Sangoma Technologies Swings to a Profit in Q4 and Fiscal 2014

Sangoma Technologies Swings to a Profit in Q4 and Fiscal 2014

By: Dylan Sikes - AllPennyStocks.com News

Friday, October 24, 2014

Stocks are in rally mode this week, gaining strength from upbeat earnings reports and economic data after being pummeled in weeks prior. Small caps have found some strength in the last week-and-a-half as well, as measured by the Russell 2000 Small Cap Index rising from a low of 1,040 last Wednesday to as high as 1,122 on Thursday. A sore spot remains the Toronto Venture exchange, which simply isn’t tracking the gains being recorded by its bigger peers this week. While Wall and Bay Street players aren’t looking to the Venture, little Sangoma Technologies Corp. (TSX-Venture:STC) posted an upbeat earnings report of its own Thursday evening for the fourth quarter and full fiscal year 2014. The Markham, Ontario-based company provides hardware and software components (data boards, voice boards, gateways, etc.) that enable or enhance IP Communications Systems for both telecom and datacom applications.


Sales were essentially flat in the fourth quarter ended June 30, 2014, registering $3.98 million, versus $4.0 million in the year prior quarter. Gross profit improved by 8 percent, though, from $2.46 million to $2.65 million. Operating income climbed about 50 percent from $410,000 a year earlier to $610,000, a rise the company attributed to higher revenue and margin more than offsetting a small rise in expenses. The big swing was in the bottom line. After reporting a net loss of $3.95 million, or 13.6 cents per share, in Q4 fiscal 2013, Sangoma turned around to a net profit of $520,000, or 1.8 cents per share, last quarter.

Looking at the complete fiscal year, revenue increased 7 percent to $13.83 million from $12.95 million in fiscal 2013. Gross profit was up 9 percent to $9.25 million from $8.48 million. Operating income improved to $940,000 from only $60,000 a year prior. Importantly, Sangoma swung from an annual net loss of $4.33 million, or 14.8 cents per share, in fiscal 2013 to a net profit of $740,000, or 2.6 cents per share, in the latest fiscal year.

As of June 30, the company had $4.98 million in cash, about $1 million more than it had a year earlier.

"This year we focused on delivering reasonable growth while generating healthy profitability, and our results confirm this, with operating income, cash flow and EBITDA of around $1 million,” said Bill Wignall, President and CEO of Sangoma, in a statement. “I'm generally pleased that the uptake of new products continues, with nearly half our revenue now coming from products introduced in recent years, and I would like to see that rate accelerate even further,” he added.

In a preliminary announcement on the earnings late in July, the Sangoma chief executive said he was “slightly disappointed” that fourth quarter sales weren’t as strong as he expected. He also warned that Q1 sales for fiscal 2015 will likely be short of fourth quarter revenue, a seasonal pattern that is not out of the ordinary. Wingall will speak more on the results at a conference call on Monday at 3:00 PM ET.

Shares of STC were up about 37 percent in 2014 through Thursday’s closing price of 28 cents, although well off a high of 41.5 cents in April. Trading at a price-to-earnings ratio in the area of 11:1, the thinly-traded, quiet company (basically only earnings releases for news all year) looks to be trending under the radar of the investment community. Shares have risen 5.5 percent in early Friday trading to 29 cents each, albeit on volume of only 6,100.

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