Good morning. It's nine o'clock, and it's time. Welcome to our Q1 result presentation. My name is Sten Kirkbak, founder and CEO of Xplora Technologies. With me today, our CFO, Mikael Clement, and we will take you through this presentation. We expect it to take approximately 25 minutes. We'll split it into three sections with a general update, then a financial update, an outlook, and we'll end with a Q&A. Before we dive in, let's do a little recap. Xplora is really leading the way in a very fast-growing industry. More than 100 million products are expected to be shipped in Asia, Europe, and U.S. We are leading the way, and the market is representing some of the world's first mobile phone, SIM connection, bank services, and digital accounts. In short, we are onboarding the future generation of consumer products.
This year are representing to be a breakthrough and pivot in our company history. We used to be known and recognized for our product portfolio and our GDPR compliant IoT platform. However, over the last couple of years, we have been working with some of the world's most recognized content provider and created a platform that really are representing the future for the wearable industry for kids products. Let me take you through some of the key highlights for our first quarter and what we have delivered so far. From 2019- 2020, we grew from 74,000 sales to 260,000 sales last year, with a very strong ambition to reach 500,000 units this year. That represent more than 130% growth. We are very proud to report that we managed a 150% growth in Q1 to reach more than 60,000 products and NOK 54 million worth of revenue.
We also managed to have solid margin to reach 35.4% gross margin. We also had another successful private placement, which secured financing for our growth plan as well as the acquisition of Xplora Mobile. While Q3 and Q4 represent the most important quarter for volumes and growth, Q1 and Q2 really lay the foundation on how we'll accomplish that. In Q1, we have managed to do some of our biggest and most important integration from the platform and software side, and we have also defined and concentrated our IP strategy. In this slide, I would like to take you through the key elements of that strategy before I go into some of the operational highlights. Our strategy will be based out of four building blocks: our product strategy, our service and software strategy, our telco as a service strategy, as well as our new fintech strategy.
When it comes to our products, our objective will always be to have three products in the market, each of them with approximately 18-month life cycle. Two of the product will be SIM connected, either via traditional SIM, eSIM, or Voice over IP, and the third product will be Bluetooth connected, meaning it cannot make a phone call. It will be a lower price point. It can still measure activity and steps. All those three product I will explain in which market and the timeline a little bit later in this presentation. Our second building block is our software as a service strategy. Again, that will be built based on three key elements. Our already recognized IoT GDPR compliant IoT platform, which basically connect all these wearable product in a safe way to the consumer.
The second element will be our activity platform, our now growing and well-recognized Goplay platform. The third element will be our content platform in the name of Xplora Arcade, which will be launched later this year, and I will explain more of the details later. The third building block is our telco as a service strategy, and with the acquisition of Xplora Mobile, previous to MVNO Pepcall, we are now able to go live in the Nordic, in EU, and in U.S. with our own connectivity program during 2021 to then attract very compelling monthly recurring revenue. I will also come back to more on that in the outlook. The fourth building block is the fintech, where we, throughout 2021, will be launching program for how kids can learn to save money and also use the watches to make tap and pay or to make payments.
That will basically be our four building blocks of the IP strategy. As you can see, all of these four building block create a lot of strategic value, as well as they are very scalable independently of hardware. Going forward, I would like to summarize before we tap into the financial three key element related to some of the key operational highlights for the first quarter. First, very importantly, we have managed to do a lot of development work, and we have also grew the team from approximately 40 key members, onboarding 11 new key member. Now a team of 51 in order to absorb all this rapid development.
When it comes to some of the key highlights from Q1, when it comes to product, we have been able to secure the first successful eSIM onboarding into new market outside of Germany, as well as we successfully have launched product into the U.S. market, growing that during Q1. We have also prepared our second generation of the Bluetooth connected product, XMOVE, and we have also started already the development of the premium product Q that will have a goal to reach the market early in 2022. We have also started to ship products by sea. Again, one of the tools in order to continue to grow our gross margin on the product.
When it comes to distribution, we have also laid a very solid foundation for the growth, as mentioned into Q3 and Q4, by adding more than 800 new retail stores in the German market, as well as secured some very strong distribution agreement both into the U.K. and U.S. market. All of that, again, to support the growth going into Q3 and Q4. I also would like to highlight that during Q1, we have probably done some of the biggest program when it comes to development in the history of the company. We have been able to onboard three new integration on our Goplay platform, onboarding new relationship with Warner Bros., as well as new programs with Netflix. A lot of new content to the Goplay platform.
We have also managed to secure very strategic important integration and program with United Nations as well as UNICEF, again, to trigger sustainability and an even stronger reason why for kids to be able to move. We have also completed the required due diligence processes and all technical assessments which is required in order to launch our Xplora Pay and Xplora Connect development program and launches for second half of this year. Finally, we have also been able to complete and finalize platform module of our Goplay platform, so we can independently move that into a straight B2B and B2B2C strategy as well, which we will come back to. That summarizes the key achievements from operational perspective in first quarter. With that, let's move into some of the financial highlights.
Thank you, Sten. As Sten mentioned, we experienced a very strong start to 2021, continuing on to the strong development seen through 2020. We exited Q1 with sales of 62,000 units, a growth of 155% from the first quarter of 2020. Keep in mind that Q1 is seasonally the weakest quarter of the year. A major share of our sales are in the third and fourth quarter of the year. Starting out the year on this strong note is very promising, combined with many operational achievements, new distribution agreements signed through the quarter. Also, keep in mind that this growth has been achieved with a major share of European retail stores being forced to continue to be closed, which you also then see in our segment sales. A major share of the growth also now in Q1 2021 has been driven by telco customers and online sales.
Telco customers have also been forced to shift their sales to online sales channels as a result of their retail outlets being forced to be closed. We see that our retail sales continue, or sales through retail channels continue to make up a much smaller portion of our total sales than expected. We are, however, experiencing some promising developments with retail partners in several European countries. It will be interesting to see the development as we move through 2021. On a geographic basis, Germany continues to be a prime driver of sales growth together with the Nordics. Germany comprising in excess of 60% of sales in Q1, with the Nordics in excess of 30%. On a four-quarter rolling basis, Q1 now represents sales in excess of NOK 233 million, and we have seen a continuing increase in the operating profitability over the last four to six quarters.
Last four quarters, we now have a gross margin of 32% combined, up from 14% in the year-earlier period. If we look at Q1 2021 over Q1 2020, group revenues show a growth of 151% to NOK 54 million. We improved our underlying gross margins from 19.9% in Q1 last year to 35.4% in Q1 this year, driving a growth in gross profitability, gross earnings of 348%. Underlying operating costs, if we exclude option costs and one-off costs, are up 113% to NOK 23.2 million, which in sum improves our underlying EBITDA from -6.6 to -4.1 in Q1 '21. The scalability in the business model is continuing to show strong improvements. Moving into the P&L. Q1 highlights, total sales growth 151% year-on-year to NOK 54 million, driven by a 155% growth in smartwatch sales to NOK 51.3 million.
Gross margins, as mentioned, 35.4% up from 19.9% in Q1 last year. Total OpEx NOK 30 million , which includes NOK 1.9 million in one-off costs and NOK 4.8 million in option costs in Q1. Reported EBITDA -NOK 10.9 million versus -NOK 7.2 million in the first quarter of last year. Adjusted for option cost and one-off costs, EBITDA adjusted was -NOK 4.1 million versus a loss of NOK 6.6 million in the comparable quarter last year. Total finance costs were NOK 2.1 million , of which NOK 1.7 million are unrealized FX losses from translation differences, which puts pre-tax losses at NOK 13.6 million versus a loss of NOK 8.4 million in the same quarter last year. Moving on to the balance sheets. Total assets increased to NOK 333.5 million from NOK 192.5 million at year-end 2020.
The increase is pretty much driven by net proceeds of NOK 146.8 million from the private placement in February, them being the key driver of the increase both in cash as well as equity. Cash ending in Q1 ended at NOK 245.4 million. That includes NOK 25.5 million in interest-bearing debt in a loan from Innovation Norway. We have equity standing at NOK 261.3 million at the end of Q1, up from NOK 128 million at year end. Of working capital items, accounts receivables were down by NOK 15.5 million - NOK 11.7 million as customers paid off their payables from the strong sales in Q4. Inventories were slightly up from Q4, up NOK 3.2 million - NOK 27.6 million as we start preparing for slightly higher volumes into Q2.
Other receivables the same, also up by NOK 25.4 million in Q1 to NOK 40.8, again, preparing for higher volumes as we prepay for new orders. Accounts payable were up by NOK 5.1 million- NOK 24.8 million in Q1 on higher order of production volumes. Into the cash flows for Q1. Cash flows from operations, -NOK 18.3 million with profit before tax of -NOK 13.6 million, net working capital changes of -NOK 5.3 million on the higher sales activity going forward. Cash from investments, -NOK 1.5 million, which in its entirety is capitalized development costs posted as investments. Cash from financing total NOK 147 million positive, which is driven by the private placement net proceeds in February. The change in net cash is a +NOK 127.2 million with cash balances at the end of the quarter at NOK 245.4 million.
A major happening for us in Q1 into Q2 is the acquisition of Xplora Mobile Holding. We announced this acquisition on March 25, and the acquisition was closed three weeks later on April 16th. Total purchase price enterprise value of NOK 227 million, with a potential earn-out based on some EBITDA and free cash flow targets for 2021 of up to NOK 20 million. The initial payment was completed on April 16th, NOK 80.3 million in cash, plus issue of 3 million shares in Xplora to the previous owners. Xplora Mobile has been our key partner in the Nordics, having been very successful in developing the market for mobile smartphone subscriptions in Norway, Sweden, Finland, and Denmark. They've come the farthest in the Norwegian market, but are showing strong growth rates in the other Nordic markets.
They had 83,000 subscribers as of the end of April. Xplora Mobile Holding will be consolidated in our figures from Q2 2021. Briefly on the financials for Q1 of Xplora Mobile Holding. These numbers have actually not been consolidated in Q1. Xplora Mobile Holding group revenues in Q1 were up by 49% from the same quarter last year to NOK 32.9 million. Key driver is an 87% growth in subscription revenues to NOK 20.3 million. This was driven by a base of, incidentally the quarter, of 80,200 subscribers, up from 76,700 net subscribers at year-end 2020. Nearly double the 44,900 subscribers Mobile had at the end of Q1 2020. Gross margins widened by 5 percentage points to 49% in Q1 2021, primarily driven by product mix towards subscription revenues. This drove a 66% year-over-year growth in gross earnings to NOK 16.3 million.
EBITDA reported at NOK 4.1 million, up from NOK 0.6 million in same period last year, showing the continued operating leverage that Xplora Mobile is starting to show. We saw this towards the end of 2020, continuing into Q1 2021, and we expect this trend to continue going forward. The company had a major Easter marketing campaign, which has driven very strong subscriber growth in both April and continuing into May, and had some transaction costs also in conjunction with the acquisition. Of total finance cost of NOK 2 million in Q1, NOK 1.8 million of which were FX effects from revaluation of assets. A net profit of NOK 1.6 million for Q1 in Xplora Mobile. I think I will like to give the word back to Sten for some comments on what we are expecting for the quarters to come.
Thank you, Mikael. Let's look forward. Xplora is currently set up now to continue to grow and launch product and services in almost 20 markets with our three product I mentioned, two being connected, one being non-connected. We have also been set up now with some of the world's largest distributor, retailers, and telcos to sell our product. Also remember that we have managed both our Q4 as well as Q1 growth with most of the retail stores, representing actually most of our sales, still being locked down. With that, we are very optimistic to reach our target throughout Q3 and Q4, with all the markets, with all the distributor, retailers, and products set up.
For the rest of this outlook, I would like to focus mostly on some of the upcoming new services. As we have mentioned before, second half of this year, it will be important time in the company history to pivot into more service generating revenue. Two of the key elements in our premium services will be our Xplora Goplay and Xplora Arcade services. If we start with Xplora Goplay, it's been the current platform where we have been able to work with some of the world's largest entertainment company. On the Goplay platform, kids can really be incentivized and encouraged to be active and earn our Xplora Coins. Already, almost 50% our full user base are already engaging with the Goplay platform on a daily and weekly level.
Also as a fun fact, I think it's fair to mention these days that our virtual currency, Xplora Coin, are probably the world's most sustainable and environmentally friendly coin because it's only generated by kids actually being physically active. A very good positive upside in that regard. On the other hand, we will then launch our Xplora Arcade service, which really is a platform where kids having Xplora Coins can use these Coins to consume and download kid-friendly content. Basically, you can look at it as an Apple App Store platform where you can download various application. However, in our case, Xplora Arcade, it's very kid-friendly and safe content appropriate for our user group, kids 4 to 11, both with entertainment content, mini-game, as well as educational content.
On the Xplora Goplay, you can earn Xplora Coins by being active, and on the Xplora Arcade, you can download kid-friendly entertainment, mini-game, and educational content. Xplora Arcade to be launched in the second half of this year. Moving forward, one of our next breakthrough really is the upcoming Xplora Pay service, which also will be a very important part of our premium service proposition. We are really touching a very strong pain point to many parent, which is to learn their children the value of saving money, and as well as how to distribute pocket money, since actual physical money no longer really exists to this user group.
With Xplora Pay, as you can see on the screen from the Xplora application, parents can set up a solution, which really is a pocket money solution. You can invite your kids to do various topics. It could be tidy your bedroom, it could be helping to recycle, it can be to move more, so having 5,000 steps per day or checking into your soccer practice, etc . All these elements can be defined in the Xplora application. If the child will reach all these defined and agreed goals, your weekly pocket money will be transferred to your account. In relation or in partnership with Mastercard and multiple more partner, Xplora will issue the child's first debit card, as well as later this year, you'll also be able to use the watch to tap and pay. First out will be our biggest market in Norway and Germany.
Again, this will be a key part of our premium service. To put it into context, a kid-friendly debit card with a parent-friendly application in U.K. by a company called GoHenry, already have attracted quite rapidly more than 1.4 million paying subscriber per month. That is only the debit card, so not the combination with the tap and pay from the Xplora watch and our already large user base. A huge market and a very clear pain point that we are addressing with this service.
Lastly, on new and upcoming services, I would just like to go a little bit more detailed into our Xplora Connect service, which is also one of the key reason why we had acquisition of Xplora Mobile, meaning that later this year, come second half, we will be able to launch our own connectivity program in both the Nordic market with Xplora Mobile already having more than 83,000 subscriber and more than NOK 7 million monthly revenue already. Also we will be able to launch our connectivity services in Europe as well as in the U.S. market. We look into this as a huge opportunity because we are selling a SIM-connected product, meaning that the product by default will require a SIM card. It's not a matter of the user will have to choose a SIM card.
They have to choose a SIM card because it's a mobile product. What we would like to accomplish is one out-of-the-box experience, whereby all watches we are selling, not from a telco distributor, but through online and retail sales. We would like all of these to make it very simple for the end consumer to activate with one click, and thereby activate a monthly subscription delivered by Xplora. We see a huge opportunity, and already in the Nordic market with Xplora Mobile, it's a service with more than 70% margin. In our global platform in Europe and U.S., we also expect more than 50% margin on these services. Of course, we will introduce this both with traditional SIM, eSIM, as well as Voice over IP.
To end this presentation and the outlook, given our big growth in new retailer, distributors, and telco, finalizing all our three product for almost 20 market. We are on track on delivering our 500,000 unit target goal for 2021. With all the new services we have been presenting over the last six month, we feel comfortable that we are on schedule for a commercial release early in Q3 2021. We are very confident with our financial position, having NOK 245 million cash in the bank. We are also very happy to communicate the expectation for the second quarter of this year to exceed the volumes sold in our first quarter. With a big contribution from Xplora Mobile, we will also be looking into a continuous steady growth in our earning going into Q2 into 2021.
The company is very happy with the progress, both from a sales, new market, as well as software and service development. On track on basically all dimension and KPIs within the company. As always, Mikael and myself will always be available for one-to-one follow-up or questions, and also all these documents will be published on xplora.com/investor. Thank you so much.
We'll now open for a Q&A. Please provide all your questions in the chat function on the screen, and Sten and I will do our best in answering them all. Sten, what are the key differences for the upcoming next generation products?
As mentioned in the presentation, we are changing products approximately every 18 months. For the upcoming 2022 product, I would like to highlight three key changes. One will be we move in a direction with an even better higher resolution screen, more in the direction with using AMOLED screen. The second one to highlight, since we are emphasizing even more content creation, we will also introduce even more storage space on the watch, allowing us to develop more content for the watch as well. But the third and probably the biggest difference will be that we will be targeting to introduce a completely new form factor in the way we design and in the layout of the watch itself. That would be the three key differences I would like to emphasize and highlight.
Good. You have previously targeted high ambitions for value-added sales in 2021, up to 20% of sales. Could you please provide an update on this after the acquisition of Xplora Mobile?
Yeah. Okay, that's a very good and highly relevant question. I think also I would like to address that with three comments to make it as clear as possible. The first comment is, as mentioned in the presentation as well, it's a clear strategic reason why we acquired Xplora Mobile outside their already large user base. As you know, we are onboarding first mobile product, we're onboarding the first mobile SIM subscription, the first saving accounts, the first digital accounts, and many more things. Of course, if we can demonstrate that we are able to transition from a smartwatch and use that to pivot into the first smartphone to continue to use our services and even mobile subscription, that will have a huge strategic value for our platform and the company.
Of course, one of the key thing will be geared toward priority to make that happen, to make a blueprint and a documentation using the user base in Nordic to make a transition and see if we can onboard those users with the content and our premium subscription, and even the SIM subscription over to the mobile phone. That will be a key priority to make that happen. Potentially even more so prioritize to grow the traditional SIMs in other market. That might be one element. The second element, just worth to address as well from a high level perspective, is that we also have to accept the fact that there has been a slight channel change over this year with COVID and lockdowns. We are seeing now that retailer will start to reopen throughout summer and into Q3, but potentially slightly later than expected.
Of course, our SIM subscription will come from sales from online and retailers. Now we have had a slightly higher sales percentage from telco, where we do not sell our own SIM subscription. It might be a slight delay into Q3 before we can start to ramp our own SIMs. Again, that makes us also in a position to emphasize even more on point number one I mentioned. Adding both those two comments, I still think the third point and the most important point to address the question is that with the acquisition of Xplora Mobile, we will of course increase our overall revenue for 2021.
I feel more optimistic than ever that even with a higher increased total revenue, we're still able to target our 20% target of revenue coming from services and subscription throughout the year and when the year is done, even with having a more focus on point number one and also the point made about the slight change of our channels.
Good. Let's see here. You partly addressed this. How will the reopening of post-COVID and retail reflect sales? Do we have any views on that?
Yeah. We tried to cover it during the presentation. Also, that's one of the reasons I highlighted that our overall ambition this year to target a 500,000. That's approximately 130% growth from last year. That's why we were very proud to present 150% growth in Q1, even with basically all retail stores being still in a lockdown position. The telcos jointly with us have done a fantastic job to pivot more of the sales into the online channel. In reality, we know that the biggest sales driver will still be from all the retail stores that are still closed.
That's why we feel quite optimistic that having 150% growth already in Q1, still in a lockdown position throughout Europe, we feel quite optimistic that when this will start to ease and everything will go more back to normal throughout summer and into Q3, we should be in a good position to hit our target this year.
Okay. There's a question here. I guess I can answer that. Can you give an estimate on the cost synergies when Xplora Mobile is fully integrated? As we mentioned, there's a key strategic reason for us to acquire Xplora Mobile. The drivers behind that are significantly more towards the sales synergies, creating new market opportunities together, than cost synergies. However, naturally, we will turn every stone to look for cost synergies on the support side, from some suppliers and other services. The prime driver of Xplora Mobile is driving sales, new sales opportunities, new market opportunities together in both the Nordic markets as well as outside the Nordics. Let's see here. Accessories, screen protectors, new wristbands, et c. That is the question. Short question, but what are our plans?
It's actually a very good question, and the reason for that is, like mentioned before, a lot of sales is done through retail. Retail love accessory because it provides very high margin, so it will do for us on online sale. We are working on some very exciting strategies for introducing even more accessory with partners, and we'll come back to that shortly. We are working on it. It's very high margin on it, and we already see quite a good sales adoption on the accessory we have on our online stores. More to come.
Are you experiencing any supplier problems or cost increases for the watches, as it seems to be the problem with many sectors these days?
That's also something we tried to address in the presentation. We also did so after Q4. This has been an ongoing issue for a few quarters now. We have seen longer lead times. We have seen component shortages. Naturally, that has given upward price pressure on some components. Also for us, we have seen difficulties in global freight markets, very volatile prices on freight, and generally higher prices on freight. This is something that we've been working on for some time. Our gross margin clearly shows that we've been able to handle that so far. We are still a small player in the big world of components, and that gives us a little bit more flexibility. On the other hand, we also need to order products further out in time.
Of course, our stronger financing now clearly gives us an edge in that regards compared to our position only a few quarters ago. Let's see here. Status on IP application. I guess that's maybe patent applications.
Yeah. Once they are getting approved officially, we will immediately post an update on that. Currently, they are still under filing.
Does the existing watch hardware support potential integration with smart locks like the ones provided by, for example, Verisure? Use the watch as a virtual key.
I love the question. Huge opportunity. We have actually received that question before, and that category also represent already, like Verisure, that has subscription and already a monthly subscription into families and houses. Without going into the details, I can just address it. It's a very good question. It's very relevant, we are also entering more and more into not only the kid, but into the whole family sector, which we have addressed a couple of times. Synergies, partnerships like that open a huge opportunity, not only for us but also to partners like you are referring to add even more premium services and value-added services to their already huge existing user base. Definitely directions that we are looking into.
There's a question here on our IP development. Where is your software engineered?
Is the software and the functionality, the property of Xplora? The same goes for the physical watches.
Yep. All right. Good question. Like we referred to, and as you could see from the strategy as well, of those four building blocks, one is related to hardware and the three others are basically related to software. Software is one of our key IP and focuses. We have a fantastic engineering and software team that is led by our very experienced and seasoned CTO, Sanghyo Kim, working out from our London offices. Our key engineering office is in London, but we also, in order to have a close relationship to manufacturing in Asia, have a small team in South Korea. The software engineers, our key team, is based in London, and we also have one in South Korea.
All development is, of course, our own IP and the core IP of the company as well, and also the lineup of certification and everything done on our watch Q also belongs to us, but done in partnership with our manufacturer, Qihoo 360, in Asia.
Almost all sales come from the Nordics and Germany. When will sales from new markets start to show, such as the U.S. and U.K., et c?
It's a good and slightly difficult question to address very straight on. The reason for that is that we are a very data-driven and algorithm-driven company, meaning that when we see the biggest opportunity to grow sale, that's where we fuel most of our marketing investments, both online and toward a retailer. That's why we have been very clear during 2020 to really fuel the growth in a couple of very strong markets, being Norway and Germany, because it provides us a lot of data insight and documentation on go-to-market strategy, how we are able to fuel that sale and scale that sale. We apply those learnings and strategy into the new markets.
Also because we saw the markets such as U.K. or Spain was even more hit by the COVID and lockdown, that was also one of the key drivers for us to focus even more on the strong progress in the Nordic, particularly Norway, as well as in Germany. As we mentioned in this presentation, we have done some very strong distribution and retail deals now, additionally in U.K. and U.S., and it seems to be quite optimistic come summer when retailers are opening up. We then expect to see more of the growth coming from markets such as U.K., Spain, as well as U.S. We always keep track on where we see the most bang for the buck when it comes to acquisition costs and invest most in the market where we get the biggest sales growth.
It's fair to say that we are continuously expanding our geographic footprints, both through retail agreements as well as online. I think we have one more question until we need to wrap up. What about making a bicycle speedometer that works with a watch? They need something for upselling.
I think I would address it in the way that from day one, also like we said in our SaaS strategy, software-as-a-service strategy in the presentation, within that, we had three building blocks. One was our IoT platform, our activity platform, as well as the content platform. We do know that bicycle as a category is a potentially huge opportunity, allowing us to, for example, leverage on our IoT platform or partner up with someone, or, as mentioned in the question, even look into accessory. It's not currently a high priority. However, we have always designed our platform to make it possible to extend, particularly the IoT platform and services, into growing categories. It could be pets, it could be bicycle, it could be the elderly market or senior market.
The platform, our IP, is set up to scale in those directions, and bicycle is one good example of that, either with product, partners, licensing, or even accessory. Currently, this year, it's not on the roadmap.
Good. I think that brings us to the end. I think with that, we would like to thank everyone for participating and for your contribution with the good questions. We are going to release our Q2 numbers on August 31st, and we will see each other again then. Thank you.
Bye-bye.