The Glimpse Group, Inc.

Welcome to the Glimpse Group's second quarter fiscal year 2025 financial results webinar. 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 release that accompanies this call is available on the Investors section of the company's website at at ir.theglimpsgroup.com. That's ir.theglimpsgroup.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 you to the company's website for more supporting industry information. I would now like to hand the call over to Liron Bentevin, President and CEO of The Glimpse Group. Liron, the floor is yours.

Thank you, Jenny, and thank you everyone for joining us. I'm pleased to welcome you to The Glimpse Group's Q2 fiscal year 2025 financial results investor call for a quarter ended December 31st, 2024. I am very proud to announce that in addition to continued strong revenue growth, this quarter we achieved positive EBITDA, positive cashflow and positiveness income. This is the first time we've achieved positive EBITDA in our history as a public company and is a direct result of our strategic and operational restructuring over the past several quarters. With our strategic transition to focus on special core mostly complete and with the increasing incorporation of enabling AI elements across our product base, we are well positioned to capture the vast potential in the immersive technology space over the coming years as the immersive technology cycle gets closer to mass adoption. There are tremendous opportunities in front of us and to facilitate In late December, we raised $6.8 million in net proceeds from one investor in registered direct equity offering. We currently have approximately $8.5 million in cash and a very clean capital structure. During the quarter, our subsidiary company, Brightline Interactive, delivered the second phase of its large DOD contract, an achievement of significant performance and technological milestones. BLI entered into an initial contract with the US Navy for an immersive AI-driven simulator system to be delivered in the coming months, setting the ground for potential follow-on contracts in 2025 and beyond. BLI delivered a scalable, immersive solution to a global government service integrator, positioning itself as a leading middleware for processing and visualizing complex information in 3D space and setting what we believe has the potential to become an industry standard. The continuing resolution for 2025 has delayed the potential awarding of multiple government and DOD opportunities. We hope this will be resolved promptly in March 2025 when the current continuing resolution and with a new administration and Congress now in place. Led by our subsidiary Fortel Reality, we continue to make strong progress on commercializing our AI-driven immersive training product and have experienced encouraging initial traction with our customers and partners. We have a strong long-term revenue pipeline and expected contracts, but putting these aside, we already have a reasonable visibility as the reminder of fiscal year 2025, ending in June 30, 2025. Driven by the timing of existing contacts, revenue recognition for Q3 FY25, we expect a decline in revenue and negative adjusted EBITDA to be more than offset by a very strong Q4 FY25 with significant revenue growth, positive adjusted EBITDA, and profitability. For the full fiscal year 25, ending June 30, 2025, We expect aggregate revenue to significantly exceed our FY24 revenue and to be about EBITDA break-even for the full fiscal year versus a significant adjusted EBITDA loss in the prior fiscal year. With that, I will now turn it over to Maidan Rothblum, Gleamson's CFO and COO, to review the financial results.

Maidan? Thanks, Liron. I will limit my portion to a summary review of our financial results Full breakdown is available in our 10-Q and press release that were filed before market opens 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 filing. Due to fiscal year 25 revenue of approximately $3.17 million, reflecting A, 52% increase compared to Q2 fiscal year 24, which ended December 31st, 2023, revenue of approximately 2.08 million, and B, a 30% increase compared to Q1 fiscal year 25, that's the quarter that ended September 30th, 2024, revenue of approximately 2.44 million. The increase in both comparative periods was primarily driven and increase in spatial core revenues as well as growth in our other businesses. Gross margin for Q2 fiscal year 25 was approximately 64% compared to 68% for Q2 fiscal year 24. The decrease was driven by revenue mix, which tends to oscillate a bit between the quarters. On average, we expect our going forward gross margins to continue to be in the 60 to 70% range. Q2 fiscal year 25 positive adjusted EBITDA of approximately $0.28 million compared to an adjusted EBITDA loss of approximately negative $1.33 million for Q2 fiscal year 24. Net operating cash provided from operations for Q2 fiscal year 25 was approximately $0.17 million compared to a net operating cash loss of approximately negative $1.68 million for Q2 fiscal year 24. Importantly, as Jeroen mentioned, this is the first profitable EBITDA quarter in the company's history as a publicly traded company, reflecting our significant restructuring efforts over the past few quarters combined with revenue growth. So specifics regarding the visibility Jeroen mentioned. For Q3 fiscal year 25, we expect a decline in revenue to a range of $1.5 to $2 million with a negative adjusted EBITDA to be more than offset by a strong Q4 fiscal year 2025 with expected revenue range of between $3.3 and $4 million and positive adjusted EBITDA. For our fiscal year 2025 ending June 30, 2025, we expect aggregate revenues to exceed $11 million compared to $8.8 million for fiscal year 2024. a 25% plus increase in annual revenue and break even adjusted EBITDA for the fiscal year versus significant adjusted EBITDA loss in the prior fiscal year. Our current cash operating expense base, pre-revenue, is now less than $0.9 million per month. Given our contracted and projected revenue cash in going forward, we expect to generate positive cash flow in each of the remaining quarters for fiscal year 25. The company's cash and equivalent position as of December 31, 2024 was approximately $8.5 million with an additional $1.4 million in accounts receivable. The increase in our cash position was primarily a result of our December 24 registered direct equity financing in which we raised $7.3 million in gross cash proceeds from one investor and a clean structure. We continue to maintain a clean capital structure with no debt, no convertible debt, and no preferred equity. Lastly, on December 24, 2024, we received a written notice from NASDAQ informing the company that it had regained compliance with NASDAQ listings, which requires listing securities to maintain a minimum bid price of $1 per share. This closes the matter that originated on September 3, 2024. I'd now like to pass it back to Liron for some closing remarks, after which we will begin our Q&A session.

Thank you, Maydan. As we guided in previous quarters, we continue to make progress in our strategic plan and have achieved strategic and operational restructuring, revenue growth, profitable operations, major contracts, and key technological developments in the area of AI, special computing, cloud, and immersive technologies. In parallel, we have bolstered and are well-positioned to execute on our growth strategy and the huge opportunities in front of us. 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. Jenny?

Thank you, Liron. If you'd like to submit a question, you can either do so by typing in the chat box below or raise your hand. We'll start with any audio questions and follow that with some write-in questions as time allows. If you would like to ask an audio question on the phone lines, please press star 1 on your phone keypad now. A confirmation tone will indicate that your line is in the queue. You may press star two if you would like to remove your question from the queue. Now, our first audio question is coming in from Casey Ryan of West Park Capital. Casey, your line is live.

Thank you. Good morning. Great quarter, gentlemen. It looks really good. I had a couple questions, just high level. Would you care to frame for everybody or for me, I guess, what the revenue split looks like between commercial and government and what you think the shape of that looks like moving forward? It feels like there's a lot of positive activity, obviously, around the DOD and government opportunities, but I'm just wondering if you can give us some sense of the split for revenues.

Good morning, Casey, and thank you. At this point, we're probably around 40%-ish revenue government and 60% commercial.

And what do you imagine as you look forward, maybe just for the remainder of this fiscal year, does that feel like it'll stay steady or do you think that'll change in some meaningful way as we go forward?

I think for the remainder of our fiscal year, we will be kind of around that range. And then as we look into 2025, We're hoping to increase the government percent of this as some of that business comes in.

Yeah, okay. All right, terrific. And then tell me what your perspective is. It feels like there's a lot of very clear use cases now being talked about around DOD and maybe other government and military applications specifically for your solutions. What's the development of the end customer, I guess, commercial versus government? Do you feel like the commercial opportunities or use cases are as clearly defined, I guess, for the commercial space?

Yeah, no, I think the kind of the applications on the kind of military defense side are going to lead to even further kind of, and larger opportunities on the commercial side. So we're definitely leveraging work we're doing on the kind of defense side to then put solutions in front, and that will take time to come to the commercial side, but those will be very significant applications of the same technologies.

Okay, terrific. And then my third question is just around the operating expense line. I think it... There was a lot of progress or a big reduction there in the OpEx line versus last year, but even versus the prior quarter. Maidan, I think you had mentioned 900,000 per month as sort of an OpEx run rate, but correct me if I misheard that. Are we thinking that OpEx will be in this same range per quarter moving forward? And I think my math is sort of 1.9 million type of number. per quarter, or do we think that those levels will start to rise a little bit as we move into the end of the year?

Casey, that estimate is correct. I think it will be stable going forward for certainly the remainder of the year. We'll see what happens going forward. We do have some capacity runway under that. It really depends on the timing of some of these larger contracts that may hit in the coming months. So we'll wait and see. But at the current level of revenue, this is the expected operating base going forward.

Okay. All right. Terrific. And then just to sort of round out on things that we talked about in the past, I guess, have there been anything, any meaningful, and maybe there haven't been because you didn't include them in the press release, but, you know, opportunities in terms of divestitures, and then, I guess, on the other side of the coin, are there any opportunities that you see to potentially acquire important or new assets out there that you guys are maybe working on in terms of business development?

The answer to both is yes. We see kind of opportunities to monetize and divest pieces of our business that we see as less critical for what we're doing and kind of we're exploring some of those avenues. And on the same time, we're seeing a lot of interesting opportunities on the outside. And we're always looking to see how we can structure deals that are accretive to the company and then productive in our kind of path forward. So there's opportunities on both sides, but we're not going to rush into anything that doesn't make sense for shareholders.

Okay, but not putting any timing, it's something that we should continue to pay attention to as being potentially positive both ways in terms of monetizing assets and potentially acquiring new assets as we move forward.

Yes, that's definitely something to pay attention to.

Okay, good. Well, terrific quarter. Thank you for the time and the questions.

Thank you, Casey.

Thank you very much. Your next question is coming from Jack Rubenstein of Dyka Partners. Jack, your line is live.

Hello, guys. I hope you can hear me. Anyway, I wanted to just go down to the basics, get an understanding of what's your immersive technology is. From what I gather, the use of artificial intelligence is the use of, is a predictive science. So using artificial intelligence, you ask questions. The role that Glimpse plays is in order to answer those questions, one must simulate possible outcomes. So, for instance, in the military area, if there's an issue, a place, for instance, where do I place my fleet, so on and so forth, their AI creates questions, creates predictions as to possibilities, and your vision answers those questions visa various simulations. Is that a proper description? And as AI grows, do we get more and more questions, and that leads to the growth of more and more immersive simulations? Thank you.

Very good question and description. Let me try and put a little bit of color, Jack, into kind of some of our AI integration and kind of I'll use a couple of kind of examples. Obviously, on the kind of the DoD side, I will be very kind of vague for obvious reasons. And I'll try and be more specific kind of a little bit on some of the commercial kind of utilization of AI in what we're doing. So on the military side, if you think about information and information that exists right now in the military, it is mostly confined to 2D. And you've got a lot of sources of information that is coming in a variety of ways. Some of it is visual. Some of it is data-driven. Some of it is in a variety of bands of sound and other elements. And what we're kind of basically doing is helping the DOD take all this information and convert the 2D information into actionable 3D information that then AI can interact with and then humans can interact with and then other non-NPC elements can interact with to kind of create value for the industry. And kind of, I left it vague, but kind of, people that understand can really kind of visualize where it's going. On the commercial side, one of the things we're working right now is we've integrated AI into our multi-person platform, allowing to simulate any scenario with AI. So imagine you're trying to simulate a sales call or a challenging HR situation or a doctor that has to give bad news to a patient. Our environment puts you in that room. You can be the doctor and you have a patient and you have to give them bad news. And the AI will act with you based on information we're providing it, allowing you to really kind of get that experience before you go do it in the real life. So hopefully that gave you a little bit of color.

Yes. Thank you very much. Yes. And that obviously is a hugely growing field. So, I mean, if you maintain your preeminent position in that field, that's a good thing for GLEMS. Yes, definitely.

Okay. Thank you very much. Well, we don't appear to have any more questions on the phone lines. I can hand back to Liron if you've got any questions through the webcast.

Thank you, Jenny. So there's two questions in the webcast, and I'll read them and try and answer them a little bit. And one of them kind of ties to what Jack just asked about. So the first one is, how do you plan to integrate AI into your offering in 2025 and beyond? So I think kind of that ties very well to Jack's question that we just answered. there is kind of the immersive world and AI kind of fully integrated. And I believe that the progress we've seen in AI over the last two years has really taken the ability to have all these interactions come into life using immersive technologies, virtual reality, and augmented reality. And what we see is integrating AI into our full product set as we're evolving and finding all these use cases across military and defense, healthcare, education, and commercial businesses, and integrating that into there. The next question I have is, would the company be involved in more government contracts soon? I certainly hope so. We've been working on building a pretty significant pipeline of opportunities. that we are executing on. Obviously, that requires the government to have a budget for 2025, which hopefully will be resolved in the coming weeks as the continued resolution expires in March. And once the budget is set, hopefully the opportunities that we are working on will be budgeted, and then we will hear positive news, and that will drive our increase in our government business in 2025.

Okay, Liron, do you have any emailed questions?

I think that's what I have.

Okay. Brilliant. Well, now I will turn back over to you for your closing remarks.

So before we go to closing remarks, Maydan says that there's another question. Maydan, if you can read it. I don't see it on my end.

I just want to ask, what kind of actions are you taking – against the competitors? What makes VRAR better than any other company in the field?

I don't like to brag, and I see this as a great opportunity. I see competitors in the space as partners in building immersive technology. I think this industry has significant growth potential ahead of it. Obviously, we have our advantages in each one of our solutions and technologies. And, uh, we've built over the last nine years, kind of what is one of the largest, uh, immersive technology companies in the world. But, uh, I think the growth is not by kind of, uh, beating our competitors by, by, uh, kind of helping build the industry and the use cases. And that will create significant opportunities for all of us.

Okay. There's another question. What is the timeframe for your project execution?

So we are continuing to execute on all of the opportunities. If we are referring to the large DOD contract that would be executed and finalized at the first period of performance by the second, the fourth quarter in our fiscal year's Q2 calendar year.

And there's another question. What can be the impact of knowledge and government experience The majority of the revenue now comes from contracted governments.

So I think there's a potentially positive impact from that because they're diverting government spend from areas that have not been very efficient to future technology boosting. Kind of the new administration is already kind of... highlighted AI as one of the initiatives that it's pushing. And I expect that to have a positive impact on us in the mid to long term rather than a negative impact. 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 an ongoing process. And if we have any questions that we have not been able to answer, please reach out to us directly.

Thank you. This does conclude today's webinar. Thank you for your participation and have a wonderful day.