Genasys (GNSS) - 2025 Q3 - Quarterly Results

Executive Summary Genasys Inc. reported dramatic business acceleration in H2 FY2025, driven by the Puerto Rico project and a US Army order, alongside increased 3Q 2025 revenue but higher operating and net losses CEO Commentary Genasys Inc.'s CEO reported dramatic business acceleration in H2 FY2025, driven by the Puerto Rico project and a US Army order, despite software constraints from federal funding uncertainty - Business in the second half of fiscal 2025 has accelerated dramatically[2] - Installation on all nine dams in the first two groups of the Puerto Rico project is underway, with confirmation of the remaining deposit for the third group[2] - The US Army issued an RFQ for the initial production order in support of the CROWS program, with procurement nearly complete[2] - Software business materially constrained by temporary freezing and uncertainty of federal grant money, with over $9 million in current software bookings held up[2] - Sales efforts and nationwide awareness have driven the pipeline of software opportunities to unprecedented levels[2] Fiscal 3Q 2025 Financial Summary Genasys Inc. reported increased revenue but higher operating and net losses in fiscal 3Q 2025 compared to 3Q 2024, with Adjusted EBITDA also showing a larger loss Fiscal 3Q 2025 Financial Summary | Metric | 3Q 2025 (Millions) | 3Q 2024 (Millions) | Change (YoY) | | :--------------------- | :------------------ | :------------------ | :----------- | | Revenue | $9.9 | $7.2 | +37.5% | | GAAP Operating Loss | ($5.9) | ($5.4) | -9.3% | | GAAP Net Loss | ($6.5) | ($6.7) | +3.0% | | GAAP Net Loss Per Share | ($0.14) | ($0.15) | +6.7% | | Adjusted EBITDA | ($4.8) | ($4.3) | -11.6% | Business Highlights and Outlook Genasys achieved key milestones in 3Q 2025, including Puerto Rico EWS project acceptance and cost reductions, with expectations for accelerated revenue and profit growth in FY2026 Key Business Highlights Genasys achieved significant milestones in 3Q 2025, including the acceptance of the first dam installation in Puerto Rico, the implementation of cost reduction measures, a change in interim CFO, and substantial revenue generation from the Puerto Rico EWS project - Received acceptance from Puerto Rico Electric Power Authority (PREPA) for the installation of instrumentation on the first dam and activation of the software system for the Early Warning System (EWS)[8] - Executed cost reduction actions expected to reduce operating expenses by $2.5 million annually, beginning 1Q 2026[8] - Named Cassandra Monteon interim Chief Financial Officer[8] - Generated $4.3 million in revenues from the Puerto Rico EWS project in fiscal 3Q 2025[8] Business Outlook Genasys anticipates accelerated revenue and profit growth from the Puerto Rico EWS project in fiscal 2026, expects a significant US Army CROWS AHD order, and projects improved software deal conversions as federal funding normalizes, supported by annualized operating expense savings and a confident capital position - Revenue and profit recognition on the Puerto Rico EWS project is expected to accelerate significantly in fiscal 2026[5] - An initial US Army CROWS AHD order for $8.0 million to $8.5 million of LRAD equipment is expected, which will increase FY2025 hardware bookings (excluding Puerto Rico) by 10% over FY2024[6] - Software pipeline continues to expand, with deal conversions expected to improve and accelerate as access to federal funds normalizes[7] - Actions taken to reduce operating expenses associated with the software business are expected to deliver approximately $2.5 million in annualized savings starting 1Q 2026[7] - Operating expenses in 3Q 2025 were down 3.9% sequentially and 6.8% year over year[8] - Cash, cash equivalents, and marketable securities totaled $5.5 million as of June 30, 2025, with confidence in adequate capital due to upcoming payments[10] Puerto Rico EWS Project Outlook The Puerto Rico EWS project is expected to accelerate revenue and profit recognition in fiscal 2026, with improved margins as installations complete - Recorded $4.3 million in project-related revenue in 3Q 2025 with very little profit margin due to percentage-of-completion accounting[5] - Project margins are expected to improve significantly as installations are completed and prior instrumentation revenues are recognized at 100% gross margin[5] - Genasys continues to expect to realize between $15 million and $20 million in Puerto Rico related revenue in fiscal 2025[5] - Revenue and profit recognition on the project is expected to accelerate significantly in fiscal 2026[5] Hardware Business Outlook Hardware bookings are improving, with a significant US Army CROWS AHD order anticipated to boost FY2025 bookings and backlog - Hardware bookings continue to improve year over year, excluding the Puerto Rico project[6] - The US Army is finalizing procurement for an initial CROWS AHD program order, expected to be $8.0 million to $8.5 million of LRAD equipment[6] - This initial order will take fiscal 2025 hardware bookings (excluding Puerto Rico) 10% higher than bookings for all fiscal 2024[6] - With the CROWS AHD order, Genasys' hardware backlog (excluding Puerto Rico) will be over $16 million[6] Software Business Outlook Software bookings remain soft due to federal funding uncertainty, but the pipeline is expanding, and deal conversions are expected to improve - Software bookings continued to be soft in fiscal 3Q 2025 due to increased scrutiny and ongoing uncertainty of federal funding sources[7] - The Software pipeline continues to expand across all product offerings[7] - Deal conversions are expected to improve and accelerate as access to federal funds normalizes[7] - Actions have been taken to reduce operating expenses associated with the software business, expected to deliver approximately $2.5 million in annualized savings beginning 1Q 2026[7] Operating Expenses and Capital Management Operating expenses decreased due to cost discipline, with annualized savings expected in 1Q 2026, and the company maintains adequate capital - Operating expenses in 3Q 2025 were down 3.9% sequentially and 6.8% year over year due to operational and cost discipline[8] - Fiscal 4Q 2025 operating expenses, inclusive of severance costs, are expected to be similar to 3Q 2025 levels[9] - Annualized savings of approximately $2.5 million from cost reduction actions are expected to begin to be realized in 1Q 2026[7][9] - Cash, cash equivalents, and marketable securities totaled $5.5 million as of June 30, 2025[10][14] - The company is confident in having adequate capital due to upcoming payments for invoices from Puerto Rico and cash flows from the US Army order[10] Fiscal 3Q 2025 Financial Review Fiscal 3Q 2025 saw revenue growth to $9.9 million, but gross profit margin declined significantly, leading to a GAAP net loss of ($6.5) million and decreased cash reserves Revenue Performance Fiscal 3Q 2025 revenue increased 38% YoY to $9.9 million, driven by a 50% increase in hardware revenue. Software revenue grew 7%, with quarterly recurring revenue up 8% YoY and Annual Recurring Revenue (ARR) reaching $8.7 million Revenue Performance (3 Months Ended June 30) | Metric | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :---------------- | :--------------- | :--------------- | :--------- | | Total Revenues | $9,857 | $7,167 | +37.5% | | Software Revenue | N/A | N/A | +7% | | Hardware Revenue | N/A | N/A | +50% | | Recurring Revenue | N/A | N/A | +8% | | ARR (End of Q) | $8,700 | N/A | N/A | Gross Profit and Operating Expenses Gross profit margin significantly decreased to 26.3% in 3Q 2025 from 52.8% in 3Q 2024, primarily due to percentage-of-completion accounting for the Puerto Rico project and hardware revenue underutilization. Total operating expenses decreased 6.8% YoY to $8.5 million, with R&D expenses down 16% while SG&A remained flat Gross Profit and Operating Expenses (3 Months Ended June 30) | Metric | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :-------------------------- | :--------------- | :--------------- | :--------- | | Gross Profit | $2,597 | $3,784 | -31.4% | | Gross Profit Margin | 26.3% | 52.8% | -26.5 pp | | Total Operating Expenses | $8,522 | $9,145 | -6.8% | | Selling, General & Admin. | $6,422 | $6,649 | -3.4% | | Research & Development | $2,100 | $2,496 | -15.9% | - Depressed gross margin primarily attributable to percentage-of-completion accounting associated with the Puerto Rico project and underutilization of hardware revenue[12] Net Loss and Adjusted EBITDA Genasys reported a GAAP net loss of ($6.5) million, or ($0.14) per share, in 3Q 2025, an improvement from ($6.7) million, or ($0.15) per share, in 3Q 2024. Adjusted EBITDA was ($4.8) million, compared to ($4.3) million in the prior year period Net Loss and Adjusted EBITDA (3 Months Ended June 30) | Metric | 2025 (Thousands) | 2024 (Thousands) | YoY Change | | :-------------------------- | :--------------- | :--------------- | :--------- | | GAAP Net Loss | ($6,487) | ($6,682) | +2.9% | | GAAP Net Loss Per Share | ($0.14) | ($0.15) | +6.7% | | Adjusted EBITDA | ($4,781) | ($4,329) | -10.4% | Cash and Marketable Securities Cash, cash equivalents, and marketable securities totaled $5.5 million as of June 30, 2025, a decrease from $13.1 million as of September 30, 2024 Cash and Marketable Securities | Metric | June 30, 2025 (Thousands) | September 30, 2024 (Thousands) | Change | | :-------------------------------- | :-------------------------- | :----------------------------- | :----- | | Cash, Cash Equivalents & Marketable Securities | $5,500 | $13,100 | -58.0% | Non-GAAP Financial Measures Explanation Adjusted EBITDA is presented as a non-GAAP metric to provide investors with helpful information for evaluating core operating performance, excluding items like other income/expense, income tax, depreciation, amortization, and stock-based compensation, which are not considered indicative of core operations - Adjusted EBITDA is a non-GAAP operational metric used by management to understand and evaluate core operating performance and trends[15][16] - It represents net loss before other income and expense, net, income tax expense (benefit), depreciation and amortization expense, and stock-based compensation[15] - These excluded items are not considered indicative of core operating performance, and their exclusion facilitates period-to-period comparisons[15][16] Corporate Information This section provides details on the upcoming financial results webcast, an overview of Genasys Inc.'s protective communications business, forward-looking statement disclaimers, and investor relations contacts Webcast and Conference Call Details Genasys Inc. will host a conference call and webcast on August 14, 2025, at 4:30 p.m. Eastern Time to discuss its fiscal third quarter 2025 financial results, with details provided for access and submitting questions - Management will host a conference call on August 14, 2025, at 4:30 p.m. Eastern Time / 1:30 p.m. Pacific Time[17] - Access the conference call by dialing toll-free (888) 390-3967, or international at (862) 298-0702[17] - A webcast will be available at https://app.webinar.net/5vKnwNmje6L, with a replay available approximately four hours after the presentation[17] - Questions to management may be submitted before the call by emailing ir@genasys.com[17] About Genasys Inc. Genasys Inc. (NASDAQ: GNSS) is a global leader in Protective Communications, providing software and hardware systems like LRAD® to protect over 155 million people worldwide - Genasys Inc. (NASDAQ: GNSS) is the global leader in Protective Communications[18] - The company offers a comprehensive portfolio of preparedness, response, and analytics software and hardware systems, including the Long Range Acoustic Device® (LRAD®)[18] - The Genasys Protect platform is designed to ensure organizations and public safety agencies are 'Ready when it matters™'[18] - Genasys protects more than 155 million people in all 50 states and in over 100 countries worldwide, with over 40 years of experience[18] Forward-Looking Statements The report contains forward-looking statements, which are based on management's assumptions and are subject to various risks and uncertainties, including geopolitical conflicts and supply chain issues, that could cause actual results to differ materially. Genasys Inc. disclaims any obligation to publicly update or revise these statements - The matters discussed are forward-looking statements within the meaning of the 'safe harbor' provisions of the Private Securities Litigation Reform Act of 1995[19] - These statements are based on particular assumptions and involve risks and uncertainties that could cause actual results to differ materially[19] - Risks and uncertainties include the business impact of geopolitical conflicts and other causes affecting the supply chain[19] - Genasys Inc. disclaims any intent or obligation to publicly update or revise forward-looking statements, except as otherwise stated[19][20] Investor Relations Contacts Contact information for investor relations is provided for inquiries regarding Genasys Inc - Investor Relations Contact: Brian Alger, CFA, SVP, IR and Corporate Development[21] - Email: ir@genasys.com[21] - Phone: (858) 676-0582[21] Consolidated Financial Statements The consolidated financial statements present the balance sheets, showing increased assets and liabilities, and statements of operations, detailing revenue, expenses, and net loss for 3Q and nine months ended June 30, 2025 Consolidated Balance Sheets As of June 30, 2025, total assets increased to $57.4 million, driven by current asset growth. However, total liabilities significantly rose to $54.2 million, primarily due to increased current liabilities and notes payable, resulting in a substantial decrease in total stockholders' equity to $3.2 million Consolidated Balance Sheets (Selected Items, in thousands) | Metric | June 30, 2025 | September 30, 2024 | Change | | :-------------------------------- | :------------ | :----------------- | :----- | | ASSETS | | | | | Cash and cash equivalents | $5,339 | $4,945 | +$394 | | Short-term marketable securities | $120 | $7,945 | -$7,825 | | Accounts receivable, net | $4,648 | $3,283 | +$1,365 | | Contract assets | $2,846 | — | +$2,846 | | Inventories, net | $11,426 | $7,313 | +$4,113 | | Total current assets | $31,932 | $26,140 | +$5,792 | | Total assets | $57,393 | $53,936 | +$3,457 | | LIABILITIES AND STOCKHOLDERS' EQUITY | | | | | Accounts payable | $7,797 | $4,034 | +$3,763 | | Accrued liabilities | $23,473 | $9,030 | +$14,443 | | Notes payable, at fair value (current) | $17,050 | — | +$17,050 | | Total current liabilities | $49,395 | $14,085 | +$35,310 | | Total liabilities | $54,234 | $36,373 | +$17,861 | | Total stockholders' equity | $3,159 | $17,563 | -$14,404 | Consolidated Statements of Operations For 3Q 2025, revenue grew 38% YoY to $9.9 million, but gross profit margin fell to 26.3%. Operating expenses decreased, leading to a GAAP net loss of ($6.5) million and Adjusted EBITDA of ($4.8) million. For the nine months, revenue increased, but the company reported a net loss of ($16.7) million and Adjusted EBITDA of ($14.7) million Consolidated Statements of Operations (Selected Items, in thousands, except per share amounts) | Metric | Three Months Ended June 30, 2025 | Three Months Ended June 30, 2024 | Nine Months Ended June 30, 2025 | Nine Months Ended June 30, 2024 | | :-------------------------------- | :------------------------------- | :------------------------------- | :------------------------------ | :------------------------------ | | Revenues | $9,857 | $7,167 | $23,729 | $17,267 | | Cost of revenues | $7,260 | $3,383 | $15,344 | $9,827 | | Gross profit | $2,597 | $3,784 | $8,385 | $7,440 | | Gross profit margin | 26.3% | 52.8% | 35.3% | 43.1% | | Total operating expenses | $8,522 | $9,145 | $26,506 | $27,024 | | Loss from operations | ($5,925) | ($5,361) | ($18,121) | ($19,584) | | Net loss | ($6,487) | ($6,682) | ($16,704) | ($20,344) | | Net loss per common share - basic and diluted | ($0.14) | ($0.15) | ($0.37) | ($0.46) | | Adjusted EBITDA | ($4,781) | ($4,329) | ($14,743) | ($16,122) |