CSP Inc.

Please stand by. Your program is about to begin. Should you need audio assistance during today's program, please press star zero. Good day, everyone, and welcome to today's CSPI Fiscal Week. Second quarter 2021 operating and financial results conference call. At this time, all participants are in a listen-only mode. Later, you will have an opportunity to ask questions during the question and answer session. You may register to ask a question at any time by pressing the star and 1 on your touchtone phone. Please note, this call may be recorded, and I will be standing by should you need any assistance. It is now my pleasure to turn today's program over to Michael Polyview. Please go ahead.

Thank you, Brittany. Hello, everyone, and thank you for joining us to review CSPI's fiscal second quarter ended March 31, 2021. With me on the call today is Victor DiLovo, CSPI's Chief Executive Officer, and Gary Levine, CSPI's Chief Financial Officer. After Victor and Gary conclude their opening remarks, we will 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 a 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 the number of uncertainties, risks, and other influences, many of which are beyond the company's control. They may influence the accuracy of the statements 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 uncertainties 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. So, our look at statements are based on the information available at the time those statements are made and management's good faith belief as of the time with respect to future events. All thorough look at statements are qualified in their entirety by this cautionary statement and CSPI undertakes no 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. A second quarter performance, again, highlights the type of success we can achieve, even during an unprecedented business climate. In addition to maintaining our business and migrating to a higher margin product and services, we have also had the wherewithal to develop innovative solutions from the ground up to meet today's growing security concerns. This is becoming CSPI's trademark. We continue to advance the primary objective of transforming CSPI into cybersecurity, wireless, and managed service company. And I believe the positioning will enable us to execute our long-term operative operations operating strategies. For example, our team has remained engaged with customers in the new business prospects, and this continuous touch strategy during the pandemic, with a sizable customer base in Florida, I would expect CSPI to emerge from a pandemic disruption quicker than most competitors as the state returns to a more normal business climate. Total revenue for the fiscal second quarter was $14.1 million. I am pleased with the overall performance as we experienced some positive indications such as new accounts, new product lines within some existing customers, and a growing pipeline of new opportunities. I continue to believe we will emerge from the pandemic a more formable company with an expanding complement of offerings to grow top line. And consistent with previous quarters, the revenue mix The pursuit of higher margin offerings allowed us to report a sixth consecutive quarter of year-over-year growth margins improvement, with a 4% increase over fiscal Q2 2020. Now let me review a hallmark of CSPI. If you recall, this past December, up to 18,000 organizations were likely exposed by sunbursts, enabled cyberattacks, a new major attack as early as a few weeks ago. and bad actors actively use the network to access many of the vulnerability systems as possible while using techniques to try to hide their action. Our ability to quickly identify the attacker's action and stop them provides a unique solution for this emerging cybersecurity threat, demonstrates our capacity to adopt the overarching commitment to develop compelling solutions to meet modern-day threats. We achieved this with ARIA Advanced Detection and Response, or ADR, an out-of-the-box solution that requires no special configuration and is purpose-built to automatically find and stop all forms of attacks, including advanced persistent threats. The ARIA ADR solution was designed to detect such attacks as well as ransomware, malware, which are consistent threats to all organizations. In March, ARIA-ADR received a Cybersecurity Excellence Award, an outstanding achievement for a recently released solution. It automatically finds and stops network-borne threats as soon as they become active in the network, and most importantly, before harm occurs. The single-platform solution provides an automated AI-driven security operations center, or SOC, that provides organizations with benefits of a transitional SOC at a fraction of the cost. Unlike other solutions, ARIA-ADR provides full-threat service coverage for on-prem infrastructure, data centers, remote devices, and cloud environments. It can be operated anywhere by IT resources with little or no cybersecurity training. Since its introduction, we have already received purchase orders from several customers, and the win for us is that these orders are not only for ADR, they are also for total MSSP solutions, where we will monitor all their security needs, but also their IT infrastructure, including firewalls, switches, and routers. With the expanding pipeline, I look forward to sharing the progress with you over the next few quarters. For the quarter, our technology solution, or TS division, revenue was 13.2 million. The TS division hit on all cylinders and was truly a strong quarter, exceeding our internal projections as revenue contribution came from our managed service, UCAS, in selling third-party products and services, which is highly profitable and reflecting in the quarterly gross margin. While budget-related, delays due to covid remain a fact that we have not shifted our strategy and i believe the performance of the ts division demonstrates a laser-like focus we are staying close to the customer often meeting them informally in accordance with social distancing guidelines to remain top of mind when decisions are made this is already bearing fruit and i'm confident with it will lead to new orders as we slowly emerge from the pandemic Our managed service practice is performing well and continues to grow as we sign new cloud-based and UCAS customers. Latin America, which I refer to in Q1 Conference Call, is a bright spot right now as customers are adding bandwidth to dozens of their locations throughout their region. Now let me share some thoughts on the cruise ship industry, which remains a vital market for CSPI. We have recently awarded a ship an expected to have them have a team in place this quarter. Further, another three ships are budgeted for retrofit by their own, and we believe that implementation can occur in the fiscal 2021 second half. This, along with operators planning to resume cruise in July, is perhaps the clearest sign yet that we are seeing the light at the end of the tunnel. We are Also monitoring other developments, such as the state of Florida filing suit against the Center for Disease Control and Prevention, or the CDC, to allow cruises to commence immediately. We also continue to expand our UCAS presence during the quarter as we added several U.S.-based customers. I believe the virtual product demonstrations have helped tremendously, both from an educational and practical perspective, so I believe we will begin to leverage the pipeline and begin converting these into revenue. Remember, this is a multibillion-dollar market opportunity, and we only need to carve out a tiny sliver for it to be quite meaningful to CSPI. Now moving to our high-performance products, our HPP division. Revenue for the quarter was $0.9 million, below internal expectations. A couple of factors are responsible. Miracom sales are historically slow during the fiscal second quarter, and we did not receive royalty revenue related to the E2D program. But we believe the E2D revenue will come in the second half of the year as scheduled. Nevertheless, we remain excited about the long-term potential of the business, especially as ARIA gains customer traction. As I mentioned earlier, we closed a few ARIA deals in the fiscal second quarter. However, because these occurred later in the quarter, we expect the reoccurring monthly revenue to initiate during the current quarter. In addition to ARIA ADR awards, I mentioned earlier, ARIA Packet Intelligence also received a Cybersecurity Excellence Award. The ARIA PI application enables complete visibility into an organization's network, including typical unmonitored lateral traffic patterns. It watches all communication and generates analytics for every packet. Security operation centers using security tools such as a SIM or the ARIA ADR solution leverage this enriched data to detect and then stop network-borne threats. So as we wait for movement within a leading cable company, the added OEM opportunities we've created for ARIA and the industry accolades embolden us that even though we are competing against much larger organizations, Because our solutions were selected due to the innovative approach to find and stop cyber attacks, including ransomware, malware, and zero-day attacks. We currently have over a dozen channel program partners, and we are speaking with several others to ensure a robust channel program, which increases our chances for success. To summarize, our approach since day one of the pandemic was to maintain contact with the customer. I believe that multiple touchpoints has and will continue to create an atmosphere that will allow us to emerge from the pandemic's disruption quicker than most competitors. Our performance highlights, especially over these past six quarters, include our continued gross margin expansion and reinforcing our strategy to transition to a cybersecurity, wireless, and managed service company. The entire CSPI team has done a superb job to get us through this storm, employed by a solid balance sheet. We continue to have the resources to execute our operating strategies and the benefit greatly as customers seek to upgrade their critical infrastructure needs. With that, I will now ask Gary to provide a brief overview on the fiscal second quarter financial performance.