Gorilla Technology Group Inc. (GRRR) Earnings Call Transcript

Welcome, everyone, to this extended in-depth fireside chat with Gorilla Technologies. I'm your host, John Roy. I cover technology companies in Water Tower Research. Today, I'm joined by Jay Chandan, he's the CEO of Gorilla and by Board member, Thomas Sennhauser. 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 a written transcript distributed without the expressed written consent of Water Tower Research. Well, welcome. Well, let's jump right into it. Let's go right into the questions. So as an introduction, maybe you could give us an overview of the company and your markets.

Absolutely, John. First for all, thanks for having me. Gorilla is a London-headquartered AI infrastructure and intelligence operator. Now we're not a software vendor or a hardware retailer like most allude to. We're a full stack builder and operator of sovereign AI infrastructure. What does that mean? It means that we design, we build and fund and operate all these AI data centers and help monetize them so that we can provide national intelligence security platforms on a long-term basis anchored by multiyear service agreements. Now what do we offer? I mean there are four markets we serve today. Security and network intelligence. So things like sovereign surveillance, lawful interception, threat analytics, compliance platforms, which been -- all of the -- or underpin the national security, cybersecurity requirements and public safety. The second one is smart city platforms. AI-driven monitoring traffic, environmental and safety platforms for both urban and national deployments. The third one is GPU as a Service. These are high-density GPU infrastructure for governments, enterprise and more importantly, research clients for delivering orchestration software, service levels, which they obviously would require a guaranteed availability. And then finally, operations and managed services. So think of it this way. Once we've secured the customers' contracts, we have long-term SLAs where we own, operate the infrastructure on behalf of the customers. That means we have to ensure uptime. We have to ensure security. We have to ensure compliance and final scalability. What does that mean? It means that the different markets. So there's been a lot of questions about, "Oh, what markets are you serving?" So for me, the market segments will be divided again, primly into 4 different segments. Government and public agencies. Today, more than 80% of our revenue is actually government and public agencies. So think about it this way, smart policing, tourism, smart city deployment, intelligence, national security. The second one is telecoms, telecom operators and utilities. So think about it this way, national backbones, AI-ready infrastructure that supports 5G. We just recently won a number of 5G projects as well, energy management and digital services. The third one is enterprises and financial institutions. So anybody who's looking for secure AI workloads, fraud detection, network intelligence, compliance and so on. And finally, we do a lot of work in education and research, so national scale digital infrastructure, for example, smart education platforms, GPU access for universities and innovation centers. So those are the 4 primary segments we cover. I hope that answers your question.

No, that's great. I mean you were talking about operations and then data centers. Maybe you can give us a little more color on this very large, what, $1.4 billion contract you did with Singapore. And I know you're building a few data centers for them, I think.

Yes. We are actually going to be building four across three different geographies, which is Indonesia, Malaysia and Thailand. When we signed the contract with Freyr, who's an NCP partner, by the way. We decided that we were going to build it in phases. We didn't want to take the big bang approach of going and deploying all $1.4 billion across three different countries. It just doesn't make sense. So what we did was we're taking the first phase of $300 million in Indonesia, starting Q4 with optional extensions. So these are 3-year contracts with obsolete extension. What are we doing? We're providing AI-native infrastructure, which means we're providing GPU-dense racks, optimized with NVIDIA H200plus hardware, liquid cool for sustained training workloads. Then we are providing low PUE workloads, basically below 1.25 typical for tropical environments, and this is very essential for the customer. We are providing sovereign-ready orchestration, which means for workload scheduling, compliance, tenant level SLAs, we manage all of that. And finally, we're also providing them with edge integration, so linking national sites to very low latency workloads. We will have kicked off all the services by first quarter of 2026. But look at it this way, John, the market demand is far more significant. You said this was large, but we are actually going after even larger projects today. The market is there. There's a demand of more than $12 billion to $15 billion plus today. And our alliance with Freyr is already pursuing more than $2.5 billion of opportunities within the Southeast Asia region alone. And what makes it very different is that we're not just building these facilities. We are owning, operating and monetizing them through multiyear SLAs. So think about it this way, what makes us more than just a contractor.

So Thomas, can you give us a little more color on that?

Absolutely. We are just in the final statement of work, a little bit about details about the networking, all the [ small PBT stuff ] we are doing and also negotiating with our partners, the pricing so that we have an optimized price, which is fitting our calculation plus also our partner. And very soon, we will have that on the road with the first chunk, which is about $300 million. And we're already discussing the next phases with the end customer, and there is much more to come. So just stay tuned.

So what about ONE AMAZON, I mean I know there was a lot of noise about that a little while ago. Tell us more, what's going on?

We've just gone through this whole last week with -- at the Climate Week. And what was exciting for us was we were able to showcase our entire profile through a launch stage activities during the September Climate Week. It was not just an ESG branding, what we are doing is that we took our flagship environmental intelligence platform and showed the world that we were actually now turning the Amazon's biome into structured investable data. Until now, it was all about, building proof of concepts, you're signing the deals with Mato Grosso, for example, getting 1 million hectare commitments from them, getting the likes of IDB to work with you. This is a long process. We're talking about a 30-year project. So it took us a long time before we could actually get this. Now we have started to look at how we deploy our Gorilla AI stack to capture all of the biodiversity. So whether it's all the biodiversity that exists within the Amazon rainforest, the water, the soil, the climate signals across millions of hectares. So we're going to start with the first 1 million hectares and go across the board. The raw biome data, which we generate is then processed in our natural infrastructure which is basically to create the world's largest natural compound database. Now we're working with the likes of [ Okura ], for example, based out of Singapore, where we're using our AI engines to analyze all of the biome compounds, the Amazonian Biome compounds for application in medical, medicines and wellness. Now the model is a dual model. From infrastructure side, we're building the data capture layer. We're having the sensor. So we're working -- we've got the sensors being deployed on the ground level. We've got the satellites mapping the topology. We've got the edge compute. And then what we're doing is it's flowing back to all of the Gorilla data centers, which we will be building within the regions. So we're building 9 data centers across each of the Amazonian countries, and we'll be building one in the United States, which will host all of the satellite data. So that's your -- that's the first model. The second one is the intelligence model. So we're converting the natural capital into tradable usable outputs. So basically, we're taking compound libraries for the biotech. We're taking environmental credit streams for finance, real-time monitoring of the government and making them tradable. That's a very unique thing which no one has ever done before. And this matters for us, and it matters for ONE AMAZON. Why? Because it shows Gorilla's ability to take something such so vast and so complex as a rainforest and turn it into a sovereign digital asset with real economic scientific value, and we're doing that in a region in Latin America. That's the most unique thing about it today.

So Thomas, ONE AMAZON is huge. Can you give us some more details?

Yes. I just came back from Climate Week in New York last week, and we had the Chairman of the Environment Task Force from the White House, Ed Russo, who did the opening. We had a big announcement on SEC, the Security of Exchange Commission who approved the digital token for ONE AMAZON. There was an MOU signed with the IDB, the Inter-American Bank. And we did a demo of our sensor with a first POC we did for a few first hectares. So things is in progress. But again, it's a huge project. It will take time. And we're looking forward to COP30, where we will have a little bit more demonstration and the first data, which we hopefully can then public share with a bigger audience.

Interesting. So let's dig a little deeper. So let's talk about your vision and strategy. I mean, obviously, there's a lot going on. Do you -- how do you define and measure your success for Gorilla over the next 12 to 24 months?

Okay. That's a good question. We -- I mean, we've told this before, and I think we want -- I want to reiterate this to the market again. We measure success in hard contracted terms, okay? There's no fluff, there's no fake contract. This is real. We've already covered over $1.4 billion, plus we won tens of millions of dollars in Southeast Asia on the 5G contracts as well. We are on track to close another further $1 billion by June 2026, which I promised. So this was completely -- which came -- which we obviously didn't disclose to the market at that point of time until we sign the deals. But now the pipeline is even bigger than before. We've got now another $5-plus billion of pipeline, apart from the $1.4 billion we've already covered and the $1 billion we've signed, and we hope that we will sign, sorry, my apologies. Now what are the metrics we measure ourselves? First of all, contracted backlog. I'm very proud to say that we have multiyear SLAs locked in, in converting our pipeline into signed agreements. Today, I can announce that we have over $85 million already locked in for 2026. By the way, this does not include the data center project of $1.4 billion, which has already been contracted. No, it does not. The second, we pride ourselves on execution speed. We go from the time we select to do our site selection to our first review, we are going in less than 90 days. That's kind of unheard of as well. The third one is cash discipline. Cash conversion cycle is important. Accelerated collections is important. Debt reduction. We've gone from, as you know, $21 million of debt in the beginning of the year. Now we're under $16 million. So we're very fortunate and we're very blessed to have done. Our CFO has done a phenomenal job. But more importantly, what the market also doesn't understand or realize is that we have $27 million of real estate assets, which is actually earmarked against the debt. So when I clear off the debt completely, I will still have additional capital reserves that will be adding to my kit. And finally, operational readiness. We need to make sure that we're able to scale delivery teams. So what we have done is that we have hired a massive team in India. As you can see, we're hiring more than 150, 200 people as we speak. We will have about 70 people in Thailand by the end of next month by the time we close our acquisitions. We will have about 150-plus people in Taiwan. We have more than 30 to 40 people in Egypt. And we're also accelerating some of our U.S. acquisition as well. So it's not just about announcing contracts, we're making sure that we are revenue generating and building on our infrastructure as well.

Yes. There was a lot of projects you were mentioning there. Are you getting any kind of reuse from one project to the next, are there feeding to each other? Are there cross-selling opportunities?

Yes, there are cross-selling opportunities today. But what we are trying to do is that we are making sure that we're able to make our partnerships and our ecosystem much more stronger. Now when I work with -- so for example, if I'm working with government sectors, I'm making sure that I'm able to work on a particular project. So for example, the 5G LI. Now that is a very, very important project for us. What we have done is that we have taken that particular project. We built on the customers done 4 years ago, successfully deployed it. The customer gave a raining review. We took that and implemented again for the same customer. So now we expanded our capabilities. Now we've gone and sold in other regions in the Southeast Asian market, as you've seen in the press announcement recently. We've got 2 new projects. And we're actively engaged in 2 more discussions in the Middle East who come to us and said, we don't know of anybody who's done that. Can you please help us? So for us, this is not just building a product and selling it and deploying it once, we make it repeatable, and that's the mantra of Gorilla today.

Great. Let's talk a little bit about your financials and capital essentially. Can you break down your capital needs and your burn rate and funding needs over the next 12, 18 months?

Absolutely. First of all, we have raised $105 million recently. We haven't spent any of that. So we only reduced debt further. We haven't used that money either. And our customers are paying. And this is an important fact, Roy. We have our customers paying us regularly now. Last quarter, they paid us. This quarter, they paid us. They're going to pay us again in a couple of weeks. So we are delivering and our customers are paying. That's one. Second, we have closed $1.4 billion of contracts, and we're targeting another, like I said, $1 billion plus by mid of 2026. The backlog itself generates payments, first of all. Secondly, we're not going to be dilutive. And I want to make this message very clear because we want to preserve shareholder value. So what we are doing is we're exploring very creative alternative sources of funding. So for example, we are already engaged in very active discussions on project level debt. We're doing vendor financing. We're working on export credit. We're working with sovereign funds. We're working with green infrastructure capital, and we're working on other partnerships where we can -- we believe that dilution is the last lever, not the first for us, okay? And then finally, what we will also do is we will also use our scale. We were developing more into the U.S., and I'll talk a little more about it as we go through this discussion. The CNS and CANS integration is helping us access local credits now. Now we are also able to tap into targeted pools of capital with our broad equity issuers as well. So think of it this way, we're prudent and capital efficient. Our burn is tightly managed and our project phased. We do not need heavy corporate level cash because our model funds the project at the SPV level and ties CapEx to contracted utilization. This keeps us very lean on our working capital and avoid speculative build. And that's why someone quoted sometime back, "we have an office or a research parlor or enhance a lot," doesn't really matter because it's London, and we've got a very, very, very lean, efficient business to run.

So looking a little shorter term, over the next 6 to 12 months, what kind of milestones should investors be looking for or watching out for?

That's a good one. Now for the last -- I mean, we have been focused on actively building our pipeline, but reducing debt at the same time, right? So -- but that does not mean we have missed the ball on how we expand. Now the next 6 to 12 months, the first focus would be our Southeast Asia Phase 1 mobilization. We've signed this large contract. We're not going to lose our eyeballs on that, and we're going to make sure we are focused. So what would the investors watch? They would be looking for anything, NTP being issued, the procurement loss being awarded in Q4 of 2025, the first racks being powered in the GPUs land. So that's our first thing. Our second would be we are very actively pursuing an acquisition, a potential acquisition in the United States. That will give us an integration of over 200 people to establish scale in an American footprint. So we believe that, that would come to some sort of a conclusion, not closing, but that would take a long time, but at least to some sort of a logical conclusion. The third one would be Thailand. We're very actively focused on Thailand. So what would happen is we would have closed our CNS and CANS acquisition, and we would have deepened our delivery capabilities in Thailand and the APAC region. I've also mandated my team and my Head of Strategy to close and look at a large facility in India. We're currently closing that as we speak. I think we should be live in either October or November. That's for our existing facility. But that said, I've also mandated to look for an acquisition, and we're in conversations with about 3 or 4 businesses, which have about 1,000 to 2,000 people, and we're looking to acquire that as well. So investors should keep an eye out on that. Singapore, we will be opening up our office. That would be more a sales office, having more with an anchored regional AI data center operations. For MENA, we are actually -- 2 things that we've been looking out for will be the milestones on the Egypt project because now we're going into testing early next year, which means we'll go -- we'll complete a full deployment by the end of next year, which will be a year ahead in terms of completion. But at the same time, we'll also be looking at projects. I just told you about a couple of 5 GLI projects, which we are looking at and talking to in the Middle East. Hopefully, that comes to some sort of a logical conclusion over the next 6 to 12 months. LatAm, this is important. The one I said has actually opened up a lot of doors for us in the LatAm region, whether it's Panama, Mexico, Guyana, Brazil, Peru, Chile and so on. We've got some very large projects coming out of Brazil, which we will be slowly or quickly announcing over the next 6 months, 6 to 12 again. And then finally, the revenue ramp. Now I talked to you about the $85 million backlog, but I didn't talk to you about what the ramp-up would be in terms of revenue. What we will do is we will provide guidance during our third quarter results so that we will let the market know exactly what that number looks like for 2026 and 2027. I hope that answers your question.

Definitely. It does seem like you've got a lot of things going on. A lot of balls in the air. You're juggling quite a number of things. Maybe we should talk about risk. So risk and execution risk. So what do you see are your biggest execution risks? And what are you doing to mitigate them?

That's a good one. I think I have about 4 or 5. And we talked about -- interesting you asked me that because we just had a management session recently, and we talked about this and we discussed it at length, and we've put some of them to rest right now. So biggest risk for me would be the GPU supply chain today. Global demand is outstripping availability. That's a big challenge. Long lead times for NVIDIA class GPUs. So that's going to be my first challenge.

I can tell you that's a 4090 that I've got sitting over here.

The second one would be power and readiness, cooling readiness. I'm sure you've seen that the high-density workloads require reliable low PUE infrastructure in very hot climates. And as you see, we are very actively investing in very hot climates today. That's number two. Sometimes there are delays in local permits and regulatory approvals. That becomes a bit of a hurdle. Sometimes there are sovereign compliance issues like strict data localization that requires security requirements, different countries. Like if you look at Southeast Asia, no 2 regulations are aligned. So we have to conform to each of the local regulations. Sometimes, sometimes, there are civil delays, vendor coordination, integration of IT and so on, geopolitical, and that's a big, big risk. In fact, I should put that first. The geopolitical exposure for us is a bit of a challenge because, for example, what happened in Thailand, right? The Prime Minister got fired. We got a new Prime Minister, lots of projects were put on hold. So people -- I do believe sometimes -- some of our investors just don't have the patience. They just don't understand the political risk we have to go through when you're looking at government projects. Listen, government projects are great for 2 reasons. Once they contract, they're gonna bed with you for the next 10, 15 years, and they pay regularly. But the biggest challenge is the political exposure, right? That's kind of a big comp. So things like regional instability, political shifts in emerging markets, FX volatility, those are some of the big execution risks, but we're also putting the mitigation strategies already in place, and we're making sure we have a team, by the way, a dedicated team to look after the mitigation of these risks.

So Thomas, any kind of view on execution risk from your position on the Board?

Yes. I think for us on the Board level, I think we have 4 risks we see in it. One is supply, of course, which is always a channel power, people and then we have the regulation region, geopolitic macroeconomics around it. And I think to mitigate all the risk on the supply side, we're working as a company very, very close with partners. We bring them early on board as early as possible. And we really believe in a strong relationship, which helps us also with the ecosystem to get the supply under control. On the power side, we have normally when we build data center, make sure that we have multiple contracts in place. We are very careful on the location. And again, a partner is a critical part to overcome this risk. On the people side, I think it's for everybody these days, critical to find the right people, the right talent. And what we are doing as a company in Gorilla, we really want to attract the right people, the right talent. And I think we have a unique culture in our company, which makes it easy to work for us, and I think it's really a cool team. So we really emphasize that and making sure we attract the people around that. Regulation and geopolitical, we work with all the regulators, the different governments as tight as possible to reduce that risk. We have in multiple regions, big projects. So if something happened in one region, it will not impact as big as we're not depending on Asia only or on European market. So that helps us to do that. And also our pipeline is in all the different regions very, very strong. And with that, we mitigation of the risk is much, much lower than maybe other company have.