Ooma Inc (OOMA) 2025 Q4 法說會逐字稿

Thank you for standing by and welcome to the Ooma Inc fourth-quarter and fiscal year 2025 financial results conference call.

(Operator Instructions).

As a reminder, today's program is being recorded.

And now I'd like to introduce your host for today's program, Matthew Robison.

Please go ahead, sir.

Thank you, Jonathan.

Good day everyone, and welcome to the fourth quarter and fiscal 2025 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 Shigeyuki Hamamatsu.

After the market closed today, Ooma issued its fourth quarter in fiscal 2025 earnings press release.

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 and presentation page of the investor relations section.

Of our website this link will be active for replay this call for one year.

During today's presentation, our executives will make forward-looking statements within the meaning of the Federal securities laws.

Forward-looking statements generally relate to future events or future financial or operating performance.

Our expectations and beliefs regarding these matters may not materialize, and actual results are subject to risk and uncertainties that could cause actual results to differ materially from those projected.

These risks include those set forth in the press release we issued earlier today and those risks more fully described in our 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.

The 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 is included in our earnings press release, which is available on our website.

On this call we will give guidance for first quarter and full year fiscal 2026 on a non-GAAP basis.

Also, in addition to our press release and 8-K filing, the overview page and events and presentations page in the investors section of our website, as well as the quarterly results page of the financial information section of our website include links to information about costs and expenses not included in our non-GAAP values and key metrics of our core subscription businesses.

These are titled Supplemental Financial Disclosure 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 fourth quarter in fiscal year 2025 earnings call.

Thanks for joining us.

We're pleased to report our results and to share our plans for our upcoming fiscal year.

For Q4 FY25, which of course is our quarter just ended, we achieved $65.1 million of revenue and $5.8 million of non-GAAP net income.

Our growth was solid and our non-GAAP net income took a significant step up versus prior quarters.

For all of FY25, our revenue grew 8% year over year and our non-GAAP net income grew 17% year over year.

We generated over $20 million of free cash flow and spent approximately $9 million repurchasing Ooma stock.

Looking forward, we believe we are well positioned to serve market segments with significant growth potential.

We also believe our higher non-GAAP net income represents a good start toward our plan to increase profitability going forward.

As we focus on four specific market segments cloud communications, specifically designed for smaller sized businesses.

POTS replacement for both business and residential customers, wholesale platform services, and residential telephony.

We believe we're a leader in each of these segments.

Given this is the start of a new fiscal year, I'd like to talk about our progress and plans for each.

As we've shared previously, our strategy for serving smaller sized businesses is built around continued customer outreach to generate awareness of our services, converting customers up to higher value tiers of service, and adding select bigger business features in a simple to use way to extend the appeal of our solution to slightly larger sized businesses.

Our progress in Q4 was on track with both the percentage of our customer base taking a premium tier of service and our average revenue per user growing in line with expectations.

We were particularly pleased to win a large new Ooma office customer with 282 users.

And to secure a double-digit number of new office customers with over 25 users each.

Looking ahead, we plan to continue our current cloud communications strategy targeting small to medium sized businesses.

We will expand our feature set in two key directions by launching new call center and new new AI capabilities.

We will also enable more integrations and along with that, strengthen our vertical marketing activities, and we intend to extend our sales reach, particularly through channel agents.

And by improving our wireless internet solution to create a stronger double play offering.

We believe millions of small to medium sized businesses across North America have yet to gain the benefits of moving to cloud-based communications, and we have the ideal solution for them.

Moving to our second key market segment, POTS replacement.

Our strategy is to provide the most sophisticated and complete solutions in the market and to leverage a combination of sales channels to increase our customer reach.

To achieve this, we focus on three routes to market; direct, via channel agents, and through third-party resale partners.

I'm pleased to report that in Q4, we made good progress, both expanding our sales activities and helping existing resale partners launch with us.

The large nationwide cable provider who we discussed last quarter where we sell Ooma AirDial, currently remains on track to start doing so by the end of March.

And Frontier Communications, the large [ILAC] we won last year, is now working with us in a limited way to begin selling Ooma Telo for residential POTS replacement, targeting customers of theirs who are at risk of phasing out.

Furthermore, I'm pleased to share some particularly exciting news for AirDial with Marriott Hotels and Resorts.

After an extensive review process, Marriott International Administrative Services just recently extended Marriott Brand certification to AirDial, which we understand makes AirDial the only current De facto POTS replacement solution recommended and supported by Marriott.

Our understanding is brand certification is a driving factor in vendor selection at all Marriott owned or managed properties and also strongly referenced at independently managed properties.

We couldn't be more pleased to now have this exclusive preferred position with Marriott for AirDial.

And I'm also pleased to highlight our recent announcement that the research firm Frost and Sullivan selected Ooma AirDial as the competitive strategy leader in POTS replacement.

It's terrific to receive this external validation of the strength of our AirDial solution.

Our plan for FY26 is to continue to execute our POTS replacement growth strategy by introducing improved and lower cost product solutions for both business and residential and by expanding sales activities across all three routes to market.

We intend to add resale partners every quarter and to assist them to drive the fastest sales ramp possible.

We believe the POTS replacement market op opportunity is quite sizable in the millions of lines, and market dynamics are increasingly driving companies to take action.

These trends make this segment a key opportunity for Ooma.

Our third key market segment is wholesale platform services, where our strategy is to strengthen our 2,600 Hz platform by incorporating Ooma's turnkey solutions.

To employ the modern design architecture of our 2,600 Hz solution to serve customers' unique requirements, and to capitalize on the market shift away from older and less substantial platforms that is starting to occur.

In Q4, we launched new turkey desktop and mobile apps, expanded our sales resources, landed a couple of small new customers, and continued proof of concept engagements with other potential customers.

Securing customers and scaling them into a sizable revenue takes an extended amount of time in this segment, but we are quite excited about the strength of our platform and the market dynamics which we feel support adoption of new solutions.

Finally, residential telephony remains a key segment for Ooma.

Our strategy is to maintain our retail placements and customer awareness marketing at Best Buy, Amazon, Costco, Walmart, and other retailers.

To drive customer interest through new lifestyle bundles such as for seniors, families, and home offices.

To capitalize more on Telo LTE, which combines wireless internet connectivity with Telo.

And to expand through enabling incumbent and competitive local exchange carriers and other fiber providers to replace their residential POTS lines with Ooma.

In Q4, we began ramping residential telephony sales at the CLAC.

I announced in Q3.

We also made progress, as mentioned earlier, towards starting limited sales with Frontier communications.

Looking forward, we view residential telephony as a stable part of our overall business, and we will explore whether we can drive growth via partners who need to replace their existing residential pot slides.

Overall, I believe we enter FY26 with good momentum across many parts of our business.

We are mindful that our outlook depends in particular on the pace at which our partners sign new customers and the timing of when we secure new partners and customers.

And so we feel we need to be cautious with our outlook while our plans materialize.

I will now turn the call over to Shigeyuki, our CFO, to discuss our results and Outlook in more detail and then return with some closing remarks.

Thank you, Eric, and good afternoon, everyone.

I'm going to review our fourth quarter financial results and then provide our outlook for the first quarter and full fiscal year 2026.

Our fourth quarter revenue was $65.1 million at the high end of our guidance range and was up 6% year by year, driven by the growth of UA business, including AirDial.

In Q4, business subscription and services revenue accounted for 61% of total revenue, subscription services revenue, as compared to 60% in the prior quarter.

Q4 product and other revenue came in at $4.5 million as compared to $3.7 million in the prior year quarter.

The year by year growth in product revenue was primarily driven by growth in Air Dial installations.

On a four-year basis, total revenue was $256.9 million for fiscal 2025 as compared to $236.7 million in the prior year, representing 8% growth year over year, including 13% growth in business subscription and services revenue.

On the profitability front, Q4 non-GAAP net income was $5.8 million meaningfully above a guidance range of $4.5 million to $4.8 million as we saw the benefit of R&D offering leverage we discussed in the last earnings call.

Q4 non-GAAP net income also benefited from lower than expected tax expenses.

On a four-year basis, non-GAAP net income was $18 million year by year growth of 17% compared to $15.4 million in the prior year.

Now, some details on our Q4 revenue.

Business subscription and services revenue grew 8% year by year in Q4, driven by user growth and upward growth.

On the residential side, subscription and services revenue was down 1% year over year.

For the fourth quarter, total subscription and services revenue was $60.6 million or 93% of total revenue as compared to $58 million or 94% of total revenue in the prior year quarter.

Now some details on our key customer metrics.

We ended q4 quarter with 1,234,000 core users, which is down from 1,242,000 core users at the end of the third quarter.

The sequential decline in total core users was primarily due to the seat reductions with IWG, which was anticipated going into Q4.

At the end of the fourth quarter, we had 503,000 business users or 41% of our total core users.

Our blended average monthly subscription and services revenue per core user or Apu increased 4% year over year to $15.26 driven by an increasing mix of business users, including higher Appu Office Pro and Pro Plus users.

During the fourth quarter, we continue to see a healthy Office Pro and Pro Plus take rate with 60% of new Office users opting for these higher tier services, which was up from 59% in the prior quarter.

Overall, 34% of office users have now subscribed to these higher tier services.

Our annual exit recurring revenue was $234 million up 3% year year by year.

Our net do subscription retention rate for the quarter was 98% as compared to 99% in the third quarter.

Now some details on a gross margin.

A subscription and services gross margin for the fourth quarter was 72% as compared to 72% in the prior year.

Product and other gross margin for the fourth quarter was 55% as compared to 72% for the same period last year.

The year over year improvement in product at the gross margin was primarily due to a fully consuming higher cost components we had procured during the pandemic in the first half of fiscal 2025.

On an overall basis, the total gross margin for Q4 was 63% as compared to 63% in the prior quarter.

The flat overall gross margin year over year reflects a heavier mix of product revenue in fiscal 25, which was 7% of total revenue due to an increase in air-dollar installations, which offset the improvement in product growth margin.

And now some details on all paying expenses.

Totalop and expenses for the fourth quarter were $35.1 million up $0.4 million or 1% from the same period last year.

Sales and marketing expenses for the fourth quarter were $17.7 million or 27% of total revenue, up 2% year by year, primarily driven by higher marketing and channel development activity for Ed in 20,600 Hz. Research and development expenses were $11.2 million or 17% of total revenue, down 6% on a year by year basis and also down 7% sequentially from Q3.

The decrease was primarily driven by hipca management as we continue to focus on R&D efficiency and operating leverage.

G&A expenses were $6.2 million or 9% of total revenue for the fourth quarter compared to $5.4 million for the prior quarter.

The year by year increase in GNA expenses was primarily due to increases in personnel and audit related costs.

Non-GAAP net income for the fourth quarter was $5.8 million was diluted earnings per share of $0.21 as compared to $0.13 in the prior quarter.

Adjusted EBITDA for the quarter was $6.9 million another record for the company, or 11% of total revenue as compared to $5.2 million or 8% for the prior year quarter.

We ended a quarter with total cash investments of $17.9 million.

We had another robust cash flow quarter with $7.8 million generated from operations in Q4.

In fiscal 2025, we generated a record $26.6 million operating cash flow and $20.2 million of free cash flow, which represented 117% and 230% increase, respectively, over fiscal 2024.

With strong free cash flow generation, we fully paid off the debt in Q4 and spent a total of $8.9 million during fiscal '25 to buy back stock through a combination of open market purchase and RSU net share settlement.

On the headcount front, we ended a quarter with 1,186 employees and contractors.

Now, I will provide guidance for the first quarter in full fiscal year 2026.

Our guidance is on a non-GAAP basis and has been adjusted for expenses such as stock-based compensation and amortization of intangibles.

We expect total revenue for the first quarter of fiscal 2026 to be in the range of $64.7 million to $65.1 million which includes $4.4 million to $4.6 million of product revenue.

We expect the first quarter on net income to be in the range of $5.1 million to $5.4 million. non-GAAP EPS is expected to be between $0.18 to $0.19. We have assumed $28.4 million weighted average deluted shares outstanding for the first quarter.

For a full year fiscal 2026, we expect total revenue to be in the range of $267 million to $270 million.

The 4 year fiscal 2026 revenue guidance assumes business subscription and services revenue growth rate of 5% to 6% over fiscal 25%, while residential subscription revenue to decline 1% to 2%.

In terms of revenue mix for the year, we expect 91% to 92% of total revenue to come from subscription and services revenue and the remainder from products and other revenue.

We expect non-GAAP net income for fiscal '26 to be in the range of $22 million to $23.5 million.

Based on this guidance range, we estimate adjusted for fiscal '26 to be $27.5 million to $29 million.

We expect a non-GAAP to diluted the EPS for fiscal '26 to be in the range of $0.77 to $0.82 per share.

We have assumed approximately 28.6 million where the average diluted shares outstanding for fiscal '26.

Let me provide additional context for our first quarter in fiscal '26 guidance.

Our revenue guidance reflects the impact of an additional churn expected from IWG in the first quarter, as well as some challenges associated with predicting the timing of added revenue ramp with new partners and customers we acquired recently.

While we are very excited about these new relationships to drive growth, the peso revenue ramp is difficult to predict.

As we are still in the early phases of implementation with them.

In terms of profitability, our non-GAAP net income guidance and adjusted EB reflect a meaningful step up, and at the mid point of guidance, these metrics are expected to grow 26% and then 21% over 2025 respectively.

With respect to adjust the margin, we believe we can achieve close to 11% for fiscal '26 as compared to 9% in fiscal '25 as we continue to drive up and leverage and make progress towards a long-term target.

In summary, We are pleased we are so pleased with a solid finish to our fiscal '25 with a record quarterly adjusted IBA along with a record free cash flow of over $20 million for the year.

We're excited about growth opportunities in front of us and remain focused on executing to our long-term strategy to achieve profitable growth.

I'll now pass it back to Eric for some closing remarks.

Eric?

Thanks, Shi.

So I talked with you today about our focus on four segments where we believe Ooma has crafted leading solutions.

We want to extend our success, providing communications solutions to smaller sized businesses, capture the large POTS replacement market opportunity both directly and through resale partners, and solidify 2,600 Hz as the modern platform for the future used by carrier worldwide.

As we achieve these goals, we also want to drive enhanced bottom line results.

It's an exciting time for us and I feel we're well placed to succeed.

Thank you.

We will now take your questions.

Arjun Bhatia, William Blair.

Awesome thanks.

Hey, this is Linda Lee here for our gen.

Eric, a question for you, what are you seeing in the S&B environment?

Has it faded a little bit after the election?

No, I wouldn't say it's faded.

Q4 is always the one quarter of the year where with everything else going on holidays and a lot of business activity, small businesses may not be in the market quite as much, but then things were back in January and we've seen that.

So I think it's been strong and it remains strong.

Awesome.

And another question, can you give us more color on how you are thinking about assisting reseal partners and driving sales, but also the strategic approach on adding new resellers every quarter in fiscal '26.

Thanks.

Yeah, it's pretty amazing to think we have over 20.

Partners that we've established relationship with to resell, in particular, Uma Airdial, and it's really exciting to see, that growing as we go forward.

Some of those partners are reselling office, a small number, and one or two are reselling Tello for post replacement as well.

So, this.

Cuts across our business even beyond air dial.

We think there are lots of entities out there that need to replace POTS lines or want to be in the market to replace POTS lines, and that our solution is the clear winner when you really step back and look at what it can do and how it operates.

And how we built it as one complete solution.

So we're excited to keep pursuing that.

We have a small team of corporate development individuals who are focused on that.

And as I said, our goal, and we've said this in the past too, our goal is to add, a couple of resellers every quarter, and we think we can do that.

Thank you.

Brian Kinstlinger, Alliance Global Partners.

Great, thanks so much.

So for someone like Marriott, how many POTS lines do they have and what's been communicated in terms of their plans and maybe time frame for replacement?

So, A I can tell you that Marriott has over 5,000 properties in the US alone.

I actually haven't looked into Canada or other markets where we can sell AirDial today, and it's very early stages with this agreement, so I think we're going to have to give it some time to be able to answer your question fully, but I know that brand certification is fundamental within the Marriott.

Community.

And so having it and being the only possible place and solution to have it, I think, is a, is a very strong position to be in.

I also think within the hospitality industry generally, Marriott is looked up to.

As a, as for the degree to which they review their solutions before they adopt them.

And so we're hopeful that this will carry some weight with us too as we look at other players in the market.

But no, it's essentially.

An open door now for us to go target their properties and bring to their, bring them our solutions.

I can tell you that a large Marriott property might need 20 to 40 lines.

If you think about all the different applications that might have a POTS line in them, so it can be sizable, but how big and how fast it's too soon to say.

Okay, and then in terms of your large cable partner for patch replacement, I think last quarter you mentioned you would know more in March in regard to the ramp from either that partner or the market in general from other partners.

Can you help us understand what is limited visibility if I'm understanding you correctly and why do you think customers might not be motivated to move much more quickly?

So the limited visibility we have is, will this partner launch in March as they are intending to do?

We think they will.

It's now March, but still, that's a first step.

How fast will their Salesforce, generate deals and generate business?

We're going to wait and see.

I can tell you though that that with this large cable partner.

A vast majority of the Fortune 1,000 have some relationship with them already, and we are involved with them not only in their, enterprise business side of the company, but also with their public sector activities, and that's a door opener for us in the public sector.

That's not an area that we've been able to do much in up to.

So we have lots of hopes, but we're going to have to go through the year and see how it materializes.

In general, I think what's been happening in the market over the last year, businesses are more likely to move forward on POTS replacement than ever before.

We still do win customers who we think are going to be quite large, but they start small.

They start with a handful of properties or or locations because that's where they face the immediate need.

But we also do see them where, they need hundreds or maybe even thousands of lines.

And so, we're excited about the market developing and we've, but, it's very hard to handicap or be certain just what's going to happen each month through this year.

Got it.

The last question I have, you mentioned in the first quarter some more turns expected from IWG.

Well, we continue to see after the first quarter quarter, more churn, you think it's stable at that point just give us the the short to medium term trajectory after the first quarter of of how it's been communicated to you or what you expect.

Yeah, we have a view on this, but things can change.

But it's interesting that, as we said last quarter, there would be some more line reductions this quarter.

When you look at in an aggregate over the last 12 months, we're just about right where we said we'd be a year ago.

So it took them longer to do some reductions than what we said were going to happen, literally this time last year.

But they've been done now and so we don't expect a lot more coming.

We think we're pretty stabilized.

I will say this too, and I can't give away too much, but up until now, almost everything we've done with IWG Regis has been to serve the businesses and users that they have in their buildings.

We are, they are testing and we are working with them on some opportunities that will take them beyond that into new areas.

And if those, Plans unfold and turn positive that it could be an upside for us together and we have a very good working relationship with them, as you might expect, and we're excited to enable them to TRY some new things.

So, you never know, but I think we're after this quarter we're going to be in a pretty good, pretty stable spot, maybe with some growth opportunity.

Okay, thank you.

Josh Nichols, B Riley.

Yeah, thanks for taking my question.

I'm just curious what you're seeing a little bit more in the SMB market if you were to just like strip out what your assumptions are for for air dial overall if you could provide a little bit of a context I know you said you were being pretty conservative on the the air dial recurring revenue piece of the business but if you could provide a little bit more granularity that would that would be helpful.

Sure.

And let me frame this more in the context of UMA's strategy and our priorities than maybe the SMB market per se.

We have expanded our business scope to include incredible POTS replacement market opportunity and also a longer term wholesale services market opportunity.

And we have shifted some of our sales and marketing activities into those areas.

Without growing substantially our sales and marketing spend, and we've done that in part because we're also committed to driving improved bottom line performance.

We were thrilled to grow non-GAAP net incomes 17% last year and to give guidance this year that's even higher in the amount of growth we're going to drive there.

So we're always balancing across our business.

We The good opportunities in the small business segment.

We're going after them and we'll grow this year nicely, but it's in the context of the overall growth we're trying to do for the company.

We still estimate there are millions of small businesses in North America that have yet to move to the cloud.

We've seen data that are around 7 million businesses with 1 to 20 employees in North America.

And that's a lot of opportunities.

Still, the majority of the new customers we get, we're taking them.

I was going to say we're taking them from just a few phone lines for maybe a cable provider or maybe even someone like a POTS line provider, into the cloud and into all the features that come with that.

We're not, it's less often that that they're actually switching from another cloud provider.

So we continue to see good market opportunity, but we are balancing our outlook across all the segments of growth we have.

Thanks.

Understood.

And then just taking a step back, well, I know you're not providing like formal guidance for anything like longer term, given that you have a little bit of turn headwinds with your largest customer and are being a little bit conservative about some of these like new air dial roll out.

Opportunities I guess like one fair to say that you would that you would hope to see the revenue growth, particularly on the recurring piece start to accelerate more meaningfully next year and then longer term you talked about the focus on increasing profitability nicely but the margin expansion.

Do you can expect to continue marching along that path beyond this year?

Yeah, I think another way to say that is if you look at the segments that we're targeting today, they have I don't know what it is, but many years of growth potential in them.

I think as big as air down POTS replacement's going to be this year, it's going to be even bigger next year and maybe even after the year after that.

Whoale services carriers are just beginning to pick their head up and realize that the broad soft and mew solutions they have are not going to take them, forward over the next 5 to 10 years, and there's a huge small business community still to be gone and gotten.

So we're viewing the investments we've made in our business, particularly in building our product portfolio, to be something we can leverage for years to come.

And we're committed to doing that while we also improve the bottom line, and we think because we've built leading solutions in the market, we're going to continue to evolve them, improve them, but we don't have to invest in them at the level we've invested in the past.

And so, our guidance this year does reflect a little bit better leverage on R&D which we're already set up to achieve.

So.

Yeah, I don't see any reason why we can't grow and be more profitable as we go forward, and that's what, that's the goal we set.

Thanks Eric.

Max Michaelis, Lake Street Capital Markets.

Hey guys, thanks for taking my question.

It's good to hear that you guys are on track, with that top tier cable company sounds like March is still in play.

Can you remind me, are we in conversations with any other of the top, national cable companies around the United States?

So we're in in in a long list of conversations at different stages in their process, and I can't really say who we're talking to and who we're not talking to, but certainly, we have aspirations to win more large players in the market, whether they be Select and ILex who have their own POTS lines in place, aggregators who bring solutions together, or.

Cable companies and others, that play in the market.

So, yeah, we are excited to talk to anyone who's interested in our solutions.

Alrighty and then we look at the business segment.

I believe you said 5 to 6% growth in 2026 or fiscal year 26, that is.

I mean, help me think about first half and second half maybe are we low single digits first half, maybe double digits second half, or just mid single digits across the board, I guess kind of help me out there how this how that should spread out throughout the year.

Yeah, so Max said, the way we think about it is, we aim to Grow at the fastest pace in the second half.

That's how we think about it, to the extent that you were taking a conservative stance on the head in particular, how the installation goes, and, we see installing more in the back half than first half.

So once we install, as the the subscription revenue follows that.

So, as we think about how the 5%-6%, that's what the business subscription growth that I guided to for the year.

How it's distributed, I would say the second half is more than the 1st half.

Okay, that makes sense thank you.

(Operator Instructions)

Matthew Harrigan, Benchmark.

Thank you.

I think when you initially announced the 2,600 Hz deal, you pointed out that there were a number of, aspects of their business that were almost completely unmonetized and I know it would have to be a gradual push over time.

When you look at the growth there, is that more new customer acquisition?

Is it broadening?

The offering to a particular customer or you, or is there really kind of, the noble opportunities to monetize, what was kind of open source, before, and then secondly, presumably the incremental.

Growth on, your top new product is going to be higher this year than last year, and you've got some 2,600 Hz growth on top of that.

So does that imply you're seeing a slowdown or at least a plateauing in the my office side on the S&B side, maybe out of caution on the economy.

I know some other calls you talked a fair bit about caution on the economy and clearly, a lot of the other names I follow, some of them are not in your area, are really expressing a lot of concerns over the economy right now.

Thanks.

Hi, Matthew.

So on the second part of your question first, we think of it more as 2,600 Hz will Take time for the revenue to ramp because when you secure new customers, they have to adopt the solution and make it work for them and then if they're going to convert existing customers over, that's a whole process as well.

So I think the impact on our business will be greater next fiscal year than this fiscal year from 2,600 Hz. But in order to achieve that, we're going to have some major wins this year in 2,600 Hz, and that is what we're setting out to do.

And then, you asked about 2,600 Hz and how we monetize it.

I think most of the growth that we're looking to achieve there is going to come from new customer wins.

We do have services that we are adding to the platform that can be monetized with the existing base.

One of them is, one of them comes from just the Ooma IP and apps that we're bringing onto the platform, some of our customers are going to want to adopt them, and that, can lead to some revenue.

And then we also have launched carrier services to go with the 260 Hertz solution, leveraging our low cost structure for our customer base there.

And so some of those activities can also be some incremental growth from the existing base, but.

I think that what you're really hearing from us is just what I said in my, opening remarks that the pace at which Airdial expands and the pace at which these resale partners join us and the ones we have ramp.

And how fast, new 2,600 customers customers expand with us, we're going to be cautious until those things are materializing, but but we haven't reduced our outlook in any part of our, of what we're doing.

And then on the Frost and Sullivan, commentary on the accelerating need for the POTS replacement, you the awareness, really kind of the predatory pricing on the part, on some of the copper lines.

If you're being cautious and moderating your pace, I mean, that implies the market's not making the necessary adjustments that fast or there's someone else, there, what, I mean, you have to have some competition.

I mean, where are you seeing alternatives to your offering and I know you're not pushing hard in Europe or certainly not Asia right now, but you've got some issues in those markets as well.

I mean, how do If you're in Germany or the UK and someone has the same problem, how are companies addressing it, or are they not addressing it?

Is there a smorgasbord of solutions over there, or in other words, it feels like that your pace of growth there may be a little bit inconsistent with the dynamics of the market that, Frost and Sullivan and yourselves have spoken about.

So we, I've seen some analysts commentary that suggests that less than 10% of the market has converted yet away from their POTS line in terms of the remaining, lines that we see out there.

It's very hard to know what that number exactly is.

I will say it's a little baffling.

I think I've learned through this process.

There's customers who we could save.

A seven-figure amount of money and still they take a year to get.

Get it done when they could have done it in 3 months.

And I don't know if these decisions aren't making it up to the CFO ranks or what, but it is shocking to me.

I am.

I know some of the local business here in the Bay Area who told me they just got Ooma Air dial for two buildings they have recommended to them by their elevator servicing company, which was great to see, and they had never looked at their POTS lines, and they were shocked to find out they're paying over $600 a month per line at each at each place.

And so they were thrilled on how much we're saving them, but they just didn't know.

So I think it's a matter of getting the word out.

I think it's a matter of of this rising up to a level where companies understand what's happening because, it's not uncommon to see $100 to $200 a month or more for the cost of a POTS line, which is just nuts when you think about it.

And if you got a lot of them, it's quite substantial.

So I, we think all the trends are there for the market to get bigger and go faster.

We've talked about our competitors in the past here.

Our biggest two competitors are aggregators, who, with larger sized accounts may have an existing relationship, and that relationship is how they will sell versus us selling with what we believe is a better product solution, and we have had large customers start with one of them and then come to us when they could not get what they needed from that other player.

So we don't feel like we're at some competitive disadvantage.

We feel like we actually have the best solution in the space and our approach to that challenge is to work with resale partners such as T-Mobile or US Cellular or other aggregators or, this large cable provider because they have those relationships when we don't.

And now you mentioned international as well.

Outside of North America, we have not spent a lot of time from an air dial perspective.

We would want to have a large, partner reseller to make the effort to go international, but it is something we'd like to do and it's something we, do spend some time on, but H1stly, we have so many resale partner conversations and activities and opportunities that we're pursuing in North America that I think we haven't moved as fast as we could outside of North America.

That's a good problem to have.

But I mean if you think about the last half of last year, we won Frontier Communications, we won another CLAC, and we won this large cable provider all in the space of 6 months.

It's, we are having some pretty good momentum.

But anyway, we have to be cautious till things come together and that's the outlook we've given you and we're just going to keep working at it, to drive the success we want to have.

And I know you can't be too definitive, but I would assume that Verizon will look at Frontier's best practices when they assimilate the acquisition.

I'm sure they will.

Yes, and when those two companies can start having strategic conversations, which they can't do yet, I'm told that the door will be open to have for us to engage in a bigger way there again.

Well, you have a lot of nice problems with air dial.

Thanks, Eric.

Bye.

Thank you.

(Operator Instructions)

And this does conclude the question-and-answer session of today's program.

I'd like to hand the program back to management for any further remarks.

Well, thanks everyone for joining us today.

We appreciate your support for UA and we're going to work hard here to have a great year.

Thank you everyone.

Bye-bye.

Thank you, ladies and gentlemen, for your participation in today's conference.

This does conclude the program.

You may now disconnect.

Good day.