CSP INC /MA/ Q2 FY2025 earnings call

Key Points

• Fiscal second quarter revenue of $13.1 million met budget, with slight product sales increase and service revenue decline except for excluding a big deal.
• AZT PROTECT signed 6 new customers during the quarter, pipeline expanded fivefold, and partnered with Rexel USA. Featured in Rockwell webinar, and marketing efforts for AZT PROTECT continued.
• TS business is profitable, executing contracts with cruise lines and freighters, and was awarded a cloud project for a Florida healthcare provider.
• Repurchased 384,000 worth of common shares and Board authorized $0.03 per share quarterly cash dividend.

Fiscal second quarter revenue was $13.1 million, meeting internal budget. Product sales saw a slight increase, while service revenue declined due to a non-repeated multi-million-dollar deal. Excluding that deal, service revenue had solid double-digit growth. Service revenue was $4.6 million of the $13.1 million total, representing 35.1% of sales. The Technology Solutions (TS) business generated $12 million in revenue and remains profitable.

Forward-Looking Statements

• Second quarter revenue of $13.1 million met internal budget.
• AZT PROTECT pipeline expanded fivefold.
• Board of Directors authorized a $0.03 per share quarterly cash dividend.

Risks Identified

• Challenging operating conditions including price increases on products TS purchases for resale.
• Potential customer spending reductions due to reduced headcount and project postponements.

Q: Could you elaborate more on the backlog for AZT and potential contract sizes?

A: The pipeline is growing with different stages, but prefer not to comment on specific numbers and suggest Brett can call for more.

Q: Is the cruise ship business continuing and growing?

A: It's been steady, with work depending on ships being on land for dry dock.

Q: Is the cell tower contract unique and can we target more cell tower companies?

A: Unique due to space and CPU power on cell towers, and we're reaching out to similar companies.

Q: Is there a sizable backlog of cloud-based projects?

A: Yes, it's more than 14, probably in the 20s.