CSP Inc.

Good day, everyone, and welcome to the CSPI Fiscal 2020 First Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, you'll have the opportunity to ask questions during the question-and-answer session. You may register to ask a question at any time by pressing star and one on your touch-tone phone. Please note today's call is being recorded, and it's my pleasure to turn the comments over to Michael Polivio. Please go ahead.

Thank you, Pete. Hello, everyone, and thank you for joining us to review CSPI's fiscal first quarter ended December 31, 2019. With me on the call today 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. Thank you, Michael, and good morning, everyone.

Since this is our first call since 2020, I would like to wish everyone a Happy New Year. To begin, total revenues for the fiscal quarter was $16.6 million compared to $19 million, slightly ahead of our internal projections. And despite the business mix, I am pleased that our gross margins improved compared to a year ago quarter, despite a $2.4 million revenue decrease. I believe this reflects the investments we have made over the past couple of years to develop higher margin products as we remain focused on driving profitability. Additionally, we continue to make progress on our unified communication as a service, or UCAS, in ARIA. Apart from driving our top line growth, these higher margin offerings will have a disproportionate benefit to our bottom line. In a few minutes, Gary will discuss our first quarter financial results in greater detail. But first, I will review our business segments, and I'll begin today with our technology solution business. For the quarter, our TS revenue was $15.5 million. Our managed service practice, or MSP, performed well as we continued to expand our customer base as well as our current customers' monthly spend on new services due to our high customer satisfaction, which is something we track closely. As someone who has been in the industry for a long time, it's difficult for our investment to achieve this high level, let alone maintain. But we do this on a consistent basis, so hats off to our entire team. Other areas of growth, such as the cruise industry, represent significant revenue opportunity, and we currently have commitments through the next two quarters. The Microsoft practice is a steadfast performer, as we experienced a 247% increase in the number of licenses in 2019, and I believe we can surpass that growth rate in fiscal 2020, based on our current trend line, in addition to exploring ways to further strengthen our Office 365 business. Our UCaaS, which is an all-in-one service for hard and soft phones, including 24x7 security and technical support with redundant data centers located in Florida and Texas. I believe we have developed something unique, a testament to our innovative and startup mentality. Everyone at CSPI is eager to get this underway so we can capture our piece of the pie and participate in this growing market, which is estimated to reach $79 billion in a few years. This is a market dominated by a few large players. However, I believe that cookie-cutter offering leaves a big portion of the addressable market open to CSPI to service. This provides an opening for smaller, nimble, and more customer-centric companies such as CSPI. We continue to have a strong pipeline, both new and existing customers, as they appreciate our secure product, not to mention it can be customized to fit their specific needs. As we mentioned on the Q4 conference call, we had two companies performing beta testing, each over 1,000 users. I'm pleased to report one of them has signed a contract, and the other one we feel confident will sign in a few weeks. From the earliest days, we have recognized that we have developed something special, so we made sure our infrastructure can support the expected demand. I look forward to providing progress updates over the coming few months. Now I'll move over to our high-performance product division. Revenue for the quarter was $1 million and reflects a decline in the product revenue, primarily Maricon. However, we do expect our legacy business to improve throughout the year, which also includes anticipated royalties in the second half of the year for foreign military E2Ds. In terms of new offerings, ARIA, our award-winning next-generation cybersecurity platform, gives us reason to be optimistic about the growth potential for HPP business segment. We have several discussions in various phases of the sales funnel, including a few that would categorize as being later or advanced stages. In fact, we are well-positioned within a leading cable company and believe this could lead to multimillion-dollar opportunities. As you would imagine, It's a small, tight-knit community, and they all know what the other is up to. So this has opened discussions with other similar companies. In addition to our direct sales team, we continue to vet potential partners for our official channel program. We currently have eight partners, and we are speaking with several others to increase our roster, which ensures a robust channel and increase our chances for success. In addition, you will see multiple announcements from integrations with go-to-market partners in the coming weeks. These are security vendors whose solutions benefit from our capabilities. These integrations will increase our solution impact as well as our market reach by leveraging access to these partners' customer base and prospects. In summary, notwithstanding the foreign exchange and anticipated ramp-up HPP business, there were no surprises and Q1 was a solid quarter. We made progress and launched our new UCAS offering, so we expect to see improvements over the remaining quarters of fiscal 2020, especially in the second half of our fiscal year. With that, I'll now ask Gary to provide a brief overview on our fiscal first quarter financials performance.