CSP (US:CSPI)2022-05-11 19:20Financial Data and Key Metrics Changes - The company reported sales of $12 million for the fiscal second quarter, with service revenue growing 21% compared to the same quarter last year [6] - Gross margins increased by 4% year-over-year, reaching 35% for the second fiscal quarter, contributing to a profit of $0.03 per diluted share, compared to a net loss of $0.20 per share in the prior year [6][19] - Cash and cash equivalents stood at $20.3 million as of March 31, 2022, an increase of $1 million from December 31, 2021 [20] Business Line Data and Key Metrics Changes - The Technology Solutions (TS) business generated revenue of $10.9 million, exceeding internal plans, with approximately 75% of the backlog attributed to this segment [11] - The High-Performance Products (HPP) division reported revenue of $1.1 million, with ongoing supply chain issues affecting revenue growth [14] - Managed Service Practice (MSP) continues to show strong performance, with expectations for sustained growth due to increasing demand for IT outsourcing [12] Market Data and Key Metrics Changes - The global managed service market is projected to grow to $300 billion by 2025, indicating a robust demand for managed services [12] - The labor market remains tight, particularly in Florida, with an unemployment rate of 3.2%, impacting recruitment and wage adjustments [8] Company Strategy and Development Direction - The company aims to transform into a cybersecurity, wireless, and managed service provider, focusing on higher-margin products and services [20] - The strategy includes adapting to a post-pandemic environment by enhancing go-to-market strategies and leveraging a strong backlog as a valuable asset [7][16] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the underlying business trends, citing high demand for products and services despite ongoing supply chain challenges [5][6] - The company is committed to prudent expense management while pursuing growth opportunities in a rising sector expected to outpace many other industries [16][20] Other Important Information - The company repurchased nearly 13,000 shares at an average cost of $7.81 per share, indicating a belief that the stock is undervalued [17][22] - Management highlighted the importance of maintaining a strong cash position while seeking returns on investments in the current interest rate environment [27][29] Q&A Session Summary Question: Stock valuation and repurchase strategy - The participant noted the stock is undervalued and inquired about the possibility of block purchases from larger shareholders instead of open market transactions [22] - Management acknowledged the suggestion and stated they would consider it [23] Question: Cash deployment and investment returns - The participant asked about deploying cash for better returns given the current treasury bill rates [27] - Management confirmed they are investing cash and benefiting from rising rates [28][29] Question: Supply chain and delivery timelines - The participant inquired about the potential for faster delivery of components amid ongoing supply chain issues [30] - Management responded that they are actively working with distributors but face challenges common across the industry [31][32] Question: UCaaS product line and market demand - The participant asked if the shift to remote work positively impacted UCaaS sales [33] - Management indicated that demand is neutral, as both office and home users require the service, and timing issues with contracts affect sales [34] Question: Royalties and revenue expectations - The participant questioned the timing of expected royalties in the second half of the fiscal year [35] - Management expressed hope for royalties but noted that timelines have been pushed out [36]