Genasys Inc. Price & Performance (GNSS)

All lines have been placed on a listen only mode and the floor will be open for At this time, it is my pleasure to turn the floor over to your host, Brian Alger, SVP, Investor Relations and Corporate Development. Welcome, Brian. The floor is yours.

Good afternoon. Welcome to Genasys' Fiscal twenty twenty five First Quarter Results Conference Call. I am Brian Alger, SVP, Investor Relations and Corporate Development for Genesis.

With me on the call today are Richard Danforth, our CEO and Jim Kline, the company's CFO. During today's call, management will make forward looking statements regarding the company's plans, expectations, outlook and future financial performance that involve certain [indiscernible] The company's results may differ materially from the projections described in these forward looking statements. Factors that might cause such differences and other potential risks and uncertainties can be found in the Risk Factors section of the company's Form 10 ks for the fiscal year ended 09/30/2024. Other than statements of historical facts, forward looking statements made on this call are based on the information and management's expectations as of today, 2025. We explicitly disclaim any intent or obligation to update those forward looking statements, except as otherwise specifically stated. We will also discuss non GAAP financial measures and operational metrics, including adjusted EBITDA. Bookings backlog and adjusted net loss, which we believe provide helpful information to investors with respect to evaluating the company's performance. For [indiscernible] please see the table on the press release issued by the company at the close of market today. We consider bookings and backlog leading indicators of future revenues and these metrics to support production planning.

Bookings is an internal operational metric that measures the total dollar value of a customer's purchase orders executed in a given period regardless of the timing of related revenue recognition, Backlog is a measure of purchase orders received that are scheduled to ship in the next twelve months. Finally, a replay of this call will be available in approximately four hours through the Investor Relations page on the company's website. Now at this time, it's my pleasure to turn the call over to Genesis Genasys' Chief Executive Officer, [indiscernible] Thank you, Brian, and welcome everyone. We are pleased to report that fiscal twenty twenty five is off to a good start. Substantially better than the prior year's quarter.

Before we get into the results of the quarter, I want to spend some time discussing Genesis Genasys enrolled during January's historic fires in Southern California. These fires made national and international noobs. I am sure that all of you are aware that in the January, Los Angeles County experienced a dangerous but not uncommon weather event creating very high winds combined with extremely low humidity. Days before anything occurred, notices were issued by various weather services and as a result, we and our customers were ready. What did happen however was far greater than anything previously experienced. Several different fires ignited across the county. Requiring an unprecedented amount of coordination and communicate the communication across a plethora of agencies. The sheer scale of the response was unprecedented. Emergency teams across the Western United States descended upon Los Angeles as part of a comprehensive mutual aid engagement to fight the fires and keep people safe. What stood out wasn't just the scale of the fires, but the technological advancements that enabled first responders from across Southern California and beyond to work together. Unfortunately, fast moving and devastating wildfires fires are not uncommon. We can all recall the images from the Paradise Tubs in Lahaina fires.

All driven by very high wins devastating communities near urban interface areas. The lesson learned from those prior tragedies led to Genesis developing in LA County to purchase our Genesis Genasys solution. Though the images of the devastation to the homes and properties of the communities across Los Angeles County are eerily similar [indiscernible] What is demonstrably different is the toll on human life. Utilizing Genesis Protect, LA County and its partners successfully safely evacuated hundreds of thousands of citizens. Without question, countless lives were saved through the timely use of the Genasys Protect platform. As we all know, the fire events of Los Angeles lasted for several days and over the course of that time, emergency managers and first responders were in continuous communication with the community. Over 400 zone status changes were communicated over just two weeks. Throughout the countrywide event, Genesis personnel were on-site sitting side by side with County, state and federal emergency management. Lessons learned from this extreme experience of being implemented in the Genesis Genasys development and customer success protocols. From a platform standpoint, Genesis Genasys proved to be incredibly resilient. Scaling up capacity orders of magnitude during peak traffic. At one point, Genesys Genasys were processed 83,000 requests per second, Genesis website grew more than 2,000,000 active users in the month of January and the number of Genesis app users jumped 5x.

During that month. Not only managers to get the word out, But Genesis also continuously informed the hundreds of thousands of impacted residents families and loved ones around the country with the official and most accurate information on the It is impossible to overstate how proud we are of the team, and the performance of Genesis Genasys in such a critical and high profile event. Recently at the California Fire Chiefs operational Technology Summit, where fire operations chiefs from across the state [indiscernible] with the goal of improving operations in firefighter safety. Genesis presented a minute by minute account of the response and communication by San Diego County for the Bernardo fire two weeks ago.

We were able to show the logs from our software that confirmed an incredibly fast response. Residents received evacuations warnings and orders in less than eight minutes after first responders arrived on scene. In rapidly changing emergencies where time of response equates equates to lives at risk, The speed and accuracy of the notifications that the Genesis Genasys platform provides enables first responders to accomplish their primary mission of protecting the community and saving lives.

While Genesis was supporting we were also making meaningful headway with the project in Puerto Rico. When we last spoke, we had received the first deposit of approximately $8,000,000 and recently we have received the second deposit for $2,000,000 and we have received written approval of the design on the third group of dams. Procurement of hardware is well underway. And our engineers are working with local teams to coordinate the installation of various on the first two groups. Importantly, we recently completed a first major milestone the provisioning of a 50 kilowatt generator. As a result, our first revenues for Puerto Rico will be recorded in our second fiscal quarter. The December results largely reflect the year on year improvement on hardware backlog and software ARR.

Importantly, both gross margins and operating expenses improved sequentially. In the quarter, we realized an increase in gross profit of $400,000 and a decrease in operating expenses of $770,000 Looking forward over the balance of fiscal year, we expect to see continued improvement in both our hardware and software business. While the Puerto Rico projects, it's certainly going to drive the greatest impact, international and law enforcement demand for our traditional LRAD products continues to rebound towards pre COVID levels.

Additionally, the value proposition of acoustics for critical infrastructure infrastructure protection and public safety is becoming increasingly more apparent and is significantly expanding our pipeline for opportunities. Finally, I'll work with the US DoD across the branches continues to be robust. Recently, we received a follow on order for two mobile communication trailers for the United States Army. And we are regularly supporting the United States Navy with spares and equipment. We continue to see progress progress with the AHD CROWS program.

As most of you are aware, funding was put in place for this in FY 2024 and is yet to be put under contract. I am certain the program will get underway and expect the timing of the award to become more clear in the coming months. In summary, fiscal twenty twenty five is steadily ramping up and we are eager to realize the acceleration in our business over the next several months. Beyond 2025, the outlook continues to improve with a broadening pipeline and increased visibility and predictability coming from our software offerings. Now I'll turn the call over to Dennis to go through the financial and greater in an [indiscernible] Thank you, Richard.

In the first quarter of fiscal twenty twenty five, we generated significant revenue growth over the prior year quarter, In the first quarter of fiscal twenty twenty five, recurring software revenue increased 69% Year over year, Total software revenue in the quarter grew 64% year over year including from an additional Genesys Genasys order Los Angeles County.

Hardware revenue grew 57% over year.

Gross profit margin was 45.8% in the December quarter. Up nearly 12 points versus the year ago period.

This quarter's results reflect the benefit of higher revenue in both the hardware and software segments and a favorable mix of revenue this quarter.

Software margins continued to increase as a percentage of sales as recurring software revenue [indiscernible] Plus hardware this quarter reflects a two point benefit from a sale through a favorable sales channel.

Conversely, last year's quarter included an order that was a two point drag on the margin. Quarterly operating expenses were $9,100,000 this quarter versus $8,700,000 in last year's first quarter. The primary increase was in SG and A for professional services, including planning related costs related to the Puerto Rico project, we anticipate quarterly operating expenses will be similar or slightly higher throughout the remainder of this fiscal year.

On a GAAP basis, our first fiscal quarter operating loss was $5,900,000 compared to an operating loss of $7,200,000 Adjusted EBITDA, which excludes non cash stock compensation, was a negative $4,800,000 a significant improvement from the negative $6,000,000 in the first quarter of fiscal twenty twenty four. GAAP net loss in this fiscal year's first quarter was $4,100,000 including $2,200,000 of other income related to the quarterly adjustment to the fair value of warrants issued with the term loan last May. This compares to the net loss of 6,700,000.0 in fiscal twenty twenty four's first quarter. Cash, cash equivalents and marketable securities totaled $13,900,000 as of December 31, 2024, compared with $13,100,000 as of the prior fiscal year end. Cash provided by operating activities in the first quarter of this fiscal year was $900,000 including an $8,000,000 deposit received for the first group of dams in Puerto Rico.

Subsequent to the end of the quarter, we received a second deposit for $2,100,000 Recently, we received written approval for the designs on the third group of dams, the expected deposit for the third group is nearly $11,000,000 We will receive the remaining 40% of the purchase price upon customer acceptance of each of the 19 dams in these three groups.

Now I'd like to update everyone on our current expectations for how the project in Puerto Rico flow through the financials. As we have seen, the cash for the group deposits are being received in advance of the work on each group of dams.

This is allowing us to procure the necessary inventory and materials to deliver and see installation and implementation plans of each group. Our current expectation that we will utilize the percentage of completion methodology for revenue recognition on the most significant elements of the Puerto Rico project.

As Richard indicated, we've achieved our first milestones with the project and initial revenues will will be recorded this quarter. With more significant revenue recognition coming in the June. When deliveries of hardware and implementation of the first group gets underway, While the details of the POC accounting are still being finalized, we don't expect to recognize significant revenues until the second half of this fiscal year.

Once revenue recognition begins, we anticipate a relatively steady contribution through project completion With the backlog that has grown to $40,000,000 including ARR of $8,800,000 and expanding pipeline of opportunities Genasys financial turnaround is well underway.

Thank you, Dennis.

Now operator, are ready to open up the call for Q and A. Thank you. Ladies and gentlemen, the floor is now open for questions.

And we'll take our first question from Mike Latimore from North land Capital. Please go ahead, Mike.

All right, great. Thanks very much.

Yes, maybe just a little bit more clarity on the deployment timeframes in Puerto Rico.

You said a little bit more revenue I think in the June and then bigger in the second half. I guess how many dams do you expect to get to to be deployed or maybe there's some other metrics that are important from a Rev X standpoint a little more detail on kind of the pattern of this year would be great.

Mike, the process has begun on the island. The first The first group will be the most challenging, of course, like every new thing. But the second and third group will begin in parallel with the first one, just staggered a little bit. So I think the the lion's share of the revenue from the work being done on the island. We expect to substantially get through those three groups. [indiscernible] with that Mike, but that's what we're running to at this point.

That makes sense.

You talked about getting cash on the third group that could be $11,000,000 eventually. Do you think you would see cash receipt on the fourth group by fiscal year end?

Unlikely. It's not that we won't try, but That's a ways off, Mike. So let's answer that as we go, sir. Got it.

And then You touched a little bit on the acoustic [indiscernible] Can you elaborate on that a little bit? Is there even opportunities for that in the LA area of Southern California?

There is. The inbound since the fires occurred the inbound traffic we're getting on our website through emails, TV and all is huge. So I think we'll see much more opportunities from a LRAD and a software perspective as a consequence of what's going on in the LA fires. Okay. Thanks very much.

And we'll take our next question from Ed Woo from Ascendiant Capital. Please go ahead, Ed.

Yes. Congratulations on all the progress. Do you disclose what the backlog was after the first quarter?

Dennis did. Dennis? It's $40,000,000 in hardware. Okay. I think it's 4.23.

And then my question is, as you're getting a lot more visibility and obviously congratulations on the success that you had. During an alley fire during what was a very chaotic time. Have you noticed any increase in potential competition or people who are seeing this as a potential market to enter No. No we haven't. It's a little too if that happens, that is probably a little too soon to see it. [indiscernible] Have a All right.

That's all the questions I have. Congratulations on the quarter.

Thank you. And we'll take our next question from Scott Searle from Roth Capital. Please go ahead, Scott.

Hey, good afternoon. Thanks for taking my questions. Nice to finally start to see PREPA rolling out. Hey, Richard, maybe to start from a high level, Could you kind of Help us understand the supply chain issues. There had been constraints initially with PREPA. How you guys are prepared for that now?

If that is still a gating factor going forward, And then just in terms of the change of administrations, is that having a positive negative impact or no impact in terms of not only ability to secure business, but the ability to have funds released against those projects.

Scott, the answer to the first question supply chain. There are issues in the supply chain. We're managing through them. Frankly, they gate our beginning but then catch up very quickly. From a change of administrations, well, it'll affect us. I think it's going to affect everybody.

But I think the business we're in from a public safety perspective is something and an increase in defense spending is something we're more likely to see from this administration than perhaps the past.

Okay.

And maybe I could to follow-up on the California wildfires. I guess, two questions. First is, did you quantify at all the inbound opportunity in terms of what you're seeing? I'd be curious in terms of the number of counties or the number of pops that might be represented in terms of the activity that that's created. But also, despite the very [indiscernible] If we look at past incidents, whether it was there's high profile false alerts that occurred in Florida, same thing in the Carolinas when there were events. There was some some press out about some I guess, faulty alerts that were provided. I'm wondering if you could provide some context in terms of what happened or in terms of the magnitude of it as well, because unlike some other events that were relatively well contained, for a shortened period of time. This went on for it's gone on for multiple weeks. Right? So I'm wondering if you could give us some thoughts and updates on how to view those comments? There's been a lot of negative press, Scott, on the LA County's response to the fires and I'll get back to that in a moment. But There was a an alert that went out on the Genesis Genasys, a WIA alert [indiscernible] Lauren across multiple channels went out.

All of them were received in the geography that was intended except the WIA. Channel and that defaulted to the entire county. And less than and it was a warning, it wasn't an evacuation. In less than three minutes, it was canceled. So that's what happened with Genesis. Genasys subsequently put a couple of software changes in place to help alleviate that from ever happening again.

So that was the one issue we experienced here at Genesis Genasys.

There have been thousands of messages that have been received in some cases days after they were sent. And all of that noise centers around the cellular infrastructure. Which like most major catastrophic events the networks are going to be overwhelmed and they certainly were in LA. As to the performance of the Genesis Genasys system, from a perspective of saving lives, Scott, if you look at this fire that lasted two weeks, there were seven fires over tens of thousands of acres, over 10 tens of thousands of homes burned to the ground. We have seen 28 or 29 loss of life. And if you compare that to other fires that are much smaller and much shorter in duration, and just parametrically measured what would potentially happen in L. A. County. It would likely be in the thousands. So LA first responders and office of emergency management did a terrific job of keeping people safe and out of harm's way. I'll remind everybody images of people passed away and burnt in their car. In recent fires and past fires.

Nobody died in their car in these LA Fires. So the performance was terrific. On both behalf of LA County and the Genesis Protect platform.

Great. Very helpful. And Richard, is there is there a way to quantify the opportunity or I'll call it intermediate opportunity that rising as a result of the performance of the Genesis Protect System in terms of inbounds and otherwise, what that what that potentially represents as we start to think about '26 and twenty seven?

There is Scott. I don't have that in front of me, but Including in LA counties, even cities and communities want it, their own platform. So when the smoke clears, so to speak, I think we'll be in a better position to quantify that as we move into the the next quarter.

Got you. And lastly, if I could, just I wanted to go back to Croz In terms of the current expected timeline of when you could start to see resolution on that front, and it's starting to impact the P and L. That's two questions. I think As I mentioned in my remarks, there are some very positive signs.

And the exact timing, I think will become more evident in the coming months.

Okay.

In the coming months. That's all I can really say about that for now.

Great.

Very helpful. Thanks so much.

Thank you.

There appear to be no further questions at this time. I'd like to turn the floor back to Brian Alger for closing remarks.

Great.

Thank you everyone for participating in today's call. A replay of the call be available on the company's website here shortly.

I want to give you all a heads up that throughout the day tomorrow, February 12, Genesis will be participating [indiscernible] And in March on March 1718, we'll also be For additional information and up to date news and activity regarding Genesis, our products, and the customers we serve, strongly recommend that you follow the company and Genesis Protect on your social networks particularly LinkedIn and X where we actively post and comment on events as they are happening.

We look forward to speaking with you again next quarter. Wanna report fiscal second quarter twenty twenty five results.

Good night.

Thank you. Ladies and gentlemen, this does conclude today's teleconference. And have a great day.