Ooma, Inc. Common Stock 2027 Q2 Earnings Call

Good day, everyone, and welcome to the second quarter fiscal 2027 earnings call of Ooma, Inc. My name is Matthew Robison, Ooma's Director of IR and Corporate Development. On the call with me today are Ooma's CEO, Eric Stang, and CFO, Shig Hamamatsu. After the market close today, Ooma issued its second quarter fiscal 2027 earnings press release. This release is also available on the company's website, ooma.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. This link will be active for replay of this call for one year. 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.

Our expectations and beliefs regarding these matters may not materialize, and actual results are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today, and those risks more fully described in our filings with the Securities and Exchange Commission. 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. Please 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. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

A discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures described in this call to the most directly comparable GAAP financial measures is included in our earnings press release, which is available on our website. On this call, we will give guidance for third quarter and full year fiscal 2027 on a non-GAAP basis. Also, in addition to our press release and 8-K filing, the Overview page and Events and Presentations page in the Investors section of our website, as well as the Quarterly Results page of the Financial Information section of our website, include links to information about costs and expenses not included in our non-GAAP values and key metrics of our core subscription businesses. These are titled Supplemental Financial Disclosure One and Supplemental Financial Disclosure Two.

Additionally, our investor presentation slides include GAAP to non-GAAP reconciliation that also provides resolution of GAAP expenses that are excluded from non-GAAP metrics. I will hand the call over to Ooma CEO, Eric Stang.

Thank you, Matt. Hi, everyone. Welcome to Ooma's second quarter fiscal year 2027 earnings call. Thank you for joining us. Q2 was another strong quarter for Ooma. We are now halfway through our fiscal 2027, and I am pleased to report that on both the top line and the bottom line, we are ahead of our original plan. I believe we have good momentum across our business, and I am excited to talk with you today about our outlook. On the top line, we achieved $83.2 million in Q2 revenue, up from $66.4 million in Q2 a year ago. This represents 25% revenue growth year-over-year, driven mainly from business customers, including AirDial and our two acquisitions late last year. Our key business subscription and services revenue grew faster and was up 38% year-over-year. And within this, our Q2 AirDial services revenue grew 75% year-over-year.

Looking forward, we believe we have good momentum across all major areas of our business, which we believe will be driven most of all by accelerating POTS replacement, new AI features, and our residential product, MyPhone. I will cover each of these later in my remarks. First, regarding our bottom line performance in Q2, we delivered non-GAAP net income of $10.2 million and adjusted EBITDA of $12.4 million. These results are up year-over-year by 58% and 74%, respectively. Adjusted EBITDA is now a solid 15% of revenue, up from 10% of revenue just six quarters ago. We are proud to have achieved steadily improving profitability over these last six quarters and longer. Looking forward, we are not done. We believe our business model can generate further increases in profitability. We outlined four key initiatives at the start of this year.

AirDial expansion, new AI solutions, the launch of MyPhone, and capitalizing on our recent acquisitions. I would like to update you on each, starting with AirDial. AirDial is, of course, our POTS replacement solution and currently the fastest-growing part of Ooma. We have created what we believe is the leading solution in the market, incorporating unique features such as multipath connectivity, extensive remote device management, and customer alerts. We are seeing the market for POTS replacement expand this year. In Q2, we added two new AirDial resale partners and are now well over 40 resale partners in total. One of the partners we added is a Verizon platinum partner and supports our strategy to engage more closely with Verizon. On the customer front, I would like to highlight one highly competitive win that demonstrates Ooma's growing strength in the market.

In Q2, we won a large hospital system, which purchased close to 200 AirDial lines, over 1,000 UCaaS seats, and Ooma Connect for internet backup. We believe we were chosen for our differentiated POTS replacement features, the flexibility of our solution, and our implementation expertise. Looking forward, it is our goal to add one to two new AirDial resale partners every quarter. Some resellers, especially if they are a carrier maintaining existing POTS lines, can make a big impact on AirDial growth. Our second initiative centers on introducing AI features on our UCaaS platforms to drive increased customer and ARPU growth. I am pleased to report we made significant progress in Q2 by introducing AI transcription and AI insights as part of our Pro Plus service tier, and by introducing two standalone AI services, our AI Answering Service and our AI Receptionist.

Our standalone services have a low monthly fee that includes a set amount of usage and offer increased usage for an additional charge. Whether a customer is stepping up to Pro Plus for an additional $5 or $10 per month per user, or whether they are also paying us $15 to $50 a month or more for our standalone services, we have the potential to significantly increase our revenue per account and per user. Our new AI services were launched at the end of Q2, so we do not yet have reliable data on customer adoption. That said, our sales teams tell us the customer reaction has been strong. As is our intention, we believe AI is driving increased interest by customers in our top Pro Plus service tier and that our standalone AI services, namely AI Answering and AI Receptionist, are receiving a lot of customer attention.

Looking forward, we are now busy creating our next AI solution, which we are quite excited about and expect to release this quarter in Q3. This solution will encompass a large number of business productivity applications, which I believe almost all customers will find valuable to their business. As regards to UCaaS, and specifically Ooma Office, I am also pleased to report we established a partnership with Thryv, which will allow Ooma and Thryv to introduce each of our solutions to one another's customers. Thryv provides innovative small business marketing and CRM solutions and excels in verticals such as healthcare, beauty and wellness, legal and finance, auto services, and many more. These are prime verticals for Ooma. We intend to launch our joint marketing activities in September, and as part of this, Ooma will also provide an integration between Office and Thryv's CRM called Keap.

Lastly, regarding UCaaS, I want to mention that Ooma Office was recently named the top VoIP provider in the 2026 Spiceworks Voice of IT survey, based on feedback from 236 IT professionals evaluating leading standalone VoIP providers. We are heartened to once again receive this recognition, especially since it is the result of voting by users themselves. Regarding our third initiative, we launched MyPhone by Ooma in Q2 as planned and began the process of building brand awareness and retail presence to drive its success. You will recall this is a residential landline solution targeted at giving younger children an alternative to a cell phone and at giving parents the control they need to keep their kids safe. MyPhone offers unique features such as Trusted Circle to limit what phone calls can occur and Quiet Hours to limit when calls can occur.

Some organizations have been formed to help warn parents of the dangers of early child cell phone use, and many of them are now supporting MyPhone. Our retailers have shown great excitement too. We are sold online now at 5 major retailers, namely Costco, Amazon, Best Buy, Walmart, and Target. We expect to be offered in store at one retailer this fall, and we expect to launch in Canada before the end of Q3. Already for Q2, we were able to increase our residential user base by over 3,000 users, a reversal of the slow user decline we have historically experienced. Taking a page from the MyPhone playbook, I am pleased to announce we will be launching another custom residential solution in Q3, branded Star Dial. Star Dial is designed to complement Starlink and provide an ideal phone service experience with Starlink.

Star Dial connects to Starlink over Wi-Fi, and most importantly, takes advantage of Ooma's proprietary adaptive redundancy to maintain high-quality calls over sometimes high-latency satellite internet. Like MyPhone, we are optimistic that major retailers will carry Star Dial, and I am pleased to share that one major retailer has already told us they plan to sell Star Dial in-store starting late this fall. We are hopeful that MyPhone and Star Dial together will boost our residential revenue. In addition, we believe that the shutting down of residential copper lines that is now underway will also boost our residential sales. Finally, as we have reported in previous quarters, we believe we are making good progress integrating our two acquisitions, FluentStream and Phone.com. We took some actions late in Q2 to capture additional synergies between Ooma and Phone.com.