Q4 2024 CSP Inc Earnings Call
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Operator: Greetings and welcome to CSP Inc's fiscal fourth quarter and full year 2024 conference. At this time, all participants are in a listen-only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded.
Greetings and welcome to CSP, Inc, fiscal fourth quarter and full year 2024 conference call.
At this time all participants are in a listen only mode.
And answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad.
Please note this conference is being recorded.
Michael Polyviou: I will now turn the conference over to your host, Mr. Michael Polyviou.
I'll now turn the conference over to your host Mr. Michael probably for you Sir you may begin.
Michael Polyviou: Sir, you may begin.
Michael Polyviou: Thank you, Alan. Hello, everyone, and thank you for joining us to review CSPI's fiscal fourth quarter and full year 2024 financial results, which ended September 30, 2021. With me on the call today is Victor Dellovo, CSPI's Chief Executive Officer, and Gary Levine, CSPI's Chief Financial Officer.
Michael: Thank you Alex Hello, everyone. Thank you for joining us to review Cspi's fiscal fourth quarter.
All year 2024 financial results.
Michael: 32024.
Michael: Me on the call today is very clever Cspi's, Chief Executive Officer, and Gary Levine Cspi's.
Gary Levine: As Chief Financial Officer.
Michael Polyviou: After Victor and Gary conclude their opening remarks, we'll then open the call for questions. During the Q&A session, we asked participants to limit themselves to one question and one follow-up question, and then re-queue at the end.
Gary Levine: Victor and Gary conclude their opening remarks, we'll 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.
Gary Levine: If you have additional questions.
Michael Polyviou: Statements made by CSPI's management on today's call regarding companies' business that are not historical facts may be forward-looking statements as the terms identified in federal securities laws. The words may, will, expect, believe, anticipate, project, plan, and intend, estimate, and continue, as well as similar expressions are intended to identify forward-looking statements. The following statements should not be meant 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 several uncertainties. and other influences, many of which are beyond the company's control, that may influence the accuracy of the statements and the projections upon which the segment and statement are made.
Speaker Change: Statements made by GCI.
Speaker Change: This call regarding the company's business that are not historical facts may be forward looking statements as a chairman's identified in federal Securities laws.
Speaker Change: May will expect believe eight project.
Speaker Change: Estimate.
Speaker Change: As well as similar expressions are intended to identify forward looking statements.
Speaker Change: The savings will not be met as guarantee of future performance or results.
<unk> cautions you that.
Speaker Change: These statements reflect current expectations about the company's peak of awards or events and are subject to several uncertainties risks and other influences many of which are beyond the company's control.
Speaker Change: The accuracy of the statements and projections upon which the segment and statements are based.
Michael Polyviou: Thank you very much. you filed with the securities in exchange. All forward look statements are based on the information available at the time those statements were made, and management's good faith belief as of the time with respect to future events.
Speaker Change: The company's 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.
The reports on Form 10-Q filed with securities.
Speaker Change: Change Commission.
Speaker Change: Forward looking statements are based on information available at the time those statements you made.
Speaker Change: So its good faith belief as of the time with respect to future events.
Michael Polyviou: All forward look statements are qualified in their entirety by this cautionary statement, and CSPI undertakes no obligation to publicly revise or update any forward look statement, whether as a result of new information, future events, or otherwise after the date thereof.
All forward looking statements either in the entirety by this cautionary statement.
Speaker Change: <unk> undertakes no obligation to revise or update any.
Speaker Change: David.
Speaker Change: It was all of your information.
Victor: Or events or otherwise after the date thereof, with that I'll turn the call over to Victor <unk> Chief Executive Officer.
Michael Polyviou: With that, I'll turn the call over to Victor Dellovo, Chief Executive Officer.
Victor Dellovo: Please go ahead. Thanks, Michael.
Speaker Change: Please go ahead.
Victor: Thanks, Michael and good morning, everyone.
Victor Dellovo: Good morning, everyone. A fourth quarter and full year financial results came in pretty much as expected when we last talked with you in August. Current revenue, which has been an area we have committed to growing, increased 17% of the total sales compared to less than 5% of sales just a couple years ago. Overall, we finished the year with more than $30 million in cash and cash equivalents as of September 30, 2024. The technology solution business generated approximately $12.7 million in sales in the fourth quarter of fiscal 2024. We finished the quarter with plenty of momentum.
Victor: Quarter and full year financial results came in pretty much as expected when we last talked with you in August.
Victor: Occurring revenue, which has been an area. We are committed to growing increased 17% of total sales compared to less than 5% of sales just a couple of years ago.
Victor: Overall, we finished the year with more than $30 million in cash and cash equivalents as of September 30th 2024.
Victor: The technology solutions business generated approximately $12 7 million in sales in the fourth quarter of fiscal 'twenty 'twenty four and we finished the quarter with plenty of momentum for.
Victor Dellovo: For example, very little of our fiscal fourth quarter revenue came from our cruise ship customers. However, towards the end of the quarter and during the current fiscal first quarter, we've seen a pickup in the business, including the signing of a large order that should be executed during the next fiscal year. It was the first cruise ship order for professional services for our company in many quarters and piggybacks on the continued consistent momentum we've built in the ocean freight liner market. Our Freightliner operation customer continues to add new ships and choose to utilize our managed service offering following the retrofits which have led to increasing recurring revenue.
Victor: For example, very little of our fiscal fourth quarter revenue came from a cruise ship customers. However towards the end of the quarter and during the current fiscal first quarter, we've seen it pick up in the business, including the signing of a large order that should be executed during the next fiscal year.
Victor: It was the first cruise ship order for professional services for our company in many quarters and piggyback on the continued consistent momentum we built in the Ocean Freightliner market.
Victor: Our free lineup operation customer continues to add new ships in and choose to utilize a managed service offering following retrofits, which have led to increasing our recurring revenue.
Victor Dellovo: We continue to see increased demand for our cloud clients who want to migrate the consumption of these services. to our cloud group. We also have a dozen active cloud-based projects to accommodate the growth. We continue to invest in people and process to provide managed service to assist in our clients with the day-to-day operations of these environments. pipeline remains very encouraging. So we are optimistic about our opportunities to grow the overall TS sales, especially the recurring revenue. during the coming.
We continue to see increased demand for our cloud clients, who want to migrate their consumption of these services to our cloud group. We also have a dozen active cloud based projects to accommodate the growth. We continue to invest in people and process to provide managed service to assisting our clients with the day to day.
Victor: Operations of these environments. The pipeline remains very encouraging so we are optimistic about our opportunities to grow the overall T. S sales, especially the recurring revenue piece during the coming fiscal year.
Victor Dellovo: On the HPP side of the business, for the fourth quarter of fiscal 2024, we reported revenue of $0.4 million, mostly from ARIA-based customers. Also, As we discussed in the prior conference call, we were in the process of transitioning our AZT Protect sales effort, being led by Greg Fisher, an experienced 20-year OT industry sales veteran who joined us in July of 2024, has redirected the organization to maximize our relationships with Rockwell Automation and other distribution partners. In the short amount of time we've made significant progress in building the market for this unique product and we entered the new fiscal year with great potential from Rockwell and the other distribution partners that primarily serve the middle market OT customers.
Victor: On the H P. P side of the business for the fourth quarter of fiscal 'twenty 'twenty four we reported revenue of point 4 million, mostly from Arya based customers also.
Victor: As we discussed in our prior conference call. We were in the process of transitioning our AZT protect sales effort being led by Greg Fisher.
Fisher inexperienced 20 year O T industry sales veteran who joined US in July of 'twenty 'twenty four has redirected the organization to maximize our relationships with Rockwell automation and other distribution partners.
Victor: In a short amount of time, we've made significant progress in building the market for this unique product and we entered the new fiscal year with great potential from Rockwell and the other distribution partners that primarily serve the middle market Ot customers.
Victor Dellovo: which tend to have shorter sales cycles than the larger OT organizations. Our internal team will continue to address the large individual corporate OT buyers with the sales cycles extending up to 18 months while they work closely with the distributors to build the short-term revenue from the middle market customers. An example was a deal we announced with the Fortune 500 electric energy producer that selected Aria Cybersecurity AZT Protect to protect its critical OT infrastructure from malicious cyber attacks. This was the first order of many to come, as we will be as it will be a few thousand endpoints over the next three years.
Victor: Which tend to have shorter sales cycles than the larger O T organizations.
Victor: Our internal team will continue to address the large individual corporate O T bias with the sales cycles, extending up to 18 months, while they work closely with the distributors to build a short term revenue from the middle market customers and.
Victor: An example was the deal we announced with a fortune 500 electric energy producer that select the ARIA cybersecurity AZT protect to protect its critical old T infrastructure from malicious cyber attacks.
Victor: This was the first order of many to come as we will be.
Victor: It will be a few thousand endpoints over the next three years.
Victor Dellovo: We will assist with the rollout as fast as the customer will allow. We believe this approach will result in a noted upturn in AZT Protect sales in fiscal 2025 unfold. Working with Rockwell Automation and other distribution partners, our sales team has quickly expanded the leads for AZT Protect to over 100. Many of these leads were generated from the Rockwell Automation Fair back in late November of twenty twenty. Gary Southwell, our Vice President and General Manager of High Performance Products, presented an in-depth view of the latest ATT&CK techniques and their financial impact. Gary's presentation was one of the show's hits and was a major reason why we generate so many leads from our participation.
We will assist with the rollout as fast as a customer whaler Wow. We believe this approach will result in a noted upturn in AZT protect sales in fiscal 2025 unfolds.
Victor: Working with Rockwell automation and other distribution partners. Our sales team has quickly expanded their leads for AZT protect to over 100. Many of these leads were generated from the Rockwell automation fair back in late November of 'twenty, 'twenty, four, but Gary Southwell, our vice President and general manager of high performance products.
Presented an in depth view of the latest attack techniques and their financial impact Gary's presentation was one of the show's hits.
It was a major reason why we generate so many leads from from our participation visitation. We also had a booth at the American Petroleum Institute show for oil and gas natural gas in Houston, where we began.
Victor Dellovo: We also had a booth at the American Petroleum Institute show for oil and natural gas. and again, a relationship with several large companies. further expanded HD Protect's awareness in the market by attending the Industrial Control System Security Week show in Atlanta. While we work to convert the leads generated from these activities into easy to protect sales during the fiscal 2025, we will be supporting additional regional trade shows events with our distributors throughout I strongly believe the interest we are generating at the trade shows is fostering by nine major industry awards. from AZT Protect has received since its launch, including the winner of the application security category at the 2024.
Victor: A relationship with several large companies.
Victor: We further expanded Ht protects awareness in the market by attending the industrial control system Security week show in Atlanta.
While we work to convert the leads generated from these activities into AZ protect sales during the fiscal 2025, we will be supporting additional regional tradeshows events with our distributors throughout the year.
Victor: I strongly believe the interests we are generating at the trade shows is fostering by nine major industry Awards.
Victor: From a Z T protect has received since its launch including the winner of the application security category at the 2024.
Victor Dellovo: 4RS Cybersecurity Award presented by Business Intelligence. Our efforts to sign new distributors and gain new customers has also benefited from the July CrowdStrike update. failure that exposed the risk continues. continues cloud updates can have on critical OT applications, including industrial automation. There is a recognition from the industrial automation vendors and the distribution channels that the traditional IT-focused endpoint protection methodologies were not meeting their requirements.
Victor: For S. Cyber Security award presented by business Intelligence Group.
Victor: Our efforts to sign new distributors and gain new customers has also benefited.
Victor: From the July crowd strike update.
Victor: The failure that expose the risk continues.
Victor: Continuous cloud updates can have aren't critical O T applications, including industrial automation industry control systems.
Victor: There is a recognition from the industrial automation vendors and the distribution channels that you should know I T focus endpoint protection methodologies, we're not meeting their requirements, we believe companies using AZT protect.
Victor Dellovo: We believe companies using AZT Protect Thanks for joining. We've proven this capability in the field under real-life operational circumstances. This alternative approach to protect industrial control services is being received as a welcome news by Rockwell Distributed Partners. The Rockwell Show was the mechanism needed to bring this news into the ecosystem. From there, we believe, we can expand into other markets. We have one agreement already completed and three others in process with top-tier U.S.-based Rockwell distributors, allowing our U.S. team to work directly with the distributor sales teams to map out target accounts to approach together.
Victor: Texturing capabilities can have prevents zero day malicious code from taking critical assistance out.
Victor: Out of the box without having seen it before and then relying on cloud updates two blocks such attacks.
Victor: We've proven this capability in the field under real life operational circumstances. This alternative approach to protect industrial controls service is being received as a welcome news by Rockwell distributor partners.
Victor: The Rockwell show was the mechanism needed to bring new this news into the ecosystem from there. We believe we can expand into other markets.
Victor: We have one agreement already completed and three others in process with top tier U S base Rockwell distributors, allowing our U S team to work directly with the distributor sales teams to map out target accounts to approach together.
Victor Dellovo: In summary, when we consider AZT Protect Market Momentum and the emergence of the Rockwell Partnership, the growth of the managed service business, and the pickup in the cruise line We have a potential to return growth during the fiscal 2025.
Victor: In summary, while we consider AZ T protect market momentum and the emergence of the Rockwell partnership the growth of that managed service business and the pick up in the cruise lines.
Victor: We have a potential to return to growth during the fiscal 2020 five with that I will now ask Gary to provide a brief overview of the fiscal fourth quarter financial performance.
Michael Polyviou: With that, I will now ask Gary to provide a brief overview of the fiscal fourth quarter financial performance.
Gary Levine: Thanks, Victor. For the fourth quarter ended September 30, 2024, we reported revenue of $13 million compared to revenue of 15.3 million for the fiscal fourth quarter ended September 30, 2023. Revenue is relatively flat compared to 2024 fiscal third and second quarter. Service revenue represented $4.4 million of overall sales compared to the year ago service revenues of $4.3 million. gross profit for the three months ended September 30 2024 was 3.7 million or 28.4% of sales compared to 5.2 million or 33.8% of sales reflecting a higher percentage of product. Gross margins on our service revenue increased 160 basis points from last year's comparable figure.
Gary: Thanks Victor.
Gary: In the fourth quarter ended September 32024, we reported revenue of $13 million compared to revenue of $15 3 million for the fiscal fourth quarter ended September 32023.
Gary: Revenue was relatively flat compared to 2020 for fiscal third and second quarters.
Gary: Service revenue represented four point.
Gary: Millions of dollars of overall sales compared to the year ago service revenues of $4 3 million.
Gross profit for the three months ended September 32024 was three.
Gary: $3 7 million or 28, 4% of sales compared to $5 2 million or 33, 8% of sales.
Reflecting a higher percentage of product sales.
Gary: Gross margins.
Gary: Service revenue increased 160 basis points from last year's comparable figures.
Gary Levine: The company reported a net loss of 1.7 million or 18 cents loss for common share for the fourth quarter and it's September 30 2024 compared to net income of $1.4 million, or $0.15 per diluted share, for a fiscal fourth quarter ended September 30, 2023. We had cash and cash equivalents of $30.6 million as compared to $25.2 million at the end of our 2023 fiscal year.
Gary: The company reported a net loss of one 7 million or 18 cents loss per common share for the fourth quarter ended September 32024.
Gary: <unk> to net income.
Gary: $1 4 million or 15%.
Gary: Per share per diluted share for fiscal fourth quarter ended September 32023.
Gary: We had cash and cash equivalents of $30 6 million.
Gary: Compared to $25 2 million at the end of our 2023 fiscal year.
Gary Levine: The Robust Sales The robust balance sheet ensures that the company has the resources to implement the AZT Protect product offering and other growth strategies. During the fourth quarter of 2024, the company repurchased 2800 shares of stock at a total cost of $34,000. and the Board of Directors has approved the payment of a $0.03 per share quarterly dividend to shareholders of record at the close of business on December 27, 2024, payable on January 15, 2025. For the fiscal quarter, our engineering and development expenses were $793,000 compared to $705,000. The increase was for outside consulting and stock compensation.
The robust sales.
Gary: Robust balance sheet ensures that the company has the resources to implement the a Z T protect product offering and other growth strategies.
Gary: During the fourth quarter of 'twenty 'twenty four the company repurchased 2800 shares of stock at.
Gary: Total cost of 34000.
Gary: And the board of directors has approved.
Gary: The payment of a <unk>.
Gary: Per share quarterly dividend to shareholders of record at the close of business on December 27th 2024 payable on January 15 2025.
Gary: Yeah.
Gary: For the fiscal quarter, our engineering and development expenses were 793.
Gary: Dollars compared to 705000.
Gary: The increase was for outside consulting and stock compensation.
Gary Levine: Our SG&A was 5.5 million compared to 4.8 million in the year ago fiscal fourth quarter. The increase was based on increased legal, audit, and tax and recruiting expenses. For the full year ended September 30, 2024, revenue was $15.2 million compared with revenue of 64.6 in the prior year. gross profit for the fiscal year was $18.9 million, or 34.1% of sales compared to $21.9 million and 33.9% of sales, with a decline largely attributed to product mix.
Our SG&A was five five.
Gary: <unk> 5 million compared to $4 8 million in the year ago fiscal fourth quarter.
Gary: The increase was.
Based on increased legal audit and tax and recruiting expenses.
Gary: For the full year ended September 32024 revenue was $15 $2 million compared with revenue of 64.6 in the prior year.
Gary: Gross profit for the fiscal year was $18 9 million or 34, 1% of sales compared to $21 9 million and 33, 9% of sales.
Gary: With the decline largely attributed to product mix.
Gary: Yeah.
Gary Levine: The reported We reported a net loss. $0.3 million or four cents. per diluted share in the fiscal year ended September 30, 2024, compared to the net income of $5.2 million, or $0.55. income per diluted share for the fiscal year ended September 30, 2023.
Gary: The reported.
Gary: We reported a net loss of <unk>.
Gary: $3 million or four cents per diluted share.
Gary: In the fiscal year ended September 30th 2024, compared to the net income of $5 2 million or 55 cents.
Gary: Income per diluted share for the fiscal year ended September 30th 2023.
Michael Polyviou: With that, I will turn it over to the operator to take your questions. Thank you.
Gary: With that I will turn it over to the operator to take your questions.
Gary: Yes.
Operator: 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 telephone keypad. The confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the start button. One moment please, while we pause for questions. Thank you.
Gary: Thank you.
At this time, we will be conducting our question and answer session.
Gary: If you would like to ask a question. Please press star one on your telephone keypad.
Gary: Information tone will indicate your line is in the question queue.
Gary: You May press star two if he would like to remove your question from the queue.
Gary: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Gary: One moment, please while we poll for questions.
Thank Keith.
Joseph Nerges: Our first question is coming from Joseph Nerges with... C. Glynn Investments.
Gary: Our first question is coming from Joseph nurses with.
Speaker Change: Secret investments, Sir your line of sight.
Joseph Nerges: Sir, your line is now closed. Good morning guys, how are you today?
Gary: Good morning, guys are either they come.
Gary Levine: Good morning, Jim. Just one quick accounting point here.
Joe: Good morning, Joe.
Joe: Oh, just one quick.
Accounting point here, Gary last year, I think you mentioned.
Joseph Nerges: Gary, last year, I think you mentioned... in our fourth quarter. We had a... a credit of 2.1 million. for Employment Retention Credit. in our reporting of the fourth quarter of last fiscal year. So obviously, that number, when we're comparing fourth quarter this year versus fourth quarter last year, that credit didn't fall into this year, so that's a considerable number.
In our fourth quarter.
Joe: We had a a credit of 2.1 million.
Joe: For unemployment retention credit and are in our reporting of fourth quarter of last fiscal year. So yeah.
Joe: But.
Joe: I must say that that number are you know.
Joe: And when we're comparing fourth quarter this year versus fourth quarter last year.
Joe: That credit didn't fall into this yourselves.
No considerable number.
Gary Levine: Absolutely, yes.
Joe: Absolutely yes.
Joe:
Joe: Oh I'll go on to them.
Joseph Nerges: I'll go on to the, not really a question, but. We talked about last year, Victor, quite a bit, what we call proof of concept. And I realized the trade shows that you referred to were very recent. In fact, we were in one last week, I believe, in Oman. But the Rockwell was last month, and then the Atlanta show, I think, was the month previous, whatever. So I'm assuming there's an enormous amount of leads come out of all those shows. Do we have any proof of concepts? Have we started testing any of these companies? And even prior to that, where are we at today with testing?
Joe: But.
We talked about last year that drove quite a bit.
Joe: Proof of concept and I realize the the trade shows that you referred to where very recent fact that we were in one last last week I believe in Oman.
Speaker Change: That's correct right you know the Rockwell was last month and then the Atlanta show I think it was.
Joe: Month cream is whatever.
Joe: I'm, assuming there's a enormous amount of leads come out of all of those shows.
Do we have any proof of concepts.
Joe: How do we how do we started testing any of these companies or even break.
Even prior to where are we at today what testing how many people are out there.
Victor Dellovo: How many people are out there? how can I say, testing, testing AZT protect. Yeah, from the shows, you know, the one for Rockwell, it was right before Thanksgiving, and then you had Thanksgiving, and then it's literally only been like 10 business days, you know, that we've been able to contact those. But yeah, there's been a lot of conversation.
Joe: How can I say testing testing easy to predict today.
Speaker Change: Yeah from the shows you know the one for Rockwell It was right before Thanksgiving and then you had Thanksgiving and then it's literally only been like 10 business days, you know that we've been able to contact those but yeah. There's been a lot of conversation, but the one that was overseas. We actually are starting a P O C. Believing it.
Victor Dellovo: But the one that was overseas, we actually are starting a POC, believe it or not on Sunday, that happened already just in a week. So yeah, there's been a lot of activity, a lot of conversations, you know, and a lot of people like the POCs will start after the new year, you know, they're kind of already on vacation mode. But there's been a lot of good conversations and a lot of, you know, things that we have to follow up on the new year. Yeah, but even even prior to that, Victor, we've had Proof of Concepts, ongoing even today.
Speaker Change: On Sunday that happened already just in in a week. So yeah. There's been a lot of activity a lot of conversations and know and a lot of people like the P. O sees will start after the new year, you know they were kind of already on vacation mode, but theres been a lot of good conversations and a lot of you know things that we have to follow up on the new year.
Speaker Change: Yeah, but even even prior to that as I said, we've had a proof of concepts ongoing even from <unk>.
Victor Dellovo: earlier this year. Oh, yeah. And those will continue.
Speaker Change: Earlier, this year, Oh, yeah, and and those will continue I think get car I, maybe I misunderstood your question, but like I thought you meant knew just from those recent shows but yeah. We have probably you know more than a dozen a P. O sees going on all of you know in various stages you know the one that debt.
Victor Dellovo: I think maybe I misunderstood your question, but like I thought you meant new just from those recent shows. But yeah, we have probably, you know, more than a dozen of POCs going on of, you know, various stages, you know, the one that that we closed with the energy company recently, that was, you know, over a year POC and we finally, you know, got awarded and there's some other that we're waiting. The POCs are done. And now we're just waiting, either for budgets, or we're waiting to see if we were the last one standing on, you know, in the POCs, and a lot of them had said to us that decisions will be made in January.
Speaker Change: That we close with the energy company recently that was you know over a year P. O C and we finally got awarded and there's some other that we are waiting the P. O sees are done and now we're just waiting either for budgets or waiting to see if we were the last one standing on you now.
Speaker Change: In the in the P. O sees in a lot of them had said to US that you know decision. We made in January I don't know, if that's true or not if it you know if it moves but we are waiting for a couple of very promising things in January so hopefully they come through it just yes just to clarify.
Victor Dellovo: I don't know if that's true or not, if it moves, but we are waiting for a couple very promising things in January. It's just, just, just a car for you.
Victor Dellovo: We have three Fortune 500 companies now that are utilizing ACT Protect. uh... the uh... you know the power company earlier this year, as well as the government. Western Intelligence Agency. So we're not talking about small customers here that have looked at it and approved it. want to clarify.
Speaker Change: P ours on this before but you know we have three fortune 500 companies now that are utilizing a T T protect a chemical company.
Speaker Change: Yeah, you know the power company, and just referred to and pharmaceutical company that we announced earlier there correct.
Speaker Change: Right.
Speaker Change: The government.
Speaker Change: You know the Western intelligence agency that better utilizing ECP protect so correct, we're not talking about small customers here that have looked at it and approve it I just want to clarify that so yeah, yeah, yeah, and and hot off the presses is there are you just keep your eyes out there's there'll be something coming out.
Victor Dellovo: Yeah, yeah, and hot off the press is this, you'll just keep your eyes out, there'll be something coming out early next week on another. win, so I'll just give you that.
Speaker Change: Early next week on another nice win so alright.
Speaker Change: Oh, one other point on the stock buyback it would be like 2800 shares.
Joseph Nerges: All I'm saying is, I think you guys and the board ought to get maybe slightly more aggressive. I know we have a little more volume in the shares now than we did a year ago, so we can't We can buy more shares under the market conditions, but I would think that you guys should be... seriously considering maybe upping the amount of shares that can be repurchased.
Speaker Change: I I I I, all I'm, saying is I think you guys and the board I get maybe slightly more aggressive I know you know we have a little more volume in this year now than we did a year ago, but yeah. So we when we can.
Speaker Change: We we can buy more shares under the market conditions, but I would think that you guys should be.
Speaker Change: Seriously considering maybe maybe upping the amount of shares that can be repurchased under the program.
Joseph Nerges: and I'll leave, I'll move on to somebody else's question. Thanks again, guys. Thank you.
Speaker Change: I'll move onto somebody else's questions. Thanks again guys.
Speaker Change: Thanks, Joe.
Yeah.
Speaker Change: Thank you.
William Lauber: Our next question is coming from Will Lauber with Visionary Wealth Advisors. Your line is Yeah, guys, just so people can realize and help us get a handle on how much money you guys are putting into this AZT effort for hopefully a huge payoff down the line. What would the earnings that division for this year. But, you know, it was a loss. So, I mean, you've got to be taking out, if you took out AZT, if it was just TS, it would. Yeah. Oh, yeah. Yeah, definitely. It would be profitable. It would be very profitable. Yes.
Speaker Change: Our next question is coming from well over with visionary wealth advisors. Your line is live.
Speaker Change: Yeah, guys just so.
Speaker Change: People can.
Speaker Change: Uh huh.
Speaker Change: And help us get a handle on.
Speaker Change: How much money are you guys are putting into this a G T effort for them hopefully a huge payoff down the line what would the earnings.
Speaker Change: Yeah.
Speaker Change: That division for the.
Speaker Change: This year.
Speaker Change: But no it was.
It was a loss so I mean.
Speaker Change: I know you said it maybe taking out if you took out a Z T. If it was just T. S. It was yeah.
Speaker Change: Oh, Yeah, Yeah, yeah definitely it was a profitable it'll be very profitable yes. Yeah. That's that's one thing you have to understand the T. S is doing really really well there the cash cow that's paying for all this R&D.
Victor Dellovo: Yeah, that's one thing that I have to understand. The TS is doing really, really well.
Victor Dellovo: They're the cash cow that's paying for all this R&D for AZT, you know, and to grow the cash position and to have a true startup and, you know, and only have a small loss for the whole year, you know. Like I said, people want earnings, they want dividend, they want cash growth, they want everything. But, you know, AZT is truly a startup, we're building, you know, we have to build a whole you know, food chain for distribution. There's a, there's a lot going on right now, but now the, and, you know, building the sales team, getting partners, there's a lot going on, uh, on that side of it.
For a Z T you now and to grow the cash position and to have a true startup and you know and I only have a small loss for the whole year you know.
Speaker Change: Like I said people want earnings they want dividend they want cash growth. They went out but you know AZ T is truly a startup with building you know we have to build a whole.
Speaker Change: You know food chain for distribution, there's a there's a lot going on right now, but now that and you know building the sales team getting partners. There's a lot going on on that side of it and then you know we had mirror com sales last year and Unfortunately, you don't because that product was was you know.
Victor Dellovo: And then, you know, we had Miracom sales last year. Um, and unfortunately, you know, because that product was. over 20 years old, the big distributor or manufacturer, actually, that was building the boards. No longer will build the boards. So all that Miracom business from last year went away. There's some pieces and parts that we still sell, but they're minimal now. So if you really look at it, you know, where we were and where we are, and to Joe's point, our big customers that we have closed are all Fortune 500 customers. And that's where we're That's where a lot of the testing, it took a lot of time through the POCs.
Speaker Change: Over 20 years old the big distributor or manufacturer actually that was building the boards no longer will build a boy. So all of that American business from last year went away are there some pieces and parts that we still sell but they're minimal now. So if you really look at it you know.
Speaker Change: Where we were and where we are in to Joe's point, you know a big customers that we have closed are all fortune 500 customers you know and that's where we're at.
Speaker Change: That's where a lot of the testing it took a lot of time through the P. O sees but now you know we have four customers that are using it that are happy and now we're just like I said, you know building up the food chain to try to get in front of more people building on name recognition, which is like I said on a prior call.
Victor Dellovo: But now, you know, we have four customers that are using it that are happy. And now we're just, like I said, you know, building out the food chain to try to get in front of more people, building on name recognition, which is like I said, on a prior call. is one of the things that, you know.
Speaker Change: There's one other things that you know I think is just because of our size and our name. It takes a lot more after it to get that sale over the fence just because you know we're competing with some of the multi billion dollar companies in this space.
William Lauber: because of our size and our name, it takes a lot more effort to get that sale over the fence just because, you know, we're competing with some other multi-billion dollar companies. Okay, could you guys put an approximation on it? I mean, could we have earned a dollar a share? Yeah, more than that, yeah. More than a dollar a share? Mm-hmm.
Speaker Change: Okay.
Could you guys put a approximation all of it I mean.
Speaker Change: We have earned a dollar a share yeah more than that yeah.
Speaker Change: More than a dollar a share hum.
Speaker Change: Okay.
Victor Dellovo: Okay, my next question was, the increase in your recurring revenue as a percentage is pretty impressive. When you look out, say three, maybe five years down the line, what, what percentage do you think that could be and what's kind of your internal goals? If we could double again in the next 24 months, that would be something that would be... be proud of. You know, that's where we're, we're very, very focused on that recurring revenue piece of it, especially in the cloud, the Microsoft business that we're, we're bringing, you know, we're continuing to grow the engineers, the support staff, and, you know, the sales staff along with it.
Speaker Change: Oh My next question was the.
Speaker Change: The increase in your recurring revenue as a percentage is pretty impressive when you look out let's say three maybe five years down the line what what percentage do you think that could be and what's kind of your internal goals.
Speaker Change: You know if if we could double again in the next 24 months that would be something that would be.
Speaker Change: We'd be proud of and you know that's why we're we're very very focused on that recurring revenue piece of it especially in the cloud the Microsoft business that where we're bringing you know we're continue to grow the engineers of support staff and our you know the sales staff along with it.
Victor Dellovo: And then the MSP, once, if we could get into the cloud play, the MSP usually comes after that. So that definitely, you know. They're adjacent to each other. If we can get one, we usually get the other. So yeah, you know, our goal is to grow that as fast as possible. There's no limits on what we can do. what we want to do, but at least, you know, at least a 10 to 15% growth minimum, you know, year over year, if not more. The answer to your question would be about 56 cents. for share.
Speaker Change: And then the MSP once once if we could get into the cloud play the MSP usually comes after that so that definitely you know.
Speaker Change: They're they're adjacent to each other if we could get one we usually get together. So yeah. You know our goal is to grow that as fast as possible. There's no limits on what will.
Speaker Change: What we wanted to but at least you know at least a 10% to 15% growth minimum you know year over year, if not more.
Speaker Change: Okay.
Speaker Change: It would be about 56 cents.
Speaker Change: <unk> per share.
Okay.
William Lauber: All right. Thank you.
Speaker Change: Alright, thank you.
William Lauber: Yeah. Thank you.
Speaker Change: Yes.
Speaker Change: Thank Keith.
John Crotty: Our next question is coming from John Crotty, who is a private investor. Your line is... Hi. Thanks for taking my call. I want to just say congratulations on the S500 Energy Company. 18 months is a long POC. I understand I've been involved with a few and good job, especially having the patience. And for us investors, we need to have the patience of a dead person. So, we're with you right along with it. Anyway, you've talked a lot about the Rockwell and I read a lot and that really seems like a great partnership with lots of leads.
Speaker Change: Our next question is coming from John crossing who is a private investor Your line is life.
John Crossing: Hi, Thanks for taking my call.
John Crossing: I wanted to just say congratulations on the S 500 Energy company I 18 months is a long P. O C. I understand I've been involved with a feeling.
Good job, especially haven't been patient.
John Crossing: As investors, we need to have the patience of a dead person so well with your right along with it anyway, you're talking a lot about the Rockwell and I read a lot and that really seems like a great partnership with lots of leap, but I want to talk about the other partnerships. You have you have the large one in Australia. You mentioned there was a smaller one in the middle East and then we had a large one.
Victor Dellovo: But I want to talk about the other partnerships you have. You have the large one in Australia. You mentioned there was a smaller one in the Middle East and then we had a larger one that was out in the U.S., I believe, in the East Coast with a lot of clients. Could you give us any feedback on that in terms of are they running Proof-of-Concepts? Do they have a large pipeline or any type of any info like that? The partner in Australia, they're not the largest partner, but we do have some POCs going on with them.
John Crossing: One that was out in the U S. I believe in the East coast with a lot of clients could you give us any feedback on that in terms of are they running proof of concepts. They have a large pipeline of any type of any info like that.
John Crossing: The lot the partner in Australia, then they're not the largest partner, but we do have some P. O sees going on with them. They are good size opportunities.
Victor Dellovo: They are good-sized opportunities. They're not in the commercial sector, so things do take time there, but they are progressing. And yeah, and the partners that we're focused on right now. You know, we. With the Rockwell is because we're really focused on that OT space and because we have the approval from Rockwell as a certified partner That's kind of where our focus has been because getting into some of the other manufacturers takes time. You know, Rockwell took us almost two years to get approved inside as a certified partner. So we're working with some of the other big manufacturers.
John Crossing: In there.
John Crossing: They're not in the commercial sector. So things do take time, there, but they are progressing and yeah and the partners that we're focused on right now.
John Crossing: We with the Rockwell is because we're really focused on that O T space and because we have the approval from Rockwell as a certified partner, that's kind of where our focus has been because getting into some of the other.
John Crossing: Manufacturers' takes time, you know Rockwell took us almost two years to get approved decide as a certified partner. So we're working with some of the other big manufacturers. We're in different stages of getting approval has a certified.
John Crotty: We're in different stages of getting approval as a certified, you know, partner that can work inside their stack. So yeah, everything is moving just at different paces, you know, just depending on how fast and in some of these large organizations, unfortunately, people leave, move or get fired. And, you know, sometimes you take two steps forward and then, you know, someone leaves and you got to re-educate the new person. And we've seen that happen in some of these large manufacturing companies. Yeah, I agree. Go for the low-hanging fruit, because they're pushing you through. I agree.
John Crossing: Partner that can work inside their stack. So yeah everything is moving just at different paces, you know just depending on how fast and in some of these large organizations. Unfortunately people leave move I'll get fired and you know sometimes you take two steps forward and then you know someone leaves and you've gotta reeducate, the new person and we've.
John Crossing: Seen that happen in some of these large manufacturing companies.
Speaker Change: Yeah I agree go for the low hanging fruit because they are pushing you to I agree.
Victor Dellovo: I also want to talk about what you mentioned a couple of calls ago, that some of the government win that you had, they had many other divisions or departments or areas that were waiting for budgets to add it in. Is anything moving along with increasing any of the opportunities with existing customers, especially like you had mentioned with the Western Intelligence? Yeah, there's another opportunity. I think that has moved forward. Timing on that is not, I'm not exactly sure, but there is a deal that I feel like in the next 90 days, we're hoping that will come in.
Speaker Change: I wanted to talk about what you mentioned a couple of calls ago that some of the the government win that you had there they had many other divisions or departmental areas that were waiting for budgets to add it in is there anything moving along with increasing any of the opportunities with existing customers.
Especially like you had mentioned with the Western intelligence.
Speaker Change: Yeah. There's there's another opportunity I think that has moved forward timing on that is is is not I'm not exactly sure but there is a deal that I feel like in the next 90 days, we're hoping that will come in.
John Crotty: And that's all I can say about that. Okay, no, that's fair enough. And I know you have a lot of nondisclosures you got to be cautious with.
Speaker Change: And that's all I can say about that okay.
Speaker Change: Okay, No that's fair enough and I know you have a lot of non disclosures you could it be cautious with no that was it and that's what I wanted just to follow up everything else read through and I liked the response that I like 56 cents a share on just the a T. S side. So that's good right.
John Crotty: No, that was it. That's what I wanted just to follow up. Everything else read through and I like the response and I like 56 cents a share on just the TS side. So that's good. All right. Thank you so much. Keep up the good work, guys. Thank you.
Speaker Change: Thank you so much keep up the good work guys.
Speaker Change: Thank you.
Speaker Change: Thank you.
Douglas Johnson: Our next question is coming from Douglas Johnson, who is a Price. Your line is life. Yes, how large are these AZT contracts you have with these three Fortune 500 companies?
Speaker Change: Our next question is coming from Douglas Johnson, who is a private investor your line of sight.
Speaker Change: Oh, yes, how large are these AC T contracts you have with the three fortune 500 companies.
Victor Dellovo: Well, I can't disclose exactly, but, you know, one of them's in the millions, and the other ones, as I mentioned in the script, we're looking to get adopted inside their infrastructure, and some of these were what was left in the current budget, and then we'll roll out, you know, I mentioned the big energy, they have thousands of systems that they told us it could take up to three years to roll them out. We're hoping to speed that up by us doing or assisting with the installation, but, you know, there are thousands of endpoints, and it's, you know, how they roll out and how fast is kind of up to the customer.
Speaker Change: Hmm.
Speaker Change: Well I cant disclose exactly but you know one of them is in the millions and the other ones as I mentioned in the script, we were looking to get adopted inside their their infrastructure and some of these were what was left in the current budget and then we will roll out you know I mentioned that the.
Speaker Change: Big energy they have thousands of systems that they told us it could take up to three years to roll them out we're hoping to speed that up by us doing are assisting with the installation, but you know there are thousands of endpoints and it's you know how they roll out and how fast it is kind of up to the customer.
Speaker Change: Thank you.
Yeah.
Speaker Change: Thanks Keith.
Jeffrey Stevens: Our next question is coming from Jeffrey Stevens with Long Pond Capital, your line is live. That's how it's going to go. I look back a couple of years ago, you guys had a relationship with NVIDIA, you guys did a little... A little, uh... Yes, we definitely have had conversations with them. That was one of the examples where some of the powers-to-be that we were talking with kind of moved on. So we kind of had to, you know, start from scratch a little bit on some of the contacts there. But there's definitely, you know, conversations. They're not moving as fast as we would like, but, you know, we do have...
Speaker Change: Our next question is coming from Jeffrey Stevens with long Pond capital Your line is life.
Speaker Change: That's not what's going on.
Speaker Change: How are you doing all.
Speaker Change: Good I wanted to look I look back a couple of years ago.
Speaker Change: Having a relationship with the video with you guys where are you guys did take a little while.
Speaker Change: A little.
Speaker Change: Announcement with them are there.
Speaker Change: There are hardware.
Software is.
Speaker Change: It possible or have you have you had conversations conversations with them with for E T.
Speaker Change: Yeah. So we definitely have had conversations with them that was one of the examples where some of the powers to be that we were talking with kind of moved on so we kind of had to you know start from scratch a little bit on some of the contacts there, but there's definitely you know conversations they're not moving as fast as we would like.
Speaker Change: But you know we do have.
Victor Dellovo: you know some relationships there and you know we're talking you know more in their robotic area that's kind of where we we want to focus on AZT and in that area what comes from it I can't say but you know that's kind of our goal and our focus with those guys.
Speaker Change: You know some relationships there and you know we were talking you know more than their robotic area, that's kind of where we want to focus on AZT and in that area. What comes from it I I cant say, but you know that's kind of our goal and our focus with those guys.
Jeffrey Stevens: All right, well, thank you so much. Thank you.
Speaker Change: Alright, well thank you so much.
Thank you.
Speaker Change: Yes.
Speaker Change: Thank you. Our next question is coming from Brett Davidson, who is a private investor Your line is live.
Brett Davidson: Our next question is coming from Brett Davidson, who is a private investor. Gary, Victor, happy holidays. How are you, Brett? Same to you, Brett. I'm doing good.
Brett Davidson: Gary Victor Happy holiday or you were saying what are you doing good.
Speaker Change:
Victor Dellovo: Just got a couple of, I'm going to limit it to one question, it's just going to be a multi-part. I'll link it with and. Is there any legacy stuff at all going on in the E2D program? And can you give a little color on those UCAS contracts that were announced in the last quarterly earnings release? There is going to be a little E2D next year, it was supposed to be in this quarter, they moved it, so we're thinking it's going to be Q1, it could move out, but that's coming, as you note, towards the end, it is at the end of its career, you know, but we believe there will be one more.
Speaker Change: Just got a couple of them I'm going to limit it to one question and it's just there'll be a multipart [laughter] linker with and.
Speaker Change: Is there any legacy stuff at all going out and the eat the E. Two D program.
Speaker Change: And can you give a little color and those you care contracts that were announced in the last quarterly earnings release.
There is gonna be a little each E D.
Speaker Change: Next year it was supposed to be in this quarter. They moved it. So we're thinking it's going to be Q1, they could move out, but that's coming as you note.
Speaker Change: You know towards the end it is at the end of its Korea, you know yeah. We believe we believe there'll be one more.
Victor Dellovo: next year and in 2025. And then, you know, there'll be some pieces and parts we're guessing over, over, we're not sure exactly. And then on the UCAS, we continue just to grow that, that business, bring in new clients. There's been a few that we, we sold a deal last quarter, but it took some time to implement and we turned on the billing in this quarter. So it'll continue to grow over time. And these are usually three-year contracts. Got it. And so that's this quarter. And you know, any any headway since then? Yeah, yeah, no, the pipeline looks pretty good on on UCAS.
Speaker Change: Next year and in 2025.
Speaker Change: And then you know there'll be some pieces and parts I'm, we're guessing over over.
Speaker Change: Not sure exactly.
Speaker Change: And then and the UK as we continue just to grow that that business is bringing on new clients. There's been a few that we solar deal last quarter, but it took some time to implement and we turned on the billing in this quarter. So it'll continue to grow over time and these are usually.
Speaker Change: Three year contracts.
Speaker Change: Got it.
Speaker Change: And so that's this quarter and you know any any headway since then.
Speaker Change: Yeah, no the pipeline looks pretty good on the on your CASM, we're constantly you know.
Victor Dellovo: And we're constantly, you know, We're bringing on one or two customers, you know, consistently every quarter of all sizes, you know, and it's a monthly recurring so, you know, it's not like you get a big pop you get, you know, whether it's 5000 or 20,000 or whatever the number may be, it's on a monthly basis. You know, like I said, we're focused on our recurring. uh... revenue at this stage of the game. We'll still sell the product uh... and services as we you know we do and I mentioned we, you know one of the cruise lines finally gave us a nice uh...
Speaker Change: We're bringing a one or two customers you know consistently every corner of all sizes, you know and it's a monthly recurring so you know it sounds like you can get a big pop you get you know, whether it's 5000 or 20000 or whatever the number may be its on a monthly basis.
Speaker Change:
Speaker Change: You know like I said, we're focused on all recurring.
Speaker Change: Our revenue at this stage of the game will still sell the product and services as we you know we do and I mentioned that we you know one of the cruise lines finally.
Give us a nice you know close to a million dollars professional service contract.
Victor Dellovo: you know close to a million dollar professional service contract uh... that will roll out over over twenty twenty five uh... Yeah, you were focused on either professional services because it's high margin or, you know, any of the recurring revenue. And we try to do like multi year deals on pretty much everything we do. Microsoft is a little different, you either get one year or monthly. But that's because it's a program that they they are. Got it.
Speaker Change: That will rollout over over 2025.
Speaker Change: Yeah, you know we're focused on either professional services, because it's high margin or you know any of that recurring revenue and we tried to do multi year deals on pretty much everything we do Microsoft is a little different either get one year of monthly, but that's because it's a program that they they offer.
Speaker Change: Got it thank you very much.
Victor Dellovo: Well, thank you very much. Yep. Have a good one. Happy Holidays. Thank you.
I would go on happy holidays.
Speaker Change: M P OLED.
Speaker Change: [noise]. Thank key's once again, if there would be any final questions or comments. Please indicate so now by pressing star one on your telephone keypad.
Operator: Once again, if there would be any final questions or comments, please indicate so now by pressing star 1 on your telephone keypad.
Victor Dellovo: Okay, as we have no further questions in queue at this time, I'd like to hand the call back over to Mr. Dellovo for any closing comments. Thank you. As always, I want to thank our shareholders for their continued interest and support. Good things are happening at CSPI and AZT Protect in generating more interest and gaining more and more momentum in the market. The increased activity we are experiencing is exciting, and we look forward to updating you on our progress in February.
Speaker Change: Okay. As we have no further questions in queue at this time I'd like to hand, the call back over to Mr de Novo for any closing comments.
Speaker Change: Thank you as always I want to thank our shareholders for their continued interest and support good things are happening at C. S. P. I N AZT protect and generating more interest in gaining more and more momentum in the market.
Speaker Change: The increased activity, we are experiencing is exciting and we look forward to updating you on our progress in February until then best wishes for a healthy happy holiday season. Thank you.
Victor Dellovo: Until then, our best wishes for a healthy, happy holiday season. Thank you ladies and gentlemen.
Okay.
Speaker Change: Thank you ladies and gentlemen, this concludes today's call and you may disconnect. Your lines at this time and we thank you for your participation.
Operator: This concludes today's call and you may disconnect your lines at this time and we thank you for your participation.
Speaker Change: Okay.