Sangoma Technologies (NASDAQ:SANG) reported fiscal second-quarter 2026 results that management said tracked “right to plan,” supported by one of the company’s strongest booking quarters in recent history and sequential revenue growth. The quarter ended December 31, 2025.
Chief Executive Officer Charles Salameh said the results reflected early traction from the company’s go-to-market strategy and investments made to position the business for growth. He highlighted improving bookings momentum, sequential growth in service revenue, and strong cash generation, while reiterating a focus on moving further into larger, multi-site mid-market opportunities.
Financial performance and cash generation
Gross profit was $38.2 million and gross margin improved to 74%, compared to 72% in the first quarter and 68% in the prior-year period. Stock attributed the margin improvement to a more favorable revenue mix and continued strength in recurring services.
Adjusted EBITDA was $8.3 million, or 16% of revenue, consistent with the prior quarter. Stock said commissions were higher in Q2 due to several large contracts booked during the period, which he described as a “healthy sign of commercial productivity.”
Cash generation was a central theme of management’s remarks. Sangoma generated $10.1 million in net cash from operating activities, which Stock said represented a 122% conversion rate from adjusted EBITDA. He attributed the strong conversion to positive working capital movements as trade receivables returned to historical levels following timing impacts tied to the company’s ERP implementation discussed on the prior quarter’s call. Free cash flow was $8.0 million, or $0.24 per diluted share, improving sequentially.
Bookings momentum and mid-market strategy
Salameh said the company is seeing sustained progress in its mid-market strategy, pointing to solid pipeline conversions, improving booking quality, and traction across verticals and wholesale motions. He added that the sales pipeline remained steady in Q2, reflecting a balance of new opportunity creation and deal conversion, with improvements in close rates.
Management highlighted a sharp increase in monthly recurring revenue (MRR) bookings. Salameh said MRR bookings grew 67% sequentially and 60% year-over-year, while acknowledging that as Sangoma engages in larger and more complex mid-market opportunities, quarterly volatility is possible.
Chief Operating Officer Jeremy Wubs provided additional detail, saying the company closed 7.5 million of the $14.8 million in new large strategic deal total contract value (TCV) identified the prior quarter. That brought large strategic TCV bookings to $10.8 million for the first half of fiscal 2026. Stock added that, as a result of Q2 booking momentum, Sangoma’s starting backlog for Q3 was up approximately 125% compared with the start of Q2, which he said provided stronger visibility into the second half of the year.
Large wins, wholesale traction, and product mix
Wubs cited several large customer wins during the quarter, including wholesale and multi-location deployments. He confirmed that a previously discussed wholesale opportunity for a large healthcare organization representing 12,000 MRR—supporting two large hospitals and nine urgent care facilities—closed during Q2. He also described closing an 18,000 MRR multi-location retail customer that had previously used three separate vendors for voice, access, and managed services and was looking to consolidate to a single provider.
Wubs said the most substantial service win of the quarter was a greater than $150,000 MRR deal with a distributed retail customer with more than 350 locations, which also sought a single provider to simplify and standardize communications across locations.
On wholesale activity, management framed the opportunity as serving ecosystem partners such as carriers, competitive local exchange carriers (CLECs), and large organizations that want a standardized communications offering to resell or deploy across affiliated locations. Wubs also said customers previously using “soft switch” platforms are being pushed toward new business models and are looking for alternatives, positioning Sangoma to participate in what he described as a transformation opportunity.
Wubs noted that some large wins include upfront product or non-recurring revenue (NRR) components, which are expected to contribute to a slightly higher product mix in Q3. However, Stock said the company expects gross margins to remain stable into Q3 and Q4 despite any mix shift. Wubs also said Sangoma’s hardware products—including on-prem UC products, phones, and gateways—continued to contribute to product revenue through distribution, with channel revenue up 4% from the same quarter last year.
In carrier voice and trunking, Wubs highlighted a contract announced during the quarter with Commio, which selected Sangoma’s wholesale SIP trunking solution to support its nationwide cloud voice and messaging footprint. He said trunking infrastructure was up over 10% from the same quarter last year.
Churn, capital allocation, and updated guidance
Salameh said retention remained strong with blended churn “just under 1%,” and later in the Q&A management cited churn of 0.96% and a goal to reduce churn further toward 0.85%. Executives said some more challenging accounts had moved through the system and that the company is using data models and AI tools to identify customers with higher churn propensity and intervene more proactively.
On capital allocation, Stock said the company continued to reduce leverage and repurchase shares. Sangoma repurchased approximately 196,000 shares during Q2 under its normal course issuer bid (NCIB). Since launching the program the prior April, the company has retired more than 700,000 shares, or 2.1% of shares outstanding. The company also retired $5.2 million in debt during the quarter and ended Q2 with total debt of $37.6 million, down from $60.4 million in Q2 of last year. Quarter-end cash was $17.1 million, up 27% from June 30.
Looking ahead, Stock said the company is tightening its fiscal 2026 guidance. Sangoma now expects:
- Revenue: $205 million to $208 million
- Adjusted EBITDA margin: 17% to 18%
Stock said achieving the outlook assumes another sequential revenue increase in Q3 and that the company anticipates returning to year-over-year organic growth after adjusting for the divestiture of VoIP Supply, which Stock said contributed $6.4 million of revenue and was sold to exit low-margin, non-recurring resale activity.
In response to questions about M&A, Salameh said the company is seeing opportunities across a range of sizes and categories and noted that valuations have come down. He said Sangoma is evaluating opportunities that could add value to its platform, including vertically oriented software companies, security players, and other communications- and call center-related businesses, while emphasizing discipline and balance sheet flexibility.
About Sangoma Technologies (NASDAQ:SANG)
Sangoma Technologies Corporation (NASDAQ:SANG) is a global provider of enterprise communications solutions that enable organizations to deploy voice, video, and data services across on-premises and cloud environments. The company’s offerings include unified communications platforms, SIP-based telephony hardware, VoIP gateways, session border controllers, and related endpoints. Sangoma serves small and medium-sized businesses as well as larger enterprises, delivering solutions for IP telephony, collaboration, contact centers, and SIP trunking.
The company’s product portfolio comprises software-based PBX systems such as PBXact and FreePBX, along with hardware appliances for secure and scalable connectivity.
