Sangoma Technologies (NasdaqGS:SANG) Q1 2026 Earnings Call November 10, 2025 05:30 PM ET Company ParticipantsSamantha Reburn - Chief Legal Officer and Corporate SecretaryRobert Young - Managing Director and Head of ResearchGavin Fairweather - Managing Director and Co-head of ResearchCharles Salameh - CEO and DirectorJeremy Wubs - COOLarry Stock - CFOSuthan Sukumar - Managing DirectorConference Call ParticipantsMike Latimore - Managing Director and Senior Research AnalystDavid Kwan - Director and Equity Rese ...

Sangoma Technologies (NasdaqGS:SANG) Q1 2026 Earnings Call November 10, 2025 05:30 PM ET Company ParticipantsSamantha Reburn - Chief Legal Officer and Corporate SecretaryRobert Young - Managing Director and Head of ResearchGavin Fairweather - Managing Director and Co-head of ResearchCharles Salameh - CEO and DirectorJeremy Wubs - COOLarry Stock - CFOSuthan Sukumar - Managing DirectorConference Call ParticipantsVijay Devar - Equity Research AnalystDavid Kwan - Director and Equity Research AnalystOperatorThan ...

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]

TORONTO--(BUSINESS WIRE)--Sangoma Technologies Corporation (TSX: STC; Nasdaq: SANG) ("Sangoma†or the "Company†), a trusted industry leader uniquely offering businesses a choice of on-premises, cloud-based, or hybrid Communications as a Service solutions, today announced its first quarter financial results and unaudited condensed consolidated interim financial statements for the three month period ended September 30, 2025. All amounts are expressed in US dollars unless otherwise stated. Sangoma Announces F ...

Core Insights - The collaboration among Vonage, Aduna, Deutsche Telekom, and mBank at the World Banking Forum aims to leverage mobile networks, APIs, and AI to enhance banking security and customer experience [1][3][6] Group 1: Industry Collaboration - The World Banking Forum in Athens gathers senior banking executives and technology leaders to discuss technological innovations in banking [1] - The partnership focuses on the integration of 5G, Network APIs, and AI to improve fraud prevention and redefine customer interactions in financial services [3][4] Group 2: Fraud Prevention and Cybersecurity - The rise of digital channels has led to an increase in fraud, with cybercrime damages projected to reach $11.9 trillion annually by 2026, necessitating advanced fraud protection strategies [2] - The collaboration aims to address current security challenges by embedding mobile network capabilities into banking applications, enhancing customer interactions while reducing fraud [3][4] Group 3: Technological Innovation - Aduna acts as an aggregator of telecom network capabilities, providing banks like mBank access to real-time verified network data, which facilitates seamless customer experiences and fraud reduction [4][6] - Vonage's Network APIs enable developers to create solutions for banks that automate verification processes, enhancing security and transforming customer experiences [6][10] Group 4: Company Profiles - mBank is Poland's fifth largest universal banking group, servicing approximately 4.7 million retail clients and 36.8 thousand corporate clients, with a focus on innovative digital banking solutions [7] - Aduna is a joint venture among leading telecom operators and Ericsson, aimed at accelerating innovation through standardized network APIs [8]

Financial Data and Key Metrics Changes - Sangoma Technologies Corporation reported Q4 revenues of $59.4 million, an increase of $1.3 million or 2% sequentially from Q3, driven primarily by strong prem-based product sales [4][23] - Adjusted EBITDA for Q4 was $11.4 million, representing 19% of revenue, which is an increase from 17% in Q3, marking the highest margin delivered over the past eight quarters [24] - Free cash flow for Q4 was $4.8 million, or $0.14 per diluted share, while for the full fiscal year, free cash flow reached $32.9 million, or $0.98 per diluted share [22][24] Business Line Data and Key Metrics Changes - The company has shifted its focus towards software-led recurring revenue services, which now represent over 90% of the revenue mix, up from 79% two years ago [6] - Core services, which include high-margin SaaS products, currently account for approximately 75% of revenue, while adjacent services account for about 25% [14][25] - The prem-based product line saw an 18% growth in Q4 over Q3, indicating strong demand and market share capture from competitors [17][66] Market Data and Key Metrics Changes - The company is experiencing a sequential growth expectation beginning in Q2 of fiscal 2026, with a focus on mid-market enterprise initiatives [10][25] - Demand in core categories is building, supported by strategic partnerships and targeted marketing efforts in key verticals such as healthcare and education [8][9] Company Strategy and Development Direction - Sangoma's strategy includes delivering organic growth by investing in people, products, and partners, while also pursuing inorganic opportunities that create strategic value [7][10] - The company plans to categorize its results into core services and adjacent services to provide greater transparency and focus on growth areas [7][14] - Strategic partnerships with companies like Amazon Web Services and VTech Hospitality are aimed at enhancing product offerings and expanding market reach [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to resume growth, citing a strong pipeline and the successful execution of their transformation strategy [10][11] - The management team noted that while larger enterprise opportunities have longer sales cycles, they expect sequential growth to begin in Q2 and continue through fiscal 2026 [10][25] - The company is optimistic about the durability of high-margin opportunities and the potential for significant value creation for shareholders [11][26] Other Important Information - The sale of VoIP Supply, completed at the end of June, was a strategic move to streamline the portfolio and focus on higher-margin growth [6][24] - The company ended Q4 with total debt of $47.9 million, significantly below its original target, and has been actively repurchasing shares as a way to return capital to shareholders [22][26] Q&A Session Summary Question: Incremental go-to-market investments focus - The investments are categorized into field coverage and marketing coverage, aimed at enhancing brand awareness and expanding partner networks [29][30] Question: Changes in macro or competitive landscape - Management noted no significant competitive pressures, but acknowledged longer sales and implementation cycles for larger deals [31][32] Question: VoIP Supply's product mix - VoIP Supply primarily dealt with third-party products, with less than 10% being Sangoma proprietary products [33] Question: M&A strategy and appetite - The company is actively looking for acquisition opportunities, particularly in high-growth areas like SD-WAN and security, with a focus on integrating them quickly [34][36][37] Question: Visibility into second quarter growth - Growth is expected from both existing bookings and new deals with shorter sales cycles, providing confidence in the forecast [44][46] Question: Customer churn management - Churn is under control, with positive trends expected as new AI-based tools are deployed to mitigate churn further [53][54] Question: Revenue growth mix between expansion and new business - The company anticipates a balanced approach between expansion activities and acquiring new business, with significant investments in both areas [55][56] Question: International market focus - The company plans to expand its international presence, particularly in English-speaking markets, while focusing on high-margin SaaS products [86][87]

Financial Data and Key Metrics Changes - Sangoma reported revenues of $59.4 million for Q4, a sequential increase of $1.3 million or 2% from Q3, driven primarily by strong prem-based product sales [5][24] - Adjusted EBITDA for Q4 was $11.4 million, representing 19% of revenue, which is an increase from 17% in Q3, marking the highest margin delivered over the past eight quarters [25][27] - Free cash flow for Q4 was $4.8 million, or $0.14 per diluted share, while for the full fiscal year, free cash flow reached $32.9 million, or $0.98 per diluted share [23][24] Business Line Data and Key Metrics Changes - The company has shifted its focus towards software-led recurring revenue services, which now represent over 90% of the revenue mix, up from 79% two years ago [7] - Core services, which include high-margin SaaS products, currently account for approximately 75% of Sangoma's revenue, while adjacent services account for about 25% [15][66] Market Data and Key Metrics Changes - The company is seeing a 16% rise in pipeline demand from the healthcare sector, indicating strong traction in this market [9] - The international portfolio has been heavily oriented towards hardware, which has limited SaaS and software products, resulting in weaker performance in international markets [91][92] Company Strategy and Development Direction - Sangoma's strategy includes delivering organic growth by investing in people, products, and partners, while also pursuing inorganic opportunities that create strategic value [8][27] - The company plans to categorize its results into core services and adjacent services to provide greater transparency into growth areas and cash flow generation [8][15] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the momentum and opportunities across the core business, expecting sequential growth to begin in Q2 and continue through fiscal 2026 [11][27] - The company is focused on building strong strategic partnerships to deliver tailored solutions for specific industries, such as healthcare and education [9][10] Other Important Information - Sangoma completed the sale of its VoIP Supply business for $4.5 million, marking a deliberate shift towards higher-margin growth [26] - The company has a strong balance sheet, allowing it to invest in growth while reducing debt, with total debt at $47.9 million at the end of Q4 [23][24] Q&A Session Summary Question: How much of the incremental go-to-market investments is about existing partners versus new partners? - Management indicated that investments are focused on both field coverage and marketing coverage to enhance brand awareness and recruit new partners [30][31] Question: Have there been any changes in the macro or competitive landscape? - Management noted no major competitive pressures but acknowledged longer sales and implementation cycles for larger deals [32][33] Question: What is the appetite for M&A given the strong balance sheet? - Management expressed a strong appetite for M&A, focusing on targets in areas like SD-WAN and security, with a disciplined approach to integration [36][38] Question: What is the visibility into sequential growth for Q2? - Management indicated that growth will come from both existing business and new deals, with a balanced pipeline of opportunities [46][48] Question: How is the adjacent category expected to grow? - Management stated that while there is some growth in adjacent services, the focus remains on core services where higher growth opportunities exist [51][52] Question: What is the outlook for customer churn? - Management reported that churn is well under control and expected to decline further due to improved customer engagement and advanced tools [57] Question: What are the priorities for M&A? - Management highlighted market access and technology integration as key priorities for M&A, aiming to enhance the overall value proposition [60][61]

Financial Data and Key Metrics Changes - Sangoma Technologies Corporation reported Q4 revenues of $59.4 million, an increase of $1.3 million or 2% sequentially from Q3, driven primarily by strong prem-based product sales [5][23] - Adjusted EBITDA for Q4 was $11.4 million, representing 19% of revenue, which is an increase from 17% in Q3, marking the highest margin delivered over the past eight quarters [24] - Free cash flow for Q4 was $4.8 million, or $0.14 per diluted share, while for the full fiscal year, free cash flow reached $32.9 million, or $0.98 per diluted share, consistent with the previous year [22][23] Business Line Data and Key Metrics Changes - The company has shifted its focus towards software-led recurring revenue services, which now represent over 90% of the revenue mix, up from 79% two years ago [6] - Core services, which include SaaS-led communication platforms, now account for approximately 75% of Sangoma's revenue, while adjacent services account for about 25% [14][25] - The prem-based product line saw an 18% sequential growth in Q4 over Q3, reflecting successful channel efforts targeting competitors like Avaya and Mitel [70] Market Data and Key Metrics Changes - The company is experiencing a 16% rise in pipeline demand from the healthcare sector, indicating strong market interest [8] - International revenue has been declining, primarily due to a focus on North America and a product mix heavily oriented towards hardware, which is less profitable compared to SaaS offerings [88][90] Company Strategy and Development Direction - Sangoma's strategy includes delivering organic growth by investing in people, products, and partners, while also pursuing inorganic opportunities that create strategic value [7][25] - The company plans to categorize its results into core services and adjacent services to provide greater transparency and focus on high-margin growth areas [7][14] - Strategic partnerships with companies like Amazon Web Services and VTech Hospitality are aimed at enhancing product offerings and expanding market reach [9][8] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, expecting sequential growth to begin in Q2 and continue through fiscal 2026 [10][25] - The management noted that while larger enterprise opportunities have longer sales cycles, the pipeline is becoming more balanced with shorter cycle deals contributing to future revenue [16][46] - The company is optimistic about reducing churn and improving customer retention through advanced AI-based tools and upselling strategies [55] Other Important Information - The sale of VoIP Supply, completed at the end of June, was a strategic move to streamline the portfolio and focus on higher-margin growth [6][24] - The company has a robust pipeline of potential M&A targets, particularly in high-growth areas like SD-WAN and security, with a disciplined approach to acquisitions [36][81] Q&A Session Summary Question: Incremental go-to-market investments focus - Management indicated that investments are being made in field coverage and marketing to enhance brand awareness and partner recruitment [29][30] Question: Changes in macro or competitive landscape - Management noted no significant competitive pressures but acknowledged longer sales and implementation cycles for larger deals [31][32] Question: VoIP Supply's product mix - It was clarified that over 90% of VoIP Supply's sales were third-party products, with less than 10% being Sangoma proprietary products [34] Question: M&A appetite and strategy - Management expressed a strong appetite for acquisitions, particularly in areas that enhance the company's portfolio and market position [35][36] Question: Visibility into second quarter growth - Growth is expected to come from both existing bookings and new deals with shorter sales cycles [45][46] Question: Customer churn management - Management reported that churn is under control and expected to decline further due to improved customer engagement strategies [55] Question: Revenue growth mix between expansion and new business - Management indicated that both expansion and new business will drive revenue growth, supported by targeted investment strategies [56] Question: International revenue decline reasons - The decline is attributed to a focus on North America and a product mix that has not prioritized high-margin SaaS offerings [88][90]

Financial Data and Key Metrics Changes - Sangoma reported Q4 revenues of $59.4 million, an increase of $1.3 million or 2% sequentially from Q3, driven primarily by strong prem-based product sales [21][23] - Adjusted EBITDA for Q4 was $11.4 million, representing 19% of revenue, which is an increase from 17% in Q3, marking the highest margin delivered over the past eight quarters [24][26] - Free cash flow for Q4 was $4.8 million, or $0.14 per diluted share, while for the full fiscal year, free cash flow reached $32.9 million, consistent with the previous year [22][26] Business Line Data and Key Metrics Changes - The company has shifted its focus towards software-led recurring revenue services, which now represent over 90% of revenue mix, up from 79% two years ago [6][24] - Core services, which include high-margin SaaS products, now account for approximately 75% of revenue, while adjacent services account for about 25% [15][25] - The prem-based product line saw an 18% sequential growth in Q4 over Q3, indicating strong demand and market share gains [61] Market Data and Key Metrics Changes - The company is experiencing a 16% rise in pipeline demand from the healthcare sector, indicating strong growth potential in this vertical [9] - The international market has seen larger declines compared to the U.S., primarily due to a focus on North America and a product mix heavily oriented towards hardware [80][81] Company Strategy and Development Direction - Sangoma's strategy includes delivering organic growth through investments in people, products, and partners, while also pursuing inorganic opportunities that create strategic value [8][25] - The company plans to broaden its presence in key verticals such as healthcare, education, and distributed enterprise, leveraging strategic partnerships to deliver tailored solutions [9][10] - A deliberate shift towards categorizing results into core and adjacent services aims to provide greater transparency and focus on high-margin growth areas [7][14] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's growth trajectory, expecting sequential growth to begin in Q2 and continue through fiscal 2026 [11][25] - The company is optimistic about the momentum and opportunities in its core business, despite longer sales cycles for larger enterprise deals [11][32] - Management noted that churn is well under control, with predictions of continued decline in churn rates due to improved customer engagement and upselling strategies [49] Other Important Information - The sale of VoIP Supply for $4.5 million was a strategic move to streamline the portfolio and focus on higher-margin growth [24][25] - The company ended Q4 with $47.9 million in total debt, significantly below its original target, and has been actively repurchasing shares as a way to return capital to shareholders [22][26] Q&A Session Summary Question: Incremental go-to-market investments focus - Investments are being made in field coverage and marketing to enhance brand awareness and partner recruitment, with a cautious approach to ensure returns [30] Question: Changes in macro or competitive landscape - No major competitive pressures noted, but longer sales and implementation cycles for larger deals are expected [32] Question: VoIP Supply's product mix - VoIP Supply primarily sold third-party products, with less than 10% being Sangoma proprietary products [34] Question: M&A strategy and appetite - The company is actively looking for acquisition opportunities, particularly in high-growth areas like SD-WAN and security, with a robust funnel of targets [36][39] Question: Visibility into Q2 sequential growth - Growth is expected from both existing bookings and new deals with shorter sales cycles, providing confidence in the forecast [43][44] Question: Customer churn management - Churn is under control, with advanced AI tools being deployed to further mitigate churn and improve retention [49] Question: Revenue by geography and international focus - The company is prioritizing North America but plans to expand its international presence, particularly in English-speaking markets [80][81]