INTELLIGENT PROTECTION MANAGEMENT CORP. (IPM)·Q2 2025 Earnings Summary

Executive Summary

• Q2 revenue grew 4% sequentially to $5.72M, driven by managed IT and procurement, while gross margin compressed versus Q1; Adjusted EBITDA improved to -$0.38M and net loss was -$1.05M, with deferred revenue of $3.86M indicating backlog conversion ahead .
• The quarter modestly beat S&P Global consensus: revenue $5.72M vs $5.52M*, EPS -$0.074 vs -$0.09*, and Adjusted EBITDA -$0.46M* estimate vs -$0.38M actual; coverage remains thin (one estimate), but trajectory is positive* .
• Strategic updates included HPE Private Cloud AI accreditation, a collaboration with IT Ally, launch of Aura consumer security offering, and repurchase of 104,600 shares under the $400K buyback authorization .
• Management expects continued sequential top-line growth and targets Adjusted EBITDA positive by early 2026; proposed tariff increases are not expected to be material in FY25, reducing macro risk overhang .

What Went Well and What Went Wrong

What Went Well

• Sequential revenue growth of 4% to $5.72M, with improved Adjusted EBITDA (-$0.38M vs -$0.48M in Q1), reflecting early integration progress and mix shift toward higher-value services .
• Backlog indicators strong: deferred revenue reached $3.86M, supporting visibility into future revenue recognition as projects are installed .
• Strategic momentum: “We were selected by Hewlett Packard Enterprise to be an accredited partner for its HPE Private Cloud AI solution,” and initiated collaborations and new consumer security offerings, broadening the go-to-market footprint .

What Went Wrong

• Net loss widened to -$1.05M versus Q1 net income of $0.81M, as Q1 benefited from a ~$2.06M tax benefit associated with the January Transactions; without that benefit, profitability remains a work-in-progress .
• Gross margin contracted from ~55% in Q1 to ~50% in Q2 as costs of revenue rose faster than sales, highlighting near-term mix and installation timing dynamics .
• Non-GAAP Adjusted EBITDA, while improving sequentially, remains negative, and management emphasized the need for operating expense discipline and marketing ROI to reach breakeven by early 2026 .

Financial Results

Summary vs Prior Periods

Margins and Profitability

Segment/Revenue Stream Breakdown

KPIs and Balance Sheet Highlights

Actuals vs S&P Global Consensus (Q2 2025)

Values marked with * retrieved from S&P Global.

Guidance Changes

No quantitative guidance for revenue, margins, OpEx, OI&E, or tax rate was provided this quarter .

Earnings Call Themes & Trends

Management Commentary

• “We are pleased with the sequential progress made during our first two operational quarters…to position IPM to be poised for growth” .
• “Our clients have dedicated Technology Managers as a single point of contact…This is an important IPM advantage” .
• CFO: “Net loss from continuing operations…totaled $1.1 million…Adjusted EBITDA for the three months ended 06/30/2025 was negative $0.4 million” .
• On IP litigation: “We estimate that we would receive no more than one third of the gross proceeds…subject to post-trial proceedings…We have not recorded any gain contingency” .

Q&A Highlights

• Restricted cash: $1.0M CD collateralizing a revolving line of credit; no borrowings outstanding, hence classification as restricted .
• Growth and margins: Management aims for consecutive revenue growth and cost discipline, targeting Adjusted EBITDA positive by early 2026 .
• Tariffs: Proposed increases expected not to have a material impact in FY25; ongoing monitoring .
• Demand generation: Early traction in referral program and focus on marketing efficiency (SEO, PPC, CRM/email) to cultivate introductions .

Estimates Context

• With one covering analyst, IPM beat consensus on Q2 revenue ($5.72M vs $5.52M*) and EPS (-$0.074 vs -$0.09*), and came in better than expected on Adjusted EBITDA (-$0.38M vs -$0.47M*), which should bias estimate revisions upward given backlog and partnership momentum* .
• Thin coverage suggests volatility in estimates; continued sequential growth, conversion of deferred revenue, and proof points in HPE/IT Ally/Aura channels would likely drive higher confidence and model de-risking* .

Values marked with * retrieved from S&P Global.

Key Takeaways for Investors

• Sequential revenue growth and improved Adjusted EBITDA signal early progress in the post-NTS transition; backlog (deferred revenue) provides visibility into 2H installs and revenue recognition .
• Gross margin compression vs Q1 warrants monitoring; mix of procurement vs services and timing of installations likely drivers—watch margin trajectory as installations convert .
• Strategic catalysts: HPE Private Cloud AI accreditation and IT Ally collaboration expand enterprise reach; Aura adds a consumer on-ramp to the security stack .
• Balance sheet flexibility: $8.3M cash, no long-term debt, and an undrawn revolver (restricted cash collateral) support execution while buybacks signal confidence .
• Litigation optionality remains a long-dated, uncertain upside; management prudently avoids gain recognition pending appeals/outcomes .
• Near-term trading lens: modest beats and partnership news are incremental positives; further evidence of backlog conversion and margin stabilization could be the next stock catalysts .
• Medium-term thesis: achieving Adjusted EBITDA breakeven by early 2026 depends on sustained sequential growth, operating leverage from services mix, and disciplined OpEx; monitor quarterly progress against these milestones .