Paradigm Capital lowers price target on Sylogist

Paradigm Capital analyst Daniel Rosenberg lowered his target price on Sylogist (Sylogist Stock Quote, Chart, News, Analysts, Financials TSX:SYZ) to $12.75 from $13.00 in a May 15 research note, citing higher near-term costs from building out the company’s partner sales channel.

However, he maintained a “Buy” rating, indicating strong SaaS momentum and improving operating leverage expected in the second half of fiscal 2025.

“Restructuring efforts that began in late 2020 are beginning to bear fruit,” Rosenberg said. “New leadership, investment in new products and a strengthened partnership with Microsoft have led to meaningful improvement in reputation and customer loyalty. Today, Sylogist is benefiting with double-digit organic growth with very healthy Adjusted EBITDA margins in the mid-20% range. With a generational government infrastructure spending cycle in the U.S., Sylogist is well-positioned to win significant market share in the fragmented mid-market.”

Founded in 1993 and based in Calgary, Sylogist provides ERP solutions to public sector clients, including K–12 school boards, state agencies, nonprofits, and international NGOs.

Sylogist’s Q1 results were mostly in line with expectations, with a standout 153% jump in bookings to $23.1-million thanks to a major contract in Texas. The company expects SaaS revenue growth to pick up later this year and into 2026. While one NGO customer was affected by U.S. federal spending cuts, management maintained its 2025 outlook, anticipating stronger growth and improved efficiency in the second half. Paradigm sees continued progress in Sylogist’s shift to a SaaS model supported by strong products.

“Revenue of $16.3M (+0.1% y/y) was in line with consensus of $16.2M,” Rosenberg said. “Accounting for the recent divestiture in the Managed Services business, revenue grew 3% y/y. SaaS revenue growth of 15% ex-divestment remained strong, with further improvements expected in the back half of the year. Gross profit of $9.6M represented a gross margin of 59.1%, up from 56.6% last year as SaaS revenue mix grew. Adjusted EBITDA of $2.6M came in slightly below consensus of $3.2M, representing an EBITDA margin of 16.1%. This was owing to higher Professional Fees and Marketing spending this quarter. Part of the added expense came from a portion of costs no longer being capitalized but rather being booked through R&D Expense.”

Impressive growth in new bookings this quarter was driven by a major contract win in Texas, which added roughly $15-million to the total.

“Recall, in April, SYZ announced that it was awarded a multi-year contract by the Texas Office of the Attorney General to provide statewide automated victim notification services (SAVNS),” Rosenberg said. “This is a business that is seeing good momentum with wins in Nevada and Massachusetts earlier this year. According to the Texas Comptroller of Public Accounts, Sylogist was awarded US$10.6M (C$15M) for the max. 5-year contract. This is meaningful for the company’s ramping SaaS business, with management expecting about $2.9M in ARR per year. We note the opportunity for further competitor displacement within large state departments as significant given recent wins and Sylogist’s position as a leading solution.”

Paradigm Capital now estimates that Sylogist will generate $14.6-million in Adjusted EBITDA on $68.9-million in revenue in fiscal 2025, improving to $20.3-million in Adjusted EBITDA on $73.1-million in revenue in fiscal 2026.

These figures represent a modest downward revision from previous estimates of $16.3-million and $21.4-million in Adjusted EBITDA for FY25 and FY26, respectively. The adjustment reflects higher operating expenses, particularly related to standing up the channel partner sales function, which affected EBITDA margins. Despite this, the firm maintains a positive outlook, noting accelerating SaaS revenue growth and increasing operating leverage in the back half of 2025 and into 2026.

“We have adjusted our forecast to account for higher opex in order to stand up its channel partner sales,” Rosenberg said. “We value SYZ using a blend of EV/EBITDA multiple and a DCF on our 2026 forecast. We utilize a 16.0x multiple on 2026e EBITDA. Our DCF utilizes WACC of 11.00%. The blended valuation results in our new target price of $12.75 (was $13.00). SYZ shares trade at 11.8x 2026e EBITDA versus peers at 22.9x. We reiterate our ‘Buy’ rating.

“Sylogist is building toward a healthy, long-term, sustainable SaaS model. Leading indicators suggest good progress, which will translate into a strong 2026. Current valuations present an attractive opportunity to own a fundamentally strong business with leading tech.”

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