CSP Inc. Stock

Good day, everyone. Welcome to CSP's Third Quarter Fiscal Year 2026 Conference Call. It is now my pleasure to turn the floor over to your host, Michael Polyviou. The floor is yours.

Thank you, Kelly. Good morning, everyone, and thank you for joining us to review CSPI's financial results for the fiscal 2026 third quarter, which ended on June 30, 26, as well as recent operating developments. Today with me on the call 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'll then open the call for questions. Q&A advance, thank you for your cooperation with this process. 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 those 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 meant as a guarantee of future performance or results. The company cautions you that these statements reflect the 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 the projections upon which the segment and the 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 report on Form 10-Q filed with the Securities and Exchange Commission.

Forward-looking statements are based on 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 the call over to Victor Dellovo, Chief Executive Officer. Victor, please go ahead.

Thank you, Michael, and good morning, everyone. The Technology Solutions business performed near our expectations during the fiscal third quarter, reflecting solid growth in our cloud and managed service business. However, our third quarter financial performance was impacted by what we believe are 2 relatively short-term factors.

First, while our Technology Solutions business continued to generate solid order growth during the quarter, our ability to convert those orders into revenue has been impacted by longer hardware vendor delivery times. In many cases, vendor deliveries that historically took 30 to 60 days are now extending well beyond 200 days. As a result, our Technology Solutions backlog is now 65% higher than it was a year ago. The second factor impacting our top line performance is the continued ramp of our AZT Protect business and the longer sales cycles associated with larger enterprise opportunities. We made meaningful progress during the quarter.

However, I believe we can and will do better. As we pursue larger accounts, we continue to add new land and expand customers while expanding relationships with existing customers as our customer base grows. We continue adapting to each customer's unique deployment time lines and procurement process for rolling out additional protected sites after the initial installation.

We recognize that every customer has different priorities and often multiple competing projects that can delay expansion. Our ability to execute within this environment continues to improve. We believe several initiatives will position us to expand both the number and size of AZD Protect opportunities over the next 6 months. First, we are nearing the end of the 18- to 24-month sales cycle for several large 6-figure opportunities and remain optimistic about converting a number of those into contracts. Second, we continue to see growing opportunities for AZD Protect to become part of an OEM customer solution.

During the quarter, we completed the integration of our AZT Protect into several OEM products and are beginning to see a growing pipeline from this market segment. While OEM sales cycles are lengthy, they create attractive long-term recurring revenue opportunities once integrated. A good example is our relationship with the Coronis software, where the integration has been completed, and we understand and we understand marketing materials and SKUs are on track for a fall launch. Another example is the work in South Africa, where our OEM partner, a large telecommunication customer is now working on a third purchase order with an AZT Protect embedded in the deployed solution.

With the integration challenges and unpredictable time lines largely behind us, we are making meaningful progress in the South African telecommunication market. We are applying the lessons learned from this deployment to other OEM relationships currently under development and expect continued progress in this segment over the coming quarters. A third initiative implemented during the quarter was the continued evolution of our direct sales organization focused on Fortune 500 customers.

Our experience with distributors, OEMs and large direct customers has reinforced that our sales organization must effectively serve all 3 channels while addressing the unique requirements of each customer. We believe the changes made during the quarter better position our sales team to shorten the sales cycle, broaden the sales funnel and improve execution as we enter into the new fiscal year in October. We remain committed to the land and expand strategy. Our approach is to secure the initial deployment at one customer site, validate the AZT Protect performs as expected within the customer's existing cybersecurity infrastructure and then deployment across additional sites.

This expansion phase has taken longer than anticipated, largely because of the evolving stakeholders' alignment and internal review process. But we believe our enhanced sales organization will help accelerate expansion by engaging higher decision-makers within customers' organization. Changes within the customer organization often require us to rebuild momentum.

While some customers seek additional validation before approving broader deployment, in other cases, IT organizations initially believe their existing infrastructure adequately protects OT environments when expansion opportunities become larger enterprise projects. This creates an opportunity for us to educate customers on the unique security requirements of operational technology. The data we've collected from existing deployments, combined with strong customer references has enabled us to build compelling business case, demonstrating why AZT Protect is a better solution for OT environments. While these dynamics are a natural part of selling into complex and evolving markets, we believe we are becoming increasingly effective at influencing the customer's decision.

We made solid progress with AZT Protect during the third quarter by signing new customers and expanding deployments within existing accounts. In addition, we achieved 100% renewal rate on all customer sites reaching their 1-year renewal period. We have also advanced into final stages of the selection process within several major corporations, demanding continued continues to be supported by the growing number of cyberattacks disrupting operations worldwide as well as increased awareness of AI-driven threats and so-called friendly fire incidents generated by internal systems.

Traditionally, cybersecurity solutions rely heavily on continuous patching, which is often impractical in OT environments. Friendly fire incidents where IT inadvertently sends faulty updates into production environments can be just as disruptive as an external attack. AZT Protect prevents these production disruptions while eliminating the need for ongoing OT application security patching.

To date, no AZT Protect customer has experienced a breach. We have also developed an extensive catalog of AI-driven exploits emerging through 2026 that AZT Protect is designed to stop. One highly publicized example was the OpenAI ChatGPT-related attack involving Hugging Face. Based on the publicly available information, we believe AZT would have prevented the attack, and we have publicly shared those findings. We continue to believe AZT Protect has little effective competition in defending against these emerging AI attacks while eliminating the need for code level security patching in OT environments.

We remain intensely focused on expanding our sales opportunities as we enter the new fiscal year. Turning to our Technology Solutions business. It once again served as our primary revenue generator despite ongoing hardware shipment delays. Our offering continues to improve the efficiency and effectiveness of our customers' IT investment across networking, wireless, mobility, unified communication, data center infrastructure and advanced cybersecurity. Our managed cloud and managed service practice continues to grow at a healthy pace. We continue to benefit from the ongoing migration to the cloud and the increasing demand for managed operational support after those migrations are complete.

A key driver remains the growing complexity of cloud environments and the unique requirements of enterprise customers. During the quarter, we entered the professional sports market with the signing of a 6-year 7-figure managed service agreement with a nationally recognized sports team. We expect to issue a joint press release in the coming weeks. We also signed a 3-year managed service agreement with a food distribution customer expecting to generate mid-6 figures annual recurring revenue.

Looking ahead, we believe our best-in-class service organization, exceptional high customer retention and continued adoption of cloud-based service will drive further service growth and support continued gross margin expansion. During the quarter, service gross margin increased 1.3% compared to the prior year period. While we recognize there is still work to do before fully realizing the value of our award-winning product and customer service, we have made significant organizational improvements that position us well for the continued growth. With that, I'll turn the call over to Gary to discuss our financial results in more detail.

Thanks, Victor. For the third quarter ended June 30, 2026, we generated $14.4 million in revenue compared to $15.4 million for the third quarter ended June 30, 2025. Product revenue was $9.9 million compared to $10.2 million for the prior fiscal year third quarter. Service revenue for the quarter was $4.5 million compared to $5.3 million in the prior year, reflecting the vendor delays issue mentioned earlier. Gross profit for the quarter was $4.3 million compared to $4.5 million for the same prior year period.

Gross margin for the third quarter grew by more than 100 basis points to 30.1% of sales compared to the year ago fiscal third quarter. Gross margin was 28.8% for the sales in the prior year's third quarter. Gross margin realized from product revenue for the quarter was 20.7% compared to 15.7% for the third quarter of fiscal 2025, while gross margin realized for service was 51.2% as compared to 53.9% for the year ago quarter. Research and development expenses increased 5% to $832,000 compared to $791,000 for the same prior year quarter as we supported customization of the AZT Protect deployments and OEM embedded developments.

Sales and general administrative expenses for the fiscal third quarter increased 3% to $5 million from $4.9 million a year ago fiscal third quarter. The company grew other income during the quarter by 58.7% due to the increase in physical transactions with customers. During the third quarter, we recorded several expenses, including an increase in variable compensation to the TS division and costs related to the buyout sale of the U.K. pension, which increased our operating loss for the quarter to $1.5 million from $1.2 million in the prior fiscal third quarter.

With the other income earned on our net -- our net loss was $846,000 or $0.09 per share of common for the third fiscal quarter compared to a net loss of $264,000 or $0.03 per share of common in the prior year's third quarter. Our strong balance sheet continues to provide us with resources to finance customer purchases. And as of June 30, 2026, we extended terms on over 20 transactions. We finished the quarter with cash and cash equivalents of $24.7 million, and the balance sheet continues to provide us with the necessary resources to execute our growth strategies for the managed service business and the AZT Protect product offering as well as paying a dividend of $0.03 per share, and we repurchased approximately 13,000 shares of common stock during the quarter.

Turning to our results for the 9 months of fiscal 2026. Revenue was $42.4 million compared to $44.3 million in the same period the prior year. Gross profit for fiscal 9 months ended June 30, 2026, was $13.5 million or 31.9% of sales compared to $13.2 million and 29.9% of sales. The company generated $1.4 million on other income and realized a tax benefit of $654,000 during the first 9 months of fiscal 2026.

During the same period of fiscal 2025, the company generated $1.1 million in other income and realized a tax benefit of $1.5 million. The company's net loss for the 9 months of fiscal 2026 was $491,000 or $0.05 per common share as compared to a net income of $100,000 or $0.01 per diluted common share for the comparable period during fiscal 2025. Lastly, the Board of Directors approved a dividend of $0.03 per share of common to be paid on September 15, 2026, to shareholders of record on August 28, 2026. We will now take your questions.

Your first question is coming from Joseph Nerges with Segin Investments.

Let me dive in on the OEM direction you're going. I'm assuming that Chronos would be the one OEM you're talking about currently, right?

Unknown Speaker

And then...

Yes, there's other ones that we're in the process of working with also.

Okay. And is there an OEM -- were you referring to an OEM in the Internet of Things, IoT, we're dealing with an OEM in that respect in that area?

Unknown Speaker

Or plan.

Well, it's all in that area. There's a couple of OEMs we're dealing with where they make boxes, and we're trying to get integrated on their platform. There's other OEMs in South Africa that they make other equipment, which I can't mention right at this second, but they make certain equipment, which, again, we're trying to get embedded on their product. So as soon as the product goes out the door, we're there. And then we just turn up the license and do a true-up every month or every quarter.

Any additional OEMs in the U.S.?

Yes. There's 3 other OEMs in the U.S. right now we're talking with at different stages.

Okay. And I have one other question on that is we announced the Cronos deal, it goes back to I looked at -- the history September last year. And you mentioned it in the call about the length of it's taking to embed these things. Do we envision that same length on these other deals? I mean, I could see a year seems like a long time, almost a year. And are we hoping that we could shorten that process?

It's not us, Joe. It's never us. It's always them, to be honest with you. They are larger organizations that truly move at a slower pace just due to the fact, I guess, the pure size sign-off and various things. It's never us. We're always there quickly. We're always waiting, let's put it that way. And there's nothing else, I think that we could possibly do to speed these large, large multibillion-dollar companies to move faster. And because of our size, it's hard to move these guys. I can promise you, we do stay on top of it constantly every week, maybe multiple times a week to try to move things along as fast as possible. It's with the Cronus.

Some of it out of our control.

95% of it is out of our control. Anything we can control, we have a plan, we have a time line, and we try to meet it.

Just one other thing, and this goes to another point, the Hugging Face attack, the press release on Monday. I don't think some people realize we do have a -- how can I say it, we have a partnership that we have not announced that I know of with a very large partner that deals quite heavily with the federal government. This partner also from my research has an embedded cybersecurity lab in their thing. I'm just wondering, I'm sure the federal government is really high up on these hacks, I'll call it, cyber attacks by software no less. And I'm just wondering, have we talked to this partner as far as getting a test with the government somehow?

Again, I know who you're talking about, which I can't mention, but we do talk to them. We have standard calls every 2 weeks. And again, because of their size, we have to move at their pace. But -- and what they tell us is minimum of what goes on between them and the government directly. I have no idea, Joe, to be honest with you.

I know. But finally, we have something that might appeal, let's put it that way, if nothing else, to somebody at the government level. That's all I'm saying if you can finally get to their the bureaucracy, the logical.

I think that's why we just put that out just to let everyone know compared to some of the other products that are out there that are not stopping these various viruses or attacks coming from different -- the way our technology is made, we're made to stop these things, right? So I think that was more of an educational press release just for either people looking at a product or the confidence of different customers already using the product. So...

I'm going to extend one more question. Just a lot of attacks in the last couple of weeks with the utilities, the water utilities, wastewater utilities. Have we had -- I mean, we've got 2 partners, UFT. And I see recently, we signed another partner was at CITCO in that. Have we gotten any feedback from those guys in the last couple of weeks? I mean, what's happening in that area as far as updating some of the customers looking to do some updates opportunity-wise?

Yes. We have a standing call with UFT. CITCO is a newer company that we signed up. So that relationship is still working. But we have a good long-term relationship with UFT because not only are they a cloud customer of ours, that's how the relationship started probably back 4 or 5 years ago because of TESCO, one of the companies they own that concentrates on the water and waste and water plants, that's how they became a reseller for the product. Again, because of their size, they have a process and the process is, a, get through legal; two, which takes forever. Second stage was get it into their lab, which took a while also. And then they wanted 3 customers of theirs to use the product for a period of time. So before they pushed it out or presented it to all their customers that they had confidence that AZT would work in like different products, whether Siemens, Emerson, you name it, Honeywell and different environments. So when they put their name on it because their goal is to sell it as a product and service directly from their sales team that they had confidence that it would represent them correctly. And so that has taken probably we're in about 9 months now. We will be announcing some new things that I won't tell you right now, but you'll see them in the next 2 or 3 weeks, some things that we'll be doing together.

Your next question is coming from Will Lauber with Visionary Wealth Advisors.

Yes. Victor, if you can kind of expand a little bit on -- I'm not quite sure I understand the sales force new strategy. I noticed, I guess, from LinkedIn that a number of the salespeople that were last year are no longer with you guys. And if you can kind of explain kind of just developments in the sales force and what the new strategy is in a little bit more detail.

Yes, it's not a new strategy. We just -- it's -- because of the sales cycle due to individual financial everyone has their own financial capacity of how long they can wait for a sale to close. We needed to kind of get into some salespeople that were used to a longer sales cycle that came from the marketplace, and that's kind of what we just ended up replacing 3 out of the 4 salespeople already that left the organization. Yes. And one of them is already up and running, one started this week, one starts next week. Yes. And we're still focused on the OEM. It's a specific business. We're working through all the resellers as we normally have, but we're also putting a heavy emphasis of us as an Aria talking to the customers directly to try to move this along as fast as possible. It's not always easy for the resellers to give us the contact info. But as time goes on, the trust builds. So they know that we're going to treat that customer with white glove service.

Okay. So would it be safe to say that, I guess, the sales force is going to be more compensated on commission rather than salary? Or how is that?

I'd rather not -- if we want to have a sidebar on that, we can talk about that in this audience.

Okay. And then if I could just get a little bit -- when you had mentioned the 18- to 24-month sales cycle, is that because the customers are in current contracts with other cybersecurity contracts and they -- that's when it expires? Or is it something that with the big companies, it just takes that long for them to kind of test it and go through everything? Or what's kind of the driver of that long sales cycle?

It's a combination of both, I would say. It's not -- it could be one or the other one is coming up for renewal or sometimes the Windows 10 is -- that's a big push where some of the -- our competitor products are not supporting any longer. So that would drive them to look. And then it's -- a lot of it's political, to be honest with you. You got the OT guys who love it, want to move fast and then you got IT folks who have to go because it's their budget, they bring it into the lab, they take their time. They got to go through. It just -- there's no rhyme of reason. We do know now for sure that if it comes from IT, we have to engage with them immediately because they -- if they have the purse strings, they are making the ultimate decision. Even if the OT guys love it, if they don't control the budget, they're not making -- they can influence the sale, but they won't make the ultimate decision on that. So some lessons learned over the last year or so on how these larger organizations and the political piece of it kind of rolls out. So yes, I just kind of gave an 18 to 24. We have closed some other business that took a lot shorter. Wastewater, we closed some businesses that took 6 weeks, right? So -- but the large $700,000 million deals, it's -- I would say it could take 12 months to 24, somewhere in that range. If I can do anything to show on that, you can believe that I'm trying.

Okay. And with the Cronos, I know that they had held at least 2 joint webinars with you all. And I guess that was even before that the product was integrated into their system. Have you gotten any indication as to what kind of interest that they're seeing from their customers?

Yes. We kind of had to put everything kind of on hold, to be honest with you, just because there was no way for the sales team to sell it, right? They were getting products integrated into their system takes quite a bit of time. It's just a process they have because it touches multiple systems, and it's a process. So not only do we have to do -- they did significant testing with it, they also had to get it integrated. So they'll be able to sell it not just in the U.S. but all over the world. So what that's going to look like, we're going to have to reengage with the sales team, the renewal team, we're going to have to kick start it up again, but the VPs of sales said, until this is fully integrated and all the SKUs are available, you need to kind of slow your role, and that's kind of where we're at right now. So promises of October -- by October 1, everything should be integrated, and then we'll go full steam ahead trying to educate the sales team, get the renewal team on board and push it out.

Your next question is coming from Mike Price.

I'm just -- can you give us an idea of what the completed product integration with the Cronos software means when it's totally rolled out in terms of revenue? What are we going to see from that?

I have no idea yet.

Okay. And can you tell us how much of the -- I haven't seen the 10-Q. How much of the receivables are being financed, both short and long term?

The probably -- well, I've broken out on -- it's probably about 30% or 40% longer term.

And the dollar amount? I mean last quarter, it was 7.7% and 8.6% over a year.

Yes. And let's see. Right now, it's 8.3.

On the longer -- over a year?

Yes.

So effectively, the receivables that are financed are going to become cash. Is that correct? So you have cash and receivables that are being financed equivalent to about $40 million.

Ash if you add those together, yes. Exactly.

Okay. I mean just trying to get an idea of the company where you have cash and receivables that are being financed at $40 million, and we're looking at less than an $80 million market cap. Can you give us -- can you tell us how many shares were repurchased last quarter? 13,000.

Yes.

Okay. Is the intent still to buy shares, especially at this price?

Absolutely.

Okay. And my final question is, we appreciate the press releases about OpenAI's attack on hugging face could have been prevented. And going back 1.5 years, what happened with CrowdStrike and the fact that the old Microsoft operating systems, anybody using it can be protected. And these are great talking points, and you said it's hard to move the needle on billion-dollar or multibillion-dollar companies. The market has to be aware of AZT and what it can do. And having 100% retention is really saying something for the product. Is there not somebody out there that CSPI can partner with that can move the needle on these multibillion-dollar companies faster than what we've seen? That's what...

Yes. We're trying to do that, Mike. That's why we're working with the Rexel Datacoms of the world, the CEDs, the SonoPars. -- because of the relationship they have, that's why we're leveraging those resellers to try to get them to walk us in as one of their premier partners. And that trust -- when talking to the salespeople, Mike, they're like, okay, well, I know Aria, I know you guys are set up. I know you checked all the boxes, but this is my best customer, right? I'm a little nervous that if I walk you in, so you have to build trust with that salesperson. And that doesn't take one drink on a Friday night. It takes time. They only have 4 or 5 customers each. So it's getting them to walk us into the large enterprise hand-in-hand. that takes some time. And that's kind of why we're working with these folks is so we can use their reputation because they've been doing business with these companies. But it's still a process because they're like, okay, we get to the table, and I don't want to share who we're talking to right now, but there's a lot of large -- our pipeline has grown tremendously from quarter-to-quarter with real companies with real budgets. So I think we did -- the team did a great job even turning the sales team over. They did a really good job. This gentleman, George has been with us now for 6 months. He did a really good job picking it up and keeping the ball moving on some of these large opportunities. The South African stuff, I was on a call with them, too. There's a lot of -- there's probably 15 really, really good opportunities that we've been working with for 6, 7 months now. So the -- when I started into this side of it, Mike, I had no idea it was going to take this long because the world of IT does not take this long. But the OT world, it just does. So we're trying to leverage every partner we have, every resource we have to try to build that report with the end user. But there is a process that they go through. It goes in multiple labs. It has to be working for 90 days. And then it goes through a purchasing process potentially. And they were looking at -- when they look at AZT, they look at other products along with it, 5 or 6 or 7 other products. There's one I mentioned in the script that we're down to 2. There was 15 different options they were looking at. It's -- and then when I want to say this is 18 months in the making, it's 18 months and we're down to 2. Hopefully, at the end of the day, we're the ones that they choose. And it's a big, big opportunity.

Well, it just seems like Aria and AZT should be household names. And the expectation is if it catches fire, it will catch fire, and we'll see exponential growth and then everybody is happy. But it's -- like you said, it just seems to be taking forever. So it's very frustrating from an investor standpoint.

Your next question is coming from Brett Davidson with Investletter.

I just got a couple of quick questions here. The router ban by the U.S. government, the foreign-made routers, is that impacting the delivery of product?

Not for us, no. These are just the name brands that are all U.S.-based. It's just with all the AI build-out, it's it's every -- memory hard drives, processors, everything is just taking a long time. It's on the average around 200 days right now compared to 30 to 60. And we just keep closing the business and the funnel just keep going. And when it gets released, we'll just keep processing it. That's all we can do. We don't make the product, so I have no control of when we get it.

Is this going to -- I mean, is this going to -- and again, I realize you're talking about third parties, but what do you anticipate the resolution of this looking like? Are you going to get caught up over the next 6 months? Or is this going to dribble in the delay is just going to be extended continuously, maybe not expanding, but it's going to be a constant struggle for the next 6 months, a year to get your hands on this material. Any insight at all?

I would say it's probably at least a year of this. I don't have a crystal ball, and they may have better, but they're not giving us any -- as long as the big boys keep buying all the product out there, this is not going to go away anytime soon. I don't want to guarantee that, but that's the feeling right now. It's going to take some time for this to flush out.

I'm sure you've seen the spend numbers, but I mean, trying to remember which one it was, spent $800 billion this past quarter, $200 billion from Google, those numbers aren't sustainable. So I'm thinking maybe in the next year, yes, this is going to start to resolve itself.

Yes. Someday this will wash out, but I don't know exactly when. My goal is to keep building the recurring revenue business on the MSP, the cloud business and AZT, -- those 3 things that I can kind of control, and that's what we're focused on. The hardware, software side of it is definitely -- it's a significant part of the business, and it pays a lot of bills, right, but that's the part that I don't have any control of.

And this impacted the gross margin, hold back on you getting hold of inventory?

It held back not -- well, the gross profit, right, because we weren't able to recognize revenue, which that's kind of why a big piece of why I think we were off on the quarter is just our backlog increased by what was 63% or something like that?

65%, yes. You do have a follow-up question from Joseph Norges with Segren Investments.

Yes. Just one more question. Gary, you mentioned that we're out of that with the U.K. now with their Pension system. Is that it? We bought off the...

No, we sold it to...

Okay. And what did that hit -- how much did that cost us in the quarter? A couple of hundred thousand? What was the?

Yes, it was the actuarial legal costs came through and it was a couple of hundred thousand.

Okay. So we have no more problem with -- we're finished with that long-term pension because obviously, the German operation was sold a long time ago, and the U.S. operation doesn't have that same -- we don't have that with our...

No, we have the life insurance that funds that indirectly. It's not part of the -- but our pensions that we have in the company are funded through that. That's the cash surrender value on the balance sheet.

There are no additional questions in queue at this time. I would now like to turn the floor back over to Victor Dellovo for closing remarks.

Thank you, everyone, for joining us today. We're continuing to work towards maximizing our opportunities for the remainder of fiscal 2026 and fiscal 2027, both on the service side of our business as well as with AZT Protect, and we look forward to reporting our progress with you. In the meantime, thank you to our shareholders for their support, to our team for their dedication and effort, and we wish everyone a good remainder of their day. Goodbye for now.

Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Good day, everyone. Welcome to CSPi's Second Quarter Fiscal Year 2026 Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Michael Polyviou. The floor is yours.

Hello, everyone, and Kelly, thank you for joining us to review CSPi's financial results for the fiscal 2026 second quarter, which ended on March 31, 2026, as well as recent operating developments.

Today with me on the call 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'll then open the call for questions. [Operator Instructions]

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 those 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 meant 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 the projections upon which the segment and the 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 report on Form 10-Q 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 the call over to Victor Dellovo, Chief Executive Officer. Victor, please go ahead.

Thank you, Michael, and good morning, everyone. CSPi returned to growth during our fiscal second quarter as our product sales grew 30% and our service business grew 7% over the prior fiscal year quarter.

Our top line growth and bottom line improvement was driven by our U.S. Technology Solutions business and some large customer purchase orders. We did see a real pickup in the AZT PROTECT orders during the quarter with more than 10 of what we call land and expand orders with new customers.

This was double the amount of AZT PROTECT orders we signed in Q2 2025. Typically, these orders are used as a test at a single site by customer to make sure AZT PROTECT meets our claims and works within the customer's existing cybersecurity infrastructure, which I am happy to report has been the case every time.

Then our team goes to work to expand our relationship with the customer through deployment at other sites. This phase of the process has taken longer than anticipated, largely due to evolving stakeholders' alignment and internal review requirements.

For example, change within customer teams often require us to reengage and reestablish momentum, while some organizations seek additional validation from initial deployment sites. In other cases, IT teams initially assess the existing infrastructure, addresses OT security needs, creating an opportunity for us to provide further education on a distinct requirements of the OT environments.

We view these dynamics as a natural part of the sales cycle in a complex and evolving market, and they continue to present opportunities for deeper engagement and long-term value creation. We are, however, making progress within the land and expand strategy. For example, AZT PROTECT is now deployed at the fourth plant in a major raw material manufacturer.

We have to approach each plant separately, but with AZT PROTECT's track record, it is taking less and less time to add each site. We are seeing similar expansion at other customers where we deployed at a single site in 2025 and now slowly expanding to additional sites within the organizations. Our most exciting AZT PROTECT land and expand relationship to date was signed in April. It is a 3-year agreement for more than 2 dozen U.S. sites of a global cement manufacturer.

The 6-figure annual revenue value of this contract will be recorded in the fiscal third quarter. This agreement took approximately 13 months to get across the finish line, but now puts us in a position to pursue the manufacturer's other sites, which number more than 100 around the world.

In late March, we entered into an agreement with a leader in the cloud-based commercial content automation service to deploy AZT and our ARIA ADR across the company's production infrastructure. And in early March, we deployed AZT PROTECT at a leading pet food producer.

These are examples of how we are consistently evolving our approach to the OT market to shrink time between the initial land and expand. What's helped our effort in the growing awareness by the market of the increasingly threats generated by AI and the so-called friendly fire attacks generated by internal sources.

Cybersecurity solutions tend to use patches to address cybersecurity threats, but continuous patches are largely ineffective in the OT operating realm. In a friendly fire attack, IT mistakenly sends a faulty update to manufacturing, which can be even more devastating than the attacks impact to OT production. With AZT PROTECT, no patches are needed and to date, no breaches has occurred.

At the same time, we continue to pursue strategic OEM relationships, most notably with Acronis as they work to embed AZT PROTECT into their platform. While these integrations require time to mature, they represent highly scalable opportunities with substantial long-term potential, and we are hoping to begin generating revenue from the Acronis relationship by the end of the current fiscal year.

AZT PROTECT continues to have little in the way of effective competition. However, the unique procurement process and development criteria for each customer and even each site within the customer has resulted in various timing delays.

Our team is relentless when it comes to realizing the AZT PROTECT opportunity, and we continue to work through each challenge as it occurs. And we are moving -- we are definitely moving the needle. After a month into the fiscal third quarter, we are encouraged by the progress we are making with the AZT PROTECT deployments.

During the second quarter, once again, the Technology Solutions business was the primary generator of our top line growth. Our offerings increased the efficiency and effectiveness of our customers' IT investment in network, wireless and mobility, unified communication and collaboration, data center and advanced technology security.

Our managed -- cloud and managed service practice continued to perform well and grew 11% over last year's comparable period. We continue to benefit from the ever-expanding business and organizational migration to the cloud and the increasing trends for enterprises of all sizes to acquire operations support required once the migration is complete.

A primary factor behind this market driver is the growing complexity of the cloud and the unique and specific needs of each enterprise. In Q1, we signed a new MSP customer that was generating nearly 6 figures in monthly revenue that commenced during the second quarter. And as we mentioned in the press release a week ago, one of the top 15 landscaping companies in the U.S. is engaging us to provide comprehensive managed services.

As we look out over the remainder of the year, we believe our Service segment momentum can continue. Meanwhile, based on our best-in-class services, our customer retention rate remains extremely high, contributing to our expanding gross margins in the Service segment.

During the quarter, service gross margins increased more than 100 basis points over the last year's comparable period. Overall, our fiscal second quarter results reinforce our confidence in the fiscal 2026 is shaping up to be a growth year for CSPi.

After being in the market with AZT PROTECT for just a short amount of time, we have gained more than 60 unique customers, some of whom as I noted earlier, have multisite installations underway and additional expansion opportunities. These customers span a broad range of verticals, including steel, energy, manufacturing, water, utilities, pharmaceuticals, food and telecommunication.

At the same time, we are dedicated to maintain momentum in our service business, and we are pleased with the margin expansion realized from these operations during the quarter, as well as the profitability we achieved during the quarter. Overall, we are hopeful of sustained top and bottom line growth during the second half of the year and generating full fiscal year growth over the last year.

With that, I will turn the call over to Gary to discuss our recent financial results in more detail. Gary?

Thanks, Victor. For the fiscal second quarter ended March 31, 2026, we generated [ $6 million ] in revenue compared to $13.1 million for the second quarter ended March 31, 2025.

Product revenue grew 30% over last year's quarter to $11.1 million, with the growth primarily attributed to a large onetime purchase order completed for a customer. Service revenue for the period grew 6.6% to $4.9 million. Gross profit for the quarter increased to $4.5 million compared to $4.2 million for the same prior year period. Gross margin for the fiscal second quarter was 28% of sales compared to the year ago fiscal second quarter gross margin of 32% of sales.

Gross margin realized from product revenue for the quarter was 15% versus 18% for the second quarter of fiscal 2025, while gross margin realized for the service revenue was 57% as compared to 55% for the year ago quarter. Research and development expenses increased 7% to $818,000 compared to $763,000 for the same period year quarter as we supported the customization of AZT PROTECT deployments and OEM embedded developments.

Selling, general and administrative expenses for the fiscal second quarter increased 2% to $4.5 million from $4.4 million for the year ago fiscal second quarter. The company grew interest income during the quarter by 27.9% due to the increase in financing transactions with customers. We recorded a tax benefit of $568,000, primarily from excess tax benefit from restricted stock awards vested during the second quarter, enabling the company to report net income of $264,000 or $0.03 per share for the fiscal second quarter compared to a net loss of $108,000 or $0.01 per common share for the prior fiscal second quarter.

Our strong balance sheet offered us the opportunity to finance customer purchase orders. And as of March 31, 2026, we extended terms on over 30 transactions. We finished the quarter with cash and cash equivalents of $23.1 million, and the balance sheet continues to provide us the necessary resources to execute our growth strategies for the managed service and the AZT PROTECT products, offering us as well as paying a dividend of $0.03 per share on June 15, 2026, to shareholders of record on May 21, 2026, and we purchased 15,510 shares of common stock.

Turning to our results for the first 6 months of fiscal 2026. Revenue was $28 million compared to revenue of $28.8 million for the same prior year period. Gross profit for fiscal 6-month period ended March 31, 2026, was $9.2 million or 33% of sales compared to $8.8 million or 30% of sales. Benefiting from the fiscal second quarter tax benefit, the company reported net income of $355,000 or $0.04 per share of common in fiscal 6 months ended March 31, 2026, compared with the net income of $364,000 or $0.04 per share for the 6-month period ended March 31, 2025. With that, I will turn it over to the operator for your questions.

[Operator Instructions] Your first question is coming from Mike Price.

I know you just awarded shares, Victor, 35,000 shares, but nothing shows more confidence, especially with the growth prospects that you have when you actually buy shares. And I know the dividend isn't payable until June 15, but there's plenty of cash. It seems like Joe Nerges is the only one that has confidence in the company to continue to buy shares. Any thoughts?

Yes. No, not really. If I think at one time, I would like to purchase it, I will. I definitely have confidence in what we're doing. I have not sold anything in many, many years. So I think that shows the confidence level that I have with the organization and where we're going.

We will send a message, though, if you actually buy shares. So consider it.

Your next question is coming from Joseph Nerges with Segren Investments.

Let's elaborate a little bit on the cement company. You said in the press release that we've installed AZT in over 2 dozen plants currently in the U.S. And I think you also mentioned on the call that worldwide, you -- what is the opportunity? Over 100 plants if it expands beyond the U.S. Now is the U.S. -- by the way, is the U.S. fully deployed? With the plants? Or do they have more plants to deploy here, too?

No, that was just the first phase. So there's potential for growth in the U.S., but the big growth is a sister company of theirs that has plants outside the U.S. that we're in talks with right now, and there is over 100 plants.

Okay. So I just wanted to clarify. And I have a follow-up, let me just get into the press release you guys did on the cement company. I think it was pretty -- the bullet points you made were great. And a couple of points that we didn't know in the past that we've talked about, especially is the savings that the customers are accruing because they've installed AZT. You mentioned $1,000 per plant savings. And can you elaborate on where that -- where the savings are coming from?

It's just the -- from talking to some of these companies that they're just saying that they're reducing the patching spend and preserving the life of their assets. So that's what they're just estimating that extending these assets for a period of time, a year or 2 or 3 would be -- just on the average would be saving close to $1,000 per plant per month.

So it's pretty significant when you look at if they can extend it for another 12 to 24 months of these units and then there's less downtime because taking out a whole system and putting a new one is not something you do 24 to 48 hours.

It takes a lot of time, effort and planning. And that means that machine is down. And as it -- when those machines shut off, they're not making money for the organization. So those are just some cost numbers that came from some of the talks we had with different companies that we're talking to. And I'm guessing every company might have a different number. But based on the one that we were just talking to, that's what they're estimating.

Just -- and also in the press release, you mentioned requirements. I guess are these industry requirements or government requirements that you're talking about with the [indiscernible] are they -- are these -- where are these requirements being deployed? I mean how -- who's coming up with these requirements?

Yes. Sometimes the industry requirements, sometimes the government requirements. It just depends.

Okay. And what -- the point -- the question basically is that you said some of the competitors cannot meet these requirements. And it looks like it's coming from the fact that their software is too comprehensive to meet some of these endpoints or to protect the endpoint.

Well, they're not investing some of the older versions of the software that are out there to meet those requirements. The new stuff, of course, they're moving forward with, but some of the stuff that Windows 7, Windows 10, they're choosing not to continue supporting that.

Okay. And then the -- just I guess this ties into it to some extent. You mentioned the lightweight, the fact that we take less memory and less core. And I guess some of the competitors take much more for cybersecurity software. And in this case, they can't meet requirements because the software is too comprehensive, the competitor software to solve the problem.

Yes. The older versions of software, once you start putting like the Windows XP, you start loading just there -- we're lightweight, right, because there's not a lot of CPU being used with that.

And when you have an old XP system, there's not a lot of extra memory or CPU that's just sitting there and not being used. And as a new software for some of these other organizations, it's CPU intensive. And we were able to keep it 1% to 2% utilization on the CPU and the memory is like 16 meg. It's very, very small. I have mentioned that in the last, I think, 3 or 4 conference calls.

So basically, a lot of competition is excluded because they really can't with their current software not...

It's just -- they're choosing to -- that's their go-to-market strategy, what they're choosing to support and not to support every organization, I guess they're looking at the overall market and what makes sense to them.

And a lot of the software that they're doing is -- it's on the network side, not so much on the endpoint side. We're very focused on the OT only, right, where some of the big players that are out there are focused on the IT side of it.

Your next question is coming from Will Lauber with Visionary Wealth Advisors.

Yes. Victor, I noticed you guys have a number of new Board members. Can you -- I know it's early on, but can you give kind of a quick review of what they're bringing to the table? Is it some new ideas or just kind of what they're adding to the Board?

Sure. Jim has been in the OT world his whole life. We worked with him at [indiscernible] Pharmaceutical that evaluated our products, saw the value in it. He has a lot of contacts. He's very well known in the industry with a lot of the manufacturers of the world, the Emerson, the Siemens, the Honeywell, he has a lot of contacts and his reputation being in the OT industry is second to none.

So he's very, very familiar with the AZT product, the development, the testing, where the value is. He's done a webinar with us. If some of you guys had attended that, probably a year ago or so. I'm not sure exactly of the date. So yes, he's definitely -- he knows the OT space. We're consulting with them on where we should go, the market strategy and then just a testimonial on how much he believes in the product that he was able to join our Board.

Okay. And then on the land and expand, is it like budget issues by plant? Or is it contract issues that they might have a contract that goes on for another year or 2? Or what's kind of driving that?

No, it's just getting inside. And what we're -- the way we do things is quite different with no patching. People, they want to see it work, right? It's definitely a different methodology compared to everyone else. It's kind of -- as they say, it sounds like magic.

So we definitely have to go through the testing inside the organization. And if we could get one individual to basically back us up, go through the testing, get it into their lab, get all the applications loaded, go through the whole process with the big steel plant. That's kind of the way we did it.

The same thing with the big cement. You get someone who definitely believes in the product, and it's easier to position it throughout the organization. And as I mentioned, I think, on the last call, IT is definitely getting more and more involved. So being able to support our vision on how we can help them has helped us convince the IT folks that we can work side by side with some of the other big endpoint protection products that you're familiar with like the CrowdStrikes of the world or whatever that it's focused mainly on the IT side of the house that we complement them. We don't really compete with them.

Okay. So out of all these places where you've landed, if you were able to get, say, 50% of all those different sites, does that make ARIA profitable or breakeven at that point?

It'd be in the right direction. It would be in the right direction. Yes.

Okay. And then on the cement producer deal, if I've identified it correctly and if you've done 2 dozen sites, you've probably gone over the number of their cement producing sites. So I assume you guys are probably doing some of their aggregate sites as well. Is that correct?

Yes. The ones that were under a particular budget, those are the ones we targeted. So we -- instead of going one by one, we like what we have to do with the steel plant because its budgets are separated.

We were able to consolidate and do kind of like a master agreement to service those plants on one particular budget. So anything else there. There's an expansion in that, too. Those were the immediate systems that had older software on it that we targeted, but there's expansion inside of 20 sites, 20-some-odd sites that we have in the U.S.

And then like I said, the real big potential is if we can get outside the U.S. to those on 100-plus where there's a lot of systems out there that could be significant. And we're working with them. The good part of it is the IT folks have already seen the product.

So I'm confident one way or the other, it's not going to take another 13 months to get over the finish line one way or the other. Whether they go with us or they don't, I think we can get -- that sales process shrunk into a much shorter period of time.

Okay. And would that be the kind of an all or nothing kind of deal or quite a bit that you're not going to have to go one by one?

No. I think it will be all or nothing. I could be wrong, but I think the way they seem to want to work, it would be all or nothing. But to be honest with you it's a little too early to really give you 100% one way or the other. But my goal is to get the whole thing.

Yes. I was kind of surprised usually you guys put things pretty close to the vest, and I have to assume that the talks are pretty advanced for you guys to put that out publicly. So...

Yes. Like I said, I kind of try to fill you in on as much as I can. Like I said, there's no guarantee on the other sites, but we are in talks. But at least we got the first U.S.-based ones under our belt already.

Your next question is coming from Brett Davidson.

All right. I'm going to use you guys as a conduit here and correct me if I'm wrong, but the AZT products are less resource-intensive than some of the competitors' more robust products targeting current hardware, whereas the older hardware has less resources available, so making AZT an option because it's less resource intensive. Is that accurate?

That's accurate.

All right. The question I have is regarding a statement in the release that says we continue to work with our strategic partners and distributors on additional multisite deployments across key markets. I'm just looking for clarification on what exactly that means.

Is that the company is attempting to obtain commitments? Or is this actively working on deployments or a mix of both?

It's a mixture of both, right? We're working with the distributors that I have mentioned prior that there are press releases out there, the CDs, the Rexel, the [indiscernible] of the world with their end-user customers where we have sold maybe one particular site, and we're trying to expand. There's a lot of water districts that we've sold into where there's expansion probability in each and every one.

So it's -- we continue to expand with the distribution side of it to get more and more of their end user customers talking to us. And then there's also expansion inside the customers that we've already closed small land and expand deals with.

So some of these are contracts where we're actively working to deploy on multisite?

Yes. They're all -- our goal is to get in there, get it tested, get it 1 site, 2 sites working in purchase orders, right? A lot of the things that we're trying to do now is not just do a POC where we're giving it away. We're attempting to do more paid POCs where the customer is actually buying a starter kit where you get 1 trust center and, say, 5 or 10 licenses.

And so there's a commitment on both sides now that we'll help them get it up and running, but they're committed to really that it's not just kicking the tires. It's -- they're committed to a true POC.

And then we get in there and they purchase it, we install it. Hopefully, they're happy and they evangelize us either at corporate where we try to do an enterprise agreement or where we -- in some cases, we have to go to each and every site because of the way the budgets are distributed across the organization.

And what would you say is the current split of these deals coming through internal sources and through these third-party relationships, these distributors and whatnot?

We're leaning on the channel significantly right now. We're trying not to take anything direct any longer. There's always an exception, but the channel that we've built over the last 18 months, we're trying to build that relationship, whether we walk them into something or the majority is, to be honest with you, they're walking us into their customers because they have long-term relationships with them.

And how many of these types of relationships do we have currently?

Well, there's 3 major ones that we have, but there's probably another half a dozen or so smaller resellers or integrators that we have. So I would say collectively, probably 10.

And are all of them feeding deals through? Or it's -- some of the larger ones are the majority of this? Or is this distributed?

Yes, it's distributed all over the place. Some of the bigger resellers, integrators that we're talking with, we're talking to 75 reps, some better than others, some more aggressive than others. Some have better relationships than others, but those are the relationships that we've been trying to build over the last year plus is getting who is CSPi inside their organization, what our value is and how easy our product is to position and there is a value to separate them from the rest of the world. That's the messaging we're trying to work with these folks, going on to small little shows in different areas of the country where they bring in 5 or 10 different customers, and we just do a little hour presentation to the customer and then try to build rapport.

So at this point, we got a whole bunch of folks outside the organization that are evangelizing for this product at this point.

That's correct.

[Operator Instructions] There are no further questions in queue at this time. I would now like to turn the floor back over to Victor Dellovo for closing remarks.

Thank you, everyone, for joining us today. We've made solid progress during the second quarter and are aggressively pursuing our opportunities for the remainder of fiscal 2026, both on the service side of our business as well as AZT PROTECT, and we look forward to reporting our progress with you in August.

In the meantime, thank you to our shareholders for your support, to our team for their dedication and efforts, and we wish everyone a good remainder of the day. Goodbye for now.

Thank you, everyone. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Greetings, welcome to the CSPi's First Quarter Fiscal Year 2026 Conference Call. [Operator Instructions]. Please note, this conference is being recorded.

I will now turn the conference over to your host, Michael Polyviou. You may begin.

Great. Thank you. Hello, everyone, and thank you for joining us to review CSPi's financial results for the fiscal 2026 first quarter, which ended on December 31, 2025, and as well as recent operating developments.

Today with me on the call is Vic Dellovo, 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. During the Q&A session, we ask participants to limit themselves to 1 question and 1 follow-up question then requeue if you have additional questions.

Statements made by CSPi's management on today's call regarding the company's business that are not historical facts made these forward-looking statements as those 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 met as a guarantee of future performance or results. The company cautions you that these statements reflect the 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 the projections upon which the segment 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 report on Form 10-Q 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 they're up.

With that, I'll turn the call over to Vic Dellovo, Chief Executive Officer. Victor, please go ahead.

Thank you, Michael, and good morning, everyone. As expected, our first quarter product revenue compared to prior year period reflects tough year-over-year comparables, which obscures the progress we made. We continue to make executing on CSPi's core growth strategies and building long-term shareholder value.

In the year ago quarter, we recorded approximately $4.5 million in the onetime product deal that did not repeat in fiscal Q1 2026. The resulting in the decline in total revenue. As I've emphasized on prior calls, our strategic focus is on expanding service revenue in growing our MRR base in the first quarter, service revenue driven by ongoing momentum in the technology solution and managed service practice grew 14.6%. This strength translated into a meaningful improvement in our overall gross margins which reached 39.3%.

The higher margin profile contributed to $171,000 increase in gross profit versus the prior year period. We also continue to gain traction in the market with a differentiated and award-winning AZT Protect cybersecurity solution, supported by both new customer wins and multisite expansion with existing customers. Overall, our fiscal first quarter results reinforce our confidence that fiscal 2026 is shaping up to be a growth year for CSPi.

The Technology Solutions business continues to lead our progress. Our offerings increase the efficiency and effectiveness of our customers' IT investments in networking, wireless mobility, unified communication and collaboration, data center is in advanced technology security. And while all our TS services are performing to plan, our managed cloud and managed service products continue to excel. We are benefiting from the ever-expanding business and organizational migration to the cloud and the increased trends for enterprise of all sizes to acquire operation support required once the migration is complete.

A primary factor behind this market driver is the growing complexity of the cloud in the unique and specific needs of each enterprise. Microsoft, through its Azure offering, is considered to be the market leader in this space. And our MSP practice is a platinum partner with the company. During our last call with you in December, we mentioned the increased investments we were making in the managed service practice. We have already begun to generate returns from the investment through the signing of new customers.

In Q1, we signed new MSP customers that will generate nearly 6 figures in monthly revenue commencing this quarter. this traction has continued into the second fiscal quarter as we look forward -- look over the remainder of the year. We believe our service segment momentum can continue.

Meanwhile, based on our best-in-class services, our customers' retention rate remains extremely high, contributing to expanding our gross margins in the Service segment. We also achieved meaningful traction with our AZT Protect product suite in the first quarter, delivering year-over-year revenue growth while we are still progressing towards the full market opportunity for cybersecurity solutions. The quarter reflected several encouraging developments. We secured multiple new site customers for ACT and through our strategic partnership and distribution continue to expand our pipeline of prospective deployments.

Despite being in the market with the RA AZT for just over a year, we now serve over 46 unique customers, some of whom have multisite installations underway. In addition, and additional expansion opportunities. These customers span a broad range of verticals, including steel, energy, manufacturing, water utilities, pharmaceuticals, food and telecommunication.

Importantly, many of the highest value multisite opportunities each with the potential to develop into 7-figure relationships remain ahead of us as customers advance through their respective procurement and deployment processes. We have already received approval...

Ladies and gentlemen, please standby. We'll get Victor back on the phone.

One moment, please. I still see it line connected. I will reconnect it again. One moment, please.

[Presentation]

We have Victor's line connected.

Michael, where did we leave off? I didn't realize we dropped.

Yes. Why don't we just pick up on -- well, Victor, it's probably easier if we just pick up from the beginning. If not, we could pick up on the top of Page 2. Okay. Let's talk about Technology Solutions business, yes.

Sorry about that, everyone. Our Technology Solutions business continues to lead our progress. Our offerings increased the efficiency and effectiveness of our customers' IT investments in networking, wireless, mobility, unified communication and collaboration, data centers in advanced technology security. And while all our CS services are performing to plan, our managed cloud and managed service practice continue to excel.

We are benefiting from the ever-expanding business in organizational migration to the cloud and the increasing trend for enterprises of all sizes to acquire operations support required once the migration is complete. The primary factor behind the market driver is the growing complexity of cloud and unique and specific needs of each enterprise. Microsoft through its Azure offering is considered to be the market leader in this space, and our MSP practice is a platinum partner with the company. During our last call with you in December, we mentioned the increased investment we were making in the managed service practice, and we have already begun to generate returns from that investment through the signing of new customers.

In Q1, we signed new MSP customers that will generate nearly 6-figure and monthly revenue commencing this quarter. Distraction has continued into the second fiscal quarter, and we look over the remaining of the year, and we believe our service segment momentum can continue. Meanwhile, based on our best-in-class services, our customer retention rate remains extremely high, contributing to our expanding gross margin in the service segment. We also achieved meaningful traction with our AZT Protect product suite in the first quarter, delivering year-over-year revenue growth.

While we are still progressing towards the full market opportunity for our cybersecurity solution, the quarter reflects several encouraging developments. We secured multiple new sites, initial site customers for AZT Protect and through our strategic partnership and distribution continue to expand our pipeline of prospective deployments.

Despite having been in the market with AZT with just over a year, we are now serving unique customers, some of whom have multisite installations underway and additional expansion opportunities. These customers spend a broad range of verticals including steel, energy, manufacturing, water utilities, pharmaceutical, food and telecommunication.

Importantly, many of the highest value multisite opportunities each with the potential to development to 7-figure relationships remain ahead of us as customers advance through their respective procurement and deployment process. We have already received approval to proceed at several second and third sites and our team is focused on rapid execution to demonstrate the substantial value AZT Protect delivers and preventing cyber attacks that otherwise can disrupt operations for hours, days or even weeks.

The case studies developer initial industry installations are helpful getting our target customers to understand how exposed they are to operational disasters and how AZT Protect uniquely acts to prevent such disaster. For some, they are learning of the risk as operational technology customers continue to lack effective cybersecurity protection at the level AZT Protect provides.

Unfortunately, for many, they don't realize their exposure until it's too late, and they are exposed. We continue to believe we have a strong competitive advantage in the space and believe that the market is starting to see us as a resource. The unique procurement process and development criteria for each customer previously mentioned has resulted in various timing delays, which we continue to work through. Our team is resilient and committed and we are not letting up. We continue to believe the effort will result in sizable AZT Protect sales for the fiscal year unfolds.

In addition to expanding direct pipeline, we are advancing strategic OEM relationships, most notably with the Acronis as they work to embed AZT Protect into their platform, while these integrations require time to mature, they represent highly scalable opportunities with substantial long-term potential. We also conducted our first webinar this quarter with Acronis which drew nearly 200 attendees and generate more than a dozen demo requests.

Engagement levels are strong, reinforcing our view that this go-to-market motion will be an important contributor to our long-term growth trajectory. In summary, we are off to a solid start of the fiscal year, with particularly strong performance in our service business. We believe we remain on track to deliver steady, profitable improvements throughout fiscal 2026. Supported by the infrastructure investments we have put in place to enable meaningful scale. As a result, we expect to generate substantial operating leverage as revenue grows.

With that, I will turn the call over to Gary to discuss our recent financial results in more detail. Gary?

Thanks, Victor. For the fiscal first quarter ended December 31, 2025, we generated $12 million in revenue as compared to $15.7 million for the year ago fiscal first quarter. Product revenue for the fiscal first quarter of 2025 was $6.7 million compared to product revenue of $11 million for the fiscal first quarter of 2025. Last year's revenue total for the quarter included several onetime transactions with customers totaling approximately $4.5 million and we didn't have any product orders of that magnitude in the first quarter of this year.

Service revenue for the first fiscal quarter increased 14.6% to $5.3 million from $4.7 million in the year ago fiscal first quarter. Gross profit for the fiscal first quarter was $4.7 million versus $4.6 million during the fiscal first quarter of 2025. The solid service revenue growth in mix during the quarter drove the gross profit margin increase. Gross profit margins for the first quarter was 39.3% of sales, which was slightly more than 10% higher than the gross margin for the prior fiscal first quarter of 29.1%.

Energy and development expenses increased 9.2% or $858,000 compared to the same period of prior year. as we supported the customization of the AZT Protect deployments and OEM and bedding developments. Sales in general and administrative expenses for the fiscal first quarter declined $143,000 to $4 million for the year ago first fiscal quarter. The company had increased interest income that increased 23% over the prior year on our financing deals and interest on our cash. The company recorded a tax expense of $280,000, which represented a year-to-date effective tax rate of 75.5%. The differential between the company's effective tax rate year-to-date and the U.S. statutory tax rate of 21% is primarily due to state income taxes changes in the valuation allowance maintained against certain state credits and nondeductible executive compensation.

Net income for the first quarter of fiscal year 2026 was $91,000 compared to $42,000 in the prior year period. Diluted earnings per common share was $0.01 compared to $0.05 in the prior year first quarter. As of December 31, 2025, our balance sheet remains strong with cash and cash equivalents of $24.9 million. We would also like to point out that the decrease in cash from September 30, 2025, was primarily related to several financing deals that we closed in Q1 '26, and we are to collect approximately $3.3 million from financing payments scheduled during the next 2 quarters. As we noted in the press release this morning, we will be paying a dividend of $0.03 per share on March 12 to shareholders of record of February '26.

With that, I will turn it over to the operator for your questions.

[Operator Instructions]. your first question for today is from Joseph Nerges with Segren Investments.

A quick accounting question. We keep talking about service revenue. Do we have 2 categories for service -- when you talk service revenue, are we tackling managed services? Are we talking services beyond mange services? Is there 2 categories or just 1 category for services revenue?

Yes, yes, multiple items, Joe. It's not just one.

All right. So then what are we talking about for managed service for the quarter? I think you said -- did you say $5.3 million. Is that correct?

Correct.

The managed services portion of our services revenue for the first quarter.

Well, that's the total service revenues inclusive of the TS division as well as the AZT.

We don't break it out, Joe. Joe, we don't break it out.

Okay, you're not breaking up between TS and AZT. I'm just trying to understand where -- how much of how much revenue in managed services do we have?

A lot. Yes, it's a good portion of it. I don't have that number right in front, but it's the majority.

Okay. So the majority of the $5.3 million would be the managed services portion of it. All right. Let me get past the accounting here. Let's talk about the Acronis just for a second. I noted that from the cones website, they changed their -- we're going to be rolled into a corona cyber protect. That's going to be their product, I understand. Is that correct?

It will be not just a cyber protect, it will be over all -- it will be on the front gooey. So like even when they potentially want to do a backup if the customer chooses, they can run our product to look at all the data and all the applications, making sure there's no issues before they back up the data.

Okay. So previously, they had a product called Acronis cyber backup. Now they change the name Acronis Cyberprotect. That's, as I understand, where we'll be rolled into. So are we not selling a Acronis Cyber Backup, haven't we sold that in our TS division? We have customers that are utilizing Acronis down there heavily?

Yes. Correct.

So theoretically, we can increase our AZT sales force by incorporating our sales team in Florida who sell the Acronis' backup service, which could now include AZT. You understand my question?

It's not really a statement, yes.

We're expanding the capability of the backup service for the possibility of adding AZT to it. And since we have customers, I assume, because we've been representing a number of years in our TS division, we might have a number of customers out there just in our division that have Acronis that are utilizing the backup service solely.

Okay. So in effect, we -- our sales team in Florida can expand the backup service to include AZT for those customers that want to have that protection.

Yes. If we're doing backup for a customer, you have to understand not all customers we do back up for. There are a few that we do.

Well, okay, whatever view we do could now utilize the AZT adding if they sort...

If they choose to spend the money, yes.

Yes. Okay. I'll let somebody else. I don't want to dominate the whole thing, but I'll come back for another question after other people have a chance to ask questions.

Your next question is from Mike Price, a shareholder.

With AZT being embedded in the Acronis offering, there should be some predictability. Can you give us an idea of how that translates into revenue? I mean at some point, it would be nice to have this quantified.

Yes. We haven't even fully integrated we're building the APIs. So how that rolls out, Mike. If we ever get that out there that we have some outlook on that, I'll include it. But at this stage, it's way too early.

And how far out do you think that might be until you give some idea of a dollar amount?

No idea, Mike, I'm not going to guess at this stage. Right now, I'm concentrating on getting the integration finished.

Okay. And also, it's been 5 months because of the blackout period that you've been able to repurchase shares. Is that in the plans with $100 million market cap and the stock within hailing distance of the 12-month low?

Yes. It's always been part of that. Yes. We've been, unfortunately, locked out for a while. It will open up in the next 48 hours in -- we'll do something this quarter -- yes, we'll be doing something this quarter.

Okay. And a statement along with that, it would sure show a lot of confidence at the insiders, other than Joe Nerges. We're buying shares also, just a statement.

Your next question for today is from Brett Davidson, private investor.

Just got a few quick things. Gary, I think you were talking about the repayments on the financing, the $3 million on the interest -- yes, are we still -- so we're going to collect $3 million. That number on the balance sheet could conceivably drop, but are we still acting in that financing rule? Is it going to drop on the balance sheet? Or it's just cycling through to another customer or whatever?

It could, right? It could. Yes. It just -- every customer is a little different. But those are the ones that we've already paid out, paid for the product and now we'll be collecting. So sometimes we're taking 3-year deals for the customer and the payment structure for all deals are a little different.

Okay. So we're still in that business. I just want to...

Yes. We're offering it to customers that are high-quality customers and it keeps us sticky inside the organization, and it's a good use of our cash.

Yes, you got your claws on them. The permission on the second and third sites, I'm just interested in kind of when that occurred. Are we talking about just in the first quarter? Or is that continued -- or excuse me, in the prior quarter? Or does that continue into the current quarter, some of those secondary sites?

The ones that have multisite, there's 2 variations, right? The ones that we deal with corporate. And then if they have 50 locations like we did with one of our large pharmaceuticals, they bought it from the corporate level, and we pushed it out to those 40 plus. In some cases, all the budgets are separated. So we have to go to one of the ones I mentioned was that steel company. We have to go to all 20-some-odd sites and we already got the third site, one came in last quarter, one came in this quarter. There's another one in the food industry that we got the second one, another one in another industry came in actually yesterday for the third site.

So yes, unfortunately, it would be nice if we could just deal with corporate, take on purchase order and push it all out. In some cases, that not the case and we have to go to every individual site. And it gets easier after the first one because the -- we don't have to do another POC. We just have to go get budget money from them. And as I mentioned earlier in the script that every customer's purchasing process is a little different. So we have to kind of abide on how each one does that. And sometimes, unfortunately, they are very, very slow and things take way more time than I think it should, but we're at the mercy of the customer.

From the description there, it sounds like this is becoming a more regular occurrence. This is starting to happen with some kind of frequency.

Yes. Look, last year, at this time, we had 2 customers, right? A year later, I mentioned we have 40 something. So we are doing that where we see the product at 1 location. We try to get someone who can evangelize the difference between us and some of the competitors out there, why they should spend money with a small company like us and how we truly do protect the endpoint and lock it down. And if we can get someone who can evangelize internally, it makes it a lot easier for the second, third in multiple locations that they have.

So yes, it's getting easier, but it's not easy, right? Every customer is a little different in getting to know the customers and how they do business is a lot of work. But we are getting references -- we are getting references and the references are helping, right? We're working on a deal right now. They're like who else do you do business with locally. And we mentioned he's like, oh, I know that person, let me call them, if they get thumbs up on RA AZT, I don't even have to do the POC. So things like that are happening. To me, it can always be faster, but things are happening in a positive direction.

Yes. That's exactly what I'm getting at. Yes, I fully get it, that this is really a tough slog, but eventually, so once mean you get to the point where multiple of these relationships start to pay dividends and one guy is talking to another guy in. I mean, do you get any feel yet of the kind of momentum where this starts to look exponential instead of linear? Or still too early?

Still a little too early, right? We're gathering the data. It's getting a little easier to connect dots, but it's still -- like I said, it's only been truly a year of really, really pushing this product and kind of figuring out the messaging and every industry is a little different. So building those like I have mentioned on the script there that we're putting these on pages together that represent the industry to try to make it a little easier to understand how we can help them and why we're a little different than the competitors where we fit in with those competitors, right?

Sometimes we can go alongside of those competitors. They can do the IT side of it while we do the OT side of it, right? And how we can join all the logs on the one interface. So those are the messages that we kind of put together over the last year to try and make it a little cleaner, clearer to the customer, everything to speed up the sales process.

So it sounds like the beginning signs are there, but it just hasn't fully mushroomed yet, but well I commend you for the hard work and moving this forward and I'll try and be patient.

Yes. We're moving as fast as -- we can.

I promise you that. You should know me, I'm not a patient person.

[Operator Instructions]. Your next question is a follow-up question from Joseph Nerges.

Okay. I'm back on again. Okay. Just a little clarification. You elaborated on the expansion of our marketing and managed services. And I'm trying to get the numbers, I heard one. I think we heard them through repeat again, where you said that we're adding some new customers in managed services. Did you say that you thought there would be monthly revenues going forward of $100,000. I'm trying to get the numbers that you gave in the...

Joe, we had a really good -- we had -- we closed some nice deals, so a little clarity. When you close an MSP deal, right, it takes various time to get them set up and actually stop billing them. Over the last -- we closed some -- before the end of last year, we closed some nice deals. It took us a little time to get those up and running. And as of last quarter, we are starting to build net close to 100,000, a little less than 100,000 additional per month of net new revenue for the MSP. That's net new revenue.

That's extremely good. That's what I thought you said, and I'm -- and that's the total of all the customers you've added another...

Yes. Those are -- yes, just for the -- just the additional increase per month.

All right. Well, great. That clarification. I thought that's what you said, but I just want to make sure that, that was -- the numbers were added up to what I was thinking of. Thanks a lot. Thanks, again, guys.

No problem, Joe. We have reached the end of the question-and-answer session. And I will now turn the call over to Victor for closing remarks.

Thank you, everyone, for joining us today. As I mentioned at the top of the today's call, we made progress on all fronts during the first quarter and are aggressively pursuing our opportunities for the remainder of fiscal 2026, both on the services side of the business as well as the AZT protect. And we look forward to reporting on our progress with you in May. In the meantime, thank you to our shareholders for their support to our team for the dedication and effort, and we wish everyone a good remainder of the day. Goodbye for now.

This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.

Good day, everyone, and welcome to the CSPi's Fiscal Fourth Quarter and Full Year 2025 Conference Call. [Operator Instructions]

It is now my pleasure to hand the floor over to your host, Michael Polyviou. Sir, the floor is yours.

Thank you, Matthew, and hello, everyone, and thank you for joining us to review CSPi's financial results for the fiscal 2025, fourth quarter and full year ended September 30, 2025, as well as recent operating development.

Today with me on the call 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. During the Q&A session, we ask participants to limit themselves to 1 question and 1 follow-up question then requeue if you have additional 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 those 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 met as a guarantee of future performance or results. The company cautions you that these statements reflect the current expectations about company's few 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 the projections upon which the segment 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 report on Form 10-Q 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 the 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 date thereof.

With that, I'll turn the call over to Victor Dellovo, Chief Executive Officer. Victor, please go ahead.

Thanks, Michael, and good morning, everyone. We had a strong finish to the fiscal year. Overall fourth quarter revenue increased 11% and while our overall gross margins increased by more than 800 basis points to 37%. We significantly increased our profitability during the fiscal fourth quarter from the same prior fiscal quarter, while continuing to invest in building the deal pipeline and new customers of our highly differentiated and award-winning AZT PROTECT cybersecurity offering for the full fiscal year, maintained our strong balance sheet and positioned ourselves for increased momentum and growth in fiscal 2026.

Once again, our Technology Solutions business drove our fourth quarter and full year growth. We expanded relationships with existing customers while gaining new customers due in large part by the exceptional customer retention track record we have earned in a wide variety of industries, including finance, manufacturing, oil and gas, health care, aerospace, education, utilities, telecommunication and maritime.

Technology Solutions increased increases the efficiency and effectiveness of our customers' IT investment in networking, wireless, mobility unified communication and collaboration, data center and advanced technology security and continues to be a major driver of our service business growth. During the fourth quarter, our service revenue grew 63% over the same prior year quarter and represented approximately 44% of our total revenue. During the year ago fourth quarter, service revenue represented approximately 30% of total revenue.

For the full year 2025, service revenue represented 36% of total revenue as compared to 33% a year ago. Managed cloud and MSP services are increasingly important part of our offering. And during the fiscal 2025, this business grew a healthy double-digit rate. One of our key objectives in fiscal 2026 is to build on that growth rate. To achieve this, we are allocating more resources to these opportunities, including add more sales reps.

Our [ MSP/cloud ] service strategy has been especially positively effective in the maritime industry. We are expanding installations during the fiscal 2025 and then gain contracts who service these installations the result of which will begin in realized in fiscal 2026. In addition, we entered our fiscal 2026 with backlog for cruise ships, installs and upgrades, which we hope to convert revenue over the next 12 months.

Growing our service business benefits our shareholders in 2 important ways. First, the revenue tends to be very sticky given our strong service track record with customers and our unique position in the marketplace. Second, our service revenue earns higher gross margins than our product revenue. We are quite excited about the results generated from our service segment during the fiscal 2025 and are even more excited about our potential entering the fiscal 2026.

Turning to the HP segment. We continue to gain traction with our strategic partners and distributors and their customers for AZT PROTECT cybersecurity offering. Over the course of the past fiscal year, our go-to-market strategy led to dozens of new AZT customer installations as well as it continuously expands pipeline for our new customers.

Working through our Gold Star resellers, including the Rockwell Automation largest North American distributors. Our strategy is to successfully implement our solution at an individual site with the customers' operations then pursue other installation opportunities within the organization. We have recently executed this sales approach with several customers as we speak and are actively working on purchase orders with our partners to deploy AZT PROTECT at additional sites.

To date, we have customers in the steel, energy, manufacturing, water utilities, pharmaceutical, food, telecommunication in other industries, all with multiple installation potential. Many of these potentials to become a 6- or 7-figure [ dollar relationship ] for our company. We have deployed case studies of the results achieved by AZT PROTECT within most of these industries and Rockwell distribution channels are aggressively taking these results to market. We believe this approach is working as we exit the year with a significant increase in the number of AZT PROTECT deployment deals in the works.

In addition, in the fall of 2024, we participated in the Rockwell Automation Fair in Anaheim, which was a first step into the Rockwell Automation channel. We participated again this year at the Rockwell Fair in Chicago that was held a few weeks ago and isn't an exaggeration to say the booth was busy throughout the entire fair. Operational technology customers continue to lack the effective cybersecurity protection at the level AZT PROTECT provides.

We continue to believe we have a strong competitive advantage in this space and also believe that the market now sees us as a substantial resource. Our objective is to convert this building momentum into sizable AZT PROTECT sales in fiscal 2026. We are quite excited about the direction in the fiscal year 2026 prospects for our business as we expand our focus to protecting industrial IoT devices.

The devices in this space have traditionally been difficult to protect due to the types of processes used and limited resources available that typically don't support conventional IT-based endpoint protection solutions. AZT PROTECT has had an initial success in being selected and deployed in such environments. We are optimistic that this opens a new market for the product. Many AZT PROTECT installations require an approach to simply simplify mass deployments. That means our team has had to enhance our software to allow for easy integration into the industrial IoT products supplied by other vendors.

To date, we have overcome these integration challenges without exception. There is still more work to be done to streamline the approach. However, this ability to integrate the deployment of AZT PROTECT into the industrial IoT companies existing systems is a major driver behind our growing pipeline into this large unserved industrial edge compute market.

In summary, our service business exited the year on an extremely strong note. And our product business is gaining momentum. We believe we are on a trajectory to generate consistent profitability improvements for the fiscal full year 2026 as we built the infrastructure and made the investment required to support significant expansion of our business. As a result, we believe that we are in a position to significantly leverage revenue growth going forward.

With that, I'm going to turn the call over to Gary to provide you with some more details about our recent financial performance. Gary?

Thanks, Victor. For the fourth -- fiscal fourth quarter ended September 30, 2025, we generated $14.5 million in revenue as compared to $13 million for the year ago fourth quarter. Our products revenue decreased $1.1 million. Service revenues increased [ $2.5 million ] or 63% compared to the year ago period.

Gross profit for the fourth quarter was $5.3 million compared to $3.7 million for the fourth quarter of fiscal 2024. The exceptional service revenue growth during the quarter drove the gross profit margin increase. Gross margin for the fourth quarter was 37%, which was more than 800 points higher than the same prior year quarter. The strong increase in service revenue drove the increased margin. On the expense side of the income statement, comparing the fourth quarter of fiscal 2025 to the same prior year quarter. Research and development costs increased 13% and as we brought to market new features for AZT PROTECT and develop software solutions to engage and integrate of our solutions into customers' operations.

Our SG&A expenses for the quarter were essentially flat as compared to last year. Our operating loss for the quarter was $0.5 million compared to $2 million operating loss for the same period of the prior year quarter. We reported a net loss of $191,000 or $0.02 per diluted share of common for the fourth quarter compared to a net income of $1.7 million of -- or $0.18 per diluted share for the year ago period.

As of September 30, 2025, our balance sheet remains strong with cash and cash equivalents of $27.4 million. Our cash position is down about 10% from our cash position a year ago. However, we continue to provide revenue financing to qualified customers and you'll note that our financing receivables level doubled over the course of the past year.

In addition, we invested in the growth strategy of AZT PROTECT. We also used cash to pay the $0.03 share dividend and repurchased 19,500 shares of our common stock during the fourth quarter for a total cost of $234,000. As we noted in the press release this morning, we will be paying a $0.03 a share dividend on July 15, 2026, to shareholders of record on December 26, 2025.

Turning to the full year ended September 30, we grew the revenue by 6% and grew gross profit by was $18.5 million or 32% of sales compared to $18.9 million or 34% of sales. We reported a net loss of $91,000 or $0.01 per share of common compared with a net loss of $326,000 or $0.04 per diluted share of common for the prior year.

I will turn the call over to the operator for your questions.

[Operator Instructions] Your first question is coming from Joseph Nerges from Segren Investments.

My quick math here. You mentioned that the service revenue in the fourth quarter was like $0.44 of total sales. So that -- if my math is correct, you're close to $6.4 million in service revenue in the quarter alone. Am I correct? Am I wrong on that math?

Yes. I mean, overall, as a company, yes, that's...

Yes, you said, I don't know, 44% of $14.5 million. That's where I'm coming up with the number. So that's a terrific number. I mean, being at the annual meeting several years ago, and Victor mentioned that he gets called all the time, trying to purchase our managed services operation.

So if we continue with that, we're talking about a plus $20 million a year service revenue just in managed services alone in the TS division. So that's really terrific. But let me get on to a question. I really think that the last press release you guys issued on the expansion of AZT PROTECT is really -- you used the term game changer when you first introduced AZT PROTECT. And I really believe that this expansion is a game changer, no as an example, I guess this all started basically with our -- am I correct, the cell tower customer in South Africa, where we deployed that and then we began deploying it through other suppliers in that environment. And then we keep talking about the black box.

So as an example, if you have a cell tower customer with, let's say, 1,000 towers, what's the what is our potential for the endpoint -- how many endpoints can we possibly sign up if it's fully deployed and accepted by customers on the line? What -- let's say, size of 1,000 towers?

Well, if you look at the 2 press releases that we've done before, right, we started off with the black box that's inside the cell towers and then we opened it up to the cameras that are on the cell towers also.

So those are the press releases that I had released probably 6 months ago or so. And it's not 1,000 towers, it's tens of thousands of towers that we're talking about. I think the first round was like 15,000 and then it will continue to grow as they move out. And I had mentioned on the last call that it took some time to get the product to be able to integrate into those systems and with significant testing. And that has already gone through the testing, in approval process with the customer.

And as we said on the other call and in press releases, we're trying to do a seed unit type of environment. And then we did that and we already get the second order for the cameras for additional cell towers. And as they continue to grow and expand, there should be further purchase orders throughout the year next year. Of what magnitude and what exactly that looks like too early to tell.

But obviously, we're just talking about 1 cell tower customer here. How many other customers could we possibly integrate. Have we signed -- have we currently signed any OEM agreements in the IIOT environment? I mean the -- the guy that's -- the supplier of the black box, he would be, I assume, a potential supplier for the IIoT market.

Have we signed contracts with these people as of yet? For OEM deployment...

Not yet.

Not yet? So that would be the next stage. And I'm assuming that's a priority for our sales team going forward is signing up as many of these OEM suppliers as possible. Am I correct? Am I wrong in that? You would be focusing on...

No, you're correct.

Well, Yes, the numbers are great. I realize I know what the problem is. Is it simply we need the time to get rollouts, full rollouts in some of our customers. I'm assuming our only full rollout of AZT PROTECT is in our pharmaceutical company. Most of the other...

That's correct.

Customers we have, have deployed it in individual plants or equipment, but not fully roll them out. So when you're saying you're expecting the full rollout over the next year to 2 years, I assume that's what you're talking about.

Yes. In some cases, we're talking to different companies about doing like an enterprise agreement where centralized purchasing would purchase it and then roll it out to all the locations.

And in some cases, I think I mentioned on the last call, we have to talk plant by plant. So since we had one initial plant that we sold to quarter, we sold it to a second one or a third one. So it just takes time based on just having to talk to 50 or 80 or 120 plants individually. So that takes time getting to -- it's easier than getting the first one in, but it's still a sales process. And then in some cases, we're talking to companies at the purchasing level where they want to cut one potential purchase order for all locations, which, of course, makes our life a lot easier and speeds up the time frame on when we can get the purchase order over the line.

One more follow-up on that. And I'm assuming that all of these potential customers already have contracts signed in their [ OT ] environment cybersecurity contracts.

So am I correct in some of these customers might be waiting for that contract to expire before they enter a new contract with a new supplier like us?

In some cases, yes. In some cases, yes. So sometimes that the competition may not be supporting older versions of software. So one of the energy companies we sold to, that's what happened. They stopped supplying the product that they're currently using, which I don't want to mention, they stop supporting older versions of Microsoft.

So we took over those couple of thousand devices because there -- they're not willing at this stage to throw them out completely, but at least we're in there and we're picking at it slowly.

All right. I appreciate the answers. Good luck going forward. It sounds like '26 could be a really good year for us.

Did you enjoy the show, Joe?

Yes, except for one thing. I came back with a cold and I still have it. I'm still trying to get rid of the cold. But the show was really good. a lot of customers came by and they seem pretty well engaged. Now closing these guys is not a story, but the numbers are there to from what I saw to hopefully get some pretty serious contracts in the not-too-distant future. So Yes, I appreciate inviting me to the show anyway.

Your next question is coming from Will Lauber from Visionary Wealth Advisors.

Just had a couple of questions. I guess I was at that Rockwell show well for, I guess, a day on a morning in get the holding, but definitely saw quite a bit of traffic and the time was there.

If I kind of remember right, most of the customers that you guys have gotten over the last year the connections were made at that Rockwell show a year ago. Is that true?

That is correct. Yes. Most of the orders that we got all came from the Rockwell. So that's been our biggest way of getting leads.

Okay. And then can you kind of quantify the number of leads you got last year versus this year and then I guess, along with that, maybe the quality of leads, I assume it's probably better this time because I noticed a number of your distributors bringing their customers to the boost. So that's a lot better than just some random person welcomed by your booth and talking to you.

Right. Yes. I'm glad you noticed that the distributors, the CDs, [ the Sona ] pasta Rexel. They -- this year being comfortable with the product, having closed some opportunities that were way more comfortable. It was an introduction last year at the show, where this year, we have a relationship. So they brought a lot of their customers. There's been a lot of follow-up already. There's been a lot of appointments already set up our initial calls.

Unfortunately, the timing of the show is like you got Thanksgiving right off of the following week. So everybody kind of takes that week off. So it's been the last 2 weeks where we we're able to get in touch with a lot of the individuals and set up initial meetings and their follow-up meetings right after Christmas. Just because we're back to back on these holidays as you see fit.

But yes, we probably got a 50% increase in leads this year than over last year. I have -- we haven't gone through all of them yet at this stage, but they seem to -- we definitely have a lot more initial meetings than we did it quickly based on the relationships we do have with the recalls of the world in CDs and [ so on and pasta ], but to set up meetings immediately for us.

So yes, we're very optimistic that we closed a lot of deals last year because of this show. My goal is to close double if we could, right? We have about 50% more of the leads, and I think we have a better relationship with them. We have a better reputation. They kind of know us now. We have a lot of installs. So yes, I'm looking forward to 2026.

Yes, that was more leads than I thought. So that's good.

Yes. You were there. Our booth was always full, right? You never saw no one that -- we had 2 demos going almost all day for the whole 8 hours that the show was there.

It was good. And then I know -- I mean, you guys have probably one of the smaller boosts and I'm sure that costs you quite a bit. But I think it's probably money well spent generating all those leads.

Yes. Definitely, definitely.

Your next question is coming from Mike Price.

You didn't mention Acronis, and I was wondering if AZT is being integrated into Acronis' software, is there not predictability as far as revenue is concerned? And if that's the case, can you give us an idea of what that might be?

Well, it is being integrated about what the projections are on that? I think it's too early to tell. We're working diligently to get that done over the next few months. But as soon as I have some information I can share, I definitely will.

So how soon do you think we start seeing some revenue? Is this something a couple of months late 2026, some kind of time frame? It seems like it should be a pretty significant number. Is it not?

I think it's too early. Our hopes for both parties is that it's going to be significant for both of us. We fill a gap that they have. So that's kind of how we put this together, but what revenue looks like, I think it's just way too early for me to even guess at this point what that is, but our hopes that it's going to be significant for both parties. I don't think Acronis as being as big as they are, would team up with us if they -- and waste their time if they didn't think it was worth their time and effort.

Okay. And last conference call, I asked you about the relationship with some of the resellers. Specifically UFT where with the original press release, they have 16,000 customers in the water [ waste ] and wastewater area. And you said that there are things in the works that would be discussed later. Do you have any more light on that?

I do. So the powers to be at UFT wanted to get 3 sites implemented and then do case studies on those 3. So that's what's happened over the last couple of months. Their customers move slower than they would like, but we are on weekly calls with updates. And then in the new year, it's a full steam ahead to a lot of their customers are doing major marketing events jointly with their 16,000 customers doing reach out.

But they needed case studies, they needed to change legal agreements. There was a lot that they had to do on their side to get this ready and I'm a little bit at their mercy, but the relationship is strong. We closed 3 opportunities over the last quarter. That was part of the case studies that they're writing up now.

Okay. And one last quick question. Last quarter, you bought some shares, but are you not subject to the same -- the company is subject to the same rules as insiders as far as buying shares. So now that you're reporting earnings so late within 2 weeks of the end of the first quarter, you can't buy shares until our next earnings. Is that the case?

Yes, pretty much. Yes.

So basically the blackout for share repurchase was from mid-September until mid-February when you next report. Is that correct?

[ The 15th ] of the month of December, and we're here now just because of when the year-end reporting. [indiscernible].

You last had a window within 2 weeks at the end of the fiscal year, mid-September. Because of the late reporting is within 2 weeks at the end of the first quarter, you cannot buy shares again until you report earnings probably mid-February. Is that correct?

Correct. That's correct.

[Operator Instructions] Your next question is coming from Brett Davidson.

I want to turn back to the fog surrounding the Acronis or [ Cranes or Alberto ] names pronounced. So I understand that a lot of this is endpoint protected, the revenue generation. How does that work with the Acronis device. Who are you going to be recognizing the revenue from? Is that coming from Acronis or is that coming from their end user?

Will be coming from a Acronis. And it's a little different with what we're doing with them. We're concentrating on scanning the backups before Acronis does the backups to make sure there's no all the content is secured, and there's nothing inside that.

And then they would trigger the backup. And that's where the advantages are scanning of all the information that's before the backup occurs, we would scan it and certify that there's nothing wrong with it, and then they would the backup go. So if they ever had to do a recovery, it would be a secured recovery.

So is this going to go on...

Will be our customer at the end.

Is this going to go on every one of those devices that they're producing? Or is it going to be based on what their customer wants? Or this is automatically going to be thrown on their devices?

No, they would still have to sell it to their customer. That's the way it is right now. If it gets to the level that you just said that would be -- we're not there yet, let's put it that way. They got to go some to their industrial customers, which I can't mention and they have to show it as an added value. And it's going to work similar.

This is going to be like a subscription type thing that will renew at some point? [ Perfect ] . And the only other thing that I had questions on was regarding the revenue next year. Is this something where we could reasonably expect incremental increases in revenue throughout the year? Or it's just so all over the place that you just don't have that kind of insight into what -- how this is going to play out.

The latter. The latter.

That concludes our Q&A session. I'll now hand the conference back to Victor Dellovo for closing remarks. Please go ahead.

Thank you, everyone, for joining us today. We hope you've come away today's call with a sense of excitement from our fourth quarter results and our opportunity for fiscal 2026. We are working extremely hard to capitalize on the opportunities we have had in the service side of our business as well as the AZT PROTECT, and we look forward to reporting on our progress with you in February of next year.

In the meantime, thank you to our shareholders for their support, to our team for their dedication and effort, and we wish everyone a happy holidays. Goodbye for now.

Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.