CSPI - NASDAQ

Greetings. Welcome to CSPi's First Quarter Fiscal Year 2025 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to your host, Michael Polyviou. Michael, you may begin.

Thank you, Paul. Hello, everyone, and thank you for joining us to review CSPi's Fiscal 2025 First Quarter Financial Results, as well as recent operating developments. The fiscal quarter ended December 31, 2024. Today, with me on the call is Victor Dellovo, CSPi's Chief Executive Officer; and Gary Levine, CSPi's Chief Financial Officer. After Victor and Gary conclude their opening remarks, we'll then open the call for questions. During the Q&A session, we ask participants to limit themselves to one question and one follow-up question and then re-queue if they have additional questions. Statements made by CSPi's management on today's call regarding the company's business that are not historical facts may be forward-looking statements as terms identified in federal securities laws. The words may, will, expect, believe, anticipate, project, plan, intend, estimate and continue, as well as similar expressions are intended to identify forward-looking statements. Forward-looking statements should not be meant as a guarantee of future performance or results. The company cautions you that these statements reflect current expectations about the company's future performance or events and are subject to several uncertainties, risks, and other influences, many of which are beyond the company's control that may influence the accuracy of the statements and the projections upon which the segment and statements are based. Factors that may affect the company's results include, but are not limited to, the risks and uncertainties discussed in the Risk Factors section of the annual report on Form 10-K and the quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements are based on information available at the time those statements are made and management's good faith belief as of the time with respect to future events. All forward-looking statements are qualified in entirety by this cautionary statement and CSPi undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise after the date thereof. With that, I'll turn the call over to Victor Dellovo, Chief Executive Officer. Victor, please go ahead.

Thanks, Michael, and good morning, everyone. It has been less than two months since we last talked with you. And during the first quarter, our business maintained the momentum we described to you back in December. We generated an increase in total revenue, boosted by 17% in service revenue and expanded our gross margins by a healthy 200 basis points, while earning $0.05 per diluted common share. We finished the quarter with more than $30 million in cash and cash equivalent, while continuing to invest in our A

Thanks, Victor. For the first quarter ended December 31, 2024, we reported revenue of $15.7 million as compared to $15.4 million for the prior year's first quarter and $13 million for the fiscal fourth quarter ended September 30, 2024. Service revenue represented $4.7 million of overall sales, compared to $4 million of overall sales during the year ago period and $4 million of overall sales during the fiscal 2024 fourth quarter. Gross profit for the 3 months ended December 31, 2024, was $4.6 million or 29.1% of sales, compared to gross profit of $4.1 million or 26.6% of sales for the quarter ended December 31, 2024, reflecting the continued execution of the company's strategy to focus on higher-margin offerings. Driven by the improved gross margin, interest income and foreign currency exchange, the company reported net income of $472,000 or $0.05 per diluted common share for the fiscal first quarter, compared to a net loss of $73,000 or $0.01 per diluted common share for the prior fiscal year's first quarter. For the fiscal first quarter, our engineering and development expenses were $786,000 compared to $700,000. The increase was for outside consulting services and stock compensation. For SG&A, was at $4.1 million, compared to $3.7 million in the year ago fiscal quarter. The increase was marketing expenses for the trade show and travel expenses as we scaled up our conferences and participation for the A

Thank you. [Operator Instructions] And the first question today is coming from Joseph Nerges from Segren Investments. Joseph, your line is live.

Good morning, guys. How are you today?

Good morning, Joe.

Good morning, Joe.

First, I want to thank you guys for the time that you gave all two of these investors that were at the annual meeting last week. And I want to start with one question that, this is from off your LinkedIn webpage. And it was sort of a summation of A

You're correct. We will announce it soon.

Okay. Very good. Thank you. And one other point, I know we've discussed this in the past. You have a number of patents that were already been assigned or awarded to you on the ARIA platform. And I'm assuming you have some pending patents to, do you have a summation of that at all, of the total we have on that?

Yes. Three have been completed. Two more have gone through all office actions by the patent office and are expected to issue by year-end. And then two more recent submissions that should be done sometimes in 2026. So, three issued - in the middle stages.

All right. Thanks a lot. Appreciate it. I will leave it open to somebody else ask the questions.

Thanks Joe.

Thank you. [Operator Instructions] The next question is coming from Brett Davidson from [Investletter] (Ph). Brett, your line is live.

Good morning gentlemen. I have questions regarding the A

No. Those have all been the stuff that we've been working on. The Rockwell channels, we literally have just been setting up contracts with these large distributors. I announced one. I think you guys saw CED back a month ago or so. And there will be another announcement here soon of another one. And then the other ones are, we're pretty close to signing. So, I'll announce all of those as they come along, but these channels are really, really new. So, some of the sales we've had have been the ones we've been working on for months or years.

So, you're anticipating that some of these Rockwell partners are going to generate sales through the course of the year?

Yes, absolutely. Absolutely. We're hoping that next quarter, if everything goes well because the way we're going to work it is, we're going to push all the – even sales come directly to us, we're going to stop pushing it through the Rockwell channels of some sort. So, that's our game plan long-term is to fulfill all through the Rockwell channels.

And one other quick question. Is there anything that prevents A

No.

Perfect. All right. Thank you very much.

Thank you, Brett.

Thank you. The next question will be from Mike Price, Mike is a Private Investor. Mike, your line is live.

Good morning. Thanks for taking my question. It was July of 2023 that you first issued the press release, calling A

The quick answer to that is no one's approached us and working with these large distributors is our first step into trying to build a name recognition and get into more feet on the street.

Okay. But with the larger customers where you say it's harder to get in the door, you haven't gone to anybody looking for any kind of partnership to get this done in a big way. Because when you put out some of these blogs about 2024 in review and 2025, what's in front of first cybersecurity measures, these things all take time, and every day that passes, there's higher risk to infrastructure as they're not. So, it seems like the sooner that A

Absolutely. We're evangelizing that through our partners directly to the customers, we’re at our trade shows. We have Gary Southwell, we’re speaking to him. We're trying to get the blogs. We're trying to – it's education. With the Rockwell Partners, it's all about training them right now, getting in front of them, getting the message out to them on how to position it, where it falls in place, why it's different than the other products that are out there, how we complement in case you come up with some issues of, oh, we already have this product, the messaging and how we – while there’s still falls in those products. As you can see, there are people getting hacked constantly. This is how we would protect that infrastructure along with whatever product they may be using already. So, unfortunately, things take time as impatient as probably most people are, but we are definitely working the channels, working in the messaging, developing the product and trying to evangelize in as many areas as possible to get that messaging out there. And a lot of people still have that. Even with the news as what it is, a lot of people will be like, well, I haven't been hacked yet, so, I'll be okay right now. And then we have to be like, well, it's only a matter of time when you won't be saying that.

Do you see an inflection sometime this year where we see some kind of significant ramp-up in A

We're counting on this year to have a significant increase in revenue Yes. We're budgeting for that.

Okay. All right. Thank you.

Thank you. [Operator Instructions] We did have another question coming in from Mike Price. Mike, your line is live.

Yeah, thanks for taking another question. This comes up every quarter. Joe Nerges didn't ask it, but the question about using some of the cash to buy back shares. And if you are so optimistic about A

Well, last quarter, we were in a complete blackout period at [Indiscernible] and we're actively looking at it to support the stock this quarter and then in the future.

Right. But the quarter before, I think you bought, what, 4,200 shares, it's been nominal from one quarter to the next.

Yes. We're taking a good close look at that, Mike. So, we will be purchasing probably more shares going forward.

Okay. And again, I know it's a pretty good size number that is going to management, but you can see if management is getting these shares, and you don't use cash to buy back shares. My position, and everybody else's position in CSPi is somewhat diluted, right? So...

Understand.

Okay. All right. Thank you. Appreciate it.

Thank you. And there were no other questions from the lines at this time. I will now hand the call back to Victor Dellovo for closing remarks.

Thank you. As always, I want to thank our shareholders for their continued interest and support. Our results in Q1 demonstrated the progress we are making and the success also highlights the ever-growing market interest of A