The Glimpse Group Q2 2024 Earnings Call Transcript

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February 14, 2024

There are 4 speakers on the call.

Operator

Welcome to the Glynx Group Q2 Fiscal Year 20 24 Financial Results Webinar. As a reminder, this conference is being recorded.

Operator

The earnings release that accompanies this call is available on the Investors section of the company's website at https 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 materially from those described in the call. 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 Liron Bentovin, President and CEO of The Glimpse Group. Liron, the floor is yours.

Speaker 1

Thank you, everyone, for joining us. I am pleased to welcome you to the Blooms Group's 2nd quarter fiscal year 2024 financial results investor call for our quarter ended December 31, 2023. During this quarter, we made substantial progress on our strategic realignment of Glimpse towards providing immersive enterprise software and services that are driven by spatial computing, Cloud and AI or Special Core, as we'll refer to it internally, led by our subsidiary company Brightland Interactive. As a reminder, we strongly believe that in order for the immersive industry to reach true scale, the compute must be processed in the cloud and not on the headsets or a computer device. To reach its full potential, we believe that immersive technology must evolve From worlds and experiences created by humans for consumption by humans to synthetic worlds whose creation is directed by humans, executed by AI in the cloud and whose consumption is for both humans and non humans, such as robots, drones and AI avatars.

Speaker 1

This is one of the key philosophies behind Special Core and an important competitive advantage if we are to be at the center of this. We are not making this journey alone. We are working closely with some of the largest players in the tech industry, such as NVIDIA and Microsoft, as well as with some of the leading hardware players in the space. We serve as middleware connecting their cloud and AI technologies and services with the needs of enterprises and organizations creating a win, win, win. Our spatial core pipeline continues to grow rapidly with several multimillion dollar contracts that are very close to the goal line.

Speaker 1

These contracts are with multiple of Department of Defense entities as well as large enterprises and organizations and will be initially executed over the next 12 to 18 months with a potential for significant recurring software components after that. While we cannot guarantee that these opportunities will materialize into signed contracts, we have good reason to believe that they will in the coming weeks months. And when they do, the impact on Glimpse should be transformative. In parallel, the immersive industry continues to develop as demonstrated by the recent launch of the Apple Vision Pro. The Apple Vision Pro pushes immersive experiences to the next level and engages with new audiences.

Speaker 1

The headsets launch has ignited new interest in immersive solutions, and we have started working with a variety of customers, ranging from federal agencies to large and small enterprises on a variety of enterprise applications and use cases. As we discussed in our last call, we expected our strategic transition to result in short term reduction in revenues as we divested and shut down non core operating assets and reduced our expenses targeting other nonessential opportunities. We expect this revenue decline to stabilize in Q1 of calendar year 2024 and growth to resume in calendar Q2 of 2024 as we ramp up spatial core revenues and as our other remaining subsidiary companies execute on their growth plans. Our other major subsidiary companies Curiel, Sector5 Digital and the newly formed Gloos Learning are focused on enterprise use cases, including lifelike3dmodeling, robust augmented reality experiences, virtual reality corporate training and education, both for healthcare, K-twelve, higher learning, recent customer contracts include Walmart, Colgate and NYU Langone Hospital to name a few. As Mehdi Danu will detail in his prepared remarks, while we have increased our investment in Special Core, We have also taken major steps to reduce our operating expense base.

Speaker 1

We are now positioned to reach profitability when we return to prior revenue levels. We will continue to monitor our expense base and adjust it as needed in a prudent manner. With that, I will now turn it over to Meydan Rothman, Pulis' 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 Q and in 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 the calculation of adjusted EBITDA and other non GAAP measures, Please refer to the MD and A section of our 10 Q filings, which you can find on our website under SEC filings.

Speaker 2

Revenue for the 3 months ended December 31, 2023 were approximately $2,080,000 compared to approximately $2,950,000 for the 3 months ended December 31, 2022, a decrease of 29%. Revenue for the 6 months ended December 31, 2023 were approximately $5,180,000 compared to approximately $6,900,000 for the 6 months ended December 31, 2022, a decrease of 25%. This decline is in line with our previously announced expectations as we continue to, a, Strategically transition our business from predominantly immersive marketing driven projects to enterprise scale spatial computing cloud AI driven immersiverecurring software solutions and B, as we divest non core operating assets. Gross margin for Q2 fiscal year 2024 was approximately 68% compared to 70% for Q2 fiscal year 2023. As we complete our strategic transition, we expect our gross margins to continue to remain in the 65% to 70% range and potentially increase afterwards.

Speaker 2

While investing in the development of our spatial core solutions, we have continued to reduce non core cash expenses. In the aggregate, we have reduced cash expenses by approximately 50% from their high. Our operational cash breakeven point is now approximately $3,000,000 revenue per quarter for $12,000,000 annually, excluding potential growth investments. For relative reference, our Q1 fiscal year 'twenty four revenue was $3,100,000 and our fiscal year 'twenty three annual revenue was approximately 13,500,000 figures that we believe are attainable once some of the large contracts we have in the pipeline materialize. Adjusted EBITDA loss was $1,330,000 for the 3 months ended December 31, 2023, compared to $2,600,000 loss for the 3 months ended December 31, 2022.

Speaker 2

Adjusted EBITDA loss of $2,600,000 for the 6 months ended December 31, 2023, compared to a $3,640,000 loss for the 6 months ended December 31, 2022. The reduced EBITDA loss for both periods was driven by the cash operating the reduction in cash operating expenses. As of December 31, 20 23, the company had cash and cash equivalents of $5,200,000 The company has no outstanding corporate debt or preferred I'd now like to pass it back to Leron for some closing remarks, after which we will begin our Q and A session.

Speaker 1

Thank you, Meydan. Our special core initiative could open up new frontiers for immersive technology and is a key element in our future. We are making significant progress and expect strong revenue development in the coming months. In parallel, we have positioned our other subsidiary companies to be cash flow positive and achieve profitable growth as they execute on their plans. I thank you all for your interest and support of the Blues Group.

Speaker 1

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

Operator

Thank you, Leron. We will now be conducting a question and answer session. The first question today is coming from Casey Ryan from Westpark. Casey, your line is live.

Speaker 3

Good afternoon, gentlemen. Hey, it was a better quarter than we certainly had expected. So congratulations, that's Good job, I think. Of the $2,100,000 do you consider all of that to be part of the core business and the units that we're sort of building out forward or do you think there was some revenue from sort of non core elements built into the quarter?

Speaker 1

Casey, thank you for joining us and for your question. I would consider all of the revenue that we have in this quarter to be part of the pieces that are moving forward. There's a couple of other things we're in the process of doing, but kind of At this point, all the revenue pieces that we have in the $2,100,000 are part of the future of where we're going.

Speaker 3

Okay, great. Terrific. And then the 68% gross margin number, I think was good and has sort of in the range that you've indicated is sort of where we expect the business going forward. On the DoD contracts, which are exciting and sort of meaningful from a revenue perspective, Are those similar just in structure or because they're government or is there some other structure that like maybe on the margins maybe sort of A little below corporate or a little above corporate maybe. I'm sort of curious if you can give us some directionality on what the margin profile of those revenues might look like?

Speaker 1

I would initially expect those margins to be in line with our general kind of range. So kind of as we're working on these kind of It will vary because they'll have different milestones and kind of different pieces that will come over the next hopefully year as we sign these. But the general margin on those contracts should be in that 60% to 70% range initially. And then as we go into the recurring elements down the road, they should be higher.

Speaker 3

Okay, terrific, terrific. And then sort of bigger picture, I think you actually made a really good point about Sort of immersive experiences and, let's say, tools and techniques, training and different applications need data processing in the cloud. Will that be part of the service offering from the Glynx Group and our subsidiaries, sort of some capability to access that or will we just sort of stay in sort of enabling software middleware type of space and sort of allow all that data processing to happen elsewhere?

Speaker 1

Our partners such as NVIDIA and Microsoft, they've built pretty amazing solutions out there. And kind of what we want to do is tap into those capabilities that are constantly evolving and we get a front row seat to see what they're kind of working on, even some of the things that are not in the public domain yet. And then really help our customers on the other end take advantage of these solutions. And kind of that's where we're kind of positioning ourselves. So we don't want to reinvent the wheel and definitely not compete with our big partners, but we want to take what they're building and enable our customers to use those smartly.

Speaker 3

Yes, that makes sense. Okay, terrific. And then one sort of Balance sheet question, I guess, there's 2 components, I guess, as you trim down the business. There's a goodwill figure for about $10,000,000 on the asset side and then a contingent liability number that between the current and noncurrent is about $5,000,000 terms of contingent liabilities related to acquisitions. Do those numbers change meaningfully as you get rid of non core assets?

Speaker 3

Or are those kind of all related to core pieces of the business today?

Speaker 1

So all the ones that are in the balance sheet as of the reported dates are tied to pieces that are part of our business. We're constantly looking at goodwill and kind of I'm not a big fan of the concept and therefore we take a kind of Pretty aggressive approach to eliminating it when possible. And as we look at the contingent liabilities, they're tied to future performance such that we're expecting and they will kind of be paid out and some are in equity and somewhere in cash as those milestones are met.

Speaker 3

Yes. Okay, good. That's helpful color. And then in terms of the contingent liability piece, What's the mix roughly? Is it fifty-fifty sort of cash and equity?

Speaker 3

Or is it sort of eighty-twenty one way or another? Of course, I can look it up, but I'm asking Be a teacher for help here.

Speaker 1

I'll defer to Meadell on this one.

Speaker 2

Hey, the majority of it is cash.

Speaker 3

Okay, great. That's a very helpful answer. Well, thank you. It feels like a constructive quarter. I'll sort of get out of the way here and turn over other folks, but thank you for taking my questions.

Speaker 1

Thank you, Casey.

Operator

Thank you. There were no other questions at time, I'd now like to turn the call back over to Liran for his closing remarks.

Speaker 1

Thank you. I would like to thank each and every one of you for joining our earnings conference call. We look forward to continuing to update you on our ongoing process and growth. If you are unable to answer any of your questions, please feel free to reach out to us directly. Thank you.

Operator

Thank you. This does conclude today's webinar. Thank you for your participation and have a wonderful day.

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Earnings Conference Call
The Glimpse Group Q2 2024
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