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spk00: Welcome to the Glimpse Group Fiscal Year 2022 Financial Results Conference Call. 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 press release that accompanies this call was issued at the close of market today and is available on the Investors section of the company's website at ir.com. theglimpsegroup.com. Before we begin the formal presentation, I would like to remind everybody 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 like to refer you to the company's website for more supporting industry information. The replay of this call will be available on the company's IR website under the Events and Presentations section. I would now like to hand the call over to LaRon Ventovim, President and CEO of the Glimpse Group. LaRon, the floor is yours.
spk06: Thank you, Sherry, and thank you, everyone, for joining us. I'm pleased to welcome you to the Glimpse Group's fiscal year 2022 financial results investor call for a year ended June 30, 2022. Glimpse's fiscal year 2022 was a transformational year, commencing with our NASDAQ IPO, ending with the addition of Brightline Interactive, and highlighted by consecutive record revenue quarters, high gross margins, strong organic growth, and several accretive acquisitions. As it relates to revenue, we had revenue, record revenue for fiscal year 2022 of approximately 7.3 million, representing 2.1X growth compared to the fiscal year 2021 revenues of approximately 3.4 million. This includes five months of sector five digital S5D acquisition, which closed on February 2nd, 2022. On a full as if fiscal year basis with full year of S5D revenues would have been approximately 9.8 million, almost 3X increase compared to fiscal year 21. Our acquisitions of Brightline Interactive closed on August 1st, 2022. Brightline generated over 5 million in fiscal year 2022. On a combined basis, we are at 15 million trailing annual revenue run rate. In other words, in about a year's time, we have grown our revenue base by 4.4x. We also continue to send record revenue on a quarterly basis with Q4 fiscal year 2022 revenue of 2.5 million, 2.5x growth compared to approximately 1 million for the same quarter last year, and sequentially breaking out a third quarter fiscal year 2022 records revenue of approximately $2 million. Importantly, our core software and services revenue, which excludes project revenue, grew by about 2.5x for the fiscal year, while our gross margins were over 80%. Cash flow and balance sheet. As McDonnell will detail later in his prepared remarks, we remain well capitalized and have a clean cap structure. Our expense structure is highly variable. Approximately 85% of expenses are labor related, and we have a controlled annual net cash burn of approximately 4 million expected for calendar year 22, which is well below our cash balance. That being said, we continue to be mindful of macroeconomic development and their potential impact on our customers, our revenue pipeline, and our operations. and we maintain the flexibility to adjust our expense and organizational structure if needed. As our subsidiaries grow, and in combination with the continued development of the immersive technology industry, we have begun an internal evaluation of potential consolidations of some of our subsidiary companies in order to optimize operations, maximize go-to-market synergies, reduce overlaps, create stronger branding, and increase scale within our ecosystem. organic growth and acquisitions. We continue to see traction and revenue growth across industries, and we have an impressive roster of Tier 1 customers, which have significantly expanded with the addition of S5D and Brightline. While we're not always in a position to name these in press releases, you can review the customer and relationship slides in the corporate presentation on our IR website for a select list. In parallel to our organic growth, we continue to explore acquisitions and are in discussions with several potential targets that would lead to our creative acquisitions. As per all of our post-IPO acquisitions, to protect our shareholders, we remain committed to not issuing equity at below our IPO price of $7 a share as floor issuance. In addition, we will continue to strive to structure acquisitions intelligently. primarily performance-based and accredited. While there is no guarantee that this will materialize, we do expect to complete additional acquisitions during this calendar year. IP. We continue to expand our intellectual property assets with four recent new patent issuances. Our seventh and eighth US patents were for a virtual reality system cross-platform, allowing for simultaneous interaction across viewing platforms and a marker-based positioning of simulated reality relating to a system for presenting a simulated reality relative to a user's position. Our 9th and 10th US patents were transferred at the close of Brightline Interactive Transaction and are for an immersive ecosystem and system and method for generating an augmented reality experience. We have several more patents in process and view our patents as forward-looking strategically positioned with significant potential and importance when the immersive industry matures. With the addition of S5D and Brightline Interactive and our organic growth, we have achieved critical scale in an industry which solely lacks that. We are now on a trailing $15 million annual revenue runway without further growth or acquisitions, have over 200 immersive industry developers, engineers, and 3D artists, own 10 patents, and an impressive roster of tier one customers and partners across industries and geographies. With these, we are one of the largest independent VR and AR software and services companies. While the immersive industry remains an early stage industry, there has been a tremendous level of progress. With many of the leading companies in the world across industries, making initial forays with increasing enterprise adoption of ROI-based solutions. While we are operating in an increasingly challenging global economic environment, Glimpse is built for the long run, has the balance sheet and operating structure to withstand microeconomic headwinds, and is well-positioned to capitalize on the immense growth opportunities ahead of us. With that, I will now turn it over to Meydan Rasloom, blimpses CFO and COO to review the financial results. Medan?
spk01: Thanks, Liron. I will limit my portion to a summary review of our financial results. A full breakdown is available in our 10-K and in the press release that were filed after market closed 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 of our 10-K filing, which you can find on our website under SEC Filings. I'll quickly note that the fiscal year 2022 financials do not include the recent addition of Brightline Interactive, which closed on August 1, 2022. Brightline, or BLI, generated approximately $5 million of revenues in calendar year 2021 with 65% gross margins and positive net income. While I will focus my remarks on our fiscal year, I will mention that we achieved record quarterly revenue of approximately $2.5 million for Q4 fiscal year 22, a 149% increase compared to Q4 fiscal year 21 revenue of approximately $1 million. and a 22% increase compared to our previous revenue record achieved in Q3 fiscal year 22. That's the January to March 22 quarter of $2.1 million. Total revenue for the year ended June 30, 2022 was approximately 7.27 million compared to approximately 3.42 million for the year ended June 30, 2021. an increase of approximately 113% at the high range of our initial estimate of approximately 7.15 to 7.25 million pre-announced in July 2022. For the year ended June 30, 2022, core software and services revenue, which excludes project revenue, was approximately 4.18 compared to approximately 1.72 for the year ended June 30, 2021, an increase of approximately 143%. For the year ended June 30, 2022, non-project revenue accounted for approximately 58% of total revenue compared to approximately 50% for the year ended June 30, 2021. For the year end of June 30, 2022, software license revenue was approximately 0.55 million compared to approximately 0.34 million for the year end of June 30, 2021, an increase of approximately 62%. 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. Gross profit was approximately 83%, for fiscal year 22 compared to approximately 57% for fiscal year 21. The increase in gross profit margin was primarily due to an increase in non-project revenue, improved project management, and expanded utilization of our Turkey-based staff. On a go-forward basis, we expect overall gross margins to decrease to the 60% to 70% range due to the additions of VLI and S5D. Operating expenses for the year ended June 30, 2022 were approximately $12.37 million compared to $7.91 million for the year ended June 30, 2021, an increase of approximately 56%. These increases were driven by four acquisitions in fiscal year 22 associated infrastructure to support a greater revenue base and to increase expenses attributable to operations of a public company commencing from our IPO in July 1, 2021. Net loss for the year ended June 30, 2022 was 5.96 compared to a net loss of 6.09 million for the prior 2021 period, an improvement of 2%, primarily driven by increases in revenue, gross profit, and other income expense outpacing growth and operating expenses. Net cash used in operating activities was 4.94 million for the year ended June 30, 2022, compared to 1.21 million for the year ended June 30, 2021. This is primarily driven by operating expenses outpacing revenue and gross profit driven by four acquisitions made in fiscal year 2022, associated infrastructure to support a greater revenue base, and increased expenses attributable to operations of a public company. Adjusted EBITDA loss of $3.97 million for the year ended June 30, 2022, increased by $2.5 million as compared to $1.47 million EBITDA loss for the year ended June 30, 2021. To recap, we ended the fiscal year with a strong balance sheet of approximately $16.2 million in cash and an additional $2 million held in escrow for potential future performance payments related to the S5D acquisition. Cash balance decreased in Q1 of fiscal year 23, that's the July to September quarter, primarily to account for the cash portion of the Brightline acquisition, approximately $3.5 million in cash, including fees and expenses, which closed on August 1, 2022. We have no material cash liabilities, no preferred equity outstanding, no convertible debt obligations, and no debt. As Leron mentioned, we have a highly variable expense structure. We watch every dollar closely and are highly cognizant of the macroeconomic environment. Insiders continue to own a substantial portion of the company, approximately 40%, which we believe aligns us very well with the shareholder base at large. In this regard, I'd like to note that in conjunction with our earnings report, we also filed a form SA with the SEC to register executive founders and board of directors stock options and founder shares. As a reminder, Form SA registering the company's employee stock options was filed with the SEC approximately one year ago. The founder, executives, and board have not sold a single share in the company's history, nor is there any intention to sell in the foreseeable future. In fact, the group has been a purchaser of common shares on the open market, despite already having a large position in the company. As the largest shareholders in the company, we have a strong, long commitment to success and all the growth is in front of us. We view this registration as a technicality and a natural step in our development as a public company. I'd now like to pass it back to Liron for some closing remarks, after which we will begin our question and answer session.
spk02: Thank you, Maidan.
spk06: We are very proud of our achievements during our first year as a publicly traded company in establishing Glimpse as one of the largest independent VR and AR software and services companies. This is a very exciting time in the lifecycle of the immersive technology sector in general, and Glimpse in particular. The industry is coming together. Hardware, software, telecom infrastructure, market awareness, and enterprise adoption are all making significant strides in sync. Glimpse continues to demonstrate successful operational execution against its long-term growth strategy and is building scale through select accretive acquisitions, new customer attraction, partnership engagement, recognition by industry leaders, and advancement of IP. Looking ahead, we expect to continue on our strong growth path during fiscal 2023, both organically and via accretive acquisitions. On numerous fronts, we are well positioned to capitalize on the many industry opportunities and further strengthen our leading market position. I thank you all for your interest in and support of the Gleams Group. And now I'll turn the call back to the operator to take some questions.
spk00: Thank you. If you would like to ask a question by telephone, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Webcast participants, if you would like to ask a question, please type your question into the text box to submit. Our first question is a phone question from Darren Avadi with Roth Capital. Please proceed.
spk05: Hi, thank you. This is Austin on for Darren. I just have two. So one, I'm curious how you think about the long-term trajectory of more recurring revenue versus project-based revenue and how you're positioning your sales first versus engineering teams with respect to driving more recurring revenues. And also relating to that, I was just curious what the gross margin variation is between project-based versus non-project-based revenue, if any. Thanks.
spk06: Sure. So I'll take a stab at the first question and then I'll pass it to be done to answer the second question. So as we look at our revenue long term, we expect to have a very large significant portion of those being recurring software revenue. The industry is not there yet. All of the organizations and enterprises that are looking at this, they want customization, and a lot of our project revenue is basically taking our technology, our software, and customizing it to specific needs of these organizations that they start in. If you look at the last year, our recurring revenue element grew pretty significantly over the year before, but we expect that to continue to grow as we move into future years putting aside kind of on an organic basis. Obviously, kind of as we add acquisitions, sometimes they will add kind of more recurring revenue base, and that will kind of cause the revenue mix to go higher. Sometimes they would add more project base, and that will cause it to go lower. But overall, the trend is that the recurring software revenue is growing and will continue to grow as we move and the industry matures. Madame, do you want to take the second question?
spk01: I just add to the first one. As I mentioned in my comments, not far from 60% of our revenues were software and services versus projects. Last year was about 50%. We're definitely making progress on that end. We have a rule of thumb that a project needs to be at least 50% gross margin, but we've historically achieved higher rates than that. So let's just say somewhere between 50% and 60% gross margin on the project side. And on the software, the pure software obviously can be very, very high, north of 90%. And services tend to be somewhere between 70% and 90%, depending on the type of service or maintenance.
spk05: Got it. And I appreciate that. And just one last quick one for me. I'm curious, as time goes on, you do more projects. I know you guys kind of own the underlying IP. You know, are there any learnings after you do a new project that would then carry over to the next that could, you know, come in the form of cost savings, thereby maybe improving gross margins over time?
spk06: Always. So, again, kind of to make sure kind of we are very clear, we do not do work for hire. Kind of all of our projects are basically enhancing our solutions and our technology. And there is always a learning that comes with it, but many times an improvement to our software and products that comes from that. So that's kind of the strategy has always been to grow our products by investing efforts into our projects.
spk02: Got it. Great. Well, I appreciate you taking my questions. Thank you. Thank you.
spk00: As a reminder, just star 1 on your telephone keypad if you would like to ask a question. Our next question is from Benjamin Pigott with EF Hutton. Please proceed.
spk03: Good afternoon. This is Ignacio Fernandez calling on behalf of Benjamin Pigott from EF Hutton. First of all, thank you for your time today and congratulations on another great year. You mentioned that Glymphs began an internal evaluation of potential consolidation opportunities. Can I just get a little bit more color on that and what that looks like?
spk06: Sure. And thank you for taking the time to join our call. So as we look at the industry growing and our companies growing, as they grow, sometimes there is overlap. It could be a technological overlap. It could be a go-to-market overlap. And as we are constantly striving to build scale within our companies, we're looking at our companies, understanding how they fit vis-a-vis each other. And when we see kind of situations where there is a clear overlap, where there's economies of scale in terms of building, kind of taking the same technology and using it for multiple use cases, or kind of taking the same go-to-market approach and using it across a couple of products, we're looking at consolidation, which allows our companies to be more efficient. So that's a process we're undergoing right now internally. And if and when we achieve kind of results, obviously we'll share that with the market. But at this point, it's an internal process that we're evaluating.
spk02: That's great. Thank you so much.
spk00: Thank you. Now I would like to turn the conference back over to Mark Swallenberg with MZ Group for our questions online.
spk02: Thank you, Cherry.
spk04: So just one writing question, guys, but the question is a good one. Are there any plans to acquire further companies that would add to the portfolio within the next quarter or two or anything you can add on there? add color on regarding that?
spk06: Sure. Thank you, Mark. It is a good question, and that's something that we're spending a lot of time on. We have a very, very strong pipeline of companies that are interested in joining Glimpse and that have solutions that kind of would enhance the Glimpse portfolio. So we are in active conversations with quite a few of them across geographies, across kind of different use cases within the technology, And we are kind of in the process of evaluating their fit into Glimpse and our ability to make them better as they make us better. And obviously kind of we will only do transactions that are accretive to shareholders. But I do expect, again, no promises since kind of you don't know what deal you've done, that we will have additional transactions to report over the next couple of quarters.
spk02: Okay, great.
spk04: And with that, Leron, I will turn it back to you for some closing remarks.
spk06: Thank you, Mark. I would like to thank each and every one of you for joining our earnest conference call. We look forward to continuing to update you on our ongoing progress and growth. If you are unable to answer any of your questions, please reach out to us directly or through our IR firm, MZ Group.
spk00: Thank you. This does conclude today's webinar. Thank you for your participation and have a wonderful day.
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