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spk02: Good afternoon, ladies and gentlemen. Welcome everyone to the Nextech AR Solutions Corporation 2021 fourth quarter and annual results conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be 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, Tuesday, March 22nd, 2022. I will now turn the call over to Ms. Lindsay Betts, Head of Investor Relations at Nextech AR Solutions Corporation. Please go ahead.
spk03: Good afternoon and welcome to the Nextech Q4 earnings call. With me on the call are Evan Gappelberg, Chief Executive Officer, and Andrew Chan, Chief Financial Officer. Today, after markets closed, Nextech AR Solutions Corp. released its financial results for the fourth quarter and year ended December 31st, 2021. A copy of the earnings disclosure is available on our website and on CDAR. Some of the information disclosed on this call is based on information as of today, March 22nd, 2022, and offers 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 the forward-looking statements disclosure in the earnings press release as well as in our CDAR filings. During this call, we will discuss IFRS results and key performance indicators. A detailed description of our key performance indicators is available in our MDNA, which can be found on CDAR. Neither this call nor the webcast archive may be re-recorded or otherwise reproduced or distributed without prior written permission from NexDeck. To begin our call, Evan Gaffelberg, CEO, will discuss Q4 and 2021 highlights, as well as any recent business developments, followed by Andrew Chan, CFO, who will review our financial results and outlook. Finally, Evan will make closing remarks before opening up the line for a question and answer period. I'll now turn the call over to Next Tech AR Solutions CEO and founder, Evan Gaffelberg.
spk06: Thank you, Lindsay. Good evening, everyone, and thank you all for joining us today. First, I want to thank all of our employees who are located across the globe, including Canada, the United States, Europe, Asia Pacific region, for their continued commitment Nextech's success throughout 2021 and now in 2022 is only made possible through the hard work, creativity, and dedication of our talented and valued employees. Our culture of organizational learning and working culture that we've developed at the company continues to drive business excellence at Nextech. In 2021, we have emphasized the accelerating adoption and extraordinary demand that we experienced for our augmented reality and metaverse solutions, specifically in Q4. And it really was reinforced with new deals closing in Q4 for augmented reality and e-commerce solutions at a pace that the company has never experienced before. The demand for 3D models, across a multitude of industries, including but not limited to e-commerce, manufacturing, and education. And we believe that this will only accelerate throughout 2022 and beyond. Our company's mission is to build the first vertically integrated AI-powered 3D model factory for the metaverse. I'm just going to repeat that, that our mission is to build the first vertically integrated AI-powered 3D model factory for the metaverse. In 2022, we're going to strive to accomplish this ambitious but attainable goal. Revenue growth has been quite dramatic since I founded the company back in 2018. We've transitioned to a SaaS business model in Q4 of 2021, which is on full display now as we roll into 2022. The ongoing COVID-19 pandemic over the past two years has certainly caused a lot of volatility in the market and a lot of unknowns. we pivoted to a world of virtual events and really the whole world pivoted to virtual events and online shopping back in 2020 and even first half of 2021, which resulted in a dramatic boost in revenue for our virtual events and e-commerce businesses in 2020 and the first half of 2021. And as we've previously mentioned, We have never considered this boost to our virtual events business to be permanent, and it really is not the main focus of our company going forward. While we have navigated the pandemic, we have always had an eye on the prize, on the bigger picture, which was always, since the founding of the company, augmented reality experiences and the modernization of 3D and AR solutions. Over the past four years, we've been investing heavily in our augmented reality and metaverse solutions, making transformative acquisitions and continuing our research and development activities to further enhance our technology stack. Finally, in 2022, we really have just begun to reap the rewards of these investments, as the world has now woken up to the idea that 3D is the future of e-commerce. The business opportunity and the demand for next tech to produce 3D models and AR experiences for the metaverse has never been greater. In 2021, the pandemic wanes. and we saw the opening up of the global economy, which has resulted in a reduction of the necessity for virtual events and has impacted the entire virtual events industry as a whole. We have prepared for this inevitability by cutting our headcount substantially as our virtual events revenue growth leveled off. However, our live event business is alive and well and growing rapidly. We are a diversified company, which gives us the good fortune to be able to pivot resources and we have moved our resources from virtual events to live events. We have moved some key clients from virtual events to live and hybrid events, which allows us to continue our momentum within the events business on our MapD platform. In 2022, we are seeing a healthy uptick in the live event business with our average monthly MapDynamics revenue, which is our live event platform, increasing 78% since Q4, with the average MapDynamics order increasing 16% compared to Q4 of 2021. Also, with our 2022 integration of Stripe, which we previously announced of the MapD platform, we've seen further growth of high margin revenue with these events. The Stripe integration provided an additional no-touch $760,000 in projected annual revenue for Next Tech through a 2.3% platform fee when Stripe is used for booth sales, again, for these live events, which is a business segment that we own and operate and are growing currently. We expect this high margin revenue to accelerate in 2022 as we introduce a new ticket sales capability, which will have at least a 2.3% fee, which will take effect in April of 2022 or in the next few weeks. So we see that business as extremely strong, high margin, profitable business. business that we are just starting to scale currently in 2022. Revenue from our AR solutions continues to rapidly accelerate. The demand for 3D models for e-commerce has increased as a new, immersive, and engaging way of online shopping has been introduced. Businesses are finally starting to recognize the benefits, and consumers are beginning to expect these experiences. In Q3, we announced our expectation to close 2021 with all of our revenue in the $25 to $29 million range. We closed out 2021 with a record-breaking $25.9 million in revenue representing 40% year-over-year growth, which isn't too shabby. We are now signing up new accounts to ARTize 3D, which is our flagship product, our flagship product for producing 3D models. And we're signing up these customers for many different industries, including furniture, fashion, sporting equipment, pet wear, jewelry, eyewear, home goods, bespoke gifts, automotive and more. And we're experiencing a big jump in demand for our 3D model making solutions, which we do not see slowing down anytime soon. We are already seeing our enterprise business, which we previously announced that Kohl's is our customer, Kmart is our customer, Pier One's our customers. We're seeing those businesses accelerate severe order flow for additional 3D models. We are also signing new deals with many small to medium-sized e-commerce sites. In Q4 alone, we saw a substantial uptick in customer adoption of our technology that are either signing 12-month annual recurring revenue contracts or annual repeat customers that keep coming back because of our incredible customer service and product technology stack. So we have almost a million dollars in annual recurring revenue or annual repeat customers. If you look at our renewable software license revenue, we pegged that at around $1.4 million in 2021, which clearly is the growth engine of the company, up 316%. year over year. All of this is truly a validation of our efforts to disrupt the emerging multi-billion dollar 3D model market with the highest quality, lowest cost, most scalable 3D model solution anywhere. All signs in 2022 point to being a historic and breakout year for everything 3D. 3D models for e-commerce, annual recurring revenue. That's our business as we go forward. That's the area of business that we believe can scale quite quickly and should be what investors keep their eye on to measure the health of the company and our growth potential. Since 2018, we've reported to investors dynamic growth and shown our ability to pivot while delivering on our promise for AR for e-commerce and revenue growth, which is now accelerating into 2022. And really, all of that speaks for itself. We started out with just a kernel of AR in 2018. We moved into the e-commerce space in 2019. As we move forward in 2020, we added virtual events into the mix and live events. Now in 2022, we are seeing the rapid acceleration in 3D and AR happening. And we strongly feel that the growth engine for revenue going forward will be our augmented reality and metaverse solutions. These solutions are being integrated to become one unified end-to-end suite of solutions called the AR Times Metaverse Suite, which we have previously demoed during an investor presentation and is expected to launch next month in April. We are focused as a company on the development and release of multiple first-to-market SaaS platforms for augmented reality and the metaverse to capture market share with our entire suite of interconnected products. Just to recap some of the products that have launched and some of the soon-to-be-launched SaaS offerings. In Q4 of 2021, we launched ARTize Labs for higher ed, ARTize Decorator for e-comm, and the Stripe integration all happened in Q4 2021. In Q1 2022, we announced ARTize 3D as the public launch, ARTize Maps, the app, was launched in beta, which is a spatial mapping app that's currently being showcased at MIT. We also launched ARTize Holograms, our human hologram creator app, which is about to be turned into a web-based human hologram experience, which we think will unleash the true potential of that app. ARTize 3D, we integrated with Shopify, That was a big deal. We're seeing fruits of that integration with many downloads and many customer sign-ups on Shopify. We also have ARTi Swirl and ARTi Social Swirl launched in Q1. ARTi's Metaverse Studio, as mentioned, launching very soon in April. Our CAD to Poly SaaS product, is expected to launch in Q2. ARTize 3D getting integrated into BigCommerce is expected to launch in March. ARTize 3D WooCommerce integration will be May. ARTize Magento integration May. We are just beginning to see the revenue and business emerge as we move full force into 3D model making, augmented reality, and metaverse solutions with our new SaaS offerings. SaaS integration with our product line has significant implications for scalability of our products and our revenue growth. With the continued rollout of our SaaS platforms, Next Tech continues to move away from a managed solution towards annual recurring revenue. I would say that we have successfully accomplish that goal. And as we move forward, we're moving towards a low touch slash no touch business model with monthly recurring revenue and annual recurring revenue. To give our investors an idea of what we're seeing in 2022 so far, our ARR, annual recurring revenue, has increased 57%. since the end of the year 2021. Average new 3D deal size is up 53% compared to Q4. We're quoting on the whale of whales, let's call it. It's a quote that we're working on, 39,000 SKUs. It could even be bigger than that. It's not a guarantee, but it's a quote and it's very close. We are contracting with repeat customers. There's an additional 3,000 SKU order. CB2 ordered 2,500 SKUs, and we have partnerships with Designer Inc., ShopLine, FKA Brands, and more. To date, Nextech has created over 10,000 3D models with about 70% of those models created since Q4 2021. That's enormous growth in our production of 3D models. In the past nine months, Nextech's 3D models have had 3.5 million views. About 1 million of that 3.5 million has happened in 2022 alone. So about a million views of our 3D models in 2022 alone in just the first, not even three months. And we're just getting started. This massive estimated $200 billion 3D model making for the e-commerce business opportunity really just started to emerge in Q4 of 2021 and is continuing in 2022. we believe it's going to continue. And we believe we're going to continue to win business because of our strategic SaaS and third-party integration initiative with the Shopify's of the world, which will get our ARTize 3D solution in front of millions of e-commerce merchants globally. And because of our belief that we have the best solution, the lowest cost, highest quality, most scalable solution in the market today. It's only a matter of time, in our opinion, that our competitors will give up, that our competitors will not be able to compete with us, as we believe we have the only truly end-to-end solution for the e-commerce industry. Now, since Facebook rebranded itself as a metaverse company, it seems like a long time ago, but it really was just a few short months ago, There's been a complete shift towards all things 3D and AR and the metaverse, and there's really no turning back. As everybody knows, Zuckerberg came out and said, I believe the metaverse is the next chapter for the Internet, and big tech believes the same thing. Microsoft, Google, NVIDIA, Unity, Shopify, Qualcomm, they're all spending and investing billions, maybe hundreds of billions in the metaverse. Many notable brands have entered the metaverse, including Nike, Adidas, Coca-Cola, Louis Vuitton, Gucci, Disney, McDonald's, and many, many more. This is all great news for Next Tech. Big tech's commitment, big brand involvement, and the shift towards mass consumer adoption will only put wind in our sails. We have a unique position as the end-to-end metaverse solution providing spatial mapping, augmented reality, and 3D models. Ultimately, you add that together, you get the trifecta. We've created a platform like no other that allow for immersive experiences, ease of use, and low cost. All of this is now on display at MIT tomorrow for the hackathon, which we publicly announced today. Our position will be cemented further upon the release of our ARTIZ metaverse suite, which is coming up in a couple of weeks. As mentioned, the ARTIZ suite of SaaS products allows you to sign in and essentially Choose your SaaS solution, whether you want a 3D model solution, an exploded view, whether you want our showroom, hotspots, animation, swirl ads, our configurator, it's all there in one place. It will become the 3D destination for businesses. There's endless use cases. malls, sports stadiums, retail stores, university campuses, theme parks, museums, corporate headquarters, events, live events, restaurants, rental properties, anybody that wants to turn their place of business or even your home into a metaverse. It's all there. Considering the potential applications for what Nextech has built and anticipated market adoption, we believe that there's over $250 billion up for grabs. We believe that the SaaS for e-commerce alone as just a segment of the entire 250 billion metaverse addressable universe is over $100 billion. So it's not a small number. And we believe that we have a leadership position and an opportunity to take huge market share over the coming years. I want to change gears. I want to speak to our investors for one moment about NASDAQ and our uplisting goals. Everybody should know by now that we have applied to NASDAQ and we still are looking at this as a top priority. We appreciate all of your patience while we work towards this goal, and we strongly feel that we are better prepared than ever to achieve it. Case in point, during Q3 of 2021, we announced our change of auditor to Markham Markham is an extremely well-known, reputable U.S. audit firm that has hundreds of companies that they've taken to an uplisting on NASDAQ or NYSE. We have also hired top new legal counsel at Haynes & Boone, who have a track record of success in getting companies uplisted. We are currently working with Markham and Haynes and Boone and are confident in their extensive experience in the U.S. exchange uplistings of companies that are like Nextech. I cannot specify timing around this. I cannot reiterate enough that this is a priority for us, and we are taking all the necessary steps to while observing and complying with U.S. exchange and SEC regulations in preparation of entry onto a U.S. major exchange. In closing, Q4 was an important quarter for growth in 2021. As a whole, it should be viewed as a transformative year for NextEx. We officially became a metaverse company with two transformative acquisitions, and we succeeded, which was not easy, in moving our business model from a managed service to an ARR slash monthly recurring revenue formula. Next Tech is now fully focused. on obtaining greater industry leadership in the augmented reality and the metaverse space with our entire suite of interconnected products. In 2021, augmented reality and the metaverse took center stage. These solutions have changed from a nice-to-have to a must-have in 2022. And this is really what we've been preparing for since the founding of the company in 2018. I'm more confident than ever in the accelerating momentum of our augmented reality and metaverse solutions, and I expect 2022 to be a year of hyper growth for all things augmented reality and the metaverse. There has been a digital transformation, and once you go 3D, you do not go back to 2D. Our AR products are sticky. and has significant implications for monthly recurring revenue and annual recurring revenue, which will accelerate with the adoption and stickiness of our entire augmented reality products and suites, which, again, is launching in April. Fueled by the metaverse, the augmented reality tidal wave is finally here. I've been repeatedly saying over the past four years, many of you have heard this, that this will be a multi-decade, multi-billion dollar megatrend. Big tech is now committed to building the ecosystem that next tech thrives in. And we feel confident. We feel very confident that our goal will be achieved. We are just at the beginning. It's an exciting time. to be a public company and to be an investor in this space. The future is bright for Nextech AR. Today, I have the utmost belief in our company's direction, our executive team, and in everybody behind the scenes working to achieve our vision of building the first vertically integrated AI-powered 3D model factory for the metaverse. With a successful 2021 now behind us, I believe that 2022 will go down in history as the breakout year for everything 3D and a great year for growth for Nextech and our shareholders. With that, I'm going to turn the call over to Nextech Air Solutions CFO, Andrew Chan, who will provide commentary on the quarterly results. Andrew, take it away.
spk05: Thank you, Evan, and good evening, everybody. As a reminder, unless otherwise noted, all figures reported on today's call are on Canadian dollars under IFRS. All the preceding information is now available on our website and has been filed on CDAR at the close of market today for your reference. Total revenues in the quarter was $6.4 million, up 11% from $5.7 million in Q3 2021 and down 9% compared to Q4 2021. 2020. Annual revenues were $25.9 million, up 47% from fiscal 2020. Compared to last year, product sales increased 38%, technology services increased 55%, and renewable software revenues increased 316%. Q4 2021 product sales were $4.2 million, down 8% over Q4 2020 and Q3 2021. Although product sales increased 38% year-over-year, the decline this quarter was mainly due to the impact of COVID-19 on the supply chain and getting the desired inventory products for the retail busy seasons. Our Q4 2021 technology services was $1.6 million, down 26% from Q4 2020 at the height of the demand for virtual events, however, up 55% compared to Q3 2021. Towards the second half of 2021, we have focused our sales and marketing efforts to promote our AR products and subscription-based businesses, and thus on virtual events. However, we still saw consistent demand in 2021 with a 55% increase in technology services revenue year over year. Renewable software revenue was the fastest growing part of our segment with half a million of dollars in revenue in Q4 2021, up 125% from Q3 2021, and makes up 5% of our total revenues at 1.4 million for 2021 with a growth of 316% from last year. At December 31st, 2021, this segment accumulated $475,000 of annual recurring revenue, ARR, mainly from fourth quarter sales. Gross profit during Q4 2021 increased by 24% compared to Q3 2021. However, it was still down 28% compared to Q4 2020. Overall, for the year, gross profit was the same in 2021 compared to 2020 at $9.8 million. Product sales gross profits were negatively affected as a result of the global supply chain issues in the second half of 2021. That resulted in higher inventory and shipping prices for the same products. We saw improved gross margins in our technology services business compared to Q3 as more virtual events in Q4 helped reduce the effects of the fixed cost nature of our virtual events delivery team. Going forward, we have reduced these fixed costs to better align with our forecasted demand. As we ramp up our AR and metaverse businesses through 2022, and as they contribute more significantly to our bottom line, we anticipate further increases in gross profits as margins for that segment is much higher than the product sales and virtual events businesses. Operating expenses for Q4 were $8.5 million compared to $10 million in Q3 2021, a savings of $1.5 million. The decrease in operating expenses in the quarter was mainly due to lower expenses in sales and marketing and research and development. During the past couple of quarters, we've restructured our sales force and marketing spend to a more cost-effective model for the new pursuits in AR sales, with the intention of lowering overall sales cost as a percentage of revenue over the upcoming quarters, in addition to managing our product sales expectations as a result of COVID-19 supply chain issues. The decrease in development cost was a result of shifting our development focus to AR products, resulting in overall lower headcount in this area. General and administrative costs remain consistent. However, we do anticipate lower expenses in this category going forward with ongoing cost-cutting initiatives since the new year. Overall headcount is currently approximately 140 people, down close to 50% from the peak in the summer of 2021. We had a net loss in Q4 of 9.3 million compared to a loss of 8.2 million in Q3 due to non-cash stock-based compensation in Q4. However, once removed, net loss for Q4 would be around 7.3 million, a decrease of close to 1 million in losses. As of December 31st, 2021, we had cash of 7.2 million, inventory of 3.4 million, and a positive working capital of 9.2 million. With the addition of the $10 million raised in January of 2020, we have close to $20 million of working capital to start the year in 2022. Along with the results of our aggressive cost savings plan to reduce the cash burn to $1 million a month, we will not need access to capital for the next 12 months. I would like to personally thank my finance and accounting team, along with our internal business partners, for all their hard work in making this happen over the last few months. With that, I turn the call back over to Evan.
spk06: Thank you, Andrew. In closing, I would like to thank our employees, our shareholders, of course, and our partners for the continued support as we remain focused on preserving and growing long-term value for our shareholders. On behalf of Nextech, thank you for your support, as always, and thank you for taking the time to join us on this call. Operators, we are now ready for the exciting question and answer portion of this call.
spk02: That is noted, sir. If you would like to ask a question at this time, please press star, then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Our first question comes from the line of Scott Buck from HC Wainwright. Your line is open.
spk07: Hi, good afternoon, guys. I appreciate the time for a follow-up question. And a lot of really good information in the call, Evan. Really appreciate it. First question for me. I'm curious, can you talk to us a little bit about, you know, what the other 3D modeling model offers are on some of the e-commerce platforms and how, you know, your product differs from theirs and maybe what would, you know, direct somebody using that platform towards, you know, a Next Tech product versus a competitor? Sure.
spk06: So it's a broad question. There's a lot of uh a lot of differences between next tech and other 3d modeling companies to summarize i would say as we've spoken our business model is very different where our competitors essentially sell a 3d model so you know a 3d model let's just say costs $50 to make, and, you know, our competitors will sell that for $100 or $150. That's the standard business model in the industry. Next Tech has taken a completely different tact and have aligned ourselves with e-com merchants by turning our offering into a monthly subscription, a SaaS product. So don't pay us for the whole 3D model cost upfront. Pay us over the course of 12 months. And by doing that, we're essentially partnering with these sites so that instead of paying, let's say, $150, an example I just gave, for a 3D model, pay us $250 per month, and we'll supply you with 25 3D models. but you're signing a 12-month contract. So for Next Tech, we get our ROI in like month four. Month three or four essentially is when we break even, and after that we start essentially printing money. The other piece of it, Scott, is we look to our additional, let's just call them add-on features. The configurator has become a runaway feature Grand Slam for us, where you create one 3D model, and using the configurator, you're able to essentially change the colors of the 3D model and or the design or the fabric, if it's a couch, just by pressing a button. So if you have, let's say, 100 different configurations of a single model, by paying us $500 a month, you could get one model plus the configurator, and now you have a full-on solution for that product. And, you know, it kind of just keeps going from there, Scott, where we also have hotspots. We have a decorator showroom. We have the ability to offer animations. We have a proprietary banner ad for swirl ads. And it's all – It all leads back to our AR size metaverse suite where you log in and you get to essentially have a full spectrum of 3D product offerings for your e-commerce site. And our competitors just don't have that kind of breadth of product, and they certainly don't offer the monthly revenue, the monthly payment terms that we offer.
spk07: That's very helpful, Evan. Do you know off the top of your head or have some idea how many customers that purchase models then come back 30, 60 days later and request some of these other services off the menu?
spk06: It's about 50% of the customers that try a 3D model and then try a simple kind of 3D model and then they come back for additional services. What we're also noticing is that we do a lot of POCs, proof of concepts, you know, where people are like, oh, you know, let's try it out. After people try it out, we get 80% of those people converting into customers. So, you know, those are very bullish signs for our industry.
spk07: Great, that's helpful. You mentioned some rather large enterprise opportunities that you guys are working on. Do you have the capacity to be able to fulfill all those requests, or would that require additional software engineers, developers, anything along those lines that would dramatically impact the OpEx line?
spk06: Yeah, so that's a good question. We are a factory, so we are scaling up as the demand comes in. It does require us to build some new tech. We are continuing to build better and better technology that continues to allow us to have a competitive advantage in the market. So I would say that we're building it while we're flying it or we're flying it while we're building it. Maybe better summarizes it where we've delivered for one customer 2,500 models in a month. Now, to be quite honest, that was difficult. That was a heavy lift. But we did it. We're now, you know, beyond that. And we're going to continue to scale. And, you know, the goal is to be able to do significant volumes as we move into the second half of the year, as we get more automation, more AI, more machine learning, you know, under our factory umbrella.
spk07: All right, that makes sense. And last one for me, nice sequential tick higher on gross margin. As the business mix shifts, how should we be thinking about gross margins, and what's the ceiling?
spk06: Well, I'm going to let Andrew take half of this, but in general terms, the business is shifting away from, manage services away from e-commerce. Well, the e-commerce business is kind of there, but it's kind of on autopilot. We don't spend a lot of time on it and a lot of resources. But when you look at the business that's growing, which is software, it's growing very rapidly, and it has a much, much higher margin than So over time, the margin is going to get better and better and better. But I'll let Andrew maybe dig into a little more detail.
spk05: Yeah, thanks, Scott. You know, if you look at the margins for our product sales, I mean, they hover around, you know, the high 38% to kind of the low 42%. That's kind of where we are. see that spot with the capacity that we that we have or the sorry the volume that we have at this point um you know with uh with coven 19 and the supply chain issues that has kind of taken it from kind of 40 something percent to kind of high 38 39 uh in q4 and i believe in q3 as well um the managed services business um you know that was quite labor intensive as i had indicated uh through delivery and whatnot And so as that kind of levels off or, you know, declines a little as we see the demand, you know, the positive contribution to what Evan was saying about 3D models and the model factory is, I would say, close to, you know, 50% to 70% in terms of margin. So, you know, as we see more volume there, I can only imagine our gross profit to increase significantly.
spk07: Okay, that's perfect. I appreciate it, Andrew. Thanks again, everyone, for the time for questions.
spk06: Thank you, Seth.
spk02: Our next question comes from the line of Lisa Thompson from SAC Investments. Your line is open. Hi, guys. Hi, Lisa.
spk04: So it looks like you got e-commerce back to break even, right? Is that where it's going to stay? Is that the idea? Yeah.
spk06: Yeah, I mean, the e-com business, like I said, is kind of on autopilot at this point, Lisa.
spk04: Okay, good. So when you talk about putting a bid out for Whale, talk about who literally are the companies you're bidding against so that we can keep an eye on them. So these are RFPs.
spk06: which means, you know, it's kind of a closed loop. You don't really know who you're, quote, bidding against. What I would say is that it's a very, very small group, very small. And, you know, that's what we're told. Like it's just, you know, there's only a few companies at the table that are capable of deliverings. And I would say that on these whales, they put you through, you know, different levels of testing our abilities because these are sophisticated, you know, some of these companies are trillion-dollar public companies. Some of them are, you know, just hundreds of billions, but they're huge. And so they're sophisticated. And so what I can say, Lisa, is that, They have put us through testing, and we've passed the quality test, meaning they give you X number of models, and they ask you to produce them. And they're highly complex. These are not simple. And so we have passed that test.
spk04: OK. So who do you run up against in general? When customers come to you, they say, oh, we tried XYZ, and now they'll try you? Yeah. Are there only a few people?
spk06: Yeah. So what we found is there's really only two companies that we hear about. And I would say that, you know, we're hearing less and less about them, and I'll explain why. One is a company called 3Kit that has a configurator, and they do photorealistic 3D models. They raised $35 million, I think it was Series B, late last year. Another company is called MarkSense, which has been around for a while. And both of those companies, if you go and you look them up and you do your research, are very, very heavily geared, if not exclusively geared, towards making 3D models or providing solutions for the furniture industry. They do not venture outside of that. What makes Next Tech extremely unique is that we are actually providing 3D models not just for the furniture industry, but for the sports industry, you know, sporting goods, for clothing, for eyewear, for jewelry. And, you know, there really isn't anybody that we run up against in those markets. We think we have those markets to ourselves. As crazy as that sounds, there's nobody else that we run up against in those markets.
spk04: Wow. Okay. So when I look at what you're doing now, it seems like you're actually getting involved in building the model, and it looks to me a lot like ad agencies. Who do you sell to? Are you selling to ad agencies or to the brands themselves?
spk06: We really don't have agency partners in a big way. There's maybe a few referral partners that we have, but we directly sell to e-commerce sites. We directly sell to brands. It's direct sales.
spk04: Okay. How far off do you think this business can be self-serve for the customer where you don't even have to get involved and just collect a check?
spk06: Well, once we set the customer up, once we deliver the models, it is self-serve. It is just collecting the check. We don't have to, you know, once the models are live on the site, unless they want more models, we just collect the checks.
spk04: Right, but making the more models, though. Is there going to be a point where they can make their own models just using your platform?
spk06: There's definitely the potential for some product categories to work that way. So, for instance, the lay of the land, Lisa, is you have simple models, you have medium models, you have complex models, and then you have photorealistic models, right? So there's a wide spectrum of 3D out there. It's not all the same. So at the low end, meaning simple things like pillows, let's say, things like wall art. Those types of things can be self-serve and on demand. And that could happen potentially in the second half of this year, because that would just be AI driven. And that is something that is highly scalable. And it's something that we are kind of going after where the volume is very high and the cost is very low. So we don't charge as much either, right? So instead of it being, let's say, $10 per month per SKU, because our cost is so minimal, we could offer it for $5 per month per SKU or even $3 to $4 per month per SKU. But you're talking about tens of thousands of, you know, pillows and pieces of art kind of thing.
spk04: Mm-hmm. Okay, good. That should help. One question about expenses. What do you expect expenses to be in the first quarter, given the cuts that you've taken?
spk06: Andrew, if you can answer.
spk05: Yeah. Yeah. I mean, I think we, at the beginning of the quarter, I mean, we still saw a lot of savings and we're continuing down that path. I wouldn't be surprised if we were, you know, another kind of million below what we've had in Q4.
spk04: Great. And does that continue or is that where you've hit?
spk05: steady state no no I think there's there's more room to go I mean our again our target is kind of 1 million kind of burn per month and you know we're going to be managing that against you know the revenue that's coming in and you know it's going to be fluid in that sense all right great that's good to know okay I think that's all my questions thank you thank you Lisa thanks Lisa
spk02: As a reminder, if you have questions, please press star 1. Our next question comes from the line of Michael Farah. Your line is open.
spk01: Hey, good afternoon, gentlemen. How are we doing?
spk06: Doing good. How are you doing? Good.
spk01: Good. Yeah, it's a pleasure to talk to you guys again. Just three quick questions. I don't know if I should just roll them off real quick, but do you see a point Given the fact that most of the revenue, well, by the way, a fantastic presentation. Evan, keep the faith. I know the stock price at the moment is not even close to reflective of what it will be. I saw that you were backed on a price target of $250 by the end of the year. I expect it to be more. But do you ever see a point where you would actually sell the e-commerce businesses, one or all of them? The second question is your patent portfolio. How do you feel? Do you feel it's strong? And will you be filing any new patents? And are there any competitor patents that are out there that you may get office action letters against that would say, hey, some of your claims, A, B, C, and D,
spk06: um so potentially selling um the e-commerce business the patent portfolio and and what that landscape looks like and is there any pending litigation so i'll start with the pending i'll start with the last first so there's no material litigation otherwise we as a public company would have to disclose that um as far as the patents go I think we're preparing to file, is it five patents, Andrew? Yeah. Yeah.
spk01: Will these be provisional or will they be non-provisional?
spk05: It's actually disclosed in, I believe, our shelf prospectus that was filed this morning.
spk06: Oh, okay. Yeah, so my patents are coming. And then as far as the e-com business, we always... Who are your patent attorneys, by the way?
spk01: Or do you just do them through the same law firm?
spk06: Yeah, Mike, you can email me, evan at nexttechar.com, and we could talk offline about that. But as far as As far as the e-com business and selling it, yes, that is on the table as a possibility, not a definite, and or spinning it off as its own public company, in which case if we did something like that, shareholders would get kind of a dividend. So, yeah, those two things are on the table. We don't see it as a business that will own, let's say, five years from now.
spk01: Yeah. But it could provide a good platform so that you might not have to dilute yourselves or the company. And then revenue comes in, and you strategically look at headcount. And the business model is just fantastic. It's definitely the next wave. I can't believe someone doesn't offer you guys $10 billion for it already. And you know what? If you get that, I wouldn't take it. Because I think it's worth a lot more as this thing expands out. There's so many geopolitical factors and so many different things that are at play. And, yeah, I'll definitely go ahead and email you about the other questions. All right. We'll take that one offline.
spk06: Thank you, Mike. Thank you for being so bullish. Appreciate it.
spk01: Oh, you bet. Well, I appreciate it. I see your vision. You know, sometimes I – Well, I've given up, you know, going on some of these social forums with, like, StockTwits and, you know, this guy's that, and they've got a bunch of vaporware. And I'm like, you don't realize the vision that Evan has and his team has. The executive team is world-class. And what you guys have done from, you know, I mean, how many other companies can generate $25 million to $30 million? Granted, it's Canadian, so you do the conversion. It's around a little over $20 million. And that's really my last question. Is there any way – and I understand because my background is law and I've dealt with the SEC and stuff like that. But is there any way that in the reporting – because I think a lot of investors that live in English-speaking countries, is there any way to actually right at the beginning say, here's what it was in CAD and here's what it is in U.S. dollars? Because I think sometimes people get confused. Yeah.
spk06: Yeah, I hear you. I'm going to talk to Andrew, and we'll look into that.
spk01: You bet.
spk06: It's a good point. All right, Mike, thank you so much. Really appreciate it.
spk01: You're welcome. Thank you so much for all your hard work, gentlemen.
spk06: Thank you.
spk01: And ladies.
spk02: There are no further questions at this time. I will now turn the call over back to Mr. Evan Gappelberg.
spk06: Well, thank you. for joining me today. I appreciate all the investors that have joined and that are taking this journey with us into the metaverse. Everyone have a great evening. Thank you.
spk02: Thank you again for participating. This concludes today's conference call. You may now disconnect.
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