Sangoma Technologies
(STC-T) C$14.84
Q3/F22 Preview: Expecting Updated Guidance post-NetFortris
Event
Q3/F22 Results: Thursday, May 12, after the markets close. Conference Call: 8:00 am ET, Friday, May 13 (Dial-in: 1 800 319-4610).Impact: NEUTRAL
Looking to continue its streak. We are forecasting Q3/F22 revenue of $54.3mm, in-line with consensus at $54.1mm, with most of the expected 94% y/y growth coming from the acquisition of Star2Star but complemented by solid organic growth. Our Adj. EBITDA of $10.7mm is right in-line with consensus, as Sangoma looks to extend its long, multi-year streak of meeting or beating consensus Adj. EBITDA estimates. We expect Adj. EBITDA margins to remain in the 19%-20% range this quarter before moderating in the next couple of quarters due to the NetFortris acquisition before returning to current (pre-acquisition) levels exiting F2023.
Expecting updated F2022 guidance post-NetFortris. Sangoma did not provide updated F2022 guidance when it announced the acquisition of NetFortris at the end of March. Management indicated that an update would be provided when it reported its Q3/F21 results. The current F2022 guidance is $215mm-$219mm in revenue and $42mm-$44mm in Adj. EBITDA.
We adjusted our estimates to reflect the NetFortris acquisition closing at the end of Q3/F22. We are forecasting F2022 revenue of $230.0mm and Adj. EBITDA of $43.2mm, in-line with consensus at $229.3mm and $42.7mm, respectively.
Some potential IT supply chain challenges ahead. In recent weeks, we have seen more data points emerging on the increasing global IT supply chain issues and related impacts. Last week, we published a note highlighting the potential impact to some of our covered names, including Sangoma (details here).
We are forecasting product revenue (~30% of total revenue in Q3/F22) to decline ~9% q/q due to seasonality as well as some impact from the increasing global IT supply chain challenges, driven in particular by the China lockdowns. Although we believe Sangoma has thus far managed the supply chain challenges well, we are looking for colour on the expected impact going forward.
TD Investment Conclusion
We are maintaining our C$33.00 target, which is based on 2.8x our C2023E revenue estimate.