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Softchoice Corporation (TSE:SFTC)
TSX:SFTC
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Softchoice Corporation
(TSX:SFTC)
68Neutral
Softchoice Corporation (SFTC) vs. S&P 500 (SPY)
Market Cap
C$1.48B
Dividend Yield2.13%
Average Volume (3M)122.13K
Price to Earnings (P/E)27.4
Beta (1Y)0.98
Revenue Growth-6.14%
EPS Growth-14.96%
CountryCA
Employees2,100
SectorTechnology
Sector Strength45
IndustrySoftware
Share Statistics
EPS (TTM)0.89
Shares Outstanding60,336,420
10 Day Avg. Volume136,593
30 Day Avg. Volume122,128
Financial Highlights & Ratios
PEG RatioN/A
Price to Book (P/B)N/A
Price to Sales (P/S)1.34
Price to Cash Flow (P/CF)-23.50
P/FCF Ratio0.00
Enterprise Value/Market CapN/A
Enterprise Value/RevenueN/A
Enterprise Value/Gross ProfitN/A
Enterprise Value/EbitdaN/A
Forecast
1Y Price Target
C$24.50Price Target Upside0.20% Upside
Rating ConsensusHold
Number of Analyst Covering6
Softchoice Corporation Business Overview & Revenue Model
Company DescriptionSoftchoice Corporation (SFTC) is a leading North American provider of technology solutions and services. The company operates within the information technology sector, offering a comprehensive suite of IT solutions that include cloud services, software licensing, hardware procurement, and managed services. Softchoice partners with various technology vendors to deliver innovative solutions that help businesses optimize their IT environments and drive digital transformation.
How the Company Makes MoneySoftchoice Corporation generates revenue through multiple streams. The primary source of income is derived from the sale and licensing of software and hardware products from prominent technology vendors. This includes enterprise software, data center solutions, and end-user computing products. Additionally, Softchoice earns revenue by providing managed IT services and consulting, which help clients effectively deploy, manage, and optimize their technology investments. The company has established significant partnerships with leading technology firms, which enable it to offer a broad range of solutions and leverage partner incentives and rebates. These partnerships, along with a focus on recurring revenue from services and subscriptions, play a critical role in Softchoice's earnings.
Softchoice Corporation Financial Statement Overview
Summary
Softchoice Corporation shows moderate profitability with a robust gross profit margin, but faces declining revenues and significant balance sheet challenges. The company demonstrates strong cash generation capabilities, offset by leverage concerns due to negative equity.Income Statement
Softchoice Corporation shows a mixed financial performance. The TTM gross profit margin is robust at 44.46%, indicating strong cost control. However, the net profit margin of 5.09% suggests lower conversion of revenue into profit. Revenue has been declining over the years, with a recent drop of 5.71% from the previous year, signaling a challenging growth environment. EBIT and EBITDA margins are moderate at 9.66% and 10.83%, respectively, showing decent operational efficiency but room for improvement.70
Positive
Balance Sheet
The company faces significant balance sheet challenges. It has negative stockholders' equity, leading to a negative equity ratio of -21.24%, which raises concerns about financial stability. The debt-to-equity ratio is not applicable due to negative equity, but the net debt level is high, indicating leverage risks. Return on Equity is not calculable, further complicating the financial assessment. Overall, the balance sheet suggests potential solvency issues.40
Negative
Cash Flow
Cash flow performance shows resilience with a solid operating cash flow to net income ratio of 2.51, indicating strong cash generation capabilities relative to earnings. The free cash flow growth rate is slightly negative, reflecting a slight decline in free cash flow. However, the free cash flow to net income ratio of 2.32 is healthy, suggesting good cash conversion. Despite these strengths, the financing cash flow is negative, indicating constraints on external funding sources.65
Positive
| Breakdown | |||||
| TTM | Dec 2023 | Dec 2022 | Dec 2021 | Dec 2020 | Dec 2019 |
|---|---|---|---|---|---|
| Income Statement | Total Revenue | ||||
| 769.79M | 816.40M | 928.21M | 903.07M | 836.75M | 953.82M | Gross Profit |
| 342.23M | 322.68M | 312.33M | 286.98M | 238.29M | 252.89M | EBIT |
| 74.38M | 70.63M | 53.84M | 237.00K | 14.97M | 22.89M | EBITDA |
| 83.35M | 77.94M | 66.75M | 16.80M | 28.65M | 36.77M | Net Income Common Stockholders |
| 39.16M | 46.04M | 21.77M | -9.96M | 2.09M | -2.85M |
| Balance Sheet | Cash, Cash Equivalents and Short-Term Investments | ||||
| 975.00K | 17.42M | 1.74M | 2.75M | 975.00K | 873.00K | Total Assets |
| 602.40M | 585.98M | 615.33M | 641.29M | 602.40M | 630.75M | Total Debt |
| 229.12M | 53.10M | 107.22M | 88.69M | 229.12M | 211.96M | Net Debt |
| 228.15M | 35.73M | 105.48M | 85.94M | 228.15M | 211.83M | Total Liabilities |
| 629.87M | 528.07M | 575.22M | 583.06M | 629.87M | 621.31M | Stockholders Equity |
| -25.39M | 57.91M | 40.11M | 58.23M | -25.39M | -6.56M |
| Cash Flow | Free Cash Flow | ||||
| 90.80M | 94.41M | 35.90M | 51.82M | -18.51M | 27.63M | Operating Cash Flow |
| 98.45M | 99.88M | 40.05M | 53.73M | -10.55M | 30.40M | Investing Cash Flow |
| -7.65M | -5.47M | -4.15M | -1.91M | -7.96M | -15.40M | Financing Cash Flow |
| -91.33M | -80.42M | -35.80M | -49.77M | 15.38M | -43.95M |
Softchoice Corporation Technical Analysis
Positive
24.45
Price Trends
24.35
Positive
23.17
Positive
20.59
Positive
Market Momentum
0.07
Positive
60.24
Neutral
35.29
Neutral
Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For TSE:SFTC, the sentiment is Positive. The current price of 24.45 is above the 20-day moving average (MA) of 24.43, above the 50-day MA of 24.35, and above the 200-day MA of 20.59, indicating a bullish trend. The MACD of 0.07 indicates Positive momentum. The RSI at 60.24 is Neutral, neither overbought nor oversold. The STOCH value of 35.29 is Neutral, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for TSE:SFTC.
Softchoice Corporation Peers Comparison
Overall Rating
UnderperformOutperform
Sector (58)
Financial Indicators
Name | Overall Rating | Market Cap | P/E Ratio | ROE | Dividend Yield | Revenue Growth | EPS Growth |
|---|---|---|---|---|---|---|---|
76 Outperform | $1.40B | 16.55 | 14.76% | 4.33% | 8.11% | 15.83% | |
76 Outperform | C$100.08B | 101.57 | 30.90% | 0.12% | 23.24% | 21.95% | |
69 Neutral | C$469.17M | 101.60 | 1.43% | 2.79% | 9.02% | -76.61% | |
68 Neutral | C$1.48B | 27.44 | -35.11% | 2.13% | -6.14% | -14.96% | |
68 Neutral | C$4.47B | 157.81 | -0.10% | ― | 14.85% | -105.25% | |
58 Neutral | $21.35B | 9.96 | -19.72% | 2.38% | 5.03% | -22.83% | |
42 Neutral | $220.09M | ― | 171.00% | ― | 7.50% | -4.22% |
* Technology Sector Average
Performance Comparison
TSE:SFTC
Softchoice Corporation
24.46
7.92
47.88%
TCX
Tucows
19.72
1.73
9.62%
TSE:ENGH
Enghouse Systems
26.08
-5.08
-16.30%
TSE:KXS
Kinaxis Inc
158.48
6.82
4.50%
TSE:CSU
Constellation Software
4,754.94
1,009.31
26.95%
TSE:CGY
Calian Group Ltd.
40.13
-17.52
-30.39%
Softchoice Corporation Earnings Call Summary
Earnings Call Date: Mar 5, 2025 | % Change Since: -0.08% | Next Earnings Date: May 8, 2025
Earnings Call Sentiment Positive
The earnings call reflects a positive sentiment with significant achievements in organic growth, customer base expansion, and strategic initiatives like the SAM+ Hub and a strong Microsoft partnership. However, this is tempered by challenges such as muted EBITDA growth, hardware revenue stability concerns, and increased cash taxes impacting cash flow.Highlights
Double-Digit Organic Growth
Softchoice achieved industry-leading double-digit organic growth, underpinned by a 10% increase in constant currency in top line gross profit, driven by double-digit growth in Software & Cloud and supporting services.
Expansion of Customer Base
The customer base expanded by more than 4% in Q3 and by 5% over the last 12 months, driven by a renewed focus on expanding the frontline sales force by 43% over the past 3 years.
SAM+ Hub Launch Success
The SAM+ Hub, a self-serve centralized software management tool, was launched with over 1,000 active customers using it, enhancing customer retention and opening new revenue opportunities.
Strong Microsoft Partnership
Softchoice was named the Microsoft Scale Partner of the Year in the U.S. with significant growth in Microsoft CSP revenue, expected to increase by approximately 25% in 2024.
Lowlights
Muted Adjusted EBITDA Growth
Adjusted EBITDA grew by only 2% in the quarter, with higher variable compensation and growth investments partially offsetting strong gross profit growth.
Hardware Revenue Stability Concerns
Despite a large hardware order in Q3, there is uncertainty regarding the stabilization of hardware revenue, with expectations of continued lumpiness and no significant rebound.
Higher Cash Taxes Impacting Cash Flow
Operating cash flow remained stable due to improved working capital management, but was offset by increased cash taxes related to 2023 true-ups and withholding taxes from a special dividend.
Company Guidance
In the Q3 2024 earnings call for Softchoice (SFTC.TO), the executives highlighted several key metrics reflecting the company's robust performance and strategic direction. The company reported a 10% increase in constant currency gross profit, primarily driven by strong double-digit growth in Software & Cloud alongside supporting services. Adjusted EBITDA grew by 2% this quarter, despite the higher variable compensation and growth investments. The adjusted EBITDA margin remained stable year-to-date compared to 2023, aligning with the company's commitment to invest in strategic areas such as workplace software, cloud, security, and AI. Additionally, the customer base expanded by over 4% in Q3 and 5% over the last 12 months, with the frontline sales force increasing by 18% over the past year. Softchoice's revenue retention rate reached 105%, demonstrating high customer retention and increased spending across all sales channels. The SAM+ Hub, a new software management tool, has already been adopted by over 1,000 customers, showcasing the company's advancement in software asset management capabilities. Overall, Softchoice expressed confidence in achieving their growth targets for 2024, with strategic investments poised to drive market share expansion and enhanced service offerings in future years.Softchoice Corporation Corporate Events
Softchoice Corporation Acquired by World Wide Technology
Dec 31, 2024
Softchoice Corporation is set to be acquired by World Wide Technology in an all-cash deal valued at C$1.8 billion, offering shareholders a substantial 62% return on their initial investment. The acquisition aims to enhance WWT’s capabilities in software, cloud, and AI, while expanding its reach in the U.S., Canada, and globally.
Softchoice Reports Strong Q3 2024 Financial Results
Nov 8, 2024
Softchoice Corporation reported a 10% year-over-year increase in gross profit, driven by robust growth in its Software & Cloud and Services segment. The company also expanded its customer base by 4%, achieving a revenue retention rate of 105% from existing clients. Despite challenges, Softchoice’s net income saw an 8% rise, showcasing its capacity for steady financial performance.
Glossary
OutperformA stock rated as "Outperform" is expected to perform better than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock is likely to deliver higher returns compared to the average returns of other stocks in the same sector or market index. Investors might consider this stock a good buying opportunity.
NeutralA stock rated as "Neutral" is expected to perform in line with the overall market or a specific benchmark. This rating indicates that the stock is neither particularly attractive nor unattractive for investment. Investors may consider holding onto the stock, as it is not expected to either significantly outperform or underperform the market.
UnderperformA stock rated as "Underperform" is expected to perform worse than the overall market or a specific benchmark over the near-to-medium term. This rating suggests that the stock may deliver lower returns compared to the average returns of other stocks in the same sector or market index. Investors might consider selling the stock or avoiding it as an investment.
Disclaimer
This AI Analyst Stock Report is automatically generated by our AI systems using advanced algorithms and publicly available financial, technical, and market data. While the information provided aims to be accurate and insightful, it is intended for informational purposes only and should not be considered financial advice. Any content created by an AI (Artificial Intelligence) system may contain inaccuracies and/or contain errors. Investing in stocks carries inherent risks, and past performance is not indicative of future results. This report does not account for your personal financial circumstances, objectives, or risk tolerance. Always conduct your own research or consult with a qualified financial advisor before making investment decisions. The analysis and recommendations provided are based on historical and current data and may not fully reflect future market conditions or unexpected developments. Neither the creators of this report nor its affiliated entities guarantee the accuracy, completeness, or reliability of the information presented. Use this report at your own discretion and risk.