Q3 2026 CSP Inc Earnings Call Transcript
Key Points
- Achieved 100% renewal rate on all AZT Protect customer sites reaching their one-year renewal period, demonstrating strong product retention.
- Gross margin expanded by over 100 basis points to 30.1% of sales, driven by improved product gross margin of 20.7% versus 15.7% in the prior year.
- Signed a six-year, seven-figure managed service agreement with a nationally recognized professional sports team, entering a new market.
- Completed integration of AZT Protect into several OEM products, including Acronis Software, with a fall launch on track and a growing OEM pipeline.
- Service gross margin increased 1.3% compared to the prior year period, reflecting continued growth in the cloud and managed service business.
- No AZT Protect customer has experienced a breach, and the company has developed a catalog of AI-driven exploits it can prevent, strengthening its competitive position.
- Total revenue declined to $14.4 million from $15.4 million in the prior year quarter, impacted by hardware shipment delays and longer AZT Protect sales cycles.
- Net loss widened to $846,000 or 9 cents per share, compared to a net loss of $264,000 or 3 cents per share in the prior year quarter.
- Service revenue decreased to $4.5 million from $5.3 million in the prior year, reflecting vendor delays.
- AZT Protect sales cycles for large enterprise opportunities remain lengthy (18-24 months), with expansion phases taking longer than anticipated due to stakeholder alignment and internal review processes.
- Hardware shipment delays are expected to persist for at least a year, with lead times averaging around 200 days compared to 30-60 days historically, impacting revenue recognition.
- Operating loss increased to $1.5 million from $1.2 million in the prior year, partly due to variable compensation and costs related to the UK pension buyout.
Good day, everyone. Welcome to CSPI's third quarter fiscal year 2026 conference call. At this time, all participants have been placed on the listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Michael Poliview. The floor is yours.
Thank you, Kelly. Good morning, everyone, and thank you for joining us to review CSPI's financial results for the fiscal 2026 third quarter. which ended on June 30, 26, as well as recent operating developments. Today 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'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, then to please re-queue if you have additional questions. In advance, thank you for your cooperation with this process. Statements made by CSPI's management on today's call
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