Full Transcript: Sangoma Technologies Q4 2026 Earnings Call

Sangoma Technologies (TSX: STC ) reported fourth-quarter financial results on Monday. The transcript from the company's fourth-quarter earnings call has been provided below. This transcript is brought to you APIs. For real-time access to our entire catalog, please visit for a consultation.

View the webcast at Summary Sangoma Technologies reported Q3 fiscal 2026 results, highlighting a transition in its business model with a focus on infrastructure-led growth, particularly in data and voice networking, which grew 9% and 17% year over year, respectively. The company revised its full-year revenue guidance to $204-$205 million due to geopolitical disruptions and pricing pressures in software and UCaaS markets. Adjusted EBITDA margins are expected between 15% and 16%.

Management emphasized strategic initiatives, including a board-led process to explore strategic alternatives to unlock shareholder value, and ongoing investments in AI and security to enhance its communications infrastructure. 79%, better than historical levels. International markets faced challenges due to macroeconomic issues, impacting revenue, while the US market remained strong with increasing larger integrated deals. Full Transcript OPERATOR (Conference Operator) Thank you for standing by.

This is the conference operator. Welcome to the Sangoma Investor Conference Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. After the presentation, there will be an opportunity for analysts to ask questions.

To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star then zero. I would now like to turn the conference over to Samantha Reburn, Chief Legal Officer. Please go ahead, Ms.

Reburn. Samantha Reburn, Chief Legal Officer Thank you, operator. Hello everyone and welcome to Sangoma's third quarter of fiscal year 2026 investor call. We are recording the call and will make it available on our website for anyone who is unable to join us live.

I'm here today with Charles Salameh, Sangoma's Chief Executive Officer, Jeremy Wubs, Chief Operating Officer, and Larry Stock, Chief Financial Officer. Charles will provide a high-level overview of the quarter. Jeremy and Larry will take you through the operating results for the third quarter of fiscal year 2026, which ended on March 31, 2026. Following their presentation, we will open the floor for Q&A with analysts.

We will discuss the press release that was distributed earlier today together with the company's financial statements and MD&A, which are available on SEDAR, EDGAR, and our website. As a reminder, Sangoma Technologies reports under International Financial Reporting Standards (IFRS), and during the call we may refer to terms such as adjusted EBITDA and free cash flow, which are non-IFRS measures but defined in our MD&A.

Before we start, I'd like to remind you that the statements made during the course of this call that are not purely historical are forward-looking statements regarding the company or management's intentions, estimates, plans, expectations, and strategies for the future. Because such statements deal with future events, they are subject to various risks and uncertainties, and actual results may differ materially from those projected in the forward-looking statements.

Important factors that could cause actual results to differ materially from those in the forward-looking statements are discussed in the accompanying MD&A, unaudited condensed consolidated interim financial statements, our annual information form, and the company's annual audited financial statements posted on SEDAR, EDGAR, and our website. With that, I'll hand the call over to Charles. Charles Salameh, Chief Executive Officer Good afternoon everyone, and thanks for joining us. This quarter is an important one for Sangoma, not just in terms of results, but in how we want investors to understand the business going forward.

The market is shifting quickly given the dynamics of AI, and before we get into the details of the quarter, I wanted to step back and provide a clearer view of how we are seeing the business evolve due to these shifts. This quarter we are breaking Sangoma into its core components—hardware, applications, data networking, and voice portfolios—to better reflect where the growth is actually occurring inside the portfolio. What this view shows us is that it is a business in transition.

When you look at Sangoma on a consolidated basis, you're seeing a blended view of very different businesses—some mature and under pressure, and others growing and becoming increasingly strategic. That consolidated lens, while accurate from a reporting standpoint, does not fully reflect where the momentum is building or where we are investing for the future. Our data networking and voice networking segments are performing very well, growing approximately 9% and 17% year over year, supported by increasing demand for trusted, intelligent communications infrastructure.

At the same time, our application business is in transition, with growth in larger integrated contracts being somewhat outweighed by declines in more commoditized segments, which is impacting our consolidated revenue profile. That divergence matters because the value in this company is not evenly distributed, and increasingly it is being created in areas that are not always visible in the top-line number. Given where we are in the year and the visibility we now have into Q4, we believe it's important to be direct. We now expect that full-year revenue to land somewhere between $204 and $205 million.

This revision reflects two factors: recent geopolitical and global trade-related disruptions are affecting certain international markets for us, and continued pricing and monetization pressure across parts of our software and UCaaS markets are also affecting us. Importantly, there are parts of the business that we believe will drive long-term value—our infrastructure assets that are performing and growing well—and we are seeing early signs of that shift accelerating as we outlined in our earnings release today.

In response to increasing inbound expressions of interest, the Board has initiated a structured strategic process supported by a financial advisor to evaluate alternatives focused on ensuring the full value of the business is realized. This is an active board-led process and a priority at the highest levels of the organization. We believe the platform we've built—particularly our communications infrastructure, our recurring revenue base, and our AI-enabled platform strategies—is increasingly relevant at scale, and this process is about aligning that strength with the right path forward.

Our objective is to continue to execute the business while the Board evaluates the right path to ensure the value is realized. For today, I'm going to anchor our discussion in three areas. First, our go-to-market is evolving towards larger integrated deployments, which I've spoken about before. We are increasingly moving up-market, not selling point solutions, but delivering integrated communication environments across our distributed enterprises.

These are multi-product deployments that combine network, voice, security, and applications into a single managed framework. What's important here is not just the deal sizes, but the deal quality. These contracts are longer term—three to five years in duration—higher value, and expand generally over time. As the deal size and the complexity increase, deployments are implemented in stages, which affects the timing of when revenue is recognized across these bundles.

That dynamic is impacting the short term. But these larger integrated deployments start improving customer lifetime value, reducing churn, and reinforcing our value proposition. We are building deeper, more embedded relationships with our customers, and that is fundamentally shifting our models. Secondly, our communication infrastructure business is emerging as a primary growth engine.

This is where we're seeing the strongest and most consistent momentum. Our data and voice networking businesses are growing ahead of the rest of the portfolio, driven by increasing demand for reliable, secure, and scalable, intelligent, trusted communication infrastructures. This reflects a broader structural shift in how communications are being consumed. As automation and AI agents become embedded in these workflows, the volume and frequency of voice and data interactions increases.

We think this will continue. These are not traditional user-driven calls; they are system-driven, always-on interactions that require routing, validation, and delivery across both the voice and the data network. That drives higher consumption at the infrastructure layer, and it's showing up in the numbers that we are seeing. We believe this is where the next phase of value creation will occur—not just in the applications, but in the networks that carry and enable those interactions.

Our owned global voice networks, combined with our broader communication stack, position us directly in that layer. And importantly, it allows us to participate in that growth not just on a seat basis, but on a usage and consumption basis over time. This is where AI becomes a catalyst, not just a feature, and where we see Sangoma playing a central role as that demand scales across our infrastructures now. Third, our financial models continue to generate strong cash flow and provide strategic flexibility.

Our recurring revenue base, improved mix, and operating discipline translate into strong conversion from EBITDA to cash. That allows us to reinvest in growth, reduce our leverage, and maintain flexibility in how we allocate capital. In Q3, we made deliberate efforts to reposition our investments towards the growing areas of our business that I spoke about earlier. As those businesses scale, we expect operating leverage to support margin expansion over the next several years.

That flexibility matters, particularly in a market where valuation does not always reflect underlying performance—Sangoma is a classic case. It allows us to continue to execute the strategy while also evaluating broader opportunities to unlock value. Taken together, these three areas reflect the business that is shifting from a collection of products to a more integrated platform, from seat-based growth to infrastructure-led consumption, and from short-term revenue focus to longer-term value creation. And with that, I'll turn it over to Jeremy to walk through the operating results in more detail.

Jeremy, over to you. Jeremy Wubs, Chief Operating Officer Thanks, Charles. I'll focus on what we're seeing operationally across the business: pipeline and customer health, momentum in our MSP and voice infrastructure lines, and how well-positioned we are to support long-term growth. First, both pipeline and customer health remained strong.

Overall pipeline and backlog were relatively flat quarter over quarter, while bookings were lower following a particularly strong Q2. As deal sizes increase, the mix and timing of bookings can vary, but we continue to build and execute against a pipeline of larger, more strategic opportunities. This quarter has seen an abundance of add-on business to previously booked deals, further reinforcing our essential communications strategy and ability to capture share of wallet. For example, the large full-stack retail solution with 350-plus locations that closed in Q2 started out at 150k MRR.

It's about 15% implemented and we've already booked an additional 50k MRR, taking this to 200k MRR. We have a customer with a large national group of clinics and, over the last 12-plus months, they've expanded to 675 locations and 144k of total MRR, with an additional 112 locations expected in the back half of this calendar year. And it's not just the larger deals that are getting larger. We have a multi-location healthcare customer that has expanded throughout the fiscal from its first location in Q1, three more in Q2, five more in Q3, with bookings now totaling 22k MRR.

Expansion is all about trust and confidence in our ability to support our customers, which continues to be stable and highly sticky. 79%, which is better than our historical levels at 1% and a direct result of the significant improvements in CSAT and NPS that I talked about in prior quarters. Second, we continue to see strong momentum in our MSP and voice infrastructure lines. Our MSP business is growing approximately 9% year over year, outperforming the broader market, driven by our strategy to move upmarket and deliver full-stack deployments.

These are multi-product engagements where we move deeper into the customer environment over time. Our voice infrastructure and advanced SIP trunking lines remain a standout, growing approximately 19% year over year, driven by new customer wins, expansions within existing accounts, and increasing traffic across our network. It's evident now more than ever that communications relevance, reliability, and trust reside in the infrastructure layer. This will continue to be amplified as cyber threats, voice and data phishing tactics, and importantly AI agents become more prevalent and embedded in workflows and the way customers operate their business.

Today, AI agents are already answering calls, booking appointments, and following up with customers. As these workflows move deeper into business operations, they rely on secure, trusted communications infrastructure with appropriate regulatory and compliance measures in place, whether that's PCI, HIPAA, STIR/SHAKEN. These capabilities don't get built overnight and they represent areas where we've invested for years and continue to expand. At the same time, we're beginning to bring AI capabilities directly into the platform, with both AI IVR and conversational receptionist agents now in beta and additional capabilities being added through select third-party integrations.

We also continue to evaluate targeted acquisitions, particularly in AI and security, where those capabilities directly strengthen our intelligent, trusted communications infrastructure. As voice becomes more embedded in automated workflows, it is clear this will continue to be one of the fastest growing and most strategic parts of our portfolio. With that, I'll turn it over to Larry to walk through the financials in more detail. Larry Stock, Chief Financial Officer Thank you, Jeremy.

As Charles outlined, the consolidated view of Sangoma Technologies maps the growth that's happening within the portfolio, and that's particularly important as we think about the underlying value of the business. At a high level, approximately 60% of our revenue comes from applications, which includes UCaaS, CX, and CPaaS technologies. Over the past two years we've consolidated this portfolio significantly, moving from a fragmented set of platforms to a more focused, integrated stack.

Within this segment we serve both a lower-end customer base where the market has become increasingly commoditized and a larger mid-market customer where we're growing through a vertical-led bundled strategy. Overall, this portfolio has declined at a low single-digit rate year to date, but we're seeing improving trends as our mix shifts toward larger, higher-quality deals. Approximately 30% of our revenue comes from our Data Networking and Voice Networking portfolio, which includes MSP Access and Carrier Voice.

Together, this infrastructure portfolio is growing in the mid-teens and becoming a more strategically important contributor as usage scales and value concentrates at the infrastructure layer. The remainder of the portfolio includes our open source business and hardware, which each represent single-digit percentages of revenue. While smaller in size, both play important strategic roles in supporting our infrastructure platform and bundled essential communication solutions.

The most important point is these different parts of the portfolio are growing at different rates, but the portfolio is built to generate cash across the board, and that cash flow is the foundation of value at Sangoma Technologies. In the third quarter we generated $6 million in net cash from operating activities, representing an 80% conversion rate from adjusted EBITDA. Year to date, our conversion of adjusted EBITDA to net cash from operations was 87%, which is right in line with our expectations for the fiscal year. 11 per diluted share, and remains a core driver of shareholder value.

During the quarter we repurchased approximately 196,000 shares under our NCIB, bringing total repurchases to approximately 271,000 shares year to date. Subsequent to quarter end, the TSX approved the renewal of the NCIB for an additional 12-month period. We also continued to reduce our debt. 5 million of term debt.

2 million. Our consistent cash generation, ongoing deleveraging, and disciplined capital returns have continued to reinforce the underlying value of the business and provide strategic flexibility as we move forward. Now turning to the P&L, total revenue for the third quarter was $51 million, reflecting the mix and timing dynamics we've discussed across the portfolio. S.

is down approximately $300,000 quarter over quarter and $660,000 year over year, reflecting the macroeconomic and global trade-related pressures that have impacted demand in certain international markets.