Genasys Inc. — Call Transcript 2026

Speaker 1: Good day ladies and gentlemen and welcome to the Genesis Puerto Rico Dam award conference call. All lines have been placed on a listen only mode and the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference please press star zero to reach a live operator. At this time it is my pleasure to turn the floor over to your host Brian Alger SVP of Investor Relations and Corporate Development. Sir, the floor is yours.

Speaker 2: Great. Thank you, Karen. Good morning, everyone. Welcome to Genesis' call to discuss the recent Puerto Rico DAM Award. I'm Brian Alger, SVP, Investor Relations and Corporate Development for Genesis. With me on the call today is Richard Danforth, our CEO. During today's call, Richard will provide opening comments and detail the award announced earlier this morning. On this morning's call, we'll make forward-looking statements regarding the company's plans and expectations pertaining to the award. Our ability to meet those expectations naturally involves certain risks and uncertainties. The company's results may differ materially from the projections described in these forward-looking statements, and factors that might cause such differences and other potential risks and uncertainties can be found in the risk section of the company's Form 10-K of fiscal year ended September 30th, 2023. Forward-looking statements on this call are based only on the information and management's expectations as of today, February 12th, 2024. We explicitly disclaim any intent or obligation to update these forward-looking statements, except otherwise specifically stated. Finally, a replay of this call will be available in approximately four hours through the investor relations page on the company's website. Now, it's my pleasure to turn the call over to Genesis's CEO, Richard Danforth. Richard.

Speaker 3: Thank you, Brian, and good morning to everybody. Well, this morning we are very pleased to announce that Genesis has been selected to provide the early warning system, engineering, procurement, and construction for all Puerto Rico's dams. The RFP for this project was released on October 10th and awarded to this company last Friday. The customer is the Puerto Rico Electric Power Authority, known as PREPA, whose duty it is to provide all the power to the island of Puerto Rico. The purpose of the project is to provide all of the design and construction for the early warning system for all 37 of the Puerto Rican dams. When complete, all dams will be equipped with a series of sensors that will allow for real-time monitoring of each dam. The data from these sensors will be connected to the Genesys Protect cloud-based platform. The information from these sensors will be displayed in the seven emergency operation centers around the island. At these EOCs, the Genesys Protect platform will allow emergency operations personnel to predict, detect when a breach or overflow will occur, and allow for communications to all the citizens that may be impacted. Communications for this system include satellite, RF, cellular, and network. and approximately 200 speaker arrays located in the areas where people may be affected by the floods. So that's a very high-level overview of the program, and now Karen will turn it over to questions.

Speaker 1: Thank you. Ladies and gentlemen, the floor is now open for questions. If you do have a question, please press star one on your telephone keypad at this time. Again, that's star one if you have a question or comment. And we'll take our first question from Mike Lattimore from Northland Capital. Please go ahead, Mike.

Speaker 4: Yes, good morning. Congrats on this deal. Looks great. So, you referenced in the press release, I think $60 to $70 million of revenue. Over what time horizon would that be?

Speaker 3: It's expected to begin generating revenue at the end of this fiscal year, but most of it is likely going to be in our fiscal year 25.

Speaker 4: Got it. And then once it ramps, is that over 18-month horizon or once it starts.

Speaker 3: If everything holds schedule, Mike, it would be complete by the end of our fiscal 2025.

Speaker 4: Got it. And can you just elaborate a little bit on the different revenue types here? It sounds like there's a mixture of maybe project management as well as your core technologies, but just a little bit more on the products and types of revenue you'll get.

Speaker 3: Well, it's dominated by our hardware revenue, but it also includes our software. The whole project has been facilitated by the Genesis Protect software platform. So there's approximately $1.9 million for a three-year license fee for the software platform. Then on top of that, there'll be maintenance annual maintenance is maintenance of revenue for all 37 of the dams that'll be ongoing and recurring.

Speaker 4: Okay so it's primarily hardware revenue yes okay got it and I guess just um last one who if any were the competitors on this deal?

Speaker 3: There were several to begin with, but only two in the end. It was us, as well as a Puerto Rican company, and it's a construction company, and I'll butcher the name, I'm sure, but you need it, Munirez Longo Diaz Meso, a long-established business on the island.

Speaker 4: Got it, got it. Okay, great. Congrats again, looks great.

Speaker 3: Thank you.

Speaker 1: Thank you. And we'll take our next question from Brian Colley from Stevens. Please go ahead, Brian.

Speaker 4: Hey, guys. Congratulations on this.

Speaker 3: Thank you. Thank you.

Speaker 4: So I'm curious, Richard, you mentioned that there's an ongoing maintenance stream that will be included in this. I'm curious just kind of what the all-in, like recurring revenue will look like You know, as a percentage of this total award.

Speaker 3: On an annual basis, Brian, I'd have to go recalculate it based on that, but it's. It's probably in the order of 2.6 million.

Speaker 4: Okay. And any information you can provide on maybe the. expected margin profile of this business? Should most of it be just kind of in line with your typical hardware margins or is there any incremental OpEx up front that you'll need to incur because of this?

Speaker 3: For our hardware, it will be the normal gross margins that we deliver. There's a lot of services That will, you know, installation services and as I mentioned, all of the installation of the sensors, the speaker arrays. So that, that's more than half of this total award. And they will carry more than their fair share of contribution margin.

Speaker 4: Okay. And I'm curious, was this award contemplated in your kind of long-term targets for your by 26 targets for $100 million in revs and $20 million in EBITDA.

Speaker 3: It's been on our radar screen for quite some time, but heavily discounted, as you might expect, in our forecasting.

Speaker 4: Got it. Awesome. Well, that's all the questions I had. Congratulations again.

Speaker 2: Brian, maybe some color on this and Richard, feel free to jump in here. But when we originally looked at this project, it wasn't for all 37 dams. There was a subset group of dams that are managed by PREPA and then there's another series of dams that are managed by other entities. It wasn't clear over the past, you know, what was it, five years, how many of the dams would be included in the overall project. And it wasn't until Most recently, January 25th, when FEMA fully funded the project across all 37 dams.

Speaker 3: So when the RFP first came out, it was a set of 20 that were funded, funded from FEMA to the tune of about $53 million. And as Brian said, on January 25th, they funded the last 17 for another 43 and a half million dollars, something like that.

Speaker 4: Okay. And how, like in terms of the pace of this revenue in 2025, is it pretty, should it be pretty evenly spread out over the course of the year or back end loaded or any color on kind of the data?

Speaker 3: No, I think the current, the current outlook and I'll say this with the expectation that it will change is that substantial revenue won't begin until perhaps six months from now. It'll ramp up and then stay pretty steady, I would imagine, in our fiscal year '25.

Speaker 4: Okay, got it. Well, congratulations again.

Speaker 3: Thank you.

Speaker 1: Thank you. And we'll take our next question from Martin Young from Oppenheimer. Please go ahead, Martin.

Speaker 4: Hi, good morning. Congrats again on the deal. I want to ask your overall positioning in Puerto Rico and whether this win can lend to, is helpful to you to let other deals somewhere in nature or more software deals in the region?

Speaker 3: I do. I think this award, Martin, is just a testament to the Genesis Protect platform, a platform that was envisioned all along as one that could take digital sensor input on one end, display it to emergency management people, and allow them to use one of multiple communication channels, as I mentioned earlier. In this case, it's through satellite, through RF, directly to your computer, directly to your phone, and also through approximately 200 speaker arrays around the island. So this is the Genasys Protect Aware portion of the platform. We released the Genasys Protect platform earlier this fiscal year, and I think the market has reacted to it very favorably.

Speaker 4: Thank you. Is there any potential for you to add on more offerings based on the -- to the hardware wins?

Speaker 3: There is, specific to this opportunity, there are a series of options for additional instrumentation, for a whole host of various hardware elements. I don't know yet what, if any of those will be ordered, but in the coming weeks we will figure that out.

Speaker 4: Thank you. That's it for me.

Speaker 1: Thank you. And we'll take our next question from Scott Searle from Roth. Please go ahead, Scott.

Speaker 5: Hey, good morning. Thanks for taking the questions. Congratulations on the announcement. Seems like it's a transformative opportunity for you guys.

Speaker 3: Thank you. It is.

Speaker 5: Yeah, maybe just to follow up quickly. I want to understand some of the slate of services because it sounds like from the design and engineering standpoint that you guys are kind of expanding the portfolio of solutions that you offer and also on the sensor front. And it sounds like some other elements as well, like you just referenced, additional optional instrumentation. So I'm kind of wondering, is that factored into the initial $60 million to $70 million estimate of the contract value? And how does that really evolve and position you going forward with other similar opportunities?

Speaker 3: The estimate is reflective of the The 37 dams configured with various sensors is a total of 13 different sensors that can be used in any combination across all 37 of those dams. So the totals that you mentioned include everything I just said. However, as I mentioned a moment ago, there's options for more sensors, more displays, more power-generating equipment, a lot of different things.

Speaker 5: Gotcha. Very helpful. And just in terms of making sure I've got my hands around the scale of the opportunity, I think you called out $1.9 million for three-year software licenses, annual maintenance of $2.6 million a year. If I kind of back that out to the hardware opportunity, and it sounds like the timeline, a lot of this is going to be deliverable in fiscal '25. You're talking about somewhere in the ballparks probably of $30 million of hardware revenue delivered in fiscal '35, is that correct? a huge number relative to your past product delivery sales figures, right? So it's probably 50% to two-thirds of probably your peak level product revenue. So I'm just trying to get my hands around that.

Speaker 3: Yeah, again, Scott, I appreciate your comments. This award came in Friday afternoon, so we haven't laid everything out quite yet. But you're right to assume that the majority of the revenue will fall in our fiscal '25. And just a point, the 2.6 you mentioned, that's the estimate for the total recurring revenue, including the software license.

Speaker 5: OK, gotcha. Thank you. And maybe just a follow-up then, the core business in North America had been slowed a little bit just in terms of budgetary concerns out there. I know this is not necessarily the intent of this call, but I'm wondering if you could give us a quick update in terms of how you're seeing some of the additional pipeline thaw going on and the conversion of that pipeline as we get into fiscal '24.

Speaker 2: Hey, Scott, we're going to take care of that tomorrow. Obviously, our conference call is scheduled for tomorrow afternoon at 4:30 Eastern. I look forward to speaking with you all about that in our financial guidance. This morning's call, as you rightly pointed out, is to discuss this very momentous award, and we'll get into the broader financial outlook tomorrow.

Speaker 5: Fair enough. Just jumping the gun a little bit. Congrats again, and look forward to the call tomorrow.

Speaker 1: We have no further questions at this time. I'll turn the floor back over to Brian Alger for closing remarks. Brian.

Speaker 2: Great. Thank you, everyone. Appreciate you calling in this morning. A replay of today's call will be available on the website here shortly, and we look forward to speaking with everyone tomorrow afternoon. Thanks again.

Speaker 1: Thank you. Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation. You may disconnect your lines at this time, and have a great day.