Earnings call transcript: Xplora Technologies Q2 2025 sees revenue surge, stock rises

Xplora Technologies reported substantial growth in its Q2 2025 earnings call, with revenue increasing by 160% year-over-year to over NOK 800 million. The company’s stock responded positively, climbing 4.58% in early trading, continuing its impressive 223% return over the past year according to InvestingPro data. Despite current trading near its 52-week high of NOK 4.94, analysis suggests the stock may be overvalued based on InvestingPro’s Fair Value assessment. The robust revenue figures and strategic advancements in product offerings and market expansion have bolstered investor confidence, though the company remains unprofitable over the last twelve months.

Key Takeaways

• Revenue soared 160% year-over-year, reaching over NOK 800 million.
• Stock price increased by 4.58% following the earnings announcement.
• Expansion in European and North American markets is underway.
• The company launched new products targeting youth and senior segments.
• Strong cash position with NOK 530 million reported.

Company Performance

Xplora Technologies demonstrated impressive performance in Q2 2025, with a significant revenue increase driven by strong sales in both the youth and senior markets. The company’s strategic focus on expanding its product lineup and geographical presence, particularly in Europe and North America, has contributed to its robust growth. The launch of new products and services, such as the Doro Aurora smartphone and Fusion X1 youth phone, has positioned Xplora well against competitors in the growing IoT and telecommunications sectors.

Financial Highlights

• Revenue: Over NOK 800 million, up 160% year-over-year.
• Recurring revenue: NOK 161 million, up 26% year-over-year.
• Gross profit: NOK 422 million, up 165%.
• EBITDA: NOK 69 million, an increase of NOK 47 million.
• Cash balance: NOK 530 million.

Outlook & Guidance

Xplora Technologies is optimistic about its future growth, with plans to launch the Doro Connect SIM service in the Nordic markets in Q3 and expand to the rest of Europe in Q4. The company aims to transition from a kids smartwatch company to a comprehensive family IoT service provider, targeting one million subscriptions. Future revenue projections for FY 2026 indicate continued growth, with an expected revenue of USD 215.85 million.

Executive Commentary

• "We are hoping to have the first significant conversion data when we’re ending Q3," said Sten, an executive at Xplora, highlighting the company’s focus on data-driven growth.
• "We are transitioning from a kids smartwatch company to a family IoT company selling services and products," Sten added, emphasizing the strategic shift in the company’s business model.
• Chettel, Acting CEO of Doro, noted, "The size of this market segment is roughly 120 million seniors in Europe and growing," underscoring the vast potential in the senior market.

Risks and Challenges

• Market Saturation: As Xplora expands, it faces potential saturation in the youth and senior markets.
• Competitive Pressure: Increasing competition in the IoT and telecommunications sectors could impact market share.
• Regulatory Changes: Potential changes in telecommunications regulations in key markets could pose challenges.
• Supply Chain Disruptions: Global supply chain issues could affect product availability and cost structures.
• Currency Fluctuations: As Xplora operates internationally, currency volatility could impact financial results.

This detailed analysis of Xplora Technologies’ Q2 2025 earnings call highlights the company’s strong financial performance and strategic initiatives aimed at sustaining growth in the rapidly evolving IoT and telecommunications markets.

Full transcript - Xplora Technologies As (XPLRA) Q2 2025:

Sten, Executive/Management, Explora Group: All right. Good morning, everyone, particularly everyone joining live. The crowd is getting bigger from each quarter. This time as well, we have a record volume joining online as well. That’s a good sign.

Before we start, I would just like to give my appreciation to our investors, our shareholders. A lot of you guys have been here since our IPO and follow us through this journey. And for the management, for the whole Explora team, now also for the Doro team joining online, it’s always very special for us when we can be on stage and tell you how we have performed. And today, we have to say, we are especially proud and we look forward to give you the numbers and the insight as well. Today, your usual suspects, myself, Knuth and Chettel will take you through all the numbers, and we’ll do that in almost the same format as we have had before.

I will give you some of this quarter highlights and the first half year highlights. Then Knut, of course, will go into all the financial details. And I’m also happy to announce well, we did announce it already that Chettle has on boarded role currently as CEO at Doro. So he will use this opportunity to give you a market and performance update, first explaining about the Doro progress and then our group number all combined. We do have a slightly extended post quarter event simply because so many things are happening.

So even after we close the quarter, quite a lot of action has been going on. So we will extend that a little bit with a couple of extra slides. And then since also we have had quite a lot of deliveries, we have a slightly tuned outlook as well. So quite a compelling agenda today. Before I give you the high level number for this first half year, I just wanted to pinpoint three quite important driver for the numbers.

If you saw when we published earlier this morning, we have a very strong number down on our EBITDA level. And a couple of key input to really understand the numbers before we present them to you. If you recall back in Q1, we said on our radar, it was very important for us to make sure that Q2 really had a good sell in and, of course, also a sell out. And the team, both on sales and marketing, has really worked hard. So we have a very strong watch activation number.

But on top of that, we also have in our core business, so the kids, we have a very high and strong conversion rate. So the number of activated watches with the conversion of how many SIM cards we

Knut, Financial Officer, Explora Group: are

Sten, Executive/Management, Explora Group: activating, our key number, in fact, is also very, very high. So 207,000 watches activated, 37% of our last twelve month watches are being activated with the SIM. That’s a very important driver for this first half year. We also have up six percentage points our gross margin, and it’s primarily driven of two elements. One is that we have successfully introduced new product SKU with improved margin, and our finance team and the market in general have also worked in our favor regard currency.

So that’s also an important element, but in particular also our new products with higher margin. And also, I know some of you do not appreciate or like the term of revised EBITDA or anything except just EBITDA. So we have reported EBITDA, but included in that, there is almost SEK 20,000,000 the first half year of one off related to the acquisition or indirectly costs related to the acquisition. But our reported EBITDA is NOK 69,000,000 for this first half year, a very solid and strong number. Highlight, the number is then as shown on the screen.

Our group revenue, up 160% to more than NOK 800,000,000. And if you all recall, it’s not that long ago when we reported a full year, that was more or less our total revenue for the full year. Now we have the first half and it’s just north of NOK 800,000,000. Our recurring revenue is up 26% to NOK161 million. And when we ended Q2, we had NOK393000 subscription, all bringing in a gross profit of NOK $422,000,000, up 165.

And as I just said, we had a reported EBITDA of NOK 69,000,000, which is up plus NOK 47,000,000. And we have still a very strong cash balance of NOK $530,000,000. And of course, Knud will really tap into the details of these numbers in a second. We also would like to be very transparent going forward with just a key summary. This is for last quarter, Q2, just what we see as our strength, but also what we really see will be on our radar, a thing that might be difficult or challenging.

We’ll be very transparent and just give you this slide every single quarter. On the strength side, we would really like to emphasize what we said last time, then it was on our radar. We really need to recover the sell in and also the sell out, which we really did in Q2, hence the good numbers. We also had three very important launches in Q2. On the Doro side, on the senior side, we launched a new Aurora product.

Chettle will come back to that later. And both within youth and senior at the very end of the quarter, we also launched our new SIM services. So we, from this second half of the year, can really start to accelerate the rollout of these SIMs on youth and senior. And again, Chetel will come back to those details. And for everyone that has really been following us for a long time, when you start to modeling your results based on the new input today, as you’ll see a very strong financial improvement and scale in our core business from Explora related to our subscription number and our margin and our conversion rate.

I will give some samples on that at the end as well. It’s really now one big thing on our radar for Q3 and Q4, and that is really to make sure that we are able to execute in a good way the implementation of what we now have launched, Doro and Youth with our SIM services. And again, Chet will provide the time line, and we can jointly, I assume, throughout today, discuss a little bit about both expectations and how we foresee this as we have recently just launched. With that, Knut, please take us through some details.

Knut, Financial Officer, Explora Group: Thank you very much, Sten. Good morning, everyone. Sten has already shown the very the most important numbers for the first half of this year. The slide here shows the reported figures. I will come back to a pro form a set of figures in the next slide.

But as you can see here, we have 160% increase year over year for the first half in the revenue numbers. The gross profit is increasing in 165% year over year, and the EBITDA is then going from NOK 21,000,000 a year ago to NOK 69,000,000 in for the 2025. That’s 220% up. Of course, as Sten said, included in the first half number, it’s SEK 19,000,000 one offs, SEK 11,000,000 came in Q1 and SEK 8,000,000 in Q2. But we are reporting the EBITDA as it is without any adjustment and so on.

But this SEK 19,000,000, I will come a little bit back to what they are in the coming slides. If we look at the Q2 number, we have also a very strong revenue growth, January from SEK 190,000,000 in revenue to SEK $4.63 Gross profit is also up. It’s the percentage change is even higher than for the revenue. And for the EBITDA, we are going from SEK 18,000,000 a year ago to SEK 51,000,000 in this quarter. It’s not only the addition of Doro that gives us this performance and this increase, but also if you compare it with the pro form a numbers, we also see an increase on all these metrics.

We have for the 2025, we have 12% increase in the revenue, 26% increase in the gross profit. And as Sten said, we have six percentage point increase in the gross margin. And the last, maybe the most important number on this, we are even going from an EBITDA of 54,000,000 in the pro form a numbers to SEK 69,000,000 for the first half. The majority of the numbers are added in Q2, where we have SEK $463,000,000 in revenue. And if you do the pro form a numbers, then you get to SEK $398,000,000, 16% increase year over year.

Gross profit, 25% increase from SEK185 million to SEK231 million. And also the gross margin goes up in the quarter with four percentage point. And of course, the last number here, we are now in Q2 on NOK51 million in EBITDA, and that’s up from NOK38 million in the pro form a. We are talking about the Explora Group. The Explora Group is the combined combination of the old Explora and Doro.

Doro is launching their own report since they are publicly listed in at NASDAQ Stockholm. So I will refer to group as the total company. I will refer to kids and youth as the old Explorer and senior as the doro for those who are not familiar with these terms. We see then the group revenues. As I’ve shown, we have a very strong increase year over year.

And the gross profit is also increasing in the quarters, going from 48% to 50%. On the EBITA side, you can see that we have also added a small square, the white square on top of it to show the adjustments that is purely one offs. In Q1, we had one off transaction cost of SEK 11,000,000. We had also one off transaction cost in Q2 because we had one acquisition loan in Q1. We changed it to a new loan in end of Q1.

And therefore, we have also some transaction costs related to that that came in Q2. The last one off that we have in the numbers is that in the senior segment, Dora has discontinued the IVS entity and there is a provision for that in the numbers there. Those who know what IBS was or is for the time being is that, that’s a pure logistic entity that Dora have used in order to move goods from their distributor in Czech to the end user. So they have tried to discontinue this for a period of time, and now is the time to do it. When it comes to segment Kids and Youth, as you can see here, we have also a strong year over year growth on the revenue side here, 195,000,000 to SEK $219,000,000 in Q2.

You can also see the steady service revenue that is on the dark red on the bottom here. And that dark red revenue stream has a gross margin of 83% in every quarter, maybe 82.5% in one quarter. When it comes to the service revenue, we also see that we are gradually building this service revenue into annual recurring revenue. And that annual recurring revenue is now SEK327 million, and that’s up SEK 64,000,000 year over year. And this is basically with the 83% gross margin.

The gross profit is also increased in the Kids and the Youth segment, going from 48% a year ago to 54% in Q2 and mainly because of our new generation of products that Sten mentioned. We can also see a very strong revenue growth in the senior segment, where the revenue increased with 19% from SEK $2.00 8,000,000 to SEK $247,000,000. The gross profit is also increasing substantially in the senior segment, and that’s mostly related to the increase in revenue, but they are also doing a good job in the logistics part of the business. If you see the gross profit in DORA or in the senior segment, it’s 115,000,000. And in the kids and the youth segment, it’s SEK 116,000,000.

So the gross profit is the same in Q2 from both segments. So how is the cost side of the business? We see that the addition of the senior segment is in the light red on top of the dark red. And as you can see here, the operating cost as a percentage of long last twelve months revenue is gradually decreasing over the quarters. And now we have and that’s very important for everyone is that we are not spending more money than actually our business allow us to do.

The key increase in cost is related to marketing in the quarter, both in the senior division. It’s about SEK 10,000,000 in additional marketing costs in the senior segment. If you look at the profit and loss, we go a little bit further down. You can see also the depreciation is now in the quarter SEK 13,000,000. In Q1, we had 24,000,000.

The reason why this is going down is that Q1 was the last quarter we had this extra amortization of Explorer Mobile customer contracts that you know. So that’s the main thing of the depreciation and amortization. And we I expect then that when we have the current level of intangible assets that this is the level that we are on for the time being. So Q1 was quite special in that sense. I will go a little bit more into the net finance expenses in the quarter.

And we had we can split it into three portion. One is the interest of the loan. We have the acquisition loan for €82,000,000 The quarterly interest is including a fee is €15,000,000 in the full quarter. In Q1, we had about 12,000,000 The reason why it’s lower is that we took it January, so it’s not the full quarter. The other part of the loan of EUR 82,000,000 is that we have also hedged the loan so that 75% of this euro bar part of the loan is therefore also hedged.

Since the euro has increased during the quarter, we have also a noncash impact of SEK38 million in the quarter for this loan. But please note that all our revenues are in euro, so that’s also why we can live well with also changes in the exchange rate on the loan. The last item here is 7,000,000 other financial items. That’s all other financial items in the Kids and Youth segment and also in the Senior segment. That was the same level as we had in Q1.

In the balance sheet, I’m not going through all the numbers, but there’s one number that you need to take in particular look at, and that’s the inventory that is built up during the quarter. And it’s about 100,000,000 that is built up in inventory in the senior division. And Sten will come a little bit back to that. But basically, it’s a scale up of in light of the expectations for the second half. So that’s a very cautious decision to build up inventory so that we have enough for the 2025.

When you look at the cash flow then, we have gone into most of these items. I got some question last time, what about the CapEx? And as you can see here, we had CapEx of SEK 15,000,000 in Q2 and we had SEK 16,000,000 in Q1. And in Q2, it’s approximately the split is half of it is in the senior segment and half of it is in the kids and youth segment. So we are ending the quarter with a very strong positive good cash position of NOK $530,000,000 in the bank.

Thank you.

Chettel, Acting CEO of Doro, Doro: All right. Good morning, everyone. As new very new in as an acting CEO of Toro, it’s my pleasure to present that part for the first time. Doro is very well positioned in the senior market. The focus, in addition to maintain and hopefully grow the underlying business of dorophones is also to add the doroconet that was launched in the Swedish market in June.

The size of this market segment is roughly 120,000,000 seniors in Europe and growing. So there is a huge potential for the business in this segment. So in addition to stabilize and grow, which we show in the previous quarter, the underlying business, the key factor, the key focus going forward is then to add Doro Connect in the eight core markets where the business will launch Doro Connect SIM cards. And a little bit similar to Explora. For Explora, it’s very often the parents who buy for the kids.

In this segment, it’s very often the kids or the senior who buy the product. An important reason for the shift in the business trend from going to be a declining business to show growth in the previous quarter year over year is the launch of two new product services. DUO Aurora is the first real smartphone for this segment. It has been launched on May 20. And we have got, now over the last few months, also homologation approvals in the networks from various telcos across Europe.

So the sell in started very good, has continued good, supported by heavy marketing, referring to Knut’s remark on the increase on marketing spending. And it continues to then be rolled out across European telcos and also started selling that product with SIM card in Sweden in June. The second big new product series is the Leva series that was introduced earlier this year, meaning before Aurora. That continues to be a success and a main contributor to the increase of revenue. And it holds a very solid position in the feature phone segment.

What also helps driving the revenue growth is the shift from the two gs to four in the networks across Europe. So you may have seen some announcements also from Norway that one operator is closing down, and that drives, of course, the revenue of these new products that have four It also has HD voice, a super clear voice for better sound quality. And you also see the caller ID, the person calling the phone without opening the flip. And there is also a safety and emergency button included in it. So two new series of products with different variations, of course, helps turn around the business to back into growth.

Then we launched DUO CONNECT on June 17, a little bit ahead of the date that we talked about last time. It has currently been launched in the Swedish market on the direct to consumer channel, meaning Doro’s web shop. And the business introduced three different price plans. There is the Doro PureVoice for the feature phones, and then there are two data plans. And these plans are designed to be fair for the end consumer, meaning not overselling gigabytes in combination with phones that doesn’t have such a high consumption.

So it’s a customer value proposition behind it. It’s not about price and gigabyte. And going forward, the business will also add services on top of it, for instance, emergency services, So it becomes more than just a pure mobile connectivity service. The start in Sweden on the DoroWeb took place, as I said, on June 17. We have had initial sales.

And I guess you are very curious how is it going. So it works. It works. It could work better process wise, but there is a share of SIM connected sold over phones of 13%. And we said, you know what the number is.

If we say get 10% over two years, it contributes with additional NOK 300,000,000 gross margin to the business. So I think good. We have started going forward the rest of the year. We showed this last time as well. There is no change.

The only change is that we have now launched in Sweden since last year since last quarter, and then we will add on with new markets now in Q3, as you see here on the slide. And then later this year, there are some big markets coming as well. That’s for the direct to consumer, which means Dura web shops and sales on Amazon. And then we will announce retail agreements during the remaining of the year. So we have now, starting after the summer break, the sell in to the different retailers in the various markets, in line with the planned rollout.

Then into the Kids and Youth segment. We have now added Youth to Kids previously. That means that the market size has substantially increased to at least 80,000,000 potential customers. We have I will come back to that on my last slide, introduced phone for the youth segment in combination with in cooperation with HMD. And we have started also with services, parental services for the youth segment.

And we will add on with mobile price plans for the youth segment, in line with the rollout of the price plans for doro, not 100% overlapping, but basically same rollout. So to the numbers of the youth and kids segment. We have, I would say, a fantastic service revenue growth, 25% year over year, taking us to SEK 82,000,000 in the quarter. The annual recurring revenue increased to SEK $327,000,000. And we see that the service revenue from outside of the Nordics keeps growing also in percent over the total, so making now a 20% share of the service revenue, up from 13% the previous year, making us more equal across the business.

And the German market performs extraordinarily well. The German market had a growth of 144% year over year of the service revenue and has now become our third biggest service revenue market after Norway and Sweden. It accounts for 10,000,000 service revenue in the quarter. This is, I would say, my favorite slide because it shows two things. Number one, the bars indicates the watch activations.

Watch activations means the first time the watch is used by the end consumer. And it’s a combination compared to sales from direct sales from Explora’s webshop and on Amazon and indirect sales through the telcos and retailers. The second point with this graph, and you see the number is increasing year over year, quarter over quarter. But there are big differences between the quarters. If we then take the line here on the top, which shows the percentage of these activated watches being activated with the service, and that line is at twelve months average, twelve months rolling.

You see that’s up then from twenty six percent two years ago to 33% last year and now up to 37%. And if you analyze the monthly numbers that we published for Q2, you will find that the service share in Q2 twenty twenty five was exactly 50%. So the 37% is a twelve month rolling, but the latest quarter was 50%. And that explains much of the improved EBITA of the business. Then we have said that we would go a little bit further into the details in two out of four quarters, where do we actually sell the products by market and by channel.

So in the first half, we sold 154,000 phones in the Kids and Youth segment, and we had a record high Q2, even higher compared to two years ago when we announced the European distribution agreement with Bratos. We were slightly above even that number in Q2. You see that Nordic accounts for 26% of the sales and the rest of Germany where rest of Europe, where Germany has a significant portion, was 72%, while North America was 2%. And then on the right hand side, you see the channel split, where the telco accounts for 47%, their retail, 29, the Explora web is growing 11% and Amazon, quite stable on 13%. So then you have some insights on the markets distribution and the channel distribution.

And one more on the same topic. What is the difference between the smartwatch unit sales and the activations? And you see, in the first half of this year, we sold 154,000 smartwatches, but the 207,000 were activated. And that is the in and out of the indirect sales, meaning what is the inventory at the end of Q4 with the distributors and the retailers and the telcos. And that is why you get these very big fluctuations, especially in Q1, which traditionally is low.

But we see on the right hand side of this slide that if you look in the longer term, the last twelve months, you see that there is hardly any difference between the number of units sold and the number of smartwatches activated. So that means that we are not building up or reducing the inventory on an average. So much on that part. And then back to the service subscription base, where we I think it’s pretty strong that we still grow with 40% from quite a high volume also last year in the quarter, so up 40%. And on the right hand side, you see the distribution between the different service categories.

We So are now at 271,000 mobile connections. That was an increase with by 50,000 or 22% year over year. The premium service has really taken off. We have promoted that even stronger, especially on our webshop, taking us to almost 90,000 and close to 100% growth. The B2B subscriptions is the revenue that we get from the telcos when they sell our mobile smart our smartwatch with their own connectivity.

So we have reached 25,000 and doubled the volume compared to last year. And the service fee, as I said, for those few who don’t want to have an Explora subscription in our web channels, there is still an opportunity to use another service. Or same goes for retail in some markets, but they have to pay a service fee. So we have 8,000 there. So totally up 112,000 year over year, 40%.

And then the mobile subscriptions, 271,000, as I said, 22% growth. And then perhaps take a look at the right hand side, where you see that the net out of the net growth of 50,000, 27,000 came from the German market that accounted for 54%. Nordics, 28%. And if you remember last time, I said that Spain is doing good, continues to do good and will do even better in the second half of the year with 9% of the net growth. Another one super important for the business performance is the RPU.

The RPU is the average revenue per user for the connectivity service. That increased by six year over year. And that may not sound so much, but you look at the numbers further down there, it has an annual revenue or equal to EBITDA effect of almost SEK 20,000,000. And what are the drivers for this? It’s an increased sale of Explora Premium.

In some of the web shops, then we have exclusively only selling the mobile connectivity, including the premium service. It also means that we have done several price adjustments over the last few years. That means that when customer churn, the new customers come in on a higher mobile tariff price. And we have also done annual price adjustments. We did that July 1.

And post quarter, we have also done it this year for in many of the markets. We increased the prices on July 1. So we have a blended gross margin here of 82%. And these small tweaks on the pricing have a considerable impact on the business performance. And then to the at the end, one last slide on the youth phone that we introduced during the quarter in June in cooperation with HMD.

It’s the Fusion X1. It’s now in place in several markets. You’ll find it in the retail in The Nordics. And two Nordic operators have also bought and listed the product. The clue here is that Explora has a service fee for the end consumer for the Guardian function, the function that the parents use to steer the content on the phone.

And that is EUR 5.99 or equivalent in the various markets. So that’s what we have launched. So independent of if it ends up with a telco submobile tariff or an explorer tariff or whatever, the customer has to pay EUR 6 for the parental service to use it. And then we will also roll out Explora mobile tariffs for the youth segment, ordinary mobile tariffs, in line with what we are then preparing for Doro. So not exactly the same dates, but all the back end is being done for both Doro and for Explora subscriptions.

So I think that was my part. Thanks.

Sten, Executive/Management, Explora Group: All right. Thank you so much. More and more numbers for every quarter. But as long as it’s a good number, I think that’s fine. We are all good.

And of course, we will stay here after the event. If you would like to have some one to one follow-up or even dig even further into the number, we’ll be here, and we have multiple meetings throughout the day as well, making sure everyone really can get into the details. I mentioned at the start that we would give you a little bit more glimpse into the future because a lot of things are going on. So we would like to highlight at least four topics to you all. A little bit about the development in North America.

We will look into something we also know a lot of you really would like us to have, and that is business to business service revenue, meaning that it’s not only our hardware that has to be either the enabler or the bottleneck for how many SIM subscription or service subscriptions we are selling. So we’ll touch a little bit or into business to business service revenue opportunities. And also, I know, as Chetl mentioned, some small highlights on how it performs with SIM conversion on Doro. I know everyone also would like to know a little bit about how does the underlying business of the Doro or senior go as well. So we’ll share that.

And we’ll make an endpoint here with annualized recurring milestone that we have achieved, making it even easier for you to calculate and really see the scalability and opportunity of the business. Starting with North America. North America is a big continent. It’s not super easy to really do amazing out from the start. We are working harder with the American team, North American team and making small progresses.

But actually, what we have experienced and see is that the Canadian market, part of the North America, seems to be developing quite nice when it comes to this category and also significantly fewer competitors than in The U. S. So the North American team had actually been able to secure what we believe might be a good deal in the future. And we are not launching a new MVNO setup, but we in partnership with Bell’s network, we are now able to sell our smartwatches in the Canadian market with our own SIM to also then drive service revenue in that regard. What is really interesting for us as a good opportunity, we are launching online in August.

But throughout September, our product will actually be rolled out in 30 Best Buy stores locations across Canada. That’s been one of kind of the most important thing for us to, at some point, achieve in The U. S, not just online, but also physical distribution. And with Best Buy in Canada, this can be a very strong opportunity for us going forward in the North American markets. So we just wanted to highlight that as this was closed at the end of Q2.

The next one, I will explain about or outside what’s just on the slide because, as you know, currently, Explora is selling hardware products, and we are trying to attach as many SIM as possible toward that volume we’re selling of our smartwatches. That’s why Chettle particularly emphasized that when we IPO ed or shortly after, we had a very solid number of 25%. So if we sold 100 watches, 25 of them would activate our SIM card. And the team has been working very hard to optimize how can that percentage be as high as possible. Like Chetel now said, average is now 37%.

That’s such a huge effect going forward. But still, it’s 37% of us selling 100 watches, right? So the bottleneck would in any way be 100. So what we have been trying to achieve for the future to be able to scale services even more is to offer our applications, our platform, our services, even our SIM to other hardware manufacturers because then the 100 we are selling is no longer a bottleneck, but we can leverage on everything being sold from partners as well. And also a lot of investors and the market in general also like business to business high profit service revenue, right?

So what we have extended now with HMD that has been providing our product for use is also that we have signed an agreement with them, so they are now licensing our family IoT platform and Guardian app, so they can offer that service into many more of the products they are selling into many, many markets. And the business model is, of course, a high margin monthly licensing fee per user when they are utilizing our Parental and Guardian app. And please note that we are expecting to very shortly be able to announce the first major agreement done by HMD with a major operator that will use this model. So we are very excited on this, meaning that with success, we can now launch this as a business to business model into multiple manufacturers also selling products, smartwatches, phone, whatever have you, so a big milestone for us. So first was kids development in North America, then it was youth.

And let’s also give some news on senior happening beyond Q2. All of Us data and insight, of course, is also available in the report being published by Doro today. That’s why we can highlight some of the news from that today as well. Chettle mentioned its two primary product SKU, the LEVA and the new Aurora series. And what really to pay attention and Knut mentioned, we have the same strong cash position end of this quarter, $530,000,000, but we have added a significant volume of goods in Doro on top of that.

And the reason for building that inventory and stock, as Knut mentioned, is that Doro is entering Q3 with the highest order reserve to date, a lot driven by introducing two favorable new product lineup, meaning that we are entering with a strong momentum going into Q3. So the underlying business, as Njut explained, both in our core business, Kids, and as you can see with this also in Doro, it’s going very well. And as Chetel mentioned, we are on track with the implementation process of SIM. Very good. All right.

So for everyone really liking to analyze and do the math on our business, I think even before we IPO ed, we had like a big dream, at least the finance team had, and that was the day we are able to have service revenue covering all our costs, we have reached a very important milestone, right? And that’s why we were really happy when we surpassed we recently announced the 400,000 subscription mark or 406,000 subscriptions. And as you can see on the graph here on the right hand side, our annualized recurring revenue, as you can see in the red graph, is actually now higher than all our operation costs minus marketing costs, meaning that we have reached this point where the revenue from our subscription and services have surpassed our operating costs minus marketing costs for selling new products. And for a company like us, that’s a huge milestone. So we are super happy for that.

And we haven’t even started to add subscription revenue from two big new categories in volume. So that’s really good and something we really wanted to pinpoint to you all today. So a slight revised framing on the outlook, not much, but would just like to emphasize that we have updated it slightly, which now says that our focus will be to continue to grow our core business from kids and now, of course, adding youth. We have launched so we have removed that, but we have now launched the Doro product with Doro Connect as well. And as Chetel said in the time line, and I would just like to emphasize that time line as well to set expectations.

We have launched online with Doro in Sweden. In Q3, we are launching in the Nordic markets. And in Q4, we are launching in Rest of Europe. And please remember, online sales is the smallest channel to Doro, but as Chetl said, we are already at a good percentage conversion rate. You all recall 10% conversion of all the volume adds $300,000,000 to the EBITA, and early data shows north of 10%, as Chetl said, on Sweden.

The number are still not significant. It’s one channel, one market, but we are on track on our trajectory. Q3 online in The Nordic in Q3. So our most important target in the outlook statement, sharing with you investors, is that we are hoping to have the first significant conversion data when we’re ending Q3. We will continue to focus on service revenue growth long term and increase our profitability, EBITA and EBIT, as Knut explained, and continue to secure the path to 1,000,000 subscription.

But it’s also crucial for us now when we are having quite a lot of roadshows, not just in Norway, in Sweden and eventually rest of Europe to really build the marketing for this year and the business that we are focusing heavily 1,000,000 subscription, but also a transition from a kids smartwatch company to a family IoT company selling services and products. So that’s the revised outlook statement. I would like to welcome everyone back on stage, and we can move into the Q and A. Just bring it straight on to Peter. Thank you.

Is it on?

Peter, Analyst/Questioner: Yes. Just a couple of questions. The first one is on senior, where there’s been very strong growth both in Q1 and in Q2. Can you just remind us how much of that is price and how much is volume related?

Knut, Financial Officer, Explora Group: I don’t think we can go into those details. So what we know and what you can also see is that they had old product lineup last year, and then they introduced new Leva’s areas during Q1 and then Aurora’s area in Q2. So it is a very different product mix that they have this year compared to previous years. So we will not be able to comment in specifics on that unless you have some more insight, Jetek.

Peter, Analyst/Questioner: Okay. And then secondly, just on the gross margins, which has improved significantly, not only due to mix, but is there only price effects that increase the gross margins within the hardware side of the business? Or is there anything else you have done kind of in the value chain that also have improved the gross margins on hardware?

Sten, Executive/Management, Explora Group: I can take the first point since it was on my slide. So we are trying to renew some of the models. So on X6 Play, one of our flagship product, we have actually built a second generation of that. And due to the change of components, we have been able to reduce the cost of the product and to increase the margin by holding the same price to end consumer.

Peter, Analyst/Questioner: All right. And just a final one, I guess that’s to you, Chetle. Even though you launched in June, is it possible to compare the launch of Doro services in Sweden to what you saw in back in the days in Explora in Norway, for example, so far, even though it’s just a couple of No. Just a month or

Chettel, Acting CEO of Doro, Doro: one, I can’t recall it. But there is a significant difference in the kids segment. It’s the kids’ first SIM card. And when we do it now in the senior, the consumers already have a SIM card. So it’s about how can we make them change.

And that’s why we said we focus on making fair SIM or mobile subscription plans that are adequate to the consumption. But no, I think we can’t compare it because it’s the first SIM card and eventually the last one. So no, it doesn’t make sense. Sorry.

Sten, Executive/Management, Explora Group: Thanks. Fair point. But I think, Petter, just your comment, that’s why we even though it’s small volumes due to the channel and country, we just wanted to give you at least that one comment that we are on track and at least numbers are above what we have used as a reference point. But hopefully, during Q3, we will have more markets and more solid data to share.

Oystein Ottgur, Analyst, ABG: Oystern Ottgur, ABG. First, on the conversion rate in Douro. Can you just so we can understand that number, specify, is that 13% of the phones sold in the web channel or of all phones sold in Sweden through all channels?

Chettel, Acting CEO of Doro, Doro: No, it’s compared to the web channel only. And just to set a little bit of expectations here. One, there is when you the consumers who buy the SIM card, they have an existing SIM card. So there is a so called port in process as well. And Doro’s back end systems are not ideally where they should be.

So we also need, going forward, to improve the sales and onboarding process and the whole logistics. So it’s not just about sales. And we will also add additional services designed especially for the elderly also to increase the attractiveness. There is a lot to do to increase that percentage.

Oystein Ottgur, Analyst, ABG: And following up on that, on your planned rollout plan for Duero SIM, you say you want to rollout in the other Nordic markets in Q3 and then Germany, France, U. K. Is that So will you’ll be live in all markets before year end?

Chettel, Acting CEO of Doro, Doro: Yes. The latest one will be in Q4. And then if it’s October or December, there is a big technical process going on, implementation project going on. So I don’t want to say what week or month specifically, but I say we say in the second half, but the Nordic markets will be first and then the remaining that you referred to.

Sten, Executive/Management, Explora Group: And also, as Chetel stated on the screen, I put it up behind, that is direct to consumer online. And retail will be announced with whatever rollout plan will be with retail. You. Very specific.

Oystein Ottgur, Analyst, ABG: Very clear. And you changed your growth target on kids and youth. You previously had a target for 15% growth. Now you say annual growth. Can you just specify why you changed this and yes, your thoughts behind that?

Sten, Executive/Management, Explora Group: The main reason why we are focusing growth and profitability in the NOK 1000000 is that previously, if you go one year back, if you recall, we had this growth and we had 25% SIM conversion. Now as Chetlev said, we have 37% SIM conversion, which is really the long term driver for service growth. And that’s the key number. So we will have solid growth, but the key thing for us is to grow the conversion rate, which give even more effect. So that’s why we are honing more in on specifying on that number as well.

But we will have still good growth, but we see even further growth in the SIM conversion, meaning that it’s the channel mix, the product mix and how we sell it that is really the key driver for the strong results we see now.

Oystein Ottgur, Analyst, ABG: Thank you. And last question. You have a pretty big pile of cash now. And also, as you said, you’ve tied up SEK 100,000,000 extra in inventory. So the cash at year end is probably going to be pretty solid.

Can you explain why you choose to have this big pile of cash? Why don’t you, for instance, pay down some debt and reduce interest costs? And what are your thoughts on how you will use this cash balance?

Knut, Financial Officer, Explora Group: So it’s quite important now to have this cash balance. We are still operating as two different units. One is Doro and one is Explora. So we need to keep that strong cash position also going

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.