Continued strength in Services mix at 82% of
total revenue in Q3 while Net Cash provided by Operating Activities
increased 121% over the prior year period.
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 third quarter financial results and
unaudited condensed consolidated interim financial statements for
the quarter ended March 31, 2024.
US $000
Q3 FY2024
Q3 FY2023
Change
Q2 FY2024
Change
Revenue
$61,046
$62,764
(3)%
$62,276
(2)%
Gross profit
$43,000
$44,424
(3)%
$43,986
(2)%
Operating expenses1
$42,745
$43,368
(1)%
$44,537
(4)%
Net loss
$(1,268)
$(685)
$(3,239)
Net loss per share (fully diluted)
$(0.04)
$(0.02)
$(0.10)
Adjusted EBITDA2
$11,155
$12,243
(9)%
$10,448
7%
Net cash provided by operating
activities
$15,506
$7,008
121%
$9,188
69%
Cash conversion of net cash provided by
operating activities to Adjusted EBITDA2
139%
57%
143%
88%
58%
Sangoma's Services revenue was $50.35 million, representing 82%
of total revenue in the third quarter of fiscal 2024. Products
revenue decreased year over year, driven by macroeconomic headwinds
and some delayed orders, however is consistent with our strategic
objective to shift towards services.
The Company's balance sheet remains very strong as it continues
to improve quarter over quarter. The third quarter finished with
net cash provided by operating activities ("operating
cash flow") of $15.51 million, an increase of 121% from the
prior year period, and a cash balance of $18.39 million on March
31, 2024, reflecting a strong quarterly progression of operating
cash flow. Cash conversion of operating cash flow to Adjusted
EBITDA2 during the second quarter reached 139%, almost two and half
times the rate compared to 57% conversion a year ago and 88% from
the immediately preceding quarter. Sangoma continues to remain
comfortably within its debt covenants.
"We are two quarters into the transformative journey and I am
exceptionally pleased and proud of how the Sangoma team is
maintaining excellent service for our core customers while
bolstering our financial health," stated Charles Salameh, Chief
Executive Officer.
"Our initiatives in expanding our go-to-market, reinvigorating
our brand and investing in our enterprise architecture program are
all tracking to plan. This, along with the continued strengthening
of our balance sheet will enhance the strategic options we have to
increase the value of our business."
Given the results for the third quarter and the assumptions
below, Sangoma is reaffirming and providing further clarity on its
guidance for fiscal year 2024. Prior guidance, announced on
February 9, 2024, projected revenues ranging between $245 million
and $250 million, with Adjusted EBITDA2 expected to fall within $41
million and $44 million. Upon careful evaluation, Sangoma is
narrowing its fiscal year 2024 revenue guidance to a range of
$246.5 million to $248.5 million and is refining its Adjusted
EBITDA2 forecast to be between $41.5 million and $43.5
million.3
Operating expenses1 were $42.75 million for the quarter,
slightly down from $43.37 million for the same period last year by
about 1%.
Net loss for the third quarter was $1.27 million, while Adjusted
EBITDA2 remained strong at $11.16 million or 18% of total revenue,
reflecting a 7% increase compared to Q2 of fiscal year 2024.
Conference call
Sangoma will host a conference call on Wednesday, May 8, 2024,
at 5:30 pm ET to discuss these results. The dial-in number for the
call is 1-800-319-4610 (International 1-604-638-5340). 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 is a leading provider of managed cloud-based
communications and technology solutions for businesses worldwide.
With a deep commitment to simplifying and enhancing communications,
Sangoma offers a comprehensive suite of cloud-native communication
solutions, including software, endpoints and connectivity services.
With a focus on value-based offerings, Sangoma empowers businesses
of all sizes to streamline their processes, reduce operational
complexity, and increase efficiency. Whether it's cloud software
solutions, reliable endpoints, or seamless connectivity, Sangoma's
expert team is dedicated to delivering trusted and innovative
services.
Sangoma is your one-stop solution for managed cloud
communications services, making vendor management more
straightforward and saving you valuable time. To learn more about
how Sangoma can transform your communication infrastructure, visit
our website at 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 remediate material weaknesses and
significant deficiencies in our internal controls, changes in the
regulatory environment, the imposition of tariffs, the decline in
the importance of the PSTN (as hereinafter defined), impairment of
goodwill and new competitive pressures, and acts of terrorism and
war, hostilities and conflicts, including, but not limited to,
Russia’s invasion of Ukraine in February 2022 (and associated
changes in global trade policies and economic sanctions), and the
other risk factors described in our most recently filed Annual
Information Form for the fiscal year ended June 30, 2023.
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 2024
to-date, the trends we expect going forward in fiscal 2024, 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, labour or
shipping costs
- That the Company is able to attract and retain the employees
needed to maintain the current momentum
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:
Three month periods
ended
March 31,
Nine month periods
ended
March 31,
2024
2023
Change
Change
2024
2023
Change
Change
$
$
$
%
$
$
$
%
Net loss
(1,268)
(685)
(583)
85 %
(6,951)
(5,396)
(1,555)
29 %
Tax
(195)
(259)
64
(25) %
(1,186)
228
(1,414)
(620) %
Interest expense (net)
1,718
1,666
52
3 %
5,175
4,876
299
6 %
Share-based compensation
764
541
223
41 %
2,282
2,738
(456)
(17) %
Depreciation of property and equipment
1,169
1,135
34
3 %
3,292
3,634
(342)
(9) %
Depreciation of right-of-use assets
716
939
(223)
(24) %
2,206
2,917
(711)
(24) %
Amortization of intangibles
8,251
8,572
(321)
(4) %
24,974
25,727
(753)
(3) %
Restructuring and business integration
costs
—
2,188
(2,188)
(100) %
1,491
2,595
(1,104)
(43) %
Loss (gain) on change in fair value of
consideration payable
—
(1,854)
1,854
(100) %
202
(3,785)
3,987
(105) %
Adjusted EBITDA
11,155
12,243
(1,088)
(9) %
31,485
33,534
(2,049)
(6) %
Percentage of revenue
18 %
20 %
(1) %
(6) %
17 %
18 %
(1) %
(6) %
View source
version on businesswire.com: https://www.businesswire.com/news/home/20240508187647/en/
Sangoma Technologies Corporation Larry Stock Chief Financial
Officer investorrelations@sangoma.com
Sangaoma Technologies (NASDAQ:SANG)
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