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CSP Inc. Reports Operating Results (10-Q)

May 14, 2009 | About:

CSP Inc. (CSPI) filed Quarterly Report for the period ended 2009-03-31.

CSP Inc. develop and market Internet software for E-commerce solutions image processing software network management integration services and high-performance computer systems. The MultiComputer Division supplies high-performance multiprocessing systems for a broad array of defense applications including radar sonar and surveillance signal processing. The company's MODCOMP Inc. subsidiary is a leading provider of Internet software solutions and systems integration. MODCOMP works with third parties to develop customized application solutions. (PRESS RELEASE) CSP Inc. has a market cap of $11.5 million; its shares were traded at around $3.12 with a P/E ratio of 34.6 and P/S ratio of 0.2.

Highlight of Business Operations:

A significant factor impacting the fluctuation in total revenues, year over year, was the currency exchange rate fluctuation of the strengthening US Dollar versus both the Pound Sterling in Great Britain (GBP) and the Euro in Germany from the first half of fiscal 2008 compared to the first half of fiscal 2009. This currency exchange fluctuation negatively impacted the current 1st half year revenues when comparing to the prior fiscal year 1st half, by approximately $2.1 million. If the exchange rates between the GBP, the Euro and the US Dollar had stayed the same as the prior year six month period, the increase in revenue would have been approximately $9.1 million.

Product revenues for the first six months of fiscal year 2009 increased by approximately $5.6 million, or 18% compared to the first six months of fiscal 2008. Service and System Integration segment product revenue increased by approximately $5.1 million, while Systems segment product revenue increased by approximately $493 thousand.

Service and System Integration segment product sales for the 1st six months of fiscal 2009 versus the prior year 1st six months increased by approximately $5.1 million. This increase was primarily due to an $8.7 million increase in shipments of third-party products from the U.S. division of the segment, due mainly to large orders sold to three of the divisions largest customers. Offsetting the increase from the U.S. division, product sales of the segments German division decreased by approximately $3.8 million, due to a decrease in sales volume which accounted for approximately $2.7 million, and an unfavorable exchange rate fluctuation of the Euro versus the US dollar which accounted for $1.1 million of the decrease. The decrease in product sales volume from the German division of $2.7 million resulted from lower sales to two of the divisions largest customers; a cable and internet service provider and a large German systems integrator. Both of these customers had cited the global economic slowdown as reasons for the decrease in orders.

Systems segment product revenue for the first six months of fiscal year 2009 compared to the same period in fiscal year 2008 increased by approximately $493 thousand. This increase was due primarily to increased product sales to Lockheed Martin of approximately $852 thousand, increased sales to BAE Systems Inc of approximately $651 thousand and decreases in product sales to Kyokuto Boeki Kaisha (KBK) of $866 thousand and General Dynamics of approximately $176 thousand.

Service revenues for the first six months of fiscal year 2009 increased by approximately $1.4 million, or 18% compared to the first six months of fiscal 2008. Service revenues in the Systems segment increased by approximately $1.6 million due to royalty revenues from Lockheed Martin, which were approximately $1.6 million in the first six months of fiscal 2009 and zero in the first fiscal six months of 2008.

Service revenues in the Service and System Integration segment for the first six months of fiscal year 2009 decreased by approximately $195 thousand compared to the first six months of fiscal 2008. This decrease was driven by lower service revenues from the segments German and UK divisions which decreased by $381 thousand and $288 thousand, respectively; which amounted to an aggregate decrease from the European subsidiaries of $669 thousand. This decrease from the European subsidiaries was driven by the unfavorable exchange rate fluctuations of the Euro and GBP versus the US dollar which accounted for a decrease of approximately $1 million. In constant US Dollars, that is if those exchange rates had remained the same year over year, there was an increase in service revenues of approximately $312 thousand, from higher professional service revenues from the UK of approximately $105 thousand and higher maintenance and other service revenues of $207 thousand from the German division. In the US division of the Service and System Integration segment, service revenue increased by approximately $473 thousand, which resulted from R2 Technologies (R2) which the Company acquired on September 25, 2008. R2 generated $711 thousand in service revenues for the six months ended March 31, 2009. Offsetting this increase, services revenues decreased in the legacy business of the US division of the segment due primarily to a lower volume of maintenance contracts during the six months ended March 31, 2009 versus the six months ended March 31, 2008.

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