Earnings call transcript: Genasys Inc Q1 FY2025 beats EPS forecast, stock surges

Genasys Inc. (NASDAQ: NASDAQ:GNSS), a $131 million market cap emergency communications technology company, reported its first-quarter fiscal year 2025 earnings, surpassing EPS expectations with a reported loss of $0.09 per share against a forecasted loss of $0.16. The company also reported revenue of $6.9 million, slightly below the expected $6.99 million. According to InvestingPro analysis, the stock appears fairly valued at current levels. Following the earnings announcement, Genasys Inc.’s stock rose 8.13% in after-hours trading, reflecting investor optimism despite the revenue miss.

Key Takeaways

• Genasys Inc. exceeded EPS expectations by $0.07.
• After-hours trading saw the stock price increase by 8.13%.
• Significant growth in recurring software revenue, up 69% year-over-year.
• Hardware revenue increased by 57% compared to the prior year.
• The company reduced its operating loss to $5.9 million from $7.2 million.

Company Performance

Genasys Inc. demonstrated strong performance in Q1 FY2025, marked by significant growth in both its software and hardware segments. Recurring software revenue saw a notable increase of 69% year-over-year, while total software revenue grew by 64%. The hardware segment also performed well, with revenue rising 57% compared to the previous year. These gains contributed to an improved gross profit margin of 45.8%, up nearly 12 percentage points from the prior year.

Financial Highlights

• Revenue: $6.9 million, a slight miss from the forecast of $6.99 million.
• Earnings per share: Loss of $0.09, better than the forecasted loss of $0.16.
• Gross profit margin improved to 45.8%.
• Operating loss reduced to $5.9 million from $7.2 million.
• Adjusted EBITDA improved to -$4.8 million from -$6.0 million.
• Cash and equivalents increased to $13.9 million from $13.1 million.

Earnings vs. Forecast

Genasys Inc. reported an EPS loss of $0.09, outperforming the forecasted loss of $0.16, marking a positive surprise of approximately 43.75%. However, the company fell short of revenue expectations, posting $6.9 million compared to the anticipated $6.99 million. Despite the revenue miss, the significant EPS beat suggests effective cost management and operational improvements.

Market Reaction

Following the earnings release, Genasys Inc.’s stock surged 8.13% in after-hours trading, closing at $3.147. This movement contrasts with the broader market trend, indicating strong investor confidence in the company’s future prospects despite the slight revenue shortfall. With a beta of 0.62, the stock shows lower volatility than the market, and has delivered an impressive 87.8% return over the past year. The stock remains within its 52-week range, between $1.65 and $4.04.

Outlook & Guidance

Looking ahead, Genasys Inc. anticipates continued growth in its hardware and software businesses. The company expects steady revenue contributions from its ongoing Puerto Rico dam project, with significant recognition expected in the coming quarters. The expanding pipeline of opportunities, especially following the LA County fires, positions the company for future success.

Executive Commentary

CEO Richard Danforth emphasized the critical performance of the Genesis Protect platform during the LA County fires, stating, "Without question, countless lives were saved through the timely use of the Genesis Protect platform." CFO Dennis Clunn highlighted the financial outlook, noting, "We anticipate a relatively steady contribution through project completion."

Risks and Challenges

• Potential delays in the Puerto Rico project could impact revenue recognition.
• Increased competition in the emergency management technology sector.
• Dependence on government contracts, which may fluctuate with policy changes.
• Macroeconomic pressures could affect overall market demand.
• Supply chain disruptions might impact hardware production and delivery.

Q&A

During the earnings call, analysts inquired about the deployment details of the Puerto Rico project and the performance of the LA County fire alert system. Executives confirmed no immediate competitive threats and discussed potential positive impacts from new defense spending initiatives.

Full transcript - Genasys Inc (GNSS) Q1 2025:

Conference Operator: Good day, ladies and gentlemen, and welcome to the Genesis Inc. Fiscal First Quarter twenty twenty five Conference Call. All lines have been placed on a listen only mode and the floor will be open 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.

Brian Alger, SVP, Investor Relations and Corporate Development, Genesis Inc.: Good afternoon. Welcome to Genesis’ fiscal twenty twenty five First Quarter Results Conference Call. I am Brian Alger, SVP, Investor Relations and Corporate Development for Genesis. With me on the call today are Richard Danforth, our CEO and Dennis Clunn, the company’s CFO. 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 09/30/2024. Other than statements of historical facts, forward looking statements made on this call are based on the information and management’s expectations as of today, 02/11/2025. 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, backlog and adjusted net loss, 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 on the press release issued by the company at the close of market today. 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 a customer’s purchase orders executed in a given period regardless of the timing of related revenue recognition. Backlog is a measure of purchase orders received that are scheduled to ship in the next twelve months. Finally, a replay of this call will be available in approximately four hours through the Investor Relations page on the company’s website.

Now at this time, it’s my pleasure to turn the call over to Genesis’ Chief Executive Officer, Richard Danforth.

Richard Danforth, CEO, Genesis Inc.: Richard? Thank you, Brian, and welcome, everyone. We are pleased to report that fiscal twenty twenty five is off to a good start, substantially better than the prior year’s quarter. Before we get into the results of the quarter, I want to spend some time discussing Genesis’ involvement enrolled during January’s historic fires in Southern California. These fires made national and international news.

I am sure that all of you are aware that in the January, Los Angeles County experienced a dangerous, but not uncommon weather event, creating very high winds combined with extremely low humidity. Days before anything occurred, notices were issued by various weather services and as a result, we and our customers were ready. What did happen, however, was far greater than anything previously experienced. Seven different fires ignited across the county requiring an unprecedented amount of coordination and communication across a plethora of agencies. The sheer scale of the response was unprecedented.

Emergency teams 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. What stood out wasn’t just the scale of the fires, but the technological advancements that enabled first responders from across Southern California and beyond to work together. Unfortunately, fast moving and devastating wildfires are not uncommon. We can all recall the images from the Paradise Tubbs and Lahaina fires, all driven by very high winds, devastating communities near urban interface areas. The lesson learned from those prior tragedies led to Genesis developing in LA County to purchase our Genesis Protect solution.

Though the images of the devastation to the homes and properties of the communities across Los Angeles County are eerily similar to Paradise, Glen Helen and Lahaina. What is demonstrably different is the toll on human life. Utilizing Genesis Protect, LA County and its partners successfully safely evacuated hundreds of thousands of citizens. Without question, countless lives were saved through the timely use of the Genesis Protect platform. 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 were in continuous communication with the community.

Over 400 zone status changes were communicated over just two weeks. Throughout the country, a countywide event, Genesis personnel were on-site sitting side by side with county, state and federal emergency management. Lessons learned from this extreme experience are being implemented in the Genesis Protect development and customer success protocols. From a platform standpoint, Genesis Protect proved to be incredibly resilient, scaling up capacity orders of magnitude during peak traffic. At one point, Genasys servers were processing over 183,000 requests per second and Genasys website drew more than 2,000,000 active users in the month of January and the number of Genesys app users jumped 5x during that month.

Not only the Genesys enable emergency managers to get the word out, but Genesis also continuously inform 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. It is impossible to overstate how proud we are of the team and the performance of Genesis Protect in such a critical and high profile event. Recently at the California Fire Chiefs Operational Technology Summit, where fire operations chiefs from across the state join emerging technology partners servicing fire and EMS industries with the goal of improving operations and firefighter safety. Genesis presented a minute by minute account of the response and communication by San Diego County for the Bernardo Fire Two Weeks ago. We were able to show the logs from our software that confirmed an incredibly fast response.

Residents received evacuations, warnings and orders in less than eight minutes after first responders arrived on scene. In rapidly changing emergencies where time of response 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. While Genesis was supporting customers in Southern California in January, we were also making meaningful headway with the project in Puerto Rico. When we last spoke, we had received the first deposit of approximately $8,000,000 And recently we have received the second deposit of $2,000,000 And we have received written approval of the design on the third group of dams. 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.

Importantly, we recently completed a first major milestone, the provisioning of a 50 kilowatt generator. As a result, our first revenues for Puerto Rico will be recorded in our second fiscal quarter. The December results largely reflect the year on year improvement on hardware backlog and software ARR. Importantly, both gross margins and operating expenses improved sequentially. In the quarter, we realized an increase in gross profit of $400,000 and a decrease in operating expenses of $770,000 Looking forward over the balance of this fiscal year, we expect to see continued improvement in both our hardware and software business.

While the Puerto Rico projects are certainly going to drive the greatest impact, international and law enforcement demand for our traditional LRAD products continues to rebound towards pre COVID levels. Additionally, the value proposition of acoustics for critical infrastructure protection and public safety is becoming increasingly more apparent and is significantly expanding our pipeline for opportunities. Finally, our work with the U. S. DoD across the branches continues to be robust.

Recently, we received a follow on order for two mobile communication trailers for the United States Army And we are regularly supporting the United States Navy with spares and equipment. We continue to see progress with the AHD CROWS program. As most of you are aware, funding was put in place for this in FY twenty twenty four and is yet to be put under contract. I am certain the program will get underway and expect the timing of the award to become more clear in the coming months. In summary, fiscal twenty twenty five is steadily ramping up and we are eager to realize the acceleration in our business over the next several months.

Beyond 2025, the outlook continues to improve with a broadening pipeline and increased visibility and predictability coming from our software offerings. Now I’ll turn the call over to Dennis to go through the financial and an outlook in greater detail. Dennis?

Dennis Clunn, CFO, Genesis Inc.: Thank you, Richard. In the first quarter of fiscal twenty twenty five, we generated significant revenue growth for the prior year quarter. In the first quarter of fiscal twenty twenty five, recurring software revenue increased 69% year over year. Total (EPA:TTEF) software revenue in the quarter grew 64% year over year, including from an additional Genesis Alert order in Los Angeles County. Hardware revenue grew 57% year over year.

Gross profit margin was 45.8% in the December quarter, up nearly 12 points versus the year ago period. 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. Software (ETR:SOWGn) margins continue to increase as a percentage of sales as recurring software revenue increases, plus hardware this quarter reflects a two point benefit from a sale through a favorable sales channel. Conversely, last year’s quarter included an order that was a two point drag on the margin. Quarterly operating expenses were $9,100,000 this quarter versus $8,700,000 in last year’s first quarter.

The primary increase was in SG and A for professional services, including planning related costs related to the Puerto Rico project. We anticipate quarterly operating expenses will be similar or slightly higher throughout the remainder of this fiscal year. On a GAAP basis, our first fiscal quarter operating loss was $5,900,000 compared to an operating loss of $7,200,000 in the year ago quarter. Adjusted EBITDA, which excludes non cash stock compensation was a negative $4,800,000 a significant improvement from the negative $6,000,000 in the first quarter of fiscal twenty twenty four. GAAP net loss in this fiscal year’s first quarter was $4,100,000 including $2,200,000 of other income related to the quarterly adjustment to the fair value of warrants issued with the term loan last May.

This compares to the net loss of $6,700,000 in fiscal twenty twenty four’s first quarter. Cash, cash equivalents and marketable securities totaled $13,900,000 as of 12/31/2024, compared with $13,100,000 as of the prior fiscal year end. Cash provided by operating activities in the first quarter of this fiscal year was $900,000 including an $8,000,000 deposit received for the first group of dams in Puerto Rico. Subsequent to the end of the quarter, we received a second deposit for $2,100,000 Recently, we received written approval for the designs on the third group of dams. The expected deposit for the third group is nearly $11,000,000 We will receive the remaining 40% of the purchase price upon a customer acceptance of each of the 19 dams in these three groups.

Now I’d like to update everyone on our current expectations for how the project in Puerto Rico flow through the financials. As we have seen, the cash for the group deposits are being received in advance of the work on each group of dams. This is allowing us to procure the necessary inventory and materials to deliver against the installation and implementation plans of each group. 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. As Richard indicated, we’ve achieved our first milestones with the project and initial revenues will be recorded this quarter with more significant revenue recognition coming in the June when deliveries of hardware and implementation of the first group gets underway.

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. Once revenue recognition begins, we anticipate a relatively steady contribution through project completion. With a backlog that has grown to $40,000,000 including ARR of $8,800,000 and expanding pipeline of opportunities, Genesis’ financial turnaround is well underway.

Brian Alger, SVP, Investor Relations and Corporate Development, Genesis Inc.: Thank you, Dennis. Now operator, we’re ready to open up the call for Q and A.

Conference Operator: Thank you. And we’ll take our first question from Mike Latimer from Northland Capital. Please go ahead, Mike.

Mike Latimer, Analyst, Northland Capital: All right, great. Thanks very much. Maybe just a little bit more clarity on the deployment timeframes in Puerto Rico. You said a little bit more revenue, I think in the June and then bigger in the second half. I guess, how many dams do you expect to get to be deployed or maybe there’s some other metrics that are important from a rev rec standpoint, but a little more detail on kind of the pattern of dam deployment this year would be great.

Richard Danforth, CEO, Genesis Inc.: Mike, the process has begun on the island. The first group will be the most challenging of course, like every new thing. But the second and third group will begin in parallel with the first one just staggered a little bit. So I think the lion’s share of the revenue from the work being done on the island, we expect to substantially get through those three groups. Okay.

Now there’s less than Mike, but that’s what we’re running to at this point.

Mike Latimer, Analyst, Northland Capital: That makes sense. You talked about getting cash on the third group that could be $11,000,000 eventually. Do you think you would see a cash receipt on the fourth group by fiscal year end?

Richard Danforth, CEO, Genesis Inc.: Unlikely, it’s not that we won’t try, but that’s a ways off Mike. So let’s answer that as we go, sir.

Mike Latimer, Analyst, Northland Capital: Got it. And then you touched a little bit on the acoustic opportunity sort of generally. I guess, can you elaborate on that a little bit? Is there even opportunities for that in the LA area or Southern California?

Richard Danforth, CEO, Genesis Inc.: There is. The inbound since the fires occurred, the inbound traffic we’re getting on our website through emails, TV and all is huge. So I think we’ll see much more opportunities from a LRAD and a software perspective as a consequence of what’s going on in the LA Fires.

Mike Latimer, Analyst, Northland Capital: Okay. Thanks very much.

Conference Operator: And we’ll take our next question from Ed Woo from Ascendiant Capital. Please go ahead, Ed.

Ed Woo, Analyst, Ascendiant Capital: Yes. Congratulations on all the progress. Do you disclose what the backlog was after the first quarter?

Dennis Clunn, CFO, Genesis Inc.: Dennis did, Dennis. It’s $40,000,000 in hardware.

Ed Woo, Analyst, Ascendiant Capital: Okay. Thank you. And then my question is, as you’re getting a lot more visibility and obviously congratulations on the success that you had in during an alley fire during what was a very chaotic time. Have you noticed any increase in potential competition of people who are seeing this as a potential market to enter?

Richard Danforth, CEO, Genesis Inc.: No, we haven’t. It’s a little too if that happens, that is probably a little too soon to see it, but no, we haven’t.

Ed Woo, Analyst, Ascendiant Capital: All right. That’s all the questions I have. Congratulations on the quarter. Thank you.

Brian Alger, SVP, Investor Relations and Corporate Development, Genesis Inc.: Thank

Conference Operator: And we’ll take our next question from Scott Searle from Roth Capital. Please go ahead, Scott.

Scott Searle, Analyst, Roth Capital: Hey, good afternoon. Thanks for taking my questions. Nice to finally start to see PREPA rolling out. Hey, Richard, maybe to start from a high level, could you kind of of help us understand the supply chain issues? There had been constraints initially with PREPA.

How 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, is that having a positive negative impact or no impact in terms of not only ability to secure business, but the ability to have funds released against those projects?

Richard Danforth, CEO, Genesis Inc.: Scott, the answer to the first question is supply chain. There are issues in the supply chain. We’re managing through them. Frankly, they gate our beginning, but then catch up very quickly. From a change of administrations, well, it’ll affect us.

I think it’s going to affect everybody. But I think the business we’re in from a public safety perspective is something and increase in defense spending is something we’re more likely to see from this administration than perhaps the past.

Scott Searle, Analyst, Roth Capital: Okay. And maybe if I could to follow-up on the California wildfires, I guess two questions. First is, did you quantify at all the inbound opportunity in terms of what you’re seeing? I’d be curious in terms of the number of counties or the number of pops that might be represented in terms of the activity that that’s created. But also despite the very strong performance of the Genesis Protect system, if we look at past incidents, whether it was there’s high profile false alerts that occurred in Florida, same thing in the Carolinas when there were events.

There was some press out about some, I guess, faulty alerts that were 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. Because 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 wonder if you could give us some thoughts and updates on how to view those comments.

Richard Danforth, CEO, Genesis Inc.: There’s been a lot of negative press Scott on the LA County’s response to the fires and I’ll get back to that in a moment. But there was an alert that went out on the Genesis system, a WEA alert. The WEA alert is part of the national IPAWS system. So an alert across multiple channels went out. All of them were received in the geography that was intended except the WIA channel.

And that defaulted to the entire county. And it was a warning, it wasn’t an evacuation. In less than three minutes, it was canceled. So that’s what happened with Genesis, was subsequently put a couple of software changes in place to help alleviate that from ever happening again. So that was the one issue that we experienced here at Genesis.

There have been thousands of messages that have been received in some cases days after they were sent. And all of that noise centers around the cellular infrastructure, which like most major catastrophic events, the networks are going to be overwhelmed and they certainly were in LA. As to the performance of the Genesis Protect System, from a perspective of saving lives, Scott, if you look at this fire that lasted two weeks, there was seven fires over tens of thousands of acres, over tens of thousands of homes burned to the ground. We have seen twenty eight or twenty nine loss of life. And if you compare that to other fires that are much smaller and much shorter in duration and just parametrically measured what would potentially happen in LA County, it would likely be in the thousands.

So the LA 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 passed away and burnt in their car in recent fires and past fires. Nobody died in their car in these LA fires. So the performance was terrific on both behalf of LA County and the Genesis Protect platform.

Scott Searle, Analyst, Roth Capital: Great, very helpful. And Richard, 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 Protect System in terms of inbounds and otherwise, what that potentially represents as we start to think about ’26 and ’27?

Richard Danforth, CEO, Genesis Inc.: There is Scott, I don’t have that in front of me, but we including in LA Counties, even cities and communities want it, their own platform. So when the smoke clears, so to speak, I think we’ll be in a better position to quantify that as we move into the next quarter.

Scott Searle, Analyst, Roth Capital: Got you. And lastly, if I could just, I wanted to go back to Crowe’s in terms of the current expected timeline of when you could start to see resolution on that front and it’s starting to impact the P and L?

Richard Danforth, CEO, Genesis Inc.: Well, that’s two questions. I think there is as I mentioned in my remarks, there are some very positive signs and the exact timing I think will become more evident in the coming months.

Scott Searle, Analyst, Roth Capital: Okay.

Richard Danforth, CEO, Genesis Inc.: Yes, in the coming months. That’s all I can really say about that for now.

Scott Searle, Analyst, Roth Capital: Great. Very helpful. Thanks so much. Thank

Conference Operator: There appear to be no further questions at this time. I’d like to turn the floor back to Brian Alger for closing remarks.

Brian Alger, SVP, Investor Relations and Corporate Development, Genesis Inc.: Great. Thank you everyone for participating in today’s call. A replay of

Brian Alger, SVP, Investor Relations and Corporate Development, Genesis Inc.: the call will be available on

Brian Alger, SVP, Investor Relations and Corporate Development, Genesis Inc.: the company’s website here shortly. I want to give you all a heads up that throughout the day tomorrow, February 12, Genesis will be participating in one on one with the AGP Virtual Tech Conference. And in March, on March 1718, we’ll also be participating in the annual Roth Conference in Dana Point. For additional information and up to date 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 LinkedIn and X where we actively post and comment on events as they are happening. We look forward to speaking with you again next quarter when we report fiscal second quarter twenty twenty five results.

Good night.

Conference Operator: 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.

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