CSP Inc. (NASDAQ: CSPI), a provider of security and packet capture
products, managed IT and professional services and technology
solutions, reported financial and operating results for the 2020
fiscal third quarter ended June 30, 2020 and provided a business
update.
Fiscal Third Quarter Highlights and
Recent Developments
- Improved gross margin percentage by
9% compared to the year-ago fiscal third quarter, driven by
primarily higher margin products.
- The ARIA Cybersecurity Solutions
product pipeline has grown and Unified-Communications-as-a-Service
(UCaaS) added several customers, highlighting the continued
interest and demand for its feature-rich functionality.
- Expanded in our managed service practice, including cloud,
Office 365 and other Microsoft offerings.
- In early April when it became
evident that COVID-19 would have a severe impact on the economy we
took three actions to improve our cash flow: we suspended our
quarterly dividend; stopped our stock buyback program; and applied
for and received a PPP loan at each segment. These actions improved
our cash position by approximately three million dollars at the end
of June.
“As we continue to adjust our business to meet
our customers’ needs during this challenging COVID-19 period, I
believe our team performed admirably during the fiscal third
quarter,” commented Victor Dellovo, Chief Executive Officer.
“Notwithstanding the business impact in certain sectors, the
breadth and financial strength of our customers and our focus on
generating recurring revenue allowed us to achieve a 9% gross
margin percentage improvement, despite the decline in revenue from
a few large low margin deals. We remain encouraged by the rising
interest and demand we are experiencing in our newest offerings,
which enabled us to deploy ARIA for an international customer while
customers continue to sign up for our UCaaS offering. This
continues to demonstrate the successful execution of transitioning
to a cybersecurity, wireless and managed service markets company.
Despite the limitation on our operations due to COVID-19,
especially in the sales area, we are continuing to build the
revenue pipeline during the fiscal quarter which we believe will
fuel our growth in the coming years. We followed all the CDC
rules pertaining to COVID-19 and most of our employees have been
working from home. We have been able to maintain our
pre-COVID-19 employment levels and keep our employees productive in
executing our long-term strategy.”
Fiscal Year 2020 Third Quarter
Results
Revenue for the fiscal third quarter was $13.5
million compared to $21.6 million in the year-ago fiscal third
quarter. Gross profit for the fiscal third quarter was $4.2
million, or 31.2% of sales, compared with $4.8 million, or 22.4% of
sales, in the year-ago fiscal third quarter, reflecting improved
product gross margin percentage plus a mix of higher margin
services business. Net loss before income tax was $200,000 for the
fiscal third quarter compared to net income before income tax of
$206,000 for the same quarter of the prior fiscal year. The
Company’s income tax expense for the fiscal third quarter was
$10,000. The Company reported a net loss of $210,000 for the third
fiscal quarter, or $(0.05) per share compared with net income of
$509,0000, or $0.12 per diluted share, for the third quarter of
fiscal 2019.
At June 30, 2020, the Company had cash and cash
equivalents of $20.0 million.
Fiscal 2020 Nine Month
Results
Revenue for the nine months ended June 30, 2020
was $46.2 million compared to revenue of $56.9 million in the prior
year nine-month period. Gross profit for the nine months ended June
30, 2020 was $12.7 million, or 27.6% of sales, compared with $12.9
million, or 22.7% of sales, in the first nine months of fiscal
2019. Net loss for the nine months ended June 30, 2020 was $1.5
million, or $(0.37) per share, compared with net loss of
$37,000, or $(0.01) per share for the fiscal 2019 nine-month
period.
Conference Call Details
CSPi Chief Executive Officer Victor Dellovo and
Chief Financial Officer Gary W. Levine will host a conference call
at 10:00 a.m. (ET) today to review CSPi’s financial results and
provide a business update. To listen to a live webcast of the call,
please visit the “Investor Relations” section of the Company’s
website at www.cspi.com. Individuals may also listen to
the call via telephone, by dialing 800-894-5910 or 785-424-1052 and
use the conference ID: CSPQ320 when greeted by the live
operator. For interested parties unable to participate in the
live call, an archived version of the webcast will be available for
approximately one year on CSPi’s website.
About CSPi
CSPi (NASDAQ: CSPI) operates two divisions,
each with unique expertise in designing and implementing technology
solutions to help their customers use technology to succeed. The
High Performance Product division, including ARIA
Cybersecurity Solutions, originated from supporting initiatives for
the Department of Defense and Western intelligence agencies related
to network monitoring, data protection, and intelligence
initiatives. This focused mindset now results in foolproof data
protection, enterprise wide. Our ARIA Software Defined Security
solutions set provides enhanced network security, as well as
accelerating incident response capabilities, while our Myricom nVoy
Series appliances provide automated breach identification and
notification, enabled by the 10G dropless packet capture inherent
in our Myricom intelligent adapters. CSPi’s Technology
Solutions division helps clients achieve their business goals
and accelerate time to market through innovative IT solutions and
professional services by partnering with best-in-class technology
providers. For organizations that want the benefits of an IT
department without the cost, we offer a robust catalog of Managed
IT Services providing 24×365 proactive support. Our team of
engineers have expertise across major industries supporting five
key technology areas: Advanced Security; Communication and
Collaboration; Data Center; Networking; and Wireless &
Mobility.
Safe Harbor
The Company wishes to take advantage of the
“Safe Harbor” provisions of the Private Securities Litigation
Reform Act of 1995 with respect to statements that may be deemed to
be forward-looking under the Act. Such forward-looking statements
may include, but are not limited to, the ARIA Cybersecurity
Solutions product, pipeline has grown and
Unified-Communications-as-a-Service (UCaaS) added several customers
highlighting the continued interest and demand for its feature-rich
functionality and we are continuing to build the revenue pipeline
during the fiscal quarter which we believe will fuel our growth in
the coming years. Pandemics, epidemics, or disease outbreaks, such
as COVID-19 may cause harm to us, our employees, our clients, our
vendors and supply chain partners, and financial institutions,
which could have a material adverse effect on our business, results
of operations, cash flows, and financial condition. The impact of a
pandemic, epidemic, or other disease outbreak, such as COVID-19,
may include, but would not be limited to: (i) disruption to
operations due to the unavailability of employees due to illness,
quarantines, risk of illness, travel restrictions or factors that
limit our existing or potential workforce; (ii) volatility in the
demand for or availability of our products and services, (iii)
inability to meet our customers’ needs due to disruptions in the
manufacture, sourcing and distribution of our products and
services, or (iv) failure of third parties on which we rely,
including our suppliers, clients, and external business partners,
to meet their obligations to us, or significant disruptions in
their ability to do so. As a result of the World Health
Organization characterizing the COVID-19 outbreak as a pandemic on
March 11, 2020, national, state, and local governments have taken
actions such as declaring a state of emergency, social distancing
guidelines, and shutting down certain businesses which are not
considered essential in part or entirely. The Company has complied
with such actions causing most employees to work remotely in all
locations. Such measures could have a material adverse effect on
our business.
The Company cautions that numerous factors could
cause actual results to differ materially from forward-looking
statements made by the Company. Such risks include general economic
conditions, market factors, competitive factors and pricing
pressures, and others described in the Company's filings with
the Securities and Exchange Commission (“SEC”). Please refer
to the section on forward-looking statements included in the
Company's filings with the SEC.
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CSP INC. AND
SUBSIDIARIES |
UNAUDITED
CONDENSED CONSOLIDATED BALANCE SHEETS |
(Amounts in
thousands) |
|
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June 30, 2020 |
|
September 30, 2019 |
|
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(Unaudited) |
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Assets |
|
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Current
assets: |
|
|
|
|
|
|
Cash and short-term investments |
|
$ |
19,976 |
|
$ |
18,099 |
Accounts receivable, net |
|
|
10,856 |
|
|
15,114 |
Inventories |
|
|
6,412 |
|
|
7,818 |
Other current assets |
|
|
4,289 |
|
|
5,503 |
Total current assets |
|
|
41,533 |
|
|
46,534 |
Property,
equipment and improvements, net |
|
|
1,205 |
|
|
1,273 |
Operating
lease right-of-use assets |
|
|
2,180 |
|
|
— |
Long-term
receivable |
|
|
5,146 |
|
|
5,328 |
Other
assets |
|
|
4,197 |
|
|
6,234 |
Total
assets |
|
$ |
54,261 |
|
$ |
59,369 |
|
|
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Liabilities and Shareholders’ Equity |
|
|
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Current liabilities |
|
$ |
14,116 |
|
$ |
20,027 |
Pension and
retirement plans |
|
|
6,941 |
|
|
6,904 |
Operating
lease liabilities |
|
|
1,562 |
|
|
— |
Notes
Payable |
|
|
2,919 |
|
|
684 |
Other
non-current liabilities |
|
|
254 |
|
|
1,326 |
Shareholders’ equity |
|
|
28,469 |
|
|
30,428 |
Total
liabilities and shareholders’ equity |
|
$ |
54,261 |
|
$ |
59,369 |
|
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CSP INC. AND
SUBSIDIARIES |
UNAUDITED
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS |
(Amounts in
thousands, except per share data ) |
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Three months ended |
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Nine months ended |
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June 30, |
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June 30, |
|
June 30, |
|
June 30, |
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|
2020 |
|
2019 |
|
2020 |
|
2019 |
Sales: |
|
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|
|
|
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Product |
|
$ |
10,294 |
|
|
$ |
18,076 |
|
|
$ |
35,812 |
|
|
$ |
47,390 |
|
Services |
|
|
3,238 |
|
|
|
3,494 |
|
|
|
10,387 |
|
|
|
9,510 |
|
Total sales |
|
|
13,532 |
|
|
|
21,570 |
|
|
|
46,199 |
|
|
|
56,900 |
|
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Cost
of sales: |
|
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Product |
|
|
8,361 |
|
|
|
15,407 |
|
|
|
29,924 |
|
|
|
39,990 |
|
Services |
|
|
947 |
|
|
|
1,324 |
|
|
|
3,537 |
|
|
|
3,976 |
|
Total cost of sales |
|
|
9,308 |
|
|
|
16,731 |
|
|
|
33,461 |
|
|
|
43,966 |
|
|
|
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|
|
|
|
|
|
|
|
|
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Gross profit |
|
|
4,224 |
|
|
|
4,839 |
|
|
|
12,738 |
|
|
|
12,934 |
|
|
|
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|
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Operating expenses: |
|
|
|
|
|
|
|
|
|
|
|
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Engineering and development |
|
|
693 |
|
|
|
583 |
|
|
|
2,081 |
|
|
|
2,109 |
|
Selling, general and administrative |
|
|
3,924 |
|
|
|
4,111 |
|
|
|
11,595 |
|
|
|
11,436 |
|
Total operating expenses |
|
|
4,617 |
|
|
|
4,694 |
|
|
|
13,676 |
|
|
|
13,545 |
|
|
|
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|
|
|
|
|
|
|
|
|
Operating income (loss) |
|
|
(393 |
) |
|
|
145 |
|
|
|
(938 |
) |
|
|
(611 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Other income (expense), net |
|
|
193 |
|
|
|
61 |
|
|
|
565 |
|
|
|
108 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Income (loss) before income taxes |
|
|
(200 |
) |
|
|
206 |
|
|
|
(373 |
) |
|
|
(503 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Income tax (benefit) expense |
|
|
10 |
|
|
|
(326 |
) |
|
|
1,109 |
|
|
|
(466 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) |
|
|
(210 |
) |
|
|
532 |
|
|
|
(1,482 |
) |
|
|
(37 |
) |
Net income (loss) attributable to common stockholders |
|
$ |
(210 |
) |
|
$ |
509 |
|
|
$ |
(1,482 |
) |
|
$ |
(37 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share – basic |
|
$ |
(0.05 |
) |
|
$ |
0.13 |
|
|
$ |
(0.37 |
) |
|
$ |
(0.01 |
) |
Weighted average shares outstanding – basic |
|
|
4,048 |
|
|
|
4,051 |
|
|
|
4,015 |
|
|
|
3,913 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net income (loss) per share – diluted |
|
$ |
(0.05 |
) |
|
$ |
0.12 |
|
|
$ |
(0.37 |
) |
|
$ |
(0.01 |
) |
Weighted average shares outstanding – diluted |
|
|
4,048 |
|
|
|
4,142 |
|
|
|
4,015 |
|
|
|
3,913 |
|
|
|
|
|
|
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Gary W. LevineCFO and
Secretarygary.levine@cspi.comDirect: 978.954-5040
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