Q4 2024 Ooma Inc Earnings Call

Yes.

[music].

Operator: www.pinnacle-art.com Hello, and thank you for standing by. Welcome to Ooma's fourth quarter and fiscal year 2024 financial results. At this time, all participants are in a listen-only mode.

Okay.

Hello, and thank you for standing by welcome to the OMA fourth quarter and fiscal year 'twenty 'twenty four financial results. At this time all participants are in a listen only mode. After the Speakers' presentation, there would be a question and answer session.

Operator: After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised.

To ask a question during the session you will need to press star one on your telephone.

You within your automated message advising yohan just rice.

Operator: To withdraw your question, please press star 11 again. I would now like to hand the conference over to Matt Robison. You may begin. Thank you, Tawanda. Good day, everyone, and welcome to the fiscal fourth quarter and full year 2024 earnings call of Ooma Inc. My name is Matt Robison, and I'm the Director of IR and Corporate Development. I apologize in case I cough during my comments.

Withdraw your question. Please press star one again.

I would now like to hand, the conference over to Matt Robison you may begin. Thank you Joanna good day, everyone and welcome to the fiscal fourth quarter and full year 2024 earnings call.

My name is Matt Robison director of IR and corporate development.

Apologize in case of cost.

Matthew Sewell Robison: On the call with me today are Ooma's CEO, Eric Stang, and CFO, Shig Hamamatsu. After the market closed today, Ooma issued its fiscal fourth quarter and full year 2024 earnings press release. This release is also available on the company's website, ooma.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 the replay of this call for one year.

On the call with me today are CEO, Eric Stang, and CFO Shay Tomer box here.

After the market closed today issued its fiscal fourth quarter and full year 2024 earnings press release. This release is also available on the company's website <unk> 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 will be active for replay of this call for one year.

Matthew Sewell Robison: During today's presentation, our executives will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

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

Forward looking statements generally generally relate to future events or future financial or operating performance.

Vacations 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.

Matthew Sewell Robison: These risks include those set forth in the press release we issued earlier today and those risks more fully described in our filings with the Securities and Exchange Commission. The foregoing statements in this presentation are based on information available to us as of the date hereof. And we disclaim any obligation to update any forward-looking statements except as required by law. Please note that, other than revenue, or as otherwise stated, the financial measures to be disclosed on this call will be on a non-GAAP basis. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

Forward looking statements in this presentation are based on information available to us as of the data hereof.

And we disclaim any obligation to update any forward looking statements, except as required by law.

Please note that other than revenue or as otherwise stated the financial measures to the scout 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 a discussion of why we present non-GAAP financial measures and a reconciliation.

Matthew Sewell Robison: A discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures discussed in this call to the most directly comparable GAAP financial measures is included in our earnings press release, which is available on our website. On this call, we will give guidance for the first quarter and full year fiscal 2025 on a non-GAAP basis. Also, in addition to our press release and 8K filing, the overview page and events and presentations page in the investor section of our website, as well as the quarterly results page, the financial information section of our website, include links to information about costs and expenses not included in our non-GAAP values and key metrics of our core subscriptions. These are titled Supplemental Financial Disclosure 1 and Supplemental Financial Disclosure 2.

The non-GAAP financial measures discussed in this call to the most directly comparable GAAP financial measures is included in our earnings press release, which is available on our website.

On this call we will give guidance for the first quarter full year fiscal 2025 on a non-GAAP basis.

So in addition to our press release and 8-K filings the overview page and events and presentations page in the investors section of our website as well as the quarterly results page.

The financial information section of our website include 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.

Eric B. Stang: Additionally, our investor presentation slides include GAAP to non-GAAP reconciliations, but also provide resolution of GAAP expenses that are excluded from non-GAAP metrics. Now, I will hand the call over to Ooma's CEO, Erik Stang. Thank you, Matt.

Additionally, our investor presentation slides include GAAP to non-GAAP reconciliation that also provides resolution of GAAP expenses that are excluded from non-GAAP metrics.

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

Okay.

Eric B. Stang: Hi, everyone. Welcome to Ooma's fourth quarter fiscal year 2024 earnings call. Thank you for joining us. I look forward to reviewing our Q4 and Fiscal Year 2024 results with you today. I'm also excited to talk with you about our strategy and plans for our upcoming 2025 fiscal year. Overall, I believe Ooma is fortunate to enter FY25 in a strong position with leading product solutions and significant potential for business expansion. In Q4, Ooma performed well financially, delivering $61.7 million in revenue and $3.5 million of non-GAAP net income. Adjusted EBITDA jumped to $5.2 million, and cash flow from operations increased significantly to $5.5 million. For all of FY24, we achieved $236.7 million in revenue.

Thank you Matt.

Hi, everyone welcome to <unk> fourth quarter fiscal year 2024 earnings call. Thank you for joining us.

Look forward to reviewing our Q4 and fiscal year 2024 results with you today.

I'm also excited to talk with you about our strategy and plans for our upcoming 2025 fiscal year.

Overall, I believe almost fortunate to enter FY 'twenty five in a strong position with leading product solutions with significant potential for business expansion.

In Q4, Houma performed well financially delivering 61 7 million in revenue and $3 5 million of non-GAAP net income.

Adjusted EBITDA jumped to $5 2 million in cash flow from operations increased significantly to $5 5 million.

For all of FY 'twenty four.

Cheap $236 7 million in revenue <unk>.

<unk> 4 million of non-GAAP net income.

And $19 8 million of adjusted EBITDA.

Year over year, we grew revenue by 10%.

Eric B. Stang: $15.4 million of non-GAAP net income and 19.8 million of adjusted EBITDA. Year over year, we grew revenue by 10%. Non-Gap Net Income by 13%, Adjusted EBITDA by 14%, and cash flow from operations by 40 percent. We achieved this growth while also investing significantly in new market opportunities and international expansion. And we believe we've made important progress in FY24 on our strategy to expand our business and drive profitable growth. On the business side, in Q4, we continued to invest in feature expansion, customer growth, and the development of new resale partnerships. On all fronts, Ooma Office, Ooma Enterprise, Ooma AirDial, and 2600 Hertz, we made significant achievements in Q4. For Ooma Office, our solution for small to medium-sized businesses, we expanded our sales efforts in the legal vertical, taking advantage of our announced integration with Clio legal practice management software.

non-GAAP net income by 13%.

Adjusted EBITDA by 14% and.

Cash flow from operations by 40%.

We achieved this growth while also investing significantly in new market opportunities and international expansion and we believe we've made important progress in FY 'twenty, four and our strategy to expand our business and drive profitable growth.

On the business side in Q4, we continued to invest in feature expansion customer growth and the development of new resale partnerships.

On all fronts with my office from an enterprise, who may air dial in 'twenty 600, Hertz, we made significant achievements in Q4.

We're a little office our solution for small to medium sized businesses, we expanded our sales efforts on the legal vertical taking advantage of our announced integration with clear legal practice management software.

These efforts are going well with our largest customer wins in the quarter being a 90 user deal.

We also increased the proportion of new home office customers, who signed up for a premium tier of service to 59% our highest level to date.

Eric B. Stang: These efforts are going well, with our largest customer win in the quarter being a 90 user deal. We also increased the proportion of new Ooma office customers who signed up for a premium tier of service to 59%, our highest level to date. I'm also pleased to report that we signed an agreement with a new partner who will resell Ooma Office, and we have started the work to enable them. We expect the contribution from this partner this year to be modest, but we consider it a great first step toward engaging other potential resale partners for Ooma Office. Regarding the enterprise, our solution for larger sized businesses, we also made significant achievements in Q4. One was a large new customer we signed where we will serve several thousand users spread across 400 locations.

I'm also pleased to report that we signed an agreement with a new partner, who will resell Limbo office and we have started the work to enable them.

We expect the contribution from this partner this year to be modest, but we continue but we consider it a great first step toward engaging other potential resale partners working in the office.

Regarding the enterprise our solution for larger sized businesses. We also made significant achievements in Q4.

One was a large new customer we signed where we will serve several thousand users spread across 400 locations.

We will we will be providing a combination of our full ucas solution for many of their users and our teams integrated calling solution for the rest.

Eric B. Stang: We will be providing a combination of our full UCAS solution for many of their users and our Teams integrated calling solution for the rest. In our targeted hospitality vertical, we continued our momentum, again winning over 50 new hotels in the quarter. We also brought on a new technology partner who helped us sell into this space. Ooma AirDial, our innovative solution to replace aging and expensive POTS lines.

And our targeted hospitality vertical we continued our momentum again, winning over 50, new hotels in the quarter.

We also brought on a new technology partners, who help us sell into this space.

Boomer era dial our innovative solution to replace aging and expensive parts lines.

To make progress in Q4 is as we invest in this new opportunity.

In Q4, we closed over 500, new customer deals with some being notable large company wins.

Eric B. Stang: Continue to make progress in Q4 as we invest in this new opportunity. In Q4, we closed over 500 new customer deals, with some being notable large company wins. We expect many of these deals will start by rolling out only to a small subset of the available locations and then build through the year.

We expect many of these deals will start by rolling out only to a small subset of the available locations and then build through the year.

In general we find customers want to move forward on their immediate needs for copper line replacement, usually driven by lines being shut off or substantially increased.

Eric B. Stang: In general, we find customers want to move forward on their immediate needs for copper line replacement, usually driven by lines being shut off or substantially increased LINE PRICING before they plan a full rollout of Ooma AirDial across their business locations. In Q4, we also continued to refine our AirDial product solution, including enhancing the AirDial remote device management system and enabling AirDial to serve new applications we come across. We added five new Airdial resale partners in Q4, which expands the number of partners reselling Airdial to over a dozen now. And finally, I'm very happy to report that Ooma Airedile won the 2024 TMC Internet Telephony Product of the Year Award for its Multipath Technology, which delivers unique and patented uninterrupted backup for POTS replacements.

<unk> pricing.

Before they plan a full rollout of whom are dialogue across their business locations.

In Q4, we also continued to refine our airedale product solution, including enhancing the airedale remote device management system, and enabling <unk> to serve new applications, we came across.

We added five new Airedale resale partners in Q4, which expands the number of partners reselling airedale to over a dozen now.

And finally, I'm very happy to report that luminaire dial one to 2024 TMC Internet telephony product of the year award for its multi path technology, which delivers unique and patented uninterrupted backup for parts replacement.

Turning now to 'twenty 600, Hertz, our wholesale Ucas D casts and surpassed platform solution.

I believe we have made tremendous progress since acquiring them just four months ago.

We believe we are on track to achieve the synergies we planned it.

On May 2600, Hertz adjusted EBITDA accretive in Q1 of this year.

Eric B. Stang: Turning now to 2,600 Hertz, our wholesale UCAS, CCAS, and CPAS platform solution, I believe we have made tremendous progress since acquiring them just four months ago. We believe we are on track to achieve the synergies we planned and make 2,600 hertz adjusted EBITDA positive in Q1 of this year. What is particularly exciting for us, though, is the level of new customer interest we are seeing. It is happening faster than I

What is particularly exciting for us, though is the level of new customer interest we are seeing.

It is happening faster than I expected.

We have already won one new customer who will convert their customer base to the 2600 Hertz kazoo platform.

And we are currently far along on other new customer opportunities.

2600, Hertz is being looked at to replace aging unless agile ucas platforms.

It is also being looked at as an alternative to standard C pass solutions, which lack prebuilt applications and cannot be directly controlled and hosted by end customers.

Eric B. Stang: We have already won one new customer who will convert their customer base to the 2600Hz Kazoo platform, and we are currently far along on other new customer opportunities. 2600 Hertz is being looked at to replace aging and less agile UCAS platforms. It is also being looked at as an alternative to standard CPaaS solutions, which lack pre-built applications and cannot be directly controlled and hosted by end customers.

Of course, the wholesale nature of this business means it will take new customers and extended amount of time to implement the solution and produce revenue.

Nonetheless, the unexpectedly high level of interest we're seeing gives us confidence in our acquisition thesis and strategy for 2600 Hertz.

We're proud of our accomplishments in Q4, but we also realize we have much more to do to capitalize on the investments we are making in the business.

Eric B. Stang: Of course, the wholesale nature of this business means it will take new customers an extended amount of time to implement the solution and produce revenue. Nonetheless, the unexpectedly high level of interest we are seeing gives us confidence in our acquisition thesis and strategy for 2600 Herb. We're proud of our accomplishments in Q4, but we also realize we have much more to do to capitalize on the investments we are making in the business. As we look forward, we believe we are well-placed to do so for three main reasons.

As we look forward. We believe we are well placed to do so for three main reasons.

One reason is we believe we are a leader in the key segments, we serve with differentiated product solutions and a very low cost position to provide services.

A second reason is we see significant untapped market opportunity in the key segments, we target.

In particular since so many smaller sized businesses have yet to move to a more advanced cloud communications solution.

The third reason is the new directions, we have invested in over the last couple of years.

Well my aired out for parts replacement.

Eric B. Stang: One reason is that we believe we are a leader in the key segments we serve, with differentiated product solutions and a very low cost position to provide services. A second reason is that we see significant untapped market opportunity in the key segments we target, in particular since so many smaller-sized businesses have yet to move to a more advanced cloud communications solution. The third reason is the new directions we have invested in over the last couple of years. Ooma Airdial for POTS replacement, and Ooma 2600 Hertz for wholesale UCAS, CCAS, and CPAS applications give us greater breadth of opportunity and open up paths to partner with others and extend our market reach. As we look forward, we see several meaningful trends that support our strategic direction and give us confidence that the investments we are making will pay off. One of these is simply the fact that, in North America alone, we estimate there are 6.4 million small businesses with 1 to 20 employees.

<unk> thousand 600, Hertz for wholesale Ucas, CCAR and C pass applications give.

Give us greater breadth of opportunity and open our paths to partner with others and extend our market reach.

As we look forward, we see several meaningful trends.

To support our strategic direction and gives us confidence that the investments we are making will pay off.

One of these is simply the fact that in North America alone. We estimate there are $6 4 million small businesses with 1% to 20 employees.

And that a significant amount of these businesses have yet to transition to a modern cloud based communications solution.

We believe the market oxy for whom a office is quite sizable.

The second trend.

Setting down of the traditional copper phone effort network, which is already underway both here in the USA and in parts of Europe and.

It seems to be accelerating as of late.

We have what we believe is the leading solution with air dial to serve equipment that doesn't easily move off of a copper line.

Eric B. Stang: And since a significant amount of these businesses have yet to transition to a modern cloud-based communications solution, we believe the market opportunity for Ooma Office is quite sizable. A second trend is the shutting down of the traditional copper phone network, which is already underway both here in the USA and in parts of Europe and seems to be accelerating as of late. We have what we believe is the leading solution with Airdial to serve equipment that doesn't easily move off of a copper line.

We're generally our small business and residential solutions, both benefit as well as customers are forced to look for new solutions when they lose their copper connection.

A third trend, which we believe is favorable tumor is the rise of <unk> Internet.

Many smaller sized businesses rely today on a double play solution.

Other words internet and phone from a cable provider.

The availability of <unk> wireless Internet can cause these businesses to reconsider not only their internet solution, but also their communications provider.

It also presents a future opportunity for Uber to offer its own <unk> double play solution.

Eric B. Stang: More generally, our small business and residential solutions both benefit as well, as customers are forced to look for new solutions when they lose their copper connection. A third trend, which we believe is favorable to Ooma, is the rise of 5G internet. Many smaller sized businesses today rely on a double play solution. In other words, internet and phone from a cable provider.

As you know currently we offer our <unk> based <unk> connect solution as backup internet for businesses or sometimes is primarily primary internet for very small sized businesses.

A fourth bucket trend.

Advent of AI.

And contact center applications and generally across all communications significant data is created in the form of calls texts and chats and AI has a strong role to play to help businesses optimize their performance.

Eric B. Stang: The availability of 5G wireless Internet can cause these businesses to reconsider not only their Internet solution but also their communications provider. It also presents a future opportunity for Ooma to offer its own 5G double-play solution. As you know, currently, we offer our 4G-based Ooma Connect solution as backup internet for businesses, or sometimes as primary internet for very small-sized businesses. A fourth market trend is the advent of AI in contact center applications and generally across all communications. Significant data is created in the form of calls, texts, and chat.

To date our activities in this area have been limited in part due to the newness of AI and the fact that AI has not yet seen much adoption by smaller sized businesses.

However, as we look forward.

We anticipate launching AI applications in our solutions and believe that these applications will make our solutions more valuable and in greater demand by our customers.

And finally, the last industry trend that I want to highlight.

Desire by.

Customers to do more with their communication solutions by making the applications that use more bespoke to their individual needs.

For smaller customers this Ken entail integrations with other solutions used in their businesses.

Eric B. Stang: And AI has a strong role to play to help businesses optimize their performance. Today, our activities in this area have been limited, in part due to the newness of AI and the fact that AI has not yet seen much adoption by smaller businesses. However, as we look forward, we anticipate launching AI applications in our solutions. We believe that these applications will make our solutions more valuable and in greater demand by our customers. And finally, the last industry trend that I want to highlight is the desire by customers to do more with their communication solutions by making the applications they use more bespoke to their individual needs. For smaller customers, this can entail integrations with other solutions used in their businesses. For larger customers, this can mean building custom applications using either CPaaS or a flexible API-based wholesale platform.

For larger customers. This can mean building custom applications using using either C pass or a flexible API based wholesale platform.

Either way luminous positioned with innovative and leading solutions to take advantage of these customer opportunities.

Building on these industry trends our plans for FY 'twenty. Five include continued investment in key opportunities balanced with improvement in bottom line results.

Some of the things we plan to accomplish in FY, 'twenty, five or one to introduce new integrations with other platforms.

Two to extend our current call center capability into a more complete and Omnichannel contact center solution.

Three to incorporate five <unk> performance into our <unk> connect wireless Internet solution.

For to expand further internationally, including with our largest customer IW Chi.

Eric B. Stang: Either way, Ooma is positioned with innovative and leading solutions to take advantage of these customer opportunities. Building on these industry trends, our plans for FY25 include continued investment in key opportunities, balanced with improvement in bottom line results. Some of the things we plan to accomplish in FY25 are, one, to introduce new integrations with other platforms. 2. To extend our current call center capability into a more complete and omni-channel contact center solution. To incorporate 5G performance into our Ooma Connect wireless internet solution. 4.

Five to enhance our 2600 hertz wholesale platform by integrating other <unk> technology and applications.

Six to increase our sales and marketing activities across our business from direct sales to online and inside sales to channel that the agent sales to partner sales.

And finally seven to grow our community of resale partners, who value our solutions and help us reach more of the vast market opportunity in front of us.

I am excited by the strategy, we have put in place and by the progress I see us having made each quarter as we expand and grow.

I believe FY 'twenty five looks to be an exciting year ahead for roomba.

Shigeyuki Hamamatsu: To expand further internationally, including with our largest customer, IWG. Five, to enhance our 2,600 MHz wholesale platform by integrating other Ooma technology and applications. Six, to increase our sales and marketing activities across our business, from direct sales, to online and inside sales, to channel and agent sales, to partner sales. And finally, seven, to grow our community of resale partners who value our solutions and help us reach more of the vast market opportunity in front of us. I'm excited by the strategy we have put in place and by the progress I see us making each quarter as we expand and grow. I believe FY25 looks to be an exciting year ahead for Ooma. I'll 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, and good afternoon, everyone.

I'll now turn the call over to Sherri <unk>, our CFO to discuss our results and outlook in more detail and the return with some closing remarks.

Thank you Eric and good afternoon, everyone.

I am going to review, our fourth quarter financial results and then provide our outlook for the first quarter and full year fiscal 2025.

We delivered another solid quarter with a total revenue of $61 7 million near the high end of our guidance range.

On a year over year basis total revenue grew 9% in the fourth quarter driven by the growth in that business as well as the addition of 26 on it hurts.

In the fourth quarter business subscription and services revenue accounted for 60% of total subscription and services revenue as compared to 55% in the prior year quarter.

Q4 product and other revenue came in at $3 $7 million as compared to $3 9 million in the prior year quarter.

On a full year basis total revenue was $236 7 million as compared to $216 2 million in the prior year, representing 10% growth year over year, including 22% growth in business subscription and services revenue.

Shigeyuki Hamamatsu: I'm going to review our fourth quarter financial results and then provide an outlook for the first quarter and four-year fiscal 2025. We delivered another solid quarter with total revenue of $61.7 million, near the high end of our guidance. On a year-over-year basis, total revenue grew 9% in the fourth quarter, driven by the growth of Ooma business, as well as the addition of 2,600 perks. In the fourth quarter, business subscription and services revenue accounted for 60% of total subscription and services revenue as compared to 55% in the prior quarter. Q4 product and other revenue came in at $3.7 million, as compared to $3.9 million in the prior year quarter. On a four-year basis, total revenue was $236.7 million, as compared to $216.2 million in the prior year, representing 10% growth year-over-year, including 22% growth in business subscription and services revenue. On the profitability front, the fourth-quarter non-GAAP net income was $3.5 million, which exceeded our guidance. On a four-year basis, non-GAAP net income was $15.4 million compared to $13.6 million in the prior year.

On the profitability front, the fourth quarter non-GAAP net income was $3 $5 million, which exceeded our guidance range.

On a full year basis, non-GAAP net income was $15 $4 million compared to $13 6 million in the prior year.

Now some details on our Q4 revenue.

Business subscription and services revenue grew 19% year over year in Q4, driven driven by business unit growth and the addition of 2600 Hertz.

Excluding the effect of inorganic revenue contribution within that.

Business subscription and services revenue grew 12% year over year.

On residential side subscription and services revenue was down one 7% year over year.

As a reminder, we had a one time churn event during the first quarter of fiscal 2024 with a particular customer.

Usual application, which continue to impact our year over year comparison in Q4.

For the fourth quarter total subscription and services revenue was $58 million.

Shigeyuki Hamamatsu: Now, some details on our Q4 revenue. Business Subscription and Services Revenue grew 19% year-over-year in Q4, driven by Ooma business user growth and the addition of 2,600 HRT. Excluding the effect of inorganic revenue contribution, Ooma business subscription and services revenue grew 12% year-over-year. On the residential side, subscription and services revenue was down 1.7% year over year.

Or 94% of total revenue compared to 93% in the prior year quarter.

Now some details on our key customer metrics.

As a reminder, except for annual exit recurring revenue. These metrics do not include the 2600 Hertz wholesale business.

We ended the fourth quarter with a $1 million 243000 core users up from $1 241000 core users at the end of the third quarter.

At the end of the fourth quarter, we had 484000 business users or 39% of our total core users an increase of 9000 from Q3.

Shigeyuki Hamamatsu: As a reminder, we had a one-time churn event during the first quarter of fiscal 2024 with a particular customer with an unusual application, which continued to impact our year-over-year comparison in Q4. For the fourth quarter, total subscription and services revenue was $58 million, or 94% of total revenue, compared to 93% in the prior year quarter. Now some details on our key customer metrics. As a reminder, except for annual, this is recurring revenue. These metrics do not include the 2600 Hertz wholesale business.

Our blended average monthly subscription and services revenue per core user or <unk>.

<unk> increased 3% year over year to $14 72.

Driven by an increase in mix of business users, including higher up through August pro and pro plus users.

During the fourth quarter, we continued to see a healthy office pro and pro plus take rate with 59% of new office users opting for these higher tiered services, which was up from 52% in the prior year quarter.

Overall, 2009% a little office users have now subscribed to pro pro plus here.

Shigeyuki Hamamatsu: We ended the fourth quarter with 1,243,000 core users, up from 1,241,000 core users at the end of the third quarter. At the end of the fourth quarter, we had 484,000 business users, or 39% of our total core users, an increase of 9,000 from Q3. Our blended average monthly subscription and services revenue per core user, or ARPU, increased 3% year-over-year to $14.72, driven by an increasing mix of business users, including higher up through Office Pro and ProPlus users. During the fourth quarter, we continue to see a healthy OfficePro and ProPlus take rate, with 59% of new Office users opting for these higher tier services, which was up from 52% in the prior year quarter. Overall, 29% of Ooma office users have now subscribed to the Pro or Pro Plus tier. Our annual exit recurring revenue grew to $227 million and was up 10% year-over-year. Our net dollar subscription retention rate for the quarter was 99% as compared to 99% in the third quarter.

Our annual exit recurring revenue grew to $227 million and was up 10% year over year.

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

Now some details on our gross margin.

Subscription and services gross margin for the fourth quarter was 72% as compared to 73% in the prior year.

As a reminder, subscription and services gross margin for the fourth quarter. This fiscal year included a full quarter impact of 26 Center hurts gross margin, which is running lower subscription.

<unk> gross margin.

Product and other gross margin for the fourth quarter was negative 72% as compared to negative 54% for the same period of last year.

As mentioned in the prior calls the decline in Q Q4 product gross margin. This year versus last year was primarily due to sell through impact of certain higher cost components that we had procured in the last fiscal year due to pandemic driven supply chain issues with.

We currently estimate product and other gross margin for the first half of fiscal 2025 will be comparable to that of the fourth quarter fiscal 2020 forward as we continue to work through this excess component costs.

Shigeyuki Hamamatsu: Now some details on our gross margin. Our subscription and services gross margin for the fourth quarter was 72% as compared to 73% in the prior year. As a reminder, subscription and services gross margin for the fourth quarter of this fiscal year included a four-quarter impact of 2,600 hertz gross margin, which is running lower relative to Ooma subscription gross margin. Product and other gross margin for the fourth quarter was negative 72% as compared to negative 54% for the same period of last year.

And then not and then normalizing in the negative 50% range starting in the second half of fiscal 2025.

On an overall basis total gross margin for Q4 was 63% as compared to 64% in the prior year quarter.

And now some details on operating expenses.

Selling and marketing expenses for the fourth quarter were $17 $3 million or 28%. Our total revenue up 2% year over year, primarily driven by increases in personnel costs and channel development activity for <unk>.

Shigeyuki Hamamatsu: As mentioned in previous calls, the declining Q4 product gross margin this year versus last year was primarily due to the sell-through impact of certain higher cost components that we had procured in the last fiscal year due to pandemic-driven supply chain issues. We currently estimate product and other gross margin for the first half of fiscal 2025 will be comparable to that of the fourth quarter of fiscal 2024, as we continue to work through this excess component cost and then normalize in the negative 50% range starting in the second half of fiscal 2025. On an overall basis, the total gross margin for Q4 was 63% as compared to 64% in the prior quarter. And now, some details on operating expenses. Selling and marketing expenses for the fourth quarter were $17.3 million, or 28% of total revenue, up 2% year-over-year, primarily driven by increases in personnel costs and channel development activities for Airdial.

Research and development expenses were $11 $9 million or 19% of total revenue up 14% on a year by year basis, driven mainly by the addition of 2600 Hertz team members.

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

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

Overall total operating expenses for the fourth quarter or $34 7 million up $2 $3 million or 7% from the same period of last year.

non-GAAP net income for the fourth quarter was $3 5 million or diluted earnings per share of <unk> 13.

As compared to <unk> 16 of diluted earnings per share in the prior year quarter.

Shigeyuki Hamamatsu: Research and development expenses were $11.9 million, or 19% of total revenue, up 14% on a year-over-year basis, driven mainly by the addition of 2600 Hz T-members. G&A expenses were $5.4 million, or 9% of total revenue for the fourth quarter, compared to $4.9 million for the prior year quarter. The year over year increase in G&A expenses was primarily due to an increase in personnel costs. Overall, total operating expenses for the fourth quarter were $34.7 million, up $2.3 million, or 7% from the same period last year. Non-GAAP net income for the fourth quarter was $3.5 million, or diluted earnings per share of $0.13, as compared to $0.16 for the prior quarter.

In addition to stock based compensation and intangible amortization expenses non-GAAP net income for the fourth quarter excluded approximately $1.0 million of acquisition and other related costs incurred in connection with the 26 on our first transaction.

Adjusted EBITDA for the quarter was $5 $2 million a record for the company or 8% of total revenue as compared to $5 $1 million for the prior year quarter.

We ended the quarter with total cash and investments of $17 $5 million cash.

Cash generated from operations for the fourth quarter was strong and up $5 $5 million. It was a new quarterly record for our company.

For fiscal 2024, we generated a record $12 $3 million of.

Operating cash flow and $6 $1 billion of free cash flow, which represented 40% and 69% increase respectively over the prior year.

Shigeyuki Hamamatsu: In addition to stock-based compensation and intangible amortization expenses, non-GAAP net income for the fourth quarter excluded approximately $1.0 million of acquisition and other related costs incurred in connection with the $2,600 transaction. Adjusted EBITDA for the quarter was $5.2 million, a record for the company, or 8% of total revenue as compared to $5.1 million for the prior year quarter. We ended the quarter with total cash and investments of $17.5 million

Given our strong cash flow in the fourth quarter, we already already began paying down the debt and reduce the outstanding balance by $2 million at the end of Q4.

We paid down an additional $10 million shortly after the end of Q4 and as of today, we have reduced the outstanding debt balance to $14 million.

On the headcount front, we ended the quarter with.

1221 employees and contractors.

Now I'll provide guidance for the first quarter and full fiscal year of 2025, our guidance is on a non-GAAP basis and has been adjusted for expenses, such as stock based compensation and amortization of intangibles.

Shigeyuki Hamamatsu: Cash generated from operations for the fourth quarter was strong, and at $5.5 million, it was a new quarterly record for the company. For fiscal 2024, we generated a record $12.3 million of operating cash flow and $6.1 million of free cash flow, which represented a 40% and 69% increase, respectively, over the prior year. Given our strong cash flow in the fourth quarter, we already began paying down the debt and reduced the outstanding balance by $2 million at the end of Q4. We paid down an additional $2 million shortly after the end of Q4, and as of today, we have reduced the outstanding debt balance to $14 million. On the headcount front, we ended the quarter with 1,221 employees and contractors.

We expect total revenue for the first quarter of fiscal 'twenty five to be in the range of $61 7 million to $62 2 million.

Which includes $3 seven to $3 $9 million of product revenue.

We expect first quarter net income to be in the range of 3 million to $3 3 million.

non-GAAP diluted EPS is expected to be between 11 and 12.

We have assumed $26 6 million weighted average diluted shares outstanding for the first quarter.

For full year fiscal 2025, we expect total revenue to be in the range of $250 million to $253 million.

The full year fiscal 2025 revenue guidance assumes business subscription and services revenue growth rate of 11% to 13% over fiscal 2024.

Shigeyuki Hamamatsu: Now, I will provide guidance for the first quarter and full fiscal year 2025. Our guidance is on a non-GAAP basis and has been adjusted for expenses such as stock-based compensation and amortization of intangibles. We expect total revenue for the first quarter of fiscal 25 to be in the range of $61.7 million to $62.3 million, which includes $3.7 to $3.9 million of product revenue. We expect first quarter net income to be in the range of $3 million to $3.3 million. Non-GAAP diluted EPS is expected to be between $0.11 and $0.12. We have assumed $26.6 million weighted average diluted shares outstanding for the first quarter.

Our residential subscription revenue to decline 1% to 2%.

For fiscal 2020 revenue guidance.

Fiscal 2025 revenue guidance also assumes the impact of larger than normal churn from IW G where the seat count is expected to be reduced by about 20% in the first quarter.

We believe this event is infrequent in nature and the substantial portion of it can be offset by additional seat deployment during fiscal 2025.

We continue international expansion with <unk>.

In terms of revenue mix for the year, we expect 93% to 94% of total revenue to come from subscription and services revenue and the remainder from products and other revenue.

We expect non-GAAP net income for fiscal 'twenty five to be in the range of $14 million to $15 million based on this guidance range we estimate.

Shigeyuki Hamamatsu: For the full year fiscal 2025, we expect total revenue to be in the range of $250 million to $253 million. The four-year fiscal 2025 revenue guidance assumes business subscription and services revenue growth rates of 11 to 13 percent over fiscal 2024, while residential subscription revenues are declining 1 to 2% for Fiscal 2025 Revenue Guidance. Fiscal 2025 Revenue Guidance also assumes the impact of larger than normal churn from IWG, where the C count is expected to be reduced by about 20% in the first quarter. We believe this event is infrequent in nature, and a substantial portion of it can be offset by additional speed deployment during fiscal 2025 as we continue international expansion with IWG. In terms of revenue mix for the year, we expect 93% to 94% of total revenue to come from subscription and services revenue, and the remainder from products and other revenue. We expect non-gap net income for fiscal 25 to be in the range of $14 to $15 million.

Adjusted EBITDA for fiscal 2025 to be 25 million to $21 5 million.

Let me give you some additional color on our fiscal 2025 non-GAAP net income guidance, while we expect the non-GAAP operating margin and adjusted EBITDA to increase year over year. Our non-GAAP net income guidance range represents a slight decline year over year due to the following factors first.

We expect interest expense to increase by <unk> seven to <unk> $8 million due to a full year impact of the new revolver debt.

Second we expect interest income will be lower year over year by approximately $1 million as we continued to focus on debt paydown in fiscal year 2025.

Lastly, we currently estimate tax expense for fiscal 2025 increased by approximately zero point $2 million.

Dollars.

We expect non-GAAP diluted EPS for fiscal 'twenty five to be in the range of 51 to 55.

We have assumed approximately 27 4 million weighted average diluted shares outstanding for fiscal 2025.

In summary, we are pleased we are.

Pleased with a solid finish to our fiscal 'twenty four with a record quarterly adjusted EBITDA, along with strong cash generation in the fourth quarter.

We are excited about growth opportunities in front of us and remain focused on executing to our long term strategy to achieve profitable growth I will now pass it back to Eric for some closing remarks Eric.

Shigeyuki Hamamatsu: Based on this guidance range, we estimate our adjusted EBITDA for fiscal 2025 to be $20.5 million to $21.5 million. Let me give you some additional color on our fiscal 2025 non-gap net income guidance. While we expect the non-gap operating margin and adjusted EBITDA to increase year-over-year, our non-gap net income guidance range represents a slight decline year-over-year due to the following factors. First, we expect interest expense to increase by $0.7 to $0.8 million due to the four-year impact of the new revolver tax. Second, we expect interest income to be lower year-over-year by approximately $1 million as we continue to focus on debt paydown in fiscal year 2025. Lastly, we currently estimate tax expense for fiscal 2025 will increase by approximately $0.2 million. Dallas.

Thank you Sig.

As I mentioned at the outset I believe we are.

Fiscal year 2025 in a strong position with leading product solutions and significant potential for business expansion.

We are working to take advantage of several significant industry trends and our strategy includes exciting investments in feature expansion customer growth and the development of new retail partnerships.

We believe our strategic focus on small to medium sized businesses.

The businesses that are in select verticals <unk>.

<unk> replacement and.

In wholesale Ucas, <unk> paas platform opportunities positions us well for future success.

Thank you, we'll now take your questions.

Thank you.

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 to withdraw your question. Please press star one again.

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

Our first question comes from the line of RJ.

Yes.

<unk> with William Blair. Your line is open.

Shigeyuki Hamamatsu: We expect non-gap diluted EPS for fiscal 25 to be in the range of 51 cents to 55 cents. We have assumed approximately 27.4 million weighted average diluted shares outstanding for fiscal 2025. In summary, we are pleased with a solid finish to fiscal 24 with a record quarterly adjusted EBITDA along with strong cash generation in the fourth quarter. We are excited about growth opportunities in front of us and remain focused on executing on a long-term strategy to achieve profitable growth. I will now pass it back to Erik for some closing remarks.

Perfect. Thank you guys I appreciate you taking the question here.

About the.

Partnership with Clio was was pretty interesting, especially as it relates to the legal vertical can you maybe just expand a little bit on how impactful that can meet the business and when you think about other verticals or other potential partnerships.

Viewing the opportunity with some of these vertical software players that exist.

As an entry point into other verticals or to expand some of those where you might already have a presence.

Yes happy to.

I don't think there as well.

Each time, we do one of these it gives us an opportunity to bring a more integrated solution frankly for the customers in that vertical and from a sales and marketing perspective, but also allows us to.

Eric B. Stang: As I mentioned at the outset, I believe we enter fiscal year 2025 in a strong position with leading product solutions and significant potential for business expansion. We're working to take advantage of several significant industry trends, and our strategy includes exciting investments in feature expansion, customer growth, and the development of new resale partnerships. We believe our strategic focus on small to medium-sized businesses, and larger businesses that are in select verticals, Parts Replacement.

Positioning ourselves well is a good solution to those customers.

To some degree depending on who the partner is we can also get some momentum and some additional sales and marketing reach out of what the partner will do with us on their own to help promote or support what we're doing.

So all around its an exciting way to just build a better solution for the customer.

We've definitely seen that and legal vertical what we've done with with with clear we've done things in a couple of other verticals already as well and I think you'll just see we expect to roll out a cadence of these through the year as we look forward.

Eric B. Stang: And wholesale UCAS, CCAS, and CPAS platform opportunities position us well for future success. Thank you. Thank you. Ladies and gentlemen, as a reminder to ask the question, please press star 1-1 on your telephone and then wait to hear your name announced. To withdraw your question, please press star 11 again.

Okay got it that's helpful and then maybe sticking.

Sticking with you there.

Decaf space I know you called that out as.

Uh huh.

As a priority going into fiscal 'twenty, five, but when you think about that market.

There is there is quite a bit of competition. There already maybe can you just give us a sense of how.

Yes.

Operator: Please stand by while we compile the Q&A roster. Our first question comes from the line of Arjun Bhatia with Remblair. Your line is open. Perfect. Thank you, guys. I appreciate you taking the time to answer the question here. I thought the partnership with Clio was pretty interesting, especially as it relates to the legal vertical. Can you maybe just expand a little bit on how impactful that can be to the business? And when you think about other verticals or other potential partnerships, how are you viewing the opportunity with some of these vertical software players that exist as an entry point into other verticals or to expand some of those where you might already have a presence? Yeah, happy to. I don't think there's any, well...

It's differentiating in that market and what you're offering has.

That's about some of the competitors to be able to take share there and then.

Help us understand the timing of when.

When we might start to see maybe an inflection from.

<unk> capabilities. Thank you.

Yes happy to talk about it it's something that has us excited.

We took a big step forward in our acquisition of 2600 Hertz on this front they have.

Worked for a number of years on their seat.

<unk> solution.

Sure.

I think by middle of this year.

That that work will come to fruition and we'll be able to really leverage in a multimodal way the capabilities they've put in place there'll be a little bit longer before we applied that solution to say home office room of enterprise, but.

Eric B. Stang: Each time we do one of these, it gives us an opportunity to bring a more integrated solution, frankly, for the customers in that vertical. And from a sales and marketing perspective, it also allows us to position ourselves well as a good solution to those customers. And to some degree, depending on who the partner is, we can also get some momentum and some additional sales and marketing reach out of what the partner will do with us on their own to help promote or support what we're doing. So all around, it's an exciting way to just build a better solution for the customer. And we've definitely seen that in legal verticals, what we did with Clio. We've done things in a couple of other verticals already as well. And I think you'll just see it.

Nonetheless, it really opens the door for us to take a big jump forward in.

And a critical part of the market, it's not our intent strategically too.

Build the most complete or extensive <unk> solution.

We see a lot of customers that need core functionality.

Where call center and contact center may be a part of what the business does and they have anywhere from a handful eight agents to a greater number.

And they want something that works well and fits into the rest of the solution and frankly isn't too expensive and we think with what we'll do with whom office Newman enterprise will approach the market more from that perspective that you can think of that a little in a way is a solution that's going to fit our business.

Eric B. Stang: We expect to roll out a cadence of these through the year as we look forward. Okay, got it. That's, that's helpful.

Eric B. Stang: And then maybe, Eric, sticking with you on this, I think you called that out as a priority going into fiscal 25, but when you think about that market, there is quite a bit of competition there already. Maybe you could just give us a sense of how Ooma is differentiating in that market, what your offering has that's above some of the competitors to be able to take share there, and then help us understand the timing of when we might start to see maybe an inflection from the CCAS capabilities. Thank you.

<unk>.

1000 employees as opposed to a big Mega.

Contact center implementation.

But what we're building on the 2600 Hertz side and what they will have is quite flexible and because of that flexibility and API based design. It will do a lot of valuable things and it will be.

Possible for anyone who wants to use that platform to extend it into any bespoke.

Eric B. Stang: Yeah, happy to talk about it. It's something that has us excited. We took a big step forward in our acquisition of 2600 Hertz on this front. They have worked for a number of years on their CCAS solution.

Applications or extension of it that they want to do so.

It's also a foundation for.

Larger companies.

Eric B. Stang: And I think by the middle of this year, that work will come to fruition, and we'll be able to really leverage in a multimodal way the capabilities they've put in place. But it'll be a little bit longer before we apply that solution to, say, Ooma Office or Ooma Enterprise. But nonetheless, it really opens the door for us to take a big jump forward in a critical part of the market. It's not our strategic intent to build the most complete or extensive CCAS solution.

Two.

To get just what they want out of the solution.

I hope that answers your question.

Timing is kind of middle of this year and then later this year for whom office new enterprise.

<unk>.

And I think I covered the way, we're targeting the market with it.

Yes that was clear.

Sure.

The color. Thank you.

Thank you.

Please standby for our next question.

Our next question comes from the line of Josh Nicolas with B Riley Your line is open.

Eric B. Stang: We see a lot of customers that need core functionality where call center and contact center may be a part of what the business does, and they have anywhere from a handful of agents to a greater number. And they want something that works well and fits into the rest of the solution and, frankly, isn't too expensive.

Yes. Thanks for taking my question two things I guess, one is can you elaborate a little bit you talked about expecting some churn I think WG in the first quarter and help quantify the impact that that has.

And then two I am just kind of curious given all the backlog ramp that you kind of talked about on the <unk> front like what youre kind of assuming for that.

Eric B. Stang: And we think with what we'll do with Ooma Office and Ooma Enterprise, we'll approach the market more from that perspective. That you can think of that a little in a way as a solution that's going to fit a business, you know, one to, you know, 1,000 employees as opposed to a big, mega contact center implementation. But what we're building on the 2600 hertz side and what they will have is quite flexible. And because of that flexibility and API-based design, it will do a lot of valuable things, and it will be possible for anyone who wants to use that platform to extend it into any bespoke applications or extensions of it that they want to do.

Growth for that piece of the business given the early stage.

Sure Hi, Josh.

So.

Every three years and working with Iwc, they've had some measure of churn so to speak I don't tend to think of it so much as churn because.

We serve all of their all of their customers now they obviously have customers who leave their centers and other ones that come in and you can view it as churn when one leaves and then maybe as a new new user when the next one comes in but we've had some turnover and some reductions.

<unk> all through <unk>.

Working with.

And.

And the numbers, we've reported to all of you over the time, we've been net they've been net of that debt.

Eric B. Stang: So it's, in some ways, a foundation for larger companies and to get just what they want out of the solution. So I hope that answers your question. Timing is kind of the middle of this year and then later this year for Ooma Office, new enterprise, and I think I covered the way we're targeting the market with it. Yeah, yeah, that was clear. I appreciate the color.

Call It say quarterly.

The assignment almost.

And those numbers tend to run at a certain level and maybe a few thousand a quarter.

But.

What should talked about is a bigger adjustment and.

Basically this is a catch up this is.

We've worked with iwc from both sides, our side and their side and help them.

Arjun Rohit Bhatia: Thank you. Thank you. Please stand by for our next question. Our next question comes from the line of Josh Nicholas with B-Rally. Your line is open.

Get a finer.

Analysis done across their full worldwide business of what lines, they need and don't need.

Operator: Yeah, thanks for taking my question. Two things, I guess. One is, can you elaborate a little bit on your expectations for some churn, I think, with WG in the first quarter and help quantify the impact that that has. And then, two, I'm just kind of curious, given all the backlog ramp that you kind of talked about on the air dial front, like what you're kind of assuming for the growth for that piece of the business, given that it's still early stage. Sure. Hi Josh.

So we're doing essentially more or less onetime catch up adjustment here theres, a little bit larger than the normal churn, we see every quarter and I think <unk> talked about it being on the order of yes.

Yes in terms of seat numbers.

About 20% of what we have with them in the seat count I think in terms of dollars, we're not going to specifically quantify it Josh I think.

We have considered it obviously in our annual revenue guidance range the impact of it and also our Q1 guidance because yes, you heard it right churn is happening in Q1. So when you consider the Q1 revenue guidance I think the other point I would be.

Eric B. Stang: Um, so, every year for years, we've had some measure of churn, so to speak. I don't tend to think of it so much as churn because, you know, we serve all of their customers. Now, they obviously have customers who leave their centers and other ones that come in, and you can view it as churn when one leaves and then maybe as a new user when the next one comes in.

We thought about the impact on net dollar retention rate.

99%.

Really just trying to just just.

Bring it down to 98% our estimate today.

When that happens so.

It's not.

Yeah.

Eric B. Stang: But we've had some turnover and some reductions all through our working with them, and the numbers we've reported to all of you over the time have been net. They've been net of what, call it, say, quarterly reassignment. And those numbers tend to run at a certain level, maybe a few thousand a quarter. But what Shig talked about is a bigger adjustment.

The 20% is a good number as I've said to catch up but impact overall has not that has seen it they can and I think that says a lot about diverse base of our customer.

And as well we are adding new users with <unk> every month, we have.

Further rollout going on with them internationally through the first half of this year at least.

Eric B. Stang: And, you know, basically, this is a catch-up. We've worked with IWG on both sides, our side and their side, and helped them get a finer analysis done across their full worldwide business of what lines they need and don't need. And so, we're doing essentially a more or less one-time catch-up adjustment here that's a little bit larger than the normal churn we see every quarter. And I think Shig talked about it being on the order of, yeah, in terms of seat numbers, about 20% of what we have with the seat count.

And they have quite ambitious plan, although I, probably can't say exactly but they're pretty ambitious plan for opening new centers around the world as well and all of that is growth for us. So we're going to see how much we.

Can offset this and generate additional growth, but but we just wanted to call out because it's out of trend.

This adjustment.

Your other question was about <unk> growth in the assumptions, we have in the outlook I'll make a quick comment on that and I don't know if <unk> has more to add.

Shigeyuki Hamamatsu: I think in terms of dollars, we're not going to specifically quantify it, Josh, but I think that we have considered it, obviously, in our annual revenue guidance range, its impact on it, and also our Q1 guidance because the churn, yes, you heard it right, churn is happening in Q1. So we consider the Q1 revenue guidance. I think the other point I would make is, you know, we thought about the impact on the net dollar retention rate. We reported 99%. Really, this trend will just, you know, bring it down to 98%, our estimate today. When that happens, So, you know, it's not a The 20% is a good number, as Eric said, to catch up, but the impact overall is not that significant.

We've chosen and our and our outlook to be conservative on.

What will happen with their dial this year, we have not been very good at predicting it.

While we shared what we can share around number of deals we closed last quarter end and.

Our continued belief in the business.

We are.

We're not.

Trying to forecast something much larger than where we are today until we.

See those results come through.

Yes.

Echo Erik said that Josh So I think we learned a lot of us 18 months.

And on <unk>, particularly the installation timing.

As we said before that when customers are ready to install or we can be the right pretty quick in and start and we had some of those.

Eric B. Stang: And I think that says a lot about our diverse base, about our customers. Well, and as well, we're adding new users with IWG every month. We have further rollout going on with them internationally through the first half of this year, at least.

Quick deals installation deals in Q4 as well.

We wanted to be conservative.

In our guidance and Thats, why we assumed and but at the same time, we are still excited about growing pipeline of abdon don't take this outlook as any dimunition. If you will and the addition of.

Eric B. Stang: And they have quite an ambitious plan, although I probably can't say exactly. But they're pretty ambitious in their plans for opening new centers around the world as well. And all of that is growth for us. So we're going to see how much we can offset this and generate additional growth. But we just wanted to call out because it's out of trend, this adjustment. Your other question was about airdial growth and the assumptions we have in the outlook. I'll make a quick comment on that, and I don't know if Shig has more to add.

Of the pipeline, we see for air dial and the deals were working.

That's as robust as ever.

Yes, so I guess I would just classify this as a little bit more like kind of baseline growth rate assumption, excluding any material traction our success.

At this time.

Yes, I mean, you heard our comments yeah.

I appreciate it I'll hop back in the queue.

Thank you.

Ladies and gentlemen, as a reminder, that start one wanted to ask a question.

Eric B. Stang: We've chosen in our outlook to be conservative on what will happen with airdial this year because we have not been very good at predicting it. And so while we shared what we could share around the number of deals we closed last quarter and our continued belief in the business, we're not trying to forecast something much larger than where we are today until we see those results come through. Yeah, I echo what Eric said, Josh.

Please standby for our next question.

Our next question comes from the line of Brian kits linger with AGP. Your line is open.

Great. Thanks, so much for taking my questions.

It's a question on the guidance if you look at the first quarter's revenue guidance at the midpoint about 9% I think.

Look at the full year, it's just to remind.

Remind you over 6% so it appears the year over year growth rates decelerating.

We think we are.

Early installs of air dial.

Not growing as quickly enrolling out like you said in the second half of the year.

I would think that coupled with the enterprise customers.

Shigeyuki Hamamatsu: So, you know, I think we learned a lot in the last 18 months, and particularly in the installation timing, you know, as we said before, that when customers are ready to install, we can be there, right, you know, pretty quick and install, and we had some of those Quick Deals, Installation Deals, and Q4 as well. You know, we want to be conservative in our guidance, and that's what we assumed, but at the same time, we're still excited about growing a pipeline with Airdial. Yeah, don't take this outlook as any diminution, if you will, of the pipeline we see for Airdial and the deals we're working on. That's as robust as ever. Yeah, so I guess I'd just classify this as a little bit more like a kind of baseline growth rate assumption, excluding any material traction or success in airdrop. Yeah, I mean, you heard our comments.

<unk> customer ramping.

Coupled with the headwind in the first half of IW G coming out.

The 20% that the second half of the year might be faster in the first half of the year could you just kind of reconcile why it appears the growth rate is going to slow.

In the second half of the year.

I think the Hey, Brian I think the.

First quarter growth versus second half is how I think about it.

Right the midpoint.

The guidance.

It implies.

Implies that 9% growth, but do remember that.

<unk>.

That.

Has the impact organic piece of that because last year Q1, or two for Q1 FY 'twenty four it hasn't had 26 centers in it.

And.

So there's an inorganic piece of it so if you take out.

Inorganic piece of it and just look at the organic growth in Q1 I'm looking at about.

Josh Nicholas: Yeah. Appreciate it. Thank you. Ladies and gentlemen, as a reminder, we start one at a time to ask the question. Please stand by for our next question. Our next question comes from the line of Brian Kinstlinger with AGP. Your line is open.

5%.

Organic growth and so if you go to back half of the year then you start to have these.

Both year, having the 26 I heard so you'll naturally see that total revenue growth lower than.

Operator: Great, thanks so much for taking my question. It's a question about guidance. If you look at the first quarter's revenue guidance, the midpoint's about 9%. If you look at the full year, it's just a smudge over 6%, so it appears the year-over-year growth rate is decelerating, and earlier installs of AirDial are not going as quickly and rolling out like you said in the second half of the year. I would think that coupled with the enterprise customers, a large customer ramp-up, also coupled with the headwind in the first half of IWG coming out, the 20% that the second half of the year might be faster than the first half of the year.

Q1, unless you consider the.

Organic inorganic piece of it so.

That's the reason why you're seeing those now the comparison as you mentioned.

I do think that.

The.

Organically, we should see.

Better growth in the second half.

As we can change the ramp on the agile opportunities.

Again without going to specific about those addai numbers first half second half anything like that but.

<unk> Foundation is what I said.

Shigeyuki Hamamatsu: Could you just kind of reconcile why it appears the growth rate is going to slow in the second half of the year? I think that, hey Brian, I think the, you know, first quarter growth versus second half, here's how I think about it. You're right, the midpoint of the guidance implies that 9% year-over-year growth. But do remember that that has the impact of the inorganic piece of it because last year Q1 or 24, Q1 Fi24 doesn't have 26 MHz in it. And, you know, so there's an inorganic piece of it. So if you take out the inorganic piece of it and just look at the organic growth in Q1 I'm looking at about I just want to, Q1, unless you consider the, you know, organic piece of it.

Kind of look at inorganic versus organic growth.

Got it Okay, and then you mentioned.

Kind of areas I think sick.

Investment and plans for the year on your strategy, if I look at the.

EBITDA growth.

It's about similar to the revenue growth plus or minus.

When do you expect investments to accelerate revenue growth and a great guy to accelerate revenue growth and a time to come do you expect to see leverage in the EBITDA margin or will you continue do you think in the near term to reinvest that profit.

Yes, so we.

We followed our outlook this year that we've been following in the past which is to invest in these key new areas of opportunity while also.

Slowly growing our EBITDA and bottom line.

Shigeyuki Hamamatsu: So that's the reason why you've seen those number comparisons you mentioned. I do think that organically, we should see better growth in the second half, especially as we continue to ramp on the airdial opportunities. Again, we're not gonna be specific about those airdial numbers, first half, second half, anything like that. But one main explanation is what I said, just kind of looking at the inorganic versus organic growth.

We are pretty proud that we are managing to do both.

Because we do have a lot going on in the company we have.

Improvements to Ummah office Newman enterprise, new verticals, we're going to target we have.

Contact center.

Coming through this year.

To bring into those those those solutions.

Eric B. Stang: Got it. Okay. And then you mentioned six kinds of areas, I think six of investment and plans for the year in your strategy. And if I look at the EBITDA growth, it's about similar to the revenue growth plus or minus. When do you expect the investments to accelerate revenue growth, and if it does accelerate revenue growth in the time to come, do you expect to see leverage in the EBITDA margin? Or will you continue, do you think, in the near term to reinvest that profit?

We have international expansion going on.

We have.

Further investment this year in air dial.

Because we also wanted to make Ed aisle.

Available outside of North America, and to do that we've got to make some some changes in the product, which we're working on and we will have done this year.

And with the acquisition of <unk> 26 on hurts Theres kind of a one time effort.

Eric B. Stang: Yeah, so we followed an outlook this year that we've been following in the past, which is to invest in these key new areas of opportunity while also slowly growing our EBITDA and bottom line. And we're pretty proud that we're managing to do both because we do have a lot going on in the company. We have, you know, improvements to Ooma Office and Ooma Enterprise, new verticals we're going to target. We have a contact center coming this year to bring into those solutions. We have international expansion going on. We have further investment this year in Airdial because we also want to make Airdial available outside of North America. And to do that, we've got to make some changes in the product, which we're working on and will have done this year. And with the acquisition of 2600 Hertz, there's kind of a one-time effort that will probably take us a year, in all honesty, although we're three or four months into it, to make 2600 Hertz stronger with the technology and applications we can bring to it from the Ooma side.

Probably take us a year in all honesty, although we're three or four months into it.

One time effort to make <unk> heard stronger by the technology and applications, we can bring to it from the <unk> side.

So there is a lot.

A lot going on right now, but as I look forward, which is I think what's your questions about.

A lot of these.

Investment areas.

I don't see them needing to continue for years to come.

They are.

Yes.

We look back to kind of the.

10 years ago nine years ago, when we went public and the strategy, we have and where we wanted to take Houma.

<unk>.

With these things I just mentioned we are rounding out the kind of company, we wanted to be and so I think that it's always in our hands how much we want to invest in new things versus bring to the bottom line.

Eric B. Stang: And so there's a lot going on right now. But as I look forward, which is I think what your question is about, I think a lot of these investment areas, I don't see them needing to continue for years to come. I look back to kind of 10 years ago or nine years ago when we went public and the strategy we had and where we wanted to take Ooma.

But and we do have a business model that could bring quite substantial amount of investment to the bottom line.

But.

This year still we've got these areas of investment.

One of our goals this year is to us.

To turn some of these areas that I just described around from being areas, where we invest and don't make much money too.

Eric B. Stang: And with these things I just mentioned, we are rounding out the kind of company we wanted to be. And so I think that it's always in our hands how much we want to invest in new things versus bring to the bottom line. And we do have a business model that could bring quite a substantial amount of investment to the bottom line. But this year, we still have these areas of investment.

To start to get more payoff from them, whether thats international or air dial.

Or even our 2600 <unk> acquisition now and as we do that I think these these.

These new areas will start to be contribute very nicely to our overall bottom line. So.

Hi.

I think thats the best answer I can give you, but but.

Eric B. Stang: One of our goals this year is to turn some of these areas that I just described around from being areas where we invest and don't make much money to start to get more payoff from them, whether that's international or airdial or even our 2600 Hertz acquisition now. And as we do that, I think these new areas will start to contribute very nicely to our overall bottom line. So, you know, I think that's the best answer I can give you, but there's a little bit more work to do, but there isn't a big mountain to climb. We know where we're going, and I think we're making good progress. Thank you so much.

It's there's a little bit more work to do but there isn't a big mountain decline, we know where we're going in and I think we're making good progress.

Okay. Thank you so much.

Thanks, Brian.

Thank you.

Please standby for our next question.

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

Thank you.

Eric you laid out a pretty expansive tam for air dial, particularly including Europe, I mean literally tens of millions of lines.

Clearly.

Im not sure it'd be shutting down the copper line, so far as AT&T, if I'm really charge and the $400.

Times, even more anecdotally, but what are people doing to defer the need to upgrade because clearly.

This is critical.

Are you seeing more in the way of competition because it is counterintuitive, but you've got this gaping need.

<unk> got the best product Okay.

The product.

Features and yet it doesn't really take off I mean is this just.

The bus more grateful process than people thought notwithstanding the move to fiber or are you actually.

We've seen some competition, perhaps in Europe, where you said you had to modify the technical specs to get.

Got it.

Interest from Vodafone and others over there. Thank you.

Yes, Hi, Matthew.

I think that the.

Brian David Kinstlinger: Thank you. Please stand by for our next question. Our next question comes from the line of Matthew Harrigan with Benchmark. Your line is open.

The market is sizable and.

The biggest challenge to our growth is getting awareness of are dialed into the market.

Operator: Thank you. Eric, you laid out a pretty expansive TAM for Aerodial, particularly for Europe, and literally tens of billions of lines. And clearly, I'm not sure I'd be shutting down the copper lines if I was AT&T, if I was really charging $400, sometimes even more anecdotally. But what are people doing to defer the need to upgrade? Because, clearly, these are mission critical.

And getting the customers to consider us and that's where we've been investing we've been investing on the direct sales front something we haven't done as much of as a company. We've been much serving smaller businesses, who have been much more marketing and inside sales driven.

But.

I think that.

Eric B. Stang: And are you seeing more in the way of competition? Because it is counterintuitive that you've got this gaping need, and you've got the best product bouquet, or the best product. Thank you. Yeah, hi, Matthew.

<unk>.

It's in our hands to go.

Seized this opportunity in a bigger way, but we have to do some things different from what we've done in the past.

Eric B. Stang: You know, I think that the market is, is sizable, and the biggest challenge to our growth is getting awareness of Airdial into the market and getting customers to consider us. And that's where we've been investing. We've been investing on the direct sales front, something we haven't done as much of as a company. We've been much, you know, serving smaller businesses; we've been much more marketing and inside sales driven. But I think that it's in our hands to go seize this opportunity in a bigger way, but we have to do some things different from what we've done in the past. Resale partners do help, particularly 2Mobile has been a very valuable partner with us, but so have some of the others that we've talked about with you in the past.

Resale partners do help particularly to mobile has been a very valuable partner with us, but still have some of the others that we've talked about with you.

Already in the past.

I don't wanted to gas over competition I think there's two years or three forms of competition that we run into.

Some of them caused delay some of them are just competition one is.

If we're <unk>.

Target with a larger customer.

We're.

It's not uncommon for the existing provider of those pipelines to come back in and say I will lower your prices back down just don't do anything and try and push things out a year.

And we do run into that sometimes we've had customers who we thought were going to move forward. We said, we're going to come back and look at this a year from now because we don't have a burning need now that the pricing has come back down and the networks intact for the moment.

Eric B. Stang: I don't want to, though, gloss over competition. I think there are two or three forms of competition that we run into, and some of them cause delay.

We do have customers where.

They've asked us to come upgrade quite an extensive amount of equipment and as we go to do that with them. They discover they didnt know, but they discover that may be there.

Eric B. Stang: Some of them are just competitions. One is if we're... talking with a larger customer. And we're, you know, that large; it's not uncommon for the existing provider of those POTS lines to come back in and say, oh, we'll lower your prices back down, just don't do anything, and try and push things out a year. And we do run into that sometimes. We've had customers who we thought we were going to move forward with who said, "We're going to come back and look at this a year from now because we don't have a burning need now that the pricing's come back down and the network's intact for the moment." We do have customers where we've, you know, they've asked us to upgrade quite an extensive amount of equipment, and as we go to do that with them, they discover, they didn't know, but they discover that maybe their alarm manufacturer has already made upgrades to some of their alarm panels without them even knowing it and actually charged them for the cost of upgrading the actual panel, which is obviously what a lot of these customers want to avoid. So, we run into that a little bit.

Alarm manufacturer has already made upgrades to some of their alarm panels without them, even knowing it and actually charge them for the cost of upgrading the the actual panel, which is obviously what a lot of these customers wanted to avoid so we run into that a little bit.

And then the third kind of competition that is hardest for us in some ways.

With some particularly large customers they.

May have another aggregator type provider, who does all of the telecom for them as a business.

And that aggregator.

May not have as good or probably doesn't have good solution solution assume a air dial but <unk>.

Promise as al will take care of it and it's difficult when you're selling against someone who.

Has.

The rest of the customer relationship around the product you are offering.

Eric B. Stang: And then, you know, the third kind of competition that is hardest for us in some ways, with some particularly large customers; they may have another aggregator-type provider who does all of the telecom for them as a business. And that aggregator may not have as good a solution, probably doesn't have a good solution for Zuma AirDial, but promises, oh, we'll take care of it. And it's difficult when you're sailing against someone who has, you know, the rest of the customer relationship around the product you're offering.

But those are the competitive challenges, we face, but honestly those shouldn't stop us from getting to the goals. We have already outlined to you in the past there is a sizable market opportunity and.

We definitely have by far the best product in the market and the evidence that I say that with us.

My view is we have.

Some of our retail partners were reselling other people's stuff and stopped doing it to come to us because they are having so much problem with other people's stuff and some of our customers are literally ripping out other people's stuff to put ours in because ours is working better for them and the other stuff wasn't working well enough I think I've talked about our customer.

Eric B. Stang: But, you know, those are the competitive challenges we face, but honestly, those shouldn't stop us from getting to the goals we've already outlined for you in the past. There is a sizable market opportunity, and we definitely have by far the best product in the market. And the evidence that I say that with is, you know, my view is we have some of our resale partners were reselling other people's stuff and stopped doing it to come to us because they're having so many problems with other people's stuff. And some of our customers are literally ripping out other people's stuff to put ours in because ours is working better for them, and the other stuff wasn't working well enough.

<unk>.

In our Q3 conference call, where we were moving quickly to do that for them.

We're very proud of the solution. We have it is a very good solution in the market.

And we just need to continue to pursue it aggressively.

And.

And so that's really what what's the challenges still.

I hope all of that is little color and helps thanks.

Sure.

Thank you.

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

Eric B. Stang: I think I talked about a customer, you know, in our Q3 conference call where we were moving quickly to do that for them. We're very proud of the solution we have. It's a very good solution in the market, and we just need to continue to pursue it aggressively. And so, that's really what the challenge is still.

I'm showing no further questions in the queue.

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

Well, thank you everyone for joining us today.

I think we.

Made some great progress in FY 'twenty four.

Sitting here today with their dial in with 2600 Hertz.

Really.

As nice additions to our growth outlook. In addition to growing office and enterprise.

Matthew Joseph Harrigan: I hope all that adds a little color and helps. Thanks. Yeah, that makes sense.

And.

So we are.

We're excited about what we can do going forward with that let me say, thank you for joining us bye bye.

Operator: Thanks, Eric. Thank you. As a reminder, ladies and gentlemen, that's star 11 to ask the question.

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

Operator: I'm showing no further questions in the queue. I would now like to turn the call back over to Eric for closing remarks. Well, thank you everyone for joining us today. I think we made some great progress in FY24 in sitting here today with AirDial and with 2600 Hertz, really nice additions to our growth outlook in addition to growing office and enterprise. And so we're excited about what we can do going forward.

Okay.

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Okay.

Okay.

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Okay.

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Eric B. Stang: With that, let me say thank you for joining us. Bye-bye. Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Beep, –

So.

Okay.

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