The Glimpse Group, Inc.NASDAQ:killed) Q1 2024 Earnings Conference Call, November 14, 2023, 4:30 PM ET
Lyron Bentovim – President & Chief Executive Officer
Maydan Rothblum – Chief Financial Officer and Chief Operating Officer
Conference call participants
Casey Ryan – WestPark Capital
Welcome to the Glimpse Group Q1 Fiscal Year 2024 Financial Results Webinar. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the official presentation. As a reminder, this conference is being recorded. The earnings release accompanying this call is available in the Investors section of the company’s website at https://ir.theglimpsegroup.com/.
Before we begin the formal presentation, I would like to remind everyone that the statements made on today’s call and webcast, including those regarding future financial results and industry prospects, are forward-looking and may 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 will also refer you to the company’s website for more industry support information.
I would now like to turn the call over to Lyron Bentovim, President and CEO [Technical Difficulty].
Thank you all for joining us. I am pleased to welcome you to the Glimpse Group’s first quarter fiscal 2024 financial results call for the quarter ended September 30, 2023. This quarter was highlighted by the continued execution of our strategic realignment of Glimpse to deliver comprehensive enterprise software and services that are driven by spatial computing, cloud and AI.
Q1 FY 2024 revenue of approximately $3.1 million, a 7% increase compared to Q4 2023 revenue of approximately $2.9 million and a 22% decrease compared to record revenue of approximately $3.95 million in the first quarter of 2023. We continue to make strong progress in our previously detailed strategic shift to space computing, cloud computing and comprehensive AI-driven software solutions. We also expect to announce important contracts in the coming months.
In parallel, we have reorganized the company, reducing the number of employees and our investments in non-core areas as you work to shed non-core assets. As we make this transition, we expect that the second quarter of FY 2024, one quarter will currently have lower revenues, but we also expect a recovery in third quarter of FY 2024, calendar 2024 revenues as we begin to recognize revenue and growth related to our particular core products and solutions.
As I discussed in our last earnings call, we strongly believe that for the immersive industry to reach its full potential and massive scale, it must be unbound from the computing limitations of traditional devices, be they VR headsets, tablets and phones of AR headphones.
The space core developed by our subsidiary Brightline Interactive is the technology engine that allows us to simultaneously integrate legacy immersive technology systems with modern cloud systems built on open standards for accelerated computing at scale.
Leveraging the essentially infinite scale of GPU access provided by our partners at WIDIA and Microsoft, Brightline is creating powerful AI workflows for massive and rapid compression of complex simulations and immersive experiences, which are computed in the cloud in real-time real and then delivered to the end devices.
Vivid examples of this include robotics training, pair-based digital simulations, rapid immersive content creation, and numerous Department of Defense applications.
The space core will be Glimpse’s growth engine, and as such, we are restructuring the business to reflect that, including the sale or closure of non-core activities and subsidiaries. Subsidiaries that remain primarily QReal and S5D are expected to be net positive cash contributors. As Maydan will detail in his prepared remarks, we have taken significant steps to reduce our operating expense base. Recently raised capital in clean structure and continues to maintain a clean balance sheet.
With that, I will now turn it over to Maydan Rothblum, CFO and COO of Glimpse to review the financial results. Maydan?
Thanks, Lyron. I will limit my part to a summary review of our financial results, a full breakdown is available in the 10-Q and press release that were 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 filing, which can be found on our website under SEC filings.
Revenue for the three months ended September 30, 2023, was approximately $3.1 million compared to approximately $3.95 million for the three months ended September 30, 2022, a decrease of approximately 22%. The decrease reflects fiscal 2022 being our record revenue quarter. In addition to the effects of our internal restructuring and a lengthening of our sales cycle generally in the comprehensive technology industry.
Gross margin for fiscal Q1 2024 was approximately 62% compared to 69% for fiscal Q1 2023. We expect our gross margins to continue to remain in the 60% to 70% range depending on the revenue mix in a quarter certain and we expect our margins to be at the high end of the range in the second half of the fiscal year as our strategic shift comes into place.
Adjusted EBITDA loss for fiscal year Q1 2024 was approximately $1.29 million compared to an EBITDA loss of approximately $1.05 million for fiscal year Q1 2023, which had a higher revenue base.
In the past year, we have reduced the number of employees by approximately 40% and will continue to do so as part of our strategic plan. This will enable us to move forward, to achieve cash flow neutrality at approximately the level of this quarter’s annual revenue, excluding incremental investments.
Just to illustrate, a year ago, our cash flow breakeven point was approximately $20 million in annual revenue. Today, we are approaching the cash limit at about $12 million in annual revenue.
Following the close of the previously recorded direct financing on October 3, 2023, the company’s cash position was over $6.5 million. As Lyron mentioned, the company has no outstanding corporate debt, convertible debt or preferred equity obligations.
On November 13, 2023, the Board of Directors authorized the Company to enter into a joint stock repurchase plan of up to $2 million to be used over the next three years. As we are committed to investing in the growth opportunities ahead of us in business operations, we do not anticipate using this plan once it has been implemented in the next week or so.
That said, we may use acquisitions in cases where extraordinary circumstances relating to our stock price create extraordinary value opportunities for the company.
I would now like to turn it over to Lyron for some closing comments, after which we will begin our question and answer session.
Thank you, Maydan. Our unique core initiative has the potential to be a key enabler for the overall industry transformation from a hardware-centric solution to one driven by cloud computing and AI. We are all in on this initiative, focusing our R&D efforts on bringing solutions based on this technology to market in 2024, while the other remaining subsidiary company Glimpse is expected to support this effort by generating positive cash contributions.
We continue to make strong progress in the development of special core core technologies and in addition to previously announced contracts with customers we expect significant contracts to materialize in the coming months.
In parallel, we have made great strides towards achieving cash neutrality at the current level of revenue and have a clean balance sheet to support our growing investments. Thank you all for your interest and support of Glimpse Group.
And now I’m going to turn the call over to the operator to take a few questions.
Question and answer session
Thanks, Lyron. [Operator Instructions] There are no questions coming. We have a question from Casey Ryan with WestPark Capital. Please ask your question. Your line is direct.
Gentlemen, thanks for the update today. I think when you announced the initial restructuring, you were talking about, there are some entities that you might be looking to take strategic action with. Do you have any updates on that or any sense of how much value there is in those or opportunities or interests from other parties around what is considered non-core right now moving forward?
Thanks for your question, Casey. So we’re in the process of reviewing the companies we have, figuring out which ones should stay within Glimpse and continue to operate. And as we mentioned in the prepared remarks, generate cash flows that will move our company forward and which ones are better off being outside and then exploring the right structure. So we still haven’t gotten to the full decision point on those, and we’ll update probably in the next few quarters as kind of progress around that.
Yes. Maybe my thinking was too short on their timeline. So it seems like this is a 12-month kind of process, not a three-month kind of process, I think.
Maybe closer to three months than 12 months, but we just had our strategic realignment call a month ago. So we are still working on it.
No, I’m not trying to pressure you, but I’m excited to get the update. So – and then the next question, it sounds like you have some visibility into what the revenue shape looks like. Is this a change? Or maybe it’s related to a specific possibility that you have a high probability of. I’m just kind of curious if you like as you change business and focus on core space opportunities that maybe your visibility is expanding in some way?
Yes. No, I actually think that as the business goes, we will have more visibility as some of these commitments will be more of a long-term nature and we will be able to see the revenue and the work that will be done over the period. So I see more visibility now than we had in previous quarters.
Good. Good. Well, that’s exciting. That’s it for me now. I’ll jump in line again. Thanks for the update.
At this point, we will turn to some written questions. Again, if you want to ask a question, please use the chat function.
I don’t see any written questions, so I’d like to thank each of you for joining our earnings conference call. We look forward to continuing to update you on our continued progress and growth. If we were unable to answer any of your questions, please contact us directly.
Thanks to everyone.
Thank you. That concludes today’s webinar. Thank you for your participation and have a wonderful day. You can disconnect the phone lines at this time.