Genasys Inc.

Good day, ladies and gentlemen. Welcome to the Genesis Incorporated Fiscal Second Quarter 2023 Conference Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session, and instructions will be provided at that time. I would now like to turn the call over to your host, Brian Alger. Brian, you may begin.

Thank you, and good afternoon, everyone. Welcome to Genesys' fiscal 2023 second quarter financial results conference call. I am Brian Alger, SEP and investor relations and corporate development for Genesys. With me on the call today are Richard Danforth, chief executive officer, and Dennis Kwon, 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 30, 2022. 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, May 8, 2023. 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 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 the company's website. Now, at this time, it's my pleasure to turn the call over to Genesis' CEO, Richard Danforth. Richard?

Thank you, Brian, and welcome, everyone. As expected, financial results for the March quarter were similar to our first fiscal quarter, with slight sequential improvements in revenue and adjusted EBITDA. Based on our pipeline and bookings, we expect to see growth resume and accelerate in the second half of this fiscal year. Steady growth in our software revenues are expected to be augmented by improved hardware bookings, particularly from international customers. Over the course of the past several quarters, we have proven that the Genesys Protect solution has both diverse demand and differentiation versus competitive alternatives. In numerous cases, including Riverside County, Aramco, BMW, San Diego County, and Los Angeles County, we have despised much larger incumbents. As I will detail in a bit, we expect our recent investments in marketing and sales will lead to increased demand, higher conversion, and greater velocity of new business, beginning with a revamped revenue-focused campaign launched in our fourth fiscal quarter. Last quarter, we talked about the success of our land and expand strategy. In Q2, we continue to see success with this strategy, expanding relationships with San Diego, Alameda, and Riverside counties in California to each include the complete Genesis Protect platform. In the case of Alameda County, our entire platform is being used by not only the county, but also the city of Berkeley, as well as UC Berkeley. As discussed on our February call, Genesis Protect played a critical role for numerous California customers this past winter with the various weather and flood events that devastated so many communities and affected millions of people. In early March, Governor Newsom declared a state of emergency for 21 counties in California, affecting over 17 million residents. Our team takes great pride in the improved outcomes facilitated by the Genesis Protect solutions and the lessons learned were instructional to public safety officials and to Genesis as we expand our coverage throughout California and increasingly into other regions. While we will continue to expand our footprint and offerings with existing accounts, we are also targeting a number of new opportunities including statewide opportunities that we believe we are well positioned for. In the second half of the fiscal year, we will be augmenting our go-to-market and sales initiatives. I want to take some time to discuss the significance of this effort and why we believe it will result in greater velocity and predictability of revenue and profit growth. The objective of our cross-functional go-to-market launch is to grow profitability and drive business growth by building a predictable pipeline with high conversion. Our investment over the past several quarters in sales, marketing, product, and customer success teams helped lay the foundation of our unified platform. Genesys Protect combines the most comprehensive preparedness, communication, and analytical solutions to keep people, communities, and assets protected. Our unified platform offers a diverse range of application, including emergency warning and mass notification for public safety, critical event management for enterprise, de-escalation for defense and law enforcement as well. In the second half of this fiscal year and leading into FY24, we will roll out enhancements to the product UI that unifies our solution set, introduces a new platform pricing structure that scales to meet the needs of our diverse customer base, execute sub-vertical focused demand generation campaigns, and launch a repeatable and scalable sales methodology that is rooted in best practices. Obviously our hardware solutions are an integral component of the Genesis Protect offering and how we position ourselves against less complete alternatives. However, in the majority of our situations, our hardware revenue are still coming from a traditional end markets and use cases. Hardware bookings continue to be a challenge in the March quarter, however. Subsequent to quarter close, we have seen activity both domestically and internationally that gives us improved confidence in achieving a full year bookings targets for hardware. The inconsistent bookings in the first half of the fiscal year has been from both domestic and international customers. The net result is that our hardware backlog declined in the March quarter to 6.5 million as compared to 21.4 million in the year prior. A current forecast of qualified hardware business that has yet to be closed represents over $40 million in bookings. As we expect coming into this fiscal year, international bookings make up a substantial portion of this opportunity. On last quarter's conference call, I said we expect fiscal 2023 bookings to follow our typical pattern with large step-up in the fiscal Q3, driven by international orders. Hardware bookings in our fiscal 2023 are expected to substantially exceed fiscal 2022 hardware bookings. Everything about that statement remains true today. The recent improvements in activity and momentum in contracts bolsters our confidence in the second half outlook that Dennis will detail in a moment. Q2, again, saw gross margin pressure as a result of the higher cost materials against orders that we priced and booked prior to us experiencing inflationary factors we discussed at length on our last call. Looking at our current component cost, the hardware backlog, and anticipated shipments for the remainder of the fiscal year, we expect to see rapid improvements from our Q2 gross margins. Moreover, as our software revenues scale, we would anticipate higher trending margins with normalized hardware margins and increasing software contribution. As I look into our current bookings and pipeline, I am confident as ever that our decision to invest in our software offerings and to shift our go-to market will yield significant growth in both revenue and profits. The impact from our growing software bookings in ARR gives us much more visibility and confidence in out-years revenue and profit margins. Previously, we discussed a three- to five-year target model of $80 million in sales, generating adjusted EBITDA margins of 22% to 26%. With the bookings secure to date and the success we have witnessed in both the sled and enterprise markets, improved focus and the investment in our Genesys Protect go-to-market, gives us the confidence to update that long-term target model to begin at an annual run rate at at least $100 million in sales and greater than 20% EBITDA margins within the next three years. Now I'll turn the call over to Dennis to go through the financials and outlook in greater detail. Dennis?