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Genasys Inc. (GNSS)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 FY2024 revenue was $7.2M, down ~50% year over year as the prior-year quarter benefited from ~$8.6M from a completed U.S. Army program of record; gross margin expanded to 52.8% on software mix while GAAP net loss widened to ($6.7M) with ($0.15) EPS .
  • Software momentum continued: quarterly recurring revenue grew 138% YoY and ARR reached $7.6M; management reiterated expectations for recurring revenues and ARR to at least double in FY2024 .
  • Puerto Rico dams Early Warning System contract was finalized the next day at approximately $75M; most revenue and cash inflows expected in FY2025–FY2026; U.S. Army CROWS AHD program sizing at $10–$15M per year from FY2025 provides multi‑year hardware visibility .
  • Management did not provide granular guidance due to revenue recognition timing uncertainty but flagged a strong Q4 bookings outlook (including Puerto Rico orders entering backlog) and cited improved international hardware bookings (+117% YTD) .

What Went Well and What Went Wrong

What Went Well

  • Gross margin expanded to 52.8% (from 46.9% YoY) driven by stronger software mix and improved hardware margins; ARR reached $7.6M and quarterly recurring revenue grew 138% YoY .
  • Strategic wins and synergy: definitive $75M Puerto Rico dams contract signed; law enforcement bookings nearly 50% ahead of FY2023 total YTD as CONNECT + LRAD engagements scale .
  • Management confidence: “Genasys is in the best strategic position in its history… high degree of visibility on record revenues for the next several years” (CEO, prepared remarks) .

What Went Wrong

  • Revenue fell ~50% YoY to $7.2M as Q3 FY2023 included ~$8.6M from a concluded program of record; hardware revenue decreased 62% YoY in Q3 while software was $2.1M (+120% YoY) .
  • Operating expenses rose 12% YoY to $9.1M (SG&A +11%, R&D +17% from Evertel and product investment), widening GAAP operating loss to ($5.4M) and adjusted EBITDA to ($4.3M) .
  • Limited near‑term visibility: no granular guidance; quarterly other expense of $1.4M included $1.1M debt issuance costs and ~$$0.4M expected quarterly interest going forward, pressuring near‑term profitability .

Financial Results

P&L snapshot and YoY/Seq comparisons

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Revenue ($USD Millions)$14.262 $4.361 $5.7 $7.167
Gross Profit ($USD Millions)$6.695 $1.479 N/A$3.784
Gross Profit Margin %46.9% 33.9% 38% 52.8%
Total Operating Expenses ($USD Millions)$8.145 $8.709 $9.2 $9.145
GAAP Operating Income (Loss) ($USD Millions)($1.450) ($7.230) ($7.0) ($5.361)
GAAP Net Income (Loss) ($USD Millions)($1.423) ($6.724) N/A($6.682)
Basic EPS ($USD)($0.04) ($0.15) N/A($0.15)
Adjusted EBITDA ($USD Millions)($0.418) ($6.055) ($5.7) ($4.329)

Notes: Q2 2024 EPS/net not disclosed in call materials; Q2 gross margin and adjusted EBITDA from the earnings call .

Segment revenue breakdown

Segment RevenueQ1 2024Q2 2024Q3 2024
Hardware ($USD Millions)$2.9 $4.0 $5.1
Software ($USD Millions)$1.4 $1.7 $2.1

KPIs and cash

KPIQ1 2024Q2 2024Q3 2024
ARR ($USD Millions)$5.0 $6.5 $7.6
Quarterly Recurring Revenue YoY Growth (%)85% 123% 138%
Cash + Marketable Securities ($USD Millions)$13.6 (as of Dec 31, 2023) $6.6 (as of Mar 31, 2024) $12.7 (as of Jun 30, 2024; excludes $3.5M bid bond)

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Puerto Rico Dams EWS Project RevenueProject term~$60–70M (selection announced Q1) ~$75M; most revenue and positive cash flow in FY2025–FY2026 Raised
Software Recurring Rev and ARRFY2024“At least double” (reiterated Q1 & Q2) “At least double” maintained Maintained
CROWS AHD Program Annual Run-rateFY2025 onwardN/A~$10–$15M per year expected New
Quarterly Interest ExpenseNear termN/A~$0.4M/quarter (dependent on 90‑day SOFR) New
Granular Revenue/Margin GuidanceFY2024LimitedNot provided (timing uncertainties) Maintained (no granular guidance)

Earnings Call Themes & Trends

TopicQ1 FY2024 (Feb)Q2 FY2024 (May)Q3 FY2024 (Aug)Trend
Software growth/ARRARR $5.0M; recurring up 85% YoY ARR $6.5M; recurring up 123% YoY ARR $7.6M; recurring up 138% YoY Accelerating
Hardware visibility (DoD/programs)New Army program expected, dependent on budget Hardware bookings down; U.S. Navy LRAD order slipped into Q3 CROWS AHD sizing guided at $10–$15M/year from FY2025 Improving multi‑year visibility
Puerto Rico EWSSelected; $60–70M; approvals over ~6 months; revenues mostly FY2025 Scope increased to ~$75M; deposit expected after contract Definitive agreement signed; ~$75M recognized over project; most in FY2025–FY2026 Firmed/execution starting
International bookingsRecovery anticipated Weak in recent years; expecting recovery +117% YTD; building backlog Recovery
Law enforcement synergiesCONNECT cross‑sell emerging LRAD + CONNECT pipeline growing YTD LE hardware bookings nearly 50% > FY2023 total ; EVAC expansion (Santa Barbara) Strengthening
Guidance toneExpect ARR and recurring to at least double; adjusted EBITDA H2 profitable Back‑half weighted; limited precision; debt financing closed No granular guidance; strong Q4 bookings expected Cautious near‑term, constructive medium‑term

Management Commentary

  • “Genasys is in the best strategic position in its history. Our product portfolio is diverse and differentiated, and we have… visibility on record revenues for the next several years.” — CEO prepared remarks .
  • “Puerto Rico… is the most significant and public demonstration of how Genasys Protect software unlocks and enables larger hardware opportunities… we expect to recognize most revenues in fiscal 2025 and 2026.” — CEO prepared remarks .
  • “In Q3, software revenue grew 120% YoY while hardware decreased 62%… gross margin was 53% largely due to the mix.” — CFO prepared remarks .
  • “Q4 bookings… expected to be exceptionally strong with the inclusion of Puerto Rico… international bookings up 117% for the first 3 quarters.” — SVP IR (Q&A) .

Q&A Highlights

  • PREPA cadence and timing: Revenues to be concentrated in FY2025–FY2026; dam‑by‑dam cadence not yet disclosed pending further work with PREPA .
  • CROWS AHD program size: ~$10–$15M annual run‑rate reasonable; FY2024 likely minimal impact; ramp begins FY2025 .
  • Bookings outlook: Q4 expected “exceptionally strong” including Puerto Rico orders into backlog; international bookings up 117% YTD .
  • Macro resilience: Management does not expect a recession to materially impact business; referenced strongest revenue year during COVID .
  • Competitive landscape: Everbridge’s focus on enterprise seen as limited impact; Genasys focus on state/local government .

Estimates Context

  • We attempted to retrieve S&P Global Wall Street consensus for Q1–Q3 FY2024 (EPS, revenue, EBITDA, target price) but data was unavailable due to provider rate limits at the time of request. As a result, we cannot quantify beats/misses versus consensus for Q3 FY2024 in this report [GetEstimates error].

Key Takeaways for Investors

  • Mix‑driven margin recovery: Despite revenue headwinds from the program‑of‑record lap, gross margin expanded to 52.8% on stronger software mix and improved hardware margins, supporting operating leverage once hardware volumes normalize .
  • Software scaling: ARR rose to $7.6M with quarterly recurring revenue +138% YoY; management maintains FY2024 ARR and recurring revenue to at least double, underpinning revenue stability and multi‑year visibility .
  • Hardware pipeline visibility: The $75M Puerto Rico project and U.S. Army CROWS AHD ($10–$15M/year) materially extend multi‑year hardware revenue runway into FY2025–FY2026, with international bookings recovery (+117% YTD) improving diversification .
  • Near‑term caution: Limited granular guidance and ~$0.4M quarterly interest expense weigh on near‑term profitability; management flagged strong Q4 bookings and cash inflows associated with Puerto Rico contract execution .
  • Strategic positioning: EVAC/ALERT/CONNECT integrated platform continues to win in SLED markets (e.g., Santa Barbara) and law enforcement; YTD LE hardware bookings nearly 50% above FY2023 total indicates cross‑sell synergy and secular demand drivers (wildfires, severe weather, civil unrest) .
  • Actionable: Track contract execution milestones (Puerto Rico EWS, CROWS procurement) and Q4 bookings conversion into backlog; monitor ARR progression toward doubling and international hardware backlog build to validate FY2025–FY2026 revenue trajectory .

Additional Relevant Press Releases (Q3 context)

  • Santa Barbara County EVAC contract expands California coverage .
  • LRAD + CONNECT synergies highlighted for law enforcement readiness amid civil unrest and events .
  • Definitive agreement signed for Puerto Rico dams project (~$75M) .