Q4 2024 Ooma Inc Earnings Call
Participants
Matthew Robison; Director of IR, Corporate Development; Ooma Inc
Eric Stang; Chief Executive Officer; Ooma Inc
Shig Hamamatsu; Chief Financial Officer; Ooma Inc
Arjun Bhatia; Analyst; William Blair
Josh Nichols; Analyst; B. Riley Securities
Brian Kintslinger; Analyst; Alliance Global Partners
Matthew Harrigan; Analyst; The Benchmark Company
Presentation
Operator
Hello, and thank you for standing by, and welcome to Ooma fourth quarter and fiscal year 2024 financial results. (Operator Instructions) I would now like to hand the conference over to Matt Robison. You may begin.
Matthew Robison
Thank you, Towanda, and good day, everyone, and welcome to the Fiscal Fourth Quarter and Full Year 2020 for earnings call. I will make my name is Matt Robison and this Director of IR and Corporate Development. I apologize in case I cough during my comments on the call with me today are Ooma's CEO, Eric Stang, and CFO, Shig Hamamatsu. After the market closed today, Ooma issued its fiscal fourth quarter and full year 2024 earnings press release. This 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 and Presentations page of the Investor Relations section of our website. This links will be active for replay of this call for one year.
During today's presentation, our executives will make forward-looking statements within the meaning of the federal securities laws. Forward-looking statements generally generally relate to future events or future financial or operating performance. Our expectations and beliefs regarding these matters may not materialize, and actual results 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 and those risks more fully described in our filings with the Securities and Exchange Commission.
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 so please note that other than revenue or as otherwise stated, the financial measures to be discussed disclosed on this call, we'll 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 and 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 is included in our earnings press release, which is available on our website on this call, we will give guidance for the first quarter and full year fiscal 2025 on a non-GAAP basis. Also, in addition to our press release and eight K filing, the overview page and Events and Presentations page in the investor section of our website as well as the quarterly results page. The financial information section of our websites include links to information about costs and expenses whom not included in our non-GAAP values and key metrics of our core subscription businesses. These are titled Supplemental Financial Disclosure one and Supplemental Financial Disclosure two. Additionally, our investor presentation slides include GAAP to non-GAAP reconciliations, but also provides resolution of GAAP expenses that are excluded from non-GAAP metrics.
Now I will hand the call over to Ooma's CEO, Eric Stang.
Eric Stang
Correct Thank you, Matt. Hi, everyone. Welcome to Ooma's Q4 fiscal year 2024 earnings call and thank you for joining us and look forward to reviewing our Q4 and fiscal year 2024 results with you today. I'm also excited to talk with you about our strategy and plans for our upcoming 2025 fiscal year.
Overall, I believe Ooma is fortunate to enter FY25 in a strong position with leading product solutions, the significant potential for business expansion. In Q4, Ooma performed well financially, delivering $61.7 million in revenue and $3.5 million of non-GAAP net income. Adjusted EBITDA jumped to $5.2 million in cash flow from operations increased significantly to $5.5 million. For all of FY24. We achieved $236.7 million in revenue, $15.4 million of non-GAAP net income and $19.8 million of adjusted EBITDA year over year, we grew revenue by 10%, non-GAAP net income by 13%, adjusted EBITDA by 14% and cash flow from operations by 40%. We achieved this growth while also investing significantly in new market opportunities in international expansion. And we believe we made important progress in FY 24 on our strategy to expand our business and drive profitable growth.
On the business side, in Q4, we continued to invest in feature expansion, customer growth and the development of new retail partnerships on all fronts. Ooma Office, Ooma Enterprise, Ooma Airedale and 26 center hurts. We made significant achievements in Q4 for Ooma Office, our solution for small to medium sized businesses. We expanded our sales efforts on the leading legal vertical, taking advantage of our announced integration with clear legal practice management software. These efforts are going well with our largest customer win in the quarter being a 90 user deal. We also increased the proportion of new Ooma Office customers who signed up for a premium tier of service to 59%, our highest level to date. I'm also pleased to report that we signed an agreement with a new partner who will resell Ooma Office, and we have started the work to enable them to expect the contribution from this partner this year to be modest, but we continue, but we consider it a great first step, third, engaging other potential reseller partners for Ooma Office.
Regarding Ooma Enterprise, our solution for larger sized businesses.
We also made significant achievements in Q4. One was a large new customer. We signed where we will serve several thousand users spread across 400 locations. We will be we will be providing a combination of our full UCaaS solution for many of their users and our team's integrated calling solution for the rest in our targeted hospitality vertical we continued our momentum, again, winning over 50 new hotels in the quarter. We also brought on a new technology partner who will help us so into this space, Ooma Airedale, our innovative solution to replace aging and expensive POTS lines continued to make progress in Q4's as we invest in this new opportunity. In Q4, we closed over 500 new customer deals with some being notable large company wins. We expect many of these deals will start by rolling out only to a small subset of the available locations and then build through the year. In general, we find customers want to move forward on their immediate needs for copper line replacement, usually driven by lines being shut off or substantially increased line pricing before the planning for rollout of Airedale across their business locations.
In Q4, we also continued to refine our Airedale product solution, including enhancing the Airedale remote device management system and enabling Airtel to serve new applications we came across. We added five new aired our resale partners in Q4, which expands the number of partners reselling air dial to over 8,000 now. And finally, I'm very happy to report that Ooma Airedale won the 2020 for TMC INTERNET TELEPHONY Product of the Year Award for its multi path technology, which delivers unique and patented uninterrupted backup for parts replacement.
Turning now to 26 hundred hurts our wholesale, you can see cash and see past platform solution. I believe we have made tremendous progress since acquiring them just four months ago. We believe we are on track to achieve the synergies. We plan and make 26 hundred hurts adjusted EBITDA accretive in Q1 of this year.
What is particularly exciting for us, though, is the level of new customer interest we are seeing is happening faster than I expected. We have already won one new customer who will convert their customer base to the 2,600 hertz pursuit platform. And we are currently far along and other new customer opportunities, 2,600 hurts is being looked at to replace aging and less agile UCaaS platforms. That is also being looked at as an alternative to standard C past solutions, which lack pre-built applications and cannot be directly controlled and hosted by end customers. Of course, the wholesale nature of this business means it will take new customers and extended amount of time to implement the solution and produce revenue. Nonetheless, the unexpectedly high level of interest we are seeing gives us confidence in our acquisition thesis and strategy for 2,600 herbs. We're proud of our accomplishments in Q4, but we also realize we have much more to do to capitalize on the investments we are making in the business. As we look forward, we believe we are well-placed to do so for three main reasons. One reason is we believe we are a leader in the key segments we serve with differentiated product solutions and a very low cost position to provide services.
A second reason is we see significant untapped market opportunity in the key segments we target, in particular, since so many smaller sized businesses have yet to move to a more advanced cloud communications solution.
Third reason is the new directions we have invested in over the last couple of years, Ooma aired out for parts replacement, the Newman 26 hundred hurts for wholesale. You can see casts and see pass applications, give us greater breadth of opportunity and open up plans to partner with others and extend our market reach.
As we look forward, we see several meaningful trends that support our strategic direction and give us confidence that the investments we are making will pay off. One of these is simply the fact that in North America alone, we estimate there are 6.4 million small businesses with one to 20 employees and that a significant amount of these businesses have yet to transition to a modern cloud-based communications solution. We believe the market opportunity for Ooma Office is quite sizable, a second trend, the shutting down of the traditional copper phone network network, which is already underway, both here in the USA and in parts of Europe, it seems to be accelerating as of late. We have what we believe is the leading solution with their dial to server equipment that doesn't easily move off of a copper line or generally, our small business and residential solutions, both benefit as well as customers are forced to look for new solutions when they lose their copper connection.
A third trend, which we believe is favorable to Ooma is the rise of 5G Internet. Many smaller sized businesses rely today on a double play solution in other words, Internet and phone from a cable provider. The availability of 5G wireless Internet can cause these businesses to reconsider not only their Internet solution, but also their communications provider. It also presents a future opportunity for Ooma to offer its own 5G double-play solution. As you know, currently, we offer our 4G based Ooma Connect solution as backup Internet for businesses or sometimes as primary primary Internet for very small sized businesses.
A fourth bucket trend is the advent of AI in contact center applications in generally across all communications. Significant data is created in the form of calls, texts and chats and AI. has a strong role to play to help businesses optimize their performance. To date, our activities in this area have been limited in part due to the new newness of AI and the fact that AI. has not yet seen much adoption by smaller sized businesses. However, as we look forward, we anticipate launching AI applications in our solutions and believe that these applications will make our solutions more valuable and in greater demand by our customers.
And finally, the last industry trend that I want to highlight is the desire by customers to do more with their communications solutions by making the applications they use more bespoke to their individual needs for smaller customers. This can entail integrations with other solutions used in their businesses for larger customers. This can mean building custom applications using using either C pass or a flexible API based wholesale platform, either way Ooma is positioned with innovative and leading solutions to take advantage of this customer opportunities.
Building on these industry trends, our plans for FY 25 include continued investment in key opportunities balanced with improvement in bottom line results. Some of the things we plan to accomplish in FY 25 are one to introduce new integrations with other platforms to extend our current call center capability into a more complete and omnichannel contact center solution three, to incorporate 5G performance into our Ooma Connect wireless Internet solution for to expand further internationally, including with our largest customer IWG. five to enhance our 26 hundred hertz wholesale platform by integrating other Ooma technology and applications, six to increase our sales and marketing activities across our business from direct sales to online and inside sales channel and agent sales to partner sales in fine leasing seven to grow our community of resale partners who value our solutions and help us reach more of the vast market opportunity in front of us. I'm excited by the strategy we have put in place and by the progress I see us having made each quarter as we expand and grow, I believe FY 25 looks to be an exciting year ahead for Ooma.
I'll now turn the call over to Shig, our CFO, to discuss our results and outlook in more detail and then return with some closing remarks.
Shig Hamamatsu
Thank you, Eric, and good afternoon, everyone. I'm going to review our fourth quarter financial results and then provide our outlook for the first quarter and full year fiscal 2025. We delivered another solid quarter with a total revenue of $61.7 million near the high end of our guidance range. On year-over-year basis, total revenue grew 9% in the fourth quarter, driven by the growth of Ooma Business as well as the addition of 25 efforts in the fourth quarter, business, subscription and services revenue accounted for 60% of total subscription and services revenue as compared to 55% in the prior year quarter.
Q4 product and other revenue came in at $3.7 million as compared to $3.9 million in the prior year quarter. On a full year basis, total revenue was $236.7 million as compared to $216.2 million in the prior year, representing 10% growth year over year, including 22% growth in Business subscription and services revenue.
On the profitability front, the fourth quarter non-GAAP net income was $3.5 million, which exceeded our guidance range. On a full year basis, non-GAAP net income was $15.4 million compared to $13.6 million in the prior year.
Now some details on our Q4 revenue business subscription and services revenue grew 19% year over year in Q4, June, driven by Ooma Business User growth and the addition of 26 efforts, excluding the effect of inorganic revenue contribution Ooma Business. Subscription and services revenue grew 12% year over year. On residential side, subscription and services revenue was down 1.7% year over year. As a reminder, we had a one-time churn event during the first quarter of fiscal 2024, with a particular customer was on an unusual application, which continued to impact our year-over-year comparison in Q4.
For the fourth quarter, total subscription and services revenue was $58 million or 94% of total revenue compared to 93% in the prior year quarter. Now some details on our key customer metrics. As a reminder, except for annual recurring revenue, these metrics do not include that 26 center hurts wholesale business. We ended the fourth quarter with 1,243,000 core users, up from 1,241,000 core users at the end of the third quarter. At the end of the fourth quarter, we had 484,000 business users of 39% of our total core users, an increase of 9,000 from Q3.
Our blended average monthly subscription and services revenue per core user or ARPU increased 3% year-over-year to $14.72, driven by an increasing mix of business users, including higher ARPU Office Pro and PRO plus users. During the fourth quarter, we continued to see a healthy Office Pro and Pro plus take rate with 59% of new office users opting for these higher-tier services, which was up from 52% in the prior year quarter.
Overall, 29% of Ooma Office users have now subscribed to Pro Pro plus here our annual exit recurring revenue grew to $227 million and was up 10% year over year. Our net dollar subscription retention rate for the quarter was 99% as compared to 99% in the third quarter. Now some details on our gross margin as subscription and services gross margin for the fourth quarter was 72% as compared to 73% in the prior year. As a reminder, subscription and services gross margin for the fourth quarter this fiscal year included a full quarter impact of 26 center whose gross margin, which is running lower due to lower subscription gross margin.
Product and other gross margin for the fourth quarter was negative 72% as compared to negative 54% for the same period last year. As mentioned in prior calls, the decline in Q2 Q4 product gross margin this year versus last year was primarily due to sell through and tied to certain higher cost components that we had procured in the last fiscal year due to pandemic-driven supply chain issues. We currently estimate Product and other gross margin for the first half of fiscal 2025 will be comparable to that of the fourth quarter fiscal 2024 as we continue to work through this excess component costs and then no, and then normalizing in the negative 50% range starting in the second half of fiscal 2025 on an overall basis, total gross margin for Q4 was 63% as compared to 64% in the prior quarter.
And now some details on operating expenses. Selling and marketing expenses for the fourth quarter were $17.3 million or 28% of total revenue, up 2% year-over-year, primarily driven driven by increases in personnel costs and channel development. Activity for Edah research and development expenses were $11.9 million or 19% of total revenue, up 14% on a year-over-year basis, driven mainly by the addition of 26 Hunter herds team members.
G&A expenses were $5.4 million or 9% of total revenue for the fourth quarter compared to $4.9 million for the prior year quarter. The year year-over-year increase in G&A expenses was primarily due to an increase in personnel costs. Overall, total operating expenses for the fourth quarter or $34.7 million, up $2.3 million or 7% from the same period last year. Non-gaap net income for the fourth quarter was $3.5 million, or a diluted earnings per share of $0.13 as compared to $0.16 of diluted earnings per share in the prior year quarter. In addition to stock-based compensation and intangible amortization expenses, non-GAAP net income for the fourth quarter excluded approximately $1.0 million of acquisition and other related costs incurred in connection with the 26 enterprise transaction.
Adjusted EBITDA for the quarter was $5.2 million, a record for the Company for 8% of total revenue as compared to $5.1 million for the prior year quarter. We ended the quarter with total cash and investments of $17.5 million and cash generated from operations for the fourth quarter was strong and up $5.5 million. It was a new quarterly record for a company. For fiscal 2024, we generated a record $12.3 million of operating cash flow and $6.1 million of free cash flow, which represented 40% and 69% increase, respectively, over the prior year. Given our strong cash flow in the fourth quarter, we already already began paying down the debt and reduce the outstanding balance by $2 million. At the end of Q4, we paid down an additional $2 million shortly after the end of Q4. And as of today, we have reduced the outstanding debt balance to $14 million.
On the headcount front, we ended the quarter with 1,221 employees and contractors.
Now I'll provide guidance for the first quarter and full fiscal year 2025. Our guidance is on a non-GAAP basis and has been adjusted for expenses such as stock-based compensation and amortization of intangibles. We expect total revenue for the first quarter of fiscal 25 to be in the range of $61.7 million to $62.2 million, which includes $3.7 million to $3.9 million of product revenue. We expect first quarter net income to be in the range of $3 million to $3.3 million. Non-gaap diluted EPS is expected to be between $0.11 and $0.12.
We have assumed $26.6 million weighted average diluted shares outstanding for the first quarter. For full year fiscal 2025, we expect total revenue to be in the range of $250 million to $253 million. The full year fiscal 2020 25 revenue guidance assumes business subscription and services revenue growth rate of 11% to 13% over fiscal 2024, while residential subscription revenue to decline 1% to 2%.
For fiscal 2025 revenue guidance, fiscal 2025 revenue guidance also assumes the impact a larger than normal churn from IWG., where the seat count is expected to be reduced by about 20% in the first quarter. We believe this event is infrequent in nature and the substantial portion of it can be offset by additional seat deployment during fiscal 2025 as we continue international expansion with high double-digit in terms of revenue mix for the year, we expect 93% to 94% of total revenue to come from subscription and services revenue and the remainder from products and other revenue. We expect non-GAAP net income for fiscal 25 to be in the range of $14 million to $15 million. Based on this guidance range, we estimate our adjusted EBITDA for fiscal 2025 to be $20.5 million to $21.5 million.
Let me give you some additional color on our fiscal 2025 non-GAAP net income guidance. While we expect non-GAAP operating margin and adjusted EBITDA to increase year over year. Our non-GAAP net income guidance range represents a slight decline year-over-year due to the following factors. First, we expect interest expense to increase by $0.7 million to $0.8 million due to a full year impact of the new revolver debt. Second, we expect interest income will be lower year-over-year by approximately $1 million as we continue to focus on debt paydown in fiscal year 2025.
Lastly, we currently estimate tax expense for fiscal 2025 will increase by approximately $0.2 million. We expect non-GAAP diluted EPS for fiscal 25 to be in the range of $0.51 to $0.55. We have assumed approximately $27.4 million weighted average diluted shares outstanding for fiscal 2025.
In summary, we are pleased we are pleased with our solid finish to our fiscal 24 with a record quarterly adjusted EBITDA, along with strong cash generation in the fourth quarter. We are excited about growth opportunities in front of us and remain focused on executing to our long-term strategy to achieve profitable growth.
I will now pass it back to Eric for some closing remarks.
Eric Stang
Eric, you should, as I mentioned at the outset, as we enter fiscal year 2025 in a strong position with leading product solutions and significant potential for business expansion. We are working to take advantage of several significant industry trends, and our strategy includes exciting investments in future expansion, customer growth and the development of new retail partnerships. We believe our strategic focus on small to medium-sized businesses, larger businesses that are in select verticals, parts replacement and wholesale, UCaaS, CCAS. and C. past platform opportunities positions us well for future success. Thank you. We'll now take your questions.
Question and Answer Session
Operator
Thank you. (Operator Instructions) Arjun Bhatia with William Blair. Your line is open.
Arjun Bhatia
Perfect. Thank you, guys.
Appreciate you taking the question here and about the partnership with Clio was pretty interesting, especially as it relates to the legal vertical. Can you maybe just expand a little bit on the how impactful that can be to the business? And when you think about other verticals or other potential partnerships, how are you viewing the opportunity with some of these vertical software players that exist to and as an entry point into into other verticals or to expand some of those where you might already have a presence?
Eric Stang
Yes, happy to. I don't think this well, the each time we do, one of these, it gives us an opportunity to bring them more integrated solution, frankly, for the customers in that vertical and from a sales and marketing perspective, it also allows us to position ourselves well as a good solution to those customers. And to some degree, depending on who the partner is, we can also get some momentum and some additional sales and marketing reach out of what the partner will do with us on their own to help promote or support what we're doing. So all around, it's an exciting way to just build a better solution for the customer. And we've definitely seen that in legal vertical. What we've done with with on with clear, we've done things in a couple of other verticals already as well.
And I think you'll just see it with what we expect to rollout a cadence of these through the year as we look forward.
Arjun Bhatia
Okay, got it. That's helpful. And then maybe sticking with you the on the die-cast space, I know you called it out as a priority going into fiscal 25, but when you think about that market? And there is there's quite a bit of competition there already. Maybe can you just give us a sense of how Ooma is differentiating in that market what your offering has that's about some of the competitors to be able to take share there and then help us understand the timing of when when we might start to see maybe an inflection from this die-cast capabilities? Thank you.
Eric Stang
Yes, happy to talk about it on. It's something that has us excited on. We took a big step forward in our acquisition of 26 hundred hertz on this front day have on worked for a number of years on their on Sika's solution. And I think by middle of this year and that that work will come to fruition and we'll be able to really leverage in a multimodal way the capabilities they put in place. There will be a little bit longer before we apply that solution to save my office room and enterprise. But nonetheless, it really opens the door for us to take a big jump forward in a critical part of the market it's not our intent strategically to build the most complete or extensive C test solution. We see a lot of customers that need core functionality where call center and contact center may be a part of what the business does. And they have anywhere from a handful eight agents to a greater number of and they want something that works well and fits into the rest of the solution and frankly isn't too expensive.
And we think with what we'll do with Ooma Office and Ooma Enterprise will approach the market more from that perspective, that you can think of that a little in a way is a solution that's going to fit a business, you know, wonder, you know, 1,000 employees as opposed to a big mega on contact center implementation. But what we're building on the 26 unheard side and what they will have is quite flexible. And because of that flexibility and API based design it will do a lot of valuable things, and it will be our possible for anyone was to use that platform to extend it into any spoke applications or extension of it that they want to do. So in some ways, it's also a foundation for larger companies and put them too on to get just what they want out of the solution. So I hope that answers your question on timing is kind of middle of this year and then later this year for Ooma Office and Ooma Enterprise. And you can I think I covered that the way we're targeting the market with it yet.
Arjun Bhatia
That was clear. Appreciate. Appreciate the color. Thank you.
Operator
Thank you.
Please standby for our next question. Our next question comes from the line of Josh Nichols with B. Riley. Your line is open.
Josh Nichols
Yes, thanks for taking my question. Two things. I guess one is can you elaborate a little bit you talked about expecting some churn, I think, with WG. in the first quarter and help quantify the impact that that has.
Then two, I'm just kind of curious, given all the backlog ramp that we kind of talked about on the Airedale front, like what you're kind of assuming for that growth for that piece of the business, given us so early stage?
Eric Stang
Sure, Josh. So every year for years in working with IWG, they've had some measure of churn, so to speak, I don't tend to think of it so much churn because we serve all of their of their customers. Now they obviously have customers who leave their centers and other ones that come in and you can view it as churn when one leaves and then maybe as a new new user when the next one comes in. But we've had some turnover and some reductions on all of through our working with them and in the numbers we've reported to all of you over the time I've been there. They've been net of that that on call it, say quarterly of the assignments almost and those numbers tend to run at a certain level and maybe a few thousand a quarter on. But what should talk about is a bigger adjustment and basically this is a catch-up this is some we've worked with WG. from both sides, our side and their side and help them get a finer analysis done across their full worldwide business of on what lines they need and don't need. And so we're doing essentially a more or less one-time catch-up adjustment here. That's a little bit larger than the normal churn we see every quarter and I think Shig talked about it being on the order of --
Shig Hamamatsu
Yeah. In terms of the numbers, about 20% of what we have with them in the seat count, I think in terms of dollars, we're not going to specifically quantify it, Josh, but I think the we have considered it obviously in our annual revenue guidance range, the impact audit it and also our Q1 guidance because the churn, yes, you heard it like churn is happening in Q1. So we consider the Q1 revenue guidance. I think the other point I would be, we thought about the impact on net dollar retention rate, we reported 99% and really the strain will just just bring it down to 98%. Our estimate today when they happen. So you know, it's not a the 20% is a good number, as I've said, to catch up. But impact overall is not that significant, and I think that there's a lot about diverse base of our customers
Eric Stang
Well and as well, we're adding new users with IWG. every month on we have further rollout going now on with them internationally through the first half of this year, at least. And they have quite a ambitious plan, although I probably can't say exactly, but they're pretty ambitious plan for opening new centers around the world as well. And all of that is growth for us. So we're going to see how much we it can offset this and generate additional growth but but we just wanted to call out because it's out of trend this adjustment.
On your other questions about international growth and the assumptions we have in the outlook, I'll make a quick comment on that, and I don't know if she has more to add on. We've chosen in our in our outlook to be conservative on what will happen with their dollar this year. We have not been very good at predicting it and so on.
Well, we shared what we can share around the number of deals we closed last quarter and and our continued belief in the business on we are on we're not on trying to forecast something much larger than where we are today until we see those results come through.
Shig Hamamatsu
Yes, I'd echo Eric said that, Josh. So I think we learned a lot of us 18 months in on that, particularly the installation timing. As we said before, that when customers ready to install. We can be there, right, pretty quick and in-store. And we have some of those quick deals, installation deals in Q4 as well that we want to be conservative in our guidance, and that's what we assumed. And but at the same time, we're still excited about growing pipeline of add-on.
Eric Stang
Yes. Due to this outlook is any dimunition if you will dimunition of of the pipeline we see for Airedale and on the deals we're working on, that's as robust as ever.
Josh Nichols
Yes. So I guess I'd just classify this as a little bit more like a kind of baseline growth rate assumption, excluding any material traction or success in Airbus? Yes.
Eric Stang
Yes. I mean, you heard our comments.
Josh Nichols
Yes, appreciate I'll hop back in the queue.
Eric Stang
Thank you.
Operator
Ladies and gentlemen, as a reminder, sorry, one wants to ask the question. Please standby for our next question. Our next question comes from the line of Brian Kintslinger, AGP. Your line is open.
Brian Kintslinger
Great. Thanks so much for taking my questions. It's a question on the guidance. If you look at the first quarter's revenue guidance at the midpoint about 9%. I think if you look at the full year, it's just over 6%. So it appears the year-over-year growth rates decelerating. So we think we're early installs of Airedale not going as quickly and rolling out, like you said, in the second half of the year. And I would think that coupled with the enterprise customers a large customer ramping also coupled with the headwind in the first half of IWG. coming out, the 20% that the second half of the year might be faster in the first half of the year. Can you just kind of reconcile why it appears the growth rate's going to slow in the second half of the year?
Shig Hamamatsu
I think the. Hey, Brian, I think the first quarter growth versus second half is how I think about it. You're right. The midpoint of the guidance implies that 9% year-over-year growth. But do remember that that has the impact of inorganic piece of it because last year Q1 or 24th Q1 FY. 24 doesn't have 26 centers in it and also that the inorganic piece of it. So if you take out the inorganic piece of it and just look at organic growth in Q one, I'm looking about and 5% organic growth.
And so if I if you go to back half of the year, then you start to have these both you're having the 2016 I heard. So you naturally see that total revenue growth lower than Q1. Unless you consider the, it's all organic inorganic piece of it. So that's the reason why you're seeing those now. But comparison you mentioned, I do think that the organically we should see better growth in the second half, especially as we continue to ramp on their dial opportunities.
I guess without going too specific about those other numbers, first half, second half, anything like that. But one main explanation is what I said, just kind of look at things, inorganic versus organic growth.
Brian Kintslinger
Got it. Okay. And then you mentioned six kind of areas, I think of investment and plans for the year and your strategy. If I look at the EBITDA growth, it's about similar to the revenue growth plus or minus, when do you expect investments to accelerate revenue growth? And if it does accelerate revenue growth in the time to come, do you expect to see leverage in the EBITDA margin. So will you continue do you think, in the near term to reinvest that front?
Eric Stang
Yes. So we we followed our outlook this year that we've been following in the past, which is to invest in these key new areas of opportunity while also on slowly growing our EBITDA and bottom line. And we're pretty proud that we're managing to do both because we do have a lot of going on in the Company. We have on the improvements to Ooma Office and Ooma Enterprise new verticals. We're going to target we have on a contact center coming through this year to bring into those those those solutions we have international expansion going on. We have further investment this year in Airedale on because we also want to make a dial on available outside of North America. And to do that, we've got to make some some changes in the product which we're working on and will have done this year and on and with the acquisition 26 unheard, there's kind of a one time effort. You probably take us a year in all honesty, although we're three or four months into a one-time effort to make 26 or heard stronger by the technology and applications we can bring to it from the other side. And so there's a lot of a lot going on right now.
But on as I look forward, which is, I think what your question's about, I think a lot of these on investment areas. I don't see them needing to continue for years to come on their head. We look back to kind of the two, 10 years ago or nine years ago when we went public and the strategy we had and where we wanted to take Ooma. And I know with these things I just mentioned, we are rounding out the kind of company we wanted to be. And so I think that it's always in our hands how much we want to invest in new things versus bring to the bottom line. But we do have a business model that could bring quite a substantial amount of investment to the bottom line. But from this year, still, we've got these areas of investment. One of our goals this year is to is to turn some of these areas that I just described around from being areas where we invest and don't make much money to on to start to get more payoff from them, whether that's international or air dial or on even our 2020 hurts acquisition now. And as we do that, I think these these on these new areas will start to be on contribute very nicely to our overall bottom line.
So, you know, I mean, I think that's the best answer I can give you, but but it's a little bit more work to do. But there isn't a big mountain to climb. We know where we're going and I think we're making good progress.
Brian Kintslinger
Thank you so much.
Eric Stang
Thank you.
Operator
Thank you. Please standby for our next question.
Our next question comes from the line of Matthew Harrigan with Benchmark. Your line is open, both.
Matthew Harrigan
Thank you. You laid out a pretty expansive TAM for air dial, particularly including Europe and literally tens of billions of lines. And clearly, I'm not sure I'd be shutting down the copper lines. If I was AT&T, I'm really charge and the [400 hours] sometimes even more anecdotally, but what are people doing to defer the need to upgrade? Because clearly it is an art mission-critical and are you seeing more in the way of a conference competition because it is counterintuitive that you've got this gaping need and you've got the best product bouquet and our best products it features and yet it isn't really taking off and maybe this is just a much more glacial process than people thought, notwithstanding the move to fiber or are you actually seeing some competition perhaps in Europe where you said you had to modify the technical specs to work we get because you have interest from the Vodafone and others over there. Thank you.
Eric Stang
Yes, Hi, Matthew. I think that the market is sizable and the biggest challenge to our growth is getting awareness of airtime into the market and getting the customers to consider us and that's where we've been investing. We've been investing on the direct sales front, something we haven't done as much of as a company.
We've been much in of serving smaller businesses who have been much more marketing and inside sales driven.
But I think that on it's in our hands to go seize this opportunity in a bigger way. But we have to do some things different from what we've done in the past at retail partners do help, particularly to mobile has been a very valuable partner with us, but still have some of the others that we've talked about with you already in the past. I don't want to though gloss over competition. I think there's two or three forms of competition that we run into on some of them cause delay. Some of them are just competition. One is on if we're talking with a larger customer and we're that large that it's not uncommon for the existing provider, those POTS lines to come back in and say I will lower your prices back down just don't do anything and trying to push things out a year and we do run into that.
Sometimes we've had customers who we thought were going to move forward. As you said, we're going to come back and look at this a year from now because we don't have a burning need now that the pricing's come back down and the networks intact for the moment on, we do have customers where we've they've asked us to come upgrade quite an extensive amount of equipment. And as we go to do that with them, they discover they didn't know, but they discover that maybe their alarm manufacturer has already made upgrades to some of their alarm panels without them, even knowing it and they actually charge them for the cost of upgrading the the actual panel, which is obviously what a lot of these customers want to avoid. So we run into that a little bit.
And then the third, com kind of competition that is hardest for us in some ways with some particularly large customers. They may have another aggregator type provider who does all of the telecom for them as a business. And that aggregator may not have as good a Salute probably doesn't have a good solution solution, assuming air dial, but promises all will take care of it. And it's difficult when you're selling against someone who on has the rest of the customer relationship around the product you're offering, but those are the competitive challenges we face.
But honestly, those shouldn't stop us from getting to the goals we've already outlined to you in the past, there's a sizable market opportunity and we definitely have by far the best product in the market and the evidence that I see that where is on my view is we have some of our resale partners were reselling other people's stuff and stopped doing it to come to us because they're having so much problem with other people's stuff and some of our customers are literally ripping out other people's stuff to put ours in because ours is working better for them and the other stuff wasn't working well enough. I think I talked about a customer in our Q3 conference call where we were moving quickly to do that for them on.
We're very proud of solution. We have it's a very good solution in the market, and we just need to continue to pursue it aggressively.
And so that's really what what the challenges still. I hope all that is little color and helps.
Matthew Harrigan
That makes sense. What's there?
Operator
Thank you. As a reminder, ladies and gentlemen, our one one's asked the question. I'm showing no further questions in the queue. I would now like to turn the call back over to Eric for closing remarks.
Eric Stang
Well, thank you, everyone, for joining us today. And I think we've made some great progress in FY 24 in sit here today with their dial in with 2,600 hurts really on as nice additions to our growth outlook in addition to growing office and enterprise. And so we are on. We're excited about what we can do going forward. With that, let me say thank you for joining us.
Operator
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
