​Here’s What’s Behind NXT-ID’s Record Revenue and Margins

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One of the more interesting emerging names in the new technologies space has been NXT-ID Inc. (Nasdaq: NXTD), which as covered before, owns a diverse portfolio of innovative products that are beginning to permeate into the mainstream. The company is a leader in the IoT and digital payment markets with its FitPay™ subsidiary and fly™ smartcard, as well as in healthcare with its LogicMark personal response systems (PERS). NXT-ID’s portfolio offers the company a good mix of current and future growth avenues going forward.

NXT-ID’s recently reported third quarter results indicate that it is continued to be paced by the record sales of its LogicMark PERS devices. Revenues for the third quarter ended September 30, 2017, were $4.5 million, compared to $3.1 million in the prior year’s quarter, an increase of 46% year-over-year. Gross profit grew to $2.8 million in the third quarter, compared to $1.3 million in the prior year’s quarter, up 110% year over year.

Source: Data from NXT-ID’s Form 10-Q for the quarterly period ended September 20, 2017. Chart by Equities.com

Revenues for the nine-month period grew to $18.9 million, compared to $3.2 million in the prior year’s period, an increase of 494% year over year. Gross profit increased to $10.1 million in the period, up from just $1.3 million in the prior year’s period, an increase of 687%.

Source: Data from NXT-ID’s Form 10-Q for the quarterly period ended September 20, 2017. Chart by Equities.com

LogicMark Continues to Drive Immediate Growth

LogicMark continues to be the core revenue driver for NXT-ID, validating the July 2016 acquisition with each successive quarter. CEO Gino Pereira said on the earnings conference call that revenues attributable to LogicMark increased “in the neighborhood of $1.5 million to $2 million year-over-year on a pro forma standalone basis.”

The unit’s non-monitored and monitored personal emergency response systems (PERS) make home care for chronic medical conditions, including “aging in place,” a reality. LogicMark is strategically positioned to benefit from the converging trends of an aging population, an increasing desire to “age in place” and the acute need to lower cost of care. LogicMark has a strong business with the Department of Veterans Affairs (VA) serving veterans who suffer from chronic conditions that often require emergency assistance. NXT-ID’s strategic plan calls for expanding this business into other retail and enterprise channels to better serve the growing demand for secure and remote healthcare.

Remote healthcare, which includes health monitoring and management using Internet-of-Things (IoT) and cloud-based processing, is an emerging area for LogicMark. In addition to the long-term trends cited above, it’s clear that, as more consumers enjoy the benefits of smart home technologies and online digital assistants, solutions that deliver autonomy and privacy will increasingly carve out larger market share. Security and privacy concerns are already central to the adoption of IoT solutions worldwide, and NXT-ID has significant potential to collaborate and license its technologies to those consumer-facing firms that are aggressively pursuing IoT opportunities.

FitPay Dominating Digital Payments

The company’s acquisition of FitPay in May 2017 has shored up its technology platform with payment, credential management, authentication and other secure services for the IoT ecosystem. The FitPay Payment Platform™ uses tokenization, a payment security technology that replaces cardholders’ account information with a unique digital identifier, to transact highly secure contactless payment and authentication services.

Subsequent to the Q3 earnings release, NXT-ID and Garmin International (GRMN) announced that the Garmin Pay contactless payment feature is now live on Garmin's vívoactive 3 smartwatch and available to cardholders of issuing banks supporting the new service. The new feature on Garmin's latest smartwatch, which was just launched in August 2017, enables consumers to make highly secure contactless payment transactions with the smartwatch at near-field communication (NFC) enabled retail locations using an existing credit or debit card account.



The new contactless payment capability is powered by the FitPay payment platform and available initially for Mastercard cardholders from numerous issuing banks and credit unions including Capital One, U.S. Bank, BECU and First Tech Federal Credit Union in the United States, and internationally through Commonwealth Bank of Australia, Cornèrcard, Sberbank of Russia, and Swiss Bankers Prepaid Services, with additional networks and issuers to be added soon.

"Bringing a powerful feature like Garmin Pay to market requires building an entire ecosystem to enable it," said Michael Orlando, Chief Operating Officer of NXT-ID and President of FitPay. "By supporting the launch of Garmin Pay and the FitPay platform, Mastercard (MA) and its participating issuing banks have shown a real commitment to making payments more convenient for consumers and to reducing friction in the payment process."

Orlando had highlighted during the earnings call that, in addition to the previously announced deal with Bank of America (BAC) that will enable BoA credit and debit cardholders across all of their different platforms to enable their cards on NXT-ID’s various device partners, the company has signed “significant agreements with some global brands that will launch products in Q1 and Q2” of 2018. “We expect those announcements to come by the end of this year or early January,” said Orlando.

NXT-ID’s flye™ Begins Takeoff

The company’s sequential revenues did decrease from the second quarter’s $7.7 million, however, Pereira clarified on the call that the company’s digital credit card – or, “smartcard” – partner, World Venture Holdings (WVH), a leading direct seller of vacation club memberships, was still digesting NXT-ID’s product shipments in the first half of this year. “We still have a significant amount of inventory to work through before they resume new purchase orders, and we don’t expect that to happen before early 2018,” said Pereira. “We are making progress in bringing them new customers and we anticipate that one of the more significant new customers will be announced by year-end.”

NXT-ID’s smart wallet technology has continued to develop in range of capability while shrinking in size. This smart wallet has the same technology as Apple (AAPL) Pay or can be integrated into a card that can be used for a variety of transactions. Versions of this technology package provide a functional and secure “vault” that enables full consumer control and customization by OEMs and solution providers.

The flye™ smartcard, developed in partnership with WVH, offers new and unique features compared to any other “smartcards” in the market. It handles the core functions such as loading in multiple cards to gather loyalty points, while opening up new opportunities. For example, the integrated Bluetooth Beacon makes it simpler for service providers to automatically open doors, provide access and initiate requests. The flye™ card is designed to work with the WVH smartphone application to offer a seamless travel experience for members.

What’s Ahead for NXT-ID

While NXT-ID is making considerable progress with FitPay into the digital payments and IoT space for future growth, the company also continues to be driven by the core strength of LogicMark, and Kevin O’Connor, President of LogicMark, was given the role of closing the earnings call presentation. O’Connor remarked that the unit was “on pace to have a record year” and that he believed “that fourth quarter performance will be a substantial increase.” O’Connor stressed that this growth has been managed while maintaining firm control on expenses. In terms of “headcount and operationally, we have been able to ramp up and support increased demand without adding additional resources and plan to continue to do that by improving overall efficiency. So, all-in-all through the first 9 months, [we had a] really strong performance, looking forward to a strong Q4 and coming back to you with great results for year-end for 2017 and then going into 2018 as well.”


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Companies

Symbol Name Price Change % Volume
AAPL Apple Inc. 173.97 1.75 1.02 40,169,307 Trade
GRMN Garmin Ltd. 58.36 -1.10 -1.85 5,300,609 Trade
NXTD NXT-ID Inc. 1.39 0.15 12.10 1,426,622 Trade
MA Mastercard Incorporated 153.40 1.47 0.97 5,067,327 Trade
BAC Bank of America Corporation 29.04 0.31 1.08 129,859,355 Trade

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