ATGN's Earnings Break Even in Q1, Down Y/Y Due to High Customer Churn

Core Insights - Altigen Communications, Inc. reported breakeven earnings per share for fiscal Q1 2026, compared to an earnings of 1 cent per share in the same quarter last year, while the stock gained 1.7% since the earnings report, outperforming the S&P 500's 1.1% decline during the same period [1][2] Financial Performance - Total revenue for the quarter was $3.2 million, a 6% decrease from $3.4 million in the prior year [2] - Gross margin slightly decreased to 62% from 63% year-over-year [2] - GAAP net income rose 16% year-over-year to $0.1 million, marking the seventh consecutive quarter of profitability [2] - Adjusted EBITDA was $0.26 million, a marginal decrease from $0.29 million in the year-ago period [5] Revenue Breakdown - Cloud Services revenue fell approximately 17% to $1.4 million from $1.7 million a year ago, primarily due to elevated customer churn during the transition from legacy platforms [3][8] - The Services & Other segment revenue increased to $1.5 million from $1.4 million in the prior year, although the previous quarter's figures were inflated by a one-time customer request [4] Cost Management - Operating expenses decreased by 9% to $1.9 million, which helped offset revenue declines and supported profitability [4][9] Strategic Transition - The company is transitioning from a legacy PBX service provider to a modern, AI-powered, Microsoft Cloud-focused communications platform [6] - Management believes the churn from legacy platforms has largely normalized and emphasized a revised go-to-market strategy targeting mid-market and enterprise segments [7] Future Outlook - Management expressed confidence in accelerating revenue growth in the second half of fiscal 2026, driven by the launch of new AI products and a growing customer base [11] - The company is investing in AI platforms, with two new solutions nearing release: a 24/7 customer self-service engine and a customer engagement analytics platform [10] Capital Investments - Altigen capitalized $0.3 million in software development during the quarter, up from $0.2 million a year earlier, reflecting its strategy to build out proprietary technology to support AI-driven solutions [12]