Sangoma Fiscal Q4 2024 Update
Quick update after fiscal Q4 2024
*Disclosure: I own shares in STC. I am not a professional. Please do your own due diligence.
Price: $7.89 CAD / $5.68 USD
MC: 189 million USD
EV: 251 million USD
1 year performance: +43%
Sangoma reported yesterday after the market closed and held a call. Results were in line with of my expectations and they guided a bit softer than I expected. The stock is currently down 6.5%.
*all numbers in USD unless stated otherwise
Quarter Recap
Revenue came in at 61 million for the quarter vs 63.7 million last year.
This landed them in the middle of their guidance for 2024.
Services revenue was essentially flat.
Product revenue was down 2.5 million or 18% to 11 million.
EBITDA came in at 11.1 million vs 10.9 million.
Up 2%.
The guidance for fiscal 2025 is as follows:
Revenue between 250 to 260 million.
This is a 3% increase from 2024 at the midpoint.
EBITDA between 42 and 26 million.
This is an increase of 3% at the midpoint.
Call Notes
Churn continues to be low at less than 1%
They are still targeting debt reduction as a priority. They are shooting for 55-60 million in debt by year end 2025.
Sounds like product revenue has bottomed and should increase from here.
They are going to start disclosing more metrics in Q2 2025.
Some non-recurring expenses in 2025 related to ERP implementation. It is about 2 million.
Valuation
I have them at 5.5-6x EV/EBITDA 2025 guidance.
Closing Thoughts
I was expecting some more revenue growth in their guidance for 2025. I have a feeling they will land closer to the high end of 2025 guidance. I was also expecting EBITDA guidance to be stronger, but once you back out the ERP costs in 2025 they are essentially in line with what I was expecting. The balance sheet is much cleaner than a couple years ago and I think pivoting to share purchases and/or M&A (depending on the valuation) makes more sense from here.
I continue to hold my shares as I think Sangoma is undervalued.
Thanks for reading.
Dean
* long STC.to