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spk00: 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 the market today and is available on the Investors section of the company's website at ir.theglimpsgroup.com. Before we begin the formal presentation, I'd like to remind everyone that statements made on today's call-in 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. 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 Laurent Bentouven, President and CEO of the Glimpse Group. Laurent, the floor is yours.
spk04: Thank you, and thank you everyone for joining us. I am pleased to welcome you to the Glimpse Group's fiscal first quarter 2023 financial results investor call for our quarter ended September 30th, 2022. Glimpse's first quarter was highlighted by record revenue and continued momentum, driven by organic growth and several recent acquisitions. Revenue. We had record revenue for fiscal first quarter 2023 of approximately $4 million. representing 287% growth, or almost 4X compared to first quarter 2022 revenues of approximately $1 million. And a 58% increase quarter over quarter compared to Q4 financial year, fiscal year 2022, in which we had our prior record quarterly revenue of approximately $2.5 million. The quarter's financials included two months of our acquisition of Brightline Interactive, which closed on August 1st, 2022. As mentioned previously, Brightline generated over $5 million of revenue in 2021 with 65% gross margins and positive net income. As a reminder, we IPO'd in July 1st, 2021 with approximately 3.4 million annual revenues for financial year 21. a number we significantly surpassed in just this quarter alone. As McDonnell will detail later in his prepared remarks, we remain well capitalized and have a clean capital structure. With the core S5D and Brightline acquisitions complete, we do not expect to utilize our current cash balance as part of the purchase price of any acquisition we may make in the foreseeable future. We also remain steadfast in our $7 share IPO price minimum for any equity issuance, whether it be acquisition related or employee stock options or other. Trading cost structure remains predominantly variable. Through continued revenue growth combined with expense controls, we are committed to reaching cash flow neutrality from our operations in calendar year 2023. Just as Gleams has achieved critical scale in aggregate, we believe that there are key strategic advantages in creating more scale within our subsidiary companies. As such, we have begun the process of consolidating some of our subsidiary companies into larger core entities, a process which we expect will be concluded by year-end 2022. At the end of this process, we expect to have six to eight larger remaining subsidiary companies, which will allow us to maximize go-to-market and branding synergies, optimize operations, and reduce overlaps. Operational highlights. We successfully completed the integration process of Sector 5 Digital, Brightline Interactive, and Popo AR, our most recent acquisitions. We continue to see traction and growth across industries, and we have an impressive roster of Tier 1 customers, which has significantly expanded with the addition of S5D and Brightline. Recent examples include our subsidiary S5D completed a mid-six-figure contract for the development of a 3D interactive gamified experience and NFTs for a partner event held by a Fortune 50 global technology company. S5D also entered into a mid-six-figure agreement with a global pharmaceutical company to continue development of its award-winning interactive anatomy training platform. Our subsidiary company XR Terra entered into a six-figure agreement with one of the largest telecommunications companies for the training in VR skills of 700 K-12 teachers. is partnering with AT&T for collaborative immersive technologies 5G demonstration to be deployed at ISEC, the largest training and simulation trade show in the U.S. organic growth. We continue to explore acquisitions and are in discussions with several potential targets that would lead to accretive acquisitions. Subject to the caveats I mentioned before, no cash consideration, and equity with a seven-door per share floor. During the quarter, ninth and tenth US patents were transferred at the close of the Brightline Interactive Transaction, and they are for an immersive ecosystem and system and method for generating an augmented reality experience. Both are fundamental patents in our view. We have several more patents in process, and view our patent as a forward-looking, strategically positioned, with significant potential and importance when the immersive industry matures. With that, I will now turn it over to Meydan Rothglum, Glimpse's CFO and COO, to review the financial results. Meydan?
spk02: Thanks, Liron. I will limit my portion to a summary review of our financial results. A full breakdown is available in our $10,000 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-Q filing, which you can find on our website under SEC Filings. Total revenue for the three months ended September 30, 2022, were approximately 4 million compared to approximately 1 million for the three months ended September 30th, 2021, an increase of approximately 287%. The increase reflects the addition of several subsidiary companies after September 30th, 2021, organic growth and new customers. For the three months ended September 30, 2022, Software service revenue was approximately $3.9 million compared to approximately $0.8 million for the three months ended September 30, 2021, an increase of approximately 383%. The increase reflects the addition of several subsidiary companies after September 30, 2021, organic growth, and new customers. For the three months ended September 30, 2022, software license revenue was approximately $0.09 million compared to approximately $0.22 million for the three months ended September 30, 2021, reflecting a difference in timing of renewals. For the three months ended September 30, 2022, core software and services revenue, i.e., VR and AR software and services revenue excluding projects, was approximately $1.3 million compared to approximately $0.86 million for the three months ended September 30, 2021, an increase of approximately 49%. For the three months ended September 30, 2022, core software and services revenue accounted for approximately 32% of total revenues, compared to approximately 84% for the three months ended September 30, 2021, reflecting the additions of Brightline and Sector 5. For the three months ended September 30, 2022, gross profit margin was approximately 69% compared to a gross profit margin of approximately 85% for the three months ended September 30, 2021. The decrease was driven by the additions of Brightline and Sector 5, which have lower margin project revenue. On a go-forward basis, we expect overall gross profit to remain in the 60 to 70 percent range, again, due to the additions of BLI, Brightline, and Sector 5. Operating expenses for the three months ended September 30, 2022 were approximately 8.2 million compared to 2.3 million for the three months ended September 30, 2021, an increase of approximately 260 percent. The increase was driven by employee headcount additions to support growth the addition of several new subsidiaries, which includes headcount, amortization of intangibles, and professional fees related to the acquisitions, and the change in fair value acquisition contingent consideration due to fluctuations in our stock price. We sustained a net loss for the three months ended September 30th, 2022 of 5.4 million compared to a net loss of approximately 1.7 million for the three months ended September 30th, 2021. a loss increase of $3.72 million or 224%. $2.41 million of this loss increase is driven by non-cash change in fair value consideration of contingent acquisition consideration. The balance primarily represents operating expense growth, outpacing revenue, and related gross profit. This reflects Current expense outlays in all areas of the companies to propel future growth, including the acquisition of several new subsidiaries and related costs. Net cash used in operating activities for the three months ended September 30th, 2022 was approximately 3.1 million compared to approximately 1.1 million for the three months ended September 30th, 2021. This was impacted by the addition of Brightline, which had a high component of deferred revenue and cash collected prior to the closing of the transaction. For the three months ended September 30th, 2022, adjusted EBITDA loss, a non-GAAP measure, was approximately 1.1 million, compared to 0.6 million adjusted EBITDA loss for the three months ended September 30th, 2021. To recap, the end of the quarter with a strong balance sheet of approximately $13 million in cash, including $2 million cash held in escrow for potential future performance payments relating to the Sector 5 acquisition. The cash decrease in Q1 of fiscal year 2023 was 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 1st, 2022. As Leron mentioned, with the core sector five and Brightline acquisitions complete, we do not expect to utilize our current cash balance as part of the purchase price for any acquisition we make in the foreseeable future. We have no material cash liabilities, no preferred equity outstanding, no convertible debt or any debt obligations. And again, as Leron said, stated, getting to cash flow break even and beyond from our operations in calendar year 2023 is a key strategic objective. I'd now like to pass it back to Liron for some closing remarks, after which we will begin our question and answer session.
spk04: Thank you, Beydan. In a challenging environment, we maintain strong momentum, finalize the integration of our three recent acquisitions, and achieve the record revenue result. well above our previous records we've simply proven our ability to rapidly scale and are solidifying our position as a premier player in the immersive technology software and services space with that the immersive technology industry is still in early stages of development and we are cognizant of the micro trends therefore as a strategic goal we are determined and committed to reach cash flow neutrality from operations of our business in 2023 We remain 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 Glimpse Group. And now I'll turn the call back over to the operator to take some questions.
spk00: Ladies and gentlemen, the floor is now open for questions. If you have any questions or comments, please press star 1 on your phone at this time. If you would like to ask a question through the webcast please click on the ask question box on the left side of your screen type in your question and hit submit. Please hold while we poll for questions.
spk06: Your first question for today is coming from Ignacio Rinaldez at EF Hutton.
spk01: Hey, good afternoon and congratulations on the quarter. A lot of really good stuff here. I guess just to start, and I know that the team is really great at finding these accretive acquisitions, maybe some more color on your current M&A strategy and funnel, and if there are any new developments in the recent months. Thank you.
spk04: Thank you. As we look at acquisitions, we're looking for a few things. First of all, we're looking for best-in-class companies that have technology that is best at what they're doing. Then we're looking to see how they can really fit into the Glimpse portfolio. So we know what our companies can do, and we're looking for companies that either open up a new opportunity for us or that fit in very well within an existing company. And as our existing subsidiary companies grow, We look more and more towards companies that would fit in, that would add some technology or some IP or some exposure that will really make our existing subsidiaries stronger. So we've got a pretty large portfolio of opportunities, and we're getting kind of constantly kind of incoming opportunities into us. And we start the process. We talk to them. We see their fit. We see the cultural fit. And if we find something that is accretive to our shareholders that makes a lot of sense, we will proceed and do it.
spk02: I just want to add to that, just to put things in perspective. Like over the last year, we've acquired several companies, but specifically Brightline and Sector 5, which are basically our size, if not a bit smaller. larger relative to glimpse at its IPO. And so the ability to not only structure these correctly but find the right fit and be able to integrate these smoothly, which we've done, is something that's critical. And obviously we're going to look for that going forward in the acquisition that we make.
spk08: That's helpful. Thank you both.
spk00: Once again, if there are any questions through the phone lines, please press star 1 at this time. Your next question for today is coming from Darren Aftey at Ross Capital.
spk03: Hi, thanks for taking my questions. This is Austin on for Darren. First question, I'm just curious. I think you mentioned on the last call cash burn target for calendar 22 is about $4 million. And correct me if I'm wrong, but my question is, does that target continue to seem obtainable? And what measures are you taking to reach break-even by 23? And additionally, how do you think about balancing that goal with reinvestments into current portfolio companies? and acquisitions, but all, you know, I know you mentioned you wouldn't be using any cash for acquisitions. So I am curious if you're, you know, if you'd be looking more like all stock versus, you know, taking on any debt to do that.
spk04: So I will start kind of addressing the latter part of your question, Austin, and thank you for asking. And then Maydan will comment on the cash flow kind of currently and kind of some of the measures we're taking. So as we look at structuring acquisitions, Historically, we have done most of the acquisitions in stock and all of it kind of performance-based with the floor of $7 IPO prices we talked about and some cash elements. In the current environment, we have basically kind of taken the cash element off and we've basically converted to all stock. We have no desire to take on any debts, kind of either pre-existing debt in companies or that that we will take on to do those acquisitions so they will be stock only with a seven dollar floor or else kind of we just won't do them uh so that's just to clarify that as we're looking in 2023 i think we can get to a scale position where we can cash flow self-sustain uh meaning that we will have enough generate enough cash flow from operations and to sustain our r d investments And given the current environment, we think that's the prudent decision to go with. And therefore, that's what we align our financials to do. And that's what we're going to do. As we mentioned in the press release and in our opening remarks, we're going to do it by continuing to grow revenue, but also by taking steps to minimize our expenses to fit within our revenue platform. Regarding the cash flow plan, I'll let me add more comments and more color.
spk02: Yeah, so our EBITDA of about negative 1 million, right, remains on track with what we stated before with the 4 million, which you mentioned as well. You know, this quarter was a little bit skewed because of Brightline and the deferred revenue issue. So that took our cash balance or increased our actual cash outlay a bit more than expected. But if you neutralize that as a one-time event, because that was not going to happen going forward, then we're back at that $1 million or so EBITDA or negative EBITDA range per quarter. And again, we have to stay within that and improve on that in order to get to the goal that, you know, I think we pretty strongly stated on this call.
spk03: Got it. No, that's great. It's very helpful. And just one more for me, and I'll pass it on. I am curious what part of the VR, AR ecosystem that you're not currently involved in that, you know, could be attractive to enter into in the near term, especially, you know, within the next year, given how many companies are looking to save you know, cash right now, are there any areas of the ecosystem in particular that might be more attractive, you know, than others to customers from a cost savings perspective?
spk04: So kind of as I look at kind of the industry as a whole, kind of post our acquisition of Brightline, which really added a defense element to our business that we were looking for, we have our hands in almost every business. So most of the companies we're looking at would at this point would add two areas we're already playing in and just strengthen our positioning both in terms of technology, in terms of IP, in terms of talented individuals that could help us achieve significant success in it. Regarding your question in terms of in this environment as people look to cut costs, where would they find opportunities? I think a strong area is in corporate training, and I think there is opportunities for companies to significantly streamline their processes and achieve strong ROI by converting some of their in-person kind of training mechanisms or ones that they do on digital into more immersive use of the technology.
spk07: Got it. I appreciate all the color and congrats on the quarter. Thank you, Austin.
spk08: Thank you.
spk00: Your next question for today is coming from Christopher Grostenor, a private investor.
spk05: Hi, guys. Congrats on the quarter. Just a question here. With the recent acquisitions, I'm kind of wondering how that changes the mix and how to think about you're kind of leading use cases now.
spk04: Christopher, thank you for joining the call and for your question. So as we look at the, I guess, transitioning opportunity base for Glymse based on our recent acquisitions, I would say one area that we would look to grow significantly in 2023 based on the new mix of technologies we have is defense. Brightline and Sector 5, both of our kind of two recent acquisitions, have a lot of opportunities that are tied to that area. And I think that area would be a strong, sustainable investment and kind of basically lead to significant revenue in the next year, even if we face a potentially kind of weak economy as a whole.
spk05: Okay, so are there specific areas within defense or just kind of defense broadly? How do I think about that?
spk04: Kind of some of these I actually can't talk about not because I'm kind of we're in a public company on the call just because some of those programs are kind of very kind of specific for the military arm that's using them and we can't go into detail. But we are talking with a variety of arms of the government around opportunities with immersive technologies, both virtual reality and augmented reality.
spk05: All right. Thanks for taking my questions, and keep up the good work, guys. That was my question.
spk08: Thank you, Christopher. Thank you.
spk00: There are no further questions in queue. I would like to turn the floor over to Laurent for any closing remarks.
spk04: 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 we are unable to answer any of your questions, please reach out to us directly or through our IR firm, Emsi Group.
spk06: This concludes today's webinar. Thank you for your participation and have a wonderful day.
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