Sangoma Technologies (STC) Q3 2025 earnings summary

Executive summary

• Delivered strong Q3 financial performance with $58.1M revenue, 17% adjusted EBITDA margin, and over 100% operating cash flow conversion from adjusted EBITDA.

• Completed major transformation (Project Diamond), establishing a foundation for multi-pronged growth: organic, inorganic, and geographic expansion.

• Core platform and on-premises revenues increased for the second consecutive quarter, reflecting strategic share gains and benefiting from competitor exits and targeted campaigns.

• Shifted focus to higher-margin core software offerings, accelerating divestiture of non-core hardware assets and improving profitability.

• Client satisfaction and NPS scores improved significantly year-over-year; churn remains below 1%.

Financial highlights

• Q3 revenue was $58.1M, down $1M sequentially due to lower non-core product sales, while core platform revenue increased.

• Gross profit reached $40M; gross margin improved to 69% from 68% in Q2.

• Adjusted EBITDA was $9.8M (17% of revenue), including $0.4M ERP costs; excluding ERP, adjusted EBITDA was $10.2M (18%).

• Free cash flow for Q3 was $8.4M ($0.25/share); $28.2M ($0.84/share) for the first three quarters.

• Net cash from operating activities in Q3 was $10.6M, with a 109% cash conversion rate from adjusted EBITDA and $34.7M for the first nine months.

Outlook and guidance

• Fiscal 2025 revenue guidance narrowed to $235M–$238M; adjusted EBITDA guidance reaffirmed at $40M–$42M (~17% margin).

• Expect gross margins to approach 75–80% and adjusted EBITDA margins to reach 19–20% as non-core products are exited and ERP savings materialize, especially in late FY2026.

• Large deal pipeline and infrastructure business showing strong growth, with a 90% QoQ increase in large deal pipeline and 15% YoY growth in infrastructure.