OOMA - OMA: INCREASING NETWORKS IN THE COMMUNICATIONS INDUSTRY
OMA: INCREASING NETWORKS IN THE COMMUNICATIONS INDUSTRY
Ooma, Inc. (NYSE: OOMA) provides leading communications services and related technologies that bring unique features, ease of use, and affordability to businesses and residential customers through innovative software-as-a-service (“SaaS”) and unified communications platforms.
Ooma, Inc. (NYSE: OOMA)
Market Cap: $318.43M; Current Share Price: $12.84
Data by YCharts
The Company and its Products
Ooma offers a range of solutions to suit each business’s needs and personalized support to resolve any issues in deploying and maintaining Ooma services. Ooma Office, Ooma Enterprise, Ooma AirDial, and OnSIP are collectively called Ooma Business.
For businesses of all sizes, the Company delivers advanced voice and collaboration features, including messaging, intelligent virtual attendants, and video conferencing to help them run more efficiently. For consumers, the residential phone service PureVoice provides high-definition voice quality, advanced functionality, and integration with mobile devices.
Below, we’ll discuss in detail why Ooma is worth watching out for.
- Well prepared to benefit from the significant growth opportunity
The Total Addressable Market opportunity available to Ooma is immense, and the Company is already working towards growing its user base in multiple verticals and channels. As shown below, the worldwide unified communications public cloud market is expected to grow from $16 billion in 2020 to $25 billion in 2025, which represents a CAGR of 9%.
Ooma seems well poised to take advantage of this opportunity.
The Company has already created a diverse and growing customer base across various industries through its integrated growth strategy. Its business and residential products are sold through direct channels, retailers, value-added resellers, master agents, and other resellers.
Ooma’s retail distribution includes national and regional consumer electronics, big box retailers, and leading online retailers, including Amazon, Best Buy, Costco.com, Walmart.com, and others. The Company also has strategic partnerships with third parties, such as T-Mobile, enabling them to sell services and products to specific customers.
In other words, Ooma has a well-established sales, marketing, and distribution network that can help it to grow its customer base and sell additional services to existing customers. This way, the Company can drive sales at a low cost of customer acquisition.
Secondly, the Company has a disruptive cost structure which plays a significant role in increasing profits. At the same time, Ooma’s products and offerings provide substantial value and savings, making it highly attractive to new customers.
Through its solutions, Ooma provides high customer satisfaction, which explains the Company’s more than 90% customer retention rate. Moreover, customers have ranked it #1 10 years in a row, placing it above competitors like Google Voice, Microsoft Teams, and Comcast.
Ooma’s popularity among existing customers and exceptional customer service is one of the reasons why it gains new customers quickly. This is also evident because 40% of Telo and 22% of Office customers first hear about Ooma by word of mouth.
Overall, it can be said that Ooma offers a wide variety of solutions that are not only well-loved by existing consumers but also provides the Company with the ability to utilize untapped opportunities.
Some of the Company’s growth drivers include small businesses with underserved needs, large businesses with custom requirements, and telecom resellers requiring their brand solutions. Ooma is also expected to add adjacent services and expand to more geographical areas, which would help it grow by leaps and bounds.
- Consistent financial performance
For the financial year that ended January 31, 2023, Ooma reported total revenue of $216.2 million, an increase of 12% YoY. Subscription and services revenue increased to $199.1 million from $175.9 million in Q4 of fiscal 2022 and was 92% of total income, primarily driven by the growth of Ooma Business and the acquisition of OnSIP.
Adjusted EBITDA was $17.4 million, compared to $15.6 million in fiscal 2022.
Non-GAAP net income was $13.6 million, or $0.54 per diluted share, compared to non-GAAP net income of $12.6 million, or $0.51 per diluted share in the prior fiscal year.
Eric Stang, chief executive officer of Ooma, commented, “For the full fiscal 2023 year, Ooma also delivered 12% revenue growth, with business subscription and services revenue growing 24% year-over-year and residential subscription and services revenue growing 3% year-over-year. We enter our fiscal 2024 year with good cash flow, no debt, and multiple growth initiatives underway designed to drive profitable growth. These initiatives include continued investment in Ooma Office to serve small and medium-sized customers, in Ooma Enterprise targeted at select verticals and customers with custom requirements, in international expansion, and in our new AirDial solution targeted at replacing aging and expensive copper POTS lines.
Ooma’s key metrics, Average Revenue Per User (ARPU) and Annualized Exit Recurring Revenue (AERR) have consistently increased over the last three years, indicating sustainable growth.
Going forward, for the full fiscal year 2024, Ooma expects total revenue from $235.5 million to $238.5 million.
The Company also expects Non-GAAP net income in the range of $14.5 million to $16.5 million and non-GAAP net income per share in the field of $0.55 to $0.63.
Over the mid-term, Ooma’s Non-GAAP target model indicates a Subscription & Services Gross Margin of around 70 – 75% and an overall Gross Margin of 62 – 65%.
The Company follows a consistent growth strategy that includes introducing new features for its solutions to ensure that products remain relevant and valuable, expanding its geographical base to recent locations, exploring new verticals, and entering into new partnerships.
Over the last year, for example, among other things, Ooma introduced new features for the Ooma Office Pro Plus tier of service, grew sales of Ooma Enterprise in select verticals, including hospitality, expanded its user base in Europe in addition to North America, and added T-Mobile as a resale partner for AirDial, the new solution to replace businesses’ aging and expensive copper lines.
In July 2022, the Company also acquired all outstanding stock of Junction Networks, Inc., which does business as OnSIP, a provider of cloud-based phone and unified communications services for small and medium-sized companies in the U.S. In fiscal 2023 alone, this acquisition contributed approximately $6.5 million to the Company’s revenue growth. Going forward, Ooma expects even more synergies to materialize from this acquisition.
Thus, Ooma is currently riding high owing to its high-quality, customizable solutions that consumers love and appreciate. The Company’s products are effective and suitable enough for penetration into and adoption by underserved markets, which should help it to expand to newer locations.
Ooma has shown that it can grow through inorganic means, and any further acquisition opportunities will only enhance its clout and increasing influence in the communications industry. In other words, Ooma seems to have all the elements that are required to take the Company to new heights.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
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Reference:
https://www.sec.gov/ix?doc=/Archives/edgar/data/1327688/000095017023012210/ooma-20230131.htm
https://www.sec.gov/ix?doc=/Archives/edgar/data/1327688/000095017022026294/ooma-20221031.htm
https://s27.q4cdn.com/537618348/files/doc_presentations/2023/04/Investor-Presentation-2023-4-7.pdf