GRRR Gorilla Technology Group Inc

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 EndedDecember 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:

InvestorsGary DvorchakThe Blueshirt Groupgary@blueshirtgroup.com

MediaJeff FoxThe Blueshirt Groupjeff@blueshirtgroup.com

Gorilla Technology Group Inc. and SubsidiariesConsolidated Statements of Comprehensive Loss(Unaudited)(Expressed in United States dollars)

Items		For the year ended December 31, 2022			For the year ended December 31, 2021			For the year ended December 31, 2020
Revenue	$	22,408,808		$	42,242,863		$	45,412,589
Cost of revenue		(14,071,902	)		(26,468,662	)		(26,857,201	)
Gross profit		8,336,906			15,774,201			18,555,388
Operating expenses
Selling and marketing expenses		(3,644,316	)		(4,961,639	)		(5,331,150	)
General and administrative expenses		(9,191,505	)		(3,430,230	)		(2,932,144	)
Share listing expenses		(70,104,989	)		-			-
Research and development expenses		(14,110,408	)		(15,053,175	)		(14,342,826	)
Expected credit losses		-			(404,210	)		-
Other income		983,932			43,819			59,198
Other gains (losses) – net		1,222,885			(127,025	)		(1,702,379	)
Total operating expenses		(94,844,401	)		(23,932,460	)		(24,249,301	)
Operating loss		(86,507,495	)		(8,158,259	)		(5,693,913	)
Non-operating income and expenses
Interest income		235,912			37,869			159,275
Finance costs		(835,273	)		(666,349	)		(461,118	)
Total non-operating income and expenses		(599,361	)		(628,480	)		(301,843	)
Loss before income tax		(87,106,856	)		(8,786,739	)		(5,995,756	)
Income tax (expense) benefit		(430,368	)		238,445			74,903
Loss for the year	$	(87,537,224	)	$	(8,548,294	)	$	(5,920,853	)
Other comprehensive (loss) income
Components of other comprehensive income that may not be reclassified to profit or loss
Remeasurement of defined benefit plans	$	7,409		$	13,087		$	(7,589	)
Components of other comprehensive (loss) income that may be reclassified to profit or loss
Exchange differences on translation of foreign operations	$	(1,672,040	)	$	453,007		$	778,758
Other comprehensive (loss) income for the year, net of tax	$	(1,664,631	)	$	466,094		$	771,169
Total comprehensive loss for the year	$	(89,201,855	)	$	(8,082,200	)	$	(5,149,684	)
Loss per share
Basic loss per share	$	(1.78	)	$	(0.29	)	$	(0.20	)
Diluted loss per share	$	(1.78	)	$	(0.29	)	$	(0.20	)

Gorilla Technology Group Inc. and SubsidiariesConsolidated Balance Sheets(Unaudited)(Expressed in United States dollars)

Items			December 31, 2022			December 31, 2021
Assets
Current assets
Cash and cash equivalents		$	22,996,377		$	9,944,748
Financial assets at fair value through profit or loss - current			1,073,229			-
Financial assets at amortized cost - current			6,871,187			9,008,499
Contract assets			725,441			1,639,893
Accounts receivable			14,041,611			34,821,818
Inventories			68,629			152,227
Prepayments - current			1,266,442			231,531
Other receivables			648,617			19,930
Other current assets			61,803			5,971
Total current assets			47,753,336			55,824,617
Non-current assets
Financial assets at amortized cost - non-current			-			50,578
Property, plant and equipment			16,132,567			34,395,070
Right-of-use assets			16,675			123,375
Intangible assets			56,342			3,419,469
Deferred income tax assets			29,905			410,203
Prepayments - non-current			612,982			-
Other non-current assets			659,071			707,391
Total non-current assets			17,507,542			39,106,086
Total assets		$	65,260,878		$	94,930,703
Items			December 31, 2022			December 31, 2021
Liabilities and Equity
Liabilities
Current liabilities
Short-term borrowings		$	13,492,935		$	22,968,092
Contract liabilities			58,475			20,194
Notes payable			602			668
Accounts payable			6,674,528			8,060,501
Other payables			3,620,998			4,532,628
Provisions - current			88,469			152,778
Lease liabilities - current			16,981			54,588
Warrant liabilities			2,042,410			-
Long-term borrowings, current portion			2,108,896			2,077,634
Other current liabilities, others			152,373			129,356
Total current liabilities			28,256,667			37,996,439
Non-current liabilities
Long-term borrowings			8,251,788			10,751,630
Provisions - non-current			61,057			105,542
Deferred income tax liabilities			148,183			78,402
Lease liabilities - non-current			-			69,587
Total non-current liabilities			8,461,028			11,005,161
Total liabilities			36,717,695			49,001,600
Equity
Equity attributable to owners of parent
Share capital
Ordinary share			7,136			6,191,100
Preference share			-			5,844,892
Advance receipts for share capital			-			33,720
Capital surplus
Capital surplus			154,730,389			41,301,738
Retained earnings
Accumulated deficit			(96,984,380	)		(9,454,565	)
Other equity interest
Financial statements translation differences of foreign operations			370,178			2,042,218
Treasury shares			(29,580,140	)		(30,000	)
Equity attributable to owners of the parent			28,543,183			45,929,103
Total equity			28,543,183			45,929,103
Significant contingent liabilities and unrecognized contract commitments
Total liabilities and equity		$	65,260,878		$	94,930,703

Gorilla Technology Group Inc. and SubsidiariesConsolidated Statements of Cash Flows(Unaudited)(Expressed in United States dollars)

		Year endedDecember 312022			Year endedDecember 312021			Year endedDecember 312020
CASH FLOWS FROM OPERATING ACTIVITIES
Loss before tax	$	(87,106,856	)	$	(8,786,739	)	$	(5,995,756	)
Adjustments
Adjustments to reconcile profit (loss)
Expected credit losses		-			404,210			-
Depreciation expenses		5,938,167			6,385,999			5,307,581
Amortization expenses		1,687,618			2,361,009			2,897,975
Loss (gain) on disposal of property, plant and equipment		70,698			(459	)		856
Impairment loss		-			-			1,238,548
Loss on lease modification		48,488			-			-
Share listing expenses		70,104,989			-			-
Share option expenses		346,122			375,941			142,416
Interest expense		835,273			666,349			461,118
Interest income		(235,912	)		(37,869	)		(159,275	)
Gains on reversal of accounts and other payables		(960,564	)		-			(25,523	)
Loss on disposal of subsidiaries		69,335			-			124,441
Gains on financial assets and liabilities at fair value through profit or loss		(405,008	)		-			-
Changes in operating assets and liabilities
Changes in operating assets
Contract assets		914,452			(158,970	)		(972,189	)
Notes receivable		-			0			3,074,266
Accounts receivable		3,580,932			(1,579,304	)		(5,060,026	)
Inventories		83,598			(62,449	)		68,568
Prepayments		(1,245,559	)		344,354			(108,164	)
Other receivables		(628,687	)		(187,708	)		79,218
Other current assets		(55,832	)		-			(21,840	)
Other non-current assets		55,361			(30,235	)		(18,657	)
Changes in operating liabilities
Contract liabilities		38,281			20,194			-
Notes payable		(66	)		(35,835	)		(5,850,712	)
Accounts payable		(1,378,916	)		1,371,017			3,102,523
Other payables		9,129			1,163,036			31,344
Provisions		(108,794	)		837			103,850
Other current liabilities		23,017			28,566			(64,222	)
Cash (outflow) inflow generated from operations		(8,320,734	)		2,241,944			(1,643,660	)
Interest received		235,912			37,869			159,275
Interest paid		(686,841	)		(655,673	)		(461,118	)
Tax paid		(2,174	)		(1,167	)		-
Net cash flows (used in) from operating activities		(8,773,837	)		1,622,973			(1,945,503	)
CASH FLOWS FROM INVESTING ACTIVITIES
Acquisition of financial assets at fair value through profit or loss		(1,105,540	)		-			-
Acquisition of property, plant and equipment		(2,935,249	)		(7,496,271	)		(4,121,887	)
Proceeds from disposal of property, plant and equipment		-			459			6,180
Acquisition of intangible assets		(73,093	)		(899,005	)		(1,404,192	)
Disposal in financial assets at amortized cost		2,187,890			135,937			26,483
Investment in financial assets at amortized cost		-			(1,579,329	)		(2,245,333	)
Decrease (increase) in guarantee deposits		368			(72,142	)		5,087
Net cash flows used in investing activities		(1,925,624	)		(9,910,351	)		(7,733,662	)
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from short-term borrowings		12,492,935			5,000,000			3,508,961
Repayments of short-term borrowings		(20,089,523	)		(327,098	)		-
Proceeds from long-term borrowings		3,447,526			6,146,341			1,184,469
Repayments of long-term borrowings		(4,899,022	)		(4,933,134	)		(900,682	)
Principal repayment of lease liabilities		(90,549	)		(33,864	)		(29,716	)
Exercise of share options		-			135,520			112,004
Payment of transaction cost		(292,416	)		-			-
Proceeds from capital reorganization		32,324,004			-			-
Exercise of warrants		714,230			-			-
Net cash flows from financing activities		23,607,185			5,987,765			3,875,036
Effect of foreign exchange rate changes		143,905			91,105			324,900
Net increase (decrease) in cash and cash equivalents		13,051,629			(2,208,508	)		(5,479,229	)
Cash and cash equivalents at beginning of year		9,944,748			12,153,256			17,632,485
Cash and cash equivalents at end of year	$	22,996,377		$	9,944,748		$	12,153,256

The following table shows our EBIT, EBITDA and adjusted EBITDA, together reconciled to the loss for the year ended December 31, 2022 and 2021 (net of operating expenses and non-operating income and expenses and excluding other comprehensive income).

	Year EndedDecember 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(1)		2,814				-
Share Listing Expense(2)		70,105				-
Adjusted EBITDA	$	(5,963	)		$	589

(1) Transaction costs are one-off expenses for professional services related to the Business Combination, asset acquisition and SOX 404 implementation project which are considered as one-off corporate development events and added back for calculation of adjusted EBITDA.(2) Share listing expense represents non-cash IFRS 2 charges recorded in connection with the consummation of the SPAC merger.