Earnings Call Transcript
Ooma Inc (OOMA)
Earnings Call Transcript - OOMA Q1 2021
Operator, Operator
Ladies and gentlemen, thank you for standing by. And welcome to the Ooma Inc. First Quarter Fiscal 2021 Financial Results Conference Call. At this time, all participants' lines are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Mr. Robison. Thank you. Please go ahead.
Matt Robison, Director of IR and Corporate Development
Thanks, Shale. Good day, everyone, and welcome to the first quarter fiscal year 2021 earnings call of Ooma, Inc. My name is Matt Robison, Ooma's Director of IR and Corporate Development. On the call with me today are Ooma's CEO, Eric Stang; and CFO, Ravi Narula. After the market closed today, Ooma issued a press release via Globe newswire. 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. A telephonic replay will also be available for a week, starting this evening about 8 PM Eastern Time. Dialing information for it is included in today's earnings press release. 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, risks related to the impact of the Covid-19 pandemic 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 day hereof, and we disclaim any obligation to update any forward-looking statements, except as required by law. Please note that other than revenue or otherwise stated, the financial measures to be disclosed on this call will be on a non-GAAP basis. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. The discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures discussed in this call to the most directly comparable GAAP financial measures are included in our earnings press release, which is available on our website. On this call, we'll give guidance for second quarter and full year fiscal 2021 on a non-GAAP basis. Also, in addition to our press release and 8-K filing, the events and presentations page in the investor 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 businesses. These are titled supplemental financial disclosure one and supplemental financial disclosure two. Additionally, our investor presentation slides include GAAP to non-GAAP reconciliation that also provides resolution of GAAP expenses that are excluded from non-GAAP metrics. Now, I will hand the call over to Ooma's CEO, Eric Stang.
Eric Stang, CEO
Thank you, Matt. Hi, everyone. Welcome to Ooma's Q1 fiscal year 2021 earnings call. I'm pleased to talk with you today. Q1 was a strong and busy quarter for Ooma. During Q1, we remained focused on executing our strategy, while also adapting to the changes in our market environment and business activities driven by the global pandemic. I'm proud of all Ooma employees for stepping up to meet the new challenges we faced. And I'm extremely pleased to report that all Ooma employees and their families remain safe today. To all Ooma employees, thank you. Our Q1 revenues were $40.3 million, up 19% year-over-year. Subscription revenues from business users grew 54% year-over-year. Our Q1 non-GAAP net income was $2.4 million, up substantially both year-over-year and versus our guidance as we optimized our activities in response to the pandemic. I believe our solid growth, coupled with increasing profitability speaks to the resiliency of our business model and our ability to adapt to changing market conditions. Given that our Q1 ended on April 30, we experienced the effects of the pandemic for much of our quarter. As you would expect except for a few essential functions, all Ooma employees shifted to working from home. Inside sales and online sales were largely unaffected, but sales through face-to-face channels and through retailers became more difficult. We adapted our marketing programs to emphasize to a greater extent the flexibility and savings afforded by our solutions. Feature wise, we moved quickly to introduce a modernized video collaboration user experience for Ooma Enterprise customers to enable the use of Ooma Office IP phones concurrently at both work and home and to launch the Ooma Office Desktop app. We accommodated an approximately 50% increase in call volume in our network, and we managed supply chain challenges effectively. Overall, it's clear our services are even more vital in these times. And we can adapt to changing market conditions. While Q1 was a very dynamic quarter for Ooma, we nonetheless made substantial progress on implementing our strategy and plan for this year. In April, we made two exciting product announcements. The first was the launch of Ooma Connect, our new fixed wireless internet service. Ooma Connect utilizes advanced LTE to deliver both Internet connectivity and Ooma Office Phone service for as low as $50 per month combined. It is designed both for businesses that want backup internet to ensure vital functions such as phone service and for businesses that want to replace unreliable or expensive DSL or satellite internet. Strategically, Ooma Connect affords us a double-play solution in the market and a distinctive new service. We also have plans to enable more new services in conjunction with Ooma Connect later this year. Ooma Connect represents the next step in our longer-term strategy to provide a complete managed infrastructure solution for small and mid-sized businesses. We're pleased that since the April launch, we now have over 100 customers running on Ooma Connect. We're also thrilled that Ooma Connect recently won TMC Labs’ 2020 Internet Telephony Innovation Award which honors products that display innovation, unique features, and significant contributions toward improving communications technology. Our second major product announcement in April was the expansion of our Office Pro service tier to include the new Office Desktop app. This app expands the work from anywhere capabilities of Ooma Office by turning Windows PCs and Macs into full-featured business phones. Customers can access call controls, start conferences, review voicemails and call recordings, search the company directory, send and receive faxes and more using the app. This launch bolsters our strategy to make Ooma Office Pro an attractive step up for more of our customers. In this regard, we are planning further feature additions to Ooma Office Pro later this year. We also made progress during Q1 on our strategy and plan this year to expand into a new region of the world outside of North America. You'll recall that at the end of Q4, we served over 20,000 users in North America with a large multinational corporation. Our plan calls for us to expand further with this customer in a new region after completing a proof-of-concept. I'm pleased to report that we will start the proof-of-concept this quarter after only a short delay caused by the pandemic. This timing leaves open the opportunity to roll out to a significant number of users in the back half of this year. Regarding enabling our partner, Sprint, to grow sales of Ooma Office branded as Sprint Omni, we made good progress during the first half of Q1 but then were constrained by the shelter-in-place rules that took effect since Sprint's sales force includes face-to-face sales. In addition, the Sprint-T-Mobile merger took effect on April 1 and as I'm sure you can imagine, Sprint and T-Mobile have a big undertaking in front of them to merge their two organizations. Sprint has had success with Sprint Omni and we know Sprint's salesforce and customers are very happy with this solution. At this point, though it is difficult to predict the further impact the pandemic and the merger process will have on our plans with Sprint-T-Mobile so we are adopting a cautious outlook at this time. A final key element of our strategy and plan this year is our focus on sales and marketing execution including securing large customers. The pandemic and changes in our economy have certainly created new sales and marketing challenges, but nonetheless we feel we are well placed to execute as the economy opens up. To share some examples, our largest new office customer in Q1 will roll out to approximately 500 users in more than 150 locations over the next 6 to 12 months. We also added about 450 more office users this quarter with a large national brand where we now enable over 900 local independent locations. Referrals have played a key role in securing these locations; regarding enterprise, we added approximately 150 users in Q1 with an existing customer with whom we expect to grow further this year to approximately 800 users in total. Looking forward, we are dynamic in our sales and marketing activities and we are engaged with all our sales channels to be prepared as the economy returns to normal. We also believe our products and services are an even greater need in these times, and customers want to take their desk phones home, communicate from their computers with our desktop app, or work anywhere via our mobile apps; we have them covered. As small businesses increasingly operate via telephone and online, we have seen further interest. Larger businesses as well are re-evaluating their needs in light of the changing work environment, and we believe this opens up new opportunities for our solutions. I will now turn the call over to Ravi to discuss our results and outlook in more detail, and then return with some closing remarks.
Ravi Narula, CFO
Thank you, Eric. And good afternoon, everyone. Before I start, I want to thank the entire Ooma team for the hard work and focus during these challenging times. I want to give my best wishes for everyone's safety at Ooma and beyond. With that, I'll start with a review of our first quarter financial results then provide our outlook for the second quarter and full year fiscal 2021. Despite the extraordinary circumstances created by this pandemic and the stay-at-home orders, we once again had a strong financial performance in the quarter achieving $40.3 million in revenue within our previously issued guidance range of $40 million to $40.5 million. On a year-over-year basis, total revenue grew 19% driven by Ooma Business. Ooma Business now accounts for 43% of revenue compared to 33% in the prior year quarter. Net income for the first quarter of fiscal 2021 was $2.4 million significantly higher than our previously issued guidance range of $500,000 to $1 million; our strong profitability demonstrated significant leverage within our expense structure as we optimize our activities during the pandemic and focused on operational efficiencies. Now some details on our Q1 revenue. Business Subscription and Services revenue grew 54% on a year-over-year basis, or 33% year-over-year when normalizing for the effect of the Broadsmart acquisition made in May of last year. Residential Subscription and Services revenue grew 4% year-over-year with combined subscription and services revenue from both business and residential growing 22%. Subscription and Services revenue as a percentage of total revenue was 93% compared to 91% for the prior year quarter. Product revenue for the first quarter was $2.7 million compared to $2.9 million in the prior year period. During March and April, a number of our channel partners such as Best Buy were impacted by the shutdown orders, which affected our revenues and user growth. Now some details on our key customer metrics. We had 1,049,000 core users at the end of the first quarter, up from 985,000 at the end of the same period last year and flat sequentially. During the quarter, we continued to add business users primarily through online sales and marketing activities. However, on a residential front, we saw a small decline in our users in the quarter caused by the economic disruptions from Covid. At the end of the first quarter, 23% of our total core users are business users, which is up from 17% for the same period last year. Our average monthly Subscription and Services revenue per core user or ARPU increased 13% to $11.56, up from $10.25 in the prior year quarter as we added business customers including many Office Pro users. We expect this increasing ARPU trend to continue for the foreseeable future. Our annual exit recurring revenue increased to $145.6 million, growing 20% year-over-year. Our net dollar subscription retention rate performed well at 100% compared to 99% for the prior year quarter. During March and April, we saw our churn rate increase by two percentage points on an annualized basis, which we believe was due to the impact of Covid-19 on the economy. We are monitoring our customers’ churn closely and although we experienced an increase in March and April, we have seen some stabilization in churn rates for May. Now some color on gross margins. Subscription and Services gross margins for the first quarter were 71%, an increase from 70% year-over-year. This increase in gross margins was due to the growth of Ooma Business and associated benefits of economies of scale. Product and other gross margins for the first quarter were negative 39%, a decrease from negative 26% year-over-year driven in part by increased air freight charges related to the pandemic. We have increased our inventory levels during the quarter, positioning us to meet our customers and partners' future needs. Overall, we are very pleased to see our total gross margins in the first quarter increased to 63%, up from 61% in the prior year quarter. With that I will now provide some color on our operating expenses for the quarter. Operating expenses for the first quarter were $23.2 million, up $1.2 million or 5% year-over-year. Sales and marketing expenses were $11.7 million or 29% of total revenue. The 7% year-over-year increase was driven by higher sales activities for Ooma Business. Sales and marketing expenses were down 5% from the fourth quarter of last year as we had moderated some sales and marketing programs, including our promotions with brick-and-mortar retailers. Research and development expenses were $7.8 million, or 19% of total revenue, flat year-over-year. We sustained our R&D expenses at our target level of sub 20% of total revenues down from 23% for the prior year quarter. G&A expenses were $3.8 million or 9% of total revenue compared to $3.3 million for the prior year quarter. During Q1, our net income of $2.4 million resulted in diluted earnings per share of $0.11 compared to a $0.04 loss per share in the prior year quarter. For the first quarter of fiscal 2021, adjusted EBITDA improved significantly to $3 million or 8% of total revenue versus a loss of $468,000 for the prior year quarter. This EBITDA achievement is well ahead of our midterm target goal of 5% of total revenue. We ended Q1 with total cash and investments of $23.3 million with no debt. Cash used in operations for the first quarter of fiscal 2021 was $2.8 million driven by the timing of annual tax and other payments and was significantly better than the $5.7 million of cash usage during the prior year quarter. On the headcount side, we ended the first quarter with 799 employees and contractors, up from 748 at the same time last year and down from 895 sequentially as we managed our spending primarily with our contractors. Before I provide our financial guidance, I want to highlight some of our key focus areas going forward. First, we continue to assess the impact of the pandemic on our profitability and cash flows, as well as on key business trends such as customer growth, churn and supplier situations. I am pleased to highlight that we have a solid cash position with no debt and a large and diversified customer base, all of which gives us confidence that we are well positioned to weather the issues at hand. Now on to our second quarter and full year fiscal 2021 guidance. Again, our guidance is non-GAAP and has been adjusted for expenses such as stock-based compensation and amortization of intangibles. After taking into account the current macroeconomic and social environment, we expect total revenue for the second quarter of fiscal 2021 to be in the range of $40 million to $40.5 million. We expect second quarter non-GAAP net income to be in the range of $1.5 million to $2 million. Non-GAAP diluted EPS is expected to be between $0.06 and $0.09. We have assumed 22.2 million weighted average basic shares and 23.1 million weighted average diluted shares outstanding for Q2. For full year fiscal 2021, given the general uncertainty around the current situation and its impact on our targeted customers, we are taking a cautious approach for full-year fiscal 2021 in terms of user growth and customer churn. Accordingly, we expect total revenue for fiscal 2021 to be in the range of $161 million to $164 million versus the previously issued guidance range of $167 million to $170 million. This revised guidance takes into account lower rates of customer additions due to decreased face-to-face sales activities and moderately higher churn for the year. Additionally, on a year-over-year basis, we have assumed very little revenue growth for our residential business and approximately 20% to 25% for our Ooma Business segment. We now expect non-GAAP net income for fiscal 2021 to be in the range of $5 million to $7 million versus the previously issued guidance range of $2 million to $4 million. This guidance assumes higher profitability in the first half of this fiscal year and with expectations of increased spending and user growth in the back half of this fiscal year. Non-GAAP diluted EPS is expected to be in the range of $0.21 to $0.30. We have assumed approximately 22.5 million weighted average basic shares and 23.5 million weighted average diluted shares outstanding for fiscal 2021. We also expect to generate positive cash flow from operations during this fiscal year. In summary, we executed well in the first quarter in spite of the effects of the pandemic and we remain confident in our long-term strategy.
Eric Stang, CEO
With that I will pass it back to Eric for some closing remarks. Thanks, Ravi. Our current business view is that while the economy will gradually open up going forward, the pandemic and its effects will be with us through this year and perhaps beyond. Although, we plan to be cautious in our outlook, we believe our solutions not only help businesses work more flexibly, but also often save them money. As we look forward, the value we bring to the customers is a core strength in these times. Another core strength is our range of capabilities. Our expanding Office Pro feature set, ability to customize Ooma Enterprise and integrate it with Ooma Office, and new Ooma Connect internet solution extend our reach in differentiation. Both our residential and our small business solutions are ranked number one by users themselves with tremendously high customer satisfaction scores and customer referrals. We believe our strategy is working and we can capitalize on significant opportunity over the long term. Thank you.
Operator, Operator
The first question is from Josh Nichols of B. Riley. Please go ahead. Your line is open.
Josh Nichols, Analyst
Yes. Glad to hear everyone's safe and thanks for taking my question. Really strong profitability on the bottom line this quarter. I didn't want to ask like thinking about it good to see that the R&D leverage that the company's capitalizing on this quarter. Is the thought that that's going to continue to remain at or around these levels as a percentage of revenue or maybe that starts to trickle up a little bit given the investments the company is doing with the new launches in the second half of this year for offerings.
Eric Stang, CEO
Hi, Josh. Good to talk to you. Our R&D this quarter is about the same level spend as it was a year ago, and we don't intend to grow it at the rate we grow sales, so that would mean some leverage in order. And maybe Ravi has more to comment.
Ravi Narula, CFO
Hey, Josh. Yes. So if you look at our mid-term target model of one to three years, the R&D range we have given is 17% to 19%. Yes, we are at the high end of that range today, but as we grow the business, we do expect some more leverage coming in. So, that 19% could over a period of time go down to 17% also.
Josh Nichols, Analyst
Thanks and then, Eric, I want to ask, great to see the company has this big opportunity in front of it to expand outside of the North America market. How long is this, I guess, demo or proof-of-concept expected to take for the company?
Eric Stang, CEO
I think that that's a little open, but I don't expect it will last more than a couple of months, maybe a little longer than that. We had intended a quarter ago to have this proof-of-concept started at the end of Q1. We had to do some work before we could be ready to start it. We got all that work done, and it will be starting this quarter and that means as I said in my script for the back half of this year; we're hopeful that we can roll out to some significant numbers of users.
Josh Nichols, Analyst
And is there any additional detail that you could provide as far as the size of the opportunity? I know last quarter you mentioned you’re already up to 20,000 seats.
Eric Stang, CEO
This company has never been as large in this new geographic region of the world as it is here in North America. The opportunity is quite significant, and I believe this is a customer we could grow with for many years. It's a substantial opportunity.
Josh Nichols, Analyst
Thanks, and then last question, and then I'll hop back in the queue. I know management's taken a pretty conservative stance on the top line for the guidance like what's kind of built in there for the expectations around Ooma Connect, the Desktop app, and upsells to these Pro solutions that the company's thinking about?
Eric Stang, CEO
I'll address the second part of your question first and then connect it back. We're quite pleased with the progress we've seen with Ooma Office Pro since its launch late last year. Approximately 5% of our user base is currently utilizing it, and among new customers, we observe that in some channels about 10% are adopting it, while in other channels, that figure can reach as high as 30% to 40%. Our aim is to increase this to a double-digit percentage of our total user base moving forward. We're satisfied with its performance and will continue to add features over time. We recently introduced the Desktop app, which serves as an important tool for remote work. Overall, I believe it's started off well, and we're making significant progress. Regarding Ooma Connect, we haven't yet established specific targets since it's newly launched and we are still gauging customer feedback. However, we're encountering customers with notably poor and expensive internet options; in these instances, Ooma Connect serves as an effective primary solution. We’ve already seen success in these scenarios. Going forward, we need to determine how many of our customers will find value in a backup internet solution for their daily needs. We are optimistic that larger companies with multiple distributed sites will view Ooma Connect as an excellent backup internet option. Currently, these companies are using other solutions, and we hope they will consider Ooma Connect as a superior alternative. There is much more ahead for Ooma Connect in its early stages, and I will provide further updates next quarter after we have gathered more experience.
Operator, Operator
You next question is from Mike Latimore of Northland Capital. Please go ahead. Your line is open.
Michael Latimore, Analyst
Thank you. Yes, congratulations on the nice quarter there. I guess on the 100 Connect users or Connect customers, do they come through any specific channel? Is there any verticals that took it? Any kind of color on that would be great.
Eric Stang, CEO
Yes. They primarily came through existing customers or our more personal sales channels, rather than through general marketing and inbound lead generation. These customers tend to be larger in size, and many are located in areas with limited Internet access. We started with a small portion of our customer base to test the new product, which has been very successful, and now we're expanding. However, we’ve found that it may not work in every customer situation as it relies on the Sprint network, and coverage is a factor. We are optimistic that the T-Mobile Sprint merger will help us increase coverage options for the product. Overall, our efforts have been in line with our expectations.
Michael Latimore, Analyst
Great. Regarding the gross margins, subscription performance was fairly strong. You mentioned the freight costs on the product side. How should we consider those margins for the second quarter in terms of subscription and product?
Ravi Narula, CFO
Yes. Mike, this is Ravi. I do expect that there will always be some fluctuations. For instance, an increase in call volume will affect margins, but as we continue to gain Office Pro customers, that will help improve margins. I anticipate that subscription service margins for Q2 will be similar to Q1 levels. As for product margins, I expect a slight improvement from Q1 levels due to lower air freight charges. However, this also depends on overall freight costs, but we do expect reduced air freight expenses in Q2 since we have built up a good inventory.
Michael Latimore, Analyst
Got it. And then just in terms of pricing your various services, are you having to change much in the way of pricing given the environment we're in or is it pretty consistent?
Eric Stang, CEO
We haven't made any significant changes in pricing. We've always offered strong value to the market and haven't felt the need to adjust it.
Michael Latimore, Analyst
Right and just last one, Talkatone. What was the Talkatone revenue in the quarter?
Ravi Narula, CFO
It was around $1 million, slightly below $1 million given CPMS had gone down especially in March and April. So it was an iota below $1 million. But we had expected was $4 million for the year. I think we are on track for that, so nothing big in terms of Talkatone.
Operator, Operator
Your next question is from Kevin McVeigh of Credit Suisse. Please go ahead. Your line is open.
Kevin McVeigh, Analyst
Great. Thank you. So I wondered can you give a sense of what percentage of your sales is face-to-face versus your other channels? Because it seems like net-net even just despite the disruption, the Covid disruptions still saw pretty good outcome overall on the revenue side.
Eric Stang, CEO
We did have a good outcome, although keep in mind that depending on when new customers come in the quarter, they may not be much revenue in the quarter, but then they build over time. Approximately 30% of our business sales come through some channel that I would consider face-to-face, which means there are field activities going on in some form. So it's about 30%.
Kevin McVeigh, Analyst
Got it. So, Eric, is it fair to say that you kind of over delivered in other areas the way the revenue came in overall?
Eric Stang, CEO
We did well in certain areas. In fact, our inbound and direct sales were a little stronger but not enough to make a big point of it.
Kevin McVeigh, Analyst
Got it. Just quickly, are you seeing any changes in customer behavior post-Covid? How are you positioned to take advantage of these behavioral shifts in a world where remote work is likely more prevalent? Can you provide insights on the bit space?
Eric Stang, CEO
I apologize. I couldn't get that from you. There was some background noise. Could you just ask it again? I apologize.
Kevin McVeigh, Analyst
Yes. Of course, Eric. Just how are you folks thinking about the business model post Covid-19, no, it feels like you could be in a position to benefit as opposed to other entities coming out of post Covid-19 as you think about your clients' need?
Eric Stang, CEO
Yes. I believe we are in a strong position after Covid-19. Our solutions are robust, and I think the pandemic has made many businesses aware of the weaknesses in their existing solutions. For example, if you're a restaurant that needs to handle all your business through phone orders and pickups, you require a reliable phone system. This is an opportunity for us to showcase what more we can offer and to encourage businesses to consider switching for reasons beyond just saving costs. I anticipate that this will benefit us as we transition after Covid. For mid-sized and larger businesses, the shift to remote work has caused many to become more cautious. These companies tend to make more strategic decisions, which means selling to IT professionals is crucial. There might be some pent-up demand as employees return to work, but currently, these businesses are not making significant new decisions. They might be supplementing their current setups or adding users for remote work, but they are not looking to make major changes at this time. Therefore, I think that as we move forward post Covid, we will gradually rebuild our sales teams, allowing us to take advantage of this situation at a measured pace.
Operator, Operator
Your next question is from Matt Stotler of William Blair. Please go ahead. Your line is open.
Matt Stotler, Analyst
Hey, guys. Thank you for taking my questions. Solid results and good to see that even in a challenging environment. I guess, first, I'd like to maybe double-click on COVID impact. You said, obviously, some push outs in the deals that require face-to-face interaction. Would love to maybe delineate between what you're seeing and how this environment is impacting conversations with existing customers? What you saw deals that were in process? And then overall new business, given it seems like outside of that face-to-face situations business actually was pretty good in the first quarter.
Eric Stang, CEO
Yes. I can elaborate a bit. Many of the smaller businesses we work with are still closed or operating in work-from-home mode. However, we are seeing a strong interest in saving money and in our mobile apps, virtual receptionist services, and remote flexibility. Our closing ratios with businesses are consistent, and we're not encountering more resistance to change. In fact, there's a recognition that better solutions are available. As I mentioned earlier, larger businesses seem to be hunkered down, working through these times while reevaluating their paths forward. The Covid situation has highlighted the importance of work-from-home capabilities. While it's uncertain how things will unfold nationwide, companies like Google and Facebook have announced plans to continue remote work for the rest of the year and possibly beyond. This shift emphasizes the value of flexible cloud phone services that can integrate into business operations. We believe this is where we stand out. In terms of deals, I don’t believe any have been pushed out. We generally experience a relatively quick sales cycle, although enterprise deals tend to take longer and constitute a smaller portion of our business. Strengthening our sales through channel partners is one of our goals this year. It has been a bit challenging to build this when conferences are canceled and face-to-face meetings with partners aren’t possible, but we are doing our best. I hope this provides clarity.
Ravi Narula, CFO
Hey, Matt. This is Ravi. If I may just add one other comment to Eric's. Over the last couple of years, we have built a very diversified sales channel right. We have VARs. We have resellers. We have retailers. We have inbounded. We do a lot of marketing activities that also gives us a lot of bench strength that we can deal with issues short term and long term. And obviously, our goal is to continue to build more and more channels and more VARs and channels as Eric said, but we are pretty happy with the diversification of our sales channel so far.
Matt Stotler, Analyst
Right. That's very helpful. Thank you. And just one more for me. We'd love to get some updated thoughts on the competitive landscape, especially in the current environment? We've heard InterMedia announced deal with NEC recently, and we've been hearing more out of Dialpad, so I'd love to get your thoughts on those players and what else you're seeing in the market, if there's any change? Thank you.
Eric Stang, CEO
I don't believe there has been any significant change. We compete with these types of companies based on user needs and our specific channels. Some companies have opted to offer video conferencing for free to increase their visibility, but we haven't followed that route. Instead, we have modernized our video conferencing for enterprise users to enhance its capabilities. This is part of our broader efforts with our enterprise solutions. Microsoft has taken an additional step in providing solutions for smaller businesses, though their definition of smaller still encompasses a fairly large segment. From what I've seen, their solution is complex to set up and operate, which makes it less suitable for many of the channels we target. There's not much more to add on this topic.
Operator, Operator
Your next question is from Joe Goodwin of JMP Securities. Please go ahead. Your line is open.
Joe Goodwin, Analyst
Thank you for taking my question. It's great to hear from everyone. Regarding the large 20,000-seat deal that was closed last year, are there any other potential opportunities currently available or in the pipeline that you could share?
Eric Stang, CEO
Yes. I can't really talk about pending deals per se. The opportunity with the same large customer this year is there to have another very significant increase. We have set out this year to secure more larger sized customers and I think we're off to a good start on that. We think we have a great solution for larger companies with a lot of distributed locations typically when they need backup Internet in those locations. And so that's one area of strategic focus for us, if you will. And there are companies who are talking to in that regard and then in general, we're able to garner opportunity with larger sized companies when they have a business process or a need that's not well fulfilled by what they have today. And particularly if they need some customization or some flexibility in the way the solution works for them. And we've talked about our enterprise solution as being very API based and the ability to be different for every single user on our multi-tenant platform based on how we customize it for them. And that's a real advantage when the customer has a need. So that's how we see it looking forward. And, yes, hope that's responsive.
Joe Goodwin, Analyst
Yes. That was helpful. Thank you. And then just in the expansion outside of North America, do you see that as a large opportunity kind of beyond the existing customers?
Eric Stang, CEO
I do for us as a business. It's fun to have a little history here maybe it's fun. We first got started internationally with WeWork in a variety of locations and that drove us to re-architect our office solution in particular to be able to operate it in more easily in other countries. And I think with this customer we will take the next step, but it will be our goal to launch more generally than just with specific customers.
Operator, Operator
Your next question is from Brian Kinstlinger of Alliance Global Partners. Please go ahead. Your line is open.
Brian Kinstlinger, Analyst
Great. Thanks so much. I'm wondering what kind of two follow-ups of questions that have been asked, but in terms of the competitive landscape, mainly RingCentral, it recently came out with a $19.99 price point that's similar to yours. Do you believe this has any impact on your sales going forward? And how often your customers inquiring about the difference between your $19.99 per month plan versus theirs when you're discussing new business opportunities?
Eric Stang, CEO
Yes. We have seen a little bit more price competitiveness from certain players. You don't always get everything and you don't always get it except with a one-year contract or other constraints. And the balance of you it's only a minority of the time that we see them in the marketplace. Our solution at that level at that price point is designed to be really easy to set up and use. And it's curated to be just what a business needs without further complexity. And I think it's why we're ranked number one by users themselves as the best solution available. And it's why we get so much of our business through referrals. So, yes, we're going to have competition, but I don't think we're not seeing a particular issue with others trying to beat us on price. Let me say that.
Brian Kinstlinger, Analyst
My follow-up is regarding the large customer; should we expect the ramp you're anticipating to have a significant impact on 2021 as a revenue driver, or will we notice that at the end of 2020? Thank you.
Ravi Narula, CFO
Brian, this is Ravi. Once we complete the proof of concept and begin installations, you should notice some positive effects in fiscal 2021. However, since the outcomes are more variable, it’s challenging to determine which specific month or quarter will see a significant impact. The effect on monthly recurring revenue will be more pronounced in fiscal 2022, especially considering that we installed thousands of users in the latter half of this year. The greater influence will come in the following year, but we may also experience some installation revenue or effects on monthly recurring revenue. I am hopeful that we will see growth from this large customer in the second half, but due to the unpredictable nature, we want to proceed with caution.
Operator, Operator
Your next question is from Matthew Harrigan of Benchmark. Please go ahead. Your line is open.
Matthew Harrigan, Analyst
Thank you. I apologize if these are two relatively Ooma neophyte questions. So when you look at the internet capability on Ooma Connect, recognizing that the marketing is different and you have to maintain the business perception. Would there be any thought of introducing that also at an appropriate price point as a higher-end residential product? And then second question is there any thoughts with all the progress on the voice recognition side of including some voice APIs in your product suite as that as a differentiator? And I realize these are kind of tangential questions but I was interested. Thank you. Thanks for taking my questions.
Eric Stang, CEO
No, but I'm glad to discuss it. I see our Ooma Connect being useful in specific home scenarios, especially for those with a home office and a strong need for connectivity. We currently offer Telo 4G, which is a 4G tower integrated with our Telo home phone solution. This product is aimed at residential users. While it may not be as powerful as Ooma Connect, it remains a valuable offering that we've continued to improve. We designed Ooma Connect in a modular fashion, allowing us to upgrade to 5G easily when the time comes, and we anticipate watching this product evolve alongside network advancements. Additionally, we have incorporated a feature called continuous voice, which we have applied for a patent on. This feature ensures that if a voice call drops on the main internet connection, the backup wireless connection will seamlessly take over without interruption, which is particularly beneficial for businesses that need to maintain customer connections. Regarding voice APIs, we aren't currently focused on exposing APIs for a developer community, but we aim to utilize our internal APIs to customize solutions for larger clients. Our approach is to offer a comprehensive solution, and we believe this is a strength of ours. We wouldn’t have secured our largest customer without providing a tailored integration of Ooma Enterprise and Ooma Office to meet their specific needs. So, we are addressing the types of solutions you mentioned, but as a complete package.
Operator, Operator
There are no further questions at this time. I will turn the call over to the presenters for closing remarks.
Eric Stang, CEO
Thank you. We appreciate all of your time today. We're working hard at Ooma and we do hope everyone out there is staying safe and that we get through these challenges of the times quickly and can move forward because we're excited about what we're doing with our strategy. Thank you everyone.
Operator, Operator
This concludes today's conference call. Thank you for your participation. You may now disconnect.