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What changed in OOMA INC's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of OOMA INC's 2023 and 2024 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 2024 report.

+415 added−375 removedSource: 10-K (2024-04-02) vs 10-K (2023-04-07)

Top changes in OOMA INC's 2024 10-K

415 paragraphs added · 375 removed · 319 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

168 edited+51 added−18 removed396 unchanged
Biggest changeOur quarterly and annual results of operations and cash flows, have varied historically from period to period, and we expect that they will continue to fluctuate due to a variety of factors, many of which are outside of our control, including: • our ability to retain existing customers and attract new customers, sell premium solutions to our existing customers and introduce new solutions; • the actions of our competitors, including pricing changes or the introduction of new solutions and products; • our ability to effectively manage our growth and successfully penetrate the communications and connected services markets for businesses, residential and mobile; • the number of monthly, annual and multi-year subscriptions at any given time; • the timing, cost and effectiveness of our advertising and marketing efforts; • the timing, operating cost and capital expenditures for the operation, maintenance, and expansion of our business; • delays or disruptions in our supply chain; • the timing of our decisions with regard to product resource allocation; • seasonality of consumers’ purchasing patterns and seasonality of advertising patterns; • service outages or security breaches and any related impact on our reputation; • our ability to accurately forecast revenue and appropriately plan our expenses; • our ability to effectively transact with our third-party software development contractors in Russia, including any disruptions or delays in research and development activities due to international sanctions imposed as a result of Russia’s ongoing invasion of Ukraine; • costs associated with defending and resolving intellectual property infringement and other claims; • changes in tax laws, regulations, or accounting rules; • the timing and cost of developing or acquiring technologies, services or businesses and our ability to successfully manage any such acquisitions; • how well we execute on our strategy and operating plans and the impact of changes in our business model that could adversely impact our results of operations and financial condition; Ooma | FY2023 Form 10-K | 23 • the impact of worldwide economic, industry, and market conditions, such as liquidity constraints and higher levels of inflation; and • quarantines, travel limitations, or business disruptions in regions affecting our operations, including our field sales and installation services teams, or the operations of third parties upon which we rely, stemming from the actual, imminent or perceived outbreaks of epidemics or pandemics.
Biggest changeOur quarterly and annual results of operations and cash flows, have varied historically from period to period, and we expect that they will continue to fluctuate due to a variety of factors, many of which are outside of our control, including: • fluctuations in demand for, pricing of, or usage of, our products, including due to the effects of global macroeconomic conditions, competition, and differing levels of demand for our products based on changing customer priorities, resources, financial conditions and economic outlook; • our ability to retain existing customers, resellers, expand our existing customers' user base, and attract new customers, sell premium solutions to our existing customers and introduce new solutions; • the actions of our competitors, including pricing changes or the introduction of new solutions and products; • our ability to effectively manage our growth and successfully penetrate the communications and connected services markets for businesses, residential and mobile; • the number of monthly, annual and multi-year subscriptions at any given time and the timing of recognition of subscription revenue; • the timing, cost and effectiveness of our advertising and marketing efforts; • the timing, operating cost and capital expenditures for the operation, maintenance, and expansion of our business; • delays or disruptions in our supply chain; • the timing of our decisions with regard to product resource allocation; • increased component costs; • seasonality of consumers’ purchasing patterns and seasonality of advertising patterns; Ooma | FY2024 Form 10-K | 25 • service outages or security breaches and any related impact on our reputation; • our ability to accurately forecast revenue and appropriately plan our expenses; • our ability to effectively transact with our third-party software development contractors in Russia, including any disruptions or delays in research and development activities due to international sanctions imposed as a result of Russia’s ongoing invasion of Ukraine; • costs associated with defending and resolving intellectual property infringement and other claims; • changes in tax laws, regulations, or accounting rules; • the timing and cost of developing or acquiring technologies, services or businesses and our ability to successfully manage any such acquisitions; • how well we execute on our strategy and operating plans and the impact of changes in our business model that could adversely impact our results of operations and financial condition; • the impact of worldwide economic, industry, and market conditions, such as liquidity constraints and higher levels of inflation; and • quarantines, travel limitations, or business disruptions in regions affecting our operations, including our field sales and installation services teams, or the operations of third parties upon which we rely, stemming from the actual, imminent or perceived outbreaks of epidemics or pandemics.
In the past, we have been subject to distributed denial-of-service, or DDOS cyberattacks, and have been subject to other forms of attacks by hackers intent on bringing down our services or accessing confidential information.
In the past, we have been subject to distributed denial-of-service ("DDOS cyberattacks"), and have been subject to other forms of attacks by hackers intent on bringing down our services or accessing confidential information.
We face continued competition from established communications providers, such as Comcast Corporation, Verizon Communications Inc. and Rogers Communications Inc; as well as traditional on-premise, hardware business communications providers, mobile communications app companies providing “over-the-top” solutions, large internet companies that offer services with features that compete with some of what we offer, and certain other communications companies.
We face continued competition from established communications providers, such as Comcast Corporation, Verizon Communications Inc. and Rogers Communications Inc.; as well as from traditional on-premise, hardware business communications providers, mobile communications app companies providing “over-the-top” solutions, large internet companies that offer services with features that compete with some of what we offer, and certain other communications companies.
We face risks in doing business internationally that could materially and adversely affect our business, including: • our ability to comply with differing and evolving technical and environmental standards, telecommunications regulations, and certification requirements outside the U.S.; • our ability to comply with different and evolving laws, rules, regulations and standards relating to data privacy, data protection, data localization and data security enacted in countries in which we operate or do business; • potential contractual and other liability to our business partners if we fail to meet their aggressive expansion schedules in new locations; • difficulties and costs associated with staffing and managing foreign operations; • potentially greater difficulty collecting accounts receivable and longer payment cycles; • the need to adapt and localize our services for specific countries; • the need to offer customer care in various native languages; • reliance on third parties over which we have limited control for marketing and reselling our services; • availability of reliable broadband connectivity and wide area networks in targeted areas for expansion; • lower levels of adoption of credit or debit card usage for internet related purchases by foreign customers and compliance with various foreign regulations related to credit or debit card processing and data privacy; • difficulties in understanding and complying with local laws, regulations, and customs in foreign jurisdictions; • export controls and trade and economic sanctions administered by the Department of Commerce Bureau of Industry and Security and the Treasury Department’s Office of Foreign Assets Control; • tariffs and other non-tariff barriers, such as quotas and local content rules; • tariffs imposed by the U.S. on goods from other countries and tariffs imposed by other countries on U.S. goods, including the tariffs implemented and additional tariffs that have been proposed by the U.S. government on various imports from China, Canada, Mexico and the EU, and by the governments of these jurisdictions on certain U.S. goods, and any other possible tariffs that may be imposed on services such as ours, the scope and duration of which, if implemented, remain uncertain; • compliance with various anti-bribery and anti-corruption laws such as the U.S.
We face risks in doing business internationally that could materially and adversely affect our business, including: • our ability to comply with differing and evolving technical and environmental standards, telecommunications regulations, and certification requirements outside the United States; • our ability to comply with different and evolving laws, rules, regulations and standards relating to data privacy, data protection, data localization and data security enacted in countries in which we operate or do business; • potential contractual and other liability to our business partners if we fail to meet their aggressive expansion schedules in new locations; • difficulties and costs associated with staffing and managing foreign operations; • potentially greater difficulty collecting accounts receivable and longer payment cycles; • the need to adapt and localize our services for specific countries; • the need to offer customer care in various languages; • reliance on third parties over which we have limited control for marketing and reselling our services; • availability of reliable broadband connectivity and wide area networks in targeted areas for expansion; • lower levels of adoption of credit or debit card usage for internet related purchases by foreign customers and compliance with various foreign regulations related to credit or debit card processing and data privacy; • difficulties in understanding and complying with local laws, regulations, and customs in foreign jurisdictions; • export controls and trade and economic sanctions administered by the Department of Commerce Bureau of Industry and Security and the Treasury Department’s Office of Foreign Assets Control; • tariffs and other non-tariff barriers, such as quotas and local content rules; • tariffs imposed by the United States on goods from other countries and tariffs imposed by other countries on U.S. goods, including the tariffs implemented and additional tariffs that have been proposed by the U.S. government on various imports from China, Canada, Mexico and the EU, and by the governments of these jurisdictions on certain U.S. goods, and any other possible tariffs that may be imposed on services such as ours, the scope and duration of which, if implemented, remain uncertain; • compliance with various anti-bribery and anti-corruption laws such as the U.S.
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.
Risks Related to Regulatory and Tax Matters • Future legislative or regulatory actions, such as the adoption of additional 911 requirements or new taxes, could increase our costs and adversely affect our business and expose us to liability. • If we cannot comply with regulations, including communications and telecommunications laws and rules of the Federal Communications Commission ("FCC") imposing call signaling requirements on VoIP providers like us, we may be subject to fines, cease and desist orders, restrictions on our business, or other penalties. • The FCC has continued to increase regulation of interconnected VoIP services and may at any time determine certain VoIP services are telecommunications services subject to traditional common carrier regulation. • Reform of federal and state USF programs could increase the cost of our service to our customers, diminishing or eliminating our pricing advantage. • We process, store, and use personal information and other data, which subjects us and our customers to a variety of evolving industry standards, contractual obligations and other legal rules related to privacy, which may increase our costs, decrease adoption and use of our products and services, and expose us to liability.
Ooma Premier offers a suite of advanced calling features on a monthly or annual subscription basis, including: custom and anonymous call blocking, receiving incoming calls on the Ooma Mobile App, call forwarding, three-way conference calling, backup number, and integration with a variety of devices and services to enable new functionality and automation, such as Google Voice, Dropbox and Amazon Alexa.
Ooma Premier offers a suite of advanced calling features on a monthly or annual subscription basis, including: custom and anonymous call blocking, receiving incoming calls on the Ooma Mobile HD App, call forwarding, three-way conference calling, backup number, and integration with a variety of devices and services to enable new functionality and automation, such as Google Voice, Dropbox and Amazon Alexa.
The success of new product introductions, such as our fiscal 2023 launch of Ooma AirDial, depends on a number of factors including, but not limited to: pricing, market and consumer acceptance, the ability to successfully identify and anticipate product trends, effective forecasting and management of product demand, purchase commitments and inventory levels, availability of products in appropriate quantities to meet anticipated demand, ability to obtain timely and adequate delivery of components for our new products from third-party suppliers, management of manufacturing and supply costs, management of risks and delays associated with product design and production ramp-up , delays in customer readiness for AirDial installations, the quality of AirDial installations performed by third-parties, ability to maintain the levels of service uptime and performance required by our customers, and the risk that new products or enhanced versions of existing products, may have quality issues or other defects or bugs in the early stages of introduction including testing of new components and features.
The success of new product introductions, such as our fiscal 2023 launch of AirDial, depends on a number of factors including, but not limited to: pricing, market and customer acceptance, the ability to successfully identify and anticipate product trends, effective forecasting and management of product demand, purchase commitments and inventory levels, availability of products in appropriate quantities to meet anticipated demand, ability to obtain timely and adequate delivery of components for our new products from third-party suppliers, management of manufacturing and supply costs, management of risks and delays associated with product design and production ramp-up , delays in customer readiness for AirDial installations, the quality of AirDial installations performed by third-parties, ability to maintain the levels of service uptime and performance required by our customers, and the risk that new products or enhanced versions of existing products, may have quality issues or other defects or bugs in the early stages of introduction including testing of new components and features.
Travel Act, the USA PATRIOT Act, and possibly other anti-bribery and anti‑money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees and third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector.
Travel Act, the USA PATRIOT Act, and other anti-bribery and anti‑money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees and third-party intermediaries from authorizing, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector.
If we fail to become compliant or maintain compliance with current merchant standards, such as PCI, or fail to meet new standards, the credit card associations may fine us or, while unusual, may impose certain restrictions on our ability to accept credit cards or terminate our agreements with them, rendering us unable to accept credit cards as payment for our services.
If we fail to become fully compliant or maintain compliance with current merchant standards, such as PCI, or fail to meet new standards, the credit card associations may fine us or, while unusual, may impose certain restrictions on our ability to accept credit cards or terminate our agreements with them, rendering us unable to accept credit cards as payment for our services.
To the extent we hire personnel from competitors, we may be subject to allegations such personnel have been improperly solicited or divulged proprietary or other confidential information. The ongoing impact of the COVID-19 pandemic, including any resurgences, could disrupt and cause harm to our business, operating results, or financial condition.
To the extent we hire personnel from competitors, we may be subject to allegations such personnel have been improperly solicited or divulged proprietary or other confidential information. The impact of the COVID-19 pandemic, including any resurgences, could disrupt and cause harm to our business, operating results, or financial condition.
In particular, we depend on third-party contactors located in Russia for engineering and software development services. We cannot assure you that our ability to continue transacting with third-party contractors in Russia would not be impacted by the effects of Russia’s ongoing invasion of Ukraine and resulting international sanctions.
In particular, we depend on third-party contractors located in Russia for engineering and software development services. We cannot assure you that our ability to continue transacting with third-party contractors in Russia would not be impacted by the effects of Russia’s ongoing invasion of Ukraine and resulting international sanctions.
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.
We refer to Ooma Office, Ooma Enterprise, Ooma AirDial, 2600Hz, and OnSIP collectively as Ooma Business. Ooma Office Ooma Office is a cloud-based multi-user communications system for small and medium-sized businesses designed to manage communications in and out of the office with a suite of business features at affordable prices.
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.
The design of these services, and the tools for monitoring and managing them, are developed in combination with our engineering team. We primarily contract with manufacturers in Vietnam and other Asian countries to produce our on-premise and end-point devices, including Ooma AirDial.
Despite precautions taken at our hosting facilities, the occurrence of a natural disaster or an act of terrorism or other unanticipated problems at these facilities could result in lengthy interruptions in our service. Even with the disaster recovery arrangements that we have in place, our service could be interrupted.
Despite precautions taken at our hosting facilities, the occurrence of a natural disaster, cyberattack, or an act of terrorism or other unanticipated problems at these facilities could result in lengthy interruptions in our service. Even with the disaster recovery arrangements that we have in place, our service could be interrupted.
Our broad range of technology may increase the likelihood that third parties will claim that we infringe their intellectual property rights. We have in the past received, and may in the future receive, notices of claims of infringement, misappropriation or misuse of other parties’ proprietary rights.
Our broad range of technology in our business may increase the likelihood that third parties will claim that we infringe their intellectual property rights. We have in the past received, and may in the future receive, notices of claims of infringement, misappropriation or misuse of other parties’ proprietary rights.
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.
Item 1. Business Overview Ooma provides leading communications services and related technologies that bring unique features, ease of use, and affordability to business and residential customers through our smart software-as-a-service (“SaaS”) and unified communications platforms.
(Google Voice); and • Traditional on-premise hardware business communications providers such as Avaya Inc., Cisco Systems, Inc. and Mitel, Inc. All of these companies currently or may in the future host their solutions through the cloud.
(Google Voice); and • Traditional on-premise hardware business communications providers such as Cisco Systems, Inc. and Mitel, Inc. All of these companies currently or may in the future host their solutions through the cloud.
Foreign Corrupt Practices Act of 1977, as amended, or the FCPA; • more limited protection for intellectual property rights in some countries; • adverse tax consequences; • fluctuations in currency exchange rates, economic stability, and inflationary conditions which could increase the price of our services outside of the U.S., increase the expenses of our international operations, including expenses related to foreign contractors, and expose us to foreign currency exchange rate risk; • exchange control regulations, which might restrict or prohibit our conversion of other currencies into U.S.
Foreign Corrupt Practices Act of 1977, as amended, or the FCPA; • more limited protection for intellectual property rights in some countries; • adverse tax consequences; • fluctuations in currency exchange rates, economic stability, and inflationary conditions which could increase the price of our services outside of the United States, increase the expenses of our international operations, including expenses related to foreign contractors, and expose us to foreign currency exchange rate risk; • exchange control regulations, which might restrict or prohibit our conversion of other currencies into U.S.
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”).
Ooma AirDial Ooma AirDial is a complete integrated solution for businesses to address the decommissioning of legacy copper-wire analog phone service, also known as plain old telephone service (“POTS”).
If any of these network service providers stop providing us with access to their infrastructure, fail to provide these services to us on a cost-effective basis, cease operations, or otherwise terminate these services, the delay caused by qualifying and switching to another third-party network service provider, if one is available, could have a material adverse effect on our business and results of operations.
If any of these network service providers stop providing or are unable to provide us with access to their infrastructure, fail to provide these services to us on a cost-effective basis, cease operations, or otherwise terminate these services, the delay caused by qualifying and switching to another third-party network service provider, if one is available, could have a material adverse effect on our business and results of operations.
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.
Ooma | FY2024 Form 10-K | 4 Our Solutions Ooma Business Our mission is providing business communications services that are simple, easy to use, and deliver excellent value to small, medium-sized and large companies. We offer a range of solutions to fit each business’ needs, along with personalized support to resolve any issues in deploying and maintaining Ooma services.
Our ability to accurately forecast demand is affected by many factors, including an increase or decrease in customer demand for our products and services, changes in consumer preferences, market acceptance of new product and service introductions by us and our competitors, levels of inventory held by channel partners, sales promotional activities by us or our competitors, and unanticipated changes in general market demand and macro-economic conditions.
Our ability to accurately forecast demand is affected by many factors, including an increase or decrease in customer demand for our products and services, changes in consumer preferences and length of sales cycle, market acceptance of new product and service introductions by us and our competitors, levels of inventory held by channel partners, sales promotional activities by us or our competitors, and unanticipated changes in general market demand and macro-economic conditions.
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.
Advertising is displayed within the mobile app and users can choose to purchase premium services such as ad-free usage and international calling plans. Ooma | FY2024 Form 10-K | 7 Sales and Marketing Our sales and marketing objectives are to grow our customer base and sell additional services to our existing customers using an integrated and multi-channel marketing approach.
Among others, these regulatory obligations include: contributing to the Federal Universal Service Fund (“USF”), the Telecommunications Relay Service Fund and federal programs related to phone number administration; providing access to E-911 services; protecting customer information; and porting phone numbers upon a valid customer request. State Regulation. The FCC has preempted much regulation of internet voice communications services.
Among others, these regulatory obligations include: contributing to the Federal Universal Service Fund (“USF”), the Telecommunications Relay Service Fund and federal programs related to phone number administration; providing access to E-911 services; protecting customer information; robocall mitigation; and porting phone numbers upon a valid customer request. State Regulation. The FCC has preempted much regulation of internet voice communications services.
Our stock price may fluctuate in response to a number of events and factors, such as quarterly operating results; changes in our financial projections provided to the public or our failure to meet those projections; our operating and financial performance and prospects and the performance of other similar companies; the public's reaction to our press releases, other public announcements and filings with the SEC; significant transactions, or new features, products or services by us or our competitors; changes in financial estimates and recommendations by securities analysts; failure of securities analysts to cover or track our common stock; media coverage of our business and financial performance; trends in our industry; any significant change in our management; sales of common stock by us, our investors or members of our management team; and changes in general market, economic and political conditions in the U.S. and global economies or financial markets, including as a result of public health crises and global conflicts, such Russia’s ongoing invasion of Ukraine.
Our stock price may fluctuate in response to a number of events and factors, such as quarterly operating results; changes in our financial projections provided to the public or our failure to meet those projections; our operating and financial performance and prospects and the performance of other similar companies; the public's reaction to our press releases, other public announcements and filings with the SEC; significant transactions, or new features, products or services by us or our competitors; changes in financial estimates and recommendations by securities analysts; failure of securities analysts to cover or track our common stock; media coverage of our business and financial performance; trends in our industry; any significant change in our management; sales of common stock by us, our investors or members of our management team; and changes in general market, economic and political conditions in the United States and global economies or financial markets, including as a result of public health crises and global conflicts, such Russia’s ongoing invasion of Ukraine.
The 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.
The SEC’s website, www.sec.gov, contains reports, Ooma | FY2024 Form 10-K | 12 proxy statements and other information regarding issuers that file electronically with the SEC. The content on any website referred to in this Form 10-K is not incorporated by reference in this Form 10-K unless expressly noted. ITEM 1A.
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.
We also have strategic partnerships with third parties, such as T-Mobile, which enables us to sell our services and products to certain of their customers. No single customer accounted for 10% or more of our total revenue for fiscal 2024, 2023 and 2022.
Changes to these or similar laws, or to their application or interpretation, or new laws, rules and regulations governing our communication and marketing activities could adversely affect our business. In the event that any of these laws, rules or regulations significantly restricts our business, we may not be able to develop adequate alternative communication and marketing strategies.
Changes to these or similar laws, or to their application or interpretation, or new laws, rules and regulations governing our communication and marketing activities could adversely affect our business. In the event that any of these laws, rules or regulations significantly restrict our business, we may not be able to develop adequate alternative communication and marketing strategies.
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 | FY2024 Form 10-K | 9 Competition The market for communications solutions and other connected services for business, home and mobile users is very large, complex, fragmented and defined by changing technology and customer demands. We expect competition to continue to increase in the future.
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.
Ooma | FY2024 Form 10-K | 11 Intellectual Property We rely on a combination of patents, trade secrets, copyrights, trademarks, confidentiality and proprietary rights agreements with our employees, consultants and other third parties, as well as other contractual protections to establish and protect our intellectual property rights.
Ooma | FY2023 Form 10-K | 15 A significant portion of our revenues today come from small and medium-sized businesses, which may have fewer financial resources to weather an economic downturn, rising inflation, and defaults by financial institutions. A significant portion of our revenues today comes from small and medium-sized businesses.
Ooma | FY2024 Form 10-K | 15 A significant portion of our revenues today come from small and medium-sized businesses, which may have fewer financial resources to weather an economic downturn, rising inflation, and defaults by financial institutions. A significant portion of our revenues today comes from small and medium-sized businesses.
If we do not comply with FCC rules and regulations, we could be subject to FCC enforcement actions, substantial fines, loss of licenses, potential private right of actions and possibly restrictions on our ability to operate or offer certain of our services.
If we do not comply with FCC rules and regulations, we could be subject to FCC enforcement actions, substantial fines, loss of licenses, repayment of funds, potential private right of actions and possibly restrictions on our ability to operate or offer certain of our services.
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.
Risk Factors Our current and prospective investors should carefully consider the risks and uncertainties described below, together with all of the other information in this Form 10-K, including our consolidated financial statements and the related notes, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the “Cautionary Note Regarding Forward-Looking Statements,” before making investment decisions regarding our common stock.
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.
Ooma | FY2024 Form 10-K | 14 Risks Related to Our Business and Our Industry If we are unable to attract new users in a cost-effective manner, our business will be materially and adversely affected. In order to grow our business, we must continue to attract new users in a cost-effective manner.
The occurrence of other events outside our control, such as public health crises, natural disasters or climate change, could impact our suppliers’ facilities and component providers, many of which are located in China and other countries in Asia.
The occurrence of other events outside our control, such as public health crises, natural disasters or climate change, could impact our suppliers’ facilities and component providers, many of which are located in Vietnam and other countries in Asia.
As a communication services provider, we are subject to FCC regulations relating to privacy, disability access, law enforcement access, porting of numbers, revenue reporting, Federal USF contributions and other regulatory assessments, E‑911, and other matters.
As a communication services provider, we are subject to FCC regulations relating to privacy, disability access, law enforcement access, porting of numbers, revenue reporting, Federal USF contributions and other regulatory assessments, E‑911, robocall mitigation, and other matters.
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.
Ooma | FY2024 Form 10-K | 6 Ooma Residential Ooma Residential includes Ooma Telo basic and premier services as well as our smart security solutions. Our residential phone service provides PureVoice HD voice quality, advanced functionality and integration with mobile devices.
Because our team develops and integrates our solutions, we are able to offer a solution that works seamlessly between software and hardware and respond to customer feedback to add in additional features and services that work across our platforms.
Because our team develops and integrates our solutions, we are able to offer a solution that works seamlessly between software and hardware and responds to customer feedback to add in additional features and services that work across our platforms.
Ooma | FY2023 Form 10-K | 16 We may experience difficulties with software development, operations, design or marketing that could delay or prevent the introduction or implementation of new or enhanced products, services and applications.
Ooma | FY2024 Form 10-K | 16 We may experience difficulties with software development, operations, design or marketing that could delay or prevent the introduction or implementation of new or enhanced products, services and applications.
If any or all of these factors fail to occur, our business may be materially and adversely affected. Our Ooma Residential product and services are sold primarily to individuals and families. With the growth of mobile technologies, many consumers have chosen to eliminate their home telephone service.
If any or all of these factors fail to occur, our business may be materially and adversely affected. Our Ooma Residential product and services are sold primarily to individuals and families. With the growth of mobile technologies, many consumers have chosen to eliminate their home telephone service as alternative services have proliferated.
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.
This summary should be read together with the more detailed description of each risk factor contained in the subheadings further below and should not be relied upon as an exhaustive summary of the material risks facing our business: Risks Related to Our Business and Industry • If we are unable to attract new users in a cost-effective manner, our business will be materially and adversely affected. • Our customers may terminate their subscriptions for our services in most cases without penalty, and increased customer turnover, as well as costs we incur to retain our customers and induce them to add users and/or functionality could materially and adversely affect our financial performance. • A significant portion of our revenues today come from small and medium-sized businesses, which may have fewer financial resources to weather an economic downturn, rising inflation, and defaults by financial institutions. • If we are unable to develop, acquire and/or sell new, or enhance existing, products, services or applications on a timely and cost-effective basis, our business, financial condition, and results of operations may be materially and adversely affected. • We may expand through acquisitions of, or investments in, other companies, each of which may divert our management’s attention, result in additional dilution to our stockholders, increase expenses, disrupt our operations and harm our results of operations. • We depend on several sole suppliers to provide the components for, and a small number of vendors to manufacture, certain on-premise devices and end-point devices we sell, and any delay or interruption in manufacturing, configuring and delivering by these third parties would result in delayed or reduced shipments to our customers and may increase our costs and harm our business and results of operations. • A ransomware attack or other security breach could delay or interrupt service to our customers, compromise the integrity of our systems or data that we collect, result in the loss of our intellectual property or confidential information, harm our reputation, or subject us to significant liability. • We rely significantly on retailers and reseller partnerships to sell our products; our failure to effectively develop, manage and maintain these sales channels could materially and adversely affect our revenue and business. • We face competition in our markets by our competitors (including mergers or other strategic transactions involving our competitors) and may lack sufficient financial or other resources to compete successfully. • We are continuing to expand our international operations, which may expose us to significant risks. • To deliver our services, we rely on third parties for our network connectivity and co‑location facilities for certain features in our services and for certain elements of providing our services. • Interruptions in our services could harm our reputation, result in significant costs to us and impair our ability to sell our services. • We rely on third parties, including third parties located in Russia, for some of our software development, quality assurance and operations, and anticipate we will continue to do so for the foreseeable future. • We rely on third parties to provide the majority of our customer service and support representatives.
Our independent registered public accounting firm is required to and has issued an attestation report on the effectiveness of our internal control over financial reporting as of January 31, 2023.
Our independent registered public accounting firm is required to and has issued an attestation report on the effectiveness of our internal control over financial reporting as of January 31, 2024.
The scope of these obligations and restrictions is changing, subject to differing interpretations, and may be inconsistent among countries or conflict with other rules, and their status remains uncertain.
The scope of these obligations and restrictions is changing, subject to differing interpretations, and may be inconsistent among jurisdictions or conflict with other rules, and their status remains uncertain.
We and our contractors are also vulnerable to other types of disasters, such as power loss, fire, floods, pandemics, cyber-attack, war (including ongoing geopolitical tensions related to Russia’s actions in Ukraine, resulting sanctions imposed by the U.S. and other countries, and retaliatory actions taken by Russia in response to such sanctions), political or civil unrest and terrorist attacks and similar events that are beyond our control.
We and our contractors are also vulnerable to other types of disasters, such as power loss, fire, floods, pandemics, cyber-attack, war (including ongoing geopolitical tensions related to Russia’s actions in Ukraine, resulting sanctions imposed by the United States and other countries, and retaliatory actions taken by Russia in response to such sanctions), political or civil unrest and terrorist attacks and similar events that are beyond our control.
Dollars; • restrictions on the transfer of funds; • international conflict and sanctions, such as those resulting from Russia’s ongoing invasion of Ukraine; • deterioration of political relations between the U.S. and other countries; and • political or social unrest or economic instability in a specific country or region, which could have an adverse impact on our third-party software development and quality assurance operations there.
Dollars; • restrictions on the transfer of funds; • international conflict and sanctions, such as those resulting from Russia’s ongoing invasion of Ukraine; • deterioration of political relations between the United States and other countries; and • political or social unrest or economic instability in a specific country or region, which could have an adverse impact on our third-party software development and quality assurance operations there.
In addition, due to political uncertainty and military actions associated with Russia’s invasion of Ukraine, we and our vendors, business partners, and contractors may be vulnerable to heightened risks of cyber-attacks, including from or affiliated with nation-state actors, which could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our services and products.
In addition, as noted above, due to political uncertainty and military actions associated with Russia’s invasion of Ukraine, we and our vendors, business partners, and contractors may also be vulnerable to heightened risks of cyber-attacks, including from or affiliated with nation-state actors, which could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our services and products.
However, our future success will also depend on our ability to introduce and sell new services, such as our fiscal 2023 launch of Ooma Office Pro Plus, as well as products, features and functionality that enhance or are beyond the voice, fax, text and connected services we currently offer, as well as to improve usability and support and increase customer satisfaction.
However, our future success will also depend on our ability to introduce and sell new services, such as our fiscal 2023 launch of Ooma Office Pro Plus or our newly-acquired 2600Hz solutions, as well as products, features and functionality that enhance or are beyond the voice, fax, text and connected services we currently offer, as well as to improve usability and support and increase customer satisfaction.
Ooma | FY2023 Form 10-K | 38 Risks Related to Being a Public Company If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.
Ooma | FY2024 Form 10-K | 40 Risks Related to Being a Public Company If we fail to maintain an effective system of internal control over financial reporting, we may not be able to accurately report our financial results in a timely manner, which may adversely affect investor confidence in our company and, as a result, the value of our common stock.
Registered users choose their own phone number to make and receive free texts and calls to most U.S. and Canadian numbers using a Wi-Fi or cellular data connection within and out-of-network. Talkatone also enables users to call, text, chat and share with friends and family that do not have the app installed.
Registered users choose their own phone number to make and receive free texts and calls to most United States and Canadian numbers using a Wi-Fi or cellular data connection within and out-of-network. Talkatone also enables users to call, text, chat and share with friends and family that do not have the app installed.
Though we have registered numerous trademarks and service marks, have applied for registration of additional trademarks and service marks and have acquired a number of domain names in and outside the U.S. if our applications receive objections or are successfully opposed by third parties, it will be difficult for us to prevent third parties from using our brand without our permission.
Though we have registered numerous trademarks and service marks, have applied for registration of additional trademarks and service marks and have acquired a number of domain names in and outside the United States, if our applications receive objections or are successfully opposed by third parties, it will be difficult for us to prevent third parties from using our brand without our permission.
Should the FCC decide to do so, it could result in an inferior user experience for Ooma’s service, which may negatively impact our business. Ooma | FY2023 Form 10-K | 33 We may not be able to comply with FCC rules governing completion of calls to rural areas and related reporting requirements.
Should the FCC decide to do so, it could result in an inferior user experience for Ooma’s service, which may negatively impact our business. Ooma | FY2024 Form 10-K | 35 We may not be able to comply with FCC rules governing completion of calls to rural areas and related reporting requirements.
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.
We generate our product and other revenue from the sale of our on-premise devices and end-point devices. We primarily offer our solutions in the United States and Canada, with limited offerings in certain other countries. We believe that our differentiated solutions and our long-term customer relationships uniquely position us to add new connected services and exploit adjacent markets.
In addition, effective June 30, 2021, voice service providers in the U.S. were required to either fully implement “STIR/SHAKEN” technology on their entire networks or implement a robocall mitigation program on those portions of their networks that are not STIR/SHAKEN-enabled. Canada is also currently in the process of implementing STIR/SHAKEN requirements.
In addition, effective June 30, 2021, voice service providers in the United States were required to either fully implement “STIR/SHAKEN” technology on their entire networks or implement a robocall mitigation program on those portions of their networks that are not STIR/SHAKEN-enabled. Canada is also currently in the process of implementing STIR/SHAKEN requirements.
Ooma | FY2023 Form 10-K | 22 If we are unable to effectively process local number and toll-free number portability provisioning in a timely manner, our growth may be negatively affected. We support local number and toll-free number portability, which allows our customers to transfer to us and thereby retain their existing phone numbers when subscribing to our services.
Ooma | FY2024 Form 10-K | 24 If we are unable to effectively process local number and toll-free number portability provisioning in a timely manner, our growth may be negatively affected. We support local number and toll-free number portability, which allows our customers to transfer to us and thereby retain their existing phone numbers when subscribing to our services.
The application of existing, new, or future laws, whether in the U.S. or internationally, could have adverse effects on our business, prospects, and results of operations. There have been, and will continue to be, substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous markets in which we conduct or will conduct business.
The application of existing, new, or future laws, whether in the United States or internationally, could have adverse effects on our business, prospects, and results of operations. There have been, and will continue to be, substantial ongoing costs associated with complying with the various indirect tax requirements in the numerous markets in which we conduct or will conduct business.
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.
Direct channel and retail are our primary distribution channels for residential customers. Our direct sales force is focused on business sales and includes trained sales representatives located in the United States and Canada. Our retail distribution includes national and regional consumer electronics, big box retailers and leading online retailers, including Amazon, Best Buy, Costco.com, Walmart.com and others.
As the majority of our customers pay for our subscriptions through credit and debit cards, weakness in certain segments of the credit markets and in the U.S. and global economies has resulted in and may in the future result in increased numbers of rejected credit and debit card payments and business failures, which could materially affect our business by increased customer default or cancellations.
As the majority of our customers pay for our subscriptions through credit and debit cards, weakness in certain segments of the credit markets and in the United States and global economies has resulted in and may in the future result in increased numbers of rejected credit and debit card payments and business failures, which could materially affect our business by increased customer default or cancellations.
Our ability to continue growing our user base depends on our ability to convince customers and potential customers that our service is sufficiently useful and cost-effective, that it makes sense to maintain or establish home telephone services with us.
Our ability to continue growing our user base depends on our ability to convince customers and potential customers that our service is sufficiently useful and cost-effective, that it makes sense to maintain or establish home telephone services with us over other alternatives.
To date, we have not generated significant revenue from outside of the U.S. and Canada, but we have continued to expand operations outside North America as we ramp up to provide services in certain countries internationally. The future success of our business will depend, in part, on our ability to expand our operations and customer base worldwide.
To date, we have not generated significant revenue from outside of the United States and Canada, but we have continued to expand operations outside North America as we ramp up to provide services in certain countries internationally. The future success of our business will depend, in part, on our ability to expand our operations and customer base worldwide.
Additionally, in the U.S., both customers and carriers may seek relief from the relevant state public utility commission, the FCC, or in state or federal court for violation of local number portability requirements. We may not be able to achieve or sustain profitability in the future and our rates of growth may decline.
Additionally, in the United States, both customers and carriers may seek relief from the relevant state public utility commission, the FCC, or in state or federal court for violation of local number portability requirements. We may not be able to achieve or sustain profitability in the future and our rates of growth may decline.
Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks different from those in the U.S. Because of our limited experience with international operations and developing and managing sales and distribution channels in international markets, our expansion efforts may not succeed.
Operating in international markets requires significant resources and management attention and will subject us to regulatory, economic and political risks different from those in the United States. Because of our limited experience with international operations and developing and managing sales and distribution channels in international markets, our expansion efforts may not succeed.
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 .
Our internal DEIB Committee leads our commitment to put this pledge into action and provides an open door to all of our personnel who would like to actively contribute to the effort. We believe a diverse and inclusive workforce serves to enrich our employee experience. Compensation and Benefits .
Although we have implemented STIR/SHAKEN in the U.S. and are in the process of implementing STIR/SHAKEN in Canada, to the extent that we inadvertently pass traffic that does not have appropriate calling party number or charge number information, we could be subject to fines, cease and desist orders, or other penalties.
Although we have implemented STIR/SHAKEN in the United States and are in the process of implementing STIR/SHAKEN in Canada, to the extent that we inadvertently pass traffic that does not have appropriate calling party number or charge number information, we could be subject to fines, cease and desist orders, or other penalties.
Ooma | FY2023 Form 10-K | 40 Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock. Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws contain provisions that could delay or prevent a change in control of our company.
Ooma | FY2024 Form 10-K | 42 Our charter documents and Delaware law could prevent a takeover that stockholders consider favorable and could also reduce the market price of our stock. Our Amended and Restated Certificate of Incorporation and our Amended and Restated Bylaws contain provisions that could delay or prevent a change in control of our company.
This hardware and software, or future technology we may want to license, may not continue to provide competitive features and functionality or be available to us at reasonable prices or on commercially reasonable terms, or at all.
Third-party hardware and software, or future technology we may want to license, may not continue to provide competitive features and functionality or be available to us at reasonable prices or on commercially reasonable terms, or at all.
National Defense Authorization Act for Fiscal Year 2019 imposed a ban on the use of certain surveillance, telecommunications, and other equipment manufactured in China, to help protect critical infrastructure and other sites deemed to be sensitive for national security purposes in the U.S.
National Defense Authorization Act for Fiscal Year 2019 imposed a ban on the use of certain surveillance, telecommunications, and other equipment manufactured in China, to help protect critical infrastructure and other sites deemed to be sensitive for national security purposes in the United States.
Although we generated cash from operations of $8.8 million for fiscal 2023, we cannot assure you that our operating cash flow will remain positive in the future as we continue to invest in efforts to scale our business. Achieving profitability will require us to increase revenue, manage our cost structure and avoid significant liabilities.
Although we generated cash from operations of $12.3 million for fiscal 2024, we cannot assure you that our operating cash flow will remain positive in the future as we continue to invest in efforts to scale our business. Achieving profitability will require us to increase revenue, manage our cost structure and avoid significant liabilities.
These increased levels may result in write-down charges from excess or obsolete inventory, charges from excess purchase commitments, the sale of inventory at discounted prices, and other actions, which may cause our gross margin to decline and harm our reputation and brand.
Increased inventory levels have in the past and may in the future result in write-down charges from excess or obsolete inventory, charges from excess purchase commitments, the sale of inventory at discounted prices, and other actions, which may cause our gross margin to decline and harm our reputation and brand.
Ooma | FY2023 Form 10-K | 28 Risks Related to Security, IT Systems and Intellectual Property We have incurred, and expect to continue to incur, significant costs to protect against security breaches. We may incur significant additional costs in the future to address any actual or perceived security breaches.
Ooma | FY2024 Form 10-K | 30 Risks Related to Security, IT Systems and Intellectual Property We have incurred, and expect to continue to incur, significant costs to protect against security breaches. We may incur significant additional costs in the future to address any actual or perceived security breaches.
In the U.S. and in other jurisdictions, a variety of regulations are currently being proposed that would increase restrictions on online service providers in the field of data privacy and security, and we believe that the adoption of such increasingly restrictive regulation is likely.
In the United States and in other jurisdictions, a variety of regulations are currently being proposed that would increase restrictions on online service providers in the field of data privacy and security, and we believe that the adoption of such increasingly restrictive regulation is likely.
We expect that state public utility commissions will continue their attempts to apply state telecommunications regulations to internet voice communications services like ours. International Regulation. As we expand internationally, we are subject to laws and regulations in the countries in which we offer our services.
We expect that state public utility commissions will continue their attempts to apply state telecommunications regulations to internet voice communications services like ours. International Regulation. Our international operations are subject to laws and regulations in the countries in which we offer our services.
Industry consolidation among customer service providers may impact our ability to obtain these services or increase our costs for these services. Ooma | FY2023 Form 10-K | 21 If we fail to continue developing our brand or our reputation is harmed, our business may suffer.
Industry consolidation among customer service providers may impact our ability to obtain these services or increase our costs for these services. Ooma | FY2024 Form 10-K | 23 If we fail to continue developing our brand or our reputation is harmed, our business may suffer.
Ooma | FY2023 Form 10-K | 41 General Risk Factors If we are unable to hire, retain and motivate qualified personnel, our business will suffer. Our future growth and success depends, in part, on our continued ability to hire and retain highly skilled personnel.
Ooma | FY2024 Form 10-K | 43 General Risk Factors If we are unable to hire, retain and motivate qualified personnel, our business will suffer. Our future growth and success depends, in part, on our continued ability to hire and retain highly skilled personnel.
Any failure to obtain registration or protection of our intellectual property rights could materially and adversely affect our business. We rely, in part, on patent, trademark, copyright and trade secret law to protect our intellectual property in the U.S. and abroad.
Any failure to obtain registration or protection of our intellectual property rights could materially and adversely affect our business. We rely, in part, on patent, trademark, copyright and trade secret law to protect our intellectual property in the United States and abroad.
We cannot guarantee emergency calling service consistent with the VoIP E‑911 order will be available to all of our customers, especially those accessing our services on a mobile device or from outside of the U.S.
We cannot guarantee emergency calling service consistent with the VoIP E‑911 order will be available to all of our customers, especially those accessing our services on a mobile device or from outside of the United States.
If problems occur with any of these third-party network or service providers, it may cause errors or reduced quality in our services, and we could encounter difficulty identifying the source of the problem.
If problems occur with any of these third-party network or service providers for any reason, including cyberattacks, it may cause errors or reduced quality in our services, and we could encounter difficulty identifying the source of the problem.
Ooma | FY2023 Form 10-K | 32 Regulatory and Tax Matters Our services are subject to regulation and future legislative or regulatory actions could adversely affect our business and expose us to liability. Federal Regulation. Our business is regulated by the FCC.
Ooma | FY2024 Form 10-K | 34 Regulatory and Tax Matters Our services are subject to regulation and future legislative or regulatory actions could adversely affect our business and expose us to liability. Federal Regulation. Our business is regulated by the FCC.
If we are unable to obtain adequate financing under our credit facility or alternative sources on terms satisfactory to us, our ability to continue pursuing our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, results of operations, financial condition and prospects could be materially and adversely affected, and the trading price of our common stock would likely decline.
If we are unable to obtain adequate financing or financing terms satisfactory to us, our ability to continue pursuing our business objectives and to respond to business opportunities, challenges or unforeseen circumstances could be significantly limited, and our business, results of operations, financial condition and prospects could be materially and adversely affected, and the trading price of our common stock would likely decline.
Broadband providers also may take measures that affect their customers’ ability to use our service, such as degrading the quality of the data packets we transmit over their lines, giving those packets low priority, giving other packets higher priority than ours, blocking our packets entirely or attempting to Ooma | FY2023 Form 10-K | 29 charge their customers more for also using our services.
Broadband providers also may take measures that affect their customers’ ability to use our service, such as degrading the quality of the data packets we transmit over their lines, giving those packets low priority, giving other packets higher priority than ours, blocking our packets entirely or attempting to charge their customers more for also using our services.
Ooma | FY2023 Form 10-K | 39 Risks Related to Ownership of Our Common Stock Our stock price has been and may continue to be volatile, or may fluctuate or decline, resulting in a substantial loss of your investment.
Ooma | FY2024 Form 10-K | 41 Risks Related to Ownership of Our Common Stock Our stock price has been and may continue to be volatile, or may fluctuate or decline, resulting in a substantial loss of your investment.

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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; as well as several locations internationally.
Biggest changeWe also lease offices in Boca Raton, Florida and several other locations throughout the United States as well as Vancouver, British Columbia. We lease space from third-party data centers under co-location agreements that support our cloud infrastructure, the most significant locations being San Jose, California; Dallas, Texas; Ashburn, Virginia; as well as several locations internationally.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeOoma | FY2023 Form 10-K | 43 PART II
Biggest changeOoma | FY2024 Form 10-K | 46 PART II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeThe 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
Biggest changeThe stock price performance on this performance graph is not necessarily indicative of future stock price performance. Sales of Unregistered Securities. Not applicable. Use of Proceeds. Not applicable. Purchases of Equity Securities by Issuer and Affiliated Purchasers. None. Ooma | FY2024 Form 10-K | 47 IT EM 6. [Reserved] Ooma | FY2024 Form 10-K | 48
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.
The graph assumes $100 was invested at the close of market on the last trading day of fiscal 2019 in our common stock, the NASDAQ Telecommunications Index and the NYSE, and its relative performance is tracked through January 31, 2024, the last trading day of our fiscal year 2024.
ITEM 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.
ITEM 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 March 28, 2024, there were approximately 56 holders of record of our common stock.

Item 7. Management's Discussion & Analysis

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

51 edited+18 added−17 removed40 unchanged
Biggest changeOoma | 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.
Biggest changeOoma | FY2024 Form 10-K | 54 Consolidated Results of Operations The following table sets forth selected consolidated statements of operations data for each of the periods indicated (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Revenue: Subscription and services $ 221,624 $ 199,105 $ 175,942 Product and other 15,113 17,060 16,348 Total revenue 236,737 216,165 192,290 Cost of revenue: Subscription and services 63,667 54,499 49,563 Product and other 25,838 24,018 24,289 Total cost of revenue 89,505 78,517 73,852 Gross profit 147,232 137,648 118,438 Operating expenses: Sales and marketing 73,503 69,671 58,631 Research and development 49,935 45,939 38,193 General and administrative 27,795 27,795 23,544 Total operating expenses 151,233 143,405 120,368 Loss from operations (4,001 ) (5,757 ) (1,930 ) Interest and other income, net 1,188 332 179 Loss before income taxes (2,813 ) (5,425 ) (1,751 ) Income tax benefit 1,978 1,770 — Net loss $ (835 ) $ (3,655 ) $ (1,751 ) Cost of revenue and operating expenses included stock-based compensation expense and related payroll taxes as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Cost of revenue $ 1,026 $ 986 $ 1,026 Sales and marketing 2,276 2,068 1,932 Research and development 4,876 4,713 4,373 General and administrative 6,932 6,388 5,746 Total stock-based compensation expense $ 15,110 $ 14,155 $ 13,077 Ooma | FY2024 Form 10-K | 55 Comparison of fiscal years 2024, 2023 and 2022 (dollars in tables are in thousands): Revenue Fiscal Year Ended January 31, Change 2024 2023 2022 2024 vs. 2023 Revenue: Subscription and services $ 221,624 $ 199,105 $ 175,942 $ 22,519 11 % Product and other 15,113 17,060 16,348 (1,947 ) (11 )% Total revenue $ 236,737 $ 216,165 $ 192,290 $ 20,572 10 % Percentage of revenue: Subscription and services 94 % 92 % 91 % Product and other 6 % 8 % 9 % Total 100 % 100 % 100 % Fiscal 2024 Compared to Fiscal 2023 We derived approximately 58% and 53% of our total revenue from Ooma Business and approximately 40% and 45% from Ooma Residential in fiscal 2024 and 2023, respectively.
Some of these limitations are: • Adjusted EBITDA does not consider the impact of interest and other income/expense and does not reflect income tax payments that may represent a reduction in cash available to us; • Adjusted EBITDA does not consider any expenses for assets being depreciated and amortized that are necessary to our business; although these are non-cash charges, the property and equipment being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash capital expenditure requirements for such replacements; • Adjusted EBITDA and non-GAAP net income exclude stock-based compensation expense and related payroll taxes because we believe these adjustments provide better comparability to peer company results and because these charges are not viewed by management as part of our core operating performance ; • Adjusted EBITDA and non-GAAP net income exclude acquisition-related costs including the amortization of acquired intangible assets, as well as third-party transaction costs incurred for legal and other professional services, and an acquisition-related income tax benefit.
Some of these limitations are: • Adjusted EBITDA does not consider the impact of interest and other income/expense and does not reflect income tax payments that may represent a reduction in cash available to us; • Adjusted EBITDA does not consider any expenses for assets being depreciated and amortized that are necessary to our business; although these are non-cash charges, the property and equipment being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash capital expenditure requirements for such replacements; • Adjusted EBITDA and non-GAAP net income exclude stock-based compensation expense and related payroll taxes because we believe these adjustments provide better comparability to peer company results and because these charges are not viewed by management as part of our core operating performance ; • Adjusted EBITDA and non-GAAP net income exclude acquisition-related costs, including the amortization of acquired intangible assets and restructuring costs, as well as third-party transaction costs incurred for legal and other professional services, and an acquisition-related income tax benefit.
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.
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.
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.
The last day of our fiscal year is January 31, and we refer to our fiscal year ended January 31, 2024 as fiscal 2024, our fiscal year ended January 31, 2023 as fiscal 2023 and our fiscal year ended January 31, 2022 as fiscal 2022. All other references to years are references to calendar years.
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.
We believe that AERR is an indicator of recurring subscription and services revenue for near-term future periods. We estimate our AERR by dividing our recurring quarterly subscription revenue from our core users by the average number of core users each quarter and annualize by multiplying by four.
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.
Cost of revenue and gross margin Cost of subscription and services revenue includes payments made for third-party network operations and telecommunications services; certain telecom taxes and fees, including Federal Universal Service Fund (“USF”) contributions; credit card processing fees; costs to build out and maintain data centers; depreciation and maintenance of servers and equipment; personnel costs associated with customer care and network operations support; amortization of certain acquired intangible assets, and allocated overhead costs.
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.
Discussion regarding our financial condition and results of operations for fiscal 2023 as compared to 2022 is included in Item 7 of our Annual Report on Form 10-K for the year ended January 31, 2023, filed with the SEC on April 7, 2023 (the "FY2023 Form 10-K").
This section of this Form 10-K generally discusses fiscal 2023 and 2022 items and year-to-year comparisons between fiscal 2023 and 2022.
This section of this Form 10-K generally discusses fiscal 2024 and 2023 items and year-to-year comparisons between fiscal 2024 and 2023.
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.
Ooma | FY2024 Form 10-K | 49 Key Factors Affecting Our Performance Our historical financial performance and key business metrics have been, and we expect that our financial performance and key business metrics in the future will be, primarily driven by the following factors: Core user growth.
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.
If in any period we are able to sell inventories that were not valued or that had been written down in a previous period, related revenues would be recorded without any offsetting charge to cost of product and other revenue resulting in a net benefit to our gross margin in that period. Ooma | FY2024 Form 10-K | 61
General and administrative expenses consist of personnel costs for our finance, legal, human resources and other administrative employees and contractors, as well as professional service fees, certain acquisition-related costs, and allocated overhead costs. We expect our general and administrative expenses to increase in absolute dollars as we continue to grow our business .
Ooma | FY2024 Form 10-K | 53 General and administrative expenses consist of personnel costs for our finance, legal, human resources and other administrative employees and contractors, as well as professional service fees, certain acquisition-related costs, and allocated overhead costs. We expect our general and administrative expenses to increase in absolute dollars as we continue to grow our business.
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.
Accordingly, we expect our product and other gross margin will continue to be negatively impacted by these higher component costs and AirDial installation costs. We expect our product and other gross margin to continue to be negative for the foreseeable future. Our subscription and services gross margin is significantly higher than product and other gross margin.
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.
Additionally, we have a non-cancelable service agreement with a telecommunications provider that contains total annual minimum purchase commitments of $1.5 million between August 2022 and February 2024 and $2.5 million between March 2024 and February 2025. Ooma | FY2024 Form 10-K | 60 Critical Accounting Policies and Estimates We prepare our consolidated financial statements in accordance with U.S.
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.
As of January 31, 2024 and 2023, non-cancelable inventory purchase commitments to our contract manufacturers and other suppliers totaled approximately $1.1 million and $7.8 million, respectively.
Although we have generated cash from operations in recent periods, our operating cash flow may not remain positive in the future as we continue to invest in efforts to scale our business.
Although we have generated cash from operations in recent periods, our operating cash flow may not remain positive in the future as we continue to invest in efforts to scale our business and paydown borrowings under our Credit Agreement.
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.
Additionally, some product costs have become subject to significantly higher pricing we experienced due to supply chain constraints in the global macroeconomic environment as well as certain components becoming subject to end-of-life and we may not be able to fully offset such higher costs through price increases. Another factor is the high AirDial installation costs due to ramp up efforts.
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.
Cash usage reflected our acquisition of 2600Hz, including the repayment of borrowings under our Credit Agreement. Reconciliations of non-GAAP adjusted measures to the most directly comparable GAAP measures are presented below under Adjusted EBITDA and Non-GAAP Financial Measures.
Ooma | 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 | FY2024 Form 10-K | 50 Key Business Metrics We review the key metrics below to evaluate our business, measure our performance, identify trends affecting our business, formulate financial projections and make strategic decisions (in thousands, except percentages): As of January 31, 2024 2023 2022 Core users 1,243 1,210 1,100 Annualized exit recurring revenue (AERR) $ 227,500 $ 206,700 $ 176,900 Net dollar subscription retention rate (1) 99 % 99 % 99 % Adjusted EBITDA $ 19,843 $ 17,395 $ 15,568 (1) Revised January 31, 2023 and January 31, 2022 due to new methodology as described below Core Users increased year-over-year, which was primarily driven by growth in business users.
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.
The following table summarizes cash flow information for the periods indicated (in thousands): Fiscal Year Ended January 31, 2024 January 31, 2023 January 31, 2022 Net cash provided by operating activities $ 12,273 8,773 $ 6,655 Net cash used in investing activities (35,328 ) (6,146 ) (4,887 ) Net cash provided by financing activities 16,454 1,843 601 Net (decrease) increase in cash and cash equivalents $ (6,601 ) $ 4,470 $ 2,369 Operating Activities The following table provides selected cash flow information for the periods indicated (in thousands): Fiscal Year Ended January 31, 2024 January 31, 2023 January 31, 2022 Net loss $ (835 ) (3,655 ) $ (1,751 ) Non-cash charges 21,735 22,245 20,095 Changes in operating assets and liabilities: (Increase) decrease in accounts receivable (2,587 ) 434 (2,082 ) Decrease (increase) in inventories and deferred inventory costs 6,341 (12,333 ) (1,571 ) Increase in prepaid expenses and other assets (2,280 ) (2,460 ) (4,609 ) (Decrease) increase in accounts payable, accrued expenses and other liabilities (9,579 ) 4,509 (3,599 ) (Decrease) Increase in deferred revenue (522 ) 33 172 Net cash provided by operating activities $ 12,273 $ 8,773 $ 6,655 For fiscal 2024, our net loss of $0.8 million included non-cash charges primarily related to stock-based compensation expense, operating lease expense, depreciation and amortization expense, facilities consolidation gain and an income tax benefit related to our business acquisition.
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.
The following table provides a reconciliation of GAAP net loss to Adjusted EBITDA for the periods indicated (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 GAAP net loss $ (835 ) $ (3,655 ) $ (1,751 ) Reconciling items: Interest and other income, net (1,188 ) (332 ) (179 ) Income tax benefit (1,978 ) (1,770 ) — Depreciation and amortization of capital expenditures 4,317 3,771 3,117 Amortization of acquired intangible assets 3,711 2,286 1,304 Acquisition-related costs 885 1,538 — Facilities consolidation (gain) charges (956 ) 1,402 — Stock-based compensation and related taxes 15,110 14,155 13,077 Legal settlement costs 300 — — Restructuring costs 477 — — Adjusted EBITDA $ 19,843 $ 17,395 $ 15,568 Ooma | FY2024 Form 10-K | 52 Components of Results of Operations Revenue Subscription and services revenue is derived primarily from recurring subscription fees related to service plans such as Ooma Business, Ooma Residential and other communications services and, to a lesser extent, from payments associated with our Talkatone mobile application and prepaid international calls.
Although we exclude the amortization of acquired intangible assets from these non-GAAP measures, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation; • Adjusted EBITDA and non-GAAP net income exclude facilities consolidation charges recorded in connection with vacated office facilities assumed in the OnSIP acquisition, including right-of-use asset impairment charges and the related ongoing operating lease cost of those facilities recorded under ASC 842, Leases .
Although we exclude the amortization of acquired intangible assets from these non-GAAP measures, management believes that it is important for investors to understand that such intangible assets were recorded as part of purchase accounting and contribute to revenue generation; • Adjusted EBITDA and non-GAAP net income exclude facilities consolidation gain or charges recorded in connection with vacated office facilities assumed in the OnSIP acquisition.
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.
As of January 31, 2024, our total future expected payment obligations under non-cancelable operating leases with initial terms longer than one year were approximately $21.3 million, with payments of $3.8 million due in the next 12 months and $17.5 million due thereafter. See Note 7: Operating Leases in the notes to our consolidated financial statements.
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.
Adjusted EBITDA represents net income before interest and other income, income taxes, depreciation and amortization of capital expenditures, amortization of intangible assets, acquisition-related costs, certain litigation settlement costs, restructuring costs, non-recurring gains, and stock-based compensation expense and related taxes. See "Non-GAAP Financial Measures" below for additional information.
A significant portion of the year-over-year increase in personnel-related costs for operating expenses was due to increases in headcount attributable to the OnSIP acquisition near the end of the second quarter of fiscal 2023.
A significant portion of the year-over-year increase in personnel and contractor related costs for operating expenses was due to increases in headcount attributable to the 2600Hz and OnSIP acquisition in fiscal 2024 and 2023, respectively.
See Note 12: Financing Arrangements in the notes of our consolidated financial statements for more information. Contractual Obligations and Commitments Our principal commitments consist of obligations under operating leases for our headquarters located in Sunnyvale, California, as well as office space and co-location data center facilities in several locations.
Contractual Obligations and Commitments Our principal commitments consist of obligations under operating leases for our headquarters located in Sunnyvale, California, as well as office space and co-location data center facilities in several locations.
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.
Fiscal 2024 Financial Performance • Total revenue was $236.7 million, up 10% year-over-year, primarily driven by the continued growth of Ooma Business and the acquisition of 2600Hz. • Subscription and services revenue from Ooma Business grew 22% year-over-year, driven by user growth. • Total gross margin was 62%, down from 64% in fiscal 2023. • GAAP net loss was $0.8 million, compared to a net loss of $3.7 million in fiscal 2023.
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.
Operating asset and liability changes for fiscal 2024 included: • an increase of $2.6 million in accounts receivable due to the timing of cash collections; • a decrease of $6.3 million in inventories and deferred inventory costs; • an increase of $2.3 million in prepaid expenses and other current and non-current assets primarily due to the capitalization of sales commissions and the timing of prepayments; and • a decrease of $9.6 million in accounts payable, accrued expenses and other liabilities due to the timing of payments Cash provided by operating activities for fiscal 2024 increased $3.5 million year-over-year, which primarily reflected working capital impacts resulting from the timing of payments.
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”).
Financing Activities Cash provided by financing activities was $16.5 million for fiscal 2024, which consisted of proceeds from the issuance of long-term debt of $18.0 million to provide funding for the 2600Hz acquisition, proceeds of $2.7 million from the issuance of common stock from our Employee Stock Purchase Plan (“ESPP”) and stock option exercises, partly offset by payments of $1.7 million related to shares repurchased for tax withholdings on vesting of restricted stock units (“RSUs”), $2.0 million repayment of long-term debt, and $0.5 million debt issuance costs.
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.
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, 2024 2023 2022 GAAP net loss $ (835 ) $ (3,655 ) $ (1,751 ) Stock-based compensation and related taxes 15,110 14,155 13,077 Amortization of acquired intangible assets 3,711 2,286 1,304 Acquisition-related costs 692 1,538 — Facilities consolidation (gain) charges (956 ) 1,402 — Legal settlement costs 300 — — Restructuring costs 477 — — Acquisition-related income tax benefit (3,131 ) (2,133 ) — Non-GAAP net income $ 15,368 $ 13,593 $ 12,630 Ooma | FY2024 Form 10-K | 58 Liquidity and Capital Resources Our material cash requirements are discussed below under “Contractual Obligations and Commitments.” As of January 31, 2024, we had $17.5 million of total cash, cash equivalents and investments and borrowing capacity of $14.0 million under our Credit Agreement, which we believe will be sufficient to meet our cash needs for at least the next 12 months.
We expect our subscription and services revenue to grow as we expand our core user base, driven primarily by growth in Ooma Business. Product and other revenue consists primarily of sales of our on-premise devices and end-point devices used in connection with our services, including shipping and handling fees for our direct customers.
Product and other revenue consists primarily of sales of our on-premise devices and end-point devices used in connection with our services, including shipping and handling fees for our direct customers.
Revolving Credit Facility In January 2021, we entered into a credit and security agreement with certain banks that provided for a secured revolving credit facility under which we may borrow up to an aggregate of $25 million and, subject to certain conditions, may be increased to up to $45 million. We currently have no outstanding borrowings.
Revolving Credit Facility In October 2023, we entered into the Credit Agreement with certain lenders that provided for a secured revolving credit facility under which we may borrow up to an aggregate of $30.0 million and, subject to certain conditions, may be increased to up to $50.0 million.
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.
GAAP net loss for fiscal 2024 includes tax benefit for the release of a $3.1 million valuation allowance resulting from the recording of certain intangible assets associated with the acquisition of 2600Hz in late October 2023, as well as a $1.0 million gain on consolidation of facility costs, partially offset by $0.7 million in acquisition related costs and $0.5 million in certain restructuring costs. • Non-GAAP net income was $15.4 million, compared to $13.6 million in fiscal 2023. • Adjusted EBITDA was $19.8 million, or 8% of revenue, compared to $17.4 million in fiscal 2023. • As of January 31, 2024, we had total cash, cash equivalents and short-term investments of $17.5 million, down $9.4 million from $26.9 million as of January 31, 2023.
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.
Investing Activities Cash used in investing activities was $35.3 million for fiscal 2024, which consisted of cash consideration paid for the 2600Hz business acquisition of $32.2 million, and capital expenditures of $6.2 million, partly offset by proceeds of $2.8 million from maturities of short-term investments and $0.3 million of cash received for working capital adjustments from the seller related Ooma | FY2024 Form 10-K | 59 to the acquisition of OnSIP in the second fiscal quarter of 2023.
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.
These non-GAAP financial measures are presented to provide investors with additional information regarding our financial results and core business operations.
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.
Ooma | FY2024 Form 10-K | 56 Operating Expenses Fiscal Year Ended January 31, Change 2024 2023 2022 2024 vs. 2023 Sales and marketing $ 73,503 $ 69,671 $ 58,631 $ 3,832 6 % Research and development 49,935 45,939 38,193 3,996 9 % General and administrative 27,795 27,795 23,544 — — Total operating expenses $ 151,233 $ 143,405 $ 120,368 $ 7,828 5 % Fiscal 2024 Compared to Fiscal 2023 Sales and marketing expenses increased $3.8 million or 6% year-over-year, primarily due to a $4.1 million increase in personnel and contractor related costs, a $0.4 million increase in commission costs, and a $0.7 million increase in intangible asset amortization, offset in part by a $1.6 million decrease in advertising and marketing expense.
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.
As of January 31, 2024, Ooma Business users comprised approximately 39% of our total core users, up from 35% as of January 31, 2023. We believe that the number of our core users is an indicator of our market penetration, the growth of our business and our anticipated future subscription and services revenue.
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.
Cost of subscription and services revenue increased $9.2 million or 17% year-over-year, primarily due to a $4.1 million increase in personnel and contractor related costs, a $2.2 million increase in infrastructure costs, a $1.7 million increase in regulatory fees, a $0.7 million increase in intangible amortization expense and a $0.5 million increase in credit card processing fees.
Cash provided by financing activities increased $1.2 million year-over-year, which primarily reflected higher proceeds from stock option exercises.
Cash provided by financing activities increased $14.6 million year-over-year, which primarily reflected cash proceeds from borrowings under our Credit Agreement.
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.
We are investing in Ooma Business to develop additional features to continue our momentum serving businesses of all sizes and further increase our average revenue per user. We continue to see a large market opportunity to capitalize on Ooma AirDial as an integrated solution for businesses to replace legacy copper-wire analog phone service. Investing in long-term revenue growth.
We then multiply that result by the number of core users at the end of the period to calculate AERR.
We then multiply that result by the number of core users at the end of the period to calculate AERR. Beginning in the third quarter of fiscal 2024, we have added $7.8 million annual recurring revenue from 2600Hz to AERR.
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.
Research and development expenses increased $4.0 million or 9% year-over-year, primarily due to a $3.5 million increase in personnel and contractor related costs, driven by higher headcount, and a $0.5 million increase in restructuring costs.
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.
Cost of Revenue and Gross Margin Fiscal Year Ended January 31, Change 2024 2023 2022 2024 vs. 2023 Cost of revenue: Subscription and services $ 63,667 $ 54,499 $ 49,563 $ 9,168 17 % Product and other 25,838 24,018 24,289 1,820 8 % Total cost of revenue $ 89,505 $ 78,517 $ 73,852 $ 10,988 14 % Gross margin: Subscription and services 71 % 73 % 72 % Product and other (71 )% (41 )% (49 )% Total 62 % 64 % 62 % Fiscal 2024 Compared to Fiscal 2023 Subscription and services gross margin of 71% decreased year-over-year from 73%.
Overall, the year-over-year increase in the cost of subscription and services reflects both organic and OnSIP-related growth of our business.
Overall, the year-over-year increase in the cost of subscription and services reflects both organic growth and growth related to our acquisitions of 2600Hz and OnSIP in fiscal 2024 and 2023, respectively. Product and other revenue gross margin changed to negative 71% from negative 41% in the prior year.
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.
Subscription and services revenue increased $22.5 million or 11% year-over-year, primarily attributable to an increase in our core users and an increase in the average revenue per core user.
Business above for additional information regarding our business, including products and services offered, competitive market and regulatory matters.
We refer to Ooma Office, Ooma Enterprise, Ooma AirDial, 2600Hz, and OnSIP collectively as Ooma Business. Ooma Residential includes Ooma Telo basic and premier services, as well as Ooma Telo LTE services. See Item 1. Business above for additional information regarding our business, including products and services offered, competitive market and regulatory matters.
Cash used by investing activities increased $1.3 million year-over-year primarily due to funding our business acquisition with proceeds from investment maturities.
Cash used in investing activities increased $29.2 million year-over-year primarily due to the 2600Hz acquisition.
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.
NDRR was flat year-over-year due to relatively consistent level of user churn and increase in Average Monthly Recurring Subscription Revenue. Ooma | FY2024 Form 10-K | 51 Adjusted EBITDA increased year-over-year in line with our revenue growth, representing approximately 8% of our total revenues for fiscal 2024 and fiscal 2023.
We 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.
We may in the future make investments in or acquisitions of businesses or technologies, which may require the use of cash.
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.
The final aggregate purchase price was approximately $32.2 million, reflecting reduction for customary working capital adjustments, and was funded in part by the incurrence of $18.0 million of borrowings under our Credit Agreement. We believe the acquisition of 2600Hz will accelerate overall growth of Ooma Business.
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.
General and administrative expenses remained the same year-over-year with key movements including a $2.5 million increase in personnel and contractor related costs to scale with the overall growth of our business, offset by a $2.4 million change in facility consolidation gain.
However, during the fourth quarter of fiscal 2023, our results of operations started to be negatively impacted by certain higher cost components that we had procured earlier in the fiscal year to manage pandemic-driven supply chain issues.
This change was primarily due to the usage of certain higher cost components that we had procured in the prior fiscal year to stay ahead of pandemic driven supply chain issues. Product and other gross margin for fiscal 2023 benefited from certain accessory sales that did not recur in fiscal year 2024.
Removed
We primarily offer our solutions in the U.S. and Canada, with limited offerings in certain other countries.
Added
We primarily offer our solutions in the United States and Canada, with limited offerings in certain other countries. On October 20, 2023, we completed the acquisition of 2600hz, Inc. (“2600Hz”) a provider of cloud-based business applications targeted at resellers and carriers, for a base purchase price of approximately $33.0 million in cash.
Removed
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.
Added
We define our core users as the number of active residential user accounts and business user extensions (excluding Talkatone and 2600Hz users).
Removed
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.
Added
Net Dollar Subscription Retention Rate Effective in the first quarter of fiscal 2024, we transitioned to a new calculation methodology for our net dollar subscription retention rate (“NDRR”).
Removed
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.
Added
Since the majority of our subscription revenue is now generated from Ooma Business customers, we believe the new methodology better reflects our operational performance during the reporting period and is more in alignment with the reporting of our industry peers.
Removed
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.
Added
Prior to the current fiscal year, we calculated the NDRR as a function of the year-over-year growth in average revenue per user and churn as further discussed in the FY2023 Form 10-K.
Removed
It measures the percentage year-over-year change in our recurring subscription revenue per core user (excluding Talkatone revenue), which is then adjusted by factoring in the percentage of our core users we have retained during the same period.
Added
Under the new methodology, we define our NDRR as (i) one plus (ii) the quotient of Net Dollar Change (as defined below) divided by Average Monthly Recurring Subscription Revenue (as defined below).
Removed
Our net dollar subscription retention rate is affected by changes in average amounts that our core users pay to us, fluctuations in the number of our core users, and our core user churn rate.
Added
We define “Net Dollar Change” as the quotient of (i) the difference of our Monthly Recurring Subscription Revenue (as defined below) at the end of a period minus our Monthly Recurring Subscription Revenue at the beginning of a period minus our Monthly Recurring Subscription Revenue at the end of the period from new customers we added during the period, all divided by (ii) the number of months in the period.
Removed
We calculate our estimated net dollar subscription retention rate for our core users by multiplying: (i) our year-over-year percentage change in annual recurring revenue per core user, which is calculated by: ▪ determining the annual recurring revenue per core user by dividing annual recurring revenue for the period ended by the number of core users at the end of that particular period; and ▪ calculating the year-over-year percentage change in annual recurring revenue per core user by dividing the current period recurring revenue per core user by the annual recurring revenue per core user for the same period in the prior year. by: (ii) our core user annual retention rate, which is calculated by: ▪ determining our core user churn, by identifying the number of paying core users who terminate service during a month, excluding infant churn, which we define as office extensions and home users who terminate service prior to the end of the second full calendar month after their activation date; ▪ calculating our monthly churn rate by dividing our churn in a month by the number of core users at the beginning of that month; and ▪ calculating our annual retention rate as one minus the sum of our monthly churn rates for the preceding 12-month period.
Added
We define our Average Monthly Recurring Subscription Revenue as the average of the Monthly Recurring Subscription Revenue at the beginning and end of the measurement period. “Monthly Recurring Subscription Revenue” is defined as recurring subscription amounts from Ooma Residential and Ooma Business customers at the end of the most recent month, excluding recurring revenue from 2600Hz.
Removed
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.
Added
For example, if our Monthly Recurring Subscription Revenue was $115 at the end of a quarterly period and $100 at the beginning of the period, and $18 at the end of the period from new customers we added during the period, then the Net Dollar Change would be equal to ($1.00), or the amount equal to the difference of $115 minus $100 minus $18, all divided by three months.
Removed
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.
Added
Our Average Monthly Recurring Subscription Revenue would equal $107.5, or the sum of $115 plus $100, divided by two. Our NDRR would then equal 99.1%, or approximately 99%, or one plus the quotient of the Net Dollar Change divided by the Average Monthly Recurring Subscriptions.
Removed
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.
Added
We use Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to manage our business, evaluate our performance and make planning decisions.
Removed
Facilities consolidation charges included asset write-downs related to leased office space assumed in our OnSIP acquisition that we determined were not needed for the future growth of our business.
Added
We expect our subscription and services revenue to grow as we expand our core user base, driven primarily by growth in Ooma Business. We expect revenues from Ooma Business will continue to account for most of our revenue for the foreseeable future.
Removed
Income Taxes We recorded a net income tax benefit of $1.8 million for fiscal 2023 which was primarily attributable to the release of a $2.1 million valuation allowance on certain preexisting deferred tax assets that was realized as a result of deferred tax liabilities assumed in our acquisition of OnSIP.
Added
Revenue increase year-over-year is also attributable to inclusion of revenue from 2600Hz, which we acquired at the end of third quarter of fiscal 2024 and revenue for the entire fiscal year from OnSIP, which we acquired in the second quarter of fiscal 2023.
Removed
We hold our cash and cash equivalents with multiple large U.S. financial institutions, including SVB previously and currently with its purchaser, First Citizens BancShares. As of the date the accompanying consolidated financial statements were issued, we had access to all of our cash, cash equivalents and short-term investments.
Added
Product and other revenue decreased $1.9 million or 11% year-over-year, primarily attributable to the sale of certain legacy inventories and accessories in fiscal 2023. These sales did not recur in fiscal 2024.
Removed
We continue to believe that we have sufficient assets and liquidity to adequately cover future obligations using cash balances that we maintain.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

95 edited+27 added−21 removed88 unchanged
Biggest changeCONSOLIDATED 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.
Biggest changeCONSOLIDATED STATEM ENTS OF CASH FLOWS (Amounts in thousands) Fiscal Year Ended January 31, 2024 January 31, 2023 January 31, 2022 Cash flows from operating activities: Net loss $ ( 835 ) $ ( 3,655 ) $ ( 1,751 ) Adjustments to reconcile net loss to net cash provided by operating activities: Stock-based compensation expense 14,833 13,903 12,682 Depreciation and amortization of capital expenditures 4,317 3,771 3,117 Amortization of intangible assets 3,711 2,286 1,304 Amortization of operating lease right-of-use assets 2,966 2,978 2,939 Deferred income tax benefit ( 3,131 ) ( 2,133 ) — Facilities consolidation (gain) charge ( 956 ) 1,402 — Other ( 5 ) 38 53 Changes in operating assets and liabilities: Accounts receivable, net ( 2,587 ) 434 ( 2,082 ) Inventories and deferred inventory costs 6,341 ( 12,333 ) ( 1,571 ) Prepaid expenses and other assets ( 2,280 ) ( 2,460 ) ( 4,609 ) Accounts payable, accrued expenses and other liabilities ( 9,579 ) 4,509 ( 3,599 ) Deferred revenue ( 522 ) 33 172 Net cash provided by operating activities 12,273 8,773 6,655 Cash flows from investing activities: Proceeds from maturities of short-term investments 2,750 12,705 16,505 Proceeds from sales of short-term investments — — 300 Purchases of short-term investments — ( 3,869 ) ( 17,488 ) Capital expenditures ( 6,159 ) ( 5,211 ) ( 4,204 ) Business acquisition ( 31,919 ) ( 9,771 ) — Net cash used in investing activities ( 35,328 ) ( 6,146 ) ( 4,887 ) Cash flows from financing activities: Proceeds from issuance of common stock 2,664 3,397 2,706 Shares repurchased for tax withholdings on vesting of restricted stock units ("RSU") ( 1,741 ) ( 1,554 ) ( 2,105 ) Proceeds from issuance of long-term debt 18,000 — — Repayment of long-term debt ( 2,000 ) — — Credit facility issuance costs ( 469 ) — — Net cash provided by financing activities 16,454 1,843 601 Net (decrease) increase in cash and cash equivalents ( 6,601 ) 4,470 2,369 Cash and cash equivalents at beginning of period 24,137 19,667 17,298 Cash and cash equivalents at end of period $ 17,536 $ 24,137 $ 19,667 Supplementary cash flow disclosure: Cash paid for income taxes, net $ 765 $ 409 $ 34 Non-cash investing and financing activities: Capital expenditures included in accounts payable at period-end $ 188 $ 243 $ 324 Purchase price receivable for business acquisition (see Note 13) $ — $ 300 $ — See notes to consolidated financial statements.
See Note 7: Leases for disclosure of impairment charges recorded in fiscal 2023. The Company did no t record any material impairment charges for fiscal 2022 or fiscal 2021. Advertising. Advertising costs are expensed as incurred, except for production costs associated with television and radio advertising, which are expensed on the first date of airing.
See Note 7: Leases for disclosure of impairment charges recorded in fiscal 2024. The Company did no t record any material impairment charges for fiscal 2023 or fiscal 2022. Advertising. Advertising costs are expensed as incurred, except for production costs associated with television and radio advertising, which are expensed on the first date of airing.
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.
Level 3: Unobservable inputs that are supported by little or no market activity The carrying value of the Company’s financial instruments, including cash equivalents, accounts receivable, inventory, accounts payable and other current assets and current liabilities approximates fair value due to their short maturities. The carrying value of debt approximates its fair value. Concentrations.
Notes to Consolidated Financial Statements Note 7: Operating Leases The Company leases its headquarters located in Sunnyvale, California, as well as office space and data center facilities in several locations under non-cancelable operating lease agreements, with expiration dates through fiscal 2030 .
Notes to Consolidated Financial Statements Note 7: Operating Leases The Company leases its headquarters located in Sunnyvale, California, as well as office space and data center facilities in several locations under non-cancelable operating lease agreements, with expiration dates through fiscal 2033 .
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.
Accounts receivable are recorded net of an allowance for doubtful accounts for expected credit losses. Allowances are recorded based upon assessment of several factors, including historical experience, aging of receivable balances and economic conditions. As of January 31, 2024 and 2023, the allowance for doubtful accounts was $ 0.3 million.
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.
References to fiscal 2024, fiscal 2023, and fiscal 2022 refer to the fiscal years ended January 31, 2024, January 31, 2023, and January 31, 2022, respectively. Use of Estimates. The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the Company’s consolidated financial statements and accompanying notes.
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.
Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of January 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The Company does not have any tax positions for which it is reasonably possible the total amount of gross unrecognized benefits will significantly increase or decrease within 12 months of the year ended January 31, 2023.
The Company does not have any tax positions for which it is reasonably possible the total amount of gross unrecognized benefits will significantly increase or decrease within 12 months of the year ended January 31, 2024 .
The complaint seeks monetary and other damages and/or injunctive relief enjoining the Company to cease describing and marketing its Basic Home Phone using the word “free” or otherwise representing that it is free. On November 9, 2021, the Federal Court of Canada removed Ms. Chiu and substituted John Zanin as the new plaintiff in the proceeding.
The complaint seeks monetary and other damages and/or injunctive relief enjoining the Company from describing and marketing its Basic Home Phone using the word “free” or otherwise representing that it is free. On November 9, 2021, the Federal Court of Canada removed Ms. Chiu and substituted John Zanin as the new plaintiff in the proceeding.
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.
We also have audited the Company’s internal control over financial reporting as of January 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission.
The Credit Agreement provides for a secured revolving credit facility (“Credit Facility”) under which the Company may borrow up to an aggregate amount of $ 25.0 million, which includes a $ 10.0 million sub-facility for letters of credit.
The Credit Agreement provides for a secured revolving credit facility (“Credit Facility”) under which the Company may borrow up to an aggregate amount of $ 30.0 million, which includes a $ 10.0 million sub-facility for letters of credit.
As of January 31, 2023, the majority of the Company’s deferred revenue balance was composed of subscription contracts that were invoiced during the fourth quarter of fiscal 2023. Remaining performance obligations .
As of January 31, 2024, the majority of the Company’s deferred revenue balance was composed of subscription contracts that were invoiced during the fourth quarter of fiscal 2024. Remaining performance obligations .
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.
Ooma | FY2024 Form 10-K | 69 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.
The Company and its lenders may increase the total commitments under the Credit Facility to up to an aggregate amount of $ 45.0 million, subject to certain conditions. Funds borrowed under the Credit Agreement may be used for working capital and other general corporate purposes.
The Company and its lenders may increase the total commitments under the Credit Facility to up to an aggregate amount of $ 50.0 million, subject to certain conditions. Funds borrowed under the Credit Agreement may be used for acquisition, working capital and other general corporate purposes.
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.
Capitalized costs related to development of the Company's customer-facing websites are amortized on a straight-line basis over an estimated useful life of three to five years . Leasehold improvements are amortized over the shorter of the lease term or estimated useful lives of the respective assets.
Zanin regarding jurisdiction and class action certification issues, and the parties are awaiting the Court to issue its ruling. The Company intends to continue to defend itself vigorously against this complaint. Based on the Company’s current knowledge, the Company has determined that the amount of any reasonably possible loss resulting from the Canadian Litigation is not estimable.
Zanin regarding jurisdiction and class action certification issues, and the parties are awaiting the Court's ruling. The Company intends to continue to defend itself vigorously against this complaint. Based on the Company’s current knowledge, the Company has determined that the amount of any reasonably possible loss resulting from the Canadian Litigation is not estimable.
The Company believes it is not practicable to separately identify earnings of OnSIP on a stand-alone basis due to the integrated nature of the Company's operations.
The Company believes it is not practicable to separately identify earnings of 2600Hz on a stand-alone basis due to the integrated nature of the Company's operations.
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.
Ooma | FY2024 Form 10-K | 64 Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments.
The 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.
The Company determines the stand-alone selling price (“SSP”) for its communications services based on observable historical stand-alone sales to customers, for which a substantial majority of selling prices must fall within a reasonably narrow pricing range.
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 .
Ooma | FY2024 Form 10-K | 72 Ooma, Inc. Notes to Consolidated Financial Statements Property and Equipment, net. Property and equipment, net is stated at cost, less accumulated depreciation and amortization. Depreciation and amortization is computed on a straight-line basis over the estimated useful lives of those assets, generally two to five years .
The Company withheld an aggregate amount of $ 1.6 million, $ 2.1 million and $ 1.6 million in fiscal 2023, 2022 and 2021, respectively, which were classified as financing cash outflows in the consolidated statements of cash flows. The Company canceled and returned these shares to the 2015 Plan, which were available under the plan terms for future issuance.
The Company withheld an aggregate amount of $ 1.7 million, $ 1.6 million and $ 2.1 million in fiscal 2024, 2023 and 2022, respectively, which were classified as financing cash outflows in the consolidated statements of cash flows. The Company canceled and returned these shares to the 2015 Plan, which became available under the plan terms for future issuance.
The offering periods are scheduled to start on the first trading day on or after March 15 and September 15 of each year. During each of the fiscal years 2023, 2022 and 2021, employees purchased 0.2 million shares at a weighted-average purchase price of $ 10.44 , $ 10.22 , and $ 9.98 per share, respectively.
The offering periods are scheduled to start on the first trading day on or after March 15 and September 15 of each year. During each of the fiscal years 2024 , 2023 and 2022, employees purchased 0.2 million shares at a weighted-average purchase price of $ 10.60 , $ 10.44 and $ 10.22 per share, respectively.
Ooma | FY2023 Form 10-K | 78 Ooma, Inc. Notes to Consolidated Financial Statements Employee Stock Purchase Plan The ESPP allows eligible employees to purchase shares of common stock at a discount through payroll deductions of up to 15 % of their eligible compensation, subject to plan limitations.
Ooma | FY2024 Form 10-K | 82 Ooma, Inc. Notes to Consolidated Financial Statements Employee Stock Purchase Plan The ESPP allows eligible employees to purchase shares of common stock at a discount through payroll deductions of up to 15 % of their eligible compensation, subject to plan limitations.
The 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.
The cost of securities sold is based upon the specific identification method. Ooma | FY2024 Form 10-K | 71 Ooma, Inc. Notes to Consolidated Financial Statements Fair Value of Financial Instruments. The Company records its financial assets and liabilities at fair value.
The Company had no interest or penalty accruals associated with uncertain tax benefits in its consolidated balance sheets and statements of operations for any periods presented. Ooma | FY2023 Form 10-K | 71 Ooma, Inc.
The Company had no interest or penalty accruals associated with uncertain tax benefits in its consolidated balance sheets and statements of operations for any periods presented. Ooma | FY2024 Form 10-K | 74 Ooma, Inc.
As amended, the promissory note and accrued interest is due and payable upon the Company’s demand at any time after June 30, 2023. GTC is a variable interest entity for accounting purposes and the Company does not consolidate GTC into its financial statements because the Company is not the primary beneficiary.
As amended, the promissory note and accrued interest are due and payable upon the Company’s demand at any time after June 30, 2023. GTC was a variable interest entity for accounting purposes and the Company did not consolidate GTC into its financial statements because the Company was not the primary beneficiary.
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.
The Company recorded $221.6 million of subscription and services revenue for the year ended January 31, 2024. We identified the evaluation of the sufficiency of audit evidence over certain subscription revenue as a critical audit matter. This matter required especially subjective auditor judgment because the revenue recognition process is automated and reliant upon complex IT systems.
Amortization of deferred sales commissions was $ 7.6 million, $ 6.0 million and $ 3.9 million in fiscal 2023, 2022 and 2021, respectively. Global Telecom Corporation (“GTC”).
Amortization of deferred sales commissions was $ 9.0 million, $ 7.6 million and $ 6.0 million in fiscal 2024, 2023 and 2022, respectively. Global Telecom Corporation (“GTC”).
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.
Product returns and sales incentives are estimated based on the Company’s historical experience, current trends and expectations regarding future experience. As of January 31, 2024 and 2023, total reserves for product returns and sales incentives were approximately $ 0.8 million and $ 0.7 million, respectively.
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.
Remeasurement and transaction gains and losses are included in interest and other income, net and were not material for any periods presented. Ooma | FY2024 Form 10-K | 70 Ooma, Inc.
The following table summarizes the activity related to unrecognized tax benefits (in thousands): Fiscal Year Ended January 31, 2023 2022 2021 Unrecognized tax benefits, beginning of fiscal year $ 8,090 $ 6,642 $ 6,017 Decrease related to prior year tax positions ( 331 ) — ( 362 ) Increase related to current year tax positions 1,301 1,448 987 Unrecognized tax benefits, end of fiscal year $ 9,060 $ 8,090 $ 6,642 The Company had no interest or penalty accruals associated with uncertain tax benefits in its balance sheets and statements of operations.
The following table summarizes the activity related to unrecognized tax benefits (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Unrecognized tax benefits, beginning of fiscal year $ 9,060 $ 8,090 $ 6,642 Increase (decrease) related to prior year tax positions 670 ( 331 ) — Increase related to current year tax positions 1,313 1,301 1,448 Unrecognized tax benefits, end of fiscal year $ 11,043 $ 9,060 $ 8,090 The Company had no interest or penalty accruals associated with uncertain tax benefits in its balance sheets and statements of operations.
As of January 31, 2023, there was $ 23.7 million of unrecognized compensation expense related to unvested RSUs, stock options and stock purchase rights under the ESPP, which is expected to be recognized over a weighted-average vesting period of 2.4 years.
As of January 31, 2024, there was $ 27.2 million of unrecognized compensation expense related to unvested RSUs, stock options and stock purchase rights under the ESPP, which is expected to be recognized over a weighted-average vesting period of 2.2 years.
Additionally, the Company has a non-cancelable service agreement with a telecommunications provider that contains total annual minimum purchase commitments of $ 1.5 million between August 2022 and July 2023 and $ 2.5 million between August 2023 and July 2024.
Additionally, the Company has a non-cancelable service agreement with a telecommunications provider that contains total annual minimum purchase commitments of $ 1.5 million between August 2022 and February 2024 and $ 2.5 million between March 2024 and February 2025.
As of January 31, 2023 and 2022, the Company does no t have any accrued liabilities recorded for loss contingencies in its consolidated financial statements.
As of January 31, 2024 and 2023, the Company did no t have any accrued liabilities recorded for loss contingencies in its consolidated financial statements.
Note 9: Stock-Based Compensation Total stock-based compensation recognized in the consolidated statements of operations was as follows (in thousands): Fiscal Year Ended January 31, 2023 2022 2021 Cost of revenue $ 956 $ 979 $ 1,015 Sales and marketing 2,019 1,856 1,910 Research and development 4,623 4,216 4,267 General and administrative 6,305 5,631 5,083 Total stock-based compensation expense $ 13,903 $ 12,682 $ 12,275 The income tax benefit related to stock-based compensation expense was zero for all periods presented due to a full valuation allowance on the Company's deferred tax assets (see Note 10: Income Taxes below).
Note 9: Stock-Based Compensation Total stock-based compensation recognized in the consolidated statements of operations was as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Cost of revenue $ 1,000 $ 956 $ 979 Sales and marketing 2,226 2,019 1,856 Research and development 4,760 4,623 4,216 General and administrative 6,847 6,305 5,631 Total stock-based compensation expense $ 14,833 $ 13,903 $ 12,682 The income tax benefit related to stock-based compensation expense was zero for all periods presented due to a full valuation allowance on the Company's deferred tax assets (see Note 10: Income Taxes below).
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.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of January 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended January 31, 2024, in conformity with U.S. generally accepted accounting principles.
The weighted-average grant date fair value of options granted during fiscal 2023, 2022, and 2021 was $ 8.06 , $ 7.89 and $ 4.72 , respectively. Restricted Stock Units. Under the 2015 Plan, RSUs may be granted to employees, non-employee directors and consultants.
The weighted-average grant date fair value of options granted during fiscal 2023 and 2022, was $ 8.06 and $ 7.89 , respectively. No options were granted in fiscal 2024. Restricted Stock Units. Under the 2015 Plan, RSUs may be granted to employees, non-employee directors and consultants.
The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data): Fiscal Year Ended January 31, 2023 2022 2021 Numerator Net loss $ ( 3,655 ) $ ( 1,751 ) $ ( 2,441 ) Denominator Weighted-average common shares 24,506,525 23,473,849 22,361,312 Basic and diluted net loss per share $ ( 0.15 ) $ ( 0.07 ) $ ( 0.11 ) Potentially dilutive securities of approximately 0.7 million, 1.4 million and 1.2 million in fiscal 2023, 2022 and 2021, respectively, were excluded from the computation of diluted net loss per share as their inclusion would have been anti-dilutive.
The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data): Fiscal Year Ended January 31, 2024 2023 2022 Numerator Net loss $ ( 835 ) $ ( 3,655 ) $ ( 1,751 ) Denominator Weighted-average common shares 25,573,288 24,506,525 23,473,849 Basic and diluted net loss per share $ ( 0.03 ) $ ( 0.15 ) $ ( 0.07 ) Potentially dilutive securities of approximately 0.6 million, 0.7 million and 1.4 million in fiscal 2024 , 2023 and 2022, respectively, were excluded from the computation of diluted net loss per share as their inclusion would have been anti-dilutive.
As of January 31, 2023, the mandatory capitalization requirement resulted in an increase to the Company’s gross deferred tax assets above, which was fully offset by the valuation allowance.
As of January 31, 2024, the mandatory capitalization requirement resulted in an increase to the Company’s gross deferred tax assets above, which was fully offset by the valuation allowance, and increases the Company's cash tax liabilities.
Notes to Consolidated Financial Statements and related shipping costs of approximately $ 2.6 million and $ 2.7 million in fiscal 2023 and 2022, respectively. As of January 31, 2023 and 2022, the Company did not have any material non-cancelable inventory purchase commitments to GTC.
Notes to Consolidated Financial Statements and related shipping costs of approximately $ 0.4 million and $ 2.6 million in fiscal 2024 and 2023, respectively. As of January 31, 2024 and 2023, the Company did no t have any material non-cancelable inventory purchase commitments to GTC.
Advertising costs are included in sales and marketing expense and were $ 16.4 million, $ 14.5 million and $ 12.2 million in fiscal 2023, 2022 and 2021, respectively. Ooma | FY2023 Form 10-K | 70 Ooma, Inc. Notes to Consolidated Financial Statements Stock-Based Compensation.
Advertising costs are included in sales and marketing expense and were $ 16.5 million, $ 16.4 million and $ 14.5 million in fiscal 2024, 2023 and 2022, respectively. Ooma | FY2024 Form 10-K | 73 Ooma, Inc. Notes to Consolidated Financial Statements Stock-Based Compensation.
Additionally, in the third quarter of fiscal 2023, the Company recorded facilities consolidation charges of $ 1.4 million to general and administrative expense, which included $ 1.3 million for right-of-use asset impairment and $ 0.1 million for fixed asset impairment, in connection with leased office facilities assumed in the OnSIP acquisition that the Company subsequently determined were not needed to support the future growth of its business.
Additionally, in the third quarter of fiscal 2023, the Company recorded facilities consolidation charges of $ 1.4 million to general and administrative expense, in connection with the leased office facilities assumed in the OnSIP acquisition that the Company subsequently determined were not needed to support the future growth of its business.
Notes to Consolidated Financial Statements Note 4: Fair Value Measurements Financial assets measured at fair value on a recurring basis by level were as follows (in thousands): Balance as of January 31, 2023 Level 1 Level 2 Total Cash and cash equivalents: Money market funds $ 11,380 $ — $ 11,380 Total cash equivalents $ 11,380 $ — 11,380 Cash 12,757 Total cash and cash equivalents $ 24,137 Short-term investments: U.S. treasury securities $ 1,232 $ — $ 1,232 Corporate debt securities — 1,491 1,491 Total short-term investments $ 1,232 $ 1,491 $ 2,723 Balance as of January 31, 2022 Level 1 Level 2 Total Cash and cash equivalents: Money market funds $ 2,275 $ — $ 2,275 Total cash equivalents $ 2,275 $ — 2,275 Cash 17,392 Total cash and cash equivalents $ 19,667 Short-term investments: U.S. treasury securities $ 7,065 $ — $ 7,065 Commercial paper — 4,548 4,548 Total short-term investments $ 7,065 $ 4,548 $ 11,613 The Company classifies its cash equivalents and short-term investments within Level 1 or Level 2 because it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value.
Financial assets measured at fair value on a recurring basis by level were as follows (in thousands): Balance as of January 31, 2023 Level 1 Level 2 Total Cash and cash equivalents: Money market funds $ 11,380 $ — $ 11,380 Total cash equivalents $ 11,380 $ — 11,380 Cash 12,757 Total cash and cash equivalents $ 24,137 Short-term investments: U.S. treasury securities $ 1,232 $ — $ 1,232 Commercial paper — 1,491 1,491 Total short-term investments $ 1,232 $ 1,491 $ 2,723 The Company classifies its cash equivalents and short-term investments within Level 1 or Level 2 because it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value.
Notes to Consolidated Financial Statements Note 10: Income Taxes The domestic and foreign components of loss before income taxes were as follows (in thousands): Fiscal Year Ended January 31, 2023 2022 2021 United States $ ( 2,557 ) $ 1,340 $ ( 120 ) Foreign ( 2,868 ) ( 3,091 ) ( 2,236 ) Loss before income taxes $ ( 5,425 ) $ ( 1,751 ) $ ( 2,356 ) Income tax (benefit) provision consisted of the following: Fiscal Year Ended January 31, 2023 2022 2021 Current: Federal $ — $ — $ — State 363 — 85 Foreign — — — Total current 363 — 85 Deferred: Federal ( 1,783 ) — — State ( 350 ) — — Foreign — — — Total deferred ( 2,133 ) — — Income tax (benefit) provision $ ( 1,770 ) $ — $ 85 The income tax benefit of $ 1.8 million for fiscal 2023 was primarily attributable to the release of a $ 2.1 million valuation allowance on certain preexisting deferred tax assets that was realized as a result of deferred tax liabilities assumed in the Company's acquisition of OnSIP.
Notes to Consolidated Financial Statements Note 10: Income Taxes The domestic and foreign components of loss before income taxes were as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 United States $ ( 491 ) $ ( 2,557 ) $ 1,340 Foreign ( 2,322 ) ( 2,868 ) ( 3,091 ) Loss before income taxes $ ( 2,813 ) $ ( 5,425 ) $ ( 1,751 ) Income tax benefit consisted of the following: Fiscal Year Ended January 31, 2024 2023 2022 Current: Federal $ — $ — $ — State 1,153 363 — Foreign — — — Total current 1,153 363 — Deferred: Federal ( 2,661 ) ( 1,783 ) — State ( 470 ) ( 350 ) — Foreign — — — Total deferred ( 3,131 ) ( 2,133 ) — Income tax benefit $ ( 1,978 ) $ ( 1,770 ) $ — The income tax benefit of $ 2.0 million for fiscal 2024 was primarily attributable to the release of a $ 3.1 million valuation allowance on certain preexisting deferred tax assets realized as a result of deferred tax liabilities assumed in the Company's acquisition of 2600Hz.
To date the Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. No liability associated with such indemnifications has been recorded to date. Ooma | FY2023 Form 10-K | 83 Ooma, Inc.
To date the Company has not incurred costs to defend lawsuits or settle claims related to these indemnification agreements. No liability associated with such indemnifications has been recorded to date.
Notes to Consolidated Financial Statements Note 8: Stockholders’ Equity Common Stock Reserved for Future Issuance The Company had shares of common stock reserved for issuance as follows (in thousands): As of January 31, 2023 January 31, 2022 Restricted stock units outstanding 1,466 1,312 Options to purchase common stock 1,217 1,325 Shares available for future issuance under stock plans 2,654 2,354 Shares reserved under ESPP 1,637 1,370 Total shares reserved for issuance 6,974 6,361 Stock Options.
Notes to Consolidated Financial Statements Note 8: Stockholders’ Equity Common Stock Reserved for Future Issuance The Company had shares of common stock reserved for issuance as follows (in thousands): As of January 31, 2024 January 31, 2023 Restricted stock units outstanding 2,075 1,466 Options to purchase common stock 1,161 1,217 Shares available for future issuance under stock plans 2,601 2,654 Shares reserved under ESPP 1,909 1,637 Total shares reserved for issuance 7,746 6,974 Stock Options.
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).
Consolidated Financial Statements and Supplementary Data Index Report of Independent Registered Public Accounting Firm – KPMG LLP (PCAOB ID No. 185 ) 64 Consolidated Balance Sheets 66 Consolidated Statements of Operations 67 Consolidated Statements of Stockholders’ Equity 68 Consolidated Statements of Cash Flows 69 Notes to Consolidated Financial Statements 70 Ooma | FY2024 Form 10-K | 63 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, 2024 and 2023, the related consolidated statements of operations, stockholders’ equity, and cash flows for each of the years in the three-year period ended January 31, 2024, and the related notes (collectively, the consolidated financial statements).
The Company’s matching contributions to the plan were $ 0.9 million for fiscal 2023 and $ 0.7 million for each of fiscal 2022 and 2021. Ooma | FY2023 Form 10-K | 86 ITEM 9. Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure None.
The Company’s matching contributions to the plan were $ 1.1 million, $ 0.9 million and $ 0.7 million for fiscal 2024, 2023 and 2022, respectively. Ooma | FY2024 Form 10-K | 90 ITEM 9. Changes in and Disagreements with Acco untants on Accounting and Financial Disclosure None.
Supplemental balance sheet information related to leases was as follows (in thousands): As of January 31, 2023 January 31, 2022 Assets Operating lease right-of-use assets $ 12,702 $ 14,396 Total leased assets $ 12,702 $ 14,396 Liabilities Short-term operating lease liabilities $ 3,617 $ 3,260 Long-term operating lease liabilities 10,426 11,194 Total lease liabilities $ 14,043 $ 14,454 Weighted-average remaining lease term 4.8 years 5.8 years Weighted-average discount rate 4.5 % 3.7 % The components of lease expense were as follows (in thousands): Fiscal Year Ended January 31, 2023 2022 2021 Operating lease costs (1) $ 4,030 $ 3,861 $ 3,947 Variable lease costs (2) 1,117 972 948 Total lease cost $ 5,147 $ 4,833 $ 4,895 (1) Recognized on a straight-line basis over the lease term.
Supplemental balance sheet information related to leases was as follows (in thousands): As of January 31, 2024 January 31, 2023 Assets Operating lease right-of-use assets $ 17,041 $ 12,702 Total leased assets $ 17,041 $ 12,702 Liabilities Short-term operating lease liabilities $ 3,742 $ 3,617 Long-term operating lease liabilities 13,676 10,426 Total lease liabilities $ 17,418 $ 14,043 Weighted-average remaining lease term 6.0 years 4.8 years Weighted-average discount rate 6.2 % 4.5 % The components of lease expense were as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Operating lease costs (1) $ 4,581 $ 4,030 $ 3,861 Variable lease costs (2) 1,217 1,117 972 Total lease cost $ 5,798 $ 5,147 $ 4,833 (1) Recognized on a straight-line basis over the lease term.
The net change in the total valuation allowance was a decrease of $ 1.6 million for fiscal 2023 and an increase of $ 3.0 million for fiscal 2022.
The net change in the total valuation allowance was a decrease of $ 1.0 million and $ 1.6 million for fiscal 2024 and 2023, respectively.
As of January 31, 2023, contract revenue that had not yet been recognized for open contracts with an original expected length of greater than one year was approximately $ 18.2 million. The Company expects to recognize revenue on approximately 43 % of this amount over the next 12 months, with the balance to be recognized thereafter.
As of January 31, 2024, contract revenue that had not yet been recognized for open contracts with an original expected length of greater than one year was approxima tely $ 26.5 million. The Company expects to recognize revenue on approximately 41 % of this amount over the next 12 month s, with the balance to be recognized thereafter.
Notes to Consolidated Financial Statements Note 5: Balance Sheet Components The following sections and tables provide details of selected balance sheet items (in thousands): Inventories As of January 31, 2023 January 31, 2022 Finished goods $ 13,715 $ 10,452 Raw materials 12,531 3,389 Total inventory $ 26,246 $ 13,841 Property and equipment, net As of Estimated life (in years) January 31, 2023 January 31, 2022 Computer hardware and software 3 - 4 $ 6,847 $ 6,996 Network and engineering equipment 3 - 5 6,283 4,979 Website development costs 2 6,251 4,816 Customer premise equipment 3 5,954 3,965 Leasehold improvements 1 - 7 497 447 Office furniture and fixtures 5 124 124 Total property and equipment 25,956 21,327 Less: accumulated depreciation and amortization ( 17,960 ) ( 14,846 ) Property and equipment, net $ 7,996 $ 6,481 Depreciation and amortization of property and equipment totaled $ 3.8 million, $ 3.1 million and $ 2.9 million in fiscal 2023, 2022 and 2021, respectively.
Notes to Consolidated Financial Statements Note 5: Balance Sheet Components The following sections and tables provide details of selected balance sheet items (in thousands): Inventories As of January 31, 2024 January 31, 2023 Finished goods $ 12,024 $ 13,715 Raw materials 7,758 12,531 Total inventory $ 19,782 $ 26,246 Property and equipment, net As of Estimated life (in years) January 31, 2024 January 31, 2023 Computer hardware and software 3 - 4 $ 6,995 $ 6,847 Network and engineering equipment 3 - 5 7,504 6,283 Website development costs 3 - 5 9,046 6,251 Customer premise equipment 3 - 5 7,466 5,954 Office furniture and fixtures 5 204 497 Leasehold improvements 1 - 5 637 124 Total property and equipment 31,852 25,956 Less: accumulated depreciation and amortization ( 21,955 ) ( 17,960 ) Property and equipment, net $ 9,897 $ 7,996 Depreciation and amortization of property and equipment totaled $ 4.3 million, $ 3.8 million and $ 3.1 million in fiscal 2024, 2023 and 2022, respectively.
Notes to Consolidated Financial Statements Note 3: Revenue and Deferred Revenue Disaggregated revenue Revenue disaggregated by revenue source consisted of the following (in thousands): Fiscal Year Ended January 31, 2023 2022 2021 Subscription and services revenue $ 199,105 $ 175,942 $ 156,873 Product and other revenue 17,060 16,348 12,074 Total revenue $ 216,165 $ 192,290 $ 168,947 The Company derived approximately 53 %, 49 % and 44 % of its total revenue from Ooma Business and approximately 45 %, 49 % and 54 % of its total revenue from Ooma Residential in fiscal 2023, 2022 and 2021, respectively.
Notes to Consolidated Financial Statements Note 3: Revenue and Deferred Revenue Disaggregated revenue Revenue disaggregated by revenue source consisted of the following (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Subscription and services revenue $ 221,624 $ 199,105 $ 175,942 Product and other revenue 15,113 17,060 16,348 Total revenue $ 236,737 $ 216,165 $ 192,290 The Company derived approximately 58 % , 53 % and 49 % of its total revenue from Ooma Business and approximately 40 % , 45 % and 49 % of its total revenue from Ooma Residential in fiscal 2024, 2023, and 2022, respectively.
Income tax (benefit) provision differed from the amount computed by applying the U.S. federal income tax rate to pre-tax loss as a result of the following (dollars in thousands): Fiscal Year Ended January 31, 2023 Rate 2022 Rate 2021 Rate Federal tax at statutory rate $ ( 1,139 ) 21 % $ ( 368 ) 21 % $ ( 495 ) 21 % State taxes, net of federal benefit ( 40 ) 1 % 52 ( 3 )% 75 ( 3 )% Foreign income and withholding taxes ( 172 ) 3 % ( 185 ) 11 % ( 87 ) 3 % Permanent tax adjustment 543 ( 10 )% 58 ( 3 )% 163 ( 7 )% Section 162(m) 843 ( 16 )% 1,050 ( 60 )% 598 ( 25 )% Stock-based compensation 530 ( 10 )% ( 1,545 ) 88 % ( 251 ) 11 % Change in valuation allowance ( 1,566 ) 29 % 2,959 ( 169 )% 185 ( 8 )% Research and development credit ( 1,288 ) 24 % ( 1,980 ) 113 % ( 243 ) 10 % Provision to return adjustments 533 ( 10 )% — — — — Other ( 14 ) 1 % ( 41 ) 2 % 140 ( 6 )% Income tax (benefit) provision at effective tax rate $ ( 1,770 ) 33 % $ — 0 % $ 85 ( 4 )% Ooma | FY2023 Form 10-K | 80 Ooma, Inc.
Income tax benefit differed from the amount computed by applying the U.S. federal income tax rate to pre-tax loss as a result of the following (dollars in thousands): Fiscal Year Ended January 31, 2024 Rate 2023 Rate 2022 Rate Federal tax at statutory rate $ ( 603 ) 21 % $ ( 1,139 ) 21 % $ ( 368 ) 21 % State taxes, net of federal benefit ( 128 ) 4 % ( 40 ) 1 % 52 ( 3 )% Foreign income and withholding taxes ( 139 ) 5 % ( 172 ) 3 % ( 185 ) 11 % Permanent tax adjustment 294 ( 10 )% 543 ( 10 )% 58 ( 3 )% Section 162(m) 802 ( 28 )% 843 ( 16 )% 1,050 ( 60 )% Stock-based compensation 812 ( 28 )% 530 ( 10 )% ( 1,545 ) 88 % Change in valuation allowance ( 1,015 ) 35 % ( 1,566 ) 29 % 2,959 ( 169 )% Research and development credit ( 2,095 ) 73 % ( 1,288 ) 24 % ( 1,980 ) 113 % Provision to return adjustments 4 — 533 ( 10 )% — — Other 90 ( 3 )% ( 14 ) 1 % ( 41 ) 2 % Income tax benefit at effective tax rate $ ( 1,978 ) 69 % $ ( 1,770 ) 33 % $ — 0 % Ooma | FY2024 Form 10-K | 84 Ooma, Inc.
The goodwill recognized was primarily attributable to the assembled workforce and is not expected to be deductible for income tax purposes. Revenues of OnSIP included in the Company’s consolidated statements of operations from the acquisition date of July 22, 2022 to January 31, 2023 was approximately $ 6.5 million.
The goodwill recognized was primarily attributable to the assembled workforce and is not expected to be deductible for income tax purposes. Revenues of 2600Hz included in the Company’s consolidated statements of operations from the acquisition date of October 20, 2023, to January 31, 2024 was approximately $ 2.3 million.
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.
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, 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 Issuance of common stock under equity-based plans 1,116,166 2,664 — — 2,664 Shares repurchased for tax withholdings on vesting of RSUs ( 137,387 ) ( 1,741 ) — — ( 1,741 ) Stock-based compensation — 14,833 — — 14,833 Other comprehensive income — — 22 — 22 Net loss — — — ( 835 ) ( 835 ) BALANCE - January 31, 2024 25,974,871 $ 211,366 $ ( 1 ) $ ( 133,278 ) $ 78,087 See notes to consolidated financial statements.
As of January 31, 2023, the Company’s maximum exposure to loss is equal to the carrying value of the convertible note receivable of $ 1.9 million, including accrued interest. The Company made total payments to GTC for inventory purchases Ooma | FY2023 Form 10-K | 74 Ooma, Inc.
As of January 31, 2024, the Company’s maximum exposure to loss was equal to the carrying value of the convertible note receivable of $ 2.3 million, including accrued interest. The Company made total payments to GTC for inventory purchases Ooma | FY2024 Form 10-K | 77 Ooma, Inc.
Notes to Consolidated Financial Statements Supplemental cash flow information related to leases was as follows (in thousands): Fiscal Year Ended January 31, 2023 2022 2021 Cash payments for operating leases $ 3,563 $ 3,945 $ 3,343 Right-of-use assets recognized in exchange for new operating lease obligations $ 2,599 $ 11,289 $ 1,196 As of January 31, 2023, maturities of operating lease liabilities were as follows (in thousands): Fiscal Years Ending January 31, January 31, 2023 2024 $ 3,690 2025 3,754 2026 2,826 2027 1,684 2028 1,647 Thereafter 1,908 Total future minimum lease payments 15,509 Less: imputed interest ( 1,466 ) Present value of lease liabilities $ 14,043 Additionally, in August 2022, the Company entered into a new operating lease agreement to expand its customer contact center and warehouse facilities in Newark, California to scale with the Company's business growth.
Notes to Consolidated Financial Statements Supplemental cash flow information related to leases was as follows (in thousands): Fiscal Year Ended January 31, 2024 2023 2022 Cash payments for operating leases $ 3,895 $ 3,563 $ 3,945 Right-of-use assets recognized in exchange for new operating lease obligations $ 7,303 $ 2,599 $ 11,289 As of January 31, 2024, maturities of operating lease liabilities were as follows (in thousands): Fiscal Years Ending January 31, January 31, 2024 2025 $ 3,845 2026 3,810 2027 3,648 2028 2,656 2029 2,742 Thereafter 4,629 Total future minimum lease payments 21,330 Less: imputed interest ( 3,912 ) Present value of lease liabilities $ 17,418 Additionally, in August 2022, the Company entered into a new operating lease agreement to expand its warehouse facilities and customer contact center in Newark, California to scale with the Company’s business growth.
Notes to Consolidated Financial Statements Note 14: Net Loss Per Share Basic and diluted net loss per share of common stock is calculated by dividing the net loss allocable to common stockholders by the weighted-average number of common shares outstanding during the period.
Ooma | FY2024 Form 10-K | 89 Note 14: Net Loss Per Share Basic and diluted net loss per share of common stock is calculated by dividing the net loss allocable to common stockholders by the weighted-average number of common shares outstanding during the period.
Notes to Consolidated Financial Statements The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows (in thousands): As of January 31, 2023 2022 Deferred tax assets: Net operating loss carryforwards $ 28,771 $ 34,808 Tax credit carryover 12,205 10,905 Operating lease liabilities 3,547 3,482 Stock-based compensation 923 1,114 Acquired intangible assets — 256 Capitalized research and development 6,061 — Deferred revenue 8 18 Other 22 26 Gross deferred tax assets 51,537 50,609 Valuation allowance ( 43,545 ) ( 45,111 ) Net deferred tax assets $ 7,992 $ 5,498 Deferred tax liabilities: Operating lease right-of-use assets $ ( 3,202 ) $ ( 3,468 ) Deferred sales commissions and other ( 2,396 ) ( 1,994 ) Acquired intangible assets ( 1,543 ) — Fixed assets depreciation ( 851 ) ( 36 ) Gross deferred tax liabilities $ ( 7,992 ) $ ( 5,498 ) Net deferred taxes $ — $ — Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective January 1, 2022.
Notes to Consolidated Financial Statements The tax effects of temporary differences that give rise to significant portions of the Company’s deferred tax assets and liabilities are as follows (in thousands): As of January 31, 2024 2023 Deferred tax assets: Net operating loss carryforwards $ 18,486 $ 28,771 Tax credit carryover 14,928 12,205 Operating lease liabilities 4,405 3,547 Stock-based compensation 1,095 923 Capitalized research and development 17,131 6,061 State Taxes 232 — Deferred revenue 4 8 Other — 22 Gross deferred tax assets 56,281 51,537 Valuation allowance ( 42,530 ) ( 43,545 ) Net deferred tax assets $ 13,751 $ 7,992 Deferred tax liabilities: Operating lease right-of-use assets $ ( 4,309 ) $ ( 3,202 ) Deferred sales commissions and other ( 2,119 ) ( 2,396 ) Acquired intangible assets ( 6,100 ) ( 1,543 ) Fixed assets depreciation ( 1,223 ) ( 851 ) Gross deferred tax liabilities $ ( 13,751 ) $ ( 7,992 ) Net deferred taxes $ — $ — Under the Tax Cuts and Jobs Act of 2017, research and development costs are no longer fully deductible and are required to be capitalized and amortized for U.S. tax purposes effective January 1, 2022.
Because the Company has net operating loss and credit carryforwards, there are open statutes of limitations in which federal, state and foreign taxing authorities may examine the Company’s tax returns for all tax years from 2009 through the current period. Ooma | FY2023 Form 10-K | 82 Ooma, Inc.
Because the Company has net operating loss and credit carryforwards, there are open statutes of limitations in which federal, state and foreign taxing authorities may examine the Company’s tax returns for all tax years from the fiscal year ended January 31, 2010 through the current period.
As of January 31, 2023 January 31, 2022 Subscription and services $ 17,239 $ 16,614 Product and other 8 59 Total deferred revenue $ 17,247 $ 16,673 Less: current deferred revenue 17,216 16,600 Non-current deferred revenue included in other long-term liabilities $ 31 $ 73 During fiscal 2023, the Company recognized revenue of approximately $ 16.6 million pertaining to amounts deferred as of January 31, 2022.
As of January 31, 2024 January 31, 2023 Subscription and services $ 17,034 $ 17,239 Product and other 22 8 Total deferred revenue $ 17,056 17,247 Less: current deferred revenue 17,041 17,216 Non-current deferred revenue included in other long-term liabilities $ 15 $ 31 During fiscal 2024, the Company recognized revenue of approximately $ 17.2 million pertaining to amounts deferred as of January 31, 2023.
RSU activity for fiscal 2023 was as follows: Shares (in thousands) Weighted-Average Grant Date Fair Value Per Share Balance as of January 31, 2022 1,312 $ 15.05 Granted 981 $ 16.25 Vested ( 770 ) $ 15.19 Canceled ( 57 ) $ 14.32 Balance as of January 31, 2023 1,466 $ 15.81 Vested RSUs included shares of common stock that the Company withheld on behalf of certain employees to satisfy the minimum statutory tax withholding requirements, as defined by the Company.
RSU activity for fiscal 2024 was as follows: Shares (in thousands) Weighted-Average Grant Date Fair Value Per Share Balance as of January 31, 2023 1,466 $ 15.81 Granted 1,507 $ 12.30 Vested ( 835 ) $ 14.65 Canceled ( 63 ) $ 15.24 Balance as of January 31, 2024 2,075 $ 13.74 Vested RSUs included shares of common stock that the Company withheld on behalf of certain employees to satisfy the minimum statutory tax withholding requirements, as defined by the Company.
Foreign Currencies To date, our revenue has been primarily denominated in U.S. dollars with a small portion denominated in Canadian dollars. As a result, some of our revenue is subject to fluctuations due to changes in the Canadian dollar relative to the U.S. dollar. Substantially all of our operating expenses have been denominated in U.S. dollars.
As a result, some of our revenue is subject to fluctuations due to changes in the Canadian dollar relative to the U.S. dollar. Substantially all of our operating expenses have been denominated in U.S. dollars. The functional currency for all of our entities is the U.S. dollar.
As of January 31, 2023, the Company had federal net operating loss carryforwards of approximately $ 96.9 million available to offset future income, of which approximately $ 45.0 million will expire in various amounts beginning in 2030 and the remainder may be carried forward indefinitely.
As of January 31, 2024 , the Company had federal net operating loss carryforwards of approximately $ 47.7 million available to offset future income, of which approximate ly $ 5.8 million will expire in various amounts beginning in fiscal 2038 and the remainder may be carried forward indefinitely.
The Company has no Level 3 assets or liabilities. For the periods presented, the amortized cost of cash equivalents and marketable securities approximated their fair value and there were no material realized or unrealized gains or losses, either individually or in the aggregate.
The Company has no Level 3 assets or liabilities. For the periods presented, the amortized cost of cash equivalents and marketable securities approximated their fair value and there were no material realized or unrealized gains or losses, either individually or in the aggregate. Short-term investments due in less than a year was $ 2.7 million as of January 31, 2023.
The fair value of employee stock options and ESPP was estimated using the Black–Scholes model with the following assumptions: Fiscal Year Ended January 31, 2023 2022 2021 Stock Options: Expected volatility 49 % 51 % 47 % Expected term (in years) 6.1 6.1 6.1 Risk-free interest rate 1.6 % 0.9 % 0.6 % Dividend yield NA NA NA Fiscal Year Ended January 31, 2023 2022 2021 ESPP: Expected volatility 41 %- 55 % 41 %- 58 % 46 %- 83 % Expected term (in years) 0.5 - 2.0 0.5 - 2.0 0.5 - 2.0 Risk-free interest rate 0.9 %- 4.0 % 0.1 %- 0.2 % 0.1 %- 0.4 % Dividend yield NA NA NA The expected term of options granted to employees was based on the simplified method because the Company does not have sufficient historical exercise data, and the expected term of the ESPP is based on the contractual term.
Fiscal Year Ended January 31, 2024 2023 2022 ESPP: Expected volatility 32 %- 43 % 41 %- 55 % 41 %- 58 % Expected term (in years) 0.5 - 2.0 0.5 - 2.0 0.5 - 2.0 Risk-free interest rate 3.9 %- 5.5 % 0.9 %- 4.0 % 0.1 %- 0.2 % Dividend yield NA NA NA The expected term of options granted to employees was based on the simplified method because the Company does not have sufficient historical exercise data for the fiscal years presented, and the expected term of the ESPP is based on the contractual term.
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.
CONSOLIDATED STATEMENTS OF OPERATIONS (Amounts in thousands, except shares and per share data) Fiscal Year Ended January 31, 2024 2023 2022 Revenue: Subscription and services $ 221,624 $ 199,105 $ 175,942 Product and other 15,113 17,060 16,348 Total revenue 236,737 216,165 192,290 Cost of revenue: Subscription and services 63,667 54,499 49,563 Product and other 25,838 24,018 24,289 Total cost of revenue 89,505 78,517 73,852 Gross profit 147,232 137,648 118,438 Operating expenses: Sales and marketing 73,503 69,671 58,631 Research and development 49,935 45,939 38,193 General and administrative 27,795 27,795 23,544 Total operating expenses 151,233 143,405 120,368 Loss from operations ( 4,001 ) ( 5,757 ) ( 1,930 ) Interest and other income, net 1,188 332 179 Loss before income taxes ( 2,813 ) ( 5,425 ) ( 1,751 ) Income tax benefit 1,978 1,770 — Net loss $ ( 835 ) $ ( 3,655 ) $ ( 1,751 ) Net loss per share of common stock: Basic and diluted $ ( 0.03 ) $ ( 0.15 ) $ ( 0.07 ) Weighted-average shares of common stock outstanding: Basic and diluted 25,573,288 24,506,525 23,473,849 See notes to consolidated financial statements.
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.
We evaluated the sufficiency of audit evidence obtained by assessing the results of procedures performed, including the appropriateness of such evidence. /s/ KPMG LLP We have served as the Company's auditor since 2021. Santa Clara, California April 2, 2024 Ooma | FY2024 Form 10-K | 65 OOMA, INC.
CONSOLIDATED 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.
CONSOLIDATED B ALANCE SHEETS (Amounts in thousands, except share and per share data) January 31, 2024 January 31, 2023 Assets Current assets: Cash and cash equivalents $ 17,536 $ 24,137 Short-term investments — 2,723 Accounts receivable, net 9,864 7,131 Inventories 19,782 26,246 Other current assets 16,497 14,368 Total current assets 63,679 74,605 Property and equipment, net 9,897 7,996 Operating lease right-of-use assets 17,041 12,702 Intangible assets, net 27,952 10,463 Goodwill 23,069 8,655 Other assets 17,615 16,584 Total assets $ 159,253 $ 131,005 Liabilities and Stockholders’ Equity Current liabilities: Accounts payable $ 7,848 $ 13,462 Accrued expenses and other current liabilities 26,586 26,726 Deferred revenue 17,041 17,216 Total current liabilities 51,475 57,404 Long-term operating lease liabilities 13,676 10,426 Debt, net of current portion 16,000 — Other long-term liabilities 15 31 Total liabilities 81,166 67,861 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; 26.0 million and 25.0 million shares issued and outstanding, respectively 5 5 Additional paid-in capital 211,361 195,605 Accumulated other comprehensive loss ( 1 ) ( 23 ) Accumulated deficit ( 133,278 ) ( 132,443 ) Total stockholders’ equity 78,087 63,144 Total liabilities and stockholders’ equity $ 159,253 $ 131,005 See notes to consolidated financial statements.
Notes to Consolidated Financial Statements Note 12: Financing Arrangements Revolving Credit Facility On January 8, 2021 , the Company, as borrower, entered into a three year credit and security agreement (“Credit Agreement”) with KeyBank National Association as Administrative Agent (“Agent”) and lender, and KeyBanc Capital Markets Inc. as sole lead arranger and sole book runner.
On January 8, 2021 , the Company, as borrower, entered into a credit and security agreement (“Key Bank Credit Agreement”) with KeyBank National Association ("Key Bank") as Administrative Agent (“Agent”) and lender, and KeyBanc Capital Markets Inc. as sole lead arranger and sole book runner.
The goodwill balance was as follows (in thousands): Total Balance at January 31, 2022 $ 4,264 Additions due to OnSIP acquisition 4,391 Balance at January 31, 2023 $ 8,655 The gross value, accumulated amortization and carrying values of intangible assets were as follows (in thousands): As of January 31, 2023 Estimated life (in years) Gross Value Accumulated Amortization Carrying Value Customer relationships 5 - 7 $ 14,745 $ ( 4,775 ) $ 9,970 Developed technology 2 - 5 2,219 ( 1,891 ) 328 Trade names 2 - 5 684 ( 519 ) 165 Total intangible assets $ 17,648 $ ( 7,185 ) $ 10,463 As of January 31, 2022 Estimated life (in years) Gross Value Accumulated Amortization Carrying Value Customer relationships 5 - 7 $ 6,735 $ ( 2,921 ) $ 3,814 Developed technology 5 1,809 ( 1,584 ) 225 Trade names 5 564 ( 395 ) 169 Total intangible assets $ 9,108 $ ( 4,900 ) $ 4,208 Amortization expense was $ 2.3 million, $ 1.3 million and $ 1.3 million in fiscal 2023, 2022 and 2021, respectively.
The goodwill balance was as follows (in thousands): Total Balance at January 31, 2023 $ 8,655 Additions due to 2600Hz acquisition 14,414 Balance at January 31, 2024 $ 23,069 The gross value, accumulated amortization and carrying values of intangible assets were as follows (in thousands): As of January 31, 2024 Estimated life (in years) Gross Value Accumulated Amortization Carrying Value Developed technology 2 - 7 $ 20,618 $ ( 2,865 ) $ 17,753 Customer relationships 5 - 7 16,545 ( 7,336 ) 9,209 Trade names 2 - 5 1,685 ( 695 ) 990 Total intangible assets $ 38,848 $ ( 10,896 ) $ 27,952 As of January 31, 2023 Estimated life (in years) Gross Value Accumulated Amortization Carrying Value Customer relationships 5 - 7 $ 14,745 $ ( 4,775 ) $ 9,970 Developed technology 2 - 5 2,219 ( 1,891 ) 328 Trade names 2 - 5 684 ( 519 ) 165 Total intangible assets $ 17,648 $ ( 7,185 ) $ 10,463 Amortization expense was $ 3.7 million, $ 2.3 million and $ 1.3 million in fiscal 2024, 2023 and 2022, respectively.
Other current and non-current assets As of January 31, 2023 January 31, 2022 Deferred sales commissions, current $ 7,826 $ 6,395 Prepaid expenses 2,777 4,239 Convertible note receivable (see "GTC" below) 1,899 1,773 Other current assets 1,866 1,191 Total other current assets $ 14,368 $ 13,598 Deferred sales commissions, non-current $ 14,467 $ 13,228 Deposits and other assets 2,117 647 Total other non-current assets $ 16,584 $ 13,875 Customer Acquisition Costs.
Other current and non-current assets As of January 31, 2024 January 31, 2023 Deferred sales commissions, current $ 8,579 $ 7,826 Prepaid expenses and other 4,177 2,777 Convertible note receivable (see "GTC" below) 2,257 1,899 Other current assets 1,484 1,866 Total other current assets $ 16,497 $ 14,368 Deferred sales commissions, non-current $ 15,257 $ 14,467 Other assets 2,358 2,117 Total other non-current assets $ 17,615 $ 16,584 Customer Acquisition Costs.
Notes to Consolidated Financial Statements Note 11: Commitments and Contingencies Purchase Commitments As of January 31, 2023 and 2022, non-cancelable inventory purchase commitments to contract manufacturers and other parties were approximately $ 7.8 million and $ 19.4 million, respectively.
Ooma | FY2024 Form 10-K | 86 Note 11: Commitments and Contingencies Purchase Commitments As of January 31, 2024 and 2023, non-cancelable inventory purchase commitments to contract manufacturers and other parties were approximately $ 1.1 million and $ 7.8 million, respectively.
Stock option activity for fiscal 2023 was as follows: Weighted-Average Aggregate Shares Exercise Price Intrinsic Value (in thousands) Per Share (in thousands) Balance as of January 31, 2022 1,325 $ 8.93 $ 12,064 Granted 95 $ 16.69 Exercised ( 194 ) $ 6.15 Canceled ( 9 ) $ 15.57 Balance as of January 31, 2023 1,217 $ 9.93 $ 5,949 Vested and exercisable as of January 31, 2023 1,043 $ 9.04 $ 5,815 The aggregate intrinsic value of vested options exercised during fiscal 2023, 2022 and 2021 was $ 1.7 million, $ 1.9 million, and $ 1.4 million, respectively.
Stock option activity for fiscal 2024 was as follows: Weighted-Average Aggregate Shares Exercise Price Intrinsic Value (in thousands) Per Share (in thousands) Balance as of January 31, 2023 1,217 $ 9.93 $ 5,949 Granted — $ — Exercised ( 54 ) $ 4.90 Canceled ( 2 ) $ 13.36 Balance as of January 31, 2024 1,161 $ 10.14 $ 2,522 Vested and exercisable as of January 31, 2024 1,068 $ 9.63 $ 2,520 The aggregate intrinsic value of vested options exercised during fiscal 2024 , 2023 and 2022 was $ 0.5 million, $ 1.7 million and $ 1.9 million, respectively.
The risk-free interest rate was based on the yields of U.S. Treasury securities with maturities similar to the expected term. Ooma | FY2023 Form 10-K | 79 Ooma, Inc.
For fiscal years presented, expected volatility was derived from the average historical volatility of the Company’s own common stock. The risk-free interest rate was based on the yields of U.S. Treasury securities with maturities similar to the expected term. Ooma | FY2024 Form 10-K | 83 Ooma, Inc.
As of January 31, 2023, the Company had zero outstanding borrowings and was in compliance with the covenants contained in the Credit Agreement. Accordingly, $ 25.0 million of borrowing capacity was available for the purposes permitted by the Credit Agreement. Ooma | FY2023 Form 10-K | 84 Ooma, Inc.
The Company is in compliance with the covenants contained in the Credit Agreement as of January 31, 2024 . Accordingly, $ 14.0 million of borrowing capacity was available for the purposes permitted by the Credit Agreement.
Loans under the Credit Agreement will bear interest, at the Company’s option, at either a rate equal to the “Base Rate” (as defined in the Credit Agreement) or (b) “Eurodollar Rate” (as defined in the Credit Agreement) plus 2.50%.
Loans under the Credit Agreement will bear interest, at the Company’s option, at either a rate equal to the Alternate Base Rate plus the Applicable Margin (as defined in the Credit Agreement) or Term Secure Overnight Financing Rate ("SOFR") plus the Applicable Margin (as defined in the Credit Agreement).
Ooma | FY2023 Form 10-K | 63 OOMA, INC.
Ooma | FY2024 Form 10-K | 66 OOMA, INC.
Ooma | FY2023 Form 10-K | 64 OOMA, INC.
Ooma | FY2024 Form 10-K | 67 OOMA, INC.

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