Sangoma Technologies (STC) Q1 2026 earnings summary

Executive summary

• Fiscal Q1 2026 exceeded consensus expectations with $50.8 million in revenue, marking a strong start and successful transition to a high-margin, recurring revenue model after divesting the third-party hardware resale business.

• Recurring revenue now represents over 90% of total revenue, with a focus on SaaS-led communications platform services and adjacent cash-generative technologies.

• Transformation initiatives, including ERP and CRM implementations, have improved operational precision, visibility, and speed, supporting scalable growth.

• Average revenue per customer increased 19% year-over-year, driven by bundling and upselling strategies.

• Bookings increased 6% year-over-year, supporting sequential growth in Q2.

Financial highlights

• Q1 revenue was $50.8 million; adjusted EBITDA $8.3 million (16% margin); free cash flow $3.2 million ($0.10 per diluted share).

• Gross margin reached 72%, up from 67% in Q4; operating expenses declined 9% year-over-year to $38.5 million.

• Net cash from operating activities was $4.9 million, with a 60% conversion rate from adjusted EBITDA, temporarily impacted by a $3.2 million working capital change due to ERP transition.

• Net loss was $2.3 million ($0.07 per share, fully diluted), compared to a net loss of $1.9 million ($0.06 per share) in the prior year.

• $5.2 million in debt retired in Q1, ending with $42.8 million total debt, down from $69.1 million last year.

Outlook and guidance

• Fiscal 2026 guidance reaffirmed: $200–$210 million in revenue and 17–19% adjusted EBITDA margin.

• Sequential growth expected in Q2, with year-over-year growth in Q3 and Q4 as bookings convert to revenue.

• Services line expected to return to sequential growth in Q2, with churn anticipated to improve through year-end.