MGM Wireless Limited (ASX:MWR) Chairman & CEO Mark Fortunatow talks about SPACETALK, the company's children’s smartphone safety device, 1H19 financials and expansion into the UK.
Anna Napoli: Welcome to the Finance News Network. I'm Anna Napoli and joining me now from MGM Wireless is Chairman and CEO, Mark Fortunatow. Mark, welcome back to FNN.
Mark Fortunatow: Hi, Anna. Nice to be back.
Anna Napoli: MGM Wireless has long been associated with school communication systems, but is now perhaps better known for its wearables technology, with its SPACETALK Smart Watch for children. Can you tell us more?
Mark Fortunatow: Now, our primary business is wearables and in particular SPACETALK, which is an all in one smart watch, phone, and GPS device. Today, although we were listed for almost 17 years, today our revenues from SPACETALK are exceeding our school communication business. We crossed that bridge last quarter and we're seeing massive growth in SPACETALK.
Anna Napoli: Thanks Mark, now turning to the SPACETALK in more detail, can you tell us about some of its features?
Mark Fortunatow: SPACETALK is an all in one smart watch, phone and GPS device. So, it makes and receives phone calls, text messages, parents can see where their child is. But most importantly its parent controlled. The children can only make and receive calls from those contacts that the parents allow them to and text messages. So, there's no chance the child can ever be bullied or be a bully. So it's a very safe and secure device. But even more importantly, it doesn't have the nasties that are normally associated with smart phones.
There's no social media. There's no YouTube. There's no access to the open internet. Of course parents can see where their child is at any time. So it's a device that you give your child before you give them a smartphone.
Anna Napoli: What's the market for this type of device and what is the size?
Mark Fortunatow: Well, the market is children from the ages of 5 to 12. It's before they get their own smartphone. Look, nobody really knows how large this market is. The most reliable or credible source that we have is Gartner, which are predicting that a massive 30 per cent of all smart watches will go to this brand new product category called Kids, which we are leading.
Just to put some numbers on that. The total size of the smartwatch market is likely to be $18 billion. So we're looking at, our market opportunity to be about $6 billion.
Anna Napoli: Last time you met with FNN in November last year, you were just launching your bricks and mortar retail launch with JB Hi-Fi and Spark in Australia and New Zealand. How did that go?
Mark Fortunatow: Fantastic. When we met, we were just as you say, we were just about to launch. We sold a massive 10 thousand units in the space of just over two months and as through JB, Spark New Zealand and our own website. And what consumer electronics retailers are telling us that arguably SPACETALK was the most successful new product launch in Australia in the consumer electronics and mobile category.
It's a phenomenal achievement. Up until then, we've only sold 3 thousand units. The last quarter we sold 10 thousand and it's all the way up from here.
Anna Napoli: The strong sales results should have delivered some fairly impressive first half 2019 financial results. Was that the case?
Mark Fortunatow: Absolutely. The results were fantastic. We sold 10 thousand SPACETALK's in the three month period. We hit record revenues. Not only did we hit record revenues, but we, in the first half year. We exceeded by 158 per cent all of that revenue from the previous year. We made a profit. We made $550 thousand dollars EBITDA. We ended up with strong cash balances and also our recurring revenue stream. The revenue received from our monthly app subscription hit $46 thousand dollars for December.
These are just fantastic results any way you look at it.
Anna Napoli: And I believe you're about to expand into the U.K. next month. What's happening in terms of your marketing and distribution?
Mark Fortunatow: Well, in three or so weeks, we're launching in the U.K. via a soft launch. What I mean by that is, it will be through our own eCommerce website and one or two small retailers, online retailers primarily. We really want to get our operations going. So we want to make sure our supply chain, our fulfilment is working. Our after sales service is working correctly. Because we're actually setting up a whole customer service department in London. That will be followed in a few months after that by a large bricks and mortar roll out.
How large, we're still working on it. But it will be a significant roll out and look, we're expecting the results from London. Sales results, to be three times larger than Australia. So we're looking at quadrupling our sales in the next five or six months, something like that.
Anna Napoli: With such a large and exciting expansion about to happen, what's the funding situation like?
Mark Fortunatow: Strong. December 31st, we ended up with $2.4 million dollars. On top of that we have a $2 million dollar convertible note, which were now drawn down $1 million to help kickstart the U.K. expansion. Funding is great.
Anna Napoli: Last question, Mark. Is there anything else you'd like to add?
Mark Fortunatow: Well, yes. Really SPACETALK is at the beginning of a whole new product category, kids wearables. It's almost like the beginning of the mobile phone era back in the '90s. Gartner is predicting that 30 per cent of the smartwatch phone market will be for children as compared to Apple having just 20 per cent of that market share. So, our market opportunity is larger than what Apple is likely to have in this wearable space. So the opportunities is fantastic for the company.
Anna Napoli: Mark Fortunatow, thank you for the update.
Mark Fortunatow: Thanks Anna.