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SoundView Technology Group Research Note: NXT-ID, Inc.; 2018 is on Track

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SoundView Technology Group Research Note: NXT-ID, Inc.; 2018 is on Track

PR Newswire

BOSTON, August 29, 2018 /PRNewswire/ --

SoundView Technology Group (http://soundview.co) releases the following company update for NXT-ID, Inc. ((NXTD).

The full report can be read at:

http://s3.amazonaws.com/PUBLISHED/NXT-ID_NXTD_SV_Note_AUG_2018.pdf

Nxt-ID (NXTD $1.73)  

2018 is On-Track 

Kris Tuttle, kris@soundview.co

Highlights

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.

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.

See updated model -http://s3.amazonaws.com/PUBLISHED/NXT-ID_NXTD_SV_Note_AUG_2018.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.

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

http://s3.amazonaws.com/PUBLISHED/NXT-ID_NXTD_SV_Note_AUG_2018.pdf

Contact:

Kris Tuttle

SoundView Technology Group

kris@soundview.co

+1-617-828-6462

SOURCE SoundView Technology Group

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