MGM Wireless showcases Spacetalk at MWC19 Barcelona as revenue soars

Spacetalk MGM Wireless ASX MWR MWC19 Barcelona Spain mobile world conference 2019
MWC 2019 is the world largest mobile technology conference with over 110,000 delegates in attendance.

Australian company MGM Wireless (ASX: MWR) is currently exhibiting its Spacetalk mobile watch device for children at the world’s biggest technology event MWC 2019 in Barcelona, as sales for the device continue to rocket.

Small Caps joined more than 110,000 delegates at the annual event, formerly known as Mobile World Congress, with representatives including mobile network operators, technology companies, consumer electronics distributors and retailers from across the globe.

At its significant stand in the wearables pavilion, MGM has experienced a high level of interest from mobile network operators, bricks and mortar retailers, and distributors globally.

“MGM is delighted to exhibit Spacetalk in Barcelona, as we’re an innovative Australian company proudly displaying our latest cutting-edge technology to the world,” MGM founder and chief executive officer Mark Fortunatow told Small Caps.

Record revenue

Exposure at the event follows MGM’s record revenue for the first half of the 2019 financial year, which was propelled by soaring sales of its Spacetalk – an all-in-one children’s mobile phone, smart watch and GPS tracker device.

MGM posted revenue of $4.07 million for the six months to 31 December 2018, up 158% on the prior corresponding period.

First half 2019 revenue was also bigger than the full 2018 fiscal year result of $2.74 million.

Driving revenue was an 1,887% increase in Spacetalk sales to $2.54 million.

About 11,000 Spacetalk watches were sold in the first half compared to around 500 in the prior corresponding period.

Spacetalk is a wearable device that enables parents and children to be in constant contact.

Parents can also see their child’s location on their smartphone via the AllMyTribe app.

Additionally, parents are notified when their child leaves designated safe spaces, such as school or home.

First half recurring revenue from monthly app subscriptions was $98,000 – a 3,631% increase on last year’s first half.

During December 2018, monthly recurring revenue had reached $30,000, notwithstanding a lag from when units are sold and subscriptions are activated.

Spacetalk Mark Fortunatow MGM Wireless MWC19 Barcelona Spain mobile world conference 2019
MGM Wireless founder and chief executive officer Mark Fortunatow at MWC19.

Mr Fortunatow was delighted with the record result, saying it was the first containing the all important Christmas retail selling season.

First half gross profit was $2.95 million, an increase of 100% on the prior corresponding period.

“Our company has transformed during the past 12 months,” Mr Fortunatow said.

“Our investments made in marketing and distribution leading up to Christmas were very well received, as demonstrated by strong pull-through in-store sales.”

He added some stores had sold out of the Spacetalk device earlier than expected and were too late to be restocked in time for Christmas. However, he said January sales continued reap the returns from the marketing and distribution investments prior to Christmas.

“In the past 12 months, we have made big investments in people, technology, manufacturing, distribution and, importantly, the Spacetalk brand itself.”

“We’re building a strong business in a segment, which players in the adult smart watch space find difficult to understand. We, however, have a strong track record and a great understanding of what parents want for their child’s development, safety and security. We’re a young and ambitious company with a great market opportunity staring us in the face, and we’re going for it,” Mr Fortunatow said.

Spacetalk growth

By any measure, Spacetalk growth is astonishing as the device is less than 18 months old.

Launched in October 2017, Spacetalk, which is aimed at children aged between four and 12, was initially sold via a single online portal.

Spacetalk’s online popularity and community acceptance rapidly attracted interest from mainstream retailers in Australia, such as consumer electronics giant JB Hi-Fi and Leading Edge Computers.

The retailers collectively sell Spacetalk in about 270 stores across Australia and online.

MGM has also finalised a deal with New Zealand’s biggest telecommunications company Spark to sell Spacetalk in each of its 73 stores and online from October 2018.

Spacetalk sells for $349 in Australia and includes a 12-month warranty. It sells for NZ$399 in New Zealand, but monthly plans are also available.

Spacetalk’s growth didn’t escape the attention of investors, who sent the share price up from $0.375 cents on 21 November 2017 to a high of $5.02 on 19 November 2018.

Meanwhile, in January 2019, MGM announced it would be selling Spacetalk in the UK from April.

“The UK market is four times larger than our market in Australia and New Zealand,” Mr Fortunatow explained.

“Our plans are advanced and stock has been ordered. We look forward to announcing our distribution partners as soon as documents are finalised.”

School mode appeal

It’s what Spacetalk doesn’t do that also separates it from the competition and appeals to parents.

The device was deliberately designed and built without access to the internet and the nasties of social media.

It includes an enhanced school mode feature that enables parents to specifically select which watch functions to disable during school hours, such as incoming and outgoing calls, messaging, step counter, location and stop watch.

Disabling functions during school hours prevents classroom distractions.

Children can’t download Facebook or YouTube and they can’t tweet.

Online bullying in schools is a concerning and confronting global issue, with France leading the charge and banning smart phones at schools for students younger than 15.

Australia followed, with New South Wales banning smart phones in state primary schools this year after an independent review found their use had driven a rise in online bullying, distractions in class and the sharing of explicit images.

“By its very nature, Spacetalk enables students to focus on learning without the distractions of social media and the ever-lurking dangers of online bullying, intimidation and heightened stress levels,” Mr Fortunatow explained.

“Disable Spacetalk functions during school hours and it’s no more than a watch. We long felt that mobile phones would one day be banned in schools and we support the initiative.”

“Spacetalk has been independently verified by leading international cyber security experts as ‘unhackable’, and has the world’s best practice security and privacy features built in. All data is hosted in Australia in highly secure data centres and protected by Australian Privacy and Data Security legislation, so security is assured,” Mr Fortunatow said.

Anthony Black is a highly experienced business and finance journalist with over 25 years experience. He was finance editor of the Sunday Herald Sun for eight years and his reports were published in News Limited papers across Australia. He has since written for numerous publications, including BRW for several years and has interviewed numerous ASX-listed company chief executives.