Sangoma Technologies (STC) AI Stock Analysis

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Sangoma Technologies

(TSX:STC)

Rating:61Neutral

Price Target:

C$8.50

▲(4.68%Upside)

Sangoma Technologies exhibits robust operational improvements and cash flow generation, as highlighted in the earnings call. Despite strong financial metrics, persistent profitability challenges and valuation concerns weigh on the stock.

Positive Factors

Financial Management

Debt to cash flow ratio is nearing the target, indicating better financial management.

Future Performance

The focus is on the guidance for the next fiscal year, indicating confidence in future performance.

Strategic Moves

The company has sold Montney Infrastructure, contributing positively to its financial health.

Negative Factors

Sangoma Technologies (STC) vs. iShares MSCI Canada ETF (EWC)

Market Cap

C$261.35M

Dividend YieldN/A

Average Volume (3M)15.82K

Price to Earnings (P/E)―

Beta (1Y)1.25

Revenue Growth-1.72%

EPS Growth76.81%

CountryCA

Employees671

SectorTechnology

Sector Strength83

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)-0.06

Shares Outstanding33,505,898

10 Day Avg. Volume7,035

30 Day Avg. Volume15,817

Financial Highlights & Ratios

PEG Ratio0.06

Price to Book (P/B)0.47

Price to Sales (P/S)0.00

P/FCF Ratio8.17

Enterprise Value/Market Cap0.87

Enterprise Value/Revenue0.24

Enterprise Value/Gross Profit1.40

Enterprise Value/Ebitda1.28

Forecast

1Y Price Target

C$11.49

Price Target Upside41.50% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering2

Sangoma Technologies Business Overview & Revenue Model

Company DescriptionSangoma Technologies Corporation (STC) is a leading provider of hardware and software components that enable or enhance IP Communications Systems for voice, data, and video applications. The company primarily operates in the telecommunications and networking sectors, offering a wide range of products such as voice-over-IP (VoIP) systems, Unified Communications (UC) solutions, IP phones, network connectivity hardware, and cloud-based communication services. With a focus on delivering high-quality, reliable, and scalable communication solutions, Sangoma serves businesses of all sizes globally.

How the Company Makes MoneySangoma Technologies generates revenue through the sale of its diverse range of communication products and services. Key revenue streams include the sale of VoIP hardware and software, Unified Communications systems, SIP trunking services, and cloud-based communication solutions. The company also earns through subscription-based models for its cloud services, offering businesses a flexible and scalable communication infrastructure. Additionally, Sangoma benefits from strategic partnerships and collaborations with other technology providers, which enhance its market reach and product offerings. These partnerships often involve bundling Sangoma's products with complementary technologies, thereby expanding its customer base and increasing sales opportunities.

Sangoma Technologies Earnings Call Summary

Earnings Call Date:May 08, 2025

(Q3-2025)

% Change Since: -2.05%|

Next Earnings Date:Sep 24, 2025

Earnings Call Sentiment Positive

The earnings call presented a largely positive outlook for Sangoma, with strong financial performance, completion of a major transformation, and improved customer metrics. While there were some challenges, such as a slight revenue dip and volatility in the hardware resale business, the company's strategic focus and achievements in debt reduction and cash flow generation indicate a strong position for future growth.

Q3-2025 Updates

Positive Updates

Strong Financial Performance

Sangoma delivered strong financial performance in Q3 with revenue of $58.1 million, adjusted EBITDA margins of 17%, and operating cash flow conversion from adjusted EBITDA over 100%.

Completion of Project Diamond

The major transformation through project diamond is complete, providing Sangoma with the financial foundation and operational structures for future growth.

ERP System Implementation

The new ERP system is on track and online, expected to generate savings of approximately $5 million over the next three years.

Improvement in Customer Metrics

Client satisfaction and NPS scores improved significantly year-over-year, with NPS scores up nearly 300% and client satisfaction scores up 23%. Customer churn remains industry-leading at below 1%.

Debt Reduction Ahead of Schedule

Sangoma has paid down debt well ahead of schedule, reducing gross debt to $53 million from $55-$60 million target, and net debt to $35.8 million.

Strong Free Cash Flow

Generated $10.6 million in net cash from operating activities in Q3, with free cash flow per share at $0.25 in Q3 and $0.84 in the first three quarters.

Launch of Normal Course Issuer Bid (NCIB)

With debt lower than planned, Sangoma launched an NCIB, reinforcing belief in its intrinsic value.

Negative Updates

Slight Revenue Dip

A shift away from lower-margin hardware reselling resulted in a slight revenue dip in Q3, although it led to a sequential improvement in gross margins.

Third-party Hardware Resale Volatility

The third-party hardware resale business was volatile due to macro factors like tariffs, leading to its classification as held-for-sale assets.

Guidance Adjustment

Revenue guidance for fiscal 2025 was narrowed to $235 million to $238 million from $235 million to $240 million, with adjusted EBITDA reaffirmed at $40 million to $42 million.

Company Guidance

During Sangoma's third-quarter fiscal year 2025 investor call, the company reported robust financial performance with revenue amounting to $58.1 million. They achieved adjusted EBITDA margins of 17% and an operating cash flow conversion rate from adjusted EBITDA exceeding 100%. Sangoma also generated a strong free cash flow per share of $0.25 in Q3 and $0.84 across the first three quarters. The company has been aggressively paying down debt, surpassing their timeline with a gross debt reduction to $53 million. Additionally, Sangoma is pursuing a normal course issuer bid, reflecting confidence in its intrinsic value. The company is strategically shifting away from lower-margin hardware reselling to focus on higher-margin communications software, resulting in a slight revenue dip but improved gross margins. Client satisfaction and Net Promoter Scores (NPS) showed significant improvements, with NPS up nearly 300% and client satisfaction scores increasing by 23%. Customer churn remained low at 0.9%, and the large deal pipeline saw substantial growth. With these metrics underscoring Sangoma's strategic transformation and operational readiness, the company is poised for continued growth in its core MRR business.

Sangoma Technologies Financial Statement Overview

Summary

Sangoma Technologies has strong gross profit margins and positive cash flows but faces challenges with consistent net losses and fluctuating revenues. The balance sheet shows financial stability, but ongoing profitability issues may impact future growth.

Income Statement

Neutral

Sangoma Technologies exhibits inconsistent revenue trends with a significant decline in revenue from 2023 to TTM. The gross profit margin remains robust at 68.6% in TTM, but the net profit margin is negative, reflecting ongoing losses. EBIT and EBITDA margins have shown improvement, but the company remains unprofitable.

Balance Sheet

Neutral

The balance sheet shows a moderate debt-to-equity ratio at 0.24 in TTM, indicating manageable leverage. The equity ratio is strong at 70.6%, highlighting financial stability. However, declining stockholders' equity due to consistent net losses is a concern.

Cash Flow

Positive

The company has positive free cash flow growth, with a 9.35% increase from the previous year. The operating cash flow to net income ratio is strong, indicating effective cash generation from operations despite net losses. However, the reliance on financing activities in prior years raises sustainability concerns.

TTM	Jun 2024	Jun 2023	Jun 2022	Jun 2021	Jun 2020
Breakdown
Income Statement		Total Revenue
238.26M	247.28M	252.53M	224.35M	134.96M	96.22M
	Gross Profit
163.51M	172.82M	172.79M	156.89M	91.90M	62.17M
	EBIT
-2.04M	-1.06M	52.00K	-5.51M	6.43M	7.50M
	EBITDA
43.03M	42.29M	45.20M	-77.43M	29.77M	16.66M
	Net Income Common Stockholders
-6.93M	-8.66M	-29.03M	-110.78M	618.58K	2.86M
Balance Sheet		Cash, Cash Equivalents and Short-Term Investments
16.67M	16.23M	11.16M	12.70M	22.09M	19.95M
	Total Assets
361.44M	400.64M	442.75M	498.53M	540.12M	128.67M
	Total Debt
62.30M	89.11M	115.16M	122.61M	89.17M	49.14M
	Net Debt
45.63M	72.88M	104.00M	109.91M	67.08M	29.19M
	Total Liabilities
106.18M	140.91M	176.63M	204.72M	164.12M	73.91M
	Stockholders Equity
255.26M	259.73M	266.12M	293.81M	375.99M	54.75M
Cash Flow		Free Cash Flow
36.46M	33.33M	15.22M	15.95M	12.87M	6.82M
	Operating Cash Flow
46.36M	44.25M	26.49M	21.06M	15.70M	8.72M
	Investing Cash Flow
-9.90M	-10.91M	-11.27M	-55.82M	―	―
	Financing Cash Flow
-37.56M	-28.26M	-16.77M	25.37M	96.41M	33.08M

Sangoma Technologies Technical Analysis

Technical Analysis Sentiment

Positive

Last Price8.12

Price Trends

50DMA

7.70

Positive

100DMA

7.69

Positive

200DMA

8.26

Negative

Market Momentum

MACD

0.05

Positive

RSI

57.53

Neutral

STOCH

58.33

Neutral

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:STC, the sentiment is Positive. The current price of 8.12 is above the 20-day moving average (MA) of 7.90, above the 50-day MA of 7.70, and below the 200-day MA of 8.26, indicating a neutral trend. The MACD of 0.05 indicates Positive momentum. The RSI at 57.53 is Neutral, neither overbought nor oversold. The STOCH value of 58.33 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:STC.

Sangoma Technologies Peers Comparison

Overall Rating

UnderperformOutperform

Sector (62)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TOI	72 Outperform	$13.71B	92.61	29.51%	―	17.62%	31.08%
TIXT	65 Neutral	C$1.36B	35.99	-5.70%	―	2.87%	-271.63%
Sector *	62 Neutral	$11.91B	9.99	-7.22%	4.96%	7.31%	-8.91%
STC	61 Neutral	C$261.35M	―	-2.67%	―	-1.72%	76.81%
CVO	61 Neutral	C$681.92M	―	-9.00%	―	8.86%	56.67%
BB	56 Neutral	$3.53B	―	-7.59%	―	-31.15%	30.02%
DND	52 Neutral	C$650.50M	―	-39.72%	0.77%	2.47%	19.37%

* Technology Sector Average

Performance Comparison

TSE:STC

Sangoma Technologies

8.12

1.00

14.04%

TSE:BB

BlackBerry

5.82

2.68

85.35%

TSE:DND

Dye & Durham

9.70

-2.01

-17.16%

TSE:TIXT

TELUS International (CDA)

5.00

-3.10

-38.27%

TSE:TOI

Topicus.com

164.50

53.00

47.53%

TSE:CVO

Coveo Solutions

7.35

-0.40

-5.16%

Sangoma Technologies Corporate Events

Sangoma Technologies Announces Meeting Results

Nov 19, 2024

Sangoma Technologies Corporation announced that all seven nominees were elected as directors at their annual general and special meeting. Additionally, key resolutions, including the appointment of KPMG LLP as auditors and the approval of the Employee Share Purchase Plan, were passed with overwhelming support. These results demonstrate strong shareholder confidence in the company’s leadership and strategic initiatives.

Glossary

BuyA stock rated as a "Buy" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock is likely to deliver higher returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

HoldA stock rated as a "Hold" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly compelling nor unfavorable for investment. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

SellA stock rated as a "Sell" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests the stock may deliver lower returns compared to other stocks in the same sector or market index. Note: This is not investment advice; please consult a financial advisor before making investment decisions.

Disclaimer

This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.