CSP (US:CSPI)2024-08-13 16:53Financial 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]