CSP (CSPI) 10 May 232023 Q2 Earnings call transcript

Good morning, everybody and welcome to CSPI Second Quarter Fiscal Year 2023 Results Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Mr. Michael Polyviou.

You may begin.

you. Thank thank quarter us XX, results and fiscal review XXXX. for second XXXX which you everyone to joining CSPI’s Hello, ended March Chief With Victor Levine, call the Chief Executive CSPI’s CSPI’s me Gary Officer; Officer. today Financial and on Dellovo, is conclude Victor we will for opening then After their remarks, the open Gary call and questions.

laws. historical will, management is forward-looking be statements to believe, the term CSPI’s on the plan, and by may call made intend, regarding may, business forward-looking identify as continue facts company’s in The federal anticipate, project, as securities identified statements. Statements intended expect, similar today’s that words are not estimate are expressions as well

reflect to should results. are the company’s risks current are the future the be which and not and the influences, beyond a may many as of future segment performance performance the statements or projections the The several of guarantee influence subject and you that or and statements cautions events which accuracy of control statements uncertainties, other upon expectations based. company’s Forward-looking company are about read these that statements

may and that the with discussed the Factors XX-K Form Factors are include, reports report Securities Form and the Risk Exchange annual of on uncertainties section the in and the to, quarterly company’s not limited filed but on affect risks results XX-Q Commission.

of the or statements, whether publicly thereof. CSPI new no result the to those Forward-looking the of available forward-looking or respect cautionary made revise with update and statement are statements time qualified management’s their a events future date statements in and statements on any otherwise information, future faith events. this the are based as undertakes time are entirety at All to by after as good obligation belief information forward-looking

Victor, With that, over Executive I’ll the Victor go Officer. to call Chief ahead. please Dellovo, turn

opportunities. ago. both recurring growth The doubled of earnings Thanks we year good quarter million-dollar-plus our direct base a the business result from more demand another per services growth of results gross year than team’s customers’ share than Michael up successful again solid third solutions $XX margins backlog in consecutive quarter. the our our a second and more everyone. in and and of pipeline morning we revenue revenue for competitive ago a to a environment and an our of Despite with our budget build customer for reported million, operating and quarter dollars, fiscal increased from Today, is increase XX% effort and

the of fiscal midway are We point our at year.

strong our with third note to Meanwhile, generate X%. fourth products quarter. We fiscal believe HPP product fiscal and that this the a sales with the particular assumed quarters. for revenue to ARIA high-performance the year during positive around the Once world. business our will segment, be business Of continued XX% continued the of able results a growth second we lead traction growth again, Technology way ago is to line gaining compared its customers of for with Solutions

our and continually than pipeline the marketing markets this key could international a capabilities team for We more have ARIA expand the this doubled our agreement. in product. customers potentially of growing We reseller line for product our establishment has through

that and signed deals MSP, We have are multiple underway. Australian have we

the challenging marks customers, year seasonality, this and some our our the fiscal financial Despite can company. historic million for to in second budget for quarter. of therefore, revenue grew period $XX.X the million most results, fiscal period from year Turning the ago quarter second total a of of for $XX.X our beginning to the be

by and our of customers’ TS continued our revenue the totaled Our $XX.X operations installation capabilities. use The implementation, million. to be segment business of training our increased driver

customer base by HPP year in ago is and driven second grow The fiscal high. the to the Myricom were million to $X.X continues quarter ARIA and revenues all-time $X.X were Our at and million pipeline compared an ARIA.

margin continued a income and while cost-efficient we the quarter, Gross XX% we operations high-return share. generating manner. from the in to $XXX,XXX reached expand the our and gain per year business over continued leverage of or ago net percentage XX%, to $X.XX During and manage period of common

While we a a prior per in to shareholders invest continue are we our long-term quarter. build increase once to of a cash $X.XX from programs again paying to share, growth, dividend $X.XX

returns. We continue to get sheet manage our optimal to balance

and lines of achieve continue ahead We to us pipeline expand. continue of our for record-setting to most levels the of product opportunities

Our strategy an differentiated growth. our as customers few focus the enhanced by effective a over factors face of our years offering past key challenging go-to-market are increasingly the well as value solutions to for

the time, we the enhance from team is customers. engineering solutions as to well to and example R&D for in invest continue existing efforts and are of we our same ARIA result not-so-distant new At efforts, a future. our our as others an to create in the development create offering top-notch working

our are and time are to faced customers adaptable our threats. challenges answers and those threats all new space, the cybersecurity by the solutions to flexible providing In the

by have full these delay we we chain have offer to The require marketplace which hurdles, to the potential. and do While hurdles in supply around most solutions of customers, shipments. overcome these to gaining be have acceptance continues strong our extensive work although opportunities hurdle. continue to expand, And created a review our momentum for we realize our

slower of continue improve it most customers team team. our our requires loyal because them would our constantly and interacts attention and cost-efficient solutions supplier our abreast same than often serve to to customers Our constant time, to keep chain our we continues timelines At supply needs. with these by options. and The remain of like to the but effective to issue

from increase our able the quite budget operating the challenge dollars, by in the competitive situation return being technology for top the maximize needs we their clients’ investments. call, to driven lines, meet environment mentioned of At Across I product an the were to effectively. is this customer

in decisions several is opportunities major resulting our However, an pursuing. are is we followed by extended frame which turn decisions, process clients order time the on in internal for of in many

for Another revenue any Lines the recent challenge has us Cruise industry. absence been the significant of from

to is as that currently and couple could the signs starting during We next one this of are we ships are beginning on ship end to other quarters. begin log several work see drought we that retrofitting

To performance summarize, fiscal first half And of if second substantial the the during half generated growth we the have we we year in better. year. the believe cooperation, even of market fiscal will be execute

first ask performance. Gary provide I brief financial overview the quarter With to of Gary? fiscal that, will now a

Thanks, Victor.

we of second XX% the second increase quarter, revenue growth reported to financial in and million fiscal mentioned Victor his achieve objectives. in operating $XX.X profit million opening compared ago an We sales fiscal our We or our a validates which million ago As quarter. and reported quarter, had remarks, further to we $X.X of second year continue fiscal gross solid and year or XX.X% XX.X% strategy. to the of sales compared of $X

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

includes is higher As costs, primarily previously, which to due consultants. outside we discussed increase personnel the

or per gross SG&A reported $X.XX were of fiscal of the for share based XXXX share or year diluted ago $XXX,XXX fiscal $X.XX $X.X of year-over-year diluted compared to million compared earnings compensation of second $XXX,XXX We share net income to expenses payroll per quarter second per earnings in income in quarter. higher on to Our million quarter increased $X.X QX variable due profit. and net in the

and mentioned earlier, quarter cash increase short-term approximately XXXX, first cash our fiscal $XX.X equivalents a $X.X that financing Victor this XX, was XXXX, lower than level, customer second than XX, and cash The held-to-maturity a in XXXX to payment of of quarter cash as primarily per in cash earnings of million in large cash sale share. as the made occurred to due double to more second September large the during As investments equivalents XXXX. million a fiscal $XX.X equivalents moving cash million the vendor year compared the and represents March quarter the and on of were

In accounts exceed X-year. is payment there which million $X.X receivable, with terms,

We of of believe which managed our to year. the third possible quarter a multiyear million the our cybersecurity, into us resources, only transforming because fourth service is wireless and company. allows the strategy $X.X and in will $X.X of paid management prudent growth fiscal be We this implement million and

in Board XX, XXXX. want share also record on quarterly XXXX, the June approved on to Directors XX, an highlight dividend May per payable shareholders’ the $X.XX that business to increase I to of on of close the

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

question your Thank Investments. coming you, Gary. from live. Instructions] is Joseph Your [Operator Segren first line of Nerges is Joseph,

morning, are you Good today? How gentlemen.

Good morning, Joe.

Joe. Hi,

that from guys as it’s I on you the with software congratulate release the Acronis. press with? of week, you’re new the Miami first up Dolphins customer the guess me at – company the – customer announcement last tied let that a Is Well, Okay.

Yes.

outside trying I and assume locals That’s in our them. of high-profile a from we’re doesn’t area, recruit publicity that the customer the pretty that hurt to

them. Yes, that’s goal with the is with part contract the of X-year it’s announcement, a

looking strong So a forward we’re to next the years. couple of relationship developing over

I area, contact other we – just from I’m – of have Tampa noticed sports our pretty is basically wondering looking of with there if teams. up professional from market Bay any contract. And program. a we’re they in quite They down, teams if the the a quite area? dynamic in sports in teams have sports wondering Acronis, under and course, few I’m a few

other things happening. than there say can’t are This conversation more is I but on. that, going

good you did of say, the there in about publicity in been cruise their And Alright. pretty late the it. industry. and well, Got bookings some Cruise, is

still you’re You’re that any basically saying to us Is degree but helped it saying? we’re hasn’t great talking. yet what

we in week Spain a now. can’t started we’re Well, ship is actually money yes, done about. we remember they have long And or one and because last completed XX talking more haven’t a before, in I week time, there spending the

a all good which are But are will to those, So we moving more it we that. is slow, if they but good after news. be moving, hopefully get kickstart

of least Well, been releases like I’ve pretty strong. have their read at the press said, that I bookings late

hopefully that... So I mean,

now watching to They have been right I dollar. every hit used are They they what so that don’t hard budgets their are of be. still, think, still

that are positive I’m at least understand. is in shape. bookings good just from I a standpoint No, saying their

from of so you’re cash million – cash a and $XX.X Now standpoint, quick in a cash equivalents. talking couple

So saying short you Is was do it million than – months? moved we Or... what consider that term term? do investments. there $X.X short-term also we you’re to X more What

X months.

X months, day. XX

XX days.

less. are XX days

Okay.

of category would So that short-term above in held anything be that’s days investments? maturity to XX and

Correct.

Correct.

– was was? R&D on year-end your say what that’s the $XXX,XXX front, did quarter, R&D for From the the spending you

$XXX,XXX.

$XXX,XXX.

Okay.

talked and it relies falls Most that I and into some multimillion-dollar way. press correct ARIA of that assumption, about let’s opportunities. your higher the press versus pipeline In $XXX,XXX about Am that’s no, And customers. why this of mentioned $XXX,XXX last and you XX. in release, it’s So now indicated year. year-end letter, course, you you lower ARIA your the in put XX the release, in basket, potential

ARIA. No. and They are both TS

Both TS any past. didn’t and any on you’ve know ARIA, okay? new in if there I I was them on contact base? NVIDIA mean progress some of front. know their and I had with of their the the And anything going discussions with any or customers And

stuff. talking some different things those a you’re to is seems slow But department line to There really, theirs. on into again, promising really product when in recently a trying get we started move of integrated worlds,

dead discussions. water, So put it not It’s at least there that way. are some let’s in

no. at all. no, No, Not

moving alright. Okay, congratulations the a lot. congratulations congratulations dividend. have. on – all to forward. really me I that’s guess, Thanks And Well, certainly, I Again

Joe. Okay,

much. very you Thank

Your Davidson, is a your next Brett live. question line Private is is Investor. who Brett, coming from

with from all have that I customer question the large one morning. long-term a Good that Is QX? about receivable.

is at others one couple but customer. There too, with a primarily least of

And ballpark continue years, a you of continuing story resolves we’re that a could do give is me next you over to that to to going to as the couple have Or add that? to when be going it. Got itself?

hope it We continues.

them about There continues. it hope this now, with been We for maybe doing X years – we’ve X. probably

inside things the us up, come keeps as it sticky pretty So account.

continue it moving So we’re forward. does hoping

the terms rate we’re our that, capturing on agreeable to the working that increases, are interest advantage? that’s out and And

Absolutely.

Absolutely. Yes.

other I wanted The a to thing of qualitative. get more was

do that could know chain holding that there the I quarter chain, supply $XX think portion ship million supply You chain is backlog. supply can up, absent things and you about what next Absent in the hiccups? you of talk

comes to supply and X the months, say the can’t majority all complete project hiccups until $XXX,XXX gear could you Because for all chain, get backlog million, right It’s be is it worth really, just you of supply away chain the might so on sometimes other you order then right? $X $XXX,XXX if it if in.

So of points it’s where in some are and that’s supply. unpredictable, frustrating the

still and this And is like equipment firewalls routers?

it’s of a lot mixture little A everything. servers, firewalls, bit a of of

estimate ARIA products? How much as of it chips would for you

point. this at itself resolved it’s now, Right

And direction. industry worth some with a you that past to that’s a in the from tech pressures moving some had all Nice, the in One your good other and giant some, hear. advantage guys of positive hiring thing those? is perspective, have hiring of

are hotbed, a a down. right? moving is Florida of people So lot

– to get that So amount are on we there, really still competitive have it salaries and the but hasn’t for out out there pay there to is it’s the people available. top people bonuses very

Interesting. a lot, guys. Alright. Thanks

You guys, quarter. take next to Well, talk care. you

You got it.

thanks. Okay,

Thank appear Victor hand going for more to like It remarks. doesn’t you over very questions. Instructions] have I’m to much. [Operator any any back closing we

Thank you.

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

growth for now are three the of the remainder continuing excites and in reported year. have current we significant the to We momentum quarters us consecutive of the quarter experience

our margins. sharing Gary Until pipeline progress Thank and stay fiscal well We I you. and have in portfolio results revenue in XXXX are forward gross quarter generating third that in look conversion, safe. the building product to favorable operating and be August. then, service a solid a

Thank you.

conclude Thank much. you This call. today’s does very conference

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