Sangoma Q1 2026 Earnings Call Summary

1Key Financial Results and Metrics

Revenue: $50.8 million, down $8.5 million from Q4, primarily due to the divestiture of the third-party hardware resale business (VoIP Supply LLC).

Adjusted EBITDA: $8.3 million (16% margin); excluding ERP implementation costs, it would have been $8.7 million (17% margin).

Free Cash Flow: $3.2 million, impacted by a $3.2 million negative change in working capital, which has since been largely reversed.

Net Cash from Operating Activities: $4.9 million, representing a 60% conversion rate from adjusted EBITDA.

Debt: Reduced to $42.8 million from $69.1 million year-over-year.

Churn Rate: Blended churn held near 1%, indicating strong customer retention.

2Strategic Updates and Business Highlights

Transition to a higher-margin recurring revenue model, now representing over 90% of total revenue.

New pipeline creation increased by 39% quarter-over-quarter, with a healthy balance between volumetric business and larger strategic deals.

Significant growth in MRR bookings: up 2.4% sequentially and 6.4% year-over-year; larger deals over $10,000 MRR increased by 39% sequentially.

Introduction of a two-segment reporting structure: Core (SaaS-led services) and Adjacent (cash-generative technologies).

Investments of $2 million in SG&A aimed at customer acquisition and partner enablement, alongside ongoing debt reduction and share repurchase initiatives.

3Forward Guidance and Outlook

Sangoma reaffirms its fiscal 2026 guidance of $200 million to $210 million in revenue, with adjusted EBITDA margins expected between 17% to 19%.

Anticipates sequential growth in Q2 and year-over-year growth in Q3 and Q4 as bookings convert into revenue.

Early Q2 activity is encouraging and aligns with growth expectations.

4Bad News, Challenges, or Points of Concern

Revenue decline of $1.7 million year-over-year, primarily due to the VoIP Supply divestiture and longer sales cycles for larger MRR deals.

Core revenue decreased by 6% year-over-year, indicating potential headwinds in converting bookings to revenue in the short term.

A temporary negative change in working capital due to a technical issue with a new payment processor, although this has been resolved.

5Notable Q&A Insights

Management emphasized the importance of their transformation efforts, including improved sales processes and team caliber, to capture larger strategic deals.

The wholesale channel has emerged as a new opportunity, with expectations for significant growth beyond traditional CLEC partnerships.

Concerns regarding the services line were acknowledged, with management expecting improvements in churn and service revenue as older, smaller contracts expire.

The team highlighted the importance of their new CRM and ERP systems in facilitating bundled sales and enhancing partner engagement, which is expected to drive future growth. Overall, Sangoma reported a solid start to fiscal 2026, with strategic initiatives aimed at enhancing growth and profitability, despite facing some challenges in revenue transition and longer sales cycles.