Ooma, Inc.

Hey, everyone. My name is Kellyanne. I'll be the conference operator for today. At this time, I'd like to welcome everyone to the UMA fourth quarter and fiscal 2023 results conference call. Today's call is being recorded. 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, simply press star 1 on your telephone keypad. If you would like to withdraw your question, please press star 1 again. At this time, I'd like to turn things over to Matthew Robinson, Please go ahead, sir.

Thank you, Kellyanne. Good day, everyone, and welcome to the fourth quarter and fiscal year 2023 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 fourth quarter and 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 Law. 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 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 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 first quarter and full year fiscal 2024 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. Additionally, our investor presentation slides include gap to non-gap reconciliation that also provides resolution of gap expenses that are excluded from non-gap metrics. Now, I will hand the call over to UMA CEO, Eric Stang.

Thank you, Matt. Hi, everyone. Welcome to UMA's Q4 Fiscal Year 2023 Earnings Call. Thank you for joining us. It's my pleasure to talk to you today about our Q4 and FY23 results and our outlook for FY24, including the many growth initiatives we have underway. Q4 FY23 was another strong quarter for UMA. In fact, it was a record quarter. $4.1 million in net income, $5.1 million in adjusted EBITDA, and $3.3 million in cash flow from operations were all records for UMA. Overall for FY23, UMA achieved 24% growth in business services revenue, 12% overall growth in revenue, adjusted EBITDA of over $17 million, and cash flow from operations of nearly $9 million. We ended the year with close to $27 million in cash, ahead of our plans to rebuild our cash position after our successful ONSIP acquisition in late Q2 last year. With positive cash flow from operations, no debt, and several exciting growth initiatives underway, I feel we are well positioned for our new fiscal year 24. Turning now to our progress in Q4, we continue to execute well on our key growth initiatives. For UMA Office, our solution targeted at small to medium-sized businesses, we added features to our ProPlus tier of service. These capabilities included call screening, integration with Zoho CRM, additional call center capabilities, improvements to UMA meetings, and new customer analytics. In FY24, we plan to add more features to Office ProPlus each quarter throughout the year, including further integrations, more advanced call center functionality, and other exciting features. These advances are part of our longer-term strategy to expand the customer opportunity for Office and to increase our ARPU. I'm pleased to say that in Q4, a little over 50% of our new Office users adopted a premium service tier, either Office Pro or Office Pro Plus, which tells us our strategy is working. Regarding UMA Enterprise, we continued our focus on feature development growth in select verticals, and channel expansion. UMA Enterprise once again in Q4 increased the number of new hospitality customer wins compared to prior quarters. New hotel customers spanned independent operator owners of several hotel brands, including Marriott, Hilton, Hyatt, Sheraton, and IHG. We continue to believe our hybrid solution in integration with approximately 80 different hotel management platforms provides a strong differentiation in this vertical. We intend this year to increase our sales and marketing efforts targeted toward this and other key verticals for UMA Enterprise. We also expect to develop one and possibly more new partners for UMA Enterprise as a means of opening up new vertical market opportunities. Turning to our international expansion, we executed as expected given the holidays in Q4. adding more users but at a slower pace than we did in Q3. Currently, we provide service to users in 13 countries and are about to bring on users in nine additional countries, making 22 in total. We anticipate that Q1 of this year will be close to, if not our strongest quarter ever, for bringing on new users with our largest customer. We expect to continue to add more users with this customer through the balance of the year. Starting late spring, we expect to enable services in a new geographic region outside of North America and Europe, and to enable services in additional geographic regions before the end of this year. We anticipate FY24 will be a milestone year for UMA's international expansion, and will position us to broaden our customer base in new markets in the years ahead. In general, for UMA Office and UMA Enterprise, Our marketing and sales efforts during Q4 were hampered a little by end-of-year seasonality, but I'm pleased to say January and now February performed well. All in, we are making good progress, though given the current economy, it is certainly the case that customers are more careful before buying, take longer to make decisions, and sometimes start with smaller commitments. We find we have to work harder in these economic times to get our messages across. But when we do, we continue to see strong customer interest. Switching over now to Airdial, our integrated solution launched just last year replaced aging and expensive copper POTS lines. I'm pleased to say we see significant market opportunity for FY24. We estimate that just in the USA, there are 10 million or more POTS lines serving businesses, that these lines are becoming increasingly costly to customers, and that most, if not all, will be shut down at some point over the next several years. Market awareness of the need to replace these copper pots lines is growing, and large enterprises in particular are starting to awaken to the fact they need a solution. To put this in perspective, just one Fortune 500 company that we are currently talking with needs to replace approximately 25,000 lines across their business. Their situation parallels many large organizations who are trying to navigate a path forward, and in some cases may already be faced with lines suddenly turned off or egregiously increasing costs for their analog line. It's not uncommon for us to engage customers who have hundreds or even thousands of lines they will need to replace. Of course, replacing these lines will be a multi-year process, and many companies today are evaluating their requirements and determining the best path forward before proceeding in earnest. We are also, not surprisingly, seeing the providers of copper pots lines on occasion, particularly for larger customers, delay price increases or delay the sunset of their copper pots lines to provide customers more time. This past quarter, I'm pleased to report we again increased our pipeline of opportunity for Airedial. More importantly, perhaps, I can share that our largest Airdial customer win in the quarter was a company that contracted with us for over 2,600 Airdial lines. We have begun the installation of these lines and expect to have them all in place by the middle of this year. I'm proud to share as well that organizations are increasingly reaching out to UMA to inquire about buying or reselling Airdial. Our goal this year is to establish Airdial as the number one solution for POTS replacement and to increase awareness of Airdial substantially, especially amongst larger customers. Our partnership with T-Mobile is a great enabler to executing our strategy. I'm pleased to report that UMA Airdial is now prominently featured in T-Mobile's new Innovation Center in Atlanta, Georgia. Our strategy for Airdial also encompasses increasing the number of partners who resell Airdial increasing our channel agent and bar representation for Airdial, and over the longer term, selling Airdial outside the USA. Particularly for equipment designed to use an analog line, a solution such as Airdial is essential. We believe Airdial is the strongest solution in the market today, and that our development plans for this year will further our competitive advantage. In particular, our remote device manager capability which gives enterprises the ability to monitor, control, and operate all their lines together from one desktop application, sets us apart from all other solutions that we see in the market. It is difficult to anticipate the speed at which the market will develop for Airdial, in addition to how quickly customers will act to install Airdial across their range of needs, but we are confident this is an exciting opportunity for UMA this year and for years to come. Now on the residential front, where we sell the UMA Telo, we continue to achieve modest growth in line with the level of investment we choose to make. During FY24, we will introduce a redesigned Telo, incorporating a new, lower-cost processor, which could also make possible new Telo features longer term. We will also continue our partnership with T-Mobile for Telo sales and continue our efforts to expand our level of engagement with T-Mobile. As new fiber internet and wireless 5G internet both roll out, we believe new opportunities are created in the market for tele-adoption. We are keen on taking advantage of these opportunities. So altogether, this is an exciting time for UMA. Unlike nearly all our competitors, we have not made any layoffs or reductions in force. Rather, with our strong cash flow and zero debt, we have the flexibility to invest for growth and if the opportunity arises, also to make targeted acquisitions. As we look forward to FY24, we are necessarily mindful of the challenging economic situation and the difficulty we face in predicting the market growth for copper pots lines replacement, but we are also steadfast in our strategy to be the number one provider of communications to the small and medium business segment, to larger enterprises operating in select verticals or with custom requirements, and to the many applications served by copper lines that are sunsetting. I will now turn the call over to Shig Hamamatsu, our CFO, to discuss our results and outlook in more detail, and then return with some closing remarks.