Hello, and welcome to the Venzee Technologies Q3 Fiscal Year 2021 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answer session. If you would like to ask a question during this time, simply press star then the number one on your telephone keypad. If you would like to withdraw your question, press the pound key. Thank you. I would now like to turn the call over to Mr. John Abrams. Please go ahead, sir.
Thank you, operator, and welcome to our discussion of Venzee Technologies Q3 2021 Financial Results. I'm John Abrams. As president and CEO, I led a business model and operational turnaround here at Venzee starting in late 2019. We began our pivot to a SaaS model platform in the fourth quarter of 2019 and completed it at the end of fiscal year 2020, with initial revenue generated from early sales of our Mesh Connector product. Today, in our third consecutive quarterly earnings call, I'm pleased to share that we are on track for our year-end targets with zero churn, building revenue, strong pipeline conversion to contract, and increased direct sales of our Mesh Connector product. Our call today will cover how Venzee's growth is reflected in our key performance indicators and how our KPI progress ensures we meet or exceed our 2021 and 2022 goals for revenue and Mesh Connector sales.
Following my remarks, our CFO, Darren Battersby, will provide a financial review, and we will conclude our call today as we do each quarter with an open Q&A session. Before I get started, I wanna let you know that the earnings release referenced on this call, the associated MD&A, as well as the slides we will speak to, can all be found in the investors section of our website, investors.venzee.com. Today's call may include forward-looking statements about Venzee's future performance. Actual performance could differ from what is suggested by our comments. Information about the factors that could affect future performance is contained in our SEDAR filings. For those of you not familiar with Venzee, we are a software-as-a-service technology platform operating in the very active consumer retail sector of the global supply chain.
We sell a product called a Mesh Connector that allows brands, those that make products, to digitally connect to retailers using our proprietary AI software available from a single cloud-based global instance. In commerce today, digital content sells physical product. Without the ability to get product information in the right digital format, products do not sell. Digital is the foundation for all retail sales. Naturally, consumer brands that have a digital advantage will win in their market. Venzee's Mesh Connector is unique in the industry and uses AI, artificial intelligence, to provide the digital advantage brands need in order to expand and maintain complex global sales channels using tech rather than people. Our proprietary Mesh Connector stand alone as the most efficient digital path to more than 400 retailers, allowing improved sales margin for brands and manufacturers.
Our intelligent solution outperforms human teams, and we know that because we have been able to measure how much time our clients save when using our AI compared to their legacy solutions. Today, our clients tell us Mesh Connectors allow them to expend a fraction of the manual human effort moving product information to retailers. One brand even told us that because of Venzee, when faced with an unprecedented supply chain and labor challenge, Venzee allowed them to survive. That's remarkable. Let me pivot here to an area you are right to look at as a mark of our success, revenue. We can't have great tech and great organizational talent and a great plan. If we can't deliver on revenue, well, then we just won't succeed. Our CFO will cover the financial details on this call in a moment, but let me address revenue straight on.
When I took on the CEO role here at Venzee in 2019, I set ambitious revenue goals. To achieve those goals, we built a set of partnerships in late 2019 and into 2020. Those partnerships, primarily with product information management companies, generated hundreds of Mesh Connector requests, but ultimately have not delivered the revenue we expected. In part, that is due to Mesh Connector discounts I discussed in our last earnings call. M&A activity in the U.S. has continued to impact as well. Some of our initial partners have been purchased by competitors who had little interest in supporting our growth. Other partners, while still keenly interested in our platform, became engaged in M&A activity that has pushed our ability to monetize those partners into 2022. While partner-driven sales approach has merit, it has not produced the results we expected in the timeframe we defined.
We have dealt with that. In the second quarter this year, we pivoted our sales approach to a direct model and hired Joel Karstadt, a proven sales leader, to accelerate revenue in line with our goals. In Q3, Joel expanded his team to give us the horsepower to directly target consumer brands, manufacturers, and retailers. We now have the capacity to both convert a robust sales pipeline and develop high-value contract revenue opportunities. Four of those opportunities are quite significant in terms of revenue. Today, we are in the final stages of negotiation on these opportunities and expect to share more details with you before year-end. By way of reminder, our goals for 2021 and 2022 are big and include selling more than 2,000 Mesh Connectors by the end of this year and recognizing $195,000 in monthly recurring revenue.
Appropriate sales discounts account for the gap between our Mesh Connector list price and the revenue we expect to generate by year-end. For 2022 year-end, we have set a goal of some 13,000 Mesh Connectors and significant associated MRR. Our revenue goals haven't changed. Our sales approach has, and we will deliver the results we expect. Let me pivot to another set of numbers that drive us here at Venzee, our KPIs or key performance indicators. Our traction in the market is real and growing. We don't just say that, we measure it. We measure our success each quarter by reporting out a traditional SaaS model set of KPIs. Along with other financial information, our quarterly KPIs were released yesterday. I wanna quickly review our KPI metrics. For Q3, the number of retail channels available to clients through our platform remained unchanged at 412.
To give some perspective on that number, our competitors typically offer a small fraction of the top U.S. retail base. We offer a far greater number of global retail connections and can expand our connections rapidly in line with client expressed and contracted need. Our 412 retail channel connections represent the vast majority of big box and e-commerce retailers and provide Venzee an advantage over competitors already. Therefore, we do not face pressure from clients at this point to add more channels. However, as we grow our operations in 2022, we will add to this number. For now, expect it to remain generally as is. Sales pipeline growth for the quarter just ended remains strong, with more than 10,000 active sales opportunities, representing a 43% increase from end of Q2.
That increase is due in part to an upgrade of our website that now allows direct purchase of our Mesh Connector product. For the most part, our site functions as lead generation. A brand, for instance, would not purchase several hundred connections through that site, but they do seem to find our offer to purchase through the site proof of our product's utility. That drives those larger brands to connect with our sales team for deeper contract-based discussion. While growing our sales pipeline is important, converting those opportunities is more so. To do that in Q3, we added additional proven sales leaders to our team and have been able to convert sales pipeline opportunities more quickly.
In fact, we have recently moved four large clients into contract negotiation for Mesh Connector purchases that, if closed, suggest a combined sales opportunity above our 2021 and even our 2022 revenue goals. You will note on our KPI chart, we reached 820 sold Mesh Connectors by the end of Q3. As I called out in my previous comments, some of those connectors were added in bulk through partnerships, partner relationships in Q1 and Q2 and are not generating revenue as expected. Should we determine that some number of these connectors will ultimately not perform, they'll be removed from our KPI report, and we will disclose that publicly. Finally, I wanna call out that churn remained at zero for the quarter.
As I close out my prepared remarks for today, I know you can tell my enthusiasm for growth of our disruptive technology platform continues to increase. Our hard work from the quarter is generating contracts now being finalized that will help us achieve our revenue targets. We are winning deals more frequently now and have announced several brand wins and our first significant contracted revenue deal that activated a set of well-known multinational consumer brands with Mesh Connectors for several of the big box retailers in North America. We are confident about our year-end goals. Our KPIs are indicative of strong performance. Our AI platform is the most advanced in our industry, and our sales team will continue along their strong trajectory. We are on the path to use our tech and sales momentum to go head-to-head against market leaders in our space.
Our AI is a significant advantage against competitors because, unlike any of our competitors, our AI allows Venzee to grow our customer base without hurting our margins. For every client added to the Venzee platform, our AI gets smarter and better at doing its job, and the time it takes to onboard a client decreases. It has taken hard work by talented people to put us in the strong position we're in. Our continued contract wins in a competitive market are helping to unlock our potential to transform this market and dominate our competitors. Thank you for your engagement and participation in our Q3 earnings call. I'm gonna turn the call over to Darren Battersby, our CFO in Vancouver, Canada, for more discussion on our financial results. Darren?
Thank you, John. As mentioned, my name's Darren Battersby, served as Venzee's CFO since John took over in 2019. I'm a current and good standing member of the Chartered Professional Accountants of Canada, and my history is in helping and advising early-stage and growth companies. I'll be discussing the Venzee results for our third quarter ended September 30, 2021. The numbers I will reference here are in USD unless I otherwise note. Before I get into the financials, I'd like to point out a few important items. As John noted, we did pivot to the Software as a Service or SaaS model platform. The company's seen four consecutive quarters of increased and unmatched revenue growth. Starting from zero, so it's obviously gonna grow from there.
Relating to the pivot, we've moved from a negative margin sales to positive margin revenue sales. Again, seeing significant growth in our sales leads and Mesh Connector pipeline, as John noted in previous slides. We also recently got a U.S. OTC ticker, VENZ.F, on the OTC Bulletin Board. In the financials, you'll see that in three months, we had approximately $16,000 of revenue. In the nine months year-to-date, we had $39,000 of SaaS revenue. Prior when comparing to the prior years, we had $0 for the three months and $26,000 in revenue for the nine months. That revenue in the previous year was not on model, not on the SaaS model, but holdover revenues from this other higher cost sales model that Venzee was employing.
Part of the pivot in 2019 prevailed into the pivot from the sales model in 2019 prevailed into 2020. The comparatives now will be based primarily on model revenue. We were able to see the second consecutive quarter where we showed positive margins. For our three months, our gross profit was CAD 11,000, gross profit margin of 67%, up from 62% in Q2. Year to date, we had approximately CAD 22,000 gross profit. That margin was 56%, again, up from 48% in Q2. Our cost of sales are relatively minor. It's primarily now just server and software costs. Overhead, you'll notice that there's been an increase, primarily due to the additional hires over the last year.
We've increased the sales and marketing teams and our implementation and tech people also. G&A has also increased. We were quite meager about a year ago, growing from a very skeleton staff with very little overhead. You'll see those numbers have increased. Looking through the numbers, you'll notice that the stock-based comp, so the options and RSUs, which vested in the quarter are a component of that. Adjusting for these non-cash expenses, we see hard costs for the three months being around $820,000. In our first quarter this year, it was $530,000, second quarter, $704,000. I anticipate these to be plateauing at around the $820-$850 sort of level.
For the nine months, we saw just over $2 million of hard costs. In the previous year is $1.2 million, so you can see the increase there. Overall, we posted net losses of $792,000 for the three months, $2.4 million for the nine months ended, giving us $0.00 per share for three months and $0.01 per share loss for the nine months year to date. And also good to point out that we have received over $1.5 million U.S of funding support, primarily through the exercise of warrants, some through options and some through the COVID relief funds in the U.S. and Canada.
Speaking of which, the PPP program in the U.S., the Paycheck Protection Program, we were able to access $90,000 USD, and that was completely forgiven by the government in this quarter. Switching to the next slide with the cap table. We have 228 million shares issued and outstanding as of today, approximately 109 million outstanding warrants, 14.3 million stock options, and 1.9 million restricted share units. Total fully diluted, we have approximately 354 million shares outstanding. Based on our current share price of CAD 0.10, we have a market cap of approximately CAD 23 million today.
All in all, I'd say this quarter was on target and where we expected from a sales point of view. We are set up for a strong Q4, as John mentioned, some strong minimum sales indicators coming in. We do expect to meet our sales and spend our targets by the end of the year, setting us up for a very strong and encouraging fiscal 2022. Thank you for your time. We look forward to interacting and talking with all of our shareholders. Please reach out through our investor relations teams and through our websites. This ends my formal discussion, and I'll hand it back to John.
Thank you, Darren. Operator, if we could now open the call to investor questions, that would be great.
At this time, I would like to remind everyone, if you would like to ask a question, please press star then the number one on your telephone keypad. We'll pause for just a moment to compile the Q&A roster.
John, it's Arlen here. We had a couple questions come in via email. I guess the one question here is what's different. Can you go into a little more detail on the difference between these PIM partnerships and these new contracts that you're discussing and that you've closed?
Yeah. PIM partners, PIMs are a very specific type of software solution that most large brands use to organize their product information. We know several of those companies. The challenge, this has been a very active sector. We're supply chain and we're consumer products in the supply chain. A lot of investment over the last two years, and we've talked about that. What we didn't realize is how much that M&A activity would affect the partnerships we were building. That interfered with a lot of those deals. The idea of working with PIMs is not a bad idea, it's a really good idea. There was interference to monetizing those. The difference with our contracted revenue now is twofold. One, most of our partner agreements were that.
They were a partner agreement, and they didn't have set revenue, and they didn't have set Mesh Connector purchases in them. They would request a lot of connectors for a particular brand, but those weren't under contract. As M&A activity interfered, a lot of those requests would go on hold. The difference now is these are contracts. They're with brands or the marketing agencies for those brands. It is essentially a direct relationship that we can monetize, and much of the work is being done for those already. As those contracts sign, we'll be able to recognize that revenue, which is why you can look. I'm always confident about Venzee. I love what we're doing. I know it's disruptive. I know it's a big deal.
The difference in tone between my previous investor calls is now we have the contracts on the table. They have revenues in them, it's contracted, and we're in a much different position. Long answer to a seemingly simple question, but that's what inspires us here at Venzee and validates the work we're doing.
You had discussed about increasing margins. I guess the more connections that you're adding to the brands. Can you discuss that a little bit more?
Yeah. This is an important point, and you know, Arlen, that I've been in the supply chain sector for big companies for a long time, and every time you add a retail relationship you have to add labor. Some of our competitors follow that model specifically. In fact, I would say all of our competition follows that model. If you add a channel for a brand A talking to retailer B, you have to add labor to move that product information. What we do at Venzee, and this was the attraction for me to Venzee to begin with, is that the AI allows that connection to exist without a labor overhead.
Our competition, every time they add a new customer, they erode the margin because they add more labor. Whereas what we do, every time we add a customer, we suck in all of their data, apply it to the AI. AI is a learning, a compute-based learning algorithm. Every time we bring in a client, our algorithm gets a bit smarter, and it's easier for us to match with the retailers. I don't wanna get too techy about it, but net-net, every time we add a customer, our AI gets more intelligent, and it gets easier for us to move content to a retail channel or set of channels. Not only do we have not the labor overhang, but the process becomes easier for our clients. Our margin improves over time, and we're already seeing that happen.
Great. That's all I had in email. Thank you.
I've seen. Yeah, go ahead.
There are no questions on this end, sir.
I have a Q&A on my screen. There's a couple of questions in here. Let me see if they've been covered. Question is, it's good to see quarter-over-quarter revenue growth from the new SaaS model that we've all been waiting for. Yes. Can you explain, are you gonna convert 820 sold connectors to 195 in MRR by end of year? You've heard a consistent theme in my remarks today about contracted revenue. As I said in my remarks, we have several of those contracts on the table. They are in the negotiation stage and very comfortable with how those revenues look for us, the durability and the number of Mesh Connectors that are signed up for.
The other part that's really interesting to me is that the aggression that these contracts, the companies behind them have about getting up and operational, we are already doing work with some of those companies. Well, I would say all of those companies. The tech validation, we're not going to have some downside late in the game or after the contract is signed that says, "Oh, this isn't what we were expecting." They know exactly what the platform does. In many cases, they have some type of operational experience on our platform already.
We are performing for big brands to big retailers and very happy that the numbers in those contracts get us where we need to be this year and are really a good indicator that we can hit our numbers, which are huge numbers for 2022, but these contracts get us there. I'm very pleased with the progress, very pleased with our new sales team. They are an aggressive bunch of folks and really doing a good job at looking at pipeline opportunities and converting those. I have another one that's popped up on the screen, unless I'll poll operator and Arlen if there's others out there. Not hearing anything, I'll go through this next one.
company has been saying it is, quote, "Strongly positioned to achieve 2000 Mesh Connector," I assume that to be sales by the end of the year. We're now more than halfway through the year with 820. What will allow Venzee to reach 2000 by the end of the year? Again, I'm gonna go back to the contracts on the table. There's in excess of those numbers in those contracts, and so that's what gives me the confidence, and very pleased with where we are. Another one has popped in.
We do have a question.
Yeah, go ahead.
Sir, when you're ready. We have a question from the line of Ryan Gunther with PI Financial.
Great.
Hey, guys. How are you doing?
Great.
Great. Would you guys consider doing like a mid-quarter update or something? Like, if you've already got one of these contracts in place just to give those numbers to. Like, most of the questions obviously are all around how you get to $295,000 MRR. Is there value in doing that with the one you already have contracted to so that people can do the metrics on their own or?
Yeah. That's. Yes. The metrics that people wanna do is given the numbers that you're selling and the MRR, you know, what exactly is the sales price. Let me just be clear on that. Our list price is $250 per retail connection per month. It's a great model. We have discounted from that $250, and what people would be able to get out of that reporting is where those discounts are, and I'm quite happy with them. Discounting is a part of the sales game, and I'm okay with that. We have our list price. It is what some of these smaller brands who have been buying connections, they are paying the list price. The bigger contracts, we're discounting that.
The core of your question, would we consider a mid-quarter? Yeah, certainly. You know, we're kind of getting to the end of the year, so arranging that isn't impossible, you know, around Christmas or something. Mid-quarter, sure. We could consider that, and we will press release these. We're very pleased with where we are today, and we'll release that information as it matures. Doing a call, I would love to do that. We spend a lot of time interacting with investors, so doing it in a consolidated fashion is easier for me to begin with and I'd love to share that good news. Thanks for the question.
Okay. Thanks.
There are no further questions on this end.
Here's one that came in that's very insightful. What's the average time it takes to close a large account from first contract to the new client committed to Venzee? We'll call that commitment a contract. Let me tell a short story on that. If you've been to our website lately, you can see expressed on that website, Mesh Connectors for sale. First call out on that, none of our competitors can offer that. I don't think I should call out the competitors, but you can find them through our investor deck. None of our competitors can do that because most of those engagements become consultative in nature. We can actually provide you the code. We can take your credit card. You can buy that connection.
Here's an interesting story. One of our large contracts, and it's a significant contract, came in. They were coming to our site, and they were investigating connectors to big box retail, and we can see who they are, and we can see what they're looking at. They did that for, I would say, a couple of weeks. We were aware. Our marketing team was aware. Our sales team was aware. Eventually, they reached out to sales directly and said, "Hey, we see all these channels. We're very interested in them and more. How do we put together a deal?" That happened less than 60 days ago.
In under two months, we've taken somebody who we didn't know was interested or in play for a deal, and we've converted that to a very thorough vetting with our tech team. There were meetings at the company site with our tech team talking about our AI, what it does, so thoroughly vetted. Those meetings all took place last month. Then this month, we are in redline discussions. I don't know that that represents, we don't have enough time in seat yet to know that that is normal for a contract conversion. But I'm very pleased at going from zero to a really large contract in under 60 days. Hopefully that gets to that question, and I'll just pause. Any more questions out there?
My queue is sort of dry, so we'll poll one more time, Arlen and operator. If not, we will wrap the call and...
I'm good.
Please press star then the number one if you would like to ask a question.
I'm gonna guess that all the popcorn kernels have popped. Look, it's early in the morning, and thank you all for joining in. My enthusiasm about what we're doing here at Venzee is authentic. We've built some outstanding tech. We built our sales and marketing teams out. They are performing. They are bringing big contracts into the negotiation stage, and those are moving as we expect, and we're very excited to hit our numbers this year. Thank you all for your support, and I'll turn it back to you, operator, to close the call.
This concludes today's conference. You may now disconnect.