Earlier this week, James Bayardelle, CEO of Nexus Enterprise Holdings, provided the following corporate update to investors.
Dear shareholders,
Nexus Enterprise Solutions filed its third quarter results with the SEC in November which showed a continued strong revenue growth trend for the company. With third quarter revenues of $832,504 we achieved a 34% increase in sales over the preceding second quarter’s $621,017 in revenues. Further, our third quarter in 2013 represented a significant gain of 472% compared to revenues of $145,504 in third quarter 2012.
With successive quarters and confirming a sustainable growth trend, this is a good time in the history of our company to begin a dialogue with our current and potential shareholders, to discuss the journey our company has taken to get to where we are today and where we aim to go in the future.
First and foremost, we are a technology company. The majority of our employees are skilled programmers who work every single day managing large database sets, refining the code of our proprietary NexChange Marketplace℠ platform, implementing modifications necessary to meet strict federal compliance standards and integrating the legacy code of our growing client base into our systems.
Like many successful start-ups that survive the rigors of their first years in a competitive market space, we had to pivot and adapt our original business plan. The defining move in our early history was the acquisition of our core technology and its development team, including our Chief Technical Officer, Jason Foster.
Our initial SaaS business model sought to license our code to companies processing large volumes of consumer leads. We quickly learned most enterprise scale companies won’t make the commitment to developing or even integrating licensed lead generation solutions into their legacy systems. The larger enterprises want the data processing of incoming leads handled for them by a trusted intermediary instead.
The greater opportunity was to become a hub that operated between the networks of affiliates that capture and sell leads and the large national brands that purchase this data. As the lead generation industry matured, intermediaries were needed to police and verify the exchange of data between lead sellers and buyers.
Data quality across the industry had dropped as unqualified lead providers sold marginal and even fraudulent data and there were few mechanisms in place to validate this information for the lead buyers. National carriers in industry verticals like auto insurance put their foot down and today sellers must broker their lead data through intermediaries such as Nexus to transact lead sales to the biggest clients.
Nexus deployed its NexChange Marketplace℠ platform to serve this market need starting with the largest sector actively purchasing generated lead data, auto insurance. This shift in strategy allowed us to survive a massive industry consolidation that put hundreds of affiliate networks out of business and successfully placed us at the heart of the supply chain of the still expanding lead generation business.
We continue to work on growing our client list of national auto insurance carriers, some of whom we’ve worked with for over a year and some that have come on board in just these past two months. Industry practices require discretion both on behalf of our clients and due to competitive considerations, but we will go on record that Nexus most definitely transacts and sells lead data to multiple national insurance carriers with major brand recognition.
While the focus of the past two years has been to establish a strong presence in the auto insurance sector as a technology intermediary, Nexus has already begun to execute lead transactions in the life insurance sector this past quarter and we are now focusing on expansion into additional verticals in 2014.
Our confidence in our ability to continue producing a significant annual growth rate over the next several years is founded on more than having a superior marketplace solution in the lead generation space. It is also based on our capacity to spot untapped opportunities for lead generation others have yet to identify and our ability to rapidly move into those areas.
Compared to areas like auto or life insurance where a core group of companies dominate the consumer marketplace, there are other more decentralized sectors where the supply of quality leads is not meeting demand and the premiums paid for leads and the profit margins from their sale are significantly higher.
In the past month, Nexus has added personnel and increased our sales force and they are already at work on our move into a completely new vertical with these higher rates and margins. We have already secured lead buyers and begun the process of acquiring leads to serve these clients. We believe this initiative will accelerate our growth beyond expectations we held even one quarter ago and we look forward to soon revealing more about this growing arm of our business.
Having accomplished our original goal of creating a competitive technological advantage and securing a client list of nationally branded companies, we are capitalizing on our management team’s deep expertise in marketing methodologies to capture a greater number of leads acquired directly from consumers.
Between a growing direct media buying campaign and building out our own company owed network of lead generating affiliates, we are increasing our internally generated leads thus lowering our acquisition costs AND further improving our lead quality.
This results in a two-pronged improvement towards greater profit margins per transaction as we save money on the front-end of the lead acquisition process and merit a higher sale price to the lead buyer due to the higher quality of data.
Nexus has positioned itself well in terms of a sustainable and scalable business model. Even when accounting for seasonal fluctuations in client spending allocations, Nexus has demonstrated its ability to sustain robust annualized revenue growth. We have a reasonable expectation we will be able to continue producing significant annual sales growth as our client base of lead buyers continues to expand every month.
Nexus is poised to now capitalize on our relatively fixed infrastructure costs to grow our profit margins as we expand into additional verticals and our revenues increase.
Offsetting expenses that presently appear as liabilities on our balance sheets are expected to continue improving in upcoming quarters as numerous items such as our final acquisition payments come off the books. With these expected line item improvements and continued revenue growth, we have reasonable expectations this will translate quite positively to our earnings per share in 2014. As of the third quarter, Nexus is cash-flow positive.
Among comparable companies, we are the only publicly traded microcap company poised to reap the benefits of success and growth in this dynamic industry. Companies with similar business strategies that preceded us by 3-5 years and exhibited similar growth patterns are now producing revenues of $50-100M so there are clear precedents and realistic benchmarks Nexus is working hard to attain.
We are committed to shareholders and to rewarding them for their investment in a true growth company deserving of a higher valuation.
Sincerely yours,
James Bayardelle
CEO, Nexus Enterprise Solutions
For more information, visit the website at www.nexusenterprisesolutions.com
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