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Sangoma Technologies (TSE:STC)
TSX:STC
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Sangoma Technologies
(TSX:STC)
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Rating:59Neutral
Price Target:
C$6.50
▼(-6.34% Downside)
Action:ReiteratedDate:02/07/26
The score is driven primarily by solid financial resilience (strong margins, low leverage, and meaningful free cash flow despite accounting losses) and a positive earnings-call setup (tightened guidance, strong bookings/backlog, and continued deleveraging). These are tempered by weak technicals (price below major moving averages with negative MACD) and limited valuation support due to a negative P/E and no dividend yield provided.
Positive Factors
High Gross Margin & Recurring Mix
A ~74% gross margin combined with a dominant recurring services mix (services ~92% of revenue) underpins durable unit economics and pricing power. This margin cushion supports reinvestment, resilient operating leverage, and the ability to fund go-to-market initiatives without immediate erosion of core profitability.
Strong Cash Generation & FCF
Consistent positive operating and free cash flow despite accounting losses provides durable financial flexibility. It funds debt reduction, targeted investments and share repurchases, reducing reliance on external financing and enabling strategic choices that support longer-term growth and margin improvement.
Conservative Leverage & Deleveraging
Meaningful deleveraging and a low debt-to-equity ratio improve balance-sheet resilience and lower refinancing and interest-rate risk. This structural strength enhances capacity for opportunistic M&A, funding multi-site rollouts, and absorbing near-term investments without threatening solvency or capital allocation flexibility.
Negative Factors
Weak Organic Revenue Growth
Sustained top-line contraction, even when adjusted for a divestiture, indicates the company must convert bookings and backlog into recurring revenue to restore scale. Prolonged organic stagnation impedes operating leverage, constrains margin expansion potential, and increases reliance on large multi-site deals for growth.
Net Losses Persist
A small but persistent net loss means reported returns remain negative despite strong EBITDA margins, suggesting non-cash items, amortization, or other charges compress GAAP profitability. Until net income turns sustainably positive, return-on-equity and shareholder returns will be constrained, limiting long-term valuation operationalization.
Execution & Timing Risk on Large Deals
A pipeline weighted to multi-site strategic contracts increases revenue and margin volatility as rollouts span many quarters. Higher commissions and incremental SG&A tied to these deals can compress near-term margins; consistent, timely execution is required to realize projected revenue and avoid prolonged working-capital strain.
Sangoma Technologies (STC) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$202.62M
Dividend YieldN/A
Average Volume (3M)36.66K
Price to Earnings (P/E)―
Beta (1Y)1.12
Revenue Growth-4.34%
EPS Growth31.52%
CountryCA
Employees671
SectorTechnology
Sector Strength88
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)-0.08
Shares Outstanding33,216,980
10 Day Avg. Volume51,941
30 Day Avg. Volume36,660
Financial Highlights & Ratios
PEG Ratio1.33
Price to Book (P/B)1.11
Price to Sales (P/S)1.19
P/FCF Ratio8.58
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$11.50Price Target Upside65.71% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering2
EPS Forecast (FY)-0.19
Revenue Forecast (FY)C$207.13M
Sangoma Technologies Business Overview & Revenue Model
Company DescriptionSangoma Technologies Corporation (STC) is a leading provider of telecommunications and unified communication solutions, specializing in software and hardware that enhance communication capabilities for businesses. The company operates primarily in the sectors of VoIP (Voice over Internet Protocol) communications, telecommunications infrastructure, and cloud services. STC's core products include voice and video communication software, telephony hardware, and cloud-based services that facilitate seamless communication and collaboration across various platforms.
How the Company Makes MoneySangoma Technologies generates revenue through multiple streams, primarily by offering subscription-based cloud services, hardware sales, and licensing fees for its software solutions. The company earns income from recurring revenue models, where customers pay for ongoing access to its cloud-based communication services. Additionally, STC sells telephony hardware, such as gateways and session border controllers, which provide the physical infrastructure necessary for VoIP communications. Significant partnerships with service providers and distributors also contribute to its revenue, as these collaborations expand the reach of its products and services. Furthermore, the company benefits from providing value-added services and technical support, which enhance customer loyalty and drive additional revenue.
Sangoma Technologies Earnings Call Summary
Earnings Call Date:Feb 04, 2026
(Q2-2026)
| % Change Since: |
Next Earnings Date:May 07, 2026
Earnings Call Sentiment Positive
The call conveyed predominantly positive operational and financial momentum: sequential revenue growth, strong adjusted EBITDA and cash conversion, significant MRR bookings growth (67% QoQ, 60% YoY), improved gross margin (74%), a much larger Q3 starting backlog (+125%), deleveraging (debt down to $37.6M) and active share repurchases. Management acknowledged near‑term challenges including a 2% year‑over‑year organic revenue decline excluding the VoIP Supply divestiture, timing/execution risk as large multi‑site deals roll out, and higher near‑term commissions and targeted investments. On balance, the improvements in bookings, cash generation, margins, and balance sheet flexibility outweigh the headwinds, while management provided tightened guidance and clear actions to monetize the growth pipeline.Q2-2026 Updates
Positive Updates
Sequential Revenue Growth Delivered
Total revenue for Q2 was $51.5 million, up 1.2% sequentially, with services (92% of revenue) growing 1% sequentially, indicating early translation of bookings momentum into recurring revenue.
Strong Adjusted EBITDA and Cash Conversion
Adjusted EBITDA was $8.3 million (16% margin), consistent with Q1, and adjusted EBITDA converted to net cash from operations at more than 120% in Q2 (net cash from operations $10.1 million). Year-to-date conversion was 91%.
Free Cash Flow and Shareholder Returns
Free cash flow improved sequentially to $8.0 million or $0.24 per diluted share. The company repurchased ~196,000 shares in the quarter and has retired >700,000 shares (~2.1% of outstanding) since the NCIB launch.
Significant Bookings Momentum (MRR)
MRR bookings grew 67% quarter-over-quarter and 60% year-over-year, driven by several large strategic, multi-site deals — one >$150,000 MRR (350+ locations), an $18,000 MRR multi-location retail win, and a closed healthcare wholesale opportunity supporting 2 hospitals and 9 urgent care facilities.
Backlog and Pipeline Strength
Starting backlog for Q3 was up approximately 125% compared to the start of Q2. Management reported a steady pipeline, improving close rates and growing traction across verticals and wholesale motions.
Improving Gross Margin and Recurring Revenue Mix
Gross profit was $38.2 million and gross margin improved to 74% (vs 72% in Q1 and 68% prior year), driven by a more favorable revenue mix and strength in recurring services.
Recurring Revenue Retention / Low Churn
Blended churn improved sequentially and held just under 1% (stated at ~0.96%), reflecting stability of the recurring base and progress in customer experience and delivery; management is targeting 0.85%.
Deleveraging and Strong Balance Sheet Actions
Debt reduced to $37.6 million at quarter end from $60.4 million a year ago (retired an additional $5.2 million of debt in the quarter). Quarter-end cash was $17.1 million, up 27% from June 30.
Product & Channel Momentum
Hardware/prem UC channel revenue up ~4% year-over-year; carrier voice and SIP trunking activity up >10% year-over-year, including a contract with Commio for nationwide cloud voice/messaging.
Tighter Guidance Reflecting Confidence
Management tightened FY'26 guidance to revenue of $205M–$208M and adjusted EBITDA margin of 17%–18%, expecting sequential revenue growth in Q3 and a return to year-over-year organic growth once VoIP Supply divestiture is adjusted for.
Negative Updates
Year‑over‑Year Organic Revenue Decline
On a like‑for‑like basis excluding $6.4 million of revenue from the strategic sale of VoIP Supply, revenue was 2% lower year‑over‑year, indicating that organic top-line growth remains a work in progress.
Booking-to-Revenue Timing and Execution Risk
Many of the recent large strategic deals are multi-site rollouts that will convert to revenue over quarters (management cited typical ramp of ~8–10 months), introducing potential timing volatility and execution complexity for near-term revenue recognition.
Higher Commissions and Near-Term OpEx Pressure
The quarter included higher commissions tied to large contracts and incremental go‑to‑market investments (management committed ~ $2 million incremental SG&A), which can pressure near-term margins until revenue scales.
Churn Improvement Still Has Upside
Although churn is below 1%, management noted non‑ideal customers churned previously and indicated there is additional room to improve (targeting 0.85%), implying current retention, while strong, is not yet at management's goal.
Industry & Market Risk for M&A and Software Valuations
Management acknowledged broader software/communications market downdrafts and commoditization pressures; while this presents M&A opportunity, it also signals potential macro headwinds and valuation uncertainty.
One-Time / Transitional Items Affecting Comparability
Last quarter's ERP implementation caused timing impacts on trade receivables discussed previously; while Q2 saw a return to historical levels, these transitional items can complicate quarter-to-quarter comparability.
Company Guidance
Sangoma tightened FY‑26 guidance to revenue of $205–$208 million and adjusted EBITDA margins of 17–18%, assuming a sequential revenue increase in Q3 and a return to year‑over‑year organic growth once the $6.4 million VoIP Supply divestiture is excluded; management also expects adjusted EBITDA margins to improve in H2 as revenue builds. That outlook follows Q2 results of $51.5 million revenue (up 1.2% sequentially; services ~92% of revenue and up 1% sequentially), $8.3 million adjusted EBITDA (16% margin), >120% conversion of adjusted EBITDA to operating cash flow (122% in Q2; 91% YTD), free cash flow of $8.0 million or $0.24 per diluted share, starting Q3 backlog ~125% higher than the start of Q2, MRR bookings +67% QoQ (+60% YoY) and $10.8 million of large strategic TCV bookings in H1 (including $7.5M closed of $14.8M identified), while balance‑sheet metrics include quarter‑end cash of $17.1M (+27% since June 30), total debt of $37.6M (down from $60.4M YoY with $5.2M retired in Q2), and share repurchases of ~196,000 in Q2 (over 700,000 or 2.1% retired since April).Sangoma Technologies Financial Statement Overview
Summary
Mixed fundamentals: revenue declined (-3.3% TTM) and net income is still slightly negative (~-3.2% margin), but gross margin is strong (~70%), leverage is modest (debt-to-equity ~0.18), and cash generation remains solid with positive operating cash flow (~$44.6M) and free cash flow (~$36.0M).Income Statement
TTM (Trailing-Twelve-Months) revenue declined (-3.3%), and profitability remains pressured with negative operating profit and a small net loss (about -3.2% net margin). The positive is that core operating earnings before non-cash items remain solid (about 17.7% EBITDA margin), and losses have narrowed substantially versus earlier years (notably 2022–2024). Overall, strong gross margin (~70%) supports earnings power, but the company still needs to translate that into consistent bottom-line profitability and return to growth.47
Neutral
Balance Sheet
Leverage looks conservative in TTM (Trailing-Twelve-Months), with debt modest relative to equity (debt-to-equity ~0.18) and down meaningfully from the higher leverage levels seen in 2022–2024. Equity remains sizable versus total assets, providing balance-sheet flexibility. The key weakness is that returns on equity are still negative due to ongoing net losses, so the balance sheet is healthy, but not yet generating attractive shareholder returns.72
Positive
Cash Flow
Cash generation is a clear strength: TTM (Trailing-Twelve-Months) operating cash flow (~$44.6M) and free cash flow (~$36.0M) are both solidly positive. However, free cash flow is slightly down year over year (about -4.6%), and cash flow relative to revenue sits around ~19.6%, suggesting good but not accelerating conversion. Importantly, the company is producing meaningful free cash flow despite reported net losses, which supports debt reduction and reinvestment, though the trend needs to stabilize.63
Positive
| Breakdown | TTM | Jun 2025 | Jun 2023 | Jun 2022 | Jun 2021 | Sep 2020 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 227.74M | 236.69M | 247.28M | 224.35M | 131.38M | 131.42M |
| Gross Profit | 159.26M | 161.75M | 172.82M | 156.89M | 96.05M | 62.17M |
| EBITDA | 40.33M | 42.95M | 42.29M | -77.43M | 29.77M | 20.12M |
| Net Income | -7.19M | -5.01M | -8.66M | -110.78M | 227.51K | 2.11M |
Balance Sheet | ||||||
| Total Assets | 325.43M | 346.55M | 400.64M | 498.53M | 540.12M | 128.67M |
| Cash, Cash Equivalents and Short-Term Investments | 17.11M | 13.49M | 16.23M | 12.70M | 22.09M | 19.95M |
| Total Debt | 45.21M | 56.11M | 89.11M | 122.61M | 89.17M | 49.14M |
| Total Liabilities | 75.39M | 92.35M | 140.91M | 204.72M | 164.12M | 73.91M |
| Stockholders Equity | 250.04M | 254.19M | 259.73M | 293.81M | 375.99M | 74.78M |
Cash Flow | ||||||
| Free Cash Flow | 35.97M | 32.95M | 33.33M | 15.95M | 12.87M | 6.82M |
| Operating Cash Flow | 44.58M | 41.79M | 44.25M | 21.06M | 15.70M | 8.72M |
| Investing Cash Flow | -8.61M | -8.84M | -10.91M | -55.82M | -109.89M | -30.67M |
| Financing Cash Flow | -33.67M | -35.68M | -28.26M | 25.37M | 96.41M | 33.08M |
Sangoma Technologies Technical Analysis
Negative
6.94
Price Trends
6.58
Negative
6.88
Negative
7.39
Negative
Market Momentum
-0.10
Negative
39.67
Neutral
53.94
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:STC, the sentiment is Negative. The current price of 6.94 is above the 20-day moving average (MA) of 6.34, above the 50-day MA of 6.58, and below the 200-day MA of 7.39, indicating a bearish trend. The MACD of -0.10 indicates Negative momentum. The RSI at 39.67 is Neutral, neither overbought nor oversold. The STOCH value of 53.94 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Negative sentiment for TSE:STC.
Sangoma Technologies Peers Comparison
UnderperformOutperform
Sector (61)
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
67 Neutral | C$269.21M | 1,414.29 | -1.32% | ― | -5.56% | -124.69% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
59 Neutral | C$202.62M | -26.14 | -2.18% | ― | -4.34% | 31.52% | |
57 Neutral | C$43.53M | -18.08 | ― | ― | 79.84% | 70.95% | |
46 Neutral | $265.66M | -8.03 | -34.34% | ― | -23.85% | 35.05% | |
44 Neutral | C$294.34M | -2.66 | ― | 1.80% | 2.47% | 19.37% | |
44 Neutral | C$83.92M | -23.06 | ― | ― | ― | ― |
* Technology Sector Average
TSE:STC
Sangoma Technologies
6.25
-0.92
-12.83%
TSE:DGX
Digi Power X
3.79
1.97
108.24%
TSE:DND
Dye & Durham
4.45
-7.82
-63.72%
TSE:HAI
Haivision Systems
9.63
5.17
115.92%
TSE:EONX
Eonx Technologies
1.09
0.95
678.57%
TSE:ICS
Integrated Cyber Solutions, Inc.
1.12
1.02
1020.00%
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.