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Gorilla Technology Group Inc. Reports First Half 2022 Financial Results.

TAIPEI, Taiwan and NEW YORK, Oct. 06, 2022 (GLOBE NEWSWIRE) — Gorilla Technology Group Inc. (NASDAQ: “GRRR” for ordinary shares and “GRRRW” for warrants) (“Gorilla” or the “Company”), a global leader in edge video analytic artificial intelligence, IoT technologies, and cybersecurity, today reported its unaudited financial results for the half year ended June 30, 2022.

1H22 Highlights:

  • Strategic pivot to Security Convergence gaining traction, with segment revenue up 63.9% y/y; contributing 49.8% of total group revenue, versus 27.8% in the first half of 2021
  • Pivot away from Video IoT as anticipated, with segment revenue decreased 36.5% y/y as projects are completed
  • First half of 2022 gross margin improved 106 basis points (bps) to 33.1% when compared to the first half of 2021, led primarily by higher gross margin of the Video IoT segment driven by greater service sales
  • Progress in building world-class management team with appointment of Dr. Rajesh Natarajan as Chief Innovation Officer
  • Adjusted EBITDA (non-GAAP financial measure) loss was reduced to $1.2 million from $1.5 million when compared to the same period a year ago
  • Net loss of $8.6 million compared to a net loss of $5.8 million from same period a year ago

Subsequent Events:

  • Closed business combination with Global SPAC Partners Co., becoming publicly traded and raising approximately $45 million in gross funding
  • Appointed Daphne Huang as Chief Financial Officer
  • Announced retirement of founder, Dr. Spincer Koh
  • Chairman Jay Chandan appointed as Chief Executive Officer as well as continuing as Chairman of the Board of Directors

Jay Chandan, Gorilla’s Chairman and CEO, commented, “We are excited to update our investors in this first earnings report as a public company. As a leader in Edge computing—which sits at the intersection of AI, IoT, and Big Data—with significant exposure to the rapid growth of Smart Cities, we believe our Nasdaq listing improves our ability to attract the attention of customers and investors alike and provide us with capital markets access to execute our global expansion strategy more rapidly.”

Mr. Chandan continued, “We are making rapid progress on many fronts. Most importantly, the business combination with Global SPAC Partners Co. brought us significant capital to fund operations as we execute a strategic shift to pursue the larger and higher margin opportunities in Security Convergence. We are using the funding to build a world-class management team, with our recent additions of new Chief Innovation and Chief Financial officers, a head of global human resources, and more to come.”

Commenting on results, Mr. Chandan noted, “We are pleased to see explosive growth in the Security Convergence segment, which is now approximately half of our total revenue. Although we are de-emphasizing Video IoT, within this segment we were able to drive a mix shift to more software, which boosted gross margin substantially, and offset supply chain-related hardware cost pressure in Security Convergence. Operating expenses are under control, growing only slightly versus last year after removing the effect of one-time transaction costs. The net is a modest drawdown of cash when looking at operating cash flows and adjusted EBITDA. Our new business bookings in 2022 remain healthy with approximately $20 million new project wins as of end of August. With substantial momentum building in the Smart Cities offering, we expect to swing to profit in the quarters ahead.”

Looking forward, Mr. Chandan concluded, “Looking toward the year ahead, we have four immediate priorities. 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 secure surveillance solutions. Finally, to transform our business away from a cost-plus system integrator model and toward a value-based sales model that is rewarded for long-term customer partnership and retention.”

First Half Results Reflect Strategic Shift to Security Convergence

Unless noted otherwise, all figures are for the six months ended June 30, 2022, and all comparisons are with the corresponding period of 2021.

Revenues declined 8.6% to $13.8 million, compared to $15.1 million in the prior year period. Revenue from both existing and new customers decreased as many projects neared completion in the second half of 2021, leaving a smaller amount of revenue to be recognized in the current period. This revenue decline is a function of the Company’s strategic shift toward security convergence and away from video IoT. The Company expects this strategic shift to enable it to pursue larger projects with healthy gross margins.

Security Convergence segment revenue grew 63.9% to $6.9 million, while a decrease in hardware and software sales in the Video IoT segment led to a 36.5% decrease in segment revenues to $6.9 million.

Gross profit was $4.6 million, compared to $4.8 million a year ago. Gross margin expanded by 106 bps to 33.1% versus 32.1% in the year-ago period, driven primarily by better margins in the Video IoT segment as customers demanded more services and less hardware and software. Video IoT segment gross margin of 36.2% increased by 398 bps versus last year. In contrast, the Security Convergence segment gross margin decreased by 163 bps to 30.0% as supply-chain constraints resulted in higher hardware costs from vendors.

Operating expenses were up 18.1% to $12.4 million, reflecting a sharp 235.2% increase in general and administrative expenses. G&A expense growth was primarily due to $2.2 million of professional expenses incurred for the public listing.

Net loss expanded by 48.2% to $8.6 million, compared with $5.8 million last year. The greater loss was caused primarily by the $2.2 million of transaction costs. However, net cash used in operating activities was approximately $3.8 million, compared to $4.9 million in the prior period. The primary factors affecting operating cash flows between these periods were negatively impacted by increases in accounts receivable and prepayments made to vendors, while benefited from increase in accounts payable and other payables.

Adjusted EBITDA loss was reduced to $1.2 million from $1.5 million a year ago. Please see “Reconciliation of Non-GAAP Financial Measures – Adjusted EBITDA Calculation (Unaudited)”, as it relates to adjusted EBITDA.

Balance Sheet and Cash Flow Review

As of June 30, 2022, cash and cash equivalents were $5.6 million as of June 30, 2022, down $4.4 million when compared to December 31, 2021. Financial assets (restricted cash and time deposits with maturity over three months) as of June 30, 2022, was $6.8 million.

The business combination with Global SPAC Partners Co. that closed in July 2022 added approximately net $32 million of cash (gross funding less transaction expenses) at the business combination closing date, to the balance sheet, which will be reflected in the upcoming reporting period.

Capital expenditures were $2.8 million compared with $2.3 million in the prior-year period.

About Gorilla Technologies Group Inc.

Gorilla, headquartered in Taipei, Taiwan, is a global leader 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.
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 higher gross margins, 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. 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.

Contacts

Gorilla Technologies Group, Inc.
Peter Wright
+1-617-454-1088
[email protected]

 
Gorilla Technology Group Inc. and Subsidiaries
Condensed Interim Consolidated Balance Sheets
(Unaudited)
(Expressed in United States dollars)
         
Items   June 30, 2022   December 31, 2021
Assets            
Current Assets            
Cash and cash equivalents   $ 5,550,103     $ 9,944,748  
Financial assets at amortized cost – current     6,776,956       9,008,499  
Contract assets     1,237,738       1,639,893  
Accounts receivable     34,799,844       34,821,818  
Inventories     75,189       152,227  
Prepayments     1,171,431       231,531  
Other receivables     1,189,279       19,930  
Other current assets     3,345       5,971  
Total current assets     50,803,885       55,824,617  
Non-current assets            
Financial assets at amortized cost-non-current     56,699       50,578  
Property, plant and equipment     31,837,514       34,395,070  
Right-of-use assets     89,149       123,375  
Intangible assets     2,323,576       3,419,469  
Deferred income tax assets     74,784       410,203  
Other non-current assets     639,999       707,391  
Total non-current assets     35,021,721       39,106,086  
Total Assets   $ 85,825,606     $ 94,930,703  
Liabilities and Equity            
Liabilities            
Current liabilities            
Short-term borrowings   $ 22,354,524     $ 22,968,092  
Contract liabilities     18,808       20,194  
Notes payable     623       668  
Accounts payable     9,214,551       8,060,501  
Other payables     5,269,927       4,532,628  
Provisions – current     119,370       152,778  
Lease liabilities – current     49,602       54,588  
Long-term borrowings, current portion     1,833,732       2,077,634  
Other current liabilities, others     94,485       129,356  
Total current liabilities     38,955,622       37,996,439  
Non-current liabilities            
Long-term borrowings     10,037,944       10,751,630  
Provisions – non-current     79,934       105,542  
Deferred income tax liabilities     109,614       78,402  
Lease liabilities – non-current     40,433       69,587  
Total non-current liabilities     10,267,925       11,005,161  
Total liabilities     49,223,547       49,001,600  
Equity            
Equity attributable to owners of parent            
Share capital            
Ordinary share     6,197,100       6,191,100  
Preferred share     5,813,247       5,844,892  
Advance receipts for share capital           33,720  
Capital surplus            
Capital surplus     41,514,796       41,301,738  
Retained earnings            
Accumulated deficits     (18,090,605 )     (9,454,565 )
Other equity interest            
Financial statements translation differences of foreign operations     1,167,521       2,042,218  
Treasury shares           (30,000 )
Equity attributable to owners of the parent            
Total equity     36,602,059       45,929,103  
Total liabilities and equity   $ 85,825,606     $ 94,930,703  

 
Gorilla Technology Group Inc. and Subsidiaries
Condensed Interim Consolidated Statements of Comprehensive Loss
(Unaudited)
(Expressed in United States dollars)
         
Items   Six Months Ended June 30, 2022   Six Months Ended June 30, 2021
Revenue   $ 13,800,930     $ 15,100,718  
Cost of revenue     (9,226,561 )     (10,256,101 )
Gross profit     4,574,369       4,844,617  
Operating expenses            
Selling expenses     (1,980,709 )     (2,193,321 )
General and administrative expenses     (1,143,756 )     (982,828 )
Transaction costs (one time)     (2,151,856 )      
Research and development expenses     (7,766,833 )     (7,253,697 )
Other income     11,037       27,326  
Other gains (losses) – net     629,929       (102,357 )
Total operating expenses     (12,402,188 )     (10,504,877 )
Operating loss     (7,827,819 )     (5,660,260 )
Non-operating income and expenses            
Interest income     11,957       22,329  
Finance costs     (464,048 )     (250,526 )
Total non-operating income and expenses     (452,091 )     (228,197 )
Loss before income tax     (8,279,910 )     (5,888,457 )
Income tax (expense) benefit     (356,130 )     60,869  
Loss for the period   $ (8,636,040 )   $ (5,827,588 )
Other comprehensive (loss) income            
Components of other comprehensive (loss) income that may be reclassified to profit or loss            
Exchange differences on translation of foreign operations   $ (874,697 )   $ 188,520  
Other comprehensive (loss) income for the period, net of tax   $ (874,697 )   $ 188,520  
Total comprehensive loss for the period   $ (9,510,737 )   $ (5,639,068 )
Loss per share            
Basic loss per share   $ (0.29 )   $ (0.20 )
Diluted loss per share   $ (0.29 )   $ (0.20 )
             

 
Gorilla Technology Group Inc. and Subsidiaries
Reconciliation of Non-GAAP Financial Measures – Adjusted EBITDA Calculation
(Unaudited)
(Expressed in United States dollars)
         
Items   Six Months Ended June 30, 2022   Six Months Ended June 30, 2021
Adjusted EBITDA1            
Loss for the period   $ (8,636,040 )   $ (5,827,588 )
Depreciation Expense     3,420,393       2,958,335  
Amortization Expense     1,030,193       1,198,619  
Income Tax     356,130       (60,869 )
Interest and Finance Costs     452,091       228,197  
Transaction Costs (one time)     2,151,856       0  
Adjusted EBITDA   $ (1,225,377 )   $ (1,503,306 )
             

__________________________
1 This is a non-GAAP financial measurement.

 
Gorilla Technology Group Inc. and Subsidiaries
Condensed Interim Consolidated Statements of Cash Flows
(Unaudited)
(Expressed in United States dollars)
         
Items   Six Months Ended June 30, 2022   Six Months Ended June 30, 2021
Cash Flows from Operating Activities            
Loss before tax   $ (8,279,910 )   $ (5,888,457 )
Adjustments            
Adjustments to reconcile profit (loss)            
Depreciation expenses     3,420,393       2,958,335  
Amortization expenses     1,030,193       1,198,619  
Share option expenses     184,943       37,319  
Interest expense     464,048       250,526  
Interest income     (11,957 )     (22,329 )
Changes in operating assets and liabilities            
Changes in operating assets            
Contract assets     402,155       (653,234 )
Accounts receivable     (1,175,393 )     209,422  
Inventories     77,038       (146,186 )
Prepayments     (939,900 )     (118,302 )
Other receivables     (4,010 )     1,648  
Other current assets     2,626       (2,079 )
Other non-current assets     33,359       (25,368 )
Changes in operating liabilities            
Contract liabilities     (1,386 )      
Notes payable     (45 )     (36,503 )
Accounts payable     927,603       (2,047,833 )
Other payables     542,481       (368,380 )
Provisions     (59,016 )     3,974  
Other current liabilities     (34,871 )     (5,904 )
Cash outflow generated from operations     (3,421,649 )     (4,654,732 )
Interest received     11,957       22,329  
Interest paid     (313,902 )     (250,248 )
Tax paid     (360 )      
Net cash flows used in operating activities     (3,723,954 )     (4,882,651 )
Cash Flows from Investing Activities            
Acquisition of property, plant and equipment     (2,815,381 )     (2,314,652 )
Acquisition of intangible assets     (14,252 )     (5,540 )
Investment in financial assets at amortized cost           (1,175,021 )
Disposal of financial assets at amortized cost     2,225,422        
Decrease (increase) in guarantee deposits     34,033       (36,292 )
Net cash flows used in investing activities     (570,178 )     (3,531,505 )
Cash Flows from Financing Activities            
Proceeds from short-term borrowings     867,694       701,257  
Exercise of share options           101,800  
Proceeds from long-term borrowings     1,574,876        
Repayments of long-term borrowings     (1,793,622 )     (487,167 )
Principal repayment of lease liabilities     (26,503 )     (8,520 )
Loan to Global SPAC Partners Co.     (1,165,339 )      
Payment of transaction costs     (87,419 )      
Net cash flows from financing activities     (630,313 )     307,370  
Effect of foreign exchange rate changes     529,800       159,920  
Net decrease in cash and cash equivalents     (4,394,645 )     (7,946,866 )
Cash and cash equivalents at beginning of period     9,944,748       12,153,256  
Cash and cash equivalents at end of period   $ 5,550,103     $ 4,206,390  

 
Gorilla Technology Group Inc. and Subsidiaries
Revenue by Customer Type
(Unaudited)
(Expressed in United States dollars)
     
Items Six Months Ended June 30, 2022   Six Months Ended June 30, 2021
  Government
  Non-Government
  Government
  Non-Government
Hardware Sales            
Video IoT   464       1,007,545             1,877,325  
Security Convergence         1,540,812             1,048,028  
Hardware Sales – Total   464       2,548,357             2,925,353  
Software Sales            
Video IoT   24,402       1,962,839             6,389,615  
Security Convergence         3,063,250             1,258,930  
Software Sales – Total   24,402       5,026,089             7,648,545  
Service Revenue            
Video IoT   2,126,322       1,804,438       1,930,553       709,216  
Security Convergence   2,143,845       127,013       1,308,669       578,382  
Services Revenue – Total   4,270,167       1,931,451       3,239,222       1,287,598  
Total Sales $ 4,295,033     $ 9,505,897     $ 3,239,222     $ 11,861,496  

 
Gorilla Technology Group Inc. and Subsidiaries
Revenue by Geography
(Unaudited)
(Expressed in United States dollars)
         
Items   Six Months Ended June 30, 2022   Six Months Ended June 30, 2021
Region                
Asia   $ 13,797,420     $ 15,097,208  
Americas   $ 3,510     $ 3,510  

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