CSP Q4 Earnings Call Highlights

CSP (NASDAQ:CSPI) executives highlighted accelerating service revenue, improving gross margins, and a growing pipeline for its AZT PROTECT cybersecurity product during the company’s fiscal fourth-quarter and full-year 2025 earnings call.

Fourth-quarter results driven by service growth and margin expansion

Chief Executive Officer Victor Dellovo said the company “had a strong finish to the fiscal year,” pointing to an 11% increase in fourth-quarter revenue and a gross margin increase of more than 800 basis points to 37%.

Chief Financial Officer Gary Levine provided additional detail, stating CSPI generated $14.5 million in revenue for the fiscal fourth quarter ended September 30, 2025, compared with $13.0 million in the year-ago quarter. Product revenue declined by $1.1 million, while service revenue increased $2.5 million, or 63%, versus the prior-year quarter.

Gross profit rose to $5.3 million from $3.7 million a year earlier, which management attributed primarily to the mix shift toward service revenue. Operating loss narrowed to $500,000 compared with a $2.0 million operating loss in the prior-year quarter.

Levine said CSPI posted a net loss of $191,000, or $0.02 per diluted share, for the quarter, compared with net income of $1.7 million, or $0.18 per diluted share, in the year-ago period.

Service revenue becomes a larger share of the business

Dellovo emphasized the increasing contribution of services to overall revenue, noting that service revenue represented approximately 44% of total fourth-quarter revenue, up from about 30% in the year-ago quarter. For the full year 2025, service revenue represented 36% of total revenue, compared with 33% a year earlier.

Management highlighted Managed Cloud and managed service provider (MSP) offerings as a priority, describing “healthy double-digit” growth during fiscal 2025 and stating that one objective for fiscal 2026 is to build on that growth by allocating more resources, including adding sales representatives.

CSPI also pointed to momentum in maritime, where the company said it has been expanding installations during fiscal 2025 and then winning contracts to service those installations, with benefits expected to begin showing in fiscal 2026. Dellovo added that the company entered fiscal 2026 with backlog for cruise ship installs and upgrades that it hopes to convert to revenue over the next 12 months.

During the Q&A, investor Joseph Nerges calculated fourth-quarter service revenue at roughly $6.4 million based on the mix disclosure, and management agreed that was approximately correct.

AZT PROTECT pipeline expands, including industrial IoT opportunities

On the product and cybersecurity side, Dellovo said the company continued gaining traction for its AZT PROTECT offering through strategic partners and distributors, resulting in “dozens of new AZT customer installations” over the past fiscal year and an expanding customer pipeline.

Management described a go-to-market approach that starts with implementing the solution at an initial customer site and then pursuing additional installations across the organization. Dellovo said CSPI was actively working with partners on purchase orders to deploy AZT PROTECT at additional sites. He also said the company has customers across industries including steel, energy, manufacturing, water utilities, pharmaceutical, food, and telecommunications, among others, and suggested some relationships could grow into “six or seven-figure” opportunities.

Dellovo and other executives discussed the role of the Rockwell Automation channel in generating leads. Management noted it participated in the Rockwell Automation Fair in Anaheim in fall 2024 and again in Chicago “a few weeks ago,” with Dellovo saying the booth was busy throughout the event. In response to a question from advisor Will Lauber, management said most orders over the last year came from the Rockwell show, and estimated a 50% increase in leads this year versus last year. Dellovo also said distributors including CED, Sonepar, and Rexel were more engaged this year and brought customers directly to the booth.

Looking ahead, Dellovo said CSPI is expanding its focus to protecting Industrial IoT (IIoT) devices, which he described as historically difficult to protect due to processor types and limited resources that do not support conventional IT endpoint tools. He said AZT PROTECT has had initial success being selected and deployed in such environments, and that the company has enhanced its software to simplify integration into industrial IoT products from other vendors. Dellovo said the company has overcome integration challenges “without exception,” while acknowledging more work remains to streamline deployment.

Acronis integration and reseller initiatives discussed, but timing remains uncertain

Management also addressed integration work with Acronis during the Q&A, but said it was too early to estimate revenue. Dellovo said the product is being integrated, and that CSPI is working to complete it “over the next few months,” adding that he would share more when possible.

In a separate question, management clarified that revenue associated with Acronis would be recognized from Acronis, not directly from the end user. Dellovo described the joint effort as scanning backups before Acronis performs the backup to help ensure secure recovery. He said Acronis would still need to sell the capability to its customers and that the model would be “subscription type” with renewals.

On reseller UFT, Dellovo said UFT wanted three sites implemented to create case studies, and that CSPI closed three opportunities over the last quarter as part of that effort. He said UFT is preparing case studies and updating legal agreements, with plans for joint marketing outreach in the new year to UFT’s customer base.

Full-year figures, capital allocation, and balance sheet

For the full year ended September 30, Levine said CSPI increased revenue by 6% and reported gross profit of $18.5 million, or 32% of sales, compared with $18.9 million, or 34% of sales, in the prior year. The company reported a net loss of $91,000, or $0.01 per share, compared with a net loss of $326,000, or $0.04 per diluted share, in the prior year.

Levine said CSPI ended the year with $27.4 million in cash and cash equivalents, down about 10% year over year. He noted that CSPI continues to provide revenue financing to qualified customers and that financing receivables doubled over the past year. The company also paid a $0.03 per share dividend and repurchased 19,500 shares during the fourth quarter for $234,000.

As disclosed on the call, CSPI expects to pay another $0.03 per share dividend on July 15, 2026, to shareholders of record on December 26, 2025.

In closing remarks, Dellovo said the company is working to capitalize on service-side opportunities and AZT PROTECT momentum and expects to provide an update when it reports again in February.

About CSP (NASDAQ:CSPI)

CSP Inc develops and markets IT integration solutions, security products, managed IT services, cloud services, purpose-built network adapters, and cluster computer systems for commercial and defense customers worldwide. It operates in two segments, Technology Solutions and High Performance Products. The Technology Solutions segment provides third-party computer hardware and software as a value-added reseller to various customers in web and infrastructure hosting, education, telecommunications, healthcare services, distribution, financial and professional services, and manufacturing industries.