CSP INC /MA/ Q2 FY2026 earnings call

• CSPI returned to growth in fiscal second quarter with product sales up 30% and service business up 7% from prior year quarter.
• U.S. technology solution business drove top-line growth, with AZT Protect seeing increased land and expand orders, including a three-year agreement with a global cement manufacturer for over two dozen U.S. sites.
• Managed cloud and managed service practice grew 11% over prior comparable period, benefiting from cloud migration trends.
• Customer retention rate for service segment remained high, contributing to expanding gross margins in service segment, with service gross margins increasing over 100 basis points from prior year comparable period

For the fiscal second quarter ended March 31, 2026, product revenue grew 30% over last year's quarter to $11.1 million. Service revenue for the period grew 6.6% to $4.9 million. Product revenue contribution was approximately 64.7% of total revenue ($11.1 million / ($11.1 million + $4.9 million)), and service revenue contribution was approximately 28.8% ($4.9 million / ($11.1 million + $4.9 million))

• Management believes fiscal 2026 can be a growth year, hopeful of sustained top and bottom line growth during second half of the year and generating full fiscal year growth over last year

• Evolving stakeholders alignment and internal review requirements have caused delays in AZT Protect deployment expansion.
• Unique procurement process and development criteria for each customer/site result in timing delays.
• Factors beyond company's control may influence accuracy of forward-looking statements and projections

Q: Mike Price asked about share purchases and dividend.

A: Victor said he has confidence in the company and would purchase shares if he wanted, and mentioned sending a message with share purchases.

Q: Joseph Nurgis asked about the cement company's plant opportunities and savings.

A: Victor said there's potential for growth in U.S. and international plants, savings come from reduced patching spend and preserved asset life, and AZT Protect is lightweight compared to competitors' software.

Q: Will Lauber asked about new board members and land and expand.

A: Victor said new board member Jim is familiar with OT world and contacts, and land and expand is about getting inside organizations and different deployment methodology.

Q: Brett Davidson asked about AZT products and multi-site deployments.

A: Victor said AZT products are less resource intensive, multi-site deployments are a mix of working with distributors and expanding inside existing customers, and they're leaning on channel significantly