Q1 2025 Genasys Inc Earnings Call
Good day, ladies and gentlemen, and welcome to the Genesys, Inc. Fiscal first quarter 2025 conference call all lines have been placed on a listen only.
Speaker Change: And the floor will be opened for questions and comments following the presentation. At this time. It is my pleasure to turn the floor over to your host Brian Alger SVP Investor Relations and corporate development welcome Brian the floor is yours.
Speaker Change: Good afternoon, welcome to Genesis as fiscal 2025 first quarter results conference call.
Speaker Change: Brian Alger, SVP Investor Relations and corporate development for Genesis.
Speaker Change: With me on the call today are Richard Danforth, our CEO, 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 and involve certain risks and uncertainties. The company's results may differ materially from the projections described in these forward looking statements factor.
Speaker Change: 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 32024.
Speaker Change: Other than statements of historical facts are forward looking statements made on this call are based on the information and managements expectations as of today February 11th 2025, we explicitly disclaim any intent or obligation to update those forward looking statements, except as otherwise specifically stated we.
Speaker Change: We will also discuss non-GAAP financial measures and operational metrics, including adjusted EBITDA bookings backlog and adjusted net loss, which we believe provide helpful information to investors with respect to evaluating the company's performance.
Speaker Change: 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 market today.
Speaker Change: Consider bookings and backlog, leading indicators of future revenues and use these metrics to support production planning.
Speaker Change: Bookings is an internal operational metric that measures. The total dollar value of a customer purchase orders executed in a given period, regardless of the timing of related revenue recognition.
Speaker Change: Backlog is a measure of purchase orders received that are scheduled to ship in the next 12 months.
Speaker Change: Finally, a replay of this call will be available in approximately four hours through the Investor Relations page on the Companys website.
Speaker Change: Now at this time, it's my pleasure to turn the call over to Genesis, Chief Executive Officer, Richard Danforth.
Speaker Change: Richard Thank.
Thank you, Brian and welcome everyone.
Speaker Change: We are pleased to report that fiscal 2025 is off to a good start substantially better than the prior year's quarter.
Speaker Change: Before we get into the results of the quarter I want to spend some time discussing genesis his involvement.
Speaker Change: Gold during January as historic fires in Southern California.
Speaker Change: These fires made national and International News I am sure that all of you are aware that that in the second week of January Los Angeles County experienced a dangerous, but not uncommon weather event.
Creating very high wins combined with extremely low humidity.
Speaker Change: Days before anything occurred notices were issued by various weather services and as a result, we.
Speaker Change: We and our customers were ready.
What did happen however was far greater than anything previously experienced.
Speaker Change: Several different fires ignited across the accounting requiring requiring an unprecedented amount of coordination and communicated communication across a plethora of agencies.
Speaker Change: The sheer scale of the response was unprecedented emergency creams across the western United States descended upon Los Angeles as part of a comprehensive mutual aid engagement to fight the fires and keep people safe.
Speaker Change: What stood out it wasn't just the scale of the site, but the technology technological advancements that naval first responders from across southern California and beyond to work together.
Speaker Change: Unfortunately, fast moving and devastating wildfires are not uncommon.
Speaker Change: We can all recall the images from the Paradise tubs and behind the fires.
Speaker Change: All driven by very high winds devastating communities near urban interface areas.
Speaker Change: So lessons learned from those prior tragedies led to Genesis developing an la county to purchase our Genesis protect solution.
Speaker Change: So the images of the devastation to the homes and properties of the communities across Los Angeles County are are really similar to Paradise, Glen Helen and behind it.
Speaker Change: What is drove months' to play different Mr toll on human life.
Speaker Change: Utilizing genesis protect La County, and his partners successfully safely evacuated hundreds of thousands of citizens.
Speaker Change: Without question countless lives were saved through the timely use of the Genesis protect platform.
Speaker Change: As we all know the fire events of Los Angeles lasted for several days and over the course of that time emergency managers and first responders, we're in continuous communication with the community.
Speaker Change: Over 400 zone status changes work communicated over just two weeks.
Speaker Change: Throughout the country Countywide event Genesis personnel were onsite sitting side by side with County State and Federal Emergency management.
Speaker Change: Lessons learned from this extreme experience of being implemented and the Genesis protect development and customer success protocols.
Speaker Change: From a plaque points platform standpoint, Genesis protect proved to be incredibly resilient scaling up capacity orders of magnitude during peak traffic.
Speaker Change: At one point Genesis servers were processing over 183 thousands of requests per second.
Speaker Change: And Genesis website drew more than 2 million active users in the month of January and the number of Genesis App users jumped at buybacks during that month.
Speaker Change: Not only to Genesis enable emergency manages to get the word out but Genesis also continuously informed the hundreds of thousands of impacted residents families and loved ones around the country with the official and most accurate information on the fires and the impacted zones.
Speaker Change: It is impossible to overstate how proud we are of the team and the performance of Genesis protect is such a critical and high profile event.
Speaker Change: Recently at the California Fire Chiefs operational technology Summit, where fire operations chiefs from across the state.
Speaker Change: Joey emerging technology partners servicing fire and EMS industries with the goal of improving operations and fierce firefighter safety.
Speaker Change: Genesis presented a minute by minute account of the response and communication by San Diego County, So that Bernardo site two weeks ago.
Speaker Change: We were able to show the logs from our software that confirms an incredibly fast response.
Speaker Change: Residents received evacuations warnings and orders in less than eight minutes. After first responders arrived on scene.
Speaker Change: And rapidly changing emergencies wear time of response equates equates to lives at risk the speed and accuracy of the notifications that the Genesis protect platform provides enables first responders to accomplish their primary mission of protecting the community and saving lives.
Speaker Change: While Genesis was supporting customers in southern California in January we were also making meaningful headway with the project in Puerto Rico.
Speaker Change: What it means is when we last spoke we had received the first deposit of approximately $8 million and recently, we have received a second deposit of $2 million.
Speaker Change: And we have received written approval of the design on the third group of dance.
Speaker Change: Procurement of hardware is well underway and our engineers are working with local teams to coordinate the installation of various components on the first two groups.
Speaker Change: Importantly, we research recently completed our first major milestone the provisioning of a 50 kilowatt generator.
Speaker Change: As a result, our first revenues for Puerto Rico will be recorded in our second fiscal quarter.
Speaker Change: The December quarter results largely reflect the year on year improvement on hardware backlog and software a R. R.
Speaker Change: Importantly, both gross margins and operating expenses improved stroke sequentially.
Speaker Change: In the quarter, we realized an increase in gross profit of $400000 and a decrease.
Speaker Change: Decrease in operating expenses of $770000.
Speaker Change: Looking forward over the balance of this fiscal year, we expect to see continued improvement in both our hardware and software business.
Speaker Change: While the Puerto Rico projects, it certainly going to drive the greatest impact International law enforcement demand for our traditional <unk> products continues to rebound towards pre COVID-19 levels.
Speaker Change: Additionally, the value proposition of acoustics for critical infrastructure infrastructure protection and public safety is becoming increasingly more apparent and as significantly expanding our pipeline for opportunities.
Speaker Change: Finally, I'll work with the U S D O D across the branches continues to be robust.
Speaker Change: Recently, we received a follow on order for two mobile communication trailers for the United States Army.
Speaker Change: And we are regularly regulate supporting the United States Navy the spans and equipment.
Speaker Change: We continue to see progress progress with the HD Crows program.
Speaker Change: As most of you are aware fundings was put in place for this in FY 'twenty four and has yet to be put under contract.
Speaker Change: I am certain the program will get underway and expected timing of the award to become more clear in the coming months.
Speaker Change: In summary fiscal 2025 is steadily ramping up and we are eager to realize the acceleration in our business over the next several months.
Speaker Change: Beyond 2025, the outlook continues to improve with a broadening pipeline and increased visibility and predictability coming from our software offerings now.
Speaker Change: Now I'll turn the call over to Dennis to go through the financials in greater and an outlook in greater detail Dennis.
Dennis: Thank you Richard and the first quarter of fiscal 2025, we generated significant revenue growth over the prior year quarter and.
Dennis: In the first quarter of fiscal 'twenty five recurring software revenue increased 69% year over year.
Dennis: Total software revenue in the quarter grew 64% year over year, including from an additional Genesis alert quarter, Los Angeles County.
Dennis: Hardware revenue grew 57% year over year.
Dennis: Gross profit margin was 45, 8% in the December quarter up nearly 12 points versus the year ago period.
Dennis: This quarter's results reflect the benefit of higher revenue in both the hardware and software segments and a favorable mix of revenue this quarter.
Dennis: Software margins continue to increase as a percentage of sales is recurring software revenue increases plus hardware. This quarter reflects a two point benefit from the sale through a favorable sales channels.
Dennis: Conversely last year's quarter included an order that was a two point drag on the margin.
Dennis: Quarterly operating expenses were $9 1 million this quarter versus $8 7 million in last year's first quarter.
Dennis: The primary increase was in SG&A for professional services, including planning related cost related to the Puerto Rico project we.
Dennis: We anticipate quarterly operating expenses will be similar or slightly higher throughout the remainder of this fiscal year.
Dennis: On a GAAP basis, our first fiscal quarter operating loss was $5 9 million compared to an operating loss of $7 2 million in the year ago quarter.
Dennis: Adjusted EBITDA, which excludes noncash stock compensation was a negative $4 8 million.
Dennis: A significant improvement from the negative $6 million in the first quarter of fiscal 2024.
Dennis: GAAP net loss can this fiscal year's first quarter was $4 1 million, including $2 2 million of other income related to the quarterly adjustment to the fair value of the warrants issued with the term loan last may.
Dennis: This compares to the net loss of $6 7 million in fiscal 2020 floors first quarter.
Dennis: Cash cash equivalents and marketable securities totaled $13 9 million as of December 31, 2024, compared with $13 1 million as of the prior fiscal year end.
Dennis: Cash provided by operating activities in the first quarter of this fiscal year was $900000, including an $8 million deposit received for the first group of dams in Puerto Rico.
Dennis: Subsequent to the end of the quarter, we received a second deposit for $2 1 million.
Dennis: Recently, we received written approval for the designs on the third group of dams.
Dennis: Do you expect a deposit for the third group is nearly $11 million.
Dennis: We will receive the remaining 40% of the purchase price upon customer acceptance of each of the 19 dams and these three groups.
Dennis: Now I'd like to update everyone on our current expectations for how the project in Puerto Rico flow through the financials.
Dennis: As we have seen the cast for the group deposits are being received in advance as to work on each group of dance.
Dennis: This is allowing us to procure the necessary inventory materials to deliver against the installation and implementation plans of each group.
Dennis: Our current expectation is that we will utilize the percentage of completion methodology for revenue recognition on the most significant elements of the Puerto Rico project.
Richard Danforth: As Richard indicated.
Richard Danforth: <unk>, our first milestones with the project and initial revenues will Herbert.
Richard Danforth: We'll be recorded this quarter with more significant revenue recognition coming in the June quarter, when deliveries of hardware and implementation of the first group gets underway.
Richard Danforth: While the details of the POC accounting are still being finalized we don't expect to recognize significant revenues until the second half of this fiscal year.
Richard Danforth: Less revenue recognition begins we anticipate a relatively steady contribution through project completion.
Richard Danforth: With a backlog that has grown to $40 million, including <unk> of $8 8 million and expanding pipeline of opportunities Genesis net financial turnaround is well underway.
Dennis: Thank you Dennis.
Speaker Change: Now operator, we are ready to open up the call for Q&A.
Speaker Change: Thank you ladies and gentlemen, the floor is now open for questions.
Speaker Change: You have a question. Please press star one on your telephone keypad at this time again that star one if you do have a question or comment.
Speaker Change: And we will take our first question from Mike Latimore from Northland Capital. Please go ahead Mike.
Mike Latimore: Alright, great. Thanks very much.
Mike Latimore: Yes, maybe just a little bit more clarity on the deployment time frames and Puerto Rico.
Mike Latimore: You said, a little bit more revenue I think in the June quarter, and then bigger in the second half I guess, how many bands do you expect to get to to be deployed or maybe there's some other metrics that are important from a rev Rec standpoint.
Mike Latimore: Mark will have more detail on kind of the pattern of damn deployment this year would be great.
Mike Latimore: Okay.
Mike Latimore: Okay.
Mike.
Mike Latimore: The process has begun on the island.
Speaker Change: First the first group will be the most challenging of course like every new thing.
Speaker Change: But the second and third group will begin in parallel with the first one just staggered a little bit.
Speaker Change: So I think.
Speaker Change: The lion's share of the revenue.
Speaker Change: From the work being done on the island.
Speaker Change: We expect to substantially get through those.
Speaker Change: Those three groups.
Speaker Change: As luck.
Mike Latimore: Mike, but that's that's what where we're running two at this point.
Speaker Change: Okay.
Speaker Change: Sure.
Speaker Change: You talked about getting cash on the.
Speaker Change: Third group that could be a $11 million. Eventually do you think you would see a cash receipt on the fourth group by fiscal year end.
Speaker Change: Unlikely, it's not that we won't try that.
Speaker Change: Okay.
Speaker Change: That's a ways off Mike so that's.
Speaker Change: To answer that is we gotcha.
Speaker Change: Got it.
Speaker Change: Then.
Speaker Change: Yes.
Speaker Change: You touched you touched a little bit on the acoustic opportunity sort of generally I guess.
Speaker Change: Can you can you elaborate on that a little bit is there even opportunities for that in the CLO area of southern California.
Speaker Change: There is at.
Speaker Change: The inbound since the fires occurred the inbound traffic, we're getting on our website through emails T V and all is huge so.
Speaker Change: I think we'll see.
Speaker Change: Much more opportunities from a L Rad and a software perspective as a consequence of what's gone on in the L. A fires.
Ross: Thanks Ross.
Speaker Change: Okay.
Speaker Change: Once again star one if you do have a question or comment.
Speaker Change: We will take our next question from Ed Woo from MS Sandy and capital. Please go ahead Ed.
Speaker Change: Yes, congratulations on all the progress did you disclose what the backlog was after the first quarter.
Dennis: Dennis did Dennis.
Speaker Change: $40 million in hardware.
Dennis: Okay.
Dennis: And then.
Speaker Change: My question is as Youre getting a lot more visibility and obviously congratulations on the success that you had in that Alley fire. During what was a very chaotic time have you noticed any increase in potential competition or people, who are seeing this as a potential market to enter.
Dennis: No.
Dennis: Now we have it and it's a little too if that's if that happens that is probably a little too soon to see it but no we haven't.
Dennis: Alright, Thats all the questions I have and congratulations on the quarter. Thank you.
Dennis: Thank you.
Speaker Change: As a reminder, that star one if you do have a question or comment.
Dennis: Okay.
Speaker Change: And we'll take our next question from Scott Searle from Roth Capital. Please go ahead.
Scott Searle: Hey, good afternoon. Thanks for taking my questions nice to finally start to see PREPA rolling out <unk>.
Richard maybe you start from a high level.
Scott Searle: Could you kind of.
Scott Searle: Help us understand the supply chain issues, there had been constrained initially with PREPA.
Scott Searle: You guys are prepared for that now if that is still a gating factor going forward and then just in terms of the change of administrations.
Scott Searle: Is that having a positive negative impact or no impact in terms of not only the ability to secure business, but the ability to have funds released.
Scott Searle: Those projects.
Scott Searle: Scott the answer to the first question is supply chain there are issues in the supply chain, we're managing through them.
Scott Searle:
And frankly, the gate are beginning, but then catch up very quickly.
Scott Searle: From a change of administrations violet it'll affect us.
Scott Searle: It's going to affect everybody, but.
Scott Searle: I think the business we're in from a public safety perspective, there's something in it and our increase in defense spending is something we're more likely to see from this administration than perhaps the past.
Scott Searle: Okay.
Scott Searle: And maybe if I could follow up on the California wildfires I guess two questions. First is did you quantify at all the inbound opportunity in terms of what Youre seeing I'd be curious in terms of.
Scott Searle: The number of counties of the number of pumps it might be represented in terms of the activity that that's created but also.
The very strong performance.
On the Genesis protects system.
Scott Searle: Look at past incidents whether it was.
Speaker Change: There is a high profile false alerts that occurred in Florida same thing in the Carolinas. When there were events. There was some some press out about some I guess faulty alerts that will provided I'm wondering if you could provide some context in terms of what happened or in terms of the magnitude of it as well.
Speaker Change: Unlike some other events that were relatively well contained for a shortened period of time. This went on for it's gone on for multiple weeks right. So I'm wondering if you could give us some thoughts and updates on on how to view those comments.
Speaker Change: Yes.
Speaker Change: And there's been a lot of negative press Scott on the on the L. A counties response to the fires and I'll get back to that in a moment, but.
Speaker Change: There was a.
An alert that went out on the Genesis system, a weird alert.
Speaker Change: They were alert as part of the National Ipods system. So.
Speaker Change: Laurent across multiple channels went out.
Speaker Change: All of them are received and the geography that was intended except the weird channel and that default to the entire county.
Speaker Change: Unless there and it was a warning that wasn't an evacuation.
Speaker Change: In less than three minutes it was canceled.
Speaker Change: So that's what happened with Genesis was subsequently.
Speaker Change: <unk> put a couple of software changes in place to help alleviate that from ever happening again.
Speaker Change: So that was the one issue that.
Speaker Change: We experienced here at Genesis there have been thousands of messages that have been received.
Speaker Change: In some cases days after they were sent.
Speaker Change: And all of that noise settles setup centers around the cellular infrastructure.
Speaker Change: Like most major catastrophic events the networks are going to be overwhelmed and they certainly were in la.
Speaker Change: As to the performance of the Genesis protect system.
Scott Searle: From a perspective of saving lives Scott if you look at this fire that lasted two weeks of a seven fires over tens of thousands of acres over 10 tens of thousands of homes burned to the ground.
Scott Searle: We have seen 28 or 29 loss of life.
Scott Searle: And if you compare that to other fires that are much smaller and much shorter in duration.
Speaker Change: And just parametric late.
Scott Searle: Uh huh.
Scott Searle: Measured what would potentially happen in L. A county.
Scott Searle: Would likely be in the thousands so the law first responders and office of emergency management did a terrific job of keeping people safe and out of Harm's way I'll remind everybody images of people.
Scott Searle: Passed away and burnt in their car and recent fires and pacifiers.
Speaker Change: Nobody died in their car and these fires.
Scott Searle: So the performance was terrific.
Speaker Change: On behalf of L, a county, and the Genesis protect platform.
Scott Searle: Great very helpful and Richard dessert.
Speaker Change: Is there a way to quantify the opportunity or I'll call. It intermediate opportunity that's arising as a result of the performance of the Genesis protects system in terms of inbounds and otherwise you know what that would that potentially represents as we start to think about 26 and 27.
Speaker Change: There is Scott I don't have that in front of me, but we.
Speaker Change: Including in L. A counties, even cities and communities want it their own platform.
Speaker Change: So when the small class so to speak.
Speaker Change: I think we'll be in a better position to quantify that as we move into the next quarter.
Speaker Change: Got you.
Speaker Change: Lastly, if I could just I wanted.
Speaker Change: Wanted to go back to Crows in terms of.
Speaker Change: The current expected timeline of when you could start to see resolution on that front and its starting to impact the P&L.
Speaker Change: So that's two questions I think.
Speaker Change: There is as I mentioned in my remarks, there are.
Speaker Change: So very positive signs.
And the exact timing I think will become more evident in the coming months.
Speaker Change: We should get in the coming months, that's all I can really say about that for now.
Speaker Change: Okay very helpful. Thanks, so much.
Speaker Change: Thank you.
Speaker Change: Once again Thats Star one if you do have a question or comment.
Speaker Change: And there appear to be no further questions at this time I'd like to turn the floor back to Brian Alger for closing remarks.
Speaker Change: Okay.
Speaker Change: Great.
Speaker Change: Thank you everyone for participating on today's call a replay of the call will be available on the company's website here shortly.
Speaker Change: I want to give you all heads up that throughout the day Tomorrow February 12th Genesis will be participating in one on ones at the AGP Virtual Tech conference.
Speaker Change: In March on March 17th and 18th we will also be participating in the annual Roth Conference in Dana point.
Speaker Change: For additional information and application news and activity regarding Genesis our products and the customers. We serve we strongly recommend that you follow the company and Genesis protect on your social networks, particularly Lincoln and <unk>.
Speaker Change: X, where we actively posting comment on events as they are happening and.
Speaker Change: We look forward to speaking with you again next quarter when we report fiscal second quarter 2025 results.
Speaker Change: Goodnight.
Speaker Change: Thank you ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation you may disconnect at this time and have a great day.
Speaker Change: [music].