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01/11 03:34
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Revenue for Q3 2025 $15.4 million, representing an 18% increase year-over-year. The increase is attributed to the growth in the Technology Solutions segment and the building momentum in the High Performance Products segment.
Product Revenue for Q3 2025 29% growth year-over-year. This growth is due to increased sales in the product side of the business.
Service Revenue for Q3 2025 $5.3 million, slightly higher than the third quarter of fiscal 2024. The increase is marginal and not attributed to any specific reason.
Gross Profit for Q3 2025 $4.5 million or 29% of sales, compared to $4.6 million or 35% of sales in Q3 2024. The decline in gross profit margin is due to higher component costs and changes in the sales mix.
Engineering and Development Expenses for Q3 2025 Increased by 7% year-over-year. The increase is due to higher consulting costs related to the AZT product.
SG&A Expenses for Q3 2025 Increased by $0.2 million year-over-year. The increase is attributed to higher sales and marketing expenses for the AZT PROTECT product.
Tax Benefit for Q3 2025 $751,000 due to a quarterly loss and a refund of federal taxes for fiscal 2019 amounting to $296,000.
Revenue for 9 months of Fiscal 2025 $44.3 million, an increase of $2.1 million compared to $42.2 million in the first 9 months of fiscal 2024. The increase is attributed to overall growth in the business.
Net Profit for 9 months of Fiscal 2025 $0.1 million or $0.01 per diluted share. This is due to a tax benefit of $1.5 million.
Cash and Cash Equivalents as of June 30, 2025 Over $26 million. This strong cash position supports the company's ability to pay dividends and invest in growth initiatives like the AZT product line.
AZT PROTECT cybersecurity offering: Continues to build awareness and significant deal pipeline in the operational technology marketplace. Deployed in steel, concrete, and lumber industries, with potential for long-term relationships. Expanded to protect energy management equipment and security camera systems in South Africa.
Market expansion in South Africa: AZT PROTECT deployed in energy management and security systems for cell towers, with potential for further expansion in industrial IoT infrastructure globally.
Cloud business growth: Managed cloud business exceeded expectations, gaining traction in niche markets like container shipping. Executed over 20 active projects across industries, showcasing expertise in secure, scalable, and high-performance cloud solutions.
Land and expand sales approach: Focused on initial deployments to build trust and expand within organizations, particularly in the steel industry and with large resellers like Rexel USA.
High component costs: Gross profit margin decreased from 35% to 29% due to higher component costs in the product side of the business, impacting profitability.
Longer deployment cycles for AZT PROTECT: Initial deployment of AZT PROTECT often requires a customized approach, leading to longer deployment times and potential delays in revenue realization.
Dependence on resellers: The company relies heavily on resellers like Rockwell Automation distributors for AZT PROTECT sales, which introduces risks related to reseller performance and market positioning.
Market competition: While the AZT PROTECT product faces little competition in its current market segment, the potential for new entrants could disrupt growth and market share.
Economic uncertainties: The company operates in diverse markets, including industrial IoT and cloud services, which are susceptible to economic fluctuations and uncertainties.
Increased operating expenses: Engineering and development expenses increased by 7%, and SG&A expenses rose due to higher sales and marketing costs for AZT PROTECT, potentially impacting net profitability.
Supply chain risks: Higher component costs and reliance on specific suppliers could lead to supply chain disruptions, affecting product availability and costs.
Revenue Growth: The company expects to grow both top and bottom line for the full fiscal year if current trends continue.
Technology Solutions (TS) Segment: Strong momentum in cloud initiatives with over 20 active projects across various industries. The company is focusing on delivering secure, scalable, and high-performance cloud solutions to accelerate digital transformation and operational agility.
High-Performance Products (HPP) Segment: The AZT PROTECT cybersecurity offering is gaining traction in the operational technology marketplace. The company is pursuing a 'land and expand' sales approach, which could lead to significant long-term relationships with customers in industries like steel, concrete, and lumber.
Market Expansion: The company is expanding its presence in South Africa with AZT PROTECT installations and sees potential for growth in protecting industrial IoT infrastructure globally.
Revenue Acceleration: Feedback from major resellers indicates the company is nearing the end of the early adoption cycle for AZT PROTECT and moving towards revenue acceleration within the next 3 to 6 months.
Quarterly Cash Dividend: The Board of Directors approved a $0.03 per share quarterly cash dividend for shareholders of record on August 29, 2025, payable on September 15, 2025.
Share Repurchase: The company repurchased 19,000 common shares on the open market during the quarter, spending $251,000.
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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