Large Enterprise Product Order Announced, Demand for 3D Models Driving Meaningful Revenue Ramp;

Nextech AR Solutions (NASDAQ:NEXCF)

CUPERTINO, CALIFORNIA, USA, September 21, 2022 /EINPresswire.com/ -- Company well positioned to benefit from increasing demand for
3D models. Before the market open on September 20, NexTech AR
Solutions Corp. announced a large purchase order to supply 7,500 3D
models for an enterprise customer. The company has already delivered
approximately 50% of this order with the remaining half to be delivered
during 4Q22. Based on our pricing assumptions, we believe these
7,500 models could be worth as much as $500.0K of revenue and
perhaps more importantly should serve as a powerful marketing tool
as NexTech looks to sign additional large enterprise customers as
well as increase wallet share in the current customer footprint. Also,
in the most recent release, NexTech indicated it is in negotiations
with other large enterprise customers with deal sizes potentially larger
than this most recent announcement. We believe the ramp in new
business should begin to show in 3Q22 results, however, the most
significant revenue growth is likely to come beginning in 2023. Given the
scalability of the model, we believe investors should expect significant
operating leverage, especially as the company exits its lower margin
retail business, potentially driving positive adj. EBITDA as early as
2H23. We recommend investors take advantage of recent weakness in
NEXCF shares ahead of these improving financial performance.


Benefits of 3D modeling for ecommerce clear, should drive multiyear demand. While still somewhat in its infancy, the use of 3D models
for ecommerce has shown meaningful benefits to both consumers and
retailers. While not appropriate for every item sold online, the number
of potential use cases is significant. Consumers can “test” a piece of
furniture or art in their home, look at a potential purse before purchasing,
or even place a watch on their wrist, without visiting a brick and mortar
store. According to Shopify, Inc. (SHOP, not rated) 3D augmented
reality product models have proven to generate a 94.0% increase in
conversions and have resulted in a 40.0% reduction in costly returns.
On some products, conversion rates have increased by as much as
250.0%. As a result, the market for 3D models is expected to grow
to $7.6B by 2025, representing a CAGR of 15.0% from 2020 levels.
As demand for 3D and augmented reality products for ecommerce
continues to grow, we believe NexTech is well positioned to be a key
beneficiary of these favorable secular trends.


ARway spinout remains on track for later this year. In June, the
company announced plans to spin out its spatial mapping platform,
ARway Ltd., into a standalone public company listed on the CSE.
Under the terms of the agreement, NexTech would maintain a majority
ownership position in ARway while NexTech shareholders also receive
a share distribution of the new company, expected to be approximately
4.0%. The spin is expected to be completed by late October as the
company has received conditional listing approval from the Canadian
Securities Exchange. We see several real-world applications for spatial
mapping including museums, hospitals, conference, trade shows, and
sporting venues. By integrating the company’s SDK customers can
create an interactive experience for their own customers including the
addition of audio keys, advertising, and even holograms enhancing the
customer experience and influencing consumer behavior. NexTech has
indicated it has received significant interest in the mapping product, and
we believe new contracts could be announced within the next 60 days.


For definitions and the distribution of analyst ratings, analyst certifications, and other disclosures, please refer to pages 4 - 5 of this report.
Valuation attractive given meaningful revenue growth opportunity and path to profitability. We are valuing NEXCF
shares at $2.50, reflecting a 15.0x EV/revenue multiple on our 2023 revenue estimate of $20.0M. Our $2.50 price target
represents approximately 315.0% upside from recent trading levels. A targeted 15.0x EV/revenue multiple represents a
premium to other small capitalization technology peers operating within the augmented reality, virtual reality, and metaverse
space. We view this as warranted in the near term as the business should begin to ramp quickly given recent partnership
announcements and anticipated revenue generation. As the company begins to demonstrate its ability to drive meaningful
revenue growth, improve gross margin expansion, and achieve consistent profitability we believe new investors should be
attracted to NEXCF shares. In addition, we suspect positive news flow, including new contract and partnership announcements
to serve as a near term catalyst, ahead of the 2023 acceleration in higher margin technology revenue.


Risks. (1) Dilution risk should the company raise additional capital given current cash burn; (2) high levels of industry
competition; (3) technology risk; (4) M&A and integration risk; (5) partnership risk given partnership agreements; (6) foreign
operation risk as the company operates in several jurisdictions with different levels of regulatory oversigh

Evan Gappelberg
Nextech AR Solutions
+1 6316556733
email us here

Legal Disclaimer:

EIN Presswire provides this news content "as is" without warranty of any kind. We do not accept any responsibility or liability for the accuracy, content, images, videos, licenses, completeness, legality, or reliability of the information contained in this article. If you have any complaints or copyright issues related to this article, kindly contact the author above.