Welcome to the Genasys Inc. Fiscal Second Quarter 2024 Conference Call. [Operator Instructions]. At this time, it is my pleasure to turn the floor over to your host, Brian Alger, SVP of Investor Relations and Corporate Development. Sir, the floor is yours.

Thank you, Kat. Good afternoon, everyone. Welcome to Genasys' Second Quarter Fiscal 2024 Financial Results Conference Call. I'm Brian Alger, SVP, Investor Relations and Corporate Development for Genasys. With me on the call today are Richard Danforth, our CEO; and Dennis Klahn, the company's CFO. During today's call, management will make forward-looking statements regarding the company's plans, expectations, outlook and future financial performance that involve certain risks and uncertainties. The company's results may differ materially from the projections described in these forward-looking statements. Factors that might cause differences and other potential risks and uncertainties can be found in the Risk Factors section of the company's Form 10-K for the fiscal year ended September 30, 2023. Other than statements of historical fact, forward-looking statements made on this call are based only on information and management's expectations as of today, May 14, 2024. We explicitly disclaim any intent or obligation to update those forward-looking statements, except as otherwise specifically stated. We will also discuss non-GAAP financial measures and operational metrics, including adjusted EBITDA, bookings and backlog, which we believe provide helpful information to investors with respect to evaluating the company's performance. For a reconciliation of the adjusted EBITDA to GAAP financial metrics, please see the table in the press release issued by the company at the close of the market today. We consider bookings and backlog leading indicators of future revenues and use these metrics to support production planning. Bookings is an internal operational metric that measures the total dollar value of customer purchases executed in a given period regardless of the other related revenue reduction. Backlog is a measure of disorders received that are scheduled to ship within the next 12 months. Now finally, a replay of this call will be available and approximately 4 hours to the company's Investor Relations website. At this time, I'd like to turn the call over to Genasys' CEO, Richard Danforth. Richard?

Thank you, Brian, and welcome, everybody. After the market closed today, we issued 2 press releases in addition to our quarterly earnings report: the first, the expansion of our board with 2 fantastic additions and the second, closing of a $15 million debt financing. As we discuss our business and outlook on this call, I think it should be clear to everyone that Genasys is in the best position it has ever been. Adding Senator Bill Dodd and Craig Fuge to our leadership team, is going to help open up even more opportunities in the coming months and years. Bill Dodd currently serves in the California State Senate representing the third Senate District, which encompasses the Northern San Francisco Bay Area and Delta region. Prior to his election to the state Senate, Bill served in the California State Assembly, representing the fourth Assembly District, which includes all of portions of Yolo, Napa-Sonoma Lake, Solano and Colusa counties. Craig Folgate served as the [indiscernible] administrator from May 2009 to January 2017. Previously, he served as a Florida Emergency Management Director from 2001 through 2009. Craig led FEMA through multiple record-breaking disasters over the years. Moving on, our previously announced selection for the Puerto Rico dam project has grown in scope, and we now expect to receive up to $75 million from PREPA. Contract terms and conditions of being actively worked and are expected to be finalized before the end of this quarter. The new program of record with the U.S. Army, adding AHCs to CROW systems now identified as CROW 16 was written into law with the 2024 federal budget. We expect this current program to yield at least as much revenue as our prior program with the United States Army, which netted over $110 million. And as we will discuss in more detail, our software business is continuing to grow with Q2 revenues -- recurring revenues and ARR growing more than 120% year-over-year this past quarter. Finally, we secured financing for a $15 million 2-year senior secured loan that fortifies our balance sheet, enabling profits from our major contracts and our investments in the software business to be realized. In summary, the company is now well financed with a very significant hardware business that will result in record backlogs going into our fiscal 2025. Further, our software business is expected to continue to grow and get to scale that makes it profitable on a stand-alone basis, not only providing better visibility and consistent revenues, but also additional profits for the overall company. Looking backwards, the second fiscal quarter was financially disappointing, while our software business [indiscernible] we're strong with quarterly bookings of $4.3 million. Second quarter hardware bookings continued to fall short at only $2.1 million. One of the projects to slip out of the second quarter was a $2.7 million contract with the United States Navy to begin replacing LRAD units previously installed on the surface ships. That order was finally received today and is expected to be in our third quarter revenues. Another $1 million or so was delayed by the late passage of the federal budget. While these revenues are now expected to be realized in our fiscal third quarter, the low bookings combined with the low hardware backlog entering the quarter resulted in a total hardware revenues of just $4 million, up sequentially, but well below the prior year period that included roughly $5 million from the prior Army AHD program. As we look at our hardware pipeline and current activities, we expect sequential improvements in bookings and revenue in both Q3 and Q4, not including the Puerto Rico project or orders under the new Army program of record. International orders are expected to play a key role as should shipments to the U.S. DoD that were delayed by the budget process. Additionally, we are pursuing a number of acoustic opportunities for both public safety and critical infrastructure protection that will diversify our hardware revenue base. As strong as the outlook for the second half is the current expected improvements in bookings is not what we had forecasted at the beginning of the fiscal year. Though a couple of opportunities were canceled, we are still pursuing and expect to secure the projects previously identified, but we don't know precisely when we will be able to recognize their revenues. Excluding bookings from Puerto Rico and the CROW 16 program, our expectations of what we will be able to close this fiscal year has dropped by approximately $15 million. So hardware bookings and revenue from projects could pull forward. Our recent history shows that is not a reasonable -- it is unreasonable to expect material movement forward. On a more positive side, our software business continues to do very well. Software bookings in the quarter included the announced EVAC contract with Los Angeles County. We're the bookings in total were over $4 million. As mentioned previously, recurring revenues were up 124% year-over-year, ARR exiting March quarter was $6.5 million, with strong activity quarter-to-date, we expect to have another strong quarter of software bookings. And as such, we continue to believe software recurring revenues and ARR will at least double for fiscal '24 versus fiscal '23. As we communicated last quarter, the vision and strategy that Genasys has been pursuing for more than 4 years is being realized. We successfully adapted a business focused on military application for acoustic hailing devices to serve a much larger market of mass notification originally with hardware sold to Japan, but ultimately enhanced and improved with software development through the 2018 acquisition of Genasys. From the get-go, our hardware business has afforded us the opportunity to develop our software capabilities, both internally and through acquisitions. Through the Zonehaven acquisition in 2021, a zone-based software, combined with our market-leading mass notification software and market-defining hardware is transforming and redefining the market of protected communications. Today, Genasys is serving a multibillion-dollar market with differentiated software and category-defining hardware. Our selection in Puerto Rico and our announced developments in Europe validate this strategy. Looking forward, we are going to aggressively pursue opportunities in public safety and critical infrastructure protection. Positioned with a fortified balance sheet, strong anchor wins and the additional support of our new Board members, who each bring remarkable experience and expertise in public safety and critical infrastructure protection, Genasys is entering a new phase of profitable growth. Through near term and granular visibility may not be as precise as some may wish, there is no denying that the Genasys prospects over the next few years is dramatically improved, and we will secure resources to attain our potential. Now I will turn the call over to Dennis to go through the second quarter financials and outlook in greater detail. Dennis?

Thank you, Richard. In the second quarter, we continued to see strength in our software business with year-over-year growth of 104% and recurring revenues growing 123% over the same prior year period. Revenues for the second quarter of this fiscal year were $5.7 million, a decrease of 49% from the prior year second quarter, which benefited from approximately $5.7 million from a prior program of record that was completed in 2023. Software revenue this quarter was $1.7 million, reflecting the 123% growth in recurring revenue. More than offsetting that growth, hardware revenue decreased 61% to $4 million. As we discussed last quarter, Genasys started fiscal 2024 with exceptionally low hardware backlog. In addition to a low backlog entering the quarter, the delayed approval of the 2024 U.S. DoD budget resulted in revenue again slipping out of quarter. Gross profit margin was 38% in the fiscal second quarter, a decline of 6 percentage points or $2.7 million from the prior year period. The drop in gross profit was primarily attributable to lower hardware revenue in this year's quarter and the related reduction in overhead absorption. We do expect gross margin percentages to recover with increased revenues in the coming quarters. Quarterly operating expenses were $9.2 million, up 10% from $8.3 million in the second quarter of fiscal '23. SG&A increased 10% while R&D increased 11% over the prior year period. The difference was largely attributable to the acquisition of Evertel and increased professional services expenses that account for more than 50% of the incremental change. On a GAAP basis, our second fiscal quarter operating loss was $7 million compared to a loss of $3.4 million in the year ago quarter. Adjusted EBITDA, which excludes noncash stock comp, was a negative $5.7 million compared to last year's negative $2.3 million. The year-over-year decline in adjusted EBITDA was due to the lower hardware revenues and subsequent reduced overhead absorption in the current year. Cash, cash equivalents and marketable securities totaled $6.6 million as of March 31, 2024, compared with $10.1 million as of the September fiscal year-end. Excluded from the cash figure is $3.5 million being held as a bid bond for the Puerto Rico business Richard discussed just a moment ago. Cash used in operating activities in the second fiscal quarter was $6.8 million. As Richard mentioned in his remarks, we expect to receive both the return of our $3.5 million bid bond and an initial award payment after the terms and conditions of the Puerto Rico contract are finalized later this quarter. Strong software bookings continue to provide upfront cash and the announced financing is fortified our balance sheet considerably. We believe we have ample resources to monetize the investments we have made in growing and diversifying our business. As we have discussed in our earnings release and in this call, there are a number of large opportunities that we are excited about. Between the Puerto Rico and CROW 16 business alone, we're expecting nearly $200 million in highly profitable revenue in the coming years. Our software business continues to grow rapidly, and it is on track to post triple-digit growth in ARR this year. We are confident that second half fiscal '24 hardware and software revenues will grow considerably from the first half, but we're not in a position to be more prioritized than that at this time. And now we'd like to open the call to Q&A. Operator?

[Operator Instructions]. Our first question comes from Mike Latimore from Northland Capital.

Thanks for the update here. On the CROW revenue, I believe that in the budget. But what do you have clarity on whether you'll get it by calendar year-end funding for the growth order?

It's not currently in our internal forecast, Mike. The money is beginning to flow to the program office. The initial kickoff meeting is scheduled for the first week of June. After that, we'll have more clarity.

Got it. Okay. And then you gave some guidance for fiscal '24 excluding Puerto Rico, but it sounds like you're expecting maybe a payment from the right after closing of the deal, I guess any clarity on how much revenue you might get from Puerto Rico this year?

I think we spoke about this on the last call. I'm not expecting any at this point. There's an initial phase of -- they need to accept our designs for each of the 37 dams. I think if we close the contract by the end of June, which is our expectation, it gives us July and August and September to get the approvals required and then we're into our fiscal '25. There will be an initial deposit subsequent to the contract being signed.

Got it. Okay. And then on the revenue recognition on the Puerto Rico deal, what 242 days.

Too soon to tell. There's been a lot of moving parts, Mike, since the last call we had I believe we told you the contract would be worth, I don't know, $60 million to $65 million last time, and now it's worth about $75 million. So the customer has added scope to each and every dam. So that all has to be included in our designs and our proposal, and we're doing that now. So I think we can -- at our next conference call, Mike, I would expect to be able to provide way more clarity than I can right now.

I mean is that something that can get deployed over like 5 years or 10 years?

No, no, I don't think so at all. The initial RFP had done 240 days after approval of all the dams.

Year-over-year growth of 104% and recurring revenue is growing.

It will not likely be 240, it will be more than that. But I'll know more next conference call. still should be very good for '25 and probably '26 as well.

And our next question comes from Ed Woo from Ascendiant Capital.

My question is on a slightly different market that you have been used to, civil disobedience. Across the country, we've been hearing about all these processors on the college campuses and people claiming that they're not getting notified or whatnot. Obviously, that will be a great opportunity for your LRAD devices. Have you seen any upticks in civil disobedience type of opportunities with police forces?

Yes, [indiscernible] coming in queries, Ed, but it's typical during a crisis is not a good time to be selling most all police forces -- major police forces here in the United States have LRADs. What this typically would do is shine a light on the need for more of them, and the acquisition of those would follow. But as you've watched some of the news over the last several weeks, there's been a lot of use of LRAD around the countries.

Well, that's great to hear. I'll then say play some really loud music and maybe some of these protestors wouldn't be so happy to be capping overnight. Thank you very much. I wish you guys good luck with everything.

[Operator Instructions]. And at this time, I'd like to turn it back to management for any closing remarks.

Well, I appreciate everyone getting on the call tonight. Obviously, there's a lot been going on over the past several months, and we look forward to updating you all on our next quarterly conference call. With that, I wish everyone good night. Thank you.

Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect connect your lines at this time, and have a wonderful day.