Group 1 - The founder of Korwell Capital identifies as a value investor, focusing on stock opportunities with a tangible margin of safety or significant discounts to long-term earning power [1] - The investment strategy emphasizes a granular understanding of business models and their positions in the industry's capital cycle to identify tail risks [1] - Preference is given to companies with sustainable competitive advantages and management alignment with shareholders, while also considering cyclical or turnaround situations with downside protection [1] Group 2 - The analyst has a beneficial long position in the shares of SANG, indicating a personal investment interest in the company [2] - The article expresses personal opinions and is not influenced by compensation or business relationships with mentioned companies [2]

Core Insights - Sangoma Technologies Corporation reported quarterly earnings of $0.02 per share, exceeding the Zacks Consensus Estimate of $0.01 per share, compared to a loss of $0.05 per share a year ago, indicating a 100.00% earnings surprise [1] - The company generated revenues of $59.36 million for the quarter ended June 2025, surpassing the Zacks Consensus Estimate by 1.83%, although this represents a decline from year-ago revenues of $60.93 million [2] - The stock has underperformed, losing approximately 17.6% since the beginning of the year, while the S&P 500 has gained 12.3% [3] Earnings Outlook - The future performance of Sangoma Technologies Corporation's stock will largely depend on management's commentary during the earnings call and the revisions of earnings estimates [3][4] - The current consensus EPS estimate for the upcoming quarter is -$0.03 on revenues of $58.19 million, and for the current fiscal year, it is $0.09 on revenues of $239.27 million [7] Industry Context - The Internet - Software industry, to which Sangoma belongs, is currently ranked in the top 29% of over 250 Zacks industries, suggesting a favorable outlook compared to the bottom 50% [8] - Another company in the same industry, Paychex, is expected to report quarterly earnings of $1.21 per share, reflecting a year-over-year increase of 4.3%, with revenues projected at $1.54 billion, up 16.6% from the previous year [9]

Financial Data and Key Metrics Changes - Sangoma Technologies Corporation reported Q4 revenues of $59.4 million, an increase of $1.3 million or 2% sequentially from Q3, driven primarily by strong prem-based product sales [4][23] - Adjusted EBITDA for Q4 was $11.4 million, representing 19% of revenue, which is an increase from 17% in Q3, marking the highest margin delivered over the past eight quarters [24] - Free cash flow for Q4 was $4.8 million, or $0.14 per diluted share, while for the full fiscal year, free cash flow reached $32.9 million, or $0.98 per diluted share [22][24] Business Line Data and Key Metrics Changes - The company has shifted its focus towards software-led recurring revenue services, which now represent over 90% of the revenue mix, up from 79% two years ago [6] - Core services, which include high-margin SaaS products, currently account for approximately 75% of revenue, while adjacent services account for about 25% [14][25] - The prem-based product line saw an 18% growth in Q4 over Q3, indicating strong demand and market share capture from competitors [17][66] Market Data and Key Metrics Changes - The company is experiencing a sequential growth expectation beginning in Q2 of fiscal 2026, with a focus on mid-market enterprise initiatives [10][25] - Demand in core categories is building, supported by strategic partnerships and targeted marketing efforts in key verticals such as healthcare and education [8][9] Company Strategy and Development Direction - Sangoma's strategy includes delivering organic growth by investing in people, products, and partners, while also pursuing inorganic opportunities that create strategic value [7][10] - The company plans to categorize its results into core services and adjacent services to provide greater transparency and focus on growth areas [7][14] - Strategic partnerships with companies like Amazon Web Services and VTech Hospitality are aimed at enhancing product offerings and expanding market reach [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to resume growth, citing a strong pipeline and the successful execution of their transformation strategy [10][11] - The management team noted that while larger enterprise opportunities have longer sales cycles, they expect sequential growth to begin in Q2 and continue through fiscal 2026 [10][25] - The company is optimistic about the durability of high-margin opportunities and the potential for significant value creation for shareholders [11][26] Other Important Information - The sale of VoIP Supply, completed at the end of June, was a strategic move to streamline the portfolio and focus on higher-margin growth [6][24] - The company ended Q4 with total debt of $47.9 million, significantly below its original target, and has been actively repurchasing shares as a way to return capital to shareholders [22][26] Q&A Session Summary Question: Incremental go-to-market investments focus - The investments are categorized into field coverage and marketing coverage, aimed at enhancing brand awareness and expanding partner networks [29][30] Question: Changes in macro or competitive landscape - Management noted no significant competitive pressures, but acknowledged longer sales and implementation cycles for larger deals [31][32] Question: VoIP Supply's product mix - VoIP Supply primarily dealt with third-party products, with less than 10% being Sangoma proprietary products [33] Question: M&A strategy and appetite - The company is actively looking for acquisition opportunities, particularly in high-growth areas like SD-WAN and security, with a focus on integrating them quickly [34][36][37] Question: Visibility into second quarter growth - Growth is expected from both existing bookings and new deals with shorter sales cycles, providing confidence in the forecast [44][46] Question: Customer churn management - Churn is under control, with positive trends expected as new AI-based tools are deployed to mitigate churn further [53][54] Question: Revenue growth mix between expansion and new business - The company anticipates a balanced approach between expansion activities and acquiring new business, with significant investments in both areas [55][56] Question: International market focus - The company plans to expand its international presence, particularly in English-speaking markets, while focusing on high-margin SaaS products [86][87]

Financial Data and Key Metrics Changes - Sangoma reported revenues of $59.4 million for Q4, a sequential increase of $1.3 million or 2% from Q3, driven primarily by strong prem-based product sales [5][24] - Adjusted EBITDA for Q4 was $11.4 million, representing 19% of revenue, which is an increase from 17% in Q3, marking the highest margin delivered over the past eight quarters [25][27] - Free cash flow for Q4 was $4.8 million, or $0.14 per diluted share, while for the full fiscal year, free cash flow reached $32.9 million, or $0.98 per diluted share [23][24] Business Line Data and Key Metrics Changes - The company has shifted its focus towards software-led recurring revenue services, which now represent over 90% of the revenue mix, up from 79% two years ago [7] - Core services, which include high-margin SaaS products, currently account for approximately 75% of Sangoma's revenue, while adjacent services account for about 25% [15][66] Market Data and Key Metrics Changes - The company is seeing a 16% rise in pipeline demand from the healthcare sector, indicating strong traction in this market [9] - The international portfolio has been heavily oriented towards hardware, which has limited SaaS and software products, resulting in weaker performance in international markets [91][92] Company Strategy and Development Direction - Sangoma's strategy includes delivering organic growth by investing in people, products, and partners, while also pursuing inorganic opportunities that create strategic value [8][27] - The company plans to categorize its results into core services and adjacent services to provide greater transparency into growth areas and cash flow generation [8][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum and opportunities across the core business, expecting sequential growth to begin in Q2 and continue through fiscal 2026 [11][27] - The company is focused on building strong strategic partnerships to deliver tailored solutions for specific industries, such as healthcare and education [9][10] Other Important Information - Sangoma completed the sale of its VoIP Supply business for $4.5 million, marking a deliberate shift towards higher-margin growth [26] - The company has a strong balance sheet, allowing it to invest in growth while reducing debt, with total debt at $47.9 million at the end of Q4 [23][24] Q&A Session Summary Question: How much of the incremental go-to-market investments is about existing partners versus new partners? - Management indicated that investments are focused on both field coverage and marketing coverage to enhance brand awareness and recruit new partners [30][31] Question: Have there been any changes in the macro or competitive landscape? - Management noted no major competitive pressures but acknowledged longer sales and implementation cycles for larger deals [32][33] Question: What is the appetite for M&A given the strong balance sheet? - Management expressed a strong appetite for M&A, focusing on targets in areas like SD-WAN and security, with a disciplined approach to integration [36][38] Question: What is the visibility into sequential growth for Q2? - Management indicated that growth will come from both existing business and new deals, with a balanced pipeline of opportunities [46][48] Question: How is the adjacent category expected to grow? - Management stated that while there is some growth in adjacent services, the focus remains on core services where higher growth opportunities exist [51][52] Question: What is the outlook for customer churn? - Management reported that churn is well under control and expected to decline further due to improved customer engagement and advanced tools [57] Question: What are the priorities for M&A? - Management highlighted market access and technology integration as key priorities for M&A, aiming to enhance the overall value proposition [60][61]

Financial Data and Key Metrics Changes - Sangoma Technologies Corporation reported Q4 revenues of $59.4 million, an increase of $1.3 million or 2% sequentially from Q3, driven primarily by strong prem-based product sales [5][23] - Adjusted EBITDA for Q4 was $11.4 million, representing 19% of revenue, which is an increase from 17% in Q3, marking the highest margin delivered over the past eight quarters [24] - Free cash flow for Q4 was $4.8 million, or $0.14 per diluted share, while for the full fiscal year, free cash flow reached $32.9 million, or $0.98 per diluted share, consistent with the previous year [22][23] Business Line Data and Key Metrics Changes - The company has shifted its focus towards software-led recurring revenue services, which now represent over 90% of the revenue mix, up from 79% two years ago [6] - Core services, which include SaaS-led communication platforms, now account for approximately 75% of Sangoma's revenue, while adjacent services account for about 25% [14][25] - The prem-based product line saw an 18% sequential growth in Q4 over Q3, reflecting successful channel efforts targeting competitors like Avaya and Mitel [70] Market Data and Key Metrics Changes - The company is experiencing a 16% rise in pipeline demand from the healthcare sector, indicating strong market interest [8] - International revenue has been declining, primarily due to a focus on North America and a product mix heavily oriented towards hardware, which is less profitable compared to SaaS offerings [88][90] Company Strategy and Development Direction - Sangoma's strategy includes delivering organic growth by investing in people, products, and partners, while also pursuing inorganic opportunities that create strategic value [7][25] - The company plans to categorize its results into core services and adjacent services to provide greater transparency and focus on high-margin growth areas [7][14] - Strategic partnerships with companies like Amazon Web Services and VTech Hospitality are aimed at enhancing product offerings and expanding market reach [9][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, expecting sequential growth to begin in Q2 and continue through fiscal 2026 [10][25] - The management noted that while larger enterprise opportunities have longer sales cycles, the pipeline is becoming more balanced with shorter cycle deals contributing to future revenue [16][46] - The company is optimistic about reducing churn and improving customer retention through advanced AI-based tools and upselling strategies [55] Other Important Information - The sale of VoIP Supply, completed at the end of June, was a strategic move to streamline the portfolio and focus on higher-margin growth [6][24] - The company has a robust pipeline of potential M&A targets, particularly in high-growth areas like SD-WAN and security, with a disciplined approach to acquisitions [36][81] Q&A Session Summary Question: Incremental go-to-market investments focus - Management indicated that investments are being made in field coverage and marketing to enhance brand awareness and partner recruitment [29][30] Question: Changes in macro or competitive landscape - Management noted no significant competitive pressures but acknowledged longer sales and implementation cycles for larger deals [31][32] Question: VoIP Supply's product mix - It was clarified that over 90% of VoIP Supply's sales were third-party products, with less than 10% being Sangoma proprietary products [34] Question: M&A appetite and strategy - Management expressed a strong appetite for acquisitions, particularly in areas that enhance the company's portfolio and market position [35][36] Question: Visibility into second quarter growth - Growth is expected to come from both existing bookings and new deals with shorter sales cycles [45][46] Question: Customer churn management - Management reported that churn is under control and expected to decline further due to improved customer engagement strategies [55] Question: Revenue growth mix between expansion and new business - Management indicated that both expansion and new business will drive revenue growth, supported by targeted investment strategies [56] Question: International revenue decline reasons - The decline is attributed to a focus on North America and a product mix that has not prioritized high-margin SaaS offerings [88][90]

Financial Data and Key Metrics Changes - Sangoma reported Q4 revenues of $59.4 million, an increase of $1.3 million or 2% sequentially from Q3, driven primarily by strong prem-based product sales [21][23] - Adjusted EBITDA for Q4 was $11.4 million, representing 19% of revenue, which is an increase from 17% in Q3, marking the highest margin delivered over the past eight quarters [24][26] - Free cash flow for Q4 was $4.8 million, or $0.14 per diluted share, while for the full fiscal year, free cash flow reached $32.9 million, consistent with the previous year [22][26] Business Line Data and Key Metrics Changes - The company has shifted its focus towards software-led recurring revenue services, which now represent over 90% of revenue mix, up from 79% two years ago [6][24] - Core services, which include high-margin SaaS products, now account for approximately 75% of revenue, while adjacent services account for about 25% [15][25] - The prem-based product line saw an 18% sequential growth in Q4 over Q3, indicating strong demand and market share gains [61] Market Data and Key Metrics Changes - The company is experiencing a 16% rise in pipeline demand from the healthcare sector, indicating strong growth potential in this vertical [9] - The international market has seen larger declines compared to the U.S., primarily due to a focus on North America and a product mix heavily oriented towards hardware [80][81] Company Strategy and Development Direction - Sangoma's strategy includes delivering organic growth through investments in people, products, and partners, while also pursuing inorganic opportunities that create strategic value [8][25] - The company plans to broaden its presence in key verticals such as healthcare, education, and distributed enterprise, leveraging strategic partnerships to deliver tailored solutions [9][10] - A deliberate shift towards categorizing results into core and adjacent services aims to provide greater transparency and focus on high-margin growth areas [7][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, expecting sequential growth to begin in Q2 and continue through fiscal 2026 [11][25] - The company is optimistic about the momentum and opportunities in its core business, despite longer sales cycles for larger enterprise deals [11][32] - Management noted that churn is well under control, with predictions of continued decline in churn rates due to improved customer engagement and upselling strategies [49] Other Important Information - The sale of VoIP Supply for $4.5 million was a strategic move to streamline the portfolio and focus on higher-margin growth [24][25] - The company ended Q4 with $47.9 million in total debt, significantly below its original target, and has been actively repurchasing shares as a way to return capital to shareholders [22][26] Q&A Session Summary Question: Incremental go-to-market investments focus - Investments are being made in field coverage and marketing to enhance brand awareness and partner recruitment, with a cautious approach to ensure returns [30] Question: Changes in macro or competitive landscape - No major competitive pressures noted, but longer sales and implementation cycles for larger deals are expected [32] Question: VoIP Supply's product mix - VoIP Supply primarily sold third-party products, with less than 10% being Sangoma proprietary products [34] Question: M&A strategy and appetite - The company is actively looking for acquisition opportunities, particularly in high-growth areas like SD-WAN and security, with a robust funnel of targets [36][39] Question: Visibility into Q2 sequential growth - Growth is expected from both existing bookings and new deals with shorter sales cycles, providing confidence in the forecast [43][44] Question: Customer churn management - Churn is under control, with advanced AI tools being deployed to further mitigate churn and improve retention [49] Question: Revenue by geography and international focus - The company is prioritizing North America but plans to expand its international presence, particularly in English-speaking markets [80][81]

Revenue Performance - Total revenue for Q4 Fiscal 2025 was $59.4 million, a 2% increase from the previous quarter, driven by product revenue growth [4]. - Fiscal 2025 total revenue was $236.7 million, within the guided range of $235 - $238 million, with a service/product revenue mix of 82%/18% [6]. - Guidance for Fiscal 2026 projects total revenue in the range of $200 - $210 million, with an expected Adjusted EBITDA margin of 17%-19% [9]. Profitability Metrics - Adjusted EBITDA for Q4 was $11.4 million, representing 19% of total revenue, the highest level in the last 8 quarters [4]. - Net loss for Fiscal 2025 was $5.0 million ($0.15 loss per share fully diluted), an improvement from a net loss of $8.7 million in the previous year [6]. - Adjusted EBITDA for Q2 2025 was $11,361, up by $251 or 2% from $11,110 in Q2 2024, with a revenue percentage of 19% [21]. Cash Flow and Expenses - Free cash flow for Q4 was $4.8 million ($0.14 per share fully diluted), with total free cash flow for Fiscal 2025 at $32.9 million ($0.98 per share fully diluted) [6]. - Free Cash Flow for Q2 2025 decreased to $4,794, down by $3,511 or 42% from $8,305 in Q2 2024 [23]. - Operating expenses for Fiscal 2025 were $163.0 million, down 6% from the previous year, reflecting cost-saving measures [6]. Debt and Financial Health - Total debt at the end of Fiscal 2025 was $47.9 million, a reduction of approximately 40% from the previous year [6]. - Interest expense (net) decreased by $806 or 55% to $658 in Q2 2025 from $1,464 in Q2 2024 [21]. Operational Efficiency - The company achieved industry-leading churn of less than 1% for both Q4 and Fiscal 2025 [4][6]. - The company completed the sale of VoIP Supply LLC for $4.5 million, securing a multiple of approximately 4x Adjusted EBITDA [6]. Tax and Depreciation - Tax expense recovery improved by $781 or 226% to a recovery of $435 in Q2 2025 compared to an expense of $346 in Q2 2024 [21]. - The company reported a decrease in depreciation of property and equipment by $210 or 17% to $993 in Q2 2025 from $1,203 in Q2 2024 [21]. Restructuring and Development Costs - Restructuring and business integration costs increased significantly by $342 or 326% to $447 in Q2 2025 from $105 in Q2 2024 [21]. - Development costs decreased by $453 or 23% to $1,510 in Q2 2025 from $1,963 in Q2 2024 [23]. - The purchase of property and equipment decreased by $613 or 43% to $822 in Q2 2025 from $1,435 in Q2 2024 [23]. Quarterly Performance - Net income for Q2 2025 was $209, a significant improvement of $1,917 compared to a loss of $1,708 in Q2 2024, representing a 112% change [21]. - Net cash provided by operating activities for Q2 2025 was $7,126, a decrease of $4,577 or 39% compared to $11,703 in Q2 2024 [23].

Core Insights - Sangoma Technologies Corporation reported its fourth quarter financial results for the year ended June 30, 2025, highlighting a year of transformation and discipline [1] Financial Performance - The financial results are expressed in US dollars, indicating a focus on international markets and potential currency impacts [1] - The company emphasizes its unique position in offering on-premises, cloud-based, or hybrid Communications as a Service solutions, which may contribute to its competitive advantage [1]

Core Viewpoint - Sangoma Technologies Corporation (SANG) shows potential for significant upside, with a mean price target of $8.42 indicating a 47.2% increase from the current price of $5.72 [1] Price Targets - The average price target consists of five estimates ranging from a low of $7.94 to a high of $9.50, with a standard deviation of $0.67, suggesting a consensus among analysts [2] - The lowest estimate indicates a potential increase of 38.8%, while the highest suggests a 66.1% upside [2] Analyst Sentiment - Analysts exhibit strong agreement on SANG's ability to report better earnings than previously predicted, which supports the view of potential upside [4] - Over the last 30 days, the Zacks Consensus Estimate for the current year has increased by 7.8%, with one estimate moving higher and no negative revisions [12] Zacks Rank - SANG holds a Zacks Rank 2 (Buy), placing it in the top 20% of over 4,000 ranked stocks based on earnings estimate factors, indicating strong potential for near-term upside [13]

Group 1 - Momentum investing contrasts with the traditional strategy of "buy low and sell high," focusing instead on "buying high and selling higher" [1] - Identifying the right entry point for fast-moving stocks can be challenging, as they may lose momentum if future growth does not justify their high valuations [1] - A safer investment approach involves targeting bargain stocks that exhibit recent price momentum [2] Group 2 - Sangoma Technologies Corporation (SANG) is highlighted as a strong candidate for investment, showing a four-week price change of 25.8% [3] - SANG has demonstrated positive returns over a longer timeframe, gaining 2% over the past 12 weeks, with a beta of 1.41 indicating significant volatility [4] - The stock has a Momentum Score of A, suggesting it is an opportune time to invest [5] Group 3 - SANG has received a Zacks Rank 2 (Buy) due to upward revisions in earnings estimates, which typically attract more investor interest [6] - The stock is currently trading at a Price-to-Sales ratio of 0.85, indicating it is undervalued at 85 cents for each dollar of sales [6] - There are additional stocks that meet the criteria of the 'Fast-Paced Momentum at a Bargain' screen, presenting further investment opportunities [7]