Xplora is a leading provider of children’s smartwatches. As of Q1’22 it had sold more than 750k watches since it was founded in 2016. The watches enable parents to keep in contact with their kids but are restricted to only showing child-friendly content. Xplora also receives recurring subscription revenues from the sale of its own mobile subscriptions and value-added software applications. In Q1’22 it had 124k mobile subscribers and recurring revenues was ~25% of its revenues. Xplora has established a strong market position, with 17% total market penetration in Norway and close to 6% for the Nordics overall.
User preferences change over time, and there is a risk that Xplora will not be able to adapt its offering to meet changing preferences. With low barriers to entry there are few obstacles to shield Xplora’s product proposition from being replicated. This could lead to a loss in market share. The company’s churn is 2.5%/month. If Xplora fails to replace the loss in customers, its ARR base would decrease and thus reduce stability in revenue flow. Moreover, Xplora has a large digital platform and could thus be subject to hacking: children could gain access to unsuitable sites and applications, which would damage the company’s reputation.