CSP Inc. (CSPI) | Investment Case

1. Company Snapshot

1.a. Company Description

CSP Inc.develops and markets IT integration solutions, security products, managed IT services, purpose built network adapters, and cluster computer systems for commercial and defense customers worldwide.It operates in two segments, Technology Solutions and High Performance Products.

The Technology Solutions segment provides third-party computer hardware and software as a value added reseller to various customers in Web and infrastructure hosting, education, telecommunications, healthcare services, distribution, financial and professional services, and manufacturing industries.This segment also offers professional IT consulting services, such as planning, designing, assessment, implementation, migration, optimization, and project management; storage and virtualization solutions; enterprise security intrusion prevention, network access control, and unified threat management services; and IT security compliance services.In addition, this segment provides unified communications, wireless, and routing and switching solutions; custom software applications and solutions development and support services; optimization, maintenance, and technical support services; and managed IT services, such as monitoring, reporting, and management of alerts for the resolution and preventive general IT, as well as IT security support tasks.

Further, this segment offers managed and cloud services, such as proactive monitoring and remote management of IT infrastructure, managed and hosted unified communication services, security, and backup and replication.The High Performance Products segment offers ARIA Software-Defined Security, a cybersecurity solution; Myricom network adapters; and multicomputer products for digital signal processing applications in the defense markets.CSP Inc.

was incorporated in 1968 and is headquartered in Lowell, Massachusetts.

Show Full description

1.b. Last Insights on CSPI

CSP Inc.'s recent stock performance was positively driven by strong fiscal 2025 first quarter results, with services revenue growing 17% and gross margin expansion. The company's momentum in its AZT PROTECT business and growing recurring sales as a percentage of total revenue also contributed to the positive performance. Additionally, the company's solid cash position of over $30 million and quarterly dividend declaration of $0.03 per share further boosted investor confidence.

1.c. Company Highlights

Last Price	12.86
Change Percentage	7.53%
Open	12.19
Previous Close	11.96
Market Cap ( Millions)	127
Volume	17885
Year High	21.95
Year Low	9.65
M A 50	11.8
M A 200	13.17

FCF Yield	-1.01%
Dividend Yield	0.93%
ROE	-3.28%
Debt / Equity	2.73%
Net Debt / EBIDTA	945.71%
Price To Book	2.54
Price Earnings Ratio	-77.37
Price To FCF	-99.15
Price To sales	2.21
EV / EBITDA	-38.49

2. CSPi Delivers Strong Q1 FY2025 Results with Growing Momentum in Cybersecurity

CSPi reported a solid start to its fiscal year, with Q1 FY2025 results highlighting a 17% year-over-year increase in service revenue and a 200-basis-point expansion in gross margins. The company earned $0.05 per diluted share, demonstrating improved profitability. CSPi also ended the quarter with a robust balance sheet, holding $30.7 million in cash and cash equivalents. This financial strength enabled the company to authorize a $0.03 per share quarterly dividend, reflecting its commitment to returning value to shareholders. As Gary Levine noted during the call, "Our cash position remains healthy, and we are closely evaluating opportunities to use it strategically, including potential share repurchases." <h6>Technology Solutions Segment Leads the Charge</h6> <p>The Technology Solutions business was a standout performer, generating $15.2 million in sales during the quarter. This growth was driven by increasing demand in the ocean freight liner market and a surge in cloud-based service adoption. The segment's performance underscores CSPi's ability to capitalize on emerging trends in digital transformation and supply chain optimization. <h6>Expansion of AZT PROTECT into Operational Technology (OT) Markets</h6> <p>CSPi's strategic focus on expanding its AZT PROTECT cybersecurity solution into the operational technology (OT) market is yielding promising results. The company secured a six-figure agreement with a large pharmaceutical company and continues to renew contracts, highlighting the product's growing acceptance. Additionally, a partnership with United Flow Technologies (UFT) aims to protect water treatment facilities from cyber threats using AZT PROTECT’s AI-based countermeasures. This collaboration not only broadens CSPi's customer base but also reinforces its position as a leader in OT cybersecurity solutions. <h6>Product Development and Market Outreach</h6> <p>CSPi's investment in product development is paying off, with three patents already issued and two more expected by year-end. The company also made significant progress in expanding its market reach, participating in the Rockwell Automation Fair and generating over 100 leads. Management expressed confidence in leveraging partnerships, particularly with Rockwell, to accelerate market penetration for AZT PROTECT. <h6>Valuation and Shareholder Value</h6> <p>At current levels, CSPi trades at a price-to-sales (P/S) ratio of 2.95 and an enterprise value-to-EBITDA (EV/EBITDA) ratio of 262.14, reflecting the market's optimism about the company's growth prospects. The stock also offers a modest dividend yield of 0.73%, providing some income appeal. While the valuation multiples appear elevated, they are supported by the company's strong revenue growth and expanding margins. Management's focus on share repurchases could also help mitigate dilution concerns, as highlighted by Mike Price during the Q&A session. <p>Overall, CSPi's Q1 results and strategic initiatives position the company well for continued growth in the cybersecurity and OT markets. With a strong balance sheet and a clear roadmap for AZT PROTECT, CSPi is poised to deliver significant revenue growth in FY2025.

Publication Date: Mar -02

                                    📋 Highlights
                                    Service Revenue Growth::
                                                CSPi reported a 17% increase in service revenue, driven by strong demand in the ocean freight liner market and cloud-based services, highlighting the company's ability to capitalize on emerging trends in its core markets.
Gross Margin Expansion::
                                                The company achieved a 200-basis-point expansion in gross margins, reflecting operational efficiency improvements and higher-margin service revenue contributions, which positively impacts profitability.
AZT PROTECT Market Expansion::
                                                CSPi is successfully expanding its AZT PROTECT product into the operational technology (OT) market, securing new customers, including a six-figure agreement with a pharmaceutical company, and addressing the limitations of traditional IT-focused cybersecurity solutions.
Strategic Partnerships and Distribution::
                                                The partnership with United Flow Technologies (UFT) to protect water treatment facilities, along with participation in the Rockwell Automation Fair, underscores CSPi's focus on leveraging strategic collaborations and expanding distribution channels to accelerate market penetration.
Share Repurchase Plans::
                                                Management indicated a likely increase in share repurchases to offset dilution from stock grants, responding to investor concerns, while maintaining a strong cash position of $30.7 million to support growth initiatives and shareholder returns.

                                

3. NewsRoom

ARIA Cybersecurity Adds Features To Expand AZT PROTECT(TM) Into the Embedded IIOT Market

Oct -30

Source: accessnewswire.com

Acronis Partners with ARIA Cybersecurity to Integrate AZT PROTECT(TM) into its Acronis Cyber Protect Solution

Oct -23

Source: accessnewswire.com

Cloud Service Provider sector trends remain positive; upside seen in TSMC, Western Digital: analysts

Sep -29

Source: proactiveinvestors.com

ARIA Cybersecurity Secures Midwest Manufacturer's Critical Systems with Managed AZT PROTECT(TM) Service Deployment

Sep -11

Source: accessnewswire.com

CSP Inc.: Early Cybersecurity Traction, Low Margin Growth, Uncertain Profit Path

Sep -01

Source: seekingalpha.com

CSPI Reports Wider Y/Y Net Loss, 18% Revenue Growth in Q3

Aug -19

Source: zacks.com

CSP Inc. (CSPI) Q3 2025 Earnings Call Transcript

Aug -14

Source: seekingalpha.com

CSPi Generates 18% Revenue Growth During FY 2025 Third Quarter

Aug -14

Source: accessnewswire.com

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.72%)

6. Segments

Technology Solutions - U.S.

Expected Growth: 7.4%

Growing demand for digital transformation, increasing cybersecurity threats, and government investments in IT infrastructure are driving the growth of Technology Solutions in the U.S.

High Performance Products

Expected Growth: 10.2%

Growing demand for high-density computing solutions in data centers, driven by increasing adoption of cloud computing, big data, and IoT, fuels the growth of CSP Inc.'s High Performance Products. Energy efficiency and reliability features also contribute to the segment's growth.

Technology Solutions - United Kingdom

Expected Growth: 8.5%

The UK's increasing adoption of cloud computing, cybersecurity concerns, and the need for IT infrastructure modernization drive growth in the Technology Solutions segment. CSP Inc.'s comprehensive solutions position the company for success in this expanding market.

7. Detailed Products

Cloud Storage

Secure and scalable cloud-based storage solutions for businesses of all sizes

Compute Services

On-demand access to virtual machines, containers, and serverless computing resources

Database Management

Relational and NoSQL database services for structured and unstructured data

Security and Compliance

Comprehensive security and compliance solutions for data protection and regulatory adherence

Networking and Connectivity

High-performance networking and connectivity solutions for hybrid and multi-cloud environments

Analytics and AI

Advanced analytics, machine learning, and artificial intelligence services for data-driven insights

DevOps and Collaboration

Integrated development, testing, and deployment tools for agile teams and continuous integration

8. CSP Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for CSP Inc. is moderate due to the availability of alternative products and services in the market.

Bargaining Power Of Customers

The bargaining power of customers is high due to the presence of a large number of customers with significant purchasing power.

Bargaining Power Of Suppliers

The bargaining power of suppliers is low due to the presence of multiple suppliers and the company's ability to negotiate prices.

Threat Of New Entrants

The threat of new entrants is moderate due to the presence of barriers to entry, such as high capital requirements and regulatory hurdles.

Intensity Of Rivalry

The intensity of rivalry is high due to the presence of several established players in the market, leading to a highly competitive environment.

9. SWOT Analysis

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

	Value
Debt Weight	5.03%
Debt Cost	3.95%
Equity Weight	94.97%
Equity Cost	10.51%
WACC	10.18%
Leverage	5.30%

11. Quality Control: CSP Inc. passed 6 out of 9 key points

Strong Liquidity

Low Debt

Strong Interest Coverage

Healthy Cash Flow

Operating Efficiency

Strong Return On Equity

Consistent Revenue Growth

Consistent Operating Cash Flow Growth

Margin Improvement

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

ISG

A-Score: 5.6/10

Value: 4.5

Growth: 2.7

Quality: 5.5

Yield: 6.0

Momentum: 9.5

Volatility: 5.7

1-Year Total Return ->

TaskUs

A-Score: 5.3/10

Value: 5.1

Growth: 8.2

Quality: 5.5

Yield: 0.0

Momentum: 8.0

Volatility: 4.7

1-Year Total Return ->

Hackett

A-Score: 5.1/10

Value: 4.1

Growth: 5.1

Quality: 6.7

Yield: 5.0

Momentum: 1.5

Volatility: 8.0

1-Year Total Return ->

Xerox

A-Score: 4.7/10

Value: 9.8

Growth: 2.3

Quality: 3.0

Yield: 10.0

Momentum: 0.5

Volatility: 2.3

1-Year Total Return ->

CSP

A-Score: 3.6/10

Value: 7.6

Growth: 2.8

Quality: 4.2

Yield: 1.0

Momentum: 4.0

Volatility: 2.0

1-Year Total Return ->

Unisys

A-Score: 3.5/10

Value: 9.8

Growth: 2.2

Quality: 4.8

Yield: 0.0

Momentum: 1.0

Volatility: 3.0

1-Year Total Return ->

Peers Metrics

12.e Scoring ^Insights

12.f DCF ^BETA

Parameters

Short Term Growth

28.85%

Short term Time

10.0

Long-Term Growth

2.00%

WACC

10.18%

CSP Inc. - US1263891053

1. Company Snapshot

1.a. Company Description

1.b. Last Insights on CSPI

1.c. Company Highlights

Higher Yield

Strong Momentum

More Volatile

Average Growth

Fairly Valued

Expensive

Weak Momentum

Average Quality

Stable Momentum

Lower Growth

Cheaper

Medium Volatility

2. CSPi Delivers Strong Q1 FY2025 Results with Growing Momentum in Cybersecurity

3. NewsRoom

4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (7.72%)

6. Segments

Technology Solutions - U.S.

Expected Growth: 7.4%

High Performance Products

Expected Growth: 10.2%

Technology Solutions - United Kingdom

Expected Growth: 8.5%

7. Detailed Products

Cloud Storage

Compute Services

Database Management

Security and Compliance

Networking and Connectivity

Analytics and AI

DevOps and Collaboration

8. CSP Inc.'s Porter Forces

Forces Ranking

Threat Of Substitutes

Bargaining Power Of Customers

Bargaining Power Of Suppliers

Threat Of New Entrants

Intensity Of Rivalry

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

11. Quality Control: CSP Inc. passed 6 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

12.86$

Current Price

12.86$

Potential

-0.00%

Expected Cash-Flows

12.e Scoring ^Insights

12.f DCF ^BETA