Gorilla Technology Group Reports 2022 Financial Results
April 04, 2023
--2022 Transition Year post IPO—
--Starts 2023 with Groundbreaking MENA Smart City Cybersecurity Win–
-- Clear Revenue Visibility for 2023 and 2024 --
--Initiates 2023 Revenue Guidance of $65 to $75 million--
LONDON, April 04, 2023 (GLOBE NEWSWIRE) -- Gorilla Technology Group Inc. (“Gorilla”) (NASDAQ: GRRR), a global provider of AI-based edge video analytics, IoT technologies, and cybersecurity, today reported its unaudited financial results for the year ended December 31, 2022.
2022 Highlights:
- Strategic pivot to security convergence as complement to advanced AI video analytics
- Beefed up video analytics offering with acquisition of assets of SeeQuestor
- Greater access to capital from listing on Nasdaq via reverse merger with Global SPAC Partners
- Moved from Taiwan-based regional supplier to London-based global leader
- Broad upgrade of leadership with new CEO, CFO, CIO, Global HR
- Implemented financial and operational discipline by transitioning out of marginal or unprofitable projects
Subsequent Events:
- Won a significant Smart City cybersecurity implementation project in MENA valued over $100 million
- Developing next generation edge AI appliance with Hailo and Lanner Electronics
- Won first U.K. customer for Smart Port project
- Strengthening team with Dr. Evan Medeiros on Board, Lawrence Ng as Head of Asia
- 2023 revenue guidance of $65 to $75 million
Gorilla Chief Executive Officer Jay Chandan commented, “After consummating the merger to go public, we began a significant transformation that is already paying off. We started the year as a strong regional player in video analytics and ended the year as an emerging global leader in security convergence. The capital and visibility provided by our U.S. listing enabled meaningful and positive change. We moved our headquarters to London and started building our European operations. We expanded our marketing efforts around the world with a focus on Europe, MENA and Asia. We rationalized our existing book of business by discontinuing non-strategic or marginally profitable customer relationships. And we accelerated our technology development with both the SeeQuestor technology purchase and the development partnership for our next-gen Edge AI appliance.”
Chandan continued, “Elements of the transformation were difficult, such as our former CEO’s retirement and the exiting of many unfavorable customer accounts, which caused a significant decline in revenue. As they say, ‘no pain no gain’ and we are already seeing the ‘gain’ from our aggressive global expansion program, evidenced by our huge win of Smart City cybersecurity project in the MENA region. The aggregate project will stretch over several years, with first phase revenue of $100 million or more to be completed in twelve months. The second phase is likely to start later this year and should be larger in project scope. We anticipate Phase II revenue to be potentially up to twice that of Phase I. This is significant upside for a company that generated $40 million of sales a couple years ago and shows the power of the new team, products, and infrastructure we built over the past year. This large MENA project is the first of what we believe could be many similar projects around the world.”
Commenting on results, Gorilla Chief Financial Officer Daphne Huang noted, “Solid growth in Security Convergence is an early indicator of the wisdom of our product pivot, and the MENA win shows that this region can drive explosive growth in the years ahead. The revenue decline in 2022 was challenging but necessary to instill sound operational and financial discipline and reset our customer and project focus. We executed the reset well at the temporary cost of material decline in revenue during transition in 2022, and laid a sound foundation to pivot to global growth in 2023 and beyond. The bottom line was impacted by the revenue decline, by the increased G&A expense from being a public company, and by the substantial investment to transform us into a global player, which shows up mainly in operating expenses. That is money well spent, as you can see with these early project wins that are an order of magnitude greater than our operating expenses for the year.”
Huang continued, “2023 will be our first year as a truly global business evidenced by our sizable entrance into the MENA region and new projects in Europe and Asia. In light of the large Phase I win in the MENA region, we plan to raise debt financing to support upfront working capital needs. Looking forward, we will continue to invest heavily in growth but do expect to grow profitably over the longer-term as revenues should far exceed the investments we make.”
Looking forward, CEO Chandan concluded, “In November, we laid out four immediate priorities for the coming year. First, to build a world-class customer-centric team responsible for commercializing Gorilla’s technologies. Second, to globalize the company by bringing our technologies to the countries that are leading the world in Smart City adoption. Third, to build a robust sales pipeline that will complement our existing products and services, with a special focus on ethical video analytical solutions. And finally, to transform our business away from a cost-plus model and toward a value-based platform as a service model, which will bring about customer stickiness and a continuous revenue stream. I am proud of our team’s hard work to deliver on all of these objectives so rapidly and am confident we will make more progress in the months ahead. Let me reiterate, the second half of 2022 was a transition period under the new management team. I am excited and proud of the sizable growth we are poised to deliver in 2023 and beyond, driven by solid execution of our global expansion strategy via both organic and inorganic growth.”
2022 Results Overview
Unless noted otherwise, all figures are for the year ended December 31, 2022, and all comparisons are with the corresponding period of 2021.
The following table summarizes financial results:
| Year Ended | |||||||
| December 31 | |||||||
| Items | 2022 | 2021 | |||||
| (in thousands) | |||||||
| Revenue | $ | 22,409 | $ | 42,243 | |||
| Cost of revenue | (14,072 | ) | (26,469 | ) | |||
| Gross Profit | 8,337 | 15,774 | |||||
| Gross Margin | 37.2 | % | 37.3 | % | |||
| Operating expense | 94,844 | 23,932 | |||||
| Operating loss | (86,507 | ) | (8,158 | ) | |||
| Net loss | $ | (87,537 | ) | $ | (8,548 | ) | |
The following table shows our EBIT, EBITDA and adjusted EBITDA, together reconciled to the loss for the year ended December 31, 2022 and 2021.
| Year Ended December 31 | |||||||
| 2022 | 2021 | ||||||
| (in thousands) | |||||||
| Loss for the year | $ | (87,537 | ) | $ | (8,548 | ) | |
| Income tax expense (benefit) | 430 | (238 | ) | ||||
| Financial expense, net | 599 | 628 | |||||
| EBIT | $ | (86,508 | ) | (8,158 | ) | ||
| Depreciation expense | 5,938 | 6,386 | |||||
| Amortization expense | 1,688 | 2,361 | |||||
| EBITDA | $ | (78,882 | ) | $ | 589 | ||
| Transaction costs | 2,814 | - | |||||
| Share Listing Expense(1) | 70,105 | - | |||||
| Adjusted EBITDA | $ | (5,963 | ) | $ | 589 | ||
(1) Non-cash de-SPAC reverse merger cost.
The revenue decline reflects the shift in emphasis to security convergence and a substantial paring of unprofitable or marginally profitable customer accounts. The table below highlights the building traction in convergence while video analytics is rationalized.
| Year Ended December 31 | Change | Change | |||||||||||||||||
| 2022 | 2021 | $ | % | ||||||||||||||||
| Dollars in Thousands | Percentage of Net Revenue | Dollars in Thousands | Percentage of Net Revenue | ||||||||||||||||
| Security Convergence | $ | 12,711 | 56.7 | % | $ | 12,055 | 28.5 | % | $ | 656 | 5.4 | % | |||||||
| Video IoT | $ | 9,698 | 43.3 | % | $ | 30,188 | 71.5 | % | $ | (20,490 | ) | -67.9 | % | ||||||
| Total | $ | 22,409 | 100.0 | % | $ | 42,243 | 100.0 | % | $ | (19,834 | ) | -47.0 | % | ||||||
The gross profit decline tracked the decline in revenue. Gross margin percentage was unchanged versus the previous year. We expect our heightened operational and financial discipline to drive gross profit improvement over time.
Operating expense growth reflected investment in transforming Gorilla into a global cybersecurity leader, increased cost of being a public company, one-time expenses related to the SPAC merger, and one-time transaction expenses mainly related to the public listing and the SeeQuestor asset acquisition. 2023 operating expenses should be higher than 2021, reflecting growth of the business and increased public company annual cost, but lower than 2022 as the one-time listing expenses are not repeated. One-time listing expenses in 2022 were $70 million, reflecting non-cash charges related to accounting for the reverse merger transaction as a capital reorganization. Other transaction-related expenses totaled $2.8 million.
Excluding transaction cost and share listing expense, adjusted net loss, a non-GAAP financial measure, was $14.6 million, higher than prior year mainly due to the increase in public company expenses. However, adjusted EBITDA was a loss of $6.0 million and operating cash flow was an outflow of $8.8 million. Capital expenditures were $2.9 million for the year. The company ended the year with $23 million of cash and cash equivalents.
Outlook
With outstanding visibility from the MENA project, Gorilla expects substantial growth versus both 2022 and 2021. Full year 2023 revenue is anticipated to be in a range of $65 to $75 million. Operating expense as a percentage of revenue is expected to decrease.
About Gorilla Technologies Group Inc.
Gorilla, headquartered in London, U.K., is a global solution provider in security intelligence, network intelligence, business intelligence and IoT technology. Gorilla develops a wide range of solutions including Smart Cities, Smart Retail, Enterprise Security, and Smart Media. In addition, Gorilla provides a complete Security Convergence Platform to government institutions, telecom companies and private enterprises with network surveillance and cyber security.
Gorilla places an emphasis on offering leading technology, expert service, and precise delivery, and ensuring top-of-the-line, intelligent and strong edge AI solutions that enable clients to improve operational performance and efficiency. With continuous core technology development, Gorilla will deliver edge AI solutions to managed service providers, distributors, system integrators, and hardware manufacturers. For more information go to Gorilla-Technology.com.
Forward-Looking Statements
This press release contains “forward-looking statements” within the meaning of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995. Gorilla’s actual results may differ from its expectations, estimates and projections and consequently, you should not rely on these forward-looking statements as predictions of future events. Words such as “expect,” “estimate,” “project,” “budget,” “forecast,” “anticipate,” “intend,” “plan,” “may,” “will,” “could,” “should,” “believes,” “predicts,” “potential,” “might” and “continues,” and similar expressions are intended to identify such forward-looking statements. These forward-looking statements include, without limitation, statements regarding our Nasdaq listing improving our ability to attract the attention of customers and investors alike, our ability to fund operations as we execute a strategic shift to pursue the larger and higher margin opportunities in Security Convergence, our expectations to swing to profit in the quarters ahead, our immediate priorities, Gorilla’s strategic shift to enable it to pursue larger projects with better revenue visibility, along with those other risks described under the heading “Risk Factors” in the prospectus Gorilla filed with the Securities and Exchange Commission (the “SEC”) on July 7, 2022, and those that are included in any of Gorilla’s future filings with the SEC. These forward-looking statements involve significant risks and uncertainties that could cause actual results to differ materially from expected results. Most of these factors are outside of the control of Gorilla and are difficult to predict. Should one or more of these risks or uncertainties materialize, or should underlying assumptions prove incorrect, actual results may vary materially from those indicated or anticipated by such forward-looking statements. Readers are cautioned not to place undue reliance upon any forward-looking statements, which speak only as of the date made. Gorilla undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date they were made except as required by law or applicable regulation.
Non-GAAP Measures
Certain of the measures included in this press release are non-GAAP financial measures, including adjusted EBITDA and adjusted net loss. Non-GAAP financial measures should not be considered in isolation from, or as a substitute for, financial information presented in compliance with GAAP, and non-GAAP financial measures as used by Gorilla are not reported by all of their competitors and may not be comparable to similarly titled amounts used by other companies.
We believe that the non-GAAP measures such as adjusted EBITDA provide useful information about our core operating results, enhance the overall understanding of our past performance and future prospects and allow for greater visibility with respect to key metrics used by our management in its financial and operational decision-making. We present adjusted EBITDA in order to provide more information and greater transparency to investors about our operating results.
Adjusted EBITDA represents EBITDA excluding transaction costs and share listing expenses which are one-off expenses for professional services related to the Business Combination, asset acquisition and SOX 404 implementation project which are considered as non-recurring corporate development events, which are added back for calculation of adjusted EBITDA.
The final table which shows our EBIT, EBITDA and adjusted EBITDA, together reconciled to the loss for the year ended December 31, 2022 and 2021 in this results announcement has more details on the non-GAAP financial measures and the related reconciliations between these financial measures.
For More Information:
Investors
Gary Dvorchak
The Blueshirt Group
gary@blueshirtgroup.com
Media
Jeff Fox
The Blueshirt Group
jeff@blueshirtgroup.com
Gorilla Technology Group Inc. and Subsidiaries
Consolidated Statements of Comprehensive Loss
(Unaudited)
(Expressed in United States dollars)