Ooma at 45th Annual William Blair: Cloud Communication Focus

On Wednesday, 04 June 2025, Ooma Inc. (NYSE:OOMA) presented at the 45th Annual William Blair Growth Stock Conference, outlining its strategic emphasis on cloud communication services. The company showcased its robust recurring revenue model and discussed plans for operational efficiency. Despite facing challenges, Ooma remains optimistic about future growth.

Key Takeaways

• Ooma reported $259 million in revenue over the past year, marking a 7% increase.
• Adjusted EBITDA rose by 24% to $25 million, reflecting operational improvements.
• The company focuses on underserved markets, like small businesses and hotels, using its AirDial solution.
• Ooma has no debt and is investing in stock buybacks, believing its shares are undervalued.
• The company aims to enhance its adjusted EBITDA margin to 20-25% in the next 4-5 years.

Financial Results

• Revenue reached $259 million, with a 7% year-over-year growth.
• Ooma’s adjusted EBITDA was $25 million, a 24% increase from the previous year.
• The company reported a 72% subscription gross margin and a 63% total gross margin.
• Research and development spending is set to decrease to 15-16% of revenue in the next 1-2 years.
• Ooma spent $12 million on stock buybacks over the past twelve months and holds $19 million in cash with no debt.

Operational Updates

• Ooma’s business segments include residential, small business (Ooma Office), enterprise (Ooma Enterprise), and wholesale (2600Hz platform/AirDial).
• Ooma Office targets small businesses with up to 20 employees, while Ooma Enterprise focuses on hotels and hospitality.
• The AirDial solution is a replacement for copper lines, with over 30 resellers, including T-Mobile and Comcast.
• The 2600Hz platform offers 300 APIs for carriers looking to modernize their systems.
• ServiceTitan is developing new applications on the 2600Hz platform.

Future Outlook

• Ooma plans to continue growing Ooma Office and AirDial, with potential contributions from the 2600Hz platform.
• The company aims to increase its business subscribers, improving gross margins to the mid-70s.
• Geographic expansion and copper line replacement opportunities with AirDial are key growth drivers.
• Ooma targets doubling its revenue in the next 4-5 years.

Q&A Highlights

• Free cash flow is expected to rise alongside EBITDA growth.
• AirDial sales through partners are anticipated to enhance sales and marketing efficiency.
• Marriott has certified Ooma AirDial for its North American properties.
• Ooma is integrating with Clio to target law firms and ServiceTitan for the 2600Hz platform.
• The company is focusing on offering tailored solutions in specific verticals to strengthen its market presence.

For more detailed insights, please refer to the full transcript below.

Full transcript - 45th Annual William Blair Growth Stock Conference:

Arjun Bhatia, Analyst, William Blair: Thanks everyone for joining. Thanks, Eric and Shig, for for coming here. I have to read a quick disclosure. My name is Arjun Bhatia. I’m the analyst here at William Blair that covers Ooma.

For a full list of disclosures, you can go to WilliamBlair.com. And we’re gonna do Eric and Shig are gonna walk through some slides, give a little background of the company. And if we have time left, at the end, we’ll open up to q and a, and we will be in here for the breakout as well. So there’ll be an opportunity to ask questions, after the presentation is done. So without further ado, thank you guys for coming.

I will let you take it away.

Eric Stang, Ooma: Thank you very much. It’s really great to be here, and you saved the best for last at the end of the day. Perfect. Yeah. It’s my pleasure to tell you about Ooma.

I’m gonna go through this relatively quickly so we save time for questions, but I hope you enjoy the presentation. Pardon me. So first of all, our obligatory safe harbor statement about forward looking statements. So wanna make sure we note that. We’re a provider of communication services.

Think about cloud telephone service. UCaaS, sometimes it’s called unified communications as a service. And we bring that technology into four separate segments for the business, and I’ll talk about each of those four segments and what we’re what’s exciting about them and what we’re what we’re doing in each one of them. You know, in general, we like to say that we transform sophisticated technology into elegant, simple communication solutions and make it accessible to everyone. And that’s really part of the art of doing this well.

Not only coming out with great features, but make them making them digestible and making them at a good value. And you put all that together, and I think that’s how you really win in the space. A quick snapshot of Ooma today so you kinda know where we’re at. We’re last four quarters, two hundred and 50 five 259,000,000 in revenue, growing 7% year over year. We did adjusted EBITDA of 25,000,000 over the last four quarters, up 24%.

We have a committed strategy towards growing EBITDA every year, and I think we’re doing a nice job with that. Shig will take you through that. Annual exit recurring revenue, 234,000,000 with a good retention. We’re basically a recurring revenue business at high 72% margins. So there’s a lot of value for us to then take and put back into the business to drive further growth and differentiation.

And that’s how we’re applying most of our capital, but we are also increasingly bringing more to the bottom line as well. We like to talk about our core users. We have over 1,200,000 core users, but that does exclude what we’re doing in some additional areas of business, which I’ll get into as I go through this. And all told, we’re about 1,100 people worldwide. So good size.

No debt. Profitable. Growing. So I mentioned we’re in four segments. This slide encapsulates what I think of as the first two segments of the business.

On the left is our residential product line. This is for, basically, homes that wanna have a great phone service at a very low price. We’re ranked number one by Consumer Reports. And then the two on the right here, small business and larger enterprise, are kind of our business UCaaS solutions. And we focus between those two primarily on the middle, Ooma Office for small businesses.

We like to say we offer small businesses the opportunity to sound like a big business at a small business price. And focusing in on that small business segment with the unique needs of that segment has allowed us to create a lot of differentiation in the market. Small businesses don’t have IT departments. They need to be able to set up and run this stuff simply, but yet still get very powerful features. And we think we put the best package in the industry together.

Our Ooma Enterprise, we focus it in certain verticals particularly, and one of our biggest is hotels and hospitality. We have over 500 hotels in North America today involved with us either for Ooma Enterprise or some other things we do. So, you know, it’s exciting set of capabilities here in these two segments. And, know, to give you a little bit more sense of why why we think it’s exciting, for small business, think about where they’re starting from. They probably have a few probably have a few phone lines coming in the business, and that’s all they have.

With Ooma, they can step up to communicating through IP phones, desktop apps, mobile apps, connect in more ways. They can do calls, but they can also do messages and chats now in their business. They can communicate through video, through faxing. So they’ve got more dimensions involved. And finally, they can set up a whole range of features to enable how they’re contacted, get things recorded, transcribed, connect with their CRM solutions, have their contacts always with them.

It’s just a powerful set of capabilities, which we’re bringing them to from probably just having a few lines into their business. Not only that, but we can usually provide all these capabilities while also saving them saving them money. Overall, as a business, our ARPU revenue per user runs about $15 and change. That’s a blend of Ooma Telo in the $9 and change range and Ooma Office, Ooma Enterprise at a much higher level. But it’s interesting that even at that $15, we can drive 72% recurring margin per user.

And that gives you a sense of how low we’ve gotten our costs in the business. And we put a lot of work into building a very efficient platform so that we can grow very cost effectively and bring the best value in the industry. And we like to think that if we can put the right features together, simple and easy to use, along with great value, that’s how we win. Now all underlying all that is our platform, which we’ve put, fifteen plus years into to create a capability of delivering great voice quality, customized solutions where needed, really great reliability, ease of use, putting it all together in a package. We span everything from one user businesses to our largest customer, which today is over 70,000 users in 32 countries.

And we do it all based on the capabilities we’ve put in into our platform. As I said, you can see at the bottom of this, Consumer Reports ranks our residential solution number one, has for many years, and the readers of PC Magazine. So customers have rated Ooma number one for small business for many years as well. We’re very proud of both of these since these are, you know, external validation of of what we’ve what we’ve built. Looking at the market and where it’s going, we still think that there are many business lines in North America yet to convert to a cloud type solution.

We estimate there are something like 6,000,000 businesses in North America with one to 20 employees, probably half of which have yet to move to the cloud. So there’s a big market opportunity to go after. And Ooma Office, in particular, is focused on on on capturing that as we go forward. Sorry. This slide’s out of order, but doesn’t matter.

So I mentioned there are four segments for the business. I’ve talked about two, residential phone service, small business phone service, and enterprise together as UCaaS. The other two segments are replacing copper lines with a dedicated solution, which I’ll get into, and serving customers with a wholesale platform that they can take and make their own. Now why is each of these important? In the first, there’s, we estimate, 10,000,000 lines in The US alone that are going away.

They’re being shut off, and they’re also seeing their prices go up. And, you know, a lot of those lines go to equipment that doesn’t convert over to a fiber or standard Internet connection. Think about alarm panels, door entry systems, elevator phones, gate phones, you know, call boxes around a campus, fax machines in in hospitals. And all those customers are faced with, what do I do? My copper line’s gotten too expensive.

It’s going away. Well, we have a drop in replacement for that. It’s called Ooma AirDial. It’s a piece of hardware that connects up to our cloud, all custom built and designed to give the customer a way to keep their equipment running. And I’ll talk more about that in a minute.

And then on the wholesale side, there are many carriers and others serving probably 50,000,000 plus users around the world that have built their solutions off of wholesale platforms they’ve gotten from others, particularly BroadSoft and Metaswitch. And those platforms are older. They haven’t kept up with the latest features and capabilities, and we believe those carriers are looking for new solutions. And the 2,600 hertz platform, which I’ll also talk about more in a minute, we think is the ideal solution for the future for wholesale customer needs. But coming back to AirDial for a minute, why AirDial?

These are some of the common applications that I mentioned previously. You know, no one wants to touch their copper lines going into their elevator phones, but they’re forced to. They have to. And so you look at Airdial. You’ve got a product that can sustain the equipment and bring you more advanced features like the ability to manage all your lines from one desktop portal, get alerts when things happen, set up multiple paths of connectivity so that one path might have a problem, the other one kicks in, and the end equipment never knows there was there was a glitch.

These are some of the unique capabilities that that make Airdial special. This is a a key growth area for us. One of the things we’re very proud of is that we now have over 30 resellers signed up in our reselling Airdial in the marketplace, including big partners like T Mobile and our most recent new big partner, Comcast. And Comcast is just rolling out, and it’s really exciting because of the reach they have and the big companies they work with. It really gives us opportunity to bring Airdial into a whole segment of the market that that I think will value it.

We’re really excited about extending our reach and growing faster with those with those partners. We’ve set a goal. Our goal is to get to 300,000 lines on. If we can do that, that’s about a hundred million of additional recurring revenue annually for the business. So it’s big.

2,600 hertz, what’s this thing about? Well, it’s a white label capable solution, but it’s also built in a very modern way with with about 300 APIs in the system, which allows someone who adopts it to make it their own. They can add features, build on it, really implement new capabilities, and that’s exciting. And that’s what makes it the right platform for the future for a carrier who’s looking about looking to make a decision for the long term about where to take their business. And here, again, we think we have a a very big opportunity over the longer term to really win big big partners and customers.

Our biggest accomplishment, which we announced last year, was the announcement that ServiceTitan is building new applications on this platform as a major customer win for us last year. So our go to market is really a little different in each of these four segments, but you can kinda add it up as we have direct sales capabilities, inside sales capabilities. We sell through resells and partners. And even on the residential side, we go through retail. We do a lot of online marketing, but we do some primary advertising.

You’ll hear us on the radio talking about Ooma Ooma Office. And increasingly, we’re working towards geographic expansion, although primarily outside of North America, that’s mainly been with our large largest customer, Regis, who has who I mentioned earlier. So with that, let me summarize and just say small businesses, underserved needs, big markets still to go. Large businesses with customer requirements, that’s where we target Ooma Enterprise, particularly in the hospitality segment. Businesses stranded by copper line sunset, we’ve got a solution.

That’s a market that’s just really developing and will particularly be big over the next five years. Telecom resellers modernizing their platform and geographic expansion. It’s a big future for us with the applications we have today and just leveraging leveraging them for future growth. Now let me turn over to Shig.

Arjun Bhatia, Analyst, William Blair: Excuse me. Ouch.

Shig Hamamatsu, Ooma: Hello, everyone. Thanks for joining the meeting presentation today. I’m just gonna spend a few minutes talking about financial overview and profile in little more detail. So first slide here on the left hand side, we’re showing the annual revenue on a historical basis. So you can see that we did about $257,000,000 of revenue last year in total.

And good thing about about our revenue composition is that 92 to 93% of our revenue is on a recurring basis. So it’s very, very predictable. And so that includes both the subscription revenue on residential and also on business and also includes the new exciting opportunity for Airdial subscription as well. We just reported q one last week or so, which was $65,000,000 of total revenue, again, continue to have a high portion of recurring revenue. This chart shows the composition of business, revenue versus, residential revenue on the left hand side.

So, the key message here is that we have an increasing proportion of business users. And so what that means is that the it not only grows revenue faster because the business subscription revenue is growing faster than residential, but also it possibly impact the gross margin. The the subscription margin on the business subscription subscriber is a little bit higher than the, residential customers. So more, business subscribers we have, the better the gross margin. And, we also have a core users on the right hand chart, which is the underlying number number users for business and, residential.

And, although the the business core users, you can see that we still have a million users, declined just a little bit this past quarter for known reasons. We are the one large customer who has gone through some adjustments, which is behind them. And so we we think we they they stabilized. So, we believe that we’re gonna go back to growth, mode for the core users and recurring revenue in the coming quarters. Here’s the ARPU.

So, ARPU stands for average revenue per user on a monthly basis. And as, Eric mentioned earlier, this is a combined blended, ARPU metric. So it’s 15037¢ in most recent quarter. And business ARPU is running over $23 a month on average and the residential $19. So again, going back to what I said earlier, which is more business users we have, the higher gross margin we can generate because cost structure is a bit similar on a gross margin basis across the two platforms.

We also consistently increasing the annual exit recurring revenue, ARR, and which also speaks to the fact that the we have a high proportion of the recurring revenue every quarter, every fiscal year. And here’s the gross margin. You can see on the left hand side that we have a 72% of the subscription margin and then 63% of the total gross margin. So aside from the subscription margin, we had the product and other gross margin. So that when you blend the two, you get 63% total.

But again, 93%, ninety two % of recurring revenue is generating 72% of gross margin on a consistent basis. On the right hand side, you were showing the roadmap to better gross margin. Again, with the growth of the business subscribers on a recurring revenue, we’re expecting that the higher proportion will continue to have a have the increasing effect on the gross margin overall. So here’s a nice chart showing our trend on the adjusted EBITDA in dollar terms and also the free cash flow we generated on a trading twelve months basis. So as you can see in the last four quarters, we stepped up on both adjusted EBITDA and a free cash flow quite a bit.

We have we have been showing quite a bit of improvement in our operating leverage, particularly for r and d spend. We used to spend 19% of revenue on r and d. Most recent quarter, we reported that we spent about 17%, and we expect we have expectation to get down to get that down to, let’s say, 16% to 15% in the next year or two, mostly because the heavy investment for the growth areas, Airdial or the higher tier service or Ooma Office, those have been already spent in the past. And so now we are being more efficient on our r and d and as we focus on our growth on the top line. That’s how we’re showing operating leverage in addition to the improving gross margin in the coming years.

And by the way, to the extent that we have increased free cash flow quite a bit in the last four quarters, You might ask, what are you doing with the capital allocation? And to the extent that we have opportunity to acquire inorganic growth, typically, what we wanna do is to acquire business, small business user base. We have done that in the past and we have a good template to do that. We typically like to acquire 10 to 10,000,000 to $25,000,000 revenue business user base and because that’s a very cost effective way to acquire and we wanna be very disciplined about the how much we pay for those kind of acquisitions. But that worked well well for us in the past, and we want to repeat that if the opportunity presents.

In the meantime, we’re using free cash flow to buy back stock, And we actually spent about $12,000,000 in the last twelve months to buy back our own stock. This is a quick overview of our balance sheet. So we have $19,000,000 in cash and no debt. And again, we can choose to accumulate cash, but we’re choosing now to buy back the stock. We believe our stock is undervalued.

And so we believe that’s the best way to return cash to investors. We continue to generate healthy cash flow from operations and free cash flow as I said before. Our capital spending is fairly consistent about $1,500,000 a quarter or so on average. So we’re not a CapEx heavy company. And so as we continue to grow further, we don’t think that profile changes, which also allows us to increase the free cash flow as well in the future.

So this is the last slide, but I want to share with you short term and long term financial model. So you can see the Q1 result, but in it’s actually sort of one to three years in midterm column to the second front of right. It’s actually one to two, that’s what we’re aiming for, which is to really get to at the bottom as you see 11% to 14% adjusted EBITDA. We think we can get to almost 11% by the time we get to Q4 this year And they really continue to show the further improvement in our operating leverage, again, in the r and d and maybe some sales and marketing as well in addition to improving gross margin. And that’s how we get to that, you know, close to the mid teens in the next couple of years.

And we also think we’re on a way to get to 20% to 25% and we’ll model to the far right, let’s say four to five years. We want to double the revenue from where we are, from the growth of AirDial, Eric talked about. We think that’s another hundred million dollar opportunity in that in that time frame, four to five years. And that we’re gonna see continued growth in Ooma Office and other solutions, perhaps some 2,600 hertz also adding to this growth to get to double their revenue from where we are, which also means that as we had more business subscribers, as I said earlier, we think we can add to the gross margin recurring margin. So instead of 72%, we see ourselves getting to mid-70s on the subscription margin, which also raises the overall gross margin and the further, operating leverage in every OpEx line you see here to close a gap between, let’s say, mid teens to, 20 to 25%.

So that is a long term, road map on the financial side. And I think that’s the last slide. So thank you very much.

Arjun Bhatia, Analyst, William Blair: Thanks. Any questions? Questions? I got the top. The last on the last slide, just checking on the financial model.

I’m curious how you think about free cash flow conversion as margins ramp and you get a few different kind of, I’ll say, growth drivers. Think that go up, or is it kind of you’d expect them to stay at the current

Shig Hamamatsu, Ooma: This is free cash you’re talking about.

Arjun Bhatia, Analyst, William Blair: Yeah.

Shig Hamamatsu, Ooma: Yeah. I I do think that the free cash would, increase commensurate with the expected growth in EBITDA. And, as I said earlier, we’re not a CapEx heavy company, so that our growth doesn’t require heavy CapEx investment. And also the take example, Airdial. Eric talked about signing up nice partners to resell Airdial.

And the beauty of that is that the partners would do the selling motion, which also means that we don’t have to carry a big sales force to realize that top line growth we have at the Airdial, which allows us to be more efficient on the sales and marketing as well. So I think all these things considered, I do think the free cash flow will will increase commensurate with the growth of EBITDA. Okay. Yeah.

Arjun Bhatia, Analyst, William Blair: And then on your business on your core business side, you’re doing 23% monthly ARPU. What like, how are you is that go to market motion largely inbound and indirect, or do you have salespeople? Like, how are you pushing that making businesses aware that, hey. We have Lumis out here for this. Yeah.

Eric Stang, Ooma: Our our go to market varies a little bit by segment. So if I look at the three segments that make up business, with small business UCaaS, we do a lot of online marketing and inside sales. We do a lot of outreach in different ways to try to get a customer to call us. We have very good conversions when they do. For Airdial, we we obviously sell through resellers, but we do a lot through channel agents.

It’s proven to be a new product category for channel agents. It’s given them additional opportunity. We’ve had good success. And, also, we’ve had special relationships. We announced last quarter that Marriott certified Ooma Airdial for all their properties, and that’s given us a great boost with going after Meridial Airdial at Marriott.

And there’s at least 5,000 Marriott properties in North America, so there’s a a great potential there. When you get to 2,600 hertz, the customer set is more well defined. There’s probably a couple thousand key customers to go after, and we can do that with a a direct sales team and and more direct outreach. Appreciate the questions. Is there anything else?

So let me start by saying we think in the world of cloud communications, you have to pick segments where you can put together the winning package. And if you try to be everything to everybody, you’re really not going to do that well. So that’s why we focus on small business. And within larger business, we pick certain areas like hotels and hospitality that have special needs. So for instance, our hospitality solutions connect up with, many different, hotel management systems.

We’re very good at blending analog phones and rooms with digital phones at the front desk or maybe the the back office. And that’s a a package that the hotels need help with to implement. And so we found good success focusing there, and and and that that focus allows us to be stronger. As we go forward, we are doing more of that. We find even with our small business solution, we’re increasingly targeting it towards certain verticals.

So for instance, relatively recently, we announced an integration with Clio, which is a CRM for for law firms, and that’s given us a nice boost in that vertical. And we do more of that as we go forward.

Arjun Bhatia, Analyst, William Blair: In those partnerships, are you do you go to market together with Cleo and ServiceTitan? Or in ServiceTitan, I think you’re maybe white label.

Eric Stang, Ooma: Yeah. ServiceTitan is just a customer, a white label customer. Sometimes, yes, to some degree more than others. Sometimes, we refer leads to them. They refer leads to us.

Sometimes, even do resell our solutions. It just varies by what the customer finds or or the partner finds best for their business. I think the key for Ooma today, we’ve got a solid business, strong financial balance sheet, and we’re serving big markets. And I I think we’ve got we’ve put a lot of work. I mean, at the height, we were spending 25% of revenue in r and d.

We put a lot of work into building great solutions. And now as we go forward, trying increasingly to focus on capitalizing in these markets. So

Shig Hamamatsu, Ooma: It’s also important to we’d like you other you to understand that we are highly differentiated from just traditional UCaaS solution providers. And particularly when it comes to AirDial, which is a very unique solution on its own and a huge opportunity with a tailwind, copper line replacement. And we also have a 2,600 Hertz, which the other UCaaS providers don’t really have, which a unique platform with with a gives you very flexible and, be able to provide a very flexible solution to carriers and like. So we’re very differentiated.

Eric Stang, Ooma: We hit zero. So I think Yeah. Should call it. Thank you. Thanks for asking questions today.

Arjun Bhatia, Analyst, William Blair: Thank you. Appreciate it. Thanks,

Shig Hamamatsu, Ooma: Thank you.

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