Xplora Technologies A/S is a Norwegian based company that develops and sells smartwatches designed to safely onboard children to the digital world. Xplora Technologies was listed on the Euronext Growth Oslo market in Nov 2020.
Xplora Technologies gives parents the confidence to allow their children to play freely outside by providing connectivity and additional safety solutions whilst simultaneously incentivising physical activity and engagement with ESG initiatives through its digital Goplay platform.
Together with producing and selling hardware Xplora Technologies generates recurring revenues from value-adding services and connectivity referred to as the Xplora Service Platform. Xplora also extends third-party licenses of the service platform to other smart devices producers, further extending upselling capabilities.
Xplora Technologies’ largest markets are Germany and the Nordics. Here and elsewhere it’s go to market strategy leverages the distribution networks of telecoms partners, where Xplora offers a unique value proposition by reducing the acquisition price of new customers for its telecoms partners. Since 2016 Xplora Technologies has grown its production from 21,000 to 395,000 units as of 2021.
This morning Xplora announced its Q3 2022 earnings in line with its trading statement, which was released in mid-October. Group revenues grew 28% year on year against the previously announced 27%, which is at the higher end of its revised guidance for annual revenue growth of 20-30%. Xplora exited Q3 2022 with group revenues of NOK 138.5m, of which recurring service revenues were NOK 42.9m (+41% y/y), derived from its 147,000 subscribers (+33% y/y), and EBTIDA was NOK -18.8m.
Overall, the quarter showed some signs of consumer weakness resulting from macroeconomic headwinds, a commonplace theme among tech and consumer discretionary stocks this quarter. Weaker-than-expected demand contributed to the guidance downgrade from +50% annual revenue growth to 20-30% annual revenue growth, while currency effects and impacts from the transition from legacy products negatively affected gross margins. Elevated operating costs, driven by projects in final stages, increases in working capital and increased marketing spending, impacted the EBITDA result.
However, the company suggested operating costs should decline following a strategy to focus marketing activities on its 9 core markets, reducing staff costs by reducing personnel to match its new growth target, and from working capital adjustments following peak Q4 demand. There were also positive developments, including its launch as a mobile service provider in Germany and France. That can be a platform to increase the customer LTV in Germany, its largest market by hardware sales, through the coupling of a sim subscription to device sales. There were also positive developments on the product front with the launch of its new entry-level XGO3 and premium X6Play watch models and plans to launch its new Premium Services platform later in November. Xplora sees both developments contributing positively to customer lifetime value over the long run.
Xplora’s outlook is to deliver on its guidance for 20-30% revenue growth as the company ramps up for its busiest quarter Q4. Looking ahead to 2023, the company will seek continued growth in the penetration rates of its nine core markets while at the same time navigating macroeconomic headwinds and lingering supply chain issues.
Disclaimer HC Andersen Capital receives payment from Xplora for a digitalIR/Corporate visibility subscription agreement./ Philip Coombes 15:30 17/11/22