LGMK: Initiating Coverage - Expanding Product Suite, Shift to Recurring Revenue

By M. Marin

NASDAQ:LGMK

READ THE FULL LGMK RESEARCH REPORT

Aging of the population among factors expected to drive growth.…

LogicMark, Inc. (NASDAQ:LGMK) provides personal emergency response systems (PERS), health communications devices, and Internet of Things (IoT) technology to form a connected care platform to help seniors continue living independently by enabling their caregivers and family to monitor their health and safety remotely. Personal emergency response systems, or PERS, are medical alert systems designed to detect a threat to the wearer’s health or safety that requires immediate attention.

Under a new management team in place since 2021, LogicMark is transitioning from a hardware sales business model to a SaaS – or what the company refers to as a Caring Platform as a Service (CPaaS) – recurring revenue and cash flow model. The company’s goal is to innovate within the industry by including and enhancing preventive and predictive technology in the PERS experience. Importantly, the company’s planned new products will include the ability to detect falls, which is a key concern for its target demographic. The CDC (Centers for Disease Control) notes that the risk of falls – about 25% of people aged 65 or older fall every year – and other adverse health events increases as people age and falls are, in fact, the leading cause of injury death in this group.

With the Silver Tsunami, majority of aging adults want to remain independent.…

The population is aging. The ability to monitor people’s well-being remotely is therefore expected to grow in importance as baby boomers become seniors. Specifically, in the U.S. 10,000 baby boomers turn 65 every day. Demand for remote monitoring tools reflects the desire by many, if not most baby boomers, to live independently and also reflects a well-documented dearth of healthcare workers. Thus, responsibility for caring for aging family members is increasingly falling on seniors themselves and their families. According to research organization the Population Reference Bureau (PRB), the care economy “will be increasingly important in an aging society.” More than 50 million people aged 65 years or older live in the U.S., according to the Administration for Community Living, with more than 25% of this group living alone.

As more older adults expect to continue living independently, there is also a dearth of care workers to support this growing population, implying a growing need for remote monitoring connected devices. The company believes this is an opportunity for LogicMark to extend its products and services to meet the increasing needs of the growing Care Economy. With a large and growing market opportunity ahead, LogicMark believes that it is among the few companies in the space innovating to modernize remote monitoring devices and platforms.

Measures to reposition company, establish SaaS recurring revenue model

The company is in the process of investing in a number of new verticals, as well as expanding and strengthening its distribution channels and expanding its product portfolio with the introduction of new devices and services. As the company innovates and creates new products, LogicMark intends to retain its legacy hardware products, which carry a roughly 60% margin, and also introduce new hardware and recurring services and software products into the mix. If successful, the SaaS model is designed to lead to growing recurring revenue.

… as product suite expands…

Management believes the Freedom Alert Plus touchscreen design represents one of the first for the PERS industry. This product and the company’s developing Caring Platform as a Service (CPaaS) model are expected to enable LogicMark to capture data to monitor customers’ well-being in real-time and leverage AI and machine learning to optimize their care. With recent and expected upcoming product launches, LGMK’s product pipeline is the broadest it has been in more than two decades. In 1Q23, the company began selling the LifeSentry Monitored PERS product. Management has noted that pre-orders of the company’s new Freedom Alert Plus PERS product, integrating proprietary Care Village software, have been strong and shipments have commenced.

… company focuses on new incremental channels; focus on online including Amazon store …

In 2021, the company signed a United States General Services Agreement (GSA), which further strengthens its partnership with the government and expands its ability to capture new sales. The company also plans to expand to other government services and expects to focus on growing its sales volume through DTC (direct to consumer) and the online category. The company believes it has built a robust store on Amazon that management notes has been seeing strong growth. LogicMark expects to reduce its blended customer acquisition costs (CACs), lower its sales cycles and boost sales by increasing its focus on the DTC and online channels. Separately, earlier this year the company announced an agreement with All Quality and Services (AQS), a full-service contract manufacturer in the electronics manufacturing services sector. With a U.S.-based contract manufacturer, the company expects to diversify risk and minimize supply chain disruptions.

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