Ooma raises FY2026 non-GAAP net income guidance to $25M as AirDial momentum accelerates

Earnings Call Insights: Ooma (OOMA) Q2 2026

MANAGEMENT VIEW

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CEO Eric B. Stang opened the call by highlighting strong Q2 financial performance, stating "we grew our revenue in Q2 to $66.4 million, while also setting some bottom line records. In Q2, we achieved record non-GAAP net income of $6.5 million and record adjusted EBITDA of $7.2 million. GAAP net income was $1.3 million and cash flow from operations was $6.4 million." Stang emphasized momentum in Business user metrics, noting "user growth net of churn, average revenue per user, annual exit recurring revenue and the take rate of our Pro and Pro Plus higher-tier offerings were all up both sequentially and year-over-year."

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Stang announced the upcoming launch of Connect 5000, a 5G internet solution designed to enhance the double-play offering for small businesses, and discussed further development of AI-driven features: "New AI features, along with more advanced contact center functionality and integrations with other vertical solutions will allow us to serve slightly larger-sized businesses, and we are already beginning to see some traction in that regard."

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On AirDial, Stang reported "we more than doubled new bookings year-over-year and secured our largest customer win today with a large national retailer. We've started the rollout with this retailer and anticipate serving over 3,000 locations."

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Stang also noted the addition of three new AirDial partner resellers, bringing the total close to 35, and highlighted progress in the 2600Hz platform with new mobile and desktop applications and expanded customer relationships.

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On the Residential side, Stang shared "we had a stronger quarter for new customer acquisition and experienced slightly reduced churn compared to Q1," and reported the signing of seven new ISP partners in Q2.

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CFO Shigeyuki Hamamatsu stated, "our second quarter revenue was $66.4 million, above our guidance range and was up 3% year-over-year, driven by the growth of Ooma Business, including AirDial." Hamamatsu also reported, "Q2 non-GAAP net income was $6.5 million, above our guidance range of $5.6 million to $5.9 million and grew 59% year-over-year, primarily driven by our improving operating leverage."

OUTLOOK

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Hamamatsu provided guidance for Q3 fiscal 2026, stating "we expect total revenue for the third quarter of fiscal '26 to be in the range of $67.2 million to $67.9 million... we expect the third quarter non-GAAP net income to be in the range of $6 million to $6.4 million. Non-GAAP diluted EPS is expected to be between $0.22 to $0.23."

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For the full fiscal year, Hamamatsu said "we expect total revenue to be in the range of $267 million to $270 million, which is unchanged from our prior guidance." He added, "we are raising the guidance and now expect it [full-year non-GAAP net income] to be in the range of $24.5 million to $25 million."

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The guidance assumes a 5% to 6% growth rate for Business subscription and services revenue and a 1% to 2% decline in Residential subscription revenue.

FINANCIAL RESULTS

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Q2 revenue was reported at $66.4 million, with subscription and services revenue of $61.1 million, accounting for 92% of total revenue.

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Product and other revenue totaled $5.2 million, up 15% year-over-year, attributed to AirDial installations.

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The company ended Q2 with 1,230,000 core users, including 508,000 business users, an increase of 9,000 from Q1.

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ARPU rose 4% year-over-year to $15.68, with 61% of new Office users choosing higher-tier services, up from 58% in the prior year.

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Annual exit recurring revenue was $240 million, up 3% year-over-year. Net dollar subscription retention rate improved to 100% from 99% in Q1.

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Subscription and services gross margin was 71.3%. Total gross margin for Q2 remained at 62%. Total operating expenses for Q2 were $35.1 million, down slightly year-over-year.

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Free cash flow for the trailing 12 months was $20 million, with $14.5 million spent on share repurchases in the same period.

Q&A

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Michael Joshua Nichols, B. Riley Securities: Asked about AirDial's contribution to ARR and its breakout. Hamamatsu responded that AirDial is "starting to contribute more to the ARR itself" and noted the acceleration in bookings.

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Nichols inquired about partner ramp on AirDial. Stang said, "it's pretty exciting to have nearly 35 partners who are reselling AirDial... resellers do take time to ramp... T-Mobile has never been stronger with us on AirDial."

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Eric Martinuzzi, Lake Street Capital Markets: Questioned use of cash for share repurchases versus M&A. Stang explained, "we do feel some share buybacks at this current share price in the market are sensible for us... But we are always looking for M&A opportunities that fit our criteria."

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Martinuzzi also questioned the business growth rate and guidance conservatism. Hamamatsu clarified, "the variability there is just the timing of the AirDial installation going into second half... it's not about the churn that we're expecting."

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Kincaid LaCorte, Citizens: Asked about the largest retail AirDial customer win and revenue per location. Stang stated, "we've done a limited amount of installations with them so far, and we are anticipating installations through the back half of this year" and suggested using $25 per line per month as ARPU guidance for AirDial.

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Matthew Harrigan, The Benchmark Company: Sought color on 2600Hz growth. Stang described ongoing investments to make it a stronger turnkey solution and said "we've added about a handful of customers so far this year onto the platform."

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Alinda Li, William Blair: Asked about the uptick in net dollar retention rate and sustainability. Hamamatsu credited "better churn quarter over last" and expects stability in the 99% to 100% range.

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Li also inquired about bottom line guidance raise. Hamamatsu cited "R&D efficiency... prudent about the sales and marketing expense... and the tax" as key drivers.

SENTIMENT ANALYSIS

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Analysts focused on AirDial growth, profitability improvements, and guidance updates, with a generally positive and constructive tone, frequently congratulating management on results.

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Management maintained a confident and optimistic tone, emphasizing momentum, growth opportunities, and execution, with Stang stating "we believe we have built outstanding solutions and have set goals to drive both growth and improved profitability going forward."

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Compared to the previous quarter, management's tone became more assertive about profitability and business momentum, while analysts were more focused on bottom line expansion and partner ramp specifics.

QUARTER-OVER-QUARTER COMPARISON

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Guidance for full-year revenue remained unchanged, but non-GAAP net income guidance was raised from a previous range of $22.5 million to $23.5 million to $24.5 million to $25 million.

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AirDial momentum accelerated, with more than double year-over-year bookings and a major new retail customer win compared to Q1's focus on new reseller launches.

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The number of AirDial partners increased, and progress with large partners like Comcast and T-Mobile was emphasized.

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ARPU and higher-tier Office service adoption rose sequentially, and net dollar retention improved from the prior quarter.

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Management expressed increased confidence in operating leverage and R&D efficiency, raising profitability targets.

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Analyst sentiment shifted to more granular questions about segment contribution and efficiency drivers, while management projected stronger bottom-line growth.

RISKS AND CONCERNS

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Management highlighted the timing of AirDial installations as a variable affecting revenue recognition, not higher churn.

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There was mention of ongoing discipline in sales and marketing and R&D expenses as key to maintaining profitability.

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No new major risks were outlined, and AirDial partner ramp speed was noted as a point of focus.

FINAL TAKEAWAY

Ooma's management underscored strong execution in Q2 2026, marked by record profitability, accelerating momentum with AirDial—including a significant national retailer win—and continued gains in the business user segment. The company increased its full-year non-GAAP net income guidance while maintaining its revenue outlook, citing improved operating leverage, R&D efficiency, and disciplined expense management as key contributors. Management's focus remains on expanding AirDial partnerships, launching new solutions like Connect 5000, and driving growth across its business and wholesale platforms in the second half of the fiscal year.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/ooma/earnings/transcripts]

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