During 2021, Nexcom had big ambitions and the company scaled up the sales department to drive further growth through increased sales of their SaaS solutions to a larger customer base. However, in 2022, the company experienced that organizations, as a result of market turmoil, first postponed investments in new SaaS systems and then canceled their projects. This contributed to Nexcom adding only one new company to its customer base in 2022. The company has therefore shifted its focus from expansion and strong headcount growth to achieving a positive cash flow with a focus on keeping costs under control – a trend seen in both larger and smaller tech companies around the world.

The decisive factors for a positive share price development are therefore that the company manages to reduce costs further, retain their existing customer base and at the same time convert more customers from pilot projects to sales from their sales pipeline than was the case in 2022.

In Q2 2022, Nexcom raised 6 MDKK, where the focus was on cutting costs, and in April 2023, the company seeks to raise an additional 7.5 MDKK for continued operations. It is important for the investment case that Nexcom manages to create a positive cash flow so that they are not dependent on new capital from outside.

Price triggers:

• Successful capital raising of 7,5 MDKK (Q2 2023)
• Maintaining 0% churn in a time of market turmoil will help cement Nexcom’s products to new and potential customers (H1 2023)
• Increased conversion of new businesses from pilots to customers (H1 2023)
• Increased revenue from existing customers via cross-selling of the company’s various SaaS solutions including the AI-powered RevealCX Boost platform (2023)
• Further cost reductions and execution of the strategy from rapid expansion to positive cash flow (2023)

Risks:

• Churn from existing customers who choose to terminate their contracts will result in a drop in revenue, putting significant pressure on the company’s cash balance
• The positive cash flow strategy is taking longer than expected, potentially resulting in further capital increases

Potential takeover candidate

In the short term, it is Nexcom’s low valuation that largely drives the investment case. With a market capitalization of DKK 30m (price DKK 2,12), Nexcom has a low valuation (P/Sales ’23 of 2-2.7x). The interesting thing about Nexcom’s pricing is that for larger US companies such as RingCentral or Five9, it may make financial sense to buy Nexcom’s technology solutions and spread the products to their own customer bases, even though Nexcom itself is not profitable.

Towards April 2023, the share price may come under pressure if uncertainty arises as to whether Nexcom can succeed with its capital raising. On the other hand, a solution to the capital need will ease the pressure on the share price.

No churn – provides a basis for long-term growth

Nexcom has had no churn (loss of customers) for 10 years. This indicates stickiness and a product that customers are happy with. The customers consist of international companies such as Groupon and Telenor. There is therefore also a good basis for Nexcom to increase its sales to existing customers by moving with customers to new countries (such as with Telenor in Denmark and the US) and increasing the use of new products (such as RevealCX Boost). In addition, there is a large potential for new customers in the US, where there are 11,000 potential customers.

AI-powered products

In 2021, Nexcon finalized their AI product (RevealCX Boost) with Telenor as the first customer. RevealCX Boost is a superstructure / add-on product for RevealCX that significantly improves RevealCX’s analysis of the customer management of the companies’ customer handling (companies’ support / customer centers). RevealCX Boost does this by assessing all data (customer contact data) instead of just a sample. According to Nexcom, it is a unique product, which should therefore boost sales. The development of RevealCX Boost also shows that the company owns AI products and has know-how on AI development that is relevant in the fight for new customers and in a potential acquisition of Nexcom.