Hello. And welcome to Ooma, Inc.'s third quarter fiscal year 2026 financial results. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. I'd now like to hand the conference over to Matt Robison. Sir, you may begin.

Thank you, Towanda. Good day, everyone, and welcome to the fiscal third quarter 2026 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, Shig Hamamatsu. After the market closed today, Ooma issued its fiscal third quarter 2026 earnings press release. This release is also available on the company's website, ooma.com. This call is being webcast live and is accessible from a link on the events and presentations page of the investor relations section of our website. This link will be active to replay this call for one year. During today's presentation, our executives will make forward-looking statements within the meaning of federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today, and those risks more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements except as required by law. Please note that other than revenue or as otherwise stated, the financial measures to be disclosed on this call will be on a non-GAAP basis. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures 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 the fourth quarter and full year 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 one, supplemental financial disclosure two. Additionally, our investor presentation slides include GAAP to non-GAAP reconciliation 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, and welcome to Ooma's third quarter fiscal year 2026 earnings call. Thank you for joining us. We are pleased to report solid Q3 financial results and to discuss the progress we are making across our business. We will also provide more information about the two acquisitions we recently announced, one of which, FluentStream, has now closed. Financially, we grew our revenue in Q3 to $67.6 million and ended the quarter with $242.7 million of annual exit recurring revenue. We achieved new records in the quarter for non-GAAP net income, which increased to $7.7 million, and adjusted EBITDA, which increased to $8.6 million. Our adjusted EBITDA for Q3 as a percentage of revenue was 13%, up from 11% of revenue in Q2 of this year and 10% of revenue in Q1 of this year. We are proud of our increased bottom-line results and believe our business has significant potential not only for revenue growth but also for further bottom-line expansion. Our business solutions performed well in Q3. We continue to invest in growth across Ooma Office, Ooma Enterprise, AirDial, and 2600Hz. Ooma Office and Ooma Enterprise added new customers in line with our expectations, and we maintained our development efforts focused on AI, contact center, vertical integrations, and other features which will boost our Pro and Pro Plus service tiers and appeal to larger-sized businesses. We expect to launch our AI solutions early next year. I'm pleased to note too that Ooma Enterprise secured its largest hospitality win to date, a hotel in Las Vegas with nearly 1,000 rooms. Regarding AirDial, we made solid progress in Q3 as we continued our efforts to expand sales and increase awareness of our solution. I'm pleased to report that we continue to add new resale partners every quarter. In…

Thank you, Eric. And good afternoon, everyone. Before I dive into our third quarter financial results, I'd like to recap the status and financial aspects of the two acquisitions we announced last month. Please note that these two acquisitions did not impact our fiscal third quarter results I'm going to discuss in a minute, as each of these acquisitions either completed or is expected to be completed in our fourth fiscal quarter. We completed the acquisition of FluentStream on December 1, 2025, for approximately $45 million in cash, which was funded by a $45 million term loan. FluentStream is expected to add $24 to $25 million of revenue and $9.5 to $10.5 million of adjusted EBITDA to Ooma annually based on current run rates. As for the acquisition of phone.com, it is expected to be completed later in the fourth fiscal quarter. The cash purchase price will be approximately $23.2 million and is expected to be funded by a combination of cash on hand and a bank loan. Phone.com is expected to add $22 to $23 million in revenue and $0.5 to $1.5 million of adjusted EBITDA to Ooma annually based on current run rates and before synergies. There are no other contingency payments for either of these acquisitions. Now I'm going to review our third quarter financial results and then provide our guidance for the fourth quarter and full year fiscal 2026. Our third quarter revenue was $67.6 million, up 4% year over year, driven by the growth of Ooma Business, including AirDial. In Q3, business subscription and services revenue accounted for 63% of total subscription services revenue, as compared to 61% in the prior year quarter. Q3 product and other revenue came in at $5.7 million and was up 14% year over year due to growth in AirDial…

For the full fiscal year 2026, we are raising the guidance and expect total revenue to be in the range of $270.3 million to $270.9 million, which includes approximately $4 million to $4.1 million of revenue contribution from FluentStream. The updated revenue guidance also reflects our current expectation for the timing of AirDial installations, some of which have been pushed out to the next fiscal year due to the timing of customer orders and the impact of normal seasonality associated with the holiday schedule in Q4, which limits customers' availability for installations. The full year fiscal 2026 revenue guidance assumes business subscription and services revenue growth rate of approximately 9% over fiscal 2025 while residential subscription revenue is expected to decline 1% to 2%. In terms of revenue mix for the year, we expect approximately 92% of total revenue to come from subscription and services revenue and the remainder from products and other revenue. As for the full year fiscal 2026 non-GAAP net income, we are also raising the guidance and now expect it to be in the range of $28.2 million to $28.7 million, which includes approximately $1.5 to $1.6 million contribution from FluentStream and $500,000 of term loan interest expense I mentioned earlier. Based on this guidance range, we estimate our adjusted EBITDA for fiscal 2026 to be $32.4 million to $32.9 million. We expect non-GAAP diluted EPS for fiscal 2026 to be in the range of $1 to $1.02. We have assumed approximately 28.2 million weighted average diluted shares for fiscal 2026. In summary, we are pleased with our solid results for the third quarter with a record adjusted EBITDA of $8.6 million, which grew 50% year over year and improved our adjusted EBITDA margin to 13%. We are also very excited about the prospects of adding FluentStream and phone.com to the Ooma family and continuing to grow revenue, profitability, and free cash flow in the fourth quarter and the next fiscal year. I'll now pass it back to Eric for some closing remarks.

Thank you, Shig. Our focus remains on executing well, capturing the opportunities before us, and driving improved top and bottom-line results. We see growth opportunities across our business and believe our recent acquisitions will propel us faster towards becoming a bigger, stronger, and more profitable business.

Thank you. We will now take your questions.

Thank you. Ladies and gentlemen, as a reminder to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. Please standby while we compile the Q&A roster. Our first question comes from the line of Josh Nichols with B. Riley. Your line is open.

Yeah. Thanks for taking my question, and great to see the company hitting another record EBITDA margin during the quarter here. It looks like there's a healthy step up in profitability in fiscal Q4 as well with the FluentStream acquisition closing. Is that because these are significantly higher subscription and services gross margin components? Or I'm just kind of curious, like, below the revenue line, what gets you to that big jump up in EPS and EBITDA for fiscal Q4?

Yeah. So I can point to a few things there, Josh. Thanks for the question. And, you know, first of all, certainly, we're seeing more operating leverage and we took some actions in late Q3 on the R&D side of the spend and that we're gonna see a full quarter impact of that in Q4. So that's number one. And, you know, we continue to manage sales and marketing spend as well. I think we started the year with 28%. And we continue to monitor the customer acquisition cost both organically but also inorganically to balance things out. Optimize them. And lastly, I think the tariff impact that we were estimating going through the second half, we didn't see that in Q3. And as of today, we're not seeing that in Q4. So I guess that's good news for us, obviously. And you know, I think all of those things combined, we're seeing a better flow through to the bottom line for Q4.

Appreciate the context. So then I know, you know, obviously, FluentStream is closed, but you're still waiting on phone.com, which is in the guidance, obviously, for the fourth quarter. Eric, you mentioned that there's, like, you know, those numbers that you kind of laid out in terms of full-year run rate numbers for those two acquisitions. You know, don't include any synergies. Is there any way for you to maybe kind of quantify any expectations that you may be able to see around those? Or is it something that you think you may start to see some synergy benefits in, like, the second half of next fiscal year or a little bit longer?

Hi, Josh. So with FluentStream, we expect the synergy benefits, at least on the cost side, to be relatively modest. There are some benefits on the revenue side with AirDial and also just being able to bring some of our developments over onto their platform. With phone.com, we're gonna have to see once we get it closed, but we do think there's more overlap in what we're doing and what they're doing, and we can work together to drive both scale economies and also just rationalize the things we're doing so that we share the work over a larger base. It's hard to say, but I'm sure we'll see some early wins out of the gate with vendor relationships. And then, you know, we'll assess from there.

Appreciate it. I'll hop back in the queue.

Thank you. Our next question comes from the line of Eric Martinuzzi with Lake Street Capital Markets.

Yeah. I wanted to understand, on the legacy business, given the Q4 guide was a little bit below where we were expecting. Shig, I think you mentioned that there were some AirDial pushouts. I've got a, you know, basically between what I was looking for and what you guys guided to on the legacy business, I'm off by about $1.5 million. Is that all attributable to AirDial pushouts?

Yes. Most of that is pretty much other pushouts. You know, earlier in the quarter, I would say, you know, during Q3, you know, obviously, so far Q4, customer engagement continues to be strong, I would say. And by the way, the AirDial bookings actually in Q3 grew 50% year over year. But, you know, in terms of customer deployment timing and also the new order timing that we were expecting originally to be much earlier, so both installation and order timing being pushed out to next year. Which is also disappointing, but it's all on the customer side. We are obviously ready to deliver and install. And some of those customers were, you know, engaged have been engaged with us for some time doing proof of concept installations. But for one reason or another, they decided to install next year versus this year. So most of that, you know, difference you talked about in guidance prior versus now is related to that.

Okay. And is this something, you know, I know you've been at this for a couple of years now with the AirDial. Is this a different behavior than twelve months ago? Just a kind of a one-off, do you think there is something a read through on the macro?

Well, I would say this again. I don't know if it's necessarily new, but I also hate to reflection of in a good way, I guess, one can say. It's a reflection of the fact that we are now engaged with larger more larger opportunities. And larger opportunity means that sometimes it takes time to get through the proof of concept in installation and get into orders and actually get into the installation. And so, you know, part of it is the growth we see and the type of larger accounts that we engage with today. With any other opportunity. So I don't know if, Eric, you would add anything to that, but

No. I think that that says it well. I mean, I suppose we've known this in the past, but, you know, it's we're seeing customers say, you know what? The holiday's coming. We'll just start in January. And with rollout. And that's a little bit of what all this is about too.

Gotcha. And, Eric, the, you know, post-close, I realized we've only taken owned FluentStream for a week now, but what are your intentions or what, you know, kind of out of the gate actions are you taking as far as embracing that FluentStream customer base?

Well, you know, we've said on our previous calls, we think FluentStream is a very well-managed business, and the CEO of FluentStream, Karen Parker, someone we've known for a long time, have great respect for, and we're thrilled she's now part of Ooma. They are driving approximately $10 million of EBITDA on their approximate $23 to $24 million of revenue, that's pretty good performance. We do think there's opportunities on the vendor relationship side. There's opportunities to leverage their channels with AirDial because they are almost a 100% go-to-market through channel relationships. You know, they're on the R&D side, they're doing some investment in areas that we're also investing in, and so we can get together and either go faster on those developments or work on more things because we have a bigger team to do stuff and we don't need to duplicate the work. So there's obviously a whole bunch of areas to kind of come together. But one of our operating principles with acquisitions, and particularly in this case, is to not try to go too fast and certainly to not assume we know what is right for their business. We need to learn and understand each other and offer more than drive. And, you know, we have a lot of confidence that Karen will make the smart decisions with us to make the opportunities come together. So yeah, it's a good performing business. We don't want to mess it up. We want to optimize it and make it better, and that's what we're gonna do kind of over an extended time period.

Got it. Thanks for taking my questions.

Thank you. Please stand by for our next question. Our next question comes from the line of Kincaid with Citizens. Your line is open.

Oh, great. This is Kincaid on for Patrick. Congratulations on the quarter, guys. Eric, I just had a question. On the phone.com acquisition call, you had mentioned that you had very AI developments in the work. Could you give us any color on what that looks like?

Yeah. A little bit. You know, being a company that handles a customer a business of phone calls and messages means we have a lot of data and a lot of opportunity to leverage that data with AI type services. Now, you know, what you see in the AI space today and the kinds of things you'll certainly see from Ooma have to do with being able to parse all that data and get understanding from it, to evaluate it, things like sentiment analysis, and then also to use AI in other ways with the business to help the business gain productivity. It will be an area where we roll out features through the year next year. But we're excited about what we have coming in, you know, just the first quarter of next year. And, you know, it'll go into our most of this will go into our Pro Plus tier. Which we think will help drive a little bit higher adoption of our highest tier service. Which also, you know, helps our ARPU growth, which has been steadily growing on the business side, as you know. So, yeah, that's how we look at it, and I guess I can't really say too much that's too specific at this point. But it's certainly an area where we've been we've done development in this area for over a year, and we're already using some of the capabilities internally at Ooma. We've learned a lot through that. I think that's also important because when it comes to small businesses and, you know, our secret sauce is the ability to understand the environment of a small business. You need to offer very clear value and make it very simple and easy to set up and use. And I think we're gonna come out with a solution that ticks all those boxes well for our customers.

Spectacular. And then a quick follow-up. This is your eighth acquisition in eleven years. I'm just curious if there's any learnings going from the first one till now that you could highlight for us?

Yeah. There are. I hadn't counted eight, but I appreciate you're doing so. You know, I think the first observation is an obvious one that everyone would talk about, which is the closer the acquisition is to what you already know how to do, the easier it is for you to understand it and the easier it is for you to leverage it and make it a success. And so if you look at our perhaps our worst acquisition, it was one where we were branching out into the camera space with a small acquisition we made. And never really did get that right. And, you know, the acquisitions we've made the last several we're very happy with. The Onsip acquisition going back three or more years now, that business continues to perform very well, in fact, than our expectations when we acquired them. 2600Hz, we really bought them mainly for technology control and synergy, but then the market opened up with opportunity for wholesale platforms in general. We've been able to also drive a revenue story there. And now with these two acquisitions, I think we're very well placed to leverage them, you know, as part of having a greater scale and therefore, better economics overall as a company. It's you know, we do look at our cost of acquiring customers through sales and marketing and our cost of acquiring customers through acquisition, and we are balancing both of those. And it's one reason why you saw our sales and marketing down at 26% of revenue for Q3. Because with these acquisitions, we're able to drive very strong growth for the company, and we can really, you know, optimize across all areas. With that. So, that's a little bit probably went on a little bit, but that's how we're seeing things, and that's a little bit of what we've learned.

I love it. Thank you for the time.

You bet.

Please stand by for our next question. Our next question comes from the line of Matthew Harrigan with The Benchmark Company. Your line is open.

This is just a Ned that you're so careful on guidance. Do you have any feel for what the non-GAAP charge is on the acquisition in FluentStream? Would be the non-cash comp and the stock compensation and the acquisition expenses? Are you assuming it might be high six figures? Then secondly, the Vegas hotel, you know, with a thousand rooms, is that presumably a gaming company with material other assets outside Las Vegas where you could get further penetration? Thank you.

I'll answer the first one. I guess, I'll let Eric answer the second one. But with respect to FluentStream, we're not able to give you the range of, you know, estimate around non-GAAP charges. In terms of intangibles, there'll be some tax-related entries for the intangibles when I book. So we can't give you that because that process takes some time to figure out after the close, which just occurred a week ago. And then there's almost no minimal no stock comp charge associated with the, there there's no stock issued, by the way, in closing a transaction. But prospectively too, there's very minimal stock comp. So we expect stock comp to stay at a similar level even post-close.

Yeah. Regarding the hotel win in Las Vegas, it was nearly a thousand rooms. It wasn't over. But, yeah, really excited to win this customer. Our goal internally is to add more than 50 hotels every quarter on our Ooma Enterprise platform. We did that again in Q3. And this hotel, I actually don't know if they're part of a larger chain or not. I just don't know. But they're certainly a major hotel in Las Vegas.

And are you seeing anything on the SMB side that gives you pause? On the economy to the extent that that business is economically sensitive?

We are not. No.

Okay. Great. Thank you.

Thank you.

Ladies and gentlemen, as a reminder to ask a question, please stand by for our next question. Our next question comes from the line of Arjun Bhatia with William Blair. Your line is open.

Perfect. Thank you. Hey, guys. Eric, I'm just curious. You're kind of acquiring FluentStream and phone.com. Presumably, you'll be integrating those working through the acquisitions at the same time. They're decent-sized deals, and, you know, you've obviously done M&A in the past. You're gonna have to deal with these two together. Can you just give us kind of your capacity to absorb both businesses at the same time throughout fiscal 2027?

Yeah. Happy to. It's obviously something we thought a lot about. One of our key goals is not to derail in any way the things Ooma is already doing as we bring these businesses into the family. We feel pretty comfortable. Partly because FluentStream is already operating at a very high level. And phone.com is as well, but phone.com is more of an opportunity for the future given the strength of the phone.com brand and URL and, you know, the high level of e-commerce business the company does. E-commerce is a very cost-effective means for growth as well. We really want to bring our sales and marketing strength to that business. Our team is probably I wouldn't be surprised if it's 10 times the size of theirs in terms of, you know, just the marketing side of what we do. And we're gonna see how that unfolds over time. But, you know, there's nothing that neither one of these businesses has something that has to get done tomorrow, with the exception of one or two very small things. So it gives us the luxury to take them at the pace that works for us. And so, you know, I think we'll be able to bring them on board very straightforwardly. And, you know, at some point, we would like to do more acquisitions because this is proving to be a very cost-effective and good method of growth for us. And if we can find more opportunities, we're open to that.

Understood. That's very helpful. And then just on the business segment, obviously had the nice win with the hotel in Vegas. When you're looking at the competitive dynamics there, just curious, where are you seeing the most sort of incremental share gains from? Like, who are the incumbents you're booting out there? And how has that competitive landscape changed over the last year or so?

So in hospitality, hotels, you're almost always replacing a legacy on-site PBX. Or, you know, something that's really quite old. And so that's the trend, you know, of moving to the cloud that's been going on for quite a number of years now. But, you know, hotels and hospitality have some unique requirements and we've been able to customize our Ooma Enterprise solution to fit the needs there very well. You know, competitively, we haven't seen much change.

Okay. Got it. Thank you.

Thank you. Sure.

Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Eric for closing remarks.

Oh, thank you everyone for joining our call today, and we look forward to well, please do have a happy holidays as well coming up. Thanks, everyone. Goodbye.

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.