Q4 2022 Genasys Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the Genesys, Inc. Fiscal year 2022 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. If you should require assistance throughout the conference. Please press star zero on your telephone keypad to reach a live operator.
At this time it is my pleasure to trying to floor over to your host Kim Rogers of Hayden IR ma'am the floor is yours.
Thank you Diana good afternoon, and welcome to Genesis incorporated fourth quarter and fiscal year 2022 financial results Conference call I'm, Kim Rogers with Hayden I or the Investor Relations firm for Genesis with me on the call today are Richard Danforth, Chief Executive Officer, and Dennis Cline Chief.
Natural officer during today's call management will make forward looking statements regarding the company's plans expectations outlook and future financial performance that involves 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 call.
<unk> Form 10-K for the fiscal year ended September 30th 'twenty, 'twenty, one and 2022 other than statements of historical facts are forward looking statements made on this call are based only on information and managements expectations as of today, we explicitly disclaim any intent.
Our obligation to update those forward looking statements, except as otherwise specifically stated we 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.
<unk> is an internal operational metric that measures the total dollar value of customer purchases.
Orders executed in a given period, regardless of the timing of the related revenue recognition backlog 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 the company's 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 Kim and welcome to everybody.
Fiscal 2022 was an exceptional year for Genesis, we delivered 15% growth in revenue and a positive adjusted EBITDA, while accelerating our strategic shift towards a higher margin recurring revenue model.
Our investments in software sales and support led to key contract wins fueled expansion in existing markets and paved the way for entry into new markets and geographies.
We expanded our SaaS platform into seven COVID-19 states in 'twenty, One, California counties.
We self funded more than $9 million in SaaS platform investments and still generated $1 million in cash from operations in the quarter and $468000 for the year.
These investments are creating a strong economic engine that will meet the growing demands for our SaaS solutions.
After repurchasing approximately $1 million in company stock, we ended the year with no debt and $19 $9 million in cash cash equivalents in marketable securities the.
The cash generating power of our core business and the strength of our balance sheets continue to provide us with the resources and flexibility to execute our long term growth strategy.
Fiscal 2022.
We delivered 15% growth in revenue and an adjusted positive adjusted EBITDA in spite of the numerous a global supply chain challenges we faced this year.
We want to thank the team for their hard work and dedication in achieving these notable accomplishment.
They work relentlessly to meet customer commitments by engineering products second sourcing or building critical components inventory to avoid unforeseen changes or shortages.
At an executive level, we continued making strategic investments to accelerate our SaaS revenue, we added new enterprise sled and utility customers and significantly increased SaaS coverage in the United States beyond a strong foothold in California by expanding into 19 other states.
These gains are directly related to our investment in sales software development and customer success teams.
We also hired a chief revenue officer, Dennis Walsh, who brings extensive enterprise SaaS experience and relationships.
We offer SaaS solutions for numerous verticals, including utilities enterprise stadiums and campuses as well as the private sector.
In the fourth quarter, we closed three new SaaS contracts for our contracts in the utility sector, which included Golden State Water Company, Florida Municipal power agency, and northwest natural and Washington State.
In addition to providing accurate real time safety alerts and notification throughout multiple channels Golden State water in Florida Municipal power agency will use Jim our mass notification platform to inform utility customers a service outages system maintenance and other customer related communication.
To give you an idea of the potential of this vertical the Golden State water company contract covers more than 260000 customer customers. The Florida Municipal power agency Jamul mass notification co op agreement covers over $2 7 million home and business cut.
<unk> throughout Florida.
Northwest natural is deploying jem to deliver alerts and internal communication to work our staff and contractors.
And enterprise success to highlight which closed at the end of our fourth quarter is a multi year enterprise SaaS contract win with Volvo The second global automaker to select Jim to replace a competitors system and better safeguard their domestic and international workforce.
The gem platform features real time situational awareness in a single dashboard offers duress buttons field check ins and recipient locations to help keep people keep employees and everyone onsite informed and safe in a crisis.
Healthy pipeline activity and our SaaS products is increasingly converting to wins across end markets and geographies, including recent key wins in the enterprise utilities and state and local sector.
Jim and zone Haven can be purchased separately as a comprehensive offering and or bundled with I am and as our integrated emergency warning system.
Investments throughout fiscal year 2022 have improved our sales productivity lead generation as we continue to grow our SaaS pipeline pipeline.
Increasingly customers, who purchased one SaaS, so hardware product or adding our other offerings to maximize the benefit of our emergency notification crisis management and evacuation solutions.
To date 13, California counties have purchased multiple Genesis software and hardware offerings five of which have purchase all Genesis offerings I M. N S integrated mass notification system mass communication software and evacuation software.
Another four counties have purchased our mass communication software and our integrated mass notification systems and another for purchased a mass notification and evacuation software.
As the only company offering a unified communications platform Upselling and cross selling within our growing customer base, a further key growth initiatives for our SaaS platform.
Turning to our international business with the EU Middle East Africa, and Asia Pacific regions reopened after Covid, we expect stronger sales and revenue contributions from all of our international sales regions in fiscal 2023.
We anticipate continued revenue growth in our fiscal 2023.
Our hardware business will start from a lower backlog than the previous year due to timing of orders carrying over from fiscal 2022 to fiscal 'twenty to 'twenty three.
Fiscal fourth quarter Board bookings was $6 million, bringing total bookings for fiscal 2022 to 38 point too.
18 million in previously expected fiscal 2022 bookings are now anticipated to close in fiscal 'twenty to 'twenty three.
Our fiscal 2022 bookings result in a backlog of 22 million that we expect to deliver in the fiscal 'twenty 'twenty three.
The carryover of orders stronger international sales continue to acoustic hailing device deliveries and increased software service sales are anticipated to augment fiscal 'twenty twenty-three bookings and backlog.
Further we are building a strong base of annual recurring revenue from our software business and it will represent a larger portion of our revenue in fiscal 'twenty to 'twenty three.
Last year, we discussed a 9% to $11 million increase in operating expenses to support our SaaS business growth.
The increase in fiscal 2022 was $6 4 million and we anticipate operating expenses to increase by approximately $5 million in fiscal 2023, reflecting our continued confidence and excitement in our SaaS business.
Through our investments to date, we have a proven a SaaS business model by replacing competitors and landing contracts with global automobile manufacturing professional sports organizations sled utility and enterprise customers.
Our strategic shift towards a higher margin recurring revenue model is gaining momentum as evidenced by the strong performance is outside of our SaaS offerings.
Fiscal 2022 strategic investments, but the key wins and fueled expansion in existing markets and entry into new markets and geographies.
That momentum has continued in the first quarter of fiscal 2023.
With the previously mentioned Volvo and the three utility contracts as well as major Jam Awards in San Diego County, and further expansion of zone Haven into Riverside and four additional California counties.
Further orders are expected this quarter.
Our SaaS platform investments are creating a strong economic engine that will meet the growing demand for critical communication systems that help keep people safe.
The cash generating power of our core business and the strength of our balance sheet continues to provide us with the resources and flexibility to execute our long term growth strategy.
With a robust pipeline current bookings and backlogs that carryover of anticipated orders stronger international sales continue the acoustic hailing device deliveries and increasing SaaS sales.
We expect continued revenue growth in fiscal 'twenty to 'twenty three.
Entire Genesis team looks forward to an exciting FY 'twenty, three and with that I'll turn it over to Dennis.
Thank you Richard.
Revenues for the fiscal 2022 fourth quarter were $16 million up 7% from the prior year quarter.
As compared to the same prior year period, a H D revenue was $11 8 million down 15% I'm an S. Revenue was 3 million five times greater than last year and software revenue was 1.1 million up 63%.
We didn't that software recurring SaaS revenue from the Americas increased 231% over the prior year quarter.
Gross profit margin was 47, 8% compared with 51, 2% in the fourth quarter of fiscal 2021.
Most profit as a percentage of revenue was lower due to an increase in software cost and higher product costs.
Operating expenses were $20 4 million up from 7 million in the same period, a year ago, largely due to a noncash $13 2 million goodwill impairment charge associated with the software reporting unit.
The noncash impairment charge was taken to reduce the company's goodwill asset due to sustained declines in major stock market indices since the beginning of the year, resulting in a decrease in the SaaS market multiples from 15.5 to five five times annual revenues.
You evaluate goodwill for impairment on an annual basis in our fiscal fourth quarter.
As a result of the impairment analysis. The company recorded the impairment loss on goodwill and $13 2 million associated with the software reporting unit for the three and 12 months ended September 32022.
Excluding the impairment charge operating expenses in the quarter were $7 3 million, a 4% increase compared to the prior year period.
Net loss for the quarter was $13 8 million or <unk> 38 per share compared with net income of $8 8 million in the fiscal 'twenty one fourth quarter.
The decrease was largely due to the noncash $13 2 million goodwill impairment charge lower gross profit margin on higher sales and a noncash income tax expense of $1 million related to a valuation allowance against deferred tax assets.
Revenues for the full fiscal year 'twenty, two were 54 million a 15% increase over the prior year.
As compared to the same prior year period I M. N S revenue grew 457% to 11.4 million and.
And software revenue grew 11% to $3 1 million.
These increases were partially offset by a 6% decrease in AHD revenue to $39 5 billion.
The increase in software revenue was largely due to growth in software as a service revenue, which increased 427% over the prior year, partially offset by a 38% decrease in professional services revenue.
Gross profit margin was 48, 7% for the full year compared with 49, 8% in fiscal 'twenty one.
Gross profit as a percentage of revenue was lower compared to the prior year, primarily due to increased cost associated with continued investment in personnel to support the growth of our software revenue and higher product cost in the second half of fiscal 2022.
Operating expenses for the total year were 41 9 million up from $22 3 million in fiscal 2021 largely due to the noncash $13 2 million goodwill impairment charge that I mentioned in the discussion of the fourth quarter results.
Excluding the goodwill impairment total year operating expenses were $28 7 million.
The increase in operating expenses was also driven by the planned increases in SG&A and research and development over the prior year to support SaaS revenue growth.
These increases in SG&A and R&D were largely driven by additional employee related costs associated with increases in sales administration engineering and software development personnel over the prior year to support software revenue growth opportunities in.
In addition, amortization expense and marketing related expenses increased over the prior year.
Net loss for fiscal year, 2022 with $16 2 million or <unk> 44 cents per share compared with net income of <unk> 7 million or two cents per diluted share in fiscal 2021.
This decrease was primarily due to the as we discussed the noncash $13 2 million impairment charge noncash income tax expense of 1 million related to a valuation allowance against deferred tax assets and an increase in operating expenses of $6 $4 million.
Adjusted EBITDA for fiscal 'twenty to 'twenty, two was a positive $2.4 million compared with $4 1 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 too.
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 and our cat business continues to generate strong cash from operations, that's enabling reinvestment for future growth.
Cash cash equivalents in marketable securities totaled $19 9 million at September 32022, compared with $20 7 million on September 30, 2021.
The 800000 decrease is the net result of repurchasing approximately $1 million of common stock in open market transactions.
Working capital totaled $20 3 million at September 32022, compared with $18 million a year ago.
We generated $486000 of cash from operating activities in fiscal year 2022.
After reinvesting approximately 9 million into the software business to support the growth opportunities we foresee.
We are diligently managing the allocation of our capital to remain debt free.
Also advancing the strategic shift in our business towards higher margin software services.
With that we'd like to open the call to Q&A.
Operator could you start the Q&A session.
Thank you the floor is now open for questions. If you would like to ask a question. Please press star one on your telephone keypad again, ladies and gentlemen that star one on your telephone keypad. If you would like to ask a question at this time. Our first question comes from Ed Woo with Ascendant cap capital. Please state your.
Question.
Yeah. Congratulations on the quarter. My question is have you noticed any change with either the macro environment. It comes out in all of these government willing to sign a contract.
No the the what we're seeing on a macro level and as I mentioned in my remarks the.
The international is opening up finally, the APAC region was probably the slowest to two.
To come back open as a result of the Covid plague.
But they are fully opened right now as well as other international markets. So.
So no I haven't it's a direct answer to your question.
Great.
Any issues with supply chain has it improved got back to normal you're having a lot of high inflation and how is that impacting your business, especially a hardware business.
Yeah.
The team here is manage that throughout the pandemic.
And they will continue to manage it.
Inflation is a real thing and that that is in factoring are impacting our gross margins our gross margins for the year of 2022 was down 1.1 percentage points.
Actually improved in Q4 over Q3, so we do have the opportunity to reprice, our products, which we've done two or three times during fiscal 'twenty to 'twenty two.
Now of course backlog doesn't get the impact of that but.
New bookings do so yes, we are we are.
<unk> a bit with the inflation growth that the world is seeing.
Great well, thanks for answering my questions and I wish you guys. Good luck. Thank you.
Thank you.
Yeah.
Our next question comes from Mike Lattimore with Northland Capital. Please state your question.
Okay. Thanks, Yeah, and congrats on the great here here.
In the I think you talked about $6 million of bookings in the fourth quarter, how much of that was in the software category.
Do we disclose it we don't disclose that Mike you'll see in the report states. The total revenues in software.
But not the bookings.
Okay.
And then can you remind me how many software salespeople you have now.
Until we have 31 sales and marketing people. In addition to that we have approximately 69 and the software development group.
Okay.
How about a number of quota carrying salespeople.
Yeah.
It's in the 31, it's most of the 31.
Sorry, I got some pre salespeople as well but.
Got it okay great.
And then.
Over the longer term as your software business scales, what what kind of gross margins do you envision there.
60% to 80%.
Okay.
Okay.
Alright, and then.
Okay.
Zone, even seems to be doing really well.
Can you give a little update there in terms of.
No I think you were trying to match zones in other states progress.
Progress there and also.
The opportunity may be.
The east coast as opposed to the West coast.
Sure well the the momentum first SaaS, both Germans Zone Haven, you know it was very very good in our fiscal 'twenty two if you've been reading our press releases of recently, you'll see we've added four more California counties to Zone Haven, we added San Diego with the mass notification gems software.
He added Riverside County was zone Haven, we announced utilities in California, Florida and Washington.
All of which has just been released in the last.
Oh wait weeks seven weeks.
We have completed the build out of our zones in the state of California.
Near completion in the state of Colorado, and then working on other states to complete you know throughout this fiscal year in terms of the east Coast and South you know the Gulf coast areas.
We have begun to prosecute our states like Florida are states like Massachusetts, Texas, Louisiana.
Football Zone Haven and Jim.
We expect to close awards in our fiscal 'twenty twenty-three and several of those areas.
Okay great.
Thank you.
Thank you.
Our next question comes from Brian Colley with Stephens. Please state your question.
Hi, This is hassan <unk> on for Brian .
Thanks for taking my question.
So you mentioned that you guys have a a robust pipeline for.
A healthy pipeline for activity that's correct.
And if you can discuss your growth outlook for both hardware and software in fiscal year, 'twenty three and blank.
When should we expect to see software revenue ramp up more meaningfully.
Yeah.
Hassan we we don't give guidance yet on that.
As you know the the nature of SAS, and and you know three year kind of contracts.
You know it does take some time before you have a meaningful flow of revenue I have mentioned in the past that we will likely begin to report on our a R. R. One and our software a SaaS software bookings are when we hit $5 million of a R. R, which we have not done yet and I expect.
That will happen in our fiscal 'twenty to 'twenty three.
Gotcha. Thanks.
And then a question on just your long term revenue targets are you guys still looking at that 80 million is that still intact.
We will update that model.
<unk> increase that.
Okay.
Thanks, and then I guess, just one more question, but can you talk about some of the initiatives initiatives and insights at the your new Chief revenue Officer has brought into our organization and why his key priorities are for this upcoming year.
His key priorities of SaaS.
Sass bookings building out a marketing group for SaaS.
E smoke thing that brings a lot of experience in this area.
And it's got.
We've got a lot to accomplish and.
We all have great confidence in his abilities.
Yeah.
Okay.
I appreciate it.
Thank you.
Yeah.
Our next question comes from Martin Yang with Oppenheimer. Please state your question.
Alright. Good afternoon. Thanks for taking my question can you maybe.
Breakout or can you give us more details on the incremental Opex in comparison, you will make fiscal 'twenty three you've been more on the sales marketing is more a D. Any detail I appreciate it. Thank you.
Yeah.
Yeah, it'll be pretty evenly spread across sales and marketing and R&D.
We've got.
A number of.
The Chief revenue, Dennis Walsh has a number of of.
Possessions and he's looking to fill to fill out both.
The sales team so when I think about it maybe it is going to be slightly skewed more towards sales and marketing.
Looking for additional marketing folks to be able to help drive lead generation and spread the word and I.
Get us a bigger market presence our visibility.
Engineering, and we will continue to add to our software team.
There's a as we continue to integrate and expand the capabilities of both the zone Haven and the gym software.
Got it thank you.
My second question is regarding your utility.
Is there any.
Important takeaways from those quarters taken affirmative wins and how do you plan to target that vertical more efficiently.
In the coming years.
The importance of it as it's a new vertical for us for our SaaS products we.
Hadn't been in the utility market, we now are.
And.
You know how many utilities are just here in the United States.
So it's a great opportunity for further expansion of our SaaS products.
Got it thank you very much.
Thank you.
Yeah.
Okay. All right. Our next question comes from Chris Huddle with Blue Caterpillar. Please state your question.
Yeah, I had a couple of questions. Thanks, guys for taking them.
Just one thing you talked about sales productivity and I wanted to ask you.
On the coming fiscal year do you expect to be able to increase quotas to be able to get higher.
Higher higher yield from your existing sales staff.
Yeah, so they already have those quotas.
Okay.
My next question is just on competition, it's been a few quarters now that you guys have been kind of on a roll able to replace some competition in your core areas and I'm wondering have you seen any kind of reaction from those competitors either in terms of <unk>.
Pricing or different tactics or is it just a case, where there you're still below the radar and they haven't really felt the need to respond yet.
Okay.
The sales cycles are typically long.
So I'm seeing a reaction is delayed.
I would I would.
Argue that we are definitely on their radar screen for certain.
We're definitely winning winning more winning a higher percentage.
And that's all a mass communication software a gem product line in the in the evacuations a SaaS product.
You know we enjoy a position that we're the only provider of that right now and I will highlight this again, but the cross selling and up selling of mass communication soft for integrating the evacuation software and then also into the integrated mass notification system.
We saw a lot as I mentioned in my remarks, 13 counties in California alone.
That we're able to upsell and no other company can do that.
Got you.
And my my last question for <unk>.
For now, it's just a little bit longer term, we've seen some interesting things happening.
In the prediction of some of these natural disasters, particularly in California on the earthquake side.
And the death of our planning is a well worn.
That people have to engage in and I'm. Just wondering you know what what kind of thoughts do you have and what expectations might investors have around partnerships that you all might.
Look to forge in kind of a disaster planning more forward looking kind of.
Area, where.
Getting in front of these things can be a major a major health and saving lives and are making things turn out better.
Yeah, we have several partnerships in place now I think you'll see I know youll see some some additions of significant providers that will also be on our platform.
And you'll also see that.
At least here in the state of California, We have an initiative going with the shake alert system. So I think you'll continue to grow on that.
Okay, well, great. Thanks, a lot guys and congratulations.
Thank you.
Yeah.
Okay and our next question comes from.
[noise] William Brenner with Vanquish capital. Please state your question.
Yes, hi, good evening Richard Dennis.
Hi, there.
Oh first one Richard can you give us a little color on the initiatives.
On utilities nice to see we signed three is this a real focus for us given geographic regions.
There are definitely some some areas that.
Historically, you have had massive issues and I see a tremendous opportunity for you there.
Then I have a blocking and tackling question for for Dennis thereafter.
Sure as I mentioned bill the.
It's always hard to get your first win in a new vertical and.
And we did that and followed it up quickly with two more.
So you can expect it. This is one of the verticals along with large scale manufacturing and others that are a focus of not only me, but our see our ROE and our entire sales and marketing staff.
Okay great.
Dennis.
If my math is correct on this fourth quarter, if I back out the impairment.
Pretax it seems as though we have about approximately a 400000 profit do you is that correct and would you happen to have a.
Adjusted.
Figure supervisor.
That is correct.
We.
It would have been about $400000 about $3 96.
Okay, great. Okay that would've been appreciated I'll also point out that it was a quarter than we generated $1 million in operating cash.
And then he thought as well 400, K in and operating income.
No I completely agree with you Richard as a material shareholder this has been a transformational year. The foundation in my opinion is built.
And I look forward to 'twenty, three and 'twenty four.
Terrific. Thank you for the kind words.
And that was our final question I'll turn it back over to Dennis for closing remarks.
Thank you we regularly meet with investors at conferences throughout the year, we will be at the Imperial capital 2022 security Investor Conference with a presentation and one on one meetings on December 15. Please.
Please visit the Imperial Securities website to register for the conference and book a meeting.
Thank you for participating in today's call. We look forward to speaking with you again next year. When we report fiscal first quarter 2023 results let.
On behalf of everyone at Genesis, we wish you and your families a happy healthy holiday season.
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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