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Genasys Inc. (GNSS)·Q1 2025 Earnings Summary

Executive Summary

  • Q1 FY2025 showed clear sequential and year-over-year improvement: revenue rose 59% YoY to $6.9M, gross margin expanded to 45.8% (from 33.9% YoY; 40.8% in Q4), operating loss narrowed to ($5.9M), and GAAP EPS improved to ($0.09) from ($0.15) YoY and ($0.26) QoQ .
  • Backlog remains ~$40M, with ARR at $8.8M; management expects Puerto Rico EWS revenue to begin in Q2 (March quarter) with a larger ramp in the June quarter and a heavier H2 contribution under percentage-of-completion accounting, driving the 2025 inflection narrative .
  • Los Angeles wildfires were a high-profile proof point for Genasys Protect; management cited unprecedented inbound interest that should convert into bookings over “the next several months,” a potential catalyst for software and hardware demand .
  • Cash and marketable securities increased to $13.9M, aided by ~$8.3M in deposits received for the first Puerto Rico dam group (plus $2.2M post-quarter), though supply chain lead times remain the primary gating factor for installation timing .
  • No formal numeric guidance was provided; qualitative outlook maintained: sequential improvement in software revenues and ARR through FY2025 (at slower rates than FY2024), with revenue recognition weighted to H2 as PR EWS progresses .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded to 45.8% (vs. 33.9% YoY; 40.8% QoQ) on higher hardware volume (better overhead absorption) and ~9ppt YoY improvement in software margins; adjusted EBITDA improved to ($4.8M) from ($6.1M) YoY and ($6.0M) QoQ .
  • Puerto Rico execution advanced: ~$8.3M deposit received in-quarter and $2.2M post-quarter; first milestone completed (50kW generator), with initial revenue recognition expected in Q2 and a larger step-up in the June quarter under POC accounting .
  • LA County incident showcased platform scale and performance, with “over 183,000 requests per second” processed at peak and “app users jumped 5x” in January, driving “unprecedented” inbound interest that management expects to convert to bookings .

Quotes:

  • “Fiscal 2025 is rapidly shaping up to be a year of dramatic improvement.” — CEO Richard Danforth .
  • “Initial revenues will be recorded this quarter with more significant revenue recognition coming in the June quarter...” — CFO Dennis Klahn .
  • “Genasys servers were processing over 183,000 requests per second.” — CEO Richard Danforth .

What Went Wrong

  • No numeric guidance; timing remains uncertain due to long lead-time materials; management highlighted that delivery schedules are the primary determinant for installation commencement .
  • Supply chain constraints persist; management is “managing through” but acknowledged gating effects on project timelines, reinforcing H2 revenue weighting .
  • Operating expenses rose YoY (to $9.1M vs. $8.7M) driven by SG&A (professional services tied to Puerto Rico); profitability still negative though losses narrowed QoQ .

Financial Results

MetricQ1 2024Q4 2024Q1 2025Vs. Estimates
Revenue ($USD Millions)$4.361 $6.741 $6.940 N/A
Gross Margin %33.9% 40.8% 45.8% N/A
Operating Loss ($M)($7.230) ($7.132) ($5.941) N/A
Net Loss ($M)($6.724) ($11.386) ($4.078) N/A
Diluted EPS ($)($0.15) ($0.26) ($0.09) N/A
Adjusted EBITDA ($M)($6.055) ($6.013) ($4.813) N/A
Operating Expenses ($M)$8.709 $9.881 $9.119 N/A

Notes:

  • Q1 net loss included a $2.5M non-cash positive change in warrant fair value; adjusted EBITDA excludes other income/expense, taxes, D&A, and SBC as defined by management .
  • Consensus estimates from S&P Global were unavailable at the time of analysis; thus, no beat/miss assessment is provided.

Segment and Mix (YoY growth by quarter)

Segment KPIQ3 2024Q4 2024Q1 2025
Software Revenue YoY Growth %+120% +92.4% +63.5%
Hardware Revenue YoY Growth %(62%) (51.9%) +57.1%
Recurring Software Revenue YoY Growth %+138% +110% +68.7%

KPIs and Balance Sheet

KPIQ3 2024Q4 2024Q1 2025
Backlog ($M)N/A$40 $40
ARR ($M)$7.6 $8.3 $8.8
Cash + Marketable Securities ($M)$12.7 $13.1 $13.9
PR Deposits Received In-Quarter ($M)N/AN/A~$8.3
PR Additional Deposits Post-Quarter ($M)N/AN/A~$2.2

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Puerto Rico EWS Revenue TimingFY2025–FY2026Most revenue in FY2025–FY2026; start after approvals (Q3 FY2024) Initial rev in Q2’25; more significant in June quarter; bulk in H2 FY2025; POC accounting to smooth recognition Maintained timing; added POC specifics
Software Revenue/ARRFY2025FY2025 growth to moderate vs triple-digit FY2024 Expect sequential improvement in software revenues and ARR through FY2025, not at FY2024 rates Maintained qualitative outlook
Operating ExpensesFY2025Not quantifiedQuarterly OpEx similar or slightly higher through remainder of FY2025 New qualitative outlook
Numeric Revenue/MarginsFY2025Not provided due to variability None provided; materials lead times drive timing uncertainty Maintained (no numeric guidance)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q3 and Q4)Current Period (Q1 2025)Trend
Puerto Rico EWS (PREPA) timing and accountingFOMB approval; ~$75M project; majority revenue in FY2025–26; deposits precede revenue First milestone complete; initial revenue in Q2; larger step-up in June quarter; POC accounting; deposits of ~$8.3M + $2.2M Progressing; visibility improving; H2-weighted
Software ARR trajectoryARR $7.6M (Q3); starting ARR $8.3M entering FY2025 ARR $8.8M; recurring software +69% YoY in Q1 Continued growth, moderated vs FY2024
LA County and product performanceALERT win added to EVAC deployment (Nov) LA wildfires: platform handled extreme scale; “unprecedented” inbound interest Positive demand catalyst, near-term bookings potential
Supply chain / lead timesCited as risk in outlook Still gating factor; being managed; long lead-time materials dictate start of installation Constraint persists
Defense/CROWS programProgram of record established; revenue likely beyond FY2024 Timing clarity expected “in the coming months” Watch for award timing update

Management Commentary

  • Strategic framing: “Fiscal 2025 is rapidly shaping up to be a year of dramatic improvement.” — CEO Richard Danforth .
  • LA fires performance: “Genasys servers were processing over 183,000 requests per second... app users jumped 5x during that month,” with “unprecedented” inbound demand expected to convert to bookings .
  • Puerto Rico execution and revenue recognition: “Initial revenues will be recorded this quarter with more significant revenue recognition coming in the June quarter... utilize the percentage of completion methodology” — CFO Dennis Klahn .
  • Mix and margins: Gross margin improvement driven by both higher hardware volume (overhead absorption, favorable channel +2pts) and rising software margin; last year’s quarter had a 2pt drag from a specific order .

Q&A Highlights

  • Puerto Rico deployment cadence: First group is most complex; Groups 2 and 3 to begin in parallel, with majority of revenue from work on the island expected from these groups in FY2025 .
  • Additional deposits: Third group design approved; expected deposit “nearly $11M” (remaining 40% upon acceptance of each of 19 dams across first three groups) .
  • Supply chain: Constraints remain but are managed; lead times are initial gate, then expected to catch up .
  • LA fires/alerts context: A county-wide IPAWS warning default issue (LEA channel) was canceled within 3 minutes; process/software changes implemented; cellular network congestion drove delayed messages in some cases .
  • Competition: No meaningful changes observed yet despite heightened visibility .
  • CROWS program: Positive signs; timing clarity expected in coming months .

Estimates Context

  • Wall Street consensus (S&P Global) for Q1 FY2025 EPS and revenue was unavailable at the time of analysis due to data access limits; as a result, we do not provide a beat/miss determination relative to consensus. When available, we anchor comparisons to S&P Global consensus.

Key Takeaways for Investors

  • Margin and loss trajectory improved: gross margin expanded to 45.8% and operating loss narrowed; net loss/EPS improved both YoY and QoQ, aided by mix and software margin gains; GAAP net also benefited from a $2.5M non-cash warrant revaluation .
  • H2 is the swing factor: Puerto Rico EWS milestones, deposits, and POC accounting point to a meaningful revenue ramp starting in Q2 and accelerating into Q3; execution against lead times is critical .
  • Demand tailwind from LA fires: Demonstrated scale/performance and visibility should lift bookings near term across software (ALERT/EVAC/CONNECT) and acoustics hardware .
  • Balance sheet flexibility improving with deposits: Cash and marketable securities rose to $13.9M; additional deposits post-quarter provide working capital for procurement .
  • Watch OpEx discipline: Management guides OpEx “similar or slightly higher” through FY2025; continued mix shift toward software and Puerto Rico margin profile will be key to operating leverage .
  • Defense optionality: CROWS award timing update could add multi-year revenue visibility; monitor for contracting progress .
  • Near-term trading setup: Stock likely keyed to Puerto Rico execution milestones, deposit cadence, and any LA-related booking disclosures; absence of numeric guidance keeps updates and bookings as primary catalysts .