Q4 2020 Genasys Inc Earnings Call
Thank you for holding ladies and gentlemen, you are in line for the Genesis think that's true fiscal year 2020 conference call. At this time, we are still gathering additional participants and we'll get started momentarily. We thank you for your patience and on the please continue to hold on.
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Good day, ladies and gentlemen, and welcome to the Genesis Inc. fiscal year 2020 conference call. All lines have of placed on listen only mode and the floor will be opened for your questions and comments following the presentation.
At this time of its my pleasure trend the for but your host Mr. thought your children, Sir the floor is yours.
Thank you I guess, good afternoon, everyone and welcome for Genesis Cisco.
2020 financial results conference call I'm, such a low in western nations for Genesis.
With me on the talk today on the current Dan for Chief Executive Officer.
And then it's gone Chief Financial Officer Genesis.
Before we begin.
Like the take this opportunity to the mind you that during the course of this call management will make forward looking statements.
On the statements of historical facts statements made during this call for looking statements based on our current expectations.
During this call the may discuss the company's plans expectations outlook on forecast for the future performance.
These forward looking statements on subject the number of risks and uncertainties, including the concept consist of.
19 outbreak of Pandemics and other risks and uncertainties many of which involve factors on circumstances that I'll be on the company's control the.
These forward looking statements are based on the information and management's expectations hats off to the.
Future results may differ materially from all the current expectations.
More information regarding potential list and I'm stuck on the days piece. That's left of the this fact the section of the company's form 10-K for the fiscal year ended September Thirtyth Twentytwenty.
Genesis disclaims any intent on obligation to up the update those forward looking statements, except as otherwise specifically stated.
The may also discuss non-GAAP operating on metrics, the caf bookings and backlog, which we believe the wide helpful information for investors with respect to the evaluating the company's performance.
We can see the bookings and backlog, leading indicators of future revenues and use the metrics to support production guidance.
Looking at the end done on based on monthly metrics that makes us the cold or dollar value of customer focus on the execute it kinda give on PDH, regardless of the timing of the related revenue recognition.
Backlog, it's the myself what gets autos the Steve the scheduled to ship in the next 12 months.
Finally, the pay off of this causes of the available in approximately four out of us to the Investor Relations page on all of that site.
At this time, it's my pleasure to be on school for flow.
On what the Genesis Chief Financial Officer, Dennis Glop Dennis.
Thank you for such a and welcome everyone well.
Well open today's call with a recap of the fiscal fourth quarter and fiscal Twentytwenty financial results rich.
Richard will then provide an update on the business.
Afterward, we'll open the call for questions.
Revenues for the fourth quarter of fiscal 2020 were a record 14 million the highest revenue for any fourth quarter in the company's history.
This compares with revenues of 7.7 million in the fourth fiscal quarter of 2019.
The <unk>, 80% of increase in revenues was primarily due to higher backlog entering the fourth quarter fiscal 2020.
Compared to the prior year period.
Gross profit was $7.6 million or 54% of revenue.
The increase in gross profit margin compared to last year was largely due to the additional leverage of fixed overhead cost.
On the higher revenues.
Operating expenses in fiscal Q4 for 4.5 million an increase from 3.9 million in the same period a year ago.
The increase was primarily due to higher selling general and administrative expenses to support our higher revenue and future revenue growth opportunities.
In the quarter ended September Thirtyth 2020, we had a non cash income tax benefit of $6.5 million, which resulted from the $7.1 million the lease of the portion of the valuation allowance against deferred tax assets.
The non cash benefit in higher revenue generated net income of $9.5 million or 27 cents per diluted share in the fiscal fourth quarter.
This compares with the net loss of $100000 or zero cents per diluted share in the same quarter last year.
Cash generated from operating activities in the quarter was $3.2 million.
Revenues for fiscal year, Twentytwenty were a record 43 million.
This compares with revenues of 37 million in fiscal 2019.
The 16% increase in revenues was primarily due to higher backlog entering fiscal 2020 compared to the prior year.
Gross profit was $22.6 million or 52.6% of revenue the.
The increase in gross profit margin compared to last year was largely due to the additional leverage of fixed overhead cost gains on higher revenues.
Operating expenses in fiscal Twentytwenty for $16.6 million and 8% increase through the same period a year ago.
The increase was primarily due to higher selling general <unk> administrative expenses to support a higher revenue and future gross revenue growth opportunities.
We had a non cash income tax benefit of $5.7 million. During the fiscal year ended September 30, 2020, which resulted from the $7.1 million release of a portion of the valuation allowance against deferred tax assets.
The non cash benefit in higher revenue generated from net income of $11.9 million or 35 cents per diluted share in fiscal 2020.
This compares with net income of 2.8 million or eight cents per diluted share in fiscal towards the United team.
Our balance sheet remains strong.
Cash and cash equivalents totaled 23.3 million on September Thirtyth 2020 up from 18.8 million at the end of the prior fiscal year the.
The $4.5 million increase in cash on cash equivalents from last year was due to cash provided by operating activities.
Working capital increased by $5 million to 29.8 million at.
September 30, 2020, compared with 24.8 million at the end of the prior fiscal year the.
The increase in working capital was primarily due to the net income from operations and cash received from the exercise of stock options in fiscal year 2020.
With that I'd like to turn the call over to Richard.
Thank you Dennis and good afternoon to everybody on the call.
Genesis had a great F y 20.
Reckon fiscal fourth quarter and second half revenue was powered the company to meet the fiscal year 2020 free pandemic outlook. We provided on our December 2019 conference call.
In spite of the unprecedented societal and business conditions in the second half of the fiscal year, our Genesis team members in San Diego and around the World did a tremendous job at helping the company achieve record the school year revenues and profits.
California in Spain, stringent lockdowns, notwithstanding as an essential provider of critical communication systems and solutions Genesis stayed open and working throughout fiscal 2020, and we plan to do so in fiscal 2021.
Our supply chain is intact and providing the necessary resources to build our industry, leading hardware systems and software solutions for a rapidly growing customer base.
As COVID-19 quickly spread throughout the world most governments and communities responded with shutdowns followed by partial reopenings and work around measures.
Although our business pipeline has grown during the pandemic these headwinds impacted our fiscal 2020 bookings which were $36 million.
As anticipated government orders well anticipate the government orders were pushed out with many governments and communities adapting to the new normal we expect to return to bookings growth as they move ahead with the plant emergency warning initiatives.
As evidence we expect record fiscal 21 first quarter bookings that will put us on track for a record Cisco Twentytwenty one revenues.
We anticipate revenues in fiscal 2021, we'll follow the same trend as fiscal 2020 with revenues weighed more heavily to the second half of the fiscal year.
We finished fiscal 2020 with multi year contract awards for mobile network carriers in Australia to use the unique location based SMS technology of on National Emergency warning systems.
The point directly on mobile network carriers of cross SMS and sell broadcast channels on National Emergency warning systems on news enables emergency communication officials to send critical notifications and information to anywhere anytime with no often required.
The powerful Geo location capabilities of news also provides authorities authorities kind of confirmation well the each mobile phone user received the potential life saving alerts and information.
Our Australia emergency Alerting awards and strategically important to Genesis because of the June 2022, emergent a European Union National public warning system directive.
Do you are you article 110 direct of mandates that every E. U member state implement the public warning system that can send emergency alerts to the mobile phones of residents and visitors in case of disasters or other critical events.
The system must include Geo targeted emergency communication and be able to notify residents and visitors of emergencies without having to opt in.
There are between two and five mobile carriers per each of you remember state on.
All of which will require the will be required to deploy software platform similar to the news that features SMS sell broadcast or a combination of both to comply with the mandate.
Having delivered over 150 million emergency SMS alerts to the mobile phones of Australians in peril since 2013 for.
Divides Genesis significant experience and competitive advantages as we had gross simply compete for awards in the E U and in other countries actively seeking to implement emergency warning systems.
Based on the June 2022 deadline in previous guidance from the E. U. We anticipate the member States would begin announcing awards in mid calendar 2021.
While we expect the U. awards will push towards the end of calendar 2021 active.
Activities throughout the EU continues at a rapid pace.
We recently conducted a demonstration for a large you country and the country's mobile telecom providers.
The demonstration resulted in a pilot program expected to go live in January.
The pilot program will include location based SMS sell broadcast and speaker integration all part of the news platform.
Despite the pandemic, we continue to have ongoing dialogue with the mobile carriers and government officials and receive Horrifies request for information from many of you member states and other countries.
We started fiscal 2021 by closing the acquisition of enterprise software provider AMAK of mobile now known as Genesis communication, Canada.
The integration of our businesses and enterprise software solutions is going well and a pipeline of enterprise business opportunities has increased significantly.
The acquisition of dress important areas of our business and revenue growth plan Genesis.
Genesis Canada's enterprise software is being utilized across a diverse customer base, including professional sports teams stadiums.
Canadian and U.S. government agencies, and large north American companies, we expect this customer base to expand throughout fiscal year 2021.
The enterprise software market in the United States, and Canada has grown significantly over the last five years.
Because of the installed base is relatively new and software licenses are typically sold in a one three of five year term.
Genesis is in a strong position to now compete for and win first time contracts and replacement of replace license renewals with our enterprise solution.
As we look into fiscal 2021 with more employees working from home and multiple of COVID-19 vaccines expected to be approved and distributed soon.
Business and government agencies are engaged and post pandemic planning, including how to better ensure work is safety and productivity.
Even though our acquisition just closed a few months ago demand for enterprise solutions of spurred a dramatic increase in Genesis enterprise software interest and our of peace.
We are pursuing a dish additional acquisitions as part of our strategy to expand the company's business, while continuing to grow revenue is all while generating positive operating cash.
We will we have why we have not utilize the 110 million a S. Three shelf registration today. We believe it offers the company of the greatest flexibility in attracting and closing acquisitions that could substantially enhance our business and maximize shareholder value.
In fiscal Twentytwenty, one we are expanding our domestic and international sales staff.
The served the growing demand for our unified critical communication platform, Jim Enterprise software and our it systems.
With the political unrest COVID-19, future Pandemics and other natural on manmade disasters continuing to increase throughout the world Jan.
Genesis systems and solutions of.
Proving to be essential to help people the help keep people safe.
Augmented by the recent acquisition and ongoing integration of Genesis communication, Canada.
And our news contract awards in Australia, we expect software bookings to grow significantly in fiscal 2021.
Combined with our growing defense public safety and law enforcement L. ride business Genesis is well positioned for another year of higher revenues.
With that I'll turn it back to the operator for Q1 day.
Thank you, ladies and gentlemen, if you out of question or comment on it its star one on your telephone keypad at this time again net of star one for any questions or comments at this time. Please.
Please hold of why we assembled the roster.
Our first question comes from Mike Latimore at Northland Capital.
Great. Thanks, Congrats on congratulations on the great year in quarter.
You mentioned, you're hiring more enterprise salespeople, you know whats the timeframe for that and then I.
How long do you expect the how long do you expect the take for them to be called me sort of fully productive.
We began the hiring process of Mike the.
Almost immediately after we completed the acquisition of Oh AMAK on mobile on October 2nd. So we have hired two full time salespeople. We have outstanding offers to two additional and the looking to put the six more on.
I expect that they'll all be on between the of our probably by our second end of our second quarter.
And then for them to ramp up the full productivity what are you assuming there.
It depends on the individual on they ended the geography, but it is you know it's not going to be immediate but I expect certainly by the the third and fourth quarter that will ramp up fairly.
Fairly steeply.
Great and.
And then you mentioned that the pilot in Europe are you the only ones sort of doing a pilot the said.
The country.
I can only speak for Genesis and we're doing the.
The pilot.
Okay great.
And then just on the L. Rad business.
What's the visibility there in terms of another.
Kind of sizable order and the school 21.
Kind of the yeah.
Yeah visibility into that and time on.
Our bookings for 2021 or <unk>, the expected to be substantially higher than that which isn't a we experience an F y 20.
That's across the board in our integrated systems, our L. Rads, and our enterprise software solutions.
Arms of the visibility.
It's quite good the cell cycle for systems and programmed L. Rad acquisitions is quite long.
So we've got good visibility into the pipeline that which is in our forecast as well.
Okay, great. Thanks very much.
You're welcome. Thank you Mike next caller please.
Well go next to add weighted Ascendiant capital.
[laughter] yeah, congratulations on the quarter on the year did I hear you correct. The you said that the company record revenue in Q1 on record revenue for fiscal year.
Not exactly I said I expect record bookings in fiscal Q1 of the flight 21, and I do expect yet again record revenue was.
For the fiscal.
Fiscal 20 2021.
From what I can see now add that's all in the cards now again I just cautioned in the past this pandemic cash the very long shadow, but.
What I see now I see continued revenue growth year over year.
Alright, Great and then obviously you guys have done a very good job of growing revenue at a pretty healthy rate you guys moving for your you know new offices or the last year of.
What on the opportunity for you know much more of margin improvement as you guys. The you know our EBITDA grow revenue at such a high pace.
Well, we did the I'll, let Dennis comment on that but I think we've had record gross margins are enough fourth quarter, but go ahead, Dennis on the fourth quarter, we had 54% gross margin for the total year was 52.6% of 50.4% is quite an improvement of or where we've been over the last couple of years.
Weve achieved the 54% over but each of the last two quarters. So the obviously that's a with the increased revenue. That's it's been a big driver in that margin growth or the.
The the software business as you look down the road.
For the last couple of years, it's we've added to the software business, but it's not yet a significant part of the total company revenue, it's probably 5% or less of total company revenue and <unk>, but as that grows in the as the percentage of the total revenue you would expect that the the margins would increase some somewhat.
Right and then on the last question I have is you know you mentioned that you guys were still pursuing M&A opportunity the units.
Congratulations on the closing of the Amiga deal are.
Are you pretty much fully integrating for me. Good also in terms of the M&A deals are you going on continued to look for smaller Genesis. The Amiga type size deals or the do you guys are potentially you know the looking for a much bigger acquisition.
The integration of a make a mobile what the the Genesis enterprise solution is ongoing and we will continue over the next couple of quarters that.
In terms of.
Acquisition candidates.
When we're not particularly constrained in size, although the two we have bought have for then of the smaller variety, but no. It's not a particular focus on small versus large its capabilities and.
What we what the acquisition can you.
Help improve from of shareholder value perspective.
Great well. Thank you for answering my questions and I wish you guys. Good luck. Thank you.
Thank you.
Yeah.
Well go next to Ryan Mcwilliams that Stephen.
Thanks for taking the questions and congrats on the results really nice here about the incremental demand you're seeing for emergency notification solutions and these corporates admin Saudis plan to go back to work are there any particular use cases that they're asking guesses about that you can solve and do you think there's a difference.
I mean, if the corporates are municipalities will move from the AD yourself for solutions.
I think of Ryan both the whether its for municipality of government door of business. It's on.
All about the.
Given the.
The employees and the management of confidence that if there's a fence occurring that could harm them that they get notified of.
As quickly as possible and and necessary actions are taken as quickly as possible. So.
The use cases are just that it's about the critical communications and getting knowing where people are and if they might be in harm's way and and what actually on those people should be taken.
Perfect and just on the public warning opportunity would it make sense to acquire or sell broadcast provider the and maybe some country. Examples are just the country. Examples for cell broadcast from maybe some additional sobriquet broadcast capabilities and then separately.
Do you think there's the opportunity for Genesis to sell its hardware solutions on top of your sell for capabilities to.
The the European countries of the <unk> as a part of the public warning opportunity.
The second question first on the answer is yes, as I mentioned the the pilot. We're doing includes both sell broadcast location base SMS and acoustic device integration.
If you get your first question most of what do we want to think about buying a cell.
Company or what was that.
Yeah, just for the cell broadcast the rider to add additional country examples for cell broadcast or <unk> capabilities.
Oh.
<unk>.
At this time of say no to that we have our own.
Integrated platform that has so broadcast and are looking for space that's a mass.
As you know we would likely.
Work with you know a hardware provider that would provide the all the horsepower necessary to run the software on those are pretty available Brian.
Yeah you of the.
On the capabilities on your part from already just to that point do you think the country's going forward as the result of Covidien will trend more towards the hybrid solutions.
In Europe or is it really on the still on the case by case basis on this one.
I think more and more are looking at the hybrid solution or it was a mix of for some broadcast vs location base SMS.
The attributes of the location based on SMS, and knowing where the of the phones are and how many phones or what might be in an area that the.
They need to be notified of of pending emergency that functionality is provided by the location based SMS, it's not in the cell broadcast so.
Knowing where the phones are how many and how they're moving I think is a proven to be the.
Quite of the first of all the valuable tool for emergency management people.
Perfect. Yeah. That's my understand is not too many providers that can do both but congrats on the quarter again like for like the question.
Thank you Ryan.
And once again, ladies and gentlemen at West Star. One if you had a question or comment and we'll go next directly from that rubbish our investment.
On thank you good afternoon guys on it.
Congratulations on a record year.
First question was last year you suggested net.
On the news would be allocated about 40% in the first half 60% in the second half.
By your comments about how revenue growth will occur this year in fiscal 21.
Is that how we should look at it.
Yes.
Okay and in.
Looking at what your higher on the.
Looking at your higher Opex in the fourth quarter of.
Of <unk> for and a half million is that going to be kind of the baseline going forward as you expand your sales force and integrate Mika.
It'll probably be a little bit higher than that I make the has its own base. So that's kind of be accretive.
In addition, as we we've noted the.
Well, we're looking to substantially increase our sales force worldwide.
We're looking at hiring in the 10 just to support the enterprise software or the amicus acquisition plus we're looking to expand our worldwide. So the sales force and to continue to support the E U initiative. So I.
I would expect to see that it will increase in 2021.
Oh, one last question How's the visibility on the right now on a the federal level of military contracts and some of the government contracts.
Looking forward into fiscal year 21.
Oh, it's it's still a bit murky as you're well aware right the <unk>, where the country still in the midst of a continuing resolution, but no fiscal year 21 of the budgets past.
The current CR expires Friday.
The 11th of December it's likely they'll pass on one week extension to that.
From a perspective of Genesis were.
Obviously very interested in the defense appropriation bill that bill.
Has passed of of Congress the voted on it the from the house six of the outside excuse me.
Senate hasn't but is expected to show the expected to shortly.
There's a scenario of that.
All 12 appropriations Bill as well as a cobot of relief package will be put together an anomaly bus and submitted to the President next week.
We shall see though I mean, there's still a lot of things that have to happen.
But it is there's general of bipartisan.
The support for the defense belt.
So there are you know political issues that always getting the way but.
We've got a chance that this will make it a certainly before the end of the calendar year.
Okay. So it's more of a timing issue you view it as more of a timing issue then of visibility or actual performance issue at this point.
Yes.
Okay. Thanks, guys. Appreciate you taking your time to answer my question I guess.
Well go next to Lloyd Korten <unk> unique investments.
Hello, Hi.
Hello Hello.
I believe the long time for the quarter like this thank you and the whole team really.
<unk>. Thank you again Hum.
A couple of the you know Joe.
Just on Australia, I know, we had one contract and this time, we want to what the it was the third contractors or any word on that.
There's been no announcement on the third Australian carrier.
Oh good okay. So we haven't lost it we might get the hat trick there.
Are you are you feeling any headwinds in the <unk> from the states because of.
The financial constructions at the role on the right now.
Ah, we certainly have our school of fiscal year 21.
The 21 was filled with the other people not working and then partially working and then figuring out how to.
Work remotely.
The tax revenues from most communities will be down across the country in the world. So that will put some pressure on it no doubt.
Well, however, say Lloyd that.
And in today's environment, whether it's the pandemic gross terrorism, whether its natural disasters its.
It's unlikely in my opinion that a a.
Community or government or a business is going to say, we're going to cancel our safety systems for our citizens or employees.
That could happen, but I think what's more likely the not that they will continue down the course.
Just more interested in new you know.
[noise] cities states that have not implement the yet whether it's going to be a bit of burden for them to spend that money that they don't have right now.
My question.
It'll be a challenge.
Yeah, Hey, listen debt was everything else has been answered. Thank you again.
You're welcome Thank you for <unk>.
Next question please.
Well go next to miles financing.
Your line is the up until the please go ahead.
Thank you hi, guys how are you doing.
The.
Three questions. The first of all the <unk> could you comment on backlogs at this time.
The one number two on backlog going into the 21 is.
The down the difference of the of the bookings and the revenue so the bookings with the as I mentioned were 36 million in the revenue was 43, so $7 million.
Okay got it.
On this the status of the your stock buyback program.
On the that expires at the end of this year. We this year, we purchased about $400000 worth of stock in the second quarter of.
Debt to the board will be looking at that tend to.
Let's see what a what the future holds.
Okay.
And finally do you see any emerging competitor single competitor that you're running up against idle the how price sensitive your sale is.
But is it with the weaker dollar overseas is that going to be of.
Of the import to you.
Well, we deal with the FX so all around the world in terms of its competitors for the yellow red product, we have the come the defacto standard it.
Don't frequently running to the competition here in the United States or outside the United States.
From an enterprise software solution provider here in North America, there's a there's a fair amount of competition with.
Some very large companies as well as some very small companies.
In terms of our integrated systems like for sold in Puerto Rico on Laguna Beach, the integrated hardware software solutions.
I believe one of the only ones that have that integrated solution. So I'd there the the well be competition, but the it would have to be a consortium of companies that we compete events Genesis debt as a single solution.
And in terms of the National Emergency warning systems like Australia like the requirements in the European.
European Union.
There there will be competition for both the the location based SMS and the cell broadcast of.
But I think the the.
Heritage of Genesis and its abilities to the <unk>.
They actually if you look back far enough. They were a pioneer on a location based SMS services. They have we have decades worth of experience in that area and I like our chances are we moving for the.
I like your chances to face a lot of guys nice nice quarter nice job.
Thank you.
And with no other questions holding I'd like to turn the conference back to management for any additional for closing comments.
We regularly discuss our business at investor events during the year, we invite you to join US for these events. Thank.
Thank you for participating on today's call. We look forward to speaking with you again in a few months when we reported fiscal 2021 first quarter results.
Ladies and gentlemen that will conclude today's call. We thank you for your participation you may disconnect at this time and have a great Dane.
Oh.
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