Another Record Result, as Both Revenue and Adjusted EBITDA1 Almost Double that of Last Year
MARKHAM, ONTARIO, May 12, 2022 – 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 highlights of its unaudited results for the third quarter of fiscal year 2022, ended March 31, 2022.
As a reminder, Sangoma completed its acquisition of NetFortris Corporation (“NetFortris”) on March 28, 2022. As a result, there is minimal impact from NetFortris on Sangoma’s income statement for the third quarter, except for the transaction expenses and their effect on net income.
Sales for the third quarter of fiscal 2022 were a record $55.13 million, almost twice that of the same quarter last year.
“This was another excellent quarter for Sangoma, both strategically and operationally,” said Bill Wignall, President and CEO of Sangoma. “I am very excited about the acquisition of NetFortris towards the end of the quarter, I’m really pleased with the engagement between the NetFortris and Sangoma teams, and I’m encouraged by the early progress on integration. Operationally, our Services business continues to expand nicely, growing from $15.80 million last year in our third quarter, to $38.70 million this year, a figure which is also up by almost $1 million from the immediately preceding quarter. And our Product revenue held up again this quarter, about flat with our second quarter, despite the continuing and very challenging supply chain headwinds. Taken together, these factors all helped contribute to another record for quarterly revenue and Adjusted EBITDA. Finally, I’d like to reiterate the very warm welcome to all the NetFortris staff, partners, and customers!”
Gross profit for the third quarter of fiscal 2022 was $38.96 million, delivering gross margin of approximately 71% of sales, up from 66% in the same quarter last year.
Operating expenses were $41.90 million for the third quarter of fiscal 2022, up 4% sequentially over the most recent second quarter of fiscal 2022. When compared to last year, operating expenses are materially higher, primarily because of the addition of the Star2Star team, the associated spending, and the non-cash intangible asset amortization arising from the acquisition.
Adjusted EBITDA1 was $10.47 million in the third quarter of fiscal 2022, almost twice that of the same quarter last year, and at about 19% of revenue, is consistent with expectations for this point in the fiscal year.
Net loss for the third quarter of fiscal 2022 was $6.76 million, which includes the additional non-cash intangible asset amortization from the Star2Star acquisition.
Sangoma continues to maintain a healthy balance sheet, finishing the third quarter of fiscal 2022 with a cash balance of $16.24 million on March 31, 2022, remains comfortably within its debt covenants, and generated $5.06 million in Adjusted Cash Flow1.
Outlook for fiscal year 2022
As a result of the acquisition of NetFortris, the results for the third quarter and the assumptions below, Sangoma is increasing revenue guidance for its fiscal year 2022. Prior guidance for this year, as disclosed in the news release dated February 10, 2022, had been for revenue of between $215 and $219 million. The Company now expects revenue of between $230 and $232 million for fiscal year 2022. Further, Sangoma is reconfirming Adjusted EBITDA guidance of $42 to $44 million, for fiscal 2022, based upon forecasted results from our core business, anticipated contributions from NetFortris as the integration begins, and the expected synergies.
The above outlook and modified 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 has experienced in the fiscal year to date and the trends we expect going forward
- The continuing recovery of the global economy, decreased government restrictions and increased customer demand as a result of COVID-19
- The successful integration of NetFortris and the achievement of post-closing synergies such as the ability to cross-sell NetFortris and Company products and services to the other’s customer base and the amalgamation of data centers
- The NetFortris business continuing to operate and generate results in a manner consistent with its business preceding its acquisition by the Company and as anticipated once integration begins in Q4
- There being continuing growth in the global UCaaS and cloud communications markets more generally
- There being continuing demand and subscriber growth for the Company’s cloud offerings
- Changes in global exchange rates do not disrupt 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 material increase to the Company’s manufacturing, labour or shipping costs
- That the Company is able to attract and keep the employees needed to maintain the current momentum
- The continued ability for the Company’s operational employees to work at the Company’s internal and outsourced facilities
- Other employees being able to work from home as required without any material impact on productivity
Full third quarter results and conference call
Sangoma will host a conference call on Friday, May 13, 2022 at 8:00 am EST to discuss these results. The dial-in number for the call is 1-800-319-4610 (International 1-604-638-5340). Investors are requested to dial in 5 to 10 minutes before the scheduled start time and ask to join the Sangoma call.
1 Adjusted Operating Income, Adjusted EBITDA and Adjusted Cash Flow are metrics used by the Company to monitor its performance and definitions of these terms, as well as other important information on these results, may be found in the accompanying MD&A posted today at www.sedar.com.
2 These results are being presented in United States dollars and reflect the seven to one share consolidation undertaken on November 2, 2021.