Sylogist is still a buy, Ventum says

Amr Ezzat, an analyst with Ventum Capital Markets, says Sylogist’s (Sylogist Stock Quote, Chart, News, Analysts, Financials TSXV:SYZ) recent US$10.6-million statewide contract win in Texas is a strong endorsement of the company’s Victim Services Suite and its overall strategy.

This marks Sylogist’s third VSS deal in the U.S. this year and, according to Ezzat, “represents a clear validation of its product, architecture, and go-to-market strategy.”

In a research update April 21, the analyst maintained his “Buy” rating and a $13.00 price target ahead of Sylogist’s Q1 2025 results.

By shifting professional services work to its partner network, Sylogist is no longer limited by internal capacity, which allows it to expand its SaaS operations more efficiently across jurisdictions. Ezzat says this contract gives Sylogist a growing edge in both cost and execution while also establishing a presence in more than 150 agencies in Texas. The deal’s structure creates room for future product expansion with little extra effort.

Commercially, Ezzat sees the Texas contract as a key reference point that boosts the likelihood of additional large-scale U.S. wins, which he describes as “sticky and defensible.”

Ezzat said Sylogist, under new leadership, has moved away from its “Steady Eddie” approach and is now focused on pursuing growth more aggressively.

“From an investor’s perspective, the management and BOD refresh was a much-needed stepping stone to revitalize a stagnant business model,” he said in his April 21 investors note. “The embers of sales growth have been rekindled, igniting a new flame within the company.

“But aggressive top-line growth is not without its growing pains.”

Margins have narrowed, as expected, due to Sylogist’s investment in growth, but they now appear to be at or near their lowest point. Looking only at short-term earnings, Ezzat argues, undervalues the stock because it ignores how the company’s margins are expected to improve over time.

The competitive landscape is also shifting in Sylogist’s favour,” the analyst said. PowerSchool Holdings’ move into private equity likely means it will raise prices and cut costs, giving Sylogist a chance to win over clients. Similarly, Blackbaud’s steep price hikes are driving some customers to look for better options, including Sylogist.

To support its growth strategy, Sylogist cut its quarterly dividend in November 2022 from $0.125 to $0.01 per share, freeing up $11-million a year for reinvestment.

Ezzat expects Sylogist to generate $17.5-million in adjusted EBITDA on $69.9-million in revenue for fiscal 2025. He forecasts those figures will rise to $23.6-million in adjusted EBITDA on $79.4-million in revenue in fiscal 2026.

“With a scope extending from technology-focused to client-focused tuck-ins, Sylogist is laying the groundwork for continued value creation,” Ezzat said.