BOSTON, April 20, 2017 /PRNewswire/ --
SoundView Technology Group
(http://soundview.co) releases the following company update for
NXT-ID, Inc. (NASDAQ:NXTD).
NXT-ID (NXTD $1.51)
FROM TECHNOLOGY TO REVENUE
KRIS TUTTLE, APRIL 19, 2017
Despite a positive update, a strategic merger agreement and
major sequential quarterly growth shares of Nxt-ID have declined
25% over the past week. After years of being in the development
stage the company is reporting very large YoY and sequential
increases in revenue. The consensus view is that investors fear
additional shares coming to market or a financing. But the cash
flow profile of the company is now very different. Consistent high
margin revenue will enable them to improve rather than impair their
balance sheet.
Nxt-ID filed their 10K for 2016 and held an online presentation
to review results, discuss current business plans including the
proposed merger with Fit Pay and take some questions from their
analysts.
We covered the Q4 results in a prior note but it's worth
reiterating. With the Q4 results, Nxt-ID
transitioned from a no-revenue development-stage technology
company to one generating material revenues ($4.5M in the quarter ended December.)
Here is a reminder of the highlights from the Q4 report:
The headline number of $4.5M in
revenue compares with $3.2M in Q3 and
nominal revenues a year ago. Revenues for the full year 2016 were
$7.7M compared with less than
$1M in 2015.
- LogicMark - Most of the growth in Q4 was driven by
LogicMark which continues to be a consistent and strong performer.
We are expecting (and modeling) continued linear growth for
LogicMark in Q1 and Q2. We could see a step up in LogicMark
revenues beginning in later in 2017 with expanded distribution and
strong one-time purchase products for PERS.
- WorldVentures - An initial shipment of cards was
delivered in Q4 for WorldVentures to complete their testing. The
exact timing of the major release of the WV flye card will
depend on the completion of tests.
In short, LogicMark is steady and growing with WorldVentures
beginning to kick in with volume shipments.
The FitPay Combination
FitPay is a technology platform that enables contactless
payments on mobile and wearable devices. The platform relies on the
tokenization scheme made popular by Android, Apple and Samsung Pay.
Thus making contactless payments possible on over 10M retail POS
terminals.
The company has gone a step further in creating more open
infrastructure (API and SDK) that allow their platform to be
tailored for uses other than payments. For example, applications
like access control in hotel rooms, office buildings and public
transit.
FitPay also brings a back-end integration and relationships with
service providers and card issuers. This area is one of the most
difficult parts of making payments work for the consumer. Combining
these integrations with Nxt-ID device level technologies can create
uniquely capable products in this emerging space.
Longer term, the most interesting part of the merger may be how
it changes the management team and culture of the company. The
management of FitPay has deep experience in payments. The CEO,
Michael Orlando, was recently a
senior VP at CyberSource and the CTO, Scott
Stevelinck, served as the Chief Technical Architect at Visa.
There are more members of the FitPay team with strong backgrounds
in the space and skills that would greatly expand and compliment
what's in place today at Nxt-ID.
Until the transaction is finalized and the team settles we can't
yet be sure how the staffing and roles will play out. But retaining
and mixing in some of the very capable team to essentially run with
the payments side of the business would be a huge asset for the
combined company.
Some cynics have asked us why FitPay would merge with Nxt-ID.
Our speculation is that FitPay may have leaned just a bit too
heavily on the wearables market (especially the non-Apple watch
part of it) and this is an area that is developing more slowly than
industry experts anticipated. Consumers adoption of new
technologies is hard to predict and often not linear. Wearables
will certainly be commonplace, but timing of mass market acceptance
is unknown.
We see the FitPay transaction as a major change for Nxt-ID, one
that puts them more convincingly on the path to be a $100M+ revenue
company with the assets and management team to run it.
Model Updates, Valuation & Conclusion
Nxt-ID management doesn't give forward guidance. However, we
know that the LogicMark business has been predictable and we will
have two quarters of inventory build to enable the official launch
of the WorldVentures flye card sometime in Q3. That should
support very strong YoY growth in Q1 and Q2 of 2017.
1H 2017 revenues will handily exceed the entire 2016 and for the
full year 2017 is shaping up to be up 3x 2016.
We've updated our IV model to reflect recent results and refined
expectations for 2017 and beyond. We'll have to do it again once
FitPay closes and we get another quarter or two of operating
results.
Our IV estimate remains $18/share.
The updated model is below.
Link:
http://s3.amazonaws.com/PUBLISHED/Nxt-ID_NXTD_SV_Update_Note_APR_2017.pdf
Additional 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 at the time
this report was published. (see back page for more general
disclosures.)
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.
Contact:
Kris Tuttle
SoundView Technology Group
kris@soundview.co
+1-617-828-6462
SOURCE SoundView Technology Group and NXT-ID Inc.