Sangoma Technologies: Leveraging Cash Flows and Industry Trends for Growth

Sangoma Technologies, a UCaaS company, has seen significant revenue growth from $21 million in fiscal 2017 to $224 million in fiscal 2022. The company has benefited from industry tailwinds and strong cash flows.

Sangoma Technologies (SANG/STC:CA), a leading unified communications as a service (UCaaS) provider, has experienced significant revenue growth, climbing from $21 million in fiscal 2017 to $224 million in fiscal 2022. This growth has been fueled by industry tailwinds and strong cash flows, positioning Sangoma as a key player in the SMB market.

Industry Tailwinds and Market Position

Sangoma's market position is bolstered by several factors. The company's focus on the SMB market, which accounted for 44% of global IT spending in 2023, is a strategic choice. The SMB segment, while slower to adopt cloud technologies than large enterprises, is experiencing a shift towards cloud-based solutions, similar to the trend seen in enterprises from 2018 to 2022. Additionally, the 67% increase in ransomware attacks on SMBs has created an urgent need for robust network security services, which Sangoma can provide.

Sangoma's unique offerings, including PBX hardware and software, managed services, and trunking services, set it apart from competitors. The company's low churn rate, less than 1% average monthly churn in fiscal 2025, further underscores its market strength. This low churn is attributed to Sangoma's focus on sector-specific solutions and its revamped relationships with channel partners, which are crucial for SMBs, according to a Seeking Alpha article.

Recent Challenges and Resilience

Despite its market advantages, Sangoma faced challenges in 2022 and 2023. The company's stock price and profitability took a hit due to industry slowdown and integration issues from its acquisition spree. However, under new CEO Charles Salameh, Sangoma has made significant strides in integrating its acquisitions and driving cash flows up.

The company's stock price took another hit in 2025 due to stalled growth. However, management believes this sell-off presents an opportunity to buy a differentiated UCaaS company at a cheap price, regardless of growth delays. While revenue is expected to decline slightly in 2026, the probability of future growth is strong, the article notes.

Looking Ahead

Sangoma's strategic focus on the SMB market, sector-specific solutions, and network security services positions it well for future growth. The company is also exploring acquisitions to expand in vertical software, network security, and new geographies, aiming to become a $1 billion company within the next 3-5 years, the analysis adds.

Valuation and Risks

Sangoma's valuation is steeply discounted compared to peers. After adjusting for capitalized software costs, the company's "regular" EBITDA for fiscal 2026 is estimated at $27.5 million, with an enterprise value of $385.6 million. This valuation suggests a 122% premium to the current price, indicating significant upside potential, the article finds.

However, risks include potential increases in churn rate due to significant product changes, dilutive acquisitions, and delays in growth returning. Management's operational expertise and long-term orientation provide a margin of safety, but investors should monitor these risks closely.

References

Sangoma Technologies: Gushing Cash Flows And Industry Tailwinds — `https://seekingalpha.com/article/4830989-sangoma-technologies-gushing-cash-flows-and-industry-tailwinds`