Good afternoon. My name is Chris, and I will be your conference operator today. At this time, I'd like to welcome everyone to the Ooma, Inc. First Quarter Fiscal 2020 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session.

[Operator Instructions] Thank you. Matt Robison, you may begin the conference..

Thanks, Chris. Good day, everyone, and welcome to the first quarter of fiscal year 2020 earnings call of Ooma, Inc. My name is Matt Robison, Ooma's Director of IR and Corporate Development. With me here today are Ooma's CEO, Eric Stang; and CFO, Ravi Narula. After the market closed today, Ooma issued a press release via GlobeNewswire.

The 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 page of the Investor Relations section of our website. This link will be active for replay of this call for at least 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 may not materialize, and actual results and financial periods 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 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 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 substitutes 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 are included in our earnings press release that is available on our website.

On this call, we'll give guidance for second quarter and full year fiscal 2020 on a non-GAAP basis.

Also in addition to our press release and 8-K filing, the Events & Presentations page in the Investors section as well as the Quarterly Results page of the Financial Information section of our website includes links to costs and expenses not included in our non-GAAP values and key metrics of our core subscription business.

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.

Before I hand it over to Eric, let me say we're pleased to be presenting at the 20th Annual B. Riley FBR Institutional Investor Conference this Thursday, May 23rd in Beverly Hills, California, the 21st Annual Credit Suisse Communications Conference in New York on June 4th, and the William Blair 39th Annual Growth Stock Conference June 5th in Chicago.

We plan to hold webcasts from each of the conferences and the details for them are on our Investor Relations site. In addition, we will be at the Bank of America Merrill Lynch 2019 Global Technology Conference in San Francisco on June 6th. Okay, Eric..

Thank you, Matt. Hi, everyone. Welcome to Ooma's Q1 FY '20 earnings call. I'm pleased to report Q1 was another strong quarter for Ooma both in terms of our financial results and our progress on key initiatives.

I'm also excited to talk with you today about our announcement that we plan to acquire Broadsmart, which is a seller of UCaaS solution to medium and large enterprises. I'll say more about Broadsmart in a moment, but first, I'd like to update you on our Q1 results and key initiatives for this year.

In Q1, we achieved revenue of 34 million, representing 13% growth year-over-year by margin subscription services revenues of 31.1 million with the vast majority of our revenue. And with a net dollar revenue retention of 99%, we feel we continue to build a strong business with significant long-term profit potential.

In the quarter, subscription services revenues from business customers grew 45% year-over-year. Rate of growth, we continue to believe outperforms others in our industry. Subscription services revenues from residential customers grew 4% year-over-year in line with our expectations.

All in, I'm proud of our continued momentum and excited about our outlook based on the initiatives we have planned for the balance of this year. For FY '20 our strategy, as we discussed previously, is to be the undisputed leader in each of the segments we target by capitalizing on our unique end-to-end platform.

Starting first with Ooma Office, which is our solutions specifically designed for the needs of a small business, our product goals this year include rounding out the core feature set and then pivoting our development on to new office services for which we can charge additional revenue.

I'm pleased to report that since the start of this fiscal year, we've launched eight new features on Ooma Office including SMS, intercom, call blocking and enhancements to virtual receptionist.

With this progress, we are now actively working on new features which we believe will drive additional revenue, including new solutions applicable to the business market that will leverage our key strategic partnership with Sprint.

On the sales front for Ooma Office in Q1, we increased our sales team and so our goal now is to leverage this investment through increased sales productivity and marketing outreach.

Moving to Ooma Enterprise which is our more complete UCaaS solution designed for larger businesses, we continued in Q1 to develop the systems and processes to serve white label partners, and we added several new channel partners in the quarter.

We also harnessed our unique ability to customize for individual customer needs by creating a unique solution for a customer opportunity, which could be quite significant for us overtime. Our efforts for this customer also align with our strategy to target selected vertical market segment opportunities.

Finally, in Q1 we expanded our sales and marketing team as part of our primary goal this year of driving more customer engagement. Our announcement to acquire Broadsmart fits directly with our goal to expand in the enterprise segment with a differentiated strategy.

Headquartered in West Palm Beach, Florida, Broadsmart provides mid-sized and large enterprises with hosted voice service, audio and video conferencing, web collaboration, fiber connectivity, and SIP trunking along with network design and security solutions.

The Company is adept at solving complex customer deployments with complete managed solutions and the team is very strong and experienced in UCaas. These capabilities align well with our strategy to differentiate in the enterprise segment versus competition.

With this acquisition, we expect to gain scale in the enterprise segment, bring on board an excellent team that understands selling to larger sized customers with custom solutions, gain access to a solid set of channel partner relationships that Broadsmart has maintained for a number of years and create the opportunity with our low cost structure to substantially improve the economics of this business.

We believe this acquisition presents us a great opportunity to take the next step in our enterprise growth strategy. I look forward to welcoming the Broadsmart team to Ooma. Ravi will provide more color on the financial aspects of this acquisition in a moment.

Strategically, our near term plans will be to integrate the Broadsmart team of about 30 professionals into our enterprise business activities, to tie Broadsmart operationally into our low cost calling platform, leverage Broadsmart's East Coast location for business expansion, maintain Broadsmart's existing customers on Broadsmart's customized Broadsoft-based calling platform, and to introduce Ooma Enterprise and even in Ooma Office to Broadsmart's channel partners as a way to maximize sales opportunities and serve a broader range of customers with more tailored solutions.

Switching now to the residential market, we made good progress in Q1 on our key initiatives for this year. And I'm pleased to report that as of today, we have begun shipping Ooma Smart Cam to end customers and select retail partners.

This is a big milestone for us and our goal now is to build customer recognition of the outstanding features and value of this camera, which will take time and be an ongoing process through the balance of this year. I'm also to report that we recently launched our first application of wireless connectivity combined with home phone service.

So far we have launched an integrated product solution utilizing 4G for Internet service. And in the future, we will bring out the 4G module as a standalone accessory to work with other solutions of ours. As I mentioned last quarter, we believe we have a sound strategy and our focus this year is most of all on execution.

Once the acquisition is completed, integration of Broadsmart will keep us extra busy and I'm confident this will be a powerful move by us in the enterprise segment.

As we look forward, we believe we can continue to increase the proportion of revenue we obtained from business customers, increase our gross margins, and gain leverage on R&D and G&A spending. And with these developments, we can drive growth and ultimately improve our bottom line.

I'll now turn the call over to Ravi to discuss our results and outlook in more detail and then return with the final comments before we take your questions..

Thank you, Eric. Good afternoon everyone. I'll start with a review of our financial results for the first quarter of fiscal '20 then provide our financial outlook for the second quarter and full year fiscal '20. I'll also provide additional financial details about the pending acquisition of Broadsmart, announced earlier today.

All income statement items except revenue are on a non-GAAP basis, and we have excluded expenses such as stock based compensation, amortization of intangibles and certain litigation charges.

The reconciliation of GAAP to non-GAAP financial data can be found in the press release issued earlier today, which is available on the investor relations section of our website.

Starting with the first quarter results, we ended the quarter with strong financial performance achieving $34 million in revenue at the top end of our previously issued guidance range of $33.5 million to $34 million. On a year-over-year basis, total revenue grew $3.8 million or 13%, primarily driven by Ooma Business.

Net loss for the first quarter of fiscal '20 was $840,000, better than the previously issued guidance range of a $900,000 to $1.3 million loss.

Revenue contributions from Ooma Business is now 33% of total revenue compared to 26% for the prior year quarter, and Ooma Business subscription and services revenue during the quarter grew 45% on a year-over-year basis.

The combined subscription and services revenue from Ooma Business and Ooma Residential grew 15% year-over-year, while our residential subscription services revenue grew 4% for the same period. During the quarter, we saw some softness in our Talkatone business, largely driven by lower ad revenue.

Overall revenue from Talkatone was $950,000 for the first quarter fiscal '20, compared to $1.2 million of revenue in the same period last year. For the first quarter of fiscal '20, product revenue was $2.9 million flat on a year-over-year basis. With that, I will now provide details on some of our key customer metrics.

Our total core users increased to 985,000 at the end of the first quarter of fiscal '20, up from 945,000 in the prior year period, with our business users now accounting for 17% of total core users compared to 14% at the end of the prior year period.

Our blended average monthly subscription and services revenue per core user increased to $10.25 in the first quarter fiscal '20, compared to $9.31 in the prior year period, a 10% year-over-year increase. Annual exit recurring revenue was $121 million at the end of the first quarter of fiscal '20, which is a 15% year-over-year increase.

We achieved a 99% net dollar subscription retention rate for the first quarter of fiscal '20 compared to 101% for the prior year quarter. With that, I will now provide some color on our gross margin.

Subscription and services gross margins increased to 70% for the first quarter fiscal '20 compared to 69% for the same period last year, improving primarily due to mix change.

Product and other gross margin was negative 26% for the first quarter compared to negative 18% for the same period last year, and improved sequentially from the fourth quarter negative 36%. These fluctuations in profit margins are driven primarily by changes in average selling price, paid charges and tariff.

Given the uncertainties around tariff, we continue to closely monitor the impact of current and future tariffs on our business. Our overall gross margins were 61% for the first quarter, up from 60% in the prior year quarter. Now onto operating expenses. First quarter fiscal '20 operating expenses were $22 million, a year-over-year increase of 14%.

Overall, sales and marketing expenses for the first quarter of fiscal '20 increased to $10.9 million, a 28% increase on a year-over-year basis, as we continue to grow our sales and marketing programs to support Ooma Business. Research and Development expenses were $7.7 million, an increase of approximately $100,000 from the same period last year.

G&A expenses of $3.3 million, compared to $3.1 million for the prior year quarter. Our net loss in the first quarter of fiscal '20 was $840,000 on a $0.04 loss per share, compared to a loss of $849,000 or $0.04 loss per share in the first quarter of fiscal '19.

Adjusted EBITDA loss was $468,000 in the first quarter of fiscal '20, compared to a loss of $522,000 for the same period last year. Now turning to the balance sheet and other metrics, we had cash and investments of $37.2 million with no debt at the end of the first quarter of fiscal '20.

Cash used in operations was $5.7 million compared to cash generation of approximately $300,000 in the prior year quarter. This use of cash was largely driven by the timing of payments of accounts payable, accruals along with some buildup of inventory.

We ended the quarter with approximately 700 employees and contractors, up from approximately 650 in the prior year quarter. Now, I would like to provide details about the financial aspects of the Broadsmart acquisition we announced earlier today.

We will be paying $7.4 million cash for the Broadsmart acquisition and there are no other contingency payments expected for this acquisition. We believe Broadsmart is complementary to the overall growth strategy of Ooma, especially with regards to our channel strategy.

Based on our forward-looking revenue outlook of Broadsmart, purchase consideration for Broadsmart represents an enterprise value of slightly under one times revenue. Furthermore, we expect Broadsmart to become accretive in the next 12 months. As we focus on scale efficiencies and generating synergies.

We expect the transition to close in the next 30 days, so we should have approximately 8 months of impact from Broadsmart to our fiscal '20 guidance. I'll now provide further details of our guidance for the second quarter and full year fiscal '20.

Our guidance is non-GAAP and has been adjusted for expenses such as stock-based compensation, certain litigation charges, amortization of intangibles and other acquisition related expenses. Additionally, this guidance includes the effect of the pending Broadsmart acquisition expected to close in the near-term.

For second quarter fiscal '20, total revenue is expected to be in the range of $35.5 million to $36 million. We expect non-GAAP net loss to be in the range of $1 million to $1.4 million. Non-GAAP net loss per share is expected to be in the range of $0.05 to $0.07. We have assumed 20.9 million weighted average shares outstanding for Q2.

For full year fiscal '20, total revenue including Broadsmart is expected to be in the range of $145 million to $148 million. We expect non-GAAP net loss to be in the range of $4 million to $5 million. Non-GAAP net loss per share is expected to be in the range of $0.19 to $0.24.

We have assumed approximately 21.2 million weighted average shares outstanding for fiscal '20. We are pleased with our first quarter results driven by growth of Ooma Business. Going forward, we believe we are well positioned to execute having enhanced our products and features as well as expanded our go-to-market strategy.

With that, I'll pass it back to Eric for some closing remarks.

Eric?.

Thank you, Ravi. As we discussed at the outset, we're pleased to complete another strong quarter for Ooma.

With our unique solution for the small business segment, our differentiated strategy in the enterprise segment which has now made even stronger by the pending acquisition of Broadsmart and our strong position and brand name in the residential segment, we are well positioned to continue our growth trajectory.

And now that we are increasingly innovating in new areas and scaling our sales and marketing, we believe we are building additional momentum. Thank you. We're now happy to take questions..

[Operator Instructions] Your first question comes from Bhavan Suri with William Blair. Your line is open..

I guess I wanted to start first just to start on the acquisition front, obviously, given the announcement this morning.

Just progress as you think about Butterfleye, competitive environment there, and then more importantly sort of as you think about not today but with future acquisitions, are you thinking more on the infrastructure side, the channel side, customers? Is it going up market like Voxter was like adding enterprise features? Help us understand what's the strategy around acquisitions? And I've got a couple more follow-ups..

Sure. Well, talking first about the acquisition we just announced, this is a very logical move for us with what we're doing today. We have a platform of Ooma Enterprise, very customizable and can do unique things for customers.

And the Broadsmart team of individuals is exceptionally strong at customizing deployments and providing white-glove service to larger enterprise customers. And so bringing that team into Ooma, I think we can do more together. And, we can talk more about it, but it's part of our direction to scale up in enterprise and leverage our strategy faster.

I think your second question was about the Butterfleye camera or I may have missed that..

Yes, so maybe a strategy a little bit. So I guess maybe just talk about sort of, so you've added Butterfleye, you've got something Home Security, which is over just to say an adjacent market.

Regarding Voxter to move up market, you've now brought a company to provide infrastructure and sort of white-glove service, and as I thought at the core kind of Ooma Telo Ooma Office, what you're building around it. I'm just trying to sense of it as you look at that map.

What do you feel like needs to be added? What do you feel like is an area that you would look at maybe not specifically a company, but just areas you look at strategically from an acquisition perspective?.

Sure, let me step back a minute and just talk about this company and what makes us special. We have a core platform that has led us to be the number one ranked phone service for residential customers and now also the number one ranked solution for small business customers.

And we really defined the Small Business segment with Ooma Office in the market compared to anyone else out there and we're building on that.

We're building with Ooma Enterprise, we're stretching capabilities into larger customer opportunities now and customers that need more completely UCAAS type solutions and more customization in their applications.

And we didn't think it makes sense for Ooma Office to try to be that too because Ooma Offices is a curated solutions specifically designed to be simple and elegant and easy to use for a small business owner. And so marrying up Enterprise with Office was a very logical move.

All of our sales and marketing efforts can now be spread across both those activities on the go-to-market side of our business, we do find significant synergy. But bringing the enterprise on board, solution on board allowed us to target, customers that we're having said no to, previously, frankly.

The acquisition of Broadsmart, the pending acquisition will allow us to take this great platform capability and extend it faster and farther into being able to meet the full range of needs of a larger customer.

It's not just what the platform can do, but it's how you work with them and how you manage their deployment, and how you structure the whole solution for them. And the team at Broadsmart is fantastic is that.

And so it marries up those capabilities with I think the enterprise solution that we've that, that we're pioneering and the small team we have there. Now when get to Butterfleye and Residential, our platform was never designed to just be a calling platform, it's designed to be a platform for services.

And we actually have the unique capability to update all the units we have out there in the field with new capabilities and features when we wish. And so extending the Home Security and video solutions onto the Residential platform is not that much of a stretch for us.

It's if you think about it, we have an always on platform that's monitoring what's happening on site and completing calls. And now you've got sensors attached to it that can essentially operate from a cloud perspective, the same way that we operate a calling platform in many ways. We're excited to what we can do in the Home Security market.

But as you know, it's been our second priority to growing in the business space. And so we've moved a little bit more slowly than perhaps we could have bringing out the capabilities for the Home Security side of what we're doing.

But we do look at Home Security field as an area that we will be able to leverage with our retailer relationships, our brand name, our install base, and our momentum on the residential side to reinvigorate growth, frankly, on the residential side of our business.

But, strategically our first priority is business and growing business to more than 50% of our total revenue. This acquisition fits with that. We're talking about acquisition strategy. I don't really want to -- there isn't a lot to say in that regard, because frankly, there's nothing we need to acquire as a company.

We have all the capabilities in house that we need to be successful. And in fact, the fact that we built our platform end-to-end over many years to operate differently from what anyone else has out there is our core strength and it's not that we want to diverge from that. But when we see good opportunities, they can lever us up like we have here.

And frankly on an acquisition price that was slightly less than what we think the go forward revenues will be just looked to us like a great opportunity to take a step forward. So that's why we've done it. I hope that answers your question for you. I know I said a lot..

No, it did. That was actually quite, quite helpful. I want to touch on the channel partners as well. So, take Broadsmart out for a second, but you've talked about expanding both Enterprise and Home Security by growing the respective partner channels.

I guess just talk me on the progress you saw there and sort of just the percentage of revenue from the channel on both the VAR channel, but also the co-branding versus white labeling channel?.

Yes, developing channels to augment what we do selling direct is a key part of our strategy, right to highlight it. And I believe it has tremendous leverage to it because each channel partner you bring on and make productive off can have several or quite a few even sales people to bring to the platform.

We distinguish this a little bit between what we do at the small business level and what we do at the enterprise level. At small business level, we're bringing on particularly IT professionals and I would say others that often have not sold telecom in the past and leveraging them into the small business channel.

And that's going well for us, but it's a steadily growing part of our business and we have a lot farther to go with it, frankly, but we have a team on that and it grows every quarter.

On the enterprise side is where you more likely to see what you might think was more typical telecom reseller, it could be -- and there we believe the traditional resellers of that type have kind of been -- and who have traditionally done things themselves have been facing this dilemma of how do I move to the cloud, and how do I preserve my relationships and my position with my customers.

And we believe one of our unique strategies, the willingness to white label to those channel partners, and we have brought on several white label channel partners over the last well since the start of this fiscal year.

And I think you recall my last conference call, I talked about how we spent a lot of our effort last year developing the systems and infrastructure to work with channel partners in that way, in a white label way. That is nascent for us, but since the start of this fiscal year, we've been turning up the dial.

And it is our -- one of our key strategic goal this year is to build a significant channel network of white label partners on the enterprise side. This acquisition of Broadsmart, they are 100% channel in what they sell and they have some very deep channel relationships.

And we're we think we're going to -- that is one of the things that we will be able to leverage here to move Ooma faster..

And one last for me. On the competitive front for Ooma Office obviously, you had a successful IPO from Zoom and they've got Zoom phone, which is sort of targeting sort of 5% to 10% type kind of environment.

And so, given sort of where Ooma Office started, I was just wondering if you seen anything there, is there any sort of competition? Or is it something where the markets are big you haven't run into? So I am just trying to sense how that competitive environment looks like at the low end.

Obviously with Voxster and stuff you're moving up market, but sort of in the core low end small business I was wondering, but you would see there from Zoom specifically?.

Sure, I have not seen them at all in our small business segment, not once. And I'm not worried about them as a competitor in that space for us. What we have built now in the small business space has got several years more actually, of development into it.

And it's a complex task to make a PBX cloud experience accessible, low cost, and easy to administrate and use in a small business setting without a VAR partner, without having to run cabling, without having to sign contracts, without even having to buy IP phones, if you don't want to buy them.

And our solution frankly goes all the way back to the first days of Ooma more than a decade ago when we started building this platform. And so, I'm pretty excited about what we have for that segment. I don't think anybody compares to us.

And so, maybe we'll see them at some point in the future, but I feel we have a very strong solution and that market is really open to us based on how much sales and marketing want to spend for growth in it..

Your next question comes from Josh Nichols with B. Riley FBR. Your line is open..

Yes, thanks for taking my question. Look forward to catching up at our conference this week. I just want to ask, as you push a little bit more into the VAR channel with your previous efforts as well as this new acquisition.

Could you talk for a little bit about any economic differences between the payouts for the VAR channel versus internally generated sales?.

Josh, this is Ravi. I'll give you a couple of data points in this. Generally speaking for a VAR and a channel partner, you have some economics to share between -- from the customers between the channel partner and the Company. So, the generally speaking the gross margins are slightly lower than if you go over to, go to a direct customer.

But at the same time we don't have to enter the same sales and marketing spending. So if I look at from a gross margin basis, I share that economic with them. But on a payback period, I'm pretty happy whether I get the customer through a direct sales channel or to a VAR or channel partners.

So the payback period, the lifetime value for customer is pretty good for whether it's coming through a VAR partner or to a direct basis. Then we were looking at this acquisition for Broadsmart, we did the same analysis saying, what is economic model to have these customers who are coming in, and we were pretty happy with the price we paid for.

So, I think overall, we are happy with this -- with the economics, we've paid for Broadsmart at the same time through the channel partners going forward..

And then just to follow up on that.

Are you seeing the customers, the customer payback period holding relatively study or potentially even coming down a little bit? Or is you kind of get these higher value business customers specifically ones with more lines?.

Good question. I'll say a couple of things. For channels which are more mature, we have been pretty happy with the payback period and the customer acquisition costs we're spending to get the customers. But over the last 12 to 18 months, we've been investing into developing and creating new channels.

That's where we are investing in and there is a higher, longer payback period for those channels. All in, we are happy with our payback period, but the existing channels have been performing very well consistently. And the new channels, obviously, as expected we are investing into, so they have a higher, the longer payback period.

But we do believe as we continue to make those channels more mature, the payback period will improve..

And then last question for me. Good to hear about the Smart Cam launch now that's shipping, but just as far as guidance, I'm assuming that there's not too much factors in the way for that for this fiscal year.

Is it fair to say?.

Yes, it, there is some expectation of that, but obviously since it's not fully, we are starting to launch it. So, I would say there is more upside from those given we have to be more conservative we started shipping it just recently..

Your next question is from Michael Latimore with Northland Capital Markets. Your line is open..

Can you just tell us, if an Ooma sales person or channel partner now sees like, they had 200 seats opportunity.

Would they sell in Ooma Enterprise or would they sell on Broadsmart?.

We'll sell them whichever is going to best fit the needs of the customer. It might even sell them Ooma Office to be honest with you. We have Ooma Office customers with over 100 seats. It's because all they needed was is the capabilities what Ooma Office does. But, generally, I would contrast the two as follows, which I think is what you're asking.

Someone who's going to utilize Ooma Enterprise is going to need something that is customizable and flexible for their specific business needs. We have a great partnership with Talkdesk on the enterprise platform for really advanced contact center.

And frankly, we have a little bit more pricing flexibility with Enterprises as you might imagine because it's a wholly owned platform from us. And if the partners interested in white label, then obviously that's going to be the platform they're working with.

But that doesn't mean to say that, if a customer needs, a particularly rich UC portfolio, the kinds of things that Broadsmart has been developed for a long time and doesn't need other integrations other than the one that Broadsmart supports and such. It may be that the Broadsmart is what we offer.

But we're not targeting one over the other, we're not saying we're going to go to all the customers of Broadsmart and tell them they have to switch. But we can be more flexible and a little more competitive on the Ooma Enterprise side. So, we'll see how this develops..

And is the Broadsmart revenue kind of stable at this point or growing? Or how's that sort of -- what's the trajectory there?.

Hey, Mike, good question. This is Ravi again. So, if you look at just recently, they have improved the churn, but they -- in the past, they were, they had some churn but they really worked hard to manage that churn down. And we still believe there's some opportunity to reduce the churn going forward.

For so far in the last couple of periods, they have been relatively flat, they've been adding new users which were to replenish the churn they were having.

So with the integration of channel strategy with options to either give Ooma Enterprise or Ooma Office at Broadsmart and I think having our low cost platform, I think we look at longer term, the synergies between Broadsmart and Ooma to help grow the revenues going forward..

And then, did they use BroadWorks or BroadCloud as the platform?.

They used BroadWorks. They host it for their customers..

[Operator Instructions] Your next question is from Kevin McVeigh with Credit Suisse. Your line is open..

Great, thank you.

Hey Ravi, can you give us a sense of how much of Broadsmart's dialed into the current revenue guidance, the 145 to 148 versus the prior guidance 140 to 143?.

The big change at this time to the guidance is largely driven by Broadsmart. So like as Josh said, I have not baked too much of Smart Cam into the guidance. There is some expectation but not a lot, but majority of the change in the guidance from last quarter to this one increase is driven by Broadsmart.

And the logic is, we'll probably close the transaction sometimes this quarter with after paying them $7 million plus of revenue with a slightly under one-times revenue multiple for seven or eight months of revenue, this should help us there.

But I think we can probably -- in the longer term, I expect it to be doing better, but right now this is our current assessment of the guidance..

And it looks like the lower end you brought down, any thoughts around that? Is that tariff related or just the maybe some costs associated with the Broadsmart deal? Just any thoughts on the earnings impact..

Yes, on the net loss side, previous guidance was $3 million to $5 million. Now, it's 4 to 5 and it's driven by Broadsmart again. And there is some initial transition expenses, sometimes have to spend some money upfront in the next six months to make some synergies some assessments things like those that's probably driving it.

But I do feel comfortable that this will be an accretive investment for us in 12 months or even under than that..

And then just real quick, what drove the decision to boost the sales force in the Ooma Office?.

The great opportunity we see. We've been growing faster than we think others are growing in the industry and we want to continue that this year. And to do that, we're going to have to have a bigger team..

Ladies and gentlemen, this concludes the Q&A portion of the call. I will now turn it back over to Eric Stang for any closing remarks..

Thank you everyone. Thanks for dialing in today and we look forward to hopefully seeing all of you at one of our conferences coming up. Thank you very much..

This concludes today's conference call. You may now disconnect..