BOSTON, November 10, 2016 /PRNewswire/ --
SoundView Technology Group (http://soundview.co) releases the
following company update for NXT-ID, Inc. (NASDAQ: NXTD).
THE SECURITY TECHNOLOGY INSIDE
KRIS TUTTLE & STEVE WAITE:
Read the full report:
http://s3.amazonaws.com/Published_Research/NXT-ID_NXTD_SV_Note_NOV_10_2016.pdf
Excerpt:
Summary
Nxt-ID has grown and evolved into a security technology company
that uses partnerships and acquisitions to monetize their
innovations and reach into multiple end markets. The LogicMark
business in healthcare is already generating substantial revenue
and the WorldVentures business with the "Flye" smart card is about
to enter a high volume stage of deliveries and begin to generate
revenue as well. We will see these two areas expand and others
added. Most recently Nxt-ID has joined the Cisco Solution Partner
program to provide biometric and encryption solutions in
conjunction with other ecosystem partners. [Investors should recall
that in Q1 of this year Cisco paid $1.4B to acquire Jasper to leverage their IoT
platform in the enterprise market.]
We will be monitoring each area individually as it grows and
contributes to the overall business. From a positioning standpoint,
investors should consider Nxt-ID as a technology provider as shown
in the figure below. The company strategy is to grow the existing
partnerships aggressively in 2017 and add new ones that will drive
growth in 2018 and beyond.
The rest of this report goes into greater depth on the
newly-added LogicMark business in PERS and also the existing smart
card business - both the WorldVentures Flye card and the evolution
of the original Wocket card/wallet. We've also included a brief
update regarding the third quarter of 2016 along with a brand new
IV model which supports a share price of $18. We will get more details out after the
company holds their full ER call in mid-November.
Recent Q3 Developments & Financial Results
In our August research note we highlighted the completion of an
acquisition (LogicMark) which marked a big transition for NXT-ID
from an early stage, largely pre-revenue company to one with
commercial metrics of growing revenue and improving EBITDA.
After the stockholders meeting on September 1st the company completed
their reverse stock split and other matters pertaining to the stock
and balance sheet. The full details can be found in the SEC
filings. These actions have allowed NXT-ID to achieve compliance
with NASDAQ and free themselves to focus on growing the core
businesses and extending their reach into new markets.
A clear harbinger of better things came in the release of
preliminary Q3 results on October
10th. The company announced (emphasis ours):
"Revenues were approximately $3M for the three months
ended September 30,
2016 compared to $418K for the same period in
2015. Revenues from the recent LogicMark acquisition were
included from July 25, 2016, and accounted for approximately
90% of the increase from the comparative period in 2015. The
operating loss for the three months ended September 30, 2016 narrowed to
approximately $500K compared to an operating loss
of $3M for
the same period in 2015. The net loss for the three months
ended September 30, 2016 was
approximately $1.5M after
approximately $1,000,000 in interest expense compared to
a net loss of $3.543M for the three months
ended September 30, 2015."
To summarize - $3M in revenue and
a $500K operating loss versus
$418K in revenue and a $3M operating loss a year ago. To be fair,
interest charges were still substantial but we expect this to
improve in the next several quarters.
In the very short-term, Q4 should offer another step-up in
business results since we will see a full quarter of LogicMark in
the results and deliveries of the WorldVentures smart card will
commence in Q4 as well.
In 2017 NXT-ID will no longer be a company with regular reports
of growing revenues and narrowing losses. For the next year we are
expecting total revenues of $37M with
very easy YoY comparisons all year long. The current market cap is
less than 1x 2017 revenues and compares to our IV of $18 /share. (See our updated IV model in the
valuation section below.)
Longer-term we expect to see more developments:
- NXT-ID has broad ambitions around their competencies and IP in
biometrics, security, sensors, miniaturization and business
development. That means they have quite a few "irons in the fire"
with a range of partners, large and small. NXT-ID is the tail on
the dog and often can't control the outcome or timing of these
initiatives. However, some of them are likely to come to
fruition.
- LogicMark is a major expansion for NXT-ID into a new market
that offers myriad possibilities. It's a solid business today with
some obvious near-term growth catalysts for the next year. But we
see robust activity and investment in what we'll call the
convergence of the internet of things (IoT) and healthcare.
This is a market that will bring together two-way communication,
sensors, biometrics and security to make home and remote care
for chronic medical conditions, including "aging in place", a
reality.
Valuation
Now we have a revenue and earnings basis upon which to build a
new IV model for NXTD. We will get more details after the company
reports full Q3 results but based on what we already know, Nxt-ID
will be reporting consistent revenues against very easy YoY
comparisons for the next several quarters.
Our new model mostly reflects the additions of LogicMark and
WorldVentures. With respect to LogicMark, we believe new products
and expanded distribution will propel growth even faster as we get
later in 2017 and into 2018. The Cisco arrangement is new, but as
part of the Cisco IoT ecosystem we expect Nxt-ID to generate some
revenues from this channel in 2017 and for it to ramp in 2018.
Additional technology integration deals could add to our
projections but none are "baked in."
One area we have been extra conservative in is the WorldVentures
Flye card. If the card takes off (sorry!) then the revenues could
be very materially beyond what we have modeled. But 1) we want to
see the card in the field and 2) we want to see how WorldVentures
rolls it out to members - existing ones and new ones. The second
point is a big swing item regarding our future estimates of their
demand for more cards from Nxt-ID.
At the current price, the stock is trading well under 1x 2017
sales and our IV suggests an $18
near-term price objective.
Read the full report:
http://s3.amazonaws.com/Published_Research/NXT-ID_NXTD_SV_Note_NOV_10_2016.pdf
ABOUT SOUNDVIEW RESEARCH
SoundView conducts independent research - mostly on emerging
technologies. We like thematic-driven companies where technology is
involved and use analysis to identify the most promising investment
opportunities.
Our business model is combination of subscription fees along
with some direct investments and advisory fees. We measure our
success by the quality of our analysis, accuracy of the conclusions
and the size and influence of our audience. We apply our own proven
approach to valuation that we call intrinsic value (IV) for
informing investment decisions and optimizing portfolio
management.
Disclosures
SoundView serves as a strategic advisor to NXT-ID and provides
advisory and other services to the company including strategy
advice, company positioning, investor communication methods and
ongoing technology and market research. SoundView employees do not
have positions or other vested interest in NXT-ID stock. Additional
disclosures at :
http://s3.amazonaws.com/Published_Research/NXT-ID_NXTD_SV_Note_NOV_10_2016.pdf
Contact:
Kris Tuttle
SoundView Technology Group
kris@soundview.co
+1-617-828-6462
SOURCE SoundView Technology Group