Net Cash provided by operating activities
increased 55% year-over-year with 124% of Adjusted EBITDA being
converted to operating cash flow
Sangoma Technologies Corporation (TSX: STC; Nasdaq: SANG)
(“Sangoma” or the “Company”), a trusted leader in delivering
cloud-based Communications as a Service solutions for companies of
all sizes, today announced its first quarter financial results and
unaudited condensed consolidated interim financial statements for
the quarter ended September 30, 2024.
Unaudited in US $000
Q1 FY2025
Q1 FY2024
Change
Q4 FY2024
Change
Revenue
$
60,150
$
63,028
(5)%
$
60,934
(1)%
Gross profit
$
41,181
$
44,028
(6)%
$
41,807
(1)%
Operating expenses1
$
42,056
$
45,001
(7)%
$
41,600
1%
Net loss
$
(1,910)
$
(2,444)
$
(1,708)
Net loss per share (fully diluted)
$
(0.06)
$
(0.07)
$
(0.05)
Adjusted EBITDA2
$
9,814
$
9,882
(1)%
$
11,110
(12)%
Net cash provided by operating
activities
$
12,127
$
7,849
55%
$
11,703
4%
Net cash provided by operating activities
as a percentage of Adjusted EBITDA2
124%
79%
56%
105%
17%
Total Revenue for the first quarter of fiscal 2025 was $60.2
million, just below the guided range of $61.0 to $62.0 million,
while Adjusted EBITDA2 came in at $9.8 million, on the high end of
the guided range of $9.0 to $10.0 million. The Company's
first-quarter results were impacted by a delay in orders that had
been expected at the close of the quarter, primarily due to the
disruption caused by Hurricane Helene, which affected both our
customers and our operations, given the Company's significant
employee presence at our Sarasota, Florida office. The revenue from
these orders was approximately $0.63 million and are expected to
fully ship in the second quarter.
The Company's balance sheet remains strong as we continue to
improve, finishing the first quarter of fiscal 2025 with net cash
provided by operating activities ("operating cash
flow") of $12.1 million representing an increase of 55% over
the prior year quarter. The Company finished the quarter with a
cash balance of $16.7 million, reflecting a strong quarterly
progression of operating cash flow, primarily due to ongoing cost
savings initiatives and effective net working capital
management.
Net cash provided by operating activities as a percentage of
Adjusted EBITDA2 for the first quarter reached 124%, representing a
significant increase when compared to 79% in the same quarter of
the prior year and the third straight quarter that it exceeded
100%.
Operating expenses1 were $42.1 million for the first quarter of
fiscal 2025, down approximately 7% over the first quarter of
2024.
"We are pleased with the growth of our sales pipeline and
average deal sizes, thanks to our new go-to-market initiatives, and
we remain on track to meet our fiscal guidance for the year," said
Charles Salameh, Chief Executive Officer. "Meanwhile, our business
profitability remains strong, with robust growth in operating cash
flow during the first quarter. This has led to continued
deleveraging of the balance sheet, giving us greater capital
flexibility for the future."
Sangoma executed a debt repayment on the revolving credit
facility of $4.3 million in the quarter, bringing total debt
repayments for the quarter to $8.7 million, marking the second of a
series of planned payments aimed at reducing Sangoma’s debt to $55
million to $60 million by the end of fiscal 2025 as outlined in our
capital allocation strategy. Sangoma continues to remain
comfortably within its debt covenants.
Net loss was $1.9 million for the first quarter of fiscal 2025,
while Adjusted EBITDA2 remained strong at $9.8 million for the
quarter, representing 16% of total revenue. The Company continues
to successfully self-fund its transformation and in this quarter
spent a total of $0.2 million relating to its strategic enterprise
resource planning ("ERP") initiative. Without this
investment, Adjusted EBITDA2 for the first quarter would be $10.0
million.
Outlook for Fiscal 20253
The Company is re-affirming guidance for fiscal 2025. Sangoma
expects revenue in the range of $250 million to $260 million and
Adjusted EBITDA2 from $42 million to $46 million.
Conference call
Sangoma will host a conference call on Wednesday, November 6,
2024, at 5:30 pm ET to discuss these results. The dial-in number
for the call is 1-800-806-5484 (International +1-416-340-2217) and
the participant passcode is 8503464#. Participants are requested to
dial in 5 minutes before the scheduled start time and ask to join
the Sangoma call.
1 Operating Expenses consist of sales and marketing, research
and development, general and administration and amortization of
intangible assets. 2 Adjusted EBITDA is a non-IFRS financial
measure used by the Company to monitor its performance. Please see
the section entitled “Non-IFRS Measures and Reconciliation of
Non-IFRS Measures” in this press release for how we define
“Adjusted EBITDA”. 3 The information in this section is
forward-looking. Please see the section entitled “Cautionary
Statement Regarding Forward-Looking Information” in this press
release.
About Sangoma Technologies Corporation
Sangoma (TSX: STC; Nasdaq: SANG) is a leading business
communications platform provider with solutions that include its
award-winning UCaaS, CCaaS, CPaaS, and Trunking technologies. The
enterprise-grade communications suite is developed in-house;
available for cloud, hybrid, or on-premises setups. Additionally,
Sangoma provides managed services for connectivity, network, and
security. A trusted communications partner with over 40 years on
the market, Sangoma has over 2.7 million UC seats across a
diversified base of over 100,000 customers. Sangoma has been
recognized for nine years running in the Gartner UCaaS Magic
Quadrant. As the primary developer and sponsor of the open source
Asterisk and FreePBX projects, Sangoma is determined to drive
innovation in communication technology continuously. For more
information, visit www.sangoma.com.
Cautionary Statement Regarding Forward Looking
Statements
This press release contains forward-looking statements,
including statements regarding the future success of our business,
development strategies and future opportunities.
Forward-looking statements are provided for the purpose of
presenting information about management’s current expectations and
plans relating to the future and readers are cautioned that such
statements may not be appropriate for other purposes.
Forward-looking statements include, but are not limited to,
statements relating to management's guidance on revenue and
Adjusted EBITDA, statements relating to expected future production
and cash flows, and other statements which are not historical
facts. When used in this document, the words such as "could",
"plan", "estimate", "expect", "intend", "may", "potential",
"should" and similar expressions indicate forward-looking
statements.
Although Sangoma believes that its expectations reflected in
these forward-looking statements are reasonable, such statements
involve risks and uncertainties and no assurance can be given that
actual results will be consistent with these forward-looking
statements. Forward-looking statements are based on the opinions
and estimates of management at the date that the statements are
made, and are subject to a variety of risks and uncertainties and
other factors that could cause actual events or results to differ
materially from those projected in forward-looking statements.
Readers are cautioned not to place undue reliance on
forward-looking statements, as there can be no assurance that the
plans, intentions or expectations upon which they are based will
occur. By their nature, forward-looking statements involve numerous
assumptions, known and unknown risks and uncertainties, both
general and specific, that contribute to the possibility that the
predictions, forecasts, projections and other events contemplated
by the forward-looking statements will not occur. Although Sangoma
believes that the expectations represented by such forward-looking
statements are reasonable, there can be no assurance that such
expectations will prove to be correct as these expectations are
inherently subject to business, economic and competitive
uncertainties and contingencies. Some of the risks and other
factors which could cause results to differ materially from those
expressed in the forward-looking statements contained herein
include, but are not limited to, risks and uncertainties associated
with changes in exchange rate between the Canadian dollar and other
currencies (in particular the United States’ (“US”) dollar),
changes in technology, changes in the business climate, changes to
macroeconomic conditions, including (i) inflationary pressures and
potential recessionary conditions, as well as actions taken by
central banks and regulators across the world in an attempt to
reduce, curtail and address such pressures and conditions,
including any increases in interest rates, and (ii) the effects of
adverse developments at financial institutions, including bank
failures, that impact general sentiment regarding the stability and
liquidity of banks, and the resulting impact on the stability of
the global financial markets at large, risks related to the
COVID-19 (coronavirus) pandemic and any resurgence thereof, our
ability to identify and effectively remediate material weaknesses
and significant deficiencies in our internal controls, our current
level of indebtedness and the ability to incur additional
indebtedness in the near- and long-term; changes in the regulatory
environment, the imposition of tariffs, the decline in the
importance of the PSTN (as defined in our MD&A), impairment of
goodwill and new competitive pressures, political disturbances,
geopolitical instability and tensions, or terrorist attacks, and
associated changes in global trade policies and economic sanctions,
including, but not limited to, in connection with (x) the ongoing
conflict in Ukraine (the “Russo-Ukraine War”) and (y) any impact,
effect, damage, destruction and/or bodily harm directly or
indirectly relating to the ongoing hostilities in the Middle East,
and technological changes impacting the development of our products
and implementation of our business needs, including with respect to
automation and the use of artificial intelligence (“AI”) and the
other risk factors described in our most recently filed Annual
Information Form for the fiscal year ended June 30, 2024.
Our guidance is based on the Company’s assessment of many
material assumptions, including:
- The Company’s ability to manage current supply chain
constraints, including our ability to secure electronic components
and parts, manufacturers being able to deliver ongoing quantities
of finished products on schedule, no further material increases in
cost for electronic components, and no significant delay or
material increases in cost for shipping
- The successful transformation of the Company’s go-to-market
strategy
- The revenue trends the Company experienced in fiscal 2025
to-date, the trends we expect going forward in fiscal 2025, the
impact of our transformation of our go-to-market strategy and the
impact of growing economic headwinds globally
- The continuing effects of recent macro factors such as
inflation, interest rates, recessions, invasions or declarations of
war
- There being continuing growth in the global UCaaS and cloud
communications markets more generally
- There being continuing demand and subscriber growth for our
Services and continuing demand as anticipated for our Products
- The impact of changes in global exchange rates on the demand
for the Company’s Products and Services
- The ability of the Company’s customers to continue their
business operations without any material impact on their
requirements for the Company’s Products and Services
- The Company’s forecasted revenue from its internal sales teams
and via channel partners will meet current expectations, which is
based on certain management assumptions, including continuing
demand for the Company’s products and services, no material delays
in receipt of products from its contract manufacturers, no further
material increase to the Company’s manufacturing, labor or shipping
costs
- That the Company is able to attract and retain the employees
needed to maintain the current momentum
- The timely execution of our ERP implementation in line with our
forecasted budget
Non-IFRS Measures and Reconciliation of Non-IFRS
Measure
This press release contains references to Adjusted EBITDA, a
non-IFRS measure. Non-IFRS financial measures are used by
management to evaluate the performance of the Company and do not
have any meaning prescribed by IFRS and therefore may not be
comparable to similar measures presented by other reporting
issuers. Non-IFRS financial measures used herein have been applied
on a consistent basis. “Adjusted EBITDA” means earnings before
income taxes, interest expense (net), share-based compensation,
depreciation (including for right-of-use assets), amortization,
restructuring and business integration costs, goodwill impairment
and change in fair value of consideration payable. Adjusted EBITDA
is a measure used by many investors to compare issuers. We believe
that Adjusted EBITDA is useful supplemental information as it
provides an indication of the results generated by the Company's
main business activities before taking into consideration how they
are financed, taxed, depreciated or amortized. Investors are
cautioned that non-IFRS financial measures, such as Adjusted
EBITDA, should not be construed as an alternative to net income or
cash flow determined in accordance with IFRS. The IFRS measure most
directly comparable to Adjusted EBITDA presented in our financial
statements is net loss.
The following table reconciles Adjusted EBITDA to net loss for
the periods indicated:
Unaudited in US $000
Three month periods
ended
September 30
2024
2023
Change
Change
$
$
$
%
Net loss
(1,910
)
(2,444
)
534
(22
)%
Tax expense (recovery)
(343
)
(347
)
4
(1
)%
Interest expense (net)
1,378
1,662
(284
)
(17
)%
Share-based compensation
728
662
66
10
%
Depreciation of property and equipment
1,085
1,073
12
1
%
Depreciation of right-of-use assets
678
759
(81
)
(11
)%
Amortization of intangibles
8,198
8,361
(163
)
(2
)%
Restructuring and business integration
costs
—
156
(156
)
(100
)%
Adjusted EBITDA
9,814
9,882
(68
)
(1
)%
Percentage of revenue
16
%
16
%
1
%
4
%
View source
version on businesswire.com: https://www.businesswire.com/news/home/20241106234313/en/
Sangoma Technologies Corporation Larry Stock Chief Financial
Officer investorrelations@sangoma.com
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