Xtract One Technologies Inc.

Hi, everyone, and welcome to Extract One's live year-end earnings call for fiscal 2023. This is Will Mays from RB Milestone Group. 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 through their unobtrusive artificial intelligence-driven weapons and threat detection system. The company's shares are traded on the TSX under the symbol XTRA. and on the OTCQX under the symbol XTRAF. Joining us today is the company's CEO and director, Peter Evans, and CFO, Karen Hirsch. Today's earning call will include discussions about the state of the business, annual financial results, and some of XTRAF1's recent milestones. This will be followed by a question and answer session based on the 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, October 19th, 2023, and will be available on the company's website after the earnings call. Before we start today's call, I'd like to note that all dollars are in Canadian dollars unless otherwise specified. Today's call contains supplementary financial measures. These measures do not have any standardized meanings prescribed under IFRS and are therefore not may not be comparable to similar measures presented by other reporting issuers. The supplementary financial measures are defined within the company's filed management discussion and analysis. Today's call may also contain forward-looking statements that are subject to risks and uncertainties that may cause actual results, performance, or developments that differ materially from those contained in the statements and are not guarantees of future performance of the company. No assurances can be given that any of the events anticipated by forward-looking statements will occur, or if they do occur, what benefits the companies will obtain from them. Also, some risks and uncertainties may be out of control of the company. Extract 1 has a full disclaimer contained in their presentation. Today's call should be reviewed along with the company's annual financial statements, management's discussion and analysis, and earnings press release issued today, October 19th, 2023, and is available on the company's website and its CDAR Plus profile. Lastly, RMG 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 ExtractOne. Peter, the stage is yours.

Thank you, Will. And thank you so much and welcome to all of our investors joining us today. It's always a pleasure and very exciting to me to be able to do these earnings announcements, particularly when we had such strong results. We're going to share a lot more details about those strong fourth quarter results, which has ended up in a milestone year for the company. Overall, it's been a very good year. We experienced our very best quarter for deployments and new bookings to cap off a record year of revenue. Revenue grew 365% for our smart gateway platform operating segment year over year. And this has been our focus. And as a focus, we can see the results and the outcome as we'll talk a bit about more today. In the process of driving growth, we've added dozens and dozens of customers and continued our expansion into new market segments. We've also continued to build up our backlog of sales commitments, totaling just under $15 million at the end of the year. Setting itself for continued and growing momentum as we enter into fiscal 2024, as this backlog moves to get installed. With the aggressive deployment schedules planned, investors can expect these bookings to convert into revenue in the coming months and quarters as we will significantly grow our installed base of deployed systems. Based on these results and the success that we've had so far and our ongoing customer engagements, I want to emphasize that we continue to be extremely optimistic about our outlook going into fiscal 2024 and expect similar growth trajectories and growth rates for the business going forward as we've experienced in this past year. There are some key highlights where investors have expressed interest through the questions in understanding in greater detail. So I'll summarize a couple of those first and then we'll get into those details. First is the overall business momentum. We've completed the strongest year of sales activity since the company's inception. The total contract value of new bookings increased 344% year over year. This follows on the prior year where we grew 240% year over year. This momentum is underscored by increased demand in the marketplace for our solutions as customers see the clear benefits of what we're delivering and the tangible ROIs from our solutions. And those customers are in fact pulling us into the marketplace and into their segments much faster than we originally planned in our business model. We're also very excited about this continued growth trajectory and the ability to continue to beat and exceed new milestones that we set for ourselves. The overall market expansion has changed too. While our primary focus started with and continues to be in the sports and live entertainment industries, where we have onboarded a number of key strategic partners, we continue to expand into other market segments, such as schools, hospitals, manufacturing and distribution. Today, I'll talk a bit about the immense benefit from the partners, people like Madison Square Gardens and the Oakview Group, and what they've done and they've provided to us as part of that partnership. I'm also going to talk a little bit about our latest partnership with the American Association of Professional Baseball. After that, I'm going to dive a little bit into success in these other market segments, as mentioned, like education, healthcare, and other public sector offerings. The other thing that I want to bring forward is our focus on scale. As a reminder, about a year or so ago, we talked about fiscal 2023 being the year of scale for the company. We continue to drive efficiencies across the entire business from building a very, very robust pipeline and reducing the time for sales conversions from opportunity to close deal. We did all this while cost effectively scaling manufacturing, installation and ongoing customer support. You'll hear Karen and me coming back oftentimes this theme today and throughout the year that we're driving significant increase in the business while keeping our operational costs flat or even down year over year. Karen will discuss those specifics in a little bit more detail. The net of all this is we've almost quadrupled sales for the business this year while keeping the operating costs flat year over year. We've got a lot to cover here today and a short period of time to do it, and we want to leave time for questions towards the end. So I'm going to jump right into a few more details here. The recurring theme from this past fiscal year is that the business has grown impressively over the last year. It's easily the best year in the history of the company. On the screen in front of you, you can see the steep acceleration representing the growth in sales. Those of you who were here last year on our Q4 earnings call will remember that we did experience that 240% growth that we talked about earlier. And that was in bookings compared to fiscal 2021. I'm incredibly pleased and very excited to share that in 2023, we accelerated that growth trajectory. further by increasing our bookings by a further 344% compared to last year. Since we first commercialized the Smart Gateway product, we've booked over $20 million of business for that product, of which approximately $15 million was from this past year, and of which $5 million was from this last quarter alone. That speaks to the continued acceleration and the growing exponential curve that we are on as a company. Demand for our solutions is accelerating along that curve, and we're seeing interest from multiple market verticals that are adopting our technology much faster than we'd originally planned. The key message of our fiscal 2023 results demonstrates that we are growing rapidly, and most importantly to me, that our technology is validated by some of the most compelling organizations on the earth. And the product is here to stay. I continue to be incredibly bullish on the outlook for the company, and I expect that the trend shown in this chart will continue and will accelerate further. Earlier this week, we announced our international growth plans in an announcement we made on Monday. On prior investor calls, I shared with the investors my overall business strategy, which was to stay hyper-focused on a specific market where we had a very tight and very strong product market fit. and to not let the company get distracted or stretched by trying to serve too many markets with too many products at the same time and being weak in all those areas. The approach and philosophy for international markets is the same. It's very complex and expensive to expand internationally. with the requirements for certifications and different certification requirements for every country, sourcing requirements, import-export requirements, tax laws, business constructs, support, partners, these kinds of things. It can be a very, very costly venture to enter into a new country to do business. I've always chosen to adopt a very pragmatic strategy and a very pragmatic approach to global expansion. Instead of dropping 10 sales guys into a country and hoping they sell something, The more important and the more pragmatic approach is to grow internationally based on winning a large critical account and using that account as the anchor, the foundation upon which to build a business. And that anchor funds the growth in that region. We've done exactly that with new recently announced global contracts that will deploy in Asia and in Europe. including winning the largest contract in the company's history, a three-year, $5.1 million US contract with a global entertainment organization. We expect that this contract will lead to further contracts, not only with that organization, but others of this caliber, as we've proven our solution is very reliable, very scalable, and we provide the highest level of customer support across the industry. We're going to continue to take the same pragmatic and judicious approach to growth. right, ensuring that we're delivering a highly predictable, high growth business model by being very selective about the markets and the customers that we choose to serve and we will engage where we see the business is highly accretive to our business plan and highly profitable at the same time. Along with this, we're gaining a lot of support of some of the most stalwart organizations in the sports, entertainment and venue management of businesses. with the support of two strategic partners that have been brought on in the last 12 months. Madison Square Gardens and the Oakview Group continue to be very strong partners for us and have opened doors to countless venues as strong advocates of our solution after testing and using the solution in their venues. In fact, over the last 10 months that we've been in Oakview Group's preferred patron screening solution, we've increased the number of units deployed at their venues by over 150%. and we continue to do so. These strategic relationships continue to provide us benefits and validate our position in the market as a top-tier technology partner. Earlier this month, we announced a new partnership with the American Association of Professional Baseball as their exclusive and preferred supplier for a league of their 12 teams. That organization has plans to continue to grow, and currently they welcome over 1.9 million patrons to their baseball stadiums each year. Through this relationship, we are engaging with multiple teams across the United States and Canada and look forward to delivering a fast, reliable and seamless patron screening experience for each of their venues. Those venues moving beyond just baseball and into many other activities with their fans and the folks in their environment. The future of these venues, alongside the aggressive growth plan of the APB, is very exciting and very interesting to me. Over the last 12 months, we've also onboarded a top tier list of customers across several market verticals. We're making very, very strong progress in our primary markets of sports and live entertainment, protecting venues that are homes of professional sports teams across the NHL, the NBA, CHL, WHL, OHL, and the USFL. Our systems are deployed at some of the most premier entertainment venues in the United States, like the Sphere in Las Vegas, Madison Square Gardens, the Beacon Theatre in New York, Radio City Music Hall, many of which are now live. And of course, the Moody Center in Austin, Texas, which was just named the best new venue of its size in America last year. We're seeing incredible successes in the sports and live entertainment industry due to our smart gateway, which was designed and built by customers and for customers with the needs of those venues in mind, and specifically through the feedback that we see from industry leaders about what they needed in order for our solution to fit their business needs. We're also expanding our customer base outside of the sports and entertainment markets a lot faster than we initially planned. This is due to the growing demand in these segments. During this year, we added a diverse set of new customers from a range of sectors. Organizations like Hyundai Transys in manufacturing, Lakewood Schools in New Jersey, where we're helping to prevent weapons from coming into the classrooms. We're also helping to protect healthcare professionals and their patients, partnering with organizations like Sentara Health. and even working with government agencies across the Department of Veterans Affairs, the Office of the Inspector General, and municipal governments such as the City of Phoenix. This is a mere subset of the organizations that we work with and those that we've publicly announced. I'm very pleased to say that we'll be able to grow in every one of these market verticals as this demonstrates the continued advancement of the Smart Gateway and its ability to fit multiple markets and serve a variety of customers from schools to hospitals to the places that we all do business. These are only a sample of some of the customers and we're pleased to say that we have a strong critical mass of customers in every segment. As satisfying as the fact, excuse me, I'm sorry, as satisfying as the fact over the past year, we've enjoyed repeat or follow on business from numerous customers. people have expanded their business with us and taken us into other venues this includes customers in automotive industries in schools in manufacturing and in the casinos and sports industries their satisfaction has translated to many customers not only expanding their business with us but becoming strong strong advocates and references of our business solution to others within their industry looking forward we One of the best gauges of future growth for the business is the quality and visibility of our pipeline. We're also seeing significant growth trends when we look at our sales pipeline, which was about 90 million at the end of 2023. The mix of our pipeline has shifted meaningfully over the past year. We're now about 40 to 50% of that pipeline is customers that are outside of what was our primary target market. effectively expanding our initial target of about a $4.6 billion TAM from the sports and live entertainment industries into a much larger $40 billion TAM that we're now aggressively pursuing, particularly with referenceable customers in those spaces. Now that we have those quality anchor customers in each of those segments who can attest to the value of our solution, we're accelerating our momentum into each of those segments and turning up the amplitude on the marketing and selling activities into those segments. At this point, I'm going to turn it over to Karen to take our investors in more detail through the financial results for the year.

I chose Wix for my business because of its massive scope for functionality and freedom of creation. Being able to integrate and change and develop at my own pace. I offer a range of products and services. To manage it all from one place is essential. It gave me time back in my day to get going on actual projects. It really just made everything feel more achievable.