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spk07: Ladies and gentlemen, thank you for standing by and welcome to the UMA, Inc. Third Quarter Fiscal 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today, Matt. Thank you. Please go ahead, sir.
spk08: Thank you, David. Good day, everyone, and welcome to the third quarter fiscal year 2021 earnings call of UMA, Inc. My name is Matt Robison, UMA's Director of IR and Corporate Development. On the call with me today are UMA's CEO, Eric Stang, and CFO, Ravi Narula. After the market closed today, UMA issued its third quarter earnings press release via Business Wire. The release is also available on the company's website, UMA.com. This call is being webcast live and is accessible from a link on the events page of the investor relations section of our website. This link will be active for replay of this call for at least one year. The telephonic replay will also be available for a week starting this evening about 8 p.m. Eastern time. Downloading information for it is included in today's press release. During today's presentation, our executives will make forward-looking statements within the meaning of the federal security 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 in financial periods 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, risks related to the impact of the COVID-19 pandemic, and those risks more fully described in our filings with the Securities and Exchange Commission. The four looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements except as required by law. Please note that, other than revenue or as otherwise stated, the financial measures to be disclosed on this call will be on a non-GAAP basis. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. The discussion of why we present non-GAAP financial measures And a reconciliation of the non-GAAP financial measures discussed in this call to the most directly comparable GAAP financial measures are included in our earnings press release, which is available on our website. On this call, we'll give guidance for fourth quarter and full year fiscal 2021 on a non-GAAP basis. Also, in addition to our press release and 8K filing, the events and presentations page in the investors section, as well as the quarterly results page of the financial information section of our website include links to cost 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 GAAPs and non-GAAP reconciliation, but also provides resolution of GAAP expenses that are excluded from our non-GAAP metrics. Now I will hand the call over to UMA CEO Eric Stang. Eric Stang Thanks, Matt.
spk02: Hi, everyone. Welcome to UMA's Q3 fiscal year 2021 earnings call. Thank you for joining us today. I'm pleased to report that in Q3, UMA continued its strong performance. For the quarter, we grew revenues to $43 million and non-GAAP net income to $3.1 million. Each of these results exceed our plan significantly. Q3 was a record quarter for the number of new business users added. exclusive of a very large customer we onboarded last year. And regarding this large customer, I'm pleased to report that in Q3, we continue to expand by onboarding many of the new sites in North America that we mentioned on our last conference call. Overall this year, the COVID crisis has certainly presented new challenges and caused us to pivot our strategy, for example, to accelerate the launch of UMA meetings and to adapt our sales and marketing. I believe we have responded well to the challenge and I'm optimistic about our outlook. As one example of the progress we are seeing, I'm pleased to report the churn of business users, which increased at the start of the pandemic, is now nearly back to the level we experienced pre-pandemic. I believe this progress positions us well for Q4. Sales and marketing execution is a key element of our strategy this year. So far this fiscal year, we have increased our sales and marketing organization by more than 100 employees and contractors. Our expanding team is, of course, focused on enabling not only direct sales but also channel, retail, and partner sales. I'd like to share some examples of our progress. For the first time, sales to business users through VARs and channel resellers increased represented over 40% of our total business sales. For sales of UMA Enterprise specifically, 16% of our sales were from channel resellers working with us for the first time. We continue to perform particularly well in select verticals and with select profiles of customers. You may recall two quarters ago, we mentioned a large national brand where we had enabled over 900 local independent locations. Now, two quarters later, we enable nearly 1,200 locations with this national brand. We find that the quality of our service delights our customers. One example of this is an UMA customer located in Florida and North Carolina who started with UMA Office for just four users about a year ago. As of Q3, they have grown to over 300 users and rolled out our service across 29 sites in their organization. The adoption rate for UMA Office Pro, our higher-priced, more featured tier of service, is now above 30% for new Office users. This is up from about 25% just a quarter ago. And finally, we have started to incorporate UMA Connect, our wireless Internet service, and UMA Wi-Fi, our managed Wi-Fi service, into our marketing and sales processes. It is still early days as these services were just recently launched. However, we continue to believe they fill a critical need for small business customers and provide us increased leverage to win new accounts. All in, I believe we are executing well on our sales and marketing initiatives. Our strategy is to serve businesses of all sizes, and we are increasingly doing so. For small businesses, we believe we bring unique competitive advantage and are the industry leader today. Our combination of curated features, ease of installation and use, and value set us apart and drive our growth. We are also creating new related infrastructure services for small businesses to provide a more complete solution and greater value. This past quarter, we announced that Frost and Sullivan honored us with their Best Practices Award for North American Competitive Strategy Innovation and Leadership. They commented that UMA is creating its own segment with its managed services strategy, the connected SMB market, and cost-effective communications and network services. It's terrific to see Frost and Sullivan share our vision that small business represents a vast, market opportunity that is underserved and ready for disruption. With larger sized businesses, we are expanding our opportunity through adding features, developing new channel partners, and increasing our reach. Our competitive advantage today is largely built upon our abilities to customize our solution for special customer needs and to support complex customer deployments. Increasingly, we are also differentiating by focusing on the needs of select vertical market segments. With these advantages, we serve both large companies with unique needs and businesses of all sizes and targeted segments. We are confident that we can increasingly differentiate our solution through focus on what we do best. I'll now turn the call over to Ravi to discuss our results and outlook in more detail, and then return with some closing remarks.
spk01: Thank you, Eric, and good afternoon, everyone. First, I want to thank the entire UMA team for their hard work during these times and for helping UMA deliver strong financial results. I'll begin with a review of our third quarter financial results and then provide our outlook for the fourth quarter and for full year fiscal 21. We once again delivered a strong performance, achieving $43 million in total revenue and exceeding our previously issued guidance range of $41 million to $41.8 million. These results were driven by strong market demand for our cloud communication services, as well as solid performance from a number of our sales and marketing channels. Total revenue growth was once again led by Uma Business, which now accounts for 44% of total revenue, compared to 42% in the prior year quarter. Net income for the third quarter of fiscal 21 was $3.1 million, which exceeded our previously issued guidance range of $1.7 million to $2.2 million. This strong profitability was primarily due to the growth of UMA business and also stems from lower employee-related expenses and reduced travel while employees are working from home. Now some details on our Q3 revenue. This quarter, Business subscription and services revenue grew 17% on a year-over-year basis. Normalizing for the effect of non-recurring installation activity from our large customer in the same period last year, we achieved 21% growth in business revenue this quarter compared to the same period last year. Residential revenue grew approximately 2% year-over-year, which was in line with our expectations. On a combined basis in Q3, total business and residential subscription revenue grew 9% compared to the same period last year. As a percentage of total revenue, subscription and services revenue was 92%, which was similar to the last year quarter. Product sales for the third quarter were strong, with product and other revenue of $3.3 million, up 7% year over year. During Q3, we saw improvements in order activity from our direct customers as well as from our VARs and reseller partners. Additionally, we saw an increase in residential product sales to brick and mortar stores in preparation for the holidays. Here are some details on our key customer metrics. We are very pleased with the growth of our total core users in the third quarter, especially the sequential acceleration of UMA business. At the end of the third quarter, we had 1,063,000 core users, up from last year's third quarter's 1,038,000 core users. 24% of these core users were business users, compared to 21% for the same period last year. Our average monthly subscription and services revenue per core user, or ARPU, increased 9% to $12.10, up from $11.13 the prior year quarter. We are pleased with this ARPU growth, driven by a higher mix of business revenue, as well as from new service offerings like UMA Office Pro. Our annual exit recurring revenue grew to $154.3 million and was up 11% from the third quarter of fiscal 20, driven by growth of ARPU and business users. Our net dollar subscription retention rate was 95%, Similar to the second quarter of this fiscal year, we see continued improvements in our customer churn for UMA business and have now seen stabilization in our churn for residential customers. Now some details on our gross margins. Our subscription and services gross margins continue to trend higher and were 72% in this quarter, up from 71% for the same period last year. These higher gross margins were driven by economies of scale and a greater mix of higher ARPU business customers. Product and other gross margins for the third quarter were negative 46% compared to negative 36% for the same period last year. This is mostly due to increased promotional activities in the quarter. On an overall basis, total gross margins for Q3 were 63% and increase of 30 basis points from the same period last year. driven by improvements in subscription and services gross margins. And now some specifics on operating expenses. Total operating expenses for the third quarter were $24 million, down $800,000, or 3% from the same period last year. Sales and marketing expenses for the third quarter were $12.4 million, or 29% of total revenue, up 1% year-over-year, and up 13% sequentially, as we added more sales resources and expanded our marketing program. We are pleased to see improvement in sales productivity given the changes we took this year and that gives us confidence to continue investing in sales and marketing activities for future growth while staying profitable. Research and development expenses were $7.8 million or 18% of total revenue down 11% on a year-over-year basis from $8.8 million. This decline in R&D expenses resulted primarily from cost savings associated with the discontinuation of the SmartCam in October 2019. Given the market evolution, our primary focus for R&D is to continue to add new features and integrations for both UMA Office and UMA Enterprise solutions, which we expect will yield continued strong growth in UMA business users and ARPU. GNA expenses were $3.8 million, or 9% of total revenue for the third quarter, and comparable to the prior year quarter. During the quarter, we had one-time credits of approximately $300,000, which are not expected to repeat in the future. Our net income of $3.1 million resulted in a diluted earnings per share of 13 cents compared to a one-cent diluted earnings per share in the prior year period. This greatly improved profitability was driven by a number of factors, including higher revenues, economies of scale, and lower employee-related expenses due to the current work-from-home situation. For the third quarter of fiscal 21, adjusted EBITDA earnings improved significantly to $3.6 million or 8% of total revenue versus $600,000 for the prior year quarter. For the nine months of fiscal 21, our EBITDA earnings were $10.4 million compared to an EBITDA loss of approximately $400,000 for the same time period last year. We ended the quarter with total cash and investments of $27.6 million with no debt, and up sequentially from $25.3 million at the end of the second quarter. Cash generated from operations for the third quarter of fiscal 21 was $2.5 million compared to $600,000 of cash used in operations in the same period last year. Additionally, during the third quarter, we generated $1.7 million of free cash flow. Now some details on our fourth quarter and full year fiscal 21 guidance. Again, our guidance is non-GAAP and has been adjusted for expenses such as stock-based compensation and amortization of intangibles. We have been successful this year in adapting our sales and marketing activities to address this COVID disruption. Should conditions become more severe, execution could be more challenging. We expect total revenue for the fourth quarter of fiscal 21 to be in the range of $43 million to $43.8 million. We expect fourth quarter non-GAAP net income to be in the range of $2 million to $2.6 million. Non-GAAP diluted EPS is expected to be between $0.08 and $0.11. We have assumed 24 million weighted average diluted shares outstanding for Q4. For full year fiscal 21, we expect total revenue for fiscal 21 to be in the range of $167.7 million to $168.5 million. an increase from our previously issued guidance range of $163 million to $164.5 million. We expect non-GAAP net income for fiscal 21 to be in the range of $10.6 million to $11.2 million, up from our previously issued guidance range of $8 million to $9.5 million. We expect non-GAAP diluted EPS for fiscal 21 to be in the range of $0.45 to $0.47, we have assumed approximately 23.6 million weighted average diluted shares outstanding for fiscal 21. In summary, we are very pleased with our strong performance in our third quarter, which demonstrates strength in our execution while we make progress towards a long-term strategy. I'll now pass it back to Eric for some closing remarks. Eric?
spk02: Thanks, Ravi. Looking forward, We believe the significant investments we have made and continue to make today set us apart from others. Key to our strategy is the unique vision we take of the market, which includes small businesses having different needs from larger businesses. Also key to our strategy is the end-to-end platform we have created to enable both superior quality and superior value. Communications is a disruptive new service with a vast market opportunity. We believe our strong focus on execution will power growth in all areas of our business. At this time, our priorities are to expand our marketing and direct sales, build our reseller community, secure new wins for UMA Enterprise with larger customers, and add to our product and feature differentiation. I'm confident we are poised for a successful Q4 and well-positioned to execute in the coming next fiscal year. Thank you, and we'll now take questions.
spk07: As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Mike Lattimore with Northland Capital. Your line is open.
spk10: Great, thank you. It was all so great there.
spk05: Thank you.
spk10: So I guess I just want to make sure I got this number right. Did you say you increased the sales and marketing headcount 100% or what was that referring to?
spk02: We said since the start of the fiscal year, we've added over 100 personnel to sales and marketing.
spk10: Okay, I got it. And what kind of percent increase did that mean?
spk01: It's We have gone up by roughly 25% to 30%. Okay. Since the start of the year. Since the start of the year, yeah.
spk10: Okay. Great. And then on the increasing channel activity, do you attribute that to just sort of getting farther away from the start of COVID, or what do you attribute the increased channel activity to?
spk02: Just hard work execution. All right. You know, to build that community, you really need to get involved and take the time to develop the relationships and the capabilities, and we've just been investing that all along here for a while now.
spk10: Okay, got it. And then just two financial questions. Gross margins look like they're really strong. What was the reason for that? And is that sustainable on the subscription side? And then how much revenue came from Takatom?
spk01: So yeah, gross margin side, I'm pretty very happy with the gross margin on the subscription services side. And I think as we continue to add more business customers, we get north of $20 per user. If a customer has 5, 3, 5, 10 users, they are a very highly profitable customer for us. So as we continue to add more business customers, that drives our subscription services gross margins higher. And then we launched UMA Office Pro also at the start of this year. And that's for $5 a month per user more. And that also helps with improving our gross margins. I think that is sustainable. As we continue to add more and more business users, we should see continuous improvement in gross margins. Top of the term revenue contributions for the quarter were around $1.2 million, which was higher than what was in Q2.
spk10: Okay. Great. Thanks, Mike. Thanks, Mike.
spk07: Your next question comes from the line of Josh Nichols with B Reilly. Your line is open.
spk03: Yeah, thanks for taking my question, and great to see such strong performance on the top and the bottom line despite some of the early pandemic headwinds. Thank you. I'm looking here. I'm kind of curious, like, what's the split, if you could break it out today, between on the business side, enterprise and UMA Office Pro, or how is that expected to kind of trend in the future, if you could elaborate on that a little bit?
spk02: Yeah. Well, UMA Enterprise is much smaller than UMA Office, so we target a higher growth rate there. But both are part of our strategy, I guess I'd say. And, you know, Office Pro is we're up over 30% of new customers adopting Office Pro. And we think that we can even push that farther as we go forward. So it's become an increasingly important part of our business. We just launched UMA Meetings, which we're very excited about. It's got some special features, including really great voice quality and the ability to share multiple screens at once. It's included in UMA Office Pro for no additional charge. So it's a brand-new capability now for us to even drive more adoption of UMA Office Pro.
spk01: Hey, Josh, if I may just add in to your first point. Rather than breaking out revenue between UMA Enterprise versus UMA Office, in the last earnings call, I had mentioned I would just remind you of that one. When we look at our size of customers, for customers with greater than $10,000 of annual recurring revenue, we have set off the UMA business customers around 20% of those are giving us more than $10,000 in ARR. That includes a large number of customers from UMA Enterprise as well as from UMA Office, which are more than $10,000 ARR. So that number has been progressing and improving over the last number of years. And I think given our sales and marketing channels, resellers, channel bars, we do believe that number will continue to grow in the future. Hopefully that helps.
spk03: Yeah, definitely. Thanks. That helps quantify and just to hit on your point, Eric, um, you've seen some really good adoption for office pro and now also with video collaboration that the company just released. I know it's early, but I would expect that there could be a very high demand that could kind of accelerate the office pro subscription adoption. And while also doing that, help you guys get back. So your net dollar subscription retention revenue of, you know, 100 or possibly higher than that as you continue to add subs on that. Is that your expectation based on, you know, what you've been hearing about this early offering?
spk02: It is indeed. I mean, we aren't stopping either with UMA meetings. There will be additional things to come that get added into UMA Office Pro as we go forward that will make it even more attractive. And at some point, and I'm not trying to single anything immediate, but at some point, I'm sure we'll even have higher tiers of capability beyond Office Pro. So it is our long-term strategy to build more capability and features into these premium offerings and drive the adoption of them.
spk03: Thanks. And then last question for me, then I'll pass it and hop back into the queue. Ravi, you mentioned it seemed like a very good number of the company's business subs have this $10,000 or more of ARR. Are you seeing a little bit more success on that front, or how should we think of the company's blend of really smaller business customers versus some of these larger customers trending with the higher ARR amount that you're getting with some of these customers and the large deployments that you've seen?
spk01: Yeah, Josh, we are focusing on small and larger businesses. We are not just focusing on bigger businesses with more than $10,000 ARR. We are happy to get an accountant's office, dental office, as well as main street businesses, and we are seeing very good success with that. Along with that, UMA Enterprise, UMA Office Pro, some of these things, VAR channels, they do bring in larger businesses. The example which Eric mentioned earlier in his prepared remarks about We started Ooma Office with one customer in Florida with four users. Now there are more than 300. Those things are driving. So because of our features, because of the need for the cloud communications, I think we are seeing customers with larger size and footprint also adopt our solution. So I think we are focusing on all of those, but I feel given the depth and breadth of our solution, we will continue to see. bigger customers also adding more and more to our data, to our portfolio.
spk03: Thanks, guys. I'll hop back to the queue.
spk01: Thanks, Josh.
spk07: Your next question comes from the line of Brian Kingslinger with Alliance Global. Your line is open.
spk06: Great. Thanks so much. You mentioned this quarter for additions, which were very strong for business subs, or one of the strongest in the history, if you exclude your large customer that added last year. As you look at this quarter's additions, I was hoping you could characterize the concentration. Did it come from just a handful of customers, including your largest customer, at least a high concentration, or was it very broad-based?
spk02: No, we had a very good quarter across the board. Even e-commerce was up nicely for us sequentially. And as I mentioned in my remarks, we've expanded the portion of our business going through channel resellers. We were about a third of our business previously, and we're now up over 40% of our business, new business. And just, you know, all of the activities we're doing, we feel good about them. They're all working and part of our strategy to grow from, you know, many dimensions. So, no, it wasn't just that large customer. Although with that large customer, you know, we talked a quarter ago, we secured an additional opportunity this fall, and it's – rolling out to a large number of locations with a very limited service to start with the hope that down the road we can expand that further. But a great, you know, next step for us with that customer as well.
spk06: Great. And that might help answer the next question I've got. As I look at the number of subscribers on the business side, sorry, the revenue per business subscriber range, it's inched down each quarter. Now it's just, you know, 5 cents here, 10 cents there sequentially. But I guess I would have thought that with the addition of Office Pro, as well as a number of other add-on features, that this would start to marginally increase. So maybe talk about, again, it's small, but talk about the trajectory of revenue per sub from a business standpoint and how you see that going forward.
spk01: Yeah, Brian, I'll take this. This is Robbie here. we actually are seeing our ARPU or business subscribers or business users go up steadily over the last number of quarters and years. So it is improving, and we can help you explain. I think it's just as Office Pro and other solutions come in, the ARPU from each business user is going up. The only caveat I would say is as the large customer comes into play and they add in a lot of seats, you might see one quarter something we added more users. At the end of the quarter, we might not have demonstrated all revenue. So there might be some quarter end activities you might see, generally speaking, but otherwise we are seeing, if I look at my ARPU for each business user, it has been trending up.
spk06: Great. Okay, thank you.
spk01: Thanks. Thank you.
spk07: The next question comes from the line of Matt Stottler with William Blair. Your line is open.
spk09: Hey, Eric, Ravi, and Matt. Thank you for taking my questions. First one, I'll just ask, you know, one more on the partner channel. Obviously, there's been a lot of news around the partner effort this year and, you know, some impacts from, you know, strategic moves in the market, some impacts from the situation during COVID. Obviously, it seems like, particularly in Q3, there's a lot of strength in that partner channel, something you guys have talked about. So I'd love to just double-click on that, maybe talk about, you know, on one hand, the pipeline of new partnerships, whether, you know, the number of new partners or the velocity there, and then maybe also comments on the recovery and the existing channels that maybe were a little more beaten up, you know, in kind of the Q1, Q2 timeframe. And then I'll follow up.
spk02: Sure. I hope I'm getting at what you're asking here. You know, at the start of COVID, when the economy really locked down hard, some of these more face-to-face channels were affected negatively for us. We bounced back from that nicely. In fact, as we talked about on the call here already, we've expanded with that. We do have a long-term committed program to build our relationships with the reseller community. And that's something that we are, you know, relatively new for us compared to others that use those channels. And I think we can bring some special advantages and we're, you know, investing in that. And we will continue to invest it. I expect it to continue to expand for us out over the, you know, foreseeable future due to the effort we're putting in on that front. Yeah, it's a real positive area for us, but then all parts of our business are pretty positive in terms of if you look at the different sales and marketing channels we use. I do think COVID has woken up businesses to the need for better solutions than what they may have had. And I've also, I don't know how much this is affecting us. It's really hard to measure it all directly, but we are seeing a lot of new business creation. today. And our solutions are so ideal for a small business getting started. We think we're very well placed for the market and where it's going.
spk09: Got it. That's helpful. And then just a quick follow-up in terms of how we're thinking about investments going forward. Obviously, there's a lot that you're investing in in terms of the go-to-market, direct channel, continued innovation, R&D front. But as we look back through the first three quarters of this year, there's clearly been some cost savings from COVID, maybe also some efficiencies that will stick around. So as we think about the proliferation of a vaccine and kind of moving back to whatever the new normal looks like, how should we be thinking about, you know, kind of relative OpEx levels and, you know, where we might see some, I guess, sustainable efficiencies and where we might expect for, you know, spending to expand on a percentage of revenue basis?
spk02: Yeah, let me start with that, and then I'll pass it over to Robby to give a little bit more of an outlook answer to the question. Even though we've been investing significantly, our sales and marketing percent of revenue was 29%, I believe. And I can easily see us doing more there to grow faster. That's interesting. It doesn't need to be that low for us to be successful. We're also thrilled that we had given guidance at the start of the year that we would be cash flow positive for the year. We've already achieved that now through three quarters, which I think shows we're ahead of plan on that front as well. But we're going to invest prudently. That's the way we've always run this business. We're going to invest where we know the growth is possible, and we're going to do it in a way that we maintain a strong balance sheet and, you know, don't try to get ahead of our skis too far, if I can say it that way. Let me turn to Ravi, though, to see if he wants to add.
spk01: Just one thing. We had – Matt, we have added – A year ago, nine months ago, we added in our investor deck a midterm target model, which was one to three-year target model, where we said we would want to achieve 5% EBITDA as a percentage of revenue. And we are at that level. So I think that thing has not changed, even with COVID or not. We do intend to stay around 5% of our revenues for the adjusted EBITDA side. We are today at 8%. Some of those you can attribute to lower travel expenses, some of those. But our goal is as we get more scale, we get higher gross margins, we get more scale for R&D, G&A, you would want sales and marketing to go up slightly while we're maintaining our 5% or so EBITDA margin.
spk09: That's helpful. Thanks again, guys. Thank you.
spk07: Your next question comes from the line of Joe Goodwin with JMP Securities. JMP Securities, your line is open.
spk05: guys thank you so much for taking my question uh congrats on the results uh on the large customer and the expansion you said you expanded or started onboarding um many of the new sites um for the north america uh segment kind of how far along are you there and then also is there any update on uh the potential of the international expansion with that same customer thank you yeah um so
spk02: We accomplished about half of what we need to do this fall in Q3, and the remaining half is still to go in Q4 in terms of what we're doing in North America. In terms of expanding the new geographic areas, I think we have a great solution for that, and I believe the customer would like to move forward with us at some point. You know, COVID has created some challenges to work through, but I believe that we will eventually get back to that kind of development with this customer that we had talked about previously. I hope to be able to give you more guidance on that at the end of Q4 when we're talking about our plan for next year. Understood. Thank you. Thank you.
spk07: Your next question comes from the line of Matthew Harrigan with Benchmark. Your line is open.
spk11: Thank you. Two questions. Firstly, I think one of your points of differentiation is the ready portability of your services from the business location to the residence. And clearly with COVID, even if it magically went away tomorrow, I think there's been a permanent change in the template that most businesses are looking at in terms of the working-home component versus people going into the office. Can you talk about how that accrues to your benefit? And then, secondly, Wi-Fi, you know, particularly at the SPTE show a number of weeks ago now, a lot of excitement over some of the new iterations, you know, Wi-Fi 6 and all that, in terms of how robust the signal is and the capacity. Can you talk about your efforts on, you know, the front line of... Wi-Fi in terms of meeting at the current level of innovation at some of the large cable companies and such. Thank you.
spk02: Sure. So on the first, I think you're absolutely right that the trend towards work from home drives customers towards a more flexible solution. And certainly a cloud solution like ours and some of the specific things we enable in our solution work great for that. I do think that The trend is bigger for us, though, in the sense that just any business that now needs to, you know, take orders by phone that they didn't used to take or set up new kinds of ring groups and IVRs and, you know, enable other key capabilities to work, you know, work from anywhere and things like that. These are things that the cloud has always been able to do better than fixed solutions. And businesses are increasingly seeing the need for that flexibility, even just in running their business, even if they're back in the office, to be frank. So I think these trends are here to stay. I agree with you. I think that customers are looking for new solutions. I think we bring a credible combination, as we talked at the outset, of flexibility. capability and ease of use and value that really appeals to a lot of businesses. So, yeah, we're definitely working to take advantage of that as we go forward. In terms of Wi-Fi, we launched our Wi-Fi solution just a month or two ago now, really. and are just getting going with it. But it's a very high-end solution. We've partnered with Xtreme Networks to enable what we do in managed Wi-Fi for customers. And I have every confidence Xtreme is going to stay on the forefront of the industry and we'll stay there with them. You know, what we're really doing with managed Wi-Fi is it's part of a package for our smaller customers that includes – UMA Connect for internet or backup internet service and UMA phone service to be able to just provide a more complete infrastructure solution and do it all for the customer without the customer having to do a lot themselves or hire expensive specialists to do it. I think it differentiates us more in the market as well because we can bring what you sense is kind of like a double-play or triple-play solution to that customer if you want to think of it that way. It's very nascent for us, and I can't say that we've implemented much yet from a sales and marketing perspective to really integrate all this together into the you know our our activities but we're going there and and we really believe we're on the right trend uh with what we're doing uh to you know for these small businesses small businesses are underserved the technology isn't there for them it's expensive for them and the most um modern technology i should say and uh we're able to do that in a in a managed way um to really improve their the capability they have um so i hope that addresses what you've asked and
spk11: Yeah, actually, as an adjunct on the first question, though, would you say that some of your larger competitors might be perceived or actually be a little more rigid in terms of just allowing the ready portability of the full service from the business location to the home? Because I had the impression that you were a little bit quicker and easier on that than some of the guys who were more focused toward the very largest businesses.
spk02: You know, that may be. I think you have to speak specifically about, you know, certain solutions in the market and what those companies are trying to do. I can tell you that I don't think it gets any easier than what UMA has done. We'll ship you a pre-activated, ready-to-plug-in-and-use IP phone that you can plug in at home. And it'll run, you know, just on your room of service like your one at the office does. You know, that's just one small example. Our desktop apps and our mobile apps are very, very strong. And you can use them anywhere that you're plugged in. And we even offer, you know, wireless solutions. And we offer solutions based on DECT if you don't, if you prefer to run off of our base station. There's a lot of flexibility there. Even with Umatello, which is our residential solution, we find a number of customers are getting it to have a second line in the home, and they like getting our desk-style, more business-type phone to go with it for maybe a home office or whatever they're doing at the home now. So there's just tons of flexibility, and we certainly market those capabilities in the market.
spk11: Thanks, Eric. Robbie, great quarter, obviously. Thank you.
spk07: Again, if you would like to ask a question or a follow-up question, press star 1 on your telephone. Your next question comes from the line of Kevin McVeigh with Credit Suisse. Your line is open.
spk10: Hey, I wonder, Robbie or Eric, if you could just frame out
spk04: the retention numbers. It sounds like you had a little bit of improvement on both sides, just kind of where they are and where you hope to get them to.
spk01: Yeah, Kevin, this is Ravi. We have 95% net dollar retention rate, but what we have seen lately in Q3 is our churn has improved. Eric mentioned that for the business side, we are clearing pre-pandemic churn rates for business. Residential, we have seen more stabilized in Q3. So I do feel going forward some of those metrics are going to help improve not only our churn rate but also retention rate as well as hopefully revenue. So I do feel more positive going into Q4 versus what we have seen in three months or six months ago. and then just to follow he mentioned about 300 000 one-time credits if you said what they were i apologize but could you just help us understand what they were in the quarter yeah they were they were reflected in gna expenses and these are sometimes you would have certain expense expectations uh and we we accrue we are on an accrual basis so we had expense expected and accrued some expenses in the past, which we found out we were able to negotiate and find out we don't have those expenses going forward. So that's why we ended up reversing those $300,000 in G&A expenses. The reason I highlighted one is it did improve my profitability in Q3, but also the normal run rate of expense for G&A would be slightly higher than what you see in Q3.
spk04: So that was something, Ravi, that wasn't factored into the guidance when you said it at the end of last quarter, correct?
spk01: Yeah, until it's fully baked in, like in terms of what will happen. There's always sometimes negotiations, sometimes just full understanding of those things. So it came in as a, I would say, it wasn't totally not unknown to us, but it wasn't definitely, there were certain thoughts, certain reviews we had to do and we were able to close that valve in Q3.
spk04: Understood. Thank you.
spk01: Excellent. Thanks, Kevin.
spk07: There are no further questions at this time. I will turn the call back over to Mr. Stang.
spk02: Well, great. Just thank you, everyone, for joining us today. We appreciate your interest in the company, and we're working hard to close out a great year and continue be positioned well for next year. So thank you.
spk07: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
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