Sign in
GI

Genasys Inc. (GNSS)·Q2 2024 Earnings Summary

Executive Summary

  • Revenue was $5.74M, down 48.8% year-over-year and up sequentially from Q1; GAAP EPS was ($0.16). Gross margin was 37.9%; Adjusted EBITDA was ($5.74M) .
  • Hardware demand was constrained by delayed U.S. DoD funding; management lowered full-year hardware outlook versus prior guidance. Software momentum continued with ARR reaching $6.5M and recurring revenue up 123% year-over-year .
  • Strategic catalysts: Puerto Rico dams project expanded in scope to ~$75M with final terms targeted before fiscal Q3-end; an initial award payment and $3.5M bid bond return are expected post-signing, with revenue largely in FY25–FY26 .
  • Balance sheet fortified via a $15M two-year term loan (SOFR+5% cash interest or SOFR+6% with partial stock interest) and ~3.1M five-year warrants at $2.53; proceeds support working capital and project execution .

What Went Well and What Went Wrong

What Went Well

  • Puerto Rico project scope expanded to ~$75M with expected sequential approvals and cash flows, improving long-term visibility: “Genasys is finally turning the corner… expanded to $75 million” .
  • Software momentum: recurring revenue +123% YoY; ARR reached $6.5M, with expectation to at least double for FY24 .
  • Strategic financing and governance: closed $15M term loan bolstering liquidity; added board members with deep emergency management/public sector expertise (Bill Dodd, Craig Fugate) .

What Went Wrong

  • Hardware revenues missed prior expectations due to delayed DoD funding and low starting backlog; management “no longer expect[s] fiscal 2024 hardware revenues to meet prior forecasts” .
  • Gross margin compression to 37.9% (from 43.9% LY) driven by lower hardware volume and reduced overhead absorption; software margins impacted by event-driven costs .
  • GAAP net loss widened to ($6.94M) and Adjusted EBITDA fell to ($5.74M), reflecting the hardware shortfall .

Financial Results

MetricQ4 2023Q1 2024Q2 2024
Revenue ($USD Millions)$10.70 $4.36 $5.74
GAAP EPS ($)($0.27) ($0.15) ($0.16)
Gross Margin (%)49.6% 33.9% 37.9%
Adjusted EBITDA ($USD Millions)($1.69) ($6.06) ($5.74)

Segment breakdown (Q2 2024):

Segment Revenue ($USD Millions)Q2 2024
Hardware$4.0
Software$1.7

KPIs:

KPIQ1 2024Q2 2024
ARR ($USD Millions)—$6.5
Software Recurring Revenue YoY Growth (%)84.9% 123%
Hardware Bookings ($USD Millions)—$2.1
Software Bookings ($USD Millions)—$4.3

Notes:

  • Adjusted EBITDA excludes other income/expense, taxes, D&A, and stock-based compensation .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Hardware RevenueFY 2024“Approach fiscal 2022 levels” “No longer expect fiscal 2024 hardware revenues to meet prior forecasts” Lowered
Software ARR/Recurring RevenueFY 2024“Software revenues to more than double YoY” “ARR at least doubling YoY at fiscal year end” Maintained
Adjusted EBITDAFY 2024“Expected to improve vs FY2023” No update provided in Q2 materialsNot updated
Puerto Rico Dams ProjectMulti-year—~$75M total; initial award payment and $3.5M bid bond return after contract; most revenue in FY25–FY26 New/clarified timing
CROWS 16 ProgramMulti-year$1M prototype (Q4’23) Program of record established; kickoff early June; revenue likely not in FY24; consistent in FY25+ New/clarified timing

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2023, Q1 2024)Current Period (Q2 2024)Trend
Puerto Rico Dams ProjectSelected; $60–70M solution integrating software & acoustics Scope expanded to ~$75M; sequential approvals; initial payment and bid bond return post-signing; revenue largely FY25–FY26 Increasing scope; clearer phasing/timing
CROWS 16 Program (Army)$1M prototype order (CROWS-AHD development) Program of record established; kickoff first week of June; revenue likely FY25 onward Progressing to execution
Software MomentumRecurring +43% YoY in Q4; expansion with LA County, Utah, Traffic AI (Ladris) Recurring +123% YoY; ARR $6.5M; expected to at least double FY24 Accelerating
Hardware Demand & Budget TimingDelayed orders to FY2024; back-half weighted DoD budget delays; lowered FY24 hardware outlook; sequential improvement expected in H2 Near-term headwinds; H2 recovery
Financing/LiquidityFollow-on equity bolstered cash (post-FY2023) $15M term loan, warrants; supports working capital and execution Strengthened

Management Commentary

  • “Genasys is finally turning the corner. The previously announced project in Puerto Rico has been expanded to $75 million…” – CEO Richard Danforth .
  • “We now expect the project in Puerto Rico to generate approximately $75 million in revenue to Genasys… expected to generate substantial EBITDA and cash.” .
  • “Between the Puerto Rico and CROW 16 business alone, we're expecting nearly $200 million in highly profitable revenue in the coming years.” – CFO Dennis Klahn .
  • On timing: “I'm not expecting any [Puerto Rico] revenue this year… initial deposit subsequent to the contract being signed.” – CEO .
  • On CROWS: “The money is beginning to flow to the program office. The initial kickoff meeting is scheduled for the first week of June.” – CEO .

Q&A Highlights

  • CROWS funding: kickoff early June; clarity pending; revenue not in FY24 internal forecast .
  • Puerto Rico revenue timing: contract expected by end of June; design approvals in Q3; revenue ramps in FY25–FY26; initial deposit after signing .
  • Civil disobedience use case: LRAD adoption highlighted; most major U.S. police forces already equipped; potential for follow-on purchases .

Estimates Context

  • S&P Global Wall Street consensus estimates for Q2 2024 were unavailable due to data access limits today; as a result, we cannot provide revenue/EPS consensus or beat/miss analysis. Where estimates comparisons would normally appear, they are omitted (values unavailable).

Where estimates may need to adjust:

  • Hardware revenue trajectory for FY24 is lower than prior guidance due to DoD funding delays and low starting backlog; consensus models likely need to shift hardware revenue into FY25–FY26 with Puerto Rico and CROWS execution (management commentary) .

Key Takeaways for Investors

  • Near-term results reflect timing issues (DoD budget, backlog), but medium-term visibility strengthened by ~$75M Puerto Rico project and CROWS program of record; expect revenue skew to FY25–FY26 .
  • Software is scaling: ARR $6.5M, recurring +123% YoY; management expects ARR to at least double FY24, supporting margin mix improvement .
  • Liquidity improved via $15M term loan; supports working capital through ramp; warrants add potential dilution but align with long-term execution .
  • H2 FY24 should show sequential revenue improvement, but FY24 hardware won’t meet prior forecasts; risk lies in government funding timing .
  • Catalysts: PR contract signing (initial deposit, bid bond return), CROWS kickoff and subsequent orders, international LRAD orders resuming (e.g., Middle East follow-on; German Navy F-126) .
  • Tactical: stock may react to contract finalizations and order flow; medium-term thesis hinges on execution of large projects and software ARR scalability .

Appendix: Additional context from press releases

  • Middle East LRAD defense orders: combined original award + follow-on over $2.7M; management noted delayed international orders starting to come in .
  • German Navy F-126 LRAD 950NXT systems: first shipment scheduled September; further shipments in FY2025–FY2026 .