CSP (CSPI) 13 Aug 242024 Q3 Earnings call transcript

Good morning, everyone, and welcome to the CSPi's Third Quarter Fiscal Year 2024 Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Michael Polyviou. Sir, the field is yours.

Thank you, Matt. Hello, everyone, and thank you for joining us to review CSPi's fiscal 2024 third quarter results, which ended June 30, 2024. With me on the call today is Victor Dellovo, CSPI's Chief Executive Officer; and Gary Levine, CSPi's Chief Financial Officer. conclude questions. remarks, Gary the then and for call Victor their we'll opening open After made CSPI's facts Instructions] Statements securities business statements [Operator by terms laws. that the call as are company's regarding not in historical identified may forward-looking management be federal on today's as identify The continue forward-looking expect, statements. estimate will, expressions similar may, anticipate, project, as words intend, are plan, believe, and well intended to

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

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

while report quarter morning, good to the and business with passed, our product business infrastructure drive third chain results, have line. and everyone. emerging building the we focused to on the has and XXXX normalized I'm to success Michael, issue Earlier PROTECT higher-margin more we revenue run pleased well our -- returned rate, our of supply the a morning, fiscal driving required announced product AZT this Thanks,

award major in as at able has XX% service and consistently attractive this success Award, AZT is AZT Customer the continuing team our to in XXX the fiscal business to team Cybersecurity Awards Application enthusiasm no named contributed follow incredible remains PROTECT has percentage and our business an the improvement line product RSA offering we for Global -- building basis in awards, with product the extend increased margin reshape cybersecurity. winner of the pipeline. product presented revenue year at being PROTECT entire leads the high-performance industry Intelligence the exception AZT brand the ninth Group. Overall, the company. points Excellence capability We of at InfoSec was Award the grow XXXX the the and for an including high, category the done are to and as following third multiple over Business gross job Security level. The have Global the for launch the been service Award Moreover, dramatically Fortress through the the the prior Cybersecurity quarter by to awareness generating

During the quarter, we mid-tier the also located signed Midwest. some manufacturing customers small in

felt few maintain teams to product the sales PROTECT we sales weeks, and to Greg industry IT a AZT that and sales experienced transforming recently focused. just similar head in opportunities many Pysher being goals. have has are and as organization. pursued in our VP We and the remain momentum throughout other Throughout hired Greg and his team -- career, for known and them business. solution consistently mentoring is up already being Greg the of is building We to driven ensure ambitious a high-performance veteran Sales XX-year achieve sales is his complex impact training

includes While the to right enterprise our focus with XXX team strategy shorter goals on to multi-pronged we sales of ensure mid-tier sales Fortune to sales because immediate engaging small companies, cycle. have the Greg

loyal continue will partners which AZT to one cycle American the taking one a the in base. market. Greg conference second larger the sales We industry opportunities, represent helping cybersecurity This for gas place because attendee the upcoming Houston. despite opportunities dedicated longer also through and pursue has we such each prepare signed the Conference in is or only awareness PROTECT the directly in helped events conference natural and team several dedicated Petroleum contract the can is multimillion-dollar and as our quarter, like Institute oil to

the with in evaluate company the and engage plants, to the water these world large the have treatment oil largest oil treatments we As in AZT in taken water process months.

ripe XXXX, marketplace. conference various months. our industrial system industry operations engineers, series the up to IT and to control attracts ICS longest academics. focused Atlanta. This and other will the believe government do these the The further We a X being concept and presence Just taken vendors cybersecurity. attend has expand POC in gathered control Since and is on Cybersecurity set has OT industries Conference conferences held X also in event to get brand running or are conference of team within largest the industrial to a opportunity and across cybersecurity system a the proof stakeholders

environments, partnership organizations, months. ] We for large have entered [ and Fortune decades. the Bonnership and new enterprises also which few intelligence over agencies PROTECT integration by executed offers X We a over across comprehensive past asset Forescout government successfully Technologies, program XXX AZT with our IoT trusted control

take huge. and time, managing full a as opportunity serves some This risk, cornerstone could mitigating ensuring threats. Forescout will integration the cyber compliance we but believe for be

a adding sector innovative technology and government a North cybersecurity customers AZT of to existing to a in-house In provider prior and solutions is and addition, leading to provider of well America, public of regions. Ebix's APAC security as partners. in its team EMEA lengthy portfolio services as red managed performed PROTECT service ARIA evaluation of Ebix commercial

customers. award-winning revenue In will world, our PROTECT by solutions partners and our opportunities. Locations Brazil, resellers X technology, of over AZT currently and these resellers. a weeks, of Greg the Morocco, to raise has IT a dozen. confident only this to signed is resources worldwide Norway, Chile, of those using the to AZT cybersecurity increase Lastly, of ensures and multiple sell India, can over all offering global the its Iberia. Peru, I of we are the including build Greg OT-focused Australia are large approach significantly and believe we reseller profile supply solutions And number December

impact to is recently to got we industry them operations new the attack reduce on -- been measure measurable insurance the how recently techniques high-profile ], Manager presenting are range to held delivering with Rockwell how cases selected up and and lengthy in existing to can high November. risk and pick companies battle and a including to update to against together, of ransomware in resulted comply [ risk Gary financial be environment companies Our Products demonstrate Rockwell, Selfe High active in Fair we $X.X led insurance which attack are cybersecurity how latest an risk, their in losses. Working guest of a have we and of outline Vice a industrial the General President measuring the to in-depth the will being Merck, the a largest facing share and and impact. partnership on ], a complement and use California; segment Performance will Automation we'll recover with of at what apply to The and solutions insurance defense, how be with event He providers how review passive regulatory be techniques will requirements, billion manufacturing can legal Ana reduction Rockwell [ this speaker. Gary will new miss. they is that

couple business, TS the Solutions, minutes and wanted highlighting Technology induced I for strike, of presents a the it review I the outage to crowd window opportunity recent AZT. spend Before

market engage already market it always technology, for had or professionals. was discussion initially or information intent AZT technology IT operational While on professionals. PROTECT commenced IT the to We've the focused OT, with was our target

disaster. So would We've of AZT deployed, been using organizations Airlines -- the level. this proven and that company We at as levels a that from can PROTECT of the on the another the corporate systems, estimated the to that down. field was in said, the helping efforts. of active become AZT not of code in avoid the and a Delta outage controlled companies the circumstances. CEO been all updates protection type capability previously benefit outages the cost as malicious both believe this critical timing crowd been We PROTECT has our capability outage can under corporations do have dollars operational It taking systems the strike has real-life flat ensure believe million. We had untested at well prevent updating billions $XXX

Solution, system running the As IT out update event than to our more critical process. The Same puts generate If the TS to become not, the any and training or of our crowd business the to as just The system implementation, and majority use due verification their has a on danger few chain with to vendors to whether servers the an and strike formal demonstrated them have be automatically, continues installation deployed lives to for it these quarter's it the intentional business and revenue. of customers, applications. Unfortunately, supply allow some can untested of be not should test. for perform and update send updates Technology a test updates norm to updates directly increased continues well most by a cybersecurity applications attacks. customers outage, to cyber driven TS success capabilities. goes critical

we could of a more beyond. And add in XX activity if process the encouraging. are wireless in fiscal they over a of we XXXX work will impact XXXX. awaiting conversion is customers, The through to to are This go that positively to locations to on and We new continue hospitality orders and favor implementing continue in XX decisions company. big MSP our several add global color, currently results

one exports freight continue MSP every we are numerous will serving containerized to and the performing be ports will equipment double are each the their container largest for which ships ocean of be ship. also and We for operators in number worldwide, specializing conversions we working and with of

service interest UCaaS UCaaS current the expect in levels than we to the it is generate managed business fourth of the a several QX. In us last has signed has revenue our more The double We practice TS PROTECT. new AZT the run few practice, momentum of develop an generating over all X with methodical UCaaS, we offering. building, profits. was allowed fiscal continued and recurring this entering strength that with in the already customers, fiscal was the years, have process during the the And cloud quarter, fund summary, to and is new X revenue, what rate business of year enter higher that TS we to and consistent now but lines annual slow fiscal also the

did the we We business. lines same methodology AZT are with the practice as the and other building determination with of

So OT IT have be the not from professionals or are need the and organizational infrastructure external the will of vigilant future. Today, I'm in to are threats to third-party our business on highly and PROTECT reinforce we whether process recent consistent to XXXX generating professionals potential deploying additional to has profits their the that responsibilities approach support near in events in we ensure compromised, be software revolutionize in business their resources thereafter. update. also confident AZT we ensure

in Our a ask a enabled now near financial record gross Gary our has develop, commitment fiscal products grow high-margin performance. I in level. With provide Gary? third our brief balance cash to us that, will innovate and overview the of expand to to services to margins quarter

Victor. Thanks,

third customer For we we orders. fiscal fiscal June of for we key supply issues complete at to were want of to to XXXX. point the a to ended revenues to and chain third I ago get million converted million as year quarter, able June and reported sizable third eased, compared revenue components the quarter had portion ship the that XX, $XX.X revenue backlog of quarter out ended XX, $XX.X the

As more normalized said we to Victor business have environment. earlier, returned a

profit representing the quarter. Gross as XXXX, fact, fuel In sales months margin percentage to XX% $X.X fiscal despite the June or was ended relatively services XX, was lower compared revenue flat sales, million to X of gross margin year-over-year XX.X% of or million second revenue compared the XXX-basis-point improvement improvement. the XXXX and $X.X higher for revenue

compared quarter, development were the For third engineering our and expenses to $XXX,XXX $XXX,XXX.

for -- Our include build costs $X.X marketing investment SG&A both sales, amounts AZT million where were and continuing to years. fiscal support and out required the the

for For to fiscal $X.X common or net the income $XXX,XXX or common share $X.X quarter a June fiscal the third fiscal third tax allowance quarter, the for ended per of net a deferred loss compared diluted we million primarily $X.XX per of of year, reported tax the prior share valuation our XXXX. $X.XX was the our In quarter, million benefit XX, asset. for release third the against

medium us large PROTECT. the believe operating the to continued of business, services and compared had flow higher-margin of cash products For $XX.X the TS to million. cash sales the our small, leverage fiscal to for quarter, the and third that $XX.X resources execute ago year flexibility focus XXXX, we of as million to our fiscal equivalents June we the quarter on AZT success $XX.X and year. XX, We enterprises gives million $X.X multipronged ability of target selling strategy at the to generated in and cash third end million our XXXX And

During the repurchased third a shares X.X total XXXX, million the of company quarter outstanding. currently for shares We $XX,XXX. X,XXX fiscal have cost

Board approved will Directors the business XX, of Lastly, I over on that, the a it per questions. take of close turn of XX, to share XXXX, shareholders the operator on to August to payable on of $X.XX record September dividend XXXX. With your quarterly

first Your Segren Instructions] Nerges from Investments. [Operator question Joseph comes from

Well, AZT is the to AZT integration is of platform. how expansion positive And Where the that is question that? that first, Forescout you PROTECT large into on gotten. awards And the congratulations has of course, My take? anticipate long partnerships forward. really first organizations going some the to of do on the PROTECT also very all

yet. it started haven't We

be are on X testing... they're it integrated to and -- planning fully right We now, planning doing to in from anywhere for be sessions X could that months

Okay.

it's obviously So end... -- our be to some from end from some their going and

to on -- a be it faster. the could engaged sure with process companies usually it's we lengthy I build with the as -- that's team lot right? to testing know fast there's through it's APIs we'll to been They've that And team integration. I'm to a In dealing a be going even work process, large and but Yes. have not all them. that these has lengthy with just that how to exactly be go going a don't be of the is

we'll So hoping but faster, we're it's see.

like their unique either that in do outside. know this not where aware they have other mergers, I'm via if you the be... you're platform you Forescout, they their that? was after in other developed or case in know would any If systems any have bought they outside Are you unique integrated suppliers Do was our company. platform the internally almost if there all was -- to

a was they it could be I'm were the was -- complement anything met the we if wouldn't this have outside pretty product signed currently and cannibalize other, ask something and we and that or have, with didn't it happy -- that whether partner they When already question, own not products saw we that them because you. guessing doing can were I wouldn't to we we internally how I'm we then said another great they they how X competing product honest same they they thing, each want against have right, sure up. whether that

Yes. attack a do. AZT product Well, they an what I like PROTECT have of know that anything don't would you where stops

effective. that course, such of download, with With significant of follow-up to -- -- you have environment because and the be clientele the have customers a here with amount [ it their a dramatic the affected -- people another got number that ] to on be were of faulty CrowdStrike were of or software with OT Rockwell. there's Just [indiscernible] in been --

that we're would currently we want they it of that Rockwell I at going [indiscernible] that a we assume of know what through that. have feel anything? Have number via for if bottle, you any the Do or customers to gotten the problem. update happened So any call

through get systems, partners thing world do building their sold what on that they love what partners. The the and to offer. food with or we that with process what with they us and Yes, to kind chain their systems. and the the the going with And certified kind of that's we of Siemens work to Rockwell we're the that's is of a Rockwells, pointed biggest the we're have Emersons

at think at level. I the show how do they talk upcoming like to we're why applications to the that's a said, they on protect with unique way the invited we us because we go core very market

now magazine doing we've of that that's that. we've their of But one now stuff, of up and had goes we've a kind their what working every think the partners. now the the there's that through got in that's approved So all blessing team we're part with they and marketing thing. and setting and been that And -- I each we're process

partners, to and them think is it's and and mind day they get when the understand you I everybody share every has only new educate have you day. that do to sign thing then all up not to you have

So marketing only then it's can the building outside you -- and inside goes getting put I base, a material and changing for to like company, process training a the foundation do doing process lot at with definitely small the we're this So feel that the companies and could There's partnerships, it. much fast, country a material resellers these we're setting -- for right? because training so material, read stage. the material there's had so training putting a And so in. language we they

has affected to the to stop went don't being same want There's were of could again. the Rockwell there to we it number only want not it. their there's from was when my affected, with different as group. And got go a a be urgency that what through more to customers case customer And [indiscernible], does point question guess lot how I of let's Well, again. that Rockwell standpoint, through are basically go through Delta things on be affected. a with sure And them were they I'm it to the

urgency the come let's little you've little ourselves a follow-up IT it there's PROTECT? add put for I'd one IT that how So your some say solution, You that -- an correction, What's And version? well, with we of version to AZT with I'll IT version. attempting a there -- say more differentiate out bit. -- a you do Can different here. or to do an color way. And with take quick

version, IT they more locked it's these of space, of the right? the because updates, Well, is in kind all of kind -- Everything OT scheduled. down,

update. it's you of was to of it update. through. basically it, more where then to the source. And type the individual some valid constant stable from tell valid the lot that's of would for cases, individual wouldn't crowd time going to approve all the it I We're a a it, think that, build the whether then We test if [ it, at So where been it and let analyze it's the in environment updates, ] kind approve that any into in crowd that's, running. not is it every get we from you that's and customer a have basically we stopped And And then the like automatic and messaging where be -- source. product And happens to to updates, where update, of have looked going nothing with of IT an software they would kind way you the that you're will automatically looks testing any not go that's kind just given have to company it to scans it's the strike, at strike there's built approve had stage, it some it's a and of should on the problems. of a be up will unless do but it the source, at to a the course, is

software of not competitors. is places many on before in testing implemented often the And been idea available words, outside -- too really has In other other this this cases. not other

] AZT lot of gap, have they And the you a these without see, if then patches do still the or whoever before all they're these too -- because updated. would they complement Trend we Well, their a we ran or potentially marketplace When or other [ ] CrowdStrike were [ thing else XXX% [ vulnerable had Sophos ] is and while Yes. is, to protect so in a products, testing Micro that's that you right? while out patch.

Okay. Well, great.

in place, pieces time... of just -- Sounds matter a like

Yes, time. understanding last -- we're on that yes, has clear umbrella, we we building got everybody the so quarters, practices it X it's I a mentioned other have it X built had the -- at least -- takes profitable the

And you build a food product. build sub-XX build sales those so you You are give how programs, build of in just people to And the the a of have a people concept force, doing the chain, HPP you many most all have developed rebate to marketing. engineers, this. that to are guys

and the we we sparingly, we hire We hire it. to can't afford enough that try and -- try I salespeople. can't hire So sense, what -- makes do right to and

we're the what do been to is partners getting -- the partners the OT, and build right space to chain the OT and right never food right? historically. getting in We've a So trying using

of when basically for Greg that OT why he's on, the XX So bring these sold into only kind that's the same partners, Nothing chose else. to we of and space. working company all years

time. Just a... matter for That's a of

models, Yes. out. It's now way, the said, and month guess time, took MSP we generates revenue Like profits, little what? in I a recurring business the built by inside that little a are other month businesses it X but consistent

ahead. session. Instructions] our concludes for the Q&A That remarks. Dellovo Victor will to Please I closing now conference [Operator hand go back

you. Thank

the and in fiscal well, we results enjoy our and December. then, summer. PROTECT. of Good sharing to progress is in things are XXXX Until interest taking and the industry your and want to experiencing rest continued exciting, our activity CSPi's are The forward fourth award-winning quarter is year we I support. safe quarter thank shareholders AZT of stay happening, always, be for the look full As notice and

This event. Thank you, concludes everyone. today's

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