Gorilla Technology Group Inc. (GRRR) Earnings Call Transcript & Summary

If I may add to that, one of the things we're also changing of the business is changing quite significantly for us is the way we are structuring our long-term contracts. When we go to long-term contracts with customers, we're not just talking about 3-year deals. We're now talking about 3-year deals plus 2-year maintenance and warranties. We're also changing the way we operate as a business. We're going from OpEx-led deals to CapEx-led deals. Sorry, my apologies. From CapEx-led deals to OpEx-led deals. So for example, data centers, where we might do better because we're not just the landlord collecting rent, but we're actually giving them the servers, the AI platforms and so on and so forth so that they can actually pay us a fee for a much longer duration. So for example, we're currently working on some data center projects where we're actually talking to them about 11-, 12-year deals. And these would typically have been CapEx deals where the customer comes and funds it in a onetime go, we would have maintained it for about a couple of years, done a build operate transfer in about 3 years. Now we have extended the life of that to about 10 to 12 years. And once you sunk your teeth in the customer, guess what, he's not moving anywhere. So we're not just kind of in the business of building what I call multibillion-dollar projects for the sake of building it, but we're actually making sure that we actually hold those margins as well over a longer period of time.

Great. No, that makes sense. And in reference to getting ready for growth, you guys recently did, what, $105 million raise. Maybe you can give us some insights and color on that, whatever you could say.

Sure. So we raised $105 million in July. And really, that was done as an equity raise, but that had several advantages. The first is that we had about 1.45 million shares in treasury that we were able to sell. So the overall number of shares that we issued to do this transaction was 1.1 million shares. The balance of that is in prefunded warrants where we have received the cash or 99.8% of the cash, but the shares have yet to be issued. So over time, those shares will be issued, we expect. But right now, they haven't been issued. So that is a good way of keeping the outstanding share count under control. With that capital, we expect a few things. The first is that we have an enormous pipeline and some of it is very near dated. We're talking coming months. So we wanted to make sure that we had the capital in place where we could perform on any contracts that we anticipate being awarded or signing. And it wasn't -- I'll get to this later, but we have debt term sheets in place, but we didn't want to take the completion risk on those. And then the other thing is that for raising funding later in the form of debt or project level financing, it helps to have the equity in place on the balance sheet. So instead of waiting to raise equity later, we raised it upfront. Now the focus is really going to be on funding projects through project level finance, and raising debt at the company level or at a project level. As I mentioned, we have term sheets on the table for up to $200 million of debt or preferred equity, which functions like debt. And the goal really is to use that to fund the next leg of growth. With respect to the project level finance, Jay will talk a little bit about ONE AMAZON. But, ONE AMAZON, we anticipate raising a funding round there that is significant, which will be one of the project level funding sources with collaboration or strategic partnership with [ Terstrata ], that is going to be another project level. And then, of course, we're in discussions with many parties such as development banks for project level finance as well. So that is not an idle discussion. That is something we've -- I think we've already delivered on, and then we're going to continue to work on.

Sounds good. And speaking of what's coming up, Jay, maybe you can give us a little bit more of a view into what you see coming in '25 and maybe anything you see happening in '26 and beyond?

That's my book. It's a book I keep every day with me, and I keep writing on it. Every single time I meet a customer, this is what I put out there. I mean, I'm sorry, I couldn't help it because it was literally sitting on my table. But listen, look, the outlook for '25 and '26 is probably the most exciting it's ever been for Gorilla. We're standing at what I think is the cusp of a major inflection point. Now over the past 12 months or maybe even 15, we put in the hard, hard, hard yards as they call it, and we've built the pipeline. We've raised the capital. We've hired the heavy hitters. We've secured the tech stack. We've built our products and perfected our products. We've built partnerships with the likes of HP NVIDIA. We are in the process of building some very large significant POCs. And we've deepened our local teams across, I mean, Thailand, India, Latin America, Taipei and now soon in Miami, we'll be opening up an office along with our ONE AMAZON team as well. Now this -- it's about converting all of that into execution for us. For 2025, you're going to see a shift from us being primarily in final negotiations and contract structuring to actually signing and delivering these multiyear multi-jurisdictional contracts. We've roughly got about $1.3 billion of potential projects we target to close by the mid of next year. And that's culminating from our $5.6 billion pipeline, which will probably grow even further before the end of this year. And with a long tail of revenues, which I talked to you about previously of between 3- and 15-year contracts. And that's foundational. It means that we are locking in cash flows that are going to anchor Gorilla's growth well into the next decade as well. So we're not thinking about '25 and '26, we're thinking '27 to '30, what happens next. Now operationally, 2025 is also when ONE AMAZON will start generating revenues, our first revenues, and which is going to be significant because not only does that open up entirely new category for us, it helps build our AI-driven environmental intelligence whilst we are talking about recurring revenue streams being tied into biodiversity, carbon credits, tokenized natural assets and so on. Now that itself could actually redefine how people think of our business going forward. Moving into '26, for me, I see Gorilla evolving even more clearly into what we've been positioning for, not just as a tech solutions vendor, but as an AI native infrastructure operator. By then, we will have had multiple multi-jurisdiction contracts. We would have built multiple sovereign data centers, either construction or underway. We will have had long-term OpEx contracts with these customers because we're now starting to move from the CapEx to the OpEx model with these governments and enterprises. And these are -- by the way, these enterprises have been starved of budgets in the past. So they're looking at us as their white knight. And we're building environmental platforms that are actually monetizing natural assets at scale. So if you look at the foundation for me, I call it rock solid. We talked about the cash. We've got a little over $100 million -- $108 million in cash, very low interest debt of about under $16 million today, another $150 million to $200 million in potential non-dilutive financing. We can draw down the cash as and when it's needed. This means that we're going from what we call a massive ramp-up with a balance to actually a very structured support system, which means we're no longer dancing at the edge waiting for money to come in. We've got the money, and we're just waiting to build on the successes which we're going to be signing over the next few quarters. And culturally, which I think is also as important, we have built a global team, and that's truly genuinely world-class today. Whether it's people like Satish who come from Cognizant or Bala, who came from SRM and Cognizant or people like Nam, who came from SRM as well, and Jackie, who came from our partner Lanner, who has just joined us about 2 weeks ago, and dozens of local hires right from Taipei to Cairo, we're not just sending in consultants, we're actually building local leadership who will own these markets long term for us as well. So in short, John, 2025-2026, expect Gorilla to go from signing these mega contracts to delivering them at scale. But at the same time, with healthy gross margins, and that's going to be our mantra, multiyear, multi-jurisdiction revenue streams that are fundamentally transforming the business. That's what I believe is going to happen to us over the next couple of years. And I'll keep this book with me all the time.

Well, that sounds great. Unfortunately, we're going to have to leave it there. We're about out of time. Jay, Bruce, thanks so much for joining us today's fireside chat. To learn more about Gorilla Technology, please visit their website or access our research on WTR's website, that's www.watertowerresearch.com. Thank you, everyone, for joining us. Now the views expressed in this fireside chat may not necessarily affect the views of Water Tower Research LLC and are provided for informational purposes only. This fireside chat may not be distributed or reproduced without written consent of Water Tower Research and should not be considered research or recommendation. WTR is an Investor Relations firm, not a licensed broker, broker-dealer market maker, investment banker, underwriter or investment provider. Additional disclaimers can be found at watertowerresearch.com.