Fed Governor Adriana Kugler to resign
Xplora Technologies reported robust financial results for the fourth quarter of 2024, with revenue reaching $243 million, marking a 15% increase compared to the same period last year. The company’s earnings call highlighted significant gains in EBITDA, which surged by 113% year-over-year to $72 million. The market reacted positively, with Xplora’s stock price rising 4.49% to $32.60, reflecting investor confidence in the company’s strategic initiatives and financial health. According to InvestingPro data, the company’s stock has delivered an impressive 108% return over the past six months, trading near its 52-week high of $3.09.
Key Takeaways
- Xplora’s Q4 2024 revenue grew by 15% year-over-year to $243 million.
- EBITDA increased by 113%, reaching $72 million.
- The company expanded its market presence with 9 new telco partnerships.
- A new youth smartwatch is set to launch in Q2 2025.
- Xplora’s stock price rose by 4.49% following the earnings announcement.
Company Performance
Xplora Technologies demonstrated strong performance in Q4 2024, driven by strategic expansions and product innovations. The company achieved an 18% revenue growth for the full year, totaling $813 million. Xplora’s focus on expanding its service revenue and reducing operating expenses contributed to its impressive EBITDA growth. The company’s market expansion, particularly in Germany and other regions outside the Nordics, has bolstered its competitive position.
Financial Highlights
- Revenue: $243 million in Q4 2024, a 15% increase year-over-year
- EBITDA: $72 million, a 113% increase year-over-year
- Gross Margin: 50% overall, 83% for service revenue
- Cash Position: $235 million, up $98 million year-over-year
- Annual Recurring Revenue: Over $300 million
Outlook & Guidance
Xplora plans to launch a new youth smartwatch in Q2 2025, along with a Doro product featuring a SIM card. The company aims for a 10% activation rate on Doro products, potentially adding $300 million to EBITDA in the second year. Xplora is prioritizing growth in service revenue and profitability, with a focus on expanding its presence in the US, UK, and Spain through online channels like Amazon (NASDAQ:AMZN).
Executive Commentary
Stan, a presenter during the earnings call, highlighted the company’s strategic focus: "We will always prioritize to drive shareholder value by increasing Service revenue and really increase profits." This statement underscores Xplora’s commitment to enhancing its service offerings and profitability.
Risks and Challenges
- Market Saturation: As Xplora expands, it may face challenges in maintaining growth rates in mature markets.
- Competition: The company must navigate intense competition, particularly in the US market, where high churn rates are a concern.
- Supply Chain: Potential disruptions could impact production and delivery timelines.
- Economic Conditions: Macroeconomic pressures could affect consumer spending and demand for Xplora’s products.
Xplora Technologies continues to build on its strong financial foundation, leveraging product innovation and strategic partnerships to drive growth in the coming quarters.
Full transcript - Xplora Technologies As (XPLRA) Q4 2024:
Stan, Presenter/Moderator, Explora: All right. Welcome, everyone, to Explora and our Q4 and full 2024 report. It’s great to see everyone here live. We probably will expect to have a record of people joining us online on the stream today as well. And we also have one additional session later today at this very building as well.
So we are super excited to see a very big growth in people following the company. As always, or this year, we have with me our CFO, Knut and our CEO, Ketel Fenefoss, and we will take you through the presentation today. We have quite a lot of good news, exciting news, quite some information to share. So we will probably spend four to five minutes today versus the normal thirty for previous presentations. So just a little heads up in that regard.
I will first, as always, take you through some of the key highlights. Knut will then deep dive into some more of the financial details. Kjell will take you through some of the very important highlight when it comes to operation and so you can see how the development is going on our various business units and segments. And then I will guide you through some of the post quarter events plus how we look into 2025. This time, we actually would like to start with this first green because it’s always very exciting when we start a year, particularly when we started 2024 because we had to share some kind of guidance with you all.
So in our outlook statement in our first quarterly presentation last year, we set out to achieve a couple of very important targets. First, we said we should aim for a revenue target to grow 15%. We also said that our primary focus would be to increase profitability, so we had a very sharp focus to increase our EBITDA. We also then said that subscription revenue and number
Knut, CFO, Explora: of subscription would be more
Stan, Presenter/Moderator, Explora: important that unit growth it’s rather prefer one new subscriber versus two new watches with no subscription attached to it. We also said on the OpEx side, we should reduce that in percentage of revenue and we also made a promise we should not increase our CapEx, but try to reduce it. And we set out, when we started the year, to launch our first senior proposition as well as try to launch our first SaaS service revenue. That’s what we stated when the year started. On that regard, we are super happy, of course, to be able to increase our revenue growth.
So instead of 15%, we managed 18% top line revenue growth. We are even more proud to actually deliver more than 100% growth in our EBITDA, our earning on the business to SEK72 million. And as you can see, we manage almost 40% growth on our services and we increased our service revenue on an annual basis by 30%. And as you also can see, our OpEx was down in percentage of revenue and we actually managed to have a CapEx lower than the year before. When it come to launching our first senior product, instead we made a decision to acquire Doro, which we worked on.
We’ll come back to a lot of those details in the outlook. And of course, as we said on the previous quarter, instead of then launching a product on the senior platform by Explora, We will then push that into the launch into Doro, of course, after that acquisition. When it comes to the launch of the first services and revenue on the SaaS, we did manage to complete the first implementation in December, and I will come back to some of those details in the outlook statement as well. Before Knut then go into the details, we will have this slide as we have had always, the group revenue for Q4 up 15% to $2.43, almost 250,000,000.00 on group revenue in Q4. We had 28% increase in recurring service revenue to 77%, and we had a subscription base when we ended the year of almost 360,000 subscription.
Gross profit up $16,017,000 and we had isolated EBITDA on Q4 at $23,000,000 and we ended with a solid financial situation with cash in the bank of $235,000,000 when ending the year. And with that, Knut will take you through some of the more details.
Knut, CFO, Explora: Thank you, Stan, and good morning, everybody. Stan already presented some of the key highlights for the quarter, and I’m going to go a little bit more into the details. When it comes to revenue in the quarter, we ended on $243,000,000 and that’s 15% year over year growth. And the EBITDA of the quarter ended on, as Stan said, on $23,000,000 That’s almost doubling from the previous year. The gross margin continues to stay stable with then service gross margin to be 83%, and that’s the most important part of our gross margin.
When you look at the distribution of revenue throughout the quarter, we see that in every quarter, we have increased revenue compared to year over year. And in Q4, we had then two forty three versus two twelve the previous quarter. If you look at the total revenues from the year in this graph, it was on $813,000,000 versus then $689,000,000 and that’s plus $124,000,000 for the whole year. So we have a good growth also in for a year. The important point about the gross profit and the contribution from service revenue is that, that contribute more and more of the overall gross profit that you can see on the graph on the below.
And you can also see how stable and predictable the gross profit from the service part is. In Q4 twenty twenty four, it was 64,000,000 out of the 116,000,000 came from services and 52,000,000 came from devices. P and L here is a lot of numbers. I’m not going to repeat too many items here. We have a gross profit, as I said, that ended on $116,000,000 That’s up $17,000,000 from the year before.
And we have a total OpEx in Q4 of $93,000,000 and that’s compared to $88,000,000 in the year over year quarter. This is $5,000,000 and the major differences in the expenses here is related to if you take one item, it’s actually the employer tax on the option share program that is a major part of that $5,000,000 5 million dollars deviation. When it comes to 2024, the full year, as I said, $813,000,000 with a gross profit of $4.00 $6,000,000 That’s a 50% gross margin as for a company as a total. And we have then a close to breakeven profit before tax, both in the quarter and also in for the full year. On the balance sheet, I’ve already mentioned that we have the cash is $235,000,000 That’s up $98,000,000 year over year.
You can also look in particular on the inventories. We have had we are on the same level as we had the previous quarter. But before that, we had three and four quarters with inventory levels above NOK 100,000,000. And the main reason why we are able to reduce working capital like this is that we have more predictable forecast and we are better in our processes. Cash flow.
We have been through most of the numbers here as well. There is one item that we can spend two seconds on, and that’s the CapEx. That’s now on $20,000,000 as we expected it to be in the beginning of the year. Last year, we had $24,000,000 It depends on how we round, if it’s $23,000,000 on $24,000,000 And if you also remember, we had actually $38,000,000 in CapEx in 2022. So we are now on a quite stable level and we benefit from the investment that was done in 2022.
If you have the key figures for then 2024 as a total, it’s the 18% growth in total revenue. We have annual recurring revenue level now of more than $300,000,000 at the end of the year. And that’s up almost 70,000,000 from a year ago. The EBITDA is now 72,000,000, and that’s the 113% year over year growth. I have one more thing, and you might have already seen it, but we are also now released a new Investor Relations Web that is an upgrade from what we have had so far.
So please have a look at it. And if you have some feedback, please let us know. Thank you. Sjoerd?
Sjoerd, Operational Executive, Explora: Good morning, everyone. I’ll spend most of the time today on the service revenue, but I’ll also touch upon the smartwatch sales development and also the OpEx over revenue. We set ourselves three internal targets for last year. That was to increase the recurring service revenue, and we truly did it increased by 33 for the year. And that was through expanding the subscriber base.
And we also stated that the service revenue from outside of the Nordic should increase and be in the range between 1015% of the total service revenue. We also said that we should sell our smartwatch models at a higher average selling price, and we landed on 4% plus for the year. And also that we should realize economics of scale by reducing the OpEx over the revenue as a percentage, and the result is minus two percentage point for the year. So we delivered on our internal targets. Let’s start then with the service revenue.
We ended the year by us with a subscriber base of 358,000. Main sectors. Mobile subscription part, which we ended the year with 258,000, is the has the highest RPU. RPU is the average revenue per user, meaning the customer revenue per month. We had a 5326% growth year over year and 53,000 units net growth.
The premium activity platform has now landed at 75,000 subscriptions. That’s our value added service that we monetize on top of the mobile subscriptions. We sell it in two ways, either by bundling it in as a part of the mobile subscription or we sell it individually through our Explorer app, for instance, to telcos, which customers then subscribe directly with us. That was an increase of 33,000 subscriptions for the year or a 79% growth. The B2B subscriptions, meaning when we get revenue from the smartwatches that we sell to telcos, we have that as a new income stream.
We now have that with nine telcos. We have five in The US. We have four in Europe. So that ended on 20,000 B2B subscriptions. And we have something which we call a service fee.
That is the alternative in The Nordics for those customers who select a different operator than Explorer when they opt in for a SIM card, and that’s more to leverage and increase the share of our service subscriptions in The Nordic and to maximize it. So it’s not the objective to sell as many service subscriptions in that category as possible. It’s more to leverage and increase the share of mobile subscriptions over smartwatches. When we then look at the mobile increased by 53,000 net for the year. That was a 26% growth.
In Q4 last year, we had an increase of 15,000 net. And we have seen a significant development in the German market. I’ll come a little bit back to that as well. But Germany accounted for 65% of our net growth in terms of mobile subscriptions in Q4. And we also see here that we had an accelerated net growth in 2024.
So despite the fact that the customer base is getting older, we see a steeper growth curve compared to 2023. So 53,000 in 2024 compared to a net growth of 48,000 in 2023. When we then look at the 53,000 net growth that we had in 2024, we see that we had net growth in all our markets. There are two markets that stand out for different reason. Again, pointing to Germany, we had 25,000 net growth last year in the German market, and that is actually the highest net growth ever that we have seen in one of our markets in a single year.
So significant shift in the German market, which always has been our largest market in terms of smartwatch sales, but we are now also able to actually monetize on the service revenue in Germany. That comes mainly from our own web shop sales and Amazon sales. You may be a little bit puzzled of the growth in Finland. You see that we grew by 1,000 mobile subscriptions. The reason for that is that we see increased interest among the three Finnish telcos that we do business with.
So the majority of our service revenue from telcos actually comes from Finland. And we had a net growth of 14,000 subscriptions or service income from the Finnish B2B telco business, which is the highest in any market. So even if Finland is a bit low on our own mobile subscription growth, it’s actually in percentage a very, very high growth of the service income in Finland. Then the premium service, which is our add on on top of the mobile subscription or sold individually through the Explorer app, We grew that net by 33,000 last year, which is almost 80% growth. And that adds approximately, let’s say, for the Nordics 10, NOK 30 NOK ARPU on top of the mobile subscription revenue.
As I said, we sell it either bundled in as an option on top of the mobile subscription plan or we sell it separately through the app. And that’s a way of generating also service revenue from the smartwatches that we originally sell without the mobile subscription plan. When we then look in total for the quarter, and that’s back to my initial slide where I said that one of our targets was that we should increase the service revenue coming from outside of The Nordics. And as you may remember, we said between 1015%. And the result for the full year last year was that 14% of the service revenue came from outside of the Nordic countries, while it was 17% in Q4.
And again, referring to Germany, that’s the highest net growth came from Germany in Q4. And we generated almost 7,000,000 service revenue in Germany in Q4, which is an increase of almost 200% compared to the quarter the year before. And Germany then accounted for 9% of the total service revenue in Q4 last year. So I think this is a fine slide on the service revenue, but you see that when you look at the device growth last year, we increased from $477,000,000 to $533,000,000 for the smartphone watch part. And for the services, we increased from $2.10 to $2.81.
But when you look at the difference on the gross profit part, you will realize that 80% of the gross profit grades last year came from the service part. So that just underlines the importance of why I’m spending seven of nine slides on the service part, and it’s an 83% margin on the service part. So that’s very important for our business. Then let’s have a look at the smartwatch unit sales and the average sales price. The smartwatch is the vehicle for our service sales, and that’s underlying then important for the service sales growth.
So in Q4 last year, we had a sale of 167,000 smartwatches. That’s the highest quarterly number ever. And it was at 16% growth year over year compared to Q4 twenty twenty three. For the full year, we had an ambition internal number of surpassing 500,000, and we did. And that was a 7% growth from 2023.
The average selling price is rather complicated to explain because there are so many factors that influence on the ASP. It’s, for instance, the currency developments. We buy in dollars and we sell in four different currencies. We have a mix of products with different price points. We have different sales channels that we sell at different prices.
But despite that fact, we managed again to increase the ASP from ten sixty three for the full year 2024 to from ten twenty one in 2023 to ten sixty three in 2024, which was a 4% grade. And there is, again referring to the German market, there is a different way of selling in Germany. The prices are bundled. So we bundled the price of a smartwatch with the price of the mobile subscription plan. So we basically, 95% of our sales on our web shops and on Amazon in Germany is on a twenty four month contract.
But we subsidized, reduced the price of the smartwatch, so that influences negatively on the overall ASP for the company. So 20,000 phones in Germany and partly in The U. S. Were sold at a reduced price to get long term mobile subscription plans. So that’s a negative impact on the despite everything else equal, the 4% growth.
Important to note. Then my final slide on the operating expenses. Here is very much the effect comes as a result of the growing revenue. And here you see the total OpEx over the revenue split into three different categories. So you see in 2022, it was 54%.
We reduced it to 43% in 2023 and then down to 41%, an improvement of two percentage points in 2024. We have split that and showed this tier in three different categories. We see the employee expenses over revenue. We see the marketing cost over revenue. And here, I want to point out the, again, the effect of recurring service revenue.
I mean, marketing cost is related to acquiring new customers. And with such a growing and high share of recurring service revenue, we get quite a decent effect on that KPI on the marketing over revenue figures. But also other OpEx develops in the right directions, down from 16.4% to 15.3%. That was my part. Thank you.
Stan, Presenter/Moderator, Explora: All right. That was a lot of numbers, but good numbers. So that’s always exciting to share. We now would like to spend a couple of slides to try to make a peak into the future. Before we do that, we have a couple of post quarter events, so something that happens or started to really materialize after December.
And one slide we would like to highlight for today is at least a lot of the investors that has been followed us for a long time have, of course, made these questions where are we on progress on these various initiatives. And when it comes to the service SaaS services B2B initiatives that we started early last year, We wanted just to share with you an update on two of these initiatives. The objective of this is, of course, to find models where we can sell or license our product or services to other business partner and again charge that on the service revenue model. We had initiation of one project in South Korea. South Korea, remember, is the country that actually kicked off the whole development of smartwatches for kids.
They were very early in order to progress. So South Korea has always been an interesting market when it comes to the Asian market for us to try to find a way to be involved in. One of the telcos, Stage five in South Korea, they wanted to have a collaboration with us and find a way how can they actually use our hardware platform avoiding themselves to have to develop hardware as we know comes with a lot of challenges and investments. So we found a way with that MVNO to license our great hardware platform and they then directly acquire that hardware from our manufacturer, but pay us a licensing fee in order to use our hardware platform. So no implication for our cash, our further CapEx and so on, but they will just license our hardware platform and sell it on their own MVNO or they are MNO in the South Korean market.
Already started a soft launch on our platform in February with a more full commercial launch in May. Another point, Chettle highlighted our steep growth in our premium service, our activity platform, which contribute for like increased our 30 NOK ARPU. So it’s a good business model for us. But if we all recall some years ago, the whole activity platform was actually developed in a collaboration with three sixty in China. We had a pilot there with 60,000 customer joining a live platform, which really developed that whole concept.
After a lot of collaboration and integration, we managed, as we said, to make another soft launch on that in December at the end of last year. It has been a lot of well, not a lot, but there has been some challenges in order to really find the best possible way to distribute it and capitalize. Currently, we have not the ideal visibility on the platform and we have all or not we, but they have only integrated one payment solution. And in China, there is a lot of different payment solution how to capture the money. But despite all that, so far, 60% of the users that are actually clicking on the advertising campaign going into the actual app are now downloading it and starting to use it and 5.4% of those user are now upgrading to a paid solution.
So it’s not significant number yet, but it’s a very good start. But we just wanted to give you that update in that regard and both of these revenue stream will now short term just be added to our general service revenue, which Kjetil and Knut has been reporting on. When there will become volume into this initiative, we’ll of course report them separately. But so far it’s part of our service recurring revenue stream. But good progress, and we just wanted to share that with you today.
The most exciting and important update is, of course, on the Youth and Senior. And we are basically packing our suitcase, getting our self ready to join Mobile World Congress this weekend. Mobile World Congress is, of course, going throughout next week. And on Sunday, we will be on stage jointly with HMD. And I think it’s more than 200 global journalists that will participate in that event, that announcement.
We are doing the announcement the day before Mobile World Congress starts, so we do it on Sunday with a lot, like I said, from the whole MVNO, from the telco industry, a lot of journalists because this is a very, very exciting category. As you know, media worldwide, teachers, parents, everyone involved having kids in the age group 10 to five, the growing concern about all the negative consequences about social media, Internet, we’re spending seven, eight hours in front of a screen every single day. It’s a really compelling market opportunity for us. The product is ready. As you can see here, we have shared it with some of you guys.
We have seen it. It’s exactly the same spec as a full blown Samsung (KS:005930) or Apple (NASDAQ:AAPL) latest generation, but instead of paying 14,000, 15 thousand, 16 thousand, we are targeting a price range very competitive of that. And all the services are, of course, finally ready to launch, whereby same as from our Explora Watch proposition, the parent can have more control related to whom should be able to call if you would like to have that opportunity. And also you can manage screen time, what type of social media application can be downloaded. All is fully controlled in the relationship between the parent and the user.
If you would like, you can unlock all the services, but you can also have control to really make sure your children have much more safe on boarding into the experience of smartwatches as well. One of the big benefits as well, everyone here having children in that age group, at least one time you have been able to change or have had to change the screen. It costs you 2,000, 3 thousand more just to change the screen when you broke it and you will break it several times. In this proposition, you can even change the screen yourself and you can do a lot more repair yourself, again, in order to reduce the overall cost. And there comes a ton of different accessory for these products that are very compelling for that target and user group as well.
So instead of now paying 12,000, 14 thousand for this proposition, we’re targeting to get it into the market for at least sub 3,000 with exactly the same specification as the high end smartphones from Samsung and Apple. So just wanted to share that progress as well live on stage in Barcelona on Sunday to announce this with HMD. And of course, we are also getting ready to step into the senior market with Douro. And post events here, as you all know, deal was closed on eighty eight point three percent. At that time, only a couple of weeks ago, we were missing out 427,000 shares to reach the 90 mark.
Since then a couple of weeks ago, we have been able to purchase 319,000 in the market. So we still have a gap of roughly 100,000 share, which we are working on and hopefully soon we’ll accomplish. We will, of course, only pay 34 per share as the offer made to everyone. And the only practical reason is, of course, we need to make 90% in order to start the delisting from the
Knut, CFO, Explora: NASDAQ, as we would
Stan, Presenter/Moderator, Explora: like to do as soon as possible. Full team, the management full team, the management team, the engineer, everyone from Explora. We had a great experience. It’s a fantastic team with a lot of enthusiasm, a lot of knowledge tradition and culture within those walls. So great experience.
We did officially also sign an agreement with them, allowing us to go into full implementation of our SIM and operation even before having the 90% of the share. So with that agreement signed, we are technically and officially allowed to go into full implementation in order to start to both plan and operationally wise start to integrate our SIM card. Next (LON:NXT) steps, we are continuing to buy the shares in the market and we can still uphold our Q2 target for be in the market with the DORA product installed with our SIM connectivity. We can still aim to have that launch to be in the market. And also from Q1 this year, we will be presented number with consolidated.
So Explora Plastoro, we will report those number combined from Q1. All right. So that means road ahead. We now have a very strong portfolio to reach our goal, 1 million subscription with our Kids product targeting Kids four to 10 from Sunday when we announce our full proposition in the youth market ten to fifteen and then also the senior market 65 with the Doro. So going forward, we’ll still report individually for Kids and Nudes segment as one category and the Senior market as one category, but we’ll consolidate all the numbers like I mentioned from Q1.
And just by that, we have become a significantly bigger company starting right now. As you heard Knut present, 2024 stand alone, this is history with Explora. We have, up until now, been operating in nine markets. We achieved steep growth to $800,000,000 revenue. We managed EBITDA, a profit on SEK72 million and we managed to sell more than 500,000.0 products.
But as of right now and as will present from Q1 going forward, we have doubled our market reach, both with HMD and with Douro. We are now a company that has $1,700,000,000 worth of revenue when we combine the 2024 number. And we combine almost have SEK 200,000,000 worth of EBITDA and we have a pool and portfolio of our product of almost SEK 2,000,000 where we can install and integrate SIM. And just to combine it, if you remember the Q4 number, Q4 number consolidated Joro and Explora. We are now a company that in Q4 had more than 500,000,000.0 revenue isolated in Q4.
And as you also can see, consolidated combined in one quarter Q4, SEK ’70 ’2 million of EBITDA, which is actually exactly the same number we had on our full year. That’s now the consolidated number for one quarter Explora and Doro combined. So we have suddenly become a lot larger company with significant number and that is even before we start the integration of the SIM cards. So now a company of SEK 1,700,000,000.0 of revenue, SEK 200,000,000 EBITDA, one full year in 2024. And the big opportunity, as we have mentioned before, is now to pre install the SIM card in the Doro portfolio of products.
And as we said, if we are able to get one out of 10 Doro phones to activate our SIM card, as you know, in Explora, we have managed 25% of the overall volume we are selling to activate an Explora SIM card, 25% in a couple of years. If we manage 10% of the DORA watches being sold, one out of 10, We will have more services, we can have a better price, it’s easier to install and we have additional services on top. If one out of 10 will activate that pre installed SIM card, We will have an additional SEK 300,000,000 EBITDA in year two. That’s our big opportunity starting from a company now at a size of SEK1.7 billion already generating SEK200 million EBITA, 10% connectivity will add SEK300 million more and we have more than SEK400 million cash in the bank combined. So the outlook, we will leave on that page.
What we’re seeing now in Q1 because a lot will happen in Q1 and we expect to come back with even more details within this outlook statement. But for now, what we’re saying, we will introduce our first youth product, as we said, in Q2 this year. We will continue to have an annual growth in our Kids category. We will introduce the first store product with SIM in Q2 and we will prioritize service revenue growth and to really increase our profitability. We will always prioritize to drive shareholder value by increasing Service revenue and really increase profits.
Both on EBITDA and EBIT level. And we’ll secure a path to make sure within four to five year, we’ll bring home 1,000,000 subscription. And with that, summary of 2024, we can deep dive into Q and A. If questions. Petit, as always.
Petr, Analyst: Yes, thank you. Just kind of overall questions with regards to how scalable the business model is. If we just assume that you are able to be at 50% gross margins and you get kind of the scale that you want, what type of EBIT margins are you kind of internally then talking about?
Knut, CFO, Explora: I don’t think we should comment on that for the time being. As Dan said, we are in the middle of the process implementing the DORO solutions. And I think we should come back to that.
Stan, Presenter/Moderator, Explora: What we can say on that Okay. Not directly, but what is interesting to calculate, Petr, is, of course, Doro has already achieved 50% on their hardware as stand alone, having no service revenue. And as we did say, by testing 10,000 actual user profile, we do see that we will be able to keep the same margin north of 80% on SIM also integrated into DORA product. So we have 30% hardware and 80% on our services. DORA already have 50% on their hardware, and we’re expecting to keep the same margin on the SIM for Doro as well.
So that gives an opportunity to calculate that question with the growth we have anticipated.
Sjoerd, Operational Executive, Explora: We have also finalized the price negotiations with the telcos on the wholesale cost of the service with the telco cost for the traffic. And that just makes us more confident that we will deliver good and high margins also in this section. So we have picked after taking probably the most profitable segment, which is the kids segment because of low data usage, knowing the fact that 90% of Doro sales is feature firms which have no data, we are pretty confident that we are going to have a very good gross margin also on those subscriptions.
Stan, Presenter/Moderator, Explora: Good question. So just if not everyone heard of for online user, has there been any pre order or marketing campaign, etcetera, for the youth category? Or will that basically start when we’re launching? To some extent, yes, it will start at the point of launch. But two comments I would like to add on that.
One is that HMD have been working for a couple of years with 10,000 families and users in many different markets. So already there is quite a significant very close user group that, of course, is very involved in the development that will be, of course, targeted toward the first product. But also there is a significant interest from retailers and telco, meaning that we assume to close quite rapidly significant number of deals in that regard once the product is live in the market. But there has not been any presales of the product. And the simple reason for that is because we believe it’s such a huge market opportunity that we have also been hesitant in order to release too much information in the market about the exact product specification, pricing and service application before we actually launch and have secured multiple telco and retail deals.
Sjoerd, Operational Executive, Explora: And we also have HMD’s sales organization lined up. This is not only explorers salespeople selling the product. And as you may remember, we also get a service revenue from the Explore application regardless of who actually sells the products. If it’s our sales organizations or or HMDs. So it’s a much bigger potential addressable market and countries and market than we are used to.
Stan, Presenter/Moderator, Explora: Yes. All right. I can summarize for the live audience. So, Ketel, why don’t you first question the development in U. S.
In service revenue, for example, expectation and development in The U. S. Market and then comment in general the development in the market in Europe in general, but outside Germany and The Nordics. And afterward, we can comment on the overlap of new market opportunity with Dror. I can address that if you start with
Sjoerd, Operational Executive, Explora: All right. Yes. So, as you saw from the pie with the revenue distribution in the different countries, you saw that the majority of the net growth in both last year overall and for Q4 was specifically high in Germany. But the question was specifically about The US and other markets. In The US, we have been talking both about, let’s say, getting the product approval, which we had last year, but also lately been asking a bit answering questions regarding on our MVNO setup on AT and T’s mobile network.
And we completed that finally in January and went live with our AT and T based MVNO. We had net growth in The US of 3,000 subscriptions in Q4. There are positives and negatives about The US. I would say that we have the products approved and in place. We have the MVNO setup completed with roughly 20 percentage points higher revenue.
On the downside, we are facing increased competition, especially from a private equity based American company that gives away their phones for free. We don’t quite understand the business model. And also from a higher churn and return rate in The US market in general, not only for smartwatches, but but for products in general. Both in retail and online, there is quite a high return rate, that is different in The US compared to what we’re used to in in in the European markets. And also, the the churn is much higher in The US than in Europe.
And that, of course, puts, let’s say, restriction on the net growth that we see in The US market. For the other markets, we have done a shift both now in The UK and in Spain to be much more focused on going online. We have very good sales figures on Amazon, and we have also just lately restructured our web business. Instead of having that individually in each specific country, we have now centralized it and recruited through specialists also from The US to drive our web sales business. So we’re doing a shift in both Britain and in Spain, going more and more focused online on web and Amazon versus previously we’ve also been been a lot in in retail.
And the challenge when you are both in retail and online is that you get some some significant pricing challenges between the channels. We’re trying then to utilize the best of our internal capacity to grow in the channels where we see that we are strong and successful. It was a long answer, but then over to the second part.
Stan, Presenter/Moderator, Explora: On Jorro, I would emphasize two points. One is that more or less it’s a very strong overlap with our MNOs and the Doro volume, but it’s in particular one market where we see additional big opportunity, which is France, where it seems that Doro have a good presence and we also have a finalized MNO setup, but a market that we barely have started to grow our watch business. So I would emphasize France as a big opportunity. Otherwise, we’ll focus on where we have the best overlap. And also actually to comment one more thing, as Cattel mentioned on HMD, with HMD, we will get also additional market reach, which might also bring some additional opportunity for all our products.
Petr, Analyst: Just a quick follow-up on the go to market strategy with Duro. Have you kind of finalized whether or not you will target one, two, three initial markets or if you will get gold kind of broad in all of their markets?
Stan, Presenter/Moderator, Explora: Yes. Thank you for commenting on that because I didn’t actually mention one of those bullet points. It was on the screen. One of the key objective with our on-site in Malmo is to start to plan exactly what you’re saying because what we will do with Drorum, we would rather emphasize a lot of focus on one country and one channel and really make sure that we learn to execute that very well and also in order to provide good data back to both ourselves and the market on how we see that conversion and then start to scale that model into more channel and more market versus going very broad and try a little bit in all channels and all market. Which channels and which market, we have still not defined.
But that will be the go to market strategy to really make sure we execute well in one channel and one market first. And that’s also to replicate the same way we approach the EXPLORER sales initially. We really executed well to find a model we could scale into more market and multiple channels.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.