CSP INC /MA/ (CSPI) Business
This page reproduces the company's own Item 1 Business text from the linked SEC filing. It is filer text, not grepcent analysis, scoring, or investment advice.
Informational only - not investment advice. See Disclaimer.
Item 1. Business
CSP Inc. ("CSPi" or "CSPI" or "the Company" or "we" or "our") was incorporated in 1968 and is based in Lowell, Massachusetts. To meet the diverse requirements of our commercial and defense customers worldwide, CSPi and its subsidiaries develop and market IT integration solutions, advanced security products, managed IT services, cloud services, purpose built network adapters, and high-performance cluster computer systems.
Segments
CSPI operates in two segments: Technology Solutions ("TS") and High Performance Products ("HPP").
TS Segment
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| ● | The TS segment consists of our wholly-owned Modcomp, Inc. subsidiary, which operates in the United States and the United Kingdom. |
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| · | The TS segment generates product revenues by reselling third-party computer hardware and software as a value added reseller ("VAR"). The TS segment generates service revenues by the delivery of professional services for complex IT solutions, including advanced security; unified communications and collaboration; wireless and mobility; data center solutions; and network solutions as well as managed IT services ("MSP") that primarily serve the small and mid-sized business market ("SMB"). |
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| · | Third party products and professional services are marketed and sold through the Company’s direct sales force into a variety of vertical markets, including automotive, defense, healthcare, education, federal, state and local government, and maritime. |
HPP Segment
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| ● | The HPP segment revenue comes from three distinct product lines: (i) a cybersecurity solution marketed as ARIA™ Software-Defined Security (“SDS”), which is offered to commercial, original equipment manufacturers ("OEM") and government customers; (ii) the Myricom® network adapters and related software for commercial, government and OEM customers; and (iii) the legacy Multicomputer product portfolio for digital signal processing ("DSP") applications within the defense markets. |
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| ● | The ARIA SDS solution is a software portfolio comprised of 3 products: ARIA Packet Intelligence software which is used by customers for its high-speed wire-rate in-line packet filtering, steering and policy enforcement functions. ARIA Advanced Detection and Response (“ADR”) solution used by customers to find and stop threats in real-time by monitoring their entire network, device and services footprint. It is used as the basis of MDR (Managed Detection and Response) services offered by ARIA and its Managed Security Service Provider (“MSSP”) partners who provide it as part of a 24x7 managed SOC (Security Operations Center) offering. The product automates the MITRE ATT&CK™ framework to find threats up to 100 times faster with fewer human resources than other solutions. |
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| ● | In July of 2023 ARIA Zero Trust (AZT) PROTECT™ was introduced to the market. ARIA AZT PROTECT™ was designed to fill a gap in the market – stopping the most sophisticated attacks that are used to attack critical infrastructure applications before harm can be done. It compliments other protection technologies in place and can stop some of the most well-known attacks including the SolarWinds attack, and the recent Russian sponsored Sandworm attacks used on utilities and energy infrastructure. The product is deployed and generating revenue from its initial contracts. |
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| ● | Revenue is derived from: (i) license sales of our software platform components, (ii) support packages and (iii) any required supporting services. The software licenses, the support packages, as well as supporting services |
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| are renewable on a recurring basis. |
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| ● | The ARIA portfolio is of value to regulated industries, such as manufacturing, pharmaceuticals, financial services, energy production, utilities, transportation and healthcare, due to the rise of critical infrastructure regulations enforced at the federal, state, and international level, as well as by industry entities. In addition, due to the complexities and high costs associated with enterprise-wide security, particularly in the creation and operation of SOCs, we believe that ARIA will be attractive to organizations that desire SOC-level protections without incurring the costs of procuring disparate tools and hiring and retaining highly trained security analysts. We also have begun selling our unique solution into MSSPs that want to offer a lower cost, more effective service at detecting today’s widening range of cyber-attacks. |
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| ● | The Myricom SmartNIC adapters (“ARC Series” and Myricom Secure Intelligent Adapters or “SIA”) are optimized for and sold into markets that require high-bandwidth and low-latency including (i) packet capture, (ii) financial transactions, (iii) machine vision and (iv) network security. The ARC series has reached end of life due to ASIC supplier problems which will significantly reduce its contribution to the HPP line of business. The focus is now supporting its applications on third party provided intelligent network interface cards. |
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| ● | Multicomputer products for DSP applications are no longer actively developed but will continue to be sold into established programs through fiscal year 2025 and supported for several years via our repair services offering. The revenue from these products, as a percentage of overall Company revenue, is expected to continue to decline over time. |
Sales Information by Industry Segment
The following table details our sales by operating segment for fiscal years ended September 30, 2025 and 2024. Additional segment and geographical information are set forth in Note 17 Segment Information to the consolidated financial statements.
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| Segment | | 2025 | | % | | 2024 | | % | |||
| | | (Dollar amounts in thousands) | |||||||||
| TS | | $ | 56,808 | 97 | % | $ | 51,065 | 92 | % | ||
| HPP | | 1,922 | 3 | % | 4,154 | 8 | % | ||||
| Total Sales | | $ | 58,730 | 100 | % | $ | 55,219 | 100 | % |
TS Segment
Products and Services
Integration Solutions
The TS segment is a value-added reseller ("VAR") of third-party hardware and software technology solutions along with our advanced technology consulting, professional IT, managed IT and Cloud services. Our value proposition is our ability to support the complete IT life cycle of planning, designing, implementing and optimizing a comprehensive solution into our customers’ IT environments to help achieve their expected business outcomes.
Third-Party Hardware and Software
We sell third-party hardware, software, and information technology products, with a strategic focus on industry-standard servers and data center infrastructure solutions, midrange data storage infrastructure products, networking and mobility products, unified communications, and advanced IT security hardware and software solutions. Our key offerings include products from Hewlett Packard Enterprise (HPE)/Aruba, Cisco Systems, Palo Alto Networks, Nutanix, Dell EMC, Juniper Networks, Varonis, Cato Networks, Fortinet, Microsoft and Barracuda. Through our business relationships with these vendors, we are able to offer competitively priced robust products to meet our diverse customers’ technology needs, providing procurement and engineering expertise in server infrastructure, storage, security, unified communications,
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mobility and networking to the small-to-medium sized businesses ("SMBs") and large enterprise businesses ("LEBs") with unique and/or complex IT environments. Many of our SMB customers have unique technological needs and may lack technical purchasing expertise or have very limited IT engineering resources on staff. We offer our customers a single point of contact for complicated multi-vendor technology purchases. We also provide installation, integration, logistical assistance and other value-added services that customers may require. We target SMB and LEB customers across all industries. Our current customers are in web and infrastructure hosting, education, travel, telecommunications, healthcare services, distribution, financial services, professional services and manufacturing.
Professional Services
We provide professional IT consulting services in the following areas:
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| ● | Assessments, planning, designing, implementation, migration, optimization services and project management. |
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| ● | Hyper-Converged Infrastructure ("HCI"). We assist our clients with designing and implementing HCI solutions from multiple vendors including DellEMC, Nutanix, HPE and Cisco. HCI is a software-centric architecture that tightly integrates compute, storage and virtualization resources in a single system. The benefits of an HCI solution are improved performance, scalability and flexibility all in a reduced footprint. |
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| ● | Virtualization. We help our customers implement virtualization solutions using products from companies such as VMWare, Nutanix and Citrix that allow one computer to do the job of multiple computers by sharing resources of a single computer across multiple environments. Virtualization eliminates physical and geographical limitations and enables users to host multiple operating systems and applications on fewer servers. Benefits include energy cost savings, lower capital expenditure requirements, high availability of resources, better desktop management, increased security and improved disaster recovery. |
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| ● | Enterprise security intrusion prevention, network access control and unified threat management. Using third-party products from companies like Palo Alto, Aruba Networks, Juniper Networks, Fortinet, Barracuda and Cisco Systems, our services are designed to ensure data security and integrity through the establishment of virtual private networks, firewalls and other technologies. |
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| ● | IT security compliance services. We provide services for IT security compliance with personal privacy laws such as the Payment Card Industry Data Security Standard ("PCI DSS"), the Health Insurance Portability and Accountability Act of 1996 ("HIPAA"), and internal control regulations under the Sarbanes-Oxley Act ("SOX"). |
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| ● | Unified communications, using Cisco Systems and Microsoft solutions. We are Cisco Premier Partner approved for its Cloud and Managed Services Program for Managed Business Communications and a Microsoft Gold Partner with specialties in Cloud, and Collaboration solutions. |
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| ● | Wireless, routing, and switching solutions using Juniper Networks and Aruba Networks products and services. |
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| ● | Custom software applications and solutions development and support. We develop custom applications to customer specifications using industry standard platforms such as Microsoft.Net, SharePoint and OnBase. We are a Microsoft Gold Partner. |
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| ● | Managed IT services that include monitoring, reporting and management of alerts for the resolution and preventive general IT and IT security support tasks. |
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| ● | Optimization, maintenance and technical support for third-party products including hardware and software, operating system and user support. |
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Managed IT and Cloud Services
As consumption models continue to evolve in our industry, we have developed a robust managed and cloud services portfolio to provide alternative solutions to traditional capital expenditure investments in IT solutions and IT operations for our clients. Our value is to provide an elastic offering that will allow the client to scale and consume these offerings with monthly billing options that help control costs and provide economies of scale.
We provide managed and cloud services in the following areas:
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| ● | Proactive monitoring and remote management of IT Infrastructure that includes networks (both wired and wireless), data centers (which includes compute, storage and virtualization), desktops, unified communications platforms and security. |
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| ● | Managed and Hosted Unified Communication as a Service via a Cisco Communication and Collaboration solution under an annuity program. |
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| ● | Managed Security (firewall, endpoint protection, malware, anti-virus Managed Detection & Response). |
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| ● | Managed BackUp and Replication. |
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| ● | Cloud services that include Microsoft 365, Azure, Azure Virtual Desktop, Greencloud, Amazon Web Services and Google Cloud Platform. |
Markets and Marketing
We are an IT systems integrator and computer hardware and software VAR. We also provide technical services to achieve a value-add to our customers. We operate within the VAR sales channels of major computer hardware and software OEMs, primarily within the geographic areas of our sales offices and across the U.S. We provide innovative IT solutions, including a myriad of infrastructure products with customized professional IT consulting services and managed services to meet the unique requirements of our customers. We market the products and services we sell through sales offices in the U.S. and the U.K. using our direct sales force.
Competition
Our primary competition in the TS segment is other VARs ranging from small companies that number in the thousands, to large enterprises such as CDW, PC Connection, Insight, Presidio, Dimension Data, and Computacenter Limited. In addition, we compete directly with many of the companies that manufacture the third-party products we sell, including Cisco Systems, IBM, HPE, EMC (now part of Dell) and others. In the network management, security and storage systems integration services business, our competitors are extensive and vary to a certain degree in each of the geographical markets, but they also include such national competitors as HP/EDS, IBM and Cap Gemini.
Nearly all of our product offerings are available through other channels. Favorable competitive factors for the TS segment include procurement capability, product diversity which enables the delivery of complete and custom solutions to our customers and the strength of our key business relationships with the major IT OEMs. We also consider our ability to meet the unique and/or specialized needs of the SMB and LEB markets and our strong knowledge of the IT products that we sell to be a key competitive advantage. Our ability to provide managed services through our network operations center and the professional IT services required to design and implement custom IT solutions to address our customers' IT needs are distinct competitive advantages. Unfavorable competitive factors include low name recognition, limited geographic coverage and pricing.
Sources and Availability of Product
No components used in our TS segment products are obtained from sole-source suppliers.
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Backlog
The gross backlog of customer orders and contracts for the TS segment was approximately $7.1 million as of September 30, 2025 compared to $4.9 million as of September 30, 2024. Our backlog can fluctuate greatly. These fluctuations can be due to the timing of receiving large orders for third-party products and/or IT services. It is expected that all the customer orders in backlog will ship and/or be provided during fiscal year 2026.
HPP Segment
Products and Services
The mission of the HPP team is to deliver a differentiated, smarter approach to cybersecurity. Our software-defined platform makes it easier for organizations to achieve enterprise-wide network security with a focus on the protection of critical assets, applications and devices from cyberattacks.
Markets and Marketing
Cyber Security Products Market
The ARIA SDS and ADR solution is targeted at organizations that need to get additional functionality out of their current cybersecurity solutions to find and stop attacks, while also reducing their operating costs. At the present time, our ARIA solutions are primarily offered through our direct sales channel, however with ARIA AZT PROTECT’s introduction we have begun to add channel partners such as independent resellers.
OEM vendors in the cybersecurity market can benefit from integrating the ARIA applications and leveraging them as internal solutions to allow their applications to scale and add critical functionality. OEMs are interested in running our ARIA SDS applications on their SmartNIC and other ARM-core based platforms.
As mentioned, MSSPs require simple, yet differentiated, solutions that can be deployed across their customer bases. The detection and automation capabilities found in ARIA solutions are valuable as they allow these security service providers to scale their offerings while increasing the productivity of their security operation center staff.
Manufacturing Market
Our focus for fiscal year 2026 and beyond is to expand from our initial successes more broadly into this market and its various sub segments.
Energy/Utility Market
We believe our AZT PROTECT product is well suited to address a critical security gap in this market. Noting that sales cycles can be up to 1 year.
Competition
CSPi’s competition in the cybersecurity space comes primarily from the large, traditional security vendors like Palo Alto, VMware and security services providers like Arctic Wolf.
Manufacturing, Assembly and Testing
Currently, products are shipped to our customers directly from our plant in Lowell, Massachusetts.
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Research and Development
For the year ended September 30, 2025, our expenses for R&D were $3.3 million compared to $3.0 million for the year ended September 30, 2024. Expenditures on R&D are expensed as they are incurred. Product development efforts in fiscal year 2024 and 2025 involved development of the ARIA product set, ARIA Zero Trust (AZT), and enhancements to our ARIA SDS and ARIA ADR product offering. We expect to continue to make investments related to the development of new cybersecurity software applications.
Intellectual Property
We rely on a combination of trademark and trade secret laws in the United States and other jurisdictions, as well as confidentiality procedures and contractual provisions to protect our intellectual property rights. We have newly issued as well as pending patents for the ARIA AZT PROTECT™ software and will be pursuing additional patent rights over time.
Sources and Availability of Product
No components used in our HPP segment products are obtained from sole-source suppliers.
Backlog
The gross backlog of customer orders and contracts in the HPP segment was $1.0 million as of September 30, 2025 as compared to $0.8 million as of September 30, 2024. Our backlog can fluctuate greatly. We can experience large fluctuations due to the timing of receipt of large orders often for purchases from prime contractors for sales to the government. It is expected nearly all of the customer orders in backlog will ship and/or be provided through fiscal year 2026.
All Companies
Significant Customers
See Note 17 Segment Information in the notes to the consolidated financial statements for detailed information regarding customers. There were no customers which comprised more than 10% of consolidated revenues for the years ended September 30, 2025 or 2024.
Employees
As of September 30, 2025, we had approximately 123 full time equivalent employees worldwide for our consolidated operations. None of our employees are represented by a labor union and we have had no work stoppages in the last three fiscal years. We consider relations with our employees to be good.
Company Website
The United States Securities and Exchange Commission (“SEC”) maintains an internet site (www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC. The Company’s internet address is http://www.cspi.com. Through that address, the Company’s Annual Report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to those reports are available free of charge as soon as reasonably practicable after they are filed with the SEC. The information contained on the Company’s website is not included in, nor incorporated by reference into, this annual report on Form 10-K.
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Financial Information about Geographic Areas
Information regarding our sales by geographic area and percentage of sales based on the location to which the products are shipped or services rendered are in Note 17 Segment Information of the notes to the consolidated financial statements.