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CSP Posts Q4 Loss as Revenues Decline Y/Y, Focuses on Growth in 2025

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Shares of CSP Inc. (CSPI - Free Report) have declined 9.6% since reporting fourth-quarter fiscal 2024 earnings, whereas the S&P 500 index has grown 1% over the same period. Over the past month, CSPI shares have lost 19.3%, underperforming the broader market’s 0.3% decline.

Earnings & Revenue Performance

CSP reported a diluted loss per share of 18 cents in the fourth quarter of fiscal 2024 against earnings of 15 cents in the year-ago quarter.

The company reported total quarterly revenues of $13 million, a 14.9% decline from $15.3 million in the prior-year quarter.

The quarterly results were partly influenced by reduced revenues and higher SG&A expenses, driven by increased legal, audit, tax and recruitment costs.

CSP Inc. Price, Consensus and EPS Surprise

 

CSP Inc. Price, Consensus and EPS Surprise

CSP Inc. price-consensus-eps-surprise-chart | CSP Inc. Quote

Segmental Performance

Technology Solutions (TS): The TS segment, which includes managed IT services and cloud-based offerings, generated $12.7 million in revenues in the fourth quarter of fiscal 2024. The segment showed significant momentum in recurring revenues that increased to approximately 17% of total revenues, up from less than 5% two years ago, signaling the company’s successful transition toward a more predictable revenue model.

High-Performance Products (HPP): Revenues from the HPP segment were $0.4 million in the fourth quarter of fiscal 2024. The segment primarily serves ARIA cybersecurity customers, and management highlighted ongoing progress with its AZT PROTECT solution, including a recent deal with a Fortune 500 energy company. While HPP’s contribution remains small, the company anticipates higher sales in fiscal 2025 as the segment’s market adoption grows through partnerships and distributor agreements.

Key Business Metrics

Gross profit for the fourth quarter of fiscal 2024 was $3.7 million (representing 28.4% of sales), down from $5.2 million (33.8% of sales) in the prior-year period. The contraction in the gross margin reflects a higher proportion of lower-margin product sales.

Service revenues contributed $4 million to total sales, down from $4.3 million in the prior-year quarter.

Cash & Debt Position

As of Sept. 30, 2024, CSP had a robust cash and cash equivalent balance of $30.6 million, up 21.3% from $25.2 million as of Sept. 30, 2023. This strong cash position provides the company with ample resources to fund its ongoing investments, including expanding its AZT PROTECT solution and other growth initiatives.

The company maintained a solid balance sheet, with total liabilities of $22.17 million, up from $19.76 million in the prior year. Importantly, CSP has no long-term debt, ensuring financial flexibility to execute its priorities while navigating a challenging macroeconomic environment.

Management Commentary: Optimism for FY25

CEO Victor Dellovo highlighted positive momentum toward the end of the fourth quarter of fiscal 2024, citing strengthened partnerships, and a growing pipeline of managed services and cruise-line projects. Notably, the company’s collaboration with Rockwell Automation generated more than 100 leads for the AZT PROTECT cybersecurity product. Management emphasized the growth potential in recurring revenues and higher-margin service offerings in fiscal 2025.

Challenges Impacting Results

The declines in year-over-year revenues and earnings were partly attributed to the completion of a one-time employee retention credit in fiscal 2023 and a less favorable product mix in fiscal 2024. Additionally, operational investments in AZT PROTECT, including building a distribution network, have temporarily weighed on profitability.

The year-over-year declines in gross profit and revenues were attributed to the product mix and reduced high-margin service revenues. Additionally, CSP faced increased operating expenses, including higher legal, audit and recruiting costs, which weighed on profitability.

Other Developments

In the fiscal fourth quarter, CSP repurchased 2,800 shares for $34,000 and declared a quarterly dividend of 3 cents per share, payable on Jan. 15, 2025. The company also announced plans to leverage its partnerships and market presence through targeted trade shows to boost awareness and adoption of AZT PROTECT.

With strategic initiatives and a strong balance sheet, CSP is optimistic about returning to growth in fiscal 2025. However, achieving these goals will require navigating the competitive landscape and converting the pipeline of opportunities into tangible revenue gains.


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