Sylogist is now a double, says Echelon

Echelon Capital Markets analyst Amr Ezzat dubbed the latest quarterly results from Canadian SaaS company Sylogist (Sylogist Stock Quote, Charts, News, Analysts, Financials TSX:SYZ) an impressive outing, saying investors ought to be taking advantage of the stock at current levels. Ezzat delivered an update on Thursday where he reiterated a “Buy” rating on SYZ and $11.00 target price, which at press time represented a projected one-year return of 102.9 per cent.

Founded in 1993 and headquartered in Calgary, Sylogist has enterprise resource planning solutions for the public service sector, including school boards, non-profits, NGOs and others. The company reported its fourth quarter and full 2022 financials on Thursday, showing total revenue up 22 per cent year-over-year to $15.3 million and gross profit up 19 per cent to $9.7 million. EBITDA climbed 31 per cent to $4.9 million, while Sylogist’s free cash flow was at $0.7 million compared to negative $1.9 million a year earlier.

“Revenue expansion in the quarter was driven by growth within our two most recent acquisitions, increased SylogistMission ERP installs and upgrades, and broad-based gains across the business,” said President and CEO Bill Wood in a press release. 

“In doing so, Sylogist has continued to drive profitability, maintaining a 32 per cent EBITDA margin this quarter. We are focused on continuing to execute on our organic growth initiatives, driving momentum, and creating long-term shareholder value,” he said.

The Q4 top and bottom lines were beats of analysts’ estimates, where the $15.3 million in revenue was above the consensus call at $14.2 million as well as Ezzat’s estimate at $13.8 million. EBITDA at $4.9 million (for a 31.8 per cent margin) was also above the Street’s forecast at $3.7 million and Ezzat’s $3.5 million.

Ezzat noted that the revenue boost was centrally due to greater new bookings and project delivery along with having a full quarter of contribution from recent acquisitions. Ezzat said cloud subscriptions were up 13.8 per cent to $6.0 million and Sylogist’s revenue backlog increased by 17 per cent to $30.3 million compared to September 30, 2021.

“We expect the Company’s evolving growth profile and M&A to act as key catalysts in driving valuation. We believe the Company’s scope of potential acquisitions extends from technology-focused to client-focused tuck-ins,” Ezzat wrote.

The analyst said the quarter was Sylogist’s fourth in a row of positive organic growth.

“Trading at 9.1 per cent FCF yield, we view the YTD stock price weakness as a unique opportunity to consolidate a position in a quality operator which boasts high visibility double-digit growth. The shares currently trade at 7.4x NTM EBITDA versus pure play comps in the 12-19x range and a median of 22.4x for high-visibility Canadian tech peers,” he said.