Sangoma Technologies (STC) AI Stock Analysis

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TSE:STC Dividends

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Sangoma Technologies

(TSX:STC)

63Neutral

Sangoma Technologies' overall stock score reflects its strong cash flow and strategic shifts towards recurring revenue, but is tempered by ongoing profitability challenges and valuation concerns. The technical analysis presents mixed signals, and while the earnings call provided some positive strategic directions, uncertainties in revenue and external factors weigh on the score.

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. S&P 500 (SPY)

Market Cap

C$271.11M

Dividend YieldN/A

Average Volume (3M)27.51K

Price to Earnings (P/E)―

Beta (1Y)1.35

Revenue Growth-2.76%

EPS Growth77.19%

CountryCA

Employees671

SectorTechnology

Sector Strength65

IndustrySoftware - Infrastructure

Share Statistics

EPS (TTM)-0.06

Shares Outstanding33,594,410

10 Day Avg. Volume22,476

30 Day Avg. Volume27,508

Financial Highlights & Ratios

PEG RatioN/A

Price to Book (P/B)N/A

Price to Sales (P/S)0.00

Price to Cash Flow (P/CF)0.00

P/FCF Ratio0.00

Enterprise Value/Market Cap1.52

Enterprise Value/RevenueN/A

Enterprise Value/Gross Profit2.38

Enterprise Value/EbitdaN/A

Forecast

1Y Price Target

C$12.52

Price Target Upside54.57% Upside

Rating ConsensusModerate Buy

Number of Analyst Covering0

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 Financial Statement Overview

Summary

Sangoma Technologies shows strengths in cash flow management and a solid equity base, but faces profitability challenges. The negative net profit margin and consistent net losses indicate ongoing operational difficulties. Revenue has been stable, but improvement in profitability metrics is needed to enhance financial position.

Income Statement

Positive

Sangoma Technologies has demonstrated a mixed performance in its income statement. The TTM gross profit margin stands at 69.01%, showing strong cost management; however, the net profit margin is negative at -2.80% due to consistent net losses. The EBIT margin is also negative at -0.13%, indicating challenges in covering operational costs. Revenue has been relatively stable with a slight decline from the previous year. Despite a positive EBITDA margin of 18.23%, the company faces profitability challenges.

Balance Sheet

Positive

The balance sheet reveals a moderate position with a debt-to-equity ratio of 0.27, suggesting manageable leverage. The equity ratio is robust at 68.86%, highlighting a strong equity base relative to assets. However, the return on equity is negative at -2.63%, reflecting challenges in generating returns for shareholders due to ongoing net losses.

Cash Flow

Positive

Cash flow analysis indicates a positive trajectory with operating cash flow exceeding net income, resulting in a favorable operating cash flow to net income ratio of 7.57. Free cash flow increased by 23.36% in the TTM, showcasing effective cash management despite profitability issues. The free cash flow to net income ratio is strong, highlighting the company's cash-generating capability.

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

Sangoma Technologies Technical Analysis

Technical Analysis Sentiment

Positive

Last Price8.10

Price Trends

50DMA

6.96

Positive

100DMA

8.37

Negative

200DMA

8.14

Positive

Market Momentum

MACD

0.37

Negative

RSI

68.75

Neutral

STOCH

84.83

Negative

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 8.1 is above the 20-day moving average (MA) of 7.33, above the 50-day MA of 6.96, and below the 200-day MA of 8.14, indicating a bullish trend. The MACD of 0.37 indicates Negative momentum. The RSI at 68.75 is Neutral, neither overbought nor oversold. The STOCH value of 84.83 is Negative, 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 (60)

Financial Indicators

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
TOI	77 Outperform	$13.37B	97.66	29.51%	―	16.90%	28.86%
STC	63 Neutral	C$271.11M	―	-2.60%	―	-2.76%	77.19%
CVO	61 Neutral	C$601.46M	―	-7.32%	―	8.86%	56.67%
Sector *	60 Neutral	$10.77B	10.41	-6.71%	2.99%	7.69%	-13.12%
TIXT	53 Neutral	$968.31M	35.99	-3.06%	―	-0.37%	-215.49%
BB	50 Neutral	$2.96B	―	-7.59%	―	-31.15%	30.02%
DND	50 Neutral	C$592.70M	―	-42.62%	0.85%	2.97%	25.63%

* Technology Sector Average

Performance Comparison

TSE:STC

Sangoma Technologies

8.29

2.18

35.68%

TSE:BB

BlackBerry

5.27

1.19

29.17%

TSE:DND

Dye & Durham

9.51

-4.64

-32.79%

TSE:TIXT

TELUS International (CDA)

3.43

-5.27

-60.57%

TSE:TOI

Topicus.com

176.13

60.00

51.67%

TSE:CVO

Coveo Solutions

6.45

-1.59

-19.78%

Sangoma Technologies Earnings Call Summary

Earnings Call Date:May 08, 2025

(Q2-2025)

% Change Since: -2.29%|

Next Earnings Date:Sep 24, 2025

Earnings Call Sentiment Neutral

The earnings call reflects a strategy shift towards high-margin recurring revenue streams and an acceleration of debt reduction, with notable improvements in cash flow and churn rates. However, challenges include a decline in third-party hardware resale revenue, uncertainty in federal government spending, and a lowered revenue guidance.

Q2-2025 Updates

Positive Updates

Net Cash from Operating Activities

Generated $11.9 million in net cash from operating activities in Q2, a 30% increase over the prior year period. Fiscal year-to-date net cash from operating activities reached $24 million, representing a 41% increase over the prior year.

Debt Reduction

Retired $8.7 million in total debt during the second quarter, reaching target debt position of $55 million to $60 million two quarters ahead of schedule.

Churn Rate Improvement

Churn rates dropped back to below 0.95%, a significant improvement from 1.1% a quarter ago, reflecting stronger client relationships.

Adjusted EBITDA Improvement

Adjusted EBITDA improved by 3% to $10.1 million while adjusted EBITDA margin improved from 16% to 17% of revenue.

Negative Updates

Third-Party Hardware Resale Decline

Revenue from third-party hardware resale declined by $1.2 million compared to Q1, with limited potential seen for growth in FY 2025.

Federal Government Spending Uncertainty

A nearly $1 million U.S. Federal government opportunity was placed on hold, and further executive orders to freeze all government hires created uncertainty.

Lowered Revenue Guidance

Revenue guidance for fiscal 2025 was lowered to $235 million to $240 million from $250 million to $260 million.

Company Guidance

During Sangoma's second quarter fiscal year 2025 investor call, the company detailed its guidance and strategic direction. Sangoma reported revenue of $59.1 million and adjusted EBITDA of $10.1 million, with a gross profit margin maintained at 68%. Despite a sequential revenue decline due to a $1.2 million drop in third-party hardware resale, the company's focus is on transitioning towards high-margin recurring revenue streams. This shift aligns with their adjusted FY 2025 revenue guidance of $235 million to $240 million, while maintaining an EBITDA margin of 17%. The company achieved a significant reduction in net debt, decreasing to $43.3 million, and a churn rate improvement to below 0.95%. Sangoma aims for long-term revenue models with over 85% recurring revenue and plans to increase gross margins to near 80% and EBITDA margins to 20%, supported by their strategic realignment and divestiture of non-core assets.

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

OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.

NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.

UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.

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.