NextTrip, Inc. Q2 FY2022 earnings call

Jacob Brunsberg discussed progress in transitioning the business to a scalable software solution, noting revenue growth from $51,800 in Q1 to $237,000 in Q2, and the development of a revenue tail. Key performance indicators tracked include revenue growth, order backlog, pipeline growth, deal closure time reduction, and partner expansion. Frank Orzechowski provided a financial overview, mentioning revenue, gross profit, operating expenses, net loss, and cash flow details. Jacob also highlighted the transition to a software-only subscription model and product expansion plans, including new product announcements combining machine health data and melt pool technology.

Revenue for the second quarter of 2022 totaled $237,000, compared to $144,000 in the second quarter of 2021. The increase was due to increased unit sales of PrintRite3D systems, subscription sales, installations related to prior year sales, and increased annual maintenance contract renewals. Gross profit for Q2 2022 was $44,000, compared to $28,000 in Q2 2021, with a gross margin of 18%. Subscription revenue in the second quarter was $14,000, with year-to-date subscription revenue at $20,000.

Revenue is beginning to show growth aligned with the new business model. There is a growing backlog with $240,000 in third-quarter orders and $30,000 in remaining revenue to recognize from year-to-date 2022 transactions. Pipeline growth includes an increase in qualified opportunities and forecasted deals for closure. Deal closure time has reduced from 12-18 months to an average of 6 months. Product launches planned for the third and fourth quarters aim to move to software-only products, which will significantly increase margins by eliminating hardware costs.

Supply chain issues, particularly with semiconductor components, are affecting OEM partners, causing increased lead times. Uncertainties related to the business transition and market adoption of the subscription-based model pose risks to achieving expected margins and growth.

Q: Could you give us a sense of what subscription revenue was in the quarter?

A: Subscription revenue was $14,000 in the second quarter and $20,000 year-to-date.

Q: When we think about backlog commentary, is it $240,000 in incremental revenue?

A: It's a mix of both perpetual and subscription revenue, including contracts out in the future and planned quarter revenue.

Q: How do you move from current gross margin teens to higher margins?

A: The transition will continue through the year, with product launches in the third and fourth quarters moving to software-only products, which will quickly increase margins by removing hardware costs.

Q: Are any OEM partners having significant supply chain issues?

A: Everyone is facing supply chain issues to some extent, causing increased lead times, but the industry is still tracking positively.

Q: Talk about traction with larger OEMs.

A: There is progress with some OEMs, including a signed deal with one major player, and upcoming product launches will align with software solutions.

Q: Thoughts on moving into polymers?

A: Working with a major aerospace company on enterprise solutions, and software offerings are applicable to both polymer and metal, with plans to be more vocal on the polymer side in the third quarter.

Q: Talk about other software features.

A: Focus is on filling the missing link in holistic quality with machine learning, MES software, and integration with simulation, with API connections to larger OEMs.

Q: Elaborate on the product council.

A: The product council is a group of companies from various markets to ensure alignment for scalable enterprise solutions, with aerospace, automotive, and medical companies involved, and names expected to be revealed in future product launches.