Executives at Ottawa-based Mitel Networks say the company’s balance sheet is strengthening as it prepares to increase its reach through a merger with Concord-based Aastra technologies.
Richard McBee is the president and CEO of Mitel. (Provided)
By Jacob Serebrin
“Consistent with our long-term strategy to drive profitable growth by leveraging our core strengths and rapidly expanding in the cloud and contact centre space, in our Q2 financial results we continued to show solid business progress,” said Richard McBee, Mitel’s president and CEO, speaking to investors on a conference call on Thursday evening.
“On this strong foundation, we have layered our ambitious and successful merger and acquisition strategy.”
The company reported revenue of $144.9 million for the three-month period ending Oct. 31. This was down slightly from the $145.5 million in revenue the company reported this time last year and up from the $141.6 million the company reported the previous quarter.
Despite the slight decline in revenue, the company reported profits of $5.4 million. That’s an improvement from its net loss of $1.9 million a year ago and losses of $3.8 million during the previous quarter.
Mitel’s increase in gross margin to 58.2 per cent is a company record.
Steve Spooner, the company’s chief financial officer, credited the increase to the growth in the company’s transition to higher margin businesses, including contact centres and service assurance.
“The results for our second quarter were strong,” said Mr. Spooner. “Our leveraged business model continues to produce solid results in a challenging environment.”
The company also paid down $20 million in long-term debt earlier in November.
Mr. Spooner said the company would continue to “aggressively” pay down its debt.
While Mitel has traditionally sold networking equipment, it is increasingly focusing on software and cloud-based solutions.
“As our products are more software oriented they come with software assurance,” said Mr. McBee. “Traditionally, we were hardware oriented, now we’re software oriented and as we make that transition, the software assurance continues to be a larger part of the business and software assurance has extremely good margins.”
He said that the revenues from services were steady but because lower margin hardware maintenance was declining, that was contributing to the increase in the company’s gross margin.
Mr. McBee also said the company’s planned merger with Aastra was moving ahead on schedule. Mitel recently received approval from its shareholders for the $392 million deal, which was announced in November.
It still requires approval from Aastra shareholders and the Canadian and French governments
“We are poised to expand our technology portfolio and geographic presence,” he said.
This is expected to be Mitel’s last quarterly report before its merger with Aastra. If the merger goes ahead as planned, the combined company will move its fiscal year to match the calendar year, with first quarter results released in April or May.