Ooma, Inc. (OOMA) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. I'm Eric Stang, President, Chief Executive Officer and Chairman of the Board of Directors of Ooma, Incorporated, and it is a pleasure to welcome you to Ooma's Annual Meeting of Stockholders. Thank you for joining us today live via our internet webcast. We're excited to be hosting a virtual meeting, which allows us to be more inclusive and reach a greater number of our stockholders no matter where they are located in the world today. Before I continue, I would like, first, to mention that I hope everyone participating on this call today is safe and healthy. These are certainly strange times, but I can report that Ooma remains strong and is navigating through them well. I will act as Chairperson of this meeting, and I've asked Jenny Yeh, our Vice President, General Counsel and Secretary, to record the minutes of this meeting. Before proceeding further, let me introduce the directors and director nominees of the company who, in addition to myself, are with us today. They are Susan Butenhoff, Alison Davis, Andrew Galligan, Pete Goettner, Russ Mann and Bill Pierce. I would also like to introduce the corporate officers who are in attendance. They are Ravi Narula, Chief Financial Officer; Jim Gustke, Vice President of Marketing; and Jenny Yeh, Vice President, General Counsel and Secretary. And also with us today are Barry Shoemake and Sabrina Wang, representing Deloitte & Touche LLP, our independent registered public accountants; Bill Hughes, representing Orrick, Herrington and Sutcliffe LLP, our outside Corporate Counsel; and Anita Gillespie, representing Broadridge Financial Solutions, Inc., acting as our inspector of elections. As we proceed, if you would like to submit a question, you can do so online at the bottom left-hand side of the screen. I will now turn the meeting over to Jenny Yeh, the company's General Counsel and Secretary, who will conduct the formal part of the meeting. Upon completion of the formal part of the meeting, I will give a presentation regarding the company.

Thank you, Eric. The Annual Meeting is being held in accordance with the company's bylaws and Delaware law. The items on the agenda for the formal meeting are: the reelection of 2 Class II directors and the ratification of the appointment of Deloitte & Touche LLP as independent public accountants for the fiscal year ending January 31, 2021. After we vote on these matters, an announcement will be made regarding the preliminary results and the formal meeting will be adjourned. After we complete the formal meeting, there will be a presentation regarding the company and an opportunity for the stockholders to ask questions. Only validated stockholders will be able to ask questions in the designated field on the web portal. Out of consideration for others, please limit yourself to one question. Please note that this meeting is being recorded. However, no one attending is permitted to use any audio recording device. During the formal meeting, we will only respond to questions regarding the procedures for the meeting and the proposals under consideration. Thank you for your understanding. After we complete the formal meeting, there will be an opportunity for the stockholders to ask questions. All stockholders can submit questions while the meeting is in progress. Please stay online after the formal meeting has been adjourned to participate in the question-and-answer session. I have proof by affidavit that notice of this meeting has been duly given and that the Notice of Annual Meeting Stockholders Proxy Statement and proxy and Annual Report on Form 10-K for the year ended January 31, 2020, were made available on or about April 16, 2020, to all stockholders of record at the close of business on April 14, the record date for the meeting. We have this meeting a record of stockholders as of that date. The affidavit, together with copies of the proxy statement, proxy card and Annual Report on Form 10-K for the year ended January 31, 2020, will be filed with the minutes of the meeting. We have appointed Anita Gillespie, a representative of Broadridge Financial Solutions to act as inspector of elections for this Annual Meeting. The inspector of elections has signed an oath of office, which will be filed with the minutes of this meeting. The inspector of elections has advised me that we have present online or by proxy a sufficient number of shares to constitute a quorum. Therefore, the meeting is duly constituted and we may proceed with business. Allow me to briefly describe the voting procedures. We will vote by proxy and by online ballot. Each holder's common stock is entitled to one vote for each share of common stock held of record at the close of business on the record date. Stockholders attending the meeting via internet webcast may vote their shares in real-time until the polls are closed. The polls to vote online are currently open. Upon receipt of all proxies and online ballots, the polls will be officially closed. The votes cast today will be counted in the final tally along with the proxies previously received. The inspector of elections will provide the preliminary results of the voting at the end of the meeting. If you've not yet voted or if you have previously voted and you now wish to revoke your proxy and change your vote, you may do so by clicking on the vote here button on the right-hand side of the screen. Any proxy may be revoked at any time prior to voting -- prior to polling being closed by the electronic submission of a later dated vote at the meeting, as I just described. The polls for each matter to be voted on at this meeting are now open. The first item of business is the Election of Directors. This item is discussed on Page 32 in the proxy statement. The company's Board of Directors presently has 7 members and is divided into 3 classes, each with a 3-year term. There are 2 Class I directors, 2 Class II directors and three Class III directors. Two Class II directors will be elected at today's meeting. Those 2 nominees receiving the highest number of votes of the shares present in person or represented by proxy at this meeting and entitled to vote will be elected as directors. Directors elected at today's meeting will hold office until the 2023 Annual Meeting of Stockholders or until their successors are duly elected and qualified. Stockholders do not have the right to accumulate their votes in the Election of Directors. As indicated in the company's proxy statement, Susan Butenhoff and Russ Mann have been nominated by the Board of Directors to serve as Class II directors. Both of these nominees are currently serving as directors of the company. Pursuant to the notice of this Annual Meeting and the proxy statement dated April 16, 2020, the proxy solicited by the Board of Directors will be voted in favor of these nominees. The company's bylaws require that stockholders provide advance notice to the company of a stockholder's intent to nominate persons as directors. No such notice was received. Accordingly, I declare the nominations for directors closed. Those of you who are voting should mark your online ballot on proposal 1 to indicate how you're voting. Proxies submitted with no instructions will be voted in favor of this proposal. The next item of business is to ratify the appointment of Deloitte & Touche LLP as independent auditors for the company for the fiscal year ending January 31, 2021. This item is discussed on Page 33 in the proxy statement. The Audit Committee of the Board, which is -- it is comprised entirely of nonemployee directors, recommended to the Board of Directors that Deloitte & Touche be appointed as independent auditors. The Board approved the selection of Deloitte & Touche for the fiscal year ending January 31, 2021, and is asking the stockholders for ratification of the selection. If the stockholders do not approve the selection of Deloitte & Touche as independent auditors, the Board and the Audit Committee will reconsider the appointment. The Board of Directors recommends that stockholders vote in favor of this proposal, and the proxy solicited by the Board will be voted in favor of this proposal. Barry Shoemake and Sabrina Wang are present from Deloitte & Touche, and are available to answer any appropriate questions that you may have at this time. Are there any questions concerning this proposal? Those of you who are voting should click on the vote here button on the lower right-hand side of the screen and follow instructions there. Proxies submitted with no instructions will be voted in favor of this proposal. The inspector of elections will not accept ballots, proxies or votes or any changes or revocations submitted after the closing of the polls. The polls for each matter to be voted on at this meeting are now closed. No additional ballots, proxies or votes and no changes or revocation will now be accepted. The proxies and ballots will be tabulated by the Inspector of Election. At this time, based upon preliminary information provided by the Inspector of Election, I can report that with regard to Proposal 1, the 2 nominees who received the highest number of affirmative votes were Susan Butenhoff and Russ Mann. Each of these individuals has, therefore, been elected as a director of the company to hold office until the 2023 Annual Meeting of Stockholders or until his or her successor is duly elected and qualified. With regard to Proposal 2, the appointment of Deloitte & Touche to act as the company's independent auditor for the fiscal year ending January 31, 2021, has been ratified by a majority of the shares present online or by proxy. These are the preliminary results of voting. The final results of voting, including any online ballots and proxies recorded during the meeting will be set forth in the report of the Inspector of Election and will be included in the minutes of the meeting. The final results will also be recorded in our reports filed with the SEC. This Annual Meeting of Stockholders is now adjourned. Thank you for your attendance. We will now proceed with our presentation and the question-and-answer period. Our Chairman will now give a report to the stockholders. After the conclusion of his remarks, we will entertain questions. Before we go any further, I would like to note that during the course of the presentation and question-and-answer period, representatives of the company may make forward-looking statements regarding future events or the future financial performance of the company. Such statements are only predictions, and actual events or results could differ materially from those predictions due to a number of risks and uncertainties. I refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's last filed Annual Report on Form 10-K, which was filed on April 14, 2020. These documents contain and identify important factors that could cause actual results to differ materially from those contained in our projections or forward-looking statements. I will now turn over the meeting to Eric.

Thank you, Jenny. [ Paul ], are we projecting the presentation?

Yes, we are.

Okay. I don't see it on my screen, but I can proceed. As Jenny mentioned, this presentation contains forward-looking statements as you can see on the second page of our presentation today. Moving to the third page of the presentation. I'm excited to talk about Ooma's progress over the last several years and where we stand today. We have quite a range of solutions for the market and are serving a quite broad market opportunity. Here on this slide, you see our solutions for residential, for smaller and medium-sized businesses and for larger enterprises. And we're doing strongly in each of these 3 areas. In the middle Ooma Office, that is the fastest-growing part of the company today. Ooma Office is designed for the needs of a small business environment. One of the unique things about Ooma is that we have focused on that segment as its own segment with its own needs and created a solution that we think is ideal for a small business. It is simple and easy to use and install. Customers do not need IT professionals to get up and running with Ooma. And it has so many powerful features that they can sound like a big business at a very affordable small business price. This is an exciting product for us that's growing double-digit growth rates and driving a lot of our overall growth as a company. On the right, Ooma Enterprise is one of the newer areas for the company. Last couple of years, we've entered into the -- this solution. This solution is a full UCaaS solution for the needs of even very large businesses. And in fact, I'm very excited to mention that our largest customer as a company today is over 20,000 users. And having Ooma Enterprise and what Ooma offered to this customer was a key part of being able to secure that opportunity. Ooma Enterprise is unique in the market in its ability to be customized and to fit the specific needs of the businesses we serve. And it's not uncommon for us to work with a business, figure out how their business processes work and to enable special features for them through our Ooma Enterprise platform. That gives us a very significant strength in the marketplace versus others. And then finally, on the left, Ooma Telo. Ooma Telo is very highly ranked by consumers and is a great value in home phone service. It starts off as free, just pay taxes and fees. Although a significant proportion of our customers also take our premium Tier called Ooma Premier and get a whole bunch of advanced features, including call blocking and full use of the mobile apps that work with the solution. These 3 solutions in the market give us a range and the capability to serve just about any customer in the market today. Moving to Slide 4. One thing we're very proud of is the users of our solutions in surveys done by PC Magazine and hereby consumer reports indicate that customers love our solutions. We rank #1 in -- with Ooma Office for business users, and we rank #1 with Ooma Telo for home users. And we think that building our business, it starts with building a great product solution, offering it at great value. And with that, you will keep your customers and be able to get referrals to new customers and that will just help you build your business over time. And we put a lot of work into providing a full solution for our customers to do that. Moving to Slide 5. While, the areas I've talked about so far are our main focus today, our reach extends into several new opportunities almost unique in that we have built our platform end-to-end, including the equipment that customers often use on-site to work with our solution. And by controlling the full platform that way, we can innovate in new areas. And here, you see some of the new things we are doing today. We are partnered with Sprint, who is a reseller of our business solution today. In the bottom left, we have just launched an exciting new product called Ooma Connect. Ooma Connect marries up an enhanced base station with a wireless antenna to provide internet services wirelessly into a business and can be used for backup internet or even primary internet needs. We are great at working with resellers, the customizability of our enterprise solution makes a very nice platform for resellers to brand their own and enable their business with. And finally, in the bottom right, you can see some of the sensors we brought out for Ooma Home Security, which we've been able to layer on, on top of our phone service for residential customers. Moving to Slide 6. There's no doubt this is a massive market opportunity. One estimate out there, as we showed here, is that this is -- market is going to grow to over $18 billion in size as we look out to 2027. And a large number of customers have yet to adopt cloud communication solutions. And so we see a tremendous opportunity for our solutions as we look forward. And all of the recent challenges in our economy with the pandemic and work from home, if anything, I think they help accelerate business and home users' desire to move to the cloud and getting more flexible and workable solution like we can bring to them. So we're quite excited about the long-term opportunity for growth as we look forward. Moving to Slide 7. There are 5 key areas listed here, where we think we have the opportunity to drive significant growth as we look forward. The first is simply that many small businesses have underserved needs. The most sophisticated technology has not been available to small businesses. And we feel with our solutions for small business, we're bringing very advanced solutions to that community of millions of businesses in just the U.S. and Canada alone. 90% of the businesses in North America are 20 users or less. And we think that, that's just a tremendous long-term growth opportunity for us and our solutions. We also see a long-term growth opportunity with larger-sized businesses where we can customize to meet their special needs. And with telecom resellers, as I mentioned a moment ago, who want to enable their own brand solutions, utilizing our platform to do so. We're moving into new adjacent services, such as Ooma Connect, providing internet service alongside phone service. And finally, geographic expansion. We're thrilled that our largest customer who is a customer of ours today in North America, the customer who today has over 20,000 users with us has asked us to pilot with them in a new geographic region, and we're hopeful that, that will lead to a significant opportunity for us to expand geographically as we look forward. All of these are drivers for us as we look forward. Moving to Slide 8. We also have a strong and strengthening financial position. We're very excited about the improvements we've been driving in EBITDA, as you see here. And we are -- we have a solid amount of cash in the bank with no debt. And with significant recurring revenue as a business, we feel like we are financially healthy and well positioned to drive our initiatives. With that, let me say thank you. Those are the presentation remarks I wanted to make. And now let me turn to questions. We'll proceed as follows. We'll begin with a few of the questions that we received in advance of the meeting. We will then take stockholder's questions that are being entered now on the web portal. And please note, we will attempt to answer as many questions as time allows. And with that, I can say -- I will give it another moment. But as of this point, we have no questions brought to us. Give it a second. If anyone wants to put in a question. Okay. Then I want to thank all of you for attending today's meeting and for the interest you have shown in the affairs of your company. We very much appreciate your attendance. And as always, thank you for your support. Thank you.

The meeting has now concluded. Thank you for attending today's presentation. You may now disconnect.