10-Q
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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2023

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-37493

 

 

Ooma, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Delaware

06-1713274

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

525 Almanor Avenue, Suite 200, Sunnyvale, California 94085

(Address of principal executive offices)

(650) 566-6600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.0001

OOMA

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes No

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large Accelerated Filer

Accelerated Filer

 

 

 

 

Non-Accelerated Filer

Smaller reporting company

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. Yes No

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes No

As of August 31, 2023, there were 25.6 million shares of the registrant’s common stock outstanding.

 

 


 

TABLE OF CONTENTS

 

Page

PART I. FINANCIAL INFORMATION

 

Item 1.

Financial Statements (unaudited):

3

Condensed Consolidated Balance Sheets

3

Condensed Consolidated Statements of Operations

4

Condensed Consolidated Statements of Cash Flows

5

 

Condensed Consolidated Statements of Stockholders’ Equity

6

Notes to Condensed Consolidated Financial Statements

7

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

17

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

26

Item 4.

Controls and Procedures

26

PART II. OTHER INFORMATION

 

Item 1.

Legal Proceedings

27

Item 1A.

Risk Factors

27

Item 2.

Unregistered Sales of Equity Securities, Use of Proceeds, and Issuer Purchases of Equity Securities

57

Item 5.

Other Information

57

Item 6.

Exhibits

57

Signatures

 

59

 

Ooma | FY2024 Form 10-Q | 2


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

OOMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands)

 

 

July 31,
2023

 

January 31,
2023

Assets

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash and cash equivalents

 

$

28,979

 

$

24,137

Short-term investments

 

 

495

 

 

2,723

Accounts receivable, net

 

 

8,612

 

 

7,131

Inventories

 

 

22,806

 

 

26,246

Other current assets

 

 

14,508

 

 

14,368

Total current assets

 

 

75,400

 

 

74,605

Property and equipment, net

 

 

9,253

 

 

7,996

Operating lease right-of-use assets

 

 

16,129

 

 

12,702

Intangible assets, net

 

 

9,030

 

 

10,463

Goodwill

 

 

8,655

 

 

8,655

Other assets

 

 

17,722

 

 

16,584

Total assets

 

$

136,189

 

$

131,005

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

Accounts payable

 

$

12,505

 

$

13,462

Accrued expenses and other current liabilities

 

 

22,379

 

 

26,726

Deferred revenue

 

 

17,391

 

 

17,216

Total current liabilities

 

 

52,275

 

 

57,404

Long-term operating lease liabilities

 

 

12,692

 

 

10,426

Other long-term liabilities

 

 

17

 

 

31

Total liabilities

 

 

64,984

 

 

67,861

Commitments and contingencies (Note 11)

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

Common stock

 

 

5

 

 

5

Additional paid-in capital

 

 

203,703

 

 

195,605

Accumulated other comprehensive loss

 

 

(5)

 

 

(23)

Accumulated deficit

 

 

(132,498)

 

 

(132,443)

Total stockholders’ equity

 

 

71,205

 

 

63,144

Total liabilities and stockholders’ equity

 

$

136,189

 

$

131,005

 

See notes to condensed consolidated financial statements

 

Ooma | FY2024 Form 10-Q | 3


 

OOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, amounts in thousands, except share and per share data)

 

 

Three Months Ended

 

Six Months Ended

 

 

 

July 31,
2023

 

July 31,
2022

 

July 31,
2023

 

July 31,
2022

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Subscription and services

 

$

54,726

 

$

47,995

 

$

107,775

 

$

94,718

Product and other

 

 

3,627

 

 

4,658

 

 

7,430

 

 

8,272

Total revenue

 

 

58,353

 

 

52,653

 

 

115,205

 

 

102,990

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

Subscription and services

 

 

15,456

 

 

12,675

 

 

30,181

 

 

25,884

Product and other

 

 

6,309

 

 

6,161

 

 

12,484

 

 

11,337

Total cost of revenue

 

 

21,765

 

 

18,836

 

 

42,665

 

 

37,221

Gross profit

 

 

36,588

 

 

33,817

 

 

72,540

 

 

65,769

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

18,842

 

 

17,432

 

 

36,832

 

 

33,583

Research and development

 

 

11,768

 

 

11,119

 

 

23,721

 

 

21,617

General and administrative

 

 

5,972

 

 

6,912

 

 

12,589

 

 

12,974

Total operating expenses

 

 

36,582

 

 

35,463

 

 

73,142

 

 

68,174

Income (loss) from operations

 

 

6

 

 

(1,646)

 

 

(602)

 

 

(2,405)

Interest and other income, net

 

 

532

 

 

17

 

 

947

 

 

50

Income (loss) before income taxes

 

 

538

 

 

(1,629)

 

 

345

 

 

(2,355)

Income tax (provision) benefit

 

 

(267)

 

 

1,967

 

 

(400)

 

 

1,927

Net income (loss)

 

$

271

 

$

338

 

$

(55)

 

$

(428)

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) per share of common stock:

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

0.01

 

$

0.01

 

$

(0.00)

 

$

(0.02)

 

 

 

 

 

 

 

 

 

 

 

 

Weighted-average shares of common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

25,330,545

 

 

24,388,275

 

 

25,327,255

 

 

24,254,465

Diluted

 

 

25,935,018

 

 

24,873,764

 

 

25,327,255

 

 

24,254,465

 

See notes to condensed consolidated financial statements

Ooma | FY2024 Form 10-Q | 4


 

OOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)

 

 

 

Six Months Ended

 

 

July 31,
2023

 

 

July 31,
2022

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$

(55)

 

$

(428)

Adjustments to reconcile net loss to net cash provided by operating activities:

 

 

 

 

 

 

Stock-based compensation expense

 

 

7,124

 

 

6,842

Depreciation and amortization of capital expenditures

 

 

2,188

 

 

1,739

Amortization of intangible assets

 

 

1,433

 

 

698

Amortization of operating lease right-of-use assets

 

 

1,460

 

 

1,449

Deferred income tax benefit

 

 

 

 

(2,043)

Facilities consolidation gain

 

 

(956)

 

 

Other

 

 

(4)

 

 

26

Changes in operating assets and liabilities:

 

 

 

 

 

 

Accounts receivable, net

 

 

(1,481)

 

 

973

Inventories and deferred inventory costs

 

 

3,347

 

 

(7,158)

Prepaid expenses and other assets

 

 

(1,485)

 

 

(2,326)

Accounts payable, accrued expenses and other liabilities

 

 

(6,896)

 

 

2,690

Deferred revenue

 

 

161

 

 

520

Net cash provided by operating activities

 

 

4,836

 

 

2,982

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

Proceeds from maturities and sales of short-term investments

 

 

2,250

 

 

9,125

Purchases of short-term investments

 

 

 

 

(3,869)

Capital expenditures

 

 

(3,518)

 

 

(2,812)

Business acquisition and related working capital adjustments

 

 

300

 

 

(9,771)

Net cash used in investing activities

 

 

(968)

 

 

(7,327)

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

1,888

 

 

1,554

Shares repurchased for tax withholdings on vesting of restricted stock units ("RSU")

 

 

(914)

 

 

(684)

Net cash provided by financing activities

 

 

974

 

 

870

Net increase (decrease) in cash and cash equivalents

 

 

4,842

 

 

(3,475)

Cash and cash equivalents at beginning of period

 

 

24,137

 

 

19,667

Cash and cash equivalents at end of period

 

$

28,979

 

$

16,192

 

See notes to condensed consolidated financial statements

Ooma | FY2024 Form 10-Q | 5


 

OOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands)

 

 

 

Common stock

 

 

 

 

Accumulated

 

Stockholders'

Fiscal 2024

 

and APIC (1)

 

AOCL (2)

 

Deficit

 

Equity

BALANCE - February 1, 2023

 

$

195,610

 

$

(23)

 

$

(132,443)

 

$

63,144

Issuance of common stock under equity-based plans

 

 

1,724

 

 

 

 

 

 

1,724

Shares repurchased for tax withholdings on RSU vesting

 

 

(431)

 

 

 

 

 

 

(431)

Stock-based compensation

 

 

3,500

 

 

 

 

 

 

3,500

Changes in other comprehensive loss

 

 

 

 

12

 

 

 

 

12

Net loss

 

 

 

 

 

 

(326)

 

 

(326)

BALANCE - April 30, 2023

 

$

200,403

 

$

(11)

 

$

(132,769)

 

$

67,623

Issuance of common stock under equity-based plans

 

 

164

 

 

 

 

 

 

164

Shares repurchased for tax withholdings on RSU vesting

 

 

(483)

 

 

 

 

 

 

(483)

Stock-based compensation

 

 

3,624

 

 

 

 

 

 

3,624

Changes in other comprehensive loss

 

 

 

 

6

 

 

 

 

6

Net income

 

 

 

 

 

 

271

 

 

271

BALANCE - July 31, 2023

 

$

203,708

 

$

(5)

 

$

(132,498)

 

$

71,205

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

 

 

Accumulated

 

Stockholders'

Fiscal 2023

 

and APIC

 

AOCL

 

Deficit

 

Equity

BALANCE - February 1, 2022

 

$

179,864

 

$

(20)

 

$

(128,788)

 

$

51,056

Issuance of common stock under equity-based plans

 

 

1,554

 

 

 

 

 

 

1,554

Shares repurchased for tax withholdings on RSU vesting

 

 

(348)

 

 

 

 

 

 

(348)

Stock-based compensation

 

 

3,337

 

 

 

 

 

 

3,337

Changes in other comprehensive loss

 

 

 

 

(39)

 

 

 

 

(39)

Net loss

 

 

 

 

 

 

(766)

 

 

(766)

BALANCE - April 30, 2022

 

$

184,407

 

$

(59)

 

$

(129,554)

 

$

54,794

Shares repurchased for tax withholdings on RSU vesting

 

 

(336)

 

 

 

 

 

 

(336)

Stock-based compensation

 

 

3,505

 

 

 

 

 

 

3,505

Changes in other comprehensive loss

 

 

 

 

(1)

 

 

 

 

(1)

Net loss

 

 

 

 

 

 

338

 

 

338

BALANCE - July 31, 2022

 

$

187,576

 

$

(60)

 

$

(129,216)

 

$

58,300

(1) Additional paid-in capital

(2) Accumulated other comprehensive loss

See notes to condensed consolidated financial statements

Ooma | FY2024 Form 10-Q | 6


Ooma, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Note 1: Overview and Basis of Presentation

Ooma, Inc. and its wholly-owned subsidiaries (collectively, “Ooma” or the “Company”) provides leading communications services and related technologies for businesses and consumers, delivered from its smart SaaS and unified communications platforms. The Company is headquartered in Sunnyvale, California.

Fiscal Year. The Company’s fiscal year ends on January 31. References to fiscal 2024 and fiscal 2023 refer to the fiscal years ended January 31, 2024 and January 31, 2023, respectively.

Basis of Presentation. The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. The condensed consolidated balance sheet as of January 31, 2023 included herein was derived from the audited financial statements as of that date, but does not include all the disclosures required by GAAP. Therefore, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and related notes included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2023 filed with the SEC on April 7, 2023 (“Annual Report”).

The accompanying condensed consolidated financial statements reflect all normal recurring adjustments that management believes are necessary for a fair presentation of the interim periods presented. The results for the three and six months ended July 31, 2023 are not necessarily indicative of the results to be expected for any subsequent quarter or for the fiscal year ending January 31, 2024.

Principles of Consolidation. The condensed consolidated financial statements include the accounts of Ooma, Inc. and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated in consolidation.

Comprehensive Loss. For all periods presented, comprehensive loss approximated net loss in the condensed consolidated statements of operations and differences were not material. Therefore, the condensed consolidated statements of comprehensive loss have been omitted.

Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes. Significant estimates include, but are not limited to, those related to revenue recognition, inventory valuation, deferred sales commissions, valuation of goodwill and intangible assets, operating lease assets and liabilities, regulatory fees and indirect tax accruals, loss contingencies, stock-based compensation and income taxes (including valuation allowances). The Company bases its estimates and assumptions on historical experience, where applicable, and other factors that it believes to be reasonable under the circumstances. These estimates are based on information available as of the date of the consolidated financial statements, and assumptions are inherently subjective in nature. Therefore, actual results could differ from management’s estimates.

Significant Accounting Policies. There have been no material changes to the Company’s significant accounting policies from those disclosed in the Annual Report.

Ooma | FY2024 Form 10-Q | 7


Ooma, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Note 2: Revenue and Deferred Revenue

The Company derives its revenue from two sources:

Subscription and Services Revenue is derived from recurring subscription fees related to service plans such as Ooma Business, Ooma Residential and other communications services. Service plans are generally sold as monthly subscriptions; however, certain plans are also offered as annual or multi-year subscriptions. Subscription revenue is generally recognized ratably over the contractual service term. A small portion of revenue is recognized on a point-in-time basis from services such as: prepaid international calls, and advertisements displayed through the Talkatone mobile application.

Product and Other Revenue is generated primarily from the sale of on-premise devices and end-point devices, including Ooma AirDial, and to a lesser extent from porting fees that enable customers to transfer their existing phone numbers. The Company recognizes product and other revenue from sales to direct end-customers and channel partners at the point-in-time that control is transferred.

Revenue disaggregated by revenue source consisted of the following (in thousands):

 

 

Three Months Ended

 

Six Months Ended

 

 

July 31,
2023

 

 

July 31,
2022

 

July 31,
2023

 

July 31,
2022

Subscription and services revenue

 

$

54,726

 

$

47,995

 

$

107,775

 

$

94,718

Product and other revenue

 

 

3,627

 

 

4,658

 

 

7,430

 

 

8,272

Total revenue

 

$

58,353

 

$

52,653

 

$

115,205

 

$

102,990

The Company derived approximately 57% and 50% of its total revenue from Ooma Business and approximately 41% and 47% from Ooma Residential for the three months ended July 31, 2023 and 2022, respectively. The Company derived approximately 56% and 50% of its total revenue from Ooma Business and approximately 41% and 47% from Ooma Residential for the six months ended July 31, 2023 and 2022, respectively. No individual country outside of the United States, and no single customer, represented 10% or more of total revenue for the periods presented.

Customers who represented 10% or more of net accounts receivable were as follows:

 

 

 

 

 

As of

 

 

 

 

 

July 31,
2023

 

 

January 31,
2023

Customer A

 

 

 

 

21%

 

 

18%

 

Deferred Revenue primarily consists of billings or payments received in advance of meeting revenue recognition criteria. Deferred services revenue is recognized on a ratable basis over the term of the contract as the services are provided.

 

 

 

 

As of

 

 

 

 

July 31,
2023

 

January 31,
2023

Subscription and services

 

 

 

$

17,404

 

$

17,239

Product and other

 

 

 

 

4

 

 

8

Total deferred revenue

 

 

 

$

17,408

 

 

17,247

Less: current deferred revenue

 

 

 

 

17,391

 

 

17,216

Non-current deferred revenue included in other long-term liabilities

 

 

 

$

17

 

$

31

During the three and six months ended July 31, 2023, the Company recognized revenue of approximately $3.1 million and $13.8 million, respectively pertaining to amounts deferred as of January 31, 2023. As of July 31, 2023, deferred revenue was primarily composed of subscription contracts invoiced during the first half of fiscal 2024, as well as amounts recorded during fiscal 2023 for annual contracts.

Remaining Performance Obligations. As of July 31, 2023, contract revenue that had not yet been recognized for open contracts with an original expected length of greater than one year was approximately $20.8 million. The Company expects to recognize revenue on approximately 43% of this amount over the next 12 months, with the balance to be recognized thereafter.

Ooma | FY2024 Form 10-Q | 8


Ooma, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Note 3: Fair Value Measurements

The Company estimates and categorizes fair value by applying the following hierarchy:

Level 1: Quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Observable prices based on inputs not quoted in active markets but are corroborated by market data.

Level 3: Unobservable inputs that are supported by little or no market activity.

Financial assets measured at fair value on a recurring basis by level were as follows (in thousands):

 

 

 

Balance as of July 31, 2023

 

 

Level 1

 

Level 2

 

Total

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

14,936

 

$

 

$

14,936

Total cash equivalents

 

$

14,936

 

$

 

 

14,936

Cash

 

 

 

 

 

 

 

 

14,043

Total cash and cash equivalents

 

 

 

 

$

28,979

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

U.S. treasury securities

 

$

495

 

$

 

$

495

Total short-term investments

 

$

495

 

$

 

$

495

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of January 31, 2023

 

 

Level 1

 

Level 2

 

Total

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

Money market funds

 

$

11,380

 

$

 

$

11,380

Total cash equivalents

 

$

11,380

 

$

 

 

11,380

Cash

 

 

 

 

 

 

 

 

12,757

Total cash and cash equivalents

 

 

 

 

$

24,137

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

U.S. treasury securities

 

$

1,232

 

$

 

$

1,232

Commercial paper