Ooma Inc (OOMA) 2020 Q1 法說會逐字稿

Ladies and gentlemen, thank you for standing by, and welcome to the Ooma, Inc. First Quarter Fiscal 2021 Financial Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Robison. Thank you. Please go ahead.

Thanks, Cheryl. Good day, everyone, and welcome to the first quarter fiscal year 2021 earnings Call of Ooma, Inc. My name is Matt Robison, Ooma's Director of IR and Corporate Development. On the call with me today are Ooma's CEO, Eric Stang; and CFO, Ravi Narula.

After the market closed today, Ooma issued a press release via Globe Newswire. 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 for this call for at least 1 year. The telephonic replay will also be available for a week starting this evening about 8:00 p.m. Eastern Time. Dialing information for it is included in today's earnings press release.

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 in 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, risks related to the impact of the COVID-19 pandemic 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 discussed in this call to the most directly comparable GAAP financial measures are included in our earnings press release, which is available on our website.

On this call, we'll give guidance for second quarter and full year fiscal 2021 on a non-GAAP basis. Also, in addition to our press release and 8-K filing, the Events and 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.

Now I will hand the call over to Ooma's CEO, Eric Stang.

Thank you, Matt. Hi, everyone. Welcome to Ooma's Q1 Fiscal Year 2021 Earnings Call. I'm pleased to talk with you today. Q1 was a strong and busy quarter for Ooma. During Q1, we remained focused on executing our strategy, while also adapting to the changes in our market environment and business activities driven by the global pandemic. I'm proud of all Ooma employees for stepping up to meet the new challenges we faced, and I'm extremely pleased to report that all Ooma employees and their families remain safe today. To all Ooma employees, thank you.

Our Q1 revenues were $40.3 million, up 19% year-over-year. Subscription revenues from business users grew 54% year-over-year. Our Q1 non-GAAP net income was $2.4 million, up substantially both year-over-year and versus our guidance as we optimize our activities in response to the pandemic. I believe our solid growth, coupled with increasing profitability, speaks to the resiliency of our business model and our ability to adapt to changing market conditions.

Given that our Q1 ended on April 30, we experienced the effects of the pandemic for much of our quarter. As you would expect, except for a few essential functions, all Ooma employees shifted to working from home. Inside sales and online sales were largely unaffected, but sales through face-to-face channels and through retailers became more difficult. We adapted our marketing programs to emphasize to a greater extent the flexibility and savings afforded by our solutions. Feature-wise, we moved quickly to introduce a modernized video collaboration user experience for Ooma Enterprise customers to enable use of Ooma Office IP phones concurrently at both work and home and to launch the Ooma Office desktop app. We accommodated an approximately 50% increase in call volume in our network, and we managed supply chain challenges effectively. Overall, it's clear, our services are even more vital in these times, and we can adapt to changing market conditions.

While Q1 was a very dynamic quarter for Ooma, we nonetheless made substantial progress on implementing our strategy and plan for this year. In April, we made 2 exciting product announcements. The first was the launch of Ooma Connect, our new fixed wireless Internet service. Ooma Connect utilizes advanced LTE to deliver both Internet connectivity and Ooma Office phone service for as low as $50 per month combined. It is designed both for businesses that want backup Internet to ensure vital functions such as phone service and for businesses that want to replace unreliable or expensive DSL or satellite Internet. Strategically, Ooma Connect affords us a double-play solution in the market and a distinctive new service. We also have plans to enable more new services in conjunction with Ooma Connect later this year.

Ooma Connect represents the next step in our longer-term strategy to provide a complete managed infrastructure solution for small- and midsized businesses. We're pleased that since the April launch, we now have over 100 customers running on Ooma Connect. We're also thrilled that Ooma Connect recently won TMC Labs' 2020 Internet Telephony Innovation Award, which honors products that display innovation, unique features and significant contributions toward improving communications technology.

Our second major product announcement in April was the expansion of our Office Pro service tier to include the new Office desktop app. This app expands the work-from-anywhere capabilities of Ooma Office by turning Windows PCs and Macs into full-featured business phones. Customers can access call controls, start conferences, review voice mails and call recordings, search the company directory, send and receive faxes and more using the app. This launch bolsters our strategy to make Ooma Office Pro an attractive step-up for more of our customers. In this regard, we are planning further feature additions to Ooma Office Pro later this year.

We also made progress during Q1 on our strategy and plan this year to expand into a new region of the world outside of North America. You'll recall that at the end of Q4, we served over 20,000 users in North America with a large multinational corporation and that our plan calls for us to expand further with this customer in a new region after completing a proof of concept. I'm pleased to report that we will start the proof of concept this quarter after only a short delay caused by the pandemic. This timing leaves us open -- leaves open the opportunity to roll out to a significant number of users in the back half of this year.

Regarding enabling our partner, Sprint, to grow sales of Ooma Office, branded as Sprint Omni, we made good progress during the first half of Q1, but then were constrained by the shelter-in-place rules that took effect since Sprint's sales force includes face-to-face sales. In addition, the Sprint-T-Mobile merger took effect April 1, and as I'm sure you can imagine, Sprint and T-Mobile have a big undertaking in front of them to merge their 2 organizations. Sprint has had success with Sprint Omni, and we know Sprint's sales force and customers are very happy with this solution. At this point, though, it is difficult to predict the further impact the pandemic and the merger process will have on our plans with Sprint T-Mobile, and so we're adopting a cautious outlook at this time.

A final key element of our strategy and plan this year is our focus on sales and marketing execution, including securing large customers. The pandemic and changes in our economy have certainly created new sales and marketing challenges, but nonetheless, we feel we are well placed to execute as the economy opens up. To share some examples, our largest new Office customer in Q1 will roll out to approximately 500 users in more than 150 locations over the next 6 to 12 months. We also added about 450 more Office users this quarter with a large national brand where we now enable over 900 local independent locations. Referrals have played a key role in securing these locations. And regarding Enterprise, we added approximately 150 users in Q1 with an existing customer with whom we expect to grow further this year to approximately 800 users in total.

Looking forward, we are dynamic in our sales and marketing activities, and we are engaged with all our sales channels to be prepared as the economy returns to normal. We also believe our products and services are an even greater need in these times. Whether customers want to take their desk phones home, communicate from their computers with our desktop app, or work anywhere via our mobile apps, we have them covered. As small businesses increasingly operate via telephone and online, we have seen further interest. Larger businesses as well are reevaluating their needs in light of the changing work environment, and we believe this opens up new opportunities for our solutions.

I will now turn the call over to Ravi to discuss our results and outlook in more detail and then return with some closing remarks.

Thank you, Eric, and good afternoon, everyone. Before I start, I want to thank the entire Ooma team for their hard work and focus during these challenging times. I want to give my best wishes for everyone's safety at Ooma and beyond.

With that, I'll start with a review of our first quarter financial results, then provide our outlook for the second quarter and full year fiscal '21. Despite the extraordinary circumstances created by the pandemic and the stay-at-home orders, we once again had a strong financial performance in the quarter, achieving $40.3 million in revenue, within our previously issued guidance range of $40 million to $40.5 million. On a year-over-year basis, total revenue grew 19% driven by Ooma Business. Ooma Business now accounts for 43% of revenue compared to 33% in the prior year quarter. Net income for the first quarter of fiscal '21 was $2.4 million, significantly higher than our previously issued guidance range of $500,000 to $1 million. Our strong profitability demonstrated significant leverage within our expense structure, as we optimize our activities during the pandemic and focused on operational efficiencies.

Now some details on our Q1 revenue. Business subscription and services revenue grew 54% on a year-over-year basis or 33% year-over-year when normalizing for the effect of the Broadsmart acquisition made in May of last year. Residential subscription and services revenue grew 4% year-over-year with combined subscription and services revenue from both Business and Residential growing 22%. Subscription and services revenue as a percentage of total revenue was 93% compared to 91% for the prior year quarter.

Product revenue for the first quarter was $2.7 million compared to $2.9 million in the prior year period. During March and April, a number of our channel partners, such as Best Buy, were impacted by the shutdown orders, which affected our revenues and user growth.

Now some details on our key customer metrics. We had 1.049 million core users at the end of the first quarter, up from 985,000 at the end of the same period last year and flat sequentially. During the quarter, we continued to add business users primarily through online sales and marketing activities. However, on the Residential front, we saw a small decline in our users in the quarter, caused by the economic disruptions from COVID. At the end of the first quarter, 23% of our total core users are Business users, which is up from 17% for the same period last year. Our average monthly subscription and services revenue per core user, or ARPU, increased 13% to $11.56, up from $10.25 in the prior year quarter, as we added business customers including many Office Pro users. We expect this increasing ARPU trend to continue for the foreseeable future.

Our annual exit recurring revenue increased to $145.6 million, growing 20% year-over-year. Our net dollar subscription retention rate performed well at 100% compared to 99% for the prior year quarter.

During March and April, we saw our churn rate increase by 2 percentage points on an annualized basis, we believe due to the impact of COVID-19 on the economy. We are monitoring our customers' churn closely. And although we experienced an increase in March and April, we have seen some stabilization in churn rates for May.

Now some color on gross margins. Subscription and services gross margins for the first quarter were 71%, an increase from 70% year-over-year. This increase in gross margins was due to the growth of Ooma Business and associated benefits of economies of scale. Product and other gross margins for the first quarter were negative 39%, a decrease from negative 26% year-over-year, driven in part by increased air freight charges related to the pandemic. We have increased our inventory levels during the quarter, positioning us to meet our customers' and partners' future needs. Overall, we are very pleased to see our total gross margins in the first quarter increase to 63%, up from 61% in the prior year quarter.

With that, I will now provide some color on our operating expenses for the quarter. Operating expenses for the first quarter were $23.2 million, up $1.2 million or 5% year-over-year. Sales and marketing expenses were $11.7 million or 29% of total revenue. This 7% year-over-year increase was driven by higher sales activities for Ooma Business. Sales and marketing expenses were down 5% from the fourth quarter of last year as we had moderated some sales and marketing programs, including our promotions with brick-and-mortar retailers.

Research and development expenses were $7.8 million or 19% of total revenue, flat year-over-year. We sustained our R&D expenses at our target level of sub-20% of total revenue, down from 23% for the prior year quarter. G&A expenses were $3.8 million or 9% of total revenue compared to $3.3 million for the prior year quarter. During Q1, our net income of $2.4 million resulted in diluted earnings per share of $0.11, compared to a $0.04 loss per share in the prior year quarter.

For the first quarter of fiscal '21, adjusted EBITDA improved significantly to $3 million or 8% of total revenue versus a loss of $468,000 for the prior year quarter. This EBITDA achievement is well ahead of our mid-term target goal of 5% of total revenue. We ended Q1 with total cash and investments of $23.3 million with no debt.

Cash used in operations for the first quarter of fiscal '21 was $2.8 million, driven by the timing of annual tax and other payments and was significantly better from the $5.7 million of cash usage during the prior year quarter. On the headcount side, we ended the first quarter with 799 employees and contractors, up from 748 at the same time last year and down from 895 sequentially, as we managed our spending primarily with our contractors.

Before I provide our financial guidance, I want to highlight some of our key focus areas going forward. First, we continue to assess the impact of the pandemic on our profitability and cash flows as well as on key business trends such as customer growth, churn and supplier situations. I'm pleased to highlight that we have a solid cash position with no debt and a large and diversified customer base, all of which gives us confidence that we are well positioned to weather the issues on hand.

Now on to our second quarter and full year fiscal '21 guidance. Again, our guidance is non-GAAP and has been adjusted for expenses such as stock-based compensation and amortization of intangibles. After taking into account the current macroeconomic and social environment, we expect total revenue for the second quarter of fiscal '21 to be in the range of $40 million to $40.5 million. We expect second quarter non-GAAP net income to be in the range of $1.5 million to $2 million. Non-GAAP diluted EPS is expected to be between $0.06 and $0.09. We have assumed 22.2 million weighted average basic shares and 23.1 million weighted average diluted shares outstanding for Q2.

For full year fiscal '21, given the general uncertainty around the current situation and its impact on our targeted customers, we're taking a cautious approach for full year fiscal '21 in terms of user growth and customer churn. Accordingly, we expect total revenue for fiscal '21 to be in the range of $161 million to $164 million versus the previously issued guidance range of $167 million to $170 million. This revised guidance takes into account lower rates of customer additions due to decreased face-to-face sales activities and moderately higher churn for the year. Additionally, on a year-over-year basis, we assumed very little revenue growth for our Residential business and approximately 20% to 25% for our Ooma Business segment.

We now expect non-GAAP net income for fiscal '21 to be in the range of $5 million to $7 million versus the previously issued guidance range of $2 million to $4 million. This guidance assumes higher profitability in the first half of this fiscal year, and with expectations of increased spending and user growth in the back half of this fiscal year. Non-GAAP diluted EPS is expected to be in the range of $0.21 to $0.30. We have assumed approximately 22.5 million weighted average basic shares and 23.5 million weighted average diluted shares outstanding for fiscal '21. We also expect to generate positive cash flow from operations during this fiscal year.

In summary, we executed well in the first quarter in spite of the effects of the pandemic, and we remain confident in our long-term strategy. With that, I'll pass it back to Eric for some closing remarks. Eric?

Thanks, Ravi. Our current business view is that, while the economy will gradually open up going forward, the pandemic and its effects will be with us through this year and perhaps beyond. Although we plan to be cautious in our outlook, we believe our solutions not only help businesses work more flexibly but also often save them money. As we look forward, the value we bring to customers is a core strength in these times.

Another core strength is our range of capabilities. Our expanding Office Pro feature set, ability to customize Ooma Enterprise and integrate it with Ooma Office, a new Ooma Connect Internet solution extend our reach and differentiation. And both our residential and our small business solutions are ranked #1 by users themselves with tremendously high customer satisfaction scores and customer referrals. We believe our strategy is working, and we can capitalize on significant opportunity over the long term.

Thank you. Operator?

(Operator Instructions) The first question is from Josh Nichols of B. Riley.

Yes, glad to hear everyone's safe and thanks for taking my question. Really strong profitability on the bottom line this quarter. I did want to ask, like, thinking about it, good to see the R&D leverage that the company is capitalizing on this quarter. Is the thought that that's going to continue to remain at or around these levels as a percentage of revenue? Or maybe that starts to trickle up a little bit given the investments the company is doing with the new launches in the second half of this year for offerings.

Josh, it's good to talk to you. Our R&D this quarter is about the same level of spend as it was a year ago. And we don't intend to grow it at the rate we grow sales. So that would mean some leverage is in order. And maybe Ravi has more to comment.

Yes. So if you look at our midterm target model of 1 to 3 years, the R&D range we have given is 17% to 19%. Yes, we are at the high end of that range today. But as we grow the business, we do expect some more leverage coming in. So that 19% could, over a period of time, could go down to 17% also.

And then, Eric, I wanted to ask, great to see the company has this big opportunity in front of it to expand outside of the North America market. How long is this, I guess, demo or proof of concept expected to take for the company?

I think that's a little open, but I don't expect it will last more than a couple of months. Maybe a little longer than that. We had intended a quarter ago to have this proof of concept started at the end of Q1. We had to do some work before we'd be ready to start it. We got all that work done, and it will be starting this quarter. And that means, as I said in my script, for the back half of this year, we're hopeful that we can roll out to some significant numbers of users.

And is there any additional detail that you could provide as far as the size of the opportunity? I know last quarter, you mentioned you're already up to 20,000 seats.

This company has never been as large in this new area -- geographic region of the world as it is here in North America, so the opportunity is pretty significant. And I do think, too, over time, this is a customer who we could be growing with for years to come. So it's a pretty big opportunity.

And then last question and then I'll hop back in the queue. I know management has taken a pretty conservative stance on the top line for the guidance. Like what's kind of built in there for the expectations around Ooma Connect, the desktop app and upsells to these Pro solutions that the company is thinking about?

I'll take the second part of your question first and then come back to Connect. We're pretty pleased with the progress we've made with Ooma Office Pro since its launch late last year. I'd say about 5% of our base is now using it. And on new customers, we're seeing -- in some channels, we're seeing about 10% of new customers take it, and some other channels, we see as much as 30% to 40% of new customers take it. And so it is our goal to drive it to a double-digit percentage as we go forward here of our entire base. So we're pretty happy with it. We're obviously adding more to it as time goes on. We just added the desktop app, and that is an important work-from-home tool as well by the way. So I think it's off to a good start, and we're doing some good things.

On Ooma Connect, we're -- we haven't set very precise goals yet because it's just out in the market, and we're getting a feel for what customers think about it. I can tell you that we are coming across customers who have remarkably poor and expensive Internet. And in those cases, it's a good primary solution -- good primary Internet solution. We have some pretty good success already in those types of situations, so we know we've got a success there. I think the -- what we need to learn as we go forward with this product is what amount of our customer base will see value in having a backup Internet solution for their everyday needs, and we're hopeful that we can drive that.

And we can also -- we're also hopeful that some much larger companies with lots of distributed locations will find Ooma Connect a great backup Internet solution for them as well. Those companies today put in other solutions today, and we're hopeful that they'll find Ooma Connect a better choice. So there's a lot to come with Ooma Connect in its early days, but I'll try to give more color on it next quarter after we've got another quarter under our belt.

Your next question is from Mike Latimore of Northland Capital.

Congratulations on the nice quarter there. I guess on the 100 Connect users -- or Connect customers, do they come through any specific channel? Is there any verticals that took it? Any kind of color on that would be great.

Yes. They did not come through general marketing and inbound lead generation as much as they came through either customers we already know or some of our more face-to-face sales channels that were still able to operate. These tend to be a little bit larger-sized customers, I would say. A lot of them so far are, I would call, some form of Main Street location, where they just don't have good access to Internet for whatever reason. And that's really where we got started with the product.

When we roll out a new product like this, something so fundamental, we start off with what we call -- we start off with levels, and we only expose it to a small portion of our customer base at once to kind of get some experience with it. It's worked fantastic. And now we're expanding. We aren't finding it will work in all customer situations. It depends on -- it runs today on the Sprint network, and we're finding -- we are subject to the coverage that, that network has. We're hopeful that with the T-Mobile-Sprint merger, we'll be able to expand the range of coverage we can adopt -- we can create with this product. But no, all our efforts so far have worked out as we expected.

Great. And then on -- just on the gross margins. Subscription was fairly strong, and then you mentioned the freight cost on the product side. I guess how should we think about those margins in the second quarter, subscription and product?

Yes. Mike, this is Ravi. I do expect the -- there's always small puts and takes which happens. For example, higher calling volume will have some impact on the margins. But at the same time, Office Pro customers, as we keep adding those, they will help us on the margin side. But I do expect subscription services margins for Q2 to be around the Q1 levels on the subscription side. On the products margins, I do expect it to be improving slightly from Q1 levels given we'll have less air freight charges. But obviously, it's a function of overall freight charges, have they gone up or not, but we do expect less airfreight charges in Q2 since we've built up good inventory.

Got it. And then just in terms of pricing your various services, are you having to change much in the way of pricing given the environment we're in? Or is it pretty consistent?

We haven't made any changes of note in pricing. We've always been a strong -- provided a strong value to the market, and we haven't felt the need to change it.

Right. And just last one, Talkatone. What was the Talkatone revenue in the quarter?

It was around $1 million. Slightly below $1 million given CPMs had gone down especially in March and April. So it was an iota below $1 million. What we had expected was $4 million for the year. I think we are on track for that, so nothing big in terms of Talkatone.

Your next question is from Kevin McVeigh of Crédit Suisse.

Great. I wonder -- can you give a sense of what percentage of your sales is face to face versus other channels? Because it seems like, net-net, even despite the disruption, the COVID disruptions, still saw pretty good outcome overall on the revenue side?

We did have a good outcome. Although keep in mind that depending on when new customers come in the quarter, there may not be much revenue in the quarter, but then they build over time. Approximately 30% of our business sales come through some channel that I would consider face to face, which means there's field activities going on in some form. So it's about 30%.

Got it. So Eric, is it fair to say that you kind of over delivered in other areas the way the revenue came in overall?

We did well in certain areas. In fact, our inbound and direct sales were a little stronger but not enough to make a big point of it.

Got it. And then just real quick on -- are you seeing -- obviously, post-COVID, I think there's going to be some behavioral changes. How are you folks kind of positioned to benefit from some of the behavioral changes [among your customers in your business] channel in a post-COVID world, where maybe probably more remote work. Can you tell us some of the [bits and pieces as businesses] kind of transition...

Kevin?

Yes?

I apologize. I couldn't get that from you. There was some background noise. Could you just ask it again? I apologize.

Yes, of course, Eric. No stress. Just how are you folks thinking about the business model post-COVID-19? It feels like you could be in a position to benefit as opposed to other entities coming out of post-COVID-19 or as you think about your clients' needs?

Yes. I think we're well placed post-COVID-19. Our solutions are strong, and I think COVID-19 has woken up a lot of businesses to the frailty or the limitations of the existing solutions they've had. And I mean take a very small petty example, but if you're a restaurant, and now you have to do all your business through phone orders and pickup, you need a phone system that's going to handle that. And so I think that it's an opportunity for us to tell people about what more we can do for them and maybe get them a little more interested in looking at switching for reasons other than just cost savings per se. So I think it's going to help us as we think about coming out post-COVID.

I would say for mid-sized and larger businesses, the move to work from home, a lot of those companies have kind of hunkered down a little bit. These are companies that make more strategic decisions. It's more of a sell to an IT professional. I think that, if anything, there'll be some -- potentially some pent-up demand as people come back to work. We'll see. I don't -- but at the moment, those companies aren't making big fundamental new decisions. They may be augmenting what they have or getting some extra users for work from home, but they're not going to try to make bigger changes right at the moment. So yes, I think that post-COVID, we'll be building back up our sales teams a little bit as we go through that. That'll be a measured pace for us, and we'll be able to take advantage of that situation.

Your next question is from Matt Stotler of William Blair.

Solid results and good to see that even in a challenging environment. I guess, first, I'd like to maybe double click on COVID impact. You said obviously some pushouts in the deals that require face-to-face interaction. Would love to maybe delineate between what you're seeing and how this environment is impacting conversations with existing customers, what you saw with deals that were in process and then overall new business given it seems like outside of the face-to-face situations business actually was pretty good in the first quarter.

Yes. Let me see if I can elaborate a little bit. A lot of the smaller businesses we serve still aren't -- still may be closed actually or in work-from-home mode. But we are finding in the market that they're very interested in saving money. They're very interested in our mobile apps, our virtual receptionist, our remote flexibility, and our closing ratios with the businesses we're talking to are in line. We're not seeing any increased resistance to change. In fact, if anything, we're seeing a recognition that there's better solutions out there. And I already mentioned in the previous comment that I think the larger sized business a little bit hunkered down and just getting through these times as they then reevaluate where they go from here. There's no doubt that the COVID situation has put a spotlight on work-from-home capabilities.

And I don't know how the nation's going to go, but out here in California, some big companies like Google and Facebook and others have announced that people are going to continue to work from home for the balance of this year and maybe even longer. So we're seeing things change. And a cloud phone service that can be flexible, and frankly, integrate into the way your business needs to operate, which is where we think we are most distinctive, I think that it's just even more valuable as we look forward.

In terms of deals we are doing, I don't think any pushed out per se. We tend to have -- for most of the business we do, we tend to have a relatively fast sales cycle. It's the Enterprise deals that tend to be longer in nature, and that's a smaller portion of our business today. But we're -- I will say, in terms of building channel, one of our goals this year is to strengthen our sales through channel partners. A little bit harder to build that when you -- when conferences get shut down and you can't go out to meet with channel partners and really tell your story that way. But even there, we're doing the best we can, and I'm sure that will turn around. So I think that pretty much lays it out, if that's helpful.

Matt, this is Ravi. If I may just add one other comment to Eric. Over the last couple of years, we have built a very diversified sales channel, right? We have VARs. We have resellers. We have retailers, we have inbound, we do a lot of marketing activities. That also gives us a lot of bench strength that we can deal with issues, short term and long term. And obviously, we -- our goal is to continue to building more and more channels and more VARs and channels as Eric said, but we are pretty happy with the diversification of our sales channel so far.

Right. That's very helpful. And just one more for me. We'd love to get some updated thoughts on the competitive landscape, especially in the current environment. We've heard Intermedia announce a deal with NEC recently, and we've been hearing more out of dial pads, so I would love to get your thoughts on those players and what else you're seeing in the market, if there's any change.

Yes. I don't think there's any fundamental change. We go up against these types of companies depending on the users' needs and the channel we're in. Some companies have chosen to give away video conferencing for free as a way to maybe expand recognition a little bit. That's something we've not done, although we did, as I said early on, we did modernize our video conferencing for our users on the Enterprise side to make it a little stronger. That's something we're doing generally on -- with our Enterprise solution.

Microsoft announced a solution for -- or took one step further in their solutions for smaller-sized businesses. But what they define as smaller is still pretty large. And I can tell you, having looked at that solution, it's an intricate product to set up and use. So it's not something for a lot of the channels that we're addressing. And I don't know that there's much else to particularly mention.

Your next question is from Joe Goodwin of JMP Securities.

Glad to hear everyone as well. Just in regards to the large -- the 20,000-seat deal that was closed last year, I mean, is there other potential opportunities out there or in the pipeline currently that you provide any color on?

Yes, I can't really talk about pending deals per se. The opportunity with the same large customer this year is they're to have another very significant increase. We have set out this year to secure more larger-sized customers, and I think we're off to a good start on that. We think we have a great solution for larger companies with a lot of distributed locations, particularly when they need backup Internet in those locations. And so that's one area of strategic focus for us if you will.

And there are companies we're talking to in that regard. And then in general, we're able to garner opportunity with larger-sized companies when they have a business process or a need that's not well fulfilled by what they have today and particularly, if they need some customization or some flexibility in the way the solution works for them. And we've talked about our enterprise solution as being very API-based and the ability to be different for every single user on our multi-tenant platform based on how we customize it for them, and that's a real advantage when the customer has a need. So that's how we see it looking forward, and yes, I hope that's responsive.

Yes, that was helpful. And then just in the expansion outside of North America, do you see that as a large opportunity kind of beyond the existing customers?

I do. For us as a business, it's fun to have a little history here. Maybe it's fun. We first got started in -- internationally with WeWork in a variety of locations. And that drove us to rearchitect our Office solution, in particular, to be able to operate in -- more easily in other countries. And I think with this customer, we'll take the next step, but it will be our goal to launch more generally than just with specific customers.

Your next question is from Brian Kinstlinger of Alliance Global Partners.

I'm wondering -- kind of 2 follow-ups of questions that have been asked. But in terms of the competitive landscape, mainly RingCentral, they recently came out with a $19.99 price point that's similar to yours. Do you believe this has any impact on your sales going forward? And how often are customers inquiring about the difference between your $19.99 per month plan versus theirs when you're discussing new business opportunities?

Yes. Yes, we have seen a little bit more price competitiveness from certain players. You don't always get everything, and you don't always get it except with a 1-year contract or other constraints. And to be honest with you, it's only a minority of the time that we see them in the marketplace. Our solution at that level, at that price point is designed to be really easy to set up and use, and it's curated to be just what a business needs without further complexity. And I think it's why we're ranked #1 by users themselves as the best solution available, and it's why we get so much of our business through referrals. So yes, we're going to have competition, but I don't think -- we're not seeing a particular issue with others trying to beat us on price. Let me say that.

Great. My follow-up is in terms of the large customer. The ramp that you're expecting, shouldn't that have much more of an impact on 2021 being a revenue catalyst? Or is that -- we may see that at the end of 2020?

Brian, this is Ravi. Yes, once we have the POC done and the installs starting to happen, you will see some positive impact in fiscal '21. Obviously, they are more binary, so it's very hard to predict which month and which quarter they will have a much bigger impact. But the impact on MRR will be more in fiscal '22 given when I put in -- when we install even thousands of users in the second half of this year. The bigger impact will be in the year after. But there could be also some install revenue or some impact on the MRR. So I am optimistic that we will see some growth from this large customer in the second half, but since it's binary, obviously, we want to be more cautionary about it.

Your next question is from Matthew Harrigan of Benchmark.

I apologize if these are 2 relatively Ooma neophyte questions. But when you look at the Internet capability on Ooma Connect, recognizing that the marketing is different and you have to maintain the business perception, would there be any thought of introducing that also at an appropriate price point as a higher-end residential product? And then the second question, is there any thought with all the progress on the voice recognition side of including some voice APIs in your product suite as that -- as a differentiator? And I realize these are kind of tangential questions, but I was interested.

No, happy to talk, and thank you. I could see our Ooma Connect being used in certain home situations, particularly when you have a home office and a really dedicated need. We do offer today something we call Telo 4G, which is a 4G tower married up with our Telo home phone solution. And that is targeted at the residential space. It's not as high powered or as capable as Ooma Connect, but it's just same product that we launched a little while ago and continues to build for us. So we do have a capability there.

I will take a minute, too, to mention that we designed Ooma Connect in a modular way that when the time comes, it will not be difficult for us to put a different modem in it and move it up to 5G. And we are looking forward with this product as well as throughput speeds and capabilities develop in the networks. We also designed it with continuous voice, by the way, which is something we've applied for a patent on, where if your voice call drops on your main Internet, your backup Internet, through the wireless, will immediately pick up the call with no miss. And that's a very nice feature, too, for businesses that have to be very sure of not losing customers.

In terms of voice APIs, it's not our strategy today to expose APIs and target a developer-type community, but it is our strategy for larger customers to work with the APIs we have internally to be able to customize for the customer. And so it's kind of a solution approach to the market all in one, and we think that's powerful. We can do a lot with it. And frankly, our largest customer, the one we talked a lot about, we wouldn't have that customer if we hadn't done something special with Ooma Enterprise and then integrated it with Ooma Office, so they could have a combined solution that does something just what they need. So we kind of are doing what you're sort of, I think, talking about today, but we're doing it as an all-in-one solution as a company.

(Operator Instructions) There are no further questions at this time. I will turn the call over to the presenters for closing remarks.

Thank you. We appreciate all of your time today. We're working hard at Ooma, and we do hope everyone out there is staying safe and that we get through these challenges of the times quickly and can move forward because we're excited about what we're doing with our strategy. Thank you, everyone.

This concludes today's conference call. Thank you for your participation. You may now disconnect.