OOMA INC
For the period ended Jul 31, 2024. Filed Sep 6, 2024.
View on SEC.govAbout this filing
A company's report for each of its first three quarters. The financial statements are not audited. It shows how the business has moved since the last annual report, and what management says changed.
Jul 31, 2024 · Filed Sep 6, 2024
OOMA$18.00+2.5%Stored close · as of Nov 6, 2026
What changed in Management’s Discussion and Analysis?
Read the current filingPrevious report: 10-Q
Period ended 2024-04-30; filed 2024-06-07.
0000950170-24-070813
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsCurrent report: 10-Q
Period ended 2024-07-31; filed 2024-09-06.
0000950170-24-104426
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of OperationsThe baseline is this issuer’s latest earlier reporting period of the same form that was filed before the current report. A previous 10-Q is a different quarter, not a year-over-year comparison. Amendments are excluded.
Compared 81 previous paragraphs and 91 current paragraphs.
46 unchanged; 35 reworded; 6 added; 0 removed; 0 previous and 4 current paragraphs rearranged.
Tables are not compared: 9 previous and 9 current tables excluded. Dates, whitespace, punctuation and numbering changes are ignored; changes to financial figures remain significant.
A changed paragraph is not evidence that risk increased or decreased. An unchanged paragraph does not establish that risk stayed the same.
Added paragraphs (6)
Current report
In June 2024, our Board of Directors authorized a stock repurchase plan of repurchasing up to $4.0 million of our common stock. Repurchases of our common stock may be effected, from time to time, in open market, negotiated or block transactions, or other means, in accordance with applicable securities laws. The timing and the amount of any repurchased common stock will be determined by our management based on its evaluation of market conditions and other factors. We will fund our repurchase plan with cash and retire any repurchased shares. The plan does not obligate us to repurchase any specific dollar amount or to acquire any specific number of shares of our common stock.
Current report
Product and other revenue increased $0.9 million or 26% year-over-year, primarily attributable to an increase of AirDial units shipped and sale of accessories to Ooma Enterprise customers.
Current report
Subscription and services revenue increased $10.2 million or 9% year-over-year, primarily attributable to an increase in our core users and an increase in the average revenue per core user, driven by organic growth, which was in part due to a higher mix of sales of our Office Pro tier services, and revenue contributed from 2600Hz.
Current report
Sales and marketing expenses increased $1.9 million or 5% year-over-year, primarily due to a $3.1 million increase in personnel and travel related costs, a $0.2 million increase in amortization of intangibles, partially offset by a $1.4 million decrease in advertising and marketing costs.
Current report
Research and development expenses increased $3.7 million or 16% year-over-year, primarily due to a $3.0 million increase in personnel-related costs, driven by higher headcount, a $0.3 million increase in allocated overhead costs, and a $0.4 million increase in restructuring costs.
Current report
General and administrative expenses increased $2.4 million or 19% year-over-year, primarily due to a $1.3 million increase in personnel-related costs, driven by higher headcount, an absence of a $1.0 million facility consolidation gain which did not recur in the current fiscal year, and a $0.3 million increase in restructuring costs, partially offset by a $0.2 million decrease in litigation costs.
Reworded paragraphs (35)
Previous wording
First Quarter Fiscal 2025 Financial Performance
Current wording
Second Quarter Fiscal 2025 Financial Performance
Previous wording
Total revenue was $62.5 million, up 10% year-over-year, primarily driven by the growth of Ooma Business.
Current wording
Total revenue was $64.1 million, up 10% year-over-year, primarily driven by the growth of Ooma Business.
Previous wording
Subscription and services revenue from Ooma Business grew 18% year-over-year, driven by user growth.
Current wording
Subscription and services revenue from Ooma Business grew 15% year-over-year, driven by user growth.
Previous wording
Total gross margin was 61%, comparable to 63% in the prior year quarter.
Current wording
Total gross margin was 60%, comparable to 63% in the prior year quarter.
Previous wording
GAAP net loss was $2.1 million, compared to $0.3 million in the prior year quarter reflecting continued investments in our operations.
Current wording
GAAP net loss was $2.1 million, compared to net income of $0.3 million in the prior year quarter reflecting continued investments in our operations.
Previous wording
Adjusted EBITDA was $5.0 million, compared to $4.8 million in the prior year quarter.
Current wording
Adjusted EBITDA was $5.6 million, compared to $4.9 million in the prior year quarter.
Previous wording
As of April 30, 2024, we had total cash and cash equivalents of $15.6 million, compared to $17.5 million as of January 31, 2024. Cash usage reflected the repayments of borrowings outstanding under our Credit Agreement.
Current wording
As of July 31, 2024, we had total cash and cash equivalents of $16.6 million, compared to $17.5 million as of January 31, 2024. Cash usage reflected the repayments of borrowings outstanding under our Credit Agreement.
Previous wording
As of April 30, 2024, we had total debt of $11.5 million, compared to $16.0 million as of January 31, 2024.
Current wording
As of July 31, 2024, we had total debt of $8.5 million, compared to $16.0 million as of January 31, 2024.
Previous wording
Core Users increased year-over-year, which was primarily driven by growth in business users. As of April 30, 2024, Ooma Business users comprised approximately 39% of our total core users, up from 37% as of April 30, 2023. We believe that the number of our core users is an indicator of our market penetration, the growth of our business and our anticipated future subscription and services revenue. We define our core users as the number of active residential user accounts and business user extensions (excluding Talkatone and 2600Hz users). We believe that the relationship that we establish with our core users positions us to sell additional premium communications services and other new connected services to them.
Current wording
Core Users increased year-over-year, which was primarily driven by growth in business users. As of July 31, 2024, Ooma Business users comprised approximately 40% of our total core users, up from 38% as of July 31, 2023. We believe that the number of our core users is an indicator of our market penetration, the growth of our business and our anticipated future subscription and services revenue. We define our core users as the number of active residential user accounts and business user extensions (excluding Talkatone and 2600Hz users). We believe that the relationship that we establish with our core users positions us to sell additional premium communications services and other new connected services to them.
Previous wording
Annualized Exit Recurring Revenue grew year-over-year due to an increase in the average revenue per core user, which was largely driven by an increasing mix of business users. We believe that AERR is an indicator of recurring subscription and services revenue for near-term future periods. We estimate our AERR by dividing our recurring quarterly subscription revenue from our Core Users by the average number of core users each quarter and annualize by multiplying by four. We then multiply that result by the number of core users at the end of the period to calculate AERR. Beginning in the third quarter of fiscal 2024, we have added $7.9 million annual recurring revenue from 2600Hz to AERR.
Current wording
Annualized Exit Recurring Revenue ("AERR") grew year-over-year due to an increase in the average revenue per core user, which was largely driven by an increasing mix of business users. We believe that AERR is an indicator of recurring subscription and services revenue for near-term future periods. We estimate our AERR by dividing our recurring quarterly subscription revenue from our Core Users by the average number of core users each quarter and annualize by multiplying by four. We then multiply that result by the number of core users at the end of the period to calculate AERR. Beginning in the third quarter of fiscal 2024, we have added $8.0 million annual recurring revenue from 2600Hz to AERR.
Previous wording
Net Dollar Subscription Retention Rate (“NDRR”) was flat year-over-year due to a relatively consistent level of user churn and increase in Average Monthly Recurring Subscription Revenue. We believe that our net dollar subscription retention rate provides insight into our ability to retain and grow our subscription and services revenue and is an indicator of the long-term value of our customer relationships and the stability of our revenue base.
Current wording
Net Dollar Subscription Retention Rate (“NDRR”) increased due to reduction in user churn and increase in Average Monthly Recurring Subscription Revenue. We believe that our net dollar subscription retention rate provides insight into our ability to retain and grow our subscription and services revenue and is an indicator of the long-term value of our customer relationships and the stability of our revenue base.
Previous wording
In addition, we use Adjusted EBITDA (Earnings Before Interest Tax and Depreciation and Amortization) to manage our business, evaluate our performance and make planning decisions. We consider this metric to be a useful measure of our operating performance, because it contains adjustments for unusual events or factors that do not directly affect what management considers being the core operating performance, and are used by our management for that purpose. We also believe this measure enables us to better evaluate our performance by facilitating a meaningful comparison of our core operating results in a given period to those in prior and future periods. Investors often use similar measures to evaluate the operating performance with competitors. Adjusted EBITDA represents net income before interest and other income, income taxes, depreciation and amortization of capital expenditures, amortization of intangible assets, restructuring costs, gain on note conversion and stock-based compensation and related taxes.
Current wording
In addition, we use Adjusted EBITDA (Earnings Before Interest Tax and Depreciation and Amortization) to manage our business, evaluate our performance and make planning decisions. We consider this metric to be a useful measure of our operating performance, because it contains adjustments for unusual events or factors that do not directly affect what management considers being the core operating performance, and are used by our management for that purpose. We also believe this measure enables us to better evaluate our performance by facilitating a meaningful comparison of our core operating results in a given period to those in prior and future periods. Investors often use similar measures to evaluate the operating performance with competitors. Adjusted EBITDA represents net income before interest and other income, income taxes, depreciation and amortization of capital expenditures, amortization of intangible assets and acquisition related costs, stock-based compensation and related taxes, litigation costs, facilities consolidation gain, restructuring costs, and gain on note conversion.
Previous wording
Adjusted EBITDA does not consider the impact of interest and other income/expense, income taxes, stock-based compensation and related taxes, amortization of intangible assets, restructuring costs and gain on note conversion; and
Current wording
Adjusted EBITDA does not consider the impact of interest and other income/expense, income taxes, stock-based compensation and related taxes, amortization of intangible assets, acquisition-related costs, litigation costs, restructuring costs and non-recurring gains; and
Previous wording
Cost of subscription and services revenue includes payments made for third-party network operations and telecommunications services; certain telecom taxes and fees, including Federal Universal Service Fund (“USF”) contributions; credit card processing fees; costs to build out and maintain data centers; depreciation and maintenance of servers and equipment; personnel costs associated with customer care and network operations support; amortization of certain acquired intangible assets, and allocated overhead costs.
Current wording
Cost of subscription and services revenue includes payments made for third-party network operations and telecommunications services, license fees, certain telecom taxes and fees, including Federal Universal Service Fund (“USF”) contributions, credit card processing fees, costs to build out and maintain data centers, depreciation and maintenance of servers and equipment, personnel costs associated with customer care and network operations support, amortization of certain acquired intangible assets, and allocated overhead costs.
Previous wording
Comparison of the three months ended April 30, 2024 and 2023(dollars in tables are in thousands):
Current wording
Comparison of the three and six months ended July 31, 2024 and 2023(dollars in tables are in thousands):
Previous wording
Subscription and services revenue increased $5.3 million or 10% year-over-year, primarily attributable to an increase in our core users and an increase in the average revenue per core user. Revenue increase year-over-year is also partially attributable to inclusion of revenue from 2600Hz, which we acquired at the end of third quarter of fiscal 2024.
Current wording
Subscription and services revenue increased $4.8 million or 9% year-over-year, primarily attributable to an increase in our core users and an increase in the average revenue per core user. Revenue increase year-over-year is also partially attributable to revenue contributed from 2600Hz, which we acquired at the end of third quarter of fiscal 2024.
Previous wording
We derived approximately 61% and 56% of our total revenue from Ooma Business and approximately 37% and 42% from Ooma Residential for the three months ended April 30, 2024 and 2023, respectively.
Current wording
We derived approximately 61% and 56% of our total revenue from Ooma Business and approximately 37% and 41% from Ooma Residential for the six months ended July 31, 2024 and 2023, respectively.
Previous wording
Product and other revenue increased $0.3 million or 8% year-over-year, primarily attributable to the sale of accessories to Ooma Enterprise customers.
Current wording
Product and other revenue increased $1.2 million or 17% year-over-year, primarily attributable to the increase of AirDial units shipped and sale of accessories to Ooma Enterprise customers.
Previous wording
Subscription and services gross margin of 70% decreased year-over-year from 72%. Cost of subscription and services revenue increased $2.7 million or 19% year-over-year, primarily due to a $1.2 million increase in infrastructure costs, a $0.7 million increase in depreciation and amortization expense, a $0.4 million increase in personnel-related costs, a $0.5 million increase in regulatory costs, and a $0.2 million increase in credit card processing fees, offset by a $0.3 million decrease in supplies and equipment costs. Overall, the increase in the cost of subscription and services reflects growth of Ooma Business. A significant portion of the year-over-year increase in infrastructure costs and amortization expense was due to the 2600Hz acquisition near the end of the third quarter of fiscal 2024.
Current wording
Subscription and services gross margin of 70% decreased year-over-year from 72%. Cost of subscription and services revenue increased $2.2 million or 14% year-over-year, primarily due to a $0.9 million increase in infrastructure costs, a $0.7 million increase in depreciation and amortization expense, a $0.4 million increase in personnel-related costs, and a $0.4 million increase in regulatory fees, partially offset by a $0.2 million decrease in software maintenance costs. Overall, the increase in the cost of subscription and services in part reflects growth of Ooma Business and an increase in infrastructure costs and amortization of acquired intangible assets due to the addition of 2600Hz near the end of the third quarter of fiscal 2024.
Previous wording
Product and other revenue gross margin decreased to negative 68% from negative 62% in the prior year period. Product margins declined year-over-year primarily due to the usage of certain higher cost components that we had procured in prior fiscal years to stay ahead of pandemic driven supply chain issues.
Current wording
Product and other revenue gross margin decreased to negative 69% from negative 68% in the prior year period, primarily due to the usage of certain higher cost components that we procured in prior fiscal years to stay ahead of pandemic driven supply chain issues.
Previous wording
Sales and marketing expenses increased $1.5 million or 8% year-over-year, primarily due to a $1.7 million increase in personnel-related costs to scale with the overall growth of our business, partially offset by a $0.2 million decrease in advertising and marketing expense.
Current wording
Sales and marketing expenses increased $0.4 million or 2% year-over-year, primarily due to a $1.4 million increase in personnel-related costs to scale with the overall growth of our business, partially offset by a $1.0 million decrease in advertising and marketing expense.
Previous wording
Research and development expenses increased $1.8 million or 15% year-over-year, primarily due to a $1.8 million increase in personnel and contractor related costs, driven by higher headcount.
Current wording
Research and development expenses increased $1.9 million or 16% year-over-year, primarily due to a $1.7 million increase in personnel and contractor related costs, driven by higher headcount, and a $0.2 million increase in allocated overhead costs.
Previous wording
General and administrative expenses increased $1.0 million or 15% year-over-year, primarily due to a $1.0 million increase in personnel-related costs to scale with the overall growth of our business.
Current wording
General and administrative expenses increased $1.4 million or 24% year-over-year, primarily due to an absence of a $1.0 million facility consolidation gain in the prior year period which did not recur in the current fiscal year, a $0.6 million increase in personnel-related costs to scale with the overall growth of our business, partially offset by a $0.2 million decrease in litigation costs.
Previous wording
As of April 30, 2024, we had $15.6 million of total cash and cash equivalents, which we believe will be sufficient to meet our cash needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the introduction of new and enhanced offerings, the timing and extent of our sales and marketing activities and research and development expenditures and other factors. We may in the future make investments in or acquisitions of businesses or technologies, which may require the use of cash.
Current wording
As of July 31, 2024, we had $16.6 million of total cash and cash equivalents, which we believe will be sufficient to meet our cash needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the introduction of new and enhanced offerings, the timing and extent of our sales and marketing activities and research and development expenditures and other factors. We may in the future make investments in or acquisitions of businesses or technologies, which may require the use of cash.
Previous wording
For the three months ended April 30, 2024, our net loss of $2.1 million included non-cash items of $6.7 million primarily related to stock-based compensation, operating lease expense, depreciation and amortization expense and gain on note conversion. Operating asset and liability changes for the three months ended April 30, 2024 included:
Current wording
For the six months ended July 31, 2024, our net loss of $4.3 million included non-cash items of $14.6 million primarily related to stock-based compensation, operating lease expense, depreciation and amortization expense and gain on note conversion. Operating asset and liability changes for the six months ended July 31, 2024 included:
Previous wording
an increase of $1.0 million in accounts receivable due to the timing of customer cash collections;
Current wording
a decrease of $1.7 million in accounts receivable due to the timing of customer cash collections;
Previous wording
a decrease of $2.6 million in inventories and deferred inventory costs;
Current wording
a decrease of $4.5 million in inventories and deferred inventory costs;
Previous wording
a decrease of $0.5 million in prepaid expenses and other current and non-current assets;
Current wording
an increase of $1.6 million in prepaid expenses and other current and non-current assets;
Previous wording
a net decrease of $2.5 million in accounts payable, accrued expenses and other liabilities due to the timing of payments; and
Current wording
a net decrease of $4.4 million in accounts payable, accrued expenses and other liabilities due to the timing of payments; and
Previous wording
a decrease of $0.6 million in deferred revenue.
Current wording
an increase of $0.1 million in deferred revenue.
Previous wording
Cash provided by operating activities for the three months ended April 30, 2024 increased $2.3 million year-over-year, which primarily reflected working capital impacts resulting from the timing of payments. Although we have generated cash from operations in recent periods, our operating cash flow may not remain positive in the future as we continue to invest in efforts to scale our business.
Current wording
Cash provided by operating activities for the six months ended July 31, 2024 increased $5.8 million year-over-year, which primarily reflected working capital impacts resulting from the timing of payments. Although we have generated cash from operations in recent periods, our operating cash flow may not remain positive in the future as we continue to invest in efforts to scale our business.
Previous wording
For the three months ended April 30, 2024, cash used in investing activities was $1.5 million, which consisted of capital expenditures of $1.5 million. Cash used in investing activities increased $2.1 million year-over-year primarily due to proceeds from investment maturities in the first quarter of fiscal 2024, which did not recur in the first three months of fiscal 2025.
Current wording
For the six months ended July 31, 2024, cash used in investing activities was $3.2 million, which consisted of capital expenditures of $3.2 million. Cash used in investing activities increased $2.2 million year-over-year primarily due to the receipt of proceeds from investment maturities in the first half of fiscal 2024, which did not recur in the first half of fiscal 2025.
Previous wording
For the three months ended April 30, 2024, cash used in financing activities was $3.8 million, which consisted of $4.5 million debt repayments and payments of $0.7 million related to shares repurchased for tax withholdings on vesting of RSUs, offset by proceeds of $1.4 million from the issuance of common stock from our ESPP and stock option exercises. Cash used in financing activities increased $5.1 million year-over-year, which primarily reflected repayments of borrowings outstanding under our Credit Agreement.
Current wording
For the six months ended July 31, 2024, cash used in financing activities was $8.4 million, which consisted of $7.5 million debt repayments, payments of $1.6 million related to shares repurchased for tax withholdings on vesting of RSUs, and payments of $0.9 million under our stock repurchase plan, offset by proceeds of $1.6 million from the issuance of common stock from our ESPP and stock option exercises. Cash used in financing activities increased $9.4 million year-over-year, which primarily reflected repayments of borrowings outstanding under our Credit Agreement.
Previous wording
In October 2023, we entered into a credit and security agreement with certain banks that provides for a secured revolving credit facility under which we may borrow up to an aggregate of $30.0 million and, subject to certain conditions, may be increased to up to $50.0 million. As of April 30, 2024, we had $11.5 million of outstanding borrowings and were in compliance with all loan covenants.
Current wording
In October 2023, we entered into a credit and security agreement with certain banks that provides for a secured revolving credit facility under which we may borrow up to an aggregate of $30.0 million and, subject to certain conditions, may be increased to up to $50.0 million. As of July 31, 2024, we had $8.5 million of outstanding borrowings and were in compliance with all loan covenants.
Previous wording
Refer to Item 7. MD&A of our Annual Report on Form 10-K for the fiscal year ended January 31, 2024 for a discussion of our critical accounting policies and estimates. There have been no changes to the Company’s significant accounting policies and estimates as outlined in our fiscal 2024 Annual Report in the first three months of fiscal 2025.
Current wording
Refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended January 31, 2024 for a discussion of our critical accounting policies and estimates. There have been no changes to the Company’s significant accounting policies and estimates as outlined in our fiscal 2024 Annual Report in the first half of fiscal 2025.
Rearranged current paragraphs (4)
Current report — wording carried from elsewhere
We derived approximately 61% and 57% of our total revenue from Ooma Business and approximately 36% and 41% from Ooma Residential for the three months ended July 31, 2024 and 2023, respectively.
Current report — wording carried from elsewhere
Product and other revenue gross margin increased to negative 70% from negative 74% in the prior year period. The negative product margin was primarily due to the usage of certain higher cost components that we procured in prior fiscal years to stay ahead of pandemic driven supply chain issues.
Current report — wording carried from elsewhere
Subscription and services gross margin of 70% decreased year-over-year from 72%. Cost of subscription and services revenue increased $4.9 million year-over-year, primarily due to a $2.1 million increase in infrastructure costs, a $1.4 million increase in depreciation and amortization expense, a $0.9 million increase in regulatory fees, a $0.9 million increase in personnel-related costs, partially offset by a $0.4 million decrease in supplies and equipment costs.
Current report — wording carried from elsewhere
A significant portion of the year-over-year increase in personnel-related costs and amortization of intangibles for operating expenses was due to the 2600Hz acquisition near the end of the third quarter of fiscal 2024.