Genasys GNSS Q2 2026 Earnings Call Transcript

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DATE

Thursday, May 14, 2026 at 4:30 p.m. ET

CALL PARTICIPANTS

• Chief Executive Officer — Richard S. Danforth
• Chief Financial Officer — Cassandra Hernandez-Monteon

TAKEAWAYS

• Total Revenue -- $15.5 million, representing a 124% year-over-year increase, with $10.3 million attributed to the Puerto Rico Dam early warning system project.
• Gross Margin -- 63.3%, driven by product mix, revenue recognition from the Puerto Rico project, and increased software sales.
• Hardware Revenue -- Rose approximately 180% year over year, primarily due to sales from the Puerto Rico project.
• Software Revenue -- $2.4 million, a 6% year-over-year increase and sequential growth of approximately 5% from the prior quarter.
• Operating Expenses -- $8.5 million, down 4% year over year and flat sequentially, with management expecting this level to persist as "the organization is right sized."
• GAAP Net Income -- $600,000, a shift from a $6.1 million net loss in the prior-year period.
• Adjusted EBITDA -- $2.5 million, compared to negative $5.1 million in the same quarter last year.
• Backlog -- Ended the period at $58 million, supported by new bookings and ongoing execution.
• Cash and Marketable Securities -- $1 million as of quarter-end, with management expressing confidence in near-term receivables collection to support operations and debt repayment.
• Debt Maturity Extension -- 60-day extension filed, moving the term loan maturity date to July 13, 2026, attributed by management to timing of expected receivables rather than operational performance.
• Puerto Rico Receivable Status -- $1.8 million received last week with the remaining balances expected soon; receivables from Puerto Rico are intended to retire company debt.
• CROWS AHD Technology Refresh Program -- $9 million initial order in production, with an addressable installed base of ~5,000 CROWS units and potential for $175 million in future program orders.
• Hardware Order Highlight -- Completion of an LRAD 950 NXT installation at a critical U.S. utility substation, with expectations for 26 additional unit orders for the same utility.
• Software Sales Activity -- Five recent sales in Santa Clara County represent repurchases by existing customers after the county stopped providing Genasys Protect centrally, indicating repeat business rather than new client wins.
• Operating Income -- $1.3 million on a GAAP basis, compared to an operating loss of $6.3 million in the previous year.
• Gross Margin Outlook -- Management expects annualized gross margins to remain above 50%.
• Revenue Outlook -- Management expects Q3 revenue to be higher than Q2, with a possible decline in Q4.
• Sales Pipeline Status -- Management references a strong pipeline, including a "final stage" competitive international opportunity and expectation for several late-stage opportunities to close in the second half.
• Competitive Landscape -- Management indicates no significant new competition for major bids and describes key offerings (LRAD, Genasys Protect, Evertel) as "unique and differentiated" in their respective markets.

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RISKS

• Management disclosed repayment of debt depends on collection of Puerto Rico project receivables, which have been slower than expected and required a 60-day extension; "the underlying business continues to demonstrate improving profitability" but receipt of funds is not yet complete.

SUMMARY

The call revealed Genasys Inc. (NASDAQ:GNSS) returned to GAAP net income profitability, supported by a 63.3% gross margin and a 124% increase in total revenue. The sizable contribution of the Puerto Rico project notably boosted both hardware sales and margins, while software revenues also expanded. Operating expenses declined by 4%, and cash management remains tied to outstanding Puerto Rico receivables whose collection will enable debt retirement before the newly extended maturity. The backlog growth and execution of new production programs, such as the CROWS AHD refresh, suggest management is prioritizing longer-term contracts and recurring software revenues.

• CEO Richard S. Danforth stated, "The foundation is in place, and we look forward to delivering what we believe will be a strong second half of the company," highlighting an emphasis on sustained growth.
• Management signaled confidence in ongoing hardware pipeline development, specifically referencing an upcoming order for 26 LRAD 950 NXTs at a critical utility, and further CROWS program activity in the second half.
• Five reported 'new' software sales in Santa Clara County were clarified as repeat purchases from current customers, not incremental client wins, due to changes in county procurement practices.
• The extension of loan maturity was framed by management as a timing issue related to payments from Puerto Rico, and not a reflection of company performance.
• Management expects at least one international, Puerto Rico–scale contract is in the "final stage" of award consideration, with results anticipated in "the coming days."

INDUSTRY GLOSSARY

• LRAD: Long Range Acoustic Device, a proprietary non-lethal hardware system used for mass notification and security communication.
• CROWS: Common Remotely Operated Weapon Station, a remote weapon system platform on U.S. military vehicles, targeted by Genasys for technology refresh contracts.
• Genasys Protect: The company’s software solution for mass notification, situational awareness, and emergency communication.
• Evertel: A secure communications and collaboration software platform, positioned by Genasys for first responders and enterprise users.

Full Conference Call Transcript

Clay Liolios: Good afternoon, everyone. Thank you for participating in today's conference call. To discuss Genasys, Inc. Fiscal Second Quarter 2026 Results ended 03/31/2026. Joining us on today's call are the company's Chief Executive Officer, Richard S. Danforth and chief financial officer, Cassandra Hernandez-Monteon. Before we begin, let me remind everyone of the company's safe harbor disclaimer. Certain portions of our comments today will concern future expectations, plans and prospects of the company that constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 2 thousand.

Forward looking statements include all statements containing verbs such as aims, anticipates, estimates, expects, believes, intends, plans, predicts, will, may, continue, projects, or targets, and negatives of these words and similar words or expressions. Forward looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those indicated by the forward looking statements. Factors that could affect our results include among others, those that are discussed under the heading Risk Factors in our most recently filed reports with the SEC. Including our annual report on Form 10-K, our quarterly reports on Form 10-Q, and our current reports on Form 8-K.

In addition, this call includes discussions of certain non GAAP financial measures, including adjusted EBITDA. The most directly comparable GAAP measures and reconciliations for non GAAP measures are available in the earnings release and other documents posted on the company's website under Investor Relations. A replay of the webcast will be available approximately 4 hours after the presentation through the conference call link on the Events and Presentations page of the company's website. With that, I would like to turn the call over to Genasys CEO, Richard S. Danforth.

Richard S. Danforth: Thank you, Clay, and thank you all for joining us today. Before we get into our second quarter, as some of you have probably seen, we filed an 8-K today announcing a 60-day extension for the repayment of our debt. Currently, we are owed $13 million related to the Puerto Rico project. While payments from Puerto Rico have been slower than expected, we remain confident that the outstanding receivables will be collected. Over the past month, I personally traveled to Puerto Rico. and met with our partners and had productive discussions regarding the project and payment process. In fact, we received payment of $1.8 million last week and anticipate receiving the remaining balances shortly.

The receivables from the Puerto Rico project are expected to be used to retire our debt. Now let's move on to our strong second quarter. This quarter represented a meaningful inflection point for Genasys. We delivered GAAP net income profitability and strong gross margins reflecting the impact of disciplined execution, operational rightsizing, and improved sales execution across the organization. Equally important, these results demonstrate that the foundational work completed over the past few years is translating into a more durable and scalable business. Genasys is operationally sound, financially disciplined, and positioned to grow across both our software and hardware platforms.

On the software side, demand for our solution continued to expand as states, counties, and enterprise prioritize reliable, compliant, and secure communication. We are seeing sustained inbound interest across both Evertel and Genasys Protect. With pipeline growth supported by recent wins in new geographies. These wins validate our value proposition and create long term opportunities for expansion within those customers. Genesys Protect continues to displace legacy emergency warning systems by combining mass notification with integrated situational awareness and mapping. This capability differentiates us in the market and allows operators to deliver highly targeted time efficient alerts during critical events. Our hardware business is also delivering a strong performance this quarter.

Supported by global demand and increasing focus on critical infrastructure protection. We continue to engage with customers across defense energy and utilities where LRI products provide a proven, non-lethal layer of security. As investments in infrastructure and capacity expansion accelerates, we see this as a multiyear tailwind. The everyday demand for our hardware combined with the rising global military budgets and the accelerating AI infrastructure build out continues to generate steady tailwinds for our hardware business. The data center and energy infrastructure expansion currently underway across the United States is a great example. We recently completed the installation of 4 LRAD 950 NXTs on a critical substation for a large US utility.

This was the first substation of many that will be equipped with LRAD 950 NXTs. We expect to receive orders for 26 additional NXTs for this very utility. Now let's take a deeper look at the second quarter and some updates on key initiatives projects and opportunities. In the second quarter, we delivered $15.5 million in revenue underscored by a 63.3% gross margin. $10.3 million was associated with the Puerto Rico Dam early warning system project. Puerto Rico project is on schedule. We have successfully completed group 3, 5, and 6 with group 1 on pace to finish in June. As mentioned, all technical risks associated with the project have been retired.

And the focus remains on executing the remaining groups. Success in Puerto Rico is a testament to our entire team, and reflects Genasys' ability to execute complex large scale, multiyear projects. We also began production under the $9 million CROWS AHD technology refresh program and expect to complete that initial order within this fiscal year. This program represents a meaningful long term opportunity given the installed base requiring monetization. With ~5 thousand CROWS units in need of this technology refitting, the addressable market for this program could be $175 million. We expect to receive additional production orders in the second half of this fiscal year.

Backlog ended Q2 at $58 million reflecting both strong execution and continued replenishment from new bookings. Overall, we are encouraged by the momentum across the business and the expanding scope of our opportunities ahead. With that, I will turn the call over to Cassandra for a review of the financial results. Cassandra?

Cassandra Hernandez-Monteon: Thank you, Richard. Now for the second quarter results. In the 2026, Genasys generated $15.5 million in revenue, up 124% year over year. Hardware revenue grew roughly 180% from the year-ago period. This included $10.3 million in contribution from the Puerto Rico project. The total software revenue increased 6% to $2.4 million compared to the year ago period. Sequentially, the software revenue increased approximately 5%. The remaining revenue was associated with hardware orders across a multitude of customers. Gross profit margin increased significantly to 63.3%. This improvement is due to several factors, including product mix, recognition, of revenue associated with the Puerto Rico project, and the increase of software sales.

Looking ahead, we expect to deliver gross margins over 50% on an annualized basis. Operating expenses for the quarter were $8.5 million, a 4% decrease from 2025 and remained flat sequentially. We expect operating expenses to normalize around this level as the organization is right sized and well equipped to execute on our projects and further scale. On a GAAP basis, operating net income was $1.3 million compared to an operating loss of $6.3 million in the prior year period. Adjusted EBITDA, which include excludes noncash stock compensation, was $2.5 million compared to a negative $5.1 million in the year ago period. The increase was driven by revenue and gross margin improvements.

GAAP net income in the second quarter was $600 thousand compared to a GAAP net loss of $6.1 million in the 2025. To echo Richard, returning to net income profitability is a significant milestone that reflects on the disciplined execution and structural improvement that the company has undergone over the past few years. We are well positioned to build durability from here. Now to the balance sheet. We ended 03/31/2026 with $1 million in cash, cash equivalents, and marketable securities. As Richard mentioned, our term loan maturity was extended to the date of 07/13/2026. This was a step to better align the maturity with our current expected cash receipts. That have been earned and are due to Genasys.

The company is confident that they will receive the receivables before the extended maturity date and has ample cash for the day to day operations. Overall, the second quarter marked a clear inflection point for Genasys. Revenue was strong across both hardware and software products, and 63% gross margin reflects the disciplined pricing favorable product mix, and operating leverage. We have been building towards over the past several quarters. Beyond the headline results, the business continues to improve with increased visibility, from backlog and a going contribution from reoccurring software revenue. While near term performance remains driven by our Puerto Rico program.

We are continuing to build pipeline across both hardware and software, with several meaningful opportunities advancing through late stage discussions and expect to support continued growth as they convert. Importantly, the extension of the debt maturity reflects timing. Not performance as the underlying business continues to demonstrate improving profitability and increasing visibility into cash generation. With that, Richard, back to you.

Richard S. Danforth: In summary, this was a pivotal quarter for Genasys. We delivered net income profitability achieved significant gross margins and remained on pace for a record revenue in fiscal 26. These results validate the strategic investment we have made and demonstrate our ability to capture and execute on the opportunities that are in the protective communication space. Perhaps even more exciting than the quarter itself is the depth of the opportunities that we continue to see across all of our business lines. From LRADS to Evertel, our pipeline has never been stronger, and we are engaging with customers from all over the world.

Looking ahead, we remain confident in our ability to deliver a meaningful year over year revenue growth while expanding annualized gross margins over 50%. Also expect to achieve both operating income and GAAP net income profitability for the year. The second half of the year is shaping up to be a defining stretch for Genasys. With a right sized organization and a leadership team aligned around our growth priorities, we are entering this period from a position of operational strength. Our pipeline continues to expand across our hardware and software segments, reflecting the growing global demand for integrated protective communication solutions and validating the strategic investments we have made over the past several years.

We believe Genasys is uniquely positioned to capitalize on this momentum. Our life saving software platforms, combined with the depth of our hardware portfolio, and the scale of our customer relationships give Genasys a differentiated value proposition. As we execute against our pipeline in the coming quarters, we expect to convert these opportunities into sustained growth continued financial improvement and meaningful long term value for our shareholders. The foundation is in place, and we look forward to delivering what we believe will be a strong second half of the company. Before moving to Q&A, I would like to take a moment to thank all of our employees, partners, customers and shareholders. For your support and trust.

With that, we would like to open up the call for Q&A. Operator?

Operator: Thank you. To pose a question over the phones at this time, simply press Our first question today will come from the line of Scott Wallace Searle at ROTH Capital Partners. Please go ahead.

Analyst (Scott Searle): Hey, good afternoon. Thanks for taking the questions, and congrats on achieving profitability in the quarter, Richard.

Richard S. Danforth: Thank you.

Analyst (Scott Searle): Maybe just to dive in, start with Crows. You had some shipments this quarter. Wondering if you could quantify that for us and what you are expecting over the second half of the year. And then there have been some larger opportunities, I think, within the pipeline that were sizable, some comparable to PREPA types of opportunities. I am wondering if you could kind of walk through what is in the pipeline right now and the timing associated with some of those larger potential opportunities.

Richard S. Danforth: Sure. The first question relative to CROWS, Q2 deliveries will happen--are expected to happen largely in Q3 and Q4. The larger Puerto Rico like opportunities, 1's at the final stage from a an award perspective. it is competitive. it is international. We expect to hear on that within the coming days. Very helpful.

Analyst (Scott Searle): And if I could just real quickly on the gross margins was a record quarter. I believe. Looking forward to the second half of this year, I know that is related to some mix issues and some software as well. But what should we be expecting over the course of the third and fourth quarter? And then as part of that, sequentially from a top line perspective, how should we be thinking about the June and September quarters? Thanks. First on gross margins, our current gross margin for the first 2 quarters is 55.3%.

Richard S. Danforth: Scott, as I think I have mentioned to you in the past, I think mix has a lot to do with it. Puerto Rico as you know, the hardware, when it leaves this building, goes out with zero margin. So as we complete the dams, we collect all that margin with no cost associated with it. So it is really going to be mix. I would not move too much further than where you are right now. We will see how Q3 goes.

Analyst (Scott Searle): And just the sequential cadence of the top line, how we should be thinking about that in June and September?

Richard S. Danforth: I think Q3 will probably be higher than Q2 from a revenue perspective. And then maybe a little lower in Q4. Great. Thanks so much. You are welcome.

Operator: Our next question will come from Jason Smith at Lake Street Capital Markets. Hey, guys. Thanks for taking my questions. You called out 5 new wins in California.

Analyst (Jason Smith): Just curious how we should think about the sales cycle that you had with each of those geographies and just to try and get a sense of what you are seeing from a sales cycle perspective overall today.

Richard S. Danforth: Yeah, Jason, a little bit of background. The 5 new wins they all reflect coming out of Santa Clara County. Santa Clara County provided the Genasys Protect software to all of the communities inside the county. They stopped doing that, and each county has come back to us to buy their own Genasys Protect. So, yeah, 5 of those are all those 5 are all in Santa Clara County. So they are not new customers, but they are repeat customers. Understood.

Analyst (Jason Smith): And what are you seeing from a sales cycle just across the total business in the software portion?

Richard S. Danforth: The pipeline is very good. Our sales folks are focusing on the larger deals because those can really move the needle a lot. The larger the deal, the longer the sales cycle. But I believe we will see you know, see some closure on those in our second half. Gotcha.

Analyst (Jason Smith): And then just going back to your prepared remarks around sort of the energy and utilities markets and are seeing some traction there. How big of a piece of the pie are those sectors today?

Richard S. Danforth: Relatively small. So the utility I mentioned, that booking, that revenue was probably ~$2 million. And if you do the math, the balance of what we expect to book from that same utility would be substantially higher than that. Alright. Perfect. Thanks a lot, guys. You are welcome.

Operator: And next, we will hear from Edward Moon Woo at Ascendant.

Analyst (Ed Woo): Yeah. Congratulations on all the progress. My question is on the competitive landscape. Have you noticed any change or new competitors against you guys for these bids?

Richard S. Danforth: No, Edward. I do not. From a system perspective, you know, like Puerto Rico, it is typically has been a construction company. Which puts us in a good competitive position, of course. On an LRAD perspective, there is not much at all. And then from a Genesys Protect perspective, it is a unique offering. And then from an Evertel perspective, that is also a unique and differentiated offering. So I think we are in a good position from where we placed our products in the market.

Analyst (Ed Woo): Great. Well, glad to hear that, and I wish you guys good luck.

Richard S. Danforth: Thank you. Thank you, Ed.

Operator: And presently, we have no further signals from our audience Mr. Danforth, I will turn it back to you, sir, for any additional or closing remarks that you have.

Richard S. Danforth: No, I think I have done the closing remarks already. Jim.

Operator: All right. Very good. Ladies and gentlemen, this does conclude today's Inc. Fiscal second quarter conference call. We thank you all for your participation. You may now disconnect.

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