SANG

• Charles Salameh highlighted strong financial performance in Q3 with revenue of $58.1 million, adjusted EBITDA margins of 17%, and strong cash generation. The major transformation through Project Diamond is complete. The new ERP system is on track with user acceptance testing in April, expected to yield $5 million in savings over three years. The company shifted focus to pure-play communications software, divested non-core assets.
• Jeremy Wubs discussed the ERP system being online, improved Net Promoter Score and customer satisfaction, IT system enhancements including TeamHub and contact center offerings, and marketing efforts to sharpen branding. The large deal pipeline increased 90% quarter-over-quarter, and the infrastructure business was up 15% year-over-year.
• Larry Stock detailed net cash from operating activities of $10.6 million, cash conversion rate of 109%, free cash flow of $8.4 million in the first three quarters, debt reduction to $35.8 million, and financial results including revenue, gross profit, and adjusted EBITDA figures.

Sangoma reaffirmed and narrowed its revenue guidance for Fiscal Year 2025 to $235 million to $238 million from the prior range of $235 million to $240 million. Adjusted EBITDA guidance remains $40 million to $42 million, approximately 17% of revenue. The net effect of lower revenue in the second half of the fiscal year has a relatively small impact on adjusted EBITDA, with margin expected to improve as the company focuses on higher-margin core offerings.

In the third quarter of Fiscal Year 2025, Sangoma reported revenue of $58.1 million. The core platform products and services revenue increased sequentially for the second consecutive quarter, while non-core products, including third-party resale, declined. Gross profit was $40 million, with gross margin improving to 69% of revenue. Adjusted EBITDA for the quarter was $9.8 million, representing 17% of revenue. The revenue contribution from core on-premises solutions and other product lines increased quarter-over-quarter, reflecting strategic efforts and competitor exits from the on-premise market.

• Tariffs and geopolitical risk could materially impact the business, though no material impact was seen yet. - Legacy player disengagement and commoditization pressures on single solution vendors pose challenges, but Sangoma is positioned to capitalize on industry shifts towards cloud and hybrid models.

Q: Gavin Fairweather asked about whether Sangoma has fully hit its stride under the new program and potential sales momentum gains.

A: Charles Salameh responded that the transformation is ongoing, with the company now in a position to accelerate, having efficient systems, tools, and processes in place, and momentum expected to build in FY 2026.

Q: Gavin Fairweather inquired about the importance of partners in industry verticals.

A: Charles Salameh mentioned adding partners with strong niches in industries like healthcare and hospitality, with a focus on industry-aligned partners and the Pinnacle partner program gaining traction.

Q: Keaton Schuelke asked about sales cycles and acquisitions.

A: Charles Salameh said sales cycles for core business are normal, but hardware resale sales cycles were affected by tariff dynamics; acquisitions are an important part of the growth strategy, with inorganic growth being one-third of the strategy, and the company now in a position to make thoughtful acquisitions.

Q: David Kwan asked about capital allocation and margins.

A: Larry Stock stated they are comfortable with the NCIB and will assess further capital allocation later; Charles Salameh added that self-funding growth is the mission, with operating leverage expected to increase over time, and margins may fluctuate but the company will self-fund growth opportunities.

Q: Robert Young asked about channel dynamics and on-prem opportunities.

A: Charles Salameh explained that legacy player disengagements create opportunities for Sangoma to attract channel partners and grow with on-prem customers as they migrate to cloud, with a focus on maintaining high customer satisfaction to support migration.