Sangoma Technologies Corp. Q2 FY2024 earnings call

Charles Salameh highlighted progress in the 100-day plan, including management team changes (e.g., hiring a CIO, sales operations leader, and marketing head), organizational restructuring for agility and cost reduction, and self-funding the transformation. Jeremy Wubs discussed the go-to-market strategy shift from component sales to bundled offerings for mid-market clients, shared a client win in the US park department, and mentioned an innovation team developing AI-powered features across products. Larry Stock talked about cash flow from operations at $9.19 million, double the prior year, cash conversion at 88%, paid down debt, inventory at healthy levels, and headcount reductions leading to ~$6 million in cost savings in FY and ~$9 million annualized.

In the second quarter of fiscal 2024, Sangoma reported total revenues of $62.3 million. Services revenue was $50.7 million, accounting for 81% of total quarter revenue, up 3% year-over-year but down just under 1% sequentially. Product revenue was $11.6 million, representing 19% of total quarter revenue, down 3% sequentially due to geopolitical and global economic conditions. Gross profit for the second quarter was $44 million, up 3% compared to the same period last year, with a gross margin of approximately 71%, up 2 percentage points from the same quarter last year. Adjusted EBITDA for the second quarter was $10.4 million, representing approximately 17% of revenue.

Sangoma provides fiscal 2024 revenue guidance in the range of $245 million to $250 million and adjusted EBITDA guidance in the range of $41 million to $44 million. The company expects a lag in revenue from the transformation but is confident in sustained profitable growth going forward.

Forward-looking statements are subject to various risks and uncertainties discussed in the MD&A, annual information form, and annual audited financial statements. Geopolitical and global economic conditions pose risks, particularly affecting product revenue due to conservatism in CapEx by customers.

Q: One on the sales cycle. If you could comment on how the sales cycle is coming along for bundles.

A: Increasingly, as we've done a better job of packaging the integrated offers, we've seen that kind of a reduction in the sales cycle for the bundles. I'd say that, kind of that being said, back to what Charles was commenting earlier about the partners and the partner ecosystem. You know, we still have some work to do to figure out, hey, what are the right bundles for which partners to, you know, because the partners themselves are a key part of that cycle. So I'd say, you know, exciting progress to see so far. But we've got more to come as we optimize and figure out the best way to manage and grow through our partner ecosystem.

Q: On collections and bad debt, do you see them declining as you make this transformative plan?

A: Collections and bad debt are declining. We're very pleased with our AR and how quickly we turned AR into cash. That's evident, you know, with the cash position that we have and how quickly we turn it. There's nothing of any concern that I have relative to the AR base. We're not seeing any issues currently with anything economic that's driving anything down.