SANG — Sangoma Technologies Corporation

Sangoma Q2 2026 Earnings Call Summary

1. Key Financial Results and Metrics

• Revenue: $51.5 million, up 1.2% sequentially.
• Service Revenue: Grew 1% sequentially, indicating early signs of recurring revenue growth.
• Adjusted EBITDA: $8.3 million, representing a 16% margin, with a strong conversion to operating cash flow at over 120%.
• Free Cash Flow: Improved to $8 million or $0.24 per diluted share.
• Churn Rate: Improved to just under 1%, reflecting strong customer retention.
• Net Cash from Operating Activities: $10.1 million, with a conversion rate of 122% from adjusted EBITDA.
• Debt Reduction: Total debt decreased to $37.6 million from $60.4 million year-over-year.

2. Strategic Updates and Business Highlights

• Booking Momentum: Achieved a 67% sequential growth in Monthly Recurring Revenue (MRR) bookings and 60% year-over-year.
• Pipeline Health: A steady pipeline with improved close rates and a balanced mix of volumetric and larger strategic deals.
• Mid-Market Strategy: Progressing with a focus on larger, more complex deals, indicating a shift in customer buying behavior towards integrated solutions.
• Partner Ecosystem: Enhanced partner engagement and contributions to bookings growth, with a focus on vertical-specific partners.
• Investment in Growth: Approximately $2 million allocated to accelerate pipeline development and customer acquisition.

3. Forward Guidance and Outlook

• Revenue Guidance: Tightened to $205 million to $208 million for fiscal 2026, with expectations for sequential revenue increases in Q3 and a return to year-over-year organic growth.
• Adjusted EBITDA Margin: Expected to improve to 17%-18% in the second half of fiscal 2026.
• Backlog: Starting backlog for Q3 is up approximately 125% compared to Q2, indicating strong visibility into future revenue.

4. Bad News, Challenges, or Points of Concern

• Revenue Decline on a Like-for-Like Basis: Excluding the divestiture of VoIP Supply, revenue was down 2% year-over-year.
• Market Conditions: Potential headwinds from macroeconomic factors and competitive pressures in the software market.
• Churn Management: While churn has improved, there is an ongoing focus on further reducing it, with a goal of reaching 0.85%.

5. Notable Q&A Insights

• Booking Drivers: The significant growth in MRR bookings is attributed to larger strategic deals and an effective partner program.
• Pipeline Conversion: Larger deals take time to roll out, but the company has established a disciplined project management approach to ensure timely revenue recognition.
• M&A Opportunities: The current market conditions present favorable opportunities for strategic acquisitions as valuations decline.
• Partner Engagement: The majority of revenue is partner-driven, with metrics in place to track partner performance and engagement effectively.
• On-Prem Solutions: Continued strong momentum in the on-premises segment, particularly in small to medium businesses, with expectations for ongoing growth.

This summary encapsulates the key points from Sangoma's Q2 2026 earnings call, highlighting both achievements and areas of concern as the company navigates its growth strategy.