CSP (CSPI) 10 Aug 222022 Q3 Earnings call transcript

Good morning ladies and gentlemen and welcome to the CSP Inc. Fiscal Third Quarter 2022 Results Conference Call. At this time, all participants have been placed on a listen-only mode and we will open the floor for you questions and comments after the presentation. It is now my pleasure to turn the floor with your host Michael Polyviou. Michael, the floor is yours.

Tom. you, Thank thank Inc's and XXXX. joining to us Hello, third you quarter CSP fiscal XX, which review everyone for ended June With Gary today Chief me Financial call Dellovo, on Inc's CSP Officer. is Executive CSP Levine, Victor and Inc's Chief Officer; the and remarks, will After the Gary then their questions. for conclude open opening Victor we call laws. statements business not historical securities facts made Inc's on management in are Statements term today's call identified be that forward-looking as by CSP regarding the is the company's may federal words believe, as estimate expressions forward-looking The expect, and continue are identify intend, will, project, plan, may, anticipate, to as similar statements. well intended

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

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

to supply Thanks, Michael short quarter. we to inflationary ongoing the pressure believe Overall, solid and and long-term and has to returns both a increasing fiscal had good a chain morning, everyone. shareholders. our third adapted growth I team generate

or Solution to business marketplace. terrific the momentum continues quarter gain in and Technology Our another TS had

experience XXXX despite flat backlog revenue second represents Services We to from grew relatively $XX year million growth the ago of $XX.X rising very achieve period, as quarter of and and below and the was XX% XX% we a results. to a migration services. overall CSPI While XXXX this our similar A XX, ago with recorded on March fiscal for objective for key a million higher over due net macroeconomic to was margin $XX.X XXXX. segment's XX% third of a quarter our is ago for is quarter, and products and backlog up events. the June team XX, to continue compared increased $XX sales year fiscal services. the level, quarter, revenue to second sequential million demand XX% Overall, but million sequential was which year slightly products increase

We this quarter despite over per share. behind the grew margin XX% gross gross full by to a margin as executing $X.XX income diluted the points or $X.X driver year are for six record improve evidenced percentage net gross ago third the revenue. of margin was At well chief goal gross compared a to XX%, the the relatively flat quarter. million The margin for fiscal of

will you currency with exchange favorable in moments. We a Gary also from review few benefit with

our that Before I Business let continue to operations. review review to a challenges our impact take minutes segment, few me the

moderated pressures remain high global supply May, at the they chain while First, in levels.

quarter. timelines overall delivery to the second same fiscal suppliers our remain compared from our instance, component For

the of are suppliers that Our telling see there shortening us isn't should much clarity. timeline, some but we

retention cost other a to revenue and second us converting The impacting can which deliver requiring margin they quarter. allowed short-term backlog higher strategy build where in leading market employee unprecedent wages. a increase products is markets, asset for conversions believe is and than finished in TS market. solution that to company. greater being revenue. components pressures the our services. is the is the to has the challenge for X% the we $XX note range, to policies, aggressively and well to situation recruitment by the on this work to our grow the seeking we improving And now challenge. Our backlog we incentives This other million offering are tight on My goods. objective competing employment the of forces labor our with focus unemployment with state are despite to is reported certain primary inflationary above rate revenue so in efforts are from a companies just Therefore, wages far pressure in to sources the generating I'll put We backlog record revenue business this backlog levels home is the however entire continues increase

did convert or revenue Solution in segment of fiscal older much achieve over a XXXX the as we $XX.X of million Technology so revenue. some backlog quarter business quarter in a to ago to able fiscal year third TS revenue to XX% were level. generate Our the second We increase

the $X backlog for is As I grew second earlier, in backlog quarter. still Despite backlog the mentioned from conversion the by - the segment we TS. fiscal approximately the million all XX% of

that years have poor while continue the customer past the managed Our of expand. new existing We're has data loss as still companies been many MSP attacks. cybersecurity practice, practices service and customers their as performer that finding of or we to security Cybersecurity from best customers, attract make making awareness, are companies stellar gradually vulnerable of to practices to place, CSPI need a them they as in potential culture. throughout These part recognize they couple prevention

achieving sales the closer closer I Regarding business, the to goal. believe incremental UCaaS and our are getting

companies if penetrate to sign to a success take solutions. of our this smaller our the a the market winning effort continue developing that in to want our will part educate on business further we over concerted solution meaningful years internally we way, market on While award merit

Regarding the remains quiet now. industry for ship cruise

However, to more favorable by to discontinue as Control and program Prevention services. of U.S. the Disease COVID-XX the of and last budgets their for freeing Center tracking to month decision be ships operators findings of only its the in cruise can reporting are aboard open the viewed the if public cases

dollar million Performance the a for our below in or Regarding HPP we which Product quarter. High backlog reported HPP. was of still object maintain $X.X multimillion revenue the division, We

continues Myricom growth. expect lower QX. was issue expected chain supply hinder same to than much a the division's the fiscal As of in revenue we as

of process revenue its of related for bulk in be program in of the the As business we also are still recorded to current most quarter QX. as restructuring to was expecting the royalty E-XD a the customer

ARIA XXXX. traffic those threat During analytics interest from Gateway crossing the at for written President the response the for Badani, each response dynamically of positive Zero The ARIA analyzing deployed to the hosted providers NVIDIA line by wire. bring without from need so compact, policies protecting Trust for lead with stop that ARIA solves can creating webinar attacks detected We attack. as in-line packet customers. fiscal their customer Vice modern see BlueField-X lot quarter DPU. sitting product as do generated approach standalone revenue on value Gateway To The we on enter the in-line a as is the of very we stop platform and a announced XXX and network critical in rate, device believe existing network at impacting Gig Gateway operates cyber release NVIDIA protection generation to we or next the generated customers. enforcing other our to attacks.. by network X said, problem - analysis Trust that bump-in-the-wire customers We a Gateway who focused security a AZT a standing Zero data delivery this potential well AZT network accelerated to traffic ARIA automated solution significant of Zero as service June a Trust will data could we Ami while

potential direct partners in to program Australia. during with as we the several and We few added vet roster, one including to for the program will channel success. our currently others the quarter, increase to ensure a for the official which increases sales we team, channel addition continue speak chances to In our partners continue robust

the in operational to that been some time. some the executed works had also We for HPP right-size business efficiencies

to operations the to many rent lower from space, relocated of work employees due the fact we a in which resulted our Specifically, that home. smaller

our consultants filling our recorded customer's to and wages through salaries we personnel margins. managing summarize, talent voids to To a gross meet are we we backlog these that have with ensure attrition Additionally, needs. and record increase and some

our each Our demonstrates order of single converting Despite margin the our to increased focusing services products quarter. some million. higher customer lost simultaneously from the This backlog progress offering, and revenue, of not engagement over strategy this during backlog. the yet we backlog we of period since highlights loyalty continued it strength on and $XX to a also yielding have the is solid

ask during and we business the transitioned are to provide Gary With the strategy I on We player the a and business. overview performance. believe growth in will unprecedent an realize financial potential. the today And active have third successfully the have the now we And period. that quarter resources, our wherewithal we margin brief to our fiscal high

Thanks, Victor.

up points. quarter. a year million, our improvement $X.X only as margin margin which of slight as in in increase quarter product ago in a higher Service year of reported We XX% representing ASP. to MSP mentioned decrease million of the decrease ago an of in $X This Despite a in percentage prior gross fiscal in the gross reported percentage quarter, third fiscal as revenue product due service revenue gross relatively third XX% combination the sales third $X.X remained year $XX.X revenue, in fiscal or this we compared six to in percentage growth gross quarter, third or X% to XX.X% quarter. XX% compared We $XXX,XXX opening was ago to from revenue revenue remarks, of XX.X% of an is of year of the while the in flat. grew our when profit as and a Victor prior sales million. revenue compared revenue product of to well was a compared decrease to margin reported As resulted the the million, increasing over his gross quarter year, second a compared of

base have gross backlog product favorable the a will margin. also Additionally,

option get customers. we to will So rest these explore assured, every our to shipped

higher to compared outside personnel costs, fiscal ago for period. development was the the increase in primarily quarter Our third year expenses engineering and $XXX,XXX due includes This which to consultants. is $XXX,XXX

of in of from approximately Our in $X.XX an collections. income from ago in fiscal per million SG&A loss third in XXXX slight in euros The due impact was increase compared quarter, million XXXX, reported QX currency exchanged quarter cash of $X.X diluted the U.K. the in XXXX. of U.S. dollars June $X.X our share was were third XX of which of to variable favorable September per equivalents million, and increase fiscal in $X.X reflects the were to - compensation. cash quarter with $XXX,XXX foreign a increase We compared a as expenses due $X.XX net ended fiscal year third XXXX. of is QX cash of the receivable $XX.X share for which quarter or gain, primarily net an million to to fiscal third subsidiary. $XXX,XXX This We XX, increase from loss

of from During the quarter shares program. $X,XXX stock repurchase fiscal third purchased the nearly we

have shares buy to shares We authorized to of XXX,XXX stock. CSPI common up of

growing that value are We when in these we the factor the shares represent and continue margin to backlog. especially at, you expansion level believe generating

a want managed we X, will September it And we management company. multiyear we of on cybersecurity, Board's strategy on during on shareholder prudent XXXX the also to $X.XX that dividend returning the of while exercise to quarterly of approach. operator wireless the ensure to that, prudent past expense have decision I highlight to to share company. friendly preserve to shareholders payable I the declare continue service turn couple the August transforming resources is record of always has business uncertainty this XXXX. it and per years, XX, of that and of With growth resources to restate questions. CSPI your the been take execute a the believe cash to the was close to to paramount a to However, will shareholder to over

[Operator is Instructions] we Please coming go from you line Thank Segren And Joseph, live. have Joseph from ahead. Nerges Investments. question a your

How guys. today? morning, you Good doing

Good, Joe.

could up - couple on for By that pay and to reported you the mean... What's dividend or as refer the reported? Thanks front. that clarifications. the the way, backlog I million. a to Is my One, did heard PR the right you $XX.X now, I here? $XX call you of correct backlog I bills start million, the

million. $XX.X

I million. mean, the $XX.X PR is

correct. That's

the number? correct Is that Okay.

Yes.

the And one repurchased other you of you or Is and X,XXX shares. repurchase $X,XXX mentioned thing worth? that shares

shares. X,XXX

Okay because I you said $X,XXX. thought

a as I backlog, mean, and we with course, the of not problems Just clarification but still backlog having the did quarter. we're last delivery. the

Right.

Fulfillment.

Yes.

that Agency. product on? the possibly that's Intelligence million that it I in could last half or it into is at calendar back $X.X November of order in go still of words, a me year, it other next PR, Products the look October the - fiscal delivery, in it's year order High-Performance that get Or this ARIA like the we that in Let guess, for one year, and delivering the of And where falls sometime? XXXX but National the of it's you to the if the still I press in for second mentioned, is least possibility that realize was release for, quarter, the -- group,

No.

No.

No?

be the will in October No. it in It will first and be quarter.

in Well, will it what in next I calendar the Calendar, fiscal that's the in but first year, quarter said. October. year, be the

Correct.

quarter. December November, October,

Correct.

We particular it have a Is sometime -- of lot of Has half XXXX. the least scale on strengthened? a is lot there services services? at offer. are scattering? any particular Well, managed we getting any goal. the of different there new -- services that's or we business any Was are there services, been services a second Okay. are -- that that meeting so Are different of - the on

of could It and It -- switching managed varies, It support. Wi-Fi a Joe. be it's It varies. be could be lot It could firewalls. desktop support. been

goal by get to. ultimate we we piece to is have So all, it go but if piece

your - business, is phones delivering that...? the problems UCaaS that the are, of UCaaS or Is some the where the business, something the Cisco

No.

No?

phones, every we best gears, can year. they get realistically, across It's all switching, them right the all just a available. anywhere is The scenario, from, now, quote fairly the months; manufacturer No. - firewalls, X

at way. least in or there the beta where at test need did to need two What sitting, got go to prospects, from with introducing. glove website, Zero mean, Trust a do if almost you're with you that BlueField NVIDIA. our if do fits area? saying it's pros the interested webinar did it - software, people know put or tested the On them into you that we let's we like prospects get since I the that that And I we to it wondering only do months guys platform that you to some where webinar? I'm the you've NVIDIA's I'm been just are,

to Yes, large. very, are the customers very that we're talking

know. it all, They fast you time. don't as takes So at move

- fast sure can spec-ed need, - that. then RFPs So the making we we getting you can. we're we're it's it's as I moving and in, becomes fit it as promise just

very Okay. cloud-based the we're customers - data centers customers, in And the about large is at and least what webinar talking was? your

Yes.

treasuries the that assume you're six-month you bit particular front, three-month months that in areas the that treasuries of X%. cash return I on close - get and six to two course, more the have can we're those I money Utilizing – little a working bank. for day particular and we making mean, on

little getting the our bank, more that? Are we putting cash for money of more are So Gary? -- a in we managing some

we Yes, are. are. Yes, we

managing have been where very we moving the absolutely. We closely have opportunities and up that

at right again Okay. That's it. guys. forward. now. like road, we're can down will about but the It least, supply all don't I Appreciate moving little hopefully, little up do a lot seems loosen thanks what we by the it have I going but know channel,

Thanks Joe.

Thanks Joe.

you. live. line your ahead. is Brett is Thank coming next Please question go the Brett, from Davidson. And

a of Good quick couple morning, questions. just

that of One backlog. is $X them HPP million

shift had you be tomorrow? you components, the to If able that would guys

Yes.

Yes.

interesting. it Got

on on any up I Has other merger to is buying looked into investigation guys competitor you gobbling to talent that way? The wanted talent? thing been there tack have smaller into touch a

different make but Yes, different pricing of of lot doesn't we've either the sense. at It's or companies, looked it's accretive. avenues a integration just just not

Yes. The only dividend I like comment level other have that at came the is I the out.

makes I a think that point. at sense of this lot

balance And here. about bills guys growing the worry leaves to of still shareholders you increase - think start cash have impairs? play into continue kind to kick reward his to Joe I a it to in paying little wouldn't and that for enough

exactly, Yes, exactly.

well got. I pretty all yes much But

take guys you care and we'll So see.

from you. hearing Nice

care Okay Brett. take

Bye, you. bye thank

[Operator question go ahead. from Will from Instructions] And your live. Visionary we do is Wealth have Advisers. Lauber line Please a Will,

we think have would the issues, be of what you if Yes, by chain the didn't supply do the kind division? normal backlog

It would take. million, probably or $X be give

That's in total? all

Yes. It's rates normal to were probably. before run for this Those $X years $X occurred. million million, the

Okay.

of So orders the have pace all? increased at the

business, unpredictable deal. going orders. The where, pace in quarter customers as better manufacturers of purchase of stuff the a to of usually can their the it's lot when customers cut get lower happens price towards orders you and the the will are actually A on know, end

flow. it's like, because, to think quarter, towards always well, I they're say end move happening the following I dollars each today, but to get year-to-year. trying of see wouldn't year going from do spend been think you how the move product. the I budgets push it's but ahead to things a unfortunately, we're So I over before just to consistent customers And

slows speeds can sometimes spend a with on paying things that year down things organizations. conversations lot a literally budget those and of later. of and gear the up there's, for within depending they it getting sometimes just So And it kind how happening

say So consistent I last the XX would it's months. over

to moving lot customers Some into just and dragging year. they are are faster and some a fall the current budgets just due how

to I the I referring before a problems big was is issue? were what guess, supply chain

Yes. XX it. was to Mostly XX three Under that normal circumstances, of. days. days is pretty wait longest unheard was months, and within the would everything was pushing XX you really

HPP, would Now they X months fast. now, most be that's, we've a then when in come literally some days, say a right and within stuff and a year. it's get And if things that to year, the for Six that's in amazing. going is little under it's said sooner, I manufacturers, cases, year. But waiting anything just and a you been XX say, year, they

Okay.

I'm - if that just potential what have go supply on did chain So kind of what guys rate of get Can trying revenue we rate all? idea of earnings to as as well an be. you comment the would problems, not kind at

the it be selling We'd of of cycles in they of But it's the lot envisioned. a and first the competition, that, off there's the just under the would from because we long, longer than least market, be much there's lot Well, expanded products certainly - a are that. that comparisons. the cybersecurity drawing at but nature HPP,

while takes the it people purchase. a really to for mid-market quite So

the somewhere XX%. do million, calculation. as so Those high, mentioned, backlog, HPP those of are are between But a XX% just $X you and kind know, can quite is as margins we the and you

it. shift piece could could kind out So that you alone, just could what would -- hit of just if the of figure we line bottom just piece you that

thank well Okay you all much. right, very

Will. Thanks

easy. it take Yes

This conclude And session today. like Q&A will further turn Dellovo to And queue there would this the for at the now back Victor questions Thank for I are you. time. remarks. to closing no floor in

you. Thank

our for thank I interest shareholders always, and want support. your As continued to

the services. to gross products and margin success higher-margin Our effort record demonstrates sell

committed and a demand While for growing growing represents services, and record we same believe undervalued and these highlights the remain to asset. business, backlog substantial we backlog the products high our the the

we exploring to to Gary fiscal December. revenue in to alternative backlog safe. in forward well, finished our customers operating However, and can Until profit. look and XXXX sharing deliver stay the are convert and be every so then, progress our results procure components year full goods I we to

call. and Thank conclude you. conference this does today's Ladies gentlemen,

Thank you phone your for have your this disconnect a at lines time, and participation. may wonderful You day.