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01/11 03:35
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Access earnings results, analyst expectations, report, slides, earnings call, and transcript.
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.
Fourth Quarter Revenue $14.5 million, an increase of 11% year-over-year. The growth was driven by strong performance in the Technology Solutions business and increased service revenue.
Service Revenue (Q4) Increased by 63% year-over-year, representing approximately 44% of total revenue compared to 30% in the prior year. The increase was attributed to the growing demand for managed cloud and MSP services.
Gross Margin (Q4) 37%, which was more than 800 basis points higher than the same prior year quarter. The increase was driven by exceptional service revenue growth.
Operating Loss (Q4) $0.5 million, compared to $2 million in the same period of the prior year. The improvement was due to increased revenue and controlled SG&A expenses.
Net Loss (Q4) $191,000 or $0.02 per diluted share, compared to a net income of $1.7 million or $0.18 per diluted share in the prior year. The decline was due to increased R&D costs and other investments.
Cash and Cash Equivalents $27.4 million as of September 30, 2025, down about 10% year-over-year. The decrease was due to revenue financing for customers, investments in AZT PROTECT growth strategy, dividend payments, and share repurchases.
Full Year Revenue Increased by 6% year-over-year. The growth was driven by the Technology Solutions business and increased service revenue.
Full Year Gross Profit $18.5 million or 32% of sales, compared to $18.9 million or 34% of sales in the prior year. The slight decline in margin percentage was due to changes in revenue mix.
Net Loss (Full Year) $91,000 or $0.01 per share, compared to a net loss of $326,000 or $0.04 per share in the prior year. The improvement was due to increased revenue and controlled expenses.
AZT PROTECT cybersecurity offering: Significant investment in building the deal pipeline and new customers. Dozens of new installations and expanded pipeline for new customers. Enhanced software for easy integration into industrial IoT products. Initial success in protecting industrial IoT devices.
Market expansion in maritime industry: Expanded installations and gained contracts to service these installations. Backlog for cruise ship installs and upgrades to be converted into revenue in fiscal 2026.
Rockwell Automation channel: Participated in Rockwell Automation Fairs in 2024 and 2025, leading to increased visibility and customer engagement.
Service revenue growth: Service revenue grew 63% in Q4 2025 compared to the same quarter in 2024. Represented 44% of total revenue in Q4 2025, up from 30% in Q4 2024. For the full year, service revenue grew to 36% of total revenue from 33% in 2024.
Managed cloud and MSP services: Achieved double-digit growth in fiscal 2025. Allocating more resources, including additional sales reps, to sustain growth in fiscal 2026.
Focus on industrial IoT devices: Targeting the industrial edge compute market with AZT PROTECT. Enhanced software to simplify mass deployments and integrate with existing systems.
Revenue financing and shareholder returns: Provided revenue financing to qualified customers. Paid $0.03/share dividend and repurchased shares worth $234,000 in Q4 2025.
Integration Challenges: The company faces challenges in integrating AZT PROTECT into industrial IoT products supplied by other vendors. Although they have overcome these challenges so far, further work is required to streamline the integration process.
Dependence on Strategic Partners: The success of AZT PROTECT heavily relies on strategic partners and distributors, such as Rockwell Automation. Any disruption in these partnerships could adversely impact sales and market penetration.
Market Competition: The cybersecurity market, particularly for industrial IoT devices, is highly competitive. The company must maintain its competitive advantage to sustain growth.
Economic Uncertainties: Economic uncertainties could impact customer budgets and spending on IT and cybersecurity solutions, potentially affecting revenue growth.
Customer Financing Risks: The company provides revenue financing to qualified customers, which has doubled over the past year. This increases financial exposure and risk if customers default on payments.
R&D Investment Pressure: Increased research and development costs to enhance AZT PROTECT and develop new features could strain financial resources if not offset by corresponding revenue growth.
Fiscal 2026 Growth Expectations: The company is positioned for increased momentum and growth in fiscal 2026, with a focus on expanding the managed cloud and MSP services, particularly in the maritime industry. Resources, including additional sales representatives, are being allocated to capitalize on these opportunities.
Service Revenue Projections: Service revenue, which represented 36% of total revenue in fiscal 2025, is expected to grow further in fiscal 2026. The company aims to leverage its strong service track record and higher gross margins associated with service revenue to drive profitability.
Maritime Industry Expansion: The company plans to expand installations and gain contracts to service these installations in the maritime industry during fiscal 2026. Backlog for cruise ship installations and upgrades is expected to convert into revenue over the next 12 months.
AZT PROTECT Cybersecurity Offering: The company aims to convert the growing momentum of AZT PROTECT into significant sales in fiscal 2026. Efforts include expanding deployments in industrial IoT environments and addressing integration challenges to streamline mass deployments.
Industrial IoT Market Entry: The company is optimistic about entering the industrial IoT market with AZT PROTECT, which has shown initial success in protecting traditionally difficult-to-secure devices. This market is seen as a large, unserved opportunity.
Revenue Growth and Profitability: The company expects to generate consistent profitability improvements in fiscal 2026, leveraging revenue growth and investments made in infrastructure and business expansion.
Dividend Payment: A $0.03 per share dividend was paid during the fourth quarter of fiscal 2025.
Future Dividend Announcement: A $0.03 per share dividend will be paid on July 15, 2026, to shareholders of record on December 26, 2025.
Share Repurchase: 19,500 shares of common stock were repurchased during the fourth quarter of fiscal 2025 at a total cost of $234,000.
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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