CSP (US:CSPI)2022-08-10 19:02Financial Data and Key Metrics Changes - The company reported net sales of $13.3 million for the fiscal third quarter, slightly below the previous year's level but representing an 11% sequential increase over the second quarter of fiscal 2022 [9] - Gross profit was $5 million, or 37.3% of sales, compared to $4.2 million, or 30.8% of sales in the same quarter last year, indicating an improvement of over six percentage points [28] - Net income for the quarter was $684,000, or $0.15 per diluted share, compared to a net loss of $423,000, or $0.10 loss per share for the same quarter of the previous year [33] Business Line Data and Key Metrics Changes - The Technology Solutions (TS) business generated revenue of $12.6 million, remaining flat compared to the previous year but achieving a 16% increase over the second quarter of fiscal 2022 [16] - Service revenue grew by 37% compared to the same quarter last year and was up 30% from the second quarter of fiscal 2022, driven by growth in managed services [29] - The High-Performance Products (HPP) division reported revenue of $0.7 million, which was below expectations, but maintained a multimillion-dollar backlog [20] Market Data and Key Metrics Changes - The overall backlog increased to $60 million, reflecting rising demand for products and services, with a service backlog of $20 million as of June 30, 2022 [9][10] - The company noted that the global supply chain pressures remain high, impacting delivery timelines from suppliers [12] Company Strategy and Development Direction - The company is focusing on migrating revenue to higher-margin products and services, which has resulted in record gross margins [10][26] - The strategy includes aggressively seeking alternative sources for components to convert backlog into revenue [13] - The company is exploring partnerships and channel programs to enhance its offerings, particularly in cybersecurity solutions [24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged ongoing supply chain challenges and inflationary pressures affecting costs and recruitment [15] - The backlog is viewed as a substantial undervalued asset, and management is committed to converting it into revenue [59] - The company anticipates that the backlog will continue to grow despite challenges in converting it to revenue [26] Other Important Information - The Board declared a quarterly dividend of $0.03 per share, payable on September 9, 2022, reflecting the company's commitment to returning cash to shareholders [35] - The company ended the fiscal third quarter with cash and cash equivalents of $21.4 million, an increase of $1.4 million from the previous year [34] Q&A Session Summary Question: Clarification on backlog figures - The reported backlog is $23.8 million, confirming the figure mentioned in the press release [37] Question: Share repurchase details - The company repurchased 7,000 shares, not $7,000 worth [38] Question: Delivery timeline for High-Performance Products - Delivery for the $1.8 million order for the High-Performance Products group is expected in the first quarter of the next fiscal year [39][40] Question: Strengthening of managed services - The company is seeing varied demand across managed services, including managed firewalls and desktop support [41] Question: Supply chain issues affecting UCaaS business - The company can obtain phones easily, but the supply chain issues primarily affect switching and firewalls [42] Question: Interest in Zero Trust solutions - The company is in discussions with large customers regarding the Zero Trust solutions introduced in the webinar [43][44] Question: Talent acquisition and mergers - The company has explored various avenues for acquiring talent but has found current pricing and integration challenges [48] Question: Normal backlog without supply chain issues - Under normal circumstances, the backlog would be around $4 million to $5 million [50]