Q2 2020 Earnings Call
And to our participants presently checked in and standing by for today's Genesis incorporated conference call. At this time, we are admitting additional participants and we do hope to be getting underway and just the next few minutes. We thank you all for your participation as well as your patience today and we ask that you. Please continue to stay bye.
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Please standby we're about to begin.
Ladies and gentlemen, good afternoon, and welcome to Genesis incorporated fiscal second quarter 2020 financial results call. All lines have been placed in a listen only mode and the floor will be open for questions. Following today's presentation. If you would like to place yourself into the Q4 question simply press Star and one on your telephone keypad.
These instructions will be repeated after our prepared remarks also if you should require assistance throughout the conference. Please press star in zero on your telephone keypad to reach a live operator at this time. It is my pleasure to turn over the floor to Saatchi, a true Laura Investor Relations for Genesis, Sir the floor is yours.
Thank you Jim Good afternoon, everyone and welcome to Genesis fiscal second quarter Twentytwenty financial results Conference call.
I'm talking about your Lotto Investor Relations one Genesis.
With me on the call today are they took downfall, Chief Executive Officer, and Dennis Klatt, Chief Financial Officer Genesis.
Before we begin I would like to take this opportunity to remind you that during the course of this call management will make forward looking statements.
Other than the statements of historical facts statements made during this call that all forward looking statements are based on current expectations.
During this call we may discuss companies plans expectations outlook on forecast future performance.
These forward looking statements are subject to a number of risks and uncertainties, including the consequences. All told we acknowledge 19 outbreak other pandemics and other risks and uncertainties many of which involves back does awesome census data beyond the company's control.
These forward looking statements are based on information and management expectations at South today.
He can do those may differ materially from our current expectations.
For more information regarding potential risks and uncertainties lead to definitely this factor section of the company's form 10-K, but that's going to get ended September Thirtyth clunky 90.
Genesis disclaims any intent obligation to update update those forward looking statements.
Except as otherwise specifically stated.
We may also discuss non-GAAP operating metrics, all bookings and backlog, which we believe a wide helpful. It helpful information to investors.
I think to evaluating the company's performance.
We consider bookings and backlog a leading indicator. So he can revenues and use these metrics to support production planning.
Bookings Ethan internal operational metric that makes up the colder dollar I'm glad you got the custom up I guess or does it get good at any given period.
God knows how the timing of that related revenue recognition.
Backlog it myself, but kept autos this deal, but I'll get scheduled to ship in the next 12 months.
Finally, it literally on this call will be available in approximately four was slightly investor relations page on our website.
At this time, it's my pleasure to Thunder Bloedel, what the Genesis Chief Financial Officer, Dennis Klatt Dennis.
Thank you saw chip and welcome everyone.
I will open today's call with a recap of the fiscal second quarter Twentytwenty financial results.
Richard will then provide an update on the business.
Afterwards, we'll open the call for questions.
Revenues for the second quarter fiscal Twentytwenty were $8.3 million compared with 10.2 million in the second fiscal quarter 2019.
The cobot 19 outbreak, partially impacted the acceptance testing and delivery of two orders with a total value of approximately $1.6 million.
Virtual acceptance testing and partial deliveries were completed in April the bounced scheduled to ship this quarter.
Gross profit was $4.3 million, 48.4% of revenue.
The decrease in gross profit margin compared to last year was driven by 77000 of additional engineering charges, resulting from the use of the more precise process to charge engineering expenses to cost of sales.
Excluding this additional cost gross profit as a percentage of sales this quarter, what have been 49.4% compared to 50.9% in the prior year.
And for the first six months of the fiscal year gross profit would have been 50.9% compared to 50.5% same prior year period.
Operating expenses in the fiscal second quarter of 20 23.7 million essentially flat compared the same period last year.
Selling general administrative expenses increased this year as we added employees and increased sales marketing activities.
Research and development expense decreased compared to the same period last year as hardware development cost decreased and some cost for charged to cost of sales offset by continued increases in software development.
We generated net income of $302000 or one cents per diluted share in the fiscal second quarter.
Compared with net income of $1.2 million, a four cents per diluted share and the same quarter last year.
Cash used in operating activities in the quarter was $345000.
This is largely due to increased inventory at the end of the quarter offset by net income and noncash charges.
And last year's similar quarter operations provided 4.2 million.
Our balance sheet remains strong.
Cash and cash equivalents at March 31, 2020 were $16.4 million compared to 18.8 million at September 30 2019.
The 2.4 million decrease in cash and cash equivalents was due to the cash used in operating activities in the year to date.
Working capital increased by.
Point 7 million to 25.5 million at March 31, 2020.
Compared to 24.8 billion at September 30, 2019.
The increase was primarily the result of net income generated this year.
During this years second fiscal quarter, we used 400002 repurchased 156000 shares of company stock.
Last year the board authorized a 5 million dollar repurchase program through December 31, 2020.
Which 4.1 million is still available.
With that I'd like to turn the call over to Richard.
Thank you Dennis and good afternoon to everybody on the call.
Fiscal second quarter and first half revenues were in line with the back loaded fiscal year revenue outlook, we've discussed on our two previous conference call.
In spite of the Cobot 19 pandemic, we remain on track for a very strong second half and another record fiscal year in revenue.
Bookings for the second fiscal quarter were $4.2 million up 10% compared with 3.8 million from the same period last year.
After posting record revenues and backlog in fiscal 2019.
Q2 of physical 20 ended with a backlog of 16 million up 13% from the same period last year.
As an essential provider of critical communication systems for the U.S. military and public safety agencies. Genesis has remained open and will remain open through the Cobras 19 crisis.
We continue to execute on all facets of our business.
Our employees the can work from home are and those that must be in the office. They are here every day.
A full production team has worked since the beginning of this crisis Monday to Friday and overtime.
We express our sincere appreciation to our employees for their different for their professionalism commitment and loyal loyalty during these difficult times.
To date on supply chain remains intact, we had did that diligently monitoring and working with suppliers to achieve maximum visibility within the constraints of the current global supply chain conditions.
Our key vendors remain open and producing parts for current and expected orders.
Domestic and international government funding continues to flow, but in some cases slower than normal. It is however, moving.
As we discussed on the last earnings call. The additional U.S. Army orders expected this fiscal year would be somewhat smaller because of the army's pent up demand for l. routes in fiscal 229 team.
We expect to the F. why 20 orders to be received very shortly.
New and follow on defense and Homeland security orders from the U.S. military the Asia Pacific and other agencies in areas are also anticipated.
We ended fiscal Q2 with $21.5 million of cash and marketable marketable securities.
Importance of our strong balance sheet and no debt is self evident during his there's cobot 19 induced economic downturn.
We have not taken a paycheck protection program loan and we do not intend to.
As Dennis mentioned, we repurchased shares last quarter and plan to continue strategically you utilizing a buyback program.
As we announced earlier today Genesis donated a public safety system software module to the Salvation Army Western territory.
This software.
Module, the western territory can rapidly react to changing requirements in conditions during the pandemic and other crisis situation and efficiently exchange information with officers core and volunteers.
Our donation will help the salvation army more effectively serve those in need.
Genesis and hardware and software solutions are being used to deliver cobot 19 notification and information in the United States, Australia, Colombia, Spain, Poland, Morocco, South Africa, India, Thailand, Malaysia, and other countries.
In the United States will recede Cobra 19 related hardware orders from the United States State Department Department of Homeland Security immigration and customs enforcement and the Florida office of emergency management and local police departments.
International hardware orders have been received from homeland security in public safety agencies in Germany, France, Belgium, Spain, Greece, and the Czech Republic and Columbia.
Additional domestic and international Corona virus related orders are expected.
The public's need for accurate and reliable information. During this pandemic has shown governments and emergency management officials, the importance and utility of directly reaching as many people as possible.
Unifying the delivery of potential lifesaving alerts and information through multiple communication channels provides is increasingly critical capability and can help migrate further large outbreak mitigate for the large outbreaks speeding economic recovery and reopening society.
The Genesis public safety platform unifies the following mass notification channels location based SMS sell broadcast mobile push notifications, social media email TV radio digital displays and Genesis acoustic arrays.
This platform works anywhere in the world on dedicated in country in region clouds.
Reliable redundant and resilient our platform ensures that critical communications are delivered to help people help keep people informed and save during this as future crisis.
In 2003rd or since 2013, Australia has been using the Genesis National emergency warning system or news to deliver emergency alerts and lifesaving information to at risk populations.
Working with two large telecom providers to flawlessly deliver more than 150 million SMS emergency notifications today puts genesis in a very good position to expand the use of news in Australia.
We have submitted proposals to all three telecom providers for Australia's national emergency notification delivery service tender.
Award decisions from all three providers are expected this quarter.
Because of our experience in success in Australia News is also well positioned to compete for and when European Electronic Communication Code Directive Awards.
The directive mandates that by June of 2022 every you member must implement a public warning system that can send emergency alerts to mobile phones of residents and visitors in case of disaster or other critical events.
The system must include Geo targeted emergency communication and be able to notify residents and tourism emergencies without having to opt in.
Genesis news fully complies with the EU mandate by providing robust location based SMS systems deployed directly on mobile carrier networks.
And the second half of the fiscal year. We expect several are a piece for the Genesis software services from the European Union member Nation.
The powerful Geo location capability of news enables emergency management officials to send Geo specific notifications to people in harm's way and monitor their progress during the mandatory evacuations.
While the Pandemics efforts on our business and supply chain are uncertain the strength of our balance sheet bookings backlog in a growing pipeline are providing a company with the resources in the flexibility to grow our business expand our staff and meet the increasing demand of our critical communications systems and solutions.
We continue to actively pursue synergistic M&A opportunities that have the potential to expand our business and create additional shareholder value.
Our systems and solutions are proving to be essential for a world experience ex experiencing exponential safety threats.
With our strong balance sheet and growing backlog and business pipeline Genesis is on track for record revenues this fiscal year and well position for future revenue growth.
With that I'll turn it back to the operator for Q1 I.
Gentlemen, thank you before is now open for questions.
The question.
And one on your telephone keypad at this time anytime you find your question has been answered you can simply you can remove yourself from the Q by simply pressing <unk> one.
If you're using a speaker phone today, we ask that while posing your question you pick up your handset to provide favorable sound quality also to make sure that your signal does reach our equipment.
Ladies and gentlemen, if you have a question. Please press Star then one on your telephone keypad at this time, we'll take a few moments. Please hold while we pull for your question.
And gentlemen, our first question that they will come from the line of Rick Neaton Rivershore. Please go ahead Rick.
Thanks, Hi, Dennis and Richard.
How do you see these new orders to help with Corona virus.
Efforts by governments.
Affecting your revenue stream.
Fiscal 2020 do you feel that this is a accretive or do you feel that this may offset some bumpiness.
No I think it will be accretive the Bumpiness you referenced records is one of timing.
No deal. They for example here in the United States, we probably have.
Two plus million dollars pent up on a process. It usually takes two weeks and now is taking four to eight weeks.
So I do believe it will be accretive and I see that.
A slowdown.
Slowly getting back to normal.
Okay.
What how can you give some examples of how your software can assist in anti virus efforts that are.
Being planned.
By potential customers.
Well. This is the news software Rick would on that enable the emergency management people to see where people are congregate.
And in an area in a time when social distancing is necessary.
It would give the emergency management of the information to know where that rule may not be being followed.
Okay, so that would be with cell phone data.
Yes.
Okay.
In terms of your visibility into the second half flow.
This year.
You seem to have pretty good visibility into your fiscal year do you have any are you starting to see any visibility into the first quarter of your next fiscal year, which is the fourth quarter. This calendar year.
Oh, we're intently focused on this fiscal year at this time.
The.
Backlog is.
<unk>.
Forecasted to generate revenue based on particular lead times and we're still inside those lead times.
For our fiscal 20.
There are some orders are like our India maintenance thing, we booked about <unk>.
For millions of about 50000, all the order last year that actually delivers over a.
Finally, a third five year period.
So there are there are cases, Rick that you were beyond the normal lead time, but it's what the supports the customer schedule.
And are you expecting you're a military orders to be received this fiscal quarter.
Yes.
Yeah.
Hey, Thanks, guys and Doug Thanks for the clarity in your prepared remarks.
Thank you Nick next question all right.
Next we'll hear from the line of Ed Woo Ascendiant capital.
Yeah, congratulations on a quarter my question.
No I don't have that really have much of it impacts the krona virus.
And we start seeing no massive.
Fiscal problems with various government.
Shut down do you see possibly that ordered it may be curtailed.
In or out.
No no Ed I mean, our biggest customer courses to us military.
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They budget on an annual basis, the f. wide 21 budgets in process.
And although it's still the is not supposed to be turned in the law. Our until October 1st of this year. It is tracking to.
Come close to that date I was still long time between now and then so things could get the rail, but it's an election year and the budget a that's running through the whole to Congress now is it all at the same level as it was this current fiscal year. So that's all very positive for us.
Great and then you didn't mention that you and for container looking at M&A opportunity you guys have a very strong cash balance sheet and obviously you know there's been a modern volatility and valuation recently.
Are you seeing increasing opportunities, particularly.
Notably with companies that may have weaker balance sheet.
We've seen an increase in possible companies to buy yes.
All right I have you seen valuation pulled back at all yet.
I think it's too soon.
At the.
I think valuations will change I mean, there's always a spike in initial reaction.
And then it dampens out, but I think as we come out of this I think valuations will put more emphasis on balance sheet than it did before.
Great. Thank you for answering my questions and good luck.
Thank you thank you Ed.
Next question well take a question from yes, and the line of miles when Steve Your line is open Sir.
Thank you Hello, Dan Thank you very much.
You mentioned that you people working overtime.
Production is you're capacity constrained and.
Is that put a limit on actual growth.
No.
We have a very large facility here.
So we have capacity and we only work one shift so we have good effectively double your capacity by putting a second shift on.
The current overtime as being.
Utilize too.
Address very specific revenue for our Q3.
And what does it will take to see a breakout in terms of revenues I mean, we see.
And have for many many quarters now.
Modest growth what would it take to break out given the fact that you are leading technological positioned at a time when it.
It seems that need is definitely there around the world.
I've revenue has grown from 16 million free fiscal years ago to 36, and a half last year with a record bookings of 46.5.
And I've said or.
Now on three occasions, I think that I expect our revenues for our F. why 20 to be yet again, a record for the company. So that pace is on.
If on a CAGR basis is a 35 or 36%.
Which is pretty good.
<unk> a is it fair to say that your position to continue that kinda growth.
Yes for the foreseeable future notwithstanding there is a little uncertainty because of this whole corona thing, but fundamentally I agree yes.
Great. Thanks, so much appreciated to keep up the good work.
Thanks, once again, ladies and gentlemen, joining today over the phones. If you have a question or a follow up that is star and one on your telephone keypad next we'll hear from William Bremer Vanquish capital.
Hello, William Your line is open you may have us on mute Sir.
Mr. Bremmer are you there.
Gentlemen, can you hear me.
Yes, Sir welcome good Okay, great. Thank you, Hey, I'm, sorry about that Dennis and Richard My apologies.
Okay first question.
Oh Youre up your product line has any potential increase of course real products.
Surprised you in terms of of demand or potential or bidding activity.
I don't think surprise me is the right characterization, we have a pretty good.
Falls on what's going on in the marketplace bid and.
Emergency software for national applications or for community applications oil for enterprise applications. Our hardware <unk> hardware is typically has a long sales cycle.
So we have pretty good visibility into.
Where rose or contraction might take place.
What a fair amount of lead time.
Well time, so definitely changed and you guys. It definitely in the sweet spot for sure.
Given the pockets of on the rest that we're starting to see not just domestically, but in certain parts of the world globally.
Protests and why it's or you guys want some type of maybe because she did a good job will explain you opportunity you start to see some maybe on local law enforcement agencies, starting to maybe it a little bit of war inquire about your services because.
These potential unrest.
Yes.
Said in my prepared remarks.
We have received orders international or as albeit small during this corona outbreak from Germany, France, Belgium, Spain, and Greece, and the Czech Republic, and Colombia in all cases, they're buying one onesies and twosies for specific.
Notification applications, but I think getting their hands on hardware and using it will get additional demand from those countries.
And then lastly, I see inventory picked up here a little bit any issue in terms of war material given this sorta.
Polk or slightly the board of business that we're having right now for your products.
022 answers to that a the inventory grew.
As a consequence of the $1.6 million that Dennis mentioned.
For our supply chain, well Cory <unk> all of the ours suppliers they have our current demand and forecasted demand.
And at this time everything fat so we're not aware of of a material issue.
Out of the Corona light or chroma 19 endemic.
We haven't been able to manage through yet so it so far so good.
Okay, great. Thank you gentlemen.
Thank you our next question will come back.
<unk>.
Investment Hello.
Hey, Hi, Richard.
I Lloyd.
A few questions.
Being what's going on with.
They just about all of these all over the country.
I know you were working I guess for several potential.
Counties cities et cetera.
That's because their budgets.
How the huge problem going Oh.
Well, if it's affecting us because of their availability. So part of that revenue shortfall in Q2 was a community.
Were there.
Workforce was working one day a week.
So having a a factory acceptance test was impossible for those folks to come and do.
I would subsequently done it but we did it virtually.
And now the hardware will begin to be shifting installed so its having that kind of an impact Lloyd.
We have seen communities that are actually putting.
As part of the annual.
Well I'm looking for the budgeting process.
Putting up potential changes in law that mandate. These kinda system. So we'll see I expect that to continue.
That would be nice.
It's been quite a while.
Since I know with the last installation was in new board or whatever.
Why such as well as middle while we just finished Newport.
I think it was last month wasn't I think so I guess were ongoing with stuff Laguna Beach, and that's a big one.
It'll take a you know probably couple of months.
What's that.
The announcement was several months ago.
Got it Ben Yeah.
I was hoping that we see you know a lot more municipalities would be running towards let's say.
Products.
There are some of those municipalities lined up.
Okay. Good.
He does that affect us positively or negatively.
Sure and a favorable way I'd say I mean they.
As I mentioned regarding <unk>, Australia.
One of the requirements that has necessitated the three carriers to.
Redo their network and therefore require new emergency software.
Includes in some cases, threeg fourg and Fiveg.
Okay.
And.
As far as Europe is concerned.
Excited about the potential hope to get some wins, it's being done by country rather than indeed.
Oh.
That's correct country by country.
Uh-huh and.
How do you.
How optimistic are you as well.
What you're hearing what you see.
I am quite optimistic or if you look at the world market for National Emergency warning systems.
Australia is probably the biggest one that as I mentioned, we should we expect a award announcements there and I think go from there it'll it'll hopefully put us in a very good position in the marketplace to go after the <unk> the you potentials.
Yeah, that's there would be a wonderful with no. Okay. Thank you guys. Thanks for your hard work.
Thanks, a lot of questions or.
Once again to our phone audience. If you do have a question or any clarification on anything covered in today's announcement simply press Star then one on your telephone keypad a friend. The reminder returned to your handset prior pressing star and wanting to be sure that your signal does recharge equipment, ladies and gentlemen.
Next we'll hear from David Lipski at Summit financial.
Yes, thank you and I need to see I'm, a registered representatives not an analyst I just a couple of numbers in your prepared remarks, I think I missed did you give a number for bookings for the quarter.
It did they were four point the [noise].
4.2.
Okay and also on the stock buyback or I caught the number 156000 shares what was the dollar amount.
It was 156000 shares and the dollar amount was 400000.
400 divided by 156.
To 56, a share good job guys. That's all I have.
[laughter].
Thank you Debbie.
And that's again Richard in Dennis at this time, we have no further questions from our audience would you like to give any closing remarks before I close out the call.
We regularly discuss our business at investor events during the year, we invite you to join us for these events.
Thank you for participating in today's call. We look forward to speaking with you again in a few months when we report fiscal third quarter results.
Gentlemen, thank you.
Ladies and gentlemen, this does conclude the Genesis fiscal second quarter 2020 financial results Conference call. We thank you all for your participation you may now disconnect your lines have a great day.
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