TD's Fresh Take Q2/F22 First Take: Solid Quarter and Guidance Raised
Event
Yesterday after the close, Sangoma reported its Q2/F22 results and increased its
F2022 guidance.
Conference Call: 8:00 a.m. ET (Dial-in: 1 800 319-4610).
Impact: SLIGHTLY POSITIVE
Q2 revenue beat; Adj. EBITDA in line. Sangoma reported Q2/F22 revenue of
$54.2mm, above our forecast of $51.5mm and consensus of $51.6mm. Adj. EBITDA
of $10.4mm was in line with our estimate of $10.0mm and consensus at $10.2mm,
as its higher-than-expected revenue was mostly offset by higher-than-expected S&M
and G&A expenses.
Revenue grew 100% y/y (driven by the Star2Star acquisition) and 3% q/q.
Product revenue of $16.4mm was above our estimate of $14.0mm (up 39% y/
y and 5% q/q). Despite the ongoing supply chain issues, Sangoma was able to
fill most customer orders and meet its gross margin expectations.
Service revenue was $37.8mm, in line with our estimate of ~$37.5mm (up 148%
y/y and 3% q/q).
Gross margin was 72.7%, in line with our forecast of 73.0% and 72.1% last quarter.
The increase from 66.2% last year was driven by the revenue mix (70% services
revenue vs. 56% last year) due to the Star2Star acquisition.
Adj. EBITDA margin was 19.2%, in line with our estimate of 19.5% and flat vs.
last quarter (19.2%) and last year (19.0%).
The company incurred $1.1mm in one-time TSX and Nasdaq listing expenses.
Net debt was $63.2mm, down slightly from $66.4mm last quarter. Net debt/Adj.
EBITDA was ~1.8x (~1.6x on a pro forma basis).
F2022 guidance raised. Sangoma increased its F2022 guidance to $215mm-
$219mm in revenue (was $209mm-$213mm) and $42mm-$44mm in Adj. EBITDA
(was $41mm-$43mm). At the mid-point, revenue and Adj. EBITDA guidance is up
~2-3%.
Our take. Sangoma delivered another solid quarter that we believe highlights the
success the company has had integrating Star2Star along with ongoing strong
operational execution. When also factoring in a continued deleveraging of the
balance sheet, we believe that the company is in a good position to complete its next
acquisition in the near term.
In our view, the combination of the solid Q2/F22 results, increased F2022 guidance,
and potential acquisition in the near term could help lead to a rebound in the share
price.
Recommendation: BUY
Risk: HIGH
12-Month Target Price: C$31.00
12-Month Dividend (Est.): C$0.00
12-Month Total Return: 78.5%