CSP Inc. Reports 4% Sales Decline and Operating Loss in Q2 Fiscal 2025

CSP Inc. reported a decline in financial performance for the second quarter of fiscal 2025, with total sales decreasing by 4% to $13.1 million compared to $13.7 million in the same period last year. The company's gross profit also fell significantly, dropping to $4.2 million, or 32% of sales, down from 47% in the prior year. This decline in profitability was attributed to increased costs of sales, which rose to $8.9 million from $7.2 million, leading to an operating loss of $1.0 million, a stark contrast to the operating income of $1.2 million reported in the previous year.

In the six-month period ending March 31, 2025, CSP Inc. experienced a slight decrease in total sales, which amounted to $28.8 million, down from $29.1 million in the same period of the previous year. The decrease was primarily driven by a $2.2 million drop in the High Performance Products (HPP) segment, partially offset by a $1.9 million increase in the Technology Solutions (TS) segment. The overall gross margin for the six months also decreased to 30% from 36%, reflecting the challenges faced in maintaining profitability amid rising costs.

Operationally, CSP Inc. reported a total of 9,863,101 shares of common stock outstanding as of May 9, 2025. The company has been focusing on enhancing its product offerings, particularly in the TS segment, which saw a 12% increase in sales driven by existing major customers. However, the HPP segment faced challenges, with a significant decline in product sales attributed to the absence of a large order that had occurred in the previous year. The company continues to explore opportunities for geographic expansion and product adoption, particularly in the cybersecurity domain.

CSP Inc. has also made strategic decisions to improve its financial position, including a focus on managing its operating expenses, which decreased slightly to $5.2 million from $5.2 million year-over-year. The company reported a net loss of $108,000 for the quarter, compared to a net income of $1.6 million in the same quarter last year. The tax benefit recorded during the quarter was $683,000, contrasting with an expense of $135,000 in the prior year, reflecting the impact of tax credits and other adjustments.

Looking ahead, CSP Inc. remains cautious about the potential impacts of geopolitical tensions and market conditions on its operations. The company is committed to addressing its internal control weaknesses and enhancing its financial reporting processes. Management believes that the available cash, cash equivalents, and access to credit will be sufficient to meet working capital needs for at least the next 12 months, while continuing to evaluate opportunities for growth and operational efficiency.