Good day, ladies and gentlemen, welcome to the Genasys Incorporated Fiscal First Quarter 2023 conference call. All lines have been placed on a listen-only mode, the floor will be open for questions and comments following the presentation. If you should require assistance throughout the conference, please press star zero on your telephone keypad to reach a live operator. At This time, it is my pleasure to turn the floor over to your host, Kim Rogers. Ma'am, the floor is yours.
Thank you, Kat. Good afternoon, and welcome to Genasys Incorporated Fiscal 2023 First Quarter Financial Results Conference Call. I'm Kim Rogers with Hayden IR, the investor relations firm for Genasys. With me on the call today are Richard Danforth, Chief Executive Officer, and Dennis Klahn, Chief Financial Officer.
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 such 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, 2022. Other than statements of historical facts, forward-looking statements made on this call are based only on information and management's expectations as of today.
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 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 purchase orders executed in a given period, regardless of the timing of the related revenue recognition.
Backlog is a measure of purchase orders received that are scheduled to ship in the next 12 months.
Finally, a replay of this call will be available in approximately four hours through the investor relations page on the company's website. At this time, it's my pleasure to turn the call over to Genasys Chief Executive Officer, Richard Danforth. Please go ahead, Richard.
Thank you, Kim, and welcome to everybody. If you look on our website, you'll see the earnings release as well as a press release that has been hung up on the wire service, but likely come out during this call, announcing the win of a large enterprise SaaS award to a company called Aramco, which happens to be the largest company in the world from a market cap basis.
With that, we are off to a strong start in fiscal 2023 with our largest SaaS booking quarter to date. Our software business continues to gain momentum, as evidenced by the $6.1 million in SaaS bookings in the first fiscal quarter of this year.
The strong bookings include an enterprise award from, as I mentioned a moment ago, Aramco, the largest market cap company in the world, and the California counties of San Diego, where they bought GEM, Riverside, where they bought Zonehaven. Subsequently, they had bought GEM and IMNS, San Mateo, which bought Zonehaven, and Monterey County, which bought both Zonehaven and GEM.
These re-results, along with our rapidly growing SaaS pipeline, further reinforce our strategy of investing in software development, sales, marketing, and customer support. The addition of the world's largest oil and gas company and large California counties to our global automobile manufacturing and regional critical infrastructure customer base elevates our SaaS profile and demonstrates our ability to successfully close, cross-sell, and support large enterprise and public safety clients.
Our international results were also robust this quarter, as our strategy to rationalize business development by establishing sales offices in APAC, Europe, and the Middle East have proven successful. During the first fiscal quarter, 50% of our bookings were international, and APAC revenue more than doubled year-over-year as the entire region emerges from COVID-related lockdowns.
With the world economy picking up, we are seeing pipeline gross growth across all of our international sales regions. We expect strong fiscal year bookings in APAC, Europe, and the Middle East, driven primarily by hardware orders as well as developing pipeline of SaaS opportunities. Total bookings for the quarter are $8.6 million, up 23% year-over-year. Hardware bookings for the quarter were $2.5 million as pending orders moved into our fiscal second quarter.
Fiscal second quarter hardware bookings through January were already 40% higher than the total first quarter hardware bookings. We expect fiscal 2023 bookings to follow our typical pattern with a large step-up in fiscal Q3. Driven by international, hardware bookings in fiscal 2023 are expected substantially exceed fiscal 2022 hardware bookings.
In what is typically our slowest quarter, fiscal first quarter revenue was $10.5 million, slightly lower than the prior year quarter and in line with our expectations. Following the usual pattern, we expect sequentially quarterly revenue to increase in the fiscal second quarter and then strengthen in fiscal Q3 and Q4, putting us on a solid footing for the seventh consecutive year of revenue growth.
Inflation resulted in increased hardware component cost and product mix was a factor in the decreasing first quarter gross margin to 43.3%. We expect our gross margin to return to more normal levels in the second half of fiscal 2023. As we discussed on our fiscal fourth quarter conference call, continued investment in our SaaS business drove a 10.5% sequential quarterly increase in operating expenses, in line with our expectations.
Given the confidence in these investments to accelerate our SaaS business growth, we anticipate operating expenses in fiscal 2023 to increase by approximately $5 million year-over-year. While SaaS bookings and revenue are growing, hardware continues to be a majority of our business, representing 90% of the total revenues in the fiscal first quarter.
Our commanding competitive position as the de facto global supplier of long-range acoustic devices gives our hardware business a compelling economic profile. We continue to diligently manage and dedicate resources to growing our global hardware business. Recent attacks and increasing threats to critical infrastructure, particularly electrical substations, are generating large business opportunities for our remotely operated LRAD 950NXT system.
The NXT uses our proprietary technology to identify and respond to potential threats. Since the NXT launch last April, we have received orders from international navies and critical infrastructure orders for dams, data centers, ports, and electrical substations. Large NXT critical infrastructure and international defense sales are expected to be a major contributor to hardware revenue this fiscal year and beyond.
Our hardware bookings are typically lumpy. We currently have a large number of hardware opportunities expected to close this fiscal year.
The US Army program of record and inter-international orders are anticipated to drive bookings growth and substantially lift hardware backlog in the second half. Hardware will continue to be the economic engine that powers the self-funding of our SaaS business development in the future. Our priority focus is fully integrating our SaaS solution and increasing the capabilities of our data-driven protective communication platform.
Our SaaS system suite is evolving with the integration of GEM, Zonehaven, and IMNS into a seamless platform, expanding our capabilities and empowering Genasys to address a much larger scope of enterprise and public safety crises.
New platform features, including flood and traffic modeling, continue to expand our platform's multi-hazard capabilities for use during hurricanes, storm surges, tsunamis, avalanches, flooding, debris flow, wildfires, chemical plumes, active shooter, and other natural and man-made disasters.
Some of our new capabilities were developed during the, were deployed, excuse me, during the recent atmospheric river condition that inundated Northern California. Our Protective Communications platform was used in many counties to communicate the location and extent of flooding, avalanches, debris flows, road closures, hazard condition, and recovery resources.
During the severe weather events, hundreds of thousands of residents accessed the Genasys Protect site to check the evacuation status of their neighborhoods and for other life-saving information. Our land and expand strategy continues to grow our footprint with government public safety customers. Increasing demand for our Protective Communications platform has 16 California jurisdictions now using multiple Genasys platform elements, with three counties using the entire platform.
Riverside, one of California's largest and most populous counties, recently purchased Zonehaven to integrate with the previously purchased GEM services and IMNS installations.
As we announced earlier this month, the city of Laguna Beach is a notable example of how the performance of our IMNS network created another upselling opportunity. The successful use of IMNS during 2 wildfires last year led the Laguna Beach City Council to prioritize the further expansion of its Genasys network. In Marin County, California, we have provided emergency warning services for the city of Mill Valley since 2019.
In 2021, IMNS installation equipment with solar power and battery backup were positioned in other areas within the county. The follow-on order announced last week further expands the county's IMNS network. We have also expanded our footprint in Alameda County, with UC Berkeley's purchase of IMNS, which will be integrated with the City of Berkeley's Genasys network.
As we announced last week, the extended network and the county's use of our Zonehaven evacuation platform will expand emergency warning coverage and notification channels during public safety threats for more than 45,000 students, staff, and facility. We expect additional California jurisdiction to join Alameda, Marin, and Riverside Counties in adopting the full Genasys platform this fiscal year.
In the enterprise market, the addition of Aramco, along with previously announced global auto manufacturers and critical infrastructure, elevates our SaaS profile and demonstrates our ability to successfully close large enterprise customers. Extending the capabilities of our software platform further differentiates us and opens doors for new and follow-on business opportunities.
Our approach to the vast enterprise sector is to target key verticals where we can reference our proven execution. We have spoken before about our ongoing investment in the SaaS platform and SaaS sales growth.
Since late 2021, we've expanded our software development, sales marketing, and customer support teams and added new personnel with the skill set needed to achieve our revenue goals. To build brand awareness and accelerate platform growth, we have recently appointed Avneet Gulati as Vice President of Marketing. Avnida is a highly successful enterprise marketing organizations.
She has implemented global go-to-market strategies and led customer acquisition programs for leading companies in the software, semiconductor, medical, and financial market. Avnida is a key addition to our leadership team who will help us drive scale and growth.
The whole team here is energized and psyched by the increasing adoption of our software SaaS platform and the burgeoning opportunities fueling growth in our pipeline. Our pipeline of qualified SaaS opportunities is now 25% greater than it was just a few months ago.
The SaaS bookings we delivered in the first quarter further validates the investments we are making in our Protective Communications platform, and we believe are a strong indicator of its potential. With Genasys software now in use in 23 states and 7 countries, soon to be 8 with the addition of Aramco, we are gaining traction in new markets and building our software footprint globally.
We are reiterating our expectations for continued revenue growth in 2023, with strong international sales, continuing LRAD deliveries to US military, and increased software services, sales, and significant SaaS revenue growth. With that, I'll turn it over to Dennis.
Thank you, Richard. Revenues for the fiscal 2023 first quarter were $10.5 million, 2% less than the prior year quarter. As compared to the same prior year period, LRAD revenue increased 19% to $9.3 million. Software revenue increased 39% to $903,000. However, this was offset by a $2.3 million decrease in IMNS revenue, which was $300,000 in this year's quarter. IMNS revenue throughout fiscal 2022 benefited significantly from a single $10 million order from the US Army.
Recurring SaaS revenue from North America increased 87% compared to last year's quarter. Gross profit margin was 43.3% this quarter, compared to 48.2% in the prior year quarter.
The gross margin percentage was impacted by inflationary pressures on product costs, the mix of revenue this year, and increased software costs to support software revenue growth. We expect the Q2 gross profit margin to be similar before improving to closer to our historical margins in the second half of this year. Operating expenses were $8 million, up from $6.5 million in the same period a year ago.
The planned increase is largely due to greater sales, marketing, and related travel expense, plus additional compensation expense this year, including a 14% increase in our engineering staff. Net loss for the quarter was $3.5 million or $0.10 per share, compared to a net loss of $1.3 million or $0.04 per share in the fiscal 2022 first quarter.
The increased loss was largely due to the lower gross profit this year and the planned increase in operating expenses to support the software growth initiatives. Adjusted EBITDA for the fiscal 23 first quarter was a loss of $2.4 million, compared with an adjusted EBITDA loss of $412,000 in the prior fiscal year first quarter. We believe this information in comparisons of adjusted EBITDA enhances the overall understanding and visibility of our business performance.
To that effect, a reconciliation of our GAAP results to non-GAAP figures has been included in our earnings release. Cash, cash equivalents, and marketable securities totaled $15.1 million as of December 31, 2022, compared with $19.9 million as of the prior year end.
Working capital totaled $17.4 million at December 31, 2022, compared with $20.7 million at September 30, 2022. Cash used in operating activities for the first three months of fiscal year 2023 was $4.9 million. This compares to cash used in operating activities of $2.7 million in the same period last year. The fluctuation primarily reflects the higher negative adjusted EBITDA in this year's quarter. We'll now open the call to Q&A. Operator?
Thank you. The floor is now open for questions. If you do have a question, you may press star one on your telephone keypad at this time. If your question has been answered, you can remove yourself from the queue by pressing one. Again, ladies and gentlemen, it's star one. Our first question comes from Brian Colley from Stephens. Go ahead.
Hey, guys. Thanks for taking my question. Congratulations, first off on the Aramco deal. I'm curious if there's any numbers you could provide around that contract or just any.
Qualitative information you could provide us with.
Well.
To kind of help us size that up.
It was the largest SaaS booking we've ever taken, by a lot, Brian. I think our largest one prior to that, Dennis, was Riverside at $1.12 million.
$1.15 million.
$50 million.
Yes.
This was substantially higher than that.
Okay.
A little color on it. It was a competitive solicitation. There were competitors from the United States, from the UK, and from Europe. They selected Genasys, which is terrific. It's a testament to the team, the team here in the United States and the team in Europe, and it's, it was just a stunning win for us.
You know, we've mentioned in the last call, Brian, we were gonna begin to focus more on enterprise, as well as continuous SLED, and we were able to go out and win the largest enterprise in the world. That was terrific.
Yeah, really impressive.
Be a lot of work to do between now and, when we go live, but, we're all very pleased.
Absolutely. Definitely an impressive win. I'm curious, when do you expect to go live on that contract?
It will go live internally.
Was it booked?
Sorry.
It was booked in Q1. We signed the contract in, December 27th, I think.
Okay.
It's been an extended period of approvals, for releasing the press release, which we received, earlier today, the approvals finally. They've had the process ongoing since early January. It's taken over a month to get their approval. It surprised us that it showed up this morning. We scrambled a little bit to make sure we could get it out there as quickly as possible.
Got it. You-
You started to say go live. The current plan is that they go live internally, at the end of March, but won't begin to use it in a public forum for about 60 days after that, or just training and practice.
Got it. This is just for the GEM software?
Yes.
Is it?
It's all SaaS.
All SaaS. All SaaS, okay.
All SaaS. They had an incumbent system, Brian, that was on-prem. This is a big deal for Aramco holding this stuff up on the network.
Was the incumbent provider, was it, you know, one of the other large competitors, like an Everbridge or OnSolve or any color you can provide there?
Yeah. It was one of those.
Okay. I'm curious what you're seeing, you know, from your competitors more recently. I mean, by the looks of this deal, it seems like your win rates are improving. Obviously, Everbridge, both Everbridge and OnSolve kind of have some other stuff going on at the companies. You know, Everbridge is going through some restructuring, so I'm curious just if you're, if you're benefiting at all from, call it maybe some distractions at your competitors.
I can't speak to that, Brian. I know we've picked up a handful of salespeople that have been laid off by those companies, particularly Everbridge. You know, we booked $6.1 million in SaaS in our first quarter, which was the biggest we've ever done. Obviously, it's being driven by Aramco, but we also picked up several counties again here in California.
I mentioned in my remarks we're currently selling our software in 23 states in the union and now 7 countries, soon to be 8. I also mentioned our pipeline has grown by 25% over the last handful of months. It's behaving the way we expected it to.
You know, with all due respect to the competitors here in the United States, they might struggle some, but they're still formidable competitors.
Right. That makes sense. One last one, and I'll cede the floor here. I'm curious, Dennis, if you could provide any color on kind of why the outsized move in gross margins this quarter. I guess in the back half, you're expecting them to get closer to, you know, the 50% range. Is that correct?
Yes, we are. You know, quarter-over-quarter, the decrease as we saw over the last half of last year's fiscal year, the margins decreased last year as well. They picked up in the fourth quarter of last year, but that was because of the volume. If you take a look, $16 million of revenue in the fourth quarter of last year versus $10.5 million this quarter, there's, you know, you pick up several points of, just from additional absorption, based upon that volume of revenue.
Once we get, probably through, mostly through the second quarter, we should see that we'll have, the orders that we'll be shipping will be based upon the orders that we have booked from the higher, list prices of our products. We have repriced that. It just takes time to get into the system and, be part of the backlog.
Understood. Okay. Thank you for the time today, gentlemen.
Thank you.
Our next question comes from Mike Latimore from Northland Capital. Go ahead, Mike.
Great. Yeah, thanks very much. Yeah, congrats on the strong SaaS bookings there. That's exciting news for sure. Just to be clear, is the $6.1 million, is that a annual contract value or total contract value?
It's the contract value total.
Total contract. Okay. Got it.
Multiple awards. Yeah.
Yep. Got it. It doesn't seem like you guys have seen really any sort of macro effects on sales cycles or anything like that. I mean, it sounds like things are going very strongly. Any, have you seen any kind of, you know, elongation of sales cycles in the enterprise market or public sector for that matter? I guess it doesn't really seem like it, but just wanna check 'cause so many other SaaS companies have seen that.
I'd say no from a SaaS perspective, from our hardware perspective. I'd probably put a little color on that, Mike. Given where we came from with a very low number.
Mm-hmm
... we've been able to grow it very nicely. From a hardware perspective, the international was most affected in our bookings from a COVID kind of thing.
Sure. Mm-hmm.
... APAC, Middle East, and even Europe, were terrible over the last three years. Frankly.
Sure
... they were coming down, began coming down prior to that. I'd say on a positive note, we see pipeline growth in all of our international markets.
Mm-hmm
We expect as I mentioned in my remarks, significant uptick in international bookings this fiscal year.
Yeah. Okay. That's great. In terms of the Aramco win, which was, you know, competitive and a replacement, are there one or two things that stand out here as to, you know, why you won the deal from a technical perspective?
I can't answer that. I have my own opinion, but I don't have the information.
Mm-hmm
... from the Aramco folks. You know, we're just getting started with them.
Yeah
... you know, part of it, Mike, is from a technical perspective, our team in Madrid has been working and working with network providers around the world since the early 2012 timeframe. They're.
Mm-hmm
... very comfortable with the large network providers. We put a compelling technical case together. They selected us. I'm sure we'll get more color from them as we continue to work with them over the coming months.
Yeah. Just last, it sounds like the pipeline growth has been great. If you look at that pipeline, you know, is there a way to rank order the applications in terms of their, you know, representation in that pipeline? You know, has one clearly got a bigger chunk of the pipeline, you know, than another here among the three main ones you have?
Well, if you look at the 3 being GEM, Zonehaven, and IMNS by its nature will drive higher revenue, but lower SaaS.
Mm-hmm.
GEM and Zonehaven, as I mentioned in my remarks, they're being combined.
Mm-hmm
... and we've seen many counties, now buy both. you know, have one and buy both. As I mentioned, Monterey bought both to begin with.
Mm-hmm
That's significant from us from a revenue perspective. If you look at SaaS combined, both SLED and Enterprise, it's a great opportunity for us.
Mm-hmm. Yeah. Okay, great. Thanks a lot.
Thank you.
Our next question comes from Ed Woo from Ascendiant Capital. Go ahead, Ed.
Yeah. Congratulations on the quarter. My question is on the increase in operating expenses of $5 million. How much of that is in sales and marketing versus development? When can you really begin to leverage the revenue growth on your margins?
I don't have it, sitting here in front of me. What was more R&D or, sales and marketing, Dennis, to you?
I don't... I can't give you a breakdown. My sense would be that it's more sales and marketing oriented than with strictly R&D development. We've added since a year ago, we now have our first Chief Revenue Officer and as Richard announced, we have Vice President of Marketing. You know, they're leading and building out their teams. It's probably gonna be... We've added a substantial number of sales and marketing folks already this fiscal year. It's more likely sales and marketing.
In terms of when the lever starts to hit, you know, the, our revenue, the Dennis remark, our revenue for Q1 was $900K up how much?
It was up, gosh, $200,000.
Yeah. It was a significant percentage. As we book more orders, and it, you know, it's a curve that's sort of asymptotic. It will begin to improve, you know, certainly by the end of this year, I'd expect.
Great. Well, thanks for answering my question, and I wish you guys good luck. Thank you.
Thank you.
Our next question comes from Kris Tuttle from IPO. Go ahead.
Hey, thanks for taking my question. I just actually have a couple of them. Just out of curiosity, what was the time since when you first started selling or marketing on the Aramco deal to the close? What was the chronological time on that?
It was shockingly quick for the Middle East, particularly. It's just a rough order of magnitude, Kris, our Dubai office became aware of the opportunity in the fall. There were multiple demonstrations and responses to RFIs. A proposal was submitted in December, I think, and the award was made on December 27th. That's shockingly fast for an enterprise of any size, notwithstanding this was the largest enterprise in the world.
They were determined to get it under contract. I think they have some issues with their existing system that was the impetus to sort of fast-track this. It was again a great team win.
Yeah, that's helpful, and that is for an enterprise sale, that's a speed of light.
Yeah.
One other question just in terms of the overall business. You know, you talk a lot about, you know, the strength in APAC, Europe, Middle East. It kind of begs the question, you know, did you see some weakness or a slow ramp or any kind of delay pattern in the US where deals maybe needed longer approvals? You know, you cited all the other geos except for the US in terms of strength, so I'm just curious if we should be, you know, thinking about that, what your observations are?
The international, I mentioned a moment ago, has been poor for the last handful of years, and most recently driven by COVID shutdowns. Our bookings from international have been down substantially. I see them returning to normal levels beginning this year. Our domestic orders have historically been somewhat lumpy, and they remain somewhat lumpy, where second half is typically substantially stronger than first half, and that's what we're seeing.
I think the U.S. is following the pattern it usually follows, and international is improving a lot.
Okay. I had two questions on the, on the technology side. One of them is, I know we've talked a little bit in the past about kind of a unified product category and name. Can you provide any kind of insight in, you know, where that is on the priority spectrum and what kind of timing there might be in terms of, you know, an upgraded unified product and branding around the software business?
Sure. We are endeavoring to do that. I mentioned in some of my remarks the unified protective communication platform. That's what we're calling it. That will include all the functionality of GEM, Zonehaven and IMNS. We will be rolling out a campaign on this late spring or early summer.
Okay. Then one other question on the technology side, and I'll hop off, is, you know, one of your, you know, one of the bigger names in the space, Everbridge, that's been around for a while. My question is about interoperability. Like them, love them, they're failing, they're succeeding, whatever. They signed a lot of large sort of contracts with governments and states to provide sort of emergency notification.
I'm wondering, is there an opportunity for Genasys, you know, on the interoperability side to come in and say, "Well, they won this award. You can't walk away from it because it'd be embarrassing." You know, we can provide some of the functions that you need now in terms of, you know, evacuation and other sorts of, you know, deeper software and data services.
What level of interoperability do you have with them, and is that a legit opportunity or does it not really hit your radar screen?
We have a handful of states in our, won't call it in a... Certainly not in our backlog yet, but we are pursuing multiple states across the union.
You'd be able to be interoperable with them, or they'd have to replace them?
Well, we'd certainly want to replace them. Our system can operate, the Everbridge channel, the Everbridge mass notification channel.
Okay. All right, great. I'll.
In many cases, we've installed our IMNS systems here in California and other states. Counties and cities may in fact have Everbridge or OnSolve, so it becomes a channel that's on the GEM platform.
I see. All right, I get it. Thanks very much. That helps. All right, thanks, guys.
Okay.
Talk to you soon.
Welcome.
Ladies and gentlemen, a reminder to get in the phone queue, it is star one. Our next question comes from Brian Colley from Stephens. Go ahead, Brian.
Thanks for taking the follow-up. I'm curious if you could just talk about your visibility to returning to revenue growth, you know, from a hardware perspective in the second quarter through the fourth quarter. You know, it seems like you have enough backlog to do that. I'm just kinda curious how we should think about the growth trajectory...
You should think second half-
On hardware.
Second half higher than first half, for sure. Our first quarter revenue, by the way, was the second-largest in company history. In my remarks, I told you I think Q2, Brian, will be higher than Q1.
Mm-hmm.
It recovering very nicely in the second half.
Got it. When you mention in the press release, like, you expect continued growth, does that include-
Year-over-year.
Year-over-year for 2Q, like, including 2Q, correct?
The comment is full year to full year.
Okay. Got it. I wanted to ask about just the go-to-market strategy for software, and maybe some of the initiatives that Dennis Walsh is working on. Are you looking more at kind of partnering with, you know, you know, any type of resellers or channel partners to kind of help you extend your sales reach without needing to hire a bunch of additional sales reps? I'm just kind of curious.
Yes.
what you're doing from a channel perspective, and also what, just any initiatives that Dennis has kind of put in place that might be working so far.
International channels for sure. Domestically, I think we have one, so it's not a big piece of anything we do right now, but it's something we certainly are looking to go do. In terms of strategy, from an enterprise perspective, it's narrowing it down. We've been, frankly, taking a shotgun approach, Brian, on going after everything. Necking that down to very specific verticals.
I mentioned we've hired a VP of marketing, so our marketing effort will be then more pinpointed at large manufacturing, for example. With the automobile wins we've had and now Aramco, we'll be focusing on, you know, a handful of verticals as opposed to everything.
Got it. That's super helpful. I wanted to ask lastly just about Zonehaven and the progress you're making just on expanding, you know, first of all, just beyond California, but also internationally, and then also the integration with GEM. I wanted to get an update on how that's going.
Yeah, the integration with GEM is ongoing. It's as I mentioned to the prior caller, it's an initiative that we've called Protective Communications. This has all the functionality of mass notification and evacuation.
We've recently released software feature sets that include flood modeling and traffic modeling, which further enhances the platform and enables the first responders to determining how what zones they wanna evacuate, running the fire model, when the fire will hit that, and then how long is it gonna take for all the cars in that community to get out.
If the answer comes back that the fire will be there in 3 hours and it takes 4 hours to evacuate, well, that doesn't work.
We've continued to put the software feature sets that we think are very, very helpful to first responders in both the GEM and the Zonehaven platform, and we expect that platform to be combined and come out into the market as Protective Communications.
Okay. Got it. Just one last thing. I mean, for the Aramco deal, are there any, like, startup costs or anything, any expenses, you know, we should expect to hit the model over the next quarter or so as that deal goes live? Or is it just kinda turning it on with SaaS?
We're not hiring anybody else to prosecute the Aramco deal. It will be a significant focus of our software development team for the next handful of months, for sure. As part of the contract, there was a relatively small upfront fee that they pay us. Most of the upfront stuff will be done as we typically do our SaaS stuff.
Okay. Got it. Perfect. Well, appreciate all the time today, and congratulations on the big win.
Thanks very much, Brian.
Our next question comes from Martin Yang from Oppenheimer. Go ahead, Martin.
Good afternoon. Thank you for taking my question. Again, another question on Zonehaven. Can you maybe outline a longer-term vision for Zonehaven and its sales process? Do you think that it will be, in future, sold more through as a feature of the GEM, as opposed to a standalone software offer?
The combined platform will be our go-to-market, Martin. You know, it's a process to redefine what mass notification is. It's not just getting notifications, but it's also getting relevant information of where and when the threat is coming from, whether it's from a hurricane or a river flooding or the disastrous things we've seen in California with the atmospheric rivers.
In that period of time recently at the atmospheric rivers, the communities were using it for warning people and evacuating people for avalanche, for debris flow, for the location of sandbags, for the location of fresh water. The utility of the GEM and Zonehaven platform was, you know, on stage here in California during that horrific weather event that took about 2 weeks. The application of the combined platform is not just forest fires.
It's any emergent situation where lots of people lives may be at risk.
Got it. Yeah, that's very clear. Thank you. Another question on current sales process. Were they currently sold in different ways and supported by the same team, or do they have, like, slightly different sales process between Zonehaven?
No, it's the same. When the SaaS sales team goes out, they're demonstrating the combined platform. In the case of Monterey, they bought, you know, the combined platform with both functions of GEM and Zonehaven. In Riverside, as I mentioned, they bought everything, but at 3 different times. They have GEM, they have Zonehaven, they have IMNS. As I said in my remarks, I think we'll see more and more of that out of the installed base as an upsell, cross-sell opportunity.
If I showed you the picture of the state of California, you know, you'll see that I think we're in 34 of the 58 counties, and 4 more in the contracting phase. Those counties that have GEM and not Zonehaven and not IMNS, it's all an opportunity.
Got it. Thank you. That's all for me.
You're welcome.
At this time, there are no further questions. I would now like to turn it back to management for any closing remarks.
Thank you. We regularly discuss our business at investor conferences throughout the year. Later this month, we will be participating in the Winter Wonderland Best Ideas Virtual Investor Conference. Additional investor conference presentations are planned throughout this fiscal year. Thank you for participating in today's call. We look forward to speaking with you again next quarter when we report fiscal second quarter 2023 results.
Thank you. This does conclude today's conference. We thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.