LRAD Corporation Aktie

Ladies and gentlemen, thank you for standing by. My name is Krista, and I will be your conference operator today. At this time, I would like to welcome everyone to Genasys Third Quarter 2026 Conference Call. I would now like to turn the conference over to [ Clay Lielos ], Investor Relations. Please go ahead.

Good afternoon, everyone. Thank you for participating in today's conference call to discuss Genasys Inc.'s fiscal third quarter 2026 results ended June 30, 2026. Joining us on today's call are the company's Chief Executive Officer, Richard Danforth; and Chief Financial Officer, [ Cassandra Montion ].

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 1995. 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 actual 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 measure 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 made 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 Danforth.

Thank you, [ Clay ], and welcome, everyone. Revenue for the fiscal third quarter was $7.3 million compared to $9.9 million in the prior year period. The decrease was driven by 2 timing-related factors. The first was the supply chain constraint associated with the CROWS program. The constraint has now been resolved. Production on this initial $9 million order is underway, and we expect to complete delivery within the fiscal year. Importantly, this was a timing issue rather than a demand issue.

The second factor was a deliberate pause in our work in Puerto Rico. We elected to suspend work until customer payments resumed. Following quarter end, collections began flowing again, and we have since remobilized project activities on the island. Even with the temporary pause, we expect the work scheduled for the fiscal year to remain unchanged. With both of these timing factors now moving in the right direction and with gross margins remaining above 50%, we continue to expect fiscal 2026 to be a record year for both revenue and profitability.

Staying on the top line, we are seeing meaningful progress in growing demand for our software offerings. Recent wins include a large multiyear Genasys Protect contract with Ada County, Idaho, home to more than 550,000 residents and over 3 million annual visitors. Ada County is the second Idaho county to replace its incumbent emergency alert provider with our platform. That displacement trend is encouraging. Agencies are moving away from legacy providers because Genasys delivers better outcomes when it really matters.

We also continued to expand our platform. In June, we announced a partnership with Intterra and CAL FIRE to connect the CAL FIRE Aware platform and Genasys Protect. This connection gives the public another trusted source for real-time emergency updates. Now any alert issued through Genasys Protect instantly spreads across the state. Separately, we integrated Genasys Evertel with the public safety data and analytics platform called Peregrine. They are a leading crime data and intelligence software used by real-time crime centers and fusion centers today.

This was tested and verified by the Vacaville, California Police Department, pushing real-time crime center intelligence directly to officers in the field rather than through manual distribution. It is worth noting that there are approximately 80 fusion centers and 800 real-time crime centers across the U.S. Integrations like these accomplish 2 important objectives. They extend the reach of our software into the platform agencies already rely on every day, and they make Genasys Protect increasingly difficult to displace once it becomes embedded in mission-critical workflows.

We are seeing steadily increasing interest from strategic partners looking to build similar connections, and we expect that to be a durable contributor to our software growth. Earlier this week, we announced a software milestone we are especially proud of. Genasys Protect now covers approximately 15% of the U.S. population and 20% of the country's land area, making it the nation's leading platform for zone-based emergency alerting, evacuation management and secure real-time communication. That level of adoption is a testament to our technology and its ability to help keep people safe and save lives.

While we are proud of this milestone, we believe there remains substantial opportunity to expand our footprint across the rest of the country. On the hardware side, momentum continues to build, particularly in critical infrastructure. Over the past several months, we have seen a steadily expanding pipeline for our LRAD 950NXT systems as a security layer for unmanned sites such as electrical substations, dams, ports and data centers. Last week, we announced a $2.4 million critical infrastructure protection order from one of the largest utilities in the United States.

The order expands a deployment that began with a single substation installation and was followed by a $2 million order. This is a customer that continues to expand its deployment as it sees the systems perform. The 950NXTs are integrated with the substation's physical security infrastructure and multisensor perimeter intrusion detection systems. They address a full range of physical security requirements to detect, assess, communicate, respond, delay and deter threats. In short, they transform passive monitoring into immediate intervention.

Critical infrastructure remains one of our strongest growth opportunities. The pipeline continues to build, and we expect the market to be a meaningful driver of our hardware growth going forward. At the same time, our long-standing defense and security customers remain active. The U.S. Army continues to be an important partner, and demand from international navies and defense agencies continues to strengthen as governments increase spending on force protection, maritime security and critical infrastructure resilience.

Overall, our pipeline continues to grow across both hardware and software, and our focus remains on converting those opportunities into signed contracts and recognized revenue. Turning to the balance sheet. In July, we extended the maturity of our term loan, providing additional working capital flexibility and reducing our dependence on the timing of payments from any single customer. We view our lenders' willingness to extend the facility as further validation of the strength of our backlog, the opportunities within our pipeline and our long-term outlook.

Overall, the fiscal third quarter was affected by timing, not by any change in underlying demand. Our backlog remains strong. Our pipeline continues to grow, and the factors that delayed revenue recognition during the quarter are now being resolved. We entered the fourth quarter with improved operating leverage, greater financial flexibility and a strong visibility into the work ahead. As a result, we remain confident in delivering a record year of revenue and profitability. With that, I'll turn the call over to [ Cassandra ].

Thank you, Richard, and thank you, everyone, for joining for third quarter results. In the third quarter of fiscal 2026, Genasys generated $7.3 million in revenue. This included only $1.3 million in contribution from the Puerto Rico project due to our deliberate decision to halt work on the island until customer payment resumes. As Richard mentioned, collections restarted after quarter end, and we have begun remobilizing activities. We expect Puerto Rico to be a meaningful contributor to the fourth quarter revenue as project activities continue to ramp through the remainder of our fiscal year.

Total software revenue for fiscal third quarter was $2.7 million, representing a 21% increase year-over-year and a 12% increase sequentially. During the quarter, we generated approximately $2.5 million in software bookings, including both new customer wins and contract renewals. We exited the quarter with 12-month backlog of approximately $69 million compared to $58.2 million at the end of the second quarter. While the increase reflects both continued order activity and the timing of certain programs, the backlog provides meaningful revenue visibility and supports our view that the third quarter revenue shortfall was primarily a timing issue rather than a reduction in customer demand.

Gross profit margin in the quarter was 57.1% compared to 26.3% in the fiscal third quarter of 2025. This improvement was driven primarily by the revenue mix. The prior year period included a large contribution from the Puerto Rico project, which carried lower margins under the percentage of completion revenue recognition methodology, while the current quarter benefited from higher portions of software revenue. Operating expenses decreased 3.8% to $8.2 million from $8.5 million in the prior year period.

Selling, general and administrative expenses decreased 4.6% to $6.1 million, while research and development expenses decreased 1.2% year-over-year to $2.1 million. These reductions reflect action taken during the quarter to better align spending with the company's cash flow profile and near-term operating priorities. GAAP net loss for the quarter was $4.7 million or a loss of $0.10 per share, basic and diluted, compared with a GAAP net loss of $6.5 million or a negative $0.14 per share in the third quarter of fiscal 2025.

Adjusted EBITDA improved to a loss of $3.1 million from a loss of $4.8 million in the prior year period, primarily reflecting improvement in gross margins and disciplined expense management. Now on to the balance sheet. Cash, cash equivalents and marketable securities totaled $3.1 million as of June 30, 2026, compared to $8 million at September 30, 2025. As Richard mentioned earlier, in July, we completed the third amendment to our term loan and security agreement, extending the maturity date to July 2027 and providing additional financial flexibility as we execute against our backlog and pipeline.

We believe the revised structure is better aligned with the operating cash flow profile of the business and supports execution of our growth strategy. In summary, while a meaningful portion of revenue shifted beyond the third quarter, the underlying business fundamentals remain solid. Gross margins exceeded 57%, 12-month backlog increased to approximately $69 million and collections in Puerto Rico resumed following the quarter end. We also took action during the quarter to better align spending with our cash flow profile while improving financial flexibility through the extension of our term loan. We remain focused on executing against our backlog, generating cash flow and improving flexibility. With that, Richard, back to you.

Thank you, [ Cassandra ]. We sit in a strong position. Our software products are beginning to get the recognition they deserve, and our hardware business is bringing in a steady flow of new orders. The demand environment across both sides of our business are as robust as they have ever been, and the work we have done this year has put us in a position to meet it. With the progress we have made on the balance sheet and the cost structure, we entered the fourth quarter with real momentum.

The term loan extension gives us working capital flexibility and reduces our dependencies on the timing of customer payments. We remain on pace for a record year in both revenue and profitability, backed by our $69 million backlog and pipeline that continues to grow. I want to thank our employees for their work this quarter and our shareholders for their continued support. With that, we'd like to open it up for Q&A. Operator?

Your first question comes from the line of Ed Woo with Ascendiant Capital.

My question is on the Idaho win. You said you displaced legacy systems. Have you seen any big changes out with competition out there? Or do you feel that it's easier that you guys are gaining momentum to be able to displace with more of your other systems and competitors out there?

I think the Ada County is an evacuation customer, and they love it, and they like the simplicity and the intuitiveness of it. And our communication software, alert software is equally the same. So they like the easier use of the platform. And I think when the contract runs out with their existing supplier, not only in Ada, but in counties all across the country, they will switch to Genasys.

And you mentioned, I think you said that was a second county in Idaho to do that. Is it much easier now for you to spread to the rest of the state and obviously other countries state...

Yes. Okay. Ada is the largest county in the state with over 0.5 million people. But yes, so we already cover more people -- most of the people in the state, and our intention is to plan the whole state.

Great. And then my last question is back on the Puerto Rico contract. You mentioned that you had a pause for a little bit, and then we're restarting now as collection is going. Does that impact the overall timing of when you're going to complete the project? And also, does that affect your overall profitability as well?

Second one first. No, it doesn't have anything to do with our profitability in Puerto Rico remains to be very good. And I think you know this, Ed, but we had not scheduled any work on the island for our fiscal fourth quarter when we came into this fiscal year, principally to stay away from hurricane season. So we have now going to be doing work in the fourth quarter in Puerto Rico. There will be some challenges based on weather, I'm sure. But right now, we've begun. And yes, we're going to get as much down on the island as possible in this fourth quarter.

Your next question comes from the line of Luke Fingerson with Lake Street Capital Markets.

Luke Fingerson on for Jason Schmidt here. I was going to start on the collection of payments from Puerto Rico. Just curious kind of how that's progressing and how we should think about the timing of collections.

In the last 4 weeks, Luke, we've collected $2.9 million like every other Friday. And they're paying against specific invoices. So it could be higher or it could be slightly lower, but the important thing is that the cash is finally flowing.

Is that kind of in line with how you expected? Or is it going to accelerate here?

There's a backup for not being paid for so long. So they're working through that backlog. And then as we continue to finish things in Puerto Rico, we will invoice them for that work.

Got you. No, that makes sense. And then kind of with the U.S. Army, you got the utility order and then the Ada County order, I mean, obviously, these opportunities are just kind of flowing in here, a lot of them follow-ons. So as these opportunities continue to develop, many of them being follow-on orders, kind of curious where you see the addressable and serviceable markets of these opportunities in the next few years?

I don't think I've ever put a number out on that, Luke, but it is large. Our bookings in the hardware side of business, non-military will be higher this year than I think it's ever been and will generate about $9 million in revenue off the CROWS program this fiscal year. I mentioned a bit in my remarks regarding CIP market and vertical. That one utility company I referenced bought $4.4 million worth of NXTs this fiscal year.

In last fiscal year, it was about $1 million. So it's over $5 million for utility here in California. And the pipeline on that unit is very robust and growing. My remarks, I told you, not only is the power stations, but it's dams, it's data centers. It's all over the map.

Yes. No, I mean good to hear. Obviously, the market is broad and booming.

I think I've mentioned this in the past, Luke, but we've sold those units to the French Navy, Spanish Navy, Canadian Navy, United States Navy, some mega yachts and in the process of bidding other country's navies.

And that does conclude our question-and-answer session. And ladies and gentlemen, that does conclude today's conference call. Thank you for your participation, and you may disconnect.

Good day, everyone, and thank you all for joining us for today's Genasys Inc. Fiscal Second Quarter 2026 Conference Call. [Operator Instructions]

To get us started with opening remarks and introductions today, it is my pleasure to turn the floor over to External Investor Relations and Representative, Clay Liolios. Welcome, sir.

Good afternoon, everyone. Thank you for participating in today's conference call to discuss Genasys Inc.'s Fiscal Second Quarter 2026 results ended March 31, 2026. Joining us on today's call are the company's Chief Executive Officer, Richard Danforth; and Chief Financial Officer, Cassandra 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 1995. 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 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 approximately $13 million related to the Puerto Rico project. While payments in 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're 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. Genasys 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 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 LRAD products provide a proven nonlethal 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 U.S. utility. This was the first substation of many that will be equipped with LRAD 950 NXTs. We expect to receive orders for 26 additional NXT 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. Out of the $15.5 million, $10.3 million was associated with the Puerto Rico Dams Early Warning System project. The Puerto Rico project is on schedule. We have successfully completed Groups 3, 5 and 6 with Group 1 on pace to finish in June of this year. 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 modernization. With roughly 5,000 CROW 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?

Thank you, Richard. Now for the second quarter results. In the second quarter of fiscal 2026, Genasys generated $15.5 million in revenue, up 124% year-over-year. Hardware revenue grew roughly 180% from a 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 revenues increased roughly 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 the second quarter of 2025 and remaining flat sequentially. We expect operating expenses to normalize around this level as the organization is rightsized 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 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 $600,000 compared to a GAAP net loss of $6.1 million in the second quarter of 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 March 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 July 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 the 63% gross margin reflects the disciplined pricing, favorable product mix and operating leverage we've been building towards over the past several quarters. Beyond the headline results, the business continues to improve with increased visibility from backlog and a growing 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.

Thank you, Cassandra. 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 2026. These results validate the strategic investment we've made and demonstrate our ability to capture and execute on the opportunities that are in the protective communications 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're engaging with customers from all over the world.

Looking ahead, we remain confident in our ability to deliver meaningful year-over-year revenue growth while expanding annualized gross margins over 50%. We 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 rightsized 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 scale of 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 second to thank all of our employees, partners, customers and shareholders for your support and trust.

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

[Operator Instructions] Our first question today will come from the line of Scott Searle at ROTH Capital Partners.

Congrats on achieving profitability in the quarter, Richard. Maybe just to dive in, start with CROWS. You had some shipments this quarter. I'm wondering if you could quantify that for us and what you're 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 wonder if you could kind of walk through what you've got in the pipeline right now and the timing associated with some of those larger potential opportunities?

Sure. The first question relative to CROWS. CROWS, we began the production of that in our Q2. Deliveries will happen largely -- expected to happen largely in Q3 and Q4. The larger Puerto Rico like opportunities, one is at the final stage from an award perspective. It's competitive, it's international. We expect to hear on that within the coming days.

Great. Very helpful. And if I could just real quickly on the gross margins. It was a record quarter, I believe. Looking forward to the second half of this year, I know that's related to some mix issues and some software as well. But what should we be expecting over the course of the third and the fourth quarter? And then as part of that, just sequentially, from a top line perspective, how should we be thinking about the June quarter and the September quarter?

First, on gross margins, our current gross margin for the first 2 quarters equals 55.3%. Scott, as I think I've mentioned 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 0 margin. So as we complete the dams, we collect all that margin with no cost associated with it. So it's really going to be mix. I wouldn't move too much further than where you are right now. We'll see how Q3 goes.

And just the sequential cadence of the top line, how we should be thinking about that in June and September?

I think Q3 will probably be higher than Q2 from a revenue perspective and then maybe a little lower in Q4.

Our next question will come from Jaeson Schmidt at Lake Street Capital Markets.

You called out 5 new wins in California. Just curious how we should think about the sales cycle that you had with each of those geographies. And just trying to get a sense of what you're seeing from a sales cycle perspective overall today.

Yes. Jaeson, the -- 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 5 of those -- those 5 are all in Santa Clara County. So they're not new customers, but they were -- they're repeat customers.

Understood. And what are you seeing from a sales cycle perspective just across the total business in the software portion?

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 some closure on those in our second half.

Got you. And then just going back to your prepared remarks around sort of the energy and utilities markets and seeing some traction there. How big of a piece of the pie is -- are those sectors today?

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.

Next, we'll hear from Ed Woo at Ascendiant.

Congratulations on all the progress. My question is on the competitive landscape. Have you noticed any change or new competitors competing against you guys for these bids?

No, Ed. I don't. From a system perspective, like Puerto Rico, it's typically has been a construction company, which puts us in a good competitive position, of course. From an LRAD perspective, not much at all. And then from a Genasys Protect perspective, it is a unique offering. And then from an Evertel perspective, that's also a unique and differentiated offering. So I think we're in a good position from where we place our products in the market.

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

No, I think I've done the closing remarks already, Jim.

All right. Very good. Ladies and gentlemen, this does conclude today's Genasys Inc. Fiscal Second Quarter Conference Call. We thank you all for your participation. You may now disconnect your lines.

Welcome, everyone, and thank you for joining today's Genasys Inc. Fiscal First Quarter 2026 Conference Call. [Operator Instructions] A reminder, today's session is being recorded.

It is now my pleasure to turn the floor over to External Investor Relations representative, Mr. Clay Liolios. Welcome, sir.

Good afternoon, everyone. Thank you for participating in today's conference call to discuss Genasys Inc.'s Fiscal First Quarter 2026 results ended December 31, 2025. Joining us on today's call are the company's Chief Executive Officer, Richard Danforth; and Chief Financial Officer, Cassandra 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 1995.

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 actual results include, among others, those that are discussed under the heading Risk Factors in our most recent 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 to 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 now like to turn the call over to Genasys' CEO, Richard Danforth. Thank you, Clay, and welcome, everyone.

In the first quarter of fiscal 2026, we built on the strong foundation laid in the back half of fiscal year 2025. We delivered a record quarterly revenue of $17.1 million and executed several key initiatives. The first of these was the appointment of Cassandra Monteon as our full-time Chief Financial Officer.

Cassandra brings 8 years of experience at Genasys, having most recently served as Interim CFO. Before that, as Vice President of Finance, Cassandra strengthens our financial operations, advances strategic initiatives and help navigate the company through significant growth and transformation. Her comprehensive understanding of our business, consistent leadership and dedication to excellence makes her an ideal fit for this position. We're confident she'll continue to provide strong financial stewardship while supporting our long-term vision. Congratulations, Cassandra.

Another significant milestone was the full repayment of our $4 million term loan, which we completed while still maintaining a strong cash position of $10.3 million at the end of the quarter. This action aligns with the objectives we previously communicated and marks meaningful progress in improving our balance sheet and financial flexibility.

Now for an update on our hardware business and the significant momentum we're experiencing. Our LRAD systems continue to gain substantial traction, both domestically and internationally, with growing demand across multiple regions and applications. On the international front, we are seeing increased interest and expanded demand to build across the Middle Eastern and Asian markets throughout the year. The versatility of our LRADs has attracted attention across diverse use cases from crowd management and public safety to border security and critical infrastructure protection.

Recent real-world deployments have generated valuable third-party validation. News coverage of our products performing exactly as intended, such as in Minnesota, where LRADs were used to safely disperse crowds while simultaneously providing clear communication to inform people of the situation. This organic media exposure has been instrumental in accelerating awareness and driving qualified interest from potential customers worldwide.

Our LRAD products are designed with a clear mission to save lives and keep people safe through effective long-range communication. These systems provide authorities with the tool to deescalate potentially dangerous situation, deliver critical emergency information across vast distances and maintain public safety without resorting to physical force.

Moving to software. Interest in our solutions is expanding, supported by engagements across municipalities, states and government entities. In Q2, we are in contracting with 5 cities/counties and 2 federal agencies. Sequentially, our software revenue increased 5%, and our pipeline continues to expand as more prospects recognize our software platform as the leading solution in terms of safety and technical superiority.

While government budget cycles and funding time lines have created some near-term conversion challenges, we remain confident in the trajectory. As these constraints become resolved in the coming months, we expect this momentum to accelerate. We view software as a critical growth vertical and a cornerstone of Genasys future.

Now turning to some of our key projects. In the first quarter of fiscal 2026, we recognized $9.8 million in revenue from Puerto Rico. The project continues to display strong engagement across all stakeholders with the first 2 dam groups completed. The third group, which is the largest with 10 dams, 50 speaker arrays and over 100 sensors is currently under construction with all the equipment on site in Puerto Rico.

Following the receipt of a multimillion-dollar deposit, site surveys and engineering designs have begun for the fourth group of 8 dams located in the mountainous west-central interior. The project remains on track for 2027 completion.

Now turning to the CROWS initiative. As a reminder, in late September, we announced a $9 million production order, representing the first contract for the tech refresh effort under the CROWS-AHD program. This milestone followed the successful 2024 qualification of our LRAD 450XL-RT model for integration with the common remotely operated weapon station system.

The broader program presents significant multiyear revenue potential for Genasys. With roughly 5,000 CROWS units in need of this technological refit and our solutions priced around $35,000, the total addressable market for this program exceeds $175 million. As additional production orders are awarded, this program is positioned to become a substantial revenue stream for the company over the coming years. We continue to expect initial revenue contribution from CROWS-AHD program in the second half of this fiscal year.

Before passing it to Cassandra, I want to briefly touch on our backlog and pipeline. Our 12-month backlog at the end of fiscal Q1 was $58 million. Regarding our pipeline, it has never been stronger as more people become aware of our company and recognize the real value that our products deliver. We're seeing steady pipeline growth. We continue to actively pursue several large-scale projects and remain engaged in the bidding process for these contracts. We're optimistic about the quality and the breadth of opportunities ahead of us and believe we're well positioned to capitalize them as they develop.

Now I'd like to pass the call over to Cassandra for an update on the first quarter financial performance. Cassandra?

Richard, thank you for the kind words earlier, and I am looking forward to working alongside this team and contributing to the company's continued growth.

Now for the first quarter's results. In the first quarter of fiscal 2026, Genasys generated $17.1 million in revenue, up 146% year-over-year. Hardware revenues grew roughly 220% from the year ago period. This included $9.6 million in contribution from the Puerto Rico project.

Total software revenue remained flat at $2.3 million compared to the year ago period. That said, sequentially, software revenues increased roughly 5%, and we continue to see strong long-term potential in our offerings.

Gross profit margins improved 48% or 220 basis points from the year ago period. This improvement is primarily due to product mix. Moving forward, we do expect annualized gross margins to be roughly 50%.

Operating expenses for the quarter were $8.1 million, a 6% decrease from the first quarter of 2025. The decrease in operating expenses was primarily due to the cost reduction initiatives Genasys completed at the end of 2025. On a GAAP basis, operating loss was a negative $0.4 million compared to an operating loss of negative $5.9 million in the prior year. This improvement was primarily due to significant increase in revenue from a year ago period.

Adjusted EBITDA, which excludes noncash stock compensation, was a positive $0.7 million compared to an adjusted EBITDA loss of a negative $4.8 million in the year ago period. GAAP net loss in the first quarter was negative $0.8 million compared to a GAAP net loss of $4.1 million in the first quarter of 2025.

Now to the balance sheet. As Richard mentioned earlier, we ended December 31, 2025, with $10.3 million in cash, cash equivalents and marketable securities.

During the quarter, we retired the $4 million term loan as planned, and our current cash position reflects the strength of our operating performance. Based on our cash forecast and anticipated cash flows, the company believes it has sufficient capital to serve its debt obligations. The first quarter of 2026 marked a strong start to the fiscal year. We delivered solid results that sets a positive foundation for the remainder of the year. For fiscal 2026, we continue to expect both operating and net income profitability while expanding our margins towards an annualized rate of 50%.

We're encouraged by our progress but remain focused on the work ahead. Our priorities center on enhancing operational efficiency and maintaining disciplined cost management as we scale revenues. We're committed to sustaining this momentum and executing our strategic plan to drive long-term profitable growth.

Richard, back to you.

Thank you, Cassandra. The first quarter was an encouraging start to fiscal 2026, highlighted by record revenue and marked by continued execution and milestones. Genasys operates at a critical intersection of public safety and emergency communication in a world where the need for these solutions continues to intensify. We've seen growing demand for our product and services across the globe as governments, organizations and communities recognize the essential role that reliable communication plays during emergencies and critical events.

Looking ahead in fiscal year '26, we remain confident in our ability to deliver meaningful year-over-year revenue growth while expanding annualized gross margins to 50%. We also expect to achieve both operating income and GAAP net income profitability for the full year. This is an incredibly exciting time for Genasys. Our focus remains on driving brand awareness, expanding our market presence, executing on the significant opportunities in front of us and ultimately delivering value for our shareholders as we build a stronger, more profitable company.

Before moving to Q&A, I would like to take a second to thank all of our employees, partners, customers and shareholders for your support and trust.

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

[Operator Instructions] We'll hear first from the line of Scott Searle at ROTH Capital.

Nice to see the continued progress on PREPA, and it sounds like CROWS is getting ready to flow out the door as well. Richard, maybe just to start, could you talk about visibility in the immediate quarter? You referenced the government slowdown. How is that impacting payments and deployment schedules in the current quarter? So as we think about sequentially how revenues progress, particularly on the PREPA front and if that's impacted CROWS at all, maybe that is just a starting point in terms of what you're seeing near term.

Sure, Scott. So I mentioned in my remarks, we have a $57 million or $58 million backlog. So that certainly insulates us from the budget uncertainties that we've seen in the federal government.

From a CROWS perspective, the defense budget for FY '26 was finally passed. It's unlikely we'll see the addition -- the FY '26 CROWS award in our fiscal year '26. There's just not enough time on the clock left. But I mean that could happen, but I wouldn't count on that. But again, our backlog, Scott, certainly insulates us significantly, $58 million.

Got you. And Richard, I think that there were a couple of larger deals out there that you had talked about in the past, a larger early warning system, I think, in Latin America. Wondering if there are any updates on that as well as I think there were some larger naval opportunities that were starting to crop up in the European theater.

There's several opportunities we're pursuing in Europe from a Navy perspective. I think you know, Scott, we've sold units now to the German Navy, the Spanish Navy, the Canadian Navy, the French Navy. And there's 3 other programs that we're pursuing with European navies that I believe will come to fruition in the next couple of quarters. In my remarks, I did talk about the Middle East, and that has historically not been a great market for us, but we expect to close a couple of very good orders here in the relative short term that I think will be significant for the company.

And Richard, if I could, one last one, just on the software front. I think there were some other contracts that had been delayed, some SaaS opportunities in municipalities and otherwise that have been delayed in the last couple of quarters. Are those starting now to catch up? And I think you referenced some other deals. I think you said that there were 2 larger federal contracts out there. I wonder if you could give us maybe frame the size and the opportunity and timing around some of that.

Scott, in my remarks, I mentioned that we're in contracting for 5 counties and cities and 2 federal agencies. So they have moved from where they were the last time we spoke, which was very uncertain to -- we're working to close them as we speak.

Our next question will come from the line of Ed Woo from Ascendant Capital.

Yes. Congratulations on the quarter. And also on your backlog or your pipeline, you mentioned that it's very robust and it's been very strong. Have you seen any changes in the sales cycle that's making it possibly added to your pipeline growing? Or has the sales cycle changed at all since last year?

Ed, the sales cycle, as I mentioned in the last quarter, because of grants being frozen in the federal government, the sales cycle got longer. Now that has begun to get somewhat better, which my remarks talked about what we have in the contracting phase now between counties, cities and federal government. So I'd say it's been longer because of that freezing of funds, but it's starting to fall.

Great. And my question is also on your gross margin goals of 50%. Is that kind of your goal for this year or a longer-term goal? Because obviously, it seems like your hardware would have lower margins, but your software will have higher margin. Do you think that they would balance each other out to kind of stay at that 50% longer term?

We believe we'll be at 50% for this full fiscal year.

[Operator Instructions] We'll take a follow-up from the line of Scott Searle at ROTH Capital.

Richard, two quick follow-ups. On the gross margin front, I know you're targeting 50% for the year, but there's some variability in terms of where we are in the deployment phase of the different dam groups. And so I think at the start of some of those contracts tend to be lower gross margin before ramping up. So how are you thinking about gross margins in the immediate March and June quarters if we start to see group 4 deploy? Or is that something that would take place more in fiscal '27?

And the second question on the software commercial front. Historically, you guys have had some opportunities, but they haven't necessarily been larger material. I'm wondering if that's changing in terms of the composition of the opportunity pipeline. Is there more going on in the commercial side of the equation, both from a software standpoint and a hardware standpoint?

Well, it's definitely still software, Scott, definitely still focused in SLED. I will say the deal sizes that we're focused on this year are significantly higher than what we've been focusing -- what we had historically focused on. So there's almost all of the ones we're pursuing, Scott, are needle movers for our SaaS business.

In terms of the hardware business, we've seen an uptick in inquiries and demand, largely driven by the events that are going on in the United States and elsewhere that federal agencies, in particular, are requiring additional LRADs. So we haven't booked anything yet with that regard, but we're working on it.

And from the gross margin perspective, Scott, you're right, mix has a lot to do with the gross margin number. I would counsel that 50% is where we expect to be for the year. And so some -- like this first quarter was down a little to that number. And next quarter, we'll probably make up for that.

And we'll take our next question today from the line of [ Lloyd Quarton ]. I'm sorry. I believe we lost our caller.

Mr. Danforth, I'll turn it back to you, rather, sir, for any additional or closing remarks that you have.

Well, thank you. Thank you all for attending the meeting. And if you have further questions, just reach out to Clay or myself. Thank you all.

Ladies and gentlemen, this does conclude today's teleconference, and we thank you all for your participation. You may now disconnect your lines.

Good day, everyone, and welcome to Genasys' Fourth Quarter and Fiscal Full Year End Results Call. At this time, I would like to hand the call over to [ Mr. Clay Lilis. ] Please go ahead, sir.

Good afternoon, everyone. Thank you for participating in today's conference call to discuss Genasys fiscal fourth quarter and full year results ended September 30, 2025. My name is [indiscernible] and I'm with the Gateway Group, the company's third-party investor relations firm. Joining us on today's call are Genasys Chief Executive Officer, Richard Danforth; and Interim Chief Financial Officer, Cassandra 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 1995. 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 actual 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 in 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 reconciliation for non-GAAP measures are available in the earnings release and other documents posted on the company's website under Investor Relations.

Additionally, 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 now like to turn the call over to Genasys CEO, Richard Danforth. Richard?

Thank you, Clay, and welcome, everyone. We finished fiscal 2025 on a very strong note. For the first time in 7 quarters, we delivered both positive operating income and adjusted EBITDA. Additionally, we saw over 153% year-over-year revenue growth in the fourth quarter, underscored by a 50% gross margin. This success reflects the foundation we've built over the prior quarters, and we are now beginning to realize the benefits of all that work.

Additionally, as of September 30, 2025, we had a backlog of more than $60 million. The close of our fiscal year was not only defined by executing on major backlog orders, but by replacing them with new customers and new projects.

This quarter marked a turning point for Genasys, allowing us to shift our focus towards the future and position the company for sustained growth. From an operational perspective, we believe we have rightsized efficient and strategically aligned to execute our existing backlog while simultaneously capturing new business opportunities.

These two initiatives are also becoming increasingly synonymous. By this, I mean, as we deliver on these large projects, we earn meaningful credibility in the market, hence growing the pipeline and the brand. For example, over the past several months, we have been approached by multiple countries and government agencies expressing interest in Puerto Rico-like deployments for our technology. This strong inbound demand for similar large-scale projects not only represents a significant growth opportunity for us, but also underscores the quality of our technology and its implementation. This increased credibility is opening new opportunities, growing our pipeline and further establishing us as a leader in protective communications space.

Moreover, our Hardware continues to display its utility in various end markets as illustrated by several of our last announcements, including the $1 million nuclear security follow-on order and the $1 million order for wildlife preservation. There are countless applications for our products, and we are committed to driving new business and expanding access to our critical communications technologies.

On the Software side, we are seeing meaningful traction of build across both law enforcement and government agencies. Genasys Protect is best-in-class and we are committed to expanding this technology as demand for advanced safety and communication solutions continues to grow. In a world confronted with frequent emergencies and large-scale disasters, the need for reliable, proven, protective technology has never been greater. Our solutions are recognized as industry-leading and helping agencies keep people safe, deliver clear communications, and manage critical events effectively. And as the government funding begins to ramp back up, we are confident that our software solutions will be a significant beneficiary given the critical role it plays to ensure safety and operational efficiencies.

Furthermore, to strengthen our reach and deepen our relationship with these agencies, we partnered with Julie Parker Communication, a leading expert in public safety communication strategy. This partnership enhances our ability to support agencies, broaden our awareness and position our software within key decision-making circles. We expect continued penetration of the software market, driven by our proprietary technology and growing customer relationships.

I would now like to spend some time providing updates on our large projects, starting with Puerto Rico. As a reminder, the Puerto Rico project is a $75 million contract with PREPA and is fully funded by FEMA. The project covers 37 dams across the island, which all report into 7 distinct groups. The Puerto Rico EWS projects is beginning to hit its stride. In fiscal 2025, we recognized $13.2 million in revenue from this project. Looking at the next several phases, we expect the project to be completed in 2027 and with the majority of the work taking place in 2026. We expect to complete group 5 and 6 this month and are actively working on group 3 and have been approved to proceed on group 1.

Next, an update on the CROWS initiative. The CROWS AHD effort, part of the tech refresh program of record saw our initial funding in fiscal '22 and fiscal '23. The first production funding was included in the 2024 federal budget. And following the successful completion of the design, test and qualification of the LRAD-450XL RT, the U.S. Army issued an RFQ in July of 2025. In late September, we announced that we won the $9 million order. This marks the first production contract for AHD under the CRO program following the qualification of the LRAD RT model. We expect this contract to generate multiyear revenues while enhancing CROWS operators' ability to communicate with potential threats before employing legal force.

In summary, while fiscal 2025 presented its share of challenges, the fourth quarter marked a strong and encouraging step forward, reinforcing our momentum and setting the stage for an exciting year ahead. The progress we made in these final months position us to enter the new year with confidence and renewed energy.

Before speaking on our 2026 outlook, I want to hand the call over to Cassandra to speak in more depth of the financials. Cassandra?

Thank you, Richard, and good afternoon, everyone. We will start with the fiscal fourth quarter and then move into our full year results.

In the fourth quarter of fiscal 2025, Genasys generated $17 million in revenue, up 73% sequentially and up 153% year-over-year. It is worth noting this is the largest revenue quarter in Genasys history. Gross profit margins for the quarter was 50.3%. The increase is primarily due to more favorable Hardware mix. We expect margins to normalize around 50% moving forward.

Operating expenses for the quarter was $7.3 million in Q4, a 26% or $2.6 million decrease from the fourth quarter of 2024. The decrease in operating expenses are primarily due to a $1.2 million decrease in professional services and a $1 million employee tax credit. On a GAAP basis, operating income was $1.3 million compared to an operating loss of $7.1 million in prior-year periods. This is largely due to our increased revenue, of which $7.6 million came from the Puerto Rico project and $2 million from the U.S. Navy.

Adjusted EBITDA, which excludes noncash stock comp, was also positive, coming in at $2.4 million compared to an adjusted EBITDA loss of $6 million in the year-ago period. GAAP net loss in the fourth quarter was $1.4 million compared to a GAAP net loss of $11.4 million in the fourth quarter of 2024.

The fourth quarter was a turning point for Genasys, we are beginning to see the hard work and efforts of our team materialize into our financial results, and we are excited to continue this positive progress into 2026.

Now shifting to the full year results. In fiscal 2025, Genasys generated $40.8 million in revenue, up roughly 70% from 2024. Hardware revenues grew over 91% in fiscal 2024. This included $13.2 million in revenue related to the Puerto Rico project. Excluding Puerto Rico, revenues from our hardware business also grew at over 12% this year, signaling a strength in our other core offerings. Our products are continually garnering interest from multiple customers across the world, and we expect to continue driving similar growth in our Hardware business into 2026.

Total Software revenue in 2025 grew 21% compared to 2024. We believe our Software segments remain a large growth driver for Genasys and as government investments pick back up, we anticipate our Software programs will capture substantial upside.

Gross profit margins for the year was 41.6% in fiscal 2025 compared to 42.4% in fiscal 2024. The slight decrease in gross margin was largely due to the percentage of completion accounting methodology applied to the Puerto Rico project in the first 2/3 of the year and was partially offset by a more favorable Hardware mix in the fourth quarter. As mentioned earlier, we do believe gross margin will stabilize at around 50% levels we witnessed in Q4.

Operating expenses for the year were down roughly 8% or $3.1 million to $33.8 million in fiscal 2025. Genasys had a reduction of professional services for the year of $1.2 million, a $1 million tax credit and a reduction of travel and marketing expenses for $800,000.

On a GAAP basis, operating loss in fiscal 2025 was a negative $16.8 million compared to an operating loss of $26.7 million in fiscal 2024. This improvement was largely due to the growth in both our Hardware and Software revenues and was propelled by cost-cutting initiatives we implemented throughout the year.

Adjusted EBITDA, which excludes noncash stock compensation, was negative $12.4 million compared to a negative $22.1 million in fiscal 2024. GAAP net loss for the year was a negative $18.1 million compared to a negative $31.7 million in fiscal 2024.

Before handing it back to Richard to speak more on the company's momentum and outlook, I did want to touch base on our balance sheet. As of September 30, 2025, cash, cash equivalents and marketable securities totaled $8 million as of September 30, 2025, compared with $13.1 million as of September 30, 2024. Based on our current cash forecasted receipts and disbursements, the company believes we have sufficient capital to serve the debt.

While there is still more work and growth ahead, I am encouraged by the progress that we've made in 2025, and I am confident in our ability to deliver meaningful financial improvements in 2026. Richard, back to you.

Thank you, Cassandra. The close of fiscal 2025 laid a strong foundation for Genasys, demonstrating our ability to execute on major projects and deliver results. This momentum positions the company to enter 2026 with confidence, setting the stage for growth and new opportunities. We expect to drive significant year-over-year revenue growth in both Hardware and Software businesses. Additionally, we expect to deliver margins of 50% throughout the year.

As we all know, the world faces no shortage of natural disasters and emergencies that demand reliable protective communication systems. Our technology save lives across the globe. Genasys' Systems are making a real difference in protecting people during some of their most vulnerable moments. The need for our products is clear, and we will continue to deliver the solutions that agencies and communities depend on to keep their citizens safe.

Overall, 2025 was a pivotal year for Genasys, finishing with a significant step in the right direction. Supported by current momentum, a strong backlog and a deep customer adoption, we will enter fiscal 2026 with real excitement and a clear commitment to improving our operational and financial results while delivering meaningful value to our shareholders.

Before moving over to Q&A, we'd like to take a second to thank all of our employees, partners, customers and shareholders for your support and trust. With that, we'd like to open up the call for Q&A. Operator?

[Operator Instructions] We'll go first to Scott Searle from Roth Capital.

Cassandra, maybe just to start, I'm not sure if I heard it, but what was Software mix in the quarter? And then, Richard, on the CROWS front, I'm wondering if we saw any contribution in the September quarter and what you're expecting in terms of linearity and follow-ons throughout the course of the year for CROWS?

I'll answer that question first, Scott. CROWS will be -- likely be a second half revenue generator. So all of it will likely happen in Q3 and maybe a little in Q4, but Q3 is more likely.

And in Q4, our Software revenue was roughly around $2.2 million. It was pretty flat compared to last quarter, but we would expect to see an increase in revenue going forward for Software.

Got you. And Richard, just to follow up on CROWS. I think it's expected to be part of a larger decade-long contract that could be $100 million to $150 million. This is the initial order. Are you seeing visibility to the follow-ons there?

And then as it relates to the pipeline, I wonder if you could discuss in a little bit more in detail. Last quarter, there were a couple of larger contracts that you called out specifically related to flooding and tsunami opportunities in international markets. I wonder if you could just provide some color in terms of size, magnitude, timing of some of those opportunities.

Well, we haven't put size or timing on those opportunities out in the public, Scott, but the -- none of what I mentioned last quarter from these larger opportunities has closed. One has reached a point where we submitted the proposal. One is a proposal to be submitted later this month and the third is further down than that.

Relative to the CROWS question, CROWS AHD is part of a program of record that has a line item in the defense budget. As you're well aware, the FY '25, there was no budget. It was a continuing resolution. So far in fiscal year '26, it remains a another continuing resolution. The current one is expected to expire the end of January, as I recall. With that said, Scott, it's -- the visibility into the annual awards is part of that budgeting process. So as they conclude with that, we'll know precisely what will be in there.

Got you. Maybe 2 quick follow-ups then, Richard. And just in terms of government engagement and opportunities in general, given the shutdown. Has momentum returned on that front in terms of other RFPs domestically? Are you seeing some momentum on that front? And kind of how would you characterize it?

And then also on the commercial front, the nuclear opportunity seems like it was a nice win. Are there other commercial or enterprise opportunities that you're starting to see build in the pipeline?

Yes. So everything you said. So from an LRAD hardware perspective, Scott, we had a very good bookings quarter. You mentioned the nuclear opportunities. There's more nuclear opportunities. If we look internationally, substantial increase in opportunities in the APAC region, we expect to close some of those here shortly. In the Middle East, which historically hasn't been a great market for us, our expectations are quite keen on some significant bookings in this fiscal year. And even Europe has shown more promise from an LRAD perspective. So no is the answer to your direct question, I haven't seen a significant decrease. In fact, I've seen an increase in demand for LRAD during these current times. .

The next question comes from [ Jared Cohen from J.M. Cohen & Company. ]

Yes, I just have a few questions. Well, you mentioned, I'll start off with different types of projects. Can you give us an idea of what type of projects might be in the pipeline? Beside -- are they like what you've done in Puerto Rico? Or can you just...

Very much so -- very much so. Puerto Rico, of course, as you know, is 37 dams or countries that don't actually -- dams, but have large numbers of basins that tend to flood and so it's the same principles of what we're doing in Puerto Rico, just a slightly different application.

Okay. This is more financial related. You talked about -- could you give us an idea of what -- 2026, what you're looking in terms of revenue growth? And/or is it possible that total 2026, are you looking for the company to be on an operating basis profitable?

We expect to be profitable in FY '26, yes. And from a revenue perspective, we don't comment on -- we don't give out forward-looking guidance, but I would point you to $60 million of addressable backlog -- 12-month addressable backlog without condition as we entered this fiscal year. .

Okay. So -- but on an operating basis, profitable, but even on a net income basis, even being profitable?

Yes.

Okay. And my last question, just related to the Software business, you have about over 50 million users or something like that. And the software business, I know it takes a long time to grow and it's been up and down over the last few years. And you mentioned this past quarter was what -- you did revenue of about, what, $2.2 million or $2.3 million. When do you think that business could be basically on a breakeven-type basis in terms of cash flow-wise.

It's not going to be this year, Jared, as we exit the following fiscal year. I would think we have a shot to make it there. Pipeline has grown by more than 100% from the same period last year. We are prosecuting some large SaaS software opportunities that we expect to close in this fiscal year. As you're well aware, fiscal '25 was disappointing from a SaaS bookings perspective, principally driven by the lack of funding in the grant process, the review process for grants, which seems to be moving along now. So our expectations for SaaS bookings and resulting ARR are very high for fiscal '26.

[Operator Instructions] Next is Ed Woo, Ascendiant Capital.

Congratulations on all the progress. My question is, as you guys get more interest in your products, have you noticed any change in competition? Have you noticed any new entrants or [indiscernible] you're competing with as you pitch out these projects? .

No, neither in Software or Hardware or systems.

All right. Then my next question is, if you guys are kind of like the main player and as building these better reputation, do you see yourself having a better pricing power or being able to price higher?

Within the government customer base, Ed, you -- although we don't provide any cost and pricing data. We are subject to -- we -- if we -- if our price goes up too much, then we're subject to having to justify the price growth. Now in some cases, we were able to justify it, and we do increase the price to be more reflective of not only the cost but improvements in profitability. But it's not like you can just charge them anything you want. Past practice is the barometer by which determine whether they think the price is too high or not. Competitive solicitation at no cost and pricing. It's up to us that did what we want giving us -- keeping in mind we have to win.

That sounds good. And then my last question is on overall for Puerto Rico. The revenue number of about $75 million is about the same, has your cost or overall profitability on a project is expected to remain the same as well?

Yes.

The next question is from Stephen Wagner, Integrity Wealth Advisors.

Richard and Cassandra, good job. Good to see a lot of the very positive wording in the press release. It's music to our ears to see the profitability in the fourth quarter and particularly some of the positive comments on the debt service.

My first question is regarding the debt service. And that is what expectations do investors have that the debt will be greatly reduced or eliminated over the course of this fiscal year that we're in, '26?

And then beyond that, the other question that I have is a frustration with the -- it feels like there's been a lack of accolades given Genasys in light of the enormous amount of life that was saved in the historic and devastating L.A. fires. They have 31 people die is -- was a massive win for humanity. And yet it seems like all we've [indiscernible] negativity. Is there any -- is there any embeds? Is there any program on the part of the company to highlight how and why Genasys is able to save the lives that they did in L.A.?

And a quick follow-on to that is what kind of outreach have you guys had in light of all of this? Because I'm sure other states, municipalities, fire departments, et cetera, counties, they know how well your software performed, and I'm sure they want it. So I'll stop there.

All right. Well, I may not remember every question, but let me address the last one first. There was a lot of bad press put out regarding the L.A. fires across the board. Negative press on Genasys, negative press on the county itself. The negative press on Genasys was walked back. There was third-party independent reviews of what happened out there. And they came to the same conclusion, Steve, that you just brought up and the people that use the software, the people that are in that industry go quite well how well it performed. And it is leading to not only additional business to existing customers, but to new customers as well. And what was the first question you asked, Steve? .

The first question was regarding the debt service.

Cassandra said, we expect cash flow receipts and disbursements to support paying off the entire debt on time.

Is there another question?

That does conclude our question-and-answer session. That also concludes our conference for today. We would like to thank you all for your participation. You may now disconnect.