Ontario-headquartered Sangoma Technologies Corp., which delivers Unified Communications solutions, both in the cloud and on-premises, has acquired VoIP Innovations LLC for $42 million, if certain conditions are reached. The acquisition, Sangoma’s eighth in eight years, should provide the combined company with increased scale, more recurring revenue, a new product category, robust EBITDA margins, and a new sales channel within Sangoma’s broader portfolio.

Under the terms of the agreement, Sangoma paid $30 million in cash and $6 million in common shares. In addition, there is a contingent consideration component of up to $6 million, payable in cash, upon achievement of certain revenue milestones in the 12 months following the date of closing.

VI is a privately-held Pittsburgh-based technology company 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. VI has over 1,400 customers, about 35 employees and has been growing consistently the last several years. The company has also recently launched its new, strategic communications platform as a service or CPaaS product, which enables developers to easily add communication capabilities, such as voice, video, messaging, etc., to their software and web applications.

VI has no debt, generated $18.9 million in revenue in 2018, with $3.3 million of net income under US GAAP, that would have generated EBITDA of about $5.6 million, implying an upfront purchase price of about 6.4x EBITDA on a trailing basis.

With about 90 percent of VI’s revenue being recurring, Sangoma’s proforma recurring/services revenue is expected to increase to approximately 45 percent of total sales.

“One of the things that mattered most to us as former owners, was how the buyers would handle the VI employees and customers,” VI co-founder, shareholder and longtime CEO Jason Tapolci said, in a statement. “Of all the buyers who considered the acquisition of VI, it became very clear to us that Sangoma was the company that most understood, appreciated and valued our long-term staff, loyal customers and company vision. We are very pleased that Sangoma will continue on with the VI business and we are confident it will continue to grow under the leadership of their very capable management.”

VI’s employees will continue to work out of their current Pittsburgh office and will be led by VI President Sebastian Kiely, who will report to Sangoma CEO Bill Wignall.

Sangoma expects its combined revenues will increase to between C$135 million and $143 million in fiscal 2020. Further, the company anticipates generating EBITDA of between approximately C$19 and $20 million this fiscal year. Sangoma’s leverage would then be projected to be about 2.4 times total debt to EBITDA, or under 2x net debt to EBITDA.