• Revenue (Q4 2024): $13 million, down from $15.3 million in Q4 2023.
• Service Revenue (Q4 2024): $4.4 million, compared to $4.3 million in Q4 2023.
• Gross Profit (Q4 2024): $3.7 million or 28.4% of sales, compared to $5.2 million or 33.8% of sales in Q4 2023.
• Net Loss (Q4 2024): $1.7 million or $0.18 loss per share, compared to net income of $1.4 million or $0.15 per share in Q4 2023.
• Cash and Cash Equivalents (End of FY 2024): $30.6 million, up from $25.2 million at the end of FY 2023.
• Stock Repurchase (Q4 2024): 2,800 shares at a total cost of $34,000.
• Quarterly Dividend: $0.03 per share, payable on January 15, 2025.
• Engineering and Development Expenses (Q4 2024): $793,000, up from $705,000 in Q4 2023.
• SG&A Expenses (Q4 2024): $5.5 million, compared to $4.8 million in Q4 2023.
• Full Year Revenue (FY 2024): $15.2 million, compared to $64.6 million in FY 2023.
• Full Year Gross Profit (FY 2024): $18.9 million or 34.1% of sales, compared to $21.9 million or 33.9% of sales in FY 2023.
• Net Loss (FY 2024): $0.3 million or $0.04 per share, compared to net income of $5.2 million or $0.55 per share in FY 2023.

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

Release Date: December 20, 2024

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

Positive Points

• Recurring revenue increased to 17% of total sales, up from less than 5% a few years ago.
• CSP Inc (NASDAQ:CSPI) finished the year with over $30 million in cash and cash equivalents.
• The company signed a large order with cruise ship customers, indicating growth in that sector.
• CSP Inc (NASDAQ:CSPI) is experiencing increased demand for cloud services, with a dozen active cloud-based projects.
• The partnership with Rockwell Automation and other distribution partners is expanding, generating over 100 leads for the AC T Protect product.

Negative Points

• Revenue for the fourth quarter was $13 million, down from $15.3 million in the same quarter last year.
• The company reported a net loss of $1.7 million for the fourth quarter, compared to a net income of $1.4 million in the previous year.
• Gross profit margin decreased to 28.4% from 33.8% due to a higher percentage of product sales.
• The transition of the AC T Protect sales effort is still in progress, indicating potential delays in revenue generation.
• Engineering and development expenses increased, impacting overall profitability.

Q & A Highlights

Q: Can you provide an update on the proof of concept (PoC) testing for the ZT Protect product? A: We have more than a dozen PoCs ongoing in various stages. Some PoCs have been completed, and we are waiting for budget approvals or final decisions. Recent trade shows have generated significant leads, and we expect more PoCs to start after the New Year.

Q: How much is CSP Inc investing in the ZT Protect effort, and what would earnings look like without it? A: The ZT Protect initiative is a significant investment, and without it, the company would be very profitable. The TS division is performing well and is the cash cow funding the R&D for ZT Protect. Without the ZT Protect expenses, earnings could have been more than a dollar per share.

Q: What are the expectations for recurring revenue growth over the next few years? A: We aim to double recurring revenue in the next 24 months. Our focus is on growing the cloud and managed service business, with a target of at least 10-15% growth year over year.

Q: Can you provide details on the size of the contracts with the three Fortune 500 companies using ZT Protect? A: While specific details cannot be disclosed, one contract is in the millions, and others involve thousands of endpoints. The rollout for some contracts could take up to three years, depending on customer timelines.

Q: What is the status of CSP Inc's partnerships, particularly with Rockwell and other international partners? A: The Rockwell partnership is progressing well, with CSP Inc certified as a partner. We are also working with other manufacturers to gain similar certifications. Internationally, we have ongoing PoCs with partners in Australia and the Middle East, although progress varies by region.

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