Gorilla Technology Group Inc.

Thank you for standing by. This is the conference operator. Welcome to the Guerrilla Technology Group, Inc. earnings call for the first half of 2025. Guerrilla Technology Group is listed on NASDAQ under the ticker GRRR. As a reminder, all participants are in a listen-only mode, and the conference is being recorded. After the presentation, there will be an opportunity to ask questions. To join the question queue, you may press star then one on your telephone keypad. Should you need assistance during the conference call, you may signal an operator by pressing star and zero. Before we begin, we will read the forward-looking statement. Today's call includes forward-looking statements made pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and projections about future events and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially. Forward-looking statements often include terms such as expects, believes, plans, anticipates, may, should, and similar expressions. For a discussion of important factors that could affect GORILLA's results, please refer to our filings with the SEC. including our most recent annual report on Form 20-F. Except as required by law, GRILA undertakes no obligation to update or revise any forward-looking statements made on this call, whether as a result of new information, future events, or otherwise. I would now like to turn the conference over to Jay Chandan, Chairman and Chief Executive Officer, and Bruce Bauer, Chief Financial Officer. Please go ahead.

Thank you very much. For everyone who's dialed in, thank you very much for your support and attention. Gorilla technology has entered the second half of 2025 with more momentum and firepower and more market than any other time in our history. Our first half delivered about $39.3 million in revenue, which is a 90-plus percent year-on-year increase. But at the same time, we did so by executing on very large complex projects in multiple geographies. It's proof that our AI-driven security, intelligence, infrastructure solutions are in demand at the highest scale and that we can deliver them consistently at scale. Now, financially, we've also strengthened our position on every front. We have a rock-solid CFO who's reduced debt to $18.1 million, improved our liquidity with about $26.1 million of cash, and then further added another $105 million to our key in July through an equity raise, through Accelerate Growth. Now, these are just not numbers on a page. These are what we call, this is fuel for securing and delivering long-term high-value projects which will define the future of Guerrilla. Operationally, We've also signed three new projects over the last 30 days. I promised I was going to be announcing a lot more in the coming days in my previous call, and we will be making very many announcements shortly as well. Two projects were in Taiwan, one in the UK. The one in the UK was a significant extension of the existing UK customer we have, but the two new projects in Taiwan were new customers. These were strategic for us, not one-off wins alone. What it also does, it helps us strengthen our long-term recurring revenue base with new customers so that we can increase and expand further into these markets. Now, profitability remains a core discipline for Guerrilla. On a normalized basis, adjusted EBITDA and adjusted net income both came out about 5.7 million, demonstrating we're not just chasing top-line growth. Now, we are building a profitable, sustainable business. Our model now is structurally much stronger compared to where we were last year at the same time, shifting from a very seasonal, milestone-heavy cycle to multi-year contracts that will deliver steady revenue alongside, you know, what we call milestone upsides going forward. We are no longer just a business of supplying technology. We're delivering national scale AI cybersecurity, data intelligence platforms that change how governments and enterprises operate. But more importantly, with the platform partnerships and global delivery capability we have now in place, or which we have created and put in place, Gorilla is built to scale and we're built to win and were built to lead. I will pass it over to Bruce.

Thank you, Jay, for the kind words, and thank you also for the overview. Jay gave you the headline financial numbers. What I wanted to do is to dive into a few items and really highlight certain things. So the first is, as Jay mentioned, the first half revenue surged to $39.3 million. That is obviously a great start, up 90% year over year. One of the things you might notice is that the gross margin is in the low 30s. This is skewed lower compared to last year because of the mix. Last year was just essentially service revenue, which is higher margin. Nonetheless, we still maintain our full year forecast for gross margins in the 40% range. And that's given basically the mix that we see in the second half of the year. A couple other things is you notice that there are two one-off adjustments or losses that show up, and I wanted to explain those. So the first is a financing-related loss. This is primarily due to the exercise of warrants by warrant holders in the first half of the year. This is basically a pure accounting item. There's no cash impact, and that's essentially the loss or the difference between the exercise price of the warrants, which was 560 a share, and the prevailing market price, which was higher. So we have to book that for accounting purposes as a loss. So there's no cash impact. There's no impact on the business at all. Actually, we were collecting cash from the warrant exercise. There's also effects related losses. So, as we note, this is due to the, this is the lagged impact of the devaluation from the addition pound in 2024. So, what happens is there is certain work that was performed that went into the contract assets or the under revenue. And then this revaluation carried through to now, when we recognize it. I would note that the addition pound has strengthened substantially in the last few weeks, so from over 50 to almost 48. So, you know, we would expect this effect to be a little bit muted or, you know, even turn around in the future. Moving on to the balance sheet items. So we ended the first half with 26.1M in cash and subsequent to the close, we mentioned, as we mentioned, we did an equity offering of 105M of gross proceeds. So where that leaves us at the moment is we have about 114M of unrestricted cash. And we have 11.3M of restricted cash. You'll notice that the restricted cash figure now is much lower than at the end of the 1st half. So, you know, it was about 16M at the end of the 1st half. That is because we had a bid bond or a guarantee that was released. So that returned about 4.9M. And then going forward, we also expect to see the restricted assets drop even further. This is, first of all, due to the release of a customer guarantee to the tune of $2 to $3 million in our coming weeks. And also, we continue our debt pay down strategy. And so we should be able to net about $1 million from paying down a loan facility and getting restricted assets released from that. So, where we are at the moment with the debt position is it's 18.1M at the end of the 1st half. We're happy because this is down from 21.4M at the end of 2024. And we just continue to selectively paid on debt where we can release. Deposits that are tied to the debt. So, just to recap for those who. may not know this so we have a working capital facility it is secured by two things the first is a property that we own in taipei and then additional to the value of the property we were forced to pledge some restricted deposits you know so here's a bank account here's a deposit it's locked up and that is the collateral as we pay down the debt then we release the collateral usually on a one-to-one basis you know pay down the dollar debt release a dollar of collateral So it remains cash neutral for the company. And that's why we pay it down. Overall, we don't want to pay off all of that because it's at 3% in dollars. So it's quite cheap and it gives us financial flexibility. A couple of other things to note. The first is that after the equity offering that we did, the shares outstanding right now are 22.9 million. This is basically because we sold treasury shares and issued about 1 million shares in addition to that. One of the advantages to the equity offering, the way we structured it, is that we have 3.47 million pre-funded warrants. And this is where we have collected almost all of the cash, but we have not issued the shares yet. And those shares will only be issued when the pre-funded warrant holder wants them to be issued. So the share count should stay at 22.9 until that part starts to change. In terms of the outlook, so the first thing is I want to confirm that the backlog for this year, when we came in to the year, it was $93 million. And of course, we've delivered $39 million of revenue. So that is taken out of the backlog. We've added $4 or $5 million to the backlog. So the backlog remains around $59 million from now until the end of the year. So we are still confident in our guidance for this year of $100 to $110 million revenue for the total year. and then targeting EBITDA margins of 20% plus, and also targeting operating cash flow positive with the current contracts and the current structure. So that leaves us on track for your numbers. You can see from the way that we've spoken to you in the past, and we'll continue to speak to you, we don't stick our finger in the air and make guidance that way. We build it from our backlog, which is confirmed orders, signed contracts, that we are either working on or about to implement. We don't sort of look at our pipeline and take a guess. So for the next year, we can confirm that we have a backlog of $70 million. Once we firm up that backlog, then we will get to the market with a more formal guidance. So stay tuned on that front. And then, as Jay mentioned, we have several near-term opportunities, which we anticipate making some announcements about in the coming couple of months. So hopefully that will give you a better idea of the backlog for 2026 and also what the guidance is. 1 of the things we've talked about in the past, and I want to talk about again today is the funding strategy for future projects. So, you know, when we do announce this feature projects, what are we doing? The 1st step is obviously to look for project level funding where there is another entity. That is friendly to gorilla, or that is an SPV or or otherwise, you know, it's a customer that's funding a project. We look for that as a 1st step. The second thing is we look for debt. And then third is equity. As you note, we raise equity. So the sequencing was important there. We saw basically a need for equity to do two things. The first is to have that ready so that we could say to the customers, yes, we're ready to go. We have cash right here, right now, we're ready to start. The second thing is that the availability and the terms that you get for debt So we are now in the market for debt. We've engaged the bank, and we're looking for debt right now. So in the future, I anticipate that we'll be making more announcements about how we fund projects, and it will be with an emphasis on project level funding and on debt. With that concluded, Jane, unless you have anything else, we can move on to Q&A.