Good day, and thank you for standing by. Welcome to the Ooma, Inc. Fourth Quarter and Fiscal Year 2026 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, Matthew Robison. Please go ahead, sir.

Thank you, Michelle. Good day, everyone, and welcome to the fourth quarter and fiscal year 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 fourth quarter and fiscal 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 & Presentations page of the Investor Relations section of our website. This link will be active for replay of this call for 1 year. During today's presentation, our executives will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results 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 first quarter and full year fiscal 2027 on a non-GAAP basis. Also, in addition to our press release and 8-K filing, the Overview page and Events & 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 the resolution of GAAP expenses that are excluded from non-GAAP metrics. Before I turn this over to Eric, I'd like you to know that we will participate in the 38th Annual ROTH Conference at Dana Point on March 23 and 24. Now I will hand the call over to Ooma's CEO, Eric Stang.

Thank you, Matt. Hi, everyone. Welcome to Ooma's Fourth Quarter and Fiscal 2026 Year-End Earnings Call. Thanks for joining us. We're pleased to report strong Q4 financial results, to update you on our progress integrating our 2 Q4 acquisitions, FluentStream and Phone.com, and to discuss our strategy and the positive momentum we see for fiscal 2027. Financially, we're pleased with our Q4 results, which included solid revenue growth and new records for net income, for adjusted EBITDA and for cash flow from operations. Our adjusted EBITDA in Q4 reached $11.5 million, which equates to 15% of revenue. This result compares favorably to adjusted EBITDA of 11% of revenue just a year ago. Total adjusted EBITDA for fiscal 2026 was $33.9 million, up from $23.2 million the prior year and $19.8 million the year before that. Looking forward, we expect our fiscal 2027 adjusted EBITDA to be comfortably above $40 million. And as we continue to grow and expand our business, we expect our adjusted EBITDA to go even higher, which is strategic to our outlook as higher adjusted EBITDA affords us greater opportunity to make acquisitions, repurchase stock and invest in business growth. On the Business front, we achieved solid growth in Q4, particularly due to our 2 acquisitions and a record quarter for AirDial. The additions of FluentStream and Phone.com provide us new avenues for growth as well as the potential to capture significant synergies. To date, we have only just started the process of integrating these acquisitions and making the most of the opportunity they present. Also in Q4, I'm pleased to report that AirDial added more lines than ever before. The number of Q4 AirDial lines installed was more than double the number that we installed in the same quarter a year ago. I'm pleased to say…

Thank you, Eric, and good afternoon, everyone. Before I dive into our fourth quarter financial results, I'd like to quickly recap the financial terms of the 2 acquisitions we completed during the fourth quarter. We completed the acquisition of FluentStream on December 1, 2025, for approximately $45 million in cash. We also completed the acquisition of Phone.com on December 26, 2025, for approximately $23.2 million in cash. The financial results of these acquired businesses are included in Ooma's financial results starting from their respective acquisition completion date in Q4. There are no other contingency payments for either of these acquisitions and the aggregate cash acquisition price was mostly funded by a $65 million term loan with an interest rate of 6.4%. Now I'm going to review our fourth quarter financial results and then provide our outlook for the first quarter and full year fiscal 2027. We had a solid finish to fiscal '26 with the fourth quarter revenue of $74.6 million, up 15% year-over-year, driven by the growth of Ooma Business, including AirDial, and the additions of FluentStream and Phone.com. On a combined basis, FluentStream and Phone.com added approximately $6.1 million of revenue in Q4, of which $6 million was in Business subscription revenue. Excluding the impact of these acquisitions, total revenue in Q4 grew 5% year-over-year. In Q4, Business subscription and services revenue accounted for 67% of total subscription and services revenue, as compared to 61% in the prior year quarter. Q4 Product and other revenue came in at $5.9 million and was up 30% year-over-year, driven by the growth of AirDial installations. Despite Q4 being a holiday quarter, we had a record number of AirDial line installations, which more than doubled over the prior year quarter. New bookings for AirDial was also robust and grew approximately 80% year-over-year…

Thank you, Shig. On nearly every metric, Ooma is a stronger company today than ever before. As we now enter fiscal 2027, we're encouraged by our past execution, the positive market tailwinds we see, particularly for AirDial, our expanding number of strategic partners and the addition of our 2 acquisitions last quarter. Our team is committed to making fiscal 2027 a great year for Ooma. Thank you for joining our call today. We'll now take your questions.

[Operator Instructions] Our first question is going to come from the line of Josh Nichols with B. Riley Securities.

Always good to see record EBITDA margins and free cash flow profitability for the company. I just was curious, you mentioned it on the call that FluentStream is already doing quite well from an EBITDA margin perspective. But you mentioned that you think that there's room for pretty significant increases for Phone.com. Does the fiscal year '27 guidance that you laid out include very much in the way of potential cost synergies on that front? Or would that potentially be some upside to the 2027 outlook that you laid out?

Yes. Thanks for the question, Josh. Our profitability guidance, we don't assume the synergy yet. We want to start the year conservatively on that note. And as we said before, we have a pretty good track record going back to prior acquisitions to achieve the cost synergies ultimately, OnSIP as an example again. And so as we start the year, we wanted to take that as an upside, as we realize them probably second half of the year, that's what we're targeting to see more meaningful cost synergies. So long story short, the guidance does not assume the synergy benefit yet.

Great. Well, that's good to hear. And then just in terms of the AirDial's catch-up, I know you said you thought there was like some customers, because of weather and seasonality, was going to be a little bit slower. But the numbers for 4Q that you kind of mentioned for AirDial seemed quite strong. And when you look at some of those like larger reseller partners, do you expect like the pace of deployments to increase pretty significantly this year relative to last year? Or what's the expectation there?

Josh, yes, in short, we do. It's difficult to forecast, and we don't want to get out in front of committed agreements that aren't in place yet. But if you look at funnels and backlogs of opportunity and the customer response we're seeing out in the market and just the momentum which AT&T is moving at to increasingly raise prices and retire more POTS lines, we think we have the potential for a very good year ahead. But we put some of that into our guidance, but we think there's definitely upside there as things unfold.

Great. And I guess last question for me, I mean you really have a pretty well-rounded capital allocation strategy, you're buying back stock, you're generating cash flow, improving the margins and you're also looking at M&A. Is the expectation right now with what's been going on in the market that you'd probably close at least like 1 additional acquisition this year based on the pipeline? Or what's the expectation there?

Well, as I said in my remarks, we think acquisitions like FluentStream and Phone.com are another great avenue for growth for the company, and it's part of our strategy today. You can never handicap when something is going to happen. There are targets out there. But I'm hopeful that every year we'll be doing some acquisition or acquisitions to augment what we're doing ourselves, just because of the opportunity we see.

Our next question comes from the line of Patrick Walravens with Citizens.

Great. This is Kincaid on for Patrick Walravens. Eric, I just wanted to follow up on 2 comments that you've made last quarter. Number one, you said that there was some of the AirDial installations that had been pushed out. You mentioned January, so I'd love to get a follow-up on that. And then I understand that you may not want to give this every quarter, but you mentioned 50 hotels per quarter was your goal. Would love to hear how that's going.

You bet. So yes, some of what was pushed out last fall did come in, in Q4, or particularly January, we had a very strong January for AirDial. And that momentum has actually carried into February as well. So I think we're off to a great start for the year on AirDial. And then on the hotel hospitality front, our goal was to add 50 new hospitality customers every quarter. I think we did a little over 80 in Q4, which is a nice step for us. That might be a record in terms of the number in any particular quarter. And I will say our Marriott relationship is also finally starting to pay off some and contributing to that number. So continued good momentum there too.

Spectacular. And then just one last one for me. On the Family Phone Bundle, do you have a sense of what the TAM on that would look like?

That's a good question. The Family Phone Bundle is 1 of 3 or 4 bundles we have in the market today, more focused around giving something easy for families to use and have 911 capability for real landline 911 and things like that. But My Phone, when we announced it, will be specifically targeted towards that market opportunity we see where parents want to have something in their home for their kids to use that isn't putting the Internet and screen time in front of them. We think it's a very, very real segment there. And I think that's partly what's been buoying our last 2 quarters' success on the residential front. So I think My Phone is going to take us to the next step. And we should have it out in the market in the first half of this year. We have previewed it with a couple of our retail partners, and they love it. And we really believe every family with kids at home, eighth grade or less, is a potential customer for that, so -- in U.S. and Canada. So it's a real opportunity.

That's great. I love it from a value perspective as well.

Our next question will come from the line of Matthew Harrigan with Benchmark StoneX.

Given the awareness of the copper line replacement quandary is increasing, what are the -- it really feels like you're making accelerations in the approval process and all that and you've kind of reached an inflection point. But the guys who aren't running with you yet, what are the kind of the ad hoc solutions that they're adapting? And I know -- adopting. I know that I've asked you this question before, but are you seeing anything in terms of competition from other providers where there's any innovation? Because it feels like, as we've also talked about before, this has been going on for a long time. And you've made, I think, a fairly conscious decision not to push the sales and marketing that heavily right now. I know R&D is coming down a lot, hence, the improvement in margins. But are you just generating a tremendous amount of pull demand and you feel vindicated of not pushing sales and marketing harder? Or do you think you could still grow even faster if you push the sales and marketing?

Yes. We are growing sales and marketing in our outlook this year. But we have something buoying our efforts, which is all our partners, 41 now, who have signed up to resell AirDial. They're driving a lot of our success too. And yes, our pricing is lower with them because they're reselling, but they're taking the sales and marketing lift on their shoulders. So it's part of our business model to leverage ourselves with the strength of others to go faster than we could go just ourselves. But I will say that I think we ended Q4 with sales and marketing about 25% of revenue. I certainly wouldn't want to see that go lower, and we may see it go higher a little bit as we go through this year. But we're definitely getting out ahead right now of additional growth opportunities that we think are coming our way on AirDial, and we are hiring in key areas.

Are you seeing anything in the way of presenting -- other people presenting alternative solutions?

Well, we do have a handful of competitors out there. And depending on the nature of the deal and who the customer is and all, they might be stronger or weaker in terms of relationship with that customer or opportunity. But I will say that I still believe -- I believe strongly that the features and capabilities in our solution are ahead of others in the market. And that allows us to really bring it all together for a customer. And I think that's why we're winning so many of these partner resellers, because they recognize the strength of our solution. I think last fall we took some additional steps to make our remote device management even more robust for our partners to use. And we have other improvements planned on AirDial this year, or really, I'd say, feature additions. So I think we're going to stay ahead. But it's -- we -- I think that the AirDial market today or the POTS replacement market, somebody is going to break through as the winning solution in the market. And I think it's ours to go get, and we're executing to try to do that.

Our next question will come from the line of Arjun Bhatia with William Blair.

Can you guys just touch a little bit on the AirDial strength, and I know in the past you've talked about implementation hurdles. Just help us understand where we are on that. Is this like a permanent sort of -- or more durable tailwinds going into 2026? Or could there still be some kind of bumps just as sort of thinking about the outlook?

Yes. So AirDial grows in a couple of ways. There is a steady stream of business we know or can reasonably forecast we're going to drive every quarter through our channel agents, through our own direct sales, through what we know some of our partners have been doing and will keep doing. But there's also big deals out there, larger size deals. And they're lumpy and you don't know when a customer is going to pull the trigger. I think that there's been a lot of budgeting to address this segment by larger customers this year, that wasn't in place last year. I know that some of our key reseller partners are putting more emphasis today than they were a year or 2 ago on this segment. And I'm hopeful we'll keep winning multiple partners every quarter to bring on board. It's not all perfect, but there is some -- there's certainly an increased momentum. But because it's lumpy and because 1 customer can be 5,000 or 10,000 lines ultimately, if it's a very large customer, you just don't know when you're going to win those and who's going to win those. So we're a little more conservative on how we forecast AirDial today. But the business is certainly out there and we feel like things are going well for us for all these opportunities.

Okay. Perfect. Got it. And then just when we're thinking of the sort of Residential business, you had a better Q4, you're kind of talking about My Phone might come in this year. Can that be a growth -- can that grow in '26? Or how are you thinking about the sort of range of outcomes?

I do think it can grow. But I can tell you, in our guidance, we have not modeled it that way. But it's -- we don't expect it to decline either. And residential is close to $100 million of revenue for us and a very nice segment for us to be in. And these -- we've had a little bit of decline over last year, not a lot, but a little, like 1% year-over-year. But I think with My Phone and some of the trends we're seeing -- I mean, essentially end users did not decline in Q3 and did not decline in Q4. And when My Phone comes in, maybe we'll see the users grow a little bit. I think that's all I want to predict at this time. Once we get My Phone in the market, depending on what retail placement it has, we'll be updating you. But certainly, it's great to see that the residential phone is not dead. There's some very good powerful reasons to have one in the home, 911 being one, something for the kids to use, having a home office with better voice quality, having a parent or a mother- or father-in-law in the home. There's all kinds of reasons why it's a nice convenience. And it may not be a nice convenience at $30, $40 a month. But with Ooma, it can be as little as just a few dollars of taxes and fees a month, and that's powerful. So yes, we see real a market opportunity there, and we're not -- we're investing in it today.

[Operator Instructions] And our next question will come from the line of Maxwell Michaelis with Lake Street Capital Markets.

First one, just kind of want to focus on ARPU. You noted FluentStream and Phone.com weren't included in this year -- or this quarter's numbers. But can you give us a sense of what that looks like in Q1? And then -- or just give us a sense of what the ARPU looks like compared to Ooma? And then if we look at sort of the AI offerings you guys mentioned earlier in the call, can you give us a sense of what ARPU looks like for a customer who is using the highest tier of all the AI offerings?

So in terms of what we could expect once we incorporate those 2 acquisitions, they're relatively comparable to Ooma Office ARPU. I would say, slightly lower than Ooma Office, but not too much. So you might see a little bit of pull-down on ARPU just because of that. But they're not too far off from Ooma Office is. In higher-tier services, I think your second question was the higher-tier services on Ooma Office.

Well, with AI.

With AI. Okay, yes.

Okay. So the first 2 services I talked about will be part of Pro Plus, which sells for $29.95 a month. A single-digit percentage of our customers today take the Pro Plus tier. But we think with AI included in it, we could move that up and that will bring our ARPU up. Our Pro tier is $24.95, our Essentials tier is $19.95. Most of our customers take our Pro tier. And then the other 2 services I mentioned will be priced separately. And they'll be both -- we haven't announced pricing on them so I can't give you a specific answer here today, I apologize. But there'll most likely be a fixed price per month and a usage charge as well, basically if you go over a certain level of usage. I think you can look at these solutions in the market today and see they're priced above -- generally, those solutions on their own are priced above where our current Ooma Office ARPU is at. So I think that they have the potential to bring our overall average up as well.

And last one for me, just around acquisitions. I think the combined revenue multiple you guys paid for, for both the companies were around 1.4x sales. I mean is there a criteria you guys are following or a multiple you guys are willing to pay for higher growth that you guys can share with us?

Yes. It's interesting, if you look at the acquisitions we've done, we've bought 2 businesses for less than 1x revenue, 1 for about 1x revenue, and FluentStream for more than 1x revenue but with very strong EBITDA coming from the company. We -- it's a balance and a trade-off. A business that has low EBITDA but we think, with our synergies, we can improve, that's work on our side and we're not going to pay up as much for that. But when we see a business with higher EBITDA that we think is stable and that we can leverage for the future, we're going to pay a little more. Either way, I think our biggest metric is: Is it accretive and do we think putting our dollars there is going to have more impact than putting them into sales and marketing? And I think that we're kind of a unique company in this whole UCaaS space as well because these businesses in the kind of the $10 million to $30 million revenue range, they're meaningful for us but there aren't a lot of other players out there who would want to buy something that size or have the financial position to do so. So I think we've got good opportunities. And it's -- but always, it's a case-by-case discussion for us over what's appropriate for that business and what it's doing.

Thank you. And I'm showing no further questions at this time. And I would like to hand the conference back over to management for any further remarks.

Well, thank you, everyone. We're up to around -- I think we got it around $320 million, $325 million in revenue for this year. If we can do more acquisitions this year, we'll be moving that up. And I think that part of what we're doing here is becoming a bigger company with more reach and more breadth and I think also appealing to a larger investor base, which is also something we're trying to do as we look forward. We're excited about these initiatives we went over with you. Four clear initiatives: one around AI, one around AirDial, one around capitalizing the acquisitions we've done and one around our better-than-expected performance on Residential. And I think those are great trends for us as we go into fiscal 2027. So thank you for your time today and I'll stop there. Thank you, everyone. Bye-bye.

This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great day.