Research note


XMReality: Q1 preview

On Wednesday the 18th of April, XMReality will publish their report covering the first quarter of 2018. We expect net sales around SEK 3m and costs to be in line with the previous quarter, which leaves us with expectations of EBIT about SEK -8m.

XMReality has not announced any news since our last update and we have neither noticed any greater market news during the period. CCS Insight has published a new report on the AR and VR market, clarifying that AR continues to attract immense interest but that enterprises are not yet adopting the technology on a broader scale. An interesting note is that the report mentions that Europe currently is the greatest proving ground for industrial use cases where companies have realized that AR opens up huge opportunities for increased efficiency and cost savings, which is the benefits that clients using Remote Guidance highlights.

Our interpretation is that the company is fully focused on getting clients to scale up their usage of XMReality Remote Guidance, which we believe is the company’s greatest challenge in the current stage. This is not a challenge that is unique to XMReality but rather for the AR market as a whole given that the breakthrough of the technology is dependent of change in the behavior of organizations and individuals.

We estimate that the company has about SEK 2m in quarterly recurring revenues and expect sales in Q1 to be bolstered by the Electrolux order announced during the beginning of February as well as increased usage of Remote Guidance among existing clients. We expect net sales about SEK 3m and a slightly increased gross margin following the expected increase in licensed software users. We expect costs to be in line with the previous quarter, resulting in an EBIT estimate about SEK -8m.  

As earlier mentioned, we believe that the most important factors to focus on in the current stage is the potential for large roll-outs, the inflow of new clients and share of software sales. XMReality will publish their quarterly report on Wednesday the 18th of April. We will get back with a comment following release of the report.

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