OOMA - Earnings call transcript Q3 2019

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Operator

Good afternoon. My name is Josh, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ooma, Inc., Fiscal Third Quarter 2019 Earnings Call. [Operator Instructions] Thank you. Matt, you may begin your conference.

Matt Robison

Josh. Thanks, everyone. day, Good the Inc. of to call XXXX of Ooma, third welcome fiscal quarter earnings And is Robison, name My Matt Corporate IR Development. and Ooma's Director of and here Ravi me today Ooma's Eric With are Narula. Stang; CEO, CFO, closed today, a via After the Ooma market press issued release GlobeNewswire. on available Company's website also is ooma.com. release the The This call website. our is live webcast accessible on link of a is Relations page events section being the of and from the Investor this will call replay for be one least link This of year. active at for

the will executives the make our meaning presentation, within of Securities statements today's Laws. During Federal forward-looking

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

call and forth earlier non-GAAP are to the in be stated, as as be matters we Our not fiscal on or and on the GAAP expectations financial and and more are our we'll of for basis. set give to as is those in guidance included that, press Securities we a discussed website. differ of non-GAAP fourth available beliefs earnings quarter regarding on periods A results the a to Also to to intended release measures call comparable as in or the discussion required filing, basis. page press actual results date website, and these a the as in press financial most the with forward-looking today, section considered this otherwise non-GAAP substitute The be financial us of well than page events to except addition XXXX disclosed to results our on The Investors described a this titled, not and business. Disclosure for non-GAAP Commission. by cost measures risks Supplemental X-K information why release financial of GAAP. note expenses based are Financial well of presentations this that and included X our On statements those measures other in are measures results Financial as our measures we subscription law. update as call, quarterly materially These will prepared this cause revenue of filings our and any financial subject may metrics in non-GAAP from directly to obligation These our financial Please disclaim available accordance non-GAAP issued fully hereof, on presentation in release forward-looking links present any reconciliation statements values include and information core in Supplemental financial are the isolation the actual Disclosure to and in projected. and could not section, that and uncertainties materialize in in include the X. our with as risks key the Exchange those

resolution to GAAP press GAAP weeks, will are include slides several presentation expenses also today's that investor in participate our In provides coming from excluded that Additionally conferences, of we reconciliation, are non-GAAP listed which non-GAAP release. in metrics.

at a and UBS Needham Growth have January on X We Conference X:XX the from Conference AM, from scheduled webcast the XX. December

Eric? Okay,

Eric Stang

outstanding outlook. we with market bring retention And today segments we where you you end-to-end results I'm our as a welcome grew unique rate our know, subscription from and dollar range. the Ooma subscription XXX%. revenue others. talk QX Ooma. was earnings guidance our was $XX.X focus Strategically, QX FY of to everyone, revenues features, Hi, quality I Ooma's business QX above believe net can year-over-year has value and better quarter million about Matt. Thanks, an 'XX our services revenue customers QX and was strategy, and platform. on developed of call. QX than for excited XX% to

And doing so. are and have is Our the a each segments service I we I way with target. we cloud to and value have lead This we first more onboarding, believe and well of the goal fair become trust in ahead created Starting And and of in a ever quality use to defined leader and segment and others, providing think of say businesses. Through it's undisputed is industry. solution ease we installation to to on become before. curated it features we phone than today. the small brand our businesses

business and business We This are are unaware year of growth rates we've results coming with our the expand we the VAR superior seeing well options executed also channels invested range On We've close pleased in deployment we're of our come. achieving. on competitors small segment our in great solution this from building users to features, heavily XXX such features market. seeing its we as and to receptionist from sales XXX are addressable report, the have progress, for channel. support choose and order to multiple and value. size at sized combination more the for calling locations we I'm development pleased some of our and PBX the as Office are flexible features of reseller of Cloud we Ooma of including functionality, larger good introducing our increasingly to have validation businesses, made

year. larger level This new is Enterprise area targeted size Regarding a off us, Voxter from for of businesses. acquisition solutions earlier our building development UCaaS this

are will I'm unique where we we and be, increasingly in not two create this space. segments convinced we yet While own to want

Enterprise distributed emerging as a which for affords can as they these want segments, our Both reliability. and Enterprise are who easily as of providers believe globally own. phone channel VAR leverage their of to cloud design high API-first architecture extremely individual solution label center I flexible businesses platform, the customized our we data claim solution well as of of requirements white a best partners for one service their the seeking Specifically,

solution release customize was a able meet our strengthen strategy demonstrates special are solutions our their The the on investing we needs. company most communities outlined recent press two to for for is adopt which Enterprise segments Our of KXConnect, I senior quickly earlier. and Ooma focused to to Currently, living well. trader

can year, has Enterprise potential Ooma next part become and the look of we scale fastest believe out the Ooma. to quickly growing As we to

there residential is of providing customers. have And Moving others residential little to our on and the to of and phone years. leadership continue that primarily many number grow when now the ranked our validators residential next Few as focus is readers the for doubt not. Consumer believe one we segment. leader cloud service thrilled base Ooma customer our this we us that great solution our are Reports in with are solutions investments best users, the business business market in success, given We're to

of to Security. primary Ooma Smart we working being On are add with our front, the course also residential additional focus services

flexible changed insights we to from on best Home name empowering signify richer our Ooma in lead and cases We thereby more to combination Security of use Smart with providing our real-time Security note, our and and strategy intuitive of have based controllable at to them a users for the competitive envisage You'll advantage lives. our becoming range Ooma customer research solution. more integrated alerts coming sensors wider increasingly a and from overall

strategy continues in of for major security our unfold, launching strides first smart marketplace. including Our to solution this the we the made year generation have

and a that we we're large are we forward. solution market others, offers plans the with going believe than more excited We are about our opportunity convinced, serving

once in where we about Consumer developments. the we have again QX, for is for new have excited coming plans planned. our showcase what residential I'm about Show Electronics this And us quite Annual This January. an Speaking year, we event important

will For and service Residential announcements, CES, security expanding our solutions both make encompassing we and several sensor Ooma Ooma camera. and phone our Butterfleye security, Ooma

customers, our continuing also QX invest include for business Enterprise. Ooma and growing to plans both in Ooma Office Our for

others. easier Office white total long-term from to expand In also make our and trend. capture QX, executing our we are working between We to goal synergies sound efforts and well. strategy growth label we activities, this marketing our to revenues our a increased Overall, channel to with Enterprise is revenue, I feature continue to enable partnerships continue Ooma's sales, new of add and new and are Enterprise. XX% believe Talkdesk customize, business and Ooma and features, leverage coming and sales We'll resellers, it's

respected by own into key and initiatives our our much Ooma platform positioning opportunities is the we end-to-end offer unique be we go of building in to further ourselves exploit services target, by hold front fully leader brand. the solid of time to taking making by in leading and in success the key expanding the I'm have progress, segments recognized, market the outlook we're Our are Well, driven excited ahead. we us. a our by and I believe to about over creating range

take the more I'll detail. let return results and outlook call with final comment to over in your and our discuss turn questions. me to the Ravi then we'll Now

Ravi Narula

will then and of fiscal for 'XX everyone. provide you, I'll fourth Thank the third results quarter for and our financial full start review fiscal and Eric, afternoon, a outlook year 'XX. good quarter with

all which as IR stock-based reminder, items statement release GAAP such found income website. press on in a our compensations, the available earlier intangibles charges. data of except are metrics and acquisition-related and is the financial expenses to amortization non-GAAP other As of The and reconciliation non-GAAP business key can revenue section be exclude a basis on issued today, of

of third Now, basis, achieving revenue to performance, $XX.X by XX%. $XX $XX.X range million guidance year-over-year quarter exceeded a our had or financial million. results. revenue, total QX of We issued On million previously grew a strong $X.X 'XX million which

our Business XX% as of higher quarter business, year-over-year the particularly as free $X.X Ooma on 'XX in are to Net users now a calling We our Business was revenue range better primarily for This to fiscal Business such large are business driven pleased services grew base. by XX% customer prior-year and issued third million quarter. Ooma the total revenue contributions of than Ooma growth with of loss. previously to overall Office. of growth $XXX,XXX of Ooma the monetization total better the subscription revenue services and guidance our from well compared toll basis XX% was as in loss $XXX,XXX,

basis. XX% Our and X% year-over-year. combined from The residential the and and Business revenue Ooma grew services Residential namely grew businesses, revenue on services subscription year-over-year Ooma core a subscription

the key Product XX% will was provide subscription I of compared for prior-year details for revenue third fiscal 'XX the $X.X our fiscal prior-year to quarter. the quarter total of on now For metrics. third was $X the further the 'XX, XX% of quarter. in compared million services customer revenue some quarter to and revenue million of

to of quarter the XXX,XXX users third of XXX,XXX from X% at of the core quarter core by total at core users fiscal third 'XX users end 'XX. the of increased fiscal the Our end

of Our Business XX% to the core third compared at quarter XX% of period. end 'XX have to users end prior-year users Ooma of at the the grown total the fiscal of

the to to $X.XX compared monthly user 'XX prior-year end of recurring growth. average of subscription $X.XX blended XX% fiscal Annualized fiscal and 'XX, in the year-over-year and quarter revenue at revenue third of increase monthly $XXX.X Our exit a or ARPU of the driven ARPU services was third approximately the million quarter increased period. by

for dollar are We pleased rate of achieved to compared have prior-year quarter. net 'XX subscription to quarter fiscal the third XX% XXX% for retention

add up also due XXX XX% 'XX Now third mix margins. to increased color improvement gross subscription subscription Overall and let margin basis This services points driven prior-year me to of the margin. for gross and quarter. quarter by services gross gross the margins the was fiscal higher and were of some from revenue

fiscal some the expected, of As cost services expect I for And repeat with XX.X% as line operating had were gross Telo are in margin Ooma Product quarter expenses. margin the to Accordingly, in services at other not period benefits especially and which prior expected quarter. for promotions third and the holiday 'XX and quarter, was negative the gross to subscription subscription be planned subscription fourth in around by gross quarter special to more now fourth for smart margins rebates and the driven XX% for quarters products. onto and security we XX%.

million, Research or Third direct marketing million, $X.X further by increased to basis. and the we to XX% sales increase sales awareness of development new of XX% support business. quarter, our $X.X increase were as approximately prior-year invested of smart a market in to overall products the development security of to XX% $X.X as create $XX.X and grew overall increase a year-over-year quarter to Ooma and expenses an G&A million, expenses million solutions. marketing Compared $XX.X well our the and from force to our million was bring million growth enhancements market Business $XX.X operating products. year-over-year $X.X to increased expenses prior-year spend programs we as were an or on infrastructure period as million

quarter. per Adjusted loss in share $XX,XXX third $XXX,XXX a versus the the year in a $X.XX loss or in of Our for the of loss 'XX loss the of third prior EBITDA 'XX was quarter. quarter net share per compared a prior-year fiscal $X.XX loss $XXX,XXX or $XXX,XXX loss of to was fiscal quarter

debt and other end the Now the of turning million metrics. investments of $XX.X third and balance We fiscal had to 'XX. quarter sheet key no of at with cash the

quarter approximately Cash $XXX,XXX operations than prior-year for usage third will up 'XX, our and quarter. XXX was with marketing. for Business. and cash fiscal full-time headcount full the the million in investments of contractors, in now cash used the $X.X Ooma XXX generated fiscal employees We prior-year more of compared For of and growth was outlook quarter provide 'XX. our The quarter. from quarter fourth reflects year in sales majority in to the I especially in our growth, ended the business

in of million. the For fiscal total million fourth $XX.X revenue quarter be expected to to $XX range 'XX, is

in which CES. of of be $XXX,XXX for marketing the per loss estimated $X.XX. net $X.XX Non-GAAP range to an to to of range loss be expected in the $X.X net non-GAAP includes to expect share is XXXX million, the $XXX,XXX spend We

with have to approximately We range million in to better loss is XX.X million. $X.X outstanding and expected we weighted net shares be XX.X $X.XX to $XXX.X of loss in for total is range In million for have And to assumed average 'XX. $X.XX be Revenue per revenue million expected, outstanding 'XX. full for be Non-GAAP share range in of in million fiscal to are now Eric fiscal the it for pleased weighted strategy. 'XX, third to now the net pass Eric? assumed based trends gives long-term we are non-GAAP closing be which we execution financial 'XX year previously guidance on We results, average to back business, our and million. increasing some summary, further about $XXX confidence for our fiscal that, quarter the and QX. the expected $X.X fiscal remarks. us of than expect for I'll to With shares

Eric Stang

Thank Ravi. you,

now is 'XX discussed and to initiatives. a well, looking year. last year for we We building R&D quarter, executing significant a QX As solid have remain in investments are We us focused and are key respects next which we believe FY we're QX in on behind we future. many ahead making the our

Looking be and out grow the providing into Is now the our R&D as of term, spend. expect business by and company with segments increasing portion the operator available a we P&L to the solutions leverage revenues longer we become with in margins substantially from Most customers. importantly, a our larger customers, our expand we target we to you. greater expect best leader to Thank We'll questions. take there? your coming

Operator

[Operator from Blair. Bhavan with Suri William Your question first comes Instructions]

line Your is open.

Bhavan Suri

Enterprise. of pretty landscape? then - high but sort level got want I do to happening you just of, yourself that maybe companies you XX the a it's UCaaS, has starting space, the guys, XX we'll go think that, moving up SMB the given there given to up, sort here, and of low the you guess, couple see just can at market about just at sort around. market been guys of about start you bouncing we little medium I talked Ring kind at and UCaaS shift sort that I and I on massive of Voxter, high think How employees more granular, successful, from idea level. about level, sort about sort questions, understand this is obviously into of of to fitting and move that how as of

that transition are guys how love that Just to market? thinking in you understand, about

Eric Stang

all, kind small Ooma business and set an don't led In from that to Office a solution, business us a solutions. to of curated we is of of different segment the is segment two segment, come the and without gives business use small a with segment. starts kinds business the the very which all they different belief that everything it larger with first Well, That out up feel easy Sure. is fact complexity the small want. very administer

that business to that value. - bigger my a even seeing up And in at on talked a move wants script. larger when just XXX in businesses. solution are of the at functionality - order set size customers a that's great We of I've

today Now when that businesses larger serving we're you you speak about mentioned. UCaaS much itself,

we're simply players like channel white the We position they XX even We're customers customer's have that segment our customers for with two to Ooma have good of enough. to and then run individual UCaaS here. are ourselves custom, specifically name being as their in on make billing, and Enterprise with many open in said the label or are that. users it's solution very harder described space, one a And that But we're we segments, of hundreds at meeting met. businesses the for just background. we're a going to users the meet targeting VAR with second I bespoke advantage we the the with is, about It's in space Enterprise is have to feel them offer an with more first are need business and all, where business readily customize doing powering solution, API easily so And and need we they I and some this. designed to think straightforward needs, the the can their it not better it's and requirements One that do and size work to specifically. will larger I much we believe it as real so our full reseller happy very we ability fits the solution the be target

getting it fact, those can't. to that their to get most big here, a that positive strategy operate response in businesses And VAR channel the it's more of from that of lot you finding holistic can't are enable way. we're in to continue - We a resellers to mentioned reseller players, the

how trying don't So the we it. and that's trying not think segments serve not be approaching I can We're guy. to trying certainly biggest, to we're that. leading beat to we're do serve we're I solution, the other the believe the we with

Bhavan Suri

connected and the potential as that seems like think it to of of it, parts your be Do or IoT question how - that, a a turning you about that of market. security this player of business sort guess a that's effectively would this early the where, sort think about a home sort talk sort these we is into as about sort I near-term. high-level do start a Ooma before little it's market guys home make you your strategically with thinking again, push we dovetails of play in had, just view of think and might a you in little you more

space. your Just the opportunity sort that and then initiatives in of

Eric Stang

Yes.

most We making are smart have strides into the we as are launch our on, we of our putting security in just what I in great And customers our XX% and solution say our of that. our business - emblematic growth think with I investment Butterfleye there great focus platforms. year-over-year of on business strides camera. growing our today because The

a can the sensor each more specificity acts. than out today. how stand on To to our also to to We give many in out is security use I alerts new other starting platform significant the you versus their our We're little range wider While of Ooma brought the to more individually going smart where we've to are differentiate system in really you with capabilities others, we're advantage. and able ways that, and competitive control bit give we're which customer because we space there gain offer players going think out in increasingly lives. it it

with into which you camera allow Our recognition more Butterfleye it, usability can solution. also has built facial

whatever to solution greater - go. think a kids allows over we and the become in a have peace their - recognized customers just, build Albeit, did a come, what's to walker bring get see as to us better it the is. going that way long of to world dog did mind understand friend the happening home, time, I you're

large forward, just space to we've we're evolve it's to and the time. to but space, is going excited, over opportunity the for launched because we the go some we're long-term first market continuing as into platform capabilities new our the are Ooma this unique solutions, very We very a suited well to bring

Bhavan Suri

get Then there. Ravi to again,

takes So Ravi, on here. for here, one puts just quick sort of and margins one you

sort a a of rates had growth You year number of fiscal varying with out for quotes designated 'XX of future parts and moving there sort building you growth. then

the and then forward? we seeing trajectory puts major takes, in margin your and gross Just that you're margins on variation the drive for thoughts look

Ravi Narula

Bhavan. Absolutely,

for at ultimate And margin look in we after last The and subscription our let you margins from subscription. we product and we and margins two, the of subscription comes by secondly, have focus user, both two Company of absorbed on, six me because Ooma and is out the around been create where into there. have revenue the is subscription the acquisitions Voxter where margins If parse this XX% - the a that's we Subscription months our gross having services. creating XXX% revenue value Enterprise Butterfleye Company. XX from to

couple we and to margin datacenters, So with more next subscription more the of those businesses. we do XX% into which on around more our invested plus sub-scale will believe two XX% pops adding as years. is I users in services But have grow, now grow there adding infrastructure,

grow. north term XX% services growing. subscription the longer as grows, the could should I now, XX% be as the that business in on services. services, margin we number and of this be margin like users, to around the gross of of even residential believe smart the do side also as So add over existing to mix grow base grow I as customer we and do as our security the expect have services we XX% And high overall more additional there. as It's in or

hardware and product given negative I get that margin don't hovering the customer and much are XX% is change expect to discount goal we around the the upfront. to gross XX%, a margin, On gross we if to have

totally We that. are fine with

in around see to change, where while, up overall. are. down not be but may once that services or we go in but think a margins speaking, the you'll would long They I margin drive gross product will subscription gross margin generally the So term,

Operator

comes question JMP next Securities. Your from Pat with Walravens

is line open. Your

Joe Goodwin

on This for Pat. is Goodwin Joe

couple of a questions. Just quick

First on is, any results? provide can you Friday Black color

Eric Stang

actually Cyber and for pleased it's where, yesterday. the different. Black Friday seen even with But we've a don't Monday always and We hand time have this us, year results far strong we're is was all what in so no

Joe Goodwin

And then know been do to any Understood. that Ooma team, is change also you motions just of in any new. moving going time that sales have your Voxter I - Enterprise But anything relatively that short your motions? is change the plans in learned have you running you to up have guys forward?

Eric Stang

I'm the promotion, sorry, said? change you

Joe Goodwin

Yes, go-to-market just the the strategy sales motion Enterprise. and for the

Eric Stang

I we've of there that kinds would answer that just Well, Yes. talking about we with seeking already the do. are been to - things

to think there synergy that's But and reseller Ooma the flow And between that level, the driving VAR Enterprise time at been is now in the more Ooma more drive synergy We nascent. also and marketing accomplish as I for have over Office. us. working well. lead working we'll We're

are going execute get resources it say our help we're our if continue certainly I largely way that's that and But areas. be the And each as what building doing best it. stronger, forwards will I We can - well. no, in think path just both the to other, doing continue to

Operator

Nichols Josh next comes with FBR. Riley your from B. question And

open. line Your is

Josh Nichols

the area to expand you as already did to mentioned - the hear Could and little you sets take with was was traction little you good platform the Enterprise think rounded And an that a talk about more on long then how I how could wanted of Yes, feature customized? that a set. for getting to type XXX opportunities some where get business going regarding the you division expansion? that plus bit bit and might out feature some you customers.

Eric Stang

your had. them customer to have happy Office I more is features, that than you serving functionality Enterprise because a year our for what And have going we we we've because part this business, and addressable need with made we've businesses, think curated be forward, bit would more set, steps do. this other originally advanced need. up to to making I'm just which several take needs really already little see a to it of small or that are we're aren't little what roadmap a multiple to market. Ooma expand it the but The don't when think wrong business on mainly adding become Ooma we it's well, be to These things businesses through QX. power and that's Sure. question are heavy year with locations serve getting weren't up it's at Ooma a - we'll relating sites, if to useful. we're to want different feature for the step There - expand that than more where And more things is and a to this I quarter receptionist to Office. of the would as is, not small is And investment that business to ability we're and lots bit but you complete think, solution keep we been where move early and necessary Ooma as that, Office with that particularly instance largely to going we larger

question. So, I hope that addresses your

On ability ability for Enterprise easier their with easier we And want the it we'll to channel described, label work make we to And positioned look in Ooma out the it segments, to we make front, to are partners solution, to investing white the customize I well year, fiscal if with be. where next are coming think pretty investments those on be to I us. well. and

Josh Nichols

home for to that space revenue? rate high Do double-digit continuing growth of I that you're mid to service sets sustainable for outside grow to good was high obviously for side. single-digit to think single-digit ask, home the overall with revenue foreseeable Is here Then new market feature see of contracting, going make on the business advanced that, you high-type the growth kind future? is although front service the the

Eric Stang

maybe at so outperformed If that. little a We've behind quarters far to we than us, been mid-single-digits we've guidance year with three you gave. this more the guiding bit look

the that space. market, the households the It's side. in the We residential to are said, perhaps million best and about the service be phone features, large business heavily North side XX a investing best quality on so we But value opportunity. the continue in less the offer on best we and and excited America

So difficult expect, much. how growth some we to forecast it's

Operator

Northland next [Operator Instructions] Mike Capital. question comes from Lattimore with Your

Your line is open.

Unidentified Analyst

guess [Vijay and one within customers, spoke could And the a on terms you of One please. them? I quarter many growth the Devar] during growth, insights also how is is any in Latimore. any you the Ooma potentially me in and Enterprise quick for that the This are so, next Mike could what accelerate little - tell that many question further Enterprise, year, how drive could subs about bit

Ravi Narula

year of core users users, remarks Business. are users And what is now XXX,XXX business had Business a Let total we jump - start And had marketing the We sharing, users the those Ravi, then don't at in common ago the a me overall also. growth which We because of mentioned growth look Eric I with we both at me were Office there We have. let can lead, is includes we is only look this there. Ooma users. and look in programs Enterprise residential overall But are additional versus break XX% separately. user at Ooma start now those, XX%. if much my and so out is with with users users XXX,XXX comments prepared there of

Ooma of is significant Office combination Business a Residential both Ooma grew, Both in Enterprise both Ooma results but quarter, a with goal, of Enterprise which Ooma have, users, the growth in don't users Office. grew out and break and Ooma - combination and both we was are we how and Office we users. many happy pretty So, Enterprise what but versus the we that are have - the

Eric Stang

I - think is Eric. this

get. the talk customers, I was that call, market this behind solution to more think, in what there is and resellers their the significant being want when a to we customers. interested excited all develop comments opportunity the the the for should potential in, we've fits able conduct this regard, more really I of segments out to in control my opened one talk Lot we and see There resellers some our are interested with size don't that I end business to more on. really are decided of and say focus solutions, we customers

to guidance of it's And in New a on when think our that early and potential. call and I Year. that we job we'll be well year giving execute our have next see capitalize So we now next lot for

Operator

are Instructions] telephonic back I'll Eric. [Operator no call to time. There this turn the currently questions at more

Eric Stang

hard as look forward. Thanks, an QX, you. outstanding participating for we're pleased you to We're Thank bring working we quarter everyone for and today.

you, thank So, everyone.

Operator

This concludes conference call. today's

may You disconnect. now

Ooma (OOMA) 27 Nov 182019 Q3 Earnings call transcript