Hi everyone. Good afternoon and thank you for joining the Fad Pipes earnings conference call. Before we begin, I would like to remind everyone that today's discussion may include forward-looking statements within the meaning of the federal securities laws, including the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include but are not limited Two statements regarding Fat Pipe's expected financial performance, business strategy, growth opportunities, customer demand, product deployment, recurring revenue initiatives, market position, and future operating results. These statements are based on management's current expectations and assumptions, and are subject to risks and uncertainties. that could cause actual results to differ materially from those expressed or implied by these statements. For a discussion of important factors that could affect Fat Pipe's actual results, please refer to the risk factors and other disclosures contained in the company's filings with the Securities and Exchange Commission, including its most recent annual report, Quarterly reports, current reports, and other SEC filings. Any forward-looking statements made on today's calls speak only as of today's date. Except as required by law, Fat Pipe undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise. And during today's call, we may also discuss certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures, where applicable, are included in today's earnings release and related materials available through the company's investor relations website and SEC filings. With that, I will turn the call over to management.
Good afternoon, everyone. This is Ragula Bhaskar, the CEO of Fat Partner Inc. And with me I have Vikrant and Kanishka. Vikrant is the one who read the Safe Harbor announcements. He's our VP for Corp Dev and IR. And then I also have with me Chief Financial Officer, Kanishka. And Kanishka will join me on this presentation. I'm excited to have you all on this call. A lot of exciting things happening. We had a good quarter. And besides that, we also introduced a new product called Constellation. That is for network monitoring both on the wide area and on the local area side. And that is an exciting product that is gaining traction. Orders have already started coming in. And we also are working towards positive cash flow. Last quarter, most of our cash went to buy inventory to deliver on the orders we had. And in October, we broke even as a company. So we hope to continue to be a positive cash flow company, as I promised you at the beginning of the year. With that, I would like to move to the financial numbers that you have been waiting for. This is for quarter two of this year. Kanishka, please take it away.
Thank you, Dr. Bhaskar. So a summary of the financial results from this quarter. For Q2, we had about 4.8 million of revenue, which was a 22% year-over-year growth. Net income of 1.2 million, which was an increase of 1 and a quarter million of net income relative to the same quarter last year. A just EBITDA of 1.16 million, which is about a 60% year-over-year increase. On the EBITDA side, gross margins continue to remain healthy at 90%. And earnings per share was 9 cents a share, which was an increase from flat last year, same quarter. Going into the first half results as a whole for Q1 and Q2 combined, On the next slide. We had 25% year-over-year growth. Apologies, can the screen share move to the next slide? Yes, we had 9.9 million of revenue, which is about 25% year-over-year growth for the six months ended September 30th, 26 relative to the six months ended in September 30th, 25. Net income grew 250% to 2.43 million. The CBDA was up 34% year-over-year. 2.45 million gross margin once again remained healthy. 91% blended and earnings per share was at 17 cents a share, which is up 240% year over year. Next slide. Going to our recurring billings, our recurring billings continued to be strong year over year relative to last same quarter last year. Our recurring billings grew 55% year over year. As a reminder, recurring billings are those billings which are billed regularly, either on a monthly or annual basis. And this represents those buildings that were collected in the. quarter for the three months ended September 30th, 2026. And with that, that's the summary of the financial results. I'll pass it back to Dr. Bhaskar to go over product and customer.
Thank you, Kanishka. Ladies and gentlemen, when you go to the next slide, Vikrant, I would like to talk to you about the company. As we always wanted to be and will continue to strive to be, we always want to be the number one product in our business and also provide the number one support to our customers so that we have happy customers. Then Entire emphasis here is make this customer experience the best that can be in the networking business. So with that goal in mind, we have always continued to do well in that arena. And the customer feedback, this is one of the charts from a company called Infotech, I believe it's a $4 billion company, marketing company. As you can see, we are way ahead of Cisco, Meraki, VMware, and everybody else in the game. And that is because we actually focus on the customer. If you look at Gartner Service, another company, if you look at independent surveys of customers, we are always rated number one. over all the other majors in every single category. And that will continue to be our goal. In terms of what we plan to do for the next few quarters, keep up the same production, work on creating more sales. At the beginning of the year, our plan was to have 36 salespeople by the end of the year. We are midway there. We are at 30 salespeople net, and we plan to add six more by the end of March, which is our fiscal year. And in terms of product, as I mentioned, Constellation was a very good product that we brought out. To give you an idea of what Constellation does, we can monitor every single aspect of your network. every single device in your network, down to every single port in your switch and your fiber connection. The advantage of that is from a customer perspective, they don't have to go to multiple vendors. In a single stack, we are able to provide you cybersecurity. That type of course, our base product, and complete network analysis. Now, as a customer, what is the advantage? You have all the data you need, networking data, cybersecurity data, and the entire company devices, inventory. In fact, including all the software you have, when the software are coming up for renewals, which software is vulnerable. We can give you a list of software that has not been updated. So essentially, it's one stop, one call, that's all. And that's our goal, to achieve network singularity. And we are headed there. And that's our biggest achievement in terms of new product class. quarter. And then we also, big of this in October, we acquired a small software technology company, and that will continue, and we'll continue to look for more companies to add. We did not raise any money to buy that company. We are doing it with our internal resources. And again, we had acquired quite a bit of equipment and hardware to meet our sales obligations. We are doing that. And in October, we broke even. And we expect to continue to break even and make positive cash flow going forward. As we continue to hire people and expand our sales motions. I don't have any other things to share with you. Vikrant, are there any questions that I can answer? Or if anyone wants to ask questions, please do raise your hand and ask questions. And Vikrant, if you could transcribe for me or.
Yes, so we have some questions from our equity analysts, so I will start off by pulling in Lisa Thompson to... Share her question. I'll enable her microphone and camera. Lalitha, you should be able to speak. Yep.
Got it. All right, I'm clicking buttons. All right, I'm here. Thank you. So just to go back to Constellation, can you tell us a little bit more how people are charged for that? Do you have to have already bought cybersecurity or is this something you can buy without having all the other pieces? How does this work?
Thank you, Lisa, for joining us on this call. Constellation can be bought as part of our Fat Pipe offering. and can also be bought as an independent product. So we are giving customers that option. And so whichever way, if they want it on-prem or if they want it in the cloud, we are happy to do it either way.
And can you buy it right away or do you have to wait till your contract ends? Okay.
Yes. No, you can buy it right away. It sits quietly in the network and it monitors the network, generates alerts, generates alarms, and generates reports for you. It's all in real time. And the way we charge is by monitored devices. So if you have 100 IPs, We will monitor it. We charge you by those 100 monitored IPs.
Okay, sounds good. Can you tell about this little software company you bought? What does that add to you or?
We have a division called Fat Pipe Technologies, which provides software services, technology services. And this company is in the same area, so we thought it would be good to add to that market and that segment.
Okay, all right. And how is this quarter looking? Is there seasonality in the business or what should we think about the December quarter?
Our, yeah, good question. Our goal is always to do at 18% growth rate and 18% EBITDA. So we will work very hard to achieve that minimum base.
All right, and then just one kind of...
The seasonality.
Go ahead.
Sorry, the seasonality can be when the holidays kick in sometimes, but this time, the December Christmas, I believe, is on Friday or Thursday, which means the next week after that would be a clean week for us to continue to close deals.
Okay. I guess my last question is kind of a big picture thing. So recently, Fortinet had kind of a controversies going on about their quarter. Can you kind of compare and contrast how you're not them?
Fortinet is a massive company. So they're affected. They have a lot more wins in different parts of their business and the world. We are focused on our market and we are not hopefully going to see any of the issues that Fortinet has.
Okay, great. That's all my questions for now. Thank you.
Thank you. And we are also constantly developing new products. As you can see that we introduced cybersecurity last year. We are introducing Constellation this year. Our goal is to be, like I said, the best product company out there. and have a good name in the market, have a good name with customers. You can say that about some of the other big companies.
All right. Thank you.
Thank you.
That's it. Thank you, Lisa. I will now enable James Kessner to be able to participate as well.
Hi, James, your question?
All right, sorry. Hey there. Good afternoon. So, just a couple quick ones. I guess, you know, we're talking about the Salesforce ramp and kind of what you expect there. You know, how long is it, you know, going to take you think for those folks to be kind of productive? Like, what is the ramp of a new salesperson look like in your company, you think?
Typically, a salesperson should become a break-even to profitability about three to six months. Some of them who are in the larger deals business will take about six to nine months. That's typical. But if they have a great pipeline, we'll work with them. If they're not able to create a pipeline, then we cut loose. Unfortunately, we have to do that.
Sink or swim, right? That's the nature of a salesperson.
Shankar Swam. Yeah, and we are hiring senior salespeople who have experience, who have a Rolodex, so we expect them to come with a partner base, right? So if they're not able to develop that, convert that partner relationship into sales, then... We are not the right company for them.
So you have a product that can hunt pretty well too. So that should help. So what about, I believe it had a $7 million contract, education contract that you were expecting to search a land, just maybe get a kind of update on that. And just in general, is that contract eventually open up other public sector opportunities?
It is. It has, and it is. We are very fortunate to land a big contract, and we are executing on that. And so that does get the word out that we can be trusted with a large contract, and we have the resources, the means, and the to execute. And so we did land a couple more deals in different parts of the country. And we are looking forward to this coming year to do the same.
Okay, that sounds great. Well, thanks for taking my questions. I appreciate it.
Thanks, Kent.
Thank you, James, and now I'll let Derek Greenberg ask his questions.
Hi, Darryl, how are you?
Good, how are you? Thanks for taking my questions. I wanted to start off just by asking about how we can think of revenue this quarter in terms of new customers versus renewals. If you had anything you could share on that.
Our new customers, we are adding new customers. The quarter is still young. We have 60 more days to go and the pipeline is looking good. We are continuing to build on the pipeline. In terms of renewals, we have good renewal clip rate. And as the company base of customers increase, the renewal rates, the renewal will be a significant, and it is already, but it will be a significant portion of our business. And our goal is, like I said, to keep the customers happy. If I can keep your If I can keep you happy and you're happy with the product and you're happy with the service, there is no reason for you to walk away from us. And remember that every single customer of ours is a critical, mission-critical customer. We run cities, counties, police, emergency services, hospitals. You name it, big school systems, I mean, school systems with 50 and 100,000 students, right? And you know, that requires expertise. And we have been developing that expertise for the last 25 years. So we know how to take care of those customers. And if that network has an issue, we are on it immediately and we try to solve it. And we have a deep expertise in getting into a customer's network and figuring it out. Really fast.
Got it. And then I was curious what you're seeing at renewal in terms of attach rates for your cybersecurity offerings, if you're seeing good uptake there, if there's anything you can share.
We are seeing more faster reception to our constellation network management and land management product. And I think part of that is because many customers, as I said in the earlier presentations, there with this Kludgy group of four or five different cybersecurity products from four or five different vendors with three to five year cycles. And therefore, peeling away from those contracts and coming to Pat Pipe takes a little longer. On the other end, Constellation is an easier install. We are not replacing any system in almost all cases. All that contracts are coming up with an annual basis, so we are able to make presentations. We have, for instance, a city in Tennessee. We have a customer who's a bank. So we are Finding that it's a lot easier to sell, and I also believe that that product is a very exciting product. It has a lot of exciting features. It's like Ragu spaghetti sauce, if you will. It's in there, the features are in there, and so anytime you have a... question about can I monitor this? My answer is yes, we can. and that people like that. They can look at every nook and cranny of that network. So that, I believe, is also going to help us with our revenues going forward. And we are pushing it to our current customers. Our current customers trust us, and it's a lot easier to explain to them the value of another feature in the same product, which they buy separately, but it's a lot easier than saying, I'm a new guy in town.
Yeah, that's really helpful. One more from me and then I'll pass it along. I was wondering if you could just talk about how some of your newer distribution and reseller partnerships are progressing, particularly TD Synnex and Carasoft.
Actually, the best person to answer that is Vikrant. Vikrant has been working with TD Synnex and Carasoft and Harvard with our sales teams. So, Vikrant, if you, I don't mean to put you on the spot, but if you can answer those questions, since you're closer to the actions and you travel to all these partners.
Yeah, so as Dr. Bhaskar mentioned, we've been seeing good success with our partners, including with TD Synnex and Carasoft. As with every partnership, it takes a little bit of time to grow it, but in that recent quarter, we have seen more wins coming in with these partners on different proposals to government customers that are looking to purchase that type solutions. We're seeing good traction in them and continued wins, and the pipeline from these partners is growing. So we are very excited with the partnerships and continue to invest more resources to further grow their revenue and opportunities to work with these partners.
And I think this week you trained like 72 salespeople at one of the partners. And last month or you, one of you traveled to their partners and made onsite presentations. And then we also have another partner called Jenny in Ohio. And our sales manager there has been visiting them and training them. And what is nice is we get very good reception. We are in a business where we have a good product and our service quality is well known. And therefore, their salespeople are looking for products that can help them set. And the most important thing is How can you help your partner salespeople sell and achieve their quota? And a lot of that involves training and providing them the resources and the pricing they need to win the business.
Got it. That's really helpful. Well, thanks for taking my questions, guys. I appreciate it.
Thank you.
Sounds great. And then I will bring on Nehul from Northland to also ask his questions. I.
Good afternoon, Nehal. How are you?
Good. How are you doing?
Doing well, thank you.
Great. Hey, can you go back to that Billings slide?
Yes, I can.
Okay, great. So yes, looks like your recurring billings ticked up pretty significantly Q/Q here from 2.4 to 2.9 million. Can you talk about the driver of that big Q/Q uptick?
Primarily, as we get more new business and turn up the circuit build products, we have been billing. And then the current customer billing, it's a layered approach, right? We have multiple layers of customers every year, every quarter. And as the buildings on each of those customers
Mhm.
start, we are seeing growth in the buildings. And the bigger deals, we have been deploying bigger and bigger deals or installations, and therefore the monthly billing on those is significantly higher in terms of dollar value. So those are the reasons.
So the driver of this big QQ uptick has been a ramp in some large customers.
Yes, and also recurring revenue streams, so from renewals that are also happening, both.
Yes. Okay, and this $7 million win, is that a...
Actually, actually, if I were to... Sorry, if I were to think through it, recurring and renewals will continue to add to the baseline of the previous quarter. So a lot of that is new business.
Go ahead, please. Yeah, right. A and so. that $7 million order, right? How much is it contributing to that half a million QRQ increase in recurring billings?
It has started contributing. I think about three to three months ago, it started happening.
distribution so that will add to about 300,000 a quarter.
300,000 a quarter, it should start contributing. And then we had other additional deals that we got bigger deals, so they are also contributing.
OK, and is that 300,000 a quarter the full run rate of that $7,000,000 order, or is there more still to be deployed?
That at full run rate, it will be about 1.18 approximately, 118,000 a month, so that will be about 350,000 a quarter.
Got it. Okay. Can you give us some color on how bookings proceeded during the September quarter?
September quarter, Kanishka, do you happen to have those specific numbers?
Yes, the top line revenue as reported on a gap basis is largely reflective of the new bookings for the quarter. So that continued to be healthy year over year. And in terms, so it did continue to grow. I can follow up with the exact growth on the billing. on the bookings, but overall top line revenue was up 22% to 4.83 million for the quarter, and the majority of that driven by new bookings.
Okay, so product RPO would be flattish QRQ from 2.2 million in the June quarter.
EE.
Go ahead. No, go ahead.
Dr. Bhaskar.
Good, Kanishka.
Kanishka, you are muted.
Sorry, yes, I am muted. Yes, so product RPO continued to grow. However, like we mentioned, remaining performance obligation is slightly different relative to the contract receivables. Remaining performance obligations is partially and deferred revenue are both partially related to our legacy book of customers in addition to the net new booking. So remaining performance obligation, remaining flat quarter over quarter is. has the benefit of the net new bookings from our recurring customers, but it also, as we shift over the legacy customers from the more one-time slash term license billing to more recurring basis, does see a decline from that basis. So remaining performance obligation overall was relatively flat because of that.
Okay, great. Well, fantastic acceleration in the buildings here. Congratulations.
Thanks, Nehal.
And then I think last question we have in the chat comes from Rudy regarding two parts. First is, how is SAD Boost coming along as far as interest from prospective customers? And then the second question is, are we still acquiring former VeloCloud customers? So Dr. Bhaskar, if you'd like to answer those.
Yes, SAT Boost, it hasn't taken off as fast as we want it. We are specking in, we have a lot of interest. We are not, haven't done some big deals in SAT Boost, but we do have customers using satellite as a backup solution. SATBoost is the one where we can triple the bandwidth. I guess most of the customers are using satellites for backup, not speed. So that hasn't taken off as much. However, in terms of VeloCloud replacements, we are doing well. So we... I think we did two or three bigger deals recently, and then we have a number of quotations out there for replacements whenever those contracts get over. So yes, we are replacing a significant number of VeloCloud customers.
And then Dr. Bhaskar, if I may add on regarding SAT boost, this is more of a recent development in the past month, but we have a number of customers with 40, 50 plus sites who are deploying satellite in addition to terrestrial transport. So we have seen more reception for SAT boost. recently, especially as SpaceX has continued to deploy their Starlink constellation and customers have begun to use that for their primary transport. And this is happening in the last two weeks.
Good.
And I think that's it for time we have on the earnings call. Vikrant, I'll pass it back to you to close.
I think I think somebody raised a hand. Did someone raise their hand just now?
Oh, think. I think I see Nahal's hand up.
Okay.
But I'll pass it back to Vikrant.
I need help.
Yeah, with that, I believe we are at the end of the Q2 Fat Piper earnings call. So, unless there are any final, or sorry, Dr. Bhaskar.
What? I see Nehal's hand up still.
No, no, that's an accident. Sorry about that.
Okay, okay. In terms of the next several quarters ahead, we will continue to work as hard as we can to keep our sales momentum up, our profitability up, and start putting cash in the bank. We did refinance one of our SBA loans that we had. before the IPO. So that helps us reduce our interest rate by about 1.85%. And then we also got a credit line of 1.5 million. Sorry, folks, I have a little cough. 1.5 million from a local bank here. And so that gives us additional resources if we need to drop on that. We will continue to buy hardware for fulfilling our sales obligations or deployments. But overall, we will continue to keep the pace. By the end of March, we should have, what, 36 salespeople. And the goal for the following year is about 48 salespeople.
Sounds good.
So with that, that should be the end of the Fat Pipe fiscal year Q2 earnings call. So thank you everyone for joining and learning more about the fiscal results for Fat Pipe and how we've been doing this quarter and going forward. And we will see you again at the Q3 financial results update.
Thank you, everyone. I appreciate you taking the time to join us.
Thanks, everyone.