Core Viewpoint - CSPI reported strong revenue growth in its fiscal third quarter, driven by the Technology Solutions segment and the AZT PROTECT cybersecurity solution, despite facing margin pressures and a modest net loss [12]. Revenue & Earnings Performances - CSPI generated revenues of $15.4 million for the quarter ended June 30, 2025, an 18% increase from $13.1 million in the same period last year [2]. - Product sales rose 29% to $10.2 million, while service revenues increased marginally to $5.3 million [2]. - Gross profit decreased to $4.5 million from $4.6 million, with margins contracting to 29% from 34% due to a higher mix of product revenues and increased component costs [2]. - The company reported a net loss of $0.3 million, or 3 cents per share, compared to a net loss of $0.2 million, or 2 cents per share, a year earlier [2]. Other Key Business Metrics - The Technology Solutions segment achieved a 20% year-over-year revenue increase, driven by strong demand for cloud services and activity in the maritime sector [3]. - The TS division secured a significant Microsoft Azure project for a Florida-based healthcare provider, highlighting CSPI's strength in managed cloud offerings [3]. High-Performance Products (HPP) - The AZT PROTECT cybersecurity solution saw momentum, with new customer deployments in the steel, concrete, and lumber industries, and follow-up contracts in South Africa [4]. - Management noted that reseller partnerships with leading Rockwell Automation distributors are transitioning from early adoption to revenue acceleration, setting the stage for broader penetration in fiscal 2026 [4]. Management Commentary - CEO Victor Dellovo emphasized a land and expand strategy, where initial deployments of AZT PROTECT serve as proof points for broader rollouts across enterprise networks [5]. - Customers reported measurable operational benefits, such as preventing system outages in critical industrial environments, indicating potential for recurring contracts as the installed base grows [5]. Financial Overview - CFO Gary Levine explained that gross margin pressure was due to product mix and higher costs, while operating expenses increased from higher sales and marketing expenditures [6]. - The company ended the quarter with $26.3 million in cash and continued share repurchases, reflecting financial flexibility despite near-term earnings softness [6]. Factors Influencing Performance - Revenue growth was strong, but profitability was limited by a higher weighting of lower-margin product revenues and additional engineering and consulting expenses for AZT PROTECT [7][8]. - Modest service revenue growth tempered the recurring revenue contribution that typically supports margin stability [8]. Future Outlook - Management expressed optimism for the fourth quarter and fiscal 2025, noting momentum in both TS and HPP segments [10]. - There is accelerating interest from resellers and international partners, which could lead to larger contract opportunities [10]. Other Developments - CSPI was added to the Russell 3000 Index, increasing its exposure to institutional investors [11]. - The company authorized a quarterly dividend of $0.03 per share, reflecting a commitment to shareholder returns [11]. - CSPI repurchased over 19,000 shares for $0.3 million, with additional shares available under the 2021 repurchase program [11].

Core Insights - CSP Inc. (CSPI) experienced a 6% decline in shares following the earnings report for Q2 fiscal 2025, contrasting with a 1.4% gain in the S&P 500 index during the same period [1] - Revenue for the quarter was reported at $13.1 million, a decrease of 4.1% from $13.7 million year-over-year, primarily due to a 74% drop in the High Performance Products (HPP) segment [2] - The company reported a net loss of $108,000, or 1 cent per diluted share, compared to a net income of $1.6 million, or 16 cents per diluted share, in the same quarter last year [3] Revenue and Profitability - Gross profit fell to $4.2 million from $6.5 million, with gross margin narrowing to 32% from 47% [4] - The HPP segment's gross margin decreased to 57% from 86%, while the Technology Solutions (TS) segment's gross margin declined to 31% from 39% [4] - Operating loss was reported at $994,000, compared to operating income of $1.2 million in the same quarter last year [5] Balance Sheet and Capital Allocation - As of March 31, 2025, CSP held $29.5 million in cash and cash equivalents, repurchased approximately $384,000 worth of common stock, and declared a quarterly dividend of 3 cents per share [6] Management Commentary - CEO Victor Dellovo noted that revenue performance was in line with internal expectations, highlighting a modest increase in product sales and a dip in service revenue due to the absence of a repeat multi-million-dollar contract [7] - CFO Gary Levine attributed gross margin compression to higher component costs and the lack of a high-margin sale from the previous year [8] Factors Influencing Performance - The significant revenue drop in the HPP segment was due to the absence of a large ARIA AZT PROTECT order that had boosted last year's results [9] - Foreign exchange losses of $132,000 and a $64,000 decrease in interest income also contributed to the net loss [10] Future Outlook - Management expressed confidence in the AZT PROTECT pipeline and ongoing investments in marketing and reseller partnerships, with an expanding backlog of cloud-based projects [11] - A new reseller partnership with Rexel USA and a significant agreement with Oryx Industries in South Africa were announced, potentially leading to growth in cybersecurity protection for cell towers [12] - Overall, CSP faced challenges in Q2 but is positioned for potential growth in the latter half of fiscal 2025, largely dependent on the success of its AZT PROTECT offerings [13]