Nextech3D Ai Corp

Good evening, ladies and gentlemen, and welcome to Next Tech AR Solutions Corporation 2022 Second Quarter Results Conference Call. Call 9-7-3 on mute to prevent any background noise. And 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, Thursday, August 18, 2022. And I would now like to turn the call over to Julia Viola, Investor Relations at Next Tech AR Solutions Corporation.

Hello and welcome to the Nextech Q2 2022 earnings call. With me on the call are Evan Gappleberg, Chief Executive Officer, and Andrew Chan, Chief Financial Officer. Today, after markets closed, Nextech AR Solutions Corp. released its financial results for the second quarter, ended June 30, 2022. A copy of the earnings disclosure is available on our website and on CDAR. Some of the information discussed on this call is based on information as of today, August 18, 2022, 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 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 MD&A, which can be found on CDAR. Neither this call nor the webcast archives may be recorded or otherwise reproduced or distributed without prior written permission from Nextech. To begin our call, Evan Gappelberg, CEO, will discuss 2022 Q2 highlights, as well as recent business developments, followed by Andrew Chan, CFO, who will review our financial results and outlook. Finally, Evan will provide closing remarks before opening up the line for a question and answer period. I'll now turn the call over to CEO and founder of Next Tech AR Solutions, Evan Gappelberg.

Thank you, Julia. Good afternoon and good evening, everyone. Thank you for joining us from around the globe today. In 2022, we have emphasized over and over again the rapidly growing demand for our 3D modeling and AR solutions, really for the transformation to Web 3.0, especially in e-commerce. This demand that we've been talking about is evident through our regular announcements disclosing a multitude of new deals closed in Q1 and Q2 of 2022, all related to 3D modeling. The new deal flow is continuing into Q3. and serves to reinforce the narrative we've been public about, which is there is a rapid acceleration. There is a massive new urgency and new demand that we are seeing for 3D models in e-commerce across various industries and product categories, which include but are limited to furniture, sports equipment, clothing, accessories, artwork, appliances, lighting, auto parts, and much more. Now, looking past, looking back gives me some sense of what to expect as I look forward. It's been four and a half years since the founding of Nextech in 2018. With $3 million, and a dream of becoming the first pure play 3d ar puddle company during that time we've navigated in and out of a number of businesses that in hindsight acted as bridges and test beds proving our resilience and ability to pivot during this time however we were always planning for this momentous moment in history making calculated decisions about our in-house development of our 3D technology, as well as picking and choosing the best strategic acquisitions that would position us for the 3D tidal wave that we believed was coming sometime in the future many years ago. We have been steadily working towards this moment, making acquisitions. We've made 10 acquisitions to date. testing our technology in the real world and developing our technology to prepare for the digital transformation and Web 3.0. Well, ladies and gentlemen, I am pleased to announce that the time is here now. How can I be so sure? How can I make such a bold statement? It's because we have been closing 3D modeling contracts at the fastest pace in our company's history. It's because Google is now indexing 3D models higher in organic search. It's because the largest prime marketplace, Amazon, has gone 3D. It's because Shopify has gone 3D. It's because Walmart, Target, Kohl's, Napa, all companies that we either currently have contracts with or are talking to have all gone 3D. The world has now pivoted to 3D. So make no mistake about it. 3D is here and it's here to stay. And it will be a big part of a multi-trillion dollar, multi-decade mega trend that is now being called the metaverse. To enter the metaverse, however, you need a 3D model. And that is what Next Tech makes. 3D models which we are now scaling the production of. For the first time, we're hearing from our customers that they are either told to buy 3D models from leadership or planning on buying 3D models in the near future. In fact, I had a call yesterday from a major customer of ours that was talking about a three-year plan to purchase over 100,000 3D models. This has never happened before in the history of Next Tech. And it signals to me that the market is here. The demand has shown up. The demand for 3D models, in my view, will only accelerate throughout the second half of 2022. And I believe that in 2023, we will see demand shift into high gear, similar to what happened with our virtual events business during the pandemic in 2020. which had a significant impact on our valuation. I believe it can and will happen again. If you look at our major customers, we're signing major customers, but we're also signing small and mid-sized e-commerce customers for 3D models as well. In Q2 and Q, even into Q3, we're experiencing a rapid expansion of major 3D modeling customers with some of the biggest retailers. These include new contracts with brand new customers, as well as bigger add-on contracts for more 3D models with existing customers, including Napa Auto Parts, Kohl's, CB2, Kmart Australia, just to name a few of our major customers. But the biggest fish in the e-commerce ocean by far is the prime marketplace it is amazon by far it's not even close amazon is the biggest fish in the e-commerce marketplace and represents at least for the business that we used to own and operate our e-commerce business about 70 percent of sales and i've seen that number over and over again about 70 percent of a company that's in the e-commerce space about 70 of their sales happens on amazon we announced on july 12 that we began supplying the world's largest prime marketplace with 3d models now that's in q3 not q2 this represented a significant significant new development and it does represent potentially massive growth for Nextech for many years to come. Signing a deal with Amazon, however, does demonstrate Nextech's technical proficiency and leadership in the 3D modeling for e-commerce space. Believe me, Amazon only works with best in breed. If you look at Amazon, there's over a million and a half registered active Amazon sellers. with hundreds or thousands of models for each one of those sellers. There's an average of 1,800 new sellers that are signing up on Amazon every single day. They have about a quarter of a billion product SKUs. It's just a massive, massive opportunity for Nextech, and it's just getting started. in Q3. So no revenue in Q2. The numbers just released did not include any revenue from this. In Q3, we anticipate a few hundred thousand dollars in revenue as we start to scale with Amazon. And we expect we will quickly grow to a million in revenue through Q4 of 2022. As we enter 2023, we are gearing up our production for the possibility of doing a million dollars a month in Amazon revenue alone. Amazon, however, is clearly not the only customer we have. Although they are significant in the potential revenue over the coming years, we have other customers that are also quite significant. We're currently in talks with some of the world's largest brands to supply hundreds of thousands of 3D models, Kohl's, Walmart, Jacuzzi, Fortune Brands, just to name a few. The more contracts we sign with major players, the more Next Tech cements itself as the world's leading supplier for 3D models, and the more companies will ultimately see us as such and come knocking on our door. The business opportunity and demand for Next Tech to produce 3D models and AR experiences for retail and e-commerce has never been greater. And we are extremely excited for what the future holds. We will take full advantage of this opportunity. E-commerce is over a $5 trillion global industry expected to grow by another trillion dollars in the next year or two. And 3D models are fundamentally transforming online shopping. Why? It comes down to one thing, ROI. There's a 40% reduction in returns, 93% higher click-through rate, and up to a 250% increase in conversions. Nothing else comes close to this ROI in e-commerce. Not video, not direct messaging, not next-day delivery. With our 3D modeling technology, we are perfectly positioned to ride this megatrend for the foreseeable future. We are the on-ramp for Web 3.0, and we have achieved a perfect product market fit with 3D models in e-commerce. Consumers, which really drive the bus, they prefer retailers who have 3D and AR experiences. 3D models are also enabling virtual product photography which is a huge new business opportunity for us we are launching this very soon it will replace product photography for web and e-commerce sites saving companies millions of dollars and generating significant revenue for next tech we offer all these solutions in one integrated platform one end-to-end solution which we believe is very very valuable and becoming more valuable every quarter next tech is creating tremendous value for the ecom ecosystem and it's just getting started with this transition to 3d models it's only a matter of time i think it's going to happen in q4 of 2022 when the breakout for everything 3D happens, where there's a FOMO, where companies are going to feel pressure to adopt 3D models. If they don't, they will feel like they are going to be left behind by their competitors. Everything today is perfectly aligned for Next Tech to experience dramatic growth over the coming year. Google, has even come out and they're supporting us. As mentioned before, they're now ranking 3D models higher than 2D images. Imagine if your product that you sell gets ranked higher by Google. That's the wind at your back. That's the position that Nextech is in. If an e-commerce site has 3D models on their site, those 3D models will organically show up higher in search results over an e-commerce site that just has 2D images, giving them a huge competitive advantage, and again, creating this FOMO, this massive amount of new demand for 3D models, and we are here to supply that demand. As we improve our AI and 3D model production capabilities, we expect to be able to grow our 3D modeling capabilities by as much as 1,000% in 2023. If you look at what we've done to date, we've set ourselves up with a SaaS platform strategically integrating with all the third party platforms, which we've talked about previously. This SaaS integration with all of our product lines really has quite significant implications for our scalability and our revenue growth, which is why we made them a priority earlier this year. We are setting ourselves up for higher annual recurring revenue year over year, driven by our monthly recurring revenue streams month over month. And as reported in our Q2 results today, we're up to almost a million dollars already in Q2 of 2022. This growth is a huge validation of our efforts to disrupt the emerging multi-billion dollar 3D model market. As we've previously indicated, 3D models for e-commerce and annual recurring revenue are going to be the area of business that we believe can scale quite quickly. Annual recurring revenue is what investors should pay close attention to in order to measure the health and the growth, really, of our company. Shopify, another big player in the e-commerce ecosystem, believes as we do, the future of e-commerce is 3D. We've integrated with Shopify. We continue to pick up customers off of Shopify. We've integrated with WooCommerce, BigCommerce, and we basically put our 3D model making solution called ARTize3D in front of the millions of merchants that are out there globally which again positions us in front of this massive 3D model for e-commerce opportunity, which is estimated to be worth $200 billion. Started to emerge really at the end of 2021, and now it's continuing through the first half and now into the second half of 2022. And we continue to believe that we're going to win more and more business. And as time goes on, capture more and more market share. And we believe that our competitors will not be able to compete for long, just because we have such a vast array of solutions. If you look at our solutions, we keep adding more. We are going to soon be adding our CAD to Poly Studio, which again is going to be a 3D essentially production studio for the creation of 3D models from CAD files. You can change the colors in the studio. You could change the mesh. You could change the textures. It's a full-on creation studio, and it'll have the virtual photography built in as well. Now, apart from ARTICE 3D and 3D modeling, Nextech also owns a portfolio of quite valuable companies. that contain breakthrough technology and industry-disrupting products. We are working towards unlocking the value of these assets and businesses, and that really brings us to our spatial computing platform, ARWay, which is getting stronger and stronger every single day. ARWay is being spun out, as previously announced. ARWay really is a next-generation computing platform for the real-world metaverse. And it drives new revenue with out-of-the-box augmented reality mapping solutions. It's a no-code platform. Anybody can use it. And we've already launched the mobile app. I suggest if you're interested, you could download it. It's just ARWay in the App Store. It's on Google and iOS. And we have an SDK that also was recently launched. We also have a studio where you can go into a web-based studio and edit maps and create exciting AR experiences. ARWay really opens Nextech 3D AR technology solutions to new substantial markets for use by creators, brands, and companies. So it really extends our reach much much further beyond just e-commerce even though that's huge uh we actually think that there's even more potential with arway we've always been focused since day one on increasing shareholder value uh which is why we announced the spin out of arway in june the spin out will result uh in our arway being a standalone public company And we believe it'll be the first publicly traded pure play spatial computing platform, which is quite exciting for our shareholders. And I am pleased to update that we are working diligently to bring this transaction to market. It's quickly moving forward and is anticipated to start trading in October on the Canadian Securities Exchange and shortly after that on a US exchange. When the spin-out is completed, Nextech will receive about 20 million shares that will be issued. Four million of those will be distributed to Nextech shareholders on a pro-rata basis. So if you own shares in Nextech today and you own shares in Nextech when we spin out ARWay, you will get a share for free. in the new public company called arway this will give next tech shareholders ownership and yet another exciting public company with a spatial computing platform which i believe is perfectly positioned for growth in again the rapidly emerging web 3.0 world there will also be zero dilution to the holdings of next tech shareholders as a result of the spin out I believe the true value of ARWay's business and technology will get the recognition it deserves and see a positive revaluation, which will benefit Next Tech shareholders, which will continue either through their indirect ownership through Next Tech. Next Tech will remain the largest single shareholder of ARWay or through the shares they get through their dividend. I'm quite confident that the spatial computing is the technology of the future. It's the next big thing that possibly even bigger than 3D modeling. And I think it could be the most important technology breakthrough in the 21st century because spatial computing essentially merges many disruptive technologies, including 3D models, augmented reality, VR, AI, and all the Web 3.0 technologies. It expands the concept of traditional computing by adding a 3D object's location in space in relation to other objects or locations. And so when we look at that, we look at our 3D models, and so we've integrated our solutions where you can now be in a spatial map and populate that spatial map with the 3D models that we make for our e-commerce customers, setting the stage for additional business from our e-com customers that also have brick-and-mortar stores. So, again, we continue to combine tech, integrate tech, and create new tech through those integrations and ultimately creating our moat with this end-to-end solution for creators and brands that's really unseen anywhere else. If you look at our future, ARWay is only one of many assets that Nextech has incubated with the potential for the development into commercial stage businesses. And so as ARWay, after ARWay gets spun out, there's a plan to repeat the business model with some of our other assets, continuing to increase shareholder value. That is the key. MapDynamics is another one of our portfolio companies that we are steadily growing. The self-serve event management software solution creates floor plans. You can have ticketing happen if you have an event, a live event. You could buy tickets on MapDynamics. You could buy a booth on MapDynamics. And we're seeing a rapid growth in that business. And obviously, one mapping technology merged with the other mapping technology creates synergies, synergies that create value. So we have integrated AR wayfinding into MapD so that we now have over 800 customers that we can sell our wayfinding to for live events. We've already done this for Restaurants Canada, for the Restaurants Canada RC show back in May of 2022. So we already have a contract with Restaurants Canada. We've already mapped out quite a large event, the largest restaurant gathering event in Canada. And we were able to do that by combining our technology. So quite an exciting time for MapDynamics. Moving right along, we are transforming and moving to become a pure play technology company. We've announced earlier in this summer, back in June, that we are positioning the company for the next level of growth. All the stuff that I've been talking about, transforming our operations with renewed laser focus on web 3.0 and our SaaS business. And with that, we have been winding down our legacy vacuum cleaner market e-commerce business. This transformation is the next logical step. It does also represent, when you look at our quarterly numbers, you do see the numbers going down, but that is strictly because We are getting out of the e-com business and not, we've taken our foot off the gas and we're exiting that. And so if you think about that, you're going to see a reduction in our product sales business, but you will see a growth, extremely rapid growth in our 3D modeling business. So it's important that everybody understand that they're not related. And so as we continue to gain traction, signing new deals, winding down our legacy e-commerce business, we're now solely focused on our fast-growing scalable business, which is our 3D modeling technology. In closing, the first half of 2022 has been challenging. As a shareholder, we all watched small cap stocks get crushed. We watched the market get crushed in the first half of the year, which included Next Tech. But the strong companies always bounce back. And I think we have only seen just the beginning of our bounce back. 2022 is proving to be a substantial year of growth for our key growth driver, which is 3D models and augmented reality. Nextech is fully focused on obtaining greater industry leadership and penetration and becoming the world's leading 3D modeling company, if we're not that already. To do this, we've made crucial business decisions. As mentioned, winding down our legacy VCM business, which will result, again, in short-term reduction of our revenue. But again, don't be alarmed. As this was all planned and anticipated, we are now going to be replacing the legacy revenue with pure 3D AR revenue, which we expect will eclipse our vacuum cleaner revenue in 2023. We continue to integrate AR-type 3D with third-party e-commerce platforms and roll out our SaaS self-serve products to increase scalability. I believe all these decisions will pay dramatic dividends as the market is finally aligning and soon will recognize the value of Nextech's groundbreaking Web 3.0 technology and solutions. The company and I are also doing everything we can to bring shareholder value, to increase shareholder value, and this is why, again, we've decided to spin out ARWave. web 3.0 and the metaverse is a multi-decade multi-trillion dollar mega trend and our technology which includes 3d models augmented reality and spatial mapping are the gateway next text capture of the market share within this burgeoning industry is just getting started and i've never been more excited and confident about the position our company is in and the opportunity we have before us. Before turning the call over, I'd like to thank our experienced executive leadership team for their hard work and dedication, and thank every Next Tech AR employee working day in and day out, striving for success to achieve our company's goals. I would also like to personally thank Paul Duffy for his massive contributions to Next Tech as president and chairman of the board. He and I have been working together for the past four years, and we are expecting to continue working together on ARWave. So that Paul can focus, I've asked him to step down as chairman of the board where I will fill the role, and he will become the chief metaverse officer of ARWave, which is hugely positive for the spin-out and for Next Tech shareholders. I have full confidence in our company's direction, and I am looking forward to our continued growth in 2022 and beyond. With that, I'm going to turn the call over to our Chief Financial Officer, Andrew Chan, to provide further commentary on the quarterly financials. Take it away, Andrew.