Gorilla Technology Group Inc.(GRRRW)Q2 2025 法說會逐字稿

Thank you for standing by. This is the conference operator. Welcome to the Gorilla Technology Group, Inc. Earnings Call for the First Half of 2025. Gorilla Technology Group is listed on NASDAQ under the ticker GRRR. The conference is being recorded. Before we begin, we will read the forward-looking statements. Today's call includes forward-looking statements made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements reflect management's current expectations and projections about future events and are subject to known and unknown risks and uncertainties that could cause actual results to differ materially. Forward-looking statements often include terms such as expects, believes, plans, anticipates, may, should and similar expressions. For a discussion of important factors that could affect Gorilla's results, please refer to our filings with the SEC, including our report on Form 20-F. Except as required by law, Gorilla undertakes no obligation to update or revise any forward-looking statements made on this call, whether as a result of new information, future events or otherwise. I would now like to turn the conference over to Jay Chandan, Chairman and Chief Executive Officer; and Bruce Bower, Chief Financial Officer. Please go ahead.

Thank you very much. For everyone who's dialed in, thank you very much for your support and attention. Gorilla Technology has entered the second half of 2025 with more momentum and firepower and more market reach than any other time in our history. Our first half delivered about $39.3 million in revenue, which is a 90-plus percent year-on-year increase. But at the same time, we did so by executing very large complex projects in multiple geographies. This proves that our AI-driven security, intelligence infrastructure solutions are in demand at the highest scale and that we can deliver them consistently at scale. Now financially, we have also strengthened our position on every front. We have a rock-solid CFO, who's reduced debt to $18.1 million, improved our liquidity with about $26.1 million of cash, and further added another $105 million to our kit in July through an equity raise to accelerate growth.

Now these are just not numbers on the page. This is fuel for securing and delivering long-term high-value projects, which will define the future of Gorilla. Operationally, we've also signed three new projects over the last 30 days. I promised I was going to be announcing a lot more coming in the coming days in my previous call, and we will be making many announcements shortly as well. Two projects were in Taiwan, one in the U.K. The one in the U.K. was a significant extension of the existing U.K. customer we have, but the two new projects in Taiwan were new customers. These were strategic footholds for us, not one-off wins alone. What it also does is it helps us strengthen our long-term recurring revenue base with new customers so we can increase and expand further into these markets. Now profitability remains a core discipline for Gorilla. On a normalized basis, adjusted EBITDA and adjusted net income both came at about $5.7 million, demonstrating we're not just chasing top-line growth.

Now we are building a profitable, sustainable business. Our model is now structurally much stronger compared to where we were last year at the same time, shifting from a very seasonal milestone-heavy cycle to multiyear contracts that will deliver steady revenue alongside what we call milestone upsides going forward. We are no longer just a business of supplying technology. We are delivering national scale AI cybersecurity, data intelligence platforms that change how governments and enterprises operate. More importantly, with the platform partnerships and global delivery capabilities we have now created, Gorilla is built to scale, and we're built to win and we're built to lead. I will pass it over to Bruce.

Thank you, Jay, for the kind words, and thank you also for the overview. Jay gave you the headline financial numbers. What I wanted to do is to dive into a few items and really highlight certain things. So the first is, as Jay mentioned, the first half revenue surged to $39.3 million. That is obviously a great start, up 90% year-over-year. One of the things you might notice is that the gross margin is in the low 30s. This is skewed lower compared to last year due to the mix. Last year essentially was service revenue, which is higher margin. Nonetheless, we still maintain our full year forecast for gross margins in the 40% range, and that's given basically the mix that we see in the second half of the year. A couple of other things you noticed are two one-off adjustments or losses that show up, and I wanted to explain those. So the first is a financing-related loss. This is primarily due to the exercise of warrants by warrant holders in the first half of the year.

This is basically a pure accounting item. There's no cash impact, and that's essentially the loss or the difference between the exercise price of the warrants, which was $5.60 a share and the prevailing market price, which was higher. So we just have to book that for accounting purposes as a loss. There's no cash impact. There's no impact on the business at all. Actually, we were collecting cash from the warrant exercise. There's also FX-related losses, which is due to the lagged impact of the devaluation from the Egyptian pound in 2024. What happens is that certain work performed went into the contract assets or the unbilled revenue, and this revaluation carried through to now when we recognize it. I would note that the Egyptian pound has strengthened substantially in the last few weeks, from over 50 to almost 48. We would expect this effect to be a little bit muted or even turn around in the future.

Moving on to the balance sheet items, we ended the first half with $26.1 million in cash. Subsequent to this close, we mentioned that we did an equity offering of $105 million in gross proceeds. So where that leaves us at the moment is we have about $114 million of unrestricted cash and $11.3 million of restricted cash. You'll notice that the restricted cash figure now is much lower than at the end of the first half. It was about $16 million at the end of the first half due to a bid bond or a guarantee that was released, which returned about $4.9 million. We also expect to see this restricted asset drop even further due to the release of a customer guarantee to the tune of $2 million to $3 million in the upcoming weeks. We continue our debt paydown strategy and should be able to net about $1 million from paying down a loan facility and getting restricted assets released from that. So where we are at the moment with the debt position is it's $18.1 million at the end of the first half.

We're happy because this is down from $21.4 million at the end of 2024. We continue to selectively pay down debt where we can release deposits tied to the debt. Just to recap for those who may not know this, we have a working capital facility secured by two things: the first is a property that we own in Taipei, and in addition to the value of the property, we were forced to pledge some restricted deposits. So we have a bank account, a deposit, locked up, which is collateral. As we pay down the debt, then we release collateral usually on a one-to-one basis. Pay down the dollar of debt, release a dollar of collateral. It remains cash neutral for the company, and that's why we pay it down. Overall, we don't want to pay off all of the debt because it's at 3% in dollars. It's quite cheap and gives us financial flexibility. A couple of other things to note. After the equity offering, the shares outstanding are now 22.9 million.

This is because we sold treasury shares and issued about one million shares in addition. One of the advantages of the equity offering is that we have 3.47 million prefunded warrants, where we have collected almost all of the cash, but we have not issued the shares yet. Those shares will only be issued when the prefunded warrant holder wants them. The share count should stay at 22.9 million until that part starts to change. In terms of the outlook, I want to confirm that the backlog for this year was $93 million. Of course, we've delivered $39 million of revenue, which is taken out of the backlog. We've added $4 million or $5 million to the backlog, so it remains around $59 million for now until the end of the year. We are still confident in our guidance for this year of $100 million to $110 million in total revenue, targeting EBITDA margins of 20% plus and also targeting positive operating cash flow with the current contracts and structure.

That leaves us on track for the full-year numbers. You can see how we spoke in the past, and we will continue to speak to, we don't just stick our finger in the air and make guidance. We build it from our backlog, confirmed orders, and signed contracts we are either working on or about to implement. We don't just look at our pipeline and take a guess. For next year, we can confirm that we have a backlog of $70 million. Once we firm up that backlog, we will get to the market with a more formal guidance. So stay tuned on that. As Jay mentioned, we have several near-term opportunities, which we anticipate making some announcements about in the coming couple of months. Hopefully, that will give you a better idea of the backlog for 2026 and what the guidance is. One of the things we've talked about in the past, and I want to mention again today is the funding strategy for future projects. When we announce those future projects, what are we doing?

The first step is obviously looking for project-level funding where there is another entity friendly to Gorilla or that is an SPV or otherwise, a customer funding a project, we look for that as a first step. The second thing is to look for debt. And then third is equity. As you know, we raised equity. The sequencing is important here. We saw a need for equity to do two things: first, to be ready so we could say to customers that we're ready to go; second, to improve the availability and terms for debt. We are now in the market for debt, having engaged the bank. We anticipate making more announcements about how we fund projects, with an emphasis on project-level funding and debt. With that, I conclude. Jay, unless you have anything else, we can move on to Q&A.

Absolutely. Let's move on to Q&A.

The first question today comes from Mike Latimore with Northland Capital Markets.

All right. Congrats on the strong growth this year so far.

Thank you, Mike.

Jay, maybe can you just highlight or summarize which customers or projects or regions were the main revenue drivers half of the year? And which do you expect to be key to the second half of the year?

Absolutely. So the first half of the year, Mike, we have very actively worked on and in Taiwan. The second half of the year, a majority of the revenue will be coming in from Taiwan, Thailand, and the Middle East. For 2026, the mix is almost an even spread between the U.S. and Southeast Asia.

Great. Great. So getting nice and diverse sources, it sounds like.

Yes. As we had promised a couple of years ago, we promised to derisk our business, not just in terms of territories and geographies, but also in terms of business segments. So that's where we are today, and we have managed to kind of derisk it.

Could you provide some details about the two projects you've mentioned in the past, specifically ONE AMAZON? It would be helpful to know when it will launch, how you plan to implement it regarding the number of sensors, and any additional clarity you can share would be appreciated.

Absolutely. This is going to be slightly long. Hold on. For us, it has been progressing very strongly. In fact, it's been a real success story for us, even pre-implementation. Now the milestones we have: one will be the official showcase at the New York Climate Week in September of 2025, where the world leaders are gathering to discuss the ONE AMAZON project. The second milestone will be the tokenization completion and launch at COP30 in November of 2025, alongside the official release of the ONE AMAZON tokens as well. On the technology side, we already have our team in Taiwan and in India, working on all the sensor technology, whether it's field deployment, environmental monitoring, IoT devices, configuring them for forest health, biodiversity tracking, and anti-deforesting alerts. We've also started working on our proof of concepts on satellite mapping, multilayer imaging, creating AI-based land use mapping operations that enable real-time monitoring and verification.

The Internet of Forest, which is the third part of our technology solution, is providing connectivity, edge AI, and cloud analytics to capture and process environmental data at scale. We've already started working very closely with a university to democratize some of the data. I'm just back from India this morning, and we are signing up with a very large university, one of the top-tier universities in the country, to build the innovation lab and ensure that we are able to help build large language and small language models in the region. Finally, we've also started on the cost per hectare analysis. The model is fully operational, where we're working to optimize resource allocation and project ROI. On the blockchain and tokenization, we're currently working on the platform, in partnership with the leading blockchain infrastructure providers. We're also working on carbon credits and environmental asset tracking, which is directly linked to the on-the-ground data from the sensors as well.

We have deployed some of the sensors, not only just in the Amazon rainforest but in other regions for comparison. The good news is we have officially signed the land use agreement for over 130,000 hectares, signed by the state of Mato Grosso. The Governor of Mato Grosso will launch it at the New York Climate Week as well. This allows us to approach other territories for closing the under- negotiation and secure a footprint for large-scale conservation and restoration. Our role, Mike, is very clear. We are the exclusive technology backbone for data capture, encompassing all connectivity, security, and system integration. More importantly, we want to ensure that ONE AMAZON is a measurable, verifiable, and commercially viable climate tech initiative. I hope that answers your question.

Yes. Excellent. Excellent. And I guess just the last one for me. The Smart School program in Thailand, maybe can you provide a sort of quick update there? And once that starts getting deployed, what kind of revenue might you be able to see in the first year?

Sure. Mike, we are currently in very deep negotiations with the government. The project, as I mentioned previously, has already expanded in scope. It's not just the smart education; there is a smart cloud infrastructure and AI database integration project as well. We are actively discussing the scoping with the customer and agreeing on some of the contractual terms. I want to be careful so I don't comment on any specific details such as the commercial model, delivery schedule, and so on. However, the size and scope of the project has only expanded, not reduced. When there's a formal contract and public announcement, we will definitely share the details over the course of the next few weeks.

The next question comes from Brian Kinstlinger with Alliance Global Partners.

This is Kevin for Brian. Could you provide an update or a little bit more of an update on any of the large MOUs that you've discussed and the progress of signing contracts? And while you've had a few MOUs, is there one you think is closest to getting signed? If so, which one?

Sure. I mean, Brian, the Wan Hai Port in Taiwan and the ADE were both in the MOU phase, but we have closed them already. As you know, for Wan Hai, we will be deploying our AI port logistics safety and operational efficiencies over the next few months. The ADE is a much more complex project; it will integrate our AI-based analytics to track and disrupt financial crime networks. It's the first of its kind that we are building, especially for the blockchain platform. The remaining contracts we are currently working on are in the final stages, and we will announce once they are signed. We are on plan. To be blunt, closing multimillion multiyear AI infrastructure contracts with governments is not a same-day exercise. The MOUs we talked about are at a very mature phase. For instance, we mentioned the project in Thailand with the Thai Police; we have actually deployed and completed proof of concepts already.

The customer is extremely happy with our results. If people took some time to look, they would see our solutions running live in multiple locations, including Pattaya, Chiang Mai, Ayutthaya, Lopburi, and so on. The opportunity remains, and we are engaged to convert these proof of concepts into contracts; these will become broader national programs. More importantly, we are still committed that this will turn out to be a $50 million to $60 million project. I hope that answers your question.

If I could add a couple of points as well. Kevin, just to add two more things. First, not all projects that Gorilla undertakes have the same life cycle. Some go through lengthy procedures starting from terms discussions, signing an MOU, and going through proof of concept, which can take months to refine and execute properly. Others can go straight to the contracting phase. Some of the opportunities we alluded to earlier in the call are of that sort. Therefore, there is no MOU skipped over that phase; we are simply talking about final signed contracts at the end of the day. The second point I would note is the timelines. One reason we're cautious with our revenue forecast is that timelines can shift. Something that begins as a proof of concept can take longer, and sometimes it gets reworked. In a couple of projects, the scope has expanded. So we're happy to have a project take longer in exchange for a larger scope. This makes precise forecasting difficult, which is why we prioritize being conservative. When we do MOUs, it's the start of a relationship that takes time to cultivate and flourish into a business. We don't try to force it. We allow it to evolve naturally, and if it takes longer, we want to ensure the market isn't getting overly excited prematurely. Instead, we communicate when it's mature.

Great. And then could you talk a little bit more about the primary uses of the capital raise? Will there be any significant increases in expenses to drive top-line growth or near-term M&A opportunities? Or is it just to have a solid cash balance that makes winning new contracts easier given your financial positioning?

I can take that, if you want, Bruce. We raised about $105 million because we are moving forward on some very large projects. We want to ensure that we can hit our ambitious targets, and without the right capital, we're just not being realistic. I'll give you an example: the government asked us to put in a bond, a cash-based bid bond for a large project, which was $20 million. We don't want to get hamstrung; that's one reason. Secondly, we're not raising money for the sake of raising it. Every dollar raised to date is tied to a very clear high-return opportunity. While equity was the right move at the time, we want to ensure that we look at debt and other strategic funding structures so we can minimize dilution while maximizing growth. In terms of our growth, we are actively engaged with CNS and CAN. Additionally, we are looking at opportunities in India, potentially expanding with about 500 to 2000 personnel. We're also potentially pursuing an acquisition in the U.S. Apart from that, all the projects we're working on are strategic. We're looking at a whole mix of new R&D products, with investments in our SD-WAN, our Intelligent Network Director product. We're working closely with NVIDIA to develop several solutions, including those for the ONE AMAZON initiative. You'll see many developments in the next few months.

The next question comes from John Roy with Water Tower Research.

Great. First of all, congratulations on a great first half. I wanted to ask about gross margins. Obviously, they tend to be down. Bruce, maybe you can give us some color on when that might stabilize in the future or if that is unlikely?

Well, first of all, the gross margins, as I mentioned, in the first half of last year and this year are influenced really by the revenue mix. Last year, we had a couple of large projects in Taiwan and the Middle East, which were primarily service and software, so higher margin. In contrast, the first half of this year included significantly more hardware deliveries, which affected the margins. I would say that for the year, we expect the margins to move up towards the target we announced given the mix. We expect contracts in the Middle East, Taiwan, Thailand, and other regions to help achieve a gross margin of around 40% for the year. Looking forward, given the current contract mix, we expect a similar margin profile in the future. Given these contracts are with governments, timing can fluctuate, and the recognition of revenue may shift between hardware and services. One quarter might exhibit volatility, but over the full year, we expect stabilization.

No, that definitely helps. No, go ahead, Jay.

Sorry, just to add to that, I think Bruce made a very valid point. We've already moved from a very lumpy milestone-driven revenue model to a more predictable model. If you look at the last two quarters and the next two quarters, it will be more predictable. More importantly, what we are trying to do is move away from these lumpy projects to long-term multiyear sustainable revenues, which means we are signing multiyear projects. What will happen over time, as we adjust our ship, we will see the effects towards the latter half of this year or the first two quarters of next year. While there will be revenue spikes and some fluctuations in gross margins, over time, the yearly numbers will be much more stable and predictable. We will have a much stronger baseline for growth, capturing all growth upsides. For example, the projects we're discussing in Southeast Asia, including Taiwan, Singapore, Jakarta, and Malaysia are all 3-, 5-, and 8-year contracts. These are not just maintenance contracts; they are proper long-term recurring contracts, allowing us to create a more stable revenue source. Just wanted to add that.

That's really helpful. One quick question on your U.S. efforts. I know you were talking about possible acquisition. Are you still working with AECOM significantly in the U.S.?

Yes, we are. AECOM, Cisco, and ONE AMAZON, which is now moving its tokenization strategy to the United States, will be significant. But we will also work closely with HPE, with whom we signed a global OEM relationship, and with NVIDIA in the near future as well.

This concludes our question-and-answer session. I'd like to turn the conference back over for any closing remarks.

Thank you very much. Some questions which you probably need answering, but I'm happy to respond to people who are sending us messages at any given point. What I wanted to let people know is that our business is moving forward in what we call real-world implementation. We are managing country risk, sovereign risk, procurement risk, implementation risk, ensuring that we can get paid on time and deliver on time. That is something I think most of you have seen; our customers are paying us. They're not just holding their money back. Our largest customer has already paid us this quarter, as you've seen from the press release this morning. What we are doing is reducing our overall accounts receivable, ensuring that we are able to run a complex global organization. For a company of our size, it's unique that we are positioned in different countries. But at the same time, we also want to ensure that our cash conversion stays on point.

Ensuring payments flow in line with project milestones is very essential for maintaining liquidity and funding expansion. We are following a multi-sourcing and multi-localization procurement program. At the same time, we're ensuring strict payment protection and contractual safeguards are established. Dealing with government can delay projects, so we want to ensure we are protected and maintain cash flow. However, we all know that sometimes execution can slip. Our approach is to design contracts and operational plans to mitigate risks before they become a problem. Despite the volatile global market, we are still delivering growth. I appreciate your patience and support for Gorilla. Thank you very much.

This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.