OOMA INC Q3 FY2025 earnings call

• Q3 was a strong quarter financially, with $65.1 million in revenue, $4.6 million in non-GAAP net income, $5.7 million in adjusted EBITDA, and $8.1 million in cash flow from operations. - Achieved debt-free status after paying off remaining credit line debt. - New customer wins in Q3, including a top-tier national cable company reselling AirDial and an aggregator/CLEC reselling AirDial and Telo. - AirDial market is heating up with price increases in copper lines and more announcements of copper line shutdowns. - 2600Hz platform has significant potential with over 300 APIs, flexible delivery models, and interest from various carriers. - UCaaS for smaller businesses is seeing success moving upmarket and growing premium tiers.

Ooma Business contributed 62% of total revenue in Q3, up from 58% a year ago. Within Ooma Business, Ooma Office performed well with new customer engagement features. AirDial saw growth in sales, with a top-tier national cable company reselling AirDial and an aggregator/CLEC reselling both AirDial and Telo. Product revenue growth was primarily driven by AirDial installations. 2600Hz, the acquired platform, is seen as having significant long-term potential with a large market opportunity involving replacing older platforms like BroadSoft and Metaswitch.

• Q4 total revenue expected to be in the range of $64.6 million to $65.1 million, including $4.5 million to $4.7 million of product revenue. - Q4 non-GAAP net income expected to be in the range of $4.5 million to $4.8 million, with non-GAAP diluted EPS between $0.16 to $0.17. - Full year fiscal 2025 revenue expected to be $256.3 million to $256.8 million, with non-GAAP net income in the range of $16.7 million to $17 million and adjusted EBITDA $22.1 million to $22.4 million. - Non-GAAP diluted EPS for full year 2025 expected to be in the range of $0.61 to $0.62.

• Potential for more churn from IWG as it's hard to predict exactly. - Impact of Verizon's acquisition on Frontier's launch timing for AirDial. - Market uncertainties and potential delays in partner integrations and customer conversions for 2600Hz and AirDial.

Q: About 2600Hz, curious on market dynamics and benefit from Metaswitch sunset.

A: Metaswitch is end of life, with a large market of 50-80 million users on those platforms. 2600Hz has a modern design with over 300 APIs, flexible delivery models, and interest from various carriers.

Q: On operating leverage and EBITDA margin.

A: Directionally, Q4 midpoint EBITDA margin around 9.2%, with progression seen from prior quarters and expectation of further improvement.

Q: On IWG churn in Q4 and beyond.

A: There could be more churn, hard to predict exactly, but not fundamental to outlook.

Q: On Frontier relationship delay due to Verizon acquisition.

A: Frontier still wants to move forward, but delay exists; also, a top-tier national cable company reselling AirDial provides a parallel opportunity.

Q: On capital allocation post-debt payoff.

A: Consideration of opportunistic buyback, potential customer base acquisitions, and need to build inventory for AirDial.

Q: On IWG trend and net retention.

A: Q4 may have some impact on retention, but stabilization expected in 98%-99% range with momentum from other areas.

Q: On AirDial impact in fiscal '26.

A: Ramp depends on partners, with a top-tier cable company wanting to launch in Q1; details to be clearer in March guidance.

Q: On market opportunity for AirDial partners.

A: Significant potential with estimated $300 annual recurring revenue per line, margins strong, and majority of lines expected to convert.