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 increased by 1%.
• Adjusted EBITDA: $8.3 million (16% margin), with a strong conversion rate of adjusted EBITDA 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, representing a 122% conversion rate 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

• Bookings Growth: Monthly Recurring Revenue (MRR) bookings surged 67% sequentially and 60% year-over-year, driven by larger strategic deals and improved close rates.
• Pipeline Health: Steady pipeline with a balanced mix of new opportunities and deal conversions; backlog for Q3 is up approximately 125% compared to Q2.
• Market Strategy: Focus on mid-market opportunities and bundled solutions is yielding positive results, with an emphasis on integrating multiple communication components for larger clients.
• Partner Ecosystem: Enhanced partner engagement and a narrowed focus on strategic verticals (healthcare, education, retail, hospitality) are expected to drive further growth.

3. Forward Guidance and Outlook

• Fiscal 2026 Revenue Guidance: Tightened to $205 million to $208 million, with expectations for sequential revenue increases in Q3 and a return to year-over-year organic growth after adjusting for the divestiture of VoIP Supply.
• Adjusted EBITDA Margin: Expected to improve to 17% to 18% in the second half of the fiscal year.

4. Bad News, Challenges, or Points of Concern

• Revenue Decline on a Like-for-Like Basis: Excluding VoIP Supply, revenue was down 2% year-over-year.
• Market Volatility: Potential macroeconomic headwinds and competitive pressures in the software market could impact future growth and M&A opportunities.
• Churn Management: Although churn has improved, the leadership aims to reduce it further to 0.85%, indicating ongoing concerns about customer retention.

5. Notable Q&A Insights

• Bookings Drivers: The significant MRR bookings growth is attributed to larger strategic deals and a more effective partner program.
• Future Growth: The leadership expressed confidence that the current growth in bookings is sustainable, with expectations for continued momentum in the mid-market segment.
• Wholesale Opportunities: There is optimism about expanding the wholesale channel, which could enhance the total addressable market (TAM) and support accelerated growth.
• Partner Engagement: The partner ecosystem is performing well, contributing significantly to bookings growth, with ongoing efforts to enhance partner enablement.
• M&A Landscape: The company sees favorable conditions for potential acquisitions, with valuations in the software market declining, presenting opportunities for strategic growth.

Overall, Sangoma's Q2 2026 results reflect a solid performance with positive momentum in bookings and strategic initiatives, although challenges remain in revenue growth and churn management. The company is well-positioned for future growth with a focus on mid-market opportunities and a disciplined approach to capital allocation.