NXT-ID (NXTD $0.45)
Acquisition into position.
Kris Tuttle & Steve Waite: August 22, 2016
In July NXT-ID completed a major acquisition that brings substantial revenues and profits ($11.1M sales and $2.1M EBITDA in 2015) into the company. The deal also takes them from a payments-focused technology provider into a more horizontal IoT technology provider to multiple markets.
NXT-ID announced an agreement to purchase LogicMark on May 18, 2016 and set about to put together the considerable financing needed to complete the deal. They put a package together and on July 26, 2016 completed the deal for consideration of $20M cash and $900K in stock. There are also performance-driven payments of $6.5M if gross margin targets are hit in future periods.
LogicMark has built a good business in personal emergency response systems. These are devices which allow easy 2-way voice communication between parties and/or 911 services. These devices are essential for aged and disabled people living on their own.
The LogicMark business is expected to continue to deliver profitable growth through the next few quarters and likely to accelerate in 2017 thanks to expanded distribution with at least one major retailer.
It's worth pointing out that two key members of the NXT-ID advisory board that might be able to be helpful in expanding this business:
Lawrence Flanagan is currently the president and CEO of AARP Member Services. He was formerly the chief marketing officer of MasterCard Worldwide. He's also formerly from Procter & Gamble.
Bill Fields is the former president and CEO of Walmart retail stores. He was also the CEO of Blockbuster and recognized industry-wide for his expertise in retail and distribution. He also played a decisive role in all the different products that Walmart purchases from around the world.
We'll be redoing our entire model in light of the LogicMark deal. As a starting point we are expecting 2016 revenues of about $13M and $4M of EBITDA. Until we factor in the increased number of shares and debt associated with the deal we don't know exactly how our IV will shake out.
Potential partnerships with the likes of the AARP and/or Walmart offer significant drivers of accelerated growth in 2017 and beyond. One thing we can say for sure is that NXTD stock will be a very different animal in September.
There is still a fair amount of structural and administrative work for the NXT-ID management team to complete in the next 30 days or so. By early September much or all of it will be resolved, including a reverse stock split.
The existing business with the WorldVentures card continues to develop and ramp. We expect to see revenues increasing at the end of Q3 and then dramatically in Q4.
After Labor Day we will be publishing our revised IV model and an updated full company report. Soon after that management plans another investor update webinar hosted by NASDAQ. It will be announced but feel free to sign-up for our email updates if you want to be sure not to miss getting our full report and the invite to this webinar. You can sign up via this link.
NXT-ID continues to work on other corporate partnerships in the IoT space. We're looking for something more along the lines of channel expansion and improved visibility in general-purpose IoT. Such things can never be forecast with certainty but we wouldn't be shocked to see one before the end of this year.
Read the full report: http://s3.amazonaws.com/PUBLISHED/SVR_NXTD_Note_August_2016.pdf
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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.)
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