CSP Inc. Reports Fiscal Year 2020 Second Quarter Financial Results
LOWELL, Mass., May 14, 2020 (GLOBE NEWSWIRE) -- CSP Inc. (NASDAQ: CSPI), a provider of security and packet capture products, managed IT and professional services and technology solutions, reported financial results for the 2020 fiscal second quarter ended March 31, 2020 and provided a business update.
“Our team was performing well during the second quarter and meeting our expectations prior to the COVID-19 pandemic,” commented Victor Dellovo, Chief Executive Officer. “To minimize the business disruption, we quickly adjusted our operations to comply with local and federal requirements and currently over 90% of the team is working remotely, which allows us to maintain contact with customers. Despite the current environment we are continuing to experience a growing interest in our newest offerings, ARIA and Unified-Communications-as-a-Service (UCaaS) business as we continue to transition to a cybersecurity, wireless and managed service markets company. We believe this is especially critical because of the increased threat to the global digital infrastructure, which is today’s lifeline to the outside world. For example, in the past few weeks we have had over a dozen customer engagements and virtual demonstrations as large and small enterprises are recognizing the need to upgrade their systems to protect customers, now and well into the future. With this rising interest in ARIA and our UCaaS offerings, we are cautiously optimistic we will convert a good number of these opportunities to revenue when the business environment is more favorable."
Recent Operating Highlights
Fiscal Year 2020 Second Quarter Results
Revenue for the fiscal second quarter was $16.1 million compared to $16.4 million in the year-ago fiscal second quarter. Gross profit for the fiscal second quarter was $4.5 million, or 27.9% of sales compared with $3.7 million, or 22.9% of sales in the year-ago fiscal second quarter, reflecting a favorable mix of higher margin services business. Income before income tax was $437,000 for the second quarter, compared to a loss before income tax of $761,000 for the same quarter of the prior fiscal year. Our income tax expense for the quarter was $1.2 million primarily from recording a valuation allowance against our deferred tax asset. We concluded that that we would not realize a portion of our deferred tax assets based on recent financial results, the COVID-19 pandemic, and the resulting economic fallout. The Company reported a net loss of $732,000 for the second quarter, or $(0.18) per share compared with a net loss of $619,000, or $(0.15) per share for the second quarter of fiscal 2019.
At March 31, 2020, the Company had cash and cash equivalents of $15.2 million. Due to the ongoing COVID-19 pandemic, the Company has suspended its share repurchase program and cash dividends to preserve its financial resources for working capital purposes.
Fiscal Year 2020 Six Month Results
Revenue for the six months ended March 31, 2020 was $32.7 million compared to revenue of $35.3 million in the prior year six-month period. Gross profit for the six months ended March 31, 2020 was $8.5 million, or 26.1% of sales compared with $8.1 million, or 22.9% of sales in the first six months of fiscal 2019. Net loss for the six months ended March 31, 2020 was $1.3 million, or $(0.32) per share compared with net loss of $569,000, or $(0.15) per share for the fiscal 2019 six-month period.
In April, 2020, Modcomp, Inc. and CSP Inc. (CSPi) were each granted and received the funds for loans from Paragon Bank in the amounts of $1,353,600 and $827,000, respectively. These loans were received under the Paycheck Protection Program (PPP), which was established under the recently enacted Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) administered by the U.S. Small Business Administration.
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 the company’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 877-876-9173 or 785-424-1667 and use the conference ID: CSPQ220 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.
CSPi (NASDAQ: CSPI) operates two divisions, each with unique expertise in designing and implementing technology solutions to help their customers use technology as a means to success. 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 Centers; Networking; and Wireless & Mobility.
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 rising interest in our ARIA and UCaaS offerings. We are cautiously optimistic we will convert a good number of these opportunities to revenue when the business environment is more favorable. 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.