CSP INC /MA/ Q1 FY2026 earnings call

• Service revenue grew 14.6% driven by technology solution and managed service practice.
• Gross margins improved to 39.3%, contributing to a $171,000 increase in gross profit vs prior year.
• AZT Protect cybersecurity solution gained traction with new customer wins and multisite expansions.
• Investment in managed service practice paying off with signing of new MSP customers generating nearly six figures in monthly revenue.
• Strategic partnership with Acronis, including embedding AZT Protect into their platform and a successful webinar with nearly 200 attendees and demo requests.

In the first quarter of fiscal 2026, product revenue was $6,700,000 compared to $11,000,000 in the prior-year first quarter, with a one-time product deal from the prior year not repeating. Service revenue increased 14.6% to $5,300,000 from $4,700,000 in the prior-year first quarter. Gross profit for the fiscal first quarter was $4,700,000 versus $4,600,000 in the prior-year period, with gross profit margins at 39.3% of sales, a significant increase from the prior year's 29.1%.

• Expect steady profitable improvements throughout fiscal 2026 supported by infrastructure investments.
• Anticipate generating substantial operating leverage as revenue grows.
• Will pay a dividend of $0.03 per share on March 12 to shareholders of record of February 26.

• Uncertainties in customer procurement processes leading to timing delays for AZT Protect deployments.
• Integration timelines with Acronis may impact revenue projections as these integrations take time to mature.
• General market uncertainties and factors beyond the company's control that may affect forward-looking statements.

Q: Hello. Good morning, guys. How are you?

A: Good. Good morning, Joe. How are you doing?

Q: A quick accounting question. We keep talking about service revenue. Do we have two categories service? When you talk service revenue, are we talking managed services, are we talking services beyond managed services? So are is there two categories or just one category?

A: For services revenue, it is multiple items, not just one. The majority of the $5,300,000 service revenue is from managed services.

Q: With AZT being embedded in the Acronis offering, there should be some predictability. Can you give us an idea of how that translates into revenue?

A: We have not even fully integrated. We are building the APIs. At this stage, it is way too early to give a dollar amount outlook.

Q: And how far out do you think that might be till you give us some idea of a dollar amount?

A: I am not going to guess at this stage. Right now, I am concentrating on the integration finished.

Q: Good morning, gentlemen. Just got a few quick things. Gary, I think you were talking about the repayments on the financing, the $3,000,000. Are we still acting in that financing role?

A: It could be. We are offering financing to high-quality customers, which keeps us sticky inside the organization and is a good use of our cash.

Q: The permission on the second and third sites—I am just interested in kind of when that occurred. Are we talking about just in the first quarter? Or does that continue into the current quarter, some of those second, third sites?

A: There are multisite deployments with various customers. Some came in last quarter, some this quarter. It gets easier after the first site but every customer is different.

Q: Okay. I am back on again. Just a little clarification. You elaborated on the expansion of our marketing and managed services, and I am trying to get the numbers. I heard them once, and I think we heard them through a repeat again. Well, you said that we are adding some new customers in managed services. Did you say that you thought it would be monthly revenues going forward of $100,000?

A: We closed some nice deals. As of last quarter, we are starting to bill net close to $100,000 additional per month of net new revenue for the MSP.