XMReality: Solid order from long-term customer ABB

Research Note

2022-09-29

15:22

Redeye is encouraged by XMReality’s latest order from ABB as it validates XMReality’s growth strategy and expands its US footprint. We maintain our estimates and fair value range unchanged.

FG

Forbes Goldman

XMReality received an order worth SEK1.5m in ARR from ABB Process Automation in the US on 28 September 2022. In light of the last-reported ARR amounting to SEK18m (Q2 2022), this should be considered a meaningful order. ABB is a long-term customer of XMReality, having been with the company since 2017. The two companies established a framework agreement in the past, through which this order came through. XMReality has previously been used with ABB Motion, a different business area.

Why is this important?

First, XMReality has landed several large enterprise customers in recent years. These include Nestlé, AB Inbev, Danone, and Sidel. It has established framework agreements with many of these customers to facilitate their business units (often decentralized) to begin using Remote Guidance. We understand that an essential pillar in XMReality’s growth strategy is to expand usage within these large customers, both in terms of business units and business processes. The latest agreement with ABB validates this strategy and confirms the potential ahead.

Second, XMReality is growing in the US, the world’s largest market. XMReality has carried out significant investments in its US operations in recent years. We are encouraged to see some positive news coming out of this market and look forward to seeing what the team (led by Tim Koeppl, President) can deliver in the years ahead.

Strong position in the aftermarket use case

ABB Process Automation expects to use Remote Guidance in supporting its customers in the aftermarket process – this is the most common use case for XMReality. However, long-term growth hinges on the success of XMReality’s new offering – launched in July 2022 – targeting planned processes. The re-engineered Remote Guidance product aims to assist customers in production, supply and R&D, among others. By shifting focus to planned activities instead of only aftermarket support, management expects to increase its addressable market by 4x. Essentially, this should drive more usage of its platform and lock in customers for many years.

Unchanged estimates and fair value range

Considering we expect accelerated sales growth in the years ahead (2021–2025 CAGR of 23%), we maintain our estimates unchanged. At this time, we are very eager to see orders regarding XMReality’s new offering – this could be a critical near-term trigger for the share price. Our Base Case is SEK1, and our fair value range spans from SEK0.1–5.

Disclosures and disclaimers

Premium Plan required to unlock

Unlock companies to access

more high quality research.