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Sangoma Technologies (TSE:STC)
TSX:STC
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Sangoma Technologies
(TSX:STC)
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Rating:56Neutral
Price Target:
C$7.00
▲(0.86% Upside)
Sangoma Technologies' overall stock score is driven by a strong earnings call that highlights growth in recurring revenue and strategic opportunities, despite challenges in core revenue and cash flow. The technical analysis indicates stable momentum, while the financial performance and valuation scores reflect ongoing profitability and revenue growth challenges.
Positive Factors
High recurring revenue mix
A recurring revenue base above 90% materially increases revenue visibility and predictability, enabling better forecasting, higher customer lifetime value, and more efficient sales ROI. This durable shift supports subscription upsells, longer customer relationships, and more stable cash flows over quarters.
Strong gross and EBITDA margins
High gross margins and a positive EBITDA margin indicate pricing power and operational leverage in core products and services. These margins allow reinvestment in R&D and go-to-market activities while absorbing SG&A growth, supporting sustainable profitability as recurring revenue scales.
Manageable leverage and deleveraging
Consistent operating cash generation and active debt repayment reduce financial risk and preserve flexibility for strategic investments. Lower leverage supports resilience in downturns, lowers interest burden, and provides capacity to fund partner enablement and targeted customer-acquisition initiatives.
Negative Factors
Sharp historical revenue decline
A steep multi-period revenue decline undermines scale economics, weakens bargaining power with channel partners, and heightens sensitivity to fixed-cost leverage. Reversing this trend is prerequisite for sustaining margin improvements and justifying continued investment in growth initiatives.
Negative shareholder returns metrics
A negative ROE signals the company is not currently converting capital into shareholder value, reflecting profitability and efficiency shortfalls. Persistent negative ROE can constrain capital access, raise the cost of funding, and pressure management to prioritize near-term profitability over long-term growth.
Weak free cash flow trend
A large drop in free cash flow reduces capacity to invest in product development, partnerships, or M&A, and limits the ability to accelerate customer acquisition. Even with solid operating cash conversion ratios, weakening FCF makes sustained deleveraging and strategic investment more difficult.
Sangoma Technologies (STC) vs. iShares MSCI Canada ETF (EWC)
Market Cap
C$223.69M
Dividend YieldN/A
Average Volume (3M)36.66K
Price to Earnings (P/E)―
Beta (1Y)1.10
Revenue Growth-4.34%
EPS Growth31.52%
CountryCA
Employees671
SectorTechnology
Sector Strength88
IndustrySoftware - Infrastructure
Share Statistics
EPS (TTM)-0.10
Shares Outstanding33,139,164
10 Day Avg. Volume51,941
30 Day Avg. Volume36,660
Financial Highlights & Ratios
PEG Ratio0.00
Price to Book (P/B)0.00
Price to Sales (P/S)0.00
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$12.00Price Target Upside72.91% Upside
Rating ConsensusModerate Buy
Number of Analyst Covering1
EPS Forecast (FY)N/A
Revenue Forecast (FY)N/A
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:Nov 10, 2025
(Q1-2026)
| % Change Since: |
Next Earnings Date:Feb 05, 2026
Earnings Call Sentiment Neutral
The earnings call indicated a strong start to fiscal 2026 with significant achievements in recurring revenue growth, pipeline expansion, and strategic opportunity capture. However, challenges such as core revenue decline, temporary cash flow impacts, and lower-than-expected gross margins were also noted. Overall, the company appears to be on a positive trajectory with a balanced outlook.Q1-2026 Updates
Positive Updates
Strong Start to Fiscal 2026
Fiscal 2026 is off to a strong start with Q1 exceeding consensus analyst expectations. The recurring revenue model now represents over 90% of total revenue, setting a foundation for sequential growth in Q2 and continued improvement in the second half.
Increase in MRR Bookings and Strategic Opportunities
MRR bookings grew 2.4% sequentially and 6.4% year-over-year. Deals over $10,000 of MRR increased 39% sequentially and are 72% above the FY '25 quarterly average.
Growth in Pipeline and Booking Momentum
New pipeline creation increased 39% quarter-over-quarter. The overall size of the pipeline remains steady with a 6% increase in the last 6 weeks, instilling confidence in Q2 and beyond.
Strong Cash Flow and Debt Reduction
Generated $4.9 million in net cash from operating activities with a 60% conversion rate from adjusted EBITDA. Retired an additional $5.2 million in debt during the first quarter.
Negative Updates
Decline in Core Revenue
Core revenue, which accounted for 74% of total revenue, decreased 6% year-over-year due to longer sales cycles on larger MRR deals.
Temporary Impact on Free Cash Flow
Free cash flow was temporarily impacted by a $3.2 million negative change in working capital, primarily due to a technical issue in transitioning to a new payment processor.
Gross Margin Lower Than Expected
Gross margin was 72% of revenue, lower than the previous quarter's 76% without VoIP Supply, primarily due to a higher attachment of product to recurring revenue offerings.
Company Guidance
During Sangoma's first quarter of fiscal year 2026 investor call, the company reported strong financial metrics and outlined a positive outlook for the year. Sangoma achieved $50.8 million in revenue, $8.3 million in adjusted EBITDA with a 16% margin, and $3.2 million in free cash flow, despite a temporary $3.2 million negative change in working capital. The company's recurring revenue model now represents over 90% of total revenue, setting the stage for sequential growth in Q2 and year-over-year growth in Q3 and Q4. Key performance indicators such as pipeline, bookings, conversion, and churn were highlighted, with new pipeline creation up 39% quarter-over-quarter and monthly recurring revenue (MRR) bookings growing 2.4% sequentially and 6.4% year-over-year. Additionally, deals over $10,000 of MRR increased 39% sequentially and are 72% above the fiscal year 2025 quarterly average. Retention remains strong, with blended churn near 1%. The company plans to invest approximately $2 million in SG&A to accelerate customer acquisition and partner enablement, while maintaining a disciplined capital allocation strategy. Looking ahead, Sangoma reaffirmed its fiscal year 2026 guidance of $200 million to $210 million in revenue and an adjusted EBITDA margin of 17% to 19%, forecasting sequential growth through the year and emphasizing the company's entry into a new phase of sustainable, profitable growth.Sangoma Technologies Financial Statement Overview
Summary
Sangoma Technologies faces challenges with declining revenue and profitability, impacting its income statement negatively. The balance sheet is stable with manageable debt levels, but the company struggles to generate positive returns on equity. Cash flow remains a concern due to declining free cash flow growth, although operating cash flows are relatively robust. Overall, the company needs to address revenue growth and profitability to improve its financial health.Income Statement
Sangoma Technologies shows a declining revenue trend with a negative revenue growth rate of -43.9% in the TTM. The gross profit margin remains relatively strong at 68.6%, but the company struggles with profitability, evidenced by a negative net profit margin of -2.9% and a negative EBIT margin. The EBITDA margin is positive at 18.1%, indicating some operational efficiency despite overall losses.45
Neutral
Balance Sheet
The company's balance sheet reflects moderate leverage with a debt-to-equity ratio of 0.24, which is manageable. However, the return on equity is negative at -2.7%, indicating inefficiencies in generating returns for shareholders. The equity ratio stands at 68.9%, suggesting a solid equity base relative to total assets.55
Neutral
Cash Flow
Cash flow analysis shows a significant decline in free cash flow growth at -59.6% in the TTM. The operating cash flow to net income ratio is 0.83, indicating that operating cash flows are relatively strong compared to net income. The free cash flow to net income ratio is 0.79, suggesting that the company is generating cash flow despite net losses.50
Neutral
| Breakdown | TTM | Dec 2025 | Dec 2023 | Dec 2023 | Dec 2022 | Dec 2021 |
|---|---|---|---|---|---|---|
Income Statement | ||||||
| Total Revenue | 235.41M | 236.69M | 252.53M | 247.28M | 224.35M | 131.38M |
| Gross Profit | 161.50M | 161.75M | 172.79M | 172.82M | 156.89M | 96.05M |
| EBITDA | 41.61M | 42.95M | 19.95M | 42.29M | -77.43M | 29.77M |
| Net Income | -7.07M | -5.01M | -29.03M | -8.66M | -110.78M | 227.51K |
Balance Sheet | ||||||
| Total Assets | 373.68M | 346.55M | 442.75M | 400.64M | 498.53M | 540.12M |
| Cash, Cash Equivalents and Short-Term Investments | 17.07M | 13.49M | 11.16M | 16.23M | 12.70M | 22.09M |
| Total Debt | 70.32M | 56.11M | 115.16M | 89.11M | 122.61M | 89.17M |
| Total Liabilities | 116.38M | 92.35M | 176.63M | 140.91M | 204.72M | 164.12M |
| Stockholders Equity | 257.31M | 254.19M | 266.12M | 259.73M | 293.81M | 375.99M |
Cash Flow | ||||||
| Free Cash Flow | 37.71M | 32.95M | 15.22M | 33.33M | 15.95M | 12.87M |
| Operating Cash Flow | 46.36M | 41.79M | 26.49M | 44.25M | 21.06M | 15.70M |
| Investing Cash Flow | -8.65M | -8.84M | -11.27M | -10.91M | -55.82M | -109.89M |
| Financing Cash Flow | -36.54M | -35.68M | -16.77M | -28.26M | 25.37M | 96.41M |
Sangoma Technologies Technical Analysis
Negative
6.94
Price Trends
7.13
Negative
7.26
Negative
7.50
Negative
Market Momentum
-0.14
Positive
39.15
Neutral
35.19
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 6.87, below the 50-day MA of 7.13, and below the 200-day MA of 7.50, indicating a bearish trend. The MACD of -0.14 indicates Positive momentum. The RSI at 39.15 is Neutral, neither overbought nor oversold. The STOCH value of 35.19 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 |
|---|---|---|---|---|---|---|---|
65 Neutral | C$154.73M | -146.14 | -1.32% | ― | -5.56% | -124.69% | |
62 Neutral | C$296.53M | -8.89 | -34.34% | ― | -23.85% | 35.05% | |
61 Neutral | $37.18B | 12.37 | -10.20% | 1.83% | 8.50% | -7.62% | |
57 Neutral | C$43.53M | -18.08 | ― | ― | 79.84% | 70.95% | |
56 Neutral | C$223.69M | -29.42 | -2.18% | ― | -4.34% | 31.52% | |
55 Neutral | C$268.69M | -1.74 | ― | 1.80% | 2.47% | 19.37% | |
48 Neutral | C$135.91M | ― | ― | ― | ― | ― |
* Technology Sector Average
TSE:STC
Sangoma Technologies
6.71
-3.94
-37.00%
TSE:DGX
Digi Power X
4.19
0.98
30.53%
TSE:DND
Dye & Durham
4.00
-11.77
-74.64%
TSE:HAI
Haivision Systems
6.43
1.51
30.69%
TSE:EONX
Eonx Technologies
1.09
0.89
445.00%
TSE:ICS
Integrated Cyber Solutions, Inc.
1.86
1.77
1966.67%
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.