Ooma Inc (OOMA) 2018 Q4 法說會逐字稿

Good afternoon.

My name is Kelly, and I will be your conference operator today.

At this time, I'd like to welcome everyone to the Ooma, Inc.

Fourth Quarter and Fiscal Year 2019 Financial Results Conference Call.

(Operator Instructions) Thank you.

Please go ahead.

Thanks, Kelly.

Good day, everyone, and welcome to the Fourth Quarter and Fiscal Year 2019 Earnings Call of Ooma, Inc.

My name is Matt Robison, Ooma's Director of IR and Corporate Development.

With me here today are Ooma's CEO, Eric Stang; and CFO, Ravi Narula.

After the market closed today, Ooma issued a press release via GlobeNewswire.

The 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 page of the Investor Relations section of our website.

This link will be active for replay of this call for at least 1 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 and financial periods 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 as well as those 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 substitutes 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 discussed in this call to the most directly comparable GAAP financial measures are included in our earnings press release that is available on our website.

On this call, we'll give guidance for first quarter and full year fiscal 2020 on a non-GAAP basis.

Also, in addition to our press release and 8-K filing, the Events & Presentations page in the Investors section as well as the Quarterly Results page of the Financial Information section of our website includes links to costs and expenses not included in our non-GAAP values and key metrics of our core subscription businesses.

These are titled Supplemental Financial Disclosure 1 and Supplemental Financial Disclosure 2. 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.

Before I hand it over to Eric, let me say we are pleased to be presenting at the 31st Annual ROTH Conference scheduled for March 19 in Orange County, California.

Okay, Eric.

Thanks, Matt.

Hi, everyone.

Welcome to Ooma's Q4 earnings call.

FY '19, which just ended on January 31, was an outstanding year for Ooma as we once again achieved significant growth, controlled our bottom line and invested in the business for the future.

We believe we entered FY '20 with strong competitive advantage in segments we target and solid momentum.

I'd like to highlight today some of our important FY '19 accomplishments and then review our plans for FY '20.

A year ago at the start of FY '19, you'll recall we were investing heavily in the core feature set for Ooma Office.

We were not yet addressing the enterprise business segment and we had just acquired a small company to develop and launch a smart camera to anchor our plans for Home Security.

Today, I'm pleased to say we are winning larger customers for Ooma Office than ever before, and our office core feature set is significantly enhanced.

Ooma Enterprise is integrated into our overall business marketing and sales programs and on a growth trajectory, and we have announced the imminent launch of Ooma smart cam with features and pricing, we believe, are superior to competition.

We're extremely pleased with our FY '19 progress and more importantly, feel we have established the competitive advantage and momentum to fuel continued success.

In Q4 of FY '19, we achieved $34.7 million in revenue, exceeding our previously issued guidance.

Overall for FY '19, we achieved $129.2 million in revenue, representing 15% (sic) [13%] year-over-year growth and a non-GAAP net loss of $3 million.

We also invested significantly in FY '19 to build for the future, spending 23% of revenues on R&D.

And in our primary area of focus, which is to grow our subscription services revenues from business customers, our understanding is we again led the industry with the year-over-year growth rate of 50% in both Q4 and for all of FY '19.

We're proud of these accomplishments and excited as we enter FY '20.

For FY '20, our strategy remains unchanged and is to be the undisputed leader in each of the segments we target by capitalizing on our unique end-to-end platform.

Simply put, we strive to provide customers better features, quality and value than others.

Our primary focus for FY '20 is to continue to execute to drive the growth of our business.

To this end, we intend to enable increased investment in sales and marketing as a percent of sales by controlling the growth of our investment in R&D; by growing our gross profit margin over time, primarily through increasing the proportion of business customers in our total revenue; and by introducing additional high-margin services in line with our long-term strategy to leverage our unique platform, increase our revenue per customer.

We also have important new developments planned for FY '20 to strengthen our competitive advantage in each of our target segments.

Starting with the small business segment, which we serve with Ooma Office, we have some final key features we want to roll out early in FY '20 at which point we will have, in our view, a complete curated feature set that affords the ultimate in simplicity, reliability and value.

Once in place, our development focus will largely shift to new services we could enable through the office platform and for which we can charge extra.

Our new partnership with Sprint is part of this vision.

This is a fundamental partnership, which has already resulted in our announcement of a 4G adapter for use with our Telo residential product.

With Sprint's strong commitment to 5G, we envisage our Sprint partnership playing a greater role across all parts of our business over time.

Moving next to the larger business segment where we provide a full UCaaS solution called Ooma Enterprise.

We plan in FY '20 to continue our strategy of developing and customizing our solution to meet the special needs of our customers.

As part of this, we anticipate focusing on selected vertical segments and further improving our solution for what they will use in customization by channel partners.

Having made major strides to round out our feature set and support our channel partners in FY '19, we now enter FY '20 ready to expand sales and marketing and drive more customer engagement.

Thirdly, on the residential front where we provide Ooma Telo for phone service and are expanding into Home Security, we have initiatives underway this year to introduce our 4G adapter for wireless Internet and phone service to launch our new Ooma smart cam and to round out the components and features of our smart security offering.

The Ooma smart cam will be a prime focus for us, since we feel it offers an unbeatable combination of features and value.

Obtaining broad retail distribution and consumer recognition for Ooma smart cam will be an ongoing process for us, given we do not intend to invest in heavy product advertising, but we are excited by the large market opportunity, the reception we're getting from our retailers and, most of all, by the feedback from our early beta customers.

Overall, we believe we have a sound strategy and our focus is on execution.

Our key FY '20 objectives include: one, growing our Ooma Office and Ooma Enterprise customer base in conjunction with increased sales and marketing: two, expanding the range of services we offer and monetize, including through the launch of 4G with Sprint; three, launching and driving recognition of Ooma smart cam and continuing the development and rollout of smart security; and four, continuing to build Ooma into a recognized, respected and leading brand.

We believe we are well placed to execute on these 4 objectives, given our unique platform, customer momentum and focus on leadership in key segments of the market.

Now before I turn the call over to Ravi, I have some special news.

We just learned that again, for the sixth year in a row, the readers of PC Magazine have voted Ooma Office the #1 small business phone service, beating out all competition.

We're naturally thrilled by this result.

Like our #1 ranking by Consumer Reports for residential phone service, winning this award validates that consumers value our solution, and we are on the right track for continued success.

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

Thank you, Eric, and good afternoon, everyone.

I'll start with a review of our financial results for the fourth quarter and full year fiscal '19 and then provide our financial outlook for the first quarter and full year fiscal '20.

All income statement items except revenue are on a non-GAAP basis, and we've excluded expenses such as stock-based compensation, amortization of intangibles and legal expenses related to certain litigations.

The reconciliation of GAAP to non-GAAP financial data can be found in the press release issued earlier today, which is available on the Investor Relations section of our website.

First, Q4 '19 and full year fiscal '19 results.

We ended the year with strong fourth quarter financial performance, achieving $34.7 million of revenue, which exceeded our previously issued guidance range of $33 million to $33.5 million.

On a year-over-year basis, total revenue grew $4.5 million or 15%.

This revenue performance was driven by the continued growth of Ooma Business as well as higher sales of security cameras in the fourth quarter.

For full year fiscal '19, we achieved revenues of $129.2 million, up 13% year-over-year and exceeding our previously issued guidance range of $127.5 million to $128 million.

Net loss for the fourth quarter of fiscal '19 was $669,000, better than the previously issued guidance range of a loss of $800,000 to $1.2 million.

Net loss for the year was $3 million compared to our previously issued guidance range of a loss of $3.1 million to $3.5 million.

Ooma Business subscription and services revenue during the fourth quarter of fiscal '19 grew 50% on a year-over-year basis and revenue contributions from Ooma Business are now 30% of total revenue compared to 23% for the prior year quarter.

Overall, we are pleased with the progress we have made in fiscal '19 on our key strategic initiatives, namely growth of Ooma Business and development of new features and functionalities for our smart security solution.

The combined subscription and services revenue from the core businesses, namely Ooma Business and Ooma Residential grew 16% year-over-year, driven by 50% growth of Ooma Business.

Our residential subscription and services revenue grew 4% on a year-over-year basis as we have been shifting our sales and marketing activities towards the growth of business.

For the fourth quarter of fiscal '19, subscription and services revenue was 89% of the total revenue compared to 90% in the prior year period.

Product revenue for the fourth quarter of fiscal '19 was $3.8 million, up 25% year-over-year, primarily due to higher sales of security cameras in the fourth quarter.

With that, I'll now provide details on some of our key customer metrics.

Our total core users increased from 929,000 core users at the end of fiscal '18 to 976,000 core users at the end of fiscal '19, driven primarily by a growth of Ooma Business.

At the end of the fourth quarter of fiscal '19, our business users now account for 16% of total core users compared to 13% at the end of the prior year period.

As a result of the mix shift towards the business customers, our blended average subscription and services revenue per month or ARPU increased to $10.17 in the fourth quarter of fiscal '17 -- fiscal '19 compared to $9.24 in the prior year period.

Annualized exit recurring revenue was approximately $119 million at the end of fourth quarter of fiscal '19, a 16% year-over-year increase.

We achieved 99% net dollar subscription redemption rate for the fourth quarter of fiscal '19 compared to 101% for the fourth quarter of fiscal '18, driven by growth in ARPU for Ooma Business offset by lower growth of residential business.

With that, let me add some color to our gross margins.

Product and other gross margin was negative 36% for the fourth quarter compared to negative 19% for the same period last year.

This negative product gross margin was impacted due to tariffs, which were enforced recently as well as due to additional freight charges incurred during the holiday period to fulfill higher-than-expected product demand.

We have since increased our inventory levels, which should help us reduce some freight charges.

However, product margins may fluctuate, including due to further changes in tariffs.

Subscription and services gross margins of approximately 70% were in line with our expectations as we continue to grow and invest in the business.

As a result of higher negative product margins and because product revenue was a larger portion of our overall revenue, our overall gross margin are 58% for the fourth quarter, down from 61% in the prior year quarter.

However, overall gross profit dollars for the fourth quarter of fiscal '19 increased to $20.1 million compared to $18.6 million for the same period last year, driven by increased subscription and services revenue.

Now on to operating expenses.

Fourth quarter operating expenses were $21.1 million, an increase of $1.9 million or 10% on a year-over-year basis.

Overall sales and marketing expenses for the fourth quarter of fiscal '19 increased year-over-year by approximately $800,000 to $10.2 million, as we increased marketing programs to support the growth of Ooma Business, offset in part by lower residential spending.

Research and development expenses were $7.4 million, an increase of approximately $200,000 year-over-year.

As we've already completed a number of enhancements to Ooma Business, we expect to see some leverage from R&D starting in fiscal 2020.

G&A expenses were $3.6 million compared to $2.7 million for the prior year quarter to support the growth of business.

We've excluded certain legal expenses of approximately $100,000 from a non-GAAP results that relates to certain losses, primarily securities litigation.

Given these expenses do not directly correlate to our regular business operations, we believe it is useful to exclude these expenses from a non-GAAP results going forward.

Our net loss in the fourth quarter of fiscal '19 was $669,000 or $0.03 loss per share compared to a loss of $508,000 or $0.03 loss per share in the fourth quarter of fiscal '18.

Adjusted EBITDA loss was $455,000 in the fourth quarter of fiscal '19 versus a loss of $176,000 for the same period last year.

Now turning to the balance sheet and other metrics.

We had cash and investments of $42.6 million with no debt at the end of the fourth quarter of fiscal '19 as we invest in the business for growth and due to increasing our inventory position at the end of fiscal '19.

For the fourth quarter of fiscal '19, cash used in operations was $2.1 million compared to cash generation of approximately $800,000 in the prior year quarter.

We ended the quarter with 684 full-time employees and contractors, up from 619 in the prior year quarter.

I'll now provide outlook for our first quarter and full year fiscal '20.

Once again, our guidance is non-GAAP and as adjusted for expenses such as stock-based compensation, certain litigation charges and amortization of intangibles.

For first quarter fiscal '20, as there is some seasonality in the first quarter relative to the fourth quarter, total revenue is expected to be in the range of $33.5 million to $34 million.

We have assumed $1 million of revenue from profit owned for the quarter.

We expect non-GAAP net loss to be in the range of $900,000 to $1.3 million.

Non-GAAP net loss per share is expected to be in the range of $0.04 to $0.06.

We have assumed 20.5 million weighted average shares outstanding for Q1.

For full year fiscal 2020, revenue is expected to be in the range of $140 million to $143 million.

We have assumed $4 million of revenue from profit owned for the year.

We expect non-GAAP net loss to be in the range of $3 million to $5 million as we continue to invest in the sales and marketing channels to grow Ooma Business as well as in R&D for expansion of smart security solutions.

We believe these investments should help us with our longer-term growth goals.

Non-GAAP net loss per share is expected to be in the range of $0.14 to $0.24.

We have assumed approximately 21 million weighted average shares outstanding for fiscal '20.

In summary, we are pleased with our fiscal '19 results, driven by continued growth of Ooma Business and believe our efforts in fiscal '19 positions us well going into this year.

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

Eric?

Thanks, Ravi.

We're pleased to finish our FY '19 year on a high note with growth exceeding our guidance, and we now look forward to FY '20 with excitement.

Ooma's increasing its differentiation as we leverage our platforms, target segments and pioneer new solutions.

We're also exploiting the full scope of our business to drive customer recognition and optimize growth synergies.

In FY '20, we will start to transition to a greater focus and spend on sales and marketing to bring our solutions to more customers.

Our primary focus remains the business market, but we are also innovating for the residential market and see great potential.

Over time, we expect to introduce new services across our business and drive more revenue per customer.

Given the large market opportunity before us and our unique solutions, we feel we are still in the early innings of developing Ooma into a large and highly successful enterprise.

With that, let me say thank you.

We're now happy to take questions.

(Operator Instructions) Your first question comes from the line of Bhavan Suri from William Blair.

I guess I just want to touch first on sort of the strategic pieces here, largely Voxter, as we think about it and obviously the smart security.

But Voxter first, it still early days obviously.

But if you think about how revenue contribution will sort of graduate over time, I'd love to get a little more color there of how tractions going, how the ramps progressing and sort of -- if I also look up 3 years, what does that offering look like as a percent of revenue?

I'd love to get a little more color on Voxter and then a quick follow-up.

Sure.

Bhavan, I'll start and let Ravi take the end of the question.

We're pretty excited about what we see in that space larger -- UCaaS solutions for generally larger-sized businesses.

As you know, we take a very specific strategy in that segment, where we're offering a platform that's very API-based and able to customize for unique needs of our customers.

We're also using that customization capability to be very flexible in working with channel partners.

We did spend much of FY '19, I think, putting the systems in place to be able to work with our channel partners more seamlessly.

And really, FY '20 now is where we're going to turn up the whip a little bit on the sales and marketing to drive the growth.

I do expect enterprise will be the largest -- well, the fastest-growing part of Ooma on a percentage basis although, obviously, it's growing off a small base to begin with.

We see certain verticals we're in today where we bring a unique solution to that vertical segment and believe that we can expand that capability to other players in those verticals.

And one of our key goals this year is to grow our channel partner base and to really drive the leverage and the growth that we talked about.

So we're pretty excited about the opportunity, but I think the first half of this year will be an important time for us to demonstrate that increased sales marketing momentum.

Ravi?

Yes.

Just one more small thing to add to Eric's point, Bhavan.

Today, business -- overall business, which is Ooma Office and Ooma Voxter Enterprise, is equal to roughly 30% of our overall revenue.

In 3 plus years, we expect Ooma Business to contribute more than 50% of the overall revenues, and I believe Voxter will play a key role in that growth trajectory.

Got it.

That's helpful.

And then one quick follow-up from me.

Just on ARPU, core user ARPU, can you tell us a little bit, more importantly, it continue to just grow nicely year-over-year.

I guess if you look at the improvement in the metric there, if you are to help quantify sort of what would be the key drivers?

I know you could say all the ones that I mentioned.

But specifically, have you seen any change in either of the upsell expansion?

Or are the initial deals getting bigger with new customers?

Or is it both sort of equally playing into it?

Some color would be great.

Let me take it.

Initially, Bhavan, I believe, the biggest reason for the growth in ARPU is because of the mix shift as business gets bigger and we get much higher revenue ARPU from a business user than from a residential user.

It's a mix of both business and residential.

So as the mix of business gets bigger, we are going to continue to see the ARPU growth happening from that perspective.

But to Eric's point earlier when -- as we bring in new services, whether it's 4G or other services, I think that could also in future increase ARPU even more compared to what we are seeing right now.

So right now, it's because of the mix shift between business to business, but in the longer term it could be for additional services also.

Yes, just to reiterate a couple of themes that I said in my opening remarks.

We've invested heavily in Ooma Office over several years now, but we are getting to a point where we've got the feature set we really want to have for that small business customer, and it's a very curated, carefully done, very easy to use and set up solution.

And we're able to now look forward to additional things we can do on the office platform that we would charge extra for.

And to degree that we're going to be investing in R&D, you'll see a shift more towards those kinds of investments, which is exciting for us as we look forward.

We also talked about, though, being measured in our growth of R&D spend, so that we can steer more of our dollars into sales and marketing, and that's also a key theme for us as we look forward, because we know we have the best solution in the marketplace.

We're convinced of it, and we need to do more to expand the customer engagement for it.

That's kind of how we look at all this at this point in time for us.

Your next question comes from the line of Patrick Walravens from JMP.

And I dropped for a minute, so if I missed the answer to this forgive me.

But I'm pretty happy with my Butterfleye camera.

And they don't call them that anymore, but what else can I expect from that in terms of sort of features and functionality?

[I m pretty happy as well], by the way, and I'm thrilled to hear you say that.

The customers who have gotten a smart cam have been giving us very good reviews.

If you look at Amazon, for instance, and we've been happy with our take rate of additional subscription services on that platform.

Obviously, we always like to be higher, but it's gotten off to a good start.

Let me put it that way.

But the new Ooma smart cam is a big step forward for us on several fronts.

One is it's both outdoor as well as indoor.

You can put it out in the elements, it has full night vision at 10 ATP and it has longer battery life and all the other great features of Ooma smart cam that we already have today, like facial recognition, geofencing, so it automatically turns on and off as you come and go just by your presence, et cetera.

It also integrates more and more seamlessly into the overall Ooma Home Security smart security platform.

When we look at what the Ooma smart cam, the new ones that were just in beta now, when we look at what that camera can do versus competition, and the price point we've announced for it $149.99, we think it beats all competition.

And we're thrilled by that.

We just got to get it shipping and get it distributed throughout our retail channels.

We also have visions to add more capabilities into the camera.

We want to make the facial recognition work even better.

We want to do other things, and that will come a time, because we can download new firmware into these cameras anytime we want and upgrade them, just like we can the core Ooma platform.

So we've got a platform here for the future as well.

But yes, if you want to put cameras all around the outside of your house and let them run for a long time on batteries and work even if your Internet goes down, which most competitors products won't do, Ooma smart cam is the choice.

Your next question comes from the line of Mike Latimore from Northland Capital Markets.

This is [Vijay Devar] for Mike Latimore.

I guess, most of my questions are answered, but I would take this one.

How are the gross margins on business related to the overall corporate margins?

Vijay this is Ravi here.

We do not break out gross margins between business and residential separately.

But just to give you some color on that, my ARPU from business user is around $20 per user on the business side and from a residential user, it's around $7 or $8 per month.

So there's a big difference between average revenue we get from a business user, and the cost is also slightly higher to service business user but not that much.

So generally speaking, from a color -- high-level color perspective, our overall subscription services margins for the company is around 70%.

And just from a higher ARPU of a business user, the gross margins are more than our residential customer ARPU -- gross margin.

So hopefully, that will help you understand but we don't -- since we have similar data centers and lot of other infrastructure, which is common, we don't have very specific gross margins for the 2 businesses.

Got it.

Got it.

This commentary around the new features to be added on smart security side.

But curious if we can hear something more on the enterprise diversion of the business.

Do you expect to launch new features there because, I guess, on the small business, it's kind of pretty much done with your R&D investments, maybe on the enterprise side, on the customization side, do you now plan to launch any new features?

Yes.

We've got new things planned in every area of our business.

I'm excited that on the small business side, the things we're largely working on now are new things that we can -- which we charge extra for.

Monetize our customers in new ways.

On the enterprise side, we tend to drive our development by the needs of the customers that we encounter.

One of the unique things we do is ask our customers if you wanted your phone systems to integrate in your business and in a particular way, what would that be.

And usually, we can do that for them fairly quickly and easily whether it's custom analytics or some unique call flows or doing other integrations into other platforms they may be using or what have you.

So we tend to let the market dictate a little bit where we go with that, although there are certain verticals that we're increasingly targeting, and in those areas we are thinking more generally about what to do for those verticals.

We will continue on investment in R&D on new features for enterprise, but in our overall spend as a company, it's not real big and it will be paced largely by the rate at which we add additional customers.

Your next question comes from the line of Josh Nichols from B. Riley FBR.

Strong finish to the fiscal year.

I did want to ask how long you think until expanding the VAR reseller channel and some potential white label solutions could really start acting this force multiplier to the company's existing sales force and we could see a nice ramp even further in business services revenue?

Yes, that's a steady developing area of the company.

We've already reached the level of hundreds of VARs involved with our Ooma Office small business solution.

These VARs tend to be pretty small entities, maybe 1 or 2 people often that may be more IT professionals that are now also going to offer phone service to the small businesses they consult to.

On the enterprise side, we have a smaller number of VARs today, but we have plans to grow that significantly through the year.

We do anticipate that when you bring on a new bar it's going to take several months to get them trained and tasseled with the solution and then also some time for their sales folks to bring the solution to their leads and drive those through the closure.

So it's not a real fast ramp.

But within several months, a new VAR can be productive and contributing.

And we have programs in place and people dedicated to growing the VARs, both on the office side and on the enterprise side.

You're right.

It is a force multiplier.

If an enterprise VAR brings several salespeople or even larger number than that, it can be quite impactful.

And that's the way we're thinking about it, since, in our minds, there aren't many players like us that are willing to work with the VARs the way we are and support full white label solutions, allow them to keep a closer relationship with their customer, do more value add than just being a sales channel.

And we think that's one of our strategic advantages the way our platform works, the way we built the systems to enable that.

And now we are, as I've said here, working to grow that channel.

So I think, like I think I said earlier, the first half of this fiscal year is going to be an important time for us to show some real sales and marketing progress now that we're ready to kind of take it on.

And then as a follow-up to a previous question, it sounds like on the office space, you're pretty close to having the set up you want and there's only a couple of more things to add early on in the year before you can add some new offerings to upsell the existing base.

Is that -- do you think is going to be more of a driver like this year?

Or do you think that upselling opportunity lies more next fiscal year and beyond?

I think there'll be some things this year, possibly around mid-year, and then more things that come late in the year.

We have a couple of different things we're trying to do.

I don't want to predict it precisely or anything.

But yes, our small businesses love what we provide them today.

And with the exception of a few things they ask about, we try to give them more and make this more complex, it's not going to be a DIY-type solution that they can do themselves, and that's the whole power of the platform.

In fact, that's the power of our business strategy focusing on small business for the solution that is custom-designed for their needs.

We don't think we have any competitor that's done that and our ability to set it up yourself do it without running any wiring in your company, do it with great voice quality even on an Internet solution that may need more consumer grade than business grade, those are real advantages we bring to the segment.

So yes, we're going to push hard growing.

And as I said, in the middle in the back half of the year, hopefully, bring out some additional things that we can -- that can take us farther.

And then last question for me, you've laid out a pretty good road map as far as Office and Enterprise for some of the expectations for this year and the push to increase sales and marketing.

But could you spend just a minute going over the high level with some of the assumptions are for this year regarding Ooma Telo, the home business as well as the security offering?

Sure.

We've talked for many quarters now about how we've steered more and more of our sales and marketing onto the business side of what we do and really have reduced a much lower level the amount of sales and marketing we put on Ooma Telo for residential.

That platform is still growing, but we don't expect significant growth from it with what we're spending and doing, so growth on the order of what we achieved in Q4 is kind of how we look at things going forward.

And now the question becomes can we expand on the residential space with the additional capabilities we're adding to that platform?

Ooma smart cam stand-alone is a fantastic video solution for the residential space, and that's something that we believe will have out in the market quite soon and will be able to start driving from a growth perspective early here in FY '20.

Smart security is out and available.

We have many happy customers, but there's still components of that solution that aren't available yet that we like to do, and I think it will take us a while through the year to bring out all of those things.

So we're not putting as much emphasis on smart security at least in the first half of the year.

When we get to mid-year, we'll give you more of an update on smart security and what we intend to do on a broader basis with that.

But -- Anyway, we couldn't be more thrilled, though, to be powering ahead on all these fronts and we're putting a lot of work in some of these areas for a while, and I think we can see we're getting there.

Your next question comes from the line of Nikolay Beliov from Bank of America Merrill Lynch.

This is actually Jacqueline Cheong on for Nikolay.

First of all, I realize there's no official guide for subscription revenues, but can you talk a bit about how we should think of subscription revenue growth going into next year?

Jacqueline, this is Ravi here.

Happy to.

So if you look at our product revenue, generally speaking, has been consistent around $12 million or $13 million per year, and it may go up slightly or not, but we are expecting our product revenue to be close to flat from fiscal '19 to fiscal '20, then maybe a small uptick but not too much.

So all the growth that you are seeing is, largely speaking, coming from subscription services revenue.

And one more point, at Talkatone, I have assumed in my guidance roughly $4 million for the year and in fiscal '19, it did close to $5 million, $4.7 million.

So I think the growth in subscription services revenue is driven by growth of Ooma Business and some small growth from Ooma Residential, Ooma Telo also.

And as Eric said, smart security is something which we are working on developing it.

So that is more of we have not assumed too much growth from smart security just because it's not out there in our fiscal '20 revenue guidance.

We are investing into it.

We're very optimistic about this, but at the same time, we want to make sure we are managing the expectations along with -- as how the results come out.

So most of the growth is going to come from Ooma Business as well as some from residential growth.

Good color.

And can you also talk on what you're seeing in the competitive environment?

How has Voxter changed your positioning, and are you seeing improvements in your win rates?

The biggest thing we've seen so far having -- we call it Ooma Enterprise now.

And having it in conjunction with Ooma Office, we're finding when we run our marketing programs and bring leads into follow-up on -- that we're able to close more of the leads, because we have a solution for just about everybody now.

We are also finding that some of the companies may be bigger, but they only need the capabilities that are in Ooma Office.

So a company we might not have targeted is now becoming an Ooma Office user, and we're thrilled by that.

We have customers today who are hundreds of users and using Ooma Office.

On the flip side, we see customers sometimes who have more of a full UCaaS set of needs and they may be smaller.

When we closed recently is about 10 users.

You think of that as an Ooma Office customer, but they needed some things that our Ooma Enterprise does.

So they become a great Ooma Enterprise customer.

And that's a great example, too, what makes Ooma special.

We did a relatively unique interface customization for them between how they use sales force in their business and what they want Ooma Enterprise to do.

So we're seeing a sales and marketing synergy between the 2 and so -- and that made us stronger.

So I guess, short answer is yes.

Got it.

Got it.

And then maybe one last one on the topic of ARPU.

Besides the mix shift, have you seen any ARPU uplift due to Ooma Enterprise?

And any color on the customer split between Ooma Office and Ooma Enterprise?

Jacqueline, this is Ravi again.

So let me answer those 2 questions.

Yes, the Ooma Enterprise ARPU is higher than an Ooma Office customer ARPU.

But since Ooma Enterprise is so small, it is helping with improved ARPU but not much because it's from a very, very small base.

Does that help?

Got it.

Yes, that helps.

I'm sorry.

What was the second question?

There are no further questions at this time.

I'll now turn the call back to Eric Stang for closing comments.

Well, thank you, everyone, for listening to our call today.

We couldn't be more thrilled to be ranked #1 by Consumer Reports and #1 by PC Magazine.

Because we do, as a business, want to make sure we have the solutions out in the marketplace that customers most value.

And it's very heartening to see those results from users telling us that and it gives us heart that as we can steer more of our investment in the sales and marketing that we can continue to drive nice growth for the company, which is ultimately what we're trying to do for all of you.

So thank you for your time today, and we look forward to next time we can talk to you.

Bye-bye.

This concludes today's conference call.

You may now disconnect.