Greetings, and welcome to CSPi's fourth quarter and 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 Polyviou, IR at EVC Group. Sir, the floor is yours.
Thank you, Alex. Hello, everyone, and thank you for joining us to review CSPi's fiscal 2023 full year results, which ended September 30, 2023. With me on the call today is Victor Dellovo, 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 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 statements 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 Factors section of the annual report on Form 10-K and the quarterly reports on Form 10-K filed with the Securities 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 it over to Victor Dellovo, Chief Executive Officer. Vic, please go ahead.
Thanks, Michael, and good morning, everyone. Earlier this morning, we announced our fiscal 2023 full-year results, and I'm pleased to report we achieved revenue growth of 19% compared to fiscal 2022. I believe our strong performance is due to several factors, including in the sustained contribution of the technology solution business, our ability to successfully convert a sizable portion of our backlog to revenue, and our proactive decision to leverage our strong balance sheet to finance large customer orders. Furthermore, we reported gross margin percentage of 34% and grew EPS well over 100% from prior year. All significant accomplishments that raises our confidence level that we can continue executing our strategy of trans-transitioning the business to higher margin products and services.
Moreover, we are continuing to experience positive momentum to kick off 2024, as we already achieved significant achievements in the Technology Solutions and High-Performance Products businesses. First, let me address the backlog issue, and then I will provide an overview of the TS business and then spend a few minutes highlighting some of our recent and exciting developments within the HPP business. As many of you already know, we entered fiscal 2023 with a level of uncertainty due to well-documented supply chain issues that impacted global economies. Specific to CSPi, the inability to receive key components from suppliers kept us from shipping orders to our new customers, raising our backlog to near record levels and dampening our revenue opportunities.
However, as the supply chain issue began to ease up during the year, we started receiving some of these key components and were able to ship finished goods and reduce the backlog to a more normalized pre-pandemic level of approximately $7.6 million. I applaud the team's ability to remain engaged with the customers throughout this period. I believe our clients' loyalty demonstrates the value we bring to them because they recognize that the products and solutions are the most effective, cost-efficient answers to their critical needs. Our performance throughout the fiscal 2023 was driven by continued performance of our technology solution, or TS business, which grew compared to fiscal 2022. The success continues to be driven by our customers' increased use of implementation, installation, and training capabilities.
Regarding the UCaaS, it turned a corner in the second half of fiscal 2023 and is now a profitable business. We believe we'll continue to see positive developments within the UCaaS as we move forward through fiscal 2024. Now, turning to our High Performance Products in HPP business. We recorded total revenue of $6.9 million for the fiscal year, compared to $3.8 million in fiscal 2022. The results were within our expectations. However, the level of optimism within the business is high and increasingly growing following the recent launch of AZT PROTECT. AZT PROTECT's advancement allows us to offer our customers a giant leap forward in the evolution of cybersecurity solutions. AZT PROTECT's performance surpasses what's available on the market today, and it's a new generation of endpoint application cybersecurity protection designed for both critical operational technology and IT environments.
The unique patented solution protects an organization's endpoints from a full spectrum of cyberattacks 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 halts attacks before damage occurs, ensuring seamless operations without disruption or downtime. It lowers the risk code base of security vulnerabilities, exploits on endpoints, devices, applications to near zero without the need for constant patching updates. Developed internally, we knew AZT was going to be a game changer for the CSP business. So the team has significantly targeted several high-profile conferences and seminars to raise awareness of AZT, including the eighteenth Annual API Cybersecurity Conference, which was held in Houston earlier this month for oil and natural gas industry.
The Rockwell Automation Conference, which was also held last month in Boston, was the world's premier industrial automation and digital transformation event. The ICS Cybersecurity Conference, which was held in Atlanta in October, is the largest, longest running event series focused on industrial cybersecurity. Since 2000, the conference has gathered ICS cybersecurity stakeholders across various industries and attracts operational and control engineers, IT, government, vendors, and academics. Then finally, the ManuSec U.S. Summit, which was held in October in Chicago. ManuSec is the premier conference for cybersecurity and manufacturing, addressing sectors drives towards digital and automation, and how imperative it is to balance it with security. We know, we know this is a crowded field, so a visible on-site presence at these and other events was critical and allowed the team to engage and communicate with key influencers and prospective clients, including Fortune 500 companies.
The in-person feedback is quite positive, and the comment we often hear from them is, "We see the need for something like AZT." Subsequent to the end of fiscal 2023, we received orders from a Fortune 500 chemical manufacturing to protect its critical production application from all forms of attack, enabling production lines to continue running without disruption. We also received an order from a Western intelligence agency to protect its critical intelligence gathering and analysis operations from cybersecurity attacks. This new contract builds on ARIA Cybersecurity's proven track record in proven security solutions for military and intelligence agencies around the world. Additionally, we launched our AZT PROTECT solution in Australia via partnership with Logi-Tech, a leading local managed security service provider.
By adding AZT PROTECT to its portfolio, Logi-Tech can offer a groundbreaking service, protecting critical applications and operational technology in IT environments such as manufacturing, mining, and government. To summarize, we gathered strong growth in our fiscal 2023 and positioned the company for even greater success in the coming years. Although the TS business has been the growth driver over the past few years, the emergence of AZT offering has changed the dynamics and gives us two businesses that can grow side by side and provide consistent growth with significant upside potential. With that, I will now ask Gary to provide a brief overview of the fiscal year's financial performance.
Thank you, Victor. For the fourth quarter ended September 30, we reported revenue of $15.3 million, compared to $16.7 million in the year-ago fiscal fourth quarter. We reported a significant revenue increase of 66% in last year's Q4 as we began to work down the record backlog, so the comparability represented a high bar. For Q4, gross profit was $5.2 million, or 33.8%, respectively. We also lowered compared to the year-ago period. However, whereas the supply chain was responsible for some of the choppiness, we achieved significant annual growth in fiscal 2023 compared to fiscal 2022, as we reported revenue of $6.4 million, a 19% increase compared to $54.4 million in the fiscal year ago.
As Victor mentioned, this performance is due to the continued success of converting some of the older backlog, allowing us to deliver product to our customers. We reported gross profits of $21.9 million, or 34% of sales, compared to $18.8 million, or 35% of sales in fiscal 2022. The slight decrease in gross margin compared to the year-ago period was anticipated and due to the business mix and the lower margin products that had been in backlog. We continue to believe our annual gross margin will expand as mentioned, as the business transitions to a higher margin product and services. For the fourth quarter, our engineering and development expense was $700,000, down $150,000 from the year-ago fiscal quarter, with a reduction in outside contractors and not filling some open positions.
Our SG&A costs for the fourth quarter was $4.8 million, similar to last year. For the full fiscal year our engineering and development expense for the fiscal year was $3.1 million, relatively flat with comparison to the year-ago period. Our SG&A expenses in fiscal 2023 were $16.9 million, compared to $15.8 million in fiscal 2022, due to increased variable compensation for bonuses, sales commissions for sales, higher sales, as well as payroll and initial costs associated with unveiling and launching of the AZT, which includes conferences, participation, and hiring several salespeople.
We reported net income of $5.2 million, or $1.09 per diluted share for the fiscal year, September 30, 2023, compared to net income of $1.9 million or $0.42 per diluted share for the fiscal year ended September 30, 2022. During the last quarter of the fiscal year 2023, the company received an Employee Retention Credit, ERC, of $2.1 million net of expenses. The ERC was not available in fiscal 2022. We had a tax benefit of $0.5 million due to the release of the valuation allowance against our company's deferred tax assets. Included in the net income is stock compensation, a non-cash expense of $1.1 million.
The company had cash and cash equivalents of $25.2 million as of September 30, 2023, compared to cash and cash equivalents of $24 million as of September 30, 2022. The cash and cash equivalents are considerably higher compared to cash and cash equivalents of $13.8 million for the quarter ended June 30, 2023, as significant cash flows were generated through the payment of receivables, including payment from financing sales provided to customers prior to fiscal year 2023. We believe this robust financial position allowed us to successfully implement this approach. It yielded positive results, and we will entertain certain options 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 January ninth, 2024, to shareholders of record on the close of business of December twenty-second, 2023. With that, I will turn it over to the operator to take your questions.
Thank you. At this time, we will be conducting our question-and-answer session. If you would like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star two 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 pull for questions. Thank you. Our first question is coming from Joseph Nergez with Seagran Investments. Your line is live.
Good morning, guys. How are you today?
Good morning, Joe.
Morning, Joe.
Okay, I see, you must have shook up the market today because the market, the stock is down, like, 3 points. So, evidently it's in your press release. Let me explain what I think is going on. You're with a big drop in the backlog, people think that that obviously the sales aren't there going forward. That's the concern. Yet in your press release, you issued, you said that you thought there was Technology Solutions, which, of course, is the bulk of our sales right now, is expecting a major contribution this year in 2024. You're looking for good business with new customers and expanded existing customers. Is that what you're trying to convey, that you expect expanding technical service, technology solution business segment?
Yeah, that's correct, Joe. We budgeted for significant growth in 2024.
So, in effect, the drop in the backlog from last year to this year is not really going to cause a problem as far as what you were expecting for 2024 growth, at least in that segment of the of on that division going forward.
Yep, that's correct.
The backlog, in effect, you know, granted, it's down, what was it? 20... I forget what it was last year. It was $20 million or something like that, that, that we had that, you know, because of the, we couldn't get the, a lot of the orders through the supply channel. So that's, that's number one. So we're really not concerned. The backlog may be low, but, but business is-
It's back to pre-pandemic levels. You know, basically, we were just trying to just, you know, talk about where the backlog was, where it is, because now it's not a factor any longer moving forward. It's pretty much business as usual for 95% of the products that we sell. And, you know, we're probably not going to be discussing it any further... moving forward.
The point I guess I'm asking you, even though it's back to pre-pandemic levels, it has no effect on what you think, what we think is going to be business in 2024. We think it is sufficient to grow the business in that, at least in the TS division.
Correct.
Okay. Second point, on the, of course, the AZT product, that's dynamic product, and I don't think people realize how much that can contribute to the future of this company. You said you added salespeople-
Mm-hmm.
And they're responsible for bringing in new business. Are we talking about new business beyond the two press releases that were issued, one on the chemical company, one on the intelligent Western intelligence a gency business? Do we have additional customers beyond that?
Well, there's the pipeline. They're growing the pipeline right now, Joe.
Okay, so we have a lot. And when we're talking about the pipeline, are we talking about customers that are testing it, the product at their facilities? I assume-
Some of them are doing POCs already. They're large Fortune 500 companies. They're the largest companies out there, so the sales cycle might be a little longer, but they're quite engaged right from the beginning. A lot of them, we met them at the show, we talked to them, and within a week or two, they wanted to discuss the product further, and some of them are already looking to set up a POC, either, you know-
Testing.
Testing, yeah. Yeah, proof of concept. But with the holidays, you know, some of it's getting pushed a little bit to the first quarter just because of Thanksgiving and Christmas, but they're quite engaged right from day one when we met them at the shows.
Okay. Great. Well, that's understandable. Just the time of year we're at right now.
Mm-hmm.
Talking about the existing now, of course, in the two press releases you issued, you never talked about the size of the contracts, and I assume that, you know, most of these people are gonna be paying on a monthly basis. That, that's the type of over a period of number of years that they contracted out. Is that correct? We're talking about not upfront payment for the software, mostly on a monthly basis?
Yeah. No, they're the first CD units that we put in there were just to buy it outright. And then, you know, as we expand, these companies are so large, Joe-
Yeah
That, you know, 170 locations and, and, it was whether we boil the ocean and try to take all 170 down, and that would take about a year to two years, they said, to get that processed, or do we start seeding it in one or two of their locations and expand from there? Like, you know, one of the government agencies, we're already talking to seven different locations. Some of them had some, you know, money left over, and they wanted to, you know, cut deals right away. So, you know, right now it's about customer engagement, getting them to test it, buy it, you know, and evangelize when we need, you know, references moving forward.
So, they're... In both cases, they're rolling out the software in phases. Let's put it that way. You said in one case, you're talking about 170 plants. Well, you can roll that out-
Unfortunately, unfortunately, we have to talk to all 170 plants because they all have seven separate budgets. So, you know, we're gonna knock one down at a time. But to get, to get our product inside their environment, saying it's, it's running, it's working, was, you know, one of the most important factors, and we did it quickly, right? With less than 60 days from beginning to end.
So, just going back, from an idea from a charge standpoint, I'm assuming we bill on the basis of how many items are being protected... how many devices are being protected, or in the case, what you call endpoints. The more endpoints we protect, the higher the bill.
Correct.
Okay, so as we roll it out little by little, you know, supposedly the bill increasing little by little, let's put it that way, as they expanding within their divisions.
Yeah. Some departments will have to purchase it outright, and, you know, some of them will want to pay on a monthly basis or a yearly basis, most likely, right? You know-
So they have-
sign a three-year deal and pay it each and every year when it comes to
In cases, it depends on how the departments decide to... In some cases, it's the departments will make the decision on whether they want to buy or whether they want to lease, basically.
Pretty much, yes.
Okay, on the cash, I assume the cash, a lot of the cash that we have is short-term treasury bills, or how do we have that going, Gary? Is that, do you have a fair amount in your rolling over in short-term treasuries, or?
Yeah, we roll them over and say that, and stay in some money market funds, but yeah, we're rolling them over short term.
Okay, how... And Logi-Tech, how are they doing? Now that I realize that you just put a PR on that, our Australian partner.
Mm-hmm.
Have they been able to have the same, let's say, initial success that we're having, as far as interest in Australia?
Yeah, they're generating opportunities that we're working with them hand in hand.
Okay. All right. That's all I've got right now. It sounds like we're great priced, and of course, the AZT product has changed HPP dramatically from where I'm sitting, so.
... Yeah, we're excited. You know, all the feedback has been positive. No one has said, "Oh, I don't see the value in this. I don't understand it." We're definitely changing people's, you know, the way they look at securing endpoints in the application. So the conversations are happening frequently, and they're getting it.
Yeah. And just one more question. You know, Australia is an example, but there should be, there's got to be additional countries out there that are demanding the same kind of reporting requirements that are being required in the U.S. and Australia. So is there an opportunity now to establish, how can I say it, similar operations from managed security service providers in these other countries, like U.K., example?
Of course.
Or Germany?
Yeah, of course, Joe. It's just the size of our organization kind of, you know, prohibits us, you know, moving as fast as we would like to, right? You know, it's, as I said, you know, TS has been doing so well that it paid for all the development of this new product. But in, you know, the HPP is truly a startup organization, right? With a new product that's, you know, we believe is game changing. But yeah, it's just the size right now, but we're working as hard and as efficient as we possibly can to try to talk to as many people. And like I said, we've rolled it out, and we did as many shows that we could get ourselves into. And the feedback was really, really good.
Like I said, we have 50 opportunities that we're working right now, just from those couple shows that we did, you know, over the last couple of months.
50 opportunities, is that what you said?
Yeah, over 50. Yeah, over 50. Yep.
Over 50. Do we, how many people do we have in the U.K.? I know we have a very, very small sales force over there. Do we still have a couple of people over there in the-
Yeah, we do.
And-
Yeah.
Are they up to snuff on this? Hey, and really, they really are kind of like technology solution type salespeople. Is that correct, as opposed to HPP salespeople?
Correct.
But they're familiar with the product.
Yeah, they all, we cross-trained all our salespeople on AZT, so they're able to at least ask the right questions and then engage the engineers on the AZT side when there's an opportunity.
All right.
Some of those opportunities that we're working right now came from the TSI.
Yeah, I'm sure. All right. Well, thanks a lot, guys. Just really exciting going forward, and I appreciate the time. Thanks.
Thank you. Our next question is coming from Mike Price, who is an investor. Sir, your line is live.
Good morning. Thanks for the time to ask some questions. Can you give us an idea of how big you think the market opportunity is for AZT?
Um, multi-billion.
Okay. And that being said, you know, it's nice that you're having conversations with 50 potential customers. But going back 2 quarters ago, you said that a problem CSPi has is a lack of name recognition.
Mm-hmm.
Last quarter, after the introduction of AZT, I asked the question of not having our name recognition, is it not better and more efficient to partner with somebody that does have name recognition? And your response was that you've only been in the market for 30 days. So but the question now is, do potential customers, more than 50, know CSPi and potential competitors and potential partners? Is it not more efficient? Because a lot of times, the best product doesn't even get seen in the market because it's not the fastest introduced to the market.
I agree with that. And we are talking to, and we have signed some of the largest security resellers and integrators in the market space, and we started working opportunities with them. We are—we definitely, you know, we use as much marketing money with all the shows, and then we targeted, you know, the top 20 or 30 security-focused resellers, integrators, and we started talking to all of them. Some of them we met at the shows that while we were there, they saw the need, and actually some of them reached out to us directly on large, large opportunities they had in the healthcare industry, protecting Microsoft OS systems and Android, that we're working in conjunction with them. So we are trying to get our name, and using the reputation from these large security resellers, you know, as fast as possible.
But they have a stringent, you know, they don't take on every single security partner. So we have, I think, been fortunate that two of the largest ones already signed, you know, contracts with us to represent AZT and ARIA.
Okay. Last quarter, I asked, and I think Joe Nergez just asked also about using funds to buy shares, and prior to today, the stock had doubled. Did you buy any shares during the quarter?
No.
No.
Okay. Well, with what's happening today, is this not provide an opportunity with $25 million in cash? I mean, the stock's down 25% today. I mean, is this not in the thought process?
It is in the thought process. We talked about it this morning-
Okay.
Gary and I.
Yeah.
Okay. And, and the final question I have, prior to today, it's great since the last conference call that the stock price has doubled. But what shows today is the, you know, small float and the illiquidity. You know, I couldn't sell a measurable number of shares to take a profit, and Victor, you couldn't, and Joe Nergez certainly couldn't. So the question is, you know, the market cap here is, what? $90 million. And looking at somebody like Dragos, who I assume is a competitor, recently raised $200 million with a $1.7 billion valuation. It seems like a big discrepancy between a CSPi and somebody like that, where CSPi supposedly has, you know, a revolutionary product, and you think it's as good or better than anything out there. Can you address that and how we close the gap?
You know, we actually saw, you know, we talked to Dragos while they were at the show, too, you know, and the thing is, they're truly not a competitor. We will complement what they do. They have gaps, and our product would actually complement with them. So there's, you know, we would love to talk to companies like that. There's really no one out there that's doing exactly what we're doing on the application, the way we're doing it at the BIOS core level.
Okay, so if you're not exactly like it, that seems that CSPi and AZT should have more value, if in fact, the market is aware of it, with a multibillion-dollar market opportunity. This-
Yes, I agree with you.
What am I missing here? What, what am I missing here?
You're not. But like, you know, the product was released end of July, and we're evangelizing and, and rolling it out as fast as possible.
Okay. All right, appreciate.
Dragos has been doing it for years, you know. So, you know, they've been at it a little longer than we have when it comes to this, this product.
Well, no, no. No, I appreciate, I appreciate the fact that they've been doing it longer, but I'm talking about the discrepancy in the valuation.
Yeah.
Sure, it might take you a while to get in there, but you're valued at $90 million, and they've got a valuation of $1.7 billion. I mean, that's a huge discrepancy. So-
Mm-hmm.
Okay, well, it looks cheap to me here. It looks awfully cheap at $17.5, so... Okay, I appreciate your time. Keep up the work.
Thank you. Have a great day.
Bye.
Thank you. Our next question is coming from Brett Davidson, who is a private investor. Your line is live.
Good morning. I got a couple-
Good morning, Brett.
The AZT thing, so, you know, you can sell it, you can do it on a subscription model. How long does it take to roll this out? So you sign a contract tomorrow, what's involved in rolling this out to a customer?
What makes our product, which I've spoken in the past about, is we can be rolled out very, very quickly. You know, we've done 1,000 endpoints in less than an hour. There's some a little tweaking after the fact, but, you know, the way we roll our product out is like a driver. It goes on the system, then it expands, and then it goes and looks out at all the applications. You ask a few questions, and it starts protecting immediately, you know, within that, what's, you know, that hour time frame, you're up and running. There's a little tweaking that goes on, but very, very minor. You know, when we rolled out the last couple, you know, you know, it was a couple hundred endpoints, and, you know, it was done in less than 30 minutes.
You know, we built it in conjunction with, customers' feedback, and that was the biggest thing, especially when we developed it for the OT space, that you cannot have downtime in manufacturing facilities, at all. And that's, that's the difference with our product. You roll it out, it does not need a reboot. And that's really, really big compared to all the other products that kind of do what we do, but not really. You need a reboot, takes a long time, it takes months to roll out, and ours is done very, very quickly and efficiently.
That adds tremendous expense in a manufacturing environment. Yeah, I could, I can see where it would be a big advantage. So-
Yeah, see, that's a difference. A lot of times with other products, you would have to have those systems be taken down. And the way we roll it out, the system does not have to be taken down. It could still be working and doing what it needs to do, in conjunction with us, you know, implementing our product inside that environment. No downtime.
So that ends up, you know, affecting the value proposition here, because that's kind of like a hidden expense in competitor products.
Mm-hmm.
So, you know, if you're rolling this out onto, to, you know, let's say it's, it's a business with 10 sites,
Mm-hmm.
I mean, is this something that the physical location matters, so you're going to do one site, you know, at a time, or does this depend on what their IT infrastructure, how that's set up, and you can literally just blanket 10 locations at once?
We could do 10 locations at once. We could do a hundred locations at once. Does not matter. All we need is just, you know, access, whether they want us to do it, or we could walk it through. The one rollout that we did with that government agency at that one location, we were not able to, you know, have any access to that whatsoever. It's a closed environment, and we just walked them through it, and they, within, you know, less than an hour, they were up and running, and they had never touched the product in their life.
Now, when you say you walked them through it, was this, you know, physical on-site, or was this?
No, just over the phone. We weren't. We had no access to the site, nor did we have access to their systems.
... So you guys don't even have to be physically present to walk them through?
Correct.
Got it. So then all of the time sucked up in this process is all going to be in the sales cycle?
All on the sales cycle.
So once you get the dotted line, you're ready to go and can roll this out-
As fast as they want it rolled out, we can help them.
So, I mean, the press releases the past few weeks have been great. You know, with 50 of these things in the cycle, I mean, is this something we can anticipate on maybe a more frequent basis, that these things are going to be rolling out, announcing these new relationships?
Yeah. The significant ones, I'm going to say, you know, we're evangelizing as much as we can. We're trying to get people to see the announcements. You know, some of these larger ones that we're working on, I'm definitely, you know, be announcing those, as soon as they hit.
Got it. And the last thing I just want to touch on, I know, I know that the cruise ship thing was still winding back up. Is that... Has there been any headway making, getting that, getting those jobs started back up?
Yeah, we started doing some cruise line work. Again, a little different aspect. They're doing a NAC solution, so we're starting to roll out at different locations for the network access control. So yeah, that business started picking up again, and, you know, we had people in Japan this week on some boats. And so, yeah, it's not. They gave us a nice schedule in the past, and that schedule hasn't, you know, come up. It's more like, "Hey, I need you here in two weeks or three weeks." It's sporadic, where the other ones were like, "Here's the next 12 ships. Here's the next 12 dates. This is when we need you." It was easy to plan for, and that's not happening. So we're doing business with them.
It's just not as organized as it was, once was.
And maybe one more follow-up question. So, the AZT thing, you know, I saw the Western Intelligence, and we're talking about manufacturing, and you also mentioned healthcare.
Mm-hmm.
Are there any other areas that kind of jump out where this would be a really good fit?
It's really anywhere, right? Because when we first rolled out the announcement, it was we focused because we worked with, I told you, some large manufacturing companies, so we focused on the OT space, zero downtime. When we rolled that out, we rolled it out into the Windows world at first, and then we rolled it out into the Linux world. So we have both, you know, different type of operating systems that we can support. And, you know, one of our key factors compared to anybody who thinks they play in this space is that we go all the way back to XP in the early versions of Linux, right? Most companies are only doing one or two versions back. We're supporting all the way back, to, like I said, to XP.
So that's definitely a game changer for us, especially in the OT space, because a lot of these manufacturers don't update or upgrade their systems, because, again, I mentioned, you know, zero downtime. And now, you know, the latest version that we're rolling out right now is for the IT environment, to where, you know, it allows, you know, patching, we can schedule things. So we're rolling that out, you know, as we speak. You probably see it, and I'm announcing it now, but you'll see an announcement that we're also rolling out a full IT product line version of AZT.
And that would be for, like, data centers and
Mm-hmm.
Got it.
Yeah.
So that's going to be a significant number of points that you guys could hit.
Correct. Correct. You know, we're talking to some financial institutions right now. We're also going to talk to all our managed service customers that we're supporting right now about, you know, potentially increasing their monthly spend by rolling out AZT on their IT servers, you know, to protect their application at the core level.
That, that's quite a few endpoints.
Yeah, quite a few endpoints. Yeah, we're going to talk to every one of our managed service customers. You know, some of them will say yes, some of them will say no. Just depends on budgets, but you know, that's what's going on right now. This conversation is happening as we speak with some of our larger MSP customers.
Nice. Well, thanks so much for the call, and look forward to continued success here.
Thanks. Have a good one. Happy holidays!
Thank you.
Thank you. Ladies and gentlemen, if there will be any final questions or comments, please indicate so now by pressing star one on your telephone keypad. Thank you. We have a question from Paul Shortino, who is a private investor. Your line is live.
Hello, gentlemen. I have several questions. The first one is, you have a revolutionary, unique product in this AZT. You're a smaller, unknown company, and why not go partner with a Dragos or even, like, a Palo Alto or one of these big cybersecurity companies that have the relationships that can get this revolutionary product out there quicker than you can on your own? That's my first question.
... That's, I think I mentioned it earlier. You know, we are talking to, you know, all types of, you know, the manufacturers, right? People who are in that space. I can't mention who we're talking to now, but there's quite a few conversations going on with companies that are in that security space that we would complement. We would go side by side with, we don't compete with, and we would enhance the overall security performance, you know, in every potential environment. So yeah, those conversations are going on right now.
Okay, and I assume if something happens, we're going to hear about it, correct?
You will hear about every exciting news that comes across the board. I hope you guys see that I'm trying to share all the information as it comes across as soon as possible.
Well, yeah. I mean, if I may be brutally honest, and with all respect, you have done an excellent job, I think, with press releases up until today. And I think why we're seeing the reaction in the stock right now is because you did a poor job of explaining the excitement that you have now on the call and the opportunity, like the reseller contracts, the going into-- that this can go into the networks, all network endpoints, also, the massive ramp. You did a poor job on the press release capturing all the excitement on AZT. So my question is, the number one part of your job is execution, and you're doing a great job at that, without question.
But you also have a responsibility to shareholders in the fact that you're a small company with a very small float, and that, you know, nobody knows about this company, this story, or this opportunity. I like to say you're at the Super Bowl and nobody knows that you're playing. So, you know, what is your strategy to enhance shareholder value since, you know, with the poor press release today, the stock shareholders are suffering for what's a massive opportunity? Like, right now, the stock is at 1x sales plus cash. It's profitable, it pays a dividend, it has a great balance sheet, and it has a really massive opportunity in front of it. So how are you going to get the story and connect to Wall Street, this massive opportunity? Number one is, I hope we're going to hear about every contract.
Like, why didn't we hear about all these reseller contracts? And if you look in the news lately, you've got utilities are being attacked, water utilities, electric utilities, China attacks in the last 24 hours. There's massive highlight on operational technology, cybersecurity. You have a unique radical product. Nobody knows about it, so shareholders will suffer until that connection is made. So I want to know what you're going to do different in going forward to get this story connected to the Street to Wall Street to enhance shareholder value, because it's a great story, but nobody knows about it.
Yeah, I think we talked about that, this whole conversation, right? You know, we're doing events. I'm talking to partners. We're talking to, you know, distribution lines, where, you know... You know, as I have said, you know, the shareholders, I think, you know, their expectations sometimes may be a little bit out of whack, offline, where, you know, they want a dividend, they want it to be increased, they want us to have earnings per share, and they want us to, you know, self-fund a startup, right? So it's, it's, you know, at, at this stage of the game, we, you know, enhanced our marketing budget by 10x, you know, that we normally did. We hired salespeople that are industry sales leader salespeople that, you know, frankly, cost a lot, right? But we, we figured we'd get better quality.
We able to get into the oil and gas, talk to these, some of these large manufacturers and companies, oil gas companies directly, that they had relationships in the past. And yeah, you know, that's what we're doing right now. So we're using the largest resellers in the security space with those conversations. But as I mentioned, these companies get, you know, their doors get knocked on constantly on small security companies, right? I think there's over 6,000 small security companies out there wanting them to represent them. So we have to go through, you know, a 100-page, you know, form that we have to fill out. Why we're different, this, the whole thing.
You know, us, you know, and they don't want to pick up a product that the company's going to be out of business in a year or two because they're not funded correctly. There's a lot that goes into it. It's not just about ringing the doorbell saying, you know, "Would you want to buy some cookies? I'm here." So there's a lot that goes into that.
No, my question more was your communication with the street in, you know, getting the story out. That's execution. You're doing a great job there. Like, I'm talking about, why didn't, you know, doing press releases, like, you got some good new resellers. We don't know about that. You have 50 opportunities-
Yeah, but these are hot off the presses, right? We had a call immediately. Literally, the ink's still drying on some of these things. So you'll see things rolling out, but, you know, we were having this press conference today, and I knew a lot of this would be coming out today. You know, you'll see a lot of things coming out in the next two or three, four weeks, and some, hopefully, some exciting news on some opportunities that are closing.
Okay. Yeah, and I think that's where, you know, the taking on a strategic investor even, with, with a big name, with, with... And it sounds like you're talking to those. I think that would be a great way, as well, to give you guys the, the name and the resources to rapidly expand this, because you have such a low structure. You're selling software. It's not going to take a lot of sales like it would for another company to drop a lot of EPS in the bottom line. Last question. Obviously, it's a small equity structure. At, at some point in the future, would you consider a forward stock split so funds can, have the ability to, to buy more shares? And maybe it's not, you know, whatever the, the right time is to, to think about something.
Is that something that you'd consider?
... Yeah, we've talked about that at the board level, you know, at every meeting, you know, what our options are. So, yeah, we would consider everything, and that's one of the things that we've talked about.
Right.
Yeah.
Yeah. Okay, well, in conclusion, a great job on the execution. And honestly, on the press release, up until today, I think you did a poor job of getting the AZT opportunity in the press release today. But that, that's not fatal because it's, what's more important is that the opportunity is there, and it's, it's super exciting. So I just hope the communication is gonna be, you know, very clear and consistent. I think consistent communication is important. These small cap companies wanna run... If you wanna run it like a private company, nobody's gonna know you're at the Super Bowl. So great job on execution, and I hope we're gonna hear a lot more on AZT to really correct the lack of excitement in the press release today.
But you kind—you corrected that in a lot of ways on the call, but we now, now people have to get the story out so Wall Street connects with it. So thank you very much.
Fair enough. Thanks for your feedback. Appreciate it.
Okay. Bye.
Thank you. Our next question is coming from John Crotty, who is an investor. Your line is live.
Hi, thank you for taking my call. I gotta tell you, I really enjoyed that last back and forth with you and Paul, because those were some of my questions. I'd like to just kinda turn and talk on a more technical side now. As Paul mentioned, there's a lot of headline news out there with all the cyberattacks, especially with China, "Taiwan, Ukraine, Russia." What interested me the most was the fact the way they're breaking through the firewalls, they're having a harder time coming through. I'm speaking more technical now, but I think you guys are sitting in a potential sweet spot.
If I understand this properly, AZT is deployed on the other side of the firewall, where it's listening all the time, as employees are now being the lead target for producing the cyber threats, whether it's through a USB or through a personal computer plugged into the network. And I'm saying that because I noticed you were saying the word air-gapped quite a lot, and to me, that means it's almost like it's a self-contained network without a direct link or constant link to the internet. I'm just hoping you can maybe explain more to the rest of the world, because that's a real serious way of breaking in now, and I believe that's how we've seen some certain nuclear reactions go down. If you could clarify that and give me a little more understanding? Thank you so much.
Okay, I'll do my best on the technical side. So where we reside is in the servers, right? On the core of the servers, where, you know, it's a driver that gets installed, and it's about 40 meg, very, very small, uses 1% or 2% CPU utilization. And what happens is, once that gets installed, it expands, and it looks at every single application. Now, we're talking to some customers right now that are testing it on literally over 1,000 systems that are running 1,100 applications at one time. And it goes out, it looks at all 1,100 applications, and then it, the person has to look at it and says: "Is it a viable application? Yes, it is.
This is where we're at." At that point, it's not gonna allow anything else besides what's installed to be executed on that. So if someone tries to get in, and, you know, because the biggest thing is when end users open up the executables, right? And then all of a sudden, then they're inside the system, and then everything goes haywire at that point. So we're at the very beginning on the core and, you know, and that's where we start protecting, and that's where we're looking at all the applications and how we protect all those applications. And then after that, that's where, you know, it's the perfect picture at that point, and, you know, we stop everything, you know, immediately at that stage.
Okay, and that makes sense. Is that sitting on the NVIDIA chip, or is it just a software install with the driver?
It's just a software install on the driver. It's about 40 meg.
Oh, oh, oh, small. Okay, thank you.
Very, very small.
That makes quite a bit from it. Yeah.
Yeah.
And, is it... One last question, I'm sorry. With the AI attached to it, is it self-learning? Does it retain or does it learn, or how does that happen?
Well, yeah, it looks at it, and then it looks at what the customer's environment and what's correct for that customer.
Ah.
That's what the perfect model is.
Got you.
And then everything else that is not there, that's when it's, it stops it, and then, you know, it, we can write code against it that will allow certain things to come through after the fact if we've seen it, deem it what, this is the correct new environment and what it should look like.
Okay, so you're starting at a static, perfect world and what's different from tomorrow and the next hour? Thank you. That makes total sense. Thank you very much.
No problem.
Thank you. Our final question today is coming from Brett Davidson, who is an investor. Sir, your line is live.
Back again. I just wanted to hop on a soapbox here for a minute. I understand the sentiments of some of the other callers and, you know, everybody would love to see the shares, share price just skyrocket and this to become an, you know, overnight success. But you know, I think patience is probably a pretty good idea at this point. I would love to see this rapidly adopted and, you know, I think you guys are, I got your nose to the grindstone trying to push this forward. But you know, at the same time, I have realistic expectations. It's not gonna happen overnight. So I'll step back down and thanks again, and we'll talk to you next quarter.
Thanks, Brett.
Thanks, Brett. Thank you. As we have reached the end of our question and answer session, I will now turn the call back over to Mr. Dellovo for any closing remarks.
Thank you. As always, I want to thank our shareholders for the continued interest and support. Our success throughout the fiscal 2023 has given us momentum heading into fiscal 2024, as we're already off to a good start with recent AZT client engagements. CSPi has always had a good reputation within the industry. The launch of AZT strengthens this view, and I believe will allow us to engage and sit at the table with Fortune 500 companies. Gary and I look forward to sharing our progress in fiscal 2024 first quarter in February. Until then, be well, stay safe, and enjoy the holiday season. Thank you.
Thank you. Thank you, ladies and gentlemen. This does conclude today's conference, and you may disconnect your lines at this time. We thank you for your participation.