The following is excerpted from the question-and-answer section of the transcript.
(Questions from industry analysts are provided in full, but answers are omitted - download the transcript to see the full question-and-answer session)
Question: David Kwan - TD Securities Equity Research - Analyst
: Maybe a question for Larry. Just on the gross margins, are you expecting it to remain, I guess, in the high 60s here just given the more favorable
revenue mix with a softer product revenue? Or [couldn't that focus] services revenue, in particular, help offset some of the gains that we saw?
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FEBRUARY 10, 2023 / 1:00PM, STC.TO - Q2 2023 Sangoma Technologies Corp Earnings Call
Question: David Kwan - TD Securities Equity Research - Analyst
: And I guess another one for you probably. But just in terms of the guidance, it seems to imply a pretty significant pickup in margins in the second
half here. I guess how much of that is related to kind of the higher gross margins due to the revenue mix versus some of these cost-saving initiatives
that Bill has outlined just kind of the tougher revenue environment? And I guess it sounds like you're not planning on implementing much in terms
of further cost reduction initiatives outside of what is [talked about in the] call?
Question: David Kwan - TD Securities Equity Research - Analyst
: Okay. That's helpful. Just in terms of the free cash flow, it's been a struggle, I guess, over the last couple of quarters here, particularly related to the
kind of noncash working cap, which has been a drag for almost -- [for their past 2] years now. I think inventories, in particular, has been the key
challenge, just this past quarter, the accounts payable and accrued liabilities with (technical difficulty) what happened there? And do you expect
to see a reversal of that in the coming quarters here, which it sounds like probably see much stronger free cash flow in the second half and maybe
into fiscal '24?
Question: David Kwan - TD Securities Equity Research - Analyst
: And maybe one question for Bill here. A lot of stuff going on in the AR market, particularly [since the launch actually we see at end of] November.
So can you talk about to what extent, I guess, you guys might be using AI in your platform and maybe how you're responding to what's going on
out there in the market, particularly, I guess, as it relates to the CCaaS part of the market?
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FEBRUARY 10, 2023 / 1:00PM, STC.TO - Q2 2023 Sangoma Technologies Corp Earnings Call
Question: David Kwan - TD Securities Equity Research - Analyst
: For sure.
Question: David Kwan - TD Securities Equity Research - Analyst
: No, I just know that you guys talked about the lower gross margins on the MSP side and that over time, you expect that the gross margins could
come down a bit as MSP becomes a greater percentage of the overall business. So I was just trying to get an understanding of the dynamic of what
you guys expect.
Question: David Kwan - TD Securities Equity Research - Analyst
: So it sounds like if margins are going to come down from these levels? Is it really either going to be product revenues being much stronger than
what we've seen at least last quarter and/or probably supply chain issues coming up?
Question: David Kwan - TD Securities Equity Research - Analyst
: Yes. I was just thinking just over the next couple of quarters in the second half, but I appreciate the color?
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