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MARKHAM, ONTARIO, September 18, 2024 – Sangoma Technologies Corporation (TSX: STC; Nasdaq: SANG) (“Sangoma” or the “Company”), a trusted leader in providing cloud-based Communications as a Service solutions for businesses of all sizes, today announced its fourth-quarter financial results and audited consolidated financial statements for the year ended June 30, 2024.
| US $000 | T4 FY2024 | T4 FY2023 | Variation | FY2024 | FY2023 | Variation |
|---|---|---|---|---|---|---|
| Revenue | $60 934 | $63 680 | (4)% | $247 284 | $252 530 | (2)% |
| Gross profit | $41 807 | $42 241 | (1)% | $172 821 | $172 791 | —% |
| Operating expenses1 | $41 600 | $43 708 | (5)% | $173 883 | $175 740 | (1)% |
| Net loss | $(1 708) | $(23 630) | $(8 659) | $(29 026) | ||
| Net loss per share (fully diluted) | $(0,05) | $(0,72) | $(0,26) | $(0,88) | ||
| Adjusted EBITDA2 | $11 110 | $10 860 | 2% | $42 595 | $44 394 | (4)% |
| Net cash from operating activities | $11 703 | $10 855 | 8% | $44 246 | $26 487 | 67% |
| Net cash from operating activities as % of adjusted EBITDA2 | 105% | 100% | 5% | 104% | 60% | 74% |
Total revenue for fiscal 2024 was $247.3 million, well within the guidance range of $246.5 to $248.5 million, while Adjusted EBITDA2 also met expectations, reaching $42.6 million against a guidance range of $41.5 to $43.5 million. The Company’s service revenue for the year increased 1.83% year over year, while product revenue declined, primarily due to the sunsetting of certain low-margin products as part of the go-to-market transformation and macroeconomic headwinds.
Gross margin for fiscal 2024 was approximately 70% of revenue, up from 68% in fiscal 2023, driven by a favorable services/products revenue mix of 82%/18% compared with 79%/21% the previous year.
The Company’s financial position remains strong, ending the fourth quarter and fiscal 2024 with net cash from operating activities (“operating cash flow”) of $11.7 million and $44.2 million, respectively, representing increases of 8% and 67% over the previous periods. The Company closed the year with a cash balance of $16.2 million, reflecting robust quarterly growth in operating cash flow, primarily due to fiscal 2024 cost-saving initiatives and effective working capital management.
Net cash from operating activities as a percentage of Adjusted EBITDA2 for the fourth quarter reached 105%, bringing the Company’s fiscal year-end figure to 104%, a significant increase from 60% in fiscal 2023.
Operating expenses1 were $41.6 million for the quarter and $173.9 million for fiscal 2024, down approximately 5% and 1%, respectively, compared with the previous period.
“Over the past year, we successfully executed our transformation strategy,” said Charles Salameh, Chief Executive Officer. “What gives me confidence in our ability to shift into growth mode rests on three things: (1) strong finances and available cash, (2) an experienced go-to-market leader and team in place who have developed a formidable growth plan, and (3) the underlying infrastructure to support them.”
The Company’s balance sheet remains robust as it continues to improve. As previously announced, Sangoma repaid $5.3 million of debt in the fourth quarter, bringing total debt repayments for the quarter to $9.7 million, marking the first in a series of planned payments aimed at reducing Sangoma’s debt to less than $60.0 million by the end of fiscal 2025, as outlined in our capital allocation strategy. Sangoma remains comfortably within its debt covenants.
Net loss was $1.7 million for the fourth quarter and $8.7 million for fiscal 2024, while Adjusted EBITDA2 remained strong at $11.1 million for the quarter and $42.6 million for the year, representing 18% and 17% of total revenue, respectively. The Company is pleased to have self-funded its transformation to date, including a total of $0.6 million related to its strategic enterprise resource planning (“ERP”) initiative in 2024. Without this investment, the fiscal-year Adjusted EBITDA2 would have been $43.2 million.
Fiscal 2025 Outlook3
The Company is providing guidance for fiscal 2025. Sangoma expects revenue of between $250 million and $260 million and Adjusted EBITDA2 of between $42 million and $46 million, including $2.1 million in one-time ERP costs. The Company also expects first-quarter revenue of between $61 million and $62 million and Adjusted EBITDA2 of $9 million to $10 million.
Conference Call
Sangoma will host a conference call on Wednesday, September 18, 2024 at 5:30 p.m. (ET) to discuss these results. The dial-in number for the call is 1‑844‑763‑8274 (International +1‑647‑484‑8814). Participants are asked to connect 5 minutes before the scheduled start time and ask to join the Sangoma call.
1 Operating expenses include sales and marketing, research and development, general and administrative expenses, and amortization of intangible assets. 2 Adjusted EBITDA is a non-IFRS financial measure used by the Company to monitor its performance. Please refer to 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 refer to the section entitled “Cautionary Statement Regarding Forward-Looking Information” in this press release.
About Sangoma Technologies Corporation
Sangoma (TSX: STC; Nasdaq: SANG) is a business communications platform provider offering solutions including its award-winning UCaaS, CCaaS, CPaaS, and trunking technologies. Its enterprise-grade communications suite is developed in-house and available for cloud, hybrid, or on-premises deployments. In addition, Sangoma offers managed connectivity, networking, and security services. A trusted communications partner for more than 40 years, Sangoma has more than 2.7 million UC seats across a diverse base of more than 100,000 customers. Sangoma has been recognized in the Gartner UCaaS Magic Quadrant for nine consecutive years. As the developer and primary sponsor of the open-source Asterisk and FreePBX projects, Sangoma is committed to continuously driving innovation in communications technology. For more information, visit www.sangoma.com.
Cautionary Statement Regarding Forward-Looking Statements
This press release contains forward-looking statements, including statements concerning the future success of our business, development strategies and future opportunities.
Forward-looking statements are provided for the purpose of presenting management’s current expectations and plans regarding 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 regarding management’s guidance on revenue and Adjusted EBITDA, statements regarding expected future production and cash flows, and other statements that are not historical facts. When used in this document, 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, these statements involve risks and uncertainties, and no assurance can be given that actual results will conform to these forward-looking statements. Forward-looking statements are based on management’s opinions and estimates as of the date 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 from those projected in the 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 on which they are based will be realized. By their nature, forward-looking statements involve numerous known and unknown assumptions, risks and uncertainties, both general and specific, that contribute to the possibility that the forecasts, projections and other events contemplated by the forward-looking statements may not occur. Although Sangoma believes that the expectations represented by such forward-looking statements are reasonable, there can be no assurance that these expectations will prove correct, as these expectations are inherently subject to business, economic and competitive uncertainties. Some of the risks and other factors that could cause results to differ from those expressed in the forward-looking statements contained herein include, but are not limited to, risks and uncertainties related to fluctuations in exchange rates between the Canadian dollar and other currencies (particularly the U.S. dollar), technological changes, changes in economic climate, changes in macroeconomic conditions, including (i) inflationary pressures and potential recessionary conditions, as well as actions taken by central banks and regulators around the world to reduce, limit and address these pressures and conditions, including any increases in interest rates, and (ii) the effects of adverse developments in financial institutions, including bank failures, that affect general sentiment regarding the stability and liquidity of banks, and the resulting impact on the stability of global financial markets in general, risks related to the COVID‑19 pandemic and any resurgence, our ability to effectively identify and remediate material weaknesses and significant deficiencies in our internal controls, our current level of indebtedness and our ability to incur additional short-term and long-term indebtedness; changes in the regulatory environment, the imposition of tariffs, the declining importance of the PSTN (as defined in our MD&A), goodwill impairment and new competitive pressures, political unrest, geopolitical instability and tensions, or terrorist attacks, and changes associated with trade policies and global economic sanctions, including, but not limited to, in connection with (x) the ongoing conflict in Ukraine (the “Russia‑Ukraine War”) and (y) any impact, effect, damage, destruction and/or personal injury directly or indirectly related to ongoing hostilities in the Middle East, and technological changes affecting the development of our products and the implementation of our business requirements, including with respect to automation and the use of artificial intelligence (“AI”), and the other risk factors described in the most recently filed annual information form for the fiscal year ended June 30, 2024.
Our guidance is based on the Company’s assessment of numerous significant assumptions, including:
- The Company’s ability to manage current supply chain constraints, including our ability to secure electronic components and parts, manufacturers’ ability to deliver ongoing quantities of finished products on time, no further material increase in the cost of electronic components, and no significant increase in shipping costs or material shipping delays
- The successful transformation of the Company’s go-to-market strategy
- Revenue trends the Company has experienced so far in 2025, trends we expect going forward in 2025, the impact of our go-to-market strategy transformation, and the impact of growing economic headwinds globally
- The ongoing effects of recent macroeconomic factors such as inflation, interest rates, recessions, invasions, or declarations of war
- There is continued growth in the global UCaaS and cloud communications markets in general
- There is continued demand and subscriber growth for our Services and continued demand as expected for our Products
- The impact of global foreign exchange rate fluctuations on demand for the Company’s products and services
- The ability of the Company’s customers to continue their business operations without a material impact on their requirements for the Company’s products and services
- Revenue forecasts from the Company’s internal sales team and channel partners will meet current expectations, which are based on certain management assumptions, including continued demand for the Company’s products and services, no material delays in receiving products from its contract manufacturers, and no further increases in manufacturing, labor, or shipping costs
- That the Company is able to attract and retain the employees needed to maintain the current pace
- The timely implementation of our ERP in accordance with our projected budget
Non-IFRS Measures and Reconciliation of Non-IFRS Measures
This press release contains references to adjusted EBITDA, a non-IFRS financial measure. Non-IFRS financial measures are used by management to evaluate the Company’s performance and have no meaning prescribed by IFRS and are therefore not comparable to similar measures presented by other issuers. The non-IFRS financial measures used in this document have been applied consistently. “Adjusted EBITDA” means earnings before taxes, interest (net), share-based compensation, depreciation (including right-of-use assets), amortization, business restructuring and integration costs, impairment of goodwill, and changes in the fair value of contingent consideration payable. Adjusted EBITDA is a measure used by many investors to compare issuers. We believe adjusted EBITDA is useful supplementary information because it provides an indication of the results generated by the Company’s principal activities before taking into account how they are financed, taxed, depreciated, or impaired. Investors are cautioned that non-IFRS financial measures, such as adjusted EBITDA, should not be interpreted 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 income.
The following table reconciles adjusted EBITDA to net income for the periods indicated: