View Press Release
View MDA
View Financial Statements
Listen to Call Recording
MARKHAM, Ontario, May 11, 2023 (GLOBE NEWSWIRE) — 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 third quarter ended March 31, 2023.
Revenue for the third quarter of fiscal 2023 was $62.76 million, an increase from the prior year of 18%.
| US $000 | Q3 FY2023 | Q3 FY2022 | Change | Q2 FY2023 | Change | |||
| Sales | $62,764 | $53,366 | 18% | $62,035 | 1% | |||
| Gross profit | $44,424 | $37,201 | 19% | $42,789 | 4% | |||
| Operating expenses1 | $43,368 | $40,137 | 8% | $44,258 | (2)% | |||
| Net loss | $(685) | $(6,755) | $(2,735) | |||||
| Net loss per share (fully diluted) | $(0.02) | $(0.21) | $(0.08) | |||||
| Adjusted EBITDA2 | $12,243 | $10,469 | 17% | $10,550 | 16% | |||
“Our third quarter brought significant changes to Sangoma. While change can be very difficult at times, I am proud of our team for remaining focused on delivering excellent results for our customers and shareholders,” said Norm Worthington, Interim Executive Chairman. “It is an exciting time for Sangoma to continue to see our team’s hard work drive our transition to a more SaaS focused business. In the third quarter our Services revenue increased by 2.25% sequentially from the prior quarter, again equivalent to an annualized organic growth rate of 10%. Services also represented 81% of our total sales this quarter, up from 80% last quarter and 69% in the same quarter of last year. And while our Services business continues to grow and compound, our Product revenue slightly declined this quarter as it remains impacted by macro conditions resulting in continued sensitivity to capex purchases. While our increase in revenue quarter over quarter was modest we delivered an Adjusted EBITDA2 for the quarter of over $12.24 million, representing about 20% of revenue and a 16% increase from last quarter.”
Revenue for the fiscal third quarter was $62.76 million, up from $53.37 million in the third quarter last year by 18%, and up by approximately 1% from the immediately preceding second quarter of fiscal 2023. Services revenue increased sequentially by over $1 million or by 2.25% from the previous quarter, representing 81% of total sales. The growth in Services revenue is the second consecutive quarter supporting an annualized 10% organic growth rate, as was discussed in our second quarter results.
Gross profit for the quarter was $44.42 million, up from $37.20 million in the same period last year. Gross margin at 71% of revenue for the quarter was slightly above the 69% in the second quarter of fiscal 2023, due at least in part to increased sales of higher margin offerings such as cloud services. While gross margin will naturally fluctuate slightly from quarter to quarter, fiscal third quarter gross margin landed on the higher end of that expected range.
Operating Expenses1 were $43.37 million for the quarter compared to $40.14 million in the third quarter of fiscal year 2022. The year over year increase reflects the added costs associated with the NetFortris acquisition, a decrease of just under $1 million from the immediately prior quarter.
Adjusted EBITDA2 was $12.24 million in the third fiscal quarter of 2023, up from the $10.47 million for the same period of the prior year, and was approximately 20% of sales. The increase in Adjusted EBITDA2 in the third quarter also represents a 3% increase as a percentage of revenue when compared to our second quarter results.
Net loss for the third quarter was $0.69 million as compared to $6.76 million for the third quarter of fiscal 2022.
Sangoma continues to generate positive Adjusted Cash Flow2 and maintain a healthy balance sheet, finishing the quarter with a cash balance of $8.01 million on March 31, 2023 and remains comfortably within its debt covenants.
As previously disclosed in its press release of March 29, 2023, Sangoma filed a resale registration statement on Form F-3 (the “Resale Registration Statement”) with the Securities and Exchange Commission (the “SEC”) for the registration of 12,271,637 of its common shares previously issued or to be issued pursuant to the terms of that certain stock purchase agreement previously entered into by Sangoma in connection with the acquisition of StarBlue Inc. on March 31, 2021 (the “StarBlue Acquisition”). The Resale Registration Statement was declared effective by the SEC on April 12, 2023, and the remaining 9,142,856 common shares that were to be issued on a quarterly basis over the next three years pursuant to the StarBlue Acquisition were all issued on May 9, 2023.
Outlook for fiscal year 2023
Given the results for the first three quarters of fiscal 2023 and in light of the items below including global economics, the Company is narrowing its revenue guidance from $250- $260 million to $250 – $254 million and its Adjusted EBITDA2 guidance from $46 – $49 million to $46 – $48 million.
The above outlook and guidance constitute forward-looking information and are 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 revenue trends the Company experienced in fiscal year 2022 and fiscal 2023 to-date, the trends we expect going forward in fiscal 2023, and the impact of growing economic headwinds globally
- The continuing recovery of the global economy from the impact of COVID-19, including decreased government restrictions and increased customer demand, all of which would not be materially negatively affected by more recent macro factors such as inflation, interest rates, or recessions
- 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 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
- There are no additional revenue reclassifications
- The Company is able to remediate the material weaknesses identified in its internal control over financial reporting
- That the Company is able to attract and retain the employees needed to maintain the current momentum
Conference call
Sangoma will host a conference call on Thursday, May 11, 2023, 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 foreign exchange (gain) loss.
2 Adjusted EBITDA and Adjusted Cash Flow are non-IFRS financial measures used by the Company to monitor its performance and definitions of these terms along with reconciliation to the closest IFRS measure may be found in the accompanying MD&A on pages 17, and 19 posted today at www.sedar.com and www.sec.gov.