da-kuk CSP Inc. (NASDAQ:CSPI) provides IT, cloud, security, and computer system products and services. I've been bullish on this stock since the introduction of Aria Zero Trust Protect ("AZT") in July 2023. AZT is designed to prevent a malicious attack before it can enter a computer. It requires no downtime to install, and the software is operating system-agnostic. AZT landed a large customer just a few months after it was launched. In a January Seeking Alpha article, I wrote that the product is a game-chan ...

Table of Contents United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended June 30, 2024 or ◻ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 0-10843 CSP Inc. (Exact name of Registrant as specified in its charter) | --- | --- | |------------------------------------- ...

CSP Inc.'s (CSPI) third-quarter fiscal 2024 results reflect a challenging transition from last year's backlogdriven revenue boost to more normalized operations. The company faced a decline in product sales and overall revenues, leading to a slight net loss. However, growth in its Services segment and strong cash reserves underscore strategic efforts to enhance profitability and position the company for success. Q2 Results CSPI reported a third-quarter fiscal 2024 loss per share of 2 cents, moving down from ...

Financial Data and Key Metrics Changes - For Q3 2024, the company reported revenues of $13.1 million, a decrease from $17.7 million in Q3 2023, attributed to a normalization of business following previous supply chain issues [19] - Gross profit for the quarter was $4.6 million, representing 35% of sales, compared to $5.9 million or 33.5% of sales in the prior year, indicating a 150 basis point improvement in gross margin percentage despite lower revenue [19] - The company reported a net loss of $185,000 or $0.02 per share, compared to a net income of $2.5 million or $0.26 per share in Q3 2023, largely due to a prior year tax benefit of $1.7 million [20] - Operating cash flow for the quarter was $2.4 million, with cash and cash equivalents at $28.9 million, up from $13.9 million a year ago [21] Business Line Data and Key Metrics Changes - Service revenue increased by 10% in Q3 2024, contributing to a 150 basis point improvement in gross margin [6] - The Technology Solutions (TS) business continues to generate the majority of revenue, driven by increased implementation, installation, and training capabilities [15] - The UCaaS offering is gaining traction, with several new customers signed in Q4, expected to double the annual revenue run rate compared to the previous fiscal year [17] Market Data and Key Metrics Changes - The company is focusing on small to mid-tier enterprises due to shorter sales cycles, while also pursuing larger opportunities that can represent multimillion-dollar contracts [8] - The AZT PROTECT product line is gaining recognition, having won multiple industry awards, which is expected to enhance brand awareness and market presence [6] Company Strategy and Development Direction - The company aims to drive higher-margin business and build infrastructure for the AZT PROTECT product line, which is seen as transformative for the high-performance product business [5] - A multi-pronged sales strategy is being employed to target various enterprise sizes, with a focus on building partnerships and expanding brand presence in the operational technology (OT) market [10][12] - The company is committed to developing high-margin products and services, which has led to improved gross margins and cash balances [18] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about returning to a normalized revenue run rate and highlighted the importance of the AZT PROTECT product line in reshaping the company's future [5] - The recent CrowdStrike incident is viewed as an opportunity to promote AZT PROTECT, emphasizing the need for robust cybersecurity measures in both IT and OT environments [14] - Management is focused on building a strong sales team and partnerships to support growth in the AZT PROTECT business [7][10] Other Important Information - The company repurchased 4,800 shares for a total cost of $70,000 during the quarter [21] - A quarterly dividend of $0.03 per share was approved, payable on September 10, 2024 [21] Q&A Session Summary Question: Integration of AZT PROTECT into the Forescout platform - Management indicated that integration planning is underway and could take 4 to 6 months [22][24] Question: Urgency from Rockwell's customers due to CrowdStrike incident - Management acknowledged the urgency and is working with Rockwell's partners to address customer concerns [28] Question: Differences in the IT version of AZT PROTECT - The IT version is designed to handle constant updates and requires individual approval for updates, contrasting with the more stable OT environment [32]

Revenue Performance - Service revenue grew by 10% to $5.3 million compared to $4.8 million in the same quarter last year, contributing to a 150 basis point improvement in gross margin percentage [2]. - Total revenue for the fiscal third quarter was $13.1 million, down from $17.7 million in the same quarter last year, as the company returned to a normalized run rate [4]. - Total sales for the three months ended June 30, 2024, were $13,105,000, a decrease of 25.0% compared to $17,708,000 for the same period in 2023 [12]. Profitability and Loss - The company reported a net loss of $0.2 million, or $0.02 per diluted common share, compared to net income of $2.5 million, or $0.26 per diluted common share in the prior year [5]. - Operating loss for the three months ended June 30, 2024, was $(720,000), compared to operating income of $575,000 for the same period in 2023 [12]. - Net loss attributable to common shareholders for the three months ended June 30, 2024, was $(185,000), compared to net income of $2,355,000 for the same period in 2023 [12]. - Net loss per common share - basic for the three months ended June 30, 2024, was $(0.02), compared to earnings of $0.27 for the same period in 2023 [12]. Cash and Financial Position - Cash and cash equivalents reached $28.9 million, providing resources for the AZT PROTECT product offering growth strategy [5]. - The company has a robust balance sheet with a near-record cash level, allowing for the implementation of near and long-term business initiatives [2]. Cost and Expenses - Gross profit for the nine months ended June 30, 2024, was $15,155,000, down 9.5% from $16,734,000 in the same period of 2023 [12]. - Total cost of sales for the nine months ended June 30, 2024, was $27,031,000, a decrease of 17.0% from $32,587,000 in the same period of 2023 [12]. - Engineering and development expenses for the three months ended June 30, 2024, were $737,000, slightly down from $741,000 in the same period of 2023 [12]. - Selling, general and administrative expenses for the nine months ended June 30, 2024, were $12,821,000, an increase of 5.8% from $12,123,000 in the same period of 2023 [12]. Business Development and Strategy - The company expects to enter the new fiscal year with an annual revenue run rate that is more than double what it was entering fiscal 2024 due to strong UCaaS business development [10]. - The AZT PROTECT offering continues to gain traction with new customer additions and increased reseller partnerships, enhancing its market penetration [2]. - The Technology Solutions business added new MSP customers and expanded relationships with existing customers, contributing to overall business growth [3]. Other Income and Tax - Other income for the three months ended June 30, 2024, was $460,000, compared to $247,000 for the same period in 2023 [12]. - Income tax benefit for the three months ended June 30, 2024, was $(75,000), compared to an expense of $(1,692,000) for the same period in 2023 [12]. Share Repurchase - The company repurchased 4,800 shares for a total cost of $70,000 during the fiscal third quarter [5].

Core Viewpoint - Zacks Investment Research has initiated coverage of CSP Inc. (CSPI) with an "Outperform" recommendation, highlighting the company's strong position to benefit from global IT spending trends, particularly in the generative AI market [1] Financial Performance - CSPI reported a net income of $1.6 million for the second quarter of fiscal 2024, a significant increase from $0.3 million in the previous year, driven by efficient cost management and a 23% growth in high-margin services [2] - The total revenues for the six months ending March 31, 2024, experienced an 8% decrease compared to the previous year, influenced by downturns in both Technology Solutions and High-Performance Products segments [5] Strategic Initiatives - The company's success is attributed to its focus on high-margin offerings, such as the AZT PROTECT software, which addresses emerging cybersecurity threats and is positioned well due to recent regulatory changes [3] - CSPI has a solid base of six patents for its AZT PROTECT software, enhancing its competitive edge in the tech landscape [4] - The company has secured a significant contract with a global pharmaceutical firm, indicating strong market demand for its products [4] Market Positioning - CSPI has a robust cash position of $27.1 million and minimal debt, allowing it to pursue growth through innovation and market expansion [3] - The company's shares have increased by 18.7% over the past six months and 160.6% over the last 12 months, with current trading at an EV/Sales multiple lower than industry benchmarks, presenting an attractive investment opportunity [6] Competitive Landscape - CSPI operates in a highly competitive sector, facing challenges from both niche firms and established giants like Cisco and IBM, which could impact market share and margins [5]

CSP Inc. (NASDAQ:CSPI) Q2 2024 Earnings Conference Call May 8, 2024 10:00 AM ET Company Participants Michael Polyviou - Investor Relations Victor Dellovo - Chief Executive Officer Gary Levine - Chief Financial Officer Conference Call Participants Joseph Nerges - Segren Investments Sergio Heiber - Heiber Research Operator Good morning, everyone, and welcome to CSPi's Second Quarter Fiscal Year 2024 Conference Call. At this time all participants are in a listen-only mode. And the floor will be opened for ques ...

Table of Contents United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q ⌧ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 2024 or ◻ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to . Commission File Number 0-10843 CSP Inc. (Exact name of Registrant as specified in its charter) Massachusetts 04-2441294 (State or other jurisdicti ...

[CSP Inc. Fiscal Second Quarter 2024 Operating Results](index=1&type=section&id=CSP%20Inc.%20Fiscal%20Second%20Quarter%202024%20Operating%20Results) CSP Inc. reported strong Q2 FY2024 results, driven by services revenue growth and strategic focus on its HPP division [Overview and Business Highlights](index=1&type=section&id=Overview%20and%20Business%20Highlights) CSP Inc. achieved strong Q2 2024 results with significant services revenue growth and margin expansion, driven by its AZT offering and market expansion efforts - The company's strategy focuses on leveraging the consistent performance of its Technology Solutions (TS) business to fund sales and marketing investments for the High Performance Products (HPP) business, particularly the AZT offering[3](index=3&type=chunk) - A multi-pronged market awareness strategy for the AZT offering is showing success, evidenced by a new major contract with a global pharmaceutical company and an expanded sales team to address mid-market opportunities[3](index=3&type=chunk) - Recent achievements include publishing a case study in Rockwell Automation's 'The Journal', being named to the CRN® MSP 500 list, and winning multiple cybersecurity product awards for AZT PROTECT[5](index=5&type=chunk) - The Board of Directors declared a quarterly dividend of **$0.03 per share**, payable on June 12, 2024, to shareholders of record on May 24, 2024[1](index=1&type=chunk) [Financial Performance](index=2&type=section&id=Financial%20Performance) CSPi's Q2 FY2024 saw slight revenue growth, driven by a 23% increase in services revenue, improving gross margins and net income [Fiscal 2024 Second Quarter Results](index=2&type=section&id=Fiscal%202024%20Second%20Quarter%20Results) Q2 FY2024 revenue grew slightly to **$13.7 million**, with services revenue up **23%**, expanding gross margin to **47%** and increasing net income to **$1.6 million** Q2 FY 2024 Financial Metrics | Financial Metric | Q2 FY 2024 | Q2 FY 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $13.7M | $13.3M | +3.0% | | Services Revenue | $5.2M | $4.3M | +23.0% | | Gross Profit | $6.5M | $5.0M | +30.0% | | Gross Margin % | 47% | 38% | +9 p.p. | | Net Income | $1.6M | $0.3M | +433.3% | | Diluted EPS | $0.16 | $0.03 | +433.3% | - The significant improvement in gross margin percentage was attributed to higher-margin services revenue and a high-margin AZT sale during the quarter[7](index=7&type=chunk) [Fiscal Year 2024 Six-Month Results](index=3&type=section&id=Fiscal%20Year%202024%20Six%20Month%20Results) For the six months ended March 31, 2024, revenue decreased to **$29.1 million**, yet gross margin improved to **36%**, and net income increased to **$1.5 million** Six Months FY 2024 Financial Metrics | Financial Metric | Six Months FY 2024 | Six Months FY 2023 | Change | | :--- | :--- | :--- | :--- | | Total Revenue | $29.1M | $31.6M | -7.9% | | Gross Profit | $10.6M | $10.8M | -1.9% | | Gross Margin % | 36% | 34% | +2 p.p. | | Net Income | $1.5M | $1.3M | +15.4% | | Diluted EPS | $0.16 | $0.14 | +14.3% | [Financial Statements](index=6&type=section&id=Financial%20Statements) The unaudited consolidated financial statements detail CSPi's financial position as of March 31, 2024, and operating results for the periods then ended [Condensed Consolidated Balance Sheets](index=6&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) As of March 31, 2024, CSPi reported **$27.1 million** in cash, **$64.2 million** in total assets, **$15.9 million** in total liabilities, and **$48.2 million** in shareholders' equity Condensed Balance Sheet Data (in thousands) | Balance Sheet Item (in thousands) | March 31, 2024 | September 30, 2023 | | :--- | :--- | :--- | | Cash and cash equivalents | $27,119 | $25,217 | | Total current assets | $50,862 | $50,364 | | Total assets | $64,200 | $65,904 | | Total current liabilities | $12,535 | $15,659 | | Total liabilities | $15,953 | $19,756 | | Shareholders' equity | $48,247 | $46,148 | [Condensed Consolidated Statements of Operations](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) The statement of operations details Q2 FY2024 total sales of **$13.7 million** and net income of **$1.6 million**, with six-month sales at **$29.1 million** and net income at **$1.5 million** Q2 FY 2024 Condensed Consolidated Statements of Operations (in thousands) | (Amounts in thousands) | Three months ended Mar 31, 2024 | Three months ended Mar 31, 2023 | | :--- | :--- | :--- | | Total sales | $13,706 | $13,269 | | Gross profit | $6,478 | $4,990 | | Operating income | $1,234 | $237 | | Net income | $1,588 | $321 | Six Months FY 2024 Condensed Consolidated Statements of Operations (in thousands) | (Amounts in thousands) | Six months ended Mar 31, 2024 | Six months ended Mar 31, 2023 | | :--- | :--- | :--- | | Total sales | $29,081 | $31,613 | | Gross profit | $10,573 | $10,807 | | Operating income | $891 | $1,601 | | Net income | $1,515 | $1,282 | [Corporate Information and Safe Harbor](index=3&type=section&id=Corporate%20Information%20and%20Safe%20Harbor) CSPi will host a conference call to discuss results, operates through two divisions, and includes a Safe Harbor statement for forward-looking information - The company will host a conference call at 10:00 a.m. (ET) on May 8, 2024, to review financial results and provide a business update[10](index=10&type=chunk) - CSPi operates two distinct divisions: The High Performance Product division, featuring ARIA Cybersecurity solutions like AZT, and the Technology Solutions division, which offers managed IT services and professional services across key technology areas[11](index=11&type=chunk) - The report contains forward-looking statements, such as building a strong pipeline and executing a growth strategy, which are subject to risks and uncertainties as detailed in the company's SEC filings[12](index=12&type=chunk)[13](index=13&type=chunk)[14](index=14&type=chunk)

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