FATN

• Financial Results

  • Year-over-year sales growth of 27% and income growth of 65%
  • EPS increased to 9 cents from 5 cents in the prior year period
  • Gross margins held steady at 92-93%, with only a minor decrease as average deal sizes grew

• Product Recognition and Competitive Position

  • Won a product offering award at Channel Vision, the world's largest channel partner show
  • Outperformed major competitors including Cisco, VMware, and Juniper in independent end-customer rankings, with 97% of customers stating they would recommend FADPipe
  • Runs an active VeloCloud conversion program, successfully winning customers from recently acquired competitors that have reduced OEM support

• Operational and Partnership Growth

  • Increased investments in partner development, marketing, trade shows, and travel this quarter; partner event attendance grew from 40 attendees two years ago to 120 attendees this year, signaling growing brand recognition
  • Added 5 sales headcount since the end of March, reaching 30-31 total sales staff, on track to hit the prior target of 36-38 sales staff by the end of the fiscal year
  • Almost 100% of sales go through channel partners, with no direct sales model; the company recently signed on TD Synapse, the world's largest technology distributor, expanding partner reach

• New Product Development

  • The new TotalSecurity 360 cybersecurity product is fully developed, load tested, and has begun rolling out to customers
  • The SADBoost product already has active deployments for state health agencies, rural distributed customers, and supermarkets, with strong interest across public and private sector; a variant of the product can also accelerate 5G and general wireless connectivity
  • AI/machine learning is integrated into core network routing for lower latency, and is used for AI-powered content filtering for schools; the company is also working on AI-enabled network congestion management

• Management maintained prior guidance for sales headcount, expecting to reach 36-38 total sales staff by the end of the fiscal year, and is on track to hit this target
• Monthly recurring revenue continues to increase quarter-over-quarter with new customer additions and renewals
• Management expects channel partners to deliver growing numbers of deals, with increasing average deal sizes, supporting continued overall growth
• 30-35% of the recently announced $7 million education deal will be booked in the September quarter, with the remainder recognized in subsequent quarters

The company does not break out financial performance by distinct product segments in this call. Aggregate company performance for the quarter: total sales grew ~27% year-over-year, net income grew ~65% year-over-year, earnings per share reached 9 cents (up from 5 cents year-over-year), and gross margins remained stable at 92-93%, down only slightly due to larger average deal sizes.

• Forward-looking statements about future performance, pipeline growth, and new product adoption are subject to inherent uncertainties that could cause actual results to differ materially from expectations, as detailed in the company's SEC filings
• The company notes that competitive products owned by large acquired firms have reduced support, creating opportunity for FADPipe, but also faces competition from well-established large vendors in the networking and cybersecurity space
• There is a lag between order booking and revenue recognition, which can create variability in quarterly revenue results

Q: Lisa Thompson (Zacks) asked what is driving revenue growth this quarter, and if the revenue mix will shift toward partners or keep growing direct sales? / A: Growth is broad-based across markets and partners, with average deal sizes increasing as partner trust grows. FADPipe has no direct sales model—almost all sales go through partners, which will continue to be the core go-to-market strategy as partners deliver growing deal flow and larger deals. The company recently signed TD Synapse, the world's largest technology distributor, expanding its partner ecosystem.

Q: Nahal (Northland Securities) asked what drove the win of the large $7 million education order, and what is the company's current sales headcount status versus fiscal year guidance? / A: The order was won with partner collaboration, meeting all technical requirements, competitive pricing, and strong, reliable first-party support. Competitor products had been acquired and saw reduced OEM support, pushing the customer to switch. Current sales headcount is 30-31, up from 24 at the end of March, and the company remains on track to hit 36-38 sales staff by the end of the fiscal year.

Q: A chat user asked how FADPipe's equipment costs and supply chain compare to competitors, and is this advantage defensible? / A: FADPipe is primarily a software company that uses commodity hardware, loading its proprietary software onto off-the-shelf components. Unlike competitors that use specialized semiconductors that face allocation delays and price increases from demand for GPUs and data center chips, FADPipe has not experienced price increases or extended lead times, allowing it to hold customer prices steady while competitors raise prices.

Q: Vikrant asked what are management's top three priorities for the rest of the year, and how the company balances growth and operating discipline? / A: Management's top priorities are all sales-focused, expanding sales growth while maintaining financial discipline and margin stability. The company is actively investing in growth this quarter including inventory locking for large orders, marketing and trade shows, and sales headcount expansion, accepting a small, manageable margin reduction to drive long-term growth.