Q1 2026 Ooma Inc Earnings Call
Good day and thank you for standing by welcome to the Yuma, Inc. First quarter fiscal year 2026 financial results Conference call. At this time all participants are in a listen only mode. After the speaker's presentation there'll be a question and answer session to ask a question during the session.
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Robinson: Please be advised that today's conference is being recorded I would now like to turn the conference of watching that Robinson. Please go ahead.
Matt Robison: Thanks, Lisa and good day, everyone and welcome to the fiscal first quarter 2026 earnings call at Sonoma, Inc. My name is Matt Robison him as a director of IR and corporate development on the call with me today are CEO, Eric Stang, and CFO Shake Hamamatsu.
Matt Robison: After the market closed today issued its fiscal first quarter 2026 earnings press release.
Matt Robison: The release is also available on the company's website and on the Dot Com. This call is being webcast live and is accessible from a link on the events and presentations page of the Investor Relations section of our website.
Robinson: We will be active for replay of this call for one year.
Robinson: 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.
Robinson: 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.
Robinson: These risks include those set forth in the press release, we issued earlier today and those who are more fully described in our filings with the Securities and Exchange Commission.
Robinson: The forward looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward looking statements, except as required by law.
Robinson: 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.
Robinson: non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.
Robinson: 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.
Robinson: Which is available on our website on this call we will give guidance for second quarter and full year fiscal 2026 on a non-GAAP basis. Also in addition to our press release and 8-K filing the overview page on events and presentations page and their investors.
Robinson: Relations section of our website as well as the quarterly results page of the financial information section of our website at good links to information about costs and expenses not included in our non-GAAP values and key metrics of our core subscription businesses.
Robinson: 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.
Robinson: Excluded from non-GAAP metrics now I will hand, the call over to our CEO Eric Stang.
Eric Stang: Thank you Matt.
Eric Stang: Hi, everyone welcome to <unk> first quarter fiscal year 2026 earnings call. Thank you for joining us.
Eric Stang: We're pleased to report solid Q1 financial results and share with you. The strong start we are making to this fiscal year.
Eric Stang: For our first quarter of FY 'twenty, six we achieved $65 million of revenue $5 6 million of non-GAAP net income.
Eric Stang: $6 7 million of adjusted EBITDA.
Eric Stang: Particularly pleased that our net income and adjusted EBITDA exceeded the top end of our range and we were off to a good start towards driving higher profitability. This year.
Eric Stang: Our revenue growth was 4% year over year, which was near the high end of our guidance range as we build momentum this year, particularly for <unk> growth.
Eric Stang: I'm pleased to say, we made particularly great progress on <unk> in Q1 and are optimistic about our outlook, which I will touch on in a few moments.
Eric Stang: As you know we focus on four market segments cloud communications, specifically designed for smaller sized businesses.
Robinson: Parts replacement for both business and residential customers.
Robinson: Wholesale platform services and residential telephony we.
Robinson: We believe we're a leader in each of these segments.
Robinson: Our cloud communications solutions performed well in Q1, though our overall results were dampened a little by some expected right sizing at our largest customer reach us.
Robinson: <unk> remains a very important customer and I'm pleased to report that the right sizing of their business, which we announced starting two quarters ago is now fully behind us.
Robinson: Well the home office and EMEA enterprise performed well in Q1, especially in certain verticals we target.
Robinson: Sequentially versus Q4 of them office expanded the number of new account wins and users.
Robinson: Success in verticals, such as dental and medical insurance and financial services and legal helped drive this as did an expanding number of larger sized account wins as we enhance them offices features to serve larger customers.
Robinson: Along with this 61% of new office users in Q1 opted for a premium service tier which may be our highest ever.
Robinson: Regarding the enterprise, you'll recall that hospitality and hotels is one of our key verticals.
Robinson: Our steady progress.
Robinson: In this vertical is paying off and I'm pleased to report that we now serve more than 500 hotels across North America.
Robinson: Switching now to human error dial our business parts replacement solution.
Robinson: Several pieces of good news to share first you'll recall that we announced a quarter ago that a major cable company will be reselling airtime and we hoped to launch with them in Q1 of this year.
Robinson: I'm very pleased to share with you today that this partner of ours is Comcast and they launched airtime on schedule.
Robinson: I'm sure you can appreciate that reaches extensive both with the largest companies in the United States and government entities as well.
Robinson: We are already engaged with them on some very large deals and are still just getting started.
Robinson: In addition, we have an expanding number of large deals in the sales funnel with our other resell partners as well and achieved some notable new customer wins in Q1, which we believe will expand in scope as these customers implement aired islands stages overtime.
Robinson: Indicative of the momentum we see we signed up.
Robinson: Several new airtime reseller partners in Q1, our most ever in a single quarter.
Robinson: Some of these new reseller partners, our sea legs, some or what you might call Aggregators and one is in the end equipment provider and servicer.
Robinson: With these wins, we now exceed 30 reseller partners for <unk>, which we believe is significant.
Robinson: Finally, you'll recall I mentioned last quarter that Marriott certified aired out for you said its properties.
Robinson: I can report that this relationship is underway and we now have more than 100 Marriott properties in our sales pipeline.
Robinson: Okay.
Robinson: Our wholesale platform services sold US 2600, Hertz also accelerated in Q1.
Robinson: I'm pleased to report we closed four new customers, which is our most ever in one quarter. These.
Robinson: These customers are relatively small in size and we will take time to implement but I think they are a great validation for our platform.
Robinson: We know these customers looked at other solutions before choosing Irma 2600 Hertz.
Robinson: One customer it's more of a C pass type opportunity much like our large customer win last year service Titan.
Robinson: As you know we are excited that our platform offers the Apis and other requirements to win these C pass type opportunities as well as replace Broadsoft and medicine, which is used by carriers and other ucas providers.
Robinson: Yeah.
Robinson: So overall I believe we made solid progress in Q1 and are off to a good start for fiscal 2026.
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 first quarter financial results and then provide our outlook for the second quarter and full year fiscal 2026.
Speaker Change: First quarter revenue was $65 million at the higher end of our guidance range and was up 4% year over year.
Speaker Change: <unk> by the growth of my business, including agile.
Speaker Change: In Q1 business subscription and services revenue accounted for 62% of total subscription and services revenue.
Speaker Change: As compared to 60% in the prior year quarter.
Speaker Change: QM product and other revenue came in at $4 $8 million as compared to $4 $1 million in there probably a quarter.
Speaker Change: The year over year growth in product revenue was driven by growth in agile installations.
Speaker Change: On the profitability front Q1, non-GAAP net income was $5 $6 million above our guidance range and grew 56% over the prior year quarter.
Speaker Change: Now some details on our Q1 revenue base.
Speaker Change: Business subscription and services revenue grew 6% year over year in Q1.
Speaker Change: Driven by user growth in ARPA growth.
Speaker Change: On the residential side subscription and services revenue was down 2% year over year.
Speaker Change: For the first quarter total subscription and services revenue was $68 $3 million or 93% of a total revenue as compared to $58 $4 million or 93% of total revenue in the prior year quarter.
Speaker Change: Now some details on our key customer metrics.
Speaker Change: We ended the first quarter with $1 million 225000 core users, which is down from 1.234 million core users at the end of the fourth quarter.
Speaker Change: The sequential decline in total core users was was primarily due to the seat reductions with Idaho, G, which was anticipated going into Q1.
Speaker Change: At the end of the first quarter, we had 499000 business users or 41% of total core users.
Speaker Change: Our blended average monthly subscription and services revenue per core user or <unk> <unk>.
Speaker Change: Increased 4% year over year to $15.37.
Speaker Change: Given by an increase in mix of business users, including higher Abu <unk> Pro and pro plus users.
Speaker Change: During the first quarter, we continued to see a healthy office pro and pro plus take rate with 61% of new office users opting for these higher tier services.
Speaker Change: Which was up from 57% in the prior year quarter overall, 36%.
Speaker Change: Office users have now subscribed to these higher tier services.
Speaker Change: Our annual exit recurring revenue was $234 million up 33% year over year.
Speaker Change: Net dollar subscription retention rate for the quarter was 99% as compared to 98% in the fourth quarter.
Speaker Change: Now some details on our gross margin.
Speaker Change: Our subscription and services gross margin for the first quarter was 72% as compared with 72% in the prior year.
Speaker Change: Product and other gross margin for the first quarter. It was negative 41% as compared to negative 67% for the same period last year.
Speaker Change: The year over year improvement in product and other gross margin was primarily due to a fully consuming higher cost components. We had acquired during the pandemic in the first half of the last fiscal year.
Speaker Change: On an overall basis. The total gross margin for Q1 was 63% as compared to 63% in the prior year quarter.
Speaker Change: Although gross margin year over year reflects a heavier mix of product revenue in Q1 this year.
Speaker Change: <unk>.
Speaker Change: The prior year due to an increase in Ed installations, which offsets the improvement in product gross margin.
Speaker Change: And now some details on our operating expenses.
Speaker Change: Total operating expenses for the first quarter were $35 $4 million up $2 million or 1% from the same period last year.
Speaker Change: Sales and marketing expenses for the first quarter were $18 $3 million or 28% of total revenue up 3% year over year, primarily driven by higher marketing and channel development activity for agile and 2006 and it hurts.
Speaker Change: Research and development expenses were $11 $3 million or 17% of total revenue down 6% on a year over year basis.
Speaker Change: Primarily driven by head count management.
Speaker Change: We continue to focus on R&D efficiency and operating leverage.
Speaker Change: G&A expenses were $5 $8 million or 9% of total revenue for the first quarter compared to $5 $5 million for the prior year quarter. The year over year increase in G&A expenses was primarily due to an increase in personnel related costs.
Speaker Change: non-GAAP net income for the first quarter was $5 $6 million or diluted earnings per share of <unk> <unk>.
Speaker Change: As compared to <unk> 14 in the prior year quarter.
Speaker Change: Adjusted EBITDA for the quarter was $6 $7 million or 10, 3% of total revenue and grew 33%.
Speaker Change: Over the prior year quarter.
Speaker Change: We ended the quarter with total cash and investments of $19 million in Q1, we generated $3 $7 million.
Speaker Change: Operating cash flow and $2 $5 million of free cash flow.
Speaker Change: As a reminder, we have a seasonally lower cash flow quarter in Q1 due to the timing of an annual employee bonus payout.
Speaker Change: On a trailing 12 month basis, we generated $26 $7 million of operating cash flow and $25 million of free cash flow.
Speaker Change: With strong free cash flow generation, we spent a total of $11 $8 million over the last four quarters, including $3 $7 million in Q1 to buy back stock through a combination of open market repurchase.
Speaker Change: Our issue net share settlement.
Speaker Change: On the head count front, we ended a quarter with 732 employees and contractors.
Speaker Change: Now I'll provide guidance for the second quarter and full fiscal year 2026.
Speaker Change: Guidance is on a non-GAAP basis and has been adjusted for expenses, such as stock based compensation and amortization of intangibles.
Speaker Change: We expect total revenue for the second quarter of fiscal 'twenty six to be in the range of $65 5 million to $66 $1 million, which includes $4 eight to $5 $2 million of product revenue.
Speaker Change: We expect the second quarter net income to be in the range of $5 6 million to $5 $9 million.
Speaker Change: non-GAAP diluted EPS is expected to be between 'twenty to 'twenty one.
Speaker Change: We have assumed $28 2 million weighted average diluted shares outstanding for the second quarter.
Speaker Change: For full fiscal year 2026, we are reaffirming our prior prior revenue guidance and expect total revenue to be in the range of 267 million to 270 $270 million.
Speaker Change: The full year fiscal 2026 revenue guidance assumes business subscription and services revenue growth rate of 5% to 6% over fiscal 'twenty five.
Speaker Change: While residential subscription revenue to decline 1% to 2%.
Speaker Change: In terms of revenue mix for the year, we expect 91%, 92% of total revenue to come from subscription and services revenue and the remainder from products and other revenue.
Speaker Change: In terms of our full year non-GAAP net income guidance, we are raising the low end of the guidance range and now expect it to be in the range of $22 5 million to $23 $5 million.
Speaker Change: <unk> non-GAAP net income guidance for fiscal 'twenty six includes the impact of approximately $500000 of tariffs.
Speaker Change: Which is our current best estimate.
Speaker Change: And based on this guidance range, we estimate our adjusted EBITDA for fiscal 'twenty six to be 28 million to $29 million.
Speaker Change: We expect non-GAAP diluted EPS for fiscal 'twenty six to be in the range of 79 to 83.
Speaker Change: We have assumed a P.
Speaker Change: Proximately $28 4 million weighted average diluted shares outstanding for fiscal 2026.
Speaker Change: In summary, we are pleased with our solid start to our fiscal 'twenty six with a strong year over year growth in adjusted EBITDA, along with robust free cash flow over $20 million for the past 12 months.
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'll now pass it back to Eric for some closing remarks, Eric Thank you Chegg.
Eric Stang: As <unk> said, we now have a solid Q1 behind us and more importantly, we increased momentum and added new partners in multiple parts of our business to support our plans. This year, we've made significant investments to develop leading solutions in each of our four target segments.
Eric Stang: And are executing well to capitalize on the significant uplift to opportunities in front of US we look forward to sharing our progress in future quarters. Thank you we will now take your questions.
Eric Stang: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone.
Speaker Change: Automated message advised in your hand, it's raised.
Eric Stang: Also ask that you. Please wait for your name and company to be announced before proceeding with your question one moment.
Speaker Change: The first question that we have today is coming from Arlinda Lee.
Speaker Change: From William Blair. Your line is open.
Eric Stang: Perfect. Thank you.
Speaker Change: What contributed to the 1% increase in <unk>.
Speaker Change: This quarter and can we expect on Rguest stay at around 90, and I are going forward with.
Speaker Change: BG fully realized with Ctrip.
Speaker Change: Yes.
Speaker Change: So the.
Speaker Change: Retention rate improvement.
Speaker Change: It was largely due to the improvement in non Regis.
Speaker Change: Subscription revenue so we're talking about traditional <unk> solutions offerings and the residential solutions Inc. In Q1, we saw the improvement in the retention rate.
Speaker Change: For the other businesses, which offset the.
Speaker Change: Anticipated decline that came three or four regions. So.
Speaker Change: That's really what happened and.
Speaker Change: Overall, I think we will we should be remaining.
Speaker Change: 99%, which we had been at prior to resist churn that we experienced in the last couple of quarters.
Speaker Change: Perfect. That's helpful and what are you seeing the demand.
Speaker Change: Did you see in the demand environment in Q1, and what are you seeing the recent months that's low.
Speaker Change: I am sorry demand environment the demand environment.
Speaker Change: Yes.
Speaker Change: I would almost.
Speaker Change: So steady as she goes I mean, we haven't seen it.
Speaker Change: Improve or deteriorate to any noticeable degree.
Speaker Change: Yeah, I mean, thats really the best I can say about it.
Speaker Change: That answers, mainly from our Ucas and Houma office numerous enterprise perspective, the demand environment for <unk> is accelerating there's no question about that more and more companies are realizing they need to do something prices continue to go up.
Speaker Change: And so we're seeing much more interest and willingness to act on that front than perhaps a year ago.
Speaker Change: That's helpful. Thank you.
Speaker Change: Thank you.
Speaker Change: Thank you one moment to the next question.
Brian: And the next question will come from the line of Brian <unk> of Alliance Global Partners. Your line is open great. Thanks, So much two questions from me.
Speaker Change: Wait to hear all the details around air Dial you mentioned just now demand is accelerating.
Speaker Change: The fiscal 2026 outlooks unchanged. So I'm curious is there any change to visibility and when you think adoption will begin to ramp in terms of revenue dollars and in terms of larger scale implementations.
Speaker Change: Yeah.
Speaker Change: So.
Speaker Change: We are I kind of put it in my script, we have opportunities before us that are.
Speaker Change: Greater in size than we've won in our one in the past and we're excited about them.
Speaker Change: And I think they're moving along well so that gives us some.
Speaker Change: Perspective on outlook.
Speaker Change: Our relationship with Comcast is still very early days.
Speaker Change: And.
Speaker Change: It will be rolling out within Comcast across their sales teams over the rest of this year in a way so.
Speaker Change: And it does take time with with larger accounts to move through the sales cycle. So.
Speaker Change: We're optimistic that the early opportunities, we're seeing bode well for what we're going to continue to see growing through the rest of this year.
Speaker Change: Okay. My second question is you.
Speaker Change: You mentioned tariffs in your business, which is relatively small but tariffs have certainly had a disproportionate impact on smbs in the short term what's the impact on this on your subscriber base.
Speaker Change: As well as the sales cycle for new logos in your new cash business.
Speaker Change: Yeah, I think thats, something we all wonder about but I can't point to any effect on our customer base or or sales opportunity driven from tariffs today.
Speaker Change: And maybe some of the pauses and tariffs that have contributed to that but.
Speaker Change: We don't we.
Speaker Change: We're not hearing from our customer base that because of tariffs, they're going to do something differently.
Speaker Change: And so.
Speaker Change: And I said in my script that sequentially versus Q4, we had a nice uptick in number of.
Speaker Change: Accounts and users that we won in Q1 Q1 is typically a stronger quarter than Q4, but still.
Speaker Change: If you look at it versus a year ago.
Speaker Change: It was also strong so.
Speaker Change: No evidence of that being an issue at this time.
Speaker Change: Okay. Thanks.
Speaker Change: Thank you one moment to the next questions.
Eric Stang: And the next question is coming from the line of Eric <unk> from Lake Street Capital markets. Your line is open.
Margaret: Yes, Margaret congratulate share on <unk>.
Speaker Change: Profit outperformance.
Margaret: And it looks to be in the operating expense items that you are getting good productivity, there and given the guidance and assuming that that that productivity persists is there anything that we should be anticipating in the out quarters as far as areas, maybe that you'll be investing in obviously.
Margaret: The R&D is down here, but anything puts and takes between the three buckets between sales R&D and G&A.
Speaker Change: Yeah, Hi, Eric happy to go into that.
Speaker Change: I'd make two observations one is within the bucket of sales and marketing, which runs 27% 28% of revenue we.
Speaker Change: We are making a slow and steady shift towards air dial and to some degree towards 2600 Hertz.
Speaker Change: Versus the other two segments we serve.
Speaker Change: Not enough to really call out a fundamental change but still.
Speaker Change: Rather than grow the sales and marketing spend we are allocating where we see our biggest in.
Speaker Change: And most significant opportunities now.
Speaker Change: Now R&D running at 17% last quarter is still quite a sizeable amount of spend.
Speaker Change: We spent close to $50 million a year on.
Speaker Change: On R&D in the company and we do have several significant feature enhancements that were driving towards this year.
Speaker Change: And they kind of dip.
Speaker Change: Differ by segment, but in a nutshell with whom our office, we are bringing out more advanced capabilities that make office appeal to a little bit larger sized businesses and that expands our tam.
Speaker Change: We're seeing some success with that.
Speaker Change: We have.
Speaker Change: <unk> customers now up to 300 400 users one of our one of our office customers is over 600 users. So we like that trend.
Speaker Change: <unk> was in pretty good feature shape, but we continue to make.
Speaker Change: Device management, and the way customers can monitor and operate device more effective.
Speaker Change: Well not affected more more extensive and and that is well liked by our customers and a source of differentiation among many for air dial.
Speaker Change: And on 2600 Hertz.
Speaker Change: We're still in the process of bringing all of the luma IP and applications onto that platform, which will appeal to new customers, who want a more turnkey solution and that's going to be a long term project through this year, but we're making 26 on hurt significantly stronger with that investment. So there is a lot going on.
Speaker Change: On in the company.
Speaker Change: We're also on 2600 Hertz, continuing to invest particularly in contact center capability.
Speaker Change: That's at the core of some of our our recent customer wins and so those are the areas, we're working on but yes overall.
Speaker Change:
Speaker Change: Our longer term target our mid two range targets to R&D as a percent of revenue would be a little bit lower from what we're spending currently.
Speaker Change: Okay, and I guess I should start with the gross margin your 72% on the subscription and services expected to persist at that same level.
Matt Robison: In a short term Eric yes.
Matt Robison: The main reason for that is we're also investing in.
Matt Robison: In the infrastructure and team.
Matt Robison: Team resources to support the growing installed base and growing new installation as well they are dials. So we've got to near term investment.
Matt Robison: And in those capacity a bit and so.
Matt Robison: Perhaps we can start to see a little better improvement.
Matt Robison: Towards the back end of the year that the near term.
Matt Robison: That's the reason I see relatively stable at 72% <unk>.
Matt Robison: Subscription gross margin.
Speaker Change: Okay and then my last question is on your Air Dial partners a year ago, you had 15 <unk> partners and today. We are over 30 curious to know about im less concerned about the number of partners you have and really more concerned about how.
Speaker Change: The partners are that you have what about those 15 from a year ago have you been pleased with the traction they've gotten <unk> been disappointed what have you learned.
Speaker Change: So when we bring on a partner.
Speaker Change: Really a reseller of airtime reseller, we know from the status of their business.
Speaker Change: Kind of what to expect and some of them are smaller some of them are more significant we're very pleased with our largest relationships T mobile U S cellular Comcast.
Speaker Change: Some of the larger Aggregators, we work with like spectra, telling others.
Speaker Change: Some of our partners are more RMR focused there might be a small CLEC with only 5% to 10000 users for something like that but.
Speaker Change: But theyre all contributing in that and Thats. The main the main thing we did bring on a what I call medium sized CLEC. If you can say it that way as CLEC with the potential for a 100000 users for air dial we brought them on last fall and we talked about and.
Speaker Change: They have started rolling out are dial to their base and are discussing with us about accelerating how fast they go with that.
Speaker Change: It's very hard to put things like that into our forecast until they happen and so we're pretty conservative about trying to.
Speaker Change: You know.
Speaker Change: Forecast things that are likely to develop until we see them developing but but were excited that theyre now.
Speaker Change: Having good success with air dial in growing it so.
Speaker Change: Across our range of of resellers. They are all important we support them all and.
Speaker Change: Sure.
Speaker Change: We think it is.
Speaker Change: A great example of the strength of our product solution in the market because they have other folks that could go to and they've come to us.
Speaker Change: Okay.
Speaker Change: Thanks for taking my questions.
Speaker Change: Okay.
Speaker Change: Sure. Thank you one moment to the next question.
Speaker Change: And the next question will be coming from the line of Josh Nichols.
Speaker Change: Your line is open.
Josh Nichols: Thanks for taking my question.
Speaker Change: Real quick just to touch on I don't think it's been brought up but I mean, you've seen some really good traction in the hospitality space 500 hotels across North America, that's one of the largest end markets.
Speaker Change: I'm just kind of curious if you could elaborate on how quickly that's been ramping up and do you think that.
Speaker Change: That could be a significant driver going forward and what you can see opportunities set there is over the next year.
Speaker Change: Yeah.
Speaker Change: It is significant when we stopped and looked at it we were surprised ourselves in a way.
Speaker Change: We target winning.
Speaker Change: 50 to 100 hotels, a quarter, that's roughly where we aim now we hope that we can do better than that perhaps now that the Marriott relationship as has been solidified and we can leverage our certification there with Marriott properties.
Speaker Change: But all in that's kind of the range, we try to work in and generally we achieve just.
Speaker Change: Sales each quarter in that range, some hotels take ummah enterprise some.
Speaker Change: Take whom have aired island, some take both and.
Speaker Change:
Speaker Change: Neither case getting one success with the customer has an opportunity to then build with the other.
Speaker Change: But yes, it's actually quite an extensive.
Speaker Change: Segment in terms of opportunity and I think we could.
Speaker Change: Could run with it for quite some time.
Speaker Change: Thanks, and then just.
Speaker Change: Taking a little bit deeper dive touched on.
Speaker Change: No.
Speaker Change: A good amount, but also 2600 hertz, but you don't break those out I assume they're still relatively immaterial piece of revenue today and Mike what's the plans in the future.
Speaker Change: Maybe start divulging, a little bit more into like maybe some segment reporting or whatnot.
Speaker Change: They're a timeline, where you think that that may come into play given back.
Speaker Change: Backlog that you've been seeing buildup over the last year or so.
Speaker Change: So let me, let me give a general answer and <unk> will add to what I say.
Speaker Change: Our outlook this year.
Speaker Change: <unk> is built.
Speaker Change: With acceleration of air dial.
Speaker Change: It's built with acceleration of new customer wins in 2600, Hertz, but we don't expect them to contribute much until next year.
Speaker Change: Because of the time to ramp customers.
Speaker Change: So.
Speaker Change: Between the two we expect more growth out of <unk> than we do out of 'twenty 600, Hertz. This year on both of course started from.
Speaker Change: Small basis, and so I think we're a ways away from being in a position, where we think about trying to break them out separately, but I don't know if <unk> wants to share more yes.
Speaker Change: You, obviously right Josh in that it's still a low single digit percentage of revenue.
Speaker Change: Ed.
Speaker Change: Total revenue report today, but we are excited about.
Speaker Change: The new customers coming on in pipeline longer sales cycle, but kind of a second part of your question.
Speaker Change: We don't necessarily have a bright line soda rule or.
Speaker Change: The expectation as to when we could start to report separately, but I think.
Speaker Change: And once it starts to get into.
Speaker Change: 10%, 15% of revenue kind of a scale I think we would start to consider.
Speaker Change: And a little bit more.
Speaker Change: Granular about how we disclose any foreign investors and analyst community too.
Speaker Change: Sure sure little more detail.
Speaker Change: Sounds fair I appreciate it thank you.
Speaker Change: Yes.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And the next question is going to come from the line of Patrick Wall Ravens of citizens. Your line is open.
Kincaid: Hi team. This is kincaid on for Patrick Walgreens.
Speaker Change: I'm just wondering if you guys had any significant change in the competitive environment you could highlight for us. Thanks.
Speaker Change: Yeah.
Speaker Change: Hmm.
Speaker Change: We're in a competitive environment all the time.
Speaker Change: And that's why we focus on the four segments, we do where we think we can really bring the leading solution and that's that's how we get competitive advantage and win.
Speaker Change: And.
Speaker Change: In the segments, we target.
Speaker Change: I think there are more immune to some of the pressures that our industry has had generally certainly are dial we're selling most of our customers on three or five year contracts and these are applications, where once they get installed they just want them to run.
Speaker Change: And aren't going to be wanting to touch on there is installation effort to put them in place. So that's also a barrier once once you get in.
Speaker Change: Small business Ucas.
Speaker Change: Small businesses.
Speaker Change: Need a unique combination of.
Speaker Change: Easy and turnkey installation and great support along with great value and we've architected our solution built in that way.
Speaker Change: We think.
Speaker Change: Half or more of the small business out there across North America.
Speaker Change: 1% to 20 employees have yet to move to a cloud type solution. So we keep just going at that market pretty straightforwardly and I don't know that we've seen any particular change in competition in that.
Speaker Change: So.
Speaker Change: I think the general answer is not anything to call out specifically for you here.
Speaker Change: And.
Speaker Change: We'll keep monitoring that but.
Speaker Change: We think our outlook depends most of all on our own execution.
Speaker Change: Yeah.
Speaker Change: Alright, thanks, so much.
Speaker Change: Thank you wouldn't limit for the next question.
Speaker Change: Our next question is coming from the line of Matthew Harrigan of the Benchmark Company. Your line is now open.
Matthew Harrigan: Thank you.
Speaker Change: We all well know the cable companies tend to emulate each other on the product pipeline and the Tech road map, particularly since they don't directly compete in particularly on the business side.
Speaker Change: They tend to.
Matthew Harrigan: Obviously, they don't have national footprints, so they work together, there, especially well.
Speaker Change: Are you already talking with.
Speaker Change: Other cable companies <unk> got the largest guinea pig or maybe Kathy Barra.
Speaker Change: Comcast and sensor or people kind of waiting to see how everything hardens, Alex as far as their execution and then secondly in response to earlier question, you said I think largely with reference to era dial.
Speaker Change: Look there are other people that.
Speaker Change: Your clients could talk to.
Speaker Change: When you look at your and I know Europe.
Speaker Change: In Asia, not your point of emphasis right now is single lease but.
Speaker Change: What are people doing their on the work around on the copper line replacement and our other competitors over there that arent present in North America or are there some of those very large telecom equipment company.
Speaker Change: Tremendously large town for ERD Islanders.
Speaker Change: I don't know what the workarounds would be other than paying a lot more money for your copper lying right now I mean, specifically you know who are you seeing as competitors have some semblance of a comparable.
Speaker Change: Technology solution. Thanks.
Speaker Change: Sure Yeah. Thank you.
Speaker Change: So on your first question.
Speaker Change: We do have a broad effort.
Speaker Change: Trying to.
Speaker Change: <unk> engaged with new reseller partners for air dial.
Speaker Change: As you would expect and.
Speaker Change: Our goal is to add at least a couple of partners every quarter and we've met that goal now for two years straight.
Speaker Change: Yes.
Speaker Change: You're right that when you work with.
Speaker Change: One cable company, others will notice and.
Speaker Change: They don't directly compete often and that can open some doors for collaboration or just referencing so yes, we are.
Speaker Change: We're excited that we can continue to add more reseller partners on air down.
Speaker Change: And I think that'll be an important driver of growth for us.
Speaker Change: On your second question, which I think it was particularly focused on Europe.
Speaker Change: We.
Speaker Change: We have.
Speaker Change: Some engagements in Europe, obviously, we're in 32 countries with <unk>, but thats on the Ucas side.
Speaker Change: We have some engagements in Europe with 2600 Hertz.
Speaker Change: Customers and I think I mentioned a quarter ago that we won one a new one in Europe, just a quarter ago.
Speaker Change: This was kind of exciting in the Netherlands, but with air dial out today <unk> has not sold it's not used I guess I would say outside of North America, We would love to win.
Speaker Change: Large.
Speaker Change: Carriers for <unk> in Europe, or other parts of the World. We don't have a big sales effort going on on that but but at any point in time, we have some discussions going I would say and generally our experience so far has been.
Speaker Change: Companies, taking a slow approach to the problem and seeing if they can't delay the need or implement something internally that will get by and.
Speaker Change: But I do think opportunities.
Speaker Change: We'll continue to unfold as we look forward.
Eric Stang: Thanks, Eric.
Speaker Change: Sure.
Speaker Change: Thank you one moment for the next question.
Speaker Change: And our next question is coming from the line of Matt Latimore, Sorry, excuse me, Mike Latimore of Northland Capital markets. Your line is open.
Speaker Change: Okay.
Vijay: This is Vijay <unk>, Mike Latimore.
Vijay: Bob.
Speaker Change: Question one.
Speaker Change: When will you be done integrating apps into 'twenty 600 hubs.
Speaker Change: I would say end of this year and I know that seems like a long time, and maybe a little bit longer than we originally intended but.
Speaker Change: <unk> done it hurts really operates in three.
Speaker Change: Ways that it goes to market. There is our shared hosted our private cloud and a global infrastructure and each one operates a little bit differently. So we actually have two.
Speaker Change: Enable the capabilities in each one we have already though launched our mobile app for some customers and our.
Speaker Change: Desktop app as well and so we're making I think good progress.
Speaker Change: Okay.
Speaker Change: Second one have you seen any change in the sales cycle Department at 600 hubs.
Speaker Change: Given the <unk> acquisition.
Speaker Change:
Speaker Change: That's hard to answer because.
Speaker Change: It's only really since that acquisition that we've.
Speaker Change: Invested in sales for 2600, Hertz and we do have a small team there today and I will say, they're doing a fantastic job, we had multiple wins of new customers in Q1 and.
Speaker Change: And so we are seeing customers receptive.
Speaker Change: One of the customers we won.
Speaker Change: <unk>.
Speaker Change: Has their own solution and a vertical space and wants to add.
Speaker Change: Communications to it and they could have built it using surpassed stead went with us and that was after looking at competitor solutions. So that was a really nice win for us.
Speaker Change: And.
Speaker Change: And another customer.
Speaker Change:
Speaker Change: That company also a small but the person running it has a lot of deep knowledge and experience with large carriers in the industry and chose us over other so.
Speaker Change: I'm seeing good momentum, but I don't know, if it's us or if it's the market.
Speaker Change: Understood. Thank you.
Speaker Change: You bet.
Speaker Change: Thank you as a reminder, if you would like to ask a question. Please press star one on your telephone.
Speaker Change: We now have a follow up coming from the line of Brian Curse leaner.
Speaker Change: Please go ahead. Your line is open great. Thanks, so much I have two questions.
Speaker Change: The first one is I'm wondering if you can quantify the number of lines that churned over the last two quarters at re just so we can evaluate the underlying growth of the business.
Brian: Yes, Brian.
Brian: It was about what we got it it is.
Brian: But I guess you are asking for specific quantify asking you guys to quantify yes. It was about.
Brian: <unk> hundred 13000 in that range in the last two quarters and we originally.
Brian: <unk> ago.
Brian: What about churning in total about 19% to 20000 over the course of last fiscal year and good chunk of that slipped into Q1, So again I remind you.
Brian: That way, the 10000 or so that churned in Q1.
Brian: We ended up showing about the same as what we had expected in total year ago.
Brian: Got it to 19 and 20 in total 12% to 13 in the last two quarters.
Brian: Correct roughly.
Brian: Roughly 10 in the last quarter. Yeah. That's helpful. I mean have you seen we can see the growth there and then you.
Brian: You've clearly in the last I'd say two.
Brian: Two quarters shifted your focus to.
Brian: Two driving stronger profit.
Brian: Assuming <unk> dialed dies.
Brian: Enjoy solid adoption, what's a reasonable goal for adjusted EBITDA margin, maybe three years out or more.
Brian: A lot higher than where we're at.
Brian: We brought our adjusted EBITDA up nicely over the last 12 months to 18 months, but I think it's just the start.
Brian: There is no reason why this business can't be very profitable with 72% margins and.
Brian: Our core solutions each of our four segments.
Brian: Pretty well developed and.
Brian: Not needing the level of R&D that they've taken in the past.
Brian: Okay. Thanks.
Brian: Thank you and at this time I'm not showing anymore.
Eric Stang: I'd like to turn it back to Eric for closing remarks. Please go ahead.
Eric Stang: Well, thank you Lisa and thank you everyone for joining us today, we really appreciate it.
Eric Stang: I think we're off to a good start for the year. So thank you I'll, let you go.
Eric Stang: Thank you all for participating in today's conference call you may now disconnect.
Eric Stang: Okay.
Eric Stang: [music].