Sangoma Technologies (STC) Q2 2026 earnings summary

Executive summary

• Fiscal Q2 2026 delivered sequential revenue growth of 1% to $51.5 million, one of the strongest booking quarters in recent history, and strong operational cash flow, reflecting successful execution of the growth strategy and improved go-to-market traction.

• Service revenue grew 1% sequentially, with recurring revenue momentum building, supported by strong pipeline conversions and improved close rates.

• The company is seeing larger, more strategic mid-market deals, with bookings and pipeline quality improving, and churn holding just under 1%.

• Strategic exit from low-margin, non-recurring resale activity via sale of VoIP Supply, LLC, impacting year-over-year revenue comparison.

• Focus on profitability, capital discipline, and strengthening software and services mix.

Financial highlights

• Q2 revenue was $51.5 million, up 1.2% sequentially; service revenue represented 92% of total revenue.

• Adjusted EBITDA was $8.3 million (16% margin), with conversion to operating cash flow exceeding 120%.

• Free cash flow improved to $8 million, or $0.24 per diluted share.

• Gross profit was $38.2 million, with gross margin rising to 74% from 72% in Q1 and 68% in the prior year.

• Net cash from operating activities was $10.1 million, with a 122% conversion rate from adjusted EBITDA.

Outlook and guidance

• Fiscal 2026 revenue guidance tightened to $205–$208 million, with adjusted EBITDA margin expected at 17–18%.

• Sequential revenue growth is expected in Q3, with a return to year-over-year organic growth after adjusting for the VoIP Supply divestiture.

• Adjusted EBITDA margins are expected to improve in the second half as revenue builds and operating leverage increases.

• Guidance assumes continued sequential growth, stable macroeconomic conditions, and successful execution of go-to-market initiatives.

• Assumptions include stable supply chain, customer demand, and access to capital.