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What changed in OOMA INC's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of OOMA INC's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+831 added−148 removedSource: 10-K (2023-04-07) vs 10-K (2022-04-08)

Top changes in OOMA INC's 2023 10-K

831 paragraphs added · 148 removed · 122 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

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Biggest changeFrom 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.
Biggest changeWe 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.
The Ooma 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.
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.
The Office desktop app for Pro users conveniently enables 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.
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.
Some of these applications include WebRTC, Call Center, Mobile and Desktop applications, Team Chat, and a distinctive reporting portal for end users and administrators. Additionally, 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.
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.
Ooma Wi-Fi enables businesses in industries such as retail, restaurant, and hospitality to support Wi-Fi IP phones on Ooma Office, Wi-Fi access for guests, and securely connect online payment systems and cloud-based applications, such as Microsoft Office, Google Workspace or CRM systems.
Ooma Managed Wi-Fi enables businesses in industries such as retail, restaurant, and hospitality to support Wi-Fi IP phones on Ooma Office, Wi-Fi access for guests, and securely connect online payment systems and cloud-based applications, such as Microsoft Office, Google Workspace or CRM systems.
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 provides unlimited personal calling within the U.S. 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.
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 U.S. 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.
Ooma | FY2022 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.
Ooma | FY2023 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.
Users make a one-time purchase of an Ooma Telo 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.
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.
Ooma | FY2022 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.
Ooma | FY2023 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.
Ooma | FY2022 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.
Ooma | FY2023 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.
Item 1. Business Overview Ooma provides leading communications services and related technologies that bring unique features, ease of use, and affordability to businesses of all sizes and residential customers through our smart software-as-a-service (“SaaS”) and unified communications platforms.
Item 1. Business 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 software-as-a-service (“SaaS”) and unified communications platforms.
We also lease data center space 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.
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.
For businesses, 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.
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.
Ooma Telo 4G combines the Ooma Telo base station with the Ooma 4G Cellular 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 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.
The SEC’s website, www.sec.gov, contains reports, 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. Ooma | FY2022 Form 10-K | 12
The SEC’s website, www.sec.gov, contains reports, 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. Ooma | FY2023 Form 10-K | 12 ITEM 1A.
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 | FY2022 Form 10-K | 7 Sales and Marketing Our sales and marketing objective is to grow our customer base and sell to our existing customers additional services using an integrated and multi-channel marketing approach.
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 | FY2023 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.
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 China and other Asian countries to produce our on-premise devices and end-point devices.
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 China, Vietnam and other Asian countries to produce our on-premise and end-point devices, including Ooma AirDial.
Because some elements of 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.
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.
Ooma | FY2022 Form 10-K | 6 Ooma Residenti al 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.
Ooma | FY2023 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.
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 $192.3 million, $168.9 million and $151.6 million in fiscal 2022, 2021 and 2020, respectively.
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 $216.2 million, $192.3 million, and $168.9 million in fiscal 2023, 2022 and 2021, respectively.
Some of these competitors include: • Established communications providers, such as AT&T Inc., Comcast Corporation, Verizon Communications Inc. and Rogers Communications Inc; • Other cloud-based communications companies such as RingCentral Inc., Vonage Holdings Corp, 8x8 Inc., Nextiva, Inc., Intermedia.net Inc., Dialpad Inc., Microsoft Corporation, Zoom Video Communications, Inc., and Alphabet Inc.
Some of these competitors include: • 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.
We control access to our software, documentation and other proprietary information, and our software is protected by U.S. and international copyright laws. As of January 31, 2022, we had 47 issued patents and 8 patent applications pending in the U.S. and 4 patent applications pending in foreign jurisdictions, all of which are associated with U.S. applications.
We control access to our software, documentation and other proprietary information, and our software is protected by U.S. and international copyright laws. As of January 31, 2023, we had 41 issued patents and 4 patent applications pending in the U.S. and 2 patent applications pending in foreign jurisdictions, all of which are associated with U.S. applications.
Ooma | FY2022 Form 10-K | 5 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 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.
We refer to Ooma Office and Ooma Enterprise 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 powerful features at an affordable price.
We refer to Ooma Office, Ooma Enterprise, Ooma AirDial 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 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.
Ooma | FY2023 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.
In addition, our offices located in Vancouver, British Columbia and Boca Raton, Florida support our enterprise customers. We utilize a variety of communication media to serve the needs of our customers including telephone, online chat, online tutorials and e-mail.
Our offices located in Vancouver, British Columbia and Boca Raton, Florida support our enterprise 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 | FY2023 Form 10-K | 8 Engineering, Research and Development We take an integrated approach to the development of our technology.
Our business and residential phone service solutions are each top-ranked by our customers according to surveys by PC Mag and Consumer Reports, respectively. Our services rely upon the following main elements: our multi-tenant cloud service, on-premise devices, desktop and mobile applications, end-point devices and calling platform.
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.
We have grown our combined Ooma Business and Ooma Residential core users to approximately 1,100,000 as of January 31, 2022. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” below for additional information.
As of January 31, 2023, our core users totaled 1,210,000 for Ooma Business and Ooma Residential. See “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” below.
We generate revenues primarily from the sale of subscriptions and other services for our business and residential communications solutions. We primarily offer our solutions in the U.S. and Canada. 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 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 U.S. 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.
No single customer accounted for 10% or more of our total revenue for fiscal 2022, 2021 and 2020. 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.
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.
Through our global network, every device enabled with the Teams app – desktops, laptops, smart phones and tablets – becomes a fully functional business phone that connects Teams users to external phone lines.
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.
Sales, Customers and Backlog 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 solutions and direct and retail are our primary distribution channels for residential customers.
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.
Ooma Managed Wi-Fi is a plug-and-play enterprise-grade Wi-Fi solution that is designed to take the complexity and high cost out of wireless networking for small and medium-sized businesses.
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 Managed Wi-Fi is a plug-and-play enterprise-grade Wi-Fi solution that is designed to take the complexity and high cost out of wireless networking for small and medium-sized businesses.
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 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.
None of our employees is represented by a labor union or subject to a collective bargaining agreement. Additionally, we utilize third party contractors and temporary personnel to supplement our workforce.
Employees and Contractors As of January 31, 2023, we had a total of 454 full-time employees, all of whom are located in the U.S. and Canada. None of our employees is represented by a labor union or subject to a collective bargaining agreement. Additionally, we utilize third party contractors and temporary personnel to supplement our workforce.
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, a nd enabling a number of other current and future productivity, automation, monitoring, safety, security and networking infrastructure applications and services.
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.
Ooma Office Pro provides a set of additional features that are designed for businesses whose needs are above and beyond our standard Ooma Office service, 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.
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.
Our commitment to DEI 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.
Diversity, Equity, Inclusion (“DEI”) and Racial Justice . Our commitment to DEI 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.
Ooma AirDial In November 2021, we announced Ooma AirDial, a complete integrated solution for business intended to address the expected decommissioning of legacy copper-wire analog phone service, also known as plain old telephone service (“POTS”). Ooma AirDial will combine phone service, a data connection and hardware in a single package that is designed to be easy to install and manage.
Ooma AirDial Ooma AirDial is a complete integrated solution for businesses intended to address the decommissioning of legacy copper-wire analog phone service, also known as plain old telephone service (“POTS”).
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 DEI and Racial Justice 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.
Our internal DEI and Racial Justice 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 .
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.
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.
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.
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.
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. Employees and Contractors As of January 31, 2022, we had a total of 383 full-time employees, all of whom are located in the U.S. and Canada.
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.
Our management team also regularly hosts “Ask and Answer” sessions across the organization to create more opportunities for employees to communicate, share ideas and learn about Ooma. Diversity, Equity, Inclusion (“DEI”) and Racial Justice .
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.
The 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. We also offer the following additional 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.
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.
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.
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.
Ooma Office provides a curated set of advanced features, managed through an online portal, including a virtual receptionist, SMS and MMS messaging, extension dialing, ring groups, call park, audio conferencing, music-on-hold, intercom/paging, and voicemail forwarding to e-mail.
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.
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.
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 2023, 2022 and 2021.
Additionally, we recently entered the POTS replacement market and our new AirDial product will face competition from other companies, such as Granite Telecommunications LLC and DataRemote Inc., promoting their own POTS-related products and solutions. See the section entitled “Risks Related to Our Business and Industry” in Item 1A. "Risk Factors" below for more information related to competition.
Additionally, we recently entered the POTS replacement market and our new AirDial product faces competition from other companies, including Verizon Communications Inc., Granite Telecommunications LLC, 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.
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.
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.
Safety and business-critical systems that today require a POTS line – including elevator phones, fax machines, public safety phones, building access systems and more – can be quickly and easily migrated to a digital connection. We commenced selling AirDial during the first quarter of fiscal 2023.
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.
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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. In addition, we offer Ooma Direct Routing for Microsoft Teams.
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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, expanded videoconferencing options for Ooma Meetings, and CRM integrations with Salesforce and Microsoft Dynamics 365.
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Home Security Ooma Smart Security is an innovative security and monitoring platform that utilizes our Ooma Telo products to provide do-it-yourself home security and awareness through a range of sensors including: door and window, motion, garage door, water, alarm siren, and a keypad that acts as a physical control panel for the security system.
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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.
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Ooma Smart Security also offers professional monitoring services, remote 911 features and multi-user geofencing capabilities to automatically arm and disarm the security system. The Ooma Smart Security mobile app for iOS and Android is the interface through which users interact with the system to pair sensors, toggle between home and away modes, check activity logs and manage and receive notifications.
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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 In July 2022, we acquired Junction Networks, Inc., which does business as OnSIP, from Intrado.
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Our direct sales force is focused on business sales and includes trained sales representatives located in the U.S. and Canada responding to inbound telephone calls and sales leads generated through marketing activity and our website and third-party web sites.
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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.
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Ooma | FY2022 Form 10-K | 8 Engineering , Research and Development We take an integrated approach to the development of our technology.
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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 U.S. 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.
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Ooma | FY2022 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.
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See the section entitled “Risks Related to Our Business and Industry” in Item 1A. "Risk Factors" below for more information related to competition. Ooma | FY2023 Form 10-K | 10 Human Capital People and Culture . We view our people and our company culture as key to our success.
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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.
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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.
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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 Annual Report on 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.
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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.
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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.
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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.
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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 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. • 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.
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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. • 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.
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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.
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Ooma | FY2023 Form 10-K | 13 • 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. • We are continuing to expand our international operations, which may expose us to significant risks. • 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.
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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.
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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.
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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 the FCC’s rules 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.
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Ooma | FY2023 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.
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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.
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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.
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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.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe also lease offices in Boca Raton, Florida and several other locations throughout the U.S. 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; and other small locations internationally.
Biggest changeWe also lease offices in Boca Raton, Florida and several other locations throughout the U.S. 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.
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.
ITEM 2. Prop erties 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.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 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.
Biggest changeITEM 3. Legal P roceedings 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 | FY2022 Form 10-K | 43 PART II
Ooma | FY2023 Form 10-K | 43 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 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 January 31, 2022, there were approximately 66 holders of record of our common stock.
Biggest changeITEM 5. Market for Registrant’s Common Equity, Related Stoc kholder 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 January 31, 2023, there were approximately 58 holders of record of our common stock.
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. Ooma | FY2022 Form 10-K | 44 IT EM 6. [Reserved] Ooma | FY2022 Form 10-K | 45
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. Ooma | FY2023 Form 10-K | 44 IT EM 6. [Reserved] Ooma | FY2023 Form 10-K | 45
The graph assumes $100 was invested at the close of market on the last trading day of fiscal 2017 in our common stock, the NASDAQ Telecommunications Index and the NYSE, and its relative performance is tracked through January 31, 2022, the last trading day of our fiscal year 2022.
The graph assumes $100 was invested at the close of market on the last trading day of fiscal 2018 in our common stock, the NASDAQ Telecommunications Index and the NYSE, and its relative performance is tracked through January 31, 2023, the last trading day of our fiscal year 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeSome of these limitations are: • Adjusted EBITDA does not consider any expenses for assets being depreciated and amortized that are necessary to our business; • Adjusted EBITDA does not consider the impact of income tax provisions or benefits, other income/expense, stock-based compensation and related taxes, amortization of acquired intangible assets and other acquisition-related charges, restructuring charges and certain litigation costs that are not recurring in nature; and • Other companies, including companies in our industry, may calculate Adjusted EBITDA differently, which reduces its usefulness as a comparative measure.
Biggest changeSome 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, as well as third-party transaction costs incurred for legal and other professional services, and an acquisition-related income tax benefit.
Executive Overview Ooma provides leading communications services and related technologies that bring unique features, ease of use, and affordability to businesses of all sizes and residential customers through our smart SaaS and unified communications platforms. For businesses, we deliver advanced voice and collaboration features including messaging, intelligent virtual attendants, and video conferencing to help them run more efficiently.
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.
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 portion of total subscription revenue.
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.
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.
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 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 services and improvements to our platforms and backend architecture.
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.
ITEM 7. M anagement’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.
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.
Cost of product and other revenue includes the costs associated with the manufacturing of our on-premise devices and end-point devices, 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.
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.
The last day of our fiscal year is January 31, and we refer to our fiscal year ended January 31, 2022 as fiscal 2022, our fiscal year ended January 31, 2021 as fiscal 2021 and our fiscal year ended January 31, 2020 as fiscal 2020. All other references to years are references to calendar years.
The last day of our fiscal year is January 31, and we refer to our fiscal year ended January 31, 2023 as fiscal 2023, our fiscal year ended January 31, 2022 as fiscal 2022 and our fiscal year ended January 31, 2021 as fiscal 2021. All other references to years are references to calendar years.
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 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 and allocated overhead costs.
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 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.
Discussion regarding our financial condition and results of operations for fiscal 2021 as compared to 2020 is included in Item 7 of our Annual Report on Form 10-K for the year ended January 31, 2021, filed with the SEC on April 7, 2021.
Discussion regarding our financial condition and results of operations for fiscal 2022 as compared to 2021 is included in Item 7 of our Annual Report on Form 10-K for the year ended January 31, 2022, filed with the SEC on April 8, 2022.
Operating expenses Sales and marketing expenses consist primarily of personnel costs for employees and contractors, advertising and marketing costs, amortization of sales commissions paid to internal sales personnel and third parties, amortization of acquired intangible assets, travel expenses and allocated overhead costs.
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.
This section of this Form 10-K generally discusses fiscal 2022 and 2021 items and year-to-year comparisons between fiscal 2022 and 2021.
This section of this Form 10-K generally discusses fiscal 2023 and 2022 items and year-to-year comparisons between fiscal 2023 and 2022.
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 sales resulting in a net benefit to 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.
We believe that maintaining our current low core user churn 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 are motivated to remain with us.
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.
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 and allocated overhead costs. We expect our general and administrative expenses to increase in absolute dollars.
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 .
For consumers, our residential phone service provides PureVoice high-definition voice quality, advanced functionality and integration with mobile devices. We generate subscription and services revenue by selling subscriptions and other services for our communications services, as well as other connected services. We generate our product and other revenue from the sale of our on-premise devices and end-point devices.
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.
The following table presents a reconciliation of GAAP net loss to non-GAAP net income (loss) for each of the periods indicated (in thousands): Fiscal Year Ended January 31, 2022 2021 2020 GAAP net loss $ (1,751 ) $ (2,441 ) $ (18,801 ) Stock-based compensation and related taxes 13,077 12,607 13,149 Amortization of acquired intangible assets and acquisition-related costs 1,304 1,304 1,289 Restructuring charges — — 3,085 Litigation costs — — 606 Non-GAAP net income (loss) $ 12,630 $ 11,470 $ (672 ) Ooma | FY2022 Form 10-K | 54 Liquidity and Capital Resources As of January 31, 2022, we had $31.3 million of total cash, cash equivalents and investments, which we believe will be sufficient to meet our cash needs for at least the next 12 months.
The following table presents a reconciliation of GAAP net loss to non-GAAP net income for the periods indicated (in thousands): Fiscal Year Ended January 31, 2023 2022 2021 GAAP net loss $ (3,655 ) $ (1,751 ) $ (2,441 ) Stock-based compensation and related taxes 14,155 13,077 12,607 Amortization of acquired intangible assets and acquisition-related costs 3,824 1,304 1,304 Facilities consolidation charges 1,402 — — Acquisition-related income tax benefit (2,133 ) — — Non-GAAP net income $ 13,593 $ 12,630 $ 11,470 Ooma | FY2023 Form 10-K | 54 Liquidity and Capital Resources As of January 31, 2023, we had $26.9 million of total cash, cash equivalents and investments, which we believe will be sufficient to meet our cash needs for at least the next 12 months.
Subscription and services revenue increased $19.1 million or 12% year-over-year, primarily attributable to an increase in our core users and an increase in the average revenue per user, driven by the growth in sales of Ooma Business and a higher mix of sales of our Office Pro tier service.
Subscription and services revenue increased $23.2 million or 13% year-over-year, primarily attributable to an increase in our core users and an increase in the average revenue per user, driven by both organic and OnSIP-related growth in sales of Ooma Business and a higher mix of sales of our Office Pro and Pro Plus tier services.
Operating asset and liability changes for fiscal 2022 included: • an increase of $2.1 million in accounts receivable due to a higher volume of product shipments in the latter half of our fiscal fourth quarter and the timing of cash collections • an increase of $1.6 million in inventories to mitigate the risk of global supply chain disruptions caused by component shortages and longer lead times • an increase of $4.6 million in prepaid expenses and other current and non-current assets primarily due to the capitalization of sales commissions and the timing of payments • a decrease of $3.6 million in accounts payable, accrued expenses and other liabilities due to the timing of payments Cash provided by operating activities for fiscal 2022 increased $2.3 million year-over-year, which primarily reflected a decrease in net loss as well as working capital impacts resulting from the timing of payments.
Operating asset and liability changes for fiscal 2023 included: • a decrease of $0.4 million in accounts receivable due to the timing of cash collections • an increase of $12.3 million in inventories and deferred inventory costs to mitigate the risk of global supply chain disruptions caused by component shortages and longer lead times, as well as to scale our need for new products • an increase of $2.5 million in prepaid expenses and other current and non-current assets primarily due to the capitalization of sales commissions and the timing of prepayments • an increase of $4.5 million in accounts payable, accrued expenses and other liabilities due to the timing of payments Cash provided by operating activities for fiscal 2023 increased $2.1 million year-over-year, which primarily reflected working capital impacts resulting from the timing of payments.
The following table provides a reconciliation of net loss (the most directly comparable GAAP financial measure) to Adjusted EBITDA for each of the periods indicated (in thousands): Fiscal Year Ended January 31, 2022 2021 2020 GAAP net loss $ (1,751 ) $ (2,441 ) $ (18,801 ) Reconciling items: Interest and other income, net (179 ) (419 ) (780 ) Income tax provision (benefit) — 85 (130 ) Depreciation and amortization of capital expenditures 3,117 2,877 2,548 Amortization of acquired intangible assets and acquisition-related costs 1,304 1,304 1,289 Stock-based compensation and related taxes 13,077 12,607 13,149 Restructuring charges — — 3,085 Litigation costs — — 606 Adjusted EBITDA $ 15,568 $ 14,013 $ 966 Ooma | FY2022 Form 10-K | 49 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.
The following table provides a reconciliation of GAAP net loss to Adjusted EBITDA for the periods indicated (in thousands): Fiscal Year Ended January 31, 2023 2022 2021 GAAP net loss $ (3,655 ) $ (1,751 ) $ (2,441 ) Reconciling items: Interest and other income, net (332 ) (179 ) (419 ) Income taxes (1,770 ) — 85 Depreciation and amortization of capital expenditures 3,771 3,117 2,877 Amortization of acquired intangible assets and acquisition-related costs 3,824 1,304 1,304 Facilities consolidation charges 1,402 — — Stock-based compensation and related taxes 14,155 13,077 12,607 Adjusted EBITDA $ 17,395 $ 15,568 $ 14,013 Ooma | FY2023 Form 10-K | 49 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 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.
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.
Ooma | FY2022 Form 10-K | 55 Financing Activities Cash provided by financing activities was $0.6 million for fiscal 2022, which consisted of proceeds of $2.7 million from the issuance of common stock from our Employee Stock Purchase Plan (“ESPP”) and stock option exercises, largely offset by payments of $2.1 million related to shares repurchased for tax withholdings on vesting of restricted stock units (“RSUs”).
Financing Activities Cash provided by financing activities was $1.8 million for fiscal 2023, which consisted of proceeds of $3.4 million from the issuance of common stock from our Employee Stock Purchase Plan (“ESPP”) and stock option exercises, partly offset by payments of $1.6 million related to shares repurchased for tax withholdings on vesting of restricted stock units (“RSUs”).
The table below provides selected cash flow information, for the periods indicated (in thousands): Fiscal Year Ended January 31, 2022 2021 2020 Net cash provided by (used in) operating activities $ 6,655 $ 4,367 $ (7,564 ) Net cash (used in) provided by investing activities (4,887 ) 229 2,866 Net cash provided by financing activities 601 1,022 1,008 Net increase (decrease) in cash and cash equivalents $ 2,369 $ 5,618 $ (3,690 ) Operating Activities The table below provides selected cash flow information, for the periods indicated (in thousands): Fiscal Year Ended January 31, 2022 2021 2020 Net loss $ (1,751 ) $ (2,441 ) $ (18,801 ) Non-cash charges 20,095 19,700 19,645 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (2,082 ) (637 ) 135 (Increase) decrease in inventories (1,571 ) (3,378 ) 407 Increase in prepaid expenses and other assets (4,609 ) (5,496 ) (4,965 ) Decrease in accounts payable, accrued expenses and other liabilities (3,599 ) (3,911 ) (4,089 ) Increase in deferred revenue 172 530 104 Net cash provided by (used in) operating activities $ 6,655 $ 4,367 $ (7,564 ) For fiscal 2022, our net loss of $1.8 million included non-cash charges primarily related to stock-based compensation expense, operating lease expense and depreciation and amortization expense.
The following table summarizes cash flow information for the periods indicated (in thousands): Fiscal Year Ended January 31, 2023 2022 2021 Net cash provided by operating activities $ 8,773 $ 6,655 $ 4,367 Net cash (used in) provided by investing activities (6,146 ) (4,887 ) 229 Net cash provided by financing activities 1,843 601 1,022 Net increase in cash and cash equivalents $ 4,470 $ 2,369 $ 5,618 Operating Activities The following table provides selected cash flow information for the periods indicated (in thousands): Fiscal Year Ended January 31, 2023 2022 2021 Net loss $ (3,655 ) $ (1,751 ) $ (2,441 ) Non-cash charges 22,245 20,095 19,700 Changes in operating assets and liabilities: Decrease (increase) in accounts receivable 434 (2,082 ) (637 ) Increase in inventories and deferred inventory costs (12,333 ) (1,571 ) (3,378 ) Increase in prepaid expenses and other assets (2,460 ) (4,609 ) (5,496 ) Increase (decrease) in accounts payable, accrued expenses and other liabilities 4,509 (3,599 ) (3,911 ) Increase in deferred revenue 33 172 530 Net cash provided by operating activities $ 8,773 $ 6,655 $ 4,367 For fiscal 2023, our net loss of $3.7 million included non-cash charges primarily related to stock-based compensation expense, operating lease expense, depreciation and amortization expense, facilities consolidation charges and an income tax benefit related to our business acquisition.
Research and development expenses consist primarily of personnel costs for employees and contractors, as well as license and product certification fees and allocated overhead costs. We expect our research and development expenses to increase in absolute dollars.
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 | FY2022 Form 10-K | 50 Consolidated Results of Operations The tables in this section set forth selected consolidated statements of operations data for each of the periods indicated (dollars in thousands): Fiscal Year Ended January 31, 2022 2021 2020 Revenue: Subscription and services $ 175,942 $ 156,873 $ 139,499 Product and other 16,348 12,074 12,094 Total revenue 192,290 168,947 151,593 Cost of revenue: Subscription and services 49,563 46,134 43,748 Product and other 24,289 18,009 18,464 Total cost of revenue 73,852 64,143 62,212 Gross profit 118,438 104,804 89,381 Operating expenses: Sales and marketing 58,631 50,919 50,497 Research and development 38,193 36,079 37,770 General and administrative 23,544 20,581 20,825 Total operating expenses 120,368 107,579 109,092 Loss from operations (1,930 ) (2,775 ) (19,711 ) Interest and other income, net 179 419 780 Loss before income taxes (1,751 ) (2,356 ) (18,931 ) Income tax (provision) benefit — (85 ) 130 Net loss $ (1,751 ) $ (2,441 ) $ (18,801 ) Costs and expenses included stock-based compensation expense and related payroll taxes as follows (in thousands): Fiscal Year Ended January 31, 2022 2021 2020 Cost of revenue $ 1,026 $ 1,054 $ 1,311 Sales and marketing 1,932 1,978 2,004 Research and development 4,373 4,387 4,773 General and administrative 5,746 5,188 5,061 Total stock-based compensation expense $ 13,077 $ 12,607 $ 13,149 Ooma | FY2022 Form 10-K | 51 Revenue Fiscal Year Ended January 31, Change 2022 2021 2020 2022 vs. 2021 Revenue: Subscription and services $ 175,942 $ 156,873 $ 139,499 $ 19,069 12 % Product and other 16,348 12,074 12,094 4,274 35 % Total revenue $ 192,290 $ 168,947 $ 151,593 $ 23,343 14 % Percentage of revenue: Subscription and services 91 % 93 % 92 % Product and other 9 % 7 % 8 % Total 100 % 100 % 100 % Fiscal 2022 Compared to Fiscal 2021 We derived approximately 49% and 44% of our total revenue from Ooma Business and approximately 49% and 54% from Ooma Residential in fiscal 2022 and 2021, respectively.
Ooma | FY2023 Form 10-K | 50 Consolidated Results of Operations The following table sets forth selected consolidated statements of operations data for each of the periods indicated (in thousands): Fiscal Year Ended January 31, 2023 2022 2021 Revenue: Subscription and services $ 199,105 $ 175,942 $ 156,873 Product and other 17,060 16,348 12,074 Total revenue 216,165 192,290 168,947 Cost of revenue: Subscription and services 54,499 49,563 46,134 Product and other 24,018 24,289 18,009 Total cost of revenue 78,517 73,852 64,143 Gross profit 137,648 118,438 104,804 Operating expenses: Sales and marketing 69,671 58,631 50,919 Research and development 45,939 38,193 36,079 General and administrative 27,795 23,544 20,581 Total operating expenses 143,405 120,368 107,579 Loss from operations (5,757 ) (1,930 ) (2,775 ) Interest and other income, net 332 179 419 Loss before income taxes (5,425 ) (1,751 ) (2,356 ) Income tax benefit (provision) 1,770 — (85 ) Net loss $ (3,655 ) $ (1,751 ) $ (2,441 ) Costs of revenue and operating expenses included stock-based compensation expense and related payroll taxes as follows (in thousands): Fiscal Year Ended January 31, 2023 2022 2021 Cost of revenue $ 986 $ 1,026 $ 1,054 Sales and marketing 2,068 1,932 1,978 Research and development 4,713 4,373 4,387 General and administrative 6,388 5,746 5,188 Total stock-based compensation expense $ 14,155 $ 13,077 $ 12,607 Ooma | FY2023 Form 10-K | 51 Comparison of fiscal years 2023, 2022 and 2021 (dollars in tables are in thousands): Revenue Fiscal Year Ended January 31, Change 2023 2022 2021 2023 vs. 2022 Revenue: Subscription and services $ 199,105 $ 175,942 $ 156,873 $ 23,163 13 % Product and other 17,060 16,348 12,074 712 4 % Total revenue $ 216,165 $ 192,290 $ 168,947 $ 23,875 12 % Percentage of revenue: Subscription and services 92 % 91 % 93 % Product and other 8 % 9 % 7 % Total 100 % 100 % 100 % Fiscal 2023 Compared to Fiscal 2022 We derived approximately 53% and 49% of our total revenue from Ooma Business and approximately 45% and 49% from Ooma Residential in fiscal 2023 and 2022, respectively.
Cash provided by financing activities decreased by $0.4 million year-over-year, which primarily reflected lower proceeds from stock option exercises.
Cash provided by financing activities increased $1.2 million year-over-year, which primarily reflected higher proceeds from stock option exercises.
Cost of Revenue and Gross Margin Fiscal Year Ended January 31, Change 2022 2021 2020 2022 vs. 2021 Cost of revenue: Subscription and services $ 49,563 46,134 43,748 $ 3,429 7 % Product and other 24,289 18,009 18,464 6,280 35 % Total cost of revenue $ 73,852 $ 64,143 $ 62,212 $ 9,709 15 % Gross margin: Subscription and services 72 % 71 % 69 % Product and other (49 )% (49 )% (53 )% Total 62 % 62 % 59 % Fiscal 2022 Compared to Fiscal 2021 Subscription and services gross margin of 72% increased year-over-year from 71% reflecting the continued growth of Ooma Business revenues with higher average revenue per user and associated benefits of economies of scale.
Cost of Revenue and Gross Margin Fiscal Year Ended January 31, Change 2023 2022 2021 2023 vs. 2022 Cost of revenue: Subscription and services $ 54,499 $ 49,563 $ 46,134 $ 4,936 10 % Product and other 24,018 24,289 18,009 (271 ) (1 )% Total cost of revenue $ 78,517 $ 73,852 $ 64,143 $ 4,665 6 % Gross margin: Subscription and services 73 % 72 % 71 % Product and other (41 )% (49 )% (49 )% Total 64 % 62 % 62 % Fiscal 2023 Compared to Fiscal 2022 Subscription and services gross margin of 73% increased year-over-year from 72% reflecting the continued growth of Ooma Business revenues with higher average revenue per user and associated benefits of economies of scale.
Overall, the year-over-year increase in research and development supports our efforts in the development of new features for both Ooma Office and Ooma Enterprise, new products such as Ooma AirDial, and launching our Ooma Business services in a number of international countries.
Overall, the year-over-year increase in research and development was designed to support our efforts in the development of new features for both Ooma Office and Ooma Enterprise, as well as new products such as Ooma AirDial.
For example, in periods where we sell significantly more on-premise devices, we would expect our total gross margin to be impacted.
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.
We also plan to evolve our Ooma Connect and Wi-Fi solutions as part of our longer-term strategy to provide a more complete solution for small and medium-sized businesses. Investing in long-term revenue growth.
Additionally, 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. We also plan to evolve our fixed wireless and Wi-Fi solutions as part of our longer-term strategy to provide a more complete solution for small and medium-sized businesses. Investing in long-term revenue growth.
Additionally, we have a non-cancelable service agreement with a telecommunications provider that contains total annual minimum purchase commitments of $0.6 million between August 2021 and July 2022, $1.5 million between August 2022 and July 2023 and $2.5 million between August 2023 and July 2024.
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 July 2023 and $2.5 million between August 2023 and July 2024. Ooma | FY2023 Form 10-K | 56 Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with U.S.
Ooma | FY2022 Form 10-K | 48 Adjusted EBITDA In addition, we use Adjusted EBITDA (Earnings Before Interest, Tax and Depreciation and Amortization) to manage our business, evaluate our performance and make planning decisions.
Ooma | FY2023 Form 10-K | 48 Adjusted EBITDA increased year-over-year in line with our revenue growth, representing approximately 8% of our total revenues for fiscal 2023 and fiscal 2022. We use Adjusted EBITDA (Earnings Before Interest, Tax and Depreciation and Amortization) to manage our business, evaluate our performance and make planning decisions.
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.
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.
Ooma | FY2022 Form 10-K | 52 Operating Expenses Fiscal Year Ended January 31, Change 2022 2021 2020 2022 vs. 2021 Sales and marketing $ 58,631 50,919 50,497 $ 7,712 15 % Research and development 38,193 36,079 37,770 2,114 6 % General and administrative 23,544 20,581 20,825 2,963 14 % Total operating expenses $ 120,368 $ 107,579 $ 109,092 $ 12,789 12 % Fiscal 2022 Compared to Fiscal 2021 Sales and marketing expenses increased $7.7 million or 15% year-over-year, primarily due to a $6.4 million increase in advertising and marketing costs and a $2.0 million increase in amortization of capitalized sales commissions, that were offset in part by a $0.6 million decrease in personnel-related costs.
Ooma | FY2023 Form 10-K | 52 Operating Expenses Fiscal Year Ended January 31, Change 2023 2022 2021 2023 vs. 2022 Sales and marketing $ 69,671 $ 58,631 $ 50,919 $ 11,040 19 % Research and development 45,939 38,193 36,079 7,746 20 % General and administrative 27,795 23,544 20,581 4,251 18 % Total operating expenses $ 143,405 $ 120,368 $ 107,579 $ 23,037 19 % Fiscal 2023 Compared to Fiscal 2022 Sales and marketing expenses increased $11.0 million or 19% year-over-year, primarily due to a $4.3 million increase in advertising and marketing costs for channel development activity, a $2.3 million increase in personnel-related costs, a $1.9 million increase in third-party commissions, a $1.7 million increase in amortization of capitalized sales commissions and a $0.8 million increase in amortization of acquired customer intangible assets.
As of January 31, 2022, Ooma Business users comprised approximately 28% of our total core users, up from 25% as of January 31, 2021. 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 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 office user extensions.
Cost of subscription and services revenue for fiscal 2022 increased $3.4 million or 7% year-over-year, primarily due to a $1.6 million increase in regulatory costs, a $0.9 million increase in personnel-related costs and a $0.8 million infrastructure costs that support the growth of Ooma Business. Product and other revenue gross margin of negative 49% was comparable year-over-year.
Cost of subscription and services revenue for fiscal 2023 increased $4.9 million or 10% year-over-year, primarily due to a $2.6 million increase in personnel related costs, driven in part by increases in headcount attributable to the OnSIP acquisition in July 2022, as well as a $1.1 million increase in infrastructure costs, a $0.5 million increase in regulatory costs and a $0.5 million increase in credit card processing fees that support the growth of Ooma Business.
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.
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.
See “Risk Factors” in Part I, Item 1A above for more information on risks associated with the COVID-19 pandemic. 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.
Ooma | FY2023 Form 10-K | 46 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.
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.
Accordingly, we expect our product and other gross margin during fiscal 2024 will be negatively impacted by these higher component 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.
See Note 12: Financing Arrangements of the accompanying notes of our consolidated financial statements for more information. Contractual Obligations and Commitments As of January 31, 2022 and 2021, non-cancelable inventory purchase commitments to our contract manufacturers and other suppliers totaled approximately $19.4 million and $5.4 million, respectively.
As of January 31, 2023 and 2022, non-cancelable inventory purchase commitments to our contract manufacturers and other suppliers totaled approximately $7.8 million and $19.4 million, respectively.
In order to drive adoption of additional services, we will need to continue to enhance our existing solutions and develop new connected services and products. 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 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. For example, we launched Office Pro Plus in the first half of fiscal 2023.
Investing Activities Cash used in investing activities was $4.9 million for fiscal 2022, which consisted of $17.5 million used for purchases of short-term investments and $4.2 million used for capital expenditures, offset in part by proceeds of $16.8 million from maturities and sales of short-term investments.
Ooma | FY2023 Form 10-K | 55 Investing Activities Cash used in investing activities was $6.1 million for fiscal 2023, which consisted of cash consideration paid for the OnSIP business acquisition of $9.8 million, short-term investment purchases of $3.9 million and capital expenditures of $5.2 million, partly offset by proceeds of $12.7 million from maturities of short-term investments.
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 increase in business users. We believe that AERR is an indicator of recurring subscription and services revenue for near-term future periods.
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, including the impact of OnSIP.
As of January 31, 2022, our total future expected payment obligations under non-cancelable operating leases with initial terms longer than one year were approximately $16.1 million. See Note 7: Operating Leases in the notes to our consolidated financial statements for a table of contractual obligations, including payments due by period.
As of January 31, 2023, our total future expected payment obligations under non-cancelable operating leases with initial terms longer than one year were approximately $15.5 million, with payments of $3.7 million due in the next 12 months and $11.8 million due thereafter.
Total gross margin was 62%, consistent with fiscal 2021. • GAAP net loss was $1.8 million, improved from a net loss of $2.4 million in fiscal 2021, largely driven by our revenue growth and higher gross margins for subscription and services. • Non-GAAP net income was $12.6 million, compared to $11.5 million in fiscal 2021. • Adjusted EBITDA was $15.6 million, compared to $14.0 million in fiscal 2021. • As of January 31, 2022, we had total cash, cash equivalents and short-term investments of $31.3 million, up $3.0 million from $28.3 million as of January 31, 2021.
Net loss for fiscal 2023 included $1.4 million in facilities consolidation charges, $1.5 million in acquisition-related transaction costs and a $2.1 million income tax benefit associated with the acquisition of OnSIP. • Non-GAAP net income was $13.6 million, compared to $12.6 million in fiscal 2022. • Adjusted EBITDA was $17.4 million, or 8% of revenue, compared to $15.6 million in fiscal 2022. • As of January 31, 2023, we had total cash, cash equivalents and short-term investments of $26.9 million, down $4.4 million from $31.3 million as of January 31, 2022.
The following table sets forth our key business metrics for each of the periods indicated (in thousands, except percentages): As of January 31, 2022 2021 2020 Core users 1,100 1,074 1,048 Annualized exit recurring revenue (AERR) $ 176,937 $ 160,528 $ 143,190 Net dollar subscription retention rate 96 % 96 % 100 % Adjusted EBITDA $ 15,568 $ 14,013 $ 966 Core Users increased year-over-year, which was primarily driven by growth in business users.
Ooma | FY2023 Form 10-K | 47 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): As of January 31, 2023 2022 2021 Core users 1,210 1,100 1,074 Annualized exit recurring revenue (AERR) $ 206,700 $ 176,900 $ 160,500 Net dollar subscription retention rate 94 % 96 % 96 % Adjusted EBITDA $ 17,395 $ 15,568 $ 14,013 Core Users increased year-over-year, which was primarily driven by growth in business users.
Ooma | FY2022 Form 10-K | 53 Non-GAAP Financial Measures This Form 10-K contains certain non-GAAP financial measures, including non-GAAP net income (loss) below and Adjusted EBITDA (see “Key Metrics” above).
Ooma | FY2023 Form 10-K | 53 Non-GAAP Financial Measures This Form 10-K contains certain non-GAAP financial measures, including non-GAAP net income below and Adjusted EBITDA above. These non-GAAP financial measures are presented to provide investors with additional information regarding our financial results and core business operations.
Fiscal 2022 Financial Performance • Total revenue was $192.3 million, up 14% year-over-year, primarily driven by the continued growth of Ooma Business. • Subscription and services revenue from Ooma Business and Ooma Residential grew 23% and 3% year-over-year, respectively. • Subscription and services gross margin was 72%, up from 71% in fiscal 2021.
Fiscal 2023 Financial Performance • Total revenue was $216.2 million, up 12% year-over-year, primarily driven by the continued growth of Ooma Business and the acquisition of OnSIP. • Subscription and services revenue from Ooma Business grew 24% year-over-year, driven by user growth and two full quarters contribution from OnSIP. • Total gross margin was 64%, up from 62% in fiscal 2022. • GAAP net loss was $3.7 million, compared to a net loss of $1.8 million in fiscal 2022.
Adjusted EBITDA represents net income before interest and other income, income tax provision or benefit, depreciation and amortization of capital expenditures, amortization of acquired intangible assets and other acquisition-related charges, stock-based compensation and related taxes, restructuring charges and certain litigation costs that are not representative of the ordinary course of our business.
Adjusted EBITDA represents net income before interest and other income, income taxes, depreciation and amortization of capital expenditures, amortization of acquired intangible assets and other acquisition-related costs, facilities consolidation charges, and stock-based compensation and related taxes. See "Non-GAAP Financial Measures" below for additional information.
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.
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.
We estimate our AERR by dividing our recurring quarterly subscription revenue (excluding Talkatone revenue) 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. Net Dollar Subscription Retention Rate was comparable on a year-over-year basis.
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 (excluding Talkatone revenue) by the average number of core users each quarter and annualize by multiplying by four.
Overall, the year-over-year increase in sales and marketing reflects our strategy to drive continued growth in sales of Ooma Business.
Overall, the year-over-year increase in the cost of subscription and services reflects both organic and OnSIP-related growth of our business.
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.
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.
We may evaluate additional possible acquisitions of businesses, products and technologies that are complementary to our business. Ooma | FY2022 Form 10-K | 47 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.
We may evaluate additional possible acquisitions of businesses, products and technologies that are complementary to our business.
General and administrative expenses increased $3.0 million or 14% year-over-year, primarily due to a $1.8 million increase in personnel-related costs, including stock-based compensation expense, a $0.7 million increase in professional services related to our international expansion efforts, and a $0.5 million increase in other administrative expenses.
General and administrative expenses increased $4.3 million or 18% year-over-year, primarily due to a $1.7 million increase in personnel-related costs to scale with the overall growth of our business, including stock-based compensation, as well as $1.4 million incurred for facilities consolidation charges during the third quarter of fiscal 2023 and $1.1 million incurred for OnSIP acquisition-related transaction costs.
Subscription and services revenue from Ooma Business and Ooma Residential grew 23% and 3% year-over-year, respectively. Product and other revenue increased $4.3 million or 35% year-over-year due to an increase in shipments of Ooma Business products, primarily driven by sales of our fixed wireless products to a strategic customer.
Subscription and services revenue from Ooma Business and Ooma Residential grew 24% and 3% year-over-year, respectively. The acquisition of OnSIP in July 2022 contributed approximately $6.5 million to our revenue growth during fiscal 2023. Product and other revenue increased $0.7 million or 4% year-over-year, which was primarily attributable to shipments of Ooma AirDial.
Therefore, both GAAP financial measures of Ooma’s financial performance and the respective non-GAAP measures should be considered together.
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.
We may in the future make investments in or acquisitions of businesses or technologies, which may require the use of cash.
We may in the future make investments in or acquisitions of businesses or technologies, which may require the use of cash. In March 2023, the portion of our cash deposits held at Silicon Valley Bank ("SVB") were temporarily unavailable as that financial institution was placed into receivership.
Research and development expenses increased $2.1 million or 6% year-over-year, primarily due to a $1.1 million increase in personnel-related costs and a $0.5 million increase in facilities-related costs, driven by higher headcount, as well as a $0.5 million increase in prototype-related and other engineering costs.
Overall, the year-over-year increase in sales and marketing reflects our strategy to drive continued growth in sales of Ooma Business. Research and development expenses increased $7.7 million or 20% year-over-year, primarily due to a $7.3 million increase in personnel-related costs, driven by growth in headcount for higher utilization of contractors, and $0.4 million incurred for acquisition-related transition costs.
Ooma | FY2022 Form 10-K | 56 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.
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.
Overall, our estimates of inventory carrying value adjustments have been materially consistent with actual results. Ooma | FY2022 Form 10-K | 57
For example, in the second quarter of fiscal 2023, our product and other gross margin was favorably impacted by nonrecurring product sales of approximately $0.5 million for legacy inventories that were previously written-down in fiscal 2022. Overall, our estimates of inventory carrying value adjustments have been materially consistent with actual results. Ooma | FY2023 Form 10-K | 57
We primarily offer our solutions in the U.S. and Canada. We refer to Ooma Office and Ooma Enterprise collectively as Ooma Business. Ooma Residential includes Ooma Telo basic and premier services as well as our smart security solutions. See Item 1. Business above for additional information regarding our business, including products and services offered, competitive market and regulatory matters.
Business above for additional information regarding our business, including products and services offered, competitive market and regulatory matters.
Removed
Ooma | FY2022 Form 10-K | 46 COVID-19 Update During fiscal 2022, we remained focused on executing our growth strategy while adapting to the evolving changes in our market environment and business activities driven by the COVID-19 pandemic.
Added
We primarily offer our solutions in the U.S. and Canada, with limited offerings in certain other countries.
Removed
We have continued to evaluate and refine our return to work strategy, as well as our investments in our go-to-market, channel development and product development efforts.
Added
In July 2022, we completed the acquisition of Junction Networks, Inc., which does business as OnSIP, a provider of cloud-based phone and unified communications services for small and medium-sized businesses, from Intrado Corp. for a base purchase price of approximately $9.8 million in cash.
Removed
We and our third-party reseller partners have experienced, and expect to continue to experience, challenges in attracting and retaining sales employees and contractors, which we believe is largely attributable to the ongoing effects of the pandemic. The severity and duration of the pandemic, including any resurgences, and the extent to which it may impact our operations remains uncertain.
Added
The final aggregate purchase price was $9.5 million, reflecting a $0.3 million reduction for customary working capital adjustments. We believe the acquisition of OnSIP will accelerate overall growth of Ooma Business. We refer to Ooma Office, Ooma Enterprise, Ooma AirDial and OnSIP collectively as Ooma Business. Ooma Residential includes Ooma Telo basic and premier services. See Item 1.
Removed
In recent periods, we have increased our inventory levels to mitigate global supply chain disruptions caused by component shortages and longer lead times. These increased levels may result in excess and/or obsolete inventory in future periods.
Added
Cash usage reflected our acquisition of OnSIP. Reconciliations of non-GAAP adjusted measures to the most directly comparable GAAP measures are presented below under Adjusted EBITDA and Non-GAAP Financial Measures.
Removed
In addition, although we saw improvement in our customer churn rate from the increased levels that we experienced earlier in the pandemic, our churn could again increase in future periods which may result in a decline to our core user growth rate.
Added
As of January 31, 2023, Ooma Business users comprised approximately 35% of our total core users, up from 28% as of January 31, 2022. As of January 31, 2023, core users included approximately 50,000 acquired OnSIP users.
Removed
The overall effects of the COVID-19 pandemic may not be fully reflected in our results of operations and overall financial performance until future periods. The global macroeconomic effects of the COVID-19 pandemic and related impacts on our customers’ business operations and their demand for our products and services may persist for an indefinite period, even after the pandemic has subsided.
Added
We then multiply that result by the number of core users at the end of the period to calculate AERR.
Removed
Our core user churn rate is higher for Ooma Business customers than Ooma Residential customers, which is driven in part by the failure rate of small businesses as well as the ongoing impact of the COVID-19 pandemic.
Added
Net Dollar Subscription Retention Rate decreased year-over-year due to lower growth year-over-year in average revenue per user, which was primarily due to continuing growth from a large customer with a customized pricing structure that slowed the rate of average revenue per user. Overall, customer churn across our user base remained stable throughout fiscal 2023.
Removed
Accordingly, we expect that our overall core user churn rate will increase to the extent that sales of our business products increase relative to sales of residential products. Growth in additional services and products.
Added
Additionally, some product costs have become subject to significantly higher pricing due to supply chain constraints in the current 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.
Removed
For example, we plan to launch a third Ooma Office tier of service during fiscal 2023 that will contain features that are even more advanced than Office Pro. Additionally, we see opportunity to capitalize on Ooma AirDial as an integrated solution for businesses to replace legacy copper-wire analog phone service.
Added
Product and other revenue gross margin of negative 41% improved from 49% in the prior year, primarily due to nonrecurring sales of legacy inventories that were previously written-down in fiscal 2022 coupled with higher sales of certain accessories with favorable margins.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

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Biggest changeA 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 | FY2022 Form 10-K | 58
Biggest changeA 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 | FY2023 Form 10-K | 58 I TEM 8.
Due to the short-term nature of these instruments, we do not believe that an immediate 10% shift in interest rates would have a material effect on the fair value of our investment portfolio. We did not have any debt as of January 31, 2022 and 2021.
Due to the short-term nature of these instruments, we do not believe that an immediate 10% shift in interest rates would have a material effect on the fair value of our investment portfolio. We did not have any debt as of January 31, 2023 and 2022.
Added
Consolidated Financial Statements and Supplementary Data Index Report of Independent Registered Public Accounting Firm – KPMG LLP (PCAOB ID No. 185 ) 60 Report of Independent Registered Public Accounting Firm – Deloitte & Touche LLP (PCAOB ID No. 34 ) 62 Consolidated Balance Sheets 63 Consolidated Statements of Operations 64 Consolidated Statements of Stockholders’ Equity 65 Consolidated Statements of Cash Flows 66 Notes to Consolidated Financial Statements 67 Ooma | FY2023 Form 10-K | 59 R EPORT OF INDEPENDENT REGIST ERED 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, 2023 and 2022, the related consolidated statements of operations, stockholders’ equity, and cash flows for the years then ended, and the related notes (collectively, the consolidated financial statements).
Added
We also have audited the Company’s internal control over financial reporting as of January 31, 2023, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Added
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, 2023 and 2022, and the results of its operations and its cash flows for the years then ended, in conformity with U.S. generally accepted accounting principles.
Added
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2023 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
Ooma | FY2023 Form 10-K | 60 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.
Added
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.
Added
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.
Added
The Company recorded $199.1 million of subscription and services revenue for the year ended January 31, 2023. 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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
Santa Clara, California April 7, 2023 Ooma | FY2023 Form 10-K | 61 R EPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM To the Stockholders and the Board of Directors of Ooma, Inc.
Added
Opinion on the Financial Statements We have audited the accompanying consolidated statements of operations, stockholders’ equity, and cash flows, for the year ended January 31, 2021, and the related notes (collectively referred to as the "financial statements").
Added
In our opinion, the financial statements present fairly, in all material respects, the results of its operations and its cash flows for the year ended January 31, 2021, in conformity with accounting principles generally accepted in the United States of America. Basis for Opinion These financial statements are the responsibility of the Company's management.
Added
Our responsibility is to express an opinion on the Company's financial statements based on our audits. We are a public accounting firm registered with the 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.
Added
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.
Added
Our audit included performing procedures to assess the risks of material misstatement of the 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 financial statements.
Added
Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.
Added
We believe that our audit provides a reasonable basis for our opinion. /s/ DELOITTE & TOUCHE LLP San Jose, California April 7, 2021, (April 8, 2022 as to the effects of the restatement to the consolidated financial statements for the year ended January 31, 2021) We began serving as the Company's auditor in 2012.
Added
In 2021 we became the predecessor auditor. Ooma | FY2023 Form 10-K | 62 OOMA, INC.
Added
CONSOLIDATED B ALANCE SHEETS (Amounts in thousands, except share and per share data) January 31, 2023 January 31, 2022 Assets Current assets: Cash and cash equivalents $ 24,137 $ 19,667 Short-term investments 2,723 11,613 Accounts receivable, net 7,131 7,310 Inventories 26,246 13,841 Other current assets 14,368 13,598 Total current assets 74,605 66,029 Property and equipment, net 7,996 6,481 Operating lease right-of-use assets 12,702 14,396 Intangible assets, net 10,463 4,208 Goodwill 8,655 4,264 Other assets 16,584 13,875 Total assets $ 131,005 $ 109,253 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 13,462 $ 7,507 Accrued expenses and other current liabilities 26,726 22,823 Deferred revenue 17,216 16,600 Total current liabilities 57,404 46,930 Long-term operating lease liabilities 10,426 11,194 Other long-term liabilities 31 73 Total liabilities 67,861 58,197 Commitments and contingencies (Note 11) Stockholders’ equity: Preferred stock $ 0.0001 par value: 10 million shares authorized; none issued and outstanding — — Common stock $ 0.0001 par value: 100 million shares authorized; 25.0 million and 23.9 million shares issued and outstanding, respectively 5 4 Additional paid-in capital 195,605 179,860 Accumulated other comprehensive loss ( 23 ) ( 20 ) Accumulated deficit ( 132,443 ) ( 128,788 ) Total stockholders’ equity 63,144 51,056 Total liabilities and stockholders’ equity $ 131,005 $ 109,253 See notes to consolidated financial statements.
Added
Ooma | FY2023 Form 10-K | 63 OOMA, INC.
Added
CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except shares and per share data) Fiscal Year Ended January 31, 2023 2022 2021 Revenue: Subscription and services $ 199,105 $ 175,942 $ 156,873 Product and other 17,060 16,348 12,074 Total revenue 216,165 192,290 168,947 Cost of revenue: Subscription and services 54,499 49,563 46,134 Product and other 24,018 24,289 18,009 Total cost of revenue 78,517 73,852 64,143 Gross profit 137,648 118,438 104,804 Operating expenses: Sales and marketing 69,671 58,631 50,919 Research and development 45,939 38,193 36,079 General and administrative 27,795 23,544 20,581 Total operating expenses 143,405 120,368 107,579 Loss from operations ( 5,757 ) ( 1,930 ) ( 2,775 ) Interest and other income, net 332 179 419 Loss before income taxes ( 5,425 ) ( 1,751 ) ( 2,356 ) Income tax benefit (provision) 1,770 — ( 85 ) Net loss $ ( 3,655 ) $ ( 1,751 ) $ ( 2,441 ) Net loss per share of common stock: Basic and diluted $ ( 0.15 ) $ ( 0.07 ) $ ( 0.11 ) Weighted-average shares of common stock outstanding: Basic and diluted 24,506,525 23,473,849 22,361,312 See notes to consolidated financial statements.
Added
Ooma | FY2023 Form 10-K | 64 OOMA, INC.
Added
CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (Amounts in thousands, except shares and share data) Common Stock and Additional Paid-In Capital Accumulated Other Comprehensive Accumulated Stockholders' Shares Amount Income (Loss) Deficit Equity BALANCE - January 31, 2020 21,716,128 $ 152,997 $ 14 $ ( 124,596 ) $ 28,415 Issuance of common stock under equity-based plans 1,279,820 2,950 — — 2,950 Shares repurchased for tax withholdings on vesting of RSUs ( 122,928 ) ( 1,641 ) — — ( 1,641 ) Stock-based compensation — 12,275 — — 12,275 Other comprehensive loss — — ( 7 ) — ( 7 ) Net loss — — — ( 2,441 ) ( 2,441 ) BALANCE - January 31, 2021 22,873,020 166,581 7 ( 127,037 ) 39,551 Issuance of common stock under equity-based plans 1,168,245 2,706 — — 2,706 Shares repurchased for tax withholdings on vesting of RSUs ( 105,072 ) ( 2,105 ) — — ( 2,105 ) Stock-based compensation — 12,682 — — 12,682 Other comprehensive loss — — ( 27 ) — ( 27 ) Net loss — — — ( 1,751 ) ( 1,751 ) BALANCE - January 31, 2022 23,936,193 $ 179,864 $ ( 20 ) $ ( 128,788 ) $ 51,056 Issuance of common stock under equity-based plans 1,174,532 3,397 — — 3,397 Shares repurchased for tax withholdings on vesting of RSUs ( 114,633 ) ( 1,554 ) — — ( 1,554 ) Stock-based compensation — 13,903 — — 13,903 Other comprehensive loss — — ( 3 ) — ( 3 ) Net loss — — — ( 3,655 ) ( 3,655 ) BALANCE - January 31, 2023 24,996,092 $ 195,610 $ ( 23 ) $ ( 132,443 ) $ 63,144 See notes to consolidated financial statements.
Added
Ooma | FY2023 Form 10-K | 65 OOMA, INC.
Added
CONSOLIDATED STATEM ENTS OF CASH FLOWS (Amounts in thousands) Fiscal Year Ended January 31, 2023 2022 2021 Cash flows from operating activities: Net loss $ ( 3,655 ) $ ( 1,751 ) $ ( 2,441 ) Adjustments to reconcile net loss to net cash provided by operating activities: Stock-based compensation expense 13,903 12,682 12,275 Depreciation and amortization of capital expenditures 3,771 3,117 2,877 Amortization of intangible assets 2,286 1,304 1,304 Amortization of operating lease right-of-use assets 2,978 2,939 3,198 Facilities consolidation charges 1,402 — — Deferred income tax benefit ( 2,133 ) — — Other 38 53 46 Changes in operating assets and liabilities: Accounts receivable, net 434 ( 2,082 ) ( 637 ) Inventories and deferred inventory costs ( 12,333 ) ( 1,571 ) ( 3,378 ) Prepaid expenses and other assets ( 2,460 ) ( 4,609 ) ( 5,496 ) Accounts payable, accrued expenses and other liabilities 4,509 ( 3,599 ) ( 3,911 ) Deferred revenue 33 172 530 Net cash provided by operating activities 8,773 6,655 4,367 Cash flows from investing activities: Proceeds from maturities of short-term investments 12,705 16,505 22,866 Proceeds from sales of short-term investments — 300 600 Purchases of short-term investments ( 3,869 ) ( 17,488 ) ( 20,077 ) Capital expenditures ( 5,211 ) ( 4,204 ) ( 3,160 ) Business acquisition ( 9,771 ) — — Net cash (used in) provided by investing activities ( 6,146 ) ( 4,887 ) 229 Cash flows from financing activities: Proceeds from issuance of common stock 3,397 2,706 2,905 Shares repurchased for tax withholdings on vesting of RSUs ( 1,554 ) ( 2,105 ) ( 1,641 ) Payment of credit facility issuance costs — — ( 242 ) Net cash provided by financing activities 1,843 601 1,022 Net increase in cash and cash equivalents 4,470 2,369 5,618 Cash and cash equivalents at beginning of period 19,667 17,298 11,680 Cash and cash equivalents at end of period $ 24,137 $ 19,667 $ 17,298 Supplementary cash flow disclosure: Cash paid for income taxes, net $ 409 $ 34 $ — Non-cash investing and financing activities: Capital expenditures included in accounts payable at period-end $ 243 $ 324 $ 1 Purchase price receivable for business acquisition (see Note 13) $ 300 $ — $ — See notes to consolidated financial statements.
Added
Ooma | FY2023 Form 10-K | 66 Ooma, Inc. Notes to Consolidated Financial Statements Note 1: Overview and Basis of Presentation Ooma, Inc. and its wholly-owned subsidiaries (collectively, “Ooma” or the “Company”) provides leading communications services and related technologies for businesses and consumers, delivered from its smart SaaS and unified communications platforms. The Company is headquartered in Sunnyvale, California.
Added
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.
Added
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.
Added
References to fiscal 2023, fiscal 2022 and fiscal 2021 refer to the fiscal years ended January 31, 2023, January 31, 2022 and January 31, 2021, 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.
Added
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).
Added
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.
Added
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.
Added
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.
Added
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.
Added
Remeasurement and transaction gains and losses are included in interest and other income, net and were not material for any periods presented. Ooma | FY2023 Form 10-K | 67 Ooma, Inc.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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, 2023 and 2022, total reserves for product returns and sales incentives were approximately $ 0.7 million and $ 1.2 million, respectively.
Added
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.
Added
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.
Added
The Company determines the 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.
Added
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.
Added
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.
Added
The cost of securities sold is based upon the specific identification method. Ooma | FY2023 Form 10-K | 68 Ooma, Inc. Notes to Consolidated Financial Statements Fair Value of Financial Instruments. The Company records its financial assets and liabilities at fair value.
Added
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.
Added
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.
Added
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. Concentrations.
Added
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.
Added
The Company performs credit evaluations of its customers’ financial condition and generally does not require collateral for sales made on credit.
Added
Customers who represented 10% or more of net accounts receivable were as follows: As of January 31, 2023 January 31, 2022 Customer A 18 % 19 % Customer B * 11 % * Less than 10 % of net accounts receivable for the period indicated. Accounts Receivable.
Added
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, 2023 and 2022, the allowance for doubtful accounts was $ 0.3 million.
Added
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.
Added
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.
Added
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.
Added
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.
Added
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.
Added
The Company pays sales commissions on initial contracts, contracts for increased purchases with existing customers (expansion contracts) and certain contract renewals.
Added
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.
Added
Ooma | FY2023 Form 10-K | 69 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 .
Added
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 two years . Leasehold improvements are amortized over the shorter of the lease term or estimated useful lives of the respective assets.

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