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spk07: ladies and gentlemen, and welcome to the Genesis Inc. Fiscal Year 2021 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. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Kim Rogers from Hayden IR. Ma'am, the floor is yours.
spk00: Thank you. Good afternoon and welcome to Genesis Incorporated fourth quarter and fiscal year 2021 financial results conference call. I am Kim Rogers with Hayden IR, the investor relations firm for Genesis. With me on the call today from Genesis are Richard Danforth, chief executive officer, and Dennis Kahn, chief financial officer. During today's call, management will make forward-looking statements regarding the company's plans, expectations, outlook, and future financial performance that involves 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 September 30th, 2021. Other than statements of historical facts, forward-looking statements made on this call are based only on information and management expectations as of today. 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 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. 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 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 call over to Genesis Chief Executive Officer, Richard Danforth. Please go ahead, Richard.
spk06: Thank you, Kim, and welcome, everybody. Our fiscal 2021 was a year of solid performance, combined with a significant level of investment to position us for future growth in our emerging software-as-a-service business. Our fiscal fourth quarter revenue grew by 8% to $15 million. and full year revenue grew 9% to $47 million, continuing our track record of consistent revenue growth over the last five years. Fiscal fourth quarter bookings were 4.1 million, bringing our total bookings for fiscal 2021 to 64 million, which exceeds any prior fiscal year total. From these bookings, we have a record 12-month backlog of $36 million. Backlog grew year over year by 217%. The company posted another quarter of positive cash provided by operating activities. Over our last four fiscal years, we have generated $24.2 million in positive operating cash, including $6.2 million this fiscal year. This performance is impressive given that we opened up offices in Dubai and Singapore and expanded our software development team as well as software sales and support team globally. Importantly, strong cash generation from our core hardware business supports these investments, as well as two software acquisitions. At the end of September, we had nearly 160 employees worldwide, seven global offices, and Genesys software now provides critical communication coverage for over 35 million people worldwide. In fiscal year 2021, we achieved our goals for record bookings, backlog, and revenue. Genesis is in an excellent position to deliver another year of backlog and revenue growth in 2022. We have seen a resounding positive reaction to our SaaS solutions, as evidenced by the announced contract awards in fiscal year 2021. In the past 12 months, the Genesis SaaS platform was launched in the United States, Canada, and Mexico, providing life-saving information for over 10 million people. We are now pursuing a wide range of global opportunities across multiple industry sectors and are excited about the growth that lies ahead. With our strategic investments, including the acquisitions of Zone Haven and Amica Mobile, Genesys has created the industry's only unified hardware and software critical communication platform. As a result, we are evolving from a pure hardware business towards an increasingly SaaS model. As we execute our strategy, we will continue to make key upfront investments in staffing and resources that will increase our operating expenses in fiscal 2022. This growth investment is expected to materially shift our revenue mix to a higher SaaS contribution with SaaS bookings anticipated to grow year over year by over 50%. The acquisitions are catalysts for our GEM, SAS, and integrated mass notification hardware and software businesses. Now with Zonehaven, we have three paths to selling this platform. Continuing to offer Zonehaven software as a standalone solution, integrating it in with our GEM enterprise software, and offering as a layer in our IM&S solutions. This combination gives Genesis three competitive advantages for securing local, regional, and national emergency management and warning contracts. Additionally, other large IM&S projects are expected to finalize and announce this fiscal year. The combination of Zone Haven evacuation management with IM&S is rapidly filling our business pipeline with opportunities from California and elsewhere in the United States. Our Genesis SaaS business is gaining momentum as evidenced by the expansion of our software services contract with a global automaker to its facilities outside North America, and will continue to expand internationally. We also landed a Gem Award in Riverside County here in California, and this is expected to expand in 2022. Our investments in sales, marketing, and software development are building a growing SaaS pipeline. GEM SAS contracts with other major corporations are in the pipeline for 2022. Additionally, opportunities exist in the United States and internationally with governments, cities, counties, and departments are part of a robust and growing SAS pipeline. We recently announced that counties in five states here in the U.S. entered multi-year GEM contracts. In all but one of these, we replaced an incumbent. The investments in sales with new offices in Dubai and Singapore expand our geographic presence and adds experienced sales leaders and sales support personnel in targeted regions. We have begun to see traction in these regions and announced a new distribution partner in Africa and the Middle East. The strategic partnership will focus on government and enterprise opportunities in this region where countries are experiencing crisis related to climate events, civil unrest, and security incidents. Our team in Europe supports Genesys' expectation for contract wins related to the EU-mandated national emergency warning systems. While we remain optimistic about the EU opportunities, the progress has been slower than expected due to the global pandemic. We now expect a mandated deadline of June of 2022 to be extended by at least one year. To date, the awards have been dominated by cell broadcasting and low price. Although most awards to date have been cell broadcast public warning systems, location-based SMS system-based RFPs are expected in 2022. With our strategic investments, including acquisitions, Genesys has created the industry's only unified hardware and software critical communication platform. As a result, we're evolving from a pure hardware business towards an increasingly SaaS model. As we execute our strategy, we will make key upfront investments in staffing and resources that will increase our operating expenses in fiscal year 2022. This growth investment is expected to materially shift our revenue mix to a higher SaaS contribution, with SaaS bookings anticipated to grow year over year by 50%. We expect another year of revenue growth for fiscal year 2022. Operating expenses are forecasted to increase year-over-year by $9 to $11 million, reflecting the additional strategic growth spending to accelerate SAS revenues. As our business grows, our model can deliver increasing SAS revenue and margin expansion once we are past the front-loaded investments to support our future growth. Having laid the groundwork for an in-demand high-margin SaaS business, we have focused on the execution of our game plan. Genesys addresses a growing global need for our unique products and solutions, putting us on track to achieve our goals. Our team is committed to our strategy of continuing to build on our base of hardware customers while rapidly increasing the SaaS-based contribution that brings attractive recurring revenues, higher margins, and increasing shareholder value. With that, I'll turn the call over to Dennis.
spk03: Thank you, Richard. Revenues for the fiscal 2021 fourth quarter were $15 million, up 8% from the prior year quarter. As compared to the same prior year period, LRAD revenue was $42.2 million, up 12%. Software revenue was up $2.8 million, up 71%. and IMNS revenue was $2.1 million down 44%. The increase in software revenue was primarily from the addition of Amica Mobile and Zonehaven, plus increased professional services revenue. Gross profit margin was 51.1% compared with 54% in the fourth quarter of fiscal 2020. Gross profit as a percentage of revenue was lower in the fiscal 2021 fourth quarter due to a 58% increase in engineering personnel, primarily software-related. Higher software expenses were due to the recent additions of Amica Mobile to our Canadian subsidiary Genesis Communications Canada and Zonehaven, and additional employees and resources for the Australia, EU, and JAM software initiatives. Operating expenses were $7 million, up from $4.5 million in the same period a year ago, largely due to a 74% increase in sales and marketing personnel over the prior year to support future revenue growth opportunities, including opening sales offices in Singapore, the UAE, and Puerto Rico, plus higher amortization expense resulting from acquisitions completed this fiscal year. Net income for the quarter was $771,000, or two cents per share, a decrease from $9.4 million in the fiscal 2020 fourth quarter. The decrease was largely due to a non-cash income tax benefit in the fiscal 2020 fourth quarter of $7.1 million from the release of a portion of the valuation allowance against deferred tax assets. For the full fiscal year 2021, revenues were $47 million, up 9% from $43 million in fiscal 2020, Gross profit margin was 49.8% for the full year, compared with 52.6% in fiscal 2020. Gross profit as a percentage of revenue was lower compared to the prior year, primarily due to continued investment in additional personnel to support the growth of our software products. Operating expenses were $22.3 million, up from $16.6 million in fiscal 2020. The increase was largely due to a 45% increase in sales and marketing expenses from the increase in sales and marketing personnel over the prior year period to support future growth opportunities, as well as the new sales offices, plus higher amortization expense resulting from acquisitions completed this fiscal year. Net income for fiscal year 2021 was $704,000, or $0.02 per diluted share, compared with $11.9 million or 35 cents per diluted share in fiscal 2020. This decrease was primarily due to an increase in operating expenses of $5.7 million, as well as the $7.1 million non-cash income tax benefit in fiscal 2020 mentioned in my discussion of the fourth quarter results. Adjusted EBITDA for fiscal 2021 was $4.1 million compared with $7.8 million in the prior fiscal year. We believe this information in comparisons of adjusted EBITDA enhances the overall understanding and visibility of our business performance. To that effect, a reconciliation of our GAAP results to non-GAAP figures has been included in our earnings release. Our balance sheet remains strong. Cash, cash equivalents, and marketable securities totaled $20.7 million on September 30, 2021, compared with $31.4 million in the prior year. Working capital totaled $18 million on September 30, 2021, compared with $29.8 million on September 30, 2020. The decrease in working capital was primarily due to the use of cash for the YMCA mobile asset purchase and Zone Haven acquisition in the first and third quarters of fiscal year 2021, respectively. We generated $6.2 million of cash from operating activities in fiscal year 2021. To provide you with some additional context, our business has generated more than $24 million in cash from operating activities over the past four years, an important metric that underscores the health of our business and is supporting investments as we strengthen our software profile. With that, we'd like to open the call to Q&A. Operator, could you start the Q&A session?
spk07: Thank you. The floor is now open for questions. If you have a question, please press star 1 on your telephone keypad at this time. Questions will be taken in the order they were received. If at any time your question has been answered, you can remove yourself from the queue by pressing 1. Again, ladies and gentlemen, if you do have a question, please press star 1 on your telephone keypad at this time. Our first question comes from Mike Lattimore. Please state your question.
spk04: Great. Thanks. Hi, guys.
spk02: Hi. So you've hired several people, salespeople, over the last year, I guess. How are they ramping, you know, are they hitting productivity guidelines along the way here? You know, again, how is productivity trending for your kind of software sales force?
spk06: It's trending up. We had a sales force that we had developed recently principally for the U.S. and Canada. With the acquisition of Zonehaven, we trained all of those sales folks on the Zonehaven platform, and they're out actively pursuing opportunities for Zonehaven as well as GEM. We saw a record year for GEM and Zonehaven on SaaS bookings. We expect that to continue to grow significantly in our 2022 and beyond.
spk02: And is it kind of a normal timeline to get to full productivity, say nine to 12 months ago?
spk06: Yeah, I think, Mike, we started this in fiscal 2020, which was the midst of the COVID year, but we were successful at adding a whole bunch of sales folks. So the first real opportunity to sell was in our fiscal 2021. And they went from a standstill to a a significant number. And again, I think it'll grow substantially from 2022 and beyond.
spk03: I think a substantial number of the additional sales personnel didn't come on board until probably our second fiscal quarter of this year.
spk02: Yeah, makes sense. You touched on the demand for cell broadcast in the EU. I guess Any sort of high-level thoughts on why some of the countries are leading with that as opposed to something maybe a little more valuable in location-based SMS for both at the same time?
spk06: I think speed was part of it. Self-broadcast for a country you can bring up in a shorter fashion than that, which requires an in-depth integration into the network carriers. But I wouldn't overlook too much or put much on that fact that cell broadcast is more prevalent. It's only been four announcements, and none have gone live yet in the EU. And as I said in my remarks, Mike, I expect RFPs in our fiscal 2022s would be those that include both the location-based two-way SMS and cell broadcasts.
spk02: Got it. And then just last on the OpEx forecast for the year, is it largely sales and marketing, or is there a reasonable percent of R&D in there as well?
spk06: It's both, for sure.
spk02: Sort of evenly mixed there?
spk06: Do you have a feel for the mix, Dennis?
spk03: Well, we've seen, if you take a look at the quarterly increase in OPEX throughout fiscal year 21, Q4 OPEX was up to about just under $7 million. So a lot of that came in through selling and marketing throughout the year. Therefore, we didn't have a full year of those costs in fiscal 21, so a lot of that will roll over and be in there for a full year for 2022 There's going to be a fair, probably increased number of engineering-type folks that we would look forward to adding to the team in fiscal 22. Okay, great.
spk06: Thanks a lot. Thank you.
spk07: Our next question comes from Brian Colley. Please state your question.
spk01: Hey, guys. Thanks for taking the question. I'm curious. If you could just talk about what the mix of bookings were in the quarter between software and hardware, and if you could give us any sense for that same number, maybe for the full year of FY21, like what the actual hard number was for software bookings, just so we can have a number for FY22 to go off of.
spk06: I don't think we've made that data public, Brian. Dennis, correct me if I'm wrong.
spk03: No, we have not.
spk01: Got it. That's fine. I was just curious if that was something you guys would be willing to provide. But in terms of software revenue for FY22, I think last quarter you may have mentioned you expected it to exceed 10% of total revenue. Is that still the case as we sit here today?
spk06: Yes.
spk01: Got it. And then as you kind of look at the pipeline of software opportunities today, I'm curious, you know, where you're seeing the most traction and the most deals between GEM, Zone Haven, and News, and which of those three do you think will be the biggest driver to Booking's growth in FY22?
spk06: It'll clearly be Zone Haven and GEM. I mean, those are pure SAS opportunities, Brian. They go live in a relatively short period once contract has been signed. If you look at the national emergency warning systems, be it cell broadcast or location-based SMS, there's what can be a lengthy non-recurring activity, which is a revenue-generating professional service. but a lengthy time before you get to the SAS piece of that. So given that, I believe that the GEM and Zone Haven SAS will grow at a faster pace.
spk01: Okay, that's helpful. And then just thinking about the, you know, you guys are expecting record revenue Is there any quantification around kind of the magnitude of total growth there that you'd be willing to provide or not at this time?
spk06: I think it'll be a double-digit kind of number, but, you know, we are still facing the perils of this worldwide material shortage issue. We have been able to manage through that without any negative impact on our revenue stream. But lead times have been going up substantially. So it's not just a matter of is the material available, it's when is it available. So that puts a little bit of caution. Coming into the year with a $36 million backlog, we did $47, $46 million in all of last fiscal 2022 for revenue. 21, excuse me. So it should... It should be north of that, and notwithstanding any supply chain issues, it would be further north of what you've seen here in fiscal 2021. Got it.
spk01: All right, great. That's helpful. I appreciate the time today.
spk06: Thank you.
spk07: Our next question comes from Merton Yang. Please state your question.
spk05: Thank you for taking my question. So my first question is on OPEX increase. Do you expect any catch-up investments for the regional offices for your fiscal 22?
spk03: We would look to expand, you know, parts of the world are still in pretty hard lockdowns and So they haven't fully opened up yet. But as we get out, have the opportunity to have our sales team meet with more customers, yes, we would expect to provide additional supporting assistance to those sales efforts.
spk06: To add to that a bit, Europe has opened up and now in some countries shutting back down again. The Middle East is largely open. The APEC region has been, I think, the region hardest locked down through this pandemic and is slowly beginning to open up. And I expect, notwithstanding a spike in the infection rate, I would expect the APEC region to largely be open at the beginning of our next calendar year, the month of January, which should facilitate more business as usual in that region that has been locked down for nearly two years.
spk05: Got it. Thank you. And, you know, when you look at the strength or the demand for GEM, would you be able to say if, you know, any size, either the enterprise customers or the counties and the municipalities are stronger, do you see more demand coming from the enterprise customers?
spk06: I see it across the board. So it's not hard to get to a market size of over half a billion dollars here in North America. And that comes up from a re-compete every, it depends on the term, but on average three years. And I think this past year has shown that our strategy, and whether the enterprise or governments, a conviction that our strategy worked. Riverside was a terrific example of that, and the large automobile manufacturer was also a great testament to that.
spk05: Just to follow up on that, is there, so when you think about the average three years of a renewal cycle, is there any year where you see a more concentrated contract that are up for renewal?
spk06: There hasn't been yet. I think our name's getting out there much more in all market areas for GEM and Zonehaven. And We're getting more inquiries on an increasing pace every week.
spk05: Got it. Thank you so much. You're welcome.
spk07: Okay, our next question comes from Ed Wu. Please state your question.
spk04: Yeah, congratulations on the quarter. I just wanted to clarify, do you say that operating expense will be up 9 to 11 million from the 22 million this year?
spk06: Yes. If you look at our Q4 spending, which reflects a full quarter of Zonehaven, that was just under $7 million. So annualizing that, it's $28 million, and we believe there will be a couple of million dollars more investment in the year.
spk04: Great. Thank you. And then thanks for answering or giving us information about the inventory shortages. Touching on that, has there been any impact on inflation on any of your components, and will that possibly impact your margins?
spk06: We have seen prices increase. We will be reflecting our price changes to reflect our costs going up as well. So, yes, we have seen pressure on our pricing that we're paying in the marketplace. I don't think it was a significant or relevant impact on gross margins this past year. So far, we've been able to manage through it through redesign and lots of effort within the operations and the engineering organizations here at Genesys. But it doesn't cast a shadow, so.
spk04: Just to clarify a question, when you announce these orders, is it for a set price over delivery of several years, or do you get some leeway of cost-plus type pricing?
spk06: No, we almost never have a cost-plus kind of contract. However, typically, particularly with our hardware, we deliver from time of order to delivery is typically measured in months, not years. Software is quite a bit different. I mean, that's that can be, we took one this past year for five years. Now, as you know, the delivery of that service, the cost to develop that service is already in the actuals. It's what that upfront cost I mentioned in my remarks. So I don't think inflation or supply chain has much, if any, of an impact in our SaaS business, in the overall software business.
spk04: Great, well thanks for answering my question. I wish you guys good luck in fiscal 22. Thank you.
spk07: That was our final question. I'll turn it back over to you for closing remarks.
spk03: We regularly discuss our business at investor conferences throughout the year. On December 8th, we are participating in the Barclays Technology, Media, and Telecom Conference. The following week, we will be at the Imperial Security Conference with a presentation in one-on-one meetings on December 15. Please contact your representative at these firms to book a meeting. Thank you for participating in today's call. We look forward to speaking with you again next year when we report fiscal first quarter 2022 results. On behalf of everyone at Genesis, we wish you and your families a happy, healthy holiday season.
spk07: Thank you. This concludes today's conference call. We thank you for your participation. You may disconnect your lines at this time and have a great day.
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