MGM Wireless Limited (ASX:MWR) CEO, Mark Fortunatow talks about growth in the company's SPACETALK brand of wearables for kids, new product categories, distribution, and growth in wearables from niche product to mainstream.
Katrina Bullock: Hello. Katrina Bullock for the Finance News Network, and joining me from MGM Wireless (ASX:MWR) today is CEO Mark Fortunatow. Mark, thank you so much for joining us, and welcome back to the network.
Mark Fortunatow: Good morning, Katrina. Lovely to be back
Katrina Bullock: Now, MGM Wireless is quite well-known to investors as the company that invented the world's first SMS-based automated communication system to notify families when children didn't arrive at school. However, the company has evolved a lot since then, and its primary business is now wearable technology devices. Could you tell the audience what the MGM Wireless business looks like today?
Mark Fortunatow: Yes, certainly. Well, most of our revenue now is comprised of our wearables business, which is on the back of the children's smartphone watch called SPACETALK. SPACETALK has been a phenomenal success since its launch. It's now sold in, not just in Australia, but in the UK, in New Zealand. Sales are approaching 50,000 units, and we are leading the market in this very fast-growing wearables space.
Katrina Bullock: Thanks, Mark. And to a question investors are asking every company at the moment, how has COVID-19 impacted the business?
Mark Fortunatow: Well, we made some big changes very early on in the company to reduce our expenses and preserve cash and adjust to anticipated lower revenues, and that's been very favorable for the company. We're in good financial shape. Yes, sales have dropped off, because SPACETALK is sold now in 777 stores, a lot of which unfortunately were closed down during the COVID-19 crisis. But despite that, sales have actually held up quite well. We're tracking ahead of where we thought we would be, which is obviously a much lower number than where we were tracking before. But by and large, we're doing well, our staff are in good shape, and the company is performing well, operating well.
Katrina Bullock: Thanks, Mark. Let's take a more granular look at some of the product categories now, starting with wearables. What can you tell us?
Mark Fortunatow: Well, wearables are one of the fastest-growing tech sectors at the moment, and expected to be that way for the coming few years. Now, within the wearable sector, smart watches is the fastest-growing sector, and respected industry forecasters like Gartner are forecasting that 30 per cent of all watches, smart watches, will be in this new emerging kids' category, which we are the leader, outside of China.
Thankfully, we're looking at a tremendous growth opportunity. We're leading it. It's a very exciting time for the company, too, because we've got two new watches, devices, coming up later this year. We're announcing our seniors watch later this month, and in time for Christmas, a new kids watch. So things are looking very, very good for the company.
Katrina Bullock: And how about your school communication systems? How are they progressing?
Mark Fortunatow: Well, interestingly, the use of our systems has never been higher, and that's really because of the disruption to school operations, especially in the early stages of COVID-19. So we're experiencing record SMS traffic volumes coming through, you can see quantum increases. Revenues are tracking at above where we thought we would be. Actually, thankfully, the COVID-19 crisis has actually been very good for our schools business.
Katrina Bullock: That's good to hear. And Mark, last year the company expanded its footprint into the UK. How is that progressing?
Mark Fortunatow: Well, prior to COVID-19, it was going extremely well. Our main distributor to the UK is Sky Mobile. Now, Sky's obviously a large company, they're Europe's largest media entertainment company, they're part of the Comcast Group that's out of the US. So, the launch went extremely well, sales were up significantly. Unfortunately, during the COVID-19 period, sales have dropped back quite a bit.
Actually, we're seeing, for the last three or four weeks now we're seeing a resumption of growth, and it's actually looking quite good. What's interesting enough is that the UK market is three times bigger than Australia, and prior to COVID-19, we were tracking at faster growth rates in the UK than in Australia. So there's significant potential there. We're looking forward to getting through COVID-19 and getting back on track to release terrific growth rates.
Katrina Bullock: Thanks, Mark. Now to finances. I understand you've recently announced a share purchase price. Could you give us a bit of a snapshot of where the finances are at?
Mark Fortunatow: Yes. We announced it this morning, in fact. So, we're actually in a strong financial position. We've got $4 million in cash, and we're debt free. However, we thought we'd offer a small opportunity for our existing shareholders only to top up their holdings, pre the next growth phase where we're about to enter on the back of our two new devices and a new distribution agreement. So we thought we'd just reward our loyal shareholders in these COVID-affected share prices, a small capital raising. We're looking at raising around $1.5 million at very attractive prices. It's just announced this morning.
Katrina Bullock: Now, before we let you go, Mark, any final words for investors?
Mark Fortunatow: Well, the company is on the cusp of a very exciting new growth period. We've got the two new devices, we've got a significant new distribution agreement, details of which will be released in the coming days. The company's in a strong financial position. Our products are leading the market. The market opportunity is just enormous, and we're leading the way. So it's just an unbelievably exciting, fantastic period for the company. Watch this space.
Katrina Bullock: Mark Fortunatow, thank you so much for the update. Looking forward to catching up with you again in August to talk FY results.
Mark Fortunatow: Terrific. Thank you, Katrina. Lovely to be on the show.