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spk05: Hi, everyone, and welcome to Extract One's live third quarter earnings call for the fiscal 2023. This is Will Mays with RB Milestone. For those of you who aren't already aware, Extract One Technologies, formerly known as Patriot One Technologies, is a disruptor in the stadium and public space security industry with their unobtrusive artificial intelligence-driven weapons and threat detection systems. The company's shares are traded on the TSX under the symbol XTRA and on the QTCQX, the OTCQX under the symbol XTRAF. Join us today as the company's CEO and Director Peter Evans and CFO Karen Hirsch. Today's earnings call will include a discussion about the state of the business, fiscal quarter results, and some of Extract One's recent milestones. This will be followed by a question and answer session based on questions investors have sent in prior to and during the webcast. Questions can be submitted directly in the Q&A module. This call is being recorded today, June 8th, 2023, and will be available on the company's website shortly after the earnings call. Before we start today, I would like to note that all dollars are in Canadian dollars unless otherwise specified. Also, today's call contains supplementary financial measures. These measures do not have any standardized meaning prescribed under and therefore may not be comparable to similar measures presented by other reporting issuers. These supplementary financial measures are defined within the filed management discussion and an analysis report. Today's call may also contain forward-looking statements that are subject to risks and uncertainties that may cause actual results, performance, or developments to differ materially from those contained in the statements and are not guarantees of future performance of the company. No assurance can be given that any of these events anticipated by the forward-looking statements will occur, or if they do occur, what benefits the company will obtain from them. Also, some risks and uncertainties may be out of control of the company. Extract 1 has full disclaimer contained in their presentation. Today's call should be reviewed along with the company's interim condensed financial statements, management's discussion and analysis, and earnings press release issued today, June 8, 2023, and is available on the company's website and its CDAR profile. Lastly, RBMG is not a registered investment advisor or broker-dealer. For more information, please visit rbmilestone.com. And now it is my pleasure to introduce Mr. Peter Evans, Chief Executive Officer of Extract One.
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spk05: Peter, stage is yours.
spk03: Well, thank you, Will, and welcome to all our investors joining us today. We're looking forward to sharing a lot more information about our third quarter results and for the fiscal year so far and year to date and overall the progression of the business. Most important thing is to thank all the shareholders for their overwhelming support of the investment made by Madison Square Garden Sports into Extract One. Over 98% of our shareholders voted positively in support of the investment at the meeting of the shareholders in April of 2023. To me, it's personally gratifying to see that endorsement also from a much broader investment community for this partnership has been evidenced from the number of calls we've had with institutional investors. It's also gratifying to me to see that since January 1st, we've seen 150% increase in the overall company market capitalization, our company value. I thank our shareholders for their continued support and to assure the investors that creating shareholder value is our top priority for myself, for the executives, and the rest of the company. MSG itself has been an invaluable partner to us. We've had in a very short time since the agreement was signed and announced, they've become an immense network for us to leverage in the sports and live entertainment industry. And they've provided us very significant and key introductions and critical decision makers across the industry itself. We're very pleased to be engaging at this level with these kinds of relationships as facilitated by MSG. We're also thrilled to have one of the most globally elite organizations, MSG itself, in sports and in live entertainment as one of our customers, as our supporter, as a very, very strong advocate across the industry, and as an investor. And we're excited to partner with them on conversations that have already started about how we can focus on innovating and changing the fan experience in new and interesting ways. We're going to turn now to a little bit of a business update about what is happening with our business and how we've been doing so far in the past quarter. It's been a good quarter for reaching a lot of key milestones. Later, Karen's going to walk through our detailed financial results and talk about some of the financial trends. To start with, we had a record quarter for bookings. We more than doubled the value of signed agreements in the third quarter than we had in the prior six months of the fiscal year. That's worth repeating again. We did twice as much business in the third quarter as we did in the prior six months. And most compelling to me was the first quarter of this year was as much business as we've done previously in the entire year. This is a very interesting trajectory for me and one that we see continuing. With the planned deployment schedules for each venue, investigators can expect all of these bookings to convert to revenue within the coming months and quarters. And we look to see an approach that's essentially going to continue to double our installed base again in the near future. Based on these results and the successes we've seen so far this year and our ongoing engagements, we continue to be very, very bullish, and I personally continue to be very, very bullish on the outlook for our fiscal 2023 and beyond as we look into 2024. And we expect to see similar trajectories as we've experienced in this Q3 on the business going forward into future quarters. There are some key highlights of the quarter where investors have expressed a really strong interest to us in questions that were sent in before this webinar. And so let's talk a little bit about those. First is the overall business momentum. We just completed the strongest quarter for sales activities ever since the company's inception. The total contract value of new bookings in the first nine months of this fiscal year, 2023, was over 790% higher than the same nine-month period last year. That's essentially an 8x increase in overall bookings. This momentum is underscored by the fact that this quarter alone, as I mentioned, we doubled the total contract value of all the signed agreements compared to those agreements signed in the first half of this year. This to me is an incredibly exciting trend, and we're starting to see all the invested time converting into customer interest and closed deals. Given that Q1, as I mentioned, was equal to the entire previous year, and given that we've just doubled those results again, we do not expect this trajectory to abate in any way, shape, or form. We've come a long way from where we were when the company started a couple of years ago, when we started bringing and introducing the smart gateway to the marketplace. What is also very exciting to me is seeing the subscription revenues, the SAS monthly recurring revenues continue to build on themselves month over month over month, stacking up on more revenues overall. Customer pull is another key metric that people have been asking about and what is happening with momentum there. For customer pull, we set a strategic plan to grow the business in a very pragmatic and intentional manner, targeting very specific markets and segments and geographies in a very defined growth pattern. That market demand is pulling us even faster than we originally planned in the markets that we were previously waiting to mature. That's created some opportunities for market expansion. While our primary focus has and continues to be on the sports and live entertainment industries, a marketplace where we're hyper-focused and that has the very best product alignment with existing budgets that can be shifted over to the smart gateway product, we do continue to expand into other markets as pulled by those markets. In the past, we've talked about successes with customers like Kia and Hyundai in manufacturing distribution. Today, I'm going to speak also about the entry into marketplaces like schools, hospitals, and other market segments. This year, as we've talked about in previous investor calls, has been a year for focus on scale. With a product that's now viable in the marketplace, The focus has been to expand deployments, expand bookings, and operationalize the business to allow us to have cost-effective scalability of the overall business. This has been our theme for 2023. We continue to drive efficiencies across the entire business from building a very, very robust qualified pipeline and reducing the time to sales conversions all the way through the cost-effectively scaling manufacturing, installation, and ongoing customer support. You'll hear both Karen and myself coming back to this concept over and over and over again throughout today's call and other future calls throughout the year. While Karen will discuss the specifics, the headline that I have that's most interesting to me is that we've more than quadrupled the business while essentially keeping our operating costs flat year over year. Our focus on our business has always been on a very hyper-focused strategy. Our main business strategy remains the same. We will be the most innovative provider of patron screening solutions available with our smart gateway platform. And in that focus, the intent is to build upon aggressive growth of bookings on the Smart Gateway platform to scale our operations, to convert those bookings to revenue very, very quickly and as rapidly as possible, and then to provide world-class customer support to ensure our customers are fully satisfied and get value realization out of the solution we've delivered to them. This investment of time has resulted in a 0% churn of our customers today, and many customers are repeating and expanding their business with us. We've got a lot more here to cover, so let's kind of get into the details of it. As mentioned, the business does continue to grow. On the screen in front of you, you'll see a steep acceleration representing the total growth in sales. Last year, we experienced 240% growth in bookings compared to 2021. So far in 2023, the total contract value of these new bookings is the 790% higher, as I mentioned previously, than what we booked in the first nine months of last year. Since we first entered in commercialization of the Smart Gateway platform in the middle of last year, we've booked over $14 million of business, of which nearly $10 million has occurred in the first nine months of this year. At the same time, we've expanded our footprint all across the United States, and we now have customers in more than one-third of the states. So to say that the business momentum is growing, to me, is a vast understatement. I continue to be incredibly bullish on my outlook for the business, and as we sit here entering into Q4, there's nothing slowing down in our business model at all, our pipeline growth, our future pipeline, and the bookings pace. I suggest to everyone on this call that the trend that we're seeing on this chart is going to continue or to accelerate further. I'm also pleased to see that we have started to see growth in certain non-core specific market verticals. Again, when we started down this journey two years ago, We focus primarily on arenas, stadiums, and live entertainment venues. And that's where we put all our sales and marketing efforts with the operational costs that we could afford to invest. We've had successes, though, across a large number of public sectors. Whether it's organizations such as the investors who may recall our deployment with the Office of the Inspector General of Washington, We did this last spring, and we continue to work with the Department of General Services as they're now introducing our solution to many of the other federal organizations that they provide services for. Since that time, we've also expanded our customer list to include amongst others, those that have been announced, the announced customers, folks like the Lakewood School Board in New Jersey, or the City of Phoenix Municipal Courts in Arizona, which is the fifth largest city in the United States, or Sentara Health, which is one of the largest not-for-profit healthcare providers in the Mid-Atlantic and Southeast of the United States. This demonstrates the continued advancement of our solution, the Smart Gateway, to now serve new market segments as we continue to innovate and refine the product to serve those markets extremely well. Most compelling to me, though, is that these organizations who evaluated us also evaluated other technologies. and they selected us based on a number of key criteria. And many of them have become advocates, promoting our product and our solution to other schools, other hospitals, and other organizations. Last week, I had the pleasure of visiting with one of our customers who is hosting a demonstration day to five other organizations in the same market segment, all of which are now compelling customers that we're engaged with today. Integrating new and progressive technology isn't easy, though. And in many of these kinds of buildings, environments, there's potential to be very, very challenging. We have a unique ability to provide a very flexible solution that adjusts to the customer's business model and their operational style. It's one of the things that differentiates us significantly versus others in the marketplace. Our approach at XPARC1 has always been to help these organizations to make the right buying decision and to deliver a high degree of customer satisfaction, turning them into promoters of the product, as I experienced last week, in the Northeast. We also continue to see success with customers in the sports and live entertainment sectors. We've not abandoned that. We've only accelerated. We're very pleased to announce some of our customers in the live entertainment venues with numerous venues, including Mount's Deals, such as Cross Insurance Center in Maine, the Simmons Bank in Memphis, Simmons Bank Liberty Stadium. I always get that wrong. in Memphis. And if the listeners in Memphis haven't had a chance to go to a showboats game yet this season, there's one more this weekend. Go and enjoy before we expand upon that deployment and allow people to watch a Memphis Tigers game for Memphis University. The sports and live entertainment sector continues to be our core area of focus and where most of our outbound marketing activities have been focused. We're working to claim a large share of a nearly $5 billion total addressable market in North America and potentially globally. The Smart Gateway was purpose-built for these markets and these environments and continues to offer customers in that segment a very unique value proposition that is unmatched by others in the marketplace today. as we continue to grow and scale and as we continue to put more and more innovation into the platform we will see the mix of customers become more and more balanced because of how those innovations serve these other market segments extremely well we also expect to see a pull continue from all these other sectors whether it's sports public and public sector services manufacturing distribution or commercial properties Until then, it's our intent to continue to build on the success and leverage our partnerships with people like OVG and Madison Square Garden Sports to elevate our position as the preferred screening solution of all sports and live entertainment venues, and to continue to provide exceptional service to all of our customers. At this point, I'm going to turn it over to Karen to take over some of the investors through our financial results for the third quarter, and then we'll be addressing questions that have come in from the web.
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spk01: Thanks, Peter. I'm excited to present our third quarter financial results for fiscal 2023. This quarter we've made some significant progress on several fronts, mostly on the revenue side that Peter talked about. So let's talk about revenue first. We've had continued growth in revenue generated from sales in our platform operating segment and our record quarter for new bookings. These wins, along with sales from earlier in the year, have contributed to a 285% increase in revenue for the first nine months of the year compared to last year. Revenue from the platform operating segment was almost $2 million for the first nine months as we continue to grow our customer base and the number of systems deployed. We continue to support two selling models for our customers, a traditional upfront model with ongoing services, and of course our subscription model, which has been very well received by the sport and entertainment markets in particular. As our subscribers continue to pay over their contract terms, the associated annual recurring revenue will continue to build, fueling growth and predictability in our revenue streams for future periods. These trends demonstrate the momentum that Peter spoke about and keep us really optimistic about the remainder of the year. During the quarter, Extract's innovation team continued to duly focus on supporting the internal platform development efforts, while also developing the AI-based solutions contracted through public sector agencies. However, due to the growing demand for our platform products, We've directed more of our AI technology resources towards supporting the continued development of our proprietary AI and machine learning capabilities and the enhancement of our gateway. Accordingly, revenue for the extract operating segment was about $387,000 for the first nine months of fiscal 2023, which is down from about $2.3 million for the same period last year. In addition to the shift in focus to platform development, This reflects the timing of certain contracts, including a million dollar contract that some of you may remember from last year with the Canadian Department of National Defense, which took place this time last year and was completed in May 2022. Not only do we continue to see significant improvement in revenue, We posted a record quarter for new bookings, which has had a dramatic effect on our contractual backlog and signed agreements that collectively totaled $11.6 million at the end of the quarter. This marks a significant milestone for the company as we start to ramp up our revenue in a meaningful way. Based on current market demand, we expect that this positive trend will continue in future quarters. As of April 30th, To 2023, we built the company's backlogs of sales commitments to over 3.6 million of fully deployed systems, along with an additional 7.9 million of sales commitments, which are pending installation. This contractual backlog represents revenue that will be recognized in future periods as we fulfill our obligations over the duration of the underlying contracts. The other side of the story involves operating expenses. While the company still remains focused on top line growth and continues to invest in targeted marketing activities to drive revenue, we are also working towards scaling our operations and improving our gross margins. Where appropriate, we have made progress redesigning internal processes to improve our operating efficiencies and optimize the value of our expenditures. The goal for these changes? is to ensure that we can scale in an efficient manner as the company focuses on balancing aggressive revenue growth with pragmatic investment into the business so that we can continue to support the needs of various stakeholders. This is reflected in the fact that we nearly tripled our total contract value in the last nine months and nearly quadrupled platform revenues relative to last year, all while holding cash-based operating expenses relatively flat. A lot of this was done by reallocating and optimizing the expenses across the company. Getting into some of the details, sales and marketing expenses were $1.8 million for the first nine months of the year, which is 26% higher than the same period last year. This increase relates to the company's intensified sales efforts and has provided the company with a favorable return considering the exponential growth in total contract value signed this quarter compared to last year. In general, we expect sales and marketing expenses will increase slightly compared to prior years as we continue to ramp up sales and marketing activities in response to the unprecedented market demand for our product and our venture into new market verticals. The company continues to invest in R&D activities to refine, improve and expand our platform solutions based on our technology roadmap and feedback from our customers. R&D costs, excluding the impact of grant funding, decreased about 14% relative to last year. This was primarily due to internal restructuring in the company over the last several quarters as we streamlined our R&D processes. We anticipate that R&D will remain at current levels or even increase slightly as we continue to deliver new and innovative products to our customers. We are first and foremost a technology company and will continue to lead through innovation. Personnel costs were 4.2 million for the first nine months of the year, up about 18% from last year. Most of this increase is related to continued investment in sales personnel to support our increasing base of customers throughout the United States. At the same time, we continue to focus on retaining our highly qualified staff across the company. and anticipate that over the coming quarters that our headcount will increase by perhaps 10 or 15% as revenues continue to grow and our business operations adapt to meet the demands of our customers. I'm very excited about our progress this quarter with record bookings that translate into a solid contractual backlog and ultimately into predictable growing revenue. As I've said before, we continue to focus on scaling the business with smart, sustainable growth and operational efficiencies. We've increased revenue in the platform operating segment by 285%, with a modest 10% increase in the segment's cash-based operating expense. This is a trend that we're targeting to maintain as we start to move towards achieving cash flow neutrality and maintaining growth in the business in a balanced manner. Finally, let's take a look at cash flow. During the first nine months of the year, the company had positive cash flow of 2.3 million compared to 1 million last year. In part, this was due to the completed investment from MSG Sports, which I was pleased to see that more than 98% of shareholders voted in support of the second tranche of the 13.4 million investment which was made to support the continued growth of the company and to strengthen the company's balance sheet. As Peter mentioned, MSG Sports continues to be an incredible partner and has made key introductions throughout the sports and entertainment industry. Their support has validated us in the marketplace, both with customers as well as within the broader investment community, and as evidenced by the increased stock price since the MSG deal was first announced. Cash used in operating activities for the first nine months of the year increased by about $740,000 compared to last year, excluding working capital and the $3.3 million of grant funding which was received in fiscal 2022. While our cash used in operating activities increased a modest amount, the results from our sales activities improved dramatically year over year. The company remains focused on cash management and obtaining the most value out of every dollar spent. In summary, we're very pleased with the growth we've experienced so far this year, but we're not done yet. We see ourselves on an upward trajectory in terms of the number and value of contracts signed and units deployed. Throughout this call, we've reiterated our focus on continuing to scale the business by accelerating top line growth while still containing expenses. As our subscriber base grows, we expect our backlog of sales commitments will continue to increase and provide investors with predictable recurring revenue. It's an exciting time to be part of this growth journey at Extract One, and I look forward to sharing more milestones with investors in the coming months. With that, I guess Peter and I welcome any questions that investors may have.
spk05: Great. Well, thanks, Peter and Karen. We have received a number of questions from investors, so let's try and get as many of these as we can answered in the remainder of the time we have. First question comes in. The question comes from an investor who's looking to gain more information on the company's marketing strategy, specifically for customers not in the sports and entertainment industry. The question is, you spoke about some expansions into other sectors. I'm wondering if you can provide more information on the company's marketing strategy for industries outside sports and live entertainment.
spk03: Sorry, I was muted there, Will. Thanks so much for the question, whoever sent that in. Let's talk about marketing. Marketing is something that's actually near and dear to my heart, having been a CMO of four publicly traded companies. So let's jump into the reality of how marketing works and how marketing doesn't work and see if we can put some of the chatter to rest. We have focused very much on sports and live entertainment. Very simple reason why. Most stadiums, arenas have walked through metal detectors, have a security staff, have security budgets, have patrons who are used to being screened. Very easy for us to go in and shift their spend to something that is better, faster, cheaper and an overall better experience versus say going after a segment like hospitals or schools where there was no budgets, no security staff, very complex decision making. which could take months or years to work its way through. A year or so ago, we saw that the schools, for example, might have been exploring, might have been thinking about it, but none of them had budgets. And so we could spend a lot of marketing dollars marketing to them, but your marketing is someone who has no money. So probably a waste of time and a waste of money if we think about it. Things have changed, particularly in the last six to nine months, probably the last four to six months. All of a sudden the shift has changed with schools and it's changed with hospitals as we've seen accelerated growth. you know, weapons threats in those industries. So accordingly, it's now the right time to focus on adding some of those segments to our marketing efforts. And we're doing that. And when we do these marketing efforts, we're going to do them in a proper B2B business manner. That doesn't mean putting ads on TV because you're going to B2C to millions of consumers that cost millions of dollars. The best way to engage these marketplaces is go where they go to learn more. So if there's a particular trade show where the chief security officer of the average school goes, we will be there. If there's particular publications they read, like the one that we had a story in last week, we will be there. If there's particular things that we can do in digital marketing to find out what are the keywords they search on, Do they search for weapons detection? Do they search for metal detection? There's ways to set up your digital marketing activities to engage and ensure that you're top of the search engine from what the words are that the chief security officer for a school, which might be different than a hospital, searches on in order to drive them to our website and drive them to us. we've seen a significant uptick in our engagements with schools hospitals and others as we've been launching these campaigns in the last three to four months and they're starting to show great dividends so uh while we had an initial focus on those segments who were writing checks when we first went on this journey about two years ago we're now expanding to do marketing efforts specifically targeted at those marketplaces where the decision makers go make their buying decisions Will, next question.
spk05: Great. Thank you, Peter. The next question is in relation to the company's reported revenue. We've actually had a couple of questions come in on this, so I'll try and combine the two. This investor is asking for information regarding the breakdown of revenues. The question is, it's great to see the steady increase in revenues quarter over quarter. Can you provide more information as to how much revenue is recurring? I'm going to combine that with another question, which was really related. It's the timing of bookings versus revenue. So I think some investors would like some insight into really how we're booking revenues.
spk01: I can address probably both those parts of the question. I think it's an excellent question. We've been very vocal about the need for stable recurring revenue. And I think in answer to your question about how much of its recurring revenue is really dependent in changes from month to month, depending on the sales agreements that we sign. As I mentioned before, we have both the upfront purchase, which we love the related cash that comes in, as well as the subscription model, which comes in more over time and is that reoccurring revenue that we're talking about. As it stands right now, about 70% of our customers opt for the subscription agreement or the arrangement. but only I would say about 45 or 50% of our revenue at this point is considered recurring revenue. And that's because the percentage continues to change from quarter to quarter as we have a different sales mix. But in general, I think as we add more and more subscribers and we anticipate that we will have both an increase in the proportion of revenue recognized as well as the dollar in our overall overtime. The other part of the question was regard to, I guess, bookings versus revenue. So if you think of it this way, when a contract first gets signed, it gets considered a booking for us. To fit into our actual contractual backlog that you see in our financial statements, that booking, we choose to wait until that booking is actually installed and starting to do and starting to bill from a revenue standpoint. And so that's the difference between the booking and then the contractual backlog. The revenue actually gets recognized either upfront if it's that kind of contract or over time for a subscription revenue as governed by accounting rules. And so you'll just see the revenue start to come in And each one grows month after month. And as you add more subscription, then you starting to recognize revenue on more and more contracts. And that's where you're starting to see this momentum that we're showing in our financial statements.
spk05: Perfect. Thanks, Karen. That's very helpful. Next question is in regarding the product roadmap for the company. The question is, it's great to hear about all the success from about smart gateways. Can you share the company's vision for its suite of products?
spk03: Yeah, sure. So there's a couple of things we can say, a couple of things I won't say. Last thing I want to do is tip off our competitors about the kind of innovations that we've got that we're working on. But, you know, we're building our business primarily around smart gateway today, right? And the marketplace, the customer is speaking to us, they're talking about kind of what the product is today and what they need of it in the future. For certain specific segments, we mentioned health care schools and others. There are certain things that they are looking for specifically to make the product that much better in their environment. And we'll do that. We'll innovate around that. One of the unique things about what we do with our platform is it's very software oriented. So it allows us to uniquely say yes to our customers when they have an idea. When I think about the relationship with Madison Square Garden, we went back in there numerous times and they'd always say well can you do x and 30 days later we'd come back and deliver x and then they say can you do y and we'd come back and deliver y and so that relationship and the ability to show the extensibility of the platform the ability to say yes to customers is what create a lot of stickiness for us not only with customers like madison square garden but also for some of these schools and healthcare oriented product customers You know, the platform itself is very extensible. We can do amazing things with that software. It's not a one trick pony like other solutions throughout the marketplace. Right now, we monitor the entryway of every venue. But if you think about the patron experience, you can start to get very creative and say, well, what if I can identify individuals and their VIPs? I want to treat them differently or they're restricted from entering the venue. We can do that with our software and we will. We can also look at integrating other things like ticketing solutions or a different set of capabilities for ingress versus egress. When I start to think about manufacturing sites or retail or distribution and things like that. So there's a really rich and robust set of features that we can deliver on. The cautionary note is, you know, we can add layer and more and more of these highly profitable recurring revenue software-based SaaS offerings onto our install base, but we can't do everything. We took a strategy two years ago to be very, very hyper-focused, and we actually reduced the portfolio significantly. So we didn't have too many things that cost us too much cost to support, to maintain, to install. So we're going to make judicious investments where we see an opportunity for accelerated value to the customers and to be able to say yes to them if that thing they're looking for actually has broad applicability to every customer in the segment. If retail store number one is looking for something, we can deliver it and we believe 50 others are looking for it. Then it makes a lot of sense for us to invest and accelerate the revenues that we can drive on top of the installed base. Ultimately, the goal is to introduce all the new functionality we can to the platform and increase the overall customer lifetime contractual value that gets delivered to us for every installation.
spk05: Perfect. Thank you. Actually, a bit of a follow on here that came in asking, what are the plans for maintenance to the system? Does extract plan to sell service contracts?
spk03: We do with every sale. Most customers will purchase not only the hardware and the software for us, but they purchase multiple years of annual maintenance, software licensing, extended warranty and things like that. That all is contributed into some of the bookings backlog that Karen referenced earlier.
spk05: Great. Great. Thanks. We had a couple of questions actually come in from Kip Herridge at VRA Insider. He's asking, are there plans to list X1 shares on the NASDAQ in the U.S.? And what might that plan look like?
spk03: So we answer this a couple of times, Will, on a few of the other calls, but let's talk a bit about it. I think it makes perfect logical sense to move up to NASDAQ. I think it makes a lot of sense overall. We have a lot of demand in the US now for extract one shares. There are some organizations, though, who for sort of reasons may or may not want to buy shares OTC or off of the TSX. It's interesting to me, though, with our renewed focus on driving up the share value, that we've seen a significant increase of the liquidity of the stock. And there's actually more shares being traded in the U.S., even though it's OTC, than there is on the TSX. So that tells me there's a lot of pent up demand for our solution or for our shares in the U.S. So it makes logical sense to move to NASDAQ as quickly as we can. But that is not a simple task. You don't simply call up 1-800-NASDAQ and get listed. There's a lot of work that needs to be done in terms of financial preparedness, in terms of documentation that needs to be prepared. And most importantly, we want to make sure that we have got a repeatable, predictable business model so we can provide very accurate forecasting in terms of a number of different metrics for the business. I think as everyone knows, if you miss your numbers on NASDAQ, it's less forgiving than the TSX. And the last thing we want to do is uplift the NASDAQ and be an orphan. So we're going to do this judiciously at the right time in the right place when the business is ready. And we show that continued growth quarter after quarter after quarter.
spk05: Perfect. Kip's follow-up question here is, With X1's growth curve and the potential to go parabolic over the coming months and years, please explain X1's SaaS model and your goals for recurring revenues over the next one, three, five years. Finally, please explain the valuations typically assigned to public companies that use a SaaS model and what that might mean for the share price going out one to five years.
spk03: Yeah, so, first off, thank you, Kip, for your question. Really appreciate your newsletter. It's a very valuable one. Parabolic, that's a great way of describing what we're doing these days, but I'll take that. In terms of the SaaS model, Karen talked a lot a bit about that. I personally like SaaS models. They're the gift that keeps on giving. You sign a deal with a customer for $300,000, well, that maybe creates a spike in revenue. Or you sign for $10,000 for each of 36 months, and every customer, you just stack another $10,000, another $20,000, another $5,000, another $8,000. And every month, you start the month with revenues already booked and in hand and delivering value to the company. So SaaS has a lot of predictability to it. The marketplace likes it, and they give much higher valuations to shares that are SaaS models because of the predictability of revenue versus the choppiness that could occur with one large contract or not. There's a lot of ways to value SaaS companies, but there's a lot of different metrics that go into it. What's your growth rate? A lot of people talk about the rule of 40. And if you think about the numbers around the rule of 40, we're actually in a very, very good position. What does the multiples you'll see for a SaaS company? It varies. You could see it as low as 3x. You could see it as high as 15x. It depends on a number of different factors that go into the company. Most importantly, though, being the growth rate. Sitting at a 790% growth rate, I think that's a good number to start with when you start valuing a company like ours.
spk05: Fantastic. Thank you, Peter. And we have time for one more question here. The question is, can you please outline some near-term milestones that investors should expect to see in the next 6 to 12 months?
spk03: Sure. Let's start with DHS. I don't think a day goes by that I don't get about 10 questions on DHS, 10 different conversations on DHS, 10 different teams asking about DHS. It's critical. It's very important. And we are deep, deep, deep in the process on DHS right now. You know, this is probably the number one most significant milestone that I have my eyes set on and the whole team is very focused on right now. We've been working relentlessly towards this goal, at least for a year. Most investors know that when we get this award from DSS, it's going to unlock a whole lot of market that is pent up and waiting for us. And, you know, prospective customers who, you know, are looking for yet another proof point of the efficacy of our solution. So it's there and I'm pleased to say there are customers who are waiting, knowing they want our solution and knowing that they will deploy it once we have DHS. So we've got a nice kind of backlog based on that DHS certification. All right. The thing that we see the most and what I think a lot of folks don't understand is DHS is not simply filling out a form, doing a test and you're done. It's a very, very, very lengthy and rigorous process. Right. Also, the DHS has tightened up the process for the Safety Act award. There have been technologies that have passed through the process when there was no definition or standards or certifications for the award that were in place yet. Right. And some of those technologies have subsequently proven to have failed. So, you know, the DHS is tightening things up and made sure that it's a very, very rigorous process before they actually apply an award. You know, so you don't simply fill out a form and voila. The process now digs deep into every aspect of business operations, who your suppliers are, who their suppliers are. What's the QA on the manufacturing process? Where do you source the parts? The resumes and the screening process for hiring employees to ensure you're not hiring bad actors. Every aspect of the business operations is scrutinized as part of DHS Safety Act certification. The good news is we're doing very well. We submitted our application at the DTED level. That was accepted, but the volume of feedback that we had from our customers who had continuously tested our product was such that the DHS came back to us and said, we think you need to submit it at a higher level. And so we have. And so now we're just working through the mechanics of answering any questions to ensure that we get that award as quickly as possible.
spk05: Perfect. Well, thanks, Peter and Karen. And thanks again, everybody, for joining today's earnings call. The recording of today's call will be soon available on Extract One's website. If you have any additional questions, I know there are several that were asked that we were not able to get to. Please feel free to send them in via email to Extract One. That's extract the number one at rbmilestone.com. That concludes today's call. And I hope everyone has a great day.
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