CSP INC /MA/ Q4 FY2025 earnings call

Management Statement and Operational Highlights

• Financial Performance: Fiscal fourth quarter ended September 30, 2025, generated $14.5 million in revenue (+11% Y/Y). Gross profit was $5.3 million, with gross margin at 37% (+800bps Y/Y). Full year 2025 revenue grew 6%, gross profit was $18.5 million (32% of sales).
• Service Business: Service revenue grew 63% in Q4 2025, representing 44% of total revenue. Managed cloud and MSP services are an increasing part of the offering, with double-digit growth in fiscal 2025 and focus on maritime industry.
• AZT PROTECT: Gained momentum with strategic partners like Rockwell Automation, with deployments in various industries. Focus on integrating AZT PROTECT into industrial IoT systems, overcoming integration challenges and building pipeline for the large unserved industrial edge compute market.

Segment Performance

• Technology Solutions: Fourth quarter service revenue grew 63% over prior year quarter, representing approximately 44% of total revenue. For full year 2025, service revenue was 36% of total revenue. Managed cloud and MSP services grew double-digit in fiscal 2025.
• HP Segment (AZT PROTECT): Gained traction with strategic partners and distributors, with dozens of new AZT customer installations during fiscal year. Focus on industrial IoT expansion, aiming to convert momentum into sizable sales in fiscal 2026.

Guidance

• Fiscal 2026 aims to build on service business growth by allocating more resources to MSP/cloud services, including adding sales reps. Convert backlog for cruise ships, installs, and upgrades into revenue over next 12 months. Leverage momentum from AZT PROTECT deployments and industrial IoT expansion for increased sales in fiscal 2026.

Risks

• Uncertainty in converting leads to actual contracts due to customer rollout timelines. Integration challenges in deploying AZT PROTECT into industrial IoT systems. Potential delays in customer contract renewals or rollouts, and market competition in the cybersecurity space.

Question and Answer

• Q: Joseph Nerges asked about service revenue percentage and IIoT expansion potential.

A: Gary Levine confirmed service revenue percentage, and Victor Dellovo discussed IIoT deployments in cell towers and integration with OEMs.

• Q: William Lauber inquired about leads from Rockwell show.

A: Victor Dellovo stated a 50% increase in leads this year compared to last, with better quality due to distributor involvement.

• Q: Unknown Analyst asked about Acronis integration.

A: Victor Dellovo mentioned ongoing integration, too early to predict revenue, but hopes for significant partnership benefits.

• Q: Unknown Analyst asked about UFT reseller relationship.

A: Victor Dellovo discussed case studies with UFT and weekly updates on progress.

• Q: Unknown Analyst asked about share repurchase blackout.

A: Gary Levine and Victor Dellovo explained the blackout period around earnings reporting.