Sangoma Technologies Corp T.STC

Alternate Symbol(s): SANG

Technology Communication Equipment

Sangoma Technologies Corporation is engaged in delivering cloud-based communications as a service solution for companies of all sizes. The Company is a business communications platform provider with solutions that include its unified communications as a service (UCaaS), contact center as a service (CCaaS), communications platform as a service (CPaaS), and trunking technologies. Its enterprise-grade communications suite is developed in-house and available for cloud, hybrid, or on-premises setups. Additionally, the Company provides managed services for connectivity, network, and security. It offers hardware and software components that enable or enhance Internet protocol communications systems for both telecom and datacom applications. Its product line includes data and telecom boards for media and signal processing, as well as gateway appliances and software. Its phones and devices include voice over Internet protocol (VoIP) hardware, headsets, telephony cards, and accessories.

TSX:STC - Post by User

Sangoma Technologies Corp > TD

<< Previous

Bullboard Posts

Next >>

Post by retiredcfon Feb 10, 2023 1:01pm

724 Views

Post# 35280041

TD

Not all bad and given that we started the year at $6.35, this looks like a huge overreaction. It will be interesting to see how much they lower their current $16.00 target. GLTA

Sangoma Technologies Corp.

(STC-T) C$7.38

Q2/F23 First Take: Macro Headwinds Drive Miss and Lower Guidance

Event

Yesterday after market close, Sangoma reported its Q2/F23 results and lowered its F2023 guidance.

Conference call: 8:00 a.m. ET; 1-800-319-4610.

Impact: NEGATIVE

Organic growth turns negative. Sangoma reported Q2/F23 results below expectations, with revenue of $62.0mm (TD: $66.5mm/consensus: $67.7mm) and Adjusted EBITDA of $10.6mm (TD: $11.2mm/consensus: $11.8mm).

Revenue grew 17% y/y, driven by the NetFortris acquisition. We estimate organic growth was down ~6%-7% y/y, a continued deceleration over the last year.
- Product revenue was $12.6mm, well below our $16.5mm estimate and down 23% y/y. Similar to last quarter, management indicated that customers continue to be sensitive to capex purchases given the current macroeconomic environment, while continued supply chain issues and the stronger US$ made things worse.
- Service revenue rebounded to $49.4mm, up 2.3% q/q, following the 1.5% q/ q decline last quarter.
Gross margin of 69.0% beat our 67.5% estimate due to revenue mix. This level is at the upper end of management's expectations for F2023.
Adjusted EBITDA margins improved slightly q/q to 17.0%, helped by the better- than-expected gross margins and OpEx.
FCF was just $0.3mm, as FCF has been hampered by non-cash working capital challenges for most of the last two years (~$11mm headwind on a LTM basis alone), with Q2/F23 FCF particularly hurt by a $3.8mm decline in accounts payable/accrued liabilities.
Net debt was $108.1mm and Net debt/LTM Adjusted EBITDA was ~2.5x, both essentially unchanged from last quarter.

Lowered F2023 guidance implies continued growth challenges but solid margin expansion. Due to the YTD results and macro headwinds, F2023 guidance was reduced by ~9% for revenue and ~5% for Adjusted EBITDA at the mid-point. The updated guidance implies that organic revenue growth could remain negative for the next couple of quarters but Adjusted EBITDA margins are poised for a sharp improvement in H2/F23 to pre-acquisition levels (~20%), as we have been expecting (similar to the Digium acquisition).

Our take. Despite an expected significant improvement in margins in H2/F23 implied by the revised guidance, we believe the Q2/F23 miss and reduced guidance, particularly the implied tepid growth outlook, could cause the stock to give up much of its solid gains YTD.