The Glimpse Group - Q3 2024

Transcript

Operator (participant)

Welcome to The Glimpse Group Quarter Three Fiscal Year 2024 Financial Results Webinar. At this time, all participants are in a listen-only mode. A 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 Investor section of the company's website at https://ir.theglimpsegroup.com/. Before we begin the formal presentation, I'd like to remind everyone that the statements made on today's call and webcast, include 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 Lyron Bentovim, President and CEO of The Glimpse Group. Lyron, the floor is yours.

Lyron Bentovim (President and CEO)

Thank you, Kat, and thank you everyone for joining us. I am pleased to welcome you to The Glimpse Group's third quarter fiscal year 2024 financial results investor call for our quarter ended March 31st, 2024. During this quarter, we made concrete and tangible strides that validate our strategic transition to focus on providing enterprise-scale, spatial computing, cloud and AI-driven immersive recurring software solutions, or SpatialCore, as we refer to it internally, led by our subsidiary company, Brightline Interactive. We announced today that Brightline Interactive entered into a $4 million+ 12-month contract with the Department of Defense, DoD entity, for a spatial computing ecosystem, integrating AI workflows and accelerated compute for a variety of defense use cases.

The ecosystem will empower users to combine massive datasets and perform complex calculations to analyze and process spatial data in order to derive insights, make predictions, and perform calculations on one-for-one digital twins, addressing challenges in infrastructure, maintenance, operations, training, and simulation. In parallel, we are in the process of securing several additional multimillion-dollar SpatialCore contracts with multiple government, Department of Defense, and large enterprise customers. The short-term aggregate value of these contracts is in the $8 million-$12 million range. While there is no guarantee that some or all of these will come to fruition, we anticipate that a good portion of these will close before calendar year-end 2024, with additional potential in the pipeline for calendar year 2025. Each one of these potential contracts has significant growth elements built into them that could lead to significant annual recurring software revenue after the initial engagement.

We believe that spatial computing represents a transformative leap forward in how enterprises interact with the digital world, seamlessly integrating it with their physical surroundings. For example, this immersive technology enable us to create comprehensive digital twins that not only mirror complex real-world environments one to one, but also enhance our ability to interact, analyze, and make informed decisions with potentially transformative applications across industries, including industrial, military, public sector, infrastructure, training, simulations, robotics, and many others. As discussed previously, 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 an essential and innovative middleware, connecting their cloud and AI technologies and services with the needs of enterprises and organizations to facilitate immersive solutions and use cases at large scale.

To illustrate, last week, our subsidiary, Brightline Interactive, together with Cesium and NVIDIA, teamed up with the Geospatial Intelligence, GEOINT, Symposium 2024 to introduce Brightline SpatialCore, which uses AI workflows for complex computation on top of real-life datasets, enabling powerful, real-time, massive, data-driven digital twin and simulation applications. As we discussed in our last call, we expected our strategic transition to result in short-term reduction in revenue as we divested and shut down non-core operating assets, while we reduced our expenses targeting other non-core opportunities. Our other subsidiary companies, QReal, Sector 5 Digital, ForeTell Reality, and Glimpse Learning, continue to generate meaningful enterprise revenues, including recently from Snap, NHL, Galderma, Halliburton, and many others, and are cash flow neutral to positive from their internal operations.

Looking forward, we expect revenues to be generally flat to up in the coming two quarters as we finalize our divestiture plans, and then we expect revenues to grow significantly in Q4, calendar year 2024, and continue to grow into 2025 as we start recognizing the revenues from the DoD entity contract we recently signed and the others we expect to follow. As Maydan will detail in his prepared remarks, given the development I detailed, we are positioned to reach cash flow profitability in the coming months. With that, I will now turn it over to Maydan Rothblum, Glimpse's CFO and COO, to review the financial results. Maydan?

Maydan Rothblum (CFO and COO)

Thanks, Lyron. I will limit my portion to a summary review of our financial results. A full breakdown is available in our 10-Q and press release that were filed after market close today. Please note that I'll refer to adjusted EBITDA and other non-GAAP measures. For calculation of adjusted EBITDA and other non-GAAP measures, please refer to the MD&A section of our 10-Q filing, which you can find on our website under SEC Filings. Revenue for Q3 fiscal year 2024 was approximately $1.9 million, compared to approximately $3.67 million for Q3 fiscal year 2024, a decrease of approximately 48%. Revenue for the nine months ended March 31st, 2024, was approximately $7.1 million, compared to approximately $10.6 million for the nine months ended March 31st, 2023, a decrease of 33%.

The decrease for both periods reflects our strategic shift to spatial computing, cloud, and AI-driven immersive software solutions, which has resulted in a turnover in our historical customer base and our divestiture of non-strategic assets. Gross margin for Q3 fiscal year 2024 was approximately 70% compared to 67% for Q3 fiscal year 2023. We expect our gross margins to continue to remain in the 65%-75% range. As previously discussed, we have made significant reductions in our operating cash expense base, as reflected by a 62% reduction in our operating expenses this quarter compared to the same quarter last year. Our operational cash breakeven point is now at approximately $3 million revenue per quarter or $12 million revenue annually.

Adjusted EBITDA loss for Q3 fiscal year 2024 was approximately $0.89 million, compared to an EBITDA loss of approximately $1.13 million in Q3 fiscal year 2023. Theoretically applying Q3 fiscal year 2023 revenue, which we believe is achievable again, would have resulted in a solidly cash flow positive quarter, this quarter. Given our current level of revenues, and subject to the signing of some of the contracts Lyron mentioned, we expect to be cash flow positive from our operations commencing in September 2024 and onwards. In such a scenario, and given our current cash balance, we expect to be self-sufficient without needing any external funding. As of March 31st, 2024, the company had cash and cash equivalents of approximately $4.3 million. The company has no outstanding corporate debt or preferred equity obligation.

I'd now like to pass it back to Lyron for some closing remarks, after which we will begin our Q&A session.

Lyron Bentovim (President and CEO)

Thank you, Maydan. Over the last couple of quarters, we have executed on the strategic transition plan we have outlined. This morning, we reaped the first fruit of this execution. Over the coming months, we expect to make additional strong progress on our spatial core initiative and see significant progress, which we hope to publicly share with you. I thank you all for your interest and support of the Glimpse Group, and now I'll turn the call back over to the operator to take some questions. Kat?

Operator (participant)

Thank you. The floor is now open for questions. If you do have a question, please 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. If you'd like to submit a question on the web, simply click the Ask a Question button, type your question, and hit Submit. Please hold while we poll for questions. Again, ladies and gentlemen, star one to ask a question on the phone. At this time, I'd like to turn the call back to management for any closing remarks.

Lyron Bentovim (President and CEO)

I would like to thank each of you for joining our earnings conference call. We look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions, please reach out to us directly. Thank you, and have a great afternoon.

Operator (participant)

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