At the end of July, NXT-ID (NXTD) released preliminary results from the second quarter, showing a huge jump in revenue, growing gross profit and shrinking net loss. Last week, full results were disclosed, providing a closer look at just how the company is blossoming into a diversified outfit and next-generation security and digital payments leader.
Revenue for the first six months of 2017 was approximately $14.3 million compared to only $80,795 for the same period in previous year. NXTD CEO Gina Pereira deadpanned, “We’re making real progress in terms of revenue” in commenting on the improvement.
The majority of the increase in revenue is a direct result of the acquisition of LogicMark, a provider of unmonitored personal emergency response devices, or “PERS” for short. LogicMark is the country’s biggest manufacturer in the no-monthly-fee PERS space, according to LogicMark President Kevin O’Connor. That’s an overlooked asset of the NXT-ID given that Global Industry Analysts in June forecast the PERS market to reach $7.4 billion by 2024.
In July 2016, NXT-ID completed the acquisition of LogicMark for $20.9 million in cash and stock, with another $6.5 million promised based upon certain performance milestones being met over 18 months from closing. No figures were broken out, but O’Connor made it clear LogicMark is generating record sales since coming under the NXT-ID umbrella.
The shipments of flye™ cards to WorldVenture Holdings also contributed to revenue, as the global roll-out of the cutting edge digital credit card to WorldVentures’ more than 500,000 members gains momentum, and there was some nominal revenue realized from the acquisition of Fit Pay in May.
Pereira offered guidance that he expects consistent revenues from Fit Pay to begin in the fourth quarter of this year. Pereira’s forecast is underscored by Fit Pay deals with Visa (V) and MasterCard (MA) related to contactless payments that should begin to bear fruit. Furthermore, Fit Pay is now providing payment capabilities to Token, a new connected ring developed by Tokenize, Inc., that has already sold out of December pre-orders. In the quarterly conference call on Q2 results, Mike Orlando, President of FitPay and COO of NXT-ID, informed shareholders that they’ve already surpassed 15 customers and signed three new ones during June alone.
A more “apples-to-apples” comparator to Q2 sales of $7.7 million would be the first quarter, since LogicMark was fully integrated into NXT-ID at that point. Revenue during the March quarter, revenue totaled $6.7 million, meaning sequential quarterly revenue increased $1.0 million, or 14.9%.
Looking a little deeper in the numbers shows that gross profit in the first half of 2016 climbed to $7.3 million, versus a gross loss of $(58,374) in the year prior period.
While revenue mushroomed in 1H, operating expenses didn’t climb proportionately, a good sign for reaching breakeven in the future. Operating costs came in at $5.6 million compared to $4.6 million last year. Operating income improved to $1.7 million in the first half this year, reversing from an operating loss of $(2.3 million) in the first six months of 2016.
Net loss during the first half was $1.93 million, down from $2.51 million during the six months ended June 30, 2016. Net loss be misleading for emerging companies because it can include things like changes in fair value of derivative liabilities and other one-time variables that tend to weigh heavily on developing companies. In the case of the net loss during the first half of 2017 for NXTD, it included an interest expense of $3.42 million and an income tax provision of $186,375. The company doesn’t report “adjusted” numbers, which can exclude things like special items, taxes, interest, depreciation and amortization.
As CEO, Pereira is obviously aware of this and the overhang of convertible debt that can cloud strong operational performance and has taken steps to clear that slate. In the recent quarterly call, Pereira said all convertible instruments have been converted now and the company is working with refinance $15 million in debt – a chunk of which was related to the acquisitions – to more favorable terms, which it hopes to have completed by the end of the year.
One year into the LogicMark acquisition and only months into the FitPay acquisition that will soon be financially accretive and NXT-ID looks to be turning the corner and shoring up its balance sheet on the back of another record-setting quarter.
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