Genasys Inc. Q2 FY2026 earnings call

• Overall Business Milestone: Q2 2026 marked a key inflection point for Genesis, with the company delivering GAAP net income profitability and strong gross margins after several years of foundational strategic investment. Operational rightsizing and disciplined cost management have left the organization well-positioned for scalable growth. The company achieved GAAP operating net income of $1.3 million (compared to a $6.3 million operating loss YoY), adjusted EBITDA of $2.5 million (compared to a negative $5.1 million YoY), and GAAP net income of $600,000 (compared to a $6.1 million net loss YoY).
• Large Project Execution: The Puerto Rico dam early warning system project is on schedule, with groups 3, 5, and 6 completed, and group 1 on track to finish in June 2026. All technical risks for the project have been retired. As of the call, $13 million in receivables is outstanding from the project, with $1.8 million received in the week prior to the call.
• Product & Market Traction: Software offerings (Evertel and Genesis Protect) see sustained inbound demand from public sector and enterprise customers prioritizing secure, compliant communication. Genesis Protect, which combines mass notification with situational awareness and mapping, continues to displace legacy emergency warning systems, with recent new customer wins expanding geographic footprint. For hardware, LRAD non-lethal security products see growing demand across defense, energy, and critical infrastructure. A large U.S. utility recently installed 4 LRAD 950 NXTs at a critical substation, with 26 additional units expected to be ordered for this customer. The $9 million CROWS AHD Technology Refresh Program, which modernizes an installed base of 5,000 CROWS units (representing a $175 million total addressable market), began production in Q2. Total end-of-quarter backlog was $58 million, reflecting strong execution and ongoing replenishment from new bookings.
• Balance Sheet Update: The company ended the quarter with $1 million in cash, cash equivalents, and marketable securities. A 60-day extension for term loan repayment to July 13, 2026 was granted, aligned to expected timing of Puerto Rico project receivable collection. The company confirms it has ample cash for ongoing daily operations.

Total company revenue for Q2 fiscal 2026 was $15.5 million, representing a 124% year-over-year increase.

• Hardware segment: Total hardware revenue grew 180% year-over-year. The $10.3 million Puerto Rico early warning system project alone made up 66.45% of total Q2 revenue, with additional hardware revenue coming from other customers across defense, energy, and utility end markets. The $9 million CROWS AHD Technology Refresh Program production began in Q2.
• Software segment: Total software revenue increased 6% year-over-year to $2.4 million, and rose 5% sequentially from the prior quarter. Software contributed 15.48% of total Q2 revenue.

• Full fiscal 2026 is expected to deliver record total revenue, with meaningful year-over-year revenue growth.
• Annualized gross margins are expected to exceed 50%, with quarterly gross margin levels affected by product mix.
• Management expects to achieve full-year operating income and GAAP net income profitability.
• Q3 2026 total revenue is expected to be higher than Q2 2026, while Q4 2026 revenue is expected to be slightly lower than Q3.
• Operating expenses are expected to normalize around the Q2 2026 level of $8.5 million, as the company is already rightsized for current and future growth.
• Additional CROWS production orders are expected in the second half of fiscal 2026, with the initial order to be completed by the end of the fiscal year. Large pipeline software and hardware opportunities are expected to close in the second half of 2026.

• Outstanding Puerto Rico project receivable payments have been slower than originally expected, which required a 60-day extension of debt maturity. While management remains confident full collection will occur before the extended maturity date, delayed collection creates near-term liquidity risk.
• Large competitive pipeline opportunities (comparable in size to the Puerto Rico project) are still in the award process, and there is no guarantee of winning these bids.
• Quarterly gross margin results are dependent on product mix, creating variability in sequential margin performance.

Q: Scott Searle at Roth Capital Partners asked for quantification of CROWS shipments in Q2, expectations for CROWS in H2, an update on large pipeline opportunities comparable in size to the Puerto Rico project, expected gross margins for H2, and sequential expectations for Q3 and Q4 revenue. / A: CROWS production began in Q2, with most deliveries scheduled for Q3 and Q4. A large, competitive international opportunity comparable to the Puerto Rico project is in the final award stage, with an announcement expected in the coming days. Gross margins will continue to depend on product mix; the Puerto Rico project recognizes all margin after hardware delivery, creating variable quarterly results. Sequentially, Q3 revenue will be higher than Q2, and Q4 revenue will be slightly lower than Q3.

Q: Jason Smith at Lake Street Capital Markets asked for context on five new California Genesis Protect wins, current sales cycle trends for software, and the current size of the energy and utilities end market for the company. / A: The five California wins are repeat customers from Santa Clara County, where individual communities now purchase their own licenses after the county stopped providing centralized coverage. Larger software deals have longer sales cycles, but management expects multiple large deals to close in H2. The energy and utilities sector is currently a small portion of business; the recent large U.S. utility order referenced in prepared remarks was $2 million, with substantially more additional business expected from that customer.

Q: Ed Wu at Ascendient asked if management has observed any changes to the competitive landscape for the company's bids across segments. / A: Management reported no meaningful changes to the competitive landscape. Large system projects like Puerto Rico typically attract construction company competitors, which positions Genesis well. LRAD hardware has very limited competition, and both Genesis Protect and Evertel are unique, differentiated offerings with strong market positioning.