Financial Data and Key Metrics Changes - In Q1 2026, the company reported revenue of $50.8 million, adjusted EBITDA of $8.3 million with a margin of 16%, and free cash flow of $3.2 million [6][22][24] - Revenue decreased by $8.5 million from Q4, primarily due to the divestiture of the third-party hardware resale business, VoIP Supply [22] - Year-over-year revenue declined by $1.7 million, or 3%, excluding VoIP Supply revenue [22] - Gross profit was $36.8 million, with a gross margin of 72%, compared to 67% in Q4 [23][24] Business Line Data and Key Metrics Changes - Core revenue, which accounted for 74% of total revenue, decreased by 6% year-over-year, while adjacent revenue increased by 6% [23] - Services now account for 92% of total revenue, reinforcing the company's transformation to a predominantly MRR-driven model [23][25] - Monthly Recurring Revenue (MRR) bookings grew by 2.4% sequentially and 6.4% year-over-year [9] Market Data and Key Metrics Changes - The overall size of the pipeline remained steady, but new pipeline creation increased by 39% quarter-over-quarter [8][14] - The company saw a pickup in its higher-velocity volumetric business, which now represents 62% of the 90-day forward pipeline [8] - Retention remains strong, with blended churn holding near 1% [9] Company Strategy and Development Direction - The company is transitioning to a higher-margin recurring revenue model, which now represents over 90% of total revenue [6] - Investments of approximately $2 million in incremental SG&A are planned to accelerate customer acquisition and partner enablement [11][21] - The company is exploring selective AI-driven software acquisitions to strengthen its vertical focus in healthcare, hospitality, retail, and education [10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting fiscal FY26 guidance, expecting sequential growth in Q2 and year-over-year growth in Q3 and Q4 [12][26] - The broader SMB market conditions may influence deal timing, but early Q2 activity is encouraging [12] - Management highlighted the importance of larger deal sizes and growing recurring revenue as indicators of entering a new phase of sustainable, profitable growth [12] Other Important Information - The company retired an additional $5.2 million in debt during Q1, ending with total debt of $42.8 million [20] - The capital allocation strategy focuses on leveraging strong cash generation to accelerate organic growth while maintaining flexibility for selective M&A [20][21] Q&A Session Summary Question: Growth investments and timelines for returns - Management indicated that the $2 million investment will focus on increasing field capacity and marketing to enhance brand coverage [30] Question: Pipeline tied to new partner relationships - Management noted a 6% increase in pipeline over the last six weeks and a 39% increase in new pipeline creation [33] Question: Decline in services and future expectations - Management acknowledged the decline in services but expects sequential growth starting in Q2 as older customer contracts complete [37] Question: Optimizations for targeting larger customers - Management highlighted improvements in product roadmap and a disciplined approach to pursuing large opportunities [45] Question: Average revenue per customer growth - Management attributed the 19% year-over-year increase in average revenue per customer to upselling and the effectiveness of the bundling strategy [58] Question: Gross margin expectations - Management indicated that gross margin was impacted by a higher mix of product revenue but expects improvement moving forward [61] Question: Backlog growth - Management stated that backlog was consistent quarter-over-quarter, with expectations for growth in upcoming quarters [69] Question: Large MRR opportunities - Management clarified that large MRR opportunities include both wholesale and bundled solutions, with significant deals already closed [74][75] Question: Total Addressable Market (TAM) expansion - Management confirmed that the new wholesale channel opens up significant TAM opportunities beyond traditional markets [80][81]

Financial Data and Key Metrics Changes - Revenue for Q1 2026 was $50.8 million, a decrease of $8.5 million from Q4 2025, primarily due to the divestiture of the third-party hardware resale business [19] - Adjusted EBITDA was $8.3 million, representing a margin of 16%, with a temporary negative impact on free cash flow of $3.2 million due to working capital changes [5][18] - Free cash flow for the quarter was $3.2 million, or $0.10 per diluted share, with a net cash from operating activities of $4.9 million [17][18] - Total debt decreased to $42.8 million from $69.1 million year-over-year, with $5.2 million in debt retired during the quarter [18] Business Line Data and Key Metrics Changes - Core revenue, which accounted for 74% of total revenue, decreased by 6% year-over-year, while adjacent revenue increased by 6% [20] - Monthly Recurring Revenue (MRR) bookings grew 2.4% sequentially and 6.4% year-over-year, with larger deals over $10,000 MRR increasing by 39% sequentially [7][8] - Average revenue per customer increased by 19% year-over-year, driven by the bundling strategy [15][52] Market Data and Key Metrics Changes - The overall size of the pipeline remained steady, with new pipeline creation increasing by 39% quarter-over-quarter [6][12] - The blended churn rate held near 1%, indicating stability in the recurring revenue base [8] Company Strategy and Development Direction - The company is transitioning to a higher-margin recurring revenue model, which now represents over 90% of total revenue [5] - Investments of approximately $2 million in SG&A are planned to accelerate customer acquisition and partner enablement [10][19] - The introduction of a clearer performance view through two segments: core and adjacent, aims to enhance transparency in revenue mix evolution [9] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in meeting fiscal FY26 guidance of $200 million to $210 million in revenue, with expectations for sequential growth in Q2 and year-over-year growth in Q3 and Q4 [24] - The company is optimistic about the growth potential in the wholesale channel and AI-driven software acquisitions to strengthen vertical focus [9][10] Other Important Information - The company continues to generate strong cash flow while strategically reinvesting in growth initiatives and expanding partner ecosystems [9] - R&D investment remained consistent at $11.3 million, with 90% of R&D spend directed towards new product capabilities [23] Q&A Session Summary Question: Update on growth investments and timelines for returns - The $2 million investment will focus on increasing field capacity and marketing efforts to enhance brand coverage and partner recruitment [26][27] Question: Pipeline generation from new partner relationships - The pipeline has increased by 6% in the last six weeks, with significant growth in bookings and a balanced mix of business types [29][30] Question: Decline in services and expectations for sequential growth - The decline was anticipated due to the completion of contracts with smaller customers, with expectations for sequential growth starting in Q2 [33][35] Question: Optimizations for targeting larger customers - The company has improved its product roadmap and established a disciplined approach to pursuing larger opportunities, enhancing efficiency in deal execution [40][41] Question: Changes in the partner ecosystem and ongoing success metrics - The partner program has been realigned to focus on strategic partners, with ongoing training and support to drive growth [46][47]