Core Insights - CSP Inc. (CSPI) has improved its operating profile as it enters fiscal 2026, driven by a growing service mix in its Technology Solutions (TS) segment and increased adoption of its AZT PROTECT cybersecurity platform in the High-Performance Products (HPP) segment [1] Financial Performance - CSPI reported revenues of $14.5 million for Q4 fiscal 2025, an 11% increase from $13 million in the same quarter last year [2] - The gross margin increased to 37%, up more than 800 basis points year-over-year, primarily due to accelerated service growth [2] - Service revenues surged by 63% or $2.5 million, improving gross profit and narrowing operating losses despite a decline in product revenues [3] Service Segment Growth - Services accounted for 44% of total revenues in Q4 fiscal 2025, up from approximately 30% in the prior-year quarter, and for the full year, services rose to 36% from 33% [4] - The managed cloud and managed service provider offerings expanded at a healthy double-digit rate in fiscal 2025, with plans to allocate more resources and add sales representatives for further expansion in 2026 [5] Maritime Industry Focus - CSPI's managed service strategy has been particularly effective in the maritime vertical, with expectations for service contracts from expanded installations to contribute significantly in fiscal 2026 [6] - The company entered fiscal 2026 with a backlog related to cruise ship installations and upgrades, enhancing revenue visibility [6] Customer Adoption and Expansion Strategy - The HPP segment is positioning AZT PROTECT as a long-cycle growth engine, with a growing pipeline of deployment opportunities and a channel approach through "gold star resellers" [7] - The company has successfully executed a strategy of deploying at one operational site and expanding to additional locations within the same enterprise [8] - Customers span multiple industries, including steel, energy, manufacturing, and telecommunications, with potential for significant multi-site deployments [9] Lead Generation and Channel Validation - Participation in Rockwell events has become a major commercial catalyst for AZT PROTECT, with a 50% year-over-year increase in leads reported during the 2025 Rockwell Fair [10] - The quality of leads has improved significantly due to greater distributor involvement, which is crucial for scaling AZT PROTECT adoption [11] Product Development in IIoT - CSPI has expanded AZT PROTECT into embedded industrial IoT (IIoT) environments, addressing challenges in protecting industrial IoT devices [12] - Enhancements to the software allow integration into existing systems of industrial IoT vendors, with a growing pipeline into the unserved industrial edge compute market [13] Balance Sheet Development - The company entered a buy-in contract in October 2024 as part of a planned termination of its U.K. defined benefit pension plan, paying £8.5 million, with expectations for this to transition into a buy-out contract in fiscal 2026 [14]

Core Insights - CSP Inc. (CSPI) shares have decreased by 15.1% since the fourth quarter results for fiscal 2025, contrasting with a 0.2% decline in the S&P 500 index, but have rebounded by 16.2% over the past month compared to a 2.7% increase in the S&P 500 [1] Financial Performance - For the quarter ending September 30, 2025, CSP reported revenues of $14.5 million, an 11% increase from $13 million in the same quarter last year, primarily driven by a surge in service revenues [2] - Gross profit rose to $5.3 million from $3.7 million a year earlier, resulting in a gross margin increase of 800 basis points to 37% from 28% [2] - The company posted a net loss of $191,000, or 2 cents per diluted share, an improvement from a net loss of $1.7 million, or 18 cents per diluted share, in the prior-year quarter [2] Annual Performance - For fiscal 2025, revenues increased by 6% to $58.7 million, while the net loss narrowed to $91,000, or 1 cent per share, from $326,000, or 4 cents per share, in fiscal 2024 [3] Revenue Composition - Service revenues surged by 63% year over year in the fiscal fourth quarter, accounting for 44% of total revenues compared to about 30% in the previous year [4] - For fiscal 2025, services represented 36% of total revenues versus 33% a year earlier, indicating a shift towards higher-margin offerings [4] Operating Metrics - The operating loss for the quarter narrowed to $0.5 million from $2 million a year earlier, reflecting margin expansion and stable operating expenses [5] - CSP ended fiscal 2025 with $27.4 million in cash and cash equivalents, down from $30.6 million a year earlier, while financing receivables increased [5] Management Insights - Management characterized the quarter as a strong finish to the fiscal year, highlighting the Technology Solutions segment's role in driving growth [6] - There is an emphasis on high customer retention and the contribution of managed services and cloud offerings to service revenue growth [6] - Leadership discussed expanding the sales organization to capture a larger share of the services market, citing opportunities for continued double-digit growth [7] Strategic Focus - Management pointed to the rapid growth in service revenues as a significant factor behind the quarter's results, which has a higher gross margin than product sales [8] - Continued investment in building a sales pipeline and customer adoption is expected to support long-term growth, despite weighing on near-term profitability [9] Future Outlook - Management expressed optimism about delivering additional growth and improving profitability in fiscal year 2026, with expectations for continued momentum in services and increased adoption of AZT PROTECT [10][11] - The timing of customer rollouts and revenue recognition may be uneven, leading to variability in quarterly revenue patterns [11] Corporate Developments - In the fiscal fourth quarter, CSP's board declared a quarterly cash dividend of 3 cents per share, payable January 15, 2026, and repurchased approximately 19,500 shares for $234,000 [12] - The company highlighted partnerships with Rockwell Automation distributors and an agreement to integrate AZT PROTECT into Acronis' Cyber Protect solution, reflecting efforts to broaden distribution [12]

Financial Data and Key Metrics Changes - Overall fourth quarter revenue increased by 11% to $14.5 million compared to $13 million in the same quarter last year [14] - Gross margins improved by over 800 basis points to 37% in the fourth quarter, driven by significant service revenue growth [5][14] - For the full fiscal year, revenue grew by 6%, with gross profit at $18.5 million, representing 32% of sales [16] Business Line Data and Key Metrics Changes - Service revenue grew by 63% in the fourth quarter, accounting for approximately 44% of total revenue, up from 30% in the prior year [6][14] - For the full year, service revenue represented 36% of total revenue, compared to 33% a year ago [6] - Product revenue decreased by $1.1 million in the fourth quarter [14] Market Data and Key Metrics Changes - The company expanded its customer base across various industries, including finance, manufacturing, oil and gas, healthcare, aerospace, education, utilities, telecommunications, and maritime [6] - The Managed Cloud and MSP services segment grew at a healthy double-digit rate during fiscal 2025 [7] Company Strategy and Development Direction - The company aims to build on the growth of its service business by allocating more resources and adding sales representatives [7] - There is a focus on expanding the AZT PROTECT cybersecurity offering, particularly in the maritime industry and Industrial IoT devices [10][11] - The company is optimistic about converting its growing pipeline into significant sales in fiscal 2026 [10][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in generating consistent profitability improvements for fiscal 2026, supported by infrastructure investments [13] - The company is excited about the potential for growth in the service segment and the product business as it enters fiscal 2026 [12][13] Other Important Information - The company reported a net loss of $191,000 for the fourth quarter, compared to a net income of $1.7 million in the prior year [15] - Cash and cash equivalents stood at $27.4 million as of September 30, 2025, down about 10% from the previous year [16] Q&A Session Summary Question: Service revenue calculation - Analyst confirmed the service revenue in the fourth quarter was approximately $6.4 million, which was well received by management [21][22] Question: IIoT expansion and potential customers - Management acknowledged the potential for significant deployments in the IIoT market and the need for OEM agreements [27][28] Question: Leads from Rockwell show - Management reported a 50% increase in leads from the Rockwell show compared to the previous year, with improved quality of leads due to established relationships [42][45] Question: Integration with Acronis - Management confirmed that AZT is being integrated into Acronis software, but revenue projections are still uncertain [54][68] Question: UFT relationship and case studies - Management provided updates on the relationship with UFT, indicating progress with case studies and future marketing efforts [56][57] Question: Share repurchase blackout period - Management clarified the blackout period for share repurchases due to earnings reporting schedules [58][60]

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]