CSP 2025 Q2 Earnings Misses Targets as Net Income Drops 106.8%

CSP Inc. (CSPI) reported its fiscal 2025 Q2 earnings on May 15th, 2025. The company experienced a significant downturn compared to the previous year, with revenue decreasing by 4.1% to $13.15 million from $13.71 million in 2024 Q2. CSP swung to a loss of $0.01 per share, a stark contrast to the profit of $0.16 per share reported in 2024 Q2. The company also reported a net loss of $108,000, reflecting a 106.8% deterioration from the net income of $1.59 million achieved in the previous year's second quarter. CSP's guidance remains optimistic, focusing on growth potential for its AZT PROTECT product, with expectations for significant contract expansions in the coming years.

Revenue

CSP reported a decline in total revenue to $13.15 million for fiscal 2025 Q2, compared to $13.71 million in the same quarter of the previous year. The Technology Solutions segment contributed the majority with $12.50 million, while the High Performance Products segment generated $647,000. This consolidated total reflects a 4.1% revenue decrease year-over-year.

Earnings/Net Income

CSP swung to a loss of $0.01 per share in 2025 Q2 compared to a profit of $0.16 per share in 2024 Q2, marking a 106.3% negative change. The company's net loss was $108,000, a 106.8% deterioration from the previous year's net income of $1.59 million. The EPS reflects weak performance.

Price Action

The stock price of CSP fell by 13.15% during the latest trading day, dropped 11.76% over the last trading week, and decreased 5.60% month-to-date.

Post-Earnings Price Action Review

CSP's post-earnings strategy of buying shares after revenue increases has historically yielded substantial returns. Over the past five years, this approach has generated a cumulative return of 372%, significantly outperforming the market. This success underscores the potential for stock price appreciation following revenue raises, which often signal upcoming business developments and boost investor confidence. While holding shares for only 30 days may seem brief, it effectively captures the initial surge in excitement post-announcement, often followed by continued price momentum. This strategy highlights the market's efficiency in reacting to fundamental news like revenue growth, allowing investors to capitalize on these movements for strong returns. Monitoring financial reports and revenue raises is crucial, as they can act as catalysts for stock price appreciation. The 30-day holding period provides a balanced approach, offering returns while managing risk through shorter exposure.

CEO Commentary

Victor Dellovo, Chief Executive Officer, emphasized that, excluding a significant contract from the previous year, the company achieved double-digit sales growth in Q2. This growth was primarily driven by the Technology Solutions segment and the AZT PROTECT product line. Despite operational challenges, Dellovo expressed satisfaction with CSP's flexibility and market penetration, highlighting strategic reseller and distribution partnerships that bolster new business opportunities, including key engagements with a major South African cell tower provider.

Guidance

CSP anticipates continued growth, particularly for the AZT PROTECT product, projecting expanding contracts that could reach substantial six and seven-figure values over the next 18 months to two years. The company maintains a strong balance sheet with over $29 million in cash and no long-term debt, supporting ongoing investments in market awareness and strategic initiatives.

Additional News

In recent developments, CSP Inc. has been actively expanding its strategic partnerships. A notable collaboration with Oryx Industries aims to integrate CSP’s ARIA Zero Trust PROTECT™ solution into Oryx's security portfolio, enhancing protection for South African businesses against cyber threats. Furthermore, CSP Inc. repurchased 23,800 shares of its common stock for $384,000 during the fiscal second quarter, reflecting its robust balance sheet and commitment to shareholder value. Additionally, CSP Inc. declared a quarterly dividend of $0.03 per share, payable on June 11, 2025, underscoring its stable financial position and shareholder return strategy.