BILLERICA, MA, December 16, 2014 – CSP Inc. (NASDAQ: CSPI), a provider of IT solutions, systems integration services and dense cluster computing systems, today reported financial results for the fourth quarter and year ended September 30, 2014.
The Company also announced that its board of directors has voted to pay its quarterly dividend of $.11 per share to shareholders of record December 28, 2014 payable January 8, 2015.
Management Comments
“We made excellent progress on our growth strategy in Fiscal 2014 as we invested in a number of areas to support future growth,” said President and Chief Executive Office Victor Dellovo. “We are excited by the promise of growth and customer diversity from Myricom, which we acquired and integrated into the High-Performance Products & Solutions (HPPS) segment during the year. We also took great strides in positioning CSP to increase margins and recurring revenue by growing our managed services business. From a financial perspective, we grew net income by 263% in fiscal 2014 to $1.3 million on a 3% decrease in revenue. For the fourth quarter, we reported a slight loss as we invested heavily in new product development and sales infrastructure to support future profitable growth.
“Fourth-quarter revenue from our HPPS segment was driven by strong Myricom sales, the delivery of a sonar system for an international customer, as well as $0.6 million in royalty revenue from an additional E-2D plane. This represents royalty for the sixth E-2D plane in fiscal 2014, exceeding our initial expectation of recording revenue for five planes during the year.
“At our IT Solutions segment, we reported another strong quarter in Germany, while business in the US continues to be soft. We continue to see managed services as an exciting opportunity for profitable growth, and recently added eight engineers, who were immediately productive.
“Looking ahead, we plan to continue to advance our growth strategy in fiscal 2015. In IT Solutions, we expect that managed services will be a key revenue and earnings generator in fiscal 2015. In HPPS, we currently are having customer discussions regarding expected E-2D production, and believe we could report royalty revenue for five planes in the second half of the year. We also are investing in product development at our Myricom business, where we see excellent growth opportunities in a number of vertical markets. We expect the growth of this business will help to smooth out revenue in those quarters that have softer sales from the military side of the business, which is inherently lumpy. We expect to begin to report meaningful revenue from our new product development efforts in Myricom in the fourth quarter of fiscal year 2015,” concluded Dellovo
Financial Results
For the fourth quarter of fiscal 2014, revenue was $19.7 million compared with $21.9 million in the year-ago quarter. For the full year, revenue was $84.6 million compared with $87.6 million in fiscal 2013. Foreign exchange had a negative effect on revenue of $43,000 for the three-month period and a positive effect of $979,000 for fiscal 2014.
Gross margin for the fourth quarter was 26% for the three-month period compared with 22% for the prior year, and gross margin for the 12-month period increased to 25% from 21% in fiscal 2013. The increases for both periods were due to a greater mix of High Performance Products and Solutions products, which carry higher margins.
Net loss for the fourth quarter was $78,000, or $0.02 per share, compared with a net loss of $8,000, or $0.00 per share, in the fourth quarter of fiscal 2013. Net income for fiscal 2014 was $1.3 million, or $0.38 per diluted share, compared with $368,000, or $0.11 per diluted share, in fiscal 2013.
Cash and short-term investments decreased by $2.2 million from $18.6 million at year-end fiscal 2013 to $16.4 million as of September 30, 2014. CSP’s cash position may vary significantly from quarter to quarter due to the high working capital requirements needed to fund large projects at both its High Performance Products and Solutions and its IT Solutions segments.
Conference Call Details
CSP Chief Executive Officer Victor Dellovo and Chief Financial Officer Gary W. Levine will host a conference call at 10:00 a.m. (ET) today to review CSP’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 cspiweb.staging.wpengine.com. Individuals may also listen to the call via telephone, by dialing (866) 952-1906 or (785) 424-1825. For interested parties unable to participate in the live call, an archived version of the webcast will be available for approximately one year on CSP’s website.
About CSP Inc.
Based in Billerica, Massachusetts and founded in 1968, CSP Inc. and its subsidiaries develop and market IT integration solutions and high-performance computer systems to meet the diverse requirements of our industrial, commercial, and defense customers worldwide.
CSP Inc.’s High Performance Products & Solutions segment includes the MultiComputer Division, which designs and manufactures commercial high-performance computer signal processing systems for a variety of complex real time applications in defense and commercial markets. The Company also owns Myricom, a pioneer in high performance computing interconnect technology. Founded in 1970, Modcomp, Inc. is part of CSPI’s Information Technology Solutions segment, and has offices in North America and Europe. Modcomp provides solutions and services for complex IT environments including disaster recovery, mobility, managed services, security, data center management, and collaboration. More information about CSP, Inc. is available at cspiweb.staging.wpengine.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, we expect that managed services will be a key revenue and earnings generator in fiscal 2015 and we currently are having customer discussions regarding expected E-2D production, and believe we could report royalty revenue for five planes in the second half of the year. 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.
| CSP INC. AND SUBSIDIARIES | ||||||||
| UNAUDITED CONDENSED CONSOLIDATED BALANCE SHEETS | ||||||||
| (Amounts in thousands) | ||||||||
| September 30, | September 30, | |||||||
| 2014 | 2013 | |||||||
| Assets | ||||||||
| Current assets: | ||||||||
| Cash and short-term investments | $16,448 | $18,619 | ||||||
| Accounts receivable, net | 12,697 | 13,529 | ||||||
| Inventories | 6,446 | 4,791 | ||||||
| Other current assets | 4,020 | 3,979 | ||||||
| Total current assets | 39,611 | 40,918 | ||||||
| Property, equipment and improvements, net | 1,472 | 1,420 | ||||||
| Other assets | 5,389 | 4,887 | ||||||
| Total assets | $46,472 | $47,225 | ||||||
| Liabilities and Shareholders’ Equity | ||||||||
| Current liabilities | $14,676 | $15,125 | ||||||
| Pension and retirement plans | 10,440 | 8,660 | ||||||
| Non-current liabilities | 69 | 405 | ||||||
| Shareholders’ equity | 21,287 | 23,035 | ||||||
| Total liabilities and shareholders’ equity | $46,472 | $47,225 | ||||||
| PRESS RELEASE | ||||||||
| CSP INC. AND SUBSIDIARIES | ||||||||
| UNAUDITED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS | ||||||||
| (Amounts in thousands except per share data ) |
||||||||
| /—–Three Months Ended—–/ | /—–Twelve Months Ended—–/ | |||||||
| September 30 | September 30 | September 30 | September 30 | |||||
| 2014 | 2013 | 2014 | 2013 | |||||
| Sales: | ||||||||
| Product | $14,132 | $16,219 | $58,877 | $65,844 | ||||
| Service | 5,616 | 5,674 | 25,742 | 21,775 | ||||
| Total sales | 19,748 | 21,893 | 84,619 | 87,619 | ||||
| Cost of sales: | ||||||||
| Product | 11,304 | 12,838 | 48,751 | 54,023 | ||||
| Service | 3,342 | 4,251 | 15,047 | 15,013 | ||||
| Total cost of sales | 14,646 | 17,089 | 63,798 | 69,036 | ||||
| Gross Profit | 5,102 | 4,804 | 20,821 | 18,583 | ||||
| Operating expenses: | ||||||||
| Engineering and development | 1,112 | 596 | 3,484 | 1,857 | ||||
| Selling, general & administrative | 3,947 | 4,234 | 16,116 | 16,025 | ||||
| Total operating expenses | 5,059 | 4,830 | 19,600 | 17,882 | ||||
| Bargain purchase gain on acquisition, net of tax | – | – | 462 | – | ||||
| Operating income | 43 | (26) | 1,683 | 701 | ||||
| Other income (expense), net | (50) | (48) | (228) | (12) | ||||
| Income (loss) before income taxes | (7) | (74) | 1,455 | 689 | ||||
| Income taxes expense (benefit) | 71 | (66) | 121 | 321 | ||||
| Net income (loss) | ($78) | ($8) | $1,334 | $368 | ||||
| Net income (loss) per share – basic | ($0.02) | ($0.00) | $0.39 | $0.11 | ||||
| Weighted average shares outstanding – basic | 3,463 | 3,422 | 3,448 | 3,389 | ||||
| Net income (loss) per share – diluted | ($0.02) | ($0.00) | $0.38 | $0.11 | ||||
| Weighted average shares outstanding – diluted | 3,463 | 3,422 | 3,499 | 3,441 | ||||
CONTACT:
Gary Levine
Chief Financial Officer
CSP Inc.
Tel: 978.663.7598 ext. 1200
Fax: 978.663.0150