Q3 2024 Genasys Inc Earnings Call
Operator: Ladies and gentlemen, thank you for your patience. Please stand by. The conference will begin immediately following the distribution of the earnings release.
Ladies and gentlemen, thank you for your patience. Please standby the conference will begin immediately following the distribution of the earning release.
Operator: Again, we thank you for your patience. Please stand by. Thank you.
We thank you for your patience. Please standby thank you.
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Ladies and gentlemen, thank you for your patience. Please remain on the line. Your conference will begin immediately following the distribution of the earnings release. Thank you for your patience. Please standby.
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Ladies and gentlemen, thank you for your patience. Please remain on the line.
The conference call will begin immediately following the distribution of the earnings release for Genesis. Thank you for your patience.
[music].
Speaker Change: Good day, ladies and gentlemen, and welcome to the Genesys, Inc. Fiscal third quarter 2024 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 to reach a live operator at this time. It is my pleasure to turn the floor over to your host Brian Alger SVP of Investor Relations and corporate development welcome Brian the floor is yours.
Yeah.
Speaker Change: Thank you and good afternoon, everyone welcome to Genesis the third quarter of fiscal 2024, physical financial results Conference call I'm, Brian Alger SVP of Investor Relations and corporate development for Genesis.
Speaker Change: The earnings release should be hitting momentarily for those of you looking for the financials you can reference our 10-Q, which is already on file.
Speaker Change: At the SEC website under Edgar.
Speaker Change: I know the company's ticker I will be discussing the results on the call and hopefully the earnings release, we'll hit momentarily.
Speaker Change: With me on the call today are Richard Danforth, our CEO and Dennis <unk> the company's CFO.
Speaker Change: 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 section of the company's Form 10-K.
Speaker Change: For the fiscal year ended September 32023.
Speaker Change: 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 August six 2024, we explicitly disclaim any intent or obligation to update these forward looking statements, except as otherwise specifically stated.
Speaker Change: 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.
Speaker Change: We consider bookings and backlog, leading indicators of future revenues and use these metrics to support production planning bookings is an internal operational metric that measures. The total dollar value of customer purchase orders executed in a given period, regardless of the timing of the related revenue recognition.
Speaker Change: Backlog is a measure of purchase orders that are received and scheduled to ship within the next 12 months.
Speaker Change: Finally, a replay of this call will be available in approximately four hours through the Investor Relations website.
Speaker Change: Got it.
Speaker Change: The company's web site.
Genesis CEO: At this time, it's my pleasure to turn the call over to Genesis CEO.
Richard Danforth: Richard Danforth.
Richard Danforth: Richard.
Richard Danforth: Thank you, Brian and welcome everyone.
Speaker Change: I am in Puerto Rico are working through the final items of the PREPA agreement.
Speaker Change: As we finalize the contract negotiations and with documentation largely out of the way. We now look forward to moving into the implementation phase of the project.
Speaker Change: To recap the Puerto Rico Dam project fully funded by FEMA and is expected to result in $75 million worth of revenue for Genesis.
Speaker Change: Accordingly, cash inflow inflows will precede revenue recognition.
Speaker Change: The timing of precise revenue recognition does not yet no. We do expect to recognize most of the rental revenues in our fiscal 2025 and 2026.
Speaker Change: The significance of the Puerto Rico early warning system goes beyond the favorable financial application.
Speaker Change: This project is the most significant public demonstration of how Genesis protect software is able to unlock and enable much larger hardware opportunities.
Speaker Change: With a growing pipeline of critical infrastructure protection opportunities. We believe the Puerto Rico Dam project is just the beginning of Genesis is realizing a significant return on the deliberate software investments we have made over the past three years.
Speaker Change: Since our last earnings call, we announced further E back coverage in California, with the addition of Santa Barbara County, and the activation of San Diego County.
Speaker Change: Tragically 2024 is shaping up to have another intense fire season with many of our customers throughout the Western U S actively using our system as I speak today.
Speaker Change: Importantly, Genesis protect feedback is helping emergency managers and first responders across the country plan for and manage evacuation, it's much more efficiently and safely.
Speaker Change: In Northern California, the nearly two week old Park fire is only 35% contained and has burned over 400000 acres and more than 600 structures have been destroyed.
Speaker Change: Thankfully the residents have been able to get out of harm's way with no civilian life loss.
Speaker Change: California, Oregon, Washington, Idaho, and Montana, Wyoming, Utah, Nevada, and Colorado. The current focus is on fire.
Speaker Change: Out here in the eastern United States. The danger is of a much wider variety as the Gulf and Atlantic Coast Coastal states.
Speaker Change: Pay off a hurricane season, with Floridians, and George and spacing changing evacuation conditions, just recently over the past couple of days.
Speaker Change: The unfortunate reality is that the exploration is need to be planned for and managed throughout the country for a variety of reasons not just natural disasters Jenna.
Speaker Change: Genesis <unk> is proving to be a critical tool for emergency managers and first responders across the country.
Speaker Change: Later this week, we are hosting a number of law enforcement leaders in Boston or depreciation of that that will include presentations from commissioner Richard Wally.
Chris Kuts: Altamont, PD and chief Chris cuts.
Speaker Change: From the <unk> settlement, Texas P J.
Unnamed Speaker: Each presents key learnings and lessons while managing cross-agency communications during and in the wake of major events. Coming back to the hardware business, fiscal 2023 and 2024 have been challenging, to say the least. But without the balance of the prior program of record, bookings and revenues have not kept pace with prior year reported results.
Speaker Change: Each presents key learnings and lessons, while managing Cross agency communications during and in the wake of major events.
Jeff Hall: Additionally, Genesis as though Jeff Hall said, we'll be speaking to the very current topic, a quiet cricket consumer apps and text messaging among governance government employees, especially those of law enforcement needs to be replaced with secure and compliant communications solutions like Genesis connect.
Speaker Change: As we announced last month, we are beginning to realize synergies from our combined sales efforts of connect and our traditional L where at hardware to a shared customer base of law enforcement.
Speaker Change: Not only are we seeing strong customer growth on the connect side, but we're also seeing meaningful uptick in <unk> bookings.
Speaker Change: Year to date are lowered horsemen hardware bookings are already nearly 50% higher than the fiscal 2023 total.
Chris Kuts: While some of this is likely due to the civil unrest, we have witnessed this year. The combined sales engagements with both connect and <unk> is also contributing in a meaningful way.
Speaker Change: Coming back to the hardware business fiscal 2023, and 2024 have been challenging to say the lease and.
Speaker Change: In 2023, we had a number of forecasted opportunities get delayed.
Speaker Change: As we have progressed through its budget 'twenty for some of those opportunities have been converted into bookings.
Speaker Change: Without the ballast of the prior program of record bookings and revenues have not kept pace with prior year reported results.
Speaker Change: But that that only tells part of the story when we strip out the bookings and revenue from the prior year program of record we see that this year's bookings activity is actually at a record pace before we start thinking about Puerto Rico or the new program with the United States Army.
Speaker Change: Core business, let alone the implications it has for expanding and accelerating our hardware business.
Speaker Change: What I said last quarter remains true today.
Speaker Change: Genesis is in the best strategic position in its history.
Speaker Change: Our product portfolio is diverse and differentiated and we have one at or have a high degree of visibility on record revenues for the next several years.
Speaker Change: Now I will turn the call over to Dennis to go through the third quarter financials and outlook in greater detail Dennis.
Dennis: Thank you Richard.
Dennis: In the third quarter, we continued to see strength in our software business with year over year growth of 120%.
Dennis: Recurring revenues growing 138% over the same time period.
Speaker Change: Revenues for the third quarter of this fiscal year for $7 2 million a decrease of 50% over the prior year's third quarter revenue, which benefited from approximately $8 $6 million from the prior program of record completed in 2023.
Dennis: Excluding the army program of record sales in the June quarter of 'twenty three.
Dennis: Fiscal Q3, 'twenty four hardware sales increased 8% year over year.
Dennis: Software revenue this quarter was $2 $1 million, reflecting 138% annual growth in recurring revenues.
Dennis: More than offsetting that growth hardware revenue decreased 62% to $5 1 million.
Dennis: It is important to remember that Genesis started fiscal 'twenty four with exceptionally low hardware backlog.
Dennis: Million of interest expense and a fair value adjustment to the loan of approximately <unk> 1 million.
Dennis: Going forward, we expect to incur approximately 400000 of quarterly interest expense, depending on the 90 day sulfur.
Dennis: Cash cash equivalents and marketable securities totaled $12 7 million as of June 32023, sorry, 2024, compared with $10 1 million as of the September fiscal year end.
Dennis: Excluding excluded from the cash figure is $3 $5 million being held as a bid bond for the Puerto Rico project.
Dennis: We anticipate a rapid return to the bid bonds following the contract signing.
Dennis: Cash used in operating activities in the third fiscal quarter was $7 5 million.
Dennis: As we have discussed in our earnings release and this call. There are a number of large opportunities that we're excited about.
Dennis: Between the Puerto Rico, and Crows, AHD business alone, we are expecting our $200 million and highly profitable revenue in the coming years.
Dennis: Our software business continues to grow rapidly and is on track to post triple digit growth in <unk>. This year.
Dennis: <unk> hardware bookings, we expect a healthy hardware bookings quarter in the fourth quarter.
Dennis: Richard do you want to take that.
Richard Danforth: They have lost merger.
Richard Danforth: Yes, the expectation for bookings in the fourth quarter of this fiscal year is expected to be exceptionally strong with the inclusion of Puerto Rico of course.
Richard Danforth: We expect that negotiation to conclude.
Speaker Change: <unk> and for the orders from Puerto Rico to be added to our backlog as we exit this fiscal year, excluding the Puerto Rico.
Speaker Change: Opportunity, however, as both Dennis and Richard said.
Dennis: International has seen a significant uptick from the prior year up 117% for the first three quarters of this year.
Speaker Change: That's an important recovery forces.
Speaker Change: Since Covid international bookings have been exceptionally weak and to see that come back and diversify our revenue base has been encouraging.
Speaker Change: Okay got.
Speaker Change: Got it.
Speaker Change: <unk>.
Speaker Change: Little hypothetical question, if we were to kind of enter your question.
Speaker Change: But if we hadn't done it my question.
Speaker Change: What do you think in terms of the impact on the demand or the timing of deployments.
Unnamed Speaker: Thank you very much.
Unnamed Speaker: and the granularity of my Dan.
Speaker Change: Weather related events, whether it's wildfires in California, Hurricanes tornadoes et cetera that continue to increase.
Speaker Change: As well as then other.
Speaker Change: First person shooter events so.
Speaker Change: Is there a way have you been quantifying the pipeline of opportunities for connect and a vac is there still some way that you could help us understand the magnitude of the opportunity there be it in terms of pop coverage subs or otherwise thanks.
Unnamed Speaker: I don't think we'll put that data out, Brian or Dennis. If you could help me with that, that would be great.
Speaker Change: I don't think we put that data out Brian or Dennis if you could help me with that.
Speaker Change: Yes.
Speaker Change: Scott we've talked about this before where the opportunity set and the Tam or the opportunity.
Speaker Change: It becomes very hard to calculate because in many cases.
Speaker Change: We're selling to the same population base multiple times.
Speaker Change: The example that we've used often is the case of Berkeley, right, where we have the University of California at Berkeley, We have the town of Berkeley, California, and we have the county of Alameda County, all buying each of our software solutions as well as our acoustics hardware systems.
Unnamed Speaker: In aggregate, you're talking hundreds of millions of dollars for, you know, our Genasys Protect software suite. But when you look at critical infrastructure, as Puerto Rico illustrates,
Speaker Change: Some of you over the next couple of months and we look forward to presenting our fourth quarter and financial.
Speaker Change: Fiscal full year results in early December.
Speaker Change: And good night.
Speaker Change: Thank you ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation you may disconnect. Your lines at this time and have a great day.