Seeking Alpha • Aug 18
The Glimpse Group Grows Revenue From Acquisitions But Operating Losses Mount
The Glimpse Group went public in June 2021, raising approximately $12.3 million in an IPO.
The firm provides a range of virtual and augmented reality software and services to organizations.
VRAR has grown revenue from a tiny base mostly due to acquisition, has generated increasing operating losses and continues to add headcount as the economy slows.
I'm on Hold for VRAR in the near term.
A Quick Take On The Glimpse Group
The Glimpse Group, Inc. (VRAR) went public in June 2021, raising approximately $12.3 million in gross proceeds from an IPO that priced at $7.00 per share.
The firm provides enterprise software and services for virtual reality and augmented reality applications.
Given VRAR’s worsening operating losses, poor Rule of 40 result and continued investment in growing the company’s expense structure despite a looming economic slowdown, I’m on Hold for VRAR over the near term.
The Glimpse Group Overview
New York, NY-based Glimpse was founded to create a VR and AR platform to deliver software and services to the enterprise market.
Management is headed by co-founder, president and CEO Lyron Bentovim, who was previously COO and CFO of Top Image Systems and of NIT Health and Cabrillo Advisors.
The company’s offering categories include:
Training & Education
Healthcare
Branding & Marketing
Retail
Financial Services
Food & Hospitality
Media & Entertainment
Social VR meetings
The company uses a "hybrid approach" to its sales and distribution efforts, with each subsidiary having its own business development and sales team while the holding company management remains actively involved in business processes and fostering collaboration between subsidiaries.
Glimpse does not develop hardware and management says that most of its software and services are compatible with all major hardware platforms.
The Glimpse Group’s Market & Competition
According to a 2021 market research report by Grand View Research, the global market for virtual reality was valued at an estimated $15.8 billion in 2020 and is expected to grow to $59 billion by 2028.
This represents a forecast CAGR of 18.0% from 2021 to 2028.
The main drivers for this expected growth are improved hardware devices and related software and services offerings by industry participants as well as a growing usage of VR technologies in training across various industry verticals.
Also, other industries are beginning to adopt these technologies, including CAD or computer aided design, healthcare services and tourism applications.
Management says major competitive or other industry participants include:
Spatial
Striver
EonReality
IrisVR
Mursion
OssoVR
Glimpse’s Recent Financial Performance
Total revenue by quarter has grown in recent quarters, but remains tiny for a public company:
5 Quarter Total Revenue (Seeking Alpha)
Gross profit by quarter has also risen significantly on a percentage basis:
5 Quarter Gross Profit (Seeking Alpha)
Selling, G&A expenses as a percentage of total revenue by quarter have varied materially in recent quarters:
5 Quarter SG&A % Of Revenue (Seeking Alpha)
Operating losses by quarter have increased substantially, as the chart shows below:
5 Quarter Operating Income (Seeking Alpha)
Earnings per share (Diluted) have remained negative over the past 5 quarters:
5 Quarter Earnings Per Share (Seeking Alpha)
(All data in above charts is GAAP)
In the past 12 months, VRAR’s stock price has fallen 20% vs. the U.S. S&P 500 index’ drop of around 2.8%, as the chart below indicates:
52 Week Stock Price (Seeking Alpha)
Valuation And Other Metrics For Glimpse
Below is a table of relevant capitalization and valuation figures for the company:
Measure [TTM]
Amount
Enterprise Value
$61,380,000
Market Capitalization
$79,660,000
Enterprise Value / Sales
10.67
Revenue Growth Rate
93.3%
Operating Cash Flow
-$3,850,000
Earnings Per Share (Fully Diluted)
-$0.83
Net Income Margin
-136.1%
(Source - Seeking Alpha)
The Rule of 40 is a software industry rule of thumb that says that as long as the combined revenue growth rate and EBITDA percentage rate equal or exceed 40%, the firm is on an acceptable growth/EBITDA trajectory.
VRAR’s most recent GAAP Rule of 40 calculation was only 2% as of FQ3 2022, so the firm needs significant improvement in this regard, per the table below:
Rule of 40 - GAAP
Calculation
Recent Rev. Growth %
93%
GAAP EBITDA %
-91%
Total
2%
(Source - Seeking Alpha)
Commentary On The Glimpse Group
In its last earnings call (Source - Seeking Alpha), covering FQ3 2022’s results, management highlighted the ‘highly variable’ nature of its expense structure, where 85% of its expenses are labor-related.
The firm inked some initial contracts with several unnamed Fortune 500 companies during the quarter.