OOMA - Earnings call transcript Q2 2020

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Operator

Good afternoon. My name is Chris, and I will be your conference operator today. At this time, I would like to welcome everyone to the Ooma Second Quarter Fiscal 2020 Financial Results. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. you. Thank Instructions] [Operator

turn over now Ooma. the will to call I

Matt Robison

is to everyone, quarter of Thanks, here Director today name Stang; With day, CEO, CFO, Corporate welcome IR Ooma, Robison, the and of My are call Chris. Good me earnings Ravi and Narula. second Development. Ooma's XXXX fiscal Incorporated. Eric Ooma's Matt and year

call live on After be this call The of release GlobeNewswire. is press release for the website, a the the company's via year. link market webcast link section replay closed the Events today, Ooma our is ooma.com. from least accessible page will at This also website. for This and Investor issued available being of a on active is Relations of one

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

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

may results regarding and cause and and actual beliefs financial Our materially are these uncertainties subject periods results expectations materialize, risks to those from to matters and projected. actual could differ that not

forth statements based those to date Securities those statements issued as as we today, risks any in as earlier presentation include this and The hereof, release press available disclaim of well forward-looking in except fully Commission. forward-looking filings to Exchange by we the with update as and described our on the information obligation in are more the These law. us set any required

in be GAAP. non-GAAP stated, The considered as to with as revenue, will than otherwise Please measures are a or other this results substitute financial for or measures isolation not non-GAAP disclosed basis. note call prepared a to that the accordance be in on financial intended be on

comparable a the website. is non-GAAP press financial on discussed discussion GAAP release earnings financial financial present directly that measures to call measures we measures A the included are our reconciliation most why in of and in this available non-GAAP of our

the non-GAAP and on page the basis. our to in third filing, fiscal press as metrics Information we'll included Investors business. costs Quarterly Also, this Financial X-K our the full-year release non-GAAP and key and core Presentations for of a well website addition call, of give links as subscription & guidance and our Results to expenses values XXXX not section, of quarter On in in Events includes page our the section

X These are Financial Financial titled Supplemental Supplemental X. Disclosure Disclosure and

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

Gateway The be San it The XX hand September at say August let over pleased to Institutional this the Thursday, our the unclear I in & we're Company Xth Investor are which and September Further Before the Chicago; [ph] to me X Gateway presenting about Midwest X; Annual these Conference IDEAS from Conference Dougherty Investor presentation Eric, and in IDEAS in Conference, Conference conferences is site. Relations including on an Midwest Minneapolis. Francisco webcast the XXXX on on details Conference

Okay, Eric.

Eric Stang

on our earnings Ooma. well Thanks, Hi, an All-in, and back compared plan. everyone. strategy FY QX for the momentum was Ooma's to strong growth excellent quarter business to of Ooma going Welcome We executed a our have results call. I fiscal XXXX residential We half grow Matt. again this we we good into QX strategy our achieved delivered year. to and our working target. is once believe particularly

exit business rate. ended profit revenue of strategy now represents business revenue. including the retention potential. subscription and quarter long-term with create believe are Financially, grew XXX% of XX% year-over-year net revenues XXX revenue, million our XX% business we total subscription to We our XX.X executing solid well were and Broadsmart recurring on a significant annualized with a for million services We QX. QX revenues, dollar

reasons. during business Operationally, we for multiple made progress QX. say the quite pleased Ooma in by this I’m I

pleased users recall through may in could last of many us year. is solution this it be to to QX, mentioned time. and you quite significant solution, the for more opportunity, this thousands I’m expected to embraced deploy deployed were customer for report I that it balance over which a creating a we to quarter large unique of customer First, our users

Enterprise our with Office this this customer’s Winning specific strategy features just right We feature needs of versus customized unique competition set unique Office to our highlights by opportunity is and provided for combination and Ooma onboarding a easy a via in customer Ooma as combination this customer solution synergistic Enterprise. together. the Ooma enabled curated Ooma working

SMB service in is share cloud new QX, Voice of Ooma our an with Sprint. powered expansion exciting late launched Sprint’s service I sales a represents IP through strategic Office by Second, over that sold Sprint relationship can This organization. and

thrilled be powering are Sprint's We new to offering.

are to In closely our collaborating sell. Sprint, with develop creates opportunity. are addition, services can believe Sprint expansion of partnership that to committed we with working opportunity this to maximize we organizations together additional Sprint We for both and our and this Ooma significant

it is we short Broadsmart only synergy upside. are we including seeing acquisition, some closed while Third, our time benefits, considered a already since we

integrated new began opportunities functional at provide. During into looking our QX, they the we Broadsmart business and organization,

Ooma Office we a case, one case, that retail vertical. for Ooma out us roll In Ooma if to Broadsmart large just sales could, scale. are all customer Ooma expected, Ooma for are integrated to demonstrating well, and roll In features large Enterprise and we working identified solution now This in combines an on partners. from not now out goes for channel another which we Enterprise, also channel Office opportunities these a but the

needs, with to capitalize we'll that optimistic Ooma and telephony-centric have our or standalone we can in finding attractive about remain in either larger Overall, acquisition, we combination be solution. UCaaS Office potential, businesses general, are highly on broader Broadsmart our

continue features. set rounding want Office. mention Ooma feature progress to Office Ooma Finally, the as to QX, we approximately regards Ooma make Business, launched I half good a dozen also new on we briefly out for that In to

the generate additional our to able we'll we revenue. planned, for increasingly service are new on which we of As be engineering capabilities development shifting types

the relatively on of low side plan according X% business, on spending. our residential Now, we back with year-over-year our the marketing QX to of delivered in growth

wireless plus Internet our expect more to well, XG out by and Sprint, adapter Telo retailers roll is powered QX. it in performing Our to we incorporating solution,

in are Our solutions. solutions camera widely by are continue not yet these marketplace and us smart but marketed refine the security while we to

scale residential more in the countries, we users. opportunity Overall, business years QX, in than but exceeded X to large In significant business X a we the announced have about Including users. million XX serve more ago, our excited dozen we remain Geographically, we are with residential services. including we momentum China market. total grow now million core users we than Japan. in the in in Ooma market started and today Talkatone,

to provide designed mix solutions distinguish stands think combinable serve distinct of customer our We to I to each but customers. to all a our overall by very solutions. out Ooma offerings, of ability large, ourselves small ideal from into ability customers serve to our also by competitively sizes segment of market, best the

Ooma delivers the our of extensibility advantage. that platform our opportunity. competitive cost flexibility, sales that These some unique of of affords ways and our into marketing feature and all and call unique parts believe platform’s new achieves scope across quality business, areas Our which disruptive synergy we are in our structure,

and turn take comment with your before in to our then the a return call we over now Ravi discuss questions. to results I’ll final detail and outlook

Ravi Narula

everyone. quarter review with I’ll our Thank results outlook good third for you, start and Eric, then a and second fiscal full-year financial provide afternoon XXXX. of our quarter the and

litigation excluded on have non-GAAP such expenses a reminder, compensation, revenue basis charges. stock-based and except we intangibles, and are As certain all a items amortization of income expenses, statement as acquisition-related

with range primarily our results, of well issued a Starting high On ended $XX.X basis, million. we quarter $XX.X strong the of the our end revenue achieving Ooma in million revenue, to guidance by year-over-year XX%, total financial quarter with grew second a driven performance previously million Business. $XX above

quarter as Ooma to second includes range $XXX,XXX, issued define loss. the we Office was to and Ooma and Revenue Ooma $X for Enterprise, XX% for from previously XX% which of loss year Business, was of prior guidance better which total compared million revenue, Broadsmart the than the $X.X million contributions quarter. now Net

Business subscription second during services year-over-year XX% quarter revenue on basis. a and the grew

and the driven overall three subscription Business The was Broadsmart’s by of acquisition subscription XX%. grew effect revenue revenue the in services and factors. Business Excluding in key Ooma services growth quarter, Ooma

Broadsmart for were better First, the results quarter previously from than expected.

our As a reminder, guidance for call, due increased XXXX in fiscal revenue to by our million, $X had we last earnings Broadsmart.

of Secondly, business insulation a services had several due to we in the resulting large we in customer quarter higher performed win installations the the in large those to customers, gained one number users. we quarter Accordingly, activate revenue. thousand

more launched add we Ooma with further to expect this this remainder Office customer, we of As year. significantly users for the locations

revenue the compared Total XX% the services and from a total last in resulted XX% also Office percentage combined Ooma of grew momentum increased subscription as to services higher quarter. period subscription in The continued XX%, to year. same and residential revenue year-over-year. revenues revenue and of for Thirdly, business

product were which this due on, million, not the second repeated certain prior year-over-year, year, sales quarter for Moving primarily down to $X.X XX% in was accessories revenue the year. of

details I our now of metrics, some that, With provide will on customer which include now key Broadsmart.

year second These core from the Broadsmart users, users to Our now fiscal of to at business year period. XX% XXXX, end XXX,XXX continuing quarter users, core XX% quarter. total X.XXX] approximately increased of of total at users of include prior the users the core up the the in [approximately end prior XX,XXX are also compared

monthly up to recurring prior or $X.XX Our the Annualized blended on Ooma per user $XX $XXX services exit in XX% subscription quarter, and a even, primarily ARPU year growth million of increased year-over-year average compared core basis. users. business revenue was to revenue to attributable

for year XXX% quarter, second retention to prior period. rate the compared During XXX% dollar net we achieved subscription the

for I’ll small same the margin. Ooma, margins given little margins and has last for the now year. period relative services Broadsmart gross gross compared to Subscription a quarter, a currently were on elaborate second lower to XX% gross scale. XX%

expect infrastructure Broadsmart. as we start we future margin However, for improvement Ooma’s leveraging gross

primarily quarter, revenue. Product and the negative year, second XX% lower negative same were for to gross for the period last product compared margins other to due XX%

were and of higher quarter, XX the Our business. reflecting overall XX% mix gross year-over-year, second for points up margins towards economies shift basis scale

and primarily and growth second increase on million, on fiscal million, Now, a $X.X onto $XX.X XX% basis, marketing Overall, million of were increase operating sales sales quarter $XX expenses, expenses XXXX in expenses XX% marketing year-over-year an operating year-over-year by driven personnel. of a a basis. were or

million, features were Research to compared expenses support technology platform, expenses our up Broadsmart. and in as for $X.X the to as million an year-over-year, development of the our year including of products. continued reflecting quarter, business, well XX% $X.X $XXX,XXX $X.X of development increase were growth innovation and G&A million, new prior

in $XXX,XXX fiscal the per a year. year to second the loss of compared second net versus Adjusted share, loss last per EBITDA loss $XXX,XXX loss $XXX,XXX XXXX in was prior for a $X.XX $X.XX of quarter of in period a the the was Our loss or share quarter XXXX fiscal quarter. same

second to $X.X quarter. turning metrics. the end in million the XXXX, cash balance total Now, after the had other sheet quarter we fiscal of and At paying investments and acquisitions of $XX.X for million the of

As so May, two the we the we quarter. in activities a of acquisition in Broadsmart had reminder, closed months

we As for the acquisition part $X.X $XXX,XXX accounting, goodwill. recorded and intangible of for assets million

the Although second usage a prior We early, XXX $XXX,XXX, we to quarter operations XXX and prior both the ended the the in management. quarter. of the quarter. in quarter up the year with from for personnel, from in initial results Broadsmart expense cash it year approximately is growth with revenue Cash relatively $XXX,XXX used on was are compared pleased

third the for guidance amortization expenses our non-GAAP full-year been is compensation, XXXX. related guidance adjusted expenses. provide for of as now has and and acquisition stock-based other such Again, quarter and fiscal I’ll intangibles,

the fiscal range third revenue million XXXX, of For be to of quarter in is expected total $XX the $XX million. to

range Non-GAAP $X.XX. expect $X.XX to be expected in of We million. net the net loss loss non-GAAP to be $X.X share per to the in is of range $XXX,XXX to

million XX.X average weighted QX. assumed outstanding shares for have We

opportunities fiscal full-year provided the million, range. previously our to be guidance large confidence to XXXX, of revenue million $X Our from the the reflects of expected midpoint the an than guidance in This total is us. of ahead $XXX.X million range increase $XXX in more of

net expect now of the Non-GAAP in to in million $X.XX $X.X to $X.X share range of expected net We an loss the to be the of $XXX,XXX of range. million, is $X.XX. non-GAAP per previously midpoint the range improvement provided loss to from be guidance

XX.X average approximately weighted shares for XXXX. assumed have fiscal outstanding We million

Ooma with our built we by performance, quarter year, momentum growth pleased especially we summary, are driven fiscal have In second this Business.

With Eric closing back that, Eric? to remarks. it I’ll pass some for

Eric Stang

Thanks, Ravi.

in and our our stepping QX strategy we a believe front momentum now and again we’re So, of in is the are that moment, wanted middle we by excited demonstrate just working, to back that executing that us. well. the I'm our fiscal opportunities of have new say results our year, I

increase of new margins areas leverage we can revenue and we business continue forward, Thank factors capitalize from and into partnerships look we the as to believe you. excite look obtained and spending. gross increase We can we on R&D gain of new As G&A extend These platform opportunity. we our also us forward. customers proportion our on

your We’ll questions. now take

Operator

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

open. line Your is

Matt Stotler

Stotler the results Bhavan. is for this questions. and on Thanks, Matt on for our Congratulations thanks taking guys,

So, and dig progressing? further days there a seeing sounds in the I data your like little early integration, first, points it into you're early Broadsmart, some and bit encouraging to that’s would how and love of takeaways for what

Eric Stang

do that to way bringing There continue some have They’ve multi-quarter with but things company, scale anymore, although in thrilled the There their ours. respects, it of us is cost the Sure. part is to plan to that the hear of to se a Ooma our their per well we people them a we you functional as structure other great by no business. organization to part in Ooma. improve have team refer Broadsmart in folded along to We're Broadsmart of organization. are

reception We're we channel think of all-in leverage we’ve and believe – very out them do like very working even than this planned acquisition, part and better the we're more as pleasantly by can expected. with pleased we it’s we gotten so to partners I Broadsmart's

Matt Stotler

the just operating then on Great. And one more metrics.

spending can any you secular some your retention, nice particularly in at BroadSoft, you. organic Thank a core your dollar dig the improvement ARPU kind of the that are looking had supplemental either with you changes of into in base, the drivers of and metrics looking adjusting the operating seasonal for across on upticks habits disclosures, even board, and seeing customer basis? inclusion that You're at you or

Ravi Narula

net generally Ravi user, and metrics, would in and more that an mix gets improving, whether user bring ARPU here. respect give of user, other average been us lots excluding goes business bigger, a to it’s a churn With this per Hi, Broadsmart, XX as consistent. ARPU, of margins, those users, is up, to has our it’s ARPU dollar gross whether And continue per month relatively that should even we north subscription of metrics as rate, revenue business our improve. start as retention

you those think improve other I we as improve. to So, to… to ARPU, continue want upon our metrics continue you will do Eric, see

Matt Stotler

Thanks the Alright. for again questions. taking

Ravi Narula

Absolutely.

Operator

with Your is next question Capital from Michael Latimore Northland Markets.

Your line is open.

Michael Latimore

large clear individual Yes, talked be congratulations on the about, to quarter selling different there. Does there, that want that an I of you lot users a is company end customer distributor into guess? is the or just a

Eric Stang

large Hi, Eric. is a It’s company. this

Michael Latimore

or…? are Great. there system And you an replacing on-premise

Eric Stang

all. We’re multiple solutions some replacing on-premise, which have, not of they are

Michael Latimore

Broadsoft that Broadsmart And we of the that Great. think companies platform? how in other Okay. then use you terms offering, differentiating about should as to relative a

Eric Stang

Yes.

come assistance complex as Those and who Customers the I some channel of strong well. even or networking for at think other need is enabling as together strong solution. have Broadsmart overall part to capabilities maybe solutions what the are at key particularly is team very they customer. relationships a

market, going As bring us the we go is we're if of from customer need. it’s more or whatever Ooma more partner will just and to Business, to solutions to a standpoint, you going because fit mix for

into in would combining are and have a about script Broadsoft for for Enterprise customer. solutions Ooma Broadsmart my as and one combining solution Ooma host other are Office Enterprise talked have we a the platform, situations we we today, Ooma And, I where that where we customer,

as capabilities a actual Broadsoft And more company. so, about the it’s our overall Solutions less about

with of what on be needs be now, nonetheless about that that time, it lot the I and increasingly and tools to and we we but arsenal is Ooma flexibility we Enterprise are what we and it in would up, certainly affords ideally. proud open of are customization think the successful, will rely the Now, building all pretty have over our will a meeting customer's

Michael Latimore

Very quarter? last, to did the contribute good. And Talkatone just then what

Ravi Narula

the Mike, contributed per as this million our is Ravi. Talkatone expectations start this year. $X of from

QX was $X revenue. of million So,

Michael Latimore

Thank Okay. you.

Operator

FBR. with Nichols Josh Riley from is B. question next Your

Your open. line is

Josh Nichols

question or significant. say to taking and you for on it know too I about Thanks my the whatnot, as but can't this customer frame looks pretty help You customer follow-on, of the a be complete anchored win, opportunity? installation the and installed size much customer? expect quarter units of you you thousands congrats how thousands to more could long the already take this with this and may

Eric Stang

those is will but we're this we scale opportunities I can from our rolling great what on that, that focused year start year. have Right think see this even but I with a doing to we're this believe now, to perspective, out we of come can customer, say through very quite more large I do it’s a if balance on next very year, us. the significant

Josh Nichols

I then furthering Sprint, mover is do that kind of with or good as did the really view going little the near-term bit ask, a more more want needle term, that and to relationship Thanks, something in you of could Great. that’s you to see, be or a just be to incremental think this that potentially? long strategic

Eric Stang

We significant view for that quite as Ooma. development a

their for powered in script, said these they’ve I Ooma by large our sales those others, we’ve selling industry through types are in of other now a and organization been seen partnerships solution my players. quite As significant they and by

this So, significant believe we quite I there’s us. to being how for have but potential see this for unfolds,

Josh Nichols

guys towards creative moving strategy direction, of of next kind see what’s like as have key it growth question lot great quarters? of balancing moves company's the metrics over forward And then and company's you several then kind the the last growth to becoming really is right in capital the overall, going for me. a Looks that Broadsmart and the

Eric Stang

you And did, to how moment. over a a this over marketplace. financially, in a give solutions but with kind competitors evolved our ours I’ll then in unique dozen of asking unlike very aside and bought the pass business, a go partial but set new of what parked we’ve who also me Ravi out to ago direction if these in platform platform. that, to new for answer they of started a for instance residential, would in of acquisitions Ooma started design Let kind are whole you platforms to approach in have, a and years kinds then consistently

is And I strength we've our of think and built. real one what of capability scope scale the and

grow, very large kind from core we and we of we customers at to of the small as – differentiate core are That’s the at on evolve providing. and continue continue do serve based we to so, of in market the strategy. solution the kind we And our can what

larger and the their for build Now, at you significantly We've know with business faster all our meet as primary a focus really we’re the we’re of than has the there, how in about and customers grow other of strategies core of include company. ability strength taking an and talked it. we what customize trying to that to quite elements ideal But it way. our do is solution to competition, how

Let it to me half. turn Ravi for other the

Ravi Narula

gets will get key growth, as we Josh, Eric do with leverage to start seeing getting on said, of And focusing think R&D and as the to on bigger gross we and on bigger, expect forward have we go respect improve. margins side business continue what we G&A. to some I business and as scale, start we as focus the

will G&A we on margins, intact get new we our leverage So, gross and period keep sales investing as and as marketing. customers, I you long our improving and payback start with think into – we keep will R&D, once

continue overall. Ooma So, Business Ooma our and to we can grow Office

you dollar long-term bigger So, the and our see the seeing start I ARPU company more you retention what and and more focus bigger as the improvement, will that’s net think, improve, us, subscription in and becomes excites will stronger. gets rate that’s as business

Josh Nichols

back in Great. I'll Thanks hop guys. queue. the

Operator

with Suisse. Kevin Your is Instructions] next question [Operator from McVeigh Credit

Kevin McVeigh

and Obviously can up perspective? if give of average you how of expect us can headwind just mortgage dilutive Broadsmart that Great Ravi overall, a nice margin sense a how get thanks. much a was sense quarter? it but in any to the wonder was Hi, to corporate we of when the from result to

Ravi Narula

So, of gross overall I – on an say this margins to impact overall overall Broadsmart Ravi. would basis, point. were one the is Kevin,

their been overall margin we one less or do and the impact so, see than profile, but is we should margins in XX% on we improves, number, should gross but So, This year lower that a our believe the That’s see improvement their we have in overall point margin are significant subscription and of XX%. are margin. higher Broadsmart. margins, would impact we as without less Broadsmart, obviously

not it’s XXX just huge point So, but, or one around would totally. point I say basis

Kevin McVeigh

anything that the obviously, then Got really win it. industry, else primarily outpacing to that? the XX% really, was nice that that growth And contributed client was or there

Eric Stang

in, This are things Sorry, track Ravi are doing and are itself to say. new even for outside execute of big Broadsmart the going or but on with is I for this Office us, the out doing. year. customer so we we to win was Business set other are customer jumped Ooma things we what this

we're progress. feeling our good about So,

You want say to something.

Ravi Narula

covered it. that No,

Kevin McVeigh

Okay. you. Thank

Eric Stang

you. Thank

Operator

from Your next with question Pat JMP Securities. Walravens is

line open. is Your

Pat Walravens

And Great, thank congratulations you. guys.

Hi. excited in about? what Sprint, Okay, are customer, most working, you A first. Eric for so right? lot Office, this quarter, of Broadsmart good you stuff Say,

Eric Stang

out is strategies in I’m we’ve together coming do different put to and things differently excited from Honestly. – that place others the able isolate. most be to there

I couldn't months, X ourselves we XX out yet. to the And relationship. sales their although In about also we needs the ways some more to months in we for about terms ideally. together meet the terms solutions new be some pleased Sprint next those about in to business our talking extend put we aren't synergy of in can If activities, excited space. customers things of much the our to then of ability I’m think look of

develop hopeful be I time this we’re quite said, for us. can partnerships over will significant and As these that similarly

Pat Walravens

I'm do which question the for most I you of significant? the of Alright, great. retention net kind you, And same so direction, the up, ticking went one like dollar then think you lot of but right the kind curious metrics Ravi, what think. is a

Ravi Narula

think leverage I but besides and more to probably it we say, all ones, as those and think metric. be continues happy it best the as is, improve, stable, it’s our going period but ARPU happens happen. get is to churn – as synergies, I'm payback that improve see with I it because pretty we Obviously, in hand-in-hand, channels, I continue these would of where gross the well but more up various margin my as my ARPU stays improvements all

So, I by think it’s growth you a and ARPU combination goes subscription gets of we all of terms cost published are net much. business go right. dollar have of structure, those, rate in doesn't big you as but retention with AERR, bigger what as ARPU up guys the

So, bottom will invest – margins line or back leverage or options, business, our as to us. the gives improve both or improve, in with will me becomes more the my available improve my margins to which

Pat Walravens

at the strategies? remind answer then against and the but, much end, how execute I that’s know one of right? to growth in think And you too, you, And Just had this terms what you need last for Ravi. one I us for the cash Okay. plenty,

Ravi Narula

roughly of Yes. We of we no debt. in for investments in cash in had $XXX,XXX XX operations. example, hand, and QX, million cash And plus burned

one X.X quarter. you but even months cash of be there in do, small a So, it’s million, whether plenty we I think, if was have or for burn, always or volatility And quarters. million this would

any of us to years plenty or cash. without quarters ahead of having have we So, raise

Pat Walravens

very Thanks, great. Okay much.

Eric Stang

Thanks.

Operator

period. closing now the turn for this it back remarks. does Q&A I’ll conclude gentlemen, to any and Ladies Ooma

Eric Stang

everyone today listening. you our for joining Thank and call

we’ve tell some things happening. can You got good

to you again Thank them really to them. and next you forward to looking We’re quarter about be excited everybody. talk this about able and

Operator

call. today's concludes This

You disconnect. may now

Ooma (OOMA) 27 Aug 192020 Q2 Earnings call transcript