Q2 2024 CSP Inc Earnings Call
[music].
Operator: Good morning everyone, and welcome to CSPI's second quarter fiscal year 2024 conference call. At this time, all participants are in a listen-only mode, and the floor will be open for questions after the presentation. If you do have any questions, we ask that you limit them to one question and one follow-up question in the interest of time. Thank you.
Good morning, everyone and welcome to C. S. P. I second quarter fiscal year 'twenty 'twenty four conference call. At this time, all participants are in a listen only mode and the floor will be open for questions. After the presentation. If you do have any questions. We ask that you limit them to one question and one follow.
Operator: My question in the interest of time, thank Keith if anyone should require operator assistance. During this conference. Please press star zero on your phone to keypad. Please note. This conference is being recorded I will now turn the conference over to your host Michael believe you you may begin.
Operator: If anyone should require operator assistance during this conference, please press star zero on your phone keypad. Please note this conference is being recorded. I will now turn the conference over to your host, Michael Polyviou. You may begin.
Michael Polyviou: Thank you, Jenny. Hello, everyone, and thank you for joining us to review CSPI's fiscal 2024 second quarter results, which ended March 31, 2020. With me on the call is Victor Dellovo, CSPI's Chief Executive Officer, and Gary Levine, CSPI's Chief Financial Officer. After Victor and Gary conclude their opening remarks, we will then open the call for questions. During the Q&A session, we ask participants to limit themselves to one question and one follow-up question and then re-cue if they have any questions.
Michael Polyviou: Thank you Johnny Hello, everyone. Thank you for joining us to review Cspi's fiscal 2024 second quarter results, which ended March 31 2020.
Michael Polyviou: With me on the call is Victor to logo Cspi's, Chief Executive Officer, Gary Levine, Cspi's, Chief Financial Officer, After Victor and Gary conclude their opening remarks, we will then open the call for questions. During the Q&A session. We ask participants to limit themselves to one question and one follow up question and then re queue. If they have additional questions Dave.
Unknown Speaker: 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 a term defined in federal securities law. 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. Unknown Speaker We look at statements that should not be meant as a guarantee of future performance or results. The company cautions you that these statements reflect the current expectations about the company's future performance or events and are subject to several uncertainties, risks, and other influences, many of which are beyond the company's control and may influence the accuracy of those statements and the projections upon which the segment and the statements are based.
Michael Polyviou: <unk> made by CSPI.
Unknown Speaker: Today's call regarding the company's business that are not historical facts may be forward looking statements as determined identified federal Securities law. The words May will expect believe anticipate project plan.
Speaker Change: Thank you.
Unknown Speaker: Can you as well as similar expressions are intended to identify forward looking statements.
Unknown Speaker: Looking statements should not be.
Unknown Speaker: As a guarantee of future performance or results.
Unknown Speaker: <unk> cautions you that these statements reflect our current expectation about the company's future performance or events.
Unknown Speaker: Subject to several uncertainties risks and other influences many of which are beyond the company's control that may influence the accuracy of those statements and projections on which segment and statements of our base.
Unknown Speaker: 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 reports on Form 10-Q filed with the Securities and Exchange Commission. Photologist statements are based on the information available at the time those statements are made and management's good faith belief as of the time with respect to future events. All photologist statements are qualified in their entirety by this cautionary statement, and CSPI makes no obligation to publicly revise or update any photologist statements, whether as a result of new information, or otherwise. Victor, please go ahead.
Unknown Speaker: 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 our quarterly reports on Form 10-Q filed with Securities and Exchange Commission.
Unknown Speaker: Statements are based on the information available at the time those statements are made and management's good faith belief as of the time with respect to future events. All forward looking statements are qualified in their entirety by this cautionary statement CSPI and takes no obligation to publicly revise or update any forward looking statements whether as a result of your information.
Unknown Speaker: You too or events or otherwise after the date thereof, with that I will turn the call over to Victor Global Chief Executive Officer.
Victor: Victor Please go ahead.
Victor J. Dellovo: Thanks, Michael, and good morning, everyone. Earlier this morning, we announced our fiscal 2024 second quarter results, which once again demonstrate the return we are generating from our strategic shift toward higher-margin products and services. While we continue to invest in broadening the launch of AZT Protect, we grew services revenue 23%, increased our gross margins 47%, and realized a five-fold increase in net income compared to a year ago. Our progress during the first half of the year, combined with the building of the pipeline of AZT, positions us for future success.
Victor: Thanks, Michael and good morning, everyone. Early this morning, we announced our fiscal 2024 second quarter results, which once again demonstrates the return we are generating from our strategic shift towards higher margin products and services, while we continue to invest in the broadening.
Victor J. Dellovo: The launch of AZT protect we grew services revenue, 23% increase that gross margins, 47% and realized five fold increase in net income compared to a year ago fiscal second quarter.
Victor J. Dellovo: Progress during the first half of the year combined with the building of pipeline of basic position us for future success.
Victor J. Dellovo: I'll start my review of the operations with our high-performance product, or HPP, which is benefiting from the growing market interest in AZT offerings. During the quarter, HPP contributed $2.5 million in total revenue compared to $1.5 million in a year-ago quarter.
Speaker Change: I'll start my review of the operations with our high performance product, our H P. P, which is benefiting from the growing market interest in AZ T offering during the quarter H B P contributed 2.5 million total revenue compared to $1.5 million and a year ago quarter. The ADT offering is changing how we operate and how the industry.
Victor J. Dellovo: The AZT offering is changing how we operate and how the industry perceives CSPI. We are generating significant attention and interest at industry events and conferences, and this interest is from some of the largest global corporations.
Victor J. Dellovo: For C C S P I.
Victor J. Dellovo: We had generated significant attention and interest in industry events and conferences and this interest is from some of the largest global corporations, despite only bringing.
Victor J. Dellovo: Despite only being months into AZT's launch, we are building traction in the market, and the level of customer enthusiasm remains high, as does the new business lead pipeline. During the quarter, we signed our largest contract for AZT, a multi-million dollar agreement with a global pharmaceutical company that is deploying AZT across its global manufacturing platform and is in the process of protecting over 40 facilities from the growing cybersecurity threat to operational technology from hostile nations, terrorism, and organized crime.
Victor J. Dellovo: Being months into easy T launch, we are building traction in the market and the level of customer enthusiasm remains high as does the new business pipeline during the quarter, we signed our largest contract for AZ T. A multimillion dollar agreement with a global pharmaceutical company, which is deploying agent T across its global manufacturing platform.
Victor J. Dellovo: And it is in the process of protecting over 40, 40 facilities and from the growing cyber security threat to operational technology from hostile nations terrorism and organized crime.
Victor J. Dellovo: Early this week, a case study of AZT Protect was published in the Journal, an award-winning publication for Markwell Automation. I can't begin to tell you how critical and important this is to reach a subscriber base of over 50,000, a targeted audience that is committed to keeping up-to-date with leading-edge methods, trends, and technologies that protect the industrial automation segment from cyber security attacks. Our partnership with Rockwell is expanding, as tomorrow we are co-hosting a webinar titled CyberRx.
Victor J. Dellovo: Early this week a case.
Victor J. Dellovo: Reis history of basically protect was published in the Journal and award winning publication from Rockwell automation, we can't begin to tell you. How critical important this is to reach as disguise base of over 50000 target audience that is committed to keeping up to date with leading edged massive trends and technologies that protect the injured.
Victor J. Dellovo: Industrial automation segment from cyber security attacks.
Victor J. Dellovo: Our partnership with Rockwell is expanding as tomorrow, we are co hosting a webinar titled Cyber our Rx how to automatically protect Rockwell OTT customers from today's cyber attacks, Gary South of all general managers C. S. P. I R. S. Cyber security will be joining Thomas House life Science, cyber and digital consulting.
Victor J. Dellovo: How to Automatically Protect Rockwell OT Customers from Today's Cyber Attacks. Gary Southwell, General Manager of CSPI ARIA Cybersecurity, will be joining Thomas House, Life Science Cyber and Digital Consultant, at Rockwell Automation. They will be discussing why the Purdue model passive defense and AV slash NGAV are not stopping the most dangerous attacks.
Victor J. Dellovo: The webinar will enable Rockwell to discuss the unique set of requirements that are needed to protect an organization's production application's attack surface and how ARIA-AZT Protect plays a unique and critical role in meeting this. Gary and Thomas will delve into the composition of supply chain attacks and finally hear about a case study of how one of the world's largest pharmaceutical manufacturers uses Aria AZT Protect in combination with Rockwell's industrial automation suite to protect their environment As we outlined during our last call, we are leveraging the height of the trade show season and attending several of the more intimate OT-focused events as we continue to further expand our brand presence within the OT marketplace.
Victor J. Dellovo: At Rockwell automation.
Victor J. Dellovo: They will be discussing why the Purdue mono passive defense and a V. Slash N G. A V I not stopping the most dangerous attacks.
Victor J. Dellovo: The webinar enables rockwell to discuss the unique set of requirements that are needed to protect an organization's production applications attack surface. It how are you a Z T protects plays a unique and critical role in meeting this need.
Victor J. Dellovo: Gary and Thomas will delve into the composition of supply chain attacks and finally here about a case study of how one of the world's largest pharmaceutical manufacturers use easy ARIA AZT protect and combination with rockwell's industrial automation suite to protect their environment and meet their challenging O T required.
Victor J. Dellovo: <unk>.
Victor J. Dellovo: As we outlined during our last call. We are leveraging the height of the trade show season and attended several several of the more intimate O T focus events as we continue to further expand our brand presence within the Ot market place. This is part of a wider launch strategy, which is to engage with fortune.
Victor J. Dellovo: This is part of our wider launch strategy, which is to engage with Fortune 500 companies, demonstrate the need for AZT Protect Solution, and believe our approach is building interest with the slower sales cycle customers, and we are building a pipeline of opportunities focused on oil, gas, energy, and water treatment plants. Just to name a few of the focus areas. To increase shorter-term revenue opportunities for AZT Protect, we implemented Phase 2 of our multi-pronged sales strategy and hired three new salespeople to focus on middle-market enterprises.
Victor J. Dellovo: 500 companies to demonstrate the need for AZT protect solutions. We believe our approach is building interests with the slower sales cycle customers and we are building a pipeline.
Victor J. Dellovo: Opportunities focused on oil gas energy and water treatment plants just to name a few of the focus industries.
Victor J. Dellovo: To increase short term revenue opportunities for AZT protect we implemented phase two of our multi pronged sales strategy and high three new salespeople to focus on middle market Enterprise as a result of this investment we have doubled the dedicated AZ AZ tea sales team to further expand AZT protect market penetration.
Victor J. Dellovo: As a result of this investment, we have doubled the dedicated AZT sales team. We believe our direct sales team and ability to use our partner's depth is going to significantly raise the profile of AZT's offering and build revenue opportunities. We also announced two major awards: ARIA Cybersecurity wins the Global Infosec Cybersecurity Product Award for AZT Protect at RSA, and ARIA Cybersecurity wins the prestigious Globe B Cybersecurity Award for AZ
Victor J. Dellovo: We are actively expanding exists existing partnerships and exploring the creation of new ones. We see this part of our go to market, Australia as a pathway to address the government segment. As we are very close to signing one of the largest government focused distributors. We believe our direct sales team and the ability to use our partners depth is gone.
Victor J. Dellovo: Significantly raised the profile of AZT offering and build revenue opportunities.
Victor J. Dellovo: We also announced two major awards that area cyber security wins Global Info SEC Cybersecurity product award for AZT protect at RSA and ARIA Cybersecurity went to prestigious global Cyber security protect award for AZT protect.
Victor J. Dellovo: The technology solution or the TS business continues to perform and contribute $11.2 million to the total revenue of $11.8 million a year ago's quarter. During the first fiscal quarter, we announced that we would deliver proactive monitoring, management, and support for the college's critical technology infrastructure, including network, security, and private cloud services. The success of TS continues to be driven by a customer's increased use of implementation, installation, and training. This component of our company remains quite robust.
Victor J. Dellovo: The technology solution or the T. S business continues to perform and contributed $11 2 million to a total revenue of $11 8 million a year ago quarter.
Victor J. Dellovo: During the first fiscal quarter, we announced a five year multimillion dollar contract to provide managed services for a prominent Florida public College, one of the largest and most diverse institutions of higher education in the nation.
Victor J. Dellovo: We will deliver proactive monitoring management and support for the college critical technology infrastructure, including network security and private cloud services.
Victor J. Dellovo: The success of T. S continues to be driven by our customers increased use of implementation installation and training capabilities. This component of our company remains quite robust as we added new ucas customers during the quarter. The T. S pipeline is currently running above average the cloud business currently has a record pipeline. This.
Victor J. Dellovo: As we added new UCAS customers during the quarter, the TS pipeline is currently running above average. The cloud business currently has a record pipeline. This is highly, this is a highly stable business as we have achieved a customer retention rate of more than 90%. The shipping business remains relatively unchanged from prior quarters.
Victor J. Dellovo: Hi, Lee this is a highly stable business as we have achieved a customer retention rate of more than 90%.
Victor J. Dellovo: The shipping business remains relatively unchanged from prior quarters, we did sign a new customer and we are looking forward to fostering a strong relationship over the coming years.
Victor J. Dellovo: We did sign a new customer, and we are looking forward to fostering a strong relationship over the coming years. As I stated on the prior call, we are currently working with one of the largest freight operators specializing in containerized ocean exports serving numerous ports worldwide with an extensive global agent network. We have, In order for over 14 ships that are expected to be retrofitted over the next few months, and upon completion, we expect to provide our managed services for each of these ships, where we'll add to our monthly recurring revenue.
Victor J. Dellovo: As I stated on the prior call. We are currently working with one of the largest freight operators specializing in containerized ocean exports, serving numerous sports worldwide with an extensive global agent network we have.
Victor J. Dellovo: In order for over 14 shifts that are expect to be retrofitted over the next few months and upon completion, we expect to provide a managed services for each of these ships will add to our monthly recurring revenue.
Victor J. Dellovo: To summarize, with the successful launch of AZT Offering, I believe we have positioned the company for sustained long-term growth and success. Our two businesses are growing, and the pipelines are growing, and this will translate to increased revenue margins and profitability. Lastly, we believe the recent two-for-one stock split increased the liquidity of CSPI shares, and I believe it will provide greater opportunities for institutional participation and enhance shareholder value at the time we are broadening our business prospects.
Victor J. Dellovo: To summarize with the successful launch of AZ T offering I believe we have positioned the company for sustained long term growth and success.
Victor J. Dellovo: Our two businesses are growing in the pipelines are growing and we will translate to increased revenue margins and profitability. Lastly, we believe the recent two for one stock split increased illiquidity F. C. S. P. I. She is and I believe it will provide greater opportunities for institutional participation and enhance shareholder value at the time.
Victor J. Dellovo: We also believe the success of AZT launch and growing cyber security threats allow us to now engage in an active investor relations strategy. We will keep you posted as we schedule conferences, participation, and other related events. With that, I will now ask Gary to provide a brief overview of our fiscal second quarter financial performance.
Victor J. Dellovo: We are broadening our business prospects. We also believe the success the basal IQ launch and growing cyber security threats are allow us now engaged in active investor relation strategy. We will keep you posted as we scheduled conferences participation and other related events with that I will now ask Gary to provide a brief overview of our <unk>.
Gary W. Levine: For the fiscal second quarter ended March 31, we reported revenue of $13.7 million compared to $13.3 million in the year ago fiscal second quarter. Our revenue performance was driven by a 23% growth in the service business. Our Q2 gross profit, which was greatly impacted by the higher service revenue, was $6.5 million or 47.3% of revenue compared to $5 million or 37.6% of revenue. For the fiscal second quarter, our engineering and development expenses were $726,000 compared to $858,000 as we reduced outside contractors and elected not to fill some open positions.
Speaker Change: Fiscal second quarter financial performance Gary.
Speaker Change: Thank you Victor.
Gary W. Levine: Our SG&A cost for the fiscal second quarter was $4.5 million dollars compared to $3.9 million dollars in the year ago fiscal second quarter, as we continue to invest in the AZT offering, including building out the dedicated sales team and trade conference participation. Benefiting from the higher service revenues and higher margin, we recorded net income of $1.6 million, or 16 cents per diluted common share, for the fiscal second quarter ended March 31st, 2024, compared to net income of 0.3 million, or 3 cents per diluted share, for the fiscal second quarter ended March 31, 2023, although amounts have been retroactively restated to reflect the two for one stock split.
Gary W. Levine: For the fiscal second quarter ended March 31.
Gary W. Levine: We reported revenue of $13 7 million compared to $13 $3 million in the year ago.
Gary W. Levine: <unk> second quarter.
Gary W. Levine: Our revenue performance was driven by a 23% growth of the service business.
Gary W. Levine: Our Q2 gross profit, which was greatly impacted by the higher service revenue.
Gary W. Levine: $6 $5 million or 47, 3% of revenue compared to $5 million or <unk>.
Gary W. Levine: 37, 6% of revenue.
Gary W. Levine: For the fiscal second quarter, our engineering and development expenses was $726000 compared to $858000 as we reduced outside contractors and elected not to fill some open positions.
Gary W. Levine: Our SG&A costs for the fiscal second quarter was $4 $5 million compared to $3 $9 million in the year ago fiscal second quarter as we continue to invest in the AZ G offering including building out the dedicated sales team and trade.
Gary W. Levine: His participation.
Gary W. Levine: Benefiting from the higher service revenues and higher margin, we recorded net income of $1 $6 million or 16 cents per diluted common share.
Gary W. Levine: For the fiscal second quarter ended March 31 2024.
Gary W. Levine: Compared to net income of 3 million or three cents per diluted share.
Gary W. Levine: The fiscal second quarter ended March 31, 2023.
Gary W. Levine: Per share amounts were had been retroactively restated to reflect the two for one stock split.
Gary W. Levine: Following the two for one stock split, we currently have 9.5 million shares outstanding. The company had cash and cash equivalents of $27.1 million as of March 31st, 2024. We believe our robust financial position allows us to execute our multi-pronged sales and growth strategy for the AZT offering, as well as other products and service lines and financials and financing large customer agreements, which have been highly successful in the past for CSPI. Lastly, the Board of Directors approved a quarterly dividend of $0.03 per share payable on June 12, 2024 to CSPI shareholders of record on the close of business on May 24, 2024. With that, I will turn it over to the operator to take your questions. Thank you.
Gary W. Levine: Following the two for one stock split we currently have nine 5 million shares outstanding.
Gary W. Levine: The company had cash and cash equivalents of $27 $1 million as of March 31, 2024.
Gary W. Levine: We believe our robust financial position allows us to execute our multi pronged sales and growth strategy for the a Z T offering as well as other product and service lines and financials.
Gary W. Levine: Financing large customer agreements, which have been highly successful in the past for CSPI.
Gary W. Levine: Lastly, the board of directors approved a quarterly dividend of <unk> <unk> per share payable on June 12, 2024 to CSPI shareholders of record on the close of business of May 24th 2024.
Gary W. Levine: With that I will turn it over to the operator to take your questions.
Operator: Thank you very much. At this time, we will be conducting our question and answer session. If you would like to ask a question, please press star 1 on your phone keypad. A confirmation tone will indicate that your line is in. You may press star 2 if you would like to remove your question from the key. For any participants using speaker equipment, it might be necessary to pick up your handset before you press the key.
Speaker Change: Thank you very much at this time, we will be conducting a question and answer session. If you would like to ask a question. Please press star one on your keypad.
Operator: Time will indicate that your line is and Nicky you May press star two if he would like to remove your question from Nicky So any participants using speaker equipment it might be necessary to pick up your handset before you press. The keys. Please pose amendment, mostly poll for questions.
Operator: Please pause for the moment whilst we poll for questions. Thank you. Your first question is coming from Joseph Nerges of Seagram Investments. Joseph, your line is live. Thank you.
Joseph Nerges: Thank you. Your first question is coming from Joseph niches of Sequined investments Joseph Your line is life alright. Thank you good morning, guys Oh.
Joseph Nerges: Thank you. Good morning, guys. How's everything going? Good, Joe. Okay, a couple, one question, one follow-up, you were you're, you're cutting me down here. One, one question. I'm going back to the last conference call you did, Victor. And you mentioned that we're close to rolling out a full production line version of AZT, which is sort of for the IT environment. Is that still in beta testing? Because that hasn't been released as yet.
Joseph Nerges: Hows everything going.
Joseph Nerges: Good Joe Joe.
Joseph Nerges: A couple of one question and one follow up you were you're you're cut me down here [laughter]. One one question I'm going back up in the last conference call you did Victor.
Joseph Nerges: And you mentioned that were close to rolling out a full production line version of S. E T.
Joseph Nerges: Which sort of for the it environment is that still in beta testing because that hasn't been released as of yet.
Victor J. Dellovo: Correct. Yeah, well, it should be May. We're doing some, you know, additional testing just to make sure everything is where it needs to be. But we have rolled it out to a few other customers already with no issues, but we have some enhancements and stuff like that where we're developing right now.
Victor: Correct correct, Yeah, we'll it should be May we're doing some additional testing just to make sure everything.
Victor J. Dellovo: Is it where it needs to be but we have rolled it out two to a few of the customers already with with no issues, but we have some enhancements and stuff like that where we're developing right now.
Victor J. Dellovo: And how will that enhance what we already have out there? In other words, what do we expect that add-on will help us with?
Speaker Change: And how will that enhance what we already have out there.
Victor J. Dellovo: In other words, what what what do we expect that add on will help us help us with it.
Victor J. Dellovo: Oh, in the OT space, right? Update. Um, and patches are not as important. And that's why our product, you know, kind of fits into where it protects it even without patches in the IT space. They still want to do patching. So we needed to allow for that, whether it's manual or automated. So that's where the enhancements came in on the IT side of it, where, like I said, in the OT space, patching is not as important, just because you can't really touch the machines in IT, whether it's a Microsoft patch or any other. [inaudible] that's out there. We need to allow for that, and that's kind of where we've been developing it and making sure it works with all the other products that are out there.
Victor J. Dellovo: Oh in the Ot space rate updates.
Victor J. Dellovo: Hum.
Victor J. Dellovo: And patches are not as important and that's why our product you know kind of fits into where it protects that even without the patches in the I T space. They still want to do patching. So we what we needed to allow for that whether it's manual or automated so that's where the enhanced.
Victor J. Dellovo: <unk> came in the I T I T side of it where like I said in the Ot space Patching is not as important I'm, just because you can't really touch the machines and the I T. Whether it's a Microsoft patch or any other you know.
Victor J. Dellovo: Patch or.
Victor J. Dellovo: That that's out there we need to allow for that and that's kind of where we've been developing and making sure. It works with all the other products that are out there.
Joseph Nerges: Okay, and just one quick follow-up here, and that is, I think the last time you mentioned with the chemical company, our 545 at a chemical company where we have multiple sites, but basically, it's the plant managers, and he happens to be the plant that's hacked or breached.
Speaker Change: And just one quick follow up here and that is the.
Joseph Nerges: I think the last time, you mentioned with the chemical company are five Fortune 500, chemical company, where we have multiple sites, but basically it's the plant managers.
Joseph Nerges: Decision, whether you wanted to implement the mhm AZT protect well you know the old sales them on when it comes out now.
Joseph Nerges: I can't imagine I mean, the approach that I would make any plant manager would be do you really want to be the plant manager had decided to not implement it.
Speaker Change: And yet you were hacked at your plant I mean, that's sort of a career ender isn't it [laughter] he's gonna be in real trouble.
Joseph Nerges: X number have implemented it.
Joseph Nerges: Not hacked in and he happens to be the the plant attacked our breached.
Victor J. Dellovo: Yeah, that makes sense. But sometimes common sense is not the thing that people use all the time.
Speaker Change: Yeah that makes sense, but sometimes commonsense is not the thing that people use all the time, so I certainly wouldn't mind Leslie I would put that in the back of their mind that if nothing else, though where we are we always do we always do.
Victor J. Dellovo: So I certainly wouldn't mind. I would, I would put that in the back of their minds. If nothing else, we always do. We always do. Well, I'll let I'll let.
Victor J. Dellovo: Well, I'll let, I'll let, I'll open up for other questions for others. Thanks, Joe.
Victor J. Dellovo: I'll, let I'll, let us all along with one other question for other people.
Operator: Thank you very much. Just a reminder that if you do have any questions, you can press star one on your phone keypad now to join the queue. We've got a question from Brett Davidson, who's a private investor. Brett, your line is live.
Speaker Change: Thanks, Joe.
Speaker Change: Thank you very much just to remind you that if you do you have any questions. You can press star one on your phone keypad now to join the key.
Brett Davidson: Please go ahead.
Operator: So the question is are we do we've got a question from Brett Davidson, who is a private investor Brett Your line is live.
Operator: Yeah.
Brett Davidson: Good morning, gentlemen. Good morning.
Brett Davidson: Good morning, gentlemen, good.
Brett Davidson: Good morning, I had a cooperative regarding those.
Victor J. Dellovo: Regarding those, three new salespersons. Talks about targeting larger mid-market companies. What does that look like? Are these guys going out and meeting at their locations? What exactly does it mean that they're targeting mid-market companies?
Brett Davidson: Three new sales persons talks about targeting.
Brett Davidson: Larger mid market companies, what does that look like are these guys going out and meeting at the at their locations what exactly does it mean that they're targeting mid mid market companies.
Victor J. Dellovo: When we talk, well, the mid to instead of looking at the top Fortune 500 companies, you know, the huge gas companies, a huge, you know, the companies that definitely have a need but move really, really slow. We're trying to get into that next layer where they're not as large, and we'll be able to target them. And hopefully, decision making can come a lot faster, POCs could go a lot faster. So that's a combination of, you know, meeting some of the customers at trade shows, you know, calling them on the phone, visiting them locally, whatever it takes. It's a combination of of
Brett Davidson: We talk all the Midsummer instead of looking at the top Fortune 500 companies you know the the huge gas companies a huge you know that the companies that are definitely have a need but move really really slow we're trying to get into that next layer, where it's they're not as bad as large and.
Victor J. Dellovo: We'll be able to target them and hopefully decision make making can come a lot faster P. O six could go a lot faster so and that's a combination of a you know meeting some of the customers that trade shows you know calling them on the phone visiting them locally whatever it takes it's a combination of all.
Victor J. Dellovo: Of everything.
Victor J. Dellovo: Unknown Speaker And, and, you know, is there a pipeline right now regarding the AZT product? Is there, you know, stuff that Unknown Speaker is in the process of developing? It's not quite to the sales line. Unknown Speaker Yeah, it's a combination. Yeah, yeah, it's a combination of we have current POCs going on where they're actually testing the product, whether it's in a lab or whether it's, you know, in their environment. And there are other ones that are, you know, that are lower down the line where we started talking to them.
Victor J. Dellovo: And you know is there a pipeline right now regarding.
Victor J. Dellovo: Regarding the product.
Victor J. Dellovo: Product is is there you know stuff that.
Victor J. Dellovo: As in process, it's not quite to the to the sales line is yeah. It's a combination of that yeah. Yeah. It's a combination of AR. We have current P. O sees going on where they are actually testing the product whether it's in a lab or whether its a you know in their environment and there's other ones where.
Victor J. Dellovo: You know that off the lower down the line, where we started talking to them and now it's about getting you know these large companies all have big labs, and getting the authorization and getting the security clearance and getting everything else that gets through so we could go into the lab and get set up you know that that's a process a lot of paperwork a lot of Khan.
Victor J. Dellovo: And now it's about getting, you know, these large companies all have big labs, and getting the authorization and getting the security clearance and getting everything else that gets through so we can go into the lab and get set up. You know, that's a process, a lot of paperwork, a lot of contracts, but you know, getting into these large opportunities. You know, that's what we've been focusing on, and we're using the automation partners like the Rockwells of the world and other players that I can't mention to try to get into the relationships that they already have.
Victor J. Dellovo: Tracks, but you know getting into these large you know opportunities you know that's what we've been focusing on and we're using the automation partners like the rockwell's over the world and other players that I can't mention [noise] to leverage their sales staff to.
Victor J. Dellovo: Try to get into the relationships that they are already currently have so that's kind of why we brought into you know the big you know we're trying to work with the Big security players that are out there also to to levers to long term relationships. They may have that can kind of move US you know a get a saint faster or you know as.
Victor J. Dellovo: So that's kind of why we brought into, you know, the big, you know, we're trying to work with the big security players that are out there also to leverage the long-term relationships they may have that can kind of move us, you know, a, get us in faster, you know, as a smaller company, CSPI, you know, compete, you know, competing with the Apollo's and the name brands, you know, by leveraging those salespeople in the relationship and that they had for maybe years, we're able to have conversations, you know, with these large companies that might take us, you know, a year just to get a conversation going, we're able to, to have a, an immediate conversation within weeks, try to, you know, get the next level with a PLC. Unknown Speaker Is there a way to, you know, Unknown Speaker, Unknown Speaker, Unknown Speaker, Unknown Speaker,
Victor J. Dellovo: As a smaller company C. S. P. I you know compete you know competing with the Palos and the name brands. It you know by leveraging those salespeople in the relationship and that they had for maybe years, we're able to have conversations you know with these large companies that might take US you know a year.
Victor J. Dellovo: Just to get a conversation going we're able to to have our intermediate conversation within weeks.
Victor J. Dellovo: Try to.
Victor J. Dellovo: Get the next level, where P. L C.
Victor J. Dellovo: Is there a way way so you know.
Victor J. Dellovo: No.
Speaker Change: Kind of measure that in like a dollar figure or is that more like a fool's errand. It at the point were at and you know selling these things or is there a way to measure this pipeline up.
Victor J. Dellovo: Potential deals.
Victor J. Dellovo: We have done some measuring internally, which I'm not willing to share, but we look at the initial opportunities based on the conversations we have, and we do have a pipeline that we're managing against. We have seen where some of the initial conversations started, and we put in an estimation of X amount of dollars. As the conversations went on, the pipeline actually increased based on other needs and other people we talked to in the organization. So yeah, we are, you know, putting together a pipeline and estimation of revenue that we're managing internally based on the initial conversations that we're having with each and every.
Victor J. Dellovo: We we have done some measuring internally, which I'm not willing to share, but we we look at the initial opportunities based on the conversations we have and we do have a pipeline that we're managing against we have seen with some of the initial conversation started and you know we put in there and that's the.
Victor J. Dellovo: Mason of X amount of dollars and as the conversations went on they have the.
Victor J. Dellovo: The pipeline actually increased based on other needs in other people we talk to.
Victor J. Dellovo: And the organization. So yeah. We we are you know putting a pipeline an estimation of revenue.
Victor J. Dellovo: That.
Victor J. Dellovo: We're managing internally based on the initial conversations that we're having with with each and every organization.
Operator: Okay, thank you very much. Your next question is coming from Mike Price, who's a private investor. Mike, your line is live.
Victor J. Dellovo: Okay. Thank you very much. Your next question is coming from Mike price. He is a private investor Mike Your line is life.
Mike Price: Thank you, good morning, thanks for taking my question. Hey, I know that you want to have a wider distribution of shares and shareholders, but with a $120 million market cap and what you paint in front of you with ACT, and having $27 million in cash, it seems like there's room to be buying shares. I've asked this question on each of the last three conference calls, and you know you have the authorized shares, but you haven't bought any shares. Any thoughts along those lines?
Mike Price: Thank you. Good morning, Thanks for taking my question here and I know that you want to have wider distribution of shares and shareholders, but it was $120 million market cap and what you paint in front of you with a C T.
Mike Price: And having $27 million in cash it seems like there's a room to be buying shares.
Mike Price: I've asked his question each of the last three conference calls and you know you had the authorized shares but you havent bought any shares any thoughts along those lines.
Victor J. Dellovo: Yeah, you know, over the last quarter or two when the stock was, you know, higher than it is currently, we didn't see the need. But, you know, as it is at this price level, we are definitely considering supporting it and buying shares in the upcoming quarter.
Speaker Change: Yeah, you know over the last quarter or two when the stock was you know higher than it is currently we didn't see the need but you know as a yeah. This this price level. We are definitely considering you know supporting it and I'm buying shares in the upcoming quarter.
Mike Price: Okay, all right. Thank you.
Speaker Change: Okay alright, thank you.
Operator: Thank you very much. Your next question is coming from Sergio Heiber of Heiber Research. Sergio, your line is now open.
Speaker Change: Thank you very much. Your next question is coming from such a high bar of hide the research said you. Your line is live.
Sergio Heiber: Hi, good morning, guys, and congratulations on... a huge improvement on the bottom line. I think you gave investors a headache in looking at the reaction today to the news. Investors are used to seeing improvements in the top line and not the bottom line. So I think that it's fantastic that you're concentrating on that, and I was wondering if you could give us some color on the bundling area with the major security products, like, for example, with Palo Alto.
Sergio Heiber: Hi, Good morning, guys and congratulations on the on.
Sergio Heiber: Huge improvement on the bottom line I think you gave investors a head fake in and looking at the reaction today two good news.
Sergio Heiber: Busters are used to seeing improvements in the top line and not the bottom line. So I think that's fantastic you're concentrating on that and I was wondering if you can.
Sergio Heiber: Give us some color on bundling area, where the major security products like for example, with Palo Alto.
Sergio Heiber: Yeah.
Victor J. Dellovo: Unknown Speaker That is definitely an option. We complement each other, you know, if it was Palo Alto or CrowdStrike or any of the other players, we can work in conjunction with all of them. You know, especially where some of the old licenses in the XP world or Windows 7 that they may not be supporting anymore, we can definitely take over any system that's running an older version. It's up to the customer.
Speaker Change: That is definitely an option. We we do complement you know if it was a palo alto or crowd strike or any of the other players. We we can work in conjunction with all of them, you know, especially where.
Victor J. Dellovo: Some some of the.
Victor J. Dellovo: Old licenses in the X P World a windows seven that they may not be supporting we can definitely you know take over any system that is running an older version you know it's up to the customer if they loved the pollo all the crowd strike or whoever they're using they can continue using it and we will work side by side you know if they see us as you know.
Victor J. Dellovo: If they love Apollo or CrowdStrike or whatever they're using, they can continue using it, and we'll work side by side. If they see us as a product that they want to fully implement across the platform, we'll be more than happy to take all the business. Yeah, we are not looking to rip and replace any of the major players out there at this stage of the game.
Victor J. Dellovo: A product that they want a fully implement across the platform will be more than happy to take all of the business. So.
Victor J. Dellovo: Yeah. We we are we are not looking to rip and replace any of the major players.
Victor J. Dellovo: There.
Victor J. Dellovo: At at this stage of the game.
Sergio Heiber: So, but why not bundle it directly so that it's sold, like, for example, Palo Alto will include your area with the Palo Alto Community.
Victor J. Dellovo: So, but we're not bundled directly so that its so like for example, the will include your B area with about how to a product.
Victor J. Dellovo: I would love to get that relationship going. If you have any contacts that could help do that, please let me know. Okay, so you have a contact with an unnamed company, which I think is Palo Alto. And that's why I'm asking that. I know you can't answer it because. So I'll go on to another question. Can you talk about why the dividend was?
Sergio Heiber: I would love to get that relationship going if you have any contacts could that could do that please let us know [laughter]. So you have you ever contact with.
Victor J. Dellovo: On the companies, which I think is Palo Alto, that's why I'm asking that I know you cant answer because.
Victor J. Dellovo: So I'll go on to another question can you talk about why the dividend was decrease.
Lynn: Thanks Lynn.
Victor J. Dellovo: Yes, we looked at it from the standpoint that if we put the shares in, it would have been really at two and a half cents. So yeah, so we went to three sites. Yeah.
Victor J. Dellovo: Yes, we looked at it from the standpoint that if we kept the shares and it would've been in but really at two and a half cents.
Victor J. Dellovo: Yeah. So we went to three sites yeah.
Sergio Heiber: Okay, and are you going to be giving it to him?
Victor J. Dellovo: Okay and are you going to kind of giving it at all.
Operator: Apologies, you've had your allotted questions. If you do have any more, Sergio, you can press star one and join back in the queue.
Speaker Change: Do you see your allotted questions. If you do you have any any more such a you can press star one and joined back in the cable right alright. Thank you very much Yankee.
Operator: All right. All right. Thank you very much. Thank you. Your next question is coming from Paul Scolardi, who's a private investor. Paul, your line is live.
Paul Scolardi: Your next question is coming from Paul Scarlatti, He's a private investor Paul Your line is life.
Paul Scolardi: Hello, gentlemen, two quick questions. First of all, we constantly see in the news the government warning against threats, threats against utilities, water utilities, all utilities.
Paul Scolardi: Hello, gentlemen, two quick questions first of all we constantly see in the news.
Paul Scolardi: The government warning against threats threats against utilities water utilities, all utilities can you give us.
Paul Scolardi: Can you give us some color on how we are approaching this industry? Have we approached the industry? Are we getting traction? Are we making the government aware that we have a solution to what?
Paul Scolardi: Color on are we approaching this industry have we approached the industry or are we getting traction.
Paul Scolardi: Are we getting the government aware that we have a solution to what they are warning about.
Paul Scolardi: Yeah.
Speaker Change: To summarize it yes on all all all parts. We I mentioned you know just a few moments ago that we are focusing on the energy the water treating men with we've done you know marketing our reaches two to all of them. We've done we've talked a to individuals' that shows.
Victor J. Dellovo: To summarize it, yes on all parts. We, I had mentioned, you know, just a few moments ago that we are focusing on energy and water treatment. We've done, you know, marketing outreach to all of them. We've done, we've talked to individuals at shows, and you know, we are mentioned I mentioned also, very, very close to signing one of the largest government distributors out there, which would allow us to do business directly with these different agencies that would speed up the process because the distributor holds all the necessary contracts that would allow us to move through the system as quickly as possible. Let's put it that way. But yeah, it's all over the news. You cannot not see it.
Victor J. Dellovo: And you know we we are mentioned I mentioned also you know very very close to signing one of the largest government distributors out there that would allow us to do business directly with <unk>.
Victor J. Dellovo: These these different agencies that would speed up the process because you know the distributor holds all the necessary contracts that would allow us to you know to me.
Victor J. Dellovo: <unk> moved through the system as quickly as possible, let's put it that way, but yeah. It's it's all over the news you cannot not see it it's definitely something where we focused on and you know some of the trade shows these folks show up there we've had conversations with them.
Victor J. Dellovo: It's definitely something we focused on, and some of the trade shows, these folks show up there. We've had conversations with them. But as I mentioned, but are your people going out to the water utility? If, if, they will take a meeting, absolutely. It was still, believe it or not, we're still in the world, and nobody really goes to work anymore.
Victor J. Dellovo: But as I mentioned your people go no people going out to the water utilities.
Victor J. Dellovo: If if if they will take a meeting absolutely. It we're still believe it or not we're still in the world that nobody really goes to work any longer it mostly everything is over zoom you know they may go in once once a once a week.
Victor J. Dellovo: It mostly everything is over Zoom. You know, they may go in once, once, once a week, or twice a week. So a lot of the calls are over Zoom, but those conversations are happening. Unknown Speaker
Victor J. Dellovo: Twice a week so a lot of the calls though are over zoom, but those conversations are happening.
Paul Scolardi: Okay, and then last question with AZT. We haven't, but can you give us some visibility now that you've been in the market trying to, you know, with these large companies, they take time. I mean, do you expect to be in this calendar, in this fiscal year 2024, closing AZT contracts? Or do you think the sale cycle now is gonna, this is a longer-term story now that you've been in the marketplace, or do you expect to start closing contracts? You've closed some already. What should we expect to see this year? You can't predict the future, but you're the CEO. Do you expect to see AZT contracts continue to be signed in this fiscal year?
Speaker Change: Okay, and then last question what do you see T.
Paul Scolardi: With AZT.
Paul Scolardi:
Paul Scolardi: We haven't but can you give us some visibility now that you've been in the market trying to you know with these large companies they take time.
Paul Scolardi: Do you expect to be in this calendar in this fiscal year of 2024 to be closing on avian.
Paul Scolardi: <unk> contracts or do you think the sales cycle.
Paul Scolardi: It is going to this is a longer term story now that you've been in the marketplace or do you expect to start closing contracts.
Paul Scolardi: Close them already should we expect to see in this year and you can't predict the future, but you're the CEO do you expect the key contracts continue to be signed in this fiscal year.
Victor J. Dellovo: Oh, absolutely. You know, of what magnitude?
Paul Scolardi: Oh, absolutely, yeah, you know or what magnitude, who I cannot say for sure but contracts absolutely. You know we are signing contracts and I know everyone gets excited when we put announcements out there, but you know our major contracts I will announce but they're all the contracts that that we have closed that don't worry.
Victor J. Dellovo: I cannot say for sure. But contracts? Absolutely. You know, we are signing contracts. And I know everyone gets excited when we put announcements out there. But you know, major contracts, I will announce, but there are other contracts that we have closed that don't warrant, you know, a public announcement. It could be 100,000 or 50,000, you know, 10,000, you know. There are different levels of contracts that we are closing.
Victor J. Dellovo: You know a public announcement you know it could be 100000 of 50 pay you know $10. You know there are different levels of contracts that that we are closing, but you know they don't warrant you know a public announcement. So you know the major ones that are in the millions you know, Iowa announced but yeah. There are contracts that that are closing.
Victor J. Dellovo: But, you know, they don't warrant, you know, a public announcement. So, you know, the major ones that are in the millions, I will announce. But yeah, there are contracts that are closing and will continue to close at different levels, you know, and if we hit another major one, then yeah, I'll announce it.
Victor J. Dellovo: And we'll continue to close of of you know different levels and you know and if we hit another major one then yeah I'll announce it when the time is right.
Victor J. Dellovo: Okay.
Victor J. Dellovo: Very much.
Operator: Okay. Thank you very much. Thank you so much, Paul. Our next question is coming from Joseph Nerges of Seagrant Investments.
Joseph Nerges: Thank you so much pull our next question is coming from Joseph niches of Secret investments. Please go ahead. Sir your line is nice yeah. Just one follow up on you mentioned the webinar Tomorrow with Rockwell and then you mentioned the the journal article that web Rockwell put out when.
Joseph Nerges: Just one follow-up question, you mentioned the webinar tomorrow with Rockwell, and then you mentioned the journal article that Rockwell put out. Will you be posting those on the website? Can we access those on the website? Yes. I think you have the invite already that's out there, right? You can join the webinar tomorrow, right? And then once we get a copy of the... The journal, we'll definitely post it on the website that you can go to.
Joseph Nerges: Will you be putting those on the website can be accessed though yeah, let's say, okay. Yeah, well, yeah. I think you had the invite already that's out there right you can join the webinar Tomorrow right and then the.
Joseph Nerges: Once we get a copy of the AR.
Speaker Change: The journal will will definitely posted on the website that you can going alright, great. Thank you very much again guys yep.
Victor J. Dellovo: All right. Great. Thank you very much again, guys. Yeah.
Operator: Thank you. Your next question is coming from Brett Davidson, who's a private investor. Brett, your line is live.
Joseph Nerges: Your next question is coming from Brett Davidson, who is a private investor but your line is life.
Brett Davidson: Yeah, I guess I was getting a little long winded, so I didn't get to wrap this up. But getting back to that, that kind of pipeline, or however you guys want to refer to it.
Brett Davidson: Yeah, I guess I was getting a little long winded so.
Brett Davidson: I didn't get the lift itself, but getting back to that that kind of pipeline or however, you guys want to refer to it.
Brett Davidson: Can you just give some idea of kind of what the size of these deals is? You know, potentially, are we talking hundreds of thousands, millions, tens of millions? of all of the above.
Brett Davidson: Can you just give some character or kind of what the size of these deals or are you.
Brett Davidson: You know potentially are we talking hundreds of thousands millions tens of millions.
Brett Davidson: You know all of your balls.
Victor J. Dellovo: Unknown Speaker 10 to millions. We don't have anything in the millions and hundreds of thousands we have in the pipeline.
Brett Davidson: Tens of millions that we don't have anything in the millions and hundreds of thousands we have on the pipeline yes.
Victor J. Dellovo: Yes.
Brett Davidson: Got it. All right. Thanks a lot.
Speaker Change: Got it alright, thanks, a lot mhm.
Operator: Thank you very much. Just as a reminder, if you have any remaining questions, you can press star one on your phone keypad. Your next question is coming from John Crotty, who's a private investor. John, your line is live.
Speaker Change: Thank you very much just as a reminder, if you have any remaining questions. You can press star one on your keypad.
John Crotty: Your next question is coming from John Crowther, He's a private investor John Your line is nice.
John Crotty: Thank you. Congratulations, guys! I really want to tell you that it was great to see the award you won, but more importantly, you put out a PR the other day that really has some great information in it. You mentioned the new industries you've won, and I was wondering if we could just get a little color on them. You stated that you had won energy and utility, as well as farm and manufacturing.
John Crotty: Thank you congratulations guys Uh huh.
John Crotty: Really wanted to tell you that that was great to see and you want you want but more importantly, you put out a PR. The other day that really has some great information in it you mentioned the new industries, you had one and I was wondering if we could just get a little color on the you had stated that you had won energy and utility as well as pharma manufacturing that we're aware of the farmer comes.
John Crotty: Now, we're aware of the pharmaceutical company, but the other three are new, and I knew that you were going after energy companies, especially with the show in Houston. Can you give any color as to what types of utility it was and maybe what type of energy company it was, as well as the manufacturing? Thank you.
John Crotty: But the other three I knew what I knew that you were going to have the energy companies, especially with the show at Houston can you give any color as to what types of utility it was and maybe what type of energy company, who was as well as the manufacturing. Thank you.
Victor J. Dellovo: of manufacturing, the utilities, and energy are like oil and gas. I can't mention any of the names, but they're just, you know, you would know who they are. They're just some of the big oil companies that are in, you know, grid companies that we're talking to, and we met at shows and, you know, getting PLCs together and trying to get into their labs. So yeah, the shows have been really good to get us in front of different companies and build some relationships a lot quicker. So we will continue to do, you know, the necessary shows that make sense for us.
Speaker Change: Oh, the manufacturing and the utilities and the energy areas like the oil and gas I can't mention any names, but they're just there.
Victor J. Dellovo: They're just you know you you would know who they are they're just some of the big oil that end and you know great companies that where we're talking to an end we met at shows and you know getting P. O sees together and trying to get into their labs.
Victor J. Dellovo: So yeah, we are.
Victor J. Dellovo: <unk> been really good to get US you know two in front of a different companies and build some relationships a lot quicker. So we will continue to do you know the necessary shows that makes sense for us.
Victor J. Dellovo: Unknown Speaker Right, because we're aware that the targets that they're coming after in the U.S., being the operational infrastructure, the electrical grid, as well as pipelines, those are the types of levels of quality we're talking about in the industry you're involved with, right? Unknown Speaker Correct. Okay, thank you. Correct. Yep.
Victor J. Dellovo: Right because it we were aware that the target that they come in after in the U S B and the operational infrastructure electrical.
Victor J. Dellovo: Electrical grid as well as pipelines that those are the types of levels of quality with partners in the industry.
Victor J. Dellovo: You were involved with right correct.
Victor J. Dellovo: Okay. Thank you correct yep.
Victor J. Dellovo: Thank you very much. Well, that appears to be the end of our question and answer session. I will now hand it back over to Vic for any closing remarks.
Victor J. Dellovo: Thank you very much for all that appears to be the end of our question and answer session. I will now hand back over to Vic for any closing remarks.
Victor J. Dellovo: Thank you. As always, I want to thank our shareholders for their continued interest and support. We are entering a period of increased activity, and we look forward to sharing our progress in our fiscal 2024 third quarter in August. Until then, be well, stay safe, and enjoy the summer.
Vic: Thank you as always I want to thank you. Thank our shareholders for their continued interest and support we are entering a period of increased activity and we look forward to sharing our progress and our fiscal 'twenty 'twenty four third quarter in August until then be well stay safe and enjoy the summer.
Operator: Thank you very much. This does conclude today's conference. You may disconnect your phone lines at this time and have a wonderful day. Thank you for your participation.
Speaker Change: Thank you very much. This does conclude today's conference you may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.
Operator: Right.