CSP Inc.

Good day, everyone, and welcome to CSPI fourth quarter and full year 2021 results conference call. At this time, all participants have been placed 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. I will be standing by should you need any assistance. Please note, this call may be recorded. It is now my pleasure to turn today's program over to Michael with EBC Group.

Thank you, Emma. Hello, everyone, and thank you for joining us to review CSPI's fourth quarter and full year-ended September 30, 2021 financial results. With me on the call today is Victor DeLobo, 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 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 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 Forms 10-K and the quarterly report on Forms 10-Q filed with the Series 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 of the time with respect to future events. All forward-looking 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. Vic, please go ahead.

Thanks, Michael, and good morning, everyone. Even though significant supply chain issues at several of our component supplies crimped up product sales during the quarter, our team continued to build business and orders. As a result, we ended fiscal 2021 with a record backlog of $13 million, up 165% from September 30, 2020 level. The backlog growth reinforces our view that CSPI will emerge from these challenging times a stronger and more formidable company. Our team also firmly believes that our award-winning product and service portfolio is enabling CSPI to compete for the increased market share. While the backlog is an encouraging development, our short-term revenue generation has been impacted by the pandemic and supply chain issues. Unfortunately, these factors will make it difficult to predict quarter-over-quarter performance. We are however confident our fiscal 2022 yearly projections We are working with our customers and suppliers to resolve and mitigate these issues as quickly as possible. We are taking every step to build revenues in the areas where external forces aren't having as much of an impact. For example, we are increasing the resources we devote to our software sales since these products and services can be delivered near-term revenue in higher margin and are delivered remotely. We grew our fourth quarter service revenue by 27% year-over-year as we continue to add new customers. Our goal of migrating to higher margin products and services is being achieved as we reported our eighth consecutive quarter of year-over-year gross margin growth, despite tougher year-over-year comps. The product mix being sold, amount of revenue recorded, and overall margin in the product are contributing to this increase from the prior year. The improved product gross margin as a percentage of revenue has been focused in fiscal 2021, particularly in the TS segment. Technology Solutions, or TS Business, again led the way with revenues of $8.8 million in the fiscal fourth quarter. Our managed service practice, or MSP, continues to be a reliable source of growth and exceeded our internal expectations as we added new, larger, and several niche customers in the retail and consumer space. We remain focused and committed to build our recurring revenue business, which is contributing significantly to the bottom line. Now let me say a few words on the cruise line activity, which has steadily increased over the past few months. In fact, today we are more bullish on this business compared to any other time during the COVID-19 pandemic, which effectively stopped our cruise activity. We received orders for four ships in Q4, which we expect to complete during the next few quarters. Aside from the revenue opportunity, this is a highly profitable business for CSPI, and our decision to maintain our cruise-related workforce early in the pandemic, despite there not being much work for them, is proving to be prudent because it is allowing our team to react quickly and meet the operator's timelines. However, the first and foremost is the health of our team, so we are taking all necessary precautions and adhering to local protocol to ensure a safe working environment. Now turning to our UCAS offering, I'm pleased to report we experienced better than expected activity in the fourth quarter and momentum has carried into the current first quarter. In fact, we have doubled the size of the business over the past few months, which is a big deal since we launched two years ago and just prior to the worst imaginable business environment. Our goal in fiscal 2022 is to complement the team's progress with smaller accounts and pursue larger accounts. Regarding the high performance product or HPP division, we reported revenue of $1.2 million, which is slightly higher than compared to fiscal Q3 revenue. While the Miracom business has steadily picked up, royalty revenue related to E2D was lower than expected, so we anticipate the balance will be recorded in the first half of fiscal 2022. ARIA remains the primary growth engine for this business segment, and we closed several deals in the quarter and recently announced the receipt of a multimillion-dollar multi-site sale of ARIA SDS solutions from a national intelligence agency. The ARIA-SDS product will be a critical component of the government's solution to improve network visibility on networks vital to national security to detect communication performance in cybersecurity-related issues, which are and will continue to be on the rise. The ARIA-SDS approach is ideal for this application, given it's designed for high-bandwidth processing, exceptional packet analytics, and real-time packet filtering capabilities. The ARIA SIA will easily aggregate the data up to 120 gig from the multi-10 gig network found in over 40 sites. Upon ingest, the ARIA packet intelligent application performs specified filtering to isolate traffic of interest. This traffic is then directed to a variety of cybersecurity tools, such as an IDS, for further threat hunting and investigations. We're especially pleased because ARIA SIA and packet intelligence application was envisioned for exactly this purpose, to provide complete real-time visibility of the entire network for cybersecurity hunting. We were able to close several new ARIA deals that were included in Q3 sales funnel, but we also managed to grow the sales funnel as our messaging and marketing education efforts is yielding positive results. During Q4, we signed additional ARIA ADR customers, and the team is highly engaged With the prospects, their primary objective is to get later stage opportunities over the finish line. We all recognize that this has the potential of generating significant top line growth with a disproportionate benefit to the bottom line. To summarize, we ended the year with a record backlog That was up 165% from the prior year level. The manufacturing and supply chain issue remains a challenge. However, we are doing everything possible to get orders out, revenue in, and margins up. We continue to have a solid foundation, even during these turbulent times, and we are laser-focused on business execution and exploring new opportunities that strengthen our long-term growth and profit ambitions. I expect for at least the foreseeable future that we will maintain a prudent expense management that will allow us to have the necessary resources to execute multi-year growth strategies. With that, I will now ask Gary to provide a brief overview on the fiscal fourth quarter financial performance.