Image source: The Motley Fool.
Date
Tuesday, Feb. 10, 2026 at 4:30 p.m. ET
Call participants
- Chief Executive Officer — Richard S. Danforth
- Chief Financial Officer — Cassandra Hernandez-Monteon
- Moderator — Clay Liolios
Need a quote from a Motley Fool analyst? Email [email protected]
Takeaways
- Revenue -- $17.1 million, representing a 146% year-over-year increase as reported by Cassandra Hernandez-Monteon.
- Hardware segment revenue growth -- Hardware revenue rose approximately 220% from the same period last year, with $9.6 million contributed by the Puerto Rico project.
- Software segment revenue -- Software revenue totaled $2.3 million, flat year over year but up roughly 5% sequentially from the prior quarter.
- Gross profit margin -- Gross margins improved by 220 basis points from the previous year, primarily due to product mix improvement.
- Operating expenses -- Operating expenses totaled $8.1 million, a 6% decrease from the previous year attributed to completed cost reduction initiatives.
- Operating income -- GAAP operating loss narrowed to negative $400,000, improving from a negative $5.9 million the prior year.
- Adjusted EBITDA -- Adjusted EBITDA was positive $700,000, compared to a negative $4.8 million during the same period last year.
- Net income -- GAAP net loss was negative $800,000, compared to negative $4.1 million in the previous year.
- Cash position -- Cash, cash equivalents, and marketable securities ended at $10.3 million after retiring a $4.0 million term loan during the quarter.
- Backlog -- Twelve-month backlog reported at $58 million, serving as a buffer against government funding uncertainties as noted by Richard S. Danforth.
- Gross margin outlook -- Management targets an annualized gross margin of 50% for the fiscal year, with some quarter-to-quarter variability.
- Profitability guidance -- Expectations remain to achieve both operating and net income profitability for the full fiscal year 2026.
- Key project update – Puerto Rico -- $9.8 million in revenue recognized from the Puerto Rico project; construction of the third dam group underway, and the fourth group initiated with a multi-million dollar deposit collected.
- CROWS AHD program -- Initial $9 million production order announced and initial revenue contribution expected in the second half of the fiscal year; program total addressable market cited as over $175 million based on 5,000 units at $35,000 each.
- Growth in software pipeline -- In the contracting phase with five cities/counties and two federal agencies, according to Richard S. Danforth.
- Leadership update -- Cassandra Hernandez-Monteon appointed as full-time Chief Financial Officer, after serving as interim CFO and Vice President of Finance.
Summary
Genasys (GNSS +1.61%) reported a record quarter with hardware sales driving the majority of growth, largely attributable to the Puerto Rico project and international demand. Strategic achievements included full repayment of a $4 million term loan and expansion of the contract pipeline in domestic and federal government sectors. Management clarified that the CROWS AHD program will not contribute further fiscal 2026 awards, but initial revenue from the $9 million order is expected within the fiscal year. The company’s twelve-month backlog of $58 million mitigates near-term risk tied to government funding cycles. Genasys targets sustained annualized gross margins of 50% and maintains guidance for operating and net profitability in fiscal 2026.
- Management confirmed the company is pursuing multiple significant hardware contracts with European navies and expects to close notable Middle Eastern orders in the near term.
- Pipeline for software contracts with government entities is expanding, and current deal sizes for SaaS offerings are significantly higher than in previous years, as directly stated by Richard S. Danforth.
- Sales cycles, previously extended by federal funding freezes, are starting to thaw, enabling progress on delayed contracts.
- Danforth noted that while hardware’s gross margin can fluctuate by contract phase, management expects full-year results to align with the 50% target.
Industry glossary
- LRAD (Long Range Acoustic Device): Directional sound system designed to broadcast warnings, instructions, and alerts over long distances for crowd control or emergency management applications.
- CROWS (Common Remotely Operated Weapon Station): A U.S. military platform that enables remote control of weapon systems, to which Genasys’ acoustic hailing devices are integrated as part of the CROWS AHD program.
- SLED (State, Local, and Education): Acronym referring to non-federal government markets—state, local governments, and education sector buyers—emphasized by Genasys for software opportunities.
- SaaS (Software as a Service): Cloud-based software delivery model in which users access software via subscription instead of direct purchase.
Full Conference Call Transcript
Clay Liolios: Ended 12/31/2025. 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 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 four 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 S. Danforth.
Richard S. Danforth: Thank you, Clay, and welcome, everyone. In the 2026, we built on the strong foundation laid in the back half of fiscal year 2025. We delivered a record quarterly revenue of $17,100,000 and executed several key initiatives. The first of these was the appointment of Cassandra Hernandez-Monteon as a full-time Chief Financial Officer. Cassandra brings eight 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 helps 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 are confident she will continue to provide strong financial stewardship while supporting our long-term vision. Congratulations, Cassandra. Another significant milestone was the full repayment of our $4,000,000 term loan, which we completed while still maintaining a strong cash position of $10,300,000 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 flexibility. Now for an update on our hardware business and the significant momentum we are 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 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 LRIP 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 tools to de-escalate potentially dangerous situations, 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 five cities, counties, and two 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 timelines 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 2020 we recognized $9,800,000 in revenue from Puerto Rico. The project continues to display strong engagement across all stakeholders, with the first two 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 multi-million dollar deposit, site surveys and engineering designs have begun for the fourth group of eight 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 $9,000,000 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 450 XLRT 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 a solution priced around $35,000, the total addressable market for this program exceeds $175,000,000. 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 twelve-month backlog at the end of fiscal Q1 was $58,000,000. 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 are seeing steady pipeline growth. We continue to actively pursue several large-scale projects and remain engaged in the bidding process for these contracts. We are optimistic about the quality and the breadth of opportunities ahead of us and believe we are well positioned to capitalize on them as they develop. Now I would like to pass the call over to Cassandra for an update on the first quarter financial performance. Cassandra?
Cassandra Hernandez-Monteon: 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 2026, Genasys generated $17,100,000 in revenue, up 146% year over year. Hardware revenues grew roughly 220% from the year-ago period. This included $9,600,000 in contribution from the Puerto Rico project. Total software revenue remained flat at $2,300,000 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 $8,100,000, a 6% decrease from 2025. The decrease in operating expenses was primarily due to the cost reduction initiatives Genasys completed in 2025. On a GAAP basis, operating loss was negative $400,000 compared to an operating loss of negative $5,900,000 in the prior year. This improvement was primarily due to significant increase in revenue from a year-ago period. Adjusted EBITDA, which excludes non-cash stock compensation, was a positive $700,000 compared to an adjusted EBITDA loss of negative $4,800,000 in the year-ago period. GAAP net loss in the first quarter was negative $800,000 compared to a GAAP net loss of $4,100,000 in 2025.
Now to the balance sheet. As Richard mentioned earlier, we ended 12/31/2025 with $10,300,000 in cash, cash equivalents, and marketable securities. During the quarter, we retired the $4,000,000 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 2026 marked a strong start to the fiscal year. We delivered solid results that set 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 are encouraged by our progress but remain focused on the work. Our priorities center on enhancing operational efficiency and maintaining disciplined cost management as we scale revenues. We are committed to sustaining this momentum and executing our strategic plan to drive long-term profitable growth. Richard, back to you.
Richard S. Danforth: 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 and emergency communication in a world where the need for these solutions continues to intensify. We have seen growing demand for our products 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 2026, 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 would like to open up the call for Q&A. Operator?
Operator: Mr. Danforth, thank you. And to our audience joining today, once again, that is star and one if you would like to ask a question at this time. Pressing star and one will place your line into a queue, and I will open your lines one at a time, and you will be invited to share your questions. We will hear first from the line of Scott Wallace Searle at ROTH Capital.
Scott Wallace Searle: Hey, good afternoon. Thanks for taking the questions. Nice to see the continued progress on PREPA and it sounds like CROWS is getting ready 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 progressed, particularly on the PREPA front, and if that is impacted CROWS at all, maybe that is just a starting point in terms of what you are seeing near term.
Richard S. Danforth: Sure, Scott. So I mentioned in my remarks, have a 57,000,000 or $8,000,000 backlog. So that certainly insulates us from you know, the budget uncertainties that we have seen in the federal government. From a CROWS perspective, the defense budget for FY 2026 was finally passed. It is unlikely we will see the addition the FY '26 CROWS award in our fiscal year '26. It is just not enough time on the clock left. But I mean, that could happen. But I would not count on that. But again, our backlog, Scott, certainly insulates us significantly.
Scott Wallace Searle: Gotcha. 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.
Richard S. Danforth: Thanks. Now there are several opportunities we are pursuing in Europe from a navy perspective. I think you know, Scott, we have sold units now to the German Navy, the Spanish Navy, the Canadian Navy, the French Navy, and there are three other programs that we are 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.
Scott Wallace Searle: And Richard, if I could, one last one. On the software front, I think there were some other contracts that had been delayed, SaaS opportunities in municipalities and otherwise, 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 two larger federal contracts out there. I am wondering if you could give us maybe frame the size and the opportunity and timing around some of that. Thanks.
Richard S. Danforth: Scott, in my remarks, I mentioned that we are in contracting for five counties and cities and two federal agencies. So they have moved from where they were the last time we spoke, which was very uncertain, to we are working to close them as we speak.
Scott Wallace Searle: Great. Thanks so much. I will get back in the queue.
Richard S. Danforth: Okay. Thank you.
Operator: Our next question will come from the line of Edward Moon Woo from Ascendant Capital. Please go ahead. Your line is open.
Edward Moon Woo: Yes. Congratulations on the quarter. And also on your backlog or your pipeline, you mentioned that it is very robust, and it has been very strong. Have you seen any changes in the sales cycle that is making it possibly added to your pipeline growing? Or is this has the sales cycle changed at all since, you know, last year?
Richard S. Danforth: At 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 you know, my remarks talked about what we have in the contracting phase now between counties, cities, and federal government. So I would say it is been longer because of that freezing of funds, but it is starting to thaw.
Edward Moon Woo: 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, you know, your hardware would have lower margins, but your software will have higher margin. Do you think that they would balance each other out to kinda stay at that 50% longer term?
Richard S. Danforth: We believe we will be at 50% this for this full fiscal year.
Edward Moon Woo: Great. Well, thanks for answering my question, and I wish you guys good luck. Thank you, Ed.
Operator: And ladies and gentlemen, we will pause for another moment to allow our audience the opportunity to signal for a question with star and one. Also a friendly reminder that if you are joining on a speakerphone, please return to your handset to be certain that your signal reaches our equipment. We will take a follow-up from the line of Scott Wallace Searle at ROTH Capital.
Scott Wallace Searle: Richard, two quick follow ups. On the gross margin front, I know you are targeting 50% for the year. But there is 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, tends 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 Four deploy or is that something that would take more in fiscal 2027? And the second question on the software commercial front. Historically, you guys have had some opportunities, but they have not necessarily been larger material.
I am wondering if that is changing in terms of the composition of the opportunity pipeline. Is there more going on the commercial side of the equation, both from a software standpoint and a hardware standpoint? Thanks.
Richard S. Danforth: Well, it is definitely still a software, Scott. Definitely still focused in SLED. I will say that deal sizes that we are focused on this year are significantly higher than what we have been focusing, what we had historically focused on. So almost all of the ones we are pursuing, Scott, are needle movers for our SaaS business. In terms of the hardware business, we have seen, you know, an uptick in inquiries and demands 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 have not booked anything yet with that regard, but we are working on it.
And from the gross margin perspective, Scott, you are 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 will probably make up for that.
Scott Wallace Searle: Great. Thanks so much.
Richard S. Danforth: Welcome.
Operator: And we will take our next question today from the line of Lloyd Quarton—I am sorry. I believe we lost our caller. Mr. Danforth, I will turn it back to you rather, sir, for any additional or closing remarks that you have.
Richard S. Danforth: Well, thank you. Thank you all for attending the meeting, and as you have further questions, just reach out to Clay and myself. Thank you all.
Operator: Ladies and gentlemen, this does conclude today's teleconference and we thank you all for your participation. You may now disconnect your lines, and have a great day.
