VR Education (AIM: VRE; Euronext Growth: 6VR), a leading virtual reality (‘VR’) technology company focused on the education and enterprise training space, provides the following trading update for the year ended 31 December 2019 (‘FY19’).
Revenue for FY19 is expected to be c.€1.02 million. Although this is an increase of 42% on the prior year (FY18: €0.72 million), it is below market expectations. The trajectory of revenue growth has been affected by the delayed launch and the lack of availability of mobile standalone headsets from the hardware providers the Group works across. This has been resolved, and there is a clear path for further ENGAGE and showcase revenue to be generated in the current financial year and beyond. The underlying dynamics are outlined in more detail in the Operational and Market Update below.
The EBITDA loss in FY19 reduced to c.€1.49 million (FY18: €1.54 million) and, due to strong cost control measures implemented during 2019, is an improvement on market expectations.
The cash balance of €1.29 million at 31 December 2019 is higher than market expectations. The current cash burn rate, net of revenue received, is approximately €0.2 million per month.
Operational and Market Update
2019 represented an important year of progress for VR Education. Revenue increased by 42% compared to the prior year and the Group’s ENGAGE platform signed up its first customers after it was released on PC-supported VR devices at the end of 2018. It was also the first year in which quality standalone VR devices (VR without the need for external computing or cabling) became available to consumers, representing a significant change in the affordability and accessibility of high-end VR hardware.
The lack of hardware available for potential business customers during 2019 accounted for a substantial portion of the shortfall in the Group’s overall revenue target for the year, however, the Board does not believe that this will be an issue for 2020 onwards as the Group is working closely with several VR headset makers including Pico, Facebook, HTC and Deutsche Telekom. With ENGAGE becoming platform agnostic in early 2020, the Group can now finally service many of the potential sales leads received during 2019 and which it continues to receive today.
The ENGAGE platform has seen many updates throughout the year with a primary focus on supporting the new wave of VR standalone devices. This makes it easier to deploy, service and utilise ENGAGE in multiple areas of enterprise and education. Additional features and content were added throughout the year with multiple lectures from Oxford University and a library of 360 video content now available to users. Also a variety of enterprise focused features have been developed for ENGAGE which include but is not limited to branding options, user administration, private hosting and security updates. The Group is currently trialling the enterprise focused features with a number of well-known corporations seeking mobile deployment in 2020.
Pico Neo 2
The Pico Neo 2 is a standalone VR headset which provides more processing power than the Oculus Quest. The Group has nearly completed the work required to provide the ENGAGE platform on this VR headset. Pico has agreed to produce headsets for the Group with ENGAGE pre-installed.
Facebook’s Oculus Quest
The importance of quality standalone VR devices for wider adoption cannot be understated with the Oculus Quest VR headset, developed by Facebook, being sold as quickly as they are manufactured leading to worldwide shortages since its release. The ENGAGE platform was ported over to support the Oculus Quest during Q2/Q3-19 and has been available for potential clients to test since September 2019. However, with all stock of Oculus Quest being sold to retail customers, Facebook have pushed back their Oculus for business initiative until Q2-20 while they build up stock. In October 2019, the Group was invited by Facebook to become part of its Oculus for business initiative via their Independent Software Vendor programme. The Group signed up for this exclusive arrangement with Facebook which will be fully deployed during FY20.
Facebook is not the only company to have released quality standalone hardware in 2019. The HTC Vive Focus Plus and Pico Neo 2 headsets are direct competitors to the Quest.
Sony’s PlayStation VR headset
2020 will see Sony release the PlayStation 5 and a new version of the PlayStation VR headset (PSVR), which will further expand the high-end VR user base; the Group intends to support this device with its current suite of showcase software.
Telecommunications Companies – Deutsche Telekom and HTC
Other telecoms companies are entering the arena with Deutsche Telekom (T-Mobile) seeking to release hardware as part of its 5G rollout. The Group has signed an agreement with Deutsche Telekom to release ENGAGE on its new VR device for 2020 offering ENGAGE to all its new 5G customers. The Group has also undertaken work, which is now nearing completion, to provide the ENGAGE platform on the HTC Vive Focus Plus standalone VR headsets.
The Group’s VR showcase experiences continued to sell strongly on all platforms during 2019. In late 2019 the Group released Shuttle Commander, a new VR showcase experience based on space shuttle missions that was exclusive for the PlayStation PSVR. This VR experience will be released during FY20 on PC, Oculus PC, Vive, Steam, Windows MR and the Oculus Quest retail store.
A new revenue stream for experiences was opened during 2019 with VR Education signing an agreement with the US Rocket and Space Centre providing a museum version of the Group’s popular Apollo 11 VR experience to visitors. This experience was in very high demand during school holidays and in December the Group signed a twelve month extension to the agreement. The Group is in discussions with many other museums globally and hopes to close similar deals during 2020.
David Whelan, CEO of VR Education, said: “While it is disappointing to not have grown revenues for FY19 at the pace previously forecasted, we have grown in the year and made significant progress which lays solid foundations for further growth in FY20. With VR adoption becoming more mainstream through the wider availability of new standalone VR devices, along with the improvements that 5G deployment will bring, we are confident that 2020 will see an increase in demand for immersive experiences. As a result, we believe that the Group will see continued strong growth of sales of our VR showcase experiences as well as an accelerated adoption of our ENGAGE platform for education and enterprise clients, who are working closely with major telecom companies providing 5G services for training and education.”