Genasys Inc.

Ladies and gentlemen, thank you for your patience. Please stand by. The conference will begin immediately following the distribution of the earning release. Again, we thank you for your patience. Please stand by. Thank you. Thank you for watching. Thank you. Thank you. Ladies and gentlemen, thank you for your patience. Please remain on the line. Your conference will begin immediately following the distribution of the earnings release. Thank you for your patience. Thank you. Ladies and gentlemen, thank you for your patience. Please remain on the line The conference call will begin immediately following the distribution of the earnings release for Genesis. Thank you for your patience. © transcript Emily Beynon Thank you. Thank you. Thank you. Good day, ladies and gentlemen, and welcome to the Genesis Inc. Fiscal Third Quarter 2024 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 to reach a live operator. At this time, it is my pleasure to turn the floor over to your host, Brian Alger, SVP of Investor Relations and Corporate Development. Welcome, Brian. The floor is yours.

Thank you. And good afternoon, everyone. Welcome to Genesis' third quarter fiscal 2024 fiscal financial results conference call. I'm Brian Alger, SVP of Investor Relations and Corporate Development for Genesis. The earnings release should be hitting momentarily. For those of you looking for the financials, you can reference our 10Q, which is already on file. at the SEC website under EDGAR, under the company's ticker. We'll be discussing the results on the call, and hopefully the earnings release will hit momentarily. With me on the call today are Richard Danforth, our CEO, and Dennis Klon, the company's CFO. During today's call, management will make forward-looking statements regarding the company's plans, expectations, outlook, and future financial performance that 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 section of the company's Form 10-K for the fiscal year ended September 30, 2023. Other than statements of historical facts, forward-looking statements made on this call are based only on information and management's expectations as of today, August 6, 2024. We explicitly disclaim any intent or obligation to update these 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 timing of the related revenue recognition. Backlog is a measure of purchase orders that are received and scheduled to ship within the next 12 months. Finally, a replay of this call will be available in approximately four hours through the investor relations website, company's website, sorry. At this time, it's my pleasure to turn the call over to Genesis' CEO, Richard Danforth. Richard?

Thank you, Brian, and welcome, everyone. I am in Puerto Rico working through the final items for the PREPA agreement. As we finalize the contract negotiations and with documentation largely out of the way, we now look forward to moving into the implementation phase of the project. To recap, the Puerto Rico dam project is fully funded by FEMA. and is expected to result in $75 million worth of revenue for Genesis. Importantly, cash inflows will precede revenue recognition. While timing of precise revenue recognition is not yet known, we do expect to recognize most of the revenues in our fiscal 2025 and 2026. The significance of the Puerto Rico Early Warning System goes beyond the favorable financial implication. This project is the most significant and public demonstration of how Genesys Protect software is able to unlock and enable much larger hardware opportunities. With a growing pipeline of critical infrastructure protection opportunities, we believe the Puerto Rico dam project is just the beginning of Genesys' realizing a significant return on the deliberate software investments we have made over the past three years. Since our last earnings call, we announced further EVAC coverage in California with the addition of Santa Barbara County and the activation of San Diego County. Tragically, 2024 is shaping up to have another intense fire season with many of our customers throughout the western U.S. actively using our system as I speak today. Importantly, Genesis Protect EVAC is helping emergency managers and first responders across the country plan for and manage evacuations much more efficiently and safely. In Northern California, the nearly two-week-old Park Fire is only 35% contained and has burned over 400,000 acres and more than 600 structures have been destroyed. Thankfully, the residents have been able to get out of harm's way with no civilian lives lost. Throughout California, Oregon, Washington, Idaho, Montana, Wyoming, Utah, Nevada, and Colorado, the current focus is on fire. But out here in the eastern United States, the danger is of a much wetter variety as the Gulf and Atlantic Coast states prepare for hurricane season, with Floridians and Georgians facing changing evacuation conditions just recently over the past couple of days. The unfortunate reality is that evacuations need to be planned for and managed throughout the country for a variety of reasons. not just natural disasters. Genesis Evac is proving to be a critical tool for emergency managers and first responders across the country. Later this week, we are hosting a number of law enforcement leaders in Boston for an appreciation event that will include presentations from Commissioner Richard Woolley of Baltimore PD and Chief Chris Cooks from the White Settlement Texas PD. Each presents key learnings and lessons while managing cross-agency communications during and in the wake of major events. Additionally, Genesys' own Jeff Halstead will be speaking to the very current topic of why encrypted consumer apps and text messaging among government employees, especially those in law enforcement, need to be replaced with secure and compliant communication solutions like Genesys Connect. As we announced last month, We are beginning to realize synergies in the combined sales efforts of Connect and our traditional LRAD hardware to a shared customer base of law enforcement. Not only are we seeing strong customer growth on the Connect side, but we are also seeing meaningful uptick in LRAD bookings. Year-to-date, our law enforcement hardware bookings are already nearly 50% higher than the fiscal 2023 total. While some of this is likely due to the civil unrest we have witnessed this year, the combined sales engagements with both Connect and LRAD is also contributing in a meaningful way. Coming back to the hardware business, fiscal 2023 and 2024 have been challenging to say the least. In 2023, we had a number of forecasted opportunities get delayed. As we have progressed through 2024, some of those opportunities have been converted into bookings. But without the ballast of the prior program of record, bookings and revenues have not kept pace with prior year reported results. But that only tells part of the story. When we strip out the bookings and revenue from the prior year program of record, we see that this year's bookings activity is actually on a record pace before we start thinking about Puerto Rico or the new program with the United States Army. I already discussed how law enforcement hardware bookings are up. But international bookings are also showing strength, up 117% year-over-year for the first three quarters of fiscal 2024. Exiting fiscal year 2024, we will have built backlog in international and law enforcement hardware, in addition to having secured several years of very significant hardware revenues from the Puerto Rico Dam Project and the U.S. Army PROS-AHC Program of Record. Though annual purchase orders will vary in size, the aggregate of hardware business across these projects is well north of 200 million. Moreover, our software business, which remains on pace to at least double recurring revenues and ARR in fiscal 2024, gives us tremendous visibility and stability in revenues over the next few years. Exiting the June quarter, ARR was 7.6 million, up approximately 135% year over year. With extremely low customer churn and average contract length in excess of four years, we remain extremely bullish on the outlook for our software business, let alone the implications it has for expanding and accelerating our hardware business. What I said last quarter remains true today. Genesys is in the best strategic position in its history. Our product portfolio is diverse and differentiated, and we have one and or have a high degree of visibility on record revenues for the next several years. Now I will turn the call over to Dennis to go through the third quarter financials and outlook in greater detail.