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TMCNet:  CSP Inc. Reports Second-Quarter Fiscal 2017 Financial Results

[May 24, 2017]

CSP Inc. Reports Second-Quarter Fiscal 2017 Financial Results

LOWELL, Mass., May 24, 2017 (GLOBE NEWSWIRE) -- CSP Inc. (NASDAQ:CSPI), a provider of IT solutions and high-performance Ethernet products for diverse applications, today reported financial results for the second quarter of fiscal 2017 ended March 31, 2017.

The Company also announced that its board of directors has voted to pay its quarterly dividend of $0.11 per share to shareholders of record June 1, 2017 payable June 15, 2017.
                                                       
Management Comments

“We are pleased to say that the second quarter results continue to demonstrate positive progress on our growth strategy,” said Chief Executive Officer Victor Dellovo. “Cross-selling efforts between our Technology Solution geographies, as well as across High Performance Products and Technology Solutions continue to gain traction.  Our managed services pipeline, in the U.S. and Europe, is growing, and we are taking actions to capitalize on the rapidly growing global security market. From a financial perspective, second-quarter sales were down 6.7%, primarily due to the timing of shipments at our U.S. business in the Technology Solutions division. However, year over year growth was achieved across our U.K. and Germany Technology Solutions businesses.

“In High Performance Products, product development is focused on solutions to assist companies in the protection of their most critical business data, as well as rapid incident response as a result of a cyber-attack. Our recently announced Myricom nVoy Solutions have received positive feedback from customers and industry analysts.  In addition, our next-generation security products are already receiving accolades, which include CSPi’s selection as an Innovative Security Provider by Leading Lights.  To support our increased focus on security, we are executing on initiatives in engineering, marketing and sales to strengthen HPP positioning as a security solutions provider. We received royalty revenues from two E-2D planes in the second quarter, and our expectation is to receive royalties from two planes in Q3 and one additional plane in the fourth quarter. 

“In Technology Solutions, strong performance in Germany and the U.K., was more than offset by weakness in the U.S. While timing of shipments affected revenues in the U.S., our managed services pipeline remains robust, we are closing managed services deals at a greater frequency and the recurring revenue stream is increasing. There is also great interest in the Myricom nVoy Solutions as part of our security managed service offerings.  We are continuing to hire engineers in the U.S. to support future growth.

“Looking forward, we are expecting solid performance in the third quarter on both the top and bottom lines given our backlog in both divisions and our cost-control efforts.  Longer term, we are making very good progress against our strategic initiatives and are positioning CSPi to capitalize on many growth opportunities,” concluded Dellovo.

Financial Results

For the second quarter of fiscal 2017, revenue was $25.3 million compared with $27.1 million in the second quarter a year ago.

Gross margin for the second quarter of fiscal 2017 decreased to 22.5% from 23.3% for the prior-year period due to the reduction in margin on the Technology Solutions business from lower product margins.

Net income for the second quarter of fiscal 2017 was $428,000, or $0.11 per diluted share, compared with net income of $503,000, or $0.13 per diluted share, in the second quarter of fiscal 2016.

Cash and short-term investments decreased to $11.0 million at the end of the second quarter of fiscal 2017 from $13.1 million at year end primarily due to increased accounts receivable at the end of the quarter with extended terms combined with other changes in working capital. 

Conference Call Details

CSPi Chief Executive Officer Victor Dellovo and Chief Financial Officer Gary W. Levine will host a conference call at 9:00 a.m. (ET) tomorrow (May 25) to review CSPi’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 785-424-1670.  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. 

About CSP Inc.

CSPi (NASDAQ:CSPI) maintains two distinct and dynamic divisions – High Performance Products and Technology Solutions – with a shared vision for technology excellence. CSPi’s High Performance Products division offers extreme-performance Ethernet products for diverse applications, including cybersecurity, financial trading, content creation/distribution, storage networking applications, as well computer signal processing systems. CSPi’s Technology Solutions division provides innovative technology solutions for network solutions, wireless & mobility, unified communications & collaboration, data center solutions, advanced security, along with professional and managed services across those technology focus areas. CSPi Technology Solutions works with the world’s leading IT software and infrastructure companies to create solutions for the unique IT requirements of its customers. For more information, please visit www.cspi.com.

Safe Harbor 

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, those related to that we expect  to receive royalties from two planes in Q3 and one additional plane in the fourth quarter and expecting solid performance in the third quarter on both the top and bottom lines given our backlog in both divisions and our cost-control efforts.  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. Please refer to the section on forward-looking statements included in the Company's filings with the Securities and Exchange Commission.

        
CSP INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS
(Amounts in thousands)
        
        
 March 31, September 30,    
 2017  2016    
        
Assets       
        
Current assets:       
Cash and short-term investments$11,038  $13,103     
Accounts receivable, net 24,318   19,564     
Inventories 6,489   5,580     
Deferred costs 1,718   635     
Other current assets 2,766   2,917     
        
Total current assets 46,329   41,799     
Property, equipment and improvements, net 1,553   1,680     
Other assets 5,315   5,228     
        
Total assets$53,197  $48,707     
        
        
Liabilities and Shareholders' Equity       
        
        
Current liabilities$22,396  $17,383     
        
Pension and retirement plans 12,977   13,441     
Non-current liabilities    228     
        
Shareholders' equity 17,599   17,655     
        
Total liabilities and shareholders' equity$53,197  $48,707     
        
        
        
CSP INC. AND SUBSIDIARIES
UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF INCOME
(Amounts in thousands, except per share data )
        
        
  /-----Three Months Ended-----/  /-----Six Months Ended-----/
 March 31, March 31, March 31, March 31, 
 2017  2016  2017  2016  
Sales:        
Product$18,684  $20,972  $33,322  $37,975  
Services 6,632   6,167   11,910   12,840  
         
Total sales 25,316   27,139   45,232   50,815  
         
Cost of sales:        
Product 15,878   17,054   28,103   31,290  
Services 3,743   3,752   6,982   8,002  
         
Total cost of sales 19,621   20,806   35,085   39,292  
         
Gross Profit 5,695   6,333   10,147   11,523  
         
Operating expenses:        
Engineering and development 573   790   1,169   1,589  
Selling, general & administrative 4,500   4,665   8,458   8,713  
Total operating expenses 5,073   5,455   9,627   10,302  
         
         
Operating income  622   878   520   1,221  
         
         
Other income (expense), net 17   (117)  61   (89) 
         
Income before income taxes 639   761   581   1,132  
         
Income tax expense 211   258   196   346  
         
Net income $428  $503  $385  $786  
         
Net income attributable to common stockholders$410  $480  $357  $756  
         
Income per share - basic$0.11  $0.13  $0.10  $0.21  
         
Weighted average shares outstanding - basic 3,724   3,609   3,697   3,589  
         
Income per share - diluted$0.11  $0.13  $0.09  $0.20  
         
Weighted average shares outstanding - diluted 3,847   3,730   3,807   3,728  
         

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