UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
(Mark One)
☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended January 31, 2024
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 charter)
Delaware
(State or other jurisdiction of incorporation or organization)
06-1713274
(I.R.S. Employer Identification No.)
525 Almanor Avenue, Suite 200, Sunnyvale, California 94085
(Address of principal executive offices and zip code)
Registrant’s telephone number (650) 566-6600
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Common Stock, par value $0.0001
Trading Symbol
OOMA
Name of each exchange on which registered
The New York Stock Exchange
Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒
Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. Yes ☐ No ☒
Securities registered pursuant to Section 12(g) of the Act: None
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, or a smaller reporting company or 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
Non-Accelerated Filer
☐
☐
Accelerated Filer
Small 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. ☐
Indicate by check mark whether the registrant has filed a report on and attestation to its management's assessment of the effectiveness of its internal control over financial
reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect the
correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of the
registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant as of July 31, 2023, the last business day of the registrant’s most
recently completed second fiscal quarter, was approximately $356 million, based upon the closing price reported for such date on the New York Stock Exchange.
26.4 million shares of common stock were issued and outstanding as of March 28, 2024.
Portions of the registrant’s definitive Proxy Statement for its 2024 Annual Meeting of Stockholders are incorporated by reference in Part III of this Annual Report on Form 10-K.
Such Proxy Statement will be filed with the U.S. Securities and Exchange Commission within 120 days after the end of the fiscal year to which this report relates. Except with
respect to information specifically incorporated by reference in this Form 10-K, the Proxy Statement is not deemed to be filed as part of this Form 10-K.
DOCUMENTS INCORPORATED BY REFERENCE
Ooma, Inc.
Table of Contents
PART I
Item 1.
Item 1A.
Item 1B.
Item 1C.
Item 2.
Item 3.
Item 4.
Business
Risk Factors
Unresolved Staff Comments
Cybersecurity
Properties
Legal Proceedings
Mine Safety Disclosures
PART II
Item 5.
Item 6.
Item 7.
Item 7A.
Item 8.
Item 9.
Item 9A.
Item 9B.
Item 9C.
PART III
Item 10.
Item 11.
Item 12.
Item 13.
Item 14.
PART IV
Item 15.
Exhibits
Signatures
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
[Reserved]
Management’s Discussion and Analysis of Financial Condition and Results of Operations
Quantitative and Qualitative Disclosures About Market Risk
Consolidated Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
Controls and Procedures
Other Information
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Directors, Executive Officers and Corporate Governance
Executive Compensation
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
Certain Relationships and Related Transactions, and Director Independence
Principal Accounting Fees and Services
Exhibits, Financial Statement Schedules
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FORWARD-LOOKING STATEMENTS
This Annual Report on Form 10-K for the fiscal year ended January 31, 2024 (“Form 10-K”) contains forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). The words “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,”
“expect,” “predict,” “could,” “potentially” and variations of such words and similar expressions are intended to identify such forward-looking
statements, which may include, but are not limited to, statements concerning the following:
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our future financial performance, including trends in revenue, cost of revenue, operating expenses and income taxes;
our estimates of the size of our market opportunity and forecasts of market growth;
our ability to develop, launch or acquire new products and services, improve our existing products and services, manage our supply
chain, and increase the value of our products and services;
changes to our business resulting from increased competition or changes in market trends;
our ability to increase our revenue and our revenue growth rate, anticipate demand for our products, and effectively manage our future
growth;
our ability to successfully maintain our relationships with our key retailers and resellers;
our ability to attract and retain customers, including our ability to maintain adequate customer care and manage increases in our churn
rate;
our ability to improve local number portability provisioning and obtain direct inward dialing numbers;
our ability to maintain, protect and enhance our brand and intellectual property;
government regulation, including compliance with regulatory requirements and changes in market rules, rates and tariffs;
our ability to comply with applicable FCC regulations, including those regarding E-911 services;
increasing regulation of our services and the imposition of federal, state and municipal sales and use taxes, fees or surcharges on our
services;
the effects of industry trends on our results of operations;
server or system failures that could affect the quality or disrupt the services we provide and our ability to maintain data security;
our ability to borrow additional funds and access capital markets, as well as our ability to comply with the terms of our indebtedness
and the possibility that we may incur additional indebtedness in the future;
the differences between our services, including emergency calling, compared to traditional phone services;
the sufficiency of our cash, cash equivalents and short-term investments to meet our working capital and capital expenditure
requirements;
our ability to successfully enter new markets, manage our international expansion, and identify, evaluate and consummate
acquisitions;
the future trading prices of our common stock; and
other risk factors included under the section titled “Risk Factors”
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You should not rely upon forward-looking statements as predictions of future events. Such statements are based on management’s
expectations as of the date of this filing and involve many risks and uncertainties that could cause our actual results, events or circumstances
to differ materially from those expressed or implied in our forward-looking statements. Such risks and uncertainties include those described
throughout this report and particularly in the sections entitled “Risk Factors” and “Management’s Discussion and Analysis of Financial
Condition and Results of Operations.” Given these risks and uncertainties, readers are cautioned not to place undue reliance on such
forward-looking statements. Readers are urged to carefully review and consider all of the information in this Form 10-K and in other
documents we file from time to time with the Securities and Exchange Commission (“SEC”). We undertake no obligation to update any
forward-looking statements made in this Form 10-K to reflect events or circumstances after the date of this filing or to reflect new information
or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations
disclosed in our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions,
mergers, dispositions, joint ventures or investments we may make.
When we use the terms “Ooma,” the “Company,” “we,” “us” or “our” in this report, we are referring to Ooma, Inc. and its consolidated
subsidiaries unless the context requires otherwise. Ooma, Ooma Premier, Ooma Telo, Ooma Office, Ooma AirDial, Broadsmart, OnSIP,
Talkatone, 2600Hz, and the Ooma logo referred to or displayed herein are trademarks of Ooma, Inc. and its consolidated subsidiaries. All
other company and product names referred to herein may be trademarks of the respective companies with which they are associated.
Ooma | FY2024 Form 10-K | 3
Item 1. Business
Overview
PART I
Ooma provides leading communications services and related technologies that bring unique features, ease of use, and affordability to
business and residential customers through our smart software-as-a-service (“SaaS”) and unified communications platforms. For businesses
of all sizes, we deliver advanced voice and collaboration features including messaging, intelligent virtual attendants and video conferencing to
help them run more efficiently. For consumers, our residential phone service provides PureVoice high-definition voice quality, advanced
functionality and integration with mobile devices.
We drive the adoption of our platforms by providing communications solutions to the large and growing markets for business, residential and
mobile users, and then facilitate growth by offering new and innovative connected services to our user base. Our customers typically adopt
our platforms by making a purchase or rental of our on-premise devices, connecting to the internet and activating services, for which they
primarily pay on a monthly basis. We believe we have achieved high levels of customer satisfaction, retention and loyalty. Our business and
residential phone service solutions are each top-ranked by our customers according to surveys by PC Mag and Consumer Reports.
Our services rely upon the following main elements: our multi-tenant cloud service, on-premise devices, desktop and mobile applications, and
calling platforms. Ooma’s cloud provides a high-quality, secure, managed and reliable connection integrating every element of our platforms.
Our platforms power all aspects of our business, providing a high-volume, low-cost infrastructure for our communications solutions, and
enabling a number of other current and future applications and services for productivity, automation, monitoring, safety, security and
networking infrastructure.
We generate revenues primarily from the sale of subscriptions and other services for our business and residential communications solutions.
We generate our product and other revenue from the sale of our on-premise devices and end-point devices. We primarily offer our solutions
in the United States and Canada, with limited offerings in certain other countries. We believe that our differentiated solutions and our long-
term customer relationships uniquely position us to add new connected services and exploit adjacent markets. We believe that our platforms
are particularly well-suited to enable the delivery of connected services because they are always on, monitored and interactive.
We have experienced strong revenue growth in recent periods. Our total revenue was $236.7 million, $216.2 million, and $192.3 million in
fiscal 2024, 2023, and 2022, respectively. As of January 31, 2024, our core users totaled 1,243,000 for Ooma Business and Ooma
Residential. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.
We were incorporated in 2003 as a Delaware corporation and our stock is listed on the New York Stock Exchange under the symbol “OOMA.”
Our corporate headquarters are located in Sunnyvale, California. Our primary website address is www.ooma.com.
Ooma | FY2024 Form 10-K | 4
Our Solutions
Ooma Business
Our mission is providing business communications services that are simple, easy to use, and deliver excellent value to small, medium-sized
and large companies. We offer a range of solutions to fit each business’ needs, along with personalized support to resolve any issues in
deploying and maintaining Ooma services. We refer to Ooma Office, Ooma Enterprise, Ooma AirDial, 2600Hz, and OnSIP collectively as
Ooma Business.
Ooma Office
Ooma Office is a cloud-based multi-user communications system for small and medium-sized businesses designed to manage
communications in and out of the office with a suite of business features at affordable prices. Ooma Office is simple and intuitive to setup and
use, mobile-friendly, scalable, and provides a variety of configurations to meet our customers’ specific needs. Customers have their choice of
equipment for voice service, including IP phones, smartphones, PCs and traditional analog phones.
Ooma Office has three service plans, which are generally sold as monthly subscriptions:
Ooma Office Essentials provides a curated set of essential business phone features that enables teams to connect seamlessly with
customers and co-workers, including: virtual receptionist, SMS and MMS messaging, extension dialing, multi-device ring options, ring groups,
call park, audio conferencing, digital fax, music-on-hold, intercom/paging, and voicemail-to-email audio files. The Office Mobile App allows
virtual deployment without hardware, so users can make, receive and transfer phone calls, listen to voicemails, text, and manage their Ooma
account on-the-go from any iOS or Android device.
Ooma Office Pro offers everything in Ooma Office Essentials while adding a set of more robust features including: HD video conferencing
(Ooma Meetings), call recording, call analytics, caller info match, enhanced robocall blocking, voicemail transcription, and integrations with
Google Workspace and Microsoft 365 applications. Additionally, the Office Pro Desktop App conveniently enables Pro users to have their
complete business communications system on their PCs and Macs to make and receive calls, host and join video meetings, use SMS and
MMS messaging, access company directories, access in-depth caller profiles for both inbound and outbound calls, and other capabilities.
The Desktop App works anywhere the computer has an internet connection, keeping employees and teams connected while working from
home, on the road, or in the office.
Ooma Office Pro Plus is our top-tier service plan that offers everything in Ooma Office Pro while adding powerful employee and customer
tools, including: advanced call management, call queuing for satisfying basic call center needs, hot-desking to facilitate hybrid work
environments and shared workspaces, online bookings to schedule appointments and meetings, expanded videoconferencing options for
Ooma Meetings, and integrations with general CRM systems such as Salesforce and Microsoft Dynamics 365, and industry specific CRM
systems such as Clio and AgencyZoom.
We also offer the following two services to our Ooma Office customers:
Ooma Connect delivers fixed wireless internet connectivity to replace or back-up slow and costly DSL, satellite, and cable services. This
solution consists of the Ooma Connect Base Station and the cellular antenna, which provides wireless internet through a nationwide
advanced cellular network. Our Continuous Voice technology for internet back-up improves call quality by sending redundant voice streams
across both the primary and wireless Internet link.
Ooma | FY2024 Form 10-K | 5
Ooma Enterprise
Ooma Enterprise is a highly customizable, flexible, and scalable unified-communications-as-a-service (“UCaaS”) solution that complements
Ooma Office and allows us to meet the needs of organizations of all sizes. Telecommunications and networking services available through
Ooma Enterprise include mobile and softphone telephony, presence and instant messaging, multiparty audio, video and web conferencing,
and call center capabilities with full Application Programming Interface (“API”) support.
Our enterprise UCaaS platform enables easy drag-and-drop call flow management, using modular applications that can be selectively
enabled to suit customer needs. Some of these applications include WebRTC, Call Center, Mobile and Desktop applications, Team Chat, and
a distinctive reporting portal for end users and administrators. For our call center customers, we offer agents and call center managers the
ability to visualize their performance through their day or over time with custom reporting solutions. Additionally, Ooma Direct Routing for
Microsoft Teams allows every device enabled with the Teams app – desktops, laptops, smart phones and tablets – to become a fully
functional business phone that connects Teams users to external phone lines.
Our platform is built on an open API architecture that enables agility, customizations, and integrations into back-end solutions such as CRM,
predictive analytics, accounting and customer renewal systems, either internally or via third party developers. Our global cloud-based
network provides business-class security, redundancy, and failover, as well as uniquely routes calls through the shortest path to provide the
highest voice quality. This gives Ooma Enterprise customers the ability to streamline business processes and ensure their customers are
serviced faster, boosting satisfaction, repeat orders, referrals, and revenues in addition to enabling their users to improve productivity.
Ooma AirDial
Ooma AirDial is a complete integrated solution for businesses to address the decommissioning of legacy copper-wire analog phone service,
also known as plain old telephone service (“POTS”). This “copper sunset” has created a significant challenge for maintaining safety
communications devices and business-critical systems that today require a POTS line – ranging from fire alarm panels to elevator phones,
fax machines, public safety phones, building access systems and more – that often cannot be migrated to voice over internet service. Ooma
AirDial provides a turnkey replacement for POTS lines by combining the Ooma AirDial base station with virtual analog phone service and a
data connection through a nationwide wireless network at one low monthly rate. Ooma AirDial also comes with an intuitive, web-based portal
that enables users to view and manage remotely the status of all Ooma AirDial devices together. Each base station can support up to four
safety devices. Ooma AirDial can be self-installed or professionally installed through Ooma or third parties.
OnSIP
OnSIP provides UCaaS solutions designed to make communications approachable for smaller sized business, much like Ooma Office,
allowing customers to utilize modern communications tools to enhance their business while streamlining deployment and ongoing
management. OnSIP customers can choose between unlimited monthly plans and metered “pay as you go” plans.
2600Hz
In October 2023, we acquired 2600hz, Inc. (“2600Hz”), a provider of business communications applications targeted at resellers and carriers.
2600Hz has a global customer base leveraging Kazoo, its open-source communications solution, and a suite of proprietary applications
through open APIs to provide UCaaS, Communications Platform as a Service ("CPaaS"), Call Center as a Service ("CCaaS") and AI tools
and applications. Prior to the acquisition, Ooma has been using 2600Hz solutions as the platform for its Ooma Office and Ooma Enterprise
service offerings. The acquisition advances Ooma’s integrated business service through the addition of Call Center, CPaaS and artificial
intelligence ("AI") capabilities while broadening its customer base to include service providers and resellers utilizing 2600Hz for their bespoke
offerings.
Ooma | FY2024 Form 10-K | 6
Ooma Residential
Ooma Residential includes Ooma Telo basic and premier services as well as our smart security solutions. Our residential phone service
provides PureVoice HD voice quality, advanced functionality and integration with mobile devices. Overall, our residential platform enables an
ecosystem for connected services by integrating with other automation solutions to enable innovative and valuable features.
Home Phone Services
Ooma Basic offers unlimited personal calling within the United States and features such as: voicemail access, call waiting, caller ID, network
address book and 911 calling, with text alerts when 911 is dialed from the home. Our Ooma Mobile HD app allows users to make and receive
phone calls and access Ooma features and settings with any iOS or Android device over a Wi-Fi or cellular data connection. The app
includes unlimited mobile domestic calls, subject to normal residential usage limitations, and enables users to make international calls on
their mobile devices using Ooma’s low-cost international calling plan.
Ooma Premier offers a suite of advanced calling features on a monthly or annual subscription basis, including: custom and anonymous call
blocking, receiving incoming calls on the Ooma Mobile HD App, call forwarding, three-way conference calling, backup number, and
integration with a variety of devices and services to enable new functionality and automation, such as Google Voice, Dropbox and Amazon
Alexa. We also offer other premium subscription services to our customers, independent of Ooma Premier, including an international calling
plan and voicemail transcription service.
Home Phone Products
We offer three ways to connect to our residential phone services:
Ooma Telo is a complete home communications solution designed to serve as the primary phone line in the home, delivering high-quality
voice communications, advanced calling features and connected services that are not offered by traditional landlines. Users make a one-time
purchase of an Ooma Telo base station and plug it into a high-speed internet connection and standard home phone devices. Users have the
option to transfer their existing phone number for a one-time fee or to select a new number at no cost. Once set up, users have access to
free nationwide calling, international calling with low rates and the features described above.
Ooma Telo Air is a wireless Ooma Telo with built-in Wi-Fi and Bluetooth capabilities that connects to the internet using the home’s Wi-Fi
network and can be paired with mobile phones to answer incoming calls from any phone in the home.
Ooma Telo LTE combines the Ooma Telo base station with the Ooma LTE Adapter and battery back-up to deliver an always-on home phone
solution with all of the advanced features provided by our unique cloud-based residential platform.
Ooma also sells a variety of accessories including: handsets with smartphone-like features, remote phone jacks and battery backup, as well
as a range of sensors for home security and monitoring.
Talkatone
Our Talkatone mobile app is available to anyone with an iOS or Android mobile device and can be downloaded from the Apple App Store or
Google Play for free. Registered users choose their own phone number to make and receive free texts and calls to most United States and
Canadian numbers using a Wi-Fi or cellular data connection within and out-of-network. Talkatone also enables users to call, text, chat and
share with friends and family that do not have the app installed. Advertising is displayed within the mobile app and users can choose to
purchase premium services such as ad-free usage and international calling plans.
Ooma | FY2024 Form 10-K | 7
Sales and Marketing
Our sales and marketing objectives are to grow our customer base and sell additional services to our existing customers using an integrated
and multi-channel marketing approach. We continually test and refine our marketing and sales tactics to drive sales at a low customer
acquisition cost.
Marketing and Advertising
Online. We use online marketing including search engine marketing, search engine optimization, online video, digital display advertising and
social media to attract customers as they do online research for the products and services we offer. We continue to reach out to our prospect
leads over time using e-mail and telemarketing until they purchase or the lead is retired.
Traditional. We use radio advertising to build awareness and interest for our products and services, which benefits both Ooma Business and
Ooma Residential. We believe that radio advertising provides an opportunity to build the Ooma brand cost-effectively, educate prospects on
Ooma’s unique combination of quality and value, and capture prospects’ attention. Businesses and consumers who hear our ads are directed
to our web site, our inbound sales personnel, and/or to key retail partners.
Word-of-mouth. We actively mobilize our customers and brand advocates to spread word-of-mouth marketing by sharing Ooma news and
information through social media and e-mail. We sell additional services to our existing customer base by offering free trials and promotional
offers, as well as sending e-mail communications and leaving messages on their Ooma voicemail service.
Sales, Customers and Backlog
We have a diverse and growing customer base across a wide range of industries. Our business and residential products are sold through
direct channels, retailers, value-added resellers, master agents and other resellers. The direct channel, value-added resellers and master
agents are our primary distribution channels for business customers. Direct channel and retail are our primary distribution channels for
residential customers. Our direct sales force is focused on business sales and includes trained sales representatives located in the United
States and Canada.
Our 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. We also have strategic partnerships with third parties, such as T-Mobile, which enables us
to sell our services and products to certain of their customers. No single customer accounted for 10% or more of our total revenue for fiscal
2024, 2023 and 2022.
Our service plans are generally sold as monthly subscriptions; however, certain plans are also offered as annual and multi-year
subscriptions. Products are generally shipped and billed shortly after receipt of an order. We do not believe that our product backlog at any
particular time is meaningful because it is not necessarily indicative of future revenue in any given period as such orders may be rescheduled
or cancelled without penalty prior to shipment. The majority of our product revenue comes from orders that are received and shipped in the
same quarter.
Customer Support
Our primary customer support objective is to satisfy our customers and educate them on the features and benefits of our products to optimize
the overall user experience. We employ an active customer management strategy in which we drive incremental revenue through cross-
selling of products and services. Our customer support teams also manage the porting process for our customers as well as billing and
payment activities.
We maintain two customer contact centers: one operated by us in Newark, California, which primarily supports our business customers, and
the other operated by a third-party provider in Manila, Philippines, which primarily supports our residential customers. Our offices located in
Vancouver, British Columbia and Boca Raton, Florida support our enterprise and some business customers. We utilize a variety of
communication media to serve the needs of our customers including telephone, online chat, online tutorials and e-mail.
Ooma | FY2024 Form 10-K | 8
Engineering, Research and Development
We take an integrated approach to the development of our technology. Our extensive engineering resources span both hardware and
software, and our business scope encompasses the entire platform from user devices such as handsets to cloud infrastructure, giving us the
ability to create unique features and services for our customers. We believe our integrated engineering and business strategy is a significant
competitive advantage and makes it feasible for us to leverage our platforms to deliver a broad range of productivity, automation and
infrastructure connected services.
We have invested significant time and resources into developing our engineering, research and development team, resulting in a group with
diverse skills, ranging from digital and radio frequency hardware design to embedded software, network software, telecommunications,
database architecture, operations support systems, billing, security, web design and mobile app development. Because our team develops
and integrates our solutions, we are able to offer a solution that works seamlessly between software and hardware and responds to customer
feedback to add in additional features and services that work across our platforms. Our team consists of a core set of engineers located
primarily in the San Francisco Bay Area, augmented by development teams in several international locations.
Operations and Manufacturing
We currently serve most of our customers from three separate data center facilities located in Northern California, Texas and Virginia, where
we lease space from Equinix, Inc. We also lease data center space from Equinix in certain cities in Europe. While our service operations are
partially redundant, account provisioning and billing are operated out of the San Jose facility for most of our customers. Our network
operations and carrier operations teams are responsible for designing our core routing and switching infrastructure, managing growth and
maintenance (including the introduction of new services) and orchestrating vendor relationships for hosted services, IP transit and carrier
services and daily operation of our cloud and other services. The design of these services, and the tools for monitoring and managing them,
are developed in combination with our engineering team.
We primarily contract with manufacturers in Vietnam and other Asian countries to produce our on-premise and end-point devices, including
Ooma AirDial. We configure and ship to our channel partners and end users through our internal manufacturing and logistics team based in
Newark, California. Our internal logistics team also manages reverse logistics for channel and warranty returns and works closely with our
engineering team to develop tooling and processes that bring new products into production.
Ooma | FY2024 Form 10-K | 9
Competition
The market for communications solutions and other connected services for business, home and mobile users is very large, complex,
fragmented and defined by changing technology and customer demands. We expect competition to continue to increase in the future. We
believe that the defining factors driving competition in our market include:
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Quality and consistency of communications services;
Lifetime value of initial investment and ongoing cost of services;
Breadth of features and capabilities;
System reliability, availability and performance;
Speed and ease of activation, setup, and configuration;
Ownership and control of the proprietary technology;
Integration with multiple end-point devices and mobile solutions;
Customer satisfaction and brand loyalty; and
Ability to effectively access reseller channels
We believe that we generally compete favorably on the basis of the factors listed above. We face competition from a broad range of providers
of communications solutions and other connected services for business, home and mobile users. Some of these competitors include:
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Established communications providers, such as Comcast Corporation, Verizon Communications Inc. and Rogers Communications
Inc;
Other cloud-based communications companies such as RingCentral Inc., Vonage Holdings Corp (acquired by Ericsson), 8x8 Inc.,
Nextiva, Inc., Intermedia.net Inc., Dialpad Inc., Microsoft Corporation, Zoom Video Communications, Inc., and Alphabet Inc.
(Google Voice); and
Traditional on-premise hardware business communications providers such as Cisco Systems, Inc. and Mitel, Inc.
All of these companies currently or may in the future host their solutions through the cloud.
Similarly, the market for our newly-acquired CPaaS and CCaaS 2600Hz solutions is rapidly evolving, significantly fragmented and highly
competitive, with relatively low barriers to entry in some segments. Our competitors in this segment of the market are primarily (i) CPaaS
companies that offer communications products and applications, such as Twilio Inc., Vonage Holdings Corp (acquired by Ericsson), Plivo
Inc., and Sinch Inc., and (ii) other software companies that compete with portions of these and CCaaS solutions, such as RingCentral Inc.,
8x8 Inc., Dialpad Inc., Five9 Inc., and NICE Systems Ltd. Additionally, our AirDial product competes in the POTS replacement market, which
is relatively new, rapidly developing and subject to change. We face competition from a range of companies, such as Verizon
Communications Inc., Granite Telecommunications LLC, MetTel Inc., and Napco Securities Technologies, Inc., as well as other service
providers that bundle their offerings with POTS-related products from POTS replacement equipment manufacturers, such as DataRemote
Inc.
See the section entitled “Risks Related to Our Business and Industry” in Item 1A. "Risk Factors" below for more information related to
competition.
Ooma | FY2024 Form 10-K | 10
Human Capital
People and Culture. We view our people and our company culture as key to our success. We aim to attract and retain talented people
representing diverse perspectives and skills, who are driven by our common Ooma values:
We care that everyone loves their Ooma experience.
We think big to innovate and revolutionize markets.
We create smarter solutions that uniquely deliver both superior experiences and superior value.
We embrace diversity of thought to make the best decisions.
We respect that problems are best solved by fact-based discussions and positive intent.
We choose to be a force for good in the world.
From time-to-time, we conduct confidential company-wide surveys to capture our employees’ views of the organization, company goals and
job satisfaction, which our senior leadership team reviews and acts upon, as appropriate. Our employees are encouraged to engage with
company leadership and openly raise concerns and questions, including via our quarterly employee communications meeting with the CEO
and senior management team. Our management team also hosts “Ask and Answer” sessions across the organization to create more
opportunities for employees to communicate, share ideas and learn about Ooma. We have periodic employee surveys that allow employees
to voice their perceptions of the Company and their work experience.
Diversity, Equity, Inclusion and Belonging (“DEIB”). Our commitment to DEIB and racial justice is more than the policies and practices
we develop and adhere to – it is an integral part of who we are and how we operate. We believe it is our responsibility to embrace a diverse
employee workforce, build a strong and caring culture of inclusion and lead with both passion and compassion. We believe our diversity
makes us strong and have pledged along with the Silicon Valley Leadership Group to be an agent of sustainable change. Our internal DEIB
Committee leads our commitment to put this pledge into action and provides an open door to all of our personnel who would like to actively
contribute to the effort. We believe a diverse and inclusive workforce serves to enrich our employee experience.
Compensation and Benefits. We aim to provide our employees competitive salaries and benefit programs that help meet the varying
needs of our workforce. These programs include an employee stock purchase plan, equity awards and bonuses, a 401(k) retirement plan
with a company match, healthcare benefits, paid time off and family leave, and flexible work arrangements. We conduct annual
benchmarking to assess our compensation and benefit programs against those of our peers.
Community Support. We believe in giving back and promoting community outreach through corporate giving and employee volunteerism.
Through our “Ooma Giving Back” program, we partner with certain non-profit organizations to help support several local communities.
Through our "Corporate Match Program", we support employee charitable donations by matching charitable donations of up to a certain
amount per employee per fiscal year.
Employees and Contractors
As of January 31, 2024, we had a total of 1221 employees and contractors, located primarily in the United States, Philippines and Canada.
None of our employees is represented by a labor union or subject to a collective bargaining agreement.
Ooma | FY2024 Form 10-K | 11
Intellectual Property
We rely on a combination of patents, trade secrets, copyrights, trademarks, confidentiality and proprietary rights agreements with our
employees, consultants and other third parties, as well as other contractual protections to establish and protect our intellectual property
rights. We control access to our software, documentation and other proprietary information, and our software is protected by United States
and international copyright laws. As of January 31, 2024, we had 50 issued patents and 2 patent applications pending in the United States
and 1 patent applications pending in foreign jurisdictions, all of which are associated with U.S. applications. Our issued patents will expire
approximately between 2031 and 2040. We are also a party to various license agreements with third parties who typically grant us the right
to use certain third-party technology in conjunction with our products and services, or to integrate software into our products, including open
source software and other software available on commercially reasonable terms. Although our success depends, in part, on our ability to
protect our proprietary technology and other intellectual property rights, we believe the technological and creative skills of our personnel, the
development of new features and functionality and frequent enhancements to our products and services are the primary methods of
establishing and maintaining our technology leadership position.
See the section entitled “Risks Related to Security, IT Systems and Intellectual Property” in Item 1A. "Risk Factors” below for more
information on our intellectual property risks.
Regulatory Matters
Traditional telephone service historically has been subject to extensive federal and state regulation, while Internet services generally have
been subject to less regulation. Because some elements of Voice-over-Internet Protocol (“VoIP”) resemble the services provided by
traditional telephone companies and others resemble the services provided by internet service providers, the VoIP industry has not fit easily
within the existing framework of telecommunications law. The Federal Communications Commission (“FCC”), the U.S. Congress, and various
regulatory bodies in the states and in foreign countries have imposed regulations on VoIP providers and are continuing to consider new
regulatory requirements on VoIP services.
Federal Regulation. As a provider of internet communications services, we are subject to a number of FCC regulations. Among others,
these regulatory obligations include: contributing to the Federal Universal Service Fund (“USF”), the Telecommunications Relay Service Fund
and federal programs related to phone number administration; providing access to E-911 services; protecting customer information; robocall
mitigation; and porting phone numbers upon a valid customer request.
State Regulation. The FCC has preempted much regulation of internet voice communications services. However, a number of states have
ruled that non-nomadic internet voice communications services may or do fall within the definition of “telecommunications services” or are
otherwise within state telecommunications regulatory jurisdiction and therefore those states assert that they have authority to regulate the
service. Although no states currently require certification for nomadic internet voice communications service providers, a number of states
have imposed certain traditional telecommunications requirements on such services. For example, a number of states require us to
contribute to state USF and E-911 and pay other surcharges, which are passed through to our customers, while others are actively
considering extending their public policy programs to include the services we provide. We expect that state public utility commissions will
continue their attempts to apply state telecommunications regulations to internet voice communications services like ours.
International Regulation. Our international operations are subject to laws and regulations in the countries in which we offer our services.
Regulatory treatment of internet communications services outside the United States varies from country to country, is often unclear, and may
be more onerous than imposed on our services in the United States In Canada, our service is regulated by the Canadian Radio-television
and Telecommunications Commission (“CRTC”) which, among other things, imposes requirements similar to the United States related to the
provision of E-911 services in all areas of Canada where the traditional telephone carrier offers such 911 services. Our regulatory obligations
in foreign jurisdictions could have a material adverse effect on our ability to expand internationally, and on the use of our services in
international locations.
See the section entitled “Risks Related to Regulatory and Tax Matters” in Item 1A. "Risk Factors" below for more information.
Available Information
Our filings with the SEC such as our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and
amendments to these reports are available free of charge at http://investors.ooma.com as soon as reasonably practical after they are
electronically filed with, or furnished to, the SEC. The SEC’s website, www.sec.gov, contains reports,
Ooma | FY2024 Form 10-K | 12
proxy statements and other information regarding issuers that file electronically with the SEC. The content on any website referred to in this
Form 10-K is not incorporated by reference in this Form 10-K unless expressly noted.
ITEM 1A. Risk Factors
Our current and prospective investors should carefully consider the risks and uncertainties described below, together with all of the other
information in this Form 10-K, including our consolidated financial statements and the related notes, “Management’s Discussion and Analysis
of Financial Condition and Results of Operations” and the “Cautionary Note Regarding Forward-Looking Statements,” before making
investment decisions regarding our common stock. The risks and uncertainties described below may not be the only ones we face but
include the most significant factors currently known by us. Additional risks and uncertainties that we are unaware of, or that we currently
believe are not material, also may become important factors that affect us. If any of the risks occur, our business, financial condition, results
of operations could be materially and adversely affected. In that event, the trading price of our common stock could decline, and you could
lose part or all of your investment.
Risk Factor Summary
Our business is subject to numerous risks and uncertainties, and the following is a summary of key risk factors when considering an
investment. This summary should be read together with the more detailed description of each risk factor contained in the subheadings further
below and should not be relied upon as an exhaustive summary of the material risks facing our business:
Risks Related to Our Business and Industry
•
If we are unable to attract new users in a cost-effective manner, our business will be materially and adversely affected.
•
•
•
Our customers may terminate their subscriptions for our services in most cases without penalty, and increased customer turnover, as
well as costs we incur to retain our customers and induce them to add users and/or functionality could materially and adversely affect
our financial performance.
A significant portion of our revenues today come from small and medium-sized businesses, which may have fewer financial resources to
weather an economic downturn, rising inflation, and defaults by financial institutions.
If we are unable to develop, acquire and/or sell new, or enhance existing, products, services or applications on a timely and cost-
effective basis, our business, financial condition, and results of operations may be materially and adversely affected.
• We may expand through acquisitions of, or investments in, other companies, each of which may divert our management’s attention,
result in additional dilution to our stockholders, increase expenses, disrupt our operations and harm our results of operations.
• We depend on several sole suppliers to provide the components for, and a small number of vendors to manufacture, certain on-premise
devices and end-point devices we sell, and any delay or interruption in manufacturing, configuring and delivering by these third parties
would result in delayed or reduced shipments to our customers and may increase our costs and harm our business and results of
operations.
A ransomware attack or other security breach could delay or interrupt service to our customers, compromise the integrity of our systems
or data that we collect, result in the loss of our intellectual property or confidential information, harm our reputation, or subject us to
significant liability.
•
• We rely significantly on retailers and reseller partnerships to sell our products; our failure to effectively develop, manage and maintain
these sales channels could materially and adversely affect our revenue and business.
• We face competition in our markets by our competitors (including mergers or other strategic transactions involving our competitors) and
may lack sufficient financial or other resources to compete successfully.
• We are continuing to expand our international operations, which may expose us to significant risks.
•
To deliver our services, we rely on third parties for our network connectivity and co‑location facilities for certain features in our services
and for certain elements of providing our services.
Interruptions in our services could harm our reputation, result in significant costs to us and impair our ability to sell our services.
•
• We rely on third parties, including third parties located in Russia, for some of our software development, quality assurance and
operations, and anticipate we will continue to do so for the foreseeable future.
• We rely on third parties to provide the majority of our customer service and support representatives. If these third parties do not provide
our customers with reliable, high‑quality service, our reputation and our business will be harmed, and we may be exposed to significant
liability.
Ooma | FY2024 Form 10-K | 13
•
•
Our business could suffer if we cannot obtain or retain direct inward dialing numbers, or DIDs, are prohibited from obtaining local or toll-
free numbers, or are limited to distributing local or toll-free numbers to only certain customers.
If we are unable to effectively process local number and toll-free number portability provisioning in a timely manner, our growth may be
negatively affected.
• We may not be able to achieve or sustain profitability in the future and our rates of growth may decline.
•
Our quarterly and annual results have fluctuated in the past and may continue to do so. As a result, we may fail to meet or to exceed the
expectations of analysts or investors, which could cause our stock price to fluctuate.
If we do not manage inventory levels and purchase commitments effectively, we may experience excess inventory levels, inventory
obsolescence, or inventory shortages that could adversely affect our results of operations.
Our level of indebtedness could adversely affect our financial condition.
Our existing credit agreements impose operating and financial restrictions on us.
Risks Related to Security, IT Systems and Intellectual Property
• We have incurred, and expect to continue to incur, significant costs to protect against security breaches. We may incur significant
additional costs in the future to address any actual or perceived security breaches.
Failures in internet infrastructure or interference with broadband access, or providers of broadband services blocking or degrading our
services, could cause current or potential customers to believe that our systems are unreliable, leading our current customers to switch
to our competitors or potential customers to avoid using our services.
If we experience excessive fraudulent activity or cannot meet evolving credit card association merchant standards, we could incur
substantial costs and lose the right to accept credit cards for payment, which could cause our customer base to decline significantly.
Any failure to obtain protection of our intellectual property rights could materially and adversely affect our business.
•
•
•
Risks Related to Regulatory and Tax Matters
•
Future legislative or regulatory actions, such as the adoption of additional 911 requirements or new taxes, could increase our costs and
adversely affect our business and expose us to liability.
If we cannot comply with regulations, including communications and telecommunications laws and rules of the Federal Communications
Commission ("FCC") imposing call signaling requirements on VoIP providers like us, we may be subject to fines, cease and desist
orders, restrictions on our business, or other penalties.
The FCC has continued to increase regulation of interconnected VoIP services and may at any time determine certain VoIP services are
telecommunications services subject to traditional common carrier regulation.
Reform of federal and state USF programs could increase the cost of our service to our customers, diminishing or eliminating our pricing
advantage.
• We process, store, and use personal information and other data, which subjects us and our customers to a variety of evolving industry
standards, contractual obligations and other legal rules related to privacy, which may increase our costs, decrease adoption and use of
our products and services, and expose us to liability.
Ooma | FY2024 Form 10-K | 14
•
•
•
•
•
•
Risks Related to Our Business and Our Industry
If we are unable to attract new users in a cost-effective manner, our business will be materially and adversely affected.
In order to grow our business, we must continue to attract new users in a cost-effective manner. We use and periodically adjust the mix
of advertising and marketing programs to promote our services. Significant increases in the pricing of one or more of our advertising channels
could increase our advertising costs or may cause us to choose less expensive and perhaps less effective channels to promote our services.
As we add to or change the mix of our advertising and marketing strategies, we may need to expand into channels with significantly higher
costs than our current programs, which could materially and adversely affect our results of operations. We will incur advertising and
marketing expenses in advance of when we anticipate recognizing any revenue generated by such expenses, and we may fail to experience
an increase in revenue or brand awareness as a result of such expenditures. We have made in the past, and may make in the future,
significant expenditures and investments in new advertising campaigns, and we cannot assure you that any such investments will lead to the
cost-effective acquisition of additional customers. New users are drawn to our products and services by rankings circulated by organizations
such as Amazon, Apple and Google app stores and highly regarded publications such as PCMag and Consumer Reports. If we are unable to
maintain effective advertising programs and garner favorable rankings, our ability to attract new customers could be materially and adversely
affected, which could lead us to increase our advertising and marketing expenditures substantially, and our results of operations may suffer.
We market our products and services principally to businesses and households. Some of these business customers and consumers are
less technically knowledgeable and may be resistant to new technologies such as our cloud-based communications solutions and our
connected services. Because our potential customers need to connect additional hardware at their location and take other steps not required
for the use of traditional communications services such as telephone, fax and e-mail, these customers may be reluctant to use our service.
These customers may also lack sufficient resources, financial or otherwise, to invest in learning about our services, and therefore may be
unwilling to adopt them. If these customers choose not to adopt our services, our ability to grow our business could be negatively affected.
Our customers may terminate their subscriptions for our service in most cases without penalty, and increased customer turnover,
as well as costs we incur to retain our customers, encourage them to add users and purchase additional functionalities and
premium services, could materially and adversely affect our financial performance.
Our service plans are generally sold as monthly subscriptions and our customers may terminate their monthly subscription for
convenience without any penalty. Certain of our service plans are also sold as annual and multi-year subscriptions, typically ranging up to
three years. However, our customers have no obligation to renew their subscriptions for such services and may elect to terminate their
subscription for any number of reasons. As a result, we have no assurance that the revenue stream associated with a particular customer
account will continue beyond the initial subscription term. Additionally, our Ooma Business customers may choose to reduce the number of
lines or remove some of the solutions to which they subscribe. Given Ooma Business customers generally pay more for their subscriptions
than residential or mobile customers, any increased churn in business customers could materially and adversely affect our core user growth,
financial performance and results of operations, and thereby increase the costs we incur in our efforts to retain our customers and encourage
them to upgrade their services and increase their number of users.
Our core user churn rate could increase significantly in the future if customers are not satisfied with our service, the value proposition of
our services, our ability to otherwise meet their needs and expectations, and/or other factors beyond our control, including the impact of rising
inflation and a slowing economy. As a result, we may have to acquire new customers or new users within our existing customer base on an
ongoing basis simply to maintain our existing level of revenue. If a significant number of customers, or one or more larger customers,
terminate, reduce or fail to renew their subscriptions, we may need to incur significantly higher marketing expenditures than anticipated to
maintain or increase our revenue, which could harm our business and results of operations. Our efforts to mitigate risk of customer churn due
to any factor may divert management’s time and focus away from efforts to address customer churn due to other factors. This broad-based
susceptibility to churn could materially and adversely affect our financial performance.
Our future success also depends in part on our ability to sell additional subscriptions and functionalities to our current customer base,
which may require increasingly sophisticated, costlier sales efforts and a longer sales cycle. Any increase in the costs necessary to upgrade,
expand and retain existing customers could materially and adversely affect our financial performance. Such increased costs could cause us
to increase our subscription rates, which could increase our customer turnover rate. If our efforts to convince customers to add users and, in
the future, to purchase additional functionalities are not successful, our business may suffer.
Ooma | FY2024 Form 10-K | 15
A significant portion of our revenues today come from small and medium-sized businesses, which may have fewer financial
resources to weather an economic downturn, rising inflation, and defaults by financial institutions.
A significant portion of our revenues today comes from small and medium-sized businesses. These customers may be more susceptible
to negative impact from economic downturns, rising inflation, and defaults by financial institutions than larger, more established businesses
as these businesses typically have fewer financial resources than larger entities. For example, small and medium-sized businesses may
have fewer financial resources to weather high inflation rates.
As the majority of our customers pay for our subscriptions through credit and debit cards, weakness in certain segments of the credit
markets and in the United States and global economies has resulted in and may in the future result in increased numbers of rejected credit
and debit card payments and business failures, which could materially affect our business by increased customer default or cancellations. If
small and medium-sized businesses experience financial hardship or declare bankruptcy as a result of a weak economy, defaults by financial
institutions, or for any other reason, the overall demand for our subscriptions could be materially and adversely affected.
If we are unable to develop, acquire and/or sell new, or enhance existing, products, services or applications on a timely and cost-
effective basis, our business, financial condition, and results of operations may be materially and adversely affected.
The cloud-based communications and connected services industries are characterized by rapid changes in customer requirements,
frequent introductions of new and enhanced services, and continuing and rapid technological advancement. To compete successfully in these
emerging markets, we must anticipate and adapt to unpredictable technological changes and evolving industry standards and continue to
design, develop, manufacture and sell new and enhanced services and products that provide increasingly higher levels of performance and
reliability at lower cost. For fiscal 2024, we derived approximately 58% of our revenue from Ooma Business and approximately 40% from
Ooma Residential and expect they will continue to account for most of our revenue for the foreseeable future.
However, our future success will also depend on our ability to introduce and sell new services, such as our fiscal 2023 launch of Ooma
Office Pro Plus or our newly-acquired 2600Hz solutions, as well as products, features and functionality that enhance or are beyond the voice,
fax, text and connected services we currently offer, as well as to improve usability and support and increase customer satisfaction. The
success of new product introductions, such as our fiscal 2023 launch of AirDial, depends on a number of factors including, but not limited to:
pricing, market and customer acceptance, the ability to successfully identify and anticipate product trends, effective forecasting and
management of product demand, purchase commitments and inventory levels, availability of products in appropriate quantities to meet
anticipated demand, ability to obtain timely and adequate delivery of components for our new products from third-party suppliers,
management of manufacturing and supply costs, management of risks and delays associated with product design and production ramp-up,
delays in customer readiness for AirDial installations, the quality of AirDial installations performed by third-parties, ability to maintain the
levels of service uptime and performance required by our customers, and the risk that new products or enhanced versions of existing
products, may have quality issues or other defects or bugs in the early stages of introduction including testing of new components and
features. Moreover, the market for plain old telephone service ("POTS") line replacement is relatively new and characterized by long sales
cycles, and Ooma AirDial may not result in long-term success or significant revenue for us. Our failure to develop solutions that satisfy
customer preferences in a timely and cost-effective manner may harm our ability to renew our subscriptions with existing customers and to
create or increase demand for our services and products and may materially and adversely impact our results of operations.
The introduction or announcement of new services and technologies by our competitors, including artificial intelligence ("AI") tools, could
make our existing solutions obsolete, cause customers to defer purchases of our products and services, or otherwise adversely affect our
business and results of operations. Further, we may experience higher product returns from retailers or reseller partners and may face
challenges managing the inventory of new or existing products, which could lead to excess inventory charges and/or discounting of such
products. In addition, new products may have varying selling prices and higher costs or different kinds of costs compared to legacy products,
which could negatively impact our gross margins and operating results. For example, as and to the extent sales of AirDial increase, we
expect to incur higher levels of support costs.
Ooma | FY2024 Form 10-K | 16
We may experience difficulties with software development, operations, design or marketing that could delay or prevent the introduction
or implementation of new or enhanced products, services and applications. We have in the past experienced and may in the future
experience delays in the planned release dates of new features and upgrades and have discovered defects in new services and applications
after their introduction. New products, or new features or upgrades to existing products and services, may not be released according to
schedule, or, when released, they may contain defects. Either of these situations could result in adverse publicity, loss of revenue, higher
than expected costs, delay in market acceptance or claims by customers against us, all of which could harm our reputation, business, results
of operations and financial condition.
Moreover, the development of new or enhanced products, services or applications may require substantial investment, and we must
continue to invest a significant amount of resources in our research and development efforts to remain competitive. We do not know whether
these investments will be successful. If we are unable to develop, license or acquire new or enhanced products, services and applications on
a timely and cost‑effective basis, or if such new or enhanced products, services and applications do not achieve adequate market
acceptance, we may not be able to realize a return on our investments and our business, financial condition and results of operations may be
materially and adversely affected.
We may expand through acquisitions of, or investments in, other companies, each of which may divert our management’s
attention, result in additional dilution to our stockholders, increase expenses, disrupt our operations and harm our results of
operations.
Our business strategy has in the past and may, from time to time in the future, include acquiring or investing in complementary services,
technologies or businesses. We may not be able to find suitable acquisition candidates, and we may not be able to complete acquisitions on
favorable terms, if at all. If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals, and
any acquisitions we complete could be viewed negatively by users, customers or investors. If we fail to successfully integrate such
acquisitions, or the technologies associated with such acquisitions, the revenue and operating results of the combined company could be
adversely affected. Acquisitions may disrupt our ongoing operations, divert management from their primary responsibilities, subject us to
additional liabilities, increase our expenses and adversely impact our business, financial condition, operating results and cash flows. We may
not successfully evaluate or utilize the acquired technology and accurately forecast the financial impact of an acquisition transaction,
including accounting charges. We have recorded significant goodwill and intangible assets in connection with our acquisitions, and in the
future, if our acquisitions do not yield expected revenue, we may be required to take material impairment charges that could adversely affect
our results of operations.
We may have to pay cash, incur debt or issue equity securities to pay for any such acquisition, each of which could affect our financial
condition or the value of our capital stock. The sale of equity to finance any such acquisitions could result in dilution to our stockholders. If we
incur debt it would result in increased fixed obligations and could also subject us to covenants or other restrictions that would impede our
ability to manage our operations. In addition, our future operating results may be impacted by performance earnouts or contingent payments.
Furthermore, acquisitions may require large one-time charges and can result in increased debt or contingent liabilities, adverse tax
consequences, additional stock-based compensation expense and the recording and subsequent amortization or impairments of amounts
related to certain purchased intangible assets or goodwill, any of which could negatively impact our future results of operations. For example,
in the third quarter of fiscal 2024, we incurred $18.0 million of borrowings used for the acquisition of 2600Hz.
When we enter into strategic transactions in which we acquire other companies, we cannot guarantee we will be able to successfully
integrate the teams, assets, technologies or business of these target companies into our business, that we will be able to fully recover the
costs of such transactions, that we will retain existing key customer and partner relationships, that we will be successful in leveraging such
strategic transactions into increased business for our products, or that we will otherwise be able to achieve the intended results of the
acquisitions.
We depend on several sole suppliers to provide the components for, and a small number of vendors to manufacture, certain on-
premise devices and end-point devices we sell, and any delay or interruption in manufacturing, configuring and delivering by these
third parties would result in delayed or reduced shipments to our customers and may increase our costs and harm our business
and results of operations.
We primarily contract with manufacturers in Vietnam and other Asian countries to produce our on-premise devices and end-point
devices and our results of operations has been and could be further affected by slowdowns in manufacturing due to external factors such as,
global conflicts and other factors.
We currently do not have long-term contracts with our contract manufacturers and they are not obligated to provide products to, or
perform services for, us for any specific period, in any specific quantities or at any specific price, except as may be provided in a particular
purchase order. If these third parties are unable or unwilling to deliver products of acceptable quality or in a timely manner, our ability to bring
services to market, the reliability of our services and our reputation could
Ooma | FY2024 Form 10-K | 17
suffer. We expect that it could take several months to effectively transition to new third-party manufacturers or fulfillment agents. We may also
decide to switch to or bring on additional contract manufacturers to better meet our needs. Switching to or bringing on a new contract
manufacturer and commencing production is expensive and time-consuming and may cause delays in order fulfillment at our existing
contract manufacturers or cause other disruptions.
Additionally, several components used in our on-premise devices, end-point devices and new products such as Ooma AirDial are “single
sourced” and any interruption in the suppliers of such components could cause our business and operating results to suffer as we identify
alternative sources of components. For example, we have in the past experienced longer lead times in the supply of some of these
components as a result of global supply chain disruptions. We are also subject to the risk of shortages (including changes in the prioritization
of our orders), price increases and the risk that our suppliers may discontinue or modify components used in our products. Some product
costs have become subject to significantly higher pricing we experienced due to supply chain constraints in the global macroeconomic
environment and we may not be able to fully offset such higher costs through price increases. The occurrence of other events outside our
control, such as public health crises, natural disasters or climate change, could impact our suppliers’ facilities and component providers,
many of which are located in Vietnam and other countries in Asia. Furthermore, the geopolitical and economic uncertainty and/or instability
that may result from changes in the relationship among the United States, Taiwan and China, may, directly or indirectly, materially harm our
business, financial condition and results of operations. For example, certain of our contract manufacturers and suppliers are dependent on
products sourced from Taiwan which has been distinguished in its prevalence in certain global markets. Hence, greater restrictions and/or
disruptions of our contract manufacturers’ suppliers’ ability to operate facilities and/or do business in and with Taiwan may increase the cost
of certain materials and/or limit the supply of products sourced from Taiwan and may result in deterioration of our profit margins, a potential
need to increase our pricing and, in so doing, may decrease demand for our products and thereby adversely impact our revenue or
profitability.
A ransomware attack or other security breach could delay or interrupt service to our customers, compromise the integrity of our
systems or data that we collect, result in the loss of our intellectual property or confidential information, harm our reputation, or
subject us to significant liability.
Our operations depend on our ability to protect our network from interruption or damage resulting from unauthorized access or entry,
computer viruses or malware or other events beyond our control, and our ability to detect any such events. In the past, we have been subject
to distributed denial-of-service ("DDOS cyberattacks"), and have been subject to other forms of attacks by hackers intent on bringing down
our services or accessing confidential information. Although these attempts were not successful in penetrating our network, we may be
subject to other DDOS and other forms of attacks in the future, undetected or otherwise. Recent developments in the threat landscape
include use of AI and machine learning, as well as an increased number of cyber extortion and ransomware attacks, with higher financial
ransom demand amounts and increasing sophistication and variety of ransomware techniques and methodology. For example, the industry
has experienced an increase in cyber-attack activity has been observed in connection with Russia’s invasion of Ukraine. We cannot assure
you that our backup systems, regular data backups, physical, technological and organizational security protocols and measures and other
procedures that are currently in place, or that may be in place in the future, will be adequate to detect or prevent unauthorized access to our
systems, significant damage, system interruption, degradation or failure, or data loss or to respond to a cyberattack once launched.
Additionally, hackers may attempt to directly gain access to a customer's on-premise appliance, or their mobile phone, which may delay or
interrupt services, or may subject our customers to further security risks, including in relation to any connected household devices a customer
might have now or in the future, such as our connected smart security sensors and our partner's connected devices or to our network more
generally. Also, our services are web-based, and the amount of data we store for our users on our servers has been increasing as our
business has grown.
Despite our ongoing efforts to enhance security measures, our infrastructure and those of third parties we rely upon may be vulnerable
to hackers, phishing, computer viruses, worms, ransomware other malicious software programs or similarly disruptive problems caused by
our customers, employees, consultants or other internet users who attempt to invade public and private data networks. In some cases, we do
not have in place disaster recovery facilities for certain ancillary services, such as email delivery of messages. Currently, a majority of our
customers authorize us to bill their credit or debit card accounts directly for all transaction fees that we charge. We rely on encryption and
authentication technology to ensure secure transmission of confidential information, including customer credit and debit card numbers.
Despite our efforts to encrypt and secure transmission of confidential customer information, hackers with sufficiently sophisticated technology
or methods may still be able to infiltrate our systems to gain unauthorized access to payment card information. Further, advances in computer
capabilities, new discoveries in the field of cryptography or other developments may result in a compromise or breach of the technology we
use to protect transaction data. In addition, because the techniques used to obtain unauthorized access to the information systems change
frequently, and may not be recognized until launched against a target, we may be unable to anticipate these techniques or to implement
adequate preventative measures.
Ooma | FY2024 Form 10-K | 18
Third parties may attempt to fraudulently induce employees, consultants or customers into disclosing sensitive information, such as user
names, passwords, customer proprietary network information ("CPNI"), intellectual property or other information in order to gain access to our
customers' data or to our data. CPNI includes information such as the phone numbers called by a customer, the frequency, duration, and
timing of such calls, and any services purchased by the customer, such as call waiting, call forwarding and caller ID, in addition to other
information that may appear on a customer's bill. In addition, because the techniques used to obtain unauthorized access, or to sabotage
systems, change frequently and generally are not recognized until launched against a target, we may be unable to anticipate these
techniques or to implement adequate preventative measures. In addition, as noted above, due to political uncertainty and military actions
associated with Russia’s invasion of Ukraine, we and our vendors, business partners, and contractors may also be vulnerable to heightened
risks of cyber-attacks, including from or affiliated with nation-state actors, which could materially disrupt our systems and operations, supply
chain, and ability to produce, sell and distribute our services and products. Any compromise or perceived compromise of our security could
damage our reputation, and could subject us to significant liability, as well as regulatory action, including financial penalties, which would
materially adversely affect our brand, results of operations, financial condition, business and prospects.
See “Risks Related to Security, IT Systems and Intellectual Property” for further risks related to security breaches.
We rely significantly on retailers and reseller partnerships to sell our products; our failure to effectively develop, manage and
maintain these sales channels could materially and adversely affect our revenue and business.
A significant portion of our Ooma Residential and Ooma Business product sales are made through a combination of direct sales and
leading retailers such as Amazon, Costco.com, Best Buy and Walmart, as well as reseller partnerships. Our future success depends on our
ability to effectively maintain, develop and expand our retail channel and reseller partnership sales as we seek to grow and expand our
customer base. We generally do not have long-term contracts with our retailers and reseller partners, and we have in the past and may in the
future experience a loss of or reduction in sales through any of these third parties, which could materially reduce our revenue and profit
margins. Our competitors may in some cases be effective in causing our current and potential retailers, and reseller partners to favor their
services or prevent or reduce sales of our services. If we fail to maintain or develop new relationships with retailers and reseller partners in
new markets or expand the number of retailers and reseller partners in existing markets, fail to manage, train, or provide appropriate
incentives to our existing retailers and reseller partners, or if they are not successful in their sales efforts, sales of our products and services
may decrease and our results of operations would suffer.
Our Talkatone application relies significantly on the Apple and Google app stores for distribution. Its future success depends on our
continued ability to distribute Talkatone through these app stores and increase its visibility therein. If Apple or Google determine that
Talkatone is non-compliant with their app store vendor policies, they may revoke our rights to sell Talkatone through their app store at any
time, which could adversely affect our revenue.
We face competition in our markets and may lack sufficient financial or other resources to compete successfully. Mergers or other
strategic transactions involving our competitors could adversely affect our ability to compete effectively and harm our results of
operations.
The cloud-based communications and connected services industries are highly competitive and we expect that competition will continue
to be intense in the future. Increased competition may result in pricing pressures, reduced profit margins and may impede our ability to
continue to increase the sales of our services and products or cause us to lose market share, any of which could substantially harm our
business and results of operations. We face continued competition from established communications providers, such as Comcast
Corporation, Verizon Communications Inc. and Rogers Communications Inc.; as well as from traditional on-premise, hardware business
communications providers, mobile communications app companies providing “over-the-top” solutions, large internet companies that offer
services with features that compete with some of what we offer, and certain other communications companies. These companies currently or
may in the future host their solutions through the cloud.
Some of our competitors have been acquired, and may in the future consolidate with or be acquired by, other companies and
competitors. Some of our competitors may enter into new alliances with each other or may establish or strengthen cooperative relationships
with systems integrators, third-party consulting firms or other parties. Any such consolidation, acquisition, alliance or cooperative relationship
could adversely affect our ability to compete effectively and lead to downward pricing pressure and our loss of market share, and could result
in a competitor with greater financial, technical, marketing, service and other resources, all of which could harm our business, results of
operations and financial condition.
Furthermore, increased competition may result in aggressive business and pricing tactics by our competitors, including: offering products
similar to our platforms and solutions on a bundled basis at no charge; announcing competing products combined with extensive marketing
efforts; providing financial incentives to consumers; and asserting intellectual property rights irrespective of the validity of the claims. In
addition, our retail partners may offer the products and services of
Ooma | FY2024 Form 10-K | 19
competing companies, which would adversely affect our business. Competition from other companies may also adversely affect our
negotiations with service providers and suppliers, including, in some cases, requiring us to lower our prices. We may not be able to compete
successfully with the offerings and sales tactics of other companies, which could result in the loss of customers and, as a result, our revenue
and profitability could be adversely affected.
The market for our newly-acquired CPaaS and CCaaS 2600Hz solutions is rapidly evolving, significantly fragmented and highly
competitive, with relatively low barriers to entry in some segments. Our competitors in this segment of the market are primarily (i) CPaaS
companies that offer communications products and applications, and (ii) other software companies that compete with portions of these and
CCaaS solutions. Some of our competitors and potential competitors in this segment are larger and have greater name recognition, longer
operating histories, more established customer relationships, larger budgets, lower operating costs, and significantly greater resources than
we do. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities,
technologies, standards, customer requirements or changing economic conditions. Our competitors may also offer products or services that
address one or a limited number of functions at lower prices, with greater depth than our products or in different geographies. Our current
and potential competitors may develop and market new products and services with comparable functionality to our products, and this could
lead to us having to decrease prices in order to remain competitive. Additionally, in connection with our AirDial product offering, we face
competition in the POTS replacement market from a range of other companies, such as Verizon Communications Inc., Granite
Telecommunications LLC, MetTel Inc., and Napco Securities Technologies, Inc., as well as other service providers that bundle their offerings
with POTS-related products from POTS replacement equipment manufacturers, such as DataRemote Inc.
Our business, operating results and financial condition also depend, in part, on our ability to establish and maintain relationships through
resellers, distributors, and strategic partners. A portion of our revenue is derived from sales made by these partners and any one of them
may later decide to sell their own products or those of third parties that may be competitive with our products. A loss or reduction in sales of
our products through these third-party intermediaries could adversely affect our revenue and other results of operations.
Ooma | FY2024 Form 10-K | 20
We are continuing to expand our international operations, which may expose us to significant risks.
To date, we have not generated significant revenue from outside of the United States and Canada, but we have continued to expand
operations outside North America as we ramp up to provide services in certain countries internationally. The future success of our business
will depend, in part, on our ability to expand our operations and customer base worldwide. Operating in international markets requires
significant resources and management attention and will subject us to regulatory, economic and political risks different from those in the
United States. Because of our limited experience with international operations and developing and managing sales and distribution channels
in international markets, our expansion efforts may not succeed. We face risks in doing business internationally that could materially and
adversely affect our business, including:
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our ability to comply with differing and evolving technical and environmental standards, telecommunications regulations, and
certification requirements outside the United States;
our ability to comply with different and evolving laws, rules, regulations and standards relating to data privacy, data protection,
data localization and data security enacted in countries in which we operate or do business;
potential contractual and other liability to our business partners if we fail to meet their aggressive expansion schedules in new
locations;
difficulties and costs associated with staffing and managing foreign operations;
potentially greater difficulty collecting accounts receivable and longer payment cycles;
the need to adapt and localize our services for specific countries;
the need to offer customer care in various languages;
reliance on third parties over which we have limited control for marketing and reselling our services;
availability of reliable broadband connectivity and wide area networks in targeted areas for expansion;
lower levels of adoption of credit or debit card usage for internet related purchases by foreign customers and compliance with
various foreign regulations related to credit or debit card processing and data privacy;
difficulties in understanding and complying with local laws, regulations, and customs in foreign jurisdictions;
export controls and trade and economic sanctions administered by the Department of Commerce Bureau of Industry and
Security and the Treasury Department’s Office of Foreign Assets Control;
tariffs and other non-tariff barriers, such as quotas and local content rules;
tariffs imposed by the United States on goods from other countries and tariffs imposed by other countries on U.S. goods,
including the tariffs implemented and additional tariffs that have been proposed by the U.S. government on various imports from
China, Canada, Mexico and the EU, and by the governments of these jurisdictions on certain U.S. goods, and any other possible
tariffs that may be imposed on services such as ours, the scope and duration of which, if implemented, remain uncertain;
compliance with various anti-bribery and anti-corruption laws such as the U.S. Foreign Corrupt Practices Act of 1977, as
amended, or the FCPA;
more limited protection for intellectual property rights in some countries;
adverse tax consequences;
fluctuations in currency exchange rates, economic stability, and inflationary conditions which could increase the price of our
services outside of the United States, increase the expenses of our international operations, including expenses related to
foreign contractors, and expose us to foreign currency exchange rate risk;
exchange control regulations, which might restrict or prohibit our conversion of other currencies into U.S. Dollars;
restrictions on the transfer of funds;
international conflict and sanctions, such as those resulting from Russia’s ongoing invasion of Ukraine;
deterioration of political relations between the United States and other countries; and
political or social unrest or economic instability in a specific country or region, which could have an adverse impact on our third-
party software development and quality assurance operations there.
Ooma | FY2024 Form 10-K | 21
Failure to manage any of these risks could harm our future international operations and our overall business.
To deliver our services, we rely on third parties for our network connectivity and co‑location facilities for certain features in our
services and for certain elements of providing our services.
We expect that we will continue to rely on third-party service providers for hosting, internet access and other services that are vital to our
service offering for the foreseeable future. For example, Equinix, Inc. and others provide data center facilities, and Inteliquent and others
provide origination services. Inteliquent is also our primary provider of 911 services. We also rely on third-party service providers or are
unable to provide for our SMS and speech-to-text services which are sole-sourced. If any of these network service providers stop providing or
are unable to provide us with access to their infrastructure, fail to provide these services to us on a cost-effective basis, cease operations, or
otherwise terminate these services, the delay caused by qualifying and switching to another third-party network service provider, if one is
available, could have a material adverse effect on our business and results of operations.
We may be required to transfer our servers to new data center facilities if we are unable to renew our leases on acceptable terms, if at
all, or the owners of the facilities decide to close their facilities, and we may incur significant costs and possible service interruption in
connection with doing so. Any financial difficulties, such as bankruptcy or foreclosure, faced by our third-party data center operators or any of
the service providers with which we or they contract, may have negative effects on our business, the nature and extent of which are difficult to
predict. Additionally, if our data centers are unable to keep up with our increasing needs for capacity, our ability to grow our business could be
materially and adversely impacted.
If problems occur with any of these third-party network or service providers for any reason, including cyberattacks, it may cause errors or
reduced quality in our services, and we could encounter difficulty identifying the source of the problem. The occurrence of errors or reduced
quality in our service, whether caused by our systems or a third-party network or service provider, may result in the loss of our existing
customers, delay or loss of market acceptance of our services, termination of our relationships and agreements with our resellers or liability
for failure to meet service level agreements, and may seriously harm our business and results of operations.
We rely on purchased or leased hardware and software licensed from third parties in order to offer our services. In some cases, we
integrate third-party licensed software components into our platforms. For example, we are integrating third-party billing software into our
platforms. Failure to integrate such billing platforms could result in increased expenses, errors, and delays. Third-party hardware and
software, or future technology we may want to license, may not continue to provide competitive features and functionality or be available to
us at reasonable prices or on commercially reasonable terms, or at all. Any loss of the right to use any of this hardware or software could
significantly increase our expenses and otherwise result in delays in the provisioning of our service until equivalent technology is either
developed by us, or, if available, is identified, obtained and integrated. Any errors or defects in third-party hardware or software could result in
errors or a failure of our service which could harm our business.
We also contract with one or more third parties to provide enhanced 911, or E-911, services, including assistance in routing emergency
calls and terminating E-911 calls. Our providers operate a national call center that is available 24 hours a day, seven days a week, to receive
certain emergency calls and maintain public service answering point, or PSAP, databases for the purpose of deploying and operating E-911
services. On mobile devices, we generally rely on the underlying cellular or wireless carrier to provide E-911 services. Any failure to perform,
including interruptions in service, by our vendors, could cause failures in our customers’ access to E-911 services and expose us to
significant liability and damage our reputation.
Interruptions in our services could harm our reputation, result in significant costs to us and impair our ability to sell our services.
Because our technology platforms are complex, incorporate a variety of new computer hardware, and the platforms continue to evolve,
our services may have errors, defects or required updates that are identified after customers begin using such services, which could result in
unanticipated service interruptions. Although we test our services to detect and correct errors and defects before their initial release and
before we make updates or other changes to such services, we have occasionally experienced significant service interruptions as a result of
undetected errors or defects and may experience future interruptions of service if we fail to detect and correct errors and defects. In addition,
updates to our hardware and/or software due to changes in third-party service providers may be required from time to time. Furthermore, the
costs incurred in correcting root causes for service outages and updating our hardware and/or software may be substantial and these and
other related consequences could negatively impact our results of operations.
Ooma | FY2024 Form 10-K | 22
We currently serve the majority of our customers from data centers in Northern California, Texas and Virginia, where we lease space
from Equinix, Inc. We also lease data center space in certain cities in Europe and serve some of our customers from cloud service providers.
These facilities and the procedures we have implemented to restore services quickly in the event of a service outage, by themselves, will not
prevent future outages. Any damage to, or failure of, these facilities, the communications network providers with whom we or they contract or
with the systems by which our communications providers allocate capacity among their customers, including us, could result in interruptions
in our service. Additionally, in connection with the expansion or consolidation of our existing data center facilities, we may move or transfer
our data and our customers’ data to other data centers. Despite precautions we take during this process, any unsuccessful data transfers
may impair or cause disruptions in the delivery of our service.
Despite precautions taken at our hosting facilities, the occurrence of a natural disaster, cyberattack, or an act of terrorism or other
unanticipated problems at these facilities could result in lengthy interruptions in our service. Even with the disaster recovery arrangements
that we have in place, our service could be interrupted. Any defects in, or unavailability of, the components of our platforms that cause
interruptions of our services could, among other things: cause a reduction in revenue or a delay in market acceptance of our services; require
us to issue refunds to our customers or expose us to claims for damages; cause us to lose existing customers and make it more difficult to
attract new customers; divert our development resources or require us to make extensive changes to our software, which would increase our
expenses and slow innovation; increase our technical support costs; and harm our reputation and brand.
We rely on third parties, including third parties located in Russia, for some of our software development, quality assurance and
operations, and anticipate we will continue to do so for the foreseeable future.
We outsource certain of our software development and design, quality assurance and operations activities to third-party contractors that
have employees and consultants in a number of international locations, including Russia. Our dependence on third-party contractors creates
numerous risks; in particular, international sanctions imposed as a result of Russia’s ongoing invasion of Ukraine could limit our ability to
transact with our third-party contractors in Russia, which could disrupt or delay current or future planned research and development activities,
increase our costs, or force us to shift development efforts to resources in other geographies that may not possess the same level of cost
efficiencies.
More generally, there is the risk that we may not maintain control or effective management with respect to these business operations.
Our agreements with these third-party contractors are either not terminable by them (other than at the end of the term or upon an uncured
breach by us) or require at least 30 days’ prior written notice of termination. If we experience problems with our third-party contractors, the
costs charged by our third-party contractors increase, or our agreements with our third-party contractors are terminated, we may not be able
to develop new solutions, enhance or operate existing solutions or provide customer support in an alternate manner that is equally or more
efficient and cost-effective. If we are unsuccessful in maintaining existing and, if needed, establishing new relationships with third parties, our
ability to efficiently operate existing services or develop new services and provide adequate customer support could be impaired, and as a
result, our competitive position or our results of operations could suffer.
We rely on third parties to provide the majority of our customer service and support representatives. If these third parties do not
provide our customers with reliable, high‑quality service, our reputation and our business will be harmed, and we may be exposed
to significant liability.
We offer customer support through both our online account management website and our toll-free customer support number. Our
customer support is currently provided via a third-party provider located in the Philippines, as well as our U.S. employees. The ability to
support our customers may be disrupted by natural disasters, inclement weather, civil unrest, strikes, terrorism, breaches of data security,
and other adverse events. A significant service outage may cause a high volume of customer support inquiries, and our third‑party customer
service center may not be able to respond to such inquiries in a timely manner, which would adversely impact our ability to deliver on our
customer commitments. We currently offer support almost exclusively in English. As we expand our operations internationally, we have made
and will need to continue to make significant expenditures and investments in our customer service and support to adequately address the
complex needs of international customers, such as support in multiple foreign languages. Industry consolidation among customer service
providers may impact our ability to obtain these services or increase our costs for these services.
Ooma | FY2024 Form 10-K | 23
If we fail to continue developing our brand or our reputation is harmed, our business may suffer.
We believe that continuing to strengthen our current brand will be critical to achieving widespread acceptance of our services and will
require continued focus on active marketing efforts. The demand for and cost of online and traditional advertising have been increasing and
may continue to increase. Accordingly, we may need to increase our investment in, and devote greater resources to, advertising, marketing,
and other efforts to create and maintain brand loyalty among users. Brand promotion activities may not yield increased revenue, and even if
they do, any increased revenue may not offset the expenses incurred in building our brands. If we fail to promote and maintain our brand, or
if we incur substantial expense in an unsuccessful attempt to promote and maintain our brands, our business could be materially and
adversely affected.
Our services, as well as those of our competitors, are regularly reviewed and commented upon by online and social media sources, as
well as computer and other business publications. Negative reviews, or reviews in which our competitors’ products and services are rated
more highly than our solutions, could negatively affect our brand and reputation. From time to time, our customers have expressed
dissatisfaction with our services, including dissatisfaction with our customer support, our billing policies and the way our services operate. If
we do not handle customer complaints effectively, our brand and reputation may suffer, we may lose our customers’ confidence, and they
may choose to terminate, reduce or not to renew their subscriptions. In addition, many of our customers participate in social media and online
blogs about internet-based services, including our services, and our success depends in part on our ability to minimize negative and generate
positive customer feedback through such online channels where existing and potential customers seek and share information. If actions we
take or changes we make to our services do not receive a favorable reception from these customers, their blogging could negatively affect
our brand and reputation. Complaints or negative publicity about our services or customer service could materially and adversely impact our
ability to attract and retain customers and our business, financial condition and results of operations.
We may not be able to effectively manage our growth and the increased complexity of our business, which could negatively impact
our brand, financial performance and increase the risk of investing in our stock.
We continue to experience significant growth in our business, including through our expansion domestically and internationally, as well
as through our acquisitions of 2600Hz in October 2023 and OnSIP in July 2022. This growth has placed and may continue to place significant
demands on our management and our operational and financial infrastructure. As our operations grow in size, scope and complexity, we will
need to increase our sales and marketing efforts and personnel worldwide, and improve and upgrade our systems and infrastructure to
attract, service, and retain an increasing number of users. For example, we expect the volume of simultaneous calls to increase significantly
as our user base grows, and our network hardware and software may not be able to accommodate this additional simultaneous call volume.
The expansion of our systems and infrastructure will require us to commit substantial financial, operational and technical resources in
advance of an increase in the volume of business, with no assurance that the volume of business will increase. Any such additional capital
investments will increase our cost base. Continued growth could also strain our ability to maintain reliable service levels for our users,
develop and improve our operational, financial and management controls, enhance our reporting systems and procedures and recruit, train,
and retain highly skilled personnel. If we fail to achieve the necessary level of efficiency in our organization as we grow, and if the current and
future members of our management team do not effectively scale with this growth, our business, results of operations and financial condition
could be materially and adversely affected.
Our business could suffer if we cannot obtain or retain direct inward dialing numbers ("DIDs"), are prohibited from obtaining local
or toll-free numbers, or are limited to distributing local or toll-free numbers to only certain customers.
Our future success depends on our ability to procure large quantities of local and toll-free DIDs in the United States and foreign
countries in desirable locations at a reasonable cost and without restrictions. Our ability to procure and distribute DIDs depends on factors
outside of our control, such as applicable regulations, the practices of the communications carriers that provide DIDs, the cost of these DIDs,
and the level of demand for new DIDs. Due to their limited availability, there are certain popular area code prefixes we generally cannot
obtain. Our inability to acquire DIDs for our operations would make our services less attractive to potential customers in the affected local
geographic areas, which could adversely affect our revenue growth. In addition, future growth in our customer base and the customer bases
of our competitors will increase our dependence on needing sufficiently large quantities of DIDs.
Ooma | FY2024 Form 10-K | 24
If we are unable to effectively process local number and toll-free number portability provisioning in a timely manner, our growth
may be negatively affected.
We support local number and toll-free number portability, which allows our customers to transfer to us and thereby retain their existing
phone numbers when subscribing to our services. During the number transfer process, our new customers must maintain both our service
and their existing phone service. We depend on third-party carriers to transfer phone numbers, a process we do not control, and these third-
party carriers may refuse or substantially delay the transfer of these numbers to us. Local number portability is considered an important
feature by many potential customers, and if we fail to reduce any related delays, we may experience increased difficulty in acquiring new
customers. Moreover, the FCC requires us to comply with specified number porting timeframes when customers leave our service for the
services of another provider. In Canada, the CRTC has imposed a similar number portability requirement on service providers like us. If we,
or our third-party carriers, are unable to process number portability requests within the requisite timeframes, we could be subject to fines and
penalties. Additionally, in the United States, both customers and carriers may seek relief from the relevant state public utility commission, the
FCC, or in state or federal court for violation of local number portability requirements.
We may not be able to achieve or sustain profitability in the future and our rates of growth may decline.
We have incurred net losses since our inception, including net losses of approximately $0.8 million in fiscal 2024. We have expended
significant resources to develop, market, promote, grow our customer base and sell our products and solutions and we expect to continue
investing for future growth. Although we generated cash from operations of $12.3 million for fiscal 2024, we cannot assure you that our
operating cash flow will remain positive in the future as we continue to invest in efforts to scale our business. Achieving profitability will
require us to increase revenue, manage our cost structure and avoid significant liabilities. Revenue growth and growth of our active user
base may slow, revenue may decline or we may incur significant losses in the future for a number of possible reasons, including general
macroeconomic conditions, increasing competition (including competitive pricing pressures), our achievement of greater market penetration,
a decrease in the growth of the markets in which we compete, or failure for any reason to continue capitalizing on growth opportunities.
Additionally, we may encounter unforeseen operating expenses, difficulties, complications, delays, service delivery and quality problems and
other unknown factors that may result in losses in future periods. If these losses exceed our expectations or our revenue growth expectations
are not met in future periods, investors’ perceptions of our business may be adversely affected, our financial performance will be harmed and
our stock price could be volatile or decline.
Our quarterly and annual results have fluctuated in the past and may continue to do so. As a result, we may fail to meet or to
exceed the expectations of analysts or investors, which could cause our stock price to fluctuate.
Our quarterly and annual results of operations and cash flows, have varied historically from period to period, and we expect that they will
continue to fluctuate due to a variety of factors, many of which are outside of our control, including:
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fluctuations in demand for, pricing of, or usage of, our products, including due to the effects of global macroeconomic conditions,
competition, and differing levels of demand for our products based on changing customer priorities, resources, financial
conditions and economic outlook;
our ability to retain existing customers, resellers, expand our existing customers' user base, and attract new customers, sell
premium solutions to our existing customers and introduce new solutions;
the actions of our competitors, including pricing changes or the introduction of new solutions and products;
our ability to effectively manage our growth and successfully penetrate the communications and connected services markets for
businesses, residential and mobile;
the number of monthly, annual and multi-year subscriptions at any given time and the timing of recognition of subscription
revenue;
the timing, cost and effectiveness of our advertising and marketing efforts;
the timing, operating cost and capital expenditures for the operation, maintenance, and expansion of our business;
delays or disruptions in our supply chain;
the timing of our decisions with regard to product resource allocation;
increased component costs;
seasonality of consumers’ purchasing patterns and seasonality of advertising patterns;
Ooma | FY2024 Form 10-K | 25
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service outages or security breaches and any related impact on our reputation;
our ability to accurately forecast revenue and appropriately plan our expenses;
our ability to effectively transact with our third-party software development contractors in Russia, including any disruptions or
delays in research and development activities due to international sanctions imposed as a result of Russia’s ongoing invasion of
Ukraine;
costs associated with defending and resolving intellectual property infringement and other claims;
changes in tax laws, regulations, or accounting rules;
the timing and cost of developing or acquiring technologies, services or businesses and our ability to successfully manage any
such acquisitions;
how well we execute on our strategy and operating plans and the impact of changes in our business model that could adversely
impact our results of operations and financial condition;
the impact of worldwide economic, industry, and market conditions, such as liquidity constraints and higher levels of inflation;
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quarantines, travel limitations, or business disruptions in regions affecting our operations, including our field sales and
installation services teams, or the operations of third parties upon which we rely, stemming from the actual, imminent or
perceived outbreaks of epidemics or pandemics.
Any one of the factors above, or the cumulative effect of some or all of the factors referred to above, may result in significant fluctuations
in our quarterly and annual results of operations and cash flows. This variability and unpredictability could result in our failure to meet our
internal operating plan or the expectations of securities analysts or investors for any period, which could cause our stock price to decline. In
addition, a significant percentage of our operating expenses is fixed in nature and is based on forecasted revenue trends. Accordingly, in the
event of revenue shortfalls, we may not be able to mitigate the negative impact on net income (loss) and margins in the short term. If we fail
to meet or exceed the expectations of securities analysts or investors, the market price of our shares could fall substantially and we could
face costly lawsuits, including securities class-action suits.
If additional tariffs or other restrictions are placed on our goods imported from other countries, or if the United States were to
withdraw from or modify existing trade agreements or regulations, our revenue, gross margin, and results of operations may be
materially harmed.
Trade restrictions, including tariffs, quotas, embargoes, safeguards and customs restrictions, could increase the cost or reduce the
supply of products available to us, or could increase the lead times of certain components and equipment that we may purchase from foreign
vendors located in China and other countries, or may require us to modify our supply chain organization or other current business practices,
any of which could harm our business, financial condition and results of operations. A wide range of our products are subject to tariffs,
including those imposed by the U.S. federal government on certain Chinese imported goods in 2019 and by China in response, which have
negatively impacted, and could continue to negatively impact our gross margins. If additional tariffs or other restrictions, including quotas,
embargoes, safeguards and customs restrictions, are placed on goods imported into the United States, or any related counter-measures are
taken by other countries, our revenue and results of operations may be materially harmed. We cannot assure you that the current U.S.
administration will not continue to increase tariffs on imports from China or alter trade agreements and terms between China and the United
States, which may include limiting trade with China.
In addition, the U.S. National Defense Authorization Act for Fiscal Year 2019 imposed a ban on the use of certain surveillance,
telecommunications, and other equipment manufactured in China, to help protect critical infrastructure and other sites deemed to be sensitive
for national security purposes in the United States. Further, in 2021, the Secure Equipment Act of 2021 required the FCC to adopt rules
clarifying that it will no longer review or approve any authorization application for certain surveillance, telecommunications, and other
equipment that poses an unacceptable risk to national security. While these measures have not had a direct effect on our supply chain, any
expansion to this ban or imposition of any similar bans by the U.S. federal government may require us to find new sources of system
assembly or other products that we import, which may result in higher costs and disruption to our business.
We are dependent on international trade agreements and regulations, such as the United States-Mexico-Canada Agreement, or USMC.
If the United States were to withdraw from or materially modify certain international trade agreements or regulations, our business and
operating results could be materially and adversely affected and our customer relationships in Canada and other countries could be harmed.
Ooma | FY2024 Form 10-K | 26
If we do not manage inventory levels and purchase commitments effectively, we may experience excess inventory levels, inventory
obsolescence, or inventory shortages that could adversely affect our results of operations.
Our vendor-supplied on-premise devices and end-point devices, as well as materials and components for new products such as AirDial
and enhanced versions of existing products, frequently have lead times of several months or longer for delivery and are built based on our
estimates of future demand. If we overestimate our requirements, we may incur liabilities for excess or obsolete inventory, which could
negatively affect our gross margins. Conversely, if we underestimate our requirements, our suppliers may have inadequate supplies of the
devices or materials and components required to assemble our products, which could result in an interruption of the assembly of our
products, delays in shipments or installations and deferral or loss of revenue. Our ability to accurately forecast demand is affected by many
factors, including an increase or decrease in customer demand for our products and services, changes in consumer preferences and length
of sales cycle, market acceptance of new product and service introductions by us and our competitors, levels of inventory held by channel
partners, sales promotional activities by us or our competitors, and unanticipated changes in general market demand and macro-economic
conditions. In addition, because we rely on third-party contract manufacturers and other vendors for the supply of our devices and
components, our inventory levels are subject to the conditions regarding the timing of purchase orders and delivery dates not within our
control.
In past periods, we have increased our inventory levels to mitigate supply disruptions caused by component shortages, longer lead
times and increased transportation uncertainty. Additionally, we experienced higher unit costs for some products that have been impacted by
supply chain constraints and inflationary pressure in the past global macroeconomic environment as well as certain components being
subject to end-of-life. Increased inventory levels have in the past and may in the future result in write-down charges from excess or obsolete
inventory, charges from excess purchase commitments, the sale of inventory at discounted prices, and other actions, which may cause our
gross margin to decline and harm our reputation and brand.
Conversely, insufficient levels of inventory could interrupt the assembly of our products, delay shipments or installations and cause
deferral or loss of revenue, any of which may negatively affect relations with customers. For instance, our customers rely upon our ability to
meet committed delivery dates, and any disruption in the supply of our services could result in loss of customers or harm to our ability to
attract new customers. Additionally, retailers may elect to return any unsold inventory without any penalty, which could result in excess
inventory charges. Any of these factors could have a material adverse effect on our business, financial condition or results of operations.
We may lose key members of our management team and other key employees, and may be unable to attract and retain employees
we need to support our operations and growth.
Our future performance depends on the continued services and contributions of our senior management and other key employees to
execute on our business plan, and to identify and pursue opportunities and services innovations. The loss of services of senior management
or other key employees could significantly delay or prevent the achievement of our development and strategic objectives. The replacement of
any of these senior management personnel would likely involve significant time and costs, and such loss could significantly delay or prevent
the achievement of our business objectives. Many members of our senior management have been our employees for many years and
therefore have significant experience and understanding of our business that would be difficult to replace. Our inability to attract and retain
the necessary personnel could adversely affect our business, financial condition or results of business. We do not maintain key person
insurance for any of our personnel.
We may not be able to secure additional financing on favorable terms, or at all, to meet our future capital needs.
We intend to continue making expenditures and investments to support the growth of our business. In the future, we may require
additional capital to pursue our business objectives and to respond to business opportunities, challenges, or unforeseen circumstances,
including the need to develop new solutions or enhance our existing solutions, enhance our operating infrastructure, and acquire
complementary businesses and technologies. Accordingly, we may decide to engage in equity or debt financings, draw down under our
existing credit facility or enter into new credit facilities to secure additional funds. However, additional funds may not be available when we
need them on terms acceptable to us, or at all, due to among other factors, general macro-economic conditions, including rising interest
rates, volatile credit markets, inflation, and bank defaults or other disruptions in the financial services industry. Any debt financing we secure
in the future could contain affirmative and negative covenants relating to our capital raising activities and other financial and operational
matters, including covenants which may limit our ability to, among other things, incur additional indebtedness and liens, make certain
investments, merge or consolidate with other entities and make certain dispositions, which may make it more difficult for us to obtain
additional capital and to pursue business opportunities.
If we raise additional funds through the issuance of equity or convertible debt securities, our existing stockholders could suffer significant
dilution. Any new equity securities we issue could have rights, preferences, and privileges superior to those
Ooma | FY2024 Form 10-K | 27
of holders of our common stock. If we are unable to obtain adequate financing or financing terms satisfactory to us, our ability to continue
pursuing our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could be significantly
limited, and our business, results of operations, financial condition and prospects could be materially and adversely affected, and the trading
price of our common stock would likely decline.
Our level of indebtedness could adversely affect our financial condition.
As of January 31, 2024, we had an aggregate of $16.0 million of outstanding indebtedness that will mature in 2026, all of which was
incurred under our three-year credit and security agreement (“Credit Agreement”) with Citizens Bank, N.A., and we may incur additional
indebtedness in the future. In addition, as of January 31, 2024, we had $14.0 million available for borrowing under our revolving credit facility
under the Credit Agreement, and from time to time, we may request incremental term loans and/or additional revolving commitments in an
aggregate principal amount of up to $20.0 million under the Credit Agreement. Our ability to pay interest and repay principal for our level of
indebtedness is dependent on our ability to manage our business operations, generate sufficient cash flows to service such debt and the
other factors discussed in this section. There can be no assurance that we will be able to manage any of these risks successfully.
Our level of indebtedness could have important consequences, including the following:
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We may use a portion of our cash flow from operations to pay interest and principal on the revolving credit facility or any term
loans, which will reduce funds available to us for other purposes such as working capital, capital expenditures, other general
corporate purposes and potential acquisitions;
Our ability to refinance such indebtedness or to obtain additional financing for working capital, capital expenditures, acquisitions
or general corporate purposes may be impaired;
We may be exposed to fluctuations in interest rates because borrowings under our Credit Agreement bears interest at variable
rates;
Our leverage may be greater than that of some of our competitors, which may put us at a competitive disadvantage and reduce
our flexibility in responding to current and changing industry and financial market conditions;
We may be more vulnerable to the current economic downturn and adverse developments in our business; and
We may be unable to comply with financial and other restrictive covenants in our debt agreements, which could result in an
event of default that, if not cured or waived, may result in acceleration of certain of our debt and would have an adverse effect on
our business and prospects and could force us into bankruptcy or liquidation.
Our ability to access additional funding under our revolving credit facility will depend upon, among other things, the absence of a default
under such facility, including any default arising from a failure to comply with the related covenants. If we are unable to comply with such
covenants, our liquidity may be adversely affected.
In addition, we and our subsidiaries may be able to incur substantial additional indebtedness in the future, subject to the restrictions
contained in the Credit Agreement and the terms of our other indebtedness. Our ability to remain in compliance with our covenants under our
debt instruments and to make future principal and interest payments in respect of our debt depends on, among other things, our operating
performance, competitive developments and financial market conditions, all of which are significantly affected by financial, business,
economic and other factors. We are not able to control many of these factors. Accordingly, our cash flow may not be sufficient to allow us to
pay principal and interest on our debt, including the notes, and meet our other obligations.
Our existing credit agreements impose operating and financial restrictions on us.
The Credit Agreement contains covenants that limit our ability and the ability of our certain subsidiaries to:
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Incur additional debt;
Create liens on certain assets to secure debt;
Consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;
Make certain investments or acquisitions or dispositions of assets;
Enter into certain sale and leaseback transactions;
Enter into certain swap agreements;
Pay dividends on or make other distributions in respect of our capital stock or make other restricted payments;
Ooma | FY2024 Form 10-K | 28
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Enter into certain transactions with affiliates; and
Make certain material amendments to any subordinated debt agreement or our certificate of incorporation or bylaws.
In addition, we have agreed that we will not permit our recurring revenue or our liquidity to decrease below certain specified levels. All of
these covenants may adversely affect our ability to finance our operations, meet or otherwise address our capital needs, pursue business
opportunities, react to market conditions or otherwise restrict activities or business plans. A breach of any of these covenants could result in a
default in respect of the related indebtedness. If a default occurs, our lender could elect to declare the indebtedness, together with accrued
interest and other fees, to be immediately due and payable and, to the extent such indebtedness is secured in the future, proceed against
any collateral securing that indebtedness.
Our ability to make payments on and to refinance our indebtedness will depend on our ability to generate cash in the future. Our ability
to generate cash will be subject to general economic, financial, competitive, legislative, regulatory and other factors, some of which are
beyond our control. If prevailing interest rates or other factors at the time of refinancing result in higher interest rates upon refinancing, then
the interest expense related to that refinanced indebtedness would increase. Our future cash flow, cash on hand or available borrowings may
not be sufficient to meet our obligations and commitments. If we are unable to generate sufficient cash flow from operations in the future to
service or repay our indebtedness and to meet our other commitments, we will be required to adopt one or more alternatives, such as
refinancing or restructuring our indebtedness, selling material assets or operations or seeking to raise additional debt or equity capital. These
actions may not be effected on a timely basis or on satisfactory terms or at all, or these actions may not enable us to continue to satisfy our
capital requirements. In addition, the Credit Agreement contains, and any of future debt agreements may contain, restrictive covenants that
may prohibit us from adopting any of these alternatives. Our failure to comply with these covenants could result in an event of default which,
if not cured or waived, could result in the acceleration of all our debts.
Our success depends, in part, on increased acceptance of our connected services, applications and products.
Our future growth depends on our ability to significantly increase revenue generated from our Ooma Business and Ooma Residential
communications solutions and other connected services. The markets for cloud-based communications and other connected services are
evolving rapidly and are characterized by an increasing number of market entrants. If these markets fail to develop, develop more slowly than
we anticipate or develop in a manner different than we expect, our services could fail to achieve market acceptance, which in turn could
materially and adversely affect our business.
Our future growth in the small and medium-sized business and enterprise markets depends on the continued use of voice
communications by businesses, as compared to e-mail and other data-based methods. A decline in the overall rate of voice communications
by businesses would harm our business. Furthermore, our continued growth depends on future demand for and adoption of internet voice
communications systems and services and on future demand for connected communications services. Although the number of broadband
subscribers worldwide has grown significantly in recent years, only a small percentage of businesses have adopted internet voice
communications services to date. For demand and adoption of internet voice communications services by businesses to increase, internet
voice communications networks must improve the quality of their service for real-time communications by managing the effects of and
reducing packet loss, packet delay, and packet jitter, as well as unreliable bandwidth, so that high-quality service can be consistently
provided. Additionally, the cost and feature benefits of internet voice communications must be sufficient to cause customers to switch from
traditional phone service providers. We must devote substantial resources to educate potential customers about the benefits of internet voice
communications solutions, in general, and of our services in particular. If any or all of these factors fail to occur, our business may be
materially and adversely affected.
Our Ooma Residential product and services are sold primarily to individuals and families. With the growth of mobile technologies, many
consumers have chosen to eliminate their home telephone service as alternative services have proliferated. Our ability to continue growing
our user base depends on our ability to convince customers and potential customers that our service is sufficiently useful and cost-effective,
that it makes sense to maintain or establish home telephone services with us over other alternatives. Our growth could slow as it has in
recent periods and our financial condition could be adversely affected if the trend of eliminating home telephone service continues or
accelerates.
Our mobile platform, available to any consumer with a Wi-Fi® or cellular data connected mobile device, operates in a market that is
fragmented and where it is difficult to gain consumer awareness. Many of our competitors in this market have been able to establish a
significant user base and reputation in the market, which may make it more difficult for our products to be adopted. Furthermore, as new
mobile devices are released, we may encounter difficulties supporting these devices and services, and we may need to devote significant
resources to the creation, support, and maintenance of our mobile applications. Additionally, our competitors may allocate additional
resources to marketing and promotion of their products, making it even more difficult to be noticed. It is also unclear how the adoption of
“over-the-top” based communications will
Ooma | FY2024 Form 10-K | 29
continue to grow. If the number of consumers using “over-the-top” based communications stagnates or declines, such movement may result
in an intensified competition for consumers in this space.
Ooma | FY2024 Form 10-K | 30
Risks Related to Security, IT Systems and Intellectual Property
We have incurred, and expect to continue to incur, significant costs to protect against security breaches. We may incur significant
additional costs in the future to address any actual or perceived security breaches.
Any system failure or security breach that causes interruptions or data loss in our operations or in the computer systems of our
customers or leads to the misappropriation of our or our customers' CPNI could result in significant liability to us. Such failure or breach could
cause our service to be perceived as not being secure, subject us to regulatory requirements such as FCC notification, result in significant
monetary costs, such as fines, legal fees and expenditures to improve and enhance our security measures, cause considerable harm to us
and our reputation (including requiring notification to customers, regulators or the media) and deter current and potential customers from
using our services.
We could incur significant costs, both monetary and with respect to management's time and attention, to investigate and remediate a
data security breach. Because our onboarding and billing functions are conducted primarily through a single data center, any security breach
in that data center may cause an interruption in our business operations. If any of these events occurs, or is believed to occur, our reputation
and brand could be damaged, our business may suffer, we could be required to expend significant capital and other resources to alleviate
problems caused by such actual or perceived breaches, we could be exposed to a risk of loss, litigation or regulatory action and possible
liability, and our ability to operate our business, including our ability to provide maintenance and support services to our channel partners and
end-customers, may be impaired. If current or prospective channel partners and end-customers believe that our systems and solutions do not
provide adequate security for their businesses' needs, our business and our financial results could be harmed. Actual, potential or anticipated
attacks may cause us to incur increasing costs, including costs to deploy additional personnel and protection technologies, train employees
and engage third-party experts and consultants.
Although we maintain privacy, data breach and network security liability insurance, we cannot be certain that our coverage will be
adequate for liabilities actually incurred or that insurance will continue to be available to us on economically reasonable terms, or at all. In
addition, although we have developed an information security program, we cannot guarantee these measures would be sufficient to protect
us from a network security incident. Any actual or perceived compromise or breach of our security measures, or those of our third-party
service providers, or any unauthorized access to, misuse or misappropriation of personally identifiable information, channel partners' or end-
customers information, or other information, could violate applicable laws and regulations, contractual obligations or other legal obligations
and cause significant legal and financial exposure, adverse publicity and a loss of confidence in our security measures, any of which could
have an material adverse effect on our business, financial condition and operating results.
Failures in internet infrastructure or interference with broadband access could cause current or potential customers to believe that
our systems are unreliable, leading our current customers to switch to our competitors or potential customers to avoid using our
services.
Many of our services depend on our customers’ broadband access to the internet, usually provided through a cable or digital subscriber
line, or DSL, connection. In addition, users who access our services and applications through mobile devices, such as smartphones and
tablets, must have a high-speed connection, such as Wi-Fi, 3G, 4G, 5G or LTE, to use our services and applications. Currently, this access is
provided by companies that have significant and increasing market power in the broadband and internet access marketplace, including
incumbent phone companies, cable companies and wireless companies. Increasing numbers of users and increasing bandwidth
requirements may degrade the performance of internet and mobile infrastructure, resulting in outages or deteriorations in connectivity and
negatively impacting the quality with which we can deliver our solutions. As our customer base grows and their usage of communications
capacity increases, we will be required to make additional investments in network capacity to maintain adequate data transmission speeds,
the availability of which may be limited, or the cost of which may be on terms unacceptable to us. If adequate capacity is not available to us
as our customers’ usage increases, our network may be unable to achieve or maintain sufficiently high data transmission capacity, reliability
or performance. Furthermore, as the rate of adopting new technologies increases, the networks on which our services and applications rely
may not be able to sufficiently adapt to the increased demand for these services, including ours. In the past, we have experienced disruptions
to our service and were able to restore service without incurring material expenses. Outages to date have not materially affected our results
of operations. However, the costs incurred in correcting root causes for service outages may be substantial and these and other related
consequences could negatively impact our results of operations.
Ooma | FY2024 Form 10-K | 31
Some of the providers of broadband internet access and high-speed mobile access, such as AT&T and Verizon, market and sell
products and services to our current and potential customers that directly compete with our own offerings, which can potentially give such
providers a competitive advantage. Broadband providers also may take measures that affect their customers’ ability to use our service, such
as degrading the quality of the data packets we transmit over their lines, giving those packets low priority, giving other packets higher priority
than ours, blocking our packets entirely or attempting to charge their customers more for also using our services. A number of states have
enacted or are considering legislation or executive actions that would regulate the conduct of broadband providers. We cannot predict
whether state initiatives will be modified, overturned, or vacated by legal action of the court, federal or state legislation, or the FCC.
The FCC’s orders could affect the market for broadband internet access service in a way that impacts our business, for example by
increasing the cost of broadband internet service and thereby depressing demand for our services, by increasing the costs of services we
purchase or by creating tiers of internet access service and by either charging us for or prohibiting us from being available through these
tiers, and we cannot predict the impact of these events upon our business and results of operations.
Frequent or persistent interruptions could cause current or potential users to believe that our systems or services are unreliable, leading
them to switch to our competitors or to avoid our services, and could permanently harm our reputation and brands. Because some of our
services rely on integration between features that use both wired and wireless infrastructures, any of the aforementioned problems with either
wired or wireless infrastructure may result in the inability of customers to take advantage of our integrated services and therefore may
decrease the attractiveness of our collective services to current and potential customers.
If we experience excessive fraudulent activity or cannot meet evolving credit card association merchant standards, we could incur
substantial costs and lose the right to accept credit cards for payment, which could cause our customer base to decline
significantly.
A majority of our customers authorize us to bill their credit card accounts directly for service fees that we charge. If people pay for our
services with stolen credit cards, we have in the past and may in the future incur substantial third-party vendor costs for which we may not be
reimbursed. Further, our customers provide us with credit card billing information online or over the phone, and we do not review the physical
credit cards used in these transactions, which increases our risk of exposure to fraudulent activity. We also incur charges, which we refer to
as chargebacks, from the credit card companies’ claims that the customer did not authorize the credit card transaction to purchase our
service, something we have experienced in the past. If the number of unauthorized credit card transactions becomes excessive, we could be
assessed substantial fines for excess chargebacks and we could lose the right to accept credit cards for payment. We have also been
affected by the credit card breaches at various retail stores, which have caused millions of consumers to cancel credit cards as a result of the
breach. We have found that some consumers do not renew their services after a card cancellation, which can have a material negative
impact on our revenue. In addition, credit card issuers may change merchant standards, including data protection and documentation
standards, required to utilize their services from time to time.
While Ooma Inc. is currently in compliance with the applicable requirements of the Payment Card Industry Data Security Standard, or
PCI, certain of Ooma's subsidiaries are currently not in compliance with all of the applicable technical PCI requirements. If we fail to become
fully compliant or maintain compliance with current merchant standards, such as PCI, or fail to meet new standards, the credit card
associations may fine us or, while unusual, may impose certain restrictions on our ability to accept credit cards or terminate our agreements
with them, rendering us unable to accept credit cards as payment for our services. Our services have been in the past, and may also be in
the future, subject to fraudulent or abusive usage in violation of applicable law or our acceptable use policies, including but not limited to
revenue share fraud, domestic traffic pumping, subscription fraud, premium text message scams, and other fraudulent schemes, any of
which could result in our incurring substantial costs for the completion of calls. Although our customers are required to set passwords and
Personal Identification Numbers, or PINs, to protect their accounts and may configure in which destinations international calling is enabled
from their extensions, third parties have accessed and used our customers’ accounts and extensions through fraudulent means in the past,
and they may do so in the future, which also could result in substantial call completion and other costs for us. In addition, third parties may
have attempted in the past, and may attempt in the future, to fraudulently induce employees or consultants into disclosing customer
credentials and other account information. Communications fraud can result in unauthorized access to customer accounts and data,
unauthorized use of customers’ services, and charges to customers for fraudulent usage and expenses we must pay to carriers. We may be
required to pay for these charges and expenses with no reimbursement from the customer, and our reputation may be harmed if our services
are subject to fraudulent usage.
Ooma | FY2024 Form 10-K | 32
Although we have implemented multiple fraud prevention and detection controls, we cannot assure you that these controls will be
adequate to protect against fraud. Substantial losses due to fraud or our inability to accept credit card payments, which could cause our paid
customer base to significantly decrease, could have a material adverse effect on our results of operations, financial condition and ability to
grow our business.
Accusations of infringement of intellectual property rights could materially and adversely affect our business.
There has been substantial litigation in the sectors in which we operate regarding intellectual property rights. In the past, we have been
sued by third parties claiming infringement of their intellectual property rights and we were able to settle such litigation. However, we may be
sued for infringement in the future, and we cannot assure you that we will be able to settle any future claims or, if we are able to settle any
such claims, that the settlement will be on favorable terms. Our broad range of technology in our business may increase the likelihood that
third parties will claim that we infringe their intellectual property rights.
We have in the past received, and may in the future receive, notices of claims of infringement, misappropriation or misuse of other
parties’ proprietary rights. Notwithstanding their merits, accusations and lawsuits like these often require significant time and expense to
defend, may negatively affect customer relationships, may divert management’s attention away from other aspects of our operations and,
upon resolution, may have a material adverse effect on our business, results of operations, financial condition and cash flows.
Certain technology necessary for us to provide our services may, in fact, be patented by other parties either now or in the future. If such
technology were validly patented by another person, we would have to negotiate a license for the use of that technology. We may not be able
to negotiate such a license at a price that is acceptable to us or at all. The existence of such a patent, or our inability to negotiate a license for
any such technology on acceptable terms, could force us to cease using the technology and cease offering products and services
incorporating the technology, which could materially and adversely affect our business and results of operations. If we were found to be
infringing on the intellectual property rights of any third party, we could be subject to liability for such infringement, which could be material.
Among other negative consequences, we could also be prohibited from using or selling certain products or services, prohibited from using
certain processes, or required to redesign certain products or services, each of which could have a material adverse effect on our business
and results of operations.
Any failure to obtain registration or protection of our intellectual property rights could materially and adversely affect our business.
We rely, in part, on patent, trademark, copyright and trade secret law to protect our intellectual property in the United States and abroad.
We cannot assure you that the particular forms of intellectual property protection we seek, including business decisions about when to file
patents and when to maintain trade secrets, will be adequate to protect our business. We seek to protect our technology, software,
documentation and other information under trade secret and copyright law, which afford only limited protection. For example, improper
disclosure of trade secret information by our current or former employees, consultants, third-party contractors, customers or vendors to the
public or others who could make use of the trade secret information would likely preclude that information from being protected as a trade
secret. Furthermore, any use of AI tools to create content or code that may be incorporated into our products or services may also impact our
ability to obtain or successfully defend certain intellectual property rights.
We cannot predict whether our pending patent applications will result in issued patents or whether any issued patents will effectively
protect our intellectual property. Even if a pending patent application results in an issued patent, the patent may be circumvented or its
validity may be challenged in various proceedings in U.S. District Court, before the U.S. Patent and Trademark Office or before their foreign
equivalents, such as reexamination, which may require legal representation and involve substantial costs and diversion of management time
and resources. In addition, we cannot assure you that every significant feature of our solutions is protected by our patents, or that we will
mark our products with any or all patents they embody. As a result, we may be prevented from seeking damages in whole or in part for
infringement of our patents.
The unlicensed use of our brand, including domain names, by third parties could harm our reputation, cause confusion among our
customers and impair our ability to market our products and services. Though we have registered numerous trademarks and service marks,
have applied for registration of additional trademarks and service marks and have acquired a number of domain names in and outside the
United States, if our applications receive objections or are successfully opposed by third parties, it will be difficult for us to prevent third
parties from using our brand without our permission. Moreover, successful opposition to our applications might encourage third parties to
make additional oppositions or commence trademark infringement proceedings against us, which could be costly and time consuming to
defend against. There have been in the past, and may be in the future, instances where third parties have used our trade names, or have
adopted confusingly similar trade names to ours. If we are not successful in protecting our trademarks, our trademark rights may be diluted
and subject to challenge or invalidation, which could materially and adversely affect our brand.
Ooma | FY2024 Form 10-K | 33
We may not be able to protect or enforce our proprietary rights in the United States or internationally. We typically enter into
confidentiality and invention assignment agreements with our employees, consultants, third-party contractors (including contractors located in
Russia and the Philippines), customers and vendors in an effort to control access to use and distribution of our technology, software,
documentation and other information. These agreements may not effectively prevent unauthorized use or disclosure of confidential
information and may not provide an adequate remedy in the event of such unauthorized use or disclosure, and it may be possible for a third
party to legally reverse engineer, copy or otherwise obtain and use our technology without authorization. In addition, such agreements may
not adequately protect our proprietary rights in foreign countries, where effective intellectual property protection may be unavailable or
limited. Our competitors may independently develop technologies similar or superior to our technology, duplicate our technology in a manner
that does not infringe our intellectual property rights or design around any of our patents. Furthermore, detecting and policing unauthorized
use of our intellectual property is difficult and resource-intensive. Moreover, litigation may be necessary in the future to enforce our
intellectual property rights, to determine the validity and scope of the proprietary rights of others, or to defend against claims of infringement
or invalidity. Such litigation, whether successful or not, could result in substantial costs and diversion of management time and resources and
could have a material adverse effect on our business, financial condition and results of operations.
Potential problems with our information systems could interfere with our business and operations.
We rely on our information systems and those of third parties for processing customer orders, distribution of our services, billing our
customers, processing credit card transactions, customer relationship management, supporting financial planning and analysis, accounting
functions and financial statement preparation and otherwise running our business. Information systems may experience interruptions,
including interruptions of related services from third-party providers, which may be beyond our control. Such business interruptions could
cause us to fail to meet customer requirements. All information systems, both internal and external, are potentially vulnerable to damage or
interruption from a variety of sources, including without limitation, computer viruses, ransomware attacks or other security breaches, energy
blackouts, natural disasters, terrorism, war, telecommunication failures, and employee or other theft, as well as third-party provider failures.
Any disruption in our information systems and those of the third parties upon which we rely could have a significant impact on our business.
We may implement enhanced information systems in the future to meet the demands resulting from our growth and to provide additional
capabilities and functionality. The implementation of new systems could come with its own set of cybersecurity risks. The implementation of
new systems and enhancements to existing systems is frequently disruptive to the underlying business of an enterprise, and can be time-
consuming and expensive, increase management responsibilities and divert management attention. Any disruptions relating to our systems
enhancements or any problems with the implementation, particularly any disruptions impacting our operations or our ability to accurately
report our financial performance on a timely basis during the implementation period, could materially and adversely affect our business. Even
if we do not encounter these material and adverse effects, the implementation of these enhancements may be much costlier than we
anticipated. If we are unable to successfully implement the information systems enhancements as planned, our financial position, results of
operations and cash flows could be negatively impacted.
Our use of open source technology could impose limitations on our ability to commercialize our services.
We use open source software in our platforms on which our services operate. There is a risk that the owners of the copyrights in such
software may claim that such licenses impose unanticipated conditions or restrictions on our ability to market or provide our services. If such
owners prevail in such claim, we could be required to make the source code for our proprietary software (which contains our valuable trade
secrets) generally available to third parties, including competitors, at no cost, to seek licenses from third parties in order to continue offering
our services, to re-engineer our technology, or to discontinue offering our services in the event re-engineering cannot be accomplished on a
timely basis or at all, any of which could cause us to discontinue our services, harm our reputation, result in customer losses or claims,
increase our costs or otherwise materially and adversely affect our business and results of operations. If a copyright holder of such open
source software were to allege we had not complied with the conditions of one or more of these licenses, we could be required to incur
significant legal expenses defending against such allegations and could be subject to significant damages, enjoined from the sale of our
solutions that contained the open source software and required to comply with the foregoing conditions, which could disrupt the distribution
and sale of some of our solutions.
Ooma | FY2024 Form 10-K | 34
Regulatory and Tax Matters
Our services are subject to regulation and future legislative or regulatory actions could adversely affect our business and expose
us to liability.
Federal Regulation. Our business is regulated by the FCC. As a communication services provider, we are subject to FCC regulations
relating to privacy, disability access, law enforcement access, porting of numbers, revenue reporting, Federal USF contributions and other
regulatory assessments, E‑911, robocall mitigation, and other matters. If we do not comply with FCC rules and regulations, we could be
subject to FCC enforcement actions, substantial fines, loss of licenses, repayment of funds, potential private right of actions and possibly
restrictions on our ability to operate or offer certain of our services. Any enforcement action by the FCC, which may include a public process,
would hurt our reputation in the industry, possibly impair our ability to sell our services to customers and could have a materially adverse
impact on our revenue.
State Regulation. We are also subject to state consumer protection laws, as well as U.S. state, municipal and local sales, use, excise,
utility user and ad valorem taxes, fees or surcharges. The imposition of such regulatory obligations or the imposition of additional taxes on
our services could increase our cost of doing business and limit our growth.
International Regulation. As we expand internationally, we are subject to telecommunications, consumer protection, data privacy and
other laws and regulations in the foreign countries where we offer our services. Our international operations are potentially subject to country-
specific governmental regulation and related actions that may increase our costs and prevent us from offering or providing our products and
services in certain countries. Certain of our services may be used by customers located in countries where VoIP and other forms of IP
communications may be illegal or require special licensing. In countries where local laws and regulations prohibit (or come to prohibit) the
use of our products, users may continue to use our products and services, which could subject us to costly penalties or governmental action
adverse to our business and damaging to our brand and reputation, our international expansion efforts, or our business and operating results.
The adoption of additional 911 requirements by the FCC could increase our costs that could make our service more expensive,
decrease our profit margins, or both.
We may not be able to comply with additional 911 requirements adopted by the FCC for interconnected VoIP providers, providers of
enterprise telephone services, non-interconnected VoIP providers and texting providers. We may or may not be able to comply with these
obligations. For example, beginning January 6, 2022, providers of non-fixed interconnected VoIP services were required to supply automated
dispatchable location, if technically feasible, or either registered location information obtained by the customer or alternative location
information. At present, we have no means to automatically identify the physical location of our customers. Our obligation to comply with the
FCC’s VoIP E-911 order and related costs puts us at a competitive disadvantage to VoIP service providers who are either not subject to the
requirements or have chosen not to comply with the FCC’s mandates. We cannot guarantee emergency calling service consistent with the
VoIP E‑911 order will be available to all of our customers, especially those accessing our services on a mobile device or from outside of the
United States. The FCC’s current E-911 requirements and changes to those requirements, including their impact on our customers due to
service price increases or other factors could have a material adverse effect on our business, financial condition or operating results. In
addition, customers may attempt to hold us responsible for any loss, damage, personal injury, or death suffered as a result of delayed,
misrouted, or uncompleted emergency service calls or text messages, subject to any limitations on a provider's liability provided by applicable
laws, regulations, and our customer agreements.
If we cannot comply with the FCC's rules imposing call signaling requirements on VoIP providers, we may be subject to fines,
cease and desist orders, or other penalties.
The FCC’s rules regarding the system of compensation for various types of traffic require, among other things, interconnected VoIP
providers who originate interstate or intrastate traffic destined for the PSTN, to transmit the telephone number associated with the calling
party to the next provider in the call path. Intermediate providers must pass unaltered calling party number or charge number signaling
information they receive from other providers to subsequent providers in the call path. In addition, effective June 30, 2021, voice service
providers in the United States were required to either fully implement “STIR/SHAKEN” technology on their entire networks or implement a
robocall mitigation program on those portions of their networks that are not STIR/SHAKEN-enabled. Canada is also currently in the process
of implementing STIR/SHAKEN requirements. Although we have implemented STIR/SHAKEN in the United States and are in the process of
implementing STIR/SHAKEN in Canada, to the extent that we inadvertently pass traffic that does not have appropriate calling party number
or charge number information, we could be subject to fines, cease and desist orders, or other penalties. Similarly, to the extent that we
cannot authenticate our customers, their traffic may be more likely to be blocked or adversely labeled. Additionally, as a VoIP provider, we
rely on the FCC to design rules that do not disadvantage our service relative to those of incumbent local exchange carriers and competitive
local exchange carriers. Should the FCC decide to do so, it could result in an inferior user experience for Ooma’s service, which may
negatively impact our business.
Ooma | FY2024 Form 10-K | 35
We may not be able to comply with FCC rules governing completion of calls to rural areas and related reporting requirements.
The FCC’s rules governing the completion of calls to rural areas and related reporting requirements require us, among other things, to
monitor the performance of our intermediate providers – telecom companies we use to help complete telephone calls to rural areas and take
steps to prevent rural call completion problems that may be caused by our intermediate providers, such as persistent low answer or
completion rates, unexplained anomalies in performance, or repeated complaints to the FCC. Under certain circumstances, if our routing
choices, meaning the intermediate providers we chose to help us complete calls to rural areas, result in lower quality service, we may be held
liable for the actions taken by our intermediate providers. If we cannot comply with these rules, we could be subject to investigation and
enforcement action and could be exposed to substantial liability. The FCC also has increased enforcement activity related to completion of
calls to rural customers, and we could be subject to substantial fines and to conduct requirements that could increase our costs if we are the
subject of an enforcement proceeding and cannot demonstrate calls from our customers to rural customers are completed at a satisfactory
rate.
Failure to comply with communications and telemarketing laws could result in significant fines or place significant restrictions on
our business.
We rely on a variety of marketing techniques in connection with our sales efforts, including telemarketing and email marketing
campaigns. We also record certain telephone calls between our customers or potential customers and our sales and service representatives
for training and quality assurance purposes. These activities are subject to a variety of state and federal laws such as the Telephone
Consumer Protection Act of 1991 (also known as the Federal Do-Not-Call law, or the TCPA), the Telemarketing Sales Rule, the Controlling
the Assault of Non-Solicited Pornography and Marketing Act of 2003 (also known as the CAN-SPAM Act) and various U.S. state laws
regarding telemarketing and telephone call recording. The FCC continues to adopt and consider additional rules related to robocalling,
robotexting, and autodialing. For example, in December 2023, the FCC adopted a one-to-one consent rule requiring companies to obtain
consent from consumers to receive automated or robotic calls or texts only from one specific good or service provider at a time. These laws
are subject to varying interpretations by courts and governmental authorities and often require subjective interpretation, making it difficult to
predict their application and therefore making our compliance efforts more challenging. We cannot be certain our efforts to comply with these
laws, rules and regulations will be successful, or, if they are successful, that the cost of such compliance will not be material to our business.
Changes to these or similar laws, or to their application or interpretation, or new laws, rules and regulations governing our communication
and marketing activities could adversely affect our business. In the event that any of these laws, rules or regulations significantly restrict our
business, we may not be able to develop adequate alternative communication and marketing strategies. Further, non-compliance with these
laws, rules and regulations carries significant financial penalties and the risk of class action litigation, which would adversely affect our
financial performance and significantly harm our reputation and our business.
The FCC has continued to increase regulation of interconnected VoIP services and may at any time determine certain VoIP services
are telecommunications services subject to traditional common carrier regulation.
The FCC is considering, in various proceedings, issues arising from the transition from traditional copper networks to IP networks. The
FCC is also considering whether interconnected VoIP services should be treated as telecommunications services, which could subject
interconnected VoIP services to additional common carrier regulation. The FCC’s efforts may result in additional regulation of IP network and
service providers, which may negatively affect our business.
Ooma | FY2024 Form 10-K | 36
Reform of federal and state Universal Service Fund programs could increase the cost of our service to our customers, diminishing
or eliminating our pricing advantage.
The FCC and a number of states are considering modifications to USF programs, including the manner in which companies, like us,
contribute to the federal USF program, and whether certain non-interconnected VoIP providers and broadband providers, among others,
should contribute to the USF. If the FCC or certain states modify contribution obligations that continue to increase our contribution burden, we
will either need to absorb the increased costs or raise the amount we currently collect from some of our customers to cover these obligations,
which would either reduce our profit margins or diminish our price advantage. A number of states require us to contribute funds to state USF
programs, while others are actively considering extending their programs to include the services we provide. We currently charge our
customers certain fees and other surcharges, which may result in our services becoming less competitive as compared to those provided by
others. If our pricing advantage is diminished or eliminated, or if we are required to absorb these increased costs and not pass-through to our
customers, our results of operations would be negatively impacted.
Our products must comply with industry standards, FCC regulations, state, local, country‑specific and international regulations,
and changes may require us to modify existing products and/or services.
In addition to reliability and quality standards, the market acceptance of telephony over broadband IP networks is dependent upon the
adoption of industry standards so that products from multiple manufacturers are able to communicate with each other. Our unique hybrid
SaaS connectivity platforms rely on communication standards such as SIP, SRTP and network standards such as TCP/IP and UDP to
interoperate with other vendors’ equipment. There is currently a lack of agreement among industry leaders about which standard should be
used for a particular application and about the definition of the standards themselves. We also must comply with certain rules and regulations
of the FCC regarding electromagnetic radiation and safety standards established by Underwriters Laboratories (“UL”), as well as similar
regulations and standards applicable in other countries. In addition, the market acceptance of POTS replacement products such as Ooma
AirDial will depend on compliance with industry standards such as National Fire Protection Association NFPA 72, UL 864 and American
Society of Mechanical Engineers ASME A17.1B. As standards evolve, we may be required to modify our existing products or develop and
support new versions of our products. We must comply with certain federal, state and local requirements regarding how we interact with our
customers, including marketing practices, consumer protection, privacy, and billing issues, the provision of 9-1-1 emergency service and the
quality of service we provide to our customers. The failure of our products and services to comply, or delays in compliance, with various
existing and evolving standards could delay or interrupt volume production of our VoIP telephony products, subject us to fines or other
imposed penalties, or harm the perception and adoption rates of our service, any of which would have a material adverse effect on our
business, financial condition or operating results.
We process, store, and use personal information and other data, which subjects us and our customers to a variety of evolving
industry standards, contractual obligations and other legal rules related to privacy, which may increase our costs, decrease
adoption and use of our products and services, and expose us to liability.
There are numerous U.S. federal, state and local, and foreign laws and regulations, as well as contractual obligations and industry
standards, that provide for certain obligations and restrictions with respect to data privacy and security, and the collection, storage, retention,
protection, use, processing, transmission, sharing, disclosure, and protection (“Processing”) of personal information and other customer data.
The scope of these obligations and restrictions is changing, subject to differing interpretations, and may be inconsistent among jurisdictions
or conflict with other rules, and their status remains uncertain.
In the United States and in other jurisdictions, a variety of regulations are currently being proposed that would increase restrictions on
online service providers in the field of data privacy and security, and we believe that the adoption of such increasingly restrictive regulation is
likely. For example, the California Consumer Privacy Act (the “CCPA”) regulates the processing of personal data, which could result in civil
penalties for violations. In addition, the California Privacy Rights Act (“CPRA”) took effect on January 1, 2023 and an increasing number of
states are adopting similar privacy laws. We will continue to monitor developments related to new privacy laws like the CPRA which will
require us to incur additional costs and expenses in an effort to monitor and comply with such laws.
In Canada, penalties for non-compliance with certain Canadian anti-spam legislation are considerable, including administrative monetary
penalties of up to $10 million and a private right of action.
Ooma | FY2024 Form 10-K | 37
The EU has implemented strict laws that apply in connection with the Processing of personal information, and other customer data. Data
protection regulators within the EU and other jurisdictions have the power to fine non-compliant organizations significant amounts and seek
injunctive relief, including the cessation of certain data processing activities. For example, the EU’s General Data Protection Regulation, or
GDPR, provides for significant penalties for violations, including fines of up to 4% of the violating company’s worldwide revenue. While the
United Kingdom’s Data Protection Act substantially implements the GDPR, the United Kingdom’s exit from the European Union has created
regulatory uncertainty, including the cross-border transfer of data. Such uncertainty may adversely impact the operations of our U.K.
subsidiary by adding operational complexities and expenses. In addition, there is uncertainty about data transfer to the United States. For
example, although the new U.S. Data Privacy Framework was formally approved by the European Commission in July 2023, the framework
may still be invalidated by the Court of Justice of the European Union, which invalidated the framework's predecessor, the Privacy Shield
Program, in 2020.
We have taken administrative, contractual and other measures designed to achieve compliance with applicable privacy laws and
standards, but we cannot guarantee these measures are sufficient. Obligations and restrictions imposed by current and future applicable
laws, regulations, contracts and industry standards, in particular as we continue to expand our international operations, may increase the cost
of our operations, affect our ability to provide all the current features of our business, residential and mobile products and services and our
customers’ ability to use our products and services, and could require us to modify the features and functionality of our products and
services. Such obligations and restrictions may limit our ability to Process data, and to allow our customers to Process data with others
through our products and services. Failure to comply with such obligations could subject us to lawsuits, fines, criminal penalties, statutory
damages, consent decrees, injunctions, adverse publicity and other losses that could harm our business.
Our customers may use our services to transmit and store protected health information, or PHI, that is protected under HIPAA.
Noncompliance with laws and regulations relating to privacy such as HIPAA may lead to significant fines, penalties or liabilities. Our actual
compliance, our customers’ perception of our compliance, costs of compliance with such regulations and customer concerns regarding their
own compliance obligations (whether factual or in error) may limit the use and adoption of our service and reduce overall demand.
Furthermore, privacy concerns, including the inability or impracticality of providing advance notice to customers of privacy issues related to
the use of our services, may cause our customers’ customers to resist providing the personal data necessary to allow our customers to use
our services effectively. Even the perception of privacy concerns, whether or not valid, may inhibit market adoption of our service in certain
industries.
In addition to government activity, privacy advocacy groups and industry groups have adopted and are considering the adoption of
various self-regulatory standards and codes of conduct that may place additional burdens on us and our customers, which may further
reduce demand for our services and harm our business. Our employees and personnel may also use generative AI technologies to perform
their work, and the disclosure and use of personal information in such technologies is subject to various data privacy and security laws and
obligations. Governments have passed and are likely to pass additional laws regulating generative AI. Our use of this technology could result
in additional compliance costs and regulatory investigations and actions. If we are unable to use generative AI, it could make our business
less efficient and result in competitive disadvantages.
Any failure by us to protect our users’ privacy and data, including as a result of our systems being compromised by hacking or other
malicious activity, could result in a loss of user confidence in our services and ultimately in a loss of users, which could materially and
adversely affect our business. Our customers may also accidentally disclose their passwords, store them on a mobile device that is lost or
stolen, or otherwise fall prey to attacks outside our system, creating the perception that our systems are not secure against third-party
access. If our third-party contractors or vendors violate applicable laws or our policies, such violations may also put our customers’
information at risk and could in turn have a material and adverse effect on our business.
Use or delivery of our services may become subject to new or increased regulatory requirements, taxes or fees.
The increasing growth and popularity of internet voice communications heighten the risk that governments will regulate or impose new or
increased fees or taxes on internet voice communications services. To the extent the use of our services continues to grow, regulators may
be more likely to seek to regulate or impose new or additional taxes, surcharges or fees on our services. Similarly, advances in technology,
such as improvements in locating the geographic origin of internet voice communications, could cause our services to become subject to
additional regulations, fees or taxes, or could require us to invest in or develop new technologies, which may be costly. In addition, as we
continue to expand our user base and offer more services, we may become subject to new regulations, taxes, surcharges or fees. Increased
regulatory requirements, taxes, surcharges or fees on internet voice communications services, which could be assessed by governments
retroactively or prospectively, would substantially increase our costs, and, as a result, our business would suffer. In addition, the tax status of
our services could subject us to conflicting taxation requirements and complexity with regard to the collection and remittance of applicable
taxes. Any such additional taxes could harm our results of operations.
Ooma | FY2024 Form 10-K | 38
We are subject to anti-corruption and anti-money laundering laws with respect to our operations and non-compliance with such
laws can subject us to criminal and/or civil liability and harm our business.
We are subject to the FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act,
and other anti-bribery and anti‑money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly
and prohibit companies and their employees and third-party intermediaries from authorizing, offering, or providing, directly or indirectly,
improper payments or benefits to recipients in the public or private sector. We use third-party representatives for product testing, customs,
export, and import matters outside of the United States. As we increase our international sales and business, we may engage with business
partners and third-party intermediaries to sell our products and services. We or our third-party intermediaries may have direct or indirect
interactions with officials and employees of government agencies or state-owned or affiliated entities. We can be held liable for the corrupt or
other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not
explicitly authorize such activities.
While we devote resources to our U.S. and international compliance programs and have implemented policies, training, and internal
controls designed to reduce the risk of corrupt payments, such as controls over expenditures for foreign contractors, and collusive activity,
our employees, partners, vendors, or agents may violate our policies. Noncompliance with anti-corruption and anti-money laundering laws
could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of
profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain
persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas or
investigations are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation,
our business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in
a materially significant diversion of management’s attention and resources, significant defense costs and other professional fees.
Enforcement actions and sanctions could further harm our business, results of operations, and financial condition.
We are subject to governmental sanctions and export and import controls, economic embargoes and trade sanctions that could
impair our ability to expand our business to, and compete in, international markets and could subject us to liability if we are not in
compliance with applicable laws.
Our products and services are subject to export and import laws and regulations, including the U.S. Export Administration Regulations,
U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of
Foreign Assets Controls. U.S. export control laws and economic sanctions programs generally prohibit the export of certain products and
services to countries, governments and persons subject to U.S. economic embargoes and trade sanctions unless a license, approval, or
other authorization is obtained from the U.S. Government. Obtaining the necessary authorizations and licenses for a particular sale may be
time-consuming, is not guaranteed and may result in the delay or loss of sales opportunities. If we fail to comply with these laws and
regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or
import privileges, government investigations, reputational harm, fines which may be imposed on us and responsible employees or managers,
and, in extreme cases, the incarceration of responsible employees or managers.
In addition, any changes in our products or services, or changes in applicable export, import, embargo and trade sanctions regulations,
may create delays in the introduction and sale of our products and services in international markets or, in some cases, prevent the export or
import of our products and services to certain countries, governments, or persons altogether. Any change in export, import, embargo, or trade
sanctions regulations, shift in the enforcement or scope of existing regulations, or change in the countries, governments, persons or
technologies targeted by such regulations, could also result in decreased use of our products and services, or in our decreased ability to
export or sell our products and services to existing or potential customers with international operations. Any decreased use of our products
and services or limitation on our ability to export or sell our products and services would likely adversely affect our business.
Ooma | FY2024 Form 10-K | 39
We may be subject to liabilities on past services for taxes, surcharges and fees.
We collect and remit state or municipal sales, use, excise, utility user and ad valorem taxes, fees, or surcharges on the charges to our
customers for our services or goods in only those jurisdictions where we believe we have a legal obligation to do so or for business reasons
to reduce risk. In addition, we have historically substantially complied with the collection of certain California sales/use taxes and financial
contributions to the California 9-1-1 system (the Emergency Telephone Users Surcharge) and federal USF. With limited exception, we believe
we are generally not subject to taxes, fees, or surcharges imposed by other state and municipal jurisdictions or that such taxes, fees, or
surcharges do not apply to our services. There is uncertainty as to what constitutes sufficient “in state presence” for a state or local
municipality to levy taxes, fees and surcharges for sales made over the internet. Taxing authorities have in the past, and likely will in the
future, challenge our position on the lack of enforceability of such taxes, fees and surcharges where we have no relevant presence, and audit
our business and operations with respect to sales, use, telecommunications and other taxes, which could result in increased tax liabilities for
us or our customers, which could materially and adversely affect our results of operations and our relationships with our customers. Finally,
the application of other indirect taxes (such as sales and use tax, value added tax, or VAT, goods and services tax, business tax, and gross
receipt tax) to e-commerce businesses, such as ours, is a complex and evolving area. The application of existing, new, or future laws,
whether in the United States or internationally, could have adverse effects on our business, prospects, and results of operations. There have
been, and will continue to be, substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous
markets in which we conduct or will conduct business.
Changes in effective tax rates, or adverse outcomes resulting from examination of our income or other tax returns, could adversely
affect our results of operations and financial condition.
Our future effective tax rates could be subject to volatility or adversely affected by a number of factors, including:
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changes in the valuation of our deferred tax assets and liabilities;
expiration of, or lapses in, the research and development tax credit laws;
expiration or non-utilization of net operating loss carryforwards;
tax effects of share-based compensation;
certain non-deductible expenses as a result of acquisitions;
expansion into new jurisdictions;
potential challenges to and costs related to implementation and ongoing operation of our intercompany arrangements; and
changes in tax laws and regulations and accounting principles, or interpretations or applications thereof.
As we expand our operations internationally, certain changes to U.S. tax laws, including limitations on the ability to defer U.S. taxation on
earnings outside of the United States until those earnings are repatriated to the United States could affect the tax treatment of our foreign
earnings. Any changes in our effective tax rate could adversely affect our results of operations.
We may be unable to use some or all of our net operating loss carryforwards, which could materially and adversely affect our
reported financial condition and results of operations.
As of January 31, 2024, we had federal net operating loss carryforwards of approximately $47.8 million available to offset future income,
of which approximately $5.8 million will expire in various amounts beginning in fiscal 2038, if not utilized, and the remainder may be carried
forward indefinitely. We also had state net operating loss carryforwards of $70.7 million which will expire in various amounts beginning in
fiscal 2025. Additionally, we have federal and research and development tax credit carryforwards that will begin to expire in fiscal 2030 and
California research and development tax credit carryforwards with no expiration date. Realization of these net operating loss and research
tax credit carryforwards depends on future income, and there is a risk that our existing carryforwards could expire unused and be unavailable
to offset future income tax liabilities, which could materially and adversely affect our results of operations. No deferred tax assets have been
recognized on our balance sheet related to these NOLs, as they are fully reserved by a valuation allowance. If we have previously had, or
have in the future, one or more Section 382 “ownership changes”, or if we do not generate sufficient taxable income, we may not be able to
utilize a material portion of our NOLs, even if we achieve profitability. If we are limited in our ability to use our NOLs in future years in which
we have taxable income, we will pay more taxes than if we were able to fully utilize our NOLs. This could materially and adversely affect our
results of operations.
Ooma | FY2024 Form 10-K | 40
Risks Related to Being a Public Company
If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our
financial results in a timely manner, which may adversely affect investor confidence in our company and, as a result, the value of
our common stock.
Pursuant to Section 404 of the Sarbanes-Oxley Act, we are required to make a formal assessment and provide an annual management
report on the effectiveness of our internal control over financial reporting. We expect that the requirements of these rules and regulations will
continue to increase our compliance costs, make some activities more difficult, time-consuming and costly, and place significant demands on
our financial and operational resources, as well as IT systems. Our control environment may not be sufficient to remediate or prevent future
material weaknesses or significant deficiencies from occurring. A control system, no matter how well designed and operated, can provide
only reasonable assurance that the control system’s objectives will be met. Due to the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and all
instances of fraud will be detected.
Our independent registered public accounting firm is required to and has issued an attestation report on the effectiveness of our internal
control over financial reporting as of January 31, 2024. If we are unable to conclude that our internal control over financial reporting is
effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control
over financial reporting, investors could lose confidence in the accuracy and reliability of our financial reports, which would cause the price of
our common stock to decline, and we could be subject to sanctions or investigations by regulatory authorities, including the SEC and the
NYSE.
Our actual operating results may differ significantly from our guidance.
From time to time, we plan to release earnings guidance in our quarterly earnings conference calls, quarterly earnings releases, or
otherwise, regarding our future performance that represents our management’s estimates as of the date of release. This guidance, which will
include forward‑looking statements, will be based on projections prepared by our management. Projections are based upon a number of
assumptions and estimates that, while presented with numerical specificity, are inherently subject to significant business, economic and
competitive uncertainties and contingencies, many of which are beyond our control and are based upon specific assumptions with respect to
future business decisions, some of which will change. We intend to state possible outcomes as high and low ranges which are intended to
provide a sensitivity analysis as variables are changed but are not intended to imply that actual results could not fall outside of the suggested
ranges. The principal reason that we release guidance is to provide a basis for our management to discuss our business outlook with
analysts and investors. Accordingly, we do not accept any responsibility for any projections or reports published by any such third parties.
Guidance is necessarily speculative in nature, and it can be expected that some or all of the assumptions underlying the guidance
furnished by us will not materialize or will vary significantly from actual results. Accordingly, our guidance is only an estimate of what
management believes is realizable as of the date of release. Actual results may vary from our guidance and the variations may be material.
In light of the foregoing, investors are urged not to rely upon our guidance in making an investment decision regarding our common stock.
Any failure to successfully implement our operating strategy or the occurrence of any of the events or circumstances set forth in this
“Risk Factors” section in this report could result in the actual operating results being different from our guidance, and the differences may be
adverse and material.
Ooma | FY2024 Form 10-K | 41
Risks Related to Ownership of Our Common Stock
Our stock price has been and may continue to be volatile, or may fluctuate or decline, resulting in a substantial loss of your
investment.
Our stock price may fluctuate in response to a number of events and factors, such as quarterly operating results; changes in our
financial projections provided to the public or our failure to meet those projections; our operating and financial performance and prospects
and the performance of other similar companies; the public's reaction to our press releases, other public announcements and filings with the
SEC; significant transactions, or new features, products or services by us or our competitors; changes in financial estimates and
recommendations by securities analysts; failure of securities analysts to cover or track our common stock; media coverage of our business
and financial performance; trends in our industry; any significant change in our management; sales of common stock by us, our investors or
members of our management team; and changes in general market, economic and political conditions in the United States and global
economies or financial markets, including as a result of public health crises and global conflicts, such Russia’s ongoing invasion of Ukraine.
The market price of our common stock could be subject to wide fluctuations in response to, among other things, the factors described in
this “Risk Factors” section or otherwise, and other factors beyond our control, such as fluctuations in the valuations of companies perceived
by investors to be comparable to us. In addition, the stock market in general, and the market prices for companies in our industry, have
experienced volatility that often has been unrelated to operating performance. These broad market and industry fluctuations may adversely
affect the price of our stock, regardless of our operating performance. In the past, many companies that have experienced volatility in their
stock price have become subject to securities class action litigation. We have been subject to this type of litigation in the past and may
continue to be a target in the future. Securities litigation against us has resulted and could result in substantial costs and has and would divert
our management’s attention from other business concerns, any of which could harm our business.
If we fail to meet expectations related to future growth, profitability, or other market expectations, our stock price may decline
significantly, which could have a material adverse impact on investor confidence and employee retention.
Sales of a substantial number of shares of our common stock in the public market, or the perception these sales might occur,
could cause our stock price to decline.
Sales of a substantial number of shares of our common stock in the public market, or the perception these sales might occur, could
cause the market price of our common stock to decline and could impair our ability to raise capital through the sale of additional equity
securities. In addition, we have registered shares of common stock which we may issue under our employee stock plans and they may be
sold freely in the public market upon issuance. We may issue our shares of common stock or securities convertible into our common stock
from time to time in connection with a financing, acquisition, and investments or otherwise. Any such issuance could result in substantial
dilution to our existing stockholders and cause the trading price of our common stock to decline.
If securities analysts do not publish or cease publishing research or reports about our business or if they publish negative
evaluations of our stock, the price of our stock could decline.
We expect that the trading price for our common stock will be affected by any research or reports that industry or financial analysts
publish about us or our business. If one or more of the analysts who elect to cover us downgrade their evaluations of our stock or provide
more favorable relative recommendations about our competitors, the price of our stock could decline. If one or more of these analysts cease
coverage of our company, our stock may lose visibility in the market, which in turn could cause its price to decline.
We have never paid cash dividends and do not anticipate paying any cash dividends on our common stock.
We do not anticipate paying any cash dividends on our common stock in the foreseeable future. If we do not pay cash dividends, you
would receive a return on your investment in our common stock only if the market price of our common stock increases before you sell your
shares.
Ooma | FY2024 Form 10-K | 42
Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the
market price of our stock.
Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws contain provisions that could delay or
prevent a change in control of our company. These provisions could also make it more difficult for stockholders to elect directors and take
other corporate actions. These provisions include:
•
•
•
•
•
•
•
providing for a classified board of directors with staggered, three-year terms;
authorizing the issuance of “blank check” preferred stock that our board of directors could issue to increase the number of
outstanding shares to discourage a takeover attempt;
prohibiting cumulative voting in the election of directors;
providing that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less
than a quorum;
prohibiting stockholder action by written consent;
limiting the persons who may call special meetings of stockholders; and
requiring advance notification of stockholder nominations and proposals.
These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it
more difficult for stockholders to replace members of our board of directors, which is responsible for appointing the members of our
management. In addition, the provisions of Section 203 of the Delaware General Corporate Law may prohibit large stockholders, in particular
those owning 15% or more of our outstanding voting stock, from merging or combining with us for a certain period of time without the consent
of our board of directors. These and other provisions in our amended and restated certificate of incorporation and our bylaws and under
Delaware law could discourage potential takeover attempts, reduce the price investors might be willing to pay in the future for shares of our
common stock and result in the market price of our common stock being lower than it would be without these provisions.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the
exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to
obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.
Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the sole and
exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty owed by any of
our directors, officers or other employees to us or our stockholders, any action asserting a claim against us arising pursuant to any provisions
of the General Corporation Law of the State of Delaware, our amended and restated certificate of incorporation or our amended and restated
bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. The choice of forum provision may limit a
stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees,
which may discourage such lawsuits against us and our directors, officers and other employees. While the Delaware Supreme Court
determined that such choice of forum provisions are facially valid, a stockholder may nevertheless seek to bring such a claim arising under
the Securities Act of 1933, as amended, against us, our directors, officers, or other employees in a venue other than in the federal district
courts of the United States of America. In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive
forum provisions of our amended and restated certificate of incorporation, and this may require significant additional costs associated with
resolving such action in other jurisdictions.
We were and are currently subject to a class action litigation, and may be subject to other litigation in the future.
The Company, its directors, and certain officers were named as defendants in a consolidated securities class action in connection with
its initial public offering, and in October 2019, the Court dismissed the lawsuit with prejudice. In addition, in February 2021 the Company and
Ooma Canada Inc. were named as defendants in a class action complaint in the Federal Court of Canada, alleging violations of Canada’s
Trademarks Act and Competition Act. In the future, especially following periods of volatility in the market price of our shares, additional
purported class action or derivative complaints may be filed against us. The outcome of any pending and potential future litigation is difficult
to predict and quantify and the defense of such claims or actions can be costly. In addition to diverting financial and management resources
and general business disruption, we may suffer from adverse publicity that could harm our brand or reputation, regardless of whether the
allegations are valid or whether we are ultimately held liable. A judgment or settlement that is not covered by or is significantly in excess of
our insurance coverage for any claims, or our obligations to indemnify the underwriters and the individual defendants, could materially and
adversely affect our financial condition, results of operations and cash flows.
Ooma | FY2024 Form 10-K | 43
General Risk Factors
If we are unable to hire, retain and motivate qualified personnel, our business will suffer.
Our future growth and success depends, in part, on our continued ability to hire and retain highly skilled personnel. We believe there is,
and will continue to be, intense competition for highly skilled technical, sales and other personnel with experience in our industry in the San
Francisco Bay Area, where our headquarters is located, and in other parts of the United States and Canada. We have from time to time
experienced, and we expect to continue to experience, challenges in hiring and retaining skilled personnel with appropriate qualifications. We
must provide competitive compensation packages and a high-quality work environment to hire, retain and motivate employees. If we and/or
our partners are unable to hire, retain and motivate the existing workforce or attract qualified personnel to fill key positions, we may be unable
to manage our business effectively, including the development, marketing and sale of existing and new services, which could have a material
adverse effect on our business, financial condition, and results of operations. To the extent we hire personnel from competitors, we may be
subject to allegations such personnel have been improperly solicited or divulged proprietary or other confidential information.
The impact of the COVID-19 pandemic, including any resurgences, could disrupt and cause harm to our business, operating
results, or financial condition.
The COVID-19 pandemic has had a material impact on the United States, Canada, and global economies and could materially impact
our business in the future in a number of ways. A resurgence of COVID-19 pandemic or the occurrence of any other pandemic could result in
suspending travel and restrict the ability of do business in person, which could impact our sales and marketing efforts and our ability to attract
new customers and successfully implement our services in a timely manner. In addition, COVID-19 or any future pandemic could disrupt the
operations of our customers, partners, contract manufacturers, suppliers and other third-party providers. If we are not able to respond to and
manage the impact of such events effectively and if the macroeconomic conditions of the general economy or the industry in which we
operate do not improve, or worsen from present levels, our business, operating results, financial condition and cash flows could be adversely
affected.
The COVID-19 pandemic has had a material impact on the United States, Canada, and global economies and could materially impact
our business in a number of ways. The COVID-19 pandemic continues to evolve and it remains difficult to predict the full impact of the
pandemic on the broader economy and how consumer behavior may change, and whether such change is temporary or permanent. The
duration and extent of the impact from the COVID-19 pandemic on our business will continue to depend on future developments that cannot
be accurately forecasted at this time, such as the transmission rate and geographic spread of the disease, the extent and effectiveness of
current or future containment actions, the widespread use of effective vaccines, the severity of breakthrough cases and emergence of new
COVID-19 variants, and the impact of these and other factors on our employees, customers, partners, contract manufacturers, suppliers and
other third-party providers. If we are not able to respond to and manage the impact of such events effectively and if the macroeconomic
conditions of the general economy or the industry in which we operate do not improve, or worsen from present levels, our business, operating
results, financial condition and cash flows could be adversely affected.
Catastrophic events or political instability could disrupt and cause harm to our business, operating results, or financial condition.
Our corporate headquarters, offices, warehouses and one of our data center facilities are located in Northern California, a region that
frequently experiences earthquakes. We also maintain an office in Boca Raton, Florida, an area that has been prone to severe weather
events, such as hurricanes. In addition, our third-party contract manufacturer facilities in Vietnam and other Asian countries and our sole
third-party customer service and support facility in the Philippines are located on the Pacific Rim near known earthquake fault zones that are
vulnerable to damage from earthquakes, tsunamis, volcanic eruptions and/or typhoons. We and our contractors are also vulnerable to other
types of disasters, such as power loss, fire, floods, pandemics, cyber-attack, war (including ongoing geopolitical tensions related to Russia’s
actions in Ukraine, resulting sanctions imposed by the United States and other countries, and retaliatory actions taken by Russia in response
to such sanctions), political or civil unrest and terrorist attacks and similar events that are beyond our control. In particular, we depend on
third-party contractors located in Russia for engineering and software development services. We cannot assure you that our ability to
continue transacting with third-party contractors in Russia would not be impacted by the effects of Russia’s ongoing invasion of Ukraine and
resulting international sanctions. If any disasters were to occur, our ability to operate our business could be seriously impaired, and we may
endure system interruptions, reputational harm, loss of intellectual property, delays in our services development, lengthy interruptions in our
services, breaches of data security and loss of critical data, all of which could harm our future results of operations. Such events may also
reduce demand for our products and services because of reduced global or national economic activity and can cause disruptions and
extreme volatility in global financial markets, increase rates of default and bankruptcy, and impact levels of business and consumer
Ooma | FY2024 Form 10-K | 44
spending. In addition, we do not carry earthquake insurance and we may not have adequate insurance to cover our losses resulting from
other disasters or other similar significant business interruptions. Any significant losses not recoverable under our insurance policies could
seriously impair our business and financial condition.
Climate change may have an impact on our business.
Any of our primary locations may be vulnerable to the adverse effects of climate change. For example, our offices and facilities in
California have experienced, and are projected to continue to experience, climate-related events at an increasing frequency, including
drought, heat waves, wildfires and power shutoffs associated with wildfire prevention. Changing market dynamics, global policy
developments and the increasing frequency and impact of extreme weather events on critical infrastructure in the U.S. and elsewhere have
the potential to disrupt our business, our third-party suppliers and our customers, and may cause us to experience higher churn, losses and
additional costs to maintain or resume operations.
Additionally, climate change concerns and the potential resulting environmental impact may result in new or more stringent
environmental, health, and safety laws and regulations that may affect us, our suppliers, and our customers. Such laws or regulations could
cause us to incur additional direct costs for compliance, as well as increased indirect costs resulting from our customers, suppliers, or both
incurring additional compliance costs that are passed on to us. These costs may adversely impact our results of operations and financial
condition.
ITEM 1B. Unresolved Staff Comments
None.
ITEM 1C. Cybersecurity
Risk Management, Governance and Strategy
We recognize the importance of assessing, identifying, and managing material risks associated with cybersecurity threats. These risks
include, among other things: operational risks, intellectual property theft, fraud, extortion, harm to employees or customers and violation of
data privacy or security laws. This process is owned by the Chief Information Security Officer (“CISO”) and is supported by both management
and our board of directors. Our CISO has served in various information technology and security leadership roles for over 30 years. He has a
Master of Science degree in Electrical Engineering from Stanford University.
Our board of directors as a whole oversees the Company’s privacy and data security, including cybersecurity, risk exposures, policies
and practices, and the steps management has taken to prevent, detect, monitor and control such risks and the potential impact of those
exposures on our business, financial results, operations, and reputation. We have tools and protocols in place designed to prevent, detect
and escalate security incidents within the Company.
Identifying and assessing cybersecurity risk is integrated into our overall risk management systems and processes. Cybersecurity risks
related to our business, technical operations, privacy and compliance issues are identified and addressed through a multi-faceted approach
including third party assessments and reviews. As part of our risk assessment process, we may perform cybersecurity risk evaluations when
selecting applicable third-party vendors, suppliers, and other service providers. To defend, detect and respond to cybersecurity incidents, we,
among other things: conduct proactive cybersecurity reviews of systems and applications, conduct employee phishing training, and monitor
emerging laws and regulations related to data protection and information security.
We have implemented incident response and breach management processes. Notifications are made based on the level of threat of the
incident. Incidents are evaluated to determine materiality as well as operational and business impact. Depending on the nature and severity
of an incident, this process provides for escalating notification to our CEO and the board of directors.
Although the "Risk Factors" section includes further detail about the material cybersecurity risks we face, we believe that risks from prior
cybersecurity threats, including as a result of any previous cybersecurity incidents, have not materially affected our business to date.
Although we continue to invest in cybersecurity and to enhance our internal controls and processes, we cannot guarantee these
measures will be sufficient to protect us from a network security incident. For further information regarding the risks we face from
cybersecurity threats refer to the “Risk Factors” within this Form 10-K.
Ooma | FY2024 Form 10-K | 45
ITEM 2. Properties
Our corporate headquarters are located in Sunnyvale, California and consists of leased office space totaling approximately 33,400 square
feet. We lease additional office and warehouse space in the San Francisco Bay Area for various product development, operational and
customer support purposes. We also lease offices in Boca Raton, Florida and several other locations throughout the United States as well as
Vancouver, British Columbia.
We lease space from third-party data centers under co-location agreements that support our cloud infrastructure, the most significant
locations being San Jose, California; Dallas, Texas; Ashburn, Virginia; as well as several locations internationally.
We believe our existing facilities are adequate to meet our current requirements. If we were to require additional space, we believe that we
will be able to obtain such space on acceptable, commercially reasonable terms. See Note 7: Operating Leases of the accompanying notes
of our consolidated financial statements for more information about our lease commitments.
ITEM 3. Legal Proceedings
For a discussion of legal proceedings, see Note 11: Commitments and Contingencies – Legal Proceedings in the notes to our consolidated
financial statements included in Part II, Item 8, "Financial Statements and Supplementary Data" of this Form 10-K, which information is
incorporated herein by reference.
ITEM 4. Mine Safety Disclosures
Not applicable.
Ooma | FY2024 Form 10-K | 46
PART II
ITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity
Securities
Market Information for Common Stock. Our common stock has been trading on the NYSE under the symbol “OOMA” since July 17, 2015.
Holders of Record. As of March 28, 2024, there were approximately 56 holders of record of our common stock. Because many of our
shares of common stock are held by brokers and other institutions on behalf of stockholders, we are unable to estimate the total number of
stockholders represented by these record holders.
Dividend Policy. We have not declared or paid, and do not anticipate declaring or paying in the foreseeable future, any cash dividends on
our capital stock.
Stock Price Performance Graph. The graph below compares the cumulative total return on our common stock with that of the NASDAQ
Telecommunications Index and the NYSE. The graph assumes $100 was invested at the close of market on the last trading day of fiscal 2019
in our common stock, the NASDAQ Telecommunications Index and the NYSE, and its relative performance is tracked through January 31,
2024, the last trading day of our fiscal year 2024.
This performance graph shall not be deemed “filed” for purposes of Section 18 of the Exchange Act, or incorporated by reference into any
filing of Ooma, Inc. under the Securities Act of 1933, as amended, or the Securities Act, except as shall be expressly set forth by specific
reference in such filing. The stock price performance on this performance graph is not necessarily indicative of future stock price
performance.
Sales of Unregistered Securities. Not applicable.
Use of Proceeds. Not applicable.
Purchases of Equity Securities by Issuer and Affiliated Purchasers. None.
Ooma | FY2024 Form 10-K | 47
ITEM 6. [Reserved]
Ooma | FY2024 Form 10-K | 48
ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
The following discussion should be read in conjunction with our consolidated financial statements and the related notes to those statements
included elsewhere in this Form 10-K. In addition to historical financial information, the following discussion contains forward-looking
statements that involve risks, uncertainties and assumptions. Our actual results could differ materially from those anticipated in these
forward-looking statements as a result of many factors, including those discussed under “Risk Factors” and elsewhere in this Form 10-K. The
last day of our fiscal year is January 31, and we refer to our fiscal year ended January 31, 2024 as fiscal 2024, our fiscal year ended January
31, 2023 as fiscal 2023 and our fiscal year ended January 31, 2022 as fiscal 2022. All other references to years are references to calendar
years.
This section of this Form 10-K generally discusses fiscal 2024 and 2023 items and year-to-year comparisons between fiscal 2024 and 2023.
Discussion regarding our financial condition and results of operations for fiscal 2023 as compared to 2022 is included in Item 7 of our Annual
Report on Form 10-K for the year ended January 31, 2023, filed with the SEC on April 7, 2023 (the "FY2023 Form 10-K").
Executive Overview
Ooma provides leading communications services and related technologies that bring unique features, ease of use, and affordability to
businesses and residential customers through our smart SaaS and unified communications platforms. For businesses of all sizes, we deliver
advanced voice and collaboration features including messaging, intelligent virtual attendants, and video conferencing to help them run more
efficiently. For consumers, our residential phone service provides PureVoice high-definition voice quality, advanced functionality and
integration with mobile devices.
We generate revenues primarily from the sale of subscriptions and other services for our business and residential communications solutions.
We generate our product and other revenue from the sale of our on-premise devices and end-point devices. We primarily offer our solutions
in the United States and Canada, with limited offerings in certain other countries.
On October 20, 2023, we completed the acquisition of 2600hz, Inc. (“2600Hz”) a provider of cloud-based business applications targeted at
resellers and carriers, for a base purchase price of approximately $33.0 million in cash. The final aggregate purchase price was
approximately $32.2 million, reflecting reduction for customary working capital adjustments, and was funded in part by the incurrence of
$18.0 million of borrowings under our Credit Agreement. We believe the acquisition of 2600Hz will accelerate overall growth of Ooma
Business.
We refer to Ooma Office, Ooma Enterprise, Ooma AirDial, 2600Hz, and OnSIP collectively as Ooma Business. Ooma Residential includes
Ooma Telo basic and premier services, as well as Ooma Telo LTE services. See Item 1. Business above for additional information regarding
our business, including products and services offered, competitive market and regulatory matters.
Fiscal 2024 Financial Performance
•
•
•
•
•
•
•
Total revenue was $236.7 million, up 10% year-over-year, primarily driven by the continued growth of Ooma Business and the
acquisition of 2600Hz.
Subscription and services revenue from Ooma Business grew 22% year-over-year, driven by user growth.
Total gross margin was 62%, down from 64% in fiscal 2023.
GAAP net loss was $0.8 million, compared to a net loss of $3.7 million in fiscal 2023. GAAP net loss for fiscal 2024 includes tax
benefit for the release of a $3.1 million valuation allowance resulting from the recording of certain intangible assets associated
with the acquisition of 2600Hz in late October 2023, as well as a $1.0 million gain on consolidation of facility costs, partially offset
by $0.7 million in acquisition related costs and $0.5 million in certain restructuring costs.
Non-GAAP net income was $15.4 million, compared to $13.6 million in fiscal 2023.
Adjusted EBITDA was $19.8 million, or 8% of revenue, compared to $17.4 million in fiscal 2023.
As of January 31, 2024, we had total cash, cash equivalents and short-term investments of $17.5 million, down $9.4 million from
$26.9 million as of January 31, 2023. Cash usage reflected our acquisition of 2600Hz, including the repayment of borrowings
under our Credit Agreement.
Reconciliations of non-GAAP adjusted measures to the most directly comparable GAAP measures are presented below under Adjusted
EBITDA and Non-GAAP Financial Measures.
Ooma | FY2024 Form 10-K | 49
Key Factors Affecting Our Performance
Our historical financial performance and key business metrics have been, and we expect that our financial performance and key business
metrics in the future will be, primarily driven by the following factors:
Core user growth. Our growth in the number of core users, a key business metric defined below, is a key indicator of our market
penetration, the growth of our business and our anticipated future subscription and services revenue, especially Ooma Business.
Low core user churn. We believe that maintaining our current low core user churn for Ooma Business and Ooma Residential is an
important factor in our ability to continue to improve our financial performance and is a distinguishing advantage over many of our
competitors. We focus on providing high-quality services and support to our users so they remain with us.
Growth in additional services and products. We believe that there is significant opportunity for us to increase the additional subscription
and services that our customers purchase from us in both the business and residential markets, which generates more value to Ooma over
the life of our customer relationship. We are investing in Ooma Business to develop additional features to continue our momentum serving
businesses of all sizes and further increase our average revenue per user. We continue to see a large market opportunity to capitalize on
Ooma AirDial as an integrated solution for businesses to replace legacy copper-wire analog phone service.
Investing in long-term revenue growth. We believe that our total addressable market opportunity is large and we intend to continue
significantly investing in sales and marketing to grow our user base in multiple verticals and channels. We expect the domestic and
international markets in which we conduct our business will remain highly competitive. We plan to work together with our strategic partners to
explore and pursue potential growth opportunities related to the market transition to 5G internet. We expect to continue investing in research
and development to enhance our platforms and develop additional connected services and products, as well as launch our Ooma Business
services in a number of international countries. We may evaluate additional possible acquisitions of businesses, products and technologies
that are complementary to our business.
Ooma | FY2024 Form 10-K | 50
Key Business Metrics
We review the key metrics below to evaluate our business, measure our performance, identify trends affecting our business, formulate
financial projections and make strategic decisions (in thousands, except percentages):
Core users
Annualized exit recurring revenue (AERR)
Net dollar subscription retention rate
Adjusted EBITDA
(1) Revised January 31, 2023 and January 31, 2022 due to new methodology as described below
$
$
(1)
1,243
227,500
$
99 %
$
19,843
1,210
206,700
$
99 %
$
17,395
2024
As of January 31,
2023
2022
1,100
176,900
99 %
15,568
Core Users increased year-over-year, which was primarily driven by growth in business users. As of January 31, 2024, Ooma Business
users comprised approximately 39% of our total core users, up from 35% as of January 31, 2023. We believe that the number of our core
users is an indicator of our market penetration, the growth of our business and our anticipated future subscription and services revenue. We
define our core users as the number of active residential user accounts and business user extensions (excluding Talkatone and 2600Hz
users). We believe that the relationship that we establish with our core users positions us to sell additional premium communications services
and other new connected services to them.
Annualized Exit Recurring Revenue grew year-over-year due to an increase in the average revenue per core user, which was largely
driven by an increasing mix of business users. We believe that AERR is an indicator of recurring subscription and services revenue for near-
term future periods. We estimate our AERR by dividing our recurring quarterly subscription revenue from our core users by the average
number of core users each quarter and annualize by multiplying by four. We then multiply that result by the number of core users at the end
of the period to calculate AERR. Beginning in the third quarter of fiscal 2024, we have added $7.8 million annual recurring revenue from
2600Hz to AERR.
Net Dollar Subscription Retention Rate
Effective in the first quarter of fiscal 2024, we transitioned to a new calculation methodology for our net dollar subscription retention rate
(“NDRR”). Since the majority of our subscription revenue is now generated from Ooma Business customers, we believe the new
methodology better reflects our operational performance during the reporting period and is more in alignment with the reporting of our
industry peers. We believe that our net dollar subscription retention rate provides insight into our ability to retain and grow our subscription
and services revenue and is an indicator of the long-term value of our customer relationships and the stability of our revenue base.
Prior to the current fiscal year, we calculated the NDRR as a function of the year-over-year growth in average revenue per user and churn as
further discussed in the FY2023 Form 10-K. Under the new methodology, we define our NDRR as (i) one plus (ii) the quotient of Net Dollar
Change (as defined below) divided by Average Monthly Recurring Subscription Revenue (as defined below). We define “Net Dollar Change”
as the quotient of (i) the difference of our Monthly Recurring Subscription Revenue (as defined below) at the end of a period minus our
Monthly Recurring Subscription Revenue at the beginning of a period minus our Monthly Recurring Subscription Revenue at the end of the
period from new customers we added during the period, all divided by (ii) the number of months in the period. We define our Average Monthly
Recurring Subscription Revenue as the average of the Monthly Recurring Subscription Revenue at the beginning and end of the
measurement period. “Monthly Recurring Subscription Revenue” is defined as recurring subscription amounts from Ooma Residential and
Ooma Business customers at the end of the most recent month, excluding recurring revenue from 2600Hz.
For example, if our Monthly Recurring Subscription Revenue was $115 at the end of a quarterly period and $100 at the beginning of the
period, and $18 at the end of the period from new customers we added during the period, then the Net Dollar Change would be equal to
($1.00), or the amount equal to the difference of $115 minus $100 minus $18, all divided by three months. Our Average Monthly Recurring
Subscription Revenue would equal $107.5, or the sum of $115 plus $100, divided by two. Our NDRR would then equal 99.1%, or
approximately 99%, or one plus the quotient of the Net Dollar Change divided by the Average Monthly Recurring Subscriptions.
NDRR was flat year-over-year due to relatively consistent level of user churn and increase in Average Monthly Recurring Subscription
Revenue.
Ooma | FY2024 Form 10-K | 51
Adjusted EBITDA increased year-over-year in line with our revenue growth, representing approximately 8% of our total revenues for fiscal
2024 and fiscal 2023. We use Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to manage our business,
evaluate our performance and make planning decisions. We consider this metric to be a useful measure of our operating performance,
because it contains adjustments for unusual events or factors that do not directly affect what management considers being the core operating
performance, and are used by our management for that purpose. We also believe this measure enables us to better evaluate our
performance by facilitating a meaningful comparison of our core operating results in a given period to those in prior and future periods.
Investors often use similar measures to evaluate the operating performance with competitors. Adjusted EBITDA represents net income
before interest and other income, income taxes, depreciation and amortization of capital expenditures, amortization of intangible assets,
acquisition-related costs, certain litigation settlement costs, restructuring costs, non-recurring gains, and stock-based compensation expense
and related taxes. See "Non-GAAP Financial Measures" below for additional information.
The following table provides a reconciliation of GAAP net loss to Adjusted EBITDA for the periods indicated (in thousands):
GAAP net loss
Reconciling items:
Interest and other income, net
Income tax benefit
Depreciation and amortization of capital expenditures
Amortization of acquired intangible assets
Acquisition-related costs
Facilities consolidation (gain) charges
Stock-based compensation and related taxes
Legal settlement costs
Restructuring costs
Adjusted EBITDA
Fiscal Year Ended January 31,
2024
2023
2022
$
(835 ) $
(3,655 ) $
(1,751 )
(1,188 )
(1,978 )
4,317
3,711
885
(956 )
15,110
300
477
19,843 $
(332 )
(1,770 )
3,771
2,286
1,538
1,402
14,155
—
—
17,395 $
(179 )
—
3,117
1,304
—
—
13,077
—
—
15,568
$
Ooma | FY2024 Form 10-K | 52
Components of Results of Operations
Revenue
Subscription and services revenue is derived primarily from recurring subscription fees related to service plans such as Ooma Business,
Ooma Residential and other communications services and, to a lesser extent, from payments associated with our Talkatone mobile
application and prepaid international calls. We expect our subscription and services revenue to grow as we expand our core user base,
driven primarily by growth in Ooma Business. We expect revenues from Ooma Business will continue to account for most of our revenue for
the foreseeable future.
Product and other revenue consists primarily of sales of our on-premise devices and end-point devices used in connection with our
services, including shipping and handling fees for our direct customers.
Cost of revenue and gross margin
Cost of subscription and services revenue includes payments made for third-party network operations and telecommunications services;
certain telecom taxes and fees, including Federal Universal Service Fund (“USF”) contributions; credit card processing fees; costs to build out
and maintain data centers; depreciation and maintenance of servers and equipment; personnel costs associated with customer care and
network operations support; amortization of certain acquired intangible assets, and allocated overhead costs.
Cost of product and other revenue includes the costs associated with the manufacturing of our on-premise devices and end-point devices,
including Ooma AirDial, as well as personnel costs for employees and contractors, costs related to porting our customers’ phone numbers to
our service, shipping and handling costs, tariffs imposed on imported product and allocated overhead costs.
Subscription and services gross margin may fluctuate from period-to-period based on the interplay of a number of factors, including
revenue mix and fluctuations in the costs described above. We expect our subscription and services gross margin to increase over the long-
term, primarily as we achieve scale efficiencies and as Ooma Business revenue becomes a larger majority of total subscription revenue.
Product and other gross margin may fluctuate from period-to-period based on a number of factors, including total units shipped as
compared to the direct costs of production and relatively fixed personnel costs incurred. We sell our on-premise devices at aggressive price
points to facilitate the adoption of our platforms and services. Additionally, some product costs have become subject to significantly higher
pricing we experienced due to supply chain constraints in the global macroeconomic environment as well as certain components becoming
subject to end-of-life and we may not be able to fully offset such higher costs through price increases. Another factor is the high AirDial
installation costs due to ramp up efforts. Accordingly, we expect our product and other gross margin will continue to be negatively impacted
by these higher component costs and AirDial installation costs. We expect our product and other gross margin to continue to be negative for
the foreseeable future.
Our subscription and services gross margin is significantly higher than product and other gross margin. As a result, any significant change in
revenue mix will cause our total gross margin to change. For example, in periods where we sell significantly more on-premise devices or
other products, we would expect our total gross margin to be impacted.
Operating expenses
Sales and marketing expenses consist primarily of personnel costs for employees and contractors, advertising and marketing costs, sales
commissions paid to internal sales personnel and third parties, amortization of capitalized sales commissions, amortization of acquired
customer relationship intangible assets, travel expenses and allocated overhead costs. We expect our sales and marketing expenses to
increase in absolute dollars as we continue to grow our business.
Research and development expenses are focused on developing new and expanded features for our solutions and improvements to our
platforms and backend architecture. Research and development expenses consist primarily of personnel costs for employees and
contractors, including third-party development, and allocated overhead costs. We expect our research and development expenses to
increase in absolute dollars as we continue to grow our business.
Ooma | FY2024 Form 10-K | 53
General and administrative expenses consist of personnel costs for our finance, legal, human resources and other administrative
employees and contractors, as well as professional service fees, certain acquisition-related costs, and allocated overhead costs. We expect
our general and administrative expenses to increase in absolute dollars as we continue to grow our business.
Ooma | FY2024 Form 10-K | 54
Consolidated Results of Operations
The following table sets forth selected consolidated statements of operations data for each of the periods indicated (in thousands):
Revenue:
Subscription and services
Product and other
Total revenue
Cost of revenue:
Subscription and services
Product and other
Total cost of revenue
Gross profit
Operating expenses:
Sales and marketing
Research and development
General and administrative
Total operating expenses
Loss from operations
Interest and other income, net
Loss before income taxes
Income tax benefit
Net loss
2024
Fiscal Year Ended January 31,
2023
2022
$
221,624
15,113
236,737
199,105 $
17,060
216,165
63,667
25,838
89,505
147,232
73,503
49,935
27,795
151,233
(4,001 )
1,188
(2,813 )
1,978
(835 ) $
54,499
24,018
78,517
137,648
69,671
45,939
27,795
143,405
(5,757 )
332
(5,425 )
1,770
(3,655 ) $
175,942
16,348
192,290
49,563
24,289
73,852
118,438
58,631
38,193
23,544
120,368
(1,930 )
179
(1,751 )
—
(1,751 )
$
$
Cost of revenue and operating expenses included stock-based compensation expense and related payroll taxes as follows (in thousands):
Cost of revenue
Sales and marketing
Research and development
General and administrative
Total stock-based compensation expense
Fiscal Year Ended January 31,
2024
2023
2022
$
$
1,026 $
2,276
4,876
6,932
15,110
$
986 $
2,068
4,713
6,388
14,155 $
1,026
1,932
4,373
5,746
13,077
Ooma | FY2024 Form 10-K | 55
Comparison of fiscal years 2024, 2023 and 2022 (dollars in tables are in thousands):
Revenue
Revenue:
Subscription and services
Product and other
Total revenue
Percentage of revenue:
Subscription and services
Product and other
Total
Fiscal 2024 Compared to Fiscal 2023
Fiscal Year Ended January 31,
2024
2023
2022
Change
2024 vs. 2023
$
$
221,624 $
15,113
236,737 $
199,105 $
17,060
216,165 $
175,942 $
16,348
192,290 $
22,519
(1,947 )
20,572
11 %
(11 )%
10 %
94 %
6 %
100 %
92 %
8 %
100 %
91 %
9 %
100 %
We derived approximately 58% and 53% of our total revenue from Ooma Business and approximately 40% and 45% from Ooma Residential
in fiscal 2024 and 2023, respectively.
Subscription and services revenue increased $22.5 million or 11% year-over-year, primarily attributable to an increase in our core users and
an increase in the average revenue per core user. Revenue increase year-over-year is also attributable to inclusion of revenue from 2600Hz,
which we acquired at the end of third quarter of fiscal 2024 and revenue for the entire fiscal year from OnSIP, which we acquired in the
second quarter of fiscal 2023.
Product and other revenue decreased $1.9 million or 11% year-over-year, primarily attributable to the sale of certain legacy inventories and
accessories in fiscal 2023. These sales did not recur in fiscal 2024.
Cost of Revenue and Gross Margin
Cost of revenue:
Subscription and services
Product and other
Total cost of revenue
Gross margin:
Subscription and services
Product and other
Total
Fiscal 2024 Compared to Fiscal 2023
Fiscal Year Ended January 31,
2024
2023
2022
Change
2024 vs. 2023
$
$
63,667 $
25,838
89,505 $
54,499 $
24,018
78,517 $
49,563 $
24,289
73,852 $
9,168
1,820
10,988
17 %
8 %
14 %
71 %
(71 )%
62 %
73 %
(41 )%
64 %
72 %
(49 )%
62 %
Subscription and services gross margin of 71% decreased year-over-year from 73%. Cost of subscription and services revenue increased
$9.2 million or 17% year-over-year, primarily due to a $4.1 million increase in personnel and contractor related costs, a $2.2 million increase
in infrastructure costs, a $1.7 million increase in regulatory fees, a $0.7 million increase in intangible amortization expense and a $0.5 million
increase in credit card processing fees. Overall, the year-over-year increase in the cost of subscription and services reflects both organic
growth and growth related to our acquisitions of 2600Hz and OnSIP in fiscal 2024 and 2023, respectively.
Product and other revenue gross margin changed to negative 71% from negative 41% in the prior year. This change was primarily due to the
usage of certain higher cost components that we had procured in the prior fiscal year to stay ahead of pandemic driven supply chain issues.
Product and other gross margin for fiscal 2023 benefited from certain accessory sales that did not recur in fiscal year 2024.
Ooma | FY2024 Form 10-K | 56
Operating Expenses
Sales and marketing
Research and development
General and administrative
Total operating expenses
Fiscal 2024 Compared to Fiscal 2023
Fiscal Year Ended January 31,
2024
2023
2022
$
$
73,503
49,935
27,795
151,233
$
$
69,671 $
45,939
27,795
143,405
$
58,631
38,193
23,544
120,368
$
$
Change
2024 vs. 2023
3,832
3,996
—
7,828
6 %
9 %
—
5 %
Sales and marketing expenses increased $3.8 million or 6% year-over-year, primarily due to a $4.1 million increase in personnel and
contractor related costs, a $0.4 million increase in commission costs, and a $0.7 million increase in intangible asset amortization, offset in
part by a $1.6 million decrease in advertising and marketing expense.
Research and development expenses increased $4.0 million or 9% year-over-year, primarily due to a $3.5 million increase in personnel and
contractor related costs, driven by higher headcount, and a $0.5 million increase in restructuring costs.
General and administrative expenses remained the same year-over-year with key movements including a $2.5 million increase in personnel
and contractor related costs to scale with the overall growth of our business, offset by a $2.4 million change in facility consolidation gain.
A significant portion of the year-over-year increase in personnel and contractor related costs for operating expenses was due to increases in
headcount attributable to the 2600Hz and OnSIP acquisition in fiscal 2024 and 2023, respectively.
Income Taxes
We recorded an income tax benefit of $3.1 million and $2.1 million in fiscal 2024 and 2023, respectively, offset by $1.1 million and $0.3 million
of income tax expense in the respective fiscal years. The income tax benefits were related to certain preexisting deferred tax assets realized
because of deferred tax liabilities assumed in our acquisitions of 2600Hz and OnSIP in fiscal 2024 and 2023, respectively.
Ooma | FY2024 Form 10-K | 57
Non-GAAP Financial Measures
This Form 10-K contains certain non-GAAP financial measures, including non-GAAP net income and Adjusted EBITDA. These non-GAAP
financial measures are presented to provide investors with additional information regarding our financial results and core business
operations. Non-GAAP financial measures are presented for supplemental informational purposes only to aid an understanding of our
operating results and should not be considered a substitute for financial information presented in accordance with GAAP and may be
different from non-GAAP financial measures presented by other companies. A limitation of the non-GAAP financial measures presented is
that the adjustments relate to items that the Company generally expects to continue to recognize. The adjustment of these items should not
be construed as an inference that the adjusted expenses or gains are unusual, infrequent or non-recurring. Therefore, both GAAP financial
measures of Ooma’s financial performance and the respective non-GAAP measures should be considered together.
These non-GAAP financial measures have limitations as an analytical tool, in that they do not reflect all of the amounts associated with our
results of operations as determined in accordance with GAAP. Some of these limitations are:
•
•
•
•
•
•
•
Adjusted EBITDA does not consider the impact of interest and other income/expense and does not reflect income tax payments
that may represent a reduction in cash available to us;
Adjusted EBITDA does not consider any expenses for assets being depreciated and amortized that are necessary to our
business; although these are non-cash charges, the property and equipment being depreciated and amortized often will have to
be replaced in the future, and Adjusted EBITDA does not reflect any cash capital expenditure requirements for such
replacements;
Adjusted EBITDA and non-GAAP net income exclude stock-based compensation expense and related payroll taxes because we
believe these adjustments provide better comparability to peer company results and because these charges are not viewed by
management as part of our core operating performance;
Adjusted EBITDA and non-GAAP net income exclude acquisition-related costs, including the amortization of acquired intangible
assets and restructuring costs, as well as third-party transaction costs incurred for legal and other professional services, and an
acquisition-related income tax benefit. These items are not factored into our evaluation of potential acquisitions, or of our
performance after completion of the acquisitions, because they are not related to our core operating performance or reflective of
ongoing operating results in the period, and their frequency and amount vary significantly based on the timing and magnitude of
our acquisition transactions and the maturities of the businesses being acquired. Although we exclude the amortization of
acquired intangible assets from these non-GAAP measures, management believes that it is important for investors to
understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation;
Adjusted EBITDA and non-GAAP net income exclude facilities consolidation gain or charges recorded in connection with
vacated office facilities assumed in the OnSIP acquisition. These charges do not reflect expected future operating expenses and
do not contribute to a meaningful evaluation of current operating performance or comparisons to the operating performance in
other periods;
Adjusted EBITDA and non-GAAP net income exclude certain legal settlement costs. These charges do not reflect expected
future operating expenses and do not contribute to a meaningful evaluation of current operating performance or comparisons to
the operating performance in other periods;
other companies may calculate these non-GAAP financial measures differently than we do, limiting their usefulness as
comparative measures.
The following table presents a reconciliation of GAAP net loss to non-GAAP net income for the periods indicated (in thousands):
GAAP net loss
Stock-based compensation and related taxes
Amortization of acquired intangible assets
Acquisition-related costs
Facilities consolidation (gain) charges
Legal settlement costs
Restructuring costs
Acquisition-related income tax benefit
Non-GAAP net income
Fiscal Year Ended January 31,
2024
2023
2022
(835 ) $
15,110
3,711
692
(956 )
300
477
(3,131 )
15,368 $
(3,655 ) $
14,155
2,286
1,538
1,402
—
—
(2,133 )
13,593 $
(1,751 )
13,077
1,304
—
—
—
—
—
12,630
$
$
Ooma | FY2024 Form 10-K | 58
Liquidity and Capital Resources
Our material cash requirements are discussed below under “Contractual Obligations and Commitments.” As of January 31, 2024, we had
$17.5 million of total cash, cash equivalents and investments and borrowing capacity of $14.0 million under our Credit Agreement, which we
believe will be sufficient to meet our cash needs for at least the next 12 months. Our future capital requirements will depend on many factors,
including our growth rate, the introduction of new and enhanced offerings, the timing and extent of our sales and marketing activities and
research and development expenditures, the expansion of our business internationally and other factors. We may in the future make
investments in or acquisitions of businesses or technologies, which may require the use of cash.
The following table summarizes cash flow information for the periods indicated (in thousands):
Net cash provided by operating activities
Net cash used in investing activities
Net cash provided by financing activities
Net (decrease) increase in cash and cash equivalents
Operating Activities
January 31,
2024
Fiscal Year Ended
January 31,
2023
January 31,
2022
$
$
12,273
(35,328 )
16,454
(6,601 ) $
8,773 $
(6,146 )
1,843
$
4,470
6,655
(4,887 )
601
2,369
The following table provides selected cash flow information for the periods indicated (in thousands):
Net loss
Non-cash charges
Changes in operating assets and liabilities:
January 31,
2024
Fiscal Year Ended
January 31,
2023
January 31,
2022
$
(835 )
21,735
(3,655 ) $
22,245
(1,751 )
20,095
(Increase) decrease in accounts receivable
Decrease (increase) in inventories and deferred inventory costs
Increase in prepaid expenses and other assets
(Decrease) increase in accounts payable, accrued expenses and other
liabilities
(Decrease) Increase in deferred revenue
Net cash provided by operating activities
$
(2,587 )
6,341
(2,280 )
(9,579 )
(522 )
12,273 $
434
(12,333 )
(2,460 )
4,509
33
8,773 $
(2,082 )
(1,571 )
(4,609 )
(3,599 )
172
6,655
For fiscal 2024, our net loss of $0.8 million included non-cash charges primarily related to stock-based compensation expense, operating
lease expense, depreciation and amortization expense, facilities consolidation gain and an income tax benefit related to our business
acquisition. Operating asset and liability changes for fiscal 2024 included:
•
•
•
•
an increase of $2.6 million in accounts receivable due to the timing of cash collections;
a decrease of $6.3 million in inventories and deferred inventory costs;
an increase of $2.3 million in prepaid expenses and other current and non-current assets primarily due to the capitalization of
sales commissions and the timing of prepayments; and
a decrease of $9.6 million in accounts payable, accrued expenses and other liabilities due to the timing of payments
Cash provided by operating activities for fiscal 2024 increased $3.5 million year-over-year, which primarily reflected working capital impacts
resulting from the timing of payments. Although we have generated cash from operations in recent periods, our operating cash flow may not
remain positive in the future as we continue to invest in efforts to scale our business and paydown borrowings under our Credit Agreement.
Investing Activities
Cash used in investing activities was $35.3 million for fiscal 2024, which consisted of cash consideration paid for the 2600Hz business
acquisition of $32.2 million, and capital expenditures of $6.2 million, partly offset by proceeds of $2.8 million from maturities of short-term
investments and $0.3 million of cash received for working capital adjustments from the seller related
Ooma | FY2024 Form 10-K | 59
to the acquisition of OnSIP in the second fiscal quarter of 2023. Cash used in investing activities increased $29.2 million year-over-year
primarily due to the 2600Hz acquisition.
Financing Activities
Cash provided by financing activities was $16.5 million for fiscal 2024, which consisted of proceeds from the issuance of long-term debt of
$18.0 million to provide funding for the 2600Hz acquisition, proceeds of $2.7 million from the issuance of common stock from our Employee
Stock Purchase Plan (“ESPP”) and stock option exercises, partly offset by payments of $1.7 million related to shares repurchased for tax
withholdings on vesting of restricted stock units (“RSUs”), $2.0 million repayment of long-term debt, and $0.5 million debt issuance costs.
Cash provided by financing activities increased $14.6 million year-over-year, which primarily reflected cash proceeds from borrowings under
our Credit Agreement.
Revolving Credit Facility
In October 2023, we entered into the Credit Agreement with certain lenders that provided for a secured revolving credit facility under which
we may borrow up to an aggregate of $30.0 million and, subject to certain conditions, may be increased to up to $50.0 million. As of January
31, 2024, we have $16.0 million of outstanding borrowings and were in compliance with all loan covenants, including having liquidity of $10
million and trailing four-quarter recurring revenue of $180 million at that date.
On June 7, 2023, we terminated our credit and security agreement with KeyBank National Association.
Contractual Obligations and Commitments
Our principal commitments consist of obligations under operating leases for our headquarters located in Sunnyvale, California, as well as
office space and co-location data center facilities in several locations. As of January 31, 2024, our total future expected payment obligations
under non-cancelable operating leases with initial terms longer than one year were approximately $21.3 million, with payments of $3.8 million
due in the next 12 months and $17.5 million due thereafter. See Note 7: Operating Leases in the notes to our consolidated financial
statements.
As of January 31, 2024 and 2023, non-cancelable inventory purchase commitments to our contract manufacturers and other suppliers totaled
approximately $1.1 million and $7.8 million, respectively. Additionally, we have a non-cancelable service agreement with a
telecommunications provider that contains total annual minimum purchase commitments of $1.5 million between August 2022 and February
2024 and $2.5 million between March 2024 and February 2025.
Ooma | FY2024 Form 10-K | 60
Critical Accounting Policies and Estimates
We prepare our consolidated financial statements in accordance with U.S. GAAP, which requires us to make estimates and judgments that
affect the reported amounts of assets, liabilities, revenue and expenses, cash flows and the related disclosures. We base our estimates on
historical experience and on other assumptions we believe to be reasonable under the circumstances. Actual results could differ materially
from these estimates. Note 2 to the notes to consolidated financial statements of this Form 10-K describes the significant accounting policies
and methods used in the preparation of the consolidated financial statements. We believe that the accounting policies discussed below are
critical to understanding our historical and future performance as these policies involve a greater degree of judgment and complexity.
Revenue Recognition
Subscription and services revenue is derived primarily from recurring subscription fees related to service plans such as Ooma Business,
Ooma Residential and other communications services. Subscription revenue is generally recognized ratably over the contractual service
term. Product and other revenue is primarily generated from the sale of on-premise devices and end-point devices, including shipping and
handling fees for our direct customers. We recognize product and other revenue from sales to direct end-customers and channel partners at
the point in time that control transfers.
Our contracts with customers typically contain multiple performance obligations that consist of communications services and related
products. Judgment is required to properly identify the accounting units of multiple performance obligations and to determine the manner in
which revenue should be allocated among the obligations. Individual performance obligations are accounted for separately if they are distinct.
The contract transaction price is then allocated to the separate performance obligations on a relative stand-alone selling price (“SSP”) basis.
We determine the SSP for our communications services based on observable historical stand-alone sales to customers, for which we require
that a substantial majority of selling prices fall within a reasonably narrow pricing range. We determine the SSP for our on-premise devices
and end-point devices based upon our best estimates and judgments, considering company-specific factors such as pricing strategies,
discounting practices, and estimated product and other costs. The determination of SSP is made through consultation with and approval by
our management. As our business offerings evolve over time, we may be required to modify our estimated selling prices in subsequent
periods, and the timing of our revenue recognition could be affected.
Our distribution agreements with channel partners typically contain clauses for price protection and right of return. We record reductions to
revenue for estimated product returns from end users and customer sales incentives at the time the related revenue is recognized. Product
returns and customer sales incentives are estimated based on our historical experience, current trends and expectations regarding future
experience. Trends are influenced by product life cycles, new product introductions, market acceptance of products, the type of customer,
seasonality and other factors. Product return and sales incentive rates may fluctuate over time but are sufficiently predictable to allow our
management to estimate expected future amounts. If actual future returns and sales incentives differ from past experience, additional
reserves may be required. To date, actual results have not been materially different from our estimates.
Inventories
Inventories consist of raw materials and finished goods and are stated at the lower of actual cost and net realizable value on a first-in, first-
out basis. At each balance sheet date, we determine excess or obsolete inventory write-downs based on multiple factors, including: forecast
demand for our products within a specified time horizon, generally 12 months, product acceptance and competitiveness in the marketplace,
product life cycles, product development plans, and current and historical sales levels. Inventory write-downs for excess and obsolete
inventory are recorded in cost of goods sold within the consolidated statement of operations during the period in which such write-downs are
determined as necessary by management. If actual future demand or market conditions are less favorable than those projected by
management, additional inventory write-downs may be required. This would have a negative impact on our gross margin in that period. If in
any period we are able to sell inventories that were not valued or that had been written down in a previous period, related revenues would be
recorded without any offsetting charge to cost of product and other revenue resulting in a net benefit to our gross margin in that period.
Ooma | FY2024 Form 10-K | 61
ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk
Interest Rates
Our exposure to market risk for changes in interest rates primarily relates to our cash and cash equivalents and outstanding debt balance.
Due to the nature of these instruments, we do not believe that an immediate 10% shift in interest rates would have a material effect on
interest income or expense.
Foreign Currencies
To date, our revenue has been primarily denominated in U.S. dollars with a small portion denominated in Canadian dollars. As a result, some
of our revenue is subject to fluctuations due to changes in the Canadian dollar relative to the U.S. dollar. Substantially all of our operating
expenses have been denominated in U.S. dollars. The functional currency for all of our entities is the U.S. dollar. To date, gains and losses
from foreign currency transactions have not been material to our consolidated financial statements, and we have not engaged in any foreign
currency hedging transactions. A hypothetical 10% increase or decrease in overall foreign currency rates would not have had a material
impact on our consolidated financial statements. As our international operations grow, we will continue to reassess our approach to managing
the risks relating to fluctuations in currency rates.
Ooma | FY2024 Form 10-K | 62
ITEM 8. Consolidated Financial Statements and Supplementary Data
Index
Report of Independent Registered Public Accounting Firm – KPMG LLP (PCAOB ID No.185)
Consolidated Balance Sheets
Consolidated Statements of Operations
Consolidated Statements of Stockholders’ Equity
Consolidated Statements of Cash Flows
Notes to Consolidated Financial Statements
64
66
67
68
69
70
Ooma | FY2024 Form 10-K | 63
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and the Board of Directors
Ooma, Inc.:
Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting
We have audited the accompanying consolidated balance sheets of Ooma, Inc. and subsidiaries (the Company) as of January 31, 2024 and
2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period
ended January 31, 2024, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s
internal control over financial reporting as of January 31, 2024, based on criteria established in Internal Control – Integrated Framework
(2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the
Company as of January 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period
ended January 31, 2024, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in
all material respects, effective internal control over financial reporting as of January 31, 2024 based on criteria established in Internal Control
– Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Basis for Opinions
The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over
financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying
Management's Annual Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s
consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits. We are a
public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be
independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the
Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or
fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the
consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits
also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an
understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the
design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures
as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting
principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of
records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide
reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally
accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any
evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions,
or that the degree of compliance with the policies or procedures may deteriorate.
Ooma | FY2024 Form 10-K | 64
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that
was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to
the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a
critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by
communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to
which it relates.
Sufficiency of audit evidence over subscription revenue
As discussed in Note 2 to the consolidated financial statements, the Company derives its revenue from subscription and services
revenue as well as product and other revenue. The Company’s subscription revenue recognition process is automated, and
revenue is recorded through reliance on customized and proprietary information technology (IT) systems. The Company recorded
$221.6 million of subscription and services revenue for the year ended January 31, 2024.
We identified the evaluation of the sufficiency of audit evidence over certain subscription revenue as a critical audit matter. This
matter required especially subjective auditor judgment because the revenue recognition process is automated and reliant upon
complex IT systems. Involvement of IT professionals with specialized skills and knowledge was required to assist with the
determination of IT systems subject to testing and the performance of certain procedures.
The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to
determine the nature and extent of procedures to be performed over subscription revenue, including the determination of the IT
systems subject to testing. We evaluated the design and tested the operating effectiveness of certain internal controls related to the
Company's subscription revenue process. We involved IT professionals with specialized skills and knowledge, who assisted in the
determination and testing of certain IT general and application controls that are used by the Company in its subscription revenue
recognition process. We assessed the recorded subscription revenue by comparing revenue to underlying cash receipts. We
evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the
appropriateness of such evidence.
/s/ KPMG LLP
We have served as the Company's auditor since 2021.
Santa Clara, California
April 2, 2024
Ooma | FY2024 Form 10-K | 65
OOMA, INC.
CONSOLIDATED BALANCE SHEETS
(Amounts in thousands, except share and per share data)
Assets
Current assets:
Cash and cash equivalents
Short-term investments
Accounts receivable, net
Inventories
Other current assets
Total current assets
Property and equipment, net
Operating lease right-of-use assets
Intangible assets, net
Goodwill
Other assets
Total assets
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable
Accrued expenses and other current liabilities
Deferred revenue
Total current liabilities
Long-term operating lease liabilities
Debt, net of current portion
Other long-term liabilities
Total liabilities
Commitments and contingencies (Note 11)
Stockholders’ equity:
January 31,
2024
January 31,
2023
$
$
17,536 $
—
9,864
19,782
16,497
63,679
9,897
17,041
27,952
23,069
17,615
159,253 $
$
7,848 $
26,586
17,041
51,475
13,676
16,000
15
81,166
24,137
2,723
7,131
26,246
14,368
74,605
7,996
12,702
10,463
8,655
16,584
131,005
13,462
26,726
17,216
57,404
10,426
—
31
67,861
Preferred stock $0.0001 par value: 10 million shares authorized; none issued and outstanding
Common stock $0.0001 par value: 100 million shares authorized; 26.0 million and 25.0 million
shares issued and outstanding, respectively
Additional paid-in capital
Accumulated other comprehensive loss
Accumulated deficit
Total stockholders’ equity
Total liabilities and stockholders’ equity
$
—
—
5
211,361
(1 )
(133,278 )
78,087
159,253 $
5
195,605
(23 )
(132,443 )
63,144
131,005
See notes to consolidated financial statements.
Ooma | FY2024 Form 10-K | 66
OOMA, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
(Amounts in thousands, except shares and per share data)
Revenue:
Subscription and services
Product and other
Total revenue
Cost of revenue:
Subscription and services
Product and other
Total cost of revenue
Gross profit
Operating expenses:
Sales and marketing
Research and development
General and administrative
Total operating expenses
Loss from operations
Interest and other income, net
Loss before income taxes
Income tax benefit
Net loss
Net loss per share of common stock:
Basic and diluted
Weighted-average shares of common stock outstanding:
Basic and diluted
$
$
$
2024
Fiscal Year Ended January 31,
2023
2022
$
221,624
15,113
236,737
199,105 $
17,060
216,165
63,667
25,838
89,505
147,232
73,503
49,935
27,795
151,233
(4,001 )
1,188
(2,813 )
1,978
(835 ) $
54,499
24,018
78,517
137,648
69,671
45,939
27,795
143,405
(5,757 )
332
(5,425 )
1,770
(3,655 ) $
175,942
16,348
192,290
49,563
24,289
73,852
118,438
58,631
38,193
23,544
120,368
(1,930 )
179
(1,751 )
—
(1,751 )
(0.03 ) $
(0.15 ) $
(0.07 )
25,573,288
24,506,525
23,473,849
See notes to consolidated financial statements.
Ooma | FY2024 Form 10-K | 67
OOMA, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Amounts in thousands, except shares and share data)
BALANCE - January 31, 2021
Issuance of common stock under equity-based
plans
Shares repurchased for tax withholdings on vesting of RSUs
Stock-based compensation
Other comprehensive loss
Net loss
BALANCE - January 31, 2022
Issuance of common stock under equity-based
plans
Shares repurchased for tax withholdings on vesting of RSUs
Stock-based compensation
Other comprehensive loss
Net loss
BALANCE - January 31, 2023
Issuance of common stock under equity-based
plans
Shares repurchased for tax withholdings on vesting of RSUs
Stock-based compensation
Other comprehensive income
Net loss
BALANCE - January 31, 2024
Common Stock and
Additional Paid-In Capital
Shares
22,873,020
Amount
166,581
1,168,245
2,706
(105,072 )
—
—
—
23,936,193 $
(2,105 )
12,682
—
—
179,864 $
1,174,532
3,397
(114,633 )
—
—
—
24,996,092 $
1,116,166
(137,387 )
—
—
—
25,974,871 $
(1,554 )
13,903
—
—
195,610 $
2,664
(1,741 )
14,833
—
—
211,366 $
Accumulated Other
Comprehensive
Income (Loss)
Accumulated Stockholders'
Deficit
Equity
7
—
—
—
(27 )
—
(20 ) $
—
—
—
(3 )
—
(23 ) $
—
—
—
22
—
(1 ) $
(127,037 )
—
—
—
—
(1,751 )
(128,788 ) $
—
—
—
—
(3,655 )
(132,443 ) $
—
—
—
—
(835 )
(133,278 ) $
39,551
2,706
(2,105 )
12,682
(27 )
(1,751 )
51,056
3,397
(1,554 )
13,903
(3 )
(3,655 )
63,144
2,664
(1,741 )
14,833
22
(835 )
78,087
See notes to consolidated financial statements.
Ooma | FY2024 Form 10-K | 68
OOMA, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Amounts in thousands)
Cash flows from operating activities:
Net loss
Adjustments to reconcile net loss to net cash provided by operating activities:
January 31,
2024
Fiscal Year Ended
January 31,
2023
January 31,
2022
$
(835 )
$
(3,655 )
$
(1,751 )
Stock-based compensation expense
Depreciation and amortization of capital expenditures
Amortization of intangible assets
Amortization of operating lease right-of-use assets
Deferred income tax benefit
Facilities consolidation (gain) charge
Other
Changes in operating assets and liabilities:
Accounts receivable, net
Inventories and deferred inventory costs
Prepaid expenses and other assets
Accounts payable, accrued expenses and other liabilities
Deferred revenue
Net cash provided by operating activities
Cash flows from investing activities:
Proceeds from maturities of short-term investments
Proceeds from sales of short-term investments
Purchases of short-term investments
Capital expenditures
Business acquisition
Net cash used in investing activities
Cash flows from financing activities:
Proceeds from issuance of common stock
Shares repurchased for tax withholdings on vesting of restricted stock units ("RSU")
Proceeds from issuance of long-term debt
Repayment of long-term debt
Credit facility issuance costs
Net cash provided by financing activities
Net (decrease) increase in cash and cash equivalents
Cash and cash equivalents at beginning of period
Cash and cash equivalents at end of period
Supplementary cash flow disclosure:
Cash paid for income taxes, net
Non-cash investing and financing activities:
Capital expenditures included in accounts payable at period-end
Purchase price receivable for business acquisition (see Note 13)
$
$
$
$
14,833
4,317
3,711
2,966
(3,131 )
(956 )
(5 )
(2,587 )
6,341
(2,280 )
(9,579 )
(522 )
12,273
2,750
—
—
(6,159 )
(31,919 )
(35,328 )
2,664
(1,741 )
18,000
(2,000 )
(469 )
16,454
(6,601 )
24,137
17,536
$
13,903
3,771
2,286
2,978
(2,133 )
1,402
38
434
(12,333 )
(2,460 )
4,509
33
8,773
12,705
—
(3,869 )
(5,211 )
(9,771 )
(6,146 )
3,397
(1,554 )
—
—
—
1,843
4,470
19,667
24,137
$
765
$
409
$
188 $
$
—
243 $
$
300
12,682
3,117
1,304
2,939
—
—
53
(2,082 )
(1,571 )
(4,609 )
(3,599 )
172
6,655
16,505
300
(17,488 )
(4,204 )
—
(4,887 )
2,706
(2,105 )
—
—
—
601
2,369
17,298
19,667
34
324
—
See notes to consolidated financial statements.
Ooma | FY2024 Form 10-K | 69
Note 1: Overview and Basis of Presentation
Ooma, Inc.
Notes to Consolidated Financial Statements
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.
Principles of Presentation and Consolidation. The accompanying consolidated financial statements have been prepared in accordance
with U.S. generally accepted accounting principles (“GAAP”) and include the accounts of the Company and its wholly-owned subsidiaries. All
intercompany transactions and balances have been eliminated in consolidation. In the opinion of the Company’s management, the
consolidated financial statements reflect all adjustments, which are normal and recurring in nature, necessary for fair financial statement
presentation.
Fiscal Year. The Company’s fiscal year ends on January 31. References to fiscal 2024, fiscal 2023, and fiscal 2022 refer to the fiscal years
ended January 31, 2024, January 31, 2023, and January 31, 2022, respectively.
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.
Comprehensive Loss. For all periods presented, comprehensive loss approximated net loss in the consolidated statements of operations
and differences were not material. Therefore, the Consolidated Statements of Comprehensive Loss have been omitted.
Segment Reporting. The chief operating decision maker for the Company is the chief executive officer, who reviews the Company’s
financial information presented on a consolidated basis for purposes of allocating resources and evaluating financial performance.
Accordingly, management has determined that the Company operates in a single reportable segment.
Revenue was principally derived from customers located in the United States for all periods presented, with a small portion attributable to
customers located in Canada and other countries. Long-lived assets located outside of the United States were not significant.
Foreign currency. The U.S. dollar is the functional currency of the Company's foreign subsidiaries. Remeasurement and transaction gains
and losses are included in interest and other income, net and were not material for any periods presented.
Ooma | FY2024 Form 10-K | 70
Ooma, Inc.
Notes to Consolidated Financial Statements
Note 2: Significant Accounting Policies
Revenue Recognition
The Company derives its revenue from two sources: (1) subscription and services revenue, which is derived primarily from the sale of
subscription plans for communications services and other connected services; and (2) product and other revenue. Subscriptions and services
are sold directly to end-customers. Products are sold to end-customers through several channels, including but not limited to distributors,
retailers and resellers (collectively “channel partners”), and Ooma sales representatives.
The Company determines revenue recognition through the following steps:
•
•
•
•
•
identification of the contract(s) with a customer;
identification of the performance obligations in the contract;
determination of the transaction price;
allocation of the transaction price to the performance obligations in the contract; and
recognition of revenue when, or as, the Company satisfies a performance obligation
Subscription and Services Revenue. Most of the Company’s 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,
directory assistance, and advertisements displayed through the Talkatone mobile application.
Product and Other Revenue. 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. The Company’s distribution agreements with channel partners typically contain clauses for price protection and right of return.
Credits and/or rebates issued for expected product returns and customer sales incentives are deemed to be variable consideration, which the
Company estimates and records as a reduction to revenue at the point of sale. Product returns and sales incentives are estimated based on
the Company’s historical experience, current trends and expectations regarding future experience. As of January 31, 2024 and 2023, total
reserves for product returns and sales incentives were approximately $0.8 million and $0.7 million, respectively.
Revenue is recorded net of any sales and telecommunications taxes collected from customers to be remitted to government authorities.
Amounts billed to customers related to shipping and handling are classified as product and other revenue. Shipping and handling costs are
expensed as incurred and classified as cost of product and other revenue.
Multiple performance obligations. The Company’s contracts with customers typically contain multiple performance obligations that consist of
communications services and related product(s). For these contracts, individual performance obligations are accounted for separately if they
are distinct. The contract transaction price is then allocated to the separate performance obligations on a relative stand-alone selling price
basis. The Company determines the stand-alone selling price (“SSP”) for its communications services based on observable historical stand-
alone sales to customers, for which a substantial majority of selling prices must fall within a reasonably narrow pricing range. The Company
determines the SSP for its on-premise devices and end-point devices based upon management’s best estimates and judgments, considering
company-specific factors such as pricing strategies, discounting practices, and estimated product and other costs.
Cash Equivalents and Short-term Investments. All highly liquid investments with an original maturity of three months or less at the date of
purchase are classified as cash equivalents. Short-term investments are classified as available-for-sale and carried at fair value, with
unrealized gains and losses, net of tax, recorded as a separate component of stockholders’ equity within accumulated other comprehensive
loss. The cost of securities sold is based upon the specific identification method.
Ooma | FY2024 Form 10-K | 71
Ooma, Inc.
Notes to Consolidated Financial Statements
Fair Value of Financial Instruments. The Company records its financial assets and liabilities at fair value. Fair value is defined as the price
that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the reporting date.
The Company estimates and categorizes the fair value of its financial assets 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
The carrying value of the Company’s financial instruments, including cash equivalents, accounts receivable, inventory, accounts payable and
other current assets and current liabilities approximates fair value due to their short maturities. The carrying value of debt approximates its
fair value.
Concentrations. Financial instruments that potentially subject the Company to concentrations of credit risk consist primarily of cash and
cash equivalents, short-term investments, accounts receivable and convertible note receivable (Note 5). The Company’s cash, cash
equivalents and short-term investments are held by financial institutions that management believes are of high-credit quality although the
balances, at times, may exceed federally insured limits. The Company performs credit evaluations of its customers’ financial condition and
generally does not require collateral for sales made on credit.
Customers who represented 10% or more of net accounts receivable were as follows:
Customer A
As of
January 31,
2024
33%
January 31,
2023
18%
Accounts Receivable. Accounts receivable are recorded net of an allowance for doubtful accounts for expected credit losses. Allowances
are recorded based upon assessment of several factors, including historical experience, aging of receivable balances and economic
conditions. As of January 31, 2024 and 2023, the allowance for doubtful accounts was $0.3 million. Bad debt expense recorded in the
consolidated statement of operations was not material for the periods presented.
Inventories. Inventories, which consist of raw materials and finished goods, include the cost to purchase manufactured products, allocated
labor and overhead. Inventories are stated at the lower of actual cost and net realizable value on a first-in, first-out basis. The Company
writes down the carrying value of inventory to net realizable value for estimated excess and obsolete inventory based upon assumptions
about forecast demand and market conditions. Inventory carrying value adjustments are recognized as a component of cost of product and
other revenue in the consolidated statement of operations.
Customer Acquisition Costs. Sales commissions and other costs paid to internal sales personnel, third-party sales entities and value-
added resellers are considered incremental and recoverable costs of obtaining customer contracts. The resellers are selling agents for the
Company and earn sales commissions that are directly tied to the value of the contracts that the Company enters with the end-user
customers. These costs are capitalized and amortized on a systematic basis over the expected period of benefit of five years, or customer
contractual term for multi-year contracts. The Company has determined the period of benefit taking into consideration both qualitative and
quantitative factors, such as expected subscription term and expected renewal periods of its customer contracts, product life cycles and
customer attrition. Amortization expense is recorded in sales and marketing expenses in the consolidated statement of operations.
The Company pays sales commissions on initial contracts, contracts for increased purchases with existing customers (expansion contracts)
and certain contract renewals. The Company periodically evaluates whether there have been any changes in its business, the market
conditions in which it operates or other events which would indicate that its amortization period should be changed or if there are potential
indicators of impairment. To date, there have been no material impairment losses related to the costs capitalized.
Ooma | FY2024 Form 10-K | 72
Ooma, Inc.
Notes to Consolidated Financial Statements
Property and Equipment, net. Property and equipment, net is stated at cost, less accumulated depreciation and amortization. Depreciation
and amortization is computed on a straight-line basis over the estimated useful lives of those assets, generally two to five years. Capitalized
costs related to development of the Company's customer-facing websites are amortized on a straight-line basis over an estimated useful life
of three to five years. Leasehold improvements are amortized over the shorter of the lease term or estimated useful lives of the respective
assets. Repairs and maintenance costs that do not extend the life or improve the asset are expensed as incurred.
Operating Leases. Right-of-use lease assets and lease liabilities are recognized at the lease commencement date based upon the present
value of the remaining lease payments over the lease term. The Company uses its incremental borrowing rate in determining the present
value of lease payments, as the discount rates implicit in the Company’s leases cannot be readily determined. Lease agreements that
contain both lease and non-lease components are combined and accounted for as a single component.
Business Combinations. The Company accounts for its business combinations using the acquisition method of accounting. The purchase
consideration is allocated to the tangible assets acquired, liabilities assumed and intangible assets acquired based on their estimated fair
values. The excess of the fair value of purchase consideration over the fair value of these assets acquired and liabilities assumed is recorded
as goodwill. Management is required to make significant estimates and assumptions in determining fair values, especially with respect to
acquired intangible assets, which include but are not limited to: the selection of valuation methodologies, expected future revenue and cash
flows, expected customer attrition rates from acquired customers, future changes in technology, and discount rates. These estimates are
inherently uncertain and, therefore, actual results may differ from the estimates made. As a result, during the measurement period of up to
one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed with the
corresponding offset to goodwill as information on the facts and circumstances that existed as of the acquisition date becomes available.
Upon the conclusion of the measurement period, any subsequent adjustments are recorded in the consolidated statements of operations.
Acquisition-related expenses are recognized separately from business combinations and are expensed as incurred.
Intangible Assets. Acquired intangible assets, which primarily consist of customer relationships, are amortized over their estimated useful
lives. Each period, the Company evaluates the estimated remaining useful life of its intangible assets and whether events or changes in
circumstances warrant a revision to the remaining period of amortization.
Impairment Assessment. Long-lived assets, such as property and equipment, capitalized website development costs intangible assets and
operating lease right-of-use assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying
amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to estimated undiscounted future cash flows expected to be generated by the asset. If the carrying amount of an asset
exceeds its estimated future cash flows, an impairment charge is recognized by the amount by which the carrying amount of the asset
exceeds the fair value of the asset.
The Company evaluates goodwill for impairment annually during its fourth quarter of each fiscal year, or more frequently if and when
circumstances indicate that goodwill may not be recoverable. The Company has a single reporting unit and consequently evaluates goodwill
for impairment based on an evaluation of the fair value of the Company as a whole.
See Note 7: Leases for disclosure of impairment charges recorded in fiscal 2024. The Company did not record any material impairment
charges for fiscal 2023 or fiscal 2022.
Advertising. Advertising costs are expensed as incurred, except for production costs associated with television and radio advertising, which
are expensed on the first date of airing. Advertising costs are included in sales and marketing expense and were $16.5 million, $16.4 million
and $14.5 million in fiscal 2024, 2023 and 2022, respectively.
Ooma | FY2024 Form 10-K | 73
Ooma, Inc.
Notes to Consolidated Financial Statements
Stock-Based Compensation. The majority of the Company's stock-based compensation is derived from RSUs granted to employees and
non-employee directors. Stock-based compensation is generally measured based on the closing market price of the Company’s common
stock on the date of grant and recognized on a straight-line basis over the vesting period. Forfeitures are recorded in the period in which they
occur.
Income Taxes. Income taxes are recorded using the asset and liability method. Deferred tax assets and liabilities are recognized for the
future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit carryforwards. Deferred tax assets and liabilities are measured using enacted tax
rates expected to apply to taxable income (loss) in the years in which those temporary differences are expected to be recovered or settled.
The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment
date.
Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. A tax position is
recognized when it is more-likely-than-not that the tax position will be sustained upon examination, including resolution of any related appeals
or litigation processes. A tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit
that is greater than 50% likely of being realized upon ultimate settlement with a taxing authority.
Interest and penalties associated with unrecognized tax benefits are classified as income tax expense. The Company had no interest or
penalty accruals associated with uncertain tax benefits in its consolidated balance sheets and statements of operations for any periods
presented.
Ooma | FY2024 Form 10-K | 74
Ooma, Inc.
Notes to Consolidated Financial Statements
Note 3: Revenue and Deferred Revenue
Disaggregated revenue
Revenue disaggregated by revenue source consisted of the following (in thousands):
Subscription and services revenue
Product and other revenue
Total revenue
Fiscal Year Ended January 31,
2024
2023
2022
$
$
221,624 $
15,113
236,737 $
199,105 $
17,060
216,165 $
175,942
16,348
192,290
The Company derived approximately 58%, 53% and 49% of its total revenue from Ooma Business and approximately 40%, 45% and 49% of
its total revenue from Ooma Residential in fiscal 2024, 2023, and 2022, respectively.
No individual country outside of the United States represented 10% or more of total revenue for the periods presented. No single customer
accounted for 10% or more of total revenue for the periods presented.
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.
Subscription and services
Product and other
Total deferred revenue
Less: current deferred revenue
Non-current deferred revenue included in other long-term liabilities
As of
January 31,
2024
January 31,
2023
$
$
$
17,034
22
17,056
17,041
15
$
$
17,239
8
17,247
17,216
31
During fiscal 2024, the Company recognized revenue of approximately $17.2 million pertaining to amounts deferred as of January 31, 2023.
As of January 31, 2024, the majority of the Company’s deferred revenue balance was composed of subscription contracts that were invoiced
during the fourth quarter of fiscal 2024.
Remaining performance obligations. As of January 31, 2024, contract revenue that had not yet been recognized for open contracts with
an original expected length of greater than one year was approximately $26.5 million. The Company expects to recognize revenue on
approximately 41% of this amount over the next 12 months, with the balance to be recognized thereafter.
Ooma | FY2024 Form 10-K | 75
Ooma, Inc.
Notes to Consolidated Financial Statements
Note 4: Fair Value Measurements
As of January 31, 2024, the Company had no short-term investments. The Company had $17.5 million in cash.
Financial assets measured at fair value on a recurring basis by level were as follows (in thousands):
Cash and cash equivalents:
Money market funds
Total cash equivalents
Cash
Total cash and cash equivalents
Short-term investments:
U.S. treasury securities
Commercial paper
Total short-term investments
Balance as of January 31, 2023
Level 1
Level 2
Total
$
$
$
$
11,380 $
11,380 $
— $
—
$
1,232 $
—
1,232 $
— $
1,491
1,491 $
11,380
11,380
12,757
24,137
1,232
1,491
2,723
The Company classifies its cash equivalents and short-term investments within Level 1 or Level 2 because it uses quoted market prices or
alternative pricing sources and models utilizing market observable inputs to determine their fair value. The Company has no Level 3 assets or
liabilities. For the periods presented, the amortized cost of cash equivalents and marketable securities approximated their fair value and there
were no material realized or unrealized gains or losses, either individually or in the aggregate.
Short-term investments due in less than a year was $2.7 million as of January 31, 2023.
Ooma | FY2024 Form 10-K | 76
Ooma, Inc.
Notes to Consolidated Financial Statements
Note 5: Balance Sheet Components
The following sections and tables provide details of selected balance sheet items (in thousands):
Inventories
Finished goods
Raw materials
Total inventory
Property and equipment, net
Computer hardware and software
Network and engineering equipment
Website development costs
Customer premise equipment
Office furniture and fixtures
Leasehold improvements
Total property and equipment
Less: accumulated depreciation and amortization
Property and equipment, net
As of
January 31,
2024
January 31,
2023
12,024 $
7,758
19,782 $
13,715
12,531
26,246
As of
January 31,
2024
January 31,
2023
6,995 $
7,504
9,046
7,466
204
637
31,852
(21,955)
9,897 $
6,847
6,283
6,251
5,954
497
124
25,956
(17,960)
7,996
$
$
$
$
Estimated life
(in years)
3-4
3-5
3-5
3-5
5
1-5
Depreciation and amortization of property and equipment totaled $4.3 million, $3.8 million and $3.1 million in fiscal 2024, 2023 and 2022,
respectively.
Other current and non-current assets
Deferred sales commissions, current
Prepaid expenses and other
Convertible note receivable (see "GTC" below)
Other current assets
Total other current assets
Deferred sales commissions, non-current
Other assets
Total other non-current assets
As of
January 31,
2024
January 31,
2023
8,579 $
4,177
2,257
1,484
16,497 $
15,257 $
2,358
17,615 $
7,826
2,777
1,899
1,866
14,368
14,467
2,117
16,584
$
$
$
$
Customer Acquisition Costs. Amortization of deferred sales commissions was $9.0 million, $7.6 million and $6.0 million in fiscal 2024,
2023 and 2022, respectively.
Global Telecom Corporation (“GTC”). In December 2018, the Company invested $1.3 million in cash in GTC, a privately-held technology
company, in exchange for a convertible promissory note that will convert to shares of GTC stock upon the occurrence of certain future
events. As amended, the promissory note and accrued interest are due and payable upon the Company’s demand at any time after June 30,
2023. GTC was a variable interest entity for accounting purposes and the Company did not consolidate GTC into its financial statements
because the Company was not the primary beneficiary. As of January 31, 2024, the Company’s maximum exposure to loss was equal to the
carrying value of the convertible note receivable of $2.3 million, including accrued interest. The Company made total payments to GTC for
inventory purchases
Ooma | FY2024 Form 10-K | 77
Ooma, Inc.
Notes to Consolidated Financial Statements
and related shipping costs of approximately $0.4 million and $2.6 million in fiscal 2024 and 2023, respectively. As of January 31, 2024 and
2023, the Company did not have any material non-cancelable inventory purchase commitments to GTC.
On March 8, 2024 ("Financing Date"), GTC completed an equity financing which qualified as a conversion event under the convertible note.
Per the terms of the note, in the event of an equity financing all of the outstanding principal and accrued but unpaid interests would be
converted to a number of shares of standard preferred stock equal to the Conversion Amount divided by the Conversion Price. Conversion
Amount is defined as outstanding principal plus unpaid accrued interest. Conversion Price is 70% of the per share price for the preferred
stock. As of the Financing Date, the carrying value of the convertible note of $2.3 million, including accrued interest was converted to 8.2
million shares of preferred stock of GTC.
Accrued expenses and other current liabilities
Payroll and related expenses
Regulatory fees and taxes
Short-term operating lease liabilities
Customer-related liabilities
Other
Total accrued expenses and other current liabilities
As of
January 31,
2024
January 31,
2023
12,301 $
4,598
3,742
1,118
4,827
26,586 $
13,621
3,609
3,617
1,045
4,834
26,726
$
$
Ooma | FY2024 Form 10-K | 78
Ooma, Inc.
Notes to Consolidated Financial Statements
Note 6: Goodwill and Acquired Intangible Assets
During fiscal 2024, the Company recognized intangibles of $21.2 million and goodwill of $14.4 million in connection with a business
acquisition completed in October 2023. See Note 13: Business Acquisition.
The goodwill balance was as follows (in thousands):
Balance at January 31, 2023
Additions due to 2600Hz acquisition
Balance at January 31, 2024
$
$
Total
8,655
14,414
23,069
The gross value, accumulated amortization and carrying values of intangible assets were as follows (in thousands):
Developed technology
Customer relationships
Trade names
Total intangible assets
Customer relationships
Developed technology
Trade names
Total intangible assets
2-7
5-7
2-5
Estimated life
(in years)
5-7
2-5
2-5
$
$
$
$
Estimated life
(in years)
Gross
Value
As of January 31, 2024
Accumulated
Amortization
Carrying
Value
20,618 $
16,545
1,685
38,848 $
(2,865 )
(7,336 )
(695 )
(10,896 )
$
$
17,753
9,209
990
27,952
Gross
Value
As of January 31, 2023
Accumulated
Amortization
Carrying
Value
14,745 $
2,219
684
17,648 $
(4,775 ) $
(1,891 )
(519 )
(7,185 )
$
Amortization expense was $3.7 million, $2.3 million and $1.3 million in fiscal 2024, 2023 and 2022, respectively.
At January 31, 2024, the estimated future amortization expense for intangible assets was as follows (in thousands):
Fiscal Years Ending January 31,
2025
2026
2027
2028
2029
Thereafter
Total
Total
$
$
Ooma | FY2024 Form 10-K | 79
9,970
328
165
10,463
5,768
5,624
5,068
3,950
3,030
4,512
27,952
Ooma, Inc.
Notes to Consolidated Financial Statements
Note 7: Operating Leases
The Company leases its headquarters located in Sunnyvale, California, as well as office space and data center facilities in several locations
under non-cancelable operating lease agreements, with expiration dates through fiscal 2033. The lease agreements often include escalating
rent payments, renewal provisions and other provisions which require the Company to pay common area maintenance costs, property taxes
and insurance. The lease agreements do not contain any material residual value guarantees or material restrictive covenants.
Operating lease right-of-use assets and long-term operating lease liabilities are included on the face of the consolidated balance sheet.
Short-term operating lease liabilities are presented within accrued expenses and other current liabilities.
Supplemental balance sheet information related to leases was as follows (in thousands):
Assets
Operating lease right-of-use assets
Total leased assets
Liabilities
Short-term operating lease liabilities
Long-term operating lease liabilities
Total lease liabilities
Weighted-average remaining lease term
Weighted-average discount rate
As of
January 31,
2024
January 31,
2023
$
$
$
$
17,041 $
17,041 $
3,742 $
13,676
17,418 $
12,702
12,702
3,617
10,426
14,043
6.0 years
6.2%
4.8 years
4.5%
The components of lease expense were as follows (in thousands):
Operating lease costs
(2)
Variable lease costs
(1)
Total lease cost
Fiscal Year Ended January 31,
2024
2023
2022
$
$
4,581 $
1,217
5,798 $
4,030 $
1,117
5,147 $
3,861
972
4,833
(1) Recognized on a straight-line basis over the lease term. Includes rent for leases with initial terms of twelve months or less, which were not material.
(2) Primarily included common area maintenance, utilities and property taxes and insurance, which were expensed as incurred.
Additionally, in the third quarter of fiscal 2023, the Company recorded facilities consolidation charges of $1.4 million to general and
administrative expense, in connection with the leased office facilities assumed in the OnSIP acquisition that the Company subsequently
determined were not needed to support the future growth of its business. In July 2023, upon the lessor's sale of the property, the Company
wrote off the remaining $1.0 million lease liability related to the lease as facilities consolidation gain in general and administrative expense in
the condensed consolidated statements of operations.
Ooma | FY2024 Form 10-K | 80
Ooma, Inc.
Notes to Consolidated Financial Statements
Supplemental cash flow information related to leases was as follows (in thousands):
Cash payments for operating leases
Right-of-use assets recognized in exchange for new operating
lease obligations
$
$
Fiscal Year Ended January 31,
2024
2023
2022
3,895 $
3,563 $
3,945
7,303 $
2,599 $
11,289
As of January 31, 2024, maturities of operating lease liabilities were as follows (in thousands):
Fiscal Years Ending January 31,
2025
2026
2027
2028
2029
Thereafter
Total future minimum lease payments
Less: imputed interest
Present value of lease liabilities
January 31, 2024
3,845
$
3,810
3,648
2,656
2,742
4,629
21,330
(3,912 )
17,418
$
Additionally, in August 2022, the Company entered into a new operating lease agreement to expand its warehouse facilities and customer
contact center in Newark, California to scale with the Company’s business growth. The lease commenced in March 2023 and will expire in
March 2033. Total rental payments are approximately $6.9 million from the commencement date through the expiration date.
Ooma | FY2024 Form 10-K | 81
Ooma, Inc.
Notes to Consolidated Financial Statements
Note 8: Stockholders’ Equity
Common Stock Reserved for Future Issuance
The Company had shares of common stock reserved for issuance as follows (in thousands):
Restricted stock units outstanding
Options to purchase common stock
Shares available for future issuance under stock plans
Shares reserved under ESPP
Total shares reserved for issuance
As of
January 31,
2024
January 31,
2023
2,075
1,161
2,601
1,909
7,746
1,466
1,217
2,654
1,637
6,974
Stock Options. Under the Company's 2015 Equity Incentive Plan, or the 2015 Plan, options to purchase shares of common stock may be
granted to employees, non-employee directors and consultants. These options vest from the date of grant to up to four years and expire ten
years from the date of grant. Options may be exercised anytime during their term in accordance with the vesting/exercise schedule specified
in the recipient’s stock option agreement and in accordance with the 2015 Plan provisions.
Stock option activity for fiscal 2024 was as follows:
Shares
(in thousands)
Weighted-Average
Exercise Price
Per Share
Aggregate
Intrinsic Value
(in thousands)
Balance as of January 31, 2023
Granted
Exercised
Canceled
Balance as of January 31, 2024
1,217
—
(54 )
$
$
$
(2 ) $
$
1,161
Vested and exercisable as of January 31, 2024
1,068
$
9.93
—
4.90
13.36
10.14
9.63
$
5,949
$
$
2,522
2,520
The aggregate intrinsic value of vested options exercised during fiscal 2024, 2023 and 2022 was $0.5 million, $1.7 million and $1.9 million,
respectively. The weighted-average grant date fair value of options granted during fiscal 2023 and 2022, was $8.06 and $7.89, respectively.
No options were granted in fiscal 2024.
Restricted Stock Units. Under the 2015 Plan, RSUs may be granted to employees, non-employee directors and consultants. These RSUs
vest ratably over a period ranging from one to four years, and are subject to the participant’s continuing service to the Company over that
period. Until vested, RSUs do not have the voting and dividend participation rights of common stock and the shares underlying the awards
are not considered issued and outstanding.
RSU activity for fiscal 2024 was as follows:
Balance as of January 31, 2023
Granted
Vested
Canceled
Balance as of January 31, 2024
Shares
(in thousands)
Weighted-Average
Grant Date Fair
Value Per Share
1,466 $
1,507 $
(835 ) $
(63 ) $
2,075 $
15.81
12.30
14.65
15.24
13.74
Vested RSUs included shares of common stock that the Company withheld on behalf of certain employees to satisfy the minimum statutory
tax withholding requirements, as defined by the Company. The Company withheld an aggregate amount of $1.7 million, $1.6 million and $2.1
million in fiscal 2024, 2023 and 2022, respectively, which were classified as financing cash outflows in the consolidated statements of cash
flows. The Company canceled and returned these shares to the 2015 Plan, which became available under the plan terms for future issuance.
Ooma | FY2024 Form 10-K | 82
Ooma, Inc.
Notes to Consolidated Financial Statements
Employee Stock Purchase Plan
The ESPP allows eligible employees to purchase shares of common stock at a discount through payroll deductions of up to 15% of their
eligible compensation, subject to plan limitations. The ESPP provides for a 24-month offering period comprised of four purchase periods of
approximately six months. Employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common
stock as of the first date or the ending date of each six-month offering period. The offering periods are scheduled to start on the first trading
day on or after March 15 and September 15 of each year. During each of the fiscal years 2024, 2023 and 2022, employees purchased 0.2
million shares at a weighted-average purchase price of $10.60, $10.44 and $10.22 per share, respectively.
Note 9: Stock-Based Compensation
Total stock-based compensation recognized in the consolidated statements of operations was as follows (in thousands):
Cost of revenue
Sales and marketing
Research and development
General and administrative
Total stock-based compensation expense
Fiscal Year Ended January 31,
2024
2023
2022
$
$
1,000 $
2,226
4,760
6,847
14,833
$
956 $
2,019
4,623
6,305
13,903 $
979
1,856
4,216
5,631
12,682
The income tax benefit related to stock-based compensation expense was zero for all periods presented due to a full valuation allowance on
the Company's deferred tax assets (see Note 10: Income Taxes below). As of January 31, 2024, there was $27.2 million of unrecognized
compensation expense related to unvested RSUs, stock options and stock purchase rights under the ESPP, which is expected to be
recognized over a weighted-average vesting period of 2.2 years.
The fair value of employee stock options and ESPP was estimated using the Black–Scholes model with the following assumptions:
Stock Options:
Expected volatility
Expected term (in years)
Risk-free interest rate
Dividend yield
(1) No option was granted in fiscal 2024.
ESPP:
Expected volatility
Expected term (in years)
Risk-free interest rate
Dividend yield
(1)
2024
NA
NA
NA
NA
Fiscal Year Ended January 31,
2023
49%
6.1
1.6%
NA
2022
51%
6.1
0.9%
NA
Fiscal Year Ended January 31,
2024
2023
2022
32%-43%
41%-55%
0.5-2.0
0.5-2.0
3.9%-5.5%
0.9%-4.0%
NA
NA
41%-58%
0.5-2.0
0.1%-0.2%
NA
The expected term of options granted to employees was based on the simplified method because the Company does not have sufficient
historical exercise data for the fiscal years presented, and the expected term of the ESPP is based on the contractual term. For fiscal years
presented, expected volatility was derived from the average historical volatility of the Company’s own common stock. The risk-free interest
rate was based on the yields of U.S. Treasury securities with maturities similar to the expected term.
Ooma | FY2024 Form 10-K | 83
Ooma, Inc.
Notes to Consolidated Financial Statements
Note 10: Income Taxes
The domestic and foreign components of loss before income taxes were as follows (in thousands):
United States
Foreign
Loss before income taxes
Income tax benefit consisted of the following:
Current:
Federal
State
Foreign
Total current
Deferred:
Federal
State
Foreign
Total deferred
Income tax benefit
Fiscal Year Ended January 31,
2024
2023
2022
$
$
(491 ) $
(2,322 )
(2,813 ) $
(2,557 ) $
(2,868 )
(5,425 ) $
1,340
(3,091 )
(1,751 )
Fiscal Year Ended January 31,
2024
2023
2022
$
— $
1,153
—
1,153
(2,661 )
(470 )
—
(3,131 )
(1,978 ) $
$
— $
363
—
363
(1,783 )
(350 )
—
(2,133 )
(1,770 ) $
—
—
—
—
—
—
—
—
—
The income tax benefit of $2.0 million for fiscal 2024 was primarily attributable to the release of a $3.1 million valuation allowance on certain
preexisting deferred tax assets realized as a result of deferred tax liabilities assumed in the Company's acquisition of 2600Hz.
Income tax benefit differed from the amount computed by applying the U.S. federal income tax rate to pre-tax loss as a result of the following
(dollars in thousands):
$
Federal tax at statutory rate
State taxes, net of federal benefit
Foreign income and withholding taxes
Permanent tax adjustment
Section 162(m)
Stock-based compensation
Change in valuation allowance
Research and development credit
Provision to return adjustments
Other
Income tax benefit at effective tax rate
$
2024
Rate
2023
Rate
2022
Rate
Fiscal Year Ended January 31,
(603 )
(128 )
(139 )
294
802
812
(1,015 )
(2,095 )
4
90
(1,978 )
21 % $
4 %
5 %
(10 )%
(28 )%
(28 )%
35 %
73 %
—
(3 )%
69 % $
(1,139 )
(40 )
(172 )
543
843
530
(1,566 )
(1,288 )
533
(14 )
(1,770 )
21 % $
1 %
3 %
(10 )%
(16 )%
(10 )%
29 %
24 %
(10 )%
1 %
33 % $
(368 )
52
(185 )
58
1,050
(1,545 )
2,959
(1,980 )
—
(41 )
—
21 %
(3 )%
11 %
(3 )%
(60 )%
88 %
(169 )%
113 %
—
2 %
0 %
Ooma | FY2024 Form 10-K | 84
Ooma, Inc.
Notes to Consolidated Financial Statements
The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows
(in thousands):
Deferred tax assets:
Net operating loss carryforwards
Tax credit carryover
Operating lease liabilities
Stock-based compensation
Capitalized research and development
State Taxes
Deferred revenue
Other
Gross deferred tax assets
Valuation allowance
Net deferred tax assets
Deferred tax liabilities:
Operating lease right-of-use assets
Deferred sales commissions and other
Acquired intangible assets
Fixed assets depreciation
Gross deferred tax liabilities
Net deferred taxes
As of January 31,
2024
2023
18,486 $
14,928
4,405
1,095
17,131
232
4
—
56,281
(42,530 )
13,751 $
(4,309 ) $
(2,119 )
(6,100 )
(1,223 )
(13,751 ) $
— $
28,771
12,205
3,547
923
6,061
—
8
22
51,537
(43,545 )
7,992
(3,202 )
(2,396 )
(1,543 )
(851 )
(7,992 )
—
$
$
$
$
$
Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized
and amortized for U.S. tax purposes effective January 1, 2022. As of January 31, 2024, the mandatory capitalization requirement resulted in
an increase to the Company’s gross deferred tax assets above, which was fully offset by the valuation allowance, and increases the
Company's cash tax liabilities.
Management believes that, based upon the available evidence, both positive and negative, it is more likely than not that the deferred tax
assets will not be utilized, such that a full valuation allowance has been recorded. The net change in the total valuation allowance was a
decrease of $1.0 million and $1.6 million for fiscal 2024 and 2023, respectively.
As of January 31, 2024, the Company had federal net operating loss carryforwards of approximately $47.7 million available to offset future
income, of which approximately $5.8 million will expire in various amounts beginning in fiscal 2038 and the remainder may be carried forward
indefinitely. As of January 31, 2024, the Company had state net operating loss carryforwards of $70.7 million which will expire in various
amounts beginning in fiscal 2025. In addition, the Company had research and development tax credits for federal and state tax purposes of
approximately $14.8 million and $12.8 million, respectively, available to offset future taxes. If not utilized, the available federal credits will
begin to expire in fiscal 2030 and the state credits can be carried forward indefinitely.
The Company’s ability to utilize the domestic net operating losses (NOLs) and tax credit carryforwards may be limited due to ownership
change limitations that may have occurred or that could occur in the future, as required by Internal Revenue Code Section 382, as well as
similar state provisions. An “ownership change,” as defined by the code, results from a transaction or series of transactions over a three-year
period resulting in an ownership change of more than 50 percentage points of the outstanding stock of a company by certain stockholders or
public groups. Any limitation may result in expiration of all or a portion of the NOL or tax credit carryforwards before utilization.
Ooma | FY2024 Form 10-K | 85
Ooma, Inc.
Notes to Consolidated Financial Statements
Uncertain Tax Positions
The Company has unrecognized tax benefits of approximately $11.0 million as of January 31, 2024. Deferred tax assets associated with
these unrecognized tax benefits are fully offset by a valuation allowance. If recognized, these benefits would not affect the effective tax rate
before consideration of the valuation allowance.
The following table summarizes the activity related to unrecognized tax benefits (in thousands):
Unrecognized tax benefits, beginning of fiscal year
Increase (decrease) related to prior year tax positions
Increase related to current year tax positions
Unrecognized tax benefits, end of fiscal year
Fiscal Year Ended January 31,
2024
2023
2022
$
$
9,060 $
670
1,313
11,043 $
8,090 $
(331 )
1,301
9,060 $
6,642
—
1,448
8,090
The Company had no interest or penalty accruals associated with uncertain tax benefits in its balance sheets and statements of operations.
The Company does not have any tax positions for which it is reasonably possible the total amount of gross unrecognized benefits will
significantly increase or decrease within 12 months of the year ended January 31, 2024. Because the Company has net operating loss and
credit carryforwards, there are open statutes of limitations in which federal, state and foreign taxing authorities may examine the Company’s
tax returns for all tax years from the fiscal year ended January 31, 2010 through the current period.
Ooma | FY2024 Form 10-K | 86
Note 11: Commitments and Contingencies
Purchase Commitments
As of January 31, 2024 and 2023, non-cancelable inventory purchase commitments to contract manufacturers and other parties were
approximately $1.1 million and $7.8 million, respectively. Additionally, the Company has a non-cancelable service agreement with a
telecommunications provider that contains total annual minimum purchase commitments of $1.5 million between August 2022 and February
2024 and $2.5 million between March 2024 and February 2025.
Legal Proceedings
In addition to the litigation matters described below, from time to time, the Company may be involved in a variety of other claims, lawsuits,
investigations, and proceedings relating to contractual disputes, intellectual property rights, employment matters, regulatory compliance
matters, and other litigation matters relating to various claims that arise in the normal course of business. Defending such proceedings is
costly and can impose a significant burden on management and employees, the Company may receive unfavorable preliminary or interim
rulings in the course of litigation, and there can be no assurances that favorable final outcomes will be obtained.
The Company determines whether an estimated loss from a contingency should be accrued by assessing whether a loss is deemed probable
and can be reasonably estimated. The Company assesses its potential liability by analyzing specific litigation and regulatory matters using
reasonably available information. The Company develops its views on estimated losses in consultation with inside and outside counsel,
which involves a subjective analysis of potential results and outcomes, assuming various combinations of appropriate litigation and
settlement strategies. Legal fees are expensed in the period in which they are incurred. As of January 31, 2024 and 2023, the Company did
not have any accrued liabilities recorded for loss contingencies in its consolidated financial statements.
Canadian Litigation
On February 3, 2021, plaintiff Fiona Chiu filed a class action complaint against the Company and Ooma Canada Inc. in the Federal Court of
Canada, alleging violations of Canada’s Trademarks Act and Competition Act. The complaint seeks monetary and other damages and/or
injunctive relief enjoining the Company from describing and marketing its Basic Home Phone using the word “free” or otherwise representing
that it is free. On November 9, 2021, the Federal Court of Canada removed Ms. Chiu and substituted John Zanin as the new plaintiff in the
proceeding. In connection with the substitution of Mr. Zanin as the new plaintiff, the Federal Court of Canada deemed the proceeding as
having commenced on November 8, 2021 instead of February 3, 2021. In January 2022, the Federal Court of Canada heard arguments from
counsel representing each of the Company and Mr. Zanin regarding jurisdiction and class action certification issues, and the parties are
awaiting the Court's ruling. The Company intends to continue to defend itself vigorously against this complaint. Based on the Company’s
current knowledge, the Company has determined that the amount of any reasonably possible loss resulting from the Canadian Litigation is
not estimable.
Indemnification
The Company enters into standard indemnification arrangements in the ordinary course of business. Pursuant to these arrangements, the
Company indemnifies, holds harmless and agrees to reimburse the indemnified parties for certain losses suffered or incurred by the
indemnified party. In some cases, the term of these indemnification agreements is perpetual. The maximum potential amount of future
payments the Company could be required to make under these agreements is not determinable because it involves claims that may be made
against the Company in the future but have not yet been made.
The Company has entered into indemnification agreements with its directors and officers that may require the Company to indemnify its
directors and officers against liabilities that may arise by reason of their status or service as directors or officers, other than liabilities arising
from willful misconduct of the individual. The maximum potential amount of future payments the Company could be required to make under
these indemnification agreements is unlimited; however, the Company has director and officer insurance coverage that reduces the
Company’s exposure and enables the Company to recover a portion of any future amounts paid. To date the Company has not incurred costs
to defend lawsuits or settle claims related to these indemnification agreements. No liability associated with such indemnifications has been
recorded to date.
Ooma | FY2024 Form 10-K | 87
Note 12: Financing Arrangements
Revolving Credit Facility
On October 20, 2023, the Company, as borrower, entered into a three-year credit and security agreement (“Credit Agreement”) with Citizens
Bank N.A., as Administrative Agent (“Agent”) and lender. The Credit Agreement provides for a secured revolving credit facility (“Credit
Facility”) under which the Company may borrow up to an aggregate amount of $30.0 million, which includes a $10.0 million sub-facility for
letters of credit. The Company and its lenders may increase the total commitments under the Credit Facility to up to an aggregate amount of
$50.0 million, subject to certain conditions. Funds borrowed under the Credit Agreement may be used for acquisition, working capital and
other general corporate purposes.
Loans under the Credit Agreement will bear interest, at the Company’s option, at either a rate equal to the Alternate Base Rate plus the
Applicable Margin (as defined in the Credit Agreement) or Term Secure Overnight Financing Rate ("SOFR") plus the Applicable Margin (as
defined in the Credit Agreement). The Alternate Base Rate is the highest of (i) the Agent’s prime rate, (ii) the federal funds effective rate plus
0.50% per annum, and (iii) the Daily SOFR rate plus 1.00% per annum. The SOFR Rate is a rate equal to the secured overnight financing
rate as published by the SOFR Administrator and displayed on CME Group Benchmark Administration Limited’s Market Data Platform. The
Applicable Margin for Alternative Base Rate Loans is 1.25% and the Applicable Margin for the SOFR Loans is 2.00%. Upon the occurrence
of any event of default, the interest rate on the borrowings increases by 5.00%. The Company is required to pay a commitment fee on the
unused portion of the Credit Facility of 0.25% per annum.
The Credit Agreement contains customary representations, warranties, affirmative and negative covenants, events of default and
indemnification provisions in favor of the Agent, lenders and their affiliates. Among other covenants, the Credit Agreement includes restrictive
financial covenants that require the Company to meet minimum recurring revenue levels and maintain specified amounts of available liquidity
on a quarterly basis.
As of January 31, 2024, the Company had $16.0 million in outstanding borrowings, which are recorded as debt, net of current portion in the
condensed consolidated balance sheets. The funds were used for the acquisition of 2600Hz at the Term SOFR interest rate of 7.4%. The
Company is in compliance with the covenants contained in the Credit Agreement as of January 31, 2024. Accordingly, $14.0 million of
borrowing capacity was available for the purposes permitted by the Credit Agreement.
As of January 31, 2024, the Company incurred $0.5 million of debt issuance costs in connection with the Credit Agreement, which was
capitalized in the condensed consolidated balance sheets and is amortized on straight-line basis over the term of the Credit Agreement.
On January 8, 2021, the Company, as borrower, entered into a credit and security agreement (“Key Bank Credit Agreement”) with KeyBank
National Association ("Key Bank") as Administrative Agent (“Agent”) and lender, and KeyBanc Capital Markets Inc. as sole lead arranger and
sole book runner. Prior to its termination as described below, the Key Bank Credit Agreement provided for a secured revolving credit facility
under which the Company could have borrowed up to an aggregate amount of $25.0 million, which included a $10.0 million sub-facility for
letters of credit. The Company and its lenders were able to increase the total commitments under the credit facility to up to an aggregate
amount of $45.0 million, subject to certain conditions. Permitted uses of funds borrowed under the Key Bank Credit Agreement included
working capital and other general corporate purposes.
The Key Bank Credit Agreement contained customary representations, warranties, affirmative and negative covenants, events of default and
indemnification provisions in favor of the Agent, lenders and their affiliates. Among other covenants, the Key Bank Credit Agreement included
restrictive financial covenants that required the Company to meet minimum recurring revenue levels and maintain specified amounts of
available liquidity on a quarterly basis.
The Company terminated the Key Bank Credit Agreement on June 7, 2023.
Ooma | FY2024 Form 10-K | 88
Note 13: Business Acquisition
On October 20, 2023, the Company acquired all outstanding stock of 2600hz, Inc. ("2600Hz"), a provider of business communications
applications targeted at resellers and carriers. The Company acquired 2600Hz for total cash consideration of approximately $32.2 million (net
of $1.8 million in cash acquired), subject to certain working capital adjustments. This payment is not subject to any contingency requirements.
The Company has included the financial results of 2600Hz in the condensed consolidated financial statements from the date of acquisition,
which for the twelve months ended January 31, 2024 were not material.
The following table summarizes the preliminary purchase price allocation, as adjusted (in thousands):
Cash and cash equivalents
Accounts receivable
Other current and non-current assets
Property plant and equipment, net
Intangible assets
Goodwill
Accounts payable and other liabilities
Deferred tax liability
Total purchase consideration
$
$
Fair Value
1,829
440
588
195
21,200
14,414
(1,487 )
(3,131 )
34,048
Intangible assets acquired primarily consisted of developed technology of $18.4 million, which represented the estimated fair values of the
acquired 2600Hz developed platform technology and have an estimated useful life of seven years as of the date of acquisition. The goodwill
recognized was primarily attributable to the assembled workforce and is not expected to be deductible for income tax purposes.
Revenues of 2600Hz included in the Company’s consolidated statements of operations from the acquisition date of October 20, 2023, to
January 31, 2024 was approximately $2.3 million. The Company believes it is not practicable to separately identify earnings of 2600Hz on a
stand-alone basis due to the integrated nature of the Company's operations. On a pro forma basis, had the 2600Hz acquisition been included
in the Company's consolidated results of operations beginning February 1, 2022, the Company’s total revenue would have approximated
$243.7 million and $226.5 million for fiscal 2024 and 2023. These pro forma revenue amounts do not necessarily represent what would have
occurred if the business combination had taken place on February 1, 2022, nor do these amounts represent the results that may occur in the
future. Pro forma net income (losses) have not been presented because the impact was not material to the consolidated statements of
operations.
In connection with the acquisition, the Company agreed to issue approximately 423,000 restricted stock units that are subject to on-going
service conditions and vest over an 18-month period. The estimated fair value of these awards of $4.3 million will be recorded as stock
compensation expense over the service period.
Acquisition-related costs charged to general and administrative expense during fiscal 2024 were approximately $0.9 million.
During the second quarter of fiscal 2023, the Company acquired Junction Networks, Inc. which does business as OnSIP for $9.5 million.
During the nine months ended October 31, 2023, the Company received $0.3 million from the seller for certain working capital adjustments,
which is recorded in investing activities in the Company's condensed consolidated statement of cash flows.
Revenues of OnSIP included in the Company’s consolidated statements of operations from the acquisition date of July 22, 2022 to January
31, 2023 was approximately $6.5 million. The Company believes it is not practicable to separately identify earnings of OnSIP on a stand-
alone basis due to the integrated nature of the Company's operations. On a pro forma basis, had the OnSIP acquisition been included in the
Company's consolidated results of operations beginning February 1, 2021, the Company’s total revenue would have approximated $222.2
million for fiscal 2023 and approximated $205.1 million for fiscal 2022. These pro forma revenue amounts do not necessarily represent what
would have occurred if the business combination had taken place on February 1, 2021, nor do these amounts represent the results that may
occur in the future. Pro forma net losses have not been presented because the impact was not material to the consolidated statements of
operations.
Ooma | FY2024 Form 10-K | 89
Note 14: Net Loss Per Share
Basic and diluted net loss per share of common stock is calculated by dividing the net loss allocable to common stockholders by the
weighted-average number of common shares outstanding during the period. Diluted net loss per share of common stock is the same as basic
net loss per share because the effects of potentially dilutive securities are antidilutive because the Company reported net losses for all
periods presented.
The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data):
Numerator
Net loss
Denominator
Weighted-average common shares
Basic and diluted net loss per share
Fiscal Year Ended January 31,
2024
2023
2022
$
$
(835 )
$
(3,655 ) $
(1,751 )
25,573,288
(0.03 ) $
24,506,525
(0.15 ) $
23,473,849
(0.07 )
Potentially dilutive securities of approximately 0.6 million, 0.7 million and 1.4 million in fiscal 2024, 2023 and 2022, respectively, were
excluded from the computation of diluted net loss per share as their inclusion would have been anti-dilutive. These shares included the
Company’s unvested RSUs, outstanding stock options and shares to be purchased under the ESPP.
Note 15: Retirement Plan
The Company offers a qualified 401(k) defined contribution plan to eligible full-time employees that provides for discretionary employer
matching and profit-sharing contributions. The Company matches the lower of 50% of employee contributions or 50% of the first 6% of each
employee’s eligible compensation that is contributed to the 401(k) plan. Contributions made by the Company vest 100% upon contribution
and are expensed as incurred as compensation costs. The Company’s matching contributions to the plan were $1.1 million, $0.9 million and
$0.7 million for fiscal 2024, 2023 and 2022, respectively.
Ooma | FY2024 Form 10-K | 90
ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
ITEM 9A. Controls and Procedures
Evaluation of Disclosure Controls and Procedures. Our Management, with the participation of our chief executive officer and our chief
financial officer, evaluated the effectiveness of our disclosure controls and procedures as of January 31, 2024. The term “disclosure controls
and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company
that are designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange
Act is recorded, processed, summarized and reported, within the time periods specified in the SEC's rules and forms. Disclosure controls and
procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in
the reports that it files or submits under the Exchange Act is accumulated and communicated to the company's management, including its
principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management
recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of
achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls
and procedures. Based on the evaluation of our disclosure controls and procedures as of January 31, 2024, our chief executive officer and
chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance
level.
Management's Annual Report on Internal Control Over Financial Reporting. Our management is responsible for establishing and
maintaining adequate internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act). Management conducted
an assessment of the effectiveness of our internal control over financial reporting based on the criteria set forth in Internal Control –
Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework). Based on the
assessment, management has concluded that our internal control over financial reporting was effective as of January 31, 2024 to provide
reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with U.S.
GAAP. The effectiveness of our internal control over financial reporting as of January 31, 2024 has been audited by KPMG LLP, an
independent registered public accounting firm, as stated in their report which appears in Item 8 of this Annual Report on Form 10-K.
Changes in Internal Control over Financial Reporting. There were no changes in our internal control over financial reporting identified in
connection with the evaluation required by Rule 13a-15(d) and 15d-15(d) of the Exchange Act that occurred during the quarter ended
January 31, 2024 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. We
have not experienced any significant impact to our internal controls over financial reporting despite the fact that most of our employees who
are involved in our financial reporting processes and controls are continuing to work remotely.
Inherent Limitations on Effectiveness of Controls. Because of inherent limitations, internal control over financial reporting may not
prevent or detect misstatements and projections of any evaluation of effectiveness to future periods are subject to the risk that controls may
become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
ITEM 9B. Other Information
On December 26, 2023, Jenny Yeh, our Senior Vice President, General Counsel, and Secretary, and a member of our board of directors,
adopted a Rule 10b5-1 trading arrangement (as that term is defined in Regulation S-K, Item 408), providing for the sale from time to time of
up to 17,300 shares of common stock. The trading arrangement is intended to satisfy the affirmative defense in Rule 10b5-1(c). The duration
of the trading arrangement is until March 1, 2025, or earlier if all transactions under the trading arrangement are completed.
No other directors or officers, as defined in Rule 16a-1(f), have adopted and/or terminated a “Rule 10b5-1 trading arrangement” or a “non-
Rule 10b5-1 trading arrangement,” each as defined in Regulation S-K Item 408, during the fiscal quarter ended January 31, 2024.
ITEM 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
Ooma | FY2024 Form 10-K | 91
ITEM 10. Directors, Executive Officers and Corporate Governance
Board of Directors
PART III
Our board of directors currently consists of eight directors and is divided into three classes with each class serving for three years, and with
the terms of office of the respective classes expiring in successive years. Our board of directors currently expects to nominate three Class III
directors for election at our 2024 annual meeting of stockholders. The terms of office of directors in Class II and Class I do not expire until the
annual meetings of stockholders to be held in 2025 and 2026, respectively. The names, ages and positions of our directors as of April 2,
2024 are as follows:
Name
Susan Butenhoff
Andrew H. Galligan
Peter Goettner
Judi A. Hand
Russ Mann
William D. Pearce
Eric Stang
Jenny Yeh
(1) Member of Nominating and Governance Committee
(2) Member of Compensation Committee
Age
64
67
60
62
55
61
64
50
Position
(1)(2)
(1)
(3)
(1)(3)
Director
Director
Director
Director
Director
Director
Director, President and Chief Executive Officer
Director, Senior Vice President and General
Counsel
(2)(3)
(2)
Director
Class
II
III
I
III
II
III
I
I
Director
Since
2016
2014
2013
2020
2009
2013
2009
2021
(3) Member of Audit Committee
Susan Butenhoff has served on our Board of Directors since July 2016. Ms. Butenhoff served as Founder, President and CEO at Access
Communications from its founding in 1991 to February 2018. Ms. Butenhoff has worked as a business consultant since March 2018. In 2008,
she sold Access Communications to Ketchum Public Relations, one of the world’s largest public relations firms and a member of Omnicom.
From August 2014 to January 2017, Ms. Butenhoff also served as the Global Tech Director for Ketchum Public Relations. Ms. Butenhoff
holds a Bachelor of Arts from University of Sussex, England and an MPhil in International Relations from the University of Cambridge.
The Board believes that Ms. Butenhoff’s leadership and business experience qualify her to serve as a director of the Company. She
possesses a proven track record of effectively assisting companies, including leading technology companies, with establishing brand
recognition and consumer product power brands. She also brings vast experience in the public relations and communications arena.
Andrew H. Galligan has served on our Board of Directors since December 2014. Mr. Galligan is currently a private investor. From May 2010
to July 2020, Mr. Galligan served as Vice President of Finance and Chief Financial Officer of Nevro Corp., a medical device company. He
served as our Vice President of Finance and Chief Financial Officer from February 2009 to May 2010, and as a consultant for our Company
from September 2010 to December 2014. From 2007 to 2008, Mr. Galligan served as Vice President of Finance and CFO of Reliant
Technologies, Inc., a medical device company (later acquired by Solta Medical, Inc.). Mr. Galligan has also held the top financial executive
position at several other medical device companies and began his career in various financial positions at KPMG LLP and Raychem Corp. Mr.
Galligan received a B.B.S. in Business and Finance from Trinity College, Dublin University (Ireland) and is also a Fellow of the Institute of
Chartered Accountants in Ireland.
Our Board of Directors believes that Mr. Galligan’s financial expertise, including his numerous years of experience as chief financial officer
and financial consultant of publicly traded and privately held companies, brings financial and accounting knowledge to our Board and
qualifies him to serve as one of our directors.
Peter J. Goettner has served on our Board of Directors since March 2013. Mr. Goettner has been the General Partner of Worldview
Technology Partners, Inc., a venture capital firm, since June 2004. He has been the Founder and Chairman of Crosschq, Inc., an IT security
company, since November 2017. Mr. Goettner was previously Founder and Chief Executive Officer of DigitalThink, Inc., an enterprise e-
learning solutions company, for seven years. Mr. Goettner holds a B.S. in Computer Engineering from the University of Michigan and an
M.B.A. from the Haas School of Business at the University of California, Berkeley.
Our Board of Directors believes that Mr. Goettner brings to our Board of Directors extensive experience in the technology industry and his
service on a number of boards provides an important perspective on operations and corporate governance matters, and qualifies him to
serve as one of our directors.
Ooma | FY2024 Form 10-K | 92
Judi A. Hand has served on our Board of Directors since June 2020. Since January 2017, Judi Hand is executive vice president and chief
revenue officer of TTEC Holdings in Englewood, Colorado, a global customer experience technology and services company serving many of
the world’s most iconic and disruptive brands. Ms. Hand also serves on the board of Sovrn, an online publisher technology platform, since
February 2022. In addition, from April 2007 to December 2017, Ms. Hand was President and General Manager of TTEC Customer Growth
Services, formerly Revana and Direct Alliance. With more than 25 years of sales and marketing experience, she has held senior positions at
telecom industry leaders including AT&T, Northwestern Bell, US West and Qwest. From May 2014 to May 2017, Ms. Hand was an
independent board member at Manitoba Telecom Services / Allstream. She holds an M.S. degree in management from Stanford University
and a B.A. in communications and marketing from the University of Nebraska.
Our Board of Directors believes that Ms. Hand is qualified to serve as a director because of her extensive corporate experience. She also
brings valuable expertise in corporate governance to our Board of Directors and nominating and corporate governance committee.
Russ Mann has served on our Board of Directors since September 2009. He has served as a board member of Ignite Visibility LLC, a digital
marketing agency servicing national franchisors and franchisees, since March 2023, and as a board member of Flume Water, Inc., an AI-
enabled smart home water meter device and data company, since November 2023. From January 2019 to November 2022, he served as
Chief Executive Officer and as a board member of WineBid, an online auction market for vintage wine. He also served as Chairman of the
Board of Directors of Demandstar, a B2B marketplace, from June 2018 to May 2022. From January 2017 until acquisition in November 2017
by Deltek, a Roper company, Mr. Mann was CEO of Onvia, then a publicly traded company providing B2G commerce intelligence and
database information services to businesses. From May 2016 until January 2017, he was Chief Marketing Officer and SVP of Outerwall’s
EcoATM kiosk network as well as General Manager of Gazelle.com, a leader in the purchase and sale of used cell phones and electronics,
until Outerwall's acquisition by Apollo Management Group. He was CMO of Nintex USA LLC, a mid-market workflow software and services
company, from November 2014 to November 2015. Mr. Mann was Chairman and Chief Executive Officer of Covario, Inc., an advertising
technology and digital marketing agency from January 2006 to May 2014. Mr. Mann holds a B.A. in Asian Studies from Cornell University and
an M.B.A. from Harvard Business School.
Our Board of Directors believes that Mr. Mann is qualified to serve as a member of our Board of Directors because of his extensive business
experience, skills and acumen developed as a senior executive at companies operating in the technology industry, as well as his experience
serving as the chairman of a board of directors.
William D. Pearce has served on our Board of Directors since March 2013, and as our Lead Non-Management Director since June 2017. He
is currently a member of the Board of Directors of Algonomy Software Private Limited (formerly RichRelevance, Inc.), a personalized
shopping experience firm, a director of SpendGo, Inc., a marketing solutions company for restaurants and retailers, and Marketing Faculty at
the Haas School of Business at the University of California, Berkeley. From 2012 to 2014, Mr. Pearce was Partner and Marketing Practice
Director at The Partnering Group, a global consumer products and retail management consulting firm. From 2008 to 2011, he was Senior
Vice President and Chief Marketing Officer at Del Monte Foods, Inc., a food production and distribution company. Mr. Pearce previously
served as President and Chief Executive Officer of Foresight Medical Technology LLC, a medical device company, from 2007 to 2008; Chief
Marketing Officer at Taco Bell Corp., a fast food restaurant company and subsidiary of the firm Yum! Brands, Inc., from 2004 to 2007; and
Vice President Marketing at Campbell Soup Company, a food manufacturer, from 2003 to 2004. Mr. Pearce holds a B.A. in Economics from
Syracuse University and an M.B.A. from the S.C. Johnson Graduate School of Management, Cornell University.
Our Board of Directors believes that Mr. Pearce is qualified to serve as a director based on his prior experience as an executive at several
publicly-traded companies and his considerable experience as a board member of several privately-held companies.
Eric B. Stang has served as our President and Chief Executive Officer and as a member of our Board of Directors since January 2009 and
as Chairman of our Board of Directors since December 2014. He is currently a member of the Board of Directors of Rambus Inc., a
technology licensing company, a member of the Board of Directors of Avalanche Technology, Inc., a memory technology company, and a
member of the board of directors of UltraSense Systems, a touch sensor solutions company. Mr. Stang was previously a director of
InvenSense, Inc., a MEMS semiconductor company, from 2014 to 2017, and Solta Medical, Inc., a medical aesthetics company, from 2008 to
2014. From 2006 to 2008, Mr. Stang was President and Chief Executive Officer and a member of the board of directors of Reliant
Technologies, a developer of medical technologies for aesthetic applications. From 2001 to 2006, he was President and Chief Executive
Officer of Lexar Media, Inc., a solid-state memory products company and currently a subsidiary of Micron Technology. Mr. Stang also served
as Chairman of the Board of Directors of Lexar Media from 2004 to 2006. Mr. Stang holds an A.B. in Economics from Stanford University and
an M.B.A. from Harvard Business School.
Ooma | FY2024 Form 10-K | 93
Our Board of Directors believes that Mr. Stang is qualified to serve as a director because of his operational and historical expertise gained
from serving as our President and Chief Executive Officer, his extensive public and private company board experience, and his experience as
an executive in the technology industry. Our Board of Directors also believes that he brings continuity to the Board of Directors.
Jenny C. Yeh has served on our Board of Directors since January 2021, and has served as our General Counsel since December 2018,
including as Senior Vice President since February 2024 and as Vice President from December 2018 to February 2024. Prior to joining us,
she served as Senior Vice President and General Counsel from November 2017 to December 2018, and as Vice President and General
Counsel from October 2015 to November 2017, of Sphere 3D Corp., an information technology company. From September 2011 to March
2015, Ms. Yeh served as Executive Counsel, Transactions and Finance, at General Electric Company, a global power, renewable energy,
aerospace and healthcare company, where she was a senior legal advisor to GE Corporate business development group, supporting global
corporate strategy and transactions across all GE industrial businesses worldwide. From 2007 to 2011, Ms. Yeh was a corporate partner at
Baker & McKenzie LLP, where she advised clients in general corporate and securities matters, with a specialization in complex cross-border
transactions. Ms. Yeh holds a Juris Doctorate from Georgetown University Law Center, and Bachelor of Arts degrees from the University of
California at Berkeley.
Our Board of Directors believes that the extensive experience in the legal and technology industries Ms. Yeh brings to our Board of Directors
qualifies her to serve as one of our directors. Our Board of Directors also believes that she brings an important perspective on risk
management and compliance issues to the Board.
Executive Officers
The names, ages and positions of our executive officers as of April 2, 2024 are as follows:
Name
Eric B. Stang
James A. Gustke
Shig Hamamatsu
Namrata Sabharwal
Jenny Yeh
Age
64
62
51
53
50
Position
President and Chief Executive Officer
Senior Vice President of Marketing
Chief Financial Officer
Chief Accounting Officer
Senior Vice President and General Counsel
Background information for Mr. Stang and Ms. Yeh is included above under “Board of Directors.”
James A. Gustke has served as our Senior Vice President of Marketing since February 2024 and served as our Vice President of Marketing
from August 2010 to February 2024. Prior to joining us, he was an independent consultant from 2009 to 2010. From 2006 to 2008, Mr.
Gustke served as Vice President of Marketing for Intuit Inc., a financial software company and from 2001 to 2006, Mr. Gustke worked at
Lexar Media, where he was responsible for business unit management, global branding and product marketing. He also served as the
founding Vice President of Marketing for Ofoto, an online photography service, which was acquired by Eastman Kodak in 2001. He joined
America Online in 1996 as the marketing leader for GNN, the company’s first internet service provider, and was previously a marketing
manager at Polaroid. Mr. Gustke holds a B.S. in Business from Arizona State University.
Shig Hamamatsu has served as our Chief Financial Officer since September 2021. Prior to joining us, he worked for Accuray Incorporated,
a publicly traded medical device company, where he served as Chief Financial Officer from November 2018 to September 2021, as Interim
Chief Financial Officer from October 2018 to November 2018 and as Vice President, Finance and Chief Accounting Officer from September
2017 to September 2018. Prior to joining Accuray, Mr. Hamamatsu served as VP, Corporate Controller at Cepheid, a publicly traded
molecular diagnostics company that was acquired by Danaher Corporation, from November 2015 to May 2017. From June 2014 to
November 2015, he served as VP, Finance and Corporate Controller at Cypress Semiconductor Corporation, a publicly traded global
semiconductor manufacturer. From May 2012 until May 2014, Mr. Hamamatsu served as VP, Finance at RPX Corporation, a publicly traded
patent risk management solutions provider. Mr. Hamamatsu began his career as an auditor at PricewaterhouseCoopers LLP. Mr. Hamamatsu
holds a B.A. Business Administration, concentration in accounting, from the University of Washington. He is a certified public accountant in
the state of California (inactive).
Namrata Sabharwal has been our Chief Accounting Officer since June 2022. Prior to that, Ms. Sabharwal served as our Vice President,
Corporate Controller since May 2016, during which time she also served as our interim Chief Financial Officer from June 2021 to September
2021. From March 2015 to May 2016, she served as our Director of SEC Reporting & SOX. Prior to joining us, Ms. Sabharwal served as
Assistant Controller and Senior Director of Finance at Gigamon Inc. from July 2012 to March 2015. Ms. Sabharwal started her career with
Deloitte & Touche LLP as a certified public accountant. She holds a Bachelor of Commerce degree in accounting and finance from Mumbai
University, India.
There are no family relationships among any of our directors or executive officers.
Ooma | FY2024 Form 10-K | 94
Delinquent Section 16(a) Reports
Section 16(a) of the Exchange Act requires directors, certain officers and ten percent stockholders to file reports of ownership and changes in
ownership with the SEC. Based upon a review of filings with the SEC and/or written representations that no other reports were required, we
believe that all reports for the Company’s officers and directors that were required to be filed under Section 16 of the Exchange Act were
timely filed for 2023.
Code of Ethics
The Company has a “Code of Ethics and Business Conduct for Employees, Officers and Directors” that applies to all of our employees,
including our Principal Executive Officer, Principal Financial Officer, Principal Accounting Officer and our Board of Directors. A copy of this
code is available on our website at http://investors.ooma.com. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K
regarding amendment to, or waiver from, a provision of our Code of Ethics and Business Conduct for Employees, Officers and Directors by
posting such information on our investor relations website under the heading “Corporate Governance—Governance Documents” at
http://investors.ooma.com.
Insider Trading Policies and Procedures
We maintain insider trading policies and procedures applicable to the Company and our directors, officers, and employees, in accordance
with Item 408(b) under Regulation S-K, reasonably designed to promote compliance with insider trading laws, rules and regulations, and
applicable listing exchange requirements. This prohibition encompasses transactions that would hedge the risk of ownership of our equity
securities, including transactions in publicly-traded options, such as puts and calls, and other derivative securities.
Identification of Audit Committee and Financial Expert
We have a separately-designated Audit Committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The members of
the Audit Committee, including each member that our Board of Directors has determined is an “audit committee financial expert” under SEC
rules and regulations, are identified below.
Members:
Financial Experts:
Andrew H. Galligan
Peter Goettner
Russ Mann
Our Board of Directors has unanimously determined that each member of our audit committee meets the
requirements for independence of audit committee members and financial literacy under the current listing
standards of the New York Stock Exchange (“NYSE”). In addition, our Board of Directors has determined that
Mr. Galligan is an audit committee financial expert within the meaning of Item 407(d) of Regulation S-K under
the Securities Act.
ITEM 11. Executive Compensation
The information required by this item will be included under the captions “Executive Compensation” and under the subheading
“Compensation Committee Interlocks and Insider Participation” under the caption “Directors, Executive Officers and Corporate Governance”
in the 2024 Proxy Statement and is incorporated herein by reference.
ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The information required by this item will be included under the captions “Security Ownership of Certain Beneficial Owners and Management”
and “Equity Compensation Plan Information” under the heading “Executive Compensation” in the 2024 Proxy Statement and is incorporated
herein by reference.
ITEM 13. Certain Relationships and Related Transactions, and Director Independence
The information required by this item will be included under the captions “Certain Relationships and Related Transactions” and “Directors,
Executive Officers and Corporate Governance—Director Independence” in the 2024 Proxy Statement and is incorporated herein by
reference.
ITEM 14. Principal Accounting Fees and Services
The information required by this item will be included under the caption “Proposal Two: Ratification of Selection of Independent Registered
Public Accountants” in the 2024 Proxy Statement and is incorporated herein by reference.
Ooma | FY2024 Form 10-K | 95
ITEM 15. Exhibits, Financial Statement Schedules
Documents filed as part of this report are as follows:
(a) Consolidated Financial Statements
PART IV
Our Consolidated Financial Statements are listed in the “Index” Under Part II, Item 8 of this Form 10-K
(b) Consolidated Financial Statement Schedules
All financial statement schedules are omitted because the information called for is not required or is shown either in the consolidated financial
statements or in the notes thereto.
(c) Exhibits
The exhibits filed or incorporated by reference as part of this Form 10-K are listed in the Exhibit Index below. We have identified in the Exhibit
Index each management contract and compensation plan filed as an exhibit to this Annual Report on Form 10-K in response to Item 15(a) of
Form 10-K.
The documents listed in the Exhibit Index of this report are incorporated by reference or are filed with this Form 10-K, in each case as
indicated therein (numbered in accordance with Item 601 of Regulation S-K).
ITEM 16. Form 10-K Summary
None.
Ooma | FY2024 Form 10-K | 96
EXHIBITS
Exhibit
Number
3.1
3.2
4.1
4.2
4.5
Description
Amended and Restated Certification of Incorporation
Amended and Restated Bylaws
Form of common stock certificate.
Form of Indenture
Description of Securities
10.1+
2005 Stock Incentive Plan and forms of agreements thereunder.
10.2+
2015 Equity Incentive Plan and forms of agreements thereunder.
10.3+
2015 Employee Stock Purchase Plan and form of agreement thereunder.
10.4+
Executive Incentive Bonus Plan.
10.5+
Executive Change in Control and Severance Agreement by and between the
Company and Eric B. Stang, dated June 9, 2015.
10.6+
Offer Letter by and between the Company and James A. Gustke, dated July
30, 2010.
Form
10-Q
10-Q
S-1/A
S-3
10-K
S-1
S-1/A
S-1/A
S-1
S-1
S-1
Incorporated by Reference
Exhibit
Number
3.1
3.1
4.1
4.2
4.5
10.1
10.2
10.3
10.4
10.5
Date Filed
9/11/2015
12/8/2023
7/6/2015
12/09/2022
4/14/2020
6/15/2015
7/6/2015
7/6/2015
6/15/2015
6/15/2015
10.7
6/15/2015
10.7
Change in Control Letter Agreement between the Company and James A.
10-K
10.8
4/11/2017
Gustke, dated August 31, 2016.
10.8
Form of Indemnification Agreement between the Registrant and each of its
S-1
10.8
6/15/2015
directors and executive officers.
10.9+
Form of Restricted Stock Unit Agreement under the 2015 Equity Incentive
10-Q
10.1
06/08/2018
Plan (effective for grants made on or after March 14, 2018).
10.10
Sublease Agreement dated as of August 6, 2019 by and among the
10-Q
10.1
12/06/2019
Company and Alibaba Group (U.S.) Inc.
10.12
First Amendment to the Sublease Agreement by and among the Company
10-Q
10.13
06/09/2021
and Alibaba Group (U.S.) Inc.
10.14+
Letter Agreement by and between the Company and Shig Hamamatsu, dated
10-Q
10.14
12/08/2021
July 3, 2021
10.15+
Executive Change in Control and Severance Agreement by and between the
10-Q
10.15
12/08/2021
Company and Shig Hamamatsu, dated September 7, 2021
10.16+
Amendment No. 1 to the Executive Change in Control and Severance
10-Q
10.16
12/08/2021
Agreement by and between the Company and Eric Stang, dated September
20, 2021
Ooma | FY2024 Form 10-K | 97
Exhibit
Number
Description
Incorporated by Reference
Exhibit
Number
Date Filed
Form
10.17+
Amendment No. 1 to the Executive Change in Control and Severance Agreement
10-Q
10.17
12/08/2021
by and between the Company and Jenny Yeh, dated September 20, 2021
10.18+
Amended Form of Executive Change in Control and Severance Agreement
10.20
Agreement and Plan of Merger by and among Geneva Merger Sub, Inc., 2600hz,
Inc. and Fortis Advisors LLC, dated as of October 20, 2023.
10-Q
10-Q
10.18
2.1†#
12/08/2021
12/08/2023
10.21
Credit Agreement by and among the Company and Citizens Bank, N.A., dated as
10-Q
10.1
12/08/2023
of October 20, 2023.
19.1
Ooma, Inc. Insider Trading Policy, adopted May 20, 2015
Filed herewith.
21.1
List of subsidiaries of the Registrant.
Filed herewith.
23.1
Consent of KPMG LLP, Independent Registered Public Accounting Firm
Filed herewith.
31.1
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Rule
Filed herewith.
13(a)‑14(a)/15d-14(a), by President and Chief Executive Officer.
31.2
Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, Rule
Filed herewith.
13(a)‑14(a)/15d-14(a), by Chief Financial Officer.
32.1
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, by President and Chief Executive Officer.
Furnished
herewith.
32.2
Certification pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section
906 of the Sarbanes-Oxley Act of 2002, by Chief Financial Officer.
97.1
Ooma, Inc. Compensation Recovery Policy, adopted September 8, 2023
101.INS
Inline XBRL Instance Document
101.SCH Inline XBRL Taxonomy Extension Schema Document
Furnished
herewith.
Furnished
herewith.
Filed herewith.
Filed herewith.
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
Filed herewith.
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
Filed herewith.
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
Filed herewith.
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
Filed herewith.
104
Cover Page Interactive Data File (formatted as Inline XBRL and contained in
Filed herewith.
Exhibit 101)
+ Indicates a management contract or compensatory plan.
Ooma | FY2024 Form 10-K | 98
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as amended, the Registrant has duly caused this
Report to be signed on its behalf by the undersigned, thereunto duly authorized.
April 2, 2024
Ooma, Inc.
SIGNATURES
By:
/s/ Eric B. Stang
Eric B. Stang
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Eric B. Stang
Eric B. Stang
/s/ Shig Hamamatsu
Shig Hamamatsu
/s/ Namrata Sabharwal
Namrata Sabharwal
/s/ Susan Butenhoff
Susan Butenhoff
/s/ Andrew Galligan
Andrew Galligan
/s/ Peter J. Goettner
Peter J. Goettner
/s/ Judi A. Hand
Judi A. Hand
/s/ Russell Mann
Russell Mann
/s/ William D. Pearce
William D. Pearce
/s/ Jenny Yeh
Jenny Yeh
President and Chief Executive Officer and Chairman of
the Board of Directors
(Principal Executive Officer)
April 2, 2024
Chief Financial Officer and Treasurer
(Principal Financial Officer)
Chief Accounting Officer
(Principal Accounting Officer)
Director
Director
Director
Director
Director
April 2, 2024
April 2, 2024
April 2, 2024
April 2, 2024
April 2, 2024
April 2, 2024
April 2, 2024
Lead Director
April 2, 2024
Senior Vice President, General Counsel and Director
April 2, 2024
Ooma | FY2024 Form 10-K | 99
Ooma, Inc.
Insider Trading Policy
(Adopted and approved on May 20, 2015 and
effective as of the Company’s initial public offering, and amended on November 28, 2023)
Exhibit 19.1
Purpose
This Insider Trading Policy (the “Policy”) provides guidelines with respect to transactions in the securities of Ooma, Inc. (the “Company”)
and the handling of confidential information about the Company and the companies with which the Company does business. The Company’s
Board of Directors has adopted this Policy to promote compliance with federal, state and foreign securities laws that prohibit certain persons
who are aware of material nonpublic information about a company from: (i) trading in securities of that company; or (ii) providing material
nonpublic information to other persons who may trade on the basis of that information.
Persons Subject to the Policy
This Policy applies to all officers of the Company and its subsidiaries, all members of the Company’s Board of Directors and all employees
of the Company and its subsidiaries. The Company may also determine that other persons should be subject to this Policy, such as
contractors or consultants who have access to material nonpublic information. This Policy also applies to family members, other members of
a person’s household and entities controlled by a person covered by this Policy, as described below.
Transactions Subject to the Policy
This Policy applies to transactions in the Company’s securities (collectively referred to in this Policy as “Company Securities”), including the
Company’s common stock, options to purchase common stock, or any other type of securities that the Company may issue, including (but not
limited to) preferred stock, convertible debentures and warrants, as well as derivative securities that are not issued by the Company, such as
exchange-traded put or call options or swaps relating to the Company’s Securities.
Individual Responsibility
Persons subject to this Policy have ethical and legal obligations to maintain the confidentiality of information about the Company and to not
engage in transactions in Company Securities while in possession of material nonpublic information. Each individual is responsible for
making sure that he or she complies with this Policy, and that any family member, household member or entity whose transactions are subject
to this Policy, as discussed below, also comply with this Policy. In all cases, the responsibility for determining whether an individual is in
possession of material nonpublic information rests with that individual, and any action on the part of the Company, the Compliance Officer or
any other employee or director pursuant to this Policy (or otherwise) does not in any way constitute legal advice or insulate an individual
from liability under applicable securities laws. You could be subject to severe legal penalties and disciplinary action by the Company for any
conduct prohibited by this Policy or applicable securities laws, as described below in more detail under the heading “Consequences of
Violations.”
Administration of the Policy
Jenny Yeh, Vice President & General Counsel shall serve as the Compliance Officer for the purposes of this Policy, and in her absence, Shig
Hamamatsu, Chief Financial Officer, or another employee designated by the Compliance Officer shall be responsible for administration of
this Policy. All determinations and interpretations by the Compliance Officer shall be final and not subject to further review.
Statement of Policy
It is the policy of the Company that no director, officer or other employee of the Company (or any other person designated by this Policy or
by the Compliance Officer as subject to this Policy) who is aware of material nonpublic information relating to the Company may, directly, or
indirectly through family members or other persons or entities:
1. Engage in transactions in Company Securities, except as otherwise specified in this Policy under the headings “Transactions
Under Company Plans,” “Transactions Not Involving a Purchase or Sale” and “Rule 10b5-1 Plans;”
2. Recommend the purchase or sale of any Company Securities;
3. Disclose material nonpublic information to persons within the Company whose jobs do not require them to have that
information, or outside of the Company to other persons, including, but not limited to, family, friends, business associates,
investors and expert consulting firms, unless any such disclosure is made in accordance with the Company’s policies
regarding the protection or authorized external disclosure of information regarding the Company; or
4. Assist anyone engaged in the above activities.
In addition, it is the policy of the Company that no director, officer or other employee of the Company (or any other person designated as
subject to this Policy) who, in the course of working for the Company, learns of material nonpublic information about a company with which
the Company does business, including a customer or supplier of the Company, may trade in that company’s securities until the information
becomes public or is no longer material.
There are no exceptions to this Policy, except as specifically noted herein. Transactions that may be necessary or justifiable for independent
reasons (such as the need to raise money for an emergency expenditure), or small transactions, are not excepted from this Policy. The
securities laws do not recognize any mitigating circumstances, and, in any event, even the appearance of an improper transaction must be
avoided to preserve the Company’s reputation for adhering to the highest standards of conduct.
Definition of Material Nonpublic Information
Material Information. Information is considered “material” if a reasonable investor would consider that information important in making a
decision to buy, hold or sell securities. Any information that could be expected to affect the Company’s stock price, whether it is positive or
negative, should be considered material. There is no bright-line standard for assessing materiality; rather, materiality is based on an
assessment of all of the facts and circumstances, and is often evaluated by enforcement authorities with the benefit of hindsight. While it is
not possible to define all categories of material information, some examples of information that ordinarily would be regarded as material are:
•
•
•
•
•
•
•
•
•
•
•
•
Projections of future earnings or losses, or other earnings guidance;
Changes to previously announced earnings guidance, or the decision to suspend earnings guidance;
A pending or proposed merger, acquisition or tender offer;
A pending or proposed acquisition or disposition of a significant asset;
Cyber security incidents and data breaches;
A pending or proposed joint venture;
A Company restructuring;
Significant related party transactions;
A change in dividend policy, the declaration of a stock split, or an offering of additional securities;
Bank borrowings or other financing transactions out of the ordinary course;
The establishment of a repurchase program for Company Securities;
A change in the Company’s pricing or cost structure;
• Major marketing changes;
•
A change in management;
•
•
•
•
•
•
A change in auditors or notification that the auditor’s reports may no longer be relied upon;
Development of a significant new product, process, or service;
Pending or threatened significant litigation, or the resolution of such litigation;
Impending bankruptcy or the existence of severe liquidity problems;
The gain or loss of a significant customer or supplier; and
The imposition of a ban on trading in Company Securities or the securities of another company.
When Information is Considered Public. Information that has not been disclosed to the public is generally considered to be nonpublic
information. In order to establish that the information has been disclosed to the public, it may be necessary to demonstrate that the
information has been widely disseminated. Information generally would be considered widely disseminated if it has been disclosed through
the Dow Jones “broad tape,” newswire services, a broadcast on widely-available radio or television programs, publication in a widely-
available newspaper, magazine or news website, or public disclosure documents filed with the SEC that are available on the SEC’s website.
By contrast, information would likely not be considered widely disseminated if it is available only to the Company’s employees, or if it is
only available to a select group of analysts, brokers and institutional investors.
Once information is widely disseminated, it is still necessary to afford the investing public with sufficient time to absorb the information. As
a general rule, information should not be considered fully absorbed by the marketplace until after the close of business on the first business
day after the day on which the information is released. If, for example, the Company were to make an announcement on a Monday, you
should not trade in Company Securities until Wednesday. Depending on the particular circumstances, the Company may determine that a
longer or shorter period should apply to the release of specific material nonpublic information.
Transactions by Family Members and Others
This Policy applies to your family members who reside with you (including a spouse, a child, a child away at college, stepchildren,
grandchildren, parents, stepparents, grandparents, siblings and in-laws), anyone else who lives in your household, and any family members
who do not live in your household but whose transactions in Company Securities are directed by you or are subject to your influence or
control, such as parents or children who consult with you before they trade in Company Securities (collectively referred to as “Family
Members”). You are responsible for the transactions of these other persons and therefore should make them aware of the need to confer with
you before they trade in Company Securities, and you should treat all such transactions for the purposes of this Policy and applicable
securities laws as if the transactions were for your own account. This Policy does not, however, apply to personal securities transactions of
Family Members where the purchase or sale decision is made by a third party not controlled by, influenced by or related to you or your
Family Members.
Transactions by Entities that You Influence or Control
This Policy applies to any entities that you influence or control, including any corporations, partnerships or trusts (collectively referred to as
“Controlled Entities”), and transactions by these Controlled Entities should be treated for the purposes of this Policy and applicable securities
laws as if they were for your own account.
Transactions Under Company Plans
This Policy does not apply in the case of the following transactions, except as specifically noted:
Stock Option Exercises. This Policy does not apply to the exercise of an employee stock option acquired pursuant to the Company’s plans, or
to the exercise of a tax withholding right pursuant to which a person has elected to have the Company withhold shares subject to an option to
satisfy tax withholding requirements. This Policy does apply, however, to any sale of stock as part of a broker-assisted cashless exercise of
an option, or any other market sale for the purpose of generating the cash needed to pay the exercise price of an option.
Restricted Stock Awards. This Policy does not apply to the vesting of restricted stock, or the exercise of a tax withholding right pursuant to
which you elect to have the Company withhold shares of stock to satisfy tax withholding requirements upon the vesting of any restricted
stock. The Policy does apply, however, to any market sale of restricted stock.
401(k) Plan. This Policy does not apply to purchases of Company Securities in the Company’s 401(k) plan resulting from your periodic
contribution of money to the plan pursuant to your payroll deduction election. This Policy does apply, however, to certain elections you may
make under the 401(k) plan, including: (a) an election to increase or decrease the percentage of your periodic contributions that will be
allocated to the Company stock fund; (b) an election to make an intra-plan transfer of an existing account balance into or out of the Company
stock fund; (c) an election to borrow money against your 401(k) plan account if the loan will result in a liquidation of some or all of your
Company stock fund balance; and (d) an election to pre-pay a plan loan if the pre-payment will result in allocation of loan proceeds to the
Company stock fund.
Employee Stock Purchase Plan. This Policy does not apply to purchases of Company Securities in the employee stock purchase plan
resulting from your periodic contribution of money to the plan pursuant to the election you made at the time of your enrollment in the plan.
This Policy also does not apply to purchases of Company Securities resulting from lump sum contributions to the plan, provided that you
elected to participate by lump sum payment at the beginning of the applicable enrollment period. This Policy does apply, however, to your
election to participate in the plan for any enrollment period, and to your sales of Company Securities purchased pursuant to the plan.
Dividend Reinvestment Plan. This Policy does not apply to purchases of Company Securities under the Company’s dividend reinvestment
plan resulting from your reinvestment of dividends paid on Company Securities. This Policy does apply, however, to voluntary purchases of
Company Securities resulting from additional contributions you choose to make to the dividend reinvestment plan, and to your election to
participate in the plan or increase your level of participation in the plan. This Policy also applies to your sale of any Company Securities
purchased pursuant to the plan.
Other Similar Transactions. Any other purchase of Company Securities from the Company or sales of Company Securities to the Company
are not subject to this Policy.
Transactions Not Involving a Purchase or Sale
Bona fide gifts of securities are not transactions subject to this Policy. Further, transactions in mutual funds that are invested in Company
Securities are not transactions subject to this Policy.
Special and Prohibited Transactions
The Company has determined that there is a heightened legal risk and/or the appearance of improper or inappropriate conduct if the persons
subject to this Policy engage in certain types of transactions. It therefore is the Company’s policy that any persons covered by this Policy
may not engage in any of the following transactions, or should otherwise consider the Company’s preferences as described below:
Short-Term Trading. Short-term trading of Company Securities may be distracting to the person and may unduly focus the person on the
Company’s short-term stock market performance instead of the Company’s long-term business objectives. For these reasons, any director,
officer or other employee of the Company who purchases Company Securities in the open market may not sell any Company Securities of the
same class during the six months following the purchase (or vice versa).
Short Sales. Short sales of Company Securities (i.e., the sale of a security that the seller does not own) may evidence an expectation on the
part of the seller that the securities will decline in value, and therefore have the potential to signal to the market that the seller lacks
confidence in the Company’s prospects. In addition, short sales may reduce a seller’s incentive to seek to improve the Company’s
performance. For these reasons, short sales of Company Securities are prohibited. In addition, Section 16(c) of the Exchange Act prohibits
officers and directors from engaging in short sales. (Short sales arising from certain types of hedging transactions are governed by the
paragraph below captioned “Hedging Transactions.”)
Publicly-Traded Options. Given the relatively short term of publicly-traded options, transactions in options may create the appearance that a
director, officer or employee is trading based on material nonpublic information and focus a director’s, officer’s or other employee’s attention
on short-term performance at the expense of the Company’s long-term objectives. Accordingly, transactions in put options, call options or
other derivative securities, on an exchange or in any other organized
market, are prohibited by this Policy. (Option positions arising from certain types of hedging transactions are governed by the next paragraph
below.)
Hedging Transactions. Hedging or monetization transactions can be accomplished through a number of possible mechanisms, including
through the use of financial instruments such as prepaid variable forwards, equity swaps, collars and exchange funds. Such hedging
transactions may permit a director, officer or employee to continue to own Company Securities obtained through employee benefit plans or
otherwise, but without the full risks and rewards of ownership. When that occurs, the director, officer or employee may no longer have the
same objectives as the Company’s other stockholders. Accordingly, such transactions are prohibited by this Policy. Any person wishing to
enter into such an arrangement must first submit the proposed transaction for approval by the Compliance Officer. Any request for pre-
clearance of a hedging or similar arrangement must be submitted to the Compliance Officer at least two weeks prior to the proposed
execution of documents evidencing the proposed transaction and must set forth a justification for the proposed transaction.
Margin Accounts and Pledged Securities. Securities held in a margin account as collateral for a margin loan may be sold by the broker
without the customer’s consent if the customer fails to meet a margin call. Similarly, securities pledged (or hypothecated) as collateral for a
loan may be sold in foreclosure if the borrower defaults on the loan. Because a margin sale or foreclosure sale may occur at a time when the
pledgor is aware of material nonpublic information or otherwise is not permitted to trade in Company Securities, directors, officers and other
employees are prohibited from holding Company Securities in a margin account or otherwise pledging Company Securities as collateral for a
loan. The Compliance Officer may grant an exception to this prohibition with regard to a pledge of Company Securities as collateral for a
loan (not including margin debt), provided that such person must clearly demonstrate, in the sole discretion of the Compliance Officer, the
financial capacity to repay the loan without resorting to the foreclosure on the pledged securities. (Pledges of Company Securities arising
from certain types of hedging transactions are governed by the paragraph above captioned “Hedging Transactions.”)
Standing and Limit Orders. Standing and limit orders (except standing and limit orders under approved Rule 10b5-1 Plans, as described
below) create heightened risks for insider trading violations similar to the use of margin accounts. There is no control over the timing of
purchases or sales that result from standing instructions to a broker, and as a result the broker could execute a transaction when a director,
officer or other employee is in possession of material nonpublic information. The Company therefore discourages placing standing or limit
orders on Company Securities. If a person subject to this Policy determines that they must use a standing order or limit order, the order
should be limited to short duration and should otherwise comply with the restrictions and procedures outlined below under the heading
“Additional Procedures.”
Additional Procedures
The Company has established additional procedures in order to assist the Company in the administration of this Policy, to facilitate
compliance with laws prohibiting insider trading while in possession of material nonpublic information, and to avoid the appearance of any
impropriety. These additional procedures are applicable only to those individuals described below.
Pre-Clearance Procedures. The persons designated by the Compliance Officer as being subject to these procedures, including the “Key
Employees” listed below, as well as the Family Members and Controlled Entities of such persons, may not engage in any transaction in
Company Securities without first obtaining pre-clearance of the transaction from the Compliance Officer. A request for pre-clearance should
be submitted to the Compliance Officer at least two business days in advance of the proposed transaction. The Compliance Officer is under
no obligation to approve a transaction submitted for pre-clearance, and may determine not to permit the transaction. If a person seeks pre-
clearance and permission to engage in the transaction is denied, then he or she should refrain from initiating any transaction in Company
Securities, and should not inform any other person of the restriction.
When a request for pre-clearance is made, the requestor should carefully consider whether he or she may be aware of any material nonpublic
information about the Company, and should describe fully those circumstances to the Compliance Officer. The requestor should also indicate
whether he or she has effected any non-exempt “opposite-way” transactions within the past six months, and should be prepared to report the
proposed transaction on an appropriate Form 4 or Form 5. The requestor should also be prepared to comply with SEC Rule 144 and file
Form 144, if necessary, at the time of any sale.
Quarterly Trading Restrictions. The persons designated by the Compliance Officer as subject to this restriction, as well as their Family
Members or Controlled Entities, may not conduct any transactions involving the Company’s Securities (other than as specified by this
Policy), during a “Blackout Period” beginning one calendar month prior to the end of each fiscal quarter and ending at the close of business
on the first business day following the date of the public release of the Company’s earnings results for that quarter. In other words, these
persons may only conduct transactions in Company Securities during the “Window Period” beginning on the second business day following
the public release of the Company’s quarterly earnings and ending one calendar month prior to the close of the next fiscal quarter.
Event-Specific Trading Restriction Periods. From time to time, an event may occur that is material to the Company and is known by only a
few directors, officers and/or employees. So long as the event remains material and nonpublic, the persons designated by the Compliance
Officer may not trade Company Securities. In addition, the Company’s financial results may be sufficiently material in a particular fiscal
quarter that, in the judgment of the Compliance Officer, designated persons should refrain from trading in Company Securities even sooner
than the typical Blackout Period described above. In that situation, the Compliance Officer may notify these persons that they should not
trade in the Company’s Securities, without disclosing the reason for the restriction. The existence of an event-specific trading restriction
period or extension of a Blackout Period will not be announced to the Company as a whole, and should not be communicated to any other
person. Even if the Compliance Officer has not designated you as a person who should not trade due to an event-specific restriction, you
should not trade while aware of material nonpublic information. Exceptions will not be granted during an event-specific trading restriction
period.
Exceptions. The quarterly trading restrictions and event-driven trading restrictions do not apply to those transactions to which this Policy
does not apply, as described above under the headings “Transactions Under Company Plans” and “Transactions Not Involving a Purchase or
Sale.” Further, the requirement for pre-clearance, the quarterly trading restrictions and event-driven trading restrictions do not apply to
transactions conducted pursuant to approved Rule 10b5-1 plans, described under the heading “Rule 10b5-1 Plans.”
Rule 10b5-1 Plans
Rule 10b5-1 under the Exchange Act provides a defense from insider trading liability under Rule 10b-5. In order to be eligible to rely on this
defense, a person subject to this Policy must enter into a Rule 10b5-1 plan for transactions in Company Securities that meets certain
conditions specified in the Rule (a “Rule 10b5-1 Plan”). If the plan meets the requirements of Rule 10b5-1, Company Securities may be
purchased or sold without regard to certain insider trading restrictions. To comply with the Policy, a Rule 10b5-1 Plan must be approved by
the Compliance Officer and meet the requirements of Rule 10b5-1 and the Company’s “Guidelines for Rule 10b5-1 Plans,” which may be
obtained from the Compliance Officer. In general, a Rule 10b5-1 Plan must be entered into at a time when the person entering into the plan is
not aware of material nonpublic information. Once the plan is adopted, the person must not exercise any influence over the amount of
securities to be traded, the price at which they are to be traded or the date of the trade. The plan must either specify the amount, pricing and
timing of transactions in advance or delegate discretion on these matters to an independent third party.
Any Rule 10b5-1 Plan must be submitted for approval five days prior to the entry into the Rule 10b5-1 Plan. No further pre-approval of
transactions, conducted pursuant to the Rule 10b5‑1 Plan will be required.
Post-Termination Transactions
This Policy continues to apply to transactions in Company Securities even after termination of service to the Company. If an individual is in
possession of material nonpublic information when his or her service terminates, that individual may not trade in Company Securities until
that information has become public or is no longer material. The pre-clearance procedures specified under the heading “Additional
Procedures” above, however, will cease to apply to transactions in Company Securities upon the expiration of any Blackout Period or other
Company-imposed trading restrictions applicable at the time of the termination of service.
Consequences of Violations
The purchase or sale of securities while aware of material nonpublic information, or the disclosure of material nonpublic information to
others who then trade in the Company’s Securities, is prohibited by federal and state laws. Insider trading violations are pursued vigorously
by the SEC, U.S. Attorneys and state enforcement authorities as well as the laws of foreign
jurisdictions. Punishment for insider trading violations is severe, and could include significant fines and imprisonment. While the regulatory
authorities concentrate their efforts on the individuals who trade, or who tip inside information to others who trade, the federal securities laws
also impose potential liability on companies and other “controlling persons” if they fail to take reasonable steps to prevent insider trading by
company personnel.
In addition, an individual’s failure to comply with this Policy may subject the individual to Company-imposed sanctions, including dismissal
for cause, whether or not the employee’s failure to comply results in a violation of law. Needless to say, a violation of law, or even an SEC
investigation that does not result in prosecution, can tarnish a person’s reputation and irreparably damage a career.
Company Assistance
Any person who has a question about this Policy or its application to any proposed transaction may obtain additional guidance from the
Compliance Officer, who can be reached by telephone at (650) 566-6671 or by e-mail at jenny.yeh@ooma.com.
Certification
All persons subject to this Policy must certify their understanding of, and intent to comply with, this Policy.
Name
Talkatone, LLC
Ooma International Operations, LLC
Ooma International Ltd.
Ooma Australia Pty Ltd.
Voxter Communications, Inc.
Broadsmart Global, Inc.
Ooma Canada, Inc.
Ooma Ireland Limited
Oomazing Telecom
Ooma Colombia S.A.S.
Ooma Peru S.A.C.
Aruba Acquisition Subsidiary Inc.
Junction Networks Inc.
2600hz, Inc.
Desktop Communications, LLC
VoIP Labs, Inc.
Trunking.IO, LLC
Ooma Brasil Holding LTDA.
Ooma Brasil Serviços Telecomunicação Ltda.
List of Subsidiaries
Jurisdiction of Incorporation
Exhibit 21.1
Delaware
Delaware
United Kingdom
Australia
British Columbia, Canada
Florida
British Columbia, Canada
Ireland
South Africa
Colombia
Peru
Delaware
Pennsylvania
Delaware
Delaware
Nevada
Delaware
Brazil
Brazil
CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
We consent to the incorporation by reference in the registration statement (No. 333-268733) on Form S-3, and in the registration statements
(Nos. 333-271194, 333-264217, 333-255093, 333-237662, 333-230693, 333-224086, 333-217254, 333-210717, 333-205719) on Form S-8,
of our report dated April 2, 2024, with respect to the consolidated financial statements of Ooma, Inc. and the effectiveness of internal control
over financial reporting.
Exhibit 23.1
/s/ KPMG LLP
Santa Clara, California
April 2, 2024
CERTIFICATION OF CHIEF EXECUTIVE OFFICER
PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.1
I, Eric B. Stang, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Ooma, Inc. for the fiscal year ended January 31, 2024;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 2, 2024
By:
/s/ Eric B. Stang
Eric B. Stang
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION OF CHIEF FINANCIAL OFFICER
PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 31.2
I, Shig Hamamatsu, certify that:
1.
I have reviewed this Annual Report on Form 10-K of Ooma, Inc. for the fiscal year ended January 31, 2024;
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the
period covered by this report;
3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material
respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as
defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules
13a-15(f) and 15d-15(f)) for the registrant and have:
(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our
supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us
by others within those entities, particularly during the period in which this report is being prepared;
(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under
our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial
statements for external purposes in accordance with generally accepted accounting principles;
(c)
Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about
the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such
evaluation; and
(d) Disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's
most recent fiscal quarter (the registrant's fourth fiscal quarter in the case of an annual report) that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control over financial reporting.
5. The registrant's other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial
reporting, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent
functions):
(a)
(b)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are
reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's
internal control over financial reporting.
Date: April 2, 2024
By:
/s/ Shig Hamamatsu
Shig Hamamatsu
Chief Financial Officer and Treasurer
(Principal Financial Officer)
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.1
I, Eric B. Stang, certify pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Section
1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), as adopted pursuant to §906 of the Sarbanes-Oxley Act of 2002,
that the Annual Report on Form 10-K of Ooma, Inc. for the fiscal year ended January 31, 2024, fully complies with the requirements of
Section 13(a) or 15(d) of the Exchange Act and that the information contained in such Annual Report on Form 10-K fairly presents, in all
material respects, the financial condition and results of operations of Ooma, Inc.
Date: April 2, 2024
By:
/s/ Eric B. Stang
Eric B. Stang
Chief Executive Officer
(Principal Executive Officer)
CERTIFICATION OF
CHIEF FINANCIAL OFFICER
PURSUANT TO
18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
Exhibit 32.2
I, Shig Hamamatsu, certify pursuant to Rule 13a-14(b) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and
Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), as adopted pursuant to § 906 of the Sarbanes-Oxley Act
of 2002, that the Annual Report on Form 10-K of Ooma, Inc. for the fiscal year ended January 31, 2024, fully complies with the requirements
of Section 13(a) or 15(d) of the Exchange Act and that the information contained in such Annual Report on Form 10-K fairly presents, in all
material respects, the financial condition and results of operations of Ooma, Inc.
Date: April 2, 2024
By:
/s/ Shig Hamamatsu
Shig Hamamatsu
Chief Financial Officer and Treasurer
(Principal Financial Officer)
OOMA, INC.
COMPENSATION RECOVERY POLICY
(Adopted and approved on September 8, 2023)
Exhibit 97.1
1. Purpose
Ooma, Inc. (collectively with its subsidiaries, the “Company”) is committed to promoting honest and ethical business conduct
and compliance with applicable laws, rules and regulations. As part of this commitment, the Company has adopted this
Compensation Recovery Policy (this “Policy”). This Policy is designed to comply with Section 10D of the Securities Exchange
Act of 1934, as amended (the “Exchange Act”), and the rules and regulations adopted by the Securities and Exchange
Commission (the “SEC”) thereunder, and explains when the Company will be required to seek recovery of Incentive
Compensation awarded or paid to a Covered Person. Please refer to Exhibit A attached hereto (the “Definitions Exhibit”) for
the definitions of capitalized terms used throughout this Policy.
2. Miscalculation of Financial Reporting Measure Results
In the event of a Restatement, the Company will seek to recover, reasonably promptly, all Recoverable Incentive Compensation
from a Covered Person. Such recovery, in the case of a Restatement, will be made without regard to any individual knowledge
or responsibility related to the Restatement. Notwithstanding the foregoing, if the Company is required to undertake a
Restatement, the Company will not be required to recover the Recoverable Incentive Compensation if the Compensation
Committee determines it Impracticable to do so, after exercising a normal due process review of all the relevant facts and
circumstances.
3. Other Actions
The Compensation Committee may, subject to applicable law, seek recovery in the manner it chooses, including by seeking
reimbursement from the Covered Person of all or part of the Recoverable Incentive Compensation awarded or paid, by electing
to withhold unpaid compensation, by set-off, or by rescinding or canceling unvested equity, including unvested stock or
restricted stock units.
4. No Indemnification or Reimbursement
Notwithstanding the terms of any other policy, program, agreement or arrangement, in no event will the Company or any of its
affiliates indemnify or reimburse a Covered Person for any loss under this Policy and in no event will the Company or any of
its affiliates pay premiums on any insurance policy that would cover a Covered Person’s potential obligations with respect to
Recoverable Incentive Compensation under this Policy.
5. Administration of Policy
The Compensation Committee will have full authority to administer this Policy. The Compensation Committee will, subject to
the provisions of this Policy and Rule 10D-1 of the Exchange Act, and the Company’s applicable exchange listing standards,
make such determinations and interpretations and take such actions in connection with this Policy as it deems necessary,
appropriate or advisable. All determinations and interpretations made by the Compensation Committee will be final, binding
and conclusive.
6. Other Claims and Rights
The remedies under this Policy are in addition to, and not in lieu of, any legal and equitable claims the Company or any of its
affiliates may have or any actions that may be imposed by law enforcement agencies, regulators, administrative bodies, or
other authorities. Further, the exercise by the Compensation Committee of any rights pursuant to this Policy will not impact
any other rights that the Company or any of its affiliates may have with respect to any Covered Person subject to this Policy.
7. Acknowledgement by Covered Persons; Condition to Eligibility for Incentive Compensation
The Company will provide notice and seek acknowledgement of this Policy from each Covered Person, provided that the
failure to provide such notice or obtain such acknowledgement will have no impact on the applicability or enforceability of this
Policy. After the Effective Date, the Company must be in receipt of a Covered Person's acknowledgement as a condition to
such Covered Person’s eligibility to receive Incentive Compensation. All Incentive Compensation subject to this Policy will
not be earned, even if already paid, until the Policy ceases to apply to such Incentive Compensation and any other vesting
conditions applicable to such Incentive Compensation are satisfied.
8. Amendment; Termination
The Board or the Compensation Committee may amend or terminate this Policy at any time.
9. Effectiveness
Except as otherwise determined in writing by the Compensation Committee, this Policy will apply to any Incentive
Compensation that is Received by a Covered Person after the Effective Date. Further, as of the Effective Date, this Policy
amends and supersedes in their entirety any prior recoupment provisions which appear in a Covered Person’s equity award
agreements or otherwise (the “Prior Policies”). Notwithstanding the foregoing, the Prior Policies shall remain in full force and
effect as to any compensation that, without the existence, and satisfaction, of conditions as set forth in the Prior Policies, may
otherwise have been deemed earned prior to the Effective Date. This Policy will survive and continue notwithstanding any
termination of a Covered Person’s employment with the Company and its affiliates.
10. Successors
This Policy shall be binding and enforceable against all Covered Persons and their successors, beneficiaries, heirs, executors,
administrators, or other legal representatives.
Exhibit A
OOMA, INC.
COMPENSATION RECOVERY POLICY
DEFINITIONS EXHIBIT
“Applicable Period” means the three completed fiscal years of the Company immediately preceding the earlier of (i) the date
the Board, a committee of the Board, or the officer or officers of the Company authorized to take such action if Board action is
not required, concludes (or reasonably should have concluded) that a Restatement is required or (ii) the date a court, regulator,
or other legally authorized body directs the Company to prepare a Restatement. The “Applicable Period” also includes any
transition period (that results from a change in the Company’s fiscal year) within or immediately following the three completed
fiscal years identified in the preceding sentence.
“Board” means the Board of Directors of the Company.
“Compensation Committee” means the Company’s committee of independent directors responsible for executive
compensation decisions, or in the absence of such a committee, a majority of the independent directors serving on the Board.
“Covered Person” means any person who is, or was at any time, during the Applicable Period, an Executive
Officer of the Company. For the avoidance of doubt, a Covered Person may include a former Executive Officer that left the
Company, retired, or transitioned to an employee role (including after serving as an Executive Officer in an interim capacity)
during the Applicable Period.
"Effective Date” means October 2, 2023.
“Executive Officer” means the Company’s president, principal executive officer, principal financial officer, principal
accounting officer (or if there is no such accounting officer, the controller), any vice-president in charge of a principal business
unit, division, or function (such as sales, administration, or finance), any other officer who performs a policy-making function,
or any other person (including an officer of the Company’s parent(s) or subsidiaries) who performs similar policy-making
functions for the Company. For the avoidance of doubt, identification of an Executive Officer for purposes of this definition is
limited to “officers” identified pursuant to SEC Rule 16a-1(f).
“Financial Reporting Measure” means a measure that is determined and presented in accordance with the accounting
principles used in preparing the Company’s financial statements (including, but not limited to, “non-GAAP” financial
measures, such as those appearing in the Company’s earnings releases or Management Discussion and Analysis), and any
measure that is derived wholly or in part from such measure. Stock price and total shareholder return (and any measures
derived wholly or in part therefrom) shall be considered Financial Reporting Measures.
“Impracticable” The Compensation Committee may determine in good faith that recovery of Recoverable Incentive
Compensation is “Impracticable” if: (i) pursuing such recovery would violate home country law of the jurisdiction of
incorporation of the Company where that law was adopted prior to November 28, 2022 and the Company provides an opinion
of home country counsel to that effect acceptable to the Company’s applicable listing exchange; (ii) the direct expense paid to a
third party to assist in enforcing this Policy would exceed the Recoverable Incentive Compensation and the Company has (A)
made a reasonable attempt to recover such amounts and (B) provided documentation of such attempts to recover to the
Company’s applicable listing exchange; or (iii) recovery would likely cause an otherwise tax-qualified retirement plan, under
which benefits are broadly available to employees of the Company, to fail to meet the requirements of Section 401(a)(13) or
Section 411(a) of the Internal Revenue Code of 1986, as amended.
“Incentive Compensation” means any compensation that is granted, earned, or vested based wholly or in part upon the
attainment of a Financial Reporting Measure (within the meaning of SEC Rule 10D-1). Incentive Compensation does not
include any base salaries (except with respect to any salary increases earned wholly or in part based on the attainment of a
Financial Reporting Measure performance goal); bonuses paid solely at the discretion of the Compensation Committee or
Board that are not paid from a “bonus pool” that is determined by satisfying a Financial Reporting Measure performance goal;
bonuses paid solely upon satisfying one or more subjective standards and/or completion of a specified employment period;
non-equity incentive plan awards earned solely upon satisfying one or more strategic measures or operational measures; and
equity awards that vest solely based on the passage of time and/or attaining one or more non-Financial Reporting Measures.
“Received” Incentive Compensation is deemed “Received” in the Company’s fiscal period during which the Financial
Reporting Measure specified in the Incentive Compensation award is attained, even if the payment or grant of the Incentive
Compensation occurs after the end of that period.
“Recoverable Incentive Compensation” means the amount of any Incentive Compensation (calculated on a pre-tax basis)
Received by a Covered Person during the Applicable Period that is in excess of the amount that otherwise would have been
Received if the calculation were based on the Restatement. For the avoidance of doubt, Recoverable Incentive Compensation
does not include any Incentive Compensation Received by a person (i) before such person began service in a position or
capacity meeting the definition of an Executive Officer, (ii) who did not serve as an Executive Officer at any time during the
performance period for that Incentive Compensation, or (iii) during any period the Company did not have a class of its
securities listed on a national securities exchange or a national securities association. For Incentive Compensation based on (or
derived from) stock price or total shareholder return where the amount of Recoverable Incentive Compensation is not subject
to mathematical recalculation directly from the information in the applicable Restatement, the amount will be determined by
the Compensation Committee based on a reasonable estimate of the effect of the Restatement on the stock price or total
shareholder return upon which the Incentive Compensation was Received (in which case, the Company will maintain
documentation of such determination of that reasonable estimate and provide such documentation to the Company’s applicable
listing exchange).
“Restatement” means an accounting restatement of any of the Company’s financial statements filed with the SEC under the
Exchange Act, or the Securities Act of 1933, as amended, due to the Company’s material noncompliance with any financial
reporting requirement under U.S. securities laws, regardless of whether the Company or Covered Person misconduct was the
cause for such restatement. “Restatement” includes any required accounting restatement to correct an error in previously issued
financial statements that is material to the previously issued financial statements (commonly referred to as “Big R”
restatements), or that would result in a material misstatement if the error were corrected in the current period or left
uncorrected in the current period (commonly referred to as “little r” restatement).