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SPACETALK LIMITED (SPA) - Revolutionizing Family Safety: CEO and MD Simon Crowther on Wearables Evolution, North American Expansion, and AI Innovations

August 26, 2024 • Andrew Musgrave

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Ready to hear the remarkable evolution of a pioneering tech company? Join us as we sit down with Simon Crowther, the visionary CEO and MD of SpaceTalk Limited, to uncover how a firm that started with SMS-based school alerts has transformed into a leader in kids' wearables and family safety technology. Simon takes us through the strategic shifts since February 2023, aimed at broadening market reach to include not just children but also seniors. We’ll unpack the secrets behind SpaceTalk's financial resurgence in Q4 FY24 and how disciplined execution and operational focus have driven this turnaround.

Get excited for an exclusive look into SpaceTalk's future growth and expansion strategies. Learn about a groundbreaking deal with a leading telco partner and ambitious plans to enter the North American market. Simon also teases upcoming innovations, from the launch of the Adventurer 2 to the integration of AI in wearables, enhancing user engagement and brand appeal. Stay tuned for insights into their marketing strategies and future product developments that are sure to catch the attention of investors and tech enthusiasts alike.

Andrew Musgrave:

Welcome again to the ASX Briefs podcast, and today we're speaking with Simon Crowther, the CEO and MD of SpaceTalk Limited, a company with over 20 years experience and is a leading developer of software services and wearable hardware products designed to ensure the safety and security of families. Simon, thanks for joining me today and welcome to the podcast.

Simon Crowther:

Thank

Andrew Musgrave:

Okay, just to start, if you could give us the company overview and a bit of the history of SpaceTalk.

Simon Crowther:

Yeah, absolutely. I've been CEO of SpaceTalk since February 2023. The company had about a 20-year history prior to me joining. Originally, the company was focused on providing text-based, sms-based alerts to schools and to parents, making sure their children were getting to school safely and on time. That school's business that original school's business has evolved and morphed over the years. It's still part of our business operations and our revenue. We have about 10% we service about 10% of all the schools still in Australia.

Simon Crowther:

But the complexion of the business has moved on significantly over the last kind of five or 10 years when the company first launched its first wearables Kids Wearables Watch and since then they've experienced good traction in the market, building a solid brand with a good reputation amongst parents and kids and I think, with me joining the company in early February last year, it marked really a step change in terms of the focus and direction of the business.

Simon Crowther:

We, like I say, built a good business, a growing business based on kids wearables, but really I saw the opportunity to take the business into a far bigger sphere of operation and really through a lens of overall family safety.

Simon Crowther:

So I think one of the only companies in the world that I'm aware of that's got more of a generational view in terms of customer lifetime value. We now are a business that's focused on not only building on the success of our kids wearables business but also rapidly evolving to be a software-led business and a business that's also focused on servicing the needs of every member of the family at all the different stages of life. So at the young end we've got a good business servicing the young kids. We've got a growing business focused on the seniors market, which is a big growth market and a big area of focus for us going forward. And in the middle, serviced by our Spacetalk mobile products and software, our tweens and teens and, essentially, mum and dad. So rapid change of direction in the last 12, 18 months from being rooted in the kids' business to being far more holistic in terms of the family view and really a trusted brand at the epicenter of Australian family life, focused on delivering safety and peace of mind.

Andrew Musgrave:

Okay, and the company has achieved a remarkable turnaround in its financial performance, reporting a positive cash flow for Q4 FY24. So what were the key factors driving this turnaround and how do you plan to maintain that?

Simon Crowther:

I think I was very focused on building a strategy for the company in the first 90 days of being in the role. I think strategy means different things to different people and different businesses at different times. For me, it was very important. After 20 years of history of the business and I think the business really failing to gather traction and realize its full potential, it was necessary, I felt, to put a very clear line in the sand in May of 2023, which is a comprehensive review of all the operations of the business and a real statement of intent in terms of the future direction of the company. I think strategy for us is rooted in focus and in discipline, and I think it's fair to say that for any investor or prospective investors who's read that strategy paper from May of last year.

Simon Crowther:

I'm very pleased with how the team has performed and we've actually executed on all of the things that we said we would do within the timeframe that we said that we would do them, and that's easier said than done because, as you're going through a turnaround, I've found and I've done several of them in the past turnarounds are inherently more complex and difficult to do than a scale-up or even a startup. You are having to wrestle with and deal with many legacy issues. By definition, a business that's going through a turnaround means that things have not gone necessarily according to plan, and so you're wrestling with the need to want to demonstrate the fact that you've got a great story, but also deal with some of the less than optimal decisions that have been made in the past. And as quite a complicated little business that's both a hardware and a software business, it's taking time for these decisions to kind of flow through. And I think the end of Q4 of the last financial year was really a reflection of how that strategy momentum has kind of started to flow through the numbers, how we've tackled our cost base, how we've really focused on innovation.

Simon Crowther:

But I think most importantly and this is really the thing that I think will help us in the future it's the focus, the focus on the lanes in which we play, not being distracted by what other rivals are doing, but knowing our lanes and knowing our place in the market and realizing that we have a niche. The niche doesn't have to be small, it needs to be focused. And we have a niche. Our niche and our lens is family safety. We think we've got a unique proposition and we continue to execute on that, and I think focus and discipline are the two key words that I think underpin how the business is run now with myself and the management team, and I think that's the thing that sets us up for future success. We continue to roll out and execute on the strategy.

Andrew Musgrave:

Okay, and if we touch on the product innovation, there's been the successful launch of products like the Adventurer 2 and the ongoing development of the software ecosystem. So how does a company ensure it stays ahead of the competition in the rapidly evolving wearables market?

Simon Crowther:

Good question. I think that for us it's useful just to explain the notion of an ecosystem in the context of SpaceTalk. I think we have a good kids wearables business. We are unique in, I think, our ability to be able to attract users and customers much younger than our rivals which is also an opportunity to be able to retain them as customers through the various life stages those young kids go through. For example, a key life stage is when they no longer wish to wear the wearable, when they've kind of just aged out of it.

Simon Crowther:

Previously, prior to us implementing our strategies as Spacetalk essentially say goodbye to them as a customer because there was no product to actually meet their needs as they kind of migrated into their first mobile phone. Now that's not the case. Not only do we have our own mobile SpaceTalk mobile, which is which is growing rapidly, we also have software products that bridge that gap so that, essentially, when a child no longer requires the wearable or is handed down to a younger sibling, they simply take out their in most cases, space built mobile sim card and transfer it to their first hand-me-down apple or android device in their first mobile phone. So, again, a new opportunity for us to grow that relationship, grow that customer lifetime value and and to be able to demonstrate to the market that we can enjoy a relationship with our customers, maybe in many, many years, as opposed to a comparatively short period of time when we just focus on selling a wearables device in its own right, which is usually measured in the space of only a couple of years, and some of them being a customer.

Simon Crowther:

So I think, again it comes back to my previous comment. It's about understanding and appreciating what our competitors are doing, but also really zeroing in on what makes us different. And I believe, compared to our rivals, we do have a very different and unique approach to our market. I think, increasingly we're going to be able to demonstrate a degree of sophistication around understanding our families, our families' database and being able to target families overall and move those families through a commercial process where we're able to engage different members of that family at different life stages and be able to have an offering for them that is relevant to their life and stage needs at that particular time. So I think our ecosystem is unique. I think our approach to families is unique. I think our ability to be able to attract customers younger than our competitors and also at the older end as well seniors, which is a massive growth market for us and also a market that's significantly bigger than kids as well. I think bodes well for the future.

Andrew Musgrave:

Okay and you've recently announced a significant partnership with Elisa in Finland as part of your re-entry into the European market, so can you share more about the strategic importance of that partnership?

Simon Crowther:

Yeah. So, going back to the early part of 2023, when we did a complete evaluation of the business and international operations, we signaled to the market that it was necessary for us to put our international operations into a temporary status mode, as we really focused on getting our core operations in Australia to scale, but we also maintained great relationships with our customers and our channel partners on the ground in those different markets as well. One thing that we know is that the Nordics are very technology savvy and we wanted to be able to and we always said this as part of our strategy that when the time was right, when we'd stabilize the Australian business, when we were on track to grow, when we got the various structures, processes, automations in place to be able to grow the business, we would be looking to expand offshore in a very controlled and focused way. We'd always maintained, as I say, good relationships with our distribution partners in Europe and also with our own customers as well, and it was a natural thing for us to do to be able to revisit the relationship in the Nordics and in this particular case, Elisa and they are very, very enthusiastic about the product. And also, I think a key difference here, unlike previously, is that every time we're looking to expand into a market has to be on the basis that we're going to be generating reoccurring revenue.

Simon Crowther:

Previously, prior to me joining, the company very hardware-centric Essentially, the business was just selling hardware with no reoccurring revenue. This time around, what we've been able to do is to be able to negotiate a deal with a key or leading telco partner whereby not only are we offering good distribution in terms of our wearables devices, but also reoccurring revenue linked to app usage in that particular market as well. So it's a very attractive deal from the outset with a high quality partner and generating positive cash flows into the business from the outset. So there's a lot to like about that particular deal, not least the fact that it's very cost effective for us to be able to kind of put those deals in place. We don't have to have people on the ground, we're not carrying significant overheads and it's highly scalable.

Andrew Musgrave:

Okay, and are you looking to do any other expansion into other European countries?

Simon Crowther:

Absolutely, and we want to be an international business. I think that it's all about sequencing and priorities. It was important for us to be able to test not only our internal processes and supply chain and various other factors to be able to make sure that our initial revisiting of the Finnish market was successful and is proven to be successful, which is good and now, on the back of that, we are looking to expand into other markets in Europe, for sure, but also into the North American market as well. I mean, the future growth of the company will be software-led and hardware-enabled. I think that's a really important distinction to make.

Simon Crowther:

In the past it's been very much a hardware-centric business but, as you'll know and your listeners will know, it's much easier to be able to scale software. It's quicker, more cost-effective, higher margin, and so what investors can expect to see over the coming next couple of months is a real refocus of the business, not only in terms of the brand how we show up from a sophistication point of view very much aiming older and more aspirational for younger kids but also from a software perspective, really upgrading the SpaceTalk app, which is a key driver of user engagement and future new customers as well for the business. So I think not only have we got a controlled kind of expansion strategy, we've also got a very controlled and focused software development strategy as well, and the two go hand in hand.

Andrew Musgrave:

Okay, and just to wrap things up, are there any upcoming partnerships or product launches that investors should keep an eye on over the next 12 to 18 months?

Simon Crowther:

Yeah, definitely. So we signal this throughout our market updates. In the last couple of months Again, I just mentioned it, so just to repeat myself very much invested in building out our software capabilities, our ability to be able to scale our software into multiple markets. At the moment, our SpaceTalk companion app is in about 160 different app stores around the world and what we want to do is be able to zero in on some of those key markets to be able to upgrade our software in that particular market and use our software more effectively as a marketing and acquisition platform for new users into the SpaceT alk ecosystem. And that means specifically that not not just focused on people who bought a wearable, but, for the first time, giving people a reason to want to download and use the Space Talk app, who may not even know about a wearable or may have no interest in wearing a wearable. We still bring them into the ecosystem and have an opportunity of migrating them onto a paid plan or plans going forward as well.

Simon Crowther:

So I think what investors will see going forward is much more focused in terms of marketing results around our SpaceTalk app, really targeting a whole new cohort of users coming into the SpaceTalk ecosystem and a whole bunch of new features on our hardware.

Simon Crowther:

We're going to be updating the market shortly about the fact that we're going to be the first company in the world to roll out AI onto kids' wearables and that's going to be a big innovation inside our business and we're also focused on really building out our capabilities around predictive analytics, particularly for our seniors product, which we call Life, and what that means is that our ability to be able to gather large amounts of data from our users and then to be able to use that data to be able to predict events, particularly in the seniors market things like fall events are really key and also to be able to predict potential events like dementia as well.

Simon Crowther:

These are all key things that investors can look forward to us being able to update the market about and to be able to message that around our products. But that will also signal a significant shift, I believe, by the end of this calendar year, where no longer will our brand be just potentially focused exclusively on the kids' market, but we'll start to bring the entire kind of family view to life, both from a product perspective, but also from a brand perspective and marketing perspective as well.

Andrew Musgrave:

Okay, Simon. Well, thanks for your time today. There's obviously plenty going on at the company, which is really exciting, and we look forward to further updates in the upcoming months.

Simon Crowther:

Thanks very much. Thanks for your time. Pleasure speaking to you.

Andrew Musgrave:

That concludes this episode of ASX. Prince, Don't forget to subscribe and we look forward to catching you on our next episode.