Nextech3D.AI Corporation (NEXCF) Earnings Call Transcript

Well, good afternoon, everyone, and thank you once again for joining us. I'm Steve Darling from Proactive for another live stream event, this time concentrating on Nextech3D.ai and really their platform, Toggle3D.ai. And we're excited to talk a little bit about what the platform is up to, where it's going, what the plans are for it and obviously, you do a bit of a demo as well. We've got some special guests coming up for you later on in the hour. But right now, I would like to introduce the CEO of Nextech3D.ai. That's Evan Gappelberg, is back with us once again. And Evan, Nice to see you again. Welcome to another live stream event.

Thanks, Steve. Great to be back with you again.

Yes, let's get into Toggle 3D and talk a little bit about this platform because it really is an interesting one that really has taken a lot of small steps but a lot of big leaps as well.

Yes. I mean I can't overstate the value of generative AI for NexTech and specifically Toggle 3D. We should talk a minute about AI in general, how it's transforming industries. There really is this transformational shift happening in the world of technology. And we supply Amazon with 3D models. We've talked about it on your show. There's like 300 million 3D models that need to be made. And we've only done like less than 1% of those 300 million. And I'm not even talking about NexTech. I'm talking about all the 3D model suppliers and all the e-commerce sites. It's still like 99% of the journey, 99% of it is still ahead of us. So we're just really scratching the surface on AI and I don't think our investors remember or even though that we invested $10 million in AI in 2021. We were way ahead of the curve. And now we're starting to actually reap the benefits of that with Toggle and these new developments, these breakthroughs. And we're patenting this technology. It's not technology that we're just creating for the -- just for the fun of it. We're patenting it, commercializing it and using it to create 3D models. And what is going to happen, Steve, and this is really critical. By the end of this year, we anticipate over 80% profit margins for our business. That is a huge number. And as far as profit margins on a business, 80% is a very rarefied space. I mean you're talking Microsoft type profit margins. You're talking just huge, huge numbers, and it's only because of the AI. And that's really the thing that's changed again. I mean we just could never have said that without AI being the engine that's really driving our business. And we've previously announced that we've achieved breakthrough AI with 3D model production capabilities that we see breakout revenue growth in 2023 and beyond. And now it's actually starting to happen. Like Q1, it just really started to trickle in. Q2, it's accelerating by Q3 and Q4, it's going to just be exponential growth.

So Evan, on the AI part of it, a lot of people are -- AI has been talked about a lot the last little while specifically. And people are nervous, they're scared. They're not sure about it because it's new. I don't think it's not unlike when the Internet started and people go, "Oh my goodness, what's going to happen", I think that it takes time for people to understand how important it is and why it's so important. And I guess that's what you're trying to get across is that you may have been ahead of the curve, but you really have to be using AI in order to be competitive in business today.

Absolutely. And people should be scared. Honestly, I'm a little concerned because the -- and you got to understand something, Steve. Man, we create a lot of tool tools. My garage is filled with tools, hammers, saws, whatever, right? Your car is a tool to get around, right? And there's 1 million tools that we create. And it allows us to leverage technology and developments to improve our lives, right? Ultimately, all these tools are there to do that. Now AI is the only thing that we've created to date that can outthink us. Now it hasn't happened yet, but it's going to look at -- this is where it gets really weird. Today, we look at everything in our office house is our tool that we use when we need it. I need a hammer; I'm going to my garage. I'm going to get the hammer, hit the NAV. Okay. But what happens when you create a tool that starts to look at you as its tool, we're used Steve, are the tool that the AI uses. I am the tool that humans and everything we've created becomes the tool of AI. That's where this is going. It sounds -- that's why it is a little scary. And they do have to regulate it. Otherwise, it could just get away from us. And instead of us being the dominant species on the planet, we might have created a species that will dominate us. And that is the scary thought. But we're not there yet for today's purposes or the purpose of this live stream. The thing that we're doing is exactly what we've done before, and that's leveraged technology just like you're leveraging the automobile and the airplane or transportation. I was just reading how Elon is now with the boring company creating the underground tunnels in Vegas, he just got approval for doing that. So at some point in the future, when you go to Vegas, you might go underground in a tunnel with your car, and it takes you -- there's no traffic, ops you up in another spot. So technology keeps on evolving. Our lives keep getting better. When you shop online, I mean, I was just reading an article, Steve, but this CTO of Amazon, and he says, that 3D models are the future of shopping online, more immersive, you could spin and zoom it, put it in your space. And that's why Amazon is putting their money where their mouth is and buying 3D models from NexTech. And so Toggle 3D is essentially an extension of what we do at NexTech where it's a SaaS platform where it's self-serve, but NexTech also uses that platform in-house to create 3D models. And so all the technology that we're building for Toggle, NexTech using for its customers, but it's also allowing subscribers to sign up and use it independent of NexTech, where there's just recurring revenue stream to the Toggle platform. And that's why Toggle is going to get spun out, as you know, in the month of June. And I think like June 15, Toggle is going to be an IPO trading under the symbol TGGL in Canada. And I'm thinking it will be TGGLF in the U.S. And so that is the next generation of 3D model creation, again, leveraging AI. So NexTech, our value is, if you think about it, we're creating 3D models, white glove service for Amazon, Target, Dyson, Electrolux bucket place, Kohl's, on and on and on. We have over 150 customers. But then if you're an individual or a small player and you don't need white glove service, you could just use the Toggle platform, but it goes beyond just e-com, Steve. Toggle can be used for -- I was just talking about Dasha and we should bring around in a minute that Toggle can be used beyond -- it could be used for kitchen design. It could be used for staging in a house. It can be used for CGI essentially gaming. So there's many, many, many use cases beyond the e-com for Toggle. NexTech focus is just e-comm. That's really what we're focused on. But the use cases for 3D models extend way beyond that, Steve.

Okay. Well, let's bring on someone that, as you said a little bit earlier in your comments, it's probably smarter than both of us definitely. We're talking about Dasha Vdovina. She's our Chief Product Officer for Toggle 3D and the audience is getting to know Dasha from some of the interviews that we do together. And Dasha, first off, welcome. Good to see you again.

Awesome. Hi, everyone. Thank you, Steve, for having me.

Yes. Just before you get into your presentation, I just want to sort of give an overview of Toggle and from your point of view of what the platform is and really where it came from to where it is now.

Yes, for sure. So Toggle 3 is our web-based design studio, right? And I say that over and over again, but really being able to design 3D models on the web is changing the game for a lot of these legacy softwares that you see today that let you do 3D models, but you need a PhD in order to accomplish a 3D model that you then are going to repurpose for these different use cases that Evan just spoke about right now and that Toggle is kind of really zoning in on here. But Toggle 3 was the inspiration for is this Canva version of 3D. And so when Canada entered the market of graphic design and completely disrupted Adobe Photoshop, it made things easy and a lot of people that do not think of themselves to be 2D artists to become these graphic designers and create their own content for marketing for social media, for resumes, PowerPoints. With Toggle 3D, we're trying to do the exact same thing, but in the 3D industry. So you don't need to have a PhD, you don't need to learn Adobe. But instead, Toggle 3D, you use your experience. You don't need any sort of background, technical knowledge and are hoping to disrupt the 3D industry in this way, exactly the same way that Canva disrupted 2D.

Okay. Evan, someone asked an interesting question. A customer like Amazon, you talk a lot about the work that you're doing with them, obviously, about licensing like your Toggle 3D and then making their own 3D models. But I think in should just address that a little bit because it's not necessarily -- because I can say, hey, I'm going to go license this. But if you don't know how to use the technology beyond that part of it, that makes it the back end of it, and I think that's what we're going to talk a bit about today, that's what makes the connection between the 2, so important. Is that fair both of you?

I think I understand the question. So you're saying like, why couldn't somebody else just use Toggle for -- to create models for Amazon.

Or why wouldn't Amazon just say, "Hey, well, license to the 3D and make our own stuff.

Okay. So there's a lot to unpack there. I mean Amazon doesn't make their own models like they are outsourcing the production of 3D models. When you think about the millions of Amazon sellers, the individual users, like Amazon's business, there is think about it like this. It's like, why doesn't Amazon have a photography studio for everybody to take pictures of their products, like all these pictures that are on Amazon, like they just don't do that. So you got to bring your pictures on to the Amazon platform. And now you have to bring your 3D models onto the Amazon platform. But here's the kicker. Amazon has very, very strict and stringent standards. To be able to bring your 3D model on, you have to meet these strict and stringent standards. We spent months building the technology that allows us to seamlessly bring the 3D model onto the Amazon platform. It has to get approved by Amazon though, ultimately. They are the gatekeeper, right? So you can't just create a 3D model and try and throw it up on Amazon. It will get rejected is the point. You have to have special skills and special technologies that we've developed over the past 6 months that allow you to do that. And then the second part of that question is scale, right? You might be able to actually get a single model approved by Amazon possibly. But you're not going to be able to get thousands of them or tens of thousands of them approved. It's just a different -- completely different workflow. So that's kind of the -- what ends up happening, Steve, is that the accounts that need thousands call us directly, and it's kind of like a white glove service, and we basically do the heavy lifting for them is kind of panel works.

Okay. Let's let Dasha take over this a little bit. And I know even you like to stay on, and I'll step back a little bit and let you take over Dasha because I know you have a presentation and sort of a demo to show everyone a little bit about how it works. Somebody by the way, on the chat mentioned the interior design would be huge for this type of -- and that's -- keep that in mind as you're going along and explaining that. But I'll let you explain sort of the demo and talk a little bit more about the platform itself, okay?

For sure. So I'm going to share my screen here. Is everybody able to see that?

Yes.

Awesome. Okay. So just a quick overview. And I know we sort of touched upon this before you brought PowerPoint out. But as a quick recap for those that have maybe new to the live stream are not hearing about Toggle 3D or I've not heard about it before. Toggle 3D is our well application for converting tech stream, customizing and sharing high-quality 3D most other one place. So with this product, we are disrupting the CGI software market. We're reimagining how this creative process works in today's legacy software. As I also mentioned, we're building it for anybody. So any technical 3D knowledge, the goal of Toggle is that you're able to walk into the platform and text your 3D model and share it, publish it -- take it off the platform and continue doing what your purpose was to -- on the 3D model. Then the next part is AI, right? So we've been talking about this as well. As a just mentioned it, we are really relying on artificial intelligence in order to be able to help us scale the platform and then also help users to be able to simplify these complex processes in today's legacy software. So we are using AI very heavily in order to simplify that workflow and make it as seamless as easy as possible for the user. And then lastly, CAD files and being able to scale 3D production by using CAD files. This is also something that we've heavily talked about. But CAD files is a quick reminder. Those are the manufacturing files that are used to create pretty much every single product around you that you see today, and it goes beyond product. But if we do kind of talk about product here, if everything around us is already created with 3D CAD files, why not be able to repurpose those for the web. Today, if you take a CAD file and try to take it out of its legacy software and repurpose it, it's incredibly hard because those manufacturing files are very heavy. You can imagine everything is down to the motor to the bolt to every single screw to every single electrical application of the product, it's very, very heavy, and there's a lot of manufacturing information in these CAD files. But for example, for 3D modeling on the web, you don't need all that information. You really just need that outer shell. And you also need that model to be prepared in a certain way that will allow you to texture it and put it on the web. So we're taking these CAD files that were previously locked up in these legacy software, and we're using that as the engine for any other 3D application moving forward. So I'll jump a little bit more into that in a second here. But I wouldn't really want to summarize this because Toggle 3D really does have 3 core functionalities, our competencies. And we're going to dive into these. I'm going to talk about some really cool stuff that's going on with each of these functionalities. But I'll just do a quick summary right now. So Toggle 3D, again, specializes in converting texturing, customizing. By converting this is this CAD application, but we don't just kind of CAD, we convert other file formats as well. The reason we talk about cat so much is because it is super hard to convert today in the industry and kind of going through that process of CAD to final 3D AR ready model. Currently, we hear the early adopters tell us this could take you through 4 6 different softwares today in order to be able to achieve your end goal. So converting CAD and being able to use CAD on the web is super powerful. And that's why we talk about so much. But again, we can convert other file formats as well.

Hold on just one second. I just want to highlight the point you said it would take half a dozen other platforms to do with Toggle what the one platform called Toggle does?

Exactly. Yes. And this is coming straight from our early adopters. We've read about it online. We've tried the whole flow ourselves. But when you have these early adopters coming into Toggle and telling you, this is exactly the technology that we use to go from point A to point B today, and Toggle can do is all in one platform. That's powerful and we hear it straight from our early adopters.

That's another shiny up moment. I cancel 6 different platforms that just subscribe for one. So that's value, a huge amount of value. And that's -- yes, that's why we're excited.

Okay. [indiscernible] functionality here texturing. And I just show you guys that we have here for texturing today. But what this means is that you're taking materials and you're applying it to your 3D mesh. So I want to talk about this a little bit because CAD files, yes, you have your 3D shell or kind of shell 3D kind of product has been created. But you can't just throw textures on that 3D product and then have it be ready for these e-commerce purposes, gaming purposes that we're talking about. You need to prepare the model in certain ways and you do certain things to the model in order to be able to apply texters to it. And then you also need to create your texture in a specific way where it's in 3D, it looks realistic. It reacts to like the way that what in the natural world. And that process today is very manual. It's very difficult. It takes hours. So texturing is another really big component of Toggle. And we are focused on making this as simple as possible. And lastly customizing. So we've talked about the 3D model. We've talked about applying textures to it. The last thing here that Toggle is really good at doing is being able to -- you can use 1 3D model, apply multiple different textures and materials to it and then create this configurator use case, where all of a sudden, you're feeding your CPQ pipeline, you're able to configure the model, share it with less like B2B manufacturing sort of use case where you're in that process of product design, you're figuring out exactly what your vendor wants this product to look like. And you're kind of combining this creative process and using this for product configuration ultimately to reach that final stage of a product that you actually wanted to be. So tables, you do that super easily. Again, this is right now currently manual like coding developer sort of task if you were to take a 3D model and try to show all these different variations in a configurator format, that takes a lot of code now. Toggle it's a point in flake. Dallas kind of dive into the really core self each to each of these core competencies. The first part is the conversion aspect of it. And if you have been following, we've released a lot of PRs in the last few weeks talking about this progress that we've made in converting CAD files to web friendly 3D models. And I think it's kind of hard to understand, unless you're really in the industry or unless you see it visually. So I'm trying my best here to kind of give you a visual example of what I mean when I say we cover 3D CAD files. On the left here, you have this native solid cash flow. This is taken directly from a CAD engine, and this is kind of -- this is a product that they designed. It has internal components. It has all of the manufacturing details on them. And this CAD file is very, very heavy. This could be 200, 300, 400, 500 megabytes. So it's a very, very heavy file. We try to load on the web. You might be sitting there for a very long period of time. So that's not going to work. So what we do is we take this need of cat file, and we restructure it and prepare it for 3D modeling. So we created interest the 3D mesh. That's kind of -- this is what you see right here on the right. And there's lots of things that happen in that process. And we've announced some of these things before, so I'm just going to recap them here. The first one is quad-escalation. What does that mean? That is the highest version of 30 mesh quality that you can get in the industry. This is what all of these big e-commerce retailers, they will not accept a 3D mesh that is lower than that sort of standard. So quad-escalation is difficult. It's not like something that you can just do straight from the CAD software today, but you can do that in Toggle. So we do offer that highest quality testilation. UBN wrapping. This is also part of that conversion process and optimization where we prepare the model to be textured. And that's the kind of the process of UBN wrapping. We've also released some impressive PRs about reducing file size but also removing internal parts. So removing internal prices as optional. But for a lot of these use cases where you don't need the internal nuts and bolts and engines and motors and all of that of your 3D model or you're just trying to showcase the external shell of it. We use computer vision to identify where those internal parts are in the model and then actually remove them in order to make your model a lot lighter. So that's what are the really great enhancements that we have here at Toggle. We also reduced the file size. And this kind of comes to that conversion because I've told you before, you can't take this 500-megabyte file and try to load it on the web. It's just not going to work. So we reduce it to a file size that is appropriate for displaying these 3 models on the web, but then also other applications as well to ensure fast loading speed and kind of the optimized experience there.

Just a quick question on that. Can you talk about how much you reduce it by? So you mentioned what it is. So from an interview that we did before, your reduction in size is quite dramatic, correct?

Yes, for sure. So we are able to reduce the file size of up to 96%. Of course, it's also -- it's going to depend on how big your file is, what your components are and everything, but we've done a successful conversion of 96% from a CAD file. We -- I also kind of just want to touch upon that because we've also converted files that are up to 1 gigabyte in size. That's massive. And we've reduced it by 96%. So kind of thinking about that, that's quite impressive conversion numbers there.

Okay. All right. I'll let you go. Very interesting.

Yes. And then kind of a little sneak peak of what's kind of being done in the R&D lab right now, we are also kind of optimizing poly count. Essentially, what that means is just clearing up the model, making it more lightweight. And again, it all kind of goes back to how can we make the lightest and kind of the best quality 3D model, and that is part of the efforts in that direction. So again, we convert CAD, we also convert a bunch of other files, and so you'll see those listed on the right. And actually, maybe I'll stop there and just talk about the use case that a little bit because sometimes this question comes up of why do I need to convert OBJ, for example, to GLB or any of these other file formats. There's also use cases in the industry where search and software will only accept a certain input so Toggle could be used to, yes, you can texture it and all of that, but you can also -- if you're just looking for that straight conversion, we offer that as well. And so I do want to stress the point that we talk about CAD is the most impressive one, a lot of other files as well. Texturing. Okay. So today in Toggle texturing is point and click. We provide users over 1,000 3D materials ready for their disposal. All they have to do is point and click, and I'll show you this demo here, doing exactly that. So this is in Toggle is a real product that is being created. It's a mirror. And you can see that we've -- there's a bunch of different materials we've already made, and we provide users that 3D material ready to go, but we also provide them a little bit of flexibility to make the tweaks that they need to in the easiest way possible from these preset materials that we already have. This is just a quick demo of this point-and-click technology within Toggle. Both in Toggle as well, we have the ability to create raw material even today. And let me show you what that looks like today. And today, in Toggle with the [ Korea ] material template, which by the way is only available for Pro, there's 2 different types of methods that you can use that are AI-powered in order to create materials. The first one is creating material from a texture image that you already have. And the second one is using a small texture image that you need to expand and then you can create the material. I'll show you what demo hear about how we can use this tool today in Toggle. What you'll see here is I'm going to pull in a fabric, just a random picture from the web. And I'm going to make it a 3D material. The question that I got asked a lot is, why can't we just take that fabric that you just dropped into that kind of demo and just put it on top of the 3D model. Well, the first point is that it won't be 3D, so it's going to look very flat on your 3D model. And the second point is that it's not going to actually wrap around your 3D model very well. So you're going to see that square texture just being like if you can think of a 3D object, it's just going to be applied like this. But then what about all those other sites that are not being applied, right? So it's not going to work very well. So what you see here in the process, let me just pause it here is that I took that fabric, I dropped it into this generator. I told the generator the type of material I'm looking for. So in this case, fabric. And then I selected from a certain amount of resets that we offer in Toggle. As I saw the pattern that looks the most accurate to my fabric. And then what happened is the generator created all of the different 2D maps that get put together to create that 3D effect. This is called PBR materials. PBR materials, the reason really important is that they react to light the same way that this material would in the real world. And that's what gives us that 3D texture. So one being generated right here, again, you see these knobs and then the artist or the person using the platform can adjust these knobs in the easiest way possible that what this does is adjust the different layers of those maps in order to get that exact sort of material that you're looking for. The something is really great and it's very useful. But the limitation here is that the output is only going to be as good as the resolution of your input. So we kind of -- we are working very heavily in order to improve that. And there's lots of use cases where this works great, but it doesn't work great for all use cases. And so this is why I'm excited, really excited about what I'm going to show you here on the next slide. What we're doing right now, this is a little sneak peek from the AI laboratory of Toggle 3D, but we are using generative the in order to make 3D materials from text prompts and from images. In this particular case, it does not matter what your input, let's say, images, if you're doing image to 3D. And certainly, it doesn't matter what your tax prompt is. The outcome with this is a high-quality 4K 3D material. And so we'll talk about this one first. This is text prompts to 3D material. As you can see here, so we're putting in the text comp green marble stone, or dark marble stone pattern and the AI generator is going to create many different variations through 4 that are being split of what if things a green marbles tone is going to look at -- look like. It's going to create lots of different images. And then after that, it's going to start to create those PBR maps, those maps that make the material 3D, and it's going to layer it over top of that image to create that 3D effect. This happens within seconds. The visitors than able to flip through all these different variations that you see here and then ultimately choose the one that best suits their needs. This is a really great use case, and the target market for this really is gaming, showroom staging, virtual simulation. What I mean here is that they're creating 3D models not necessarily as a replica of something that exists in the physical world, but more as like a prop. So for example, if we're looking at like gaming, if you're creating a certain tree that you're putting in your game or you have certain couch in your environment, then you can generate materials here that are going to be similar to what you're looking for, let's say, a fabric or in this case, a marble stone, and use these materials texture 3D model for those types of use cases.

Yes. I think it's also important to note that this is why some of the other competitors out there that you sometimes see them create 3D models from text prompts can't use it for e-comm, right? Because it's not an exact match, right? It's an approximation, right? It's whatever the AI thinks it should look like. It's not -- like if you said red leather couch it might show 6 different red leather couch options, but not the actual one that the e-comm retailer wants a 3D model of. And so that's a very different technology, just pointing that out.

Yes. No, I mean that's a really great point because like you said, every single time in this case, we want the next example of Red Crocodile leather fabric. Every single time you ask the AI to generate that, it's going to generate different variations every single time. The likelihood that you'll see this exact Red Crocodile leather fabric is not very likely. It's going to be a different version of it, but it won't be exactly the same one. So that's why the use cases for this are those sorts of things that you're not trying to recreate -- but you just need a material for, like I said, like crop in a 3D scene. Yes. And so you see another one here, a blue glossy tiles.

Yes, they look great.

They do. So these are all 4K. This is very high quality. Does it matter again kind of what your prompt is, you're going to get those high-quality materials. And again, you have all those PBR layers. You can see actually in this example, very well of the mature reacting to light, and that's what [indiscernible].

So if I'm a gaming developer, and I go into Toggle 3D and I'm just like, okay, I need a whole bunch of props for my video game. I could just go in and just type in the PoPs and it will just pop up on my screen, and I can export that into my game. It's really that easy.