This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk02: Good afternoon ladies and gentlemen. Welcome everyone to the Nextech AR Solutions Corp first quarter results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. Instructions will be provided at that time for you to queue up for questions. I'd like to remind everyone that this call is being recorded today, Wednesday, May 12, 2021. I will now turn the call over to Shauna Mason, Investor Relations at Next Tech AR Solutions Corp. Shauna, the floor is yours.
spk03: Thanks, Operator. Good afternoon and welcome to the Next Tech Q1 earnings call. With me on the call are Evan Gappelberg, CEO, and Koshif Malik, CFO. Today, after market close, Next Tech AR Solutions released its financial results for the first quarter ending March 31st A copy of the earnings disclosure is available on our website and on CDAR. Some of the information discussed on the call is based on information as of today, May 12th, and contains forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review all forward-looking statements disclosure in the earnings press release, as well as in our CDER filing. During this call, we will discuss IFRS results and non-IFRS financial measures. A reconciliation between IFRS results and non-IFRS financial measures is available in our MD&A, which again can be found on CDER. Neither this call nor the webcast archives may be re-recorded or otherwise reproduced or distributed without prior written permission from Next Tech. To begin our call, Evan Gappelberg, CEO, will discuss the highlights of our first quarter as well as recent business developments, followed by Tasha, who will review our financial results and outlook. Finally, Evan will make some closing remarks before opening up the line for more questions. I'll now turn over the call to Evan. Thanks, Evan.
spk01: Thank you, Shauna. Good afternoon, and thank you for joining us today. First, I want to thank our employees all over the world. They're located in Canada, United States, Europe, and the Asia Pacific region. I want to thank them for their continued commitment. Next Tech's success in the first quarter of 2021 was made possible through the hard work creativity and dedication of our talented and valued employees. Our culture of organizational learning and respectful collaboration is energizing and driving business excellence throughout our company. I would like to thank our employees in advance for another year of strong performance in 2021. Nextech's first quarter growth was fueled by a combination of all our businesses that we operate, not just one. We are a unique public small cap company in that we are diversified in multiple businesses that all have the red thread of AR connecting them as our core technology is, of course, augmented reality. Our AR business is the fastest growing part of our business and is connected to everything we sell, creating a virtual flywheel effect within our company. For e-commerce, we have our genie in the bottle, which we are rapidly bringing to market as a self-serve platform for all CPG brands and expect to have this new platform under the brand livestreamhologram.com in the near future. For events under Inferno, previously Inferno, currently IgniteX and LiveX, we offer a large selection of AR-enhanced experiences, including human holograms for keynote speakers, 3D augmented reality booths, augmented reality portals, as well as custom AR experiences that we build for our customers on demand. Throughout Q1 2021, demand for our products and our solutions has accelerated. I'm particularly excited about our next generation digital experience platform called Nextech AR LiveX. The transition of all our events from Inferno, now called IgniteX, to a new highly scalable LiveX platform will allow us to save and reduce our overhead by approximately $6 million annually. As a result of this major cost savings, the company has committed all current and future events for our LiveX platform. LiveX sits at the intersection of the massive creators market and the enterprise market while simultaneously On the LiveX platform, you can have a three-day corporate summit going on with speaker tracks, breakout rooms, chat, and AR holograms, all with real-time analytics, while at the same time, a YouTube star is playing guitar and singing for his or her million followers, earning money from our ad network, while at the same time, Nextech is putting on a capital markets day. while Restaurant Canada is hosting a Top Chef cooking show, while an NFT auction is happening, all while product is being demoed and sold from thousands of Shopify site owners. That's what I call scale. That's LiveX. The LiveX platform is a walled garden, just like Facebook and Snap. And just like Facebook and Snap, we see our advertising network generating significant revenue in 2021 and beyond. With LiveX, our events are designed 10 times faster, allowing for significant cost savings and scale. With LiveX, we have better user functionality and design, resulting in an improved attendee experience. With LiveX, we have multiple monetization options, including advertising, ticketing, merchandise sales, event sales, and even NFT auctions. Reduction in the cost to serve per event will yield a greater gross profit with additional benefit of recurring revenues from monthly and annual subscriptions. Transitioning all of our events to LiveX platform will, again, save the company an estimated $6 million annually. Nextech AR LiveX has the potential for further delivery efficiencies and related cost benefits through Q3 with the release of LiveX 2.0, which will feature a self-serve option. Our business model has not changed as we are in the AR virtual experience business, which is the fastest growing highest demand technology and market today. In conclusion, Next Tech is focused on its key strategic priorities of maintaining financial strength and liquidity. Since our inception, the company has been advancing efforts and evaluating potential acquisitions to optimize its tech stack, improve its capital structure and liquidity, and ultimately enhance long-term shareholder value. In Q1 2021, our results once again reinforced the importance of our three foundational pillars. A leader in augmented reality technology, which is underpinned by enabling digital transformations in key verticals like education, entertainment, events, retail, medical, and even marketplaces, that all live and breathe on the LiveX digital platform, which is, in our belief, the platform of the future. We are full steam ahead, and I have total confidence in our team and the direction our company is going. With that, I'll turn the call over to Kashif Malik to further comment on the quarterly financials.
spk04: 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. Total revenue in the first quarter was up 210% to $7.7 million as strong growth for product sales, technology services, and renewable software increased. Product sales grew 146% to $6 million due to expanded product offerings, adding additional sales channels and increased capacity to facilitate the fulfillment of sales. Our technology services continued to gain traction resulting in $1.4 million in revenue or 2,831% increase over the prior period. As previously noted, the nature of this revenue will vary from quarter to quarter based on the number, size, and timing of client projects underway. We continue to be pleased with the diversity and strength of our total revenue base. For the quarter, no individual customer accounted for greater than 10% of total revenues. Gross profit increased by 146% to $3.3 million or 43% of revenues compared to 54% of revenues in the prior year. This decrease is primarily due to additional headcount for the delivery of technology services. Total bookings, which are related to technology services, increased 4,774% to $2.2 million. We continue to win incremental business and add new customers every day. Backlog for the period was $2 million, and we anticipate we will recognize the majority of this revenue in the current fiscal period. Operating expenses were $10.2 million compared to $2.4 million in the prior period. The increase in operating expenses was primarily due to higher headcount and related compensation costs. In certain situations, the company may utilize stock-based compensation to compensate vendors and attract talent. As such, other expenses have increased stock-based compensation as well as amortization for intangible assets. We had a net loss of $9.2 million compared to a loss of $1.4 million in the prior period, largely due to the factors I just mentioned. Over the past two quarters, we have aggressively expanded our team size, skill set, and capabilities across all functions, organically as well as through acquisitions. As Evan mentioned, with our recent success in product delivery, we anticipate that with the shift in our resources, we'll reduce our expenses in the year ahead. We believe that these investments will continue to support our growth strategy. On March 31st, 2021, we had cash of $7.9 million, inventory of $4.7 million, and a positive working capital of $9 million. We anticipate further sales of our product offerings as we continue to grow. This continues to be an unusual period with the pandemic, and we continue to monitor and respond to conditions as they unfold. On April 8th, shortly after we closed the quarter, we completed our bought deal offering, bringing in $14 million of new financing to deliver on our strategy and growth in the year ahead. Thank you for your continued support of Nextech. With that, I will turn the call back over to Evan.
spk01: Thank you, Kashi. In closing, I would like to thank our employees, our shareholders, and our partners for their continued support as we remain focused on building long-term shareholder value. On behalf of Nextech, I want to thank you for your support. And as always, thank you for taking the time to join us on this call. Operator, we are now ready for the question and answer portion of this call.
spk02: As a reminder, to ask a question, you will need to press star 1 on your telephone. Again, star 1 on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster. Your first question comes from the line of Lisa Thompson from Zacks Investment. Your line is now open. Thank you. Good evening.
spk00: Hi, Lisa. How are you?
spk05: Good. I was glad to get the release early so I could look at it. So that made me happy.
spk01: We try. We try.
spk05: Thank you. Anyway, I am fascinated by the sequential revenue improvement in the business. And I find the whole thing so counterintuitive. Product sales was up great from the Christmas quarter, which makes no sense to me. In a good way. Yeah, in a good way and in a totally unexpected way. Can you explain what's happening there and what to expect going forward? Because I expected seasonality and we didn't get any.
spk01: Yeah, it's a very good question. So in our e-commerce business, I would say that we've hit the sweet spot where our product mix is in high demand, and we really didn't see a slowdown, as you mentioned, in Q1. E-commerce has really become a very powerful business model, and it's just – I don't know. It's hard to explain, Lisa, other than to say coming out of a pandemic year like 2020 was, I think it might have changed consumers' behavior and smoothed out the dips that we're used to seeing with e-commerce. So, you know, from where we're sitting, we see that business stabilizing at a much higher run rate than previous years.
spk05: So do we expect this to grow, or have you pretty much tapped out the product categories you're in, and would you go into new ones, or is this just going to be your learning lab like you talked about in the past?
spk01: All good questions. So it's been primarily our learning lab. You know, it's kind of like the business that that bulked up and really exploded unexpectedly. You know, we didn't expect the e-com business to be such a big part of our revenue base. But at the same time, we've been using it for building relationships with major brands like Dyson, Mila, KitchenAid, and using it for the genie in the bottle, you know, test bed. We also have a substantial... studio set up for AR capture in California inside of our warehouse. So I guess it's all the above, Lisa, meaning the business is continuing to grow. We're continuing to innovate within that space. We're forging relationships with major brands that we're going to be bringing our augmented reality technology to. and selling our augmented reality technology that we've built specifically for e-commerce to the big brands. Again, Dyson, Mila, KitchenAid, and others. So it's a continuation of the same story, except right now we're at the point where we're commercializing and going to market with our genie in the bottle, which I mentioned on the call.
spk05: Great. So let's talk about the AR business. We had the opposite effect there where it has a little bit of seasonality. Is there some way to describe, is it customers or is it forward planning? How does one expect to look at the quarters going forward for that business?
spk01: The AR business is growing very, very rapidly. What we've noticed in the AR business is that enterprise customers are, you know, it used to be in 2018, 2019, you had to explain what augmented reality was and also explain the ROI. In 2020, augmented reality really took center stage. And in 2021... we see augmented reality becoming a much bigger part of our business. Q1 2021 I don't think is indicative of the year. We are launching, as I mentioned, our Genie in the Bottle hologram technology as a self-service platform where you, Lisa, will be able to sign in, establish your own account, take out your iPhone, put it on a tripod, and beam yourself as a hologram anywhere in the world. You'll be able to, if you have a product that you want to sell, you'll be able to print the QR code and have your own genie in the bottle. And you don't need to call us to do this. So up until now, you would have to call into Next Tech and ask us to do this work for you, with you. In the very near future, you're going to be able to do it yourself. We see that as the way that augmented reality can scale, and we see that as really the beginning of our augmented reality revenue generation. That's the key is being able to scale, Lisa.
spk05: Okay. Going back to what you said about moving over to the new LiveX platform or generation you're using, How long does that process take? Is that immediately now all customers will be using that, or does that take a few months to move over?
spk01: How does that work? It's a 30-day process. So we're in motion now. New business is being conducted on LiveX. And old customers, existing customers, are being moved over to IVEX. So, you know, it's about a 30-day process to move everything over.
spk05: So after a month, then, do you expect to start reaping the full $6 million savings? I do.
spk01: Yeah. Yeah. I think it's going to be hitting the bottom line starting really today. and accelerating over the next 30 days i'm saying over the next 30 days we we should be the transition over to livex should be completed but it's already begun and can you take that maybe and translate it into cash burn like where are you now and where might you be a few months from now well i mean the cash burn um You know, it's approximately $2 million a month, and we could see that getting down to a million. So we think we can cut it in half on this platform, which brings us to potential cash flow positive situation in the second half of the year.
spk05: Wow, that would be awesome.
spk01: Yeah.
spk05: Great. My last question, which I'm not that person, but where are you exactly in this process with the NASDAQ? I don't even want to ask that.
spk01: Yeah, I know. So we are still talking with NASDAQ. NASDAQ obviously had some questions and some, you know, hurdles that they put in front of us. And we are still working on getting up listed to NASDAQ. We still expect that in the future, we will be a NASDAQ listed company.
spk05: Okay, great. Thank you. That's all my questions.
spk00: Okay. Thank you, Lisa.
spk02: Once again, if you want to ask a question, you will need to press star 1 on your telephone. I don't see any question at this time. You may continue.
spk01: Okay. If there are no more questions, if it's just Lisa that had – Sir, do you have – you have a follow-up question from Lisa. Okay.
spk02: I will open her line. Thank you.
spk05: Hi. Just one other quick one. Right now, how much cash do you have on hand after offering?
spk01: We have almost $20 million.
spk05: Okay. Great. Thank you. That's it. Just needed that. Thank you.
spk01: Okay. Thanks, Lisa.
spk02: Your next question comes from the line of Andy Feldman from Feldman Investments. Your line is now open.
spk00: Yes. Hi. Thank you for taking the question. Have you provided guidance for this quarter?
spk01: Hi, Andy. Nice to meet you. Yeah, we have not provided guidance, although Lisa Thompson, who is a ZACS research analyst, has a research report out, and I'm sure she'd be happy. Or you could go on to ZACS and find it. But she's the only one who has guidance. We don't put out guidance quarter to quarter.
spk00: But you do have guidance out, I think, for the year, correct? For the year, we did, but we didn't break it into quarters. Okay. So I'm assuming that you're going to see sequential growth each quarter to get to where you need to be. Is that right?
spk01: We expect that we will have a significant uptick in the second half of the year because we're bringing new technologies to market. and also obviously with the LiveX. So we also are chasing after enterprise-scaled transactions, which take a little bit longer. So it's hard to predict when the revenue actually hits. I don't know that it's going to be linear, but we're confident with our full year number.
spk00: All right, thank you. I appreciate it, and good luck to you and the company. Thank you.
spk02: There are no further questions at this time. You may continue.
spk01: All right. Well, thank everybody for joining today, and we'll see you next quarter. Have a good evening.
spk02: This concludes today's conference call. Thank you for participating. You may now disconnect.
Disclaimer