Q3 2024 Ooma Inc Earnings Call

Speaker 1: Hello, and welcome to UMA third quarter fiscal year 2024 financial results. At this time, all participants on the...

Hello, and welcome to all of my third quarter fiscal year, 'twenty 'twenty four financial results.

At this time all participants are in a listen only mode.

Speaker 1: After the speaker's presentation, there will be a question and answer session.

After the speaker's presentation, there will be a question and answer session.

Speaker 1: to ask a question during this session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star.

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Speaker 2: I will now let the Hennie Conference open to Matt Robinson. So you may begin. Thank you, Twanda. Good day, everyone, and welcome to the fiscal third quarter 2024 earnings call of Uma Inc. My name is Matt Robinson and I'm a Director of IR and Corporate Development.

I would now like to hand, the conference over to Matt Robison you may begin. Thank you too Rhonda good day, everyone and welcome to the fiscal third quarter 2024 earnings call.

My name is Matt Robison, Animas director of IR and corporate development on the call with me today are CEO, Eric Stang, and CFO should hamamatsu.

Speaker 2: On the call with me today are UMA CEO Eric Stang and CFO Shig Hamamatsu.

Speaker 2: After the market closed today, I'm going to issue its fiscal third quarter 2024 earnings press release. This release is also available on the company's website, uma.com. This call is being webcast live and is accessible from a link on the events and presentations page of the investor relations section of our website. This link will be active for replay of this call for one year.

After the market closed today issued its fiscal third quarter 2024 earnings press release. This release is also available on the company's website and 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.

It's like it will be active for replay of this call for one year.

Speaker 2: 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.

During today's presentation, our executives will make forward looking statements within the meaning of the federal Securities laws.

Looking statements generally relate to future events or future financial or operating performance.

Speaker 2: Our expectations and beliefs regarding these matters may not materialize, and actual results are subject to risk and uncertainties that could cause actual results to differ materially from those projected. These risks include those sit forth and the press release we issued earlier today, and those risks were fully described in our filings with the Securities and Exchange Committee.

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.

Speaker 2: 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.

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.

Speaker 2: 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 an isolation, or as a substitute for results prepared in accordance with GAAP.

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.

Speaker 2: 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.

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.

Speaker 2: On this call, we will give guidance for fourth quarter and full year fiscal 2024 on a non-gap basis. Also, in addition to our press release, an 8K filing, the overview page and events and presentations page in the investor section of our website as well as the quarterly results page of the financial information section of our website, include links to information about costs and expenses, not included in our non-gap values, and key metrics of our course description visit. Thank you.

On this call, we will give guidance for fourth quarter and full year fiscal 2024 on a non-GAAP basis. Also in addition to our press release and 8-K filing your overview page and events and presentations page in the investors section of our website as well as the quarterly results page of the financial information section of our website includes links to.

Information about costs and expenses not included in our non-GAAP values and key metrics of our core subscription businesses. These are titled supplemental financial disclosure, one and supplemental financial disclosure. Two Additionally, our investor presentation slides include GAAP to non-GAAP reconciliation that also provides resolution of GAAP expenses that are excluded from that.

Speaker 2: These are titled, Self-Mental Financial Disclosure 1 and Self-Mental Financial Disclosure 2. Additionally, our investor presentation slides include GAP to non-GAP reconciliation, that also provides resolution of gap expenses that are excluded from non-GAP metrics.

Speaker 2: Now I will hand the call over to UMA CEO , Eric Stang.

non-GAAP metrics.

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

Speaker 2: Thank you, Matt. Hi, everyone. Welcome to UMA's third quarter fiscal year 2024 earnings call. Thanks for joining us.

Thank you Matt Hi.

Hi, everyone welcome to <unk> third quarter fiscal year 2024 earnings call. Thanks for joining us.

Speaker 2: I can report that Q3 was another strong quarter for Uma. We performed well financially and made a major advance by acquiring 2,600 hurts during the quarter. We look forward to reviewing our progress with you.

I can report that Q3 was another strong quarter for EBA, we performed well financially and made a major advance by acquiring 2600 hertz during the quarter.

Forward to reviewing our progress with you.

Speaker 2: Acute three results include 59.9 million in revenue.

Our Q3 results include $59 9 million in revenue.

Speaker 2: 4 million of non-gap net income and 5 million of EBITDA.

$4 million of non-GAAP net income.

And 5 million of EBITDA.

Organically for Q3, which is to say, excluding the impact of 2600 Hertz.

Speaker 2: We increased our business subscription and services revenue 14% year over year.

We increased our business subscription and services revenue, 14% year over year.

Speaker 2: We held our op-ex spending nearly flat to a year ago, and we grew our EBITDA by 17% versus Q3 last year.

We held our opex spending nearly flat to a year ago.

And we grew our EBITDA by 17% versus Q3 last year.

Speaker 2: Our annual exit recurring revenue, including 2600 Hertz, is now 225 million.

Our annual exit recurring revenue, including 2600 Hertz is now $225 million.

Speaker 3: We fill these results, demonstrate good progress for the company and strong performance for the quarter.

We feel these results demonstrate good progress for the company and strong performance for the quarter.

Speaker 3: During Q3, we continue to pursue the strategies we have outlined throughout this year to expand UMA's revenues from business customers.

During Q3, we continued to pursue the strategies, we have outlined throughout this year to expand hummus revenues from business customers.

Speaker 3: Ooma Office, our award-winning solution for small the medium sized businesses, added premium features and new integration.

<unk> Office, our award winning solutions for small to medium sized businesses.

Added premium features and new integrations.

Speaker 3: One of our most exciting new integrations is with Cleo, the number one software used in the legal industry.

One of our most exciting new integrations as with Clio the number one software used in the legal industry.

Speaker 3: Users of Clio can now integrate their umakalling and communications with their Clio experience.

Users can now integrate their calling in communications with their <unk> experience.

Speaker 3: This integration is available as part of UMA's Pro Plus service tier and contributes to our long-term strategy of increasing our premium office users and raising our average revenue per user.

This integration is available as part of <unk> Pro plus service tier.

And contributes to our long term strategy of increasing our premium office users and raising our average revenue per user.

Speaker 3: I'm pleased to report that in Q3, we once again sequentially increased our RPU from business customers.

I am pleased to report that in Q3, we once again sequentially increased our RP from business customers.

Speaker 3: I'm also pleased to report that 56% of our new office customers were premium users and that premium users now make up 28% of our total office customer base.

I'm also pleased to report that 56% of our new office customers where premium users.

And that premium users now make up 28% of our total office customer base.

Speaker 3: With exciting in Q3 to announce finally, the name of our largest customer, International Workplace Group, or IWG, which is also known by the name Regis.

With exciting in Q3 to announce finally, the name of our largest customer international workplace group or IW G, which is also known by the name Regis.

Speaker 3: We made the announcement in conjunction with the launch of our services for IWG in Asia.

We made the announcement in conjunction with the launch of our services for IW G in Asia.

Speaker 3: In Q3, we rolled out our platform for the Africa region and started serving IWG in South Africa.

In Q3, we rolled out our platform for the Africa region and started serving IW G in South Africa.

Speaker 3: In total, we now serve IWG in 30 countries across five different regions, and we are working with them to...

In total we now serve I WG in 30 countries across five different regions and we are working with them to expand further.

Speaker 3: We anticipate slower international expansion in Q4, given the holidays, followed by a pickup in Q1 as we roll out to new countries throughout the first half of next year.

We anticipate slower international expansion in Q4, given the holidays, followed by a pickup in Q1 as we rollout to new countries throughout the first half of next year.

Speaker 3: Outside of North America, we also expanded with UMA Enterprise, which began serving a new customer with locations spread across Australia, Netherlands, Spain, and the UK, in addition of course to here in the USA.

Outside of North America, We also expanded with whom are enterprise, which began serving a new customer with locations spread across Australia, Netherlands, Spain, and the UK. In addition of course to here in the USA.

Speaker 3: And our targeted hospitality vertical, we once again landed over 50 new hospitality locations.

And our targeted hospitality vertical.

Once again landed over 50, new hospitality locations.

Speaker 3: The largest of which being a property with 474 rooms and another being our second error.

The largest of which being a property with 474 rooms, and another being our second airport hotel.

Speaker 3: In general, we believe our strategy and enterprise to focus on select verticals is giving us advantages in the market.

In general we believe our strategy in enterprise to focus on select verticals is giving us advantages in the market.

Speaker 3: In Q3, we continue to pursue our air dial strategy aggressively. In particular, we hired additional sales personnel and signed a total of four new air dial reseller.

In Q3, we continued to pursue our air dial strategy aggressively.

In particular, we hired additional sales personnel and signed a total of four new Airedale resellers.

Speaker 3: One of which touched on communications we announced in a press release.

Of which Touchtone communications, we announced in our press release.

Speaker 3: These resellers join a number of others we are already partnered with for air dial including T-Mobile and more recently US Air??

These resellers joined a number of others. We are already partnered with for air dial, including T mobile and more recently U S cellular.

Speaker 3: We also announced that Viking electronics, who is a manufacturer of more than 500 security and communications products, including emergency phones, entry systems, elevator phones, and campus safety phones.

We also announced that Viking electronics, who is the manufacturer of more than 500 security and communications products, including emergency phones entry systems elevator phones and campus safety bonds.

Speaker 3: began recommending air dial to its customers and distributors after performing their own extensive testing of air dial.

Dan recommending <unk> to its customers and distributors after performing their own extensive testing of aired aisle.

Speaker 3: As we've mentioned, we believe Eardel offers the best solution in the marketplace for replacing increasingly expensive and soon to be commissioned copper lines that are connected to elevators, fire and alarm panels, older PBX equipment, and more.

As we've mentioned we believe are now offers the best solution in the marketplace, we're replacing increasingly expensive and soon to be decommissioned copper lines that are connected to elevators foreign alarm panels older PBX equipment and more.

Speaker 3: We are thrilled by the validation we are seeing by the many restillers we have signed up for air dial.

We are thrilled by the validation we're seeing by the many resellers, we have signed up for airtime.

Speaker 3: We are also thrilled to have announced in Q3 that Elevator World magazine, the leading media voice in the vertical transportation industry, selected Uma for the 2023 ELEs Awards in the category of best communication system supplier, honoring the Uma Airdell solution for POTS replacement.

We are also thrilled to have announced in Q3 that elevator World magazine, the leading media voice in the vertical transportation industry selected Umar for the 2023 lease awards in the category of Best Communications system supplier honoring the ummah Airedale solution for <unk>.

Placement.

Speaker 3: We're not standing still either in our continued improvement of air dial.

We're not standing still either and our continued improvement of air dial.

Speaker 3: Just recently, we announced that AirDial now incorporates Uma's patented multi-path technology.

Just recently, we announced that aired I'll now incorporates <unk> patented multi path technology.

Speaker 3: Multi-path creates a continuous dual connection between air dial and the public switch telephone network by transmitting data packets simultaneously through two separate data links.

Multi path creates a continuous dual connection between air dial and the public switched telephone network by chance meeting data packet simultaneously through two separate data links.

Speaker 3: Unlike other approaches where calls are dropped unfailable, failover, where there can be delays before failover occurs, and where other issues can occur related to the quality of individual transport length.

Unlike other approaches where calls are dropped unavailable fail over where they can where there can be delays before fail over occur occurs and where other issues can occur related to the quality of individual transport links.

Speaker 3: Oomas Multi-Path Technology provides seamless backup for customers who enable two internet connections to their AirDoll device.

Multi path technology provides seamless backup for customers, who are enabled to internet connections to their <unk> device.

Speaker 3: Multi-path provides one more example of how UMA stands out by providing the full end-to-end air-dial solution and comes seeing both cloud and customer premise equipment.

Multi multi path provides one more example of how <unk> stands out by providing the full end to end error dial solution encompassing both cloud and customer premise equipment.

Speaker 3: While not announced, we also made additional improvements in Q3 to AirDOS Remote Device Manager or RDM as we call it.

While not announced we also made additional improvements in Q3, two are Dallas remote device manager or RDM as we call. It <unk>.

Speaker 3: RDM gives our Airdow customers the ability to provision, monitor, manage, and control all of their Airdow devices from one portal. We view RDM as another key difference.

<unk> gives our air to our customers the ability to provision monitor manage and control all of their <unk> devices from one portal.

We view RDM is another key differentiator for airtime.

Speaker 3: And please report that in Q3, we landed what we expect will become our two largest airdile customers today.

I am pleased to report that in Q3, we landed what we expect will become our two largest <unk> customers today.

Speaker 3: One of these customers is a large retailer with many individual brands.

One of these customers is a large retailer with many individual brands. We've already started rolling out <unk> one brand of stores owned by this customer where we are displacing another parts replacement solution.

Speaker 3: We've already started rolling out AirDial to one brand of stores owned by this customer where we are displacing another POTS replacement solution.

Speaker 3: We expect this rollout is just phase one with this customer.

We expect this rollout is just phase one with this customer.

Speaker 3: The other customer is a provider in the elevator industry with access to a very large number of opportunities.

The other customer as a provider in the elevator industry with access to a very large number of opportunities.

Speaker 3: I'm pleased to report our backlog of potential sales opportunities grew again in Q3 and we have many large opportunities that we are pursuing.

I am pleased to report our backlog of potential sales opportunities grew again in Q3, and we have many large opportunities that we're pursuing.

Speaker 3: I'd like to turn now to 2,600 Hertz, which is the new business we acquired back in October .

I'd like to turn now to 'twenty 600, Hertz, which is the new business, we acquired back in October.

Speaker 3: As a reminder, 2600 Hertz provides open source core calling functionality named Kazoo that is in use today by many telecom providers.

As a reminder, 2600 Hertz provides open source pork, calling functionality named kazoo that is in use today by many telecom providers.

Speaker 3: Since initially launching Kazoo over a decade ago, 2600 Hertz has also expanded to provide its own non-open source suite of pre-built U-CAST, C-PAST, and call center applications.

Since initially launching kazoo over a decade ago 2600, Hertz has also expanded to provide its own non open source suite of prebuilt Ucas surpassed and call center applications.

Speaker 3: Telecom providers have the choice of relying solely on open source casue and building applications themselves or contracting with 2600 Hertz for a more complete solution.

Telecom providers have the choice of relying solely on open source kazoo and building applications themselves are contracting with 2600 Hertz for a more complete solution.

Speaker 3: 2600 Hertz today provides hosted cloud, private cloud, and customer hosted solutions to approximately 130 paying customers who serve hundreds of thousands of end users.

2600, Hertz today provides hosted cloud private cloud and customer hosted solutions to approximately 130 paying customers who serve hundreds of thousands of end users.

Speaker 3: The company runs data centers in eight locations spread across North America, Europe , and Oceania, maintains a workforce of about 100 employees and contractors, and has revenues of approximately 7 million annually.

The company runs data centers in eight locations spread across North America, Europe, and Oceania maintains a workforce of about 100 employees and contractors.

As revenues of approximately $7 million annually.

Speaker 3: Three main reasons drove our decision to acquire 2600 Hertz.

Three main reasons drove our decision to acquire 2600 Hertz, we made this acquisition to capitalize on the opportunity we see in the wholesale marketplace.

Speaker 3: 1 locks significant operational benefits between Ouma and 2600 Hertz.

To unlock significant operational benefits between Uber and twice 600 Hertz.

Speaker 3: And to enhance Uma's strategic position and ability to serve the fundamental needs of large carriers and other partners.

And to enhance <unk> strategic position and ability to serve the fundamental needs of large carriers and other partners.

Speaker 3: It's now been about six weeks since 2600 Hertz became part of UMA.

It's now been about six weeks since 2600 Hertz became part of Oman.

Speaker 3: In that time, we have blended our two teams together, rationalized spending in certain areas, and established our new combined strategy.

In that time, we have blended our two teams together.

Rationalized spending in certain areas and established our new combined strategy.

Speaker 3: Central to our strategy is to strengthen 2,600 hertz in the marketplace by leveraging UMA's application technology, scale, and low-cost position, and by launching new services.

Central to our strategy is to strength in 2600 Hertz in the marketplace by leveraging <unk> application technology scale, and low cost position and by launching new services.

Speaker 3: We are now actively working internally to provide 2,600 hertz customers telecom services delivered in a CPaaS business model. We're also working to leverage some of UMA's key user applications for the benefit of 2,600 hertz customers.

Now actively working internally to provide 2600 hertz customers Telecom services delivered in a seat Paas business model.

We're also working to leverage some of whom as key user applications for the benefit of 2600 Hertz customers.

Speaker 3: 2600 Hertz's customer base has responded with positive feedback on our acquisition.

2600, Hertz as customer base has responded with positive feedback on our acquisition.

Speaker 3: They are excited about our strategic direction and the intellectual property and resources we bring as a larger scale and more mature organization. Similarly.

They are excited about our strategic direction and the intellectual property and resources, we bring as a larger scale and more mature organization.

Similarly, we already have active.

Speaker 3: Conversations underway with a number of possible new customers.

Conversations underway with a number of possible new customers. These conversations will take time as possible customers evaluate pursue and get to know us, but we are optimistic about their potential.

Speaker 3: These conversations will take time as possible customers evaluate KAZOO and get to know us, but we are optimistic about their potential. Overall, I believe our integration with 2600 Hertz is going well, and we are on track, as promised, to make the acquisition adjusted EBITDA creative to UMA within six months.

Raul I believe our integration with 2600 Hertz is going well and we are on track as promised to make the acquisition adjusted EBITDA accretive to OMA within six months.

Speaker 3: Finally, I'm thrilled to mention that the publication UC Today recently named the KUNZU communication solution from 2600 Hertz as the best white label solution at the prestigious UC Partner Awards 2023.

Finally, I'm thrilled to mentioned that the publication you see today.

Recently named the consumer communications solution from 'twenty 600 Hertz.

As the best White label solution.

At the procedures you see partner Awards 2023.

Because he was chosen by a panel of 12, leading analysts and the cloud communications industry from a field of four finalists of.

Speaker 3: Of course, we're not surprised, since we know Kazoo's modern API-based architecture sets it apart in the industry.

Of course, we are not surprised since we know because these modern API based architecture sets it apart in the industry.

Speaker 3: With that, I will now turn the call over to Shig, our CFO , to discuss our results and outlook in more detail, and then return with some closing remarks. Thank you, Eric.

With that I will now turn the call over to Sherri, 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.

Speaker 4: Before I dive into our third quarter financial results, I'd like to quickly recap the financial aspects of the 2600 Hertz acquisition we completed on October 20th, 2023, right before the end of the third quarter.

Before I dive into our third quarter financial results I'd like to quickly recap the financial aspects of the 2600 Hertz acquisition, we completed on October <unk> 2023.

<unk> before the end of the third quarter.

Speaker 4: We acquired 2,600 hertz for approximately $33 million in cash, and there are no other contingency payments for this acquisition.

We acquired 26 on a hearse for APA.

Proximately $33 million in cash and there are no other contingency payments for this acquisition.

Speaker 4: With regard to funding of cash purchase price, we used approximately $50 million of our cash from balance sheet and the remaining $80 million came from a new $30 million evolving line of credit from Citizens Bank.

With regard to funding of cash purchase price, we used approximately $50 million of our cash from balance sheet.

And the remaining $80 million came from our new $30 million revolving line of credit from the citizens Bank.

Speaker 4: 2,600 hertz is expected to add approximately $7 million in annual recurring revenue to UMA.

2600, Hertz is expected to add approximately $7 million in annual recurring revenue to Umar.

Speaker 4: The acquisition of 2600 Hertz is expected to be accretive to adjusted EBITDA within six months and to make increasing contribution to our overall adjusted EBITDA as operational synergies realized in subsequent periods.

The acquisition of <unk> 26, and it hurts is expected to be accretive to our adjusted EBITDA within six months and to make increasing contribution to our overall adjusted EBITDA as operational synergies.

Lies in subsequent periods.

Speaker 4: Now I'm going to review our third quarter financial results and then provide our outlook for the fourth quarter and four-year fiscal 2024.

Now I'm going to review, our third quarter financial results and then provide our outlook for the fourth quarter and full year fiscal 2024.

Speaker 4: We delivered another solid quarter with a total revenue of $59.9 million, which included $0.23 million of subscription and service rate revenue from 2,600 hertz for the last 12 days of the quarter.

We delivered another solid quarter with a total revenue of $59 9 million.

Which included <unk> $3 million of subscription and services revenue from 2600 Hertz for the last 12 days of the quarter.

Speaker 4: Excluding 2600 Hertz revenue contribution, Q3 revenue came in at $59.6 million at the high end of a guidance range of $59 million to $59.6 million.

Excluding 26 Senate Hurts revenue contribution Q3 revenue came in at $59 $6 million at the high end of our guidance range of 59 million to $59 $6 million.

Speaker 4: On a year-over-year basis, total revenue grew 6% in the third quarter, driven by the growth of UMA business, which accounted for 58% of total subscription and services revenue, as compared to 55% in the prior year quarter.

On a year over year basis.

Total revenue grew 6% in the third quarter, driven by the growth of alumina business, which accounted for 58% or toura subscription and services revenue as compared to 55% in the prior year quarter.

Speaker 4: Q3 product and other revenue came in at $4 million as compared to $4.9 million in the prior year.

Q3 product and other revenue came in at $4 million as compared to $4 9 million in the prior year.

Speaker 4: The prior Q3 product revenue included certain accessory sales that did not recur.

The prior year Q3 product revenue included certain accessory sales that did not recur this year.

Speaker 4: On the profitability front, the third quarter non-gap net income was $4 million.

On the profitability front, the third quarter non-GAAP net income was $4 million.

Speaker 4: Excluding $0.3 million of net loss from 2600 Hertz, the third quarter non-GAAP net income was $4.3 million, exceeding our guidance range of $3.8 million to $4.1 million.

Excluding zero point $3 million of net loss of 26, and it hurts the third quarter non-GAAP net income was $4 3 million exceeding our guidance range of $3 8 million to $4 8 million $4 $1 million.

Speaker 4: and represented 24% increase over $3.5 million in the prior quarter.

And represented 24% increase over $3 $5 million in the prior year quarter.

Now some details on our Q3 revenue.

Speaker 4: Excluding the impact of 2,600 hertz, UMA business subscription and services revenue grew 14% year over year in Q3, driven by user growth.

Excluding the impact of 2600, Hertz Blue MA business subscription and services revenue grew 14% year over year in Q3, driven by user growth.

On the residential side subscription and services revenue were flat year over year.

Speaker 4: As a reminder, we had a one-time churn event during the first quarter of this fiscal year with a particular customer with an unusual application where we lost approximately 4,000 teleusers, which continued to impact our year-over-year comparison in Q3.

As a reminder, we had a one time churn event during the first quarter of this fiscal year with a particular customer with an unusual application. While we lost approximately 4000 total users, which continue to impact our year over year comparison in Q3.

Speaker 4: For the third quarter, total subscription and services revenue was $55.9 million, or 93% of total revenue as compared to $51.7 million, or 91% of total revenue in the prior year quarter.

For the third quarter total subscription and services revenue was $55 9 million or 93% of total revenue as compared to $51 7 million or <unk>, 91%, our total revenue in the prior year quarter.

Now some details on our key customer metrics.

Speaker 4: Please note that the key metrics I'm about to discuss do not include any metrics related to 2,600 hertz user.

Please note that the key metrics and about the discussed do not include any metrics related to 2600 Hertz users.

Speaker 4: Given the wholesale nature of 2,600 Hertz's business, we do not intend to blend 2,600 Hertz's user metrics into our traditional core user metrics, which will continue to represent the key metrics related to UMA business and residential users only.

Given the wholesale nature of 2016, it hurts US business, we do not intend to blend 26 kind of hurts the user metrics into our traditional core user matrix, which will continue to represent the key metrics related to <unk> business and residential users only.

Speaker 4: We ended the third quarter with 1,241,000 core users, up from 1,237,000 core users at the end of the second quarter.

We ended the third quarter with $1 million 241004 users up from 1.237 million core users at the end of the second quarter.

Speaker 4: At the end of the third quarter, we had 475,000 business users, or 38% of total core users, an increase of 8,000 from Q2.

At the end of the third quarter, we had 475000 business users or 38%.

Total core users an increase of 8000 from Q2.

Speaker 4: Our blended average monthly subscription and services revenue per core user, or APU, increased 3% year over year to $14.63, driven by an increase in mix of business users, including higher APU Office Pro and ProPlus users.

Our blended average monthly subscription and services revenue per core user or <unk> increased 3% year over year to $14.63 driven by an increase in mix of business users.

Including higher outgrew office pro and <unk> plus users.

Speaker 4: During the third quarter, we conchaed to see a healthy Office Pro and Pro Plus take rate with 56% of new office users opting for these higher tier services, which was up from 50% in the prior quarter.

During the third quarter, we continued to see a healthy office pro and pro plus take rate with 56% of new office users opting for these higher tier services, which was up from 50% in the prior year quarter.

Speaker 4: All of all, 28% of OOMA office users have now subscribed to our Pro Plus tier.

Overall, 28%.

The office users have now subscribed to a pro.

Plus here.

Speaker 4: our net dollar subscription retention rate for the quarter was 99% as compared to 99% in the second quarter.

Our net dollar subscription retention rate for the quarter was 99% as compared with 99% in the second quarter.

Speaker 4: Our annual exit recurring revenue, which now consists of recurring revenue from UMA core users and 2600 Hertz users.

Our annual exit recurring revenue, which now consists of recurring revenue from our core users and 26 and encourage users grew to $225 million and was up 10% year over year.

Speaker 4: grew to $225 million and was up 10% year over year.

Now some details on our gross margin.

Speaker 4: Our subscription and services gross margin for the third quarter was 72% as compared to 73% in the prior year.

Our subscription and services gross margin for the third quarter was 72% as compared with 73% in the prior year.

Speaker 4: Q3 subscription and services gross margin this year was impacted by certain investments we made for our largest customer as we started the further expansion into Asia and Africa in the third quarter, as well as investments in our customer support resources for ongoing airtight arrangements.

Q3 subscription and services gross margin. This year was impacted by certain investments we made for our largest customer as we started to further expansion into Asia and Africa in the third quarter.

As well as investments in our customer support resources for ongoing Edite arrived.

Speaker 4: Products and other growth margins for the third quarter was negative 73% as compared to negative 35% for the same period last year.

Product and other gross margin for the third quarter was negative 73% as compared to negative 35% for the same period last year.

Speaker 4: As mentioned on the previous calls, the decline in QC product gross margin this year versus last year was anticipated and primarily due to the following two factors.

As mentioned on our previous calls the decline in QC product.

Gross margin this year versus last year was anticipated.

And primarily due to the following two factors.

Speaker 4: First, you sort of sell through impact of certain higher cost components that we had procured in the last fiscal year to stay ahead of pandemic driven supply chains.

First we set a sell through impact of certain higher cost components that we have procured in the last fiscal year to stay ahead of pandemic driven supply chain issues and.

Speaker 4: And second, the prior Q3 product gross margin benefited from certain accessory sales that did not recur this year.

And second the prior year Q3 product gross margin benefited from certain accessory sales that did not recur this year.

Speaker 4: We continued to expect product and other growth margins for the remainder of fiscal 2024 to be negatively impacted by one time excess component cost running through the PNL and currently estimate product and other growth margin for the fourth quarter to be in the neighborhood of negative 70%.

We continue to expect product and other gross margin for the remainder of fiscal 2024 to be negatively impacted by one time SaaS component costs running through the P&L and currently estimate product and other gross margin for the fourth quarter to be in the neighborhood of negative 70%.

Speaker 4: On an all-all basis, total gross margin for Q3 was 62% as compared to 64% in the prior quarter.

On the overall basis total gross margin for Q3 was 62% as compared to 64% in the prior year quarter.

And now some details on operating expenses.

Speaker 4: Total operating expenses for a total quarter were $33.4 million up $0.6 million or 2% from the same period of last year.

Total operating expenses for the third quarter were $33 $4 million up zero point $6 million or 2% from the same period of last year.

Speaker 4: excluding the impact of 26 cent afurge, the total operating expenses increased 0.1 million, or effectively flat from the

Excluding the impact of <unk> 26, and it hurts the total operating expenses increased <unk> 1 million.

Or effectively flat from the same period of last year.

Speaker 4: Selling and marketing expenses for a third quarter worth $15.8 million or 28% of total revenue and flat year over year.

Selling and marketing expenses for third quarter were $16 8 million or 28% of total revenue.

Flat year over year.

Speaker 4: excluding the impact of 26% it hurts sales and marketing expenses for quarter was $16.6 million or a decrease of $0.3 million from the same period last year as we control that spend into increased profits.

Excluding the impact of 26000, Hertz sales and marketing expenses for the third quarter was $16 $6 million or a decrease of <unk> 3 million from the same period last year as we control that spend into increased profitability.

Speaker 4: Research and development expenses were $11.3 million or 19% of total revenue, up 3% on a year-by-year basis, from $11.0 million, $11.0 million. Join them by investments and new features for human office and enterprise, as well as Edda.

Research and development expenses or $11 3 million or 19% of total revenue up 3% on a year by year basis from $11 million $11 million driven by investments in new features but little office and enterprise as well as Ed.

Speaker 4: excluding the impact that the 26th Senate hurts, R&D expenses for the throw quarter will $11 million flat compared to the same period last year.

Excluding the impact of 26000 Hertz R&D expenses for the third quarter was $11 million flat compared to the same period last year.

Speaker 4: GNA expenses were $5.3 million or 9% or total revenue for a quarter, compared to $4.9 million for a prior year quarter. The year over year increase in GNA expenses was primarily due to an increase in personal costs.

G&A expenses were $5 3 million or 9% of total revenue for the quarter compared to $4 9 million for the prior year quarter.

The year over year over year increase in G&A expense expenses was primarily due to an increase in personnel costs.

Speaker 4: Non-Gap Net income for the third quarter was $4 million or diluted earnings for share of 15 cents.

non-GAAP net income for the third quarter was $4 million or diluted earnings per share of <unk> 15.

Speaker 4: Exploring the impact of 2600 Hertz, non-Yap net income for the third quarter was $4.3 million or deluded earnings per share of 16 cents, as compared to 14 cents in the prior year quarter.

Excluding the impact of 2600 Hertz non-GAAP net income for the third quarter was $4 $3 million.

Diluted earnings per share of <unk> 16.

As compared to 2014 in.

In the prior year quarter.

Speaker 4: I adjusted even that for the quarter was finally in dollars for 8% of total revenue.

Adjusted EBITDA for the quarter was $5 million or 8% of total revenue.

Speaker 4: excluding the impact of 26 cent of hurts, adjusted the EBITDA for the quarter was $5.2 million, for 9% of total revenue and represented 17% increase of a 4.5 million dollars for the same period the last year.

Excluding the impact of <unk> 26, and it hurts adjusted EBITDA for the quarter was $5 2 million or 9%.

Total revenue and represented 17% increase over $4 5 million for the same period last year.

Speaker 4: We ended a quarter with total cash investments of $18.9 million.

We ended the quarter with total cash and investments of $18 9 million.

Speaker 4: We generate cash from operations of $1.9 million as compared to $2.5 million in the same period last year.

We generated cash from operations of $1 9 million as compared to $2 5 million in the same period last year.

Speaker 4: As mentioned earlier, we founded a cash purchase price of 26 kind of hertz with a combination of cash from a balance sheet and an $18 million draw from a new 30 million dollar volume, the volume line of credit.

As mentioned earlier, we funded a cash purchase price of 26 at Hertz with a combination of cash on our balance sheet and an $18 million draw from our new $30 million volume revolving line of credit.

Speaker 4: The new credit facility has a three year term and the borrowing under it will bear interest rate based on Swellbar plus 210 basis points or approximately a 7.5% of all in bond rate at the time of the drawdown and of total.

The new credit facility has a three year term and borrowing under Ed will bear interest rate based on sulfur plus 210 basis points or approximately seven 5% of all in borrowing rate at the title of the drawdown in October.

Speaker 4: The additional details on the credit facility available in a form AK filed on October 23rd, 2023, as well as in a form 10Q to be filed later this week.

The additional details on the credit facility available in a form 8-K filed on October 23rd 2023, as well as in our Form 10-Q to be filed later this week.

Speaker 4: On the head down front, we ended a quarter with 1192 employees and contractors, which included new team members from 26 on a hurt.

On the headcount front, we ended the quarter with 11, 192 employees and contractors, which included new team members from 2600 Hertz.

Speaker 4: Now I'll provide guidance for the fourth quarter and fourth fiscal year 2024.

Now I'll provide guidance for the fourth quarter and full fiscal year 2024.

Speaker 4: Our guidance is on a non-gap basis and has been adjusted for expenses such as stock-based compensation, amethasational intangibles, and certain non-recurring items.

Our guidance is on a non-GAAP basis and has been adjusted for expenses, such as stock based compensation amortization of intangibles and certain nonrecurring items.

Speaker 4: Additionally, the guidance reflects a full quarter impact of 26% efforts starting in the fourth quarter, as well as interest expense for the outstanding balance under a new, quite a facility, and the parts are then at the already-lated obstruction activities to place earlier in the fourth quarter.

Additionally, the guidance reflects a full quarter impact of 2600 Hertz, starting in the fourth quarter as well as interest expense for the outstanding balance under our new credit facility and a partial benefit related to restructuring activities took place earlier in the fourth quarter.

Speaker 4: We spent total revenue for the fourth quarter of fiscal 2024 to be in the range of $61.2 million to $61.8 million, which includes $3.8 to $4.1 million of product revenue.

We expect total revenue for the fourth quarter.

Fiscal 'twenty four 'twenty 'twenty four to be in the range of $61 2 million to $61 8 million.

Which includes three eight to $4 $1 million of product revenue.

Speaker 4: We expect the fourth quarter of net income to the in the range of 3.1 to 3.4 million dollars.

We expect the fourth quarter net income to be in the range of three one to $3 4 million.

Speaker 4: As mentioned earlier, Q4Net income guidance includes a full-quarter impact of interest expense related to the new credit facility, which is estimated to be approximately $0.4 million.

As mentioned earlier Q4 net income guidance includes a full quarter impact of interest expense related to the new credit facility, which is estimated to be approximately 0.4 million.

Speaker 4: Additionally, the guidance assumes antisexpans will be sequentially lower by approximately $0.2 million, given that $15 million of cash from balance sheet was spent towards the cash purchase price of 2600 hertz.

Additionally, the guidance assumes interest expense will be sequentially lower by approximately $2 million given that $15 million of cash from our balance sheet was spent towards a cash purchase price of 2600 Hertz.

Speaker 4: Non-gap diluted EPS is expected to be between 12 cents and 13 cents.

non-GAAP diluted EPS is expected to be between 12 and 13.

Speaker 4: We have assumed 26.7 million where the average dilute shares outstanding for the fourth quarter.

We have assumed $26 7 million weighted average diluted shares outstanding for the fourth quarter.

Speaker 4: For four fiscal year 2024, we've spent total revenue to be in the range of 236.3 million to 236.3 million.

For full fiscal year 2024, we expect total revenue to be in the range of $236 3 million.

Two $236 9 million.

Speaker 4: In terms of revenue mixed for the year, we expect 93.5% of total revenue to come from subscription and services revenue and the remaining 6.5% from products and other revenue.

In terms of revenue mix for the year, we expect 93, 5% of total revenue to come from subscription and services revenue and the remaining six 5% from products and other revenue.

Speaker 4: We've spat non-gap and an income for fiscal 24 to be in the range of 14.9 million to 15.2 million dollars.

We expect non-GAAP net income for fiscal 'twenty forward to be in the range of $14 9 million to $15 2 million.

Speaker 4: CISCO 2024 and the R&KM guidance also reflects an increase in interest expense related to the new credit facility of our approximately point four million.

Fiscal 2024 net income guidance also reflects an increase in interest expense related to the new credit facility of approximately <unk> 4 million.

Speaker 4: as well as reduction in interest income of approximately $2 million for the reasons stated earlier.

As well as a reduction in interest income of approximately $2 million for the reasons stated earlier.

Speaker 4: Based on this non-gath net income guidance range, we estimate our adjusted EBITDA for fiscal 2024 to be $19.49 million to $19.7 million, or approximately 8% of revenue.

Based on this non-GAAP net income guidance range, we estimate our adjusted EBITDA for fiscal 2024 to be $19 4 million to $19 7 million or approximately 8% of revenue.

Speaker 4: We expect non-gab due to the EPS for fiscal 24 to be in the range of 57 cents to 58.

We expect non-GAAP diluted EPS for fiscal 'twenty four to be in the range of <unk> 57 to 58.

Speaker 4: We have assumed approximately 26.3 million where the average deluded shares outstanding for fiscal 2024.

We have assumed.

Approximately $26 3 million weighted average diluted shares outstanding for fiscal 2024.

Speaker 4: In summary, we are pleased with our solid performance in the third quarter.

In summary, we are pleased with our solid performance in the third quarter.

Speaker 4: The team has done a great job of growing business subscription revenue 14% here over your organic

The team has done a great job of growing business subscription revenue, 14% year over year organically.

Speaker 4: while keeping operating expenses effectively flat in today's economic environment, which resulted in irrever your organic non-gap net income and adjusted the growth of 24% and 17% respectively. I'll now pass it out to Eric for some-

While keeping operating expenses effectively flat in today's economic environment, which resulted in year over year organic non-GAAP net income and adjusted EBITDA growth up 24% and 17% respectively.

I will now pass it back to Eric for some closing remarks, Eric.

Thank you Sig.

Speaker 3: Q3 was a busy quarter for us. We worked to grow our business user base and to expand internationally. We also invested significantly to increase our airdile sales team, number of resellers and pipeline of opportunities. And with those, our airdile installed user base.

Q3 was a busy quarter for us we worked to grow our business user base and to expand internationally.

We also invested significantly to increase our <unk> sales team number of resellers and pipeline of opportunities with those our airedale installed user base.

Speaker 3: On top of these, we also closed on our 2600 Hertz acquisition and took steps to integrate 2600 Hertz into UMA and along with that optimize our cost structure. I feel we're well along on our plans for 2600 Hertz and the acquisition is going smoothly.

Top of these we also closed on our 2600 Hertz acquisition and took steps to integrate 2600 hertz into Uber and along with that optimize our cost structure.

Phil we're well along on our plans for 'twenty 600, Hertz and the acquisition is going smoothly.

Speaker 3: Our plans for Q4 entail continued focus on our multiple strategies for growth, in combination with sensible expense management, and continued cash generation from operations. Thank you.

Our plans for Q4 until continued focus on our multiple strategies for growth in combination with sensible expense management and continued cash generation from operations.

Thank you.

Now I'll take questions.

Speaker 1: Thank you. Ladies and gentlemen, as a reminder to ask the question, please press start 1-1 on your telephone, and then wait to hear your name and out.

Thank you, ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and then wait to hear your name announced.

Speaker 1: to withdraw your question. Please first start one one again. Please stand by while we compiled Q&A Ross.

To withdraw your question.

Please press star one again please.

Please standby, while we compile the Q&A roster.

Speaker 5: Our first question comes from the line of Mike Latimore with no flan capitol market. Yaline is open. Great. Yeah. Thanks for watching. On the

Our first question comes from the line of Mike Latimore with Northland Capital markets. Your line is open.

Great. Thanks very much.

On the.

Your largest customer which is a region.

Speaker 3: How many users do you think they will have by fiscal year end now? And then I think you said you expect to launch new countries next year. I guess what's the kind of incremental opportunity next year? Yeah, I might.

How many users do you think they will add by fiscal year end and then I think you said you expect to launch new countries next year, I guess, what's the kind of incremental opportunity in extra.

Yeah, Hi, Mike.

Hello.

Hello.

Sure.

We're we're over 85000 users with them now.

And.

We did not have as much growth in Q3, as we might have because some of these new countries are taking a little bit more work on both sides too.

To bring up and get going.

And Q4 will be a little slower to just with.

A lot of work to do this and the teams need a little bit of a break but.

Speaker 3: You know, we'll be up over 90,000 at the end of the fiscal year. And I've talked in the past that we could get to maybe 120,000 or so. And that's where we're working towards for the first half of next year. But each...

We will be will be up over 90000 at the end of the fiscal year end.

I've talked in the past that we could get to.

Maybe 120000 or so.

That's what we're working towards for the first half of next year, but.

Each.

Speaker 3: It's an extra effort every country we add and the countries are smaller now than the ones at the outset. So how fast we get there are not exactly sure. But we're anticipating the first half of next year still busy with adding users.

It's it's an extra effort every country. We added the countries are smaller now than the ones at the outset. So how fast we get there I'm not exactly sure but were anticipating the first half of next year, it's still busy with having users.

Speaker 5: Great, great. And then how about just the, you know, the US small business market? Any noticeable change versus last quarter in terms of just, I don't feel cycles, collections, general activity and sort of small business, UCAS land.

Okay great.

And then how about just the.

The small business market.

Noticeable change versus last quarter in terms of just.

Sales cycles collections, just general activity in sort of small business <unk> land.

Speaker 3: Actually no. Fail cycles are similar, no collections issues other than the normal ones we have.

Actually no sales cycles are similar no collections issues other than the normal ones we have.

Speaker 3: You know, we're a little cautious for Q4 because as we remember last year with the holidays and all, small businesses were busy or finishing up their years and then, you know, obviously we kicked off in January with a good market opportunity.

We're a little cautious for Q4, because we remember last year with the holidays and all.

Small businesses were busy are finishing up their years and then.

We kicked off in January with.

A good market opportunity.

Speaker 3: But we think the markets, it was stronger during the COVID time when everyone was figuring out new solutions, but it's still robust. And most importantly, there's a big market that's yet to be brought up to, a modern communication solution like rumor provides. So we see lots of opportunity to go after. Great. And we are pleased that.

But.

We think the markets.

Yes.

Was stronger during the Covid time, when everyone was figuring out new solutions, but it's still robust and most importantly, there is a big market, that's yet to be brought up to.

Our modern communication solutions like zoom or provides so we see lots of opportunity to go after.

Great and just last one on product gross margin.

Speaker 5: Once some of the anomalies come out of the mixture, what should that product cross margin normalize to?

One some of the anomalies come out of the mix here, what should that product gross margin normalize too.

Yes so.

Speaker 4: It's probably what we're talking about Q2 next year, once we get through.

It's probably we're talking about Q2 next year once we get through.

Speaker 4: you know, the consumption of the higher cost components might. But I think a normalized range, I would say 50, 50 to 55 kind of lanes, which were traditionally warbed there before we had this components. So that's that's what I would say. Okay. Very good.

The consumption of higher cost components, Mike, but I think normalized right.

<unk> I would say safety.

$50 to 55 kind of range, we traditionally award there before we had this component. So that's why I would say.

Okay.

Alright, guys. Thanks, a lot.

Thank you. Thank you.

Please standby for our next question.

Speaker 1: Our next question comes from the line of Earth, the PIGR, with JMP security. Siulan is open.

Our next question comes from the line of Erik <unk> with JMP Securities. Your line is open.

Speaker 6: Yeah, thanks for taking the question. First off, just on the outlook for Q4, it does seem as though you're looking for relatively flat sequential growth on the subscription revenue on an organic basis. Is there any reason you're more conservative there?

Yes, thanks for taking the question.

First off just on the on the outlook for Q4. It does seem as though you are looking for relatively flat.

Sequential growth on the subscription revenue.

On an organic basis is there any reason you are more conservative there.

Speaker 4: So, on an overall total revenue basis, you know, one of the reasons is we had about $40,000 of non-recurring product.

So all of our total revenue base is.

While the reason is we had about $400000 of <unk>.

Non recurring product.

Speaker 4: product we're avenue in Q3 that we're not going to have having Q4 so

Product revenue in Q3 that we had in Q4 itself.

Speaker 4: you know, that's one of the total revenue themes for that, your quarter to quarter. And then there's one adjustment that on the business subscription side that in a sequential phase is well-making that really just one time in nature and it's now fundamentally.

That's why the total revenue.

It seems flat quarter over quarter.

And then there is one adjustment that.

On the business subscription side that in a sequential basis, we're making that really just one time in nature and it's now fundamentally.

Speaker 4: Nothing different about the trend that's passed. So if you take out these two items, fundamentally we see still the subscription that when you're growing.

Nothing different about the trend that SaaS. So if you take out.

These two items.

And the value, we see still that subsequent shown revenue growing.

Speaker 7: at more normalized level, which is, you know, I would say

A more normalized level, which is.

I would say.

Speaker 7: $100,000, quarter of a quarter. So it's a bit of a hard to see, obviously with that some of these pointers, but that's what we see.

$100000 quarter over quarter, So it's hard to see obviously without some of these pointers that that's what we see.

Speaker 6: Okay. And then you said Regis could reach, I think he said, 120,000 end users. How many countries would you anticipate that that will be?

Okay, and then you said regus could reach.

You said 120000 end users how many countries would you anticipate that that will be.

Speaker 3: over 50 for sure. We're already able to serve more countries than we're now in with them as we wait for conversions and roll out to happen. But I believe we'll be in.

70 or so.

Over 50 for sure.

We're already able to serve more countries than they are and we're now in with them as we wait for conversions and rollout to happen.

But.

I believe we'll be in.

Speaker 3: vast majority of the countries there now and they're in a total of about 100 countries, but I need to be a little conservative because I think we'll see how it runs out in the tail. Some of the countries are quite small.

Yes.

Vast majority of the countries that are now and there is a total of about 100 countries, but I need to be a little conservative because I think we will see.

How it runs out in the tail some of the countries are quite small.

Speaker 6: Okay, then how do you anticipate generating follow-on business with those countries? Is that, can you talk a little bit about timing around that?

Okay, and then how do you anticipate.

Generating follow on business with those countries is that kind of can you talk a little bit about.

Timing around that.

Speaker 6: Their follow-on difference with additional customers inRatislok

Yes.

With additional customers.

Customer incentives.

Speaker 3: Sure, sure. So obviously the next six to nine months is just rollout phase of...

Sure sure.

So obviously the next six to nine months is just rollout phase of.

Speaker 3: as we've discussed here. They are a growing organization, so that's potential growth for us. And also, we're serving there, the kinds of users of theirs that we're serving are the ones that have,

As we've discussed here.

They are growing organization, so thats potential growth for us and also <unk>.

Serving there.

The kinds of users of theirs that we're serving are the ones that have.

Speaker 3: that are operating in their buildings. They have other users that do other things with them that are potential for us down the road as are more premium solutions that we could roll out with them as well. I don't wanna get too much into where we see it evolving next, but we think we'll have more opportunities for growth after we get this rollout under our belt.

Sure.

That are operating in their buildings. They have other users that do other things with them that are that are potential for us down the road as our more premium solutions that we could rollout with them as well.

Don't want to get too much into where we see it evolving next but.

We think we will have more opportunities for growth. After we get this rollout under our belt.

Got it okay. Thank you.

Okay.

Thank you.

Speaker 1: Please stand by for our next speaker, moment.

Please standby for our next speaker one moment.

Speaker 1: Our next question comes from the line of Josh Nichols. Would Be Rally, the line is open?

Our next.

Comes from the line of Josh Josh Nichols with B Riley Your line is open.

Speaker 8: Yeah, thanks for taking my question. I was wondering if you could elaborate a little bit. I think you mentioned it.

Yeah. Thanks for taking my question I was wondering if you could elaborate a little bit I think.

Speaker 8: In the quarter you landed two air dial customers that you think ultimately are probably going to become the largest customers. I know air dial is taking a little bit longer to ramp than originally.

You mentioned that in the quarter you landed two airedale customers that you think ultimately are probably going to become.

The largest customers I know are Dallas, taking a little bit longer to ramp than originally anticipated but.

Speaker 8: anticipated, but could you provide a little bit more clarity on the type of market opportunity that those two customers represented? Do you have any visibility into?

Could you provide a little bit more clarity on the type of market opportunity that those two customers represented do you have any visibility into.

Speaker 8: What type of install units these two customers alone could represent if we think about over the next 12 to 18 months?

What type of.

Install units. These two customers alone could represent if we think about over the next 12 to 18 months.

Sure Hi, Josh.

Speaker 3: Yeah, we mentioned that to clarify my words, we mentioned they could be the two our two largest customers today. We do have other customers we are.

Okay.

Yes, we mentioned to clarify my words, we mentioned it could be the two our two largest customers to date, we do have other customers we are.

Speaker 3: pursuing in our sales funnel that are even larger. But each one is thousands of users, and let me put it that way. Not over 10,000, but thousands of users.

Pursuing in our <unk>.

Sales funnel that are that are even larger.

But each one has thousands of users and let me put it that way not over 10000, but thousands of users.

Potential.

The other thing we've seen is all through this year.

First three quarters of this year.

Number of opportunities in our sales funnel, particularly the number of <unk>.

Potential users in our late stage.

Speaker 3: sales process has grown each quarter. And that also helps us...

Sales process has grown each quarter and then.

That also.

Helps us.

Speaker 3: get a better understanding of where we can go with this. We did make a big step in Q3. We were able to fill several sales positions.

Get a better understanding of where we can go with this.

Did it make a big step in Q3, we were able to fill several sales positions for air dial.

Speaker 3: for air dial, which will allow us to go after the market more strongly. We have 10 different verticals that we're pursuing with air dial.

<unk> will allow us to go after the market more strongly.

10 different verticals that we're pursuing with air dial and.

Speaker 3: And if you look at the opportunities we have and even dress what these couple of customers can represent, it continues to be a very positive opportunity for us. But obviously, as you said, we need to get, get.

If you if you look at the opportunities we have and even just what these couple of customers can represent.

It is.

It continues to be a very positive opportunity for us, but obviously as you said we.

We need to.

Get get.

Speaker 3: We would like to move faster and we're doing, and we're investing to do that.

We would like to move faster and we're doing and we're investing to do that.

Speaker 8: Thanks, so then just more or two small things. Shig, did you mention, I think you said product revenue would be between 3.8 million and 401 for 40.

Thanks, and then just.

One or two small things shake did you mentioned I think you said product revenue would be between $3 $8 million and 401 per quarter.

Speaker 8: Okay, so it's random in line. Yep. And then last question, I know that there's like a big delta between...

Okay.

Yep.

And then last question I know that there is like a big Delta between.

Speaker 8: the gap and the non-gap guidance for 4Q. I know that that's not super surprising, given the acquisition, I was just kind of curious what you were expecting for one time cost, just trying to think about how to manage or model the cash flow for 4Q.

The GAAP and non-GAAP guidance for <unk> I know that that's not super surprising given the acquisition I was just kind of curious what you were expecting for onetime costs, just trying to think about how to manage our.

Model the cash flow for <unk>.

Speaker 4: Yes, for the fourth quarter, we're gonna have a few one-time costs. So one item is that we're stretching costs, we're stretching activities that we undertook as costs associated with it. It's impressively charged by half a million that we're incurring there in two-four.

Yes, so the fourth quarter.

We are going to have a few one time cost so.

What items are restructuring cost.

<unk>.

Pricing activities that we undertook as COO.

Costs associated with associated with some press release, Josh rates half a million dollars.

That we are incurring there in Q4.

And.

We also have.

Speaker 7: Fama additional, acquisition of the later cost, but we can get, it's actually in the press release too, and happy to get you a little more detail there. Sounds good, appreciate it, thank you.

Some additional.

Acquisition related costs.

We can get it is actually a press release in the press release to and happy to get you a little more detail there.

It sounds good I appreciate it thank you.

Thank you.

Thank you.

Please sandberg our next question.

Speaker 1: And next question comes from Lana Bryant, Tint Flinger with a Lion's Global Partners. Yalana Zilpe.

Our next question comes from the line of Brian Slinger with Alliance Global Partners. Your line is open.

Speaker 9: Great, thanks so much for taking my question. Congrats on the successes with AirDial. My one question is, last quarter you talked about there were challenges in the pace of installation. Some of it were people, some of it were the various places where installs might happen. What progress has the company made, especially within its control, the pieces that are in its control, if any, to help improve installation rates?

Great. Thanks, so much for taking my question congrats on the successes with air dial.

One question is last quarter, you talked about.

Our challenges in.

The pace of installation some of that where people some of it were.

The various places where installs might happen.

What progress has the company made especially within its control pieces under its control.

Any to help improve installation rates.

Speaker 3: Yeah, hi Brian .

Thank you.

Yes, Hi, Brian.

Speaker 10: I feel we've got that well in hand actually. We have a customer right now who wanted to roll out to quite significant number of locations and do it all in a week.

I feel we've got that well in hand actually we have a customer right now who wanted to rollout quite significant to quite significant number of locations and do it all in a week.

Speaker 10: And we did it. And so when a customer is ready to move, and if the customer knows what their needs are and where their needs are and has the access and all that planned out, we can move quickly with them. We're not all our customers are like that. Some customers can take

And we did it.

And.

So when our customers ready to move and if the customer knows what their needs are and where their needs are and has the access and all of that planned out we can move quickly with them.

We are.

Not all of our customers are like that some customers can take several months just to even.

Speaker 10: several months just to even, you know, stand up a proof of concept and test something for then a couple months more. But sometimes you get, sometimes you get customers who have a deadline and they wanna move. So I feel like the pace of rollout is being driven more from, but customers can accomplish them what, than our team. Where we're ready to go. Thank you, my second question.

Standup a proof of concept in test something for then a couple of months more but sometimes you get sometimes to get customers, who have a deadline and they want to move so I feel like.

The pace of rollout is being driven more from what customers can accomplish them what.

Then our team we're ready to go.

I guess my second.

Question for Shane would be.

Speaker 9: when the installations start ramping and they become a more meaningful piece of revenue, just remind us the puts and takes to product revenue and margin versus subscription and service.

And then the installation start ramping.

And they become the more meaningful piece of revenue just remind us.

The puts and takes to product revenue and margin versus subscription and services.

Speaker 4: Yeah, so as the installation lands, so we're reporting the cost of cost and revenue related installation activity itself in a product along with a product.

Yes, so as the installed installation are asked by in that so we're reporting the.

Cost cutting cost and revenue related to installation activity itself in a product along with our product.

Speaker 4: itself. And so, you know, we got to start to see that product revenue increase as we ran on the installation.

Itself and so.

We got to start to see that product revenue increase as we.

Ramp on installation.

Speaker 7: And I think we talked about earlier, but our intent is to not lose money on the installation activities.

And I think we talked about earlier about our intent is to.

<unk> lose money.

The installation activities.

Speaker 4: Meaning that, you know, we pass on a cost to the customer to achieve that. And so, my take on that is, as we have more air-dye-related product installation revenue, product margins should improve as well over time. Well, obviously, that will precede the ramp on the.

Meaning that we pass on a cost per customer.

To achieve that.

So.

My take on that is as we have more AD related product installation revenue.

Product margins should improve as well over time, obviously that would precede the ramp on the.

Speaker 4: Subscription, rather than you relate it to your dial because the installation needs to have when you're in front of it.

Subscription revenue related to add though because <unk> needs to happen in front of it.

Speaker 4: And we're still seeing a pretty good trend on our outgroup on the service side. And we think it's going to be a creative to our subscription margin today as we ramp on the subscription side as well.

And.

We're still seeing a pretty good trend down at all.

<unk> on the service side, and we think it's going to be accretive to our subscription margin today as we ramp on a subscription side as well.

Great. Thank you so much.

Thank you.

Speaker 1: has a reminder, ladies and gentlemen, that star one one to ask the question. Please.

As a reminder, ladies and gentlemen that star one to ask the question.

Please standby for our next question.

Speaker 1: Our next question comes from the line of Matthew Herrigan with Ben Schmach. Your line is open.

Our next question comes from the line of Matthew Harrigan with benchmark. Your line is open.

Speaker 5: Thank you. Firstly, since you're not including 2600 hertz in your KPIs, and it's pretty evident, we're going to be modeling that in the longer term. You talked about some of the growth opportunities there with some of the customized apps and certainly even better monetization of Kazoo. What's your ambition in terms of the long term?

Thank you.

Firstly since you are not including 2600 Hertz and your <unk>.

Kpis are its pretty evident and we're going to be modeling that longer term you talked about some of the growth opportunities there.

With some of the customized apps and thirdly, even yes.

Better monetization.

What's your ambition in terms of the long term.

Speaker 5: growth rate there, which presumably exceed that for your core business. And then secondly, on your existing subscription business, you said that 28% are taking pro or pro plus right now. I mean, you've got a good product incrementally at pretty low incremental cost.

Growth rate, there, which presumably exceed that your core business and then secondly on your existing <unk>.

Scripts in business.

<unk> said that 28% are taking CRO or pro plus right now we've got a good product incrementally at pretty low incremental cost.

Speaker 11: Why is it, I know I've asked you this before, but how often do you consider voting more to marketing to upgrade the installed base? I don't know whether it's much more of a, you know, brotherly shove than looks like on the surface to get people to upgrade, but presumably, you could be affording more utilities for customers and ramping it through real freight while you do it at the same time. Thanks. Yeah.

Why is it I know I've asked you this before but.

How do you consider devoted more to marketing to upgrade the installed base or whether it's much more of a.

Rather lose shelf and it looks like on the surface to get people to upgrade, but presumably you could be afford and more utility for our customers and revenue growth rate.

At the same time Opex.

Yes, Hi, Hi, Matthew.

<unk>.

Speaker 10: Well, we do do a bit of outreach to our existing customer base around Pro and ProPlus. Got to keep in mind that when they came on board as users,

Well, we do do a.

A bit of outreach to our existing customer base around pro and <unk> plus.

Keep in mind that when they came on board as users.

Speaker 10: They self-selected at the time with our solution. So they're pretty happy with what they've got many of those users. In some cases, it's hard to reach out to them too because marketing emails don't always get to flow through. But...

They self selected at the time.

With our solution. So they are pretty happy with what they've got many of those users.

In some cases, it's hard to reach out to them to because.

Marketing emails don't always get the flow through but.

Speaker 10: We do see customers as they expand. I'm starting to tap into some of our new capabilities. And as I said, the new customers coming on board are coming on more than half of them are taking a premium premium.

But we do we do see customers as they expand.

Starting to tap into some of our new capabilities and.

As I said, the new customers coming on board.

Our.

Coming on.

More than half of them are taking a premium premium premium.

Speaker 10: here. You know, we, it might be part of it a little bit, might be too, just you really need to explain it to customers. And our salespeople are able to do that with the new customers, a little bit of hard to have those conversations at that level with our installed base. But it is something we work on and we can devort more resources to going forward. First question again.

Tier.

We.

It might be part of it a little bit might be to just you really need to explain that to customers and our salespeople are able to do that with the new customers, who are a bit hard to.

Have those conversations at that level with our installed base, but but it is something we work on and we can devote more resources to <unk>.

Resources to going forward.

First question again.

Speaker 11: Would there be a way to do a sort of a push free trial for like a month or three months to just show them the capabilities? I assume the expenses wouldn't be that high to do it or is that just awkward in terms of the software upgrade?

Wait.

Would there be sort of a push pretty trial for like a month or three months, because certainly the capabilities I assume.

That just wouldn't be it wouldn't be that hard to do.

Understood, but just awkward in terms of the software upgrade.

Speaker 10: No, we do different kinds of things. Sometimes more or less of that nature. Yeah.

No, we do different kinds of things, sometimes more or less of that nature.

<unk>.

Yes, yes.

Speaker 10: It's a good question and what we tend to do today is just send emails with a little bit of information of some of the features that people could get. But free trials aren't a bad way to go either. J S

Okay.

It's a good question and we tend to do today is just send E mails with.

But a little bit information on some of the features that people could get but.

Free trials arent too bad way to go either.

And.

Speaker 11: Keep that in mind. I think a manual first question was something on the line of would expect the 26th-century herbs, what sort of growth rate that you could assume in relation to the core business or something like that, right? Exactly, because it's pretty obvious. People are going to be modeling that, separately since you're not including that in your core KPIs as you stipulated.

Keep that in mind.

I think your first question was something along the line of with respect to 2006, our herds.

What sort of growth rate that you could pursue in relation to the core business or something like that right.

Okay.

People are going to be modeling out separately since youre, not including that your kpis as you stipulated.

Speaker 10: Yeah. We're literally lucky to try to answer that question with too much detail because it's only been six or seven weeks that we've...

Yes.

We're a little reluctant to try to answer that question with too much detail because it's only been six or seven weeks that we have.

Speaker 10: been developing this opportunity now and owned it. But we do see real meaningful opportunities.

Ben.

Developing this opportunity now as an owned it.

But we do see real meaningful opportunities.

Speaker 10: You know, there are users out there of the consue platform from an open source perspective that could be converted over into paying users by offering them more than what they have today.

There are users out there the consumer platform from an open source perspective that could be converted over into paying users by offering them more than what they have today. There are significant opportunities for new customers to be brought onto the platform some of whom would.

Speaker 10: there are significant opportunities for new customers to be brought onto the platform, some of whom would be moving off another platform that's out there, and others that just are going to sunset maybe something they've built internally and want to move to something more modern. I think we are close to getting our first

Moving off another.

Platform that's out there.

Others that just are going to sunset, maybe something they built internally and want to move to something more modern.

I think we are close to <unk>.

Speaker 10: customer to move off of another company's platform and on the on a kazoo, but we'll have to wait and see if we close that in queue for.

Getting our first.

Customer to move off of another company's platform and onto on a kazoo, but we'll have to wait and see if we close that in Q4, and then thirdly the C pass services.

Speaker 12: And then thirdly, the CPAS services, and we have a very specific effort in place today to bring UMA's cost structure and scale in telecom services as a CPAS offering to the installed base and then move from there. Predicting what that will be for next fiscal year is hard for us. I think that we'll learn a lot the next three months in our sales efforts and then be able to give better guidance at the end of the next quarter. Great. Thanks, Eric. Thanks, Chig.

We have a very specific effort in place today to bring <unk> cost structure and scale in telecom services as the C pass offering to the installed base and then move from there.

<unk> what that will be for next fiscal year is hard for us I think that we'll learn a lot. The next three months and our sales efforts and then be able to give better guidance at the end of next quarter.

Great. Thanks, Eric.

You bet.

Thank you.

Please standby for our next question.

Speaker 1: Our next question comes from the line of our June Bhattia with Wembley, Yalani Sopi.

Our next question comes from the line of Jim <unk> with William Blair. Your line is open.

Speaker 6: Thank you guys for taking the question. If I could just go back to the user growth, I know it sounded like it was a large customer region that was driving some of the headwind there, but if we look to other customers, are you seeing similar kind of muted growth there in Q3 and Q4, is it largely related to Regis where we're seeing slower growth from the user-based rather?

Alright.

Thank you guys for taking my question, if I could just go back to the user growth.

Good luck.

Your largest customer region that was driving some of the headwinds there, but if we look to other customers.

Are you seeing similar.

Kind of muted growth there in Q3, and Q4 or is it largely related to <unk>.

We're seeing solid growth from our customer base from user base revenue.

Yes, hi.

Speaker 10: Well, we're thinking for both Q3 and Q4, particularly Q4 now. We're going to see, as you said, muted growth with our large customer. But beyond that, we want to be cautious because

Well, we thank you for both Q3 and Q4, particularly Q4 now.

We're going to see as you said muted muted growth with our large customer.

But.

Beyond that we want to be cautious because.

Speaker 10: Q4 is an interesting quarter with the holidays involved in small businesses taking time off for being very busy

Q4 is an interesting quarter with the holidays involved in small businesses, taking time off for being very busy with the holiday time.

Speaker 10: with the holiday time. It's not always the best time for customer acquisition. We're being very sensible about that in our investment strategies. We are controlling ourselves and marketing spend. We're happy with our customer acquisition costs and we're improving the EBITDAQ commensurately. EBITDAQ is growing faster than our, than our growth of our other metrics. So I think we have a good plan for Q4.

It's not always the best time for customer acquisition, we are being very sensible about that in our investment strategies. We are controlling our sales and marketing spend are we're happy with our customer acquisition cost and we're improving the EBITDA commensurately.

Our EBITDA is growing faster than our than our the growth of our other metrics. So I think we have a good plan for Q4.

Speaker 10: But yeah, we're being a little guarded just to wait and see how it turns out. I can get one more data point. I know you didn't ask about residential, but...

And but but yes.

Yes, we're being a little guarded just to wait and see how it turns out I can give one more data point I know you didn't ask about residential but.

Speaker 10: We're pleased with our residential business.

We're pleased with our residential business, thus far into the quarter were through Black Friday, and cyber Monday and in that thanks.

Speaker 10: thus far into the quarter. We're through Black Friday and Cyber Monday and that, you know,

Speaker 10: Thanksgiving period when we, you know, want to drive some sails on the residential front and we were happy with what we achieved.

Thanks, giving period when we.

Wanted to drive some sales on the residential front and we were happy with what we achieved.

Speaker 10: this year compared to a year ago. So that's one piece of positive news that we already have.

This year compared to a year ago.

One piece of positive news that we already have.

Speaker 13: Okay, perfect. That's helpful. And then maybe going back to Regis, I know you're talking about expanding into other countries and the opportunity that could pose longer term. How should we think about what that process is like to go into other countries? How long does it take to take to open up a new geography? How many resources are required? What are the challenges? Maybe just help us understand that process a little bit better.

Okay perfect.

And then maybe going back to.

So I know you're talking about.

Expanding into other countries and the opportunity that could pose longer term.

How should we think about what what that process is like to go into other countries. How long does it typically take to open up a new geography Permian resources are required.

The challenge is maybe just help us understand that process.

A little bit better.

Speaker 10: Sure. I'm going to repeat some of the things that may have said in previous calls. I apologize. So it starts with putting our capabilities into the region because we're doing with communications services. You have to be mindful of Internet.

Sure.

I'm going to repeat some of the things that may have said in previous calls so I apologize but.

So it starts with putting our capabilities into the region.

Because we are dealing with communications services.

You have to be mindful of.

Speaker 10: distances and delays that can affect the quality. So we have to have...

Internet distances.

And delays that can affect the quality. So so we have to have fully stand alone <unk>.

Speaker 10: fully stand alone instances of what we do in each region where we want to serve the countries there. As I said, we're in five regions today and we can serve all the countries now pretty much in those regions.

Since as of what we do in each region, where we want to serve the countries there.

As I said, we're in five regions today, and we can serve all of the countries now pretty much in those regions, although we arent yet.

Speaker 10: although we aren't yet. And then we have two more regions to stand up between now and the middle of next year.

And then we have two more regions to stand up between now and the middle of next year.

Speaker 10: Once we have those seven regions in place, we'll have very good coverage. And then it comes down to what you need to do to be in that particular country. There may be certain laws and regulations you have to conform to, certainly language and other adaptations to the platform, maybe calling patterns. You have to decide how you're going to deliver.

Once we have those seven regions in place will have very good coverage.

And then it comes down to what you need to do to be in that particular country. There may be certain laws and regulations you have to conform to certainly language and other adaptations to the platform maybe calling patterns.

You have to decide how you're going to deliver services from a carrier.

Speaker 10: Services from a carrier partner status.

Partner status.

Speaker 10: and then once you have that in place,

And then.

Once you have that in place.

Speaker 10: uh... plan a rollout strategy that involves, you know, converting away from something already in place and there's a lot of work to do that

Plan, a rollout strategy that involves converting away from something already in place and Theres a lot of work to do that so.

Speaker 10: So, we tend to roll out with our large customer kind of country by country or a couple countries in a region at a time and then you move on to the next ones.

We tend to rollout with our large customer kind of country by country or a couple of countries in the region at a time and then you move on to the next ones.

And.

Speaker 10: You know, we went into Hong Kong in Q3. We went into South Africa in Q3. There are other countries in Asia that we're expanding in in Q4.

We went into Hong Kong.

In Q3, we went into South Africa in Q3.

There are other countries in Asia that we're expanding in in Q4.

Speaker 10: We'll be finishing up South African Q4 and we'll just be rolling out from there. You know, it's giving us an incredible footprint.

We will be finishing up South Africa in Q4, and we will just be rolling out from there.

It's giving us an incredible footprint.

Speaker 10: On a much bigger stage than we've operated on in North America. And I think that's a really valuable asset for UMA as we look forward, not only for our U-Cast solutions, but also, frankly, for air dial.

On a much bigger stage than we've operated on in North America, and I think that's really valuable asset for <unk> as.

As we look forward not only for our Ucas solutions, but also frankly for <unk> and.

Speaker 3: And we're going through the thinking right now on what our priorities will be for next year to start to capitalize on this asset beyond North America. And Airdial will be a very strong.

Going through the thinking right now.

And what our priorities will be for next year to start to capitalize on this asset.

Beyond North America.

Eric will be a very strong.

Speaker 10: Contender contender for that because we think we have such a unique solution there and kind of a unique market opportunity at this time So it's exciting for us to have this in place. We're well down the train on all of this Not to go on, but you know It's been years in the making to be where we are today and we're just getting over I think the final hurdles

Can denver contender for that because we think we have such a unique solution there and kind of a unique market opportunity at this time. So it's an exciting for us to have this in place we're well down the train on all of this.

Not to go on but its been years in the making to be where we are today and we're just getting over I think the final hurdles.

Speaker 13: Sorry, one more if I can just follow up. On the, is the subscription and services gross margin following this international build-out meaning? Once this is, once you have the additional region stood up by the middle of next year, should that be the drop in subscription gross margins or other factors that maybe I'm not considering there?

Yeah.

And sorry, one more if I can just follow up on the is the subscription and services gross margin following the international build out meaning once this thing is once you have the additional regions stood up in the middle of next year should that be the trop and.

Subscription gross margins or are there other factors that maybe I'm not considering there.

Speaker 7: Yeah, so certainly, you know, we talked about a little bit, but, you know, we're making some investment related investments related to the expansion there that I talked about. We just talked about.

Yes, so certainly.

We talked about a little bit but.

We're making some investment related investments related to the expansion there can I talked about we just talked about.

Speaker 4: So, you know, it's pointing down, wrapping you a little bit upfront, I mean, that gross margin, a little bit upfront on the subscription side. I think going into second half of next year, I think we started to see more scale efficiency there.

So it is pointed out on revenue a little bit of upfront I mean gross margin a little bit upfront on a subscription side I think going into the second half of next year I think we started to see more scale efficiency there.

Speaker 7: Will expect to largest customer as well. And also in your terms, remember that 2600 hertz gross margin or recurring revenue isn't quite at the level that. Corporate margin is either so as we walk through the, you know.

Well, they expect their largest customer as well.

And also on your Jonathan remember that 2016, our harvest gross margin on our recurring revenue isn't quite at the level of that.

Corporate margin as either so as we walk through that.

Speaker 7: for the expansion of largest customer along with the synergy related to the space center hers. I think second half of next year's good point to start to see some improvements on the subscription margin. Okay, very helpful.

Further expansion of <unk>.

Our largest customer along with the synergies related to transmission Hurst, Inc.

Second half of next year is a good point to start to see some improvements on our subscription margin.

Okay.

Helpful. Thank you for taking my questions.

You bet.

Speaker 1: Thanks Sharon, no further questions in the queue. I will now like to turn the call back over to the earth for close and remark.

Thank you.

I'm showing no further questions in the queue.

I would now like to turn the call back over to Eric for closing remarks.

Speaker 10: Well, thank you, everyone. We've gone the full hour, so I won't say more, but I appreciate your attendance today. Thank you very much. Bye-bye.

Well. Thank you everyone. We've gone full hours, so I won't say more but I. Appreciate your attendance today. Thank you very much bye bye.

Speaker 1: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.

[music].

Okay.

Okay.

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