Earnings call transcript: Genasys Inc Q3 2025 sees revenue beat amid EPS miss

Genasys Inc (GNSS), a $73 million market cap emergency communications systems provider, reported its third-quarter 2025 earnings, revealing a mixed financial performance. The company posted a revenue of $9.9 million, surpassing forecasts by 8.08%, while its earnings per share (EPS) fell short of expectations at -$0.14, compared to the anticipated -$0.11. Despite the earnings miss, the stock saw a modest 1.23% increase in aftermarket trading, closing at $1.62. According to InvestingPro data, the company’s current Fair Value analysis suggests slight undervaluation, though investors should note that 2 analysts have recently revised their earnings expectations downward.

Key Takeaways

• Genasys reported a revenue beat with $9.9 million, up 38% year-over-year.
• EPS missed projections, coming in at -$0.14 versus the forecast of -$0.11.
• Hardware revenues grew approximately 50% year-over-year.
• The company is facing challenges from federal funding delays affecting software bookings.
• Stock price experienced a slight increase post-earnings.

Company Performance

Genasys Inc demonstrated strong revenue growth in the third quarter of 2025, with a 38% year-over-year increase. The company is expanding its market reach, particularly in hardware, which saw a 50% growth. Despite these gains, the EPS miss highlights ongoing profitability challenges, with InvestingPro data showing concerning cash burn rates and a weak overall financial health score. The company’s gross profit margin of 30.13% over the last twelve months, combined with delayed federal funding, continues to pressure profitability.

Financial Highlights

• Revenue: $9.9 million, up 38% year-over-year
• Earnings per share: -$0.14, compared to -$0.11 forecast
• Gross profit margin: 26.3%, lower than previous periods
• Operating expenses: $8.5 million, reduced from $8.9 million in Q4
• Net loss: $6.5 million

Earnings vs. Forecast

Genasys reported an EPS of -$0.14, missing the forecast of -$0.11 by a margin of 27.27%. This miss contrasts with the revenue performance, which exceeded expectations by 8.08%. The discrepancy between revenue and EPS suggests cost management issues or unforeseen expenses impacting the bottom line.

Market Reaction

Following the earnings release, Genasys’s stock saw a modest increase of 1.23% in aftermarket trading, closing at $1.62. While the revenue beat provided some positive sentiment, the EPS miss and ongoing challenges in securing federal funding likely tempered investor enthusiasm. The stock has struggled significantly, with InvestingPro data showing a dramatic 52% decline over the past six months. Currently trading near its 52-week low of $1.46, the stock’s performance reflects both company-specific challenges and broader market uncertainties. Subscribers to InvestingPro can access 8 additional key insights about GNSS’s financial health and market position.

Outlook & Guidance

Looking ahead, Genasys anticipates a significant revenue boost in Q4 2025 from its Puerto Rico project, projected to contribute $15.2 million for the fiscal year. The company also expects improved gross margins and has outlined potential revenue from the CROWS project in the first half of FY2026. While these developments suggest a positive trajectory, analyst targets ranging from $4.50 to $5.50 indicate significant potential upside if execution aligns with projections. For detailed analysis and comprehensive valuation metrics, investors can access the full GNSS research report on InvestingPro, which is part of their coverage of over 1,400 US stocks.

Executive Commentary

CEO Richard Danforth emphasized the company’s global impact, stating, "Genesys delivers products all over the world that save lives." He acknowledged the challenges faced in fiscal 2025 but expressed confidence in the market demand for Genasys’s offerings, highlighting the company’s strategic positioning in emergency communication systems.

Risks and Challenges

• Federal funding delays impacting software bookings could hinder revenue growth.
• Lower gross profit margins suggest potential cost pressures.
• The targeted headcount reduction and cost discipline initiatives may affect operational capacity.
• Macroeconomic factors and funding uncertainties pose broader industry risks.

Q&A

During the earnings call, analysts focused on the Puerto Rico project’s cash flow and margins, seeking clarity on the impact of federal funding delays. Discussions also covered the integration of flood prediction technology and its market potential, underscoring Genasys’s strategic focus on innovation and market expansion.

Full transcript - Genasys Inc (GNSS) Q3 2025:

Conference Operator: Good day, ladies and gentlemen, and welcome to the Genesis Incorporated Fiscal Third Quarter twenty twenty five 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. At this time, it is my pleasure to turn the floor over to your host, Brian Alger, SVP of Senior Relations and Corporate Development. Sir, the floor is yours.

Brian Alger, SVP Investor Relations and Corporate Development, Genesis Incorporated: Good afternoon. Welcome to Genesis’ fiscal twenty twenty five third 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 Cassandra Montion, the company’s Interim CFO. During today’s call, management will make forward looking statements regarding the company’s plans, expectations, outlook and future financial performance that may 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 ks for the fiscal year ended 09/30/2024. Other than statements of historical facts, forward looking statements made on this call are based only on the information and management’s expectations as of today, 08/14/2025. 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 and backlog, which we believe provide helpful information to investors with respect to evaluating the company’s performance.

For a reconciliation of the 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. 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. Backlog is a measure of purchase orders received that are scheduled to ship within 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.

At this time, it’s my pleasure to turn the call over to Genesis’ CEO, Richard Danforth. Richard?

Richard Danforth, CEO, Genesis Incorporated: Thank you, Brian, and welcome, everyone. Fiscal Q3 revenues reflect the first material impact of the Puerto Rico Early Warning System project. Total revenues were $9,900,000 in the quarter, inclusive of 4,300,000.0 from Puerto Rico. Our software pipeline is at an all time high and is rapidly growing in response to our sales efforts and increased awareness of our offerings due to the LA fires, SignalGate, and more recently, the floods in Texas. International and domestic LRAD bookings continue to rebound, resulting in a growing 12 backlog of business that for Genesis as a whole, amounted to more than $60,000,000 at the June.

As you are aware, after invoicing the customer in March, we received a partial payment for the deposit on the third group of dams in Puerto Rico in May. The remaining portion has finally been transferred today. We believe the root cause of the payment delays has been identified and resolved, and future payments are now expected to be made in a timely manner similar to the first two groups deposits. The Crows AHD effort, part of the CROSE two tech refresh program of record, saw our initial research and development funding in fiscal twenty twenty two and 2023. The first production funding was included in the 2024 federal budget.

And following the successful completion of the design, test, and qualification of the LRAD four fifty XLRT, the US Army issued an RFQ in July 2025. The RFQ has since closed, and a purchase order of 8 to 8 and a half million dollars is being finalized. Genesis expects many more years of continued CROSE related revenue. The temporary funding freeze of the urban area security initiatives and the homeland security grant program as well as the cancellation of FEMA’s hazard mitigation programs, building resilience infrastructure and communities that occurred at the beginning of this calendar year has delayed, disrupted, and in some cases, eliminated more than 2,000,000,000 in annual funding that state and local agencies rely on. This has resulted in a slowdown of our software bookings.

As we detailed in our earnings release earlier today, more than $9,000,000 of software bookings are currently awaiting funding from various federal programs that flow down to state and local jurisdictions. Recent indications are that public safety and hazard mitigate mitigation grants are being solidified and funding is slowly starting to move, but it would be naive to think that everything will change instantaneously. Acknowledging this reality, we have recently completed a number of actions to reduce our operating expense levels while maintaining a strong sales effort for Genesys Protect. Included in those actions was a targeted headcount reduction. We expect to save 2 and a half million dollars annually as a result of the actions taken.

It is important for all of us to understand that despite the recent slowdown in software bookings, our traction and momentum are growing. As I’ve already mentioned, our pipeline of software business is at an all time high, and our geographic footprint is expanding. Historically, Genesys has seen most of its success West Of The Rockies. However, with new product feature sets and targeted sales effort, we have seen a massive improvement in the pipeline of business East Of The Rockies. So, much so that more than 25% of the software pipeline added in the past twelve months comes from the customers located East Of The Rocky Mountains.

In our c CRM system, many details in our software pipeline are labeled pending funding. These deals range from cities within LA County looking for their own evac licenses to large regional emergency managers eager to eager for precise zone based solutions to even federal agencies interested in Genesis unique and differentiated Genesis Protect. Though the recently reported top line results don’t reflect this activity, our deal count diversity of customers and increasing deal size gives us increasing confidence that Genesys Protect meets the market demands. I would now like to spend a little time detailing our progress in Puerto Rico. As you know, this is a $75,000,000 contract with PREPA that is fully funded by FEMA.

The project covers 37 dams across the island of Puerto Rico that have been broken down into seven distinct groups. The first two groups, which have a total of roughly $17,000,000, are well underway. Within the first two groups, there are nine dams. Each dam has unique sensor and communication equipment requirements. Across the first two groups, 58 poles, 69 solar panels, kits, 51 sensors, 35 cameras, and nearly 400 l rad speakers will be installed.

As of this week, construction is underway on all nine dams, and essentially all of the equipment necessary to complete the installations for the first two groups is on the island. Moreover, sign off on the first DAM and the early warning system software has already been received. The significance of this acceptance cannot be overstated. The software and hardware development and integration is complete and operational on the first DAM. The third group is the largest of the seven groups, including installations at 10 dams valued with a value of $18,000,000 to Genesis.

Upon receipt of the remainder of the deposit, we will rapidly seek permits and finalize the production of the equipment and begin construction necessary to complete this group as quickly as possible. With tropical storm Aaron tracking down, towards Puerto Rico this week, we’re reminded that the installation schedules are sometimes subject to forces outside our control. Thus far, the construction project has been going, going very well, and we will, we are tracking very close to plan. There is no guarantee that the weather will continue to cooperate, but regardless, we aim to complete the installations across all seven groups as quickly as possible. Whether it is natural disasters, geopolitical geopolitical unrest, or macroeconomic change, a lot of uncertainties continue to arise around the world, which in many cases creates new and evolving opportunities for Genesys solutions.

Genesys delivers products all over the world that save lives. From Africa to Singapore to Florida Central Florida, Genesys software and hardware is making a difference in protecting lives throughout the world. We know that we have products that the market wants. Exiting the June, Genesis has over $60,000,000 in its twelve month backlog. This does not include the $650,000 of ARR associated with Puerto Rico nor anything related to Crows.

While not a guarantee of outcome, the existing backlog and the growing pipeline of additional business provides us with confidence in the business and the strategic value of the company. In summary, fiscal twenty twenty five has been challenging on a number of levels. However, with an extremely strong backlog, growing pipeline and differentiated product portfolio, Genesis is in position to reap the rewards of its investments over the next several years. Now I will turn the call over to Cassandra to go through the financial outlook in greater detail. Cassandra?

Cassandra Montion, Interim CFO, Genesis Incorporated: Good afternoon, everyone. In the 2025, Genesis generated $9,900,000 of revenues, up 42% sequentially and up 38% on a year over year basis. Hardware revenues grew approximately 50% year over year, reflecting the $4,300,000 of revenue from the Puerto Rico project Richard already discussed. Total software revenues in the quarter grew 7% year over year, but was flat flat sequentially as the limited bookings were offset by our slight churn. Gross profit margins for June came in at 26.3%, which is lower than both the prior year and the previous quarter.

This This decline is primarily due to the percentage of completion accounting applied to our initial revenues from Puerto Rico, a less favorable hardware mix and higher tariff costs on certain imported components. As mentioned earlier in today’s earnings release, we expect gross margins to improve as the Puerto Rico project progresses, owing to the delayed recognition of profits under the percentage of completion method. Operating expenses for the quarter came in at $8,500,000 down from $8,900,000 in March and $9,100,000 in the same quarter last year. This year over year and sequential improvement reflects our continued focus on cost discipline and the absence of certain legal and professional service fees. In light of the dynamics Richard just outlined in our software business, we’ve recently completed a set of targeted cost reductions.

These are expected to reduce our annualized operating expenses by $2,500,000 beginning in the 2026. As part of these actions, we made the difficult decision to reduce headcount by 19 full time employees, including 10 in Spain. On a GAAP basis, our third fiscal quarter operating loss was $5,900,000 compared to a loss of $5,400,000 in the prior year quarter and a a loss of $6,300,000 in the March. Adjusted EBITDA, which excludes noncash stock compensation, was a negative $4800000.0100000.0 dollars in the 2025, but down slightly from the negative $4,400,000 in June. GAAP net loss in this financial year’s third quarter was $6,500,000 which compares to last year’s third quarter net loss of $6,700,000 and last quarter’s $6,100,000 net loss.

Cash and cash equivalents and marketable securities at the June totaled $5,500,000 down sequentially from $7,200,000 on 03/31/2024. During the third fiscal quarter, cash used in operating activities was $5,900,000 which included a $750,000 use of cash resulting from changes in operating assets and liabilities to help offset the impact of our net loss and working capital shift, we secured $4,000,000 through the first amendment to our term loan, finalized just ahead of our last earnings call. Looking forward, in the fiscal fourth quarter, we anticipate a significant increase in both revenue and profit contributions from Puerto Rico. While some variables remain, we continue to project $1,520,000,000 dollars in total revenues from Puerto Rico for fiscal twenty twenty five. Additionally, we expect to report improving gross margins with operating expenses remaining consistent with those from the third quarter.

Factoring in our installation schedule Puerto Rico, the remaining LRAD backlog and our software ARR of $8,700,000 we ended June 2025 with a twelve month backlog totaling $61,000,000 This positions us well for continued momentum heading into the next fiscal year. Now we would like to open up the call for Q and A. Operator?

Conference Operator: Thank you. The floor is now open for questions. And our first question comes from Scott Searle from ROTH Capital. Go ahead, Scott.

Scott Searle, Analyst, ROTH Capital: Hey, good afternoon. Thanks for taking the questions. Maybe to dive right in on PREPA, Richard, it sounds like now we’ll finally start to get some revenue recognition that goes along with it. Could you give us some high level thoughts in terms of gross margins as we look out into the September and beyond. We’ve had, I think, percent gross margins in the first ’2 quarters of the early prep or rev.

Could you remind us what gross margins look like over the course of the $75,000,000 contract and what we should be expecting over the next quarter or two? And along with that, maybe help us understand cash flow from operations with the give and takes of inflows as we move into the group three and some more payments on that front.

Richard Danforth, CEO, Genesis Incorporated: That’s a lot, Scott. So if I miss one, ask me again. But from a total contract perspective, gross margin expectation on Puerto Rico, it is higher than normal LRAD gross margins. Normally, our hardware gross margins are in the 50% plus or minus. Puerto Rico is is likely going to be better than that.

As per q three and q four, there was actually some margin recorded on the on the Puerto Rico revenue in q three. It was approximately you know the number?

Cassandra Montion, Interim CFO, Genesis Incorporated: 27. No.

Richard Danforth, CEO, Genesis Incorporated: The absolute number.

Cassandra Montion, Interim CFO, Genesis Incorporated: Oh, of total? Yeah. 26 No.

Richard Danforth, CEO, Genesis Incorporated: That’s what it is. So But to answer your question, as we finish more work on the island, that’s the trigger to bring the margin and the revenue record it. In q one, we were four plus in q three, excuse me, we’re 4 plus million dollars in in revenue and approximately $700,000 in gross margin that was recorded. Q four should be substantially better than that.

As Cassandra mentioned, our revenue expectation in q four is substantially higher than our revenue expectation in q three.

Scott Searle, Analyst, ROTH Capital: Gotcha. And and Richard, just the from a cash flow perspective, it it’s pretty complicated. You received a fair amount, I think, for group one and group two. How does that flow with group three, and and where are we in terms of the planning phases for the additional groups?

Richard Danforth, CEO, Genesis Incorporated: All three groups planning, engineering is done. The first two groups, as I said in my remarks, represent nine dams, and construction is in process on all nine. In fact, one has been accepted by the customer, which is also the software the overall software license was accepted as well. The third group, we we just received today the wire for the balance of the deposit they owed us. So we will begin in earnest to work on group three.

So from a cash flow perspective, Scott, as we complete dams, that will generate cash. As we kick off the third group, that will generate cash. So I think from that perspective, the cash flow from operations should be very healthy as compared to historically.

Brian Alger, SVP Investor Relations and Corporate Development, Genesis Incorporated: And just as a reminder, Scott and others on the call, the way the contract was originally written and and is being executed, the customer will be paying us 60% of each group’s value upfront as a deposit. And that’s obviously what we just received the final payment on or at least we got notice of today. As we complete each DAM, and we’re talking cash accounting, not accrual accounting that we have with GAP, but on a cash accounting basis, we are invoicing the customer on a DAM by DAM basis as each DAM’s completion is accepted by the customer.

Scott Searle, Analyst, ROTH Capital: Got you. Very helpful. And two more if I could just follow-up. CROWS, it’s exciting to see that finally happening. Could you what is the outlook in terms of the September?

Will some revenue from CROWS in that initial award potentially sneak into the September? And I think the number you talked about in this initial, tranche was 8 to 8 and a half million. Is that the annual run rate that we should be thinking about, or does the number change, potentially get larger as we look out into ’26 and ’27?

Richard Danforth, CEO, Genesis Incorporated: I think it will get larger. Our historic numbers for the old program of record were between 10 and $15,000,000. As to your question regarding the revenue expectations for the fourth quarter, I think you’re gonna see the CRO’s revenue in our fiscal twenty six first half.

Scott Searle, Analyst, ROTH Capital: Gotcha. And lastly, just, you know, from a macro standpoint in terms of federal budgets, the impact that that’s pushing down onto local municipalities and spending. Certainly, it seems like it slowed up the first half of this year, and it doesn’t seem like you’re forecasting any sort of a major recovery on that front. But I’m wondering, is there a steady state level of business we should be thinking about that’s relatively immune to federal funding and those sources that have been constrained? Thanks.

Richard Danforth, CEO, Genesis Incorporated: Most of our revenue is generated from state and local governments. So there’s there isn’t an immunity from the the sometimes chaos that we see in Washington DC.

Conference Operator: Thank

Richard Danforth, CEO, Genesis Incorporated: you. I think I will mention that oops. Did we lose you, Scott?

Brian Alger, SVP Investor Relations and Corporate Development, Genesis Incorporated: I think you guys still talk.

Ed Woo, Analyst, Ascendiant Capital: Go ahead

Brian Alger, SVP Investor Relations and Corporate Development, Genesis Incorporated: go ahead and finish your answer.

Richard Danforth, CEO, Genesis Incorporated: The the we do, however, have some resilience against that chaos in in as much as a a a current active backlog, twelve month backlog of over $60,000,000

Conference Operator: Thank Again, ladies and gentlemen, it’s star one to ask a question. Our next question comes from Ed Woo from Ascendiant Capital. Go ahead, Ed.

Ed Woo, Analyst, Ascendiant Capital: Yeah. There was some major weather flood event recently. What is your flood product, and have you noticed any increases in people’s interest in the that type of product? Thank you.

Richard Danforth, CEO, Genesis Incorporated: We have. As I mentioned in my remarks at the East Of The Rockies has has grown the the interest in our product has grown a lot recently. We have teamed with a company named FloodMap, and we have their flood prediction models on our Genesis Protect platform. And simply put, we can look at the current weather, forecasted weather, and forecast when a river will will go over or when a when a dam might breach and then be able to draw a geo live geographic representations of where that water will go and get messages to everybody that might be in harm’s way. So that’s gotten traction on the East Coast.

It’s gotten traction in a lot of areas, particularly what we’re seeing with the floods in, North Carolina and in Texas.

Brian Alger, SVP Investor Relations and Corporate Development, Genesis Incorporated: To add on that, Ed, the the value of having FloodMap integrated with our products, especially eBack, allows for a very targeted, a very precise message to be sent out to those that are being impacted. So if you think about what we just saw in California with the tsunami watches, instead of alerting all of Sonoma County, which goes quite a ways inland, utilizing flood map, emergency managers could very easily segment the coastal regions that may or may not be impacted and send messages to only those people along the coastline. The same would be true of somebody in a river basin, for instance. And that’s part of the new feature set that our product team brought brought to the market this year is that layering capability within EVAC itself.

Ed Woo, Analyst, Ascendiant Capital: That’s a great product. I I got a tsunami warning in LA, and I was 20 miles in then. So thank you very much for answering my questions, and I wish you guys good luck. Thank you.

Richard Danforth, CEO, Genesis Incorporated: Yep.

Conference Operator: Again, ladies and gentlemen, that’s star one to ask a question. There appear to be no further questions at this time. I would now like to turn it back to management for any closing remarks.

Brian Alger, SVP Investor Relations and Corporate Development, Genesis Incorporated: Great. Thank you, Kat. Thank you, everyone, for participating in today’s call. A replay of the call will be available on our website shortly. For additional information and up to date news and activity regarding Genesys, our products, and the customers we serve, we strongly recommend that you follow the company and Genesys Protect on your social networks, particularly LinkedIn and X, where we actively post and comment on events that are happening and those that are happening around the world.

We look forward to speaking with you again next quarter when we report fiscal fourth quarter and full year 2025 results. Until then, good night.

Conference Operator: Thank you. This does conclude today’s conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.