Q2 2021 Genasys Inc Earnings Call
Yeah.
Good day, ladies and gentlemen, and welcome to the Genesis incorporated fiscal second quarter 2021 conference call on.
All lines have been placed on a listen only mode on the floor will be opened for questions and comments on the presentation. If you should require assistance throughout the conference. Please press star zero on your telephone keypad to reach of live operator at this time of its my pleasure to turn the floor over to your host Sasha Chill era, Sir the floor is yours.
Thank you Kirk.
Good afternoon, everyone welcome to the Genesis.
Fiscal second quarter 2021 financial results conference call I'm, sorry, yes, the Lada Investor Relations for Genesis.
Me on the call today are Richard Danforth, Chief Executive of all Peter and Dennis Klahn, Chief Financial Officer of Genesis.
Before we begin I'd like to take this opportunity to remind you that during the course of this call management will be making forward looking statements other than the state myself historical facts.
<unk> made during this call that are forward looking statements are based on all the current expectations. During this call. We may discuss the company's plans expectations outlook or forecast for breach of performance.
These forward looking statements are subject to the number of risks and uncertainties.
Without the limitations of business impact impact of epidemics, pandemics and other risks and uncertainties many of which in wall.
The factors are circumstance circumstances that are beyond company's control. These forward looking statements are based on information and managements expectations as of today for you Kevin.
Results may differ materially from our current expectations.
For more information regarding potential risks and uncertainties. Please because that's what the risk factors section of the company's form 10-K for the fiscal year ended September cut the 20th.
2020.
<unk> disclaims any intent or obligation to update those forward looking statements, except as otherwise specifically stated.
The may also discuss non-GAAP operational metrics of bookings and backlog, which we believe the wide helpful information for investors with RA.
I stick to evaluating companies bottlenecks.
We consider bookings and backlog, leading indicators of future revenue and use these metrics to support production planning book.
Bookings at the Internet operation on the makes it that makes us the total dollar value of the customer but case at us execute day in a given period, regardless of the timing of the related revenue recognition.
Backlog is the measure of purchase 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 some of the Investor Relations page on our website at this time. It is my pleasure to turn the flow at all what the Genesis CFO Dennis clock goodness.
Thank you, Jeff and welcome everyone.
I will open today's call with the recap of the fiscal second quarter 2021 financial results Rick.
Richard will then provide an update on the business.
Afterward, we will open the call for questions.
Revenues for the second quarter of fiscal 2021 were $11 3 million up 37% from the prior year quarter.
As compared to the same prior year period.
Ed HD revenue was $9 8 million.
8 million up 34%.
Integrated mass notification systems revenue was 826000 up 45%.
Software revenue was 678000 up 64%.
The increase in software revenue was primarily from professional services and new software contracts.
Gross profit margin was 47, 2% compared with 48, 5% in the second quarter of fiscal 2020.
Gross profit as a percentage of revenue was lower in the fiscal 2021 second quarter due to a 56% increase in engineering personnel primarily software related.
Higher software expenses were due primarily to the recent addition of our Genesis communication, Canada subsidiary and additional employees to support the Australia European Union and enterprise software initiatives.
Operating expenses grew $4 8 million up from $3 7 million in the same period a year ago the.
The increase was largely due to a 67% increase in sales and marketing personnel over the prior year to support future revenue growth opportunities, including opening sales offices in Singapore, and the United Arab Emirates.
Net income for the quarter was zero point of 3 million or a penny per share net.
Net income per share was unchanged from the fiscal 2022nd quarter.
Cash provided by operating activities for the year to date was 363000 due to the ordinary course of Biz.
Non cash charges offset by an increase of inventory in the year to date net loss.
Our balance sheet remains strong.
Cash cash equivalents and marketable securities totaled $26 4 million on March 31, 2021.
Paired with $31 4 million on September 32020.
Working capital totaled $26 5 million at March 31, 2021, compared with $29 8 million on September 32020.
The decrease in working capital was primarily due to cash used to complete the purchase of the make of mobile assets in the first quarter of fiscal 2021.
With that I'd like to turn the call over to Richard.
Thank you Dennis and good afternoon to everybody on the call.
Strong performance from our software integrated mass notification and alright acoustic hailing device business segments and sales increases in all our major geographic business areas areas drove revenue of 13% higher in the first six months over the same period last year.
Fiscal first half bookings for $15 6 million, an increase of 83% from the first six months of fiscal 2020.
Backlog at March 31, 2021 was $13 8 million.
From 16 million of year earlier.
In April we received nearly $20 million in new orders with more expected this month and in June.
Todays bookings and backlog for substantially higher than last year at this time.
And have the company well positioned for a record fiscal year bookings backlog and revenue.
We continue to invest in critical communications technologies and key personnel to grow our emergency management software integrated mass notification systems, and El Dorado acoustic hailing devices market applications and business opportunities.
Addition to our software development engineering support and sales and marketing teams throughout the through hiring and assets of the generous Genesis communication, Canada and Genesis Madrid.
Have enabled us to meet the surge of U S and international demand for Genesis Lifesaving systems and solutions.
With offices now open in the United Arab Emirates, and Singapore staffed with business development professionals with extensive in region sales experience.
We expect revenue growth in all our major geographic business area this fiscal year.
Genesis news of National Emergency warning system continues to deliver location based SMS emergency alerts to in Australia to help keep people safe.
In March extreme rainfall in eastern Australia led to widespread flooding for several days.
<unk> many of the country's most populated areas.
News was used to warn and provides safety and evacuation informations to millions of Australians.
The use of news to send more than 180 million mobile alerts and Australia over the last eight years has provided genesis the extensive knowledge and experience to successfully compete for the European Union Public warning systems Awards.
Our business development and engineering teams in Europe of very active responding to and participating in rfps for numerous from numerous EU member states.
Genesis news fulfills the EU requirement that every EU country implement day national public warning system that sends the emergency alerts to mobile phones of residents and visitors multi.
Multichannel flexible and customizable Genesis news features industry, leading location based SMS and advanced cell broadcast technology.
All engineered built and supported by our team in Europe.
The flexibility and competitive feature set of our Genesis emergency management software platform.
We're recognized last quarter with an opening contract from the global automobile manufacturer.
All of it 19 vaccination tracking project from the government of Canada, and a recent foundational mass notification and emergency Management Service Award from Riverside County, California.
The multi year, Jim enterprise contract from the worldwide automobile manufacturer of expedited the delivery of critical event notification and life saving alerts to more than 25000 employees and contractors working at 25 of 24 facilities in Canada, and 12 U S States.
Opportunities to expand Jim enterprise to that automakers facilities outside North America are being contemplated.
Vaccination tracking is becoming important capability to fully reopen many government facilities the <unk>.
Canadian government vaccine Vexation tracking project Leverages <unk> proprietary automated events situational awareness and Geo fencing features.
The project includes two way of alerts and responses over E Mail SMS callouts voice over IP.
Ups and mobile apps mobile applications.
Vaccination tracking day data is.
Anonymised to strictly safeguard private information.
Additional Jim Enterprise and government recurring revenue contracts are anticipated this fiscal year.
Last month's selection of the <unk> software platform by Riverside County.
The power multichannel public safety warnings to residents before during and after the crisis situation is of major stepping stone in our California business strategy.
With wildfire season, and the accompanying power shut offs notwithstanding through much of the year.
The delivery of timely emergency alerts and life saving notifications will help keep people safe.
As the only provider of a public safety platform that unifies the emergency management software.
Sensor inputs multichannel alerting solutions and lead the industry, leading voice broadcast speaker of raise that feature of solar power satellite connectivity and battery backup we anticipate an increasing jen and the.
Increasing gem sales and growth in California, and other major geographic business areas.
The rollout of the COVID-19 vaccination campaigns in the U S and throughout the world is providing optimism that the challenges and disruptions around the world will soon be resolved.
Genesis team members in the United States of working from the office and our manufacturing facility remains fully operationally operational fulfilling orders for all of our vital lifesaving systems.
Per the outlook provided on the last two calls we expect second half fiscal year revenues will be much stronger than the first half. Additionally, we anticipate the combination of key business initiatives to further augment the company's technology and product offerings.
And Genesis market reach and maximize shareholder value.
On the strength of the recently announced U S Army and Riverside County, California Awards, as well as others expected.
Jim I am an S. NIH D orders Genesis is on track for a record fiscal year bookings backlog and revenue.
And well positioned for long term business growth.
With that I'll turn it back over to the operator for Q&A.
Thank you the floor is now open for questions. If you do have a question you May press star one on your telephone keypad at this time. The for your question has been answered you could remove yourself from the queue by pressing one again, ladies and gentlemen at star one to ask a question and our first question comes from Mike Latimore from Northland.
Hum.
Yes.
[laughter].
Yes. Thank you. Thank you.
Great quarter there.
Alex It sounds strong.
Just on the I guess in terms of the sales group can you just kind of update us on.
How many people you have and do you expect to hire more salespeople by year end.
We do expect to hire more salespeople by year end of we have hired.
Mike.
Our sales professionals in Europe, and Asia Pacific and.
Middle East.
Of the United States and Canada.
And we've been doing that.
Principally all of this fiscal year I think the pace of hiring will slow, but it will it will continue this quarter.
Great and then you said you were sort of off to a strong start here in the.
Second half I guess can you talk a little bit about on sort of on the software side of the business.
You know is that also off to a strong start and is it more enterprise or you kind of the business.
The I'll answer both markets. The EU is is quite active right now in terms of Rfps.
<unk> and demonstrations I expect contract awards to begin to be announced this summer for the EU. So it's very busy over there for us right now.
Arms of enterprise.
We've never been busier.
Doing demonstrations on a daily basis answering rfps.
I think the win in Riverside County, and the win with the automobile manufacturer.
Certainly pointed to that our strategy is in fact working interest.
Certainly it was a validation.
Great Great and then on the.
Software business.
You you're getting now of this in the pipeline is that is that going to take the form of the recurring SaaS business or is it you know of licensed software.
Kind of of restaurants on the next would be great.
Sure the.
The National Emergency warning systems software you can you can model of that.
And that it will be 50% of professional services and 50% of SaaS model.
The enterprise suites will be 99% SaaS.
Mhm Okay.
Great.
Excellent Thanks, a lot.
Youre welcome. Thank you Mike.
Next question. Please on the next.
The next question comes from Martin Young from the Oppenheimer Go ahead Martin.
Hi, good afternoon. Thank you for taking my questions.
First on the reverse side awards can you maybe talk about it kind of competitive dynamics for debt win.
And.
If there's any implications.
For the rural of side of the wars two other.
The region is for California.
Sure. There was it was there was an incumbent and there were six competitive offerings.
To provide this service.
And Genesis was selected so we displaced the incumbent in Riverside.
And beat out the other for.
In the case of the automobile manufacturer.
We were selected to compete and we were only competing against the competitor.
And we were successful let the displacing the incumbent.
The competitor.
So I think of it as I said, a moment ago it's of validation.
The first wins.
Particularly those as large as the automobile manufacturer in Riverside County.
Provides referenced sets to other counties and other large manufacturers in the world.
That we will leverage.
The business development activities.
Thanks. Our next question is how do you feel about your current the software engineering resources.
Do you foresee maybe acceleration of investments in.
<unk> software side of the business given the momentum you're seeing.
Yes.
And Dennis correct me, if I'm wrong, but we're of about tripled our software development of human resources in the last.
Two years.
The three years.
We have continued to hire through the pandemic and we're still hiring in Madrid now so I think that's going to continue.
And a follow up on that do you.
Do you expect that U two extend well into the next fiscal year of where you know maybe if there is something a lot more revenues coming out.
Yes. It is.
It will it will extend into the next fiscal year and beyond.
Got it thanks and my final question is more longer term I think in the past you sort of talk about the.
Really the long term mix in your business, where software would take a much higher share of and with that in mind, how would your margin profile has changed versus where you are today.
It'll go up.
So I've said in the past the Martin that.
If you look out.
Three to five years of so we'll see.
Continue to see that we expect to continue to see substantial topline growth and we expect to see a mix of more 50 50 from of hardware software.
The hardware margin for the Genesis is very healthy and that the.
On the model perspective about 50% of software margins will be higher than that.
I think the aggregate will certainly be higher.
Thanks, a lot of jump back in the queue.
Thank you Martin next question please.
And our next question comes from the Ed Woo from <unk> Capital go ahead Ed.
Yes, congratulations on the quarter as things are quite back to normal on you guys are getting in our solution on your business of how important is it for you guys to look at M&A opportunities.
Any good opportunities are valuations out there.
Yes, so we as you know Ed we.
Sure.
Normally looking at ways to increase the.
The portfolio of Genesis Inorganically through acquisition.
We closed on Genesis of communication, Canada on October.
And we're actively pursuing other opportunities as we speak.
Great.
You mentioned a lot of strength in the U S business, what about in Asia I know you guys.
Committed a lot of the investments out there are you seeing a lot of opportunities on them now.
Yeah.
Yes, and the.
The press release.
You'll see with where the.
And just see if I can find it real quick.
So if you look at our sales.
As compared to the same quarter last year.
Revenues were up.
Across all geographic areas.
And we believe we're going to continue to see that.
As we continue through the balance of this fiscal year and other in the next and beyond.
Great book for answering my question of good luck. Thank you.
Thank you.
Next question please.
Our next question comes from Rick.
From reverse your investments go ahead.
Good afternoon, and thanks for taking my call today.
I noticed when you.
Broke out your revenue for the quarter, you had about 9% non hardware.
In your bookings as you are looking for where does that percentage of.
The non hardware revenue, increasing as a percentage of your bookings and backlog.
Sure.
It is.
Do you have a target.
For fiscal 'twenty one.
What percentage of revenue you want again.
You're a software and.
Oh, the emergency management.
Revenues too as a percentage of total.
We do believe we characterize the correct and then more longer term.
Outlooks versus the quarter of the year.
True.
Repeat what I said, a moment ago, we expect to be at the 50.
<unk> 50 of hardware software kind of business in the next several years.
And as I've said before on eclipsing $100 million.
Okay.
<unk>.
With most of your business coming in North America in the second half of your fiscal year do you see any particular areas of.
The rest of the World, where you anticipate anticipate being.
The stronger than others and.
If you and in early fiscal 'twenty to the U.
See any different geographic areas coming on more strongly.
Yes.
I mean, there's a big there's you know the big initiatives.
For our.
So the in each country with the public warning system.
And we.
Committed significant resources to.
To capture that.
And again things are pipeline looks very good geographically we're up from.
From a revenue perspective up in every region of the world.
And our second half.
And despite the fact that a fair amount of of the world is still.
Of having large impacts from COVID-19.
But that is changing and the.
And the pipeline is looking robust.
We're optimistic for the year in the future.
Okay. Thanks.
Thanks, Richard I appreciate your time today.
Youre welcome.
Thanks, Nick next question please.
Our next question comes from miles when you.
You ask go ahead Myles.
Hi, Richard how are you.
I'm not sure I tuned in the late so you may have already responded to this.
Terrific increase in revenues it didn't see the increase of the bottom line impact of that.
As we've mentioned the since last year, our expense side is up particularly in the sales and marketing.
The miles would describe this year.
As of year of transition and growth.
The transition is in.
In support of the initiatives in the EU and in support of the of the enterprise initiatives here in North America and other.
Regions of the world, including as I mentioned, the the middle East end of.
The APAC region.
Okay terrific job again, and thanks, a lot appreciate it.
Yeah.
Again, ladies and gentlemen to ask a question on the phone of Star one.
And our next question comes from Lloyd Korten from unique investments go ahead.
Hello Nice.
Revenue.
Really happy to see debt.
The how big is the potential European business on their rollout.
Lloyd of stayed away from commenting on that only in as much as it could lead to some discussion on or triangulation on the pricing.
No I mean the.
I mean I have no idea of what these what they pay for these systems et cetera, but is the total.
Is there a is it a $1 billion debt of $100 million if the.
I'm not I'm not talking the Youll win it all but you might get a piece of it of a fraction of a percentage how big is that business generally is that of public information.
You can find it you can find peoples opinion and publicly available data and I'd ask the alloy to look there.
I'm going to shy away from that question.
Okay.
Also.
The projections on profits going forward.
We have said into a lot of money.
Yeah, We've said the Lloyd's since we began this fiscal year debt, we will be we expect to be profitable and we expect to be cash flow positive yet again this year.
But as I mentioned to the prior caller our expenses are up it was planned we're meeting our plan and we're meeting our forecast.
So our operating income of.
Is is going to be less than it was last year and the cash flow will likely be less than it was last year, but still both very positive.
Okay also.
The Navy day.
The retrofitting the ships with more modern now ready or is that something that's going to be coming up.
No. They are we have a navy IV IQ to begin to replace that which has been in the fleet for more than a decade.
And how much is what kind of dollars of that is that been published.
I don't think so but I mean.
It put a round number on it Lloyd it's probably in the order of a million dollars of year.
Okay, Alright, well. Thank you good luck next six months.
Thank you.
At this time I would like to turn it back to management for any closing remarks. Thank you.
We regularly.
Let me discuss our business at the investor events during the year.
Might 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 2021 third quarter results.
Thank you. This does conclude today's conference. We thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.
[music].
Yeah.
Yeah.
All of them.