SoundView Technology Group
Research Note: NXT-ID,
Inc. ( $NXTD);
2018 IS ON-TRACK
SoundView
Technology Group (Boston) –August 29, 2018:
SoundView Technology Group (http://soundview.co) releases the following company update for NXT-ID,
Inc. (NASDAQ:NXTD).
The full report
can be read at:
Read
this news in full and see images at http://www.investorideas.com/CO/NXT/news/2018/08291SoundView.asp
Nxt-ID (NXTD $1.73)
2018 is On-Track
Kris Tuttle, kris@soundview.co
We published our 2018 outlook for
Nxt-ID in April and the most recent quarterly report showed consistent progress
and updated expectations for 2H 2018 and early 2019.
Here are the major highlights:
1.
The
company refinanced the last major tranche of their high cost debt which has
resulted in dramatic savings in interest.
2.
Fit
Pay revenues are becoming material as Garmin has ramped the number of devices
with Fit Pay to 10.
3.
The
new “Flip” payment device is set to debut soon, and we’ll get our first
indications of demand in Q3.
4.
LogicMark
has remained a steady and profitable grower with a number of new digital
health-related products scheduled for release during the next six months.
We expect to see some additional Fit Pay
ODM announcements later this year. We spent some extra time visiting the Fit Pay
division of Nxt-ID and get into some greater detail below about their position
and long-term growth opportunities for them – spoiler alert – the biggest
market may not be smart watches.
Fit Pay
Garmin has added “Garmin Pay” more
deeply into their product portfolio with a total of 10 in the lineup now with
more expected as the year progresses.
The other part of the Fit Pay expansion is
just as important but less noticeable. Payments is a global business and Fit
Pay enjoys a large footprint, especially relative to their size. Today the
company is in 25 countries and over 170 banks with the numbers growing every
month.
We expect to hear about some
significant new customers for Fit Pay in 2018. These will also reinforce the
positioning Fit Pay as a platform and a strategic asset. We were a little disappointed
to see Fossil Group/ Michael Kors recently launch with Google Pay but there are
still many more opportunities.
At this point Fit Pay is generating
meaningful, consistently-growing revenue that should begin to drive top line
growth rates higher, especially in 2019.
Investors are eagerly awaiting the
introduction of the new “Flip” device which can be used to make payments and be
loaded from a crypto currency account. There is definitely high interest in
being able to make easy payments at the POS with cryptocurrencies like Bitcoin.
To be fair the Flip will rely on “loading” funds from your Bitcoin account
which are then spent as you might with a gift card or an EZ Pass.
Over time though we expect to see the
Flip more tightly integrated with crypto currencies and wallets. For example,
we recently saw a demonstration of something called Button
Wallet
that creates a multi-currency crypto wallet in seconds in Telegram. It’s just a
proof of concept but it works.
The Flip business model is based mostly
on recurring fees (although there is a $29 price for the Flip itself.)
Consumers will be asked to pay at least $1.99/month in account fees and a 3%
exchange fee on Bitcoin loads. These fees are reasonable to start but there is
certainly room to reduce these fees in spur demand based on consumer response.
With a few additional innovations the
Flip and the Fit Pay software could do something much bigger. For example, it
seems doable to be able to use a Bitcoin QR code to load the Flip more
directly. Combined with the expanding availability of crypto ATMs it would give
consumers something much closer to “digital cash” than what we have today.
Valuation and Stock
Conclusion
The Q2 report was close to our
estimates. However, we took some time to substantially revamp our model to
focus it on Fit Pay and LogicMark.
When the dust is settled the new model
is lower in terms of total revenue but much higher in terms of profitability.
Even though the company will have a meaningful amount of recurring revenue
given the Fit Pay business model we are not adjusting the PE multiple.
Investors should also appreciate that
in Q3 we should see YoY revenues return to strong positive growth.
Our updated model is below. The changes
push our IV estimate up slightly to $11.81 per share. We also note that we’ve
factored in a modest amount of additional equity capital. We have no idea what
the company plans in terms of capital raising but our model suggests they could
use some additional capital before they get to sustainable profitability in
2019.
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.
Additional
Disclosures
SoundView serves as a strategic advisor to Nxt-ID and
provides advisory and other services including strategy advice, company
positioning, investor communication methods and ongoing technology and market
research. See our full page of practices and disclosures which should be
attached to this report. If not, it is available at http://soundview.co/practices
More disclosures
Contact:
Kris Tuttle
SoundView
Technology Group
617-828-6462
Media
Contacts:
Chris
Orlando
+1-760-468-7273
D.
Van Zant
+1-800-665-0411
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