MARKHAM, ONTARIO, February 27, 2020 – Sangoma Technologies Corporation (TSX VENTURE:STC), a trusted leader in delivering Unified Communications solutions for SMBs, Enterprises, OEMs, and Service Providers, both on-premise and in the cloud, today announced highlights of its second quarter unaudited results of fiscal 2020, ended December 31, 2019.
For the second quarter of fiscal 2020, sales were a record $32.29 million, 10% higher than the same quarter in fiscal 2019 and 15% above the immediately preceding first quarter of this year. EBITDA at $5.19 million was an all-time high, and the first time ever that Sangoma has generated more than $5 million in EBITDA in a single quarter.
| Q2 FY2020 | Q2 FY2019 | Change | Q1 FY2020 | Change | |
| Sales | $32.29 m | $29.22 m | 10% | $28.01 m | 15% |
| Gross profit | $21.32 m | $17.83 m | 20% | $17.48 m | 22% |
| Operating Expense | $19.17 m | $17.03 m | 13% | $15.88 m | 21% |
| Operating Income1 | $2.15 m | $0.79m | $1.61 m | ||
| Net Income | -$1.33 m | -$0.27 m | $0.91 m | ||
| Net earnings per share (fully diluted) | ($0.018) | ($0.005) | $0.013 | ||
| EBITDA1 | $5.19 m | $2.40 m | 116% | $3.67 m | (41%) |
1 Operating Income and EBITDA are metrics used by the Company to monitor its performance and the definitions may be found in the accompanying MD&A posted today at www.sedar.com.
“I’m pleased to see Sangoma grow from the prior year’s revenue for the twentieth straight quarter and I’m particularly proud to see EBITDA cross the $5 million per quarter mark for the first time”, said Bill Wignall, President and CEO of Sangoma. “Our second quarter had a number of features worth noting including the acquisition of VoIP Innovations to kick off the quarter (which is delivering nicely to our expectations), the really encouraging signs of continued solid growth in our services business, slightly softer demand for our one-time product sales like many companies are seeing these days given events around the globe, and a significant reduction in debt service costs as we locked in half of our loans at a lower interest rate of 4.2%. And subsequent to the end of our second quarter, we entered into an agreement to acquire e4 Strategies, in order to strengthen our sales capabilities in the open source market.”
Gross profit was $21.32 million in the second quarter of fiscal 2020 at a gross margin of 66%, 5% higher than for the same quarter last year and continuing the trend of slightly stronger gross margins as the percentage of Sangoma revenue from recurring revenue continues to increase, bolstered this quarter by the inclusion of the VoIP Innovations acquisition for part of the quarter.
Operating expenses were $19.17 million in the second quarter of fiscal 2020, $2.14 million higher than last year almost entirely from the inclusion of VoIP Innovations early in the quarter.
For the second quarter of fiscal 2020, EBITDA at $5.19 million was more than twice that in the same quarter last year, primarily resulting from the inclusion of VoIP Innovations for part of the quarter, growing services revenue, and the adoption of IFRS 16 at the beginning of this fiscal year.
Net loss for the second quarter ended December 31, 2019 was $1.33 million, including the $2.60 million of acquisition costs, compared to a net loss of $0.27 million in the second quarter of fiscal 2019.
Sangoma finished the quarter with a cash balance of $13.36 million, working capital of $2.03 million and total debt of $43.31 million. Adjusted cash from operations, excluding the impact of the acquisition of VoIP Innovations, was $0.95 million. The lower than usual adjusted cash flow was caused primarily by the elimination of a large contract manufacturer to simplify our supply chain, requiring a temporary build in inventory (as had been previously communicated), together with modest movements in a few working capital items.
Guidance
Given the growing possibility of further disruption in supply chains due to the coronavirus, the increasing uncertainty regarding the global economy and the number of flashpoints around the world, the slightly softer demand for one-time product sales, and the impact of IFRS16, we have decided to revise our guidance. For fiscal 2020, Sangoma is slightly lowering revenue guidance to $128 – 132 million, but is increasing our expected range for EBITDA up to $19 – 21 million.
Conference Call
President and CEO, Bill Wignall, and CFO, David Moore will host a conference call on Thursday February 27, 2020 at 5.30 pm Eastern Standard Time to discuss the quarterly 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.