Sangoma Technologies Q2: There Are Reasons To Remain Positive Despite A Weak Quarter

Summary

• Sangoma's Q2 results were underwhelming, with total revenue and Adjusted EBITDA down 5% and 3% year over year respectively.
• Management also lowered full-year revenue and Adjusted EBITDA guidance due to lower demand and a change in strategy.
• FCF remains strong, which has supported continued deleveraging, with the leverage ratio now just above 1.
• Shares are valued cheaply at 6.9 times FCF, implying limited downside, with upside hinging on improving margins and revenue growth driven by acquisitions.
• As a result, I am maintaining my Buy rating on SANG stock.

Chainarong Prasertthai

Investment thesis

Shares of Sangoma Technologies (NASDAQ:SANG) are up slightly since my original recommendation last October, where I assigned them a Buy. Notably, shares were up more than 20% prior to releasing their Q2 FY25 results. The market reacted negatively

Analyst’s Disclosure:I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.