Ladies and gentlemen, thank you for standing by, and welcome to the Ooma, Inc third quarter fiscal 2021 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 today, Matt. Thank you. Please go ahead, sir.

Thank you, David. Good day, everyone, and welcome to the Third Quarter Fiscal Year 2021 Earnings Call at Ooma, Inc. My name is Matt Robison, Ooma's Director of IR and Corporate Development. On the call with me today are Ooma's CEO, Eric Stang; and CFO, Ravi Narula. After the market closed today, Ooma issued its third quarter earnings press release via Business Wire, 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 press release. During today's presentation, our executives will make forward-looking statements within the meaning of the federal security 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, risks related to the impact of the COVID-19 pandemic and those risks 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 as 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 fourth quarter and full year fiscal 2021 on a non-GAAP basis. Also, in addition to our press release and 8-K filing, the Events & 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 but also provides resolution of GAAP expenses that are excluded from our non-GAAP metrics. Now I will hand the call over to Ooma's CEO, Eric Stang.

Thanks, Matt. Hi, everyone. Welcome to Ooma's Q3 Fiscal Year 2021 Earnings Call. Thank you for joining us today. I'm pleased to report that in Q3, Ooma continued its strong performance. For the quarter, we grew revenues to $43 million and non-GAAP net income to $3.1 million. Each of these results exceed our plan significantly. Q3 was a record quarter for the number of new Business users added, exclusive of a very large customer we onboarded last year. And regarding this large customer, I'm pleased to report that in Q3, we continued to expand by onboarding many of the new sites in North America that we mentioned on our last conference call. Overall this year, the COVID crisis has certainly presented new challenges and caused us to pivot our strategy, for example, to accelerate the launch of Ooma Meetings and to adapt our sales and marketing. I believe we have responded well to the challenge, and I'm optimistic about our outlook. As one example of the progress we are seeing, I'm pleased to report the churn of Business users, which increased at the start of the pandemic, is now nearly back to the level we experienced pre-pandemic. I believe this progress positions us well for Q4. Sales and marketing execution is a key element of our strategy this year. So far this fiscal year, we have increased our sales and marketing organization by more than 100 employees and contractors. Our expanding team is, of course, focused on enabling not only direct sales but also channel, retail and partner sales. I'd like to share some examples of our progress. For the first time, sales to Business users through VARs and channel resellers represented over 40% of our total business sales. For sales of Ooma Enterprise specifically, 16% of our sales were from channel resellers working with us for the first time. We continue to perform particularly well in select verticals and with select profiles of customers. You may recall 2 quarters ago, we mentioned a large national brand where we had enabled over 900 local independent locations. Now 2 quarters later, we enabled nearly 1,200 locations with this national brand. We find that the quality of our service delights our customers. One example of this is an Ooma customer located in Florida in North Carolina who started with Ooma Office for just 4 users about a year ago. As of Q3, they have grown to over 300 users and rolled out our service across 29 sites in their organization. The adoption rate for Ooma Office Pro, our higher-priced, more feature tier of service, is now above 30% for new Office users. This is up from about 25% just a quarter ago. And finally, we have started to incorporate Ooma Connect, our wireless Internet service, and Ooma Wi-Fi, our managed Wi-Fi service, into our marketing and sales processes. It is still early days as these services were just recently launched. However, we continue to believe they fill a critical need for small business customers and provide us increased leverage to win new accounts. All in, I believe we are executing well on our sales and marketing initiatives. Our strategy is to serve businesses of all sizes, and we are increasingly doing so. For small businesses, we believe we bring unique competitive advantage and are the industry leader today. Our combination of curated features, ease of installation and use and value set us apart and drive our growth. We are also creating new related infrastructure services for small businesses to provide a more complete solution and greater value. This past quarter, we announced that Frost & Sullivan honored us with their Best Practices Award for North American Competitive Strategy Innovation and Leadership. They commented that Ooma is creating its own segment with its managed services strategy, the connected SMB market and cost-effective communications and network services. It's terrific to see Frost & Sullivan share our vision that small business represents a vast market opportunity that is underserved and ready for disruption. With larger-sized businesses, we are expanding our opportunity through adding features, developing new channel partners and increasing our reach. Our competitive advantage today is largely built upon our abilities to customize our solution for special customer needs and support complex customer deployments. Increasingly, we are also differentiating by focusing on the needs of select vertical market segment. With these advantages, we serve both large companies with unique needs and businesses of all sizes and targeted segments. We are confident that we can increasingly differentiate our solution through focus on what we do best. I'll 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. First, I want to thank the entire Ooma team for their hard work during these times and for helping Ooma deliver strong financial results. I'll begin with a review of our third quarter financial results and then provide our outlook for the fourth quarter and for full year fiscal '21. We once again delivered a strong performance, achieving $43 million in total revenue and exceeding our previously issued guidance range of $41 million to $41.8 million. These results were driven by strong market demand for our cloud communication services as well as solid performance from a number of our sales and marketing channels. Total revenue growth was once again led by Ooma Business, which now accounts for 44% of total revenue compared to 42% in the prior year quarter. Net income for the third quarter of fiscal '21 was $3.1 million, which exceeded our previously issued guidance range of $1.7 million to $2.2 million. This strong profitability was primarily due to the growth of Ooma Business and also stems from lower employee-related expenses and reduced travel while employees are working from home. Now some details on our Q3 revenue. This quarter, business subscription and services revenue grew 17% on a year-over-year basis. Normalizing for the effect of nonrecurring installation activity from our large customer in the same period last year, we achieved 21% growth in business revenue this quarter compared to the same period last year. Residential revenue grew approximately 2% year-over-year, which was in line with our expectations. On a combined basis in Q3, total business and residential subscription revenue grew 9% compared to the same period last year. As a percentage of total revenue, subscription and services revenue was 92%, which was similar to the last year quarter. Product sales for the third quarter were strong, with product and other revenue of $3.3 million, up 7% year-over-year. During Q3, we saw improvements in order activity from our direct customers as well as from our VARs and reseller partners. Additionally, we saw an increase in residential product sales to brick-and-mortar stores in preparation for the holidays. Now some details on our key customer metrics. We are very pleased with the growth of our total core users in the third quarter, especially the sequential acceleration of Ooma Business. At the end of the third quarter, we had 1,063,000 core users, up from last year's third quarter's 1,038,000 core users. 24% of these core users were Business users compared to 21% for the same period last year. Our average monthly subscription and services revenue per core user, or ARPU, increased 9% to $12.10, up from $11.13 in the prior year quarter. We are pleased with this ARPU growth driven by a higher mix of business revenue as well as from new service offerings like Ooma Office Pro. Our annual exit recurring revenue grew to $154.3 million and was up 11% from the third quarter of fiscal '20, driven by growth of ARPU and Business users. Our net dollar subscription retention rate was 95%, similar to the second quarter of this fiscal year. We see continued improvements in our customer churn for Ooma Business and have now seen stabilization in our churn for residential customers. Now some details on our gross margins. Our subscription and services gross margins continue to trend higher and were 72% in this quarter, up from 71% for the same period last year. These higher gross margins were driven by economies of scale and a greater mix of higher ARPU business customers. Product and other gross margins for the third quarter were negative 46% compared to negative 36% for the same period last year. This is mostly due to increased promotional activities in the quarter. On an overall basis, total gross margins for Q3 was 63%, an increase of 30 basis points from the same period last year driven by improvements in subscription and services gross margins. And now some specifics on operating expenses. Total operating expenses for the third quarter were $24 million, down $800,000 or 3% from the same period last year. Sales and marketing expenses for the third quarter were $12.4 million or 29% of total revenue, up 1% year-over-year and up 13% sequentially as we added more sales resources and expanded our marketing programs. We are pleased to see improvement in sales productivity given the changes we took this year, and that gives us confidence to continue investing in sales and marketing activities for future growth while staying profitable. Research and development expenses were $7.8 million or 18% of total revenue, down 11% on a year-over-year basis from $8.8 million. This decline in R&D expenses resulted primarily from cost savings associated with the discontinuation of the Smart Cam in October 2019. Given the market evolution, our primary focus for R&D is to continue to add new features and integrations for both Ooma Office and Ooma Enterprise solutions, which we expect will yield continued strong growth in Ooma Business users and ARPU. G&A expenses were $3.8 million or 9% of total revenue for the third quarter and comparable to the prior year quarter. During the quarter, we had onetime credits of approximately $300,000, which are not expected to repeat in the future. Our net income of $3.1 million resulted in a diluted earnings per share of $0.13 compared to $0.01 diluted earnings per share in the prior year period. This greatly improved profitability was driven by a number of factors, including higher revenues, economies of scale and lower employee-related expenses due to the current work-from-home situation. For the third quarter of fiscal '21, adjusted EBITDA earnings improved significantly to $3.6 million or 8% of total revenue versus $600,000 for the prior year quarter. For the 9 months of fiscal '21, our EBITDA earnings were $10.4 million compared to an EBITDA loss of approximately $400,000 for the same time period last year. We ended the quarter with total cash and investments of $27.6 million with no debt and up sequentially from $25.3 million at the end of the second quarter. Cash generated from operations for the third quarter of fiscal '21 was $2.5 million compared to $600,000 of cash used in operations in the same period last year. Additionally, during the third quarter, we generated $1.7 million of free cash flow. Now some details on our fourth quarter and full year fiscal '21 guidance. Again, our guidance is non-GAAP and has been adjusted for expenses such as stock-based compensation and amortization of intangibles. We have been successful this year in adapting our sales and marketing activities to address this COVID disruption. Should conditions become more severe, execution could be more challenging. We expect total revenue for the fourth quarter of fiscal '21 to be in the range of $43 million to $43.8 million. We expect fourth quarter non-GAAP net income to be in the range of $2 million to $2.6 million. Non-GAAP diluted EPS is expected to be between $0.08 and $0.11. We have assumed 24 million weighted average diluted shares outstanding for Q4. For full year fiscal '21, we expect total revenue for fiscal '21 to be in the range of $167.7 million to $168.5 million, an increase from our previously issued guidance range of $163 million to $164.5 million. We expect non-GAAP net income for fiscal '21 to be in the range of $10.6 million to $11.2 million, up from our previously issued guidance range of $8 million to $9.5 million. We expect non-GAAP diluted EPS for fiscal '21 to be in the range of $0.45 to $0.47. We have assumed approximately 23.6 million weighted average diluted shares outstanding for fiscal '21. In summary, we are very pleased with our strong performance in our third quarter, which demonstrates strength in our execution while we make progress towards our long-term strategy. I'll now pass it back to Eric for some closing remarks. Eric?

Thanks, Ravi. Looking forward, we believe the significant investments we have made and continue to make today set us apart from others. Key to our strategy is the unique vision we take of the market, which includes small businesses having different needs from larger businesses. Also key to our strategy is the end-to-end platform we have created to enable both superior quality and superior value. Cloud communications is a disruptive new service with a vast market opportunity. We believe our strong focus on execution will power growth in all areas of our business. At this time, our priorities are to expand our marketing and direct sales, build our reseller community, secure new wins for Ooma Enterprise with larger customers and add to our product and feature differentiation. I'm confident we are poised for a successful Q4 and well positioned to execute in the coming next fiscal year. Thank you, and we'll now take questions.

[Operator Instructions] Your first question comes from the line of Mike Latimore with Northland Capital.

Great. So I guess I just want to make sure I got this number right. Did you say you've increased the sales and marketing head count 100%? Or what was that referring to?

We said since the start of the fiscal year, we've added over 100 personnel to sales and marketing.

Okay. Got it. And what kind of percent increase would that be?

It's -- we have gone up by roughly 30 -- 25% to 30%.

Okay. Since the start of the year?

Since the start of the year, yes.

Okay. Great. And then on the increasing channel activity, do you attribute that to just sort of getting further away from the start of COVID? Or what do you attribute the increased channel activity to?

Just hard work, execution. With the -- to build that community, you really need to get involved and take the time to develop the relationships and the capabilities, and we've just been investing in that all along here for a while now.

Okay. Got it. And then just 2 financial questions. Gross margins look like they're really strong. What was the reason for that? And is that sustainable on the subscription side? And then how much revenue came from Talkatone?

So yes, gross margin side, I'm pretty -- very happy with the gross margin on the subscription services side. And I think as we continue to add more Business customers, we get north of $20 per user. If the customer has 5 -- 3, 5, 10 users, they are very -- highly profitable customer for us. So as we continue to add more Business customers, that drives our subscription services gross margins higher. And then we launched Ooma Office Pro also at the start of this year, and that's for $5 a month per user more. And that also helps with improving our gross margin. So I think that is sustainable. As we continue to add more and more Business users, we should see a continuous improvement in gross margins. Talkatone revenue contributions for the quarter were around $1.2 million, which was higher than what it was in Q2.

Our next question comes from the line of Josh Nichols with B. Riley.

Great to see such strong performance on the top and the bottom line despite some of the early pandemic headwinds. Looking here, could you -- I'm kind of curious, like what's the split, if you could break it out today between, on the Business side, Enterprise and Ooma Office Pro? Or how is that expected to kind of trend in the future, if you could elaborate on that a little bit?

Yes. Well, Ooma Enterprise is much smaller than Ooma Office. So we target a higher growth rate there. But both are part of our strategy, I guess I'd say. And Office Pro is -- we're up over 30% of new customers adopting Ooma Office Pro, and we think that we can even push that further as we go forward. So it's become an increasingly important part of our business. We just launched Ooma Meetings, which we're very excited about. It's got some special features, including really great voice quality and ability to share multiple screens at once. It's included in Home Office Pro for no additional charge. So it's a brand-new capability now for us to even drive more adoption of Ooma Office Pro.

And Josh, if I may just add in to your first point. Rather than breaking out revenue between Ooma Enterprise versus Ooma Office, in the last earnings call, I had mentioned -- I would just remind you of that one. When we look at our size of customers, for our customers with greater than $10,000 of annual recurring revenue, we have said of the Ooma Business customers, around 20% of those are giving us more than $10,000 in ARR. That includes a large number of customers from Ooma Enterprise as well as from Ooma Office, which are more than $10,000 ARR. So that number has been progressing and improving over the last number of years. And I think given our sales and marketing channels, resellers, channel -- VARs, we do believe that number will continue to grow in the future. Hopefully, that helps.

Yes, definitely. That helps quantify it. And just to hit on your point, Eric, you've seen some really good adoption for Ooma Office Pro. And now also with video collaboration that the company just released, I know it's early, but I would expect that there could be a very high demand that could kind of accelerate the Ooma Office Pro subscription adoption and while also doing that, help you guys get back to your net dollar subscription retention revenue of 100 or possibly higher than that as you continue to add subs on that. Is that your expectation based on what you've been hearing about this early offering?

It is indeed. I mean we aren't stopping either with Ooma Meetings. There will be additional things to come that get added into Ooma Office Pro as we go forward that will make it even more attractive. And at some point -- and I'm not trying to signal anything immediate. But at some point, I'm sure we'll even have higher tiers of capability beyond Ooma Office Pro. So it is our long-term strategy to build more capability and features into these premium offerings and drive the adoption of them.

And then last question from me. Then I'll pass it and hop back into the queue. Ravi, you mentioned -- it seemed like a very good number of the company's business subs have this $10,000 or more of ARR. are you seeing a little bit more success on that front? Or how should we think of the company's blend of really smaller business customers versus some of these larger customers trending with the higher ARR amount that you're getting with some of these customers and the large deployments that you've seen?

Yes. Josh, we are focusing on small and larger businesses. We are not just focusing on bigger businesses with more than $10,000 ARR. We are happy to get an accountant's office, dental office as well as Main Street businesses, and we are seeing very good success with that. Along with that, Ooma Enterprise, Ooma Office Pro, some of these things, VAR channels, they do bring in larger businesses. The example which Eric mentioned earlier in his prepared remarks about we started Ooma Office with one customer in Florida with 4 users, now they're more than 300. Those things are driving -- so because of our features, because of the need for the cloud communications, I think we are seeing customers with larger size and footprint also adopt our solutions. So I think we are focusing on all of those. But I feel, given the depth and breadth of our solution, we will continue to see bigger customers also adding more and more to our portfolio.

Your next question comes from the line of Brian Kinstlinger with Alliance Global.

Great. You mentioned this quarter 4 additions, which were very strong for business subs or one of the strongest in the history if you exclude your large customer that added last year. As you look at this quarter's additions, I was hoping you could characterize the concentration. Did it come from just a handful of customers, including your largest customer, at least a high concentration? Or was it very broad based?

No. We had a very good quarter across the board. Even e-commerce was up nicely for us sequentially. And then as I mentioned in my remarks, we've expanded the portion of our business going through channel resellers. We were about 1/3 of our business previously, and we're now up over 40% of our business, new business. And just all of the activities we're doing, we feel good about them. They're all working in part of our strategy to grow from many dimensions. So no, it wasn't just that large customer, although with that large customer we talked a quarter ago, we secured an additional opportunity this fall. And it's rolling out to a large number of locations with a very limited service to start with the hope that down the road, we can expand that further. But a great next step for us with that customer as well.

Great. And that might help answer the next question on that. As I look at the number of subscribers on the business side -- sorry, the revenue per business subscriber, it's inched down each quarter. Now it's just $0.05 here, $0.10 there sequentially. But I guess I would have thought that with the addition of Office Pro as well as a number of other add-on features, that this would start to marginally increase. So maybe talk about -- again, it's small, but talk about the trajectory of revenue per sub from a business standpoint and how you see that going forward.

Yes. Brian, I'll take this. This is Ravi here. We actually are seeing our ARPU for business subscribers or Business users go up steadily over the last number of quarters and years. So it is improving. And we can help you explain -- I think it's just as Office Pro and other solutions come in, the ARPU from each Business user is going up. The only caveat I would say is as the large customer comes into play and they add in a lot of seats, you might see 1 quarter something -- we added more users at the end of the quarter, we might not have demonstrated all revenue. So there might be some quarter-end activities you might see, generally speaking. But otherwise, we are seeing -- if I look at my ARPU for each Business user, it has been trending up.

The next question comes from the line of Matt Stotler with William Blair.

First one, I'll just ask one more in the partner channel. Obviously, there's been a lot of news around the partner effort this year and some impacts from strategic moves in the market, some impacts from the situation here in COVID. But obviously, it seems like, particularly in Q3, there's a lot of strength in that partner channel that you guys have talked about. So I'd love to just double-click on that, maybe talk about, on one hand, the pipeline of new partnerships, whether -- the number of new partners or the velocity there. And then maybe also comment on the recovery in the existing channels that maybe were a little more beaten up in kind of the Q1, Q2 time frame. And then I have a follow-up.

Sure. I hope I'm getting at what you're asking here. At the start of COVID, when the economy really locked down hard, some of these more face-to-face channels were affected negatively for us. We bounced back from that nicely. In fact, as we talked about on the call here already, we've expanded with that. We do have a long-term committed program to build our relationships with the reseller community. And both -- and that's something that we are -- relatively new for us compared to others that use those channels. And I think we can bring some special advantages, and we're investing in that, and we will continue to invest. I expect it to continue to expand for us out over the foreseeable future due to the effort we're putting in on that front. Yes. It's a real positive area for us, but then all parts of our business are pretty positive in terms of -- if you look at the different sales and marketing channels we use. I do think COVID has woken up businesses to their need for better solutions than what they may have had. And I've also -- I don't know how much this is affecting us. It's really hard to measure it at all directly, but we are seeing a lot of new business creation today. And our solutions are so ideal for a small business getting started. We think we have -- we're very well placed for the market and where it's going.

Got it. That's helpful. And then just a quick follow-up in terms of how we're thinking about investments going forward. Obviously, there's a lot that you're investing in, in terms of the go to market, direct channel, continued innovation in the R&D front. But as we look back through the first 3 quarters of this year, there's clearly been some cost savings from COVID, maybe also some efficiencies that will stick around. So as we think about the proliferation of a vaccine and kind of moving back to whatever the new normal looks like, how should we be thinking about kind of relative OpEx levels and where we might see some, I guess, sustainable efficiencies and where we might expect for spending to expand on a percentage of revenue basis?

Yes. Let me start with that, and then I'll pass it over to Ravi to give a little bit more of an outlook answer to the question. Even though we've been investing significantly, we're -- our sales and marketing as a percent of revenue was 29%, I believe. And I can easily see us doing more there to grow faster. That's -- it doesn't need to be that low for us to be successful. We're also thrilled that we had given guidance at the start of the year that we would be cash flow positive for the year. We've already achieved that now through 3 quarters, which I think is -- shows we're ahead of plan on that front as well. But we're going to invest prudently. That's the way we've always run this business. We're going to invest where we know the growth is possible, and we're going to do it in a way that we maintain a strong balance sheet and don't try to get ahead of our skis too far, if I can say it that way. Let me turn to Ravi though to see if he wants to add.

Just one thing. We had -- Matt, we have added -- a year ago or 9 months ago, we added in our investor deck a mid-term target model, which was 1- to 3-year target model, where we said we would want to achieve 5% EBITDA as a percentage of revenue. And we are at that level. So I think that thing has not changed. Even with COVID or not, we do intend to stay around 5% of our revenues for the adjusted EBITDA side. We are today at 8%. Some of those you can attribute to lower travel expenses, some of those. But our goal is as we get more scale, we get higher gross margins, we get more scale for R&D, G&A, you would want sales and marketing to go up slightly while we are maintaining our 5% or so EBITDA margin.

Your next question comes from the line of Joe Goodwin with JMP Securities.

Congrats on the results. On the large customer and the expansion, you said you expanded -- or you started onboarding many of the new sites for the North America segment. Kind of how far along are you there? And then also, is there any update on the potential of the international expansion with that same customer?

Yes. So we accomplished about half of what we need to do this fall in Q3, and the remaining half is still to go in Q4 in terms of what we're doing in North America. In terms of expanding to new geographic areas, I think we have a great solution for that, and I believe the customer would like to move forward with us at some point. And COVID has created some challenges to work through, but I believe that we will eventually get back to that kind of development with this customer that we had talked about previously. I think I'll be -- I hope to be able to give you more guidance on that at the end of Q4 when we're talking about our plan for next year.

Your next question comes from the line of Matthew Harrigan with Benchmark.

Two questions. Firstly, I think one of your points of differentiation is the ready portability of your services from the business location to the residence. And clearly, with COVID, even if it magically went away tomorrow, I think there's been a permanent change in the template that most people -- businesses are looking at in terms of the work-at-home component versus people going into the office. Can you talk about how that accrues to your benefit? And then secondly, on Wi-Fi, particularly at the SCTE show a number of weeks ago now, a lot of excitement over some of the new iterations, Wi-Fi 6 and all that in terms of how robust the signal is and the capacity. Can you talk about your efforts on the front line of Wi-Fi in terms of meeting the current level of innovation at some of the large cable companies and such?

Sure. So on the first, I think you're absolutely right that the trend towards work from home drives customers towards a more flexible solution. And certainly, a cloud solution like ours and some of the specific things we enable in our solution work great for that. I do think the trend is bigger for us though in the sense that just any business that now needs to take orders by phone that they didn't use to take or set up new kinds of ring groups and IVRs and enable other key capabilities to work from anywhere and things like that. These are things that the cloud has always been able to do better than fixed solutions, and business is increasingly seeing the need for that flexibility. Even just in running their business, even if they're back in the office, to be frank. So I think these trends are here to stay. I agree with you. I think that customers are looking for new solutions. I think we bring a credible combination, as we talked in our -- at the outset of capability and ease of use and value that really appeals to a lot of businesses. So yes, we're definitely working to take advantage of that as we go forward. In terms of Wi-Fi, we launched our Wi-Fi solution just a month or 2 ago now really and are just getting going with it. But it's a very high-end solution. We've partnered with Extreme Networks to enable what we do in managed Wi-Fi for customers. And I have every confidence Extreme is going to stay on the forefront of the industry, and we'll stay there with them. What we're really doing with managed Wi-Fi is it's part of a package for our smaller customers of -- that includes Ooma Connect for Internet or backup Internet service and Ooma phone service to be able to just provide a more complete infrastructure solution and do it all for the customer without the customer having to do a lot themselves or hire expensive specialists to do it. I think it differentiates us more in the market as well because we can bring with -- since it's kind of like a double-play or triple-play solution to that customer, if you want to think of it that way. It's very nascent for us. And I can't say that we've done -- implemented much yet from a sales and marketing perspective to really integrate all this together into our activities. But we're going there, and we really believe we're on the right trend with what we're doing for these small businesses. Small businesses are underserved. The technology isn't there for them. It's expensive for them. And the most modern technology, I should say. And we are able to do that in a managed way to really improve the capability they have. So I hope that addresses what you've asked and...

Yes. Actually, as a follow-up on the first question though, would you say that some of your larger competitors might be perceived or actually be a little more rigid in terms of just allowing ready portability of the full service from the business location to the home? Because I had the impression that you were a little bit quicker and easier on that than some of the guys who are more focused toward the very largest businesses.

That may be. I think you have to speak specifically about certain solutions in the market and what those companies are trying to do. I can tell you that I don't think it gets any easier than what Ooma has done. You can -- we'll ship you a pre-activated, ready to plug in and use IP phone that you can plug-in at home, and it will run just on your room of service like the one at the office does. That's just one small example. Our desktop apps and our mobile apps are very, very strong, and you can use them anywhere that you're plugged in. And we even offer wireless solutions, and we offer solutions based on deck [ph] if you don't -- if you prefer to run off of our base station. There's a lot of flexibility there. Even with Ooma Telo, which is our residential solution, we find a number of customers are getting it to have a second line in the home. And they like getting our desk style, more business-type phone to go with it for maybe a home office or whatever they're doing at the home now. So there's just tons of flexibility, and we certainly market those capabilities in the market.

[Operator Instructions] Your next question comes from the line of Kevin McVeigh with Crédit Suisse.

I wonder probably, Eric, if you could just frame out the retention numbers. It sounds like you had a little bit of improvement on both sides. Just kind of where they are and where you hope them -- hope to get them to.

Yes. Kevin, this is Ravi. We have 95% net dollar retention rate. But what we have seen lately in Q3 is our churn has improved. Eric mentioned that for the business side. We are nearing pre-pandemic churn rates for business. Residential, we have seen more stabilized in Q3. So I do feel, going forward, some of those metrics are going to help improve not only our churn rate but also retention rate as well as hopefully revenue. So I do feel more positive going into Q4 versus what we have seen in 3 months or 6 months ago.

And then just a follow-up. You had mentioned about $300,000 of onetime credits. If you said what they were, I apologize. But could you just help us understand what they were in the quarter?

Yes. They were reflected in G&A expenses. And these are -- sometimes you would have certain expectations, and we are on an accrual basis. So we had expected and accrued some expenses in the past, which we found out we were able to negotiate and find out we don't have those expenses going forward. So that's why we ended up reversing those $300,000 in G&A expenses. The reason I highlighted one is it did improve my profitability in Q3 but also the normal run rate of expense for G&A would be slightly higher than what you see in Q3.

So that was something, Ravi, that wasn't factored into the guidance when you said it at the end of last quarter, correct?

Yes. Until it's fully baked in, like in terms of what will happen, as there's always sometimes negotiations, sometimes a full understanding of those things. So it came in as -- I would say it wasn't totally not unknown to us, but it wasn't -- definitely, there were certain parts -- certain reviews we had to do, and we were able to close that well in Q3.

There are no further questions at this time. I will turn the call back over to Mr. Stang.

Well, great. Just thank you, everyone, for joining us today. We appreciate your interest in the company, and we're working hard to close out [Call Ends Abruptly]