CSP Inc.

Good day, and welcome to the CSPI's first quarter and fiscal year 2023 conference call. At this time, all participants have been placed on a listen-only mode, and the floor will be open for questions and comments after the presentation. It is now my pleasure to turn the floor over to your host, Michael Poliview. The floor is yours.

Terrific. Thank you, Kelly. Hello, everyone, and thank you for joining us to review CSPI's fiscal 2023 first quarter results, which ended December 31, 2022. With me on the call today is Victor DeLovo, 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 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 several uncertainties, risks, and other influences, many of which are beyond the company's control, that may influence the accuracy of the statements and projections upon which the segments and statements are based. Factors that may affect the company's results 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 reports on Form 10-Q filed with the Securities and Exchange Commission. For a look at statements are based on the information available at the time those statements are made and management's good faith to believe 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. Victor, please go ahead.

Thanks, Michael, and good morning, everyone. This morning, we reported a very strong start to the fiscal year 2023. We grew product sales 63%, service sales 13%, and overall total sales 48% over the first quarter of prior fiscal year. When we last talked with you back in December, we noted that each of the business segments were hitting on all cylinders. We continue to execute with similar fashion during the first quarter and increase our overall gross margins by 2.5 percentage points over last year to 31.7%. The revenue and gross margin led to generating 21 cents in earnings per share, while last year we lost 9 cents a share during the last year's fiscal first quarter. All in all, we are quite proud of our performance to start fiscal 2023. During the past several years, we've stayed the course as we migrated our business to offer higher value cybersecurity, wireless, and managed service offerings. It was easy, especially It wasn't easy, especially with the onset of COVID-19 pandemic and its related challenges, but our business model is beginning to show both its value to our customers as well as its potential to our shareholders. The demand for our award-winning products and services is building. We are increasing business with our existing customers while at the same time gaining new customers. A technology solution business continues to grow during the first quarter. At the same time, our high-performance product business revenue more than doubled compared to a year-old first quarter. It was primarily due to sizable customer engagements, but they fully recognized during the quarter. While the timing of potential orders is subject to movement from one quarter to another, our business pipeline is robust, and we are cautiously optimistic that our HPP business will be growing contributed as the fiscal year progresses. In this morning's news releases, I noted our business and the opportunity pipeline we have in front of us is stronger today than any time in our company's history. Our strategy combined with our unique solutions and top-notch engineers are some of the leading factors. We are continuing to fund R&D so that our product continues to provide these unique solutions to our expanding base of customers. The early market reception to these prior capabilities is opening doors for us with companies that have never talked to CSPI before. And we hope to have some positive news over the coming months. While we have a strong momentum and our opportunities in the marketplace continue to expand, we do have hurdles to overcome to realize our full potential. One of the highest such hurdles is the continued supply chain constraints we are experiencing over a few of our suppliers. The problem has gotten a lot better since the height of last summer. However, the historic six-week delivery timeframe on orders is still being realized. However, the good news is that our customers continue to stay loyal to us. We believe the supply chain issues continue to exist because China is locked down until mid-December, and they are still enforcing very severe COVID-19 quarantines in certain areas. While some of our suppliers have moved their sourcing out of China, they can't ramp up overnight, so we remain hopeful that China will relax its regulations, which will reduce supply chain constraints over time. Our revenue growth during the fiscal quarter was driven by a technology solution, or TS, business and managed service practice. We generated revenue of $15.9 million, a 40% increase over a year ago, TS revenue, and we are winning new customers while earning while earning increased business from existing customers. During the beginning of the pandemic, we quickly shifted to this segment because it was short of sales cycles and sales were not being impacted by restrictions. And we have continued to focus on this segment as it's become a growth engine over the past couple of years. The managed service practice revenue grew 24.4% from prior year and was driven by customers' increased customers increasing use of the implementation installation and training capabilities. Our high performance products or HPP business had one of its strongest quarters in quite some time and reinforces the sentiment that we have been sharing with you over the past year. We reported revenue of $2.5 million, a significant increase compared to a year ago level of $1.1 million. The primary contributor was from a government contract which had been expected for some time and we We're just waiting for some critical components to finalize and ship the order. The quarter also included revenue contributions from royalty revenue related to E2D program as well as Mericom. To summarize, we had a great start to the fiscal year. A strategy of focusing on higher margin products and services that meet customer demand is yielding solid progress each quarter, and we have reported two consecutive quarters of 40% plus revenue growth. Despite converting some of the older backlog to revenue, we also booked nearly an equal number of new orders. This demonstrates the strength of our offering, yet it also highlights our continued engagement in customer loyalty during this period since we have not lost a single order from the backlog. We have successfully transitioned our business during this unprecedented period, and today we are an active player in the high growth and margin business. and we believe that we have the resources and wherewithal and strategy to realize our potential. With that, I will now ask Gary to provide a brief overview of our fiscal first quarter financial performance.