CSP Inc.

everyone, and welcome to the CSP Incorporated Fiscal 2020 Fourth Quarter Conference Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions. Please note, this call is being recorded. And now, it is my pleasure to turn the conference over to Mr. Michael Poliview. Please go ahead, sir. Thank you, Leo.

Hello, everyone, and thank you for joining us to review CSP's CSPI's fiscal fourth quarter and full year ended September 30, 2020. With me on the call today is Victor DeLavo, CSPI's chief executive officer, and Gary Levine, CSPI's chief financial officer. After Victor and Gary conclude their opening remarks, we'll then open the call for questions. Statements made by CSPI's management on today's call regarding the company's business that are not historical facts may be forward-looking statements as the term is identified in federal securities laws. The words may, will, expect, believe, anticipate, project, plan, intend, estimate, and continue, as well as similar expressions are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance or results. The company cautions you that these statements reflect current expectations about the company's future performance or events and are subject to a number of uncertainties, risks, and other influences, many of which are beyond the company's control that may influence the accuracy of the statement and the projections upon which the segment and statements are based. Factors that may affect the company's results include but are not limited to the risks and uncertainty discussed in the risk factor section of the annual report on Form 10-K and the quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements are based on the information available at the time those statements are made and management's good faith belief as at the time with respect to the future events. All forward-looking statements are qualified in their entirety by this cautionary statement and CHPI should undertake the new obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise after the date thereof. With that, I'll turn the call over to Victor DeLobo, Chief Executive Officer. Victor, please go ahead.

Thanks, Michael, and good morning, everyone. We hope you and your families have not been impacted by our ongoing COVID-19 pandemic. Despite the impact of the COVID-19 on your operations and our customers' operations, since March, we have remained focused on executing our key objectives to ensure our CSPI is positioned for long-term success. I would like to devote most of my prepared remarks to reviewing our progress on reaching these objectives and the adjustments we have made in our new fiscal year. One objective since the pandemic hit and begun impacting our ability to aggressively pursue our marketing plans has been to maintain a full workforce. We have used government programs to help achieve this objective, as we consider it a central element to CSPI's maximizing its long-term marketing opportunities. We've adjusted our operations and continue to do so as the situation's merit to ensure our employees are working in a safe environment. For those working remotely, we have given them the tools to continue to operate at 100% efficiency. The broader objective of transforming CSPIs to cybersecurity wireless and managed service company is progressing and yielding encouraging results. As we continue to expand our managed service customers in the launch of our UCAS and ARIA offerings, we are delivering on gross margin improvements. Total revenue for the fiscal fourth quarter was $16.1 million, and for the full year, we reported $62.3 million. These are not the levels that we had expected when we entered the fiscal 2020, as the year-over-year declines in both periods continue to impact by COVID-19 pandemic. further the focus on higher margin products and services allowed us to report robust gross margin improvements of eight percent and five percent in q4 and full year respectively in fact this is the fourth quarter we have reported year-over-year gross margin improvement demonstrating our effect effectiveness despite the lower revenue figures further i want to emphasize as we continue to transition this process to cybersecurity, wireless, and managed service markets companies and continue to work for even greater gross margins in 2021. The pandemic continues to expose the weakness and limitation of the network infrastructures as remote workers' environments are leading to increased instances of threat and ransomware. In fact, according to some published reports, spear phishing attacks reached a near seven-fold increase since the pandemic began. I believe the new and positive Perspective calls we are having with customers demonstrates the seriousness of this issue and is creating opportunities for CSPI. We are hopeful that the companies are setting aside budgets in 2021 to resolve it. While COVID-19 may have brought some of these security issues to the forefront, the underlying weakness and vulnerabilities were already there and is why we are elected to devote resources in entering this market segment. Because we have a highly experienced team, in less than two years we were able to develop our offering internally. I believe the numerous industry awards and accolades validate the strength and breadth of our offering in support of our view that ARIA and Unified Communications as a Service are positive positioned to address today's critical network issues. For the quarter, our technology solutions, or TS, revenue was $12.5 million, and for the full year was $55.9 million. We received orders from larger customers, and we would expect the pace to pick up once COVID-19-related impacts lessen so small and medium-sized customers have the budget to proceed with new purchases. As you know, this is a transactional business, and we still need to be out in front of our customers. Our managed service practice continues to expand as we sign new cloud-based customers and UCAS customers, including in the educational area, which is seeking to enhance the systems during this current climate. By continuing to address our customers' needs, especially during these challenging times, we are demonstrating our value to them daily. Bottom line, the professionalism, commitment, and dedication of our team is why we continue to grow our customer base. separately the cruise ship industry remains one of the industries greatly impacted by the pandemic. And when we spoke last in August, the Cruise Line International Association had announced that its ocean-going cruise line members had voluntarily extended the suspension of the cruise line operations from the U.S. ports till mid-September 2020. However, given the severity of the impact, and not surprisingly, they pushed it back to March 2021. Further, Europe is experiencing a sharp rise in cases and new measures are being imposed by several European countries, thus the already limited resale of the crews in the Mediterranean and other regions. Although the travel restrictions have hampered our ability to gain access to the ships, our teams have had regular scheduled communication with the operators to reassign the team members to work on other projects that require assistance with the goal to keep them engaged and ready to proceed at a moment's notice. This preparedness on our part has proved to be pivotal during the fourth quarter as we gain access to two ships at dry dock to perform upgrades. While the procedures and safety protocols were rigorous, it was worth it to ensure the well-being of our personnel. Yes, it's a small step, but also a positive signal because we're moving in the right direction and there's light at the end of the tunnel. Remember, the cruise line operators have already purchased the equipment, so these ships are giving us a backlog that will need to be dealt with. Turning to our Microsoft practice, it continues to perform well, and we are receiving tremendous amounts of interest, so I believe the momentum will continue to generate strong results in 2021. During the quarter, we continue to gain positive traction with our UCAS offerings. We added new customers, and we are in the process of expanding sites with our current customers. As a reminder, the UCAS market is expected to grow from $15.8 billion in 2019 to $24.8 billion by 2024. Despite our efforts being limited because of the pandemic, we are continuing to increase the number of vital product demonstrations on a weekly basis. In fact, the new business pipeline is higher today than compared to the fiscal third quarter. Moving on to our high performance product or HPP division revenue for the quarter was 1.7 million below our internal projections as well as the revenue related to the E2D program was pushed out. However, we do expect to recognize in the first half of fiscal 2021. We remain excited about ARIA in our award-winning next generation cyber security platform that helps organizations protect themselves from harmful hidden attacks with our human intervention. We have a few installations both in the U.S. and internationally, and we continue to be well-positioned within a leading cable company that has created other OEM opportunities for Aria. While the current pandemic is delaying physical deployment evaluation and decisions, we believe that there are indications that their posture could change in the next few months as budgets for new projects, once frozen because of COVID-19, could be freed up as early as January. By raising our awareness at the vital trade shows and throughout the marketing campaigns, we have a solid lead flow. This is going to be meaningful revenue contributed for the company. To summarize, I believe we have successfully adapted our operations since March to sustain our business and grow our prospects. We have a solid base of recurring revenue and diversified customer base, essential ingredients to manage through the current market. Further, the interest in our products and services remain high. The pipeline continues to grow, and it's is a leading indicator for future periods for exceptional performance. With that, I will now ask Gary to provide a brief overview on the fiscal fourth quarter and full-year financial results.