Q1 2021 Genasys Inc Earnings Call
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Good day, ladies and gentlemen, and welcome to today's Genesis.
Financial first quarter 'twenty and 'twenty.
Conference call.
All lines are in listen only mode.
And it's my pleasure now to turn the floor over to Sasha Calera, Sir the floor is yours.
Thank you thank you Doug and good.
Good afternoon, everyone and welcome to Genesis fiscal first quarter 'twenty 'twenty, one financial results conference call I'm, Saatchi Art Schelotto Investor Relations for Genesis.
With me on the call today on Richard Danforth, Chief ex you could do all pizza and Dennis Klahn, Chief Financial Officer on 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 are forward looking statements are based on current expectations.
During this call we may discuss company's plans expectations outlook on forecasts about future performance.
These forward looking statements are subject to a number of risks and uncertainties, including the consequences of COVID-19 outbreak and other risks and uncertainties many of which involve factors all circumstances that are beyond the company's control. These.
These forward looking statements are based on information and managements expectations as of today.
Future results may differ materially from our current expectations.
For more information regarding potential risks and uncertainties. Please refer to the risk factors section of the company's form 10-K for the fiscal year ended September.
'twenty and 'twenty.
Genesis disclaims any intent or obligation to update those forward looking statements, except as otherwise specifically stated.
We may also discuss non-GAAP operational metrics on bookings and backlog, which we believe provide helpful information to investors with respect to evaluating the company's performance.
We consider bookings and backlog, leading indicators of future revenues and use these metrics to support production planning.
Bookings and internal operational metric that measures. The total dollar value of the customer purchase orders execute day in a given period.
Regardless of the timing of the related revenue recognition.
Backlog is it myself, but case orders received that are scheduled to ship in the next 12 months.
Finally, a replay of this call will be available in approximately four hours through the Investor Relations page on our website.
At this time, it's my pleasure to try and all of the floor to Genesis CFO Dennis glass Dennis.
Thank you, Jeff and welcome everyone.
And I will open today's call with a recap of the fiscal first quarter 'twenty 'twenty one financial results.
Richard will then provide an update on the business afterward afterward, we will open the call for questions.
Revenues for the first quarter of fiscal 'twenty 'twenty, one were $8 million down from eight 8 million and the prior year quarter due to the delayed shipment of and order because the customer required payment and not yet been received prior to the quarter and.
And the payment been made on time revenue would've been essentially in line with Q1 of the prior year.
And the delayed payment was subsequently received and the order shipped in early January.
Gross profit was $3 $7 million or 46, 1% of revenue.
Gross profit decreased from the first quarter and fiscal 'twenty and 'twenty due to lower hardware shipments and 95% increased and software engineering personnel over last year from the recent addition of and making mobile and additional employees to support the Australia European Union and enterprise software initiatives and additional engineering.
Charges, resulting from a more precise process to charge engineering expenses to cost of sales.
Excluding this additional cost gross profit as a percentage of sales would have been 51 per cent compared with 52, 4% and the prior year.
Operating expenses were $4 $4 million and increased from $3 9 million and the same period a year ago.
The growth was largely due to a 50% increase and sales and marketing personnel over the prior year period to support future revenue growth opportunities.
Net loss for the quarter was $600000 or two cents per share compared with net income of 600000 or <unk> <unk> per share and the first quarter of fiscal 'twenty and 'twenty.
And the change was due primarily to the lower revenue and increased engineering sales and marketing expenses.
We generated $1.3 million and cash from operating activities in spite of the lower revenue and increased operating expenses.
Our balance sheet remains strong.
Cash cash equivalents and marketable securities totaled $27 5 million on December 31, 'twenty 'twenty down from $31 4 million on September 32020, principally due to the acquisition of and making mobile.
Working capital totaled $25 6 million on December 31, 'twenty and 'twenty compared to $29 8 million on September 32020.
With that I'd like to turn the call over to Richard.
Thank you Dennis and good afternoon to everybody on the call.
During our last call I mentioned debt despite record revenues in fiscal year 2020 bookings had been impacted by the worldwide pandemic as governments communities and businesses, we are adapting to the new normal.
We saw this play out as fiscal 'twenty 'twenty, one first quarter bookings were a record $12 2 million, 43% higher than the first six months of fiscal 'twenty and 'twenty.
Backlog at December 31, 'twenty, and 'twenty was $21 5 million down slightly from the periods period fiscal year's quarter.
A strong business pipeline bookings and expected backlog and the fiscal second quarter.
Positioning the company for another year of record revenues.
Last quarter we.
Completed the acquisition of AMIC and mobile.
Book to a $5 1 million dollar U S Army follow on order and successfully.
Successfully completed and EU public warning system initiative pilot program for a large European country.
And responding to Rfps from several European countries.
And experienced a surge and software business activity and North America, giving us a strong start to fiscal 'twenty 'twenty one.
To help meet the growing domestic and international demand for Genesis systems and solutions.
We have added 16 more people to our sales force and the last four quarters.
Stood up international offices in Singapore and Dubai.
And appointed business development professionals with extensive regional sales experience and the Asia Pacific The Middle East Africa, Central Asia, and Latin America.
The technology and personal investment we continue to make a significantly increasing business opportunities for Genesis mass messaging software enterprise safety and emergency management software and integrated solutions.
Any of these opportunities include governments and communities that are moving ahead with planned emergency warning initiatives to better protect citizens and workers and as part of a reopening and adjusting to the new normal.
Our Australia and emergency Alerting awards, and a pandemic have increased and interest and awareness of the national emergency warning solution for the European Union National Public warning system Directive.
Rfps are underway as many EU member states plan to allocate EU COVID-19 funds to fulfill the directive that mandates at every EU country implemented public warning system that can send emergency alerts to the mobile phones of residents and visitors and alike.
We are currently participating in several rfps with multiple countries and mobile network operators and recently completed a successful pilot program with a large EU country and its mobile telecom providers.
And our pilot program and demonstrated our news cell broadcast location based SMS Genesis speaker arrays and performance across two G. Three G. Four G and five G networks.
To give some additional content around these opportunities there are between two and five mobile network operators per EU member state.
All of which will likely deploy a software platform similar to news that features SMS and S. M S cell broadcast or a combination of both.
The integration and rollout of our enterprise safety software is quickly progressing.
Government agencies and business enterprises are evaluating software systems that help ensure the safety and productivity of the many staff members and employees that continue to work from home.
Many agencies and businesses are adapting to and even encouraging just growing work from home trend.
In addition to professional sports teams stadiums Canadian and U S government agencies, and large north American companies, who currently use Genesis software.
We are working to close multi year recurring revenue from contracts with cities universities, and additional government agencies and businesses and several U S States and Canada.
While the enterprise safety software market forecast to grow exponentially decade.
Genesis is in an extremely strong position to win and first time contracts and replace license renewals with a unified multi channel solutions.
After proving our emergency management software and implementing integrated safety systems, and Laguna Beach Mill Valley, and Newport Beach over the last two years, we're now on track to land additional integrated solutions contracts.
In addition to the ongoing expansion of Laguna beaches citywide early warning system and enhancing the installation and mill Valley and Newport Beach contracts from other cities and communities in California and elsewhere are expected this fiscal year.
We are also competing for integrated software and hardware contracts that include national tsunami and earthquake early warning systems regional public safety systems and visit a contact contact tracking for areas with large tourism based economies.
And as the only provider of a unified platform that includes emergency management software industry, leading voice broadcast speaker arrays, and multi channel alerting solutions, we anticipate substantial growth and this emerging area of our business.
While much uncertainty related to COVID-19 remains to date, we have managed through the disruptions caused by this worldwide pandemic.
Genesis team members around the World continue to do terrific work and moving our key business initiatives forward.
<unk> many of them continuing to work from home due to the local COVID-19 restrictions.
On manufacturing facility remains open.
And and fulfilling orders for our central communication systems that help keep people safe.
This fiscal year, we are continuing to pursue additional synergistic acquisitions as part of our strategy to expand the company's business grow revenues and maximize shareholder value.
We also anticipate several integrated public safety mass notification system awards and another large U S. Army program of record award for the LDR at 450 <unk>.
On multiyear contracts contracts and awards and Australia, and the many recent and expected request for proposals from the European Union initiative and from North America for our enterprise software solutions have us well positioned for a record software bookings and revenue.
In summary, I'm very optimistic about the future and the growing software and hardware business opportunities with record fiscal first quarter bookings and strong bookings and backlog growth expected in our fiscal second quarter Genesis is on pace for another year of record revenues.
With that I'll turn the call back over to the operator for Q&A.
Operator.
Thank you the floor is now open for question and if you do have a question. Please press star one.
And.
Question from taken and the order day, where we see it.
Is that any time. Your question has been answered you can't remove yourself from the queue by pressing one again, ladies and gentlemen, if you do have a question. Please press star one on your telephone keypad.
Yeah.
I'll call on capital.
Tom.
Mike Lattimore. Please state your question.
Okay.
And the bookings like look very strong there.
Gratulation is on that.
So just wanted to touch on on a little bit of the I guess first and European trial, you said and I think you said it was complete I guess any more color that you can provide there and what would be the next step and if so what and when would that next step.
The next step would be rfps and they are in process now and Mike.
Okay.
And you also said you have responded to I think you said multiple country Rfps I guess.
Are you responding to country, specifically or is it countries and <unk>.
And then kind of are you seeing sort of everybody wanting cell broadcast and asked the mass or someone and kind of one or the other to start.
Okay.
Several countries.
And as well as network operators within those countries.
Our front end and back and SMS and cell broadcast all of the above.
Okay.
And when you say country do you mean, a government entity within the country or the mobile operator and the country.
No it will be the the government entity for the front end and a mobile operators for the back and Okay Alright, great.
And then.
Are they giving you any indication on how long before they make some decisions.
Yeah.
They are there.
Stating that it could be within the next couple of months, but I like.
Like all of these things they take longer than anybody ever expected.
And.
And is that is that a little bit more near term than I think originally you were talking about I think mid year or maybe the second half of the year. So is that a little bit sooner than expected.
It is but I'm going to stick with what I said before Mike I think the yes.
Principal revenue will begin and our fiscal 'twenty 'twenty two.
Sure sure. Okay, and then just last on the sales force hires I think you said you've added 16 people.
I can't remember is there more to go beyond that and if so when do you think that will be done.
Yes, so far on our second quarter, we've added five additional and we still have more to go.
Okay.
And it should be.
And do you think it will be complete and the next couple of quarters on.
Yes.
Okay got it.
Alright, thank you.
And you won't get Mike.
Okay, Great and the next call pace. Our next question comes from Ed Woo with <unk>.
Capital. Please state your question.
Yes. Thank you. My question is on the Omega acquisition have you guys feel like you guys are fully integrated.
The team and our sales people.
Yes, the team and the salespeople we have Ed we're still.
Completing the integration of the software platforms and that will that will continue throughout this fiscal year.
But yeah. The sales team is integrated and the engineering team are integrated.
Great and then you did mention that you guys are still on the hunt for additional acquisitions, how is the M&A opportunities market valuation out there looking.
Okay.
I think there's plenty out there Ed.
And as Youre well aware the.
The companies that operate on the and the SaaS market.
The multiple demands are very high.
So it's that's the challenge we face through all of this if we're going to buy and the and the SaaS World.
Great and then my last question and you mentioned at Roseville Big order at the right at the end of the quarter that got pushed out.
Part of it was good and a new normal with the pandemic.
Is that something we should be expecting from the next couple of quarters as well.
No.
And it can happen, but this was a particularly.
Complicated transaction and a foreign country.
Alright, great well, thanks for the color and wish you guys. Good luck. Thank you. Thank you.
Thank you Ed Operator next call. Please.
Okay. Our next question comes from Ryan Macwilliams with Stephens, Inc. Please state your question.
Question. So just on the software side of the house can you talk about some of the conversations you're having in the enterprise and along with the state and local market and do you think demand for emergency communications and these markets could actually be stronger this year versus last year.
I do think there'll be they already are stronger right.
And.
And to your first question we're seeing.
Cities counties.
Enterprise private enterprise business.
Colleges.
Townships.
And so municipalities and.
And large businesses.
That's great and then are you hearing from demand.
And the U S and Canada perfect.
And then are you seeing more demand from these large enterprises as their workforces are now remote like do they feel a need for a new solution to protect their employees now that does employees are more distributed and not in a central hub or headquarters.
Yes.
That's absolutely driving demand.
So two things are happening.
And the industry, there's still a.
A great deal of people that are.
Working from home or working partially from Holland, and partially from and the office on different days and different shifts within days. So the coordination of all of that is something that Ah and.
Surprise is looking for and.
And we're doing our best to prosecute the opportunities.
Excellent Yeah, I definitely think duty of care because there's more distributor.
Employees, it's going to be a theme this year.
Two questions on public warning, if you don't mind.
Just to start you know.
As you're having these conversations for a public warning systems generally are you bidding on the front and and the back and at the same time or do you think that back and is generally still going to be a separate bidding process with a mobile network operator.
It will it will absolutely be a second bidding process. So there'll be an RFP from the front end typically from the not typically but from the.
Country government.
And then they the whether it's a location based SMS and cell broadcast it would be the individual carriers.
And do you think those.
Mobile network, operator discussions and they could follow through beyond the June 2022 deadline.
It's just the countries that really need to have the system in place before and weather.
And places to influence assistant beforehand.
I don't believe that June 'twenty and 'twenty two deadline is gonna be Matt Ryan I mean, theres been too and it was probably unrealistic.
On realistic to begin with and then you throw the worldwide pandemic and it only moves things to the right. So.
I think.
While we have begun to see the RFP flow.
And I think we will see that all through.
The first at least the first half of next year. So.
It's gonna be a 2022 late 'twenty and 'twenty, two 'twenty and 'twenty three kind of.
Notional implementation process.
Perfect and then last question from me and thanks for the time once again is I would like to see that you're expanding your sales distribution globally.
And many countries that aren't covered under this EU opportunity.
Love to hear your thought process on some of those new offices opening up and like why do you think of public warning as a global opportunity. Thanks.
Yeah.
And I've mentioned this on a prior call I believe but.
In terms of international business development, and historically, we had conducted that from here on the United States.
Having a global presence and office banking capabilities and the region and a presence that can reach out to the customer base, despite the pandemic and the.
Multiple times on differences that we face.
Ads, just adds and our ability to close on on public safety systems and I see.
Increases in public safety systems from both the integrated systems, like Laguna Beach, and others as well as the the SMS and cell broadcast and both the Asia Pacific and the Middle East regions, particularly.
So I think Ryan it's just following the track of increased demand for public safety systems around the world.
Excellent and appreciate the color thanks, guys.
Thank you alright, and next call correctly.
Our next question comes from Rick Nelson with perpetual investments. Please state your question.
Hi, good afternoon gentlemen.
Most of my questions have been asked and answered, but and looking at the.
Prospect of exponential increases and opportunities in an emergency management and software as a service.
Where we should be looking at these and 2022 through 2024.
And that the timeframe, we should be looking at for this exponential increase.
Yes.
Okay.
Everything else has been asked answered and covered in your prepared remarks. So thank you for being so thorough.
Youre welcome Thanks, Rick.
Youre welcome.
Next call from our next question comes from Robert Smith from the Center for performance. Please state your question.
Yes, hi, good afternoon, and thanks for taking my questions.
Looking at the U a mandate and opportunity is there a way to.
Come up with a figure as to what the total market a possibility is there opportunity.
And there Robert but I have not commented on that publicly it would lead to potential.
<unk> disclosures.
There is public data that's out out there that gives.
It gives an opinion on the overall size of the market and the EU.
Okay. Thank you and.
So your comments about the year and touch upon our topline revenue, but there's no comment about.
The bottom line, so to speak and so on a reflection of the margin question or.
Uh huh.
Thank you.
You don't want to say anything about them.
And I'm happy to say something and we expect our gross margins to be in line with historical averages.
For year over year.
We expect and our experience and I've been talking about it for several quarters that we are.
We are experiencing an increase and expenses associated with particularly sales and marketing.
And to support our growth initiatives and that that expense will be higher and our fiscal 'twenty. One and then it was in 'twenty and 'twenty.
So we felt we still.
And I'm still expecting.
We still expect the company to record record revenues be profitable and.
Positive cash generator and our fiscal 2020.
Okay. Thanks, so on on 'twenty one.
Okay.
Okay.
And our next question comes from Lloyd Korten with unique investment Thats Your question.
Yes.
And then.
Just one question the comment you just made on.
And the.
And what's.
Out there publicly on.
On the size of the potential market.
Could you tell me what that number is.
No I'll point, you to where to go to find it and it's it's it's out there even Ryan was talking earlier as published things on that size of that market.
Where do I go for it.
Lloyd I can I can get Oh, I will point out point you to a site.
A site that will have it.
I, just don't have that info and sitting here right now, but I will send it to you.
Thank you so much.
Right.
Okay. Our next question comes from will Hamilton with Matt and thank you.
State your question.
Hey, guys.
Just a question on the sales force Q give us a sense as to.
Hmm.
What are the productivity targets for reps did you hire I mean, obviously not in year one but.
And once they mature what kind of revenue do you expect these guys are women and two to bring in.
Different depending on the flavor product systems and software they are selling.
It's much different in Europe for the EU initiatives than it is and the enterprise market here and the U S.
I won't give you a specific number will but I will tell you that.
The EU initiatives and by country as you know and the millions and you can get.
Small city here in the United States or Canada for $25000.
So it's all over the map.
Right.
Many of the 'twenty, you've hired or so.
Or her dedicated towards your vs.
U S.
Or other markets.
The 16, we hired last year and Dennis has a chart included.
<unk> and Europe, I believe five and Europe, sorry, and.
And of the 16, therefore, 11 would be and the enterprise suite here and the U S and that includes.
The three or so that joined us as part of the acquisition.
Okay.
And then one question just on cadence of revenue I think previously you talked about maybe a 60 40 60 split this year.
Okay fair, if wrong, but is that what youre still thinking in terms of the cash.
And so the revenue between first half second half.
It'll be similar to that well.
Okay. Thank you.
Youre welcome.
Yeah.
Okay and it doesn't look like we have any further questions.
Again, ladies and gentlemen, if you would if you would like to ask a question. Please press star one.
Bruce edge and again.
And I have a question about the Navy research contract could you give us a little information about that.
Sure Bruce re competed and won for a phase one spi or with the United States Navy to do some research on next generation.
Long range acoustic device technology.
And is there a payments associated with that or how does it how does it go forward.
Yes.
The first phase is approximately a 240 K development project.
There'll be an evaluation and and reports submitted by us to the Navy.
The Navy will then make a decision to go onto a phase two S. B I R. The limits on phase two Spi ours are right around $1 million.
And if it gets through phase two and moves on to phase III, It's at a point, where the product will be commercialized.
Great.
And she owned by the company.
Great. Thank you.
Youre welcome.
Again, ladies and gentlemen, if you would like to ask a question. Please press star one.
Okay. We have a question from Robert Smith. Please state your question.
Yes, so on.
Is this contract had not been pushed into the subsequent quarter what might the members who looked like.
From a reporting period.
And that's.
It would have been.
Revenue would have been flat compared to the prior year and it would have been significantly ahead of the loss would have been.
Okay.
Probably cut in half or a little bit more than that.
Okay. Thank you.
That's all the time, we have right now.
Okay. There are no further questions I'll turn the call back over to the speaker for any closing remarks.
Thank you 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 and a few months when we report fiscal 2021 second quarter results.
Thank you. This concludes today's conference call. We thank you for your participation you may disconnect. Your lines at this time and have a great day.
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