Earnings Call: Q1 2020

Nov 15, 2019

Earnings release

Thank you for standing by. This is the conference operator. Welcome to the Sangoma Technologies First Quarter twenty twenty Investor Conference Call. As a reminder, all participants are in listen only mode and the conference is being recorded. I would now like to turn the conference over to David Moore, Chief Financial Officer. Please go ahead, Mr. Moore. Thank you, operator. Hello, everyone, and welcome to Sangoma's investor call. We are recording the call, and we'll make it available on our website for anyone who is unable to join us live. I'm here today with Bill Wignall, Sangoma's President and Chief Executive Officer, to take you through the results of our first quarter of fiscal twenty twenty, which started on July 1, and we will discuss the press release that was distributed yesterday, together with the company's unaudited interim financial statements and Q1 MD and A, which are both available on SEDAR and on our website at www.sangoma.com. As a reminder, Sangoma reports under International Financial Reporting Standards, IFRS. And during the call, we may refer to a couple of terms such as operating income, EBITDA and adjusted cash flow that are not IFRS measures, but which are defined in our MD and A. For fiscal twenty twenty and thus starting on July 1, Sangoma adopted IFRS 16, a new accounting standard, and the first quarter results incorporate that new standard. Also, please note that unless otherwise stated, all reference to dollars are to the Canadian dollar. Before we start, I'd like to remind you that statements made during the course of this call that are not purely historical are forward looking statements regarding the company or management's intentions, hopes, beliefs, expectations and strategies for the future. Because such statements deal with future events, they are subject to various risks and uncertainties, and actual results might differ materially from those projected in those 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 and A, our annual information form and in the company's annual audited financial statements posted on SEDAR. Finally, I note that we've had several requests to hold these calls prior to the market's opening. Traditionally, we've held them at 11:00 or noon to better accommodate our numerous shareholders and analysts on the West Coast. But given the increasing demand to hold these quarterly updates earlier in the day, we plan to start at ten a. M. Eastern for our next quarter report. And with that, I'd like to hand the call over to Bill. Thanks, David. Good morning, everyone, and thank you for joining us today. I've consciously kept my prepared remarks more succinct because we did an extensive update on our most recent call, which was just three weeks ago. I've structured my comments into four sections today. First, I will start by going through our Q1 results. Second, I will share a brief first impression of our acquisition of Voigt Innovations after just a few short weeks. Third, I will offer a very brief update on Sangoma's corporate strategy. And finally, I will conclude with a few comments on fiscal twenty twenty guidance, given that we've had a few questions about that overnight. Finally, I'll hand the call back over to David for our typical open Q and A session. With that, let's turn to our Q1 results. For the first quarter of fiscal 'twenty, sales were $28,000,000 31% higher than the same quarter last year and a record for Sangoma's first quarter. Revenue this quarter was 7% lower than the immediately preceding quarter, reflecting the typically softer first quarter seasonality compared to the prior year's fourth quarter and the significant onetime order in the last quarter of fiscal twenty nineteen, both of which had been previously communicated. Gross profit was $17,500,000 in the 2020 at a gross margin of 62%, about 4% 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 sources gradually increases. Operating expenses were $15,900,000 in the first quarter, higher than last year, primarily because 2019 had only one month of expenses in it, but essentially consistent with the immediately preceding fourth quarter. For the first quarter of fiscal twenty twenty, EBITDA at $3,700,000 was 46% higher than in the same quarter last year, resulting from the inclusion of Digium sales for the full three months this year, the operational efficiencies obtained from the restructuring during 2019 and the required adoption of IFRS 16 at the beginning of this fiscal year. Net income for the first quarter was $900,000 compared to a net loss of $1,000,000 in fiscal twenty nineteen, which was due to the inclusion of $2,000,000 in onetime transaction costs incurred to complete the acquisition of Digium. And for the final portion of my commentary on first quarter results, I'll briefly touch on a couple of highlights from our balance sheet and cash flow. Sangoma finished the quarter with a cash balance of $33,400,000 Please note that that cash balance was unusually high because it included the net $21,000,000 of equity raised in the bought deal, which took place during Q1 and remained on the balance sheet at the end of the quarter. Much of this was subsequently used, along with the additional debt taken on, to close the acquisition of Voip Innovations shortly after Q1 closed. Sangoma's adjusted cash flow from operations, which excludes the impact of acquisitions, was about $3,000,000 Working capital was $27,300,000 and total debt as of September 30 was $21,700,000 That brings my comments on Q1 financials to a close, and let's now turn to our first impressions shortly after the VI acquisition. It's only been a couple of weeks since we closed the transaction, so there's not yet a whole lot to add to my comments from the last call in October, but here is a short update. From a product point of view, you will recall that BI specializes in wholesale SIP trunking as the primary line of business. This service is sold to partners, who I'll describe in a moment, but not typically to end users. Their wholesale SIP trunking service is therefore sold with a usage based pricing model as required by those types of companies in the value chain. Sangoma also has a SIP Trunking business, as many of you know, but our service, called SIP Station, is typically sold to end users and is priced accordingly, including with a flat rate model. The company has also recently launched its new Strategic Communications Platform as a Service, or CPaaS, product. CPaaS is an exciting new product category receiving significant attention from customers and investors alike that enables developers to add communications capability, such as voice, video or messaging, to their software and web applications without having to be communications nor networking experts. The VI CPaaS product is called AppyDays, and CPaaS as a category is quite hot if you look at companies like Twilio or Nexmo, which was acquired by Vonage, commanding very high valuation multiples. VI's customers, as you may remember, are a series of partners that then resell the service to their own customers, who are the ultimate end users, as you'd expect, given the wholesale model. These kinds of BI customers include MSPs, service providers, PBX resellers, call centers and some large enterprises as well, most all of which are based in North America. An example or two might be a traditional reseller who would sell the SIP service to connect the premise PBX they were selling concurrently or could be a service provider such as a UCaaS company since most all UCaaS offerings bundle SIP trunks as an integral part of their service. Sangoma does this with our own UCaaS service, for example. BI has over 1,400 customers with no significant customer concentration and a successful channel program to recruit such partners. And strategically, we see the fit with BI as very strong. Sangoma continues to look for prudent ways to grow our product portfolio, customer base, distribution network, overall sales, recurring revenue and EBITDA. This acquisition ticks all six of those boxes. And financially, it's an equally good fit with strong profitability and about 90% of revenue being recurring. So we are pleased to see the equity markets embracing the deal and share price responding accordingly. Thus far, it's mostly steady as she goes with BI. And given this is our eighth acquisition in eight years, I hope you will not be surprised to hear that just a few weeks into it, all looks perfectly fine. We are at the stage where there is a lot of back and forth travel to begin the work on coordinating activities. So as you would expect, many Cendroma executives have been spending time in Pittsburgh the last few weeks to begin those discussions. On the product side, we're planning to add a few new employees at BI to enable investments into both their core products as well as the newer CPaaS offering, something that was already factored into our plans. From the marketing perspective, we are just starting to align our messaging. So for instance, work has begun to integrate their website with sangoma.com. And a couple of weeks back, almost immediately after the transaction closed, we had several VI staff attend our annual user conference for open source customers called AstraCon. This is a big event for Sangoma, one which brings together many hundreds of Astra's developers, and I'm pleased to say that the event was very well received this year with really positive feedback from the open source community. We had VI demo Appy days to that audience, and it got a good level of interest from the group. Building the developer community is one of the core success factors in a CPaaS business strategy, and the Asterisk community is one of the largest. So we hope to be able to cross pollinate that community to be interested in Appudix. And finally, from the sales point of view, we've started looking at how to cross sell VI services to Sangoma customers and resellers. We held our annual Partner Advisory Council recently in meeting with some of our biggest, most engaged resellers at the Atlanta Braves ballpark. And I note it was very convenient of the Braves to get eliminated from the World Series for us. We launched the BI SIP trunking service to them and introduced the concept of CPaaS and what Appy News is. Lots more work to be done there, obviously, given we're only three weeks in, but we've hit the road running. So to summarize our view of this acquisition, our eighth and eight years, VI satisfies very well most of the strategic objectives for an M and A candidate, and it's reassuring to see the markets seem to agree. This will hopefully give you a brief update on VI after only a few short weeks, and I'll now touch briefly on our corporate strategy. On the most recent call together just three weeks back, I provided a comprehensive multipage update on the evolution of our company's strategy over the past several years. So I'm not going to spend a lot of additional time on that today. Instead, I'd invite anyone that is new to these calls to please listen to that recording from the October 21 call, which is available on our website in the Investor Relations section. I'd simply like to reiterate today our highest level strategy, both from an investor's point of view and from an industry or competitive standpoint. First, Sangoma plans to grow much further and do so via our demonstrated mix of organic growth and M and A, but we also seek to do so prudently, balancing growth and the investments that drive it with a desire for reasonable profitability and long term financial health or stability. We have competitors that follow the dam the torpedoes mentality, investing very high fractions of sales and customer acquisition costs with no profit and others that use the milk the cash cow approach. We are very consciously in the middle, seeking to deliver growth with profitability. And in our marketplace, we try to identify competitive strategies in which we have some form of unique positioning so we are not simply fighting head to head against larger industry players, but instead competing in a way where we have some differentiated advantage whenever possible. And with that very short reminder about corporate strategy, I'd like to touch on guidance for a minute. We didn't plan on covering guidance in any real detail today, to be honest, given we are not changing our forecast in any way. But overnight and this morning, we've already had three separate questions about this, so I've decided to touch on it a bit as a result. Those three questions were: one, why did you not reference guidance in your press release? Two, did your guidance from last month already factor in the impact of IFRS 16? And three, if your guidance from last month did not factored in, which would add something to EBITDA, do you have updated guidance or when will you have it? So let's go through each of those in turn since if one person asked, it's possible that others had similar questions. First, regarding the question, why didn't you include guidance in your press release? The answer is super simple. We simply did not have anything new to add to our comments on guidance, which were just released literally three weeks ago. That's it, short and sweet. The second question was, did you already factor in IFRS 16 into your guidance when you released it last month? The answer is that the impact of IFRS 16 was not factored into our fiscal twenty twenty guidance when it was released with our fiscal twenty nineteen results in October. For fiscal twenty twenty, we have, as required, adopted IFRS 16, a new standard for reporting office leases that takes this out of OpEx and puts it into depreciation. This is, of course, not unique to Sangoma. We have no say in the matter. We acknowledge that this does alter reported EBITDA. And as such, we recognize, of course, that IFRS 16 implies some upside to the 19,000,000 to $20,000,000 in EBITDA that we guided to for fiscal twenty twenty. And finally, the third question was, if IFRS 16 was not built in, do you have updated guidance for when will you have it? The answer is that we're not updating guidance at this point today at the end of Q1 because it's honestly only three weeks since we issued it. We really do not want to get into the habit of updating guidance every quarter unless, of course, some new facts cause our outlook to deviate materially. Instead, we plan to do so once or twice a year, just like we did in fiscal twenty eighteen and fiscal twenty nineteen. Nothing has changed. If you look back, you'll see that we did not update guidance in Q1 of either of our last two years. So it will once again be our plan to provide updated guidance for fiscal twenty twenty at the end of Q2 when we release results in February. It was at the midpoint that we updated guidance for you last year and for the year before that. And to us, that makes sense as we have half of fiscal year behind at that point. And it lets us factor in all the inputs to our model and thus not be reacting to one single factor in isolation. So sure, we'll factor in IFRS 16 at that time, but we'll also have a full quarter of VoIP Innovations under our belt instead of just three weeks. We'll know more about whether the tariffs on imports that were to take effect in September but were put off until December are real or not. We'll have an extra three months of visibility into what is happening with the global economy, given all the numerous flash points around the world, etcetera. This way, you get a full picture, one that factors in all the inputs, at least to the best of our ability, and isn't reactive to any single one on its own. So now that I tried to respond fully to the questions we received prior to this call, I hope you have a clearer picture on guidance. And that's it for my prepared remarks today. I'd like to wrap up with a quick summary. Sangoma has come a long way from being a nano cap stock with $10,000,000 in sales and a market cap less than that, a single product line that was in decline and no recurring revenue. You have now seen a proven track record driven by new products, new customers, compounding recurring revenue, all supplemented by prudent acquisitions to augment the organic growth. We are now a much larger, stronger corporation with sales well in excess of $100,000,000 proven growth, solid EBITDA margins, expanding recurring revenue, positive cash flow and with the management to continue winning new customers, building new products and acquiring new businesses. I am pleased with your company's financial performance, track record and current state of the business, and it is encouraging to see investors rewarded with some movements in share price recently. Given the outlook, your Board believes the company is still significantly undervalued. All the research analysts who cover us continue to have price targets well above today's level, and many competitors in our product categories are commanding much higher multiples. I remain very proud of our progress at Sangoma. We've come a very long way in just a few short years when many folks didn't believe it was possible from our starting point. So I'll now wrap up my comments, hoping that I've provided you with a clear update on your company. As a reminder, our Annual General Meeting is being held on the December 19 here in our corporate offices in Markham, and we look forward to seeing some of you there. With that, I'll turn the call back to David for questions. Thank you, Bill. To make sure everyone knows how to ask questions, I'll ask the operator to go over the instructions. Operator, we're ready to take questions now, please. Thank you, sir. We will now begin the question and answer session. Our first question comes from Nick Quicoren with Acumen Capital. Congratulations on a great quarter. Just my first question is on IFRS 16. You remind me of the impact on the Q1 results? David, could you jump in? I think it was about $600,000 is that right? That's correct. Yes. So, Nick, it was $3,700,000 with it factored in, and it would have been around, I don't know, 3,100,000.0 or something like that without it. And then do you expect that $600,000 to be fairly flat throughout the year, or would innovation increase well? Yes. It's a little bit hard to predict. We think it'll be pretty flat. But that's kind of why I said we don't want to be trying to update guidance and giving forecasts three weeks after the last one. Let us get the eye under our belt and see what else is going out there in the industry before we update further. Thinking about $600,000 is not a bad number. Okay. That's great. Just on sales, I see they were up 31% year over year, and that was a combination of Digium and Organico. Can you maybe quantify what Digium added year over year? No, I don't think we want to get into that, Nick. I know not last call, but the one before that we had asked. It's very common that folks are wondering, tell us the growth rates of product line X, product line Y, product line I don't think we want to be doing that. As I said, it's one of the most competitively sensitive pieces of information we have. I think you know that we have product lines at very differing growth rates, right? We've got really mature products that have been around for a long time that are in gradual decline. We have some that are about flat, some that are growing slowly and some that are growing quickly. And the competitors in each of these categories are different. So we don't really need those guys knowing the exact growth rates of one piece of the business versus another. That's fair. And then just on the pipeline, how do you feel about the expected pipeline now that you completed the acquisition of BI? I'd say it's a bit too early to comment. As I mentioned in my remarks, we've started to work on it, but the work is not really about the pipeline that existed. The infrastructure that's in place at BI can handle that normal pipeline. Our focus early on is trying to figure out how to get the BI products and services first into the Sangoma channel and then the Sangoma products and services into the VI channel. And I don't feel like I can comment in a really knowledgeable way after three weeks about the impact on the pipeline from that quite yet. That's fair. And just the last question for me. I know that a Digimax issue took quite a bit of management time to integrate. Do you feel like GBI will be a similar amount of time or will it be less? No, that's a good question. Perfectly fair. I think it will be less for the reasons that I would guess are a little bit obvious. The reason the Digium work was fairly extensive is there was a lot of restructuring needed to get those two businesses aligned and find the synergies between them. In the VI case, there's not restructuring needed. The business is well run and financially healthy. And so I think it is true that the work to bring the businesses together will be, using your word, less expensive and faster. Great. That's all for me. Thank you. Okay. Sure. Our next question comes from Gavin Fairweather with Cormark Securities. Please go ahead. Hey there. Good afternoon. Hi, Gavin. Just wanted to start on maintenance and subscription line there. Pretty nice growth in your Q1 from kind of the cadence of, call it, dollars 10,000,000 a quarter from Q2 to Q4 of last year. Was there anything notable kind of going on there or just good growth in your cloud and SIP business there? David, do you want to try that one? Nick, could you just repeat that sorry, Gavin. Could you just repeat that again, please? Yes. Just your recurring revenue or the maintenance and subscription line kind of jumped up to $11,000,000 It was kind of trending at around 10,000,000 from Q2 to Q4 the Yes. I would take that and just look at it kind of on an average over the last two, three quarters. There are some cases where things come in out of that line, but what you'll see is a gradual trend upwards. Q four was a bit of an aberration, so there's nothing new to read into that. I think I mentioned that on the last call. Mhmm. If you look at that, it's on a consistent basis. You'll see it's pretty much a straight line. If you go back, except with Q4 being a bit of an outlier. So the trend gradually up in that line has been pretty similar for the last multiple quarters, if you exclude Q4. Okay. That's helpful. And then you talked a little bit about the early integration of the sales functions, and I do recognize it's early days. It seemed like you were talking about introducing the BI products into the Sangoma channel. Just kind of curious what milestones or steps need to take place prior to starting to introduce the Sangoma product into the BI channel and how we should think about time lines on that? Yes, there's not really a I don't know, it's a milestone or a hurdle or anything, Gavin. It's just it's the same set of people in both companies that would be working on either of those cross selling initiatives. And our view was we're going to pick the VI products into the Sangomage channel first. And the reason we did that was to be candid, completely opportunistic. We had a meeting already scheduled. We do it once a year where we bring in, we call it the Partner Advisory Council, the largest, kind of most engaged resellers from around North America and have them in one place with lots of mindshare for that period. And so it's easier for us to get the BI products in front of them when we have them in a room rather than an entire sales force out talking to them or doing it by webinars or putting people on planes. So that's why we picked that one first. There's nothing that's stopping the Sangoma products going into the BI channel is just what's going to come second and the first one is going to need our retention for the next, I don't know, month or three. That's all. That makes sense. And then just lastly, before I pass the line, you talked about how BI provides SIP trunks into UCaaS providers. Curious if that's kind of a major piece of the business. It seems like an interesting opportunity because then you can hitch on to the growth of other kind of UCaaS providers. But I'm curious if it how it kind of works? Like does the UCaaS provider typically work with one SIP provider? Or is it kind of like an OEM relationship? Or you kind of need to get specked in early to work with those guys? Yes, that's a good question. It varies hugely from UCaaS company to UCaaS company. There's no single way of doing it. I would say that I wouldn't use the OEM analogy, but you're right it's nice to be there early because once they've got it, you have to be able to offer something that's competitively advantageous for them to consider adding you in or changing you. Some would use one or two carriers, but I think most would not be purely with one. Others might use three or four. There's nothing special about the number. UCaaS is just one of the customer segments at BI, given we told you there's really no customer concentration at all. I think that's true of the customer segments, too. UCaaS would not be dominant or something like that, Gavin. I do see it as an opportunity. As you said, UCaaS is growing and going to some of those companies and offering them a solution that we think might be preferable to one they have is interesting, but very, very difficult to quantify at this early stage. Okay. I'll pass the line. Thank you. Yes, sure. Our next question comes from David Kwan with PI Financial. Please go ahead. Hi, guys. Good morning, David. Good morning. Just on the BI, I think from a growth standpoint, they were growing at a slower pace relative to you guys, at least from an organic perspective. They're driving much stronger margins. So I was wondering to what extent you might look to reinvest more in the VI business to drive faster growth, whether it be investing more in sales and marketing. I know you've talked about the cross selling opportunities there. And then I guess on a somewhat related note, in the MD and A, there was talk about, I guess, increasing investments and focus on new customer acquisition. Just wondering if you can provide more details on that. Yes. So just to clarify, at the first part of your questions, last comment, you mentioned they have VI had higher margins. They have higher margins at the EBITDA level, but not at the gross margin level. And I think that's what you meant, right, David? What I meant, yes. Because it was, I think, the 30%. Yes. No, you're right. I just wanted to make sure that we were on the same page. And then to go into your question, I think the opportunities to invest are real and modest. They have, I don't know, 35 some odd people. I said in my comment, we're going to add a few headcount. A few is three or four, but not 15. We're not going to ramp up the size of the business and the cost structure by 50%. My view is that the early term opportunity to get leverage from a little bit of extra investment is probably not in sales and marketing there. It's probably in product development. I can't remember if we've talked about this previously, but BI as a company that was privately held, smaller than Sangoma, maybe fewer resources available, was finding itself choosing between investment in product development on the core product versus investment in engineering on the newer product. And our view is they don't need to be mutually exclusive. We can add a few people. We think that can help accelerate the rollout and hopefully the adoption of the CPaaS product. And so the early investment will go into software development and network engineering to get resources being spent on both product category rather than one at the expense of the other. So that would be my comment about investment and the ballpark sizing of it. You asked a second question that I think wasn't related to VI, but I've lost it, David. What was the other one? Yes. Don't know if it was related to or just in general, but I think there was a comment in the MD and A. I'm talking about increased investments and focus on new customer acquisition. Is that I guess any material change from what you guys have been doing in the past? And if so, any details you can provide on that? No, I don't think there's anything substantive. For sure, we're investing in customer acquisition and marketing and sales, and you can see that by looking at the amount of money we're spending. That number hovers around 20% of sales, sometimes it's 17%, sometimes it's 21%. If you think back to the way the company looked four or five years ago, we were spending I don't know, dollars 5,000,000, 3,000,000 in marketing and sales, and we're now spending $20,000,000 and that's going to be higher this year as revenue grows up. So if you look inside our organization, the size of the sales teams that do direct selling to major accounts or the number of people we have servicing distributor type customers or the number of people in a sales department that sell into the resellers, the number of people dedicated to cloud. We never really had salespeople focused only on cloud until this fiscal year. So there is more and more investment. But the way it's ramping up is not different than the way it ramped up in prior years. The secret sauce, as we've joked about on prior calls, is we spend more money in absolute dollars on marketing and sales and on R and D each year than in the year before, but the rate of increase of that should be slower than the rate of increase of revenue. And surprise, surprise, that's the leverage to the EBITDA line. So I hope that answers the question. There's nothing super new or different about the way that's growing, David. Helpful, Bill. I appreciate that. I guess a question for David. Just on the inventory levels, I know you guys have talked about in the past about the supply chain reconfiguration and rationalization. I guess that got pushed out a quarter here. So should we just be assuming that the inventory should be building in Q2 and then come back to more normal levels in Q3? That's correct, David. It's literally the speed at which things move. And some of that most of that has happened in this quarter, but there's a whole bunch of timing things. And so, yes, it is looking at quarter in Q2. This quarter, yes, yes. So you will see the impact in this quarter's results. There was a slight uptick last quarter, but not as much as I had guessed that would have been three months ago. Okay. Perfect. And then just one last question. Assuming you guys don't make more acquisitions, which I know is unlikely to be the case, but as you integrate VoIP Innovations, where could you see your EBITDA margins going? I don't think we're going to quantify that, David. We've tried to do the best we can with guidance without kind of getting too far out in front of ourselves. Generally, we started by giving guidance for less than a year, now we're trying to guide at the beginning of the year. We said that we saw it going up from last year to this year. You know that we've guided to EBITDA of around 14%. All I would really say, and I realize this is qualitative, probably not what you were hoping for, is there's nothing magic about 14%, right? The whole idea here is that as the company scales and as a larger fraction of the revenue comes from recurring sources, the cost of customer acquisition to get the same total revenue goes down because some of that revenue is already there locked in and compounding from the year before. So that, along with my comment earlier that we consciously choose to spend more dollars each year on R and D and marketing and sales than in the year before, but at a slower rate than revenue grows, tells you that we expect EBITDA to expand. But trying to quantify that out into the following year is something I think we're going to stop short of. Okay. Thanks, guys. Sure. Our next question comes from Gabriel Leong with Beacon Securities. Please go ahead. Hi, good afternoon and thanks for taking my questions. Hi, Gabriel. Hi, there. Couple of follow on questions for me. So first, since it's been over a year since the close of the transaction, wanted to ask a question on Digium. Specifically around what's happening sort of on their product side. It's been a year now. What are the what's happening in terms of their product positioning, especially for some of the products that overlap with Sangoma? How are those products being positioned? Number one. Number two is, are there any plans to sunset some of complementary products you have between the two companies? Yes. I don't think we've ever talked about that. Good and fair question, Gabe. So my first kind of half joking part of the answer is there's no they anymore. It's all one company, right? So there's no like it's operated as this self contained, independent arm's length entity. There's one engineering team and one sales and marketing team, blah, blah, blah. And the way that's played out into the product portfolio with some of the stuff you've asked about, is it going to happen or what's the plan has already taken place. It's not something we would really proactively talk about publicly, but there's nothing embarrassing or secretive about it. Not the stuff you put in a press release or I would proactively put into the script for a conference call. But where there was overlap, many, many of the individual products inside multiple product lines have already been handled in the way you've suggested. Some might get less R and D and still be offered if people want them but not be changing much. Others might indeed have the end of life. And that varies from product line to product line, but it's happened across product lines like the telephony cards, the gateways, individual lines of IP phones. So there's lots of that. I don't know if you have visibility to this, Dave, but we have a very large number of SKUs for a company our size. There's probably David, could you help me? A dozen telephony card SKUs just inside Sangoma plus all the little variants of do you want this many? It could be 400 variants. Yes. 400 once you put all the variants into those dozen primary lines of cards. And so lots of that has already happened, Gabe. But beyond that, being more specific about whose 4E1 cards did you choose to standardize on or which 2FXS, 4FXS gateway did you choose, I think, is beyond the scope of this call. Okay. That's great. Thanks for the feedback there. And then I have some follow on questions around VI. First, in terms of the cross selling opportunities, it sounds like the focus is going to be on bringing VI's products into Sangoma's customer base first. So maybe walk us through the sales process there. So I mean, I would imagine the focus will initially be on trying to sell VI into new Sangoma PBX customers on prem or SaaS. But I'm kind of curious in terms of the existing on prem PBX customers you have. How hard do you think is it going to be for them to for you to kind of switch out their connectivity provider and then move VI in? And what's the driver there? Is it going to be more of a pricing thing you think that's going drive some of the changes? Yes. I think you already understand the differences between the new and the existing base properly based on your question. So it is true that when someone's buying a new system for the first time, it is more likely that they're choosing a connectivity solution at that point. And so when our channel is selling a premise based PBX, we want that connected through our SIP trunks, not somebody else's. And that's the, as you said, the easier or more logical point in time to do it. Having said that, we have a large installed base. And there's absolutely nothing preventing us going in and our channel going in and trying to sell SIP trunking into that installed base. Generally, I would say the simplest way to think about this is our sales team and our sales channel understands that there's two super simple approaches to that connection. And it doesn't even matter whether you have a current generation PBX or an old generation PBX. There are gateways that can change the technology interface between them to either the PSTN or an IP trunk. And so whether that PBX is connected today with the PSTN or on a SIP trunk, we want to talk to them. If it's on the PSTN, it's a bit easier, Gabe, because then the pitch is often about cost savings. It's typically much less expensive to use SIP trunking than a PSTN connection. If they already have a SIP trunk, it's a little bit harder, but we're still going to be asking our sales guys and channel to go and have those conversations, in which case, the selling point will be different from different types of customers into different types of customers, right? Some of them, it might be our SIP trunk is less expensive. Some of them might be they have a flat rate SIP trunk and we could do something that's usage based. That may be that we have some features in our SIP trunking service that our competitors don't have that the customers use now. So this is what I mean when I say it needs some work to get everybody up to speed on what that sales cycle looks like, what's the unique selling point, how do we sell the value of Titanium, the brand for the VI SIP trunks, show them about we've got DIDs in every single part of the country you would need, and we've got the ability for the resellers to go in and custom brand or white label, the portal to their customers. And while it sounds simple, sell SIP trunks, there's some education needed of the sales team and sales channel to get that work. Got you. And can you remind us again in terms of your on prem sorry, excuse me, in terms of how many sort of on prem seats you currently have under the same deal with that is using a third party content provider that you could potentially sell into? Yeah. We don't really have good reliable stats on the percentage that use someone else versus us. All I can say is we have about 1,000,000 seats of prem UC, And we have a very small fraction of that on Sangoma SIP trunk. What else they use and whether they're on a third party SIP trunk or whether they're on a PSPN connection or some other more out there solution, really don't have great data on yet. Got you. That's helpful. One last question for me. On the in terms of the CPaaS opportunity, can you talk a little bit about what the go to market strategy is going to be? And what you're going to have to bring to the table to be able to get that to get CPaaS to get it adopted on a wide scale to make that successful? Is going to require bringing in some new specialized salespeople? And are you going after a different customer base versus what you historically go after? And if you can talk about the pricing model there, that'd be helpful. Yes. Almost all of that, I would say, Gabe, we're just not ready to answer in an intelligent way. I can talk about it a little bit, so you don't feel like I'm being evasive, but it won't be a conclusive answer. So do we need a different Salesforce? I think the answer is no. But it for sure, if if if there's education needed to get our sales team at channel up to speed on selling the VIC trunking, the education job is higher on the CPaaS side. You said what's needed. You know, you you you can, in some ways, think of this as a two part customer base, like lots of other business models have. So you need some people who may or may not be paying customers to be building apps, and you need someone else to be using those apps. And that first group is typically developers. You could break that into two subparts. We can be building some of those apps ourselves. And especially early on, that is something that many CPaaS companies have to do. Over time, one would hope that it's more third party developers building those apps. That's step one, I would say. Step two is you need customers using those apps. Sometimes a third party developer will build an app and then a customer will find it and use it. Other times, the end customer will know they need an app and then have the app built using the CPaaS platform. And then I think the last thing you asked, is this what you're asking or am I off track here? No. That's very helpful. Thank you. Okay. So the third part is the pricing part, which is really two options. First of all, we could talk about, like, where is the app? Where do you get it to pay for? And we have this thing called the showroom. You can think of it like, you know, the Play Store or something from Google, where the apps will reside, and a user can go in and access the app and pay for it. You can either end up charging to purchase the app or give the app away free just like you see when, you know, you're downloading some app in in Apple Store or something. And and then if it's given away for free, the monetization is based upon usage in many cases. So the traffic that's created from the app that would then pass over our network can be charged, per minute or something like that. So all of those things, you know, they they make up a go to market strategy that I feel like we don't have our hands fully around yet after three weeks. And that's why I said, I can give you a little bit of color so that you can see we know what the hell we're doing, but we don't feel like we have the answers yet. Got you. That's very good feedback. Thanks very much and congrats on all the progress. Thanks, Gabe. This concludes the question and answer session. I would like to turn the conference back over to David Moore for any closing remarks. Thank you, operator, and thanks, everybody, for your participation today. We really appreciate it. Thank you for your support this year. And a reminder that we do have our AGM coming up on the December 19. For anybody who would like to join us, you'd be most welcome. And with that, thank you very much, and enjoy the rest of your day. Thank you, everyone. Bye. This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.