Xplora Technologies - Cost cuts lift 2023 EBITDA by 20% - ABG

Cutting costs by 10-20%: we lift ‘23e EBITDA by 20% Higher ASP and subscriptions to drive growth in ‘23e 14x 2023e EV/EBITA, fair value range of NOK 9-23 Soft Q3 report driven by soft GM and higher costs Q3 revenues were NOK 139m, corresponding to a strong organic growth of 28% y-o-y. However, the EBITDA came in below expectations driven by a weaker gross margin, particularly hurt by a stronger USD as well as higher opex, among others due to higher marketing expenses (NOK 29m vs. NOK 13m in Q3’21). Xplora has said that it is renegotiating supplier agreements to include a more balanced FX risk. However, we still lower our gross margin assumptions for ’23e-‘24e by ~1.5% to be prudent. Xplora reiterated its FY‘22e revenue guidance of +20-30% y-o-y, which implies Q4’22 sales of NOK 194-238m. We estimate Q4 revenues of NOK 220m, which corresponds to a volume growth of 18% y-o-y, vs. 38% in Q3. Increased EBITDA in 2023 due to cost cuts and subscriptions We have recently seen a significant weakening of consumer sentiment, among others in Germany, which is currently the most important growth market for Xplora. Hence, we have cautiously assumed a 6% volume decline in 2023. However, we still forecast 9% revenue growth. This is driven by 1) 29% recurring revenue growth due to a 37% higher subscriber base at YE’22e vs. YE’21, and 2) 8% higher smartwatch ASP. In H2’22, Xplora launched its next generation smartwatch models (XGO3, X6 Play and X6 Pro). On average, these sell at ~30% higher retail prices, meaning there is the potential for significant ASP growth in ‘23/’24. In addition, Xplora has announced cost savings of 10-20% for 2023. We have assumed an 11% reduction in 2023 opex vs. 2022. As a result, our 2023 EBITDA estimate increases by 20% to NOK 43m. This would correspond to an EBITDA increase of ~NOK 50m y-o-y. Trading at 0.7x sales and 14x EV/EBITA on 2023e Xplora is now trading at 0.7x sales and 14x EBITA for ‘23e. We expect the company’s strong track record (107% sales CAGR in ... Läs mer på ABG Sundal Collier