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

Good afternoon, ladies and gentlemen. Welcome, everyone, to the NexTech AR Solutions Corporation 2021 Fourth Quarter and Annual Results Conference Call. [Operator Instructions] I'd like to remind everyone that this call is being recorded today, Tuesday, March 22, 2022. I will now turn the call over to Ms. Lindsay Betts, Head of Investor Relations at NexTech AR Solutions Corporation. Please go ahead.

Good afternoon, and welcome to the NexTech Q4 earnings call. With me on the call are Evan Gappelberg, Chief Executive Officer; and Andrew Chan, Chief Financial Officer. Today, after markets closed, NexTech AR Solutions Corp. released its financial results for the fourth quarter and year ended December 31, 2021. A copy of the earnings disclosure is available on our website and on SEDAR. Some of the information disclosed on this call is based on information as of today, March 22, 2022, and offers forward-looking statements that involve risks and uncertainties. Actual results may differ materially from those set forth in such statements. For a discussion of these risks and uncertainties, you should review the forward-looking statements disclosure in the earnings press release as well as in our SEDAR 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 SEDAR. Neither this call nor the webcast archive may be rerecorded or otherwise reproduced or distributed without prior written permission from NexTech. To begin our call, Evan Gappelberg, CEO, will discuss Q4 and 2021 highlights as well as any recent business development; followed by Andrew Chan, CFO, who will review our financial results and outlook. Finally, Evan will make closing remarks before opening up the line for a question-and-answer period. I'll now turn the call over to NexTech AR Solutions CEO and Founder, Evan Gappelberg.

Thank you, Lindsay. Good evening, everyone, and thank you all for joining us today. First, I want to thank all of our employees who are located across the globe, including Canada, the United States, Europe, Asia Pacific region for their continued commitment. NexTech's success throughout 2021 and now in 2022 is only made possible through the hard work, creativity and dedication of our talented and valued employees. Our culture of organizational learning and working culture that we've developed at the company continues to drive business excellence at NexTech. In 2021, we have emphasized the accelerating adoption and extraordinary demand that we experienced for our augmented reality and metaverse solutions, specifically in Q4. And it really was reinforced with new deals closing in Q4 for augmented reality and e-commerce solutions at a pace that the company has never experienced before. The demand for 3D models and augmented reality experiences is increasing globally across a multitude of industries including, but not limited to, e-commerce, manufacturing and education. And we believe that this will only accelerate throughout 2022 and beyond. Our company's mission is to build the first vertically integrated AI-powered 3D model factory for the metaverse. I'm just going to repeat that, that our mission is to build the first vertically integrated AI-powered 3D model factory for the metaverse. In 2022, we're going to strive to accomplish this ambitious but attainable goal. Revenue growth has been quite dramatic since I founded the company back in 2018. We've transitioned to a SaaS business model in Q4 of 2021, which is on full display now as we roll into 2022. The ongoing COVID-19 pandemic over the past 2 years has certainly caused a lot of volatility in the market and a lot of unknowns. We pivoted to a world of virtual events and really the whole world pivoted to virtual events and online shopping back in 2020 and even first half of 2021, which resulted in a dramatic boost in revenue for our virtual events and e-commerce businesses in 2020, in the first half of 2021. And as we previously mentioned, we have never considered this boost to our virtual events business to be permanent, and it really is not the main focus of our company going forward. While we have navigated the pandemic, we have always had an eye on the prize, on the bigger picture, which was always, since the founding of the company, augmented reality experiences and the monetization of 3D and AR solutions. Over the past 4 years, we've been investing heavily in our augmented reality and metaverse solutions, making transformative acquisitions and continuing our research and development activities to further enhance our technology stack. Finally, in 2022, we really have just begun to reap the rewards of these investments as the world has now woken up to the idea that 3D is the future of e-commerce. The business opportunity and the demand for NexTech to produce 3D models and AR experiences for the metaverse has never been greater. In 2021, the pandemic waned. And we saw the opening up of the global economy, which has resulted in a reduction of the necessity for virtual events and has impacted the entire virtual events industry as a whole. We have prepared for this inevitability by cutting our headcount substantially as our virtual events revenue growth leveled off. However, our live event business is alive and well and growing rapidly. We are a diversified company, which gives us the good fortune to be able to pivot resources, and we have moved our resources from virtual events to live events. We have moved some key clients from virtual events to live and hybrid events, which allows us to continue our momentum within the events business on our Map D platform. In 2022, we are seeing a healthy uptick in the live event business with our average monthly Map Dynamics revenue, which is our live event platform, increasing 78% since Q4 with the average Map Dynamics order increasing 16% compared to Q4 of 2021. Also, with our 2022 integration of Stripe, which we've previously announced of the Map D platform, we've seen further growth of high-margin revenue with these events. The Stripe integration provided an additional no-touch $760,000 in projected annual revenue for NexTech through a 2.3% platform fee when Stripe is used for boot sales, again, for these live events, which is a business segment that we own and operate and are growing currently. We expect this high-margin revenue to accelerate in 2022 as we introduce a new ticket sales capability, which will have at least a 2.3% fee which will take effect in April of 2022 or in the next few weeks. So we see that business as extremely strong, high-margin, profitable business that we are just starting to scale currently in 2022. Revenue from our AR solutions continues to rapidly accelerate the demand for 3D models for e-commerce, has increased as a new immersive and engaging way of online shopping has been introduced. Businesses are finally starting to recognize the benefits. And consumers are beginning to expect these experiences. In Q3, we announced our expectation to close 2021 with overall revenue in the $25 million to $29 million range. We closed out 2021 with a record-breaking $25.9 million in revenue, representing 40% year-over-year growth, which isn't too shabby. We are now signing up new accounts to ARitize 3D, which is our flagship product, our flagship product for producing 3D models. And we're signing up these customers for many different industries, including furniture, fashion, sporting equipment, pet wear, jewelry, eyewear, home goods, bespoke gifts, automotive and more, and we're experiencing a big jump in demand for our 3D model making solutions which we do not see slowing down anytime soon. We are already seeing our enterprise business, which we previously announced that Kohl's is our customer, Kmart is our customer, Pier 1 is our customers. We're seeing those businesses accelerate their order flow for additional 3D models. And we are also signing new deals with many small- to medium-sized e-commerce sites. In Q4 alone, we saw a substantial uptick in customer adoption of our technology that are either signing 12-month annual recurring revenue contracts or annual repeat customers that keep coming back because of our incredible customer service and product technology stack. So we have almost $1 million in annual recurring revenue or annual repeat customers. If you look at our renewable software license revenue, we pegged that at around $1.4 million in 2021, which clearly is the growth engine of the company, up 316% year-over-year. This, all of this, is truly a validation of our efforts to disrupt the emerging multibillion-dollar 3D model market with the highest quality, lowest cost, most scalable 3D model solution anywhere. All signs in 2022 point to being a historic and breakout year for everything 3D. 3D models for e-commerce, annual recurring revenue, that's our business as we go forward. That's the area of business that we believe can scale quite quickly and should be what investors keep their eye on to measure the health of the company and our growth potential. Since 2018, we have reported to investors dynamic growth and shown our ability to pivot while delivering on our promise for AR, for e-commerce and revenue growth, which is now accelerating into 2022. And really, all of that speaks for itself. We started out with just a kernel of AR in 2018. We moved into the e-commerce space in 2019. As we moved forward in 2020, we added virtual events into the mix and live events. Now in 2022, we are seeing the rapid acceleration in 3D and AR happening. And we strongly feel that the growth engine for revenue going forward will be our augmented reality and metaverse solutions. These solutions are being integrated to become 1 unified end-to-end suite of solutions called ARitize Metaverse suite, which we have previously demoed during an investor presentation and is expected to launch next month in April. We are focused as a company on the development and release of multiple first-to-market SaaS platforms for augmented reality and the metaverse to capture market share with our entire suite of interconnected products. Just to recap, some of the products that have launched and some of the soon-to-be-launched SaaS offerings. In Q4 of 2021, we launched ARitize Labs for higher ed ARitize Decorator for e-com and the Stripe integration all happened in Q4 2021. In Q1 2022, we announced ARitize 3D as the public launch; ARitize Maps, the app was launched in beta, which is a spatial mapping app that's currently being showcased at MIT. We also launched ARitize Holograms, our human hologram creator app, which is about to be turned into a web-based human hologram experience, which we think will unleash the true potential of that app. ARitize 3D, we integrated with Shopify, that was a big deal. We're seeing fruits of that integration with many downloads and many customer sign-ups on Shopify. We also have ARitize Swirl and Social Swirl launched in Q1. ARitize Metaverse Studio, as mentioned, launching very soon in April. Our CAD to POLY SaaS product is expected to launch in Q2. ARitize 3D, getting integrated to big commerce, is expected to launch in March. ARitize 3D WooCommerce integration will be May; ARitize Magento integration, May. We are just beginning to see the revenue and business emerge as we move full force into 3D model-making, augmented reality and metaverse solutions with our new SaaS offerings. SaaS integration with our product line has significant implications for scalability of our products and our revenue growth. With the continued rollout of our SaaS platforms, NexTech continues to move away from a managed solution towards annual recurring revenue. I would say that we have successfully accomplished that goal. And as we move forward, we're moving towards a low touch/no-touch business model with monthly recurring revenue and annual recurring revenue. To give our investors an idea of what we're seeing in 2022 so far, our ARR recurring revenue has increased 57% since the end of the year 2021. Average new 3D deal size is up 53% compared to Q4. We're quoting on a whale of -- the whale of whales, let's call it. There's a quote that we're working on, 39,000 SKUs. It could even be bigger than that. It's not a guarantee, but it's a quote and it's very close. We are contracting with repeat customers. There's an additional 3,000 SKU order. CB2 ordered 2,500 SKUs, and we have partnerships with Designer Inc, SHOPLINE, FKA Brands and more. To date, NexTech has created over 10,000 3D models with about 70% of those models created since Q4 2021. That's enormous growth in our production of 3D models. In the past 9 months, NexTech's 3D models have had 3.5 million views. About 1 million of that 3.5 million has happened in 2022 alone. So about 1 million views of our 3D models in 2022 alone in just the first, not even 3 months, and we're just getting started. This massive estimated $200 billion 3D model-making for the e-commerce business opportunity really just started to emerge in Q4 of 2021 and is continuing in 2022. We believe it's going to continue. And we believe we're going to continue to win business because of our strategic SaaS and third-party integration initiative with the Shopifys of the world, which will get our ARitize 3D solution in front of millions of e-commerce merchants globally and because of our belief that we have the best solution, the lowest cost, highest quality, most scalable solution in the market today. It's only a matter of time, in our opinion, that our competitors will give up, that our competitors will not be able to compete with us as we believe we have the only truly end-to-end solution for the e-commerce industry. Now since Facebook rebranded itself as a metaverse company, it seems like a long time ago, but it really was just a few short months ago, there's been a complete shift towards all things 3D and AR and the metaverse. And there's really no turning back. As everybody knows, Zuckerberg came out and said, "I believe the metaverse is the next chapter for the Internet." And big tech believes the same thing. Microsoft, Google, Nvidia, Unity, Shopify, Qualcomm, they're all spending and investing billions, maybe hundreds of billions, in the metaverse. Many notable brands have entered the metaverse, including Nike, Adidas, Coca-Cola, Louis Vuitton, Gucci, Disney, McDonald's and many, many more. This is all great news for NexTech. Big tech's commitment, big brand involvement and the shift towards mass consumer adoption will only put wind in our sails. We have a unique position as the end-to-end metaverse solution, providing spatial mapping, augmented reality and 3D models. Ultimately, you add that together, you get the trifecta. We've created a platform like no other that allow for immersive experiences, ease of use and low cost. All of this is now on display at MIT tomorrow for the Hackathon, which we publicly announced today. Our position will be cemented further upon the release of our ARitize Metaverse Suite, which is coming up in a couple of weeks. As mentioned, the ARitize suite of SaaS products allows you to sign in and essentially choose your SaaS solution, whether you want a 3D model solution, an exploded view, whether you want our showroom, hotspots, animation, Swirl ads, our configurator, it's all there in 1 place. It will become the 3D destination for businesses. There's endless use cases: malls, sports stadiums, retail stores, university campuses, theme parks, museums, corporate headquarters, events, live events, restaurants, rental properties. Anybody that wants to turn their place of business or even your home into a metaverse, it's all there. Considering the potential applications for what NexTech has built and anticipated market adoption, we believe that there is over $250 billion up for grabs. We believe that the SaaS for e-commerce alone, as just a segment of the entire $250 billion metaverse addressable universe, is over $100 billion. So it's not a small number, and we believe that we have a leadership position and an opportunity to take huge market share over the coming years. I want to change gears. I want to speak to our investors for one moment about NASDAQ and our uplisting goals. Everybody should know by now that we have applied to NASDAQ, and we still are looking at this as a top priority. We appreciate all of your patience while we work towards this goal and we strongly feel that we are better prepared than ever to achieve it. Case in point, during Q3 of 2021, we announced our change of auditor to Marcum. Marcum is an extremely well-known, reputable U.S. audit firm that has hundreds of companies that they've taken to an uplisting on NASDAQ or NYSE. We have also hired top new legal counsel at Haynes and Boone who have a track record of success in getting companies uplisted. We are currently working with Marcum and Haynes and Boone and are confident in their extensive experience in the U.S. exchange uplistings of companies that are like NexTech. I cannot specify timing around this. I cannot reiterate enough that this is a priority for us. And we are taking all the necessary steps while observing and complying with U.S. exchange and SEC regulation in preparation of entry onto a U.S. major exchange. In closing, Q4 was an important quarter for growth in 2021, as a whole, should be viewed as a transformative year for NexTech. We officially became a metaverse company with 2 transformative acquisitions. And we succeeded, which was not easy in moving our business model from a managed service to an ARR/monthly recurring revenue formula. NexTech is now fully focused on obtaining greater industry leadership in the augmented reality and the metaverse space with our entire suite of interconnected products. In 2021, augmented reality in the metaverse took center stage. These solutions have changed from a nice-to-have to a must-have in 2022. And this is really what we've been preparing for since the founding of the company in 2018. I'm more confident than ever in the accelerating momentum of our augmented reality and metaverse solutions, and I expect 2022 to be a year of hyper growth for all things augmented reality and the metaverse. There has been a digital transformation. And once you go 3D, you do not go back to 2D. Our AR products are sticky and have significant implications for monthly recurring revenue and annual recurring revenue, which will accelerate with the adoption and stickiness of our entire augmented reality products and suites which, again, is launching in April. Fueled by the metaverse, the augmented reality tidal wave is finally here. I've been repeatedly saying over the past 4 years, many of you have heard this, that this will be a multi-decade, multibillion-dollar mega trend. Big tech is now committed to building the ecosystem that NexTech thrives in, and we feel confident, we feel very confident that our goal will be achieved. We are just at the beginning. It's an exciting time to be a public company and to be an investor in this space. The future is bright for NexTech AR. Today, I have the utmost belief in our company's direction, our executive team and in everybody behind the scenes working to achieve our vision of building the first vertically integrated AI-powered 3D model factory for the metaverse. With the successful 2021 now behind us, I believe that 2022 will go down in history as the breakout year for everything 3D and a great year for growth for NexTech and our shareholders. With that, I'm going to turn the call over to NexTech AR Solutions CFO, Andrew Chan, who will provide commentary on the quarterly results. Andrew, take it away.

Thank you, Evan, and good evening, everybody. As a reminder, unless otherwise noted, all figures reported on today's call are on Canadian dollars under IFRS. All the proceeding information is now available on our website and has been filed on SEDAR at the close of market today for your reference. Total revenues in the quarter was $6.4 million, up 11% from $5.7 million in Q3 2021 and down 9% compared to Q4 2020. Annual revenues were $25.9 million, up 47% from fiscal 2020. Compared to last year, product sales increased 38%, technology services increased 55% and renewable software revenues increased 316%. Q4 2021 product sales were $4.2 million, down 8% over Q4 2020 and Q3 2021. Although product sales increased 38% year-over-year, the decline this quarter was mainly due to the impact of COVID-19 on the supply chain and getting the desired inventory products for the retail busy season. Our Q4 2021 technology services was $1.6 million, down 26% from Q4 2020 at the height of the demand for virtual events, however, up 55% compared to Q3 2021. Towards the second half of 2021, we have focused our sales and marketing efforts to promote our AR products and subscription-based businesses and thus, on virtual events. However, we still saw consistent demand in 2021 with a 55% increase in technology services revenue year-over-year. Renewable software revenue was the fastest-growing part of our segment with $0.5 million in revenue in Q4 2021, up 125% from Q3 2021 and makes up 5% of our total revenues at $1.4 million for 2021 with a growth of 316% from last year. At December 31, 2021, this segment accumulated $475,000 of annual recurring revenue, ARR, mainly from fourth quarter sales. Gross profit during Q4 2021 increased by 24% compared to Q3 2021, however, was still down 28% compared to Q4 2020. Overall for the year, gross profit was the same in 2021 compared to 2020 at $9.8 million. Product sales gross profits were negatively affected as a result of the global supply chain issues in the second half of 2021. That resulted in higher inventory and shipping prices for the same products. We saw improved gross margins in our technology services business compared to Q3 as more virtual events in Q4 helped reduce the effects of the fixed cost nature of our virtual events delivery team. Going forward, we have reduced these fixed costs to better align with our forecasted demand as we ramp up our AR and metaverse businesses through 2022 and as it contribute more significantly to our bottom line, we anticipate further increases in gross profits as margins for that segment is much higher than the product sales and virtual events businesses. Operating expenses for Q4 were $8.5 million compared to $10 million in Q3 2021, a savings of $1.5 million. The decrease in operating expenses in the quarter was mainly due to lower expenses in sales and marketing and research and development. During the past couple of quarters, we've restructured our sales force and marketing spend to a more cost-effective model for the new pursuits in AR sales with the intention of lowering overall sales cost as a percentage of revenue over the upcoming quarters in addition to managing our product sales expectations as a result of COVID-19 supply chain issues. The decrease in development costs was a result of shifting our development focus to AR products, resulting in overall lower headcount in this area. General and administrative costs remained consistent. However, we do anticipate lower expenses in this category going forward with ongoing cost-cutting initiatives since the new year. Overall headcount is currently approximately 140 people, down close to 50% from the peak in the summer of 2021. We had a net loss in Q4 of $9.3 million compared to a loss of $8.2 million in Q3 due to noncash stock-based compensation in Q4. However, once removed, net loss for Q4 would be around $7.3 million, a decrease of close to $1 million in losses. As of December 31, 2021, we had cash of $7.2 million, inventory of $3.4 million and a positive working capital of $9.2 million. With the addition of the $10 million raised in January of 2020, we have close to $20 million of working capital to start the year in 2022. Along with the results of our aggressive cost savings plan to reduce the cash burn to $1 million a month, we will not need access to capital for the next 12 months. I would like to personally thank my finance and accounting team, along with our internal business partners for all their hard work in making this happen over the last few months. With that, I turn the call back over to Evan.

Thank you, Andrew. In closing, I would like to thank our employees, our shareholders, of course, and our partners for the continued support as we remain focused on preserving and growing long-term value for our shareholders. On behalf of NexTech, thank you for your support, as always, and thank you for taking the time to join us on this call. Operator, we are now ready for the exciting question-and-answer portion of this call.

[Operator Instructions] Our first question comes from the line of Scott Buck from H.C. Wainwright.

First question for me. I'm curious, can you talk to us a little bit about what the other 3D modeling model offers are on some of the e-commerce platforms and how your product differs from theirs? And maybe what would direct somebody using that platform towards a NexTech product versus a competitor?

Sure. So it's a broad question. There's a lot of differences between NexTech and other 3D modeling companies. To summarize, I would say, as we've spoken, our business model is very different, where our competitors essentially sell a 3D model. So a 3D model, let's just say, costs $50 to make. And our competitors will sell that for $100 or $150. That's the standard business model in the industry. NexTech has taken a completely different tack and have aligned ourselves with e-com merchants by turning our offering into a monthly subscription, a SaaS product. So don't pay us for the whole 3D model cost upfront, pay us over the course of 12 months. And by doing that, we're essentially partnering with these sites so that instead of paying, let's say, $150 in the example I just gave for a 3D model, pay us $250 per month and we'll supply you with 25 3D models. But you're signing a 12-month contract. So for NexTech, we get our ROI in like month 4. Month 3 or 4 essentially is when we break even. And after that, we start essentially printing money. The other piece of it, Scott, is we look to our additional, let's just call them, add-on features. The configurator has become a runaway grand slam for us where you create 1 3D model. And using the configurator, you're able to essentially change the colors of the 3D model and/or the design or the fabric, if it's a couch, just by pressing a button. So if you have, let's say, 100 different configurations of a single model, by paying us $500 a month, you can get 1 model plus the configurator, and now you have a full-on solution for that product. And it kind of just keeps going from there, Scott, where we also have hotspots, we have a decorator showroom, we have the ability to offer animations, we have a proprietary banner ad for Swirl ads. And it's all -- it all leads back to our ARitize member suite where you log in and you get to essentially have a full spectrum of 3D product offerings for your e-commerce site. And our competitors just don't have that kind of breadth of product, and they certainly don't offer the monthly revenue, the monthly payment terms that we offer.

That's very helpful, Evan. Do you know off the top of your head or have some idea how many customers that purchase models then come back 30, 60 days later and request some of these other services off the menu?

It's about 50% of the customers that try a 3D model and then try a simple kind of 3D model, and then they come back for additional services. What we're also noticing is that we do a lot of POCs, proof of concepts, where people are like, "Oh, let's try it out." After people try it out, we get 80% of those people converting into customers. So it's -- those are very bullish signs for our industry.

Great. That's helpful. You've mentioned some rather large enterprise opportunities that you guys are working on. Do you have the capacity to be able to fulfill all those requests? Or would that require additional software engineers, developers? Anything along those lines that would dramatically impact the OpEx line?

Yes. So that's a good question. We are a factory. So we are scaling up as the demand comes in. It does require us to build some new tech. We are continuing to build better and better technology that continues to allow us to have a competitive advantage in the market. So I would say that we're building it while we're flying it, or we're flying it while we're building it. I think this better summarizes it where we've delivered for 1 customer 2,500 models in a month. Now to be quite honest, that was difficult. That was a heavy lift. But we did it. We're now beyond that, and we're going to continue to scale. And the goal is to be able to do significant volumes as we move into the second half of the year, as we get more automation, more AI, more machine learning under our factory umbrella.

All right. That makes sense. And last one for me. Nice sequential tick higher on gross margin. How should -- as the business mix shifts, how should we be thinking about gross margins? And what's the ceiling?

Well, I'm going to let Andrew take half of this. But in general terms, the business is shifting away from managed services, away from e-commerce. Well, the e-commerce business is kind of there, but it's kind of on autopilot. We don't spend a lot of time on it and a lot of resources. But when you look at the business that's growing, which is software, it's growing very rapidly, and it has a much, much higher margin. So over time, the margin is going to get better and better and better. But I'll let Andrew maybe dig into a little more detail.

Yes. Thanks, Scott. If you look at the margins for our product sales, I mean, they hover around the high 38% to kind of the low 42%. That's kind of where we see that spot with the capacity that we have or -- sorry, the volume that we have at this point with COVID-19 and the supply chain issues but has kind of taken it from kind of 40-something percent to kind of high 38%, 39% in Q4 and, I believe, in Q3 as well. The managed services business, that was quite labor-intensive, as I had indicated, through delivery and whatnot. And so as that kind of levels off or declines a little as we see the demand, the positive contributions, what Evan was saying about 3D models and the model factory is, I would say, close to 50% to 70% in terms of margins. So as we see more volume there, I can only imagine our gross profit to increase.

Our next question comes from the line of Lisa Thompson from Zacks Investment.

So it looks like you got e-commerce back to breakeven, right? Is that where it's in and that's where it's going to stay? Is that the idea?

Yes. I mean, the e-com business, like I said, is kind of on autopilot at this point, Lisa.

Okay. Good. So could you talk -- when you talk about putting a bid out for whales, talk about who is -- who literally are the companies you're bidding against so that we can keep an eye on them?

So these are RFP, which means it's kind of a closed loop. You don't really know who you're "bidding against". What I would say is that it's a very, very small group, very small. And that's what we're told. Like it's just -- there's only a few companies at the table that are capable of delivering. And I would say that on these whales, they put you through different levels of testing our abilities because these are sophisticated -- these are -- some of these companies are trillion dollar public companies, some of them are just hundreds of billions, but they're huge. And so they're sophisticated. And so what I could say, Lisa, is that they had put us through testing, and we've passed the quality test, meaning they give you x number of models and they ask you to produce them. And they're highly complex. These are not simple. And so we have passed that test.

Okay. So who do you run up against in general? Do other -- when customers come to you, they say, oh, we tried X, Y, Z and now we then try you? Are there always people?

Yes. So what we found is there's really only 2 companies that we hear about. And I would say that we're hearing less and less about them, and I'll explain why. One is a company called Threekit that has a configurator, and they do photorealistic 3D model. They raised $35 million, I think, in a series B late last year. Another company called Marxent which has been around for a while. And both of those companies, if you go and you look at them up and you do your research, are very, very heavily geared, if not exclusively geared, towards making community models or providing solutions for the furniture industry. They do not venture outside of that. What makes NexTech extremely unique is that we are actually providing 3D models, not just for the furniture industry, but for the sports industry, sporting goods, for clothing for eyewear, for jewelry. And there really isn't anybody that we run up against in those markets. We think we have those markets to ourselves. As crazy as that sounds, there's nobody else that we run up against in those markets.

Wow. Okay. So when I look at what you're doing now, I mean, it seems like you're actually getting involved in building the model, and it looks to me a lot like ad agency. Who do you sell to? Are you selling to ad agencies or to the brands themselves?

We don't -- we really don't have agency partners in a big way. There's maybe a few referral partners that we have. But we directly sell to e-commerce sites. We directly sell to brands. It's direct sales.

Okay. How far off do you think this business can be self-serve for the customer, where you don't even have to get involved and you just collect the check?

Well, once we set the customer up, once we deliver the models, it is self-serve. It is just collecting the check. We don't have to -- once the models are live on the site, unless they want more models, we just collect the check. And as far as getting into...

Right. But making more models though? Is there going to be a point where they can make their own models just using your platform?

There's definitely the potential for some product categories to work that way. So for instance, the lay of the land, Lisa, is you have simple models, you have medium models, you have complex models and then you have photorealistic models, right? So there's a wide spectrum of 3D out there. It's not all the same. So at the low end, meaning simple, things like pillows, let's say, things like wall art, those types of things can be self-serve and on demand. And that could happen potentially in the second half of this year because that would just be AI-driven. And that is something that is highly scalable. And it's something that we are kind of going after where the volume is very high and the cost is very low. So we don't charge as much either, right? So instead of it being, let's say, $10 per month per SKU because our cost is so minimal, we could offer it for $5 per month per SKU or even $3 to $4 per month per SKU. But you're talking about tens of thousands of pillows and pieces of wall art kind of thing.

Okay, good. That should help. One question about expenses. What do you expect expenses to be in the first quarter given the cuts that you've taken?

Andrew, if you could answer.

Yes. Yes. I mean, I think we -- at the beginning of the quarter, I mean, we still saw a lot of savings, and we're continuing down that path. I wouldn't be surprised if we were another kind of million below what we've had in Q4.

Great. And does that continue? Or is that where you think steady state?

No. No, I think there's more room to go. I mean, again, our target is kind of $1 million kind of burn per month, and we're going to be managing that against the revenue that's coming in and it's going to be fluid in that sense.

[Operator Instructions] Our next question comes from the line of [ Michael Fara ].

Just 3 quick questions. I don't know if I should just roll them off real quick. But do you see a point, given the fact that most of the revenue -- well, by the way, a fantastic presentation, Evan. Keep the faith. I know the stock price at the moment is not even close to reflective of what it will be. I saw that you were backed on a price target of $250 by the end of the year, I expect it to be more. But do you ever see a point where you would actually sell the e-commerce business as one or all of them? The second question is your patent portfolio. How do you feel -- do you feel it's strong? And will you be filing any new patents? And are there any competitor patents that are out there that you make office action letters against that would say, hey, some of your claims A, B, C and D. So potentially selling the e-commerce business, the patent portfolio and what that landscape looks like? And is there any pending litigation?

So I'll start with the -- I'll start with the last first. So there's no material litigation. Otherwise, we, as a public company, would have to disclose that. As far as the patents go, I think we're preparing to file -- is it 5 patents, Andrew?

Yes. Yes. 5 [ patents ]...

Will these be provisional or will they be...

Nonprovisional. It's actually disclosed in, I believe, our prospectus that was -- our shelf prospectus that was filed this morning.

So yes. So patents are coming. And then as far as the e-com business, we always...

Who are your patent attorneys, by the way? Or do you do them through the same law firm?

Yes, Mike, you can e-mail me, [email protected], and we could talk offline about that. But as far as the e-com business and selling it, yes, that is on the table as a possibility, not a definite and/or spinning it off as its own public company, in which case, if we did something like that, shareholders would get kind of a dividend. So yes, those 2 things are on the table. We don't see it as a business that we'll own, let's say, 5 years from now.

Yes. But it could provide a good platform so that you might not have to dilute yourselves or the company. And if revenue comes in and you strategically look at headcount and the business model is just -- it's just fantastic. It's definitely the next wave. I can't believe someone has an opportunity, I guess $10 billion, for it already. But -- and I will -- and you know what, if you get that, I wouldn't take it because I think it's worth a lot more as this thing expands out. There's so many geopolitical factors and so many different things that are at play. And yes, I'll definitely go ahead and e-mail you about the other question. I understand. We'll take that one offline.

Thank you, Mike. Thank you for being so bullish. Appreciate it.

You bet. Well, I appreciate it. I see your vision. Sometimes I -- well, I've given up going on some of these social forms with like stock glitz. And this guy is that and they've got a bunch of paper work. I'm like, you don't realize the vision that Evan has and his team has. The executive team is world-class and what you guys have done from, I mean, how many other companies can generate $25 million to $30 million, granted it's Canadian, so you do the conversion, it's around a little over $20 million. But -- and that's really my last question. Is there any way -- and I understand because I -- my background is law and I've dealt with the SEC and stuff like that, but is there any way that in the reporting because I think a lot of investors that live in English-speaking countries, is there a way to actually -- right at the beginning, say, here's what it was in CAD and here's what it is in U.S. dollars because I think sometimes people get confused.

Yes. I hear you. I'm going to talk to Andrew, and we'll look into that. It's a good -- yes, it's a good point.

There are no further questions at this time. I will now turn the call over back to Mr. Evan Gappelberg.

Well, thank you for joining me today. I appreciate all the investors that have joined and that are taking this journey with us into the metaverse. Everyone, have a great evening. Thank you. Bye.

Thank you again for participating. This concludes today's conference call. You may now disconnect.