Genasys (US:GNSS)2025-05-13 20:46PART I. FINANCIAL INFORMATION Item 1. Financial Statements (Unaudited) Genasys Inc.'s unaudited financials for March 31, 2025, show decreased assets and equity, alongside a narrowed net loss and improved operating cash flow Condensed Consolidated Balance Sheets Total assets decreased to $49.7 million while liabilities rose to $41.7 million as of March 31, 2025, leading to a sharp decline in stockholders' equity Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2025 (Unaudited) | September 30, 2024 | | :--- | :--- | :--- | | Total Assets | $49,721 | $53,936 | | Cash and cash equivalents | $5,667 | $4,945 | | Short-term marketable securities | $1,409 | $7,945 | | Total current assets | $23,420 | $26,140 | | Goodwill | $13,257 | $13,329 | | Total Liabilities | $41,665 | $36,373 | | Accrued liabilities | $17,401 | $9,030 | | Notes payable, at fair value | $12,810 | $12,010 | | Warrant liability | $3,220 | $6,640 | | Total Stockholders' Equity | $8,056 | $17,563 | Condensed Consolidated Statements of Operations For Q2 2025, total revenues increased to $6.9 million with a narrowed net loss of $6.1 million, reflecting improved performance over the prior year Statement of Operations Summary (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Six Months 2025 | Six Months 2024 | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $6,932 | $5,739 | $13,872 | $10,100 | | Gross Profit | $2,610 | $2,177 | $5,788 | $3,656 | | Loss from Operations | $(6,255) | $(6,994) | $(12,196) | $(14,224) | | Net Loss | $(6,139) | $(6,938) | $(10,217) | $(13,662) | | Net Loss per Share | $(0.14) | $(0.16) | $(0.23) | $(0.31) | Condensed Consolidated Statements of Cash Flows Net cash used in operating activities significantly improved to $5.4 million for the six months ended March 31, 2025, with investing activities providing $6.5 million Cash Flow Summary (in thousands) | Activity | Six Months Ended March 31, 2025 | Six Months Ended March 31, 2024 | | :--- | :--- | :--- | | Net cash used in operating activities | $(5,375) | $(12,496) | | Net cash provided by (used in) investing activities | $6,461 | $(3,347) | | Net cash provided by financing activities | $25 | $10,218 | | Net increase (decrease) in cash | $1,057 | $(5,629) | - The improvement in operating cash flow was primarily due to a smaller net loss and a significant increase in accrued liabilities, which included a $9.7 million customer deposit for the Puerto Rico project159598 Notes to Unaudited Condensed Consolidated Financial Statements Notes detail the Evertel acquisition, $14.3 million in remaining performance obligations, fair value measurements, and segment performance showing software growth - On October 4, 2023, the Company acquired Evertel Technologies LLC for a total consideration of $4.6 million, consisting of cash, common stock, and contingent consideration, adding $2.9 million to goodwill333639 - As of March 31, 2025, the company had approximately $14.3 million in remaining performance obligations, with about 98% expected to be recognized as revenue over the next 12 months, including $9.7 million related to the Puerto Rico contract60 - The company has a $15 million Term Loan due in May 2026, recorded at a fair value of $12.8 million as of March 31, 2025, with associated warrants classified as a liability with a fair value of $3.2 million103104107 Segment Revenue and Operating Loss (Six Months Ended March 31, in thousands) | Segment | Revenue 2025 | Revenue 2024 | Operating Loss 2025 | Operating Loss 2024 | | :--- | :--- | :--- | :--- | :--- | | Hardware | $9,310 | $6,945 | $(6,363) | $(5,886) | | Software | $4,562 | $3,155 | $(5,833) | $(8,338) | | Total | $13,872 | $10,100 | $(12,196) | $(14,224) | - On May 9, 2025, the company amended its Term Loan agreement to receive an additional $4 million loan, with a potential for another $4 million, maturing on December 31, 2025157 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses a 21% Q2 2025 revenue increase, narrowed net loss, and strategic growth initiatives, with Adjusted EBITDA loss improving to $10.0 million Overview and Business Outlook Genasys provides Protective Communications solutions, anticipating future growth from key contracts like the $75 million Puerto Rico Early Warning System and a new U.S. Army program - The company offers a unified, end-to-end Protective Communications platform combining software (ALERT, EVAC, CONNECT) and hardware (ACOUSTICS, LRAD)163165 - Future growth is expected from a fully funded contract of up to $75 million for Puerto Rico's Early Warning System and a new U.S. Department of Defense CROWS program186 - Key business developments include a contract with Maui for EVAC services, a mass notification software contract with Los Angeles County, and a $3.35 million follow-on maintenance agreement with the Indian Navy189 Results of Operations Q2 2025 revenues increased 21% to $6.9 million, with gross profit up 20%, driven by higher sales and a favorable product mix, while operating expenses remained flat Comparison of Three Months Ended March 31 (in thousands) | Metric | 2025 | 2024 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $6,932 | $5,739 | $1,193 | 20.8% | | Gross Profit | $2,610 | $2,177 | $433 | 19.9% | | Loss from Operations | $(6,255) | $(6,994) | $739 | (10.6)% | Comparison of Six Months Ended March 31 (in thousands) | Metric | 2025 | 2024 | Change | Change % | | :--- | :--- | :--- | :--- | :--- | | Total Revenues | $13,872 | $10,100 | $3,772 | 37.3% | | Gross Profit | $5,788 | $3,656 | $2,132 | 58.3% | | Loss from Operations | $(12,196) | $(14,224) | $2,028 | (14.3)% | - The increase in hardware revenue for Q2 2025 was largely due to higher backlog, including $1.23 million from initial deliveries for the Puerto Rico contract204 - Software revenue growth was driven by a 28% increase in recurring revenue for the quarter and a 46% increase for the six-month period204217 Segment Results and Adjusted EBITDA The Software segment's operating loss narrowed by 28% in Q2 2025, contributing to an improved total Adjusted EBITDA loss of $10.0 million for the six-month period Adjusted EBITDA Reconciliation (in thousands) | | Three Months Ended March 31, | Six Months Ended March 31, | | :--- | :--- | :--- | | | 2025 | 2024 | 2025 | 2024 | | Net loss | $(6,139) | $(6,938) | $(10,217) | $(13,662) | | Adjusted EBITDA | $(5,149) | $(5,739) | $(9,963) | $(11,794) | - The Software segment's Adjusted EBITDA loss improved by 31.8% in Q2 2025 and 35.3% in the six-month period, reflecting revenue growth and cost management232236 - The Hardware segment's Adjusted EBITDA loss increased by 21.7% in Q2 2025 and 11.5% in the six-month period, primarily due to higher operating expenses related to the Puerto Rico project232236 Liquidity and Capital Resources As of March 31, 2025, the company held $5.7 million in cash, with management believing current capital is sufficient for the next twelve months, despite potential needs for additional funds Cash and Liquidity (in thousands) | Account | March 31, 2025 | September 30, 2024 | | :--- | :--- | :--- | | Cash and cash equivalents | $5,667 | $4,945 | | Short-term marketable securities | $1,409 | $7,945 | - Cash used in operating activities for the six months ended March 31, 2025, was $5.4 million, an improvement from $12.5 million used in the prior-year period245246 - Management believes current capital is sufficient for the next twelve months but notes that additional capital may be needed and may not be available on satisfactory terms241244 Item 3. Quantitative and Qualitative Disclosures About Market Risk The company considers its direct exposure to foreign exchange rate fluctuations minimal due to transactions primarily in U.S. dollars or naturally hedged local currencies - The company's direct exposure to foreign currency risk is considered minimal as most transactions are denominated in U.S. dollars or local currencies of its foreign subsidiaries, which acts as a natural hedge250 Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective as of March 31, 2025, with no material changes in internal control over financial reporting during the quarter - Management, including the principal executive and financial officers, concluded that disclosure controls and procedures were effective at a reasonable assurance level as of March 31, 2025253 - No changes in internal control over financial reporting occurred during the fiscal quarter ended March 31, 2025, that materially affected, or are reasonably likely to materially affect, internal controls254 PART II. OTHER INFORMATION Item 1. Legal Proceedings The company is not currently a party to any pending material legal proceedings - As of the report date, there are no pending material legal proceedings to which the Company is a party or to which any of its property is subject258 Item 1A. Risk Factors New risks include adverse effects from international trade policies and specific challenges related to the Puerto Rico Early Warning System project, which could delay or disrupt benefits - International trade policies, including tariffs and sanctions, could raise costs, reduce margins, and negatively impact customer demand260 - The ability to realize the full benefits of the Puerto Rico Early Warning System project is at risk due to Puerto Rico's fiscal challenges, political instability, and high susceptibility to natural disasters like hurricanes263264 Item 5. Other Information On May 9, 2025, the company amended its Term Loan agreement to secure an additional $4 million loan, with a potential for another $4 million, maturing December 31, 2025 - On May 9, 2025, the Company amended its term loan agreement to secure an additional $4 million loan, with an option for another $4 million at the lenders' discretion270 - The new term loan matures on December 31, 2025, and includes a provision requiring a total return to lenders equal to 30% of the principal amount being repaid270