Fatpipe Inc/UT Q1 Earnings Call Highlights

Key Points

• FatPipe reported strong fiscal Q1 2027 results: Sales rose approximately 27%, income increased roughly 65%, and EPS climbed to $0.09 from $0.05, while gross margins remained around 92%–93%.
• Channel partnerships and larger deals are driving growth. Nearly all sales come through partners, TD Synnex was added as a distributor, and a recently announced $7 million education-sector order could contribute 30%–35% of its value in the September quarter.
• The company is investing for expansion while broadening its product portfolio. FatPipe increased inventory, marketing and sales hiring, while advancing VeloCloud replacement opportunities, SATBOOST wireless technology and its Total Security 360 cybersecurity offering.

Fatpipe Inc/UT NASDAQ: FATN reported first-quarter fiscal 2027 sales growth of about 27% and income growth of roughly 65% from the prior-year period, while earnings per share increased to $0.09 from $0.05, Chief Executive Officer Ragula Bhaskar said during the company’s earnings call.

Bhaskar said the company maintained margins of approximately 92% to 93%, though margins can decline modestly as FatPipe pursues larger transactions. He characterized the period as a strong quarter following a previously large quarter and credited employees, partners and customers for supporting the company’s growth efforts.

Channel strategy and larger deals

Management attributed the sales performance to growth across market segments, an increase in deal sizes, additional transactions and expanded contributions from channel partners. Bhaskar said FatPipe has increased investment in its channel program and signed TD Synnex, formerly Tech Data, as a distributor.

“Almost all” of FatPipe’s sales come through partners, Bhaskar said, with only a limited number of customers choosing to work directly with the company. The company’s strategy is to use partners as its “feet on the street,” he said.

FatPipe said closer partner relationships and greater trust have led partners to bring the company into larger opportunities. Bhaskar said management expects channel partners to increase both the number and size of deals they bring to FatPipe.

The company recently announced a $7 million education-sector deal. Bhaskar said approximately 30% to 35% of that order could be booked during the September quarter as units are delivered, while noting that revenue recognition occurs as products are assigned to customers, shipped or installed. Management said the transaction resulted from working closely with a partner on a request for proposal, with FatPipe displacing a major incumbent based on product capabilities and pricing.

Management did not disclose June-quarter bookings, though President and Chief Technology Officer Sanchaita Datta said bookings were “significantly higher” and characterized the figure as forward-looking. Bhaskar said there is generally a lag between bookings and revenue recognition, with unfulfilled orders at the end of June carrying into the current quarter.

Investments in sales, inventory and marketing

FatPipe said it is balancing growth investments with operating discipline. Bhaskar said the company made a significant inventory investment during the quarter to support larger orders and also bought RAM and SSD components at fixed prices.

The company spent nearly $400,000 on marketing during the quarter, according to Bhaskar, largely because multiple trade shows were held during the period. He said FatPipe’s partner-development spending has begun to increase awareness of the company, citing attendance of about 120 partners at an event in Las Vegas, compared with about 80 attendees the prior year and about 40 attendees two years earlier.

FatPipe had more than 30 sales employees, up from 24 at the end of March, Bhaskar said. Management expects to add another five or six people by the end of December and to have about 36 to 38 sales employees by the end of March. Newly hired sales personnel have a first-year quota of $2 million, while the company expects between $700,000 and $1 million in first-year contribution, depending in part on each salesperson’s existing relationships, Bhaskar said.

Bhaskar said his primary priorities for the remainder of the year are sales growth, sales execution, financial discipline and preserving margins where possible.

Product initiatives and competitive positioning

Management said FatPipe is pursuing customer conversions from competing products, including VeloCloud. Bhaskar said the company has closed enough VeloCloud replacement deals to demonstrate momentum and is working on additional opportunities. He said conversions can occur as customers’ existing contracts come up for renewal.

During the call, management said customers have cited FatPipe’s first-party support and responsiveness as advantages, particularly as some competing products have changed ownership. FatPipe also said its products use proprietary software loaded onto commodity hardware, which it said has helped the company avoid some supply-chain price increases and lead-time pressures experienced by competitors.

FatPipe said it has begun deploying and marketing its SATBOOST offering, which is intended to improve wireless transmission performance. Management said the product has been deployed with state health agencies, supermarkets and other geographically distributed customers, and that it has drawn interest from public- and private-sector organizations. Bhaskar said variants of the technology could also be used to improve 5G connectivity.

The company also said its Total Security 360 cybersecurity solution has completed testing and is being provided to customers. Bhaskar said adoption may take time because customers often change cybersecurity products as existing contracts expire. He described the product as a single offering intended to address potential security gaps created when customers use products from multiple vendors.

On artificial intelligence, Bhaskar said FatPipe uses machine learning in its networking products to support routing and address latency and jitter. The company is also exploring AI applications for network congestion management and has developed technology for identifying and blocking graphical sexual content, which management said could be applicable in schools.

About Fatpipe Inc/UT (NASDAQ:FATN)

FatPipe is a pioneer in enterprise-class, application-aware, secure software-defined wide area network (“SD-WAN”) solutions for organizations, including enterprises, communication service providers, security service providers, government organizations, and middle-market companies. Organizations, large and small, have become increasingly dependent on their information technology (“IT”) network infrastructure for data access and communications, and the critical importance of network reliability, extensibility, and durability has continued to grow as the volume of traffic across those networks expands.

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