Fatpipe Inc/UT Q2 Earnings Call Highlights

Key Points

• FatPipe returned to profitability in Q2: Revenue rose 22% to about $4.83 million, net income reached $1.2 million, and adjusted EBITDA increased about 60% to $1.16 million. Gross margin was 90%, and EPS was $0.09.
• Recurring billings grew 55% year over year to $2.9 million, driven largely by new business, larger deployments and renewals. The company also began receiving orders for its new Constellation network-monitoring product.
• FatPipe plans to expand its sales team from 30 to 36 by fiscal year-end and about 48 the following year. Management is working toward positive cash flow and targets 18% growth and 18% EBITDA, without providing December-quarter revenue guidance.

Fatpipe Inc/UT NASDAQ: FATN reported a 22% increase in second-quarter revenue and a return to profitability, as recurring billings rose and the networking company began selling a new network-monitoring product.

Revenue was approximately $4.83 million for the quarter ended September 30, 2026, Chief Financial Officer Kanishka Ragula said on the earnings call. Net income was $1.2 million, an improvement of about $1.25 million from the year-earlier quarter. Adjusted EBITDA rose about 60% to $1.16 million, while gross margin was 90%.

Earnings per share were $0.09, compared with flat earnings per share in the same quarter a year earlier. For the six months ended September 30, revenue increased 25% to $9.9 million, net income grew 250% to $2.43 million and adjusted EBITDA rose 34% to $2.45 million. First-half gross margin was 91%, and earnings per share increased 240% to $0.17.

Recurring billings and large contracts

Recurring billings increased 55% year over year in the second quarter, Ragula said. She described the measure as billings collected during the quarter that recur monthly or annually.

During the question-and-answer session, Northland analyst Nehal Chokshi said recurring billings had risen from $2.4 million in the prior quarter to $2.9 million. Chief Executive Officer Ragula Bhaskar attributed the increase to new business, larger deployments and renewals, adding that much of the increase came from new business.

Asked about a $7 million education contract, Ragula said it was contributing about $100,000 a month, or approximately $300,000 per quarter. Bhaskar said the contract’s full run rate would be about $118,000 a month, or roughly $350,000 a quarter. He said the company was executing on the contract and had won additional deals in other parts of the country.

Ragula said overall remaining performance obligations were relatively flat quarter over quarter. She said new bookings from recurring customers were offset in part by the shift of legacy customers from one-time or term-license billing toward recurring billing.

New product and sales hiring

Bhaskar said FatPipe had begun receiving orders for Constellation, a product designed to monitor wide-area and local-area networks. The product can be purchased independently or as part of the company’s existing offering and can be deployed on customers’ premises or in the cloud, he said. Pricing is based on the number of monitored devices.

Bhaskar told Maxim Group analyst Derek Greenberg that Constellation was seeing faster reception than the company’s cybersecurity offering. He said some customers have multiyear contracts with existing cybersecurity vendors, while Constellation generally does not require replacing another system or faces contracts that renew annually.

The company had 30 salespeople and planned to reach 36 by the end of its fiscal year in March, Bhaskar said. Its goal for the following year is about 48 salespeople. New sales hires typically become profitable within three to six months, he said, although those working on larger deals may take six to nine months.

Cash flow and financing

Bhaskar said FatPipe spent much of its cash in the prior quarter on inventory needed to fulfill orders and broke even in October. He said the company expects to continue working toward positive cash flow while expanding sales and buying hardware for deployments.

The CEO also said FatPipe acquired a small software technology company in October using internal resources. He did not name the business or disclose a purchase price. The acquisition adds to FatPipe Technologies, which provides software and technology services, he said.

FatPipe refinanced an existing Small Business Administration loan, reducing its interest rate by about 1.885%, Bhaskar said. The company also obtained a $1.5 million credit line from a local bank.

Looking ahead, Bhaskar said the company’s goal is to achieve an 18% growth rate and 18% EBITDA. He did not provide specific revenue guidance for the December quarter.

About Fatpipe Inc/UT (NASDAQ:FATN)

FatPipe Inc is a Utah-based networking technology company that develops software-defined wide area networking (SD-WAN) and WAN optimization solutions. Its products are designed to help organizations improve network performance, reliability, security and connectivity across offices, data centers, cloud environments and remote locations.

The company's offerings use multiple network connections to provide traffic management, failover and load balancing. FatPipe's portfolio has included SD-WAN, WAN virtualization, VPN, secure connectivity and network optimization solutions intended for enterprises, service providers, government organizations and other institutions.

FatPipe serves customers through business and channel relationships in the United States and international markets.

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