Q1 2022 CSP Inc Earnings Call
Speaker 1: Please stand by, your program is about to begin.
Stand by your program is about to begin.
[music].
Speaker 1: Good day and welcome to the CSPI fiscal Q1 2022 earnings conference call. Currently all phone lines are in a listen only mode. Later there will be an opportunity to ask questions during a question and answer session. You may register to ask a question at any time by pressing the star then 1 on your telephone keypad. Please be advised today's program may be recorded. It is now my pleasure to turn the program over to Michael. You may begin, Sir.
Good day and welcome to the C. S. P. I fiscal Q1 2022 earnings Conference call. Currently all phone lines are in a listen only mode. Later there'll be an opportunity to ask questions. During our question and answer session. You May Register to ask a question at any time by pressing Star then one on your telephone keypad. Please be advised today's program maybe recorded.
It is now my pleasure to turn the program over to Michael O'leary, you may begin Sir.
Thank you Aaron Hello, everyone and thank you for joining us to review Cspi's.
Speaker 2: Thank you, Erin. Hello, everyone. And thank you for joining us to review CSPI's fiscal first quarter ended December 31, 2021.
First fiscal first quarter ended December 31, 2021.
Speaker 2: With me on the call today is Victor De Lovo, CSPI's Chief Executive Officer, and Gary Levine, CSPI's Chief Financial Officer. After Victor and Gary conclude their opening remarks, we'll then open the call for questions.
With me on the call today is Victor to logo Cspi's, Chief Executive Officer, and Gary Levine Cspi's, Chief Financial Officer, After Victor and Gary conclude their opening remarks, we'll then open the call for questions.
Speaker 2: Statements made by CSPI's management on today's call regarding the company's business that are not historical facts may be forward-looking statements as determined identified in federal securities laws. The words may, will, expect, believe, anticipate, project, plan, intend, estimate, and continue, as well as similar expressions are intended to identify forward-looking statements.
Statements made by management on today's call regarding the company's business that are not historical facts may be forward looking statements as genocide.
Federal Securities laws towards May will expect believe anticipate project plan intend estimate and continue as well as similar expressions are intended to identify forward looking statements.
Speaker 2: Overlooking statements should not be read as a guarantee of future performance or results. The company cautions you that these statements reflect current expectations about the company's future performance or events and are subject to a number of uncertainties and risks and other influences many of which are beyond the company's control and may influence the accuracy of the statements and projections upon which the segment statements are based.
Forward looking statements should not be read as a guarantee of future performance or results.
The company cautions you that these statements reflect current expectations about the company's future performance or events and are subject to a number of uncertainties and risks and.
And other influences many of which are beyond the company's control that may influence the accuracy of the statements and projections upon which the segment.
Statements are base.
Speaker 2: Factors that may affect the company's results include, but are not limited to the risks and uncertainties discussed in the risk factor section of the annual report on Form 10-K . And the quarterly report on Form 10-Q file with scaries exchange commission.
Factors that may affect the Companys results include but are not limited to the risks and uncertainties discussed in the risk factors section of the annual report on Form 10-K , and quarterly reports on Form 10-Q filed with Securities and Exchange Commission.
Forward looking statements are based on the information available at the time those statements are made and management's good faith belief as at the time with respect to future events.
Speaker 2: Fair looking statements are based on the information available at the time those statements are made and management's good faith belief as at the time with respect to future events.
Speaker 2: All further looking statements are qualified in their entirety by this cautionary statement and CSPI undertakes no obligation to publicly revise or update any further looking statements, whether as a result of new information, future events or otherwise after the date thereof. With that, I'll turn the call over to Victor Delovo, Chief Executive Officer. Please go ahead. Thanks everybody, and now let's turn to the other side of the Sergey.
All forward looking statements are qualified in their entirety by this cautionary statement and CSPI undertakes no obligation to publicly revise or update any forward looking statements whether as a result of new information feed.
Or events or otherwise after the date thereof, with that I'll turn the call over to Victor <unk> Chief Executive Officer. Please go ahead.
Thanks, Michael and good morning, everyone.
Speaker 2: We reported Solow's fiscal first quarter performance as we achieved many of our objectives.
We reported a solid fiscal first quarter performance as we achieved many of our objectives. For example revenue of $12 4 million increased 9% year over year and 24% sequentially.
Speaker 2: For example, revenue of $12.4 million increased 9% year over year and 24% sequentially. accept camera angle of 3 for camera angle objection and contact the
Service revenue grew 23% year over year.
Speaker 2: During the quarter, we continue to manage through a variety of issues during the quarter.
During the quarter, we continued to manage through a variety of issues during the quarter.
Speaker 2: Some of the key factors continues to be the impact of COVID-19 Omicron variant. We had multiple internal COVID outbreaks during the quarter, which slowed us down from completing certain projects.
Some of the key factors continues to be the impact of COVID-19, Omicron variant, we had multiple internal COVID-19 outbreaks during the quarter, which slowed us down from completing certain projects.
Speaker 2: Then of course the supply chain issue which has delayed many customer orders and with our backlog increasing to over 15 million. Under a normal environment we would have had a significant profit for the quarter.
And of course, the supply chain issue, which has delayed many customer orders and with our backlog increasing to over 15 million under a normal environment. We would have had a significant profit for the quarter.
Speaker 2: We also had to give our employees raises to keep the turnover at a minimum. The Florida job market is one of the hottest in the US, so there are many options for our employees. We also had recruiting fees in the tune of $80,000 for the quarter. With the labor market being so tight, we had to hire multiple recruiting companies to help.
We also have to give our employees raises to keep that turnover at a minimum the Florida job market is one of the hottest in the U S. So there are many options for our employees. We also had recruiting fees in the tune of $80000 for the quarter with the labor market being so tight we have to hire.
Multiple recruiting companies to help.
Backfill some of the open positions.
Speaker 2: backfill some of the open positions and as well as new positions because of the growth in the MSP.
And as well as new positions because of the growth in the MSP.
Division. Despite the challenges we were able to generate growth during the quarter as well as build our backlog.
Speaker 2: Despite the challenges, we were able to generate growth during the quarter as well as build backlog.
Speaker 2: Our performance during the first quarter resulted from our continued high engagement with our customers and suppliers to proactively resolve and work through issues. Our team is quite proud that today we have now lost a single order in the backlog. Additionally, being nimbler than our larger peers, we have been able to quickly shift gears to refocus our resources to the services side of the business, which has been a huge success.
Our performance during the first quarter resulted from our continued high engagement with our customers and suppliers to proactively resolve and worked through issues of team is quite proud that today, we have not lost a single order in the backlog. Additionally, being nimbler than our larger peers, we have been able to quickly shift gears to <unk>.
Focus our resources to the services side of the business, which has.
Speaker 2: not been nearly as impacted by us of plane chain issues and have captured meaningful revenue opportunities during this period of search.
Not been nearly as impacted by supply chain issues and have captured meaningful revenue opportunities. During this period of uncertainty.
Our primary goal of migrating to higher margin products and services continues to be achieved as reported solid gross margins of 29, 1%.
Speaker 2: A primary goal of migrating to higher margin products and services continues to be achieved as we reported solid gross margins of 29.1%.
Speaker 2: similar level compared to a year ago fiscal first quarter, despite heading into a period of tougher euro via comparison and facing inflationary pressures with our costs. We do believe at this point we should be able to make further progress with our overall gross margin as compared to Q1 as the year progresses.
A similar level compared to a year ago fiscal first quarter, despite heading into a period of tougher year over year comparison and facing inflationary pressures without cost. We do believe at this point, we should be able to make further progress with our overall gross margin as compared to Q1.
Yeah progresses.
Our technology solution a T S business generated revenue of $11 3 million in the fiscal first quarter and outstanding result that exceeded our plan. Our managed service practice or MSP remains a bright spot because business is that a challenge to retain or attract internal talent I don't expect this dynamic to change.
Speaker 2: A technology solution of TS business generated revenue of 11.3 million in the fiscal first quarter. And our standing result that exceeded our plan. Our managed service practice or MSP remains a bright spot because business is a challenge to retain or attract internal talent. I don't expect this dynamic to change much in the...
Hi, Jeanine.
Speaker 2: Coming here, so we will continue to dedicate the necessary resources to capture our share of this market to build a portfolio of service contract costs.
Coming year. So we will continue to dedicate the necessary resources to capture our share of this market to build a portfolio of service contract customers.
Moving on to the cruise business. The team is currently deployed and working.
Speaker 2: Moving on to the Cruisagne business, the team is currently deployed and working.
Speaker 2: is progressing on four ships, as I mentioned in Q4 call. While the Alma-Krown variant has lowered the operation's optimizer, regarding the timing of additional retrofits, there is another set of ships that could be awarded later this quarter or early Q3. As a reminder, this business provides CSPI with an attractive business opportunity and we have a slightly focused on winning additional business as our fiscal year progressed.
It is progressing on four ships as I mentioned in Q4 call wildly Omnicom Varian has lowered the operator optimism regarding the timing of additional retrofits. There is another set of ships that could be awarded later this quarter or early Q3. As a reminder, this business provides C. S P I within it.
The business opportunity and we are decidedly focus on winning additional business as our fiscal year progresses.
Speaker 2: Regarding UCAS, we added several new customers during the quarter and I'm encouraged with our progress. We do face continued obstacles that are hindering our ability to maximize the revenue potential of this offering. Name recognition is always an issue and we also have a small or sale force than compared to a larger pair.
Regarding <unk>, we added several new customers during the quarter and I'm encouraged with our progress. We do face continue obstacles that are hindering our ability to maximize the revenue potential of this offering name recognition is always an issue and we also have a smaller sales force that can pay up to a larger peers.
Speaker 2: Regarding the high performance product or HPP division, we reported revenue of 1.1 million as the American business performed better than expected. This growth was offset by lower than expected royalty revenue related to the E2D program.
Regarding the high performance product our H P. P Division, we reported revenue of 1.1 million as American business performed better than expected. This growth was offset by lower than expected royalty revenue related to the E <unk> program.
Speaker 2: Approximately 50% of the royalty expected it, revenue was recorded in Q1. With the remaining balance, now expected to be recorded in the second half of fiscal 2020.
Approximately 50% of the royalty expected it revenue was recorded in Q1.
With the remaining balance now expected to be recorded in the second half of fiscal 2022, while Ari remains the primary growth engine for this business segment in December we announced the availability of the Miracle Oxy T X O network interface adapter designed to act as a secure unit directional network bridge.
Speaker 2: While RIA remains the primary growth engine for this business segment, in December we announced the availability of the Miracom XC-TXO network interface adapted designed to act as a secure unidirectional network.
Speaker 2: This product has already been deployed in organizations, including a large public cloud operator and in government applications requiring a network gateway that allows one-way data transfer between classified and unclassified networks.
This product has already been deployed in organizations, including a large public cloud operator, and government applications, requiring a network gateway that allows one way data transfer between classified and unclassified networks. While we don't expect this product to significantly change the upper trajectory of American business.
Speaker 2: But we don't expect this product to significantly change the upper trajectory of American business. It does demonstrate our ability to respond to an increase demand from our OEM and large customers to create a one-way data path.
Does demonstrate our ability to respond to increased demand from our OEM and large customers to create a one way data past.
With regards to ARIA the emergence of the AUM of crime and the timing of holiday slow down the momentum as we had experienced earlier in the quarter. However, we did manage to close a few M D. Our customers and the revenue contributed from these.
Speaker 2: With regards to ARIA, the emergence of Omicron in the timing of holiday slowed down the momentum as we had experienced earlier in the quarter. However, we did manage to close a few MDR customers in the revenue contributed from these commenced in the current fiscal Q2. As of today, we continue to grow our ADR customers generating recurring monthly revenue and a team is working hard to sign new contracts.
Commenced in the current fiscal Q2 as of today, we continue to grow our ADR customers generating recurring monthly revenue and the team is working hard to sign new contracts.
Speaker 2: The order is in the back yard along with the deals. We are pursuing a sizable and we will dramatically transform the revenue landscape for the HPP business.
The orders in the backlog along with deals we are pursuing a sizeable and will dramatically transform the revenue landscape for the H P. P business.
Speaker 2: Although the timing to bring these opportunities across the finish line is unpredictable.
Although the timing to bring these opportunities across the finish line is unpredictable at this point.
Speaker 2: to summarize, we increase that backlog, demonstrating the heightened interest.
To summarize we increased that backlog demonstrating the heightened interest for our products and services and also due to the supply chain issue, which has limited our sales growth, we continue to implement and execute on the initiatives aimed to improve a near term performance such as focusing on service business, while strengthening how long.
Speaker 2: for our products and services that we are, and also due to the supply chain issue, which has limited our sales growth. We continue to implement and execute on the initiatives aimed to improve a near term performance, such as focusing on service business.
Speaker 2: while strengthening our long-term interest as we continue to make progress with the UCAS in ARIA. A bit out of slow pace than we would like. Gary and his financial team has excelled over the past two years and the prudent expense management that have implemented allowed us to maintain our resources.
Term interest as we continue to make progress with our ucas and area of bed at a slower pace than we would like Gary and his financial team has excelled over the past two years and the prudent expense management that have implemented it allowed us to maintain our resources to execute a multi year growth strategy of transform.
Speaker 2: to execute a multi-year growth strategy of transforming to a cybersecurity wireless and managed service.
Turning to a cybersecurity wireless and managed service company.
Speaker 2: With that, I will now ask Gary to provide a brief overview on the fiscal first quarter financial performance.
With that I will now ask Gary to provide a brief overview on the fiscal first quarter financial performance.
Speaker 3: Gary, Victor. As Victor mentioned in his opening remarks, our first fiscal revenue, first quarter revenue was $12.4 million, representing an increase of 9% year over year, and 24% compared to Q4 fiscal 2021.
Gary Thank you Victor.
As Victor mentioned in his opening remarks, our first physical revenue first quarter revenue was $12 $4 million, representing an increase of 9%.
Year over year, and 24% compared to Q4 fiscal 2021 .
Speaker 3: We reported gross margin of $3.6 million or 29.2% of sales compared to $3.4 million or 29.7% of sales at the year ago fiscal first quarter.
We reported gross margin of $3 $6 million or 29.2% of sales compared to $3 4 million or 29, 7% of sales a year ago.
<unk> first quarter.
Speaker 3: Although we were entering a period of tougher year over year gross margin comparison.
Although we were entering a period of tougher year over year gross margin comparisons.
Speaker 3: as the pandemic-related conditions allow us to record a disproportionate level of higher margin service revenue.
As the pandemic related conditions allowed us to record a disproportionate level of higher margin service revenue.
Speaker 3: We had previously started that, we stated that our near and short-term goal is to maintain an annual gross margin and the mid to high 20s, which was achieved.
We had previously started that.
Stated at our near and short term goal is to maintain an annual gross margin in the mid to high Twenty's, which was achieved.
Speaker 3: Our engineering and development expenses for the fiscal first quarter were $627,000 compared to $729,000 in the year-of-go period.
Our engineering and development expenses for the fiscal first quarter were $627000 compared to $729000 in the year ago period.
Speaker 3: The decrease is primarily due to lower personnel costs.
The decrease is primarily due to lower personnel costs.
Speaker 3: Our S-T-N-A expenses in Q1 was 3.4 million.
Our SG&A expenses in Q1 was $3 4 million.
Speaker 3: a slightly increased due to the increased payroll and commissions in the T.S. segment from the year ago SGNA costs of 3.2 million dollars.
A slightly increased due to the increased payroll and commissions in the TSS segment from a year ago, SG&A costs and $3 $2 million.
Speaker 3: We reported a net loss of $366,000 in the fiscal first quarter, or 9 cents loss per diluted share compared to net income of $1.2 million, or 26 cents per diluted share for the first fiscal quarter of fiscal 2021.
We reported a net loss of $366000 in the fiscal first quarter or nine cents loss per diluted share compared to net income $1 $2 million or 26%.
26 cents per diluted share for the first fiscal quarter of fiscal 2021.
Speaker 3: If you recall, the 2021 fiscal first quarter included a gain on a debt forgiveness of the paycheck protection plan SBA loans at the TS and HPP segments totaling 2.2 million, which was established as part of
If you recall.
<unk> 2021 fiscal first quarter included a gain on debt forgiveness of the paycheck protection plan SBA loans at the TFS and HP segments totaling $2 2 million.
Which was established as part of the cares Act.
Speaker 3: excluding the game on the debt forgiveness of the paycheck protection plan SBA loans, the company would have reported a net loss of $1.1 million or 26 cents loss per dulymped share for the first quarter of fiscal 2021.
Excluding the gain on the debt forgiveness of the Paycheck protection plan SBA loans. The company would have reported a net loss of one.
Millions of dollars or 26 cents loss per diluted share for the first quarter of fiscal 2021.
We ended the first fiscal quarter with cash and cash equivalents of $19 $3 million as of December 31, 2021.
Speaker 3: We ended the first fiscal quarter with cash and cash equivalents of $19.3 million as of December 31, 2021. A decrease of over $700,000 from the September 30, 2021.
A decrease of over $700000 from the September 32021.
Speaker 3: In late December 2021, we re-activated the stock repurchase program with authorization to buy up to 194,000 shares of CSPI common stock.
In late December 2021, we reactivated the stock repurchase program with the authorization to buy up to 194000 shares of CSPI common stock.
Speaker 3: We did not purchase any shares in the first fiscal quarter ended December 31, 2021.
We did not purchase any shares in the first fiscal quarter ended December 31 2021.
As a common practice, we will update on a quarterly basis as the program is executed.
Speaker 3: As a common practice, we will update on a quarterly basis as the program is x.
Speaker 3: We will continue to exercise expense management to ensure we have the resources to execute the multi-year growth of our transforming to a cybersecurity wireless and managed service.
We will continue to exercise expense management to ensure we have the resources to execute the multiyear growth of our tranche for me two way cyber security wireless and managed service company.
Speaker 3: With that, I will turn it over to the operator to take your questions.
With that I will turn it over to the operator to take your questions.
Speaker 1: At this time, if you would like to ask a question, please press the star then one on your telephone keypad. You may withdraw your question at any time by pressing the pound key. Again, it is star then one to ask a question.
At this time, if you would like to ask a question. Please press. The Star then one on your telephone keypad you may withdraw your question at any time by pressing the pound key again. It is star then one to ask a question.
And we can take our first question from Scott Caldwell, who is a private investor.
Speaker 1: And we can take our first question from Scott Colwell, who's a private investor.
Yes, good morning, and thank you very much I'm a longtime shareholder can you just box in the.
Speaker 1: Yes, good morning. Thank you very much. I'm a long time shareholder. Can you just box in the aggregate cost of being a publicly traded company on an annual basis, please?
Aggregate cost of being a publicly traded company on an annual basis. Please.
That's probably.
Speaker 3: I don't have the numbers right off hand, but in the past, it's been about $1.8 to $2 million a year.
I don't have the numbers right off hand, but in the past, it's been about $1.82 million a year.
Speaker 1: Okay. Has the board explored any potential to put the company up for sale?
Okay.
Has the board explored any.
Any potential to put the company up for sale.
We've explored that over the years, we have talked to a number of companies over my 10 year here at the company. There's no active program to do that at the moment.
Speaker 3: We've explored that over the years. We have talked to a number of companies over my tenure here at the company. There's no active program to do that at the moment.
Speaker 3: I'm concerned by the fact that you mentioned that we are not as substantial as some of our competitors, and that puts it as a severe disadvantage in the marketplace.
I just I'm concerned by the fact that you mentioned that we are not as substantial.
<unk> some of our competitors and that puts it is.
Severe disadvantage in the marketplace.
Yes, I understand that yes.
Speaker 1: Well, I'd certainly like to encourage you to explore opportunities because it's $2 million across. It seems to be completely out of whack.
Well I'd certainly like to encourage you to explore opportunities because it $2 million of cost.
It seems to be completely out of whack.
Yeah.
Okay.
Thank you.
Okay.
Once again it is star then one to ask a question, we'll pause for additional questions to queue.
Speaker 1: Once again, it is star then one to ask a question. We'll pause for additional questions to queue.
Yeah.
Yeah.
Speaker 1: And we can take our next question from Mike Pranks, who is a private investor. Your line is open.
And we can take our next question from Mike <unk> Who's a private investor Your line is open.
Speaker 3: Good morning, Victor Gary. Thanks for taking my call. I just have a quick question about the share repurchase that you announced. And the way the press release was worded, it's at management's discretion.
Good morning, Victor Gary Thanks for taking my call.
I just have a quick question about the share repurchase that you announced and the way. The press release was worded it's at management's discretion.
Speaker 3: Can you provide the shareholders some assurance that the manager management's discretion to buy shares does not coincide with management's potential sale of shares?
Can you provide the shareholder some assurance that the manager management's discretion to buy shares does not coincide with management's.
A potential sale of shares.
Yeah.
Well.
Speaker 3: I mean, basically no one in the management group at this point has sold and you have a very limited period of time that we don't have blackout periods. But...
I mean basically no one in the management group at this point is sold and you have a very limited period of time that we don't have a blackout period.
But.
Speaker 3: At least at this point, I mean, it can't answer for the rest of the management team, but I don't feel selling large amounts of shares.
At least at this point I mean, I can't answer for the rest of the management team, but I don't see us.
Selling large amounts of shares.
Well, obviously the stock is very illiquid and if I go to sell 10 or 15000 shares.
Speaker 3: Well, obviously the stock is very liquid. And if I go to sell 10 or 15,000 shares, I'm gonna affect the price of the stock. So the question basically is, management has the discretion to buy shares with corporate cash that if you decide to sell 20,000 shares, you don't have the liquidity that I would not have. That's basically the question.
I'm going to affect the price of the stock. So the question basically is management has the discretion to buy shares with corporate cash that if you decided to sell 20000 shares.
You don't have the liquidity that I would not have that's basically the question.
Speaker 3: Well, our intent is not to support the management.
Well, our intent is not to support the management.
Speaker 3: buying shares. I mean, to go out and buy shares if they are actively selling, that's for sure. So, okay. That's it. Thanks.
Teen buying shares.
Go out and buy shares if they are actively selling that's for sure.
Okay.
That's it thanks.
Once again it is star then one to ask a question.
Speaker 1: We'll go next to Joseph Nurgis with Seagram Investments. Your line is open. My guy.
We will go next to Joseph <unk> with Seagram investments your line is open.
Hi, guys. How are you I thought I didn't think my questions were.
Speaker 3: questions were answered here. I didn't know if the star one was working on my phone. Couple of quick things. On your press release, you talked about increasing the managed services in the quarter. And I'll...
Answered here I didn't know if the star one was working on my phone.
Couple of quick things on your press release, you talked about increasing the managed services in the quarter and.
At a brisk pace I guess this way you've stated it.
Speaker 4: versus because of a talent reign at a lot of the smaller companies. So I'm assuming that means a lot of the smaller companies can't attract a talent that you even watch your security or outsourcing most of the IT work outside the traditional in-house staff.
Versus because of a talent drain a lot of the smaller companies. So I'm assuming that means a lot of the smaller companies can't attract the talent there to even watch your secured and are outsourcing most of their.
I T work outside the.
Traditional up.
In House staff.
Speaker 2: It's partially that, but they can attract them at times, but they're not staying long enough. And then you have a training process of X amount of months and then all of a sudden, before you know it, they're leaving.
Am I correct on that it's it's partially that but they can they can attract them at times, but they're not staying long enough and then you have a training process of you know X amount of months and then all of a sudden you know before you know it they're leaving.
Speaker 2: to, you know, for a higher salary, a bonus structure, whatever it may be, and then they have to stop from ground zero again. That's been one of the driving factors of some of the, you know, where they hire us. Not that we don't have the same issue, but at least we have, you know, a lot of people that they can count on, not just one or two. And obviously,
Gee, you know for a higher salary oh bonus structure or whatever it may be in and they have to start from ground zero again, that's been one of the driving factors of.
Some of the you know where they hire us not that we don't have the same issue, but at least we have you know a lot of people that they can count on and not just one or two.
Hi.
And obviously, so I'll start I think becomes a.
Speaker 4: an option that a lot of times they may not have considered in the past and they are considering it today.
An option that a lot of times, they may or may not have considered in the past and they are considering today.
Speaker 4: On the second part of the press release, you talked about the UCAS. I think you mentioned something that are for a point that.
That's correct.
On the second part of the press release, you talked about the U class I think he mentioned something about a point a point.
Speaker 4: There would have been a significant profit at our referent specifically you cast here. No, no overall, overall, overall. Yeah. If you could have supplied.
There would have been a significant profit and I referred to specifically you Kathy or no no overall overall overall, yeah. If you could've supplied.
Speaker 4: uh... you know uh... uh... and i assume a lot of you mentioned at the last conference call uh... about uh... you know you can side-up you can't customer but you can't deliver the telephone or you can't deliver some of the hardware required uh... you can't have a good time just for you can't just for everything the you can't just a small piece of the overall
You know.
Thanks very much.
If if and I assume a lot of and you mentioned that in the last conference call.
You know you can sign up a ucas customer, but if you can't deliver to telephones are you can't deliver a some of the hardware and required a you can't obviously, it's not just for you guys. This is for everything.
The U K or is it just a small piece of the overall.
Speaker 4: you know, um, back log, you know, it's hardware, it's the software that goes along with it, we could deliver it without the hardware, where's it going, and then the services that go along with it, you know, to install it. So let me rephrase my question. If this was three years ago, and there were no supply chain issues, or essentially there wasn't supply chain issues three years ago, I assume, we were pretty much, pretty normal, let's put it that way. You're saying that we would have been, From the
Now backlog.
It's it's hardware it's the.
The software that goes along with it we could deliver it but without the hardware where is it going and then the services that go along with it you know to install it. So let me rephrase. My question. If this was three years ago and there were no supply chain.
So essentially there wasn't supply chain. This is three years ago you were.
Pretty much pretty normal, let's put it that way.
Saying that we would've put it because everybody profitable.
On a normal schedule Oh, that's two two issues one is supply chain, obviously, the anti virus absent those two things we have been pretty profitable.
Speaker 4: Let's two issues. One is supply chain, obviously, and the virus.
Speaker 4: absent those two things we've been pretty profitable because of normal delivery schedule. Yeah, we've never had a $15 million backlog like that ever. It's been half or less than that historically. So obviously...
Because of normal delivery schedule.
We've never had a $15 million backlog like that ever it's been half or less than that.
Shortly so obviously.
Speaker 4: would take much to increase the quarterly sales if you didn't have the backlog or the supply problem. Slight change. Our cruise business just said that you were you're working on cruise is now and then you expect more orders down down the road. Is that what you were doing? Yeah, we're working on the next set of.
Wouldn't take much.
To increase there.
Quarterly sales, if you didnt have the backlog or the supply problems.
Our cruise business you said that you were you're working on Korlym is now and then you expect more orders down the down the road is that yeah. We're working on the next set of.
Speaker 2: Set of ships just things are moving a little slower. I think just with
Set of ships just things are moving a little slower I think just with.
Speaker 2: But the uncertainty, you know, with the cruise line, you know, the decisions that normally take, you know, months have taken a little longer. But, you know, the conversations are there.
But the uncertainty you know what the cruise line you know there's decisions that normally take you know mines had taken a little longer but you know the conversations are there.
Speaker 4: Did we have some E2D royalty in the first quarter?
And did we did we have some <unk> royalty.
Royalty in the first quarter.
Or are you expecting work later in the areas that was yeah. That's.
Speaker 4: or I'd expect more later in the year. Yeah, probably in the third report quarter.
Probably in the third and fourth quarters.
The remainder of the EQT okay.
Speaker 4: the remainder of the E2D. Let me just go back to the press release you had in December and that's the one on the new product, the data diode, the one-way transmit.
Let me just go back to the press release, you had in December and that's the one on the new product the data diode the one way transmit.
Speaker 4: product that you know this myrocom and in that press release you specifically you talked about existing
Product that you introduced Myra com mhm and in that press release, you, specifically you've talked about existing customers.
Speaker 4: where I guess data centers, who are cloud providers using it or somebody's using it and the government agency.
Where I guess datacenter or cloud provider using it or somebody is using it and the government agencies.
Yeah.
Now.
Speaker 4: So it has been beta tested or it has been? No, that's been, we've actually, the beta is over. We actually sold it. Okay. Yeah. And
So.
It has been beta tested.
It has been Oh, no that's been we've actually the betas over we actually sold it.
Yeah.
And.
Speaker 4: Also in that press release, you also mentioned potential use by OEMs, originally OEMs for this product.
Also on that call in that press release, you also mentioned potential used by Oems original.
Oh Williams for this product have.
Speaker 4: have you implemented any of that or is that being tested by them or whether or not they want to incorporate it into their Well, the testing phase is over. We've been awarded a couple of large opportunities, but we can't get the boards to deliver it. Oh, that was going to be my nice with a million dollars question. A multi-million dollar question actually. We can't ship.
Have you implemented any of that or is that being tested by them.
Whether or not they want to incorporate in the.
The testing phases over we've been awarded.
A couple of large opportunities, but we can't get the boards to deliver it.
It was just that was gonna be mandates.
Question.
How.
Multimillion dollar question actually we can't ship I I gotcha. Okay. So that's great. So in a way. It's it's good that you've got the opportunity, but you know.
Speaker 4: I got okay, so that's great. So in a way, it's good that you got the opportunity, but you know.
Speaker 4: pending delivery of product as opposed to...
Pending pending delivery of product.
As opposed to up.
Speaker 5: not being able, you know, not having the product.
Not being able or not.
Not having a product.
Speaker 5: Kids ...
Acknowledged and accepted by the Oems.
Speaker 5: So what are we talking about on board? How, what does it take to get an American board?
So why.
What are we talking about an onboard how what does it take to get into my account board.
Speaker 4: It's a moving target. I could tell you today and it will change tomorrow. So I rather just...
Time wise exactly three months, it's a it's a moving target I could tell you today and it will change tomorrow, so I'd rather just.
Speaker 4: not give you a delivery date because it has changed like three times already. On the board is some key tips that are utilizing.
Now I'll give you a delivery date, because it has changed like three times already okay.
Question on the board as it is some of the key chips that are.
That area.
Are you utilizing.
But.
So these are these Oems are pretty sizable type customers I assume from the backlog that is hmm.
Speaker 5: So these OEMs are pretty sizeable type customers. I assume for the backlog it is.
We're talking about some pretty big companies.
Yeah.
Speaker 2: Yeah, absolutely, absolutely. So I don't know, you know, I don't know exactly what the rollout is. They're a little hesitant to give us a rollout schedule. Moving forward, considering we, you know, we're not sure the first set of delivery, but we're hoping that it continues not only on the opening orders, but into the future.
Yeah, absolutely absolutely so.
I don't know you know I don't know exactly what the rollout is there they're a little hesitant to give us a rollout schedule moving forward. Considering we you know we're not sure are the first set of delivery, but you know we're hoping that it continues not only on the opening orders or you know into the future.
But like you mentioned that.
Speaker 5: But you mentioned that you would have some considerable volume revenue if you could deliver the board.
You would have a.
Some considerable thought.
Considerable volume in revenue if you could deliver the board.
Speaker 2: We have budgeted to put the orders in this year and you know it's up in the year whether they'll hit in
We had budgeted.
The orders in this year and you know it's up in the air whether they'll hit in.
Speaker 2: In this year or next year, it's just, we have no control of, we're talking to them constantly, we're pushing, but in the scheme of things, on the totem pole, I'm not sure where we stand to be completely...
And this year or next year. It's just you know we have no control of you know where we're talking to them constantly we're pushing but and you know in the scheme of things you know on the tone and Paul I'm, not sure where we stand to be to be completely honest with you.
Okay, well very good. Thank you very much I appreciate it sounds like we're making progress.
Speaker 5: Okay, well, very good. Thank you very much. I appreciate it. It sounds like we're making progress absent. What we can't control. Let's put it that way.
What we can't control, let's put it that way.
Definitely a lot.
Yeah.
Speaker 1: And as a reminder, it is star than one to ask a question. We'll pause briefly for an additional questions to queue.
And as a reminder, it is star then one to ask a question, we'll pause briefly for any additional questions to queue.
Speaker 1: We do have another question. It comes from Brett Davidson, a private investor. Your line is open.
We do have another question.
It comes from Brett Davidson private Investor Your line is open.
Speaker 1: Good morning, I'm looking for just a little color and a couple of items.
Good morning, I'm looking for just a little color on a couple of items.
Speaker 1: The receivables show us about quarter and a half.
Yeah receivables show is about a quarter and a half.
Speaker 1: You know as the move to the to the managed service thing is Is there any insight that that may start to contract?
It is.
The move to the to the managed service thing.
Is there any insight that may start to contract.
Okay.
Speaker 4: Well, let me just clarify some things too. Remember that a lot of the revenue that we have is booked net, not gross, but the receivable is gross. So that can be a little deceiving within taking some of that. And I like it. I'll follow on.
Well.
Brett Let me just clarify some things to remember that a lot of the revenue that we have is booked net.
Net not gross but the receivable as it grows so that can be a little deceiving within taking some of that and I'll leave it there.
All along.
Nik I didn't mean to interrupt you.
Speaker 4: And now, Gary, Gary? No, and that's what I was just trying to say within the receivable, there are those items. So that's just to fuse it off from that standpoint, Brett.
No go ahead Gary.
No and that's what I was just trying to stay within the receivable there are those items.
Curtis skews it off.
From that standpoint.
Brett.
Speaker 6: on the shift business.
Got it.
On the chip business.
Speaker 6: Maybe it can add some detail as to how that whole process works. So you guys land a contract. I mean, these multi-hundred thousand contracts and are you out there for two weeks, two months, six months? What did it take to complete one of these contracts?
Maybe it could add Oh.
Some detail as to how that whole process works. So so you guys only under contract.
I mean are these are multi hundred thousand contracts and are you out there for two weeks two months six months.
What does it take to complete one of these contracts.
Speaker 2: There's different contracts for different that one of them could be where we just go on four or five ships all over the world and we'll do a site map of where all the new APs and wireless needs to go. That's phase one. That phase two is you get the order delivering of the APs. They have their own
There's different contracts for for for a different.
One of them could be where we just go on four or five ships all over the world and we will do a site map of where all the new a piece and wireless needs to go that's phase. One then phase two as you get the order or you know delivering of the a piece that they have their own.
Speaker 2: set of individuals that actually put them where they go. And then we'll come back on. And usually while the ship is sailing, the guys will be on there configuring them. And then making sure that it's fully covered all over the ship.
Set of individuals that actually you know put them, where they go and then we'll come back on and you know usually wildly ship is sailing will be you know the guys will be on their configuring them and then you know making sure that it's fully covered all all over the ship.
Speaker 2: and eat the pharynx because of the metal walls, they take care of all that. And then they come back and then another phase three is to write that all up and do a full, you know, description of where everything is, the configurations, you know, all the paperwork that goes along with it. So it's in different stages and you know, it doesn't happen all the time. And then there's the retrofit where they are docked out of the water.
Any interference because of the metal walls. They take care of all that and then they come back and then another phase III is to write that all up and do a full you know description of where everything is the configurations. You know all the paperwork that goes along with it. So it's in different stages and you know it doesn't happen all the time.
And then there's the retrofit where they their doctor out of the water.
Speaker 2: and we'll come in and do the site map and everything will be done and it has to be done in two weeks. You know this they literally work 18 hours a day for two weeks straight just because it has to be done while it's on dry dot.
And we will come in and do the site map and everything will be done and it has to be done in two weeks you know their as they literally work 18 hours a day for two weeks straight just because it has to be done while it's on dry dock.
Speaker 2: So there's different things that happen. It just depends on the customer and their needs.
So there's different things that happen. It just depends on you know the customer and their needs.
And they usually give them my four ships at a time and you know it just depends on the size of the ship matters too right. There's usually three different sizes, you know and it just each you know each one is you know the bigger the ship tomorrow cost to do it.
Speaker 2: And they usually give them like four ships at a time and it just depends. And the size of the ship matters too, right? There's usually three different sizes. And each one is the bigger the ship, the more it costs to do it.
Yeah.
Speaker 6: And these are multi-hundred-thousand dollar jobs, or a million dollar jobs, or a hundred to a thousand.
And these are multi hundred thousand dollar jobs are million dollar jobs or.
Now hundreds of hundreds of thousands.
Speaker 4: Got it. And so, you know, from billing standpoint, are each phase being built separately, or is this wait till the end, and it's all, what will we do? That's why we kind of separated them. So we're not waiting to the end because it could be months in between. So we've kind of tried to separate them as stages so we can get paid as we go. Got it. All right, I wanna switch gears to the E2D thing.
Got it and so you know from billing standpoint, or each phase being billed separately or or just wait till the end and it's all [laughter].
That's why we kind of separated them. So we're not waiting to the end because it you know it could be months in between so we've kind of tried to separate.
As stages. So we can get paid as we go.
Got it.
Alright, I wanted to switch gears to the to the E. Two D thing.
Or are we still bringing in any any revenue for spares for the the American planes or are we just limited to the other.
Speaker 6: Are we still bringing in any revenue for spares for the American planes? Are we just limited to the foreign time time now?
The foreign country right now.
It's primarily the foreign content there may be a few spares that are done for the American, but they're shifting over to newer technology.
Speaker 4: Primarily the foreign content there may be a few spears that are done for the Americans, but they're shifting over to newer technology. Yeah, so even the spare stuff is dry enough.
Got it so even the spare stuff is drying up.
Got it.
Alright. Thank you very much I know you guys have yourself.
Speaker 6: All right, thank you very much and you guys have yourself a good afternoon. Yeah, you too, Brad. Brad, Brad.
Good afternoon.
You bet right.
Once again Thats Star then one for a question we'll pause briefly.
Speaker 1: Once again, it's star than one per question. We'll pause briefly.
Okay.
Speaker 1: There are no additional questions at this time. I'd like to turn the program over to Victor Demlovo for any additional remarks.
There are no additional questions at this time I'd like to turn the program over to Victor <unk> for any additional remarks.
Speaker 2: Thank you. As always, I want to thank our shareholders for their continued interest in support. These remain challenging times. However, we are executing on a plan to deliver near short-term and long-term results as remain committed to growing the business. Gary and I look forward to sharing our progress in fiscal 2022 second quarter operating result in May. Until then, be well and be safe.
As always I want to thank our shareholders for their continued interest and support these remain challenging times. However, we are executing on our plan to deliver a near short term and long term results as we remain committed to growing the business, Gary and I look forward to sharing our progress in fiscal 2022 second quarter off.
Earning results of May until then be well and be safe.
Okay.
Speaker 1: Thank you for your participation. This does conclude today's program. You may disconnect at any time.
Thank you for your participation. This does conclude today's program.
Disconnect at anytime.
Hum.
[music].
Speaker 7: The.
Speaker 7: The.
Okay.