CSPi Q3 2026 Earnings Call Summary

1Key Financial Results and Metrics

Revenue: $14.4 million, down from $15.4 million in Q3 2025.

Product Revenue: $9.9 million, compared to $10.2 million in the prior year.

Service Revenue: $4.45 million, down from $5.3 million year-over-year.

Gross Profit: $4.3 million, down from $5.45 million in Q3 2025.

Gross Margin: Increased to 30.1%, up from 28.8% year-over-year.

Net Loss: $846,000 or $0.09 per share, compared to a net loss of $264,000 or $0.03 per share in the prior year.

Cash Position: $24.7 million in cash and equivalents; the company also repurchased approximately 13,000 shares during the quarter.

2Strategic Updates and Business Highlights

Technology Solutions: Continued growth in cloud and managed services, despite hardware delivery delays impacting revenue recognition.

AZT Protect: Progress made in integrating AZT Protect into OEM products, notably with Acronis, and expanding into new markets, including South Africa.

Sales Strategy: Revamped sales organization to better serve Fortune 500 customers and address longer sales cycles, particularly for larger enterprise opportunities.

Customer Retention: Achieved a 100% renewal rate for customers reaching their one-year renewal period.

3Forward Guidance and Outlook

Management remains optimistic about converting several large contracts in the AZT Protect pipeline over the next 6 months.

Continued focus on expanding the number and size of AZT Protect opportunities, leveraging lessons learned from existing deployments.

Anticipation of further growth in managed services and cloud offerings, supported by a strong service organization and high customer retention.

4Bad News, Challenges, or Points of Concern

Supply Chain Issues: Significant delays in hardware vendor deliveries, extending from 30-60 days to over 200 days, resulting in a 65% increase in backlog.

Financial Performance: Declining revenues and increased net losses compared to the previous year raise concerns about short-term financial health.

Sales Cycle Length: Extended sales cycles for larger contracts, compounded by organizational complexities within customer companies, are hindering revenue growth.

Market Competition: The need for continuous education on the unique requirements of operational technology environments, as well as competition from other cybersecurity solutions.

5Notable Q&A Insights

OEM Partnerships: Discussions on the integration timeline with Acronis and other OEMs indicate that delays are largely due to the size and processes of these larger organizations.

Sales Strategy: The sales team has undergone changes to better align with longer sales cycles, with new hires focused on nurturing relationships and expediting processes.

Cybersecurity Landscape: The company highlighted the increasing demand for cybersecurity solutions amid rising cyber threats, particularly in operational technology environments.

Future Opportunities: Management is optimistic about potential partnerships and expanding their presence in government-related cybersecurity efforts, although these processes are slow-moving. Overall, CSPi is navigating significant operational challenges while pursuing growth in its cybersecurity and managed service offerings, with a cautious but optimistic outlook for the future.