CSP Inc. Reports Third-Quarter Fiscal 2016 Financial Results

LOWELL, Mass., Aug. 18, 2016 (GLOBE NEWSWIRE) -- CSP Inc. (NASDAQ:CSPI), a provider of IT solutions and purpose-built network adapters for diverse applications, today reported financial results for the third quarter of fiscal 2016 ended June 30, 2016.

The Company also announced that its board of directors has voted to pay its quarterly dividend of $0.11 per share to shareholders of record August 31, 2016 payable September 9, 2016.

Management Comments

“We performed well on both the top and bottom lines in the third quarter, as we continue to make excellent progress against our operational and strategic initiatives,” said President and Chief Executive Office Victor Dellovo. “Sales were up 21% in the third quarter, and we reported EPS of $0.32 versus $0.07 a year ago.

“In the High Performance Products Division, we received royalty revenue for three E-2D planes, as well as additional revenue from parts shipments to support future E-2D plane builds.  Separately, we received product revenue from an existing international customer. In Q4 we expect to receive royalties from one E-2D plane, in line with our initial projections.

“In addition, our legacy Myricom product line, known as the Myricom ARC Series C-Class, continues to perform very well. During the quarter, we fully launched our next-generation FPGA network adapter product, branded as the ARC Series E-Class. The product has the industry’s best combination of high functionality along with low latency; which is crucial for the finance community focused on automated trading. For the remainder of fiscal year 2016, we are concentrating on ramping up the adoption of our ARC Series of 10GbE network adapters, not only in the finance markets but also in the packet capture and video broadcast markets.

“At our Technology Solutions Division, our core strategy continues to be increasing sales of managed services to generate higher-margin profits,” said Dellovo. “We are seeing steady progress on this front in the U.S. We are closing managed services deals at a greater frequency and the recurring revenue stream is increasing. In Germany, we are making tactical changes to drive higher managed services sales to augment the already strong advanced security sales. In the reorganized U.K. business we are focused on building our sales pipeline while improving efficiency to drive better profitability.

“Looking ahead, we continue to be encouraged by the progress we are making in executing on our strategy across our businesses,” concluded Dellovo. “While we still have much work to do, the most significant changes to transform the business are in place, and we are beginning to see positive results and are looking to continue our momentum in Q4 and into fiscal 2017.”

Financial Results

For the third quarter of fiscal 2016, revenue was $26.9 million compared with $22.3 million in the third quarter a year ago.

Gross margin for the third quarter of fiscal 2016 grew to 26.8% from 23.6% for the prior-year period due to leverage on higher volumes.

Net income for the third quarter of fiscal 2016 was $1.3 million, or $0.32 per diluted share, compared with net income of $249,000, or $0.07 diluted per share, in the third quarter of fiscal 2015.

Cash and short-term investments increased to $11.6 million at the end of the third quarter of fiscal 2016 from $11.2 million at year end fiscal 2015. 

Conference Call Details

CSPi Chief Executive Officer Victor Dellovo and Chief Financial Officer Gary W. Levine will host a conference call at 5:00 PM (ET) today to review CSPi’s financial results and provide a business update.  To listen to a live webcast of the call, please visit the “Investor Relations” section of the company’s website at www.cspi.com. Individuals may also listen to the call via telephone, by dialing (888) 632-3384 or (785) 424-1675.  For interested parties unable to participate in the live call, an archived version of the webcast will be available for approximately one year on CSPi’s website. 

About CSP Inc.

CSPi (NASDAQ:CSPI) maintains two distinct and dynamic divisions – High Performance Products and Technology Solutions – with a shared vision for technology excellence. CSPi’s High Performance Products division offers extreme-performance Ethernet products for diverse applications, including cybersecurity, financial trading, content creation/distribution, storage networking applications, as well computer signal processing systems. CSPi’s Technology Solutions division provides innovative technology solutions for network solutions, wireless & mobility, unified communications & collaboration, data center solutions, advanced security, along with professional and managed services across those technology focus areas. CSPi Technology Solutions works with the world’s leading IT software and infrastructure companies to create solutions for the unique IT requirements of its customers. For more information, please visit www.cspi.com.

Safe Harbor 

The Company wishes to take advantage of the “Safe Harbor” provisions of the Private Securities Litigation Reform Act of 1995 with respect to statements that may be deemed to be forward-looking under the Act. Such forward-looking statements may include, but are not limited to, those related to concentrating on ramping up the adoption of our ARC Series of 10GbE network adapters and in Q4 we expect to receive royalties from one E-2D plane. The Company cautions that numerous factors could cause actual results to differ materially from forward-looking statements made by the Company. Such risks include general economic conditions, market factors, competitive factors and pricing pressures, and others described in the Company's filings with the SEC. Please refer to the section on forward-looking statements included in the Company's filings with the Securities and Exchange Commission.

(Amounts in thousands)
  June 30, September 30,    
Current assets:        
Cash and short-term investments $11,590  $11,181     
Accounts receivable, net  20,553   19,888     
Inventories  5,615   5,749     
Other current assets  3,662   3,264     
Total current assets  41,420   40,082     
Property, equipment and improvements, net  1,578   1,564     
Other assets  5,401   5,350     
Total assets $48,399  $46,996     
Liabilities and Shareholders' Equity        
Current liabilities  18,136   17,382     
Pension and retirement plans  9,343   10,009     
Non-current liabilities  20   15     
Shareholders' equity  20,900   19,590     
Total liabilities and shareholders' equity $48,399  $46,996     
(Amounts in thousands, except per share data)
   /-----Three Months Ended-----/
 /-----Nine Months Ended-----/ 
  June 30, June 30, June 30, June 30,
Product $20,345  $15,696  $58,320  $45,544 
Services  6,567   6,591   19,407   16,050 
Total sales  26,912   22,287   77,727   61,594 
Cost of sales:        
Product  16,460   13,461   47,750   37,974 
Services  3,247   3,560   11,249   10,356 
Total cost of sales  19,707   17,021   58,999   48,330 
Gross Profit  7,205   5,266   18,728   13,264 
Operating expenses:        
Engineering and development  779   626   2,368   2,305 
Selling, general & administrative  4,573   3,945   13,286   11,824 
Total operating expenses  5,352   4,571   15,654   14,129 
Operating income (loss)  1,853   695   3,074   (865)
Other expense, net  (76)  (113)  (165)  (275)
Income (loss) before income taxes  1,777   582   2,909   (1,140)
Income tax expense (benefit)  520   333   866   (277)
Net income (loss) $1,257  $249  $2,043  $(863)
Net income (loss) attributable to common stockholders $1,198  $240  $1,959  $(863)
Income (loss)  per share - basic $0.33  $0.07  $0.54  $(0.25)
Weighted average shares outstanding - basic  3,618   3,540   3,599   3,522 
Income (loss)  per share  - diluted $0.32  $0.07  $0.52  $(0.25)
Weighted average shares outstanding - diluted  3,743   3,633   3,733   3,522 


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