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spk03: Welcome to the Glimpse Group fiscal third quarter 2022 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 investor section in the company's website at ir.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 materially from those described in this 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. With that, I would like to now turn the call over to Lerone Bentabim, President and CEO of the Glimpse Group. Lerone, the floor is yours.
spk04: Thank you, Mark, and thank you, everyone, for joining us. I am pleased to welcome you to the Glimpse Group's Fiscal Third Quarter 2022 Financial Results Investor Call for our quarter-ended March 31, 2022. The Glimpse Fiscal Third Quarter was highlighted by record revenue, continued strong growth, high gross margins, the completion of our largest acquisition to date, new partnerships and Tier 1 customers, international expansion, and additional issued patents. These continue to confirm the adoption of our enterprise-focused VRAR software and services solutions. As it relates to revenues, we had record revenue for the three- and nine-month period, with revenue approximately doubling versus the previous year period. Q3 financial year 2022 was the first quarter in which we surpassed $2 million in revenue, compared to approximately $0.9 million for the same quarter last year, thereby breaking our previous record revenue of $1.7 million approximately achieved in December 21st quarter. This is especially notable as our Q3, January to March, is historically the slowest quarter of our fiscal year. Our reported numbers include only two months of S5D financials, which closed on February 1st, 2022. On a pro forma basis, if S5D had been included for the entire reported period, then our revenue would have been approximately $7.3 million for the nine-month period and approximately $2.3 million for the three-month period. Importantly, our core software incentives which exclude project revenue, also set a company record increasing by over 170% compared to the same three and nine month periods of fiscal 2021, comprising over 50% of total revenue. Given the current environment, I'm increasingly asked about our cash flow and general financial condition. This is an area of focus for us. The company's cash position as of March 31st, 2022, was approximately 20 million, including 2 million held in escrow for potential future performance payments related to the S5D acquisition. We have a clean capital structure with no debt, no convertible debt, no preferred equity, or any material obligations. Our expense structure is highly variable. Approximately 85% of expenses are labor related. And we have a controlled annual net cash burn rate of approximately 3 to 4 million expected for the calendar year 2022. which is significantly below our cash balance. We constantly monitor macroeconomic developments, our customers, revenue pipeline and operations, and maintain the flexibility to adjust our expense structure if needed. We continue to see customer traction, which demonstrate a variety of diverse applications and use cases for AR and VR technologies. We entered into a new paid customer agreement with several Fortune 500 companies, While I cannot name these currently, and these are initial contracts, they add to our existing list of top tier global customers across industries, further demonstrating our capabilities and ability to deliver to global enterprises. We believe that non-fungible tokens, NFTs, and blockchain technologies will be key elements of transacting and value creation in the metaverse. To that end, we continue to develop these capabilities internally and announce a paid partnership with the Commission, an Ethereum blockchain decentralized finance company and creator of the Commission token, one of the first digital assets principally backed by gold for the development of multiple 3D AR-based NFTs. In parallel to our organic growth, we continue to explore acquisitions and are in discussions with several potential targets. While there is no guarantee that these will materialize, we do expect to complete additional acquisitions during this calendar year. As demonstrated previously, we strive to structure acquisitions intelligently, primarily performance-based, accretive, and in full alignment with the long-term operational and strategic goals. During the quarter, we closed the accretive acquisition of Sector 5 Digital, S5D, the largest Williams acquisition to date, approximately doubling our revenue base. The acquisition closed on February 1, 2022, and the integration is substantially complete. Approximately 70% of the potential future acquisition proceeds are based on the achievement of significant revenue milestones over the next three years, with payments that are primarily equity-based, with a floor issuance price of $7 per share, like all of our previous post-IPO acquisitions. We expanded our global footprint with the launch of Glimpse Israel, the company's fourth operating location after the US, Turkey, and Australia, as an integral part of our international expansion into global hubs for technology, innovation, and bringing our solutions to these markets. During the period, we appointed Ian Charles to our board of directors as an independent director and chair of our audit committee. Ian is a strategic CFO with nearly 25 years of executive leadership experience in scaling software companies, as well as experience in public markets, M&A, and multinational operations. With the development of immersive industries, we believe that this is the proper time to strengthen the Gleams brand, marketing and digital strategies at the corporate level and across our subsidiary companies. To help achieve this, we appointed James Watson as chief marketing officer, CMO. James is a 20 plus year technology marketing veteran with significant immersive technology experience who has spent the last 10 years developing award-winning marketing programs across the VR and AR sectors with leading global companies. On the IP front, we continue to add to our intellectual property portfolio. During this quarter, Glimpse was issued its sixth U.S. patent for presenting a simulated reality adaptive user space and our seventh U.S. patent for a cross-platform virtual reality system allowing for simultaneous interactions across viewing platforms. With our growing and significant revenue base post-S5D acquisition, Our 150 plus VR and AR software developers, engineers, 3D artists, and business professionals, as well as seven issued patents, we believe that we are one of the largest independent VR and AR software and services companies. As I've mentioned before, I believe we are at the early stage of a hyper growth tech cycle, which will last for decades to come and become ubiquitous throughout industries. While we may be heading into more challenging economic times, enterprises' curiosity, Interest in immersive technologies and the metaverse remains high. Adoption is increasing. Glymphs is built for the long run. As the balance sheet and operating structure to withstand a potentially challenging environment and is well positioned to capitalize on the immense growth opportunities. With that, I will now turn it over to Meydan Rothblum, Glymphs' CFO and COO to review the financial results. Meydan.
spk00: Thanks everyone. I will limit my portion to a succinct review of our financial results. A full breakdown is available in our 10Q 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&A section, which is available in our 10Q filing which you can find on our website under SEC filings. Well, our fiscal year Q3 period, January to March, has historically been the slowest quarter of the year. We achieved record quarterly revenue of approximately 2.05 million for Q3 fiscal year 22. A 123% increase compared to Q3 fiscal year 21 revenue of approximately 0.9 million and a 21% increase compared to our previous revenue record achieved in Q2 fiscal year 22, October to December 21 of 1.69 million. Including S5D for the entire quarter, revenues would have been approximately 2.3 million. Total revenue for the nine months ended March 31st, 2022 were approximately 4.8 million compared to approximately 2.4 million for the nine months ended March 31st, 2021, an increase of 95%. Including S5D for the nine-month period, total revenue would have been approximately 7.3 million, an increase of over 200%. The increase for both periods reflect the addition of S5D and organic growth. For the three months ended March 31st, 2022, software services revenue were approximately 1.9 million compared to approximately 0.8 million for the three months ended March 31st, 2021, an increase of approximately 156%. For the nine months ended March 31st, 2022, software services revenues was approximately 4.3 million compared to approximately 2.1 million for the nine months ended March 31st, 2021, an increase of approximately 104%. The increase for both periods reflect the addition of S5D and organic growth. For the three months ended March 31st, 2022, software license revenue was approximately 0.13 million compared to approximately 0.17 million for the three months ended March 31st, 2001, a decrease of approximately 24% reflecting a difference in timing of license renewals. For the nine months ended March 31st, 2022, software license revenue was approximately 0.4 million compared to approximately 0.3 million for the nine months ended March 31st, 2021, an increase of approximately 39%. As the VR and AR industries continue to mature, we expect our software license revenue to continue to grow on an absolute basis and as an overall percentage of total revenue. For the three months ended March 31st, 2022, non-project revenue, i.e. VR and AR software and services revenue only, For approximately 1.2 million compared to approximately 0.4 million for the three months ended March 31st, 2021, an increase of approximately 176%. For the three months ended March 31st, 2022, non-project revenue accounted for approximately 58% of total revenues compared to approximately 47% for the three months ended March 31st, 2021. For the nine months ended March 31st, 2022, non-project revenue, again, VR and AR software and services revenue only, were approximately 2.9 million compared to approximately 1.1 million for the nine months ended March 31st, 2021, an increase of approximately 171%. For nine months ended March 31st, 2022, non-project revenue accounted for approximately 61% of full revenue compared to approximately 44% for the nine months ended March 31st, 2021. Gross profit was approximately 82% for the three months ended March 31st, 2022, compared to approximately 36% for the three months ended March 31st, 2021. Gross profit was approximately 85% for the nine months ended March 31st, 2022, compared to approximately 48% for the nine months ended March 31st, 2021. The increase for both periods was driven by the increase in non-project revenue, which produces higher margin, improved management of project revenue costs, sorry, improved management of project revenue costs of goods sold, and utilization of lower cost limps turkey staff. On a going forward basis, We expect overall gross profit to decrease from this level as S5D's gross profit has historically been in the 55 to 65% range, and it currently comprises about half of the company's combined revenue base. Operating expenses for the three months ended March 31st, 2022 were approximately 4.1 compared to 1.6 million for the three months ended March 31st, 2021. an increase of approximately 157%. Operating expenses for the nine months ended 30, sorry, March 31st, 2022 were approximately 9.4 million compared to 4.4 million for the nine months ended March 31st, 2021, an increase of approximately 116%. The increase for both periods was driven by employee headcount additions to support growth incurrence of expenses specific to Glimpse being the publicly traded company and the addition of three new subsidiary companies. We sustained a net loss of $1.8 million for the three months ended March 31st, 2022, as compared to a net loss of $1.2 million for the prior 2021 period, a loss increase of $0.1 million, or 42%. Net loss for the nine months ended March 31st, 2022 was $5 million, as compared to a net loss of $3.2 million for the prior nine-month 2021 period, a loss increase of $1.7 million, or 53%. This represents operating expense growth outpacing revenue and related gross profit, reflecting investments in all facets of the company to propel future growth, including the acquisition of three new subsidiary companies. Net cash used in operating activities was 3.7 million for the nine months ended March 31, 2022, compared to 1 million during the prior nine-month period, an increase of approximately 2.7 million. This is primarily driven by an increase in net loss of approximately 1.7 million, an increase in accounts receivable reflective of increased revenue period over period, and payment of performance-related bonuses. For the three months ended March 31st, 2022 adjusted EBITDA loss of 1.1 million increased by 0.6 million as compared to 0.5 million loss for the three months ended March 31st, 2021. Adjusted EBITDA loss of 2.5 million for the nine months ended March 31st, 2022 increased by 1.7 million as compared to a 0.8 million loss for the nine months ended March 31st, 2021. To recap, we ended the fiscal quarter with a strong balance sheet of approximately $20 million in cash, including $2 million held in escrow for potential future performance payments relating to the S5D acquisition. We have no material cash liabilities, no preferred equity outstanding, and no debt of any sort. That being said, we are in uncertain times. Given our cash balance, clean balance sheet, highly variable cost structure, and a controlled annual expected net cash burn rate of 3 to 4 million for calendar year 2022, we are well positioned to weather any potential slowdown in the economy if such were to occur and capitalize on any unexpected opportunities should those arise. I'd like to pass it back to Liron for some closing remarks, after which we will begin our Q&A session.
spk04: Thank you, Maidan.
spk00: Going back to you.
spk04: Thank you, Maidan, again. GLEAMS continues to demonstrate successful operational execution against our long-term growth strategy through selected creative acquisitions, new customer traction, partnership engagements, recognition by industry leaders, and advancement of intellectual property. These accomplishments are allowing us to build critical scale as we continue to position ourselves as one of the premier companies in the enterprise immersive technology industry. Looking ahead, despite heightened uncertainty in macroeconomic environment, we have a clear vision of the significant opportunities in front of us. Given our strong balance sheet, variable expense base, and unique diverse platform model, we believe we are well suited to weather the storm. In a world increasingly curious about and driving towards the next frontier of connection through immersive technologies, blockchain, and AI, we expect a strong remainder to our financial year 2022 through June 2022 and a strong revenue growth into 2023. I thank you all for your interest in and support of The Glimpse Group. And now I'll turn the call back over to Mark to take some questions.
spk03: Thank you, Laurent. If you'd like to ask a question, you can either type it in the chat box below or raise your hand by clicking on the raise hand icon. Alternatively, if you're dialed in by phone, press star nine. We'll start with any audio questions and follow that with any questions written in the chat box. And now for the first question, I will invite you to unmute your line. Please unmute, state your full name and organization, and proceed with your question.
spk05: Daniel with us. Hey guys, can you hear me?
spk02: Yeah, sure. Yeah. Hey, this is Dan Day with B Riley securities. How are you guys doing?
spk04: Pretty good. How are you?
spk02: Yeah, good. Thanks for, thanks for taking my questions. So, so first one, one kind of piece of this market I wanted to ask about, it seems like it's sort of the nearest term in terms of kind of being at a tipping point is sort of enterprise augmented reality. So just any sort of kind of recent anecdotes you might be able to point to that indicate we might be reaching sort of the tipping point where more companies are going to start integrating these types of augmented reality applications into their workflows. And then I guess as a side question on that, is the growth of this market highly tied to companies setting up sort of like private 5G networks. Like I'd imagine they need, you know, hyper-fast, hyper-reliable sort of networks that support any type of augmented reality. So is that one of the bottlenecks here in that as companies roll out these private networks, you might see more usage changes?
spk04: Yeah, no, I'll take the second half first and then go back and talk about kind of augmented reality at the corporate level as a whole. So we've been working with one of the leading 5G companies and a few of our subsidiaries have been working with them. And you hit it spot on. Kind of their view on the 5G implementation is requiring corporations to install those kind of 5G kind of repeaters, in a sense, in their networks. So kind of using the 5G technology from the telecom manufacturers and kind of providers to lever that and really get that kind of high speed, immersive, kind of high bandwidth usage within the corporate network. Where we're seeing right now a lot of traction on the augmented reality side is on the marketing side. And as companies are trying to reach out to Gen Zs, they are more and more using social media augmented reality as the best way of reaching and connecting with those consumers. And that is driving a lot of revenue growth at this point.
spk02: Got it. Thank you. Another one I had, you know, interesting partnership you announced on the NFT side during the quarter. I'm just wondering maybe if you could just lay out your thoughts on the, you know, complementary nature between Metaverse and then NFTs and blockchains on the other side. And I mean, longer term, do you kind of see the NFT blockchain space as an area for acquisition as well, given how kind of complementary it is to AR, VR? Or is it kind of more likely to be these sort of partnership type deals?
spk04: So I'll start with the end, or actually I'll start with a high-level philosophy. So I think blockchain technology is going to be a key participant in this immersive tech cycle. I believe that blockchain will provide three main elements that will drive forward the future of the metaverse. The first one is the obvious one in many ways, which is a currency that allows people wherever they are to interact with each other in whatever world they are in, in the metaverse. So that's obviously the first and most obvious use case. The second one is actually kind of identity verification. And as you go into the metaverse, you need to know who you're dealing with in certain points. Obviously people might want to keep their privacy, but if someone is going to show up in my virtual office, they better have kind of their kind of identity known to me. rather than having a kind of avatar unknown to me show up in my office. So blockchain will be a key element of determining and monitoring people's identity. And the third one relates to NFTs, which is probably the most important one, is going to drive the assets that will be utilized in the metaverse. All these assets, in a sense, would be NFTs, not NFTs that will be speculated upon but nfts that will manage the utility of those assets and that utility might change in different worlds the look and feel of that asset so as as artists like our company curial create 3d assets those will look differently in different worlds based on how those worlds are defined and then the ownership of those assets who owns them and how can you kind of exchange ownership in a variety of different ways in different worlds so we see a blockchain technology as key to the future of the metaverse We are right now working on multiple partnerships, but down the road, I would expect us to have some blockchain technology that will be part of Glimpse, whether we start a blockchain-focused company or we acquire one. But since we see that as a main element of the future, we will definitely be involved in that game.
spk02: Awesome. That's very interesting. Thanks, Laurent. And then just last one for me. I know you can't be specific company-wise, just in terms of M&A and your pipeline, just in broader terms, anything out there recently that's caught your eye as looking super interesting for acquisition or something you're starting to look, some segment of this landscape that you're starting to look at a little more closely?
spk04: Yeah, there's a lot of acquisitions, a lot of interesting companies out there. We are in multiple kind of advanced conversations with very interesting companies. And we're trying to constantly figure out how to do those deals in a way that is creative to our shareholders and creating win-win where kind of the companies coming in will add significant value to the Glimpse ecosystem and the Glimpse ecosystem will add significant value to those companies. So we are, I'm probably talking, weekly with kind of double figure companies kind of that are potentially interested in kind of becoming part of our ecosystem and some of those are going to be long-term opportunities and some of those might be shorter-term opportunities great well i appreciate all the time the commentary take any questions and i'll turn it over thank you okay and our for our next question i've gone ahead and
spk03: Ask them to unmute.
spk05: Hey, can you hear me?
spk02: Sure.
spk05: Hi, this is Dylan Hessel with Roth Capital Partners. Interesting questions. Two, if I may, on one of your more recent patents with cross-platform VR and how that relates to non-VR related devices, could you sort of elaborate a little bit more on how you see that playing out and what that might mean for cross-border interaction. And then as a follow-up, with the agreements you mentioned on the Fortune 500 side, what sort of timeline do you see in terms of those starting to generate revenue for you?
spk04: I'll take the second one first. So kind of these partnerships, they're going to generate revenue in this quarter that we're in right now. at least initial revenue, and then grow from that into kind of the next fiscal year for us. So those are kind of live happening kind of, and we're interacting with those companies and already working on some deliverables for them. In terms of the patent, the patent basically allows interactions between players that are in a VR setting with individuals that for some reason cannot be in VR, for example, using a tablet. And allowing the participants that are in the tablet to participate as same avatars in a VR setting. So the VR users will see the tablet user as another avatar in the space. And really expanding the ability of people that whether they have any disability that prevents them from going into VR or just don't have a VR headset with them at that point in time to participate as active participants. And we're already used that technology in some of our subsidiaries.
spk05: Great. Thank you.
spk04: Thank you. Mark, any more questions?
spk03: Hello? Sorry about that. It was on mute. Yeah, we got one more. I've gone ahead and unmuted them. Can you say your name and organization, please?
spk01: Yeah. Hello, this is Ignacio Bernaldez from EF Hutton representing Benjamin Pickett. First of all, congrats on the strong quarter. I was wondering if you could describe the integration process of Sector 5 Digital into the broader Glimpse Group subsidiary ecosystem. And then secondly, or any notable achievements from any of your subsidiaries that you'd like to touch on or highlight? Thank you.
spk04: So obviously kind of in terms of additional achievements, kind of we try and communicate as best we can things that we can talk about and we put press releases out and then recap those in the call. So I don't have any new ones that I can break just yet, but kind of hold on. I'm sure there'll be more coming out in the coming weeks. Regarding the integration of S5D into Glymphs, that's been actually very, very successful. Medana has led the integration on the systems and processes, but the important one is actually in the go-to-market. We've already had numerous opportunities where S5D is joining forces with Glymphs historical subsidiaries. going to market and opening opportunities to work together. There's numerous opportunities in the pipeline where S5D is working with Glimpse companies, as well as we are kind of exploring integration, S5D's kind of software, S5D Rush, into kind of our kind of main chassis element as well. So kind of we're looking at technology integration, but we're also working together on multiple projects opportunities with RFPs and SOWs that we're putting out together.
spk01: Great. Thank you.
spk03: All right. And if there's no more questions there, that does conclude our question and answer session. Leron, I'll turn it back to you for some closing remarks.
spk04: Thank you, Mark. 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 progress and growth. If you were unable to answer any of our questions, please reach out to us directly or through our IR firm MC group.
spk03: Thank you, everyone. This does conclude today's webinar. Thanks, and have a wonderful day.
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