CSP Inc.

Good day, ladies and gentlemen, and welcome to CSPI's fiscal fourth quarter and full year 2019 conference call. My name is Keith, and I'll be your coordinator for today. At this time, all participants are in a listen-only mode. We will conduct a question-and-answer session toward the end of this conference call. If you'd like to ask a question, please press the star 1 on your touch-tone phone. I'd now like to turn the call over to Michael Polivio. Please go ahead, sir.

Thank you, Keith. Hello, everyone, and thank you for joining us to review CSPI's fiscal fourth quarter and full year-ended September 30, 2019 results conference call. With me on the call is Victor Dellovo, CSPI's Chief Executive Officer, and Gary Levine, CSPI's Chief Financial Officer. Before we begin, I'd like to remind you that during today's call, we will 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 Securities and Exchange Commission. Please refer to the section on forward-looking statements included in the company's filings with the SEC. After Victor and Gary conclude their opening remarks, we'll then open the call for questions. With that, I'll turn the call over to Victor Dellovo, Chief Executive Officer. Victor, please go ahead.

Thanks, Michael, and good morning, everyone. Gary will be reviewing the Q4 financial results in a few minutes, so I will focus my remarks on our full-year performance. To begin, total revenue for fiscal 2019 increased 8% to slightly over $79 million. I am pleased with our results and I also believe the investments we made over the past couple of years positions us for even greater success in fiscal 2020 and beyond. As we transform CSPI to a cybersecurity, wireless, and managed service company, specifically our new and exciting revenue opportunities for unified communication as a service and ARIA, I do expect these to begin generating revenue during the second half of our fiscal 2020 and I'll discuss these in greater detail. But first, let me begin with a review of our technology solution business. For the full year, TS revenues increased to $71.1 million, representing a 14% increase over fiscal 2018. This reflects a healthy increase in the product and service revenue, which grew at 13% and 18% respectively. Our managed service practice, or MSP, exceeded our expectations, and for a business that did not exist three years ago, we already had a significant number of new customers, and the list keeps growing each quarter. In fact, in the first few weeks of our fiscal 2020 first quarter, we signed several new customers, so we are bullish on the full year results. However, what I'm most proud of is the high customer satisfaction, and I believe the continued positive customer experience is going to help us secure new customers. Kudos to the entire team. They're doing an amazing job, and I'm confident that they will continue to perform at a very high level. We also continue to Our work within the cruise industry, which if you recall, initially started with one operator and increased to include a second. Both are well regarded and among the largest global operators. In fiscal 2019, we have completed a total of 17 ships and we currently have commitments for the next seven months or through fiscal third quarter. Finally, our Microsoft practice is performing well and is benefiting from the actions to recruit the right talent. While we still have opening positions, filling these together with our marketing spend will continue to strengthen our Office 365 business. We also continue to pursue our unified communication as a service business, or UCaaS, which is an all-in-one service for hard and soft phones, including 24 by 7 security and technical support, with redundant data centers located in Florida and Texas. This is a fast-growing and dynamic market, which is controlled by just a few large players. And according to published reports, it is expected to have a 29.4% compound average growth rate through 2024, when it's anticipated to reach a $79 billion market. As you would imagine, with these market characteristics, we are have allocated significant resources to develop an offering which I believe is distinct and offers competitive differentiation. Currently, we have two customers performing testing and since they have over a thousand users being tested at multiple locations, the feedback is positive and we maintain our timeline to officially launch in January. There is a tremendous amount of interest in the UCAS and the pipeline is getting deeper. I'll now move to our high-performance product division. Full-year revenue was $7.9 million, and while the $2.6 million decrease was not entirely unexpected, it's primarily due to $1.7 million decline in royalty revenue related to the E2D program, plus another $3.5 million in lower multi-computer service and AmeriCom revenue. However, this was partially offset with nearly $1 million increase for multi-computer products and services, We remain confident we can secure additional purchases for both POTS and royalties for fiscal 2020 for foreign military E2D planes. In addition to our legacy HPP revenue, we are very excited about the future revenue opportunities. As I mentioned earlier, ARIA, our award-winning next-generation cybersecurity platform, is why we are cautiously optimistic about the growth potential for our HPP business segment. As a reminder, ARIA provides advanced protection for critical data assets that need to be assessed by end users and applications, both in the cloud and on-site. I want to review the progress that we made since we last spoke and the initiatives that we are currently underway to ensure the successful launch of ARIA during the second half of current fiscal year. With the supplier issue successfully resolved, we commenced shipments as we have officially transitioned from beta stage to rollout stage. This increased level of confidence has allowed us to build a sales team. In the last three months, we have hired three trained direct salespeople with each a minimum of 15 years experience. I believe it's worth pointing out that each was fully employed at the and other organizations that they made a conscious decision to join the CSPI team. As many of you know, this is a historically tight labor market, so I believe that the decision is a game changer because they recognize ARIA's advantage in how we can potentially reshape the competitive landscape. Let me remind you, CSPI is a relatively newcomer in the cybersecurity space, an unknown entity, so it's a big moral boost when they joined. and I can say without hesitation their energy and enthusiasm is already permeating through CSPI. While we continue to downplay a rapid initial ramp-up, given the typical long sales cycle required when dealing with OEMs and MSSPs, the pace of sales meetings has increased and our sales funnel has risen exponentially. We are continuing to vet potential partners for our official channel program, which is part of our two-pronged strategy to expand to include resellers with security expertise in order to improve the sales funnel of our cybersecurity products. We have signed three partners in the past three months, and we are expecting more as we progress over the next coming months. And since a robust channel program together with the expanding direct sales team will give us a strong platform for revenue growth. As anticipated, the customer feedback remains positive, primarily regarding ARIA's ease of deployment and ease of use. So it's now just a matter of time before we get the first certificate in order. Actually, every potential customer has looked at ARIA is still in the sales funnel of more than two dozen or so. So I'm pleased to report that not a single one has walked away. Each one is progressing throughout the sales process with a few approaching the more advanced stages. Also, the recent acknowledgement we received from Cyber Defense Magazine, the premier source of IT security information, validates our vision and is a key in the third-party endorsement that will drive further customers' interest and demand. I can't underestimate the importance of this reference, and in combination with our sales and development efforts, we will maintain our plans for further educate the market. I also believe due to the momentum we are generating and the positive customer experience, the timing will benefit us as customers are finalizing budgets for the new year, certainly the larger ones. In summary, we made significant progress in fiscal 2019 and we carried this momentum into the new fiscal year. As we enter the new year, we have a solid existing business and exciting new offerings in each of our business segments, UCAS in our TS business and ARIA in our HPP business, and believe we are positioned to succeed in the coming year and cement our migration to a cybersecurity wireless and managed service market company. I believe we now have the pieces in place to significantly improve our top line and achieve profitability in fiscal 2020. With that, I'll now ask Gary to provide a brief overview of our fiscal fourth quarter financial performance. Gary?