NexTech3D.AI Corp.

Thanks, operator. Good afternoon and welcome to the Nextech Q1 earnings call.

With me on the call are Evan Gappelberg, CEO; and Kashif Malik, CFO. Today after markets close, Nextech AR Solutions released its final results for the first quarter ending March 31, 2021.

A copy of the earnings disclosure is available on our website and on SEDAR.

Thank you, Shauna. Good afternoon and thank you for joining us today.

First, I want to thank our employees all over the world. They're located in Canada, United States, Europe and the Asia Pacific region.

I want to thank them for their continued commitment. Nextech's success in the first quarter of 2021 was made possible through the hard work and creativity and dedication of our talented and valued employees.

Our culture of organizational learning and respectful collaboration is energizing and driving business excellence throughout our company. I would like to thank our employees in advance for another year of strong performance in 2021.

Nextech's first quarter growth was fueled by a combination of all our businesses that we operate, not just one. We are a unique public small cap company and that we are diversified in multiple businesses that all have the red thread of AR connecting them as our core technology is, of course, augmented reality.

Our AR business is the fastest growing part of our business and is connected to everything we sell, creating a virtual flywheel effect within our company. For eCommerce, we have our genie in the bottle, which we are rapidly bringing to market as a self serve platform for all CPG brands and expect to have this new platform under the brand livestreamhologram.com in the near future for events under Inferno -- previously Inferno currently IgniteX and LiveX.

We offer a large selection of AR enhanced experiences including human holograms or keynote speakers, 3D augmented reality booths, augmented reality portals, as well as custom AR experiences that we build for our customers on demand. Throughout Q1 2021 demand for our products and AR solutions has accelerated.

I'm particularly excited about our next generation digital experience platform called the Nextech AR LiveX.

Thank you, Evan, and good evening. As a reminder, unless noted otherwise, all figures reported on today's call are in Canadian dollars under IFRS.

Total revenue in the first quarter was up 210% to CAD 7.7 million, as strong growth for product sales, technology services and renewable software increased. Product sales grew 146% to CAD 6 million due to expanded product offerings, adding additional sales channels and increased capacities facilitate the fulfillment of sales.

Our technology services continued to gain traction, resulting in CAD 1.4 million in revenue, or 2,831% increase over the prior period. As previously noted, the nature of this revenue will vary from quarter to quarter based on the number, size and timing of client projects underway.

We continue to be pleased with the diversity and strength of our total revenue base. For the quarter, no individual customer accounted for greater than 10% of total revenues.

Gross profit increased by 146% to CAD 3.3 million, or 43% of revenues compared to 54% of revenues in the prior year. This decrease is primarily due to additional headcount for the delivery of technology services.

Total bookings, which are related to technology services, increased 4,774% to CAD 2.2 million. We continue to win incremental business and add new customers every day.

Backlog for the period was CAD 2 million. And we anticipate we will recognize the majority of this revenue in the current fiscal period.

Operating expenses were CAD 10.2 million, compared to CAD 2.4 million in the prior period. The increase in operating expenses was primarily due to higher headcount and related compensation costs.

In certain situations, the company may utilize stock-based compensation to compensate vendors and attract talent. As such other increases -- other expenses have increased stock-based compensation, as well as amortization for intangible assets.

We had a net loss of CAD 9.2 million, compared to a loss of CAD 1.4 million in the prior period, largely due to the factors I just mentioned. Over the past two quarters, we have aggressively expanded our team size, skill set and capabilities across all functions, organically as well as through acquisitions.

As Evan mentioned, with our recent success in product delivery, we anticipate that with the shift in our resources will reduce our expenses in the year ahead. We believe that these investments will continue to support our growth strategy.

Thank you, Kashif. In closing, I would like to thank our employees, our shareholders and our partners for their continued support as we remain focused on building long-term shareholder value.

On behalf of Nextech, I want to thank you for your support and as always, thank you for taking the time to join us on this call. Operator, we are now ready for the question-and-answer portion of this call.

Thank you. Good evening.

Hi, Lisa. How are you?

Good. How are you?

Glad to get the release early, so I could look at it. So that made me happy.

We try, we try.

Thank you. Anyway, I am fascinated by the sequential revenue improvement in the business and I find the whole thing, so counter intuitive.

Product sales was up great from the Christmas quarter, which makes no sense to me and…

In a good way.

Yes. In a good way and in a totally unexpected way.

Can you explain what's happening there and what to expect going forward because I expected seasonality and we didn't get any?

Yes. It's a very good question.

So in our e-commerce business, I would say that we've hit the sweet spot where our product mix is in high demand. And we really didn't see a slowdown, as you mentioned.

In Q1, e-commerce has really become very powerful business model. And it's just -- it's just I don't know, it's hard to explain, Lisa, other than to say, coming out of a pandemic year like 2020 was, I think it might have changed consumers behavior.

It's smoothed out the dips that we're used to seeing with e-com. So, from where we're sitting, we see that business stabilizing at a much higher run rate than previous years.

All good questions. So it's been primarily our Learning Lab.

It's kind of like the business that bulked up and really exploded unexpectedly. We didn't expect the ecomm business to be such a big part of our revenue base.

But at the same time, we've been using it for building relationships with major brands like Dyson, Mila, KitchenAid, and using this for the genie in the bottle, in a testbed, we also have a substantial studio set up for AR Capture in California inside of our warehouse. So I guess it's all the above Lisa, meaning the business is continuing to grow.

We're continuing to innovate within that space. We're forging relationships with major brands that we're going to be bringing our augmented reality technology to and selling our augmented reality technology that we built specifically for e-commerce to the big brands; again, Dyson, Mila, KitchenAid, and others.

So it's a continuation of the same story. Except, right now.

We're at the point where we're commercializing and going to market with our genie in the bottle, which I mentioned on the call.

Great. So lets just talk about AR business, you had the opposite effect there were has a little bit of juvenile, is there some way to describe, is this customers?

Or is it forward planning? How does one expect to look at the quarters going forward for that business?

The AR business is growing very, very rapidly. What we've noticed in the AR business is that enterprise customers are -- it used to be in 2018, 2019, you had to explain what augmented reality was and also explain ROI.

In 2020, augmented reality really took centre stage and in 2021 we see augmented reality coming a much bigger part of our business. Q1, 2021, I don't think is indicative of the year.

We are launching, as I mentioned our Gennie in the bottle hologram technology as a self service platform where you, Lisa will be able to sign-in, establish your own account, take out your iPhone, put it on a tripod and beam yourself as a hologram anywhere in the world. You'll be able to, if you have a product that you want to sell, you'll be able to print the QR code and have your own Genie in the bottle.

And you don't need to call us to do this. So up until now, you would have to call into next tech and asked us to do this work for you with you.

In the very near future, you're going to be able to do it yourself. We see that as the way that augmented reality can scale.

And we see that as really the beginning of our augmented reality, revenue generation. That's the key is being able to scale Lisa.

Okay. Going back to what you said about moving over to the new LiveX platform or generation, how long does that process take?

Is that immediately now all customers will be using that? Or does that take a few months to move over?

How does that work?

It's a 30-day process. So, we're in motion now.

New business is being conducted on LiveX and old customers' -- existing customers are being moved over to LiveX. So, it's about a 30-day process to move everything over.

So, after a month, then do expect to start reaping the full $6 million savings, right?

I do. Yes, I think it's going to be hitting the bottom-line, starting really today and accelerating over the next 30 days.

I'm saying over the next 30 days, we should be -- the transition over to LiveX should be completed, but it's already begun.

And can you take that maybe and translate it into cash burn? Like, where are you now?

And where might you be a few months from now?

Well, I mean, the cash burn it's approximately $2 million a month and we could see that getting down to $1 million. So, we think we can cut it in half on this platform, which brings us to potential cash flow positive situation in the second half of the year.

Wow, that would be awesome. Great.

So, my last question, which to -- because I'm not that person. But where are you exactly in this process with NASDAQ?

Don’t want to answer that.

Yes, so we are still talking with NASDAQ. NASDAQ obviously had some questions and some hurdles that they put in front of us.

And we are still working on getting uplisted to NASDAQ. We still expect that in the future we will be a NASDAQ-listed company.

Okay, great. Thank you.

That's all my questions.

Thank you, Lisa.

Okay, if there are no more questions, if it's just Lisa that had…

Okay.

Yes.

Hi. Just one other quick one.

Right now, how much cash do you have on hand after offering?

We have almost 20 million.

Okay. Great.

Thank you. That's it.

Just needed that. Thank you.

Okay. Thanks, Lisa.

Yes. Yes.

Thank you for taking the question. Have you provided guidance for this quarter?

Hi, Andy. Yes.

We have not provided guidance. Although, Lisa Thompson, who is a Zacks research analyst has a research report out and I'm sure she'd be happy or you could go on to Zacks and find it.

But there's -- she's the only one who has guidance. We don't put out guidance quarter-to-quarter.

But you do have guidance out I think for the year, correct?

For the year we did -- we did, but we didn't break it into quarters.

Okay, so I'm assuming that you're going to see sequential growth each quarter to get to where you need to be, is that right?

We expect that we will have a significant uptick in the second half of the year, because we're bringing new technologies to market. And also, obviously with LiveX.

So we also are chasing after enterprise scaled transactions, which takes a little bit longer. So it's hard to predict when the revenue actually hits.

I don't know that it's going to be linear. But we're confident with our full year number.

All right, thank you. I appreciate it.

And good luck to you and the company.

Thank you.

All right. Well, thank everybody for joining today.

And we'll see you next quarter. Have a good evening.