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DATE

Friday, Aug. 14, 2026 at 10 a.m. ET

CALL PARTICIPANTS

• Chief Executive Officer-Victor J. Dellovo
• Chief Financial Officer-Gary W. Levine

TAKEAWAYS

• Revenue -- $14.4 million, representing a 6.5% decrease from $15.4 million in the prior-year period due to extended hardware vendor delivery times.
• Net Loss -- $846,000, or $0.09 per common share, compared to a net loss of $264,000, or $0.03 per share, in the third quarter of fiscal 2025.
• Gross Margin -- 30.1%, increasing 1.3 percentage points from 28.8% year over year.
• Technology Solutions Backlog -- 65% higher than the prior-year level, reflecting orders that could not be converted to revenue due to supply chain constraints.
• Product Revenue -- $9.9 million, compared to $10.2 million in the prior-year period.
• Service Revenue -- $4.45 million, compared to $5.3 million in the prior-year period.
• Product Gross Margin -- 20.7%, increasing from 15.7% in the third quarter of fiscal 2025.
• Service Gross Margin -- 51.2%, decreasing from 53.9% in the year-ago period.
• Research and Development Expenses -- $832,000, representing a 5% increase year over year to support AZT Protect customization and OEM developments.
• Selling, General, and Administrative Expenses -- $5 million, a 3% increase from $4.9 million in the prior-year quarter.
• Operating Loss -- $1.5 million, widening from a $1.2 million loss in the prior-year period, partially because of UK pension buyout costs and variable compensation.
• UK Pension Buyout Cost -- Approximately $200,000, including actuarial and legal fees to transfer the plan to an insurance company.
• Cash and Cash Equivalents -- $24.7 million as of June 30, 2026, compared to $27.4 million at the end of fiscal 2025.
• Financing Receivables -- $8.3 million in current receivables and $8.2 million in receivables due after one year.
• Share Repurchases -- 13,000 shares of common stock purchased during the fiscal third quarter.
• Quarterly Dividend -- $0.03 per share, approved by the board of directors for payment on Sept. 15, 2026.
• Vendor Delivery Times -- 200 days or more for certain hardware components, compared to a historical range of 30 to 60 days.
• Managed Service Contracts -- A six-year, seven-figure agreement with a professional sports team and a three-year mid-six-figure annual recurring revenue agreement with a food distributor.
• Nine-Month Revenue -- $42.4 million, compared to $44.3 million for the first nine months of fiscal 2025.
• Nine-Month Net Loss -- $491,000, or $0.05 per share, compared to net income of $100,000 in the same period last year.
• AZT Protect Renewal Rate -- 100% for all customer sites reaching their one-year renewal period during the quarter.
• Other Income -- $330,000, representing a 58.7% increase year over year.

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RISKS

• CEO Dellovo warned that "prolonged across the board vendor hardware delivery delay is likely to continue through the current fiscal fourth quarter and into the first half of fiscal 2027," which may impact the timing of revenue recognition from the current backlog.
• Dellovo stated that for large enterprise deals, the company is experiencing a "18 to 24 month sales cycle," reflecting complex internal review processes and stakeholder alignment within customer organizations.
• CFO Levine noted that operating loss increased due to "costs related to the buyout sale of the UK pension," which impacted third-quarter profitability.

SUMMARY

Management for CSP Inc. (CSPI -3.71%) reported that fiscal third-quarter results were significantly impacted by hardware supply chain constraints, resulting in a 65% year-over-year increase in the Technology Solutions backlog. The company is focusing on a land-and-expand strategy for its AZT Protect cybersecurity product, targeting long-term recurring revenue through direct enterprise sales and OEM integrations. Financial performance reflected an expansion in total gross margin to 30.1% despite a decrease in total revenue. Management confirmed that organizational changes within the sales team are intended to address the 18 to 24 month sales cycles associated with large-scale industrial and utility accounts.

• CEO Dellovo noted that hardware vendor lead times have extended dramatically, stating that "deliveries that historically took 30 to 60 days are now extending well beyond 200 days."
• Management completed the integration of AZT Protect with Acronis software, with a full marketing and SKU launch scheduled for the fall.
• The company entered the professional sports market by signing a six-year, seven-figure managed service agreement with a nationally recognized team.
• The Technology Solutions segment pipeline includes 15 active opportunities in South Africa where AZT Protect is being embedded into telecommunications solutions.
• CEO Dellovo reported that AZT Protect is designed to stop emerging AI-driven exploits, stating the company "publicly shared" findings that the solution would have prevented a specific highly publicized attack involving Hugging Face.
• The company completed the sale of its UK pension plan to an insurance company, eliminating future liabilities associated with that retirement system.
• Management identified a growing pipeline of Fortune 500 opportunities, though Dellovo noted that "if it comes from IT, we have to engage with them immediately because if they truly have the purse strings, they are making the ultimate decision."

INDUSTRY GLOSSARY

• AZT Protect: A cybersecurity product designed to shield critical applications from attack without requiring constant software patching, specifically targeting operational technology environments.
• OT (Operational Technology): Hardware and software that detects or causes a change through the direct monitoring and control of physical devices, processes, and events in enterprises.
• OEM (Original Equipment Manufacturer): A company that produces parts and equipment that may be marketed by another manufacturer.
• Technology Solutions (TS): A business segment that functions as a value-added reseller of third-party hardware and software and provides professional IT consulting.
• Managed Service Provider (MSP): A company that remotely manages a customer's IT infrastructure and end-user systems, typically on a proactive basis and under a subscription model.
• Financing Receivables: Outstanding balances from customers who have been granted extended payment terms for technology purchases financed by the company.

Full Conference Call Transcript

Operator: Good day, everyone. Welcome to CSPi's Third Quarter Fiscal Year 26 Conference Call. At this time, all participants after the presentation. It is now my pleasure to turn the floor over to your host, Michael Polyviou. The floor is yours.

Michael Polyviou: Thank you, Kelly. Good morning, everyone, and thank you for joining us to review CSPi's initial results for the fiscal 26 third quarter which ended on June 30, 2026 as well as recent operating developments. Today, with me on the call is Victor J. Dellovo, CSPi's chief executive officer and Gary W. 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 to please requeue if you have additional questions. In 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 can influence the accuracy of the statement, and the projections upon which 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 statement whether as a result of new information, future events, or otherwise after the date thereof. With that, I will turn the call over to Victor J. Dellovo. Chief Executive Officer. Victor, please go ahead.

Victor J. Dellovo: Thank you, Michael, and good morning, everyone. Technology solution 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 the technology solution business continue 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 protect 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 AZT 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 Protects 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 lent they create attractive long term recurring revenue opportunities once integrated.

A good example is our relationship with the Acronis software. Where the integration has been completed and we understand mark we 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, 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 timelines 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-led 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 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 1 customer site, validate the AZT protect performs as expected within the customer's existing cybersecurity infrastructure.

And then deploy 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-level 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 requirements of operational technology.

The data we have collected from existing deployments combined with strong customer references has enabled us to build a 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 continues to be supported by the growing number of cyber attacks 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 needs for ongoing OT applications 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. 1 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 effect 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 offer offering continues to improve the efficiency and effectiveness of our customers' IT investment across networking, wireless, mobility, unified communication, data center and advanced cybersecurity. A 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 in customer service, we have made significant organizational improvements that position us well for the continued growth.

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

Gary W. Levine: Thanks, Victor. For the third quarter ended June 30, 2026, we generated $14.4 million in revenue compared to $15.4 million with 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 $4.45 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 $5.45 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 25. But gross margin realized from service was 51.2% as compared to 53.9% for the year ago quarter. Research and development expenses increased 5% to $832 thousand compared to $791 thousand the same prior year quarter as we supported customization of the AZT Protect deployments and OEM embedding developments. Selling, general and 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. Increase in variable compensation to the TS division, and costs related to the buyout sale of the UK 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 loss was $846 thousand or 9¢ per share of common for the third fiscal quarter compared to a net loss of $264 thousand or 3¢ 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 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 3 cents per share and we purchased approximately 13 thousand shares of common stock during the quarter. Turning to our results for the 9 months of fiscal 26, revenue was $42.4 million compared to 44.3 million in the same period of the prior year. Gross profit for the 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 thousand during the first 9 months of fiscal 26. During the same period of fiscal 25, 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 26 was 491 thousand or 5¢ per common share. As compared to a net income of $100 thousand. Or 1¢ per diluted common share for the comparable period during fiscal 25. Lastly, the board of directors approved a dividend of 3¢ per share of common to be paid on September 15, 2026 to shareholders of record on August 28, 2026.

Victor J. Dellovo: We will now take your question.

Operator: Certainly. The floor is now open for questions. If you have any questions or comments, please press 1 on your phone at this time. We ask that while posing your question, you please pick up your handset listening on a speakerphone to provide optimum sound quality. Please hold for just a few moments while we poll for questions. Your first question is coming from Joseph Nerges with Segren Investments.

Joseph Nerges: Good morning, guys. How are you today?

Victor J. Dellovo: Good, Joe.

Joseph Nerges: Let me dive in on the OEM direction you are going. I am assuming that you are Acronis would be the 1 OEM you are talking about. Currently. Right? Mhmm and then Yeah,.

Victor J. Dellovo: there is other ones that we are we are in the process of working with also.

Joseph Nerges: Okay. And is there an OEM Were you referring to an OEM in the--in the Internet of Things IoT, the we are dealing with an OEM in that respect, in that area.

Victor J. Dellovo: Or a plant Well, it is all in that area. it is you know, there is there is a couple OEMs we are dealing with where they make boxes. And we are trying to get integrated on their platform. there is other OEMs in South Africa that they make other equipment which I cannot mention right at this second, but they make certain equipment which again, we are trying to get embedded on their product So as soon as the product goes out the door, you know, we are, we are there, and then we just turn up the license and, you know, do a true up every month or every quarter.

Joseph Nerges: Any additional OEMs in The US?

Victor J. Dellovo: Or are we Yes. there is there is 3 other OEMs in The US right now we are we are talking with at different stages.

Joseph Nerges: Okay. And I have 1 other question on that is you know, we announced the Acronis deal. It goes back. I looked at Yeah,. The history. Back September last year. Yep. And you mentioned it in the call about the length of it is taking to embed these things. Do we envision that same length on these other deals? I mean, you know, I could see a year seems like a long time, almost a year. And are we hoping that we could shorten that process?

Victor J. Dellovo: it is not us, Joe. it is never us. it is always them. Be h1st with you. They are larger organizations that truly move at a slower pace. Mhmm. You know, just due to the fact, I guess, of pure size sign-off and various things. it is never us. We are always there quickly. We are always waiting. Let's put it that way. And this 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 and you know, it is hard to move these guys.

I can promise you, you know, we do stay on top of it constantly every week, maybe times a week to try to move things along as fast as possible. You know, it is with Acronis, is out of our control. Yeah,. 95% of it is out of our control. Anything we can control, we have a plan. We have a timeline, and we try to meet it.

Joseph Nerges: Just 1 other thing on and this goes to another point. The Hugging Face attack was you know, the press release on Monday. Mhmm. I do not I do not 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 a embedded cybersecurity lab in their thing. I am just wondering I am I am sure the federal government is really high up on these hacks. I will call it cyber attacks by software, no less.

And I am just wondering, you know, have we talked to this partner as far as getting us--getting a test with the government? Somehow? You know?

Victor J. Dellovo: Again, I know who I know who you are talking about, which I which I cannot mention, but we do talk to them. We have standard calls every 2 weeks. And, again, because their size you know, we Yeah,. 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.

Joseph Nerges: I have no idea, Joe, to be honest with you. Oh, I know. But finally, we have something that might appeal. Let's put it that way. If nothing else, somebody at the government level. that is all I am saying.

Victor J. Dellovo: If you can finally get through there, the bureaucracy Mhmm. Of these larger I think that is why we just put that out just so to let everyone know, you know, compared to some of the other products that are out there that are not stopping these various viruses or attacks, you know, coming from different--the way our technology is made, we are made to stop these things. Right? So I think that was more of a educational press release just for either people looking at a product or you know, the confidence of different customers already using the product.

Joseph Nerges: So And I am gonna extend 1 more question. Just recently, a lot of attacks in the last couple weeks with the utilities, the water utilities, wastewater utilities. Partners, UFT, and I see recently we signed another partner with SITCO. I--in that we have we gotten any feedback from those guys in the last couple weeks? I mean, with what is what is happening in that area, as far as updating some of the customers looking to do some updates. Cybersecurity wise?

Victor J. Dellovo: Yeah,. We have a standard call with UFT. SITCO 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 is how the relationship started, you know, probably back 4 or 5 years ago because of Tesco, 1 of the companies they own that concentrates on the water and waste and water plants. that is 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, 2, which takes forever.

You know, 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 present presented it to all their customers that they had confidence that AZT would work in, like, different products, whether it is Siemens, Emerson, you know, you name it, H1ywell. You know, their goal is to sell it as a, you know, a product and service directly from their sales team that they had confidence that it would, you know, represent them correctly. And so that has taken probably, we are in about 9 months now.

We will be announcing some new things that I will not tell you right now, but you will see them in the next 2 or 3 weeks some things that we will be doing together.

Joseph Nerges: Alright. Thanks. I will get back in the queue.

Victor J. Dellovo: Thank you. Guys.

Gary W. Levine: Thanks, Joe.

Operator: Your next question is coming from Will Lauber with Visionary Wealth Advisors. Please pose your question. Your line is live.

William Lauber: Yes. Victor, if you can kind of expand a little bit on it. I am not quite sure I understand the Salesforce, new strategy. I would noticed, I guess, from LinkedIn that a number of the salespeople, that were there last year are no longer with you guys. And if you can kind of explain kind of just development in the Salesforce and what the new strategy is. In a little bit more detail.

Victor J. Dellovo: Yeah,. it is not a new strategy. We just it is because of the sales cycle, due to individual financial--you know, 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 is kind of what we just, you know, ended up replacing 3 out of the 4 salespeople already that left the organization. Yeah,. And, you know, 1 of them is already up and running. 1 started this week. 1 starts next week. Yeah,.

And, you know, we are we are still focused on the OEM. it is a it is a specific business. We are working through all the resellers as we normally have. But we are also putting a heavy emphasis of us, as in, you know, Aria talking to the customers directly to try to move this along. As fast as possible. it is not always easy for the resellers to give us the contact info, but, you know, as time goes on, the trust builds so they know that we are gonna treat that customer with white glove service.

William Lauber: Okay. So would it be safe to say that I guess, the Salesforce is gonna be more compensated on commission rather than salary, or how is that I would rather not If we wanna have a sidebar on that, we can we can talk to you or rather talk about that in this audience. Okay. Okay.

And then if I could just get a little bit when you had menti1d the 18 to 24 month sales cycle, is that because the customers are in current contracts with other cybersecurity contracts and they that is 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 is the driver of that? Long sales cycle?

Victor J. Dellovo: it is a combination of both, I would say. it is not it could be 1 or the other. 1 is coming up for, you know, for renewal or, you know, sometimes the Windows 10. Is you know, that is a big push where some of the, you know, our competitor products are not supporting any longer. So that would drive, you know, them to look. And then it is, it is a lot of it is political. You know, 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 is their budget. You know, they bring it into a lab.

They take their time. You know? They gotta go through. It you know, it just there is no rhyme or reason. You know? You know, we do know now for sure that if I if it comes from IT, we have to engage with them immediately because if they truly have the purse strings, they are making the ultimate decision. Even if the OT guys love it, if they do not control the budget, they are not making, you know, they can influence the sale, but they will not make the ultimate decision on that.

So, you know, 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 yeah.

William Lauber: You know, I just kinda gave an 18 to 24. You know, we have closed some other business that took a lot shorter.

Victor J. Dellovo: You know? Wastewater, we closed some businesses that, you know, you know, took 6 weeks. Right? So but the large you know, 700 thousand million-dollar deals, you know, it is it I would say, you know, it could take 12 months if to 24, somewhere in that range.

William Lauber: If I can do anything to show on that, you can believe that I am trying. Okay. And, with Acronis, I know that they would sold at least 2 joint webinars with y'all. And I guess that was even before that product was integrated into their system. Have you gotten any indication as to what kind of interest that they are seeing from their customers?

Victor J. Dellovo: Yeah,. We kind of had to put everything on hold, to be honest with you, just because there was no way for their sales team to sell it. Right? They were the getting products integrated into their system takes quite a bit of time. it is just a process they have because, you know, it touches multiple systems and you know? it is a it is 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 will be able to sell it, you know, not just in The US, but all over the world.

So what that is gonna look like, we are gonna have to reengage with the sales team, the renewal team. You know, it is it is we are gonna 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 roll, and that is kind of where we are at right now. So, you know, promises of October by October 1, everything should be integrated and then we will go full steam ahead trying to, you know, educate the sales team. Get the renewal team on board, and, you know, push it out.

William Lauber: Okay. Alright. I will go back in the queue.

Operator: Thank you. Your next question is coming from Mike Price.

Mike Price: Good morning. I am just can you give us an idea of what the completed product integration with the Acronis software means when it is totally rolled out in terms of revenue What are we gonna see from that?

Victor J. Dellovo: I have no idea yet.

Mike Price: Okay. And can you tell us how much of the I have not seen the 10-Q. How much of the receivables are being financed? Both short and long term?

Gary W. Levine: The probably well, it broken out on the--it is probably about 30 or 40% longer term. And the dollar amount?

Mike Price: Mean, last quarter, it was 7.7 and 8.6 over a year.

Gary W. Levine: Yep and let's see. Right now, it is 8.3.

Mike Price: On the longer, over a year?

Gary W. Levine: Yeah,.

Mike Price: 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? 40 million. Cash and inquiry.

Gary W. Levine: Yeah,. Yep.

Mike Price: Oh, you mean if you add those together? Yep.

Gary W. Levine: Exactly.

Mike Price: 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 are looking at less than an $80 million mark market cap. Okay. Can you give us can you tell us how many shares were repurchased last quarter?

Gary W. Levine: 13 thousand.

Mike Price: 13 thousand?

Gary W. Levine: Yep.

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

Victor J. Dellovo: Absolutely.

Mike Price: Okay. And my final question is, you we appreciate the press release about OpenAI's attack on, Hugging Face could have been prevented. And going back a year and a half, 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 is hard to move the needle on billion dollar or multibillion dollar companies. The market has to be aware of AZT in what it can do.

And having a 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?

Victor J. Dellovo: I mean, Victor, it was--Mike. Yeah. We are trying to do that, Mike. You know? that is why we are working with the Rexel, DataComms of the world, you know, the CEDs, the ePlus, you know? Because of the relationship they have, that is why we are leveraging those resellers to try to, you know, get them to, walk us in as 1 of their you know, premier partners. And that is that trust you know, when talking to the salespeople, Mike, they are like, OK. I know Aria. I know you guys are set up. I know you checked all the boxes. But, you know, this is my best customer. Right?

I am a little nervous that if I walk you in, so you have to build trust with that salesperson. And that does not take, you know, 1 drink on a Friday night. You know? It takes time. You know? They only have 4 or 5 customers each. So it is it is getting them to walk us into the lodge enterprise hand in hand. That takes some time. You know? And that is kinda where we are working with these folks is so we can use their reputation because they have been doing business with these with these companies. But it is still a process because they are like, OK.

We get to the table, and you know, I do not wanna share. who we are talking to right now, but there is a lot of large org our pipeline has grown tremendously from quarter to quarter with real companies with real budgets. So I think the team did a great job even turning the sales team over. They did a really good job. You know, 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.

On the South African stuff, I was on a call with them, too. there is a lot of this, probably 15 really, really good opportunities that we have been working with for 6, 7 months now. So, you know, when I started into this side of it, Mike, I had no idea it was gonna take this long because the world of IT does not take this long. But the OT world, it just does. So we are trying to leverage every partner we have every resource we have to try to build that rapport 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.

Mike Price: And then, you know, then it goes through a purchasing process potentially And they were looking at when they look at AZT, they look at all the products along with it. 5 or 6 or 7 other products. You know, there is 1 I menti1d in the script that, you know, we are down to 2. There were 15 different options they were looking at. it is you know? And then when I wanna say this is 18 months in the making, it is 18 months, and we are down to 2. You know? Hopefully, at the end of the day, we are the ones that they choose. And it is a big, big opportunity. Mhmm.

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 will see exponential growth And then you know, everybody's happy, but it is like you said, it is just seems to be taking forever. So it is very frustrating from an investor standpoint. But I appreciate your I appreciate your diligence.

Victor J. Dellovo: Yep. Appreciate your diligence. Thanks, Mike.

Operator: Your next question is coming from Brett Davidson with Investletter. Please pose your question. Your line is live.

Brett Davidson: Good morning. I just got a couple quick questions here. The router ban by the US government the foreign made routers, is that impacting the delivery of product?

Victor J. Dellovo: Not for us. No. These are just the name brands. That Mhmm. You know, that are all US-based. it is it is just with all the AI build out, it is every memory, hard drives, processors. it is everything's just taking a long time.

Brett Davidson: You know? it is on the average around, you know, 200 days. Right now.

Victor J. Dellovo: Compared to 30 to 60. And we just keep closing the business, and the funnel will just keep growing. And when it gets released, we will just keep processing it. that is all we can do. We do not make the product, so I have no control of when we get it.

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

Victor J. Dellovo: I would say it is probably at least a year of this. I am you know, I do not have a crystal ball, and they may have better, but they are not giving us any you know? As long as the big boys keep buying all the product out there, this is not gonna go away. Any anytime soon. You know, I do not wanna guarantee that, but that is that is the feeling right now. it is going to take some time for this to flush out.

Brett Davidson: I am sure you have seen the spend numbers, but, I mean, trying to remember which 1 it was. Spent 800 billion this past quarter. 200 billion from Google. Those numbers are not sustainable, so I am thinking maybe in the next year, yeah, this is gonna start to resolve itself.

Victor J. Dellovo: Yeah,. Someday this will wash out. You know? But I do not 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 is what we are focused on. Know, the hardware software side of it, is definitely you know, it is a it is a significant part of the business, and it pays a lot of bills. Right? But that is the part that I do not have any control of.

Brett Davidson: And this impacted the gross margin? The holdback on you getting a hold of inventory.

Victor J. Dellovo: Oh, and held back not--well, the gross profit. Right? Because we did not we were not able to recognize, you know, revenue, which, you know, that is kinda why a big piece of why I think we were off on the quarter is just our Yeah,. Our backlog increased by, I what was it, 63% or something like that. 65%. Yeah,. 65%. Yeah,.

Brett Davidson: Alright. Well, thanks so much.

Victor J. Dellovo: Thanks. Thanks, Brad.

Operator: Once again, if there are any questions or comments, please press 1 on your phone at this time. Please hold a moment while we pull for any additional questions. You do have a follow-up question from Joseph Nerges with Segren Investments. Please pose your question, your line is live.

Joseph Nerges: Yeah. Just 1 more question. You Gary, you menti1d that we are out of that we are out of The UK now with their Pension. Pension system. Is that it?

Gary W. Levine: We bought out the--so no. We sold it to insurance company. Sold it. Yep.

Joseph Nerges: Okay. And what did that hit how much did that cost us in the quarter? Couple 100 thousand?

Gary W. Levine: What was the--Yeah. It was the actuarial and legal costs. Came through, and now it was a couple hundred thousand.

Joseph Nerges: Okay. So no more we have no more problem with we are finished with that long term pension because we obviously, the German operation was sold a long time ago. And The US operation does not have that same we do not have that with our--no.

Gary W. Levine: We have the life insurance that yeah. That funds that. Indirectly. it is not part of the but our pensions that we have in the company are funded through that. that is what the cash surrender value on the balance sheet.

Joseph Nerges: Okay. Alright. Well, thank you very much. Appreciate it, guys.

Gary W. Levine: Yep. Yep.

Victor J. Dellovo: Thanks, Joe.

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

Victor J. Dellovo: Thank you, everyone, for joining us today. We continue to work toward maximizing our value for the remainder of fiscal 26 and fiscal 27. 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.

Operator: 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.