Nextech3D.AI Corporation (NTAR.CN) 2021-04-15 Earnings Call Transcript

Good afternoon, ladies and gentlemen. My name is Gabriel, and I will be your conference operator today. At this time, I would like to welcome everyone to the Nextech AR Solutions Corporation Fourth Quarter and 2020 Year-end Results Conference Call. With me on the call are Evan Gappelberg, Chief Executive Officer; and Kashif Malik, Chief Financial Officer. Today after markets close, Nextech AR Solutions Corporation released their final results for the fourth quarter and full year 2020. A copy of the earnings disclose is available on the website and SEDAR.

Thank you very much for that and good afternoon and welcome everybody. Thank you for joining us today. I should say this evening, Wow! What a difference a year makes. 2020 was truly a unique year for the world and for Nextech. COVID-19 emerged early in the year, stock market crashed, along with Nextech stock to sub $1. If anyone can remember back in the beginning of 2020, only to rebound and see the market and Nextech stock explode higher, hitting $10 a share at its peak in 2020. 2020 was truly a unique year and that it was a year of both extreme lows and extreme highs for shareholders. Today, however, we're in 2021. We made it. Things look on track to get back to normal, or I should say pre-COVID-19 normal. I do want to thank all of our employees who are from all over the world, literally from all over the world for their continued commitment. We truly have a diverse group of talents at Nextech which is super exciting to me. As a small fast growing technology company, we do have talents from Canada, from United States, Poland, France, U.K., Germany, Netherlands, Russia, Scotland, South Africa, Spain, Taiwan, Singapore, Japan, China, and Israel. Pretty amazing for a small company to have talents spread out all over the globe like that. And I can't wait to meet each and every one of you. Nextech successes in 2020 were made possible only through the hard work, creativity and dedication of our talented and valued employees. Our culture of organizational learning and respectful collaboration is energizing our business and driving business excellence, and I would like to thank our employees for another year of strong performance.

Thank you, Evan and good evening. As a reminder unless noted otherwise, all figures reported on today's call are in Canadian dollars under IFRS. As a company changed its year-end in the prior year, the fourth quarter figures in 2020 are for the 3 months period from October 1 to December 31, 2020 and are compared to the 4-month period from September 1 to December 31, 2019. For the annual comparatives, it is the 12 months ended December 31, 2020 compared to the 7 months ended December 31, 2019.

Thank you, Kashif. In closing, I would like to thank our employees, our shareholders, our partners for their continued support as we remain focused on increasing long-term shareholder value. I do want to -- before we open it up to calls, I do want to just say one thing about NASDAQ because I know that's going to be the number one question. So before everybody jumps to answer that question, I just want to say we're still talking to NASDAQ. There is nothing else that we will be able to publicly disclose on this call. So please ask some other question. And with that, operator, if you'd like to ask a question other than NASDAQ, I'd be super happy to answer because we are still talking and there's nothing else to say.

How are you doing?

Yes.

Yes, I will take that. So, look, as you know, we said, when we started in 2019, augmented reality was just forming, I actually speak to dozens of augmented reality companies that have been in business for 10 years. And they're still only doing like a $1 million, $2 million in revenue. So as you know, we acquired Vacuum Cleaner Market and Infinite Pet and we've recently launched True Life and so we use those for test beds. And we got lucky in 2020 with those businesses became in very high demand. But time augmented reality showed up to the party. We were there in 2020 with our AR Tech stack. And so in 2020, the augmented reality product mix started to take off. In 2021, which is really your question, I expect that to continue. And so in 2021, I think that it's fair to say that revenue will be split evenly, meaning 50% technology, and 50% product sales and in ecom. I think in 2022, it will, ecom will be less and less. I mean, ecom continues to grow. But it's not going to grow as fast as our technology business. And so we see ecom becoming a smaller and smaller part of our revenue, even though in 2020, it was the majority.

Is that okay? Okay. I really haven't had a chance to go through the numbers, because I still haven't found all of them yet. Just the MD&A. So, as far as you -- Kashif, you’ve mentioned that there was a whole bunch of one-time expenses in 2020. Do you actually have a number for that?

Lisa, it's a combination of different things. We haven't completely quantified it. Some of its related to the financing. So we initially call that one-time, but we just recently did another financing with some of the recruitment costs. So we can look to normalizing that. And I can probably send that to you separately, if you want to build it for your model.

I think at this point, we are just going to be closing the quarter, so I can -- I just had -- we will mention it on our next call.

So I'll just speak to your question. So Q1, Lisa, is going to be another quarter in revenue. And we will be releasing that soon as possible. But you know, we can't really pre-release it on this call. But we've had eight back to back quarterly records in revenue, and we expect that to be nine.

The ad business ...

Yes, the ad business is as you know, we hired Hareesh, from Microsoft and he's now hired a bunch of ad sales people. And we are in the process of scaling that business. It is live. And as soon as we have something to report, we will put it out, but we expect it to be a much bigger part of our second half of 2021 revenue mix. The first half was really getting Hareesh situated and setting it up.

Thank you.

We do. So, I believe the main way to monetize it is to create a self serve platform where you Lisa will be able to log in to your own account. And you will be able to take out your cell phone and beam yourself into anywhere you want to go as a live human hologram. And so, you'll pay for that service. And we could see -- so everybody, everybody on the planet, I believe, who want to use that technology.

Well, we are -- I mean, it's happening in 2021, I could tell you that.

I'd rather not put a date on it because my team will kill me, If I do. So I think just stay tuned.

Thanks, Lisa.

Good. Hey, Kelvin.

Good, Kelvin. Thank you.

Sure. So -- sure. So some of that Kelvin is going to be organic growth, and we're already experiencing that in Q1, and continuing into Q2. So our existing tech stack is gaining a lot of traction in the marketplace. But we also see acquisitions as another potential major source of kind of accelerating our technology sales and revenue mix. So there's a number of acquisitions, that -- discussions that I'm in right now. And we look at the capital that we raised from Mackie, growth capital, and we're going to use it to accelerate our technology revenue growth as well as investing in our tech stack.

Yes.

Hello?

Oh, how are you doing, Evan? Sorry, I was on my phone. I just had a question about your exposure to Bitcoin or crypto assets, intangible assets. Are you guys considering reallocating more of your cash towards Bitcoin in the near-term?

Okay. That was my only question. I was just wondering.

Yes, hello. Thank you for taking my call. I was hoping to find out about any patents that you might have regarding the hologram technology. Can you please tell us a little bit about the IP associated with the very exciting hologram technology, please. Thank you.

Okay. Thank you very much.

Hi, this is Sue. I'd like to find out a little bit more about your higher education business that started with Ryerson. I believe you mentioned earlier that you're partnering with Microsoft. Wondering where it is now and where you want to go in this year and next?

Awesome.

Good evening, gentlemen. I had a question about whether your thoughts on what COVID-19 coming to an end will have on your business?

So you don't feel that when people go back to work they're working at -- going back to the office to work at the office, and going to live events and things such as that, that it won't have effect on any of your businesses.

That’s good to hear. I wonder if I could get a follow-up question.

I'm curious, it sounds like our business, your business is far reaching geographically, are the areas that are more opportunistic at this point for the company? In other words, how are all your different areas doing geographically?

And your next question will come from Eric . Please go ahead.

Hi, Eric.

A couple of quick questions. One, how do you see your ability to release the results faster after the close?

That’s great. Secondly, as the business scales up, how do you accomplish that? You see bigger contracts, you see -- is the sales force -- like, are you going to subscription model? Or is it more renewal? Yes, like, how will your cost of goods sales grow versus revenue?

Your next question will come from Mo Cheema of Position Imaging. Please go ahead.

That's a great question. The challenge there -- so the answer is this year 2021, we will be looking at those types of partnerships. In 2020, we were just trying to keep up with the demand for our products and services and build our foundational technology. In 2021, as we mentioned earlier, self serve is a key piece of our technology roadmap, especially for AR live streaming. So I can envision where we could potentially have Shopify selling our AR live streaming to all of their -- all their customers. So you have to have the right product for that. You have to be able to scale, right? And so we're just kind of waiting for that right product to be able to go to and have those kinds of partnerships.

Not yet. That's -- its interesting use case that is brand new. But no, we have not really discussed that in house, but maybe we will.

Yes, hey, Evan, thank you for taking my call. Question on your technologies and what you might have patented and other technologies that you may be seeking patents for. Just want to get a sense for what is actually yours and no one else can has? What advantage do we have? Thank you.

It does. Thank you.

Hey, Eric.

Yes, yes.

Yes, you're making a great question. And so the answer is yes. We're actually talking to a museum group in Asia. So the answer is we are, yes. And that is a good use case. Yes, thank you.

Hi, Evan. Congratulations on everything you guys have done in the last 2, 2.5 years, starting with just you and now getting close to 300. It's quite impressive. At the beginning, you talked about the self-service hologram. potential.

Is there anybody currently doing that in the world?

So then the potential once you organize it, the way you envision it, the potential you would be first to market on something like that, and that's worldwide and I presume in every language or whatever, correct?

Correct, it would be live streaming. So you'd be able to speak in your native tongue. So it wouldn't even -- they wouldn't even be any language translation, it would just be your native tongue. And it's for everybody on the planet, who has a smartphone in their pocket, because it'll be triggered through the AirShow app.

Exactly. Think about troops in the field, you'd see these movies all the time where they're away from their wife and kids for extended periods. And then they get a minute on a Zoom call or whatever, well, this would be a lot better than that. If you think about education, you could deem professors from Harvard, from MIT, top professors in the world, all over the globe into people's homes. It really is transformative technology and we couldn't be more excited about. I mean, you've seen -- everybody, I hope has seen me, I'm the guinea pig on the myself into everybody's living room with a Vacuum Cleaner to show how it's done. Show that it can be done. And so yes, super excited about that.

Thank you, Jeff. Appreciate it.

Yes, I was just going to say, on that note, we will end it. Again, I want to thank everybody for joining me and Kashif and the rest of our team on this call. And we'll be back for the next conference call. Thank you.

Thank you.

Thank you very much. Your first question will come from Lisa Thompson of Zach Investment. Please go ahead.

Hi, Evan and Kashif. So how are you?

Okay. Well, the instruction said I only get one question. So before going back in the line, so my guess my big question is now that we're already in April, can you give kind of a big picture view of where you think the company is going this year as far as like revenue mix. I see that you broke out finally, eCommerce and the rest of the business in your filing.

So what's your feeling of like what portion of the business is going to be that this year and next year? And the add business all that. Go ahead.

Great, thank you. I guess, I go back in the queue.

Ms. Thompson, you’re allowed a follow-up question if you would like to.

Right. So could you give us a guess of what -- at least the first quarter looks like as far as expenses?

Okay, great. And do you want to give us any insight to how March went?

That's great. That's really good to hear. How is the ad business coming, the platform?

What’s the timing on that?

Okay, great. I guess my final question is the hologram that you've been demonstrating, and looks to be actually awesome. Have you ...

... different ideas on how to monetize that?

What's the timing on something like that rolling out?

Okay.

Okay, great. I'll let somebody else ask some questions. Thank you so much.

Thanks, Lisa.

Your next question will be from Kelvin Kong of Research Capital. Please go ahead.

Hi, Evan and Kashif. How are you doing?

Quick question here. So in terms of -- I'm kind of alluding back to an answer that you provided to Lisa, so you said your product mix for technology and eCommerce will be likely targeting a 50-50 between the two. Can you just give us some insight as to kind of how your resource will be kind of allocated. And I guess, specifically how I guess some of the proceeds from your recent financing will tend to get you there and kind of where your focus is on allocating money to getting to that?

Understood. Thank you.

And your next question will come from John Millennial of -- is a Private Investor. Please go ahead. John Millennial?

Hey, John.

Yes, we can hear you.

No, we I don't see us going back into Bitcoin.

Okay. Thank you.

Your next question come from Steven Spielvogel of -- is a Private Investor. Please go ahead.

Yes. We're preparing to file multiple patents around the technology. We've engaged with patents attorneys and we are preparing to file patents around it. So we're at with that.

You’re welcome.

Our next question will come from Susan Altenberger of -- sorry, is a Private Investor. Please go ahead.

Sure. Thank you for the question. So we had a super successful launch with Ryerson University in 2020. And I believe that they are doubling down. And there's some additional business, I think that will be happening with Ryerson. As far as Microsoft goes, they have very strong relationships across higher ed. We are a Microsoft partner. We are now -- we hired house that Nextech that are working with Microsoft, specifically on going after higher ed. And so, stay tuned. I mean, it's on our roadmap. In 2021 we should have some exciting developments around our edtech.

Yes. Thanks, Sue.

Our next question will come from Tom Stephens, Private Investor. Please go ahead.

That's a good question. We have not seen a slowdown. COVID-19 is winding down. We have not seen a slowdown, like I mentioned. Earlier we're expecting Q1 to be a record. We believe that our business was never a COVID business, per se, wasn't dependent on COVID. COVID itself is the adoption of technology that we set out. So all it did was push the industry that we are in 3 years forward. Now it's 3 years forward, and it's going strong. It's not going to go back 3 years, again, after COVID ends. And so we actually just benefited from COVID, even though COVID was a tragedy from a personal -- from a business standpoint, we don't see our business slowing down at all from COVID. In fact, what we're really hearing is that now that COVID is going away, enterprise customers are going to be spending more money on the technology that we sell.

Not at all. It's hard to explain on this call, and I'm happy to have a separate call with you. But the world changed, there was a paradigm shift. When you go through a paradigm shift, you don't shift back. And so it's -- COVID-19 is not going to -- coming to an end is not going to have a negative impact on our business. We believe that actually it's going to have a positive impact on our business, there's going to be more spending on the technology that we sell. Our technology is not just about work-from-home, shop-from-home. That's not the sum total of what we do. And also, one last thing I'll leave you with is that prior to 2020, prior to the pandemic, I'd say 95% of the workforce was forced to come into the office. After the pandemic, it's going to be 50%, 60%. That's a huge number of people that are going to be able to work-from-home, work remotely that were not there previously. That's a huge, huge number. And so our business is going to continue to grow even after COVID-19. We'll leave it at that.

Sure.

Yes, it's an interesting question. Again, I don't know how deep we want to go on this call, but I'll leave it at this. In the Asia Pacific region, the demand for augmented reality is insatiable. It's off the charts. In the Asia Pacific region, specifically, there is an extraordinary demand for augmented reality. In the EMEA region, I would say, the demand is probably a second, and then in North America would be like third. And so there's different products that we sell. And in different regions, there's different demand metrics. So that's kind of just high level on the AR side. And then as far as our events platform, I think in North America and EMEA, it's a little bit stronger, although the Asia Pacific region is starting to catch up as well. So I would say there's a global demand for our services and products. And I think in a year, we'll have a better view of where there's stronger demand specifically.

Thanks for your input.

You’re welcome.

Hi, Evan.

That's a great question, Eric. I'll take that with you offline. But -- yes.

So it's really two -- this two factors. One is create more self serve technology, so that people could just sign up, just like you do with Zoom, you don't talk to anybody at Zoom, you just sign up for Zoom. So we're building that into our tech stack. And then we're also doubling our sales force Q2, and I expect we will double it again in the second half of the year. So I wouldn't be -- our sales force, essentially, Eric, deals with the larger more complex customer requests, while the self serve platform can deal with the simpler use cases. So we want to have both in place as we grow into 2021 and beyond. So beef up the sales force and create more of a frictionless self serve platform. Those are the two paths that we're pursuing to growth.

Thank you.

You’re welcome.

Hi, Evan. My question is, has Nextech explored partnership opportunities with platforms or marketplaces like Shopify, Etsy where there's more of a one to many approach to really get the most bang out of the buck?

And my second question is we're seeing a trend of buy online, pick up in store and buy online ship from store, sort of phenomenon going on, and a lot of that picking and processing is happening in the retail store. And there has been a lot of talk about augmented reality, expediting the operations process of picking with augmented reality. So I was just curious if you've explored that side of the business of the opportunity to digitize the inventory that's in the store.

Great. Thank you.

Thank you, Mo.

And your next question will come from Edward Kaplan, a Private Investor. Please go ahead.

Yes. So we're just now pursuing patents on our technology primarily because in the early days it wasn't so clear which technology was going to win. And so having a patent on technology that you don't sell, makes no sense to me, because patents are not cheap. So we waited until we identified products that were in demand, products that we can sell and now we're pursuing patents. Hope that answers your question.

You're welcome.

Your next question will come from Eric Nelson, Private Investor. Please go ahead.

Yes, hi, Evan.

Have you given any thought to somehow teaming up with the museums, world class museums where you could set up rooms where people can actually go to these places and investigate? I mean, it's so hard these days, I mean, even before COVID to visit some of these museums, because you had to line up.

I think that would be a tremendous opportunity for people that just can't get to these places and there's some great museums all over the world. And I was lucky to see them when I was younger, but now it's practically impossible.

Right. Thanks.

All right. I think we'll take one more question and then we'll call it a day.

Okay. Your last question will come from Jeff Gates, Private Investor. Please go ahead.

Yes.

No.

So if somebody is in Mexico, and their grandparent is in the United States, they could literally beam themselves into their grandparents living room and sit with them?

Sounds amazing. Keep up the good work, and we're all rooting for you guys.

Okay. Thanks.

That’s all we have -- go ahead.

This concludes today's conference call. You may now disconnect.