Genasys Inc.

Ladies and gentlemen, thank you for your patience. Please remain on the line. Your conference call will begin momentarily. Again, we do appreciate your patience. Please remain on the line. Your conference call will begin momentarily. Thank you. Good day, ladies and gentlemen, and welcome to the Genesis Inc. Fiscal Second Quarter 2022 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 the live operator. At this time, it is my pleasure to turn the floor over to your host, Kim Rogers, IR. Ma'am, the floor is yours.

Thank you, Dagna. Good afternoon, and welcome to Genesis Incorporated Fiscal First Quarter 2022 Financial Results Conference Call. I'm 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 Klon, 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's expectation 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 backlogs, 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 purchased 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 the company's website. At this time, it's my pleasure to turn the call over to Genesis Chief Executive Officer, Richard Danforth. Please go ahead, Richard.

Thank you, Kim, and welcome everybody to our call. We had a terrific second quarter with revenues of $13.2 million, up 17% from the prior year Q2. First half revenues were $23.8 million, up 23% from the first half of fiscal 2021. Gross margins in Q2 were 52.9%, bringing the first half gross margins to 50.3%. Revenue growth and higher gross margins helped lift adjusted EBITDA to a positive $850,000 for the quarter. Bookings for the first half were $12.5 million, yielding a backlog at the end of Q2 of $23.9 million, up 73% or $10.1 million from a year ago. First half cash used was $4.2 million, of which $3.2 million was used to purchase inventory and $1 million to repurchase company stock. As I've mentioned on prior calls, we have purposely increased inventory to hedge against a disruption in the worldwide supply chain. The increased inventory is planned to turn into revenue this fiscal year. During Q2, Genesis systems were used around the world to help keep people informed and safe. In Australia, Genesis News was used to alert residents and visitors in coastal areas of a potential tsunami following the January 15th volcanic eruption in Tonga. Also in the quarter, in the early morning hours of February 10th, after a wildfire broke out in Emerald Cove, California, Laguna Beach emergency personnel activated the city's Genesis integrated mass notification system to broadcast evacuation warnings to residents and visitors. After the fire, Brendan Manning, the emergency operations coordinator for Laguna Beach, had this to say, and I quote, only great things to report using Genesis to facilitate alerts and notifications. We sent out alerts every 10 to 15 minutes. Residents, city council, city leadership, and the media all reported positive things on the use of our outdoor warning system, end of quote. Other highlights include the country of Slovenia selecting Genesis News to power its national public warning system. That system is expected to go live in July. Earlier this quarter, we announced the formal release of the new LRAD 950 NXT and an order from the Spanish Navy. There is a worldwide market for this product, and more orders are expected this fiscal year. The strong performance and high margin contribution of LRAD hardware continues to serve as the economic engine to fuel the expansion of our software business. We grew our software pipeline by 40% in the second quarter when compared to the first quarter, and signed 10 contracts which include the country of Slovenia, three Genesis emergency management contracts in the state of Texas, and Zone Haven contracts in Los Angeles, and four additional California counties. SAS bookings in our first half of FY22 are already 67% higher than all of last year. Further, North American Q2 SAS revenues were double that of our Q4 actuals in FY21, and continued growth is expected through this fiscal year and beyond. We received a $2 million contract from the City of Berkeley, California for a gem-powered integrated mass notification system. IM&S bookings through Q2 were strong, equaling any prior full-year totals. With a growing pipeline, we are on track for record integrated mass notification system bookings this fiscal year. Genesys software and integrated mass notification systems now help safeguard more than 43 million people around the world. We are adding the resources to substantially increase this number over the next few years. We continue to invest in sales and engineering development to support the growth of our software business, particularly in the SaaS segment. In Q2, we added six people to the software development and sales team. Year-round fire seasons are increasing and increasing natural disasters, political and civil unrest, active shooter incidents, and armed conflict are creating numerous catalysts for Genesys' growth globally. Enterprises and governments are more aware than ever of their responsibility to keep employees and citizens safe and informed. Zone Haven is a valuable, competitive differentiator to the Genesys software platform and a true greenfield opportunity. Additional contracts from cities and counties in California and other states are expected to drive second-half Zone Haven bookings and revenue growth. GEM will continue to be a growth catalyst for this fiscal year and beyond. Important feature differentiators are being added to GEM, including full zone haven integration. Additional domestic and international GEM contracts are expected to close by fiscal year end. Regarding news and the EU public boarding mandate, we still anticipate a June of 2022 deadline to be pushed out, and we continue to work multiple contract opportunities with EU member nations. Investments in sales offices in the Asia Pacific region, Europe, and the Middle East are paying off. Revenue in our Europe, Middle East, and Africa sales regions were up last quarter and in the full first half compared to fiscal 2021 periods. The lessening COVID impact in the Asia Pacific countries increases our sales opportunity in that region. LRAD is on track for another strong year of U.S. and international public safety, law enforcement, homeland security, and defense sales, with large bookings expected in our second half. We are investing in our high margin software business to capitalize on multiple catalysts. Software orders and pipeline growth are expected to accelerate through this fiscal year and beyond. Based on our quarter-end backlog of $23.2 million and supported by our current supply chain visibility and rapidly growing business pipeline, we are reaffirming our fiscal 2022 outlook of a sixth straight year of revenue growth and a fourth consecutive year of record revenues. Before I hand the call over to Dennis, I would like to thank all the members of our worldwide team for their hard work and commitment to the company's success. Dennis?