OOMA INC (OOMA) stock intrinsic value fair value estimate & owner earnings analysis

Ooma sells internet-based phone service. Ooma Business (Ooma Office, Ooma Enterprise, the AirDial replacement for copper business lines, the 2600Hz platform, OnSIP, and since December 2025 FluentStream and Phone.com) made about 64% of fiscal 2026 revenue. Ooma Residential, mainly Telo home phone service, made about 34%. Revenue was $273.6 million in the year ended January 31, 2026. About 92% of it is recurring subscription revenue with a 70% gross margin. The rest is device sales, which lose money. Existing customers' spending has been very stable: Ooma reports net dollar retention of 98% to 99% in each of the last three years. How we measured earnings. We start with operating cash flow. We take out working-capital swings and stock compensation, which averages about $15 million a year and is a real cost to shareholders. We also take out the capital spending needed to keep the business running. Ooma's leases are paid through a working-capital line, so we count lease costs as operating costs rather than adding them back. On that basis Ooma lost money for owners every year from fiscal 2017 to fiscal 2025, from about 68 to 79 cents a share in fiscal 2017-2020 to between 4 and 14 cents in fiscal 2021-2025. Fiscal 2026 was the first positive year, at about $9.8 million or 35 cents a share. That 35 cents understates the business as it stands today. On December 1, 2025 Ooma bought FluentStream for $50.5 million. On December 29 it bought Phone.com for $22.6 million. Together they add roughly $47 million of annual revenue, but they contributed only $6.1 million in fiscal 2026. The first half of fiscal 2027 shows the combined business. Revenue was $164.4 million, up from $131.4 million a year earlier, and quarterly revenue rose from $81.1 million to $83.2 million. We estimate owner earnings of about $11 million for the half. Both quarters were consistent, which is why we start the forecast near 70 cents a share rather than 35. One accounting judgement matters a lot. The acquisitions created about $47 million of customer lists, technology and trade names, which are written off over five to seven years. That write-off, now about $12 million a year, is a non-cash charge, so we add it back. It accounts for more than half of today's owner earnings. The add-back is only fair if the acquired customers keep paying. Before the deals, the pro forma figures in the annual report show both businesses holding revenue flat, near $24 million and $23 million. Ooma's own customer base also retains about 99% of its revenue. So the base case assumes the acquired revenue holds, and the bear case assumes it wears away. Taxes are a second judgement. Ooma has $81.4 million of federal tax losses it can use against future profits, so it pays almost no cash tax today. In every case we assume those losses run out around fiscal 2030-2031 and cash taxes then take about a fifth of owner earnings. Base case, $8.74 a share. Owner earnings are about 70 cents in fiscal 2027. They grow 5% a year for four years and then 4% a year. The drivers are ones already in the filings: Ooma Business subscription revenue grew 10% in fiscal 2026, AirDial is growing, and the profit margin has widened. Growth before acquisitions was modest, about 4% in fiscal 2026, and the growth rates reflect that. After year 10 we let earnings fade 5% a year for 15 years. Customers are sticky, but we can document no growth that far out. Bear case, $3.65 a share. Integration and churn hold fiscal 2027 to about 55 cents. Earnings then fall 3% a year as Residential shrinks and the acquired customers wear away over the seven-year lives Ooma itself gave them. The debt adds pressure: Ooma borrowed $65 million from Citizens Bank for the deals, and the term loan is due December 1, 2030. After year 10, earnings fade to nothing within five years. Bull case, $15.15 a share. Ooma earns about 78 cents in fiscal 2027, the first-half pace. Earnings grow 9% a year for a decade, in line with Ooma Business's recent growth plus continued margin gains. They hold flat for another ten years and then decline. We do not subtract the debt from these values. Owner earnings are already after interest, and repayment is visible: $11.5 million was repaid in the first half of fiscal 2027. The debt risk is in the bear case instead. What would make this wrong. The valuation depends on the combined company continuing to earn at the rate of its first two quarters. A decade of losses before fiscal 2026 is a real warning. The annual results for fiscal 2027 are the next check. If acquired customers leave faster than expected, or if stock compensation rises again (it reached $17.9 million in fiscal 2025), all three cases fall. One reported figure did not reconcile cleanly: annualized recurring revenue rose only $11.8 million to $245.9 million despite the acquisitions. We believe that reflects the averaging method, since the deals closed late in the quarter. Actual quarterly revenue since then supports the larger figure. Ooma also faces a class action in the Federal Court of Canada, and it recorded $1.5 million of litigation costs in fiscal 2026. The margin-of-safety price is $4.25 a share. That price allows for a short profit record and new debt, and from it the base case implies about 20% a year.