10-Q 1 ooma-10q_20190731.htm 10-Q ooma-10q_20190731.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended July 31, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                   to                  

Commission File Number: 001-37493

 

 

Ooma, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Delaware

06-1713274

(State or other jurisdiction

of incorporation or organization)

(I.R.S. Employer

Identification No.)

525 Almanor Avenue, Suite 200, Sunnyvale, California 94085

(Address of principal executive offices)

(650) 566-6600

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock, par value $0.0001

OOMA

The New York Stock Exchange

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    Yes      No  

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

As of August 31, 2019, there were 21.1 million shares of the registrant’s common stock outstanding.

 

 

 


 

TABLE OF CONTENTS

 

 

  

 

  

Page

 

PART I. FINANCIAL INFORMATION

Item 1.

  

Financial Statements (unaudited):

  

3

 

  

Condensed Consolidated Balance Sheets

  

3

 

  

Condensed Consolidated Statements of Operations

  

4

 

  

Condensed Consolidated Statements of Cash Flows

  

5

 

 

Condensed Consolidated Statements of Stockholders’ Equity

 

6

 

  

Notes to Condensed Consolidated Financial Statements

  

7

Item 2.

  

Management’s Discussion and Analysis of Financial Condition and Results of Operations

  

23

Item 3.

  

Quantitative and Qualitative Disclosures About Market Risk

  

33

Item 4.

  

Controls and Procedures

  

33

 

PART II. OTHER INFORMATION

Item 1.

  

Legal Proceedings

  

34

Item 1A.

  

Risk Factors

  

34

Item 2.

  

Unregistered Sales of Equity Securities and Use of Proceeds

  

62

Item 6.

  

Exhibits

  

62

Signatures

  

64

 

 

 

 

 

Ooma | FY2020 Form 10-Q | 2

 


 

PART I — FINANCIAL INFORMATION

Item 1. Financial Statements

OOMA, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited, amounts in thousands, except share and per share data)

 

 

 

July 31,

2019

 

 

January 31,

2019

 

Assets

 

 

 

 

 

 

 

 

Current assets:

 

Cash and cash equivalents

 

$

14,018

 

 

$

15,370

 

Short-term investments

 

 

14,637

 

 

 

27,253

 

Accounts receivable, net

 

 

4,683

 

 

 

3,723

 

Inventories

 

 

11,266

 

 

 

10,117

 

Other current assets

 

 

7,656

 

 

 

5,450

 

Total current assets

 

 

52,260

 

 

 

61,913

 

Property and equipment, net

 

 

5,017

 

 

 

4,563

 

Operating lease right-of-use assets

 

 

3,286

 

 

 

 

Intangible assets, net

 

 

8,226

 

 

 

2,635

 

Goodwill

 

 

4,264

 

 

 

3,898

 

Other assets

 

 

6,245

 

 

 

5,379

 

Total assets

 

$

79,298

 

 

$

78,388

 

 

 

 

 

 

 

 

 

 

Liabilities and Stockholders’ Equity

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$

10,697

 

 

$

10,231

 

Accrued expenses and other current liabilities

 

 

19,570

 

 

 

19,048

 

Deferred revenue

 

 

16,044

 

 

 

15,443

 

Total current liabilities

 

 

46,311

 

 

 

44,722

 

Long-term operating lease liabilities

 

 

1,823

 

 

 

 

Other liabilities

 

 

353

 

 

 

619

 

Total liabilities

 

 

48,487

 

 

 

45,341

 

Commitments and contingencies (Note 11)

 

 

 

 

 

 

 

 

Stockholders’ equity:

 

 

 

 

 

 

 

 

Preferred stock $0.0001 par value: 10 million shares authorized; none issued and outstanding

 

 

 

 

 

 

Common stock $0.0001 par value: 100 million shares authorized; 21.1 million and 20.3 million shares issued and outstanding, respectively

 

 

4

 

 

 

4

 

Additional paid-in capital

 

 

146,319

 

 

 

138,848

 

Accumulated other comprehensive income (loss)

 

 

6

 

 

 

(10

)

Accumulated deficit

 

 

(115,518

)

 

 

(105,795

)

Total stockholders’ equity

 

 

30,811

 

 

 

33,047

 

Total liabilities and stockholders’ equity

 

$

79,298

 

 

$

78,388

 

 

See notes to condensed consolidated financial statements

 

 

 

 

 

 

 

 

 

 

 

 

Ooma | FY2020 Form 10-Q | 3

 


 

OOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited, amounts in thousands, except share and per share data)

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

July 31,

2019

 

 

July 31,

2018

 

 

July 31,

2019

 

 

July 31,

2018

 

Revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscription and services

 

$

34,469

 

 

$

28,426

 

 

$

65,581

 

 

$

55,738

 

Product and other

 

 

2,874

 

 

 

3,255

 

 

 

5,769

 

 

 

6,165

 

Total revenue

 

 

37,343

 

 

 

31,681

 

 

 

71,350

 

 

 

61,903

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of revenue:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Subscription and services

 

 

11,213

 

 

 

8,818

 

 

 

21,024

 

 

 

17,592

 

Product and other

 

 

3,810

 

 

 

4,090

 

 

 

7,573

 

 

 

7,600

 

Total cost of revenue

 

 

15,023

 

 

 

12,908

 

 

 

28,597

 

 

 

25,192

 

Gross profit

 

 

22,320

 

 

 

18,773

 

 

 

42,753

 

 

 

36,711

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Sales and marketing

 

 

12,834

 

 

 

10,499

 

 

 

24,293

 

 

 

19,394

 

Research and development

 

 

9,597

 

 

 

8,443

 

 

 

18,479

 

 

 

16,965

 

General and administrative

 

 

5,168

 

 

 

3,995

 

 

 

10,280

 

 

 

8,447

 

Total operating expenses

 

 

27,599

 

 

 

22,937

 

 

 

53,052

 

 

 

44,806

 

Loss from operations

 

 

(5,279

)

 

 

(4,164

)

 

 

(10,299

)

 

 

(8,095

)

Interest and other income, net

 

 

280

 

 

 

198

 

 

 

538

 

 

 

375

 

Loss before income taxes

 

 

(4,999

)

 

 

(3,966

)

 

 

(9,761

)

 

 

(7,720

)

Income tax benefit

 

 

16

 

 

 

62

 

 

 

38

 

 

 

131

 

Net loss

 

$

(4,983

)

 

$

(3,904

)

 

$

(9,723

)

 

$

(7,589

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss per share of common stock:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

$

(0.24

)

 

$

(0.20

)

 

$

(0.47

)

 

$

(0.39

)

Weighted-average shares of common stock outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

 

 

20,849,935

 

 

 

19,673,658

 

 

 

20,667,905

 

 

 

19,499,677

 

 

See notes to condensed consolidated financial statements

 

 

 

 

Ooma | FY2020 Form 10-Q | 4

 


 

OOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited, amounts in thousands)

 

 

 

Six Months Ended

 

 

 

July 31,

2019

 

 

July 31,

2018

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$

(9,723

)

 

$

(7,589

)

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Stock-based compensation expense

 

 

6,393

 

 

 

5,076

 

Depreciation and amortization of capital expenditures

 

 

1,347

 

 

 

1,062

 

Amortization of acquired intangible assets

 

 

516

 

 

 

343

 

Non-cash operating lease expense

 

 

899

 

 

 

 

Other

 

 

(224

)

 

 

(246

)

Changes in operating assets and liabilities:

 

 

 

 

 

 

 

 

Accounts receivable, net

 

 

43

 

 

 

(430

)

Inventories and deferred inventory costs

 

 

(1,389

)

 

 

(1,476

)

Prepaid expenses and other assets

 

 

(2,303

)

 

 

(1,633

)

Accounts payable and other liabilities

 

 

(2,139

)

 

 

3,884

 

Deferred revenue

 

 

425

 

 

 

509

 

Net cash used in operating activities

 

 

(6,155

)

 

 

(500

)

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Purchases of short-term investments

 

 

(19,196

)

 

 

(13,988

)

Proceeds from maturities and sales of short-term investments

 

 

32,046

 

 

 

29,762

 

Capital expenditures

 

 

(1,632

)

 

 

(855

)

Business acquisition, net of cash assumed

 

 

(7,073

)

 

 

(2,402

)

Net cash provided by investing activities

 

 

4,145

 

 

 

12,517

 

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from issuance of common stock

 

 

1,808

 

 

 

1,644

 

Shares repurchased for tax withholdings on vesting of restricted stock units ("RSU")

 

 

(730

)

 

 

(1,200

)

Payment of acquisition-related holdback

 

 

(420

)

 

 

 

Net cash provided by financing activities

 

 

658

 

 

 

444

 

Net (decrease) increase in cash and cash equivalents

 

 

(1,352

)

 

 

12,461

 

Cash and cash equivalents at beginning of period

 

 

15,370

 

 

 

4,483

 

Cash and cash equivalents at end of period

 

$

14,018

 

 

$

16,944

 

 

 

See notes to condensed consolidated financial statements

 

 

 

Ooma | FY2020 Form 10-Q | 5

 


 

OOMA, INC.

CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY

(Unaudited, amounts in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Common stock

 

 

 

 

 

 

Accumulated

 

 

Stockholders'

 

 

 

and APIC (1)

 

 

AOCI (2)

 

 

Deficit

 

 

Equity

 

BALANCE - February 1, 2019

 

$

138,852

 

 

$

(10

)

 

$

(105,795

)

 

$

33,047

 

Issuance of common stock under equity-based plans

 

 

1,454

 

 

 

 

 

 

 

 

 

1,454

 

Shares repurchased for tax withholdings on RSU vesting

 

 

(730

)

 

 

 

 

 

 

 

 

(730

)

Stock-based compensation

 

 

2,982

 

 

 

 

 

 

 

 

 

2,982

 

Changes in comprehensive income

 

 

 

 

 

11

 

 

 

 

 

 

11

 

Net loss

 

 

 

 

 

 

 

 

(4,740

)

 

 

(4,740

)

BALANCE - April 30, 2019

 

$

142,558

 

 

$

1

 

 

$

(110,535

)

 

$

32,024

 

Issuance of common stock under equity-based plans

 

 

354

 

 

 

 

 

 

 

 

 

354

 

Stock-based compensation

 

 

3,411

 

 

 

 

 

 

 

 

 

3,411

 

Changes in comprehensive income

 

 

 

 

 

5

 

 

 

 

 

 

5

 

Net loss

 

 

 

 

 

 

 

 

(4,983

)

 

 

(4,983

)

BALANCE - July 31, 2019

 

$

146,323

 

 

$

6

 

 

$

(115,518

)

 

$

30,811

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

BALANCE - February 1, 2018

 

$

128,083

 

 

$

(84

)

 

$

(90,931

)

 

$

37,068

 

Issuance of common stock under equity-based plans

 

 

1,205

 

 

 

 

 

 

 

 

 

1,205

 

Shares repurchased for tax withholdings on RSU vesting

 

 

(759

)

 

 

 

 

 

 

 

 

(759

)

Issuance of common stock for business acquisition

 

 

390

 

 

 

 

 

 

 

 

 

390

 

Stock-based compensation

 

 

2,314

 

 

 

 

 

 

 

 

 

2,314

 

Changes in comprehensive loss

 

 

 

 

 

(1

)

 

 

 

 

 

(1

)

Cumulative adjustment upon adoption of Topic 606

 

 

 

 

 

 

 

 

(292

)

 

 

(292

)

Net loss

 

 

 

 

 

 

 

 

(3,685

)

 

 

(3,685

)

BALANCE - April 30, 2018

 

$

131,233

 

 

$

(85

)

 

$

(94,908

)

 

$

36,240

 

Issuance of common stock under equity-based plans

 

 

488

 

 

 

 

 

 

 

 

 

488

 

Shares repurchased for tax withholdings on RSU vesting

 

 

(441

)

 

 

 

 

 

 

 

 

(441

)

Stock-based compensation

 

 

2,762

 

 

 

 

 

 

 

 

 

2,762

 

Changes in comprehensive loss

 

 

 

 

 

36

 

 

 

 

 

 

36

 

Net loss

 

 

 

 

 

 

 

 

(3,904

)

 

 

(3,904

)

BALANCE - July 31, 2018

 

$

134,042

 

 

$

(49

)

 

$

(98,812

)

 

$

35,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1) Additional paid-in capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2) Accumulated other comprehensive income (loss)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to condensed consolidated financial statements

 

 


 

 

 

Ooma | FY2020 Form 10-Q | 6

 


Ooma, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

Note 1: Overview and Basis of Presentation

Ooma, Inc. and its wholly-owned subsidiaries (collectively, “Ooma” or the “Company”) create new communications experiences for businesses and consumers, delivered from its smart cloud-based SaaS platform. The Company was founded in 2003 and is headquartered in Sunnyvale, California.

The Company’s fiscal year ends on January 31. References to fiscal 2020 and fiscal 2019 refer to the fiscal year ending January 31, 2020 and the fiscal year ended January 31, 2019, respectively.

In May 2019, the Company acquired Broadsmart Global, Inc. (“Broadsmart”), a provider of cloud-based unified-communications-as-a-service (“UCaaS”) solutions based in Florida. See Note 12: Business Acquisition below. The Company refers to its Ooma Office, Ooma Enterprise and Broadsmart offerings collectively as Ooma Business. The Company refers to its Ooma Telo basic and premier services and Smart Security solutions as Ooma Residential.

Principles of Presentation and Consolidation

These unaudited condensed consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, the information included in this Quarterly Report on Form 10-Q should be read in conjunction with the audited consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended January 31, 2019 (“Annual Report”).

These financial statements have been prepared on the same basis as the Company’s annual financial statements and, in the opinion of management, reflect all normal recurring adjustments necessary to present fairly the Company’s financial position, its results of operations, and cash flows for the interim periods presented, but are not necessarily indicative of the results of operations to be anticipated for the full fiscal year ending January 31, 2020. The condensed consolidated balance sheet as of January 31, 2019 included herein was derived from the audited financial statements as of that date.

The condensed consolidated financial statements include accounts of the Company and its wholly-owned subsidiaries. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates.  The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the Company’s condensed consolidated financial statements and notes thereto. Significant estimates include, but are not limited to, those related to revenue recognition, inventory valuation, valuation of goodwill and intangible assets, deferred sales commissions, operating lease assets and liabilities, regulatory fees and indirect tax accruals, loss contingencies, stock-based compensation, income taxes (including valuation allowances) and fair value measurements. Estimates are based on historical experience, where applicable, and other assumptions believed to be reasonable by management. These estimates are based on information available as of the date of the condensed consolidated financial statements, and assumptions are inherently subjective in nature. Therefore, actual results could differ from management’s estimates.

Comprehensive Loss.  For all periods presented, comprehensive loss approximated net loss in the condensed consolidated statements of operations and differences were not material. Therefore, the condensed consolidated statements of comprehensive loss have been omitted.

Recently Adopted Accounting Standards

Leases.  On February 1, 2019, the Company adopted Accounting Standards Update (“ASU”) 2016-02, Leases (Topic 842) which superseded the guidance in Topic 840 and required the Company to recognize operating leased assets and corresponding liabilities on the balance sheet and to provide enhanced disclosures. The Company adopted Topic 842 using the modified retrospective transition method by applying the new standard to all leases existing at the date of initial adoption and not restating comparative periods. The Company elected the package of practical expedients, which among other things, allowed it to carry forward its historical lease classification and its assessment of whether any existing leases as of the date of adoption are or contain leases.

Adoption on February 1, 2019 resulted in the recognition of $4.1 million of operating right-of-use “ROU” assets and $4.3 million of operating lease liabilities on the condensed consolidated balance sheet, with no adjustment to accumulated deficit.

 

 

Ooma | FY2020 Form 10-Q | 7

 


Ooma, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

The difference of $0.2 million represented deferred rent for leases that existed as of the date of adoption, which was an offset to the opening balance of ROU assets.

Adoption of the new standard did not materially impact the Company’s consolidated statements of operations, consolidated statements of stockholders’ equity and consolidated statements of cash flows. The Company has implemented policies, processes and controls to support the standard's measurement and disclosure requirements. See Significant Accounting Policies – Leases below and Note 6: Operating Leases.

Stock-based compensation. The Company adopted ASU 2018-07, Compensation – Stock Compensation (Topic 718): Improvements to Nonemployee Share-Based Payment Accounting in the first quarter of fiscal 2020, which expanded the scope of Topic 718 to include and simplify financial reporting for non-employee stock-based payments. Under the amended standard, most of the guidance on stock compensation for non-employees became aligned with the requirements for employees. The adoption of this ASU did not have a material impact on the Company’s consolidated financial statements.

Significant Accounting Policies – Leases

On February 1, 2019, the Company adopted Topic 842 using the modified retrospective transition method by applying the new standard to all leases existing at the date of initial adoption. Comparative prior period amounts have not been adjusted and continue to be reported in accordance with historical accounting under Topic 840.

Under Topic 842, the Company determines if an arrangement is a lease at inception. The Company’s leases primarily consist of real property and are classified as operating leases. The Company does not have any finance leases nor material arrangements as a lessor. ROU assets and lease liabilities are recognized at the lease commencement date based upon the present value of the remaining lease payments over the lease term. The Company uses its incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. Lease expense for lease payments is recognized on a straight-line basis over the term of the lease. Lease terms may include options to renew or extend when it is reasonably certain that the option will be exercised. Lease agreements that contain both lease and non-lease components are accounted for as a single component. Short-term leases with an initial term of twelve months or less are not recorded on the balance sheet.

 


 

 

Ooma | FY2020 Form 10-Q | 8

 


Ooma, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

 

Note 2:  Revenue and Deferred Revenue

The Company’s revenue for the three and six months ended July 31, 2019 and 2018 are presented in accordance with the provisions under Topic 606. The Company derives its revenue from two sources:

Subscription and Services Revenue is derived primarily from recurring subscription fees related to service plans such as Ooma Business, Ooma Residential and other communications services. Subscription revenue is recognized ratably over the contractual service term.

Product and Other Revenue is generated from the sale of on-premise appliances and end-point devices, including shipping and handling fees for direct customers, and to a lesser extent from porting fees that enable customers to transfer their existing phone numbers. Revenue is recognized at the point in time that control transfers which is typically when the product is delivered or when all customer contractual provisions have been met, if any.

Refer to the Company’s Annual Report for additional information regarding its revenue recognition policy.

Revenue disaggregated by revenue source consisted of the following (in thousands):

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

July 31,

2019

 

 

July 31,

2018

 

 

July 31,

2019

 

 

July 31,

2018

 

Subscription and services revenue

 

$

34,469

 

 

$

28,426

 

 

$

65,581

 

 

$

55,738

 

Product and other revenue

 

 

2,874

 

 

 

3,255

 

 

 

5,769

 

 

 

6,165

 

Total revenue

 

$

37,343

 

 

$

31,681

 

 

$

71,350

 

 

$

61,903

 

The Company derived approximately 59% and 69% of its total revenue from Ooma Residential and approximately 38% and 27% from Ooma Business for the three months ended July 31, 2019 and 2018, respectively. The Company derived approximately 62% and 70% of its total revenue from Ooma Residential and approximately 36% and 26% from Ooma Business for the six months ended July 31, 2019 and 2018, respectively.

No individual country outside of the United States represented 10% or more of total revenue for the periods presented. No single customer accounted for 10% or more of total revenue for the periods presented.  

Customers who represented 10% or more of the Company's net accounts receivable balance were as follows:

 

 

As of

 

 

 

July 31,

2019

 

 

January 31,

2019

 

Customer A

 

 

16

%

 

 

 

Customer B

 

 

11

%

 

 

15

%

 

 

Ooma | FY2020 Form 10-Q | 9

 


Ooma, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Deferred Revenue.  Deferred revenue primarily consists of billings or payments received in advance of meeting revenue recognition criteria. Deferred services revenue is recognized on a ratable basis over the term of the contract as the services are provided. For all arrangements, any revenue that has been deferred and is expected to be recognized beyond one year is classified in long term liabilities on the condensed consolidated balance sheets.

Deferred revenue consisted of the following (in thousands):

 

 

As of

 

 

 

July 31,

2019

 

 

January 31,

2019

 

Subscription and services

 

$

16,205

 

 

$

15,682

 

Product and other

 

 

87

 

 

 

68

 

Total deferred revenue

 

 

16,292

 

 

 

15,750

 

Less: current deferred revenue

 

 

16,044

 

 

 

15,443

 

Non-current deferred revenue included in other long-term liabilities

 

$

248

 

 

$

307

 

During the three and six months ended July 31, 2019, the Company recognized revenue of approximately $3.4 million and $11.8 million, respectively, that was included in the corresponding deferred revenue balance as of January 31, 2019.

Remaining Performance Obligations.  As of July 31, 2019, contract revenue that has not yet been recognized for open contracts with an original expected length of greater than one year was $0.2 million. This amount includes both long-term deferred revenue and any non-cancelable contract amounts that will be invoiced and recognized as revenue in future periods.

 

 

 

Ooma | FY2020 Form 10-Q | 10

 


Ooma, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Note 3:  Fair Value Measurements

The Company records its financial assets and liabilities at fair value. The Company estimates and categorizes fair value by applying the following hierarchy:

Level 1:

Quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2:

Observable prices based on inputs not quoted in active markets, but are corroborated by market data.

Level 3:

Unobservable inputs that are supported by little or no market activity.

The Company’s financial assets that are measured at fair value on a recurring basis by level within the fair value hierarchy were as follows (in thousands):

 

 

Balance as of July 31, 2019

 

 

Balance as of January 31, 2019

 

 

 

Level 1

 

 

Level 2

 

 

Total

 

 

Level 1

 

 

Level 2

 

 

Total

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Money market funds

 

$

6,853

 

 

$

 

 

$

6,853

 

 

$

5,951

 

 

$

 

 

$

5,951

 

U.S. government securities

 

 

1,996

 

 

 

 

 

 

1,996

 

 

 

 

 

 

 

 

 

 

Commercial paper

 

 

 

 

 

1,498

 

 

 

1,498

 

 

 

 

 

 

5,429

 

 

 

5,429

 

Total cash equivalents

 

$

8,849

 

 

$

1,498

 

 

$

10,347

 

 

$

5,951

 

 

$

5,429

 

 

$

11,380

 

Cash

 

 

 

 

 

 

 

 

 

 

3,671

 

 

 

 

 

 

 

 

 

 

 

3,990

 

Total cash and cash equivalents

 

 

 

 

 

 

$

14,018

 

 

 

 

 

 

 

 

 

 

$

15,370

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Short-term investments:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. government securities

 

$

5,180

 

 

$

 

 

$

5,180

 

 

$

11,088

 

 

$

 

 

$

11,088

 

Corporate debt securities

 

 

 

 

 

2,384

 

 

 

2,384

 

 

 

 

 

 

4,735

 

 

 

4,735

 

Commercial paper

 

 

 

 

 

5,926

 

 

 

5,926

 

 

 

 

 

 

8,253

 

 

 

8,253

 

U.S. agency securities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

990

 

 

 

990

 

Asset-backed securities

 

 

 

 

 

1,147

 

 

 

1,147

 

 

 

 

 

 

2,187

 

 

 

2,187

 

Total short-term investments

 

$

5,180

 

 

$

9,457

 

 

$

14,637

 

 

$

11,088

 

 

$

16,165

 

 

$

27,253

 

 

The Company classifies its cash equivalents and short-term investments within Level 1 or Level 2 because it uses quoted market prices or alternative pricing sources and models utilizing market observable inputs to determine their fair value. The amortized cost of cash equivalents and short-term investments approximated their fair value and there were no material realized or unrealized gains or losses, either individually or in the aggregate, and no other-than-temporary impairments.  As of July 31, 2019 and January 31, 2019, the Company had no material Level 3 assets or liabilities and there have been no transfers between levels.

 

 


 

 

Ooma | FY2020 Form 10-Q | 11

 


Ooma, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

Note 4: Balance Sheet Components

The following sections and tables provide details of selected balance sheet items (in thousands):

Inventories

 

 

As of

 

 

 

July 31,

2019

 

 

January 31,

2019

 

Finished goods

 

$

8,174

 

 

$

7,567

 

Raw materials

 

 

3,092

 

 

 

2,550

 

Total inventory

 

$

11,266

 

 

$

10,117

 

Other assets

 

 

As of

 

 

 

July 31,

2019

 

 

January 31,

2019

 

Prepaid expenses

 

$

2,566

 

 

$

2,681

 

Deferred sales commissions, current

 

 

1,735

 

 

 

1,081

 

Convertible note receivable (1)

 

 

1,382

 

 

 

 

Deferred inventory costs

 

 

632

 

 

 

334

 

Other current assets

 

 

1,341

 

 

 

1,354

 

Total other current assets

 

$

7,656

 

 

$

5,450

 

 

 

 

 

 

 

 

 

 

Deferred sales commissions, non-current

 

$

5,247

 

 

$

3,387

 

Convertible note receivable (1)

 

 

 

 

 

1,315

 

Other non-current assets

 

 

998

 

 

 

677

 

Total other non-current assets

 

$

6,245

 

 

$

5,379

 

(1) Convertible note receivable from Global Telecomm Corporation was reclassified from non-current assets to current assets as of July 31, 2019.

Customer Acquisition Costs. The Company capitalizes a significant portion of its sales commission costs as an incremental cost of obtaining customer contracts and amortizes to sales and marketing expense over an expected benefit period of five years. Amortization expense for deferred sales commissions was $0.4 million and $0.1 million for the three months ended July 31, 2019 and 2018, respectively, and $0.8 million and $0.2 million for the six months ended July 31, 2019 and 2018, respectively. To date, there have been no impairment losses related to the costs capitalized.

Global Telecomm Corporation (“GTC”).  In December 2018, the Company invested $1.3 million in cash to Global Telecomm Corporation, a small privately-held technology company, in exchange for an 18-month convertible promissory note, bearing interest at 10% annually. The principal and unpaid accrued interest on the promissory note will convert to shares of GTC common or preferred stock upon the occurrence of certain future events. As of July 31, 2019 and January 31, 2019, the Company did not hold any shares of GTC common or preferred stock. The Company has partnered with GTC on certain research and development and inventory procurement activities. The Company is required to consolidate the assets and liabilities of variable interest entities (“VIEs”) in which it is deemed to be the primary beneficiary. GTC is considered a VIE because, among other factors, it lacks sufficient equity to permit the entity to finance its activities without additional subordinated financial support from other parties. The Company’s convertible promissory note issued by GTC represents a variable interest. However, the Company does not participate in the day-to-day operating decisions or other decisions that would allow it to control GTC, and therefore, the Company is not considered the primary beneficiary and is not required to consolidate GTC’s financial statements in Ooma’s financial statements. As of July 31, 2019 and January 31, 2019, the Company’s maximum exposure to loss was equal to the carrying value of its convertible note receivable, including accrued interest. For all periods presented, the Company held no other variable interests in VIEs.

 

 

Ooma | FY2020 Form 10-Q | 12

 


Ooma, Inc.

Notes to Condensed Consolidated Financial Statements (Unaudited)

 

As a result of the Company’s investment, GTC is also a related party of Ooma. During the three and six months ended July 31, 2019, the Company procured certain raw material inventories from GTC that amounted to approximately $0.2 million and $0.4 million, respectively. As of July 31, 2019 and January 31, 2019, the Company recorded prepaid inventory deposits to GTC of $0.4 million and zero, respectively, included in other current assets on the condensed consolidated balance sheet. As of July 31, 2019 and January 31, 2019, the Company’s non-cancelable purchase commitments with GTC were $2.8 million and zero, respectively.

Accrued expenses

 

 

As of

 

 

 

July 31,

2019

 

 

January 31,

2019

 

Payroll and related expenses

 

$

7,005

 

 

$

7,926

 

Regulatory fees and taxes

 

 

5,921

 

 

 

5,645

 

Short-term operating lease liabilities (1)

 

 

1,677

 

 

 

 

Acquisition-related consideration

 

 

228

 

 

 

925

 

Other

 

 

4,739

 

 

 

4,552