On Tuesday, Ooma (NYSE:OOMA) discussed first-quarter financial results during its earnings call. The full transcript is provided below.
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Summary
Ooma reported strong financial results for Q1 fiscal 2027, with revenue increasing 25% year-over-year to $81.1 million and non-GAAP net income rising 73% to $9.7 million.
The company's Airdial service experienced significant growth, with services revenue up 80% year-over-year and new lines installed more than doubling compared to the previous year.
Ooma introduced Uma AI, a suite of AI-powered capabilities designed to enhance customer response and call handling efficiency, expected to drive additional revenue.
Residential user base grew for the first time in many quarters, driven by strong sales of Umatelo and new MyPhone product targeting families with children.
Ooma is integrating its recent acquisitions, FluentStream and Phone.com, and is focused on reducing debt and pursuing further acquisitions to bolster growth.
Future guidance was raised, with fiscal 2027 revenue expected to be between $326 million and $328.5 million, driven by business subscription growth and stable residential revenue.
CEO Eric Stang highlighted the company's strategic initiatives, including expanding Airdial, leveraging AI solutions, and exploring acquisition opportunities.
Full Transcript
OPERATOR
Hello and welcome to UMA First Quarter Fiscal Year 2027 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 the question during the session you will need to press STAR 1-1 on your telephone. You will then hear an automated message advising your hand is raised to withdraw your question. Please press STAR 1-1 again. I would now like to hand the conference over to Matthew Robinson. You may begin.
Matt Robison
Thank you. Good day everyone and welcome to the first quarter fiscal 2027 earnings call of Ooma Inc. My name is Matt Robison. I'm the Director of IR and Corporate Development. On the call with me today are Ooma CEO Eric Stang and CFO Shig Hamamatsu. After the market closed today, Ooma issued its first quarter fiscal 2027 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 for replay of this call for one year. During today's presentation, our executives will make forward looking statements within 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 do not materialize in Actual results 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. A 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 second quarter and full year fiscal 2027 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 Investors 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 and also provides a resolution of GAAP expenses that are excluded from non GAAP metrics. Now I will hand the call over to Ooma CEO Eric Stang.
Eric Stang (Chief Executive Officer)
Thank you, Matt, hi everyone. Welcome to Ooma's first quarter fiscal year 2027 earnings call. Thank you for joining us. We're pleased to report strong Q1 financial results and a good start to our fiscal 2027 year. I believe we are making good progress on our key initiatives for this year and I look forward to reviewing them with you today. Financially for Q1, I'm pleased to report that we exceeded expectations with revenue growing 25% year over year to $81.1 million, non GAAP net income growing 73% year over year to 9.7 million and adjusted EBITDA growing 78% year over year to 11.8 million. Subscription and services revenue from business customers grew 38% year over year and reached 69% of total subscription and services revenue. Excluding the impact of two acquisitions that we made late last year, we stepped up our organic growth rate of business subscription and services revenue by a couple of percentage points to 9% year over year. As expected, a key driver of our stronger business services growth was Airdial services revenue in Q1 was up by 80% versus a year ago. And on the residential side of our business, I'm happy to mention that for the first time in many quarters, we grew our base of residential users in Q1. All in, we believe we were off to a strong start for fiscal 2027 and so we'll be providing improved guidance for the balance of this year later in our remarks. As we discussed on our last conference call, we are focused on several key initiatives for this fiscal year. The first I would like to address is our commitment to expanding airdial. We believe the market opportunity for POTS replacement is accelerating as more companies incur higher POTS charges or have their lines turned off by AT and T or others. And as you know, we have built Air Dial from the ground up to provide a fully integrated solution incorporating unique features to best serve this market. In Q1, we were proud to announce new features including equipment disconnect detection where we identify if the equipment that is connected to Air dial goes down. We also announced off hook alerts to identify equipment connected to Airdial that goes off hook for an extended time. These features were added in response to a customer of ours in the healthcare space who must ensure working connections are always in place. We believe that both of these new features are unique to Airdial and bring added differentiation to AirDial's remote device management suite of services. Commercially, Q1 was a record quarter for Airedial. New lines installed were more than double the number of a year ago. In general, we are seeing increased market interest in pots replacement by many industry sectors and in Q1 we achieved particular success serving health care customers, REITs and state and local government bodies, including schools. In Q1 we also met our goal of securing two additional airdial resellers in the quarter. One of these new resellers will be switching away from a competitor's product to exclusively sell Airdial. We are excited to be working with them and all of our 40 plus airdial resellers the second initiative for this year that I would like to discuss is our plans to introduce AI Solutions on our UMA Office platform. I'm pleased to report that earlier this month we announced Ooma AI, which is a suite of new AI powered capabilities including AI Transcriptions, AI Answering Service, AI Receptionist, AI insights and an OpenAI integration. Together, these features enable UMA customers to capture, summarize and analyze call information automatically while improving responsiveness and overall call handling efficiency. Today, three of these features, namely AI Transcription, AI Answering Service and the OpenAI integration have been released to customers and the two others are in beta and will be released soon. The AI Answering Service and the AI Receptionist service carry a separate monthly charge and the other features have been made available in Ooma's top tier of service called ProPlus. As such, we expect adoption of OOM AI to bring increased revenue for Ooma. In general, we believe AI can be a valuable tool for small businesses to help them automate routine tasks, deliver real time insights, move faster and work smarter. One statistic we have heard is that over 50% of calls to small businesses go unanswered by a live person and close to 25% go unanswered at all. A key goal in our development of OOMA AI has been to create the right set of features that will be most useful to small businesses while also making the features very easy to enable and use. While it is early days and too soon to evaluate customers response to Ooma AI, we are excited about its potential. The third initiative for this year that I would like to update is our plans for our residential business. Last quarter I mentioned that Ooma Telo sales were remarkably robust and I'm pleased to report that strong sales of Telo continued in Q1. In fact, as I mentioned earlier, for the first time in many quarters we grew our base of residential users. In Q1, we see several market drivers for residential phones. One in particular is Parents desire to give their kids a phone but avoid the screen time associated with mobile phone use. We estimate There are approximately 20 million households in the United States with children aged 5 to 14 years old. According to the Pew Research Center, 86% of parents say managing children's screen time is a day to day priority. That's not surprising given studies have shown that smartphone use in children can lead to sleep disruption, negative mental health outcomes and increased inattention symptoms. Organizations like wait until 8th unplugged smartphone, free Childhood Screen, Strong Screen Sense and many others have emerged to help parents with screen time concerns. To address this and give parents a solution, we recently launched My Phone, a modern landline designed specifically for families with kids. My Phone contains several features aimed at allowing parents to monitor and control their kids phone usage. One is Trusted Circle Calling, which allows calls only between approved contacts, and another is Quiet Hours, which blocks all calls during homework, bedtime or family time. Online call logs also allow parents to monitor incoming and outgoing calls. I'm pleased to report that we have received a strong retailer response to our announcement of My Phone. My Phone is now available at Walmart.com and will soon roll out to other online retailers. We also expect that My Phone will become available on the shelf in Walmart stores starting this fall. The last initiative I'd like to touch upon is our plans to make the most of our two acquisitions from late last year and to pursue further acquisitions in the future. We believe the integration of each of our recent acquisitions is going well and our rationale and plans for each acquisition continue to hold true. As a reminder, Fluent Stream is a solid business generating high ebitda that brings us increased channel strength and another outlet to sell. Airdial phone.com has low EBITDA, but we can take and are taking steps to improve its financial performance through scale economies and phone.com also affords us a second small business brand in the market with a powerful name and URL. We anticipate driving further improvements over the next three quarters and as we increasingly leverage ooma's marketing and sales expertise, lean operations, product strengths and vendor relationships. As Shig will note in his comments, we have now paid down our debt to about $53 million and intend to continue to pay it down further each quarter to strengthen our ability to make more acquisitions in the future. I will now turn the call over to Shig, our CFO to discuss our results and outlook in more detail and then return with some closing remarks.
Shig Hamamatsu (Chief Financial Officer)
Thank you Eric and good afternoon everyone. I'm going to review our first quarter financial results and then provide our outlook for the second quarter and full year fiscal 202027 we had a strong start to fiscal 202027 with the first quarter revenue of $81.8 million up 25% year over year, driven by the growth of Ooma Business including Air Dial and the additions of FluentStream and phone.com on a combined basis. FluentStream and phone.com added approximately $11.5 million of revenue in Q1, which was their first full quarter since the acquisition. Excluding the impact of these acquisitions, total revenue in Q1 grew 7% year over year. In Q1, business subscription and services revenue accounted for 69% of total subscription and services revenue as compared to 62% in the prior year quarter. Q1 product and other revenue came in at $6.6 million and was up 37% year over year driven by the growth of AirDial installations with a record number of AirDial online installations again in Q1, which more than doubled over the prior year quarter. New bookings for AirDial also continued to be robust and grew more than 75% year over year in Q1. On the profitability front, Q1 non GAAP net income was $9.7 million and grew 73% year over year. On a combined basis, FluentStream and phone.com added approximately $2.7 million of non GAAP net income in Q1, excluding the impact of these acquisitions, non GAAP net income grew 24% year over year as we continue to focus on operating leverage on R and D and optimizing our sales and marketing spend. Now some details on our Q1 revenue business Subscription and services revenue grew 38% year over year in Q1 Driven by user growth and output growth for UMA Business and the additions of fluent stream and phone.com excluding the impact of the acquisitions. Business subscription and services revenue in Q1 grew 9% year over year. On the residential side, subscription and services revenue was flat year over year as the residential user base continued to stabilize in Q1 following a trend we saw beginning in the second half of the last fiscal year. For the first quarter, total subscription and services revenue was $74.6 million or 92% of total revenue as compared to $60.3 million or 93% of total revenue in the prior year quarter. Now some details on our key customer metrics. Please note that Q1 ARPU as well as net dollar retention rate include the impact of the two recent acquisitions for the first time as these businesses had their first full quarter with Ooma in Q1. Our blended average monthly subscription and services revenue per core user or ARPU increased 9% year over year to $16.77 this year over year. Increase in blended ARPU reflects a meaningful increase in our business core user base with higher ARPU which Now accounts for 49% of the core users as compared to 41% a year ago. During the first quarter we continue to see a healthy Office Pro and Proplus take rate with 53% of new office users opting for these higher tier services. Overall, 39% of Ooma office users have now subscribed to these higher tier services. Our net dollar subscription retention rate for the quarter was 99% as compared to 99% in the fourth quarter. We ended the first quarter with 1,420,000 core users, up from 1,404,000 core users at the end of the fourth quarter. At the end of the first quarter we had 699,000 business users or 49% of of our total core users, an increase of 15,000 from Q4. Our annual exit recurring revenue was $294.6 million, up 26% year over year. Excluding the impact of the recent acquisitions, our annual exit recurring revenue grew 7% year over year. Now some details on our gross margin. Our subscription and services gross margin for the first quarter was 72% compared to 72% in the prior year. Product and other gross margin for the first quarter was negative 31% as compared to negative 41% for the same period last year with a year over year improvement in product and other gross margin reflects an increase in mix of air dial, hardware installation revenue within product and other revenue. On an overall basis, the total gross margin for Q1 was 64% as compared to 63% in the prior year quarter and now some details on operating expenses Total operating expenses for the first quarter were $41.4 million, an increase of $5.9 million year over year due to the additions of affluent stream and phone.com excluding the impact of the acquisitions, the total operating expenses increased $0.3 million from the same period last year. Sales and marketing expenses for the quarter were $19.7 million while 24% of total revenue up 8% year over year due to the addition of fluent, stream and phone.com expenses. Research and development expenses were $14 million or 17% of total revenue up 24% year over year due to the addition of Fluent, Stream and phone.com team members. GNA expenses were $7.6 million or 9% of total revenue for the first quarter compared to $5.8 million for the prior quarter. Non GAAP net income for the first quarter was $9.7 million or diluted earnings per share of $0.35 as compared to $0.20 in the prior quarter. Adjusted EBITDA for the quarter was record $11.8 million or 15% with total revenue and grew 78% over the prior year. Quarter we ended a quarter with total cash and investments of $17.2 million. In Q1 we generated $6.4 million of operating cash flow and $4.9 million of free cash flow. On a trailing 12 month basis we generated $30.3 million of operating cash flow and $24.5 million of free cash flow. We spent a total of $17.7 million over the last four quarters including $4.6 million in Q1 to buy back stock through a combination of open market repurchase and RSU net share settlement. In addition, we paid down the term loan by $5 million in Q1 and reduced the outstanding debt balance to $53.5 million at the end of Q1. On the headcount front, we ended a quarter with 1432 employees and contractors. Now I'll provide a guidance for the second quarter and full fiscal year 2027. Our guidance is on a non GAAP basis and has been adjusted for expenses such as stock based compensation, amortization of intangibles and acquisition related and other expenses. We expect total revenue for the second quarter of fiscal 2027 to be in the range of 81.6 million to $82.3 million, which includes 6.3 to $6.7 million of product and other revenue. We expect the second quarter non GAAP net income to be in the range of 9.4 million to $9.8 million. Non GAAP diluted EPS is expected to be between $0.33 to $0.34. We have assumed 28.9 million weighted average diluted shares outstanding for the first quarter. For full year fiscal 27, we expect total revenue to be in the range of 326 million to $328.5 million. The full year fiscal 27 revenue guidance assumes business subscription and services revenue growth rate of approximately 31% over fiscal 26 while residential subscription revenue to be flat to a decline of 1%. In terms of revenue mixed for the year, we expect approximately 92% of total revenue to come from subscription and services revenue and the remainder from products and other revenue. We expect non GAAP net income for fiscal 27 to be in the range of 37.5 million to $39 million. Based on this guidance range, we estimate our adjusted EBITDA for fiscal 27 to be 45 million to $46.5 million. We expect non GAAP diluted EPS for fiscal 27 to be in the range of $1.29 to $1.34. We have assumed approximately 29.1 million with average diluted shares outstanding for fiscal 2027. In summary, we are pleased with our strong start to our fiscal 27 with a record adjusted EBITDA of $11.8 million in Q1, which grew 78% year over year along with a record free cash flow of $24.5 million for the trailing 12 months. We're excited about both organic and organic growth opportunities in front of us and remain focused on achieving another meaningful progress towards our long term financial targets. I'll now pass it back to Eric for some closing remarks.
Eric Stang (Chief Executive Officer)
Eric, thank you Shig. With our strong start, we feel we're off to what can be a very strong year for ooma. While we have exciting initiatives across our business, we are most focused on capturing what we see as accelerated market demand for Air Dial, driving added growth through UMA, AI and MyPhone, driving further contributions from our acquisitions of fluent stream and phone.com and working to pursue new acquisitions in the future. Thank you everyone for joining us today. We will now take your questions.
OPERATOR
Thank you ladies and gentlemen. As a reminder to ask the question, please press Star one one on your telephone then wait for your name to be announced. To withdraw your question, please press STAR 1 again. Please stand by while we compile the Q and A roster. Our first question comes from the line of Arjun Batia with William Blair. Your line is open.
Arjun Batia
Perfect. Thank you so much. Congrats on the quarter here guys. Eric, if I can start with you. It sounds like Ooma Air Dial really is picking up. Can you just give us a sense of your visibility into the future revenue there? What does the pipeline look like and how are the implementations going with those customers that you've already sort of won at this point?
Eric Stang (Chief Executive Officer)
Sure. Hi Arjun. So implementations are going great. We're. We're able to respond as needed as customers come in and we're excited about all the opportunities we're seeing, including those where some of our customers have maybe had a bad experience with another competitor and are switching to move to AirDial. We don't really discuss pipeline, so to speak, but I can say that with 40 plus resellers now, we have quite a big footprint in the industry helping us find opportunities. And that's part of the strategy here is to really leverage ourselves with all of our great partnerships. Really excited about the two we added this last quarter and obviously our biggest partners today remain T Mobile, Comcast and a couple of carriers that we've talked about in the past. Comcast is still not. Is still only doing a small bit of what small amount of what we think they can be in the future, but still it's a great relationship and one that is developing. So we think we have a lot of activity underway and the market it's possible to see where AT&T and others are shutting off lines and the number of announcements just keep going up. And I think a lot of we're talking to a lot of companies today that weren't as focused on this a year or two ago, but now realize they need to do something and they're really looking for the best solution in the market. And when, when we can get that kind of engagement with the customer, we do very, very well because there are things about our solution that are unique and we think make it quite special. So we're excited about the outlook in the US and in Canada as we look forward and think that the market is building and we're growing, we have opportunity to grow significantly as we move forward.
Arjun Batia
That's helpful. Thank you. And maybe on the AI sort of announcements, those were very interesting to hear as well. It sounds like you're in different phases of deployment depending on which AI service we're talking about and they're monetized in different ways as well. But I'm just curious to hear your kind of perspective on what the financial impact could be if we're talking about this in a year or two years out. Is this something customers have expressed interest in and what does the upsell opportunity look like for AI transcription and answering service?
Eric Stang (Chief Executive Officer)
Yeah, that's a good question and it's one that we don't have a lot of experience with to give a very educated answer. The statistics on small businesses being able to respond to their phone calls while they're doing everything else they do suggests that there's a real need for these capabilities. And given that our AI voicemail, and AI transcription are going to be very competitively priced and I think very easy to set up and use, we're hopeful that a lot of our customers will find value and adopt them and it will become an extra charge to our customers. So from a revenue perspective, it's a boost for Ooma. Today, a single digit percentage of our customers take Ooma Pro Plus, which is the highest tier of service we have, and some of our AI services are going into that tier. We'd like to think that with those services there and some education of our customer base, we could move that take rate up to double digit going forward. So there'll be a boost there as well. It's hard to say, but I think we're all experiencing the power of AI in our businesses and there's no going back. There are going to be more features to come. We've only announced the first four or five that are coming out now, but we have a roadmap out years to pursue and we believe there's going to be a range of things we can do for small businesses. It's really a special opportunity for us because all of that customer's communications, their phone calls, their messaging are flowing through UMA so we can help them analyze that data and be more proactive with it. So I think it's the start of a story for OOMA that we can unfold over the next couple years.
Arjun Batia
All right, got it. Thank you for the color.
OPERATOR
Thank you. Our next question comes from the line of Eric Martinuzzi with Lake City Capital Markets. Your line is open.
Eric Martinuzzi
Yeah. Congrats on the quarter as well from me. I wanted to better understand the drivers of the upside. Just going back to your guide for Q1, the midpoint of your revenue expectation was 80 million even and you exceeded that by 1.1 million. Is the big driver here just the core business customers? Is it more Air Dial? What's the biggest driver of the upside?
Shig Hamamatsu (Chief Financial Officer)
Yeah, Eric, thanks for the question. And the biggest driver or the upside was from Air Dial. And you know, as we said when we guided for Q1 and for the year, you know, we wanted to remain conservative in airdrop in particular because it's not always easy for us to predict the timing of installation, even though the bookings and demand has been increasing. So we're cautious about that. We're happy with the outcome of it obviously exceeded by a good amount. And I think that's the biggest piece of it. The other piece as Eric pointed out in his remarks too. But the residential didn't decline and again that's another area that we planned conservatively and we actually didn't see a decline there. So that helped a bit as well in Q1 in relation to what we had expected at the beginning of the quarter. So I would say those were the two biggest driver and AirDial being the biggest of it.
Eric Martinuzzi
Okay. And then just the follow on would be for this. You've also upped your outlook for the full year. Do you expect. Does that refreshed guidance for FY27, does that anticipate both of these trends that you outlined persisting or is it, hey, Q1 was a bit of an anomaly. Let's see how things play out in Q2. Thank you.
Shig Hamamatsu (Chief Financial Officer)
I wouldn't say that Q1 was an anomaly. Obviously Q1 established, obviously the Q1 established a baseline, so to speak to beginning the year, which is a great baseline by the way. But in our guidance, I think you see when you work out the model that we still remain conservative, relatively speaking, especially the pace of ramp on air dial because again for the same reason I said it just now that we want to remain conservative in predicting the timing of installation of the lines. And again the booking has been strong. Like I said in my remarks, the booking in Q1 year over year grew 75% and that looks like three or four quarters in a row. We had a growth breakdown of bookings but again timing of installation is still hard to predict but we are optimistic but we want to be conservative on that. And secondly, I don't know if you picked up but I used to say in a guidance that residential going to be down -1 to -2% but based on the recent trend, I improved that a little bit to say flat to minus 1%. Now we are going to see Walmart stores being stocked with my phones in the second half of the year. We're being conservative on that. We don't know quite frankly how much the take rate is going to be as much as we are excited about it. So there's a little bit of conservatism built on that. So long story short, Eric, that you know, we're still being conservative forward looking here given some of the nature of these businesses. Air dial and microphone in particular that I just mentioned.
Eric Martinuzzi
Got it. Thanks for taking my questions.
OPERATOR
Thank you. Our next question comes from the line of Patrick Walraven. Thank you citizens, your line is open.
Patrick Walraven
Hey team, congratulations on the quarter. I just wanted to dig in on Ooma AI. I was doing the math a little bit on how much usage the customer is going to get for that 1599 on AI Assistant and the $49.99 on the receptionist. And it seems like it's 38 cents a minute, 50 cents for the receptionist. It'd be great to give us an understanding of what the COGS look like for something like that. Is that going to be positive for your margins or is that something that's potentially going to hurt it? And then the press release wasn't very specific on how the usage, additional usage is going to be priced. And so it'd be great to get some clarity on that.
Eric Stang (Chief Executive Officer)
Yeah, we'll price additional usage per minute is the way we do it. And. If you look in the industry, you'll see prices that range quite a bit for these kinds of services. We think we're pretty competitive with the package we put together. And actually the AI answering machine is kind of a unique positioning in the market. You don't see that from others. And it's a very useful capability at a lower price point than a full AI receptionist service would be. So it's a nice entry point for a small business as well to get started with some added capability. Cogs wise. We are hosting internally the AI activities to transcribe calls, summarize them and then work with the data. We also do utilize some outside capabilities as well. And I can't tell you here exactly what our cogs are, but I can tell you that we think we'll be driving margins that are well in line with the margins report overall spectacular. And then just one quick follow up on that. I guess when I think about it, it feels like the amount of time that a customer spends on spends talking to the AI system is something that the business itself doesn't have a lot of control over. If I have one customer that, you know, yaps along with it for the whole 40 minutes I've blown through my usage without getting a lot of value. Is there any way that you guys manage that on your end or how do you think about that kind of conundrum? Well, you're talking now about the answering service and the receptionist service. The other people leaving voicemails or just all your conversations throughout the day are part of ProPlus. So there's not a usage based element to that. For receptionist answering services, people tend to leave a message of a minute or two at most and not really go on. But you know, I think different businesses will vary and obviously we're going to make this attractive to our customers. So we may come out with other packages over time for high power customers. You can enable these services on one line or many lines in the business as well. So depending on how many numbers you have set up for reaching outside parties, you have flexibility there too. I think that for a business that finds value in these services, I don't think our pricing is going to hold them back. All right, thank you so much.
OPERATOR
Thank you. Our next question comes from the line of Bryant Kentzlinger with Alliance Global Partners. The line is open.
Bryant Kentzlinger
Great, thanks. It's great to hear about the progress your business development with Aired out is making. Can you put any numbers behind your comments? For example, you mentioned air dial lines, service, revenue, bookings and more were up 75 to 80% and maybe that's not the exact range. Can you share what any of those numbers are for us?
Eric Stang (Chief Executive Officer)
Yeah, I mean the number we gave you is lines installed and that number was up. Sorry, pause a minute. I said that lines installed were more than double that of a year ago. And Shig said that bookings, bookings, go ahead. Dropped over 75%. Yeah, and yeah, I mean that gives you some sense of how fast it's moving for us. We expect it to be up again in Q2 and up each quarter throughout. Throughout this year.
Bryant Kentzlinger
Sorry, what I meant was are we going from 2,000 to 4,000 lines? We're going from 10,000 to 20,000. Double is hard to understand where we really are. Same with services, revenue and bookings. Or you're just not prepared yet and they're too small numbers to share.
Eric Stang (Chief Executive Officer)
They're not too small numbers to share. We don't break out air dial at maybe the level of granularity that you're asking for here, but we are comfortably over. How else do I want to say it, Chip?
Shig Hamamatsu (Chief Financial Officer)
One way to think about it so Eric or Brian to say is that we reported about 15,000 core business user growth from quarter to quarter.
Eric Stang (Chief Executive Officer)
Majority of that was air dial. That's helpful.
Bryant Kentzlinger
Thank you. And then are the sales cycles beginning to change? Is it just integrations are starting for bookings from several quarters ago.
Eric Stang (Chief Executive Officer)
What's changed over the last quarter and a half or so that you're starting to see this inflection point? It sounds like on the demand side. Well, I think it's the things I've said in my conference calls. There are more lines being shut down than ever before. We have more partners reselling air dial than ever before. We are seeing larger entities with many locations around the United States get more and more focused on the need to do something and starting to take action. We are even seeing some of the partners we started working with or customers we won 612 months ago just go faster. Now it really varies by customer, but we're definitely seeing market movement and not surprisingly, there are millions of lines out there that are going to have to switch out over the next two, three years. And so customers need to get in front of this. It's an exciting time for us. I think for the next three years we're going to see Airdial as a very strong contributor to to the business as the majority of lines go away. Now having said all that, most of the lines going away today are from AT&T. There are others out there that have lots of lines, Verizon being one, that are really not sunsetting many lines yet. So depending on how those parties, know, move forward, there's a long term roadmap here for POTS lines needing to be replaced. So it's still frankly early days in the POTS line replacement business I think compared to where it's going. And that's why we're seeing the market acceleration.
Bryant Kentzlinger
Great, thanks. Last question I have you talked about ma, what are some of the top priorities? Maybe any details related to either technology, what fills out your stack or geography where maybe you're lacking presence. Anything you can share on that would be great. Sure, happy to.
Eric Stang (Chief Executive Officer)
But neither of those are a particular concern to us. We viewed making smaller sized acquisitions as a way to strategically grow UMA cost effectively and all three, you know, if you look at our three last three UCaaS acquisitions in fluentstreamphone.com and onset, business like those would be of interest to us or be in our target sweet spot. Doesn't mean we wouldn't also look at other things or things that might broaden us in certain ways. But fundamentally we're looking for cost effective growth, increased scale, moving Ooma up to just be a larger business in the market. And I think that when businesses that we're acquiring can be accretive 1/4 out, which both fluent stream and phone.com were a very viable strategy for us. So that's what we're trying to do. And about the only constraint I'd say is we're focused in North America, we're not trying to expand geographically.
Bryant Kentzlinger
Great. Thanks a lot.
OPERATOR
As a reminder, ladies and gentlemen, that Star one one to ask a question. Thank you. Please stand by for our next question. Our next question comes from the line of Matthew Harrigan with Benchmark Stonex. Your line is open.
Matthew Harrigan
Thank you. This May be quite a conjectural question, but I'll go there anyway. When you look at the family safety market, which actually would include predatory activity toward kids, as well as not being too distracted by social media on the mobile side, it's an enormous tam. You know, both. Both in the US And Europe as well. I'm aware of one small software company that's trying to address that. I know Verizon's done some things in house, but is there anything that you're doing that would be appropriate to that market? Because, I mean, clearly there's some opportunity with my phone, but if you had something comparable on the mobile side, where you had both kind of a safety element and not watching too much of the Kardashians element as well, it would certainly have a pretty huge TAM in the market relative to my phone. Thanks.
Eric Stang (Chief Executive Officer)
Yeah, that's an interesting area to think about. And there are certainly other things one can do and other things certain companies are doing. Our focus today is my phone, which is specifically targeted at kids who have a defined list of others they want to be in touch with. There's a bit of a viral impact to this because when your kid gets one, you want the other kids that are their friends to get them, too. And the parents get together and they discuss what they're going to do. And it really is a nice way to give your kids some freedom and ability to interact with others, but still know that they're not subject to all the challenges of social media and connectivity that comes with a smartphone. So it's a remarkably large movement. We. We were talking just the other day about an organization in Washington, the state of Washington, in a particular location there, where there's actually a nonprofit that's giving out phones like this to try and get all the kids on something that's safer. It's a big deal. We've also seen social media banned in some countries for kids below a certain age. Not the US of course, but I'm thinking countries. I believe, if I'm remembering right, Spain was one of them that did that recently. So I think there's a real role for myphone. I can tell you that when we talk to retailers, our buyers at retail are often individuals with kids at home, and they get it instantly when we start talking about the use case. If you've got a kid at home and you're facing these issues and you hear about what MyPhone is and what we're trying to do, it really resonates. So as you can tell from shig's guidance, our Guidance. We don't really know what to expect from iPhone and we haven't put too much in the outlook for it. But we are going to really put some marketing behind it, particularly through social media channels and influencers and see if we can't get, you know, get a lot of parent interest in what we think is a great solution for younger kids. So that's really our focus and you know, as we're successful with that, maybe we'll look more broadly from there.
Matthew Harrigan
Would you say that even if you didn't have anything in the hopper in terms of active developments or discussions, would you have reason to believe that any of your technology would be readily transferable to the mobile side or is it just no visibility on that? In other words, it would be an app.
Eric Stang (Chief Executive Officer)
Oh no. I do think some of our technology is transferable, in fact.
Matthew Harrigan
I'm sorry. Well, I don't want to get too specific or I don't know if you can hear me, but I don't want to try to get too specific on what we might be thinking about or what you're going towards. But we do have our mobile app called Talkatone and we're very aware of how mobile apps can be tailored to meet certain needs in the market. And so we have that technology in house along with the technology that obviously creates the special features that my phone brings. But yeah, I think you're getting out ahead of where we are. Okay, great. Thanks. Eric, congratulations again on the numbers.
OPERATOR
Please stand by for our next question. Thank you. Our next question comes from the line of Matthew Moss with B Rally Securities. Your line is open.
Matthew Moss
Hi, this is Matthew on for Josh. Thanks for taking my questions. Just to start off. So on the product gross margin side it came in at around like negative 30%. I'm wondering like how much of that is sustainable, you know, air dial Gen 2 cost savings and is negative 30% of like around there a good run rate going forward?
Shig Hamamatsu (Chief Financial Officer)
Yes. Matthew, this is Sheikh. Thanks for the question. I do think and our expectation right now is you're going to see a little bit worse product margin starting Q2 and rest of the year. A couple of reasons. One would be the, you know, we're going to start to see the impact of higher component prices that we may have talked about in the past a little bit. So these are memory pieces. So it's not a. Unique to, it's not unique to UMA per se but you know, so those components going to tello residential product and air dial. So we're going to start to see Some impact of it starting Q2 and rest of the year secondary. Again, we're not putting too much my form estimate into the forecast to be conservative, but to the extent that we see those units shipped into stores in the second half, when we do realize them, we are going to lose some money up front. You know, really customer acquisition costs from our perspective. So for those two reasons, you know, you're going to see a little bit worse product margin Q2, and particularly in the second half. So long story short here, that I think that for the whole year, we're estimating about minus 40% for the entirety of the year. So maybe you can model to that around that number. Got it. That's helpful. Okay, so then going into fiscal 28, right after some of that second half weakness from launching more MyPhone products, like, I guess, how do you see that going from negative 40 to, I guess, closer to 30, like maybe 35? Yeah, I mean, I can. I can't really predict yet of the, you know, 28, but, you know, and I just. Nobody knows where the memory price is going either. Right. So it's hard for me to say. But if you have to model something for 28, maybe you want to keep it on minus. Maybe you want to keep it on minus 40 for now.
Matthew Moss
Got it. Thanks. And then, so I guess you mentioned my phone. I'm wondering, like, what the ARPU is looking like for my phone versus Cord Tello.
Shig Hamamatsu (Chief Financial Officer)
So my phone would be all premium subscription users when they sign up. So, you know, it would be accretive to our average residential ARPU, which is $9 and change. So it'll be accretive to that number. Great. Super helpful. Last question for me. I know you guys mentioned Verizon was still inactive on pot shutdowns. I'm just wondering, do you see any signals on when that might change? Maybe it might be the second half of this year, maybe next year. I'm wondering, as an upside lever, what we should think about that. I don't have any signals to share there now.
Matthew Moss
All right, that's fair. Thanks for taking my questions.
OPERATOR
Thank you. Ladies and gentlemen, I am showing no further questions. Thank you. Thank you.
Eric Stang (Chief Executive Officer)
I would now like to turn the call back over to Eric for closing remarks. Well, thank you everyone for joining us today. We appreciate your time. It's just one quarter into the fiscal year, but it's a good start and we see lots of opportunity to go capture and we're going to execute our best to do it. So thank you, everyone.
OPERATOR
Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
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