Genasys Backlog Hits 61 Million in Q3

Genasys (NASDAQ:GNSS) reported fiscal 3Q2025 results on August 14, 2025, with revenues rising 38% year over year to $9.9 million (GAAP) on strong contributions from Puerto Rico. Hardware sales drove growth. Gross margins fell to 26.3% due to an unfavorable mix, and management announced $2.5 million in annualized cost reductions as part of a targeted restructuring set to begin in FY2026. This summary highlights key developments in backlog, project execution, and product evolution shaping the investment outlook.

Genasys grows backlog with Puerto Rico project progress

The twelve-month backlog reached $61 million at the end of Q3 FY2025, not including annual recurring revenue (ARR) gains from new multi-year Puerto Rico contracts or the anticipated U.S. Army CROWS program. International and domestic acoustic hailing device (LRAD) orders are rebounding, positioning the company for sustained pipeline growth.

"International and domestic LRAD bookings continue to rebound, resulting in a growing twelve-month backlog of business that for Genasys as a whole amounted to more than $60 million at the end of June. As you are aware, after invoicing the customer in March, we received a partial payment for the deposit on the third group of dams in Puerto Rico in May. The remaining portion has finally been transferred today. We believe the root cause of the payment delays has been identified and resolved, and future payments are now expected to be made in a timely manner similar to the first two groups' deposits."
-- Richard Danforth, CEO

Backlog momentum and resolution of Puerto Rico payment bottlenecks reduce execution risk and support near-term revenue visibility across both hardware and software segments.

Genasys targets margin improvement after transitory Q3 pressure

Hardware revenues grew approximately 50% year over year, but overall company gross margin fell significantly as initial Puerto Rico project work recognized a lower proportion of profits under percentage-of-completion accounting. Additionally, increased tariff expenses and a less favorable product mix contributed to margin compression.

"Profit margins for June came in at 26.3%, which is lower than both the prior year and the previous quarter. This decline is primarily due to the percentage of completion accounting to our initial revenues from Puerto Rico, a less favorable hardware mix, and higher tariff costs on certain imported components. As mentioned earlier in today's earnings release, we expect gross margins to improve as the Puerto Rico project progresses, owing to the delayed recognition of profits under the percentage of completion method."
-- Cassandra Montion, Interim CFO

Investors should expect margin normalization and potential operating leverage as the Puerto Rico project advances along the revenue recognition curve through FY2025 and beyond.

Software pipeline diversifies eastward; precision alerts drive demand

Though overall software bookings were soft this quarter due to delayed federal and state funding for public safety, the company’s Genasys Protect platform now integrates advanced flood modeling and has seen more than 25% of software pipeline additions over the past twelve months from regions east of the Rocky Mountains. The partnership with FloodMap broadened product relevance in high-profile U.S. flood zones, contributing to rising interest in market segments historically underpenetrated by Genasys.

"We have teamed with a company named FloodMap, and we have their flood prediction models on our Genasys Protect platform. Simply put, we can look at the current weather, forecasted weather, and forecast when a river will go over or when a dam might breach. And then be able to draw a geo-live geographic representation of where that water will go and get messages to everybody that might be in harm's way. So that's gotten traction on the East Coast. It's gotten traction in a lot of areas, particularly we're seeing with the floods in North Carolina and in Texas."
-- Richard Danforth, CEO

Expanding product functionality and regional reach within Genasys Protect positions the company to capture new emergency management contracts as disaster risk and public sector resilience investments increase nationwide.

Looking Ahead

Management guides for a substantial sequential increase in both revenue and gross margin for Q4 FY2025, driven by Puerto Rico delivery milestones, with full-year Puerto Rico revenues projected between $15 million and $20 million. Operating expenses are expected to remain stable at current levels, while the $61 million twelve-month backlog and $8.7 million software ARR as of June 2025 provide a strong foundation for FY2026 momentum. No specific quantitative guidance was provided regarding CROWS timing or federal funding recovery for public safety software bookings in the near term.

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This article was created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.