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spk05: afternoon ladies and gentlemen please continue to hold your conference will begin momentarily please continue to hold your conference will begin in a couple minutes thank you for holding Thank you. Thank you. Thank you. Thank you. Thank you.
spk04: Good afternoon, ladies and gentlemen. Thank you for holding. Your conference call will begin very shortly. Once again, thank you for holding. Your conference call will begin in just a couple of minutes. Thank you. Thank you.
spk02: Welcome to the Glimpse Group Fiscal Second Quarter 2023 Financial Results Webinar. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. As a reminder, this conference is being recorded. The earnings released that accompanies this call is available on the Investors section of the company's website at https://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 the call. Please refer to the company's regulatory filings for a list of associated risks, and we would also refer to the company's website for more supporting industry information. I would now like to hand the call over to Laurent Bentovim, President and CEO of the Glimpse Group. Laurent, the floor is yours.
spk01: Thank you, Max, and thank you, everyone, for joining us. I'm pleased to welcome you to the Glimpse Group's fiscal second quarter 2023 financial results investor call for a quarter ended December 31st, 2022. Glimpse's second quarter was highlighted by continued momentum across various significant business developments and technological fronts, and a focus on cost efficiencies as we drive towards achieving our goal of cash neutrality in calendar year 2023. For the fiscal second quarter 2023, we generate a revenue of approximately 3 million, representing 75% growth compared to first quarter 2022 revenues of approximately 1.7 million. For the first half of financial year 2023, We generated record revenue of approximately 6.9 million, representing 155% growth, or 2.5x, compared to 2.7 million for the same period last year. With our recent acquisitions of Brightline Interactive and Sector 5 Digital fully integrated, we are seeing strong momentum with significant customers in the government and Department of Defense sectors, as well as large software infrastructure providers and telcos. While these contracts take longer to materialize, we do expect to see some of the impact of these in calendar year 2023. We expect Q3 FY23, January to March 23 revenues, to exceed Q2 FY23 revenue while having a materially lower net cash flow. As made down in detail later in his prepared remarks, we remain sufficiently capitalized and have a clean capital structure. In recent months, we improved internal efficiencies, rationalized investments, and reduced our operational cash expense base by approximately $2.5 million on an annualized basis, representing approximately 15% of our annual operating cost base. These reductions include 20% to 25% voluntary cash salary cuts by the company's executives We expect to see the effect of these reductions in the upcoming quarter and beyond. As stated previously, we are committed to reaching cash flow neutrality from our operations in calendar year 2023, and we will achieve that through a mix of revenue growth combined with additional cost cuts as needed. As a reminder, approximately 80% of our operations expenses are variable. With the core S5D and Brightline acquisitions complete, We do not expect to utilize our current cash balance as part of the purchase price or the integration costs of any acquisition we may make in the foreseeable future. The combination of immersive technologies, AI and blockchain can enable the creation of a metaverse, a shared virtual space that allows users to interact with a computer generated environment and each other in real time. AI can be used to create intelligent and responsive virtual environments that can adapt to user behavior and preferences, making the metaverse feel more natural and lifelike. Blockchain can provide the underlying infrastructure for secure and transparent transactions and ownership of virtual assets within the metaverse, allowing users to buy, sell, and trade digital goods and services with confidence. Additionally, blockchain can enable decentralized governance and control over the metaverse, giving users greater autonomy and ownership over their virtual experiences. The combination of these technologies has the potential to create a seamless, immersive, and decentralized metaverse that could transform the way we interact with each other and the digital world. Over the last few months, the ability to engage with conversational AI has taken a giant leap forward with GPT-3.5. And to highlight this, the previous paragraph was written by ChatGPT with a very easy prompt for me. In line with our vision, we recently launched several key technology initiatives which we believe are imperative to our future, including embedding artificial intelligence capabilities in our XR software product utilizing augmented reality-based try-on for e-commerce, NFT blockchain integration for e-commerce applications, and working with NVIDIA to build a multiverse training environment with many potential Department of Defense DoD use cases. We continue to see traction and growth across industries, and we have built an impressive roster of global customers across industries, use cases, and geographies. Recent examples include Sector 5 Digital S5D completed a six-figure dollar multi-domain 3D experience for Airbus U.S. Space and Defense, which debuted at the annual Association of the United States Army AUSA 2022 exposition. Curio completed a paid engagement to create an immersive experience to complement the launch of Sabrina Carpenter's real-world fragrance, Sweet Tooth, on Walmart.com. via a virtual experience in decentralized. During the quarter, PopoAR successfully integrated machine learning, ML, algorithms to perform skin diagnostics and a single-mail-based AR try-on for a global social media company. In addition, PopoAR recently released its first commercial version of a real-time face landmark detection, ML, model that leverages facial recognition to enable real-time virtual experiences. Brightline Interactive, VLI, collaborated with AT&T for an integrated technological demonstration at the iITSEC conference, the largest training and simulation trade show in the U.S. Additionally, at the iITSEC conference, VLI, in collaboration with NVIDIA, demonstrated a realistic multi-user hyperscale simulation tailored to training use cases. VLI is currently pursuing potential and active relationships with most major DOD agencies, The solutions being discussed will allow agencies to investigate and implement hyperscale solutions addressing specific use cases and requirements. New Glimpse subsidiary company, Glimpse Israel, utilizing the VR software platform of Fortel Reality, entered into a paid engagement to become a key partner for the Israeli Ministry of Education's Metaverse Lab. In addition to our 10 issued US patents, Our subsidiary company, Immersive Health Group, IHG, completed the assignment of the technology and IP of InsightVR, consisting primarily of immersive learning experience solutions delivered in VR and utilizing AI game-based learning and an extensive proprietary library of learning 3D assets, primarily targeting the clinical and nursing healthcare segments. In parallel, InsightVR's teams joined IHG, significantly strengthening its development and business development team. The company's board of directors and compensation committee authorized the company to issue stock options to the three executive founders of the company. In a long-term incentive plan, the vesting of shall occur over four years from issuance and is primarily based upon the company's achievement of very significant annual revenue between $30 million and $100 million and stock price between $20 a share to $60 a share growth targets with a fixed exercise price of our IPO price of $7 a share. These will be detailed in an 8K that was expected to be filed later this week. The executive founders have not sold a single share since the company's inception seven years ago, pre or post IPO, and have invested additional funds directly. We believe that this incentive plan further demonstrates our strong belief, confidence, and long-term commitment to the company and its shareholders. With that, I will now turn it over to Meydan Rothblum, Glimpse's CFO and COO, to review the financial results. Maydan?
spk03: Thanks, Leron. I will limit my portion to a summary review of our financial results. A full breakdown is available in our 10-K in the press release that was 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 QT filings, which you can find on our website on the investor relations section under SEC filings. Total revenue for the three months ended December 31st, 2022 was approximately 2.95 million compared to approximately 1.69 million for the three months ended December 31st, 2021, an increase of 75%. Total revenue for the six months ended December 31st, 2022 was approximately 6.9 million compared to approximately 2.7 million for the six months ended December 31st, 2021, an increase of 155%. The increase for both periods reflect the addition of several subsidiary companies after December 31st, 2021 and new customers. Gross profit was approximately 70%. for the three months ended December 31st, 2022 compared to approximately 88% for the three months ended December 31st, 2021. Growth profit was approximately 70% for the six months ended December 31st, 2022 compared to approximately 87% for the six months ended December 31st, 2021. The decrease for both periods was driven by the addition of BLI and S5D which carry a lower margin. Net income for the three months ended December 31st, 2022 was positive $1.31 million as compared to a net loss of $1.57 million in the comparable 2021 period, an absolute positive change of $2.88 million. To sustain the net loss of approximately $4 million for the six months ended December 31st, 2022, compared to a net loss of $3.23 million for the comparable 2021 period, a loss increase of $0.84 million. The changes were driven by an increase in operating expenses from the acquisition of several subsidiaries, partially offset by non-cash gain from change in fair value of acquisition contingent consideration. Net cash used in operating activities was $6.4 million, $4.9 million for the six months ended December 31, 2022, compared to $2.36 million during the prior period. This was driven by an increase in net loss for the six-month period and a decrease in accounts of payable and deferred revenue, primarily related to the BLI acquisition, offset by increased non-cash expenses, acquisition contingent consideration, fair value adjustment, stock-based expenses, and intangible asset
spk07: Amortization.
spk03: Adjusted EBITDA loss of 2.58 million for the three months ended December 31st, 2022, compared to a 0.81 million loss for the three months ended December 31st, 2021. Adjusted EBITDA loss of 3.63 million for the six months ended December 31st, 2022, compared to a $1.44 million loss for the six months ended December 31st, 2021. To recap, we ended the quarter with approximately $9.4 million in cash and equivalents, including $2 million cash held in escrow for potential future performance payments relating to the S5D acquisition. Cash balance decreased in the first half of fiscal year 23, primarily to account for the cash portion of the Brightline acquisition and its integration thereafter, which has been completed. As Leron mentioned, with the core S5D and Brightline acquisitions completed, we do not expect to utilize our current cash balance as part of the purchase price or integration of any potential acquisition we make in the foreseeable future. We are now focused on optimizing our operations and continuing our progress towards reaching cash flow breakeven from operations in calendar year 23. We continue to maintain a clean balance sheet with no debt, no preferred equity outstanding, and no convertible debt obligations. I'd now like to pass it back to Liron for some closing remarks, after which we will begin our Q&A session.
spk01: Thank you, Maydan. While the overall macro and business environment in Q2 FY23 continue to be challenging. We have had many positive developments and achieved several key goals during the quarter, including the full integration of the Brightline Interactive Acquisition, advancement of VR multi-person operability, AI, and blockchain integration into our software products that are critical to our future success, signed new contracts with existing and new global customers, and entered into advanced discussions with DOD entities, some of the direct contractors. There are incredible opportunities ahead of us as the immersive industry continues to develop and advance. We remain well positioned to capitalize on these opportunities, having achieved scale and a leading market position. With that, the immersive technology industry is still in its early stages of development, and we are cognizant of the macro trends. Therefore, as a Strategic goal, we are determined and committed to reach cash flow neutrality from the operations of our business in 2023 as we look to continue to grow and develop our business. I thank you all for your interest in and support of the Glimpse Group. And now I'll turn the call back to the operator to take some questions.
spk05: Thank you, Liron. If you'd like to submit a question, you can either type in the chat box below or raise your hand. We'll start with any questions and follow that with some write-in questions as time follows. Now, our first question comes from Darren Aftai with Roth. Please proceed.
spk00: Hi, thanks for taking my question. This is Dylan on for Darren. I wanted to talk a little bit about the visibility you might have into the various DoD contracts. Like, I appreciate the timeline for those, but how much of the potential monetization is I guess like built into your estimates on getting the cash flow neutrality this year. Like if those get pushed out a quarter or two, does that impact how you're looking at your cash?
spk01: No, kind of. So we assume having worked kind of with DOT entities in the past, kind of we assume that those are long sell cycle, even though we hope to be pleasantly surprised, but we are being very conservative in our assumptions and are not taking any of these into consideration as we look at achieving cash neutrality in 2023.
spk00: Got it. And then in terms of the run rate you're currently on, is there any sort of low-hanging fruit left that you can manage to either push in some more sales or sort of on the fixed cost side take some more out of the operating expenses?
spk01: Yeah, now we have flexibility both obviously on the cost side and kind of basically adjusting our investments. In a sense, kind of as I look at our costs, we're investing in two main things, in R&D and in sales and marketing. And obviously kind of R&D builds the product that eventually we kind of take to market. Sales and marketing really helps us kind of push those opportunities in. So kind of it's a question of balancing the investment in these versus achieving the goal of cash flow net neutrality. So we look at this on a monthly basis, see where we are, and make adjustments as we need to to make sure we achieve our goals.
spk00: Great. And last one for me. Can you just talk a little bit about on the hardware front how you think about third parties that exist out there that sort of produce the hardware that in some cases is necessary for some of the solutions you could provide?
spk01: So as we look at the hardware companies out there, we see all of them as our kind of partners because they're building the hardware that enables our customers to utilize our software solutions. So obviously we work with all of the leading kind of hardware manufacturers on the VR side and on the AR side and kind of constantly understand where they are, where they're going. And as those companies come out with new hardware models, like what Meta and HTC and Pico recently have done, or like Apple is rumored to do, kind of these push forward the ability to utilize and what can be done with software allowing us and our customers to kind of push forward and kind of generate more traction.
spk00: Great. I'll pass it on. Thank you.
spk01: Thank you.
spk05: Please note, if you have a question or a comment, please press star 1 on your touchtone phone. Pressing star 2 will remove you from the queue if your question has been answered. Excuse me. Once again, please press star 1 if you have a question or a comment.
spk06: Once again, that's star one if you have a question or a comment. There are currently no questions in queue.
spk05: At this time, we'll turn to some writing questions. Again, if you'd like to ask a question, please use the chat function. Okay, we have no further questions in queue. I'd like to turn it back over to Liron for any closing remarks.
spk01: 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 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.
spk05: This does conclude today's webinar. Thank you for your participation and have a wonderful day.
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