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

I'm your host, John Roy. I cover technology here at Water Tower Research. And today, I'm joined by Jay Chandan, the CEO of Gorilla. Jay, good to see you again.

Likewise, John, hope all it's been well with you.

Absolutely. I should mention that the company's safe harbor statements can be found on their website. Also, this fireside chat may not be reproduced or written transcript distributed without the expressed written consent of Water Tower Research. So with that, Jay, why don't we get started? And for those that don't know Gorilla, why don't you give us a quick overview of what the company does?

Absolutely. So John, first of all, thanks for having me once again. It's been a very exciting period for us. We've been deploying mission-critical AI security platforms as people understand it. It's video intelligence, post-event analytics, secure network intelligence, lawful interception, IPDR capabilities as and when the customers require. Now we're pretty much built up to scale and resilience as we build for national infrastructure. But what is very unique about it is what the AI infrastructure we've been building have moved from being purely what I call software and a solutions company, but into a sovereign grade AI compute with increased data center capabilities across the regions, whether it's Middle East, North Africa, Europe, Southeast Asia, Latin America, East Asia and so on and so forth. Now the headline example, for example, is the 3-year contract we signed with Freyr for about $1.4 billion. And the first $300 million is currently being launched in Thailand as we speak. I'm actually sitting here right in Thailand right now. And the structure will lead to us building our AI infrastructure layer and the GPU deployments as we go forward. Now when we go through the motions of that, if you look at the other side of it, we have pushed hard on the foundations. We are strengthening our inferences across multiple accelerator types, and we're extending all our capabilities with enterprise customers such as Toyota as well. It's not just sovereign AI data centers. We've also advanced our one Amazon stack with our real sensors running on AWS with full operational capability layers with Knox and SSOs. We've also continued to work on lawful interceptions. You've seen that we won actually 2 other deals in Southeast Asia, and these were big IPDR programs with the customers. And there, we were able to deploy our existing 5G AI solutions. At the same time, we started productizing our solution -- our intelligent network director solutions as well, along with our firewall capabilities. I can proudly tell you today, John, that we're now building our solutions for post-quantum readiness, which means designed today to withstand all of the security threats of tomorrow and more importantly, make sure that we're already not being too late. Now on the scale side, finally, we've created our Indonesia data center program. We're in the final stages of closing the SOWs and the SLAs, and we are moving from paperwork into mobilization. Our Phase 1, as I mentioned, is $300 million of deployment. And in parallel, we're also now executing additional paperwork for the $450 million phase running alongside it as well. So we're working very tight time lines with our OEM partners, making sure we're working with NVIDIA to lock all the delivery time lines and so on and so forth and bringing best-of-breed of all of the GPU tranches in the Blackwell generation systems, including our GB200-class architecture. So what are we doing? What does Gorilla do? We're investing behind execution. That means we're building out our R&D teams in Thailand. We're scaling up our engineering teams in India. We've expanded our footprints across Taiwan, Thailand, India, and we are increasing our hiring cycles in -- to match both the delivery pipeline as well as making sure that we're able to create a productization schedule so that we're making our deployments repeatable. That's important. We have our -- I'm also very proud to say that we will have our 2 new offices, one in Singapore and one in Indonesia over the next 2 weeks. We'll be hiring about 20 new people in our Jakarta office over the next 40 days, and we'll also be building our India data center team as we speak. So long and short of it is we're not trying to be noisy. We're just trying to be inevitable. That's Gorilla.

That sounds like great progress. Speaking of progress, I mean, obviously, Amazon ONE is a big deal. And I believe someone won a Nobel award for Sustainability -- or I should say, was a finalist for the Nobel award there. Maybe you could give us a little insight and color on how that all came about and how crazy was it?

It has been crazy since then. It's really difficult to overstate, John, what it means, what the recognition means because you don't -- nobody dreams of waking up one day or being born and saying, listen, I want to be part of the Nobel Sustainability Club. Now people often underestimate the weight behind it. This is not one of these awards where you just wake up one morning, you get it, you have a nice dinner and everybody goes home, frame certificate, logo, blah, blah, blah. No. This was a formal nomination for 2025 Sustainability Awards in the category of leadership in implementation for Jayesh Chandan. Now what that wording really matters because it's not just about the good intentions or the clever decks we prepared, it's also about actually building on a national scale where sustainability is engineered into the infrastructure itself. Now the Nobel Sustainability Trust, everybody knows about it is an institution that has changed and shaped the global thinking on responsibility, right? I mean when you say Nobel, everybody talks about responsibility. But it's also about how the progress is made for the future of this planet. And when I met with the Nobel's, I spent a lot of time over the last few months with them. They are absolutely on top of it. They breathe sustainability. So for me, there's no shortcut to getting on top of that pyramid. It's not the way you can just bluff in and weigh market your way in. For me, it was very meaningful and most importantly, it was also very surreal. Why? Because I built my career with building complex systems across the world, whether it was Nigeria, whether it was Thailand, whether it was Latin America, whether it was India, very complex markets, and I was never chasing applause. But to suddenly find that our work has been acknowledged by an institution associated with the Noble legacy. For me, it was about a pause and think, okay, what does that mean? Maybe all those late nights I did, all those stubborn decisions weren't completely irrational. Now for Gorilla, it was a validation. What does it mean for Gorilla? It tells the market, we're just not talking nonsense. We're not talking about sustainable AI. We're deploying it at national scale, right? Whether it's the ONE Amazon, whether it's the Taoyuan Airport, whether it's the Thai projects, whether it's the India investments we're currently making and looking going after AI across the Indian subcontinent, I often say sustainability only counts when it survives the contact with reality. So for me, the challenge is not about being nominated, it's about being recognized. And frankly, I wouldn't have it another way, but it makes me even more now think larger than I've ever done before.

Well, congratulations again. You certainly deserve it.

Thank you, sir.

Now you have continued to make investments in other ways. I believe you made an acquisition recently or closed on a deal, Astrikos.

Astrikos. Yes, we invested in the company. Yes. So we did not invest -- I've been watching all the blogs and so on and so forth. And I've seen people talk about, hey, it's just another fancy logo. No, it's not. We invested in India because it's the fastest moving theater right now for AI adoption and national scale digital infrastructure deployment. Now what does Astrikos do? Astrikos is building AI-driven platforms, and built a whole product suite aimed at turning infrastructure into operational outcomes across different verticals. What most people don't realize is that they actually have a whole bunch of product suites, which is now deployed in various cities and states in India. They have a contract with NEOM, and they're also very actively engaged in the United States. Now so what does that do? Their product -- they've got a whole bunch of products, Omnific, Cognus, this company has product called Kolaz, KIM and so on. These are all about measuring impacts across different data collection platforms so that they can take -- make decisions at scale. Now what is the biggest challenge for us when we went into India is that there were 3 different market categories we wanted to address: AI compute, data centers and more importantly, sovereign security. Now if you look at AI as a strategically compelling story in India today. The demand according to, I think, Grand View Research, in 2024, they were at about $15 billion. But by 2033, they're growing to more than $330 billion. That's a 40% CAGR, okay? I would be a fool to ignore that market and that incremental growth. But on the other side, if you look at data centers, they're growing from, what, $9 billion, $10 billion, again, according to Grand View to about $30 billion by 2032, 2033. Again, that's something we cannot ignore. And there's also proof in the pudding. If you look at the hyperscalers, for example, they've actually proven the thesis. Microsoft recently announced, I think as recent as about 3 days ago, announced a $17.5 billion investment into AI in India. Amazon has already planned more than $35 billion of investment. And Google just recently committed, I think, about $15 billion or $16 billion. So what does that mean for Gorilla? What does Astrikos mean? We're actually building a serious delivery engine across India and Southeast Asia, so that we can scale up demand. Now Astrikos provides us a complementary product portfolio where we can actually go out to the market, not just in India or the neighboring regions, globally where our data center programs can actually provide compute foundation for the AI adoption rates, which the globe is going through right now. So we're investing in India purely because India is where we believe AI will become infrastructure and infrastructure will become national capability. So that's Astrikos that's why.

Excellent, excellent. Yes, there's been a lot of news flow about India, certainly for sure. So you've mentioned, obviously, a variety of projects. Maybe if you were to take a step back for a second and just kind of highlight the top 3 or 4 that you see that are going on right now that are -- I'd really like to hear about differentiated stuff, right, stuff that you really think makes Google shine.

Yes. That's a really good one. You put me on the spot there. I'm trying to figure out the 4 -- okay, let me give you 4. The short answer for me would be we have execution and we have references, okay? Now as you know, we signed a very large project with the government of Egypt. At that point in time, people are like, "Oh, Egypt, come on, what's happening there? " Now I can tell you, the project is running at full speed. We've built our Air Gap network program. The mission-critical sovereign infrastructure is running. Parts of the data center environment have already been built. They're ready, tested and the program is now progressing across all of the FAT, which is file acceptance testing, rollout planning and all of the delivery milestones are being met. And what is more important is that the customer is paying us on time, proof in the pudding, right? The second one is our 5G lawful interception. Now in Taiwan and Southeast Asia, we had a lot of these wins recently. And again, I don't think so people understand we were the first 5G LI solution to be deployed globally, okay? This is a time when people didn't have a product at all. Now we built these products, and these are not isolated projects. They are national scale platforms where we're delivering in highly regulated environments, where performance, security, compliance are completely nonnegotiable. Now when you look at these deployments, we're all live and operating at scale, okay? Why this matters is because if you look at all these 5G programs across the globe, they're either a white paper or they are proof of concepts. These are not proof of concepts. Governments and telecom operators, they want to talk to each other. But when you deliver at that level, word travels really fast. And if you look at the other 2 projects, which we recently signed, they were word of mouth. They reached out to us and said, we're seeing this direct influence on the government of Taiwan, can you help us out, right? And so -- and the third one is on the AI infrastructure. Now we had a lot of publicity on the AI infrastructure side. So the first program we are kicking off is about $300 million, as I mentioned, and that's the first phase. And that's on the way. The mobilization is already kicking off. In parallel now, I can tell you, we did this today, we have now started directly the second phase of $450 million, and that will move alongside. But of course, we have to go to the SOWs, the SLAs and so on. And we finished finalizing the next steps on all of the different phases with Freyr today. We sat in our offices, we closed all of them. So what is -- if you look at what is consistent, the pattern is very consistent because we're now delivering at national scale. We're no longer becoming a POC company. We're becoming a global reference. And that's exactly what is happening today in terms of where our projects are.

Great. That's some very good highlights. So now for the number’s guys, what do you think you're going to be able to do in 2026 in terms of -- I mean, I know you guys have a lot of cash ready to go to use. You got a lot of cash committed. You're going to need investments, you're going to need to make investments. Give us kind of a flavor of what you see 2026 is going to be like, not guidance, just kind of what is it going to be to you?

Absolutely. For me, okay. So 2026 is about scale for me with discipline and personally, a little less caffeine for our finance team. Don't tell that to Bruce. He's not here today. He loves this coffee, by the way. See, revenue -- for us, revenue with real visibility is no longer a wishful thinking, okay? We are -- I know we give a broad guidance of $137 million to $200 million, but that was because we were being very prudent and very factual with what we have. We have $85 million of signed contracts and a backlog already, which we have to deliver towards. Now that range is driven by timing, not by demand. We're seeing a broader customer diversification across the globe for us, not just in Asia. So we're trying to reduce the concentration risk. So if you look at how we evolve as a company and you look at our concentration risk, 2026 will be the year of what I call reduced concentration across different customers, across different industries, across different geographies. Now the Freyr timing for us is also a swing factor. Why? Because the only real variable in the guidance for us is the timing of the first Freyr deployment, which is happening in the first half of '26. Our numbers deliberately assume minimal contribution from the Freyr in the other phases of the projects and the later phases of the projects as well. So think about it this way, optimism for me is fun, but I think discipline, it actually pays the bills, right? So Freyr deployment now changes for us the scale of the company itself. So once the Freyr programs are fully deployed, we will have what is called as a very strong annualized revenue, predictable month-on-month, quarter upon quarter, which means Gorilla stops being a growth story and starts becoming a steady infrastructure platform. That's a very key message, which I wanted to kind of deliver. But as that happens, margins improve, right? The AI infrastructure ramps up. Now data centers, for example, being a very different margin profile. When on balance sheet, we're expecting about 75% gross margin, 60% to 65% EBITDA. But with a 20% to 25% operating margin, what happens is these assets sit in SPVs with a nonrecourse debt. And this is something which the market is also not able to understand and visualize because we're not putting this -- whether it's debt or equity, we're not putting this at least on the debt on the balance sheet. We're getting the upside without turning the balance sheet into a stress test. Now we have over $110 million of cash today. We have reduced our debt well below $15 million, which is kind of making us quite -- and we haven't sold our asset yet, and our asset is now valued at about $25 million, $26 million. We have a further $22 million -- actually $30 million of collections expected over the next few weeks. That gives us the flexibility to execute without having to tap into the equity market every time we build something large and expensive. Now capital intensive, yes, reckless, no. Okay? Most people are expecting they're like, hey, you've signed this $1.4 billion contract, when is revenue coming, right? There is upfront cash burn because GPUs don't grow on trees, right? And paybacks are within 2, 2.5 years, and we're seeing financing offers at 85% to even 100% loan to cost, okay? We've actually got term sheets. So equity is already in place for the first 2 deployments and leverage only increases when the revenue is contracted. So I think that's the key message we want to leave to the market, less equity, more leverage, nonrecourse debt, off-balance sheet SPVs. That's kind of where we are, and that's the outlook for '26 for us.

Great. Well, Jay, we're kind of running at the end of our time here. We're going to have to leave it. I want to thank you so much for joining me.

Thank you, John.

For investors, if you want to learn more about Gorilla, please visit their website or access the research on the company that we have at WTR at www.watertowerresearch.com. I want to remind everyone that the views expressed in this fireside chat may not necessarily reflect the views of Water Tower Research LLC and are provided on the informational purposes only. This fireside chat may not be distributed or reproduced without the written consent of Water Tower Research and should not be considered research nor recommendation. WTR is an investor engagement firm, not a licensed broker, broker-dealer market maker, investment banker, underwriter or investment adviser. Additional disclaimers can be found at watertowerresearch.com.