The Glimpse Group, Inc. (GGRP) Q4 2025 Earnings Report, Transcript and Summary

Welcome to the Glimpse Group's Fiscal Year 2025 Financial Results Webinar. [Operator Instructions] 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 t 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 you to the company's website for more supporting industry information. I would now like to hand the call over to Lyron Bentovim, President and CEO of the Glimpse Group. Lyron, the floor is yours.

Thank you, Holly. Thank you, everyone, for joining us. I am pleased to welcome you to The Glimpse Group's Fiscal Year 2025 Financial Results Investor Call for quarter ended June 30, 2025. Fiscal year 2025 was a remarkable year for Glimpse with many achievements. Return to revenue growth, achievement of annual cash flow neutrality for the first time in the company's history, significant Tier 1 customer wins, divestiture of non-core assets, key technology development centered around integrating AI into our immersive products. The filing of 7 new patents primarily focused on the integration of AI with immersive technologies, all while maintaining high gross margins and a clean balance sheet. Our software products and services are at the forefront of several key emerging technology segments, immersive, spatial computing, AI, cloud. We have established a track record of working with major customers across industries as well as relationships with some of the leading companies in the tech world and have a significant pipeline and growth potential. However, these have not translated into significant shareholder value creation, which has led us to strategically review and with the Board's approval of the plan that will unlock and create far more value for all of us as shareholders. I will go into more details later in my prepared remarks. Driving our growth going forward, our main engine is our subsidiary, Brightline Interactive. As a quick reminder, BLI, through its product Spatial Core provides advanced spatial computing, AI-driven operational simulation middleware software and solutions to the Department of War and big data-driven enterprises. Spatial Core sits at the intersection of spatial computing, immersive technologies, AI, cloud and geospatial data. We view it as an operating system for computing, processing and visualizing information in 3-dimensional space on the cloud. BLI specializes in creating AI-supported workflows on top of dynamic synthetic environments that integrate multimodal and real-time data to accelerate decision-making, enhance mission readiness and expand human and nonhuman training capabilities that can be used in a variety of arenas, including digital twins, robotics, drone and autonomous vehicles. While Spatial Core is at the cutting edge of technology, it is not science fiction. It is based on BLI's established 15 years of technological development deep knowledge-based and rooted in proven paid-for contracts with major entities with high operational and executional requirements. In fiscal year 2025 alone, Brightline achieved several critical milestones, including successfully executing and delivering the development of a unified synthetic training ecosystem for a major DOW entity, a $4-plus million initial contract. The system enables soldiers to train, plan and execute missions in a fully virtualized environment, providing interfaces for collaboration and digital twin integration and functionality. Entered into a $2-plus million Spatial Core contract with another DOW entity as the direct prime to be delivered over the next 12 months. While we can't go into any additional details just yet, it has similar AI and deep tech characteristics as other spatial core contracts. Successfully delivered first full motion immersive simulator to the U.S. Navy, providing the U.S. Navy with advanced simulation capabilities that bridge the gap between the real and virtual world. This state-of-the-art system incorporates spatial computing elements to enable high-level, cost-effective simulations, ensuring that military personnel can train in realistic and immersive environments. Delivered an advanced immersive simulation to a large government service integrator, BLI was able to create a sophisticated spatial simulation in record time, setting what we believe has the potential to become a new industry standard. This initial simulation project was developed with the goal of allowing the GSI to gather simulation needs from others to then add to this build or for further deployments in a cost-effective and scalable manner. Entered into a cooperative research and development agreement, CRADA, with the U.S. Army Combat Capabilities Development Command, Command control Communication, Computer, Cyber Intelligence Surveillance and Reconnaissance Center, Brightline to develop, assess and improve workflows to create and augment synthetic imagery for use in training and assessing artificial intelligence and machine learning algorithms. These, in addition to prior recent years achievements, represent initial contracts and validation of BLI's technology and delivery capabilities. All of these have the potential to expand into multimillion, multiyear follow-on contracts, leading to eventually possible inclusion in programs of record, which are exceptionally large long-term DOW contracts. In addition, BLI has a robust pipeline of new potential customers, both in the DOW space and in the enterprise big data segment, oil and gas, aviation, tech and many others. We believe that BLI's growth potential is immense, even if it does not immediately materialize to its fullest extent and takes time to fully develop. DOW contracting, for example, is notoriously slow and quite complex. In parallel to Brightline, our other entities also achieved major milestones during the fiscal year, including an NIH grant in partnership with Yale Medical, Drexel University and New Jersey Institute of Technology to advance VR education for adolescent and young adult cancer patients, partnership with Montefiore Einstein for our VR study for teen mental health, 3D immersive enterprise service agreement with a leading global energy tech company. Foretell Reality, our subsidiary, entered into several contracts for its AI-driven immersive training product, while Glimpse Learning entered into multiple software license contracts in the health care and educational segment. Despite all of this, we don't believe that our intrinsic value and certainly not Brightline is reflected in Glimpse's current valuation, not even remotely in our view. Indeed, based on our internal analysis, we believe that BLI's public company comps alone in the DefenseTech AI segment trade at vast multiples of trailing annual revenue. Even if a significantly discounted revenue multiple was to be applied to BLI, its valuation would far exceed Glimpse's current valuation. We believe that Brightline's true value and potential is hidden within the Glimpse umbrella and is potentially encumbered by it. This being the case, and in light of Glimpse's current position as a largely abundant illiquid microcap, we have reached a conclusion that the best way to maximize shareholder value for Glimpse shareholders and to increase BLI's chances of success is to spin out BLI. If successful, BLI will become an independent publicly traded company, a pure-play, well-funded stand-alone spatial computing, AI-driven cloud operational simulation middleware provider to the DOW and big data-driven enterprises. While the final methodology has not been determined yet and success is not guaranteed, our Board of Directors has approved the strategy and general process, which we expect to play out in the coming months. As part of the process, the plan is for Glimpse shareholders to be issued shares in the spun-out BLI public entity as a distribution. In parallel, current Glimpse shareholders will maintain their holdings in Glimpse, which we believe could have considerable and attractive going-forward alternatives to pursue as a clean, healthy NASDAQ technology company. With that, I will now turn it over to Maydan Rothblum, Glimpse's CFO and COO, to review the financial results. Maydan?

Thanks, Lyron. I will limit my portion to a summary review of our financial results. A full breakdown is available in our 10-K and press release that were filed earlier today and yesterday afternoon. Please note that I may refer to non-GAAP measures. For the calculation of non-GAAP measures, please refer to the MD&A section of our 10-K filing. Fiscal year '25 revenue of approximately $10.5 million, an increase of approximately 20% compared to fiscal year '24 revenue of approximately $8.8 million. The increase was primarily driven by an increase in Spatial Core revenues and despite the divestiture of non-core assets and entities. Q4 fiscal year '25, that's the April to June '25 quarter, revenue of approximately $3.5 million, an approximate 105% increase compared to Q4 fiscal year '24 revenue of approximately $1.7 million and an approximate 150% increase compared to Q3 fiscal year '25, that's the January to March '25 quarter, revenue of approximately $1.4 million. We expect fiscal year '26 revenue to exceed fiscal year '25 revenue. However, given the nature of Brightline's DOW-driven contracts, revenue recognition timing and potential U.S. government budget delays, the per quarter revenue in fiscal year '25 is expected to be quite choppy with significant movement from quarter-to-quarter. We expect Q1 fiscal year '26 to be significantly lower than Q4 fiscal year '25 and revenues to grow sequentially in the following quarters. Gross margin for fiscal year '25 was approximately 67.5% on par with 67% for fiscal year '25 -- sorry, '24. We expect our gross margins to remain in the 65% to 75% range due to a larger portion of revenue coming from Spatial Core and software license sales. We were essentially cash breakeven for the fiscal year, marking an extraordinary turnaround. Net operating cash loss in fiscal year '25 was approximately negative $0.27 million compared to a net operating cash loss of approximately negative $5.2 million for fiscal year '24. reflecting our significant reorganization efforts, cost reductions, revenue growth and the maintenance of high gross margins. The company's cash and equivalent position as of June 30, 2025, was approximately $6.85 million with an additional $0.85 million in accounts receivable. We continue to maintain a clean capital structure with no debt, no convertible debt and no preferred equity. I'd now like to pass it back to Lyron for some closing remarks, after which we will begin our Q&A session. Lyron?

Thank you, Maydan. Fiscal year 2025 was a pivotal year for Glimpse. We executed on our plan and made great strides, and there are immense opportunities ahead of us. We are determined to try and unlock shareholder value and have several options to achieve this. We intend to aggressively pursue these in the coming months, all the while keeping a sharp focus on our existing businesses and continuing to drive their growth. During this period, we may need to minimize public communications. I thank you all for your interest in and support of The Glimpse Group. And now I'll turn the call back over to Holly to take some questions.

Our first question is coming from Casey Ryan with WestPark Capital.

Pretty significant. Can I ask sort of as we look at markets, do you feel like BLI's opportunities are primarily in defense and defense-related industries? Or is there some overlap with other opportunities in education and health care? And I'm just trying to understand kind of what would be left with the core business and what would be going with BLI outside of defense contracts currently?

I'll take kind of 2 separate kind of parts of the question. So in terms of Brightline's opportunity, obviously, kind of we've made significant strides with the DOW, and we've got multiple paths that each lead to pretty significant opportunities. In addition to that, we've basically started exploring how to work with our Spatial Core product with enterprises. Kind of it's going to take probably longer to get kind of significant revenue from that, but we see this as kind of a pretty tremendous opportunity for Brightline. Education and health care are less the focus for Brightline, but that's the focus of some of the other entities within Glimpse where we see a significant opportunity integrating immersive technologies with AI. And kind of offering a variety of solutions that will help educational organizations, both at the college level and at the K-12 level as well as kind of health care enterprises to utilize kind of our technology to simulate, train and practice certain scenarios.

Okay. Okay. That's helpful. And then I know it's early days. We haven't worked on all the details, but from the announcement today to sort of some endpoint where there's something with BOI that happens that's fully consummated, are we looking at a time frame that's maybe 12 months? Or does that feel too long to you and you think it's something sooner than that?

That is way too long kind of we expect to initiate the process kind of in the coming weeks, and we expect that process to take several months to go through, but we expect something to happen if we're successful at the beginning of the calendar year.

Okay. Terrific. Terrific. And then in terms of sort of the education markets, I guess, and maybe other commercial markets outside of defense again, where do you think -- do your customers feel like they're still learning how to integrate the technologies? Or do you think they're getting closer to sort of integrating them into their normal operations and expanding them broadly, say, a college or K-12 institution?

That's a good question, Casey. Kind of I think that we are very close to that kind of transition of basically organizations trying things out to organizations fully ready to kind of jump into the water and start swimming. We're working with one of the leading universities in Florida as our kind of primary first kind of beta partner for our kind of AIA solution, and we're planning in the fall semester -- in the spring semester, starting in January to fully launch that solution in partnership with them. And that will be a significant test and probably one of the more advanced kind of willingness of an organization to really jump into the immersive AI space.

Okay. That sounds very compelling. And then sort of just jumping back to BLI, do we sort of sense that like there will be a name change? Or do we think Brightline has a good brand name and that will sort of be the name that we move forward with? Because it feels like all the key players would sort of know that name already. But I'm just sort of wondering.

I do not expect any name change kind of we expect Brightline Bright has a significant brand in the space that it's here with kind of with -- primarily with kind of customers, partners, technology, kind of those there's no reason to change the name. It's a good name.

Yes. Okay. Perfect. Well, this is a significant and potentially a great strategic move. I'll sort of drop off the question line and let others ask questions as we go forward.

Our next question is from [ Richard Molinsky with Max Ventures. ]

First of all, congratulations in turning the company's cash flow around. That was a big change. And this Brightline seems very, very exciting. And I'm wondering, I did love the news release of what you're doing with team mental health at Montefiore. And I know you said the government is really the #1 market for you, but the health care could be like #2. And I'm wondering whether this -- your services and your AI, you could go to some major companies and offer the services for them to sell it to their customers and increase the sales that way besides you doing it on your end?

Richard, kind of this is exactly kind of the path we're planning on taking in 2026 with some of our AI solutions kind of AIA product. We are looking at finding partners in certain industries that specialize in that industry. They've been offering basically 2D kind of solutions to their customers in a variety of fields. We want to kind of integrate their know-how in their industry with our AIA solutions and then allowing them to offer the solution on our platform to their customers kind of integrating immersive AI into their solutions. So that's definitely a game plan for us for 2026 for the AIA product.

Right. And when realistically do you think this spin-off could happen in your estimate? Is it 6 months down the road, 3 months? Do you have any idea when you'd want this to happen?

So our plan is to make it happen as quickly as possible, as I responded to Casey's question, I expect this to happen early in 2026 if everything goes according to plan.

All right. That's terrific. And with one of the last questions, you've been really good monitoring -- managing the cash. Do you expect the cash -- you won't have any cash needs at all at this point in time based on what you currently have in the bank and your projections?

Yes. We expect to fully be able to operate kind of with the cash we have.

Our next question for today is from [ Hung Nguyen, ] a private investor.

As far as enterprises, do you plan to get into the training employees for private enterprises as far as system and processes?

Thank you for the question. Kind of we are -- kind of our subsidiaries are not focused directly on corporate training solutions, but our AIA solution allows employees to soft skill train various scenarios in a very effective way, and that's definitely part of our go-to-market.

[Operator Instructions] Our first online question is, is the proposed spinout of BLI given the overhead costs of being a small public company are high and profits are still low -- are still small?

Thank you for the question. We've basically taken that into consideration. And definitely, that's a kind of reason against doing it and part of the reason we've not explored this now. But we believe even with the cost of maintaining 2 public entities, the value that will be created to Glimpse shareholders and the potential for Brightline to access capital as part of the process make this a significantly valuable opportunity for Glimpse shareholders.

Our next online question is, when can we expect this spin-off? Very exciting developments with Brightline. Do you see joint ventures with larger companies wanting to offer Brightline services to their customers?

So 2 parts to this question. The first, we expect, if everything goes according to plan, to have this happen early in 2026. And we're definitely constantly looking at partnership for Brightline. We have significant relationships with some of the world-leading technology companies, and we expect to continue to work with them and strengthen the relationships.

I'd now like to turn the call back over to Lyron for closing remarks.

Thank you, Holly. 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 day.

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