Q4 2021 Genasys Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the Genesys, Inc. Fiscal year 2021 conference call. All lines have been placed on a listen only mode and the floor will be opened for questions and comments following the presentation.
You should require assistance throughout the conference. Please press star zero on your telephone keypad to retool our operator at this time. It is my pleasure to turn the floor over to your host Kim Rogers from Hayden IR ma'am the floor is yours.
Thank you good afternoon, and welcome to Genesis incorporated fourth quarter and fiscal year 2021 financial results conference call I am Kim Rogers with Hayden IR, the Investor Relations firm for Genesis with me on the call today from Genesis are Richard Gagnon fourth Chief Executive Officer.
And Dennis Khan, Chief Financial Officer during today's call management will make forward looking statements regarding the company's plans expectations outlook and future financial performance that involve certain risks and uncertainties. The company's results may differ materially from the projections described in these.
Forward looking statements factors that might cause such differences and other potential risks and uncertainties can be found in the risk factors section of the company's Form 10-K for the fiscal year ended September 30th 2021.
Other than statements of historical facts forward looking statements made on this call are based only on information and management's expectations as of today.
We explicitly disclaim any intent or obligation to update those forward looking statements, except as otherwise specifically stated we will also discuss non-GAAP financial measures and operational metrics, including adjusted EBITDA bookings and backlog, which we believe provide helpful information to investors.
With respect to evaluating the company's performance for a reconciliation of adjusted EBITDA to GAAP financial metrics. Please see the table in the press release issued by the company at the close of the market today.
We consider bookings and backlog, leading indicators of future revenues and use these metrics to support production planning.
So as an internal operational metric that measures. The total dollar value of customer purchase orders executed in a given period, regardless of the timing of related revenue recognition.
Clark is a 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 through the Investor Relations page on our website at this time, it's my pleasure to turn the call over to Genesis Chief Executive Officer, Richard Danforth. Please go ahead Richard.
Thank you, Kevin and welcome everybody.
Fiscal 2021 was a year of solid performance combined with a significant level of investment to position us for future growth in our emerging software as a service business.
Our fiscal first fourth quarter revenue grew by 8% to $15 million.
And full year revenue grew 9% to $47 million.
Our track record of consistent revenue growth over the last five years.
Fiscal fourth quarter bookings were $4 1 million, bringing our total bookings for fiscal 2021 to 64 million, which exceeds any prior fiscal year total.
From these bookings were a record 12 month backlog of $36 million.
Backlog grew year over year by 217%.
The company posted another quarter of positive cash provided by operating activities over our last four fiscal years, we have generated $24 $2 million in positive operating cash.
Including $6 2 million this fiscal year.
This performance is impressive given that we opened up offices in Dubai, and Singapore and expanded our software development team as well as software sales and support team globally.
Importantly, strong cash generation from our core hardware business supports these investments as well as two software acquisitions.
At the end of September we had nearly 160 employees worldwide seven.
Seven global offices and.
Genesis software now provides critical communication coverage for over 35 million people worldwide.
In fiscal year 'twenty to 'twenty, one we achieved our goals for record bookings backlog and revenue.
Genesis is in an excellent.
Positioned to deliver another year of backlog and revenue growth in 2022.
We have seen a resounding positive reaction to our SaaS solutions as evidenced by the announced contract awards in fiscal year 2021.
In the past 12 months the Genesis SaaS platform was launched in the United States, Canada, and Mexico, providing life saving information for over 10 million people.
We are now pursuing a wide range of global opportunities across multiple industry sectors and are excited about the growth that lies ahead.
With our strategic investments, including the acquisitions of Zone Haven, an American mobile.
Genesis has created the industry's only a unified hardware and software critical communication platform.
As a result, we were evolving from a pure hardware business.
Towards an increasingly SaaS model.
As we execute our strategy.
We will continue to make key upfront investments in staffing and resources that will increase our operating expenses in fiscal 2022.
This growth investment is expected to materially shift our revenue mix to a higher SaaS contribution with SaaS bookings anticipated to grow year over year by over 50%.
The acquisitions are catalysts for our gems, SaaS and integrated mass notification hardware and software businesses.
Now with Zone Haven, we have three paths to selling this platform continuing to offer zone Haven software as a standalone solution.
Integrating it in with our Gem enterprise software and.
And offering has a layer and our I M N S solutions.
This combination gives genesis three competitive advantages for securing local regional and national emergency management and warning contracts.
Additionally, other large <unk> projects are expected to finalize and announce this fiscal year.
The combination of zone Haven evacuation management with I M N at I M. S is rapidly filling our business pipeline with opportunities from California and elsewhere in the United States.
Genesis SaaS business is gaining momentum as evidenced by the expansion of our software services contract with a global automaker to its facilities outside North America.
And we will continue to expand internationally.
We also landed a gym award in Riverside County here in California, and this is expected to expand in 2022.
Our investments in sales marketing and software development of building a growing SaaS pipeline.
Gems SaaS contracts with other major corporations are in the pipeline for 'twenty to 'twenty two.
Additionally opportunities exist in the United States and internationally with governments cities counties and departments are part of a robust and growing SaaS pipeline.
We recently announced the countries counties excuse me in five states here in the U S entered multiyear gem contracts.
And all but one of these we replaced an incumbent.
The investments in sales with new offices in Dubai, and Singapore expand our geographic presence and as experienced sales leaders and sales support personnel in targeted regions.
We have begun to see traction in these regions and announced a new distribution partner in Africa, and the Middle East.
The strategic partnership with focus on government and enterprise opportunities in this region, where countries are experienced crisis related to climate events civil unrest and security incidents.
Our team in Europe supported Genesis expectations for contract ones related to the EU mandated national emergency warning systems.
While we remain optimistic about the EU opportunities the progress has been slower than expected due to the global pandemic.
We now expect a mandated deadline of June of 2022 to be extended by at least one year.
To date the awards have been dominated by cell broadcasting and low price.
Although most awards to date have been cell broadcast public warning systems location base S. M. S system based Rfps are expected in 2022.
With our strategic investments, including acquisitions Genesis has created the industry's only unified hardware and software critical communication platform.
As a result, we're evolving from a pure hardware business towards an increasingly SaaS model.
As we execute our strategy strategy, we will make key upfront investments in staffing and resources that will increase our operating expenses in fiscal year 2022.
This growth investment is expected to materially shift our revenue mix to a higher SaaS contribution with SaaS bookings anticipated to grow year over year by 50%.
We expect another year of revenue growth for fiscal year 2022 operating expenses are forecasted to increase year over year by 9% to $11 million, reflecting the additional strategic growth spending to accelerate SaaS revenues is.
As our business grows our model can deliver increasing SaaS revenue and margin expansion. Once we are past the front loaded investments to support our future growth.
Having laid the groundwork for an in demand high margin SaaS business. We are focused on the execution of our game plan.
Genesis addresses a growing global need for our unique products and solutions.
Putting us on track to achieve our goals. Our team is committed to our strategy of continuing to build on a base of hardware customers while rapidly increasing the SaaS based contribution that brings attractive recurring revenues higher margins and increasing shareholder value.
With that I'll turn the call over to Dennis.
Thank you Richard.
Revenues for the fiscal 'twenty, 'twenty, one and fourth quarter were $15 million up 8% from the prior year quarter.
Compared to the same prior year period Hell Red Avenue revenue was $42 2 million up 12% software revenue was up $2 8 million up 71% and I M. N. S revenue was $2 1 million down 44%.
The increase in software revenue was primarily from the addition of America Mobile and Zone Haven, plus increased professional services revenue.
Gross profit margin was 51, 1% compared with 54% in the fourth quarter of fiscal 'twenty 'twenty.
Gross profit as a percentage of revenue was lower in the fiscal 2021 fourth quarter due to a 58% increase in engineering personnel primarily software related.
Higher software expenses were due to the recent additions of America mobile to our Canadian subsidiary Genesis Communications, Canada, and Zone Haven, and additional employees and resources for the Australia, EU and Jam software initiatives.
Operating expenses were $7 million up from $4 5 million in the same period, a year ago, largely due to a 74% increase in sales and marketing personnel over the prior year.
For future revenue growth opportunities, including opening sales offices in Singapore, the UAE and Puerto Rico, plus higher amortization expense, resulting from acquisitions completed this fiscal year.
Net income for the quarter was 771000 or two cents per share a decrease from $9 4 million in the fiscal 'twenty 'twenty fourth quarter.
The decrease was largely due to a noncash income tax benefit in the fiscal 'twenty 'twenty fourth quarter of $7 $1 million from the release of a portion of the valuation allowance against deferred tax assets.
For the full fiscal year 2021 revenues were $47 million up 9% from $43 million in fiscal 'twenty 'twenty.
Gross profit margin was 49, 8% for the full year compared with 52, 6% in fiscal 'twenty 'twenty.
Gross profit as a percentage of revenue was lower compared to the prior year, primarily due to continued investment in additional personnel to support the growth of our software products.
Operating expenses were $22 3 million up from $16 6 million in fiscal 'twenty 'twenty the ink.
Greece was largely due to a 45% increase in sales and marketing expenses from the increase in sales and marketing personnel over the prior year period to support future growth opportunities as well as the new sales offices, plus higher amortization expense, resulting from acquisitions completed this fiscal year.
Net income for fiscal year, 'twenty, 'twenty, one with 704000 or <unk> <unk> per diluted share compared with $11 9 million or 35 cents per diluted share in fiscal 'twenty 'twenty.
This decrease was primarily due to an increase in operating expenses of $5 7 million as well as the $7 1 million noncash income tax benefit in fiscal 'twenty 'twenty mentioned in my discussion of the fourth quarter results.
Adjusted EBITDA for fiscal 2021 was $4 1 million compared with $7 8 million in the prior fiscal year.
We believe this information and comparisons of adjusted EBITDA enhances the overall understanding and visibility of our business performance.
To that effect a reconciliation of our GAAP results to non-GAAP figures has been included in our earnings release.
Our balance sheet remains strong cash cash equivalents and marketable securities totaled $20 7 million on September 32021, compared to $31 4 million in the prior year.
Working capital totaled $18 million on September 32021, compared with $29 8 million at September 32020.
The decrease in working capital was primarily due to the use of cash pretty meager mobile asset purchase and zone Haven acquisition in the first and third quarters of fiscal year 2021 respectively.
We generated $6 $2 million of cash from operating activities in fiscal year 2021.
To provide you with some additional context, our business has generated more than $24 million in cash from operating activities over the past four years, an important metric that underscores the health of our business and is supporting investments as we strengthen our software profile.
With that we'd like to open the call to Q&A.
Operator could you start the Q&A session.
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First question comes from Mike Latimore. Please state your question.
Alright, thanks, guys.
Okay.
So.
You hired several people sales people over the last year I guess, how are they ramping productivity.
Hi, guys.
Guidelines, along the way here and kind of how is private productivity trending for your kind of software sales force.
It's trending up.
We had oh.
Our sales force that we had developed a.
Principally for the U S and Canada.
With the acquisition of Java Zone Haven, we trained all of those sales folks are on the zone Haven platform and they are out actively pursuing opportunities for zone Haven as well as Jim.
We saw a record year for Jama Zone Haven of SaaS bookings.
We expect that to continue to grow significantly in our 'twenty to 'twenty two and beyond.
And what kind of a normal timeline to get the whole productivity say nine to 12 months about that.
Yeah I think.
Mike We started this in fiscal 'twenty 'twenty fiscal 2020, which was in the midst of the Covid year, but we were successful at adding a whole bunch of sales folks. So the first real opportunity to sell was in our fiscal 2021 and they went from.
Standstill too are a significant number.
And again, I think it'll grow substantially from 2022 and beyond.
Thank you.
Stansell number the additional sales personnel didn't come on board until probably our second fiscal quarter.
Okay cause here.
Yeah that makes sense.
You touched on that.
Demand for cell broadcast in the U I guess any any sort of high level thoughts on why some of the.
Countries are leading with that as opposed to something maybe a little more valuable and location based SMS for both of US at the same time.
I think our speed was part of it so broadcast for a country you can bring up.
Short of fashion than that which requires.
In depth integration into the the network carriers.
But I wouldnt, although look too much or put much on what that fact that cell broadcast has been more prevalent it's only been four.
<unk> and none have gone live yet in the EU.
And as I said in my remarks, Mike I'd expect Rfps in our fiscal 2022 should be those that include both the the.
The location base, two way SMS and cell broadcast.
Got it got it and then just last on the.
Opex forecast for the year is it largely a sales or marketing or us or in Europe.
Reasonable percent of R&D in there as well.
And it's both for sure.
Sort of evenly mix there.
Do you have a feel for the mix stuff.
Well, we've seen I mean, if you take a look at the quarterly increase up in Opex throughout fiscal year 'twenty one Q4.
Opex was up to about just under $7 million. So a lot of that came in through selling and marketing throughout the year.
Therefore, that's we didn't have a full year those costs in <unk>.
In fiscal 'twenty. One so there are a lot of that will rollover in and being there for a full year for 'twenty two mm theres going to be a fair probably a increased number of engineering type folks that we would look forward to adding to the team in fiscal 'twenty two.
Oh, great. Thanks, a lot.
Yeah.
Thank you.