Ooma - Earnings Call - Q2 2026

Executive Summary

• Revenue of $66.4M, up 3% y/y, with subscription/services at $61.1M (92% of total); results exceeded S&P Global consensus revenue of ~$65.7M and non-GAAP EPS of ~$0.20 as Ooma delivered $0.23 non-GAAP EPS and record adjusted EBITDA of $7.2M.*
• FY26 guidance raised for GAAP net income to $3.5–$4.0M and non-GAAP net income to $24.5–$25.0M, while revenue was maintained at $267–$270M; Q3 FY26 guidance implies revenue $67.2–$67.9M and non-GAAP EPS $0.22–$0.23, broadly bracketing consensus.*
• Operating leverage drove margin resilience: GAAP gross margin ~61% and non-GAAP ~62%; adjusted EBITDA margin reached 11%, at the low end of the mid-term target range (11–14%).
• Execution catalysts include AirDial bookings more than doubling y/y, a new largest retail win (anticipated ~3,000 locations), and continued product innovation in 2600Hz apps and AI-driven features—building momentum into H2.

*Values retrieved from S&P Global.

What Went Well and What Went Wrong

What Went Well

• “Record adjusted EBITDA of $7.2 million” and non-GAAP EPS growth of 52% y/y underscore improving operating leverage and profitability focus.
• AirDial ramped strongly: “We more than doubled new bookings year over year and secured our largest customer win to date with a large national retailer… anticipate serving over 3,000 locations;” partners expanding to “approaching 35” resellers.
• Business KPIs strengthened: core users 1.23M (+5K q/q), business users 508K (+9K q/q), ARPU $15.68 (+4% y/y), Office Pro/Pro Plus take rate 61% of new users; NRR 100% vs 99% in Q1.

What Went Wrong

• Product/other gross margin remains negative, albeit improving: Q2 product gross margin -47% (vs -69% LY), with heavier product mix (AirDial installs) offsetting improvements; overall gross margin flat y/y at 62%.
• Residential subscription/services revenue declined 2% y/y; sequential churn improved, but the segment remains a headwind to mix.
• Guidance variability reflects installation timing on AirDial (customer timing), leading to wider ranges for Q3 and full-year mix of product vs subscription/services.

Transcript

Speaker 4

Hello and welcome to Ooma Inc.'s second quarter fiscal year 2026 financial results conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press *11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press *11 again. I will now like to turn the conference over to Matt. You may begin.

Speaker 9

Thank you, Tawanda. Good day, everyone, and welcome to the fiscal second quarter 2026 earnings call at Ooma Inc. My name is Matt Robison. I'm the Director of IR and Corporate Development. On the call with me today are Ooma's CEO, Eric Stang, and CFO, Shige Hamamatsu. After the market closed today, Ooma issued its fiscal second quarter 2026 earnings press release. This release is also available on the company's website, ooma.com. This call is being webcast live and is accessible from a link on the Events and Presentations page of the Investor Relations section of our website. This link will be active to replay this call for one year. During today's presentation, our executives will make forward-looking statements in the meaning of the Federal Securities Laws. Forward-looking statements generally relate to future events or future financial or operating performance.

Our expectations and beliefs regarding these matters may not materialize in actual results and are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today, and those risks more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements except as required by law. Please note that, other than revenue or as otherwise stated, the financial measures to be disclosed on this call will be on a non-GAAP basis. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP.

The discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures discussed in this call to the most directly comparable GAAP financial measures is included in our earnings press release, which is available on our website. On this call, we will give guidance for third quarter and full year fiscal 2026 on a non-GAAP basis. Also, in addition to our press release and 8-K filing, the overview page and Events and Presentations page in the Investor section of our website, as well as the quarterly results page of the Financial Information section of our website, include links to information about costs and expenses not included in our non-GAAP values and key metrics of our core subscription businesses. These are titled Supplemental Financial Disclosure 1 and Supplemental Financial Disclosure 2.

Additionally, our Investor Presentation slides include GAAP to non-GAAP reconciliation that also provides resolution of GAAP expenses that are excluded from non-GAAP metrics. Now, I will hand the call over to Ooma's CEO, Eric Stang.

Speaker 3

Thank you, Matt. Hi, everyone. Welcome to Ooma's second quarter fiscal 2026 earnings call. Thank you for joining us. We're pleased to report strong Q2 financial results and to discuss the momentum we have going into the second half of our fiscal year. Financially, 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. Currently, we are at 11% adjusted EBITDA as a percent of revenue, our highest to date, and now already at the low end of our midterm target range model of 11% to 14%. I believe these results show the power of our business to grow top-line revenue while also driving improved bottom-line profitability.

Regarding our revenue from business users, our metrics strengthened in Q2: 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. We believe we executed well to achieve these results. Regarding our communications solutions for smaller sized businesses, we will be strengthening our ability to provide a double play offering by introducing the Connect 5000 later this quarter. Connect 5000 is a 5G internet solution that incorporates Wi-Fi and prioritizes voice traffic over the connection. Sold with Ooma Office, it will allow us to offer a more complete solution for our customers. It also affords us the opportunity to increase our revenue and have a deeper relationship with our customers. In Q3, we will also continue our efforts to develop new AI-driven features.

For smaller sized businesses, we believe AI features need to be not only powerful but also very easy to use and extremely low cost. We have already developed AI applications that we use internally and are learning from them as we craft new features for our customers. 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. I'm pleased to report that AirDial ramped well in Q2. We more than doubled new bookings year over year and secured our largest customer win to date with a large national retailer. We've started the rollout with this retailer and anticipate serving over 3,000 locations. We also closed several other significantly sized customers who placed initial orders.

As is our goal every quarter, we expanded the number of partners who will resell AirDial and signed three new partner resellers in the quarter. We believe two of these new partners have experience selling competitive solutions and will be able to ramp relatively quickly with AirDial. In total, we are now approaching 35 AirDial partner resellers. Currently, real estate and REITs, colleges and universities, healthcare and senior living, state and local government, and hospitality are very active segments for AirDial. In general, we believe the POTS replacement market is expanding as more businesses come to realize the need to act. We believe AirDial is the leading solution in the market today, and we intend to make it even stronger in the future by introducing further enhancements to our AirDial remote device management portal and by driving down the cost of AirDial hardware.

For 2600Hz, our wholesale UCaaS, CPaaS, and contact center platform, we announced in Q2 the launch of new mobile and desktop applications. More recently, we also introduced video meetings and team chat. We signed one new customer in Q2 and expanded with several existing customers. Looking forward, we see continued sales momentum and remain focused on extending Ooma IP to the 2600Hz platform. On the residential front, we had a stronger quarter for new customer acquisition and experienced slightly reduced churn compared to Q1. Subscription and services revenue, though down year over year, was up slightly sequentially. Retail and direct are our main sales channels, but we also sell to internet service providers and receive customer referrals from T-Mobile. Currently, we have approximately 85 ISPs selling or referring Telo, and we signed seven new ISPs in Q2.

While ISP-driven users make up just a small percentage of our Telo user base today, we believe sales to ISPs represent additional opportunity for growth. As we go into the second half of our fiscal year, our focus is on capitalizing fully on AirDial, continuing to enhance Ooma Office to drive higher ARPU and to expand to larger customers, and positioning 2600Hz as the best wholesale platform. We hope to expand our list of AirDial partners and see our existing partners ramp sales significantly. Most of all, we are focused on executing well. We believe we have built outstanding solutions and have set goals to drive both growth and improved profitability going forward. Now, before I turn it over to Shig, I would also like to mention that this past July marked 10 years since Ooma became a public company. We're proud of this milestone.

Since we went public, we have more than tripled our revenue, dramatically improved our bottom line, shifted to serving primarily business customers, and reinvented ourselves to serve new markets. I'm proud of our accomplishments and excited as I look forward, since I believe Ooma has never been stronger than it is today. I'll now turn over the call to Shig, our CFO, to discuss our results and outlook in more detail, and then return with some closing remarks.

Speaker 5

Thank you, Eric, and good afternoon, everyone. I'm going to review our second quarter financial results and then provide our outlook for the third quarter and full fiscal year 2026. Our second quarter revenue was $66.4 million, above our guidance range, and was up 3.5% year over year, driven by the growth of Ooma business, including AirDial. In Q2, business subscription and services revenue accounted for 62% of total subscription and services revenue as compared to 60% in the prior quarter. Q2 product and other revenue came in at $5.2 million and was up 15% year over year due to growth in AirDial installations. On the profitability front, Q2 non-GAAP net income was $6.5 million, above our guidance range of $5.6 to $5.9 million, and grew 59% year over year, primarily driven by our improving operating leverage.

Q2 non-GAAP net income this year also included a small amount of tax benefit due to the recent changes in the U.S. tax law. Now, some details on our Q2 revenue. Business subscription and services revenue grew 6% year over year in Q2, driven by user growth and ARPU growth. On the residential side, subscription and services revenue was down 2% year over year. For the second quarter, total subscription and services revenue was $61.1 million, or 92% of total revenue, as compared to $59.6 million, or 93% of total revenue in the prior quarter. Now, some details on our key customer metrics. We ended the second quarter with 1,230,000 core users, up from 1,225,000 core users at the end of the first quarter. At the end of the second quarter, we had 508,000 business users, or 41% of our total core users, an increase of 9,000 from Q1.

Our blended average monthly subscription and services revenue per core user, or ARPU, increased 4% year over year to $15.68, driven by an increase in the mix of business users, including higher ARPU Office Pro and Pro Plus users. During the second quarter, we continued to see a healthy Office Pro and Pro Plus take rate, with 61% of new Office users opting for these higher tier services, which was up from 58% in the prior quarter. Overall, 37% of Ooma Office users have now subscribed to these higher tier services. Our annual exit recurring revenue was $240 million, up 3% year over year. Our net dollar subscription retention rate for the quarter was 100%, as compared to 99% in the first quarter. Now, some details on our gross margin. Our subscription and services gross margin for the second quarter was 71.3%, as compared to 72% in the prior year.

Product and other gross margin for the second quarter was negative 47%, as compared to negative 69% for the same period last year. The year-over-year improvement in product and other gross margin was primarily due to our fully consuming higher cost components we had procured during the pandemic in the first half of the last fiscal year. On the overall basis, the total gross margin for Q2 was 62%, as compared to 62% in the prior quarter. The flat overall gross margin in Q2 this year reflects a heavier mix of product revenue versus prior year due to an increase in AirDial installations, which offset the improvement in product gross margin. Now, some details on operating expenses. Total operating expenses for the second quarter were $35.1 million and down $0.1 million year over year.

Sales and marketing expenses for the second quarter were $18 million, or 27% of total revenue, up 2% year over year, primarily driven by higher marketing and channel development activity for AirDial and 2600Hz. Research and development expenses were $11.5 million, or 17% of total revenue, down 6% on a year-over-year basis, primarily driven by headcount management as we continue to focus on R&D efficiency and operating leverage. G&A expenses were $5.6 million, or 8% of total revenue for the second quarter, compared to $5.4 million for the prior quarter. The year-over-year increase in G&A expense was primarily due to an increase in personnel-related costs. Non-GAAP net income for the second quarter was $6.5 million, or a diluted earnings per share of $0.23, as compared to $0.15 in the prior quarter.

Adjusted EBITDA for the quarter was a record $7.2 million, or 11% of total revenue, and grew 27% over the prior year quarter. We ended the quarter with total cash and investments of $19.6 million. In Q2, we generated $6.4 million of operating cash flow and $5 million of free cash flow. On a 12-month basis, we generated $26 million of operating cash flow and $20 million of free cash flow. With strong free cash flow generation, we spent a total of $14.5 million over the last four quarters, including $4.5 million in Q2 to buy back stock through a combination of open market purchase and RSU net share settlement. On the headcount front, we ended the quarter with 1,195 employees and contractors. Now, I will provide guidance for the third quarter and full fiscal year 2026.

Our guidance is on a non-GAAP basis and has been adjusted for expenses such as stock-based compensation and amortization of intangibles. We expect total revenue for the third quarter of fiscal 2026 to be in the range of $67.2 million to $67.9 million, which includes $5.7 million to $6.2 million of product revenue. 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. We have assumed 27.9 million diluted shares outstanding for the third quarter. For full fiscal year 2026, we expect total revenue to be in the range of $267 million to $270 million, which is unchanged from our prior guidance.

The full year fiscal 2026 revenue guidance assumes business subscription and services revenue growth rate of 5% to 6% over fiscal 2025, while residential subscription revenue is expected to decline 1% to 2%. In terms of revenue mix for the year, we expect 91% to 92% of total revenue to come from subscription and services revenue and the remainder from products and other revenue. In terms of full year fiscal 2026 non-GAAP net income, we are raising the guidance and now expect it to be in the range of $24.5 million to $25 million. Updated non-GAAP net income guidance for fiscal 2026 includes the impact of approximately $500,000 of tariffs, which is our current best estimate. Based on this guidance range, we estimate our adjusted EBITDA for fiscal 2026 to be in the range of $28.5 million to $29 million.

We expect the non-GAAP diluted EPS for fiscal 2026 to be in the range of $0.87 to $0.89. We have assumed approximately 28.2 million diluted shares outstanding for fiscal 2026. In summary, we are pleased with our solid results for the second quarter with a record adjusted EBITDA of $7.2 million, which grew 27% year over year and improved our adjusted EBITDA margin to 11%. Our free cash flow remains robust, with $20 million generated for the past 12 months, along with $14.5 million of share repurchase for the same period. We're excited about growth opportunities in front of us and remain focused on executing through our long-term strategy to achieve profitable growth. I'll now pass it back to Eric for some closing remarks. Eric?

Speaker 3

Thanks, Shig. I'm pleased to say we now have a strong first half of our fiscal year behind us and the momentum that goes with that. We're encouraged by our recent growth with AirDial and by the scope of market opportunity we see across our business. Our focus is on executing well, capturing the opportunities before us, and driving improved top and bottom line results. Thank you, everyone. We'll now take questions.

Speaker 1

Thank you. Ladies and gentlemen, as a reminder to ask a question, please press *11 on your telephone, then wait for your name to be announced. To withdraw your question, please press *11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Josh Nichols with B. Riley. Your line is open.

Speaker 6

Yeah, thanks for taking my question. Good to see the improvement, particularly in the bottom line and company buying back some stock. I know you mentioned AirDial bookings, you know, more than doubled. With the second half hardware ramp, I presume a lot of that's related to AirDial as well. Is it AirDial contributing in any meaningful percentage to AR at this point? At what point do you think you'd start giving a little bit more granularity on the breakout as that continues to build?

Speaker 5

Yeah, I think, yes, AirDial is contributing to the growth of ARR and also the ARR as a whole is starting to contribute meaningfully. If you also look at it from the perspective of user adds on the business side, which increased by 9,000 quarter by quarter, a good chunk of that came from AirDial. From these kind of data points, we think that especially if you look at a quarter by quarter basis, even on an annual basis, AirDial is starting to contribute more to the ARR itself. Also, having double the booking year over year, as you've heard it, Josh, that certainly helps to accelerate that growth further into the second half.

Speaker 6

Thanks. Just to update, you continue to add new partners on the AirDial front as well, too. When you look, I think in Q1, you launched with a very large market cap telecom company. You have an aggregator, CLEC, and a previously announced ILEC. Any updates, Eric, that you could give us on just how that ramp is progressing since the last quarter call update? Thanks.

Speaker 3

Yeah. Hi, Josh. It's pretty exciting to have nearly 35 partners who are reselling AirDial in the marketplace. I think that's a pretty strong vote of the strength of our solution as well. Two of the resellers we brought on, or signed, I should say, this last quarter are moving from a competitor's product to ours, which is also quite exciting. These resellers do take time to ramp. We announced a very important relationship with Comcast early this year. We have seen orders now from Comcast, but still, it's slowly moving forward as Comcast works deals and trains its sales teams. I think that the back half of this year, we could see acceleration there. T-Mobile has never been stronger with us on AirDial. They are doing a fantastic job.

We are also seeing the CELEC that we announced pretty much this time last year finally start to ramp with AirDial in a meaningful way. That's just three of the close to 35 resellers we have. I feel we're well placed with the range of companies we're working with. I think all of them have plans to grow as we go forward. Our goal is to add a couple every quarter. My expectation this time is that we'll have more that we're adding in Q3, and a couple of them could be particularly exciting as well. More to come, but yeah, that's working well for us.

Speaker 6

Appreciate it. Thanks, guys. Thanks, Josh.

Speaker 1

Please stand by for our next question. Our next question comes from the line of Eric Matanoussi with Lake Street Capital Markets. Your line is open.

Speaker 0

Mike, congratulations as well on the improving profitability of the business. I wanted to talk about where you're pointing that incremental cash flow. Obviously, in Q2 with the, what was it, $4.5 million or so on the share repurchase program, is that to say that we're not actively pursuing any M&A opportunities, or is it just to say that your own shares are the better bargain in the market with that cash flow?

Speaker 3

It really doesn't say either one of those. We do feel some share buybacks at this current share price in the market are sensible for us. We have started doing that as of about 9 or 12 months ago. We are always looking for M&A opportunities that fit our criteria, and our criteria are fairly specific. We don't want to overpay. We're looking for a strategic way to acquire users more than technology, and we're looking for businesses that are small enough in size that they can fit into what we're doing without upsetting our major plans as a company. There are opportunities out there. From time to time, we have discussions, and we would like to do more, almost call them tuck-ins like that, as we go forward.

Speaker 0

Okay. The growth on the business side, you've got two quarters in a row here of 6% growth in the core subscription service growth rate on the business side. You're talking about 5% to 6% for the year. Is that just conservatism, or are we looking at maybe some incremental churn that we need to model for in the back half?

Speaker 5

Yeah, it's, hey, Eric. It's not so much about incremental churn, but I think you may notice that we've given a relatively wide range for Q3 on revenue and also still for the whole year. I think the variability there is just the timing of the AirDial installation going to the second half. Now, we doubled, more than doubled the booking, and we continue to ramp up the bookings going to the second half. Sometimes the installation timing, because of customer timing on their end, not so much about our readiness to install, plays into it. There's a little bit of conservatism from that perspective, but it's not about the churn that we're expecting.

Speaker 0

Got it. Thanks for taking my question.

Speaker 5

Thank you.

Speaker 3

No, thank you.

Speaker 1

Please stand by for our next question. Our next question comes from the line of Pat Wall-Ravens with Citizens. Your line is open.

Speaker 7

Hey, team. This is Kincaid on for Pat. Thanks for taking the question. Super excited to hear about that new largest retail customer that you guys landed. I'd love to hear more about how that deal came about, what was the differentiator, what let you win that, and are we going to start seeing that in the back half of the year, or what's the timeline there?

Speaker 3

Yeah, it's an exciting win for us. This is a very large national retailer. This is a company we've talked to for a long time. They went through a number of trials with our solution. We actually thought they might, you know, sign up in Q1. That moved into Q2. This is a customer we've also won with our partner T-Mobile, which we're very excited about as well. They played a key role in winning this deal, too. We've done a limited amount of installations with them so far, and we are anticipating installations through the back half of this year. I don't know how fast it'll move at this point. A very big validating win. Frankly, we hope the first of many more. There are large business opportunities in the market like this.

With the strength of the partners we have and the increased focus on POTS replacement by larger businesses now, we have a whole range of sizes of opportunity in our pipeline, and we're obviously working all of that. A really nice win. I wish I could say who it was. I can't, but it came together after a lot of validation on their part and a lot of testing of our solution.

Speaker 7

Spectacular. If you can give me a little color on how much, like you said, 3,000 locations, how much revenue are you expecting to drive per location with these installations?

Speaker 3

We can't answer that for a customer, but we've given guidance to you on what to model for AirDial ARPU, and that's around $25 a line per month. That's a blend of, you know, across our go-to-market channels and the different pricing we have in them. I think that's a reasonable number to use for AirDial going forward.

Speaker 7

Thank you so much.

Speaker 1

Thank you. Please stand by for our next question. Our next question comes from the line of Matthew Harrigan with The Benchmark Company. Your line is open.

Speaker 0

Thank you. I know it's probably a bit of a test of an afterthought compared to AirDial, but can you talk a little bit about 2600Hz and what kind of the organic growth rate there is? I know you introduced a number of new open APIs, and I think when you did the deal, you know, there was some discussion of trying to get better monetization for Kazoo. I know it fits well within your business portfolio, but it necessarily doesn't get as much bandwidth as AirDial, perhaps understandably. Thank you.

Speaker 3

Yeah. 2600Hz is a wholesale platform, and we sell it to companies that want to offer their own solutions in the market. Our ARPU per user, if you look at it that way, is pretty low. Obviously, we're not doing any of the rest of the business to get those users. We are working this year to bring Ooma IP onto the 2600Hz platform, and I made some important announcements about that actually in my opening script and comments. The reason for that is that the real strength of 2600Hz is its flexibility and its API-based design, but it doesn't have as strong a turnkey application as we'd like it to have. By bringing Ooma IP onto it, we are making it a very good turnkey solution as well. For smaller customers in the market, that's important.

For the larger customers in the market, they really care about the flexibility and what they can do with it. Our largest win to date on that platform was ServiceTitan, who uses in particular 2600Hz's contact center capability and was able to build a number of AI-driven applications working with our platform to really create something bespoke to their needs. That's powerful. Our vision for 2600Hz is to win other large customers like that who will use the platform in that way. I would say this year, by the end of the year, we will have also filled out the boxes in terms of the turnkey solutions, and that'll put us in a stronger position for next year for going after the smaller players who care more about that.

I think we've added about a handful of customers so far this year onto the platform, but it's also a sale where once you win a customer, it can take many months to have them move their users over or grow with the platform. We view it more as upside opportunity next year than this year. This year, we are really rounding out the solution. We'll continue to give guidance every quarter on it. We're super excited for the long term because the traditional platforms in use out there today, BroadSoft, BroadWorks, MetaSwitch, others, were built a long time ago. They don't have all the modern features that a platform like 2600Hz can enable. We feel there's real opportunity over the next several years to be the platform of the future.

Speaker 0

We know that you have enough on your hands with AirDial in North America. To the extent that you're getting full demand from Europe, that's really a testament to the efficacy of the product relative to limited alternatives. Are you seeing more of that? I know that's not a priority, but I was just curious.

Speaker 3

Today, AirDial is being sold in North America, U.S., and Canada. We would move to other parts of the world if or when we have a large carrier or other entity that can be a lead customer in that market. We don't have any announcements in that regard today. That's how we would evolve with it. If we are able to achieve a customer like that, we already have Ooma services operating in 32 countries around the world as part of our IWG Regis customer relationship. We already have a pretty good head start towards enabling a service like AirDial in other countries. Honestly, I don't want to make too much of this because our primary focus still is North America because we just see so much opportunity here.

Speaker 0

Great. Thanks, Eric.

Speaker 3

Thank you.

Speaker 1

Please stand by for our next question. Our next question comes from the line of Alinda Li with Ooma. Your line is open.

Speaker 2

Perfect. Thank you. Congrats on a solid quarter and also on the 10-year anniversary. Quick question here. NRR was 100%. Can you give us more color in terms of what drove the one-point uptick there? What should we expect NRR to be going forward?

Speaker 5

I think the biggest contributor just overall was we had a better churn quarter over last. Obviously, last quarter, we saw the impact of what we think is last of the large IWG churn. We didn't have that this quarter. Just looking across the other service lines, I think we had, generally speaking, the improved churn quarter. I think that's the biggest contributor to the better retention rate. Was the second part of the question, Linda? Sorry, I missed it.

Speaker 2

Yeah, no worries. The second part was what should we expect in our net dollar subscription retention rate to be going forward?

Speaker 5

I think we've been very steady between 99% to 100%. Sometimes it rounds up, sometimes it rounds down, kind of a situation. I think that's a good zone to be in, and I think that's what we think it's going to be.

Speaker 2

Awesome. Cool. Another question is top line guidance was reiterated, but net income guidance is raised again by around 7.6% at the midpoint. What are the efficiencies that you are looking to implement to achieve the bottom line guidance? I know you mentioned also the tax benefit that is helping with the bottom lines. Any other efficiencies that we should be aware of?

Speaker 5

Yeah, just to kind of get the tax fund out there. Part of the raise from that income, I would say $7,000 to $100,000 of the raise was related to tax law change that I talked about. It's just that our estimate for tax payment is much lower due to the one big beautiful bill that we all heard about. The remainder, which is still a meaningful portion of the raise, is really seeing the R&D efficiency. That's a big part because we more or less see flat R&D or maybe slightly less R&D going into the second half. As we said, going into this year, we wanted to see the R&D leverage that we talked about. I think that's the biggest driver, in addition to the tax benefit. Also, we've been very prudent about the sales and marketing expense.

It's hovering around 27% of revenue, and as we said before, we are very disciplined about customer acquisition cost and making sure that we're putting into the right channel to realize the best ROI that we can achieve. Both the sales and marketing efficiency, the R&D leverage, and the tax, those are three pieces.

Speaker 2

That's really helpful. Thank you.

Speaker 5

Thank you.

Speaker 1

As a reminder, ladies and gentlemen, let's start one-on-one to ask the question. Please stand by for our next question. Our next question comes from the line of Brian Kinstlinger with Alliance Global Partners. Your line is open.

Speaker 8

Hi, thanks. This is Kevin for Brian. Can you give us a sense on the new business line trends you're seeing with your largest UCaaS customer? Should we expect meaningful growth over the next 12 to 18 months?

Speaker 3

If you're referring to IWG Regus, we have rolled out to the countries we're planning to roll out to, and I think we expect them to be essentially stable as we look forward in our outlook.

Speaker 8

Great. Thank you.

Speaker 1

Thank you. Ladies and gentlemen, I'm showing no further questions in the queue. I will now like to turn the call back over to Eric for closing remarks.

Speaker 3

Thank you. Thank you, everyone, for joining us today. You know, it's interesting to put our results in a little bit of longer-term perspective. I think it was a couple of years ago we did mid-teens, upper teens EBITDA. I think last year we did $23 million. We've guided this year for around $29 million, Shige, if I'm correct. We intend to drive EBITDA higher next year. I think we have built a business that has the potential to be highly profitable. Our solutions are well developed, and they're leading in the market. As we grow, we can get leverage on a lot of our spending. It is our plan to continue to drive both growth and bottom line performance. We feel that the combination of those two is what's going to build the most valuable company as we look forward. We appreciate your time today.

We had a strong first half of the year. As I said in my opening comments, we're glad to have that momentum as we go into the second half of the year. Thank you, everyone.

Speaker 1

Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.