The Glimpse Group Q1 Fiscal Year 2026 Earnings Call - Brightline IPO Spinoff and Fortel AI Traction despite Revenue Dip

Jenny, Moderator/Operator: Good afternoon, ladies and gentlemen, and welcome to the Nortech Systems third quarter 2025 earnings conference call. With me on the line today are Jay Miller, President and Chief Executive Officer, and Andrew Lefrin, Chief Financial Officer and Senior Vice President of Finance. All lines have been placed on a listen-only mode, and the call will be open for questions and comments following the management presentation. At this time, it is my pleasure to turn the call over to Andrew Lefrin.

Andrew Lefrin, Chief Financial Officer and Senior Vice President of Finance, Nortech Systems: Thank you, Paul. I would also like to welcome everyone to today’s conference call. Jay will begin the call with a review of our operations, recent developments, and business outlook. Then I will review Nortech’s third quarter 2025 financial results, before turning it back over to Jay for his closing comments. We will open up the call for your questions. Before we continue, please note statements made during this call may be forward-looking regarding expected net sales, operating results, future plans, opportunities, and other company expectations. These estimates, plans, and other forward-looking statements involve unknown and known risks and uncertainties that may cause actual results to differ materially from those expressed or implied on this call. These risks, including those that are detailed in our most recent SEC filings, may be amended or supplemented.

The statements made during this call are based upon information known by Nortech as of the date and time of this call, and we assume no obligation to update the information in today’s call. You can find Nortech’s complete Safe Harbor statements in our SEC filings. Now with that, I will turn it over to Jay for his opening comments. Jay.

Jay Miller, President and Chief Executive Officer, Nortech Systems: Thank you, Andy, and good afternoon, everyone. We’re glad you could join us today.

I’m very proud of our team’s execution and our positive third quarter results, which reflect continued evidence of our restructuring efforts and cost discipline are paying off. During the quarter, we realized increased manufacturing efficiencies across customer programs transferred to new plants, which are driving planned sustained performance improvement as we experience a continued positive mix shift from new product introduction to first builds of recurring production. While we have incremental work to do in this area, we have made significant progress over the past several quarters to realize the benefits of our streamlining and long-term cost structuring initiatives. The entire Glimpse Group leadership team is proud of the hard work and execution of our employees. We continue to closely monitor on-again, off-again imposition of tariffs. We continue to see strong quoting activity as many of our customers are evaluating near-shore manufacturing strategies for both North America and China.

We believe we are currently very well positioned in our North American footprint as our Monterrey Maquiladora operations and Minnesota facilities work under the framework of the USMCA.

Jenny, Moderator/Operator: We’re taking a different call.

Jay Miller, President and Chief Executive Officer, Nortech Systems: While the tariffs with Mexico remain uncertain, it’s important to note Nortech is not the importer of record into the United States for goods produced in Mexico, as we operate under a Maquiladora structure for our customers. This materially reduces our direct exposure to these tariffs. In situations where we incur tariffs on imported components, we are working closely with our customers to pass these costs through. All in all, we are working hard and have all hands on deck to proactively monitor the shifting landscape, trade policies, and uncertainties in the current geopolitical environment. We have recently.

Jenny, Moderator/Operator: I’m texting her.

I apologize. There appears to have been a technical error. I do apologize. I’m extremely sorry about that. I’m going to start the script right now.

Let’s just get to the right place.

Yes. Welcome to The Glimpse Group’s Q1 Fiscal Year 2026 financial results webinar. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. As a reminder, this conference is being recorded. The earnings release that accompanies this call is available on the investor section of the company’s website at https://ir.theglimpsegroup.com/. Before we begin the formal presentation, I’d like to remind everyone that statements made on today’s call and webcast, including those regarding future financial results and industry prospects, are forward-looking and may be subject to a number of risks and uncertainties that could cause actual results to differ materially from those described in the call. Please refer to the company’s regulatory filings for a list of the associated risks. We would also refer you to the company’s website for more supporting industry information.

I would now like to hand the call over to Lyron Bentovim, President and CEO of The Glimpse Group. Lyron, the floor is yours.

Lyron Bentovim, President and CEO, The Glimpse Group: Thank you, Jenny, and thank you, everyone, for joining us. I’m pleased to welcome you to The Glimpse Group’s Q1 Fiscal Year 2026 financial results investor call for a quarter ended September 30, 2025. While revenues were down as we guided and expected during the quarter, we made significant strategic progress in advancing the potential IPO spinoff of our subsidiary company, Brightline Interactive, while making substantial deliveries on key contracts and expanding the traction of our AI software product, Fortel AI. Specifically, Brightline made an initial successful delivery on a multi-million dollar annual SpatialCore contract with a Department of Defense entity. Brightline is also in advanced discussions regarding multiple significant Department of Defense opportunities. While these discussions have been impacted by the government shutdown and continuing resolution, we still expect these to materialize into contracts during calendar year 2026.

Our AI software license product, Fortel AI, our AI role-play simulation providing intelligent conversational simulations in immersive environments, has been gaining traction in both the education and healthcare segments. While early in its commercialization, the level of enterprise interest in Fortel AI and the accelerating pace of new licenses and annual license renewal is encouraging. Our goal is for Fortel AI to eventually become a fundamental base for Glimpse’s revenues. Our other businesses continue to perform well. For example, we recently signed several contracts with one of the world’s largest oil service companies, aggregate contract value in the mid-six figures, for the development of 3D brand environments and animation and corporate presentations.

Regarding the Brightline IPO spinoff, our immediate strategic focus is driving a potential IPO and spinoff of Brightline as its own independent publicly traded company, a pure-play standalone, well-capitalized provider of AI-driven spatial computing cloud-based operational simulation middleware to the Department of Defense and large enterprises, enabling real-time data orchestration and training of digital twins, robotics, drones, and autonomous systems. In October 2025, we initiated the IPO spinout process, engaged Lucid Capital Markets LLC as our investment banking partner, and an experienced securities counsel. While there is no guarantee of success, we expect the process to play out over the coming months with a potential Brightline IPO in the first half of calendar year 2026.

Current Glimpse shareholders, in parallel to their new holding in a spun-out Brightline, will also maintain their holdings in Glimpse in addition to our core immersive businesses, which are increasingly driven by traction in our Fortel AI software product. We believe that there are considerable value creation alternatives for Glimpse to pursue as a clean, healthy, NASDAQ-listed technology company. We are in the initial stages of reviewing such potential alternatives. With that, I will turn it over to Maydan Rothblum, Glimpse’s CFO and COO, to review the financial results. Maydan.

Maydan Rothblum, CFO and COO, The Glimpse Group: Thanks, Lyron. I will limit my portion to a summary review of our financial results. A full breakdown is available in our 10Q and press release that were filed before market after, sorry, market close today. Please note that I may refer to non-GAAP measures. For the calculation of non-GAAP measures, please refer to the MD&A section of our 10Q filing. As discussed previously, we expected fiscal year 2026 revenues to be choppy by quarter, as demonstrated by results in this quarter. Q1 fiscal year 2026 revenue of approximately $1.4 million, reflecting a 43% decrease compared to Q1 fiscal year 2025. That’s for the period ending September 30, 2024, revenue of approximately $2.4 million. The decrease reflects timing of Department of Defense contracts and the U.S. government budgetary delays and our previous divestiture of non-core entities.

Gross margin for Q1 fiscal year 2026 was approximately 72% compared to approximately 68% for fiscal year 2025. We expect our gross margins to remain in the 65%-75% range. Adjusted EBITDA loss for Q1 fiscal year 2026 was $0.92 million compared to $0.46 million loss for Q1 fiscal year 2025, reflecting the lower revenues in this quarter. The company is currently operating at an adjusted EBITDA break-even level at approximately $10 million of annual revenue, which is equivalent to our fiscal year 2025 revenue. The company’s cash and equivalent position as of September 30, 2025, was approximately $5.56 million, with an additional $0.66 million in accounts receivable. We continue to maintain a clean capital structure with no debt, no convertible debt, no preferred equity, and as of October 2025, no contingent liabilities after making the final performance payments relating to Brightline Interactive’s acquisition in 2022.

Since there are many moving parts currently in play, we will not be providing revenue guidance for the remainder of our fiscal year ending on June 30, 2026. I’d now like to pass it back to Lyron for some closing remarks, after which we will begin our Q&A session. Lyron.

Jay Miller, President and Chief Executive Officer, Nortech Systems: Thank you, Maydan. This quarter was marked by the formal initiation of the value creation initiatives we previously discussed, initially led by the potential IPO spinoff of Brightline and then to likely be followed by other initiatives. This process will play out during our fiscal year 2026, and we will keep you updated to the degree possible as we progress. In parallel, we expect our business to continue to grow with a focus on Fortel AI software licenses. Thank you, all of you, for your interest and support of the Glimpse Group. Now I’ll turn it over to Jenny for some questions.

Jenny, Moderator/Operator: Thank you very much. At this time, we will be conducting our question and answer session. If you would like to ask a question via the phone lines, please press Star 1 on your phone keypad. A confirmation tone will indicate that your line is in the queue. You may press Star 2 if you would like to remove your question from the queue. For anyone using speaker equipment, it might be necessary to pick up your handset before you press the keys. If you would like to ask a question via the webcast, please click on the Ask Question box on the left side of your screen, type in your question, and hit Submit. Please wait a moment while we poll for questions. Just a reminder on the phone lines, if you would like to ask a question, you can press Star 1 on your phone keypad now.

Okay, we don’t appear to have any questions on the phone lines. I’ll then hand over to Lyron to see if there have been any questions submitted via the webcast.

Lyron Bentovim, President and CEO, The Glimpse Group: No, there are no questions on the webcast, so I would take this opportunity to thank each and every one of you for joining our earnings conference call. We look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions, please reach out to us directly. Thank you and have a great day.

Jenny, Moderator/Operator: Thank you very much. This does conclude today’s webinar. Thank you for your participation and have a wonderful day.