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In a strategic move to realign its business focus, The Glimpse Group, Inc., a company specializing in computer programming services, has announced the divestiture of two wholly owned subsidiaries, QReal, LLC, and its related operating entity GLIMPSE GROUP YAZILIM VE ARGE TİCARET ANONİM ŞİRKETI, also known as Glimpse Turkey. This transaction, effective as of October 1, 2024, is structured as a management buyout led by the current General Manager of QReal.
The divestiture is expected to provide The Glimpse Group with an initial value of approximately $4.0 million, excluding potential further equity upside. The company anticipates this move will result in about $1.2 to $1.5 million in annual cash expense savings and simplify its operations by reducing its workforce by approximately 60 employees. Additionally, the divestiture will eliminate the company's exposure to risks associated with operating in Turkey.
Financially, The Glimpse Group does not foresee significant changes to its projected revenues for the fiscal years 2024 and 2025. The company will retain full revenues from QReal's largest customer until it has collected $1.35 million net cash, after which it will receive a monthly cash revenue share for 18 months from the revenues generated by this customer.
As part of the divestiture agreement, The Glimpse Group will receive a $1.56 million Senior Secured Convertible Note from the new independent entity, with principal repayment directly tied to the entity's revenue. The company will also hold a minority equity stake in this entity.
The Glimpse Group believes that QReal's virtual try-on business will have better growth prospects and success potential as an independent entity, which could potentially create significant equity value for The Glimpse Group's shareholders beyond QReal's current valuation within the company.
In other recent news, The Glimpse Group has announced its Fiscal Year 2024 financial results, revealing a 35% decrease in revenue, which fell to $8.8 million. Despite this decline, the company has secured notable contracts, including a $4 million deal with the Department of Defense, which is expected to boost revenues in FY25. In fact, the company predicts Q1 FY25 revenues will significantly surpass Q4 FY24 figures.
These recent developments also include partnerships with NVIDIA (NASDAQ:NVDA), Microsoft (NASDAQ:MSFT), and AT&T, providing Glimpse Group with a competitive edge. The company's strategy also emphasizes the value of their solutions to facilitate future Annual Recurring Revenue opportunities. With these strategic shifts, The Glimpse Group anticipates a revenue increase in FY25.
InvestingPro Insights
The Glimpse Group's (VRAR) recent divestiture decision aligns with some key financial metrics and trends highlighted by InvestingPro. The company's market capitalization stands at a modest $12.7 million, reflecting its current position in the market. InvestingPro data shows that VRAR's revenue for the last twelve months as of Q4 2024 was $8.8 million, with a concerning revenue growth decline of -34.7% over the same period.
Two relevant InvestingPro Tips shed light on the company's financial situation. Firstly, VRAR "holds more cash than debt on its balance sheet," which could provide some financial flexibility as it implements this strategic change. Secondly, the company is "quickly burning through cash," which may explain the motivation behind the divestiture to achieve annual cash expense savings.
These insights align with the company's stated goals of simplifying operations and reducing expenses. Investors considering VRAR might find additional value in exploring the 8 other InvestingPro Tips available, which could offer a more comprehensive view of the company's financial health and market position.
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