Nextech3D.ai (ticker: NEXCF), in its recent earnings call, disclosed its unaudited financial and operating results for the year and fourth quarter ending December 31, 2023. The company reported generating approximately $5 million in revenue in 2023 despite economic headwinds.
Nextech3D.ai's strategic pivot to India in the third quarter of 2023, which lowered labor costs, has shown positive outcomes. With a focus on profitability in 2024, the company is bolstering its enterprise customer base and introducing new AI-powered services, including 3D photography.
The subsidiary ARway is witnessing growing demand for its services, and significant growth is anticipated in the latter half of 2024. The company is also leveraging its shares for services program to maintain financial stability without additional capital raising.
Key Takeaways
- Nextech3D.ai reported $5 million in revenue for 2023.
- The strategic shift to India in Q3 2023 led to reduced labor costs and positive results.
- The company is aiming for profitability in 2024, focusing on enterprise-level customers and new AI services.
- ARway, a subsidiary, is experiencing increased demand and is expected to grow substantially in the second half of 2024.
- Nextech3D.ai is expanding its offerings beyond 3D modeling and has partnerships with major entities like Amazon (NASDAQ:AMZN).
- The company is pursuing licensing opportunities and has avoided additional capital raises through a shares for services program.
- CEO Evan Gappelberg expressed confidence in reducing financial risk by selling non-core assets and highlighted the company's operational self-sufficiency.
Company Outlook
- Nextech3D.ai is positioning itself as a comprehensive provider of AI 3D technologies.
- The company is exploring licensing opportunities to expand its revenue streams.
- There is a strong focus on achieving sustainable financing and increasing operational stability.
Bearish Highlights
- The company acknowledged the challenging economic conditions that have affected its operations.
Bullish Highlights
- Nextech3D.ai is experiencing growth in its 3D modeling business and positive cash flow.
- The company's partnerships and potential deals with enterprise companies and platforms, including Amazon, are seen as key growth drivers.
Misses
- There were no specific financial misses mentioned in the earnings call.
Q&A Highlights
- CEO Gappelberg stated that big deals are expected to be a primary growth driver.
- The company anticipates reduced operating expenses due to the utilization of low-cost resources in India.
- Confidence in the technology and team was reiterated, with a belief in securing significant contracts in the near future.
In summary, Nextech3D.ai has laid out a strategic plan geared towards profitability and growth. The company is optimizing its operations, focusing on high-potential partnerships, and leveraging its technological advancements in AI and augmented reality. With a prudent financial strategy and a clear vision for the future, Nextech3D.ai is navigating through economic challenges with an eye on long-term success.
InvestingPro Insights
Nextech3D.ai (NEXCF) has made headlines with its recent strategic initiatives and financial performance. To further understand the company's position in the market, let's delve into some key metrics and insights from InvestingPro.
InvestingPro Data:
- The company's market capitalization stands at a modest $12.35 million, reflecting its status as a small-cap enterprise.
- With a striking revenue growth of 150.24% in the last twelve months as of Q3 2023, Nextech3D.ai has demonstrated its ability to significantly increase its sales.
- However, the company's operating income margin was reported at -461.41%, indicating that despite growing revenues, operational costs have been a major challenge.
InvestingPro Tips:
- Analysts are optimistic about Nextech3D.ai's sales growth in the current year, which aligns with the company's own projections for increased demand for its subsidiary ARway's services in the latter half of 2024.
- The company's stock price has experienced high volatility, which could be of interest to certain investors. This volatility is further underscored by the stock being in oversold territory according to the RSI, suggesting that there may be potential for a rebound.
For investors seeking a deeper dive into Nextech3D.ai's financial health and future prospects, there are additional InvestingPro Tips available at https://www.investing.com/pro/NEXCF. These insights can provide a more comprehensive understanding of the company's financials and market position. For access to these valuable resources, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. With 14 more tips listed on InvestingPro, there's a wealth of information to help make informed investment decisions.
Full transcript - Nextech Ar PK (NEXCF) Q4 2023:
Operator: Good afternoon, ladies and gentlemen. Welcome everyone to the Nextech3D.ai Full Year and Fourth Quarter Earnings Conference Call. [Operator Instructions] I’d like to remind everyone that this call is being recorded today, April 29, 2024. On the call are Evan Gappelberg, Chief Executive Officer; and Andrew Chan, Chief Financial Officer. Today, after market closed, Nextech3D.ai released its unaudited financial and operating results for its full year and fourth quarter ending December 31, 2023. A copy of the earnings disclosure is available on the Nextech3D.ai website and on SEDAR. Some of the information discussed on this call is based on information as of today, April 29, 2024, and contains forward-looking statements that involves 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 the company’s SEDAR filings. During the call, they will discuss IFRS results and key performance indicators. Neither this call nor the webcast archive may be recorded or otherwise reproduced or distributed without prior written permission from Nextech3D.ai. To begin the call, Evan Gappelberg, Chief Executive Officer, will discuss financial highlights as well as recent business developments, followed by Andrew Chan, Chief Financial Officer, who will review financial results and outlook. I’ll now turn the call over to Chief Executive Officer and Founder of Nextech3D.ai, Evan Gappelberg.
Evan Gappelberg: Thank you. Welcome, everyone, and thank you for joining. 2023 is in the rear view. We are driving hard in 2024, but it is important to look at 2023 just to gain some perspective. We did do about $5 million in revenue in 2023. And that was during challenging economic conditions. I don’t know if everyone remembers, but in 2023, interest rates were rising at a breakneck pace and capital was leaving the capital markets. Raising capital has become extremely, extremely difficult in 2023, and that really continues because interest rates are still at elevated levels in 2024. We made strategic initiatives in late 2023. Given the climate that we were in, we pivoted to India in Q3 2023. That strategic shift contributed to our optimistic outlook in 2024 and beyond. We reduced our labor costs quite dramatically, and we’re starting to see dramatic positive results from that pivot to India without losing our production capabilities along the way, meaning it’s not easy to move 100 people from one part of the world to another and still maintain your business, especially as a small company. So that was no small feat, and we accomplished that. And I can happily report that, that is done. We also had a reduction in head count in 2023 to streamline our operations and reduce our costs in our drive to profitability and growing cash flow positive. We also invested heavily in our AI technology, particularly in our patented technology, which is playing a crucial role in our enhanced product offerings and also our operational efficiencies. For Nextech, AI is actually driving our business forward. If you look at our business performance in 2023, we reduced our burn, but it didn’t actually kick in, in a dramatic way until 2024 because it does take a quarter or 2 to see the results. So 2024, we’ve reduced our burn to right around and really just under $200,000 a month. Q2 2024, which is where we are today, we are looking at our 3D modeling business. That segment of the business, if we look at that business as a stand-alone business, it is cash flow positive. And that’s generated by optimizations of our AI technology and the combination of our pivot to India. Again, looking forward, we are driving towards achieving profitability in 2024, and that’s going to be on the back of increased enterprise level customers. We are currently working towards closing deals with some very large accounts. And when those deals close, we expect that that’s going to have a material impact on our business. We are also looking at innovation, and that’s a big part of our story that we are innovators in the 3D modeling space. It’s not just about 3D models, it’s about generative AI texturing, it’s about our CAD converter technology enhancements in our AI capabilities to improve 3D modeling process and ultimately improve the speed, lower the cost and increase our ability to scale. Our AI and 3D cloud hosting services are expanding in 2024 again, and of course, our AI-powered 3D photography studio, which I’m extremely bullish about, it’s a brand-new service, and we are seeing a strong market demand. Every single customer that we presented to wants it, is buying it and signing up for it. So if you think about photography, 3D photography going with the 3D model, it really is a perfect business, and that is 100% AI powered. Those – 3D photography business is an AI business segment that we are launching right now in Q2. If you look at the market, we’re still dealing with high interest rates, which again is I think, keeping a lot of the small cap stocks from actually achieving much higher valuations. And – but from our perspective, we are seeing significant interest in our entire tech suite, including our 3D modeling business and our AI-powered services. But again, I will stress that the upside is still ahead of us as these enterprise deals really do take time and they really do – they really will have a material impact. If we look at our subsidiary performance, ARway is standing out. ARway has experienced a significant increase in demand for its indoor navigation and wayfind services globally throughout 2023 and really starting to surge in Q1 and Q2 2024. We’re signing deals now on a weekly basis. That’s pretty much unheard for a new tech company to be able to achieve that on a global scale. And I’m extremely bullish on ARway and what’s to come in the second half of 2024. If you look at ARway, the main event and the thing for investors to keep their eye on is developing infinite scale indoor navigation. Nobody has cracked the code on infinite scale indoor navigation using spatial maps. We think we are knocking on that door and about to break through. We believe that we will be first to market in 2024, and that will really, really excite the entire global market for what it is the ARway sells, which is, again, indoor navigation using our proprietary spatial computing platform. So the big event though there is infinite scale. So pay attention to that. We have many ARway pilot programs that are concluding, and we expect them to transition into major contract signings, again, specifically in the second half of 2024. If you look at our growth, the completion of pilot programs, which is what we have been working on really for the last 6 months, is anticipated to lead to signing of substantial contracts, and that’s going to continue to boost the company’s growth and profitability for years to come. If you look at the convergence of technology and advancements with new business opportunities, it really does position ARway and by extension the parent company, Nextech, for robust performance in 2024. So as we move forward and we look at Nextech and we look at Toggle, you really need to look beyond just 3D model. The company positions itself as a comprehensive AI 3D tech provider expanding and extending beyond mirror 3D modeling. That’s where we started, but we are way, way past just doing 3D models. We have a full spectrum of 3D-related technologies and services. And I would suggest our investors value our company not just on the 3D modeling business but also on the intrinsic value of our patented technology and the future significant revenue opportunities, which include the 3D modeling business, but extends the 3D texturing using AI; 3D hosting using cloud – our own cloud services; 3D AI photography. These services are extremely valuable. They’re part of our technology that we’re selling. And again, we don’t think that the company is getting the proper valuation for its suite of 3D AI technologies that it’s been pioneering. If you look at our platforms, we’ve seen notable growth in 2023, up over 50% over 2022 in our top line revenue. Most of that growth is tied with partnerships with major entities like Amazon and other significant platforms. We are positioning with new partnerships, which we think will position the company for future growth and provide substantial returns to investors. So it is always Amazon, that’s our key account, but we have other key accounts that are quite significant that we are working on closing. Beyond Amazon, beyond our operating business, we also have investments in subsidiaries. We have major financial equity in Toggle and in ARway. We own 26 million shares combined, which are currently worth as of the close of trading today, $5.1 million in equity. So if you look at our current market cap, I’m talking about Nextech, at these very, very depressed prices, you have a company that clocked in at $5 million in revenue, and we have about $5 million in equity. That’s – if you look at our market cap, something is wrong. It’s so undervalued. It borders on the absurd, but that’s the small-cap market. If you look at our shares for services program, I want to highlight that for our investors because I think it’s misunderstood and I also think our investors don’t understand how valuable that is, the program has been a huge success. The program, which involves compensating employees and service providers with company shares instead of cash, has been massively successful and it has succeeded in Nextech not needing to raise additional capital. And that will continue as long as our shares for services continues until the company goes cash flow positive. So let me reiterate. We have been extremely successful with our shares for services program. It’s worked, it’s working, it will continue to work. As long as it continues to work, we will not be raising capital. I’ve been offered anywhere from $5 million to $15 million investments in the last couple of months, and I have turned them down. Why? Because our shares for services program is working. So we are not raising capital, and that’s evidenced by the fact that I’m turning down capital raises at this juncture. So that’s good news for shareholders because I know that’s always a hot topic. So if you look at sustainable financing, that’s what the shares for services represents. Ongoing success of the shares for services program suggests that the company might be able to avoid traditional capital raising indefinitely and to continue to fund operations through this approach until we go cash flow positive, which we expect to happen later this year. Further support from investors, we have some long-term investors who are prepared to support the company financially by buying potential non-core assets for cash from the company. So there’s even additional cash on the sidelines. If the company wants to sell some of its non-core assets, it has some investors that are willing to put cash in and do that. So if you look at – if you think about what I’m describing, we’ve really reduced the financial risk of Nextech by minimizing the need for external financing, the company lowers its financial risk and increases its operational stability. So even though if you look at our balance sheet, you look at our bank account, there’s not a lot of cash, but we’re operating, we’re paying our bills, and we’re able to continue to sustain our business and grow our business in this current market without having to go to the market for capital raises. So if you look at our company, $5 million in revenue this year. We’re going profitable with our 3D modeling business. Cash flow positive already in Q2. And if you look at 2024, Amazon still represents a huge opportunity, but we have lots of opportunity for growth with other enterprise companies and platforms that we are currently working with, have NDAs with, are doing POCs with, and we expect to have some of these contracts land in the near-term, although they do take a lot of time to actually close. It’s just the way the big companies work. I thought we would have them closed in Q1. They are rolling into Q2. It’s not uncommon, but that is essentially what is happening at our companies. So, with that, I am going to turn it back to the moderator.
Operator: [Operator Instructions] Your first question comes from Scott Buck from H.C. Wainwright. Please go ahead.
Scott Buck: Hey Evan, nice to catch up. I just want to ask about some of the potential licensing opportunities. I know there was a release put out earlier this year that you guys may be closer to something. Just curious if you could kind of walk us through the mechanics of how would deal like that could potentially be structured?
Evan Gappelberg: Sure. So, how are you doing Scott? Good to hear your voice. So, our technology, this is primarily the CAD to 3D Toggle platform that we have been negotiating and working with large enterprises where we would license the tech to them, they would essentially pay us a usage fee on a monthly basis and they would turn their CAD files, these are equipment manufacturers, into 3D models on the platform and then texture it and then use our photography studio to take pictures, publish it to the web, then they would also use it for hosting for tracking the data and analytics. And so it’s kind of this CAD, the 3D, very easy-to-use platforms that we are seeing a lot of interest in across multiple industries, including jewelry, industrial manufacturing and a bunch of others. Even consumer product goods, companies are looking at it for rapid prototyping where they might have boxes of cereal or boxes of mac and cheese. And in different parts of the world, those boxes have different labels on it. And so we would make the 3D model and then they would be able to transfer it throughout the globe by just changing the text on the 3D model and then have these prototypes essentially. So, that’s kind of the use case, Scott.
Scott Buck: I appreciate that. That’s helpful. And then second, I wanted to ask about revenue cadence through ‘24. I assume we are still kind of largely dependent on delivery schedules. But if there is any color you can provide there, I think that would be helpful.
Evan Gappelberg: Yes. So, right now, we are built for scale. We can produce for these large enterprise customers. And again, licensing the tech means they are actually producing the 3D models, they are loading the CAD file on to our platform and out task the 3D model. It’s pretty instant and then they point and click on the texture, the color that they want. And so we have the ability to license our tech to scale it. Things are taking a little longer, but we are heavy in negotiations and nobody is walking away from the table. It’s just driving through NDAs and then testing phases and then legal and then it goes to the innovation department, and it goes to someone who is on vacation, don’t believe how long it takes to land these deals. But even with Amazon, Scott, when we first started, we had almost six months of testing, six months before they actually signed the contract. So, that’s just par for the course in 2024. It’s kind of steady as she goes with our business and our revenue, but these big deals are going to be the thing that really moves the needle.
Scott Buck: Yes. No, that’s helpful. And then last one for me, Evan, just on OpEx for ‘24, I assume you guys are able to scale the business at operating expense levels that are fairly close to where you are today, or do you need a meaningful amount of investment in either R&D or sales and marketing in ‘24 to support this growth?
Evan Gappelberg: We have actually suck all of our money in 2022, 2023. We put tens of millions of dollars in building the tech and the team. And so we do not foresee, in fact, OpEx expenses. In fact, it’s going down because we continue to use our India resources when we need any new resources. So, if you think about that equation, the cost of – these resources in India are like 90% less than North America. So, we are selling our goods and services in markets where the price is high and then our cost is quite low.
Scott Buck: That’s helpful. It sounds like we should see some real operating leverage as we move through the year. I appreciate the time and look forward to catching up again in a few weeks for the first quarter.
Evan Gappelberg: Thanks Scott.
Operator: Evan, I will turn it back to you for closing remarks.
Evan Gappelberg: Alright. In conclusion, investing in Nextech or one of our subsidiary company, Toggle or ARway, is investing in innovative early-stage startups. These startups have moved shot the potential in the emerging industries like 3D, like AI, like augmented reality and spatial computing, all of which, according to Gartner (NYSE:IT) and others, have multi-billion dollar market potential. I remain committed to increasing shareholder value. It has definitely taken longer than expected. Interest rates, the pandemic, these are all things that are not in my control. And as of right now, our business is ready to scale. It’s clear to me that our tech and our team is in place. So, it’s not a matter of if, it’s just a question of when will these big deals land. AI has the potential to drive our business forward to new heights with our growing patent portfolio and our growing product portfolio of AI GPT products. We are well positioned to surprise investors to the upside. We are very undervalued in my opinion, and I think that long-term investors that are still invested will be rewarded. We are working with some of the biggest companies and brands around the globe, including the largest e-commerce company on the planet, including the largest car rental company in South America, including the largest consumer packaged goods company and many other large companies that we would hope to be able to announce soon. These companies, these big accounts represent the future potential growth of our business revenue. Again, it takes time. It takes patience. We’ve built the tech. It is pioneering technology and we are focused on monetizing that. We have gotten our cost down. And now it’s just a question of when we get a signed contract and then it’s off to the races. I want to thank our investors for staying steadfast and I do believe that there is going to be a reward. Thank you.
Operator: This concludes today’s conference call. Thank you for your participation and you may now disconnect.
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