• Total Revenue: $15.7 million, up from $15.4 million in the prior year's first quarter.
• Service Revenue: $4.7 million, compared to $4 million in the previous year and the fiscal fourth quarter.
• Gross Profit: $4.6 million, representing 29.1% of sales, up from $4.1 million or 26.6% of sales in the prior year.
• Net Income: $472,000 or $0.05 per diluted common share, compared to a net loss of $73,000 or $0.01 per diluted common share in the prior year.
• Cash and Cash Equivalents: $30.7 million as of December 30, 2024.
• Engineering and Development Expenses: $786,000, up from $700,000 in the prior year.
• SG&A Expenses: $4.1 million, compared to $3.7 million in the prior year.
• Dividend: Authorized $0.03 per share quarterly cash dividend.

• Warning! GuruFocus has detected 3 Warning Signs with CSPI.

Release Date: February 10, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• CSP Inc (NASDAQ:CSPI) reported a 17% increase in service revenue for the first quarter of fiscal 2025.
• The company expanded its gross margins by 200 basis points, reflecting improved profitability.
• CSP Inc (NASDAQ:CSPI) ended the quarter with over $30 million in cash and cash equivalents, indicating strong liquidity.
• The company secured a second major cruise line order and continued success in the ocean freight liner market, boosting monthly recurring revenue.
• CSP Inc (NASDAQ:CSPI) signed several new customers for its AZT Protect product, expanding its presence in the operational technology cybersecurity market.

Negative Points

• Despite the positive developments, AZT Protect revenues are not yet material in the estimated $50 billion OT market.
• The company faces long sales cycles, particularly with large OT customers, which can delay revenue realization.
• CSP Inc (NASDAQ:CSPI) has not yet fully leveraged its partnership with Rockwell Automation, as sales through this channel are still in the early stages.
• The company has been slow to gain name recognition in the market, which could hinder faster adoption of its products.
• There is ongoing concern among investors about the dilution of shares due to management stock compensation, with calls for more aggressive share buybacks.

Q & A Highlights

Q: Can you provide an update on the AZT Protect product and any upcoming upgrades? A: Victor Dellovo, President and CEO, confirmed that there is a slight upgrade in progress for AZT Protect, which will be announced soon. The product continues to evolve to meet security needs.

Q: How many patents does CSPI currently hold, and are there any pending? A: Victor Dellovo stated that CSPI has three issued patents, with two more expected by year-end and two additional submissions anticipated to be completed by 2026.

Q: What sales channels are being used for AZT Protect, and have any sales come through the Rockwell channel? A: Victor Dellovo explained that current sales have not yet come through the Rockwell channel, as they are still setting up contracts with large distributors. However, they anticipate sales through Rockwell partners as the year progresses.

Q: Has CSPI considered partnering with a company that has greater name recognition to accelerate AZT Protect's market penetration? A: Victor Dellovo mentioned that no such partnership has been approached, but they are working with large distributors to build name recognition and expand market reach.

Q: Is there a plan to use cash reserves to buy back shares, especially to offset shares given to management and directors? A: Victor Dellovo and Gary Levine acknowledged the importance of this strategy and indicated that they are actively considering purchasing more shares to support the stock and prevent dilution.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.