Ooma, Inc.

Ladies and gentlemen, thank you for standing by, and welcome to the UMA, Inc. second quarter fiscal year 2023 financial results call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, please press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press star one. Thank you. Matt Robison, you may begin your conference.

Thanks, Josh. Good day, everyone, and welcome to the second quarter fiscal year 2023 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, Shig Hamamatsu. After the market closed today, UMA issued its second quarter fiscal year 2023 earnings press release. This 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 more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof and we disclaim any obligation to update any forward-looking statements except as required by law. Please note that, other than revenue or as otherwise stated, the financial measures to be disclosed on this call will be on a non-GAAP basis. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures discussed in this call to the most directly comparable GAAP financial measures is included in our earnings press release, which is available on our website. On this call, we will give guidance for the third quarter and full year fiscal 2023 on a non-GAAP basis. Also, in addition to our press release and 8K filing, the overview page and events and presentations page in the investor section of our website, as well as the results page of the financial info section of our website, include links to information about costs and expenses not included in our non-GAAP values and key metrics of our core subscription businesses. These are titled Supplemental Financial Disclosure 1 and Supplemental Financial Disclosure 2. Additional, our investor presentation slides include GAAP to 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 Q2 fiscal year 2023 earnings call. Thank you for joining us. This is an exciting time for UMA, and we have a lot to talk about today. My comments will start with a review of our results and major initiatives and then address our recent acquisition of Onset, which we are also announcing today. Q2 FY23 was a strong quarter for UMA across the board. Revenue of $52.7 million, non-GAAP net income of $3 million, and EBITDA of $4 million all exceeded expectations. In addition, our gross margins increased. with Q2 services gross margin at 74% and Q2 total gross margin, which includes product sales, at 65%. These results are influenced only modestly by our acquisition of onset, which occurred very late in Q2 and added less than $300,000 of revenue to the quarter. Our balance sheet remains strong, with cash at $22.5 million and no debt, after generating $2.2 million of cash from operations in the quarter and also paying to acquire Onsip. Later, when we discuss the Onsip acquisition, I'll review our plans to regrow our cash going forward. As you know, we have several initiatives underway to grow UMA business. For UMA Office, targeted at smaller-sized businesses, we announced just last quarter the launch of our ProPlus tier of service. Like our Office Pro tier, which came before, this is a way for UMA Office to appeal to slightly larger sized businesses and to increase our business ARPU. Close to 50% of our new users in Q2, excluding our growth with our largest customer, signed up for either the Pro or Pro Plus tier. We are now working on the next tranche of several features to add to the Pro Plus tier, with the goal of launching these additional features this quarter. Regarding UMA Enterprise, we made progress on several fronts over the last three months. As planned, we launched modernized versions of our desktop, mobile, and video apps, and of our administrator portal. We also significantly expanded our sales into the hospitality vertical by closing over 25 new properties. We secured a particularly large new UMA Enterprise customer in early August who requires a solution that can adapt to their infrastructure, which is one of the strengths of UMA Enterprise. In Q3, we expect to onboard 1,000 users with this customer and also to install close to 300 UMA Connect devices, one for each of their locations. As we've discussed previously, We are now ramping users with our largest customer in both North America and Europe. We expect this ramp to continue through the balance of this year with the potential to onboard more than the 25,000 additional users we originally planned to add this year. We also believe that further user growth with this customer will continue next year. It's great to see our efforts in full swing now with this customer. One of our most significant new initiatives, which took hold just this last quarter, is of course UMA Airdial. Airdial is our integrated solution to replace aging and expensive copper phone lines that serve specialty equipment, such as fire and security panels and elevator phones that are designed to operate with analog lines. With tens of millions of copper lines now in use in the USA, we believe the market opportunity for Airdial is massive. As planned, we were able to build Airdial units in Q2 and begin making sales. We also engaged with additional strategic partners, including New Horizon Communications and Intelligent Solutions, both of whom separately announced they will start reselling Airdial. And as expected, we are finding that Airdial opens up relationships with new channel partners, which can also benefit UMA Office and UMA Enterprise. I'm pleased to report that our backlog of opportunity for Airdial is significant and growing daily, as we anticipated. We've learned since launching Airdial last quarter that while some customers will install Airdial themselves, others prefer or will require installation assistance. Accordingly, UMA is partnering with a national organization that provides third-party installation services. In addition, some customers tell us it is easy for them to take a phased approach, at least initially, rather than replace all their copper lines at once. We anticipate that these factors will influence the rate of growth for Airdial. We plan to scale internal and external resources over the next couple of quarters to facilitate and accelerate customer onboarding. Lastly, regarding Airdial, I'm thrilled to report that Airdial was chosen by a panel of eight leading unified communications industry analysts as the best endpoint solution for 2022. Airdial received this prestigious UC award among a large field of contenders from the publication you see today. Altogether, UMA Business added 21,000 users in Q2 net of churn. This is an exciting and a substantial increase from prior quarters. We expect to maintain this level of user growth in Q3 as we continue to execute on our key strategic priorities. I would now like to turn to our announcement today that UMA has recently acquired Junction Networks, also known as ONSIP, from Intrado. ONSIP was founded in 2004 and is headquartered in New York City. The company provides UCAS services primarily to smaller-sized businesses located in the USA. Entrato purchased ONSIP just a couple of years ago as a core asset to enable a broader UC strategy planned at the time. However, changes in Entrato's strategic direction led to this opportunity for UMA to acquire ONSIP for $9.75 million in cash. ONCEP is expected to add a little more than $10 million in annual revenues to UMA and to be accretive starting in Q4 of this year. ONCEP operates its own internally developed UCaaS platform that is used today by approximately 5,000 customers comprising approximately 50,000 users. The company provides a high quality and well-respected solution designed primarily for serving smaller-sized businesses. On average, each ONSIP customer is approximately 10 users in size. ONSIP's go-to-market activities span both direct sales and sales through channel partners, with customer referrals also contributing to growth. The company's level of customer churn is low, nearly what Buma experiences today. and ONCEP is known for its high touch and helpful customer support. The company has about 40 employees, many of whom are highly experienced and have been with ONCEP for at least several years. In all these respects, ONCEP represents a solidly performing business that does not require fixing and aligns well with UMA's strategy to be the leader in serving small businesses. Now, obviously, Just from a purely economic standpoint, this is a highly attractive acquisition for UMA. The amount we are spending in this transaction to acquire new users is substantially less than what we currently spend on average via our existing sales and marketing activities. We believe this alone makes this transaction a clear win for us. In addition, we believe we can drive strong profitability at onset. we estimate we can increase ONCIP's gross margin to above 70% of revenue through synergies we bring based on our scale. And given the maturity of ONCIP's platform, we do not anticipate unusual or high expenses to operate the business. As such, our outlook, as mentioned previously, is for ONCIP to be accretive to UMA starting in Q4 of this year. Strategically, We approach spending on inorganic growth opportunistically. In almost all respects, ONCEP lines up perfectly with our criteria for inorganic growth, which include a well-performing business that is operating in the segments on which we focus, is of a size that fits with our business and resources, and which can be purchased for an attractive valuation. Our go-forward plan for ONSIP is to improve the experience for ONSIP users by upgrading them at some point in the future to a more feature-rich solution that takes advantage of capabilities now available in UMA Office. This will take time to implement to ensure a seamless upgrade process for ONSIP users. In addition, to accomplish this, we first need to incorporate into UMA Office certain features now only provided by ONSIP. including basic call center functionality and a wider range of support for IP phone models. By and large, the additional features we will add to Ooma Office to enable Onsip are capabilities that were already on our Ooma Office roadmap. However, with the acquisition of Onsip, we now plan to increase our R&D spending modestly over the next two to four quarters to accelerate development of these features. Accelerating these roadmap items will also help bolster the attractiveness of UMA office to increasingly larger sized customers. Conversely, on the sales and marketing front, we plan to trim our spending modestly over the next two to four quarters. This is for two reasons. The first is to fund the accelerated R&D that we are planning. The second reason is to increase net income and cash flow from operations. Given the depressed state of valuations in our industry, we would like to position ourselves to take advantage of other inorganic growth opportunities in the future should they come along. All in, we expect our realigned spending to result in R&D running at approximately 19% of revenues and sales and marketing running at approximately 30% of revenues for the back half of this year. To summarize, we are excited to achieve the significant increase in users afforded by Onsip. Our primary focus for Onsip at this time is on integrating the team and achieving operational synergies. We're also realigning our spending to establish increased flexibility to take advantage of further industry consolidation. I will now turn the call over to Shig, our CFO, to discuss our results and outlook in more detail, and then return with some closing remarks. Okay.