Nextech Ar Solutions Corp
CNSX:NTAR
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
0.035
0.265
|
| Price Target |
|
We'll email you a reminder when the closing price reaches CAD.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
You don't have any saved screeners yet
Good afternoon, ladies and gentlemen. Welcome everyone to the NexTech3D.AI Fiscal Year 2022 and Fourth Quarter 2022 Results Conference Call. [Operator Instructions] I would like to remind everyone that this call is being recorded today, Thursday, April 20, 2023. And I will now turn the call over to Ms. Julia Viola, Investor Relations at NexTech3D.AI. Julia, please go ahead.
Hello and welcome to the NexTech’s fiscal year 2022 and fourth quarter 2022 earnings call. With me on the call are Evan Gappelberg, Chief Executive Officer and Andrew Chan, Chief Financial Officer.
Today, after markets closed NexTech3D.AI released its unaudited financial and operating results for its fourth quarter and fiscal year ended December 31, 2022. A copy of the earnings disclosure will be available on our website and on SEDAR once our audit is complete. Some of the information discussed on this call is based on information as of today, April 20, 2023 and contains 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 will be available once our audit is complete and our MD&A is filed on SEDAR. Neither this call nor the webcast archives maybe recorded or otherwise reproduced or distributed without prior written permission from NexTech.
To begin our call, Evan Gappelberg, CEO will discuss fiscal year 2022 and Q4 2022 highlights as well as recent business developments, followed by Andrew Chan, CFO who will review our financial results and outlook. Finally, Evan will provide closing remarks before opening up the line for a question-and-answer period.
I will now turn over the call to CEO and Founder of NexTech3D.AI, Evan Gappelberg.
Thank you, Julia. So, today’s numbers that we just released are unaudited and they are essentially due to a scheduling issue with our auditors, the actual audited numbers will be filed on SEDAR shortly next week. And there is obviously not expected to be anything materially different, which is why we are comfortable having this call. Obviously, we are finalizing the audit. So, we have a very good view and feel 100% confident in today’s release or we would not have released the numbers today.
When I look back at 2022, it was a long time ago there has been a lot of things that happened in 2022. And most importantly, I am going to talk a little bit about 2023. So, first off, let’s just review that in 2022, we emphasized the rapidly growing global demand for our 3D modeling and augmented reality solutions for e-commerce. And today in 2022, we are being proven right about that trend continuing in 2023 as our business is growing and remains very strong.
The new deal flow is continuing in 2023. And really that serves to reinforce the narrative that we have been publicly vocal about which is that there is a rapid and accelerating adoption and demand for 3D models in e-commerce across various industries and product categories, which include furniture, sports equipment, clothing, accessories, artwork, appliances, lighting, auto parts, everything that you buy online. And so that trend is here to stay.
And 3D models in e-commerce, is rapidly becoming a must-have solution. In Q3 2022, it’s important to highlight that we have landed Amazon. They are by far the single largest enterprise customer that a company can land for 3D models for e-commerce. They are going all in on 3D. The world has pivoted towards 3D. So, make no mistake about it, 3D is here to stay and it will really be driving the next leg of the $5.5 trillion e-commerce mega trend. To compete in the next decade in e-commerce, in medicine, in education, in events, you will need a 3D model. And that is what NexTech makes. We make 3D models. And we have breakthrough generative AI, which gives us a competitive advantage in the market and positions us for rapid growth for many years to come. It was quite a challenge to get here, meaning 2023, but we are here now. And we see nothing, but blue sky opportunities from here going forward.
But let’s go back to Amazon for a minute, because it’s just the most important customer for NexTech. We have delivered almost 20,000 3D models to Amazon, 20,000 take a minute to take that in, 20,000 products on Amazon chairs, couches, TVs, rugs, coffee tables, all the products that you and your friends and your relatives shop for on Amazon are being converted from 2D flat photos to 3D interactive models. And NexTech is leading that conversion. It’s amazing. It truly is amazing. It’s amazing that we are a preferred 3D model supplier for Amazon. We are very proud of that. And we are proud of the fact that our relationship is only getting stronger and stronger as time goes on with Amazon.
We just had a call – I was on the call this week. I am not on every call. But we – I was on this call. And just to be clear, I mean we are fully integrated with them. I mean, just imagine we speak with them daily, our tech is integrated into their platform. The 3D models that we supply them, is a constant flow of back and forth. They have a platform called Chime, which is very much like Slack, but it’s 100% built and owned by Amazon. We are communicating with them daily, all day multiple times a day, because our volume is that big and getting bigger.
We are anticipating that as a preferred 3D model supplier that they are going to allow us to load models directly onto the Amazon platform, which is basically turning us into a preferred Seller Central and really exclusive 3D model supplier. This is a huge new opportunity for NexTech. We have been talking about them opening up Seller Central. They have mentioned to us that they are going to allow us before they open Seller Central publicly to bring our clients through Seller Central onto the Amazon platform. This is a big deal. We expect this to happen in May 2023. They are essentially giving us the keys to the Amazon kingdom as a trusted partner. Meaning they are going to allow us to operate essentially independently.
Right now, we are supplying them with models. But in the not too distant future meeting next month, we are going to be supplying their merchants with models. And we are going to be bringing those models over the Amazon wall onto the platform, because they trust us, we are basically going to be able to do that autonomously. So, that is a very big deal. From our perspective, it means more deals and more revenue. Why? Because we are going to be able to go hunting after Amazon merchants, we are going to be able to potentially go to Amazon merchants and offer them an opportunity to bring to have 3D models made by NexTech onto the Amazon platform.
And to be clear, I don’t know of any other company that’s going to be able to do that. And so it’s a very, very big deal. It’s – from our perspective, it’s kind of like going hunting in the zoo, so significant upside in our business. Signing a deal with Amazon really does demonstrate NexTech’s technical proficiency and leadership in 3D modeling for e-commerce and sets us up for success with other big enterprise accounts as well since once you break through with Amazon, everybody else is relatively easy. And believe me Amazon only works with best in breed. They don’t work with just anybody. And it’s not – it wasn’t easy to establish that relationship. Today, there is millions of registered active Amazon sellers worldwide, each with millions. There is millions of 3D models that are needed. The Amazon platform has over 250 product SKUs. If you just wrap your head around that, like I said earlier, we have delivered like 20,000. So the upside is just massive, massive, massive. The opportunity is huge for our company.
And we really just got started in Q3 2022. So we are like 7 months, 8 months in and we see a significant ramp up in demand continuing in 2023, especially starting next month, with our new status as an exclusive supplier for Seller Central merchants not just supplying Amazon corporate. And those merchants pay a different price point, which leads to much higher profitability for us. So again, we are super excited about that new development. The demand for 3D models in e-commerce in my opinion will only accelerate through 2023. And I believe that as we get into the second half of the year, we are going to see demand shift into overdrive. It’s similar to what happened to our business during the pandemic with virtual events and it did have a significant impact on our valuation. And I believe that, that is going to happen again.
As we move forward in the e-commerce industry, the business, the opportunity, the demand for NexTech to produce 3D models and AR experiences for e-commerce has never been greater. And we are extremely excited for this opportunity. And we are taking full advantage of this opportunity. Again, it’s a $5.5 trillion dollar industry expected to grow to over 6 trillion in 2024. 3D models are fundamentally transforming online shopping. Why? Because you get a 40% reduction in returns, 93% higher click-through rate and a 250% increase in conversions. Nothing else comes close to this ROI on e-commerce, not video, not direct messaging, not even next day delivery. With our 3D modeling technology, powered by our Generative AI, we are perfectly positioned to ride this mega trend for the foreseeable future.
We really are the on-ramp for Web 3.0. And we have achieved a perfect product market fit with 3D models in e-commerce. NexTech, we believe is creating tremendous value for the e-commerce Industry, which is now getting started just getting started with the transition from 2D to 3D. If companies do not adopt this technology, they will be left behind by their competitors. So once again, 2023 everything is perfectly aligned for NexTech to experience dramatic growth throughout this year.
Now, as we improve our AI and 3D model production capabilities, we expect that our profit margins will improve dramatically. We think that in 2023 we will be able to hit as much as a 90% gross profit margin due to our breakthrough Generative AI is not today towards the end of the year, but it’s going to be a watershed moment in NexTech’s history and drive profitability for many years to come. And we are on the path to achieving that. It’s quite significant.
If you look beyond our 3D modeling for e-commerce, we have a portfolio of technology companies that we feel are very valuable. They have breakthrough technology, industry disrupting products. And we are working towards unlocking the value of these assets and businesses. And that brings us to our augmented reality spatial computing platform, ARway. ARway is an augmented reality experience platform. And we are getting a lot of interest from companies that use HoloLens, Microsoft’s technology, Magic Leap and others. And so we expect that when Apple comes out with their glasses, which is expected to happen this summer, I know we have talked about it a number of times that there will be an explosion in demand, because it’s not the consumer, it’s enterprise customers that spend the $2,000, $3,000, $4,000 for a pair of these glasses for their warehouse workers that want an augmented reality experience platform. And that is what ARway – think of ARway as an operating system for augmented reality experiences. And it is just an enormous, enormous application beyond the phones with the glasses. And so it opens up NexTech’s 3D and AR solutions to new substantial markets for use by creators, brands and companies. And we have been very, very busy. We have secured over 20 pilots with big brands for ARway and we expect to announce some major deals very soon.
We are as mentioned in talks with major – all the major glasses companies about integrating ARway into their ecosystem. We believe ARway is the killer application for glasses, because it allows for custom and dynamic AR experiences, which is what the glasses need today. The glasses today come with some pre-built software that really only offers point solution experiences like gaming. ARway can offer an array of never ending experiences that can be controlled remotely and updated dynamically, which is what the glasses manufacturers tell us they want. We have always been focused on increasing shareholder value. As the largest shareholder that is my primary goal and as CEO that is my job. And that is why in June, we spun out – we announced the spin out of ARway and then we actually completed the spin out in October of 2022.
And as a result of that spin out, I believe the true value of ARway’s business and technology is now starting – just starting to get recognition it deserves. I see a positive reevaluation in the near future with the glasses for sure and with some new contracts, which will benefit not just ARway investors, but the NexTech’s shareholders, because as everybody knows we own 13 million shares of ARway. So as ARway increases its value, it increases the value of ARway. I am 100% confident that AR glasses and our AR experience platform, ARway is the next big breakthrough in technology, possibly the most important technology breakthrough in the 21st century other than AI. I mean, AI is fundamentally going to power a lot of the experiences, but the augmented reality glasses plus ARway’s experience – AR experience platform as an operating system really is the complete package. We just see an enormous, enormous blue sky opportunity there and unlimited use cases.
If we look at our next spin-out, Toggle 3D, we announced that that would be spun out and that is on track to happen in early June. Toggle 3D is funded. Toggle 3D has gotten their opinion from the valuator. And so Toggle 3D is on track and on its way for and will be a successful second IPO spin out for NexTech’s shareholders creating value. NexTech shareholders will get a pro rata share of 4 million Toggle 3D shares. And we are super excited for that to happen in the June timeframe.
So, if you look at our portfolio of companies, we also have NexTech Event Solutions, which is in the $50 billion live event industry. We have integrated and updated that platform and that is now starting to show an acceleration in growth. So NexTech, at the end of the day, has become a pure-play technology company that spins off other pure-play technologies and retains an ownership stake – a 50% stake. We are extremely excited about our 3D modeling business. We are extremely excited about our ARway platform, the augmented reality experience platform. We are extremely excited about the growth prospects of our Toggle 3D platform. There is really just a perfect synergistic ecosystem that each one of these businesses is playing a role in. And they all become pure-play technology companies, but the mothership is NexTech.
So in closing, the company and AI are doing everything we can to bring shareholder value up. Our stock is not reflecting the work that we do. And we are focused on increasing shareholder value. And we are doing everything that we think we can to try and increase the value of our company. If you look at NexTech and you look at Toggle 3D and you look at ARway and you look at our NexTech Event Solution and you add them all up. I think it’s fair to say that the valuation that we see today is extremely, extremely low and attractive given the fact that there is these megatrends that each one of these startups will play an important role in.
So I have never been more excited. I have never been more confident about the position that our company is in and the opportunity that we have in front of us. Before turning the call over, I’d just like to thank our experienced executive leadership team for their hard work and dedication. I want to thank every NexTech AR employee working day in and day out striving for success to achieve our company goals. I especially want to thank our new COO, Reza, who is really doing an amazing job on executing on the dream. And I have full confidence in our company’s direction. And I am looking forward to our continuing growth in 2023 and beyond.
With that, I am going to turn the call over to our Chief Financial Officer, Andrew Chan to provide further commentary on the financials.
Thank you, Evan and good afternoon. As a reminder, unless otherwise noted, all figures reported on today’s call are in Canadian dollars and under IFRS. All the preceding financial information was made available today through press release. The final audited financials and MD&A will be made available next week once our audit has been completed and will be available on our website as well as on SEDAR.
As you know, we have wound down our e-commerce legacy business and as such in accordance with IFRS we have removed the results of that legacy business from our financial statements which now focus on our ongoing technology business. And as such, our technology revenue for the year was CAD3.2 million, down from CAD6.7 million compared to last year. These revenues continue to reflect the transition of our business from virtual events to 3D models, the Metaverse and Web 3.0.
3D model revenue increased 266% contributing to CAD1.5 million in revenue in 2022 compared to 2021 with contributions from marquee customers such as Amazon. We also saw consistent repeat revenue from our NexTech Event Solutions platform throughout 2022. Gross profit came in at CAD1.6 million compared to CAD1.9 million last year, but with higher margins with a 51% gross profit margin compared to 28% last year. This is attributable to a more profitable 3D model business compared to our legacy virtual events business. We anticipate gross profit margins to increase even more as we continue to implement AI technologies in our 3D model production process to allow us to increase our model creation capacity at scale.
Operating expenses for the year was CAD22 million, down CAD4.5 million from last year. Sales, marketing expense was down CAD5.4 million compared to last year and research and development was down CAD2.7 million compared to last year as we were focused our efforts to our 3D model business and away from virtual events, while taking a fiscal responsible approach in that process.
General and administrative expense have increased CAD3.6 million mainly due to one-time expenses related to the ARway spin-out and paid acquisition bonuses. To help offset the cash outlay for these expenditures, our previously announced employee shares for services compensation plan contributed CAD2.5 million this year.
Net loss from continuing operations for the year was CAD26 million, down CAD4 million from last year contributing to a CAD0.26 loss per common share, down almost CAD0.10 from CAD0.35 in 2021. As of December 31 2022, we had a cash balance of CAD3.8 million in addition to the gross CAD3 million raise at the end of January 2023 and continue to hold CAD13 million shares of ARway valued at approximately CAD12 million to fund our future. This quarter and the fiscal year is a continuation of months of hard work from NexTech employees related to cost management, refocus of our business and onboarding large customers and the launch of ARway. Like Evan, I would like to thank each NexTech employee for their hard work and dedication and look forward to working with them in the next phase of our exciting journey.
With that, I turn the call back to Ev.
Thank you, Andrew. I do want to mention one thing before we open it up and we also let’s not forget that we did upgrade to the OTCQX in December – December 16, 2022. And to anyone that thinks that the NASDAQ dream is done, you would be mistaken anyone who underestimates my resolve for getting listed on NASDAQ, you will be sorry that you did. And I just want to put that out there, because I know that, that’s all always been a hot topic.
But operator, we are ready for questions.
Thank you, Mr. Gappelberg. [Operator Instructions] We go first to Scott Buck at H.C. Wainwright.
Hi, Evan. Thanks for taking my question. First, could you talk a little bit about what the revenue opportunity is within the current customer footprint? I guess what I am saying is if you were not to add one more customer from this point forward, could you grow revenue 10x with Amazon and some of the other large enterprise customers you have?
I think it – thank you, Scott. It’s a great question. If we only had Amazon as a customer, that would be enough. Amazon represents millions of merchants and they are opening the door and allowing us now to engage directly with merchants starting next month. So if we just had Amazon we would be extremely happy and very, very busy for the next decade, but the reality is that we have announced. We also have target Crate & Barrel, Kohl’s, we are the single source supplier for Kohl’s, Wesfarmers Group out of Australia. There is a long list Dyson, Electrolux, we supply lots and lots of big brands and substantial e-commerce players with 3D models. And the magic here Scott is that with our Generative AI, this is going to become an extremely profitable business for us. And we will be able to scale our production to meet the global demand of all the Amazon merchants and beyond.
That’s helpful, Evan. It kind of flows into my next question, just in terms of where you stand from a capacity standpoint, are you able to meet the level of interest, the level of demand that you have currently?
Currently, we are able to meet the demand, but the demand has been held back again by Amazon. They basically have closed their platform, where their merchants cannot bring models on. So, that’s been holding the demand back even though the demand is there. But that is going to start to flip and switch in next month. And throughout the year, it’s just going to continue to ramp up. The good news is Scott is that our AI is get better and better and stronger and stronger everyday. And the more models its makes, the more – the stronger it gets. And so we currently do not have a supply or demand problem. We are able to manage both sides of that.
That’s great. And then last one for me, Evan, just on the current cash balance, I am curious kind of what the preference or thinking is as we move through ‘23 in terms of either raising capital or potentially selling ARway shares to raise some working capital?
Yes, it’s an interesting question. I mean, we talk a lot about internally, but there is the potential that we go cash flow positive. Obviously, everything needs to line up for that to happen. And if that happens, then we don’t need to raise any more money. But it’s not pie in the sky it is something that can happen. And we are driving very hard to achieve that. So, that’s really the focus right now and that’s really what’s driving us.
Alright. Perfect. I appreciate the additional color. Thank you very much.
Thanks, Scott.
Thank you. We go next now to Lisa Thompson of Zacks Investment Research.
Hi, guys.
Hi, Lisa.
Glad to hear an update again. I guess a few questions. It’s a little hard to wade through the numbers with the restatement and particularly trying to figure out the fourth quarter. So you may – Evan, you made a comment that you wanted to possibly work to get to 90% gross margins? Can you tell us where we are in the fourth quarter in the gross margin level if you take out all the one-time stuff?
So I wouldn’t look at 2022 to give you any real guidance about what 2023 is going to look like meaning, I mean, it’s going to run, but the AI has gotten substantially better in 2023. And so our margin is going to accelerate throughout the year. And for us to achieve that 90% gross profit margin is in my view doable as we roll into Q4. But these are technological advancements that need to happen that, the foundational tech is there. We are on the path to achieving it. But obviously, we can’t talk about what hasn’t happened yet other than to say that it’s possible and we are driving towards that goal. As we look at Q4, there was a lot of things – lot of startup costs that were in Q4, because we were just really starting to ramp our production for Amazon. And not much of that was really AI powered. As we roll into Q2, more of our tech – more of our 3D models is going to be built by AI, the more that we build with AI, the more our profit margins are going to expand. And so it’s really an AI story here, Lisa and the AI is really just starting to get going. So looking backwards isn’t going to give you a good indication of what’s to come. We really have to just look forwards at and know that the AI is going to continuously improve our margin.
Okay, good to know. So one number I could figure out on Q4, so it looks like you were up 36% sequentially from Q3 in revenues, is that a number that is going to continue or is there some point where it starts to spike? Is there a step function maybe, how does that go rollout this year?
Yes. So 2020 or 2023, rather Q1, I think we are going to see another bump in sequential growth. In 2023 Q2 is when I think we start to see 50%, 60%, 70% sequential growth over Q1 and Q3, we should continue to see that kind of growth and it could really pop in Q4. I mean, this is all happening real-time as we start to get deeper and deeper into Amazon’s merchants and the AI starts to be able to scale. That’s really going to determine how fast we can grow our top line and bottom line.
Alright. That sounds exciting. Good to hear that.
We are very excited, Lisa.
Yes. Sure. So when are we going to start seeing the revenue come in at ARway?
That’s a good question. We expect – first of all, there is some small revenue that’s already trickled in. We have already closed a number of pilot projects. There is some significant six-figure contracts, almost all the deals that we are working on with ARway are enterprise deals. So, they do take a little bit of time. But we are having calls with big brands and big names, these are big boys, Verizon, Philip Morris, Hanger, Outlet Malls, Walt Disney, I mean, we have some very, very big names, the biggest names that are very interested. And when I say interested, it takes work for them to actually pilot a project, meaning they have to create either a white label app for them or they do – they create a white label app with their SDK. They create an experience and augmented reality, way-finding experience or whatever they are going to use it for. And they test it out for a period of weeks. They have their employees use it. And only after that the conversation moved to let’s talk about a rollout and the quoting that kind of thing. So, it is an enterprise sale, Lisa. It does take a little time, but we are generating some small pilot revenue now, the pilot revenues are tens of thousands of dollars. The enterprise sale is hundreds of thousands of dollars. So, we are in the tens of thousands today. We are on the cusp of getting a deal that’s in the hundreds.
Sounds great. Based on my last trip to the Outlet Mall, I am looking forward to it.
Exactly.
And I couldn’t find anything.
Yes.
Good stuff. Alright. Great. Well, I look forward to seeing the full filing next week and try to pass through the numbers. But it looks great. Thank you so much.
Thank you, Lisa.
Thank you. We’ll go next to Christopher Sakai at Singular Research.
Hi, guys. This is [indiscernible] for Chris. I would like to circle back to gross margins. If I know you have provided us 2022, 51%, if you can you give us a flavor of where you guys were on fourth quarter?
Yes. As I mentioned, fourth quarter is not going to be indicative of what we are doing in 2023. We can talk about it, but its rearview mirror. It’s not going to give you an indication about investing in NexTech today, why you should invest in NexTech today has nothing to do really with 2022. But if you want the number, Andrew would be happy to give it to you.
Sure, I can maybe pick it up with him on the call. On the fourth quarter, obviously, and congrats on strong 2022 and making the transition, so kudos to you and your team. It seems it was pretty strong growth in fourth quarter. But correct me if I am wrong, the fourth quarter technology service revenues were probably slower than what you – the growth part was a little slower than what you had in third quarter. Is that right?
I don’t think so. Andrew?
Yes. In our press release, we said there was a 14% growth in Q4, that was many driven by the holidays and working with our customers over the holidays are a bit troublesome and completing models and whatnot.
Okay. So, some of that probably jumps into the first quarter…?
Yes.
Okay. Yes. So, again though, I don’t have all the numbers, but it seemed that way. And thanks for giving guidance, the previous caller, in terms of what you expect in first quarter, second quarter and the rest of the year. Any more color you could provide on 2023 would be helpful. Obviously, also from the perspective of gross margins, but also from selling and marketing expense, which I see for the year ending [ph] number are significantly down, which is obviously good for your cash flow. But at the same time, I see that you guys are working very hard to garner new customers, so if you can kind of paint a picture and give some guidance on that.
Yes. So, we are going to probably pre-announce our Q1 numbers sometime in the not too distant future. So, stay tuned for that. But this is the year of breakout growth. If I haven’t been clear, let me be crystal clear. This year 2023, Q1 should be a solid, good quarter. Q2, we should see at least 50% sequential growth over Q1. And I expect to see that same kind of trend in Q3. And Q4 could be something extremely special, where we get triple digit, 100% growth in both top line and bottom line where the AI kicks in to high gear. So, this is a year of breakouts rapid growth for NexTech. It’s already begun. Q1 is already in the history books, we will release that. As I have said it was a good quarter, but Q2 is going to be even better and Q3 and Q4 better still. So, it’s just going to be this ramp up of revenue. And we will be able to talk some more, as you know, on the Q1 after we release the Q1 numbers. But both, the profit margins and the revenue are going to increase quarter-after-quarter-after-quarter. And as far as marketing expenses, as mentioned, with Amazon, allowing us to market their merchants, we can now target Amazon merchants directly. That’s a huge, huge cost savings. Like I said earlier, it’s like going hunting in the zoo. We are going to – we know where they are. They are on and we are going to offer them our 3D modeling services. There is nobody else doing that. So, we see that as just a bonanza, an absolute bonanza for NexTech, because our cost of targeting them is very, very low. And yes, our customer acquisition cost is low, our margins are going to be high and get stronger throughout the year. And we see that as a big revenue driver throughout the year.
So, as a percentage of sales, there is more room for our sales and marketing to go down?
Yes, absolutely.
And between 2021 and ‘22, the steep decline probably can be attributed to your spin-off of ARway and divestment or stoppage of the legacy business or there are more parts to it?
Excuse me, did you – you are talking about 2021 versus 2022?
Yes. The steep decline in sales and marketing, right?
So, we did not spinout ARway until Q4 2022. So, ARway has nothing to do with that. As mentioned previously a number of times, in 2021, we had a completely different business driven by virtual events and e-commerce. In 2022, we divested ourselves of those two businesses, which is why you saw the decline in revenue. And so the whole story is that those legacy businesses are no longer part of our going forward plans. Everything now is geared towards high margin pure-play technology companies.
Okay. So, it’s essentially all of it is due to the…?
100%.
Yes, that sort of things.
Yes. Everything is – think of everything as a complete reboot.
Okay. Great. Thank you.
Sure.
Thank you. The next now to Asad Rashid, private investor.
Hello, Evan. Thanks for taking my question. I am going to kind of step away from the financial aspect, for a bit, I saw the few questions. Evan, with your parts, library or archives in the AR technology, I want to ask you, is the AI sufficiently positioned, or is it capable to step-in and cover any inventory that is lacking to build a particular model?
Not every – so today cannot just go into the parts library and build anything and everything. That is the future. And that is the goal. But today, it can only do some of the products, but by going into the parts library. But over time, as we keep adding to the parts library, the parts library gets bigger. And that means that, there is more potential for the AI to go in and assemble more and more products. So, it just gets stronger and stronger and bigger and bigger over time.
And do you anticipate or is there any mindset that potentially the – I guess the product, you have in Toggle 3D through other customers that may be implemented within the library as well or not?
That’s a good question. I will have to get back to you on that whether we are able to harvest the parts from Toggle 3D, I don’t see why not, but I will have to get back to you on that.
Thank you. And just one last question. Do you think maybe one day, NexTech could potentially be a cash dividend paying stock?
I do. I think that, essentially, we are doing that now with our businesses. And so let’s just use as an example, one of our businesses got acquired, and there was a windfall gain to NexTech, because we own 10 million or 13 million shares. We would end up with, I don’t know $100 million in cash. And so it would be hard for me not to dividend some of that out to our loyal investors. And again, being the largest single shareholder, I am always going to do what’s in the investors’ best interest, so yes.
Appreciate it. Thank you very much.
Thank you.
We will take our next question now from George Kramer, private investor.
Good afternoon Evan. I am going to let you tell you how much I appreciate the work you are doing for us. It seems like you are working very hard. And I certainly appreciate it. But what I wanted to ask is to get some clarification on the Apple Glasses. I am looking on the internet now. And what I am seeing is they are talking about an Apple headset coming out in June of this year.
Yes.
But the glass is not until ‘26 and ‘27 or…
Yes. So, from what I understand, and until it’s out, it’s all just conjecture is that, there is going to be a pair of, I guess they call it XR glasses that come out this summer, where it’s not pure AR, it’s an AR – VR pair of glasses, so it’s I think not a pure. So, think about it like this, I don’t know if you wear reading glasses, but the idea of the AR glasses is a lightweight pair of glasses that you would wear that are equivalent to your reading glasses, okay. Those are the pure AR glasses, that you are talking about ‘26, ‘27. The glasses that are being discussed, that Apple is going to release this summer is a hybrid of VR-AR goggles. They are more like you see pictures of them. They are like almost like ski goggles, very cool looking. But they are not “glasses”, like reading glasses, but they do this thing. And so I don’t care whether you call it glasses, or goggles, or headsets, it works. Our technology will work with that technology. And that’s all I care about is that ARway’s tech will be able to get integrated into those Apple goggles that come out this summer. And that’s all I really – and that’s all you should care about as an investor as well. So, glasses, goggles whatever you want, it’s going to work.
Okay. I just wanted to try to clarify it. One of the questions I have is the – I wonder if I could ask how many 3D models using AI, that you can get ready in one month now and then what would it be by the end of the year, do you have any idea?
Yes. So, it’s a good question. It’s going to be happening in real time, over the next couple of weeks, and months and quarters. And so just think about it as we are just at the beginning. And so that means, 6,000, 8,000 models per month today, that can scale to 10x or more by the end of the year. But it could be some variation of that. But that’s how I see it kind of playing out where look, the AI is able to produce, if the AI is fully formed, it can produce a 3D model in a couple of minutes. Now, you still need to go through QA, right, you still need to have somebody do some quality control, although that can be automated too. And you still need to get it onto the Amazon platform, although that can be automated too. So, there is lots of pieces to it. It’s not such a – it seems like a simple question. But it’s, there is a lot of pieces and parts to actually build the technology so that it can deliver the 3D model on to somebody’s website and be hosted in the cloud. So, to answer your question, it’s happening now. We are able to deliver, as I have said, 6,000 to 8,000 a month, and that number is going to grow. And it could grow quite dramatically. It’s just hard for me to gauge. And I don’t see it stopping, meaning once it starts to grow exponentially, it doesn’t stop. So, if you go past 2023 into 2024, in theory, we would have essentially limitless production capacity.
Well, that sounds perfect. Just one more question if I can. I am trying to define what AI means to this business. And the question is, is AI just like a software that you update, and that’s all you need, or do you have to add more personnel and more computer power, or can you explain, clarify that for me?
Yes. So, the magic with AI is that it generates the more without more people, right. It kind of builds on itself, so it’s an algorithm, it’s a computer program that learns, which means you don’t have to keep programming. That’s the magic, it programs itself. And so you don’t need more people…
More computer power to do it, as well?
Well, that’s, I don’t know about the computer power, most of it happens in the cloud. We use the cloud, AWS, or Azure, and so most of the computing happens in the cloud. We haven’t had an issue with the computing power. But in terms of the growth of AI, it’s really magical. And it really is extremely powerful, because it learns, just like people learn. And it gets smarter, just supposedly like people do. And as that happens, it’s able to do more and more, work faster and faster and it never sleeps. It’s 24 hours a day, 7 days a week, 365 days a year. So, if you point it in the right direction, it’s incredible. I mean, obviously, if it’s going the wrong way, it’s a problem. So that’s the best I can give you on kind of how I see AI working today.
Okay, I appreciate your help. Thank you much.
Thank you, George.
Thank you. We will take our last question from Vincent Capozzi of Private Investor.
Who is your competition?
Is this Vincent?
Now, this is his wife, Gail.
Hi, Gail.
Hi.
So, there is no public company that we compete with. There are private companies that are out there that do some similar stuff. There is a company named Avatar that does virtual try-on, they just raised CAD45 million in Series A rounds or B rounds, but there really aren’t any competitors that are publicly listed. So as private companies, it’s hard for us to really identify, I think Amazon has told us that they have NexTech and a handful. So, look at your hands, not that many of companies that are making 3D models for them today.
Okay, thank you for that.
You are welcome, Gail.
And we do have a follow-up question now from Asad Rashid.
Okay.
Hello, Evan. Just to follow-up, when we are talking about the portfolio of technologies that NexTech has built say, god rolling down the road, one of them gets acquired, will you retain the database that all these operating systems have been building or...?
I am not sure I understand the question.
So, pretty much the, I guess, intellectual property, does NexTech still…
Yes. So no, no, we become a shareholder, just like you, we are not going to control when we spin it out is its own public company at standalone and it gets all the assets. Yes, so, it’s own public company. And there is a reason we do that. Otherwise, it would be – well, first of all, it wouldn’t be a legit standalone public company if we retain the IP. And also it would make it impossible for a suitor if somebody wanted to acquire one of these spin-outs if they don’t have any IP. Yes, there is nothing there, right, so...
Yes. And just one last question, we are familiar with your partnership with Amazon, do you at all anticipate further growing with Amazon Web Services at all in the future?
What you – again I am not sure what you mean by that.
I mean, well, you have the quite a range of technologies in your portfolio. Obviously, if you are working with Amazon with about the Toggle 3D or even AR ties for this matter, ARway or any other technology that you may have in your portfolio not perhaps that can be predicated more towards Amazon Web Services?
I see. Yes. We are definitely cross-selling if that’s what you are asking. We are very aware of that there is cross over and ability to cross-sell to our customers is important and we will definitely – we have been doing that, yes.
Perfect. Thank you. Thanks very much.
Thank you, Asad.
And Mr. Gappelberg, it appears we have no further questions. I will turn the conference back to you sir for any closing comments.
Alright. I just want to thank our loyal shareholders. I do believe that the stock is extremely undervalued at these levels. And I do believe that patience and poise will prevail. Thank you very much. Have a nice evening.
Thank you. And again, ladies and gentlemen, this will conclude the NexTech3D.AI fiscal year 2022 and fourth quarter 2022 results conference call. Again, we would like to thank you all so much for joining us and wish you all a great evening.