Intelligent Protection Management Corp. Q2 FY2026 earnings call

• Overall Business Trajectory

• IPM is evolving into a higher-value enterprise infrastructure-focused company centered on recurring managed services, enterprise cybersecurity, and cloud infrastructure, positioned at the intersection of three key secular industry trends: mission-critical cybersecurity, enterprise cloud migration, and AI-driven transformation of enterprise computing.
• Q2 2026 delivered solid core execution, with healthy customer demand, robust new customer additions, growing pipeline, and an expanding recurring revenue base. Results were impacted by temporary, isolated issues that do not reflect underlying business fundamentals.
• Deferred revenue increased to $4.5 million as of June 30, 2026, up from $3.9 million at the end of 2025, representing future revenue for booked but unfulfilled customer orders.

• Customer Growth & Vertical Traction

• Growth is driven by new customer additions and expansion of services to existing clients, with strong traction leveraging referrals and case studies to acquire new accounts in highly regulated industries. The company saw specific success in legal and finance verticals in Q2, with a strong growing pipeline in healthcare, energy, private equity, manufacturing, and retail.
• Procurement of AI infrastructure often acts as an entry point for long-term managed service relationships, converting one-time project revenue into future recurring revenue streams.

• Operational & Financial Strength

• IPM holds a strong balance sheet with $7.5 million in cash and cash equivalents and no long-term debt, providing financial flexibility that acts as a competitive advantage in the current market.
• The Phoenix Tier 3 data center agreement was extended through 2032 at a discounted rate for significant capacity, with steady growth in private cloud, AI private cloud, and managed backup segments. The company leverages hyper-converged assets to maximize power and space utilization for future client onboarding.

• Strategic Direction & Capital Allocation

• IPM's core strategic goal is to act as a strategic technology partner managing large portions of customers' IT environments, to build durable enterprise value through recurring revenue, high retention, operating leverage, and increased lifetime customer value.
• Disciplined capital allocation prioritizes: 1) organic investment to expand recurring revenue and customer lifetime value; 2) strategic acquisitions to strengthen the technology platform, expand geographic reach, and add complementary capabilities; 3) maintaining a conservative balance sheet to preserve flexibility.
• IPM is well-positioned as a consolidator in the fragmented managed services, cybersecurity, and cloud infrastructure markets, targeting smaller businesses with strong customer bases that lack scale to compete independently, with a focus on improving business quality rather than just size.

For Q2 2026 (ending June 30, 2026), total IPM revenue was $6.5 million, an increase of 13% year-over-year (YoY). Breakdown by product segment:

1. Managed IT Technology Revenue: $3.8 million (58.5% of total Q2 2026 revenue), growing more than 8% YoY. This segment includes managed IT security, backup/disaster recovery, and web hosting services.
2. Procurement Revenue: $2 million (30.8% of total Q2 2026 revenue), increasing 64% YoY, driven by customer demand for AI-related infrastructure equipment.
3. Professional Services Revenue: $363,000 (5.6% of total Q2 2026 revenue), decreasing 47.3% YoY.
4. Subscription Revenue: $249,000 (3.8% of total Q2 2026 revenue), decreasing 10.5% YoY. For the first half of 2026, total revenue was $12.8 million, a 14% YoY increase. Managed IT revenue grew 9% YoY and procurement revenue grew 70% YoY, offset by declines in professional services and subscription revenue.

• Management maintained its full-year guidance target of achieving positive adjusted EBITDA by the fourth quarter of 2026.

• All unrecognized revenue from delayed Q2 2026 bookings (held as deferred revenue) is expected to be recognized in future quarters as orders are fulfilled and delivered.
• Management expects the temporary timing-driven decline in Q2 2026 professional services revenue to ease after the summer months as customer engagement delays are resolved.

• Global supply chain constraints for critical IT components (memory, CPUs, GPUs) caused extended lead times, delayed revenue recognition for Q2 2026 bookings, and pushed revenue for unfulfilled orders into future periods.

• A single large customer order fulfilled across two reporting periods incurred higher than expected component and freight costs, resulting in a combined loss on the order that compressed margins and widened the Q2 2026 net loss.
• Revenue from large related-party customer NewTekOne is declining as the customer pursues IT spending reduction initiatives, creating concentrated customer revenue risk.
• Professional services revenue is vulnerable to quarterly volatility from customer timing delays and internal resource constraints.
• Procurement revenue is inherently unpredictable and carries lower gross margins than the company's core recurring service segments.

Q: What types of customers are driving current growth, and what traction has IPM gained in highly regulated industries like legal and healthcare? / A: IPM leverages referrals and case studies from its existing regulated-industry customer base to acquire new accounts in target verticals. The company achieved specific growth success in legal and finance verticals during Q2, and holds a strong growing pipeline across healthcare, energy, private equity, manufacturing, and retail.

Q: Have Q2 supply chain constraints eased in Q3, and when does IPM expect normalization? / A: Constraints only impacted the lower-margin procurement segment, with no supply chain issues for service lines. IPM has already diversified its distributor, vendor, and manufacturer relationships to mitigate future procurement constraints. All booked but delayed revenue is recorded as deferred revenue and will be recognized as orders are fulfilled in coming quarters.

Q: Is the 47.3% Q2 decline in professional services revenue a structural issue or just timing-related? / A: The decline is purely timing-driven. Professional services bookings are actually strong and growing, but customer scheduling delays and internal resource constraints impacted revenue recognition this quarter. The company expects these timing issues to ease after the summer months.

Q: How much capacity does the extended Phoenix data center agreement provide, and what utilization does IPM expect? / A: The extended agreement locked in a heavily discounted rate for significant long-term capacity through 2032. IPM is seeing steady customer growth across private cloud, dedicated AI private cloud, and managed backup/disaster recovery segments, and uses hyper-converged infrastructure to maximize power and space utilization, leaving ample excess capacity for future new client onboarding.