Q4 2025 Ooma Inc Earnings Call

Okay.

Operator: standing by and welcome to the Ooma Inc. fourth quarter. 2025 financial results At this time, all participants are in a listen-only mode.

Thank you for standing by and welcome to the fourth.

Fourth quarter and fiscal year 2025 financial results conference call. At this time all participants are in listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question. During this session you'll need to press star one on your telephone. If your question has been answered and you'd like to remove yourself from the queue.

Operator: There will be a question and answer session. To ask a question during this session, you'll need to press star 1-1 on your telephone. question has been answered. And if you'd like to remove yourself from the queue, simply press star 111. As a reminder, today's program is being recorded.

Simply press Star one again as a reminder, today's program is being recorded.

Operator: And now I'd like to introduce your host for today's program, Matthew Robison. Please go ahead, sir.

Speaker Change: I'd like to introduce your host for today's program Matthew Brotherson. Please go ahead Sir.

Matthew Robison: Thank you, Jonathan.

Matthew Robison: Good day, everyone, and welcome to the fourth quarter and fiscal 2025 earnings call. My name is Matt Robison, and I'm the director of IR.

Speaker Change: Thank you Jonathan Good day, everyone and welcome to the fourth quarter and fiscal 2025 earnings call.

Matt Robison: My name is Matt Robison, who must director of IR and corporate development on the call with me today are CEO, Eric Stang, and CFO Schick Hamamatsu.

Matthew Robison: Call with me today or Ooma's CEO Eric Stang. After the market closed today, Ooma issued its fourth quarter in fiscal 2025. is also available on the company's website. hosting Webcast Live. Accessible from a link on the events and presentation. Investor Relations section of our website.

Matt Robison: After the market close today <unk> issued its fourth quarter and fiscal 2025 earnings press release. The release is also available on the company's website and the dot com.

Matt Robison: 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 looks like will be active for replay of this call for one year.

Matthew Robison: will be active for replay of the In today's presentation, our executives will make forward-looking statements within the meaning of the federal All of these overlooking statements generally relate to future events or future financial or operational events. Our expectations and beliefs regarding these matters may not materialize and actual results are subject to risk. because actual results are different materially. 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. All forward-looking statements in this presentation are based on information available to us as of the date hereof.

Matt 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.

Matt Robison: 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.

Matt Robison: In our filings with the Securities and Exchange Commission.

Matt Robison: All 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.

Matthew Robison: claim any obligation to update any forward Please note that, other than revenue or as otherwise stated, the financial measures to be disclosed on this call will be on a non-cash basis. get financial measures are not intended to be considered in isolation or as a substance.

Matt Robison: Please note that other than revenue, whereas 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.

Matthew Robison: This is a discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP all to the most directly comparable gap. Included in our earnings press release, which is available Next call, we will give guidance for first quarter and full year fiscal year. In addition to our press release and 8K filing, the overview page Thank you. financial information section of our website. links to information about costs and expenses not included in our non-GEP values and key metrics of our core subscription. These are titled Supplemental Financial Disclosure 1.

Matt 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.

Matt Robison: On this call, we will give guidance for first quarter and full year fiscal 2026 or a non-GAAP basis. Also in addition to our press release and 8-K filing the overview page on events and presentations page in the investors section of our website as well as the quarterly results page of the.

Matt Robison: The financial information section of our website include.

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

Matthew Robison: Additionally, our investor presentations slides include GAPs and non-GAP reconciliation, that also provides a resolution of GAPs and non-GAPs.

Matt Robison: For non-GAAP metrics now I will hand, the call over to CEO, Eric Stang.

Eric Stang: Now, I will hand the call over to Ooma's CEO. Thank you, Matt. Hi, everyone.

Eric Stang: Thank you, Matt Hi, everyone welcome to <unk> fourth quarter and fiscal year 2025 earnings call. Thanks for joining us.

Eric Stang: Welcome to Ooma's fourth quarter and fiscal year 2025 earnings call. Thanks for joining us. We're pleased to report our results and to share our plans for our upcoming fiscal year. For Q4 FY25, which of course is our quarter just ended, we achieved $65.1 million of revenue and $5.8 million of non-GAAP net income. Our growth was solid and our non-GAAP net income took a significant step up versus prior quarters. For all of FY25, our revenue grew 8% year-over-year and our non-GAAP net income grew 17% year-over-year. We generated over $20 million of free cash flow and spent approximately $9 million repurchasing Ooma stocks.

Eric Stang: We're pleased to report our results and to share our plans for our upcoming fiscal year.

Eric Stang: For Q4, FY 'twenty five which of course is our quarter. Just ended we achieved $65 1 million of revenue and $5 8 million of non-GAAP net income.

Eric Stang: Growth was solid and our non-GAAP net income took a significant step up versus prior quarters.

Eric Stang: For all of FY 'twenty five our revenue grew 8% year over year and our non-GAAP net income grew 17% year over year.

Eric Stang: We generated over 20 million of free cash flow and spent approximately $9 million repurchasing stock.

Eric Stang: Looking forward, we believe we are well-positioned to serve market segments with significant growth potential. We also believe our higher non-gap net income represents a good start toward our plan to increase profitability going forward.

Eric Stang: Looking forward, we believe we are well positioned to serve market segments with significant growth potential. We also believe our higher non-GAAP net income represents a good start toward our plan to increase profitability going forward.

Eric Stang: As you know, we focus on four specific market segments. Cloud Communications, specifically designed for smaller-sized businesses. POTS replacement for both business and residential customers. Wholesale Platform Services, and Residential Telephony. We believe we are a leader in each of these segments.

Eric Stang: As you know we focus on four specific market segments cloud communications, specifically designed for smaller sized businesses.

Eric Stang: Cost replacement for both business and residential customers.

Eric Stang: Also platform services and residential telephony.

Eric Stang: We believe we are a leader in each of these segments. Given this is the start of the new fiscal year I'd like to talk about our progress and plans for each.

Eric Stang: Given this is the start of a new fiscal year, I'd like to talk about our progress and plans for each. As we've shared previously, our strategy for serving smaller sized businesses is built around continued customer outreach to generate awareness of our services. converting customers up to higher value tiers of service, and adding select bigger business features in a simple-to-use way to extend the appeal of our solution to slightly larger-sized businesses. Our progress in Q4 was on track, with both the percentage of our customer base taking a premium tier of service and our average revenue per user growing in line with expectations.

Eric Stang: Okay.

Eric Stang: As we've shared previously our.

Eric Stang: Our strategy for serving smaller sized businesses is built around continued customer outreach to generate awareness of our services.

Eric Stang: <unk> customers up to higher value tiers of service and adding select bigger business features in a simple to use way to extend the appeal of our solution to slightly larger sized businesses.

Our progress in Q4 was on track with both the percentage of our customer base, taking a premium tier of service and our average revenue per user growing in line with expectations.

Eric Stang: We were particularly pleased to win a large new Ooma office customer with 282 users. and to secure a double-digit number of new office customers with over 25 users each. Looking ahead, we plan to continue our current cloud communications strategy targeting small to medium sized businesses. We will expand our feature set in two key directions by launching new call center and new AI capabilities. We will also enable more integrations, and along with that, strengthen our vertical marketing activities. And we intend to extend our sales reach, particularly through channel agents, and by improving our wireless internet solution to create a stronger double-play offering.

Eric Stang: We were particularly pleased to win a large new home office customer with 282 users.

Eric Stang: And to secure a double digit number of new office customers with over 25 users each.

Eric Stang: Looking ahead, we plan to continue our current cloud communications strategy targeting small to medium sized businesses, we will expand our feature set in two key directions by launching new call Center, and new I keep new AI capabilities.

Eric Stang: Will also enable more integrations and along with that strengthen our vertical marketing activities.

Eric Stang: And we intend to extend our sales reach particularly through channel agents and by improving our wireless internet solution to create a stronger double play offering.

Eric Stang: We believe millions of small to medium-sized businesses across North America have yet to gain the benefits of moving to cloud-based communications, and we have the ideal solution for them.

Eric Stang: We believe millions of small to medium sized businesses across North America have yet to gain the benefits of moving to cloud based communications and we have the ideal solution for them.

Eric Stang: Moving to our second key market segment, POTS replacement, our strategy is to provide the most sophisticated and complete solutions in the market, and to leverage a combination of sales channels to increase our customer reach. To achieve this, we focus on three routes to market, direct, via channel agents, and through third-party resale partners. I'm pleased to report that in Q4, we made good progress both expanding our sales activities and helping existing resale partners launch with us. The large nationwide cable provider who we discussed last quarter will resell Ooma AirDial. currently remains on track to start doing so by the end of March.

Eric Stang: Moving to our second key market segment parts replacement our strategy is to provide the most sophisticated and complete solutions in the market and the leverage a combination of sales channels to increase our customer reach.

Eric Stang: To achieve this we focus on three routes to market direct via channel agents.

Eric Stang: Through third party resale partners.

Eric Stang: I am pleased to report that in Q4, we made good progress both expanding our sales activities and helping existing resale partners launched with us.

Eric Stang: The large nationwide cable provider, who we are.

Eric Stang: We discussed last quarter, where we sell air dial.

Eric Stang: Currently remains on track to start doing so by the end of March.

Eric Stang: And Frontier Communications, the large ILEC we won last year, is now working with us in a limited way to begin selling Umatello for residential POTS replacement, targeting customers of theirs who are at risk of phasing out.

Eric Stang: And frontier communications the large ILEC. We won last year is now working with us in a limited way to begin selling Uber tullow for residential parts replacement targeting customers of theirs were at risk of phasing out.

Eric Stang: Furthermore, I'm pleased to share some particularly exciting news for Airdial with Marriott Hotels and Resorts. After an extensive review process, Marriott International Administrative Services just recently extended Marriott brand certification to AirDial, which we understand makes AirDial the only current de facto POTS replacement solution recommended and supported by Marriott. Our understanding is brand certification is a driving factor in vendor selection at all Marriott-owned or managed properties, and also strongly referenced at independently managed properties. We couldn't be more pleased to now have this exclusive preferred position with Marriott for Airdial.

Eric Stang: Furthermore, I'm pleased to share some particularly exciting news for air dial with Marriott hotels and resorts.

Eric Stang: After an extensive review process Marriott International administrative services, just recently extended Marriott brand certification to air dial, which we understand makes air dial the only current de facto parts replacement solution recommended and supported by Marriott.

Eric Stang: Our understanding is brand certification as a driving factor in vendor selection at all Marriott owned or managed properties and also strongly referenced it independently managed properties.

Eric Stang: We couldnt be more pleased to now have this exclusive preferred position with Marriott for airtime.

Eric Stang: And I'm also pleased to highlight a recent announcement that the research firm Frost & Sullivan selected Ooma Erdau as the competitive strategy leader in POTS replacement. It's terrific to receive this external validation of the strength of our airdial solution.

Eric Stang: And I'm also pleased to highlight our recent announcement that the research firm Frost <unk> Sullivan selected <unk> as the competitive strategy leader in parts replacement.

Eric Stang: It's terrific to receive this external validation of the strength of our <unk> solution.

Eric Stang: Our plan for FY26 is to continue to execute our POTS replacement growth strategy by introducing improved and lower cost product solutions for both business and residential, and by expanding sales activities across all three routes to market. We intend to add resale partners every quarter and to assist them to drive the fastest sales ramp possible. We believe the POTS replacement market opportunity is quite sizable in the millions of lines and market dynamics are increasingly driving companies to take action. These trends make this segment a key opportunity for Ooma.

Eric Stang: Our plan for FY 'twenty six.

Is to continue to execute our parts replacement growth strategy by introducing improved and lower cost product solutions for both business and residential.

Eric Stang: And by expanding sales activities across all three routes to market.

Eric Stang: We intend to add resale partners every quarter.

Eric Stang: And to assist them to drive the fastest sales ramp possible.

Eric Stang: We believe the parts replacement market opportunity is quite sizable in the millions of lines and market dynamics are increasingly driving companies to take action.

Eric Stang: These trends make this segment a key opportunity for OMA.

Eric Stang: Our third key market segment is wholesale platform services, where our strategy is to strengthen our 2,600 hertz platform by incorporating Ooma's turnkey solutions. To employ the modern design architecture of our 2600 hertz solution to serve customers' unique requirements. and to capitalize on the market shift away from older and less substantial platforms that is starting to occur. In Q4, we launched new turnkey desktop and mobile apps, expanded our sales resources. landed a couple of small new customers and continued proof-of-concept engagements with other potential customers. Securing customers and scaling them into a sizable revenue takes an extended amount of time in this segment, but we are quite excited about the strength of our platform and the market dynamics which we feel support adoption of new solutions.

Eric Stang: Uh huh.

Speaker Change: Our third key market segment as wholesale platform services.

Speaker Change: Our strategy is to strengthen our 2600 hertz platform by incorporating <unk> turnkey solutions.

Speaker Change: To employ the modern design architecture of our 2600 <unk> solution to serve customers' unique requirements.

Speaker Change: And to capitalize on the market shift away from older and less substantial platforms that is starting to occur.

Speaker Change: In Q4, we launched new turnkey desktop and mobile apps expanded our sales resources.

Speaker Change: And in a couple of small new customers and continued proof of concept engagements with other potential customers.

Speaker Change: Securing customers and scaling them into a sizeable revenue.

Takes an extended amount of time in this segment, but we are quite excited about the strength of our platform and the market dynamics, which we feel support adoption of new solutions.

Eric Stang: Finally, residential telephony remains a key segment for Ooma. Our strategy is to maintain our retail placements and customer awareness marketing at Best Buy, Amazon, Costco, Walmart, and other retailers. To drive customer interest through new lifestyle bundles, such as for seniors, families, and home offices. To capitalize more on Telo LTE, which combines wireless internet connectivity with Telo, and to expand through enabling incumbent and competitive local exchange carriers and other fiber providers to replace their residential pot slides with Ooma. In Q4, we began ramping residential telephony sales at the CLEC, I announced in Q3. We also made progress, as mentioned earlier, towards starting limited sales with Frontier Communications.

Speaker Change: Yeah.

Speaker Change: Finally residential telephony remains a key segment for Houma.

Speaker Change: Our strategy is to maintain a retail placements and customer awareness marketing at best buy Amazon Costco, Walmart and other retailers.

Speaker Change: To drive customer interest through new lifestyle bundles, such as for seniors families and home offices.

Speaker Change: To capitalize more on Tullow, LTE, which combines wireless internet connectivity with Tullow.

Speaker Change: And to expand through enabling incumbent and competitive local exchange carriers and other fiber providers to replace their residential parts slides with houma.

Speaker Change: In Q4, we began ramping residential telephony sales at the CLEC I announced in Q3.

Speaker Change: We also made progress as mentioned earlier towards starting limited sales with frontier Communications.

Eric Stang: Looking forward, we view residential telephony as a stable part of our overall business and we will explore whether we can drive growth via partners who need to replace their existing residential POTS lines.

Speaker Change: Looking forward, we view residential telephony is a stable part of our overall business and we will explore whether we can drive growth via partners, who need to replace their existing residential parts slides.

Eric Stang: Overall, I believe we enter FY26 with good momentum across many parts of our business. We are mindful that our outlook depends, in particular, on the pace at which our partners sign new customers and the timing of when we secure new partners and customers. And so we feel we need to be cautious with our outlook while our plans materialize.

Speaker Change: Overall, I believe we enter FY 'twenty six with good momentum across many parts of our business.

Speaker Change: We are mindful that our outlook depends in particular on the pace at which our partners signed new customers and the timing of when we secured new partners and customers and so we feel we need to be cautious with our outlook, while our plans materialize.

Shigeyuki Hamamatsu: 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, and good afternoon, everyone. I'm going to review our fourth quarter financial results and then provide our outlook for the first quarter and full fiscal year 2026. Our fourth quarter revenue was $65.1 million at the high end of our guidance. and was up 6% year-over-year, driven by the growth of the Ooma business, including AirDots. In Q4, business subscription and services revenue accounted for 61% of total revenue subscription and services revenue as compared to 60% in the prior quarter.

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

Speaker Change: Thank you Eric and good afternoon, everyone.

Speaker Change: I'm going to review, our fourth quarter financial results and then provide our outlook for the first quarter and full fiscal year 2026.

Speaker Change: Our fourth quarter revenue was $65 $1 million at the high end of our guidance range and was up 6% year over year, driven by the growth of my business, including agile.

Speaker Change: In Q4 business subscription and services revenue accounted for 61% of total revenue subscription and services revenue as compared to 60% in the prior year quarter.

Shigeyuki Hamamatsu: Q4 product and other revenue came in at $4.5 million as compared to $3.7 million in the prior quarter. The year-over-year growth in product revenue was primarily driven by growth in airdial installation. On a four-year basis, total revenue was $256.9 million for fiscal 2025, as compared to $236.7 million in the prior year, representing 8% growth year-over-year, including 13% growth in business subscription and services revenue. On the profitability front, Q4 non-GAAP net income was $5.8 million, meaningfully above our guidance range of $4.5 million to $4.8 million, as we saw the benefit of R&D operating leverage we discussed in the last earnings call.

Speaker Change: Q4 product and other revenue came in at $4 $5 million as compared to $3 $7 million in the prior year quarter.

Speaker Change: The year over year growth in product revenue was primarily driven by growth in agile installations.

Speaker Change: On a full year basis total revenue was $256 $9 million for fiscal 2025, as compared to $236 $7 million in the prior year, representing 2% growth year over year, including 13% growth in business subscription and services revenue.

Speaker Change: Yeah.

Speaker Change: On the profitability front Q4, non-GAAP net income was $5 $8 million meaningfully above our guidance range of $4 5 million to $4 $8 million as we saw the benefit of R&D operating leverage we discussed in the last earnings call.

Shigeyuki Hamamatsu: Q4 non-GAAP net income also benefited from lower than expected tax On a four-year basis, non-GAAP net income was $18 million, year-over-year growth of 17%. compared to $15.4 million in the prior year. Now some details on our Q4 revenue. Business subscription and services revenue grew 8% year-over-year in Q4, driven by user growth and upward growth. On the residential side, subscription and services revenue was down 1% year-over-year. For the fourth quarter, total subscription and services revenue was $60.6 million, or 93% of total revenue as compared to $58 million, or 94% of total revenue in the prior quarter.

Speaker Change: Q4, non-GAAP net income also benefited from lower than expected tax expense.

Speaker Change: On a full year basis, non-GAAP net income was $18 million year over year growth of 17%.

Speaker Change: Compared to $15 $4 million in the prior year.

Speaker Change: Now some details on our Q4 revenue.

Speaker Change: Business subscription and services revenue grew 8% year over year in Q4, driven by user growth and <unk> growth.

Speaker Change: On the residential side subscription and services revenue was down 1% year over year.

Speaker Change: For the fourth quarter total subscription and services revenue was $66 million or 93% of total revenue as compared to $58 million or 94% of total revenue in the prior year quarter.

Shigeyuki Hamamatsu: Now some details on our key customer metrics. We ended our fourth quarter with 1,234,000 core users, which is down from 1,242,000 core users at the end of the third quarter. The sequential decline in total core users was primarily due to the seat reductions with IWG, which was anticipated going into Q4. At the end of the fourth quarter, we had 503,000 business users, or 41% of our total core users. Our blended average monthly subscription and services revenue per core user, or ARPU, increased 4% year over year to $15.26. Driven by an increasing mix of business users, including higher-up Office Pro and ProPlus users.

Speaker Change: Now some details on our key customer metrics.

Speaker Change: We ended the fourth quarter, we had $1 million 234000 core users, which is down from $1 million 242000 core users at the end of the third quarter.

Speaker Change: The sequential decline in total core users was primarily due to the seat reductions with IW G, which was anticipated going into Q4.

At the end of the fourth quarter, we had 503000 business users or 41% of our total core users.

Speaker Change: Our blended average monthly subscription and services revenue per core user or incur.

Speaker Change: Increased 4% year over year to $15 and 26 <unk>.

Speaker Change: Driven by an increase in mix of business users, including higher IPO office Pro and pro plus users.

Shigeyuki Hamamatsu: During the fourth quarter, we continued to see a healthy Office Pro and Pro Plus take rate with 60% of new Office users opting for these higher tier services, which was up from 59% in the prior quarter. Overall, 34% of Ooma office users are now subscribed to these higher tier services. Our annual exit recurring revenue was $234 million, up 3% year-over-year. Our net dot subscription retention rate for the quarter was 98% as compared to 99% in the third quarter.

Speaker Change: During the fourth quarter, we continue to see a healthy office pro and <unk> plus take rate with with 60% of New office users auditing for these higher tier services, which was up from 59% in the prior year quarter.

Speaker Change: Overall, 34% of home office users have now subscribed to these higher tier services.

Speaker Change: Our annual exit recurring revenue was $234 million up 3% year over year.

Speaker Change: Our net dollar subscription retention rate for the quarter was 98% as compared to 99% in the third quarter.

Shigeyuki Hamamatsu: Now some details on our gross margin. Subscription and services gross margin for the fourth quarter was 72% as compared to 72% in the prior year. Product and other gross margin for the fourth quarter was negative 55 percent as compared to negative 72 percent for the same period last year. The year over year improvement in product and other gross margin was primarily due to a fully consuming higher cost components we had procured during the pandemic in the first half of fiscal 2025. On an overall basis, the total gross margin for Q4 was 63%, as compared to 63% in the prior quarter.

Speaker Change: Now some details on our gross margin.

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

Speaker Change: Product and other gross margin for the fourth quarter. It was negative 55% as compared to negative 72% for the same period last year.

Speaker Change: Over year improvement in product product gross margin was primarily due to a fully consuming higher cost components. We had procured during the pandemic in the first half of fiscal 2025.

Speaker Change: On the overall basis. The total gross margin for Q4 was 63% as compared to 63% in the prior year quarter.

Shigeyuki Hamamatsu: The flat overall gross margin over a year reflects a heavier mix of product revenue in fiscal 25, which was 7% of total revenue due to an increase in air-dial installations, which offset the improvement in product gross margin.

Speaker Change: Overall gross margin year over year reflects a heavier mix of product revenue in fiscal 'twenty, five which about 7% of total revenue due to an increase in Ed installations, which offset the improvement in product gross margin.

Shigeyuki Hamamatsu: And now, some details on our all-paint expense. Total operating expenses for the fourth quarter were $35.1 million up $0.4 million or 1% from the same period last year. Sales and marketing expenses for the fourth quarter were $17.7 million, or 27% of total revenue, up 2% year-over-year, primarily driven by higher marketing and channel development activity for AirDial and 2600Hz. Research and development expenses were $11.2 million or 17% of total revenue, down 6% on a year-over-year basis, and also down 7% sequentially from Q3. The decrease was primarily driven by headcount management, as we continue to focus on R&D efficiency and operating leverage.

Speaker Change: And now some details on our operating expenses.

Speaker Change: Total operating expenses for the fourth quarter or $35 $1 million up zero point $4 million or 1% from the same period last year.

Speaker Change: Sales and marketing expenses for the fourth quarter were $17 $7 million or 27% of total revenue up 2% year over year, primarily driven by higher marketing and channel development activity for agile and 2600 Hertz.

Speaker Change: Research and development expenses was $11 $2 million or 17% of total revenue down 6% on a year over year basis, and also down 7% sequentially from Q3.

The decrease was primarily driven by head count management as we continue to focus on R&D efficiency and operating leverage.

Shigeyuki Hamamatsu: And G&A expenses were $6.2 million, or 9% of total revenue for the fourth quarter, compared to $5.4 million for the prior quarter. The year-over-year increase in G&A expenses was primarily due to increases in personnel and audit-related costs. Non-GAAP net income for the fourth quarter was $5.8 million with diluted earnings per share of 21 cents. as compared to $0.13 in the prior quarter. Adjusted EBITDA for the quarter was $6.9 million, another record for the company, or 11% of total revenue as compared to $5.2 million, or 8% for the prior year quarter. We ended a quarter with total cash investments of $17.9 million.

Speaker Change: G&A expenses were $6 $2 million or 9% of total revenue for the fourth quarter compared to $5 4 million for the prior year quarter. The year over year increase in G&A expenses was primarily due to increases in personnel personnel and audit related costs.

Speaker Change: non-GAAP net income for the fourth quarter was $5 $8 million or diluted earnings per share of <unk> 21.

Speaker Change: As compared to <unk> 13 cents in the prior year quarter.

Speaker Change: Adjusted EBITDA for the quarter was $6 $9 million another record for the company or 11% of total revenue as compared to $5 $2 million or 8% for the prior year quarter.

Speaker Change: We ended the quarter with total cash and investments of $17 9 million.

Shigeyuki Hamamatsu: We had another robust cash flow quarter with $7.8 million generated from operations in Q4. In fiscal 2025, we generated a record $26.6 million of operating cash flow and $20.2 million of free cash flow, which represented 117% and 230% increase, respectively. over fiscal 2024. With strong free cash flow generation, we fully paid off the debt in Q4 and spent a total of $8.9 million during fiscal 25 to buy back stock through a combination of open market repurchase and RSU net share settlement. On the headcount front, we ended a quarter with 1,186 employees in contract.

Speaker Change: We had another robust cash flow quarter with $7 $8 million generated from operations in Q4.

Speaker Change: In fiscal 2025, we generated a record $26 $6 million of operating cash flow and $22 million of free cash flow, which represented 117% and 230% increase respectively.

Speaker Change: Over fiscal 2024.

Speaker Change: With strong free cash flow generation, we fully paid off the debt in Q4 and spent a total of $8 $9 million during fiscal 'twenty five to buy back stock through a combination of open market repurchases and our issue net share settlement.

Speaker Change: On head Count front, we ended the quarter with 11 186 employees and contractors.

Shigeyuki Hamamatsu: Now I will provide guidance for the first quarter and full fiscal year 2026. Our guidance is on a non-GAAP basis and has been adjusted for expenses such as stock-based compensation and amortization of intangible. We expect total revenue for the first quarter of fiscal 2026 to be in the range of $64.7 million to $65.1 million. which includes $4.4 to $4.6 million of product revenue. We expect first quarter net income to be in the range of $5.1 million to $5.4 million. non-GAAP dilute EPS is expected to be between 18 cents to 19 cents. We have assumed $28.4 million weighted average diluted shares outstanding for the first quarter.

Speaker Change: Now I'll provide guidance for the first quarter and full fiscal year 2026, our guidance is on a non-GAAP basis and has been adjusted for expenses such as stock based compensation.

Speaker Change: And amortization of intangibles.

Speaker Change: We expect total revenue for the first quarter of fiscal 2026 to be in the range of $64 7 million to $65 1 million.

Speaker Change: Which includes four four to $4 $6 million of product revenue.

Speaker Change: We expect first quarter net income to be in the range of $5 1 million to $5 $4 million non.

Speaker Change: non-GAAP diluted EPS is expected to be between 18 to 19.

Speaker Change: We have assumed $28 4 million weighted average diluted shares outstanding for the first quarter.

Shigeyuki Hamamatsu: For full year fiscal 2026, we expect total revenue to be in the range of $267 million. $270,000,000 The four-year Fiscal 2026 Revenue Guidance assumes business subscription and services revenue growth rate of 5 to 6 percent over Fiscal 25 while residential subscription revenue to decline 1 to 2 percent. In terms of revenue mix for the year, we expect 91 to 92 percent of total revenue to come from subscription and services revenue and the remainder from products and other revenue.

Speaker Change: For full year fiscal 2026, we expect total revenue to be in the range of $267 million.

Speaker Change: Two $270 million.

Speaker Change: The full year of fiscal 2026 revenue guidance assumes business subscription and services revenue growth rate of 5% to 6% over fiscal 'twenty five while residential subscription revenue to decline 1% to 3%.

Speaker Change: In terms of revenue mix for the year, we expect 91% to 92% our total revenue to come from subscription and services revenue and the remainder from products and other revenue.

Shigeyuki Hamamatsu: We expect... non-GAAP net income for fiscal 26 to be in the range of $22 million to $23.5 million. Based on this guidance range, we estimate our adjusted EBITDA for fiscal 26 to be $27.5 million to $29 million. We expect the non-GAAP diluted EPS for fiscal 26 to be in the range of $0.77 to $0.82 per share. We have assumed approximately $28.6 million, where the average diluted share is outstanding for fiscal 26.

Speaker Change: We expect.

Speaker Change: non-GAAP net income for fiscal 'twenty six to be in the range of 22 million to $23 $5 million based on this guidance range. We estimate our adjusted EBITDA for fiscal 'twenty six to be 27 5 million to $29 million.

Speaker Change: We expect non-GAAP diluted EPS for fiscal 'twenty six to be in the range of 77.

Speaker Change: To 82 per share.

Speaker Change: We have assumed approximately $28 6 million weighted average diluted shares outstanding for fiscal 'twenty six.

Shigeyuki Hamamatsu: Let me provide additional context for our first quarter and fiscal 26 guidance. Our revenue guidance reflects the impact of an additional turn expected from IWG in the first quarter, as well as some challenges associated with predicting the timing of an airtight revenue ramp with new partners and customers we acquired recently. While we are very excited about these new relationships to drive airdial growth, the pace of revenue ramp is difficult to predict. as we are still in the early phases of implementation with them. In terms of profitability, our non-GAAP net income guidance and our adjusted EBITDA reflect a meaningful step up, and at the midpoint of guidance, these metrics are expected to grow 26% and 21% over 2025.

Speaker Change: Let me provide additional context for our first quarter in fiscal 2006 guidance.

Speaker Change: Our revenue guidance reflects the impact.

Speaker Change: Additional churn expected from <unk> in the first quarter as well as some challenges associated with predicting the timing of AD revenue ramp with new partners and customers we acquired recently.

Speaker Change: While we are very excited about these new relationships to drive <unk> growth the peso revenue ramp is difficult to predict as.

Speaker Change: As we are still in the early phases of implementation with them.

Speaker Change: In terms of profitability, our non-GAAP net income guidance and our adjusted EBITDA reflect a meaningful step up and at the midpoint of guidance. These metrics are expected to grow 26% and then 21% over 2025, respectively.

Shigeyuki Hamamatsu: With respect to adjusting the EBITDA margin, we believe we can achieve close to 11% for Fiscal 26 as compared to 9% in Fiscal 25 as we continue to drive operating leverage and make progress towards our long-term target.

Speaker Change: With respect to adjusted EBITDA margin, we believe we can achieve close to 11% for fiscal 'twenty six as compared to 9% in fiscal 'twenty five as we continue to drive operating leverage and make progress towards our long term target.

Shigeyuki Hamamatsu: In summary... We are pleased with a solid finish to our fiscal 25 with a record quarterly adjusted EBITDA along with a record free cash flow of over $20 million for the year. We're excited about growth opportunities in front of us and remain focused on executing to our long-term strategy to achieve profitable growth.

Speaker Change: In summary.

Speaker Change: We are pleased we have solid pleased with a solid finish to our fiscal 25 with a record quarterly adjusted EBITDA, along with a record free cash flow of over $20 million for the year.

Speaker Change: We're excited about growth opportunities in front of us and remain focused on executing to our long term strategy to achieve profitable growth.

Eric Stang: I will now pass it back to Eric for some closing remarks. Eric. Thanks, Shig. So I've talked with you today about our focus on four segments where we believe Ooma has crafted leading solutions. We want to extend our success providing communication solutions to smaller size businesses. captured a large pots replacement market opportunity, both directly and through resale partners. and Solidify 2600Hz as the modern platform for the future used by carriers worldwide. As we achieve these goals, we also want to drive enhanced bottom line results. It's an exciting time for us, and I feel we're well-placed to succeed.

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

Eric Stang: Thanks Chip.

Speaker Change: So I've talked with you today about our focus on four segments, where we believe <unk> has crafted leading solutions.

We want to extend our success, providing communication solutions to smaller sized businesses.

Speaker Change: Captured a large parts replacement market opportunity, both directly and through resale partners and.

Speaker Change: And solidified 'twenty 600, Hertz as the modern platform for the future use by carrier worldwide.

Speaker Change: As we achieve these goals, we also want to drive enhanced bottom line results.

Speaker Change: This is an exciting time for us and I feel we are well placed to succeed. Thank you. We will now take your questions.

Eric Stang: Thank you.

Operator: We will now take your questions.

Arjun Bhatia: The first question comes from the... Arjun Bhatia from William Blair, your question please. Awesome, thanks.

Speaker Change: Certainly and our first question comes from the line of Arjun Bhatia from William Blair. Your question. Please.

Alinda Lee: Hey, this is Alinda Lee here for Arjun. Eric, a question for you. What are you seeing in the SMB environment? Has it faded a little bit after the election? No, I wouldn't say it's faded. Q4 is always the one quarter of the year where, with everything else going on, holidays, and a lot of business activity, Small businesses may not be in the market quite as much, but then things were back in January and we've seen that. So I think it's been strong and it remains strong.

Speaker Change: Awesome. Thanks, Hey, this is Linda Lee here for our Gen. Eric a question for you what are you seeing in the F&B environment, David a little bit after the election.

Speaker Change: No I wouldn't say it's faded.

Speaker Change: Q4 is always the one quarter of the year, where with everything else going on holidays, and a lot of business activity.

Speaker Change: <unk>.

Speaker Change: Small businesses may not be in the market quite as much but then things were back in January and we've seen that.

Speaker Change: So I think it's been <unk>.

Speaker Change: Strong and it remains strong.

Alinda Lee: Awesome.

Eric Stang: And another question, can you give us more color on how you resell partners and driving sales but also the strategic approach on adding new resellers every quarter in Fiscal 26. Thank you. Yeah, um, it's pretty amazing to think we have over 20 partners that we've established a relationship with to resell, in particular, Ooma AirDial. And it's really exciting to see, you know, that growing as we go forward. Some of those partners are reselling Office, a small number, and one or two are reselling Telo for post replacement as well. So this. cuts across our business even beyond Airdial.

Speaker Change: And another question can you give us more color on <unk>.

Speaker Change: You already know about.

Speaker Change: Retail partners in driving sales, but also the strategic approach on adding Neal.

Speaker Change: I'll, let resellers every quarter in fiscal 'twenty sacks.

Speaker Change: Yes.

Speaker Change: It's pretty amazing to think we have over 20.

Speaker Change: Partners that we've established relationship with to resell in particular air dial.

Speaker Change: And it's really exciting to see.

Speaker Change: That growing as we go forward some of those partners are reselling office, a small number.

Speaker Change: In one or two of reselling tullow for past replacement as well so.

Speaker Change: This.

Speaker Change: Cuts across our business even beyond air dial.

Eric Stang: We think there are lots of entities out there that need to replace POTS lines or want to be in the market to replace POTS lines. And that our solution is the clear winner when you really step back and look at what it can do and how it operates and how we built it as one complete solution. So we're excited to keep pursuing that. We have a small team of corporate development individuals who are focused on that. And as I said, our goal, and we've said this in the past too, our goal is to add a couple of resellers every quarter.

Speaker Change: We think there are a lots of.

Speaker Change: Entities out there that.

Speaker Change: Need to replace parts lines or want to be in the market.

Speaker Change: To replace parts lines and that our solution is the clear winner when you really step back and look at what it can do and how it operates.

Speaker Change: And how we built that as one complete solution. So so we're excited to keep pursuing that we have a small team of of corporate development individuals who are focused on that.

Speaker Change: And as I said, our goal and we've said this in the past two our goal is to add a.

Speaker Change: A couple of resellers every quarter and we think we can do that.

Eric Stang: And we think we can do that. Thank you.

Speaker Change: Thank you.

Thank you and our next question comes from the line of Brian <unk> from Alliance Global Partners. Your question. Please.

Eric Stang: Next question, comes from the line of Brian... from Alliance Global Partners. Great, thanks so much. So for someone like Marriott, how many pots lines do they have? And what's been communicated in terms of their plans, and maybe timeframe for replacement? So I can tell you that Marriott has over 5,000 properties in the U.S. alone. I actually haven't looked into Canada or other markets where we can sell Airdial today.

Brian <unk>: Great. Thanks, so much.

Speaker Change: So for someone like Mary Anne.

Brian <unk>: Lines may have.

Brian <unk>: What's been communicated in terms of their plans and maybe timeframe for replacement.

Brian <unk>: So.

Brian <unk>: Okay.

Brian <unk>: I can tell you that that merit.

Brian <unk>: Has over 5000 properties in the U S alone I actually haven't looked into Canada or other markets, where we can sell <unk> today.

Brian <unk>: And.

Eric Stang: And it's very early stages with this agreement, so I think we're going to have to give it some time to be able to answer your question fully. But I know that brand certification is fundamental within the Marriott community, and so having it and being the only possible place and solution to have it, I think, is a very strong position to be in. I also think within the hospitality industry generally, Marriott is looked up to as, you know, for the degree to which they review their solutions before they adopt them. And so we're hopeful that this will carry some weight with us, too, as we look at other players in the market.

Brian <unk>: Its very early stages with this agreement so I think we're going to have to.

Brian <unk>: Give us some time to be able to answer your question fully.

Brian <unk>: Fully but.

Speaker Change: I know that brand certification is fundamental within the Marriott community and so having it and being the only parts replacement solution to have it I think is a.

Speaker Change: Very strong position to be in I also think within the hospitality industry generally Marriott is look to up to <unk>.

Speaker Change: As you know.

Speaker Change: The degree to which they review their solutions before they before they adopt them and so we're hopeful that this will carry some weight with us too as we look at other other players in the market but.

Eric Stang: But no, it's essentially an open door now for us to go target their properties and bring them our solutions. I can tell you that a large Marriott property might need 20 to 40 lines. If you think about all the different applications that might have a POTS line in them, so it can be sizable, but how big and how fast, it's too soon to say.

Speaker Change: But no it's essentially.

Speaker Change: Open door now for us to go.

Speaker Change: Target their properties and bring to there.

Speaker Change: Bring them our solutions I can tell you that a large marriott property might need 20% to 40 lines.

Speaker Change: If you think about all the different applications that might have a potline in them. So.

Speaker Change: <unk> can be sizable, but how big and how fast it's too soon to say.

Eric Stang: And then introduce your large table partner for Patrick. I think last quarter you mentioned you would know more in March in regard to the ramp from either that partner or the market in general from other partners. Can you help us understand what has limited visibility, if I'm understanding you correctly, and why do you think customers might not be motivated to move much? So the limited visibility we have is, will this partner launch in March as they are intending to do? We think they will. It's now March, but still, that's a first step. How fast will their sales force generate deals and generate business?

Speaker Change: Okay, and then in terms of the large cable partner for parts replacement Okay.

Speaker Change: Last quarter, you mentioned you would know more in March in regard to the ramp from that partner in the market in general come other partners can you help us understand what is eliminated visibility I'm understanding you correctly why do you think customers might not be motivated to move much more.

Speaker Change: <unk>.

Speaker Change: So the limited visibility we have is will this partner launch in March as they are intending to do like we think they will it's now March but still that's a first step.

Speaker Change: Fast for their sales force.

Generate deals and generate business, we're going to wait and see.

Eric Stang: We're going to wait and see. I can tell you, though, that with this large cable partner, vast majority of the Fortune 1000 have some relationship with them already. And we are involved with them not only in their enterprise business side of the company, but also with their public sector activities. And that's a door opener for us in the public sector. That's not an area that we've been able to do much in up to date.

I can tell you, though that with this large cable partner.

Speaker Change: Vas majority of the Fortune 1000 has some relationship with them already and.

Speaker Change: We are involved with not only in there.

Speaker Change: Enterprise business side of the company, but also with their public sector activities and that is a door opener for us into the public sector. That's not an area that we've been able to do much in up to date. So we have lots of hopes, but but we're going to have to go through the year and see how it materializes in general.

Eric Stang: So we have lots of hopes, but we're going to have to go through the year and see how it materializes. In general, I think what's been happening in the market over the last year, businesses are more likely to move forward on cost replacement than ever before. We still do win customers who we think are going to be quite large, but they start small. They start with a handful of properties or locations because that's where they face the immediate need. But we also do see them where they need hundreds or maybe even thousands of lines.

Speaker Change: So I think.

Speaker Change: What's been happening in the market over the last year businesses are more likely to move forward on parts replacement than ever before.

Speaker Change: We still do when customers, who we think are going to be quite large, but they start small they start with a handful of properties or or locations, because thats, where they face the immediate need.

Speaker Change: But but we also do see them, where you know.

Speaker Change: They need hundreds or maybe even thousands of lines and so.

Eric Stang: And so we're excited about the market developing, but it's very hard to handicap or be certain just what's going to happen each month through this year.

Speaker Change: We're excited about the market developing and we've but.

Speaker Change: It's very hard to handicap or or be certain just what's going to happen each month through this year.

Eric Stang: The last question I have, you mentioned in the first quarter some more turns expected from IWG. Will we continue to see, after the first quarter, more churn? Do you think it's stable at that point? Give us the short to medium-term trajectory after the first quarter. how it's been communicated to you or what you... Yeah, um... We have a view on this, but things can change. But it's interesting that, as we said last quarter, there would be some more line reductions this quarter. When you look at it in aggregate over the last 12 months, we're just about right where we said we'd be a year ago.

Speaker Change: The last question I had you mentioned in the first quarter some more turns expected from <unk>.

Speaker Change: We continue to see after the first quarter quarter more turn you think stable at that point.

Speaker Change: The short term medium term trajectory after the first quarter of <unk>.

Speaker Change: What's been communicated to you or what you expect.

Speaker Change: Yeah.

Speaker Change: Okay.

Speaker Change: We have a view on this but things can change, but it's interesting that.

Speaker Change: As we said last quarter, there would be some more.

Line reductions this quarter when you look at it in the aggregate over the last 12 months.

Speaker Change: Just about right, where we said we'd be a year ago. So it took them longer too.

Eric Stang: So it took them longer to do some reductions than what we said were going to happen literally this time last year. But they've been done now. And so we don't expect a lot more coming. We think we're pretty stabilized. I will say this too, and I can't give away too much, but up until now, almost everything we've done with IWG Regus has been to serve the businesses and users that they have in their buildings. They are testing and we are working with them on some opportunities that will take them beyond that into new areas. And if those plans unfold and turn positive, it could be an upside for us together.

Speaker Change: Do some reductions than what we said we're going to happen literally this time last year, but they've been done now and so we don't expect a lot more coming we think we are pretty stabilized I will say this too and I can't give away too much but up until now almost everything we've done with Iwc Regis has been to serve the.

Speaker Change: Businesses and users that they have in their buildings.

Speaker Change: We are they are testing and we are working with them on some opportunities that will take them beyond that into new areas and if those those.

Speaker Change: Plans unfold and in turn positive it could be an upside for us together and we have a very good working relationship with them as you might expect and we're excited to enable them to try some new things. So you know.

Eric Stang: And we have a very good working relationship with them, as you might expect. And we're excited to enable them to try some new things.

Eric Stang: So you never know, but I think after this quarter, we're going to be in a pretty stable spot, maybe with some growth opportunities.

Speaker Change: You never know, but I think we're after this quarter, we are going to be in pretty good pretty stable spot, maybe with some growth opportunity.

Speaker Change: Okay. Thank you.

Speaker Change: Okay.

Josh Nichols: And our next question comes from the line of Josh Nichols from B Riley. Your question. Yeah, thanks for taking my question. I'm just curious what you're seeing. a little bit more on the S&B market. If you were to just like strip out what your assumptions are for AirDial overall, if you could provide a little bit of a context. I know you said you were being pretty conservative on the AirDial recurring revenue piece of the business. provide a little bit more granularity, that would be helpful.

Speaker Change: Thank you and our next question comes from the line of Josh Nichols from B Riley Your question. Please.

Josh Nichols: Yes, thanks for taking my question.

Josh Nichols: I'm just curious what youre seeing.

Josh Nichols: A little bit more in the SMB market. If you were to just.

Josh Nichols: Strip out what your assumptions are for for air dialogue Raul If you could provide a little bit of context, I know you said, you're being pretty conservative on the <unk>.

Josh Nichols: Recurring revenue piece of the business, but if you could provide a little bit more granularity that'd be helpful.

Eric Stang: Sure, and let me frame this more in the context of Ooma's strategy and our priorities than maybe the SMB market per se. We have expanded our business scope to include an incredible POTS replacement market opportunity and also a longer term wholesale services market opportunity. And we have shifted some of our sales and marketing activities into those areas without growing substantially our sales and marketing spend. And we've done that in part because we're also committed to driving improved bottom line performance. We were thrilled to grow non-gap net income 17% last year and to give guidance this year that's even higher in the amount of growth we're going to drive there.

Speaker Change: Sure and let me frame this more in the context of <unk> strategy and our priorities than maybe the SMB market per se.

Speaker Change: We have expanded our business scope to include a incredible parts replacement market opportunity and also a longer term wholesale services market opportunity and we have shifted some of our sales and marketing activities into those areas.

Speaker Change: Growing substantially our sales and marketing spend and we've done that in part because we're also committed to driving improved bottom line performance. We were thrilled to grow non-GAAP net income, 17% last year and to give guidance. This year, that's even higher in the amount of growth we're going to drive there. So we're always balancing.

Eric Stang: So we're always balancing across our business. We see good opportunities in the small business segment. We're going after them and we'll grow this year nicely, but it's in the context of the overall growth we're trying to do for the company. We still estimate there are millions of small businesses in North America that have yet to move to the cloud. We've seen data that are around 7 million businesses with 1 to 20 employees in North America. And that's a lot of opportunities. Still the majority of the new customers we get, we're taking them from just a few phone lines from maybe a cable provider or maybe even someone like a POTS line provider into the cloud and into all the features that come with that.

Speaker Change: Across our business.

Speaker Change: We see good opportunities in the small business segment, we're going after them and we will grow this year nicely but.

Speaker Change: It's in the context of the overall growth we're trying to do for the company.

Speaker Change: We still estimate there are millions of small businesses in North America that have yet to move to the cloud. We have seen data that are around 7 million businesses with 1% to 20 employees in North America, and that's a lot of opportunity is still the majority of the new customers, we get we're taking them.

Speaker Change: He has to say.

Speaker Change: We're taking them from just a few phone lines for maybe a cable provider or maybe even someone like a pipeline provider.

Speaker Change: Into the cloud and into all of the features that come with that we're not it's less often.

Eric Stang: It's less often that they're actually switching from another cloud provider. So we continue to see good market opportunity, but we are balancing our outlook across all the segments of growth we have.

Speaker Change: Theyre actually switching from another cloud provider. So we continue to see good good market opportunity, but we are balancing our outlook across all the segments of growth we have.

Eric Stang: Thanks, understood. And then just taking a step back, I know you're not providing like formal guidance for anything like longer term, given that you have a little bit of churn headwinds with your largest customer and are being a little bit conservative about some of these like new airdial rollout . opportunities. I guess like one, Pedro said that you would hope to see the revenue growth, particularly on the recurring piece, start to accelerate more meaningfully next year. And then longer term, you talked about the focus on increasing... Profitability, and I see a bit of margin expansion.

Speaker Change: Thanks understood and then just taking a step back I know you are not providing formal guidance for anything like longer term.

Speaker Change: Given that you have a little bit of churn headwinds with your largest customer and are being a little bit conservative about some of these like new air now rollout.

Opportunities I guess.

Speaker Change: One theater, saying that you would that you would.

Speaker Change: I hope to see that revenue growth.

Particularly on the recurring piece start to accelerate more meaningfully next year and then longer term you talked about the focus on increasing profitability nice EBITDA margin expansion.

Eric Stang: Do you expect to continue marching along that path beyond this? Yeah, I think another way to say that is if you look at the segments that we're targeting today, they have I don't know what it is. But many years of growth potential in them. I think as big as is Airdial and POTS replacements going to be this year, it's going to be even bigger next year and maybe even after the year after that. Wholesale services, carriers are just beginning to pick their head up and realize that the Broadsoft and Metaswitch solutions they have are not going to take them, you know, forward over the next five to 10 years.

Speaker Change: We expect to continue marching along that path beyond this year.

Speaker Change: Yes, I think another way to say that is if you look at the segments that we're targeting today they have.

Speaker Change: I don't know what it is but many years of growth potential in them.

Speaker Change: Think as big as are down on parts replacement is going to be this year. It can be even bigger next year and maybe even after the year. After that wholesale services carriers are just beginning to pick their head up and realize that the broadsoft. The meta switch solutions. They have are not going to take them.

Speaker Change: <unk>.

Speaker Change: Forward over the next five to 10 years.

Eric Stang: And there's a huge small business community still to be gone and gotten. So we're viewing the investments we've made in our business, particularly in building our product portfolio, to be something we can leverage for years to come. And we're committed to doing that while we also improve the bottom line. And we think because we've built leading solutions in the market, we're going to continue to evolve them, improve them, but we don't have to invest in them at the level we've invested in the past. And so, you know, our guidance this year does reflect a little bit better leverage on R&D, which we're already set up to achieve.

Speaker Change: And Theres a huge small business community is still to be gone and gotten so.

Speaker Change: We are viewing the investments we've made in our business, particularly in building our product portfolio to be something we can leverage for years to come.

Speaker Change: We're committed to doing that while we also improve the bottom line and we think because we built leading solutions in the market, we're going to continue to evolve them improve them, but we don't have to invest in them at the level. We've invested in the past and so our guidance. This year does reflect a little bit better leverage on R&D, which were already set up.

Eric Stang: So, yeah, I don't see any reason why we can't grow and be more profitable as we go forward. That's the goal we set.

Speaker Change: To achieve so.

Speaker Change: Yes, I don't see any reason why we can't grow and be more profitable as we go forward and that's that's that's.

Speaker Change: That's the goal we set.

Josh Nichols: Thanks, Eric.

Speaker Change: Okay.

Speaker Change: Thanks, Eric.

Speaker Change: Thank you.

Maxwell McKellen: Thank you, and our next question comes from the line of Maxwell McKellen. Late Street Capital Partners Markets. Is your question Hey, guys, thanks for taking my question. Good to hear that you guys are on track with that top tier cable company. Sounds like March is still in play. Can you remind me, are we in conversations with any other of the top national cable companies around the United States? So, we're in a long list of conversations at different stages in their process, and I can't really say who we're talking to and who we're not talking to, but certainly we have aspirations to win more large players in the market, whether they be CLECs and ILECs who have their own POTS lines in place, aggregators who bring solutions together, or cable companies and others that play in the market.

Thank you and our next question comes from the line of Maxwell Mckellips from Lake Street Capital Partners markets. Your question. Please.

Maxwell Mckellips: Hey, guys. Thanks for taking my question.

Maxwell Mckellips: Good to hear that you guys are on track with that top tier cable company. It sounds like March is still in play can you remind me are we in conversations with any other the top Nash.

Maxwell Mckellips: National cable companies around the United States.

Speaker Change: So we are in Congress.

Speaker Change: And a long list of conversations at different stages in their process.

Speaker Change: And I can't really say, who we're talking to and who are not talking to but but certainly.

Speaker Change: Ah.

Speaker Change: We have aspirations to win more.

Speaker Change: Large players in the market, whether they be CLEC, and <unk>, who have their own pots lines in place Aggregators, who bring solutions together or.

Speaker Change: Cable companies and others.

Speaker Change: That.

Eric Stang: So, yeah, we are excited to talk to anyone who's interested in our solution. Alrighty, and then we look at the business segment, I believe you said five to 6% growth in 2026, or fiscal year 26. That is, I mean, help me think about first half and second half, maybe are we low single digits first half, maybe double digits second half, or just mid single digits across the board, I guess kind of help me out there how this how that should spread out. Yeah, so Max said, you know, the way we think about it is, you know, we we we aim to grow at the faster pace in the second half.

That play in the market so.

Speaker Change: Yes.

Speaker Change: We are.

Speaker Change: Excited to talk to anyone who is interested in our solutions.

Speaker Change: Alright, and then we look at the business segment I believe you said, 5% to 6% growth in 2026, our fiscal year 'twenty six that is I mean help me think about.

Speaker Change: First half and second half maybe are we.

Speaker Change: Low single digits first half, maybe double digit second half or just mid single digits across the board I guess kind of help me out there how the how that should spread out throughout the year.

Speaker Change: Yes so.

Speaker Change: The way, we think about it is.

Speaker Change: We aim to.

Uh huh.

Speaker Change: We'll grow at the fastest pace in the second half is how we think about it to the extent that you were taking a conservative stance on add on in particular, how the installation goes and.

Eric Stang: That's how we think about it. You know, to the extent that you were taking a conservative stance on the airline in particular, how the installation goes, and, you know, we see installing more in the back half than first half. So once we install, as you know, the subscription revenue follows that. So, you know, as we think about how that 5 to 6 percent, that's the business subscription growth that I guided to for the year, how it's distributed, I would say second half is more than the first half. Okay, that makes sense. Thank you.

Speaker Change: We see installing more in the back half than first half. So once we install as you know.

Speaker Change: The subscription revenue follows that so you know.

Speaker Change: As we think about how that 5%, 6%, that's what the business subscription growth that I guided to for the year.

Speaker Change: How it's distributed I would say second half is more than the first half.

Speaker Change: Okay that makes sense. Thank you.

Operator: And as a reminder, ladies and gentlemen, if you do have a question at this time, please press star one, one on your telephone.

Speaker Change: Thank you and as a reminder, ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone and our next question comes from the line of Matthew Harrington from Benchmark. Your question. Please.

Matthew Harrigan: And our next question comes from the line of Matthew Harrigan. Benchmark. Your question please. Thank you. I think when you initially announced the 2600 Hz deal, you pointed out that there were a number of aspects of their business that were almost completely unmonetized, and I know it would have to be a gradual push over time. When you look at the growth there, is that more new customer acquisition? Is it broadening, you know, the offering to a particular customer, or is there really kind of, you know, de novo opportunities to monetize, you know, what was kind of open source, you know, before?

Matthew Harrington: Thank you I think when you initially announced the 2600 Hertz deal.

Hinted out that there were a number of.

Matthew Harrington: Aspects of their business that were almost completely on.

Matthew Harrington: And then monetize them and I know, we would have to be a gradual closer over time. When you look at the growth there is that more new customer acquisition is it broadening.

Matthew Harrington: The offer and to a particular customer or is it really kind of.

Matthew Harrington: Novo opportunities to monetize.

Matthew Harrington: What was kind of open source before and then secondly, presumably the incremental.

Matthew Harrigan: And then secondly, you know, presumably the incremental uh, you know, growth on, uh, your, your top new product, uh, is going to be higher this year than last year. And you've got some 2,600 Hertz growth on top of that. So does that imply you're seeing a, a slowdown or at least a plateauing in the, uh. Ooma office side, on the S&B side, maybe out of caution on the economy. I know on some other calls, you talked a fair bit about caution on the economy, and clearly, you know, a lot of the other names I follow, some of them are not in your area, are really expressing a lot of concerns over the economy right now.

Matthew Harrington: Growth on.

Matthew Harrington: Your top new product is going to be higher this year than last year and you guys from 2600 Hertz growth on top of that so does that imply youre seeing a slowdown or at least a plateauing.

Matthew Harrington: <unk>.

Matthew Harrington: Office side on the SMB side, maybe other caution on the economy I know on some other calls.

Matthew Harrington: You talked a fair bit about caution on the economy and clearly.

Matthew Harrington: A lot of the other names I follow some of them are not in your area.

Matthew Harrington: Expressing a lot of concerns over the economy.

Matthew Harrigan: Thanks.

Matthew Harrington: Right now thanks.

Eric Stang: Hi, Matthew. So on the second part of your question first, we think of it more as 2,600 hertz will take time for the revenue to ramp. Because when you secure new customers, they have to adopt the solution and make it work for them. And then if they're going to convert existing customers over, that's a whole process as well. So I think the impact on our business will be greater next fiscal year than this fiscal year from 2,600 Hertz. But in order to achieve that, we're going to have some major wins this year in 2,600 Hertz.

Matthew: Hi, Matthew.

Matthew: So on the second part of your question first.

Matthew: We think of it more as 2600 Hertz will tell.

Matthew: Take time for the revenue to ramp because when you secure new customers they have to adopt the solution.

Matthew: Make it work for them and then if theyre going to convert existing customers over that's a whole process as well so.

Matthew: I think the impact on our business will be greater next fiscal year. Then this fiscal year from 2600 Hertz, but in order to achieve that we're going to have some major wins. This year in 2600 Hertz and that is what we're setting out to do.

Eric Stang: And that is what we're setting out to do. And then, you know, you asked about 2600 Hz and how we monetize it. I think most of the growth that we're looking to achieve there is going to come from new customer wins. We do have services that we are adding to the platform that can be monetized with the existing base. One of them is, you know, one of them comes from just the Ooma IP and apps that we're bringing onto the platform. Some of our customers are going to want to adopt them, and that, you know, can lead to some revenue.

Matthew: And then you.

Speaker Change: You asked about.

Speaker Change: Twice 600, Hertz and how we monetize it.

Speaker Change: Most of the growth that we're looking to achieve there is going to come from new customer wins, we do have services that we are.

Speaker Change: Adding to the platform that can be monetized with existing base. One of them is one of them comes from just the Houma IP and apps that we're bringing onto the platform. Some of our customers are going to want to adopt them and that.

Eric Stang: And then we also have launched carrier services to go with the 2600 Hz solution, leveraging our low-cost structure for our customer base there. And so some of those activities can also be some incremental growth from the existing base. But, you know, I think that... What you're really hearing from us is just what I said in my opening remarks, that the pace at which Airdial expands and the pace at which these resale partners join us and the ones we have, Ramp, and how fast new 2,600 customers expand with us, we're going to be cautious until those things are materializing.

Speaker Change: It can lead to some revenue and then we also have launched.

Speaker Change: Carrier services to go with the 2600 solution leveraging our low cost structure for our customer base, there and so some of those activities can also be some incremental growth from the existing base.

Speaker Change: But.

Speaker Change: Uh huh.

Speaker Change: I think that.

Speaker Change: What you're really hearing from US is just what I said in my in my opening remarks that the pace at which.

Speaker Change: <unk> expands and the pace at which these resale partners join us and the ones we have ramp and.

How fast new towards 600 customers.

Speaker Change: Its customers.

Speaker Change: Expand with us we're going to be cautious until those things are materializing, but.

Matthew Harrigan: But we haven't... reduced our outlook in any part of our of what we're doing. And then on the frost and solvent, you know, commentary on the accelerating need for the pots replacement, the awareness, you know, really kind of the predatory pricing on the part on some of the copper lines. You know, if you're being cautious and moderating your pace, I mean, that either implies the market's not making the necessary adjustments that fast, or there's someone else, you know, there, you know, what, I mean, you have to have some competition. I mean, where are you seeing alternatives to your offering?

Speaker Change: But we haven't.

Speaker Change: <unk> reduced our outlook in any part of our of what we are doing.

Speaker Change: And then on the Frost <unk> Sullivan commentary on UBS already need from the parts in place Matt you'd be awareness.

Speaker Change: It really kind of the predatory pricing on the part on some of the copper lines.

Speaker Change: If you are being cautious and moderating your pace either implies the market's not me.

Speaker Change: Making the necessary adjustments that faster there is someone else.

Speaker Change: There.

Speaker Change: I mean, you have to have some competition I mean, where are you seeing all alternatives to your offering and then I know youre not pushing hard in Europe, We're certainly not Asia right now, but <unk> got some issues in those markets as well I mean, how do you.

Eric Stang: And I know you're not pushing hard in Europe, or certainly not Asia right now. But you've got some issues in those markets as well. I mean, how do If you're in Germany or the UK and someone has the same problem, how are companies addressing it? Are they not addressing it? Is there a smorgasbord of solutions over there? In other words, it feels like your pace of growth there may be a little bit inconsistent with the dynamics of the market that Frost and Sullivan and yourselves have spoken about. So we, I've seen some analysts commentary that suggests that less than 10% of the market has converted yet away from their POTS line in terms of the remaining lines that we see out there.

Speaker Change: If you're in Germany, or the U K and someone has the same problem.

Speaker Change: Our companies are addressing it or are they not addressing it is or is there a smorgasbord of solutions over there.

Speaker Change: In other words it.

Speaker Change: Feels like your pace of growth there may be a little bit inconsistent with the dynamics of the market that Frost <unk> Sullivan and yourselves have spoken about.

Speaker Change: So.

Speaker Change: I've seen some analysts.

Speaker Change: Commentary that suggests that less than 10% of the market has converted yet away from their parts line in.

Speaker Change: In terms of the remaining lines that we see out there it's.

Eric Stang: It's very hard to know what that number exactly is. I will say it's a little baffling. I think I've learned through this process, there's customers who we could save a seven figure amount of money, and still they take a year to get get it done when they could have done it in three months. And I don't know if these decisions aren't making it up to the CFO ranks or what, but it is shocking to me. I know some of the local business here in the Bay Area who told me they just got Ooma AirDial for two buildings they have recommended to them by their elevator servicing company, which was great to see.

Speaker Change: It's very hard to know what that number exactly is I will say, it's it's a little baffling I think I've learned through this process. There is customers, who we could save a seven figure amount of money and still.

Speaker Change: Take a year to get.

Speaker Change: Get it done when they could have done it in three months and I don't know if these decisions aren't making it up to the CFO ranks.

Speaker Change: Or what but it is shocking to me.

Speaker Change: I know some of the local business here in the Bay area. You told me. They just got Houma air dial for two buildings. They have recommended to them by their elevated servicing company, which was great to see and they had never looked at their pots lines and they were shocked to find out they are paying over $600 a month per line at each at each play.

Eric Stang: And they had never looked at their POTS lines, and they were shocked to find out they're paying over $600 a month per line at each place. And so they were thrilled on how much we're saving them, but they just didn't know. So I think it's a matter of getting the word out. I think it's a matter of this rising up to a level where companies understand what's happening, because it's not uncommon to see $100 to $200 a month or more for the cost of a POTS line, which is just nuts when you think about it.

Speaker Change: And so they were thrilled about how much you're saving them, but they just didn't know so I think it's a matter of getting the word out I think it's a matter of.

Speaker Change:

Speaker Change: Of this rising up to a level where companies understand what's happening because it's not uncommon to see 100 to $200 a month or more for the cost of our <unk> line, which is just nuts. When you. When you think about it and if you've got a lot of them it's quite substantial.

Eric Stang: And if you've got a lot of them, it's quite substantial. So we think all the trends are there for the market to get bigger and go faster. We've talked about our competitors in the past here. Our biggest two competitors are aggregators who with larger sized accounts may have an existing relationship. And that relationship is how they will sell versus us selling with what we believe is a better product solution. And we have had large customers start with one of them and then come to us when they could not get what they needed from that other player.

Speaker Change: So we think all the trends are there for the market to get bigger and go faster.

Speaker Change: We've talked about our competitors in the past year.

Speaker Change: Our biggest two competitors are aggregators.

Speaker Change: Who with larger sized accounts may have an existing relationship and that relationship is how they will sell versus us selling with what we believe is a better product solution and we have had large customers start with one of them and then come to us when they could not get what they needed from that other player.

Eric Stang: So we don't feel like we're at some competitive disadvantage. We feel like we actually have the best solution in the space. And our approach to that challenge is to work with resale partners, such as T-Mobile or US Cellular or other aggregators or this large cable provider because they have those relationships when we don't. And now you mentioned international as well. Outside of North America, we have not spent a lot of time from an Airdial perspective. We would want to have a large partner reseller to make the effort to go international, but it is something we'd like to do and it's something we do spend some time on.

Speaker Change: So.

Speaker Change: We don't feel like we're at some competitive disadvantage, we feel like we actually have the best solution in the space and.

Speaker Change: Our approach to that challenge is to work with resale partners, such as T mobile or U S cellular or other aggregators or.

Speaker Change: This large cable provider because they have those relationships when we don't.

Speaker Change: Now you mentioned international as well.

Speaker Change: Outside of North America, we have not spent a lot of time from an <unk> perspective.

Speaker Change: We would want to have a large.

Speaker Change: Partner reseller to make the effort to go international but it is something we'd like to do and it's something we.

Speaker Change: Do you spend some time on but honestly, we have so many resale partner conversations and activities and opportunities that we're pursuing in North America that I think we haven't moved as fast as we could outside.

Eric Stang: But honestly, we have so many resale partner conversations and activities and opportunities that we're pursuing in North America that I think we haven't moved as fast as we could outside of North America. That's a good problem to have. But I mean, if you think about the last half of last year, we won Frontier Communications, we won another CLEC, and we won this large cable provider all in the space of six months. We are having some pretty good momentum. But anyway, we have to be cautious till things come together and that's the outlook we've given you.

Speaker Change: Outside of North America.

Speaker Change: That's a good problem to have.

Speaker Change: But I mean, if you think about the last half of last year. We won frontier Communications. We won another CLEC and we won this large cable provider all in the space of six months.

Speaker Change: We are having some pretty good momentum but anyway.

Speaker Change: Have to be cautious till things come together and thats. Thus the outlook, we've given you in.

Matthew Harrigan: And we're just gonna keep working at it to drive the success we wanna have. And I know you can't be too definitive, but I would assume that Verizon will look at Frontier's best practices when they assimilate the acquisition. I'm sure they will. Yes, and when those two companies can start having strategic conversations, which they can't do yet, I'm told, that the door will be open to have for us to engage in a bigger way there again. You have a lot of nice problems with Aired Isle.

Speaker Change: We're just going to keep working at it.

Speaker Change: To drive success, we want to have.

Speaker Change: And I know you can't be too definitive I would assume that Verizon will look at frontier as best practices.

Speaker Change: A somewhat acquisition.

Speaker Change: I am sure they will yes.

Speaker Change: And.

Speaker Change: When those two companies can start having strategic conversations, which they can't do yet I'm told.

Speaker Change: On the door will be opened to have.

Speaker Change: For us to engage in a bigger way there again.

Speaker Change: Where do you have a lot of nice problem comparator I'll. Thanks, Eric.

Operator: Thanks, Eric. Bye. Thank you. And once again, ladies and gentlemen, if you do have a question at this time, please press star 11 on your telephone. This does conclude the question and answer session of today's program.

Eric Stang: Thank you.

Eric Stang: Thank you and once again, ladies and gentlemen, if you do have a question at this time. Please press star one on your telephone.

Eric Stang: And this does conclude the question and answer session of today's program I'd like to hand, the program back to management for any further remarks.

Operator: I'd like to hand the program back to management for any further remarks. Well, thanks, everyone, for joining us today. We appreciate your support for Ooma. And, you know, we're going to work hard here to have a great year. Thank you, everyone. Bye bye. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.

Speaker Change: Well, thanks, everyone for joining us today, we appreciate your support for <unk>.

Speaker Change: We're going to work hard here to have a great year. Thank you everyone Bye bye.

Speaker Change: Thank you, ladies and gentlemen for your participation in today's conference. This does conclude the program you may now disconnect good day.

Speaker Change: Okay.

Speaker Change: [music].