Genasys Inc. Q2 FY2025 earnings call

• PR Project: Design, planning, and procurement for the Puerto Rico project have been progressing well. Implementation and installation work on the first of 19 dams has started. The third group of dams has designs approved, but the down payment hasn't been received yet. Design work for groups 4 - 7 will continue. - Software Business: The Genasys Protect platform was resilient and effective during the LA fires. The pipeline for EVAC has increased over 100% since fiscal 2025 start. CONNECT software is gaining traction with larger organizations. After the LA fire incident, safeguards were implemented in software within 48 hours. - CROWS Program: Expect to receive initial production order this fiscal year, with the potential for significant long-term impact on the LRAD business.

In the second fiscal quarter of 2025, Genasys' hardware revenues grew slightly sequentially and were up 17% year-over-year. Total software revenue for the quarter grew 29% year-over-year but decreased 3% sequentially ($64,000) due to some customers not renewing expiring agreements. Hardware contributed a portion of total revenue, and software's total revenue had a year-over-year increase but a sequential decrease.

• Third quarter revenues are expected to recognize additional initial shipments of materials to Puerto Rico and improved other LRAD orders. - For the Puerto Rico project, percentage of completion accounting means cash will precede revenue and profit recognition initially, with gross margins compressing then accelerating as installation progresses. - The 12 - month backlog stands at $50 million, including ARR of $8.6 million.

• Delay in receiving the down payment for the third group of dams in Puerto Rico, though assured by the customer. - Software business is dependent on federal grants, and uncertainty exists due to federal budget issues. - Network connectivity issues during crises as seen in the LA fire incident, although safeguards were implemented post - incident.

Q: Scott Searle inquired about rev - rec on the PR project, progress on groups 4 - 7, the impact of federal budgets on the opportunity pipeline, the CROWS opportunity, and non - traditional markets.

A: Dennis Klahn explained the rev - rec theory on the PR project. Richard Danforth stated that the third group of dams is approved with designs signed off but waiting for the deposit, and design work for groups 4 - 7 will start soon. Richard Danforth mentioned that software opportunities are varied and often dependent on grants, confirmed the CROWS opportunity's potential, and noted non - traditional markets are driven by software.

Q: Mike Latimore asked about PR project supply progress, revenue recognition in the third and fourth quarters, and EBITDA/cash flow expectation.

A: Richard Danforth said 100% materials for the first three groups of PR dams are received or on order. Dennis Klahn explained that in the third quarter, with installation costs and hours expended, margins will start to improve, and in the fourth quarter, similar revenue recognition dynamics will apply. Dennis Klahn confirmed EBITDA and cash flow expectation remains unchanged.

Q: Edward Woo asked about international opportunities' lead times due to federal budgets.

A: Richard Danforth responded that international opportunities usually take longer inherently, but there's no additional increased time to close due to federal budgets.