Okay, good morning, everyone. Hope you're all feeling bright-eyed and cheery. Looks like a lot of people took their B1s last night, so not bad of a night. Look, my name is Charles Salameh. I am the CEO of Sangoma Technologies. I think today, just given the kind of crowd size, what I'd like to do is just kind of keep this relatively simple. It's a simple company, fairly small in size, $250 million type company. Give you a sense today of just why I joined the company, which I did in September of 2023.
What we've done and what we were focused on for the first year that I came here, where we intend on taking the company, and then I'll show you some of the key financial metrics from an investment point of view and give you an indication why I think this is going to be one of the companies that you should kind of keep your eye on. Sangoma Technologies was founded about 40 years ago. It was a very small voice-based company selling mostly PBX cards, things of that nature. My career is 35 years in the IT industry, mostly with Fortune 1000, big, big technology players.
First 15 years with Bell Canada, went to the top of the food chain there, became one of their EVPs, then became President of Hewlett-Packard Canada, then took over all of Hewlett-Packard's North American and South American IT outsourcing businesses, went to Nortel for a couple of years, bought LG Electronics out of Korea, became their CEO and President for three years in Korea, then came back, did a merger between CSC and Hewlett Packard Enterprise. We formed DXC, which went on IPO back in April of 2017. Really good example of why leadership matters. You saw that if you followed that stock, it went, you know, IPO to $67, went to $98 and came crashing back down to $16. A lot of that to do with leadership. Taught me a lot about why leadership matters at the CEO level. Then went to Infosys.
For those who do not know that company, it is the third largest system integrator on the planet. This was right around the time that cloud migration was beginning to really ramp up for the enterprise, around 2018. I became Chief Revenue Officer of that organization, about 500,000 employees at the time all over the world, and doing quite well. The career was going well. One of the board members at Hewlett-Packard, who used to be the Chief Marketing Officer, joined this company and called me and said, "Hey, Charles, you want to come and have a look at this company?" I am like, "What are you, nuts? Like, I am running an $18 billion business. You want me to come and look at a $250 million company?" She knew that there is something here that I would, through my eyes, that I would see. This is where the journey starts.
I took the job, just so you know. Sangoma was, you know, like I said, a very old company. The previous CEO to me was a guy named Bill Wignall, who bought 11 companies over the period of about seven years. These companies were voice companies, data companies, networking, hardware, telephony, most of it all proprietary owned. This was during the COVID period. If you heard what I said about my career, between 2018 and 2022, we had probably the fastest growth in enterprise ever, where I was personally responsible for moving almost $800 million of private data center environments for the enterprise to Amazon, to Azure, to Google, which is what caused Amazon's stock to go like crazy in the early, you know, 2021, 2022. That was also obviously exacerbated by the impacts of COVID.
What COVID also did was turn the UCaaS market on its heels because video conferencing, working from home, the Zoom phenomena, the Teams phenomena, companies that were in the UCaaS space had valuations that went through the roof. Between 2020 and 2021, Sangoma went from $2.50 to $31. Now, it bought 11 companies of every type: voice, data, video, security, what have you, but they focused on the UCaaS business because that's where the valuations were coming from and they were getting value for the stock. Bill did a few more acquisitions during that period, and by 2022, macroeconomic issues hit, seven interest rate hikes, a lot of commoditization in the industry. Investors started asking questions. "What kind of company are you?" Bill said, "A UCaaS company that was now a commodity." Boom, stock drops all the way to $3. Hence, this is when I joined.
He was let go, and then I came into the company. What did I do really is to define what the company was. After 35 years in the industry for myself, when I look at this company, what I saw was a set of jigsaw puzzle pieces that had never been put together. 11 acquisitions over seven years. What do you guys think I saw? I saw efficiencies, cash, dollars, system improvements, a confused kind of brand. Those are not difficult things to fix. We began the journey of assembling the jigsaw puzzle and came out with the story I am about to tell you now. The company had about $110 million of debt when I joined. It was not hemorrhaging cash, $8 million, roughly per quarter of cash from operations. Not very good growth, kind of pretty flat, solid EBITDA.
Lots and lots of room for improvement. For the most, it did not really have an identity. What I saw was an identity that no one else had in the market. I also saw, from being an enterprise guy, that there was a rising new market coming, which is the mid-market, and I will explain that to you in a second. We are essentially an essential communications company. Every business on the planet requires five basic essential communication needs: voice, data, video, security, and hardware. Most of the small cap players and micro- caps in the tech industry today serve up one of those things. If you want UCaaS, you get it from RingCentral. If you want networking, you might get it from Vonage. If you want security, you will pick it up from Fortinet.
If you want to buy phones, you get it from Polycom or Cisco. Who has all of it in one bundle? Sangoma does. The only problem was when I joined, it was not put together so that I could sell it as a bundle. What we have now done is created what I believe to be the widest set, and I would challenge any one of you to find me another company that is a small cap player in our space that has all of these assets, both cloud-based, prem, and hybrid, for voice, data, video, and security, sold à la carte in the component pieces. That is the way most SMBs want to buy it, or bundled together, where you are now serving this new market. I want you to keep your mind on this mid-market because that is the one that is the key focus area here.
It's all of our own proprietary technology. The other asset I loved about this company is that I'm an engineer, have been for 30 years. It has its own engineering force. The story about the engineering team is pretty funny. My CTO, the previous CEO, was a buyer of assets. He wasn't really an operator, good guy, but a buyer of assets. Didn't really understand engineering because he wasn't an engineer. When I came, we looked at the engineering team, and it's like I opened the door to this cupboard and out from the hidden in the back were these guys with white lab coats, and these were our engineers, and they were so smart. To me, my eyes lit up because having your own in-house engineering team allows you to have one of the equations of growth, which is the build equation.
The other one, the buy equation, you need a balance sheet. You need cash to do that. If you have both, a build-buy options for everything, you're in a great position. I'll tell you what we did to make that happen. This is an important slide, and I'll just spend two minutes on trying to help you understand it. For all of my career, there are four archetypes of customers, right? Consumers, SMB, private enterprise, public sector. Some would argue public sector and private enterprise are the same. They are not. I've served both of them. What's happened in the last five years is that the small-medium business archetype, which has served as an SMB, it's served as one archetype, right? You're an SMB provider. The S and the B, S and the M have split.
The reason they have split is that the guys on the left, the small companies, sub-500, they need technology. They kind of understand it. They generally buy it because they absolutely need it. They do not really know much about it. They do not want any SLA. They want usually low, low, low pricing. And they do not have any dedicated IT teams. The guys on the right, this is where Sangoma used to serve. I would tell you most of the micro- caps that you invest in or the small caps will be serving the component players. This market here, the mid-market, is where the enterprise was 10 years ago. Remember that group I just told you about that moved $1 trillion during 2019 to 2022? The mid-market is the next wave coming through. Two reasons why.
For the last 10 years, I've been supporting enterprise and protecting their networks by moving them to the cloud. Therefore, hackers are moving down market. There's been a 67% rise in ransomware attacks in the mid-market, which has created a heightened awareness of technology and the value of it for their networks. Number two, mainstream technology like ChatGPT and AI buzzing everywhere. All these mid-sized companies are saying, "Well, how can I use it to lower my cost, improve my customer experience, and just live up to the demands of what buyers are looking for right now in terms of technology?" They don't have an IT department either. What they're looking for is the same thing the enterprise was looking for from the system integrators.
They're looking for an integrator who can put together their technology capabilities to meet the demands of what they need now, the essential communications of voice and data and video and security and the hardware. They want to buy it from a single vendor so they can get a lower TCO. They want some SLAs now, meantime to repair, meantime to respond, of which we have. They need some management, right? Not only for today's technologies, but now for the future of technologies. Given how fast technology is advancing and they don't have IT departments, they need a vendor that they can deal with or they can work with to handle today's and tomorrow's technologies. There is not a company right now, not one. There's only one that's actually getting close. There are a privately- held equity company out of Florida that is trying to build what Sangoma has.
All we had to do was put the puzzle together, which is not that hard if you're an operator like me who've been doing this for 30 years. Right now, the company just gave you some scale, 100,000 roughly customers that we have today, about 1,100 channel partners. To give you an idea, when I joined, that channel partner number was 5,000. Because if you kind of look at this microphone here, if I give you, I'm a guy for analogies to help you kind of see things. If you assume this is a carrot, you know, with the little all the fuzzy stuff and then the carrot's underneath, we had 11 acquisitions. Every time I pulled a carrot out of the ground, there was a whole ecosystem of partners attached to only selling that product.
Not only did I have to integrate the company, I had to integrate the partner ecosystem. In enterprise world, that's partner segmentation, account segmentation, 101. Most of the enterprise guys like me who've been trained know how to do that. We've focused on the 1,100 top partners because why? They generate 80% of my revenue. Therefore, I'm much more prescriptive of how I spend my SG&A, my marketing dollars to stimulate the channel to sell my services. Very sticky business. This is the first thing that I loved about this company. You come into a company like this, and I'm leaving a very successful career to join this company for personal reasons, as well as obviously helping our shareholders, our customers, and the 700 men and women that work at the company.
The first thing I look at is how much is leaking out the bottom. If you're not organized and operationally sound, you must be hemorrhaging customers. They really weren't. It's a very sticky business, annuity-based, five-year contracts, generally speaking. Gross margins are pretty high at 68%. They were down a little lower before we joined, but now they're up a little higher. That number is going to continue to climb. That's not guidance. I'm just telling you that number is going to continue to grow as we gain more and more efficiencies, and you'll see why in a second. 83% of the business is fairly stable. It's monthly recurring long-term revenue over time. This number has changed quite a bit. It used to be sort of 78%-22%. The company had a heavy focus on product.
I hate the NRR business, the non-recurring business, because especially if you're in a publicly traded company, it's what kind of screwed up our whole year this year. You have to, it's very hard to predict lumpy revenue when you have an MRR business, a monthly recurring revenue business, mixed in with an NRR business, the narcotic of one-time sales. You'll be forced to go back to it all the time to try and get your top line number up, but it's hard to predict. It could be up $2 million, down $1 million, up $3 million, depending on the size of the deals. It's not a very good business for publicly traded companies to have.
If you heard my Q2 call, you'll know that over the course of the year that I've been here, we're going to, we've decided to look at all the acquisitions, all 11. I knew when I saw them all, there's no board that's that good. There's got to be some acquisitions in here that just were not part of a strategy. I was right. I knew right away that one doesn't fit my picture. I'll just put this in my pocket until I'm ready. We're now ready to move into divestitures and removing some of the low-margin business. I'm going to use that capital to obviously do some things with capital allocation, which I'll explain in a second, but pretty healthy business. Now, this is the money slide. I'll just be really quick about it.
Imagine in your mind 11 different companies scattered all over the place, each one selling their components. I had to bring all that together to create a value proposition with my management team. We have a phenomenal leadership team, enterprise-class people that we've brought into the company. The company in the circle, I'll just make it real simple. The circle represents this being a communications platform company. We are not a UCaaS company. We are a platform company selling communication services, voice, data, video, security, SD-WAN, networking, SIP trunking. All of these components all sit in a cloud-based environment. Almost all of these are sitting in Amazon's cloud now. I took them out of my data centers, put them in the cloud, which is what I've been doing for the enterprise for a long time. They're sold at a prem-based hybrid or cloud.
Now, if anyone knows the prem markets, NEC pulled out. Mitel is going bankrupt under Chapter 11. Avaya is struggling in this market because everyone is betting on what I said at the beginning of this call. That mid-market, which is 44% of the global IT spend, is about to make a mass move to the cloud, which is exactly what the enterprise did 10 years ago. Now the mid-market is making that move. These guys who played in the prem markets are saying, "Okay, well, I can't invest in there. I'm going to go invest all of my energy into the cloud," which is what NEC did, which is what Avaya did. This is a massive opportunity for us. We're one of the very few pure prem cloud providers. We provide prem, hybrid, and cloud. It's a $3.5 billion market. I'm a $250 million company.
I need $30 million, $40 million out of that business over the next couple of years. The stock goes nuts relative to its current valuation. We are doubling down on that. We have a big Mitel strategy, takeout strategy, and we're getting all of the resellers all over the United States and in Canada now coming to us looking for support as soon as they found out Mitel went in Chapter 11 and NEC pulled out of the market. The two biggest players are out. It's a discontinuity. We're taking advantage of it. Below at the core is the ERP system, right? This is a brand new system we put in. What do you need it for? A ton of things for those who know what ERP is. The main thing you need it for is single bill.
If you've got 11 pieces of a jigsaw puzzle, remember that box of bits and bytes? You know, it's all the same pieces, but it's a different handful every single time. You've got to put it on one bill. We didn't have that. We now have it. It's now implemented and being rolled out. Same with the top, CRM, Salesforce.com. You've got to put that system in. You have to. Any company that you're investing in right now, they better have a CRM system and an ERP system, especially if they want to grow inorganically, because that's where all the savings come from when you buy companies and you start bolting them on. You integrate the sales at the top, all your accounts. You integrate your financial system at the bottom.
That takes out 10% or 15% of your cost savings, and you just keep doing it over and over again. This is the core of the company. It's a communications platform company. Think about it like a SaaS company. That's really what we're selling, software as a service. It's all sitting in the cloud. We're partnering in the center in our innovation foundry with industry-based experts who understand retail, healthcare, education. We're taking the company to become much more vertically oriented. The reason for that is mid-market customers don't have IT departments. When you sell to them, you've got to make the technology contextually meaningful to the discontinuities that are occurring in their industry. You've got to speak to them like when we sell to the Marriott Hotels, which is one of our customers. How can we help improve the customer experience in the hospitality sector?
Do we follow hospitality protocols? We are partnering with industry-best company because now we can. With an integrated company, you can quickly partner with SaaS companies, but I could also acquire because now we are shifting our strategy to three vectors of growth. I have always sort of told young leaders who I mentor a little bit, always provide yourself with optionality. It is the key because you never know what is going to happen in the market. Trump could come along and say, "We are going to take over Canada." He says 51st state. Not going to happen. A little political thing there. Things could happen in the industry, macroeconomic issues, geopolitical issues. You want to give yourself options. How do you do that? You want to grow the company organically, which is you want to get the engine growing through innovation.
You want to grow it inorganically and expand the business. To do that, you need an integrated company, a strong balance sheet, lots of cash. Where are we now? We went from $100 million. We're now two quarters ahead of where we thought we would be on our debt. We're down to $60 million in debt. Our cash flow has almost doubled from when I started the company. We have lots of cash. Debt is way down. Cash is way up. Interest rates have come down. The cost of capital has come down. Lots of companies who don't have these balance sheets are great targets for companies like me. We're kind of acting like the guys in 2009 after the housing crash. That's how Larry and I planned this. Macroeconomics are definitely going to get better. Let's just spend the year integrating the companies.
I had a second option for growth, which is inorganic. Can't do that unless you have an integrated system, ERP, integrated CRM, right processes, better tools, improved competency. That's what I've been doing for the last 14 years, plus taking $10 million of money out of the company by integrating them all together. We're now on the pivot to growth phase. I call this the Renaissance phase. The first 14 months of being here were not fun. It's non-sexy work. It's real hardcore operational process stuff. Now we move into the Renaissance phase where I can grow inorganically, organically, and through geographic expansion because I'm in the cloud. When you're in the cloud, we follow GDPR all over the world. I can put my stuff anywhere. In fact, we're already in the U.K. now as it is.
Revenue hasn't been my focus for the first year because everything I just told you, gross profits have remained strong and stable to this time. Adjusted EBITDA is continuing to grow. Just look at my free cash flow line and look at free cash flow per share since we joined. That's the earnings per share number that most institutional investors are going to look at when they take my EBITDA number. They're going to break it down to figure out what the key free cash flow per share is. Because it's now stable, I'm going to report on it. I never reported on some of these metrics until I felt like the company was stable. We first focused on debt, then we focused on cash flow.
We focused now on free cash flow per share, which I think is a key metric for all of you guys as you're thinking through your stuff. The next one to shoot a fall is we're going to now show you the revenue growth that the company can generate from this consolidated position. I'll leave you with just this. We're trading at $4.8. We got pulled down by all the tariff noise. You know, we're like one of the small boats in the big ship. When the big ships go down, we go down with them. I think at $ 204 million of enterprise value trading at 4.9x trailing EBITDA, there's a tremendous amount of value here. We had the stock up to CAD 11.50 in January before all this nonsense occurred from CAD 3. We went from CAD 3 to CAD 11 with no revenue growth.
Just on the story I'm telling you right now, investors were all in. We're now moving into the acquisition phase. We'll be doing some divestitures. I just issued an NCIB with some of the capital allocations. I just issued it three weeks ago. We've been buying nonstop. Why wouldn't I? The stock's down at this point. I might as well. We'll be using some of the capital and cash we've built up in the reserves for acquisitions, which we're doing next. We're in active talks right now. I'll be selling some of the divisions that I told you that I'm going to now pull out of my pocket that will actually give me even more cash to go look at expanding the value proposition both geographically and from buttress-type acquisitions that can help really harness the power of the value prop that we're supplying to the mid-market.
Super strong management team. These are all enterprise-class executives who have come on board. Jeremy, my COO, actually worked for me for 15 years. One of the number one guys in networking technology in Canada, running Bell Canada. Oh, and Sam from Goodmans, Larry from Jabil , and myself. You heard my history. Look, that's the story of Sangoma. It's been a really fun year getting this company ready to go. You know, I hope you guys keep an eyeball on it and kind of watch us as we continue to flourish and listen to my conference calls. If you ever have any questions, I got three minutes left. I can answer any quick ones that you have right now. Otherwise, I'll be around. Yes, sir. How much do I own?
Yeah.
Personally? About CAD 400,000 of my own, plus about 1 million shares through the company's contribution.
I made a big buy last November when the stock went down at $3. It's like, okay, I'm in. Yes, sir.
[audio distortion]
Yeah. Most of those players, Mitel, Avaya, NEC, they're all seeing what I've talked to you guys before, that the next wave of growth is going to be the mid-market moving to the cloud. Amazon and Azure and Google are fighting for that right now. To support that migration, these guys have to invest in one or the other. I continue to invest in prem, which is a dying business, declining at about -4% -5%, but still $3 billion. I can put all my money towards building my cloud, and that's what they're doing. They have moved away from these markets, and that's left a big hole, and we're going to fill that.
Because I'm a small company, $3 billion market, and if I can grab $20 million, it's great for us. Yes, sir.
Can you grab that breakout of revenues?
I would say 80% 70% would be the United States, 20% Europe and rest of the world, particularly the U.K., and 10% in Canada. Not at all, not for us. We manufacture our own telephones and communication systems out of China. We can move them to Vietnam, but we also have a plant here in the United States. If I have to, I'll just move it to the United States. Not a big deal. One of the nice things about this company is all of this technology is my technology. It's proprietary-owned technology by Sangoma, and that allows us to very quickly move the stuff around at very high margins. I think I'm done. Yes, sir.
[audio distortion]
I think you're going to see organic growth starting this July. You know, it's going to be a pretty steady pace because the sales cycles on these are a little longer, 6-12 months because five-year contracts. You know, you're going to have this organic growth, maybe single digits for the first year, and then inorganic will come in behind it. If it's a buttress acquisition, it will shoot that up. If it's an adjacent market acquisition, then I'll be reporting on both of them for at least a year. Okay, folks, thank you so much for your time. I appreciate that.