CSP (CSPI) 28 Dec 202020 Q4 Earnings call transcript

Good day, everyone. And welcome to the CSP Inc. Fiscal 2020 Fourth Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions. is call this note being recorded. Please it over to now, is my conference the turn to Mr. pleasure And Michael Polyviou. Please go ahead, sir.

then call full opening fiscal Thank Financial and you, joining quarter XXXX. CSPi's for not intent, CSPi's for words continue on as Victor Chief the by statements. The similar in Executive made estimate thank and remarks, September and as call conclude CSPi's management open and With Gary fourth expressions the company's today identified on regarding identify plan, forward-looking me Leo. And Laws. CSPi's the questions. Statements us may may, statements Officer; today's Victor hello, to and will, Officer. business, historical everyone, Levine, year we'll forward-looking was After as XX, ended to their Dellovo, Securities call is that you well intended Chief be expect, term review are believe, the Federal Gary are project, facts anticipate,

statements filed XX-K of which Securities events quarterly and uncertainties results The report are a that future as on Risk statements and and accuracy and the that may Form upon segment section the the performance a Commission. are based. expectations may company's uncertainties, the the the the XX-Q or are to of but control should other report and the and include, of company's risks Factors many which Exchange protection guarantee future not these affect are in about the annual subject Form that the the statements limited on results. cautions with you and discussed of performance company risks Factors read to number or not influences, company's of Forward-looking reflect statements current be beyond the influence

publicly All in forward-looking to are of Forward-looking statements events. those the in qualified their the with the statements these a information, or time date respect any please ahead. otherwise the faith cautionary call to CSPi made based I'll as after undertakes update Chief information of on Officer. statements, new as at obligation good Dellovo, that, and future With Victor, Victor Executive whether entirety management's the by forward-looking go statements available no time turn thereof. revise are are belief over future events the or statement result

hit remained would the our our you progress pandemic has Thanks, not since families like hope been on and been to remarks begun is operations, good key workforce. pandemic. devote everyone. executing by your the customers have objectives year. made have long-term and in prepared operations COVID-XX We and to One pursue ongoing adjustments of I a marketing on Michael, fiscal ability objective have ensure our maintain for of objectives reviewing since most and to COVID-XX morning, our impacted aggressively focused to Despite the the we these your new my CSPi full reaching on our we impacting our March, impact to and plans success. positioned

long-term this working to maximizing situation's a so The and in service We've progressing is achieve managed an transforming to we a operate to safe remotely, a CSPi to environment. objective, the at to CSPI's of But encouraging cybersecurity results. continue as essential broader our merit used given tools and have objective We help employees those wireless we ensure element efficiency. do have as marketing working operations government them our to yielding its to continue XXX% programs are consider and adjusted company opportunities.

had reported and for delivering the launch ARIA revenue margin $XX.X As the quarter and fiscal levels year $XX.X are of offerings, we million. we to our respectively. expand QX managed by allowed are the periods impact we X% and These for pandemic. year-over-year a and X% was customers fourth we continue entered margin gross focus improvements. in full service that Further, million, in the both to our as report we gross robust of continue the on not to services XXXX, products UCAS in COVID-XX the us and declines improvements fiscal on Total full expected when higher margin year,

this work In workers to instances network gross lower of even cybersecurity margins and I the weakness greater wireless fact, process leading demonstrating gross reported managed ransomware. service the emphasize, threat continues quarter and as XXXX, to expose despite company, market’s we year-over-year as limitations Further, improvement, effectiveness the this to we is are want and figures. remote and have environments the continue fourth revenue infrastructures, margin continue to our transition of for in the increase pandemic to to

of for In opportunities and fact, it's pandemic according demonstrates and attacks prospective published some a spear I the the seven-fold new positive reports, phishing creating this we since CSPI. believe issue seriousness to near reached began. are customer having increase the with cause

We are aside setting budgets XXXX to it. companies resolve hopeful the in that are

weakness numerous our critical elected develop support the have experienced are accolades positioned resources Unified-Communications-as-a-Service that to already COVID-XX brought in the our this market of of entering I have two and in address strength issues. and to issues years, these view Because security devote may While internally. we network team there, breadth its awards we some and and ARIA offering segment. were underlying validate the vulnerabilities than to highly of were less industry forefront, why our and we to and offering able believe today's

was We would once the budget up we the Solutions TS from and pace full medium-sized and orders million. and have with customers quarter, customers purchases. proceed million, larger so the to small Technology new impacts lessens, $XX.X pick expect our For revenue COVID-XX-related or to received year was the for $XX.X

is As to you our be of business know, transactional need in and customers. this still we out front a

enhance customer is why to the the during and especially by remains cruise we customers, from address last dedication By team Cruise impacted grow of to continue practice one XXXX. customer's seeking systems cloud-based cruise suspension to mid-September the pandemic. challenging International members new the these including sign our demonstrating ship climate. professionalism, daily. greatly Our in line them to had and our base. which announced ports line we we this times, in line, of Bottom Separately, industry August, Association we And the its expand managed spoke area are had going Line educational till to the current commitment the when extended during our value service needs, as of is the customers the U.S. the cruise industries voluntary ocean continues continuing operations that UCAS our

impact not regions. surprisingly pushed European is Europe cases [indiscernible], restart new it of the a in the already imposed However, other Mediterranean March XXXX. several countries back they and experiencing to are severity by and given limited being of the rise and cruise Further, thus, the in sharp measures the

to hampered Although our regular gain access the with to communication scheduled ability ships, travel have restrictions teams the have had our the operators.

with This the we to at has projects a and two part them access to have upgrades. require work to the to preparedness assistance pivotal fourth other proved ships on goal the reassigned engaged keep on moment's to gain during dry dock quarter, We perform members be at as that notice. our to team ready proceed

the we're operators small the it be rigorous, right end it's so the giving Remember, light have backlog positive with. a there's purchased direction and these to that of are already the will at dealt equipment, tunnel. cruise ships line worth us need protocols step safety signal, to also because in well-being and our moving a personnel. the ensure was but of as were procedures the the a While Yes,

so Turning I to our perform continue Microsoft and receiving practice, to the it of believe will momentum are we results generate XXXX. strong amounts continues to interest, in well tremendous

During added process customers our we of gain the current expanding sites in the quarter, are positive UCAS traction with offerings. we continue We customers. and to new our with

a Despite a to because grow are is the on the demonstrations market As the vital XXXX weekly number pandemic, to our limited we being in basis. by billion expected $XX.X of of $XX.X reminder, assets XXXX. continuing increase product billion UCAS from to

new business is In pipeline than quarter. the to higher fact, today, fiscal the third compared

million, was the HPP projections, our fee related out. quarter our was EXD revenue $X.X pushed as to on or well high-performance revenue Moving the to internal product, program for below division as

However, the platform from in harmful helps to recognize cybersecurity hidden next that themselves our award human attacks with winning we fiscal generation about of excited remain We protect first-half ARIA organizations XXXX. intervention. in do expect our

the has both a and for and continue be in to few well-positioned other created within U.S. that installations have internationally, opportunities company We we leading cable ARIA. OEM a

By that as company. could a our budgets early since current and we have be trade be solid there as revenue going for flow. vital To are few believe of next meaningful physical deployment, and is raising frozen freed shows because for have decisions, in months, the new could their and prospects. contributor believe the projects operations we indications to marketing January. at that the change business summarize, This adapted once throughout successfully we campaigns, posture the grow COVID-XX our our as I our the sustain is to While pandemic up delaying lead March awareness evaluation

revenue and We base, Further, pipeline full grow results. exceptional quarter for and fiscal With through to base on brief overview high, to I to our solid and services in performance. the continues is diversified the provide Gary now will periods and a ask future have for customer a the remain financial a leading indicator of that, manage fourth ingredients year the products recurring market. essential interest current

Thanks, Victor.

As fiscal Victor was mentioned $XX.X in million remarks, million, our revenue $XX.X and fourth quarter respectively. year fiscal opening his and

margin profit fiscal X%, profit was million QX the X%. the and million gross in pursuit both reflect The margin also results periods. improvement Our gross of $XX.X year improved respectively, is gross improved resulting approximately fiscal and margin by reported of by XX%, fourth We in $X.X in gross quarter XX.X%, while the margin year, business. higher

period. Our $XXX,XXX, expenses fourth for quarter development fiscal $XXX,XXX engineering was year ago compared in the and the to

approximately which level. the For the year ago $X.X was year, this is with expense flat full million,

partially $X.X in net to We federal compensation $XX,XXX and a of valuation the tax a the $XXX,XXX Our million, approximately of deferred to the QX, losses. was QX a operating $XXX,XXX The of tax benefit variable year that SG&A was $X.X more in from be decrease in quarter research the the offset credits, and The decrease income million for net quarter. resulting likely due from to by the last fourth quarter U.S. company's current $XXX,XXX. the in year's loss fourth the back the ago allowance income Federal tax was year costs. carry development fiscal reported partial in fourth to against benefit expenses compared benefit are realized, net assets due

immense benefit and years, the us from preservation with couple loss resource and impact net our execute to that, it of business cash effects suspension leverage throughout our at program measures $XX.X year quarterly over The the continue foreseeable fiscal be the and net our we loan the short-term of For PPP preserved we to buyback economy, identical fiscal loss investments investments to XXXX. into will year, compared I of past nearly the allowing Therefore, cash. stopping positioned plan million our QX. including posture we we maintain dividend, reported to our of and questions. to been With of an the over to made stock take business We the for earlier, $X.X the $XXX,XXX. similar has of future, pandemic cash to cash and a your a our will proceeds will efforts. operator turn implemented have end the ended the million, development our The

We'll from question [Operator Investments. of Instructions] Segren our Nerges Joseph take first

Your open. is line

And Good guys. New morning, you, Happy to Year guys.

Joe. you, to Same

Thank you, Joe.

I One that EXD quick thing correct? the Is from in revenues that, you were there guess program did the say fourth quarter. no

had royalties There was We in some fourth some, Joe. quarter. the

some you And Okay. that of too. in said year you're first the half…? first-half the then expecting Is the

into What expected the that some Yes, some quarter. rolled was rolled we has over. first

Okay.

year? get didn't rolled the revenue you in fourth So, quarter, as quarter much into of thought as the the first some you next

Right.

Assuming go here, away right.

basically are I -- the Is Okay. coming where aware royalties we're That's the I that or Taiwanese the on assume you that evidently receiving you're purchases. revenues the don't know whether foreign did see from? correct?

Correct.

for the And four see planes the in they in I contracted fiscal fourth quarter, your Taiwanese, quarter. fourth

added down road, still revenue the coming but future? by that's little, So little a sometime one the in plane year, whatever,

Correct.

you did you that see assume You or I did? didn’t?

we Well, we don't is have -- the problem

awarded. the since contracts far being that’s Now

we Yes, that. saw

realized but it's Okay. there, that. you it, out we get to when going I you're know at know least don't

other ago customers, for a week not was back Let offer three for words, offering free release to solar free on me go the we're month the a is and three months press winds solar that customers organizations, platform and is that the winds other in that strictly correct?

winds Right, just targeted at point. was right to that solar this

just you But it response or last really any week. we that people have mean on or of it's I offered feedback potential got offer? kind customers? know I because early,

holidays really, Not is yet, stuff [Indiscernible]. the everything like and Joe. And plus with really slow

Yes, I realized. week best world. The in

Yes.

get to seen about talking And people. try had people is that's to back something XX,XXX press large that fairly get a To you figures We're mentioned in to to I've the on. of base that. XX,XXX, release you on or XX,XXX

That's right. Yes.

several do I of say -- -- some Do list we sort contact currently could have that using we have we a of that are organizations we Are it a better, on who how know, who hit can that that? it?

it's if currently sometimes has roll if get solar sleeves. we're companies or to but we just start of and they who just ask talking winds to marketing can it. your see have list don't, We That's we can up that calling

on database might someplace. bear People basis. targeting does that e-mails the customer Usually certain

that just platform? the curious, three is -- strictly the So winds is strictly solar months the for I offer was for

in for Yes, has budgets to make trying opportunity XX and it's right open bit we rolling some, in if leave if little of give a for it a long-term. allocated, something someone now days because times to the get these or will to an them being it are else we so I'll help sense and makes sense three-year else have it financially, them contract, can just things

of talking Gary ARIA the the potential they or by cases, we platform, interesting other my information security generally ARIA, mentioned platform what often ADR the standpoint some we we customers at about the sometimes and One mention I security customers can that, some have We can the older stuff least area that and in of that, platform, words, oldest correct or -- we're in security tools. eliminate need don't currently. placed guess implementing of is often all legacy from was release, their tools? press other In systems things Southwell that

yes. Well,

on it sometimes one. take it or what to could have, depending they manufacturers cut different and we Sometimes, three down

management one have tool you one platform So and managing everything.

I'm systems older be And really existing we legacy only can in some substantial. fact even And in of the that the cases, costs can the the some not stuff. guessing maintaining replace of

it be could implementing eliminating area, some pretty even be we older competitive So might not by -- the stuff. of

Correct.

more is a return your why on we're a investment and customers of the that and substantial the I'm mean, extraordinary stumped And whole I pandemic what be should out realized aware eight be I had -- traction or areas you're is should that getting I going six, at it's we forward. difficult. talking for about now, and what, that now months are thing, more been more. So least getting little on But to not that we there it assume people it's it.

getting more out name Yes. [ph] our trade eye more more the name it's get We're and and doing wins. right got balls And shows. and more and get now recognition. to there We

the you about enthusiasm. generate and to continues Well, mentioned beginning at platform the

spending implementation. as let are to of us time not whether the I'm assuming in opportunity they're the or or have to the matter people with help So the interested

Exactly.

did PPI for You Okay. mention about the to million Right. paperwork have guys there And did submitted year, R&D the $X.X resolution for we approximately. loan? government? for the PPI you Any the that loan the

we The did -- one we Yes, that received. and we

yet? I'm And million. assuming you response as was from it $X.X a no Yes, government the of got

We forgiven. Yes, received and we it's have. Christmas been before response just

information. but Okay. that mention, been forgiven it out been we don't I to it got we has interesting hanging right, to great. That might've least because that All want at have there, think

Okay.

information QX. in we'll share QX more From

into Okay. it fell QX. Because

Correct.

All positive somebody and I to think. back going Forgive me. going let to least forward thanks. I'm step that's a question. at the else very ask right, Well,

Thanks, Joe.

We'll move [Operator Instructions] Brett next to Davidson [ph].

Your is open. line

gentlemen. morning, Good

Good morning, Brett.

business Joe couple wondering talked color a record just press I've little got was you pipeline. little new could The like of I'm financials questions. a press bit about what here on and on split give the release means. I that between kind of the is headline exactly release. a if the

and to Well, X-X talking was that from the put few of trying we're out amount it built various events we prospects. x customers pipeline quote just a the We're to to back. months It's we’re doing. the already where

And on focused is another? board? Or like is area the it more that than across spread one

No, the on, we I everything in mentioned past, or focused as revenue do, we're UCAS, based on MSP, recurring was cloud whether it's base models, ARIA.

And piece We the increase So across business, the we that it from. a we install We'll an at -- behind if get across look the have you which the it, of trying of monthly kind everything. put been always big percentage recurring maintain where it, it in but a basis. up. to manage we'll so we’ll services to is MSP still it, varies those wise, lot and can products funnels to of them we're for a it, service which we'll then it's position on came as funnels, the favorable those four build all and try client product, that's revenue cases sell try board and those them

that's cloud, kind or for that whether across model ARIA. could we're with board at. for go the UCAS, the of So, looking it’s that Azure can anything or go And

larger kind areas evenly And other or it's area amount dollar by of is represented again any than split? like a

know, now, a past, been can fully longer. doing No, the little I because cost. and for cloud we're ARIA it it manage at it base is of and just buy course, it the we both mentioned as them, a manage it themselves, positioning can so as right and they is increasing heavier you this little right a point, UCAS the MSP at we've as in

the to operating relates color assets you Maybe could that some up little And what assuming lease here. to either UCAS. is liabilities, some I service and I'm on how or give why that The of it that’s the the a represents? and split managed Gary bit might swing

putting on obviously so now there's the as longer-term that just certain leasing there's leases Well, a financials, aspects the within that the standard to disclose contracts pronouncement statements new relative some well that to we of the have as up we with financial Brett. have,

Got it.

not new, So reporting? just necessarily change it's it's in something

You're under accounting the reporting right, rules. the it's requirements

of activities is it And different certain going some are split on? is Or that that dominated by these kind of it. lease area? Got between evenly

these with within Some recognized aspect financial be of that. just we sales, commitments And some of also to leasing that's in that got the -- with have we've got the long-term obligations but has why the financing that long-term statements. a on you've to standard it

Got it.

switching back release, Now that I press to from some generated that. questions

So, of the all it what Is entail? use response combination software? exactly does it and advanced Or is software ARIA the detection hardware?

Both, correct.

let don't you it it you to want inside, automatically through reverse where set. you it then it to could it, if call if can things only. the automatically rules fix about you could out don't line, through logs, next set, you at software in look either rules back I had at it automatically fix based you that it go then them can you then or the can see look If it put be the fix you want you the then the would on want as you conference the in want to in rules install it, last and and and talked set the and and firewalls, you But network day. logs on on the taps either can to based it put the you could appliance happening automatically or it

on? like activity a based the more IP-based? is that of going like is that's And Or signature it on

data it in, all IP. taking sell license actually we that's we per per It's IP, IP-based. coming It's the it so

sell if if licenses, we do So has aspect you'll then you XXX then want to if depends manage XXX it then XX/X is a it And it someone to it's it would and redundant. the in us monitor or second of internally. and if then have IPs,

release, well, that was, with indicated activity ARIA you thought ADR that Alright. how my the associated guys know first And inside do stops SUNBURST press okay, And that? detect. the

and is, it tested stops this. look out. way exactly engineers the why figure that very the changes monitor -- does, what through. That's all we The confident our I engineers have it that the else all internally the that's the said, it team we way -- everything at like going ransomware the But we data how and

has it this I theoretically tested activity? stops mean out? all been is this proven the and Or

work labs, big companies tested the No, in some their with it's that and conjunction players with other of too, firewalls. we in

lab across. big You name goes and players software, the of everything and gear integrated tons we have We're that partner. and

manufacturers, we just saying this stuff. lot get test we to it. of a these lot of No, have from So and a we're feeds not

Got it.

demonstrate So guys you this is and proof out gone of to that. enabled actually concept have

more So the less, it's related. traffic just or

is they're network, user these knocking you're that If people and get out. to off from whatever that does the in using meant and it

and across looking biggest mentioned things we north way gathering it in south, the looking there. it, the data. could West be network. start network for Everybody they inside. and months put to I something things like outside inside of from We're the you have they there, prior the looks out do why be and there East so said, it that inside probes months I One could be had get at we're to month in. the festering the that traffic, a firewall and -- is inside little there these That's then shouldn't And coming traffic that when analyzes

a analyze players of that's we than is to lot way we're there. the I So why, east think different and that out west traffic

that's the And component AI comes where in?

Correct.

too kind Joe asked taken anybody So, there's received, any guess you like, that received early? I feedback? release Is I And guys how advantage or had have yes. this has still this. of that's of know, been if this,

early. too Still

all I'll All you much. And see very you now. for guys soon. got right. Thank Well, I that's

good one. a Have

Have a good one.

to move [Operator Stewart Instructions] [ph]. James next We'll

open. is line Your

morning, gentlemen. Good

morning. Good

screener new on working that one Victor margin question margins is that moment. that companies company towards unnoticed And you're our the firm question XX on U.S. with, first products, know I'm sure and in all cybersecurity was as want ARIA working the execution, proven have phenomenally primary CSPi you the you're that I your I directed the congratulate high forward as the and Are you top a to Because that you've as My on all you. discussions done the our moving possible And works. would the accretive acquisition? you're but ventures bought CSPi investment in a undervalued. is, always any far the being further only at for to it's there My And really has on high also within product at going such of joint company on are acquisition any award that of products obviously, winning. firms not or be getting.

Just the you in you looking those if might be discuss any of at wondered things future? could

always everything's if or things that something talk wouldn't that everything's focused And would to potential be whatever just right, us the us shareholders needed. the do on companies product, to comes both there's to then to vote could table generate someone from and I be building if or accretive other happen if would it sales the But, Well, bring now, there. immediately. But to whether on We table, make on on we other sense purchase see to constantly. to right go we're ways. trying

congratulate again, Well, I you.

both done job. has your phenomenal -- done I think you've a team a entire

it. I much. Thank you very appreciate

Thanks, James.

Jonathan to Haine next We'll move [ph].

line is open. Your

the transformation, And there New and I'm curious, just these a kind really given on Good this morning, gentlemen. encouraging any stock. longtime the congratulations results. strong of is Happy of also Year CSPi holder I'm to is outperformed microcap a the lot years of can rebounded. me highs, now has cap Russell explain index. for And at index all-time the the microcap you way indices, small

stock might there's a explanation as stock of the you so if fundamental Year. Merry given late? an wondering underperformer such Christmas, and transformation, New strong of Thanks the any just again, I'm why So have is Happy

Merry Christmas. Happy New Year.

think start And difficult There once with a think I volume kind the to we've IR resonate the is thing And as products, think Well, the success have start more germinate. well is pursuing high really we're get Do now. to the And more. margins any of more performance once further story in Victor? it's TS we comments, do the out got of to as it. strong that's such that I to to new Obviously, I are things. will do more think and low the you those there starts get CSPi a getting story thing. I we'll group, trying

up. summed No, you it

believe it's of too, undervalued that for of are on lot a actually aspects been CSPi years I showing we've think, where there's profits. working I that great

in always see One past margins about story thing were You'll it the years the low. from the very margins. was

-- the I it have that think, and put makes that. as model, both little get piece we unified we the said and all And the ahead. a with go And and now like of the fixed messaging, more also. sides more revenue products like just that which to the the and being bit, bringing get it sense. said, into as where unified, the long I pandemic fast recurring On tie together. strategy we of brakes ties group, products now TS that But kind on services on think we security play I been have the the all getting together, with to messaging is all house, that It's ARIA it of hasn't it success

I is hear stock Victor, the think great one is quick follow time before I it's think And very up you limited. undervalued. say that my you know to

you signal the I once are think any a bullish that real insider investor market thank on the from again. know and guys purchases, small, shares I I however And shares, perspective, frequent a XXXX will sends mic you and I will XXXX future. as to regular markets my cease

two Douglas Johnson time from [ph]. take questions. for have we first And more question We'll that

open. is line Your

on payable all Question you. PPP? that Thank the Is notes of $X.X sheet, balance the million.

Yes, now. by

Okay.

Terry And we'll our final take [indiscernible]. question from

line open. Your is

be? potential curious is? think believe size do in market would product was cybersecurity be What software. that global the XXXX I on kind market billion think do the the I spend? estimated was of you for total ARIA adjustable What ARIA $XXX you to particular about

lot a billion silos could $XX in overall billion of to that It's $XX billions, market. fit, of hit that we the because of

So, conservatively billion. $XX $XX billion,

sounds great. Okay. That

over And that Victor I'd Mr. concluding call to our remarks. the return question-and-answer for happy Dellovo concludes be any session. to

Thank you.

As their thank for always interest and I our want to support. continuing shareholders

then excited are based the revenue I quarter safe years. prospects about New believe long-term look to Year. in in February, this year, sharing fiscal our therefore and our results and I Happy Gary drive coming we'll and and We forward our first growth until we on profitability made progress stay

you. Thank

This CSP XXXX earnings conclude does QX, the conference call. Inc.

have now everyone lines may You and a day. good disconnect your