets in the years ahead.
Yeah.
In general for home office, and enterprise, our marketing and sales efforts. During Q4 were hampered a little by end of year seasonality, but I'm pleased to say January and now February performed well.
All in we are making good progress.
So given the current economy. It is certainly the case that customers are more careful before buying take longer to make decisions and sometimes start with smaller commitments.
We find out we have to work harder in these economic times to get our messages across but when we do we continue to see strong customer interest.
Switching over now to air dial our integrated solution launched just last year replace aging and expensive copper pots lines.
I am pleased to say, we see we see significant market opportunity for FY 'twenty four.
We estimate that just in the USA, there are 10 million or more pots lines serving businesses.
But these lines are becoming increasingly costly to customers.
And that most if not all will be shut down at some point over the next several years.
Market awareness of the need to replace these copper pots lines is growing and large enterprises in particular are starting to awaken. The fact, they need a solution.
To put this in perspective, just one fortune 500 company that we're currently talking with needs to replace approximately 25000 lines across their business.
Their situation parallels many large organizations, we're trying to navigate a path forward and in some cases may already be faced with lines suddenly turned off or egregious really increasing costs for their analog line.
It's not uncommon for us to engage customers, who have hundreds or even thousands of lines they will need to replace.
Of course, replacing these lines will be a multiyear process and many companies today are evaluating their requirements and determining the best path forward before proceeding in earnest.
We are also not surprisingly seen the providers of copper pots lines on occasion.
Particularly for larger customers delayed price increases or delay the sunset of the copper pots lines to provide customers more time.
Okay.
This past quarter I am pleased to report, we again increased our pipeline of opportunity for air dial.
More importantly, perhaps I can share that our largest aired out customer win in the quarter was a company that contracted with us for over 2600 Airedale Alliance.
We have begun the installation of these lines and expect to have them all in place by the middle of this year.
I am proud to share as well that organizations are increasingly reaching out to them or to inquire about buying or reselling airtime.
Our goal this year is to establish <unk> as the number one solution for parts replacement and to increase awareness of airedale substantially, especially amongst larger customers.
Our partnership with T. Mobile is a great enabler to executing our strategy I am pleased to report that <unk> is now prominently featured in T Mobile's, New innovation Center in Atlanta, Georgia.
Our strategy for ERD I'll also encompasses increasing the number of partners, who resell air dial, increasing our channel agent and bar representation for air at all.
And over the longer term selling airtime outside the USA.
Yeah.
Particularly for equipment designed to use an analog line of solutions such as air dial is essential.
We believe <unk> has the strongest solution in the market today and that our development plans for this year will your will further our competitive advantage.
In particular, our remote device manager capability, which gives enterprises the ability to monitor control and operate all of their lines together from one desktop application.
Sets us apart from all other solutions that we see in the market.
This is difficult to anticipate the speed at which the market will develop for air Dial. In addition, how quickly customers will act to install air dial across a range of needs, but we are confident this is an exciting opportunity for EMA this year and for years to come.
Now on the residential front, where we sell the Houma Tello, we continue to achieve modest growth in line with the level of investment we choose to make.
During FY 'twenty four we will introduce a redesigned tello incorporated incorporating a new lower cost processor, which could also make possible new tullow features longer term.
We will also continue our partnership with T mobile for Tullow sales and continue our efforts to expand our level of engagement with T mobile.
As new fiber Internet and wireless <unk> Internet both rollout we believe new opportunities are created in the market for Tullow adoption. We are keen on taking advantage of these opportunities.
So altogether. This is an exciting time for Roma.
Nearly all of our competitors, we have not made any layoffs or reductions in force.
Rather with our strong cash flow and zero debt, we have the flexibility to invest for growth and if the opportunity arises also to make targeted acquisitions.
As we look forward to FY 'twenty four we are necessarily mindful of the challenging economic situation and the difficulty we face in predicting the market growth for copper pots lines replacement, but we're also steadfast in our strategy to be the number one provider of acumen communications to the small and medium business segment.
To larger enterprises operating in select verticals are with customer requirements and.
And to the many applications served by copper lines that are sunsetting.
I will now turn the call over to Shing Komatsu, our CFO to discuss our results and outlook in more detail and then return with some closing remarks.
Thank you Eric and good afternoon, everyone.
I'm going to review, our fourth quarter financial results and then provide our outlook for the first quarter and full fiscal year 2024.
We delivered another solid quarter with a total revenue of $56 $5 million near the high end of our guidance range of $56 3 million to $56 6 million.
On a year over year basis total revenue grew 12% in the fourth quarter.
Driven by the strength of my business as well as the addition of onset.
In the fourth quarter business subscription and services revenue accounted for 55%, our total subscription and services revenue as compared to 49% in the prior year quarter.
Q4 product and other revenue came in at $3 9 million as compared to $4 $7 million in the prior year quarter.
The prior year Q4 product revenue included certain accessory sales that did not recur. This year as we mentioned on our last earnings call.
On a full year basis total revenue was $216 2 million.
Compared to one and $92 $3 million in the prior year, representing 12% growth year over year, including 24% growth in business subscription and services revenue.
On the profitability front, the fourth quarter non-GAAP net income was $4 $1 million above our guidance range of $3 5 million to $3 8 million and was another record for the company.
On a full year basis, non-GAAP net income was $13 6 million compared to $12 $6 million in the prior year.
The team has done an excellent job balancing execution of our growth initiatives and managing expenses during the fourth quarter.
Now some details on our Q4 revenue.
<unk> business subscription and services revenue grew 29% year over year in Q4.
Driven by user growth and the addition of onset which continues to perform well with solid customer retention.
Excluding the effect of onset revenue contribution Luna business subscription and services revenue grew 15% year over year.
On the residential side subscription and services revenue grew 2% year over year.
For the fourth quarter total subscription and services revenue was $52 6 million.
Or 93% of total revenue compared to 91% in the prior year quarter.
Now some details on our key customer metrics.
We ended the fourth quarter with $1 million 210000 core users up from 1.202 million core users at the end of the third quarter.
At the end of the fourth quarter, we had 428000 business users or 35%.
Total core users an increase of 11000 from Q3.
Our blended average monthly subscription and services revenue per core user or <unk> <unk>.
Increased 6% year over year to $14 24.
Driven by an increase in mix of business users, including higher Abu office Pro and pro plus users.
During the fourth quarter, we continued to see a healthy office pro and pro plus take rate with 52% of new office users opting for these higher tier services, which was up from 44% in the prior year quarter.
Overall, 26% of them office users have now subscribe to a pro pro plus here.
Our annual exit recurring revenue grew to $206 $7 million and was up 17% year over year.
Our net dollar subscription retention rate for the quarter was 94% as compared to 95% in the third quarter.
A few words about our net dollar retention rate, which is a function of year over year <unk> growth and churn.
As we saw back in the second quarter Theyre continuing growth from our largest customers slowed the rate of <unk> growth in the fourth quarter gave him a specific pricing structure with them, while they all our churn across our user base remains stable during the quarter.
As mentioned previously we plan to transition to a revised calculation methodology for our net dollar retention rate effective in the first quarter of fiscal 2024.
We believe it will make this metric a better reflection of our operational performance.
As well as more in line with how others in our industry are reporting.
Had we used the new methodology in the fourth quarter, we estimate that our net dollar retention rate would have been approximately 99%.
Now some details on our gross margin.
Our subscription and services gross margin for the fourth quarter was 73%, which was consistent with 73% in the prior year.
As a reminder, subscription and services gross margin for the fourth quarter of this fiscal year included the impact of onset gross margin, which is running lower relative to my subscription gross margin of 74% when onset is excluded.
Product and other gross margin for the fourth quarter was negative 54% as compared to negative 49% for the same period last year.
There were two primary drivers for the year over year decline in product gross margin first certain accessory sales that benefited product gross margin in the prior year did not recur this year.
Second we started to see the impact of certain higher cost components that we had procured earlier in fiscal year to stay ahead of pandemic driven supply chain issues.
On an overall basis total gross margin for Q4 was 64% as compared to 62% in the prior year quarter. The higher total gross margin in Q4. This year was primarily due to a lower mix of product revenue.
And now some details on operating expenses.
Total operating expenses for the fourth quarter were $32 3 million up $4 4 million or 16% from the same period last year.
Excluding the impact of onset the total operating expenses increased $3 million or 11% from the same period last year.
Sales and marketing expenses for the fourth quarter were $16 9 million or 30% of total revenue up 16% year over year, driven by higher marketing and channel development activity.
<unk> business, which includes <unk> as well as the addition of onset related expenses.
Research and development expenses were $10 5 million or 19% of total revenue up 17% on a year over year basis from $8 $9 million driven by investments in new features for both of them are office and Houma enterprise as well as new products such as agile.
A portion of the year over year increase in R&D expense was also attributable to the addition of <unk> members.
G&A expenses were $4 9 million or 9% with total revenue for the fourth quarter compared to $4 5 million for the prior year quarter.
Year over year increase in G&A expenses was primarily due to an increase in personnel cost and the addition of one ship.
non-GAAP net income for the fourth quarter was $4 1 million or diluted earnings per share up 16.
As compared to <unk> 13 cents in the prior year quarter.
In addition to stock based compensation and intangible amortization expenses non-GAAP net income for the fourth quarter excludes approximately $10 million of acquisition related costs.
In connection with the <unk> transaction.
Adjusted EBITDA for the quarter was $5 1 million another record for our company or 9% or total revenue as compared to $4 million for the prior year quarter.
We ended the quarter with total cash and investments of $26 $9 million.
Cash generated from operations for the fourth quarter was strong and at $3 $3 million was a most we had achieved.
And nearly double the $1 8 million.
<unk> generated in the same period last year.
On the head count front, we ended the quarter with 1040 employees and contractors.
Now I'll provide guidance for the first quarter and full fiscal year of 2024.
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 first quarter of fiscal 2024 to be in the range of $56 4 million to $56 9 million.
Which includes three four to $3 $7 million of product revenue.
The first quarter revenue guidance includes the negative impact of approximately 4000 residential users churning in the quarter for a specific customer.
This one time event, which is expected to impact our residential services revenue is related to a customer who has been using <unk> for their call centers for many years and we have been anticipating their transition to another solution for some time.
Meanwhile, our relationship with this customer remains strong as we continued to expand our relationship with <unk> business offerings for other uses.
We expect first quarter net income to be in the range of $3 4 million to $3 7 million.
non-GAAP diluted EPS is expected to be between 13 to 14.
We have assumed $25 7 million weighted average diluted shares outstanding for the first quarter.
For full year fiscal 2024, we expect total revenue to be in the range of $235 5 million to $238 5 million.
The full year of fiscal 2020 for revenue guidance assumes subscription and services revenue growth rate of 18% to 20% of alumina business.
And subscription and services revenue growth of 1% for residential.
In terms of revenue mix for the year, we expect 92% to 93% of total revenue to come from subscription and services revenue and the remainder from products and other revenue.
We expect non-GAAP net income for fiscal 2024 to be in the range of $14 5 million to $16 $5 million.
Based on this guidance range, we estimate our adjusted EBITDA for fiscal 2024 to be $18 7 million to $27 million.
For approximately 9% of revenue at the upper end of the range.
Let me give you some additional color on our non-GAAP net income guidance and adjusted EBITDA range for fiscal 2024.
We expect product and other gross margin for fiscal 2024 will continue to be negatively impacted by certain higher cost components. We had procured in fiscal 2023 in order to manage pandemic driven supply chain issues.
We estimate the impact of such one time excess component costs running through fiscal 2024, P&L to be $2 million to $3 million.
Excluding the impact of this onetime cost we believe our fiscal 2024, non-GAAP net income and adjusted EBITDA range could have been higher by a similar amount.
Which would have put our adjusted EBITDA margin in the 9% to 10% range.
We expect non-GAAP diluted EPS for fiscal 2024 to be in the range of 55 to.
63 <unk>.
We have assumed approximately $26 3 million weighted average diluted shares outstanding for fiscal 2024.
In summary, we are pleased with our solid finish to our fiscal 2023 with a record quarterly non-GAAP profitability, along with strong cash generation in the fourth quarter. We're.
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 will now pass it that they're at for some closing remarks Eric.
Thanks Chip.
And I am pleased to say I have some additional good news to share.
And earlier this week that Ummah has once again, one PC magazine's business Choice Award for Best Voip system.
We're always deeply honored to win this award because it is based on PC Megs independent customer surveys.
A remarkable 10th year in a row Umar was voted number one ahead of other providers.
<unk> business of course is our primary focus for revenue growth.
Business services revenue now makes up 55% of total <unk> services revenue driven in part by our outstanding 39% growth and business users during FY2023.
As we head now into FY 'twenty four we're excited to continue to pursue several initiatives for growth.
Including extending our leadership serving small business.
<unk> select verticals and customer requirements for larger enterprises.
Establishing ourselves as the number one solution for replacement of aging copper pots lines.
And expanding further internationally to serve our largest customer in new markets and position ourselves for further future growth in those markets as.
As we look ahead to FY 'twenty, four we see tremendous opportunity for profitable growth.
Thank you everyone, we'll now pause and take your questions.
Thank you and as a reminder, if you do have a question. Please press star one at this time.
We'll hear first today from Matt Stotler with William Blair.
Hey, there thanks for taking the questions maybe just first of all on the onset I. Appreciate the updated color on that one maybe you could just double click on where we're at in terms of the integration of that business and then any plans to re platform acquired customers going forward or how we should think about further progress there ahead.
Hi, Matt.
Progress is good the team is folded into the <unk> team.
Functionally and.
I think the resources are.
Our very efficient on that business. We've also made some great strides in improving the gross margins in that business.
We do have a little farther to go but.
Excited about where we're at.
In terms of actually moving on Sip customers over to the <unk> platform that is a longer term initiative for us and actually looking at our plans. This year. We have so many good growth initiatives underway that were taken in even more measured pace.
In terms of making those that transition we don't feel a strong need to have to do it quickly.
If.
In select cases, we move a little faster because we have something on the zumba platform that a customer wants that the answer platform doesn't offer and in those cases, we would move a customer because we don't want to make significant investments in the onset platform beyond what it does but it's a very good platform. It does a lot of good things today and a lot of customers very happy with it.
Our churn is stable and well in line with where we expect it to be on that business. So.
We are.
It's been folded in as part of <unk>, and we're kind of taking it in stages as we go from here.
Got it Thats very helpful. And then maybe one on the call Center.
The capabilities that you have mentioned a.
A couple of times looking to build out more of those capabilities going forward.
Maybe we could just dig into what that opportunity looks like.
How many customers are seeking at this point or are being used for call center.
Functionality are using call center functionality, and what that opportunity looks like within kind of the broader base or the market that youre going after and then maybe some commentary on what that <unk> uplift is for call center over.
Home office. Thank you.
Sure and by the way, let me speak about this from two perspectives.
We have customers on numerous enterprise, who use our call center capability on whom enterprise and some of those customers are just using call center capability.
We've offered call center solutions that are.
Pretty extensive on whom enterprise for some time.
Houma office traditionally has not offered any.
Call Center capability, now with whom office pro plus which sells for $29 95, we're building in.
What I would call basic call center functionality.
Obviously that starts with call queuing and the ability to have agents login and Logout and.
Dynamically direct calls.
You'll be able to listen in on calls barge and on calls to the other basic things you do in a call center environment.
That is helpful to whom office member of my office is targeted at small and medium businesses, particularly 1% to 20 employees, but really up to a 100 employees and theirs.
$7 million plus businesses in North America in that in that size range and with this capability and home office Pro plus we can go after the company that has a 2345 10 person call Center.
Taking calls for their business in a more integrated way, but thats different from powering up a more significant call center application, if we're going to power up a more significant call center application, we would turn to EMEA enterprise.
But you'll recall that one of the key hallmarks of boom office is simple and easy to use and can be set up by businesses without even needing an it professional to do it and that's the way we're approaching call center, with whom office pro plus and the pricing there will be 29 95. It already is at $5 higher from.
<unk> office pro which does not have these capabilities and other things and.
Thats.
That's the opportunity it moves us up a little bit larger sized businesses buying home office and it allows us to be a pretty well rounded solution for most businesses kind of a 100 employees in less.
Very helpful. Thank you again.
Yes.
We'll hear next from Mike Latimore with Northland capital markets.
Thanks, Congrats on the strong profitability there.
I'm wondering if you can give a little just a little more info on air now.
How many units have been deployed and how many you've built now kind of what kind of.
We expect this year and I know you've kind of given some gives and takes there, but just a little more detail would be great.
Yeah.
We've obviously built in an outlook for air dial to our overall outlook and.
We're a little careful with that because it's difficult to predict how fast the market will develop.
Barry.
It's going to be driven for us to buy to what degree, particularly large customers sign on with us because on some of these customers can make a very material difference to what happens in the year.
We're not disclosing specific numbers for <unk>.
At least not at this time.
We built the first.
10000 boxes last year.
Those parts are can support up to four lines, each and we are still.
Consuming that first dose first 10000 units as we sit here today.
So we.
We hope also to have additional partners, who will resell air dial to announce in the first half of this year and.
If if we close those opportunities that are looking promising to US right now those might take up our forecast a little bit for the year. So I hope that gives you a little more color.
<unk>.
But that's about what we're ready to disclose today.
Okay. Thanks, and then just on the macro environment it sounds like.
Can you talk a little bit about <unk>.
Although the longer sales cycles, but any thoughts said January seemed pretty good.
Kevin can you talk a little bit about over the last six months, let's say how things transpire here are weak.
It sounded like things were maybe a little softer and third partners, maybe stay that way for now theyre getting better now or are they still kind of in total.
Dennis.
How is the macro environment playing out about six months here.
Yes, Fortunately overall, we're doing well because we are growing internationally as you know and we're growing with <unk> and that's on top of what we do with office and enterprise, but when I look at office and enterprise specifically.
We have to work a little harder to tell our messages now our messages are compelling we can save customers money, we can give them a lot more capability than what they've had previously.
And all of that is very positive.
But I will say that.
Second half of November and December were.
I would say down a tick for us versus prior to that and I would say were up a full ticket more starting January so.
Something about that time of year, we actually experience kind of a similar outcome a year ago.
I don't want to just say, it's seasonality because I think every year is a little different but.
But I do think Thats the case, a little bit on the enterprise side in particular, where we're selling larger customers and larger deals we had some deals that we have.
Where the customers broke them apart and decided to take them in phases, rather than go forward with the full thing at once and we're seeing that a little bit with these economic times.
But.
By and large our solutions save customers' money and Thats, a saving grace for us even in these market times.
We can rely on that to continue to drive growth.
Okay. Thanks, Sam Thank you.
And from B Riley, we will hear next from Josh Nichols.
Hello, Josh.
Gosh.
Operator, maybe we can come back to Josh in a little bit.
Yes.
And it looks like he may have disconnected accidentally I will just move next to Brian <unk> with Alliance Global partners.
Great. Thanks, so much for taking my questions you got two my first one is last quarter.
Discretionary I'm curious bobby's perspective customers to <unk> last quarter, you said it was taking time and resources to plan for and then it was taking longer than expected as a result customers one prepared.
Can you give us any update on changes to customer planning and Moreover, our customers moving forward with planning and preparation does necessary I would tell you that one nice win that you announced.
With that thinking a little bit so that a customer that we landed in Q4 and that's a big win.
26 more than 2600 lines.
They're going to they expect they want to get them all installed in the first half of this year and that's about a fab is fastest we.
I think the customer is going to move when you've got that much to do I think it might even extend out a little bit longer than that but it's a good sign to us that they want to get on with it and get them. All done we have had other customers move in.
A slower pace it depends on the customer's resources, whether they want to do the installs themselves or contract with us to do them. We do have the third party reports resources in place for doing installs we've.
<unk> got a strong internal team to support that process.
We are hiring in that area as well.
But.
I think by and large.
We are.
Yes, it's a little bit customer specific but it does take time with the largest customers out there the ones that are thousands of lines, they're more likely to still be.
Evaluating the situation what they want to do testing our solution.
And.
Not feeling the need necessary to act right away.
But but realizing that they've got to act they've got to do something and in a way we like that because when a customer tests and uses our solution David It really stands out how much better ours is in certain ways, particularly the remote device management that I talked about.
In my opening remarks.
It's a very enterprise grade solution that we built and all of these boxes that we're putting out in the field are manageable remotely from our cloud and.
It's a very powerful solution so.
I think that.
I think it behooves us when we can work with the customer and really explain the benefits of what we bring we continually.
Add capability and evolve what <unk> was able to do we are now able to work with.
Our primary partner is T mobile and we build in the surface with service with their wireless internet, but if a customer has a strong relationship with another another wireless provider. We have others that we can work with now as well we have brought out remote antennas for customers, who may need extra boot.
<unk>.
Antennas that can even be mounted outdoors for the system. So there is all kinds of refinements that are going on as well.
Even in a remote device managers on generation three and I think we have three more generations that we want to evolve with this year, but but it's exciting and.
Increasingly.
If you'd asked me this three four months ago five months ago, I would say almost all of our customer wins were from our own marketing our outreach, we're starting to see customers, calling us now.
I heard about you I read about you in.
One of the.
Analysts saw.
Pieces or.
Saul your press release with T mobile or whatever it is and.
I think that key to our growth this year too is getting our name getting.
Much better known what we are bringing to the market. So I don't know I hope I didn't go on too far there, but thats little perspective was a perfect segue into my second question actually.
With that win.
That you discussed at nice wind for air Dial I'm curious the nature I think we're going to direct sale because it can be a T. Mobile they call you and then last quarter, you talked about T mobiles paying commissions. So unlike tallo reps are likely going to be more engaged im curious is that thesis playing out since we last spoke meaning.
Are the reps engage in air dial in and pipeline build and sales.
So I'll take the first part of your question that large deal is one that we're working for several months.
Came to us through an agent partner.
We'll really an agent and a deal of that size. The agent plays a key role, but we also get involved in a direct basis as you can imagine.
And then the second part of your question.
Couldn't be more pleased with the reception and the effort T Mobile's, making.
They are they have been turned into be a great partner for air dial in.
We are optimistic as we look forward.
Great. Thank you.
We'll move on to Matthew Harrigan with benchmark.
Thank you.
<unk> always taken a very carefully modulator approach internationally I think mainly working in concert with your largest customer.
Now much more seemingly ambitious can you talk about how you're containing your risk in this macro environment, especially it sounds like going into a new card as well. Thank you and congratulations on the numbers and the guidance.
Thank you.
Yes, I can talk about that.
<unk>.
You know what we've done in North America, and what we've done in greater Europe .
Has been.
<unk> done.
With a fair bit of investment physical investments in our own machines and data center locations that we work with and build built for.
Larger scale and.
And that's working well for us, but as we think about many other regions of the world and by the way when we talk regions. We talk more regions than you might think because with our kinds of communication services latency is important matters to you don't want to have your your machines your data centers.
Located too far from our customers are.
So as we move to two these other regions of the world that we are opening up we're doing it on a much lower cost basis.
Working with our hosting provider.
We've done the work internally to also have our system run in that environment.
It becomes cookie cutter, a little bit you can.
Turn on and turn off.
Processing capability, if you will as you need it it make sure per unit expenses, a little bit higher but when you are lower scale in these other geographies.
How we're going to ensure that we don't.
Sure.
End up spending too much.
And then managing it we can manage this worldwide from our knock in our our resources here in the U S and Europe . So we're not having to add a lot of physical people resources.
In other regions, so I feel pretty comfortable we know how many users we're going to get in each region. We know roughly how fast we're going to get them.
To be honest, we have to put some of this capability in place before the conversions happen and there is a little bit of a drag on our on our gross margin so to speak as we put the cost in place and then.
Convert to users over but but we can model that and we know what it's going to be.
And.
So.
Yes.
That's how we see it.
As we look out to next year and years beyond we want to expand beyond serving this one large customer, but honestly our first focus would be in Europe . It wouldn't be these other regions that we're going to be also be working with them in buying.
By and large I would say that so so we've had to make sure that what we're doing in these other regions as.
Is reasonable expense.
Expense versus what were what were.
Driving revenue.
I think you commented before that.
Copper line.
Hugh replacement issue was even more.
More of an issue in Europe , and the U S are you trying to are you doing anything with <unk> at this point over in Europe or is that you've got too many things and the other things in the hopper.
Do that at this point.
We do not have in our plans this year too.
Do anything with air dial outside of the United States, but that said.
If we are able to establish the right partnerships.
Right.
Partners in some of these other countries.
That could change our outlook.
If we do develop such partnerships, though it will take a little time to reconfigure the product to operate properly with the.
The kind of modem and bands we need to work with not a lot it's not hard engineering, but it will take some time so.
But.
We.
We would like to be building towards in future years.
Selling air dial in other markets, we've looked at some markets and in some cases, we've seen markets that have already started the transition to sunsetting copper lines in other markets. They are just talking about starting it late this year or next year. So.
We're not we're not behind.
It's perfect timing for us to start working towards that.
Great. Thank you.
Thank you.
And as a reminder, that is star one for questions. We'll hear next from Josh Nichols with B Riley.
Thanks, sorry, Eric I reached over on mute their line bumped into the table I guess that was enough to get disconnected.
But.
I just wanted to check.
Oh, yes.
Yes.
Easier for me to dial back in so just wanted to check in great to hear you reaffirm that <unk> is going to be a very strong quarter with your key customer expanding into further markets I think through <unk> you had added 25000 Adil.
Additional seats right this past year.
Anything you'd comment about the expected to see the ads of the cadence. This year is expected to be comparable to last year, a little bit higher or lower based on the plan that the company is giving you thus far.
I think the best planning for this year.
Would be to say will.
Onboard on the order of the number of users we did last year.
And.
I think youll see some.
A little bit heavier on boarding in the first quarter and second quarter and then it's a little bit farther out for me to plan in Q3 Q4, but we're thinking we can have a year similar to last year and growth.
Yeah.
Perfect and then last question for me.
Obviously, there is a huge market opportunity for <unk>.
And we're getting closer and closer to potential sunsets for some of these copper lines have you been hearing any rumblings about via.
Viable competitors or alternatives that are coming to market, even if theyre not out today I find it odd that.
You guys have such a lead on this but it's a very large opportunity.
I have not heard any rumblings of new competitors in this space.
I can tell you that.
In a in a in a larger deal.
We're most likely going to be up against.
Granted who bought epic and Thats a solution that they bought a hardware solution that they bring to market and we're going to be up against probably AT&T, who resells a box they buy from data remote we believe against both of those solutions, we have clear advantages.
And.
You can imagine when you are taking hardware from somewhere and then try and put service on top of it you do not have the kind of integrated solution that we've designed from the ground up.
So we do have competition out there, but it's not.
It's not nearly as extensive as you might think.
Sure.
Yes.
We feel good with the product, we're bringing to market.
Well, that's great to hear I'll hop back in the queue. Thanks.
Okay.
Yes.
And our next question will come from Joe Goodwin with JMP Securities.
Great. Thank you for taking my questions.
Great to hear that the churn across the subscriber base has remained stable in the current environment. Just curious can you talk about any trends and kind of churn on the business side for those who are on the office Pro and office Pro plans is it materially higher than just your standard office subscriber subscriber.
Any sort of commentary there would be great.
It's not.
In fact, I would suggest that probably our pro and pro plus tier customers are lower because they are more likely to be a little bit larger business.
Our churn.
It does.
<unk>, sorry about that yes.
Churn tends to run a little higher with the smallest customers, we have and as the customers get bigger it tends to be less.
And since office prone parts are going to apply more likely to have a little bit larger customer.
But in general overall churn is very stable.
Thank you.
Great.
And with no other questions at this time I will turn things back to the company for closing remarks.
Hello, everyone and thank you as always for taking the time to.
Join us for our call. We really appreciate it we are working hard here too.
Drive a bigger and more valuable business.
We're excited about our progress in the things we're doing in.
While obviously.
I look forward. The next time, we can speak thank you everybody bye bye.
And that does conclude today's conference again, thank you for joining US you may now disconnect.
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