Erin Rheaume - IR, The Blueshirt Group Eric Stang - Chief Executive Officer Ravi Narula - Chief Financial Officer.

Michael Nemeroff - Credit Suisse Nikolay Beliov - Bank of America Merrill Lynch Pat Walravens - JMP Securities Josh Nichols - B. Riley & Co Bhavan Suri - William Blair Matt Robison - Wunderlich.

Good day. And welcome to the Ooma Fourth Quarter Fiscal 2017 Earnings Conference Call. Today’s call is being recorded and at this time, I’d like to turn the conference over to Erin Rheaume. Please go ahead ma’am..

Thank you. This is Erin Rheaume, Ooma Investor Relations and I am pleased to welcome you to Ooma’s conference call to discuss its fourth quarter and fiscal 2017 earnings result. With me on the call today is Ooma’s CEO, Eric Stang; and CFO, Ravi Narula. After the market closed today, Ooma issued a press release through PR newswire.

The release is also available on the company’s website at ooma.com. This call is being webcast live on the Investor Relations’ page of the Ooma website and will be available for a period of one year. During the course of 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.

Forward-looking statements in this presentation include, but are not limited to, statements related to our business and financial performance, and expectations and guidance for future periods, our expectations regarding our strategic product initiative and the related benefits and our expectations regarding the market.

Our expectations and beliefs regarding those matters may not materialize and actual results in financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected.

These risks include set forth in the press release that we issued earlier today, as well as those 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 required by law. Please note that other than revenue or as otherwise stated, the financial measures to be disclosed on this call will be 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 disclosed in this call to the mostly directly comparable GAAP financial measures are included in our earnings press release that is available on our website. Let me now turn the call over to Eric Stang, Ooma’s CEO..

Thank you, Erin. And hello and welcome to Ooma’s FY 2017 Q4 earnings call. first of all just please bear with me today as I speak, I spent a long time at the dentist yesterday and I’m not all back together. This is a particularly exciting time for Ooma.

I’m pleased to talk with you today about our strong Q4 performance and our outlook for the upcoming FY 2018 fiscal year. As this is the start of a new fiscal year, I’d also like to review our strategy and longer term vision. In Q4, FY 2017 we exceeded our revenue guidance by achieving total revenue of $27.6 million for the quarter.

The fastest growing part of our business was Ooma Office for small business customers, which grew subscription service revenue approximately 60% year-over-year. Ooma Telo for residential customers and Talkatone for mobile customers also experienced solid growth in line with our expectations.

Adjusted EBITDA for Q4, FY 2017 was positive for the second quarter in a row and we ended the quarter with over 933,000 core users and over 1.7 million Talkatone mobile app users.

We begin FY 2018 with great momentum, we have more growth initiatives underway than ever before and major new opportunities including our partnership with WeWork in which we’ll provide phone service to their members. I’ll discuss WeWork in greater depth shortly.

As I outlined during our last conference call, the first of our four key goals for FY 2018 is to expand our small business customer base significantly. Throughout FY 2018 we will increase our investment in sales and marketing through additional online and direct advertising and growth of our sales team.

We will continue to build a reseller program by attracting and educating new resellers and establishing better systems to support them. We will accelerate the development of new features and increase the number of users we can support per customer and will expand the range of IP phones, we support.

While we’re expanding the capabilities of Ooma Office, we will continue to focus on small businesses. These businesses make up at least 90% of all the businesses in North America and represent a very large market opportunity and as I’ve said before, we’re confident that we bring several fundamental competitive advantages to serving them.

We will also build upon our new partnership with WeWork in FY 2018. For those of you who don’t know much about WeWork, they’re a community of creators, entrepreneurs, small businesses and enterprises.

WeWork provides flexible workspace, business services and a collaborative community environment to more than 90,000 members across 125 locations in 38 cities and more than 10 countries globally.

In calendar 2017, they plan to double their real estate footprint, in fact they’ve already announced that they will open new locations in several new markets this year. We have created a deep partnership with WeWork which includes integration between ourselves and WeWork to improve the overall phone experience for WeWork members.

The result, Ooma Office for WeWork provides a streamlined user experience for on boarding and customer support includes rental of an IP phone from Ooma and a fixed monthly price to the member and is scalable to the enterprise level. Ooma Office for WeWork is now available through WeWork to all of their members in the US and Canada.

We also have plans to scale Ooma Office for WeWork to serve WeWork members in several new international locations outside of North America. These plans accelerate Ooma’s international strategy and will require us to increase our development spending in FY 2018.

This is an exciting new development for us and a special opportunity to expand our business in conjunction with a major global partner. The second of our key goals for FY 2018 is to continue to add Ooma Telo customers but more importantly monetize our Telo customer base in new ways that increase ARPU.

We recalled that one of the core differentiators for Ooma is our ability to control all of our end-point devices and add new services to the platform including services that extend beyond traditional telephony.

Our two biggest initiatives in this area are our new internet security service powered by Zscaler and our recently announced new smart home security service with Remote 911. Ooma internet security was discussed during our last conference call, so I won’t say much about it here.

Beyond that it protects all of the devices connected to a home network from internet threats including all IoT devices in the home and is available to our Telo customers for an additional monthly fee of just a few dollars a month. We recently rolled out the service to all Telo devices and early indications are encouraging.

Our second major initiative is to increase Telo ARPU is Ooma smart home security with Remote 911, which we announced at CES and are currently rolling out to our Telo customer base.

This breakout solution enables the Ooma Telo to connect to motion door, window and water sensors provided by Ooma to allow seamless home monitoring via Ooma’s new dedicated mobile app.

It comes with a unique feature we call Remote 911 that allows [technical difficulty] user who receives an alert to call 911 from anywhere while using the mobile app and have the call placed to their local public safety center as if they were calling from their Telo at home.

This feature is particularly important because it empowers our customers to take action when alerts occur and avoid the use of third party monitoring services. We know home protection represents a significant market opportunity given that most homes today lack security systems.

We bring strong competitive advantage through our unique features especially Remote 911 with our superior value since customers can leverage their Telo and need only to buy sensors from us and through our installed base which we can leverage without significant marketing cost.

Sensors ranging price from $24.99 to $34.99 depending on the type of sensor. We monitor one sensor for free with our basic phone service and up to 100 or more sensors for $5.99 a month. We also provide home monitoring for no extra charge to our premier customers who pay $9.99 per month for their premier service.

We intend to add more features and create new ways to monetize this service in FY 2018. Our third goal for FY 2018 is to expand the potential of the Ooma platform and remain poised to cease break out opportunities.

Given the large markets we serve, the breadth of opportunity afforded by our platform and the acceleration of our international strategy, we will invest significantly in R&D during FY 2018.

And in doing so, we will drive toward the fourth and last of our key goals for FY 2018 by operating at only a slightly negative EBITDA for the year, with the added expectation that we will exit FY 2018 with breakeven EBITDA. Now given that this is the start of a new fiscal year. I’d like to elaborate on our longer strategy and drivers of success.

When Ooma was founded over 10 years ago, we set out to redesign how home phone services delivered and to create a unique platform capable of many services. We accomplished this during phase one of our corporate development and become number one rated home phone service in America.

Our second phase was to take everything we learned about making phone service better and apply it to small business. We undertook this effort several years ago and today have a fantastic small business solution that was voted number one by the readers of EC Magazine.

We entered our third phase of development last year, when we announced our first major non-telephony service on our platform which is Ooma internet security. We’re still in the early innings with this phase of adding services to our platforms and recognize it represents a vital new opportunity for our business in our future.

Now in FY 2018, we’re about to embark on the fourth phase of our development and extend our small business service beyond North America to international markets. And looking longer term, we anticipate further new phases of development and expansion. We see a tremendous growth opportunity ahead and we’re excited about our future outlook.

Now let me turn the call over to Ravi to discuss our results and outlook in more detail. I’ll then return with final comments and we will take your questions..

Thanks Eric and good afternoon, everyone. As a reminder all income statement items except revenue are on a non-GAAP basis and exclude expenses such as stock-based compensation, related taxes and amortization of intangibles.

The reconciliation of the GAAP to non-GAAP financial data can be found in the press release issued earlier today on our Investor Relations website. Today I’m going to review the financial results of our fourth quarter and fiscal year 2017 and then provide our outlook for the first quarter and fiscal year 2018.

Total revenue for fiscal year 2017 was $104.5 million, an increase of $15.7 million or 18% year-over-year. Net loss for fiscal 2017 was $2.7 million, an improvement of $5.8 million from a net loss of $8.5 million in fiscal 2016.

Total revenue for the fourth quarter of fiscal 2017 was $27.6 million, an increase of $3.3 million or 13% on a year-over-year basis. Consistent with our prior guidance, we achieved $1 million of Business Promoter revenue in the quarter.

Net loss for the fourth quarter of fiscal 2017 was $203,000 compared to $1.6 million loss for the same quarter last year. For the fourth quarter of fiscal 2017 subscription and services revenue increased $3.5 million or 17% on a year-over-year basis to $24 million.

This revenue growth was driven by growth in subscription and services of Ooma Office which grew at 59% during the same period. Our subscription and services revenue for full year fiscal 2017 increased 25% on a year-over-year basis and represented 87% of total revenue as compared to 85% of total revenue for the prior year quarter.

Excluding Business Promoter, subscription and services revenue grew by 27% on a year-over-year basis. Our core user based increased 17% from $800,000 at the end of the fourth quarter last year to over $933,000 at the end of the fourth quarter this year and our premium users grew from 46% to 48% of the overall core user base during the same period.

Our small business core users are now 17% of total core users as compared to 14% at the end of the same quarter last year. our small business revenue continues to grow driven by Ooma Office and is now 21% of our overall revenue compared to 18% in the prior year quarter.

Our average monthly subscription and services revenue per core user excluding Business Promoter was $8.28 for the fourth quarter of fiscal 2017 compared to $7.98 for the prior year period. This growth in ARPU was driven by growth in Ooma Office users thus resulting in higher blended ARPU.

By the end of the fourth quarter, Talkatone had more than 1.7 million monthly active users a growth of over 10% on a year-over-year basis. It is important to note that, there is some seasonality in the Talkatone business and historically we have seen a dip in Talkatone revenue in the first quarter as compared to the fourth quarter.

We had built the impact of the seasonality in our Q1 guidance. Annualized Exit Recurring Revenue or AERR increased 16% year-over-year to $89.4 million for the quarter up from $76.9 million for the prior year quarter.

Our net dollar subscription retention rate for the fourth quarter was 91% compared to 94% for the same quarter last year driven primarily due to lower Business Promoter revenue.

Product and other revenue for the fourth quarter was $3.5 million a decrease of 6% on a year-over-year basis primarily due to lower average selling price as a result of lowering the MSRP of Telo in early fiscal 2017. Now moving onto gross margin, we are very happy with the continuous improvements we’ve made to our gross margin.

Our subscription and services gross margin increased to 70% in the fourth quarter up from 67% for the same quarter last year as a result of expanding the percentage of Ooma Office customers in the mix and also because of the benefit of scale.

Product and other gross margins was negative 18% for the quarter compared to negative 8% for the prior year quarter impacted due to lower ASPs of our products.

Our overall gross margin increased to 58% in the fourth quarter compared to 55% for the same quarter last year as a result of increasing mix of subscription and services revenue as a percentage of total revenue. Fourth quarter operating expenses was $16.4 million and increase of $1.4 million or 9% year-over-year.

This increase in operating expenses was primarily driven by higher R&D expenditure as we continue working on new features and functionalities prior to our investment in Ooma Office. Sales and marketing expenses were $8.4 million, an increase of $400,000 year-over-year primarily due to increased sales initiatives to grow our office channel.

Research and development expenses were $5.5 million, an increase of $1.1 million year-over-year due to investments in personnel and other costs.

This increased investment in R&D supported the work on our platform including launching of WeWork service in US and Canada as well as recent announcement of internet and home security services to our customers. G&A expenses were $2.5 million which are relatively flat from the prior year period as we continue to see the benefit of scale.

Due to a growth in Ooma Office, leverage of G&A and prudent expense management, our net loss in the fourth quarter was down to $200,000 or $0.01 loss per share compared to a net loss of $1.6 million or $0.10 per share for the fourth quarter of fiscal 2016.

Adjusted EBITDA improved to a positive $171,000 in the fourth quarter of fiscal 2017 compared to $1.3 million loss in the fourth quarter of fiscal year 2016. This was a second consecutive quarter of positive adjusted EBITDA.

Now turning to the balance sheet, we had cash, cash equivalents and short-term investments of $53.2 million with no debt as of the end of the fiscal year. deferred revenue at the end of fiscal 2017 increased to $16 million from $15.1 million at the end of fiscal 2016.

This increase is primarily due to growth in deferred subscription and service revenue as we continue to increase our core user base. This was the third consecutive quarter we’ve generated positive cash from operations of $561,000 compared to $439,000 in the prior year quarter.

We ended fiscal 2017 with 180 full time employees up from 139 at the end of fiscal 2016. We also had additional 368 personnel working for Ooma on a worldwide basis through our various partner organizations at the end of fiscal 2017.

Now for our outlook, the following guidance excludes stock-based compensation expense and related taxes and amortization of intangibles. For first quarter of fiscal 2018, total revenue is expected to be in the range of $27.8 million to $28.4 million.

Consistent to Q4, 2017 guidance this first quarter revenue guidance assumes approximately $1 million of revenue from business promoter. Now looking forward to fiscal 2018 and longer term, we expect tremendous growth opportunity in North America and beyond driven by WeWork and other opportunities.

WeWork opportunity will require us to invest in new hosting infrastructure in a number of regions around the world as well as developing products to address country specific features and functionalities. This investment in infrastructure and R&D is expected to help us execute on our international strategy as a much faster pace.

Obviously we’ll be careful managing this additional investment in line with our payback period expectation. This means we may have slightly negative adjusted EBITDA for the next couple of quarters, with expectations of getting back to positive EBITDA by the end of fiscal 2018.

Additionally, we believe this incremental investment will help accelerate a growth rate in fiscal 2019 and in beyond. Non-GAAP net loss for the first quarter of fiscal 2018 is expected to be in the range of $400,000 to $700,000.

Non-GAAP net loss per share is expected to be in the range of $0.02 to $0.04, we have assumed $18.3 million weighted average shares outstanding for Q1. For full year fiscal 2018, total revenue is expected to be in the range of $121 million to $124 million. We expect our non-GAAP net loss to be in the range of $1.5 million to $2.5 million.

This translates an adjusted EBITDA for the fiscal year between breakeven to negative $1.3 million for the year. Nevertheless, we do expect to achieve adjusted breakeven by the end of fiscal 2018. Non-GAAP net loss per share is expected to be in the range of $0.08 to $0.13.

We have assumed approximately 18.8 million weighted average shares outstanding for fiscal 2018. In summary, we are very excited with all the milestones we’ve achieved in fiscal 2017 including becoming $100 million plus revenue Company. Development of our reseller channels of our Office and launching of WeWork in US and Canada.

Additionally, we also recently launched new services on our residential platform which we expect will help further improve our subscription and services revenue in the longer term. With that let me pass it back to Eric for some closing remarks.

Eric?.

Thanks Ravi. As I mentioned at the outset, this is a particularly exciting time for Ooma. We have many initiatives in place to continue to drive growth in FY 2018 and our unique strategy has tremendous long-term potential.

Specifically in FY 2018 we expect Ooma Office into a lesser extent Ooma Telo to be the main drivers of our growth and we expect Business Promoter and Talkatone to deliver a positive return to the business.

Longer term, we envisage capturing significant market share by extending our platform to support a range of services in international markets and by providing evermore complete solutions for small business, home and mobile users. With that, thank you and we’ll now take your questions..

[Operator Instructions] and this time, we’ll take a question from Michael Nemeroff, Credit Suisse..

I’ve got a bunch of questions around WeWork that sounds like obviously it’s going to be pretty significant longer term, but - and will impact the EBITDA in the near term. Eric, is that an exclusive arrangement that you have with WeWork? How long is it for? And then also Ravi, you said that you expected to accelerate growth in 2019.

When should we start to see any revenue coming from WeWork? Will it come in 2018 just little bit more clarification on the timing of that revenue would be great, thanks.

And then also specifically Ravi, on the increased investments in R&D is that, how much of - what percent of the increase is going to go towards WeWork versus some of the other incremental opportunity that you’re working on to build out the platform, Eric. Thanks..

Sure. Hi Michael, this is a very important new partnership for us and for WeWork.

We believe WeWork looked around the industry, thought hard about what it wanted to do and selected Ooma for this new partnership to work together with them and we spent a lot of time integrating our systems and procedures between us, so that they can offer Ooma Office for WeWork to their members in a very seamless way.

We’re also I believe scaling globally now with them and that’s a very exciting longer term opportunity for us. So I believe it’s our opportunity to pursue, they have worked with others in the past and I believe they still do work at least with one other, but I believe that they’re very engaged with us today.

Is it a long-term agreement? We certainly view it that way and we’re going to be investing as we said particularly this year in international market locations as part of that longer term development.

As you can imagine, the way our business works, we kind of view it region-by-region and we have to put assets in place in a region to be able to serve countries that might be in that region and that’s part of why we have to do a little extra investment this year. Let Ravi answer the rest..

Eric, before Ravi starts, are there any revenue share agreements? Is there anything that they’re committed to you in terms of number of subscribers that they will bring on to you and just any more details around that? I mean it sounds like you’re making a big investment and developing some technology and processes with them.

I just don’t understand how much of that is contract versus just your goodwill and bringing on a new big partner..

There is an extensive contract between us. When we make an investment internationally, it’s driven off of a joint process we have with them that gives us an understanding of new markets they may be entering or other things they may be doing internationally and what that’s likely to lead for us.

There aren’t formal guarantees of certain outcomes, but we’re not going to invest unless we worked together with them and we both have an understanding of what we’re achieving with that investment. I will say two that, when we invest we will see customers from that investment from WeWork relatively quickly.

It will, It’ll be an opportunity for us longer term if and when we choose to try to do things in an international country beyond WeWork, but when we invest we’re going to, be doing it to achieve WeWork members using our phone service..

And Michael with respect to your couple of questions, one on timing of revenue. We do as I mentioned earlier, we do expect meaningful revenue in fiscal 2019, but we should start.

We will start seeing revenue in fiscal 2018 onwards, so for example we have hundreds of users as of now from WeWork, where we should be able to, we’re able to give them service and we should see some revenue coming from those guys. In terms of the R&D investment, there are two investments we’ll make for international.

One is infrastructure which requires hosting facilities, having servers and other hosting capabilities in various regions around the world and then to invest into R&D, to get features and functionalities for country specific requirements there.

That would be in $2 million of investments to be made over a period of time, we will not launch all services in all countries at the same time. There will be a schedule, we will work with them, as per their plan. But I do expect those investments to start yielding meaningful revenue in fiscal 2019 and beyond there..

Let me add one final statement.

This is great opportunity for us, it’s always been in our longer term vision to extend beyond North America, we now have an incredibly significant global partner to work with, where if we make an investment, we can start to see benefits from it, just about right away and someone we can partner with to develop on an international scale.

It’s really a terrific opportunity for us to exploit and so you can imagine, we want to see that and I think we’re doing and it’s built into the guidance that we’ve given you here and I think we’re going to be able to handle this pretty well, as we grow up..

Great, thank you very much Eric. Congratulations, hope you feel better..

We’ll now move to Nikolay Beliov with Bank of America..

Eric, how many members does WeWork has overall?.

They have more than 90,000 members worldwide, that number last year they doubled their number of members.

Also more than doubled their number of members, more than doubled their number of locations and they have given guidance already that they’re going to double their number of locations again this calendar year, so it’s a large and growing business..

Got it, that’s very helpful. Thank you. How does the WeWork relationship impact you for the roadmap around Office, so far for anyone customer? I believe you can do up to 20 users, how upwards do you need to scale to be able to basically being sync with work and then [indiscernible]..

It’s a good question Nikolay.

For the launch of our WeWork service, we’ve already relaxed the constraint of 20 users, we can handle users up to I mean, accounts with hundreds of users or more and that’s something we did as part of our WeWork launch, another thing we did as part of our WeWork launch is we made it possible to use our service with an IP phone exclusively without needing Ooma Base Station on site as well.

those are capabilities in Ooma Office where we worked they’re not yet available in Ooma Office generally, but you can imagine that overtime we’ll probably bring those capabilities over to our main Ooma Office..

Got it and Ravi, one for you.

In terms of the guidance for fiscal year, I think how should we think subscription revenue growth versus product growth and how much are we baking [ph] for Business Promoter for the year? And have we hit the bottom for business promoter? How was the point where Business Promoter is not a headwind anymore?.

We have taken a very conservative view for Q4 last year as well as fiscal 2018 with respect to business promoter.

So in terms of subscription services revenue the way to look at would be, think of Ooma Office subscription services and even Ooma Telo residential subscription services growing at the same pace as fiscal 2017, so I don’t expect it to be different from there.

Business Promoter to some extent will decline probably a $1 million quarterly run rate and Talkatone will grow but at a smaller pace. So the main core of our business, the Ooma Office as well as the residential they’re going to continue growing at a very good pace.

With the Ooma Home Security launch we’ll probably be selling some more devices like the sensor, so that should help with some improvements in the product revenue, but overall I do believe that subscription services revenue do continue to grow for the two major growth engines in our business..

Got it, thank you..

We’ll now hear from Pat Walravens with JMP Securities..

I’ve three questions, I’ll just lay them out front, so two were on WeWork again. First of all, how does the - will it be a lower gross margin or is there a revenue shares and impacts. So that’s number one.

Secondly, who owns the customer for WeWork? So if you know a lot of company start and WeWork and then grow and then they leave, will that still be your customer and then lastly, I would love to hear just a little more color on how the internet security is doing..

Sure. We expect the margins on our WeWork business to be largely in line with the margins we’ve had generally for Ooma Office. They’re not quite at the same level, but they’re baked into our guidance and we feel very comfortable that we’re going to be able to continue to provide the kinds of margins you’ve seen in the past from Ooma Office.

The customer, I would think of it at least notionally as it’s a joint relationship between us and WeWork with the customer and it is designed, so the customer would leave WeWork and want to continue to service, we can both continue to provide that to the customer and I think that’s a positive of what we’ve created.

And finally in terms of internet security. Originally when we talked about on our last call, we were going to start marketing as we rolled it out to our base. We decided to wait until we have rolled it out to our entire base before beginning the marketing for it and that’s.

And it takes us a while a better part of a month to rollout to our base because we have to update the firmware in the Telo’s and we do that with a very careful deliberate process.

We’re now at the point where every Telo is been upgraded, we have started to send the very first service announcements out to some of our customers, we’ve had some of those people enrolling free trials and we are encouraged by the little bit we’ve done so far, but really the balance of Q1 because we’re already more or less halfway into Q1, the balance of Q1 is going to be important time for us to really determine what kind of take grades, we can drive on Ooma internet security.

I know people have experienced it, love it and so I think we know the word of mouth it’s been a very important part of Ooma in our development and we think, this will fall into that category as well. But I wish I could give you more precise answers, but I think on our next conference call we’ll be in a position to do so..

Okay, great. Thanks Eric..

Thank you..

[Operator Instructions] we’ll now move to Josh Nichols with B. Riley..

Just a couple of follow-ups.

Regarding the $2 million in R&D expenses associated with WeWork, is that all going to hit this fiscal year or part of it going to lead over into the next fiscal year as we look into fiscal 2019?.

Josh, this is Ravi. The major investment in these individual countries will be made in fiscal 2018, but once they launch service in a country, there’s a regular sustaining as well as effort you need to provide and do in terms of R&D effort and things like that to keep the customer happy as well as keep bringing new features and functionalities.

So the majority of the spend would be in fiscal 2018, but the portion which it relates to the infrastructure, the hosting facilities. They will continue in years beyond fiscal 2018 onwards. The reason is you have to host data centers and things like that as you grow with the customers.

So the R&D expenditure will go down year-over-year in 2019 over 2018, but infrastructure will continue to grow. The goal is to have a large number of customers where you can generate meaningful revenue and these services pay off by themselves.

One of the other things we’ve seen is international, we’re investing I think the US and Canada we have already have great infrastructure here. Any new opportunities like these as to our bottom line much faster, so as the international opportunities mature, we will start seeing benefits of that coming there also..

And then, I guess how much of an impact do plan on the company’s new internet security offering having in fiscal 2018?.

We’ve - with both internet security and own security and also other services that we do intend to bring out through FY 2018 and which we’re not yet ready to talk about, in each case we’ve tried to plan them pretty conservatively just because it’s new ground for us.

We’re hopeful from our customer surveys and the things we hear back from our customers that we have a big opportunity for each. But we want to be conservative at this time and then see how things unfold..

And then last question from me, like let’s say I mean Amazon has been talking about integrating phone service into the Echo, Google Home is been looking to - doing the same thing.

If one or both of these service providers decided to choose Ooma as a partner, what would you have to do scale and how quickly could you do it?.

Well that’s a hypothetical that you’ve asked, but in general I would say those devices can be end-point devices for our service if we wanted them to be [indiscernible] and it would not be very hard for us to make our service available on them.

Depending on what APIs they open up or how they evolve the capabilities of those products, we’re excited as we look forward.

There have been some recent announcements in the press that are mainly rumors I think and we’re not going to comment on those but if the capability to provide more of our services on one or more of those types of devices is possible, it’s something we want to do and I think it’s upside opportunity for us as we look forward, except it’s exciting..

Thanks guys, appreciated..

We’ll now move to Bhavan Suri with William Blair..

Nice job on the quarter and obviously WeWork congrats on closing that.

Just a quick question, Eric if you think the investments you’re making, are there other opportunities like WeWork and is there a partnership, a partner channel, are group of people investing into pursue opportunity similar to that where you can embed your solution as part of the other solution especially for SMBs, is that something you’re starting to consider, is that or WeWork sort of initial one and then we’ll see how that plays out?.

Well I do think there can be other opportunities like that out there. I mean stars have to align for those sorts of things to happen. We have done partnerships on the home side in the past, a very recent one which we haven’t really talked much about because it’s nascent.

But there’s an energy supplier named Clearview who is now offering Telo phone service for free to its members as a choice among many as a free good when they sign up for their service.

So we do things when we see an opportunity, I can tell you that WeWork is a significant scale opportunity and one we’re going to stay very focused on at this time just because it’s just, it has so much potential for us. But yes it’s something that our systems and platform are capable of when a partner wants to do something with us..

Got it and then, if you just look at the Ooma Office business unit you’ve obviously got partners to resell that, just some color and sort of how that’s going with the partners and sort of, are [indiscernible] significant partners are sort of becoming important to you for the Ooma Office channel?.

Well I think what you may be speaking about is, the development of our buyer/reseller channel..

Right, exactly. Yes..

Yes and that is a longer term commitment that we’ve talked about now for probably two quarters and that’s developing nicely, but it’s something that will take time. We do have a meaningful number of [indiscernible] partners now.

They are or reseller partners, they are buying products from us and we’re getting customers through that channel, but it is still really in the greater scheme of things nascent and has a lot further to go.

Also there is a fair bit of systems development and process development to support these kinds of resellers optimally and we’re investing in that right now and I think will be through pretty much first half of this year to get things where we really want them.

But I can’t tell you, that as we sit here today we have an internal team on this from a sales perspective and that’s not something I could say, a quarter or more ago. We were just putting that team together and we have built into our plans this year some significant progress on that.

Overall our plans for growing in the small business space with Ooma office this year are quite significant along the lines of what we’ve grown in FY 2017 and our growth rates in FY 2017 was very high and much faster than the growth of the market. So we’re obviously building on the buyer/reseller channel as well as our other channels..

That was really helpful. Thanks. One last one for Ravi, obviously so [indiscernible] tick up sort of just as you more Ooma Office, but within Ooma Office, can you just give a little color on how ARPU has trended just within that business as customers have grown, as you expand the offering. Thanks for taking my questions guys..

Hi, Bhavan. So with respect to ARPU growth, you’re right the blended ARPU went up primarily because of Ooma Office being a bigger piece of the equation.

Within Ooma Office ARPU would grow primarily because if we’re able to upsell the services to additional users coming in and that does happen, so if a customer had three employees and now they add a fourth or fifth employee, we would see the revenue from that customer going up, but the ARPU would not go up because we measure ARPU on a per user basis unless we make a price change which we have not recently done, the ARPU within Ooma Office will not go up, but as Ooma Office becomes bigger and bigger piece of the overall equation, you’d see the overall ARPU going up..

We’ll now take a question Matt Robison with Wunderlich..

I was wondering if you guys can talk maybe a little bit about regulatory challenges to some of the expansion, with WeWork overseas if there’s going to be a CapEx increase along with the R&D and how that might be proportionally and what you might have to do, if anything to move the security with the Zscaler to these all IP phone situations like - I know it doesn’t seem it’s coming out initially like that, it sounds like you’re relying on the Telo to significant degree for initial instance, but if there’s going to be an evolution towards the kind of solutions you provide with WeWork, [indiscernible] security..

Sure. Hi, Matt. I mean when we go into an international market we have to meet the regulatory requirements to that market. Generally, the US is pretty regulated so if you can do it here, you can do it in a lot of places. Taxation is typically a lot simpler in some of these countries it’s just VAT for instance.

But yes, there can be special emergency dialing plans, special customer information requirements on how you control that, other special requirements and we have been doing work since last fall to adapt our platform to be capable of making these kinds of changes more easily because we know we’re going to be doing it in several places.

So there’s going to be some legal work as well, it’s going to hit the G&A just to understand everyone one of these and get it right, but we’re set up to do that and that’s in our guidance. In terms of, I’ll let Ravi speak more in just a second, but in terms of Zscaler, first our internet security service is at wonderful service for small business.

We really believe that, but we’re launching these kinds of new services first on our residential Telo platform to prove them out hardened them, if you will and really develop them to wear [ph] their full potential and then we will look at moving them over to the Office platform.

And I do think longer term you’ll see these services showing up on the Office platform as well and that’s a big opportunity but there’s only so much we can do so fast and so the focus for this year, we expect it to be the residential side with these new services and then we’ll have to reassess at that point, where we go from there longer term.

Did you want to say anything more?.

Yes, on the CapEx spending, Matt. Yes there will be some capital expenditure, we’ll have to do in terms of investment especially for international locations.

Our current CapEx spending as a percentage of revenue is around 2%, so it will go up a little bit, but not significantly, so it may go from 2% to 2.5% or 3% but you’re not seeing - we’re not talking about millions of dollars, we might have a $1 million or less total investment in CapEx increase in fiscal 2018 [indiscernible] meaningful..

We’ve done significant investments in North America in the past and those are largely in place now, so..

Thanks..

Other questions?.

There are no more questions in the queue. This time I’ll turn it back over to Erin Rheaume for any additional or closing remarks..

Thanks for joining us. We look forward to updating you on our next earnings call..

Thanks everybody. We’ll see you..

Once again, that does conclude today’s conference call. Thank you all for your participation..