A very interesting listen with some exciting stuff, namely:
New tech stack emphasized unlocking new value and platform for future growth - new 2.0 being released in Q1
Still committed to developing competitive and innovative hardware
Ambitious growth agenda with a view to double and triple the number of hardware sales on an annualised basis going forward and get the software firing in terms of number of users and subscription sales and in order to do that, they need to operate in multinational basis - looking to be in 8-12 markets by end of June!
Overarching objective for the business is to move into being a predictive analytics business
Next kids device being more age agnostic
Some AI transcribing of the audio with timestamps below:
00;00;00;00 - 00;00;28;15UnknownWelcome to another episode of ASX breaks. Very engaging, insightful discussions with leaders from the most innovative companies listed on the ASX. And today we're pleased to welcome again Simon Crowder, the CEO and Managing Director of Space Talk Limited, a technology company focused on providing safe and innovative communication solutions for families. Simon, thanks for joining me again and welcome back to the ASX Breaks podcast.
00;00;28;21 - 00;00;47;22UnknownThank you for having me. Right. It's been a little while since we last spoke. So first of all, space talks, revenue grew by 12% and the annual recurring revenue increased 16% to 11 million. So what are the key drivers behind this impressive growth? Well, we're executing on the plan. As per the strategy. I think we just focused on doing the basics.
00;00;47;22 - 00;01;12;06UnknownWell, and that means that we're focused on activating our ecosystem of interconnected products. It's still early days, but it's pleasing to be making so much progress. I think the soft locking of our mobile devices to our own, space talk mobile network is really key to our strategy. And we're seeing both, you know, a reasonably strong sell out of our hardware at retail.
00;01;12;08 - 00;01;35;27UnknownAnd in most cases, when someone buys one of the space talk smart watches from us, there's a corresponding, subscription space talk mobile as well. So, that decision to soft let those devices is probably having about a year or so ago. And I think that's been, you know, a fundamentally good decision for the business. And so it's actually starting to really start to power our recurring revenue as well.
00;01;36;00 - 00;02;00;17UnknownOkay. And you achieved a 54% increase in paid mobile subscribers. So why are you focusing on subscriptions in recurring revenue instead of hardware sales? Well, I think I think it's both really. But, it's much easier and faster, more capital light for us to be able to scale a software business as opposed to a hardware business. I think hardware is still very important to us going forward.
00;02;00;20 - 00;02;20;16UnknownPart of the update we made to the market through the half year results, we laid all that there for our shareholders in terms of the short term and kind of more, forward looking strategy for the business. You know, we are very committed to developing, competitive and innovative hardware, both for seniors and for for the next generation of kids devices as well.
00;02;20;17 - 00;02;42;14UnknownBut, you know, when you when you're looking to significantly grow, reoccurring revenue, you need a software engine. I think what's pleasing about the progress that we've made is that we we again, made it clear in previous updates that when we launched, the version 1.5 of the Space or Gap, it was very much a compromise built on the existing, limitations of the tech stack inside the business.
00;02;42;17 - 00;03;23;04UnknownBut but we still focused on driving software, users and and subsequently software software subscriptions as well. But the really interesting point is going to come with the business when we launch, 2.0 version of our app, in Q1, that's going to be a completely new tech stack. I think for the first time in the company's history, we'll have, software that's going to really allow us to be able to, drive deeper engagement with users and customers and also give us the opportunity to have, software only subscribers at the moment, predominantly, a, an app user is somebody who's also a watch user as well.
00;03;23;07 - 00;03;49;25UnknownI think going forward, part of our strategy is to be able to grow both, and only subscriptions and users, as well as, subscriptions linked to a smartwatch subscriptions as well. The company also reported a 96% improvement in EBITDA, bringing losses close to break even. So how has the cost optimization contributed to this turnaround? Well, since day one though, just just celebrated my second anniversary.
00;03;49;27 - 00;04;17;04UnknownAs CEO of the company, I think from day one, we we were very clear about the fact that we were going to manage our costs effectively and rightsize the organization. I think we've demonstrated that, you know, quarter on quarter that we are we manage the business in a very efficient way. So not only have we rightsize there from, a headcount perspective where the opportunity presented itself to be able to outsource, services, we've we've done that.
00;04;17;06 - 00;04;40;24UnknownWe've previously updated the market that we now have a call center is based in Fiji, and we've we've experienced and not only efficiencies there, but also, a good service, and also contributed to our cost management as well. We get more visibility on those costs, which is, which is good. But also when the opportunity in the business to kind of automate, you know, buy rolls and build, I think is another mantra inside the business as well.
00;04;40;24 - 00;05;05;22UnknownWe just I think we just used made some commonsense decisions around, you know, the operating costs in the business and taken out, as much cost as we can without sacrificing the right kind of domain expertise inside the business to be able to kind of scale and grow the business, going forward. So I think it's just the culmination of, a plan strategy to optimize costs wherever possible inside the organization.
00;05;05;22 - 00;05;21;07UnknownI think when you're working with limited cash, and limited runway, the way that we have been doing over the last year or two, it just forces you to be very tight on these things and extract the most value, that we can with, with, with what we have in order to be able to maneuver the business into the position that we have to.
00;05;21;07 - 00;05;42;20UnknownNow, where pleasingly, we are, being able to start to deliver the results that I've been, you know, hoping to be able to deliver for shareholders for the last two years. Okay. And just touching on the financials, the company recently restructured its debt, freeing up 750,000 in cash flow over the next 12 months. So how does this improve financial flexibility for the business?
00;05;42;23 - 00;06;06;02UnknownWell, I think the first thing to say is that, you know, this is the situation that, you know, I we inherited as a leadership team, this relationship was debt. Had been put in place prior to us arriving. And that's kind of the responsibility that we we took on board. You know, with that debt becomes a need to be able to obviously repay it in a, in a, in a structured way.
00;06;06;02 - 00;06;26;08UnknownAnd I think first things first, it was to again to demonstrate to PR asset management and who we've got a great relationship with that we are an effective management team and that we had a plan for the future of the business and that we could start to deliver on that plan. I think we demonstrated that we had the support and the backing, which is which is fantastic.
00;06;26;10 - 00;06;48;23UnknownSo they're not only, you know, our our bankers, but they're also investors in the organization as well, which I think is really pleasing. But we have to have a plan to be able to, repay that. And ultimately that's going to come from our ability to be able to generate cash. And so the organization and yeah, that's been my focus from day one, is being able to get to a position where we're starting to, generate cash.
00;06;48;25 - 00;07;09;22UnknownAnd we're on on track for that. But I think the important thing to, to, really clarify, perhaps for some shareholders is some of the, the caveats that come with having debt, which is at the end of the day, we have to have a very collaborative relationship with, with pure asset management, given their status in the organization.
00;07;09;24 - 00;07;44;08UnknownI think also, that, we had a $5 million liability that was due to be repaid in March, in fact, next month. We've now through, I believe, the ability to demonstrate the fact that we've got a good grip on the business. And we have a plan that's effective and also scalable. We've managed to extend the debt and the repayment, and also to be able to push that 5 million liability into a situation where we've got a much, more, flexible approach to repaying that starting next month, which is $100,000 a month on a regular basis, kind of going forward.
00;07;44;11 - 00;08;14;18UnknownAnd what that effectively means is that we've taken out those big, lumpy payments that come across every kind of 3 or 6 months that we have on the original schedule, which means, in turn, that we're not kind of having to tie up that, that cash going forward. So what we've done is really, created an opportunity for ourselves over the next two years to really motor, the business model, really be able to show not only cure, but also the, the market, the value of the, of the company by continuing to focus on execution.
00;08;14;21 - 00;08;42;22UnknownSo it's really just helped us, extend our runway, you know, not tie up that cash in terms of repayments, but also just be able to settle into a more affordable and, and, I think cash light way of being able to kind of manage that, that going forward. I feel very confident now given the relationship, but also, the way that we structured the, the repayments that we all put yourself in a good position to, to repay that debt in full and on time.
00;08;42;22 - 00;09;01;00UnknownAnd I think that further the risks space talk for any investors who made to this point have been somewhat concerned about, how we might be able to afford to repay that. I think we now demonstrated the fact that we can be able to repay that in good order going forward. And you had $2.4 million in cash at period end.
00;09;01;00 - 00;09;22;19UnknownSo do you anticipate needing additional capital or is space talk on a path to self sustaining profitability? I think, you know, realistically, we're always looking at what our options might be in terms of growth. I think we're now in growth mode. I think there's there's there's two ways you can do these things. You can do it organically, which will, you know, can always take, you know, time scale to do that.
00;09;22;21 - 00;09;42;12UnknownAnd then you can look at, raised growth capital to be able to accelerate that. I think what we're doing is giving yourself some options. It's too early to say at this stage. What are plan is but I, you know, we've got an ambitious a growth agenda. You know, at the moment, we, we, you know, we sell, a certain number of watches in the Australian market.
00;09;42;13 - 00;10;06;09UnknownYou know, we want to be able to double and triple the number of hardware sales that we have on an annualized basis going forward, and also really want to get all software firing as well in terms of, users and subscription sales. In order to be able to do that, we're going to be operating on a multinational basis in the half year update, we, have a very ambitious plan to be able to further extend all kind of digital retail footprint, in the second half of the year.
00;10;06;11 - 00;10;26;25UnknownWe're looking to be in, you know, somewhere between 8 and 12 markets by the end of June. Very much capital light strategy, but still takes up, you know, specialist domain expertise and resources, to do it anyway, it will be a will do in a very cost effective way. And to scale Amazon and Shopify presences going, going forward.
00;10;26;28 - 00;10;51;28UnknownI'd say that in due course, we'll take a look at what we need. And then if we need to then we'll, we'll, you know, we'll come to the shareholders with, with, you know, a very solid story about what they can expect to see if we all can raise capital and what the return would be. But I think we've, we've we we put ourselves in a position now where I like to think that we've demonstrated to the market our ability to manage the business effectively.
00;10;52;00 - 00;11;08;00UnknownWe've definitely turned the corner, in my opinion, in terms of the position of the business and where we've maneuvered ourselves. And now I really want to accelerate the growth of the business, going forward. So it's an open question or one which, you know, I think I'll answer and I'll take shareholders in due course. Okay.
00;11;08;01 - 00;11;43;03UnknownAnd looking at those offshore markets, you've highlighted an international growth strategy, particularly leveraging digital sales channels like Shopify and Amazon. So how does this fit into space talks broader expansion plans? Well, it's really important. We can scale our digital channels and our software and a capital that way. And I think this is really important, but also it gives us the opportunity, particularly with kind of these digital, retail channels, channels, to be able to trial different things, from a digital marketing perspective, scale up, scale back, tried different, propositions in the market.
00;11;43;05 - 00;12;05;01UnknownI think the key thing is to establish, these store fronts. And then I think it then becomes a marketing exercise to drive traffic, because there's one thing having them there's no thing actually transacting. And we're able to do with developing plans in parallel with each other at the moment. So I expect these stores to make a contribution to our numbers in the second half of the year.
00;12;05;04 - 00;12;26;02UnknownThis will unfold, in due course. We're literally in the process of, you know, in the weeds of all housekeeping around scaling into these individual markets. It's it's, know, it takes a lot of time. So to do it properly. And that's what we're focused on doing. The has had a few false starts in the past in terms of international scaling up.
00;12;26;02 - 00;12;53;09UnknownWe're determined to do it the right way this time and in a sustainable way. I mean, that's that's the key thing to emphasize is that everything we're doing is part of a concerted strategy and also, sustainable, and done properly. So the set up is worthwhile as taking the time to do it properly, because then we can have solid, foundations, if you like, or building blocks for the next financial year to really start to grow and to kind of scale these different, store presence as well.
00;12;53;11 - 00;13;27;01UnknownSo that doesn't exclude is from having channel partners on the ground or even looking at, even traditional retail in due course. But for now, the focus is on digital, retail. I think that's the right decision to make. So dollars go as far as possible, but also really extends our reach as well. Some of those, those Amazon and Shopify store fronts coming online as we speak, I expect to be able to give the market a bit of an interim update, in due course as we public our English speaking, stores up and running over the course the next couple of weeks, and then towards the end of the second half
00;13;27;01 - 00;13;44;17Unknownof the year, we'll have a non-English speaking markets kind of, up and running takes a little bit longer to do that kind of a setup than a translation perspective. But I think, you know, I'd be very pleased to get to the end of this financial year. Have you started the year in, you know, essentially one, one country, which is Australia, you know, us?
00;13;44;18 - 00;14;00;12UnknownA yes, we have some retail presence in New Zealand. But we're going to really start to expand out this financial year as well. But by the end of this one financial year, we will come from 1 or 2 markets to 12. And I think I'd be I'd be pretty pleased with that as a result. I think that's a good position to the business overall.
00;14;00;15 - 00;14;26;10UnknownOkay. And just touching on the seniors market, the partnership with Telia's opens up significant growth in the seniors care segment. So how to based or plan to tailor its offerings to make the unique needs of this demographic? Well, seniors is is just a really exciting part of our strategy going forward. I think we've only really started to, to, see the really early stages of the potential here.
00;14;26;12 - 00;14;59;02UnknownI think just to remind listeners and shareholders, you know, at this stage, we are working with a legacy device, the original life device, really dipping our toe into the water. Talia are a great partner for us. To to retest our thinking and to get some initial sales going. But in parallel with this, we're also working on, as I've said earlier, in the conversation space or 2.0, which is an entirely new, software tech stack, which is going to allow us to do, and operate at a much higher level than we currently are at the moment.
00;14;59;04 - 00;15;22;14UnknownAnd with that, also the next generation of, Siemens device as well. It'll be a very different, software experience and a very different hardware experience. I think we've got, looking forward to making a couple of updates around this in the near future about our competitive advantage in this space and how we're going to show up, which is very different, than what's gone before.
00;15;22;17 - 00;15;44;25UnknownI think, though, what's exciting about this is the size of this market opportunity, not just in Australia, but in kind of all, developed countries around the world. You've got an aging population, you know, if you think of it as being the over 50s market, health and wellness and vitality are really important. I think we've got we will have a proposition for that.
00;15;44;25 - 00;16;03;19UnknownBut also really what my overarching objective for the businesses is to move ourselves into being a predictive analytics business. You know, watches and all sensors will allow us to capture a lot of data, how we can gain insights using that data going forward is going to be what I say, that we unlock the great value for shareholders.
00;16;03;21 - 00;16;21;07UnknownAnd that's really what we're focused on. And I would think that by I talk to, you know, the end of this calendar year to be in is in a situation where we can really start to demonstrate to the market and also to our shareholders how this entire ecosystem is actually comes together. And I expect this to be a very different looking business by the end of this year.
00;16;21;09 - 00;16;41;20UnknownSo, you know, a a very unique approach to the seniors market, both hardware and software, an entirely new, tech stack that allows us to go much deeper in terms of our engagement with our customers and prospects, our ability to take a user through a freemium experience. We can't currently do with our existing, technology.
00;16;41;22 - 00;17;07;11UnknownAnd, the next generation of, kids device, which be far more age agnostic. So a very different looking, business, a very different looking, value proposition in the market, a very different, looking set of products and services, software and hardware. All right, Simon, it's been great to catch up now to get another update on where the company is at, and we look forward to further updates in the upcoming months.
00;17;07;13 - 00;17;21;00UnknownThanks so much. Look forward to, keeping in touch with you in the next update. Thank you very much. That concludes this episode of ASX briefs. Don't forget to subscribe and we look forward to catching you on our next episode.
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