Ooma (NYSE:OOMA) reported second-quarter fiscal 2027 revenue of $83.2 million, up 25% from $66.4 million a year earlier, as growth in its business communications operations, AirDial POTS-replacement service and recently acquired businesses lifted results.
Chief Executive Officer Eric Stang said the company was ahead of its original plan on both revenue and profitability at the midpoint of its fiscal year. Business subscription and services revenue increased 38% year over year, while AirDial services revenue rose 75%.
Profitability and Cash Flow Improve
Ooma posted non-GAAP net income of $10.2 million, or $0.35 per diluted share, compared with $0.23 per diluted share in the prior-year period. Adjusted EBITDA reached a record $12.4 million, representing 15% of revenue and an increase of 74% year over year.
Chief Financial Officer Shig Hamamatsu said the company benefited from operating leverage in research and development, optimization of sales and marketing spending, and synergies from the FluentStream and Phone.com acquisitions.
- Subscription and services revenue was $75.6 million, or 91% of total revenue.
- Product and other revenue increased 46% to $7.6 million, driven by a 50% rise in AirDial installations and initial MyPhone shipments.
- Total gross margin was 63%, compared with 62% a year earlier.
- Operating cash flow was a record $13.1 million, while free cash flow was $10.8 million.
- Trailing-12-month operating cash flow totaled $37.1 million and free cash flow totaled $30.2 million.
The company ended the quarter with $17.5 million in cash and investments. Ooma spent $4.4 million during the quarter on stock repurchases and net share settlement, and it paid down $6.5 million of its term loan, reducing debt to $47 million.
AirDial Gains Partners and Large Customer Win
AirDial, Ooma’s solution for replacing legacy plain old telephone service, or POTS, remains its fastest-growing business. During the quarter, Ooma added two resale partners, bringing its total to more than 40. One of the additions is a Verizon platinum partner, Stang said.
The company also won a hospital-system customer that purchased nearly 200 AirDial lines, more than 1,000 unified communications-as-a-service seats and Ooma Connect internet backup. Stang said Ooma believes it was selected because of AirDial’s POTS-replacement capabilities, implementation expertise and flexibility.
Management’s goal is to add one to two new AirDial resale partners per quarter. On the call, Stang said the company is seeing more activity and interest in POTS replacement, though customers continue to conduct proof-of-concept work and may follow rollout schedules based on their own installation needs.
Hamamatsu said AirDial subscription revenue grew 80% year over year in the first quarter and 75% in the second quarter. He identified AirDial as one of the two largest contributors to the company’s improved outlook.
AI Products and UCaaS Strategy
Ooma introduced AI transcription and AI insights in its Pro Plus service tier during the second quarter, alongside standalone AI Answering Service and AI Receptionist products. The new standalone services launched near the end of the quarter, and Stang said the company did not yet have reliable adoption data but had received strong feedback from sales teams and customers.
The company plans to introduce its Ooma AI Productivity Pack in the third quarter. Stang said the first phase will include about 10 business-productivity features intended to help customers track customer activity, draft text messages and customer responses, and assist with payments. He said Ooma expects a double-digit percentage of new customers to adopt AI offerings during the quarter.
Stang said Ooma is running most of its AI internally on company-owned hardware and uses solutions tailored to specific functions to manage costs. The company expects its usage-based pricing model to support desired margins.
Ooma also established a partnership with small-business marketing and CRM provider Thryv. The companies plan to begin joint marketing in September, while Ooma intends to provide an integration between Ooma Office and Thryv’s Keap CRM.
Residential Products and Acquisitions
Ooma launched MyPhone in the second quarter, a residential landline offering aimed at younger children and parents seeking more control over calling. The product is available online through Costco, Amazon, Best Buy, Walmart and Target. Ooma expects MyPhone to be available in-store at one retailer this fall and plans a Canadian launch before the end of the third quarter.
Residential users increased by more than 3,000 during the quarter, reversing the company’s historical gradual user decline. Hamamatsu said residential subscription revenue is now expected to range from flat to up 1% for the full year, compared with the company’s earlier expectation for a 1% to 2% decline.
In the third quarter, Ooma also plans to launch Star Dial, a residential product designed to work with Starlink internet service. Stang said Star Dial uses Ooma’s adaptive redundancy technology to support call quality over higher-latency satellite connections. One major retailer has said it plans to sell the product in stores beginning late this fall, according to management.
The company said it continues to integrate FluentStream and Phone.com and took actions late in the second quarter intended to generate additional Phone.com-related synergies beginning in the third quarter. Ooma remains open to future acquisitions of smaller UCaaS providers that could expand its small- and medium-sized business user base.
Outlook
For the third quarter, Ooma forecast revenue of $83.7 million to $84.5 million and non-GAAP net income of $9.8 million to $10.2 million, or $0.34 to $0.35 per diluted share.
For fiscal 2027, the company projected revenue of $332 million to $333.5 million, non-GAAP net income of $39.5 million to $40.3 million, and adjusted EBITDA of $47.5 million to $48.3 million. Ooma expects full-year business subscription and services revenue to grow about 32% from fiscal 2026.
Ooma plans to hold an investor day at the New York Stock Exchange on Sept. 29, where management said it expects to provide additional detail on its AI roadmap, AirDial partner strategy, MyPhone and Star Dial initiatives.
About Ooma (NYSE:OOMA)
Ooma, Inc, headquartered in Sunnyvale, California, is a leading provider of communication services for residential and business customers. Since its founding in 2004, Ooma has built a cloud-based platform that leverages Voice over Internet Protocol (VoIP) technology to deliver voice, video and data services over broadband networks. The company went public on the New York Stock Exchange in 2015 under the ticker OOMA and has continued to expand its service portfolio to meet evolving customer demands.
For residential users, Ooma offers an all-in-one home phone service that includes its flagship Telo device, mobile and web applications, and optional smart home security features.
