Jim Machi Discusses Sangoma's Acquisition of VoIP Innovations

In this Executive Insights podcast, BCStrategies' Jim Burton discusses Sangoma's acquisition of VoIP Innovations, LLC (VI) with Jim Machi, Sangoma's VP of Marketing. VI is a privately-held, technology company based in Pittsburgh that specializes in wholesale SIP trunking offered primarily to resellers, service providers, MSPs, and call center customers across North America, utilizing a recurring revenue model.

Transcript

Jim Burton: Welcome to BCStrategies Executive Insights. This is Jim Burton and I'm joined today by Jim Machi, VP of Marketing at Sangoma. Any of you who have watched the news recently recognize that they just made a purchase of VoIP Innovations out of Pittsburgh, PA, and Jim, I guess the question is why?

Jim Machi: Hi Jim. First of all, thanks for having me on. I think at a high level there are two reasons. I would ask people if you want to go read our press release go to our website and read it, but at a high level I'll go through it. First of all, there's good revenue there. They're a healthy company so they'll add 20 million dollars approximately USD to our company and also very healthy EBITA, and 90% of their revenue is recurring revenue. So it's all really good revenue. We're really happy about that, a healthy company. We're actually going to invest in it more because we feel like it can grow on its own. So that's the first reason.

The second reason is we actually see revenue synergies between us. So, for instance, the VoIP Innovations’ customer base sells their wholesale carrier services to MSPs and service providers and larger solution vendors and that's great, but a lot of those guys are also asking for UC solutions. We can provide those UC solutions to the channel, to that VoIP Innovations channel. We see real cross-selling opportunities there. That's another really good thing for us and was really interesting for us that we felt like we could do that.

The other aspect of their product portfolio beyond their wholesale carrier services is their CPaaS platform. You know CPaaS platforms really well, and obviously Apidaze may be familiar to some of the listeners to your podcast, and we feel like we can add third-party applications that can go on top of our UC solutions, maybe integrate with back office or things like that and enable that to happen faster. So we feel like it will make our UC platform even more viable and more attractable, I don’t know if that's a word, to a lot of other companies. So we see a lot of good synergies out there with what we've done and what they can do for us and how we can help VoIP Innovations.

Jim Burton: We've got two areas here to talk about and I'll start with the first one and that's the SIP offering. In your press release, it makes a comment about an Eastern Management study that went out and talked to 3,000 IP customers about what they viewed. Could you talk about that a little bit? I have followed SIP trunking a lot over the years and it's certainly getting better but not a lot of people still have it fully nailed and it sounds like you guys do. I think it's an opportunity for you to stand up and brag about what you’ve done, because it looks like the study shows you as the top vendor in that space.

Jim Machi: Yes, Eastern Management Group did a survey of 3,000 end users out there, small and medium businesses. So the SIP trunking that we provide with our UC platforms would be for these small/medium businesses and they independently did it (the survey). It's not like we funded them to do it. They independently did it and then we were pleased that we came out number one. So that's for the enterprise SIP trunking, the business SIP trunking. So we know that business pretty well. VoIP Innovations is a wholesale SIP trunking (company), so they weren't part of that survey. There were 29 companies of business SIP trunking, small/medium business SIP trunking providers, that were part of the survey. So since VoIP Innovations is at a different level of wholesale and we were at more the enterprise business level, that was our SIP trunking that we provide with our UC platforms right now?

Jim Burton: Well I think the important thing there is whatever secret sauce that you’ve got you'll be able to take over to that offering so that's all very, very good news.

Let's move on now to CPaaS and you and I had a chance to have a conversation just prior to starting this podcast and I expressed to you how I see CPaaS as what a great opportunity to help integrate into business processes that would just extend the whole unified communications capability. Any thoughts on that area how that can just help overall your product offer?

Jim Machi: Yeah well that we definitely in the back of our mind about the promise of CPaaS and how it could help our UC offerings that we've talked about before. There's work going on to integrate Apidaze with Asterisk, for instance, and next week is AstriCon and we're going to have a demo there with Apidaze and integration with some of our low-level open source platforms there, so the work is just starting on that and there's a lot more to come. There's no announcements we're ready to make on that, but I think people should expect us to do integration with the two products together. And there will be more on that at the appropriate time, but we see a lot of promise there, like I said. And there's a lot of good things out there for both people that can develop on the open source community, develop Apidaze for those open source platforms we have, and also have applications developed on Apidaze that could work with our current UC platform and make it more viable in a bigger ecosystem out there and that's really what we're looking for.

Jim Burton: Well one of the things about this acquisition is we see lots of acquisitions on a regular basis and some of them, you just wonder why are they doing that and they kind of build a case about it being synergistic, but this one looks like it's actually right down your path for the future, supporting things you’ve already got and adding an important piece but not a piece that you couldn’t survive without with the CPaaS offer.

One of the things that I know people are always looking at when they are looking for a company's product, and if you're not a Cisco or a Microsoft or a big name, it's like okay how well is this company doing? And you mentioned this acquisition got to be accretive just based on the comments that you’ve made, but without trying to get into a financial analysis here, can you just share with our audience a little bit about the stability and growth of the overall company and where you see it headed?

Jim Machi: Yeah, let me talk about Sangoma. The past few years we've been profitable. There's been some M&A going on but also organic growth with our cloud platforms and actually even our on-prem platforms are growing, the UC on-prem platforms are growing. So we have organic growth and then we supplement that with M&A, so we're like a 100 million dollar company now with a healthy EBITA, a really good EBITA, and that's all because we tightly control what we're doing and we don’t want to just spend money to spend money. So then we add another company that also is very healthy so that means we can invest more in the business. Like I said before, we're going to invest a little bit more into VI because we feel like they need it and we feel like we can grow both parts of their business, the carrier services and the CPaaS platforms. And so we feel like we're going do some more investment there and so I mean it's as simple as that. We just control what we're doing. I think our management has a good feel for the spending of the money and loosening up where we need to in terms of investing so we continue to grow so that's really good. It's really great to be a part of a company like that. It's really good to be part of a growing company. I think all the employees are happy about it and our customers should be happy because we're healthy. And like you said, we're smaller than a lot of our competitors out there, but we're out there, our products are good like that Eastern Management Group report that we talked about before, and so our customers are generally really happy and we want to continue to service them well.

Jim Burton: So Jim could you just spend a minute and give me kind of the overview I asked in the beginning, just maybe reinforce that is the overall view of why Sangoma made this important acquisition?

Jim Machi: Outside of the immediate financial benefit we get that we talked about, we really think there's revenue synergies that we can get so there will be revenue synergies of VoIP Innovations being a part of Sangoma. We feel like we can grow that business and also there's revenue synergies that come to Sangoma from VoIP Innovations because of the channel stuff we talked about. So that's why we feel really good about the deal and we're real excited about it.

Jim Burton: Well great. Jim, thank you for your time today. It's exciting news and important news and I'm glad we had a chance to talk about it and share it with our audience.

Jim Machi: Thank you and I'll be happy to talk to you again in the future. Thank you, Jim.