CSP Inc.

Good morning and welcome to CSPI's third quarter fiscal year 2023 conference call. At this time all participants are on a listen only mode and a question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note, this conference is being recorded. I will now turn the conference over to your host, Michael Polivio. Sir, the floor is yours.

Thank you, Ali. Hello, everyone, and thank you for joining us to review CFPI's fiscal 2023 third quarter results, which ended June 30, 2023. 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'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, Estimates can 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 event 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 projection upon which the segment and statements are based. Factors that may affect the company's results include, but they're 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 Exchange Commission. Overlook of 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 Overlook of Statements are qualified in their entirety by this cautionary statement that 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 they're up. With that, I'll turn it over to Victor DeLivo, Chief Executive Officer. Vic, please go ahead.

Thanks, Michael, and good morning, everyone. Today, we reported continued momentum for our business as revenue grew 33%. Our performance was driven by the continued outperformance of our technology solution business, and I believe the results reaffirm our strategy to dedicate significant resources to this segment over the past couple years. Our other product lines and business segments performed as expected during the quarter, and the business mix and tax treatment led to an increase in earnings. Gary is going to provide more details on the tax topic during his remarks. A major contributor to the momentum in the quarter was the continued conversion of the backlog to revenue, a good portion of which had been on the books for greater than 12 months as supply chain issues for the key components kept us from shipping completed orders to the customer. Our customers continue to remain loyal because our products and solutions are the most effective, cost-efficient answers to their critical needs, and we are extremely pleased to finally move this backlog to revenue. Our focus over the next few quarters to convert the remainder of this older backlog to revenue, and our team is constantly engaged with our customers to keep them abreast of the supply timelines and options. It is worth noting that throughout this prolonged supply chain issue, we have not lost a single order, which I believe reflects the importance of our products and our services to the business. Turning to some of the segment's results, our TSA business revenue totaled $16.4 million compared to $12.6 million in the year-ago fiscal third quarter. As evidenced by the dramatic year-over-year increase, this segment continues to be driven by our customers' increased use of our implementation, installation, and training capabilities. Our HVP revenue was approximately $1.3 million in line with our expectations and compared to $700,000 a year-ago fiscal third quarter. While the ARIA customer base continues to grow and the pipeline remains high, recent developments will positively impact ARIA solution and HPP segment overall in the upcoming quarters and years. Perhaps our biggest achievement during the fiscal third quarter was our newest product launch, ARIA Zero Trust Protect, which we are internally calling AZT. It has generated a lot of enthusiasm within the organization in the early Industry feedback gives us reason to be excited. It is something that we have been developing internally, as we often do, and we believe it will be a major growth driver for our high-performance product HPP business as we move into the fiscal 2024 and beyond. The advanced and patent AI-driven technology has garnered interest from leading customers and reaffirms our belief that gives us greater confidence that it will be a game-changer for CSPI. We have quite a few customers prior to the launch of ACT, and we envision it's going to accelerate adoption of the ARIA product lines and generate a reliable stream of monthly revenue for our company. As we move through the fiscal fourth quarter and expectations for fiscal 2024, we believe the success, reliability, and consistency of our TS business will be complemented by the HPP business, primarily as the as the buzz being generated from AZT Protect converts to orders, positioning us to significantly expand revenue and gross margins from this product line in fiscal 2024 and well beyond. We believe our ability to develop this product is unique and separates CSPI from other companies in the space, especially among larger players where we can identify a need and move on it quickly. With limited development dollars, other companies would need to evaluate, analyze the opportunity, even with unlimited funds, they may still lack the technical skills to develop something like AZT. So I'd like to spend a few moments describing why we are so excited about AZT. First, AZT's advancement allows us to offer our customers a giant leap forward in the evolution of cybersecurity solutions. AZT's performance surpasses anything available on the market today. It's a new generation of endpoint cybersecurity protection designed for critical operational technology environments. The unique patent solution protects all organization endpoints from the full spectrum of cybersecurity attacks and intrusion techniques, including the most advanced zero-day attacks, malware, ransomware, supply chain vulnerabilities, even those threats that are completely unknown to security teams. By deploying artificial intelligence capabilities, AZT, cost of tax before any damage occurs, ensuring seamless operations without disruptions or downtime. It lowers the risk of cybersecurity vulnerabilities, exploits on endpoint devices, applications to near zero without the need for constant patching updates. Our team believes AZT is an excellent solution for a wide range of industries, including utilities, logistics, manufacturing, pharmaceuticals, banking and finance, healthcare, and energy. We are currently ramping up our sales and marketing investments to address these and other markets as we actively negotiate transactions with bars and key international markets in order to maximize the global opportunity. During the fiscal third quarter, we entered into one of these such agreements in Australia. Rapid digital transformation is blurring the boundaries between IT and operational technology. OT networks have been traditionally air-gapped and kept isolated from the outside world. This is no longer the case. The cyber attacks on OT networks are most vulnerable and best prevented by AZT. The product represents CSPI's latest offering of differentiated value-enhanced solutions for the challenges faced by customers. As I mentioned before, we think it's going to be a significant growth driver for our To summarize, we have generated substantial growth during the first nine months of our fiscal year. The launch of AZT is underway. We are quite excited about the opportunities ahead. With that, I will now ask Gary to provide a brief overview of the fiscal third quarter financial performance.

Thanks, Victor. As Victor mentioned in his opening remarks, we achieved significant growth in the fiscal third quarter compared to last year's fiscal third quarter. We reported revenue of $17.7 million, a 33% increase compared to $13.3 million in the year-ago fiscal third quarter, as we have successfully converted some older backlog and delivered finished products to our customers. We reported gross profits of $5.9 million, or 33.4%, of sales compared to $4.9 million or 37.4% of sales in the year-ago fiscal third quarter. As a reminder, a function in the quarterly gross revenue is anticipated due to business mix. However, we continue to believe our annual gross margin will expand as the business transaction transacts to higher margin products, transitions, excuse me. Our engineering and development expenses for the fiscal third quarter were $741,000 compared to approximately $884,000 in the year-ago period. The year-ago costs were higher primarily due to higher personnel costs, which included outside consultants, and the development of the ACT product, which, as mentioned earlier, was only recently unveiled. Our SG&A expenses in Q3 were $4.6 million compared to $4.1 million in the year-ago fiscal third quarter due to increased and variable compensation for bonuses, sales commissions from higher sales, as well as payroll and initial costs associated with the unveiling and launching of the AZT. Our tax benefit was $1.7 million for the third quarter, primarily from the release of the valuation allowance against the deferred tax asset. We performed an analysis and determined that it is more likely than not that substantially all of the deferred tax asset in the U.S. jurisdiction will be utilized. We reported net income of $2.5 million in the fiscal third quarter for a diluted earnings per share of 52 cents compared with net income of $684,000 for a diluted earnings per share of 15 cents for the fiscal 2022 third quarter. The company had cash and cash equivalents of $13.8 million as of June 30, 2023, as compared to cash and equivalents of $23.9 million as of September 30, 2022. The lower amount is primarily due to the strategy we implemented last year to leverage our strong balance sheet and finance certain large customer orders in preferable interest rates, as well as the increased level of receivables created by product sales. However, in early Q4, a significant cash flow has been generated through the payment of receivables and the full repayment of financing provided to a customer during fiscal 2022. We believe the successful implementation of this approach also has yielded positive results, and we will entertain similar opportunities if it meets our strictest criteria. I also want to highlight that the Board of Directors approved a quarterly dividend of $0.04 per share payable on September 12, 2023 to shareholders of record on the close of business on August 23, 2023. With that, I will turn it over to the operator to take your questions.

Thank you. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue, and you may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please, while we poll for questions. Thank you. Our first question is coming from Mike Price, who is an investor. Your line is live.

Thank you. Good morning. Congratulations on a great quarter. Hey, previously you had said that CSP has a problem with name recognition, and it seems like if you have a revolutionary product, as you call it, the AZT, have there been any discussions with anybody larger that can get this to the market more faster and in a bigger way than CSP on its own?

Not currently. Right now, we just announced it less than 30 days ago. So we're looking to build a customer base. And then, as always, everything is on the table. If we were able to be approached, it would always be something we would look at.

Okay. And you said that the repayment, the payment of the receivables taken place in the fourth quarter. Does that bring the cash back over $20 million?

Um, pretty close to that.

Yeah.

Yeah. Pretty close. It's constantly changing based on payables and you know, it's, it's constantly moving, but it is right. Right. It's close to that 20 million.

You've categorized $2.4 million as held to maturity. With interest rates, short-term rates where they are, I assume that cash is earnings a fair return, you know, even on a short-term basis.

Yes.

Okay, because I'm looking at the cash that you have and invested in short-term rates. That probably covers what the current dividend is on an annual basis. And it goes back to the question of, Having a company with a $60 million market cap with $20 million in cash and cash equivalents, the dividend is quite a bit lower than pre-COVID. And also a question about the share repurchase. I think you authorized $194,000. I don't think you did anything in the previous quarter. What about the quarter just completed? Have any shares been repurchased?

A very small number.

Okay. Well, with the runway that you have, isn't this a good use of funds? I mean, it seems like this AZT Protect is the future of this company. And as shareholders, we can certainly get out in front of that by using some of the cash to repurchase shares. I appreciate the illiquidity in the stock, but whenever possible. I noticed, Victor, in the last window, you bought a few hundred shares, which shows your confidence. by opening up your wallet. It seems like the shareholders should be able to do the same.

Well, we'll take that under advisement and we're constantly reviewing that with the board. Right now, we're just investing in the AZT and so, but we'll take your

Yeah, and the cash fluctuation to having that $20 million at times, as you see, it goes down is because some of our larger customers, you know, these finance deals that we're doing at a, you know, an interest rate, which is definitely, you know, in our favor to make their life a little easier just based on budgets that they may, you know, get preferable benefits. Pricing model, but you know They don't want budgets a yearly instead of like multi-year and those are the reasons why we're doing self financing with these larger institutions So that cash is important for us and then having the reseller business to to get the lines of credit to buy the equipment having that cash allows us to have large credit lines with the big distributors and manufacturers and that allow us to place these multimillion-dollar orders without having to go out and get financing, especially at the race out there. So that's why that cash sometimes is important to have there because it kind of, in some cases, like I said, it helps finance the deals that we may or may not get. And then second of all, it allows us to purchase the products that we need to with these big lines of credit that we have with these distributors. Okay, and the last question.

The last question or comment is, I understand at the end of a fiscal year you have 90 days to report, but it's a little frustrating that you take usually until mid-December. You know, it's a full, what, 75 days to see results. Is there a reason that it takes so long? I mean, I don't see anybody. A lot of it depends on the audit, you know, timing.

Mike a lot of it is dependent on the time and one of the things that we have is we've got a lot of moving parts in our closing related to you know many of the products are shipped by the manufacturer and then we have to go and spend a large amount of time just determining if what the cutoff between is it good is it in the quarter or not in the quarter and that takes us a significant amount of time as well as the time we have to spend having the audit done. Okay.

All right. I appreciate your time. We're trying to move it up.

We're trying to move it up.

I appreciate your time and great quarter and looking forward to the end of the year. Thanks a lot. Thanks, Michael.

Thank you. Thank you. Our next question is coming from Joseph Nerges with Segron Investments. Your line is live.

Yeah, good morning, guys. Congratulations on a great quarter and a great product introduction with this AZG Protect software. Two words were used in the press release. Initially, he used the term revolutionary, and in today's press release, he you use the point of a potential game changer for a product, and I agree wholeheartedly. Let me recommend one thing. I did review on the website. You have an extensive write-up on this product on the website, I mean really extensive. And for any current investor or potential investor, I really advise them to go to the website and review it there because there's so much detail that it's hard to convey just in a conference call. I don't know if you agree with me, but you really put a lot of color on this new product. So that's something that people should look into.

Appreciate it, Joe.

You talked in the last, for the last press release, last conference call, about potentially expanding the managed service providers, and you were talking about overseas. Have we made any headway on that? I know you talked about the Australian MSP that was just signed, but similar, I'm assuming, There's good potential for lots of parts of, you know, especially the European area or even the UK where we are now. Have we any candidates there that we're currently talking to?

We're talking to them, but we want to make sure they have commitment, right? It's not just another product on their catalog that they're going to put time and resources, you know, not just signed a reseller application and our agreement. So the conversations are going on, but we're not going to just sign up people just to be another line on their catalog. We want to make sure that they're committed to sell it.

Well, I've got that. That's great, and I agree with you. But with this, if they don't recognize the potential of this AZT protection product we just introduced, I mean, you should – there should be a lot more serious discussions when this is now available for them in the future.

Yeah, yeah. There's quite a few in the U.S. that we're talking to, and they're going well. I'll just leave it as that.

How many channel partners do we have? Do you have approximately how many channel partners have we signed over the years?

Um... I would probably say five or six that are specialized in selling security.

And then you're talking to more, like you just mentioned. Are we still looking for any royalties on the E2D, either this year or possibly next fiscal year?

It's liquid, but I'm thinking it's going to be Q1.

Okay. Okay, Q1.

Yeah, Q1 of next year. It could roll into Q4, but I'm more comfortable saying Q1.

Okay. You mentioned in the press release about considerable attention from industry leaders, and I think you added to this a little bit, and you're just – current presentation, but are we talking about industry specific leaders in the industries like you mentioned, pharmaceuticals, transportation, energy? So we are touching the base with some, and I assume in this case, some of them are pretty large. When you talk about utilities, most of them are pretty big.

Yeah, they're all big, the ones we've been talking to.

All right, well, that's great. So the market there is huge.

Yeah, the OT space where they have, you know, a lot of manufacturing, you know, oil, gas, you know, a lot of, you know, OT, that operational technology area, those are the companies that we're talking to right now.

Okay, great. And just to follow up to the previous question here, talking about the stock buyback, and I understand, you know, utilizing the money for, marketing purposes what we're doing and getting new deals but when you think about a stock well put it this way when you have a potential game-changing revolutionary product and your stock is selling for less than one time sales and that is less than one time sales it certainly would suggest that buying an opportunistic potential to buy some stock when you get the chance now I realize In the open market, it's hard to buy. Some days we have very little volume, so you really are limited on what you could do. But, again, if you just look at the combination of what we have available to us now and the fact that we're less than one-time sales, I mean, that's almost unheard of for a technology company to be at that level. Again, thanks a lot. Great quarter, and I'm hoping to hear from you guys again in early December on this. Great. Thanks again.

Thanks, sir.

One other point. One other point before I leave you. I'm going to give you a historical, from my perspective, and a prediction here. Many years ago, there was a small company, and it was named Halide Corporation. And they released a new product, and it was a Xerox copier. Well, the answer was the product was so successful that not long afterward, they changed the name of their company from Haloid to Xerox. I predict that we have that same potential going down the road. We may change the company name someday to Area Cybersecurity if this AZT Protect product is as successful as I think it could be. So I'm changing the name of the company for you. Again, thanks a lot.

Appreciate it. Thanks, Joe.

Thank you. Our next question is coming from Brett Davidson, who is an investor. Your line is live.

Good morning. Maybe you guys can ask Joe for me what the new ticker is going to be.

Yeah.

ARIA.

ARIA.

That might work. I got all kinds of different items I want to touch on. Was there any revenue this quarter from the cruise ship business?

Limited. Limited.

There was some, though. That's still winding up.

Yeah. Yeah. They're slow to make decisions right now. They're doing well, but they're prioritizing, you know, different projects at this point, but we're in talks, we're there, we're ready. Um, but we're keeping the, you know, the engineers busy with other projects while this other stuff is still, it's moving just at a turtle's pace.

So probably not Q4, maybe sometime in, uh,

No, there'll be some, it's, there's a revenue there. It's just not at the same peak. It was once, but we are still getting, you know, revenue and projects for the various cruise lines.

So it's kind of like the beginning of, uh, just accelerating back to more normal levels.

We're hoping, you know, there's, we, we have a roadmap. We just have to have them execute on the roadmap.

Got it. Um, The supply chain, I know before it was like nine months to get stuff for that ARIA hardware. What does that look like now? Are we looking at half that time period, or you can pretty much get what you need when you need it?

For the ARIA piece of it, you know, we're probably six weeks now for the ARIA hardware that goes along with it. And then, you know, the AZT Protect is all software, right? So, you know, it's instantaneous for that piece of it. On the TS side of the house, in some product lines and manufacturers, it's pretty quick. You know, I would say anywhere from four to eight weeks. And then in certain other... product lines of the same manufacturers in some cases, it's nine months still. So it's just, it varies, you know, a lot of switching products across the board, whether I don't want to name who they are, but some of the big players, it's still a lengthy process. You know, they, you know, some of the dates we're getting is believe it or not, it's 2025 in some cases. Yeah. And some of the larger switches, the backlog is, is pretty bad. Um, But in some other cases, you know, different models we can get in four weeks. So it's just, you know, it varies based on product line and manufacturers in some cases. But it's definitely getting better. It's not getting worse, you know, which is good for us. But some of the backlog that we flushed out was, you know, it was close to a year old that finally came in. And we're hoping that, you know, we continue flushing the backlog and, putting that revenue to the books.

And, um, the, the Australian, uh, distributor now is that strictly, is that strictly services or are they also hardware?

They're strictly a security company. So they're both interested. Yeah, we have opportunities both on the ADR, MDR, and we are talking to a few customers on the new release of the AZT product.

So are they directing customers to you, or are they just reselling the area?

They would be reselling it, but we're help supporting it on the technical side.

Got it. The significant cash flow. So I'm assuming that's all coming back from one customer. Is that accurate?

Majority from one customer, but it's probably three different customers the cash flow is coming in.

So the one big customer, I mean, is there a potential to run this through again with them? We've been doing it for five years.

We've been doing it for five years. And then we just signed another... deal with a different customer for a five-year deal that took a multimillion-dollar order and spread it over five years.

Got it. And these are popping up on a regular basis. I mean, are you guys using this as part of the sales pitch for these products, or they're, you know, requesting this because it's been done before or they heard from other customers? How is it that these develop?

Well, we've probably been doing it for probably the last decade, but just on a smaller, you know, we weren't really, you know, in the market to do it. But some of the large customers that we do a lot of business with, you know, they wanted the three or five-year pricing, but they could not, you know, give it more, you know, they could cut a purchase order, but the budgets were year by year by year. So when we ended up doing one of the deals with them, then they kept requesting it, and they're a phenomenal customer, and they got more money than – the risk is zero. So when we took it, we're like, we'll do it. And then a couple other customers that – our last deal, the customer requested it. He's like, hey, we want you to do this for us. And we're like, yeah, no problem. They're a creditworthy customer.

And it's all for delivery of products? It's all for delivery of product now, or is any of this written so the product is delivered over the life of the financing?

No, the product is delivered up front, and they're using it, and then there's support that goes along with it that gets, you know.

So, I mean, has anybody approached you to do this as an extended delivery? So, you know, we need 10 this year, 10 next year. Yeah. You know, we'll finance it through you guys and sign a long-term deal like that or nothing like that?

It's project by project. You know, that's kind of how it looks. Like, you know, it could be a storage product or it could be a networking project or it could be a wireless project. It's based on the projects, not just the, you know, they're usually good for three to five years. One of the customers we just, one of the new orders we just did for a couple million dollars on this, We did a deal prior to that for three years, and then the gear, they need to upgrade all their equipment. So we did another deal with them for five this year, this time.

But do any of them involve equipment delivered over a multi-year timeframe?

No, they get it all up front.

And, I mean, do you see a scenario where you guys could possibly pitch that to have a recurring sales stream over like three to five years or something, or nobody wants to commit that far out.

No, nobody wants to commit. We do a one, it's one deal, you know, either three equal payments or five equal payments, depending on, we try to do three year deals. Five is unusual. you know but you know it just depends um and that's kind of how how we frame it and then when the project gets renewed because maybe the maintenance or the gear is you know becoming obsolete then we'll try to roll them into a new a new opportunity um i just want to add uh one comment directed at mike um there there is a huge um cpa shortage huge accounting

graduate shortage. I can't see the audit wrapping up any sooner because all of those firms are operating shorthanded. So I would be shocked if somehow that process can be shortened.

Yeah, and then one thing that – a year-end close is way different than a quarterly close, right? The amount of work that the audit firm does is quite significant compared to a quarterly close, so that's why it takes extra time. And to Gary's point, we have to wait at least two weeks or so to make sure the cutoff – is correct in the orders and the product are getting, you know, put in either the Q4 or Q1. And, you know, that takes time because we have to work with the manufacturers or the distribution looking at the cutoff and invoice date. So there's a lot more tedious work that goes into a year-end close to make sure that, you know, all the revenue goes into the correct quarter.

Yeah. I mean, I see the way you have this revenue recognition. Mm-hmm.

Yeah, heavy. Got it. Yeah, I know. The rules have become so obtuse that it's difficult to follow them, the revenue recognition stuff. Exactly. And the last thing, have there been any sales booked yet on that AZT product? We're still looking out like Q4. Q4. Got it. All righty. Well, thanks so much for taking the time to answer the questions. This one was pretty entertaining. Mike and Joe, thanks again, guys. You take care as I sit here in comfortable 73-degree sunny Buffalo.

Have a good one.

Not to rub it, but, yeah, take care.

Thank you. Once again, ladies and gentlemen, if you have any remaining questions, please press star 1 on your phone at this time. We have a question from Joseph Nerges from Segrin Investments. Your line is live.

This is just to fill in, Brett, on the Australian question. The name of the company is Logitech. That's the Australian company. There's a nice article out there on this particular association with ARIA. The title of the article is Cybersecurity for Manufacturers' Legacy OT Systems. If he puts Logitech and ARIA cybersecurity in his Google search, he'll find that article. And for anybody, if they want to look it up, it's a nice article, commentary by Gary Southwell, our general manager on that particular product. All right. Thanks, guys.

Thanks.

Thank you. We have a question from Will Lauber with Vision Wealth Advisors. Your line is live.

Yes, can you guys just kind of clarify with the Hawkeye what, I guess you're getting just international sales now, and if there is any international sales, do you guys for sure get that revenue or how that works?

Well, it's coming, it's really slowing down, Will. There hasn't been a lot of transactions that have gone on, you know, where there's We're getting pretty close to the end of the program. So we've had very little, I mean, it's just a few hundred thousand dollars that we believe is going to be available.

Okay, because every once in a while I'll see something about some other country buying some, but are they starting to get, are the international people starting to get some of the more advanced planes now that you guys aren't getting that anymore?

That's what we believe. Okay. Because there's not that many orders coming through.

Okay. And with this new ARIA product, can you kind of describe, I guess, looking back when you first started this product line, I guess a couple years ago, like what the level of interest is now with this new product compared to when you were starting out or even like a year later or something like that?

Well, the AZT piece of it, you know, we've talked to a lot of customers already. We've hired a couple of new salespeople, but we just rolled it out. But all the feedback has been positive, you know, Um, we're doing things a little different than some of the other potential companies are doing. So they're very interested in hearing, you know, what we're doing, how we're doing it. You know, the demos are going well, you know, we, uh, we're talking to a couple of large customers. They've already asked for pricing after the first meeting. So, you know, we're, we're enthusiastic. We're asking them, you know, they know we just rolled it out. We're asking for feedback and, um, you know, they're being brutally honest, the good, bad, and the ugly, and it's really hasn't been any ugly, which is, which is good, um, at this stage. So, you know, it's about, it's about taking the resources that we have, right. And, uh, just getting our name out there, you know, we're going to put some, some, uh, energy, um, with marketing more than we have in the past. Um, I think, like I said, this product is just another, it's a, it's a segment, uh, that needs attention. And I think the way we're doing it, we're approaching it is different. And we're gonna put some time and money against it, getting our name out there. And like I said, we already hired two new salespeople over the last 30 days, a couple inside people to focus on this and hopefully start generating some revenue and taking those profits and reinvesting them to continue the growth. So that's kind of the short-term game plan right now.

So you said these are all very large potential customers. Usually that might imply a longer sales cycle. What is the standard sales cycle in the cybersecurity space, and how would you expect that to compare to this product?

big companies don't move fast, but this product can be, you know, we can do a POC and get it implemented inside their infrastructure within 10 minutes. Right. Um, so there's not going to be a long P you know, POC timeline to do this. Um, you know, if the budgets hit correctly, we're hoping to, you know, you know, to be able to close sales, you know, in a, in a, a quick manner. Right. Um, In the larger companies, you know, we're trying to focus on different divisions, get some adoption of the product, and then roll it out instead of trying to roll it out to all, you know, company-wide because that would take, you know, I would say minimum a year to do that. So we're trying to focus on, you know, getting a department or a division to adopt the product and roll it out that way so we, you know, can evangelize it easier as you know it's already being adopted inside your organization and then the next focus is to look at some medium-sized companies which decisions are made you know a lot quicker so I can't give you you know how long the average sales cycle is because on this particular product because it's been it's too new you know on the same product that we have the sales cycle I would say six months you know it could be quicker and it has been been two months, but I would say the average sales cycle is probably four to six months on the ADR and MDR.

So would it be safe to say, I mean, one of the possible good points about going with bigger customers is that the price point, you know, is probably somewhat of a drop in the bucket for them. I mean, would that be safe to say or...

I would love to say that, but everybody's looking at every dollar right now, but compared to their security budget, I don't think we would cause a lot of harm if they were to adopt it throughout the organization. It's a necessary evil, and I've got to believe security has got to be number one on their list to make sure that there's dollars put to securing security. There are several lines, whether it's a pharmaceutical organization or manufacturing.

Okay. All right. Well, thank you very much.

Have a good one.

Thank you. As we have no more questions in queue at this time, I will hand it back to Mr. DeLovo for any closing comments he may have.

Thank you. As always, I want to thank our shareholders for the continuing interest and support. We had success in the quarter converting some of the older backlog, which I believe demonstrates we are committed to fulfilling our customers' orders. Our reputation within the industry is stronger today and continues to rise and the introduction of AZT product will only help our cause as we move forward. Gary and I look forward to sharing our progress in the fiscal 2023 fourth quarter in the full year ending September 30th operating results later this year. Until then, Be well, stay safe, and enjoy the rest of the summer. Goodbye.

Thank you. This concludes today's conference call. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation.