It has been a little while now since I last caught up with VRE, the company behind the Engage virtual reality platform.
So, following on from a positive update yesterday, I duly dialled in with management earlier this morning. This included CEO and founder David Whelan along with CFO Seamus Larrissey who filled me in on where the business is currently at, along with the future prospects.
This comes, after the company update to the market yesterday stated that Engage had continued to gain strong traction in the first three months of 2021.
This has resulted in revenue during that period increasing by 138% to 0.4m euros which is equivalent to two-thirds of the platforms full year revenue of 2020.
The shares, which have been quite volatile over the last year, moved up positively yesterday before seeing a further increase today, now standing at 15p.
Whelan says that the company has certainly been busy and that the acceleration has continued, where there is a lot of traction.
“We are now getting some really valuable clients on the platform and very recognisable brand names and obviously the US State Department within that is a big one”.
The CEO adds on the latter, that he isn’t able to divulge exactly what the company is doing but does say that they are keen to be able to host larger group meetings such as training events. The company is also seeing momentum gain from its partnership with US based and education focused VictoryXR and the CEO expanded. “Things have grown quite significantly and from a channel partner perspective they are now coming to us every month. They have now onboarded a lot of content on to our platform and have a growing number of licences from their customers”. Having started with Engage from a standing point it is clear that it is building a head of steam and without doubt 2020 has, as Whelan says, been a game changer for the company.
With Engage focused on three distinct solution areas Whelan expands on the mix of the 28 new customers that have been signed up for adoption since the start of the year.
“Of those 28, Enterprise has accounted for around 40% with Education about 35% and Events making up the rest, although we do have a lot of Events prospects in the pipeline”.
The CFO points out that although event season tends to be from August through September and into October, they are now seeing corporations coming and approaching them looking at smaller internal events out of that period. The trend is certainly unlikely to go away anytime soon and is highly likely to become a more widely adopted theme, not merely because of the health issues around close and multiple gatherings, but cost and ease of use.
Whelan acknowledges that VRE perhaps came to the market a little too soon, but that they are now very much on front foot with plenty to target and feels if they were arriving on the market today, they would probably enjoy a greater valuation. With the building blocks in place and seemingly up to the first lift, we touch upon the relationship with the giant HTC which last year invested in the business for a major stake. “The traction with HTC is just starting to build up and we expect to see that really ramp up in the second half of this year” says Whelan. “We haven’t announced anything from that relationship yet, but in the second half we expect to see the revenues flow through, particularly from the Asian market. We have been and are, working with them hand in hand getting the support structure right for scaling up and you should be able to expect to hear good things on that in the second half of the year”. The Asian market alone via the HTC relationship provides a potentially massive opportunity for VRE and Whelan says that Engage is the only Western VR platform that is available in China.
Additionally, he points out that in China when the Government mandates something, then that is effectively what happens everywhere and quickly, so potentially millions of users could actually happen quite fast.
As a direct result of the pandemic the VR sector which was already expanding and evolving is now seeing increasing drivers that bode well for VRE and that embraces all three areas the company is serving.
In particular, VR headset hardware has recently seen additional manufacturers enter the market which has resulted in an increased product offering whilst lowering the retail selling price.
Although the VR market is still at a relatively early stage of its growth curve it provides a massive opportunity for VRE if things simmering come to the boil, in particular the cemented relationship with HTC. In broker Davy’s research note from the February results it pencilled in full year 2021 revenue expectations of 2.6m euros being achieved, although with yesterday’s update that could prove conservative, particularly if the current trend continues and the expected Asian revenues via HTC commence and subsequently gain traction. Of course, VRE isn’t awash with cash, but Whelan sounds relaxed about that and says that if they do raise additional money further down the line it will be done at the right time and to support strong growth opportunities. As a testament of the building progress, the headcount at VRE is up to 60 now and looks likely to increase further should the current and future market adoption go the way it appears to be heading.
That, along with other factors, continue to make the shares a (speculative) potentially exciting growth opportunity that could prove highly rewarding over the medium to longer term.