Investor Presentation 2Q2023 Video and Q&A

For those that missed the investor presentation, Spacetalk has posted it to their YouTube account. This presentation also includes the Q&A!

Interesting highlights for me were:

• 12:10 - Even with the cash flow positive quarter, we took a large inventory payment for Adventurer 2 to sell in this quarter (if I heard that right - should see a new watch in the next couple of months. If I were to wager a bet, it would be after the shortfall arrangement expires, likely sometime late March / early April in time for Easter?)
• 14:05 - Expect a large uplift of revenue for new watches as retailers place their fill in orders (anyone have insights as to whether SPA gets payment for the watch on retailer sell in, or a percentage of the estimated sell price with the remaining payment to SPA for the watch upon sell out to the customer? For example, if A2 sells to JBHifi for $200 with a RRP of $400, will SPA get the full $200 upon sell in with a corresponding 45 / 60 / 90 day payment? or will the revenue reflect something like a 50% / $100 payment from JB to SPA until Sell out when JB pays the remaining $100?)
• 15:15 - Bestbuy started off with 2 colours and now in discussion about expanding their range. We've already got our first set of orders as they come in to refresh their shelves. (What wasn't clear was the point around expanding the range - have we presold our A2 or just sold in the other 2 colors to the stores? Looking at BB's website, coral is sold out, and Ocean is unavailable. Not much availability for Midnight / Grey, so I'm thinking he's referencing the new A2 being ranged in BB soon. Which is great, as it will mean a global launch and likely a universal watch not limited by the regional 4G bands)
• 16:10 - Question asked if there was an inventory write off for the budget (original) kids watch. (Question was avoided / forgotten - obviously there will be an impact from this inventory write off but unknown to what extent...)
• 16:35 - Jumpy had a cash impact of about $1m in this quarter. (He previously referenced that about half customers elect for the full annual plan of $165 vs the monthly. Doing some rough maths and assuming 40% of the other customers signed up to jumpy in Dec and 10% signed up in Nov for 2 payments, this means approx 10k customers signed up in the quarter)
• 19:30 - Have renewed the WA School Contract (This was previously $1m / yr. Likely increased the rate to $1.1m and is the driver behind the 10% growth)
• 20:15 - Focusing on sales teams in the US vs a call center. Recruiting a sales rep to focus a lot more on the consumer retailers vs telco's
• 21:55 - Single call center in Adelaide as a shared service model. ($2m additional cost savings likely baked into closing the regional call centers and moving that all to Adelaide. Great to see the CEO doing this vs MF that set up regional call centers and regional operational managers. So much more cost efficient!)
• 23:40 - Low rates of participation in the rights issue has not impacted the development and the development of Adventurer 2
• 24:00 - Adventurer 2 orders were placed and paid for in last quarter. Need to figure out timing for releasing A2 to allow runout of A1. It's a complete redesign of the housing, the strap, how the strap connects to the case, and looks a lot thinner. Addresses a lot of issues of the A1
• 26:10 - Large revenue attributed in Quarter 3 from cash received from retailers with their delayed payment terms. (Emphasized at 26:50 that the cash bump in Q3 comes from the retailers and less cash from sell out / activations as it's a bit slower period of time)
• 28:30 - Thinking in the shorter term over the next four months for feature adds to the watch is audio books, bedtime stores, games, etc that you can charge for. In the longer term, build out an ecosystem for kids, and have some sort of app store and have 3rd parties develop apps where SPA will take a transaction fee / subscription fee
• 29:50 - Bought A2 inventory last quarter, which is why the cash wasn't more positive, and we're buying inventory now for our budget watch (this surprised me that they've locked in the design for the budget watch and have placed orders for it!)

Overall I'm more positive on Spacetalk! I think this was a really good update and I'm excited to see the new watch designs (& buy the A2 for my kids! Maybe launch a pre-release to investors / current owners as this group would be the greatest cheerleaders for the new product? Hint hint...)