Good morning everyone. Welcome to our Q3 2022 result presentation. My name is Sten Kirkbak, Founder and CEO of Xplora, and with me we have our CFO, Mikael Clement. As always, we will divide the presentation into three section. I will start to give you a highlight from the quarter, then Mikael will give you some key financial details, and then I will end with the outlook statement. Of course we'll also have a Q&A session at the end. Let's start with Q3 highlights. I think it's important to mention that this quarter has been a key quarter for the company, in the company history, actually. We have finalized some of our major investment in new products, set up of new mobile service provider setup, as well as completing our premium service platform in order to drive future recurring revenues from services.
Also, it's been a quarter where we have transitioned out of legacy products in order to prepare the ground for introducing new products. For that reason, we are very pleased to announce that group revenues are up 28% to NOK 138.5 million. Our recurring service revenue is up 41% to NOK 42.9 million, and our subscriber base ended at a very strong 147,400 paying subscriber, up 33% year-over-year. Our gross earning was 41% or NOK 56.7 million, something we have expected slightly higher, but due to the currency, we are buying products in dollars, selling in NOK and euro, the gross earnings has been slightly lower. Our EBITDA came in at NOK -18.8 million, also slightly lower than we have expected.
Key reason for that is the effect of the gross margins given the exchange and the currency, as well as we have been transitioning out of new products, as well as we have also reduced our overall sales volume for this year, and we have not got the effect of the cost optimization in this quarter which I also will come back to. Our cash balance ended at a strong NOK 70 million. Before we go into some more details, I would like to start with the 2022 overview for the goals we set out when we started the year.
This year, we plan to launch three new products into the market, also the first time where we have developed two OEM products ourself so every single component of the product is built by Xplora with the full IP and the value that comes from building the product from scratch. Naturally, it allows us to better integrate with our software platform. Also, we set out to replicate the very successful Nordic SIM` model into one to three global market. Of course, we should also take all the learnings from more than 100,000 users on our Goplay platform, transition this accordingly with our global SIM rollout in order to launch Goplay version II allowing customer to upgrade to a premium subscription, again, accordingly to the global SIM rollout.
Also for this year, very important to establish our U.S. operation, also to include partnership both with distributor, retail, and telco, and also to demonstrate to the market the scalability and the profitability in our business case. It's fair to say a lot of these achievements has actually been executed and launched throughout the third quarter, including year-to-date now of today in November. The key takeaways from the performance has been to finalize the development of the three large project I mentioned three new watches, SIM connectivity platforms, and connectivity or our service premium platform as well. Also, as mentioned, it's been key for us to be able to sell out all our previous models before the introduction of new product in order to avoid building stock in the distribution and retail channels.
As you can see on the screen as well, every single X5 Play and eSIM product is sold out from the retail perspective. We have kept some volumes of the XGO2 and X5 Play in Amazon to continue to sell out on our digital channel. All in retail in our distribution channels, the current product is currently sold out, which was the one key goal going into Q3 preparing the ground for introduction of new products. Also, as you can see from the U.S. perspective, we have established office, all legal, technical requirements for our operation in U.S. is completed and also the team of six is in place.
They have managed to sign the key distribution agreement with a distributor, as well as we also have announced the first retail partner in Target, Walmart, and Best Buy, currently online with the objective to move into physical store performance going into next year. Also, as you can see, three new products to be developed this year, our new entry-level model and two premium products. You can see all the development is completed. The XGO3 is already in the market. The new X6 Play is being introduced as we speak.
The X6 Pro, which I will come back to as well, is finalized from a development point of view and is now into production for a slightly later launch into the market. As we also have announced, we have already not only announced one to three new MVNO in the global market, but we are already live in the U.K. market with our SIM connectivity program. We are live by November in Germany, and we are also live in France with our subscription model as well. Currently, the technical implementation of the Spanish mobile setup is also completed, expected with a December launch. In the U.S., we have already also announced the first agreement with AT&T, expecting to go live in the U.S. market with the same mobile subscription model in next year.
We are very happy to announce that our Goplay Generation Two, meaning that the ability to upgrade to premium content, is now also going live as of mid-November. On the screen, you can also see we are currently still in implementation of our ERP system, and we have also started our efficiency program for 2023, which I will come back to slightly later. One last thing to mention on key takeaways from performance in Q3. As we mentioned, we have had some hits on our gross earnings related to the currency, buying in dollar and selling in NOK and euro. We have also been using third quarter in order to negotiate key deals from our vendors in order to reduce the risk of the currency fluctuation up and down.
We have already accomplished quite a lot in that regard, and we will continue to work on that to improve going into 2023. To quickly recap our SIM model we started this year being live in all the Nordic markets. We had objective to launch in one to three global market. As I just said, we have already announced several of our global SIM subscription models. On the screen, we would just like to give you an example of the value proposition when we're going live in the global market.
As you can see, we are choosing to have three or more different models where the customer can either pay as you go, you can have a 12-month prepaid contract, or you can commit to a 12-month contract and have a slightly discounted monthly price, all accordingly to be competitive in the price in the local market and also drive the same profitable business model as you have seen we have done previously in the Nordic market as well. In parallel of our SIM global rollout, we have now also aligned our Gen 2 of Goplay. Being launched this month, you can also see that we have already demonstrated that our Goplay users walked far more than other users, 2,500 steps more each day.
We have categorized now all the feedback, all the data we have had from our users so far. We have launched 10 awesome new categories with content, allowing customer to dig into new watch faces, ringtones, set up a lot of new campaigns. We have e-books, we have a lot of games, e-learning, auction, a lot of competition with prices, how to utilize your Xplora Coins. We have built a new section we have called GoBrands, allowing us to integrate partnership with third party to provide even more content to our platform. These are the 10 awesome new categories where kids will be able to go in and download new content and really optimize their Goplay experience. As you also can see on the screen, we have divided it into two value proposition.
Some of the content come for free and will be part of our Connect Basic program. When you buy a SIM connectivity plan from Xplora you'll get access to some of the content from the Goplay. However, we allow the customer also to upgrade their SIM mobile plan in order to get Xplora Connect Premiu and then you can really get the most out of your Xplora watch and utilize and use all the content from these 10 categories. You can see some of the reference points on the screen as well. What is the key difference with the free versus the premium version? Again, this will also now go live, and it will be rolled out accordingly to our global SIM rollout plan. I would now like to take you through some of the updates with our new product.
Before doing that, I would also just like to spend some time on our watch history. As a fun fact, it's interesting to look back when we reported Q3 last year. We could then just report that we now had sold more than 500,000 watches back in Q3 last year. One year approx later we just also now recently announced that we have achieved more than 1 million watches sold. Should take us to be the number one smartwatch for kids in Europe and U.S. combined, and with all the experience from taking seven products into the market when we went into 2022. Also, as you can see, we have been partnering up with some of the major, largest, most recognized brand in the world when it comes to distribution, retailers, content partnership and so on. That's a very strong history.
The future is even more exciting for the Xplora team. We have now recently announced and launched a brand new platform of hardware products. We have divided it into Goplay and Pro, where we have our XGO3. It's our new entry-level product. It's a proposition where we really provide value for money, still with Xplora experience and quality. That's our Goplay product. For the first time, as mentioned, we have now developed our own OEM product. Every single thing is built from scratch. All IP belongs to Xplora and we have done this in order to really be able to integrate with our software platform. Also, one key takeaway with the strategy for the Play and the Pro is to extend the lifetime of the hardware platform itself. Previously, we have had a strategy to replace the product roughly every 18 months.
With the new hardware platform allowing us to do a lot more upgrade and changes in personalization from a software perspective, we also expect now the lifetime to be substantially longer on the hardware platform itself, allowing us to have slightly more time between when we do the financial investments in producing new hardware products. Our X6 Play which I will present to you slightly more in detail in a second, is our new premium product. Playful, powerful, and even more personalized. And with the Pro that should be the flagship product in this whole category, really taking it to the next step. It's all developed and done, in production for a slightly later launch. Going a little bit more into the X6 Play, like I said, more powerful, more personal. It's unique because every child is.
With this strategy, we really have emphasized two key differences from everything else you see on the market. Of course, it comes with more power, more storage, better camera, larger screen, everything you expect from a hardware upgrade. We have really been thinking of how can we personalize this to the kids in the best possible way. We have a hardware strategy in order to do that, and we have a software strategy in order to do that. The hardware strategy, we have developed a range of accessories, actually providing more than 3,000 combinations in order to personalize your watch. With wristband, with bezel with loops everything the child can buy from Xplora in order to optimize the watch. That allows us also to sell more accessories with very high profit margin. On the software side, it's where it becomes super exciting.
Of course, the product is 100% Goplay compatible. Also now, of course, you can upgrade to premium content, allowing you to access even more content. You can really play around with watch faces, with ringtones, download new application, and really get the most out of your watch, and also, again, to personalize and optimize it to the way you best would like it. I think it's a fantastic opportunity for us to launch this product with success, even from the get-go. As of this presentation is being held, we have also been awarded a very high and prestigious award from CES a Innovation Award for 2023 Best of Innovation. Every year, all the various categories are invited to be part of this innovation from CES, and only the best of the best will be awarded as a winner in each of the categories.
As a reference point, last year, it was only one key award in the whole wearable category. With our new product, with X6, we already got announced that we are winning this category for 2023. Going to Las Vegas CES in January it will be a physical presentation and award of this prize. We believe it's a combination of product innovation and integration with our platform in order to make kids walk more and move more, as well as our ESG strategy, where kids can help other kids with their activity. Combination of that is what made us win this award. Super excited and a great start for our new product lineup. With that, I would like to have Mikael to come up and take you through the financial details. Thank you.
Thank you, Sten. We'll start out with taking a look at our revenues in the third quarter. Group revenues in Q3 amounted to NOK 138.5 million. That's an increase of 28% year-over-year from Q3 last year and a solid sequential increase from NOK 111 million in revenues in the second quarter this year. Looking at the regional sales and the regional breakdown. Device sales made up NOK 95.4 million in revenues this quarter, up 23% year-over-year. Germany remains our largest market for device sales with around 60% of those revenues, followed by Norway as the second-largest market at around 25% of device revenues. Service revenues amounted to NOK 43.2 million in the third quarter an increase of 41% from Q3 last year.
This comprised mostly of Xplora Connect subscription revenues. Norway is clearly the largest share of our service revenues at around 60% of revenues, followed by Sweden as the second-largest market with around 25% of the revenues, and Finland, and then Denmark. Group revenues in Q3, as mentioned, NOK 138.5 million up 28% year-over-year from last year. Germany commands the largest share of group revenues at 41% of sales followed by Norway at 37% of group revenues, and Sweden at 10% of group revenues.
Recurring service revenues were NOK 42.9 million in the third quarter this year, a growth of 41% year-over-year. Recurring service revenues represented 31% of our overall sales in the third quarter, and we're now at an unannualized run rate of more than NOK 170 million in annual recurring revenues. We exited the quarter with 147,400 subscribers with a chart on the left here showing the growth in subscribers over the last three years. A solid growth in the third quarter as well. Norway continues to command the largest share of subscribers at 82,000 subscribers, representing a penetration rate of 19% in the target market, kids aged 4-10 in Norway.
We have 38,000 subscribers in Sweden, representing an implicit penetration of 5%, 16,000 subscribers in Finland with a penetration of 4%, and we're at 2% penetration in Denmark with 8,000 subscribers. We now have a subscriber base of 3,000 subscribers outside the Nordics, of which the U.S. commands the largest share of those subscribers. Looking at our growth and penetration in the Nordic markets over time we're at 19% in Norway, but we have clearly the longest track record in the Norwegian market. We see how the other markets are progressing in terms of penetration rates, and they continue to follow a very similar growth path that we've seen historically also in the Norwegian markets.
Gross earnings in the third quarter were NOK 57 million, an increase of 7% from NOK 53 million in the third quarter of last year. Gross margins were 41% this quarter, down from 49% in the same quarter last year. Gross margins were negatively affected by a stronger U.S. dollar from procurement of goods, as well as some effects from transitioning of product introductions. Adjusted for the negative currency effect this quarter, our gross margins would be in the high 40%s. The underlying gross margin in our service business remains stable. As Sten mentioned we are renegotiating terms with suppliers, and we have secured improved terms and mitigated some FX risk on future product supplies. Moving into the P&L. Payroll costs, or excuse me, revenues first, NOK 138.5, up 28%.
Gross earnings at NOK 56.7 million for a margin of 41%. Payroll costs were NOK 23.3 million versus costs of NOK 21.6 million in the same quarter last year. We exited Q3 with 136 employees. Other operating costs this quarter were NOK 52.2 million, up from NOK 31.4 million in the same quarter last year. This includes NOK 28.6 million in marketing costs, where we have three key elements driving those costs. One is the transitioning of product generations, primarily from the acquisition of Xplora Mobile Holding according to NGAAP. EBIT at -NOK 31.5 million, pre-tax ended at NOK 32.6 million with net profit with a loss of NOK 31.6 million in Q3 2022.
Year-to-date figures, we have revenues of NOK 323 million up 27% over the same period last year, with recurring service revenues up close to double, 96% increase to NOK 111 million, and smartwatch sales up 6% year-to-date which shows that we've seen an accelerating underlying growth in our smartwatch sales from Q1 through Q3. Gross earnings show an increase of 41% to NOK 158 million, with our margin at 48.8% versus 43.9% in the same period last year. Payroll costs year-to-date NOK 56.9 million versus NOK 50.6 million in the same period last year, with other operating costs at NOK 122.1 million, up from NOK 70.7 million.
This includes NOK 53 million in marketing costs year-to-date, up from NOK 30 million last year. EBITDA year-to-date is -NOK 21.1 million and with an EBIT of -NOK 57.6 million in year-to-date. Profit before tax at -NOK 58.7 million the first nine months of 2022 versus a loss of NOK 30 million in the same period last year. Moving on to the balance sheet. Financial fixed assets on our balance sheet amounted to NOK 249.2 million, largely goodwill and estimated value on customer contracts from the acquisition of Xplora Mobile Holding. Intangible assets of NOK 37 million is largely capitalized development costs. We had accounts receivables exiting Q3 of NOK 56 and a half million as a result of higher sales in the quarter.
That's an increase from NOK 46 million at the end of Q2. Inventories were up by 9.5 million NOK- NOK 9.5 million to prepare for seasonally higher sales in the final months of the year. Other receivables stood at NOK 77.3 up quite a bit from NOK 27.4 on higher prepayments of ordered goods as well as VAT. We had cash balances of NOK 69.7 million at the end of Q3 versus NOK 81.2 million at the end of Q2. We exit Q3 also with interest-bearing loans of NOK 27.9, slightly down from NOK 28.6 at the end of Q2. Accounts payable were NOK 79.9 million, up from NOK 19.8 on remaining payments on significantly larger factory orders.
Our short-term liabilities were NOK 74.4 million, up from NOK 66.6 million, comprising prepayments of our subscriber base as well as accruals. Over to the cash flow. Q3 cash from operations is a -NOK 20.4 million with cash earnings of -NOK 19.9 and -NOK 0.6 in net working capital changes. Cash from investments is a -NOK 7 million with NOK 6 million coming from product and service platform development and NOK 1 million from investments in our new ERP systems. Cash from financing in Q3 was NOK 16 million positive on new equity from exercise of contractual subscription rights. This leaves net change in cash of -NOK 11.5 million in the third quarter. We exit the quarter with NOK 69.7 million in the bank.
In a larger perspective, I'll sum it up with our cash movements so far this year. We entered 2022 with NOK 140 million in cash. Through the year, we have a negative EBITDA of NOK 21 million. We have paid NOK 20 million in earn-out payment for the remaining acquisition price of Xplora Mobile Holding acquired last year. We have CapEx totaling NOK 29 million year- to- date and we have a negative working capital movement of NOK 15 million, offset by a positive NOK 15 million in financing, leaving us with NOK 70 million on the balance sheet in cash at the end of Q3. With that, I will leave the word back to Sten for a few words on our outlook.
Thank you, Mikael. Let's have a look at the road ahead. I would like to really emphasize the importance of this slide. Going forward, we will really focus on our core business and our core value proposition. As we mentioned in the introduction, previously, we have been focusing on up to 20 different markets. Now we have introduced SIM connectivity in nine of our markets. That will be defined as our core markets, and we will put all our effort into those nine markets. We'll focus on the markets where we have SIM connectivity, allowing us to replicate the Nordic SIM model from previously and bundle as many as possible of our watches with SIM connectivity.
As well as we also presented, we make it very simple for the customer to potentially upgrade to premium content in order to get even more out of their Xplora watch, to personalize it, to optimize it, and access even more content and application. That will be our core focus into 2023, nine market with a very strong value proposition consisting on the watch bundled with SIM and easy access to upgrade to premium services. That gives us a unique value proposition from every single competitor out there. It's also a lot more difficult to replicate and copy. As we have been presented previously as well, it drives seven to 10 time more profitability for every single watch we are selling with that integrated value proposition. We'll focus on these nine core market.
On top of that, as we mentioned initially as well, we are going to introduce and implement an efficiency plan. Key strategies behind our new plan is that we have already now finalized major investment when it comes to three new watches, new rollout our SIM connectivity plan in five new market as well as our premium service platform. That allows us to be a lot more efficient when it comes to our marketing spend. Instead of focusing on 20 market we are narrowing that down to our nine core market with a stronger value proposition. On top of that, as I also mentioned when I introduced the new product, we are extending the lifetime of our hardware platform from 18 month to far longer lifetime before we will start to develop and introduce new product.
Instead, we will use software to upgrade and make the product relevant for years to come. In addition, we will also look into how we can reduce some of our personnel costs related to our new strategy when it comes to number of markets we are focusing on, and also the fact that we now have finalized the production of new product platform and services. All in all we are aiming to reduce our operating costs by 10%-20% going into 2023. In the same sentence, it's also very important to underline that we will maintain the focus on our software and ability to provide software and content delivery capabilities. Also, it's very important to mention that we are negotiating supplier agreements in order to have a more balanced currency risk profile going forward.
As I said in the introduction, we have already successfully done that with some our suppliers and will continue to do that with more our suppliers as well. To summarize in the outlook statement, we remain on track to deliver our revised target 20%-30% revenue growth for 2022. Also, we will exit 2022 with a brand-new hardware platform of two new OEM products and a new entry-level product. Xplora Connect will be available now in nine markets, growing from the four Nordic market to nine global market, including the opportunity to drive further increased annual recurring revenue from both SIM and premium content. As mentioned we'll do all focusing on our core market, allowing us to have a stronger, more profitable value proposition, and also we'll enter into 2023 with a more optimized cost structure and a negotiation of key agreements.
We will then have a target to continue to grow our revenue into 2023 with a target of most of the growth coming from service revenue. Also together with a cost reduction of 10%-20% will generate a more profitable result for the company going forward. With that, we can move into the Q&A session. All right, so Mikael, why don't you guide us through the question that has come in and we go by one by one?
Sure. Quite a few questions here I already see here. How quickly are you seeing the effects of now offering mobile subscriptions?
Mm.
In Germany, U.K., and France? It seems like Finland has increased. Can we expect the same in other markets?
Yeah. By experience, it will always take some time to introducing new product or services into new market. However as we remember from the Nordic, we saw more or less the same growth pattern.
Mm.
Which we hope also to see in different market. Also, I think it depends on the number of channels we have in the various market, given how quickly we can grow. I think it's fair to say that we do expect some faster pickup in the German market in particular since we have a very strong position in that German market with a lot of retails.
Good. How is the profit margin related to the SIM business developed from earlier, given that you're now operating various markets? Well, as we commented Xplora Connect has experienced stable margins, this quarter and so far this year. A nd we also expect our new mobile service provider businesses to generate similar margins as in the Nordics. Let's see here. H ow large was the negative FX effect on gross margins in percent, a nd what do you mean by transition of products?
The negative effect, roughly NOK 8 million. What we mean by the transition of our product is basically the sell out of our previous model, XGO2 and X5 Play. Very important to make sure that that is all sold out from a distribution retail perspective, preparing the ground for introducing the new product, so we are not left with big volumes in the warehouse from our retailer, but it's sold out, so we can quickly and efficiently start to sell our new products.
Yeah. Is there any earn-out or negative injections left in the balance sheet?
No, Xplora Mobile Holding is fully paid for, so no more earn-outs.
Can you break down the 10%-20% cost reduction?
Yeah. High level, it's three elements. First of all, it's the reduction of third-party consultants, primarily related to all the R&D and development we have done from building new product, new platform, and new MVNO implementation. The second is, in general, the reduction of marketing spend.
Mm.
Since we're now focusing on nine core markets instead of 20.
Mm.
Those nine market where we have significant better margin selling both products, SIM, and services. Also, the third element will be a reduction of headcounts in the company.
Good. Is the 10%-20% cost reduction compared to 2022 or versus the current run rate?
Yeah. It's compared to 2022.
Is the Q3 CapEx more normalized given the current run rate of the business?
Well, moving into 2022, we guided NOK 30 million-NOK 35 million in CapEx. We believe we will likely end up in the high end of that, possibly slightly above, as we are rolling out five MVNOs versus the guidance of one to three. We've not issued any guidance for 2023 yet, but as we are completing some major projects this year, we would expect CapEx next year to come down from current year levels.
What margin potential do you see for your international MVNOs?
We hope to see the same margin globally as we have previously seen in the Nordics, roughly 70%-80% margin range.
What about price?
Hmm.
Profits on your new products?
Well, we have previously stated that we target gross margins around 30% for our device sales. We do also expect that for our new generation.
Hmm.
Of products. However, they will carry a slightly higher average selling price than our previous generation of products.
Do you expect the gross margin and lower EBITDA margin to continue?
No. First of all, we are renegotiating supplier agreements related to the currency, buying dollars, selling NOK and Euro. We already have progress on that, as mentioned in the report, and we'll continue to work on that going forward as well. Also, new smartwatches will have as Mikael just said, the similar percent margin, but of course it will have a higher selling price. Also our core sales will focus more towards selling services from not just the watch, but also associated with SIM and premium services, which also will provide significantly higher profitability in our product range going into 2023.
Where did you have the highest growth in Q3?
I assume it means by number of sales and market. We do see a big uplift in our German market in particular, where we have seen a very accelerated growth. Also, it's one of the largest market, of course, and as we have stated previously and before as well, it will take some time to develop this positioning to the large market. However the benefit is also when it first starts to accelerate, we see this very big growth, and we have experienced that in the German market right now.
Is there a risk that a weaker or falling U.S. dollar will hurt you going forward as you renegotiate contracts at a potential peak of the U.S. dollar strength?
Well, it's also a good question.
Mm-hmm.
As we mentioned, we have done two things, discussing with our vendors, and one is to renegotiate the price and terms of our products. Second is that we are mitigating the FX risk, balancing the risk better between us. I would argue no to that answer. How is your growth in Norway developing? Well, we have seen a reduced household spend in the Norwegian market as well in general, the whole category. Of course, Xplora has also been affected of the same reduction of household spend is what we can see in the numbers. Also why we mentioned that it's very positive that we see in the bigger markets such as Germany to see this accelerated growth.
What is the update on the competitive landscape? Do you see Apple entering the category next year?
Probably no one knows for sure. The best indication we have is what we see of patents being filed, products being launched in CES, Mobile World Congress, and also the conversation we have with multiple retailers and telcos. So far, we see the same appetite from partnerships from introducing new product services next year. We haven't seen any new patent filings. We haven't seen any new products being launched at the latest Mobile World Congress or CES. I think the whole category in general are getting more and more mature. It's growing both in Europe and U.S. I think that's why it's very positive for Xplora to have this strong position being a category leader. Once we hit that 1 million mark we are the biggest in this category. As the whole category is growing, I think that's a very positive thing for Xplora and our position.
What actions do you take to prevent your watches from being hacked? Will you be able to turn previous watch buyers in Germany into premium subscribers? Two different questions there in one.
Two different questions. Related to the security in general, as we have stated previously, it's one of our biggest competitive advantages why we are being selected from the biggest retailers, distributors, and telcos, because we go through these multiple, both internal test processes as well as external parties to try to both hack or investigate Xplora and help us improve our stability, our system, our security all the way. We do that multiple times every year. For every telco we are also onboarding, we have to go through extensive homologation processes, also testing every single security aspect with our product. We will continue to do that. We have always done that as well. It's one of our strengths. When it comes to how to upgrade the audience to premium services, we have no data for that yet.
However, we do have more than 100,000 users on our platform currently using our services. We have taken all that learning into the Goplay Generation Two, which we are now launching, and it will be our focus to try to upgrade and convert those subscribers the same way we'll learn how to sell SIM subscription. We'll apply the same strategy, the same marketing approaches to upgrade all the customer to premium services as well.
Let's see here. A couple similar questions in regards to the U.S. How are U.S. sales progressing?
As we stated in the presentation, our core foundation is set up. The team is in place. We have signed a key distribution partner. We have signed three major retail partners. Sales are still on the low end, but we expect that to grow going into 2023 now when all the foundational fundamentals are in place.
Where are the hardware produced? Where are your products produced?
We have three different suppliers in the Asian market, but both inside China and outside of China as well.
Are you seeing softening watch sales due to worsened economic outlook in the primary markets? I think we partly addressed that. We have seen weaker household sentiments in some markets such as the Nordic, which has had some effects on growth for us as well.
Mm.
There are some overlapping questions here. Can you elaborate on the mix on growth for hardware and subscriptions next year, 2023?
As we mentioned, one of the key reason why we'll focus on our nine market where we have SIM subscription is that our margin is 7x- 10x more if we sell the product with SIM, and particularly also if we extend to premium services. Meaning that our key focus will be on those nine market, and again, try to convert as many as possible to upgrade with Xplora SIM and also Xplora premium services.
Mm.
The number of the percentage, we do not have data historically from that, but that will be our key focus going into 2023 now in the setup.
Good. I think we're closing in here. Do you still expect to have a positive EBITDA for fiscal year 2022? The answer to that is yes, we are with our current sales forecast, still expecting a positive EBITDA for the year.
Seems to be the final question.
Yes.
As always, please reach out if any additional questions following up from this presentation. You'll find all the information as always on xplora.com/investor. Thank you for participating.