Welcome to The Glimpse Group's first quarter fiscal year 2025 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. The earnings release that accompanies this call is available on the investor section of the company's website at https://ir.theglimpsegroup.com. Before we begin the formal presentation, I would 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, Kelly, and thank you, everyone, for joining us. I'm pleased to welcome you to the Glimpse Group's Q1 fiscal year 2025 financial results investor call for quarter-ended September 30th, 2024. During the quarter, we delivered the first phase of our large DoD contract and have made significant progress towards securing several multi-million-dollar enterprise-scale spatial computing, cloud, and AI-driven immersive software solutions SpatialCore contracts with multiple government, DoD, and large enterprise customers. The short-term aggregate value for those contracts is in the $5 million -$10 million range. We expect to get confirmation on one of these contracts in December 2024 and to receive additional confirmations in early 2025 due to budgetary delays. In parallel to SpatialCore, our other immersive businesses continue their positive momentum from the previous quarter.
Some recent examples: we entered into a mid-six-figure contract with a large global water and hygiene infrastructure company for an augmented reality solution. We entered into a mid-six-figure contract with a global energy company for immersive content. We entered into a multi-year mid-six-figure contract with a state district for immersive education. Our subsidiary QReal saw a significant increase in revenue driven by demand from its largest customer for AR lenses and 3D models. While the immersive industry, and Glimpse as a significant participant in it, has faced challenging headwinds in the past few years, we have successfully transformed and stabilized our business and are now seeing and experiencing concrete positive growth indicators. As such, we expect revenues to continue to increase in the coming quarters based on signed contracts in our advanced revenue pipeline.
We also expect to be cash flow positive in the current quarter and the quarters after, which will result in an increased cash balance without the need for capital raise. However, the transformation and positive development achieved in recent months has not been reflected in our stock price, creating what we believe is a significant disconnect between our intrinsic value and our public company valuation. To illustrate, we're a company with immersive technology, AI and cloud-driven revenues, large enterprise and DoD customers, a strong pipeline of revenues, positive cash flow going forward, and a clean balance sheet, yet has a ridiculously low market cap, nominal trading volume, and consistent selling pressure, even when we put out very positive news. This valuation disconnect has had, and continues to have, a substantial negative effect on our ability to execute on our growth strategy.
As such, the board of directors of the company is exploring various aggressive strategic options to enable the business to be in a position to invest in its growth while unlocking the value inherent in our business and/or assets and may pursue such options during the
fiscal year. As part of this strategic review process and our previously announced strategic realignment and divestiture of non-core assets, effective on October 1st, 2024, we divested the business of QReal and its related Turkey-based operating entity. Some of the key elements of this divestiture include: QReal was one of the original Glimpse businesses acquired upon our inception in 2016.
We believe that QReal's virtual trial business has a greater growth and success potential as an independently funded entity outside of Glimpse potentially creating significant equity value for Glimpse's shareholders in excess of QReal's current equity value within Glimpse.
The divestiture creates approximately $4 million of expected net cash value to Glimpse over the next two years, inclusive of $1.2 million -$1.5 million in annual cash savings, excluding the upside potential from our equity position in the divested entity and/or from the repayment of our senior note. The divestiture simplifies and streamlines Glimpse's operations, approximately 60 less employees, and eliminates the Turkey country risk. No material change is expected for our revenues for fiscal year 2025 and 2026, as Glimpse retains the revenues from QReal's largest customer in full until such time that Glimpse has collected and retained at least $1.35 million in net cash in aggregate, after taking into account all related operating expenses and fees.
After satisfaction of the milestone, Glimpse will receive a monthly cash revenue share for an additional period of 18 months in relation to any revenues generated from this same customer. Glimpse was issued a $1.56 million senior secured convertible note in a new and independent entity, NewCo, that will operate QReal's virtual trial business. Senior note principal payback is tied directly to revenue collected by the NewCo, separated from the milestone referenced above. NewCo has raised outside capital, and Glimpse was issued a minority equity stake in the 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-Q and press release that were 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 filing, which you can find on our website under SEC filings. Q1 fiscal year 2025 revenue of approximately $2.44 million, reflecting a 44% increase compared to Q4 fiscal year 2024, as the quarter ended June 30th, 2024, revenue of approximately $1.7 million. The quarter-over-quarter increase was primarily driven by an increase in SpatialCore revenues and a 21% decrease in revenue compared to Q1 fiscal year 2024, as the quarter ended September 30th, 2023, revenue of approximately $3.1 million.
The year-over-year decrease was primarily driven by our strategic alignment over the last nine months, which led to a turnover in our legacy customer base and consolidation and divestiture of some of our businesses. We expect revenue in the next three upcoming quarters to exceed $3 million on average per quarter, and aggregate revenue for fiscal year 2025, ending June 30th, 2025, to be in the $11 million -$12 million range compared to $8.8 million for fiscal year 2024, which is the year that ended on June 30th, 2024, representing a 25%-35% increase in annual revenue. This expected growth will be primarily driven by an increase in SpatialCore revenues as well as potential growth in our other businesses. Gross margin for Q1 fiscal year 2025 was approximately 79% compared to 62% for Q1 fiscal year 2024.
The increase in gross margin was driven by an increase in SpatialCore revenues and higher software license revenues this quarter. On average, we expect our going forward gross margin to be in the 60%-70% range. Adjusted EBITDA loss for Q1 fiscal year 2025 was approximately $0.46 million compared to an adjusted EBITDA loss of approximately $1.29 million for Q1 fiscal year 2024. Our current cash operating expense base pre-revenue is now less than $1 million per month. Given our projected revenues going forward, we expect to generate positive cash flow in each of the three remaining quarters of fiscal year 2025. The company's cash and equivalent position as of September 30th, 2024, was approximately $1.4 million, with an additional $0.9 million in accounts receivable.
We do not intend to raise capital in the foreseeable future, especially since we expect our operations to generate positive cash flow and grow our cash balance. 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.
Thank you, Maydan. We have made major strides over the past year in repositioning and restructuring the company strategically and operationally. We are positioned as a provider of AI and cloud-based enterprise immersive software and services and poised for revenue growth and cash profitability. However, this has yet to be reflected in our stock price to the great deterrent of our growth potential and shareholders. Going forward, we are going to continue to focus on profitable growth and, in parallel, aggressively explore all strategic options with the goal of unlocking the value of our business and/or underlying assets. Thank you all for your interest in and support of The Glimpse Group, and now I'll turn the call back over to the operator to take some questions.
Thank you, Lyron. If you'd like to submit a question, you can either type it in the chat box below or raise your hand. We'll start with any audio questions and follow that with some writing questions as time allows. For audio questions, please press star one to enter the queue. Please hold just a few moments while we pull for any questions. Your first question is coming from Casey Ryan with WestPark Capital. Please pose your question. Your line is live.
Good afternoon, gentlemen. Exciting quarter with the QReal news. Before we talk about that, can we talk a little bit about your discussion around the operating expense level, which I think you said was going to be $1 million or a little less per quarter? Does that include the cost savings, I guess, related to QReal? I was trying to understand how to marry Q3's OPEX versus what's going forward. Is it basically just saying taking $400,000 out and then saying it's roughly a million?
Yeah. So kind of if you look forward based on where we are right now, and obviously kind of it's always a moving target as we add and subtract based on what we need. Right now, we're run rate at under $1 million of monthly costs.
Okay. Okay. Okay. Good. Terrific. Thank you for that clarification. That's good. And so a lot of the new customer opportunities are pretty exciting. One thing I'm noting is it's pretty diversified. You're looking at sort of water infrastructure and government and DoD work and other areas. How are you finding customer opportunities? I'm curious if people are coming to you or if you have some channel help outside of your direct sales efforts, but I'm impressed by the revenue or by the industry diversity in terms of winning opportunities.
Yeah. So a few things. We've been doing this for kind of eight-plus years at Glimpse and some of our subsidiaries have been doing this for a couple of years longer than that. So we've got kind of a good network of relationships with customers and channel partners. Many of the customers are actually coming to us with needs, and obviously kind of our leaders and biz dev people are constantly talking to customers, understanding where they are, what they need, and how our solutions kind of address what those are.
Okay. Good. And so given that structure that there's some inbound, it sort of suggests that there's potentially upside as we go forward as people continue to evaluate and adopt kind of your core technologies.
We certainly hope so.
Yeah. That's right. We'll just sort of go ahead and expect that. Last question. Software license, that revenue segment, I know it's not the bulk of the business, but it doubled in the quarter, and I'm just curious if that's sort of a one-time event or if that's sort of a more durable $200,000 is kind of a durable quarterly run rate for us to think about moving forward?
Maydan, do you want to take that?
Hey. Yes. I think that is more or less a reasonable number to expect going forward based on some of the things that we have on Spatial Core, which if those come to fruition, there are significant follow-on activities for follow-on contracts that have a stronger recurring nature in them of software licenses, but also some of the stuff that we mentioned with other businesses. So.
Okay. Good.
I do expect that's a reasonable number going forward.
Okay, and so it sounds like we should expect that to grow maybe in line with the overall business growing because it sounds like that sort of piece of the revenue line gets pulled in as the contracts get bigger and there's recurring work to be done and sort of customer help to be provided. So.
Yeah. There's definitely growth that's inherent in it. Again, kind of on a quarterly basis, it can fluctuate, but kind of the trend is up.
Okay. Good. All right. Well, terrific. And then just on the government contracts that you mentioned, were those part of the fiscal year, I guess, fiscal year 2025 for the federal government, so tied to the last budgetary process, or is there some new budgetary work that those contracts are tied to?
So, kind of as you know, the government has basically decided or kind of Congress not to approve a budget for 2025 just yet. So, kind of given the results of the election, it feels like kind of we will have to wait until the new Congress is in for them to, I assume, very quickly put together a budget. So, I expect that to happen early in 2025. I think by law, they have to do it by March. And once that happens, kind of things take a while to trickle down from the budget being approved to us hearing about certain things, but they'll start flowing in that direction.
Yeah. Okay. So we're actually still on that Continuing Resolution, is what you're telling me, so I should pick up the politics section of the newspaper and get caught up on that. But listen, I think overall.
I'll tell you what, it's very entertaining these days.
Listen, overall, very exciting. I think it's terrific to get the upside and the optionality on QReal, so that feels like a real asset for the business that doesn't absorb current resources and your management focus. Overall, it looks like a very good quarter, so we look forward to what's coming next. Thank you for taking my question.
You're welcome.
At this time, we'll turn over to some writing questions. Again, if you would like to ask a question, please use the chat function. Please hold a moment while we pull for any questions. I am not seeing any questions. Lyron, did you have any emailed questions that you would like to ask?
No, there are no emailed questions.
Okay and now.
Just from each and every one of you.
Go ahead, Kelly.
I'd just like to turn the call back over to you for any closing remarks.
I would like to thank each and every one of you for joining our earnings conference today. To continue to ask questions, feel free to reach out to us directly.
Thank you, everyone. This does conclude today's webinar. Thank you for your participation and have a wonderful day.