Sangoma Technologies (STC) Q3 2025 earnings summary

Executive summary

• Achieved 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 under Project Diamond, improving operational efficiency and surpassing debt reduction targets ahead of schedule.

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

• Enhanced operational efficiency with a new ERP system, expected to yield $5M in savings over three years.

• Large deal pipeline and partner engagement have increased significantly, especially in targeted industry verticals.

Financial highlights

• Q3 revenue was $58.1M, down 2% sequentially and 5% year-over-year, mainly due to non-core product declines, while core platform revenue increased for the second consecutive quarter.

• Gross profit reached $40M, with gross margin at 69% for both the quarter and year-to-date.

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

• 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 was $10.6M in Q3, with a 109% cash conversion rate from adjusted EBITDA.

Outlook and guidance

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

• Margins expected to improve as the business shifts further to higher-margin services and away from non-core hardware.

• Management anticipates gross margins moving toward 75–80% and adjusted EBITDA margins to 19–20% by late FY2026.

• Inorganic growth (acquisitions) will be a major focus for FY2026, enabled by a strengthened balance sheet.

• Management expects continued growth in core platform revenues and margin expansion as the business model shifts toward higher-value services.