P Rospectus S Ummary
PROSPECTUS SUMMARY This summary highlights selected information that is presented in greater detail elsewhere in this prospectus. This summary does not contain all of the information that you should consider before investing in our common stock. You should read this entire prospectus carefully, including the sections titled “Risk Factors,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and the related notes included elsewhere in this prospectus, before deciding whether to purchase shares of our common stock. Unless the context otherwise requires, the terms “Ooma,” the “company,” “we,” “us,” and “our” in this prospectus refer to Ooma, Inc. and its consolidated subsidiary, and this “offering” refers to the offering contemplated in this prospectus.Overview
Ooma is a leading provider of innovative communications solutions and other connected services to small business, home and mobile users. Our unique hybrid SaaS platform, consisting of our proprietary cloud, on-premise appliances, mobile applications and end-point devices, provides the connectivity and functionality that power our solutions. Our communications solutions deliver our proprietary PureVoice HD voice quality, advanced features and integration with mobile devices at extremely competitive pricing and value. Our platform helps create smart workplaces and homes by providing value-added communications and other connected services and by integrating end-point devices to enable the Internet of Things. Our platform and solutions have the power to provide communications, productivity, automation, monitoring, safety, security and networking infrastructure applications to our users.
We drive the adoption of our platform by providing communications solutions to the large and growing markets for small business, home and mobile users and then accelerate growth by offering new and innovative connected services to our user base. Our small business and home customers adopt our platform by making a one-time purchase of one of our on-premise appliances, connecting the appliance to the internet, and activating subscription services, for which they primarily pay on a monthly basis. We believe we have achieved high levels of customer retention and loyalty by delivering exceptional quality and customer satisfaction.
Our services run on our unique platform consisting of four proprietary elements:
We currently offer our solutions in the U.S. and Canadian markets. We believe our differentiated platform and our long-term customer relationships uniquely position us to add new connected services, and exploit adjacent markets, all without significant capital investment or high customer acquisition costs to drive their adoption. We offer and are developing connected services for the following applications:
We have experienced significant revenue and user growth in recent periods, growing our “core users” from approximately 174,000 as of January 31, 2011 to approximately 678,000 as of April 30, 2015, representing a compound annual growth rate of approximately 38%. We define core users as the number of home user accounts, office user extensions, and standalone Business Promoter accounts, which means Business Promoter users who do not subscribe to any other services from us. We believe we have one of the lowest customer churn rates in the industry, with an average monthly core user churn rate of 0.55% for the 12-month period ending on April 30, 2015. Additionally, we had approximately 1.5 million and 1.6 million Talkatone monthly active users as of January 31, 2015 and April 30, 2015, respectively. We have a predictable revenue model with growth in recurring revenue, with total revenue of $39.2 million, $53.7 million and $72.2 million in fiscal 2013, fiscal 2014 and fiscal 2015, respectively. Our total revenue for the three months ended April 30, 2014 and 2015 was $16.3 million and $19.9 million, respectively. Subscription and services revenue, which includes the recurring portion of our total revenue, has increased as a percentage of our total revenue over the last four years, from approximately 30% in fiscal 2011 to 75% in fiscal 2015. It has also increased as a percentage of our total revenue from 67% for the three months ended April 30, 2014 to 78% for the three months ended April 30, 2015. We have continued to make significant investments in research and development, brand marketing and channel development, incurring net losses of $(3.7) million, $(2.0) million and $(6.4) million in fiscal 2013, fiscal 2014 and fiscal 2015, respectively, and a net loss of $(3.9) million for the three months ended April 30, 2015. In addition, we had net income of $0.5 million for the three months ended April 30, 2014. Therefore, our Adjusted EBITDA was $(2.2) million, $(0.4) million and $(3.5) million in fiscal 2013, fiscal 2014 and fiscal 2015, respectively, and $1.0 million and $(1.9) million for the three months ended April 30, 2014 and 2015, respectively. See footnote (3) in “Selected Consolidated Financial Data” for a description of how we define Adjusted EBITDA, why we believe it is useful to investors, and a reconciliation to our net loss, which is our most directly comparable financial measure calculated and presented in accordance with generally accepted accounting principles, or GAAP.
Industry Background
Overall Industry Trends
Several key trends are driving changes within the small business, home and mobile communications markets. Consumers in all three markets are demanding higher quality and performance from products and services, but at a lower cost. The rapid proliferation of ubiquitous connectivity, connected devices, cloud computing, big data, and the widespread availability of broadband internet, have been coupled with a steady decline in component and computing costs. The convergence of these powerful technologies at a lower cost is leading the market toward a more integrated and connected network of devices enabling smart workplaces, smart homes, remote access and automation and a host of potential products and services. As companies and consumers embrace the Internet of Things, we believe the market for connected services and products will expand rapidly.
The Small Business Market
Small businesses struggle to compete with larger enterprises that leverage their size to cover the high costs of communications and other connected services. While small businesses seek top-quality communications services and high-end productivity solutions, such services are seldom tailored to the unique needs and price sensitivities of small businesses, resulting in an underserved small business community.
Small businesses have traditionally had only three choices when deciding on their communications infrastructure: traditional landline solutions, PBX solutions and internet-based solutions. Each of these choices presents challenges, such as high cost and limited functionality for traditional landlines and PBX solutions and inconsistent quality and complexity for internet-based solutions.
The Home Market
The market for consumers of communications and other connected services in the home shows a shift from traditional home telephone lines to internet-based service providers. We believe many consumers, particularly families with children in the household, desire home telephone services, but are frustrated with current offerings due to high costs and lack of value-added functionality. These frustrations have caused a shift in the market from traditional landline services to internet-based solutions. However, many internet-based solutions present challenges, such as limited features, bundled phone service by cable companies with poor customer service or poor voice quality due to the inability to effectively cope with internet bottlenecks.
Consumers are adopting new technologies in the home, including new connected devices enabling the Internet of Things. Current product offerings, including many of the single-use end-point devices, are difficult to network together and do not effectively integrate communications services into a complete solution. The market has failed to provide an affordable solution that facilitates easy adoption and seamless integration of the home telephone, home connectivity and mobile offerings, leaving consumers with sub-optimal options.
The Mobile Communications Applications Market
Due to the limited functionality and high cost of traditional cellular service plans, consumers with mobile devices are increasingly relying on a variety of apps to provide calling, messaging, and other communications and connectivity solutions. The competition in this space is fragmented across a number of companies, and consumers face limitations with many of the apps currently on the market, including limited feature sets and restrictions on calls.
Our Opportunity
We believe there is a significant opportunity to gain market share in the small business, home and mobile applications markets due to the following factors:
Our Competitive Strengths
We believe the following strengths position us well to capitalize on the expected growth in our target markets:
Our Growth Strategy
Our objective is to enable smarter and more affordable communications solutions and other connected services through the use of our platform. The following are the key elements of our growth strategy:
Risks Associated with Our Business
Our business is subject to many risks and uncertainties, as more fully described under “Risk Factors” and elsewhere in this prospectus. For example, you should be aware of the following before investing in our common stock:
Corporate Information
We were incorporated in 2003 as a Delaware corporation. Our headquarters are located at 1880 Embarcadero Road, Palo Alto, CA 94303, and our telephone number is (650) 566-6600. Our corporate website address is www.ooma.com. The information contained on our website is not incorporated by reference into this prospectus, and you should not consider any information contained on, or that can be accessed through, our website as part of this prospectus or in deciding whether to purchase our common stock. We have included our website address only as an inactive textual reference and do not intend it to be an active link to our website.
Implications of Being an Emerging Growth Company
The Jumpstart Our Business Startups Act, or the JOBS Act, was enacted in April 2012 with the intention of encouraging capital formation in the U.S. and reducing the regulatory burden on newly public companies that qualify as “emerging growth companies.” We are an emerging growth company within the meaning of the JOBS Act. As an emerging growth company, we may take advantage of certain exemptions from various public reporting requirements, including the requirement that our internal control over financial reporting be audited by our independent registered public accounting firm pursuant to Section 404 of the Sarbanes-Oxley Act of 2002, certain requirements related to the disclosure of executive compensation in this prospectus and in our periodic reports and proxy statements and the requirement that we hold a nonbinding advisory vote on executive compensation and any golden parachute payments. We may take advantage of these exemptions until we are no longer an emerging growth company.
We will remain an emerging growth company until the earliest to occur of (i) the last day of the fiscal year in which we have more than $1.0 billion in annual revenue; (ii) the date we qualify as a “large accelerated filer,” with at least $700 million of equity securities held by non-affiliates; (iii) the date on which we have issued, in any three-year period, more than $1.0 billion in non-convertible debt securities; and (iv) the last day of the fiscal year ending after the fifth anniversary of the completion of this offering.
This prospectus includes statistical, market and industry data and forecasts we obtained from publicly available information and independent industry publications and reports we believe to be reliable sources. These publicly available industry publications and reports generally state that they obtain their information from sources they believe to be reliable, but they do not guarantee the accuracy or completeness of the information. Certain estimates and forecasts involve uncertainties and risks and are subject to change based on various factors, including those discussed under the headings “Special Note Regarding Forward-Looking Statements” and “Risk Factors” in this prospectus.
The last day of our fiscal year is January 31, and we refer to our fiscal year ended January 31, 2013 as fiscal 2013, our fiscal year ended January 31, 2014 as fiscal 2014, our fiscal year ended January 31, 2015 as fiscal 2015 and our fiscal year ending January 31, 2016 as fiscal 2016. All other references to years are references to calendar years.
“Ooma,” “Ooma Telo,” “Instant Second Line” and “The smart phone for your home” are our registered trademarks in the U.S. and, in some cases, in certain other countries. Our unregistered trademarks and service marks in the U.S. include: “Ooma Office,” “PureVoice,” “Talkatone,” “The smart phone for your business” and “The smart phone for your home or business.” This prospectus also contains trademarks, service marks and trade names of other companies. Solely for convenience, the trademarks, service marks and trade names referred to in this prospectus may appear without the ®, TM or SM symbols, but such references do not constitute a waiver of any rights that might be associated with the respective trademarks, service marks or trade names.
The Offering
The following information assumes that the underwriters do not exercise their option to purchase additional shares in the offering. See “Underwriting.”
We refer to our Series Alpha, Series Alpha-1 and Series Beta convertible preferred stock collectively as our “convertible preferred stock” in this prospectus.
Except as otherwise indicated, all information in this prospectus is based upon shares of our common stock (including 847,160 unvested shares of restricted common stock subject to our repurchase right) outstanding as of April 30, 2015, and excludes:
Except as otherwise indicated, all information in this prospectus reflects and assumes:
Summary Consolidated Financial Data
The following tables summarize our historical consolidated financial data and should be read together with our consolidated financial statements, the notes to our consolidated financial statements and the sections titled “Selected Consolidated Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” contained elsewhere in this prospectus.
We derived the summary consolidated statements of operations data for the fiscal years ended January 31, 2013, 2014 and 2015 and summary consolidated balance sheet for the fiscal years ended January 31, 2014 and 2015 from our audited consolidated financial statements included elsewhere in this prospectus. We have derived the unaudited consolidated statements of operations data for the first three months of fiscal 2015 and fiscal 2016 and the unaudited consolidated balance sheet data as of April 30, 2015 from our unaudited consolidated financial statements included elsewhere in this prospectus. We have prepared the unaudited financial information on a basis consistent with our audited consolidated financial statements and have included, in our opinion, all adjustments, consisting only of normal recurring adjustments, that we consider necessary for a fair presentation of the financial information set forth in those statements. Our historical results are not necessarily indicative of the results to be expected in any future period, and our interim results are not necessarily indicative of the results to be expected for the full fiscal year.