Ooma, Inc.

Good day and thank you for standing by. Welcome to the UMA incorporated third quarter fiscal 2022 financial results. At this time, all participants are in a listen only mode. After the speaker's presentation, there will be question and answer session. To ask a question during the session, you will need to press star one on your telephone keypad. Please be advised that today's conference is being recorded. And if you require any further assistance, you may press star zero. Without a further ado, I would like to welcome your first speaker for today, Mr. Matt Robinson. Sir, the floor is yours.

Thanks, Carl. Good day, everyone, and welcome to the third quarter fiscal year 2022 earnings call of UMA, Inc. My name is Matt Robinson, UMA's Director of IR and Corporate Development. On the call with me today are UMA's CEO, Eric Stang, and CFO, Shig Hamamatsu. After the market closed today, UMA issued its third quarter fiscal year 2022 earnings press release. 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 and presentations page of the investor relations section of our website. This link will be active for replay of this call for at least one year. A telephonic replay will also be available for a week starting this evening about 8 p.m. Eastern time. Dialing 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 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 were fully described in our filings for 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 press release, which is available on our website. On this call, we will give guidance for fourth quarter and full year fiscal 2022 on a non-GAAP basis. Also, in addition to our press release and 8K filing, the overview page and events and presentation page in the investors section of our website, as well as the results page, The financial information section of our website includes 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 and non-GAAP reconciliation. That also provides resolution of GAAP expenses that are excluded from non-GAAP metrics. Now, I will hand the call over to UMA CEO Eric Stang. Thank you, Matt. Hi, everyone. Welcome to UMA's Q3 fiscal year 2022 earnings call. Thank you for joining us today. Q3 was another strong quarter for UMA, and we're excited to talk with you today about our progress and outlook. In Q3, we continued to drive growth across our business. Our key subscription and services revenues increased year over year by 24% for business customers and 4% for residential customers. I'm pleased to report business customers now make up 49% of our total subscription and services revenues and are on pace to exceed 50% in the near future. I'm also pleased to report total revenues in Q3 were up 14% to $49.17 million, and we expect to exit our FY22 fiscal year at a $200 million total annual revenue run rate. We achieved this growth while also exceeding our goals on the bottom line. Q3 non-GAAP net income was $3.3 million. EBITDA was $4 million. And we ended the quarter with an increase in cash to $31 million. All in, Q3 was another strong quarter for UMA, in which we continued to drive growth across the business. Our primary objective, of course, remains to grow revenues from business customers. In Q3, we developed several new UMA Office features, including call analytics, mobile app enhancements for multi-line and three-way calling, Google and Microsoft contacts integrations, and new capabilities to enable easier adoption of Office by larger-sized businesses. Altogether, these feature additions will also help propel the growth of UMA Office Pro, our premium service tier. In Q3... we achieved our highest level so far with 48% of new office users opting for our pro tier. And we exited Q3 with 19% of all office users subscribed to the pro tier, also our highest level so far. This adoption of pro, of course, also helps drive our ARPU, which overall for UMA is up 9% year over year. and it enables us to serve larger-sized businesses who require more advanced features. As we mentioned last quarter, we are currently developing a third UMA Office Tier of Service that will contain even more advanced features and be priced above Office Pro. Internally, we call this Tier Pro Plus, and we are planning to make it available in the first half of next year. During Q3, we added several new office customers that are 30-plus users in size. With UMA Enterprise, we added approximately 150 new locations with a large national brand where we now serve over 2,000 locations. And in our targeted hospitality vertical, we got off to a good start by winning seven new properties. We also increased the number of agents and resellers we work with, and increased our sales of UMA Connect for wireless internet, both for backup and primary service. We believe our solutions resonate in the marketplace, and we continue to focus on driving sales growth along with ARPU expansion. In Q3, we moderately expanded the number of locations we serve with our largest customer by launching service at approximately 30 new locations spread across North America and Europe, plus one location in the Middle East. This month, we are rolling out to several additional locations with the plan to begin larger-scale rollout early next year. It has taken significant effort to get to this point, and we believe we are now quite close to executing our full plan. We continue to see significant opportunity with this customer in North America, Europe, and other regions of the world. On November 1, we made an exciting new announcement about the introduction of UMA AirDial. Airdial is a complete, integrated solution to replace copper lines used by businesses in safety and business-critical applications, such as elevator phones, fax machines, various types of IoT sensors, public safety phones, and building access and alarm systems. We estimate there are millions of copper lines in use for such applications today and believe that providers of these copper lines are both raising prices and making plans to retire them. We also believe the existing alternatives available in the marketplace today are generally expensive and cumbersome to deploy and manage. UMA Airdial brings together UMA's expertise across hardware development, operating large-scale cloud networks, ensuring highly reliable analog voice, enabling centralized device and service management, and integrating wireless Internet via our relationship with T-Mobile to create what we believe is a game-changing new product solution. While Airdial was just recently introduced, we are already experiencing strong customer interest. And finally, on the residential side of our business, I have a very exciting new announcement to make. I'm pleased to announce that T-Mobile will soon offer Umatello to their wireless home Internet customers. As I'm sure you are aware, 5G presents a meaningful new option for millions of Americans to stay connected at home. T-Mobile's 5G home internet service is available to more than 30 million homes across the country with a rapidly growing customer base. Our partnership with T-Mobile will enable consumers to get a great deal on Umatello home phone service when they sign up for T-Mobile home internet. We view this as a terrific extension of our partnership with T-Mobile. I will now turn the call over to Shig Hamamatsu, our new CFO, to discuss our results and outlook in more detail, and then return with some closing remarks.

Shig? Thank you, Eric, and good afternoon, everyone. I will begin with a review of our third quarter financial results and then provide an outlook for the fourth quarter and for full year fiscal 2022. We delivered another quarter with strong financial results, achieving $49.2 million in total revenue, exceeding our guidance range of $47.8 million to $48.5 million. On a year-over-year basis, total revenue grew 14%, driven by the strength of UMA Business. UMA Business now accounts for 49% with total subscription and services revenue, compared to 44% in the prior year quarter, as we continue to make progress towards achieving more than 50% of our subscription and services revenue coming from business customers in the near future. Non-GAAP net income for the third quarter was $3.3 million, which exceeded our guidance range of $2 to $2.8 million. our solid revenue growth and profitability demonstrate the strength of a large and diversified customer base, as well as the increasing scale of the company. Now, some details on our Q3 revenue. Our business subscription and services revenue grew 24% on a year-over-year basis, and residential services revenue grew 4% year-over-year. On a combined basis in Q3, total subscription and services revenue grew just over 13% compared to the same period last year. Subscription and services revenue was $44.7 million, 91% of total revenue compared to 92% in the prior year quarter. During the third quarter, we saw our product and other revenue increase 35% to $4.5 million as compared to $3.3 million for the same period last year. The growth in product sales was primarily due to sales of our fixed wireless products to a strategic customer as we seek to expand our partnerships. Now some details on our key customer metrics. We ended the third quarter with 1,098,000 core users up from 1,063,000 core users at the end of the third quarter last year, driven by the growth in business users. I'm excited to report that we now have 302,000 business users. Our average monthly subscription and services revenue per core user, or APU, increased 9% to $13.24, up from $12.10 in the prior year quarter. driven by an increasing mix of business users, including higher accrued Office Pro users. During the third quarter, 48% of new Office users opted for Office Pro service, which was up from 42% in the prior quarter. Overall, 19% of our Office users have now subscribed to our Pro tier. Our annual exit recurring revenue grew to $174.3 million, and it was up 13% year-over-year. Our net dollar subscription retention rate for the quarter was 98%, which was an improvement from 95% in the prior year quarter. Now some details on our gross margins. Our subscription and services gross margins for the third quarter were 73%, an increase of 100 basis points year-over-year and up 60 basis points sequentially. The improvement in subscription and services gross margins was driven by an increase in scale and a greater mix of higher-up-proof business customers. Product and other gross margins for the third quarter were negative 46%, comparable to negative 46% for the same period last year, but improved sequentially from negative 53% in Q2. This improvement over second quarter was mostly due to the sales of fixed wireless products to a strategic customer I mentioned earlier. On an overall basis, total gross margins for Q3 were 62%, a decrease of 80 basis points from the same period last year due to a higher mix of product revenue during the quarter. And now some details on operating expenses. Total operating expenses for the third quarter were $27.3 million, up $3.2 million, or 14% from the same period last year. Sales and marketing expenses for the third quarter were $14.4 million, or 29% of total revenue, up 16% year-over-year, driven by higher marketing and channel development activity for UMA business. Research and development expenses were $8.4 million, or 17% of total revenue, up 7% on a year-over-year basis, from $7.8 million. driven by investments in new features for both UMA Office and UMA Enterprise, as well as new products such as UMA Airdial, which was introduced just last month. G&A expenses were $4.5 million, or 9% of total revenue for the first quarter, compared to $3.8 million for the prior year quarter. G&A expenses in the prior year included a one-time $300,000 benefit from reversal of certain accruals that did not recur this year. The remaining increase in G&A expenses was primarily driven by higher personnel-related costs and support activities related to overseas expansion. Our non-GAAP net income of $3.3 million resulted in a diluted earnings per share of 13 cents comparable to the 13 cents of diluted earnings per share in the prior year quarter. Adjusted EBITDA earnings for the quarter improved to $4 million, or 8% of total revenue, as compared to $3.6 million for the prior year quarter. We ended a quarter with total cash and investments of $31 million, compared to $27.6 million at the end of Q3 in the prior year. cash generated from operations for the third quarter was $1.9 million compared to $2.5 million in the same period last year. On the headcount front, we ended a quarter with 978 employees and contractors. Now I'll provide guidance for the fourth quarter and full fiscal year 2022. Again, our guidance is on a non-GAAP basis and has been adjusted for expenses such as stock-based compensation and amortization of intangibles. We expect total revenue for the fourth quarter of fiscal 2022 to be in the range of $49.7 million to $50.2 million. The fourth quarter revenue guidance range assumes a similar level of product and other revenue as compared to the third quarter as we anticipate additional shipment of fixed wireless products to the same strategic customer during the quarter. We expect the fourth quarter net income to be in the range of $2.3 to $2.8 million. Non-GAAP diluted EPS is expected to be between $0.09 to $0.11. We have assumed 25.3 million weighted average diluted shares outstanding for the fourth quarter. For four-year fiscal 2022, we expect total revenue to be in the range of $191.5 million to $192 million, an increase from our previously issued guidance range of $188.5 million to $190 million. We expect non-GAAP net income for fiscal 2022 to be in the range of $11.7 million to $12.2 million, up from our previously issued guidance range of $10 to $11.5 million. We expect non-GAAP diluted EPS for fiscal 2022 to be in the range of 47 cents to 49 cents. We have assumed approximately 25 million weighted average diluted shares outstanding for fiscal 2022. 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 our long-term objectives. I'll now pass it back to Eric for some closing remarks. Eric? Thanks, Jake.