Today's video release

Now, let's move on to today's next interview. It's an interview with Gorilla Technology Group. Hello. Today, we have Bruce Bauer, the interim Chief Financial Officer (CFO) of Gorilla Technology Group. The company is traded on NASDAQ under the ticker symbol 'GRRR'. Welcome, Bruce.

Bruce:Thank you, Craig. It's an honor to be here.

Craig:As a CFO, how are you adapting Gorilla's financial strategy to the rapid growth and evolving market opportunities?

Bruce:Yes, the most important thing is that cash is needed to grow the Business. Therefore, the top priority was to secure at least 15 million dollars in unrestricted cash. This not only allows for the acquisition of new contracts and preparation to fulfill them, but also enables investment in new market opportunities, such as expanding operations and marketing in new areas and spending on innovation. The current cash reserves are over 40 million dollars.

Craig:How do you balance capital allocation between growth initiatives, innovation, and returns to Shareholders?

Bruce:The current business development pipeline exceeds 1.5 billion dollars. From this, we evaluate contracts that are expected to yield short-term results, estimate the necessary cash to acquire and execute them. The cash reserves have slightly decreased from 40 million dollars to the upper 37 million dollar range, with the majority allocated to growth. We also plan a 6 million dollar stock Buy back, with the remainder invested in research and development (R&D). Moving forward, we plan to continue allocating the majority to growth, using excess funds for innovation, R&D, and distributing dividends to Shareholders as needed.

Craig:Gorilla currently holds substantial contract and financial assets. How do you manage them to support Business operations and strategic objectives?

Bruce:Contract assets refer to unclaimed revenue. Eventually, it will be reported as revenue. Basically, work is done and revenue is recognized accordingly. This is recorded as contract assets. The goal is to start the cycle of converting contract assets into cash by quickly advancing the billing process once the contract milestones are achieved.

Financial assets are mainly used as guarantees for customers. The numerical value of financial assets will increase as guarantees are expanded for new contracts. On the other hand, the aim is also to smoothly manage them and secure cash flow for the business by reducing them as much as possible. From the end of 2024 to the beginning of 2025, the focus will be on advancing this management cycle.

Craig:Gorilla's gross profit margin and operating profit margin improvements are notable. What measures are being taken to maintain and expand these?

Bruce:Regarding operating profit, the current infrastructure can handle doubling the current business scale, and the operating leverage is effective. The key is to acquire new contracts and improve the gross profit margin as a result. For gross profit margin, efforts are being made to adjust prices to reflect market prices appropriately and to review contract approaches. This includes setting goals for contract scale and gross profit margin. Additionally, improvements in product mix such as shifting to software will contribute to expanding the gross profit margin.

Craig:The $6 million stock buyback program demonstrates confidence in Gorilla's valuation, but how are you balancing this with investments for future growth?

Bruce:In September, there was up to $40 million in cash available. I decided that there was no need to use all of it for new businesses, and I believed that the stock price was severely undervalued. Therefore, instead of issuing new shares, I chose to buy back shares. This demonstrates the low valuation and confidence in the future to the market. However, this approach is only carried out when the stock price is low or if it does not harm business growth.

Craig:What initiatives are being taken to optimize cash flow while maintaining focus on scaling up and innovation?

Bruce:Thoroughly managing existing and new contracts is key. For existing contracts, it involves promptly converting unbilled revenue into billed revenue and collecting accounts receivable. It also includes managing prepaid and accounts payable to secure cash flow as much as possible. For new contracts, it is important to minimize or delay our investment timing, as well as determine payment timing from customers. For instance, using surety bonds instead of cash guarantees incurs some costs in the P&L but can save a large amount of cash.

Craig:What do you think are the most important indicators that investors should pay attention to in order to understand Gorilla's progress and potential?

Bruce:Key indicators to watch in growing technology companies are growth rate, gross profit margin, operating margin, and cash flow. By 2025, it is predicted that the conversion rate from EBITDA to operational cash flow will exceed 100% due to the liberation of customer guarantees, demonstrating a healthy business model that generates cash while growing. These are the points we focus on.

Craig:It is satisfactory. Bruce, thank you very much for the detailed explanation today.

Bruce:Thank you for inviting me. I look forward to discussing Gorilla anytime.