Nextech3D.AI Corporation (NEXCF) Earnings Call Transcript & Summary

[ Evan Gappelberg, CEO, NexTech AR ] Solutions will be here for 30 minutes, and he will be answering any questions at the end of his presentation. Evan, take it away.

Great. Thank you very much, and welcome, everybody. As we all are aware, there's a lot happening in the world. And I figured I would just mention that the business that NexTech AR Solutions is in is augmented reality and 3D models for the e-commerce business. And that business is, I would say, recession resistant. In fact, during COVID, we saw a massive uptick in e-commerce. So it's a bull market, and it's an exciting time for NexTech AR Solutions. So let's jump into it. This is just the disclaimer. This is some of our blue-chip leadership team. You'll see we have executives from SAP, Huawei, Ernst & Young, Microsoft, Google, Teradata and some hardcore entrepreneurs like Paul Duffy and myself. If you look at some of the relationships that we've been building, we -- partnerships with Microsoft, Ericsson, Singtel, Azure, and we have integrations so far with Shopify and SHOPLINE, which we've recently announced, and we're building our integrations with BigCommerce, WooCommerce and Magento so that we will be visible everywhere in the e-comm ecosystems so that the millions and millions of e-commerce site owners will come to NexTech as their 3D model factory. If you look at our customers, it's a who's who, Fortune 500 companies, as well as even the government of Canada. And some of our marquee names, we have Pier 1, Sears, Kohl's, Kmart Australia, CB2 which owns the Crate and Barrel brand, and IKEA that purchased 3D models from us and subscribed to our augmented reality for e-commerce platform. So our 3D model factory is the story here. It's powered by artificial intelligence. So AR on itself is an interesting technology, but AI plus AR is when the magic happens. It allows us to scale our 3D model creation capabilities beyond what our competitors could do today. And that is huge. So if you look at ARitize 3D, ARitize is our brand. If you search ARitize online, you just do a Google search, you'll find all of our products. It's an AI-powered 3D model creation factory that can scale the production of 3D models. So we could take a 2D image off of an e-commerce website and turn that 2D picture into a 3D model using AI. It's currently available right now as an app on Shopify. High-quality models, very scalable, and we believe we have disruptive pricing as well. And here's a video to kind of show you how it works. [Presentation]

So as you see, the model allows you to view the [ 3D assets ] in your room, which is a key piece of shopping online. You no longer have to guess if this is the model that's going to fit in your space. If this chair will fit in your room, if the style is right, the color is right, the couch is right, you can actually see it for yourself using augmented reality, and it reduces returns dramatically. So it's a big win for e-commerce sites. ARitize CAD is another 1 of our proprietary products. We could take CAD files, which manufacturers across the globe all use. It's a standard file for manufacturers, and we could convert those into lightweight poly 3D models. It's an end-to-end solution for manufacturers. You could scan the QR code on screen here. We created this Ford EV Mustang Mach-E for Ford for 1 of their car shows, and I'll just show the video. [Presentation]

So what you're seeing is our 3D model in augmented reality. That's not a real car. You can see the quality in the detail of this 3D model, very high quality, very photorealistic and super exciting for us to be a part of the Mach-E journey. Then move to the next slide. So the big problem in the world of e-commerce is that there's $1.47 trillion in returns globally. That's a huge, huge number. In the United States alone, it's $170 billion. I know that I get boxes -- when I buy furniture, I get boxes delivered to my house, you open the box. And if it's the wrong color or the wrong size or the wrong shape, you just call them up and return it. Oftentimes, what happens is they tell you to just keep it because it costs more money to actually return it to ship it back than it does for them to just tell you to keep it. Using augmented reality, having a 3D model, where you could view it in your space, try before you buy, really speaks to this $170 billion in return problem and reduces returns by up to 80%, which is huge. If you look at 3D asset creation, everybody wants them. The problem is nobody can scale. Nobody can produce hundreds of thousands and millions of 3D models. Right now, the global demand is north of 16 million models. It's actually closer to 400 million 3D models, which is a huge, huge number. So right now, historically, it was very time consuming to produce the models. It required technical talent. The quality was inconsistent, and it was expensive, not scalable. Enter NexTech, we've created a way to scale the production of 3D models using AI. If you look at e-commerce, it's the perfect product market fit, 94% higher conversion rates when customers interact with products in augmented reality, 61% of consumers prefer retailers with AR, 40% reduction in returns. Again, our customers are at the bottom. If you look at our solution, we're offering an end-to-end solution. Our competitors do not offer the end-to-end solution. They might offer 1 of these things, but they don't offer the whole end-to-end solution. So we create the 3D model. We host it in our cloud and then you have a configurator, animations, product hotspots. All these are add-on features that are essentially upsells. We then offer a viewer where you could distribute your augmented reality on your website using WebAR. There's no app required. We have a decorator. We have an ad configurator. And ultimately, all these things combined represent a one-stop shop, end-to-end solution for an e-commerce site, which transforms their business and really takes them into the metaverse, which they all want to be a part of, and NexTech is really the only company that can actually take them into the metaverse. So AI-powered. Again, I cannot stress enough that AI is our secret sauce. We create our models using AI, we also have product hotspots, animations, 360 exploded views, color configurators, room decorators, virtual staging, 3D carousel, 3D [ fluoro lights ]. Nobody has and I mean nobody, none of our competitors have the breadth of product offerings that we offer in the e-comm space. And we're just going to walk through this and show you some videos. This is the product hotspot demo where you literally have these little buttons on screen, and you could see those little dots give you a description that you can actually see what the product's made of or where it's made or what's so special about it. This is an animation. This is 1 of my favorite videos because it shows you not just a product, but how the product works. And so we do that as well. This is a 360 exploded view. So if you have a product that you need to kind of see the inners of, you would contact us and we would be able to create this experience for you as well. This is another 1 of my favorites. It's called the configurator. Everybody knows there's different colors for the same product. So instead of having to make -- if there's 6 different colors, let's say, of the shell of this hot tub, well, you could make 6 different models or -- which cost a lot of money or you can just use our configurator technology, which is just software that changes the color by clicking a button without having to create 6 different models, you just have 1 model and the configurator. You could see the color changing. You could see the shell inside changing. All that's possible just through pure software, the 1 model and you can have almost unlimited configurations of that model. This is a 3D carousel. So instead of your product picture, you can insert the 3D model into your carousel. If you're an e-commerce site owner, you'll know what I'm talking about, that carousel is a big part of their selling experience. We also have the ability to virtually stage product so that you could insert a 3D model into a product picture. So you could take a picture of your living room, of your bedroom and insert a bed or a couch into that picture using our virtual staging technology. This is also 1 of my favorites. This is a swirl ad. So on your website, you can have the 3D assets spinning in a banner. Higher click-through rates, lower returns and super engaging. So as a consumer, this is the kind of experience I want when I go to a website, and I shop. And it creates FOMO where once your competitor has these swirls on their website as their banners instead of just static 2D images, you're going to want them, too. And that's what we're experiencing. We're experiencing a tremendous amount of demand in the market. It used to be that we had to sell people on these experiences. Today, it's more of a I must have it and just a negotiation on price. So that's a decorator or decorators. You could put multiple 3D assets in a room. So that's another upsell for us. So if you look at our total addressable market, it's huge. There's 7.5 million e-comm merchants, 400 million product SKUs -- if you look at our pricing, we basically set it up so that you pay us $250 per month for a 12-month contract and we'll create 25 3D models for you. Now to put that into perspective, our competitors charge $250 for 1 model, 1 model for $250, NexTech says don't pay us for a single model. We'll do 25 models, pay us $250 a month. Now we're partners with these e-commerce sites, they get to spread out their payments over 12 months. It's great business for NexTech because it's very sticky. Once you go 3D, you never go back. And it's great for the merchant because they get to manage their cash flow and ARitize their entire website on 1 easy payment. So 50 SKUs would be $450 a month; 100 SKUs, $800 a month. Thinking of it as $10 per model per month or $9 per model per month, if you go 500 SKUs, it's going to cost you $6 per model per month. And for NexTech, that's recurring revenue that turns into -- turns us ultimately into a cash cow. Tier 1, which would be the $250 per model per month. The total addressable market if we were able to capture it, our monthly recurring revenue would be $6 billion. Our annual recurrent revenue would be $71 billion. Tier 2, $8 billion and $97 billion; Tier 3, $11 billion and $100 billion. The point is these are big numbers. And all we need to do as a company is capture a small piece of that and there's an enormous amount of cash flow coming into NexTech. And we're already doing it. It's already happened. The train has left the station. Brands we work with. They're all highlighted here. There are some big names there and some medium-sized names and even some small names. So lots and lots of customers that we are signing up. And the reason is, is that we have disruptive technology, and we've disrupted the market on price and scale. We're the most affordable, as we just mentioned, we've broken down the price into a monthly small amount, and we're the most scalable solution. So if you want us to make you 500 models or 5,000 models, we can accommodate you. Our competitors cannot. They cannot scale and their price is much, much higher than ours. So it's giving us an opportunity to gain market share in 2022 and beyond. [indiscernible] is driving 3D adoption. Google is now ranking 3D models higher in their organic search. Right now, we are a partner with Google, and we've already indexed over 5,000 3D models with Google as their partner. Shopify, we're also partnered with them with our 3D models, your Shopify store will rank higher on Google and your models may even show up on the first page of search results. That's a quote from Shopify. That's not NexTech. If you look at Shopify and NexTech, we've integrated with Shopify in their app store, Q1 of 2022. So we just did this earlier this year. Shopify again, has come out and said the future of e-commerce is 3D. And for NexTech, we totally agree, and we are integrated so that if you have a Shopify website, you don't actually need to sign a contract with NexTech. You download our app, which is in the Shopify app store. You pay Shopify to $250 per month and Shopify pays NexTech, the $250 per month per 25 SKUs. It's as simple as that. And so it's a great business for us. We're doing the same thing with BigCommerce. I think over the weekend, I was told we signed up 7 new accounts, [indiscernible] Saturday and Sunday, all on the Shopify platform. So if you look at these on-screen images, you can take out your smartphone right now, hold up your camera, scan the QR code, take your phone and aim it either at the wall or at the floor in your room, and you will see magically the 3D asset, the augmented reality experience show up in your room. This really is just an opportunity for you to see how it works. The same thing with these assets. These assets were created using our CAD to POLY technology. As you could see, this is more like on the equipment side whereas the 2D to 3D is more on the product side, just furniture and things like that. This is a great video, which kind of speaks to our end-to-end solution critical to understand that we offer an end-to-end solution, one-stop shop. [Presentation]

End-to-end solution. So creating the metaverse, we have technology that allows us to spatially map a room. The metaverse really is the new Internet. It's enhanced to deliver 3D content. The key here is that when you look at where we are in terms of the history of the Internet. You had the Web 1.0, which connected all of us to information. You would go online and just search websites. 2.0, which social media connected us to people, to our friends and family, wherever they are. And Web 3.0 will connect all of it. It will connect objects, people and places in a 3D immersive environment. That is the metaverse. It really is the future of connectivity. We've been building the metaverse since 2018, content is king, and we have the 3D model factory. We produce 3D models of products, but we also can produce 3D human holograms with our ARitize hologram app. We could create avatars. We also have the ability to mint these 3D assets into NFTs, which we are doing. We use our spatial mapping technology to create a metaverse experience and then populate it with 3D assets. And that is unique to NexTech. Some of the other metaverse players are much, much bigger, Roblox, Microsoft, Niantic, Meta, Epic Games space. But these are all multibillion and even some of them are 1 trillion companies. Our market cap is now sub-$100 million. The metaverse in your pocket, spatial mapping app, ARitize Maps, this is launching very soon in the month of April. This is expected to launch, and it will allow for you to create your own mini metaverse. It's a creator tool and all you'll need is to have your own account, you log in -- we're going to have a premium model, so anybody can use it. And then ultimately, you can teleport into the metaverse using our ARitize holograms -- human hologram creator app, create your own hologram, be anywhere, anytime, no [ glean ] screen, all you need is your smartphone. It's amazing. This is a metaverse experience that we've already created. So we don't just talk the talk, we walk the walk. We have paying customers that pay us to create spatial maps and populate them. If you look at -- this is kind of a demo, but I'm going to kind of just jump to the next slide. So this is another mini metaverse experience. If you look at the map, you'll see on the left -- actually, I'm going to go back to screen. You see the -- all the white dots everywhere. That's our studio where we've mapped the space. And then you could see the little way-finding arrows. And there's the red circle as that's kind of the location. You could even see a hologram. It looks a little bit like a ghost inside of the spatial map. All of that uses NexTech metaverse technology, which is super, super cool. So NexTech's addressable market. ARitize 3D is over $100 billion; ARitize CAD, almost $10 billion; ARitize Maps, almost $100 million. So it's a couple of hundred billion dollars that we are going after. If you look at our growth, quite impressive, 2021 numbers were just the prelim numbers released today. Annual total revenue for 2021, $25.9 million, up 47% year-over-year. If you look at our renewable software license, that's a highlight, up 316% to $1.4 million. Our annual recurring revenue continues to grow. Our e-com business is stable and also growing. And year-over-year, 47% growth, not bad. As you look at our share price, we're at the lowest levels we've been at in over 2 years. We currently have just under 100 million shares outstanding. Market cap is just under $100 million. I'm the single largest shareholder. We're cashed up. We have roughly $15 million in cash, and we're super, super excited about the business that's ahead of us. And so I'm going to open it up for questions.

Evan, we have 2 questions here. What is the likelihood of being listed on the NASDAQ in the next year?

Very high. We are engaged with NASDAQ. We have applied and we expect to be listed.

Okay. And this next question is actually a 2-part question. Currently, what is the maximum number of 3D models that can be created on a daily basis? And other than more computing power, is there anything else necessary to scale higher from any production model?

Yes. So as far as the maximum number, I don't have an actual maximum number. The reality is that the technology to scale is not really more about -- it's not about computing power. It's more about the AI piece getting smarter. So AI, ML, machine learning, it's all about feeding that machine more and more products. So it gets smarter and smarter and better and better so that it could create these 3D models faster and faster with less and less human interaction. So that's really what's key. As far as the Shopify integration, we're seeing a dramatic uptick in customers. As I mentioned, we signed up 7 customers just over the weekend. So that's a lot to sign up when you're not even -- it's basically self-serve. So as we look at our patent portfolio, we are in the process -- we have a number of patents pending, and we're in the process of applying for a whole portfolio of patents related to our technology that we're building. And so we've waited to build our patent portfolio until we figured out what the tech was that was going to take us to -- into the metaverse and beyond. We now have it, and we feel very confident with our technology. It's -- we talk to all the biggest tech companies, the Googles, the Microsofts, the Amazons, of the world, even the Apples and none of them have figured out how to scale 3D modeling. So it's not like they figured it out. It's -- they're looking to us to figure it out. That's what has been going on in the market. In terms of monetizing our AR holograms, we're going to license. We're going to charge as people use the holograms. It will be a premium model. But ultimately, we're creating an SDK so that anybody can have human holograms in their app, and they'll basically be -- it will be a licensing type of plan. So as far as integration with wearables, yes, I mean, think of that as just the App store. There'll be an app that will be part of that ecosystem -- and so we will be integrated. Right now, we are integrated with Microsoft's HoloLens that already happened. And so there's that. And then as Microsoft comes out with there -- as Microsoft, as Apple comes out with their glasses, we will be integrating with those as well. As you look at our share structure, Currently, we don't have any intention of raising additional capital in the near term because as I mentioned, we're cashed up. We just raised money. So we feel comfortable with the next 12 months where we're going to be building our technology out, building our customer base up and keeping our costs under control which will allow us to keep our -- the number of shares outstanding at around the current levels. There could be some options or some warrants that get exercised, but we're not currently planning on another offering. So that's kind of where we're at.

Evan, thanks so much. We, unfortunately, are out of time, and I know that there are a lot of other questions, but -- to those who have questions that were not answered, you can leave them on the MeetMax website, and we can get them out to Evan. And perhaps we can set something for another [indiscernible] presentation meeting. But Evan, thank you so much. That was a great presentation. I actually clicked on the pink pocketbook. And I put it on my desk, and it really seemed like it was right there on my desk, and I must have it. [indiscernible] like this.

So you need to go out and buy it.

Yes. I will. I will. Thanks so much. Great, great presentation.

Thank you.

Have a great day, everyone. Thank you for joining. Bye.