Ooma, Inc. (OOMA) Q4 2020 Earnings Report, Transcript and Summary

Ladies and gentlemen, thank you for standing by, and welcome to the Ooma Fourth Quarter and Fiscal 2020 Financial Results Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker, Mr. Matt Robison. Please go ahead, sir.

Ladies and gentlemen, welcome to the fourth quarter of fiscal year 2020 earnings call of Ooma, Inc. As Holly mentioned, my name is Matt Robison and I'm the Director of IR and Corporate Development. With me here today are Ooma's CEO, Eric Stang; and CFO, Ravi Narula. After the market closed today, Ooma issued a press release via GlobeNewswire. The release is also available on the company's website, ooma.com. This call is being webcast live and is accessible from a link on the Events page of the Investor Relations section of our website. This link will be active for replay of this call for at least 1 year. A telephonic replay will also be available for a week starting this evening about 8:00 p.m. Eastern Time. Dialing information for it is included in today's earnings press release. During today's presentation, our executives will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize and actual results and financial periods are subject to risks and uncertainties that could cause actual results to differ materially from those projected. These risks include those set forth in the press release we issued earlier today as well as those more fully described in our filings with the Securities and Exchange Commission. The forward-looking statements in this presentation are based on information available to us as of the date hereof, and we disclaim any obligation to update any forward-looking statements except as required by law. Please note that other than revenue or otherwise stated, the financial measures to be disclosed on this call will be on a non-GAAP basis. The non-GAAP financial measures are not intended to be considered in isolation or as a substitute for results prepared in accordance with GAAP. A discussion of why we present non-GAAP financial measures and a reconciliation of the non-GAAP financial measures discussed in this call to the most directly comparable GAAP financial measures are included in our earnings press release, which is available on our website. On this call, we'll give guidance for first quarter and full year fiscal 2021 on a non-GAAP basis. Also in addition to our press release and 8-K filing, the Events and Presentations page in the Investors section as well as the Quarterly Results page of the Financial Information section of our website includes links to costs and expenses not included in our non-GAAP values and key metrics of our core subscription businesses. These are titled Supplemental Financial Disclosure 1 and Supplemental Financial Disclosure 2. Additionally, our investor presentation slides include GAAP to non-GAAP reconciliation that also provide resolution of GAAP expenses that are excluded from non-GAAP metrics. Now I will hand the call over to Ooma's CEO, Eric Stang.

Thanks, Matt. Hello, everyone, and welcome to Ooma's Q4 FY '20 Earnings Call. I'm very pleased to talk with you today. Since this is our fiscal year-end, I'd like both to recap our overall progress in FY '20 and to provide a strategic look at the new year ahead. But before I do so I'd like to review briefly our strong Q4 results. For our Q4 quarter just ended, Ooma generated revenue of $40.6 million and net income of $1 million, both above our guidance ranges. Q4 revenue grew 17% year-over-year. We believe we exit FY '20 in a strong position, with $143 million of annual recurring revenue and 100% net dollar subscription revenue retention rate. I'm particularly pleased to announce that during Q4, our largest customer for Ooma Business grew to be now over 20,000 users. I'm also pleased to announce that our Sprint partnership deepened and the backlog of opportunities we see from this partnership expanded severalfold. And I also want to announce that with the Q4 launch of an expanded feature set for Ooma Office, which is a new service tier we call Ooma Office Pro, our solution is attractive to more businesses and larger businesses than ever before. Overall, we are excited because we believe our success in Q4 positions us well for FY '21. We have winning solutions for the market, and we see tremendous opportunity ahead. It's interesting to look back just 1 year to the start of FY '20 and observe the progress Ooma has made. In just the last 12 months, Ooma has partnered with Sprint and enabled Sprint to resell Ooma office through their sales teams, branded Sprint Omni. We have demonstrated the superiority of our business solution versus others at a very large multinational corporation and scaled it to over 20,000 users with this customer. We've introduced the Ooma Office Pro feature set to expand the market opportunity of Ooma Office and increased revenue per user. We've integrated Ooma Office and Ooma Enterprise into one solution for businesses that need a best-in-class solution for small business environments, combined with the power of a full UCaaS offering. We've built a strong enterprise go-to-market team and expanded sales through reseller partners, including by acquiring the Broadsmart business team and their reseller relationships. We've brought to market important new features for our residential customers, including our 4G backup Internet solution. We've taken internal actions to enhance our ability to drive the growth of Ooma Business and improve overall profitability. And perhaps most importantly, we've achieved growth rates for both our business revenues and our residential revenues that we believe exceed others. I'm proud of the Ooma team for executing well in FY '20. And I believe these accomplishments give us important momentum as we go into FY '21. Some of that momentum can be seen by the kinds of customers who are adopting Ooma. One example is a new Ooma customer in Florida where we will ultimately enable more than 200 users. This company performs marketing for other businesses and shows Ooma Enterprise, in part because we enable them to mine data from their use of our solution through some custom APIs. You'll recall that the flexibility and ease of customization of Ooma Enterprise is our core strength and differentiator. This customer also runs a call center, and Ooma Enterprise was the perfect choice for them to power it. Another example is a new customer of ours for Ooma Office who is switching away from an in-house PBX. This customer is a law firm with 2 locations, totaling about 30 users. You'll recall that simplicity, ease of use and great value are the core strengths of Ooma Office. As lawyers who are focused on serving their clients, Ooma's attributes are very attractive. But prior to the launch of Ooma Office Pro, we could not have served this customer because they require a call recording and voice mail transcriptions for record keeping. Now with Ooma Office Pro available, we can fully meet their needs and capture this opportunity. These are just 2 simple examples of how Ooma is winning in the marketplace. I think at the core, they demonstrate Ooma's uniqueness in the market. They also demonstrate our strategic view that small business and enterprise are 2 different market segments with different needs. Today, we believe Ooma is the clear industry leader in serving small businesses, and we believe that when it comes to enterprise UCaaS, Ooma can satisfy larger customers that value customization to meet their special needs. Now looking forward to the FY '21 year ahead, we have many drivers creating opportunity for growth. First and foremost, is that we have great solutions out in the market today, and it's up to us more than ever before to enable growth through sales and marketing execution. To this end, we will continue to strengthen and expand our sales and marketing activities. This will happen on all fronts, but we will emphasize expanding our sales through reseller partners and targeting our marketing to vertical segments. From a product and feature perspective, we will implement 3 major advances this year. The first is we will add a desktop app and other functionality to Ooma Office Pro to further expand the market reach of this solution. The second is we will complete our modernization of the Ooma Enterprise user experience. This effort will encompass user portals, mobile apps, and collaboration capabilities. And thirdly, we will launch a groundbreaking new product we call Ooma Connect. Ooma Connect will consist of a new, more powerful Ooma Office base station, combined with a separate adapter housing an LTE advanced radio and 8 integrated antennas. This solution is already in beta at some Ooma customers, and we couldn't be more excited about the feedback we are hearing. Many customers tell us they want backup Internet into their businesses. And some customers, particularly those limited to DSL or even satellite Internet access, tell us they want to switch to a faster and more reliable solution. We intend to launch Ooma Connect by the end of this fiscal quarter. Regarding our largest customer opportunities and key partnerships, we will capitalize further on the momentum we initiated in FY '20. With our largest business customer, we are currently engaged in a proof-of-concept, which we hope will lead to significant further growth in a new market area in the back half of this year. Meanwhile, we also expect to drive moderate expansion of our users with this customer in the regions we already serve them. With Sprint, we see an abundance of opportunities to capitalize on the partnership we've established. One simple goal is to continue to train the Sprint sales teams and enable more and more Sprint salespeople to sell Sprint Omni. Beyond that, Sprint is our partner to enable the wireless connectivity in Ooma Connect. And we expect Sprint will also sell our new Connect solution under the Omni brand. Finally, we are mindful that the merger with T-Mobile is now likely to occur. And we are waiting to see how this merger can open up further opportunity for us. In this regard, we are particularly looking forward to Ooma Connect, taking advantage of the expanded network coverage between Sprint and T-Mobile. Altogether, as we look to FY '21 and the year ahead, we see the core drivers of our business being: strong sales and marketing execution on all fronts; successful launch of Ooma Connect, both by us and by Sprint; expansion into a new market area with our largest business customer; serving larger customers with Ooma Office at a higher revenue per user, driven by leveraging Ooma Office Pro; adding new reseller and VAR relationships and enabling them to succeed; and securing new large customers, possibly even very large customers who value the unique customization we can bring with Ooma Enterprise. As you can see, we have significant exciting opportunities ahead. Now before I turn the call over to Ravi, I'd like to make 2 special comments. The first concerns the worldwide health crisis and how it affects Ooma. We currently expect the impact on Ooma to be minor and our residential sales to be more affected than our business sales. To date, lack of supply availability of some accessories on the residential side of our business has caused us to delay some retail promotions and to incur some added costs by expediting product to us. On the business front, we have not been impacted thus far other than the crisis is causing a delay currently in our ability to bring product into inventory to support the launch of Ooma Connect. The second comment I'd like to make is to announce some wonderful news. The vote is in, and Ooma is once again the #1 ranked solution for business VoIP according to the readers of PC Magazine. This represents the seventh year in a row that Ooma has won PC Magazine's VoIP Business Choice Award. Needless to say, we couldn't be more pleased to hear from customers that we are their top choice. This is another validation that our strategy is working and we bring fundamental differentiation to the market. I will now turn the call over to Ravi to discuss our results and outlook in more detail, and then return with some closing remarks.

Thank you, Eric, and good afternoon, everyone. I'll start with a review of our fourth quarter fiscal '20 financial results, then provide our outlook for the first quarter and full year fiscal '21. We had strong financial performance in Q4, achieving $40.6 million in revenue, above the high end of our previously issued guidance range of $39.6 million to $40.3 million. On a year-over-year basis, total revenue grew 17%, driven primarily by Ooma Business. Ooma Business accounted for 42% of total revenue as compared to 30% in the prior year quarter. On a full year basis, total revenue for fiscal '20 was $151.6 million compared to $129.2 million for fiscal '19, achieving 17% growth year-over-year. Revenue from Broadsmart, which was acquired in May 2019 added 5 percentage points of growth to the year. And importantly, net income for the fourth quarter was $1 million, significantly better than our previously issued net income guidance range of breakeven to $400,000. This performance was driven by higher subscription revenue and expense management, while continuing our focus on growth. Net loss for full year fiscal '20 was $672,000 compared to a net loss of $3 million for fiscal '19. I'll now add additional color to the Q4 revenue. Ooma Business subscription and services revenue in Q4 grew 61% on a year-over-year basis and 38% year-over-year after excluding revenue from Broadsmart. In the fourth quarter, we added new users in North America from the large customer we had mentioned in our previous earnings calls. We are excited about the continued sales momentum with this customer. And as Eric mentioned earlier, we're engaged on multiple fronts, including conducting a proof-of-concept in a new market. Going forward, we expect further expansion from this opportunity and will provide progress updates in future earnings calls. Ooma Residential subscription and services revenue in the fourth quarter grew 3% year-over-year and the combined subscription and services revenue from both Ooma Business and Residential grew 22% on a year-over-year basis. Total subscription and services revenue as a percentage of total revenue for the fourth quarter was 92%, up from 89% last year. Product revenue for the fourth quarter was $3.2 million compared to $3.8 million in the prior year quarter. As a reminder, fourth quarter revenue for fiscal '19 included $1 million of Smart Camera revenue, which we discontinued in October 2019. So adjusted for Smart Camera, our product revenue grew $400,000 year-over-year. Now some details on our key customer metrics. We had 1,048,000 users at the end of fiscal '20, up from 976,000 users at the end of the prior fiscal year, with 22% of our total users now being business users. For clarity, we define a user as an Ooma Business user or a Residential customer. Our blended average monthly subscription and services revenue per user, or ARPU, increased 12% to $11.38, up from $10.17 in the prior year quarter as we added higher ARPU customers, including a number of Office Pro customers. We expect ARPU to continue trending upwards as Ooma Business continues to grow. Annualized exit recurring revenue was $143 million, growing 20% year-over-year. Driven by the strong performance of Ooma Business and stable customer churn, we achieved net dollar subscription retention rate of 100% compared to 99% for the prior year quarter. Moving to gross margins. Subscription and services gross margins for the fourth quarter of fiscal '20 was 70% and in line with our prior outlook. Product and other gross margins were negative 36% for the fourth quarter of fiscal '20 comparable to the prior year quarter's product margins. During the fourth quarter, to minimize the impact of coronavirus on our business, we expedited some product shipments from China. As Eric mentioned, we are working closely with our contract manufacturers to mitigate potential supply chain issues. We will continue to monitor and assess the potential risks to our business. To the best of our knowledge, we have reflected the potential impact of this virus in our financial guidance. Overall, gross margins in the fourth quarter increased to 61% from 58% in the prior year quarter, primarily due to growth in subscription and services revenue of Ooma Business. Now some commentary on the operating expenses for the quarter. Fourth quarter of fiscal '20 total operating expenses were $24.2 million, up $3.1 million or a 14% year-over-year increase. Sales and marketing expenses were $12.3 million or 30% of total revenue, up 21% year-over-year. This increase was driven by growth in sales head count and increasing marketing programs to grow Ooma Business. Research and development expenses were $7.5 million or 19% of total revenue, up 2% year-over-year. As a result of our discontinuing the Smart Camera product and focusing our development effort on to Ooma Business, we are pleased to report that we achieved our R&D expense target of sub-20% of total revenue in Q4. G&A expenses were $4.3 million or 11% of total revenue compared to $3.6 million for the prior year quarter. Included in fourth quarter fiscal '20 expenses were approximately $400,000 of nonrecurring expenses, including final expenses relating to a certain litigation claim. In the absence of these onetime expenses, G&A expenses would have been roughly flat with the preceding quarter. During Q4, we achieved net income of $1 million or $0.04 diluted EPS compared to a $0.03 loss per share in the prior year quarter. This increased profitability was due to continued growth in revenue and expense management. Now on to EBITDA and balance sheet metrics for the fourth quarter. For the fourth quarter of fiscal '20, adjusted EBITDA profit improved significantly to $1.4 million versus a negative EBITDA of $450,000 for the prior year quarter. We ended the fiscal year with total cash and investments of $26.1 million. Cash used in operations for the fourth quarter of fiscal '20 was approximately $800,000 compared to $2.1 million for the same period last year. This fourth quarter operating cash usage included payment of $1.5 million of restructuring charges undertaken in October. We ended the fiscal year with more than 800 employees and contractors, up from approximately 700 at the end of the prior year. I'll now provide guidance for the first quarter and full year fiscal '21. Again, our guidance is non-GAAP and has been adjusted for expenses such as stock-based compensation and amortization of intangibles. First quarter fiscal '21 guidance. After taking into account the current macro environment, we expect total revenue for the first quarter of fiscal '21 to be in the range of $40 million to $40.5 million. We expect non-GAAP net income to range between $500,000 to $1 million. Non-GAAP diluted EPS is expected to be between $0.02 and $0.04. We have assumed 22.9 million weighted average diluted shares outstanding for Q1. For full year fiscal '21, total revenue for fiscal '21 is expected to be in the range of $167 million to $170 million. This guidance includes year-over-year subscription and services growth rate of approximately 30% for Ooma Business and around 2% to 3% for Residential. We expect non-GAAP net income for fiscal '21 to be in the range of $2 million to $4 million. Non-GAAP diluted EPS is expected to be in the range of $0.09 to $0.17. We have assumed approximately 23.5 million weighted average diluted shares outstanding for fiscal '21. From a cash flow perspective, we expect to generate breakeven to positive cash from operations during fiscal '21. Subject to seasonal puts and takes, the seasonality can cause cash flows to fluctuate throughout the year, with the first quarter typically requiring higher cash usage, given timing of annual payments. In closing, we had a strong fiscal '20, both in terms of financial performance and execution, given that we added new customers and integrated Broadsmart into our business. I believe this performance positions us well for strong execution going forward. With that, I'll pass it back to Eric for some closing remarks. Eric?

Thanks, Ravi. To recap, Ooma made great strides in FY '20. Our increased focus on business, combined with new customer and partnership opportunities, positions us well in our view for the upcoming fiscal year. The market opportunity we serve is vast. We have exciting new developments planned and strong focus on sales and marketing execution. I'm proud of the Ooma team and thank everyone of them for their hard work and dedication to make this possible. I also thank our shareholders and our other stakeholders for their support. Everyone at Ooma is 100% committed to driving future success. With that, let me turn it back to the operator so we can take questions.

[Operator Instructions] Our first question is going to come from the line of Mike Latimore, Northland Capital.

Great quarter and outlook. Very nice. I guess in terms of this large customer, what -- I guess how quickly did you get that deployed? That's pretty quick to get 20,000 pieces deployed. How fast was that deployment?

Mike, this is Eric. We started that late Q2 of last year. So really, in the 6 months back half of last year -- last fiscal year, we did that. And yes, it took a lot of work. You're right.

In terms of the new opportunity there, is that of similar size to what's already been deployed or some variation on that?

Yes, I think the opportunities with this customer are extensive over an extended outlook. I do believe we have the potential to, this year, see growth similar to what we achieved last year, but we're going to have to get through this proof-of-concept and then expand from there.

In terms of the channel work that you've been doing, what kind of pipeline are you seeing through the channel, I guess, separate from Sprint?

Yes. With the Broadsmart acquisition, we strengthened our channel relationships. And we've also built up a team for this effort that took some time to put in place. But we go into this fiscal year with that team solidly in place, and I think pretty good momentum. We're adding tens of reseller partners and agents every quarter. And it takes a little time to help those partners and agents get their first sale. But then if things go well with you and you become a good partner to work with them, then you can build from there. We also have a specific strategy, as we've talked previously around securing white label partners, partners who want to white or gray label our solutions. Since our Enterprise solution is so customizable, it's easy for a white label partner to make it look and feel their own. And that has made good progress of late as well, simply because it took us most of last year to put the systems in place to kind of work with partners in that way. But that is also part of our plans for growth this year. We don't -- I'm not sure we've given any further metrics, just how much we do in channel and reseller activities, but it's -- I think relative to the industry, we're lights on it. We're heavy on our direct sales activities. And so we see potential to get a little more growth out of the reseller side of the business.

Yes. And then in terms of first quarter guidance. Is there any seasonality there, like on the product side or residential side to think about?

Mike, this is Ravi.

I'll make a comment.

Go ahead.

Go ahead, Ravi. It's fine.

I was just going to say, generally speaking, if you look at -- from a residential perspective, there's small seasonality in January, February. Residential is pretty -- generally speaking, holiday period is heavy and then Jan, Feb is slightly lower. But given the size of our business, given the scale, there's not much seasonality overall. Talkatone might have small seasonality also January, February, same thing with CPM. But overall, we do not see any major seasonality in the business in Q1.

Okay. Very last one. You talked about adding, I think, collaboration this year. Can you elaborate on that? There's a lot of different sort of definitions of collaboration.

Sure. And what I was actually speaking to was modernizing the user experience for the things we have today. We offer video collaboration. We offer the other things I mentioned in my opening remarks. But the user interfaces and user experience has been ideal, as ideal as we'd like it. So we've been investing in that. We've brought out a new desktop app on our enterprise solution already. We're soon to bring out new mobile app user experience and a new admin portal user experience. And the last thing we will get to will be revamping our video collaboration experience. But, yes. So...

Our next question will come from the line of Bhavan Suri, William Blair.

Let me echo my congrats. It's a nice quarter there. I guess let me touch a little bit first on the big customer, too. Just -- Eric, I'd love to understand sort of the competitive environment there. Who did you see? Who did you compete against? And sort of what drove some of that selection process?

Yes, I can't add a lot of color beyond what we think we've talked in the past about, Bhavan. This is a customer that's a large multinational company. They've used a variety of solutions in their business in different places and for different reasons. It's a competitive environment. We have had to beat out some well-known competitors at that customer to move forward the way we have. But we were able to bring 2 things that really fit this customers' need well. One was a very simple, easy to use, good value solution in Ooma Office for much of their needs, combined with a very sophisticated enterprise solution that we could customize and make it do some things that they weren't getting generally from the industry. And it is interesting to think about this as more of a trend. We see customers who have PBX solutions -- in-house PBX solutions where they customize them quite extensively and they don't want to give up those capabilities, yet they want to move to the cloud. And I think we're well positioned to be able to work with a customer and even improve upon what they've had in the past. So where we win with an enterprise customer is often when we can sit down and say, how does your business work? How can we enable you better? And based on that that's how we won this customer, and that's how we hope to win other large customers as we go forward.

Got it. Got it. And then I want to touch on Sprint a little bit. I know you brought it up. But I'd love to understand sort of the dynamics in terms of growth there. I'll ask, and I know you won't share, sort of its overall contribution to the business. And then more importantly, sort of as you give color, what types of customers are you seeing coming through that channel? Is there a pattern of size or geography or vertical or something like that?

Yes, I can answer that a couple of different ways. First of all, Sprint has an extensive business sales force. And it's not just one way to market. They work with channel partners. They have larger customer teams, smaller customer teams. And we are slowly working towards working with all the members of their sales force. I would say, on average, for -- they're probably bringing in a little bit larger-sized customers than what we would bring it on our own. But it's not a big difference. I will say this, though, they do have some very large customer relationships that, I think, with Ooma Connect now coming will be another point of leverage to potentially also help us through them really, let them secure some very large customers that we might not normally be reaching out to. So I think it's a great opportunity. Everything takes time. Their sales force does sell lots of things. And fortunately, the sales that we've made with them so far have gone well, and I think it would be fair to say that the people within Sprint at the front lines are pleased and talking positively about the experience, which is the momentum you need and encourage the sales force to get behind something. We've set our goal, and it's a goal we set rather random lease. So bear with me on this. But our goal is that by the time we've matured this relationship, 10% of our new users that we're adding in a period will be through the Sprint channel.

Got it. Got it. Got it. That's helpful. I'll ask a quick one on the channel itself, overall. Obviously, sort of the direct piece and then there's sort of the embedded piece, so to speak, the white label piece, the co-branding. Just about sort of how those 2 pieces are progressing, sort of are you seeing more traction with the co-branding or the white labeling? How are those conversations and discussions going in terms of those types of arrangements?

I think we're seeing good traction with talking to resellers and getting them to understand the uniqueness that we can bring to them and how we can work with them and support them. Our customization is a big differentiator. A second differentiator is our ability to handle an end-to-end deployment with whatever needs arise. That's a capability that the Broadsmart team brought to us, and in some customer situations can be quite meaningful. I would say for last fiscal year, our progress was relatively slow. And I think what gotten away a little bit was this big new customer that we added in the back half of the year. And all the work we did for them and the customization we did for them to enable them, that delayed some of our other plans on -- with enterprise. But I think it's really coming together today, and we have much bigger goals for it this year than last year. And the channel is quite extensive. We have our own unique capabilities for it, some of which I just mentioned. And I think we're going to find our niche in it, and that's going to be successful for us and take us much further than where we are today with it.

[Operator Instructions] Our next question will come from the line of Aman Gulani, B. Riley.

Congrats on another great quarter. So I want to talk about the Sprint partnership some more. Obviously, it's progressing pretty smoothly. I just want to get a sense for the visibility in terms of when you think that might ramp. And do you think your visibility will improve once the merger is complete?

I'm not quite sure I know what you mean by visibility. If you mean our ability to give you visibility about it...

Yes, just like visibility in terms of ramping, like when the sales team might be marketing Omni to their customers aggressively.

Yes. We increased our sales in Q4 versus Q3. We built our backlog. And by the way, we don't see all of Sprint's backlog, but they do share some of it with us where we can help them with it. That grew severalfold. And I would venture to say that a significant number of the people, their sales team, have not yet made a significant step with us in terms of, for instance, selling a customer or quoting or things like that. So I think there's plenty of room to develop. And it's -- and I can tell you, Sprint's been great to work with. They are solidly behind what we're doing together. And with our new Connect solution powered by Sprint, it's a 2-way partnership. And I think it's on us. This goes into our bucket of sales and marketing execution for this year that we just need to do.

Got it. And do you -- are you looking to maybe possibly, like, secure another wireless carrier with a similar, like, white label solution?

Well, if I can be cheeky for a moment. We're hoping T-Mobile will become part of the partnership. But no, I mean at this point we are focused on what we're doing with Sprint. Now Sprint is the partnership, primarily for the United States. So in other market areas, we might do something. But I think in the U.S., we're pretty focused on Sprint.

Got it. Okay. Just last question from me. I just wanted to get a sense for how Ooma Office Pro is tracking, and then how are the new features sort of being received by the market.

Yes. We're not going to give numbers every quarter on this. But since we launched it a couple of months ago, I think we have 2,500 users on it, something like that. And that was really came from customers that were explicitly waiting for it. And we are -- we've been training our sales team on it. And we -- I don't have a good perspective on what percentage of the customer base is going to adopt it. But I know that it isn't uncommon in our industry to get some advanced features, find out you like them, and then choose to keep using them. And that'll be part of the model as we go forward.

Our next question is going to come from the line of Pat Walravens, JMP Securities.

This is Joe Goodwin on for Pat. Congrats, again, on the quarter. Just curious, looking at the business subscription revenue growth line. Excluding Broadsmart, it has decelerated now down to 38%. As we lap that acquisition, is there a level of revenue growth that you expect that the business subscription line to kind of stabilize that? Or how should we think about that in the model going forward?

Joe, this is Ravi. There are a couple of things I'll highlight. One, in my prepared remarks, I did say my guidance assumes around 30% year-over-year growth on business subscription in fiscal '21 compared to fiscal '20. That's one aspect. So I did -- I have, at least saying, it will be 30% or probably higher, hopefully. Second aspect is, if you look at Q4, we ramped the large customer implementation early on late last year. And while we're working on POC for this year in a new market, I do feel there is some opportunity for growth because of either this large customer or other large customer opportunities, which could come up, and I do believe those things will help us in the longer term with our growth rate. So I do feel 30% is something I feel very comfortable with. But obviously, we have to execute on those, and then there are opportunities behind that. And then as Eric mentioned earlier, Office Pro, if larger customers start adopting Office Pro, we will see some uptick on that one. Ooma Connect is going to be launched later this quarter. So those could potentially also help increase our subscription services. So there are lots of levers we have, larger customers. This large customer POC, once it's successful, and we are ready to deploy. And then these new solutions can help us grow our ARPU and subscription growth rates.

I'll add one comment there just to get a little more drill down on Ooma Connect. 20 -- over 20% of our business user base today runs on a DSL line. And if you look at the speeds of connectivity they get and what they pay for it, I believe Ooma Connect can be a better solution all around for those customers. So we're pretty excited about the potential for Ooma Connect in that way. And it's going to take time with any new product, I'm sure there'll be some working out and refinement. But we see a lot of potential for this new solution. Also when you get to the small business environment, often, we're competing with a cable-type Internet solution, and that can mean a double play from someone else. And now, in effect, we have our own double play. And so I think it's going to also strengthen us all around as we go to market. It's been a big effort on our part. The new Ooma base station is a significant step forward, and this antenna is -- and module adapter is a very custom design that takes advantage of the latest technology with advanced LTE to get good signal strength even at pretty remote locations. So I think we've got a lot of potential. It's going to take us a little time to prove these things, and then we'll be able to give better guidance on them, but that's how we're viewing it.

And we have time for one final question. Our last question for the day will come from the line of Andrew King, Dougherty & Company.

So I just wanted to get a bit of a better idea of where you're seeing your confidence that you'll be able to hit this 30% year-over-year growth despite a lot of your competitors predicting the slowdown in spending as a result of COVID-19?

Well, I'm not aware of what my competitors are specifically projecting vis-à-vis COVID-19. I can tell you that, so far, our business has not been affected by it on the business side of the company. And we are -- we have channels to market and routes to market that I think can be strong even if people aren't traveling, so to speak. So I suppose, we don't know what COVID-19 is going to turn into. I know there's been a lot of concern about it. But I think we've given a forecast that we believe in with the knowledge we have at this time. Ravi, do you want to add anything?

I would -- just one other thing. Over the last couple of years, Andrew, we have built very diversified sales channels, whether it's resellers, VARs, our channel, we talked about Sprint and some of these other opportunities. So that also gives us confidence that, hey, we have a very diversified channel, it doesn't depend upon one specific thing. So we have done a detailed analysis on as part of our planning for fiscal '21 and see how we can look at and feel comfortable about our 30% guidance range. We looked at our supply chain also. So we have looked at a number of places and feel that we are -- given the channels, we are well positioned for this growth rate.

Okay. And if you don't mind me sneaking a quick follow-up. How many quarters did you build into your guidance of any COVID-19 impact? Was it just this next quarter? Or are you seeing it farther up than that?

It's a good question. We don't know much what will happen in long term, but we have looked at the next 3 to 6 months of where the supply chain issues could come in. There could be big situations. But we have looked at our supply position for the next 3 to 6 months.

I'll add a little bit to that. I actually did talk with a leading infectious disease doctor about this last week. I think everyone -- the expectation most people have is that between now and the end of April, it's going to be the strongest. And then the summer is going to be lighter. And then you're going to see it come back next winter -- next fall/winter. And I think, also if you -- now, I'm sorry, I'm just going on here. But U.S. has not done much testing of this virus, and it's not easy to get tested for the virus. And so the virus could be a lot more places already than we know. But I think it's -- I think you have to assume that it's going to spread, that most people who get it are going to have mild symptoms. And we're just going to have to wait and see on how much it slows down our economy as such. A lot of our products do ship out preconfigured for the customer through an inside sales process. So that process can -- is not likely to be largely affected by something like this. And also our CMs in Asia are, for the most part, back to work. They've been through the quarantine process and such, and particularly the larger CMs, people are back producing. So I think -- we think we're going to get through it in the next couple of months. It's going to die down through the summer, and then we'll be dealing with it again next fall. But I think the U.S. will be a lot better positioned to deal with it when that point comes. My two cents.

Thank you. I would now like to turn the call over to Eric for closing comments.

Well, thank you, everybody. We appreciate your taking time to listen to our call today. As I said in my last remarks, everyone at Ooma is 100% focused on driving results for this year. And we look forward to the next time we can talk with you. Thank you very much.

Once again, we'd like to thank you for your participation on today's conference call. You may now disconnect.