Sangoma Technologies Corporation (SANG) Q1 2026 Earnings Report, Transcript and Summary

Thank you for standing by. This is the conference operator. Welcome to the Sangoma Investor Conference Call. [Operator Instructions]. The conference is being recorded. I would now like to turn the conference over to Samantha Reburn, Chief Legal Officer. Please go ahead, Ms. Reburn.

Thank you, operator. Hello, everyone, and welcome to Sangoma's First Quarter of Fiscal Year 2026 Investor Call. We are recording the call and we 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 and Marketing 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 first quarter of fiscal year 2026, which ended on September 30, 2025. 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 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.

Good afternoon, everyone, and thanks for joining us. I'm pleased to report that fiscal 2026 is off to a strong start. Q1 tracked to plan, exceeding consensus analyst expectations. As outlined last quarter, following the sale of our third-party hardware resale business, Q1 serves as a bridge to our higher-margin recurring revenue model, which now represents 90% plus of our total revenue. With that foundation in place, we are positioned for sequential growth in Q2 and continued improvement to the second half as we convert our growing bookings into revenue. In Q1, we delivered $50.8 million, $8.3 million in adjusted EBITDA with 16% margins and $3.2 million in free cash flow. The margin profile reflects normal seasonality, while free cash flow was temporarily impacted by a $3.2 million negative change in working capital that has since been largely reversed. Larry will provide more detail in his section. This quarter, I want to anchor on a few of the KPIs that guide how we run the business, pipeline, bookings, conversion and churn. Jeremy will provide additional detail and examples of recent bookings that reflect the strategy I've outlined in previous calls. Thanks to the transformation completed in May, including the successful ERP and CRM implementation, we now operate with far greater precision, visibility and speed. This gives us data-driven foundation as we enter our new phase of growth. The overall size of our pipeline remains steady, but new pipeline creation increased 39% quarter-over-quarter. Importantly, we saw a pickup in our higher velocity volumetric business, which now represents 62% of our 90-day forward pipeline compared with 55% in Q4, providing a better balance between short-term visibility and long-term growth. On the booking side, larger strategic opportunities continue to accelerate. MRR bookings grew 2.4% sequentially and 6.4% year-over-year, while deals over $10,000 of MRR increased 39% sequentially and are 72% above our FY '25 quarterly average. We're now seeing the bundled mid-market wins envisioned during our transformation materializing in the field. These deals span multiple verticals, including wholesale, carrier, education, health care and are emblematic of the new Sangoma go-to-market motion actually taking hold. Meanwhile, retention remains excellent with blended churn holding near 1%, highlighting the stability and the quality of our recurring base. Sangoma today is a much stronger, in a much stronger position with tremendous optionality in how we pursue growth. Our balance sheet provides flexibility to both invest and adapt quickly to shifting market dynamics. For example, our Prem business grew over 60% year-over-year, benefiting from capacity created by larger players exiting this segment. At the same time, we continue to generate strong cash even as we strategically reinvest in growth initiatives, expanding our partner ecosystems, launching new reps to market and forming high-value partnerships. One recent example is our wholesale channel, just launched 6 months ago, where we've already signed our first $10,000 MRR deal and have multiple opportunities in the active pipeline. These are solid leading indicators of the growth we expected and expect over the next several quarters. We're also exploring selective AI-driven software acquisitions to strengthen our vertical focus in health care, hospitality, retail and education. These initiatives are generating tangible pipeline, early bookings and a clear momentum. Now beginning this quarter, we are introducing a clearer view of our performance through 2 segments, core and adjacent. A core represents a SaaS-led communications platform services, UCaaS, CCaaS, MSP services and access, the primary growth drivers of the company. Adjacent includes cash-generative technologies such as trunking and open-source platforms that complement our core offerings and strengthen the company's financial foundation. This structure provides greater transparency into where we are investing and how our revenue mix continues to evolve towards recurring software-centric streams. Larry will provide additional color on those numbers shortly. Now with the systems leadership and programs and partners now fully in place, we are confidently scaling our go-to-market engine. We plan to invest approximately $2 million in incremental SG&A over the coming quarters to accelerate customer acquisition and partner enablement, supported now by higher NPS scores and customer satisfaction. On the capital allocation side, our approach remains disciplined. We continue to pay down debt, reduce leverage and return value to our shareholders through our normal course issuer bid. At the same time, we are maintaining flexibility for selective accretive M&A to complement our organic growth. Looking ahead, we remain on track to meet our fiscal FY '26 guidance. We expect sequential growth in Q2 and year-over-year growth in Q3 and Q4 as our bookings convert and new programs scale. While the broader SMB market conditions can influence deal timing, early Q2 activity is encouraging and consistent with our growth expectations. I want to thank the entire Sangoma team for their continued focus and execution. The progress we're making, seeing larger deal sizes, growing recurring revenue and expanding routes to market, gives me great confidence that Sangoma is entering a new phase of sustainable, profitable growth. I'll now turn it over to Jeremy to walk through our operating metrics in more detail, followed by Larry with the financials and the capital allocation update.

Thanks, Charles. I'm excited to provide an update today on our go-to-market progress. As Charles noted earlier, the successful implementation of several of our transformation programs supports our ability to operate with greater precision and speed, and this is critically important to scale our go-to-market. Building on Charles' overview, I want to add that we exited Q1 with a healthy pipeline that remains strong, up 6% in the last 6 weeks. This recent momentum, combined with the 39% quarter-over-quarter increase in new pipeline creation that Charles mentioned, gives us confidence in our Q2 plan and beyond with a healthy balance of our volumetric business and larger strategic deals. To add a bit more color on our pipeline of larger, more strategic deals, we exited Q1 with $14.8 million in new logo TCV. Here, we are leveraging the breadth of our full essential communications capabilities, combined with our deep engineering pedigree to solve the challenges facing our largest prospects. This speaks to our ability to transition from a point solutions provider to a broader essential communications player in the market. The product roadmap and IT systems changes we put in place during our transformation are aligning well with these market opportunities. The pipeline momentum is encouraging, but what's even more important is that we're starting to see the deals moving through the sales cycle start to convert. Our teams are progressing opportunities more efficiently. And as a result, total MRR bookings are up 6% year-over-year. In our Q4 earnings call, I referred to a few of our go-to-market strategies targeting service providers, MSPs, vertical solution providers and more specifically, highlighted a wholesale opportunity in our pipeline with the CLEC of greater than $20,000 MRR with a potential to double over the next 9 months. That deal is now closed and booked, and we have 2 other material deals in our pipeline, each greater than 12,000 MRR using a comparable wholesale solution that we are actively working to close this quarter. Last earnings call, I also noted that our pipeline now includes some of the largest MRR opportunities since Charles and I joined, including some exceeding $100,000. Just in the last week, we closed a solutions bundle to a distributed enterprise of over $150,000 MRR, further demonstrating the momentum in our strategic segments. This trend towards larger, higher-value wins is a direct result of the effectiveness of our bundling and go-to-market initiatives. In fact, average revenue per customer increased 19% year-over-year, underscoring the effectiveness of our bundling and go-to-market initiatives in delivering greater value for both our partners and end customers. Beyond these larger strategic MRR wins, our hardware products, such as our prem UC products, phones, gateways continue to contribute to revenue without an implementation lag as they move through distribution. I am very pleased that our channel, driven by our prem UC programs has now delivered 4 consecutive quarters of sequential revenue growth. With Q2 underway, I'm encouraged by the progress we're making. We have a growing pipeline with a mix of volumetric business and larger strategic opportunities, which support our essential communications value proposition. We are booking these larger deals, and we'll see the revenue impact later quarters, and we're continuing to capture share in the premise UC market, which hits the P&L relatively quickly. I want to extend my sincere thanks and appreciation to the entire Sangoma team for their execution in Q1 and continued focus on driving sustainable, profitable growth. I'll end there and pass things over to Larry. Thank you.

Thank you, Jeremy, and welcome, everyone. We appreciate you joining us for today's call. Our first quarter results following our transformation tracked right to plan. We're now operating under a predominantly software and services-led recurring revenue model, and that's setting a strong foundation as we look to drive growth and operating leverage throughout the fiscal year. In the first quarter, we generated $4.9 million in net cash from operating activities, representing a 60% conversion rate from adjusted EBITDA. This included a negative change of $3.2 million in working capital, primarily driven by an increase in trade receivables due to a technical issue in transitioning to a new payment processor as part of our ERP implementation. The onetime issue has been resolved, and trade receivables have since returned to historical levels. Looking ahead, we expect quarterly net cash from operations to convert from adjusted EBITDA in the range of 90% to 100% for the rest of the year, underscoring our high operating efficiency and ability to drive value creation. Free cash flow for the first quarter was $3.2 million or $0.10 per diluted share. We retired an additional $5.2 million in debt during the first quarter, and we ended Q1 at $42.8 million of total debt compared to $69.1 million last year. We continue to execute on our normal course issuer bid. And to date, approximately 710,000 shares have been repurchased for cancellation, representing 2.1% of our shares outstanding and reinforcing our confidence in Sangoma's long-term value. Our capital allocation strategy for fiscal '26 is clear: leverage strong cash generation and our balance sheet to accelerate organic growth and expand profitability. As Charles mentioned, we're investing an incremental $2 million in SG&A, specifically targeting channel and go-to-market initiatives to advance our products and platforms, enhance the customer experience and scale our market reach. At the same time, we'll opportunistically evaluate inorganic growth through M&A while continuing to reduce debt and return capital to shareholders. This balanced approach preserves flexibility and position us to drive long-term value creation. Let's turn to the P&L. Revenue for the first quarter was $50.8 million, representing a decrease of $8.5 million from the fourth quarter, primarily due to the divestiture of Sangoma's third-party hardware resale business, VoIP Supply LLC. Without VoIP Supply, revenue was $1.1 million lower compared to $51.9 million from the fourth quarter. On a year-over-year basis, revenue declined by $1.7 million or 3%, excluding $7.6 million in revenue from VoIP Supply. Core revenue, which accounted for 74% of total revenue, decreased 6% year-over-year, while adjacent revenue increased 6%. Core revenue was in line with our expectations and reflects longer sales cycles on larger MRR deals, the dynamic we discussed during our Q4 earnings call in September. As Charles and Jeremy highlighted in our KPIs, we expect to see more of this booking momentum convert to revenue in subsequent quarters with stronger core performance anticipated as the year progresses. Adjacent revenue was primarily driven by our Trunking as-a-Service offering, which has been reinvigorated through our transformation activities in fiscal '25. We continue to disclose services and product revenue splits in our MD&A with services now accounting for 92% of total revenue. This further reinforces our transformation this year to a predominantly MRR-driven company. Gross profit was $36.8 million in the first quarter. Gross margin was 72% of revenue compared to 67% in the fourth quarter. Without VoIP Supply, gross margin was 76% in the fourth quarter. This change was driven mainly by a higher attachment of product to our recurring revenue offerings driven by competitive displacement opportunities. Adjusted EBITDA for the first quarter was $8.3 million or 16% of revenue and included approximately $0.4 million in expense related to our ERP implementation. Excluding these costs, adjusted EBITDA would have been $8.7 million or 17% of revenue. This was in line with historical seasonal patterns and margin improvement is expected over the course of the year. Operating expenses for Q1 totaled $38.5 million, down $3.6 million or 9% compared to the same period last year. This reduction reflects the efficiency gains we've achieved through our transformation initiatives in fiscal '25. Importantly, we've maintained a steady commitment to innovation. Our investment in R&D remained consistent at $11.3 million for the quarter, in line with Q1 last year. Capitalized development costs were $1.5 million compared to $1.7 million in the prior year, noting that we amortized $1.5 million in R&D expense in Q1, which is included in our adjusted EBITDA calculation. What's evolved over time is our focus on developing new product capabilities. We're increasingly incorporating both in-house and third-party AI innovations across our cloud, hybrid and on-prem platforms. Notably, 90% of our R&D spend is now directed towards new products and capabilities, reflecting our strong emphasis on innovation and long-term growth. With the quarter coming in largely as expected and given the solid bookings activity we've seen in Q1 and into the early weeks of Q2, we are reaffirming our guidance for fiscal '26 of $200 million to $210 million in revenue and adjusted EBITDA margin in the range of 17% to 19%. As we said on our prior earnings call, we expect sequential growth to begin in Q2 and continue through the year with Q1 marking the low point and the bridge to stronger growth ahead. As always, I want to extend my sincere thanks to the talented team at Sangoma. Your dedication and daily contributions continue to drive our success. That concludes our prepared remarks. Operator, let's open up the call for some Q&A.

[Operator Instructions] Our first question is from Gavin Fairweather with Cormark Securities.

I just wanted to start out on the growth investments. I think you referenced $2 million of incremental growth spending here. Maybe you can just update us on the timing of making those investments, what the key buckets are and how you're thinking about the timelines to returns on that spend?

Well, our initial investments are really going to be in SG&A, the $2 million at least started in Q1 materialize in Q2 and Q3 and Q4, mostly in the buckets of increasing capacity in the field, providing us more coverage to recruit partners who are really now embracing the bundle and also partners who are in the vertical orientation areas of health care, education, retail and hospitality. And then the second area is just investment in marketing. which is brand coverage to get our end customers, some of the verticals that we're focused on and certainly our partners much more aware of the full breadth of the portfolio and the suite that the company has to offer. So that's where most of our investment is going right now. Obviously, on the capital side, we've tried to gain efficiencies in our capital expenditures within our engineering team using our internal tools and technologies that are allowing us to reinvest, recouped capacity from within our engineering core into innovation. We've actually moved the needle quite a bit on that. And obviously, the other investment areas are as per our capital allocation program, which investing in NCIB, investing in potential acquisition opportunities and obviously paying down our debt.

Appreciate that. Very helpful. And you've done a lot of work to cultivate new partner relationships and build out new channels like wholesale. Curious what you're seeing in the pipeline tied to that. Are you finding that these new paths to market are generating significant new pipe for you? Any commentary there would be helpful.

Yes. I mean we highlighted a few of those kinds of metrics earlier, our pipeline is up 6% in the last 6 weeks. I mean new pipeline creation is up 39% and even year-over-year pipeline is up 6%, so we are seeing pretty significant, our bookings are up, sorry, 6%. So, we are seeing the kind of fruits of our labor pay off. We're seeing strength in our pipeline. We're seeing a good balanced mix between kind of the velocity business and some of these larger strategic deals. And of course, now we're starting to see those like some of the examples I gave earlier, convert into bookings. So, the investments are paying off. The $2 million incremental investment will help us to build even bigger, more significant pipeline, close more bookings and drive the growth strategy that we have.

On your path to the mark-to-market question, Gavin, a couple of really interesting new paths. The most exciting one right now that we're seeing, to be honest, beyond the vertical bundles and the vertical partners that are really starting to grab hold of what we're trying to do within those particular verticals is the wholesale channel. This wholesale channel has become a really interesting opportunity that I don't think we really saw about a year ago, this idea of being able to put together our solutions and then put them in a private model, giving them to a CLEC type company and allowing them to sell that to their end user base at a discounted rate, kind of takes the commission part away from traditional channel routes and really provides a more wholesale pricing model to a particular customer who wants to then take it to an ecosystem of their end users. In this area, that's one of the deals we just closed this quarter. And I think, a really cool new path to market for us that really wasn't part of the original plan. It's something Jeremy has talked a lot about in a white label offering, but we've kind of gotten a fast track from white label into wholesale. And I think this is an exciting area that we're going to keep our eye on.

Appreciate that. And then just lastly for me on services, a bit of a steeper decline in the quarter. You called out sales cycles. Is there any other moving parts that you'd kind of call out this quarter? And maybe just discuss whether you think that the services line is part of the sequential growth that you're expecting to see in Q2? And that's it for me.

This was a plan. We understood where services were going relative to the transformational programs that really started, as you know, back in early 2024. We knew there was going to be those customers that signed on with us. They're really tiny customers before we got here in 2021 that were on 3-year contracts. They're coming through the system. pretty much coming through now in completion this quarter. That's why this quarter is where it's going to be at and why we think sequential quarter starts in Q2 and Q3 because we've pretty much cut most of those older customers of smaller natures through the pipeline. Don't really expect to see much more in the area of declines in services. In fact, we think churn is going to continue to improve between now and the end of the year for a whole lot of reasons, one of them the one I just mentioned. And we still foresee sequential growth in Q2 and the year-over-year growth beginning in Q3 and Q4 on a pure organic basis, mostly and entirely in the services area.

The next question is from Suthan Sukumar with Stifel.

Congratulations on a nice all-around quarter here. For my first question, I just wanted to, on your successful pivot to larger customers. Can you speak a little bit about how some of the optimizations you guys have implemented around sales cycles and implementation timelines, given that these tend to be relatively longer here for these larger customers versus the smaller customers that Sangoma has targeted in the past?

There's 2 things I'd highlight, Suthan, around our ability to be more efficient in executing on some of these larger, more strategic prospects. One is certainly we, over, during our transformation period, made sure that we look very carefully at the product roadmap and make sure we had the right sort of more advanced feature sets, other things that were required that really fit well with starting to push ourselves upmarket into these more strategic opportunities. So that helps really fill the funnel in the pipeline with more of these larger strategic deals. The second thing is we have a very disciplined weekly cadence around how we pursue large opportunities. The sort of no stone unturned. We're very, very focused on understanding what's required for the client, how do we put the right proposal together. And we have our teams kind of on the ready to support the really professional proposals that get out to those clients, with the quality and speed that allows us to go capture these opportunities quickly. So, when I talked earlier about some of the booking examples, the large wholesale deal, we hunted down 2 other significant ones in the funnel and that large distributed enterprise deal over $150,000 MRR. Those we are able to successfully win as a result of having an integrated proposition, the right features on the road map and having a really strict and well-disciplined deal process to hunt those down.

Also, Suthan, I'll just tell you, quite frankly, one thing I don't talk a lot about as part of the transformation, we talk about process systems, tools, but one thing that we did, that we should be highlighting a lot more is we improved the pedigree of the entire team as we pivoted ourselves from kind of point solution sellers to bringing in high-caliber sales folks who really understand the propositions that we're trying to put forward, that the company can offer and bring an ecosystem of more sophisticated partners who also are looking for solutions like this. All of that plays on top of what Jeremy said, plays into speeding up the deal cycles and improving the quality of close rates. So that's a big part of it. We don't spend a lot of time talking about it, but we've pretty much rebuilt the entire sales team over the course of the last, I would say, 18 months.

Great. That's helpful color. Maybe a follow-on to that. Do you guys foresee making other organizational changes across the business to further support your go-to-market motion?

No, the only, the organization right now is very stable from a leadership or structural point of view. The only other changes that could happen to the company, obviously, would be anything that we did in terms of M&A, either being integrated and expanding an existing part of our business or something that might be even more exciting that's in an adjacent market that could create another division of the company. We're just not there yet. We're in the process of looking at M&A. But as far as the way the current company is set up, no, we don't see any real big changes to the company and the structure.

Okay. Great. And just one last one for me is it sounds like the partner ecosystem is starting to gain more momentum, especially if you guys are looking to step up more investments in that area. Could you remind us on some of the heavy lifting that's been done to date in your partner ecosystem? What's left to do? And what are some of the proof points as investors we should be looking out for to gauge ongoing success here?

Well, look, we took, Jeremy will add a couple of bit more color to this, but we took 4,000 partners when we started this company back in 2024, down to top 1,100 or so, of which of those the top 400 have really generate most of our revenue, 80% of our revenue. We've realigned that partner program to a more sophisticated segmented partner structure called Pinnacle Partners. And then we've aligned our SG&A investments and our resource allocation to partners depending on where they sit in the pyramid, which not only allows us to be much more and deeply entrenched with more strategic partners around exploiting market discontinuities or opportunities within, particularly within verticals, but also to encourage partners who are coming into the system to move upmarket, selling more of our services to incentives that are much more organized, much more thoughtful and much more aligned to the needs of what channel looking for nowadays. It's a very different model, I think, in my mind, the channel has evolved quite a bit in the last 5 years. These guys are much more sophisticated. They want recurring revenue. They want deeply entrenched relationships with their technology vendors, and they want quality service. And so that heavy lifting of trying to discover what they want, understand, organize them in a manner that's scalable for a company of our size and then have an ongoing onboarding, training, awareness program for them, which is most of that work is now behind us, and we're just facilitating these partners and growing with.

Yes. I think, Charles, you summarized it well. I'd say we've gone through the major, call it, horizon of transforming our partner program, getting traction, getting engagement. The second horizon for us is now we do have partners in the ecosystem who grew up selling a single point solution, right? And that's kind of how they've grown up. Now our kind of next horizon is how do we take what we've accomplished with our new channel model, it's hunting, it's driving pipeline. How do we get those partners who grew up selling one thing? How do we get them selling multiple things so they can go on a journey with us. So as that transformation happens, you're talking the longer tail, the smaller partners, but that's a whole additional opportunity to drive growth and pipeline for us.

The next question is from David Kwan with TD Cowen.

Maybe tying on the last series of questions as it relates to kind of refining your channel partner strategy and whatnot. You quoted some new numbers here, which appreciate the additional metrics. One of them was on the average revenue per customer and you saw some good growth there. Can you maybe dissect that number though, a little bit more in terms of trying to figure out how much that was kind of maybe culling of kind of smaller customers versus kind of growth in your larger core set of customers?

Yes. I would say, I mean that's all MRR-related growth, David, like MRR type accounts, like some of that's a combination of supersizing deals. So, getting at larger sort of single element deals, but more importantly, actually our bundle strategy executing. So, when you sell these bundle opportunities, network, security, unified communications, et cetera, the deal sizes just get larger, right? So that's really what's occurring, and we're pulling our average deal sizes up. I think I quoted an increase of 19% year-over-year in average revenue per customer, and that's really driven by new logos and our ability to upsell into these larger bundles.

I'll just quickly, very quickly, David, add that part of the transformation was building an integrated CRM and ERP. If you say that really fast, it sounds like a simple tool. But what CRM really provides is the ability to allow your partners to bundle products together and understand what their commission payouts or recurring revenue will be as a result of that. We launched a program called BV IgniteX, one of our portfolios, one of the sort of flagship portfolios. We put some resources attached to it, and we basically reinvigorated partners who really only sold one of our solutions. But back to those partners haven't talked to them in a long time, gave them an opportunity to understand they can bundle new products with their own products together, and we're starting to see the impact of that on ARPU. And so, we believe mining to account expansion, some of our existing partners through more sophisticated programs that allow us to cross-sell and upsell because we can now because we have the tools and systems to do so, is going to continue to drive ARPU up over the coming quarters.

That's great color, guys. And then on the gross margin side, that came in a bit lower than what we were expecting, I think what you guys were guiding for the quarter. And it sounds like it was kind of a revenue mix and more greater mix of higher, product revenue that carries lower margins. I guess just given the timing of when you guys came out with the guidance kind of right towards the end of the quarter, just was there a lot of product sales that came in, in the last week or 2, I guess?

Yes. So we saw product sales higher than expected. originally. And if we look absent board supply quarter-over-quarter, it's about consistent to what it was prior. So it was in line with really where we thought overall, and we do expect that to increase as we get through the next 3 quarters for sure as we move on through the year, and we see services continue to be such a high percentage for us as well as core.

So I guess, could you throw out the 75% number for Q1? Like is that something that you think you can hit in Q2? And how should we be thinking about for the balance of the year?

Yes, that's exactly right. That's how I am thinking about it for the balance of the year.

Okay. That's helpful. And just one last question. I saw there was just over $0.5 million in restructuring costs. What did that relate to?

It's part of the transformation. It's also part of, as we look at things like ERP and how we're looking at the company moving forward as we've implemented that. That's really all that is some staffing-related items.

The next question is from Mike Latimore with Northland Capital.

This is Vijay Dewar for Mike Latimore. A couple of questions. One, how much did backlog grow sequentially?

I'm sorry, I didn't hear that. Can you repeat that?

How much did backlog grow sequentially?

Backlog was pretty consistent quarter-over-quarter. There wasn't a material growth like Q4 into Q1. I think what you'll see is bigger backlog growth going into the next quarters given some of the bookings and the deals that I highlighted earlier.

Okay. And how are bookings in the quarter relative to your expectations?

Yes. Our bookings in this quarter were pretty much like almost 100% on expectations, like it was completely in line with our plan.

The next question is from Robert Young with Canaccord Genuity.

I'm trying to understand the large deals that you were talking about over $100,000, the MRR opportunities over $100,000. Are these bundled mid-market at the high end? Or are these the wholesale CLEC opportunities that you were talking about early in the call?

Yes. Let me cover it, Rob. There's, I'll put them in 2 buckets. So first, in the kind of wholesale type solutions and bundles, we did close a deal, $25,000 MRR with, and I mentioned about 9 months out, we expect that to expand quite considerably. So that's in the wholesale space. Again, it's an MRR deal. We have 2 other pretty substantial ones I referenced earlier, both over 12,000 that are in our pipeline, not, those aren't closed yet. And then as a solutions bundle, so this networking, some network security, UCaaS, some other combination of solutions we sold to a large, distributed enterprise in the retail space. That deal was $150,000 MRR. So that's completely different than the deals that we sold in the wholesale space.

Okay. And then as you look at this wholesale opportunity with the CLEC, is that where the CLEC is effectively operated as a channel? Like is that selling through into their customers, a bundle.

That's right. I mean we're selling basically a wholesale solution to the CLEC. I mean, usually, they're buying at a wholesale price, and they'll go out and sell a combination of that solution with some of their own, say, infrastructure, maybe it's over their fiber or their network, they'll sell the solution out to their end customer. So, the CLEC deals are like that. I would think of it, you've probably seen other companies go after this spaces as well. We see some opportunities in the soft switch space, so replacing some of the soft switch opportunities that the process shops and CISCOS would have gone after with our own hosted wholesale solution offer.

Okay. And I mean when you, the CLECs, when they're looking at your product, is there a significant lift here in go to market like training salespeople within the CLECs to resell here? Or is it a situation where this is, I mean, maybe an industry standard that you just weren't able to sell into before because the CRM systems didn't allow you to bundle. Like what is it that's opened this up suddenly?

I think it's a very good question. I would say this is an opportunity, I think both Charles and I saw early when we got and joined Sangoma. It was a channel that Sangoma hadn't been pursuing. The hadn't been going after CLECs MSPs with this type of white label solution. I think, we had some of the building blocks in place, not all of them. We had to make some systems changes and some road map changes in particular to address it. We did that, and now we're hutting this down, and we're pretty excited to see some pretty substantial deals in the pipeline. And as I mentioned before, a pretty substantial one closed already in Q1.

There's not, and just I want you to be clear, this is not just geared at CLEC, Rob. The idea of wholesale is really to any institutional company that wants to kind of control the networking and technology stack for a bunch of end users. We have a deal we're proposing right now. It's a health care institution that has multiple hospital facilities with hundreds of special care clinics attached to this ecosystem in the United States. They're looking for a white label solution, and they've come to us. And we're pretty far down the road with these guys where you'd never have thought that these guys wanted to actually take a wholesale solution from us as a health care institution and ecosystem. And so there's a ton of opportunity beyond CLEC that we're exploring. The idea that Jeremy and I saw here was wholesale white label, not necessarily wholesale and white label just for the CLEC. It's just one of the channels of many others that are interested in this type of solution, and now we're geared to serve them.

Okay. Last question on that would be just around the TAM. Does that materially increase the TAM that Sangoma can address?

Look, we're a $200 million company. So, any TAM that's a sizable nature, we're going to go after it. It does absolutely open up a whole new channel for us. I think it's come faster than we had anticipated, which is all goodness. And when you're going through these transformations and you understand how the company, all the components the company has and when you start putting things together, coupled with a very rapidly changing dynamic, in the tech space, these opportunities open up. The prem was a great example, another area that just, we had a Mitel exit, we had an Avaya exit. We pounced in, and we have a 60% increase in our pipeline just in a short period of time. So we have lots of really exciting deals that are happening in spaces that we maybe didn't really originally plan for. This is one of them, and I think there's a significant opportunity for TAM. This goes, like I said, beyond CLEC, it goes into these other institutions. It goes into ISPs, it could go into hyperscalers. We could take it into a lot of places. And we're just in the very early innings right now. And within 4 or 5 months, managed to close our first deal and see many more in the pipeline.

Okay. And maybe one more question. You made, there was a comment earlier in the call where you said that the size of the pipeline was the same, but the new pipeline creation was up 39% quarter-over-quarter. And I'm trying to understand what you meant by that statement. you just a little bit for me?

I mean, the pipeline is up 6% in the last 6 weeks. The pipeline creation, new pipeline creation is up 39%. So that's relative to last quarter. So the aggregate pipeline is up and the new pipeline creation is up. So it's both. It wouldn't make sense to have one and not the other.

This concludes the question-and-answer session and today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.