Recently, NexTech (OTC:NEXCF) preannounced its Q2 revenues of $3.5 million, up 133% over last year and 40.5% sequentially. Most of that growth came from the acquisition of Jolokia both from current customers and a rapid increase in new customer wins as NexTech took control of sales and marketing. Q3 looks even stronger as contracts will not be booked as revenues until the customer has completed the event or trade show for which the deal was signed. Many deals are for events that are in future months so activity in Q2 may show up in Q3 or even later. Given this accounting treatment we expect the company may start reporting deferred revenues on its income statement giving investors an indication of future revenues. Up until NexTech took over all of Jolokia’s revenues were from annual contracts recognized ratably. Now many deals are being made for single events as well.
Today NexTech AR announced it has partnered with Ryerson University, with over 46,000 students, to launch RALE, the Ryerson Augmented Learning Experience platform, based on NexTech’s InfernoAR. The technology license agreement has an initial value of $250,000 and may create more revenue tied to additional AR services. The initial launch will focus on teaching first year chemistry, biology, and physics to over 5,000 students during the fall and winter semesters. The initial agreement calls for an annual license fee for the InfernoAR platform, plus an annual license fee for the Aritize white label app, plus a fee per AR lab with an initial build of 20 labs. The company will offer this same business model to schools throughout North America. This solution could have wide appeal to schools trying to offer more than video to enhance learning and replace in person labs.
Because of this Q2 revenue beat, and the extreme interest in the InfernoAR platform, we are raising estimates. Since Jolokia became part of NexTech the company has rapidly ramped sales and marketing efforts and hired more and higher experienced sales people that are closer more and higher ticket deals. There has been a large increase in activity from the company’s spend on advertising and sales activity and the pipeline has increased exponentially. We expect this to translate to higher sequential revenues. We now expect 2020 revenues to exceed CN$18.2 million or $13.5 million US. This does not take into account that we also fully expect the company to make accretive acquisitions this year.
As a reminder, NexTech closed the acquisition of Jolokia on April 30, 2020. At that time Jolokia had approximately eleven employees. It is located in Santa Cruz, California. In 2019 it generated $1 million in revenues and had customers such as Merck (NYSE: MRK), Toyota (NYSE:TM), CBS, and Polycom, all of whom were on annual subscription plans. NexTech paid 1 million shares in restricted stock priced at $1 per share ($1.38 CAD,) and Jolokia has a 12-month earn-out based on revenue milestones of an additional $4 million.
Recently the shorts attacked the company with numerous issues many of which are discussions of past results. Current investors are looking to the future and the success of the Jolokia acquisition, which, in the preannouncement of Q2 revenues, looks to have already contributed in a meaningful way. The company is seeing great interest and has a large pipeline of prospects, which are turning into new customers daily. While there is certainly still risk to estimates, if NexTech can execute and build repeat customers, it certainly well positioned in an industry that is exploding.
Source: NexTech AR
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