CSP Inc. (NASDAQ:CSPI) Q2 2019 Earnings Conference Call Transcript

May 08, 2019 • 10:00 am ET

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CSP Inc. (NASDAQ:CSPI) Q2 2019 Earnings Conference Call Transcript

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Presentation
Operator
Operator

Good day, ladies and gentlemen, and welcome to the CSPi Second Quarter Fiscal 2019 Conference Call. My name is Aaron, and I'll be your coordinator for today. At this time all participants are in listen-only mode. We will conduct a question and answer session toward the end of the conference call. (Operator Instructions) Please be advised today's program may be recorded.

I would now like to turn the call over to CSPi Chief Financial Officer, Gary Levine. Please proceed, sir.

Executive
Gary Levine

Good morning, everyone, and thank you for joining us. With me on the call today is Victor Dellovo, CSPi's Chief Executive Officer.

Before we begin, I would like to remind you that during today's call, we'll 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. 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 SEC. Please refer to the section on forward-looking statements included in the Company's filings with the Securities and Exchange Commission.

During today's call, after Victor provides an introduction, I'll discuss our second quarter financials. Victor will come back for an update on our business segments and on our strategic progress, and then, we'll open it up to your questions.

With that, I'll turn it over to Victor.

Executive
Victor Dellovo

Thanks, Gary. During the second quarter, we advanced our transformation to become a cybersecurity, wireless and managed services Company. Financially, strong demand for our managed IT services was offset by a softer multi-computer sales and resulted in a slightly lower year-over-year revenue.

In our High-Performance Products segments, we advanced the customer evaluation stage for our ARIA SDS cybersecurity solution and experienced good demand for our legacy Myricom network adaptors.

In the Technology Solutions, our UK operations delivered a strong quarter and our US operation benefited from the growing base of customers for our managed IT services. After Gary reviews our financial results for the quarter, I'll come back with detailed review of our achievements and our progress in Q2 by segment.

Gary?

Executive
Gary Levine

Thanks, Victor. For the second quarter, revenues were essentially flat at $16.4 million compared to $16.6 million a year ago. Our total cost of sales was flat versus the prior year at $12.6 million. Gross profit for the quarter was $3.7 million, down from $4 million a year ago, in-line with the slightly lower sales volume. Gross margin was 22.9% compared to 24% a year ago.

Second quarter engineering and development expenses were $781,000, up slightly from $759,000 a year ago, reflecting our continued investment in the development of our next-generation cybersecurity solutions. As a percentage of sales, Q2 engineering and development expenses was 4.8%, up from 4.6% last year. Q2's SG&A expenses were $3.7 million, or 22.9% of sales, compared to $4.1 million,