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01/11 11:05
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
The earnings call revealed declining service revenue, reduced gross profit margins, and a net loss for the quarter, despite a solid cash position. The Q&A session highlighted management's reluctance to provide specific details on the backlog and potential contracts, raising concerns about transparency and future growth. While there are positive elements like industry recognition and partnerships, the overall financial performance and lack of clarity in guidance suggest a negative outlook, potentially leading to a stock price decline of -2% to -8% over the next two weeks.
Revenue $13.1 million, down from $13.7 million year-over-year, reflecting a slight increase in product sales but a decline in service revenue due to a single multi-million-dollar deal that wasn’t repeated this quarter.
Service Revenue $4.6 million, down from $5.2 million year-over-year, primarily due to the absence of a high-margin multimillion-dollar sales contract recognized in the prior year.
Gross Profit $4.2 million (32% of sales), down from $6.2 million (45.3% of sales) year-over-year, attributed to higher component costs in the product side of the business and the absence of a high-margin contract from the previous year.
Net Loss $108,000 or $0.01 per diluted share for the quarter, compared to a profit in the prior year, influenced by the decline in revenue.
Cash and Cash Equivalents Over $29 million, which supports the company’s ability to pay dividends and invest in growth.
Operating Expenses Essentially flat compared to the prior period, indicating stable cost management.
Tax Benefit $683,000 due to excess tax benefits from restricted stock awards and tax credits.
Six Months Revenue $28.5 million, down from $29.1 million year-over-year, reflecting overall revenue decline.
Net Profit for Six Months $341,000 or $0.04 per diluted share, indicating a decrease compared to the previous year.
Share Repurchase $384,000 spent on repurchasing 23,800 shares during the quarter.
AZT PROTECT traction: AZT PROTECT continues to gain traction in the OT marketplace, signing six new customers during the quarter.
New reseller partnership: Entered a new reseller partnership with Rexel USA, a premier Rockwell Automation distributor.
New customer contract: Signed a contract with Oryx Industries in South Africa for AZT PROTECT, potentially generating seven-figure sales.
Market expansion: Expanded opportunities for AZT PROTECT, increasing total opportunities fivefold over the past couple of quarters.
New customer acquisition: Acquired new customers in South Africa, enhancing market presence in the region.
Revenue performance: Fiscal Q2 revenue was $13.1 million, meeting internal expectations despite a decline in service revenue.
Cash position: Finished the quarter with over $29 million in cash and cash equivalents.
Share repurchase: Repurchased $384,000 worth of common shares during the quarter.
Focus on AZT PROTECT: Continued investments in marketing AZT PROTECT and enhancing the sales team.
Cloud services project: Awarded a project for Microsoft Azure migration for a Florida-based healthcare provider.
Revenue Decline: Service revenue declined to $4.6 million from $5.2 million due to a single multi-million-dollar deal not being repeated this quarter.
Operating Conditions: Challenging operating conditions anticipated, including price increases on products purchased for resale and potential customer spending reductions due to reduced headcount and project postponements.
Component Costs: Higher component costs in the product side of the business affected gross profit, which decreased from 45.3% to 32% of sales.
Market Competition: Increased competition in the cybersecurity market, particularly for AZT PROTECT, as the company seeks to expand its customer base and market presence.
Economic Factors: Economic uncertainties may influence customer spending and project timelines, impacting overall revenue and profitability.
AZT PROTECT Growth: AZT PROTECT continues to gain traction in the OT marketplace, with six new customers signed during the quarter and a fivefold increase in total opportunities.
New Reseller Partnership: Entered a new reseller partnership with Rexel USA, a leading distributor, to deploy AZT PROTECT in various industrial settings.
International Expansion: Signed a contract with Oryx Industries in South Africa to protect equipment for a major cell tower provider, with potential seven-figure sales over 18 months.
Marketing Investments: Continued investments in marketing AZT PROTECT, including participation in conferences and regional events.
Technology Solutions Contracts: Executed contracts with cruise lines and a healthcare provider for cloud-based services, indicating strong demand in the Technology Solutions sector.
Revenue Expectations: Fiscal second quarter revenue was $13.1 million, meeting internal expectations, with a promising start to the second half of the fiscal year.
Profitability Outlook: Gross profit for the quarter was $4.2 million (32% of sales), reflecting higher component costs and a previous high-margin contract not repeated this quarter.
Cash Position: Finished the quarter with over $29 million in cash and cash equivalents, supporting ongoing investments and a quarterly cash dividend.
Challenges Ahead: Anticipated challenges include price increases on products and potential reductions in customer spending due to economic conditions.
Dividend Declaration: Board approved a $0.03 cash dividend for shareholders, payable on June 11, 2025.
Quarterly Cash Dividend: The Board of Directors authorized a $0.03 per share quarterly cash dividend for shareholders of record on May 28, 2025, payable on June 11, 2025.
Share Repurchase Program: The company repurchased $384,000 worth of common shares during the quarter, purchasing 23,800 shares.
The earnings call shows mixed signals: strong service revenue growth and improved operating loss are positive, but net loss and cash decline are concerning. The Q&A reveals uncertainty in revenue predictability and lack of OEM agreements. While the Acronis partnership and potential endpoint sign-ups are promising, the lack of concrete guidance tempers optimism. Overall, the sentiment is neutral due to balanced positives and negatives.
The earnings call presents a mixed picture: positive revenue growth and cash position, but declining gross margins and higher expenses. The Q&A reveals potential in the AZT PROTECT product and new markets, but management's reluctance to share future projections adds uncertainty. Given these factors and the lack of clear guidance, the stock price is likely to remain stable in the short term.
The earnings call revealed declining service revenue, reduced gross profit margins, and a net loss for the quarter, despite a solid cash position. The Q&A session highlighted management's reluctance to provide specific details on the backlog and potential contracts, raising concerns about transparency and future growth. While there are positive elements like industry recognition and partnerships, the overall financial performance and lack of clarity in guidance suggest a negative outlook, potentially leading to a stock price decline of -2% to -8% over the next two weeks.
The earnings call reveals a mixed performance with declining service revenue and gross profit, and a net loss compared to last year's profit. Despite strong cash reserves and shareholder returns via dividends and buybacks, the lack of clear guidance on AZT's backlog and competitive pressures in cybersecurity raise concerns. The market's response is likely negative due to the revenue miss, reduced profit margins, and management's vague responses in the Q&A, overshadowing the positive aspects like cash position and shareholder returns.
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