CSP (CSPI) 11 Aug 192019 Q3 Earnings call transcript

Good day, ladies and gentlemen, and welcome to the CSPi’s Third Quarter Fiscal 2019 conference call. My name is Priscilla, and I will be your coordinator for today. [Operator Instructions] I would now like to turn the call over to CSPi Chief Financial Officer, Gary Levine. Please proceed, sir.

Before we begin, I'd like to remind you that during today's call, we will take advantage of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995 with respect to statements that may be deemed to be forward-looking under the act. numerous forward-looking cause company. statements that differ results cautions from materially made company factors actual could to The by the risks described conditions, pricing economic Exchange Commission. with include competitive and Such and factors the market Securities pressures the in factors, others company's filings and general Please the forward-looking section statements company's in the refer with the to filings SEC. on included

we'll regarding During open progress, will then Victor third quarter today's call, financials. your strategic to after up and Victor's an it introductory our update questions. remarks, and segments then I'll discuss our business provide

With that, I'll turn it over to Victor.

everyone. Thanks, good and Gary, morning,

in We with a review are by for third offset pipeline products wireless for our company. over year-over-year our we the as which Gary solid services segment. by continuing platform, quarter, quarter, fiscal the in progress and I'll financial managed the partially growth had cybersecurity, Gary? was soft our revenue ARIA a growth reviews multi-computer is managed transformation In year. of our IT back and After invest to our sales. strong Overall, for poised demand next in QX we results services our cybersecurity including come however,

Thanks, Victor.

quarter, million X%, to up revenues a third $XX.X compared year million the For were ago. $XX

Gross million ago. was was million year sales ago. of the cost total XX.X% Our ago. a compared a to compared XX% Gross quarter $X.X margin $XX.X million million, year $X.X a $XX.X was year to third for profit down from

of completed. out were where reduction of The year contract development expenses ARIA last expenses the services is labor engineering and down building a the not a platform $XXX,XXX and the help year Third $XXX,XXX, in in foundation to recovery software decline quarter consulting from a attributed to was ago. required

total a was and X.X% sales, year. last X.X -- As expenses X.X%, down from of development percentage engineering

year. XX.X% or million $X.X in previous the million of with were $X.X sales of expenses SG&A or XX.X% compared sales QX

was a payable the of contribution, tax last tax to We the tax and due income of with year. taxes a had prior large expense compared U.K. reconciliation benefit of of the benefit benefit due a a and credit. to the research tax adjustment higher pension quarter $XXX,XXX effective result tax the return for tax $XXX,XXX rate development a tax provision expense third year's of to and The of no

The effective was tax a or XXX% to continuing operations Net quarter $XXX,XXX year from the rate XX.X% prior $X,XXX compared for diluted $X.XX compared in share the per or share income the ago. per income X diluted of was with year.

loss million were $XXX,XXX Net decrease to close Cash the inventory increase $X.X by income was of fiscal the of in that a receivable the dividends. of the from $XX.X end operations. order quarter $XX.X at million received due XXXX. year from the timing, of an million and quarter, included of short-term due for $X.X shipments discontinued investments customers well in the third at XXXX were the million million not end quarter paid in-transit of third as in $X.X down The to in the increase accounts primarily after as until

pay on to of share of voted XXXX, shareholders a to August has $X.XX Directors of record quarterly on Board payable our Lastly, XXXX. XX, and dividend September XX, per

of continue focus costs on our line the and will to quarter, boost to products Looking company. the bottom fourth around performance to we managing sales while higher-margin

to back call the turn Victor. now I'll

related now cybersecurity were The starting shipping. our with year. last we million our Thanks, to ARIA HPP and $X.X Gary. Products $X.X us issues, previously, we provide in our supplier now I'll platform down revenues High-Performance have behind compared a are SDS division. launch review, discussed to segment delay of million is

products resources product. continues. of right our as for up now, for to looking At In the fact, Myricom our demand are time, build sales same legacy exciting this we

purchases and million for additional In about royalties E-XD to the in foreign during our military for $X.X quarter. multi-computer product both planes amount third business, parts see continued the we

our we typical visibility it in military our into business, performance for have is but E-XD limited QX. As expect order similar levels

a series of demand Secure quarter, products, detection for legacy solid first we or enhances Myricom sale and response our ARC of our including During Intelligent which SIA, saw OEM incident products. the threat Adapter,

selling that networks, for also We're to security use in dedicated to of teams centers threats their MSSPs. companies look operation including

our by for now advanced that critical ARIA, platform, to our next-generation provides assessed applications, protection need in on-site. to the both data cloud end-users cybersecurity Moving assets which and award-winning and be

have As we issues launch supplier put had that behind us. noted, delayed ARIA

all card applications. after shipping supports now ensuring the are that developed We the ARIA

sales not the given we about growth are initial anticipate While with prospects and dealing when we year a cycle ramp-up OEMs rapid next our the are sales for accordingly. excited long do required MSSPs, the capabilities typical expanding and

ease from First customers have regarding positive ARIAs and use. of very impressions is, encouraging of our been That very for ease us. course, deployment of

the efforts. our and development committed market and So to a is educating of from staying sales here, it matter

progress our We carrier/MSO segments ARIA are seeing products. for in the

advanced are planning capabilities latest investigations large to internal the organizations detection XG is from service own add attack. same protect X out reasons; for the the have first, one process We SD-WAN in needed roll networks. commercial with to infrastructure around way, their who the to around improve services Operators looking properly other offerings. is in threat and offering, such to of Much as formal ensure motivated they services operator and packages are protected

cycles, their long cybersecurity provide from customer value-added Second, network-borne integration applications and as our impact are their long-term but often a threats of revenue for offer business. complex in a protection can special Such data deals and require substantial service. have can sales they efforts

high-potential with when integration greater many of and kind members allows opportunities automation the automation for security product, integration The threats. Demisto, to and we lower-level developed functionality security security team are and functionality response. that isolate orchestration, to on. that's integration of for capabilities is recently using SOAR This a out-of-the-box. We push-button ARIA of teams identify enables first This investigations working

is A robust our which channel to resellers give program, for for expand to for security expanded a include potential products. cybersecurity improve vet funnel aimed will channel sales in strong official program with expertise us and the our sales growth. to team revenue platform order to continue We partners

to business. Turning Solutions third Revenues year-over-year. were our the XX% in Technology quarter up now

or large recognizing to practice continues existing base grow a our MSP while which QX. managed significant new manufacturer, We services revenues closed customer customers. a recently Our bringing will exciting we deal on with and in start airline

redundant or UCaaS, We Florida which to including for our or service security and with is Texas. continued centers located soft XX/X also grow hard in support, all-in-one an data technical and phones, Unified-Communications-as-a-Service,

with building talent and well marketing. investing after our up We also continued practice Microsoft to engineering in do our

service we to In to growth a from multi-computer closing, wireless transforming markets. focusing remain on cybersecurity, committed CSPi defense-related focus in and managed opportunities on

our sharing you look recent year. quarters to our and by from with forward encouraged expect are ahead. in building progress ARIA, progress revenues We begin this to exciting with in We coming fiscal the product the

I'll that, turn With to the questions. over it your operator take to

take today [Operator Instructions] Investments. question Segren over we'll with Joseph Nerges And from first

Okay.

So E-XD, quarter you about say, $X.X you on in this about did million got the planes, on $X.X revenue? E-XD million

Planes and parts, Joe.

that million? that was the $X.X -- number... Is and Planes

correct. Yes. That's

similar in saying, you're in the you're same the And fourth the or something quarter fourth quarter? expecting

Right.

-- did in very the included little got there was report? was finally the that in way, ARIA third but quarter shipped shipped something saying quarter, in you we out revenue, something Are say, was Yes. third By congratulations, the the you the that you this door. we said

Correct.

care But ship taken probably was caused supplier that you supplier was are not of? issue the some also -- we product issues have saying still of us that if there supplier the to some could

and finish supplier No. pretty we issues, to on It's go the then the final just and then we that. X, the we're slowed finally then get them full -- months, able just site much all finished over us it go the a to to had a so do of had. kind started we when were were we had chip a and they through developing down through applications from we able that last from X, the that our test X all -- And beta applications product on testing develop

on we our were -- make to sale. applications first now, to applications continue on will now, was to able and our available develop were marketplace load we So enhance that we take the what But performance. of all able right and is and

Okay. Great.

beta so And beta some Or the testing is complete? applications? still much pretty are testing we -- we

we No. big just Beta testing to work long mentioned, just other as continue with -- gear. will Demisto, manufacturers like I continue networking hold, we for securities like as companies manufacturers with of

that applications integrating their continue custom not standalone. sell as just we our it's So can well products as into

because you $XXX,XXX would question be that was said, was R&D other for That quarter. expenses about as or of something And I on you less consulting indicated. expense, as which the Okay. like down -- our

Correct.

in approximately approximately that going range the that level is we that -- per we're you're anticipating quarter forward? $XXX,XXX So

our a project. because from $XXX,XXX range, complete have to of kind a back $XXX,XXX credit got that Joe, A did didn't vendor we who we

Okay. I indicated also product the -- particularly ARIA your line. and in you're expanding your see sales where you efforts,

a for channel way. of the the it the central both put country to according director website, your all-new for west the looking part and that You're let's

direct months channel, the We hired developing in that salespeople channel for ago, a started, looking We're those who's across X, person locations. U.S. the about marketplace in the the X resellers don't, I last quarter,

and invest product X the So looking a continue he that's in grow, we open they as viable now develop but grow, may we'll -- and salespeople initial somewhere we're that and channel, between as continue marketplaces. those it different to up he's to X to developing we have then working

well things are and this very sounds is pipeline pretty like exciting. rolling It ARIA

go a We'll next Instructions] to investor. private Davidson, [Operator Brett

confused response I CSP get just little and kind here. I'm few -- a some these of to quite the there like a at I'm quarter. of the this questions and Looks is impression; changes new looking

multi-computer there revenue quarter. a was prior very I so -- the little it was I it less if maybe than that little year's take So and

Correct.

pretty Had to of year? looking rest order thin it's still any through it? up showed the Or

For...

the For multi-computer?

The products? multi-computer

Yes.

-- That's thin now. right very it's Yes.

right And release see did believe couple I planes of next funded? Japanese you assume I a in for XX got the are orders the the now. And

Right.

higher that's I be because shipments of just to of ARIA the receivables onetime or new a in The know, increased something levels is products end-of-quarter is going now change thing? don't to the going we're that normal. that see receivable

the in the some a is volume That But not going into it's and group TS end the -- product. was -- right as building group. cybersecurity of any some we have -- of through the quarter, now, we orders we'll obviously, got get large the TS out the towards that large

side, the almost services been profit a the you probably which for managed in TS tell, both growth this good lot the is generating on projects the larger revenue and of has of as The all organization. some side year can it really of and the Yes. really,

some timing. always at day the purchase, way customers hour So the just The last it's day, at the yes, quarter. and it's of last

to able a it, then it and And gear the said, fluctuate Gary purchase or like to then it's having ship invoice timing all on us on just based depends issue. will just So so customers. it

the more So the ARIA or difference? on that to the lead of than likely to receivables -- no is sales real service products, side

on services More the side.

it. Got

this change in same inventory, the the So mean thing, going to be... is I that is

receivables. [indiscernible]

probably just the or that's it revenue. on sometimes for has just customers, to it TS, to all X yes, timing. all That's that to us recognize able actually or day the We and be later, we receive days land the went the purchase FOB depends destination means, out when next from orders

ARIA legacy the quarters, change in new next to a from in a inventory quarters, levels X is next real at to the not next be products switch-over least quarter, couple the stuff? So going versus of there

Right. be We're fluctuations, it there a I but to be of mean not lot build not balances. will up. going we're to inventory going building

they of way. could that's up rollout, of able then stalk as put stages potentially or game of Yes. few -- it's and meet we're where a quickly -- these it No, the months hundreds us a the to at the larger whatever be fairly as if we get that right to now, that may early stage to as this we some deadlines with talking MSSPs, are and thousands right comes where of some that let's we're give products to able customers now,

order guys needed purchase are long-term currently? like others? just anything pretty for there the as much ordering You is So

For?

ARIA For products. the

working we're to to large close contracts. -- or talking you're now, the Right opportunities and still -- building OEMs, these talking just large long-term pipeline MSP trying MSSP with -- potential

as contracts? length they're long-term signed as Long-term or the far long-term in as of before

or long length. The as their you a manufacturers, X, our and as could boards, potential go do a agreement get product we on X, software sell they When X, X way, it either into years. sell specked licensing we either

change So they you I going same that an product guys it how they that have it order mean need it built; change for just they thing? the and are send you. I out guys mean to -- just to is once to send You the work? going is operates? the back how orders Or

Exactly.

our not We'll not customers necessary keep the more, to happy, keep inventory less.

Got it.

high the give it like So a what Or and you my extent over us you what the that's add a leaving what little in a how high this head you XX% at growth, talk Can of XX% little. in or kind a or of legacy some we've this products? to growth, growth are as XX% seen above looks is of but bit total Is and much can of will to as guys XX% me be previously? -- like? high about like that maybe idea growth looking just at to that high clarity terms you of far scratching

of legacy -- growth investing a we're whatsoever, in will continue different the don't all animal that's -- I to much compare not the products, legacy it stuff. the until the that at Well,

as and of So new this the off, disintegrates is falls that the is just line. new life product this organization,

at it done goes all in So the well, -- the it next we the significant we're growth over have all dwarf years. months. last XX growth what XX XX ever to If should looking

at So is the legacy really are kind of differentiating... to the be customers that going products? Or of the expense

tech... product is an old legacy The

We invested... haven't

We since -- haven't that don't invested product in even I when. know in

last... the Over

-- road? switch -- new these What is ordering the X or this customers coexist with those to trying is... exist are going are customers those going -- that I'm products, are to get Or down each other to the are products to over

a different It's base, customer a It's it's different base. customer target. a different

years like So been just... still of just that might putter it's couple along and the for next

and If diminish XX% it it back along think to to -- don't said, I I it was you ago, at XX% If going like go we ago, than I if way back X I going years to ever was year-over-year. better know, go years you where, remember, was hung thought or as there's and -- It's X kept it, it's what something it price long this that the the we'll with new things the that there, we do technology. there's still for out of -- it all want a as need but need some in and support done we've definitely still investment and is but going people

are continue same going a new at help to lot product of the takes -- Yes. But Those up. the to time ramps

they as keep we've the And kind over the -- model, margins was in stuff we digits, aren't that they're really the has stuff, And all That the MSP get generating the then has margin the and the anything and other TS years Absolutely. -- in been we built taking our X about as we years bill about aren't the goes. turning XX% XX%, X, that low in step that And long goal We're all the the level. profits now, a we the we'll E-XD where ago we that's away. recurring-revenue just X but profit of are talked been middle and X, Every talked on. of with organization. side other customers month, right? the last the moving

product, So it's model. like selling it's a a but recurring-revenue

Yes.

at So third started new transition the sales much how during they've legacy? much... to versus it of the products is quarter, pretty the Or was the all? from ARIA Do

No.

initial. the just It's

of it expect we initial. opportunities. It's to close a while No. And little these just continue we until some for

to are So this? the it's of be the going big are OEM that ones deals to kind drive going

then like of into We're focus types We the institutions, we're all the every and banks direct organization. -- -- can OEMs hoping MSSPs, accounts hospitals. it financial it, commercial fits on hearing and to of all

a develop selling of that our play for you're play then and of a you're like long when government those, we commercial to some with the of a a be millions also said, OEMs would and talking I longer, but dollars takes that's to period it like partners, talking there with time. the and which, -- So MSSPs, millions

Got it.

sales the like come board to then? on individual first the might thing So be

Absolutely.

Right.

the maybe lot opportunities type they how is. a But organization $XXX,XXX, big wide are $XXX,XXX, and deep and They of how small. $XXX,XXX depending

huge with All we're was it. help. see excited that. very I'm That right. that Got profitable decently And to a

company, mentioned drive at that it's small, paying dividend, the I've the to a we've starting That's and all that's dividend time on profit start-up thing and same -- that's before, call that's -- public, the at pay the same a time.

view. Yes. since pretty Looks It's the standalone to profitable been minus my multi-computer the me -- long time company from been standpoint stuff. a has on a good

Yes.

Good. Good.

So a I you're confused, that. that little Brett, less hope after

any turn for remarks am this I no closing at today. or call presenters further have our the showing questions I'll additional we to back time. that

this Thank call. speaking you with again morning. forward us all you to on joining next our We look for

you. Thank

for This today's does include your participation. program. Thank you

any disconnect You may now time. at