Q2 2024 The Glimpse Group Inc Earnings Call

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Operator: Good afternoon. Thank you for holding for the Glimpse Group conference call. This conference call will begin in just a couple of minutes. Once again, thank you for holding. Please stay on the line.

Good afternoon, and thank you for holding for the glimpse Group Conference call. This conference call. It will begin in just a couple of minutes. Once again. Thank you for holding please stay on the line. This conference call will begin in just a couple of minutes.

Operator: This conference call will begin in just a couple of minutes. This conference will begin in just a couple of minutes. Welcome to the Glimpse Group Q2 Fiscal Year 2024 Financial Results Webinar. At this time, all participants are in a listen-only mode.

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Welcome to choose the glimpse group Q2 fiscal year 'twenty 'twenty four 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.

Operator: 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 www.investors.com, forward slash forward slash IR dot the Glimpse Group dot com forward slash, 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- 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. Leron, the floor is yours.

The earnings release that accompanies this call is available on the investors section of the company's website at H T. T. P. S. Colon forward slash forward Slash I, our das the glimpse group dotcom forward slash before we begin the formal presentation I'd like to remind everyone that statements made on today's call and webcast.

Cost, 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 Lee Roth bent to them President and CEO of the glimpse group. They were on the floor is yours.

Liron Bentevin: Thank you, everyone, for joining us. I am pleased to welcome you to the Glimpse Group's second quarter fiscal year 2024 financial results investor call for the quarter ended December 31st, 2023. During this quarter, we made substantial progress on our strategic realignment of Glimpse towards providing immersive enterprise software and services that are driven by spatial computing, cloud, and AI, or the spatial core, as we refer to it internally, led by our subsidiary company, Brightline Interactive. As a reminder, we strongly believe that in order for the immersive industry to reach true scale, the compute must be processed in the cloud and not on the headsets or computing devices. To reach its full potential, we believe that immersive technology must evolve from worlds and experiences created by humans for consumption by humans to synthetic worlds whose creation is directed by humans, executed by AI in the cloud, and whose consumption is by both humans and non-humans, such as robots, drones, and AI avatars.

Thank you everyone for joining us.

I am pleased to welcome you to the beams groups second quarter fiscal year 2024 financial results Investor call for quarter ended December 31 2023.

During this quarter, we made substantial progress on our strategic realignment of games towards providing immersive enterprise software and services that are driven by specialty computing cloud and AI or special core as we refer to it internally led by our subsidiary company Bright one interactive.

As a reminder, we strongly believe that in order for the more severe industry to reach to scale. The compute must be processed in the cloud and not on the headsets or computing device.

To reach its full potential we believe that immersive technology must evolve from worlds and experiences created by humans for consumption by humans.

Synthetic worlds, whose screen even as directed by humans.

Executing by AI in the cloud and whose consumption gains for both humans and non humans such.

Such robots drones and AI all stars.

Liron Bentevin: This is one of the key philosophies behind Special Corps and an important competitive advantage if we are to be at the center of it. We are not making this journey alone. We are working closely with some of the largest players in the tech industry, such as NVIDIA and Microsoft, as well as with some of the leading hardware players in the space. We serve as middleware connecting their cloud and AI technologies and services with the needs of enterprises and organizations, creating a win-win-win. Our Spatial Core Pipeline continues to grow rapidly, with several multi-million dollar contracts that are very close to the goal. These contracts are with multiple Department of Defense entities as well as large enterprises and organizations and will be initially executed over the next 12 to 18 months with a potential for significant recurring software components after that.

This is one of the key philosophies behind special Court and an important competitive advantage. If we are to be at the center of this.

We are not making this journey alone.

We are working closely with some of the largest players in the tech industry, such as Nvidia and Microsoft as well as with some of the leading hardware players in the space.

We serve as middleware connecting their cloud and AI technologies and services with the needs of enterprises and organizations, creating a win win win.

Our special core pipeline continues to grow rapidly with several multimillion dollar contracts that are very close to the goal line.

These contracts are with multiple of department of defense entities, as well as large enterprises and organizations and it will be initially executed over the next 12 to 18 months with the potential for significant recurring software components after that.

Liron Bentevin: While we cannot guarantee that these opportunities will materialize into signed contracts, we have good reason to believe that they will in the coming weeks and months. And when they do, the impact on Glimpse should be transformative. In parallel, the immersive industry continues to develop, as demonstrated by the recent launch of the Apple Vision Pro. The Apple Vision Pro pushes immersive experiences to the next level and engages new audiences.

While we cannot guarantee that these opportunities will materialize into signed contracts. We have good reason to believe that they will in the coming weeks and months and when they do the impact on claims should be transformative.

In parallel the mercy of industry continues to develop.

Commentary by the recent launch of the Apple vision parole.

The Apple envision fro pushes the immersive experiences to the next level and engages with new audiences.

Liron Bentevin: The headset launch has ignited new interest in immersive solutions, and we have started working with a variety of customers, ranging from federal agencies to large and small enterprises on a variety of enterprise applications and uses. As discussed in our last call, we expected our strategic transition to result in a short-term reduction in revenues as we divested and shut down non-core operating assets and reduced our expenses targeting other non-essential opportunities. We expect this revenue decline to stabilize in Q1 of calendar year 2024 and growth to resume in calendar Q2 of 2024 as we ramp up spatial core revenues and as our other remaining subsidiary companies execute on their growth. Our other major subsidiary companies, Curiel, Sector 5 Digital, and the newly formed Glimpse Learning, are focused on enterprise use cases, including lifelike 3D modeling, robust augmented reality experiences, virtual reality, corporate training, and education, both for healthcare, K-12, and higher learning. Recent customer contracts include Walmart, Colgate, and NYU Langone Hospital, to name a few.

They had since launch I think you might have new interesting emerging solutions and we have started working with a variety of customers ranging from federal agencies to large and small enterprises and a variety of enterprise applications and use cases.

As we discussed in our last call we expected our strategic transition to result in short term reduction in revenues as we divest they've been shut down non core operating assets and reduce our expenses targeting other nonessential opportunities.

We expect this revenue decline to stabilize in Q1 of calendar year 2024 and growth to resume in calendar Q2 of 2024 as we ramp up the spatial core revenues and those are other remaining subsidiary companies execute on their growth plans.

Our other major subsidiary company, that's curial sector, five digital and the newly formed glimpsed learning our focus on the enterprise use cases, including life likes me be modeling robust augmented reality experiences virtual reality corporate training and education for health care K to 12.

Higher learning.

Recent customer contracts include Walmart, Colgate and NYU Langone hospital to name a few.

Liron Bentevin: As McDonald-Beatle said in his prepared remarks, while we have increased our investment in Spatial Core, we have also taken major steps to reduce our operating expenses. We are now positioned to reach profitability when we return to prior revenue. We will continue to monitor our expense base and adjust it as needed in a prudent manner. With that said, I will now turn it over to Meydan Rothbloom, Glimpse's CFO and COO, to review the financial results. Meydan

As John will detail in his prepared remarks, while we have increased our investment in special core we have also taken major steps to reduce our operating expense base.

We are now positioned to reach profitability when we return to prior revenue levels. We will continue to monitor our expense base and adjust it as needed in a prudent manner.

With that I will now turn it over to Mike Dunn, Rothman glimpses, CFO and CFO to review the financial results.

Meydan Rothbloom: Thanks, Leron. I will limit my portion to a summary review of our financial results. A full breakdown is available in our 10-Q and in a press release that was filed after the market closed today. Please note that I will 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 filings, which you can find on our website under SEC filings.

Especially you're wrong.

Alright.

So somewhere in your review of our financial results.

A full breakdown is available in our 10-Q and the press release that was 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 of our 10-Q filings, which you can find on our website under SEC filings.

Meydan Rothbloom: Revenue for the three months ended December 31st, 2023 was approximately $2.08 million compared to approximately $2.95 million for the three months ended December 31st, 2022, a decrease of 29%. Revenue for the six months ended December 31st, 2023 was approximately $5.18 million compared to approximately $6.9 million for the six months ended December 31, 2022, a decrease of 25 percent. This decline is in line with our previously announced expectations as we continue to A, strategically transition our business from predominantly immersive marketing-driven projects to enterprise-scale spatial computing cloud AI-driven immersive recurrent software solutions, and B, as we divest non-core operating assets. Gross Margin for Q2 FY24 was approximately 68%, compared to 70% for Q2 FY23.

Revenue for the three months ended December 31, 2023, or approximately $2.08 million compared to approximately $2 95 million for three months ended December 31st 2022, a decrease of 29%.

Revenue for the six months ended December 31st 2023.

Were approximately 5.18 million compared to approximately $6 9 million for the six months ended December 31st 2022, a decrease of 25%.

This decline is in line with how you see announced expectations as we continue to a strategic strategically transitioned our business from predominantly immersive marketing driven projects to enterprise scale spatial computing cloud AI driven or MRSA.

Crime software solutions and B as we divest non core operating assets.

Gross margin for Q2 fiscal year 'twenty four was approximately 68% compared to 70% for Q2 fiscal year 'twenty three.

Meydan Rothbloom: As we complete our strategic transition, we expect our gross margins to continue to remain in the 65% to 70% range and potentially increase after. While investing in the development of our spatial core solutions, we have continued to reduce non-core cash expenses. In the aggregate, we have reduced cash expenses by approximately 50% from their highs.

As we complete our strategic transition, we expect our gross margins to continue to remain in the 65% to 70% range and potentially increase afterwards.

While investing in the development of our special core solutions, we have continued to reduce noncore cash expenses.

In the aggregate, we have reduce cash expenses by approximately 50% from their high.

Meydan Rothbloom: Our operational cash break-even point is now approximately $3 million in revenue per quarter or $12 million annually, excluding potential growth. For relative reference, our Q1 fiscal year 24 revenue was $3.1 million, and our fiscal year 23 annual revenue was approximately $13.5 million. Figures that we believe are attainable once some of the large contracts we have in the pipeline materialize. Suggested EBITDA loss was $1.33 million for the three months ended December 31, 2023, compared to $2.6 million loss for the three months ended December 31, 2022. Adjusted EBITDA loss of $2.6 million for the six months ended December 31, 2023 compared to a $3.64 million loss for the six months ended December 31, 2022. The reduced EBITDA loss for both periods is driven by the cash operating, which is a reduction in cash operating. As of December 31st, 2023, the company has cash and cash equivalents of $5.2 million. Additionally, the company has no outstanding corporate debt or preferred equity obligations.

Our operational cash breakeven point is now approximately $3 million revenue per quarter or $12 million annually, excluding potential growth investments.

Or else of restaurants, our Q1 fiscal year 'twenty four revenue was $3 1 million and our fiscal year 'twenty three annual revenue was approximately $13 5 million.

Figures that we believe are attainable once some of the large contracts, we haven't quite been the pipeline materializes.

Okay.

Adjusted EBITDA loss was 1.33 million for the three months ended December 31, 2023, compared to $2 6 million loss for the three months ended December 31st 2022.

Adjusted EBITDA loss of $2 6 million for the six months ended December 31st 2023, compared to a $3 six four.

Million dollar loss for the six months ended December 31 2022.

The reduced EBITDA loss for both periods was driven by the cash operating results.

A reduction in cash operating expenses.

As of December 31st 2023, the company had cash and cash equivalents of $5.2 million.

The company has no outstanding corporate debt or preferred equity obligations.

Liron Bentevin: I'd now like to pass the microphone back to Liron for some closing remarks, after which we will begin our Q&A session. Thank you very much. Our special core initiative could open up new frontiers for immersive technology and is a key element in our future. We are making significant progress and expect strong revenue development in the coming months. In parallel, we have positioned our other subsidiary companies to be cash flow positive and achieve profitable growth as they execute on their plans. Thank you all for your interest and support of the Glimpse Group.

I'd now like to pass the basketball you're wrong for some closing remarks, after which we will begin our Q&A session.

Thank you Mike.

Our special corporate initiative could open up new frontiers for immersive technology and is a key element in our future.

We are making significant progress and expect strong revenue development in the coming months.

In parallel we have positions our other subsidiary companies to be cash flow positive and achieve profitable growth as they execute on their plans.

Thank you all for your interest and support of the claims group and now I'll turn the call back over to the operator to take some questions.

Operator: And now I'll turn the call back over to the operator to take some questions. We will now be conducting a question and answer session. If you have joined the webcast, please submit a question. To submit a question, you can type your question in the chat box and press submit.

Thank you Lee Ron we will now be conducting a question answer session. If you have joined on the webcast. Please submit a question to submit a question you can type your question in the chat box Empresa met.

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You have dialed in today. Please press star one on your telephone keypad, if you wish to ask a question.

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Operator: For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. Once again, that's star 1 if you wish to ask a question. Please hold while we poll for questions. And once again, that's star one if you wish to ask a question. The first question today is from K.C. Ryan from Westbrook.

For participants using speaker equipment and may be necessary to pick up your handset before pressing the star keys. Once again that is star one if you wish to ask a question I'm. Please hold while we poll for questions.

And once again Thats star one if you wish to ask a question. The first question today is coming from Casey Ryan from West Park Casey Your line is life.

Liron Bentevin: Casey, your line is live. Good afternoon, gentlemen. Hey, it was a better quarter than we certainly had expected, so congratulations. That's a good job, I think. Of the $2.1 million, do you consider all that to be part of the core business and the units that we're sort of building out moving forward? Or do you think there was some revenue from sort of non-core elements built into the quarter? Hey, Casey, thank you for joining us and for your question. I would consider all of the revenue that we have this quarter to be part of the pieces that are moving forward. There's a couple of other things we're in the process of doing, but kind of, at this point, all the revenue pieces that we have in the $2.1 million are part of the future of where we're going.

Oh, good afternoon, gentlemen, hey, it was it was a better quarter than we certainly had expected. So congratulations that's a good job I think.

Of the $2 1 million do you consider all of that to be part of the core business and the units that were sort of building out moving forward or do you think there was some revenue from from sort of noncore elements built into the quarter.

Hey, Casey Thank you for joining us and for your question.

I would consider all of the revenue that we have in this quarter to be part of the are the pieces that are moving forward.

There was a couple of other things we're in the process of doing what kind of at this point to all the revenue pieces that we have in the $2 1 million are part of the future of where we're going.

Liron Bentevin: Okay, great. Terrific. And then the 68% gross margin number, I think, was good and is sort of in the range that you've indicated is sort of where we expect the business going forward, on the DOD contracts, which are exciting and sort of meaningful from a revenue perspective. Are those similar just in structure or because they're government, or is there some other structure that, like maybe, on the margins may be sort of a little below corporate or a little above corporate maybe

Okay, great terrific.

And then the 68% gross margin number I think was good and it is sort of in the range that you've indicated is sort of where we expect the business going forward.

On the D O D contracts, which are exciting and sort of meaningful from a revenue perspective.

Are those similar justin structure or or because their government or.

Is there some other structure that like maybe on the margins may be sort of a little below corporate or a little above corporate maybe I'm sort of curious if you can give us some directionality on what the margin profile of those revenues might look like.

Liron Bentevin: I'm sort of curious if you can give us some directionality on what the margin profile of those revenues might look like. I would initially expect those margins to be in line with our general kind of range. So kind of as we're working on these, it will vary because they'll have different milestones and kind of different pieces that will come over the next, hopefully, year as we sign these. But the general margin on those contracts should be in that 60 to 70 range initially, and then as we go into the recurring elements down the road, they should be higher. Okay, terrific, terrific, and then, sort of, bigger picture, I think you actually made a really good point about, sort of immersive experiences and, let's say, tools and techniques, you know, training and different applications need data processing in the cloud. Will that be part of the service offering from the Glimpse Group and our subsidiaries as sort of some capability to access that?

I would initially expect those margins to be in line with our general kind of range. So kind of as we're working on these kind of and it will vary because they'll have different milestones in kind of different pieces that will come over the next hopefully year as we sign these but the general margin on those contracts should be in the $60.

70 range initially and then as we go into the recurring elements down the road there should be higher.

Okay terrific terrific.

And then sort of bigger picture I think.

You actually made a really good point about.

Sort of immersive experiences and.

Let's say tools and techniques, you know training and different different applications need data processing in the cloud will that be part of the service offering.

From a glimpse group and at our subsidiaries as sort of some sort.

Liron Bentevin: Or will we just sort of stay, you know, in sort of an enabling software middleware type of space and sort of allow all that data processing to happen elsewhere? Our partners, such as NVIDIA and Microsoft, have built pretty amazing solutions out there. And kind of what we want to do is tap into those capabilities that are constantly evolving, and we get a front row seat to see what they're kind of working on, even some of the things that are not in the public domain yet. And then really help our customers on the other end take advantage of these solutions. And that's kind of where we're positioning ourselves. So we don't want to reinvent the wheel and definitely not compete with our big partners, but we want to take what they're building and enable our customers to use it smartly.

Some capability to access that or will we just sort of states you know in sort of enabling software middleware type of space.

Or all that data processing to help happening elsewhere.

Our partners, such as Nvidia and Microsoft Big Bill, It's pretty amazing solutions out there and that's kind of what we want to do is tap into those capabilities that are constantly evolving and we get a front row seat to see what they were kind of working on even some of the things that are not in the public domain yet and.

Then we can really help our customers on the other and take advantage of these solutions and that's where we're kind of positioning our ourselves. So we don't want to reinvent the wheel and definitely not to compete with our big partners, but we want to take what they're building and enable our customers to use those smartly.

Liron Bentevin: Yeah, that makes sense. Okay, terrific. And then there is one sort of, um, balance sheet question, I guess. There are two components, I guess, as you trim down the business. There's a goodwill figure for about $10 million on the asset side, and then a contingent liability number that, between the current and non-current, is about $5 million in terms of contingent liabilities related to acquisitions. Do those numbers change meaningfully as you get rid of non-core assets or are those kind of all related to core pieces of the business today? So all the ones that are in the balance sheet as of the reported dates are tied to pieces that are part of our business. We're constantly looking for goodwill and kind of, I'm not a big fan of the concept, and therefore, we take a kind of pretty aggressive approach to eliminating it when possible.

Yeah.

That makes sense, okay terrific and then one sort of.

Our balance sheet question I guess.

Theres two components I guess as you as you trimmed down the business.

There was a goodwill figure for about $10 million on the asset side, and then a contingent liability number that between the current and non current is about $5 million in terms of contingent liabilities related to acquisitions.

Do those numbers change meaningfully as you get rid of noncore assets or are those kind of all related to core pieces of the business today.

So all the ones that are in the balance sheet as of the reporting dates are tied two pieces that are part of our business. We're constantly looking at goodwill and I'm not a big funnel of the concept and therefore, we take care of any kind of a pretty aggressive approach to eliminating it when possible.

Liron Bentevin: And as we look at the contingent liabilities that are tied to future performance, such as we're expecting, and they will kind of be paid out, some in equity, and some in cash as those milestones are met. Yeah, okay. Okay, good. That's a helpful color. And then in terms of the contingent liability piece, what's the mix roughly? Is it 50-50 sort of cash inequity, or is it sort of 80-20 one way or another? Of course, I could look it up, but I'm asking, asking, being a teacher for help here. I'll defer to Maydan on this one. Hey, yeah, the majority of it is cash.

As we look at the contingent liability as they're tied to future performance.

Such that we were expecting and they will kind of be paid out in some of our in.

In equity in somewhere in cash as those milestones are met.

Yeah, Okay. Okay got it that's helpful color and then in terms of the contingent liability pizza, what's the mix roughly is it 50 50 sort of cash and equity or is it sort of 80 20 in one way or another of course I can look it up but I'm asking asking.

A teacher for help here.

I'll do I'll defer to me that on this one.

Hey, Yeah, that's the majority of it is cash.

Meydan Rothbloom: Okay, great. That's a very helpful answer. Well, thank you. It feels like a constructive quarter.

Okay, Great. That's a very helpful answer well. Thank you appeal that goes through.

K.C. Ryan: I'll sort of get out of the way here and turn it over to other folks, but thank you for taking my time. Thank you, Casey. Thank you. There were no other questions at this time.

Dr. Porter are all sort of get out of the way here and turn it over other folks, but thank you for taking my questions.

Thank you Casey.

Yeah.

Thank you there are no other questions at this time I'd now like to turn the call back over to Leon for his closing remarks.

Liron Bentevin: I'd now like to turn the call back over to Liron for his closing remarks. 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 were unable to answer any of your questions, please feel free to reach out to us directly. Thank you. Thank you. This does conclude today's webinar. Thank you for your participation, and have a wonderful day.

Thank you I would like to thank each and every one of you for joining our earnings conference call.

Look forward to continuing to update you on an ongoing process and growth.

Unable to answer any of your questions. Please feel free to reach out to us directly. Thank you.

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