Engage XR Holdings (LSE:EXR) — Full Year Results Presentation

0:02 Good morning, ladies and gentlemen, and welcome to the VR Education Holdings PLC full year results investor presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged. It could be submitted at any time by the q and a tab situated in the right hand corner of your screen. Simply type in your question and press send. The company may not be in a position to answer every question it receives during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so.

0:30 I'd also like to remind you this presentation is being recorded. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to David Whelan, CEO Seamus Slowery, CFO of VR Education Holdings.

0:47 Hello, everybody. My name is David Whelan. I'm the CEO of VR Education Holdings, the team behind the ENGAGE platform. I'm joined here today by Seamus. Hi, everyone. So today, we're actually doing something a little bit different. We're presenting inside our own ENGAGE platform. So I'm here in a virtual office location,

1:05 and I'm in my own home office. And then, Seamus Seamus, can you tell the audience where you are? Yeah. I'm in the Waterford office, just in here on my own, and it seems like I'm right beside Dave. So what we're do, this is obviously our PowerPoint presentation behind us, and we're talking about our final results for last year and also our medium term outlook. So, Seamus, I'm just gonna get to the correct slide for you. There you go. Thanks, Dave. Yeah. So let just want to take you through some of our operational and financial highlights for the year. Operationally, we've seen an acceleration of ENGAGE demand during the year. And with the launch of ENGAGE events post the onset of COVID in March, we've seen continued growth throughout the year. We've also seen a substantial increase in the addressable user base through the launch of ENGAGE mobile, which supports both Android devices and iOS devices.

1:55 We signed in excess of €1,800,000 in ENGAGE deals during the year with, and at the end of the year, we had 60 active customers. But possibly the most excite expansion in the year was that ENGAGE went live to HTC customers in the Greater China region just before the year end, and we expect this to be a very significant, player in 2021 onwards.

2:17 Financially, just some financial highlights. You can see that group revenue grew to 1,420,000, which is up 38% on the prior year. Within that, ENGAGE comprised 40% of total group revenue, a significant increase on the prior year where it was less than 10%. We also saw an increase in ENGAGE user numbers, up 700% year on year. ENGAGE standalone revenue grew, 550 percent and finished year just shy of 600,000. Group gross margin was 72%, and at cash at the end of the year was €2,000,000. Okay. So what are the commercial use cases for ENGAGE? So we have three main offerings on the platform. So we have our virtual campus, which is an always on location, and it's used for distance learning. And we have some really top clients using the platform for virtual remote training and, remote education. So we have the likes of Stanford University, Oxford University, and Tokyo Global Gateway. So these are very premium names and brands associated with the platform.

3:19 Then we also have ENGAGE virtual office, which is it is an always on location, kind of a corporate location, which has a some offices offset. And it allows employees to meet up with each other no matter where they are in the world and have company meetings, conferences, and events as well. And some of the people who are using it, in this regard are Fidelity Investments, HTC, NVIDIA, McKinsey and Company. And then finally then, we also have, virtual events. So because of COVID especially, lots of the physical events have been canceled, and we've been hosting events on a very regular basis inside ENGAGE with some very, again, top tier, organizations such as Audi, Yahoo, Vodafone and European Commission. And we're gonna talk a little bit more about each one of these, commercial use cases later on in the presentation.

4:15 So so just looking at our financial performance in a little bit more detail. In f y twenty, as already mentioned, we generated 1,400,000 in total revenue, which was up 38% on the prior year. ENGAGE comprised 500 and sorry. ENGAGE grew 550% in a revenue basis and more than 700% on a user basis year on year and now comprise, more than 40% of total group revenues. I think one of the most important points to note though, and which wasn't in our trading update, is that ENGAGE revenue for the first seven weeks of 2021 has been naught point 3,000,000, which represents 50% of total ENGAGE revenue for 2020. I think that highlights the growth and the and the demand for the platform at the moment.

5:00 Non engaged revenue, which is primarily our showcase experiences, which would have been a key factor in the past, they're down slightly in the year, but that's due to COVID nineteen related museum closures in The United States. But we still closed the year with 75,000 downloads and, 800 over 800,000 in revenue in that stream. Our gross profit margin increased by 11% from 61% in 2019 to 72% in 2020. That's primarily due to increased ENGAGE revenue contribution. Our cash balance at the year end was in excess of 2,000,000, and our monthly cash burn was 250,000 per month at the year end. But during 2021, that has fallen to 150,000 in January and February per month.

5:48 So just looking at some of the key performance metrics that we measure internally and that we're we'll be reporting on going forward. Obviously, ENGAGE revenue, I've already touched on. It's grown from 92,000 to 599,000 year on year, which is a compound annual growth rate of 550%. More interestingly, would be our revenue by type for f y twenty. You can see that our recurring revenue is 61% of our total revenue. That would be licensed deals for educational or enterprise customers. We then have 15% in professional services. That's custom work that we would perform for our education or enterprise customers on a one off basis, so tailoring the platform to their needs or creating one off piece training. Then and the new revenue stream that came on board this year was the ENGAGE events piece, and that's generated 24% of our total ENGAGE revenue for the year.

6:41 Then just looking at our total license numbers, you can see that our total, licenses have grown from just under 1,600 at the start in h one twenty nineteen to just shy of 3,000 at the end of twenty twenty, which shows the significant growth that we've had in the in 2020. That's a compound semiannual growth rate of a 177% over the period. Then if we look at our active customers and we define an active customer as a customer who's greater than 3,000 in cumulative average contract value, so basically excluding any trial customers,

7:13 you can see that we've grown from three in h one twenty nineteen to 23 at the end of h two twenty twenty. And as it stands today, we're in excess of 35 active customers on the platform. Okay. So what I'm going to show next is a short video presentation of ENGAGE. So hopefully, it'll enlighten you a bit more on some of the available features and some of the unique capabilities of the platform that really video based communications just can't do.

7:55 We all experience the world in unique ways. Hey. Through our senses, we gather information and build cognitive process process to understand concepts. Hey. This is how we learn. But what if we could push these boundaries past our physical world? Fire. Fire. What if you could communicate with anyone in the world yet feel like you were in the same room? If you could meet and learn putting up the highs teammates globally, sharing media, and ideas jump into a simulated training But the real test is being able to do the right thing in a stressful situation. To gain a deeper understanding of the task at hand. Warm and dry. And when you squeeze the trigger to squeeze the You have ventilated the baby, and now it's time to reassess. Please fasten your seat belt, sir. Creating real world scenarios, improving employee knowledge and skills. Exactly. Plant another tree. And this time, we put it up the top. Imagine if quality education was accessible to all regardless of geographical location.

9:01 Large hazard and increase the risk to these big cities. What if no field trip is too far or impossible? Okay. So I hope you enjoyed that short presentation. I'm going to go back to the PowerPoint now. Just give me a moment to load this. Okay. So in the video, you would have seen some of the use cases. So you've seen it for simulated training and communication. And just to go through these in a little bit more detail, let me open it up here on screen. So I'm actually bringing in these PowerPoints from OneDrive, so directly from a web source. Okay. So as you can see on the screen here, we have virtual campus, virtual office, and virtual events.

9:48 So with our virtual campus, again, we do have persistent locations. So these are always on locations where

9:54 students can log in at any stage from anywhere in the world, meet up with other students associated with that online university or that online college. And then they can go and attend either prerecorded classes or they can attend live classes and with lecturers from all over the world. You know? And it it they they seem to really enjoy it a lot more than video based communication where they have peer support groups inside, and they really feel like they're taking part in a real class because it really does feel like you're in a real environment. And, actually, even though Seamus is probably a 100 miles away from me in the real world, I feel like he's only maybe 10 feet away from me here in the virtual world. It's something you just you don't get on video. Our virtual office is is very similar, so you can see it in here. So, again, it it's a it's a wide open area, and I will be going a little bit more into detail on this later on, where, again, employees can go meet.

10:43 They can have those private conversations at, say, a water cooler as an example, which they've probably been missing using Zoom calls all the time. You can have sales presentations in there as well and corporate, events in there or training events as well, training simulation. And I think you've seen in the video, where we had a guy on an that was actually safety training. All of that kind

11:04 of, material can be quite quickly developed inside ENGAGE. And then for virtual events, we're working with some really premium, companies in virtual events where, obviously, the physical events have been canceled, all through 2020, and, they're looking for alternatives. They have been using video communication, but they found that the engagement is not is very, very poor through video, events, large scale video events, and they're looking for alternatives. And we have, special abilities, which I'll go talk about later on in this presentation. So some of the main things, from this year as well is we're available on all major platforms, and we just recently released ENGAGE on mobile phones and tablets. The screens here that we're presenting on, actually, these are Chromium based screens. So anything that runs on Google Chrome will run inside ENGAGE.

11:49 We can stream in video as you just saw, and we can stream in three d video as well. So if you're in VR, that video could look three d to you, and we can stream in three sixty video from any web source. And with the spatial audio, when you're on when you're inside ENGAGE, if there were 70 people at this presentation, if somebody is off down the other end of the room, they will sound like they're off down the other end of the room. You know, they would sound very quiet to us, and people who are closer to you sound closer. You can have these private hallway conversations. You can't do that on video based medium where the person who's presenting is the person that everybody can hear. Whereas if I'm sitting in a virtual presentation, I can whisper to the person next to me without disturbing anybody else. And we can also do a lot of customization. So this is one of our meeting room environments, but we have all different environments that can be fully customized and branded for the organization themselves. And I'm gonna show you one of those environments later on today.

12:44 Okay. James, do wanna do this one? Yeah. So I just want to briefly go through how we get to market with and generate revenue from our from the three offerings that we have. So if we look at the top, we have, the virtual campus, the virtual office, and the virtual events. And how we get those to market is either through our direct b to b sales organization or indirect through our channel partners. Our b to b sales organization comprises our business developers who are based in America, in The UK, and in Asia. And they've generated the vast majority of our revenue to date, both with the onset of HCC coming on board and us delivering the platform to the Greater China region in the back end of twenty twenty, we expect our channel partners to be a more significant portion of our revenue going forward.

13:30 We also have other channel partners, which include resellers in South Korea and also in the North American markets. That feeds down into into software licenses generated on our side through b to b sales and also revenue share coming in from our channel partners. Coupled with our support services and our professional services section, we generate revenue and deliver our product to end end user clients, both enterprise and educational. Okay. So just to go into a little bit more detail about our virtual office, our meeting, environments. This is a virtual Menlo Park, from Facebook. So Facebook provided us with a a digital location, which we imported into ENGAGE, and they use this environment, for many events and meetings. So you can see here, that's a presenter screen. This is a large area.

14:19 It's actually based on the real place in Menlo Park. And these buildings around the outset, these have virtual meeting rooms, and there's a gallery space down here as well. And again, they use it for our Facebook employees logging in all over the world, and they also can invite clients in there as well and talk about Facebook products that are coming up. So it's really cool environment. And it's, again, it's always on. It's a persistent location. Here for virtual campus or education. So one of the the core drivers of ENGAGE early early on has been it was an education and training platform, and that's how it was developed. And we worked a lot with educators. And Stanford University, are using, the platform for medical training. Here, you can see a baby getting getting a resource.

15:06 So not only is ENGAGE really useful for just general meetings and live meetings, it's actually very, very useful for simulated training. So you can put in these very detailed simulations where people, get a lot of, a lot of experience where they role play, tasks. You know? So they could role play on this, virtual baby to resuscitate it very, very easily. And this is something that you can't do, easily in a real world where you'd have to have lots of expensive equipment and a baby analog to do is where we do it all digitally at a fraction of the cost, and then it can be served out globally in one go. And then virtual events. So as a lot of you might know, HTC came in last year and they invested in the company. They now are a very large a very large shareholder. They have a 20% stake in the business.

15:55 What happened last year, back in March is we held the VIVE Ecosystem Conference, inside ENGAGE, and it was a huge, huge success. So the actual physical conference was supposed to be held inside, China. But because of COVID and the spread of COVID, inside China, that was obviously canceled. Normally, HTC would invite a couple of thousand developers to, a conference. They would talk about all the hardware that they have coming up, all the software that they're working on, and get the developers excited. And, however, this was this was obviously canceled, and they came to us a few weeks beforehand and said, look. We've been using ENGAGE, and we're very excited about it. Can you guys help? We we had host the event. It was the first time we hosted a major event inside ENGAGE. We had over a thousand concurrent users in VR attending from all over the world.

16:43 A lot of them are actually based in China, and we had over 1,100,000 people watching the livestream. Very, very successful event. And as I said, just before the event even finished, I got a call from Alvin Grayland. He's the Chinese president of HCC. I said, look. Are you guys looking for investment? We're very impressed with the service that you guys have given us and the platform. We'd like to get on board and help you push out the platform in the Greater China region. And then we we signed up, and we we signed a commercial deal with HTC last year, and they are starting to roll out ENGAGE services in the Greater China region. And they also have a license as well to resell ENGAGE services all over the world. So what we're do is we're going to bring you to the VIVE developer conference in our spatial recording.

17:28 So it's one of the unique features of ENGAGE where not only did the event happen live, we actually recorded everything. So we recorded all the people inside, all the audio. We recorded the presentations as well, and you can actually go and physically walk around inside the simulation. So it's not like a recorded video. You can actually sit down and enjoy it from any position, or you can even interact with these facial recordings as well. So we're just gonna take a short journey there, and then we're gonna come back to this location. So hello again. Welcome to the Vive Ecosystem Conference that was held last March. This is a special recording where we recorded everything that happened within the conference. And standing right next to me, this is Alvin Grayland, the president of HTC China.

18:16 And behind him, we have a presentation, but this is one of the, locations that we use for events on a very regular basis. Now I have this spatial recording paused. I'm gonna unpause this, leave a play for maybe about thirty seconds so so you can see what the conference was like. And then we're gonna zip back into our meeting room environment. So I'm just gonna unpause this now, and then I'm gonna move out of the way. Okay, Alvin? So these are pictures that you guys have probably seen way too many of, and you probably hope you never see them again. But what if you could see them in a different way? What if they come out in a three d way that really lets you understand and appreciate them? But don't worry guys, these viruses aren't going to hurt you because we prepared. All of you guys have been now issued special protective gear.

19:03 So this is a very interesting type of experience that we can have because of platforms like this. And this is actually going to be how the future of conferences are going to be done. So why don't we do a little fun thing? Let's do a quick selfie with your protective gear, these viruses right now. Okay. So I've just paused the presentation there. So this is just to give you an example of what a conference was like in VR, where we have all these different elements floating around the place, and then the audience were put into hazmat suits. But we had instances where we had whales actually fly overhead. We had a train come through the screen as well. So it's just to give you a brief example of what a spatial recording, is like. So I'm gonna meet you back in the conference room.

19:56 Okay. Welcome back. I hope you enjoyed that little trip to the the VIVE ecosystem conference. And, it's a it's a really kind of strange experience when you attend a live conference and you're being recorded. You can actually actually stand and look at your own avatar presenting. So it's a pretty cool feature of ENGAGE. So here we can actually see the competitive landscape for ENGAGE. You see a couple of names listed here. And obviously, of the big ones here, you have Zoom and Microsoft Teams. Now a lot of places are using Zoom and Microsoft Teams as their preferred online communications platform, and actually, we're presenting this through one of those platforms right now. And but you'll also see then we have some virtual reality companies here, VRAR companies, and Glu and Spatial. So on the the product list that you can see here actually, I'm just gonna move out of the way. As you can see here, we're very competitively priced against video based communications, and we're actually less expensive than some of the VR and AR alternatives as well. We can have over 35 users in a simulation at once, so we can have actually up to 70 people in this particular room, or we can we have scaling abilities where you can have millions of people attend a virtual conference if need be. A lot of our competitors actually don't have that. We do support a broad range of VR devices, and we will be supporting AR devices in the future when those wearables become available.

21:15 We also as well have real face avatars. So this is my real face. I really look like this. I'm probably not as skinny because I've made my avatar skinny. I've put on a lot of weight over COVID, and that's really what Seamus looks like as well. So you can upload a photograph into ENGAGE, and it will build the avatar. There's no need to be tweaking settings And spatial audio, which is really key for the collaboration aspect of ENGAGE. So if this room with 20 people in it and some of them were down the back, one can lean over to the other and whisper in their ear without disturbing the person who's giving the presentation, That's something that you just can't do on virtual media. And again, the spatial recording, which is really cool, which what you've just seen with the HTC event, it's one of the killer features on ENGAGE, and it actually makes content creation very easy. And using that as a content creation tool, you can then publish that content on the platform for others to enjoy as well. So we have a lot of capabilities. Some of these platforms have some of the capabilities that we have, but we actually combine them all into one very easy to understand and easy to use package. And we're starting again to get a lot of traction in a lot of areas, not just in education, which is what we used to focus on, but also in corporate training, corporate onboarding, and especially events because of COVID concerns.

22:29 So just some of the kind of key outlines of what we've seen happen over the past twelve months and especially over the past six months is that there's a huge demand for the ENGAGE platform in all our use cases. So we're probably seeing, like, 30% of our demand in education, 30% in in corporations and enterprise, and another 30% in event space. You know? So all the the areas that we serviced are actually seeing rapid acceleration in demand, and it it's working out very, very well for us. There's also a growing demand for a next generation communications platform to address evolving corporate and institutional leads emerging from the limitations of video based platforms like Zoom, Microsoft Teams, Webex, etcetera. So especially in these conferences where you have a couple of thousand people log in to a video cast, it's not very interactive. You're just watching PowerPoint after PowerPoint or Keynote after Keynote. There's no real interaction.

23:25 Whereas in a virtual platform like ENGAGE, we have these conference centers where people can go, have private hallway conversations, meet up with salespeople. That's why people go to events. That's where a lot of business is done, is those chance meetings with people who are at the event. And that's something that we can provide online that simply a lot of these video communication platforms can't. Also as well, there's billions of dollars investment coming in from Facebook, Sony, HTC, Qualcomm, NVIDIA, and many others. And very, very soon Apple will be coming into this space as well. These guys are very heavily invested in making sure that VR and AR or XRS calls and is gonna be accessed this year or, well, over the next few years. And then we have telecommunications companies, you know, really pushing out five g at the moment. They really have a vested interest in ensuring that this technology, becomes very popular and ubiquitous.

24:15 Reason being is because on four g, people are very happy well, pretty happy with their streaming services, so they can watch YouTube videos or Netflix on their mobile phone using four g, and they use a certain amount of data. But if VR and AR becomes very successful, the amount of data that's required for simulations, especially if you're simulating, on a server somewhere and piping that in, the data consumption is gonna increase rapidly. And a lot of these telecommunication companies have spent billions of dollars in getting licenses for five g services. They really want to upsell customers to five g and six g services in the future where they will they will really use a lot of data, and they will really make sure that five g is is a worthwhile investment, whereas currently, not very many people really need to upgrade to four g. Also, as well, we have a lot of channel partners coming on stream. So HTC, obviously, our main channel partner, reselling ENGAGE services in China, and we're expecting big things to happen from h two this year. Also, we have channel partners in Korea and also a few coming on stream in The US as well. So it's not just us selling directly because we don't have a huge amount of business developers. We actually have these other companies selling on our behalf, and that's a model that we expect will be very successful for us in the future as we roll out the different territories in the future.

25:36 Also as well, we're seeing a huge well, a very, very strong demand in North America and in Asia as well. So we have very few customers currently in Europe. That's something that we are gonna rectify this year, but a lot of the, adoption is coming from The US and Asia. Again, Korea and Japan would probably be some of the leaders in the region, and then China has just come on stream. We released ENGAGE on Chinese servers just before the end of last year. And, again, HTC are just getting up and running, and we're we're expecting to see big things coming in the second half middle of the second half of this year. Okay. James, wanna do medium term outlook? Yeah. I will. Of course. So the group is really, really excited about the future of the of ENGAGE and where it's going to go. And as we announced in our trade and update in in January, we're expecting to achieve €10,000,000 in ENGAGE revenue with 500 active enterprise customers, which will, lead to a 100,000 monthly users during the period 2023 to 2025.

26:39 So how that translates into key performance metrics? We expect to see a growth of ENGAGE revenue, and we want we expect to deliver annual average compound annual growth rate from ENGAGE in excess of a 100% until that 10,000,000 target is reached. We expect it to be high quality, though, recurring ENGAGE revenue to comprise 80% of that figure, with the other 20% comprised of 10% professional services and ten percent one off events. We expect growth

27:07 margin to be in excess of 80%. We expect that to we expect to achieve that level when ENGAGE revenue is between 5 to 10,000,000. We expect to see a 10% average month on month increase in users to reach that 100,000 mark, reflecting a target of 500 active customers. Customer retention rates, we expect, and it's only a management estimate at this stage, to retain at least 80% of our customers. As we've already mentioned, most of our customers came on stream in the second half of twenty nine 2020, which means renewals haven't become up yet for most of our customers. But those customers that came on stream earlier than that have all renewed. So we're very positive about that figure, and we think it's a prudent figure to be at 80%. And finally, we expect our average contract value to grow to in excess of €20,000.

27:57 Currently, it stands for 2020 at €14,000, excluding trial customers. And as demand for increased number of licenses grow, we expect that figure to go up.

28:12 So there's obviously a strong, large, global growing market on driving the growth in ENGAGE and the growth in VR. So if we see the three markets that we're targeting, you can see global team collaboration software. The market was 10,000,000,000 at the end of twenty twenty. Global elearning was a 165,000,000,000, and global virtual events was 94,000,000,000. There's also very strong forecast compound annual growth rate across those three sectors. We consider our initial target addressable market to be up to 10% of those markets, which gives us a range of between ten to twenty five billion of a total addressable market, a very sizable market for us to be addressing. Obviously, the VR market is still quite immature within this. With with the availability of hardware accelerating, there's going to be less barriers to adoption.

29:06 However, ENGAGE development in 2020 sought to overcome this. We're now cross platform support, desktop, Android, and iOS support.

29:16 So our addressable market is far in excess of what other stand alone, your spiritual platforms offer. And we expect 2021 to be another formative year, especially in within the ENGAGE platform and within the the with the channel partners with HCC in the Greater China region. Okay. So if we look at the graph here, this is estimated shipping of headsets for 2019. So a lot of these companies actually don't release numbers on how many units that they ship. But this data is something that I got from Statistica online. Now in 2020, there was a real big sea change in in VR and AR adoption. So Facebook released the Oculus Quest two in a big way, and they released it towards the end of last year. And it's estimated that they sold over 1,000,000 Oculus Quest two devices alone in

30:09 the final quarter of twenty twenty, a lot of that actually towards the Christmas period. They were actually held back. Those numbers were held back because unit numbers, they were very hard to actually purchase in shops. They were always sold out, you know, and we're actually seeing that acceleration really go really, really grow. And what we've, did last year is ENGAGE was released for the first time on the Facebook Oculus, store. And in the week that we released ENGAGE on the Oculus store, we had 15,000 people, sign sign up for accounts on ENGAGE. Like, so there's a huge, huge demand for collaborative and social apps on that platform, and we're still seeing an acceleration of people actually joining. There's other headsets going to be coming out in the market later this year as well. So there's going to be even though you have HTC, you have Facebook there, you also have PlayStation, but there's going to be other competitors coming into the market quite soon as well. Expect to see some telecoms companies enter this arena as well. And as I said, Apple are fully expected to release some type of wearable VR, AR device, and we feel it's gonna be within the next twelve months. It is very, very soon.

31:17 Really, what's standing to them now is a lot of the research and development has been done. Qualcomm have a reference design and chipset that they could use, But the headsets now are becoming really very they're not expensive at all. So you can get an Oculus Quest today for $300, it'll soon be $200. And the experience is really, really good. HTC have their own version, which is the the VIVE Focus, which is really focused on enterprise and education, really, really good device as well.

31:43 And I think the experience and the cost really now was coming to a level where this is very commercially viable now and, does lots of, game developers really jumping on board, the especially on the Oculus device. So the execution. So, it's not just myself and Seamus in the organization. We've grown, quite large actually over the past twelve months. So we've grown our team from about 30 staff to about 55, maybe 56 staff at the moment. And we've a very, very strong technical team. You know? So some of these people here. So David McDermott, who you can see here, head of studio. He used to work quite a lot for Nintendo in Japan, very senior animator. And he worked on some really premium games like Star Fox and some of the Mario material as well. He's head of our our content studio, really, really strong guy. Mike Armstrong, who you can see here, he was one of the first developers to create a social VR experience in VR back many, many years ago. It was a virtual cinema. He's actually our our leads architect

32:47 on the platform. Then you can see Eileen here who's our technical project manager, and she works from some big organizations along with along with Jonathan there as well. They work with very big tech organizations such as Bluefin and Redhash here in Waterford. So they they really know from an operational point of view of how to get the best from your developers. And even though we've hired so many people and we've grown so so large, actually, especially in the past six months And, again, look, we're a very, very strong technical team, but you can see here we have some hires. Most of our outstanding hires actually are in sales, business development, and marketing. So with a lot of our customer base in The US and in Asia, we will be opening up small satellite offices. They won't actually be physical offices. They'll be virtual offices, but we'll have people in those locations dedicated to to customers over in that area where they can pick up and do, like, sales calls, support calls for, any events that are happening.

33:45 Because, even though we are a European company, a lot of the requests that are coming in are actually coming in the middle of the night for us. So we really need to build up that side of the organization and also as well the the sales and marketing of the business as well. So it's great having a very, very mature platform that works everywhere. But if people can't find you, you know, they're not gonna buy into you. And we are seeing a lot of competition coming up, especially in The United States. Their technology is certainly maybe a couple of years behind of where we currently are, but they probably have a little bit more notice in that area. So that's one area that we're certainly going to focus on is The U. S. Market. And then HTC this year are really going to push ENGAGE in the Asia market. And then in Europe then as well, they have some really strong ties with some strong companies in the European arena.

34:34 So just kind of in summary, really, of why we feel that the ENGAGE platform is a good platform to invest in and why it's worth your time. So last year, we had a record increase in revenue, up by 550% just on the ENGAGE platform, and our user base by 700%. And we had 60 commercial deals signed, most of it in the second half of last year. So it's shown really, really strong demand and strong interest in the ENGAGE platform. Also with our collaboration with HTC, HTC coming on board as an investor in the company and a 20% stakeholder in the company, they're really going to use their marketing and their salespeople to really push out ENGAGE services in China. And China is actually the fastest growing immersive market in the world, and we're expecting to see big things happening again in the second half of this year.

35:26 ENGAGE has some unique abilities. So we have our recorded projected presence. Our spatial recording system is something that none of the other platforms currently have, and we we also have the ability to host large scale events. So some of the platforms can host smaller events, but we can hold many, many people many millions of people actually inside ENGAGE if need be. We are targeting 10,000,000 ENGAGE revenue and 500 active enterprise customers and over a 100,000 monthly users between 2023 and 2025. So that's coming up very, very soon. And our annual revenue,

36:02 SIGAR, from ENGAGE to be in excess of 100% to reach the 10,000,000 target. We have a very large addressable market across three core, sectors. So we have our virtual office, virtual campus, and virtual collaboration. And we estimate that our addressable market is between somewhere between 10,000,000,000 and 25,000,000,000. We also have a very dedicated and experienced management team, very technically minded, very technically technically able, and we're very, very ambitious. So today, with online communication, when people say, I'll talk to you online, what they'll say is, I'll Skype you later, or I'll I'll I'll meet you in Microsoft Teams. We want the conversation to change very, very soon to, I'm gonna engage with you later. Let's meet in VR. I'm gonna engage with you. That's where we see the ENGAGE platform as the next generation communications platform, as the next Skype, as the next Microsoft Teams. That's really what we're aiming at, and they're the people that we're looking at as our main competitors.

36:58 So, yeah, I hope you enjoyed our presentation. You we will be sharing this presentation later on, but myself and Seamus now are going to take off our headsets, and we're actually gonna log in to conference and or sorry, the the talk, and we're gonna answer any of your questions. I hope you enjoyed it. Thank you. The Just while the company take a few moments to review those investor questions submitted already, I'd like to remind you the recording of the presentation along with a copy of the slides and the published q and a can be accessed via your investor dashboard on the Investor Meet company platform.

37:48 I'd also like to remind you that your feedback is important to the company. Immediately after the presentation has ended, you will be redirected for the opportunity to provide feedback in order the company can better understand your views and expectations. David Seamus, thank you for that presentation. Investors have submitted a number of questions during the the event itself. I'd love to hand back to you just to, respond to those where appropriate to do so. Seamus, perhaps if I could ask you to to read out the question and, respond and say who it's from. Thank you. Yes, of course.

38:18 So the first question I have here is from Shane. He's just looking just some color around the medium term outlook, more specifically, the average contract value in excess of EUR 20,000.

38:31 Can you talk to us through the pricing evolution and how this target will be achieved? How do we get to there? And are you receiving any pushback from corporates on pricing?

38:40 And how are deals negotiated? Is it annual or semiannual? I can take that. So at the moment, our average contract value in at the back end of 2020 was €14,000 per contract. That's for an active customer. We consider anyone an active customer. They're not a trial customer. So, basically, a value in excess of €3,000 per customer. So the way we view the evolution of this, we see clients coming on for smaller licenses upfront, which has been the the what we've experienced to date. And then as they get more and more comfortable with the platform, they take on more and more licenses to cover more of their organization. One example of that is we had a a a large corporation come in for an agreement for a small number of licenses in around €10,000 mark, and they've come back three times since.

39:28 And now their total contract value with us is almost touching a €100,000, which is the expected route that we feel will take with large corporates. They want to get a feel for it. They want to make sure it's fit for purpose, and then they'll scale up accordingly. In terms of pricing, we haven't received any pushback from our corporates to date on the pricing that we've offered. There's been no issues around that. And our contracts are annual automatically renewing, and payment is made upfront on all of our contracts. If we do some professional services work for as part of that where we might create custom custom location or a bit of custom content for a licensee, then that's paid on a milestone basis with a large upfront payment to to make sure we're covered. Then just again from Shane, any ideas towards commercial angle of spatial recording functionality within events, post event recordings of industry conferences, or maybe even musical performances?

40:24 I'll leave that one to you, Dave. Yeah. So with spatial recordings, they they are very unique. And what we can do and you've seen it in in the example where we can record the event itself. And not only do you record the presenters, presenters, but you can record everybody who attends the event as well, and that can be replayed over and over again. Music events are certainly very interesting to us where if you're going to a musical event in virtual reality, we can again spatially record that and then that can be sold pretty similar to an album. So, yes, you are buying a ticket to attend a virtual event, but as part of your ticket, you're actually gonna get the spatial recording. So you can replay that over again. So it's like getting a digital album, but you're actually inside the digital album. The spatial recording system has actually been used quite extensively in education. So we have providers on the platform who create educational content using the recording and then sell that content on as well. So there's huge amount of possibilities on the platform. First and foremost, what we're concentrating on right now is the communication aspect of ENGAGE as an alternative to Microsoft Teams and video based platforms.

41:31 We see like, if you're if you're on a call with maybe eight people or less, video communication is perfect. But if you have a call with maybe ten, fifteen, 20 people and you need to collaborate on, ENGAGE is the right tool for that. So it's in it's gonna complement a lot of these bigger organizations who have remote teams. Thanks, Dave. Another one here that I think is gonna be more you than me. Allspace announced Microsoft is using the platform to host its annual Ignite conference next week, which is typically attended by 20 to 30,000 people. Could you talk us through the key advantages ENGAGE would offer over platforms like Verbella and AllSpace that are now beginning to target virtual events? And also, how important do you feel that photorealistic avatars are to corporate clients?

42:17 Yeah. Well, Microsoft actually owned AllSpace, so it's no surprise that they're gonna host their their big event in AllSpace. And Verbella have been around for about ten years, and they're mostly on desktop displays. I think people really lose what immersive technology is all about. So quite often when you attend these events in those areas, kind of similar to what we've done here actually, they're doing just PowerPoint presentations. But when you host a full virtual event, people don't wanna see cartoon representations. They wanna see the real face, especially for professional organizations. You wanna see the real face of the CEO or the real face of the salesperson you're speaking to. It's the network opportunities that are available inside as well. You don't just wanna go inside and watch PowerPoint after PowerPoint.

43:03 You want something that's really super engaging. When we had the HTC event as an example, The CEO came up through the ground, and then we had jets fly over, and we had, like, fireworks go off, we had all these special animations. And with the example that I showed, you've seen coronavirus coming out of the screen, and then everybody were were in hazmat suits. This is stuff that you can't do on video platforms or even in real life. And this this is the the use cases for using virtual platforms for events. But the most important thing is the communication aspect where you can have that private conversation with somebody and and spark up a conversation, then hopefully that will lead on to lead on to more business. But, yeah, I do feel that the the cartoon nature of all space and also Verbella really doesn't lend itself very well to professional the professional look that a lot of these larger corporations that we're dealing with now want to achieve, especially if they're using it for sales meetings for clients. It's their first time meeting a company. They want it to look as professional as possible.

44:07 Cheers, Dave. Graham has asked here, will significant wins in China plus other regions require an RNS if they're introduced via channel partners such as HTC? Yeah. I I'll answer that one. We would expect to announce any significant wins, be it in China or anywhere else that HTC, our other channel partners sell if they're of that notable size. Obviously, we can't it would be on a deal by deal basis as to whether we could announce who the specific customer was, but we'd see no issue with that. We've all it wasn't significant, but we have mentioned already that we did an event with Yahoo, which was via HTC. And in the future, we'll continue to do that where appropriate. There is just to add to that as well, there is at sometimes where we sign NDAs with large corporations, and we just can't announce what we're doing with that corporation. But if they if they get a substantial license, then, yes, we will be releasing that news to the markets.

45:05 Graham also asked, in your last presentation, you stated you're busy mocking up all the major events for 2021. Did this happen? We are currently in advanced talks for a number of events of varying sizes, which we hope to land in 2021. And as bigger ones are announced, we'll we'll inform the market at that stage. Watch good space is what I would say. So Michael has said, great to see the platform in action and working seamlessly. Could I check what the main feedback from your existing clients has been and where they'd like you to continue to develop the platform? I'll leave that with you, Dave. Yeah. So it really depends on the client. So the three different sectors that we have have three different needs. So education and corporate are pretty similar. Education clients, really, what they wanna see are more and more tools for creating and sharing contents. That's really what their use case is for it.

45:58 So they want students to be able to create their own little mini experiences as an example and then share it with the class. So that's really on the education side. On the corporate sides, it's making it available on more and more platforms, which is something we addressed last year. So we released ENGAGE on mobile phones and tablets and iPhones and making it easier for people to attend virtual events With the corporations as well, with our training and development teams, they sometimes require more and more training from us. They want, like, like, a better tutorials really on the platform. Because we've been developing the platform so rapidly, our tutorial system can actually get out of date quite quickly as we introduce new features or up update the UI. And on the event space, quite often, the the early events that we had on the platform, a lot of the corporations were actually just trying to replicate what they would do in a real event. And we were we were getting quite jaded of that. So we had some events where, say, XPRIZE as an example, they they had an event inside an arcade cabinet. It was a Space Invaders cabinet. And if you look up, you could see the Space Invaders sprites. And if you look straight ahead, you could see somebody playing on the arcade game.

47:08 They are more interesting. So what we say to people is really, really open your minds and and really be very imaginative because we don't wanna replicate what you can do in the real world. We wanna wanna make events and and collaboration a lot better. And we use it ourselves actually on a daily basis, which has made the platform better. So we haven't been in our physical office since March, but we hold on our daily stand ups inside ENGAGE or Kanban board meetings inside ENGAGE as well. And it keeps the whole organization very, very well connected. And even post COVID nineteen, there's gonna be a real blended learn or a blended work environment where I know everybody is keen to get back into the office just for that social aspect. But after a while, they're gonna say, you know what? I actually did enjoy working from home, you know, spending more time with the family, not traveling, like, two hours in the car to get into work. So I think there will be a huge blended work environment in the future where you'll probably spend half your time in the office and half your time out of the office. And for that time when you're out of the office and you need to connect, ENGAGE is the perfect way to do that.

48:13 Thanks, Dave. Another question from Michael was just do we have any EBITDA margin guidance for the medium term? We didn't put it into our medium term outlook, but our expectation from what's out there with analysts at the moment is that we will turn EBITDA positive at some stage in the next eighteen to twenty four months. And, obviously, EBITDA will grow significantly then as we move into the larger revenue market marks that we have outlined in our medium term outlook. Malar has asked what kind of ongoing investment is required in r and d to keep that two year advantage over the emerging competitors? So we have sorry, Dave. If you want to take that, you can No. No. No. Go ahead, James. Go ahead. So we so we have a very strong technical team that we've expanded significantly over the last twelve months We're constantly working on new new developments for the ENGAGE platform to keep it above and beyond what our competitors are doing. That development will continue to be ongoing, and we plan to release new updates to ENGAGE periodically.

49:16 Dave, you might want to add on to that. So that was just my view on it. Yeah. We do have a head start at the moment. Like, really but we we have a path to profitability right now. So, like, we're getting more and more revenue coming in each month, more and more customers coming in each month, but we're very ambitious. Like, we don't want to just be profitable. We want to really scale the business in a big way, you know. So really where the the business needs are right now are more business developers and more after sales support people and really actually support people as well to support our channel partners. You know? So we have, like, obviously, HTC we talked about, but we've got our channel partners coming on stream in in The United States and marketing as well. The where we are at the moment is with last year, especially in the last four or five months of last year, we didn't have a lot of announcements out in the market.

50:07 We were actually focused on the business where we were closing contracts, getting more and more people on the platform, getting the next updates out. That's gonna change very, very soon. So we have a new marketing team in place. You're gonna see more and more announcements from us as well. And as the the, say, the share price grows, then look, it is something that we will look at in the future where we if we're gonna raise we're gonna be raising for scaling the business, not for continued operation of the business. Cheers, Dave. Another question here is what benefits does teaching or learning in VRAR have over traditional environments? I'm asking specifically to gauge potential for growth in your educational side of the platform. Yeah. So there's been quite a few studies done over the past few years and some tests and thesis out there as well. So if you look them up online, some of them actually show an 80% better retention rate using virtual reality than traditional methods of education. Now it's not for all education.

51:02 It's for certain aspects of education. So history, education where you have to do physical stuff or anything role playing, those are the types of education that we really benefit. Medical training is a huge, huge, huge example of this where when people are provided medical training in a virtual environment and they can repeat these simulations over and over and over again, they get a lot more practical practice before they actually go and then practice on maybe, like, a a cadaver, what they might only get to do that once or twice. But there's benefits across the board and even with the engagement of workers and employees in onboarding to a new company by providing them onboarding through VR. They actually get more of a feel for the company, especially now that they're all working remotely instead of just getting a couple of blank phone calls from people and and trying to engage or or figure out what the the the kind of the how the company structure is if they meet these people in a a virtual setting.

52:02 They feel more included in in the in the business. Thanks, Dave. There's a couple of overlapping questions, so I'll skip over them. There's one here from Whale. In your trading update, you mentioned you're focused on getting new strategic partners. Is that expected to support the covering of the monthly cash burn? Or how do you plan covering the cash burn over the next twelve months? So I can take that. So as we stated in the presentation, our cash balance at the end of twenty twenty was just over CHF 2,000,000. In the first two months of the year, our cash burn has been less than CHF 150,000 per month based on the fact that our revenue is growing significantly. And we do continue continue to expect to see our cash burn to decline during 2021. So without any strategic partner investment or anything like that, we do have sufficient funds to cover more than twelve month period.

52:54 And there we are always looking at various strategic partners coming on board, but it's not an expectation that that's how we're going to support ourselves. We are in a position where we are self supporting at the moment. Then the another question that's literally just popped in, sort of a follow on to that from Sam. In any future equity increase, will you include existing private investors through an open offer? I see no reason why we wouldn't do that, but we haven't made any decision as in terms of a future equity raise at this moment. But as of when the time is right, we we will advise the market accordingly on that. That's a lot of some of other questions are overlapping. There's there's one technical question in there that I'll have to get our tech team to answer. So I'll respond to that, yeah, after the presentation is over because I just don't have the answer to that myself or David wouldn't either. But other than that, think we've covered off all the questions. So there was there was a couple of overlapping ones, so I think I think that's I think we're there or thereabouts. That's how Sorry.

53:56 Go ahead, David. I was just gonna say I'd probably close out with so being an entrepreneur, being a company, like, being you always wanna be ahead of the game, you know, but you you don't wanna be too far ahead of the game. So you wanna be maybe two or three years ahead of the game at most. I think when we started out, we were probably five years ahead of the game, but we had that other side of the business or showcase experiences that were doing really, really well for us. I do think the market is coming to us now. COVID has certainly been a catalyst, but the headsets becoming cheaper and the headset quality actually becoming a lot better as well. And with COVID pushing everybody online, the market has certainly come to us, and I do feel we're probably a year and a half to two years ahead of the game right now, which is exactly where we want to be. There was a lot of promise, okay, when we went on to the the the markets two, three years ago.

54:45 And VR actually had a lot of hype behind it as well. There were some other VR companies as well that were probably well ahead of the game. Whereas I I feel now and looking back at it, we probably went on the market maybe a little bit early, but things are certainly changing and turnarounds like revenues are up. We're getting records, user numbers, signing up month on month, whereas before it used to be quite lumpy. We've doubled our staff in the last nine months. We gone from two business developers who closed deals in excess of 1,800,000 last year just with two business developers. We now have eight business developers working with us. So everything is going along in the right direction. So I think we've an exciting few quarters ahead of us. That's fantastic. David Seamus, thank you very much for addressing those questions.

55:34 Of course, the company review all questions submitted today and publish those responses where appropriate to do so on the investor meet company platform. David, thank you very much for that that that wrap up there, and thank you both for updating investors today. Can I please ask investors not to close the session as you will now be automatically redirected for the opportunity to provide your feedback? If you access this meeting from our website, the feedback page will appear. But if you've accessed the meeting via the link sent to you in the email, you simply just be asked to log back in and submit your feedback. It takes just a couple of seconds. It'd be greatly appreciated by the company. On behalf of VR Education Holdings PLC, we'd like to thank you for attending today's presentation. That concludes today's session. Thank you, dear. Thank you. Thank you. Bye now.