Sangoma Technologies Corporation

Thank you for standing by. This is the conference operator. Welcome to the Sangoma Investors Conference Call. As a reminder, all participants are in listen-only mode. The conference is being recorded. After the presentation, there will be an opportunity for analysts to ask questions. To join the question queue, you may press star, then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. I would now like to turn the conference over to Samantha Reburn, Chief Legal Officer. Please go ahead, Ms. Reburn.

Thank you, Operator. Hello, everyone, and welcome to Sangoma's second quarter of fiscal year 2025 investor call. We are recording the call and will make it available on our website for anyone who is unable to join us live. I'm here today with Charles Salameh, Sangoma's Chief Executive Officer, Jeremy Wubbs, Chief Operating and Marketing Officer, and Larry Salk, Chief Financial Officer. Charles will provide a high-level overview of the quarter. Jeremy and Larry will then take you through the operating results for the second quarter of fiscal year 2025, which ended on December 31, 2024. Following their presentation, we will open up the floor for Q&A with analysts. We will discuss the press release that was distributed earlier today, together with the company's financial statements and MD&A, which are available on CDAR+, EDGAR, and our website. As a reminder, Tengoma reports under International Financial Reporting Standards, IFRS. And during the call, we may refer to terms such as adjusted EBITDA, which is a non-IFRS measure but is defined in our MD&A. Before we start, I'd like to remind you that the statements made during the course of this call that are not purely historical are forward-looking statements regarding the company or management's intentions, estimates, plans, expectations, and strategies for the future. Because such statements deal with future events, they are subject to various risks and uncertainties, and actual results may differ materially from those projected in the forward-looking statements. Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in the accompanying MD&A, our annual information form, and the company's annual audited financial statements posted on CDAR+, EDGAR, and our website. With that, I'll hand the call over to Charles.

Thanks, Sam. We appreciate you guys taking the time to join us today and for your continued interest in and support of Sangoma. But I'm pleased to share our Q2 FY25 performance. Our focus remains unwavering, and we're fully committed to driving sustainable, profitable growth and delivering long-term value to our shareholders, clients, and our partners. It's been 14 months since we began this transformational journey, and I'm proud of the tremendous effort and the results the team has achieved during this time. Now, this journey has deepened our understanding of the viability and profitability of our various product lines, particularly in Q2. This knowledge has enabled us to refine our strategies, prioritize our investments that are aligned with our core business and our growth objectives while increasing profitability and free cash flow. Our vision has always been to position Sangoma as a highly innovative communications platform company, delivering high margin, recurring revenue streams. This quarter, with our financial position strengthening faster than anticipated, as Larry will describe, we are accelerating our efforts to build on this foundation. Our FY25 priorities have shifted accordingly, reflecting a stronger focus on core business alignment and long-term growth investments. Since launching our go-to-market transformation in May of 2024, our efforts were weighted heavily towards transactional, non-recurring product revenue to drive customer acquisitions and to create the cross-sell and up-sell opportunities. Simultaneously, we have been building momentum in larger, more profitable recurring revenue deals, which tend to have longer sales cycles, while also refining our partner ecosystem to support these long-term goals. We have leading indicators that Jeremy will discuss later on that support the MRR momentum and strategy, albeit it is taking a little longer than anticipated. One area of our business that is under review is our third-party hardware resale business. While not core to our long-term strategy, it provided an opportunity to expand our client base, particularly in the federal government sector, and provide some improved top-line growth. Entering fiscal 2025, we had expected to leverage the award of a GSA certificate, which essentially allows companies to sell products and services to the U.S. federal government to establish the groundwork for future recurring revenue streams within the U.S. federal government. However, recent shifts in government spending and administrative processes have created a lot of uncertainty in this segment, not just for us, but for many other industry players that serve this market. For example, a nearly $1 million U.S. federal government opportunity which we were well positioned to secure, was placed on hold in December of 2024. This uncertainty was reinforced with further executive orders by the new administration to freeze all government hires, sending a clear signal that the spending patterns have dramatically changed. In Q2, in this area of our business, it declined by $1.2 million compared to Q1, exclusive of the $361,000 that rolled over from the previous quarter. While the remainder of our business was beginning to show signs of sequential quarter-over-quarter growth, we now see limited potential for the third-party hardware resale segment to contribute meaningfully to our FY25 growth objectives. Rather than pursuing lower-margin hardware sales to offset this decline, which we could have, we chose to realign our efforts and, more importantly, our SG&A investments towards high-value opportunities within our core business. By prioritizing emerging mid-market opportunities and high-margin recurring revenue streams, we are positioning Sangoma for long-term success, along with the core strategies we have discussed previously. Building on the momentum from Q1, we continue to make meaningful progress in Q2 across key go-to-market initiatives. These efforts, which include expanding accounts, securing new logos, closing larger strategic deals, are driving measurable results and reinforcing our commitment to long-term growth. This quarter, we further increased our investment in CRM and ERP systems, process automation, and competency rescaling, all of which are nearing completion and already delivering clear benefits. Operational efficiency has improved significantly with strong cash conversions, cash from operations, while client satisfaction and NPS scores have reached new record highs. Additionally, churn rates have seen a remarkable improvement dropping back to below 0.95%. a significant improvement from our 1.1 a quarter ago and back in line with historical averages. This not only reflects the growing strength of our client relationships, but also validates the focus of our transformational efforts towards securing long-term recurring revenue streams. We've also reached key financial milestones well ahead of schedule, successfully achieving our fiscal year-end debt target of $55 to $60 million. This enhanced financial flexibility enables us to take bold strategic actions, expediting the divestiture of non-core assets while efficiently allocating capital to continue bringing down our debt. These processes are already in motion, and we are excited to move forward. As we discussed in previous calls, the divestment of non-core assets should have a significant positive impact on our profitability, enhancing both gross margin and EBITDA margin while creating new opportunities for innovation through both build and buy strategies. As a result, we are making the deliberate decision to adjust our year-end revenue guidance to reflect the strategic shift away from transactional lower-margin third-party hardware resale and an acceleration of our investment in our core business and strengthening the profitability of Sangoma. This move aligns with our long-term focus on investing in high-margin recurring revenue opportunities and optimizing the quality of our revenue streams. While this adjustment impacts top-line revenue expectations, our overall profitability outlook remains unchanged, and all other metrics remain at or ahead of plan. These actions underscore our focus and unwavering commitment to driving sustainable, profitable growth. Before handing it over to Jeremy, I want to reiterate our strategic priorities as we continue to evolve the business and align with our long-term goals. expanding our portfolio to acquisitions and potential developers, which are already underway and aligned to our core platform. Second, driving organic growth within our existing partner ecosystems and new partners. Third, prioritizing high margin recurring revenue solutions in key verticals, such as healthcare, education, distributed enterprise. Fourth, optimizing operations to deliver record efficiency and client satisfaction. Five, maintaining disciplined financial management to navigate the macroeconomic and political uncertainties while ensuring flexibility for future opportunities. By staying focused on these priorities, we are confident in our ability to drive and deliver greater value to our stakeholders and position Sangoma for its next phase of growth and value creation. Now I'll hand it over to Jeremy to discuss the quarter in far more detail. Jeremy?