OOMA 10-K & 10-Q changes, risk factors and insider trading

A significant portion of our revenues today comecomes from small and medium-sized businesses, which may have fewer financial resources to weather an economic downturn, rising inflation, tariffs, and defaults by financial institutions.

If additional tariffs or other restrictions are placed on our goods imported from other countries, or if the United States were to withdraw from or modify existing trade agreements or regulations, our revenue, gross margin, and results of operations may be materially harmed.

We may not be able to achieve or sustain profitability in the future and our rates of growth may decline.

Our service plans are generally sold as monthly subscriptions and our customers may terminate their monthly subscription for convenience without any penalty. Certain of our service plans are also sold as annual and multi-year subscriptions, typically ranging up to three years. However, our customers have no obligation to renew their subscriptions for such services and may elect to terminate their subscription for any number of reasons. In addition, evolving state and federal laws, regulations, and rules, including the Federal Trade Commission’s “Click-to-Cancel” Rule announced on October 16, 2024,rules aimed at making cancellation easier for customers, may result in greater numbers of customer terminations. As a result, we have no assurance that the revenue stream associated with a particular customer account will continue beyond the initial subscription term. Additionally, our Ooma Business customers may choose to reduce the number of lines or remove some of the solutions to which they subscribe. Given Ooma Business customers generally pay more for their subscriptions than residential or mobile customers, any increased churn in business customers could materially and adversely affect our core user growth, financial performance and results of operations, and thereby increase the costs we incur in our efforts to retain our customers and encourage them to upgrade their services and increase their number of users.

Because our technology platforms are complex, incorporate a variety of new computer hardware, and the platforms continue to evolve, our services have experienced and in the future may have errors, defects, bugs or other quality or reliability problems that can interfere with their intended operations or the intended operation of the systems in which our software and services are installed, or have required and in the future may require updates that are identified after customers begin using such software or services, any of which could result in unanticipated service interruptions. Although we test our services to detect and correct errors, defects, bugs or other quality or reliability problems before shipment or their initial release and before we make updates or other changes to such software or services, we have occasionally experienced significant service interruptions as a result of undetected errors, defects, bugs or other quality or reliability problems and may experience future interruptions of service if we fail to detect and correct the same. There can be no assurance that our pre-shipment or pre-release testing programs will be adequate to detect all such quality or reliability problems. In addition, updates to our hardware and/or software due to changes in third-party service providers may be required from time to time. Furthermore, we have incurred and may in the future incur additional costs incurredin inconnection with correcting root causes for service outages and updating our hardware and/or software may be substantial and these and other related consequences have negatively impacted and could in the future negatively impact our results of operations.operations and reputation and brand.

We currently serve the majority of our customers from data centers in Northern California, Texas and Virginia, where we lease space from Equinix, Inc. We also lease data center space in certain cities in the United States, Europe, South Africa, and Asia Pacific and serve some of our customers from cloud service providers. These facilities and the procedures we have implemented to restore services quickly in the event of a service outage, by themselves, will not prevent future outages. Any damage to, or failure of, these facilities, the communications network providers with whom we or they contract or with the systems by which our communications providers allocate capacity among their customers, including us, could result in interruptions in our service. Additionally, in connection with the expansion or consolidation of our existing data center facilities, we may move or transfer our data and our customers’ data to other data centers. Despite precautions we take during this process, any unsuccessful data transfers may impair or cause disruptions in the delivery of our service.

Despite precautions taken at our hosting facilities, the occurrence of a natural disaster, cyberattack, or an act of terrorism or other unanticipated problems at these facilities could result in lengthy interruptions in our service. Even with the disaster recovery arrangements that we have in place, our service could be interrupted. Any errors, defects, bugs or other quality or reliability problems in, or unavailability of, the components of our platforms that cause interruptions in the intended operation of our software or services, or the intended operation of the systems in which our software or services are installed, could, among other things: cause a reduction in revenue or a delay in market acceptance of our services; require us to issue refunds to our customers or expose us to claims for damages or other legal liability; cause us to lose existing customers and make it more difficult to attract new customers; divert our development resources or require us to make extensive changes to our software, which would increase our expenses and slow innovation; increase our technical support costs; and harm our reputation and brand.

A significant portion of our revenues today comecomes from small and medium-sized businesses, which may have fewer financial resources to weather an economic downturn, rising inflation, tariffs, and defaults by financial institutions.

A significant portion of our revenues today comes from small and medium-sized businesses. These customers may be more susceptible to negative impact from economic downturns, rising inflation, tariffs and related uncertainty, and defaults by financial institutions than larger, more established businesses as these businesses typically have fewer financial resources than larger entities.

The cloud-based communications and connected services industries are characterized by rapid changes in customer requirements, frequent introductions of new and enhanced services, and continuing and rapid technological advancement.advancement (such as the use of artificial intelligence (“AI”) and machine learning). To compete successfully in these emerging markets, we must anticipate and adapt to unpredictable technological changes and evolving industry standards and continue to design, develop, manufacture and sell new and enhanced services and products that provide increasingly higher levels of performance and reliability at lower cost. For fiscal 2025,2026, we derived approximately 61%64% of our revenue from Ooma Business and approximately 36%34% from Ooma Residential and expect they will continue to account for most of our revenue for the foreseeable future.

However, our future success will also depend on our ability to introduce and sell new services, such as our fiscal 2023 launch of Ooma Office Pro Plus or our 2600Hz solutions, as well as products, features and functionality that enhance or are beyond the voice, fax, text and connected services we currently offer, as well as to improve usability and support and increase customer satisfaction. The success of new product introductions, such as our fiscal 2023 launch of AirDial,introductions depends on a number of factors including, but not limited to: pricing, market and customer acceptance, the ability to successfully identify and anticipate product trends, effective forecasting and management of product demand, purchase commitments and inventory levels, availability of products in appropriate quantities to meet anticipated demand, ability to obtain timely and adequate delivery of components for our new products from third-party suppliers, management of manufacturing and supply costs, management of risks and delays associated with product design and production ramp-up, delays in customer readiness for AirDial installations, the quality of AirDial installations performed by third-parties, ability to maintain the levels of service uptime and performance required by our customers, and the risk that new products or enhanced versions of existing products, may have quality issues or other defects or bugs in the early stages of introduction including testing of new components and features. New product introductions may pose new challenges for us as we enter new business lines. For example, in connection with ramping sales of Ooma AirDial, we have experienced and from time to time we continue to experience delays in customer readiness for installations and increasing utilization of third parties for installations. Moreover, the market for plain old telephone service ("POTS") line replacement is still relatively new and characterized by long sales cycles, and Ooma AirDial may not result in long-term success or significant revenue for us. Our failure to develop solutions that satisfy customer preferences in a timely and cost-effective manner may harm our ability to renew our subscriptions with existing customers and to create or increase demand for our services and products and may materially and adversely impact our results of operations.

The introduction or announcement of new services and technologies by our competitors, including artificial intelligence ("AI") tools, could make our existing solutions obsolete, cause customers to defer purchases of our products and services, or otherwise adversely affect our business and results of operations. Further, we may experience higher product returns from retailers or reseller partners and may face challenges managing the inventory of new or existing products, which could lead to excess inventory charges and/or discounting of such products. In addition, new products may have varying selling prices and higher costs or different kinds of costs compared to legacy products, which could negatively impact our gross margins and operating results.

A significant portion of our Ooma Residential and Ooma Business product sales are made through a combination of direct sales and sales through leading retailers such as Amazon, Costco.com, Best Buy and Walmart, as well as reseller partnerships. Our future success depends on our ability to effectively maintain, develop and expand our retail channel and reseller partnership sales as we seek to grow and expand our customer base. Generally, our agreements with our retailers and reseller partners are not long-term and do not impose minimum sales requirements, and we have in the past and may in the future experience a loss of or reduction in sales through any of these third parties, which could materially reduce our revenue and profit margins. Our competitors may in some cases be effective in causing our current and potential retailers, and reseller partners to favor their services or prevent or reduce sales of our services. If we fail to maintain or develop new relationships with retailers and reseller partners in new markets or expand the number of retailers and reseller partners in existing markets, fail to manage, train, or provide appropriate incentives to our existing retailers and reseller partners, or if they are not successful in their sales efforts, sales of our products and services may decrease and our results of operations would suffer.

We primarily contract with manufacturers in China, VietnamVietnam, Taiwan and other Asian countries to produce our on-premise devices and end-point devices and our results of operations has been and could be further affected by slowdowns in manufacturing due to external factors such as global conflicts and other factors.

We currently do not have long-term contracts with our contract manufacturers and they are not obligated to provide products to, or perform services for, us for any specific period, in any specific quantities or at any specific price, except as may be provided in a particular purchase order. If these third parties are unable or unwilling to deliver products of acceptable quality or in a timely manner, our ability to bring services to market, the reliability of our services and our reputation could suffer. We expect that it could take several months to effectively transition to new third-party manufacturers or fulfillment agents. For example, we moved some of our product assembly in November 2025 and have experienced delays in receiving assembled products. We may also decide to switch to or bring on additional contract manufacturers to better meet our needs. Switching to or bringing on a new contract manufacturer and commencing production is expensive and time-consuming and may cause delays in order fulfillment at our existing contract manufacturers or cause other disruptions.

Additionally, several components used in our on-premise devices, end-point devices and new products are “single sourced” and any interruption in the suppliers of such components or other impacts related to such sole suppliers, such as an increase in tariffs on goods imported from outside the United States, could cause our business and operating results to suffer as we identify and establish alternative sources of components. For example, we have in the past experienced longer lead times in the supply of some of these components as a result of global supply chain disruptions. We are also subject to the risk of shortages (including changes in the prioritization of our orders), price increases and the risk that our suppliers may discontinue or modify components used in our products. The occurrence of other events outside our control, such as public health crises, trade disputes, changes in trade policies, natural disasters or climate change, could impact our suppliers’ facilities and component providers, many of which are located in China, VietnamVietnam, Taiwan and other countries in Asia. Furthermore, the geopolitical and economic uncertainty and/or instability that may result from changes in the relationship among the United States, Taiwan and China and related tensions, may, directly or indirectly, materially harm our business, financial condition and results of operations. For example, certain of our contract manufacturers and suppliers are dependent on products sourced from Taiwan which has been distinguished in its prevalence in certain global markets. Hence, greater restrictions and/or disruptions of our contract manufacturers’ suppliers’ ability to operate facilities and/or do business in and with Taiwan may increase the cost of certain materials and/or limit the supply of products sourced from Taiwan and may result in deterioration of our profit margins and a potential need to increase our pricing which may decrease demand for our products and thereby adversely impact our revenue or profitability.

If additional tariffs or other restrictions are placed on our goods imported from other countries, or if the United States were to withdraw from or modify existing trade agreements or regulations, our revenue, gross margin, and results of operations may be materially harmed.

Trade restrictions, including tariffs, quotas, embargoes, safeguards and customs restrictions, and uncertainty related to such restrictions, could increase the cost or reduce the supply of products available to us, or has in the past and could in the future increase the lead times of certain components and equipment that we may purchase from foreign vendors,vendors. These events have in the past and may in the future require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition and results of operations. For example, the newcurrent U.S. administration recently announced tariffs on goods imported from China,various countries, including from China and Vietnam where we source manysome of our products and components.components, Dueunder the International Emergency Economic Powers Act ("IEEPA"). In February 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under IEEPA. The Supreme Court only ruled on IEEPA tariffs and did not invalidate any other tariffs, nor did the court address whether or how the U.S. government might issue refunds of IEEPA tariffs. If the U.S. government is ultimately required to issue refunds, the process likely will take many months or years. Following the Supreme Court's decision, the U.S. presidential administration announced its intention to invoke other laws to collect tariffs and announced new tariffs on imports from all countries, in addition to any existing non-IEEPA tariffs. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such increasedtariffs, ortariff levels, and whether further additional tariffs or other restrictions,retaliatory quotas,actions embargoes,may be imposed, modified, or safeguardssuspended. beingThe placedultimate impact on goodsus importedof intoany tariffs imposed remains uncertain and will depend on several factors, including whether additional or incremental U.S. tariffs or other measures are announced or imposed, to what extent other countries implement tariffs or other retaliatory measures in response, and the Unitedoverall States,magnitude and anyduration relatedof counter-measuresthese aremeasures. takenIf disputes and conflicts further escalate, actions by othergovernments countries,in weresponse could be significantly more severe and restrictive. Any of the foregoing may haverequire us to raise our prices or increase inventory levels, or find new sources of system assembly or other products that we import, any of which could negatively impact our revenue, gross margins, and results of operations may be materially harmed.

We are dependent on international trade agreements and regulations, such as the United States-Mexico-Canada Agreement, or USMC.USMCA. If the United States were to withdraw from or materially modify certain international trade agreements or regulations, our business and operating results could be materially and adversely affected and our customer relationships in Canada and other countries could be harmed.

Our operations depend on our ability to protect our network from interruption or damage resulting from unauthorized access or entry, computer viruses or malware or other events beyond our control, and our ability to detect any such events. In the past, we have been subject to distributed denial-of-service ("DDOS cyberattacks"), and have been subject to other forms of attacks by hackers intent on bringing down our services or accessing confidential information. We may be subject to other DDOS and other forms of attacks in the future, undetected or otherwise. Recent developments in the threat landscape include use of AI and machine learning, as well as an increased number of cyber extortion and ransomware attacks, with higher financial ransom demand amounts and increasing sophistication and variety of ransomware techniques and methodology.methodologies. For example, theAI industryautomation experiencedis anexpected to increase inthe cyberattacksvolume and pace of cyberattacks, and AI language generation tools have also made phishing attempts more sophisticated. Use of AI in connectionour withsystems Russia’sand invasion of Ukraine. We cannot assure you thatby our backupthird-party systems,vendors, regularincluding datacloud backups,providers, physical,SaaS technological and organizational security protocols and measuresplatforms, and other proceduresexternal thatpartners, aremay currentlyalso inexpose place,us to new or thatunexpected mayvulnerabilities, beparticularly in place into the future,extent willcustomer bedata adequateor personal information is accessible to detect or preventstored unauthorized access to our systems, significant damage, system interruption, degradation or failure, or data loss or to respond to a cyberattack once launched. Additionally, hackers may attempt to directly gain access to a customer's on-premise appliance, or their mobile phone, which may delay or interrupt services, or may subject our customers to further security risks, including in relation toby any connectedAI household devices a customer might have now or in the future, such as our connected smart security sensors and our partner's connected devices or to our network more generally. Also, our services are web-based, and the amount of data we store for our users on our servers has been increasing as our business has grown.tools.

Ooma provides leading communications services and related technologies that bring unique features, ease of use, and affordability to businesses and residential customers through our smart SaaS and unified communications platforms. For businesses of all sizes, we deliver advanced voice and collaboration features including messaging, intelligent virtual attendants, and video conferencing to help them run more efficiently. Ooma’s all-in-one replacement solution for analog phone lines helps businesses maintain mission-critical systems by moving connectivity to the cloud. For consumers, our residential phone service provides PureVoice high-definition voice quality, advanced functionality and integration with mobile devices.

We generate revenues primarily from the sale of subscriptions and other services for our business and residential communications solutions. We generate our product and other revenue from the sale of our on-premise devices and end-point devices.devices, including Ooma AirDial. We primarily offer our solutions in the United States and Canada, with limited offerings in certain other countries.

We refer to Ooma Office, Ooma Enterprise, Ooma AirDial, 2600Hz, FluentStream, Phone.com, and OnSIP collectively as Ooma Business. Ooma Residential includes Ooma Telo basic and premier services, as well as Ooma Telo LTE services. See Item 1. Business above for additional information regarding our business, including products and services offered, competitive market and regulatory matters.

Total revenue was $256.9$273.6 million, up 8%7% year-over-year, primarily driven by the continued growth of Ooma Business and the $6.1 million revenue contributed from the acquisition of 2600HzFluentStream and Phone.com in lateDecember October 2023.2025.

Total gross margin was 61%, downconsistent fromwith 62%61% in fiscal 2024.2025.

Non-GAAPGAAP net income was $18.0$6.5 million, compared to $15.4a net loss of $6.9 million in fiscal 2024.2025.

CashNon-GAAP flownet provided by operating activitiesincome was $26.6$29.2 million, compared to $12.3$18.0 million in fiscal 2024.2025.

As of January 31, 2025,2026, we had $57.9 million outstanding debt, net of unamortized issuance costs. We had no outstanding debt, compared to $16.0 milliondebt as of January 31, 2024.2025.

Effective in the first quarter of fiscal 2024, we transitioned to a new calculation methodology for our net dollar subscription retention rate (“NDRR”) as discussed below. Since the majority of our subscription revenue is now generated from Ooma Business customers, we believe the new methodology better reflects our operational performance during the reporting period and is more in alignment with the reporting of our industry peers. We believe that our net dollar subscription retention rate ("NDRR") provides insight into our ability to retain and grow our subscription and services revenue and is an indicator of the long-term value of our customer relationships and the stability of our revenue base.

Prior to fiscal 2024, we calculated NDRR as a function of the year-over-year growth in average revenue per user and churn as further discussed in the FY2023 Form 10-K. Under the new methodology, weWe define our NDRR as (i) one plus (ii) the quotient of Net Dollar Change (as defined below) divided by Average Monthly Recurring Subscription Revenue (as defined below). We define “Net Dollar Change” as the quotient of (i) the difference of our Monthly Recurring Subscription Revenue (as defined below) at the end of a period minus our Monthly Recurring Subscription Revenue at the beginning of a period minus our Monthly Recurring Subscription Revenue at the end of the period from new customers we added during the period, all divided by (ii) the number of months in the period. We define our Average Monthly Recurring Subscription Revenue as the average of the Monthly Recurring Subscription Revenue at the beginning and end of the measurement period. “Monthly Recurring Subscription Revenue” is defined as recurring subscription amounts from Ooma Residential and Ooma Business customers at the end of the most recent month, excluding recurring revenue from 2600Hz.2600Hz, FluentStream and Phone.com.

NDRR declined slightlyincreased year-over-year due to relatively consistent user churn offset byand an increase in Average Monthly Recurring Subscription Revenue.

Adjusted EBITDA increased year-over-year in line with our revenue growth, representing approximately 9%12% and 8%9% of our total revenues for fiscal 20252026 and fiscal 2024,2025, respectively. We use Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) to manage our business, evaluate our performance and make planning decisions. We consider this metric to be a useful measure of our operating performance, because it contains adjustments for unusual events or factors that do not directly affect what management considers being the core operating performance, and are used by our management for that purpose. We also believe this measure enables us to better evaluate our performance by facilitating a meaningful comparison of our core operating results in a given period to those in prior and future periods. Investors often use similar measures to evaluate the operating performance with competitors. Adjusted EBITDA represents net income before interest and other income,expense (income), income taxes, depreciation and amortization of capital expenditures, amortization of intangible assets and acquisition related costs,assets, stock-based compensation and related taxes, acquisition-related costs, litigation costs, restructuring costs, gain on note conversion, and facilities consolidation (gain) charges.gain.

Adjusted EBITDA does not consider the impact of income tax provisions or benefits, other income/expense, stock-based compensation and related taxes, amortization of intangible assets andassets, acquisition-related costs, restructuring costs and costs that are not recurring in nature; and Ooma | FY2026 Form 10-K | 53 Adjusted EBITDA does not consider any expenses for assets being depreciated and amortized that are necessary to our business; although these are non-cash charges, the property and equipment being depreciated and amortized often will have to be replaced in the future, and Adjusted EBITDA does not reflect any cash capital expenditure requirements for such replacements;

Because of these limitations, you should consider Adjusted EBITDA alongside other financial performance measures, including net income (loss) and our other GAAP results.

The following table provides a reconciliation of GAAP net income (loss) to Adjusted EBITDA for the periods indicated (in thousands):

Subscription and services gross margin may fluctuate from period-to-period based on the interplay of a number of factors, including revenue mix and fluctuations in the costs described above. We expect our subscription and services gross margin to increase over the long-term, primarily as we achieve scale efficiencies and as Ooma Business revenue becomes a larger majority of total subscription revenue.revenue and we realize expected synergies from our acquisitions.

Subscription and services revenue increased $17.0$13.4 million or 8%6% year-over-year, primarily attributable to an increase in revenue generated from AirDial; an increase in the average revenue per core user, driven by organic growth, which was in part due to higherincreased sales toof ourOoma Office and Ooma Enterprise customers,services; and revenue contributedcontribution from 2600Hz,FluentStream and Phone.com, which we acquired at the end of thirdthe fourth quarter of fiscal 2024, and an increase in AirDial lines.2026.

Product and other revenue increased $3.1$3.4 million or 20%19% year-over-year, primarily attributable to thean increase ofin AirDial units shipped, sale of accessories to Ooma Enterprise customers, and professionalTelo service revenue from 2600Hz.shipments.

Sales and marketing expenses increased $3.8$1.0 million or 5%1% year-over-year, primarily due to a $4.7$2.4 million increase in personnel and contractor related costs, and a $0.6 million increase in commission costs,commissions, partially offset by a $1.5$1.2 million decrease in advertising and marketing expense.

Research and development expenses increaseddecreased $4.4$4.0 million or 9%7% year-over-year, primarily due to a $3.8 million increase in personnel and contractor related costs, driven by higher headcount, a $0.7 million increase in restructuring costs, and a $0.1 million increase in allocated overhead costs, partially offset by a $0.2$3.3 million decrease in hostingpersonnel-related costs, driven in part by a reduction in acquisition-related stock-based compensation expense, and a $0.9 million decrease in restructuring costs.

We recorded an income tax benefit of $3.1$2.5 million in fiscal 2024,million, offset by $1.1$0.5 million of income tax expenseprovision in fiscal 2024.2026. The income tax benefitsbenefit wereis related to certain preexisting deferred tax assets realized because of deferred tax liabilities assumed in our acquisition of 2600HzPhone.com in fiscal 2024, which did not recur in fiscal 2025.2026.

The following table presents a reconciliation of GAAP net income (loss) to non-GAAP net income for the periods indicated (in thousands):

For fiscal 2025,2026, our net lossincome of $6.9$6.5 million included non-cash items of $30.3$26.8 million primarily related to stock-based compensation, operating lease expense, depreciation and amortization expenseexpense, and gainan onincome notetax conversion.benefit related to our acquisition of Phone.com. Operating asset and liability changes for fiscal 20252026 included:

aan decreaseincrease of $1.8$2.6 million in accounts receivable due to the timing of cash collections;

aan decreaseincrease of $6.6$3.2 million in inventories and deferred inventory costs;

Ooma | FY2025 Form 10-K | 53 an increase of $2.7$1.2 million in prepaid expenses and other current and non-current assets primarily due to the capitalization of sales commissions and the timing of prepayments; and a net decreaseincrease of $2.2$1.4 million in accounts payable, accrued expenses and other liabilities due to the timing of payments a decrease of $0.4$0.2 million in deferred revenue.

Cash used in investing activities was $6.4$69.7 million for fiscal 2025, which consisted of capital expenditures of $6.4 million. Cash used in investing activities was $35.3 million for fiscal 2024,2026, which consisted of cash consideration paid for the 2600HzFluentStream businessand acquisitionPhone.com acquisitions of $32.2$64.1 million,million and capital expenditures of $6.2$5.6 million, partly offset by proceeds of $2.8 million from maturities of short-term investments.million. We did not have any acquisitions in fiscal 2025.

Cash usedprovided inby financing activities was $19.8$44.3 million for fiscal 2025,2026, which consisted of $16.0$65.0 million inproceeds debtfrom repayments, paymentsissuance of $4.4 million related to shares repurchased for tax withholdings on vesting of RSUs, and payments of $4.5 million under our stock repurchase plan, offset bydebt, proceeds of $5.1$3.0 million from the issuance of common stock from our ESPP and stock option exercises.exercises, offset by $6.5 million of debt repayments, $0.5 million of credit facility issuance costs, payments of $5.1 million for shares repurchased for tax withholdings on vesting of RSUs, and payments of $11.6 million under our stock repurchase plan. Cash usedprovided inby financing activities increased $36.3$64.1 million year-over-year, which primarily reflected a borrowing of $18.0$65.0 million under our Credit Agreement forto fund the 2600HzFluentStream acquisitionand Phone.com acquisitions in fiscal 2024, which did not recur in fiscal 2025, and repayments of borrowings outstanding under our Credit Agreement in fiscal 2025.2026.

Term Loan and Revolving Credit Facility

In October 2023, we entered into a credit and security agreement (the “2023 Credit Agreement”) with certain banks that providesprovided for a secured revolving credit facility under which we may borrow up to an aggregate of $30.0 million and, subject to certain conditions, may be increased to up to $50.0 million. On December 1, 2025, the Company entered into the Credit Agreement, the terms of which replace and supersede the terms of the 2023 Credit Agreement. The Credit Agreement has a term of five years and provides for a term loan facility of up to $65.0 million and a revolving credit facility of up to $10.0 million. In December 2025, the Company borrowed $65.0 million as a term loan maturing on December 1, 2030. The Company used the proceeds of the term loan to finance the FluentStream and Phone.com acquisitions (see Note 13: Business Acquisition). As of January 31, 2025,2026, we had zeroa $58.5 million outstanding borrowingsterm loan balance and were in compliance with all loan covenants.

As of January 31, 20252026 and 2024,2025, non-cancelable inventory purchase commitments to our contract manufacturers and other suppliers totaled approximately $6.2$15.1 million and $1.1$6.2 million, respectively. Additionally, we have a non-cancelable service agreement with a telecommunications provider pursuant to which we are obligated to total minimum purchase commitments of $11.9$10.2 million between March 20242025 and February 2029, of which $10.2$8.1 million was outstanding as of January 31, 2025,2026. See Note 11: Commitments and aContingencies non-cancelablein servicethe agreement with a cloud service provider pursuantnotes to whichour weconsolidated arefinancial obligated to total annual minimum purchase commitments of $1.1 million between March 2024 and February 2025, of which $0.1 million was outstanding as of January 31, 2025.statements.

We have and will continue to incorporate both internally developed and third-party AI solutions into our products and services, including call transcription, call answering, and receptionist services. We are also increasingly using third-party AI technologies internally in our business. AI technologies are complex and rapidly evolving, and the successful integration of new and emerging AI technologies, such as generative AI, automated speech recognition, text-to-speech andtext-to-speech, natural language processingprocessing, and AI agents into our products and services will require additional investment, and the development of new approaches and processes, which could be costly and may increase our expenses, yet we may not realize the desired or anticipated benefits from AI in a timely or cost-effective manner.

Use of AI tools by us or our third-party vendors could also result in unintended consequences. For example, AI algorithmsalgorithms, generative AI, automated speech recognition, text-to-speech, natural language processing, and AI agents that we and our third-party vendors use may be flawed or may be based on datasets that are biased or insufficient. Such AI tools may also fail to perform as intended, or may operate in ways that are inconsistent with our policies, customer expectations, contractual commitments, or legal obligations. Inaccuracies from relying on AI tools could lead to errors in our decision-making, product development, or other business activities. Any disruption or failure in our or our third-party vendors’ AI systems or infrastructure could result in delays or errors in our operations, which could harm our business, reputation, financial condition and results of operation. In addition, any latency, disruption, or failure in AI tools or infrastructure incorporated into our business could result in security vulnerabilities, delays, or errors in our offerings. Our use of third-party AI tools may expose confidential, proprietary, personal, or customer information if not properly governed. Further, the incorporation of AI-powered features into our products and services may subject us to new or enhanced governmental or regulatory scrutiny, data privacy and information security laws, litigation, including class-action suits, confidentiality or security risks, ethical concerns, or other complications that could harm our business, reputation, financial condition or results of operations.

Trade restrictions, including tariffs, quotas, embargoes, safeguards and customs restrictions, and uncertainty related to such restrictions, could increase the cost or reduce the supply of products available to us, or have in the past and could in the future increase the lead times of certain components and equipment that we may purchase from foreign vendors. These events have in the past and may in the future require us to modify our supply chain organization or other current business practices, any of which could harm our business, financial condition and results of operations. For example, the current U.S. administration announced tariffs on goods imported from various countries, including from China and Vietnam where we source some of our products and components, under the IEEPA.International Emergency Economic Powers Act (IEEPA). In February 2026, the U.S. Supreme Court issued a ruling striking down certain tariffs previously imposed under IEEPA. The Supreme Court only ruled on IEEPA tariffs and did not invalidate any other tariffs, nor did the court address whether or how the U.S. government might issue refunds of IEEPA tariffs. If the U.S. government is ultimately required to issue refunds, the process likely will take many months or years. Following the Supreme Court's decision, the U.S. presidentialadministration imposed new tariffs under Section 301 of the Trade Act of 1974, which apply at differing rates depending on the country of origin, including with respect to any goods we may import from China, Taiwan, Vietnam, or other listed countries. The U.S. administration announcedhas itsalso intentioninitiated toadditional invokeinvestigations otherthat lawscould toresult collectin tariffs and announced newfurther tariffs on imports of electronics and other products, including from allcountries countries,where inwe additionsource toproducts anyand existing non-IEEPA tariffs.components. There remains substantial uncertainty regarding the duration of existing and newly announced tariffs, potential changes or pauses to such tariffs, tariff levels, and whether further additional tariffs or other retaliatory actions may be imposed, modified, or suspended. For example, in August 2026, following the imposition of additional U.S. tariffs on Canadian goods, the Canadian government announced that it intends to impose retaliatory tariffs on certain U.S. goods, including electronics, effective in September 2026. Depending on the final scope of these measures, our products could become subject to additional duties on entry into Canada, which could increase prices to our Canadian customers and channel partners, reduce demand, cause us to absorb additional costs, or require us to establish alternative distribution or importation arrangements outside the United States. The ultimate impact on us of any tariffs imposed remains uncertain and will depend on several factors, including whether additional or incremental U.S. tariffs or other measures are announced or imposed, to what extent other countries implement tariffs or other retaliatory measures in response, and the overall magnitude and duration of these measures. If disputes and conflicts further escalate, actions by governments in response could be significantly more severe and restrictive. Any of the foregoing may require us to raise our prices or increase inventory levels, or find new sources of system assembly or other products that we import, or modify or establish distribution, importation or fulfillment operations outside the United States, any of which could negatively impact our revenue, gross margins, and results of operations may be materially harmed.operations.

In past periods, we have increased our inventory levels to mitigate supply disruptions caused by component shortages, longer lead times and increased transportation uncertainty. Additionally, we experienced higher unit costs for some products that have been impacted by supply chain constraints, certain components being subject to end-of-life, and inflationary pressure,pressures, such as thethose increaseresulting infrom increased pricing of the memory chipsand other components due to thesurging surgedemand infor AI.such components to support AI infrastructure and product orders. We are increasing and may continue to increase inventory levels due to shortages in the electronic components industry due to the rise in AI demand, certain components becoming subject to end-of-lifeend-of-life, as well asand uncertainty related to restrictions on goods imported into the United States or to otherwise mitigate related supply chain risks and uncertainties, such as the FCC’s recent update to the “Covered List” of communications equipment deemed to pose an unacceptable risk to U.S. national security to include all consumer-grade routers produced in foreign countries. Increased inventory levels have in the past and may in the future result in write-down charges from excess or obsolete inventory if demand shifts or products become non-viable, charges from excess purchase commitments, the sale of inventory at discounted prices, and other actions, which may cause our gross margin to decline and harm our reputation and brand.

Despite our ongoing efforts to enhance security measures, our infrastructure and those of third parties we rely upon may be vulnerable to hackers, phishing, computer viruses, worms, ransomware, and other malicious software programs or similarly disruptive problems caused by our customers, employees, consultants or other internet users who attempt to invade public and private data networks. In some cases, we do not have in place disaster recovery facilities for certain ancillary services, such as email delivery of messages. Currently, a majority of our customers authorize us to bill their credit or debit card accounts directly for all transaction fees that we charge. We rely on encryption and authentication technology to ensure secure transmission of confidential information, including customer credit and debit card numbers. Despite our efforts to encrypt and secure transmission of confidential customer information, hackers with sufficiently sophisticated technology or methods may still be able to infiltrate our systems to gain unauthorized access to payment card information. Further, advances in computer capabilities, new discoveries in the field of cryptography or other developments may result in a compromise or breach of the technology we use to protect transaction data. In addition, because the techniques used to obtain unauthorized access to the information systems change frequently and are becoming more sophisticated, and Ooma | FY2027 Form 10-Q | 44 may not be recognized until launched against a target, we may be unable to anticipate these techniques or to implement adequate preventative measures.

The cloud-based communications and connected services industries are highly competitive and we expect that competition will continue to be intense in the future. Increased competition may result in pricing pressures, reduced profit margins and may impede our ability to continue to increase the sales of our services and products or cause us to lose market share, any of which could substantially harm our business and results of operations. We face continued competition from established communications providers, such as Comcast Corporation, Verizon Communications Inc., AT&T Inc., Charterand Rogers Communications Inc and other cloud-based communications companies such as RingCentral Inc., Vonage Holdings Corp. (acquired by Ericsson), 8x8 Inc., Nextiva, Inc., Intermedia.net Inc., Dialpad Inc., Microsoft Corporation, Zoom Video Communications, Inc., Alphabet Inc. (Google Voice), Crexendo, Inc. and Rogers CommunicationsAlianza, Inc.; as well as from traditional on-premise, hardware business communications providers, such as Cisco Systems, Inc. and Mitel, Inc., mobile communications app companies providing “over-the-top” solutions, large internet companies that offer services with features that compete with some of what we offer, and certain other communications companies. These companies currently or may in the future host their solutions through the cloud.

The market for our CPaaS and CCaaS 2600Hz solutions is rapidly evolving, significantly fragmented and highly competitive, with relatively low barriers to entry in some segments. Our competitors in this segment of the market are primarily (i) CPaaS companies that offer communications products and applications, such as Twilio Inc., Vonage Holdings Corp. (acquired by Ericsson), Plivo Inc., and Sinch Inc., and (ii) other software companies that compete with portions of these and CCaaS solutions.solutions such as RingCentral Inc., 8x8 Inc., Dialpad Inc., Five9 Inc., and NICE Systems Ltd. Some of our competitors and potential competitors in this segment are larger and have greater name recognition, longer operating histories, more established customer relationships, larger budgets, lower operating costs, and significantly greater resources than we do. As a result, our competitors may be able to respond more quickly and effectively than we can to new or changing opportunities, technologies, standards, customer requirements or changing economic conditions. Our competitors may also offer products or services that address one or a limited number of functions at lower prices, with greater depth than our products or in different geographies. Our current and potential competitors may develop and market new products and services with comparable functionality to our products, and this could lead to us having to decrease prices in order to remain competitive. Additionally, in connection with our AirDial product offering, we face competition in the POTS replacement market from a range of other companies, such as Verizon Communications Inc., Granite Telecommunications Ooma | FY2027 Form 10-Q | 46 LLC, MetTel Inc., AT&T Inc. and Napco Security Technologies, Inc., as well as other service providers that bundle their offerings with POTS-related products from POTS replacement equipment manufacturers, such as DataRemote Inc.

Ooma | FY2027 Form 10-Q | 47 potential or actual international conflicts, tensions, and sanctions, such as those resulting from the Israel-U.S.-Iran conflict, Russia’s ongoing invasion of Ukraine, and escalating political tensions between China and Taiwan;

Ooma | FY2027 Form 10-Q | 46 deterioration of political relations between the United States and other countries, including due to U.S. foreign policy in Latin America, North America and Europe; and political or social unrest or economic instability in a specific country or region, which could have an adverse impact on our third-party software development and quality assurance operations there.

Any one of the factors above, or the cumulative effect of some or all of the factors referred to above, may result in significant fluctuations in our quarterly and annual results of operations and cash flows. This variability and unpredictability could result in our failure to meet our internal operating plan or the expectations of securities analysts or investors for any period, which could cause our stock price to decline. In addition, a significant percentage of our operating expenses is fixed in nature and is based on forecasted revenue trends. Accordingly, in the event of revenue shortfalls, we may not be able to mitigate the negative impact on net (loss) income and margins in the short term. If we fail to meet or exceed the expectations of securities analysts or investors, the market price of our shares could fall substantially and we could face costly lawsuits, including securities class-action suits.

While we believe that our current product offerings are not considered consumer-grade routers under the FCC’s guidance updated on April 22, 2026, this effective ban may in the future limit the type of products we can develop, limit manufacturing locations, or increase the costs of offering such products. The failure of our products and services to comply, or delays in compliance, with various existing and evolving standards could delay or interrupt volume production of our VoIP telephony products, subject us to fines or other imposed penalties, or harm the perception and adoption rates of our service, any of which would have a material adverse effect on our business, financial condition or operating results.

We rely on a variety of marketing techniques in connection with our sales efforts, including telemarketing and email marketing campaigns. We also record certain telephone calls between our customers or potential customers and our sales and service representatives for training and quality assurance purposes. These activities are subject to a variety of federal U.S. and Canadian laws and regulations such as the Telephone Consumer Protection Act of 1991 (also known as the Federal Do-Not-Call law, or the TCPA), the Telemarketing Sales Rule, the CRTC’s Unsolicited Telecommunications Rules, the CRTC’s National Do Not Call List Rules, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (also known as the CAN-SPAM Act), and various U.S. state and Canadian provincial laws regarding telemarketing, email marketing, social media marketing, and telephone call recording. The FCC continues to adopt and consider additional rules related to robocalling, robotexting, and autodialing. For example, in December 2023, the FCC adopted a one-to-one consent rule requiringthat would have required companies to obtain consent from consumers to receive automated or robotic calls or texts only from one specific good or service provider at a time. These laws are subject to varying interpretations by courts and governmental authorities and often require subjective interpretation, making it difficult to predict their application and therefore making our compliance efforts more challenging. For example,example,the onEleventh JanuaryCircuit 24, 2025, the FCC postponedvacated the one-to-one consent requirements until January 26, 2026, due to challenges to the new rule in theJanuary United States Court of Appeals for the Eleventh Circuit,2025 and the courtFCC ultimatelysubsequently vacatedremoved the rule.rule We cannot be certain our efforts to comply with these laws, rules and regulations will be successful, or, if they are successful, thatfrom the cost of such compliance will not be material to our business. Changes to these or similar laws, or to their application or interpretation, or new laws, rules and regulations governing our communication and marketing activities could adversely affect our business. In the event that any of these laws, rules or regulations significantly restrict our business, we may not be able to develop adequate alternative communication and marketing strategies. Further, non-compliance with these laws, rules and regulations carries significant financial penalties and the risk of class action litigation. For example, in September 2025 we were named as a defendant in a putative class action complaint in the U.S. District Court for the Northern District of California, alleging violations of the TCPA, which was dismissed with prejudice in February 2026. If we are unable to successfully defend future putative class actions, our financial performance, reputation and business could be adversely affected.TCPA.

In the United States and in other jurisdictions, a variety of regulations are currently being proposed that would increase restrictions on online service providers in the field of data privacy and security, and we believe that the adoption of such increasingly restrictive regulation is likely. For example, the California Consumer Privacy Act (the “CCPA”) regulates the processing of personal data, which could result in civil penalties for violations. In addition, the California Privacy Rights Act (“CPRA”) took effect on January 1, 2023 and many states are now adopting similar privacy laws. We will continue to monitor developments related to new privacy laws like the CPRA which will require us to incur additional costs and expenses in an effort to monitor and comply with such laws. Legislators and regulators in the United States and elsewhere are also increasingly focused on privacy protections for minors under 18 years of age. For example, the Children’s Online Privacy Protection Act (“COPPA”) applies to operators of commercial websites and online services directed to children under the age of 13 that collect personal information from children, and to operators of general audience websites with actual knowledge that they are collecting information from children under the age of 13. Our MyPhoneTM VoIP services are directed at parents of children and include features such as green listing, quiet hours, and advanced call blocking to enhance children’s safety and privacy. Although we strive to ensure this will be compliant with applicable COPPA and other children’s privacy laws, any noncompliance could subject us to governmental enforcement actions, litigation, fines and penalties or adverse publicity, and we could be in breach of our customer contracts and our customers could lose trust in us, which could harm our reputation and business. Additionally, proposedstate legislationlaws mayand imposeregulatory newinitiatives obligationsincreasingly onaddress online servicesservices, whichconnected mayproducts, and digital features that are likely to be accessed by olderminors teens,under including,the inage someof cases,18. 16-Depending on how these laws are interpreted and 17-year-oldapplied, children.services such as MyPhone or related settings, parental controls, and privacy disclosures, among others, may become subject to additional obligations. Compliance with these requirements may require product, engineering, marketing, legal, and operational changes, may limit features or data processing practices, and may increase litigation, regulatory, reputational, and customer trust risks, particularly because laws directed to children and teens may be interpreted differently from COPPA and may apply even where a product is directed primarily to parents.

The EU has implemented strict laws that apply in connection with the Processing of personal information, and other customer data. Data protection regulators within the EU and other jurisdictions have the power to fine non-compliant organizations significant amounts and seek injunctive relief, including the cessation of certain data processing activities. For example, the EU Data Act became effective in September 2025 and imposes additional obligations on companies offering connected products, related digital services, or data-processing services in the EU, including requirements relating to user access to data generated by connected products, data sharing, contractual terms, interoperability, and switching between data-processing or cloud services. As such, we may need to modify customer contracts, product designs, data-export capabilities, data-sharing processes, and vendor or reseller arrangements. These changes could increase compliance and engineering costs, create operational complexity, limit our ability to use certain data, increase customer or third-party disputes, or affect our competitive position in the EU. In addition, the EU’s General Data Protection Regulation, or GDPR, Ooma | FY2027 Form 10-Q | 61 provides for significant penalties for violations, including fines of up to 4% of the violating company’s worldwide revenue. While the United Kingdom’s Data Protection Act substantially implements the GDPR, the United Kingdom’s exit from the European Union has created regulatory uncertainty, including the cross-border transfer of data. Such uncertainty may adversely impact the operations of our U.K. subsidiary by adding operational complexities and expenses. In addition, there is uncertainty about data transfer to the United States. For example, although the new U.S. Data Privacy Framework was formally approved by the European Commission in July 2023, the framework may still be invalidated by the Court of Justice of the European Union, which invalidated the framework's predecessor, the Privacy Shield Program, in 2020.

Our international operations are subject to U.S. tax laws, including limitations on the ability to defer U.S. taxation on earnings outside of the United States until those earnings are repatriated to the United States, which could affect the tax treatment of our foreign earnings. Any changes in our effective tax rate could adversely affect our results of operations. In addition, from time to time our income tax returns may be examined by the Internal Revenue Service and other tax authorities. We assess the likelihood of adverse outcomes resulting from any such examinations when and as appropriate to determine the adequacy of our provision for income taxes. There can be no assurance that the outcomes from any such examinations will not have an adverse effect on our results of operations and financial condition.

As of January 31, 2026, we had federal net operating loss carryforwards of approximately $81.4 million available to offset future income, of which $79.4 million may be carried forward indefinitely. We also had state net operating loss carryforwards of $96.9 million which will expire in various amounts beginning in fiscal 2029. Additionally, we have federal and research and development tax credit carryforwards that will begin to expire in fiscal 2030 and California research and development tax credit carryforwards with no expiration date. Realization of these net operating loss and research tax credit carryforwards depends on future income, and there is a risk that our existing carryforwards could expire unused and be unavailable to offset future income tax liabilities, which could materially and adversely affect our results of operations. No deferred tax assets have been recognized on our balance sheet related to these NOLs, as they are fully reserved by a valuation allowance. If we have previously had, or have in the future, one or more Section 382 “ownership changes”, or if we do not generate sufficient taxable income, we may not be able to utilize a material portion of our NOLs, even if we achievesustain profitability. If we are limited in our ability to use our NOLs in future years in which we have taxable income, we will pay more taxes than if we were able to fully utilize our NOLs. This could materially and adversely affect our results of operations.

The Company, its directors, and certain officers were named as defendants in a consolidated securities class action in connection with its initial public offering, and in October 2019, the Court dismissed the lawsuit with prejudice. In addition, in February 2021 the Company and Ooma Canada Inc. were named as defendants in a class action complaint in the Federal Court of Canada, alleging violations of Canada’s Trademarks Act and Competition Act, and in September 2025, the Company was named as a defendant in a putative class action complaint in the U.S. District Court for the Northern District of California, alleging violations of the TCPA, which was dismissed with prejudice in February 2026.Act. In the future, especially following periods of volatility in the market price of our shares, additional purported class action or derivative complaints may be filed against us. The outcome of any pending and potential future litigation is difficult to predict and quantify and the defense of such claims or actions can be costly. In addition to diverting financial and management resources and general business disruption, we may suffer from adverse publicity that could harm our brand or reputation, regardless of whether the allegations are valid or whether we are ultimately held liable. A judgment or settlement that is not covered by or is significantly in excess of our insurance coverage for any claims, or our obligations to indemnify the underwriters and the individual defendants, could materially and adversely affect our financial condition, results of operations and cash flows.

We refer to Ooma Office, Ooma Enterprise, Ooma AirDial, 2600Hz, FluentStream, Phone.com, and OnSIP collectively as Ooma Business. Ooma Residential includes Ooma Telo basic and premier services, MyPhone, StarDial as well as Ooma Telo LTE services.

FirstSecond Quarter Fiscal 20262027 Financial Performance

Total revenue was $81.1$83.2 million, up 25% year-over-year, primarily driven by the growth of Ooma Business and contributions of FluentStream and Phone.com.Phone.com, Inwhich were both acquired in December 2025, we completed the acquisitions of2025. FluentStream and Phone.com, whichPhone.com contributed $11.2$22.4 million in revenue in the aggregate for the first quarterhalf of fiscal 2027.

GAAP net income was $2.6$3.0 million, compared to net lossincome of $0.1$1.3 million in the prior year quarter reflecting continued improvement in our operations.

As of AprilJuly 30,31, 2026, we had total cash and cash equivalents of $17.2$17.5 million, compared to $20.1 million as of January 31, 2026, decreasewith the change primarily drivenattributable byto prepayments of term loan borrowings.

As of AprilJuly 30,31, 2026, we had $52.9$46.5 million outstanding debt, net of unamortized issuance costs. We had no outstanding debt as of AprilJuly 30,31, 2025.

Core Users increased year-over-year, which was primarily driven by growth in Ooma Business users, including the addition of 165,000 core users associated with ourfrom FluentStream and Phone.com offerings.Phone.com. As of AprilJuly 30,31, 2026, Ooma Business users comprised approximately 49% of our total core users, up from 41% as of AprilJuly 30,31, 2025. We define our core users as the number of active residential user accounts and business user extensions (excluding Talkatone and 2600Hz users). We believe that the relationship that we establish with our core users positions us to sell additional premium communications services and other new connected services to them.‌ Annualized Exit Recurring Revenue ("AERR") grew year-over-year due to an increase in the average revenue per core user, which was largely driven by an increasing mix of Business users. We believe that AERR is an indicator of recurring subscription and services revenue for near-term future periods. We estimate our AERR by dividing our recurring quarterly subscription revenue from our Core Users by the average number of core users each quarter and annualize by multiplying by four. We then multiply that result by the number of core users at the end of the period to calculate AERR. AERR includes the annual recurring revenue from 2600Hz. Since the fourth quarter of fiscal 2026, AERR includes annual recurring revenue generated from our FluentStream and Phone.com offerings.

Net Dollar Subscription Retention Rate (“NDRR”) was flatdecreased year-over-year. We believe that our net dollar subscription retention rate provides insight into our ability to retain and grow our subscription and services revenue and is an indicator of the long-term value of our customer relationships and the stability of our revenue base.

Because of these limitations, Adjusted EBITDA should be considered alongside other financial performance measures, including net income (loss) and our other GAAP results.

The following table provides a reconciliation of GAAP net income (loss) to Adjusted EBITDA, for each of the periods indicated below (in thousands):

Product and other revenue consists primarily of sales sale of our on-premise devices and end-point devices, including Ooma AirDial, and from installation services, equipment rentals, and professional services.

Cost of subscription and services revenue includes payments made for third-party network operations and telecommunications services, license fees, certain telecom taxes and fees, including Federal Universal Service Fund (“USF”) contributions, credit card processing fees, costs to build out and maintain data centers, depreciation and Ooma | FY2027 Form 10-Q | 25 maintenance of servers and equipment, personnel costs associated with customer care and network operations support, amortization of certain acquired intangible assets, and allocated overhead costs.

In February 2026, the U.S. Supreme Court issued a ruling invalidating certain tariffs previously imposed under the International Emergency Economic Powers Act (“"IEEPA”"). As a result of this ruling, we may beare eligible for a refund of tariffs previously paid on imported goods. During the three months ended July 31, 2026, we received refunds of $0.3 million of previously paid tariffs, which were recorded as a reduction of product costs. As the recoverability and timing of any suchfurther refundrefunds remainsremain uncertain, we have not recorded a benefit for any additional potential refundrefunds and will not do so until such amounts are realizable. We will continue to monitor these developments and their potential impact on our results of operations.

Comparison of the three and six months ended AprilJuly 30,31, 2026 and 2025 (dollars in tables are in thousands):

Three months ended AprilJuly 30,31, 2026 Compared to Three months ended AprilJuly 30,31, 2025

We derived approximately 70% and 62%63% of our total revenue from Ooma Business and approximately 28% and 35% from Ooma Residential for the three months ended AprilJuly 30,31, 2026 and 2025, respectively.

Subscription and services revenue increased $14.3$14.4 million or 24% year-over-year, primarily attributable to the contributioncontributions of FluentStream and Phone.com offerings,Phone.com, continued growthexpansion inof AirDial lines,revenue, and organic growth, including increased sales of Ooma Office services, which resulted in an increase in our average revenue per core user.

Product and other revenue increased $1.8$2.4 million or 37%46% year-over-year, primarily attributable to an increase in AirDial and Telo shipments.

Three months ended AprilJuly 30,31, 2026 Compared to Three months ended AprilJuly 30,31, 2025

Subscription and services gross margin was 70% as of 71%July increased31, year-over-year2026, fromconsistent 70%.with the prior year quarter. Cost of subscription and services revenue increased $3.8$4.2 million or 21%23% year-over-year, primarily due to a $2.1 million increase in personnel-related costs, a $0.8$1.4 million increase in infrastructure costs, a $0.3 million increase in banking fees, and a $0.3 million increase in amortization of intangible amortization, partially offset by a $0.2 million decrease in regulatory fees.assets. Overall, the increase in the cost of subscription and services in part reflects the growth of Ooma Business and the additional costs resulting from sales of FluentStream and Phone.com offerings.

Product and other revenue gross margin improved to negative 32%25% from negative 42%47% in the prior year period. The improvement in product margin was primarily due to a$0.3 moremillion favorablein salestariff mixrefunds towardrelated higherto marginIEEPA productsruling suchreceived asin AirDial.three months ended July 31, 2026.

Three months ended AprilJuly 30,31, 2026 Compared to Three months ended AprilJuly 30,31, 2025

Sales and marketing expenses increased $2.5$3.3 million or 13%17% year-over-year, primarily due to a $1.1$1.2 million increase in commissions due to growth in AirDialOoma linesOffice users and salesAirDial of FluentStream and Phone.com offerings,revenue, a $1.4$1.3 million increase in amortization of intangible assets attributable to recent acquisitions, and a $0.4$1.0 million increase in personnel-related costs,costs attributable to our acquisitions of FluentStream and Phone.com, and a $0.2 million increase in license fees, partially offset by a $0.8$0.4 million decrease in advertising and marketing expense.

Research and development expenses increased $2.6$3.0 million or 21%24% year-over-year, primarily due to a $2.2$2.4 million increase in personnel and contractor-related costs, a $0.3$0.4 million increase in license fees,fees relating to our AI innovation activities, and a $0.1$0.4 million increase in restructuring costs, partially offset by a $0.3 million decrease in software costs.

General and administrative expenses increased $1.8$1.4 million or 22%18% year-over-year, primarily due to a $1.3$1.1 million increase in personnel-related costs related to increased headcount from recentour acquisitionsFluentStream and Phone.com acquisitions, and a $0.2$0.3 million increase in restructuringsupplies and equipment costs.

As of AprilJuly 30,31, 2026, we had $17.2$17.5 million of total cash and cash equivalents and borrowing capacity of $10.0 million under our Credit Agreement, which we believe will be sufficient to meet our cash needs for at least the next 12 months. Our future capital requirements will depend on many factors, including our growth rate, the introduction of new and enhanced offerings, the timing and extent of our sales and marketing activities and research and development expenditures, the repayment of outstanding indebtedness, and other factors. We may in the future make investments in or acquisitions of businesses or technologies, which may require the use of cash. We may seek to raise additional funds at any time through equity or debt financings. If we are unable to raise additional capital when desired and at reasonable rates, our business, results of operations, and financial condition would be adversely affected.

For the threesix months ended AprilJuly 30,31, 2026, our net income of $2.6$5.6 million included non-cash items of $8.7$17.6 million primarily related to stock-based compensation, operating lease expense, and depreciation and amortization expense. Operating asset and liability changes for the threesix months ended AprilJuly 30,31, 2026 included:

ana increasedecrease of $0.5 million in accounts receivable due to the timing of customer cash collections;

an increase of $1.8$5.2 million in inventories and deferred inventory costs, driven by the timing of inventory receipts as sales of Telo and Airdial increase;

a net increase of $0.3$3.2 million in accounts payable, accrued expenses and other liabilities due to the timing of payments and our acquisitions of FluentStream and Phone.com; and a decrease of $0.7$0.3 million in deferred revenue.

Cash provided by operating activities for the threesix months ended AprilJuly 30,31, 2026 increased $2.7$9.4 million year-over-year, which primarily reflected working capital impacts resulting from the timing of payments. Although we have generated cash from operations, our operating cash flow may not remain positive in the future as we continue to invest in efforts to scale our business.

For the threesix months ended AprilJuly 30,31, 2026, cash used in investing activities was $1.1$3.3 million, which consisted primarily of capital expenditures of $1.5$3.7 million, offset by $0.4 million cash received from a working capital adjustment related to the FluentStream acquisition. Cash used in investing activities decreasedincreased $0.1$0.8 million compared to the prior year period, driven by the $0.4 million working capital adjustment received, partially offset by higher capital expenditures.

For the threesix months ended AprilJuly 30,31, 2026, cash used in financing activities was $8.3$18.8 million, which consisted of payments of $1.4$3.3 million related to shares repurchased for tax withholdings onupon vesting of RSUs, and payments of $3.3$5.7 million under our stock repurchase plan, and debt prepayments of $5.0$11.5 million, partially offset by proceeds of $1.4$1.7 million from the issuance of common stock from our ESPP and stock option exercises. Cash used in financing activities increased $6.9$12.9 million year-over-year, which primarily reflected prepayments of term loan borrowings under our Credit Agreement (as defined below) during the threesix months ended AprilJuly 30,31, 2026, which did not occur in the threesix months ended AprilJuly 30,31, 2025.

We maintain a credit agreement with Citizens Bank, N.A., as amended through December 2025 (the "Credit Agreement"). The Credit Agreement has a five-year term and provides for a term loan facility of up to $65.0 million and a revolving credit facility of up to $10.0 million. In December 2025, we borrowed $65.0 million as a term loan maturing on December 1, 2030. We used the proceeds of the term loan to finance the FluentStream and Phone.com acquisitions (see Note 13: Business Acquisition). As of AprilJuly 30,31, 2026, we had a $52.9$46.5 million term loan balance, net of unamortized debt discount and issuance costs, no borrowings under the revolving credit facility under the Credit Agreement, and were in compliance with all loan covenants.

Refer to Part II, Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the fiscal year ended January 31, 2026 for a discussion of our critical accounting policies and estimates. There have been no changes to the Company’s significant accounting policies and estimates as outlined in our fiscal 2026 Annual Report in the first quarterhalf of fiscal 2027.