Genasys Inc.

Please stand by, we are about to begin. Ladies and gentlemen, good afternoon and welcome to Genesis Incorporated's fiscal second quarter 2020 financial results call. All lines have been placed in a listen only mode and the floor will be open for questions following today's presentation. If you would like to place yourself into the queue for a question, simply press star and one on your telephone keypad. These instructions will be repeated after our prepared remarks. Also, if you should require assistance throughout the conference, please press star and zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn over the floor to Satya Chalara, Investor Relations for Genesys. Sir, the floor is yours.

Thank you, Jim. Good afternoon, everyone, and welcome to Genesys Fiscal Second Quarter 2020 Financial Results Conference Call. I'm Satya Chalara, Investor Relations for Genesys. with me on the call today are Richard Danforth, Chief Executive Officer, and Dennis Clam, Chief Financial Officer of Genesis. Before we begin, I would like to take this opportunity to remind you that during the course of this call, management will make forward-looking statements. Other than the statements of historical facts, statements made during this call that are forward-looking statements are based on current expectations. During this call, we may discuss company's plans, expectations, outlook, or forecast for future performance. These forward-looking statements are subject to a number of risks and uncertainties, including the consequences of COVID-19 outbreak, other pandemics, and other risks and uncertainties, many of which involve factors or circumstances that are beyond the company's control. These forward-looking statements are based on information and management expectations as of today. Future results may differ materially from our current expectations. For more information regarding potential risks and uncertainties, please refer to the risk factors section of the company's form 10-K for the fiscal year ended September 30th, 2019. Genesis disclaims any intent or obligation to update those forward-looking statements except as otherwise specifically stated. We may also discuss non-GAAP operational metrics of bookings and backlog, which we believe provide helpful information to investors with respect to evaluating the company's performance. We consider bookings and backlog as 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 the 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 in the next 12 months. Finally, a replay of this call will be available in approximately four hours through the investor relations page on our website. At this time, it's my pleasure to turn the floor over to Genesis Chief Financial Officer, Dennis Clam. Dennis?

Thank you, Satya, and welcome, everyone. I will open today's call with a recap of the fiscal second quarter 2020 financial results. Richard will then provide an update on the business. Afterwards, we'll open the call for questions. Revenues for the second quarter of fiscal 2020, or $8.3 million, compared with $10.2 million in the second fiscal quarter of 2019. The COVID-19 outbreak partially impacted the acceptance testing and delivery of two orders with a total value of approximately $1.6 million. Virtual acceptance testing and partial deliveries were completed in April with a balance scheduled to ship this quarter. Gross profit was $4.3 million, or 48.4% of revenue. The decrease in gross profit margin compared to last year was driven by 77,000 of additional engineering charges resulting from the use of a more precise process to charge engineering expenses to cost of sales. Excluding this additional cost, gross profit as a percentage of sales this quarter would have been 49.4% compared to 50.9% in the prior year. and for first six months of the fiscal year, gross profit would have been 50.9% compared to 50.5% for the same prior year period. Operating expenses in the fiscal second quarter of 2020 were 3.7 million, essentially flat compared to the same period last year. Selling and general administrative expenses increased this year as we added employees and increased sales and marketing activities. Research and development expense decreased compared to the same period last year as hardware development cost decreased and some costs were charged to cost of sales, offset by continued increases in software development. We generated net income of $302,000, or one cent per diluted share, in the fiscal second quarter, compared with net income of $1.2 million, or four cents per diluted share, in the same quarter last year. Cash used in operating activities in the quarter was $345,000. This was largely due to increased inventory at the end of the quarter, offset by net income and non-cash charges. In last year's similar quarter, operations provided $4.2 million. Our balance sheet remains strong. Cash and cash equivalents at March 31, 2020 were $16.4 million, compared to $18.8 million at September 30, 2019. The $2.4 million decrease in cash and cash equivalents was due to the cash used in operating activities in the year to date. Working capital increased by $0.7 million to $25.5 million at March 31, 2020 compared to $24.8 million at September 30, 2019. The increase was primarily the result of net income generated this year. During this year's second fiscal quarter, we used 400,000 to repurchase 156,000 shares of company stock. Last year, the board authorized a $5 million repurchase program through December 31, 2020, of which 4.1 million is still available. With that, I would like to turn the call over to Richard.