The Glimpse Group Q4 2023 Earnings Call Transcript

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September 28, 2023

There are 5 speakers on the call.

Operator

Welcome to the Glimpse Group Fiscal Year 2023 Financial Results Webinar. At this time, all participants are in a listen only mode. Question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. The earnings release that accompanies this call is available on the Investors section of the company's website at https Semicolon/ir.

Operator

Theglimpsegroup.com/Before we begin the formal presentation, I'd like to remind everyone that statements made on today's call and webcast, including those regarding future financial results and industry prospects are forward looking and may be subject to a number of risks and uncertainties that could cause actual results to differ Please refer to the company's regulatory filings for a list of associated risks. And we would also refer you to the company's website for more supporting industry information. I would now like to hand the call over to Liran Bentovam, President and CEO of The Glintz Group. The floor is yours.

Speaker 1

Thank you, John, and thank you, everyone, for joining us. I am pleased to welcome you to the Glimpse Group's fiscal year 2023 Financial results investor call for year ended June 30, 2023. Glimpse's fiscal year Was highlighted by strong revenue growth year over year, combined with significant cost reductions and a strategic repositioning towards providing Immersive enterprise software and services that are driven by spatial computing, cloud and AI. Our 2023 revenue of approximately $13,500,000 a 85% increase compared To 2022 revenue of approximately $7,300,000 primarily driven by the acquisition of Whiteline Interactive and Sector 5 Digital. Since the company's IPO in July 2021, our annual revenues have increased by approximately 4x from an IPO base of approximately 3,400,000 While the immersive industry has evolved significantly over the past few years, it has yet to reach High adoption levels on either the enterprise or the consumer side.

Speaker 1

Over the last few months, we have seen a change in the market. Organizations are no longer just looking for one time proof of concept project to test out immersive technologies. They are looking to fully integrate immersive technologies strategically into many aspects of their business. The good news is that this change It's a sign of the beginning of the maturation period for the industry, and it will eventually lead to a more stable recurring revenue model. But in the short run, this has led to a significant increase in sales cycle and may impact short term revenues.

Speaker 1

In recent months, we've seen a few significant developments in the industry. Apple announced its first immersive headsets, The VisionPRO and MENA announced yesterday its next generation headset, the Oculus 3, both with enhanced spatial capabilities, Blending the physical and virtual worlds. Other large players are introducing advanced headsets as well. These are expected to push the industry Forward a step further. However, in our view, for the immersive industry to be truly unleashed And reach its vast potential, it has to first be untethered from the computing limitation inherent in current immersive technologies hardware, Doctor headsets, tablets and phones.

Speaker 1

When the processing and compute of immersive experiences are done at the cloud level And then transmitted to a headset or a device, the impact could be revolutionary. Powerful immersive experiences with endless use cases Throughout industries, driven by cutting edge spatial AI capabilities delivered over true 5 gs networks to devices With a far smaller and lighter form factor, recent development in spatial computing, cloud and NI, Combined with our internal capabilities and relationships on these fronts have driven us to the strategic decision to focus on developing By doing so, Glimpse can greatly expand the immersive capabilities and solutions it offers its enterprise customers, Provide those in scale, potentially leading to significant revenue growth driven by recurring software license and SaaS revenues. Our immersive cloud based development is powered by and is being done in collaboration with industry leaders such as NVIDIA, Microsoft, AT and T and the U. S. Military.

Speaker 1

In order to facilitate this process, we are streamlining our operations down to focus on 3 primary subsidiary companies, BrightLine Interactive, Q Real and Sector5 Digital. In parallel, we will explore various Strategic alternatives for our subsidiary companies, including raising capital into them, spinning them out, selling them or consolidating them into our main three This is not a straightforward transition, and it will require a glimpse to restructure internally, Invest in developing these new technologies while continuing to cut legacy costs. The short term impact may include the decline in revenues However, we view this as an essential move if we are to become a dominant software player in this larger scale industry. While further development and investment will be required to bring our vision to fruition, we have already begun to see adoption in the market. Recent examples include: BrightLine, alongside prime contractor BCI Solutions and subcontractor Purdue University, Was awarded a low 7 figure direct to Phase 2 contract with the U.

Speaker 1

S. Air Force. The overall solution utilizes BrightLine's spatial computing platform, combined with AI and machine learning elements to teach and operate robots using human tracking and immersive simulation environments in industrial settings. BrightLine also entered into a cooperative research and development agreement, CRADA with the U. S.

Speaker 1

Naval Surface Warfare Center, Dahlgren Division to adopt new technologies in end to end immersive hyperscale environments and simulator Bridgeline was recently selected to support a major immersive technology hardware provider to accelerate their computing interface into GPU enabled clouds with streaming and visualization capabilities. OpCo AR, a subsidiary of Curiel, Enter into a software license with Yves Rocher, a global skincare, cosmetics and perfume company to provide AI powered analysis and real time visual product recommendations. Cheerio also completed a paid engagement to create an immersive experience To complement the launch of Sabrina Carpenter's real world fragrance, Sweet Tooth on walmart.com via a virtual store and NFT experience in Decentraland. SPEAR XR, now part of S5D, entered into an initial agreement for 2 WebAR experiences with 1 of the world's largest consumer packaged goods companies, Which is expected to be deployed in commercial environments and accessed by consumers on mobile phones and tablets without a need to download an app, Potentially leading to additional WebAR experiences and widespread implementation. As Medan will detail later in his prepared remarks, We have taken significant steps to reduce our operating expense base and continue to maintain a clean capital structure.

Speaker 1

In parallel, we decided to raise capital today in a clean structure, and we are currently well capitalized to pursue this opportunity. With that, I will now turn it over to Meydan Rotmoom, Glimp's CFO and COO, to review the financial results. Meydan?

Speaker 2

Thanks, Leroy. I will limit my portion to a summary review of our financial results. A full breakdown is available in our 10 ks and the press release that were filed after market close today. Please note that I'll refer to adjusted EBITDA and other non GAAP measures. For a calculation of adjusted EBITDA and other non GAAP measures, please refer to the MD and A section of our 10 ks filing, which you can find on our website under SEC filings.

Speaker 2

Total revenue for the year ended June 30, 2023 was approximately $13,500,000 compared to approximately $7,300,000 for the year ended June 30, 2022, An increase of approximately 85%. The increase reflects the addition of subsidiary companies through acquisitions and new customers. Fiscal year Q4 fiscal year 2023, that's the April 23 to June 23 quarter, Revenue of approximately $2,900,000 a 16% increase compared to Q4 fiscal year 2022 revenue of approximately 2,500,000 Gross profit was approximately 68% for the year ended June 30, 2023, Compared to approximately 83% for the year ended June 20, 2022. The decrease was driven by the addition of DLI and F5D Lower margin project revenue. Adjusted EBITDA loss for fiscal year 'twenty three was approximately $6,450,000 Compared to EBITDA loss of approximately $3,970,000 for fiscal year 2022.

Speaker 2

During the fiscal year in recent months thereafter, we decreased the company's annual operating expense base by approximately $5,000,000 in aggregate Approximately 25%. We expect to continue to significantly reduce our operating expense base as we realign our operations. Our target is to reach cash flow profitability from our subsidiary company's operations, potentially as soon as Q2 fiscal year 24, it's the October to December 2023 period, excluding any growth investments. As Yaron discussed, S5D is an active operating entity of the company and is expected to remain one of our 3 core subsidiary companies Going forward, due to a slowdown in S5D's business relative to the assumptions made during its acquisition, it was determined that it would be appropriate to write down its goodwill and intangible assets totaling approximately $15,000,000 This was a key non cash driver in our net loss. We ended fiscal year 23 with approximately $5,600,000 in cash and equivalents.

Speaker 2

Today, September 28, 2023, We entered into an agreement with 2 institutional investors to raise $3,300,000 approximately $3,000,000 net of all fees and expenses, We have a registered direct offering at $1.75 per share, utilizing the company's S-three registration. That comes out to about 1,800,000 common shares that will be issued. There are no warrants. There are no other derivatives In the transaction, it's straight common stock. The transaction is expected to close during the 1st week of October 2023.

Speaker 2

Post closing, the company will have approximately $7,000,000 of cash on hand. We have no outstanding corporate debt, no convertible debt And no preferred equity obligations. I'd now like to pass it back to Leron for some closing remarks,

Speaker 1

Thank you, Meidhan. As we continue to reiterate, we are still in the early days of the immersive technology cycle. I think the immersive industry has reached the next step in its evolution, and the Glimpse Group has a unique opportunity to capitalize on. With the knowledge, IP and Tier 1 customer and partner relationships we have accumulated over the past 7 plus years As one of the largest independent software and services company in the segment, we have an opportunity to be a key part of this fundamental transformation of the immersive industry. Thank you all for your interest and support of The Blim's Group.

Speaker 1

And now I'll turn the call back over to the operator to take some questions. John?

Operator

Thank you, Liron. We'll start with any audio questions and follow that with some write in questions as time allows. Now our first question comes from Casey Ryan with Westpark Capital. Please proceed.

Speaker 3

Good afternoon, everybody. Thanks for the call today. There's a lot to process here, but one of the important things Going forward, I guess, have you thought about what's the right with the new three divisions and then sort of the business focusing maybe more around projects, Broadly, have you thought about what like target gross margin ranges might be like Maybe if it was all software, we would think 80s, but if it's projects, would you feel comfortable thinking sort of in that 60% to 70% range would sort of be An expectation that might be reasonable? Or what are your thoughts around gross margins as you move forward post realignment?

Speaker 1

So good afternoon, Casey. So first of all, kind of the reverse. We're actually focusing more on software rather than projects. So that's the exact reverse of the transition we're going through. So if you look at kind of where we are, kind of we have basically got a hybrid mix of probably 30% Software licenses in 70% projects right now.

Speaker 1

So we're going to try and morph that on its head over the coming quarters years. But I would look at margin of probably 60% to 70% over the next few quarters and then growing from there.

Speaker 2

Okay.

Speaker 3

And then this is a question for the future, but with these 3 distinct Units that we're laying out in the call today, do you believe that you might start providing percentage of revenue contributions from each just because I presume that like one of them or 2 of them may be bigger than like the other. But would you guys consider doing that kind of reporting moving forward just to add some sort of Depth to sort of the revenue breakdown outlook, I guess?

Speaker 1

So overall, kind of we haven't Slows and broken down revenues by subsidiaries for a variety of reasons. But the 3 big ones we're focusing on are Pretty balanced in terms of kind of between themselves when you kind of obviously, there's different fluctuations on a quarterly basis based on kind of what is recognized kind of in each period. But overall, they're kind of like 3 legs of our stool. So they're all 3 pretty sizable and balanced subsidiaries.

Speaker 3

Okay. Okay, good. And then as you think about strategically evaluating The other pieces of the business, maybe pieces that don't fit cleanly into this new structure, you have any expectation of what those structures might look like? Like are you focused on making them cash transactions? Or is it possible to Equity compensation or other royalty type of structures or Would you be focused on generating cash from selling off assets potentially?

Speaker 1

So we're looking at kind of basically how do we value of pieces that we are not seeing as strategic to our business. And we're open to a variety of structures, Spending them out and holding a piece to it to selling them out for either cash or some future royalties to integrating them into some of the bigger pieces we're keeping. We're exploring all of the options, and there's quite a few active discussions that we're undertaking right now. But it's not something that's going to drive the business in a big way. So it's more about allowing us to really focus our efforts and resources on The areas where we've seen significant traction and we think there's very big opportunities down

Speaker 4

the road.

Speaker 3

Good, great. And then probably the last question for me is just, Meta's Connect kind of their ARVR kind of conference was this week. Aside from us judging for ourselves what maybe the takeaways from that conference were, were there things beyond the hardware that like were meaningful or Thoughts that you might have around what Meta is saying that sort of constructive for the overall end market of AR and VR?

Speaker 1

So I think kind of obviously it showed OneMeta's commitment, renewed commitment to the space And this is still kind of a high priority for them, obviously, kind of they've changed the name into it, but It's showing kind of how they think about the industry. I think the headset is a step forward. It's Stake in a lot of the good features, not all of them, but many of them from the Pro, which was priced too high for the market in terms of kind of mass adoption And kind of reduce the price to a price that I think is very reasonable, while adding a very important kind of element of mixed reality, allowing you to mix The physical world with the immersive experience and really kind of signed up similar to how Apple is looking at their element. So I think you can see the trends from what Apple is doing and what they're talking about and what Meta is doing and seeing where the next phase of this industry is going to.

Speaker 3

Great. Thank you. Those are the bulk of my questions. So I appreciate you taking the time to answer those. Thank you.

Speaker 1

Thank you, Casey.

Operator

Okay. The next question comes from Stephen Kaye with SWK Consulting. Please proceed, Stephen. Hi. Thank you very much for the call.

Operator

Did I hear you say earlier that you were Going to do a raise at $1.75 a share. And if I did hear that, Is there any way for any of us to participate in that or that's purely a Single one off institutional commitment.

Speaker 1

That was a one off deal that happened Earlier today, just after the close, and it is not open to other participants. But Hopefully, if you're interested, you'll be able to find shares in the market. But this deal is a one time opportunity that helped us Put together in our balance sheet enough cash to allow us to invest in what we see as an amazing opportunity down the road.

Operator

Okay. The next question comes from Jordan Sottari with Beeline Advisory. Jordan, please proceed.

Speaker 4

Hello, gentlemen. Congratulations on all the success thus far. I wanted to ask, Do you guys foresee in the maybe coming 12 months, 24 months with the current market conditions, there'll be opportunities For more acquisitions, is that in the plans or would you say that you're Pretty much done in terms of going harder on acquisitions and right now more focused on Streamlining operations.

Speaker 1

So I would love to do opportunistic acquisitions. We are Actually getting a lot of very interesting opportunities in front of us. The unfortunate fact is right now there's a big disconnect The public markets where we're at, and that's where our currency is, and the private markets in terms of valuations. So for us to do any sizable acquisitions, we will need that to balance out or even go in our favor. So we will need to see public valuations go up and private company valuations go down for us to kind of Consider doing acquisitions.

Speaker 4

I would agree. All right. That's it from my side.

Speaker 1

Thank you, Jordan.

Operator

Leron, do you have any questions from your side?

Speaker 1

I do not see any. So I would like to thank each and every one of you for joining our earnings

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Earnings Conference Call
The Glimpse Group Q4 2023
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